| Item 1. | 1 | |||
| Item 1A. |
18 | |||
| Item 1B. |
38 | |||
| Item 2. |
38 | |||
| Item 3. |
39 | |||
| Item 4. |
39 | |||
| PART II | ||||
| Item 5. |
40 | |||
| Item 6. |
41 | |||
| Item 7. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
43 | ||
| Item 7A. |
64 | |||
| Item 8. |
66 | |||
| Item 9. |
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
66 | ||
| Item 9A. |
66 | |||
| Item 9B. |
67 | |||
| PART III | ||||
| Item 10. |
68 | |||
| Item 11. |
71 | |||
| Item 12. |
Security Ownership of Certain Beneficial Owners and Management and Related Unitholder Matters |
79 | ||
| Item 13. |
Certain Relationships, Related Transactions and Director Independence |
81 | ||
| Item 14. |
84 | |||
| PART IV | ||||
| Item 15. |
85 | |||
Recent Developments
On October 4, 2007, Inergy acquired the assets of Riverside Oil and Gas Company headquartered in Chestertown, New York. At the time of the acquisition, Riverside Oil and Gas delivered retail propane to approximately 3,800 customers.
On October 5, 2007, Inergy acquired the membership interests of Arlington Storage Company, LLC (“ASC”). ASC is the majority owner and operator of the Steuben Gas Storage Company (“Steuben”), which owns a natural gas storage facility located in Steuben County, New York, with approximately 6.2 bcf of working gas capacity, maximum withdrawal capacity of 60 MMcf/day and maximum injection capability of 30 MMcf/day. In addition to Steuben, ASC owns the development rights to the Thomas Corners storage project (“Thomas Corners”). Thomas Corners is also located in Steuben County, and, upon completion, will have a working gas capacity of approximately 5.7 bcf and maximum withdrawal and injection capabilities of 100 MMcf/day and 50 MMcf/day, respectively. Inergy expects the Thomas Corners project to be developed and commercially operational by fall of 2009.
General
Inergy Holdings, L.P.
Our cash-generating assets consist of our partnership interests, including incentive distribution rights in Inergy, L.P. (NASDAQ: NRGY), a publicly traded Delaware limited partnership, which operates a rapidly growing, geographically diverse retail and wholesale propane supply, marketing and distribution business. In addition to Inergy’s retail and wholesale propane business, Inergy also owns and operates a growing midstream operation including a natural gas storage facility (“Stagecoach”), a liquefied petroleum gas (“LPG”) storage facility and a natural gas liquids (“NGL”) business.
Our primary objective is to increase distributable cash flow to our unitholders through our ownership of partnership interests in Inergy. Our incentive distribution rights in Inergy entitle us to receive an increasing percentage of total cash distributions made by Inergy as it reaches certain target distribution levels and have resulted in increasing cash distributions to us. In addition, we may elect to make additional investments in Inergy which would increase our ownership interest in Inergy. The proceeds of such investments may be used by Inergy to pursue its growth strategy.
Inergy’s primary objective is to increase distributable cash flow to its unitholders. Inergy has primarily grown through acquisitions of retail propane and certain midstream operations. Inergy further intends to pursue its growth objectives through acquisitions of both propane and midstream operations, internally generated expansion, and measures aimed at increasing the profitability of existing operations.
Our aggregate partnership interests in Inergy as of September 30, 2007, consist of the following:
| • | a 100% ownership interest in each of the managing general partner of Inergy, which manages Inergy’s business and affairs, and the non-managing general partner of Inergy, which owns an approximate 0.9% general partner interest in Inergy; |
| • | 4,706,689 Inergy common units, representing an aggregate limited partner interest in Inergy of approximately 9.4%; and |
| • | all of the incentive distribution rights in Inergy, which entitle us to receive increasing percentages, up to a maximum of 48.0%, of any cash distributed by Inergy as certain target distribution levels are reached in excess of $0.33 per Inergy unit in any quarter. |
1
Our cash flows consist of distributions from Inergy on the partnership interests we own. Inergy is required by its partnership agreement to distribute all of its cash on hand at the end of each quarter, less reserves established by its managing general partner in its sole discretion to provide for the proper conduct of Inergy’s business or to provide for future distributions. While we, like Inergy, are structured as a limited partnership, our capital structure and cash distribution policy differ materially from those of Inergy. Most notably, our general partner does not have an economic interest in us and is not entitled to receive any distributions from us and our capital structure does not include incentive distribution rights. Therefore, our distributions are allocated exclusively to our common units, which is our only class of security outstanding.
The incentive distribution rights entitle us to receive an increasing percentage of cash distributed by Inergy as certain target distribution levels are reached. They generally entitle us to receive 13.0% of all cash distributed in a quarter after each Inergy unit has received $0.33 for that quarter, 23.0% of all cash distributed after each Inergy unit has received $0.375 for that quarter and 48.0% of all cash distributed after each Inergy unit has received $0.45 for that quarter. For the quarter ended September 30, 2007, Inergy declared a distribution of $0.595 per unit, which resulted in our company receiving approximately $11.4 million in distributions comprised of approximately $2.8 million from the limited partnership units we own of Inergy, approximately $0.4 million from our 0.9% non-managing general partner interest in Inergy and approximately $8.2 million from the incentive distribution rights of Inergy.
On October 25, 2007, we declared a quarterly distribution on our common units of $0.535 per limited partner unit, or $2.14 per limited partner unit on an annualized basis.
The address of our principal executive offices is Two Brush Creek Boulevard, Suite 200, Kansas City, Missouri, 64112 and our telephone number at this location is 816-842-8181. Our common units trade on the NASDAQ Global Select National Market under the symbol “NRGP.” We electronically file certain documents with the SEC. We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K (as appropriate), along with any related amendments and supplements. From time-to-time, we also may file registration and related statements pertaining to equity or debt offerings. You may read and download our SEC filings over the internet from several commercial document retrieval services as well as at the SEC’s website at www.sec.gov. You may also read and copy our SEC filings at the SEC’s public reference room located at 100 F. Street, N.E., Washington, D.C. 20549. Please call the SEC 1-800-SEC-0330 for further information concerning the public reference room and any applicable copy charges. In addition, our SEC filings are available at no cost after the filing thereof on our website at www.inergypropane.com. Please note that any internet addresses provided in this Form 10-K are for information purposes only and are not intended to be hyperlinks. Accordingly, no information found and/or provided at such internet addresses is intended or deemed to be incorporated by reference herein.
