Nebraska Ethanol plant idle, but town is optimistic

Source: Art Hovey, Lincoln Journal Star • Posted: Thursday, August 30, 2012

ALBION — The last time the local ethanol plant went into idled status, it was 2008 and mothballing turned out to be the beginning of a complete financial meltdown for its owner, VeraSun.

This time, local businessman and economic development promoter Tim Kayton isn’t expecting anything nearly as serious to happen, even though the operation now owned by Valero has been out of production mode since June.

“We hate to see them go idle,” Kayton said Wednesday, “but we understand why with the price of corn.”

Despite the drought that has put heavy pressure on virtually all corn users, he looks for a return to normal for 60 employees in fairly short order.

“They’re going to run idle when they can’t make money,” he said of Valero. “When they can make money, they’ll take it back up.”

Valero, the world’s largest independent oil refiner, wasn’t even in the ethanol business as recently as 2009. That’s when its Texas-based management went to bankruptcy court to buy seven VeraSun plants, including one in Nebraska, for $477 million.

Now it owns 10 plants in seven states, each with an annual capacity of 120 million gallons, and ranks third nationally in manufacture of corn-based fuel.

VeraSun was the biggest casualty of a previous run-up in corn prices. Its management was unable to compensate for cost pressures by locking in higher prices for its ethanol.

Its two other locations in Nebraska — at Ord and Central City — now belong to Green Plains of Omaha.

Even though a combination of drought and high demand have pushed corn prices past $8 a bushel in 2012, Bill Day of Valero was quick to agree with Kayton on Wednesday that it and other ethanol producers will ride out this storm.

“This is not like that,” he said of the situation in 2009.

This time it’s the weather, and the weather will change.

Day and other visitors from Valero headquarters touched down in the corporate jet in nearby Columbus so they could make Albion the first of several stops that also will take them to host communities in South Dakota, Indiana, Ohio and Wisconsin.

Day met with the media for about an hour to talk about the situation in Albion, at other Valero plants, and about the bigger ethanol picture, which includes plants under various owners on idle and others operating at reduced capacity.

Albion and Linden, Ind., are the only Valero plants on idle status, but the company is running at only about 50 percent of its 1.2-million-gallon capacity overall because of strains on the ethanol economy.

“The corn basis here and in Linden is significantly higher than at our other plants,” Day said of the grain cost structure.

The cost of production at those two sites is also higher because of poorer rail connections.

He stressed that Albion employees are not on the outside looking in.

“They’re all still on the payroll. They’re all still coming to work.”

That commitment to the workforce will continue for however long it takes to get back to normal production, Day said.

“Valero is a huge international company, and we take care of our people.”

A return to full production could come as soon as the end of the year, he said

“We haven’t put a timetable on it. It really depends on the market.”

As harvest approaches high gear, he said, “we’re in wait-and-see mode. We’re hopeful things are not as bad as they seem.”

Some combination of lower corn prices and higher ethanol prices will put an end to idling at some point.

“It needs to be a more positive situation,” Day said.

In touching on other matters, Day acknowledged that Valero wants to ship crude oil through the Keystone XL pipeline, assuming its permit application gets past the latest round of state and federal scrutiny.

“We love the Keystone XL pipeline,” he said.

Meanwhile, the pair of golden scissors that economic development advocate Kayton used to cut the ribbon on what began as a VeraSun plant is still on display at his Case-IH farm machinery business along Nebraska 14.

“Valero, we think, is a good company, a profitable company,” he said.