LP Gas • March 2022 • SUPPLY POINTS

The National Propane Gas Association (NPGA) is calling it a “massive win for propane.”

Supporting an NPGA rehearing petition, the Federal Energy Regulatory Commission (FERC), which regulates the rates of liquid pipelines, revised the five-year index level used to determine annual changes to interstate oil pipeline rate ceilings.

FERC established a producer price index for finished goods minus 0.21 percent for orders placed retroactively after July 1, 2021, through June 30, 2026.

Having lower rates, NPGA says, helps to control propane marketer costs at the terminal when pipeline costs rise.

The revised index rate translates to a savings of 3.23 cents per gallon of propane sold for the new five-year period against the prior five years, based on estimates by outside experts, NPGA adds.

FERC estimates an overall cost savings for consumers of $3.7 billion over the next five years.

The revised index level is a departure from December 2020 when the commission set the producer price index for finished goods plus 0.78 percent.

NPGA had disagreed with FERC’s methodology that calculated the index level based upon the middle 80 percent of pipeline cost changes over a per-barrel-mile basis for the five-year period 2014-19. If left in place, the methodology would have led to higher liquid pipeline rates, according to the association.

NPGA, with Airlines for America, Valero and Chevron, filed for a rehearing to challenge a shift in FERC methodology.

FERC says it found persuasive arguments to return to its policy of calculating the index level based on the middle 50 percent of pipeline cost changes. The commission ruled that the middle 50 percent calculation is consistent with its practice in its 2015 and 2010 index reviews and will reflect rates that are just and reasonable.

A mild start to this winter’s heating season caused U.S. propane prices to decline from their highest starting price level for a heating season since 2014, the U.S. Energy Information Administration (EIA) reports.

The wholesale propane price at the U.S. benchmark at Mont Belvieu, Texas, reached $1.51 per gallon on Oct. 5, 2021, and has since declined to $1.30 a gallon as of Jan. 31, 2022.

During October 2021, the wholesale propane price at Mont Belvieu was the highest since February 2014. Propane prices have fallen since October 2021 because warmer-thannormal weather in October through December resulted in less propane consumption for space heating, EIA says.

Trends in international markets have also influenced U.S. propane exports and wholesale propane prices, the administration notes. During the first 11 months of 2021, U.S. propane exports averaged 1.3 million barrels per day, the highest export level for the first 11 months of any year since 2004, when EIA began tracking propane exports. Global demand for propane has risen due to its increased use as a petrochemical feedstock. Global demand for U.S. propane has remained steady despite higher U.S. prices because international prices for propane and other feedstocks have also increased, according to EIA.

PADD FOCUS: NGL TRANSPORT

PADD 2 A coalition of energy product transporters and manufacturers, including propane industry stakeholders, are supporting litigation to keep open the Enbridge Line 5 light oil and natural gas liquids pipeline serving Michigan, the surrounding states and Canada. The coalition, representing retail propane marketers, propane and crude oil pipeline operators, and gasoline, diesel, jet fuel and industrial raw materials manufacturers, filed an amicus brief in federal district court in support of litigation to block Michigan’s attempt to shut down the pipeline. The brief was filed as part of the litigation between Enbridge and the state of Michigan in response to a November 2020 order issued by Michigan Gov. Gretchen Whitmer to shut down the pipeline. Whitmer maintains that Line 5 poses a threat to the Great Lakes. According to the Association of Oil Pipe Lines, the amicus brief reiterates federal law through the Pipeline Safety Act preempts Michigan’s attempts to shut down an interstate pipeline because Congress granted the federal government exclusive authority to regulate interstate pipeline safety. The National Propane Gas Association and four state propane associations (Indiana, Michigan, Ohio and Wisconsin) signed the amicus brief.

PADDS 1B, 3 Energy Transfer says its natural gas liquids (NGL) business had record transportation and fractionation volumes in the fourth quarter of 2021. For the three months ended Dec. 31, 2021, compared to the same year-ago period, NGL transportation volumes increased primarily due to the initiation of service on its propane and ethane export pipelines into its Nederland Terminal in the fourth quarter of 2020, higher volumes from the Permian and Eagle Ford regions and higher volumes on its Mariner East pipeline system, according to the company. In February 2022, construction of the final phase of the Mariner East project was completed and commissioning in progress. Energy Transfer’s Mariner East franchise will now include multiple pipelines across Pennsylvania connecting the Marcellus/Utica basins to markets throughout the state and the broader region, including its Marcus Hook terminal on the East Coast.

In our January issue, we presented our annual Propane Suppliers Guide, featuring listings of propane producers, wholesalers and resellers who market propane to the nation’s LP gas retailers. To be included in a future Propane Suppliers Guide, which is also available at lpgasmagazine.com, email brichesson@northcoastmedia.net.