EPA-AA-SDSB-82-13

                         Technical Report
                  Distribution of Methanol as a
                       Transportation Fuel
                                by


                        R. Dwight Atkinson



                            June  1982
                              NOTICE

Technical Reports do not necessarily represent final EPA  decisions
or positions.  They  are  intended to present technical analysis  of
issues using  data  which are currently  available.   The purpose  in
the release of such reports is to facilitate the exchange  of  tech-
nical information  and  to inform the public of technical  develop-
ments which may  form the  basis  for  a final EPA decision,  position
or regulatory action.

             Standards Development and  Support  Branch
               Emission Control Technology Division
           Office of  Mobile  Source Air Pollution Control
                Office of Air,  Noise and Radiation
               U.S. Environmental Protection Agency

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                        Table of Contents

                                                               Page

I.   Introduction 	  1

II.  Overview of Existing Motor Fuel  	  1
     Distribution System

     A.    Pipelines	1
     B.    Waterborne Transportation	6
     C.    Truck Tankers  	  8
     D.    Rail Tank Cars	10
     £.    Storage	12
           1.    Primary Distribution System	12
           2.    Secondary Distribution System	14

III. Technical Factors in Methanol Distribution	14

     A.    Technical Problems in Transportation	16
     B.    Technical Problems in Storage	17
     C.    Potential Dispensing Problems at the Pump  	18
     D.    Summary of Technical Distribution Problems 	19

IV.  Economics of Synfuel Distribution  	20

     A.    Overview of Illinois and Wyoming 	21
           Methanol Plants
     B.    Specific Costs in Transporting Methanol  .....  .21
           1.    Pipelines	  .21
           2.    Rail	23
           3.    Storage Costs	23
     C.    Distribution Costs from Production Sites 	23
           to Bulk Terminals
           1.    Southern Illinois Plant  	25
           2.    Wyoming Plant	25
           3.    Average Cost of Fuel Delivery to	27
                 Bulk Terminal (Long Range)
     D.    Distribution Costs from Bulk Terminal to	29
           Retailer (Local Distribution)
     E.    Retailer Costs	29
     F.    Total Distribution Costs	32

V.   Distribution Capacity Needed to Support a  	32
     Synfuel Industry

     A.    Future Fuel Needs	32
     B.    Long-Range Capacity	35
     C.    Bulk Terminal Capacity	36
     D.    Tank Truck Capacity	36
     E.    Retail Capacity	37
     F.    Cost Comparisons Between Synfuel Options 	37

VI.  Conclusions	39

References	41

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I.   Introduction

     This report  examines  the issues surrounding  the  distribution
of synthetic motor fuels, especially methanol.   It  is  divided  into
four  basic  sections.  The  first  is  an overview  of  the  existing
transportation fuel  distribution network.   Capacities and  histor-
ical trends are discussed in  this  section.   The  second major divi-
sion addresses the unique  technical factors associated with meth-
anol  distribution.    Following  this,   the  economics  of  synfuel
distribution  are  examined.   Costs  for  long-range,   local,   and
retail  distribution  are presented.   The  last  section draws  upon
the  previous  three  sections  to determine  the  total  distribution
capacity needed  to   support a viable synfuel  (either methanol  or
synthetic gasoline)  industry.   The  total  capital  costs  for  such
distribution networks  are  given and compared  to the  capital  cost
requirements for synfuel production facilities.

II.  Overview of Existing Motor Fuel Distribution System

     There are  five  major  means whereby  liquid fuels are  trans-
ported today:  pipeline, ocean tanker,  inland barge,  tank  trucks,
and rail tank car.   These transportation modes have blended  into a
distribution  network  according  to  an  evolution  which  has  been
underway since Henry Ford popularized the automobile.

     The petroleum industry transported about 7.5  million  barrels
of gasoline  per  day by  these methods  in  1977. [1]   Table 1 shows
the amount  of  petroleum products  delivered by each mode in 1950,
1960, 1970,  and  1977.  'As  is apparent, the  role  played by pipe-
lines has  been an .expanding  one  during  this time  frame as  they
have  not  only carried increasing  amounts but  also  the  relative
percentage transported by pipeline has  grown.   While  the  percent-
age of  petroleum products   transported  by  water  carriers and  rail
tankers has  significantly  declined, it. should be  noted that  with
regard to total  tonnage,  only the  rail mode has shown a  decline.
The amount transported by trucks has increased substantially since
1950  but  the  percentage  has  remained  fairly constant.   Each  of
these links  in  the  motor fuel distribution system  is  discussed in
more detail below together with a discussion of storage facilities.

     A.    Pipelines

     Pipelines  are,  in  their  simplest form,  a  series  of  steel
pipes  welded together,  with  pumping  stations  placed at  various
points  along the route  to maintain  proper  flow.   They range  in
diameter from  4  to  58 inches  and  vary  in  length from a  few miles
to a few thousand miles.[1]

     Pipelines  currently  transport over  72  percent of the crude
petroleum and  roughly  37  percent of refined  petroleum products in
the  United  States.   Most  are common carriers,  that  is  they  must
carry  the  product of  any  company  meeting the  pipeline's  tariffs

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                                      -2-
                                        Table  1
                      Petroleum Product  Transportation Methods[2]
Pipelines

Year
1950
1960
1970
1977**

Tons*
52.7
140.0
333.1
526.0
Percent
of Total
12.75
21.31
31.12
36.56
Water

Tons*
185.2
244.2
286.4
361.7
Carriers
Percent
of Total
44.85
37.17
26.75
25.14
*    Tons rounded to nearest million.




**   Preliminary.
Trucks

Tons*
130.8
242.5
425.2
524.6
Percent
of Total
31.66
36.93
39.72
36.46
Railroad

Tons*
44.4
30.2
25.8
26.4
Percent
of Total
10.74
4.59
2.41
1.84
Total
Tons*
413.1
656.9
1,070.5
1,438.7

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                                -3-
and regulations  as  governed by the Interstate  Commerce  Commission
and the Federal Energy Regulatory Commission.[2]

     The  petroleum  products  and  crude  oil  pipeline networks  and
capacities  in  the  U.S.  are  given in  Figures  1  and  2.   These
figures  also  show  the  location  of major  terminals and  refining
areas.   As  can be  seen,  there is  a  great concentration  of  pipe-
lines near highly populated areas and  refining  centers,  especially
in the east and  midwest.   Few, however, are near the western coal
fields.   thus,  it  is  more  likely  that methanol  produced in  the
eastern  coal  fields will to  some  degree  be  able to use  existing
pipelines  than methanol  originating  in the  west.   The  costs  of
constructing  new pipelines  will   be  addressed  in  a  subsequent
section.

     Even though the eastern states have a relatively high density
of pipelines, there are technical factors  which must be  considered
before concluding  that  methanol  can  be transported  in them.   In
addition  to  material  compatibility,  discussed  later,  one  such
factor of  pipeline  distribution is batching.   This  refers to  the
separation of different  products or  grades of  crude  in  a  single
pipeline.[3]   Since initial volumes  of  methanol  will  be  small
compared to that  of gasoline it is unlikely  that  entire pipelines
would be dedicated  solely to methanol  transfer.   Instead,  batching
would be used.

     Shipments are  batched  in a continuous sequence with  products
of similar quality  being  next to each other.   Typically,  they  are
shipped  in groups that  move from lighter  to  heavier  gravities  and
then back  to lighter in  a  sequence  such as:   gasoline-kerosene-
fuel  oil-kerosene-gasoline.   Cycles   may  be   up  to  10  days  in
length,  depending on  such  factors  as pipeline  capacity,  refinery
scheduling, and market demand.[3]

     If  some  of the methanol  is  to be  used  in blends  with  gaso-
line,  then  it would be  desireable to  batch it  next to  gasoline
since  some  mixing  of  adjacent  products  occurs.[4]   To  minimize
this interface,  or  the  mixing  of  different  products, batches  are
sometimes physically separated  by  devices  such as rubber  spheres.
If the methanol being transported  is  to be used  in a  pure  form,
then this technique would be desireable.   Although it has  not been
attempted, it is believed  that pure  methanol can be  successfully
batched  through  petroleum  pipelines.[1]    Conoco   is   currently
planning a  test program  for  the  summer of .1982 to determine  the
feasibility of batching methanol in a pipeline.[5]

     Ethanol, a  similar alcohol,  has  been successfully  batched in
a pipeline, however.[4]   This was done in January 1981  by William
Pipeline  Co.  of  Tulsa,    Oaklahoma.[4]   They  transported  5,000
barrels of ethanol  approximately 200 miles through an 8  inch- pipe-
line.   Unleaded gasoline  was  transported on  either end of  the
ethanol  in  a  straight run  configuration,  i.e., the  interface  was

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               Figure 1
CRUDE OIL PIPELINE CAPACITIES
         ( THOUSANDS OF BARRELS DAILY )
            AS OF DECEMBER 31,1978
                                                 NATIONAL PETROLEUM COUNCIL

                                                    UGIUO

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                 	Figure 2	

PETROLEUM PRODUCTS PIPELINE CAPACITIES
                   THOUSANDS OF BARRELS DAILY *
                    AS OF DECEMBER 31,1978
            A         N        A
                                                            NATIONAL PETROLEUM COUNCIL

                                                                   IICINO
                                                                MAfOt 111*4111 IOCARON

                                                                MAJOI niMINAl ItOIAOl IOCAI1ON

                                                                nriuM CONMCIION

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                                -6-
unprotected by  a physical  apparatus.   As a  result,  about 200  of
the 5,000  barrels  mixed with  the  gasoline during  transit.   Since
the ethanol was ultimately  used as  a  blending agent with gasoline,
this mixing was not undesirable.

     Special  care  was  exercised  in  this project  to  prevent  the
ingress of water which  could lead  to  phase separation  when ethanol
(or  methanol)   is   blended  with  gasoline.    These   precautions
consisted  of  using  only  sealed tanks  with  floating  inner  roofs
(tank  designs  are  discussed in detail  in a  subsequent  section).
Similar precautions  would  also be  necessary  with  methanol if  it
were to be used in a blending  capacity.   It  should be  noted  that
over the  past  10 years,  essentially all newly constructed  tanks
have been  the  floating  roof variety, due  to  concerns  over evapor-
ative  hydrocarbon  emissions.[4]  Even  tanks  which pre-date  this
time period are being retrofitted  with floating roof  tanks.   Most
of  these  new  and retrofitted   tanks  are not  sealed,  however,  and
would  therefore require some modification, as discussed  later,  to
further prevent the ingress of  water.

