WisBiz In-Depth: Badger State Ethanol
By Gregg Hoffmann
MONROE - Badger State Ethanol, one of two Wisconsin ethanol plants featured at a recent international conference in Madison, is developing yet another market from one of its byproducts – carbon dioxide gas (CO2).
“We emit about 300-400 tons of CO2 gas daily,” said Gary Kramer, president and general manager of the BSE plant. “We will sell raw gas. Another company will convert it into liquids. It’s used in beverages, refrigeration, preservation, dry ice, a number of products.”
The CO2 operation, which required the addition of a recovery facility to the Badger State plant, is an example of the environmentally-conscious approach Kramer and John Malchine, CEO and chairman, have taken since the plant opened in September 2002.
“We really don’t waste anything in the process,” Kramer said. “The plant is considered to be a zero effluent plant. We recycle process water. The only water currently discharged is sanitary waste water and some cooling tower blow down. That is treated and is environmentally friendly water.”
BSE uses a lot of corn in its process. “The plant is engineered to produce 41 million gallons of ethanol per year,” Kramer said. “We’re working above that right now. We’ve reached a plateau of 48 million gallons. We think we can reach 52 million gallons.”
The plant processes about 48,000 bushels per day of corn, producing between 140,000 to 142,000 gallons of 199.2% proof alcohol every day. BSE returns about 17 pounds from every bushel of corn used in ethanol production back into the food stream via high protein dried feed for livestock.
“We are in the energy conversion business here,” Kramer said. “Because of that, we want to optimize how we use our raw material of corn.”
Most BSE corn comes from Wisconsin elevators.
“We established relationships with the elevators, and they contracted with the growers,” Kramer said. “Elevators have rail access, and about half the corn arrives here by rail.
Farmers also deliver by truck all day long, but they are paid by the elevators.”
The company decided to go with elevators because that industry has experience. “It’s a tested industry,” Kramer said. “They have proven they know what they are doing. They’ve been doing it for a hundred years. We benefit from their expertise, and we don’t have to compete with them.”
Wisconsin & Southern Railroad serves the BSE plant, and links to other railroads such as Burlington, North Santa Fe, Union Pacific and Canadian National/Illinois Central at Janesville. About half of the ethanol from the plant is shipped by rail and half by trucks. Markets are as far away as New York, California, Arizona and Washington.
The Wisconsin & Southern had been scheduled to close in Monroe, but it has expanded operations because of the BSE shipments.
BSE is registered with the SEC as a limited liability corporation and has upwards to 500 investors. It is not a cooperative, and investors have no obligations to contribute corn to the plant.
This structure also allowed Kramer and Malchine to seek investors beyond Wisconsin. Many have agricultural backgrounds.
Kramer is a veterinarian, and Malchine has run a family farm in Racine County. “Our ag backgrounds are what brought us together,” Malchine said. “We both saw the potential ethanol has for agriculture and for the environment.”
BSE has 36 employees and dozens of contractors. “We have an economic development impact that includes people from farmers to truck drivers to computer experts,” Malchine said.
“We located in Monroe, because Monroe wanted us. Officials from the community were part of our planning from the first day on. Many were involved and very helpful.”
Kramer said the approval process had some of the usual obstacles faced by ethanol plants, but overall those were minimal and the process went smoothly.
Malchine and Kramer say the financial impact of their plant, and the ethanol industry, already is being felt in the agriculture community.
“As you look into the future, if ethanol was not here we would have about 1.2 billion more bushels of corn on the market,” Malchine said. “That would mean about a buck per bushel difference on price. When you look at that, and the government program and how it is structured today, it would cost the American consumer between $5 and $6 billion a year for corn prices.
“It’s in the formula. If corn doesn’t hit a certain price, the government pays you so much per bushel for all the corn you raise. Because ethanol is a viable user of corn, it has resulted in savings.
“We’ll never be in the range of $75-$80 billion a year the U.S. government uses to secure foreign oil. It’s on your tax bill not at the gas pump. We’re so dependent on foreign oil. If they decided to turn off the key, we could have a massive recession. Energy is the key. We feel ethanol can play a part in providing that energy.”
Malchine also said ethanol is a clean source for fuel cells. Once such cells are further developed, and hydrogen is needed, yet another market for ethanol could be created.
The main concern of Kramer and Malchine is that a recent explosion of interest in building ethanol plants could end up creating a shortage of corn.
“There seems that there is a fever that is consuming the country right now, where these groups are wanting to build ethanol plants everywhere,” Kramer said. “We’re aware of at least another 54 plans on the horizon. When you’re looking at such rapid development within an industry, I’m not sure that’s healthy.
“You’re going to run over that line where it is economically feasible or economically good, not only for the ethanol industry but a whole lot of other industries. It’s not good, in my opinion, that things would happen so fast.”
Malchine said, “The industry has to make sure it walks well before it starts to run. There’s a tendency some times to look at the warm and fuzzy feeling a new industry can have. In the long term, it has to be planned.
“It has to be very, very carefully thought through, and planned for the scenario to arise to show what this industry can mean for the country. It has a lot of positive things going for it, but we have to look at the balance of stock piles.”
Gregg Hoffmann is a veteran journalist and former writer of the Milwaukee Insight column for Wispolitics.com. Hoffmann, now a Westby resident, writes WisBiz In-Depth about statewide business stories. He explored the status of the overall ethanol industry in Wisconsin in a previous column. Read it: http://www.wisbusiness.com/index.iml?Article=19197