Michigan seeks propane reserve despite abundance

The long-standing Enbridge Line 5 dispute may have contributed to the propane reserve bill, writes Amy Strahan

A Michigan senator has introduced a bill to US Congress proposing the creation of a strategic propane reserve, similar to the one the country has for crude, to ensure supplies during winter. This is despite the US' ample and growing output of natural gas liquids (NGL) and vast network of storage infrastructure, and may be influenced by the state's pursual of a shutdown of the 540,000 b/d Line 5 crude and NGL pipeline — Michigan's main propane supply source.

Michigan senator Debbie Stabenow, a Democrat and vocal critic of Line 5, introduced the bill in February. It is currently under review by the Senate's committee on energy and natural resources. Under the proposal, government agency the EIA would conduct a review of the US' propane supply chain and evaluate suitable storage locations for the reserve. The EIA would also investigate appropriate supply and price "triggers" that would release propane from the reserve.

The proposal comes even as US propane production and exports continue climbing to new highs, while stocks remain well above last year's levels and historical averages. Domestic propane inventories dropped by about 2.5mn bl to 56.2mn bl (4.53mn t) over the week to 24 March, leaving them more than two-thirds higher than a year earlier and a third above the five-year average, the latest EIA data show. In the US midcontinent — home to Michigan state and the majority of the country's propane heating consumption — stocks stood at 12.5mn bl, 43pc higher than a year earlier. US propane production of 2.37mn b/d (5.9mn t/month) was down from an all-time high of 2.6mn b/d in December but up slightly from a year earlier, while exports remained close to record levels at 1.8mn b/d, compared with 1.07mn b/d in the same week of 2022.

The main US midstream operators that supply propane — Enterprise, Targa, Energy Transfer, Phillips 66 and Oneok — collectively list their underground storage capacity for unfractionated and fractionated NGLs at 343.5mn bl, the majority of which is situated on Texas' Gulf coast. Yet industry lobbyists argue that higher supplies and plentiful storage capacity does not necessarily translate to better access for residential customers.

The US' National Propane Gas Association (NPGA) collaborated with Stabenow's office to draft the legislation. "According to the EIA, propane supply was near the bottom of a five-year average for the entirety of 2021," the NPGA says. "That trend continued into March 2022 when the senator's staff approached the NPGA about studying the need for a reserve." The NPGA also recommended the Department of Energy and the EIA consider other alternatives to a strategic reserve.

In the line of fire

Michigan is the second-largest-consuming US state for propane, the NPGA says. The state's Democratic governor, Gretchen Whitmer, has fought for the closure of Line 5 since her election four years ago, and in November 2020 succeeded in getting . Line 5 operator Canada's Enbridge prevented the shutdown by shifting the case to federal courts, with support from the Canadian government and the US administration. But Whitmer put forward a five-step plan to ensure propane supplies in the event of its May 2021 closure, including $15mn for the development of rail and storage infrastructure in the Upper Peninsula.

Stabenow also sought the closure of Line 5 until it was proved to be safe in 2018. But her position on the Line 5 dispute is not clear, nor whether the strategic reserve plan has any link with Whitmer's efforts to have it shut down. The US Army Corps of Engineers on 23 March delayed its environmental review of Enbridge's plan to protect the disputed section of the line in a tunnel from late 2023 to spring 2025. Any EIA study on planned infrastructure in the area might include Line 5, but the NPGA says the scope is currently unclear.

Enbridge’s Line 5 pipeline