An Arctic Blast… And Then Some

The exceptionally cold start to this winter has had a strong impact on dealers, as well as the energy market in general in many states. Although residents in various cold-weather states are accustomed to dealing with extreme temperatures, residents of Oklahoma might typically see only a couple of cold-weather spurts each winter, and usually not in early December.



This past December was different, as Oklahoma saw temperatures fall into the teens, and the chilly weather continued in January. The conditions prompted Oklahoma Gov. Mary Fallin on Jan. 6 to declare a Liquefied Petroleum Gas Emergency and issue an exemption to 49 CFR 390-399, which includes hours-of-service (HOS) regulations.



“I’ve been here 22 years, and I don’t recall there ever being an executive order in the state of Oklahoma specific to LP-gas or propane,” said Richard Hess, executive director of the Oklahoma Propane Gas Association.



The early cold start to winter has been good news for propane marketers in many states, but the good news has been tempered by supply challenges that have seen state propane gas associations working feverishly to get HOS restrictions lifted. Propane marketers in various cases were doing only partial fills for customers, and at the same time were having to pass along high propane prices.



Oklahoma saw its first snow in early December, which Hess noted is extremely early for that state. Fallin issued the initial executive order on Dec 4 that lasted through Jan. 5. The Oklahoma Propane Gas Association contacted the governor’s office before Jan. 5, explaining that although issues may have been resolved for other energy industries that were included in the initial executive order, the propane industry needed another order as soon as possible. Gov. Fallin then approved a second order for an additional 30 days, pushing into February.



In Missouri, the governor extended an emergency order lifting HOS rules in December that was set to expire Jan. 13. Missouri Propane Gas Association executive director Steve Ahrens told BPN on Jan. 11 that he believed all loading points were on allocation. But on the bright side, he had seen weather reports showing that temperatures would move up the following week.



“We’ve got guys going wherever they can get product,” he stated. “A little warmer weather would be helpful, but our guys are still too many loads behind. There’s some short-filling going on, and it just seems to be a struggle to keep up with demand. I think most of them are doing OK, but it’s not where we would love to be.”



Wisconsin Propane Gas Association executive director Betsy Ahner said in January that supply issues had moved “past the critical point” in her state. Marketers were calling the association, stating they are out of propane and asking the association for advice. Some smaller marketers in Wisconsin had been delivering only partial loads, and the supply issue had begun to hit some of the larger marketers as well.



Ahner heard reports from different marketers that the Janesville, Wis. terminal regularly had anywhere from 15 to 20 trucks in line, 30 at one point. When Janesville fills off the pipeline, it can fill two trucks per hour, so that resulted in a 15-hour wait. Other terminals in Wisconsin or that serve the state are on allocation, and some had no propane at all. Ahner added that the Upper Peninsula area of Michigan was dealing with the same problems as the marketers in northeast Wisconsin. Rapid River in Michigan’s Upper Peninsula is one terminal that has experienced particularly high demand from marketers in both states.



Although snow had not been as big a problem in Wisconsin as it was in Michigan, Ahner heard a prediction for freezing rain that she said would not help the situation.



The entire Midwest is in the same predicament regarding propane supply, and marketers are going wherever they can to find product. “There are lines all over the place when there is propane,” she noted. Northwest Wisconsin pulls its propane primarily from the Rosemount and Pine Bend terminals in Minnesota. The refinery in Superior, Wis. puts out as much propane as it can, but marketers in that area could use more than it has been able to provide, she pointed out. The southern part of the state pulls from Janesville and Rockford Ill., and some marketers go to Dubuque, Iowa. The Junction City terminal in central Wisconsin was temporarily out of propane when Ahner spoke to BPN in January. Wisconsin also has three rail terminals in the state that have been reported to have difficulty getting deliveries on time, and their supply has not been enough to meet demand.



The Wisconsin association and the Wisconsin Department of Administration, Division of Energy, along with other state propane gas association executives and state energy regulatory offices, participated in a conference call in January regarding the current Midwest propane situation. The U.S. Department of Energy and the National Propane Gas Association (NPGA) also participated in the call.



The Michigan Propane Gas Association (MPGA) and the Michigan Public Service Commission were also among the participants. MPGA executive director Derek Dalling told BPN that executives from corn drying states who took part in the phone call were particularly hard hit. Michigan is not a major corn drying state, but Dalling saw corn harvesting combines in Michigan fields at the end of November and early December, which is extremely rare for his state.



“Of course, all that corn is being dried with propane, Dalling noted. “So we’ve got increased demand, certainly in the Plains states and in the western Great Lakes, and slowly but surely that kind of crept over to Michigan.”



Michigan propane representatives met with Gov. Rick Snyder in October and were happy to tell him that propane marketers in that state were not having many supply problems. However, that changed when the extremely frigid weather hit toward the end of December, causing transportation and supply issues.

