LP Gas, February 2014

Starved for supply Propane demand overwhelms distribution system solutions sought H ow did we get here A confluence of events has put the propane industry in what some are calling a state of crisis High demand and low supply in certain segments of the country as well as distribution disadvantages have left many propane marketers scrambling to fill customer tanks One of the first signs that something was amiss came last year when we heard rumblings about a Cochin Pipeline reversal project see Datapoints page 26 Instead of propane coming down from Canada to help supply the Midwest pipeline owner Kinder Morgan undertook a project that will ultimately send light condensate north of the border later this year Work on the pipeline which had supplied about 40 percent of Minnesotas propane according to the state association has interrupted valuable propane supplies to this region this winter Then crop drying season hit with a vengeance and in the same region that Cochin runs According to the U S Energy Information Administration EIA propane inventories in the Midwest fell to their lowest level for November since 1996 At the same time propane demand reached the highest level ever recorded for November 18 million barrels per day for the week ending Nov 1 EIA notes Moreover a look at EIAs webpage on U S propane propylene exports shows a record 408000 barrels per day leaving the country last October With the new year came the polar vortex to complicate matters further Persistent low temperatures and dangerous wind chills in January affected EDITOR IN CHIEF BRIAN RICHESSON As of late January 33 states had declared emergencies this winter nearly half the country In my 38 years of living in Northeast Ohio I have never experienced consistent cold like this temperatures and wind chills below zero Getting propane to where its needed to meet demand has become the issue especially at a time when shale gas production is driving additional changes to pipeline infrastructure and not always to benefit propane States of emergencies were declared and commercial truck drivers were spared from hours of service regulations so they could hit the roads longer to source propane As of late January 33 states had declared emergencies this winter In addition the U S Department of Transportation announced regional exemptions for the Midwest East and South through Feb 11 and requests were being made to help the West as well The supply issue has gone mainstream with the media reporting the publics outcry over propane shortages and skyrocketing prices Politicians are hearing their constituents concerns and looking into the root cause of the problem Some consumers are even venting on our social media pages Solution minded So what is the solution Some within the industry are calling for curtailed propane exports Some say relief from the Jones Act also would help as we went to press the National Propane Gas Association said it was looking to file for a Jones Act waiver The 94 year old law allows only a small fleet of American ships to move between U S ports As it stands foreign ships are moving hundreds of millions of NGL gallons out of our marketplace each month And in a bit of irony the United States still has had to import propane from the high seas to help meet this winters demand at a time when domestic propane production has risen each year since 2008 Propane storage is another discussion point Studies in recent years have brought light to the industrys distribution and infrastructure challenges stressing the need for marketers to grow their bulk storage capacities A primary underground storage project of about 88 million gallons planned in upstate New York also would alleviate supply issues but facility owner Crestwood Midstream Partners formerly Inergy has run into permitting issues We went to press just ahead of NPGAs board meeting in Clearwater Beach Fla where we expected the supply topic to be front and center Well report back to you on what took place but dont forget to access our Twitter @ lpgas_ mag and Facebook facebook com lpgasmagazine pages for the latest updates from the industry LPG brichesson@ northcoastmedia net 6 LPGas February 2014 www LPGasmagazine com