Bio-fuel making business rained out

Tag: alternative fuel

Biofuel-makers are facing some rough times these days in the Midwest. First, tough market conditions in both the grain and fuels sectors squeezed margins down to nubs. Then, along came some of the worst flooding in a century. Add up those two, and it's spelling a not-so-great scenario for the ethanol industry in the last few weeks.

Though dollars and cents haven't closed shutters in some facilities in Iowa, Mother Nature has. Two facilities in the Cedar Rapids area, where flooding wiped out more than 4,000 homes and did millions of dollars in damage to the city's downtown and infrastructure, have been closed because of the high waters and subsequent damage they caused.

"Penford Products had completed work on a new 45 million gallon per year ethanol wet mill just prior to the flood. Due to flood related issues at their facility, Penford has stated they anticipate 'that the facility will not be in position to manufacture significant product volumes prior to the end of this August,'" Shaw says. "The ADM (Cedar Rapids) ethanol wet mill did not sustain damage from the flood. However, production had been suspended due to interruption of water supplies from the city. Now the plant 'is operating at partial capacity due to local water use constraints' and ADM 'will increase operating capacity as circumstances permit.'"

Infrastructure interruptions similar to the water supply interruptions in Cedar Rapids have caused temporary closures or scaled-back production at plants elsewhere in the state, Shaw adds.

"Another ethanol plant in Iowa was running at a reduced rate of production due to lack of rail access and the need to truck ethanol to end markets. With limited rail access restored in addition to truck capabilities, the plant has returned to full production," he says. "Although road and bridge closures have caused challenges, no ethanol or biodiesel refinery has reported a disruption of feedstock supply that will impact operations. Logistics constraints continue to ease."

While railroad delays could continue well into the summer, Shaw says they're starting to show signs of easing "in both severity and frequency."

The recent economic and environmental conditions slowing ethanol and biodiesel production has been a tough pill for an industry whose growth, some say, is tied directly to the price of petroleum. Though, even while this tends to drive ethanol growth, it's at the point now where it's causing the industry to actually halt development. VeraSun's Endres says this doesn't diminish the need for continued biofuels production, and the production slowdown underway is likely temporary, he adds.

"With oil prices hovering around record levels, there is a tremendous urgency for domestically produced fuel options in our country," he says. "Ethanol is a solution that is available today and will continue to have a strategic impact on diversifying our energy needs."