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After starting operations in 2007, Red Trail Energy LLC of Richardton, N.D., is debt-free and has paid out $25 million to its shareholders as dividends. Mikkel Pates / Forum News Service

Red Trail president speaks up for ethanol production

RICHARDTON, N.D. — Now more than ever, farmers who believe in the future of ethanol need to speak up for it, says Gerald Bachmeier, president of the North Dakota Ethanol Producers Association.

Bachmeier, who also serves as chief executive officer of Red Trail Energy LLC, in Richardton, says there are several key policy goals in play:

• First is to ensure compliance and continuance to the Renewable Fuel Standard. The RFS sets the Renewable Volume Obligations — the targets for each refiner or importer of petroleum-based gasoline or diesel fuel, Bachmeier says.

The RFS, established in 2005 and 2007, requires certain amounts of renewable fuels (primarily ethanol) to be used through the RVO. This is tracked by using Renewable Identification Numbers. Every gallon produced carries a 38-character "RIN number." Blenders can choose to defer their compliance by buying a RIN on an open market, which fluctuates.

The ethanol industry has criticized the Environmental Protection Agency for "loosely" and excessively handing out "hardship waivers" to some refineries, which Bachmeier says destroys demand.

In late June, the EPA proposed that in 2019, some 19.88 billion gallons of biofuel would be blended into the U.S. fuel supply, a 3 percent increase from 2018, but didn't fix the waiver issue.

• Second, the EPA should keep the current 15 billion gallon requirement for conventional biofuels like corn ethanol. Distributors need this to accelerate investments in the pumps and other infrastructure to get E15 (a 15 percent ethanol blend with petroleum) into the marketplace, and perhaps to E30 sometime in the future.

In a related matter, the ethanol industry wants to increase ethanol blends from the current 10 percent standard to the 15 percent blend in the summer months. The ethanol industry needs a waiver from the "Reid vapor pressure," a measure of the volatility of gasoline. The Trump administration has said they are close to making this happen, but it needs the investment in pumps and equipment.

• Third, the industry should help consumers learn the octane-enhancement benefits of ethanol. The higher the octane number, the more compression the fuel can withstand before igniting. Bachmeier says the government must make sure the so-called Research Octane Number is high enough, because that's what triggers Corporate Average Fuel Economy tax credits, which cuts taxes on vehicles made to use renewable fuels.

Red Trail tale

Bachmeier says Red Trail Energy is a prime example of what is at stake for American gains with ethanol.

Red Trail Energy started production in January 2007 as the Renewable Fuel Standard came into its current status. Initially, Red Trail's capacity was 50 million gallons per year. Bachmeier, as a consultant, was part of the initial $100 million equity drive. He came back into management in 2010.

Red Trail since then switched from coal to natural gas, and now produces ethanol at 64 million gallons per year.

The company has 936 owners, about half of whom deliver corn to the plant. The plant ships out a unit train of 96 cars (2.7 million gallons) twice a month.

The plant is now debt-free. It has paid off $55 million in debt, has put $17 million into the facility and $25 million to owners in dividends.

Despite its western location, the company sources 98 percent of its corn in trucks from producers across North Dakota, into South Dakota and Montana. Even in the drought year of 2017, the company acquired 10 million to 11 million bushels west of the Missouri River and an additional 12 million from other areas.

This fall, farmers had a sizeable wheat crop and were emptying their bins of corn. Red Trail has 1.5 million bushels of permanent storage and in August were holding an additional 1 million bushels in storage bags.

The company owns a share of Renewable Products Marketing Group LLC, based in Shakopee, Minn. RPMG markets ethanol for 18 plants in North Dakota, South Dakota, Minnesota and Iowa. They market 2 billion gallons on a regional basis and are developing ethanol markets in other countries. Bachmeier sits on the RPMG executive board.

"We're looking to export markets," Bachmeier says. "Primarily, North Dakota's ethanol moves into the Pacific Northwest and into Canada," Bachmeier says.

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