Inergy, L.P.
Inergy, L.P., a publicly traded Delaware limited partnership, was formed on March 7, 2001 but did not conduct operations until the closing of its initial public offering on July 31, 2001. Inergy owns and operates, principally through its operating company, Inergy Propane, LLC, a rapidly growing, geographically diverse retail and wholesale propane supply, marketing and distribution business. Inergy also operates a growing midstream business that includes the Stagecoach natural gas storage facility, an LPG storage facility and an NGL business.
Inergy believes it is the fifth largest propane retailer in the United States, excluding cooperatives, based on retail propane gallons sold. For the fiscal year ended September 30, 2007, Inergy sold approximately 362.2 million gallons of propane to retail customers and sold approximately 383.9 million gallons of propane to wholesale customers. Inergy’s propane business includes the retail marketing, sale and distribution of propane, including the sale and lease of propane supplies and equipment, to residential, commercial, industrial and agricultural customers. Inergy markets its propane products under various regional brand names. As of November 1, 2007, Inergy serves approximately 700,000 retail customers in 28 states from 321 customer service centers which have
2
an aggregate of approximately 32.2 million gallons of above-ground propane storage. In addition to its retail propane business, Inergy operates a wholesale supply, marketing and distribution business, providing propane procurement, transportation and supply and price risk management services to its customer service centers, as well as to independent dealers, multistate marketers, petrochemical companies, refinery and gas processors and a number of other NGL marketing and distribution companies in 40 states, primarily in the Midwest, Northeast and Southeast.
Inergy also owns and operates a midstream operation including the following assets:
| • | the Stagecoach natural gas storage facility, a high performance, multi-cycle natural gas storage facility with approximately 26.25 bcf of working gas capacity, a maximum withdrawal capability of 500 MMcf/day, and a maximum injection capability of 250 MMcf/day. Located 150 miles northwest of New York City, the Stagecoach facility is among the closest natural gas storage facilities to the northeastern United States market. Stagecoach is connected to Tennessee Gas Pipeline Company’s 300-Line. The facility is fee-based and is currently 100% committed primarily with investment grade-rated companies with term contracts that have a weighted average maturity extending to August 2014. |
| • | an NGL business in Bakersfield, California, which includes natural gas processing, NGL fractionation, NGL rail and truck terminals, bulk storage, trucking and marketing operations. |
| • | the Bath Storage Facility, an LPG storage facility with a 1.4 million barrel salt cavern storage facility located near Bath, New York, approximately 210 miles northwest of New York City and 60 miles from Inergy’s Stagecoach facility. The facility is supported by both rail and truck terminals capable of loading/unloading 15 – 17 rail cars per day and 15 truck transports per day. |
Inergy has grown primarily through acquisitions. Since its predecessor’s inception in November 1996 through September 30, 2007, Inergy has acquired the assets and liabilities of 72 companies for an aggregate purchase price of approximately $1.5 billion, including working capital, assumed liabilities and acquisition costs. The acquisitions include the assets and liabilities of 11 propane companies and 2 midstream companies acquired during fiscal 2007 for an aggregate purchase price, net of cash acquired, of approximately $98.9 million.
The following chart sets forth information about each business Inergy acquired during the fiscal year ended September 30, 2007, and through the date of this filing:
| Acquisition Date |
Company |
Location | ||
| October 2006 | Bath Storage Facility | Bath, NY | ||
| October 2006 | Columbus Butane Company, Inc. | Columbus, MS | ||
| October 2006 | Hometown Propane, Inc. | Campbell, NY | ||
| November 2006 | Mideastern Oil Company, Inc. | Salisbury, MD | ||
| December 2006 | Sunbelt Energy of Florida, LLC | Jacksonville, FL | ||
| December 2006 | Stevens Gas Service, Inc. | Essex Junction, VT | ||
| February 2007 | South Lateral Pipeline | Tioga County, NY | ||
| May 2007 | F&S Oil Company | Waterbury, CT | ||
| July 2007 | Brent & Selma retail propane locations | Selma, AL | ||
| August 2007 | Quality Propane, Inc. | Tallahassee, FL | ||
| August 2007 | Bay Cities Gas Corporation | Tampa, FL | ||
| September 2007 | Prince Oil Company, Inc. (d/b/a Valley Propane) | Christiansburg, VA | ||
| September 2007 | DeCock Bottled Gas & Oil Company | Escanaba, MI | ||
| Acquisitions after |
||||
| October 2007 | Riverside Gas & Oil Company | Chestertown, NY | ||
| October 2007 | Arlington Storage Company, LLC | Steuben County, NY | ||
3
Industry Background and Competition
Propane
Propane, a by-product of natural gas processing and petroleum refining, is a clean-burning energy source recognized for its transportability and ease of use relative to alternative stand-alone energy sources. Inergy’s retail propane business consists principally of transporting propane to its customer service centers and other distribution areas and then to tanks located on its customers’ premises. Retail propane falls into four broad categories: residential, industrial, commercial, and agricultural. Residential customers use propane primarily for space and water heating. Industrial customers use propane primarily as fuel for forklifts and stationary engines, to fire furnaces, as a cutting gas, in mining operations and in other process applications. Commercial customers, such as restaurants, motels, laundries and commercial buildings, use propane in a variety of applications, including cooking, heating and drying. In the agricultural market, propane is primarily used for tobacco curing, crop drying, poultry brooding and weed control.
Propane is extracted from natural gas or oil wellhead gas at processing plants or separated from crude oil during the refining process. Propane is normally transported and stored in a liquid state under moderate pressure or refrigeration for ease of handling in shipping and distribution. When the pressure is released or the temperature is increased, it is usable as a flammable gas. Propane is colorless and odorless; an odorant is added to allow its detection. Propane is clean-burning, producing negligible amounts of pollutants when consumed.
The retail market for propane is seasonal because it is used primarily for heating in residential and commercial buildings. Approximately 70% of Inergy’s retail propane volume is sold during the peak heating season from October through March. Consequently, sales and operating profits are generated mostly in the first and fourth calendar quarters of each calendar year.
