In 2005, there was only one ethanol plant operating in Indiana. But by the end of 2006, after the state General Assembly pushed through millions in incentives and Gov. Mitch Daniels signed legislation mandating that state vehicles use biofuels when possible, there were plans to build at least 25 more, Hurt said.
But the current credit squeeze, along with other market developments, shut down this Indiana town's ethanol dreams. It is just the latest development in a rocky year.
For The Record
Los Angeles Times Sunday, November 23, 2008 Home Edition Main News Part A Page 2 National Desk 1 inches; 49 words Type of Material: Correction
Ethanol industry: In Tuesday's Section A, an article about the credit crunch scuttling a planned ethanol plant in San Pierre, Ind., misquoted a resident who opposed the plant. Dawn Danford said "some people are grateful for anything that helped kill off that ethanol plant" -- not "I am grateful."
First, corn prices jumped from around $2.50 a bushel in 2005 -- when ethanol plant construction began to take off -- to nearly $8 this summer on the futures market, before falling to below $4 this week.
The cost of growing corn skyrocketed, as fertilizer and seed costs jumped as much as 40%. Meanwhile, crude oil and gasoline prices -- which determine the value of ethanol on the U.S. trading markets -- have come down, narrowing the difference between the cost of gasoline and ethanol.
And the number of lawsuits -- filed by environmentalists or local residents who don't want their rural community turned into a site for industry -- aiming to block new production facilities from being built has steadily grown.
There were 139 ethanol plants operating in the U.S. as of January and 61 additional refineries under construction, according to the Renewable Fuels Assn., a Washington-based trade group.
But financial woes have led at least 27 plants to close, halt construction or be scrapped, according to DTN, an agricultural news and information service.
"There's been no credit for months," said Todd Neeley, who covers biofuels for DTN. "Even the top ethanol producers are having a difficult time getting financing. For these smaller projects, like San Pierre, they had no chance of surviving in this kind of environment."
Ethanol proponents insist this is just a temporary bump in the biofuel's potentially rich future, and may inspire producers to expand their operations to create ethanol out of other cheap materials, such as crop waste, yard cuttings, or wood and forest products.
"There is a lot of overblown concern," said Bob Dinneen, president and chief executive of Renewable Fuels Assn., the industry's main trade group. "We are not the only industry hurt by what's happening on Wall Street. But there is plenty of room for growth once the credit markets ease."
In the meantime, the dream of a revival is on hold for communities such as San Pierre.
