STAR GROUP LP

USINESS

Structure

Star Group, L.P. (“Star” the “Company,” “we,” “us,” or “our”) is a home heating oil and propane distributor and services provider with one reportable operating segment that principally provides heating related services to residential and commercial customers. Our unitholders voted in favor of proposals to have the Company elect to be treated as a corporation, instead of a partnership, for federal income tax purposes (commonly referred to as a “check-the-box election”), along with amendments to our partnership agreement to effect such changes in income tax classification, in each case effective November 1, 2017. In addition, the Company changed its name, effective October 25, 2017, from “Star Gas Partners, L.P.” to “Star Group, L.P.” to more closely align our name with the scope of our product and service offerings. Unitholders will receive a Form 1099-DIV and will not receive a Schedule K-1 as in tax years prior to December 31, 2017. Our legal structure has remained a Delaware limited partnership and the distribution provisions under our limited partnership agreement, including the incentive distribution structure has remained unchanged. As of November 30, 2024, we had outstanding 34.6 million common partner units (NYSE: “SGU”) representing a 99.1% limited partner interest in Star, and 0.3 million general partner units, representing a 0.9% general partner interest in Star.

The following chart depicts the ownership of Star as of November 30, 2024:

Star Group, L.P.

Limited PartnersCommon Units99.1% · General Partner (Kestrel Heat)General Partner Units0.9%

Public Unitholders - Common Units

88.1%

Officers and Directors - Common Units

11.9%

Star is organized as follows:

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Our general partner is Kestrel Heat, LLC, a Delaware limited liability company (“Kestrel Heat” or the “general partner”). The Board of Directors of Kestrel Heat (the “Board”) is appointed by its sole member, Kestrel Energy Partners, LLC, a Delaware limited liability company (“Kestrel”).

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Our operations are conducted through Petro Holdings, Inc., a Minnesota corporation that is a wholly owned subsidiary of Star Acquisitions, Inc., and its subsidiaries.

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Petroleum Heat and Power Co., Inc. (“PH&P”) is an indirect, wholly owned subsidiary of Star. PH&P is the borrower and Star is the guarantor of the seventh amended and restated credit agreement’s $210 million five-year senior secured term loan and the $400 million ($475 million during the heating season of December through April of each year) revolving credit facility, both due September 27, 2029. (See Note 13—Long-Term Debt and Bank Facility Borrowings).

We file annual, quarterly, current and other reports and information with the Securities and Exchange Commission, or SEC. These filings can be viewed and downloaded from the Internet at the SEC’s website at www.sec.gov. In addition, these SEC filings are available at no cost as soon as reasonably practicable after the filing thereof on our website at www.stargrouplp.com/sec.cfm. You may also obtain copies of these filings and other information at the offices of the New York Stock Exchange located at 11 Wall Street, New York, New York 10005. Please note that any Internet addresses provided in this Annual Report on Form 10-K are for informational 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.

Legal Structure

The following chart summarizes our structure as of September 30, 2024.

Business Overview

We are a home heating oil and propane distributor and service provider to residential and commercial customers who heat their homes and buildings primarily in the Northeast and Mid-Atlantic U.S. regions. As of September 30, 2024, we sold home heating oil and propane to approximately 404,600 full service residential and commercial customers and 61,700 customers on a delivery only basis. Approximately 266,000 of these customers, or 57%, are located in the New York, New Jersey, and Connecticut. We believe we are the largest retail distributor of home heating oil in the United States, based upon sales volume with a market share in excess of 5.5%. We also sell gasoline and diesel fuel to approximately 26,800 customers. We install, maintain, and repair heating and air conditioning equipment and to a lesser extent provide these services outside of our heating oil and propane customer base including 20,800 service contracts for natural gas and other heating systems. During fiscal 2024, total sales were comprised of approximately 61% from home heating oil and propane, 21% from other petroleum products, the majority of which is diesel and gasoline, and 18% from the installation and repair of heating and air conditioning equipment and ancillary services. We provide home heating equipment repair service and natural gas service 24-hours-a-day, 7-days-a-week, 52 weeks a year. These services are an integral part of our business, and are intended to increase customer satisfaction and loyalty.

We conduct our business through an operating subsidiary, Petro Holdings, Inc., utilizing multiple local brand names, such as Petro Home Services, Meenan, and Griffith Energy Services, Inc.