Propane competes primarily with natural gas, electricity and fuel oil as an energy source, principally on the basis of price, availability and portability. Propane is more expensive than natural gas on an equivalent BTU basis in locations served by natural gas, but serves as an alternative to natural gas in rural and suburban areas where natural gas is unavailable or portability of product is required. Historically, the expansion of natural gas into traditional propane markets has been inhibited by the capital costs required to expand pipeline and retail distribution systems. Although the extension of natural gas pipelines tends to displace propane distribution in areas affected, Inergy believes that new opportunities for propane sales arise as more geographically remote neighborhoods are developed. Propane is generally less expensive to use than electricity for space heating, water heating, clothes drying and cooking. Although propane is similar to fuel oil in certain applications and market demand, propane and fuel oil compete to a lesser extent than propane and natural gas, primarily because of the cost of converting to fuel oil. The costs associated with switching from appliances that use fuel oil to appliances that use propane are a significant barrier to switching. By contrast, natural gas can generally be substituted for propane in appliances designed to use propane as a principal fuel source.
In addition to competing with alternative energy sources, Inergy competes with other companies engaged in the retail propane distribution business. Competition in the propane industry is highly fragmented and generally occurs on a local basis with other large full-service, multi-state propane marketers, smaller local independent marketers and farm cooperatives. Based on industry publications, Inergy believes that the 10 largest retailers account for approximately 40% of the total retail sales of propane in the United States, and that no single marketer has a greater than 10% share of the total retail market in the United States. Most of Inergy’s customer service centers compete with several marketers or distributors. Each customer service center operates in its own competitive environment because retail marketers tend to locate in close proximity to customers. Inergy’s typical customer service center generally has an effective marketing radius of approximately 25 miles, although in certain rural areas the marketing radius may be extended by a satellite location.
The ability to compete effectively further depends on the reliability of service, responsiveness to customers and the ability to maintain competitive prices. Inergy believes that its safety programs, policies and procedures are more comprehensive than many of its smaller, independent competitors and give Inergy a competitive advantage
4
over such retailers. Inergy also believes that its service capabilities and customer responsiveness differentiate it from many of these smaller competitors. Inergy’s employees are on call 24-hours and seven-days-a-week for emergency repairs and deliveries.
Retail propane distributors typically price retail usage based on a per gallon margin over wholesale costs. As a result, distributors generally seek to maintain their operating margins by passing costs through to customers, thus insulating themselves from volatility in wholesale propane prices.
The propane distribution industry is characterized by a large number of relatively small, independently owned and locally operated distributors. Each year, a significant number of these local distributors have sought to sell their business for reasons that include, among others, retirement and estate planning. In addition, the propane industry faces increasing environmental regulations and escalating capital requirements needed to acquire advanced, customer-oriented technologies. Primarily as a result of these factors, the industry is undergoing consolidation, and Inergy, as well as other national and regional distributors, have been active consolidators in the propane market. In recent years, an active, competitive market has existed for the acquisition of propane assets and businesses. Inergy expects this acquisition market to continue for the foreseeable future.
The wholesale propane business is highly competitive. Inergy’s competitors in the wholesale business include producers and independent regional wholesalers. Inergy believes that its wholesale supply and distribution business provides it with a stronger regional presence and a reasonably secure, efficient supply base, and positions it well for expansion through acquisitions.
Midstream
Inergy owns, as part of its midstream operations, a high-performance, multi-cycle natural gas storage facility (Stagecoach) in New York that it acquired in August 2005. Inergy also owns a natural gas liquids business in California, which includes natural gas processing, NGL fractionation, NGL rail and truck terminals, bulk storage, trucking and marketing operations, and a 1.4 million barrel salt cavern liquefied petroleum gas storage facility near Bath, New York. Inergy believes these businesses complement its existing propane operations and provide it with added long-term strategic benefits.
Natural Gas Storage Business
According to the Energy Information Administration’s 2007 report Natural Gas Consumption Overview, natural gas supplies approximately 23% of U.S. energy, generating about 26.4% of electric power, supplying heat to over half of all U.S. homes and providing over 35% of all primary energy for U.S. industries. In recent years, the market for natural gas has experienced increasingly volatile prices, due in part to the following factors:
| • | weather-related demand shifts; |
| • | infrastructure constraints; |
| • | trading impacts on short-term energy markets; and |
| • | supply, demand and other factors affecting alternative fuels. |
Underground natural gas storage facilities are a critical component of the North American natural gas transmission and distribution system. They provide an essential reliability cushion against unexpected disruptions in supply, transportation or markets, and allow for the warehousing of gas to meet expected seasonal and daily variability in demand. According to the Energy Information Administration, U.S. natural gas consumption is expected to grow at a compound annual growth rate of approximately 1.0% through 2020.
Most forecasts of North American natural gas supply and demand suggest a continuation of trends that will result in increased demand for natural gas storage capacity. Seasonal and weather sensitive demand sectors (residential and commercial heating demand and gas-fired power generation demand) have been growing and are expected to
5
continue to do so, while the less seasonal industrial demand has been declining. Natural gas supply, meanwhile, has become almost entirely non-seasonal, requiring greater reliance on natural gas storage to respond to demand variability. On average, total North American natural gas consumption levels are approximately 40% higher in the winter months than summer months primarily due to the requirements of residential and commercial market sectors. These markets are very temperature sensitive with demand being highly variable both on a seasonal and a daily basis thus requiring that storage be capable of providing high maximum daily deliverability on the coldest days when storage due to infrastructure constraints provides as much as 50% of the market’s total requirement. Analysis has shown that seasonal winter demand has continued to show steady growth even though warmer winter temperature trends have muted the full impact of this increasing demand. Gas storage has facilitated the creation of a natural gas industry that is characterized by a production profile that is largely non-seasonal and a consumption profile that is highly seasonal and weather sensitive. Natural gas storage is essential in reallocating this inherent supply and demand imbalance.
In the natural gas storage business, there are significant barriers to entry, particularly in depleted reservoir storage such as the Stagecoach facility. Barriers include:
Geology: rock quality, depth, containment and reservoir size heavily influence development opportunities;
Geography: proximity to existing pipeline infrastructure, surface development, and complicated land ownership all combine to further increase the difficulty in developing and operating natural gas storage facilities;
Specialized skills: finding and retaining qualified and skilled natural gas storage professionals is a challenge in today’s competitive job market in the oil & gas sectors due to the specialized nature of the skills required; and
Development costs: costs for new natural gas storage capacity development have continued to increase.
