Consortium to assess feasibility of dedicated ethanol pipeline in the U.S.

Magellan Midstream Partners, L.P. and Buckeye Partners, L.P. today announced they have begun a joint assessment to determine the feasibility of constructing a dedicated ethanol pipeline. The proposed ethanol pipeline system would safely and efficiently deliver renewable biofuel from the Midwest to distribution terminals in the northeastern United States (New York and Pennsylvania).

The proposed pipeline would have the capacity to supply more than 10 million gallons (37.85 million liters) of ethanol per day - roughly around 165,000 barrels of oil equivalent per day - , enough to meet the needs of millions of northeastern motorists who purchase 10% ethanol blended gasoline or higher ethanol blends such as E85.

The pipeline would gather ethanol from production facilities in Iowa, Illinois, Minnesota and South Dakota to serve terminals in major markets such as Pittsburgh, Philadelphia and the New York harbor (map, click to enlarge). The project, which preliminarily has been estimated to cost in excess of $3 billion, would span approximately 1,700 miles (2,730km) and would take several years to complete.

The most promising liquid fuel alternative to conventional gasoline today is ethanol. But without an efficient means to transport ethanol from the Midwest to other markets, its benefits are limited. Having a dedicated ethanol pipeline running from the Midwest to the eastern markets will help bridge the gap between the Midwest and the East, aiding America's energy security. So I applaud these two companies' efforts and I look forward to working in Congress to support the development of such pipelines. - Senator Tom Harkin (D-IA), Chairman of the Senate Committee on Agriculture, Nutrition and Forestry, an advocate of ethanol pipelines

The feasibility of this project is dependent upon the successful outcome of ongoing studies addressing technical and economic issues associated with the transportation of ethanol via pipeline. Congressional support and assistance is necessary for a project of this nature given the changing federal policies associated with renewable fuels:
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In addition to assessing governmental support, financing and technical issues, Magellan and Buckeye stated that the feasibility study would also review construction requirements, construction costs, project economics, regulatory issues and other matters. The technical and feasibility studies could be complete in the latter half of 2008. However, the necessary governmental support, the timing of which is unknown at this time, is critical for the partnerships to make a decision on proceeding with construction of the proposed ethanol pipeline. Pursuit of the proposed project also is conditioned on changes to federal tax laws to ensure that transportation of ethanol by pipeline will be treated the same as the transportation of natural resources, such as refined petroleum products, by pipeline.

We believe the proposed pipeline is a unique and innovative solution to meeting the growing need for renewable fuels in the Northeast. Pipelines have consistently been chosen over the years as the safest, most reliable and cost effective method for moving liquid fuels. The potential project would be a major step in bringing ethanol into the traditional petroleum infrastructure system. - Don Wellendorf, Magellan's President and Chief Executive Officer

Although there are many hurdles to overcome to make this ethanol pipeline project a reality, the two partnerships are hopeful that the obvious need for a pipeline to deliver ethanol from the Midwest to distribution terminals in the northeastern United States will lead to a viable and successful project.

This feasibility study will evaluate the possible use of existing right-of-ways and workforces as well as other synergies and resources that our companies have. Our goal is to develop a cost effective project that could deliver ethanol from the production hubs in the Midwest to the high demand areas in the Northeast. - Eric Gustafson, Buckeye's Senior Vice President and Chief Operating Officer

Both companies have extensive experience handling ethanol at their respective terminal locations. Magellan already blends ethanol at 36 of its petroleum products terminals and is currently investing in six new ethanol blending systems at its terminals in the Midwest and southeastern states. Buckeye currently has 24 terminals with ethanol blending capabilities and is in the process of investing in two new ethanol blending systems at its terminals in the Northeast.

Magellan Midstream Partners, L.P. and Buckeye Partners, L.P. are unaffiliated publicly traded partnerships formed to own, operate and acquire a diversified portfolio of energy assets. The partnerships primarily transport, store and distribute refined petroleum products in their respective service areas.

Brazil has already begun building a dedicated ethanol pipeline to connect its sugarcane growing areas in the Center South (Sao Paulo state) to coastal cities. The 950 km pipeline network is a $800 million project managed by Japan's Mitsui & Co Ltd and state-owned oil company Petrobras.

References:
Magellan Midstream Partners: Magellan Midstream Partners and Buckeye Partners Announce Joint Assessment of Dedicated Ethanol Pipeline - February 19, 2008.

Biopact: Brazil planning $500 million ethanol pipeline network by 2008 - April 14, 2006

Biopact: Sao Martinho announces 30 year ethanol export contract with the Mitsubishi Corporation - March 26, 2007