Companies Consider Building Ethanol Pipeline

Dedicated pipeline, if built, would carry ethanol from Iowa and other Midwest states to East Coast.

An ethanol pipeline is being proposed to be built which would pipe ethanol from Iowa and Midwest states to East Coast motor fuel markets. Magellan Midstream Partners, a company which pipes gasoline to Iowa and other states, is exploring the possibility of building a the pipeline to carry ethanol. Magellan, based in Tulsa, Okla., and another pipeline company, Buckeye Partners of Pennsylvania, have started a study to determine the feasibility of the project.

The project would cost more than $3 billion and run from northwest Iowa to the New York harbor. Because of uncertainty about the future of federal biofuel incentives, the companies would need a government loan guarantee to make the pipeline financially feasible, says Bruce Heine, Magellan's director of government and media affairs.

Connection to major markets

A new federal energy law passed in late 2007 requires refiners to use 36 billion gallons of biofuels per year by 2022, guaranteeing a growing market for ethanol producers. However, the future of biofuel tax credits and a tariff on imported ethanol is less certain.

Distribution is a challenge for the ethanol industry. Ethanol is not shipped via gasoline pipelines because of concern that the alcohol would corrode the pipes as well as absorb water. Heine says the industry is studying ways to prevent the corrosion problem both in existing gasoline pipelines as well as in dedicated ethanol pipelines.

"Having a dedicated ethanol pipeline running from the Midwest to markets in the eastern U.S. will help bridge the gap between the Midwest and the East, aiding America's energy security," says Sen. Tom Harkin, D-Iowa, chairman of the U.S. Senate Ag Committee.

The Magellan-Buckeye plan tentatively proposes having three sites in Iowa for delivering ethanol to the pipeline. The sites would be near Mason City, Fort Dodge and in O'Brien County in the northwest corner. The pipeline would carry more than 10 million gallons of ethanol a day.

Cheaper way to ship ethanol

Most ethanol is now shipped long-distance by rail. There is a price advantage to shipping ethanol by pipeline compared to rail car. "The two pipeline companies who are thinking about building this have an 80 year history in the business and have a staff who know what is feasible and what isn't," says Sen. Charles Grassley, R-Iowa.

Congress is thinking about appropriating money to help build the pipeline. "If we could have such a pipeline, it would probably be a greater boost to production of ethanol than either the tax incentive or the renewable fuels mandate we have in existing law," says Grassley. "I say that because I'm told transporting ethanol by pipeline is a 16 cent per gallon savings compared to shipping ethanol by rail."

Spokesman Bruce Heine of Magellan says there are three areas in Iowa that would each have an origin point for this proposed pipeline. "An origin point would be a storage terminal for ethanol producers to bring their product to by truck," he explains. "We would load the pipeline from these points located at Mason City, Ft. Dodge and in O'Brien County. These facilities would complement the direct connections from some ethanol plants to the pipeline system itself."

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