Magellan Midstream Partners, LP has signed a joint development agreement with POET to continue assessing the feasibility of constructing a dedicated ethanol pipeline. The proposed ethanol pipeline system would deliver ethanol from the Midwest to distribution terminals in the northeastern United States.
Magellan and Buckeye Partners, L. P. originally announced their intent to jointly study the feasibility of a large-scale renewable pipeline project in February 2008. (Earlier post.) Although Buckeye continues to believe pipelines are the most effective way to transport large volumes of liquid energy, they recently decided to focus on other priorities and have discontinued their role in this pipeline project.
POET is the largest producer of ethanol in the world with more than 1.5 billion gallons of annual ethanol production from 26 ethanol production facilities in seven Midwestern states. When combined with 300 million gallons of ethanol that POET markets for nine plants outside its network, POET is one of the largest ethanol marketers with 1.8 billion gallons of annual production.
The proposed common carrier pipeline system would gather ethanol from production facilities in Iowa, South Dakota, Minnesota, Illinois, Indiana and Ohio to serve terminals in major Northeastern markets. The project, preliminarily estimated to cost in excess of $3.5 billion, would span approximately 1,700 miles and would take several years to complete.
Although there are many hurdles to overcome to make this ethanol pipeline project a reality, Magellan and POET say they are optimistic that the need for a pipeline to deliver ethanol from the Midwest to distribution terminals in the northeastern United States may lead to a viable and successful project. A positive assessment will allow one or both partners to enter into a subsequent agreement to construct a dedicated ethanol pipeline.
The feasibility of this project is dependent upon the successful outcome of ongoing studies addressing technical and economic issues associated with the transportation of ethanol via pipeline. In addition, federal legislation revising the US Department of Energy’s loan guarantee program is critical for a project of this nature to move forward.