Kinder Morgan offers ethanol pipeline; others may follow

By Erin Voegele | January 03, 2009
Kinder Morgan Energy Partners LP began offering commercial ethanol service along the company's 16-inch pipeline running between Tampa and Orlando, Fla., in November. The transportation policy for ethanol in the Central Florida Pipeline became effective Nov. 17, with the first commercial batch of ethanol flowing within seven days. Ethanol shipments will continue once per week on a regular schedule.

Jim Lelio, Kinder Morgan's director of business development and manager of national renewable fuels, said the company will keep resources focused on the Central Florida Pipeline for now. "We continue to monitor and improve the process for moving ethanol on this pipeline system," he said.

According to Lelio, Kinder Morgan's first step in expanding ethanol shipments into other geographic areas will be compiling a prioritized list that matches the company's existing assets with commercial demand. "Right now, we are very encouraged with central Florida," he said.

While Lelio said he was unsure when Kinder Morgan's next ethanol pipeline project would be developed, he said the Central Florida Pipeline will serve as a model as the company undertakes those projects. "Each pipeline system has its own challenges," he noted. "We hope we will have success in other places, too." The Central Florida Pipeline ethanol project took approximately 18 to 24 months to develop.

Other companies are moving forward with plans for ethanol pipelines, as well. Georgia-based Colonial Pipeline Co. is studying the feasibility of introducing ethanol into pipeline shipments using geographic information system technology software. The software, provided by Environmental Systems Research Institute Inc., provides a framework for understanding different elements of the study based on geographic location and relationship. Colonial Pipeline is using the software to find the best opportunities for connecting producers to pipelines, terminals and retail gas stations.

In addition, All Fuels & Energy Co. announced it has entered into agreements with two privately held infrastructure technology firms with the purpose of constructing multi-purpose pipelines capable of transporting all alternative fuels.

Recent legislation has improved the feasibility of transporting ethanol by pipeline, making it likely that additional biofuel pipeline projects will be developed. Language included in the Emergency Economic Stabilization Act of 2008 revamps a provision in the tax code that had previously blocked publicly traded partnerships (PTP) from being able to claim income generated from biofuels as qualifying income.

Under the old tax code, PTPs such as Kinder Morgan had to earn 90 percent of their income from the exploration, transportation, storage or marketing of depletable natural resources, including oil, gas and coal. If this condition was not met, the PTP would be treated as a corporation for tax purposes. The change to the tax code now allows PTPs to earn qualified income from the transport, storage or marketing of any renewable liquid fuel approved by the U.S. EPA.