"An ethanol boom spurred by federal funding, private investment and intense farm lobby support is now quickly fading and many companies may find themselves bankrupt after the impending shake-up of the ethanol industry, Bankruptcy Law360 reported yesterday. Last year, corn-based ethanol was seen as the savior of the farm belt, which saw its return from corn products shoot to record levels after decades of declining prices. However, higher construction and feedstock costs, combined with a drop in ethanol prices, are sending previously profitable facilities scrambling to make ends meet. Several companies, such as Agassiz Energy in Minnesota and VeraSun Energy Corp. in South Dakota, have announced delays in plans to build new ethanol plants. Others, such as Alchem Ltd. in North Dakota, have been forced by market conditions to shut down existing plants, at least temporarily. Part of the reason the industry is now having trouble is due to overproduction; the United States has approximately doubled in production capacity since the Energy Policy Act was enacted in 2005, vastly exceeding people's expectations. Meanwhile, the special distribution infrastructure that ethanol requires has not been able to keep pace with the increased amount of product, said Dan Rogers, a partner at King & Spalding LLP who specializes in energy transactional work."
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