Ashland City Council
MINUTES FOR THE WORK SESSION OF COUNCIL
January 24, 2007
PLEDGE OF ALLEGIANCE
PRESENTATION OF MINUTES:
None
Wednesday, January 24, 2007 2:00 pm 3rd floor Conference Room
PURPOSE- Ethanol
Meeting
Glen Stewart - The goal this afternoon is to hold the presentation
including questions and answers to 2 hours. Those that wish to
speak after the presentation, I am going to go by the list of those who
signed up on the way in, first one first and if you signed on here and
choose not to speak that is perfectly okay. But that is how I am
going to take the first speakers, is off of that list and if you signed
it because you thought it was an attendance sheet, that is okay
also. Just say I really do not want to speak. We are going
to send around the attendance sheet, it is on the way and please sign
in.
When you speak, I want you to stand and when you are recognized, please
give your name and address to our Clerk of Council so we can record
that. I want to share with you that if any of you need to leave, this
meeting is an open meeting and you can leave at any time you choose. Be
as quiet as you can, that is all we ask and not everyone has 2 hours to
sit here and listen to this process. I would ask that you turn your
cell phones to at least a quiet position and with that we are going to
get this meeting started. We are going to ask for introductions
and I am going to start to my far left: Robert M. Valentine, Ward 2,
Ruth Detrow Ward 3, Paul Wertz Ward 4, Glen Stewart, Councilman at
Large and I am going to start here with Fire Chief Mark Burgess, Larry
Paxton, Engineering, Jim Cooper, Engineering, Ellie Grubb,
Mayor’s Asst., William Linson, Municipal Court, Jerry Mack,
Street Dept., Anna Tomasek, Finance Director, Bruce Wiser, Water
Treatment, Curt Young, Water Distribution Sanitation, William Miracle,
Police Chief, Robert Valentine Ward 1, Mayor Bill Strine.
Any other City elected officials in the audience? Any County elected
officials, please stand and give your name please: Mike Wells,
County Commissioner, Kim Edwards, County Commissioner, County
Auditor.
Twp elected officials: Richard Westner, Montgomery Twp Trustee.
Martha Pendelton, Ashland City Schools.
Stewart: Thank you everyone for your attendance this
afternoon. We are going to go through a presentation this
afternoon. If you will note, I have on Item #3 Presentation by
Dean Homayouni and Glenn Hyman. Glen Hyman is not an officer of
the company. They are going to make their presentation and that
will be followed by questions and answers. The process we are going to
use and the questions and answers, City Council will have the
opportunity to ask questions and City Council and other elected and
appointed officials within the city, and then I would like to go to the
general audience and start there. With that, Dean would you care
to start?
Dean Homayouni- Good afternoon, my name is Dean Homayouni. I am
from Las Vegas Nevada and to give you a little background about our
group. We started looking at in January 2005 about trying to find
a way to differentiate our stations from the competition. Our
group is currently distributing about 800 million dollars in gasoline a
year in over 400 gas stations in Idaho, Montana, and the state of
Nevada, Utah and all the way down to Phoenix. One of our founders
came across this alternative energy product called E85 which is 85%
Ethanol. We looked at selling the product from about January of
2005 all the way to June of 2005 and spent a good 6 months.
They have been in the gasoline industry for over 30 years.
So they are not Wall Street guys and they are not fly by
nighters. They have built a company from scratch, from 0 sales to
almost 800 million dollars in revenue through hard work, outstanding
surface and participating with gas station owners they surface day in
and day out. So we spent about 6 months looking at alternative
energy products and found that it is a really great idea because:
1. Ethanol uses it source from corn, it employs
farmers.
2. It keeps the dollars within the United
States. We do not have all this money going out to foreign
countries and we are actually going to see one of the slides about
where all the oil is and who uses the oil.
3. It also employs Americans all the way on the down
cycle and one of the studies we have shows that this Ethanol plant,
which we are going to give to the City Council is going to effect or
provide downstream somewhere between 600 and 800 jobs. That is
what is going to create between all of these additional retail jobs
between people of the plant, between the guaranteed employment of the
farmers and their workers because these plants are supplied by
Corn. Starting in June of 2005, we actually approached these
projects in a very detailed manner starting in June 2005 before
President Bush got up for the State of the Union Address back in
January of 2006 and he mentioned Ethanol and the whole thing
crazy. We test marketed the product at 4 stations, so if you go
to E85fuel.com and there is 4 gas stations there, they are selling the
E85 product. We own those gas stations because we wanted to make
sure before you wind up selling a product; we wanted to go through the
diligence we have to perform. I owned one of those gas stations
where the product was sold. I literally talked to thousands and
thousands of customers about the E85 product. We were originally
buying it from a brokerage group out of the California area, that
relationship did not work. We then decided to start the rails product
on the manufacturer of Ethanol which is Aberdeen and were railing it
from Minnesota, that did not work for us because we are in the business
of selling gasoline products the way gas station owners work, is that
when they call up to have their product delivered, they want it here in
24 hours. They don’t want to hear it is taking a train an
extra 7 days to get the product delivered to our location and therefore
you are going to be out of product. During this period of time,
we have been selling the product; there were times where my gas station
had no E85 to sell for 11 days. Because we were dependent upon
rail, it happens all the time. So starting in about November of
2005, which again that we already had spent about 11 months on this
project already. The two main guys swung around and asked me to
go out and perform the research to figure out what did we have to do to
really create a distribution channel originally where anyone selling
the E85 product or a person could buy a flexible vehicle and drive all
the way to Billings Montana, all the way to Phoenix, Arizona to buy a
car. Because as we are going to see in some of the slides, there
is one station selling E85 in Idaho, there is two in Utah, there is 4
in Nevada and as of a few months ago, I think there were 0 in
Arizona. Those are the main markets we server right now.
Back in the Super Bowl of last year, GM started running their ads on
flexible fuel vehicles. Those are the cars they are showing where
they have the corn fields and they say that you can get this
alternative energy vehicle, a flexible fuel vehicle can burn any
combination of 0 Ethanol all the way up to 85%. But the reality
is, is that the American public is really not getting advantage of
those vehicles unless people step forward to be able to deliver the
product where people can drive from point A to point B and they go on a
400 mile trip and they are able to fill their car along the way.
That was our original vision, starting in November, we said, you know
something? We wanted to build a local plant that we are not dependent
upon rail that someday can drive from Billings, Montana to Phoenix
Arizona and hurry out 150 stations along the way for people to be able
to fill up their cars. This alternative energy is not going to
work unless you have a distribution outlet to allow the consumer to buy
the product. So then we turned around and say, lets look at other
states where we are able to build a plant because the big problem with
that, Idaho grows no corn. It only grows 6.7 million bushels of
corn and almost all of it is silage. They grind it up and
use it to feed the cattle and this plant, for the farmers is going to
require about 18 million bushels of corn. This plant is going to
require every 8-9 days 105-110 train carloads of corn or about 400 dump
trucks full of corn shelved at that plant every week. Each one of
these plants, a 50 million gallon plant consumes about 110,000.00 acres
of corn. That is a lot of corn. Now did anyone see
President George Bush’s State of the Union Address
yesterday? I missed it but I know that he talked about Ethanol
and one of the things he talked about was 35 billion gallons of
alternative fuels which is a combination between bio-diesel and ethanol
by the year of 2017. We are currently producing about 6.7 billion
gallons, so we have a long ways to go. We talking about, do we
need to produce 6 times more of this alternative energy product and the
only way we are going to get there is either find some other source or
ask our farmers to grow a lot more corn. Because that every time
we are able to reduce our dependency on foreign oil, it increases the
security of our country. There is only one reason we are in Iraq,
spending billions of dollars right now. And we are over there
because we want to guarantee the oil supply. So that is kind of
like overall today a little background about us that we are a 1 term
company doing business, the two major people finding the company has
been in business over 30 years. They built their company from
scratch. They are not Wall Street guys, they are not
Bankers. They are people who day in and day out has built their
companies from nothing and I think this year we are going to be about
800 million in revenue. They’re in this alternative energy market
for a long term. They are not people who are going to come
out of here and build a plant and decide to walk on that plant.
