U.S. Senators Tom Harkin and Richard Lugar introduced legislation July 21, 2008 to give ethanol pipeline owners the same tax benefits they receive for moving petroleum products. "While the most efficient mode for transporting liquid biofuels is by pipeline, a provision in the tax code is effectively blocking Publicly Traded Partnerships (PTP) – that build and operate most liquid pipelines – from moving forward. By law, PTPs are supposed to earn 90% of their income from the exploration, transportation, storage, or marketing of depletable natural resources, including oil, gas, and coal, but not renewable fuels." The Harkin-Lugar bill would change the federal tax code to state that PTPs can earn "qualified" income from the transport, storage, or marketing of any renewable liquid fuel approved by the Environmental Protection Agency.
According to John Eustermann, a partner in our Boise office specializing in biofuels, while the measure is seen by those in the ethanol industry an encouraging step towards moving ethanol to the retail pump, it’s part of a long-term effort he’s seen to augment the almost exclusive transport of ethanol via rail cars. Challenges will include the potential incompatibility and understanding the short- and long-term risks of transporting fuel-grade ethanol through pipelines, whether dedicated or existing.