Propane Problems Make a Long Harvest Even Longer
Arlen Bonde has a lot of corn to combine, but he was moving at about half speed in mid-November.
On Nov. 19, Bonde had combined about 3,500 out of 10,000 acres of corn. Time was of the essence. The fall had, for a time, turned mostly dry, but Bonde — and other farmers across the region — knew the conditions wouldn’t last.
Even with the time crunch of knowing winter could come in earnest at any time, Bonde had one combine parked and one running in a field west of Valley City.
The reason for this delay, amid a season of delays, is out of Bonde’s control.
“We’re like many of the growers around,” he said. “We can’t get propane.”
Propane — and a lot of it — is needed this year to dry the abnormally wet corn crop throughout the region. Bonde’s corn on Nov. 19 was running in the 26-28% moisture range. He sells most of his corn to ethanol plants in the area, and he wants it at about 14% before hauling it in.
He needs the propane to dry the corn. If he can’t dry the corn, his corn has to sit and wait for the propane delivery. And that means there has been little point in rushing through the wet fields.
Farmers across the region are dealing with the same issue. Numerous Midwestern governors have declared emergencies and expanded the hours in which trucks hauling propane can operate. The Federal Energy Regulatory Commission on Nov. 19 announced it will initiate an alternative dispute resolution process with pipeline companies, shippers and their representatives to explore actions FERC and industry can take to alleviate propane pipeline constraints in the Midwest.
The frustration for Bonde and other farmers throughout the region is that propane is not in short supply, in North Dakota or anywhere else. The problem is that the late harvest has taxed a distribution system still trying to find a way forward after big changes in the past decade.
Five years of change
Propane is a byproduct of natural gas production. Natural gas production has increased in North Dakota’s Bakken oil field in recent years because of the North Dakota Industrial Commission’s mandates on reducing flaring, meaning burning off the natural gas that comes with from oil production. Natural gas processing plants and transmission lines for natural gas liquids — including propane — have been built at a rapid pace to meet the flaring requirements, even as natural gas prices have lagged below levels that make it economical to capture them.
“Without flaring mandates, it’s unlikely we would have seen the same level of development over the past several years related to new processing plant applications,” explained Brian Kroshus, one of three members of the North Dakota Public Service Commission, which regulates the processing plants.
Justin Kringstad, director of the North Dakota Pipeline Authority, said there are a handful of “fractionation” plants in the Bakken that break down the components of natural gas onsite, including propane.
Some of the propane produced at North Dakota processing plants may stay locally, but often, much of it has been contracted ahead of time to go to states in the Corn Belt, says Mike Rud, executive director of the North Dakota Petroleum Marketers Association.
Kringstad said the majority of North Dakota processing plants ship out all natural gas blends in a mix, bound for further processing in Kansas.
“Understandably, it’s a frustrating situation for producers when we continue to read about record oil and gas production not only in the Bakken, but in shale plays throughout the United States,” Kroshus says.
According to the Energy Information Administration’s Nov. 25 This Week in Petroleum report, propane supply has been about normal for this time of year, as have prices.
Rud explains that the distribution system, as it is now, hasn’t been able to handle the demand of so many states having such a late harvest of such wet corn. While a pipeline used to provide propane to many of the states experiencing the worst of the effects of this year’s propane demand, that changed about five years ago.
In 2014, Kinder Morgan turned a pipeline that took propane from Canada into Midwestern states, including North Dakota, Minnesota and Illinois, and reversed it to take natural gas condensate back to Canada for use in oil extraction. Rud says that meant big changes to how propane ended up in Midwestern states.
Suppliers scrambled to build more storage and rail terminals. But Rud said there simply isn’t enough storage for all the propane that has been needed in the region this fall. Propane dealers in North Dakota typically would be able to get 15 to 20 loads per day at this point in the fall.
“They’ve been able to maybe get two or three a week” this year, Rud says.
Solution isn’t clear
The scramble for propane might be slowing down. With a late November storm striking much of the region, some farmers are likely to leave their corn in the field, where it will dry down slowly over the winter. Rud thinks that will lighten demand.
In the meantime, he urges continued patience. Home heating is the priority, and propane will be delivered to farms as soon as suppliers can manage.
“Our hearts go out to the ag people. We know the situation there, and we know the situation we’re in,” he says, noting that propane dealers could be making more money if they could supply the propane needed. “We’d like nothing better than to be able to provide that kind of propane in a wet year.”
Patience is already how Bonde operates. Over the course of his career in farming, he’s grown his father’s small farm to a large operation. In addition to his 10,000 acres of corn, he’d usually plant 14,000 acres of soybeans. Wet conditions meant he took prevented planting on all but 2,500 acres intended for beans. Like the corn, all of the soybeans had to be dried this year.
On Nov. 19, Bonde said that if he would know that the winter would be light on snow, he’d just slowly make progress on combining, giving it time to dry down naturally. And he was understanding about his inability to get the propane he needed to harvest at full bore.
“They’ve got to spread out these loads over all their growers. They can’t just keep one guy going. So everybody gets their turn, you know, which is fair,” he said.
Rud says suppliers don’t have viable options for preparing for years like 2019. Building more storage capacity is a significant investment, and forward contracting propane to fill the storage can be risky if the weather turns dry. Most of the suppliers in this region are small operations without the financial ability to take such risks.
“That’s the big boy’s game,” he says.
Bonde acknowledged his supplier is doing all he can to get propane to farmers.
“But he can’t manufacture it,” he said. “All our neighbors are having the same problem. We’re not alone.”
Source: Jenny Schlecht, Agweek