Construction at Patriot Renewable Fuels continues while ethanol production increases
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By Stephen Elliott, selliott@qconline.com
ANNAWAN -- As Americans watch gasoline prices hover around $3 a gallon and crude oil push toward $80 a barrel, workers at Patriot Renewable Fuels labor outside in the hot sun.
Amid corn fields and dirt and just south of Interstate 80, a $165 million ethanol plant is under construction. It's a massive project. There currently are 115 ethanol plants nationwide, according to Renewable Fuels Association, and another 79 under construction.
Building the plants is complex, with success depending on variables such as investors, loans, materials and commodity prices.
Not all companies have been able to get off the ground, like Patriot. Other projects are stalled because of higher corn prices or the inability to secure financing.
At Patriot, workers are putting down railroad track, which will be used to bring in corn and bring out ethanol and corn byproducts that will be used as animal feed.
"I don't think there has been a new project in Henry County that has built nine miles of railroad track," said Patriot President and CEO Gene Griffith.
Two cement 110-foot storage towers will store the distiller's grain, or animal feed, before it is shipped out. In the coming weeks, silos will be built that have storage capacity for a million bushels of corn. Evaporator towers are already in place.
The 400-some acre facility will have space for up to 500 rail cars. They'll move into and out of the area on Iowa Interstate Railroad lines.
Patriot started construction in January 2007. It is scheduled to open in late spring of 2008, providing 45 to 50 quality jobs, Mr. Griffith said.
He is confident of ethanol's viability in America. But it may not be a godsend for everyone.
Higher corn prices due to the demand for ethanol are driving up livestock feed prices. That translates to higher prices at the grocery store for consumers.
Jeff Squibb, a spokesman with the Illinois Department of Agriculture, said there has been a 17 percent increase in corn planting nationwide because of ethanol. There are six ethanol plants in Illinois, Mr. Squibb said, and about another 40 being developed.
"There are concerns," Mr. Squibb said. "Livestock producers are worried about the cost of feed. Corn and beans are used for animal feed. Increased feed costs impacts the profitability of their operations."
And higher corn prices mean less profit for the ethanol producers.
But, ethanol is home grown and is getting a push from the federal government in the form of tax credits for producers. Ethanol reduces petroleum dependence and pollutants, such as carbon dioxide, according to the Illinois Corn Marketing Board.
Approximately 6 billion gallons is produced nationwide, according to Patriot's project coordinator, Judd Hulting. He said production is expected to reach 12 billion gallons, or about 10 percent of American's gasoline consumption, in coming years.
"The industry is growing at an unprecedented rate," Mr. Hulting said. "It's going to cause a lot of industry adjustments."
Ray Defenbaugh, who has successfully operated Big River Resources, a farmer-owned ethanol plant in West Burlington, Iowa, since 2004, is ready to begin construction on a plant in Galva this year.
He said some prospective developers are realizing the difficulties of getting everything in place.
"It's like pieces to a puzzle," Mr. Defenbaugh explained. "It takes a combination of things to make a plant work at a particular site. Transportation, electricity, gas, water and incentives.
"A lot of people staked their claim on trying to build a project. But then, as they were developing through those issues, they found other issues."
He said some plants couldn't secure bank loans or acquire enough community interest from investors.
At Patriot, Mr. Griffith said they were able to secure 200 investors, which in turn, helped in securing loans from several different banks.
Rich Goldstein, president of River/Gulf Energy, Davenport, associated with Alter Barge Line in Bettendorf, and executive vice president of Alter Company in St. Louis, announced plans in the spring of 2006 to build a $100 million ethanol plant in Buffalo, Iowa.
Those plans have been put on hold because, in part, of higher corn prices.
"The corn risk is higher than it used to be," Mr. Goldstein said. "The volatility in price is much more than it used to be. And, the tightness of credit is happening now among all industries. Another factor is construction costs for ethanol plants are skyrocketing."
Yet, he still wants to build. Mr. Goldstein said he is interviewing prospective investment partners daily.
Ethanol also is part of the plans in Kewanee, but the progress there is unknown.
Bill Price, executive director of Kewanee Economic Development Corporation, would divulge little about a proposed ethanol plant in the city. In March, it was announced that a Moline company, Ethanol Production Company, signed an agreement with the Lininger Industrial Park in Kewanee, giving EPC the option to buy the ground.
"We're working on it," Mr. Price said Friday. "It's pretty much stuff we can't talk about. It's ongoing. It's active. Just because there is no publicity doesn't mean we're not working on it."
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