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In Wake of Propane Shortage, Lawmaker Asks Obama to Curb Exports

As the Midwest and Northeast regions of the United States struggle with bitterly cold weather and low supplies and high prices for propane, exports of the fuel -- especially to Europe, Asia and Latin America -- have risen more than 75% in a year, the U.S. Energy Information Administration (EIA) reports.

Meanwhile, a member of Congress from the Midwest has asked President Obama to intervene in the crisis, by ordering a reduction in the amount of propane exported.

According to a 12-page update on the propane market situation delivered by EIA on Feb. 5, the United States exported 410,000 b/d of propane and propylene in November 2013, a 76% increase over the 233,000 b/d exported the previous November and the highest monthly total on record. The exports increased 236% from November 2011, when they were 122,000 b/d.

EIA data also shows liquefied petroleum gas (LPG) exports -- which includes propane, ethane, ethylene, propane, propylene, normal butane, butylene, isobutane, and isobutylene -- totaled 427,000 b/d in November 2013. That month, the Netherlands imported the most LPG from the U.S., at 77,000 b/d, followed by Mexico (65,000 b/d), Japan (63,000 b/d), Brazil (57,000) and Venezuela (39,000).

Guatemala imported 19,000 b/d of LPG from the U.S., and three other countries in Latin America -- Chile, the Dominican Republic and Ecuador -- each imported 18,000 b/d. Meanwhile, Canada and Honduras each imported 16,000 b/d, and China imported 13,000 b/d. Other countries with reported imports were Costa Rica and Spain (3,000 b/d each) and the United Kingdom (1,000 b/d).

On Monday, U.S. Rep. Bruce Braley (D-IA) sent a letter to President Obama, asking him to invoke the International Emergency Economic Powers Act and limit the amount of propane being exported.

"We are facing a propane emergency within the U.S. that can be partially attributed to an increase in exports," he wrote, according to the Des Moines Register. "The Midwest's supply of propane fell to 8.789 million barrels at the end of January, the lowest it has been in recent history.

"Iowans should not be freezing in their own homes while we export American propane to heat homes in other countries."

Residential propane prices have also spiked in recent days, especially in the Midwest. On Feb. 3, Indiana reported the highest price for propane in the region at more than $4.26 per gallon, up 52% from a price of $2.80 per gallon on Jan. 6. Three states -- Minnesota, Ohio and Wisconsin -- had prices above $3.90 per gallon on Feb. 3, when the prices ranged from about $3.36-$4.26 per gallon. By comparison, the prices ranged from about $1.91-$2.89 per gallon on Jan. 6.

According to the EIA, 36% of the households that use propane for heating are located in the Midwest, followed by the South (34%), West (16%) and Northeast (14%). But the data also shows that only 7% of homes in the Midwest, about 2.31 million structures, use propane for heat. Meanwhile about 762,000 homes in the South, or 4% of the total number of homes, use propane for heat.

Tucker Perkins, chief business development officer for the Propane Education and Research Council (PERC), told NGI's Shale Daily that three factors -- a strong demand for propane by farmers to dry the 2013 corn crop, cold weather from the polar vortices, and propane exports -- have created the current situation.

"It's those three things together that have created a problem, but certainly we think increased exports were a contributor for sure," Perkins said Monday. "Unusually strong demand in a compressed period of time started this chain of events. Overall supplies were reduced over a five-year range going into the winter, and we were on the low end of that range across the country. That's almost directly a function of exports.

"Everything would have been fine but for a very abnormal number of degree days to this point. The winter and the heating demand, in the upper Midwest in particular, have been tremendous."

According to PERC, the United States produced about 18 billion gallons of propane in 2013 -- including 12.2 billion gallons from gas processing plants and 4.2 billion gallons from refinery production -- and imported about 1.2 billion gallons, mostly from Canada. About 8.2 billion gallons were consumed by the retail market, while 5.4 billion gallons went to petrochemical feedstocks and 4.5 billion gallons were exported.

FERC invoked its emergency authority Friday under the Interstate Commerce Act to redirect shipments within the U.S. to help alleviate "dangerously low" propane supplies to consumers in the Midwest and Northeast (see related story).

The order by the Federal Energy Regulatory Commission (FERC) directs Enterprise TE Products Pipeline Co. LLC to temporarily provide priority treatment to propane shipments from Mont Belvieu, TX, to the Midwest and Northeast regions, which are suffering from severe cold weather (see Shale Daily, Feb. 7).

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