Officials point out Fairbank ethanol plant’s role in ‘growth industry’

Source: By Jim Offner, Waterloo Cedar Falls Courier • Posted: Tuesday, June 30, 2015

FAIRBANK | On Thursday, Iowa Agriculture Secretary Bill Northey was in Kansas City, Kan., to meet with the U.S. Environmental Protection Agency and, later that day, participate in a “Rally for Rural America” on behalf of the federally mandated Renewable Fuel Standard.

Only one day earlier, officials in charge of Iowa’s largest network of ethanol plants said the RFS could disappear, and it wouldn’t make a whit of difference to the plants’ profitability.

“It’s an interesting dilemma for us, because our chairman, Charles Koch, has always had a view that free markets are how businesses should be run,” said Jeremy Bezdek, corporate vice president of biofuels and ingredients with Wichita, Kan.-based Flint Hills Resources LLC, a subsidiary of Koch Industries Inc. “So, we’ve always favored the elimination of mandates and subsidies.”

Flint Hills has said the RFS, which sets a floor for the amount of ethanol in the nation’s gasoline supply, should “go away,” because ethanol can compete and succeed without any props, Bezdek said.

“We’ve invested significant amounts of money in the ethanol production aspect, and the reason we’ve done that is we believe these plants can be profitable without a mandate,” he said. “I don’t think that’s necessarily a popular opinion throughout our industry, but it is our opinion. And we believe that based on the fact that, based on the fact that, at what we believe the long-term corn price will be and the long-term crude oil price will be, ethanol brings value to transportation. So, our position remains very consistent that we’d support the elimination of mandates.”

Greeting the community

Flint Hills’ unfettered faith in its products was on full display Wednesday at an open house at its Fairbank ethanol plant.

“We’re trying to have interaction with the community, since we are a part of the community,” said Garland Krabbenhoft, manager of Flint Hills’ plants in Fairbank and Shell Rock.

The company put up a massive tent and served free lunches to any and all comers and then offered tours through the Fairbank plant, which produces about 110 million gallons of ethanol per year, Krabbenhoft said.

The plant also churns out distillers grain, which goes to feed, and now also makes corn oil.

“As far as production, we’re always trying to improve and innovate to increase the production and co-products of corn,” Krabbenhoft said. “Last couple of years, we’ve added corn oil to broaden what we’re giving back to our customers. We’re always looking at ways to improve on production. So, we have not peaked on production, and we’re excited about how to upgrade that feed stock. It’s an exciting time for us and Northeast Iowa.”

The Fairbank plant employs about 67 workers. Many, if not all, of them were helping out at the open house. Some served food; others piloted golf carts for a parade of tours through the massive plant.

“Five years ago, we had roughly about 48 people working here, so we’ve grown, and it’s across the board,” Krabbenhoft said. “If we really want to innovate, we really have to have the right talent in place. We added up to seven hourly employees recently. It shows our employees we’re here on a long-term basis.”

Further plant growth is anticipated, Krabbenhoft said.

“We’re setting our conditions to expand the plant, hopefully, sometime in the future,” he said.

Flint Hills bought the Fairbank facility from Hawkeye Renewables in 2011, a year after it had purchased similar operations in Shell Rock and Menlo.

Hawkeye Renewables built the Fairbank plant in 2005 and Shell Rock in 2008.

Bezdek, who played a central role in negotiations to acquire the operations, said both plants are ideally situated for growth.

Economic impact

The Fairbank plant processes more than 40 million bushels yearly.

“In general, it’s all local here, hopefully direct through a farmer or through a co-op,” he said.

That’s significant, said Karla Organist, economic development director in Fayette County.

“In addition to providing a significant number of jobs for area residents, many who live in nearby Fayette County communities, the ethanol plant is a major purchaser of locally produced corn,” Organist said. “Flint Hills has made a commitment to source only farmer-owned corn, either directly or through a local co-op and accepts grain by truck or tractor and wagons,”

She noted the plant uses 48 million bushels per year and Fayette County produces about 32.6 million per annum — much of which likely is going to the local plant.

“Prior to the plant in Fairbank, many farmers trucked their grain to the river,” Organist said. “With the facility so close, the savings in transportation costs have been significant for local Fayette County farmers.”

It also boosts the railroad, since Iowa Northern carries about 14 or 15 cars of ethanol away from each plant each day, Krabbenhoft said.

Bezdek said Flint Hills was excited about the Fairbank property — as it was in others it purchased — the first time officials saw it.

“I can tell you we were excited from the very first visit,” Bezdek said, glancing around the Fairbank property. “They were well-built plants, they’re in great locations. Of course, the quality of the corn is just fabulous in this part of Iowa. We’re just excited to operate these facilities and bring our operating culture to this area.”

Fairbank, like Shell Rock, can store as much as 2.5 million bushels of corn. The plants were ideal for a company like Flint Hills, which wanted to move from buying, selling and trading to manufacturing ethanol, Bezdek said.

“We’ve been in the ethanol business for 20 years, and in 2007-08, we decided we wanted to get into the production,” he said. “At the time, production orders were very strong, and nobody wanted to sell, so we had to wait a little bit, and then, in 2010, we were able to do our first deal, with Shell Rock and Menlo.

Location in the midst of some of the richest corn production in the U.S. offered immediate rewards, but Fairbank brought something extra, Bezdek said.

“For Fairbank, the team we have here is very entrepreneurial,” Bezdek said. “We’ve done pilot programs here. Our first oil extraction, we did here. Our first cellunator (a process used in creating feedstock), which is yield-improvement technology, we did here.”

Fairbank also is trying out a new corn hybrid, as well, Bezdek said.

“This mindset that exists here to try new things and apply those elsewhere, is really a core capability of this plant,” he said.