Ethanol capacity comes back on the drawing boards

Industry trade show, new plants put the shine back on ethanol

By Dave Hannon -- Purchasing, 8/14/2008 12:41:00 PM

It’s been a roller coast ride for ethanol in the U.S. the past couple years. After getting a major boost in interest and investment during the early phase of the oil price boom, investment in ethanol plunged and several producers canceled plans to build new plants in the U.S.

But lately ethanol is getting some new support. Following the Environmental Protection Agency’s decision last week to deny a request by the governor of Texas to reduce for one year the mandate on ethanol production, the ethanol industry rallied at the American Coalition for Ethanol conference in Omaha, Neb. this week. The Associated Press reports that among the plans announced at the meeting are a new social networking Web site so ethanol producers can share information and promoting a package of proposed laws that ethanol producers can try to get enacted in their home states.

The increased interest has also brought plans for new plants again. This week, Poet, a Sioux Falls, S.D., ethanol distiller, got approval to build its largest plant yet in West Lebanon, Ind. with capacity for 115 million gallons a year. Poet also said that construction will be completed on a $4 million pilot-scale cellulosic ethanol production facility and the plant will be being production this year adjacent to its ethanol production facility in Scotland, S.D.

But already, the uptick in ethanol interest has some market watchers talking about ethanol’s impact on corn prices, despite the dramatic dive in corn prices in the past six weeks and the Agriculture Department projection that this year's corn crop has withstood rains and flooding to deliver a harvest of 12.3 billion bushels—573 million more than it expected last month and second in size only to last year's harvest.

Reuters reports that the USDA raised by 150 million bushels, to 4.1 billion, its expected total of corn to be used to make ethanol this year, which if realized would take 33% of the crop grown which would likely increase prices.

See also: New ethanol plants come online