The Possibility of the Pipeline
by Lacey Dixon
You can’t ship ethanol through a pipeline. Or so we’ve been told.
As the ethanol industry continues to redefine efficiency and challenge technological barriers, it shouldn’t be a surprise that this ethanol myth has been busted. Today, shipping ethanol via pipeline is not only possible, but a concept in the testing stages.
The current question is not whether pipelines are an option for ethanol transportation, but whether they are a viable option for this industry examining logistical potential on all fronts.
Less than five years ago, former Congressman Gil Gutknecht (R-MN) was one of the first to explore the idea of implementing a pipeline infrastructure for ethanol. With the nation exporting more than billion every day to import crude oil, he recognized the importance of growing domestic ethanol production. And as U.S. ethanol production expanded, he knew that it made sense to examine whether shipping ethanol via pipeline would be a possibility.
“There had always been interest in shipping ethanol using the same pipelines that bring gasoline to markets, but it had always been dismissed because, regardless of what challenges there might be, the volume just didn’t justify it,” said Ron Lamberty, Vice President / Market Development for the American Coalition for Ethanol (ACE). “Congressman Gutknecht and others recognized that greater volume from an RFS would change that discussion.”
The potential of an ethanol pipeline was discussed at a 2006 meeting in Sioux Falls, South Dakota with Congressman Gutknecht, the American Coalition for Ethanol, and Mark Glaess of the Minnesota Rural Electrics Association who brought many of the rural electric co-ops to the table. The rural electrics have offered that, should an ethanol pipeline be constructed, they would share their rights of way which already exist in their extensive system of rural power lines.
The working of a pipeline
Today, petroleum pipelines efficiently transport large quantities of fuel over long distances. The layout of the country’s pipelines reflects fuel that’s produced on either Coast, or in the Gulf Coast, and transported to consumers in the middle of the country. The ethanol industry’s transportation needs are almost exactly the opposite – production in the center of the country and consumers on both Coasts and in the South.
Pipelines are one-way “highways,” with fuel added on one end and removed at the opposite end, so transporting ethanol would require one-way pipeline routes from ethanol production hubs in the Midwest outward to its large markets.
Pipelines ship products – whether natural gas, petroleum products, or specialty products – through a pressurized cylinder tube that links point A and point B. Pipelines are a unique transportation solution because multiple products may be shipped at the same time, either because the batches of product do not mix, or because they can be separated by a “pig.”
In addition to their main purpose of separating batches of liquid products in the line, pipeline pigs are plugs that can clean and inspect the integrity of the pipeline. Instrumentation packages allow pigs to test for dimples and imperfections by filming the inside of the pipeline, or pigs with brushes can help scrub pipelines to rid them of product build-up.
According to several petroleum companies which spoke with Ethanol Today, ethanol pipeline transportation faces challenges in three main areas.
First, the pipeline industry does not know the long-term impact of ethanol in pipelines, and additional research is needed to gain conclusive materials-compatibility experience. Second, tanks and pumps may need to be added in a variety of locations to support ethanol loading and unloading. Finally, the current one-way movement of petroleum products through the pipeline counters the location of today’s grain-based ethanol production.
Despite the challenges, ethanol consumers and pipeline companies recognize the value in exploring a large-scale transportation system for a growing renewable fuels industry – especially one that could compete with the costs of rail and truck shipments.
Testing the theory
Kinder Morgan Energy Partners, L.P., which transports two million barrels of petroleum products per day, is evaluating the potential for shipping ethanol via pipeline in response to requests from its customers. After extensive laboratory research spanning the last 24 months, the company says that it plans to test ethanol shipments this fall in a 16-inch pipeline linking the large fuel markets of Tampa Bay and Orlando, Florida.
With no rail service to these markets, 100 percent of their ethanol supply is currently brought in by truck. As a result, these Florida cities are in a unique position to immediately benefit from pipeline shipments.
Jim Lelio, Kinder Morgan’s Director of Business Development and National Biofuels Manager/Central Florida Pipeline, said that a long checklist of items has been completed for the fall pipeline test, including identifying and replacing any pipeline system parts – such as stainless gaskets, o-rings, and meter seals – that may be incompatible with the ethanol.
Also, pigs were used to clean the pipeline in preparation for the introduction of ethanol and to prevent any existing residue from contaminating the new product. Lelio said that scrubbing the pipeline is an important step in the overall cleaning process prior to injecting ethanol batches into the line.
According to Lelio, the 104-mile stretch of pipeline was chosen for several reasons – the markets supporting ethanol on each end, the flat terrain surrounding the pipeline, and the fact that the line transports only gasoline today.
