Editor’s note: This commentary is by Mike Ryan, who worked for 25 years in management at Digital Equipment Corp., followed by several years working as an independent consultant. He is retired and lives in Hyde Park.
In my commentary published in VTDigger on Feb. 5, I attempted to alert Vermonters to the causes of the shortage of propane and the huge increase of prices in our state. I asked you all to contact your reps to solicit their help; I also said that I would stay on this issue until we had a solution.
I am happy to report progress and tell you we are starting to yield results – but we have a lot of work to do before we can take our foot off the gas.
First of all, we said we needed to engage the Washington delegation. This was accomplished.
The link below is to a Burlington Free Press article written by Dan D’Ambrosio that reports that the Vermont Washington delegation requested in a formal letter that the U..S Commerce Secretary order a halt or slow-down of propane exports to relieve the pressure on supplies to Vermont. It also features his interview with me. Burlington Free Press article.
From all the Vermont media I approached, only VTDigger and the Burlington Free Press have allowed me to get my information out. I don’t know why. I worked WCAX particularly hard, even offering to help them but to no avail.
In spite of limited media support, all of the pressure at this point from Vermont and other affected states did have an impact.
The link below is for reference only; it is a heavy read. It is important though because it is the biggest enabler of our propane shortage problem. It covers the hearing in May 2013 whereby the approval to reverse the TEPPCO pipeline shutting off 44 percent of the Northeast’s supply of propane was given by the Federal Energy Regulatory Commission (FERC). FERC May 2013 hearing.
I understand from a recent discussion with Joe Rose, president of Propane Gas Association of New England, that the reason this was allowed was because the pipeline had been assessed as underutilized. Anyway it seems that arrangements made to ensure supply at a reasonable price in the light of the change did not work out due to having to start the heating season with insufficient inventories in the Northeast, a very cold winter, and by then, an obviously inadequate product delivery infrastructure.
The next link covers FERC taking action for the first time in history to order TEPPCO to reverse the flow of their pipeline again so that propane got delivered to the Northeast and the Midwest in February. This order does not yet cover all of the important supply pipelines and was only valid until Feb. 21. But it is a start. Link.
This order, in addition to the Sanders and Co. letter to the Commerce Secretary requesting the temporary curtailment of exports gets at all of the issues necessary to restore supply at a reasonable price to the Northeast into play.
Since then, on Feb. 28, the Vermont House of Representatives passed state Rep. Linda Martin’s resolution, H.R.14, which deals with the entire subject. You can read the whole document by using this link: HR.14.
The resolution concludes with:
Resolved by the House of Representatives:
That this legislative body finds the market of propane to be unsuited to market-based regulation and requests that federal regulation of propane exports and distribution be instituted such that the propane shipment infrastructure, including the TEPPCO and Cochin pipelines and other supporting infrastructure, is restructured to resemble the configuration existing before the modifications beginning in May 2013. Federal control of the propane market should be implemented regardless of the impact it may have on exports. If it can be shown to the satisfaction of the Secretary of Commerce and the Commissioner of the Federal Energy Regulatory Commission that unbridled exports can be resumed without negatively impacting supply or pricing to the domestic market, exports of propane should be permitted to resume, and be it further
Resolved: That this legislative body respectfully requests the President of the United States, the U.S. Congress, and the Federal Energy Regulatory Commission to enact laws to control pricing and force transparency of the propane industry, and be it further
Resolved: That the Clerk of the House be directed to send a copy of this resolution to President Barack Obama, the Vermont Congressional Delegation, Secretary of Commerce Penny Pritzker, and Acting Chairman Cheryl Lafleur of the Federal Energy Regulatory Commission.”
These letters went out on March 11, 2014.
All of this pressure and activity plus pressure from other Northern states and the arrival of emergency shiploads of propane from Norway and Algeria have temporarily led to an improving situation. The nationwide price of propane has come down each of the last five weeks and now stands at $3.27/gallon, down from a high of $4/gallon but still much higher than last year’s price at this time which was $2.38/gallon.
The export of propane has leveled off, even declined somewhat. You can see all of this data yourselves by accessing the links below. The first link covers nationwide weekly pricing and the second link covers weekly nationwide exports.
Nationwide weekly pricing
Nationwide exports
We need a permanent solution to the propane supply and pricing problem and this means a seat at those tables where important decisions affecting the supply and pricing of oil derivatives and gas for Vermont are made. I do not feel that there is sufficient pressure or momentum in the convergence of politics, industry, law, finance and media to cause this to happen on its own, it needs to be driven.
We need a permanent solution to the propane supply and pricing problem and this means a seat at those tables where important decisions affecting the supply and pricing of oil derivatives and gas for Vermont are made.
Firstly and hopefully, winter will soon be over. I am sure that a number of influential people/organizations would be happy if warmer weather took the pressure off. We cannot allow this to happen. We must build on the pressure that has already been created by the new understanding of the facts. We must push as hard as we can through the summer to make sure that next winter’s pricing and supplies of propane and other fuels are secure.
If we don’t push hard, the problem could actually be much worse next year. In addition to the current known problems there are huge industry/financial pressures building in Washington to flood Europe with U.S. produced natural gas, using the Ukraine situation as an excuse to further their pre-existing agenda. Were these people to succeed, it would mean all pipelines and infrastructure would be prioritized away from propane and toward natural gas. I don’t see any “champions” for ensuring supply and reasonable pricing for the Northeast in these discussions at this point. New York Times article. Politco article.
This natural gas for Europe question should never really arise. Natural gas can only be shipped overseas in liquid form. It is achieved by sending the U.S. produced gas by pipeline to a terminal where it is subjected to extremely low temperatures causing it to turn into a liquid. It can then be loaded onto specially constructed ships capable of maintaining the low temperatures. The process needs to be reversed after the ship docks at its destination before it can be sent to the users once again by pipeline. None of the infrastructure is in place either in the U.S. or Europe to facilitate exports on such a scale. The investment required to make this happen would be huge and no one would be willing to pay for it on either end. In addition, it would take years to achieve any significant impact even if cost was not an issue.
What I believe is happening though is that the industry wants to use this to get permission to export crude oil. They already have a campaign in full swing which questions the “absurdity of allowing propane and other derivative products to be exported without any limits or controls but not crude oil or natural gas.” There is maybe nothing wrong with this idea if it is part of an overall plan to satisfy the needs of domestic markets and exports before unbridled exports of everything win approval. Any changes to the plan, must be monitored to ensure ongoing compliance.
This leads to the question: “How can we achieve this?”
It can’t be in our interest to try to take this task on as a standalone state. I believe that we need strong, knowledgeable empowered leadership and representation at a Northeast regional level which connects state governors and Washington delegations from all of those states potentially affected by any proposed changes with the national political and industry players. If we try to do it alone we won’t have the clout and indeed might wind up fighting with other Northeast states for our share of oil and gas resources. I think there is much to be gained by cooperation in this situation.
With this in mind I have reached out to Joe Rose who, while based in Maine, has a role that covers New England albeit his organization’s role right now is limited to: “As the regional trade association representing the propane industry in New England our mission is to provide information, training, and promote the various uses of propane.” I found him to be very forthright and solution oriented with a huge amount of knowledge of the industry. I plan on working with him if I can, using his knowledge to push for those solutions that are going to give us the best result for New England and at the same time create opportunities for win-win situations with other Northern states and other stakeholders. He has some good ideas but he needs some help.
I will also continue working with state Rep. Linda Martin as she can help engage our Washington delegation, our governor and other lawmakers in this effort.
I would welcome critique, comments and ideas from those who have a passion or strong interest in this issue.
