DES MOINES, IOWA - With new ethanol and biodiesel plants going online monthly and increasing demand for the homegrown fuel additives, transportation companies are scurrying to provide the needed trains, trucks and storage tanks to keep up with the rapidly growing industry.
The fuel additive industry is growing from regional to national distribution, driven by a federal renewable fuels standard beginning in 2006 that is expected to double the use of ethanol and biodiesel by 2012.
The transportation system must keep up to move the raw materials to processing plants and ship the fuel from the Corn Belt to markets nationwide.
“There is a challenge and there will be a challenge as both of these products begin to get more use outside of the middle section of the country,” said Scott Weiser, president of the Iowa Motor Truck Association, a trade group. “Several members of our congressional delegation have indicated there needs to be a focus on those issues of infrastructure and transportation if and when we are going to serve the rest of the nation.”
Several states offer tax incentives or funding for development and promotion of ethanol and biodiesel. They include Florida, New York, Illinois, Idaho, Delaware and Arkansas.
In New York, for example, E85 fuel, an ethanol blend, is exempt from state sales taxes and the state requires government agencies to use E85 when possible.
Other states, including Georgia and Colorado, also require state agencies to use biofuels.
In addition to motor fuels, trends such as the growing use of biodiesel as a home heating oil in New England and some Western states could cause demand for biofuel to grow even more dramatically, said Grant Kimberley, a spokesman for the Iowa Soybean Association.
And as demand grows, so do the needs for an improved transportation network.
“It already is a challenge with just transporting the normal products the railroads transport,” Kimberley said. “We’ll have to be moving more and more renewable fuels that way unless we figure out ways to send this stuff through petroleum pipelines.”
Iowa, the nation’s leading ethanol producer, has plants that can produce more than a billion gallons of ethanol a year and plans are under way to nearly double that, according to the Iowa Corn Growers Association.
The state also recently edged out Texas as the leading biodiesel manufacturer, with the capacity to make 131 million gallons and expansion plans to add as much as 250 million gallons, Kimberley said.
About 75 percent of the nation’s annual production of 4.3 billion gallons of ethanol a year is moved by rail, with the remaining 25 percent transported by truck, according to the Renewable Fuels Association.
Infrastructure is growing, the association said in an annual industry report released in February.
“Infrastructure is being expanded from Massachusetts to Baltimore to Atlanta. Railroad and terminal companies are working to expand their ability to accommodate larger volumes of ethanol,” the report said.
Weisner said the trucking industry also has seen an expansion around ethanol and biodiesel plants, which need abundant supplies of corn and soybeans to be shipped in and the finished product to be trucked out by tanker trucks.
Although trucks are used to transport fuels shorter distances, much of the long-distance shipping is done by rail, which is considered more efficient for shipping large volumes of fuel long distances.
Spokesmen for major rail companies, including the nation’s largest freight hauler, Union Pacific, said they are investing in track improvements near ethanol plants.
A privately owned shortline railroad in northeast Iowa is planning a large expansion, spending $55 million to upgrade its track and expand operations.
“We’re trying to gear up so that in five years the railroad has the capacity to handle 2 billion gallons of biofuels,” said Iowa Northern Railway President Dan Sabin.
The 163-mile railroad, which runs between Manly in north central Iowa southeast to Cedar Rapids, has received a $25.5 million loan from the U.S. Department of Transportation to help with the work.
“Our research shows that by 2011, there will be 12 billion gallons of ethanol made in the United States and 6 billion will be within 300 miles of Manly, Iowa,” Sabin said.
About 2 billion gallons of that will be originating at plants along the Iowa Northern Railway route along with as many as six biodiesel plants, Sabin said.
Sabin plans to build a 1,000-car rail yard in Manly, a town of 1,349 people, where construction will begin in November on a 100-acre biofuels storage and shipping terminal designed to hold 5 million gallons of biofuels by next spring, with plans to expand to 20 million gallons within five years, Sabin said.