The Oil Boom Doesn’t Care if Your Chickens Are Freezing to Death

Propane tank car/Wikipedia

Propane is a byproduct of both natural gas production and crude oil refining. Just in the past year, its production has spiked by 15 percent, and a good chunk of that new production is considered surplus, to be exported from brand new fuel terminals. In fact, just since 2012, propane exports have gone up from around 150,000 barrels to 400,000 barrels a day as of last October. It should be flush times the Hank Hills of rural America. But, according to The New York Times, it’s quite the opposite. Propane fuel prices have shot up in some areas by more than $2 a gallon since the beginning of winter, and as of the end of January, the national wholesale average for propane had more than doubled in less than a month’s time.

If you’re of suburban or urban origin, propane might recall BBQ grills more than the thing that keeps your house warm. But its use for heating is widespread in rural areas, often going for less money per-gallon than heating oil while burning cleaner. (Figure about 8 percent of Midwestern homes use propane as heating fuel.) Lately, it’s been a lot cheaper than oil. In December, a gallon of heating oil went for for over four bucks, while propane chilled at $1.70. (The fuels deliver different BTUs, but even with the conversion, propane was about $1.50 cheaper.) Since then, the situation has reversed itself, with dire consequences and muddy explanations.

For example, in North and South Dakota (notably where much of the gas boom is concentrated), the Standing Rock Sioux Tribe has been forced to open shelters for its members to stay warm while their tanks at home sit empty. Meanwhile, state attorneys general from across the Midwest are claiming price-gouging and opening top serious investigations, while local and state authorities race to provide emergency assistance to squeezed households. Unfortunately, that assistance isn’t in the form of tankers full of propane.

Shortages are the root problem, with big fuel suppliers cutting off local providers with thanks to this year’s deep freeze—and corn. Last fall was wet, which meant harvesting wet corn. So, some larger percent of February’s missing propane went to drying out some corn in November. The thing is that the propane emergency was already manifesting last fall in this very different form, when prices were still very low. Wet weather during the harvest season meant a need to dry harvested corn, which is done with help from propane fuel (corn needs to be dried to 15 percent moisture to be stored without molding). This put a hurt on local propane stocks. The “propane drying crisis of 2013” (in the words of AgWeek’s Mikkel Pates) ended without disaster, but winter was still coming and, along with it, something much worse.

Propane, like its combustible relatives gasoline and diesel, isn’t typically stored in large quantities locally. It’s piped and shipped around as needed, but that’s not quite as smooth an operation as, say, an electrical grid, which has vastly more ability to bounce supplies around the country as demand varies. In fact, part of the propane problem is due to the early-winter shutdown of a pipeline from Alberta to the upper-Midwest as part of a larger project by gas energy giant Kinder-Morgan to reverse that pipeline’s flow, a task expected to take until this summer.

At the end of last month, energy company ONEOK filed the regulatory paperwork to reverse one of its own pipelines to move propane back from Oklahoma to its storage hub in Kansas. Basically, this nod to the current crisis just means it might at some point this month provide some relief in the form of increased supply. But only if it feels like it, that is.

As for the chickens, here it is from the NYT:

Hundreds of miles to the southeast, at the Del-Ray Ranch here in Calhoun County, Ala., the concerns were just as intense in the state’s $15 billion a year chicken business. Ray Bean began his week with the realization that the propane supply that helps him and his wife to raise more than 500,000 chickens a year had dwindled to zero.

“You know that within four or five hours, if that temperature starts to fall, those birds are going to pile up against the walls to try to maintain body heat,” said Mr. Bean, whose farm quickly received an emergency delivery, but only for 20 percent of normal capacity. “You know what’s going to happen.”

So, to recap, American corn producers operating with help from government farm subsidies were buying propane with, in some part, your money to dry out their corn harvest. For reasons that remain somewhat a mystery, the American propane infrastructure, which is about as resilient as a dog fart, apparently, didn’t recover or refill in time for our current full-on epic winter. And, to mess things up even more, only a month before the corn harvest propane crisis, producers were racing like hell to get propane out of the domestic market with help from brand new export terminals.

There’s your oil boom: paying for others’ profits while your chickens die horribly and people you didn’t vote for figure out the economics of offering relief during a heating fuel crisis. Good times.

vice

17 Comments on "The Oil Boom Doesn’t Care if Your Chickens Are Freezing to Death"

Plantagenet on Mon, 10th Feb 2014 1:05 am 



People shouldn’t even have chickens if they aren’t smart enough to look ahead and plan how to keep their chickens warm through the winter.

rockman on Mon, 10th Feb 2014 1:23 am 



“…paying for others’ profits while your chickens die horribly and people you didn’t vote for figure out the economics of offering relief during a heating fuel crisis.”

Yes…that horrible system called the free market. Such a crime to export a domestic energy sources just for the sake of profit. Sorry….lost my train of thought. Was I talking about US companies exporting propane or Canadian companies exporting oil to the US? Or was I talking about companies in Texas and La shipping NG to New England and thus increasing our cost?