We also offer several pricing alternatives to our residential home heating oil customers, including a variable price (market based) option and a price-protected option, the latter of which either sets the maximum price or a fixed price that a customer will pay. Users choose the plan they feel best suits them which we believe increases customer satisfaction. Approximately 95% of our full service residential and commercial home heating oil customers automatically receive deliveries based on prevailing weather conditions. In addition, approximately 31% of our residential customers take advantage of our “smart pay” budget payment plan under which their estimated annual oil and propane deliveries and service billings are paid for in a series of equal monthly installments. We use derivative instruments as needed to mitigate our exposure to market risks associated with our price-protected offerings and the storing of our physical home heating oil inventory. Given our size, we believe we are able to realize certain benefits of scale and provide consistent, strong customer service.

Currently, we have heating oil and/or propane customers in the following states: Connecticut, Delaware, Maryland, Massachusetts, Michigan, New Jersey, New York, Pennsylvania, Rhode Island, Vermont, Virginia, West Virginia and the District of Columbia.

Industry Characteristics

Home heating oil is primarily used as a source of fuel to heat residences and businesses in the Northeast and Mid-Atlantic regions. According to the U.S. Department of Energy—Energy Information Administration, Residential Energy Consumption Survey (released May 2022), these regions account for 82% (4.1 million of 5.0 million) of the households in the United States where heating oil is the main space-heating fuel and 19% (4.1 million of 21.9 million) of the homes in these regions use home heating oil as their main space-heating fuel. Our experience has been that customers have a tendency to increase their conservation efforts as the price of home heating oil increases, thereby reducing their consumption.

The retail home heating oil industry is mature, with total market demand expected to decline in the foreseeable future due to conversions to natural gas and electricity, availability of other alternative energy sources and the installations of more fuel efficient heating systems. Therefore, our ability to maintain our business or grow within the industry is dependent on the acquisition of other retail distributors, the success of our marketing programs, and the growth of our other service offerings. Based on our records, our customer conversions to natural gas and electricity have ranged between 1.1% and 1.6% per year over the last five years. We believe this may continue or even increase. In addition, there are legislative and regulatory efforts underway in several states seeking to encourage homeowners to reduce or even eliminate the consumption of fossil fuels that we sell.

The retail home heating oil industry is highly fragmented, characterized by a large number of relatively small, independently owned and operated local distributors. Some businesses provide full service, as we do, and others offer delivery only on a cash-on-delivery basis, which we also do to a significantly lesser extent. In addition, the industry is complex and costly due to regulations, working capital requirements, and the costs and risks of hedging for price protected customers.

Propane is a by-product of natural gas processing and petroleum refining. Propane use falls into three broad categories: residential and commercial applications; industrial applications; and agricultural uses. In the residential and commercial markets, propane is used primarily for space heating, water heating, clothes drying and cooking. Industrial customers use propane generally as a motor fuel to power over-the-road vehicles, forklifts and stationary engines, to fire furnaces, as a cutting gas and in other process applications. In the agricultural market, propane is primarily used for tobacco curing, crop drying, poultry breeding and weed control.

The retail propane distribution industry is highly competitive and is generally serviced by large multi-state full-service distributors and small local independent distributors. Like the home heating oil industry, each retail propane distribution provider operates in its own competitive environment because propane distributors typically reside in close proximity to their customers. In most retail propane distribution markets, customers can choose from multiple distributors based on the quality of customer service, safety, reputation and price.

It is common practice in our business to price our liquid products to customers based on a per gallon margin over wholesale costs. As a result, we believe distributors such as ourselves generally seek to maintain their per gallon margins by passing wholesale price increases or decreases through to customers, thus insulating their margins from the volatility in wholesale prices. However, distributors may be unable or unwilling to pass the entire product cost changes through to customers. We believe this is especially true in the propane business. In these cases, significant decreases in per gallon margins may result when prices rise. The timing of cost pass-throughs can also significantly affect margins. (See Customers and Pricing for a discussion on our offerings).

Business Strategy

Our business strategy is to increase Adjusted EBITDA (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a definition) and cash flow by effectively managing operations while growing and retaining our customer base as a retail distributor of home heating oil and propane and provider of related products and services. The key elements of this strategy include the following:

Pursue select acquisitions Our senior management team has developed expertise in identifying acquisition opportunities and integrating acquired customers into our operations. We focus on acquiring companies within and outside our current footprint.

