Ethanol start-ups are running on empty

Sam Eaton Feb 2, 2009
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Ethanol start-ups are running on empty

Sam Eaton Feb 2, 2009
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TESS VIGELAND: Another ethanol producer bit the dust today. Wisconsin-based Renew Energy owns one of the nation’s largest ethanol plants. It filed for bankruptcy with more than $100 million in debt. And it’s probably not the last to go. But don’t write the corn-based fuel’s obituary just yet.

From the Marketplace Sustainability Desk, Sam Eaton reports.


SAM EATON: Ethanol producer Verasun was the first to file for bankruptcy last October after locking in corn contracts at high prices. Since then, the casualties have mounted. Today more than 15 percent of the nation’s production capacity sits idle.

Bob Dinneen with the industry trade group Renewable Fuels Association says the reason is simple.

BOB DINNEEN: We are not immune to the economic crisis that is facing the entire economy.

Dinneen says the companies that have failed couldn’t weather the double hit of the credit crunch and low gas prices that undercut ethanol’s competitiveness.

Economist Dan Basse with Ag Resource is less diplomatic.

Dan Basse: They were slow to react.

Basse says too many players got into the business without understanding the cyclical nature of corn prices. But he says the infrastructure they’ve created is still worth something.

BASSE: There’s going to be a transition here of assets — plants, if you will — from the smaller, poorly capitalized to those who are more specialized in this industry and have deep pockets and can withstand.

Archer Daniels Midland and Poet for example. Basse says Congress’ biofuels mandates haven’t changed. The U.S. is still required by law to use some 15 billion gallons of ethanol a year by 2015. It’ll just be a smaller group of companies poised to take advantage of that.

In Los Angeles, I’m Sam Eaton for Marketplace.

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