In response to the findings of the Statewide Energy Assessment and under a further directive by Gov. Whitmer, the Michigan Department of Environment, Great Lakes, and Energy released the “Upper Peninsula Energy Task Force Committee Recommendations Part I – Propane Supply” in April 2020. This task force was created by Gov. Whitmer in June 2019 and directed to “consider all available information and make recommendations that ensure the U.P.’s energy needs are met in a manner that is reliable, affordable, and environmentally sound.” Their report on propane supply offered 14 recommendations “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.”
We analyze the potential impacts and feasibility of these recommendations in the pages that follow. We also explore the use of alternative fuels to propane such as natural gas and electricity to provide for winter heating needs in the Upper Peninsula. Five key points summarize our review of the task force’s recommendations.
- Closures of Line 5, even if only temporary in nature, will leave the Upper Peninsula vulnerable to price spikes and supply shortages in heating fuels. Shutting down Line 5 will force U.P. residents to rely on a mix of rail and trucking to transport propane from Superior, Wisc. But doing so would leave propane supplies vulnerable to more points of failure, given the U.P.’s experience of intense winter weather. Even recent reports of the potential reversal of flows in the Michigan Express Pipeline do not change the fact that limiting supply options is undesirable in any system when availability and reliability are essential.
- Laws designed to limit price increases during shortages are likely to prolong shortages. The task force’s final recommendation encourages Michigan’s Legislature to consider adopting price controls for heating fuels. However, such controls are likely to cause supply shortages by limiting incentives for propane dealers in other regions to ship their product to the U.P.
- Alternate home heating options will cause a two- to three-fold increase in heating costs. The Michigan Statewide Energy Assessment recommended that alternative heating fuels and methods should be considered for the U.P. But extending natural gas infrastructure would add a minimum of about $3,500 in upgrade costs for each home and hundreds of millions more in infrastructure expenditures. Electrification of propane-heated homes is also poor choice in an area that already pays relatively high electricity prices. Switching from propane to electric heat would increase costs by between about $3,400 and $3,900 each year per household.
- Transitioning from propane to electric appliances, water heaters and furnaces could cost more than $25,000 per household. Electrification advocates claim heat pumps can replace propane heaters. But they do not work well below 30 degrees Fahrenheit, so supplemental electric resistance heating must be added. Installing electric resistance heat and switching to electric water heaters for existing propane water heaters could impose more than $25,000 in expenses per household in the U.P.
- Weatherization Assistance Program upgrades would be prohibitively expensive. Many homes in the U.P. are ineligible for federally funded efficiency upgrades due to structural defects. So even before this program could aid in reducing energy consumption in the U.P., an indeterminate amount would need to be spent to upgrade currently ineligible homes. After those minimum standards were met, upgrading each propane-heated home to meet the energy efficiency standards and reduce energy consumption might cost between $15 million and $470 million, depending on how strict a standard is used. Michigan received only $18 million through the Weatherization Assistance Program in 2019, so this would require a large expansion of this federal program.
A broader concern arising from the task force’s recommendations is that they propose several new government incentives or programs, new state spending, increased surcharges and fees, new reporting requirements and increased regulatory control of the existing propane market.
Ostensibly the recommendations for more government intervention are aimed at reducing the negative impacts of decreased supply and increased prices for propane. But those negative impacts would not exist or would be greatly diminished if it were not for the effort on the part of the state government to close Line 5 and stop the construction of the Line 5 Straits of Mackinac Tunnel. In this case, government action is causing the very problem that they have created the U.P. Energy Task Force to solve.
 “Upper Peninsula Energy Task Force Committee Recommendations Part I -Propane Supply” (Department of Environment, Great Lakes, and Energy, April 17, 2020), https://perma.cc/D85S-S4TJ.
 Dana Nessel, “Comments on UP Energy Task Force- Draft Committee Recommendations-Part I-Propane Supply” (Michigan Department of Attorney General, April 6, 2020), https://perma.cc/RLK5-B8NW.