Good Neighbors

Residents of Watertown, S.D., are basking in the benefits that have accompanied the building of an ethanol plant on the edge of town. From lower utility bills for city residents to plentiful feed for surrounding dairy farmers and cattle feeders, Glacial Lakes Energy LLC has had a positive impact on the community.
By Story and Photos By Susanne Retka Schill | August 04, 2008
An ethanol plant on the edge of a community might seem to be a recipe for conflict with neighbors, but residents of Watertown, S.D., have embraced Glacial Lakes Energy LLC.

Perhaps it's because everyone knows the ethanol plant paid back the original investors better than two-to-one in dividends. Perhaps it's because they've gone above and beyond what it takes to be good neighbors. That's no small feat for a plant that requires more than 150 trucks to deliver corn Monday through Friday. To ensure there are no line-ups that could disrupt traffic, the deliveries are timed so there's a steady stream of trucks throughout the 10-hour day. Furthermore, initial concerns that the plant would have an odor problem never materialized. Standing in the parking lot of the 100 MMgy ethanol plant on a hot summer day, one can detect only a mild odor that can't be detected at all a few blocks away.

The Benedictine sisters, who live in the Mother of God Monastery across the field from the ethanol plant, say the smell is nothing compared with the rendering plant that used to operate on the south edge of town. There has been an increase in traffic, and of course, a change in the view from the hill where the monastery overlooks Watertown. Sister Ramona Fallon, prioress of the community, wryly notes the view of the industrial park and added truck noise does make promoting retreats at the monastery for its peace and quiet a bit contradictory. "It does impact the environment, but is it severely disturbing our life? No," Fallon says.

Certainly the livelihood of area farmers has improved with the addition of a new market for their corn, which is widely credited for boosting commodity prices. Farmers aren't the only ones who have benefitted from the ethanol plant. Every resident of Watertown has been affected because they not only have the opportunity to purchase lower-priced midlevel ethanol blended fuel but they also have lower utility bills. Having an ethanol plant keeps utility rates in the city of 20,000 reasonable, says Geoff Heig, general manager of Watertown's municipal utilities. In comparing Watertown's natural gas rates with other municipal utilities of the same size, he estimates that residents get a 5 percent savings. On $33 million in total natural gas purchases, that amounts to $1.5 million in annual savings, he says. "The plant's load is the same every day, summer and winter," Heig explains. "In natural gas, the more you buy in the summer results in a better price in the winter." Glacial Lakes Energy's impact on the city's utilities is significant. "Of our $60 million budget, $25 million comes from the ethanol plant," he says. Of the $25 million, roughly $22 million is for natural gas, $2 million for electricity and $1 million for water. The ethanol plant uses twice the amount of natural gas as the whole town uses collectively, Heig says. While many people are concerned about the water demand from an ethanol plant, Heig says at 500 gallons per minute, the plant is the city's largest customer, "but it's not a significant amount like the gas usage." The city is currently building a new water plant, he adds. "We're glad to have a customer [like the ethanol plant] that's helping to pay for it." The plant also directly benefits the city in another way, Heig adds. In addition to the utility bill, the city collects a 2 percent sales tax, which amounts to $500,000 a year, for the city's general fund from the ethanol plant alone.

Craig Atkins, president of the city's economic development committee, Focus Watertown, cites a number of other positive impacts from the ethanol plant. "It's helped at every level of the local economy," he says. "With the difficult economic times of the last couple of years, Watertown's economy has been stable." The 70-plus jobs at Glacial Lakes Energy don't make it the largest employer in town, but they are quality jobs with high average salaries, Adkins says. The farming community's increased prosperity is also a plus for retailers in town.

From Atkins perspective, a lot of synergies have developed with the advent of the ethanol plant. For example, the rail spur built to service the plant to transport ethanol and distillers grains shipments has attracted a plastics molding plant that receives its resin by rail. The development group continues to recruit new businesses, looking for opportunities to utilize the ethanol plant's carbon dioxide supply. Atkins also credits the presence of the ethanol plant in helping the city land federal funding for a truck bypass around the south end of town that had been sought long before the ethanol plant was built.

Big on Ethanol Blends
With an ethanol plant in town, Watertown residents support the use of ethanol blends. Shortly after Glacial Lakes Energy began producing ethanol in 2002, John Sperry started tinkering with the go-karts that race around the Thunder Road Family Park, which he owns with a brother and brother-in-law. Sperry took one go-kart, drilled out the jets and adjusted the carburetor so it could run on E85. After successfully converting one, he switched over all 26 of the 6.5 horsepower Honda engines and seven double carts with 9 horsepower engines. "As far as I can tell, we're the first ones with concession karts that run on E85," he says.

