Bismarck Tribune - Bismarck News - New N.D. ethanol plants getting big subsidy checks

New N.D. ethanol plants getting big subsidy checks

Jul 21, 2008 - 04:05:56 CDT

By DALE WETZEL
Associated Press Writer

North Dakota's two newest ethanol factories have collected $1.78 million in state subsidies during the past six months, in part because high corn prices have made it difficult to profit from selling the alternative fuel.

From October through March, Blue Flint Ethanol of Underwood has received $901,521 in subsidies, state Department of Commerce records show. Red Trail Energy LLC of Richardton got $877,725 during the same six-month period.

Both factories, which are capable of producing about 50 million gallons of ethanol annually, have been operating for less than 18 months. Red Trail began making fuel in January 2007 while Blue Flint started manufacturing ethanol the following month.

Neither the Red Trail nor the Blue Flint factory began drawing state support until late last year, but both are on pace to reach an annual limit of $1.6 million. The subsidy fund is financed by a share of state registration fees on farm vehicles and a portion of North Dakota's tax on agricultural fuel.

The subsidy demand is prompting state officials to consider whether North Dakota's ethanol support program needs to grow, and whether public opinion would tolerate that step.

"It gets to the point of asking, how deep is the support for the ethanol industry, and I'm not sure we know the answer to that," said Lt. Gov. Jack Dalrymple, who helped craft the subsidy formula the North Dakota Legislature approved five years ago.

"A year or two ago, ethanol was considered a great, green alternative fuel," Dalrymple said. "But today, it's under attack by other industries who have had some success in bringing down the image of ethanol."

Ethanol has been blamed for rising food prices, although advocates on both sides dispute its impact.

Samuel Bodman, the U.S. energy secretary, and Agriculture Secretary Ed Schafer estimated last month that increased demand for corn for ethanol production was responsible for less than 5 percent of food-price inflation this year.

Bodman and Schafer, in a letter to New Mexico Sen. Jeff Bingaman, also estimated that increased ethanol blending in gasoline has dampened gasoline price increases by 20 cents to 35 cents a gallon.

North Dakota's ethanol subsidy payments are calculated by balancing the price of corn, which is used to make the fuel, with the price of ethanol itself. They are triggered during any quarter when North Dakota's ethanol price is below $1.30 a gallon and corn prices average more than $1.80 a bushel.

In recent months, prices for both ethanol and corn have been well above those benchmarks, state data shows. However, ethanol prices have been weaker than the price of corn and the imbalance has triggered subsidy payments.

For example, from January through March, North Dakota ethanol prices averaged $2.26 a gallon, or 96 cents above the benchmark. Corn prices averaged $4.21 a bushel, which was $2.41 greater than the threshold that activates subsidy payments.

Price trends suggest the imbalance will continue. Corn prices surged above $7 a bushel this month.

New North Dakota ethanol factories planned at Hankinson and Spiritwood have recently been put on hold. When completed, their developers say, both factories will be capable of producing 100 million gallons of ethanol annually.

Another plant, a 110-million-gallon factory near Casselton, is still on track to open in December, project developers say.

Dalrymple and Gov. John Hoeven said they plan to consult soon with ethanol interests about possible changes to the subsidy program.

"We'll know a lot more as we get into the fall and can see how many plants we have got operating, and the (production) volumes," Dalrymple said. "We will have a better idea of what we're working with."

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Comments

Mike wrote on Jul 22, 2008 12:26 AM:

" The railroads needed a subsidy to get started, as do many beneficial industries and infrastructure. Ethanol is a wise investment. It takes about 30,000 btu's to produce 77,000 btu's of ethanol. Ethanol uses water, but do you consider the water use of an oil refinery? Ever wonder why they are located by water?
We know what the consequences of the Exxon Valdez spill was, what are the impacts of spilling corn?
Ethanol is Not the big boys. Isn't Red Trail owned by 800 North Dakotan's?
Oil is good for our state. It seems that these ethanol plants have converted corn fields to oil wells. 125 bushel corn yield equates to about 350 gallons/acre, times value of $2.50=$875 per acre. Corn price in fall of 2005 was $1.30, times 125 bushel=$162.50. $700/acre value added times 2.5 million acres = $1.75 billion value added for North Dakota, annually. It seems like an awesome investment. "

