The proposed construction of an ethanol pipeline from Iowa to the East Coast gained a bit more momentum with the passage of last week’s financial bailout package in Washington. The measure contained a provision, added by Iowa Senator Tom Harkin, that removes a hurdle to the pipeline project – which is a joint venture of Oklahoma-based Magellan and Buckeye Partners of Pennsylvania.
Magellan spokesperson Bruce Heine says the provision changed the tax code that prohibited publicly traded partnerships from earning income from the transportation of renewable fuels. "This was a show stopper. This was a barrier for the project to continue," Heine told Radio Iowa. "If this tax issue weren’t resolved, then it would have stopped us in our tracks."
Iowa is the number one producer of ethanol. The proposed 1,700 mile pipeline would include three "hub" sites in Iowa – located near Mason City, Fort Dodge and in northwest Iowa’s O’Brien County. Magellan and Buckeye officials are still conducting a feasibility study. Heine says one challenge is that ethanol tends to crack pipelines more often than diesel, jet fuel or gasoline.
"There are some technical challenges associated with transporting ethanol versus other petroleum based fuels. We continue to work with our industry in understanding those differences," Heine said. If constructed, the pipeline would carry ten-million gallons of ethanol a day from the Midwest to the East Coast. Heine says the project has a pricetag of $3.5 billion and would take at least four years to get up and running.
"We are in outreach efforts, talking to ethanol producers and continuing to work with Congress on other options – including federal financing options," Heine said. "We hope to take this to the next step." The federal government is requiring refiners to be using 36-billion gallons of ethanol and other biofuels by 2022. Currently, the production requirement is 9-billion gallons annually.