Havre Daily News
Planners for an ethanol plant at Rocky Boy's Indian Reservation asked the Montana Grain Growers Association board Monday to form a cooperative that would participate in planning and have seats on its board. The planners also said the cooperative could be approached later to invest in the plant.
An ethanol plant could bolster the price of wheat locally and help keep railroad lines open, the planners said. The plant and wheat producers have many common interests and should start working together as soon as possible, ethanol plant consultant Steve Baker, of Iowa-based Rural Development Associates, told the association board Monday.
“It struck us, if there is any organization that has the leadership, the credibility to strike this up, it would be out of this group,” Baker said.
He presented the basics of the proposed plant to the association and said he would be able to share more if there was a formal agreement.
“It sounds like a viable plan,” Keith Schott, Montana Grain Growers Association president, said today. “Until we see some hard and fast numbers, it's hard to know for sure.”
Schott said the MGGA board, which is holding its quarterly fall meeting in Havre this week, will take up the issue today. If it decides to form a cooperative, the association's research committee would determine how that is done, he said.
An ethanol plant at Rocky Boy would be the second wheat-fed ethanol plant operating in the United States, Baker said. It would need more than $85 million in investments to get off the ground. Part of the start-up cost is to build the infrastructure to allow the plant to process wheat rather than corn, the usual grain processed at ethanol plants, he said. The upside is that a byproduct, wheat gluten, is also a good revenue producer.
Planners have said the plant would create a $50 million-a-year local market for wheat that could potentially raise wheat prices by 10 cents a bushel. They also expect a 43 percent annual return on investment, Baker said.
“It's food for thought,” Big Sandy farmer Lochiel Edwards, MGGA's past president, said today.
Sixty percent of the start-up cost will probably come in the form of bank loans, with the Chippewa Cree Tribe contributing up to about $15 million, including infrastructure and natural resources, Baker said. Local investors and outside investors will be sought for the rest, he said.
Baker told the association the plant could be built as soon as the summer of 2007, and would produce 40 million gallons of ethanol, a fuel additive, each year. To produce that much ethanol, it would require 14 million bushels of wheat.
The plant would also be one of the biggest producers of wheat gluten in North America. Gluten is added to bread products like bagels for elasticity and strength, Baker said.
Board members wanted to know if a wheat ethanol plant would be as profitable as corn ethanol plants located in the Midwest.
Baker's answer: It could be more profitable than corn because of the wheat gluten produced. The byproduct, even if sold for below-market rates through a deal with a distributor, would contribute about a third of the plant's revenue.
MGGA board member Brad McCabe said he wanted to know about the worst-case scenario.
Baker said that once an agreement is in place, partners would have access to all the studies and be able to help strategize and choose business partners such as a firm to market the plant's products.
National Tribal Development Association chief operating officer Neal Rosette said in a recent interview that international agricultural giant Cargill Inc. has made an offer to market all of the wheat gluten produced by the plant. Rosette said NTDA and its consultants will conduct several market studies before making a decision on the offer, a process that could take several months.
MGGA, by way of a farmers cooperative, could have a say in whether to go with Cargill or another company, Baker told board members Monday.
“It's going to be access (to rail) and it's going to be the gluten market that will make or break this project,” Baker said.