FEW: The most important issue in the industry

By Luke Geiver | June 10, 2010
Posted June 18, 2010

The management and business track of the 2010 International Fuel Ethanol Workshop & Expo (FEW) spanned two days, featured six panels and dissected the most important issue facing the ethanol industry today. John Urbanchuk, technical director for Entrix Inc., explained the role the Volumetric Excise Ethanol Tax Credit (VEETC) will play in the future. The author of an ethanol impact study titled, "Contribution of the Biofuels Industry to the Economy of Iowa," Urbanchuk said without the extension, 112,000 jobs would be lost. Some believe a tax credit is not needed when a mandate to use ethanol is already in place, he noted. "But, the RFS2 says you've got to use ethanol, it doesn't say you have to produce ethanol," Urbanchuk said. The tax credit acts as a domestic incentive for U.S. producers, and without it, ethanol would be shipped from outside the country, limiting production inside our borders.

The consequences for the country, especially the communities where ethanol production plays a major role, would be severe, Urbanchuk said. "This industry is probably the most important tool for rural economic development that the United States has seen in the last 50 years." Urbanchuk's sentiments did not go unnoticed. His presentation, which was featured in a panel titled, "Making the Math Work: Leveraging Every Possible Revenue Stream," was attended by roughly 90 people, many taking notes and asking the presenters questions on topics ranging from new project implementation to creating individual plant profiles.

"I very much enjoyed the conference up to this point," John Christianson, principal partner for Minnesota-based Christianson and Association said, before starting his presentation, "and with all the uncertainty and volatility that we've had in the ethanol industry, it's important that we analyze where we want to go." A majority of the panels focused on Christianson's topic of risk management for plants moving forward, but other presentations outlined failed business models of the past. Trevor Hinz, director of business development for ICM Inc., explained what his company could do for plants operating or idled under bankruptcy. ICM member, Austin Gillen, a market research analyst, presented on finding grant and loan guarantees. "Not much has changed," he said, "in the loans and grant programs over the past year."

For all new projects, Angela Ronayne, senior project manager for Merjent, said ethanol producers have to have a strong public relations strategy. They have to tell the story of a plant to those outside the plant, she said, when they plan on starting new projects. New projects however, might be difficult to pay for in the next year. "Right now, the tough part is that no money is going out, and no money is going in," Gillen said, regarding loan and grant money.

Financial constraints aren't the only factors a plant needs to consider, according to Tom Wapp, commodity price risk manager for United Bio Energy. In his presentation, "Plant Specific Risk Management: Assessing Your Plant's Profile," Wapp told the audience there are limitless factors that can effect a plant. Recognizing the unique existence of each plant, he said, is a key element for successful plant operation. "Every plant has a unique fingerprint." A plant is distinguished by five characteristics: goals and objectives, corn origination, ethanol marketing, distillers marketing and natural gas purchasing. To be successful, the plant needs to "Plan the work, and work the plan," he said.

The "plan" as Wapp called it, means taking into account as many factors as possible when making plant decisions. In addition to Wapp and many others touched on policy. Graham Noyes, attorney for Stoel Rives LLP, reiterated the goals, purpose and possible future of a topic many others discussed: RFS2. With an overwhelming majority of the participants in the conference expressing to the EPM team the renewed optimism in the industry, Noyes outlined the real importance to managing and operating a sound business model. When asked what is right with the RFS2 system, he told the crowd, "The system is advancing us towards energy security."