CUOMO ADMINISTRATION’S INACTIVITY LEADS TO PROPANE WOES

I don’t have to tell you that it’s been a miserable winter in the northeast. We’ve been battered by an array of winter storms, from Polar Vortices to blizzards, and seemingly endless barrage of below-average temperatures.

This, of course, has led to higher than normal use of home heating fuels. Furnaces have been working overtime just to maintain a livable heat in households and businesses buffeted by the biting arctic winds.

Those of us from rural areas of Upstate New York are especially pained by it. Where we live there aren’t natural gas lines serving every house, so we opt for home delivery of propane. Back in October, propane prices were relatively reasonable in the $1.70/gallon range. Now, it’s in the range of $3.30/gallon. That’s a 94% spike in heating costs over the course of the season on a per unit basis alone. So it’s safe to say most homeowners (who didn’t opt for pre-buys or locked-in prices) are faced with heating bills more than double the size of last year’s.

Even though one would think that propane prices would be at all-time lows due to the explosion in fuel acquisition from Marcellus Shale deposits, it’s not the case due to an overwhelming number of issues affecting supply and delivery: demand for home heating is high; lots more propane is being used to dry corn due to a wet crop in the Midwest; a pipeline once used to bring propane to NY now sends ethanol south; the lack of propane pipelines forces mass delivery by rail already strained by oil shipments; propane exports are at record-high levels; there is a lack of adequate storage; and heavy snowfall prevented tractor trailers from moving propane.

So, it was a perfect storm.

Unconcerned with the big picture and out of tune with the science of economics (not to mention always on the search for an attention grabber), politicians and bureaucrats at all levels of government (local, state, federal) have been very quick to charge the industry with gouging. They want the masses to believe prices are high because the “evil oil companies” want to take advantage of their customers in a high-need winter.

It’s grandstanding at its finest and, in New York, it masks the blame that needs to be directed at the accusers themselves.

For four and a half years now, state officials have been sitting on an application by Crestwood Midstream to repurpose abandoned salt mines in Reading for storage of liquefied propane and butane. The $50 million investment would allow the Finger Lakes storage facility to contain 88.2 million gallons of propane at once. The fuels would be constantly cycled in and out, to the tune of 96 semis and 48 railcars per every 24-hour period, 7 days a week. A facility of that scale would keep New York – and likely the whole northeast - well supplied.

Were it in operation now, industry officials say it would have inhibited the supply and pricing issues currently plaguing Upstate New Yorkers. The savings to consumers for this winter alone would have surpassed $84 million. Looking ahead, the company has plans to increase total storage to 210 million gallons, affording New Yorkers price and supply certainty in perpetuity, capitalizing on the Marcellus Shale reserves and making for very affordable heating bills.   

All of those plans are well and good, but they mean nothing if Crestwood Midstream isn’t allowed to forge ahead with them.

The Department of Environmental Conservation’s silence over the firm’s application has been deafening. The public comment period closed in November 2011, and here it is March 2014, with no word from state officials about the future of the approval process. Making matters even more confounding is that the state’s geologist approved the integrity of the abandoned salt mines well over a year ago.

The word on the street is that Governor Cuomo is behind the holdup. He is a hardened foe of energy development, as this mirrors what he’s doing with the equally-extended and equally-silent fracking moratorium. Since the DEC falls under the auspices of the Governor, the Finger Lakes facility will likely stay as an idea and propane prices will ride a painful roller coaster until the man is out of office.