Ethanol producer has burning ambition

Columbia firm seeks millions to fund biofuel plants

Tyrone Walker
The Post and Courier

S.C. Commissioner of Agriculture Hugh Weathers takes a spin in an ethanol-fueled Chevrolet Avalanche that General Motors donated to the state in 2006. An ethanol plant planned by a Columbia-based company could be providing fuel for such vehicles by 2010.

The Post and Courier

Alan Hawes
The Post and Courier

Barry Hutto checks corn stalks on his farm in Holly Hill in a 2007 photo. South Carolina is not a major corn-producing state, and some growers here say an ethanol plant in the state wouldn't prompt them to increase the acreage they devote to the crop.

The Post and Courier

Life in Chester could be changing in the name of alternative fuel.

East Coast Ethanol LLC, a Midlands-based company, is proposing to build a corn-based ethanol plant southeast of the city. Local farmers like it. Chester economic development boosters see opportunities. And the deal will give South Carolina a foothold in the corn-based fuels market.

Today, virtually all of the field corn raised in the state goes to feed livestock, according to the S.C. Department of Agriculture.

But with the proposed construction of the state's first corn-based ethanol plant, it just might harness the attention of businesses, farmers and consumers looking for financial gains or fuel efficiency — or both.

The Southeast United States is growing, and with big states such as Texas and Florida, it has become the most populous region in the country. More people means more automobiles. Add to that growing demand for cleaner-burning fuels — helped by federal government incentives — and the result is a renewed interest in the business of extracting liquid energy from crops such as corn.

In total, 160 ethanol plants with a capacity of 9.25 billion gallons a year were operating around the country as of June. At least 50 more are being built or expanded, which would add another 4.36 billion gallons to the mix.

The federal Energy Information Administration earlier this year estimated the Southeast ethanol market's potential demand at 2.3 billion gallons per year, sparking startups such as Randy Hudson's East Coast Ethanol to consider tapping into that demand.

The Columbia-based company was created about a year ago through the four-way merger of Mid Atlantic Ethanol, Palmetto Agri-Fuels, Atlantic Ethanol and Florida Ethanol, and it has raised $9.8 million in seed money. East Coast is seeking to raise an eye-opening $843 million, with at least $254 million coming from equity investors, to build and operate four corn-fed plants, each with a capacity of 110 million gallons a year, in the Southeast by fall 2010, including the one it is planning south of Rock Hill. The other three are proposed for Florida, Georgia and North Carolina.

"Our four facilities (if and when they become operational) can supply ethanol to the Southeast United States at a much cheaper rate than imported ethanol because of reduced transportation costs given our geographical location," the company said in a July 21 filing with the U.S. Securities and Exchange Commission.

Trained ears

The risks are plentiful. Funding, for instance, remains a tall order given the tightening credit markets and a diminishing appetite among investors for ethanol plants.

The Chester project faces other challenges: The production of corn-based ethanol requires lots of feedstock — 176 million bushels in the case of each of East Coast's proposed plants — and demand likely will increase as rival facilities come online.

But South Carolina isn't a major corn-growing state, producing just 33 million bushels in 2005, the latest figure available from the state Agricultural Statistics Service.

So East Coast and others are looking to alternative strategies adopted by other plants that are setting up shop outside the Midwest corn belt. First United Ethanol LLC, for one, plans to operate on a "destination model" when its plant in Camilla, Ga., opens in October.

"We flipped the theory upside-down and said, 'Well, we don't have the corn here, but what we can do is rail the corn in,' " said Alicia Shirah, communications director for the company, which goes by its initials, FUEL. "We have the markets where the ethanol is going, and it's cheaper to ship corn to us than it is to rail ethanol out."

But railing a commodity such as corn over long distances can be expensive. That's one reason Michael Gunter of the South Carolina Farm Bureau said he thinks the East Coast Ethanol plant is "uneconomical" given the weak economy.

"Two or three years ago, there was a real thought going around to build an ethanol plant in the state," Gunter said. "It was thought of, but when this crazy market started going up, the plans were trashed for good reason."

Shirah said her company's plant intends to sell a natural byproduct of ethanol production as animal feed to offset the costs of transporting corn from the Midwest. And it hopes to use as much locally grown feedstock as possible.

Toss-up

More corn going to more places could be good news for Palmetto State farmers, who until the ethanol boom never considered raising corn as an alternative fuel source because of the high shipping costs.

Danny McAlhaney of McAlhaney Farm and Jody Weathers of Weathers Farm both grow field corn.

"It's a toss-up as far as the farmer goes," Weathers said. "He doesn't care as long as he gets his money from the crop. It'll help me."

Both growers said the number of acres they farm would remain the same since corn is a high-risk crop, sensitive to rain or drought and volatile price swings.

"I think the only difference it's going to make is an availability of ethanol to the public," McAlhaney said. "The more people who use our products, the better off we are."

Back in Chester, Karlisa Parker waits for East Coast Ethanol to complete its fundraising process. As the county's executive director of economic development, she served as a liaison between local residents and the company.

"What was attractive to us as far as wooing them is that we do have a lot of agriculture property," Parker said. "They were very interested in talking with local farmers about the ability to grow and store corn, and we always want to create synergies with people who are already here. So it benefits everybody in the area."

Parker went out of her way to support the construction of the ethanol plant. She even flew five Chester residents to Iowa to experience the sights, sounds and smells of an existing corn-based ethanol plant.

The conclusion about the smell: "It's like cornflakes."

John McDermott of The Post and Courier contributed to this report.