Ethanol backers: Policies tilt for oil pipeline

An Iowa group that promotes ethanol and biodiesel fuels says it is raising "red flags" with the state's top elected officials about plans for an 1,100-mile Bakken crude oil pipeline crossing through 17 Iowa counties.

The Iowa Renewable Fuels Association has sent a memo to the state's congressional delegation, Gov. Terry Branstad and other key politicians warning that federal energy policies are stacked in favor of petroleum interests with advantages not available to the ethanol industry.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, told The Des Moines Register his organization isn't taking a stance for or against the oil pipeline proposed by Texas-based Energy Transfer Partners. But the ethanol industry, which relies on railroads and trucks for distribution, wants the same opportunities to ship products to market by pipeline, he said. There are no ethanol pipelines in Iowa even though the state is the nation's leading producer.

The proposed 30-inch-diameter oil pipeline would originate in North Dakota's Bakken oil fields, passing through South Dakota and Iowa en route to Patoka, Ill., east of St. Louis. The project, scheduled to be operational in late 2016, must still win approval from the Iowa Utilities Board.

Vicki Granado, a spokeswoman for Energy Transfer Partners in Dallas, said the company supports the development of renewable sources of energy. She notes it has a plant in Fulton, N.Y., that uses corn to produce ethanol that is blended into gasoline.

"However, that does not diminish the fact that as a country, we are still dependent on foreign sources to meet the current needs of oil in this country. Our project is designed to provide much-needed infrastructure to get domestically produced crude oil to markets where it can ultimately reach Americans and provide the base fuel into which ethanol is blended," she said.

Because a majority of Bakken crude oil is now transported by railroads that have historically carried farm crops to market, there is a backlog of rail shipments of wheat, grain and soybeans that is causing economic concerns for farmers in North and South Dakota, Granado said. Building the pipeline, which would initially transport up to 320,000 barrels of crude per day with the potential to transport as much as 570,000 barrels per day, would free up rail cars for grain shipments, she added.

The Des Moines Register obtained a copy of the Iowa Renewable Fuel Association's memo through a public records request filed with Branstad's office. Iowa Citizens for Community Improvement, which opposes the pipeline project, received the memo through a similar request. CCI spokesman David Goodner said the memo shows concerns about the pipeline appear to go far beyond the environmental and farming communities and include some of Iowa's major business lobby groups.

Grant Menke, policy director for the Iowa Renewable Fuels Association, said in the July 17 memo that federal policies favor the petroleum industry in two specific ways:

• The project would be eligible for a federal pipeline loan guarantee not available for an ethanol pipeline project. The Iowa association noted that plans for an 1,800-mile ethanol pipeline from Sioux Falls, S.D., to New York harbor were shelved in 2010 because a federal loan guarantee could not be secured..

• Energy Transfer Partners LP is a master limited partnership, which is taxed as a partnership but trades ownership interests like corporate stock. By statute, master limited partnerships have only been available to investors in energy portfolios for oil, natural gas, coal extraction and pipeline projects, the memo notes. Such projects have access to capital at a lower cost and are more liquid than traditional financing approaches to energy projects, making them highly effective at attracting private investment.

Investors in renewable energy projects, however, are explicitly prevented from forming master limited partnerships, the association said.

Those advantages — coupled with the oil industry's "century of subsidies, federal petroleum mandate and fuel distribution monopoly have tilted the energy policy playing field heavily in favor of oil," the renewable fuels group's memo claims.

U.S. Sen. Tom Harkin, D-Ia., said in response to the association's memo that he believes the best way to reduce fossil fuel dependence is by putting more resources into renewables and conservation, not in trying to develop more oil or coal resources.

"We need to be investing in biofuel pipelines and advanced biofuels, like the cellulosic biorefineries under construction in our state as well as solar, wind and geothermal energy products. I think that the Iowa Renewable Fuels Association shares many of my views," Harkin said. "For oil pipelines, states have the responsibility to assess the public interest and eminent domain issues."

A spokeswoman for U.S. Sen. Chuck Grassley, R-Ia., said he supports an "all-of-the-above energy policy," whether the source is wind, biofuels, fossil or nuclear, because the nation's energy needs are so great and because reliable, affordable energy is critical to growing the economy. "He advocates for federal policies that put all forms of energy on a level playing field," the aide said.

Branstad spokesman Jimmy Centers said the Republican governor continues to gather facts about the proposed pipeline and is listening to Iowans' opinions. The decision will ultimately be made by the Iowa Utilities Board, but only after public meetings are held in each county the proposed pipeline would go through, Centers said.