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Gas firm rides rails to growth

By   /   Friday, April 24th, 2009  /   Comments Off on Gas firm rides rails to growth

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Paso Robles-based propane marketer Delta Liquid Energy is on track for expansion — about 300 feet of track, to be exact.

The company has just unveiled a new storage and distribution facility in Santa Maria that includes 300 feet of private railroad track, 90,000 gallons of propane storage capacity and a new office building that consolidates retail operations it used to have in Buellton and Arroyo Grande.

Bill Platz, president of Delta, said the new facility is aimed at saving customers money and smoothing out supply shocks. Delta counts customers over a swath of Central and Southern California from San Luis Obispo County to Kern County and as far as Tulare, Los Angles and Orange counties.

In the winter, Platz said, Delta brings in about 2 million gallons of propane for customers from Ventura to San Luis Obispo counties. Before the new Santa Maria facility, Delta had to truck its fuel from locations in the San Joaquin Valley, the High Desert and even the Los Angeles area. Now, in the event of a shortage, Delta can import straight from Texas or Canada.

“The bigger picture is that in California, propane supply is not large enough in the wintertime and it’s too large in the summertime,” Platz told the Business Times. “Our goal was to provide supply to our Central Coast customers in the wintertime without having to import from our other rail facility in Lancaster.”

That’s a kind of security that many local operators can’t offer, Platz said. For Delta, this is crucial because it gives the firm a toe-hold against far bigger competitors.

“We’re kind of a middle-sized marketing company,” Platz said. “We have nine locations across the state. We compete against national-sized marketers.”

With about $46 million in 2008 revenue, Delta ranks as the second-largest private company in San Luis Obispo County and the 25th biggest private firm in the Tri-Counties. Founded in 1936 by Platz’s grandfather as a single store, it’s also third-generation family-owned.

Platz is navigating the firm through a choppy economy and a changing propane industry. As it stands, sales split up to about a third for residential uses, a third for commercial uses and a quarter for engine fuels, with the rest of the propane selling wholesale, Platz said.

“Our strongest drop-off is the fuel that we sell to commercial customers for things like forklifts,” Platz said. “When people aren’t buying widgets, companies aren’t making widgets and they aren’t moving widgets with forklifts.”

The weather also has a big impact on residential sales — balmier winters mean poorer sales. And recent pushes for weatherization and greening up homes have also taken a bite from sales, Platz said.

“The last three winters have been relativity warm,” Platz said. “We’ve seen a drop off in residential use due to warmer years and conservation.”

But business remains strong, Platz said. While mass layoffs happen elsewhere, Platz said he can “probably count on two hands” the number of employees he’s had to let go from his staff of slightly more than 100.

“Because it’s an energy business; when we talk about demand destruction, it’s not that strong,” he said. “Customers still have to use the stuff — they just use it in smaller quantities.”

And while some propane uses decline, new opportunities are opening up for using propane as a cleaner-burning engine fuel, a big route for growth, Platz said. Delta already supplies the fuel to many school districts that use it to run buses.

“We’re strong proponents of using propane as an alternative fuel,” Platz said. “We just landed a very large account in Los Angeles that’s going to use propane for 80 school buses.”

Though propane engines are available for big vehicles like the Ford F-150, riding lawnmower engines might prove a boon for Delta.

Lawnmower engines long escaped the level of oversight applied to automobile engines. As a result they are some of the dirtiest engines in the country, and the U.S. Environmental Protection Agency is tightening down on their emissions.

Propane helps clean up those engines. Big names such as Ferris have already rolled out commercial zero-turn mowers, with nine other manufacturers following suit this year. When the new mowers come, Delta will be ready to fuel them.

“It looks like there’s a great opportunity in lawnmowers,” Platz said. “The propane-based mowers actually meet all the EPA’s 2012 emissions standards.”

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