PRAIRIE VOICES: Ethanol -- a volatile industry
Harold Newman, 76, of Jamestown, N.D., is one of North Dakota's premier businessmen, and one of the state's pioneers in the making of ethanol. A native of Mayville, N.D., Newman got an industrial arts degree from the Minnesota State University-Mo...
Harold Newman, 76, of Jamestown, N.D., is one of North Dakota's premier businessmen, and one of the state's pioneers in the making of ethanol.
A native of Mayville, N.D., Newman got an industrial arts degree from the Minnesota State University-Moorhead in 1956. Instead of taking a teaching career, he started a highway advertising sign company in Jamestown.
Today, Newman Signs is the 10th-largest sign-making and sign-printing company in America.
In 1982, Newman and a group of investors bought a potato processing plant in Grafton, N.D., and converted it to ethanol. In 1993 he became the primary owner of Alchem Ltd., which since was mothballed.
In 2006, he announced plans to build a 100-million-gallon ethanol plant as part of an energy park near Spiritwood, N.D. In 2009, because of a poor ethanol economic climate, he abandoned that project.
Newman spoke about ethanol with Agweek magazine reporter Mikkel Pates.
Q. How did you get into the ethanol business?
A. The plant initially was a Borden Foods Co. potato flake plant. The Alchem Ltd. plant was built in 1982 and initially was designed to use cull potatoes as a source to convert to alcohol. It was designed to be a 4-million-gallon plant capacity at the start.
There were 10 stockholders, all of whom were in that area except for myself. Each of us put in $10,000, initially. But we could never get the effluent (waste) problem solved, so we had to switch to corn.
Actually, we tried some barley because the corn was higher-priced. The barley worked, but it was hard on the equipment -- too abrasive.
The company was always -- in my judgment -- underfunded, undercapitalized. We got a $10 million loan to keep it going until 1997, then at a 10-million-gallon capacity. Then, corn got to $4.50 a bushel, so we couldn't keep it open anymore.
In the meantime, the corporation had incurred $675,000 in debt to farmers for grain. I put $1 million into the plant in about 1993 -- paid off the farmers, and we got it going again.
Q. Was ethanol a profitable business then?
A. For a short duration in 2006 -- actually, about three-year period from 2004 to 2006 -- it was very good, because a federal government had outlawed methanol, which is supposedly going into people's drinking water. The oil companies had to substitute something, and that was ethanol.
Q. It was just over two years ago that your company announced it would temporarily close the Grafton, N.D., plant. You said that it would reopen when it was "economically feasible." What happened?
A. We needed an upgrading quite badly. We were forced to put in environmentally favored equipment to get rid of the particles in the air that weren't very favorable to comply with the Environmental Protection Agency.
We thought it would be a good time to do it, and we did do it. We put a lot more equipment in there, automation too. I suppose we've put in about $6 million to $8 million since we closed it.
Q. Does that mean it won't reopen -- ever?
A. You can't say, well, we're not going to open it, but the alternative was worse at the time. You can't continue to lose money on something. Corn has come down some, but it's not enough to make it work. If corn gets down to $2.30 or distillers grains would go to $110 a ton, I guess it could reopen. But, of course, that kind of price of corn isn't beneficial to a farmer who is making payments on a $320,000 combine.
Q. Since those improvements, ethanol has been in an upheaval, with corn prices going up and then moderating. Ethanol projects -- including the one at Fergus Falls, Minn., this past week -- have been troubled. How do you make its future?
A. Congress is deciding whether to continue the 6-cent subsidy on the product. I'm optimistic that they're going to continue doing that. While there are problems in the industry, we don't want to forget that it's working in some places. In Brazil, for example, 85 percent of what they use (for vehicle fuel) is ethanol. There's a place for it.
Q. You were a driving force behind the development of proposed 100-million-gallon ethanol plant at Spiritwood, N.D., in conjunction with a Great River Energy park. Why did you pull out?
A. Same reason. We'd have used 33 million bushels of corn and would have had less energy costs because we'd be getting steam from the coal-fired power plant. Cargill's barley-malting plant would benefit too, because they'd have less energy costs.
The problem was that corn was $6 a bushel -- three times what we'd paid for it a few years ago. Besides that, you had no assurance from the federal government that you were going to keep a tax waiver in there. That doesn't look good to a financial institution that would lend you money.
I want to emphasize that we got tremendous cooperation from the state of North Dakota and Great River Energy on that project.
But we voluntarily said we're not interested at this point until things change. Even locally, there was a considerable amount of money that was going to go into it and probably still will, but not under these conditions.
I think there's reason to be optimistic that there will be an ethanol plant there someday. It may be downsized some or built in stages, but there's a lot of corn raised in this country -- right here.
Q. What's your take on the future and practicality of non-corn ethanol?
A. There's a lot of research going on, mostly on using something other than corn to make ethanol -- cellulosic. There's some research on sugar. If they ever could get sugar solved, it would be quite a bundle for this area because of the Red River Valley and Minnesota. There's reason to be optimistic.
Colleges -- especially land-grant schools dealing with agriculture -- are studying it. We hope there's reason to be optimistic. I'm not ready to predict how that industry will go.
I've gone to several energy conferences, and about four where cap and trade has come up.
Q. You used to sell some of your pecans as pecan pies through the Tower City, N.D., cafe. Those billboards offered a free piece of pie with a fill-up of ethanol -- two products you've cared about. That cafe is closed, but are you still in the pecan business?
A. Oh yes. We had a good crop this year. We sell a lot to Wal-Mart.