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Rural Communities Banking on Biofuel

As demand increases for ethanol and other renewable fuels, smaller towns in out-of-the-way locations are counting on biofuel business to heat up their economies.

Feb/Mar 08
Springfield, Kentucky, used to be a crossroads for the tobacco trade, the place farmers brought their bright leaves to dry and buyers from Philip Morris and Standard Commercial Tobacco came to buy up the crop. These days, Springfield is poised to become a crossroad for another industry - this one aimed at blending agriculture with technology to fuel everything from cars to the local economy and beyond.

"We have a long agricultural tradition," says Hal Goode, of the Springfield Washington County Economic Development Agency. "This is a natural for us." In fact, Springfield/Washington County - total population 11,400 - beat out spots in Québec, Ireland, and Siberia to host Alltech, Inc.'s first Kentucky biofuel refinery, according to Pearse Lyons, Ph.D., president and founder of Alltech, a high-tech animal feed manufacturing and research firm. Construction on the project is slated to begin this month and the plant is scheduled to begin production in approximately 14 months.

According to Lyons, Alltech already had a Wisconsin operation producing a range of yeast-derived natural animal nutrient products, but when it came to investing $40 million to get on the biofuel bandwagon, it made more sense to stay closer to home. "We also looked at no fewer than five other locations in Kentucky," he says. "But our engineering, production, and development staff is located in Nicholasville, so Springfield was the best choice."

Lyons' long-range vision calls for the site to not only produce ethanol, but also a host of agricultural production pursuits from dairy farming and meat processing to farm-raising seafood. In all, says Goode, the Alltech project means jobs, education, and training opportunities, along with economic growth to his region.

Corn or Cash?
U.S. government mandates have put ethanol production on the fast track calling for the production of 37 billion gallons of the biofuel by 2017. Currently there are 131 ethanol refineries online in the United States, with another 72 under construction and 10 undergoing expansion, according to the Renewable Fuels Association, a Washington, D.C.-based trade group.

As long as ethanol continues to figure in America's renewable energy equation, agricultural communities throughout the Midwest stand to benefit big time. That means economic developers in in rural communities are gearing up to pitch their locales - with lots of open spaces brimming with ag-savvy residents - as prime sites for refinery site selectors.

"These plants need to be located in areas that are surrounded by corn," says Anna Schramke, executive director of the Economic Development Corporation of Green County, Wisconsin, where Badger State Ethanol, LLC operates a plant in Monroe. "The whole energy efficiency industry is market driven."

But according to Wallace Tyner, Ph.D., professor of agricultural economics at Purdue University, ethanol plant site location has more to do with inducements than with finding cornfields and willing workers. State-sponsored incentives are the true drivers for site selection. "If you look at a map of where ethanol plants are located, you'll see they are located in Iowa, Illinois, Minnesota, Nebraska, and South Dakota," he says. "That's because all those states have significant incentives and subsidies to build those plants. Indiana is the fourth-largest corn producing state and up until last year had only one ethanol plant, and that was built with a federal subsidy."

Still, Lyons plays down the role of incentives, even though Alltech received up to $8 million in tax breaks under Kentucky's Incentives for Energy Independence Act, a measure passed in 2007 to spur renewable energy facilities in the state. "Incentives are very important," he says, "but they can never be the overriding reason for the project. This is an economically viable project and the incentives were more of an encouragement that a crucial part of the project."

Even so, every state in the nation uses some kind of incentive program in an effort to get a piece of the ethanol-related pie, according to the Database of State Incentives for Renewables and Efficiency, an ongoing U.S. Department of Energy-funded project of the North Carolina Solar Center and the Interstate Renewable Energy Council (IREC).

Building With Byproducts
While states craft incentives to lure renewable energy business, economic development centers in rural communities are looking for ways to turn ethanol plants into anchors for other energy-related businesses. Schramke says the renewable energy industry is a way for rural communities like hers to kick open the door to technology and lure compatible industries to locate alongside Monroe's ethanol plant. "We believe it's a renewable resource," she says of the renewable energy industry itself. "We're already seeing use of ethanol refining byproducts."

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