Ethanol Expansion Underway

June 19, 2001

Just three days following the announcement by the Environmental Protection Agency that California must abide by federal clean air regulations regarding the use of oxygenates in federal reformulated gasoline, the impact on ethanol plant construction has been felt, according to the Renewable Fuels Association. One new ethanol plant began construction the day of the official announcement. According to ethanol plant builders, dozens of other proposed plants will now move forward, adding hundreds of millions of gallons of capacity to the ethanol industry over the next year and a half, said RFA.

"The impact of President Bush's decision to uphold clean air standards has been tremendous, and it's only been three days," said Bob Dinneen, vice president of the RFA. "The ethanol industry has been given an unambiguous signal to expand at an unprecedented pace. This week 600 million gallons of ethanol production capacity began moving forward. The ethanol industry will clearly have more than ample capacity to meet California's oxygenate demand and, in fact, move us toward the ability to replace MTBE nationwide."

"Tall Corn Ethanol," a farmer-owned cooperative, began construction of a 40 million gallon per year production facility in Coon Rapids, IA. The plant is the first of three 40 million gallon plants being built by Broin and Associates. Northern Lights Ethanol was scheduled to begin construction in Milbank, SD. The third plant construction will begin in the next two months.

In addition, this year Broin and Associates will complete construction of a new ethanol plant in Wentworth, SD, and a major expansion at Exol, Inc. in Albert Lea, MN -- totaling 60 million additional gallons. Broin will also soon begin an expansion project at the Pro- Corn ethanol plant in Preston, MN, raising its annual capacity from 18 to 36 million gallons. "The denial of the California waiver has had a positive impact on investors' and lenders' willingness to move forward with ethanol projects," said Jeff Broin, president of Broin and Associates.

Fagen, Inc., has been able to proceed with several projects following the EPA announcement. Construction will begin this calendar year on plants in Oregon, Wisconsin, Iowa, and South Dakota for a total of 210 million gallons of additional ethanol capacity. "The correct decision by the EPA to not allow California to backslide has pushed several of our projects to the finish line," said Bill Wells, vice president, Fagen Inc.

"A number of our projects waiting for this decision have now given us the green light to move forward as fast as possible," said Larry Johnson, business development manager with Delta-T Corp. Delta-T expects to begin construction on 8 to 10 ethanol plants over the next 12 months that would total 270 to 300 million gallons of additional ethanol production capacity.

"This decision removes the largest uncertainty that was standing in the way of several significant projects," said Phil Madsen, president of Katzen International Inc. "Many of these projects will now move forward."

Facing widespread water contamination from MTBE, California is phasing out its use by Dec. 31, 2002. However, California also petitioned the federal EPA to waive the Clean Air Act requirement that RFG contain at least two percent oxygen by weight. This clean octane provision is enormously successful in reducing harmful emissions and also prevents gasoline from containing higher quantities of other harmful octane enhancers such as benzene. The RFA argued in technical submissions over two years the waiver was unnecessary because MTBE could be replaced with ethanol - preserving RFG's air quality benefits but not threatening precious water supplies.