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Fuel Industry, Lawmakers Want Answers on Propane Issues

Fuel Industry, Lawmakers Want Answers on Propane Issues
Propane distribution and supply issues cause headaches across the U.S.; Propane Education and Research Council announces plans to probe cause

Record cold temperatures across the country, and particularly in the Midwest, have created an unprecedented surge in demand for propane, sparking higher energy costs for farmers and consumers.

According to the Energy Information Administration, residential propane prices in the Midwest topped $4.20 per gallon last week, quite a bit higher than the $2.28 consumers paid just a month ago.

Related: Cold Weather Strains Midwestern Propane Supplies

That has sparked questions from Sen. Chuck Grassley, R-Iowa, and lawmakers in other affected states, who say the shortages have them concerned for consumers.

Propane distribution and supply issues cause headaches across the U.S.; Propane Education and Research Council announces plans to probe cause of issues

"The recent propane supply shortage and price increases are causing hardship for the many rural Iowa families that use propane to heat their homes," Grassley said. "I'm asking the agency that oversees business practices to look at the propane situation and see whether the price increases are legitimate or manipulated in any way to consumers' detriment."

Grassley submitted a letter to the Federal Trade Commission to question soaring prices, suggesting they "remain vigilant in overseeing the propane market prevent possible anti-competitive behavior or illegal manipulation, and to ensure that any supply shortages are not created artificially."

Meanwhile, other lawmakers are requesting additional funds from the Department of Health and Human Services to make sure families have enough heat.

Sens. Amy Klobuchar, D-Minn., Al Franken, D-Minn., and Tammy Baldwin, D-Wis., last week said extreme cold weather combined with transportation bottlenecks should warrant emergency Low Income Energy Assistance Program grants for impacted states.

Related: Missouri Attorney General To Investigate Propane Price Spikes

The letter was submitted shortly after another group of Representatives from Minnesota requested assistance from the White House to not only help consumers, but ensure that constituents have enough fuel to "keep livestock and poultry barns warm."

The Representatives also requested that the U.S. Department of Transportation exemption to the hours-of-service regulations be extended for as long as may necessary to address the issue. The exemption allows drivers to work longer hours to keep propane deliveries coming.


Propane industry group says it doesn't understand shortages either
The Propane Education and Research Council says it is interested in exploring the causes behind factors related to the supply shortage.

"At a time when U.S. propane production is at an all-time high, PERC wants to know what can be done to ensure that propane can be quickly and affordably put to use here at home, even during times of extreme weather," the group said.

To do that, PERC says it will examine:

Transportation Infrastructure: The December shutdown of the Cochin pipeline in the upper Midwest coupled with the reversal of another Midwest pipeline that previously transported propane contributed to that region's tight propane supplies. As supplies from natural gas and crude oil increase, so has competition for pipeline access and resources.

"Measures must be taken to ensure that the proper infrastructure is available to move propane from large national storage facilities to local propane retailers, especially in the winter," PERC said.

Storage: The majority of the large propane storage facilities are located outside the Northeast and Midwest where most propane is used. Increasing local storage capacity in these regions would enable quicker response to increased demand but often requires overcoming local political and perceptual hurdles.

Exports: The U.S. is producing ample propane supply, but more is being shipped overseas than ever before. In 2013, more than 20% of U.S. propane production was exported, up from 5% in 2008. Increased exports have made a large portion of these stockpiles unavailable for domestic use.

States can help
PERC is also urging governors in affected states to consider declaring an Economic Injury Disaster, which would trigger loan programs to enable propane retailers to replenish propane supplies.

"The good news for propane is that the long-term supply picture is positive, the logistical and transportation challenges we're experiencing today can be overcome, and spring is on the way," PERC says. "As extreme weather subsides, prices should stabilize and the market should reflect that abundance."

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