Although there are significant barriers to entry within the natural gas storage industry, competition is robust. Competition for natural gas storage is primarily based on location, connectivity, and the ability to deliver natural gas in a timely and reliable manner. Inergy’s natural gas storage facility competes with other means of natural gas storage, including other depleted reservoir facilities, salt cavern storage facilities, and liquefied natural gas and pipelines.
Storage capacity is held by a wide variety of market participants for a variety of purposes such as:
Reliability: local distribution companies (“LDCs”) hold the bulk of capacity and tend to use it in a manner relatively insensitive to gas prices, injecting gas into storage during the summer to meet fairly well-defined inventory targets, and withdrawing it in winter to meet peak load requirements while retaining a sufficient cushion of inventory to meet worst-case, late winter demands. For such customers with an obligation to serve core end use markets, the value of storage may be significantly greater than the price differential between winter and summer gas. LDCs will pay the price to secure the natural gas storage they need up to the cost of alternatives (i.e., long haul pipeline capacity or above-ground storage).
Efficiency: pipeline operators use storage capacity for system balancing requirements and to manage maintenance schedules, as well as to provide storage services to shippers on their systems. Producers use capacity to minimize production fluctuations and to manage market commitments. Power generators use storage capacity to provide swing capability for their plants that experience high daily and even hourly variability of requirements.
Arbitrage: energy merchants and other trading entities use storage for gas price arbitrage purposes, buying and injecting gas at times of low gas prices and withdrawing at times of higher prices as driven by the fundamentals of the natural gas market.
6
The value of natural gas storage is a reflection of its critical role in providing the North American natural gas market with a degree of supply reliability, flexibility, and seasonal and daily demand balancing.
NGL Business
In general, natural gas produced at the wellhead contains, along with methane, various NGLs. This “rich” natural gas in its raw form is usually not acceptable for transportation in the nation’s major natural gas pipeline systems or for commercial use as a fuel. Inergy’s natural gas processing operation, located in Bakersfield, CA, separates, for the most part, the NGLs from the methane, and delivers the methane to the local natural gas pipelines. The NGLs are retained for further processing within Inergy’s fractionation facility.
NGL fractionation facilities separate mixed NGL streams into discrete NGL products: ethane, propane, normal butane, isobutane, and natural gasoline. The three primary sources of mixed NGLs fractionated in the United States are (i) domestic natural gas processing plants, (ii) domestic crude oil refineries, and (iii) imports of butane and propane mixtures. The mixed NGLs delivered from domestic natural gas processing plants and crude oil refineries to our NGL fractionation facility are typically transported by NGL pipelines and, to a lesser extent, by railcar and truck.
NGL products (ethane, propane, normal butane, isobutane and natural gasoline) are typically used as raw materials by the petrochemical industry, feedstocks by refiners in the production of motor gasoline and by industrial and residential users as fuel. Ethane is primarily used in the petrochemical industry as feedstock for ethylene production, one of the basic building blocks for a wide range of plastics and other chemical products. Propane is used both as a petrochemical feedstock in the production of ethylene and propylene and as a heating, engine and industrial fuel. Normal butane is used as a petrochemical feedstock in the production of ethylene and butadiene (a key ingredient of synthetic rubber), as a blendstock for motor gasoline and to derive isobutane through isomerization. Isobutane is fractionated from mixed butane (a mixed stream of normal butane and isobutane) or produced from normal butane through the process of isomerization, principally for use in refinery alkylation to enhance the octane content of motor gasoline, in the production of iso-octane, and in the production of propylene oxide. Natural gasoline, a mixture of pentanes and heavier hydrocarbons, is primarily used as a blendstock for motor gasoline or as a petrochemical feedstock.
Inergy’s NGL business encounters competition from fully integrated oil companies, and independent NGL market participants. Each of Inergy’s competitors has varying levels of financial and personnel resources, and competition generally revolves around price, service and location. The majority of Inergy’s NGL processing and fractionation activities are processing mixed NGL streams for third-party customers and to support its NGL marketing activities under fee-based arrangements. These fees (typically in cents per gallon) are subject to adjustment for changes in certain fractionation expenses, including natural gas fuel costs. Inergy’s integrated midstream energy asset system affords it flexibility in meeting customers’ needs. While many companies participate in the natural gas processing business, few have a presence in significant downstream activities such as NGL fractionation and transportation, and NGL marketing as Inergy does. Inergy’s competitive position and presence in these downstream businesses allows it to extract incremental value while offering customers enhanced services, including comprehensive service packages.
Business Strategy
Our business strategy is to increase distributable cash flow to our unitholders through our ownership of partnership interests in Inergy. Our incentive distribution rights in Inergy entitle us to receive an increasing percentage of total cash distributions made by Inergy as it reaches certain target distribution levels and have resulted in increasing cash distributions to us.
7
Inergy’s Business Strategy
Inergy’s primary objective is to increase distributable cash flow for its unitholders, while maintaining the highest level of commitment and service to its customers. Inergy has engaged and will continue to engage in its objectives of further growth through acquisitions both in its propane and midstream operations, internally generated expansion, and measures aimed at increasing the profitability of its existing operations.
Competitive Strengths
Inergy intends to pursue this objective by capitalizing on what it believes are its competitive strengths as follows:
Proven Acquisition Expertise
Since Inergy’s predecessor’s inception and through September 30, 2007, Inergy has acquired and successfully integrated 72 companies—68 propane companies and 4 midstream businesses. Inergy’s executive officers and key employees, who together average more than 15 years experience in the propane and midstream energy-related industries, have developed business relationships with retail propane owners and businesses as well as midstream industry participants throughout the United States. These significant industry contacts have enabled Inergy to negotiate most of its acquisitions on an exclusive basis. Inergy believes that this acquisition expertise should allow it to continue to grow through strategic and accretive acquisitions. Inergy’s acquisition program will continue to seek:
| • | businesses that generate distributable cash flow that is accretive to Inergy common unitholders on a per unit basis; |
| • | propane and midstream businesses in attractive market areas; |
| • | propane businesses with established names with reputations for customer service and reliability; |
| • | propane businesses with high concentration of propane sales to residential customers; |
| • | midstream businesses that generate predictable, stable fee-based cash flow streams; |
| • | midstream businesses with organic growth opportunities or strategic regional enhancement; and |
| • | retention of key employees in acquired businesses. |
Management Experience
Our senior management team has extensive experience in the propane and midstream energy industry. Our management team has a proven track record of enhancing the value of our partnership, through the acquisition, integration and optimization of the businesses we own and operate.