The second thing we did was we then started to look at other states
where to build plants and we looked at Mississippi, looked at Texas and
we looked at building a plant in Texas using sugar cane. We
looked at Oregon; we looked at the state of Ohio. We did a
tremendous amount of research. We settled on two locations, one
of them is in Idaho which is where the founders home base is and the
other location is in Ashland, OH we love Ashland
Ohio. We are distributors of Petroleum Products. We want to
roll and make it where the consumer has the ability to buy a flexible
vehicle from Ford, GM or Chrysler. We will see some of those cars
which are available today and the consumer is able to buy it when they
go on a trip. That is our expertise. We are not experts in
sourcing corn and we are not expert in running plants. What we do know
how to do is going to the gas station owners based on our actual
experiences to explain to them what is the reaction of the
consumer to create this marked. We want to be the first to
market, to distribute the product directly to the consumer. That
is our goal; that is what we want to do. Now I talked to
thousands of people just like yourselves. There would come into
the gas station and would ask me about the E85 product. I could
talk for hours about the E85 product. It is clear burning, it is
made in the United States. What is the downside? A flexible
fuel vehicle which I went and bought my son and Explorer sports gap
because it is a flexible fuel vehicle. Ethanol gets somewhere
between 5-10% less gas mileage per gallon, has about 25% less
BTU’s. In order to be fair to the consumer we intend to
price that product 5-10% below what regular gasoline costs you right
now. We are not here to cheat the consumer. Our goal is to
say to the average American and say if you could buy a fuel made in the
United States and you will get the same exact gas mileage for dollar
spent and it is going to help the American Economy, it is going to
employ Americans and the money is going to stay here and is going to
wind up reducing our dependency on foreign oil. The consumers I
talked to in Las Vegas are very enthusiastic. A lot of people
have defined this product our response was much better than we actually
thought it was going to be. In fact we were completely surprised
that we wind up getting rid of our super gasoline, which frankly our
stations were selling about 3,000.00 gallons a month then we replaced
on super with E85 and we sold about 30,000.00 gallons a month of the
E85 fuel. So for us as marketers, it is better for us because the
product that we are replacing, it was going about 10 times the
volume. So that is a little background and now I am going to step
us through with a slide show which will give you a little more
background about alternative energy, about who we are, about what these
plants are going to entail to build, how long they are going to take to
build and I think you are going to find it informative.
So, the entity that we are going to propose to set up here is going to
be called Ohio State Ethanol, Inc. and you are going to see that we use
the same for all of our entities. I made a little boo boo even
though I am a Lawyer. I went and applied to register 10 million shares
and the state came back and wanted something like 97,000.00 dollars
from me so I am going to be refilling the paper work and we are going
to adjust the number of shares we have outstanding.
We are a developing stage entity. Glen is here today, Glen do you want
to stand up? Glen Hyman. Glen is the person who is working
with us to help us finalize our plans and also he is working with
various groups regarding the funding on the plants. Like I said,
we got out, have done a tremendous amount of research, we looked at
multiple states and we are going to form this entity. It is going
to be an Ohio based entity and our business plan is to build Ethanol
plants and the major people which are owners of the parent of this
entity which is called Silver State Ethanol, Inc. Every single
owner is a client of my law office and every single person who owns
stock 75% of them are in the Petroleum business and they own gas
stations. The principles have a combined 65 years experience in the
energy market and like I said before, they are not Wall Street
people. They are not guys who are trying to make a quick
buck. These are guys that have spent their lives in energy
sector. What’s our structure? We have a parent called
Silver State Ethanol Inc. and we have that name because our parent is
located in the state of Nevada and provides a very advantages tax
structure to us and is known as the Silver State. We have a few
entities which are called Idaho State Ethanol Inc which is that ISEI
and have another entity called Ohio State Ethanol Inc. We set up
another called Oregon State Ethanol Inc, and we are actually looking at
a potato plant in Oregon to build a plant. Our ultimate plan is
because we have also looked at another alternative energy which is
called Bio-Diesel. We are also looking at building a Bio-diesel
plant which is that ISDI Yellow under Idaho also one in Ohio and
another one in Oregon. So our phase I is to get these Ethanol
plants built and to build a Bio-Diesel plant. Bio-Diesel is
another good product, it is made out of soybean, made out of sunflower
seen and you can also make it out of animal fat and it is also a low
sulfur burning fuel. So you also wind up having a lot of environmental
benefits related to bio-diesel.
MISSION: We sat down about a year ago when we decided to
put this slide show together and we said, we want to capitalize on the
increasing demand for the ethanol product and frankly almost all of the
ethanol today is being used in what is called the E10 blend where the
Federal Government mandates 26 major US cities in the United States and
uses a 10% blend of Ethanol during a certain period of the year because
ethanol burns 30% cleaner. EPA standards put President Bush, is
really referring to when he wants us to produce Ethanol. He wants
that all the states and all the cities to be required to use a 10%
blend. That is one of our markets. We test marketed the E85
product. We want to sell and distribute the product, which is
actually 85% ethanol. Now the East Coast is going to become a major
center regarding a demand for ethanol. We are going to see later
on, here is two additives used in gasoline, one of them is called MTBE
which is a petroleum based additive and that is one of the replacements
of not having to use ethanol during this period when the EPA requires
the cities to use that product. But the MTBE had a lot of
problems. It attaches to ground water, it caused water pollution
of ground water. It was tested and it also causes Cancer. So the
state of California as an example, outlawed using MTBE as part of their
mixture as of December 2005. We are going to see a slide of a
bunch of states which have actually outlawed use of it and the federal
government said you can’t use anymore MTBE’s as part of the
mixture as of December 31, 2010. And that is what is going to
drive a lot of usage here. And we are going to see a slide later
on in the states which currently do not allow you to use that
product. So we think we got organized and we think we are very
strategic and I hope the Mayor and the City Council also agree with me.
We think that we are a very efficient business. You don’t
grow a business from 0 to 800 million in revenue by being ineffective,
you don’t grow it by giving lousy customer service. And the
business we are in, you make a penny or 2 pennies a gallon for you all
to know. So it is not a high profit margin business and demands,
it requires that we give excellent customer service. We would not
have 400-500 gas station owners buying fuel from us if we do not give
good service. Our goal is to replace MTBE in a reformed related
gasoline which is an RFG, and once again the RFG is that 10% mixture
you need during certain periods of the year in these 26 major U.S.
cities and is required by the EPA. We think that there is going
to be a 1.6 billion gallon demand on the East Coast alone just to
replace the MTBE’s. These are big numbers. So what
are the 5 things that the country needs and we need to create an
alternative energy opportunity? We need competitive clean technologies
and ethanol has been around forever. It is basically alcohol made
from a still, it is Moonshine. We really have perfected technology over
the last 20 years. The yields are going up per bushel. They
started out at about 2.2 gallons per bushel. It is now up on an
average to about 2.8 gallons per bushel. They are working on some
new enzymes and the process is trying to get that technology of above 3
gallons per bushel. Another thing we have is higher oil and gas
prices. We actually had a discussion about this. Gas has
kind of dipped back down. Now I am from Las Vegas and yesterday
gas is selling for 2.39 cents a gallon regular gasoline. I fly
out here and it is $ 1.89 per gallon. I thought I would never see
gas under 2.00 dollars. During the next 10 years, China and India
are going to be using as much Petroleum as the entire work uses
today. That is only 10 years from now. So you can imagine
what sort of pressure that is going to wind up putting on the world
markets about our petroleum supply, so even though everybody is feeling
good and our energy crisis has dipped my feeling is the chart is going
to be going up and down but it is only going to go one way. If we
have a war in the Middle East or we have another hurricane come through
the Gulf, the prices are be going thru the roof again. So the
good thing we have is energy security. We also need State and
Federal incentives. One thing you all need to realize is the
Federal government is part of President Bush’s 2005 energy
bill. They give a 51-cent per gallon tax credit to the company
which is directly delivering the product to the gas station owner. That
is called a blender of record credit. That is why we want to use
our expertise to distribute fuel that we want to distribute it directly
because we want to get that 51 cents a gallon. That gives us 25
million dollars a year from the federal government. What it
really does is that is a hedge on our business plan against corn.
Because corn over the last 7 months has gone up from about 2.50 dollars
a bushel all the way to 4.00 dollars a bushel. So we need some
built in strategy, something which gives our company a competitive edge
over everybody else to make sure that plant is going to run and that is
where the blender of record credit, the state and federal incentive
gives the ability based on our expertise to deliver fuel to be able to
go out to the federal government and say “Guess What” we
have 25 million dollars he owes because of we are distributing the fuel
directly and then we also have the environmental and also the consumer
of carry. What does that mean? That we got prices ethanol
product, to the end consumer to make sure that he gets the same gas
mileage per dollar spent because we want the consumer to be treated
fairly. That is the only way it is going to work. You all
have got to get that product, the end consumer has got to get that
product somewhere between 5 and 10% cheaper than what regular gas
prices are. Now if we are hoping to solve all these issues or
else for our company in tandem with the farmers and a lot of other
ethanol producers to help us address some of these issues. So
then once again, the 3 elements sustainable to energy that we need, the
technology which we have, the plants have been in operation a long
time, we need the ability to finance the plants and of course you have
heard about all of these plants getting bilked, there is a lot of money
going around to finance alternative energy. We think it is even
going to be a lot more than Glen and I have in my pocket value.
