DES MOINES (AP) — Iowa, Nebraska and several other states are dealing with significantly higher prices for propane because of a supply problem caused by a late harvest, persistent cold weather and the temporary shutdown of a major supply pipeline.
The problem began in October and November when farmers across the Midwest took to the fields to harvest the late developing corn crop before the cold weather set in. Much of the crop was still wet and needed to be run through propane-powered dryers to avoid spoilage, creating a surge in demand for the fuel.
And as lower-than-usual temperatures arrived early in the Upper Midwest, demand for propane increased. The liquefied petroleum gas is used to heat homes in rural Midwestern areas where there are no natural gas lines. About 15 percent of Iowa households rely on propane for warmth.
“We came out of a crop drying season that really took a toll on the amount of volumes available in the industry,” said Drew Combs, vice president of propane for Minnesota-based CHS Inc., one of the nation’s largest wholesalers. “Now we’re looking at a situation where we have a very large demand because of the extremely cold weather ... and it is looking to last into January.”
The supply problem has driven prices 14 percent higher since mid-November in Iowa, where customers are paying $1.88 a gallon — 34 percent higher than a year ago when the fuel sold for $1.40 a gallon. In Nebraska the price of propane has climbed 12 percent in the last month. In Wisconsin and Minnesota it’s up 13 percent and in Illinois 15 percent.
To compound the issue, a major pipeline was shut down from Thanksgiving to Dec. 18, further reducing the availability of propane in the Upper Midwest.
The 1,900-mile Cochin pipeline carries propane southeastward from Canada through North Dakota and Minnesota, across northeast Iowa and into eastern Illinois. Its owners, Kinder Morgan Energy Partners, shut the pipeline down to install new pumps that would reverse the pipeline’s flow early next year. Instead of bringing products such as propane from Canada, the company plans to move a petroleum product called light condensate from Illinois to Alberta, Canada, where the product is in high demand and more profitable. It is used to dilute bitumen — thick oil taken from Canadian oil sands — so it can be transported.
Minnesota, which gets about 40 percent of its propane from the pipeline, was hit hard by its closure, which forced propane suppliers to send trucks to northern Iowa terminals for fuel. Add additional traffic from North Dakota, South Dakota, and Wisconsin to the Iowa terminals and the stress on Iowa’s propane supply became a serious issue, said Harold Hommes, an energy analyst for the Iowa Department of Agriculture and Land Stewardship.
“Our neighbors to the north are struggling. They had some of the same repercussions from getting grain dried and then getting ready for heating; they just never got a chance to catch up,” Hommes said. “Winter set in then and we were never able to rebuild supplies.”