     This experience with ethanol indicates that methanol batching
should also be  feasible.   If true,  then much  of the existing  east
coast  pipeline  network  could  be utilized to  distribute  methanol,
avoiding  the  necessity of constructing  special lines  solely  to
handle methanol.

     B.    Waterborne Transportation

     The nation's inland waterways  system is  illustrated  in Figure
3.  It consists of  approximately   25,000 miles of waterways  and
includes  rivers,   intracoastal waterways,  canals,   channels,   and
other waterways.[6]  In order  to be considered navigable,  a water-
way must   facilitate the  movement  of   a sufficient  quantity  of
products to be  commercially economic.   The width of the  waterway,
its depth,  and  the  navigability of its  bends,  locks,  and channels
are key factors in  determining this  quantity.  Nearly  25 percent
of  the total inland  waterways  system is less  than  6 feet  deep  and
almost 80 percent is less  than  14 feet deep.[6]

     As can be  seen  in  Figure  3, navigable waterways,  particularly
the Ohio and Mississippi Rivers and the Great Lakes, could be  used
to  link  methanol production facilities in the  eastern U.S.  with
major  population centers  in the same region.   Western  production
facilities, in  Wyoming  and Montana  for example, will  not  be  able
to  rely  upon  this   transportation  method.   Instead,  pipelines  or
rail tankers (discusssed later  in this  section)  will be  needed for
long range distribution from the western sites.

     The inland waterway  industry  consists of  approximately  1,800
towing  companies  which serve   87   percent  of  the  nation's major
cities.[6]  These  companies operate  over 4300  towboats  and  tugs
with a combined horsepower of  approximately  6.1  million.   Tank

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                                  -7-
  Figurr-3. ConiintTcinily Navigable V.'utervvays of the UniU-ci States. $/
                                                                                      Atlantic
                                                                                      Iniracoastal
                                                                                      Waterway
 CONTROLLING DEPTHS
•M 9 FEET on MORE
... UNDER 9 FEET

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                                -8-
barges number 3,971 with a total capacity of  71.3  million barrels
(refer to Table 2).[6]

     Tank  barges  are  either  pushed  by  towboats  or  pulled  by
tugboats.   Towboats  are  flat  bottomed  vessels   with  multiple
rudders for maximum control.   They are typically used where  large
waves  are  not  encountered.    In  deep water  areas  and  along  the
coast, the more streamlined tugboats  are  used to move  barges.   A
towboat may push as many as  20 barges  at  one time while a tug may
pull up to 4  in a  simple operation.   The  larger  towboat flotillas
have  a capacity of up  to 200,000  barrels,  though  in most  cases
smaller flotillas are dictated by local restrictions.

     Another  aspect   of  waterborne  transportation  .is  the  self-
propelled  tanker  used  in  coastal  and  oceanic  commerce.   These
vessels  range   in   capacity   from   10,000   to  over   1,000,000
barrels.[1]  .Table 2 shows that as of  July 1979,  there were 352 of
these maritime carriers in the U.S.  fleet  with a  total capacity of
over 97 million barrels.

     Pipelines  generally  do  not  carry   heavy  products  such  as
residuals due to the  relatively  high pour points and viscosity of
these  materials.   Thus,  domestically,  barges and  tankers  often
complement  pipelines  in  moving  the  heavy  petroleum   products.
Still, gasoline accounts for approximately 50 percent of  domestic
volume  petroleum  product  movements  on  inland   waterways.[2]
Distillate fuel oil accounts for 23 percent and  residual  fuel oil
12  percent.   When foreign tanker  imports are  included  in volume
calculations,  residual   fuel  oil  is  transported in  the  largest
quantities followed by  distillate fuel oil,  crude  oil,  and  other
products.[2]   This shift  in  rank is  primarily  due to the fact that
domestic refineries  are  optimized  to produce  gasoline  and  other
high-priced products.   Consequently,  the  U.S. imports large  quan-
tities of residual fuel oil.[2]

     The large  role  played by tankers and barges  in  transporting
petroleum  products and  crude  oil has important implications  for
the  future of methanol  shipment for several  reasons.   Of primary
importance is simply  their  availability.   Second,   these  carriers
are  flexible  with  regards to the number of major markets  they can
serve.   The  Ohio  River Valley  and  Great Lakes  for example,  are
accessible without extensive construction projects which  could be
needed for pipeline  transport.  Third, it is significant  to note
that  chemical grade  methanol  is currently moved by both  ship and
barge.[1]  Thus, the  technical  expertise  gained in this  practice
should prove  beneficial  if methanol  were  used  to  fuel  the nation's
vehicles.

     C.    Truck Tankers

     The  role  of  the  trucking   industry   in  transporting  the
nation's petroleum products  has  long  been a  vital one.   This is

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                                                          Table 2
                              Inland Waterways and Maritime Carriers — Summary, July 1979[6]
Self-Propelled
Tank Vessels
(Tankships)
Non-
Self-Propelled
Vessels
(Tank Barges)
Greater Than 5,000 Barrels
Capacity
Waterways
System
1. East Coast
2. West Coast
3. Great Lakes
4. Alaska
5. Hawaii
6. Gulf &
Mississippi
TOTAL
1. East Coast
2. West Coast
3. Great Lakes
4 . Alaska
5. Hawaii
6. Gulf &
Mississippi
TOTAL

Number of
Units
152
55
8
0
12
. 74

301
335
91
91
9
6
2,731

3,263

Total Capacity
(barrels)
44,722,553
22,172,689
373,270
0
11,566,547
18,145,074

96,980,133
10,865,387
2,787,437
1,425,053
131,433
100,567
54,581,191

69,891,068

Less Than 5,000 Barrels
Capacity
Number of
Units
27
10
6
3
0
5

51
82
36
9
30
1
550

708

Total Capacity
(barrels)
24,190
6,391
7,988
1,244
0
5,169

44,982
140,591
67,363
13,614
44,523
818
1,180,519

1,447,428
TOTAL
                                                                                                          Total
                                                                                                         Capacity
Number of
Units
179
65
14
3
12
79
352
417
127
100
39
7
3,281
3,971
4,323
Total Capacity
(barrels)
44,746,743
22,17-9,080
381,258
1,244
11,566,547
18,150,243
97,025,115
11,005,978 T
2,854,800
1,438,667
175,956
101,385
55,761,710
71,338,496
168,363,611

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                               -10-
verified by the fact  that  nearly all oil products and LPG  are,  at
some point, transported  by tank truck.[2]  Table 1  indicates  that
the  total  tons of  petroleum  products transported  by trucks  has
grown rapidly in recent years.

     Tank trucks are  primarily  used  for  local  distribution  and are
optimum in  the 25  to 50  mile  range. [1]  Truck  tankers are  also
used in longer hauls  to  supplement  pipeline  deliveries in seasonal
peak demand periods.[2]   New tank  trucks are  getting lighter and
stronger with the  increased  use  of aluminium  alloys,  stainless
steel,  and  reinforced  fiberglass.   This lighter  weight  permits
larger  payloads,  with capacities  approaching  11,000  gallons  (262
barrels).[2]  Because of the many  companies that own and  operate
tank trucks,  the  short distances  involved  in  most hauls,  and the
extent  of the nation's highway  system,  truck  transport  and  hence
its capacity is difficult to document.

     The National Petroleum  Council (NPC) has  attempted  to deter-
mine this capacity by conducting  a  survey of the  major trade asso-
ciations. [7]   They  estimate  that as  of  December  31, 1978  there
were over 50,000  tank vehicles  of  over   3,500 gallons  in capacity
in the  U.S.   The  total  fleet capacity of  these  tankers is  about
364.4 million gallons (8.7 million  barrels),  'it should be  noted
that only approximately  80 percent of these tankers  were designed
to haul liquid products,  the  remainder  being used  to  transport
compressed  gases.   The  NPC  reports,  however,  that  all of  these
vehicles could  be  used  to  haul petroleum  in  an emergency.   The
degree to which these tankers  are compatible with methanol  has not
as yet  been determined.  The  general subject of materials compati-
bility will be addressed in a later section.

     D.    Rail Tank Cars

     Several  types  of  tank  cars exist  with  some  equipped  with
heating coils or insulation to  facilitate  the  transportation  of
heavy fuels and asphalt.   Pressurized cars carry  LPG while  unpres-
surized, unheated cars are usually relied upon to  carry gasoline,
aviation fuel, and  distillate fuel oils.  Capacities  of  tank cars
range up to 50,000  gallons (1190 barrels) or more.[2]   As  many as
110  tank cars can be connected in  a series  to form a  unit train,
making large volume transport possible by rail.fl]

     As of  June  15,  1979  there were 202,811  tank  cars,  with  a
combined capacity of  3.6  billion gallons (85.7  million barrels),
in the  U.S.  fleet. [7]   Table 3  gives a  breakdown  of  these  tank
cars according to their  capacity and use.  From  this  table it can
be seen that  107,552 tank  cars,  representing a capacity  of 2.2
billion gallons (52.3 million  barrels)  are  suitable  for carrying
crude oil  or  petroleum  products.  Those  not  suitable  are either
owned—by the  railroad to transport  diesel fuel for  its locomotives
or have special  design  purposes  such   as  acid  or  caustic  soda
transport.   Also  evident  from  this  table  is   that  77,166  cars

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                          Table 3
Summary of Demographic Breakdown of U.S.  Tank Car Fleet [7]
(June 15, 1979)

Private Non-Pressure
Uninsulated
Coiled
Insulated
Coiled
Total
Private Pressure
Uninsulated
Insulated
Total
Unsuitable Total
RR Owned Total
Grand Total

Under
8,500
Gallons

996
3,875
387
1,578
6,836

0
599
559
12,755
233
20,423

8,500
to
13,499
Gallons

2,837
2,674
3,994
11,689
21,144

627
6,897
7,524
30,076
642
59,386
Age
All Years
13,500
to
20,499
Gallons

434
2,835
130
1,336
4,735

273
92
365
32,002
1,411
38,513

20,500
to
30,499
Gallons

10,390
14,429
712
18,067
43,598

2,060
2,457
4,517
11,060
2,518
61,693

Over
30,500
Gallons

561
106
10
176
853

15,350
2,031
17,381
4,549
13
22,796

Total
Number

15,218
23,919
5,183
32,846
77,166

18,310
12,076
30,386
90,442
4,817
202,811

Total
Capacity

306,131,695
429,313,277
64,048,976 '
583,110,649 P
1,382,604,597

583,595,930
209,331,725
792,927,655
1,327,217,268
88,283,117
3,591,032,637

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                               -12-


having a  capacity of  1.4  billion  gallons  (33.3 million  barrels)
are used for  nonpressurized  transport purposes.  It is  these  cars
that would typically be relied upon to carry methanol.

