Environment

At UGI, we practice responsibility throughout our business. We emphasize the necessity to reduce our environmental impact and encourage conservation and energy efficiency. As a distributor of our nation’s most affordable, efficient and cleanest fossil fuels, we supply today’s energy to power businesses and enrich the lives of our customers. Climate change creates a challenge that UGI must address to serve our customers’ energy needs for the next 140 years. UGI believes that safe, reliable, affordable, innovative and efficient operations will create sustainable investment opportunities and long-term value for our stakeholders.

Emissions and Climate Change

In our first materiality assessment, along with an internal assessment of risks and opportunities impacting our business, climate-related issues and GHG emissions proved to be material areas of focus. We believe UGI has an opportunity to continue to reduce emissions through investments in efficiencies and by offering innovative solutions to our customers. In addition to adhering to applicable laws and regulations, UGI remains committed to a three-step approach to combat climate change and GHG emissions:

Reduce our own emissions through investments in infrastructure and more efficient operations

Reduce our customers’ emissions through conversions, energy-efficiency programs and fleet conversions

Invest in alternatives to reduce our GHG emissions and provide innovative solutions to our customers

UGI is currently working to incorporate energy-management systems into the business that will create more robust and consistent datasets across all four of our business segments. Once fully implemented, we believe the systems will provide UGI with further opportunities to improve on our track record of environmental stewardship, including establishing GHG emission reduction targets on a fully-consolidated basis.

Financial and Physical Risk1

Many of our customers rely on UGI’s energy products and services to heat their homes and businesses, and for agricultural purposes such as crop drying. Therefore, to the extent that weather conditions may be affected by climate change, our results of operations are adversely affected by warmer-than-normal heating season weather or lack of precipitation. Weather conditions have a significant impact on the demand for our energy products and services for both heating and agricultural purposes.

Harsh weather conditions in other geographies may at times impede the transportation and delivery of LPG, or restrict our ability to obtain LPG from suppliers. Spikes in demand caused by weather or other factors can stress the supply chain and limit our ability to obtain additional quantities of LPG.

The adoption and implementation of any U.S. federal, state or local laws or regulations or foreign laws or regulations imposing obligations on, or limiting emissions of GHGs could increase our cost of providing service and we may not be able to pass these increased costs on to customers.

To the extent financial markets view the impact of climate change and emissions of GHGs as a financial risk, these factors could adversely affect our ability to access capital markets or cause us to receive less favorable terms in future financings.

1For a full list of risks relating to UGI and its subsidiaries, please see “Item 1A: Risk Factors” in UGI’s Annual Report on Form 10-K for the fiscal year ended September 30, 2019 and its Quarterly Report on Form 10-Q for the 6 months ended March 31, 2020.

Reducing Our Emissions – Smart Investments Lay the Foundation for Tomorrow’s World

Managing our own emissions not only plays a key role in the long-term sustainability of the Company, but it also promotes safety and efficiency.

Scope 1 Emissions

UGI Utilities

1UGI Utilities Scope 1 emissions restated due to a misclassification in the 2018 report, The Energy to Do More.

Midstream & Marketing

2Results in the 2018 ESG Report, The Energy to Do More, did not include emissions from UGI Energy Services’ Conemaugh and Hunlock facilities.

AmeriGas

UGI International

1UGI International LPG footprint includes the West & North Regions, which makes up ~85% of UGI International’s Net Income.

Scope 2 Emissions

UGI Utilities

2UGI Utilities Scope 2 emissions restated due to a misclassification in the 2018 report, The Energy to Do More.

AmeriGas

UGI International

TOMORROW’S ENGINEERING

The engineering team at Energy Services works to ensure that our assets incorporate new technology aimed at improving efficiency and reducing emissions. Our compressor stations utilize gas recovery systems to reduce emissions. Common, and widely-criticized practice, is to isolate compressors under full pipeline pressure and then “blow them down” to no pressure for maintenance. Our gas recovery system recycles the trapped gas so that other compressors operating at the station consume the gas as engine fuel. This new system reduces the vented gas from blowdowns by approximately 75%, which equates to a 15% – 20% reduction in total methane emissions associated directly with compressors.

