A little blub in this month’s Trains Magazine says that ethanol producer POET, based in my hometown, is trying to get a federal loan guarantee for construction of a pipeline. The proposed line would apparantly go from eastern S.D. to New Jersey. The article says the loan amount would be $4 Billion. It would transport the equivilent of 210 tank cars per day.
(I’ll correct the numbers later, if I remembered the info wrong.)
My thought is this: Say you spend $4 Billion on a pipeline from S.D. to N.J… You would be saving the cost of shipping 210 tankcars every day by rail. Granted, you would have ongoing operaing expenses for the pipeline operation. How long would it take to pay off the $4 Billion loan, with the savings from not shipping by rail?
Either way, the CO2 yield, not just in transporting it, is scary. I don’t know the carbon footprint with either solution, but I would think the pipeline might be the better method in the long term if we want to minimize the impact on the environment of producing that much ethanol. And shipping it![:O]
I had read somewhere that water contamination (condensation) in pipelines is a concern for certain commodities. Would this be a problem concerning ethanol?
Based on what I have read water contamination is the largest problem a pipeline would have to deal with. Ethanol is soluble in water.
Just my humble opinion, and Paul North being a civil engineer may be able to expound on it, compared to rail I think the cost of the pipeline would be prohibitive. ROW acquisition, the cost of construction, and the liabilities that accompany the above seem to make rail the better option.
Well, we can take a shot at that, with some reasonable assumptions - and if you can tolerate what I have to do for formatting this post at the moment . . . . For a loan at 6.00 % to be fully paid back over 30 years, that costs very nearly $6.00 per month per $1,000 of loan, or about $0.20 per day. Multiply by a factor of 1,000 and it’s $200 per day for a $1 Million loan. Multiply by a factor of 1,000 again and i’ts $200,000 per day for a $1 Billion loan. Multiply by a factor of 4 and it’s $800,000 per day for that $4 Billion loan. Divide that by 210 cars per day and that capital cost alone is about $3,800 per carload of ethanol. If it’s 1,300 miles or so from S.D. to N.J., that’s about $3.00 per car-mile equivalent, or maybe 3 cents per ton-mile for a 100-ton capacity car. Overall rail rates are in the 5 to 6 cent per ton-mile range - though ethanol could well command higher than that, I have no idea - so maybe up to half of that cost and potential savings is consumed just in the capital cost of the pipeline. Then you have to add in the operating costs for the pipeline; on the other hand, for the rail haul you have to add in the cost of loading and unloading the tank cars. An intangible is the flexibility of the railcar - the ethanol plant can send it to a different receiver on each trip, if one goes out of business or finds a cheaper source, or shuts down for overhaul, vacation, fire, etc., whereas the pipeline can go to only one or at most a few. Also, on these numbers the pipeline is a 30 year commitment and exposure- anything changes much or goes wrong during that long time frame, and that investment may be irrecoverable = “stranded”. Bottom line - the pipeline may be competitive with the rail haul, but is inflexible in destinations and deployment of capital. - Paul North.
In the current political environment, I’d hate to be the one to intro a level of paranoia into the discussion., BUT,but you would also have to consider that the pipeline or the very threat of a pipline might be a baraining chip in a transportation costing chess game with railtransportation providers.
An argument could be there is already transportation infrastructure in place to move the product efficiently by rail. As Paul mentioned, rail transportation gives the parties involved a level of flexibility in points of delivery. Points of delivery that can be altered by any number of fisical or financal factors.
A pipline while eminently efficient in delivery of liquids, when they are engineered for those specifics of the product handled. Cannot be beat. The problem, and it could be major is once taylored for a product the system is first of all costly to reingeneer. Secondly, it is locked to an A- B pair as to origin and destination. Thirdly, it needs to be operated 24/7/365 for maximum efficiency and return on investiment.
Lastly, is ethenol going to have a long life as a viable fuel/fuel adative or is is just a short term political response to a situation ginned up to meet a hidden political agenda?
There seem to be questions raised as to the reality of using a food crop to create an alternative fuel source, when there are other alternate resources for the same use ( natural gas and petroleum and oil shale.) There have been questions as to the amount of actual horsepower gained when ethanol is used as an adative and the horsepower from a whole petroleum fuel.
I am just concerned that we may be being stampeded into somethingf we really do not need to get into when there are other resources better utilized. Thanks.
Back in the 70’s there was a similar discussion on slurry coal pipelines. At the time, economics of transportation wasnt that important to me, so I didnt follow it much.
Ethanol is such a low margin business that any economic factor must be seriously considered. Paul, excellent job in discussing the costs involved in a pipeline. What about the rail costs involved? Does anyone know what current rail charges are for the movement? Rail at this time has a huge monopoly on this commodity. As we know, monopolies dont last forever.