We actively pursue home heating oil only companies, propane companies, dual fuel (home heating oil and propane) companies and selectively target motor fuels acquisitions, especially where they are operating in the markets we currently serve.

Deliver superior customer service We are dedicated to consistently providing our customers with superior service and a positive customer experience to improve retention and drive additional revenue. We have established programs and conduct surveys to effectively measure customer satisfaction at certain brands.

We have deployed a customer relationship management solution at most of our larger brands. We believe this allows us to provide a more consistent customer experience as our employees will have a 360 degree-view of each customer with easy access to key customer information and customized dashboards to track individual employee performance.

We have resources dedicated to training employees to provide superior and consistent service and enhance the customer experience. This effort is supported, reinforced and monitored by our local management teams.

Provide complementary service offerings These offerings include, but are not limited to, the sales, service and installation of heating and air conditioning equipment, and standby home generators. In addition, we also repair and install natural gas heating systems.

Pursue environmental sustainability opportunities We are committed to pursuing initiatives that reduce greenhouse gas emissions across our product offerings, by offering biodiesel blended products and by offering energy efficient heating and air conditioning equipment to our customers.

Seasonality

Our fiscal year ends on September 30. All references to quarters and years respectively in this document are to fiscal quarters and years unless otherwise noted. The seasonal nature of our business results in the sale of approximately 30% of our volume of home heating oil and propane in the first fiscal quarter and 50% of our volume in the second fiscal quarter of each fiscal year, the peak heating season. Approximately 25% of our volume of motor fuel and other petroleum products is sold in each of the four fiscal quarters. We generally realize net income in our first and second fiscal quarters and net losses during our third and fourth fiscal quarters and we expect that the negative impact of seasonality on our third and fourth fiscal quarter operating results will continue. In addition, sales volume typically fluctuates from year to year in response to variations in weather, wholesale energy prices and other factors.

Degree Day

A “degree day” is an industry measurement of temperature designed to evaluate energy demand and consumption. Degree days are based on how far the average daily temperature departs from 65°F. Each degree of temperature above 65°F is counted as one cooling degree day, and each degree of temperature below 65°F is counted as one heating degree day. Degree days are accumulated each day over the course of a year and can be compared to a monthly or a multi-year average to see if a month or a year was warmer or cooler than usual. Degree days are officially observed by the National Weather Service.

Every ten years, the National Oceanic and Atmospheric Administration (“NOAA”) computes and publishes average meteorological quantities, including the average temperature for the last 30 years by geographical location, and the corresponding degree days. The latest data covers the years from 1991 to 2020. Our calculations of normal weather are based on these published 30 year averages for heating degree days, weighted by volume for the locations where we have existing operations. Our operating and financial plans are based upon the published weather data for the last ten years.

Competition

Most of our operating locations compete with numerous distributors, primarily on the basis of price, reliability of service and response to customer needs. Each such location operates in its own competitive environment.

Customer Attrition

We measure net customer attrition for our full service residential and commercial home heating oil and propane customers. Net customer attrition is the difference between gross customer losses and customers added through marketing efforts. Customers added through acquisitions are not included in the calculation of gross customer gains. However, additional customers that are obtained through marketing efforts at newly acquired businesses are included in these calculations from the point of closing going forward. Customer attrition percentage calculations include customers added through acquisitions in the denominators of the calculations on a weighted average basis from the closing date. Gross customer losses are the result of a number of factors, including price competition, move outs, credit losses and conversions to natural gas and electrified heating systems. (See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Customer Attrition.)

Customers and Pricing

The number of home heating oil customers comprise 78% of our product customer base, with propane customers comprising another 17% and motor fuel and other petroleum product customers making up the remaining 5%. (During fiscal 2024, we sold 253.4 million gallons of home heating oil and propane and 129.1 million gallons of motor fuel and other petroleum products.)

Our full service home heating oil customer base is comprised of 96% residential customers and 4% commercial customers. Approximately 95% of our full service residential and commercial home heating oil customers have their deliveries scheduled automatically and 5% of our home heating oil customer base call from time to time to schedule a delivery. Automatic deliveries are scheduled based on each customer’s historical consumption pattern and prevailing weather conditions. Our practice is to bill customers promptly after delivery. We offer a balanced payment plan to residential customers in which a customer’s estimated annual oil purchases and service contract fees are paid for in a series of equal monthly payments. Approximately 31% of our residential home heating oil customers have selected this billing option.

