Heating fuel pipelines are being pushed to their limits

By STEVE EVERLY - The Kansas City Star Date: 12/22/00 22:15

The pipelines that deliver natural gas and propane to the Midwest and much of the rest of the country are being pressed to their limits as frigid weather pushes demand for heating.

The major interstate pipelines that send heating fuel to the Kansas City area are going full-bore. And there is little relief in sight, as lower-than-normal temperatures cause consumption to soar.

"We are moving all of the gas we can possibly move," said Dan Considine, a spokesman for Williams Gas Pipeline Co.

The story is similar for propane, which tends to be used most in small towns and rural areas. The pipeline company that delivers the fuel to area dealers says it, too, is running at capacity.

"The system is taxed, but so far so good," said Kelly Swan, a spokesman for Mid-America Pipeline Co.

The problem is the weather. Area temperatures are running about 50 percent lower this month than the 30-year average for December. Putting further stress on the pipeline network is the geographical size of the cold snap. The United States east of the Rocky Mountains has generally had colder-than-normal weather recently.

In a bid to keep demand within capacity, Williams Gas Pipeline issued a "flow order" Dec. 12 that will be in place at least until Christmas. The order will levy heavy penalties on customers that draw more gas than they ordered. It mainly affects companies that purchase their own gas. Area utilities, which are priority customers, said they did not expect to be affected by the order.

Williams also has the option of kicking off its pipelines any interruptible customers if demand threatens to exceeds capacity. So far this has not happened.

The flow order can affect a company's operations because the penalties are so large: about $55 for every thousand cubic feet of gas pulled out of the pipeline that was not ordered. Wholesale gas prices are about $11 per thousand cubic feet.

Rich Shuck, manager of natural gas for Farmland Industries Inc., said the penalties were so high that Farmland was purchasing more gas than it thought it needed. The company recently curtailed operations at one of its fertilizer plants to ensure that it would not have to pay the penalty.

"You want to make sure you are caught on the plus side," Shuck said.

For most consumers the possibility of running out of home-heating fuel is remote. Gas utilities have preferred positions on interstate pipelines.

Missouri Gas Energy and Kansas Gas Service said Friday that they were able to get the gas they required and did not expect any problems. They have natural gas delivered by the interstate pipelines to their service territories and then send the fuel to their customers.

"Everything is working as planned," said Steve Johnson, a spokesman for Kansas Gas Service.

Propane supplies in some areas of the country, such as in the Southeast, have been curtailed, and dealers have been unable to obtain all the propane they ordered. In at least a few instances consumers have not been able to get their propane tanks completely filled.

The propane pipeline serving the Kansas City area has not had to ration supplies. Some propane terminals are reporting longer lines of trucks waiting to pick up propane to deliver to customers because of the increase in demand.

MFA Oil of Columbia, a major provider of propane in Missouri, and Ferrellgas Partners LP, which is based in Liberty and is the country's largest retailer of propane, did not return calls seeking comment.

Consumers of natural gas and propane can expect to be hit by higher prices because of cold weather and soaring demand.

The price of wholesale natural gas in the Midwest is about $11 per thousand cubic feet, about five times the level of a year ago. Wholesale propane prices are double those of a year ago.

Propane and natural-gas consumers can expect to pay an additional $400 -- and possibly much more -- to heat an average home this winter.

A pipeline failure that would cause fuel supplies to disappear could worsen things.

Considine, of Williams Gas Pipeline, said demand and cold weather were putting equipment, such as compressors that push the fuel through the pipelines, to the test. But he said there was enough redundancy in its pipelines that there should not be a problem even if there were some equipment failures.

Jeff Thompson, an analyst for Propane Resources, a consulting group in Mission, said the propane delivery system was going through its own test.

The most propane delivered in one month in the 1990s was about 12 million barrels. This month the amount is expected to be between 15 million and 18 million barrels.

That is a lot of stress for the propane industry. In the 1990s, expansions of the propane delivery infrastructure, including the trucks needed to make customer deliveries, were not always made. Now the cold weather is revealing flaws in the system.

"They tried to do more with less, and it worked through the '90s, but now we're kind of caught," Thompson said.

Now the worry is that January could be as bad or worse than this month, which would draw down stockpiles.

"`Things could get tight," he said.

To reach Steve Everly, call (816) 234-4455 or send e-mail to severly@kcstar.com

http://www.kcstar.com/item/pages/home.pat,local/37750155.c22,.html

-- Martin Thompson (mthom1927@aol.com), December 23, 2000