Clearly President Bush, last night on the State of the Union Address,
said he wants 300-400 hundred more Ethanol plants built. That is
the amount of product that we are actually referring to and he shows
policies that clearly the federal government or at least President Bush
is putting forth a very affirmative policy about alternative
energy. So what is our gripes? And one of the things he
talks about was the nations security and that one blue line; that shows
our domestic oil production. Our production is only going one
way. It is going down. It is not going up. We like to see
the line that shows our production of petroleum products or some form
of energy to drive our vehicles. And I think President Bush was
very smart. He said that we need to do two things. We need
to make Ethanol and Bio-Diesel and alternative energy 20% of our
gasoline supply and we need to increase the miles per gallon on our
cars. Has anyone seen that movie by Al Gore, The Undeniable
Truth? Anyone see that? Our cars in the U.S. we get 20 miles a gallon.
In China the average car gets 31 mpg and in Japan they get 42
mpg. We would like to decrease our dependency very quickly by
trying to move to the mpg standards other countries have in place right
now. But, by the year 2020, we have a gap. We have a
certain amount of production and we have this gap there which shows
that all that other energy has got to come from someplace. It
either has to come from alternative energy or it has to come from
foreign countries. So we all looked at where is our energy coming
from? Who has the oil and who uses the oil? Saudi Arabia, Iraq,
Iran, Venezuela, Russia, China, Mexico, Libya and Nigeria. They
got the oil. We have 2%. Who uses the oil? We use 26% of
oil but we have 2% in the nation’s reserves. So that is one
of the reasons why we keep hearing about alternative energy about
producing Ethanol, about going Bio-Diesel because somebody can look at
this chart and say; what are we doing? We are like consuming a lot of
oil, but we really don’t have that supply. So what kind of
emerged and what has really happened is; once we saw the chart, what
has emerged is that Ethanol, the technology has been involved in the
mass and in the amount being produced in tandem with FFV being outlawed
has like really started to create a market where it is kind of like a
snowball going downhill. You start out really slow and is not
really moving and all of a sudden it gets bigger and bigger and bigger
and finally you hit a critical mass and that snowball just starts
moving. Now they referred to two types of Ethanol, one is called
Foreign Ethanol and the other is Cellulistic Ethanol. And that
substance is made out of wood chips or President Bush talks about
Switch Grass. These are other alternative Bio Mass products to
make Ethanol out of and when we were looking at building a plant in
Idaho that we looked at straw, we looked at soy gum, we looked at hay,
we looked at potatoes, we looked at sweet peas, we looked at 10
different products to make Ethanol out of. Potatoes also. Corn is
still the cheapest. Now clearly, the country needs the farmers to
produce corn, we have a shortage of corn. That is why corn is
going through the roof. You all know it. You are farmers.
The corn yesterday was about $ 4.00 dollars a bushel. Clearly
President Bush and Congress is asking the American farmer to help with
this because the only real viable economical technology that we have to
produce the Ethanol product as of today is corn. Now what
is our strategy? We would love to come out here, at Ashland,
build a plant out here. Once again, why did we pick Ashland?
Because Ashland is within 4 major metropolitan cities. Because
that we are distributors of gasoline products, we want to put a
regional plant in the area that we think we can deliver the product by
truck within 2 ½ hours. And if we can get Cleveland,
Columbus, Detroit, Toledo, Pittsburgh. If we think that we have a
relatively large population basis within 2 ½ to 3 ½ hour
drives by truck. Now why do we limit it to that! Because federal
law states that a truck driver can only drive 10 hours before they have
to take a break. So we want to have a location of where we are
going to deliver the product to, to at least be within that 10 hour
turn-a-round, or preferably less. So we kind of driven in a
circle and say here is our markets. We started out at 54 million;
our standard plant is now is 50. We think the county is going to
need 30 plants just to handle the East coast. We want to expand
as the market grows and then based on the renewable fuels act, which
was passed in 2005, the goal was to have about 9 billion gallons of
Ethanol a year produced. That Act requires 240 plants across the
country. So imagine if you got President Bush now and says he
wants 30 billion gallons of Ethanol per year. We are talking
about producing 3 times more. He is really saying by the year
2020 he wants about 700 plants. That is a lot of plants. A lot of
communities, a lot of corn. Remember each 50 million gallon plant
requires about 110,000.00 acres of corn. So what is
Ethanol? It is moonshine. It is 100% alcohol; it is made from
Biomass. Corn is used to make it. It is 200 proof. It is an
excellent additive to gasoline to boost the octane level by 2.5 points.
E85, the octane level is 105. To get an idea, Super I think is
89. So it is much higher, that is why it is cleaner
burning. It also burns 30% cleaner than gasoline. It helps the
environment. It is now becoming a significant source of renewable
energy and clearly the country is moving in the direction of using
alternative energy to reduce our dependency on foreign oil. So
once again I think we have had this discussion about before. The
states were requiring that these 26 major cities are now requiring a
10% blend of Ethanol to gasoline, mostly because it burns
cleaner. We talked about the energy bill that did require 4
billion gallons of alternative fuels in 2006. I think we are at
7.6 million gallons right now. That amount has got to increase up
to a total amount of 12 billion gallons by 2012. We talked about
President Bush the using of Ethanol in January 2006. General
Motors ran a bunch of commercials. Has anyone here seen the commercials
GM ran about their flex-fuel vehicles? They are great
commercials, the problem is the consumer does not have any place to buy
the pump. So one of the states would say no more MTBE’s. We
talked about the 10% you need to blend. All these states in blue
said no more MTBE's by these states, so it is expanding, clearly there
is a market. The biggest market is California. And then
what is the RFG? That is where we have a 10% blend it has been required
since 1995 concentration of the cities are on the East and West
coast. RFG is requiring cities which is comprised of about 25% of
our population and then Ethanol and MTB are the 2 choices at this
moment. So we said before the MTB because it attaches to ground
water is leaving ground water that we think causes cancer.
That blue line shows by 2010 it has to be gone. And the red line,
the only practical replacement they have for it is Ethanol that is
driving what is called the E10 market and you can see the amount of
Ethanol going up. Do we want to role E85 to use as an alternative
fuel to replace the gasoline. That yellow line would be off the
chart. It would be up the flagpole. The flexible fuel
vehicles. How many people here know what a flexible fuel vehicle
is? A flexible fuel vehicle can run on any mixture of regular
gasoline which is 100% gasoline all the way up to 85% Ethanol. Like I
said, I bought my son a car, the only thing he did was abuse it.
He used a bunch of gasoline, finally I had to take it away from him a
couple of times. But Ford, GM and Chrysler, they started to
produce Flexible Fuel Vehicles down in Brazil. Brazil, for the
last 20 years has had a law which states every gas station has to offer
diesel, and offer at least a 30% blend of alcohol. All their cars
made in Brazil today are flexible fuel vehicles. They do not
allow cars to be sold right now if it is not a flexible fuel
vehicle. Brazil reduced their dependency on foreign
oil from 85% all the way down to 10% but they did over a 20 year
period. It is not something that happened overnight and frankly
it is not something we like to necessarily do. Because I ran the
numbers, if we wanted to create the same source of market as Brazil, it
would actually consume 93% of our farmland for growing corn. So
because Brazil has got a much smaller energy market, they are able to
produce enough Ethanol to get rid of the amount of foreign oil coming
in. And then also Brazil makes their Ethanol out of Sugar
Cane. Next, we are going to see some of the cars that GM and
Chrysler are offering regarding Flexible Fuel vehicles. The cars
automatically adjust to the firing depending on what percentage of
Ethanol you have in your tank. So they have a little sensor
determining what percentage you have because you may go fill up your
car with gas or even half way and then fill it up with Ethanol blend
products so that computer chip has to recognize really to determine, I
got all the way from 1% to 85% and the problem is though which we are
going to see, this E85 is not available. So here is some example
of cars which are offered today, flexible fuel vehicles. These
are the Dodge cars, they have some trucks, they have the Sebring, and
they have the Dodge Caravan. It does not cost any extra money to
get a flexible fuel vehicle. You get the exact same gas mileage
using regular gasoline. So the only thing you have is the upside
potential. There is like no downside of owning a flexible fuel
vehicle. These are some of the cars offered by Ford. 85% of
their offerings are going to have the ability to have a flexible fuel
engine. And then of course you have GM leading the way.
They have quite a few trucks and cars and the SUV which are available
today via a flexible fuel vehicle. But what is the problem?