The town's other big promoter of E85 has a long history with ethanol. "Sioux Valley [Co-op] was the first [gas station] in South Dakota to offer E10 back in the early '70s," says Manager Gary French. The cooperative installed a blender pump three years ago at its station on the east side of Watertown. "It wasn't six months after that and people were asking, When are you getting them over at our other locations?'" French says. There's been a steady increase in the gallons of ethanol sold by the cooperative, which receives its ethanol directly from Glacial Lakes Energy. French says that the sale of unleaded gasoline without ethanol has dropped while E30 sales have increased each month. E10 sales are holding steady and E85 has increased some. The ethanol plant is accepted in the community, he adds. "A lot of times when something like this comes to town you have people bad-mouthing it," he says. "That's pretty much nonexistent."

On the Farm
From the farmer's point of view, the ethanol plant has been good, says Vincent Ries, chairman of the board at Sioux Valley Co-op. "It's brought the price of corn up for farmers," he says. As he fills his pickup with $55 worth of E85, he points out that the price would have been $20 higher if he were filling up with regular gasoline, and perhaps even more. "They say fuel would be even higher if it weren't for ethanol," he says referring to studies including a paper published by Iowa State University saying that ethanol production
has reduced gasoline prices at the pump from 29 to 40 cents a gallon, depending on the region.

While in some areas livestock producers oppose using corn to produce ethanol because it has contributed to an increase in prices, in Watertown, they see the plant as one big feed processor. Brothers Greg and Jim Moes are expanding their dairy farm east of Watertown so they can bring a fifth generation into the operation. They hope to move into a new facility this fall and build their herd up from 350 to 2,200 cows. Shortly after the ethanol plant opened, the Moes began purchasing distillers grains to feed their own dairy cows and soon were mixing custom rations for other cattle producers who wanted to use distillers grains. They now have five live-bottom trucks that haul six to eight loads daily from Glacial Lakes Energy's plants in Watertown and Redfield. Their venture has created new jobs and supported growth in livestock feeding in the area. "It used to be everybody was shipping livestock out to the big feed yards," Greg Moes says. "Now you go up and down the road and they're feeding distillers grains. They used to have to grind corn if they were going to feed, but now they haul corn to the ethanol plant and bring it back already processed." Moes says the modified wet grains is a good product to feed with alfalfa and makes for a consistent feed that the cows like. It also eliminates the need to add high-priced minerals and soybean protein supplements. With their heifers, they've taken it a step further and replaced the corn and alfalfa ration with distillers grains mixed with corn stalks and wheat straw. His only concern is that because of the growth in the livestock industry, there may not be enough distillers grains to supply all of them.

Lakness Land and Cattle, 20 miles southwest of Watertown, sells about a third of its corn crop directly to ethanol plants, including Glacial Lakes Energy and others in eastern South Dakota. Another portion is sold to local elevators that ask the Laknesses to deliver the corn to ethanol plants. Like the Moes, the Lakness family sells corn and brings back distillers grains for the cattle. "The cattle know if you don't have it in the feed," Marietta Lakness says. "It's sweet and it has high energy." Marietta handles the finances for the operation, which consists of her and her husband Nathan, his brother Joe and wife Renee, and the brothers' parents Milton and Benita Lakness. She remembers well the research that went into their decision to invest in ethanol when times were difficult. "We were faced with low commodity prices and coming off a couple of years recovery from flooding," she says. The Laknesses had invested in other projects in the past that hadn't worked out, so they researched ethanol and attended several meetings before investing. Although they were well-schooled in the ethanol process by the time it came to invest, it still meant borrowing money after a streak of bad crop years. Even though the point of investing in ethanol is to build a local market, farmers are most likely to invest in land and machinery. "It was a risk for a lot of farmers to invest in ethanol, to diversity their dollars," she says. The minimum investment was for 5,000 shares at $2 per share. Ultimately, Glacial Lakes Energy attracted 4,000 investors from across South Dakota, with the majority coming from the immediate region. The plant was built at the right time, and in the good years paid back 200 percent to investors. According to Glacial Lakes Corn Processors'the cooperative that wholly owns Glacial Lakes EnergyWeb site nearly $50 million has been paid out in dividends since the plant opened. "These are returns that stayed in the state," Lakness says. "How many times did that turn over in the community?" In her opinion, ethanol is a great opportunity. "We're investing in a multimillion dollar company that's 20 miles away, and we can go to the annual meeting. We have the opportunity to have hands-on involvement. We have neighbors on the board of directors and what they've learned they can carry back to their own operations."

Lakness points out that many local elevators also benefitted by investing in the plant and by purchasing grain to deliver to the plant. "Our dividends from local co-ops have increased," she says. The rural economy has benefited by the grain sales staying local, and by the narrowing basisan indication of how the spread between the futures market and the local cash price has narrowed due to increased local demand.

In rural communities such as Watertown, S.D., it is apparent ethanol has benefited corn farmers and the livestock industry, and proven that an ethanol plant can be a good neighbor.

Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her at sretkaschill@bbiinternational.com or (701) 738-4922.