Farmers Co-op shelves plans for Hillje biodiesel plant
""If things change tomorrow, it would take us about a week to get things rolling," - FCEC Manager Jimmy Roppolo
By BRENDA SOMMER bsommer@leader-news.com

The Farmers Co-operative of El Campo's plans to build a biodiesel facility in Hillje are officially on hold, the victim of changing market conditions.

"We had a meeting with our biodiesel people last week, and we decided with the way the market is now, we're going to stand by now, we're not actually going to build the plant," said Jimmy Roppolo, FCEC general manager. "We have the land platted and the financing set up. But the cost to make biodiesel without the state incentive, it's not profitable right now."

FCEC joined forces in late 2006 with Geo- Green Fuels to create Coastal Fuels of El Campo, a new company meant to build a 5-million gallon per year biodiesel plant adjacent to FCEC's Hillje cotton gin.

Under the state's former biofuel incentive program, Texas gave 20 cents per gallon to producers of ethanol or biodiesel. Producers were required to pay the state 3.2 cents per gallon in return.

"It was a pretty healthy amount on a 5-million gallon plant, $840,000 or $850,000 per year, which made it definitely worth going forward with the biodiesel," Roppolo said.

The state's incentive program was in place between June 2006 and August 2007, and the amount of biodiesel made in Texas jumped 110 percent.

Between June 2006 and May 2007, the state paid about $9.5 million to producers, all for biodiesel, and state officials estimated the annual total at about $12 million.

Lawmakers feared that price tag would skyrocket to $102 million a year, based on estimates that biofuel production would boom over the next two years, and chose not to fund the program during the last legislative session in January 2007.

Seventeen states offer incentives to produce biofuels, and Roppolo said those states offer producers between 20 cents and $1 per gallon of biofuel produced.

"We've jumped through all the hoops except for pulling the trigger, and if tomorrow they come up with a state subsidy or a better federal subsidy, then we might change our minds," Roppolo said.

Not only has the state yanked its subsidies, but the cost of plant oils used to make biodiesel has leaped dramatically, Roppolo said.

"All the plant oils have gone through the roof," he said. "Five years ago, cotton seed oil was 7 cents a gallon. Now, it's 70 cents a gallon."

Roppolo doesn't feel planning for a biofuel plant has been a waste of time.

"We've done all our homework, the bank has approved our financing," he said. "If things change tomorrow, it would take us about a week to get things rolling. All the work hasn't been for nothing. We've done a lot of work and research that's useful for the future, and in the future could be a great endeavor.

FCEC isn't entirely out of biofuels as another market for its products, since its Port of Victoria grain handling facility is right next door to a proposed ethanol plant which got some good news from the state Monday.

"The ethanol plant got their permits as of yesterday, so that's a good sign," Roppolo said Tuesday. "We're still working with that group and continue to do so."

Lone Star Ethanol received air and waste water permits from the Texas Commission on Environmental Quality and is on schedule for construction to begin this summer. The air permit was approved on Feb. 8, while the wastewater permit was granted in January.

The 100-million-gallon per year ethanol production facility - announced in January 2007 - will be built at the Port of Victoria with plant start-up set for late 2009.

In January 2007, Lone Star Ethanol announced its plans to build a plant adjacent to the Farmers Co-operative of El Campo's Victoria grain handling facility.

The relationship between the co-op and Lone Star Ethanol is relatively simple at this time, Roppolo said.

"There's a letter of understanding that … we'd supply them with grain and sell our by-products and possibly have an ownership stake in their plant in the future," he said. "We have a lot of options."

A lease option agreement was signed in December with the Port of Victoria, according to Lone Star Ethanol Executive Director Ronald White.

"With our lease agreement with the Port of Victoria and our new permits, we look forward to getting started on construction as soon as possible," he said.

More than 200 construction jobs and 60 permanent jobs are expected to be created from that project.