Propane shortages during grain-drying season are common in North Dakota, but there may be a novel solution for it that’s good for both the oil and gas and agriculture sectors.
North Dakota Pipeline Authority Justin Kringstad and North Dakota Director of Mineral Resources Lynn Helms have been talking with lawmakers at the state Capitol about the potential for underground storage of propane in salt caverns, which they believe could help alleviate future shortages during harvest and other crunch times.
“At any given time, at least two to three times more retail grade propane is produced in North Dakota than is consumed,” Kringstad told the North Dakota Industrial Commission during its regular session this week. “And I know that flies in the face of the challenges and things we’ve seen in North Dakota regarding propane availability.”
In 2019, for example, when there was all the flooding and wet grain to dry, North Dakota was completely out of propane, and had to ship from other states like Kansas.
It’s not a production issue, Kringstad said, but a logistics and storage issue.
Right now, the closest underground storage is near Menter in Minnesota, where Hess operates an underground storage facility that can hold about 25,000 barrels. Other than that, Kringstad said, propane is coming to North Dakota by rail or pipeline from other states.
“These plants 24 hours a day have to be running gas through them,” he told NDIC Commissioners. “They can’t economically store rows and rows and rows of steel bullet tanks on location in order to store this propane, and marketers are in the same situation.”
But they could cost-effectively store propane underground in North Dakota. Underground storage of hydrocarbons like propane is actually not a new technique, it’s been used in places like Texas to store not only propane, but NGLs and even crude oil.
“The experts suspect that we have potential places where (propane storage) would work,” Kringstad told the Williston Herald. “But until you go down and physically drill and run tests on the salt and the formation, you can’t say with absolute certainty.”
Salt caverns are built underground using water to essentially carve out a space by dissolving away solid salt. But, over time, because underground salt pockets are actually quite warm, they tend to deform and can lose their shape. That’s why study is needed, to prove out the concept with North Dakota geology, and ensure known parameters for industry. Otherwise, companies will be unlikely to take the risk.
Lawmakers are talking right now about how much to spend on salt cavern research as part of Senate Bill 2014 — the budget for the Department of Mineral Resources and the Division of Oil and Gas. So far, there’s $9.5 million allocated toward it, down from $14 million. But the matter is also still a topic of discussion.
North Dakota Department of Mineral Resources Director Lynn Helms said early conversations with propane marketers about the idea have been very positive. Underground salt cavern storage could work for them, if proves to be a viable concept.
“As it stands right now, their closest supply point is Sioux City, Iowa,” he said. “The propane gets fractionated in Kansas. It can come back to Sioux City by pipeline, and then it has to get in a rail car or a truck to get to East Central North Dakota.”
Helms said suitable storage likely lies between Stateline and Powerball or Robinson Lake.
“I realize that is not central North Dakota, but it’s much closer to East Central North Dakota than Sioux City, Iowa,” he said. “The problem with Sioux City, Iowa, is that they have to mobilize in order to start bringing propane to that hub, and then figure out how to truck it here. So, by the time the market responds, the prices go very very high, whereas having half a million gallons or so of propane stored somewhere between Minot and Trenton would be vastly superior to that.”