Seems like to some folks the free market is only operating fairly only when they are getting what they need at a price they think is fair. BTW despite increased exports there was still enough propane in storage to meet all domestic demand. The problem was moving it from storage to the end users. Folks can have all the propane they’ll need during the highest demand periods. All they need do is buy some more tanks. And then they can fill cheaper during the summer. Problem solved.

Makati1 on Mon, 10th Feb 2014 1:59 am 



Ain’t for profit, unregulated capitalism great! I doubt that the normal farmer with a few chickens for his own use has this problem. The chickens will just move into the barn and the cows will keep them warm. When you factory farm, you pay the price when the system fails. Too bad. No pity here.

Davy, Hermann, MO on Mon, 10th Feb 2014 2:15 am 



True Rock, propane in the summer is good planning. This is something lacking today with the general public who often buy when the tank gauge reads 20%. It is much the same for the just-in-time world we live in. In a time of increasing scarcity, market manipulation, and overextended global distribution systems we face the above globally.

rockman on Mon, 10th Feb 2014 2:30 am 



Perhaps the other states should study the incentive efforts created by the Texas state govt. Granted we benefited from the fed credits but check the plans below that were announced after the credit expired. Another advantage Texas wind has had: unlike all the other states the fed govt has no authority over our offshore wind. Which is how Texas offered not only offshore wind leases years ago we also had the first offshore wind pilot project installed several years go. In the meantime the law suites have raged over fed wind leases off the east coast. Two major offshore Texas wind projects are still scheduled.

Siemens AG (SIE), Europe’s largest engineering company, won a contract to supply 28 turbines to a wind project in Texas that’s majority owned by BlackRock Inc. Components of the 2.3-megawatt turbines used in the Windthorst-2 project will be built in Iowa and Kansas. The 68-megawatt wind farm will generate enough power for almost 20,000 U.S. homes and is expected to go into operation this year.

Also Siemens last week won a 79-turbine contract for a 182-megawatt wind farm, also in Texas.

Also Enbridge today announced that it has entered into an agreement with Renewable Energy Systems Americas Inc. for construction of the 110 MW Keechi Wind Project, located in Jack County, Texas, at a cost of approximately $200 million.

Also Google just announced a $75 million investment into the Panhandle 2 wind farm outside of Amarillo, Texas. This marks the company’s fifteenth renewable energy investment and its second in Texas. Once it’s operational, the new wind farm is scheduled to produce 182MW, enough capacity to provide energy to 56,000 homes. The facility is schedule to go online by the end of 2014 and will consist of 79 Siemens 2.3MW turbines.

Texas is a wind power superstar. But it has to be to stay up with our jobs and population explosion. Thanks to our wind power we just dodged a big bullet. This investment saved Texas’ bacon during the polar vortex that dropped temperatures across most of North-America. On Tuesday demand reached a never seen before peak of 57,277 megawatts.

Thankfully sufficient generation and higher wind output from West Texas wind farms boosted the state’s electric supply Tuesday compared to Monday when the grid operator declared an emergency as power plants shut unexpectedly, reducing supply.

I know some folks don’t like to hear the classic Texas brags. But as we say in the Lone Star state: IT ain’t bragging if it’s true. LOL.

rockman on Mon, 10th Feb 2014 2:50 am 



Davy – But I’m still sympathetic. Yeah: buy more tanks for the house and fill up during the summer. But how many could afford to do so? Long before we “run out” of X we’ll be faced with a significant increase in just-time failures. But how much will be invested in the infrastructure, especially for local distribution, when it’s becoming obvious to many that we’re heading towards serious resource limitations. If some folks don’t like the free market exporting propane out of the US let’s see how they like it when the same free market restricts imports to the US. So far we can out bid other countries. Consider how the average Mexican feels about being the second largest oil exporter to the US. Anyone one thinks they wouldn’t like to keep it local to help their businesses and families? Free enterprise cuts both ways.

Folks shouldn’t be hypocritical on the subject. If one enjoys the free market advantage in one area they shouldn’t bitch when it works against them in another IMHO. Some think the US has some inherent right to be the first ones at the feed trough and the rest of the world just gets whatever is left. In the coming years I suspect China, and perhaps India, will be adjusting that atituds

rollin on Mon, 10th Feb 2014 2:56 am 



A back-up heat source is the best solution to the problem. You can live in the dark, but freezing can kill.

neil noj on Mon, 10th Feb 2014 2:57 am 



Sioux Indians can’t get heat in North and South Dakota. Currently, $1 billion of gas (high in natural gas liquids used to make propane) is being flared in the Bakken field of North Dakota. Burlington Northern railroad (owned by Warren Buffet) has blocked any competing energy delivery modes (coal slurry pipelines, competing railroads and pipelines) for as long as I can remember (I am nearly 60). We may need a rural naturalgasification program similar to rural electrification of the 1930’s. Shovel ready project so farmers can burn NG and not propane.

ghung on Mon, 10th Feb 2014 4:54 am 



Most propane users lease their tanks which means a couple of things. Only the company which owns the tank will fill it, and the companies will only set a tank that holds a years supply or less. They want to fill it a couple of times a year or more. If there’s a really cold year, folks may be using propane at twice their normal rate. There’s also a lease and maintenance charge built into the price of their propane; as much as 25-50 cents a gallon last I checked. You’re pretty much at the mercy of your vendor. They have “keep it full” plans to even out the costs over the year, but it’s still more expensive in the long run.

