Company considers regional ethanol pipeline

By Ron Kotrba | January 01, 2008
Tulsa, Okla.-based Seminole Energy Services is gauging the interest of Nebraska ethanol producers in a $150 million pipeline covering 175 miles in central Nebraska with a new terminal pegged somewhere within a 25-mile stretch between Hastings and Grand Island. The facility would have the capacity to store 27 million gallons (nearly 650,000 barrels) of ethanol at one time, and if enough ethanol producers sign on, the terminal could aggregate nearly 2 billion gallons per year near the intersection of two major rail lines. The proposed facility will also contain a unit-train loading facility.

Seminole Energy's business development representative Kirk McClymont told EPM his company is already building a natural gas pipeline through central Nebraska, predominantly to serve ethanol producers that consider local natural gas supplies to be limited and therefore more costly. The company hopes to increase natural gas supplies to those producers and help to lower energy costs. Now, Seminole Energy is gauging interest in an ethanol pipeline to increase product output while lowering transportation costs. "We're already securing right of ways and environmental easements," McClymont said. "It's been my contention that we need a pipeline to move ethanol around the state. We're trying to see if it will be economically feasible to bring the product to a central area that will have access to Union Pacific and Burlington Northern Santa Fe [railroads]."

McClymont said it's ideal to build a natural gas pipeline while planning an ethanol pipeline. "It's an opportune time to explore," McClymont said. "It will take seven to 10 months to build the natural gas pipeline, which would be ample time to gauge interest in the project." From mid-November to mid-December, Seminole Energy will be talking with plants "in the fairway," or close to the natural gas line under construction, having them sign confidentiality agreements and filling out questionnaires about their current rail situation. "If producers choose to fill out the questionnaire, we'll assess the interest," McClymont said. "If there are only two or three, then it probably won't work." If closer to eight or 10 plants show interest, then the company's engineering staff would assess the feasibility of the project, which would take an additional 30 days. It would take another 60 days to complete a precedent agreement and a detailed plan to get the pipeline and terminal built. "We need a commitment from the plants," McClymont stressed.

He couldn't say how much producers would have to pay per gallon for access to the pipeline at press time, but he said he would be able to estimate costs in mid-January. He added there are still unanswered technical questions to be addressed, such as corrosiveness.

Ethanol plants choosing to invest in the pipeline/terminal project would have the option to sell their products to the end-user directly from the plant or from the terminal. McClymont said the big pipeline runnersthe Kinder Morgans and Magellans of the worldaren't interested in pipelining ethanol, in part because of the lack of large volumes at a common point. If the proposed terminal has 650,000 barrels of on-site storage and nearly 2 billion gallons of ethanol coming through it every year, the major oil pipeline operators may think differently about ethanol.