Our Manning Liquefied Natural Gas Plant utilizes similar enhancements, including managing boil-off and incorporating a nitrogen recovery system to increase the efficiency of certain functions by as much as 20%. Additionally, the Manning system recovers vapor generated from trucking operations and injects it into the subcooled LNG produced by the liquefier. This enhancement helps to better manage boiloff production and avoids unnecessary venting.

Committed to Methane Reductions

Increasingly, methane emissions have been a focus of both UGI and our stakeholders. We take methane emissions seriously and continue to work towards more efficient methane management. As such, UGI Utilities is a partner in the EPA’s Natural Gas STAR and Methane Challenge programs. Participation in these programs signals a commitment to reduce methane emissions and furthers our goal to be a more efficient natural gas distribution company. Currently, we have the highest proportion of contemporary mains in the Commonwealth of Pennsylvania – nearly 90%. Through our pipeline replacement and betterment activities, investment in efficient assets, continuous improvement of our leak detection and repair programs, and other efforts, UGI Utilities operational fugitive methane emissions decreased by 90% over the last 20 years. During this time, the scope of our operations doubled. Therefore, our commitment to reduce methane emissions remains critically important to both the environment and the safety of the communities we serve. To achieve 2030 and 2040 target emission reductions, UGI Utilities will need to reduce emissions by 35% by 2030 and 55% by 2040 from current levels.

Committed to Methane Reductions

Pipeline Replacement and Betterment

Commitments

  • Replace all cast iron pipes by 2027
  • Replace all bare steel pipes by 2041
  • Our replacement rate is roughly 65 miles per year

Leak Detection and Repair

Our UGI Utilities team has procedures in place directed at minimizing risks through proactive detection of leaks across our 12,300 miles of gas mains. Our procedures comply with and, in many cases, exceed federal and state requirements. Primarily, we utilize flame ionization, optical methane detection, infrared detection, and laser detection for leak surveys, but we regularly evaluate new technology to better support the safety and efficiency of our system.

The frequency of surveys on our system varies and depends on a number of factors. These factors include the facility and the material of the pipe.

Leak repair timelines vary and depend largely on the classification of the leak. The classifications are based on safety, not GHG impact. Leaks, and repair timelines, are classified as follows:

The method of repair depends on the material, pressure, and the nature of the leak. Our repair methods include cut-out and replacement, leak clamp installations, and repair sleeve installations.

Small Product, Big Impact

Across our LPG businesses each year, we sell propane cylinders containing approximately 225 million gallons of propane. These cylinders can be used for indoor cooking, outdoor heating, and leisure activities, among other things. AmeriGas and UGI International have made investments into cylinder distribution to streamline our processes and improve the customer experience, but the small cylinders can have a large impact on our carbon footprint.

Of the 225 million gallons, roughly 50 million gallons can be attributed to leisure barbeque activity. These gallons displace charcoal which emits roughly 60% more CO2 than propane for a total CO2 reduction of approximately 370 million pounds! This is equivalent to taking 25,000 cars off the road.

Fleet Conversions

The AmeriGas team has been working with customers to deploy more propane fleets as an alternative to diesel. One area of considerable growth is school bus fleets, but AmeriGas has also experienced growth in nationwide fleets, forklifts, and lawnmowers. Autogas gallons increased 13% in Fiscal 2019 versus Fiscal 2018.

In Fiscal 2019, AmeriGas worked with the North Penn School District to convert its school bus fleet from diesel to LPG.

The demand for CNG has also been increasing. Like propane, CNG burns more cleanly than diesel and can reduce emissions by as much as 90%. Our Energy Services and Utilities teams have been working with customers to convert truck fleets to cleaner burning and abundant CNG. UGI Utilities fuels the Lehigh and Northampton Transportation Authority (LANta) natural gas bus fleet, which had 44 CNG buses in 2019 and is expected to have an additional 10 CNG buses by the end of 2020.

