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Walker convenes regional group to tackle propane supply issues

June 10, 2014 | 0 comments


As summer weather begins to hit its stride in the Midwest, heating bills are far from most people's minds. But some officials are looking at strategies that will help avoid the propane shortages – and high prices -- seen across the region last winter.

Gov. Scott Walker, who now chairs the Midwestern Governors Association, convened a working sub-committee of that group in Madison to focus on the propane supply last week.

As chair of the MGA, Walker gave the opening remarks June 4 as he convened the propane working group.

"The recent shortage demonstrates how important it is to address and review all factors affecting our propane supply. We can always do more to improve our awareness, preparedness, and readiness levels, which is exactly what the MGA working group is focused on," Walker said.

Wisconsin has approximately 250,000 residents who use propane as their main source of heat for their home or business.

In his opening remarks, Walker recognized CHS, the nation's leading farmer-owned energy and grain cooperative, for signing a long-term agreement to build a propane terminal in northwest Wisconsin in conjunction with Federation Cooperative in Black River Falls.

Federation Cooperative will manage and operate the propane terminal at Hixton.

That cooperative agreement is part of an estimated $24 million investment previously announced by CHS to expand propane service in the region.

One of the reasons the Minneapolis-based farmer cooperative plans to beef up its propane infrastructure is the reversal of the Cochin pipeline.

That pipeline, operated by Kinder Morgan Energy Partners, will be reversed from a southerly flow to a northerly flow, to move light condensate to existing terminals in Alberta, Canada.

Previously the pipeline was available to bring products, including propane, to the Midwest and a terminal in Kankakee County, IL. (The Cochin pipeline continues to a connection in Windsor, Ontario in Canada.)

The pipeline does not traverse Wisconsin, but crosses the northeast corner of Iowa on its way into Illinois. It crosses through North Dakota, Minnesota and several Canadian provinces.

According to a Kinder Morgan website, the reversal of the Cochin pipeline could take place as early as July 1.

New LP terminal

Served by a rail line, the new propane terminal in northwest Wisconsin is expected to be completed this fall and will have 360,000 gallons of storage tanks. The new terminal will have the ability to offload six railcars every four-and-a-half hours and two truck-loading bays capable of loading six trucks per hour.

"Given the severe winter that we experienced, and the reversal of the Cochin pipeline, this new CHS propane terminal is a great and welcome addition to Wisconsin's propane infrastructure," Walker said.

"We appreciate CHS making such a significant investment in Wisconsin, as it will better help us ensure the health and safety of Wisconsinites with a more steady propane supply."

Team leaders from Midwestern states traveled to Madison for the two-day working group meeting to share best practices and lessons learned, as well as discuss the Cochin pipeline reversal and other propane transportation issues.

They also heard from propane marketers, industry leaders, and the National Propane Gas Association, and met with experts from the U.S. Department of Energy and the U.S. Energy Information Administration.

The MGA is a nonprofit, bipartisan organization that brings together the governors of Midwestern states to work cooperatively on issues of importance to the region. Current members of the MGA are Gov. Pat Quinn (IL), Gov. Mike Pence (IN), Gov. Terry Branstad (IA), Gov. Sam Brownback (KS), Gov. Rick Snyder (MI), Gov. Mark Dayton (MN), Gov. Jay Nixon (MO), Gov. John Kasich (OH) and Walker.

Making strides

"The propane working group has already made strides in reviewing this past season, identifying potential action, taking next steps, and developing partnerships within the industry to mitigate potential problems in the upcoming season," Walker said.

"I'm very grateful to my fellow governors for engaging in this important topic and working together to find solutions to lessen the negative impacts a propane shortage has on our residents."

Back in March, Governor Walker was selected by the bipartisan group of Midwestern governors to serve as chair of their association.

As he told a group of farm reporters recently in a roundtable discussion in his office, Walker chose strengthening the propane supply chain as his "chair's initiative" and primary focus.

Since he chose that primary focus in March, teams from each of the nine Midwestern states have participated in numerous conference calls, each discussing a different propane subject. The meeting in Madison last week brings members of that working group together to continue those discussions and planning in person.

During the meeting Walker said he had sent a letter to President Obama and the Department of Health and Human Services last week asking for one-time flexibility with Low Income Home Energy Assistance Program (LIHEAP) funds.

Program advance

Walker's request would allow Wisconsin to spend up to $8 million of state money between July 1 and October 1 on LIHEAP and then pay itself back when funds are appropriated for the new fiscal year.

Another alternative suggested by Walker would be locating $8 million at the U.S. Department of Health and Human Services that will be carried over into fiscal year 2015 to temporarily offset this money and grant Wisconsin a LIHEAP advance.

Walker said that doing so, and allowing Wisconsin to start to service LIHEAP propane tanks before October 1, would enable the state to potentially purchase 15 percent more propane, resulting in as much as $1 million in savings.

Those savings could then be used in various ways to help LIHEAP recipients and/or provide greater price certainty and ensure more propane is physically in Wisconsin before the higher-demand winter months set in.

According to the Campaign for Home Energy Assistance, LIHEAP provided assistance to 214,531 Wisconsin households in 2013, down slightly from a year earlier.

The average Wisconsin household benefit was $336 in 2013.

Wisconsin's allocation under LIHEAP for 2013 was $98.4 million and the allocation for 2014 is $103.1 million.

More information on state and county allocations under the program is available at www.liheap.org. Public inquiries can also be directed to 866-432-8947.

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