“Because of uncertainty about the future of federal biofuel incentives, the companies would need a government loan guarantee to make the pipeline financially feasible, said Bruce Heine, Magellan’s director of government and media affairs.”
If the product depends on government subsidies to be “competitive,” is it wise to massively subsidize its transportation?
unfortunately, it appears that what makes good political sense is not the same as what makes good economic sense.
How about you start transporting it by rail, and when the volume becomes large enough, there will be enough projected savings to transition to a pipeline…
The cross country natural gas and gas pipelines were not a “Build it and they will come” venture, were they?
my [2c][2c][2c]
(I considered putting 150 billion of those icons in, to equal the projected $3 billion price tag quoted in the article, but after the initial evil laugh, reconsidered. Besides, it’s the thought that counts, right? )
the Federal government has made a history of subsidizing transportation in this country…starting with grants for toll roads and plank roads in the late 1700’s early 1800’s…canals…huge land grants and even cash subsidies for railroads upto about 1870…not to mention the corruption and scandals of that era…and of course the all time biggest Federal government transportation subsidy ever…the US Highway System…which of course wrecked the railroads almost as bad as the railroads wrecked the canal companies…see a pattern??
Ethanol is a political solution to energy. It buys votes in the corn belt and is less efficient then gasoline and it is more expensive per mile to use than gasoline since mileage on ethanol is 1/2 to 2/3 of gasoline. in addition the increase in grain pricing is causing food prices to go up. Everything from ceral to meat that used to eat the stuff. Who knows what brilliant plan a bunch of pompous lawyers in DC called senators and congressmen will dream up next? They may pull the plug on ethanol when us mere mortals complain enough about what they are doing to our cost of living. So if you were going to try and service this market how can you possibly plan to build something that will take five to ten years to pruchase the land and construct. In the meantime your friendly local politician ( at least at election time) who wants your vote so he can line his pockets some more at the feed trough of tax dollars may decide that bicycles are good enough for the Chinese and look at the growth in their economy so ethanol is a waste of time and your car is not needed. You now need a bicycle. How are you going to get back that huge investment in a pipeline. Any one in business who trusts the government to do what they say without covering all the bases when dealing with them probably isn’t going to be in business for long. Hence a stance of I will build a pipeline for you but you aren’t going to air me out if you change your mind. The service doesn’t depend on government subsides to function but it is the government change of direction that needs a warranty protection in the event of a shift in the direction.
Same problem in a “Pipe Line” as in your car. Rusts the Gas Line and hardens all the Plastic Fittings. In your car, a few feet of Stainless Steel Gas line and Stainless Metal Fittings and you have a “Flex Fuel” car for little increase in cost.
2,000 miles of pipe in the ground, must have a lot of demand to justify the cost. Corn to eat, corn for fuel, corn for cattle, from where and at what cost! ??? Maybe the Pipe Line should go south for the Suger Beet market, or to the southern docks for the imported from South America product?
Not counting inflation, in a year, the Oil Problem is already costing me $700 in added gas cost and $1,400 in added Natural Gas & Electric cost. That’s $2,100 I don’t spend on consumer goods.
It makes one feel good, but if it costs more it will fail in time.
Going “Green” only works, long term, if the cost is the same or less.
going green is nothing more then a flavor of the day plank in the liberals platform
[soapbox]
Somebody forgot that you cannot shove ethanol through a pipe with any other product? You cannot use saltwater/brine as a plug or separator. How much ethanol do you have for a dedicated ethanol-only pipeline?
The concept is “wonky” from the word go! REALITY CHECK?
Even the “Green” crowd is having second thoughts about Ethanol. It’s time has come and it will be going.
http://www.sciencemag.org/cgi/content/abstract/1151861
http://www.washingtonpost.com/wp-dyn/content/article/2008/02/07/AR2008020704230.html
One environmental writer remarked that these studies “serve as a death-knell for corn-ethanol subsidies in the U.S.,” coming as they do from a variety of independent institutions including Princeton University, Woods Hole Research Center, and Iowa State (smack in the heart of corn country).
Clearing land to grow additional corn stocks to make ethanol would release twice as much greenhouse gases into the atmosphere over the next 30 years as just burning regular gasoline.
Oops.
Ethanol is the biggest pig-in-a-poke that we’ve seen in quite some time. Unfortunately, it has strong political muscle and I don’t know if we’ll see it end any time soon.
The land grants were the best deal the Government ever made. The West was opened up and the railroads paid for them many times over through very low rates on Government traffic. Also the Government kept every other acre which then became valuble once rail transportation was available. This was no give-a-way.
Unfortunately, the truth is not taught in our schools.