We offer several pricing alternatives to our residential home heating oil customers. Our "variable" pricing program allows the price to float with the heating oil market and other factors. In addition, we offer price-protected programs, which establish either a "ceiling" or a "fixed price" per gallon that the customer pays over a defined period. The following chart depicts the percentage of the pricing plans selected by our residential home heating oil customers as of the end of the fiscal year.

Sales to residential customers ordinarily generate higher per gallon margins than sales to commercial customers. Due to greater price sensitivity, our own internal marketing efforts, and hedging costs of residential price-protected customers, the per gallon margins realized from price-protected customers generally are less than from variable priced residential customers.

The propane customer base has a similar profile to heating oil residential and commercial customers. Sales to residential customers ordinarily generate higher per gallon margins than sales to commercial customers. Pricing plans chosen by propane customers are almost exclusively variable in nature where selling prices will float with the propane market and other commercial factors.

The motor fuel and other petroleum products customer group includes commercial and industrial customers of unbranded diesel, gasoline, kerosene and related distillate products. We sell products to these customers through contracts of various terms or through a competitive bidding process.

Derivatives

We use derivative instruments in order to mitigate our exposure to market risk associated with the purchase of home heating oil for our price-protected customers, physical inventory on hand, inventory in transit, priced purchase commitments, and the variable interest rate on a portion of our term loan. Currently, the Company’s derivative instruments are with the following counterparties: Bank of America, N.A., Bank of Montreal, Cargill, Inc., Citibank, N.A., JPMorgan Chase Bank, N.A., Key Bank, N.A., Mieco LLC and Wells Fargo Bank, N.A.

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 815-10-05, Derivatives and Hedging, requires that derivative instruments be recorded at fair value and included in the consolidated balance sheet as assets or liabilities. To the extent our interest rate derivative instruments designated as cash flow hedges are effective, as defined under this guidance, changes in fair value are recognized in other comprehensive income (loss) until the hedged item is recognized in earnings. We have elected not to designate our commodity derivative instruments as hedging instruments under this guidance, and as a result, the changes in fair value of the derivative instruments during the holding period are recognized in our statement of operations. Therefore, we experience volatility in earnings as outstanding derivative instruments are marked-to-market and non-cash gains and losses are recorded prior to the sale of the commodity to the customer. The volatility in any given period related to unrealized non-cash gains or losses on derivative instruments can be significant to our overall results. However, we ultimately expect those gains and losses to be offset by the cost of product when purchased.

Depending on the risk being hedged, realized gains and losses are recorded in cost of product, cost of installations and services, or delivery and branch expenses.

Suppliers and Supply Arrangements

We purchase our products for delivery in either barge, pipeline or truckload quantities. As of September 30, 2024 we had contracts with approximately 136 third-party terminal sites for the right to temporarily store petroleum products at their facilities. Home heating oil and propane purchases are made under supply contracts or on the spot market. We have entered into New York Mercantile Exchange ("NYMEX"), Platts American Gulf Coast or Mont Belvieu based physical supply contracts for approximately 76% of our expected home heating oil and propane requirements for our full service residential and commercial customers for the fiscal 2025 heating season. For the fiscal year 2025 heating season, approximately 74% of the Company’s contracted home heating oil volume with suppliers has a biofuel component. We also have entered into NYMEX or Platts American Gulf Coast based physical supply contracts for approximately 46% of our expected diesel and gasoline requirements for fiscal 2025.

During fiscal 2024, Shell Trading and Shell Oil Products US provided approximately 16% of our petroleum purchases and Motiva Enterprises LLC provided 15% of our petroleum product purchases. During fiscal 2023, Shell Trading and Shell Oil Products US provided approximately 18% of our petroleum purchases and Motiva Enterprises LLC provided 14% of our petroleum product purchases, respectively. Our supply contracts typically have terms of 6 to 12 months. For fiscal 2025, approximately 24% of our physical supply contracts are with Motiva Enterprises LLC. All of our supply contracts provide for minimum quantities and in most cases do not establish in advance the price of home heating oil or propane. This price is based upon a published index price at the time of delivery or pricing date plus an agreed upon differential. We believe that our policy of contracting for the majority of our anticipated supply needs with diverse and reliable sources will enable us to obtain sufficient product should unforeseen shortages develop in worldwide supplies.

