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State continues to study UP propane distribution

LANSING — The state of Michigan announced on March 12, 2021, the MI Propane Security Plan, a multiagency effort with the Michigan Public Service Commission; the Michigan Department of Environment, Great Lakes and Energy; the Michigan Department of Transportation, and the Department of Technology, Management and Budget. The propane security plan is focused on ensuring that Michigan’s propane needs are met when Enbridge’s Line 5 oil pipelines, that run through the Great Lakes, are shut down.

In November 2020, Gov. Gretchen Whitmer and the Department of Natural Resources (DNR) notified Enbridge they were terminating its easement to run an oil pipeline through the Great Lakes based on persistent and incurable failures to comply with the terms of the easement. Additionally, the governor and the DNR also revoked the easement under the governor’s public trust responsibilities.

Enbridge has repeatedly claimed that the risk of an oil leak is very small, but that assertion was challenged three years ago, when the National Transportation Safety Board released a Marine Accident Brief involving the pipeline.

On April 1, 2018, a tug and barge, was westbound in the Straits of Mackinac when the barge’s starboard anchor, which had unknowingly released and was dragging on the bottom, struck and damaged three underwater electrical transmission cables and two oil pipelines. About 800 gallons of dielectric mineral oil leaked into the water from the cables. The oil pipelines sustained only superficial damage. Repair and replacement of the cables was estimated at more than $100 million.

Following on the heels of that near-catastrophe, Whitmer requested that the Michigan Public Service Commission assess whether Michigan’s energy infrastructure was capable of meeting the state’s needs in the face of changing weather and energy demand.

In February 2019, the governor requested a Statewide Energy Assessment The Governor directed the Michigan Public Service Commission (MPSC) to conduct a Statewide Energy Assessment (SEA) to evaluate whether Michigan’s electric, natural gas, and propane delivery systems were adequate to account for changing conditions and extreme weather events. The request came after a January 2019 Polar Vortex emergency, when during a period of extreme cold, an explosion at a major natural gas supply source forced one of the state’s large monopoly utilities to take the facility offline.

In addition, she requested recommendations on how to mitigate risk. A final report from MPSC was delivered on Sept. 11, 2019. Both the MPSC and the administration have taken several steps to implement these recommendations.

The MI Propane Security Plan states that ensuring propane security for Michigan requires action from the legislature as well. The five points are:

– Protect consumers from price gouging and provide accessible heating assistance for families in need.

– Send clear signals to encourage market participants to invest in the development of alternative propane sourcing options.

– Leverage the tools of state government to encourage the development of alternative sourcing options.

– Monitor propane supply and coordinate responses to potential disruptions with the energy industry.

– Maximize propane efficiency while reducing energy costs in Michigan through efficiency, weatherization, and the transition to electrification and renewable energy.

On June 7, 2019, Whitmer’s office issued a release stating that she signed an executive order creating the UP Energy Task Force (UPETF).The tasks assigned were to assess the U.P.’s overall energy needs and how they are currently being met; identify and evaluate potential changes in energy supply and distribution; and formulate alternative solutions to meet the U.P.’s energy needs – including alternatives to the current distribution of propane through Line 5, which, the release stated, poses an unacceptable threat to The Great Lakes.

The release also stated that about 25 percent of U.P. residents use propane for home heating, and much of that propane is delivered through the Line 5 pipeline. The future of Line 5, however, is uncertain.

A report from the National Transportation Safety Board made one point abundantly clear, only by happenstance did Michigan avoid a catastrophic oil spill in the Great Lakes on April 1, 2018, when a 12,000 pound anchor inadvertently dragged across the bottomlands of the Straits of Mackinac struck Line 5. The unacceptable threat posed by the continued operation of the pipelines through the Straits, as well as the lack of an established back-up propane distribution system were Line 5 to malfunction, make developing alternative solutions a priority.

The April 17, 2020, UPETF report, along with UPETF committee’s “Recommendations: Part I – Propane Supply,” proposed 14 recommendations for action by the governor, Legislature, and state agencies to better track and anticipate supply and demand, minimize disruption impact, and provide a more cohesive plan for those who are disproportionally impacted by high energy costs in the U.P.

When Whitmer established the U.P. Energy Task Force, she noted that residents of the Upper Peninsula “deserve an energy supply that is affordable, secure, and environmentally sound.”

She asked the Task Force to come up with recommendations to meet those goals by first analyzing the use of propane in the U.P. and what a disruption of supply could mean to residents and businesses.

Whitmer made Michigan’s long-term energy security a priority. One of the primary objectives for the task force is to develop a plan for the state’s propane supply in the event of a major disruption, such as the shutdown of the Line 5 pipeline that crosses the Straits of Mackinac. On Aug. 5, 2019, the state issued a request for proposals seeking an assessment of alternative means for meeting Michigan’s propane supply needs and recommendations for the best way to ensure Michigan residents and businesses have access to the energy they need into the future.

The five-point plan release stated that Enbridge’s efforts to postpone the shutdown of the oil pipelines that run through the Great Lakes are a predictable attempt to preserve market share. It is worth remembering, however, that 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.

Michigan is near the top of the list of states in terms of overall propane consumption, but the state’s residential use leads the nation. Altogether, 489 million gallons of propane are consumed annually in Michigan and more than three quarters of that is used by residential customers.

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