Ethanol production resumes at plant in Buffalo Lake, Minn.
BUFFALO LAKE -- This is the day that trucks are expected to rumble out of the gate carrying the first ethanol produced at the former Minnesota Energy plant in Buffalo Lake since early 2010.
Business partners Steve Walker and Patrick Riggs created Purified Renewable Energy LLC and raised the capital to acquire and upgrade the 1997-vintage facility that some feared might be scrapped. They started production in early July, just as a Midwestern drought began pushing the price of corn to historic highs and squeezed already tight margins in the industry.
"We're entrepreneurs, what can I say?'' said Riggs. "We're risk takers and we're entrepreneurs and we're going for it.''
They're going for what they believe will be the next half-step in ethanol's evolution. Riggs, vice president and CFO, calls it "generation one-and-a-half."
He anticipates that ethanol will remain primarily a corn-based biofuel. But increasingly, other feedstocks -- primarily agricultural waste materials -- will be used to produce a portion of it.
The next half-step will also involve a greater diversity in products. While he anticipates that ethanol for fuel and distillers grains as animal feed will continue to represent the largest volume of production, Riggs believes biorefineries will also begin to produce isobutanol and other chemicals, such as industrial solvents, that are made today from petroleum.
Ethanol companies like Gevo and Rentech are using smaller ethanol plants to produce these products for niche markets. Purified Renewable Energy intends to exploit those opportunities as well, according to Riggs.
These are among the reasons that the Buffalo Lake facility -- although small by industry standards -- interested the partners. It is currently permitted to produce 25 million gallons of ethanol per year, and could be expanded to a 35 million-gallon capacity in the future.
The Buffalo Lake plant uses a dry milling process that is based on a design by a company known as Katzen. With the right modifications, it could produce a biobased chemical while also producing ethanol and distillers grains.
The plant's technology platform also lends itself to improvements in efficiencies and, down the road, the use of varied feedstocks. Riggs said they aim to match if not exceed some of the industry's leading efficiencies for the amount of ethanol produced.
The Buffalo Lake plant also had appeal to the investors as an opportunistic buy. Building an ethanol plant today can cost $2 to $3 per gallon of capacity, sometimes more. Buying a "used'' plant can reduce the capacity cost to $1 per gallon.
The investors have invested roughly $2 million at this point to upgrade the plant and bring it back into production. The plant has a workforce of 25 to 30 employees, Riggs said.
The company has a contract with Tenasca for both its corn procurement and the marketing of its ethanol and distillers grains. Being located in Renville County and what remains a relatively "corn rich'' area during this drought are very important to it, he noted.
The location in a county known for its value-added, agricultural processing operations could prove beneficial down the road as well. Beet pulp and other agricultural residues could someday be a feedstock for ethanol, he said.
Riggs said that while there is a great deal of investment in rural farm lands, he believes many have overlooked the equally great opportunities for investment in processing and other activities in rural areas.
As for the future of the ethanol industry, he is confident. He doesn't expect Congress to "pen stroke an industry away'' by eliminating the Renewable Fuel Standard that assures ethanol represents 10 percent of our gasoline blend. Nor does he expect refiners to abandon it. Ethanol has proven itself as an environmentally clean and economical octane booster and replacement for methyl tertiary butyl ether, a fuel additive more commonly referred to as MTBE, and similar additives.
The ethanol industry is also well-grounded. Its big players are companies like ADM and Valero, disciplined and capable of reducing or ramping up production in pace with market changes, he added.
There's discipline to be found at the plant in Buffalo Lake, too. Riggs said that he and his partner aren't wringing their hands over tight margins in the industry, but instead keeping their focus on what needs to be done. "We just work and do it,'' he said, adding: "Like I said, it is an interesting and exciting opportunity.''