Searsport  Planning  Board  Hearings  Interested  Party  Tes5mony  

I  am  here  on  behalf  of  a  160-­‐year-­‐old  building.    It  is  not  the  biggest  old  building  in  Searsport,  but  I  think  it  is  the  preBest  building  in  town.    It  was  the  Searsport  Bank  for  over  100  years.  

 

2  

 For  8  years  it  was  home  to  LeI  Bank  Books.  They  leI  Searsport  in  June.    While  the  threat  of  the  tank  wasn’t  the  only  reason  the  owners  decided  to  relocate  to  Belfast,  it  certainly  was  the  5pping  point.  The  owners  of  the  bookstore  loved  the  old  building  and  the  store  and  the  loca5on  with  its  high  traffic  poten5al.  They  had  really  outgrown  the  space  years  ago  but  endured  a  liOle  5ghtness  on  the  shelves  because  of  all  the  aOributes  of  the  building.        They  didn’t  have  to  wait  un5l  the  tank  was  built  to  witness  the  effects  on  the  business  climate  in  Searsport.  As  this  town  was  fractured  over  the  promise  of  a  handful  of  jobs  the  decision  was  made  for  them.      Despite  years  of  success,  and  aOachment  to  the  store,  they  leI  Searsport.    If  you  have  any  doubt  about  whether  Searsport  will  become  known  as  “the  town  with  the  tank”,  with  the  implied  adverse  effects  we  all  know  will  occur,  try  finding  a  suitable,  long-­‐term  tenant  for  the  preBest  building  in  town.      Know  this,  Searsport  is  already  known  as  “the  town  that  is  building  the  tank”  and  it  IS  already  having  a  s5fling  effect  on  business.      While  the  tank  already  affects  my  business,  perhaps  to  its  founda5on,  I  am  also  concerned  about  the  physical  founda5on  of  the  old  bank  building.  I  would  invite  the  members  to  the  basement  of  my  building  and  have  them  feel  the  stacked  stone  founda5on  that  has  endured  160  years  of  traffic.    You  can  feel  the  big  trucks  go  by.    An  addi5on  of  thousands  of  fully  laden  tankers  can  only  threaten  the  integrity  of  Main  Street  and  my  founda5on.    In  fact,  the  proposed  LPG  terminal  threatens  the  economic  founda5ons  of  this  town,  which  is  one  of  the  many  reasons  under  exis5ng  ordinances  that  the  Searsport  Planning  Board  should  deny  this  applica5on.    

Truck  Rack  for  LPG  

Here  is  one  more  very  compelling  reason.      We  were  told  by  DCP  that  the  144  trucks  a  day  that  is  permiOed    was  a  “theore5cal”  number  and  couldn’t  be  accomplished  because  they  didn’t  have  enough  truck  loading  spots,  and  there  wasn’t  enough  room  for  them.    This  is  what  is  separa5ng  us  from  144  trucks  a  day:    

When  it  was  suggested  that  their  true  inten5on  was  to  build  an  export  terminal  we  were  told  that  it  wasn’t  technically  feasible  to  receive  propane  in  trucks  and  that  they  couldn’t  cool  the  propane.        Yet  at  these  hearings  in  November,  DCP,  in  describing  the  rail  loading  opera5ons,  said  that  they  could  remove  the  contents  of  a  railcar  or  tank  truck,  if  there  were  any  ques5on  about  the  conveyance,  and  cool  it  separately  and  return  it  to  the  tank.    What  they  described  was  a  receiving  opera5on.        Don’t  forget,  their  Dr.  Raj  told  us  propane  slowly  evaporates,  but  cools  quickly,  it  cools  itself,  so  they  only  need  to  condense  the  evaporate,  something  they  have  tes5fied  they  are  constantly  doing  anyway.    When  I  ques5oned  their  Mr.  Baldridge  about  why  they  would  s5ll  green  light  a  project  with  the  current  high  import  prices  and  economics,  I  was  told  it  is  a  vola5le  market.  When  I  suggested  it  was  about  spreads,  he  said  it  was  about  West  Texas  Intermediate  and  Brent  crude.  Mumbo  Jumbo,  to  be  sure,  which  brings  me  to  the  next  slide:    

It  is  a  vola5le  market,  but  as  you  see,  we  have  the  cheapest  natural  gas  for  any  consuming  na5on  in  the  world.    

