Poet abandons plan for pipeline to East Coast

Ethanol giant Poet has scuttled plans for a $4 billion pipeline that would have carried Midwestern ethanol to the East Coast, citing lack of government support.

The Sioux Falls-based company announced in 2009 that it was working with Magellan Midstream Partners to explore building an 1,800-mile pipeline from Davison County to Linden, N.J. The companies had chosen a route and a pipeline design and were raising money, Poet CEO Jeff Broin said. Plans called for ethanol to begin flowing sometime in 2014.

There was just one hitch: To be viable, a large-scale ethanol pipeline would need federal financing, too. And the Department of Energy — which has granted Poet a loan guarantee to build a commercial-scale cellulosic ethanol plant in Iowa — does not have the authority to finance biofuels pipelines.

Poet and Magellan hoped to change that by lobbying in support of legislation that would have made pipelines eligible. But these efforts at “congressional outreach” were unsuccessful.

Consequently, the parties agreed sometime last year to “focus our efforts on other projects,” Magellan spokesman Bruce Heine said.

Until eligibility rules are changed, Broin said, the project will stay on the shelf.

“While we continue to believe in the economics (of the project), we know that a loan guarantee from the federal government is required,” Broin said, comparing the pipeline to a public works project.

Expanding the energy loan program would be a hard sell in Washington, especially in an election year, said analyst Brian Milne, a commodities analyst.

“It’s very tough to see where you can find any of these large federal guarantees,” he said. “We’re in a very heated political climate this year. ... (The pipeline) was even a challenge a few years ago, when it was announced.”

Long-term goal, not a pressing need

Poet spokesman Nathan Schock said the company had preliminary discussions with other producers about buying space on the pipeline but had not begun negotiating long-term shipping contracts. He downplayed the extent of Poet’s fidelity to the project, saying “very little” had been completed when the company decided to walk away.

source: argusleader