Magellan, Partner Consider Ethanol Pipeline
By Jason Womack, Tulsa World, Okla.
Feb. 20–Magellan Midstream Partners LP has begun assessing the feasibility of building a $3 billion pipeline that would move ethanol from the Midwest to Pennsylvania and New York.
The study — a joint effort by Tulsa-based Magellan and Breinigsville, Pa.-based Buckeye Partners LP — will examine the technical, economic and legislative issues associated with building the 1,700-mile pipeline.
Don Wellendorf, president and CEO of Magellan, said in a prepared statement Tuesday that pipelines are the safest and most efficient way of moving liquid fuels.
“We believe the proposed pipeline is a unique and innovative solution to meeting the growing need for renewable fuels in the Northeast,” he said. “The potential project would be a major step in bringing ethanol into the traditional petroleum infrastructure system.”
The proposed pipeline would be up to 24 inches in diameter and carry 300,000 million barrels of ethanol per day. The ethanol would then be blended with gasoline.
Magellan operates a 8,500-mile refined petroleum products pipeline that transports fuels throughout the Midwest. The partnership has been involved with ethanol blending since 1980,
when a federal excise tax credit made the process economical.
Earlier this year, Magellan began construction on a $2 million ethanol blending facility in Tulsa and another in Oklahoma City. It plans to add four blending systems, bringing its total number of terminals with ethanol blending capabilities to 42.
Buckeye Partners can blend ethanol at 24 of its terminals and is adding the capability at two more facilities in the Northeast.
The partnerships embarked on the feasibility study to address fuel requirements under the Energy Independence and Security Act of 2007, which requires the nation to use 9 billion gallons of ethanol this year, growing to 36 billion gallons by 2012.
“That bill dramatically increased the requirements for ethanol,” Magellan spokesman Bruce Heine said in a telephone interview. “It creates the opportunity to move a significant amount of ethanol.”
The study will focus on construction requirements and other project economics. The partnerships will determine the best route for the pipeline and what tariff to apply.
Technical issues will also have to be addressed. Ethanol is transported primarily by truck or rail car. Its corrosive properties make it difficult to run through pipe.
Heine said technical issues are being examined by the Association of Oil Pipelines.
The partnerships will also look for legislative support.
“For this project to move forward, we will also need some things from Congress,” Heine said.
The companies will seek a loan guarantee and a change in tax code. Current law does not treat the transportation and storage of ethanol as a qualifying source of income for Magellan and Buckeye.
Both companies are master limited partnerships, which avoid corporate income taxes. However, in order for them to keep their partnership status, 90 percent of their income must come from a qualified source. Transportation and storage of gasoline and diesel fuel are both qualifying sources of income.
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Jason Womack 581-8380 jason.womack@tulsaworld.com
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