And,  yes,  crude  oil  is  vola5le.    A  $25  or  $30  a  barrel  move,  30%,  over  6  months,  is  vola5le.  But  the  spread  isn’t  nearly  so  vola5le.  The  two  types  of  crude  move  in  tandem,  and  the  spread  between  

them  changes  slowly.    

           *  

*  

spread

 

 If  anything  the  spread  is  widening,  as  U.S.  oil  supplies  con5nue  to  expand    

 US  Oil  Produc5on  is  the  Highest  in  15  Years  

 Just  like  our  natural  gas  and  gas  liquids  like  propane,    

They  are  expected  to  rise  for  many  years  to  come.      

The  processing  of  both  oil  and  natural  gas  yield  LPG’s.  The  yield  is  around  10%.  LPG  is  a  by-­‐product  and  it  needs  to  be  sold.  LPG  supply  is  rising  because  oil  and  gas  produc5on  is  rising  and  

exports  are  rising  as  a  result.      LPG  imports  are  virtually  non-­‐existent,  except  from  Canada.  

 There  are  no  water  borne  imports.  

© 2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 19

The U.S. Has Moved from a Net Importer of LPG to Become a Net LPG Exporter

U.S. Imports and Exports of LPG, Thousand Tonnes per Day

• Overall LPG trade was nearly balanced in 2010, but total LPG exports are now higher than imports.

• Waterborne LPG exports have exceeded imports since 2009

0

5

10

15

20

25

30

2003 2004 2005 2006 2007 2008 2009 2010 2011

Canada Imports

Waterborne Imports

Mexico Land ExportsWaterborne Exports

LPG  and  Propane  prices  are  falling        

Propane  prices  are  near  a  10  year  low  

Analysts  all  agree  on  the  outlook.    This  is  from  a  presenta5on  made  to  the  Board  of  Directors  of  the  NPGA,  

 the  Na5onal  Propane  Gas  Associa5on  last  January  

!"#$%&'()'*+$,-'./01/23'(4'5-6/(4$,'78(#$4-'*1##,9'

!"#$%&"'&()$*+,"$-&.**/01&2*3&4*-,&.#$$)"5&!*#+6-)%*&7",*8&

9#0:#$3&;<=><?>&

@":$+*&"'&A"8:B*&C#8#0+*-&#0%&'"$*+#-,-D&E6*&F$*#,&GFH&@:$1*I&'$"B&!JGEJ2&J0*$13&#0%&E:$0*$=&.#-"0&#0%&K"BL#03M&

Propane  will  be  exported,  not  imported  

!"#$%&'&'$()*+,-#

!"#$%"&'(#)$*+,'-.%%'/)0,'12&3)#,'

4567'

4577'

4867'

4877'

467'

7'

67'

877'

867'

577'

567'

5776'5779'577:'577;'577<'5787'5788'5785'578='578>'5786'5789'

.%/0#

1'2#3$,45&'#674,$28#

?,@'(#)$*+,'AB$)#@&'!)"#C,D'EA?FAG'

200  thousand  barrels  a  day  of  addi5onal  propane….That’s  9  million  gallons  A  Day  of  propane  in  the  USA  -­‐    3.285  billion  gallons  a  year  to  be  exported  

