The renewable fuels revolution, once taboo for oil-rich states like Texas or Oklahoma, is seeing massive ethanol and biodiesel plants under construction or on the drawing board in already corn-deficit areas.
The ethanol and biodiesel boom, fueled by better U.S. energy proposals that include outlawing MTBE and tax breaks for renewable fuels, is branching out from the Corn Belt into areas like the Texas Panhandle city of Hereford, the so-called cattle feeding capital of the nation. There, custom feedyards already ship in up to 80% or more of the corn needed to feed several million head of cattle.
Other ethanol plants are being built or expanded in Colorado and Wyoming where corn is also scarce. Kansas looks to see a half-dozen or more new ethanol plants. Biodiesel plants are in the works in San Antonio, TX, and southern Oklahoma, two other areas that nowhere near approach enough soybean production to feed the operations.
So why is The Panda Group of Dallas breaking ground this summer on a 100-million gallon ethanol plant in Hereford, where unit rail cars by the hundreds haul in millions of bushels of corn to service feedyards and a new influx of dairies? One reason is the use of technology to take advantage of a continuous supply of cattle manure and cotton gin waste to fire the plant instead of high-priced natural gas.
And Panda will have an instant market for wet distillers' grain, which will be sold to area feedyards for blending into their fed-cattle ration.
“We had looked at getting into renewable fuels from the wholesale electric business,” says Rhett Hurless, Panda vice president of development. “We looked at using some sort of biomass; manure, grass clippings or other, to fire an electric generating facility. Hereford was selected because of the large supply of manure.”
Ethanol was not Panda's first choice. It initially wanted to generate, then sell electricity to a regional power company (Xcel Energy). “We had access to enough manure to power a 50 megawatt plant,” says Hurless. “But Xcel indicated it would be 2008 before it would be ready to purchase the electricity. So we switched to the ethanol project and will possibly come back with a power project in 2008.”
Along with the constant supply of manure to fire the ethanol plant, Panda will use water from the city wastewater facility. “The ‘gray water’ means we are taking advantage of another waste resource,” says Hurless, noting that his company has been involved in many environmentally-friendly power plants worldwide.
“You could call this a real sexy deal,” says Hereford Mayor Bob Josserand, commenting on Panda's plan to use manure from feedyards and wastewater to produce a product that is sold back to feedyards and dairies. Josserand is also president of AzTx Cattle Co., which operates four commercial feedyards in Texas and Kansas, yards that already ship in 80-90% of their corn by unit train. He sees several pluses in the project, as well as the other 100 million gallon ethanol plant from White Energy Hereford LLC.
“We already use distillers' grain at our Garden City, KS, feedyard and consider its feed value as 100% of steam flaked corn,” says Josserand.
Hurless says Panda is building its own unit train loop of tracks in order to maintain a steady supply of corn. “We will ship in up to 40 million bushels of corn annually from the Midwest,” he says. “Some local corn will likely also be bought at harvest. We will be another market for growers. We will likely pay the local basis as it relates to the Chicago Board of Trade futures price.”
What may be even more out-of-character than the location of the Panda plant are plans for a second 100-million-gallon ethanol facility — also in Hereford. White Energy Hereford LLC announced its plans to construct the plant last spring, about the same week as Panda. But this plant will be a more traditional ethanol facility.
White will use natural gas and electricity to create steam for ethanol production. And when possible, it will use grain sorghum from regional growers as its source of grain. “We will have a strong emphasis on grain sorghum because it costs about 50¢/bu. less than corn but is equal in value to corn in the ethanol production process,” says Tim Snyder, White project manager.
However, the White operation will also require large shipments of Corn Belt grain. To help accommodate this need, it's being built adjacent to an ADM unit train storage facility.
“We've been working with Hereford city leaders for about two years to get this plant started,” says Snyder, noting that the plant is set to open early fall of 2006. “Hereford is an ideal location for an ethanol plant because of its proximity to the large market for ethanol in California and the West. We are halfway to California, whereas plants in the Midwest are much farther away.
“Our costs of delivering the product are much lower. At the same time, we have a large market for both high quality wet and dry distillers' grain through area feedyards and the expanding dairy industry.”
Don Cumpton, executive director of the Hereford Economic Development Corp., says the regional dairy industry, which included only one or two operations less than 10 years ago, will likely see 13 dairies and more than 30,000 cows in his county alone by the end of 2006. The Texas Panhandle itself expects to see more than 50 dairies in the next few years.
“We will have a continuous market for the distillers' grain,” he says, adding that Panda's manure-fired plant will never run short of biomass. “They will burn 1,000-1,500 tons of manure a day. We produce twice that much here.”
Additional ethanol plants, in the 40 million-gallon range, are in the works in the northern Texas Panhandle near Dumas.
While the Texas plants are just underway, a smaller, yet successful operation in Torrington, WY, has plans to double or triple its size. Tom Lacock, a former Iowa corn grower who is now a spokesman for the Wyoming Business Council, says the 5 million-plus gallon Wyoming ethanol facility is scheduled to expand.
He sees further expansion of the industry in the Rocky Mountain states if there are indeed provisions for more flexible-fuel vehicles coming out of Detroit and other automobile manufacturing areas. “We could see at least a 50¢ and even close to a $1 reduction in fuel costs for vehicles in the E-85 category,” he says.
In still another ethanol venture, the Greeley, CO, area is looking at a 140 million gallon ethanol plant. That would require some 50 million bushels of corn annually to meet that level of fuel production, fuel that would likely be sold across Colorado, New Mexico, Arizona, California and Utah.
“This is a testament to the will and dedication of all those involved in the ethanol industry to provide a reliable, cost-effective and homegrown fuel for the homeland.”
All this growth is creating additional markets for corn producers, says Leon Corzine, president of the National Corn Growers Association.
“The ethanol market is the single most successful and fastest growing value-added market for farmers — it is a rural economic development engine in the form of jobs and farm income,” he says. “Last year, 11% of the corn crop went to ethanol, this year it is expected to reach nearly 13%. As the ethanol industry continues to grow, opportunities for corn growers will expand as well.”