by Matt Hughes
J-E News Editor
As snow and cold weather return to the area, state officials have begun to show concern for the shrinking levels of propane across the Commonwealth.
30 states have declared propane energy emergencies since propane supplies hit their lowest level ever during the second week of January.
The governor’s office, Kentucky Emergency Management and the Energy and Environment Cabinet are working together with federal agencies and the Kentucky Propane Gas Association to stay informed of our propane issues.
Last week House Committee Natural Resources & Environment Chair Rep. Jim Gooch of Providence heard testimony on what had created the situation. That meeting cited four main reasons for the drop in propane levels.
•Record grain harvests across the upper Midwest occurred late, which meant everyone harvested at the same time. Because the season was wetter than usual, more propane was needed to dry the grain. In 2012, 65 million gallons were used. This year 300 million gallons were needed, which reduced propane below normal levels heading into the heating season.
•A major pipeline in Canada was temporarily out of commission from November until December 20th, which supplied 40% of propane to Minnesota. Railroad re-routing and other infrastructure problems hampered other exports from Canada, forcing upper Midwest and Northeast marketers to look further for supply.
•High overseas prices caused an expansion of the amount of propane being exported. In October of 2012, 189,000 barrels a day were exported. In October of 2013, 408,000 barrels were exported.
•Much colder than normal winter weather has caused a severe rise in petroleum demand. Customers are consuming greater quantities of propane and suppliers cannot keep up with demand.
“Certainly all of these factors - weather, pipeline breakdowns, soaring demand and price volatility and multiple uses for propane from home heating to commercial uses - have created a perfect storm for propane shortages,” said Rep. Gooch. “These unfortunate series of events show us just how critical ‘all’ energy sources are to our daily lives. As elected officials, we must ask ourselves if we could see the same developments in natural gas supply shortages as we are being forced to shift from coal to natural gas for base load electricity generation. Natural gas prices have more than doubled since we started this switch some 24 months ago and industry experts are questioning whether we are building adequate natural gas pipelines to the power plants at the rate we are announcing planned shutdowns of coal fired generation. Not asking these questions as we move away from our most abundant, reliable and affordable resource of coal could have disastrous consequences for our citizens.”
Rep. Gooch has filed House Bill 63 that would require retail electric suppliers to maintains 30- day supply for electricity generation.
“Propane is a very tight comodity right now,” said Greg Simpson the general manager of Southern States. “Nobody really saw this kind of winter coming. But we’ve been able to stay in propane at Southern States.”
Simpson said that Southern States, with local offices in Clay and Slaughters, has managed to keep gas in their pipeline by contracting it rather than buying on the market.
“It’s been a struggle to keep the pipeline full,” he said. “I’ve heard of other companies around the area that haven’t been so fortunate.”
Simpson said that although Southern States has been able to keep customers supplied, they have been unable to take on new customers. He estimates the shortage will last another 35-40 days.
“The Kentucky Propane Gas Association (KPGA) is working with its national affiliate to ensure expedited shipments of propane by all modes: pipeline, rail and transport,” KPGA wrote in a statement on their website. “Efforts are underway with the U.S. Department of Energy to acknowledge that an emergency exists not only in our state, but throughout the nation, as consumers and businesses in dozens of states are faced with higher energy costs due to persistent cold weather.”
In January Governor Steve Beshear waived federal requirements on propane suppliers to expedite transporting the fuel. He has said he will continue to waive those requirements until the situation is under control.
Kentucky Attorney General Jack Conway’s office was contacted by residential and commercial customers in western Kentucky who had difficulties getting a release from United Propane Gas and its affiliates. The Attorney General contacted UPG and they volunteered a general release for customers they could not accommodate. The Office of the Attorney General will continue to monitor UPG and customers who have difficulties with their propane suppliers should email rateintervention@ag.ky.gov or call the Propane Supply Complaint Hotline 1-866-592-2556.
“I will continue my efforts to stay up to date on the propane problem and other energy issues and will share new information as it becomes available,” said Rep. Gooch.
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