U.S. needs to improve ethanol transport

By Timothy Gardner

NEW YORK (Reuters) - The United States will need to make big improvements in shipping ethanol from the U.S. heartland -- perhaps even building pipelines from the Midwest to the coasts -- to transport the fuel to markets, the head of a U.S. ethanol industry group said on Tuesday.

High oil prices, decreasing domestic crude production and growing demand for fuels that emit less greenhouse gases have pushed the U.S. government to increase incentives for making ethanol.

The U.S. Department of Energy has set a goal of boosting ethanol production from the current output of about 5 billion gallons per year (19 billion liters) to 60 billion gpy (227 billion liters) by 2030.

The expansion has already stressed train and trucking transport.

Rail transport from ethanol plants in the Midwest could be centralized in coming years, but already the industry has fallen behind. "I don't need to be negative about this, but railroads didn't start planning four or five years ago to make the upgrades that would be ideal for right now," Monte Shaw, president of the Iowa Renewable Fuels Association, said by telephone at the Reuters Global Biofuels Summit.

He said rail and trucking must be improved, but new pipelines could also play a role. "This is probably a little bit oversimplistic, but I've heard people say, 'Look we've got interstate highways, bury them in the right of way, and let's build these things.'"

Major U.S. fuel pipelines have not been built in decades and the cost of steel, labor, siting and engineering could run into billions of dollars.

"I don't think you could do it without some sort of government help," said Shaw, adding that such help could take the form of easing permitting to tax incentives.  Continued...