It happened over a three-week stretch in May. The U.S. ethanol industry hit a consequential and historic milestone that, aside from a few press releases, almost went unnoticed. The nature of the booming ethanol business—still somewhat unconsolidated, decentralized and growing at a furious pace—makes it ripe with opportunity to miss the proverbial forest for the trees. So when a trio of dry-mill ethanol plants came on line back-to-back-to-back in late May, the industry coolly surpassed the 100-plant mark—and kept on building.

These days, many dry mill ethanol plants are alike in their fundamental form and function, so when Lincolnway Energy LLC, Frontier Ethanol LLC and Front Range Energy LLC started grinding corn and cranking out ethanol and distillers grains in May, few industry observers realized they were the 99th, 100th and 101st operating commercial-scale ethanol plants in the United States. While it might be interesting to examine why the 100-plant mark has been met, it is probably more insightful to look at how it's been done. In other words, how did the ethanol industry get from "there" to "here?" How did it go from 1.5 billion gallons per year to 4.6 billion gallons per year in less than half a decade? Ethanol plant project development—the process of taking these ethanol production enterprises from concept through construction—has certainly changed over the years. For the most part, as the industry matures, the project development process is getting less thorny and more streamlined. However, that doesn't mean today's developers don't face challenges, including some new ones created by the industry's explosive growth.

Money Chasing Projects

It's impossible to talk about the changes in project development without a discussion on the changing financial landscape of the ethanol industry. A lot of people walked away from ethanol production in the 1980s with a negative impression of the industry, says Jeff Broin, chief executive officer of Broin Companies. As a result, few were willing to take a chance on the ethanol industry when the industry re-emerged in the mid-1990s. "It was near impossible to get insurance, it was near impossible to get bonding, and it was near impossible to get loans," Broin recalls.

Just a decade ago, there were fewer than 10 banks that would consider lending money to an ethanol project, says Mike Bryan, CEO of BBI International. Now, many people are clamoring for the chance to invest. "I wouldn't suggest that it's absolutely no problem to obtain funding, but it certainly isn't the problem it used to be," he tells EPM.

Randy Doyal, general manager of Al-Corn Clean Fuel in Claremont, Minn., a plant that recently celebrated its 10-year anniversary, describes the changing financial climate as "the wildest thing" he's ever seen. A few years back, he says, it was hard work to overcome the uncertainty of investors and lenders. "Now, money's not an issue," he says. "As a matter of fact, it seems … money is no object."

Broin partially agrees with Doyal's assessment, but he looks at the shifting financial paradigm of the ethanol industry from a unique angle. "There's actually too much money chasing too few projects," he says. "That's been a significant change in the industry."

Some of the newcomers coming into the industry will be around for the long term, Broin predicts. Others are treasure seekers who want to make quick money. "Without question, we have already entered an era of consolidation in the industry," Broin says. "Obviously it was inevitable that this would occur."

New Types of Ideal Sites

One obvious challenge ethanol project developers are faced with today is finding ideal locations in the Corn Belt. As more and more plants are built in the nation's Upper Midwest—where plants have historically been surrounded by feedstock supplies—some, but not all, experts believe ethanol plants are starting to encroach on each other's turf. Those 50- and 100-mile corn procurement radiuses are overlapping in more and more places. "Almost any place you look that's got an extra bushel of corn, somebody is going to build an ethanol plant," Doyal tells EPM.

Yes, the traditional Corn Belt may be brimming with dry mills, Bryan acknowledges. However, based on projections from the National Corn Growers Association, Bryan tells EPM he can comfortably say the nation's corn supply will be sufficient to produce up to 15 billion gallons of ethanol yearly, or more than 10 billion gallons per year over what is currently produced.

Like others, Broin stresses a responsible build-out. While he wants to see the industry grow, he considers it very important that ethanol facilities are located in suitable areas with sufficient corn supply and other amenities. Building out the industry with those things in mind is crucial, he says, "so that we can maintain a strong industry moving into the future."

It's a standard that's growingly difficult to achieve. The qualifying elements of a "great" corn dry-mill location have changed as the industry has grown, says Dan Sanders, president of Front Range Energy, a 40 MMgy ethanol plant in Windsor, Colo. The facility is located further west than most large-scale ethanol plants, other than a few in California and one under construction in Arizona. Building a plant outside the Corn Belt makes things a little more tricky, but not impossible. Since the plant is located far from adequate supplies of it production feedstock, the facility has a shuttle train service in place to rail in grain. "We can deliver corn in an economic condition that still keeps us competitive," Sanders says.