Ethhead wrote on Jul 21, 2008 11:09 PM:

" It's upsetting to see and hear so many misinformed and just plain wrong statements assumed as fact because they've been heard over and over and over and because someone said it on TV so it must be true, or someone read it on the internet, so it must be true. Wake up people and start thinking for yourselves.
The anti-ethanol push is coming from big-oil who can't stand the fact they will sell 9 billion fewer gallons of gasoline this year because of ethanol. By the way the blender's credit goes to the refiners, not the ethanol plants. This is what supports the market and increases demand. Eliminate the subsidy and guess what, refiners would continue to blend ethanol because it's cheaper than gas and helps their margins. Oh and that nickle's worth of corn in each box of corn flakes - is that what's making the price go up or is it oil that has doubled over the last year causing the run-up? The majority of your food costs are transportation, labor, and packaging - not the cost of the raw input. Look around, the price of every raw material has gone up in the past year, driven by a weak dollar and low interest rates. How convenient that some choose to pick on ethanol as the root cause of it all. One last thing, all that water that an ethanol plant supposedly uses amounts to about as much as an 18 hole golf course, maybe we should ban golfing too. Folks, bottom line is Ethanol is a part of the solution to reducing our dependance on foreign oil, and as a recent combat veteran, I'm willing to pay a bit more for a glass of milk knowing that money will stay in the United States and end up in a producer's pocket and not the hands of a terrorist. As a matter of national security, we need to support it. "

What about Big Surgar wrote on Jul 21, 2008 6:28 PM:

" I support and use Ethanol. I would actually pay more for it and lose the support payment. How much money is going into Surgar Beets? They should have equal competion, now that surgar cane is going into ethanol. I haven't seen corn farmers plowing under there corn crops. Surgar beet farmers did. Our Senators and congressmen are high on the list of money recieved from big surgar. Turn Surgar Beets into ethanol and you won't hear another word from me. "

Local Manufacturer wrote on Jul 21, 2008 4:31 PM:

" Gee, I wish that I could receive subsides when my business is slow or when our operating costs increase. Of course, as small business this would not be possible. Corporate welfare is only for the big boys. "

wait a minute Ann wrote on Jul 21, 2008 2:32 PM:

" I don't necessarily disagree with the anti-ethanol comments, although I've used ethanol for years because it runs cleaner and with a higher octane rating, but no dairy farmer can say with a straight face, "if an enterprise is not profitable without subsidies it is bad business."

In North Dakota the milk stabilization board doesn't set a maximum price for milk ... IT SETS A MINIMUM PRICE ... it's worse than a subsidy, it's government price control and not to benefit the consumer, but to only benefit the producer, the dairy companies and the grocers. Everyone else gets the shaft. "

To all the negative comments wrote on Jul 21, 2008 1:55 PM:

" It seems that most of you are simply uneducated about the facts in reducing dependence on foreign oil. Ethanol is only part of the solution to reducing this countries dependence on imported oil. I could see you putting it down if you receive christmas cards from the oil producing country leaders in the middle east. THINK ABOUT WHAT YOU ARE SAYING BEFORE YOU TEAR UP ANY RENEWABLE FUEL IN THIS COUNTY! "

Driver wrote on Jul 21, 2008 12:26 PM:

" Great. I get to pay for my fuel twice now. Once at the pump and then again with my tax return. Ignore the funny numbers. The pump price plus the subsidy is your true cost per gallon. If it were a real solution I would support it. I don't think it is. "

Ann Hoerner wrote on Jul 21, 2008 10:10 AM:

