Hereford hosts first ethanol plant to run in Texas

The New Brew

ELLIOTT BLACKBURN
AVALANCHE-JOURNAL

HEREFORD - Jeffrey See looked over his shoulder and swept his arm toward the vats and pipes lining the dusty, concrete hallway.

"I know it's hard to believe now, but it is going to look like a hospital," See said.

It wasn't hard to believe. The building already felt sterile, despite the dirt on the floor, and only the rows of windowed cisterns, instead of gurneys, and the hard hats that crowned See and everyone around him ruined the effect. Pipes twisted their way around the large metal box of a building, ready to push, first, ground corn, then mash, then fermented slurry toward tall, outdoor columns. High-proof mush would drip down the metal tubes, leaving vaporized alcohol to float into a condenser, be ruined for human consumption to fit federal health requirements, and then pushed out to huge storage tanks to wait for the next train.

Jim Watkins / Staff White Energy V.P. of Construction and Development, Jeff See describes the flow at the Hereford, Texas ethonal plant they are building. Order a print

The yeast needed the cleanliness, explained See, White Energy's vice president of construction and development and a veteran builder of ethanol plants. The vats will be scrubbed again and again to ensure no bacteria interfered with the tiny organisms that would ferment millions of bushels of corn into an initial, 30-proof brew.

"Super-strong beer," See said.

Texas's first ethanol facility should begin grinding bushels for fuel late this month. White Energy's 100 million gallon facility in Hereford comes online as its industry struggles with low prices, large supplies and bad press. It also opens a much smaller field than excited announcements with datelines from smaller Texas towns promised - the refinery is the first of four nearing completion and nine originally permitted in the state.

Residents who will live and work not far from the newest addition to the smalltown skyline did not know what to make of the facility. None of the fuel distilled in the tall, steel columns

constructed over the past year will be sold in the surrounding region, and the majority of the corn will come from far away. New jobs will help but are far fewer than the 350 workers that built the complex and lived and ate in the city for now.

"What's going to happen when they leave and they're up and running?" Terri Sursa asked.

Gallons for gallons

White capitalized on 50-year-old grain and rail infrastructure in Hereford. All of the corn used for the process will come by rail from the Midwest, through a contract with ADM Cargill. Local sorghum may play a part in the ethanol mix, though price and quality would dictate that, and the mix would not likely reach higher than 20 percent, chief executive Gary Kuykendall said.

Jim Watkins / Staff The White Energy ethonal plant under construction in Hereford, Texas. Order a print

Each Deaf Smith County ethanol plant will use roughly 400 million gallons of water a year, or more than a third of what Hereford pumped from its well fields in 2006.

Because both sites import their corn from the Midwest, the operations drain less of the region's water than other projects. A bushel of corn, which in Nebraska took 2,100 gallons of irrigation in a 2003 study, produces 2.7 gallons of ethanol, according to a recent report by the National Research Council. Using those numbers, a 100 million gallon ethanol plant would need more than 77 billion gallons of water a year for its corn alone - close to eight times what the city of Lubbock used in 2006.

The Panhandle couldn't handle that for long. Cash crops, dairies, feedlots and cities rely on the Ogallala aquifer, a massive underground formation stretching from West Texas to Nebraska, to quench the arid reason. The aquifer has declined steadily over the past 50 years, and as surface water resources like Lake Meredith struggle, bigger cities like Amarillo and Lubbock will compete with traditional agricultural users for the water.

Long term water usage estimates projected a Deaf Smith County shortage for irrigated agriculture before the plants began construction.

Hereford Mayor Bob Josserand doesn't believe water issues would turn away the dairies or other businesses that have moved to his area any time soon, but he regrets not investing in a more expensive city wastewater treatment center that could have recycled gray water and expects to make a costly investment in brackish groundwater tucked far below the Ogallala to supply the city in the future.

"There are several solutions, none of them very appealing to the average citizen," Josserand said.

The ethanol plants would be pushed to increase water recycling, too, he said. White Energy is designing a gray water system that would allow the plant to move off of the city's treated water supply and recycle waste, though the company has not made enough progress to set a date for when it could begin using such a system, Kuykendall said.

"We are working with several water organizations today to try to figure that out, not only for this plant, but for all of our plants," Kuykendall said.

A lonely spot

This Panhandle town is a lonely southern dot in the galaxy of ethanol plants marked in See's wind-blasted office trailer.

It's as far south as he has traveled to build a facility, he said, though he'll soon move a little further to work on another White Energy plant under construction in Plainview.

