Pipeline association president urges propane industry to utilize available capacity

The regional propane shortages of last winter were not the result of inadequate pipeline infrastructure or insufficient national propane supply, says the head of the Association of Oil Pipe Lines.

Enough pipeline capacity was available to transport propane supplies to where they were needed – as long as owners and shippers of propane adequately planned for their winter demand prior to winter, according to Andrew Black, president and CEO of the association, whose member companies own and operate 185,000 miles of crude oil, refined product and natural gas liquids pipelines.

“The simplest and most straightforward solution to prepare for next winter is for distributors and marketers to use the millions of barrels of spare pipeline capacity available to them,” Black said during a Senate committee hearing in May focusing on last winter’s propane shortages.

Black noted how propane shipments on the western leg of the Mid-America Pipeline servicing Minnesota were at system capacity (48,000 barrels per day) in December 2013 and January 2014. But shipments from February through October of last year were far below the pipeline’s capacity.

“On average, shippers use only 32 percent of this pipeline’s capacity,” Black explained. “That means nearly 12 million barrels of propane capacity on the pipeline went unused by propane shippers. That’s 12 million more barrels of propane Minnesota farmers and homeowners could have used last winter, but it wasn’t requested or shipped by propane marketers or distributors.”

A similar scenario exists in Wisconsin, where the eastern leg of the Mid-America Pipeline serving the state’s terminals averages only 50 percent utilization (of 53,000-barrels-per-day capacity), meaning 9.5 million barrels of propane capacity on average goes underutilized by propane distributors and marketers each year, Black said.

The U.S. Energy Information Administration reported below-average propane inventories across the Midwest throughout 2013, not just in the fall and winter, indicating local and regional propane marketers did not take the deliveries necessary to maintain traditional stocks of propane, Black said.

Black encouraged propane market participants to use the millions of barrels of spare pipeline capacity available in the spring, summer and early fall. He said this might also give the propane sector more confidence to increase local and regional storage.

And if there’s interest, “our member companies would love to build a dedicated propane line for shippers willing to sign long-term contracts to finance that,” Black said.