Ethanol and Energy & Environment and Agriculture/Farming and Economic Development and Transportation, Distribution & Logistics

Biofuel plans have suppliers stoked

September 18, 2006

Indiana's plan to become the Middle East of biofuels could be a boon well beyond the rural towns that will welcome more than a dozen refineries with workers, corn and soybeans.

Firms that make and supply parts and expertise needed to build the $1.8 billion in ethanol and biodiesel plants--and related infrastructure--are gearing up.

"There is absolutely a tremendous window of opportunity for us ... . We think this is a wave we can ride for several years," said Paul K. Bolin, vice president of sales for Indianapolis-based Kennedy Tank and Manufacturing Co. Bolin said the firm has already been awarded several contracts for plants in Ohio and Missouri and is now pursuing contracts in Indiana for its stainless- and carbon-steel tanks.

The 108-year-old, fourth-generation family firm even is looking at potential business in New England and Texas.

"We've been asked to quote projects in those areas," Bolin added.

State officials say quantifying the economic impact of the 12 new ethanol and three biodiesel plants announced is difficult. Collectively, the plants will cost nearly $1.8 billion and employ upwards of 650 people, state officials estimate.

"Exactly how much [spending] will remain in the state we don't know for sure," said Ken Klemme, assistant director for economic development at the Indiana State Department of Agriculture.

Officials say it's probably a safe bet a lot of the site preparation, concrete work and steel fabrication is likely to go to state firms, but it gets cloudy from there.

It turns out that many of the refineries are little more than kits--big ones, at that--manufactured elsewhere.

That might not have been the case if Indiana had been more active sooner in the ethanol industry than other states were, Klemme said. "We might have had more Indiana vendors" specializing in the equipment.

But he said the recent biofuels push does open doors for firms here, not only to supply Indiana plants but to look at opportunities nationally, as well.

Indianapolis-based Metro Products, whose products include a corn separator/strainer for the food industry--think Smucker's jelly and Gerber baby food--already is providing equipment for plants elsewhere, including ethanol makers Aventine and Williams Energy.

"Ethanol production has finally caught up with us" in Indiana, said Jack Sweeney, an engineer for Metro Products.

Its latest product, the Langsenkamp Model 77, is a horizontal centrifuge that strips corn of its fiber and germ and all kinds of other useful byproduct. The new model costs about $50,000 and is designed to help produce ethanol more efficiently, thanks to its 225-gallon-per-minute capacity.

Metro Products just sold units for ethanol plants in Nebraska and Texas. But, here, "our biggest challenge, if you will, right now is getting in front of the people who are providing the capital equipment."

It isn't just the refineries where firms see dollar signs.

Farms ramping up to grow more corn will need more grain bins, for example, said Rob Swain, a partner in Fishers-based BioEnergy Development Co. The firm and its partners develop, design and build ethanol and soy-diesel plants, including a 60-million-gallon ethanol plant going up in Rushville.

And the way Pete McKay sees it, fuel distributors will need to expand their tank farms to handle ethanol and biodiesel blending and storage. The sales chief at Williams Beck & Hess Inc., a West Newton firm that builds and maintains fuel depots statewide, recently planned to take a contingent from the Lieutenant Governor's Office to a fuel depot to show them what's involved in biofuel storage.

Because ethanol is blended with gasoline mostly at storage facilities, not at the refineries, "You would expect some demand for tanks and ethanol storage structures," said David Swenson, an associate scientist and lecturer in economics at Iowa State University.

But Swenson is concerned that some farm-state politicians and industry advocates in states such as Iowa, where there are nearly 30 ethanol plants with another two dozen on the way, have overhyped the economic impact of ethanol plants.

In "Input-Outrageous: The Economic Impacts of Modern Biofuel Production," he notes that economic models improperly factor in growth potential for such sectors as trucking. "All of the corn used for ethanol production had to be hauled somewhere in the region prior to the introduction of the plant."

Swenson also says there are relatively few firms that are putting up plants and that the majority of the capital equipment is manufactured outside the state.

Construction jobs are temporary. And many of the construction workers are from outside the community. The plants "have beneficial impact on the local economy to the extent they're linking to local contractors or hooking up with local suppliers of labor."

Demand for ethanol has soared as an alternative to the environmentally unfriendly fuel additive MTBE. It and ethanol make gas burn cleaner.

Ethanol is the prime ingredient in E85, with gasoline the other 15 percent. About 6 million so-called flex-fuel vehicles in the United States can burn E85. It's been less expensive than gasoline for much of this year. But E85's lower fuel economy numbers don't necessarily make it a better bargain for motorists--at least until it becomes more plentiful and less expensive.

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