Saturday, July 18, 2009

Proposed Ethanol Pipeline to Extend into South Dakota

July 17, 2009

The nation's largest biofuels producer and a Tulsa-Okla.-based pipeline company are expanding the route of a proposed $3.5 billion dedicated ethanol pipeline into South Dakota, the companies said Friday.

Poet LLC and Magellan Midstream Partners LP are studying the feasibility of the 1,800-mile pipeline, which is dependent upon studies addressing technical issues and Congress revising the U.S. Department of Energy's loan guarantee program, the companies say.

If built, the route would begin in Davison County, S.D. -- further west than O'Brien County, Iowa, as originally planned -- and deliver the alternative fuel from plants in Iowa, South Dakota, Minnesota, Illinois, Indiana and Ohio to distribution terminals in the northeastern United States.

"With South Dakota being in the top five of ethanol producing states and having almost a billion gallons of production capacity, that just made sense," said Poet spokesman Nathan Schock.

Magellan has been working with the Association of Oil Pipe Lines for years on how to transport ethanol through a pipeline, said spokesman Bruce Heine.

Heine said the biggest challenge is stress corrosion cracking, in which ethanol tends to cause internal cracking of carbon steel pipe more so than gasoline or diesel.

Magellan thinks the solution will be a combination of potential additives to help protect the pipe and the use of different welding techniques.

"We believe the combination of these factors would allow us to reliably, safely and cost effectively transport ethanol from the Midwest to the East Coast," Heine said.

Poet, based in Sioux Falls S.D., is the nation's largest ethanol producer with more than 1.5 billion gallons of annual production from 26 ethanol plants.

Magellan Midstream Partners LP transports, stores and distributes refined petroleum products.

Schock said Poet is taking the lead on market analysis for the project, while Magellan is addressing technical and issues. The two are working together on legislative challenges.

A positive assessment would allow one or both partners to enter into an agreement to construct an ethanol pipeline, but any project would take several years to complete.

Schock said he hopes for a decision on whether to move forward by the end of year or early 2010.

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