FALL 2009 ISSUE


Partnering for Natural Advantage



By strategically partnering with an existing power plant, POET’s Biorefinery at Big Stone City, South Dakota has become one of the lower-cost and most environmentally-friendly producers in the ethanol industry.




In the waning years of the 1990s in the picturesque countryside of northeast South Dakota, the Big Stone Power plant was angling for a business partner and only getting nibbles.


“As a coal-fired utility we felt we had some things to offer an industrial partner — reasonably priced energy, land, rail and water services,” recalls Jeff Endrizzi, Big Stone Power Plant Manager. “And we were also interested in promoting the economic development of the area. We’d been looking for a partner for a few years and at times thought we had some people interested, but nothing ever materialized. Then we heard about this group of farmers who wanted to develop a value-added product, probably ethanol…”


One of that “group of farmers,” Del Strasser of nearby Wilmot, also recalls those days.


“Our steering committee’s first brainstorming meeting was in September of 1999,” says Strasser. “We met in Milbank to look at what we could do to increase the demand for corn in our area. There was a real need for something at that time. Corn was really cheap and the basis was really wide, just because there wasn’t enough local demand.”


Soon the two groups began getting together and Endrizzi recalls the first meeting between the two entities.


“We made our presentation and the farmer group seemed interested, but the POET people who accompanied them had some questions – this would be different than any other facility they’d ever done before,” says Endrizzi. “But a part of the first meeting included a site visit of the power plant, and during that tour people really began to get excited about the possibilities.”


Strasser described another of the earlier meetings.


“There were a lot of people there in suits and they asked us a lot of questions,” says Strasser. “I think they wanted to see if our group was really serious and likely to go through with it.”


But the group – which would shortly become a partnership between Northern Growers and Broin Investments – was indeed very serious and very committed, and began a series of meetings with farmers to raise the needed capital. Soon engineering details and contracts were worked out, and a unique partnership between POET Biorefining – Big Stone and the owners of Big Stone Power was formed. Construction on a $40 million, 40-million gallon ethanol plant began on Big Stone Power’s land in early 2001, and ethanol production commenced in June, 2002 under POET management.


HOW IT WORKS


“Almost all ethanol plants use natural gas to heat their boilers for process steam,” explains Blaine Gomer, General Manager at POET Biorefining – Big Stone. “But here we use high temperature, high pressure steam generated by the Big Stone Power plant to heat our boiler. Big Stone Power sends high temperature, high pressure steam directly to us through a one-half-mile, overhead, insulated pipe to a steam re-boiler located in our plant. This steam re-boiler utilizes Big Stone Power’s steam and generates low pressure steam that is then used in our plant processes. The Big Stone Power steam condensate is then returned back to the power plant. This steam generating process is very, very efficient as compared to conventional natural gas boiler systems.”


The steam is sold to the POET plant at a rate tied to the cost of delivered coal, which provides a considerable savings over natural gas, especially given the volatility in gas prices the past few years. But the arrangement also benefits Big Stone Power.
“From our perspective we look at it as an unusual revenue stream,” notes Endrizzi. “Most other coal-fired plants don’t have a steam-use customer.”


The POET Biorefinery is also able to capitalize on another unique natural resource opportunity from its next-door neighbor. Big Stone Lake lies approximately two miles away from the two facilities, and every spring Big Stone Power pumps excess lake water into its 348-acre cooling pond. POET is then able to pump lake-quality water from the pond for use in its processes.


Other advantages of being located next to a power-generating plant include sharing rail road tracks and rail services, having pressurized water available for fire protection systems, having a dedicated uninterruptable electrical supply line that has eliminated POET’s need for backup electrical generators and having distilled water available for the cooling towers and boiler feed water systems. All these utilities are obtained from Big Stone Power.


“We’re the only POET biorefinery situated next to a power plant, and one of the very few in the industry,” notes Gomer. “It’s worked out really well.”


EXPANSIONS AND FEATURES


Things change fast in the ethanol industry, and after a few profitable years the board (which includes five representatives from the Northern Growers and two from POET) decided to make some changes of their own. In 2006, they added POET’s new BPXTM technology which uses proprietary enzymes to convert raw starch from corn and eliminates the need for cooking. This change decreased costs of production, while increasing the yield per bushel of corn to one of the industry’s better marks. The use of BPX technology also enhanced the quality of the dried distillers grains with solubles (DDGS).


Then in 2007, they did a $40 million expansion to increase the nameplate capacity of the plant to 75 million gallons per year.