     Rail transportation currently  constitutes  the  smallest  market
share of petroleum  product  distribution with just under 2  percent
(see Table 1).  Liquefied petroleum gases and  coal  gases are moved
in  the greatest  volumes followed  by  residual  fuel oil, asphalts,
and lubricating oils.[2]

     Despite  the  diminishing  role  of  railroads  in  transporting
petroleum products,  they may  be  more prominent in methanol  trans-
portation.   This  can be expected since rail lines  already  connect
the  coal  mines with  major  markets.   Since methanol  plants  are
likely to be sited near the mines,  few  new  tracks would  need to be
laid.  This will  be especially  important in the west where there
is  a  paucity  of  navigable  waterways,  necessary  for  barge  trans-
portation.

     E.    Storage

     1.    Primary Distribution System

     The system of  pipelines,  tankers and barges that moves crude
oil  from  producing  areas  to  refining  centers,  and  the  similar
facilities that move refined petroleum  products in  bulk  to  market-
ing areas,  are  generally referred  to as the  primary  distribution
system.[8]   In  order  to understand  the  storage,  aspects   of  the
primary petroleum distribution system,  one  must  be familiar  with
the concepts  of minimum and  maximum  operating  inventories.  These
are discussed  below along with the national  storage capacity.

     The minimum  operating  inventory is  defined  as the inventory
required to fill  such  components  as  pipelines,  tank bottoms,  and
refinery process  equipment in  order to  maintain normal  operations;
this volume is  considered  unavailable  for  consumption.[8]   Short-
ages and runouts  would occur  if  inventory were to  fall  below  this
level.  Table 4 indicates that the minimum  operating inventory for
the U.S. primary  distribution  system is approximately 720  million
barrels with just over 40 percent of that being crude  oil.

     The maximum  operating  inventory  must also be  considered  when
examining storage capacities.  This concept refers to the  maximum
quantity that could be stored  in assigned  tankage  (plus  inven-
tories maintained outside of storage  facilities) while still main-
taining a workable  operating  system.[8]  In determining the maxi-
mum operating inventory a  company must allow empty space  in tank-
age  to  1)  provide  room for thermal  expansion, 2) receive  inven-
tory, and 3)  have a margin of error for emergency situations and
schedule changes.  Exceeding the maximum operating  inventory could
lead to slowdowns and interruptions in the system.

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                               -13-

                              Table  4

            Overview of Primary Distribution System[8]

                               U.S. Primary Distribution System
                             Minimum Operating Inventory. — 1978
                                    (Millions of Barrels)

Crude Oil                                     290
Gasoline                                      210
Kerosene                                       35
Distillate Fuel Oil                           125
Residual Fuel Oil                              60

                                              720
                    U.S. Primary Distribution System
                    Total Shell Capacity of Tankage       Under
                    	September 30, 1978	   Construction
                         (Millions of Barrels)

Crude Oil                        462                       12
Gasoline                         438                        5
Kerosene                          90           less than    1
Distillate Fuel Oil              365                        3
Residual Fuel Oil                162                       _1

                                1517                       21

-------
                               -14-
     The  tank  capacities  for  crude  oil and  each  of  the  major
refined  products are  shown  in Table  4.  The  actual measure  of
stocks  lies  at  any  one time  somewhere  between the  minimum  oper-
ating  inventory  and the  total  storage  capacity.   The  National
Petroleum  Council  states  that  inventory  has   averaged  about  50
percent of tank  capacity for  the  past  30 years  (see Figure 4).[8]
Since  individual tanks  alternate between empty and full,  the NPC
concludes that  no significant storage capacity  exists  for holding
emergency supplies.

     It  is  likely that  many  new primary storage  facilities  will
therefore have  to be  constructed in  order  to   adequately  serve  a
neat  methanol  fleet.   This  is  to  be  expected  since  methanol's
lower  energy content  compared to  gasoline  or  diesel fuel  means
that nearly  twice the  capacity is needed  to store the same amount
of energy.

     2.    Secondary Distribution System

     The  secondary  distribution  system  is  comprised  of  small
.resellers of  petroleum  products,  such  as gasoline  service stations
or  fuel oil  dealers.[8]   This  system  along  with  the  consuming
sector  contains substantial holding capacity.   In an ..analysis  of
the  storage  capacity for gasoline  and distillate fuel oil  in the
secondary/consumer  network,  the  National Petroleum  Council  esti-
mates that capacity  exists  for at 'least  500  million barrels,  or 60
percent of the primary storage- capacity for these  products.

     Since  this  network  is  by definition  near  marketing  areas,
there  should  be no problems with regard to location  in  using its
capacity to distribute methanol.

III. Technical Factors in Methanol Distribution

     This   section  identifies   the  unique   technical   problems
expected  to   be  encountered  when   transporting,   storing,   and
dispensing  methanol or  methanol-containing  fuels.    Included  are
discussions  on  the  types  of  materials  found  in  the distribution
system  which are known  to  be  incompatible   with methanol,  the
problem of preventing  the ingress of water into storage tanks, and
ways to decrease  the amount of time spent at filling stations (the
lower energy  content of methanol  vs. gasoline  or diesel fuel could
necessitate more  frequent or longer fueling stops).

     It should  be noted that  the estimates below  of  the  extent of
the  various  technical  problems of methanol  distribution  are first
order estimates.  There is  a  paucity of  data along these lines and
more  research will  be  necessary before  the net  costs  associated
with a conversion to methanol  can be better determined.

-------
 TOTAL
 SYSTEM
CAPACITY
                         SHELL
                       CAPACITY
                          OF
                       TANKAGE
      MAXIMUM
     OPERATING
     INVENTORY
            MINIMUM
           OPERATING
           INVENTORY
                  "COMPLETELY
                  UNAVAILABLE"
                   INVENTORY
                                                         TANK TOPS
SPACE IN THE SYSTEM WHICH IS NEEDED TO
   MAINTAIN A WORKABLE OPERATING SYSTEM
   AMOUNT OF PETROLEUM WHICH CAN BE
     STORED, IN ADDITION TO THE MINIMUM
     OPERATING INVENTORY, WHILE STILL
     MAINTAINING A WORKABLE SYSTEM.
     THIS INCLUDES SEASONAL INVENTORY.
                                                                 ACTUAL INVENTORY ON REPORTING DATE
    ADDITIONAL PETROLEUM REQUIRED TO
      HAVE AN OPERABLE SYSTEM AND
      AVOID PROBLEMS AND RUN-OUTS
                                                              TANK BOTTOMS

;£-$fi

;:»;:; PLUS: *
PIPELINE FILL, EQUIPMENT FILL
P IN-TRANSIT
                                                                                                           Ln
                                                                                                           I
                Figure1/-. Slmpliricd Diagram of Terms Describing Petroleum Inventories and Storage Capacities. ]}/

-------
                               -16-
     A.    Technical Problems in Transportation

     Methanol  is  highly  corrosive  to certain  materials found  in
the petroleum  product  distribution network  and has little  effect
on  others.   When  in  contact with  ordinary  carbon  steel such  as
that  found  in  pipelines,  fittings,  and  valves,   it  tends  to
dissolve  rust  and  to  slowly corrode the steel. [1]   The rate  of
rust dissolution is fairly rapid but  that  of  steel corrosion is  so
slow  as  to warrant no  concern.   Carbon  steel,  in  fact,  is  the
common construction material for methanol tanks and pipelines.[1]

     Because methanol leaches out ordinary pipe dope,  it is  recom-
mended  that  either screwed  flanges  sealed  with  a  teflon  thread
sealant  or  welded  flanges  be  used.[1]   The  normal  practice  of
welding  underground piping  and coating  with  asphalt  or  plastic
adhesive tape  to  prevent corrosion should be followed  in the case
of newly constructed methanol pipelines.

     The pumps used in methanol transfer  are  made of either  carbon
steel  or bronze lined  steel.   Either mechanical  seals  or  square
asbestos  packing  is  used to  seal  the  pumps  and  prevent  leaks.
Since these pumps are essentially the same as those  used in  handl-
ing petroleum  products,  no change would  be necessary to facilitate
methanol transfer.[1]

     Some plastics  are  also  susceptible to deterioration by meth-
anol.   Plastics  are often used in  the  construction of  gaskets,
0-rings, and packings.[1]   Since the chemical  industry  uses meth-
anol  in  various processes,  they have already  faced this type  of
problem.  Neoprene  and neoprene-asbestos mixtures  were  found  to  be
resistant to the  debilitating  action of methanol.[1]   Plastics  to
be  avoided  include polyurethane, Buna-N  and Viton  (common  compo-
nents  in  some  pipelines   as   well   as   automobile  engines  and
pumps.)[4,9,10,11]

     One  final issue  relating  to  material  compatibility concerns
the  batching  of   methanol  in pipelines with   other  petroleum
products.[19]   Since methanol  is such a  strong solvent,  it  could
dissolve  the  rust inhibiting   agents  which  typically  line  the
insides  of pipelines.  This  potential problem will be addressed  in
the Conoco research program mentioned earlier.[5]

     In  addition  to   the concerns   about  material  compatibility
there  is another potential problem  associated with ordinary  valves
in  such  places as  transfer lines.   This  is their  susceptibility to
blown  gaskets  and valve  packing due  to the  expansion  of methanol
when its container  is heated by the sun's rays.  Relief valves can
remedy   this   situation.   Although   gasoline  also   expands  when
heated,   its   thermal   expansion   characteristics   are  not   as
pronounced as  those for  methanol.   Thus  there are  fewer concerns
over blown gaskets when  shipping gasoline.[12]

-------
                               -17-
     B.    Technical Problems in Storage

     Considerable  industrial  experience  has  been  accrued in  the
storage  of  pure  methanol  in mild  steel  tanks with  satisfactory
results.[1]   It  has  been demonstrated that old steel  tanks  can be
cleaned by removing rust and water  with  a solvent  such as methanol
or isobutanol at a low cost. [9,10]   These  tanks  can  then be  used
to store methanol on a permanent basis.