GM spent millions and millions of dollars on the flexible fuel vehicle
and they we were way ahead of the curve and we understood that the
average consumer had no place to buy E85 at. The most ridiculous
thing is you got Ford, GM and Chrysler spending millions of dollars to
advertise flexible fuel vehicles in California and consumer cannot even
by a product there. The most ridiculous thing I ever heard
of. So this shows my state from top to bottom where the stations
are at that actually offer the E85 product. Minnesota clearly leads it
and Illinois because that is where all the Ethanol plants originally
started. So our goal is to find a way to bring 220 some stations
which are in Minnesota to all of these other states and we are going to
see that Ohio has 8 and believe or not 4 of those are Air Forces
bases. Nevada has 4. California has 4 and all of those are
like the Pow Wow to a research center. They are all government
facilities. The consumer cannot go buy the product. We have
people talking about the E85 flexible fuel vehicle market. It is
extremely hard to try to convince someone to buy that car if they have
no place to fill up your vehicle. Look at all these states:
Alabama, Alaska, Arkansas, Connecticut, Delaware, Hawaii, Louisiana,
Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York,
Rhode Island, Vermont have 0, there is not 1 place a consumer could go
to fill up your car with E85. Idaho has 2, and that is 2 Air
Force bases. So because that we are distributors and we decided
to test market the product, we felt there is an opportunity here to be
the first to market. But in order to do that we have to have
regional plans that are able to deliver the fuel to the gas station
owner within 24 hours, otherwise they are not going to hear it.
So what do you need to build a plant? And that is always a big
thing. We need Railroad access, we also need a water source and I
need to be corrected on the water. It takes about 350 thousand
gallons of water a day to fill up the fermentation VATS, but we are
actually going to need another 300 – 350 thousand gallons a day
for the cold water. So the numbers I have here are not
correct. I called the builders today. One of the builders which
like gave us those numbers said yes it is possible, but it winds up we
have to put in a special process that is going to cost us about 14
million dollars and that is why people are not putting in those
processes so your great Mayor pointed out that fact to me last
night. I went and rechecked it and he was actually right on the
mark. Very impressive by the way. We also we need the
freeway access, the natural gas and we need cattle because if we are
going to see that one of the by-products that Ethanol processes
produces is what is called the Stiller grains. So for every 54
lbs in a bushel the end process produces about 24 lbs of this protein
mash which is called the distiller grains which is what the cows are
really able to do. We are going to try to create the
smallest footprint we can for this plant and we think it is going to be
somewhere between 40-50 acres at the current industrial park. So
we are working the land down to try and hopefully work with the
city. What does it take, and what is the time to build the plant?
This is what happens. Once our financing guys say go, we then
have got to spend about 1 million ½ dollars to the engineering
firms that we have retained. They spend about 2 ½ months
drawing all the designs for the plants. And of course we built
these plants, a lot of times that are giving you the same designs but
are just taking us for a bunch of money. They are really not
hearing these things. Now after they produce that, they
hung out with what is called a schedule A. Schedule A is every
single piece of equipment which is going in that plan including the
amount of emissions for each piece of equipment. That then gets
admitted into the state agencies along with the EPA. And within
the State of Ohio, you are not allowed to turn a shovel of dirt until
you have all of your permits. That is going to be your Air
Permit, your Water permit, all the stuff you need. So you bet it
takes about 2 ½ months to do the plans and we think the city is
going to take 4-6 months before we get issued a permit. We really
cannot begin construction of this plant somewhere between 6-8
months. It is going to cost about 98 million dollars to
build somewhere around there. It does not include our working
capitol. Our working capitol is about another 15-20
million. We think our estimated cost that we use per gallon is
150. That has actually gone up now, corn is going up and we think
are estimated sales price is going to be $2.25 per gallon and that
includes on the long run that .51 cent per gallon credit that we get
from the Federal Government. So our true net is going to $2.25
minus the 51 cents so it comes out to about $ 1.74. Our expected
income at one point in time was we thought was going to be 39 that now
is going to be ½. Why is half? Because corn has gone
up. For every dollar that corn goes up, we have to pay an extra
18 million dollars but at the same time the distiller grade increases
in price because foreign corn has gotten more so it is about a 66%
ratio for every dollar corn goes up, it costs us about .66 cents more
per gallon to produce. How many folks in here are farmers? I am sure
you all know the corn prices. So what does the production cost
us? Basically you get the corn, chew it up, clean it, you put in this
mash. It is fermented. It actually releases CO2. It then
gets distilled. You dehydrate it. Which means you use a chemical
process to remove the water from the Ethanol. You get it down to 99.9 %
pure alcohol. And then you add a 5% mixture of gasoline to it
before you go to store it, because it is alcohol, you do not want
anyone to be drinking it. By like putting a foreign substance in it, it
smells and people are not going to wind up drinking it. The next
thing we do is other products. We add the distiller grains. We
have to dry them, we centrifuge them first, the dryers are 12 million
dollars. These are the types of investments we are talking about
making. $12 million dollars to take the distiller grains and get
the water out of them the first pass and then dry them because the
distiller grains on a wet basis only have a shelf life of about 3-5
days. So most of the plants are drying them out because they
don’t want to end up having and extended shelf life and they are
able to ship them around the country where the cattle are located at.
And then of coarse you have the silage which is kind of leftovers and
that gets evaporated either through a cooling tower. Now we
talk about distiller grains. For you all to understand the amount
of distiller grains coming out is we are going to produce 150 thousand
tons per year. That comes to 566 tons per day. That plant
is going to produce 1.1 million lbs of distiller grains a day.
That is a lot of distiller grains. The number of cattle those
distiller grains are able to feed are 188 thousand dairy cows and 63
thousand beef cows. So do we think we are going to able to
offload all these distiller grains locally. At this point, it
doesn’t call for that as part of our plant. That is why we
have to wind up putting a dryer in at this plant. Because we are
going to wind up shipping some of these distiller grains. A
lot of them go to Texas and the Oklahoma area. Of course, if in fact
that we are lucky enough to build a plant here. While the plant
is being built, then we are going to be aggressively going around to
the dairy farmers and the cattle farmers and try to get them to buy
distiller grains from us. So what do the plants look like? Has
anyone here seen an Ethanol plant? These are some ideas. I
have 4 pictures of 40 million gallon plants and will admit I get the
cleanest ones. Our goal is we want to have a plant which is
maintained and looks like these plants. And you can kind of see
it is a factory, they have grain silos and the major things that one
plant has here which is actually a perfect plant is: It has a
Railroad, has rail, has water and is in Farm country. So because
you have the Silos, it kind of mixes in around the environment.
Other examples, I love this plant which is in Missouri. I think
it is just a beautiful plant. You can see the railroad. The
roads they have but that gives you an idea of what this plant is going
to look like. Okay, someone has asked us about the smell and the
plants they make the alcohol. They have stills. These plants are
built supposedly ¼ mile downwind from the plant. You
should not smell anything from that plant. So if you all want to
know what the smell zone is. You would take the particular site,
draw a nice little circle around it and that is really the area which
would wind up being effected. As like, has anyone driven by a
beer plant? Which is a ferment. The smell is nowhere near as bad
as a beer plant. Here are some ideas of the plant
layout. Like I said I would love to see us have a plant like this
nice and green, very clean, shows you what plants like, the silos are
there and we need a lot of corn. So before I talk about the tax
credit. We all get a little visualization. The Federal
Government gives a .10-cent per gallon what is called a small producer
of Ethanol, the producers credit on the first 15 million gallons
produced. If we wind up, there is two ways for us to distribute the
product. The one is for us to do what we do best which is sell
gasoline. We know how to do that. We know how to go out to
gas station owners and talk to them about gasoline, selling
gasoline. In fact I told a couple guys last night. I gave
them a story. We had two guys from California that we originally
buying the Ethanol from, really nice guys, MBA’s from Harvard,
slick hair. They looked like movie stars, not like me. They
went out to Las Vegas and they tried to get stations to sign to buy
Ethanol. They are out there 3 months and they did not get one
station to sign. Our president went out on 1 weekend and got 20
stations to sign up. So why? Because he knows what gas station
owners want to hear. He knows what terms they want. He knows they
want the product delivered there and they don’t have to pay for
it for 10 days. He knows the gas station owner wants someone to
pay to convert their station. They don’t want to go through
the hassle. That is why when he goes out to talk to people they
can talk to a gas station owner about the product, what it takes to
install it. So if we distribute it through our methodology on the
left which is where we are going to distribute it directly to gas
stations with a .51cent per gallon credit, we plan on selling it to gas
stations in Ohio, Pennsylvania, Indiana and the state of
Kentucky. If we are not able to sell that product directly, we
can sell that product 4 times over right now today by going to a third
party, the marketing group and telling of the selling of the
product. But we do not want to do that because the way corn is
going, we need to get that blender of record credit to make sure that
there is plenty for those 8 months. That’s our hedge, that
is why the bankers like us. The bankers have hundreds of
different plans they receive as far as building the Ethanol
plants. They understand we are in this thing for the long haul
and that we have been selling gasoline for an extended period of time
almost 30 years. We like to build the company from scratch and at
the end they have the confidence that we know what we’re
doing. So that is kind of our plan.
