CVEC Marks 20 Years

Stories reveal a can-do spirit at Chippewa Valley Ethanol Co.
By Susanne Retka Schill | July 14, 2016

Chippewa Valley Ethanol Co. started up 20 years ago in April 1996, and, in June, the company marked the milestone with a noon meal, industry speakers and public tours. Anniversaries are a time for celebrating and storytelling.

Board member Dale Tolifson recalls the effort that went into raising the money to build the plant in the early 1990s. After the farm crisis of the 1980s, there wasn’t a whole lot of extra cash around, but more than 600 farmers invested, agreeing to deliver corn as part of their membership in Chippewa Valley Agrafuels Cooperative. Area businessmen wanted to invest as well, but couldn’t because of the cooperative structure and requirement to deliver corn. So, a corn pool was created to accommodate nonfarmers who could invest in that organization to technically qualify and deliver their quota of corn. Employees have become owners as well through the corn pool. 

That still wasn’t enough, recalls Jan Lundebrek, an ag lender at the time and an original board member. They got 10 or 11 area banks to participate in letters of credit, she says, “and as security, our farmers agreed to put up a nickel per bushel of corn delivered.”  No small feat when that required more than 600 farmers to agree, but that and the builder’s ownership stake put the project financing over the final hurdle and construction began on the 15 MMgy plant.  The farmers’ nickel a bushel paid off that part of the debt within nine months, Lundebrek says.

Bill Lee recalls arriving at the construction site a few days after he started working with Delta-T. “It was the first plant Delta-T built,” he says. “Bibb Swain had it about 90 percent perfect.” He went on to manage CVEC for its first 15 years, describing his first job as being to figure out the other 10 percent. Mike Jerke succeeded Lee as manager, leaving two years ago to manage Guardian Energy Management. Chad Friese, who was hired by Lee as commodity manager, is the current general manager. 

Tolifson and Lundrebrek remember sitting in the offices of what is now CoBank, not long after starting up. The bankers told them, “You guys have to start working together. You’re never going to make it, if you’re competing with each other.” CVEC got together with four other Minnesota farmer-owned ethanol producers—Corn Plus, DENCO, Heartland Corn Products and Al-Corn—and launched the Renewable Products Marketing Group. It made it possible for single, farmer-owned plants to compete with the large commodity corporations, Lee pointed out in his remarks at the anniversary celebration.

In 1998, CVEC took advantage of the flexibility in the Delta-T design to begin producing industrial alcohol under its Glacial Spirits subsidiary. Industrial alcohol is a narrow, niche market, David Thompson, longtime board member and current chairman, says. It wasn’t easy to get into, but it has brought good returns when fuel ethanol margins were tight. Potable alcohol was added to the product line, and CVEC became the producer of Shakers Vodka. Shakers no longer exists, but today the company is producing organic vodka for Phillip’s Prairie Organic Spirits, which requires meeting organic certification requirements for ingredients and handling. Friese describes the diversity as like having three separate processes: fuel ethanol, industrial and organic. 

In 2002, the plant was expanded to 45 MMgy and when the boom years began in 2006, the board seriously considered doubling production by adding a second, ICM-design plant alongside the existing facility. “We pulled the plug on that when we realized the industry had more capacity under construction that was online,” Thompson says, recalling that at the time, national production was about 6 billion gallons with an equal amount under construction. The board and management rightly figured once those new gallons came online, some facilities would get in trouble, although no one anticipated the economic downturn that multiplied the impact. CVEC joined other partners in RPMG to form Guardian Energy and buy the never-run Janesville, Minnesota, plant out of the VeraSun bankruptcy proceedings. Later, they would participate in two other Guardian Energy investments in ethanol plants in Hankinson, North Dakota, and Lima, Ohio. Some years, the investments in RPMG, Guardian Energy and product diversification have contributed more to the bottom line for the company than CVEC’s fuel ethanol production, the board members will tell you. All told, the company has seen 19 profitable years out of 20.

Over the years, the company has been among the leaders in the industry, lobbying in the Minnesota legislature to get one of the first state mandates, lobbying in Washington for the renewable fuel standards, being among the first plants to offer direct E85 sales from the plant and among the first adopters of corn oil extraction. Not all innovations were successful in the long run, however. The company invested in Frontline BioEnergy LLC and built a gasification unit to power the plant from biomass. It made sense when natural gas prices were high, but sits idle since natural gas prices plummeted.

Capital investments continue. A year ago more distillation capacity was added. This past winter a new boiler was installed and this summer a new water cooling system is under construction. “We want to keep this plant as new and up-to-date as possible,” Tolifson says. 

“We’re a very active board,” Thompson says. “We’ve had other industry people tell us we’re among the most active, but we try not to micromanage.”  The board’s goal has been to think long term and look for ways to grow the company, while paying out as much as possible in dividends. “Never be complacent,” he says. “No matter how good things are going, we’re always looking for the next thing.” Another important factor is the right attitude. “What makes the company successful is that we have a lot of people saying we’ll make it work, instead of people who say it won’t work.”

Author: Susanne Retka Schill
Managing Editor, Ethanol Producer Magazine
sretkaschill@bbiinternational.com
701-738-4922