Osage Bio Energy Moves Forward Plans for Ethanol Plants in Southeast

Richmond Times-Dispatch (VA) (KRT): May 25--HOPEWELL -- Whether it is in Hopewell, Mecklenburg County or elsewhere, Osage Bio Energy LLC plans to eventually build and operate four ethanol-production facilities in the Southeast.

"It's not a done deal in Hopewell, but we will build an ethanol plant. It's just a matter of time," Osage Bio Energy CEO Craig Shealy said. "We are going to build four plants. We hope one of those is in Hopewell."

Shealy said the company has everything to accomplish that goal: a team of experienced executives and veterans of the ethanol industry, a comprehensive business plan, a commitment to the environment and foremost -- capital.

This month, First Reserve Corp., an equity firm that specializes in investments in the energy industry, made a commitment of $300 million for the construction of Osage's four ethanol plants. This would be Osage Bio Energy's first ethanol plant.

Osage Bio Energy, which is based in Glen Allen, has looked at several sites in Virginia and other parts of the Southeast. The company has publicly identified two: a 55-acre parcel near downtown Hopewell and a 600-acre site just outside Chase City in Mecklenburg.

In Hopewell, the company has entered into an agreement with the city and a developer to purchase the Exeter site at the end of South Main Street. The agreement specifies Osage's intent to build a biofuel facility with a capacity to produce 68.2 million gallons of undenatured anhydrous ethanol per year. The company, however, said it plans to produce 55 million gallons of ethanol a year.

The deal is just a step from completion, said City Attorney Edwin N. Wilmot. Hopewell owns 12 acres of the site, which Osage will purchase for $1 million. Osage will purchase the other 43 acres from Richmond-based developer HDC, LLC.

The plant would cost $150 million to $160 million to build and equip and it would take up 17 acres of the 54-acre site. The rest of the land would be used for storage and shipping and receiving. The plant would provide 45 to 55 full-time jobs and an estimated $2.2 million in tax revenue to Hopewell.

Osage has until July 31 to finalize the deal.

The state Department of Environmental Quality could decide within days whether to grant, modify, or deny Osage's permit request.

The future of the Hopewell project depends on how soon DEQ grants those permits, Shealy said, noting that the company expects to have everything else, including local permits, in place by the July deadline.

. . .

The ethanol project has sparked strong opinions from residents and local officials in Hopewell and in Mecklenburg because of concerns about pollution. The location of the proposed plant near downtown Hopewell is also an issue.

In Hopewell, the idea of an ethanol refinery has divided the community and prompted two lawsuits.

Because of the significant public interest in the issue, DEQ held a public hearing a few weeks ago and the agency has received comments from nearly 500 residents -- about 400 against Osage's project, said Sparky Lisle, DEQ's air-permit writer.

In Mecklenburg, where Osage hopes to buy private property in an agricultural area, plans are not as advanced, but the company is facing similar opposition. A group of residents under the name of Association to Preserve Mecklenburg has organized protests and lobbied county officials who are reviewing zoning regulations for the project.

However, the company also seems to be gaining support for the Mecklenburg facility. In February, Gov. Timothy M. Kaine announced an award of $650,000 for Mecklenburg to extend a water pipeline to the site where Osage plans to build the ethanol plant.

"The Osage Bio Energy ethanol plant in Mecklenburg will provide the commonwealth with additional agriculture-based ethanol that will advance a goal of the Virginia Energy Plan calling for production of in-state renewable energy sources," Kaine said in a statement in February.

. . .

Osage wants to establish the first major ethanol plant in the state with hopes of producing millions of gallons of the alternative fuel to distribute along the East Coast.

The company said its projections to produce 55-million gallons of ethanol a year in Hopewell would be about the same quantity as the estimates for Chase City, if the project there advances.

The company said the plants would alleviate a demand for alternative fuels in the region and would put Virginia on the map of the growing renewable-fuel movement.

The federal government has promoted the production of biofuel as a means to reduce U.S. dependency on foreign oil. And state and local governments continue to provide incentives for local ethanol production.

Between 2000 and 2007, the number of ethanol plants more than doubled and production capacity tripled in the U.S, according to the Alternative Fuels and Advanced Vehicles Data Center of the U.S. Department of Energy. But there are few plants on the East Coast.

Ethanol producers face unique distribution challenges because most plants are in the Midwest, while gasoline consumption is highest on the East and West coasts, according to the agency.

"As ethanol production increases nationwide, distribution will become a more critical issue," the agency states in its Web site.

Joel Stone, Osage Bio Energy's chief operating officer and a 30-year veteran of the ethanol and food-ingredient industries, said Osage would need about 24 million bushels of barley annually, the grain the company wants to use.

This is the company's first attempt to own an ethanol plant. Osage Bio Energy, which incorporated in January 2007, is the sister company to Roanoke-based Osage Inc., a company that has been involved in the distribution of ethanol in the Southeast for the past 20 years.

"It's a new venture for us," Shealy said. Regardless of what happens in Hopewell, the company will continue to pursue its goal to build four plants, he said.

Author: Luz Lazo, Richmond Times-Dispatch, Va.

Contact Luz Lazo at (804) 649-6058 or llazo@timesdispatch.com.

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