Petroleum refiner to purchase Hawkeye plants

By Kris Bevill | July 15, 2010
Posted Aug. 24, 2010

Petroleum refiner and chemicals producer Flint Hills Resources LP has agreed to acquire two Iowa ethanol facilities. The 115 MMgy plants, located in Menlo and Shell Rock, were formerly owned by Hawkeye Growth LLC, a subsidiary of Hawkeye Energy Holdings LLC. A purchase price for the plants has not been disclosed, but Flint Hills Resources said it expects the sale to be final in September.

The sale of the Menlo and Shell Rock facilities will mark Hawkeye's exit from ethanol production ownership. The company also owned production plants in Iowa Falls and Fairbank, Iowa, but sold the facilities through a voluntary restructuring plan it initiated last December. Hawkeye continues to manage operations at those facilities. It was not immediately known whether Hawkeye will also be retained to manage the Menlo and Shell Rock plants. In a news release, Flint Hills Resources said it will conduct a full evaluation of each plant and doesn't plan "any immediate changes."

The entrance of Flint Hills Resources into the ethanol production circle is another example of an emerging shift in plant ownership from corn growers to petroleum industry players. Valero Energy Corp.'s renewable fuels division, which began acquiring ethanol plants through the VeraSun Energy Corp. bankruptcy in 2009, currently owns and operates 10 plants with a combined production capacity of more than 1 billion gallons of ethanol. And while Murphy Oil Corp. recently announced plans to scale back its refinery operations, the company continues to operate a 120 MMgy plant near Hankinson, N.D., and said it will possibly acquire other ethanol facilities to support its retail gasoline marketing operations.

It's likely that Flint Hills Resources will utilize at least some of the ethanol produced at the Iowa facilities at its St. Paul, Minn., refinery. The plants' abilities to serve major U.S. fuels markets was one reason the company was attracted to the facilities, according to the company. Flint Hills Resources is the largest purchaser of ethanol in Minnesota and uses it at the St. Paul refinery, where it produces 320,000 barrels per day of transportation fuels. The company also distributes fuel throughout Iowa and the upper Midwest and owns a fuel terminal in Bettendorf, Iowa. "This acquisition enhances our base business and allows us to compete more completely in the fuels market," Flint Hills Resources President Brad Razook said. "It puts us in position to create value for our customers in a segment of the fuels market that is becoming increasingly important."