Flexible Financial Structure
Inergy has a $350 million revolving credit facility for acquisitions and a $75 million revolving working capital facility. These facilities include a provision which allows us to utilize up to $200 million of combined borrowing capacity for working capital as needed during the winter heating season. Inergy believes its available capacity under these facilities combined with its ability to fund acquisitions through the issuance of additional partnership interests will provide a flexible financial structure that will facilitate its acquisition strategy.
Propane Business Strengths
Focus on High Percentage of Retail Sales to Residential Customers
Inergy’s retail propane operations concentrate on sales to residential customers. Residential customers tend to generate higher margins and are generally more stable purchasers than other customers. For the fiscal year ended
8
September 30, 2007, sales to residential customers represented approximately 69% of Inergy’s retail propane gallons sold. Although overall demand for propane is affected by weather and other factors, Inergy believes that residential propane consumption is not materially affected by general economic conditions because most residential customers consider home space heating to be an essential purchase. In addition, Inergy owns nearly 90% of the propane tanks located at its customers’ homes. In many states, fire safety regulations restrict the refilling of a leased tank solely to the propane supplier that owns the tank. These regulations, which require customers to switch propane tanks when they switch suppliers, help enhance the stability of Inergy’s customer base because of the inconvenience and costs involved with switching tanks and suppliers.
Regionally Branded Operating Structure
Inergy believes that its success in maintaining customer stability and its low cost operating structure at its customer service centers results from Inergy’s decentralized operation under established, locally recognized trade names. Inergy attempts to capitalize on the reputation of the companies it acquires by retaining their local brand names and employees, thereby preserving the goodwill of the acquired business and fostering employee loyalty and customer retention. Inergy expects its local branch management to continue to manage its marketing programs, new business development, customer service and customer billing and collections. Inergy believes that its employee incentive programs encourage efficiency and allow it to control costs at the corporate and field levels.
Operations in Attractive Propane Markets
A majority of Inergy’s propane operations are concentrated in attractive propane market areas, where natural gas distribution is not cost-effective, margins are relatively stable, and tank control is relatively high. Inergy intends to pursue acquisitions in similar attractive markets.
Comprehensive Propane Logistics and Distribution Business
One of Inergy’s distinguishing strengths is its propane procurement and distribution expertise and capabilities. For the fiscal year ended September 30, 2007, Inergy delivered approximately 383.9 million gallons of propane on a wholesale basis to our various customers. These operations are significantly larger on a relative basis than the wholesale operations of most publicly-traded propane businesses. Inergy also provides transportation services to these distributors through its fleet of transport vehicles, and price risk management services to its customers through a variety of financial and other instruments. The presence of Inergy’s trucks serving its wholesale customers allows Inergy to take advantage of various pricing and distribution inefficiencies that exist in the market from time to time. Inergy believes its wholesale business enables it to obtain valuable market intelligence and awareness of potential acquisition opportunities. Because Inergy sells on a wholesale basis to many residential and commercial retailers, Inergy has an ongoing relationship with a large number of businesses that may be attractive acquisition opportunities for it. Inergy believes that it will have an adequate supply of propane to support its growing retail operations at prices that are generally available only to large wholesale purchasers. This purchasing scale and resulting expertise also helps Inergy avoid shortages during periods of tight supply to an extent not generally available to other retail propane distributors.
Midstream Business Strengths
Strategically Located Assets
Inergy’s assets are situated close to or within demand based market areas, which positions Inergy well to leverage the services it offers to its customers relative to its competitors. Inergy owns and operates natural gas storage operations approximately 200 miles northwest of New York City. These assets are among the closest natural gas storage facilities to the New York City market and have the capability of delivering gas to this market as well as other Northeast and Mid-Atlantic market centers. Inergy also owns and operates an NGL operation in
9
Bakersfield, California, strategically situated between the major refining centers of Los Angeles and San Francisco. Inergy believes there are opportunities to further leverage its geographic location, expand its current asset base and to enhance the platform of services it offers to its customers that will further enhance the value and profitability of these assets.
Ability to Leverage Industry Relationships
Inergy’s management team has extensive industry relationships and they have been successful in leveraging these relationships with both new and existing customers of the midstream operations into profitable opportunities to further grow Inergy’s operations.
Stable Cash Flows
Inergy’s midstream operations consist predominantly of fee-based services that generate stable cash flows. Inergy’s Stagecoach operations are 100% fee-based with a weighted average contract maturity which extends to August 2014. These contracts are with investment-grade rated customers such as large east coast utilities and major gas marketing firms. The weighted average maturity of Stagecoach contracts extends to August 2014. In addition, Inergy’s West Coast NGL operations are also primarily fee-based and have little exposure to fluctuations in commodity prices. Inergy believes that this further adds to its stable cash flow and enhances its access to the capital markets.
10
Operations
Inergy’s operations reflect two reportable segments: propane operations and midstream operations.
Propane Operations
Retail Propane
Customer Service Centers
As of November 1, 2007, Inergy distributed propane to approximately 700,000 retail customers from 321 customer service centers in 28 states. Inergy markets propane primarily in rural areas, but also has a significant number of customers in suburban areas where energy alternatives to propane such as natural gas are generally not available. Inergy markets its propane primarily in the eastern half of the United States through its customer service centers using multiple regional brand names. The following table shows Inergy’s customer service centers by state:
| State |
Number of Customer Service Centers | |
| Alabama |
46 | |
| Arkansas |
2 | |
| Connecticut |
4 | |
| Florida |
23 | |
| Georgia |
5 | |
| Illinois |
4 | |
| Indiana |
22 | |
| Kentucky |
1 | |
| Maine |
5 | |
| Maryland |
8 | |
| Massachusetts |
4 | |
| Michigan |
34 | |
| Mississippi |
35 | |
| New Hampshire |
3 | |
| New Jersey |
4 | |
| New York |
11 | |
| North Carolina |
9 | |
| Ohio |
26 | |
| Oklahoma |
3 | |
| Pennsylvania |
9 | |
| Rhode Island |
1 | |
| South Carolina |
2 | |
| Tennessee |
10 | |
| Texas |
26 | |
| Vermont |
8 | |
| Virginia |
4 | |
| West Virginia |
3 | |
| Wisconsin |
9 | |
| Total |
321 | |
From its customer service centers, Inergy also sells, installs and services equipment related to its propane distribution business, including heating and cooking appliances. Typical customer service centers consist of an office and service facilities, with one or more 12,000 to 30,000 gallon bulk storage tanks. Some of Inergy’s customer service centers also have an appliance showroom. Inergy has several satellite facilities that typically contain only large capacity storage tanks.
