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NORTHWEST MINNESOTA:
Ethanol plant plans proceed

Grand Forks Herald
Written By: Ryan Bakken, Herald Staff Writer

April 11, 2005 - A proposed ethanol plant for northwestern Minnesota has a new name, a new location and a new raw material. But the project's goals remain the same -- providing jobs, another market for farmers and a more diversified economy. A year ago, seven northern Red River Valley farmers comprised a group named New Harvest Ethanol that hoped to build a plant near Crookston that used barley to produce the fuel. Now, the company Agassiz Energy LLC hopes to build a plant near Erskine, Minn., that uses corn to produce 40 million gallons of ethanol a year. The name change was because New Harvest was too similar to other company names in Minnesota. The site moved 30 miles eastward because Erskine proved to be a better site for transportation and environmental reasons. And barley was nixed for the more conventional corn because the piggybacking of a beta-gluten plant onto the ethanol project didn't happen. If everything goes smoothly, construction could begin as early as late fall, with the plant opening in late 2006 or early 2007.

Roadblocks remain

With $1 million in seed money from about 25 farmers and businessmen in the northern valley and $275,000 in grants, the project has made great headway in the last year. The money was used for an environmental analysis, engineering feasibility, a business/marketing plan and legal consultation.

"We're still in the evaluation stage," said Don Sargeant, former University of Minnesota-Crookston chancellor who is the project coordinator for Agassiz Energy.

"We're still watching all kinds of things out there. But if the arrow continues to point in the right direction, we're about three months from the next huge decision."

The next huge decision is whether to seek $43 million from investors. The plant would cost $95 million, with the balance coming from a bank loan.

While several roadblocks remain until then, the biggest one is obtaining a permit from the Minnesota Pollution Control Agency to burn coal as the plant's energy source. Not obtaining a permit would be a deal-breaker, Sargeant said, because the energy cost would be $7 million more a year without coal.

The coal-burning permit was the big reason that the plant site was moved from Crookston. That city already has two coal-burning operations, at UMC and the American Crystal Sugar plant.

"We weren't getting positive feedback on burning more coal at Crookston," Sargeant said. "So, we decided to move down the road a bit."

Erskine also offers shipping advantages, since it's at the crossroads of two major highways and two major rail lines. U.S. Highways 2 & 59 intersect there, as do the Burlington Northern Santa Fe and Canadian Pacific lines.

The Erskine location also qualifies for the federal New Market Tax Credit. Organizers say they will also set up a state-run program, known as JOBZ, aimed at creating jobs in rural Minnesota. Hefty tax breaks are available under JOBZ.

Raising the money

After obtaining the coal-burning permit and Securities and Exchange Commission approval, the next hurdle is finding investors.

A group in the southern end of the valley also is pursuing an ethanol plant. That has raised some concern with Agassiz Energy. Currently, there are 80 plants nationwide.

"We need some early feel on the competition in the area to get the needed equity," Sargeant said.

"With something like this, you're always managing risk," he said. "One risk is that too many plants can be built, increasing the supply of ethanol and increasing the price of corn. Another is that government subsidies and regulations can come and go. You can't count on them long term."

Time is right

Still, the time may be right for ethanol expansion.

Because of the price of oil, blended fuel is cheaper at the pumps. Minnesota Gov. Tim Pawlenty is a strong supporter of ethanol. And the federal energy bill mandated a doubling of annual ethanol production to 5 billion gallons by 2012.

"If the mandate stays, there's a demand for 25 more plants," Sargeant said. "But what happens if we build 50 new plants? It's a risk."

The plant would provide 35 new jobs, most of them well-paying positions because they involve computerization and automation.

And it would provide another growing option for farmers. The corn would come from a 50-mile radius.

The plant would provide a one-time economic boost of $142 million during construction, according to Agassiz Energy numbers. It would expand the economic base by $110 million per year, increase household income by $20 million and increase the local corn price by 5 to 10 cents per bushel.

"It was a little disappointing to see it go east, but we think it will still be good for the region," said Kari Thompson, executive director of the Crookston Development Authority, who did the grant writing for the initial group.

"It will be beneficial for the farmers in the area, and we hope to get some jobs or some other spin-off benefits."

Feedlot an option

One potential spin-off would be a feedlot, where cattle would be fed a combination of sugar beet tailings and the byproduct of the ethanol production.

The feedlot would save the plant money because it would eliminate the need to dry the byproduct. And the byproduct would lower feed costs for the cattle operation.

"A feedlot is not part of our business plan," Sargeant said. "But someone is more than likely going to have such a plan. It does create opportunities for that."

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Bakken reports on local news and writes a column. Reach him at
780-1125; (800) 477-6572, ext. 125; or rbakken@gfherald.com.