Cold, short supply drive higher Wis. propane costs

Country Visions Cooperative propane tanks, Friday, Jan. 24, 2014. (WLUK/Eric Peterson)
Country Visions Cooperative propane tanks, Friday, Jan. 24, 2014. (WLUK/Eric Peterson)

MADISON, Wis. (AP) – Wisconsin propane users are bundling up and watching their money fly out the door as prices skyrocket amid a vicious combination of ultra-cold weather, depleted storage reservoirs and pipeline problems.

Propane prices have jumped across the country since the heating season began in October. According to the latest figures from the U.S. Energy Information Administration, wholesale prices have climbed 28 percent nationally between mid-December and Jan. 20, including a 23 percent jump between Jan. 13 and Jan. 20. Residential prices, meanwhile, have gone up 9 percent over the last month.

In Wisconsin, wholesale propane cost an average of $2.26 per gallon on Jan. 20, up 35 percent since mid-December. Wisconsin residential prices averaged $2.30 per gallon on Jan. 20, up 13 percent from a month earlier. That means a person with a 500-gallon propane tank is suddenly paying $135 more to fill it than he or she did in December.

Gov. Scott Walker has been issuing orders since October lifting truckers’ hour limits in hopes of moving more propane faster. He plans to meet with propane industry stakeholders on Monday to discuss the problem. But propane distributors and the 250,000 or so people Walker’s office estimates rely on their product may have to pinch their pennies until spring.

“This is a major, major crisis,” said Brandon Scholz, managing director of the Wisconsin Propane Gas Association. “Everybody’s first question is ‘what’s the solution?’ There is not a short-term solution here.”

The shortage began to form in October, according to a statement on the National Propane Gas Association’s website. States across the Upper Midwest completed large corn harvests almost simultaneously rather than in the usual stages, requiring huge amounts of propane to dry the corn before it could be stored. Growing propane exports – more than 20 percent of domestic propane was exported in 2013, according to the NPGA – also led to smaller reserves.

Pipeline work slowed efforts to replenish wholesalers’ reserves. The Cochin pipeline, which provides about 40 percent of Minnesota suppliers’ propane, was shut down for most of December for repairs, triggering a chain reaction through the distribution system as suppliers traveled further to find gas. Then a brutal cold snap hit the eastern United States, driving up demand.

With storage tanks depleted, ongoing production can’t keep up. Terminals have started limiting how much propane they will load into trucks in an effort to ensure everyone gets something, Scholz said. That means more trips for truckers, driving up costs that add to the retail price, he said.

Andy Fiene, chief executive officer of Mount Horeb-based Premier Cooperative, which serves about 7,000 propane customers across southwestern Wisconsin, said his truckers have been traveling as far as Kansas and Nebraska to get propane.

“It’s not that the country is out of propane,” Fiene said. “It’s just getting it where it needs to be is the biggest challenge. There’s only so many trucks, the pipeline is only so big, you can only push so much through the pipelines.”

But it’s unclear why wholesale prices are spiking, Scholz said. Many retail distributors have locked their customers into contracts that set their prices, creating shortfalls between their revenue and rising wholesale costs.

“There could be propane dealers who go out of business,” Scholz said. “Your mom-and-pop propane dealers aren’t making any money this year.”

An NPGA spokeswoman said she had no explanation for rising wholesale costs. Sen. Chuck Grassley of Iowa has asked the Federal Trade Commission to investigate what may behind the increases.

Walker has issued four executive orders since October lifting the hour limit for truckers to speed deliveries. His last order expired Thursday, but federal officials issued their own order lifting hour limits for propane truckers on Jan. 19. That order covers 10 Midwestern states until Feb. 12.

And earlier this month the state Department of Transportation relaxed road weight limits to increase the amount of propane trucks can carry in a single trip.

Walker on Thursday addressed the propane shortage in a radio message, asking people to let friends and loved ones stay with them if they need to keep warm, telling them to contact their vendors when their tanks are 70 percent empty and conserve their propane.

It’s unclear what might come out of Monday’s meeting. Walker’s spokesman said in an email the governor and stakeholders will look for “additional solutions.”

Sherry Tyler, 70, of Holmen, said she and her 73-year-old husband, Tom, just ordered a refill of their 500-gallon tank last week at $2.09 per gallon, nearly 30 cents per gallon more than at the end of December. She said they’ve turned their thermostat down from 68 degrees to 66 degrees and have taken to wearing jackets in the house to stretch their supply.

“We are a little (worried),” Tyler said. “That’s our only source of heat.”

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