Magellan, Buckeye To Pursue Ethanol Pipeline

Magellan Midstream Partners LP and Buckeye Partners LP have begun a joint assessment to determine the feasibility of constructing a dedicated ethanol pipeline, according to Magellan information.


The proposed ethanol pipeline system would safely and efficiently deliver renewable fuel ethanol from the Midwest to distribution terminals in the northeastern United States. It could have the capacity to supply more than 10 million gallons of ethanol per day, enough to meet the needs of millions of northeastern motorists who purchase 10 percent ethanol blended gasoline or higher ethanol blends such as E85.


The pipeline would gather ethanol from production facilities in Iowa, Illinois, Minnesota, and South Dakota to serve terminals in major markets such as Pittsburgh, Philadelphia, and the New York harbor. The project, which preliminarily has been estimated to cost in excess of $3 billion, would span approximately 1,700 miles and would take several years to complete.


The feasibility of the project is dependent upon the successful outcome of ongoing studies addressing technical and economic issues associated with the transportation of ethanol via pipeline. Congressional support and assistance is necessary for a project of this nature given the changing federal policies associated with renewable fuels, the company said.


In addition to assessing governmental support, financing, and technical issues, Magellan and Buckeye stated that the feasibility study would also review construction requirements, construction costs, project economics, regulatory issues, and other matters. The technical and feasibility studies could be complete in the latter half of 2008.


However, the necessary governmental support, the timing of which is unknown at this time, is critical for the partnerships to make a decision on proceeding with construction of the proposed ethanol pipeline. Pursuit of the proposed project also is conditioned on changes to federal tax laws to ensure that transportation of ethanol by pipeline will be treated the same as the transportation of natural resources, such as refined petroleum products, by pipeline.


Both companies have experience handling ethanol at their respective terminal locations. Magellan already blends ethanol at 36 of its petroleum products terminals and is currently investing in six new ethanol blending systems at its terminals in the Midwest and southeastern states. Buckeye currently has 24 terminals with ethanol blending capabilities and is in the process of investing in two new ethanol blending systems at its terminals in the Northeast.

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