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Emergency FERC Order to Alleviate Propane Shortages in Midwest, Northeast

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Extreme cold conditions this winter have resulted in dangerous propane shortages in parts of the United States. Emergency measures were needed to restore supplies via pipeline.

On Feb. 7, in response to a request submitted by the law firm Venable LLC on behalf of the National Propane Gas Association (NPGA), the U.S. Federal Energy Regulatory Commission (FERC) issued an order directing Enterprise TEPPCO to provide priority transportation on its pipeline to propane shipments to help relieve crisis conditions in the Midwest and Northeast. The order represents the first time FERC has exercised the emergency authority granted to it by the Interstate Commerce Act (ICA).

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Propane supplies in the Midwest and Northeast have fallen to dangerously low levels as a result of extremely cold weather following immediately upon an intense crop-drying season. Logistical issues in the interim had prevented many suppliers from restocking their supplies. As tanks have run down and prices skyrocketed, companies have sent trucks as far as Texas and North Carolina to find propane, causing 18-hour waits at some terminals. Residents have been directed to conserve propane, and propane companies have resorted to short-filling tanks in efforts to make the existing supply last as long as possible.

Enterprise TEPPCO operates a pipeline that transports propane and other refined products, such as gasoline and diluent (a substance which is mixed with heavy crude oil from Canada to facilitate pipeline transportation) from the Houston area to the Midwest and Northeast. The pipeline, however, is at capacity, and due to scheduled shipments of diluent (which usually receive priority treatment on the pipeline) and refined products, propane shippers have been unable to put enough product in the pipeline to meet demand in the markets experiencing shortages. Since propane originating in the Houston area takes two to three weeks to reach storage facilities in the Midwest and Northeast, propane will only reach these markets before supplies run out if shippers are able to immediately inject product into the pipeline.

Section 1(15) of the ICA authorizes FERC to order pipelines to provide priority to particular products or types of transportation whenever FERC determines that an emergency requiring immediate action exists anywhere in the country.

Although FERC had never exercised this authority, Venable filed a pleading last Thursday requesting that the Commission order Enterprise TEPPCO to provide priority treatment to propane shipments while suspending the priority treatment usually given to diluent. One day later, FERC issued its order directing Enterprise TEPPCO to prioritize propane shipments through Feb. 14.

In response to a subsequent agreement between Enterprise TEPPCO and NPGA, FERC extended the priority transportation order to Feb. 21 . Propane shippers are now working to originate as much propane as possible to re-supply areas in desperate need.

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