Leading by Example – Sustainable Facilities

The UGI and AmeriGas headquarters is in Valley Forge, Pennsylvania. The building is LEED certified Silver and is served with 50 kW of power from a roof-mounted solar PV energy system. Many of our facilities have been upgraded to LED fixtures and occupancy sensors have been added to help reduce electric usage.

April 2020 marked the one-year anniversary of the opening of UGI Utilities’ Lancaster County headquarters, powered by a combined heat and power (CHP) system.

Air Quality

Not only is air quality an important contributor to climate change, it impacts our relationship with the communities in which we operate. All of our facilities with air permits are operating below our permit limits. The increase in 2019 air quality figures is attributable to the addition of compressor stations, expansion of gathering systems, and includes five months of the newly acquired CMG systems.

1Air quality figures restated due to a misclassification in the 2018 report, The Energy To Do More.

Water Management

While UGI does not use a significant amount of water resources in our regular business activities, we recognize the importance of maintaining water quality. Water analysis is an important aspect of UGI Utilities’ gas main construction. We conduct engineering analyses as part of our pipeline design to assess potential discharges to waterways. Through those efforts, we identify best practice management strategies for mitigating potential discharges. We include these practices in our plans and permits so that they are employed during the construction phase. This includes engineering analysis of horizontal drills below waterways to assess potential inadvertent returns to those waters, and implementation of engineering controls during the drilling operations to prevent and contain any that may occur. Additionally, we comply with all applicable regulations, including the Clean Water Act.

Recently, our Energy Services business completed pipeline construction in the Susquehanna River Basin. The activities associated with that construction were deemed water use neutral from a consumption perspective under the Susquehanna River Basin Commission regulations.

TOMORROW’S EFFICIENCY

Penn State Health Milton S. Hershey Medical Center and Penn State College of Medicine is installing a Combined Heat and Power (CHP) system at its facility. The plant is expected to be fully operational later this year.

The natural gas-fired plant will generate 60% of Milton S. Hershey Medical Center’s electricity and the majority of steam demand for climate control, cooking, hot water generation and sterilization of medical equipment.

Installation of the CHP plant was aided by an Alternative and Clean Energy grant and by Act 129, Pennsylvania’s energy efficiency resource program. In addition, the plant provides Milton S. Hershey Medical Center with significant economic and environmental benefits.

“The CHP plant has a tremendous economic benefit to us,” said Kevin Kanoff, campus energy engineer. “We will reduce our utility purchases in the neighborhood of $2.5 million per year. The dollars can be invested to provide high levels of care for our patients in Central Pennsylvania.”

“The cogeneration plant will serve as a backup for us in case of an emergency or a power outage. It gives us resiliency.”
– Kevin Kanoff, Campus Energy Engineer

Milton S. Hershey Medical Center Campus Energy Engineer Kevin Kanoff (left) and UGI’s Steve Bareuther (right) tour the Center’s new CHP plant.

Biodiversity

UGI’s natural gas businesses often have projects that require a thorough evaluation of the surrounding ecosystem. We recognize the importance of a healthy ecosystem and strive to conserve biodiversity in the communities we serve.

During the planning stages of our capital projects, UGI conducts thorough environmental evaluations of proposed pipeline routes and project locations. The evaluations identify sensitive waterways and wetlands as well as projected encounters with endangered species. Site locations are chosen to avoid these areas. For UGI Utilities gas main designs, sensitive areas are avoided if practical. If not, we implement construction plans that minimize disturbance to sensitive areas and species.

A History of Conserving Biodiversity

2013:

In 2013 UGI Energy Services started construction for the expansion of its Auburn Line to deliver Marcellus Gas to the major interstate pipelines for distribution throughout the Northeastern United States.

2016:

Three years later, the area has been restored, demonstrating UGI’s commitment to biodiversity.

When possible, UGI Utilities utilizes public and private rights-of-way to avoid creating additional disturbances to an ecosystem. This planning is an important aspect of our gas main corridor selection process as the existing rights-of-way tend to be fairly narrow to minimize land disturbance and tree clearing.

