Only One Farmer-Owned Ethanol Plant in Works in Indiana

Model used in western state not working as well here.

Published on: Apr 30, 2007

For all the hoopla about new ethanol plants in Indiana, when one boils down the matter to the nuts and bolts, only one ethanol plant currently under construction or in latter planning stages is farmer-owned. That's Cardinal Ethanol, Winchester, Ind. The other 12-15 plants are owned by a myriad of investors or corporations.

Farmers have ownership in the plant currently up and running at Rennselaer, but outside investors own more than 50%. The original intent was for it to be a farmer-owned plant, but the group behind it ran into financing trouble and eventually turned to a non-farm, outside-Indiana investor to finally get the project off the ground.

Roger Bailey, Greencastle, is chairman of a group actively pursuing a plant in the Putnam/Clay County area. He also was instrumental in bringing a plant currently under construction near Cloverdale to Putnam County. He began his quest as a member of the Greencastle economic development group more than six years ago. Finding funding for such projects inside Indiana is not an easy task, he says.

"We've not been nearly as successful here in Indiana at raising farmer-owned capitol as many groups have been in western states," he observes. Farmer-owned plants, often owned by a farmer-owned co-op, are very popular in the Western Corn Belt, including in Nebraska, Iowa and parts of Nebraska.

Part of the reason for the difference may be timing, Bailey says. But he also believes a large part of the difference boils down to different laws that affect how groups wanting to start a farmer-owned business can operate. Laws for 'new-age' co-ops are much more co-op friendly in Iowa and many other western states, he says. Indiana does not have such a 'new-age co-op' law.

"That means there are many more hoops to jump through here to get a project off the ground," he says. "Legislation in many other states has streamlined the process and made it easer for groups that want to enter such a project to get started."

One central Iowa ethanol plant, a rather small 50-million-gallon per year facility is owned entirely by farmers and local townspeople with an interest in the community, an Iowa source and a stockholder himself reports. Some 975 stockholders hold equity in the plant. Many are blue-collar workers with a minimal amount of money invested in the project. It's been up and running for some time, and as many as three to four hundred stockholders attend each annual meeting of the co-op, the stockholder says.

Even there, though, the winds of change may be blowing, the Iowa stockholder observes. A recent project trying to get off the ground had to issue a second equity drive to try to raise funds. Fundraising in that part of the country was easier in the past, this person observes.

No changes in Indiana legislation that might have significantly simplified the process of getting a new venture off the ground occurred this session. Nothing on the drawing board would point to any changes or to formation of a law making it easier for new-age co-ops to form and operate, Bailey observes.