!"#$%&'&'$()*+,-#

!"#$%&'("#')»  .$,/01#2&#&304$35#(36#3&7#+$47'#,25#

8$,74+9,&#/255#2&+$'36'#:*;*#<.=#648852'6#>?@A#B%C7#%)#DAE!#

»  F$,83&'#64885)#48#DAA#B%C7G#-,60#,H#01'#2&+$'36'#/255#3++4-4530'#2&#FIJJ#KKK##

»  F'0$,+1'-2+35#3&7#$'627'&935C#+,--'$+235#7'-3&7#H,$#8$,83&'#7,/&#

»  ;4$8546#L,54-'6#'M8,$0'7#0,#,N61,$'#-3$O'06#

»  K&+$'-'&035#8$,83&'#8$,74+9,&#2&#FIJJ#K#/255#$'853+'#828'52&'#2&P,/6#3&7#2-8,$06#

»  F$,83&'#8$2+'6#/255#7'+52&'#$'539L'#0,#+$47'#,25#%40#/255#$'-32&#/'55#3%,L'#&304$35#(36#

*  

*  

Roz  Elliot  has  told  us  for  a  long  5me  that  their  LPG  will  come  from  the  North  Sea,    while  others  thought  it  would  be  Qatari  LPG.  

No  maOer,  we  don’t  import  from  there  any  more,  we  export  to  NWE    

     *  

*   *   *  Exports  

Prices  are  from  the  Oil  Price  Informa5on  Service,  OPIS  

(c)Copyright by Oil Price Information Service (OPIS), a division of UCG. Reproduction of this report without permission is prohibited. Europe LPG Report is published each business day. OPIS does not guarantee the accuracy of these prices. Pricing/Editorial Office: 800-275-0950. For a limited copyright waiver, call (888)301-2645.

DECEMBER OVERHANG WEIGHS ON NWE PROPANE

(Continued on Page 3)

Table of ContentsOPIS LPG Full Day PricesOPIS LPG Mont Belvieu Snapshot

OPIS Monthly Prices

OPIS Freight Rates & Netbacks

OPIS NWE Propane Forward Prices

OPIS Global Forward Prices

p. 1p. 1

p. 2

p. 2

p. 2

p. 3

Brent Crude Oil ($/bbl)

MAR 108.33 -0.64APR 107.53 -0.69

FEB 109.52 -0.50Month Price Change

WTI Crude Oil ($/bbl)

MAR 92.27 +0.97APR 92.73 +0.92

FEB 91.82 +1.02Month Price Change

ICE Brent Futures at 16:30

Energy Futures at Settlement

31 December 2012

OPIS LPG Full Day Prices ($/mt)

OPIS LPG Mont Belvieu Snapshot ($/mt)

Butane cif ARA (+4,000mt)Propane cif ARA (ToT Cargoes)Location

865.00898.00

Low

869.00902.00High

867.00900.00Mean

-25.00 906.921-10.00 972.105

Change MTD Avg

Butane FOB MedPropane FOB Med

868.00928.00

872.00932.00

870.00930.00

-15.00 903.368-10.00 983.000

Mont Belvieu Non-TET ButaneMont Belvieu Non-TET PropaneLocation

805.21461.74Mean

+7.93 797.676+1.95 413.414

Change MTD Avg

OPIS 30-Day Spot Prices ($/mt)

Calcula5on  

 Roz  said  North  Sea  propane  so  we  will  use  that.    $985  MT  FOB.    Freight  is  lower  than  I  had  postulated  last  November,  around  $25MT,  so  with  insurance,  let’s  say  $1015MT  CIF  Searsport.  That’s  $1.95  a  gallon.    Wholesale  propane  on  the  East  Coast  is  $1.09  a  gallon.    So  the  loss  isn’t  as  

bad  as  I  originally  guessed.    It  is  only  86  cents  a  gallon,  not  a  dollar.      At  that  rate  they  only  lose  $19-­‐1/2  million  per  tank  full.  That’s  $97.6  million  a  year  at  your  stated  

volumes  of  5  turns.      

                       

Even  building  the  terminal  and  wai5ng  for  the  markets  to  come  their  way  is  financially  untenable.  The  cost  of  the  terminal  is  $50  million.  The  interest  alone,  at  a  low  3%,  is  $1.5  million.  Taxes,  which  they  claim  will  be  over  $500,000,  and  other  fixed  costs  like  insurance  are  another  500,000,  so  at  least  $3  

million  a  year.    

But  their  opportunity  costs  are  much  higher.    

North  Sea  Propane  FOB  

$985MT  

Ocean  Freight   $25MT  

Insurance   $5MT  

Total  CIF  Searsport  

$1015MT  =  $1.95/gal  

Wholesale  price  PADD1  

$1.09/gal  

LOSS   $0.86/Gal  

DCP’s  ROCE  was  28%  at  the  end  of  the  third  quarter  and  30%  in  2011.  That  is  how  they  measure  their  opportunity  costs.      

