Ethanol plant to use
new coal technology
By Stephen Thompson
Assistant Editor
stephenA.thompson@wdc.usda.gov
ob Ferguson brandishes a sheet of paper. “Look
at this,” he says. “Our corn basis is 44 cents. We
just don’t have enough markets for our local
production.”
Ferguson is a farmer and businessman near
the small southern Minnesota town of Heron Lake. The corn
basis he is referring to is the difference between the going
price at the nearest New Vision elevator in Heron Lake and
the top price paid in Chicago. Ferguson’s response to low
prices was to help found Heron Lake BioEnergy LLC — a
mainly farmer-owned effort to build a new 50-million-gallonper-
year ethanol plant to boost local corn prices and help
revitalize the local community.
It’s a story being repeated across the Midwest as ethanol
plant construction continues in high gear. But there is a twist
here: the Heron Lake plant will not burn natural gas, as in
the vast majority of ethanol facilities, but coal.
The cost of energy is critical to the bottom line
of a corn-to-ethanol plant because so much is used.
To prepare the corn for fermenting, it is blasted with
steam. Fermenting and distilling require heat.
Drying the distillers’ grains — the part of the corn
remaining after fermentation — requires even more,
as much as 50 percent of the entire fuel budget.
Big savings over gas
The clean-burning coal technology will add to
the price of the plant, but a study in 2004 indicated that it
would cost 70 percent less for energy than using natural gas.
Since then, coal prices have risen; however, gas prices have
risen even more steeply, seemingly vindicating the decision to
go with coal. “Coal is still an extreme bargain,”
says Ferguson.
An LLC business structure was chosen because it was felt
that it offered more financing alternatives than a pure cooperative.
Heron Lake LLC financing is grounded soundly in
the community, with the majority of its financing coming
from farmers; much of the rest comes from local residents.
“We have a sizeable investment from
the four counties surrounding us,” says
Ferguson, who is president of the company.
Moreover, Minnesota law requires
that all investors in the LLC must
either be state residents or owners of
property in the state. The Minnesota
LLC allowed local businessmen — who
would not have been able to invest in a
traditional co-op — to buy in.
The venture began in 2001, when a
group of local farmers, led by Ferguson,
formed the board of directors, each
contributing $10,000. The first concern
was providing necessary infrastructure,
especially a reliable water supply.
“You can get held hostage pretty fast
if you don’t do your homework,” says
Adam Schumacher, one of the board
members of Minnesota Soy Processors
MNSP), another LLC. A well was
drilled, and it promised sufficient water
not only to feed the plant, but also to
supply a biodiesel plant located about
11 miles south, operated by MSNP.
In a three-way agreement, the town
of Heron Lake agreed to take over the
well and finance it with a 15-year bond,
which was to be paid off through fees
from the plant and from a pipeline supplying
the biodiesel operation. Mayor
John Hay sees the agreement as vital to
the interests of the town as a whole:
“We want business here that can attract
jobs,” he says. “This will double our tax
base to $50 million and give us additional
revenues to improve our school.”
Option to stay
Schumacher participated in the venture
because he wants local children to
be able to stay in the community instead
of moving away in search of jobs. “If every farmer can get a
nickel more a bushel, it might allow him to fit one of his kids
into the operation,” he says. “A lot of people who have moved
away would like to come back if they could.”
Schumacher’s farm doesn’t stand to benefit directly from
higher corn prices: it’s primarily a nursery operation, with most
of its revenue coming from sale of trees and shrubbery for use
as windbreaks, riparian buffers and other conservation uses.
Paul Pohlman, a corn and soybean farmer, echoes
Schumacher’s hopes. His roots in the area are deep: his
grandfather settled here in the 1800s, and he grew up on the
farm he now runs. He invested in the nearby biodiesel plant,
which has yet to turn a profit, and sees higher grain prices as
only part of the benefits of a successful ethanol plant: “It’s a
chance to improve the job situation here — give young people
more opportunities.”
The equity drive began in July 2004, and lasted until the
following January. To encourage locals to participate, farmers
and non-farmers were allowed to purchase shares with a minimum
investment of only $20,000. The response was strong,
say members, because local people share their vision of the
plant as a way to encourage overall prosperity and preserve
their community. The local Heron Lake State Bank helped
out by making loans for the purchase of equity shares. When
the drive was over, 1,069 investors had bought shares.
