Post-Bulletin, MN
10-30-07
Editorial: Caution is prudent with Eyota ethanol plant
The Eyota City Council has little interest in a one-year moratorium on industrialuse annexation, and we can't blame them. The moratorium, suggested as a way
to put plans for a 55-million gallon ethanol plant on hold, would tie the city's
hands, and there's no reason to do so -- there will be plenty of opportunities for
city officials to block construction of the plant in the next few months.
Having said that, however, a strong argument can be made that Eyota should
proceed with caution. We say this, not merely because of valid concerns about
the city's water supply and possible odor problems from the plant, but because
the ethanol industry is in a state of transition.
On June 20, 2006, a gallon of ethanol was worth $4.23, and ethanol plants were
sprouting across the country. Two weeks ago, that same gallon of ethanol was
worth $1.55. Corn is a bit cheaper right now than it was 16 months ago, but not
nearly enough to offset a price drop this steep. A plant in Granite Falls, Minn.,
reported its most recent quarterly profits at $2 million, compared to $15 million a
year ago.
With profits sinking, construction of facilities in Minnesota, Colorado, North
Dakota and Indiana have been delayed. Some plants that were in production
have been shut down until corn prices fall or ethanol prices rise.
"The end of the ethanol boom is possibly in sight and may already be here," said
Dr. Neil E. Harl, an economics professor at Iowa State University who also
is a consultant for ethanol producers. "This is a dangerous time for people to
be making investments."
Will the industry turn around? Probably. Industrial growing pains are hardly
unusual, and in the big picture, ethanol is in its infancy. Twenty years from now,
there's little doubt Americans will be burning more biofuels in their cars than they
do today.
The odds are, however, that much of that ethanol won't be made from corn.
Unlocking the energy in switchgrass, wood, crop residue and other substances
that are less agriculturally intense than corn and soybeans will be the key to
ethanol's future.
Eyota, through no fault of its own, has missed the boom times of corn-based
ethanol. So, instead of rushing to get a facility built in order to claim a share of
already-dwindling returns, a more prudent path would be to wait for the next
generation of ethanol plants, which presumably will use less fossil fuel, produce
less pollution and won't require farmers to plant corn fencerow-to-fencerow.