Lines at terminals in the Lower Peninsula area of Michigan got longer just before Christmas, and allocations took effect in surrounding states. That resulted in many trucks coming to Michigan to get propane. MPGA fought for and achieved an HOS waiver just before Christmas, and that expired on Jan. 10.



“We spent the entire new year for the first week or so trying to get the waiver extended, and thankfully the governor worked with us again and extended a waiver until the end of January,” Dalling stated. “The industry has until the end of January to get its act together with supply issues, because I just do not see another waiver happening here.”



Iowa Propane Gas Association executive director Deb Grooms reported in early January that for several days, terminals on the West Leg of the Enterprise MAPL pipeline experienced extremely high demand and low terminal inventories. Trucks loaded directly off the pipeline as product was received at exceptionally slow rates. That period of strong demand prompted allocation on the West Leg of the MAPL system. Enterprise Terminals and Storage invoked terminal allocation at all its terminals located in the Mid-America Pipeline West Leg system, including Clay Center, Greenwood, Mankato, Ogden, Sanborn, and Whiting.



George Jaques of Plains Marketing forwarded an email that he sent to Iowa Gov. Terry Branstad in mid-January, which stated that “right now, we are heading quickly to disaster status with our supply of propane we have here in Iowa. We are not alone; Minnesota, Illinois, Wisconsin….and the rest of the states in the Upper Midwest are at emergency status and swiftly moving to disaster. The pipelines have been and are pumping at maximum rates and have been almost non-stop since corn drying.”



He added that propane marketers are “short-filling” agricultural, industrial, and heating customers so their supply is not depleted. “Now the secondary storage [marketers’ large storage tanks] is starting to run out and transporters are out of hours of service,” Jaques wrote.



Minnesota Propane Association executive director Roger Leider told BPN in January that marketers in the state have had an HOS waiver since Dec. 1, and he said it would probably be in place until early February. He noted that the two pipelines in the state, TEPPCO and Cochin, were both under allocation.



“We’re having guys that are trucking all the way from Kansas,” he stated. “Right now, we’re just hanging on. We’ve really done about all we can do with an hours-of-service exemption.”



The Georgia Propane Gas Association obtained a waiver of the hours of service as declared by Gov. Deal effective Jan. 10. That waiver was in effect for up to 30 days. Executive director Jennifer McKeen told BPN that “We are delighted to have been given relief by the governor’s office.”



“Natural gas curtailment presented a challenge we have not experienced here in Georgia in over five years,” she wrote in an email to BPN. “Couple that with the supply challenges in the Midwest and Northeast, and you have a very busy time for the propane industry. We are seeing transports we have never seen before. Hours-of-service relief is as widespread as I have ever seen in my almost 15 years with the industry.”



Responding to a request from the Pennsylvania Propane Gas Association (PAPGA), Pennsylvania Gov. Tom Corbett issued a disaster declaration easing transportation regulations in that state to avoid interruption of propane and fueloil delivery. The order was in effect until Jan. 25. “Pennsylvania is not an easy state to be granted hours-of-service relief due to the fact the governor must declare a state of emergency,” stated Shelby Metzger, PAPGA executive director. “However, because of our members’ willingness to respond to several surveys and providing additional detailed information, our lobbyist Kathy Speaker MacNett and Jim Ressler [of] Ressler Propane, PAPGA Governmental Affairs Committee Chair, were successful obtaining this relief.”



In Missouri, Ahrens of the Missouri Propane Gas Association said marketers are forced to pass the high propane prices down to consumers, and the consumers calling his office are not happy. He added the natural gas industry is experiencing the same issues, with several businesses in Lebanon getting notices of natural gas curtailment, and he hoped it would help propane marketers gain footing in some areas where natural gas made a big push a few years ago.



“I would say nobody wants the winter to be over, but a little break would be nice,” he added.     —Daryl Lubinsky


Along the Beltway, NPGA Requests Assistance With Serious Supply Situation



In response to the supply and transportation challenges that propane industry members have experienced, the National Propane Gas Association (NPGA) has been hard at work along the beltway to help ease the situation.



On Jan. 14, Rick Roldan, president and CEO of NPGA, sent a letter to the Association of American Railroads (AAR)(Washington, D.C.), asking the group to urge its members to do their best to expedite propane shipments in the wake of rail shipment delays.



In the letter, addressed to AAR president and CEO Edward R. Hamberger, Roldan noted that he and Hamberger spoke during another serious supply situation several years ago. At that time, the railroad association gave priority to propane rail shipments, and those actions helped the propane industry avert a difficult situation.