     Two  related problems  in  storing methanol are 1)  preventing
water  from  entering  the tank,  which  could  cause  phase  separation
in methanol-gasoline  blends, and   2)  preventing   breathing  losses
from the tank as the  ambient temperature changes  and  the  level of
methanol fluctuates.[1,9,10]  The  approach taken  to resolve  these
problems depends on which of the two  general  types of  bulk storage
tank is being used, floating roof or fixed roof.

     Floating roof  tanks are commonly used  to store  gasoline  at
refineries and large bulk terminals.   The floating roof  tank has a
roof that actually floats on the  surface of the  liquid.   Plastic
or  rubber collars  seal the  border  between  roof  and tank  wall.
This design virtually eliminates breathing  losses  since  the  amount
of  vapor space  above   the  liquid  is  minimized.   As  mentioned
earlier, this is the  reason why floating roof  tanks  have been in
such widespread  use  over the past  10 years.  [4]   Tests  in Germany
and New  Zealand  indicate that a second  seal  is needed  to prevent
water from entering the  tank.[9,10]   Another, cheaper,  solution to
the water ingress problem is to  simply construct a fixed roof  over
the tank to  keep out rainfall.[1,10]

     Fixed roof  tanks are typically used to store  intermediate  and
smaller  quantities  of  petroleum products  in bulk  storage.   This
tank design  is  also used for  storage of chemical grade  methanol.
Breathing losses are unavoidable with this  type of tank.   However,
water  ingress  as vapor  or  liquid  can be  prevented  by  either
putting desicators on the air vents or covering the surface  of  the
methanol with a  dry  gas such as nitrogen or  carbon dioxide.   Both
methods have been used in industrial applications.

     Potential  storage  problems also exist  at the retail  level.
Typically, retail outlets have  from one  to  six  storage tanks,  each
having  a 10,000  gallon (238 barrel) capacity.   Currently,  there
are approximately 173,000 service stations  nationwide.[1]   If  each
has an average  of 4  tanks,[13]  then  there .would  be approximately
700,000  tanks  in use.  These vessels have  historically  been  made
of carbon steel which,  as  pointed  out earlier, is  a  satisfactory
material  for  storing  methanol.   Since 1965 however,  these  carbon
steel  tanks  have been systematically  replaced  by  tanks made of a
polyester-fiberglass  laminate.   This  material   offers  superior
corrosion resistance  to gasoline and  its surroundings but  is  not
recommended   for  methanol storage since  it  can  cause  a  noticeable
increase  in  the gum  content  of   fuels  containing methanol.[10,

-------
                               -18-
13,14]   Roughly  10  percent  of  all  retail  storage  tanks are  now
made of  the  polyester-fiberglass laminate and by 2000,  25  percent
of all  tanks  are expected to be  of  this  variety. [13]   Replacement
of  these  tanks  with  carbon  steel  tanks  would be  necessary  if
carbon  steel  tanks  were  not  available  at  a  station  desiring  to
carry methanol.

     C.    Potential Dispensing Problems at the Pump

     The  hoses,  nozzles,  etc.  that are  currently  being used  to
dispense gasoline  are  compatible with  methanol.[1]   Thus no  modi-
fications  should be  necessary  to this  type  of  equipment to  prevent
corrosion  or  deterioration of  pumping components.   However,  some
modifications  may  be  necessary to  increase the pumping rate  of
methanol because of its lower energy content.

     Methanol  contains about  half  the energy   as  gasoline  on  an
equal  volume basis.   Since methanol  engines  are  anticipated  to
have  an   approximately   20  percent   higher  fuel   efficiency  as
compared to gasoline engines,  roughly  60 percent more  methanol  on
a volumetric basis would  be needed to  propel a  car  the same number
of miles  it  would  otherwise travel on gasoline.[15]   This  implies
that motorists will  not be able to drive as far in methanol  vehi-
cles for a given size fuel tank.

     A  simple  solution would be  to  increase the fuel  tank  volume
by  60  percent.  Although this could  give  a methanol  vehicle  the
same driving  range  as  a  gasoline powered  vehicle, there are._two
associated detriments:   1)  increasing the  tank volume  ±-s  incon-
sistent with current trends in downsizing,  i.e., it would increase
vehicle weight and present possible  spacing problems,  and 2)  since
more volume  would  be  pumped,  there  would  be  more  time  spent  per
fill-up.   This could increase  crowding at  service  stations.   Even
without  larger tanks  there  could  be  crowding  since  less  energy
would be  pumped  per  unit  time  than  is customary.  Whether or not
this increased  crowding would  be  important is  unknown,  since  the
current  operating  capacity of  service stations  at  peak hours  is
unknown.

     Because  of  the space  and weight  constraints  it  is unlikely
that the full 60  increase  in   tank  size  would  be  realized.   Some
increase,  however, is  likely so that motorists  could  have  compar-
able driving ranges  to those customary today.   Thus the problem of
potentially crowded  filling  stations remains.   A possible solution
would  be to  increase  the fuel flow rate of the dispenser.   This
too, however, has potential drawbacks.

     These problems  are  related  to  a  phenomenon known  as  "spit-
back" which  results  when fuel  is  fed  too  fast  into  the vehicle's
tank.   Currently,  car  fill pipes  and service  station  pumps  are
designed for an  approximate  12 gallon  per minute (gpm)  rate.[16]
Some self  service  stations, however, have nozzles calibrated  to 10

-------
                               -19-


gpm to  further reduce the  likelihood  of spitback.   This  practice
is  also  followed  in  areas  using  vapor  recovery  (such  as  in
California) where flow rates of 8 to 10 gpm are common.

     If it  were  necessary to  alleviate  this  spitback  problem  the
tanks  of  future  vehicles  could  be  constructed  to  accommodate  a
higher  fueling rate.   One possible  way  to substantially  increase
this rate would  be  to use a dual-nozzle delivery  system.   In this
design,  the  dispenser  would   have  two  nozzles  instead  of  the
customary single  approach.   They would  be inserted  together into
separate  fill pipes  which  would follow  separate  routes  to  the
tank.   Thus as much as 24 gallons could  be  dispensed per minute to
the tank, but each fill  pipe would only  be  delivering the  usual 12
gpm.  This could  significantly  reduce  the  amount  of time motorists
spend  actually refueling  their  vehicles  and partially  alleviate
the crowding problem at  service stations.

     An additional benefit  of  the dual-nozzle approach is  that it
could prevent accidental misfueling  with gasoline.   The dual  meth-
anol  nozzle could  not  fit  into the  single-holed  fill pipes  of
gasoline tanks.   Similarly,  if the   individual nozzle diameters of
the methanol  system  were   slightly  smaller  than   those  of.  the
unleaded gasoline dispenser, then gasoline  could  not be fed into a
methanol vehicle's  tank.  (The nozzles  for unleaded gasoline  are
smaller than those for leaded  gasoline for  this  same reason,  i.e.,
to  prevent  misfueling.)   While  this  system would  require  addi-
tional  equipment  on  both vehicles and dispensing pumps,  the  addi-
tional costs should be minimal.

     D.    S'lTmnary of Technical Distribution Problems
     In conclusion, there are  a  number  of  technical factors influ-
encing the distribution  of  methanol.  Of  these,  material compati-
bility  is the  greatest concern.   When transporting  methanol  by
pipeline,  it may  leach  out  ordinary   pipe  dope,  for  instance.
Screwed flanges  sealed with teflon  or  welded flanges could  alle-
viate. this problem.   There  appears to be  no  compatibility problem
with the  carbon  steel  of the pipeline itself or  the pumps used to
facilitate transfer.   Similarly,  the steel construction  of barges
and rail  and truck tankers should present no problem  for methanol
transfer.  Some  plastics,  however,  such as  polyurethane ,  Buna-N,
and Viton found  in gaskets,  0-rings  and packings in some pipelines
are not  compatible with methanol and  would  have to  be  replaced.
Noeprene  and neoprene-asbestos  mixtures are adequate replacement
materials.

     In bulk storage,  floating roof  tanks are  needed to minimize
both water ingress (especially when  methanol  is  used as  a blending
agent) and evaporative emissions (whether  or not it is  a blending
agent).   As  mentioned  earlier, this type  tank has  become more and
more popular over  the  last  10 years due to  concerns over reducing

-------
                               -20-
evaporative  emissions.   Tests  indicate,  however,  that  a  second
sealing may need to be added to provide adequate water protection.

     Storage at  the retail level  could  present the  most  problems
if  the current  trend of  relacing  carbon steel  tanks  with  ones
constructed  of  polyester-fiberglass  laminate  continues.    This
latter  material  causes  an increase in  gum  content of  methanol
containing  fuels.   By 2000,  at  the current  rate of replacement,
approximately  25 percent  of  all  tanks  would  be  the  polyester-
fiberglass type.

     There appear to  be  few compatibility  problems at the  dispens-
ing pumps.  However,  because  of methanol's lower volumetric  energy
content,  there could be increased  crowding  at  filling  stations.
This is  expected since  1)  more frequent  stops would  be  made  by
motorists  if  their fuel tanks  are  kept  at  the current  size  for
gasoline vehicles;  and 2)  more  volume per  fill-up would be  needed
if  on  board tank  size  is  increased  to  make  driving range  more
compatible with  that  of  gasoline  vehicles.  It  is unknown a^t^this
time whether or  not this increase in pumping  time would adversely
affect  service stations  since  their current  operating  conditions
are  unknown.   However,  an increase in  the  fuel  delivery  rate,
possibly via a dual-nozzle pump,   could  alleviate this,_  problem  if
it arose.

