FERGUS FALLS, Minn. - If you've ever been to a brewery, the new ethanol plant here might look and smell familiar.
The 55-million-gallon Otter Tail Ag Enterprises plant, which recently opened on a 114-acre site west of Fergus Falls, uses the fermentation process to produce ethanol from corn.
"Yes, we're sort of a brewery," said Chief Executive Officer Kelly Longtin.
Around him is a maze of shiny pipes and tanks, which are used to move and store ethanol during the fermentation process.
The smell of fermenting ethanol - reminiscent of beer being brewed - hangs in the air.
Ethanol isn't the only thing produced at the plant.
A co-product of ethanol production is distillers grain, a high-quality feed for livestock and poultry.
Some of the distillers grain produced at the Fergus Falls plant will be dried and sent to large out-of-state livestock operations.
Distillers grain that isn't dried can't be stored for long, so wet distillers grain from the Fergus Falls plant is sold close to home.
But ethanol and corn are the plant's stars.
The 157,000 gallons of ethanol produced daily typically go to cities, including Fargo, with "tank farms."
The ethanol then is mixed with stored gasoline, with the blended fuel taken to service stations.
Longtin and other ethanol advocates would prefer that ethanol go directly to stations.
With the right equipment installed at the stations, consumers could decide at the time of their purchase what ratio of gas and ethanol to pump into their vehicles.
To produce its ethanol, the Fergus Falls plant grinds 57,000 bushels of corn daily, or roughly the corn produced on 350 acres.
The transformation of corn into ethanol typically takes about three days, Longtin said.
For corn farmers in the Fergus Falls area, the ethanol plant can mean extra money.
"We're glad it's here. It can help our basis," said Peter Aasness, a Fergus Falls farmer who's sold corn to the plant.
Basis is the difference between local cash prices and the nearby future price on the Chicago Board of Trade.
Basis is determined by many things, including local demand.
The average U.S. corn price rose from $3.43 per bushel in March 2007 to $4.83 in March 2008, according to the U.S. Department of Agriculture
Prices rose even higher after a key USDA report earlier this week projected that U.S. farmers will plant less corn than a year ago.
The higher prices could encourage farmers to plant more corn than projected.
Longtin is optimistic about the plant's long-term success, even with higher corn prices.
In any case, U.S. ethanol plants should be able to obtain enough corn, assuming average yields, said Brian Jennings, president of the American Coalition for Ethanol, a Sioux Falls, S.D.-based trade association.
Otter Tail Ag Enterprises' research found that more than 50 million bushels of corn are raised annually in the Fergus Falls area.
The plant will use roughly 20 million bushels annually.
Typically, new ethanol plants produce either 50 million or 100 million gallons annually, Jennings said.
Both those plant sizes are large enough to capture the necessary economies of scale, he said.
Longtin said 55 million gallons was logical for the Fergus Falls plant, given the amount of corn produced nearby.
Two other ethanol plants are being built in the area.
Work on the Tharaldson Ethanol plant near Casselton, N.D., is going well, said Russ Newman, vice president of development for Tharaldson Ethanol.
The 100-million-gallon plant is expected to open late this year.
In Hankinson, N.D., the 100-million-gallon VeraSun Energy Corp. plant is scheduled to open this summer, said Mike Goblirsch, regional general manager.
The plant will begin taking in corn in 20 to 30 days, he said.
The plant had belonged to U.S. BioEnergy, which recently merged into VeraSun.
Brookings, S.D.-based VeraSun owns and operates 10 ethanol production plants with an annual capacity of 980 million gallons.
By year's end, the company expects to have 16 plants with a combined capacity of 1.64 billion gallons, which would make VeraSun the nation's largest ethanol producer.
The Hankinson plant has had a corn merchandiser on site and actively procuring corn for a year, Goblirsch said.
Longtin said he doesn't think the Casselton and Fergus Falls plants will compete, at least directly, for corn.
The Fergus Falls and Hankinson plants may compete over some corn, but it's not a major concern, Longtin said.
Planning for the Fergus Falls plant began in January 2005. Construction began in October 2006.
Longtin, named CEO of Otter Tail Ag Enterprises in May 2006, said the finishing touches on the plant remain to be completed.
"But we're up and running, and that's exciting," he said.
Otter Tail Ag Enterprises
- Operates 55-million-gallon ethanol plant in Fergus Falls, Minn.
- 33 employees, earning $14 to $20 per hour
- 57,000 bushels of corn ground daily
- 157,000 gallons of ethanol produced daily
- 485 tons of distillers grain produced daily
- 877 investors - 62 percent of them farmers - from 193 Minnesota cities
- Projected to have annual economic impact regionally of $110 million.
Source: Otter Tail Ag Enterprises