The propane situation grows more dire by the day for Minnesota LP users. The StarTribune reported earlier this month that 230,000 farms and homes will be impacted by the loss of a pipeline through that state that carries 40% of Minnesota's propane supply.
A grower brought this to my attention at this week's Profit Briefing seminar in Mankato, Minnesota and I am glad he did. Kinder Morgan, which operates the 1,900 mile Cochin pipeline will make adjustments to over 1,500 valves and pumps on the line and will begin transporting dilutant to Canadian tar sands operations.
The dilutant is used to dilute crude oil so it runs more smoothly through pipelines. Kinder Morgan received a presidential permit on November 19th for the project and expects to permanently end LP shipments via Cochin after March 2014.
Local propane purveyors are already purchasing rail cars and trucks to make up for the lost transport capacity, and officials are suggesting farmers increase their storage capacity as deliveries may be problematic in times of high demand.
Drew Combs, CHS vice president for propane, said farmers and homeowners who need frequent fuel deliveries may need to think about adding storage. “If you go through one tank every week, maybe you ought to think about getting a larger tank for your home,” he said, according to the StarTribune.
Propane imports from Canada have fallen over the past few years as the United States has become self-sufficient in propane. Declining sendouts from Canada have had the pipeline running at 22% of capacity and the reversal and conversion are an effort to better utilize the infrastructure.
But Minnesota propane users should expect higher LP prices as a greater focus is placed on ground transport -- rail and truck.
“There is no propane shortage,” said Jason Doyle, president of Alliance Energy Services, based in North Kansas City, Mo., and operator of 75 propane terminals in North America. “We always have plenty of propane, but it is not always in the right places,” according to the StarTribune.
Officials also note that we could see a repeat of this year's delivery crisis if demand for LP is high for agricultural use in fall 2014, as it was over the last few months. Current LP pricing reported to the Inputs Monitor averages $1.96 in Minnesota. That is 19 cents above the regional average. In 2012 and 2013, LP prices bottomed in July. We will look for opportunities to book LP in Minnesota and elsewhere along the way, but it could be a long while before pricing drops into our go-zone.