LPG railyards

I'ma newbie here so I hope I am posting in the right spot. My question is that I am looking to find out more about how an LPG rail yard would work. Would each propane railyard tank be dedicated to a single gas distributor or could (would?) different gas distributors share the same railyard propane tank. That's what I am trying to understand. Any help would be appreciated.

I'm no Hank Hill (animated propane expert) but In many cases LPG tank cars are delivered directly to dealers' own rail sidings and unloaded directly into their on -site storage tanks.
The operation you seem to be asking about would most likely have one or more bulk storage tanks and the product would be loaded into trucks, either local delivery "bobtail" trucks or into larger tractor trailer units which then supply the dealers' own storage facilities. I doubt the various dealers would have seperate on -site storage at the bulk distribution rail terminal.

Thanks V8! Sounds like there are two different setups.

So for the bulk distribution rail terminal, I would think that distributors would be buying from specific wholesalers and they would not want their propane mixed with other distributors propane for Q/C reasons. That's why I was thinking separate tanks. I'm still not clear.

When a distributor brings their truck to pickup propane at a bulk distribution rail LPG terminal, is the distributor buying specific product they have ordered from a remote wholesaler? Or is it kinda like us going to a regular gas station and filling up with whatever's in the bulk distribution rail terminal propane storage tanks? I was thinking the former and thinking they would not want their propane mixed in with someone else's propane, thus my wondering about dedicated tanks. Do you have a sense for how that might all work?

And If it's more like going to a gas station, who would they even be buying propane from? Not the railroad, I wouldn't think.

G Steam if you want to understand Propane from Producer to retail seller may I recommend the following blog articles from the RBN Energy website;

Here are some of the relevant posts.

http://www.rbnenergy.com/the-art-of-ngl ... to-reality

http://www.rbnenergy.com/movin-down-the ... le-on-mapl

http://www.rbnenergy.com/the-great-stat ... uling-ngls

And more rail related;

http://www.rbnenergy.com/wild-west-ngls ... ds-markets

The webblogs are a fantastic resource for non-cognoscenti to learn a basic understanding of the Energy business, but even with their simplification some aspirin is occasionally needed.

Thanks JayBee, those are great primer articles.

So the takeaway for me is that the LPG bulk distribution piece is complicated and requires a lot of expertise. Seems like it would have to be an independent terminal operator and not a railroad running the show. Now I'm thinking the railroad might typically just provide some track space and let an LPG distributor setup the bulk railside storage/distribution operation.

The only rail LPG operation I have been able to find where the railroad is even partially involved with directly offering LPG bulk distribution seems to be with CSX, but I still think it is a company called Transflow that does the actual distribution, plus I don't think there are any storage tanks at that railyard.

Still not clear to me if an LPG bulk rail terminal would co-mingle various customer's propane in the same railside storage tank. Actually, come to think of it, I still don't think I'm very clear on much of any of this.

But I do appreciate the helpful responses received so far! Any other thoughts out there?

GSteam wrote: So for the bulk distribution rail terminal, I would think that distributors would be buying from specific wholesalers and they would not want their propane mixed with other distributors propane for Q/C reasons. That's why I was thinking separate tanks. I'm still not clear.

When a distributor brings their truck to pickup propane at a bulk distribution rail LPG terminal, is the distributor buying specific product they have ordered from a remote wholesaler? Or is it kinda like us going to a regular gas station and filling up with whatever's in the bulk distribution rail terminal propane storage tanks? I was thinking the former and thinking they would not want their propane mixed in with someone else's propane, thus my wondering about dedicated tanks. Do you have a sense for how that might all work?