I do have for city council today. Some of the questions were
asked regarding the economic impact of the Ethanol plant. We have
one study which was done for you all to understand. Says here, new jobs
are created at the consequence of increased economic activity caused by
Ethanol production. The increased output resulting from
ongoing production of 50 million gallons per year Ethanol plant will
support the creation of as many of 836 new jobs. Lets talk about
how that is going to affect Ashland. While this plant is being
built, there is going to be from anywhere 100-200 people that are going
to be out here full time for a 14 month period building. They are
all getting paid. Now they are staying in your hotels, buying gas
from gas stations, going to the stores to shop, going also to your
restaurants. Clearly you are going to have a significant amount of
people who are going to be spending money while this plant is being
built. When this plant is being built, all of a sudden there is
going to be somewhere between 37-45 employees that are going to be here
full time running the plant. But what does this plant do, employs
the farmers around here for the corn. It supports the people that are
going to trucking, restaurants spending money and that
rotates through the economy 7- 8 times. For each dollar paid by a
manufacturing plant to its employees that same dollar rotates through
the economy 8 times. You also need to understand that your
schools are going to wind up getting taxes based on the gross value of
this plant. This plant is probably going to have a fixed asset
amounting to about 80 million dollars so your schools are going to have
a benefit. And because we are going to be directly
employing up to 45 employees which says is going to create upward to
836 jobs in total. Those 45 employees what kind of jobs are they
going to have. Insurance benefits, 401 K, they get their tuition
paid for, all part of our personal policies. If you want to go to
college, it is paid tuition. That is 45 people that are
like going to wind up having a job, are able to buy a house, 45 people
who have insurance for them and their family. Besides the other
jobs which are created as the result of all of these dollars going
through the economy. Well, we also have other studies which was
in the Ethanol industry in Minnesota. So you can get an
idea. Within the state of Minnesota, of course Minnesota as we
saw, they have 222 gas stations selling E85 and clearly have got a lot
of plants. The economic impact was 404 million dollars to
manufacturing, 44 million to wholesale and trade, 41 million to service
(which would be restaurants, etc.). The total economic impact in
the state of Minnesota by then moving full speed ahead with the Ethanol
plants came out to 587 million dollars. The employment impact was
about 2600 jobs total. So that is some of the data and I will
leave these reports with City Council and you all can have some
additional back up for the Mayor. And with that said, I
appreciate the time.
Stewart- Thank you Dean, I would like to open this question and answer
and I will start to my far left Bob Valentine. I would like for
each one of you to consider your most important single question and
move through the Council. Give the Mayor the opportunity to ask a
question and let us move in that direction.
COMMENTS OR QUESTIONS FROM
THE AUDIENCE:
Robert M.Valentine, Ward 2- Question: The Farmers’ corn
prices, and I know you need lots of corn and I know you are going to
have to go around the counties to get what you need. I keep
looking back at Wal Mart. What they did Vlasic, what they did to
Schwinn. Once they got to the point where they were really independent,
then they zapped the price down. I just want to know, how are we
going to keep the price up for the farmers?
Dean Homayouni- Answer: Our regional plant involves us using a
group called Scolar to source our corn. Scolar is a very good
group and they actually have a center which is located in South Central
Ohio. And we’re mostly using them for Idaho because there
is no corn grown in Idaho. So we clearly have got to use some
group to get the corn for us. Now one of the reasons we decided
to come out to Ashland is that Ohio, I think grows about 250 million
bushels of corn per year. So we started looking at states and our
criteria was, where does the corn grow and which state has got the
population centers. Because if we want to sell the E85 product in
Ashland, we had to be close to the primary structures. Now
we would love to buy all the corn locally, but I think that what that
is going to require of the farmers is that they need to form a co-op
and be able to come to us and say, you know something? We can supply 10
million bushels per year. I don’t know what that number is
going to be. Okay, and then to be able to give us some sort of
system to be able to get the corn here. Cause remember, that we
are going to have 105 to 110 railroad cars of corn every 8 days showing
up or 400 dump trucks of corn. That is a lot of corn. So we
have to have some effective system for us to get that product delivered
to us in a relatively short time when we need it. So one of the
things we talked about with the Railroad guys this morning, they said,
one of the ways to do it is if someone has a grain storage or Grain
Silo area. The farmers bring all their corn there to store it and
then we are able to load it into some sort of effective transportation
method, but clearly with all the Ethanol plants getting built and what
President Bush said last night. He wants 500 more Ethanol plants
built. He wants 500 times 110,000.00 acres. I don’t
know what does that number come to? It is a big number of
acreage. If the farmers don’t sell the corn to us, they can sell
it to someone else. There are going to be plenty of opportunities
and plenty of a market long-term for whoever is growing corn to have a
market to sell their product to. There is approximately 37
additional Ethanol plants under construction right now. The thing
that we would ask is. We would love to buy the corn locally, but
we are going to ask the farmers, hopefully working with the City
Council and the Economic Development office to have some sort of Co-op
formed so that number one, we do not want to go out and negotiate with
400 different farmers to buy their corn. It is just not going to work
for us. But if the farmers form a Co-op and they bring all their corn
to one spot and it is stored in one spot; we would love to buy all the
corn we can from the farmers here. But that price is going to
have to be competitive with what our sourcing guys are able to go out
and do the risk management, etc. It is like basic business at
that point.
Robert L. Valentine, Ward 1- I thought that you had a great
presentation. I have a lot of questions and I believe you
answered a lot of them also. Some very fundamental.
Question: Is there going to be any kind of abatement involved
here? With the State? As far as taxes.
Dean Homayouni- Answer- Okay, The state does a couple of things, on the
plane ride out here, I printed all the tax items we can get, we would
like to apply for the state for a job creation tax credit of which is
always to pay the employees 1 ½ times whatever the minimum wage
is. They give us a rebate on state taxes, also they give us some
dollars to train the employees, of course we have to apply for
that. We have got to identify the site where the plant is going
to go. The state also give us an abatement on like I think it is
up to 75% of our property taxes related to machinery or any equipment
which is used for schools for I think a maximum of 10 years. Any
abatement that we are going to get that would be subject to the
Mayor’s approval, it is going to be subject to the City Council
and of course that is for you all to run through your numbers to figure
out how bad you want us or whether you even want us at all. You
may turn around and say that we don’t want and Ethanol
plant! We want to build a plant here, but it is subject to the
citizens working with their Council members and the Mayor and the
Economic Development Department to make a decision of whether or not
that you want this plant. So we haven’t done anything final
as far as asking the city for any abatements or anything like
that. The first thing we have to do is make sure that the Mayor
and the City Council and the citizens want us to build a plant
here. Cause if you don’t want us to build the plant here,
then why go any further really.
Robert L. Valentine, Ward 1 – Question: You mentioned
600-800 jobs downstream or upstream which ever way you want to go and
37-45 employees in the plant full-time. What do you mean by
Upstream/Downstream?
Dean Homayouni, Attorney: Answer: Okay, for every dollar
that is produced by a manufacturing entity, that rotates from 5-10
times through your economy. So this person is getting paid.
He is then going spending money in a restaurant or going he is going to
Home Depot to redo his house or he is going to Wal Mart. All of
those increased dollars increase the economic effect. But besides the
plant. In our discussions with the Railroad guys, today they said
to service our plant they are going to hire 10-12 employees. So that is
a perfect example that there are other additional services and other
additional people being hired which are outside of the plant itself.
Robert L. Valentine, Ward 1- Question: But technically it is
37-45 employees full- time in your plant:
Dean Homayouni- Answer: Yes.
Ruth Detrow- Question: I certainly understand you wanting that
Federal .51 cents/gallon. That is a blenders subsidy. Where
is it going to be blended? You are going to produce Ethanol here
and you say you are going to go out and talk to individual service
stations so it is going to have to be blended before it gets there?
Dean Homayouni- Answer: Correct. Let me tell you the way we
do it now in Las Vegas. Is that these trucks that carry the fuel
which you have all seen them, you have 2 types of trucks. One of
them has about 9-10 thousand gallon tanker on it. So then you got
other trucks. They have the one tanker and then they have a
secondary tanker. Those trucks hold about 15 thousand
gallons. Now within the 1 truck tank, they have compartments in
there. So it is not just one big tank. So what happens, is we are
currently going to where our Ethanol is stored at in a rail car and we
pump the Ethanol out of the rail car to one compartment in that tank
and then the truck drives over to the rack and the rack is where it is
recently a big distribution center for gasoline products. We pump
gasoline into another one of the compartments. Then when the
truck goes out they have the special trucks that we use, as the fuel is
going into the gas tank, we say; what blend do we want out of each
tank. So if we’re selling E85, we want 85% to come out of this
compartment and 15% out of the other compartment and it blends it right
there on the spot. At the service station. Because in order
to get the blender of record credit, Ohio has a regulation
205.04. It gives 3 scenarios of what your allowed to get blender
of record credit. In order to do that, you can go to a rack and
pick up E85 fuel. You actually have got to be the blender. So if
you take Ethanol out of your plant and drive over to the rack and you
put the gasoline in it and you buy from the rack and then you drop it
off at the gas station, you are the blender of record. Likewise if you
build a holding tank, because lets say that we are selling the E85 fuel
and this plant is going to produce somewhere I think 170,000.00 gallons
per day of Ethanol. So if we are selling E85, that means that we need
about 32 thousand gallons a day of gasoline to make the E85
product. Clearly the vast majority of the Ethanol’s that we
have made depending upon the final distribution the final call, they
may wind up putting 200,000.00 or 100,000.00 gallon storage tank on the
property for gasoline so when the trucks go to service the stations
locally, they would just line up filling up the gasoline at the tankers
right there. But because the E10 market is so much better, that
would be something where would not store than particular gasoline on
site. It is just going to be too much gasoline. If we
wanted to use 90,000.00 gallons per day of Ethanol as E10 and we wind
up fixing it with gasoline, then we would have to store 1 million
gallons of gasoline on site and we are just not going to do that.
