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Propane prices skyrocket, Midwest supplies drop

Jan. 28, 2014 | 0 comments


Farmers and rural residents who have been filling their liquid propane tanks already know, prices are skyrocketing as suppliers have to go further and further for supplies. As the frigid weather continues, the situation has gotten critical.

Cooperatives and other petroleum businesses that supply rural residents have had to make trips as far away as Kansas and even Texas to get supplies of propane.

Governors of 26 states have declared states of emergency as propane supplies tightened and prices skyrocketed.

On Friday, state propane prices were up to $4.30 a gallon, which was twice the price of a week earlier.

Exports, drying needs for the late-maturing corn crop and the massive needs for home heating as the brutal winter temperatures continue, are some of the reasons for the current situation. A pipeline shutdown is also cited as part of the reason for the current propane shortage.

The Cochin pipeline that previously supplied propane from Canada to Wisconsin, Minnesota and the Dakotas has been closed so it can be reversed. Instead of bringing propane to the Midwestern states, it will be reversed to bring a different product to the Canadian market, explained Bob Carlson, CEO of Landmark Services Cooperative.

According to the Propane Education and Research Council there are 900,000 U.S. farms that depend on propane as well as six million households that use the fuel as their main form of heating.

With extreme cold temperatures dipping down as far as Georgia and the Gulf Coast this week, many of those propane users have needed far more than they generally do.

Prices in various regions in the Midwest have gone up to as high as $6 a gallon — three times the normal rate.

Landmark's Carlson said they have a large allocation of propane going into each winter, but have now had to supplement that supply with propane from various sources, at increasingly higher prices.

"We will be able to get it, but prices will continue to go up," he said.

Normally, propane for their southern Wisconsin customers would come from a pipeline in Janesville but his co-op has had to supplement that with increasingly higher-priced fuel from further away.

Far away supplies

"It's been insane," said Carlson. "We have gotten loads from Kansas and have considered getting loads from Texas, though we haven't had to do that yet.

"Our customers needs have been supplied, thanks to the great work of our energy team."

Carlson, speaking by telephone to Wisconsin State Farmer said there were hints to the industry in November that there might be issues with the propane supply, but the brutal winter heating needs have brought the situation to a head.

"The distribution system for LP hasn't been upgraded even though usage has been up because of the increased efficiency of propane. We've had allocation issues staring at us for a number of years."

According to the National Propane and Gas Association the industry had inventory of 65 million gallons in 2012 and 300 million gallons in 2013, and still there have been shortages. Because of high prices overseas, exports were strong.

Couple those issues with a lot of use during the corn drying season and we get to the current situation, Carlson said.

Exports have now decreased because of the run-up in domestic prices, he added.

Carlson said his cooperative and its suppliers are now pressing for improvements in the propane infrastructure.

"Cenex, from which we get a lot of our supplies, has pledged to spend $18 million on shortage issues — building storage and rail access."

For now, the bottom line for their customers is that they will be able to get propane, but no one knows what the price is going to be, he said.

The state acts

In a radio address last week Gov. Scott Walker called attention to the propane shortage and said the state was doing all it can to protect the health and well-being of the 250,000 state citizens who depend on propane to heat their homes and businesses.

He also called a summit of industry leaders on Monday (Jan. 27) to sort out some of the issues.

Walker issued an executive order that allows for truckers that deliver propane to Wisconsin to drive longer hours. The state's Department of Transportation has authorized a weight limit relief order for vehicles transporting energy in the state to increase the amount of propane carried in a single trip.

Heartland governors and Congressional representatives pushed for a federal declaration of emergency from the U.S. Department of Transportation so that propane and fuel transporters can help meet the demand across the hard-hit ice belt.

Officials urged anyone who depends on propane to heat their home to contact their propane vendor when the tank reaches 30 percent full. Because of the limited propane supply, propane vendors are not able to fill tanks completely right now.

Waiting until the tank goes completely empty could be a recipe for disaster.

Officials, including Carlson, are urging propane users to conserve their existing supply by turning down the thermostat a degree or two to help their existing supply last a little longer.

Agencies can help

Also last week, Walker directed the Department of Administration's Division of Energy Services to release $1.5 million in additional Low Income Home Energy Assistance Program (LIHEAP) Crisis Benefit dollars to the 49 counties and tribes that have a high percentage of propane households.

That state bureau has contacted 23,000 low-income propane customers and provided information on assistance available through the Wisconsin Home Energy Assistance Program (WHEAP) http://www.homeenergyplus.wi.gov/.

The Keep Wisconsin Warm Fund (KWWF) http://www.kwwf.org/ has agreed to temporarily allow an increase in their income limit for propane households from 60 percent of State Median Income (SMI) to 80 percent SMI, and will allow propane households to potentially receive an increased maximum benefit of $600.

The fund has temporarily adjusted its policy to allow propane households the ability to potentially receive two benefit payments in a year.

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