Report Says Michigan Does Not Need Line 5 for Propane Delivery

According to a report released by the National Wildlife Federation in late July and prepared by London Economics International LLC (LEI), Michigan’s Upper Peninsula does not need to use Enbridge Inc.’s (Calgary) Line 5 for its propane supply. The Upper Peninsula relies on Line 5 for significant volumes, but the report maintains Michigan can source propane exclusively by truck or rail for an estimated additional 5 cents/gal.

“LEI finds that, with strong recent and projected growth in supply of NGLs from the United States, and with flat to declining demand for propane in Michigan, the prospect of persistent propane supply shortages in Michigan is unlikely, even if Enbridge Line 5 ceased to operate, and event-driven supply interruptions or weather-driven shortages such as experienced in 2014 during the polar vortex winter, will likely occur on occasion, as they have in the past,” the report concludes. “But with the prospect of plentiful supplies relative to demand, the main concern with the potential absence of Enbridge Line 5 is the delivered cost of alternative sources of propane.”

LEI adds that with the focus on the cost of alternatives, its key findings are that “the lowest-cost alternative options to Enbridge Line 5 would be truck or rail from Superior, Wis. LEI estimates the price increase to consumers in the Upper Peninsula would likely be about $0.05 [5 cents] per gallon. This small price increase would be lost in the noise of typical propane price volatility.”

Mike Shriberg, Great Lakes regional executive director of the National Wildlife Federation, says to put price into context “the normal annual fluctuations tend to be about 30 or 40 cents per gallon for propane. He notes that Michigan lawmakers have expressed concern over shutting down Line 5 because of the Upper Peninsula’s reliance on propane, but that the LEI report could assuage those concerns. “What it shows is that we don’t have to trade off energy security for protection of the Great Lakes, and we think that’s something our elected officials will be happy to hear,” he says.

The pipeline, built in 1953, runs from Wisconsin to Canada and is used to transport crude oil and natural gas liquids. A section runs beneath the Straits of Mackinac, which connect Lake Michigan and Lake Huron. The report from London Economics International is the first in a series to show how the potential shutdown of Line 5 would affect Michigan. Michigan Gov. Rick Snyder is scheduled to make a decision on the line’s future by the end of September when all reports have been released.

(SOURCE: The Weekly Propane Newsletter, August 6, 2018)