* Ethanol pipeline to East Coast may cost $4.25 bln
* Current ethanol-blended demand doesn’t justify pipeline
* Moving ethanol by pipeline cuts greenhouse gas emissions
By Tom Doggett
WASHINGTON, July 19 (Reuters) - A pipeline carrying ethanol from the corn-producing heartland of the Midwest to big East Coast cities would not be feasible without government backing and a mandate requiring higher ethanol blends in gasoline.
The U.S. Energy Department was required by Congress to assess the economic feasibility of building an ethanol pipeline, which is being pushed by the struggling industry.
The department’s assessment found the project would not be profitable without higher demand for the biofuel.
To make the $4.25 billion project work for its backers, the pipeline would need to ship 4.1 billion gallons a year of ethanol to the East Coast. But current demand is only 2.8 billion gallons a year for ethanol in those markets, so it would still be cheaper to ship by railroad, truck or barge.
The industry is asking the Environmental Protection Agency to boost the ethanol blend rate in gasoline to up to 15 percent from 10 percent now.
The report said government incentives, such as loan guarantees, would also still be needed to get the pipeline project off the ground.
Welcoming the report were two main backers of a dedicated ethanol pipeline, Magellan Midstream Partners (MMP.N) L.P, a Tulsa, Oklahoma, pipeline company, and POET, the world’s largest ethanol producer.
“A renewable fuel pipeline would enhance the transportation efficiencies for the domestic renewable fuels industry,” the companies said in a joint statement. “A large scale pipeline project is feasible under certain conditions and that a federal loan guarantee is necessary to move forward.”
The government report found that a pipeline would reduce rail, truck and barge congestion, while cutting greenhouse gas emissions.
“The faster product delivery cycles, more reliable delivery schedules, and increased safety will enhance the flexibility to accommodate any significant expansions in ethanol production and demand in the future,” the department said.
The EPA will decide in the next few months whether to approve increases in the ethanol blend rate, which is opposed by car makers, who contend the fuel would be hard on engines, and some environmental groups, who oppose using food to make fuel.
Under U.S. law, ethanol production, which now uses mostly corn, is required to increase to 36 billion gallons by 2022 from 13 billion gallons this year. Future ethanol production will rely less on corn and more on woodchips, switchgrass and other agricultural waste. (Editing by Walter Bagley)