Spotlight on Illinois

Source: By Holly Jessen, Ethanol Producer Magazine • Posted: Friday, February 13, 2015

Some of the most influential players in gaining federal support for the early ethanol industry have roots in the Land of Lincoln.

Illinois, the No. 3 ethanol producing state, has a unique history that goes back to some of the earliest days of the ethanol industry. Before the farmer-cooperative model developed, companies like Archer Daniels Midland Co. and Pekin Energy Co. worked hard to secure federal tax credits and find a market for ethanol as transportation fuel. “Those companies had a lot to do with the early industry,” says Dave Loos, technology and business development director for the Illinois Corn Growers Association.

Today, ADM still operates two plants in the state, located in Decatur and Peoria. According to ADM’s company timeline, the Arab oil embargo of the early 1970s prompted President Jimmy Carter to ask Dwayne Adreas to convert a new beverage alcohol plant in Decatur to a fuel ethanol plant. That project was completed in 1978.

Pekin Energy Co., a joint venture of Texaco and Corn Products Co., operated an ethanol plant in Pekin, Illinois, which is now operated by Aventine Renewable Energy. The coal-fired wet mill was built as a sugar processing facility in 1899 and was converted to ethanol production in 1981, according to Aventine’s website. That company also operates a second plant, a dry mill built in 2007, at the same location on the east bank of the Illinois River. Notably, a third facility in Pekin was owned by Midwest Grain Producers until 2009, when Illinois Corn Processing Holdings took over.

An article published in the January 1981 Illinois Times estimated that about half of the fuel ethanol produced in the U.S. was made in Illinois. At that time commercial ethanol plants operated in 18 Illinois counties and there were another 21 small on-farm stills. The story, “Illinois: The Land of Ethanol,” was written by James Krohe Jr., the then associate editor of the monthly magazine on public affairs.

Krohe also wrote about ADM’s Decatur plant and the company’s belief that there would be a market for fuel ethanol as a gasoline substitute. However, the article characterized ADM’s success in producing commercial quantities of fuel at a profit as what helped Charles Duncan, then U.S. energy secretary, to convince President Carter of the feasibility of the ethanol industry. “It might be more accurate to describe Illinois not as the Land of Ethanol, but the Land of ADM,” Krohe wrote in the 9,000 word article.

While Illinois companies had a running start in the early days of the ethanol industry, with corn processing giants like ADM taking the lead, the state eventually fell behind, Loos says. Other states used the farmer-cooperative model to leapfrog ahead of Illinois for about 10 years. “Even now, although we have a very solid industry, we don’t have the capacity that an Iowa does, or even a Nebraska,” he says.

First Co-op Plant
The state’s first small dry mill ethanol plant to embrace the cooperative model was Adkins Energy LLC, Loos says. Construction began at Atkins Energy in 2001 and the plant began operations in August 2002, says Ray Baker, general manager of the facility. When the plant started up, it was majority owned by two cooperatives, the Pearl City Elevator Co-op and the Atkins Energy Co-op, made up of area farmers who signed up with a grain delivery requirement. In 2011, Adkins Energy Co-op was liquidated and the grain delivery requirement was eliminated, Baker says. Today, the general membership owns 50 percent of the plant and the elevator co-op the other 50 percent.

“Our main focus has been on operational efficiency improvements, improving our yields, as well as incremental expansion,” he says. “When the original plant was built, it was probably a nameplate capacity of about 38 MMgy and we’ve moved it up to a peak capacity of 52 MMgy.”

A secondary focus is on product diversification and advanced biofuel opportunities. In late January, the company was producing batches of biodiesel at a 2 MMgy biodiesel plant colocated with the ethanol plant to take advantage of the corn oil separated at the ethanol plant as a biodiesel feedstock. The company hoped to reach full capacity sometime in February, Baker told Ethanol Producer Magazine. In addition, Adkins Energy is one of only a few U.S. ethanol plants that has an on-site, combined-heat-and-power system.

Illinois has a strong transportation system via river and rail, plus access to nearby high-volume markets. Loos named the majority of the state’s 14 ethanol plants located on or near the Mississippi or Illinois rivers, including two located at port authorities and one with its own river load-out facility. “The rest of the plants are connected to large rail systems that have easy access to containers for export,” he says, adding that the state’s transportation system removes some of the risk facing ethanol production facilities. Currently, only the ethanol plant in Canton, Illinois, is shut down. Central Illinois Cooperative filed for bankruptcy in 2007 before construction was completed on that facility. Overall, the state’s ethanol industry is strong. “I think Illinois ethanol plants have some of the best managers in the country,” he says. “We haven’t had the ebb and flow in the industry that other states have had.”

Looking at corn production in Illinois, more than half goes to the state’s ethanol plants, according to numbers from ProExporter Network. In 2014, Illinois corn growers harvested 11.7 million acres of corn, with an average yield of 200 bushels per acre. “That’s just amazing,” says Jeff Jarboe, the vice president of ICGA board of directors. According to yield numbers from 2004-’05 on, that’s the highest yield on the list. In 2012-’13 Illinois had an average yield of 105 bushels compared to 178 bushels last season.

The state’s ethanol producers do meet as the Illinois Renewable Fuels Association, Baker says, adding that it’s been very positive for the industry. “I think we’ve had a lot of success working together and I would hope we’d see continued success.” Perhaps someday the association will have paid full-time staff but for now Loos works with the group part time. Funding comes from the members and collaborative work with ICGA and Illinois Corn Marketing Board.

The groups are currently working to encourage the state of Illinois to discontinue an E10 tax incentive for retailers and turn it into an E15 incentive. Since E10 is already a permanent part of the gasoline supply incentivizing the sale of that fuel is not effective, Baker says, adding that the change would help advance E15 offerings in the state and save the taxpayers money.

Jarboe also pointed to work going on in Chicago to pass an ordinance that would require fuel retailers to offer E15. He’s hopeful that if the initiative is successful in that city, it could spread to the whole state. “I think it’s an excellent start,” he says, adding that it’s expected to come before the full city council for a vote in February or March.