Partnership announces multi-plant plan

By EPM Staff Writer Ron Kotrba | May 01, 2006
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Ethanol West LLC and its majority owner and creator, Western Milling LLC, announced in April a strategic partnership between the two companies to build, supply and operate multiple ethanol plants in the West, namely in California and Arizona, with other sites under consideration in Idaho, Washington, Colorado and Oregon.

Six is the magic number for the new alliance; that's how many plants the Ethanol West-Western Milling team currently has on the drawing board. Plans will be initiated in only a few months, with construction scheduled to begin on its first plant in Keyes, Calif.located in the dairy-rich San Joaquin Valleyin the third quarter of this year.

All six ethanol plants will produce 55 MMgy and will be designed to double capacity within a year of production. The agreement between Ethanol West and Western Milling is that Ethanol West will own, build and operate these facilities, and act as its own general contractor. "We're not ready to announce the engineering company yet," said Jeremy Wilhelm, COO for Ethanol West, but he told EPM it would be a well-known engineering firm in the ethanol industry.

Western Milling's responsibility will be to procure the corn, 19 million bushels of which will be consumed by each plant every year. Except for the Keyes plant, Western Milling will also market the plants' distillers wet grains. None of the plants will be equipped with dryers; the wet product will be distributed within trucking distance of the respective plants. Western Milling already distributes its animal feed products to more than 500 commercial dairy and poultry operations throughout this region of special interest to the partnership. "Seventy-five percent of Western Milling's business is dairy," Wilhelm said. "Western Milling is railing in the corn anyway, so we're just going to be extracting the starch to make ethanol." This will provide additional value to a commodity that's already being railed into the region from the Midwest.

An ethanol marketer has not been declared yet. These destination plants will be located near large cities where insatiable demand exists for gasoline and ethanol. They will be within trucking distance, saving time and money on what would otherwise be spent on rail. "Essentially we've got a direct feed to the blenders, bypassing the big distribution terminals," Wilhelm said. "It's possible that we may just market the ethanol ourselves."

According to Wilhelm, the cost of building one of these destination plants is less than erecting a plant in the Midwest. "We're going to build these plants for about $1.10 to $1.20 a gallon," he said, or between $60.5 million to $66 million per plant. "It's cheaper because there are no dryers, there are no thermal oxidizers being installed and there's already rail on-site because the plants are collocating next to feedlots."

Wilhelm said the second plant is scheduled to start construction around the fourth quarter of this year, in Bakersfield, Calif., with a third plant breaking ground in Gila Bend, Ariz., sometime in 2007.