IV.  Economics of Synfuel Distribution

     In a draft  study performed by DHR,  Inc.  for the  Department  of
Energy to investigate methanol use options,  the cost  of  both meth-
anol  and  gasoline  distribution  from  two  hypothetical   synfuel
production   facilities   to   regional   distribution   centers  was
considered.[1]    One  plant was  located   in   the  coal  fields  of
southern  Illinois  and  the other  in  northeastern  Wyoming.   Each
plant  has  a   100,000  barrel  per  day capacity (methanol).   The
logistics and  costs of  fuel  delivery  from these plants to  speci-
fied sites is  discussed  below.  Following  this discussion, typical
local  distribution  and  retailing  costs  are given and conclusions
reached about  the  total  cost  of distributing  methanol and synthe-
tic gasoline.

     It should be  noted that a  conservative approach in  terms  of
methanol distribution costs was followed in this report.   That  is,
in  each  aspect  of  distribution,  long-range,  short-range,  and
retail, assumptions were  made  which  would tend  to   increase  the
cost of methanol distribution relative to  that for  synthetic gaso-
line.   In most  instances,  for example,  future methanol  vehicles
were assumed to  have  the same energy  efficiency as  their  gasoline
counterparts,  although  it is  generally   believed   they  will  be
roughly 20  percent  more  efficient.  This  approach was followed  in
order  to  help  assure  that  the costs of distributing  methanol were
not underestimated, since  some costs of  converting  to methanol  are
inevitably overlooked at this early stage.

-------
                               -21-
     A.    Overview of Illinois and Wyoming Methanol Plants

     The  southern Illinois  plant  would  be  located  near  several
major markets  including  St. Louis,  Chicago,  Toledo,  Indianapolis,
Kansas City,  Cincinnati,  and Louisville.   To simplify  the  study,
it was assumed that the  entire product  from this plant would  be
distributed  solely  to  St. Louis  and   Chicago.   Both  of  these
markets are  more than large enough to consume  such  quantities  of
methanol.

     Both  St.  Louis  and  Chicago  are major oil refining  areas
located by the Mississippi  River and  Lake  Michigan,  respectively.
Each area  has major storage terminal  facilities  and is  connected
by a network of common carrier product pipelines  (refer  to  Figure
1) which could be  used  to distribute methanol.   Systems for trans-
porting  the  methanol from  the  production  plants  to these  areas,
however,  would need  to be  devised.  A pipeline from the Illinois
methanol plant  to  St. Louis would  be approximately 100  miles long,
while  one  to  Chicago  would be roughly  300  miles  in  length.   A
pipeline  construction  company   contacted  as part  of  the  above
mentioned  study reports  that   for  a  marketing  split  of  roughly
one-third  to St.  Louis  and two-thirds to  Chicago,  the  necessary
pipeline  diameters would  be  10  inches  and 12  inches,  respec-
tively.

     The Wyoming  plant  near Gillette  is  located  further than the
Illinois plant from major markets,  the closest  ones  being  Denver,
Minneapolis,   Omaha  and  Kansas  City.   As  with  St.   Louis  and
Chicago,  these  markets also have major terminal  storage facilities
for petroleum  products and  are  connected  to other markets by pipe-
line.  Minneapolis and Kansas  City have access to  inland  water-
ways.   Only  Denver,  however,  has  a  pipeline  which  comes  near
Gillette.   A   pipeline  connecting  the  Wyoming  plant  with  the
primary markets would  be approximately 1,000 miles long  and 10  to
24 inches in diameter.

     B.    Specific Costs in Transporting Methanol

     As  discussed  earlier,  the major  means  of  transporting fuels
long distances within  the U.S.  are  pipeline, barge,  and  rail tank
car.  Of these, all but  barge  transportation are likely components
in  the distribution  network surrounding the  two design  plants;
each is  too  far from  inland waterways to  make barges feasible.[1]
Table 5  shows  the  average transportation  cost for methanol  for the
two  remaining  modes,   pipeline  and  rail  tank  car.   These  are
discussed  below.   Costs  for distributing synthetic  gasoline will
be addressed in a  subsequent section.

     1.    Pipelines

     Of  the  two means of transporting methanol  listed  in Table  5,
pipelines  are the cheaper.  As  can be seen  from this  table, the

-------
                  -22-
                 Table 5

Average Transportation Costs for Methanol
    (1981 dollars per million Btu)[l,17]
Railroad Tank Car Transportation Costs (Unit Trains)
Distance, Miles



Distance,
Miles
50
100
200
500
800
1000
1200
100
200
400
600
800
1000
Pipeline Transportation
Bbl/Day 50,000
Pipe Dia. , Inch 10
.07
.12
.19
.41
.58
.72
.85
Cost
.28
.35
.58
.78
1.01
1.28
Costs
100,000
14
.049
.082
.12
.28
.41
.48
.59




200,000
20
.025
.033
.07
.19
.26
.33
.39

-------
                               -23-
operating  cost  decreases significantly  as  the volume  transported
increases.  These costs are similar  on  a volumetric  basis  to those
incurred in transporting  gasoline  via pipeline since  the  physical
properties of methanol and gasoline are similar.

     The overall installed capital costs  for  pipelines  in  an aver-
age terrain outside  of  metropolitan areas is  $11,000  per  diameter
inch-mile  (1981  dollars).[1]   For  metropolitan areas,  the capital
costs  rise to  $33,000  per   diameter  inch-mile.[1]   These  costs
consist of right-of-way,  pipe costs  and installation  and pumping
station equipment.   Typically,  capital  charges  of  depreciation,
interest,   taxes, and insurance account  for  75 percent  of  the pipe-
line  transportation  cost with  operating  and  maintenance  costs
accounting for the remainder.

     2.    Rail

     As mentioned  earlier,  there  are two modes  of railroad  tank
car transportation:   small  volume  transport  with a  few cars  in  a
mixed freight train or  large  volume  transport as  a unit train with
roughly  100 cars.   Unit  trains  usually only  apply  to  a  fixed
route, but are  less costly than individual  tank cars in a  mixed
train.  The average cost  for  railroad transportation by unit train
is given in Table 5.  From this  table it can  be seen that  railroad
tank car  transportation costs are  2.7-3.4 times  higher than those
for a  14  inch  pipeline carrying 100,000 barrels  per day  of meth-
anol.  Operating  and maintenance  costs account  for approximately
85 percent of the rail  costs  while capital  charges account for the
remaining 15 percent.

     3.    Storage Costs

     The bulk terminal  storage and  blending costs would be approx-
imately $0.13-0.17  per million  Btu  (mBtu)  of methanol.[1]   This
includes operating and  maintenance and  capital costs.   The capital
costs  for bulk  storage  facilities  constructed  of  standard  mild
steel are given in Table 6.

     C.    Distribution   Costs   from  Production  Sites   to   Bulk
           Terminals

     Distribution costs for   transporting pure methanol and  gaso-
line  from  both  the Southern  Illinois and Wyoming sites  discussed
earlier to markets  (bulk  terminals)  are presented in the  following
sections.    In  both cases, the  assumption was made  that  methanol
would  be  carried by pipeline  to markets and then  stored in bulk
terminals  and blended or  marketed  as needed.   In  addition, distri-
bution costs from  another study will be  discussed and  compared to
that of the DHR report.

-------
               -24-
               Table  6

     Bulk Storage Capital Costs
         (1981 Dollars)[1,17]

Storage Tank Size,
      Bbl                      Cost
      125,000               $  313,000
      250,000                  474,000
      500,000                  719,000
    1,000,000                1,090,000

-------
                               -25-
     1.    Southern Illinois Plant

     Table 7 shows  the  distribution costs to a bulk  terminal  from
this plant for  the two  fuels  as determined  by  DHR.   The  distri-
bution costs are $0.31 per mBtu  for synthetic gasoline and  $0.56
per mBtu for methanol.   Note  that these costs include  terminaling
costs.   Terminaling costs are the same  for  both methanol and  gaso-
line since they  include  such factors as labor, grounds  keeping and
to a smaller degree electricity which are essentially the  same for
both products.[18]

     The gasoline costs  reported  by DHR,  however,  appear to  be
based on the assumption  that  the capital cost of a gasoline  pipe-
line would be roughly one-half that of  a methanol  pipeline trans-
porting  the  same  amount  of  energy.   (Recall  that  the  energy
density  of  methanol  is  about  half that  of  gasoline.)   This  is
overly simplistic since  the volumetric  flow  of  a pipeline  varies
with the cross-sectional  area and,  as indicated by  DHR  themselves,
pipeline capital cost is  proportional  to the radius and  not  the
area or volumetric capacity.

     To estimate a  revised cost  of transporting gasoline  by  pipe-
line, it will be  assumed  that the DHR statement that  75 percent of
such costs are due  to capital  charges,  and  the remainder operating
and  maintenance,  is  correct.   As  determined  by  DHR,   pipeline
capital  costs   are  assumed  to   be    proportional  to   pipeline
diameter.  Operating  and maintenance costs for gasoline pipelines
are  estimated  to  be  25  percent  less   than  a comparable  methanol
pipeline transporting  the  same  amount   of  energy.[18]   This  last
estimation is based on the  assumption that  two-thirds of operation
and  maintenance   costs  in  a  gasoline,  pipeline  are  due  to  such
factors  as  labor and maintenance  and  one-third due  to  pumping
costs.    For  a  methanol  pipeline  the labor  and  maintenance  costs
would  be very  nearly the  same  but the  pumping costs  would  be
roughly  twice  as high  since  twice the  volume  is  being  trans-
ported. [18]   Following   this  procedure,  synthetic  gasoline  would
cost approximately  $0.37  per mBtu to distribute to  a  bulk  terminal
from the southern Illinois plant.

     The capital costs  of the  methanol  pipeline (as  determined by
DHR) and gasoline pipelines (as determined  by the above  procedure)
are also given in Table 7.  Together,   the  methanol pipelines  cost
roughly  $65 million.   To transport  the  energy equivalent  in  gaso-
line,  the  100 mile pipeline would be  approximately 7 inches  in
diameter and the 300 mile  pipeline would have a diameter of  8.5
inches.  Together, the gasoline pipelines would cost $46 million.

