## U.S. PIPELINE 

## T RANSPORTATION OF 

## BIOFUELS

Eric Gustafson Senior Vice President Buckeye Partners, L.P. On behalf of The Association of Oil Pipe Lines

## Discussion • Overview of US Pipelines • Bio - diesel and Pipelines • Ethanol and Pipelines

## U.S. Crude Oil and Refined Products



## Pipelines

## U.S. Refined Product Pipeline System • Approximately 100,000 miles (160,934 kilometers) • Majority located in Central, Gulf Coast and Eastern regions of the U.S. 

### • Transport over 6 billion barrels annually

# U.S. Pipeline Fundamentals • Pipelines are the most cost efficient and safest method of on -shore transportation of liquid fuels • In U.S., most Product Pipeline capacity is common carrier (vs. Proprietary Pipelines) 

### • Product batching of multiple fuels • Today, ethanol is transported via truck, rail, 

### barge and ship; biodiesel is transported predominantly by truck and rail.

– Blending takes place at terminals

# U.S. Biodiesel Industry Today • 165 plants in operation • 1.8 bgy (6.8 b liters/year) capacity 

### • 80 plants under construction • 3.2 bgy (12.1 b liters/year) capacity by end of 

### 2008 • 6-8% of U.S. highway diesel 

### • B20 – 20% Biodiesel Blend – 30% market share required Source: National Biodiesel Board

# U.S. Biodiesel Plants

Source: National Biodiesel Board

# U.S. Biodiesel Demand

Source: National Biodiesel Board

# U.S. Biodiesel Pipeline Status
• Neat Biodiesel requires special handling

– Pour Point 

### • Several tests conducted (B20) 

### • Trail back biggest concern

– Assure Jet Fuel not impacted

# U.S. Biodiesel Summary
• Supply exceeds demand 

### • Diesel pool can easily accommodate expected supply • Pipeline issues under review / tests • No regional imbalances

# U.S. Ethanol Industry Today • 122 biorefineries

– 75% of production in 6 states 

### • 6.4 bgy (24 b liters/year)capacity today 

### • 74 Ethanol Biorefineries under construction • 7 Ethanol Biorefineries under expansion 

### • 12 bgy (45.4 b liters/year) at end of 2009 • Congressional / Administrative Goals

– Double ethanol consumption in 10 years Source: Renewable Fuels Association

## States with 100 mm gal/year



## Production

## Need to Move Ethanol from Producing Area to Consuming Area • Current Logistics

– Trucks • 8K gallon (30.2K liter) Capacity

– Railcars • 30K gallon (113.5k liter) Capacity

– Barges • 10 to 15Kbbl Capacity

# Volume Comparison

One 16” pipeline can take continuous flows on a daily basis equal to 15 barges

# Ethanol and Pipelines • As domestic and international ethanol production continues to increase, the economic viability of domestic pipeline 

### shipments increases as well

– Introduction of ethanol into the pipeline system presents challenges and opportunities • Challenge is related to the potential incompatibility of fuel grade ethanol with existing pipeline infrastructure • Opportunity is related to new commercial opportunities, especially for ethanol blends

# Technical Issues • Technical challenges to pipeline transportation of ethanol

– Moisture (product quality) • Test batches

– Materials compatibility (steels and elastometers)

– Stress Corrosion Cracking (SCC) 

### • SCC is one of the most critical technical issues to overcome

– Significant research and development program is underway

# SCC Research and Development • Focus on three areas: 1. Assess ability to transport low level ethanol blends (10, 20, 30 percent) and batching practices on existing pipelines without significant modification and no SCC (findings within 12 months) 2. Better understand the environmental and stress conditions under which SCC can be expected, including contaminants, chlorides, and other impurities in fuel and feedstocks. Develop SCC mitigation strategies, such as inhibitors, oxygen scavengers, deaeration to remove dissolved oxygen and lower the corrosion potential. (findings within 12 months) 3. Changes in new pipeline design that would be appropriate to mitigate integrity threats associated with transportation of fuel grade and neat ethanol (findings within 24 - 36 months)

# SCC Research and Development • R&D program at Pipeline Research Council International (PRCI) (Contact: Ken Lorang, Senior Project Mgr, klorang@prci.org )

– Conducted by CC Technologies (Contact: Patrick Vieth, SVP, Integrity and Materials, patrick.vieth@dnv.com )

– International support

– Support from the U.S. Department of Transportation

# Other Factors • Economics

– A pipeline from the Midwest to East Coast would be a multi billion dollar project

– Ability to obtain long-term shipper commitments

– Pipeline rates are expected to be competitive with current transportation modes • Logistics

– Individual productions facilities relative to volumes necessary to support a pipeline

– Need for gathering infrastructure to support interstate pipeline transportation • Regulatory authority

– Need for clarity of federal guidelines on safety and economic aspects of pipeline transportation of ethanol

# Conclusion • Pipelines remain the most reliable, safe and economic mode to transport large volumes of liquid fuels • With continued increases in domestic and international ethanol production, pipelines may provide an economic method of transporting ethanol • Technical challenges have to be overcome, primarily SCC • Investors need assurance that ethanol is long term component of gasoline in the United States

# Contact Information

Eric Gustafson Senior Vice President Buckeye Partners, L.P. Email: EGustafson@buckeye.com Phone: (610) 904-4235 

### Raymond Paul Director, Government Affairs Association of Oil PIpelines Email: RPaul@aopl.org Phone: (202) 292 -4509