Fuel for the Economy

As the U.S. employment rate continues to rise and policymakers work to repair the economy and create jobs, leaders in the ethanol industry are working to underscore the industry's potential to create jobs and reinvigorate rural areas.
By Erin Voegele | April 14, 2009
Many people who live in rural areas have seen firsthand the impact of an ethanol plant on their local economy. These new plants create well-paying jobs for area citizens, support and expand local businesses and create new enterprises. "The growth of the biofuels industryparticularly ethanolhas been one of the most significant rural economic development initiatives in the past 50 years," says John Urbanchuk, an analyst with LECG LLC who tracks the biofuels industry. "The establishment of these plantslargely in rural areashas revitalized rural communities."

For the past several years, Urbanchuk has been working on annual economic impact studies for the Renewable Fuels Association. His latest study, titled "Contribution of the Ethanol Industry to the Economy of the United States," found that the ethanol industry added $65.6 billion to our nation's gross domestic product in 2008. The dollar amount represents the full impact of spending for annual operations, the transportation of ethanol, capital spending for new construction, and research and development. According to the study, the increased economic activity generated through ongoing production, construction of new capacity, and research and development supported more than 494,000 jobs in all sectors of the economy.

"Quite clearly, I think it's been very positive for rural America," Urbanchuk says. The impact of these ethanol plants can really be felt in two distinct ways, through new construction and through continued operation. These effects are felt by local, regional and national economies, he says.

An operating ethanol plant spends money to keep production going. In addition to buying corn feedstock, plants also purchase electricity and natural gas from utilities, and supplies from a wide variety of businesses. They pay wages to workers and provide business for transportation companies. "All those dollars circulate throughout the economy,"
Urbanchuk says. "The ongoing, recurring manufacturing of ethanol leads to economic impact."

The construction activity that accompanies the building of new plants and the expansion of existing plants also provides opportunities. "Every dollar of construction activity also has an economic impact," he continues. On a national level, there is also research and development ongoing in both the public and private sectors to develop new feedstocks and technologies. "All those sorts of things have an economic impact as well," Urbanchuk says.

While a typical 50 MMgy corn ethanol plant directly employs 40 to 50 workers, Urbanchuk's research found that a plant of that size can support approximately 1,500 jobs. "The money [those plants] pump into the economy also enables other people to add jobs," he says. "That is not inconsequential." As would be expected, an idled plant has an equally negative effect on the local economy. "There have been plants that have been idled," Urbanchuk says. "When that happens there is a cost to the community. If you close a 50 MMgy plant, you are putting about 1,500 jobs in the entire economy at risk."

A Local Perspective
While these statistics are impressive, it's important to remember that these 40, 50, 1,500 or 494,000 jobs aren't just jobs. These numbers represent real people like Colleen Osborne, who is a quality manager at Poet Biorefining's Jewell, Iowa, ethanol plant. She's been working at the ethanol plant since it opened three years ago. Before seeking employment with Poet LLC, Osborne worked as a medical technologist. Tired of working late nights, weekends and holidays, Osborne says she was ready for a change.

In her position at Poet, Osborne works to ensure the plant's products meet quality specifications. Although Osborne says the area she lives in offers comparable employment opportunities, it is likely she would be forced to commute long distances to find a good job if the ethanol plant didn't exist.

Poet Biorefining's Jewell plant employs about 45 people, however, the impact is greater than simple job creation, Osborne says. The plant's employees have purchased homes, support local schools and patronize hometown businesses. "During the construction phase, the impact was especially strong," she says. Many of the construction workers, who built the plant, utilized local motels, restaurants and stores. Since the plant has begun operating, the town has been further supported by those who visit the plant, including other Poet employees, vendors and repairmen, she says.

According to Gary Pruismann, an operator at Poet's Jewell plant, two new restaurants have opened in the community since construction began on the plant. The plant has also benefitted local farmers, he says. "When diesel was $5 [a gallon], the difference between moving that grain 15 miles and 180 miles was huge," Pruismann adds. The plant also raised the price of grain for local farmers. "With the restaurants and stuff, the money is being spread out amongst us, and I think it's been a big impact," he says. With the current state of the economy, Pruismann says people often ask him if the plant is still running. "Yeah, we're still running," he tells them. "I think we're in good shape."