     2.    Wyoming Plant

     In  this example, DHR assumed that   one 14 inch diameter  pipe-
line  1000 miles  long  would  carry all the methanol  to  either
Minneapolis,  Chicago, or Kansas  City.   The capital costs  for  this

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                              -26-
                             Table 7

       Distribution Costs to and Including a Bulk Terminal
         For a Southern Illinois Methanol  Plant,  $/mBtu
                       (1981 Dollars)[1,17]
Pipeline, 100 miles to
St. Louis, 33%; 300
miles to Chicago, 67%
Bulk terminal operating cost*
Added storage in bulk terminal
Pure
Methanol
.31
.15
.10
.56

DHR
.16
.15
.31
Gasoline
Revised
.22
.15
.37
Pipeline
Capital Cost;  (millions of dollars)

100 mile, 10 inch diameter            15.3

100 mile, 7 inch diameter                               10.8

300 mile, 12 inch diameter            49.7

300 mile, 85 inch diameter                              35.2
*  No interest charges are made for the stored fuel.

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                               -27-
pipeline would  be $165  million (see Table  8).[1]  Following  the
procedures outlined  in the previous  section,  a pipeline  to  carry
the same amount  of  energy in the form of  synthetic  gasoline  would
be 10 inches in diameter and cost roughly $118 million.

     The costs associated with  distributing methanol and synthetic
gasoline from  the Wyoming plant  to  a bulk  terminal are  given  in
Table 8.  DHR  estimated these distribution costs  to a bulk termi-
nal to be $0.40 per mBtu  for gasoline and  $0.73 per  mBtu for  meth-
anol-.   As  was  the  case with  the  southern  Illinois  scenario,
however, DHR apparently assumed the  cost to  transport  gasoline  by
pipeline would be one-half  that of methanol.   Using  the aforemen-
tioned capital cost for a  10  inch pipeline  for gasoline  and  the
same  75/25  split of  capital  costs and  operating and maintenance
costs discussed  earlier,  synthetic gasoline  would cost  $0.50  per
mBtu to distrbute.

     3.    Average  Cost of Fuel  Delivery to Bulk  Terminal  (Long
           Range)

     If one assumes that half  of the nation's  synfuel  plants  are
located in the west  and half  in the  east, then an average nation-
wide  distribution cost from production  facility to bulk terminal
can be obtained  from the previous two sections.   By averaging  the
values given  in   Tables  7 and  8,  one obtains  a  typical methanol
distribution cost of $0.65 per mBtu  and a  revised  cost  of  $0.44
per mBtu for synthetic gasoline.

     In a less detailed  report  than the  DHR  study described above,
ICF,  Inc.  also  examined  the  costs  associated with  methanol/
synthetic gasoline  distribution.[19]   Both short- (268  miles)  and
long- (1,039 miles) range pipeline scenarios  were  examined in that
study also.  There,  the average cost of distribution  from produc-
tion facility to  bulk terminal  was estimated to be  $0.44 per mBtu
for  methanol  and  $0.22 per mBtu for  synthetic  gasoline.   These
costs, however,  did  not consider terminaling costs;  the  DHR  study
did.  When these  costs  are  subtracted from the  DHR estimates  given
above, average distribution costs from  plant to bulk  terminal  are
estimated to be $0.40 per mBtu  for methanol and $0.29  per mBtu for
synthetic gasoline  (revised).   As can be seen,  the two reports  are
in close agreement,  especially  for methanol where  the  DHR estimate
is $0.04 per mBtu less.  The gasoline estimates  are further  apart
and  the  ICF projection is  the  lower  of  the  two.   This  is due  to
the fact that  ICF made the same  simplistic  assumptions concerning
the  relative  costs  of methanol  and  synthetic  gasoline transport
discussed earlier. .  That  is,  gasoline would  cost  one-half  as much
to distribute  via pipeline as  methanol.  Using the  original  DHR
estimate  based  on  this  assumption   for comparisons,  an  average
distribution cost for synthetic gasoline would be $0.21  per  mBtu.
This is very close to the ICF value of $0.22  per mBtu.

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                              -28-
                             Table 8

        Distribution Costs to and Including a Bulk Terminal
               For a Wyoming Methanol Plant,  fc/mBtu
        	(1981 dollars)[1,17]	

                                        Pure             Gasoline
                                      Methanol      DHR     Revised

Pipeline, 1000 miles to                 .48         .26       .35
  Minneapolis, Chicago, or Kansas
  City

Bulk terminal operating cost*           .15         .15       .15

Added Storage in bulk terminal          .10         	      	

                                        .73         .40       .50

Pipeline
Capital Cost;  (millions of dollars)

1000 mile, 14 inch diameter             165

1000 mile, 10 inch diameter                              118
*  No interest charges are made for the stored fuel.

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                               -29-
     D.    Distribution  Costs  from  Bulk  Terminal  to  Retailers
           (Local Distribution)

     Local distribution  is  primarily done by tanker  truck.   Since
trucks would  be making  periodic  trips,  as  opposed  to  the  fixed
pipeline  carrying   fuel,  it  is  likely  that  the  costs  per  unit
volume  would  remain  fairly  constant.    Some economies  of  scale
could probably  be  realized  from a switch  to  methanol,  but  overall
more  trips will have to  be made  since  trucks  cannot  increase  in
size by the necessary amounts due to state weight limitations.

    .This approach  was  followed in Table  9,  which  gives  the  costs
of transporting  synthetic gasoline and  methanol by tank  truck for
distances from  5 to  75  miles.   These  costs are  based  on  trucks
with  9,000 gallon  capacities with  one  stop delivery and an  empty
backhaul.  Capital  costs account for roughly 40 percent of  total
costs while operating and  maintenance  accounts for  the  remaining
60  percent.   Tank  trucks  cost  $76,000-82,000  each  with $49,000-
55,000  for  the  tractor and  $27,000 for a  trailer  having  vapor
recovery equipment.[1]   For the purposes of  this study,  a  typical
distance of 50  miles  will be used.   Thus,  local methanol  distri-
bution would  cost   $0.28  per mBtu while  synthetic gasoline  would
cost $0.14 per mBtu to transport this-distance.

     E.    Retailer Costs

     The costs  of retailing fuel are more like  those  of long-range
distribution  than  local distribution.    That   is,   the  costs  of
retailing are primarily  fixed  costs,  such as land or  rent.   Unlike
the  case with  long-range   distribution,  however,   large  capital
investments should  not  be  required.   Instead  of  installing more
storage  tanks  to facilitate  the sale of  larger volumes of  meth-
anol, it would  be more  likely  that the  service  station would  mere-
ly  receive more  frequent   deliveries   from  the  bulk  terminals.
Instead of filling  their methanol tanks  once a  month, for example,
the  retailer  would  fill  these  tanks  every two  weeks.  Such  a
procedure would  avoid the capital costs  associated  with installing
new  storage  tanks,  unless  of  course his  existing  tanks  are not
compatible with methanol'.   Retailing also differs  from both  long-
range and local distribution in that the critical marketing factor
is  fuel  energy  used and not volume.  The following example should
clarify this point.

     First, let it  be assumed  that  gasoline  and methanol cost the
same  per  unit  energy (e.g., gasoline is $2.00 a gallon  and  meth-
anol  is $1.00  per gallon).   Also,  let  it  be  assumed  that both
gasoline and me.thanol engines have  the  same  fuel  efficiencies,  so
that a person with  a  methanol-fueled auto buys  twice  the volume of
fuel  as  a  person with a gasoline-fueled  car.  With methanol, each
retailer would  sell twice the volume of  fuel as compared to  gaso-
line,  but  the  same amount  of  energy,  and  would obtain  the same
amount  of  revenue.   His operating costs would  change very little,

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                      -30-
                      Table  9

        Tank Truck Distribution  Costs[1,17]
        	(1981 Dollars)	

Distance                       Cost, $ per mBtu
 (Miles)                    Methanol      Gasoline

    5                         .13           .07
   25                         .21           .11
   50                         .28           .14
   75                         .37           .19

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                               -31-
since his fixed  costs  dominate  and  actual pumping costs are negli-
gible.

     The  above  scenario  is  very  reasonable,  except  that  it  is
likely that  methanol engines will  be as much  as 20 percent  more
fuel efficient than  gasoline  engines  and  less  total  energy will be
required.  If  this were the case,  then each vehicle  would require
less fuel (in  terms  of energy)  per fill-up or  fill-up  less often.
In  either case,  retailers would  see  a  reduction  in  sales,  but
costs would  remain at  or very near prior levels.  If all stations
remained in  business,  then the  total cost of  fuel retailing would
remain constant  under  this scenario,  as it  did under  the  prior
scenario.  Since the total  amount of  energy  distributed will be 20
percent less,  the cost for retailing methanol per mBtu will be 25
percent  higher.   However,  experience  with  the  current  gasoline
retailing situation  might  say that  the current drop  in demand for
gasoline is  forcing  some retailers out  of  business, and reducing
the  overall  cost of  retailing.   In  the  extreme, then,  one might
expect that  a  20 percent drop in fuel  (energy) usage would result
in  the  need  for  20  percent less  retailers  and  reduce  overall
retailing costs  by 20  percent.  In  this case,  the cost  for retail-
ing methanol per mBtu would be  the  same as gasoline  since both the
amount of energy and  the  cost  of  retailing would  decrease by  20
percent.   Since  it is  impossible to determine  which  of  these situ-
ations would  actually  occur,  both  will be  used to bracket  the
possibilities.

     Typical retailer mark-ups are estimated to be in the range of
$0.05-0.18 per gallon  of gasoline.[20]   However, since  the  lower
mark-ups are usually associated with  the  high-volume  stations,  the
average mark-up  per  gallon  of gasoline sold  in the U.S.  should be
nearer to the lower limit,  about  $0.09  per  gallon,  or  $0.76  per
mBtu.  For methanol, the cost would lie between  this value  and 25
percent more since the total  amount of  energy  distributed would be
20 percent less  due  to the expected  higher  efficiency  of methanol
engines.   Thus,  the  cost of  retailing methanol would  be $0.76-0.95
per mBtu.

