A critical nationwide shortage of propane, coupled with one of the coldest winters on record, is giving rural Minnesotans the chills.
Steve Olafson of Skelgas in Park Rapids has been losing sleep at night wondering if the company can stay in business.
“People always think when the costs go up we’re making money,” he said. “It’s just the opposite. We’re on the thinnest margin now we’ve ever been to stay in business.”
And things are about to get worse.
The Cochin Pipeline, which services up to 50 percent of propane needs from Canada into the U.S., is scheduled to shut down permanently in April, mostly due to the emergence of shale markets.
That main artery has been functionally inert for much of the winter, forcing propane suppliers to hunt all over the country for alternate sources.
“The line has seen varying usage over the past many years for Minnesota marketers depending upon crop drying, weather-related needs and pricing differentials,” Cochin’s website says. “In recent times the average daily draw on the line from the two Minnesota terminals at Benson and Mankato has totaled about 8,000 barrels per day. This equates to about 120,000,000 gallons of propane per year. In reality this draw happens on a sporadic basis with large amounts of product being drawn at peak times, and then the system going for days or weeks with little or no propane drawn at either terminal.”
And that’s what’s causing Olafson’s heartburn.
Although costs haven’t quite doubled from last year, they’re close: $1.40 per gallon fuel is now $2.40 a gallon and rising.
Propane use climbs for Hubbard County and other rural areas in the fall, especially a cool, wet fall, when farmers use it to dry out their crops.
Home heating is another drain, especially when tax exemptions encourage homeowners to switch over.
Last weekend’s milder temps are giving Olafson a breather, but not by much.
“By the fall of 2014, Minnesota shippers and marketers will need to find alternative sources and possibly distribution points for 120,000,000 gallons of propane per year,” the Cochin website advises. “It is too early to speculate on the ramifications of this change, or the possible answers. Most likely there will not be a single answer, but many. As this moves forward it will be important for marketers to have a good solid relationship with their suppliers and shippers.”
Olafson said he wishes he had the answer, but he’s not seeing it in the clouds. He’s too busy scrambling day to day to get a day’s supply in. The company right now is filling 200-gallon minimum orders.
Wholesalers have suggested Skelgas and other local suppliers build more underground storage capacity.
“That doesn’t help if you can’t get the gas,” Olafson said. “We have enough gas for today,” he said Monday.
Meanwhile he’s advising customers to stay patient, conserve, and plan ahead.
Customers who purchased propane last summer are in a far better position than those who order if when they run out.
“We’re all in the same boat,” he said.
Park Rapids’ other major supplier, Gas Service Company, did not return a call seeking comment by the time this story went to press.