Propose ethanol plant going against the grain

Monday, January 19, 2004

Two farmer-owned ethanol plants have had success in Missouri, but there's no track record in the state for an ethanol plant that doesn't involve farmers in the ownership mix, industry observers say.

That hasn't stopped efforts to build a $58 million ethanol plant in Cape Girardeau's Nash Road industrial park without the help of a farmers' cooperative to turn corn into fuel.

At its board meeting Nov. 12, the Cape Girardeau County Industrial Development Authority approved issuing up to $250 million in revenue bonds for the project. The bonds would be purchased by investors and retired by Renewable Power of Marshall, Mo., which plans to build and run the ethanol plant and at a later date a related power plant that could generate electricity from garbage.

The ethanol plant is projected to create 35 to 40 permanent jobs and would produce 40 million gallons of fuel annually, using an estimated 15 million bushels of corn.

Nationwide, there are 74 ethanol plants with the capacity to produce 3 billion gallons annually. Much of it goes to California, which has strict clean-air regulations. Ethanol plants produce grain alcohol, which is added to gasoline to make a cleaner-burning fuel.

Missouri only has two ethanol plants up and running, one in Macon in northeast Missouri, the other in Craig in the northwest part of the state. Combined, they use about 24 million bushels of corn annually and produce over 60 million gallons of ethanol.

The Missouri Corn Growers Association says there's limited room for growth in the ethanol industry in the state. But Fred Stemme, the organization's marketing director, said a new energy bill in Congress could mandate greater use of ethanol as fuel, possibly doubling nationwide consumption by 2012.

A study commissioned by the association in 2001 concluded that Missouri currently could support as many as five plants, each generating 30 to 50 million gallons of ethanol a year. The estimate took into account the amount of corn harvested in Missouri and economic factors.

Limited by supply

For Missouri, the primary limiting factor would be the corn supply, said Stemme. Missouri farmers harvested 2.8 million acres of corn last year, including an estimated 460,000 acres in Southeast Missouri. Statewide, the harvest amounts to about 300 million bushels.

Another factor that could limit growth is competition between ethanol planets, which cuts into state funding for the industry, said John Eggleston. He is a Memphis, Mo., corn grower and president of Northeast Missouri Grain in Macon, where the state's first ethanol plant opened in May 2000.

The state initially earmarked $3.1 million in production payments for ethanol plants. But state budget cuts have lowered the amount, Eggleston said.

Last year, the two operating ethanol plants split about $1.6 million in production payments. As more ethanol plants are added, there will be less money available to each plant, he said.

The state only provides production payments to farmer-owned plants, so Renewable Power ethanol plants won't qualify for state payments, Eggleston said.

Farmer-owned plants also benefit the farmers investing in the operation who sell their crops to those plants. Without farmers as investors, Stemme said, a plant like the one proposed in Cape Girardeau must depend strictly on market prices to get the large amount of corn needed.

Corn is 70 percent of cost

Steve Burnett, general manager for Northeast Missouri Grain, said corn purchases account for about 70 percent of the cost of operating an ethanol plant. As the number of ethanol plants increases, so does competition for corn. Stemme said it won't be profitable for plants if they have to pay too high a price for corn.

So far, no bonds have been sold for the Cape Girardeau plant, and no date has been set for a groundbreaking. Mitch Robinson, Cape Girardeau County's industrial recruiter, has confidence in the project. He's hoping to secure a $350,000 grant from the state to construct a road and extend water and sewer service to the Nash Road site.

Robinson, who has been working to land the plant for more than a year, said construction could get under way this spring on a 32-acre soybean field south of Nash Road near the Spartech plastics plant. The ethanol plant could be in operation by spring 2005.

The power plant venture isn't as far along in the planning stage. It would require another 20 to 40 acres, Robinson said.

Phil Danforth, general manager for Renewable Power, said preliminary work is under way for construction of his company's ethanol plant at Marshall, Mo., in Saline County, and plans are in the works for the Cape Girardeau plant and one in Carbondale, Ill.

"We are getting money together now," he said.

Meanwhile, construction already has started on a farmer-owned 40-million-gallon ethanol plant in Saline County in Malta Bend, not far from Marshall.

Danforth had approached two farmer cooperatives to invest in the plant, but they merged and decided to build their own plant with the help of a tax abatement agreement from the Saline County Commission. That involved the issuance of $62 million in bonds.

Danforth said the competition won't hurt development of his proposed 30-million-gallon ethanol plant in Marshall. But groundbreaking for his plant in Marshall wasn't held until Sept. 30 of last year, more than a year after originally planned.

Securing financing for the plant and the necessary environmental permits presented Renewable Power with several delays.

Other possible ventures

In addition to the Malta Bend plant now under construction, farmers are looking at possible ethanol ventures in Stoddard County in Southeast Missouri and Audrain County in northern Missouri.

Jackson farmer Roger Schwab said he hopes the Cape Girardeau ethanol plant is built. "It would definitely be a benefit any time we can get another market for our corn," said Schwab, who, along with his brother, plants about 500 acres of corn.

He said the plant could buy corn from throughout the region.

"I believe there is enough corn produced in this area to support an ethanol plant," he said.

335-6611, extension 123

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