Web exclusive posted Feb. 28, 2008, at 8:05 p.m. CST

The idea of an ethanol pipeline through the heart of America isn't new, but a $3 billion proposal announced this week by two industry heavyweights is intriguing news.

Magellan Midstream Partners LP and Buckeye Partners LP, two independent oil pipeline companies, announced Feb. 19 that they were considering a 1,700-mile dedicated ethanol pipeline from the Midwest to the Northeast. A feasibility assessment will be completed later this year, the companies said.

Pipelines have been proposed by the industry and politicians from Corn Belt states to alleviate delays caused by traditional transportation such as barges, railroads, ships and tanker trucks. These proposals have been met with opposition and skepticism because some ethanol proponents would prefer to see the renewable fuel locally consumed.

However, now that the Energy Security & Independence Act of 2007 has mandated a five-fold increase in ethanol production by 2022, Magellan and Buckeye believe a pipeline will be considerably more economical—once it is built. That will take several years, the companies said. "A project of this nature could carry up to 300,000 barrels a day of ethanol, 4.5 billion gallons a year from the Midwest to the East Coast," said Magellan spokesman Bruce Heine. "We'll need help from Congress seeing this thing through."

Several obstacles stand in the way, Heine said. Although pipelines are generally seen as the fastest, cheapest way of transporting liquid fuels, ethanol absorbs water and impurities found in pipelines, and there are logistical limitations to existing pipelines. In the past, there were insufficient volumes of ethanol to be transported, but that is no longer the case.

Heine said the Magellan-Buckeye pipeline would have the capacity to handle 10 million gallons of ethanol per day. It would carry both corn-based and cellulosic ethanol. Magellan blends ethanol at 30 of its petroleum terminals, and Buckeye has 24 terminals with ethanol-producing capabilities. The pipeline would run south through Minnesota and Iowa, then eastward, tying into Buckeye's existing right of way in central Indiana all the way to the eastern seaboard. Heine said that should lessen the difficulties of obtaining rights of way along the proposed pipeline route. The companies' feasibility assessment will also review construction requirements, construction costs, project economics, regulatory issues and other issues.

The feasibility of this project hinges on the successful outcome of ongoing studies addressing technical and economic issues associated with the transportation of ethanol via pipeline. In September, the Association of Oil Pipelines initiated a study to see if low-ethanol blends could be transported in existing pipelines without causing corrosive cracking. Magellan and Buckeye are also participating in that study. The project is also conditional to changes in federal tax laws to ensure that the transportation of ethanol by pipeline will be treated the same as the transportation of natural resources, such as refined petroleum products, by pipeline.

In 2006, Iowa Sen. Tom Harkin, D-Iowa, and Indiana Sen. Richard Lugar, R-Ind., introduced legislation to investigate an ethanol pipeline. In 2007, former Minnesota Rep. Gil Gutknecht proposed an 8-inch pipeline from Nevada to Iowa that would carry 1.7 billion gallons of ethanol and be built by a public-private partnership. Although neither proposal was passed, the EISA incorporates remnants of both. Language in the legislation gives the U.S. DOE and the Department of Transportation the green light to conduct feasibility studies and issue a report due in 2009.

"While others have tried and looked at it, the synergies of Magellan and Buckeye are significant [once the engineering and technical challenges are overcome]," Heine said.