Let me clarify a little bit. There are two different sources for Liquid Propane for a retail distribution. One source is the Refinery, typically they sell the Propane they produce though a Logistics provider called a "Midstreamer" in the Energy business. Typically the amounts are small and the Output will go directly to a Retail seller of Propane. Both Truck and Rail will move this supply. The much bigger source is from Natural Gas Wells, especially those described as "Wet". The output from these wells goes to a fractionator which separates out the individual gases, Methane, Ethane, Propane, Butane, Iso-butane, Pentane, Hexane, and a few others. The output of almost all the fractionators is described as "Purity Grade" meaning it meats a National Standard for how pure it is. So once this is done the product is freely traded by the companies in the business, and a sale by one company to another frequently does not result in any movement of the Propane. Rather the result will be that Mega Storage Co. will record on its books that ABC Midstream LLP sold 100,000 barrels of Propane out of the total of 500,000 barrels stored in tank #21 to XYZ Propane Co. There are two big pricing and storage hubs in the US East of the Rocky Mountains, the Henry Hub at Erath, LA, and the Conwy Hub at Conwy, KS.

Thanks again JayBee! Very helpful.

It sounds to me like ABC Midstreamer would then be the company with railside propane storage tanks intended for further distribution. The railroad would be providing rail transportation for Mega Storage Co. and maybe leasing out some track/railyard space to ABC Midstreamer Company. Sound about right?

Would XYZ Propane be buying product from the midstreamer or from Mega Storage Co? XYZ Propane buying from ABC Midstream instead of Mega Storage makes more sense to me as a standard product distribution model - but it sounds different from what you wrote if I'm reading your reply correctly. Then who pays ABC Midstream and what type of contracts would ABC Midstream have and with whom?

Sounds like ABC Midstream provides a valuable service I'm just trying to understand who their clients would be and how they might justify plunking down all sorts of money to build expensive facilities. Maybe they would have territorrial exclusive rights with various entities. Just a guess.

GSteam wrote: So the takeaway for me is that the LPG bulk distribution piece is complicated and requires a lot of expertise. Seems like it would have to be an independent terminal operator and not a railroad running the show. Now I'm thinking the railroad might typically just provide some track space and let an LPG distributor setup the bulk railside storage/distribution operation.

Doing research against the Grafton and Upton RR, by any chance?

exactly what i was thinking, chrisf !

GSteam wrote:Thanks again JayBee! Very helpful.

It sounds to me like ABC Midstreamer would then be the company with railside propane storage tanks intended for further distribution. The railroad would be providing rail transportation for Mega Storage Co. and maybe leasing out some track/railyard space to ABC Midstreamer Company. Sound about right?

Mega Storage would own the storage tanks at the large hub, not way out near the retail customer, also likely that they would own the loading racks for rail tankcars at their facility.
ABC Midstream would own, or more likely lease on a long-term basis, rail tankcars to deliver the Propane to XYZ Propane. If they are big enough ABC Midstream may also own pipelines to supply their largest customers, or to reach a large regional distribution center. The local storage tank would be own by XYZ Propane and typically would hold 3-5 rail tankcars worth of Propane.

Would XYZ Propane be buying product from the midstreamer or from Mega Storage Co? XYZ Propane buying from ABC Midstream instead of Mega Storage makes more sense to me as a standard product distribution model - but it sounds different from what you wrote if I'm reading your reply correctly. Then who pays ABC Midstream and what type of contracts would ABC Midstream have and with whom?

XYZ Propane would be buying from ABC Midstream. ABC Midstream would buy Propane from Refineries(under a "Keep Dry" contract) or on the NYMEX Propane Futures market. Most likely both.
http://www.eoddata.com/stockquote/NYMEX/PN.htm

Sounds like ABC Midstream provides a valuable service I'm just trying to understand who their clients would be and how they might justify plunking down all sorts of money to build expensive facilities. Maybe they would have territorrial exclusive rights with various entities. Just a guess.

They make money by providing a service to bridge between the Propane producers and the Propane users, and they make their money for the service they provide. They have limited territorial rights (markets that are large enough that they own pipelines to serve.) More often because of their knowledge of the risks in the market, and how to avoid falling to them they are survivors. There are no barriers to entry other than large capital requirements, and the need to build commercial relationships with the underlying trust required.

Wow, JayBee, thanks for taking the time to put that all together. That should keep me busy for awhile.

Cheers!