11
Customer Deliveries
Retail deliveries of propane are usually made to customers by means of Inergy’s fleet of bobtail and rack trucks. Propane is pumped from the bobtail truck, which generally holds 2,500 to 3,000 gallons, into a stationary storage tank at the customer’s premises. The capacity of these tanks ranges from 100 gallons to 1,200 gallons, with a typical tank having a capacity of 100 to 300 gallons in milder climates and 500 to 1,000 gallons in colder climates. Inergy also delivers propane to retail customers in portable cylinders, which typically have a capacity of five to thirty-five gallons. These cylinders typically are picked up by Inergy and replenished at its distribution locations, then returned to the retail customer. To a limited extent, Inergy also delivers propane to certain customers in larger trucks known as transports, which have an average capacity of approximately 10,000 gallons. These customers include industrial customers, large-scale heating accounts and large agricultural accounts.
During the fiscal year ended September 30, 2007, Inergy delivered approximately half of its propane volume to retail customers and half to wholesale customers. Inergy’s retail volume sold to residential, industrial and commercial, and agricultural customers were as follows:
| • | approximately 69% to residential customers; |
| • | approximately 22% to industrial and commercial customers; and |
| • | approximately 9% to agricultural customers. |
No single retail customer accounted for more than 1% of Inergy’s revenue during the fiscal year ended September 30, 2007.
Approximately half of Inergy’s residential customers receive their propane supply under an automatic delivery program. Under the automatic delivery program, Inergy delivers propane to its heating customers approximately six times during the year. Inergy determines the amount of propane delivered based on weather conditions and historical consumption patterns. Inergy’s automatic delivery program eliminates the customer’s need to make an affirmative purchase decision, promotes customer retention by ensuring an uninterrupted supply and enables Inergy to efficiently route deliveries on a regular basis. Inergy promotes this program by offering level payment billing, discounts, fixed price options and price caps. In addition, Inergy provides emergency service 24 hours a day, seven days a week, 52 weeks a year.
Seasonality
The retail propane business is seasonal with weather conditions significantly affecting demand for propane. Inergy believes that the geographic diversity of its areas of operations helps to minimize its exposure to regional weather. Although overall demand for propane is affected by climate, changes in price and other factors, Inergy believes its residential and commercial business to be relatively stable due to the following characteristics:
| • | residential and commercial demand for propane has been relatively unaffected by general economic conditions due to the largely non-discretionary nature of most propane purchases by Inergy’s customers; |
| • | loss of customers to competing energy sources has been low; |
| • | the tendency of customers to remain with Inergy due to the product being delivered pursuant to a regular delivery schedule and to Inergy’s ownership of approximately 90% of the storage tanks utilized by its customers; and |
| • | Inergy’s ability to offset customer losses through a combination of acquisitions and to a lesser extent, sales to new customers in existing markets. |
Since home heating usage is the most sensitive to temperature, residential customers account for the greatest usage variation due to weather. Variations in the weather in one or more regions in which Inergy operates can significantly affect the total volumes of propane it sells and the margins it realizes and, consequently, its results
12
of operations. Inergy believes that sales to the commercial and industrial markets, while affected by economic patterns, are not as sensitive to variations in weather conditions as sales to residential and agricultural markets.
Transportation Assets and Maintenance
Inergy’s transportation assets are operated by L&L Transportation, LLC, a wholly owned subsidiary of Inergy Propane, LLC. The transportation of propane requires specialized equipment. Propane trucks carry specialized steel tanks that maintain the propane in a liquefied state. As of September 30, 2007, Inergy owned a fleet of approximately 143 tractors, 625 transports, 1,192 bobtail and rack trucks and 714 other service vehicles. In addition to supporting its retail and wholesale propane operations, Inergy’s fleet is also used to deliver butane and ammonia for third parties and to distribute natural gasoline for various processors and refiners.
Inergy owns truck fabrication and maintenance facilities located in Indiana and Ohio. Inergy also has a trucking operation located in California as part of its NGL business. Inergy believes that its ability to build and maintain the trucks it uses in its propane operations significantly reduces the costs Inergy would otherwise incur in purchasing and maintaining its fleet of trucks.
Pricing Policy
Inergy’s pricing policy is an essential element in its successful marketing of propane. Inergy bases its pricing decisions on, among other things, prevailing supply costs, local market conditions and local management input. Inergy relies on its regional management to set prices based on these factors. Inergy’s local managers are advised regularly of any changes in the posted prices of its propane suppliers. Inergy believes its propane pricing methods allow it to respond to changes in supply costs in a manner that protects its customer base and gross margins. In some cases, however, Inergy’s ability to respond quickly to cost increases could cause its retail prices to rise more rapidly than those of its competitors, possibly resulting in a loss of customers.
Billing and Collection Procedures
Inergy retains its customer billing and account collection responsibilities at the local level. Inergy believes that this decentralized approach is beneficial for a number of reasons:
| • | customers are billed on a timely basis; |
| • | customers are more likely to pay a local business; |
| • | cash payments are received faster; and |
| • | local personnel have current account information available to them at all times in order to answer customer inquiries. |
Trademarks and Trade Names
Inergy uses a variety of trademarks and trade names which it owns, including “Inergy” and “Inergy Services.” Inergy believes that its strategy of retaining the names of the companies it has acquired has maintained the local identification of such companies and has been important to the continued success of the acquired businesses. Inergy’s most significant tradenames that it operates under are “Arrow Gas”, “Blue Flame”, “Bradley Propane”, “Burnwell Gas”, “Country Gas”, “Dowdle Gas”, “Gaylord Gas”, “Hancock Gas”, “Highland Propane”, “Hoosier Propane”, “Independent Propane”, “Maingas”, “McCracken”, “Modern Gas”, “Moulton Gas Service”, “Northwest Energy”, “Ohio Gas”, “Pearl Gas”, “Pro Gas”, “Pulver Gas”, “United Propane”, and “Tru-Gas.” Inergy regards its trademarks, trade names and other proprietary rights as valuable assets and believes that they have significant value in the marketing of its products.
