Council Bluffs Daily Nonpareil, IA
09-29-06
A look at the economic value of ethanol production
Phil Rooney, Staff Writer
The potential benefits to a community that come with developing ethanol plants
varies with the amount of local ownership, according to an Iowa State
University study.
Economist Dave Swenson and staff researcher Liesl Eathington co-authored
"Determining the Regional Economic Values of Ethanol Production in Iowa
Considering Different Levels of Investment."
Swenson said the big money that's coming out of ethanol plants is going to the
investors, and if all of that money leaves the local economy, the local benefits will
be much less.
"You would think that's a no-brainer," he said.
Swenson created a modeling system that considered the job growth potential to
a rural area of Iowa for an ethanol plant producing 50 million gallons annually,
given different levels of local ownership or investment. In building the model, he
developed and processed information on the production characteristics of
modern ethanol plants.
The researchers started with a baseline figure that assumed the plant had no
local ownership, then allocated the returns to investors back into the county to
mathematically model how the county's economy would react to an increase in
that type of income, with a special focus on jobs.
Swenson applied the model to four plants already operating in Iowa, but was
required to give the plants anonymity to get the information.
One was completely owned by people from outside the area, while the local
ownership of the other three was 27 percent, 63 percent and 73 percent.
The researchers found that with no local ownership a plant will create, directly or
otherwise stimulate, 133 jobs in the regional economy, with another 29 jobs
created for every 25 percent increase in local ownership of the plant, according
to the study.
"What changed was how much money was available to spend if that money was
paid to local investors," Swenson said. "Most of that gets spent as household
consumption."
The following conclusions were reached:
- For the firm that had 27 percent local ownership, the local ownership dimension
accounted for 47 more jobs.
- For the firm at 63 percent, the local ownership dimension added 80 more jobs.
- For the firm at 73 percent, the local ownership dimension added 53 more jobs.
The benefit goes mostly to existing local business.
"It's basically boosting your Main Street economies," Swenson said.
The baseline model might be a rural average, but the impact would be stronger
for a trade center like Council Bluffs.
"You'd have a greater opportunity to spend more money in that region," Swenson
said.
With 27 ethanol plants processing corn, mostly for ethanol, and at least as many
more in some stage of planning, Iowa is in an ethanol plant construction boom;
but Swenson adds a note of caution.
"If those returns slow down," Swenson said, "those local ownership impacts will
go down . . . There's always a downside to everything."
However, those benefits still could be greater for the community than with other
investments.
In past studies, Swenson has cautioned people against expecting too much in
terms of job creation from ethanol plants, while stressing that their creation is a
positive development.
"These are good jobs paying good wages, and a plant has really good linkages to
technical economies," he said.
But people who say a 50-million-gallon plant will support 700 people are not
dealing with reality, Swenson said.
"That's just crap," he said.