Ruth Detrow- Question: But you do have sources? You
wouldn’t be saying okay now, where am I going to get the
gasoline?
Dean Homayouni: Answer: Okay, You all know the Flying J, you know
the Flying J gas stations, right? Mr. Hall, one of our founders,
Brad Hall who started this company 30 years ago is selling fuel.
He is probably 1 of the major customers of Flying J. He buys all
of his petroleum right now out of Salt Lake City. That is where
he is getting the product from now. They are highly
competent. They are going to be able to obtain the petroleum
based gasoline they need otherwise they would not be building this
plant out here. So that is what makes our plant viable. It is
because when they go up to refinery to buy fuel, are they going to
someone to contract to buy fuel, They are putting a balance sheet in
front of them that shows 60 million dollars in net worth and they are
showing 800 million dollars to revenue. So, I guess, what I said,
they are not Wall Street guys. They have been in the business a
long time and you walk up and say I have been in the business for 30
years. I built my company from scratch. I have been audited
financially and did 800 million dollars in sales. People want to do
business with you. If you are a lawyer and CPA like me, no one
wants to do business with me. If I try to go buy a product, no
one is going to sell it to me. Because I do not have that track
record. That is why it is very critical as part of our
distribution plan that the top 2 guys have got an extensive track
record, long-term, not fly-by-nighter guys who have been with us day in
and day out for 30 some years. So they are completely confident
that they are going to be able to get the gasoline. But before
they go out to do the contracts to get the gasoline, they have to know
where the plant is going to be, when the plant is going to be done, and
they are going to have to know when do we need that supply.
Paul Wertz, Ward 4- Question: When the first plants were being
built, they had trouble with water, ground water. The newer
plants and technology is going to be better, but how much water is
being left out of the system.
Dean Homayouni- Answer: Okay, They have some newer technology
through Wynn Bender, called the Delta D. which is what the vendors were
looking at. They told me it is 350 – 500 thousand gallons a
day.
Paul Wertz, Ward 4- what I am asking is, when you use it, how much of
that water is going to be pumped back out? The discharge.
Dean- because we are probably not going to spend 20 million dollars to
do a 0 discharge, that we think what is going to go into the sewage
system per day, it is going to be about somewhere in about 100,000.00
gallons a day.
Stewart- Question: Lets say all of us get together, get married
and we build a plant. And it has been in operation a couple of
years, and then the bottom falls out and Ohio State Ethanol goes under.
What happens? How do we recover that site?
Dean- the first thing is clearly from a legal point of view, which I am
just going to speak as a lawyer. If you have Ohio State Ethanol
Inc, winds up buying the land, and then they build a plant, then the
owners of that plant, all of a sudden corn goes to 9.00 dollars a
bushel, it is going to be tough for that plant to make money, but those
are always the type of risks you have in a business. You have to
have enough money to carry you through when the times aren’t so
great and you have to conserve some of that money when in fact you are
turning a profit. The first thing is if like we go out of
business, I got a lender who wants their plant back. That lender
is President Bush stating we need, he wants 520 more plants built by
the year 2017 or 2020. Someone is going to come and buy that
plant. In fact I told Glen, We have a person, probably one of the
best phone guys I have ever met. Like if you ask this guy to call
up President Bush in a day, he would be on the phone with him the next
day. I asked this person to go out and try to find us
plants, because the price of corn had gone up and my feeling was, there
were going to be people who were not in the distribution business that
weren’t going to get the blender of record credit the way we are
and I thought some of these plants were going to be struggling,
especially if you have not signed a long term hedging contract and now
you are paying $ 4.20 for your corn. I told him, I said “Go
out and try to find me a plant for $ 80 million dollars built
already”. We don’t have to go through the hassle of
building a plant, we don’t have to deal with the construction
people and maybe there is someone out there who has decided they want
out of the Ethanol business. This guy has been looking for a
month, he has not found one group to sell us a plant. Not one group
would sell us a plant. So because you have that policy and we
have looked at the major factors, the policy is the federal government
wants alternative energy, my personal opinion is if like we were not
able to cut it, sooner or later when you have a change in the pricing
structure to make it profitable to run those plants, someone is going
to come in and take over that plant. It is just
inevitable. That is where we are sort of going. And that is the
only type of answer I can give you right now. But clearly
that we are not making a substantial investment and our Bankers are not
making a substantial investment based on a project that we think is
going to fail. I think if the Federal Government comes along and
mandates, then all states have got to get rid of MTBE and they want 10%
gasoline in all the gasoline all year long, we are not going to have
enough Ethanol.
Stewart: We have 3 County Commissioners here. Mike would
you like to ask a question?
Michael Welch, County Commissioner- Question: Just one point I would
like to bring up! I feel that this would be a real opportunity
for this area to address an issue that has been talked about probably
for about 15 years and that is land preservation. So often, it is
clear, a couple of times we have articles about land preservation and I
feel that if we as a community can help farmers to market their crop,
lessen the transportation cost, that it is simple mathematics that the
farmers are probably going to stay in business and not sell his ground
for development. So even if a farmer does make more money, he is
going to turn that money over many times. There is seed
companies, fertilizer companies, implement dealers who hire mechanics,
tire dealers, petroleum, every day needs. If you are a Dairy Farmer or
Beef Farmer you have veterinarian and feed companies. So I would
hope that everybody would take an open mind toward this project.
Kim Edwards, County Commissioner- Question: Foreign Corn. Is there a
flexibility to this company to do soybean or any other product?
What is that flexibility?
Dean- Answer: I like you asked about Soybean because part of our
plan is also to build a Bio-Diesel plant, Soybean is a main ingredient.
The two guys who are really the drivers behind the business is like I
said, they are not Wall Street guys, they are gas distribution
guys. We actually had BBI which is one of these international
companies, actually 2 of the feasibility studies for the state of
Idaho. They looked at multiple products to make Ethanol out of
including wheat, straw, soy gum, barley, potatoes, sugar beets and
corn. What happened was all of these other products they did a
study on was costing anywhere from $2.70 to $ 4.50 for a gallon of
Ethanol, so it just wasn’t feasible. Now Congress and
President Bush, they are working on other enzymes hypothesis to try to
create what is called Cellulistic Ethanol which is Ethanol made from
biomass other than corn. Corn has got some disadvantages, a beanstalk
food source that we use to feed our cattle, we used to feed our
chickens, we used to feed our hogs and we are using that to produce
energy and of course that you know with the corn going up, it is going
to have an effect upon other downstream food source, like I am worried
if I can have Corn-on-the-cob this summer. Maybe not. You
know really like corn goes up, basically the amount you feed cattle
goes up and then cause we have these distiller grains, they have gone
up so some of the prices of your beef is going to go up and chicken,
hog farmers will really be upset because it is costing them a lot more
to feed their hogs. So the Federal Government right now is
spending millions of dollars trying to create technologies to produce
Ethanol. If we wanted to replicate the Brazilian model for Ethanol, it
would consume, using corn, it would consume 93% of our farmland.
It is just not going to work. Now President Bush is referring to
Switch Grass and that is grass that grows on the prairie and is natural
growing. Imagine you had these gigantic harvesters go out and they just
mow the prairie. They bring it back, they bundle it up and wind up
making it out of that. Now 5 years ago they said they thought
they were going to have a breakthrough and you would be able to make
the Switch grass, it grows on land, you can’t really use as
farmland. And because it is so dense for us to completely replace
all of our gasoline using Ethanol would require 13% of our farmland
growing Switch grass. So it sounds great. It is not 92%
only 13%, it is a prairie grass, it grows on land which does not
require water and you can’t really use it for farmland. The
problem is they still have not figured out the process of having to be
able to make Ethanol out of that biomass product. They said they were
going to have it 5 years ago. It is still not done. Now
they are talking about another 5 years. So who knows when that
process will be put in place? The risk that we have is that our
entity we have to constantly keep up and understand what are the
technologies out there to produce Ethanol and make sure that we have
enough money on hand if a cheaper source comes into play, we have the
ability to convert the plant. So a perfect example is for us to
switch our plant over to use potatoes instead of corn, it would cost us
about 10 million dollars; so clearly we have to have some money sitting
in reserve in case some new technology comes along to enable us to be
able to use an alternative source. But the government is always
working on that stuff, they are spending a lot of money on it.
