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Published March 21, 2014, 09:28 AM

Propane supplies likely to remain tight for years to come

If you rely on propane, put your thoughts of spring away and start concentrating on this coming fall and winter. Planning ahead and contracting for supplies can help you avoid the price spikes seen this year, and likely will again.

By: Tom Cherveny , Forum News Service

MONTEVIDEO, Minn. — If you rely on propane, put your thoughts of spring away and start concentrating on this coming fall and winter.

Planning ahead and contracting for supplies can help you avoid the price spikes seen this year, and likely will again.

The new reality is propane supplies will remain an issue for years to come in west-central Minnesota.

“It is going to be tight. Propane is going to be very tight moving forward,” says Scott Rohlik, Cenex Harvest States regional fuels manager, speaking to the Chippewa County Corn and Soybean Growers in Montevideo, Minn.

Rohlik advised the group to look at a variety of options, including adding more on-farm storage, to manage the new reality.

Propane inventories in the Upper Midwest are at a record low right now. “There’s a fairly good supply in the South, but they are putting that on barges and sending it overseas because they can make more money; so the pipelines sending it this way aren’t sending it like they should,” Rohlik said.

No doubt, this season’s troubles can be blamed largely on what some have called a “perfect storm.”

One of the biggest crop-drying falls in the past 10 years was piggybacked by the fifth coldest winter in modern records.

This last season’s propane usage in Minnesota is expected to total somewhere in the range of 300 million to 350 million barrels, but it’s not a record breaker. Usage totaled 365 million barrels in 2009, Rohlik pointed out.

The difference going forward is that, on April 1, Minnesota will be losing access to the pipeline that provides much of the state’s propane. Kinder-Morgan will complete the reversal of its Cochin Pipeline and begin moving product north to Canada.

This region enjoyed access to the line at a terminal in Benson.

Until now, Canada has supplied 45 percent of Minnesota’s propane, Rohlik said.

The decision to reverse the pipeline and export to Canada was a straight-forward business decision. Kinder-Morgan has contracts to deliver product to Alberta, Canada, at 100 percent capacity for the next 10 years.

The great variability in Minnesota’s demand for propane meant that the pipeline was only operating at capacity in three of every 10 years, Rohlik saod.

“You can’t build a church for three days of the year, right?”

That’s now the problem for CHS and other propane distributors in the state.

CHS and others are investing millions of dollars to upgrade rail and storage infrastructure in Minnesota, Rohlik said.

Yet they are not likely going to make the investments to match propane needs in those peak years; at least, not anytime soon.

As a result, Rohlik said, the region will be relying more and more on rail to meet needs. Rail transport requires long lead times to lock in the cars needed.

This last season, things didn’t move so fast by truck either. Rohlik said there were many cases when trucks lined up for as long as 12 hours waiting to be loaded at Minnesota terminals.

“We could empty the terminals and refineries within three days,” Rohlik said of the peak demand periods.

Other trucks made trips to North Carolina and Texas to obtain supplies, adding to freight costs.

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