VeraSun asset sale shakes up industry

By Ryan C. Christiansen | May 04, 2009
During a bankruptcy court-approved auction sale in March, the assets of VeraSun Energy Corp. were acquired by San Antonio, Texas-based oil refiner and marketer Valero Energy Corp., a group of lenders represented by AgStar Financial Services ACA of Mankato, Minn., German financial giant WestLB AG, and Minneapolis-based investment banker Dougherty Funding LLC.

One of the newest ethanol producers in the U.S., Valero is also suddenly one of the largest. But as of press time, the Texas oil refiner was not a member of the organizations that typically represent ethanol producer interests, such as the American Coalition for Ethanol, Growth Energy, the Renewable Fuels Association, and the National Ethanol Vehicle
Coalition, all of whom formally petitioned the U.S. EPA to allow the use of up to 15 percent ethanol in gasoline for motor vehicles.

Instead, Valero continues to retain membership in the National Petrochemical & Refiners Association, a lobbying group that testified before the U.S. Senate Subcommittee on Clean Air and Nuclear Safety earlier this year that ethanol should not be blended into gasoline at levels higher than 10 percent, suggesting that levels above 10 percent have not been sufficiently tested for their safety.

"We recognize that ethanol is going to be an important part of the fuel mix in this country and the renewable fuels standard isn't going anywhere," said Bill Day, director of media relations for Valero, "as long as we're required to buy ethanol, we might as well make it. That's why we're in the business.

"The amount of capacity that Valero purchased makes us the third leading ethanol producer in the country but, for us, it's actually a very, very small part of our operations and a small part of our bottom line," Day continued. "We're still overwhelmingly a petroleum refiner and not an ethanol producer. "

While Valero's acquisition of VeraSun's plants means a loss in members for some ethanol industry organizations, those who depend on ethanol for their livelihood are looking forward to seeing the plants operating again.

"We want it humming," said Albion, Neb., Mayor James Jarecki. "Everybody in the community is anxious to see it get goingand stay goingto retain jobs, retain revenue, and retain the tax base."

Jarecki said personally, he is pleased that the plant was acquired by a petroleum refiner and marketer, which must acquire ethanol for blending. "If the federal government mandates 10 percent (ethanol) being mixedif [Valero] can own itthey probably have a competitive edge and so it can be a huge advantage, also. It would more or less be eliminating a wholesaler, in my eyes, and that would be good. It would make [the ethanol plant] competitive.

"It's still a win-win deal all the way around and it helps the farmer, too," Jarecki continued. "There are a lot of things that you can put in your town that really doesn't maybe help the ag community much; but this is one thing that does help."

"The communities where we bought the plants are very excited about a company like Valero coming in and keeping the plants in operation and keeping the employees on the job," Day said.