     In  deriving  these  retail costs,   no  attempt  was  made  to
account  for  any additional  costs  the  retailer  would   bear  when
methanol is  first introduced.  For example,  he will have  to  make
some monetary  allowance for  the  initial small volume  of  custom-
ers.  The retailers  in some instances will also  incur  costs asso-
ciated with  installing new tanks if  the  existing ones are incom-
patible or unavailable  due  to large demands  for the  specific fuels
they contain.  (This topic  is addressed in Section V.)   The afore-
mentioned  retailing   costs   should   therefore  be   considered  as
long-term costs,  after the methanol market stabilizes.

     As  mentioned  earlier,  in  the  cases of  long-range  and  local
methanol distribution  costs,  it was assumed  that  methanol vehicles
would  have   the  same fuel  efficiency as  their  gasoline counter-

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                               -32-
parts.   Thus,  the  volume  of methanol  needed was  twice that  for
synthetic gasoline.   Although  this  approach appears  inconsistent
with  that  followed to  determine  retail  costs,  each procedure  is
conservative with  respect  to the  estimation of  methanol distribu-
tion  costs.   That  is, in  all  instances the assumptions  were  made
which would  tend  to  increase  the  cost  of distributing methanol
relative to gasoline.  This  was done  to help  assure  that the costs
of  distributing  methanol  were  not underestimated,  since some  of
the costs of conversion are inevitably overlooked.

     F.     Total Distribution Costs

     The total  cost of  distributing  methanol and synthetic gaso-
line can now be determined by combining the costs presented  in the
last  three  sections.   Methanol would cost  $1.69-1.88  per mBtu  to
distribute; gasoline  would  cost  $1.34  per mBtu.   Gasoline  has  a
significant advantage over methanol  in  terms of  percentage  (21  to
29  percent),  but  the absolute  difference  is  only  $0.35-0.54  per
mBtu.

     In order to understand  the implications  of  these  higher meth-
anol distribution  costs, it  is useful to know what fraction  of the
total fuel  cost  is due  to distribution.   In Table  10!  the  plant-
gate, [21]  distribution,  and at-the-pump  costs   for  methanol  and
synthetic  gasoline  are  given.   As  can  be  seen,  distribution
accounts for  13-22 percent  of methanol's  price at  the pump  and
8-15  percent  for gasoline.  Thus, it is  clear that  the  dominating
factor in determining the  retail  price  of  each  fuel is  production
costs.

V.   Distribution Capacity Needed to Support a Synfuel  Industry

     In the first  two sections  of this  report the existing  petro-
leum  fuel   distribution system   and  technical  factors  affecting
methanol  distribution  were  discussed.   A  key  question   to  be
answered when considering  the viability of  a  given synfuel is  "how
much distribution  capacity is needed  to support  it?"   This  section
expands  upon  the  discussions  in the  first  two sections  in  an
attempt to answer  this  question.   Also, this section will  discuss
the total capital  cost  of  implementing  this capacity based  on the
findings of the previous section.

     A.     Future Fuel Needs
     First, it  will be  necessary to know approximately how  much
methanol  or  synthetic gasoline  must be  distributed  to fuel  the
nation's  automotive  fleet.   Table 11  shows the  expected  consump-
tion  of gasoline  and diesel  fuel  for  selected  future years  as
projected  by  Data  Resources,  Inc.[22]   To simplify  this  discus-
sion,  it  will be  assumed that  synfuels will be  used to meet  20
percent of the nation's transportation fuel needs by the year 2000.

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                              -33-
                             Table 10

                     Synthetic  Fuel  Costs*[21]
                     	( $ per mBtu)	
                                Methanol         Synthetic Gasoline
Plantgate Costs                5.90-12.42            7.35-15.29

Distribution Costs             1.69-1.88                1.34

Cost at Pump                   7.59-14.30            8.69-16.63
*     The   range  of  plantgate   costs   for  each   fuel   reflect
differences due  to capital  charge rates of  11.5 and  30  percent.
Bituminous  coal  was  used  as  a  feedstock  to  each.   The  methanol
price  range  is  from  the   Texaco  process  (low)  and  the  Koppers
process  (high).   That  for  synthetic  gasoline  was  based  on  the
Mobil MTG process.

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                              -34-

                             Table 11

                   Future Motor Gasoline Demand
                      (Billions of Gallons)[22]

                           1985        1990        1995       2000
Motor Gasoline
   Regular
   Unleaded
Diesel
89.6
23.2
66.4
20.5
81.1
9.7
71.4
29,8
78.2
9.2
69.0
36.7
78.4
8.7
69.7
4 3 .'8
                          110.1       110.8       114.9      122.2

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                               -35-
     The 122.2  billion gallon total  for  gasoline and  diesel  fuel
in 2000  has the same  energy content as  267.4 billion gallons  of
methanol.[14]  Thus, if methanol were chosen  to meet  20 percent  of
these needs, approximately 53.5 billion gallons of  that fuel would
suffice.   Similarly,  if  synthetic gasoline is relied upon  for  20
percent of  the nation's transportation needs  in 2000,  then roughly
27 billion  gallons  of  it  would be necessary.  The  total  volume  of
transportation fuel in the year 2000  under  the 20 percent methanol
scenario  is roughly  151.3  billion  gallons,  while  that for  the
synthetic gasoline option is 122.2 billion gallons.

     B.    Long-Range Capacity

     In order to  produce  53.5 billion gallons of  methanol annual-
ly,  35  methanol  plants  would be  needed,  each  producing  100,000
barrels per day.  Without  knowing  where each  of  these plants would
be located  it is  impossible  to know the exact nature  of  the asso-
ciated distribution network.   To  simplify the discussion here  and
to represent an upper  limit  of needed capacity it  will be assumed
that  new pipelines will  be  constructed  to  facilitate  all  long-
range distribution.

     In  the previous  section  it  was determined  that  for  western
markets,  a  14-inch  pipeline  would  be  sufficient  to  transport
100,000 barrels of  methanol  per  day 1,000 miles  to major markets.
Similarly  for eastern  markets, two pipelines, 10 and  12  inches  in
diameter,  stretching  100  and  300  miles,  respectively,  could  also
facilitate  100,000 barrels  per  day  to  major markets.   Assuming
that  17  of the necessary 35  methanol  plants are  located  in  the
west  and  18 in the  east, then there would  be  a need  for  17,000
miles of 14  inch  pipelines,  5,400 miles having a  12  inch diameter
and 1,800 miles with a 10 inch diameter.

     The  capital  costs  for  these individual new pipelines  were
given earlier  and can  be found in  Tables  7  and 8.    Using  these
values,  the aggregate cost  to the nation  for new methanol pipe-
lines  for  the  above methanol  scenario  would  be  roughly  $4.0
billion.

     Following  a  similar  approach  for  the  synthetic  gasoline
option, 17,000 miles  of  10 inch diameter pipeline  would be needed
to connect  western production facilities  with major  markets.   For
the 18 production  facilities  in  the east, 5,400 miles  of 8.5 inch
diameter  pipeline and  1,800  miles  of 7 inch  pipeline would  be
needed.  Using  the individual capital costs  given in  Table  7  and
8, the aggregate cost  to  the  nation  for  the new synthetic gasoline
pipelines would be  approximately $2.8 billion.  Thus,  pipelines  to
facilitate  the  methanol  option would  cost  roughly   $1.2  billion
more nationwide than that needed for the synthetic gasoline route.

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                               -36-
     C.    Bulk Terminal Capacity

     Typical gasoline  bulk terminals are  large enough  to  facili-
tate an approximate  10 day supply from the  refinery.[13]   If  this
rule of thumb  is  also applied  to  methanol,  then the  average  bulk
terminal would  need to  hold  1 million gallons for  each  methanol
plant  that  sends  its  total  production to  it.   Since,  however,  a
given  volume of methanol is  in effect  replacing half  that  volume
of  gasoline,  the  storage capacity  that  previously  went  to  the
gasoline  should be  available  for  methanol.   Thus  only  500,000
gallons of  capacity would have  to be added  to each  terminal  for
each 1 million  gallons of methanol  it would store.   From  Table  6
it  can be  seen that  a storage tank of this size would cost  $719
thousand.   The  total costs to  the  nation  to  construct enough meth-
anol storage  tanks at  bulk  terminals to  store the  production  of
3.5  billion  barrels per  day  would  be roughly  $25 million.   Note
that this cost  does not include the purchase of  land  on which  to
locate  the  additional  tanks.   This was  not  included since  the
degree  such land  would  be  needed  and  the  associated costs  are
unknown.  These costs, however,  should be minimal  compared  to  that
for tank purchases.

     For the synthetic gasoline  option, it  is likely  that  existing
gasoline  terminals would  also  be accessible  to  synthetic gaso-
line.  Thus no additional tanks at bulk terminals would be needed.

     D.    Tank Truck Capacity

     As noted  earlier,  the  National  Petroleum Council  estimates
that as of  December  1978 there  were approximately  40,000  tank
vehicles hauling liquid  products.[7]  The total capacity  of these
trucks  was  approximately  291.5 million  gallons.[7]    The  average
size truck  in  such a fleet would  have a  capacity of  nearly 7,300
gallons.  For  that same  year, Data Resources  reports a total  of
122.8  billion gallons  of  motor fuel  were  consumed.[22]  Thus,  each
tank truck  has a yearly  haul of  approximately 3  million  gallons,
or approximately A20 hauls per truck per year.

     Since  a  total  of 151.3  billion  gallons  of fuel (methanol,
gasoline  and  diesel)  are needed  under  the 20  percent  methanol
scenario,  there would be  28.5  billion gallons  more  fuel  consumed
in  2000 than  in 1978.  If the  number  of  hauls  per truck  per  year
remains constant,  and  assuming the same  ratio  of  tank truck  to
nationwide  capacity,  the same  individual  tanker capacity  as  that
sited  above,  and  no spare capacity in  either the  1978  or  2000
systems,  then   an  additional  9,300  tank  trucks  would  be  needed.
Tank  trucks this  size  cost   roughly  $78,000  each. [1]  Thus  the
total  cost  of   9,300  tankers  would be approximately  $725  million.
Since  nearly  the  same volume  of fuel was consumed  in  1978 as  is
projected for  2000 under  the  synthetic  gasoline option,  no addi-
tional capacity would  be  needed in 2000 for gasoline over the  1978
level.

