On Jan. 22, 2014, the National Propane Gas Association released a press statement announcing that the U.S. Department of Transportation had issued a regional order for the Midwestern, Eastern and Southern regions. The goal of this order was to alleviate a major U.S. natural gas shortage and “allow transporters to move propane more freely throughout the most affected.”
“Last week, the U.S. Department of Energy reported that cold weather led to record-high natural gas storage withdrawals, as well as propane,” the statement claimed nearly a decade ago. “These are the largest drawdowns in the 20-year history of the survey and the second time this year the record has been broken..”
The 2013-14 U.S. gas shortage was, according to the NPGA, an appropriately labeled deficit initially generated by a large, wet harvest in the Upper Midwest that happened almost all at once, over a wide area. This yield required massive amounts of propane in order to be properly dried before storage, a demand which, in turn, greatly reduced propane inventories throughout the area.
After a large pipeline in the area closed for infrastructural realignment and a massive winter storm hit most of the country, demand snowballed even further, depleting propane supplies as far as Canada.
Throw in an increased rate of U.S. exports of propane that same year and previous years, and you’ve got a legitimate national crisis on your hands.
Although the price of natural gas did eventually return to pre-crisis levels, “ the price of propane did move up quickly from the $1.20-$1.30/gallon range up to almost $1.75/gallon as Mount Belvieu (and other Southern) supplies were diverted (rail shipments, curtailed pipeline deliveries, etc.) to help meet Midwest and Northeastern requirements,” according to a post by RBN Energy released in late February of 2014.
Fast forward nearly a decade and similar issues concerning propane have risen in the Midwest once again, albeit with some key differences. Although Middle American homes and farms are once again facing a natural crisis, the causes are not due to any lack of the fuel within U.S. borders.
On Nov. 14, 2019, Rep. Kelly Armstrong, R-N.D., signed a letter addressed to Federal Energy Regulatory Commission Chairman Neil Chatterjee explaining the contemporary situation: “(Farmers) who are lucky enough to have crops to harvest this year are now struggling with drying a wet corn crop. Wet corn put in storage can start to spoil in as little as three days. There are also reports that grain elevators are having to stop the delivery of corn from farmers and storing corn on the ground because they’re running short of propane as well.”
“We urge further action by the Commission to increase the supply of propane to North Dakota,” the letter advocated.
But make no mistake, there is no shortage of actual C3H8 in the United States. In fact, natural gas production in general has increased immensely over the past five years. As the U.S. Energy Information Administration states in its Short-term Energy Outlook, published on Nov. 13, 2019: “By October 31, U.S. total working gas inventories reached 3,762 billion cubic feet (Bcf), which was one percent higher than the five-year average and 16 percent higher than a year ago.”
“EIA forecasts that annual U.S. dry natural gas production will average 92.1 billion cubic feet per day (Bcf/d) in 2019, up 10% from 2018,” the report continued. The bulk of this extracted natural gas is stored and exported through the Houston Ship Channel and the Gulf of Mexico and, as Jordan Blum of FuelFix stated in an article published in Aug of 2016, “this growth has helped make Houston’s Enterprise Products Partners (a publicly traded energy producer based in Texas) the world’s largest exporter of propane.”
These production numbers, although tedious, illustrate that the Midwest is dealing with an issue quite different from the one it faced in the winter of ’13: The problem doesn’t lie on the production end of the propane market, but rather in the infrastructure that stores and physically ships the fuel from one end of the country to the other.
As any farmer will tell you, this year has been a wet one.
In September 2018 North Dakota experienced an average of 1.54 inches of precipitation and an average low of 41 degrees. This year, the same month saw an average of 4.27 inches of precipitation with an average low of 38. These colder temperatures and increase of rain and snow have led to escalated pressure on propane storage and transportation facilities throughout the Midwestern region as folks try to keep both their crops, not to mention their houses, warm through this premature winter.
Declaring a state of emergency, North Dakota Gov. Doug Burgum confirmed in an executive order issued on Nov. 2, 2019, “Colder-than-normal fall temperatures and precipitation levels have increased the demand for (propane and other natural gases) retail uses, including home heating.”
Burgum’s declaration, which waived certain restrictions on hauling hay, livestock, propane and other petroleum products, was followed by increased efforts by the North Dakota delegation to convince Chairman Chatterjee of the FERC to provide more aid.
“Last week, I urged FERC to do what they can to ensure an adequate supply of propane in the Midwest,” Armstrong told the Press. “Without propane to dry the corn, this harvest season could get even worse. I appreciate that FERC has listened to our concerns and taken action to begin to alleviate the shortage.”
Burgum remains urgent, as well.
“As farmers are bringing their crop in from the field, the lack of propane is causing a delay in drying the crop for storage,” Burgum said in a press release issued Nov. 20. “The propane shortage and the quadrupling of supply costs add to an already challenging year.”
Later that day, on Nov. 20, the FERC announced that it would initiate an alternative dispute resolution (ADR) process to alleviate the propane shortages in the region, accepting a proposal to allow the emergency transportation of propane to the Midwest over a 30-day period.
Sen. John Hoeven, R-N.D., who was instrumental in achieving the aid, issued the following statement in response to the commission’s announcement: “We appreciate FERC for responding to our call to action and for beginning this process with pipeline companies and propane shippers. While the increased temperatures have helped reduce demand for propane, our agriculture producers still need access to reliable and affordable propane supplies to dry their grain and recover from wet harvest conditions. We will continue working with the agency to ensure this process is effective in preventing regional shortages of this much-needed resource.”
While the assistance comes as a great relief to North Dakotans, the long-term problem of storage and regular transportation equipped with the capabilities to deal with early, extreme conditions remains.