Liquid Product Price Volatility

Volatility, which is reflected in the wholesale price of liquid products, including home heating oil, propane and motor fuels, has a larger impact on our business when prices rise. Home heating oil consumers are price sensitive to heating cost increases, and this often leads to customer conservation and increased gross customer losses. As a commodity, the price of home heating oil is generally impacted by many factors, including economic and geopolitical forces, and is closely linked to the price of diesel fuel. The volatility in the wholesale cost of diesel fuel as measured by the New York Mercantile Exchange (“NYMEX”), for the fiscal years ending September 30, 2020, through 2024, on a quarterly basis, is illustrated in the following chart (price per gallon):

(a)

On November 30, 2024, the NYMEX ultra low sulfur diesel contract closed at $2.19 per gallon.

Acquisitions

Part of our business strategy is to pursue select acquisitions. Each acquired company’s operating results are included in the Company’s consolidated financial statements starting on its acquisition date. Customer lists, other intangibles (excluding goodwill) and trade names are amortized on a straight-line basis over seven to twenty years.

During fiscal 2024, the Company acquired one propane and four heating oil businesses for approximately $49.4 million in cash. The gross purchase price was allocated $40.4 million to intangible assets, $13.7 million to goodwill, $4.9 million to fixed assets and reduced by $9.6 million of negative working capital.

During fiscal 2023, the Company acquired one propane and two heating oil businesses for approximately $19.8 million in cash. The gross purchase price was allocated $10.4 million to intangible assets, $8.0 million to goodwill, $2.3 million to fixed assets and reduced by $0.9 million of negative working capital.

During fiscal 2022, the Company acquired five heating oil businesses for approximately $15.6 million (using $13.1 million in cash and assuming $2.5 million of liabilities). The gross purchase price was allocated $7.3 million to intangible assets, $3.1 million to goodwill, $5.6 million to fixed assets and reduced by $0.4 million of negative working capital.

Employees and Human Capital Management

We consider our employees a key factor to Star’s success and we are focused on attracting and retaining the best employees at all levels of our business. In particular, our dedication to providing superior customer service depends significantly on employee satisfaction and retention. We strive to create a productive and collaborative work environment for our employees. Our human capital measures and objectives focus on safety of our employees, employee benefits, and employee development and training.

The safety of our employees and customers is paramount. We strive to ensure that all employees feel safe in their respective work environment. Since March 2020, a portion of our office personnel have worked remotely. We believe that our employees have adapted well and continue to be flexible to the changing working conditions.

To attract talent and meet the needs of our employees, we offer benefits packages for full-time employees. We offer a health and welfare and retirement program to all eligible employees. We also provide our employees with resources for professional development including technical training, feedback and performance reviews from supervisors, and management training.

As of September 30, 2024, we had 3,039 employees, of whom 909 were office, clerical and customer service personnel; 834 were equipment technicians; 474 were fuel delivery drivers and mechanics; 540 were management and 282 were employed in sales. Due to the seasonal nature of our business and depending on the demands of the 2025 heating season, we anticipate that we will augment our current staffing levels during the heating season from among the 295 employees on temporary leave of absence as of September 30, 2024. As of September 30, 2024, considering seasonal and employees that are on leave, we had 1,362 (39%) employees that are represented by 62 different collective bargaining agreements with local chapters of labor unions. There are 20 collective bargaining agreements up for renewal in fiscal 2025, covering approximately 419 employees (12%). We believe that our relations with both our union and non-union employees are generally satisfactory.

