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Rural customers likely to see propane cost rise

Rural customers likely to see propane cost rise

Rural customers who rely on propane for heating and cooking are apt to see an increase in costs this

Rural customers who rely on propane for heating and cooking are apt to see an increase in costs this season.

Propane prices are up compared to last year, and the local supply is down, according to the federal Energy Information Administration.

Added to the supply and demand issue is the fact that the sole pipeline that delivers propane to the Northeast, owned by TEPPCO/Enterprise Products, was shut down indefinitely following a leak in August. And the company does not expect the pipeline to be operating before mid-December.

Industry and government representatives say it’s too early to speculate if the shutdown of the TEPPCO/Enterprise Products pipeline, already surpassing the longest closure in its history, will have an impact on consumers this winter.

The pipeline was closed after it started leaking gas in Schoharie County Aug. 27. It was the third leak since the pipeline was built in 1963.

A leak in 2004 resulted in a Delaware County home being destroyed by an explosion. In 1990, two people were killed when the line blew up in North Blenheim, destroying several buildings.

After the 2004 leak and explosion, the pipeline was shut down for about a month. It was closed for two months after the 1990 blast.

This time, the federal Pipeline and Hazardous Materials Safety Administration, a division of the Department of Transportation, issued Enterprise/TEPPCO a lengthy corrective action order calling for numerous steps before the line can be re-energized.

There were roughly 13,000 homes heating with propane in Albany, Fulton, Montgomery, Saratoga, Schenectady and Schoharie counties back in 2000, according to the New York State Energy Research and Development Authority.

The most recent figures, dating to 2008, only account for counties of larger populations and estimate more than 8,000 homes used propane in Saratoga County that year. NYSERDA estimated 1,029 homes used propane in 2008 and 2,570 in Albany county that year.

NYSERDA spokesman Jeffrey Gordon said supplies appeared to be sufficient in mid-October, but the agency can’t speculate on whether the shutdown will affect consumers’ prices.

“What the impact will be, we can’t speculate at this point,” Gordon said. “Certainly to meet the demand the industry is seeking ways to address the ways to get propane here in other ways.”

According to the U.S. Energy Information Administration, the propane supply available for New York was at 2.43 million barrels Oct. 15 compared with 2.69 million barrels on Oct. 16, 2009.

That supply was estimated to suffice for 59.5 days Oct. 15 compared with 62.5 days worth in October 2009.

Consumers were paying $2.635 per gallon of propane in October of 2009. This year, the price is at $2.971, according to the EIA.

Without the pipeline, Enterprise/TEPPCO spokesman Rick Rainey said the area suppliers have to travel farther to fill propane trucks at the company’s Watkins Glen facility, which has underground storage available.

Aside from the pipeline, Rainey said propane comes to the Northeast via railway and by ship to East Coast ports. Rail and ships supply about two-thirds of the propane to New York and Pennsylvania; the pipeline provides the remaining third.

Rainey said suppliers are responsible for getting propane to customers and said he couldn’t speculate on whether the price will change for consumers as a result of the pipeline's break.

But storage figures, he said, can change depending on usage.

“This time of year, it’s sort of a moving target because what’s in store at this second can change tomorrow,” he said.

The amount of money Enterprise/TEPPCO earns supplying the propane is set by the federal government, Rainey said.

Overall, he said, the supply of propane, which primarily comes from Texas and the Gulf region, is strong.

“There’s a lot of production coming from areas like shale plays. The bottom line is there is no shortage of products like propane. It’s an issue of infrastructure needed to deliver it and to process it,” he said.

Prior to the pipeline leak and shutdown, suppliers were able to pick up their propane at terminals supplied by the pipe, including in Selkirk, Oneonta and Watkins Glen.

Those who gathered their supplies in Selkirk and Oneonta have to send trucks to Watkins Glen instead to make use of that terminal's underground storage.

Watkins Glen is roughly 195 miles from Selkirk and about 109 miles from Oneonta.

It was unclear over the past two weeks whether local suppliers who bring propane to the homes are anticipating increased costs this winter due to the pipeline’s closure.

Calls seeking input from Suburban Propane, AmeriGas, and Ferrellgas, all local propane companies, were not returned.

New York Propane Gas Association spokeswoman Barbara Roach, in an e-mail response, downplayed the impact of the line's closure and appeared to have an optimistic outlook for it being turned back on.

“Propane pipeline systems are extremely reliable and have very few instances when leaks occur. This leak was a contained incident and the integrity of the overall system is in excellent condition,” Roach said in the e-mail.

“The pipeline is expected to be repaired and operating by early December, in advance of the most severe winter weather,” Roach said.

Roach said the fact that the Watkins Glen terminal receives propane by railway ensures supplies are obtainable, albeit in Watkins Glen.

“This may cause some longer lines for loading supply trucks. However, at this point, we believe the impact to consumers will be minimal,” Roach said.

Rainey from Enterprise/TEPPCO said the company was expecting to complete purging the pipe between Jefferson and Selkirk this week.

The company needs federal approval to then begin injecting water at high pressure through the pipeline to make sure there are no leaks.

If there are leaks, they will have to be fixed and then the testing can resume.

The best estimate for resuming service at the Selkirk station, Rainey said, was Dec. 13.

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