Over the last few weeks, I have been hearing from a growing number of constituents, including propane suppliers, about a tight propane supply resulting in significantly higher prices. This has caused headaches for many constituents who heat their homes with propane and are concerned about the price spike and tight supplies. Reports from some propane dealers say that some of their supply trucks are waiting in line for up to 20 hours at wholesale terminals.
The exorbitant price increases being seen in our area and throughout much of Minnesota is due to increased demand and a limited supply. The following is an update on the propane situation assembled by my colleague Rep. Pat Garofalo on the current situation.
A tight propane supply occurred in late October when the timing of the fall grain harvest occurred at the same time across much of the upper Midwest. The supply constraint was exacerbated by the Cochin pipeline reversal. Kinder Morgan, the owner of the pipeline began the process of changing the pipeline from propane supplier from the west moving crude oil distillate suppler from the east. Most of the people affected by the supply shortage last fall were farmers who were drying grain at harvest time. Not anticipating the severity of the 2013-2014 winter, most experts at the time believed the shortage last fall to be a temporary situation.
The short supply and increased prices are now largely affecting people who use propane for home heating and for livestock systems. There may some who may have averted the higher prices, at least for now, if they pre-purchased their propane supply last summer or fall.
There are several factors contributing to the tight supply of propane and the price spike, including:
The large corn harvest, and unusually wet grain last fall resulted in a large amount of propane use for grain drying last fall. An extended period of severe winter weather throughout the upper Midwest. Supply disruptions as work continues on the Cochin Pipeline for its reversal. A second pipeline that supplies Wisconsin terminals has reportedly been down for maintenance as well.According to a national news report, U.S. production of liquid propane has increased by 2.6 billion gallons since 2008. However, this supply is more than offset by U. S. exports increasing by 3.5 billion gallons.
What is currently being done
According to a press release issued by the Minnesota Department of Commerce last week, the Federal government is appropriating more money for low income heating assistance. The Commerce Department has begun to take the necessary steps to increase LIHEAP Crisis payments from $500 to $1,000 for applicants currently heating their homes with propane and heating oil. The Department believes the crisis payments will be available as early as next week.
A list of local service providers and information on applying for the Minnesota Energy Assistance Program is available by visiting the Energy Assistance section of the Division of Energy Resources website at http://mn.gov/commerce/energy, or by calling 1-800-657-3710 or 651-539-1882. EAP is administered by the Minnesota Department of Commerce.
Other forms of assistance may be available through county social service programs, community-based organizations, and nonprofit agencies. See the Stay Warm Minnesota webpage for a list of resources.
Additionally, here are some other things that are currently being done to address the situation:
Executive orders have been issued at the federal level, by Governor Dayton, and by MNDOT to lift the hours of service restrictions on truck drivers who are transporting propane. This will help keep supplies moving to dealers, and ultimately, to customers. The federal executive order remains in effect for the duration of the emergency, or February 11, 2014, “whichever is less”.Although prices have spiked, it is not anticipated that propane supplies will completely dry up in any area of the state.
Many dealers are only partially filling propane tanks to ensure supplies are available to all customers. While this may increase the cost of delivery for customers, and spread out customer’s bills in a more affordable manner. CHS and other cooperatives are working to beef up their rail car capacity and track facilities in an effort to replace transportation of supplies that would otherwise have been transported via the Cochin Pipeline.
Governor Dayton met today with the Propane Association, and there are discussions occurring in the Minnesota House regarding legislative action that can be brought forward after the legislative session begins on February 25th. We need to ensure that a smooth supply chain in the absence of the Cochin Pipeline supply for next fall.
Please feel free to contact me with any additional questions or ideas around this very important issue. You can reach my office by phone at 651-296-6746 – or you can email me at email@example.com.