“We have chosen this pipeline because it was the simplest,” Lelio said. “And, if we were going to have successful ethanol shipments, it would most likely be on this pipeline.”
The company does not plan to use pigs to separate the shipments of ethanol and gasoline because it feels that putting ethanol under pressure between gasoline batches on a relatively flat terrain will result in very little mixture between the colliding interfaces of the two fuels.
Kinder Morgan says it intends to judge the success of the ethanol shipments sandwiched between shipments of gasoline based on product quality, pipeline integrity, and materials compatibility criteria. If the results of the test run are positive, commercial application of ethanol shipments through the pipeline will be pursued.
“If we can determine success, we will provide a commercial offering to the marketplace at the end of this year, and apply the lessons learned to other systems in our pipeline network,” he said.
In addition to product pipelines, Kinder Morgan has developed a relationship with the biofuels industry. The company delivers natural gas to numerous Midwestern ethanol plants, has invested significant capital to provide customers ethanol storage and handling capabilities at its liquid terminal facilities, and supports a third-party biodiesel refinery operating on one of its properties.
Looking at volumes
According to TEPPCO representative Dan Ownby, while pipeline systems function well when there is a high volume of product to move, they are not as advantageous in terms of startup costs and flexibility. However, he points out that since 2001, pipeline costs have remained the most consistent when compared to rail, barge, and truck.
Knowing the cost advantages, Ownby suggests examining volume. Compared to the high volumes of petroleum products that are shipped through pipelines, ethanol volumes today are merely a fraction. A typical batch of gasoline sent to a pipeline terminal is 25,000 barrels, or more than 1 million gallons. These batches are received around the clock, year-round. By comparison, a 50 million gallon per year ethanol plant would produce about one batch per week.
In May of last year, TEPPCO tested the shipment of ethanol via pipeline between Indianapolis and Argo, Illinois. The 273,000 gallons of ethanol traveled 150 miles.
Extensive testing of the quality of the ethanol was performed prior to, during, and after the shipment, and one major change was witnessed. The colorless ethanol transported through the pipe turned a dark amber color due to heavy oxidized solid hydrocarbons, or “gum,” in the line, which is the residue of other products being shipped through the line for 50 or more years.
In early August of this year, TEPPCO announced the opening of a terminal in Boligee, Alabama that will handle a multitude of products, including ethanol. There, 5 million gallons of ethanol storage will help supply the fuel needs of Birmingham and Montgomery and of eastern Mississippi until a proposed Stage Two could increase the storage to 42 million gallons. With barge, pipe, and truck access, this ideal location will test the role of a domestic fuel terminal in the South.
Magellan and Buckeye companies are also exploring the options of shipping ethanol via pipeline and have a proposal for a large-scale renewable fuel pipeline system running from the Midwest to the Eastern U.S.
“The proposed system originates in Northwest Iowa and would transport as much as 300,000 barrels per day of ethanol into distribution terminals in Ohio, Pennsylvania, Maryland, as well as New York Harbor,” said Bruce Heine, Magellan’s Director of Government and Media Affairs.
Legislative support for ethanol pipeline transport
Because much of the nation’s pipeline infrastructure is owned by Master Limited Partnerships that can only derive 10 percent of their income from non-qualifying assets such as ethanol, a workable ratio among shipping products must be established.
The Biofuels Pipeline Act was introduced in July 2008 to encourage research and investment into improving the economical transport of renewable fuels to major markets. Authored by U.S. Senators Tom Harkin (D-IA) and Richard Lugar (R-IN), the proposed legislation would provide similar tax benefits for shipping petroleum and ethanol by identifying them as like assets.
Petroleum companies recognize the legislation as integral for making an investment in renewable fuels transportation. According to Bruce Heine of Magellan, resolving the tax issue related to publicly traded companies is essential.
“If this issue is not resolved, publicly traded partnerships like Magellan and Buckeye will be unable to pursue a project of this scale,” he said.
Furthermore, Heine points out that any additional funding options would encourage companies to explore the questions posed by customers.
“We are continuing to explore our options for federal financing such as a loan guarantee,” he said.
Because the costs of constructing a pipeline can be as much as million per mile, demanding a significant commitment from the industry, legislative support for the expansion of infrastructure can signal that domestic ethanol production and use remain a priority for the nation.
TEPPCO’s Ownby suggests that the final logistics solution for ethanol will include all types of transportation, including pipelines. If pipeline materials can prove compatible, the costs competitive to other forms of transport, and if the volume is sufficient, pipelines may indeed be a possibility for ethanol.