Growing US energy supply brings new challenges

The bone chilling winter of 2014 is a clarion call for America. Record cold has sent power lines down, created regional and local energy shortages, and sent prices rocketing upward for every form of energy we use to stay warm. It ironically comes at a time when domestic supplies of energy are rapidly increasing. No longer is our primary energy challenge dependence on foreign oil suppliers, but rather it's how best to make use of our own bountiful resources and ensuring that energy gets to where it's needed.

This new energy challenge became crystal clear this winter in a small but important part of the American energy market: propane. In less than a decade, as a result of shale gas development, the U.S. has gone from importing propane to producing more propane than we consume.  However, our ability to move and stockpile propane around the country – our energy infrastructure – has not kept pace with record production.

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Secretary of Energy Ernest Moniz, speaking before the National Association of State Energy Officials on February 5, advised that the difficulty experienced this winter with propane is merely part of a much larger energy infrastructure challenge the nation faces, something he intends to explore in the department's first quadrennial review.

The challenges the propane industry faces, like that of natural gas, are twofold. First, storage capacity in consuming regions is ridiculously small, and we need to fix that. Propane demand was highest in rural parts of the Midwest and Northeast affected by the polar vortex and record cold temperatures. These large propane consuming regions have no large scale storage facilities. Homes, businesses and farms lowered thermostats to conserve, yet still used an estimated  20 percent more propane in December than the year before. This caused propane stockpiles at the Conway, Kan., supply hub to drop to levels not seen in nearly a decade.

In addition, the shale gas boom is forcing a redirection of gas transportation infrastructure that impairs propane movements in pipelines, rail cars, and trucks from where it is produced and stockpiled. During harvest season, autumn rains forced more producers to dry their crops, consuming five times more propane than the previous harvest. Normally, these supplies are replenished before winter, but a major propane pipeline into the Midwest was shut down for weeks. Additional temporary shutdowns at refineries and gas plants in the region added to the problem.

Propane supply issues affect real people, often in fly-over country beyond the big media markets. Yet, what has happened over the last few weeks should renew hope that Americans in both the government and private sectors can still work together to solve problems.

Thousands of propane retail companies, mostly local small businesses, have stepped up to the plate. They shifted to overtime hours and exhausted resources searching for fuel to replenish inventories and finance soaring wholesale prices and transportation costs that they know will show up in customers’ bills. Delivery men and women braved icy roads, pulled heavy hoses through deep snow, and endured long hours to bring fuel to their neighbors.

Likewise, executives at trucking companies, railroads, and pipelines have prioritized propane shipments wherever possible. Some manufacturers and agribusinesses with surplus propane supplies have pitched in. The private sector rallied.

Governors and other state and federal transportation officials issued orders extending hours of service rules and waiving weight limits to expedite propane shipments.  U.S. Energy Secretary Ernest Moniz got personally engaged, making phone calls to ease bottlenecks, getting constant updates, and briefing the president. Other federal agencies connected with states to ensure low-income energy assistance was available to the neediest among us and offer loans to small businesses.

Additional propane supplies are starting to get through. However, winter isn't over and demand for heating could remain high for weeks. My message to the millions of customers facing higher prices and tightening supplies is no one – not retailers, state and federal officials, government and the propane industry – have forgotten you. We are fixing these problems. Prices will stabilize. And our industry, which has been around for more than 100 years, is setting a precedent that other energy sources will follow to eliminate these energy challenges in the future.

Willis is the president and CEO of the Propane Education & Research Council (PERC), an organization devoted to supporting propane safety, training, and R&D of new propane-fueled technology. Willis has nearly five decades of experience in the energy industry, from working in the oil and natural gas fields of La. to serving as a senior congressional staffer in Washington D.C. He has operated as PERC CEO since 1998. For more information about Roy, visit his blog at http://energygumbo.com/ or contact him at roy.willis@propane.com.