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September 24, 2013

XNG building, expanding CNG hubs

Mainebiz graphic / Matt Selva
Mainebiz graphic / Matt Selva
Xpress Natural Gas plans to add a distribution hub in Eliot early next year and plans to expand its existing Baileyville distribution hub by the end of 2013.

Boston-based Xpress Natural Gas is increasing its footprint in Maine with plans to build a second compressed natural gas distribution hub in Eliot by early next year and increase capacity at its Baileyville operation by 40% this year.

"We still have permitting to go through, but if there are any delays on those fronts, we have backup locations as well," John Nahill, XNG's president and CEO, says of the Eliot expansion.

Nahill told Mainebiz the new facility will help the company meet a growing demand for its truck-delivered fuel. Nahill says the company's Baileyville hub had sold out since starting earlier this year, as the company brought on clients including paper mills in Madison and Lincoln and hospitals in Presque Isle and Caribou. Before the end of the year, Nahill says he expects to begin deliveries to Great Northern Paper mill in Millinocket and clients in New Hampshire.

With a location in the southernmost part of the state, near interstates 95, 495 and 93, Nahill says the company will be able to reach customers in New Hampshire, southern Maine, Vermont and Massachusetts.

To meet the immediate increase in demand, Nahill says the company plans to increase delivery capacity at the Baileyville distribution hub 40%, which would make the facility capable of delivering 40 truckloads of compressed natural gas a day. Plans for the new Eliot distribution hub call for the same capacity. Together, the plants would give the company the ability to displace up to 200,000 gallons of oil fuel, or around 300,000 gallons of propane fuel, per day.

Nahill says the company is on track to meet its goal of displacing the equivalent of 30 million gallons of heating oil by the end of this year, a goal set in 2011 when the company started Maine operations. Nahill says he expects the company will displace over 30 million gallons in 2014 alone.

As XNG looks to expand its reach, the company's target market is also growing.

"We started 100% industrial," Nahill says of the company's customer base. Within two to three years — at full build-out of its Maine operation — he expects the customer mix will be closer to 50-50, between industrial and commercial clients.

Earlier this year, the company formed partnerships with Dead River Co. and Maine Natural Gas as part of an effort to reach those commercial clients.

The company is also in negotiations for a location in central Maine. Nahill declined to say where until the process is further along. Nahill says the company expects to have 40 direct employees and 150 indirect workers driving and maintaining its fleet when the Eliot expansion is completed.

Those expansions are based on a projected increase in demand for natural gas in the state and region, says Nahill.

"We see more supply coming and prices of natural gas actually declining," Nahill says.

Nahill credits the low price of natural gas and, in part, customers' limited access to pipeline natural gas, for the increasing demand.

But he views pipeline service as a complement to what XNG provides, operating as a bridge or transitional service that can get customers converted and accustomed to using natural gas before a pipeline becomes available.

"We offer transition services for a company until the pipeline gets there, and sometimes that's going to be a matter of months and sometimes a matter of years," Nahill says.

That was the case with the UPM Madison mill, which plans to switch to pipeline gas by December after receiving compressed natural gas from XNG this spring. The mill's General Manager Russ Drechsel told Mainebiz in late August that he expects the pipeline natural gas will cost roughly one-third of heating oil, on a per-ton basis.

Nahill says the company has learned from the construction of its Baileyville operation and will build out more capacity for cleaning and processing the gas at the operation in Eliot before its compressed, which was a bottleneck at its first distribution hub.

"A lot of the first-time-out work was expended on Baileyville and now it's being replicated in Eliot," Nahill says.

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