Feb. 8 (Bloomberg) -- Enterprise Products Partners LP must prioritize propane shipments on a pipeline to the U.S. Midwest and Northeast, where cold weather has caused heating-fuel prices to climb, federal regulators ordered in the first use of their emergency powers.
The one-week directive issued late yesterday by the Federal Energy Regulatory Commission is effective immediately and applies to the Enterprise TE Products Pipeline system, which originates in Mont Belvieu, Texas. The agency cited its authority under the U.S. Interstate Commerce Act.
Propane in the Midwest soared to a record premium over prices on the Gulf Coast last month as a polar vortex swept across the eastern U.S., dumping snow and ice and causing temperatures to plummet to record lows in cities from New York to Florida. Supplies of the heating fuel in the Midwest tumbled to the lowest seasonal level since at least 1994.
“Clearly, it shows that the government is very worried about propane supplies throughout the Midwest and Northeast and not so worried about gasoline supplies,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “You’ve seen the price of propane spike, and you’ve seen trucks running up from Texas through the Midwest for resupply and the weather continues to be cold.”
Rick Rainey, a spokesman for Enterprise Products in Houston, didn’t immediately respond to phone and e-mail messages seeking comment on the order.
Last week, the Federal Motor Carrier Safety Administration, the arm of the Transportation Department responsible for commercial-vehicle safety, authorized truck drivers moving propane and other heating fuel in 34 states to work longer hours to move more supply into hard-hit regions.
The National Propane Gas Association asked the commission on Feb. 6 to order Enterprise to use 81,000 barrels a day of space on the TEPP pipeline typically reserved for diluent to ship propane instead. The Washington-based trade group also asked the agency to order the reversal of Enterprise’s ATEX pipeline so that it sends propane north instead of ethane south.
FERC, in its order yesterday, asked for more information before it rules on the request, including the status of propane inventories, projected deliveries of the fuel and potential demand.
A OneOK Partners LP subsidiary filed a tariff change with the agency last week to reverse the flow of its North Line 5, which runs to Medford, Oklahoma, from Kansas, in response to “unprecedented propane market conditions.” The Tulsa, Oklahoma-based company asked FERC to grant it special permission on short notice so the service could become available as soon as possible.
Propane at the rack in Conway, Kansas, jumped 16 cents a gallon to $1.92 yesterday, data compiled by Bloomberg show. The fuel reached a record $4.90 a gallon on Jan. 23. The spot price at Mont Belvieu retreated 0.5 cent to $1.555 a gallon. They are the top two U.S. propane storage hubs.
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