Poet will not build second ethanol plant

Published 12:00 am Monday, May 5, 2008

By Tim Engstrom and Sarah Kirchner, AlbertLeaTribune.com

GLENVILLE &8212; Sioux Falls, S.D.-based Poet Biorefining will not construct an ethanol plant at the Agra Resources Industrial Park west of Glenville, home to an existing, farmer-owned ethanol refinery managed by Poet.

Permit delays have made the project less attractive in comparison to Poet projects elsewhere, according to Poet&8217;s announcement Friday.

Email newsletter signup

&8220;When we selected Glenville for a second ethanol production facility, we believed that we would be holding its grand opening sometime around today,&8221; said Larry Ward, vice president of project development for Poet, in an announcement released Friday.

The only permit remaining for the project was an air-quality permit from the Minnesota Pollution Control Agency.

MPCA Commissioner Brad Moore said his agency won&8217;t take the blame on this one.

The delay in the permitting process came on Poet&8217;s behalf at the onset of the project, he said. The MPCA informed Poet in February 2007 about the project possibly needing to meet federal &8212; not state &8212; guidelines on &8220;single-source&8221; air quality. The company, he said, didn&8217;t apply until July 2007.

If a project meets three tests, it needs the &8220;single source&8221; designation. The three are: 1. same product 2. adjacent 3. common ownership.

&8220;This is not only the law for Minnesota, this is also the law across the nation,&8221; Moore said.

He said Poet could&8217;ve had its air permit by January 2008 if it hadn&8217;t haggled over MPCA designating the site as &8220;single source.&8221;

Poet spokesman Nathan Schock said the company filed for the permit in March 2007. He provided the Tribune with a UPS delivery confirmation to MPCA that states March 27, 2007.

&8220;Our objective is to build these things as fast as possible,&8221; he said.

60 million-gallon plant

The existing ethanol plant, called Poet Glenville East, is owned by a cooperative of farmers. Poet manages it. The new one would have been called Poet Glenville West and would have been owned and operated by Poet, the world&8217;s largest producer of ethanol.

&8220;It&8217;s a $130 million project and 40 jobs that won&8217;t be coming,&8221; said Gary Pestorious, chairman of the board for Poet Glenville East.

Pestorious said the MPCA found the two Glenville plants to be too close together for pollution standards. He said Minnesota has lost a lot of business in the past 10 years for similar reasons.

&8220;We&8217;re not very competitive with Iowa or other states,&8221; he said.

Poet worked with the MPCA for a year to get permits in place, and Pestorious said the company finally had to move on to the next project.

&8220;It&8217;s not a good situation, but that&8217;s the way it is,&8221; he said.

The company already attained a water appropriation permit from the Minnesota Department of Natural Resources and a water permit from MPCA.

Poet Glenville West was approved April 15 by the Freeborn County commissioners for a tax-increment-financing district and county loan totaling up to $7 million out of a total $130 million price for the entire plant. Developmental authority powers were also approved.

Poet Glenville West was to be a 60 million-gallon-a-year refinery, creating a sister operation to the existing Poet Glenville East, which produces 45 million gallons of ethanol a year.

The new plant would have incorporated cellulosic ethanol, using more of the corn plant than simply the alcohol from the kernel, which is considered the new wave of

biofuels.

Poet has opened three new ethanol refineries in the states of Indiana and Ohio in the past seven months, with more to come before the end of the year. The equipment that was on order for the Glenville plant will remain in storage for about six months until projects in the eastern Corn Belt are ready.

&8216;Single source&8217;

Dan Dorman, executive director of the Albert Lea Economic Development Agency, also said Poet had difficulty working with the Minnesota Pollution Control Agency on an air permit.

Dorman said it seems easier for companies to get MPCA permits by building two smaller plants than it does to build one large one, even if they would have equal emissions. Plus, he said the MPCA treats the existing cooperative-owned plant and the plant to be owned by Poet as one group &8212; &8220;which for reasons I don&8217;t understand, make the air permit harder to get.&8221;

Dorman said Poet was not enthusiastic about working in Minnesota after delays at a plant built in Lake Crystal, which he said took three costly months more than a similar one built in Emmetsburg, Iowa.

&8220;I just don&8217;t see anything good locally on this,&8221; Dorman said.

