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Corn fuel's bottleneck

Will emerging ethanol earn its own national pipeline system?

LARIMORE, N.D. - Dennis McCoy can get part of his corn crop to the bellies of hogs without a hiccup. But the North Dakota farmer believes ethanol made from his other corn acres is hamstrung by traditional truck and rail shipping.

"I think the ethanol industry is overbuilt for the time frame right now," said McCoy, who has been growing corn for fuel for 25 years near Larimore, in eastern North Dakota. "Maybe the industry needs to step back and figure out the infrastructure to get it where it needs to go."

Shipping ethanol from farm states to the East and West coasts by pipeline could open up markets and help clear a bottleneck that has kept the fuel additive from getting to the pumps. An industry group is already studying such a project.

Not everyone thinks one is needed. The ethanol industry is new enough that it's not clear where the pipeline should go or whether ethanol prices will hold up.

Bob Dinneen, president and chief executive of the Renewable Fuels Association, said an ethanol pipeline may not be as secure as rail cars, barges and trucks.

A pipeline "is an option, but I don't think it's the option," Dinneen said.

The Association of Oil Pipe Lines, a Washington, D.C., trade group that represents about 50 pipeline companies, is studying whether gasoline blends containing up to 20 percent ethanol can be transported safely in existing pipelines.

The study also will focus on stress-corrosion cracking and design requirements for ethanol-only pipelines, said Mike Mears, chairman of the pipeline group and vice president of Magellan Midstream Partners L.P. of Tulsa, Okla. The study will cost about $800,000, about 10 percent from a federal grant, he said.

Distribution remains a major challenge to growth. The price of ethanol dropped by 30 percent this year, and production stalled on some plants hit by high corn prices and construction costs.

Ethanol is not shipped in existing pipelines because its high oxygen content makes it too corrosive and it also absorbs water and impurities in pipelines.

Ron Lamberty, a vice president of the Sioux Falls, S.D., American Coalition for Ethanol, said a pipeline would help, "but it's a chicken-and-egg argument - the infrastructure needs to be in place before there is enough volume to pay for it."

Mears estimates a dedicated pipeline would cost about $1-million per mile - about $2-billion from the Midwest to the East Coast, where strong markets exist.

An ethanol-exclusive pipeline could move more than 4-million gallons of the fuel daily, or the entire production of about 30 average-sized ethanol plants, Mears said.

That volume, along with government incentives and long-term shipping commitments, would be necessary to support a dedicated pipeline, he said.

Fast facts

Ethanol's rise

- Ethanol production this year is pegged at 6.8-billion gallons and is expected to swell to 9-billion gallons next year, said Ron Lamberty, a vice president of the Sioux Falls, S.D., American Coalition for Ethanol.

- President Bush has called for reducing U.S. gasoline use by up to 20 percent by 2017, mainly by increasing production of alternative fuels such as ethanol.

- The United States has 131 ethanol refineries, 10 of which are expanding, and 72 more are being built, according to the Renewable Fuels Association.

Associated Press

[Last modified November 27, 2007, 01:34:52]