From: By Timothy Gardner, Reuters
Published December 20, 2007 06:16 PM

Ethanol producers covet existing oil pipelines

NEW YORK (Reuters) - The burgeoning U.S. ethanol industry is looking longingly at existing oil product pipelines for transporting the alternative fuel, an idea almost unthinkable a few years ago because of contamination fears.

"As volumes increase, the economics for pipeline transport of ethanol will make a lot of sense," Mark Stowers a research and development vice president at private company POET, the largest U.S. ethanol producer, told reporters in a teleconference on Wednesday.

Pipeline owners have feared that ethanol's tendency to absorb water and to act as a solvent could corrode the lines and contaminate other fuels sent up the ducts.

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But pipelines that have been researching ways to solve that problem believe they are closing in on an answer.

"We have been engaged in research on this," Steve Baker, a spokesman for the Colonial Pipeline, the country's largest oil products pipeline, said in an interview. "Early results are encouraging, but there is a lot more research required on our end."

He said Colonial has worked with several major ethanol producers on studying ways to send the alternative fuel up existing pipelines or along new dedicated pipelines that could be built on the existing right-of-ways.

The energy law signed by President George W. Bush this week mandates a five-five fold increase in ethanol blending to 36 billion gallons per year by 2022. The industry already has swelled 40 percent this year as the government offers incentives in an effort to begin to wean the country off foreign oil.

Pipelines are the cheapest way to transport any motor fuel. But ethanol producers have been limited to trucks and trains to send fuel from Midwest production areas to the high-demand coasts.

Baker said Colonial, which transports oil products from the Gulf coast to the U.S. Northeast, hopes to begin research work with university Georgia Tech on ways to carry renewable fuels on existing and dedicated pipelines.

Oil companies are cautiously optimistic that breakthroughs could be made.

"The problems with water contamination are technical issues that need to be addressed; it's not that they can't be addressed," said Peter Lidiak, the pipeline director for industry group the American Petroleum Institute.

He said the industry is researching whether sending pure ethanol, or fuel blends, via pipeline can be done without corroding the ducts.

"The hope is that some of the first bit of this research will yield some good results within the next year or so, and then it will be a matter of time before the companies move it -- if the results look good," said Lidiak.

(Reporting by Timothy Gardner; Editing by David Gregorio)

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