At Poet Biorefining's plant in Corning, Iowa, Christy Green works as a grain merchandiser. She says the community has been very supportive of the plant since the beginning. In her position, Green builds relationships and works with local corn producers, and manages inventory. Before finding a job with Poet, Green worked at a grain elevator. She says that although she enjoyed that job, it offered no potential for growth. The ethanol plant has allowed her to take the next step in her career. "If the ethanol plant wasn't here, I definitely would not have the job opportunity that I have right now in the community," she says. "I'm really excited to be here. I never dreamed that when I made the change it would work out this wellbut it has."

The community of Fairmont, Minn., has also experienced positive gains brought about by the ethanol industry. The south-central Minnesota town is home to an ethanol plant owned by Biofuel Energy Corp. VeraSun Energy Corp. constructed a plant four miles away but, because of the economic situation, that plant has not begun operations.
Mike Humpal, Fairmont's assistant city administrator in charge of community and economic development, says the [Biofuel Energy] plant has truly benefitted the local economy. "I think it's been very positive from a few aspects," he says. "It's created 50 well-paying jobs. It's increased the tax base significantly, and it adds value to a raw product that we can continue to produce."

The construction phase was particularly beneficial, Humpal says. The construction workers created a lot of economic activity. Some of those workers moved on once construction was complete, while others stayed in the community. "I believe it had a fairly positive impact on attracting some new folks to the area," he says.

Bob Wallace, president of Fairmont's Chamber of Commerce, agrees. In addition to jobs provided directly by the plant, the community has seen a number of spin-off jobs develop. Wallace says trucking and rail industries in particular have been positively impacted. The service companies and fuel suppliers that serve those transportation industries have also benefited. The plant has also increased the tax base and allowed farmers to earn better prices for their corn, he says.

"The huge impact for us was the construction of these two facilities," Wallace says, echoing the sentiments of others in communities where ethanol plants have been built. In the approximately 18 months it took to build the plants, the community's hospitality industry, restaurants, housing and automobile industries were positively impacted, he says. In addition, local electrical and parts suppliers experienced a large increase in business. "It had a huge economic impact here," he says. "The amount of money that was spent and generated and left in the community was significant."

Roger Moore, chairman of the Minnesota Corn Growers Association board, lives in the Fairmont area and agrees that the economic impact of ethanol plants trickles down to local businesses. "It all filters down a bit, you know," he says. "The whole community benefits from the ethanol plant. No doubt about that." He stresses the plant's impact on farmers who received a better price for their corn. Farmers benefit even more when they have ownership in the plant. "From a corn farmer's perspective, it's great to have an ethanol plant in the county," he says. "It's even greater if it's locally owned."

While the local economy has been positively impacted by the construction and operation of Biofuel Energy's ethanol plant, the community has also experienced the negative impact of VeraSun's idle facility. "These plants that idledor that did not start upthe local areas feel that," Wallace says. When plants idle, he says, that puts about 1,500 jobs in the entire economy at risk. "The closure of these facilities has a really devastating impact," he says.

A Bright Future
Even though the economy is in a difficult place right now, Urbanchuk says he expects to see continued growth in the ethanol industry. "I think, personally, that the outlook in terms of economic contribution is very bright, but we have to get through this little rough patch that we're in now," he says

As the industry strives to meet the requirements established by the renewable fuels standard, the economic contributions of the ethanol industry are expected to grow, Urbanchuk says. That's because of the role that capital investment in construction plays in creating economic activity, he says. "The indications that we have from the cellulosic industry is that the capital expenditures associated with building a cellulosic plant may be as much as three times more than that for a traditional dry-mill corn ethanol plant," Urbanchuk adds.
This means there will be larger expenditures for the components that go into building the plants, which will provide further support for the industries that supply materials for the ethanol industry. "I think the rate of growth will likely be a bit faster, and that's good," he says. "It's good for the industries that are supplying those materials into new plants, and for the people who produce the raw materials that go into those parts."

Erin Voegele is an Ethanol Producer Magazine staff writer. Reach her at evoegele@bbiinternational.com or (701) 373-8040.