“We determined that we’d still be able to get plenty of corn, and that we could lower our breakeven by spreading our costs over more gallons,” says Strasser, who has been Board President since production started. “We were also lucky – we got it done before the big increase in materials cost a couple of years ago.”


Strasser is particularly proud that farmers consider the plant to be user friendly.


“So many farmers have said they appreciate our layout and the way it handles the unloading of corn,” says Strasser. “As a board, we may not understand all about fermentation and distillation, but we do understand how it is to bring grain into a facility. We were outspoken that we wanted it to be user friendly, quick in and quick out.”


SAFE, FUN, SUCCESSFUL


Now in its eighth year of production, the production facility in Big Stone has established enviable track records in plant safety and low employee turnover. But perhaps another equally important, although less tangible factor, is how the team members enjoy their work and each other.


“Our employees are loyal and work hard,” says Gomer, a home-grown boy from Lake Norden who was able to come home to South Dakota from Nebraska to work for POET. “They’re also active in the community – team members serve in various ways, and some of our managers are on the school board. They also really like to get together and socialize – that’s the culture in this area.”


Big Stone Power’s Endrizzi also voices an appreciation for some of the same values.


“This is a very rural area with mostly small towns,” says Endrizzi. “We run into the [POET] team at ball games, church, meetings – they’re our neighbors – at work and home. Our business relationship has been mutually beneficial, but I also value the personal relationships – there’s a lot of trust that’s been built up over the years.”


Strasser also values the relationships with people in both plants.


“I enjoy working and being with people – maybe that comes from my spending so much time on the tractor,” chuckles Strasser. “But it’s been fun to work with people who are positive, forward-looking and forward-thinking. I remember when we first met with some of the engineers at our earlier meetings and we realized how this partnership could help us reach our goal of being one of the truly low-cost producers in the business – which we knew would be helpful in the tough times that would come sooner or later. In my mind, this has been successful beyond our imagination in those early days in helping the community, providing good jobs, and growing the market for our corn.”


Big Stone Helped Launch Career


Picking up his degree in Ag Systems Technology from South Dakota State University in 2003, Justin Van Veen landed his first job as an Operator at the Big Stone Biorefinery less than five miles from the corn and soybean farm where he grew up. In the six years that have followed, Justin’s career path has led him to a position in Plant Management at POET’s Corporate Office in Sioux Falls, with stops along the way for management positions in Ashton, Iowa.


“At Big Stone I learned ethanol production, but I also learned about POET’s approach to teamwork and communication,” says Van Veen. “It’s a really unique facility and was a wonderful experience.”


Now as a Process Specialist, Van Veen does training and plant troubleshooting, and relies heavily on the experiences he had as a rookie employee at Big Stone.


“Starting out on the ground floor as an Operator was an amazing way to learn the ins and outs of ethanol production,” states Van Veen. “Those operators are the guys on the ground level running the plant.”


Van Veen also has some other good memories of the Big Stone plant.


“It was a blast,” recalls Van Veen fondly. “I had a lot of fun, but it was always very professional. I go back there occasionally in the course of my current job, and it’s always fun to see the people there again.”


Need to Expand Markets


Northern Growers Board Member Lars Herseth first became interested in ethanol as a farmer looking for a new market for corn.


“When my grandfather and dad were farming, they raised more livestock than crops. Then it turned the other way around,” says Herseth. “We wound up with a huge basis and were at a real disadvantage compared to other states with river markets.”


Which is one of the reasons that as a twenty-year member of the South Dakota Legislature, and later as a member of the Corn Utilization Council, Herseth sponsored and supported measures to promote the state’s ethanol industry. As a result of some of these earlier efforts, one of every three corn rows in South Dakota is currently converted into ethanol, a higher corn-to-ethanol utilization rate than any other state. But now it’s ethanol that needs some new markets.


“Now there’s no place for new biofuels, which is why it’s so important for us to be able to move to E15 — to develop a market for them,” says Herseth. “The other issue is the need for more blender pumps throughout the country so people can have a choice of different blends. If people’s only choice is E10 or E85, you’re not going to be able to penetrate that market as easily as if you have other choices like E30, which seems to be a rather optimum blend with mileage about equal to regular gasoline.”


Enjoys Customers


After twenty years in the grain business at a local elevator, Julie Fritz joined the POET Big Stone team six years ago.


“It’s been a very good thing for me,” says Fritz. “I was hired as an accountant, but soon became a Grain Buyer and getting to be a manager was a huge boost.”


What does Fritz enjoy most about her job?


“I still enjoy talking with the customers,” reflects Fritz. “After 26 years in the area, I know most of their wives and families on a personal level. Then when I came here, I got to know our Minnesota customers and their families too.”





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