“I am writing to inform you that we are facing a similar, if not more serious, situation today.” Roldan added that the current challenge of the late crop drying season and the early start to the winter heating season were exacerbated by the “fundamental transition” of the energy transportation system, and that pipeline and rail systems are making modifications to accommodate the substantial increase in production from shale plays. The use of railcars to ship crude oil from the shale plays has increased significantly.



Roldan commented to BPN that NPGA would like to see rail shipments of propane arriving quickly in the areas where they’re needed most. “As an industry, we have to start thinking about how we adapt in an environment where our delivery structure is changing. This includes not only rail shipments, but also pipeline transportation and over-the-road transports.”



The following day, he asked U.S. Transportation Secretary Anthony Foxx to declare a state of emergency and grant regional exemptions from HOS regulations for the Midwest and Eastern service centers as defined by DOT’s Federal Motor Carrier Safety Administration. He cited conditions such as the late, wet grain and corn harvest, historic low temperatures, and lack of storage in the Northeast. These waivers were granted Jan. 19, effective to Feb. 11.



Roldan wrote that the propane industry’s challenges in meeting consumer demand result from additional factors such as the unavailability of the Cochin Pipeline as a prime source of propane, insufficient pipeline takeaway capacity in the Bakken formation to transport crude oil being produced there, and the “tremendous growth in energy production from shale formation that has caused a dramatic change in energy flows across North America.”



Asked to elaborate on the circumstances of the situation for the propane industry, Roldan told BPN: “This is the first major winter we’ve had in about 10 years, and it has brought to light the various challenges facing the industry. The current situation has given us a unique opportunity to advocate for a variety of issues that would help our members throughout the year, including: increased storage capacity, an online reservation system for pipeline lifts, and excluding terminal wait times from on-duty time calculations.



“I want to underscore the importance of increasing our storage capacity. Proposals to build primary storage facilities are collecting dust on the desks of government officials across the U.S. For example, one application for a critical storage facility for New York and New England has been awaiting approval from members of Governor Cuomo’s cabinet since 2009. The Finger Lakes LPG Storage Facility would house 88.2 million gallons of propane and connect to the existing TEPPCO interstate pipeline and ship propane via truck and railcar. The current proposal calls for a rail/truck loading facility that is capable of being operated on a 24-hour basis 365 days a year. 



“To highlight the importance of this storage facility, New England accounts for 7% of national total consumer propane demand, but holds only 1.2% of total primary propane storage capacity. Independent analysis estimates average heating-season consumption in New England at just under 3 million gallons per day.”



In an email to the propane industry that included a copy of the letter to Foxx, Roldan wrote that NPGA is working at all levels of the federal government to seek relief for the infrastructure and distribution challenges. He noted to BPN that NPGA also contacted officials from the U.S. Department of Energy and has kept various Congressional offices up to date on the situation. He added that response to the communications has been positive.



On Jan. 17, NPGA received a letter from AAR president Ed Hamberger in response to its correspondence from earlier that week requesting his assistance in working with the railroads to expedite propane shipments, Roldan noted.



Hamberger’s reply was positive. He said, “I have reached out to the lead commercial officers at the seven Class I railroads and more than 170 shortlines that are members of the AAR. I’ve asked that they raise internal awareness of service opportunities involving your members.”


More News from NPGA on Increased Railcar Filling Limits



NPGA president and CEO Rick Roldan sent an email to members on Jan. 17 reminding them of an important provision in the federal hazardous materials regulations that may help in transporting a higher volume of fuel. This provision allows for increased filling limits of railcars during the winter as addressed in Notes 9 and 10 of Section 173.314 of Title 49 of the Code of Federal Regulations (CFR), i.e. 49 CFR 173.314.



Specifically, Note 9 of § 173.314(c) specifies that LPG must be loaded so that the outage is at least 1% of the total capacity of the tank at certain reference temperatures depending on the insulation type used on the railcar. However, Note 10 permits railcar loading at reduced reference temperatures during the months of November through March as noted below, based on the following insulation parameters:

• 100°F for a non-insulated tank (down from the normal 115°F);



• 90°F for a tank with thermal insulation incorporating a metal jacket that has an overall thermal conductance at 60°F of no more than 0.5 Btu/hr/sq ft/degree F (BHSF) temperature differential (down from the normal 110°F);



• 85°F for a tank with thermal insulation incorporating a metal jacket that has an overall thermal conductance at 60°F of no more than 0.075 BHSF temperature differential (down from the normal 105°F).



Note 10 also states that the winter reference temperatures may only be used for a tank car shipped directly to a consumer for unloading and not stored in transit. The offeror of the tank must inform each customer that the tank car was filled based on winter reference temperatures. The tank must be unloaded as soon as possible after March in order to retain the specified outage and to prevent a release of hazardous material that might occur due to the rail tank car becoming liquid full at higher temperatures.