PRIMGHAR – Slightly over four dozen people attended a press conference last week that discussed the feasibility of a new ethanol pipeline that would transport biofuels from Iowa to eastern U.S. endusers. The pipeline is best seen as starting somewhere in O’Brien County.

The event, sponsored by O’Brien County Economic Development Corporation, included representatives from Magellan Midstream Partners and POET LLC, who are studying the feasibility of a large scale pipeline system capable of safely transporting ethanol from northwest Iowa to New York Harbor.

In March, 2009 Magellan and POET entered into a joint development agreement to study the feasibility of building the 1,700-mile pipeline. POET is a fully integrated ethanol company with 26 plants, the largest producer of ethanol in the world.

“Independence Pipeline is the name that has been given to the project,” said Bob Berens, POET’s director of site development. “Together Magellan and POET are ideally suite to undertake a project of this nature and scope.”

“We feel that pipelines are the most efficient, cost effective and reliable method available for transporting large volumes of renewable fuels from the Midwest to the markets where those volumes are consumed,” said Berens.

Bruce Heine, from Magellan, explained that his company is in business is to build pipelines. Magellan currently has 80 petroleum product terminals, an 8,700-mile petroleum products pipeline system and an 1,100-mile ammonia pipeline system.

“The majority of gasoline and diesel fuel that flows into the state of Iowa is through a Magellan system,” said Heine. “Many of you may know us as the Williams, or Williams Brothers, pipeline system that goes back to the 1960s. Magellan is now the owner/operator of those assets.”

Pipelines generally operate like a toll road, Heine said, where products are received from a refiner on their pipeline system, Magellan then moves the product to the intended destination, collecting a toll, called a tariff.

“The composition of the fuels is ever changing,” said Heine. “Policy changes in Congress that encourage the use of renewable fuels has placed ethanol as a desired fuel. Because of this, ethanol and biodiesel are now recognized as fuels to receive the same treatment has gasoline.”

According to Heine, the federal Renewable Fuels Standard, has removed a big barrier that could have put this joint project between Magellan and POET on the back burner.

Most ethanol is currently moved by truck, rail, barge or ship, Heine said, adding that a small pipeline in Florida that does transport ethanol by pipeline from Tampa to Orlando appears to be working well.

“As we look at the components of increased renewable fuels required each year by the RFS,” said Heine. “We look at this area of Iowa as the Honey Pot region, a very fertile area of ethanol production.”

Some technical issues have been resolved, the company rep said. Minor issues of color change and water normally present in ethanol or the pipeline can now be managed. A major challenge was the stress corrosion aspect, Heine said Magellan’s goal is to have zero leaks. “With ethanol, we are very close as an industry to having this under control,” he added.

“The pipe will be made of carbon steel,” said POET’s Berens. “These pipes can last a long, long time. They have been successfully used for the past 100 years.”

Other challenges include swings in the energy policy itself with federal taxes or tariffs placed on Brazillian ethanol. For this project to be successful, the feasibility study details the need for federal financing.

Heine said the Department of Energy has loans available for projects that meet their requirements for innovative projects and those that enhance economic viability and create new jobs. Heine and Berens feel this project meets those requirements.

The feasibility study will not be finished until the end of the calendar year. Until it is finished, the terminal sites and exact location of the pipeline cannot be finalized, but O’Brien County has been identified as one of the most likely spots for the pipeline to originate.

Pipeline transportation benefits

• Pipeline transportation rates are relatively insensitive to increases in fuel prices. Pipelines are reliable. Pipeline downtime is typically minimal.

• Deliveries through direct connections to pipelines can be continuous and essentially trouble free.

• Independence Pipeline will operate as a common-carrier open access system. Magellan plans to continue its current business model of being a service provider.

• Pipelines can provide excellent inventory management services as well as a platform under which products can change hands in transit.

• Product can be easily redirected in-transit to alternate destinations if market conditions dictate.

• Pipelines can provide in-transit storage at nominal costs to shippers who do not have adequate storage to hold products as part of their marketing strategies.

Contact Renae Vander Schaaf by e-mail at renaefarmnews@gmail.com.