13
Wholesale Supply, Marketing and Distribution Operations
Inergy currently provides wholesale supply, marketing and distribution services to independent dealers, multi-state marketers, petrochemical companies, refinery and gas processors and a number of other NGL marketing and distribution companies, primarily in the Midwest and Southeast. While its wholesale supply, marketing and distribution operations accounted for approximately 28% of total revenue, this business represented approximately 4% of Inergy’s gross profit during the fiscal year ended September 30, 2007.
Marketing and Distribution
Because of the size of its wholesale operations, one of Inergy’s distinguishing strengths is its procurement and distribution expertise and capabilities. This is partly the result of the unique background of Inergy’s management team, which has significant experience in the procurement aspects of the propane business. Inergy also offers transportation services to these distributors through its fleet of transport trucks and price risk management services to its customers through a variety of financial and other instruments. Inergy’s wholesale supply, marketing and distribution business provides Inergy with an additional income stream as well as extensive market intelligence and acquisition opportunities. In addition, these operations provide Inergy with more secure supplies and better pricing for its customer service centers. Moreover, the presence of Inergy’s trucks across the Midwest and Southeast allows it to take advantage of various pricing and distribution inefficiencies that exist in the market from time to time.
Supply
Inergy obtains a substantial majority of its propane from domestic suppliers, with its remaining propane requirements provided by Canadian suppliers. During the fiscal year ended September 30, 2007, a majority of Inergy’s sales volume was purchased pursuant to contracts that have a term of one year; the balance of Inergy’s sales volume was purchased on the spot market. The percentage of Inergy’s contract purchases varies from year to year. Supply contracts generally provide for pricing in accordance with posted prices at the time of delivery or the current prices established at major storage points, and some contracts include a pricing formula that typically is based on such market prices. Some of these agreements provide maximum and minimum seasonal purchase guidelines.
Three suppliers, ExxonMobil Oil Corp. (13%), BP Amoco Corp. (12%) and Sunoco, Inc. (12%), accounted for approximately 37% of propane purchases during the past fiscal year. Inergy believes that contracts with these suppliers will enable it to purchase most of its supply needs at market prices and ensure adequate supply. No other single supplier accounted for more than 10% of propane purchases in the current year.
Propane generally is transported from refineries, pipeline terminals, storage facilities and marine terminals to Inergy’s approximate 650 storage facilities. Inergy accomplishes this by using its transports and contracting with common carriers, owner-operators and railroad tank cars. Inergy’s customer service centers and satellite locations typically have one or more 12,000 to 30,000 gallon storage tanks, which are generally adequate to meet customer usage requirements for seven days during normal winter demand. Additionally, Inergy leases underground storage facilities from third parties under annual lease agreements.
Inergy engages in risk management activities in order to reduce the effect of price volatility on its product costs and to help insure the availability of propane during periods of short supply. Inergy is currently a party to propane forward and option contracts with various third parties to purchase and sell propane at fixed prices in the future. Inergy monitors these activities through enforcement of its risk management policy.
14
Midstream Operations
Natural Gas Storage Operations
Stagecoach was acquired on August 9, 2005 and is a high performance, multi-cycle natural gas storage facility with approximately 26.25 bcf of working storage capacity of natural gas, maximum withdrawal capability of 500 MMcf/day, and maximum injection capability of 250 MMcf/day. Located approximately 150 miles northwest of New York City, the Stagecoach facility is currently connected to Tennessee Gas Pipeline Company’s 300 Line and is a significant participant in the northeast United States natural gas distribution system. On September 1, 2007, Inergy placed into full commercial service an expansion of its Stagecoach facility, which increased its working storage capacity of natural gas to approximately 26.25 bcf through the addition of approximately 13.0 bcf of storage to its existing 13.25 bcf working storage capacity. The Stagecoach facility, including the expansion storage capacity is 100% contracted with predominantly investment-grade rated customers such as large east coast utility companies and major gas marketing firms. As of September 30, 2007, the total capital invested in the Stagecoach facility including the initial acquisition and associated expansion capital was approximately $335.6 million. Stagecoach is also expected to construct a pipeline interconnect with the proposed Millennium Pipeline which will enhance and further diversify Inergy’s supply sources and provide interruptible wheeling opportunities to its shipper community.
West Coast NGL Operations
Inergy’s NGL business, located near Bakersfield, California, currently provides natural gas gathering/processing, liquids processing and fractionation, rail and truck terminal throughput, propane storage, natural gas liquids transportation, and purchase and sale of LPG purity products. The facility includes a 10,000 barrel per day NGL fractionation plant, a 25 million cubic feet per day natural gas processing plant, approximately 6 million gallons of NGL storage and state of the art rail and trucking terminals. This facility is supported by predominantly fee based contracts. Inergy has announced a significant capital expansion of this facility, including the construction of additional refrigerated NGL storage capacity and the installation of a butane isomerization unit to convert normal butane into isobutane for use by west coast refiners in gasoline blending. Inergy expects this expansion to be in commercial service by the fall of 2008.
Bath LPG Storage Facility
Inergy’s Bath LPG storage facility is a 1.4 million barrel salt cavern storage facility located near Bath, New York, approximately 210 miles northwest of New York City and approximately 60 miles from the Stagecoach facility. The facility is supported by both rail and truck terminals capable of loading and unloading 15-17 rail cars per day and 15 truck transports per day. The facility is currently fully contracted in butane and propane storage.
For more information on Inergy’s reportable business segments, see Note 14 to the Consolidated Financial Statements.
Employees
We have no employees. However, as of November 1, 2007, Inergy had 2,880 full-time employees and 91 part-time employees. Of the 2,971 employees, 113 were general and administrative and 2,858 were operational. Of the operational employees, 153 were members of labor unions. Inergy believes that its relationship with its employees is satisfactory.
Government Regulation
National Fire Protection Association Pamphlets No. 54 and No. 58, which establish rules and procedures governing the safe handling of propane, or comparable regulations, have been adopted as the law in substantially
15
all of the states in which Inergy operates. In some states these laws are administered by state agencies, and in others they are administered on a county or municipal level. Regarding the transportation of propane, ammonia and butane by truck, Inergy is subject to regulations promulgated under the Federal Motor Carrier Safety Act. These regulations cover the transportation of hazardous materials and are administered by the United States Department of Transportation. Inergy conducts ongoing training programs to help ensure that its operations are in compliance with applicable regulations. Inergy maintains various permits that are necessary to operate some of its facilities, some of which may be material to its operations. Inergy’s management believes that the procedures currently in effect at all of its facilities for the handling, storage and distribution of propane and the transportation of ammonia and butane are consistent with industry standards and are in compliance in all material respects with applicable laws and regulations.