How  much  can  this  money  make  for  the  corpora5on?  

Third Quarter 2012 Conference CallOctober 31, 2012

14

Midstream Overview

Return on Capital Employed

DCP Midstream! "#$%&'()*+%,-./%012

Other Midstream! $-.*'%(/3*/4-'5%'*+674+

8 9:7)67:4*,%:+%://6:7(;*,%:,<6+4*,%=>?%@A9B%(/)-C*%D%:3*':E*%=>?%):&(4:7%*C&7-5*,

FG-4-H%?9F%I(,+4'*:C%&7:/4%(/%9:'4G:E*J%>*K:+

18%30% 28%

20%

2009 2010 2011 2012YTD

Annualized*

1  

If  you  look  at  their  actual  results,  as  reported  by  DCP,  their  year  to  date  Return  on  Capital  Employed  is  an  impressive  28%.    So,  their  opportunity  costs  on  $50  million  is  really  $14  million  a  year,  the  minimum  amount  this  money  should  be  earning    But,  if  they  Export  the  calcula5on  looks  like  this:        

Wholesale  Price   $1.09/Gal     $567.00MT  

Ocean  Freight   $  25.00MT  

Insurance   $      5.00MT  

TOTAL   $597MT  CIF  ARA  

Market  price  CIF  ARA  

$900MT  

PROFIT   $303.00MT/              $.582/gal.  

Per  “tank  full”  $13,200.00  

Per  year  -­‐5  turns  $66,000,000  

ROCE  88%    

o        Obviously,  if  they  export  their  real  volume  would  be  much  higher.    144  trucks  a  day,  their  permiOed  level,  is  1.44  million  gallons  a  day.      The  3  rail  spots  in  their  plans  can  unload  at  least  75  cars  a  day;  that  is  another  2.250  million  gallons  a  day.      That’s  3.69  million  gallons  a  day.        They  could  fill  that  tank  in  less  than  a  week.  They  could  easily  manage  3  vessels  a  month,  36  vessels  a  year.  They  could  turnover  680  million  gallons  a  year  and  make  $400  million  on  a  $50  million  investment.    So,  lose  a  minimum  of  $3  million  a  year  which  is  really  $14  million  in  their  view,  just  standing  s5ll,  or  make  almost  a  half  of  a  billion  dollars  a  year  expor5ng?        What  would  you  do?    

The  wholesale  prices  for  our  area  from  the  Energy  Informa5on  Administra5on    

If  you  don’t  believe  me,  you  might  believe  them,  at  least  when  they  are  talking  to  their  investors  and  the  stock  analysts  rather  than  us.    

Last  June,  Greg  Garland,  Chairman  and  CEO  of  Phillips  66,  told  financial  analysts:        

“We  consider  growth  in  this  area  around  frac7ona7on,  around  LPG  exports,  etcetera,  in  this  space,  as  we  think  about  this  midstream  space  and  growth  in  that.”  

 This  is  what  they  showed  their  investors  last  October:      

!"

#$!#"

Note  -­‐“Export  capability  increases…”  by  200  to  250  MBPD  –  thousand  Barrels  Per  Day  That  is  9  to  11.25  million  gallons  a  day.  

!"#!$

%#$!"#$%&'()"*+,"-.-/01213"4-&2$%1"2.5%16&0"-.5"'$78-.0"&(1(-&'9"

!"##&!"#!$'()*$'+,-.)$/).(-.0$(,$

+,1.,-2)3$45)6754$

!"#!$45**.)$+,1.,-2)3$85+70$7.44$-9(,$

6)2:./-.0$

;()<.-$03,(*+/4$/2))./-$456673$21.)9(,=$

>?62)-4$+,/).(4.$

@2)*(7$'.(-9.)$6(--.),4$).-5),$

A,/).(4.0$/9.*+/(7$/)(/<+,=$

>?62)-$/(6(8+7+-3$+,/).(4.4$B)2*$

C#D";EFG$-2$%""H%D"$;EFG$

F)26(,.$0.930)2=.,(-+2,$B(/+7+-+.4$)(+4.$

0.*(,0$83$#D"I$;EFG$

;EFG$

#JK""$

#JL""$

"$

!"#!$ !"#%$ !"#L$ !"#D$ !"#M$ !"#N$

O.(-+,=$A,054-)3$

F.-/9.*$B..04-2/<$

>?62)-4$

FGO$

P56673$

****  

   

