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Demand, infrastructure affects price and delivery of heat amid very cold winter

January 27, 2014 at 6:13 PM EDT
Despite a large supply, the especially cold winter weather is having an impact on prices and delivery of natural gas and propane for Americans. Judy Woodruff discusses the various factors with Marty Durbin of America's Natural Gas Alliance.

JUDY WOODRUFF: Well, this especially cold winter is having an impact on the prices, and at times delivery sometimes of natural gas and propane. In Wisconsin, Governor Scott Walker directed state agencies today to work with residents who are having trouble getting propane as supplies have dwindled and the price has spiked up.

Over in the Northeast, as demand rises, the pipeline system for delivering natural gas is the subject of new questions. And this weekend, a rupture of a TransCanada pipeline in Canada has affected customers in Minnesota, North Dakota and Wisconsin.

Marty Durbin is CEO of America’s Natural Gas Alliance, which is an industry trade group. And he joins us now. Thank you for being here.

MARTY DURBIN, America’s Natural Gas Alliance: Happy to be here.

JUDY WOODRUFF: So I think a lot of Americans think we have this glut, this enormous supply right now of natural gas, but we’re finding out it’s more complicated than that.

MARTY DURBIN: It actually is true. We do have an enormous supply of natural gas.

What we’re seeing happen now is that this is obviously a severe weather event, as we have been hearing about. And so the prices will move when we have these events. You know, the last two winters were very mild. We saw prices down around $2.50. So while we are having some isolated issues of infrastructure, both policy and some financing issues around pipelines and what have you, bottom line is the supply is there.

JUDY WOODRUFF: Well, if the supply is there, then what is happening? We mentioned three states in the Midwest. What are the infrastructure and the pipeline issues, problems?

MARTY DURBIN: Well, let me be clear first in the TransCanada pipeline issue.

There’s a concern about anybody that is going to have to be in the cold right now. But it did the — the TransCanada explosion did end up having an impact in three states. It affected about 100,000 residents where the gas company asked them to curtail their use. Happy to say that those curtailments have all been lifted. And they never lost their gas service.

So they were able to work around the issue, and because there is enough pipeline network out there.

JUDY WOODRUFF: And what about the pricing part of all this? The price — again, if there is a huge supply, why are prices going up? I was reading today that they have gone up — I can’t find the numbers — I think four times higher than normal?

MARTY DURBIN: Well, there were some price spikes in specific instances.

The fact is that, even in the Northeast, especially with residential and commercial customers, they have guaranteed contracts for natural gas, so they didn’t see prices go up. They did use more. It affects more the electric generators, who don’t have these guaranteed contracts for natural gas supply.

So when they can be interrupted, everyone else is using it, they have to buy on the spot market. So it’s really just an incremental part of the market out there, where these prices ended up being so high.

JUDY WOODRUFF: Was the industry taken by surprise by this, given the cold weather…

MARTY DURBIN: Oh, I don’t — no, I don’t think the industry was taken by surprise. I mean, this is a — again, I think, a severe weather event that we’re dealing with here.

I think the industry is showing that there were not specific supply constraints from a natural gas standpoint. I think the other thing we have to realize …

JUDY WOODRUFF: What did you mean by that?

MARTY DURBIN: Well, I think in essence, we have got — the infrastructure is there, but in certain instances…

JUDY WOODRUFF: To get the gas from the origin to the people who need it’s?


But, again, there are isolated areas, for example, in New England. There is not as much of a pipeline infrastructure there. Part of this is now that, you know, we have seen such a fast transition to this — you know, this natural gas abundance, that we’re going to have to catch up, both from infrastructure, policy, financing and other opportunities, to make sure that the natural gas is always there when it’s needed.

JUDY WOODRUFF: Right. And I want to ask you very quickly, before I let you go, Marty Durbin, about propane. I know that’s not your area, but what is the story there with the rising costs and the scarcity?

MARTY DURBIN: Well, again, I think the stockpiles of propane have been down for two reasons, number one, the colder-than-normal weather.

And then also back in the fall, there was a very wet harvest. Propane is used in the agriculture — agriculture industry to dry the harvest. So stockpiles were down. And propane doesn’t have as quick an ability to ramp up production. So, when we have these severe weather events, that’s why we start to see stockpiles dwindle.

JUDY WOODRUFF: So this is just a temporary — how long — people who are — need propane who can’t get it, how long are we talking about waiting? Do we know?

MARTY DURBIN: Well, the expectation, as the weather starts to moderate, we will see prices moderate, but also the production will be able to start catching up to the demand.


Well, we thank you, Marty Durbin with America’s Natural Gas Alliance.

MARTY DURBIN: Happy to be here.


MARTY DURBIN: Thank you.