By Bob Geiger
Dolan Media Newswires
Minneapolis — A proposed 1,700-mile ethanol pipeline from the Midwest to the East Coast has hit a major speed bump, with a U.S. Department of Energy study terming the multibillion-dollar project economically unfeasible.
The study’s findings indicate that the ethanol pipeline would need to carry 4.1 billion gallons of corn-based ethanol annually to be feasible without major financial incentives.
That volume is nearly 50 percent higher than the volume for the pipeline being proposed by Poet, the world’s largest producer of ethanol, and Tulsa, Okla.-based Magellan Midstream Partners LP.
Poet and Magellan had been courting support in Congress to amend an alternative energy loan guarantee program that would back up 80 percent of the debt the companies plan to spend installing the ethanol pipeline.
Still, Poet and Magellan were ìpleasedî with the study, according to a statement attributed to the companies.
“While our project differs from the hypothetical project considered within the DOE’s study, we believe the DOE’s conclusions are directionally correct: a large scale pipeline is feasible under certain conditions and that a federal loan guarantee is necessary to move forward,” according to the statement.
But according to the DOE report, moving ethanol through the pipeline would cost shippers 28 cents per gallon at projected demand levels, well over the 19 cents per gallon average rate for the rail and barge transportation currently used.
Mark Graul, a spokesman for pro-ethanol group Growth Energy, also said the DOE report was positive because it at least indicated such a project is possible.
The proposed ethanol pipeline includes a spur into southern Minnesota before it snakes through Iowa, Illinois, Indiana, Ohio, Pennsylvania and New Jersey before terminating in Linden, N.J.
The DOE report follows an effort last week by Poet executives, Growth Energy and supporters of legislation to raise the percentage of ethanol in fuel from 10 percent.
Growth Energy’s co-chairman, retired U.S. Army Gen. Wesley Clark, spoke to reporters to promote open market competition of ethanol and oil, including creation of ethanol pipelines to the coast.
That plan, called “fueling freedom,” would have increased ethanol’s presence by establishing 200,000 blender pumps nationwide and requiring all automobiles sold in the United States to be flex-fuel vehicles at a per-car cost of $120 for automakers.
“The fact is we’re spending over $300 billion on foreign oil,” Clark said. “That’s not iPods, that’s not phones. And we could recirculate it in our economy.”
The hitch? Federal support for the “fueling freedom” program would cost $5 billion to $7 billion a year before a phasing out tax benefits for ethanol producers.
“That’s nothing compared to the cost of oil,” said Clark, who referred to increased federal support for home-grown ethanol as “freedom of choice for fuel.”
Currently, the ethanol industry is capped by a 10 percent fuel blend limit.
With ethanol making up slightly more than 9 percent of U.S. fuel supply, the industry must either boost that percentage or level the playing field with oil, as its new proposal would.
Republican Minnesota Gov. Tim Pawlenty has supported increasing the percentage of ethanol in gasoline to at least 15 percent.