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Posted on  

January 27, 2003

Ethanol May Help Rural Communities

Anne Knowles
Senior writer – Northern Nevada Business Weekly

Northern Nevada economic developers and some farmers are looking into fostering an ethanol industry here to help the area’s struggling rural economies.

Policy makers and agriculturists met earlier this month to learn about the alternative fuel and to brainstorm ways in which Nevada could get a foothold in the growing industry, including building a plant in Winnemucca capable of producing 30 million to 40 million gallons of ethanol a year.

Ethanol is made primarily from corn, which is broken down and distilled, and used as a blend with gasoline or diesel fuel to power cars, trucks and fuel cells. It can be used both as a fuel or fuel blend and as a replacement for MTBE — methyl tertiary butyl ether — the widely-used fuel oxygenate that replaced lead and has caused serious groundwater contamination in many areas, including Lake Tahoe.

Eighteen states have banned the use of MTBE. Nevada has not, but the state gets almost all its gasoline from producers in California, which has legislation to ban MTBE by 2004. Many producers there, including Philips-Conoco, British Petroleum-Amoco, Shell Oil, and Exxon-Mobil, plan to stop MTBE use earlier than that.

“By April, 55 percent of all California gas will be MTBE free,” said Pat Perez, manager, Transportation Fuel Supply & Demand Office at the California Energy Commission, during a presentation at the Nevada Ethanol Workshop in Reno.

California alone represents a huge market for ethanol. At present, California producers use 120 million gallons of ethanol annually; by April that will jump to 500 million gallons, said Perez. By 2004, they will need between 760 million gallons and 990 million gallons, he estimates.

“California would welcome Nevada ethanol plants because it would significantly lower their transportation costs,” said Perez. “Now they move it from the Midwest,” where almost all ethanol is currently produced in this country.

The question, though, is can Nevada build a profitable ethanol industry?

In 2001, corn was planted on 76 million acres of land in the United States. Only 3,000 of those acres were in Nevada and that was down from 4,000 acres the year before, according to the U.S. Department of Agriculture.

Almost all ethanol in the U.S. is made from corn. In a listing of 69 plants all but a dozen were making ethanol from corn, according to BBI International, an ethanol consultant in Golden, Colo. Of the 10 new plants now under construction in the U.S., all are planning to use corn. Other crops, such as potato and sugar beets, are being tried but may contain too much water. And the use of cellulosic parts of trees, brush and garbage to produce ethanol is still in the research stage, although it’s getting close to commercialization, according to Mark Yancey, director of consulting services at BBI.

“There have been a lot of questions whether we could grow corn,” said Lee Bosch, president, Bosch Motors in Winnemucca and a member of the Humboldt Development Authority. He said one farmer in Winnemucca has planted 35 acres that yielded about 140 bushels of corn per acre. “The corn came out great,” said Bosch.

Those yields as promising for a first run, said Bosch. Farmers in the Midwest, where most corn is grown, secure financing based on yields of 150 bushels per acre, although they produce up to 170 bushels per acre. Bosch said with the application of fertilizer, the corn yields here could approach 170 bushels per acre too.

Bosch said about 30 farmers are now interested in building an ethanol plant in Winnemucca, and the city and county have been supportive of a project. The group has found a site, as well as two back-up sites, and has permitting and secured the financing to build a plant capable of producing 30 million gallons to 40 million gallons.

The group now is talking to three consultants about doing a feasibility study that would look at four to five crops — including corn, artichokes and waste potatoes — that could be used to make ethanol. They hope to sign a contract for the study within a month. The study itself should take 60 days, primarily because a lot of data was already collected for a similar study in Idaho, said Bosch.

Construction could then begin in six months, at the earliest, and the plant could be completed in a year, he said. Such a plant would bring in $120 million annually to Humboldt County, according to Bosch.

If Nevada farmers can grow the corn, and build and operate the plant, everything could be uphill from there. The largest market, California, is right next door. One by-product from the production of ethanol — dry distiller grain soluble or DDGS — can be sold as feed for dairy cows, chickens and cattle. The process to dry it accounts for about 40 percent of a plant’s energy costs, but it can sold without drying if it is sold locally, which helps to significantly reduce overall costs.

Minnesota is home to 13 ethanol plants, including AGRI-Energy LLC in Luverne. The 20 million gallon per year plant, owned and operated by 200 farmers, was built in 1997 for $20.8 million with USDA loans, according to David Kolstrud co-op manager for CORN-er Stone Farmers Cooperative.

He said the farmers committed money and corn to the plant and since 1997 they have made three times their original investment. The plant was financed with a stock offering, which Kolstrud said is now worth four times its original price.

He estimates that each Minnesota plant pumps about $10 million annually into local economies. He said the state legislature has done studies demonstrating that for every $1 spent by the state on ethanol investments or credits, $13 gets returned to the community.

According to BBI’s Yancey, it costs about $1.50 a gallon to build a 20-million gallon capacity plant; the figure drops to $1.10 per gallon for a 60-million gallon plant. Production costs total about $1.40 per gallon: $1.20 for the process, 7 cents for administration and 13 cents for debt service. Revenue equals about $1.55 per gallon, for a pre-tax profit of 15 cents per gallon.



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