 As  you  can  see,  DCP  told  their  investors  that  they  are  going  to  increase  their  LPG  exports  by  200  to  250    thousand  barrels  a  day.    That’s  up  to  11.25  million  gallons  a  day  or  4.1  billion  gallons  a  year.    That  is  almost    8  million  tons  of  addi5onal  exports  a  year,  or  175    large,  ocean-­‐going    LPG  Tankers.  Their  proposed  mega-­‐tank  holds  around  43,000  Metric  tons;  a  large  LPG  tanker  holds  around  45,000MT.    That  is  their  stated  plan,    to  export  their  growing  surplus.  And  when  your  growth  plan  is  that  aggressive,  every  ½    billion  gallons,  or  36  vessels  full,  helps.    Think  about  it,  they  need  5  new  terminals  the  size  of  this  one  just  to  handle  their  new  exports.    I  spoke  to    the  Army  Corps  of  Engineers.    Once  this  terminal  is  built  the  CORPS  would  have  no  jurisdic5on  nor  review  if  the  applicant  wanted  to  export  rather  than  import.    In  fact,  neither  would  the  Planning  Board  nor  the  Town  of  Searsport.      It  seems  that  it  would  require  no  more  than  a  no5fica5on  to  the  DEP  and  Coast  Guard.      I  hope  that  it  is  now  clear  that    it  is    a  virtual  impossibility  that  this  is  an  import  terminal  and  a  virtual  certainty  that  it  is  an  export  terminal.  This  company  exports  propane,  it  does  not  import  it.    This  is  why  it  maOers.      

1  

It  means  that  DCP  misled  everyone.  The    DEP,  ACOE,  the  SPB,  all  of  us.    It  means  we  can’t  trust  anything  they  say.    It  means  that  all  of  the  nega5ve  effects  you  have  heard  such  a  great  deal  of  tes5mony  on  will  be                                  much,  much  worse.      That  is  why  they  misled  us  and  con5nue  to  mislead  us.    Imports  are  seasonal,  they  said,  when  the  tourists  are  gone,  and  they  will  lead  to  energy  security  and  lower  prices  for  Maine.    But  exports  never  stop.    They  aren’t  seasonal.  They  are  year  round.  On  wet  roads,  dry  roads,  icy  roads,  foggy  roads,  roads  full  of  tourists,  roads  in  the  gloom  of  winter’s  late  aIernoon,  or  in  the  pink  glow  of  summer’s  night,  in  the  bright  sunlight  and  the  dark  of  night,  propane  will  flow  towards  Searsport.    It  means  that  the  traffic  impact  will  be  constant,  summer  and  winter,  24/7/365,    as  144  full  tanker  trucks  a  day  head  toward  Searsport.  288  trucks  a  day  in  and  out  of  the  terminal,    one  every  5  minutes.    It  means  that  there  will  be  propane  accidents  on  our  roads.      It  means  that  the  effect  on  our  infrastructure  will  be  much  worse.    It  means  the  costs  to  the  Town  will  be  much  higher.    

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 It  means  the  effects  on  our  businesses,  on  the  jobs  lost,  on  our  property  values,  and  on  the  quality  of  our  lives  will  be  much,  much  worse.    It  also  means  higher  prices  for  Maine  propane  and  greater  energy  insecurity  as  our  surplus  is  exported.    There  is  no  good  reason  for  this  terminal,  and  every  reason,  under  many  of  our  ordinances,    to  deny  their  applica5on.    Thank  you  for  your  aOen5on.    Good  luck  in  your  delibera5ons.      David  Italiaander  Searsport  Bank  Building  LLC