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Companies looking into cross-country ethanol pipeline

Two companies have entered into an agreement to find out whether a cross-country ethanol pipeline is a feasible venture.

Magellan Midstream Partners, L.P. and Buckeye Partners, L.P. on Tuesday announced they have begun a joint assessment to determine the feasibility of constructing a dedicated ethanol pipeline. According to a company report, the proposed ethanol pipeline system would safely and efficiently deliver renewable fuel ethanol from the Midwest to distribution terminals in the northeastern United States.

The proposed pipeline 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% 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 most promising liquid fuel alternative to conventional gasoline today is ethanol. But without an efficient means to transport ethanol from the Midwest to other markets, its benefits are limited," says Senator Tom Harkin (D-IA), Chairman of the Senate Agriculture Committee and leader in promoting ethanol pipelines. "Having a dedicated ethanol pipeline running from the Midwest to the eastern markets will help bridge the gap between the Midwest and the East, aiding America's energy security. So I applaud these two companies' efforts and I look forward to working in Congress to support the development of such pipelines."

"We believe the proposed pipeline is a unique and innovative solution to meeting the growing need for renewable fuels in the Northeast," says Magellan CEO Don Wellendorf. "Pipelines have consistently been chosen over the years as the safest, most reliable and cost effective method for moving liquid fuels. The potential project would be a major step in bringing ethanol into the traditional petroleum infrastructure system."

"This feasibility study will evaluate the possible use of existing right-of-ways and workforces as well as other synergies and resources that our companies have," says Buckeye CEO Eric Gustafson. "Our goal is to develop a cost effective project that could deliver ethanol from the production hubs in the Midwest to the high demand areas in the Northeast."

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. Congressional support and assistance is necessary for a project of this nature given the changing federal policies associated with renewable fuels.

In addition to assessing governmental support, financing and technical issues, Magellan and Buckeye officials say 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.

Although there are many hurdles to overcome to make this ethanol pipeline project a reality, company officials say they're hopeful the obvious need for a pipeline to deliver ethanol from the Midwest to distribution terminals in the northeastern United States will lead to a viable and successful project.

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.

Two companies have entered into an agreement to find out whether a cross-country ethanol pipeline is a feasible venture.

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