Our Utilities and Energy Services businesses have a history of returning disturbed areas to their original state. The restoration has important aesthetic value for our stakeholders but, more importantly, a profound impact on the surrounding ecosystem. One of the benefits of restoration includes minimizing the conversion of lands to non-permeable surfaces that can increase surface water run off which can harm the surrounding ecosystem.

Reducing our Customers’ Emissions – Affordability, Reliability and Responsibility

Customer Conversions

UGI predominantly markets and distributes natural gas and LPG. These two sources are much cleaner than alternatives like coal and heating oil. In terms of power generation, natural gas emits 50% – 60% less CO2 when compared to a typical coal plant. Converting customers from heavier hydrocarbons remains a driving factor behind our commitments to our stakeholders.

Over the past 10 years, UGI Utilities has converted 98,620 households to natural gas. The reduction in GHG emissions of these conversions is equivalent to removing 58,245 cars from the road, resulting in nearly $100 million in annual energy cost savings for these households.

Energy Efficiency Programs

Energy Efficiency Programs

UGI Utilities offers a variety of energy efficiency programs to residential and commercial electric and gas customers. The EE&C Programs were designed to encourage customers to install high efficiency appliances (Energy Star Rated) over less expensive, standard efficiency appliances by providing incentives to offset the incremental equipment cost.

By participating in these programs, customers receive the benefits of saving energy and money, both in terms of receiving a rebate for the equipment installation, and lower utility bills. In total, over 700,000 electric and gas customers are eligible for the Company’s EE&C Programs. Residential customers are eligible for rebates up to $1,700 and a few commercial customers have received rebates in excess of $100,000, which enabled them to further invest in their facilities.

Over the past three years, the UGI Save Smart Energy Efficiency Rebate Program is responsible for saving 346,400 MCF of natural gas, which resulted in 19,017 metric tons of carbon not entering the atmosphere. The program has issued over $12 million in rebates to customers that have chosen to pursue energy efficiency upgrades. One particular project for a small business customer resulted in a $54,600 rebate, substantial energy savings, and the receipt of the National Green Building Council Small Business Project of the Year award in 2017.

UGI International also offers a range of financial incentives for individuals and businesses that are interested in energy savings projects such as condensating boilers, insulation, and more efficient appliances.

FUELING “CLEANER” BUSINESS

UGI Utilities worked with Classic Drycleaners and Laundromats, a small family-owned business, on the first commercial EE&C program. Headquartered in Carlisle, PA, Classic worked with UGI on energy efficiency improvements that included new dry cleaning machines, replacing coin operated washers and dryers, replacing three shirt laundry units and more.

Classic’s upgrades resulted in a $54,600 rebate, a significant reduction in energy consumption, annual savings of more than $26,000 in natural gas costs, and recognition as National Green Building Council Small Business Project of the Year.

 

UGI’s EE&C Manager (left) Brian Meilinger with Classic Drycleaners owners John and Paula Gribble (right).

Invest in Alternatives

Solar

81,900 MWh generated in Fiscal 2019; plans to install approximately 1,000 solar panels on behalf of our customers. UGI and AmeriGas headquarters is served with 50 kW of power from a roof mounted solar PV energy system

Landfill Gas Recovery

Methane and landfill gas consumption at Broad Mountain generation facility is approximately 1.4 million Dth per year, enough Dth to heat 177,824 homes

Combined Heating and Power (CHP)

In Fiscal 2019, 27 Combined Heating and Power customers totaling 114 MW; two new projects underway

Compressed Natural Gas (CNG)

Currently operate 13 public CNG facilities and supply natural gas to an additional 10 customer-owed CNG facilities

Bio-LPG and Renewable Natural Gas

UGI International (North region) is supplementing supply portfolio with Bio-LPG; proportion of Bio-LPG is expected to grow over the next 10 years

Energy Marketing in Europe

In 2017, we acquired DVEP, a Netherlands based gas and electricity marketer, which marketed 1 Twh from renewable energy sources in Fiscal 2019

UGI continues to evaluate the efficacy of incorporating RNG into our supply portfolio.