Clearly corn is still the major item we are using. We don’t
see any of that changing for at least another 5 years minimum, but you
never know what is going to happen. You hear about all types of Cancer
every day. Then it comes out in the paper, someone could come out
in the paper next year and say that they finally figured out how to use
the Switch grass. But that is something that our company has to
be flexible enough to adjust to is the technology changing. But
corn is by far still the cheapest.
Stewart: Matt would you like to ask something? Nothing?
At this point, I am going to ask Dean if a, I have a sheet and a half
of people that want to ask questions. Keep your questions focused
and keep it short so we can get through as many people as we
like. The first person I have on my list is John Roberts.
John Roberts: I am interested in this because of a one-time
interest, I used to teach at Ohio State University, OSU has done
Ethanol and Bio-Diesel for approximately 50-60 years
continuously. I taught a class in Bio-Diesel at OSU and I also
received an Ethanol grant for approximately $1.6 million dollars and
have been actively involved in that. Why all that? Simply because
I am now employed with the Ashland West Holmes Career Center and the
Adult Education area and we are actively interested in trying to
support educationally. I propose that we do something immediately
because that is the right thing to do, but that is my personal
view. I think that it is the right thing to do and the right time
to do it and we need to get it done because of our survival.
Other than that I also promise to at least look into all educational
classes. Bob Grundy here who I team up with and Evan and I have worked
together, so we offer the possibility of classes since I taught those
classes at Ohio State. So I offer my support and I will give my address
and everything. Thank you very much.
Ted McFadden, 810 West 10th Street: How will I know how much this
is going to cost the people of Ashland. I just want to also make
a general statement. I will bet you all the Tea in China, that if
this thing goes through and the corn goes into this thing, the soybeans
goes into it, your cost of living in a short time will double and any
of you spending on groceries know that it is flying up right now.
Thank you.
Anthony Watson, 1025 Elmarna Ave.: I worked 37 years for General
Motors and retired from General Motors. I drove the E85 Yukon
Denali since they came with it. Like he says, the problem is the
distribution, there is not enough gas stations that handles the
E85. General Motors has put E85 stations in the Myers course in
Michigan. My son moved from Phoenix AZ, to Iowa city so I go get
a newspaper, and they editorials in there that up in Cedar Rapids, this
man here told me that we need water, how many gallons it takes per
gallon to produce 1 gallon of Ethanol.
Dean: On a 50 million gallon a year plan, basically you are going
to have 350 thousand gallons of water that is going to go into this big
fermentation vat. The total process to produce say 160 thousand gallons
a day, I know my math is probably off. Between the discharge
going in the sewer and the amount of water you put into the vat, the
evaporation happens in the cooling towers and if we don’t put in
this $ 22 million dollar process which we are probably not going to
wind up doing, that plant is going to use about 700,000.00 gallons of
water a day. So you figure that out, it is going to take about 5
gallons of water, or a little less to produce 1 gallon of Ethanol.
Have you looked into the capacity of this area?
Dean: It is my understanding that in order for that type of water to be
supplied to the city, you would have to drill a new well. The
city is also looking at building a Reservoir. And clearly there
would be some discussions about who is going to wind up paying for that
well. It’s our plant. We need the water.
I would like to see it come here, it creates jobs. I don’t
have any problem with it coming here if you have the resources to do
it.
Stewart: I guess I would like to respond to that in that you are
absolutely right, we had a drought; we had to reduce our water
usage. We have tables that show that we are using over the past 5
years somewhat less than 3 million gallons of water a day anywhere from
about 262 to 283 or 289 this past year. We have, what we feel is
a sustainable capacity, who can help me with that number, about 3.7
million? Is that what it is? 3.6 million gallons today in the
water structure that we have today. We need, in my opinion; we
would need to put another high production well in service in the near
future before this plant would start in production. Now that is
just my opinion, that is not City Council’s opinion, that is not
the administration’s opinion, I am offering an opinion that as
many of you are. It is very doable in the longer term, as Dean
has pointed out, we have purchased the land for a Reservoir, and we
have not started a reservoir. There are studies going on as we
speak and Mr. Cooper.
James Cooper: We are hoping in February, is when we are coming
back.
Stewart: We are not sitting on our hands, but we don’t have
all the answers yet.
Ron Augustine, 1072 TR 979: No questions.
Jerry D. Meng, 202 C.R. 1675, Jeromesville: No questions.
Al Lawrence, Mansfield News Journal- Questions after the meeting.
John Boyer, 1327 C.R. 1475- no questions.
Ron White, 106 C.R. 1181, Nova- My question is, the byproduct that
comes from this. What will the price be for this commodity coming
out of the plant and what kind of protein and energy are we looking at?
Dean: the byproduct is actually referred to as the distiller
grains, and you get about 24 lbs of this protein mash distiller grain
from each 1 bushel of corn. It is about 1/3. These
distiller grains, the price moves in tandem with the corn. So if corn
goes down, distiller grains go down also and if corn goes up, distiller
grains go up but there is a 3rd fact we have to consider with all these
Ethanol plants getting bilked from the constant decrease in what people
are obtaining before the distiller grains. Right now it is about $8.00
a ton. There are articles on the benefits and protein on using the
distiller grains to feed dairy cattle and also the beef cows.
Clearly, a lot of that product is going to come off of that production
line. Dairy farmers in Idaho they like it in a wet status because
they are able to work easily to mix other products in with it so that
is why they want it wet, not dry. They put vitamins, enzymes in
there. If someone wants to give me their E-mail and would be
happy to send articles on that. I am not really the expert on
that regarding the protein and content is. I know a lot of the
cattle farmers are using that product.
Bruce Wiser, Water treatment: The only thing that I was going to
question was the 100,000.00 gallons of discharge to the city will
undoubtedly be a pretty high strength waste. I would hope that we
could work together to find a way and get the waste to a condition to
where it would not become a problem for us.
Dean: The engineers, the people who are building the plant, they
work very closely with sewage, the treatment people to figure out what
processes do we have to do up front for two factors: 1) what you
want done, 2) what it economically costs us to get it done to be able
to deliver some relatively cleaner sewage product to you. If you
want to send me his E-mail, I can send it to the people from Delta and
also ask and he can call them up and they will give you some more
detailed information about what the waste is on that particular
100,000.00 thousand gallons a day.
Kim Edwards: It has to do with natural gas. You commented
earlier about natural gas. Have you had conversations with
Columbia Gas regarding the amount of natural gas transmissions where
you would have to run another line from those two transmission lines
that are in that vicinity?
Dean: We have gone through a bunch of calculations regarding the
natural gas, in fact a really nice book for everybody to understand
about Ethanol plants and what they require, BBI.com and they have what
it takes to build an Ethanol plant. This plant is going to
require about 50 thousands therms a day to just be able to produce the
Ethanol. That doesn’t include the amount of natural gas
that we need to dry the distiller grains and we are not going to know
how much we have got to dry the distiller grains until we build the
plant and actively go out to the farmers. A bunch of farmers,
they may come up and say we want half of the distiller grains and we
want them wet. So we don’t necessarily know what that
number is going to be. We haven’t had the discussion with
the gas entity yet and here is a perfect example. We have to run
a 6-mile gas line up in Idaho to bring us the amount of gasoline.
That project is going to be anywhere from $ 5-6 million dollars. We are
paying for that. Once the city tells us they want us here and the
citizens tell us that yes we have all decided and we have another
meeting and we all vote and then we really start going gung-ho.
We start dealing with the Railroad companies, get a final quote, we
call the gas entity and figure out how many therms are being pushed
through that gas-line today. If we have to upgrade the line,
that’s part of our analysis and we will do to make sure the site
is correct. We need railroad which Ashland has. We need a
freeway, which Ashland has. We need water which we hope we are
going to have. We need corn which the state of Ohio has and we
need cattle which the state also has to have. We kind of left
that gas issue out there because frankly, I know we can always get the
amount of gas that we are going to need. That is not a major
concern of ours. The biggest concern is that the citizens of
Ashland, the City Council, the Mayor and everybody else who is going to
make this decision to actually want us to come here. It is your
decision about whether you want us or not. That is our kind of get of
jail card, pass go. If we don’t have that first, then we
will have to go looking somewhere else.
Chris Harding: no comment
John Chorpening, 1126 Overlook- I am also concerned about the water
usage, we are talking about 700,000.00 gallons of water a day and I
understand that there is still the creation of other jobs down the
line. I am also concerned about how many trucks will be leaving
the plant, is it 20 a day? That is what the math comes out to.
