There are pros and cons to using both natural gas and propane as crematory fuels, heavily influenced by their availability in your crematory’s location. If you’re struggling to make a choice between natural gas and propane, you have to exercise due diligence and precisely calculate which is best for you. Doing so will help your operating costs tremendously.
One crematory that has faced this situation head on is First State Cremation Center, Inc., in Millsboro, Del., which opened in May 2009. American funeral Director asked one of First State Cremation Center’s shareholders, David Salmon, how the company arrived at its decision.
Q: How has the natural gas versus propane situation changed for you over the years?
A: Our facility is a new venture whereby several funeral home owners and myself, a licensee without a funeral home, combined their resources to construct a facility like no other in our area. We built our facility from the ground up as a cremation center, recognizing the increased consumer demand for cremation combined with the opportunity to provide client families a state-of-art facility and incorporating a witnessing room, a pet crematory and a pet merchandise resource center.
Once the shareholders accepted the building design we contacted the natural gas distributor in our area, only to find out that there was a natural gas distribution line that ran in front of our building site, not a supply line we could tap into. In order for us to gain access to natural gas we would have to purchase a “Christmas tree” valve at $50,000, plus the cost of trenching a gas line to the building. Hence, plan B.
We sent out bid letters to four propane gas distributors in our area. Three responded. Of the three, one distributor was 4 cents less per gallon then the next lowest bidder. The price points from the three responders were a total of 7 cents difference. Now, that may not seem like much, however, when you factor in the volume we anticipated through historical cremation call data per the funeral home owners, plus a 3-4 percent annual increase in cremation call volume and adding in the pet crematory, the projected volume, on an annual basis, 7 cents is a significant number. We’re anticipating a 20,000 gallon first-year volume.
The fact that the natural gas option was way out of the budget turned out to be a blessing. With natural gas, the Public Utilities Commission regulates these suppliers in Delaware. Propane distributors are not (regulated), and the opportunity exists to bid-out propane.
Certainly, based on volume, a crematory facility may have some leverage with the natural gas supplier, but on the propane side, even a mid- to high-volume facility may garner a better price per gallon than with natural gas.
To keep everyone honest, based on the bid price, we found OPIS (a division of UCG, the parent company of Kates-Boylston). When we receive a propane delivery, our crematory technician notifies me of the gallon amount, price per gallon and the hazmat charge, I receive via e-mail the daily “rack rate” from OPIS. Our terms and conditions with our propane supplier are as follows: The rack rate at Delaware City, Del., where they receive their fuel, plus a per-gallon transport fee which is currently 11 cents per gallon, plus the bid amount. These three prices combined add up to our per-gallon price.
As it turned out, our first delivery was priced at typical commercial pricing. I notified the distributor and advised them that I was an OPIS subscriber and based on our bid contract they were at 70 cents over contract. They made the corrections in their computer and the subsequent two deliveries have been spot on with the OPIS price guide.
Q: Do you believe one method is more efficient than the other?
A: I’m not confident that one fuel is better over the other. Some like the convenience of not having a fuel delivery truck on site, plus not having to deal with underground or above-ground storage tanks. Ultimately, a crematory operation should spend a great deal of time looking at the peaks and valleys of fuel prices of any source and determine the volatility of each compared to the price.
We have three 1,000-gallon tanks buried on the premises to handle the projected at 1.6 months worth of operation (with reserve). We have installed high-pressure meters (at $225 each) for each unit to get readings at the start of a cremation and at the end of a cremation to determine fuel consumption in 100-cubic-feet increments for humans and pets. Based on usage and applying the conversion formula from cubic feet to gallons, we are able to zero in on the gallons of usage per cremation within 100 cubic feet (the meter factor).
Our units are using at 23 gallons for the first cremation and at a 15 percent reduction in fuel usage for each subsequent cremation. Based on Delaware Department of Natural Resources and Environmental Control code we can operate during daylight hours.
There have been discussions as to which fuel burns hotter (propane), yet which fuel is deemed more efficient and less costly (natural gas). In my opinion, based on last year’s run up in oil, gasoline, propane and natural gas prices and the volatility in the oil markets, whatever fuel a crematory is using (and yes, there are some out there still using heating fuel oil in their units) it makes sense to get the most out of your dollars by shopping around or meeting with the natural gas supplier to try and negotiate a better price.
If a crematory is currently using natural gas and is considering switching to propane, there will be some cost involved (i.e., the burner orifice, the thermal-coupler, spark plugs, etc.) Plus it will require propane tanks, or tying you to the supplier to provide the tanks. If you purchase the tanks, be certain you get a certificate of sale with the tank ID/serial numbers on the documentation, along with the meters and pressure valves where applicable.
The piping for natural gas is the large, 2-inch pipe. This is the pipe we installed and is fine for propane. The propane meters are high-pressure, and the system must maintain an 11-inch water column during the entire operation.
Q: Do you know of any other crematories that are going through the same situation?
A: I shared this information with a funeral home/crematory operation I know in Virginia. He had suspected that his fuel usage was at 40 gallons of propane per cremation. After reading his meter and using the formula to calculate fuel usage, he contacted his propane dealer. The difference in what he was billed and what he used was significant. They discovered a leak between the tank and the meter. He was issued a credit of $5,200. That’s at 2,500 to 3,000 gallons of propane he had paid for and didn’t use. If he hadn’t had a meter, this would have been extremely difficult to prove.
The conversion formulas are readily available online for all fuel types. You will need a source (OPIS) to determine the rack rate from the port your distributor is receiving propane or pipeline for natural gas. However, unless your unit is metered, using the fuel conversion formula and subscribing to OPIS is a moot point.
If you or a family member have any further questions or concerns with respect to cremation, cremation services, cremation costs or a direct cremation please feel free to contact Cremation Options toll free 24 hours daily at 1-877-989-9090.
Source: Joshua Cabe Johnson