Des Moines Register
02/24/06
Limit sought on foreign control of Iowa
energy
JERRY PERKINS
REGISTER FARM EDITOR
Legislation might be needed to control foreign ownership of energy and food
production in Iowa and the United States, an Iowa farm leader said Thursday.
Chris Petersen of Clear Lake, president of the Iowa Farmers Union, described as
"disturbing" the announcement this week that an Australian-owned company is
buying a 60 percent interest in a Lakota ethanol plant.
Global Ethanol plans to buy the stake in Midwest Grain Processors LLC, one of
the largest and one of the first farmer-owned ethanol plants to be built in Iowa.
"When you are talking about energy and food, it represents a national, strategic
interest," Petersen said. "We farmers are not too happy with this. We're
questioning it."
Others in the industry say Petersen's call for legislative bans on outside
investment may be going too far, because rural communities often experience
difficulty in finding capital to start new businesses and need other investment
sources.
"It's no surprise that Wall Street is interested in Iowa's ethanol plants," said
Monte Shaw, executive director of the Iowa Renewable Fuels Association. "The
industry is growing very fast, and more investment is needed."
Petersen stressed the need to keep the returns from agribusinesses inside the
state's borders.
"We believe in the local ownership and the local benefits of ethanol, biodiesel,
wind energy and livestock production," he said. "When Iowa farmers and local
Main Street businesses own those, the profits go to the people it's supposed to
go to. Local businesses generate income and taxes so the Legislature has
something to spend."
1.1 billion gallons
Iowa is the largest ethanol-producing state with a production capacity of 1.1
billion gallons a year, Shaw said. Iowa ethanol plants produce more than 25
percent of the ethanol in the United States. The state is expected to generate
another 600,000 gallons of ethanol production in the near future.
Economists say it's inevitable that outside investors will want to invest in an
industry where returns are reaching 20 percent to 30 percent a year.
"As long as ethanol looks profitable, we will continue to see that kind of
investment pressure," said Chad Hart of Iowa State University's Center for
Agricultural and Rural Development.
Jason Henderson, an economist with the Federal Reserve Bank of Kansas City,
concurred.
"Whenever there are profits on the table, companies are going to come and
invest in that industry," Henderson said.
Shaw said that when outside investors own a plant, the profits leave the
community, but there are other economic benefits.
"If you hadn't had that investment, would you have had those jobs or created
more demand for Iowa corn?" he asked.
A number of factors have combined to create large profits for plants that produce
ethanol, a corn-based fuel that is blended with gasoline. Among them: high
prices for petroleum, state and federal tax incentives, a national energy policy
that supports production of domestic fuels, and environmental concerns.
Farmers speak up
Two Iowa farmers who have invested in ethanol plants said they would prefer
that the plants have local ownership so profits stay in the community. But, they
said, farmer-owners of ethanol plants have a right to sell if they want.
Bill Couser, a farmer from Nevada who is president of the Lincolnway Energy
ethanol plant being built in Nevada, said he thought it was best if local people
owned ethanol plants, but outside investors can't be kept out.
"There's nothing that says people can't come in and buy the shares of ethanol
plants," he said.
Vance Bauer, a farmer and Iowa Farm Bureau Federation member from Gowrie,
said he has invested in the Frontier Ethanol plant being built near Gowrie by
Broin Cos. He said he wouldn't favor passage of legislation restricting ownership
of the plants.
"Even if the investment money is coming from outside the state, an ethanol plant
in Iowa is still creating jobs locally and creating a market for Iowa corn," Bauer
said. "No matter who owns it, it's still doing some economic good for Iowa."
Jeff Broin, chief executive officer for Broin Cos., said the company has set aside
for local investors a certain percentage of the equity in each of the seven Iowa
ethanol plants it has built, is planning to build or has under development.
"Broin always reserves a certain piece for local folks," he said. "As the ethanol
industry grows and matures, there are bound to be larger entities coming into the
industry. We hope they understand the industry well enough so that there is
responsible growth."
Nothing new
There is nothing new about outside investors coming into Iowa to own ethanol
plants, said David Holm of the Iowa Institute for Cooperatives in Ames.
Most of the ethanol plants built in Iowa in the past 18 months have been built
without farmers' equity, Holm said. "You can't build a wall around the state," he
said. Holm said he remembered when Iowa sought out investors from outside the
state.
"We used to go to meetings and talk about how we could attract more outside
equity to Iowa," he said.
Sen. Tom Harkin, D-Ia., said in a statement that more federal money is needed
to help local groups build plants. He faulted the Republican-controlled Congress
for scaling back grant and venture-capital programs authorized by the 2002 farm
bill.
"The critical question is what we do in this country to help farmers and local
investors own ethanol and biodiesel plants," Harkin said.
Philip Brasher of the Register's Washington Bureau contributed to this report.