The impact of a closure on propane supply used for residential heating in the U.P. has been a frequent argument made by those opposed to shutting down Line 5. About 1 in 5 homes rely on propane for winter hearing in the U.P. The lower peninsula also sources some propane from the pipeline, but at a much smaller percentage.
A U.P. Energy Task Force appointed by Whitmer made draft recommendations last year on alternative energy sources, including expansion of low-income assistance programs, incentivizing new storage and transitioning propane supply to rail cars. The task force’s final report is due by March 31.
The propane plan builds on those recommendations, calling for millions in new spending that’s already being requested in Whitmer’s fiscal 2022 budget proposal pending before the Republican-controlled state legislature.
The propane plan calls for $10 million next year to help low-income homeowners weatherize their homes and conduct other energy efficiency projects. The state is “also reviewing additional opportunities, such as cost-effective alternatives to meet heating needs through electrification” and a new Propane Commission created though a lame duck bill in December will promote high-efficiency appliance usage.
The plan also calls for $15.1 million in railroad infrastructure spending specifically for propane delivery and storage improvements.
The money is requested as part of the 2022 budget proposal for the Michigan Department of Transportation (MDOT), which has been working to expand track capacity in Escanaba and Kincheloe, according to the plan. The department and Michigan Technological University are also working with a consultant on an eight-month study of delivering propane by rail.
Propane suppliers say railroad transportation presently increases propane costs about 5 to 7 cents per gallon compared to Line 5. They say transitioning supply to rail will take time and cost money. New railcars will be necessary, as evidenced by a recent cold-weather shortage.
Dan Harrington, the owner of U.P. Propane in Iron Mountain, said he shifted to using railroad cars around November 2020 in anticipation of the pipeline’s closure. Nonetheless, he’s concerned with transitional demand on the system.
“There’s just not the infrastructure available, terminals and railroad cars, to transport that much propane,” he said.
Republican legislators on Friday indicated they were unfriendly to the proposals presented in the plan.
“They’re coming to the legislature and begging us to give them more money to develop more alternatives, when the legislature already acted on this,” Sen. Ed McBroom told Bridge Michigan, referencing the legislature’s 2018 backing of the Mackinac tunnel project.
State officials have indicated they expect the market to adjust to the loss of the pipeline and the plan notes that some propane suppliers have already begun steps to wean themselves off Line 5, which offloads propane near Rapid River. The plan notes diversification in wholesale supply and new ownership at Kincheloe and Alto terminals.
Whitmer’s plan calls Enbridge’s efforts to fight the pipeline closure a “predictable attempt to preserve market share.”
“Enbridge does not actually own any propane. It is neither a propane retailer nor wholesaler, nor is the company involved in propane fractionation. Instead, Enbridge merely transports product on its pipeline. Other market actors see an opportunity and are pursuing alternatives,” the plan states.
Other aspects of the plan involve “maximizing” propane in state storage reservoirs, identifying alternative sources and adding storage in the U.P., encouraging pre-buying to lock-in supply, requiring companies bidding on contracts to supply state government attest they can meet supply obligations after Line 5 is closed, and developing a strategic reserve to ensure supply during periods of high demand.
The plan encourages the legislature to adopt new fuel price-gouging protections using Wisconsin law as a model. On Friday, Attorney General Dana Nessel issued a statement asking customers to report any gouging. Her office helped draft legislation to enhance price-gouging investigation and enforcement that failed to gain traction in the Senate last year.
Nessel urged the Legislature to “re-introduce and reconsider the proposal, as it would allow for expanded enforcement of price-gouging during an emergency declaration or a market disruption, such as for energy products.”