Inergy Midstream Carving Gas Storage Niche In Marcellus

As we all know by now, it’s the midstream sector of the natural gas industry that is driving forward much of the activity in America’s energy sector, fed by the tax advantages offered through master limited partnerships. They come in all sizes, shapes and mixtures of businesses, which can often change on a moment’s notice or at an executive’s whim.

Today one of the most active midstream players is Inergy Midstream, LLC, a subsidiary of Inergy L.P. headquartered in Kansas City, MO. Inergy boasts of having the largest independent natural gas and LPG storage operations in the Northeast and also owns a unique solution mining and evaporative salt production company. Those efforts are strategically located atop the growing Marcellus Shale play in upstate New York. Inergy is among the nation’s fastest growing MLPs.

Another key component of Inergy’s business portfolio is propane. As the fourth-largest retail propane distribution company, it serves 800,000 customers from more than 300 customer service centers in 32 states.

William R. Moler is senior vice president of natural gas midstream operations for Inergy Midstream. He joined Inergy in 2004 as director of midstream operations and was promoted to senior vice president in 2007. Prior to joining Inergy, Bill held senior level positions with Westport Resources Corporation and Kinder Morgan. He received a B.S. in Mechanical Engineering from Texas Tech University. In an interview, he discussed the company’s growth and its energy strategies.

P&GJ: When was Inergy formed and how has it grown since its start-up?
Moler: Inergy was formed in 1996 by John Sherman, president and CEO of Inergy, and other members of its management team. Inergy, L.P. went public in July 2001 and has significantly expanded its operations to an enterprise value of over $3.5 billion today. Inergy has grown through the acquisition of 80 retail propane companies and six midstream businesses as well as through organic expansion projects in its midstream businesses.

P&GJ: How did Inergy get into the propane business and is this a profitable market today?
Moler: John Sherman and several other founding executives are propane industry veterans and in 1996, they set out to create one of the most profitable retail propane companies in the U.S. The retail propane market is highly fragmented, with less than 40% of the U.S. market share in the hands of the top 10 propane retailers. Inergy has been able to generate stable, recurring cash flows in a variety of operating environments and its financial and operational metrics lead the propane industry peer group.

P&GJ: What is Inergy’s strategy for its midstream assets? Is Inergy a classic example of a midstream energy company developing its own unique array of assets that its managers have found to be profitable?
Moler: Inergy’s strategy of diversifying its operations into the midstream energy sector has been very successful and has generated a second platform from which Inergy can grow its business. Inergy’s natural gas storage and transportation assets are uniquely situated within 200 miles of New York City and are or will be connected to the four major pipelines that deliver energy into the Northeast which is the largest and arguably the best demand market in the country.