For its electrical power, the choice was between a local
cooperative, Federated Rural Electric, and an investor-owned
company. Though they were “neck and neck” in prices and
benefits, the board chose to go with the co-op.
“They’re our neighbors,” says Ferguson. “People who care
about what we’re trying to do for our community.” The coop
not only bought stock in the venture, it has applied for a
USDA Rural Development low-interest loan totaling
$740,000 for the project. “I can say nothing but good about
Federated,” Ferguson says.
Environmental delays
Construction of the plant was planned to begin in March
2005. However, the necessary permits from the Minnesota
Pollution Control Agency were held up for several months
because of objections by environmentalists over the use of
coal for fuel. “They were afraid that coal use would mushroom
if the plant got built,” says Pohlman.
He and the other board members see this as a case of
being unable to see the forest for the trees: the plant will not
only be clean-burning, its effect will be to lessen greenhouse
gas emissions by reducing overall the use of fossil fuels.
The board hired lawyers, who helped
keep the resulting delay to a manageable
length. Pohlman gives credit to
Ferguson for handling the situation:
“Bob knows where he wants to go and
how to get there.”
Further unexpected delays were
caused by issues with the design of the
railroad facility serving the plant. The
original plan called for a straight siding
next to the main rail line, providing
space for 75-car trains taking on ethanol
and DDG. However, the siding would
have blocked an important road, so the
board opted to redesign the track layout.
A new plan called for a loop track.
This required the acquisition of 121
additional acres next to the site, and
moving the plant slightly from its originally
planned position. The new layout
is more efficient, offering room for up
to 180 railroad cars, and allowing separate
tracks for ethanol tankers and
DDG hoppers. The new design allows
for adding track capacity in the future.
Together, the delays pushed back the
construction date nine months, to
November. Completion is now scheduled
for April 2007. Despite the hitch,
Mayor Hay remains confident in the
potential boost to the area. “A lawyer,
who is an investor, told us: ‘Take a picture
of your main street today, and one
another 4 years from now. You’ll see the
difference.’”
Ferguson also looks forward to better
times. “If we cause a narrowing of
the basis, the difference will go into
John Q. Farmer’s pocket, whether he’s a
member or not,” he says. “If it goes
down 20 cents, that means $2 billion
for the local economy.”
Technology reduces oxide emissions
The use of coal in the Heron Lake BioEnergy plant
depends on a new technology known as “fluidized bed”
combustion. A fluidized bed boiler works by blowing highpressure
air through a bed of solid fuel grains.
The resulting turbulence suspends the fuel in the air,
mixing both together thoroughly and allowing more complete
combustion than other methods. This reduces or
eliminates carbon monoxide and hydrocarbon emissions.
At the same time, combustion temperatures can be regulated,
keeping them below the level at which oxides of
nitrogen form, thus eliminating an important cause of acid
rain and “smog.”
Limestone powder, which absorbs sulfur in the coal, can
be injected into the process, eliminating sulfur dioxide,
another troublesome precursor of acid rain. Those features
make expensive scrubbers and other equipment to clean
the exhaust from the boiler unnecessary.
Biomass applications
The advantages of fluidized bed combustion don’t stop
there, however. The design lends itself well to biomass
fuels, such as straw, sawdust, corn stover, etc. In fact, any
solid fuel that can be ground up and blown into the boiler
can be used. If future regulations require the use of renewable
fuels, the plant will be able to handle them without
costly modifications.
Heron Lake BioEnergy President Bob Ferguson thinks
that, with no relief for high gas prices in sight, other
sources of fuel will become available. “There’s a lot of
growth, a lot of new technology in development,” he says.
One option originally considered was the use of distillers’
grains as fuel for the plant. “It wasn’t feasible to use
distillers’ grains as fuel when natural gas cost $3.50 for a
thousand BTUs,” says Ferguson. But as gas prices rose, so
did the utility of distillers’ grains as animal feed.
While prices for distillers’ grains are still lower than
those of raw corn, it actually makes better feed because
the starch has been removed by the fermenting and distillation
process, leaving more valuable fats and proteins. At
first, dried distillers’ grains (DDG) were used mainly as cattle
feed; but DDG is now being used to feed hogs and poultry
as well, with some being exported overseas. The growing
value of DDG as feed has killed any interest in it as fuel.