Inergy’s midstream operations are subject to federal, state and local regulatory authorities. Specifically, Inergy’s Stagecoach natural gas storage facility and related assets are subject to the regulation of the Federal Energy Regulatory Commission, or FERC.
Under the Natural Gas Act of 1938 (“NGA”), FERC has authority to regulate gas transportation services in interstate commerce, including storage services. FERC’s authority to regulate those services includes the rates charged for the services, terms and conditions of service, certification and construction of new facilities, the extension or abandonment of services and facilities, the maintenance of accounts and records, the acquisition and disposition of facilities, the initiation and discontinuation of services, relationships with affiliated entities, and various other matters. Natural gas companies may not charge rates that, upon review by the FERC, are found to be unjust, unreasonable, or unduly discriminatory. In addition, the FERC prohibits natural gas companies from unduly preferring or unreasonably discriminating against any person with respect to pipeline transportation rates or terms and conditions of service. The rates and terms and conditions for such services are found in the FERC-approved tariff of Central New York Oil and Gas Company, LLC (“CNYOG”), Inergy’s regulated subsidiary and owner of the Stagecoach facility. Pursuant to the NGA, existing interstate transportation and storage rates may be challenged by complaint and are subject to prospective change by FERC. Additionally, rate increases proposed by the regulated pipeline or storage provider may be challenged by protest and such proposed increases may ultimately be rejected by FERC. CNYOG currently holds authority from FERC to charge and collect market-based rates for services it provides at the Stagecoach facility. There can be no guarantee that CNYOG will be allowed to continue to operate under such a rate structure for the remainder of the Stagecoach facility’s operating life. Any successful complaint or protest against rates charged for Stagecoach storage and related services, or CNYOG’s loss of market-based rate authority, could have an adverse impact on Inergy’s revenues.
In addition, the Stagecoach facility’s market-based rate authority would be subject to further review if it acquires transportation facilities or additional storage capacity, if Inergy or one of its affiliates provides storage or transportation services in the same market area or acquires an interest in another storage field that can link Inergy’s facilities to the market area or if Inergy or one of its affiliates acquire an interest in or is acquired by an interstate pipeline.
There can be no assurance that FERC will continue to pursue its approach of pro-competitive policies as it considers matters such as pipeline rates and rules and policies that may affect rights of access to natural gas transportation capacity, transportation and storage facilities. Any successful complaint or protest against such rates or loss of market-based rate authority could have an adverse impact on Inergy’s revenues associated with providing storage services.
In August, 2005, Congress enacted legislation that, among other matters, amends the NGA to make it unlawful for “any entity” to use any deceptive or manipulative device or contrivance in connection with the purchase or sale of natural gas or the purchase or sale of transportation services, including storage services such as those provided by the Stagecoach facility, subject to FERC regulation, in contravention of rules prescribed by the FERC. On January 20, 2006, the FERC issued rules implementing this provision. The rules make it unlawful for any entity, in connection with the purchase or sale of natural gas subject to the jurisdiction of the FERC, or the
16
purchase or sale of FERC-regulated transportation services, directly or indirectly, to use or employ any device, scheme or artifice to defraud; to make any untrue statement of material fact or omit to make any such statement necessary to make the statements made not misleading; or to engage in any act or practice that operates as a fraud or deceit upon any entity. The new legislation also amends the NGA to give the FERC authority to impose civil penalties for violations of the NGA up to $1,000,000 per day per violation. The new anti-manipulation rule does not apply to activities that relate only to intrastate or other non-jurisdictional sales, gas processing, or gathering, but does apply to activities of interstate gas pipelines and storage providers, as well as otherwise non-jurisdictional entities, such as gas processors, to the extent the activities are conducted “in connection with” gas sales, purchases or transportation subject to FERC jurisdiction. It therefore reflects an expansion of the FERC’s NGA enforcement authority.
Certain aspects of Inergy’s midstream operations are also subject to the Pipeline Safety Act of 2002, as amended by the Pipeline Inspection, Protection, Enforcement and Safety Act of 2006, which provides guidelines in the area of testing, education, training and communication. In addition to pipeline integrity tests, pipeline and storage companies are required to implement a qualification program to make certain that employees are properly trained. The United States Department of Transportation has approved Inergy’s qualification program. Inergy believes that it is in substantial compliance with these requirements and has integrated appropriate aspects of the law into its Operator Qualification Program, which is in place and functioning.
Additionally, Inergy is subject to stringent federal, state and local environmental, health and safety laws and environmental regulations governing its operations. These laws and regulations impose limitations on the discharge and emission of pollutants and establish standards for the handling of solid and hazardous wastes. Applicable laws include the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), the Clean Air Act, the Occupational Safety and Health Act, the Emergency Planning and Community Right to Know Act, the Clean Water Act and comparable state or local statutes. CERCLA, also known as the “Superfund” law, imposes joint and several liability without regard to fault or the legality of the original conduct on certain classes of persons that are considered to have contributed to the release or threatened release of a hazardous substance into the environment. While propane is not a hazardous substance within the meaning of CERCLA, other chemicals used in Inergy’s operations may be classified as hazardous substances. Failure to comply with these laws and regulations may result in the assessment of administrative, civil or criminal penalties, the imposition of remedial liabilities and the issuance of injunctions restricting or prohibiting Inergy’s activities. Inergy has not received any notices that it has violated these environmental laws and regulations in any material respect and it has not otherwise incurred any material liability or capital expenditure thereunder.
For acquisitions that involve the purchase of real estate, Inergy conducts due diligence investigations to assess whether any material or waste has been sold from, or stored on, or released or spilled from any of that real estate prior to its purchase. This due diligence includes questioning the seller, obtaining representations and warranties concerning the seller’s compliance with environmental laws and performing site assessments. During these due diligence investigations, Inergy’s employees, and, in certain cases, independent environmental consulting firms, review historical records and databases and conduct physical investigations of the property to look for evidence of contamination, compliance violations and the existence of underground storage tanks.
Recent scientific studies have suggested that emissions of certain gases, commonly referred to as “greenhouse gas” and including methane, a primary component of natural gas, and carbon dioxide, a byproduct of the burning of fuels such as propane and natural gas, may be contributing