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Propane shortage could happen again

DES MOINES, Iowa and WASHINGTON – The Iowa Department of Agriculture and Land Stewardship reports that propane prices this week have fallen by 27 cents to a statewide average of $2.81 per gallon. Even with a monster storm set to blast much of the state Thursday, the price drop is partly due to warmer temperatures and decreased demand from the peak several weeks ago.

One reason Iowans are feeling the pain in propane is demand for rail cars able to haul natural gas liquids away from the Bakken Formation in North Dakota. Normally some of those cars would transport propane, but production of oil in the Bakken has outstripped the ability of available pipelines to ship oil out, and now cars are being diverted to North Dakota.

Iowa Ag Secretary Bill Northey says there’s another problem, longer-term, that could put Iowans out in the cold again next winter.

“One of these pipelines that hauls a lot of propane from Canada is going to be reversed and only deliver a different kind of petroleum product into that new oil production area [in Canada],” says Northey. “Next year we’re going to lose one of these pipelines that we normally depend on.”

That’s the Cochin Pipeline in northeast Iowa. The pipeline’s parent company Kinder Morgan is reversing it to send 95 thousand barrels of oil thinning agents per day into Canada. The project has a $260 million price tag and is set for a full in-service date of July first, 2014. Once it’s repurposed, Northey says Iowa’s propane landscape will be quite different.

“Can we replace it with more storage? Can we replace it with more rail car capacity, other kinds of things?” Northey says. “We won’t replace it with another pipeline, but it’s a pipeline that feeds kind of northeast Iowa, Minnesota, a significant part of the region here that could impact us as well.”