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                               -37-
     If, however,  the trucks dedicated  to methanol  transfer  make
twice as many  hauls  per year to  retail outlets as  their  gasoline
counterparts then  no additional trucks  would  be needed over  that
necessary for  gasoline  transportation.   This is a  likely  scenario
given  the  significant  cost  of tanker  trucks.[23]   Although  this
approach would not require an initial capital  investment for meth-
anol delivery  trucks,  the  fact  that they  would  be  operating twice
as many miles  per  year as  the gasoline  trucks  indicates they  will
need replacing twice as often.   Thus,  in  the  long  term,  the  $725
million additional  dollars for methanol tankers will  have to  be
spent, but the impact would be spread out over a number of  years.

     E.    Retail Capacity

     If, as depicted above,  approximately  the same  volume  of  fuel
was consumed in  1978 as is projected for  2000  under the  synthetic
gasoline  option,  then  no  additional   retail  capacity  would  be
needed for  gasoline in  2000  over  1978  levels.  Given the  likely
scenario whereby retail methanol  tanks  would  be  filled   twice  as
often  as  gasoline  tanks,  there  would  similarly  be  no  need  for
additional  storage  tanks  for  methanol.    Those  constructed  of
fiberglass laminate  will,  however, need to  be replaced by  carbon
steel tanks due  to their incompatibility with  methanol.  Since,  as
mentioned earlier, fiberglass tanks will only  comprise roughly  25
percent of all retail  tanks  in 2000, and  since  methanol will  only
comprise a  fraction of  service station  storage needs, the  degree
of this substitution is likely to be minimal.

     F.    Cost  Comparisons Between Synfuel Options

     The total costs of  implementing distribution  networks  for the
two  synfuel options can  now  be  approximated by  combining  the
individual costs for each distribution  component.   This  has  been
compiled in Table 12.   As can be  seen  the  distribution network for
a scenario which yields 20 percent of  the nation's  transportation
fuel needs  in  2000  by. methanol would  cost  roughly  $4.75  billion.
A similar  network whereby the  same fraction of fuel  was  supplied
by  synthetic  gasoline would  cost $2.8  billion,  or  $1.95  billion
less than the methanol option.

     In order  to  put these  findings  into  perspective,  one  must
also consider  the differences in the  production  facility  capital
costs associated with  each scenario.  It has been estimated that a
methanol plant  of the  size  depicted in this  study would  cost  at
least $680 million less than  a  similar  facility which yields gaso-
line. [21]   The relative  capital costs here are approximately $1.99
billion for  a  methanol  plant and $2.67 billion for the  synthetic
gasoline facility.

     Thus,  to  produce  enough methanol  to meet  20  percent  of the
fuel demand  in  2000 would require an investment  of approximately
$69.7  billion.   If the  synthetic  gasoline route were  chosen, the

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                              -38-
                             Table 12

          Capital  Costs of  Synfuel Distribution in 2000
                     (Billions of 1981 Dollars)
Pipelines

Bulk Terminal

Tank Trucks

Retail C

Total
Methanol
4.0
lal 0.025
0.725
icity 0.0
4.75
Synthetic Gasoline
2.8
0.0
0.0
0.0
2.8

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                               -39-
total capital costs  for the requisite production  facilities  would
be $93.5 billion.   As  can be  seen,  the  capital costs  for  distri-
bution are dwarfed  by  production capital costs which are 15  to  33
times as great.

VI.  Conclusions

     It  has  been  noted  that  the  petroleum product  distribution
network is very  complex and extensive.  Since there are  few  pipe-
lines and navigable waterways  near  the western  coal fields,   it  is
likely  that   new  pipelines  will   be  needed  to  support  synfuel
production in this region.  Railroads are  typically located  near
these fields and thus  could be  relied upon in the  initial  stages
of  synfuel  implementation.   Their  high  costs relative  to  pipe-
lines,  however,  precludes  their long-term use.    In  the  eastern
half of the U.S.,  there are  many pipelines and  navigable  waterways
which  could  support  synfuel  distribution to  some degree.   Here
also,  railroads  which  already  connect   coal  fields  with  major
markets could be relied upon in the early stages.

     The extent  to which the  existing distribution system can  be
used to support  a  synthetic  fuels  industry is impossible  to deter-
mine  accurately due  to  the  lack  of information concerning  the
exact location  of future  synfuel  plants and unanswered  questions
regarding the compatibility of  these  new  fuels,  especially  meth-
anol, with materials in the existing network.

     Material compatibility  problems  of methanol  which have  been
identified include:  1) its  leaching out of  ordinary pipe  dope  in
pipelines,  2)  the  dissolution  of  rust inhibitors from  pipeline
inner walls during  batching, 3)  the deterioration  of  certain  plas-
tics and rubber compounds, and  4)  the tendency of  methanol  fuels
to gum  when  stored in polyester-fiberglass laminate tanks.   None
of these problems  appear  to  be significant at this time.   Research
has  been initiated  by major  oil  companies  to  examine these  and
related issues in more detail.

     The cost of distributing  methanol from plantgate  to  customers
at a  retail  outlet  is approximately  $1.69-1.88  per million  Btu.
Similarly,  synthetic gasoline  would  cost roughly $1.34  per  million
Btu  to  distribute.    These  costs  are responsible  for  13  to  22
percent  of methanol's  price at  the pump and 8  to 15  percent  for
synthetic gasoline using  production cost estimates developed  else-
where .

     In  order for  methanol to  meet  20  percent  of the  nation's
transportation .fuel needs  in  the  year  2000,  approximately  $4.75
billion  would be  required  to  increase  current  capacity  in  the
motor  fuel  distribution  network.    If  synthetic  gasoline  were
relied upon to meet  this  same  requirement, then $2.8 billion would
be needed.  Thus,  choosing methanol would  necessitate  the spending

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                               -40-
of  $1.95  billion  over  that  required  for  synthetic  gasoline  to
facilitate distribution.

     These  capital costs  are quite  small,  however,  compared  to
those necessary  to construct  the requisite  production facilities.
A single methanol  production  facility yielding  100,000 barrels  per
day  costs,  for   example,  approximately   $680 million   less   to
construct  than  a  comparable  synthetic   gasoline   plant  ($1.99
billion versus $2.67 billion).  Thus, the  construction costs asso-
ciated with building enough methanol plants to meet  20  percent  of
domestic  needs  in 2000 would  be  approximately  $69.7  billion.
Synthetic gasoline  plants  necessary  for this amount of  fuel would
cost a  total  of roughly  $93.5  billion.  The methanol  route would
therefore be $23.8 billion less expensive in terms of plant costs.

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                               -41-
                            References

     1.    "Methanol Use Options  Study," DHR Incorporated  for DOE,
Draft, Phase  I, Vol.  Ill,  Appendices  D-F,  Contract  No.  DE-AC01-
79PE-70027, December 1980.

     2.    "Environmental   Aspects    of    Synfuel   Utilization,"
EPA-600/7-81-025, March 1981.

     3.    "Petroleum  Storage  and Transportation  Capacities,  Vol.
Ill,  Petroleum Pipelines,"  National  Petroleum Council,  December
1979.

     4.    Personal  communications  with  William  Samp,  Willaims
Pipeline Co., Tulsa, OK, December 1981.

     5.    Personal  communication with Richard  Tinneal,  Conoco,
Houston, TX, December 1981.

     6.    "Petroleum  Storage  and Transportation  Capacities,  Vol.
V. Waterborne  Transportation," National Petroleum  Council,  Decem-
ber 1979.

     7.    "Petroleum  Storage  and Transportation  Capacities," Vol.
IV,  Tank Cars  arid Trucks,  National  Petroleum Council,  December
1979.

     8.    "Petroleum  Storage  and Transportation  Capacities," Vol.
II,  Inventory  and  Storage,  National  Petroleum Council,  December
1979.

     9.    "BP  New  Zealand  Experience  with  Methanol-Gasoline
Blends," G.R. Cassels, et al., BP New  Zealand  Ltd.,  Proc.  3rd Int.
Symposium on Alcohol Fuels Tech., Asilomar, CA, May 29-31,  1979.

     10.   "Gasoline-Methanol   Fuel    Distribution   and   Handling
Trial, "R.W. Hooks and R.  Sagaive,  Deutsche Shell  AG,  PAE-Labor,
Hamburg, West  Germany, Proc.  3rd  Int.  Symposium  on  Alcohol  Fuels
Tech. Asilomar, CA, May 29-31,  1979.

     11.   "New   Zealand's    Methanol-Gasoline   Transport    Fuel
Programme,"  Graham,  E.,  et  al.,  University of Canterbury,  Proc.
3rd  Int.  Symposium on  Alcohol  Fuels Tech.,  Asilomar,  CA,  May
29-31, 1979.

     12.   Personal  communications  with  Jerry  Hurley,  American
Petroleum Institute, Washington, D.C.,  December 1981.

     13.   Personal communications with F.B. Killmar,  Owens  Corn-
ing, December 1981.

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                               -42-
     14.   Personal  communications   with  Bryce   Cecil   American
Petroleum Institute, Washington, D.C., December 1981.

     15.   "Methanol As  An  Alternative  Transportation Fuel,"  R.
Rykowski, et  al,  Presented at  Sixth  Symposium of  Env. Aspects  of
Synfuel Conversion Technologies, Denver Co, October 26-30,  1981.

     16.   Personal communications with Robert Maxwell, U.S.  EPA,
Ann Arbor, MI, April 1981.

     17.   "Economic  Indication,"  Chemical   Engineering,   p.   7,
April 6, 1981.

     18.   Personal Communication  with  Bill  Taylor, Marathon  Oil
Co., Findlay, Ohio, Apri 1982.

     19.   "Methanol From Coal:   Prospects and  Performance As  A
Fuel and As A Feedstock," ICF, Inc.,  December 1980.

     20.   Personal  communications  with  John  Ayling,   Lundberg
Survey, Inc., North Hollywood, CA,  February 1981.

     21.   "Indirect Liquefaction  Processes,"   John McGuckin,  U.S.
EPA, Ann Arbor, MI, December 1981.

     22.   Energy Review, Data Resources, Inc., Winter 1980.

     23.   Personal  Communications   with  Lana   Butts,   American
Trucking Association, Washington, D.C., April 1982.

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