Ethanol production expected to have huge impact on Ohio's rural areas, corn farmers
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Fields of fuel
Ethanol production expected to have huge impact on Ohio's rural areas, corn farmers
Sunday, November 26, 2006
John Funk
Plain Dealer Reporter
Ohio has joined the green revo lution - turning corn into lu crative automotive moon shine.
Six "biorefineries" are under construction in the state, with a combined annual capacity of 500 million gallons of 200-proof ethanol. Up to another half dozen have either been proposed or will be proposed, say industry experts and state officials.
All the ethanol will be blended into gasoline, either at a 10 percent ratio to clean up tailpipe emissions, or at 85 percent to produce even cleaner burning E85 for the growing fleet of flex-fuel cars that can run on gasoline or ethanol. The giant fermentation and distilling operations will also churn out tons of animal feed, known to agribusiness as dried distillers grain.
The economic impact is expected to be considerable. The construction costs alone come to an average of $1.50 per gallon of capacity, making a 50 million-gallon plant, for example, a $75 million project before interest costs are added.
Not only will the refineries create jobs paying $15 to $22 per hour in hard-pressed rural areas, but they also are expected to boost employment for trucking and rail companies that will move the corn in and the ethanol and animal feed out.
And they will improve the sales of natural gas suppliers, since the plants will use prodigious amounts of fuel. At least one project, Coshocton Ethanol LLC, is talking to companies that can capture and sell the pure carbon dioxide created by the fermentation process - about 152 tons per year.
With just six plants now being built, "there will be a couple hundred new jobs tied directly to the ethanol plants and maybe as many as 1,000 jobs from related companies," said Lt. Gov. Bruce Johnson. He heads the Ohio Department of Development, which is offering loan, grant and tax credit packages to ethanol producers.
In order to encourage ethanol consumption, the state has made outright grants to service stations - $350,000 last year and nearly $1 million this year - to help pay for E85 pumps, and to terminals and blenders that store and mix ethanol with gasoline. (The alcohol is typically added at fuel terminals, not at refineries.)
In the long term, biofuels such as ethanol will generate enough wealth to create a rural renaissance and a "knowledge-based rural economy," said Tom Door, undersecretary for rural development with the U.S. Department of Agriculture, at a renewable energy summit in Columbus last week. "Renewable energy is rural energy. This is the opportunity of a lifetime."
The push for ethanol was underway in the Corn Belt years before the Bush Administration focused on it as a biofuel for energy independence.
There are 109 working ethanol refineries across the Midwest. This year they are expected to produce about 5 billion gallons - up 1 billion from last year, said Kristin Brekke of the American Coalition for Ethanol. Another 61 ethanol refineries are under construction, she said, or will soon be under construction.
The growing demand for corn as an ethanol refinery feedstock has already pushed up prices for the kernels to levels that were once as sociated with droughts.
The cash price for Ohio corn last week was $3.40 to $3.54 per bushel, nearly twice the $1.80 per bushel that the state's farmers earned on average last year.
"Yes, it does help raise the price of corn and that is good for Ohio's farmers," said Johnson. "The alternative is to keep burning gasoline made from Saudi and Venezuela oil."
The voracious demand for corn created by the refineries has created critics, though.
The Earth Policy Institute warns that ethanol production will this year swallow 55 million tons, or about one-sixth of the total corn harvest, yet supply only 3 percent of the nation's automotive fuel. Since America's farms typically supply 70 percent of the world's corn ex ports, the impact of ethanol produc tion from corn will be global.
And new ethanol plants are breaking ground quickly - one on average every three days, wrote Lester Brown, president of the institute, earlier this month.
The federal Energy Department has set 12 billion gallons as the top limit for corn- based ethanol produc tion and has estab lished a generous R&D grant program for making ethanol from wood chips, switch grass and prairie grass.
On Nov. 1, the agency set aside $17 million for grants supporting research into micro organisms capable of breaking down cellulose into alcohol.
Ohio's new ethanol plants are not likely to make local corn prices spike, said Dwayne Siekman, executive director of the Ohio Corn Growers Association.
"Based on size of corn crop and where our corn goes [to other states], we can sustain the six plants without a problem," he said. "And you can throw in three more plants without affecting local prices."
But the nation will need to grow more corn - and will, said Siekman.
One of the largest of the refineries now under construction is the 110 million-gallon plant scheduled to open in early 2008 in Greenville, northwest of Dayton.
The project is unique in that it involves an oil company and an agribusiness.
The Andersons Inc., an agribusiness, signed a deal in October with a subsidiary of Marathon Oil Co. to jointly build the plant and perhaps others in the future. The Andersons will manage the Greenville facility and Marathon will distribute the ethanol.
"We have been using renewable fuels for more than 20 years and are the second-largest user of ethanol in the nation," said Marathon spokeswoman Linda Casey. "This partnership secures supply."
The Andersons already operates an ethanol plant in Michigan and a second in Indiana. It is considering a second Ohio plant near Marion.
Neill Mckinstray, vice president and general manager of the company's ethanol division, said the market for ethanol as an automotive fuel has a lot of room to grow.
"But fact is, the amount of corn-based ethanol will be limited by the corn supply," he said. "And yes, the price of corn is a significant factor in the cost of livestock production. But I would remind people that this whole ethanol business is based on our huge demand for fuel. We have to decide just how important is it to drive around in our SUVs."
To reach this Plain Dealer reporter:
jfunk@plaind.com, 216-999-4138