Perhaps you are right, but we need to start somewhere. Congress refuses to allow drilling for our own oil so we have to buy it from people who don’t like us. And it is finite in supply. Ethanol can be a good bridge fuel until we develop other technologies.
John Timm
Well yes and no. Ethanol gets 2/3s the mileage of gasoline in a DUEL FUEL engine. However an engine manufactured to burn ONLY ethanol gets about 95% of the mileage of a gasoline engine.
nyc#25 you the man.
Using Association of American Railroad estimates, 132,461,911 acres of land were given to 16 railroad corporations and to several states for railroad development purposes. AAR estimated the value of the land averaged just under $1 per acre ($.945). Using 1942 dollars, this represented a value of $161,144,316. Using a nominal annual rate of return between 1871 and 1942 of 4%, the value by 1942 of the land grants to the railroads was $2,145,152,177.
Through June, 1937, government rebates had amounted to $155,200,000. By 1942, the AAR estimated that the U.S. Government had received $215,000,000 in total rate rebates, about one-tenth of the value of the land grants to the railroad companies.
I’m friends with one of the world’s leading authorities in corn and other grains, located at local university. He has no use for the crop ethanol programs. Several years ago he warned me it was a dead end and would drive up the cost of the cheap food this country has enjoyed for years, especially since he saw the world demand rising sharply. He also warned me the politicians would not stop the subsidy programs to the producers. Finally, he warned me that the only way ethanol producers would make money is because of government grants and tax write-offs. Guess what–everything he said has come true.
His solution–skip the ethanol, go directly to developing other sources, start drilling everywhere there’s oil and natural gas, and direct all new non-wind or non-solar power plants to burn clean coal or go nuclear. By about 2030 he figures new technology will be available to reduce dependence on oil dramatically by about 2050. But since when has our government, or probably any other for that matter, though long-term? Other than Brazil for their sugar cane ethanol program, I can’t think of one. (And Brazil didn’t take into account its loosing undeveloped land big-time for various reasons, including planting more sugar cane.)
I’m suprised by your reply. I would have expected you to have a list of land sales by railroad per year. The figures you quote seem to indicate that the railroads kept all those sections and then sold them in 1942 at maximum value. I would guess that some of the land was sold immediately and some never sold, with the rest somehere in between. That would change the “balance” between grants and transportation savings. Granted, I wouldn’t have the time to do that much research and calculating to find out how much it shifts the equation.
Sold them and … did what with the money?
The proceeds didn’t just blow up. They were put back into something. In an ordinary business, you value the investment dollar; you don’t carefully count some, and then pretend others didn’t exist.
Conversion of the value doesn’t eliminate the value, regardless of whether property was sold in 1871, 1890, 1906, or 1942.
I’m not say there wasn’t any value in the land grants, otherwise the railroads wouldn’t have taken the deal if they thought it was worthless. What I’m having trouble grasping is how you used the grants given in the 1800s and valued them in 1942 for a comparison of their worth. Wasn’t the idea of the land grants to fund the construction? If so, wouldn’t the railroad’s books have to balance at the end of the year? To make my point (question) clearer, didn’t the railroads have to take out MASSIVE construction loans using the assumed value of the land as collateral and using the proceeds from the land sales to pay off the debt. Doesn’t that reduce its value since it’s already “spoken for” so to speak?
Well, if the land is valued at $XX, and $AA dollars of the value is converted to cash by sale, then put into physical plant, the balance sheet should show that land is ($XX-$AA) and physical plant is increased by $AA. The total Assets column will still read $XX. The portion put into $AA suffers from accumulated depreciation, but it also generates a rate of return throughout its economic service life. So, even though the dollars may have been converted from one asset class to another, the “value” didn’t disappear; indeed, it may have been enhanced from a productivity standpoint. Too, value is extracted from timber and minerals, grazing leases, which generates an overall corporate rate of return or revenue stream without converting the property.
At the same time $XX, or ($XX-$AA) appreciates, in general, and its market value increases even as its book value may stay the same and this certainly occured many times over between 1871 and 1946, even as it is difficult to find an industry paper on land grants that acknowledges the fact.
Yes, but the rebates didn’t end in 1937 or 1942. With the passage of the Transportation Act of 1940 which caused the government to pay regulated public rates for some transportation, the AT&SF gave back to the Government 400,000 acres of the A&P Land Grant, and still had to give a discount $189.5 million on Government transportation between 1942 and 1946. In the book History of the Santa Fe by Keith Bryant the total revenue for all Land Grant sales by the Santa Fe was in round figures $25 million by 1947 with approximately 1 million acres yet unsold. The rebates didn’t end for Military traffic until October 1st, 1946.