Government Regulations

Regulations in Response to Climate Change. There is increasing attention in the United States and worldwide concerning the issue of climate change and the effect of greenhouse gas (“GHG”) emissions, in particular, from the combustion of carbon-based fossil fuels. Our heating oil and propane products are widely considered to be fossil fuels that produce GHG emissions. To combat the cause of global warming domestically, President Biden identified climate change as one of his administration’s top priorities and pledged to seek measures that would pave the path for the U.S. to achieve net zero GHG emissions by 2050. In April 2021, President Biden announced the administration’s plan to reduce the U.S. GHG emissions by at least 50% by 2030. These environmental goals earned a prominent place in the Biden administration’s $1.2 trillion infrastructure bill, which was signed into law on November 15, 2021. On August 16, 2022, President Biden signed the Inflation Reduction Act which aims to reduce GHG emissions by offering tax and other financial incentives designed to encourage homeowners to switch to alternative sources of energy other than those we sell, including a tax rebate of up to $8,000 per qualified household for the installation of an electric heat pump for a home’s primary heat source. States must apply for rebate funding with the U.S. Department of Energy and adopt and administer energy rebate programs within their respective states before homeowners can apply and receive tax rebates under the program. As of October 2024, two (2) states within our operating footprint -- New York and Rhode Island – have launched programs to distribute homeowner rebates. The timing of when the other states within our operating footprint will adopt energy rebate programs in order to distribute homeowner rebates remains uncertain.

Numerous states and municipalities have also adopted laws and policies on climate change and emission reduction targets. For example, on July 18, 2019, the State of New York (location of approximately 44% of our residential home heating oil and propane customers) passed the Climate Leadership and Community Protection Act (“CLCPA”). Among other things, the CLCPA sets out a series of emissions reduction, renewable energy, and energy storage goals to significantly reduce the use of carbon-based fossil fuels and eventually achieve net zero GHG emissions in the state. In December 2022, New York approved the Scoping Plan, which details actions required to advance directives stated in the CLCPA and to enable New York to limit GHG emissions as a percentage of 1990 emissions to 60% by 2030 and to 15% by 2050. However, the CLCPA gave the New York Department of Energy Conservation until January 1, 2024, to promulgate regulations to ensure that the State of New York meets the CLCPA’s GHG emission limits as outlined in the Scoping Plan. The State of New York has not yet adopted regulations to implement the CLCPA’s GHG emissions despite the January 1, 2024 deadline for doing so.

On May 2, 2023, the State of New York adopted its 2024 fiscal year budget, which included amendments to New York’s Energy Law and to its Executive Law that prohibit “the installation of fossil-fuel equipment and building systems” in any new buildings under seven stories, except for a new commercial or industrial building greater than 100,000 square feet in conditioned floor area beginning December 31, 2025 (the “Fossil Fuel Ban”). The Fossil Fuel Ban applies to equipment that uses heating oil, propane and natural gas for combustion and will then expand to all new buildings beginning January 1, 2029. Specifically, the Energy Law and the Executive Law direct the New York State Fire Prevention and Building Code Council (the “Code Council”) to include the Fossil Fuel Ban on installation of fossil-fuel burning equipment and building systems in new buildings in the State of New York’s Energy Conservation Construction Code (the “Energy Code”) and in the Uniform Fire Prevention and Building Code (the “Building Code”). We understand that New York Building Code Council is set to integrate the Fossil Fuel Ban into its 2025 Building Code update.

On October 12, 2023, a coalition of businesses, trade associations and labor unions including the National Propane Gas Association, New York Propane Gas Association and Mulhern Gas Co., filed a federal lawsuit in the Northern District of New York (Mulhern Gas Co., Inc. et al v. Rodriguez, et al., Case No. 1:23-cv-1267) claiming that the Fossil Fuel Ban violates federal law. The lawsuit seeks to declare the Fossil Fuel Ban invalid and to block its enforcement on the grounds that it is preempted by the federal Energy Policy and Conservation Act ("EPCA"). It relies on a recent decision by the U.S. Court of Appeals for the Ninth Circuit (California Restaurant Association v. City of Berkeley) which held that a ban on gas piping in a new building in Berkeley, California was invalid on the basis that it concerned the energy use of appliances covered by the EPCA and was therefore preempted by federal law. As this legal challenge is ongoing, it remains uncertain what impact, if any, it will have on the Company’s operations in the State of New York.

In May 2019, New York City (location of approximately 3% of our residential home heating oil and propane customers) enacted Local Law 97 as a part of the Climate Mobilization Act aimed at reducing GHG emissions by 80% from commercial and residential buildings by 2050. Starting in 2024, this law will place carbon caps on most buildings larger than 25,000 square feet. In addition, in December 2021, New York City passed Local Law 154 of 2021, which will phase out fossil fuel usage in newly constructed residential and commercial buildings starting in 2024 for lower-rise buildings, and in 2027 for taller buildings. With few exceptions, all new buildings constructed in New York City must be fully electric by 2027.