If you buy your own tank you can have any size you can afford, or multiple tanks. We buried or own thousand gallon tank when we built, even though propane isn’t our primary heating source. I was becoming more peak aware and assumed these shortages and price spikes would become more frequent, and we managed a good deal back then on a new, quality tank; still, about $1500. Owning your own tank means you can shop for the lowest price, usually in summer; a larger tank means getting bulk deals. When full (~850 gallons), our tank will last us for years (mainly clothes dryer and cooking). Lets us buy when prices crash.

We save 50 cents or more per gallon owning our tank and buying in bulk (400-500 gallons). Since we started heating all of our water with wood and solar, we only buy every few years, or when the price crashes. The solar clothes dryer helps a lot as well. I bought an inductive cook top that we use on good solar days; saves even more on propane.

ghung on Mon, 10th Feb 2014 4:58 am 



… as for keeping the chickens warm, I would find a way to put all of that chicken shit to work.

Davy, Hermann, MO on Mon, 10th Feb 2014 7:31 am 



Yea, Rollin, multiple heat sources is a good start. I have wood, electric, and propane. Propane is the big heat source in my local area along with wood and electric. Most people here use electric too. Many use wood. They have been bitching about propane prices but no shortages here yet.

As for the chickens, I know BAU can’t survive without Big Ag but many more people should keep chickens. I am gearing up for 10 or 15 for eggs. The corn drying is a big deal. When I had my 1000 acre corn and soy farm that friggin grain bin made me nervous. I used to really keep an eye on that corn. My farm was on the MO river so sometimes you had to bring corn in early (wet). It is amazing how fragile our food distribution system is. Imagine propane shortage leading to large corn storage losses.

Rock, agreed on the hypocritical stance on free market. It seems some people only like markets when it benefits them. Until they find a better system they best live with what we got. Central planning was a dud. Yet, might be martial law soon if collapse sets in. Man, can you imagine what the hard core conservative folks would do if Pres O declared martial law. Man, there would be succession in the county I live in.

SteveO on Mon, 10th Feb 2014 2:15 pm 



“If you buy your own tank you can have any size you can afford”

Here in the northeast, if you own the tank, the propane companies will not deliver to you. For “liability” reasons, you have to lease the tank from the company you buy your propane from, which locks you in with one supplier. Changing suppliers involves transferring ownership of the tank to the new supplier.

It’s a racket, and another example of crony capitalism at its finest.

Davy, Hermann, MO on Mon, 10th Feb 2014 2:24 pm 



Steve O, we are still able to get our personal tanks filled here in Missouri. That does sound like a racket and the typical company refrain of insurance liability!

rockman on Mon, 10th Feb 2014 2:43 pm 



SteveO – Not that I’m a big fan of govt getting to involved in the free market but that situations sounds like it could use a healthy dose of it. Wonder how much leverage the state gov’t might have…as in if a company won’t fill privately owned tanks they lose their license to operate in the state. That would let them decide how much that “liability” really concerns them.

hillco on Mon, 10th Feb 2014 3:20 pm 



Propane has been pretty cheap for the last few years. I figured it couldn’t last. I prepay for propane in May, so the price increase hasn’t hit yet. The furnace is nearly 18 years old, so we’ll see how things go in May. I’d go heatpump, but I’m here most of the time and I really hate listening to the furnace fan run all the time. A lot of people heat with wood around here, but we live far enough from the fire department to cause my already high insurance rate to go straight up.

Davy, Hermann, MO on Mon, 10th Feb 2014 3:21 pm 



Ditto, Rock, don’t play with peoples basics like heat in a cold winter!

Mike2 on Mon, 10th Feb 2014 5:21 pm 



@all: Like I see this Story, this is not a “small size” Business, we are taking here from energy amounts of 1-4GWh/year! What means 60-260tonnes of ex. propane per anno.
Or 2-10big trucks full of propane.
Lot of stuff for building a 1+ year Lasting tankfarm!
And normally I am not realy a fan of “bio”-energy but in this case, where the corn, the corn-drying machines and the chickens are all together in a singe place(no transport problem): Why not taking the straw of the corn, producing fuel-pellets of it an heat all the things with it that are needed. -You can even make electricity out of it by using a big sterling engine or a (small) steam-engine.