" Enthanol is bad business and along with Saudia Arabia will take this country down. I'm surprized that Ed Schafer stated that it has contributed to only 5% to food costs. Bottom line is this, If an enterprize is not profitable without subsidies it is bad business. I'm a dairy farmer. My base milk price is $16.85. A year and a half ago, it was $12.00 and corn was $2.00/bu. Last week I paid $6.60/bu. That's over three times the cost for corn. Fuel is nearly double and subsidizing enthanol will not fix that. With triple priced corn we need $39.00 milk to maintain the same small level of profit that we did have. Anything that takes land from the production of food in this country will drive up your food prices. Cellulose energy is just as short sighted. It will compete with acres used for food and likely be heavily subsidized. That means corn will stay high, groceries stay high and higher. This is going to result in the biggest exodus in the dairy industry this country has ever seen and when the dust settles, you will be paying $15.00 a gal for milk. We need to use the things that have no other use than to provide engery. If oil is not drilled for, coal not mined and used for the benefit of humans, what will we do with it? There are priorities in life and we need to use them as responsibly as is possible. The wind has no end, the sun will not run out. Water will always run downhill to make energy. Let's mine, drill, build wind farms, solar power, electric and hydrogen cars. Let's not subside anything that is not going to be feasable when completed.
Hats off the person commenting about the rush to invest in low risk ethanol. They don't have any risk with your taxes paying for it. "

elk hunter wrote on Jul 21, 2008 9:01 AM:

" wake up people these ethanol plants are nothing but a gov. subsidy. I use to work for one. they depend on the gov. they would be belly up without it. you can thank then for all the high prices for food over the last couple of years. lets cut the subsidy out of these plants for three years and we'll see how many are left. People don't realize that it takes more energy to make ethanol than you get out of it.(ie natural gas and power). just something to think about "

A Disaster wrote on Jul 21, 2008 8:44 AM:

" The corn based ethanol program has been a disaster from day one. It has done nothing to contribute to the energy solution as basically it requires an equal amount of fossil fuels energy (or BTU equivalent) to produce every gallon of ethanol. It has not been an energy program, it has been a redistribution of wealth program. It takes money away from other industries and our citizen taxpayers and it places it in the hands of the corn producer, ethanol manufacturer and investors. It's time to stop the subsidies and see if this industry can make it on its own (which it can't because it was never feasible from Day One). "

Edward wrote on Jul 21, 2008 8:40 AM:

" Another joke pulled on the citizens by legislators. As My View stated; ethanol is a poor green alternative that isn't economically feasible. As Joel Heitkamp said he doesn't care what it costs the citizens as long as it helps farmers (no matter how wealthy they are already). Legislators have no clue how to solve the energy crisis and shouold get out of the way. "

to my view wrote on Jul 21, 2008 8:35 AM:

" Excuse me but "never been considered aa great green alternative fuel". Where did you come up with that one. Algore thinks it is a great fuel. Corn price have gone up becuase other countries are buy the corn. The corn used for ethanol does not take up that much if the corn crop for food. I believe but am not sure. But, corn for humans is only about 2% of the total crops produced. Most of it goes to feed for cattle. But, becuase a few people know that it will help with the energy problem. They have started a negitive comments like yours. They say the the feed by product ofthe plants now is not good for the cattle feed or the the cost of food will good up becuase of the ethanol plants. the eco nuts will have you going in circles for along time. They want it one way but not the other. Which is it for you? higher gas prices at the pump or another fuel for your car. Oh, do not say the electrical is the way to go either. So, far they have not gotten to many cheap electrical cars to go over 100 mile on one charge. And were are you going to get the energy for the electric cars. When you do not want wind power produced becuase of some type of bird the might fly into the wind mills. You have not even given the ethanol plants a chance to get started. Even the oil industery hard a hard time getting started. So, give it a chance. "

hereyago wrote on Jul 21, 2008 8:20 AM:

" Ethanol is the great fuel scam that you get free of charge with the global warming scam. "

My View wrote on Jul 21, 2008 7:10 AM:

" There's a reason investors are opening these low risk, subsidized plants as fast as they can and it has little to do with helping solve the energy crisis. Corn ethanol never was 'considered a great, green alternative fuel' by anyone other than the investors, growers and politicians. It isn't economically feasible; this article providing a case in point. The facts and numbers are easily verified and don't support it.

Exploring alternative energies including various ethanol blends is a great idea. Corn is a fine agricultural product with many good uses but isn't feasible for making ethanol. Many knew that from the beginning. "

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