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Ethanol Sees Expansion

Spanish energy company Abengoa became the second large-scale commercial cellulosic ethanol plant to open in the U.S. last month in Hugoton, Kansas, following the September dedication of the POET-DSM plant in Emmetsburg, Iowa. Both make about 20 million gallons of fuel per year. 

Even new corn-based ethanol plants are starting to blossom again in the northern Plains. This fall, two veteran leaders in that industry are exploring production of a 70 million-gallon corn and milo plant in Onida, South Dakota.

“We’re still working on nailing down agreements on all of the utilities and infrastructure,” says Walt Wendland, CEO of Homeland Energy Solutions, LLC, an ethanol plant located in Lawler, Iowa. Wendland owns farmland not far from Onida, as does Chris Schwarck, another leader in the ethanol industry who is working with Wendland.

One of the reasons for exploring the South Dakota venture, a wide corn basis, will sound familiar to veteran ethanol plant investors in western Iowa and southern Minnesota, who once faced similar challenges. In central South Dakota, the corn basis ahead of harvest was more than $1 under futures, says Wendland.

“We’ve seen the negative impact the wide basis has had in the area. This looks like a win-win for investors and the local area that will benefit from about 25 million bushels of new demand,” Wendland says. 

With a need for better corn markets, Wendland doesn’t expect obstacles to raising capital for the new plant.

“We’re going to open it up to the local area first. We’re confident we can raise the needed equity to get this thing going,” he says.

The U.S. ethanol industry already has 14.9 billion gallons of nameplate capacity and 14.3 billion gallons in operation, according to the Renewable Fuels Association. That’s close to the 15 billion gallons of corn ethanol allowed under the Renewable Fuel Standard and above the EPA target of approximately 13 billion gallons the agency proposed for 2014 about a year ago.

Still, Wendland sees good markets outside of the U.S.

“I’m confident that ethanol is a great value around the world, and I think we can develop an export market,” he says. “There should be a lot of opportunities out there at this price.”

Another new corn ethanol plant is further along. Dakota Spirit AgEnergy LLC is building a 65 million-gallon plant near Jamestown, North Dakota, that is expected to come online next year.

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