White is not likely to have much more company in the current market. Panda Energy worked toward opening its 100 million gallon facility outside Hereford, fueled by burning cow manure, in the first quarter of 2008. A smaller, Levelland ethanol plant fueled mostly by local grain also expects to open early next year.

But other proposed Panhandle projects remain, at best, on the drawing board - a 200 million gallon plant in Pampa has not moved toward construction, and smaller sites in Friona and Sunray remain in the planning or finance stages, according to representatives from the projects. Other plants announced years ago in central and southern Texas do not have permits from the state's environmental regulatory agency.

Kuykendall faulted a wave of reports tying ethanol to rising food prices, reports that ignored the increases in transportation costs and tight global supplies for grain, he said, for the industry slow down. State leaders chose not to fund ethanol incentives this year, which led White Energy to reconsider its position in Texas, he said.

It's become tougher to find private financing, too. Bruce Bullock, director of the Maguire Institute for Energy at Southern Methodist University, pointed to the fuel's dependence on government mandate to create a market and an estimated 80 percent increase in domestic ethanol production over the past two years. Global production is up 30 percent over the last year, he said.

Investment interest dried up as potential ethanol production climbed.

"Needless to say, as a result of that, ethanol prices have come down," Bullock said.

Kuykendall considered the national supply numbers overblown. Refiners were perking up at low ethanol prices, and the smaller supply could find a wider market than government mandates.

"We're not nearly that bullish," Kuykendall said. "I don't think you're going to see as much capacity come online as people thought five months ago."

No easy street

Stores, hotels and rental properties have enjoyed the construction. Sales tax revenue jumped 30 percent as crews raised the refinery, and occupancy rates at city hotels and motels are three times better than normal, city manager Rick Hanna said.

In ten years, after city tax abatements on the facility phase out, Hereford anticipates $400,000 a year in straight revenue - a new fire engine, Hanna said.

"It'll be significant, but it won't put us on easy street," Hanna said.

Antonio Saucedo Baldo, manager of Baldo's restaurant down the road from the ethanol plant, believed the project would help his city grow. Wanda Cepeda, a hairstylist sitting in her empty salon off of Main Street, hoped the same. Her friend was already interested in trucking jobs related to the distillery.

"I'm certain that it will bring a lot of work in and help some businesses that are slow," Cepeda said, looking around her shop. "We need some business around here."

Crystal Velasco, manager of JJ's Diner, wondered about a brewery smell once the plant cranked up, and worried about the safety of the facility sitting so close to town. But at least it offered some variety to the standard trade for the area, she said.

"There's a lot of dairies, a lot of things to do with cows," Velasco said. "It's something different."

Terri Sursa, manager of the Sun Loan company and Tax Service on Main Street, figured those nearby dairies and feedlots meant Hereford residents could handle any smell the refinery might throw at them. She rifled through the local paper to one lonely rental property advertised in the classifieds. Prices improved and the number of available rental homes plummeted with the arrival of the construction crews, she said.

But the flood of contract workers had not meant much to her business, she said, and she wondered about what the plant would contribute to the community once it began producing fuel. The whole operation could be monitored at night by four employees monitoring work stations and a fifth rover to watch the machinery. The site will employ 40.

"In the long run, I don't know what it will do," Sursa said.

Mushy anchor

Josserand thinks he does. The town may not boast the acres of grain the northern states populated with ethanol refineries do, but Hereford is no stranger to a corn-fed economy. Idle cattle and mountains of dry feed covered with tarps and tires blanket the landscape rolling toward the city of 14,000. Feedlots have long been big business in the county, and dairies fleeing higher land costs elsewhere have begun to join them.

Cargill supplies a good amount of the dark food pellets stored under those tarps. But high corn prices have helped drive cattle out of the Panhandle and into northern states, according to Cattle Fax, a market research service for the industry.

An estimated 150,000 fewer head of cattle were fed in the southern states this year, owing in part to the lower feed costs that can be found in the corn rich north, said Kevin Good, a senior market analyst for the service.

Huge centrifuges at the ethanol plant wait to prepare 830,000 tons of wet distiller's grain, a high-energy corn mush, for the area's cattle operations.

The plant jobs, the trucking opportunities, the tax boost - all of that would be good for Hereford, Josserand said.

But the real value to the area was the high-energy wet feed White Energy and other ethanol plants will eagerly look to unload, he said in a telephone interview from the office of his feedlot, AzTx Cattle Co.

"We'd see a lot more cattle move north into the northern states where the product is available," Josserand said. "Because the product will be here, it will keep the feedlots here, keep the packing houses here - it will be very beneficial to the area overall."