Moore said some board members for Poet Glenville West already are board members for Poet Glenville East. By having commingled board members, it meets the federal test of common ownership. That gives the two plants the &8220;single source&8221; designation, thus requiring the permit, he said.

That permit would have determined responsibility for each of the two plants should the amount of air pollution from them exceed standards. Moore produced an April 10 letter from Poet&8217;s attorney, William Taylor of Woods Fuller Shultz & Smith in Sioux Falls. It states Poet accepted MPCA&8217;s view on the &8220;single source&8221; designation and was willing to move forward with the issuance of an air permit.

Schock said the company &8220;reluctantly accepted &8216;single source&8217; designation to try to avoid further delays.&8221;

He noted the date on that letter from Taylor was nearly a month ago and said the delays added up.

Moore said if Poet hadn&8217;t pulled out Friday, the paperwork would&8217;ve been in place for the MPCA to issue the air permit in one or two weeks.

He said there are other factors at play, such as the high price of corn, when a company pulls out with the permit process 99 percent complete. He noted ethanol projects have slowed or halted in states such as Iowa, Kansas, South Dakota, Nebraska and Michigan.

&8220;There&8217;s another side to the story here,&8221; Moore said.

He also said Poet Glenville East was slow to resolve MPCA enforcement actions, which his agency suggested be resolved prior to the permitting process for Poet Glenville West.

Schock said the company filed air-quality permits for two ethanol plants in Ohio in March 2007 and one in Indiana in April 2007. He said all three are two-thirds constructed and will be done before the end of the year.

He said though energy prices have increased the prices of all commodities, the value of ethanol has also increased, keeping it profitable. That Poet has refineries under construction and is looking at multiple other sites show high corn prices are not a deterrent to building.

&8220;We very firmly believe in the long term and in the contributions of the ethanol industry,&8221; Schock said.

&8216;Helpful and supportive&8217;

Dorman said if another company, such as Cargill, had built the second plant, the same amount of emissions would have been in the air and the project wouldn&8217;t have met the &8220;single source&8221; designation.

&8220;How does this make any difference in emissions?&8221; he asked.

Freeborn County Board of Commissioners Chairman Glen Mathiason said the permitting process might be something the state should look at further and possibly streamline.

&8220;My understanding is it&8217;s a pretty long, drawn-out affair compared to other states,&8221; he said, adding he&8217;s disappointed the plant won&8217;t be built.

&8220;Any time you lose something like that, it&8217;s too bad,&8221; Mathiason said.

He and Commissioner Mark Behrends divested themselves of their involvement with Poet in order to guide the economic development through county government without a financial conflict of interest.

&8220;I feel pretty confident in the industry, but if it&8217;s not going to be here, I&8217;m not really at a loss anyway,&8221; Mathiason said.

Many officials in Freeborn County have worked with Poet Director of Site Development Michael Roth. He said Freeborn County &8220;has been fantastic to work with.&8221;

He cited Freeborn County Administrator John Kluever and Planning and Zoning Administrator Wayne Sorensen as &8220;helpful and supportive.&8221;

Roth said Dorman and the Albert Lea Economic Development Agency staff helped shepherd Poet&8217;s project through local channels by working behind the scenes.

&8220;At the end of the day, it&8217;s a business decision that had to be made,&8221; Roth said.

Roth said as Poet continues to build in Indiana and Ohio, Mathiason and Behrends will be on the call list for investing in plants there.

Poet already invested $2 million in the Glenville West project.

&8220;I&8217;m discouraged,&8221; said Poet Glenville East General Manager Rick Mummert Friday. &8220;Certainly we were looking forward to having a sister plant located next door and the benefits that that would have created.&8221;

In a previous interview with the Tribune, Mummert said Glenville West would have incorporated new technology, allowing it to produce little to no wastewater. The new technology also would have saved on the use of natural gas, he said.

Commissioners Jim Nelson and Dan Belshan were not in on the county approvals because of their involvement with Poet Glenville East &8212; formerly called Exol.

In the announcement Friday, Ward said: &8220;It is Poet&8217;s goal to be the most efficient producer of ethanol in the world, and that starts with making sure our plants are cited in the best possible locations. We have always had a very rigorous due diligence process for site selection that we refuse to compromise. Occasionally, a project that initially looked solid can lose its attractiveness over time. We&8217;ve seen this happen before and have canceled projects in the past.&8221;