Frankly, I am amazed by the number of ethanol trains CSX ships on it’s Chicago line (ex B&O). There seem be at least a couple a day that I hear on the scanner.
Paul, can you retrieve your slide rule and provide us a few more facts, figures, and estimates?
What is the capacity of a pipeline? How much product (as compared to a ethanol 80 car train) can be moved?
What speed does the product move?
Are there different grades of ethanol? Thus, how does a pipeline segregate the product during transport?
Obviously, if a main trunkline pipeline is built between the midwest and the east coast, then “branch lines” can be constructed to other locations at key strategic locations?
Obviously, more questions will develope, but this should get it rolling.
I remember the coal slurry proposal, a boondoggle that never came off. The idea was to transports PRB coal from Wyoming to Arkansas (don’t ask me why Arkanasa) via pipeline. Since Wyoming is arid, the idea was to get water from the Oglala Aquifer, a huge underground lake that’s mostly under Nebraska.
Now there is a theory that the Aqufier is being depleted by too much draw for irrigation. Imagine what 30 years of pumping for a slurry pipeline would have done.
I think you’re off a bit on this. The plan was for a pipeline to be built from the Missouri River in South Dakota to be run over to Gillette, Wyoming, in order to provide the water source. Then S.D. Governor Bill Janklow, had caused a big fuss, in offering to sell the water, that the states downstream didn’t believe was his to sell.
I lived in Gillette at the time. The ETSI coal slurry pipeline and the Hampshire Energy Project, to turn coal into gas, both fell apart in about a 2 week period. As a consequence, the local economy went right down the drain, and I became a gypsy and moved 500 miles to find a new job.
I’m by no means an expert on economics, but I do think the railroads have the advantage of already having infrastructure in place. As Paul pointed out, the cost of building a pipeline would be enormous when interest, ROW acquisition, and other costs are put in place.
Now, factor in the uncertainties. We have a president who is averse to further coal development (probably the reason DM&E backed out), and the uncertain future of ethanol. Will the latter be with us forever or will it no longer be called for when new technology makes cleaner burning engines? Will coal die off because of nuclear energy? Simply put, it may be to the advantage of the ethanol producers to ship via the available mode of transport rather than invest huge sums that may have a questionable outcome twenty or thirty years down the line. I surely would not ‘bet the farm’ on things being as they are today happening thirty years from now.
Good analysis, but I doubt that anyone can find money at 6% at this point in time and a thirty-year term seems even more doubtful. Ten years at the most is much more likely and how far north of 6% the rate would turn out to be would depend on the financial status of the borrower.
In fact, questions about the long-term viability of the ethanol industry, the need for ongoing subsidies at a time when government resources are severely stretched and the history of bankruptcies and projects that have never gotten off the ground make it doubtful that the money could be obtained at any cost.
All of these factors reinforce your conclusions.
John Timm
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Well, we can take a shot at that, with some reasonable assumptions - and if you can tolerate what I have to do for formatting this post at the moment . . . . For a loan at 6.00 % to be fully paid back over 30 years, that costs very nearly $6.00 per month per $1,000 of loan, or about $0.20 per day. Multiply by a factor of 1,000 and it’s $200 per day for a $1 Million loan. Multiply by a factor of 1,000 again and i’ts $200,000 per day for a $1 Billion loan. Multiply by a factor of 4 and it’s $800,000 per day for that $4 Billion loan. Divide that by 210 cars per day and that capital cost alone is about $3,800 per carload of ethanol. If it’s 1,300 miles or so from S.D. to N.J., that’s about $3.00 per car-mile equivalent, or maybe 3 cents per ton-mile for a 100-ton capacity car. Overall rail rates are in the 5 to 6 cent per ton-mile range - though ethanol could well command higher than that, I have no idea - so maybe up to half of that cost and potential savings is consumed just in the capital cost of the pipeline. Then you have to add in the operating costs for the pipeline; on the other hand, for the rail haul you have to add in the cost of loading and unloading the tank cars. An intangible is the flexibility of the railcar - the ethanol pla
CO2? Horrors! “The sky is falling!!!” If the gummint ever pulls the subsidies on ethanol production, the whole thingie will collapse. “They” are proposing a crude oil pipeline from the MT/ND “Bakken/Williston Basin” oilfields to the Gulf area. The NIMBYs are on the warpath! What if they disturb an aboriginal burial site? Don’t even think about it… The oil now goes by BNSF, and others, to the southern refineries. Also, isn’t ethanol corrosive to steel pipe? A crude oil leak would be bad; an ethanol leak could be a disaster, unless it was un-adulterated ethanol. Then bring out the lawn chairs, ice, limes, and mixers!!! Whoopee!
I’ll rain on your parade and mention that the ethanol is denatured before it leaves the plant. Also, since you don’t mind disturbing an aboriginal burial site, perhaps said pipeline could be laid through any other cemeteries in its path without asking questions.