Natural gas riding high on supply, but don’t count propane out

Natural gas, recognized lately for its abundance in shale deposits across the United States, has garnered its share of media attention. Its prices are at record lows, and its prospects as a motor fuel are gaining momentum.

The rise of natural gas is not going unnoticed by the general public either.

Reading my badge while in the hotel elevator at the Western Propane Trade Show & Convention last month in Reno, Nev., an industry outsider greeted me with the words “Propane, huh?” The gentleman proceeded to question our future to survive alongside natural gas. It’s doubtful he had the full knowledge to back his claims – I proceeded to tell him propane is processed from natural gas, so it’s not going anywhere – but his words were yet another source fueling the hot topic of energy competition in this country.

Oil industry tycoon T. Boone Pickens has promoted natural gas as a motor fuel since 2008 – as he did with propane for two years before government struck a blow and restricted the industry’s consumer education efforts. In addition, legislation making natural gas the preferred alternative fuel in vehicles was introduced in Washington but defeated in the Senate. (NPGA and the propane industry were among those arguing that consumers, not government, should drive the alternative fuel market.)

Considering these factors, it’s hard not to view natural gas as having some impact on propane’s future. I posed the issue to Mike Sheehan, owner of Sheehan’s Gas Co. in Bird Island, Minn., who says natural gas will always challenge propane because of the price differential (now favoring natural gas by about 30 percent), “and the fact that we’re exporting propane will keep our costs higher than normal.”

“We have such an abundance of energy right now in the U.S. it’s staggering,” Sheehan says. “Five years ago, we were wondering what life was going to be for fossil fuels. Now we’re the Saudi Arabia of the world as far as shale energy. It’s changed a lot of things in a short period of time.”

Sheehan is in a unique position, with a unique perspective, as he markets propane and natural gas to his customers. In 1969, Sheehan’s Gas faced losing Bird Island to natural gas, so the company chose to enter the business. “Why fight it?” says Sheehan, who urges propane marketers to “think outside the box” in their businesses. Today, Sheehan’s Gas supplies three towns with natural gas.

The alternative fuel battle is raging, with word that natural gas is coming strong as a motor fuel, despite high upfront costs for infrastructure. More vehicles and refilling stations are coming online. A healthy supply and low fuel costs are opening opportunities for natural gas in compressed (CNG) and liquefied (LNG) forms. In fact, LNG has displaced four large propane corn-drying accounts in Minnesota, says Sheehan, frustrated by a continued lack of general knowledge about propane.

“I never thought I’d have an LNG customer in my area,” Sheehan says of the fuel that’s stored and transported as a liquid at -260 degrees until it’s used in its gaseous state. “Now I have four.”

Rest assured, the propane industry isn’t standing idly by. It’s spending a tremendous amount of money in the motor fuel market (now well known as propane autogas), which has become a focal point for PERC and new autogas business development hire Mike Taylor. Autogas is making inroads in fleet applications and in national headlines with the help of public relations firms. And NPGA is considering various ways to push propane in front of media and policymakers.

Promoting the benefits of propane autogas against the likes of gasoline and diesel is one thing. But here comes clean, affordable, abundant natural gas flowing in similar applications as propane, and we must prepare. As PERC President Roy Willis said about product development at the council’s April meeting, “We have a lot of work ahead of us. … We need to put our foot on the accelerator and get ready.”