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St. Louis company may build $80 million ethanol plant in Southwestern Il
By ALAN J. ORTBALS

   Center Oil Co. of St. Louis is scouting Southwestern Illinois for a site to build and operate an $80 million ethanol production plant that could be up and running as soon as next summer.

   Several sites are under consideration including one on the Missouri side, according to Barry Frazier, president of Center Ethanol Co., a subsidiary of Center Oil.

   Center Oil is the area's second largest privately held company with $4.9 billion in sales in 2004. The company distributes gasoline and other refined petroleum products throughout the United States by pipeline, ship, barge and truck to and from petroleum terminals.

   The proposed ethanol plant will include grain elevators, tanks for storage as well as fermentation and distillation and processing facilities. It will span 50 to 70 acres and cost approximately $80 million to build.

   "Center Oil is a fairly sizeable purchaser/blender of ethanol in our system today and has been for many years," said Frazier, "but, we've never been a producer of ethanol. I think it's a natural extension of our business. It provides us some control over a component that we're going to have to purchase anyway, especially with the mandates that were announced last year in the new (federal) energy bill. There's an increasing requirement for oil companies - and anyone involved in gasoline blending and distribution - to increase the amount of ethanol that's blended."

   Frazier says Center Oil will be bringing large amounts of grain in by barge, rail and truck and transporting the finished product out in the same manner. He estimates that processing 50 million gallons of ethanol will require 18 million to 19 million bushels per year.

   According to Martha Schlicher, director of the National Corn-to-Ethanol Research Center in Southern Illinois University Edwardsville's University Park, there are two big reasons driving such a major investment.

   One reason is that the federal energy bill that was passed by Congress and signed by the president last August gradually increases the renewable fuel standard over the next six years. It also contains incentives for production of renewable fuels.

   Another reason is that states are banning MTBE - Methyl Tertiary Butyl Ether - which has historically been used as an oxygen source in fuel. A total of 26 states including Illinois have now banned MTBE and more are headed in that direction, according to Schlicher.

   "The only current viable alternative today as an oxygen source in fuel is ethanol," said Schlicher, "so that has created a lot of certainty about the interest and demand for ethanol. In fact, within the state of Illinois, 94 percent of our gasoline is blended with ethanol up to the 10 percent level. You are seeing an expansion of all gasoline being blended up to the 10 percent level. But, there are still over two billion gallons of MTBE being used in the country today…so you can see that demand for ethanol will be growing."

   The nearest ethanol production plant is Lincolnland Agri-Energy LLC in Crawford County, Ill. near the Indiana border, she added.

   Schlicher says SIUE's ethanol research center has spent a lot of time working with the Center Oil team, educating players on how ethanol is made and on technological advancements. The National Corn-to-Ethanol Research Center will continue to offer its assistance if the plant is built. Center Oil has already spent more than a year on the project, she says, and has really done a thorough job of understanding the industry; understanding the potential; and focusing on doing it within its home geography.

   Schlicher says she's impressed with Center Oil's management team and with the approach it has been taking toward this investment.

   "We have the opportunity to be a cooperative for these ethanol plants, to use our instrumentation and our laboratories to work in areas of unmet need for the industry," she said. "We often spend a lot of time with investors of various types on the front end helping them as a third party nonprofit. We feel it's our way of thanking the state for the investment it has made in our facility to ensure that we are doing everything we can to support economic development."

   Center Oil is still in the due diligence phase of reviewing sites, approaching potential partners, exploring financing and judging feasibility.

   "We anticipate making a decision on whether we proceed in the second quarter of this year," Frazier said. "Pending receiving necessary permits, we would be looking at summer, 2007 for start-up. There will be 30 to 35 full-time positions."