Proposed $3B Ethanol Pipeline Crosses Western Pennsylvania

By Rick Stouffer

Two major petroleum pipeline companies on Tuesday proposed construction of a $3 billion ethanol pipeline from the Midwest to Pittsburgh distribution terminals and to the East Coast.

Tulsa, Okla.-based Magellan Midstream Partners L.P. and Buckeye Partners L.P., of Breinigsville, Lehigh County, said the proposed 1,700-mile, first-ever ethanol pipeline project could carry as much as 10 million gallons of corn-based fuel daily. A joint assessment of the project has begun.

The pipeline would connect production facilities in Iowa, Illinois, Minnesota and South Dakota to major markets such as Pittsburgh, Philadelphia and the New York Harbor area.

As proposed, the project would cross the Western Pennsylvania counties of Beaver, Allegheny, Westmoreland, Cambria and Blair on its way east, utilizing Buckeye rights-of-way for its existing petroleum pipelines.

“We believe the proposed pipeline is a unique and innovative solution to meeting the growing need for renewable fuels in the Northeast,” Magellan’s CEO Don Wellendorf said.

Buckeye operates a number of petroleum terminals in the Pittsburgh area, including Midland, Beaver County, along the Ohio River west of Coraopolis, on Neville Island and in Indiana Township in Allegheny County, and in Delmont and Hempfield in Westmoreland County.

“We would utilize Buckeye rights-of-way for the pipeline, but it’s way too early to determine terminals to be used for ethanol,” said Buckeye spokesman Stephen Milbourne.

The key determining factor concerning whether the project will be built lies with the federal government, according to Milbourne. Specifically, ethanol carries with it a 51-cent-a-gallon tax refund, available to every company blending ethanol with gasoline. There also is a 54-cent-a-gallon tariff and a 2.5 percent duty on ethanol imported from Brazil, the world’s largest ethanol producer.

Also, the Energy Independence and Security Act of 2007 mandates that 36 billion gallons of renewable fuels, including ethanol and biodiesel, be available by 2022.

“We need to know those favorable policies are in place for the long-term,” Wilbourne said. “It’s also more than likely that we would need some federal support, either government backing for construction loans or favorable financing for the project.”

“The pipeline makes a lot of sense, but I question the timing,” said Skip Simmons, an energy analyst in Houston with consulting firm Wood MacKenzie Research and Consulting. “There’s been a slowdown in ethanol investment.”

Simmons said Magellan and Buckeye are taking a chance relying on government policies to make the huge project viable.

“While it’s the first major pipeline proposed to carry ethanol, government policy can shift on a dime,” Simmons said. “It seems like this is a bit early in the process.”

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