Go to the mobile version of this Web site.

Login | Contact Us | Site Map | Paid archives | Electronic edition | Subscription Questions | Extras

Home › Business › Energy

Heady days of '06 wane, but ethanol plants in Colorado OK

By Gargi Chakrabarty, Rocky Mountain News (Contact)

Published December 31, 2008 at 12:05 a.m.

Text size  
Doug Henston, CEO at Solix Biofuels, holds marine algae used in making biofuels.

Photo by Barry Gutierrez © The Rocky

Doug Henston, CEO at Solix Biofuels, holds marine algae used in making biofuels.

A cornfield in Yuma County, Colorado's ethanol country.

Photo by Matt Mcclain / The Rocky/2007

A cornfield in Yuma County, Colorado's ethanol country.

Related Links

More Energy

More stories »

A Texas company in spring 2007 announced it would build Colorado's biggest ethanol plant in Yuma, 40 miles south of Sterling.

Panda Ethanol's $120 million plant annually would produce 115 million gallons of ethanol, a motor fuel brewed from corn. The distillery would be Yuma County's second; the first was Yuma Ethanol, then under construction.

The two plants would add 70 full-time jobs.

"Panda's plant will help solidify our leadership role in this new energy economy," Andrea Anderson, the former executive director of Yuma County Economic Development Corp., had said proudly.

Her sentiments were short-lived.

Panda Ethanol has not been able to close on its financing. Many doubt the proposed plant will be built at all because investors increasingly are reluctant to lend money to ethanol producers.

The other plant, the $61 million Yuma Ethanol, came online in fall 2007, but after a three-month delay. It employs roughly 30.

The ethanol sector has been hurting for a while. Almost a year ago, national publications speculated a bust as a frenzy of new plant construction led to a supply glut, squeezing margins for producers.

Rising prices of corn further ate into ethanol's profitability. Corn topped $7.50 a bushel in summer, nearly double from a year earlier and triple from two years ago. Since then, it has settled at about $3.50.

In past months, nearly two dozen ethanol plants have shut down across the nation.

Panda Ethanol aside, Colorado's five ethanol plants - including those in Windsor, Sterling and Yuma - have fared better than most others, said Dave Vander Griend, chief executive of ICM, a Colwich, Kan., company.

ICM has designed and built many of the local plants.

"Colorado plants have been doing a good job of risk management," Vander Griend said. "All are running and making ends meet."

Yuma Ethanol, for example, has contracted with agri-giant Archer Daniels Midland to market its product - 50 million gallons a year. It has arrangements with local farmers to buy corn and with feedlots to sell distillers grain (an animal feed), shielding the plant from some of the economic fluctuations experienced elsewhere.

"Yuma Ethanol has been good for me," said farmer George Steward who had invested in the plant. "The return on my investment in the plant has been far better compared to the stock market."

Critics say ethanol could be more competitive and sustainable if it were produced from crops such as switchgrass, or agricultural and forest waste, instead of corn. They blame rising food prices on the growing supply of ethanol, claiming that is diverting corn from the food chain.

Ethanol supporters say the corn used for fuel is mostly genetically modified and unsuitable for human consumption. And they point out the technology for cellulosic ethanol is not ready for commercial debut.

Ethanol's outlook has worsened in past months as plunging oil prices made it a less attractive alternative fuel.

Drivers filling up with E-85 ethanol the Friday after Christmas at a Conoco station in Denver paid $1.59 a gallon. The fuel, a blend of 85 percent ethanol and 15 percent gasoline, was 6 cents more than gasoline selling the same day at $1.53 a gallon.

"Today you got a huge credit crunch that has made it difficult for a whole lot of people to operate ethanol plants, let alone build new ones," Vander Griend said. "There's not going to be much construction in the foreseeable future."

Federal mandates to encourage ethanol in fuel blends, generous subsidies to blenders and stiff tariffs on imported ethanol led to a rapid expansion of distilleries and a surge in demand for corn in recent years.

Companies such as ICM, which built new plants across the country, including Colorado, has no new projects on the drawing boards today. That's a far cry from 2006 when it had 40 in the works.

Denver-based BioFuel Energy Corp., an ethanol company that went public in June 2007 and built two plants in the Midwest, is low on cash. On Tuesday, its stock closed at 35 cents a share, indicating scant investor interest.

Ethanol producers could see more pain in 2009, industry observers say, if oil prices remain low and the federal government doesn't mandate more use.

Currently, the government limits the mix of ethanol to 10 percent in regular gasoline, but supporters are urging an increase in that limit to expand the market for the fuel.

Unless the market for ethanol expands, they say, the market for cellulosic ethanol could take awhile to develop. The Energy Act of 2005 mandates 36 billion gallons of renewable fuel be added to the national fuel supply each year beginning 2022.

Today, corn ethanol totals more than 10 billion gallons a year. By 2022, it could account for no more than 15 billion gallons - given the constraints of diverting the food crop into fuel production, said Jim Lane, editor and publisher of BioFuels Digest.

The remaining would have to come from other biofuels. "Cellulosic ethanol, which today is in a pilot and demonstration stage, will account for a majority of renewable fuel by 2022," Lane said. "That's what makes it so important."

Colorado's cellulosic ethanol industry is small but promising. This month, Broomfield-based Range Fuels was ranked No. 5 among the nation's hottest bioenergy companies by BioFuels Digest.

Range Fuels is preparing to open a cellulosic ethanol plant near Soperton, Ga., in late 2009. The facility will use a proprietary technology Range Fuels has been testing to turn wood waste into ethanol.

In August, Vancouver, British Columbia- based Lignol Energy Corp. announced it will locate its cellulosic ethanol plant in Grand Junction. The $88 million plant, which will convert beetle-kill and other wood residues into motor fuel, will be operated by Suncor Energy (USA) Inc.

The National Renewable Energy Laboratory and the Colorado Center for Biorefining and Biofuels (C2B2) help attract new companies to the state, Lane said.

"Colorado is cohesively organized for renewable energy," Lane said. "That's the primary reason why cellulosic ethanol startups are going there although it's not known as a venture-capital center."

chakrabartyg@RockyMountainNews.com or 303-954-2976

Colorado and ethanol

* Corn crop: In Colorado, roughly 1.34 million acres this year.

* Production: Colorado is producing nearly 130 million gallons a year.

Plants, production per year

* Yuma Ethanol in Yuma 40 million gallons

* Sterling Ethanol in Sterling 42 million gallons

* Merrick & Co. in Aurora 3 million gallons

* Coors Brewing Co. in Golden 3 million gallons

* Front Range Energy in Windsor 40 million gallons

Comments

  • December 31, 2008

    11 a.m.

    Suggest removal

    jbowen43 writes:

    Financing a business venture of this size is always subject to the whims of the market. Why do you think other types of energy production and extraction facilities have difficulty getting built? Financing and insurance. That's why.