Finding a great location isn't just about access to corn. There were a few more obstacles to overcome with building a plant in Colorado rather than, for example, Kansas, Sanders says. The project was more expensive due to higher prices for land and water. Front Range Energy was able to overcome those issues, however. "It makes a project a little bit harder," Sanders says. "But … it's doable." On the other hand, while the plant's location is far away from where the majority of U.S. corn is grown, it's closer to good markets for ethanol and carbon dioxide. That adds up to a freight advantage for Front Range Energy.

Furthermore, a large number of cattle is produced in the area, providing a strong local market for the 120,000 tons of distillers grains produced at the plant annually. As many project developers say, ethanol plants can rail corn in—or DDGS out—but they can't do both.

Fast … and Still Not Fast Enough

One key to the ethanol industry's impressive pace of expansion has been the speed at which the leading builders have been able to develop, design and build production facilities. As Bryan says, builders like Fagen Inc., ICM Inc., Broin Companies, Delta-T and others have been able to not only increase the speed and efficiency in which plants are built, but build multiple plants simultaneously. Despite the enormous investments these and other companies have made to amplify their capabilities, man power and resources, there is a growingly long waiting line to get plants built by the most experienced and qualified companies. In fact, with so many projects clamoring for spots, new projects are now waiting as long as 18 months before the leading design/build companies are able to take on the job. "We have a major predicament on our hands—in terms of plants that want to get built and the capabilities to get them built," Bryan says.

Fagen Inc., for example, has projects scheduled through 2009. The company can't take on more projects unless one of the projects already on its list decides to go elsewhere, says Ron Fagen, the company's founder and CEO. That's a huge change. "Up until a year ago, we had to work extremely hard to get a project," he says.

With so many plants being built, it's difficult to get the needed equipment from vendors, says Matt Sederstrom, vice president of marketing and project development for Fagen.

"It's taking longer to procure and obtain the equipment than it was before," Fagen says. "So therefore it delays construction somewhat, just because of the huge demand for equipment."

Ironically, even though the ethanol plant construction line is getting longer, all the major builders are getting plants built faster. For example, Broin says his company has significantly changed the way it designs and builds dry mills, which results in more rapid construction. Much of the plant's equipment is built off-site, brought to the facility and "bolted together." In the 1990s, the company needed 12 to 14 months to build a 15 MMgy plant. Now, it can generally complete a 60 MMgy plant in 10-and-a-half months. Other builders have taken very similar measures.

100 Mark Already History

One thing is certain: Reaching the 100-plant mark isn't the end of anything for the ethanol industry. To the contrary, experts say it's just the beginning. Fagen, for one, sees the milestone as a sign of the industry's strength. "It's definitely a good mark that the ethanol industry has arrived, and we're not stopping there," he tells EPM.

Bryan agrees. "I never thought the day would actually come where we'd reach 100 ethanol plants," he says. "Now I'm looking forward to the day when we have 200 ethanol plants, and clearly, I think that's going to happen."

Fagen and Bryan are not the only industry leaders thinking of that next milestone. It's also on the mind of Bill Lee, general manager of Chippewa Valley Ethanol Co. LLLP, a 45 MMgy ethanol plant that has been operating in Benson, Minn., for 10 years. Lee tells EPM it won't take another 25 years to get the second 100 plants on line in America.

That's why, as important of a milestone as this is, Bryan considers the 100-plant signpost a sort of non-event. "I think we're going to blow by the 100 ethanol plant mark like it was standing still, and the industry is going to keep right on going at a breakneck pace," he says.

Broin, however, has a slightly different view of the future. He predicts the industry will see growth for the next couple of years until the corn supply tightens and profit margins change. "It's my opinion that the grain and energy markets combined with the commercial viability of cellulosic ethanol will determine the growth after that," he says.

One thing is clear: The industry didn't get to this point by accident. It took years of aggressive effort on the part of many to bring the ethanol industry to where it is today. The contributions of design/build companies that have been around since the early days of the industry are invaluable, Bryan tells EPM. Also, the Renewable Fuels Association, the American Coalition for Ethanol and other associations have contributed to the industry's growth in immeasurable ways by effectively advancing the ethanol agenda on both a national and state level. And through the low spots over the years, countless others just wouldn't give up on ethanol, making what's happening today possible.

There's one more group to thank, Fagen says. "The farmers are solely responsible for getting the ethanol industry where it is today and convincing Washington D.C., that this is a good thing [that] really works," he says. "All the credit has to go the farmers—nobody else but the farmers. Anybody now that's getting in the ethanol industry is riding on the shirttails of the farmers."

Holly Jessen is an Ethanol Producer Magazine staff writer. Reach her at hjessen@bbibiofuels.com or (701) 746-8385.