Statement on Propane Supply, Demand, and Distribution
The National Propane Gas Association is working at all levels to seek relief from the current supply, distribution, and infrastructure problems facing American propane customers.
To allow for expedited delivery of propane, NPGA is working with stakeholders throughout the industry to seek relief from the current situation. Presently, the U.S. Department of Transportation has issued a regional order for the Midwestern, Eastern, and Southern regions which will allow transporters to move propane more freely throughout the most affected regions. The rare regional orders apply to 10 Midwest, 14 Eastern, and 9 Southern states. A total of 31 states so far have individually issued Hours of Service relief.
Last week, the U.S. Department of Energy reported that cold weather led to record-high natural gas storage withdrawals, as well as propane. These are the largest drawdowns in the 20-year history of the survey and the second time this year the record has been broken. Efforts are underway with the U.S. Department of Energy to acknowledge that emergency conditions could be forming, as consumers and businesses in dozens of state are faced with higher electricity and gas costs due to persistent cold weather.
In addition to seeking relief at the federal level, NPGA is working with officials within the pipeline, rail, and truck transport industries and asking for propane shipments to be prioritized within their industry.
The challenges in delivering propane for consumers during this prolonged period of cold weather started with a confluence of events beginning in October.
Abundant grain crops were being harvested throughout the Upper Midwest almost simultaneously this fall. Ordinarily, the harvest progresses in stages through the region but in late 2013, the harvests happened at the same time over a wide area. This was a large, wet crop which required massive amounts of propane in order to be dried prior to storage. That demand reduced propane inventories throughout the area.
At the same time, infrastructure realignments inhibited the transportation of propane. The Cochin pipeline, which provided 40% of the product used by Minnesota suppliers, was shut down for repairs. This triggered a chain reaction causing suppliers to go further out to load their supply. Canadian imports to the Northeast were also impaired by rail re-routing. This forced Minnesota and Wisconsin retailers to get their propane at the pipelines in Iowa, increasing demand in that state.
As the harvest demand ended, a massive winter storm rolled across much of the country. Demand for residential, commercial and agricultural heat soared. The average number of heating degree days* for this winter is more than 10 percent higher than last year. The forecast continues to project colder than normal weather for much of the United States.
An important difference between this year and previous years is the extent of propane exports into the world market. In 2013, more than 20% of total U.S. propane was exported, up from 5% in 2008.
All these combined to prevent regional inventories from recovering and the existing pipeline and terminal infrastructure has been unable to recover. This has required longer driving distances and loading times, a scarcity of available product and delays in making deliveries to customers.
*Heating degree days are used to calculate the deviation in temperature from an average day from 65 degrees.
The National Propane Gas Association is the national trade association of the propane industry. NPGA represents approximately 3,000 companies, including producers, wholesalers, transporters, and retailers of propane gas as well as the manufacturers and distributors of associated propane equipment and appliances. 50 million Americans choose propane as their energy source. Propane is a clean-burning, efficient and climate-friendly alternative fuel that is available now. For more information about NPGA and the propane gas industry, visit NPGA online at www.npga.org.
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