In March 2021, the State of Massachusetts (location of approximately 4% of our residential home heating oil and propane customers) signed into law “An Act Creating A Next-Generation Roadmap for Massachusetts Climate Policy” (the “2021 Climate Law”) that establishes a 2030 limit of at least a 50% reduction in GHG emissions below the 1990 GHG emissions baseline and requires the Secretary of Energy and Environmental Affairs to set interim emissions limits and sector-specific sublimits every five years. The 2021 Climate Law tasks the Massachusetts Department of Environmental Protection (the “MassDEP”) with developing a high-level program to meet the emissions limit for residential, commercial, and industrial heating and identified a Clean Heat Standard (“CHS”) as a regulatory option for addressing this requirement. The proposed regulations released by MassDEP in May 2023 could require, among other things, heating energy suppliers to demonstrate the conversion of approximately 3% of their customers to electric heat each year. Such proposed regulations, if adopted, could dramatically negatively impact the Company’s Massachusetts operations and impose onerous reporting requirements on the Company. The proposed regulations are in the comment period.

On August 11, 2022, the State of Massachusetts signed into law “An Act Driving Clean Energy and Offshore Wind” (the “2022 Climate Law”). The 2022 Climate Law establishes a new pilot program to allow up to 10 municipalities to require through zoning that new construction or substantial renovation projects will be fossil-fuel free, and instructs the State’s Department of Energy Resources (“DOER”) to adopt regulations to structure the pilot program. The DOER adopted final regulations structuring the pilot program in July 2023. The purpose of the pilot program is to allow the DOER to study the implementation of fossil fuel bans in municipalities and evaluate future best practices on decarbonization. As of January 2024, seven municipalities have been approved to begin enforcing the new zoning requirements.

These measures, which have or may have the effect of reducing or eliminating GHG emissions from fossil fuel-burning vehicles, boilers and furnaces, could significantly negatively impact the Company’s operations in New York City, New York State and Massachusetts, which together constitute a material portion of the Company’s business. Other states in which the Company operates and that are material to the Company’s operations, such as Connecticut, Rhode Island and New Jersey, have adopted similar GHG laws or have otherwise announced GHG reduction targets. However, while we cannot predict at this time whether and in what manner the New York CLCPA, the Massachusetts 2021 Climate Law, the Massachusetts 2022 Climate Law, or other state and local GHG laws or targets could impact the Company, these measures could over time have a material negative impact on the Company.

Environmental and Safety Regulations. We are also subject to various federal, state and local environmental, health and safety laws and regulations. Generally, these laws impose limitations on the discharge or emission of pollutants and establish standards for the handling of solid and hazardous wastes. These 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, the Oil Pollution Act, and comparable state statutes. CERCLA, also known as the “Superfund” law, imposes joint and several liabilities 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. Products stored and/or delivered by us and certain automotive waste products generated by our fleet are hazardous substances within the meaning of CERCLA or otherwise subject to investigation and cleanup under other environmental laws and regulations. While we are currently not involved with any material CERCLA claims, and we have implemented programs and policies designed to address potential liabilities and costs under applicable environmental laws and regulations, failure to comply with such laws and regulations could result in civil or criminal penalties or injunctive relief in cases of non-compliance or impose liability for remediation costs.

We have incurred and continue to incur costs to address soil and groundwater contamination at some of our locations, including legacy contamination at properties that we have acquired. A number of our properties are currently undergoing remediation, in some instances funded by prior owners or operators contractually obligated to do so. To date, no material issues have arisen with respect to such prior owners or operators addressing such remediation, although there is no assurance that this will continue to be the case. In addition, we have been subject to proceedings by regulatory authorities for alleged violations of environmental and safety laws and regulations. We do not expect any of these liabilities or proceedings of which we are aware to result in material costs to, or disruptions of, our business or operations.

Transportation of our products by truck 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 or similar state agencies. Several of our oil terminals are governed by the United States Coast Guard operations Oversite, Federal OPA 90 FRP programs and Federal Spill Prevention Control and Countermeasure programs. All of our propane bulk terminals are governed under Homeland Security Chemical Facility Anti-Terrorism Standards programs. We conduct ongoing training programs to help ensure that our operations are in compliance with applicable regulations. We maintain various permits that are necessary to operate some of our facilities, some of which may be material to our operations.