Valero restarts 2 idled plants as harvest improves corn supply

Not long after conducting an executive swing through five of the 10 communities where it owns ethanol plants, Valero Corp. announced that the two plants that had been temporarily idled had been restarted at Albion, Neb., and Linden, Ind.

“One of the reasons I wanted to go to these communities, in particular, was to meet with the media,” said Bill Day, executive director of media relations. “The employees at the plants were comfortable because we kept them on the payroll. Nobody was laid off or furloughed. We wanted to be sure people in the community were comfortable with it. In both cases those were plants previously owned by VeraSun that Valero bought out of bankruptcy. We wanted to be sure people didn’t think this was a situation like that.”

Day said the idling of the two plants was due to local conditions that made the already tight margins worse—a local corn basis that was higher than in most areas, plus poorer rail access which increased ethanol shipment costs. “In an environment where margins are already squeezed, if you add any additional costs on top of that, even if small, it is enough to make a plant unprofitable,” Day explained. Once harvest got underway, the margin situation improved and the plants were restarted.

“We are positioning ourselves to be successful, even in low margin environments like this,” Day added. “That’s a lesson we learned from the refining and retail sides of the business.” With no control over the weather, corn prices or other market fluctuations, Day said the company pays close attention to finding plant efficiencies.

The impact of the drought was the biggest concern, which, Day said has been alleviated some as harvest actually got underway. “It’s not as bad as some of the worst projections, but we’re all hopeful for better rains next year.” Day’s observation was that the worst drought conditions were in the west as the executive team traveled from Aurora, S.D., and Albion, Neb., further east to Jefferson, Wis., Linden, Ind., and Bloomingburg, Ohio. In late August, the local media were quite concerned about the impact of the drought and the talk of renewable fuels standard waiver. “Valero hasn’t taken a position on the waiver either way,” Day said. “So that was an easy one for me.” He added that the local media were very knowledgeable about ethanol and agricultural markets, and asked good questions.

The Valero visits were part of the company’s United Way campaign kickoff. “It’s a very big deal with Valero, something we’ve done since we started the company in 1980,” Day explained. Ethanol plant employees are encouraged to get involved in the community and support nonprofits. In some cases, Day said Valero’s United Way efforts have doubled agency revenues. “These are small agencies typically serving large territories and rural communities,” he said. “It’s been a huge influx in cash and opportunity.” He also said it has been an important public relations tool, helping assure the rural communities that the petroleum refiner would be “a company that communities are proud to have in their backyard.”