If anyone wants to consider where oil and gas product distribution can go haywire, the recent domestic propane "perfect storm" bears examination. That was why a US House Energy and Commerce subcommittee included it in a Mar. 6 fuel supply and infrastructure hearing.
"Our inadequate energy infrastructure is already causing problems," Committee Chairman Fred Upton (R-Mich.) declared in his opening statement. "This winter's regional propane shortage throughout Michigan and much of the Midwest is a case in point."
Propane from natural gas has been the fastest growing domestic propane production component, US Energy Information Administration chief Adam Sieminski said. Supplies broke records almost weekly in 2013 as a result of increased oil and gas drilling, he told the committee's Energy and Power Subcommittee.
That rapid growth made the US a net propane exporter, Sieminski said in his written testimony. Exports reached 402,000 b/d in December as imports hit 121,000 b/d via tanker into the Northeast and through pipelines from Canada into the Midwest, particularly Minnesota and Michigan, he indicated.
Agriculture and other industries are the largest propane and propylene markets, but it's also used heavily in rural areas without natural gas service, Sieminski said. "Residential and commercial demand has a strong seasonal pattern, with a winter peak to meet heating needs," he added.
Sieminski said a record corn harvest last fall combined with a wet growing season to increase Midwest propane demand. Consumption reached nearly 1 million b/d the week ending Nov. 1, a figure more typical of January or early February when the heating season usually hits its peak, he said.
Aggravating factors
Winter 2013-14 propane market challenges were aggravated because several pipelines used to bring propane from the Gulf Coast and Canada are being converted to other uses, National Propane Gas Association Pres. Richard Roldan testified. Low preseason inventories and a colder winter added to the problem, he added.
Government responses included hours-of-service and weight waivers so truckers could obtain and transport distant supplies, Roldan said. The US Federal Energy Regulatory Commission used emergency authority for the first time to require the Enterprise TE Products Pipeline (Teppco) to prioritize pipeline shipments from Feb. 7 through 14, he said.
Teppco voluntarily extended the order through Feb. 21, noted Association of Oil Pipelines Pres. Andrew J. Black. It also asked other refined products suppliers to voluntarily defer shipments, he added. Oneok and Kinder Morgan submitted tariffs to FERC for more propane shipments from Conway, Kan., and Mont Belvieu, Tex., Black said.
"There is enough pipeline capacity to transport propane supplies to where they are needed," he emphasized. More off-season purchases and storage in consuming areas could help, Black suggested.
