Web exclusive posted August 18, 2008 at 11:47 a.m. CST

There are challenges - and opportunities - faced by companies developing ethanol pipelines. Dan Ownby, director of business development at TEPPCO Partners L.P., and Jim Lelio, director of business development at Kinder Morgan Energy Products L.P. discussed those challenges and opportunities during the American Coalition for Ethanol's 21st Conference and Trade Show in Omaha, Neb., Aug. 12-14.

Ownby said the industry will use all possible modes of transportation - especially pipelines - to transport ethanol in the future. "Rail and barge rates have really gone up," he said. "So we've been studying this very hard." He said the limiting factors in developing ethanol pipelines have been water-use issues and stress crack corrosion. "We have to have extra tankage for storage," he said. "There are also coating issues to deal with."

Ownby said TEPPCO transported a test batch of ethanol from Indianapolis to an Argo, Ill., facility in May 2007 - a distance of about 150 miles. "We haven't looked at the long-term effects yet," he said. "We did extensive testing of the ethanol product quality and found that the most significant find was color change - it turned a dark amber color."

Other than short distances, Ownby said there are currently minimal ethanol pipeline in the United States. "Pipeline companies are all working for it, but we need to work together to solve the biggest problem - stress crack corrosion," he added. "We can't jeopardize the pipelines until we know exactly why it happens and how will affect the pipelines."

Lelio said Kinder Morgan is working to perfect their pipelines so they can be ethanol-capable. "We focus on where our customers want us to go, and what they want us to do - and that's why we are focusing on ethanol," he said. "As our customers look to meet the renewable fuels standard (RFS) quantity, they will be looking at this - and we will respond to that."

According to Lelio, all of the company's West Coast facilities are currently ethanol-capable. "In the Gulf Coast we have a 24 terminal system in 15 markets and our plan is to have all of those ethanol capable in 2009," he added. In late September Kinder Morgan has plans to test pipelines in Florida and perform a parts compatibility test. "There is a lot of preparation going on, to get ready for that," Lelio said. "Tens of thousands of new parts have to be brought in and replaced - valves, pumps, and the pipeline."

The batch tested will be pure ethanol, rather than a blended product. "We felt success was more likely that way," he said. "It's what we see in the future. If you're blending it ahead of time, then there's more interface - you have to add more tankage, and that's a higher expense."

Lelio said Kinder Morgan hopes to be done testing by early January 2009.