Dean: There are 2 types of trucks. If we take the 50
million gallons divided by 360 days, I do not have a calculator, I know
it is 150 gallons probably, somewhere around there. Now if you
use the larger trucks, those hold between 14 and 15 thousand gallons
between the two tanks. So we would have somewhere between
10 and 15 trucks a day going out. So because the plant is running
24 hours a day, the place just does not shut down, Ethanol is being
produced and when you are going to gas stations, we are opened 24 hours
a day, so we can deliver at anytime. You would be having a truck
coming and going about once every 1 hour ½. So if you have
15 trucks loaded and is going out 24 hours with the continuous
operation. We are talking a truck every 45 minutes. These trucks
are always in operation. There is no truck parked. They will run
24 hours/day. So I am just kind of using that as a gauge. I think
we really got conservative. Lets say a truck would come and go
every ½ half an hour. That would be a decision once again,
something else for the City Council to consider, overbearing on the
traffic. The reason I am asking, we were originally going to use
tankers to ship them out. Well we have two different
capabilities, we actually put it up on the chart. We told them 1
chart, we would deliver the product ourselves directly, and then we get
that blender of record credit. If we are not able to get that
delivered ourselves then we sell it to the 3rd party marketer.
That means we do not get a blender of record credit and typically we
ship all the stuff around the country. But our main, especially
with corn going up is going to be more critical for us to sell the
product directly because we need that blender of record credit to
offset the increase in corn prices.
Stewart- I just want to comment, we have approximately 15 minutes left
and we are halfway through our list that have signed up and want to
honor those who have signed up for a question.
Marla Akridge, Chamber of Commerce – One of the questions, would
the farmers here have the first opportunity to sell to you.
Dean: We would love to buy as much corn as we could from the
local farmers comparing into what our risk management guys are
doing. If Scolar comes along and they say that we are going to
sell your corn at $3.20 a bushel and whatever hedging we are doing to
get you that price and then we are able to go to the local farmer co-op
and of course it will all be open. We are not going to hide the
ball. We are going to turn and say, here is what these guys have
recently committed to give us our corn for. If your co-op wants
to match that price, we would love to by all the corn from you.
Because Scolar charges us besides the price that they are going to pay
also the shipping. So clearly by buying the corn locally, that is
a benefit to us. If gives the farmer the benefit and know that we are
not trying to cheat them or pull the wool over their eyes. We are more
than happy to show the farmers what we are going to buy for. The
only thing we ask of the co-op is that they form a group, gets all your
corn, put it in one place then the railroad guys will bring the train
in. One of the solutions they said today was they have a big
grain storage in Mansfield and also in Ashland. We just want to make
sure that we can effectively transport that corn. We do not want
400 dump trucks showing up a week at this site, we need some efficient
methodology used and of course for us to go out and know that we have
our corn. That plant has got to have that corn and if we can get
the local farmers to supply 25% of that corn or half the corn or
basically the entire plant. That is why we are here trying to build a
plant in the state of Ohio because Ohio grows a lot of corn.
Bob Thompson, Co-op- is it possible to get a copy of the slide
presentation today. There is an area that I am confused on where the
numbers. Some of the numbers aren’t adding up.
Tom McGee, 1728 W. Circle Drive- I have been looking at Ethanol plants
for several years now and I have to mention this is the best program
that I have seen. There are 3 things that you look at to have a
successful Ethanol plant. First one is the availability of supply, we
are in the Corn Belt but I think the system that he has worked out is
pretty good so you will have the supply. Second, the operating costs- I
wanted to ask you the utilities, I think we will be competitive as
about any place, I am not sure what the cost for water will be, but our
gas is competitive, electricity is a little bit high, but I thing we
are going to be all right on the operating costs and where this plant
really shines though is on the marketing seen. The E85 marketing
technique they are using is very very helpful in the success of this
plant.
Dan Kliner, 1407 Twp Rd. 843- Dean gave a pretty good presentation and
he answered questions that I had.
Guy Howman, 1406 Twp Rd 843- how is this going to affect all this land
that is set aside to help supply this.
Tom- There is what you call Conservation Land; there is a lot of land
set aside for conservation purposes. Actually the Government is
opening that up for energy crops, it appears that way at least.
Bill Hinson, 1924 Stone Ridge Drive- I guess the one question I have,
what is the risk that in the short-term production will outpace demand
by the distributors and demand by the consumer.
Dean: I think I said before, that where everybody is selling the
product at right now is under that gasoline at 10% emission. That
is not our game plan or in our business. Our business plan is to
go create E85 markets that a lot of people have flexible fuel vehicles
and drive all the way from Pittsburgh to Indiana to Kentucky to be able
to fill up their cars. We think that entire plant is going to be
consumed by 150 gas stations. We are talking about Eastern
Indiana and State of Ohio, Western Pennsylvania all the way down to
Kentucky. That is a lot of states. That is the market that
we are going after so on the market that we are going after, we
don’t think there is ever going to be an over supply. We
think that we could sell every single drop and that is where our
expertise, us doing our marketing research and us test marketing the
product and us understanding what the consumer wants. We are
going after a market no one else is really going after. We are
not necessarily going after the 10% market even though that is
available to us. We want to go out to the 85% market that we think is
wide open. I have seen this all the time. When was the last time
a person had the opportunity to go into the biggest market in the world
which is energy. It is a sector the biggest part in the world
that no one is selling it to. When was the last time that
happened? I will say this, When Bill Gates developed Windows. No
one else is going at that. I think that is where we are at right
now. We want the service of market as seen on the slides all
those states. There is 8 stations in Ohio, 2 in Kentucky, more in
Indiana about 22. We think this market is wide open and that is the
market we are going to want. We are not concerned about over
supply.
Chester Milliron, 960 Twp Rd 1104- is there any possibility you can
recycle this water.
Stewart: I think that is where the investment came from of an
additional plant site investment that would consider recycling water.
Dean: In order for us to use half the amount of water, the number was
between $ 15 to 21 million dollars and none of those plants are
spending that much. It is actually much cheaper for those to buy your
water. I don’t foresee us at that time making a commitment
to spend upwards of 21 million dollars to save a certain number of
gallons per day.
Stewart- Water conservation is a big number, a big thing on the
forefront of everybody’s mind. I think there is some
opportunities to work with if Ohio State Ethanol would come to Ashland
Ohio, I think there are some opportunities to work with them in the
water arena.
Kathy Berg, Ashland Water- Couple of comments: First of all there
was a question about some of the farm ground, there is always
opportunity for farmers to put land back in production. Also
there seems to be a lot of concern about the demand for supply and
demand and if there is going to be a market out there. Last
Spring I can attest to this because I was actually in Wayne County once
a week and I have a Dodge Caravan Flexible Fuel Vehicle I am taking
advantage of E85 and there is only 1 station that sold it by the
fairgrounds in Wooster. At that point it was about 10-15 cents
more a gallon than regular gas and there were many times I went there
and they did not have any supply, they were out. Which is a
challenge, because the worse thing you can do to those flexible fuel
vehicles is go back and forth. So that is a big issue. The other
thing I would like to say is if we don’t open our eyes to except
this here, someone else is gladly going to put this company on the map
for them. Because I do not think this alternative fuel issue is
going to go away right now. This is an opportunity to help our
local farmers and on the water issue as farmland is developed there is
more water consumed as well. Every household that goes in consumes
water and that is not going to be to the quantity granted of the
700,000.00 gallons but you will get the big picture I think there is a
lot of advantages you can do here, it can help our community, it can
help the environment and put this place on the map.
Judith Shafer, 1334 St Rt N. 603- I am a resident of Milton Twp,
adjacent to the Industrial Park. I am also a Supervisor with Soil
and Conservation District. Something you did not cover in your
presentation and I wish you would ensure me that in case of plant
failure, There is nothing hazardous that would be airborne or stream
borne correct?
Dean: Okay, The first thing, Ethanol is an alcohol; the reason
that the government is using Ethanol is to replace MTBE because if you
have a spill, it evaporates. The plant is a petrol-chemical
plant; you can call it Ethanol, alternative energy and put a nice ring
to it but bottom line is we are producing a material which can catch
fire. I am not going to hide it, I am not going to try and cover
it, sounds great, it is great energy, alternative energy but it is
still a chemical plant. That is what we are producing. So,
Can we guarantee that the plant is never going to blow up? No I
cannot do that cause I am a Lawyer. I see plants this happens all
the time. But we will do whatever we must do to make sure that
plant is run properly. And believe me that we are. Lenders
are going to insist it, OCEA is going to insist it but us as people
that own that project including the highly qualified people that we are
going to hire. We are going to make that that plant is of the
utmost safety we can possibly have. If something goes wrong at
that plant, we are wiped out, we’re done. The 30 years of work is
over. So some of the things we need to discuss is we don’t
employees working at that plant who smoke. We need very
responsible people showing up here. The plant is going to require
drug testing and it is going to be periodic drug testing. We do
not want people using illegal substances or have got an alcohol
problem, cause once again you have responsibilities. Once again
we will do the best that we can to hire the most competent people to
run that plant but it is a chemical plant.
Stewart- Thank you Dean.
Robert Valentine, Ward 2- these double tinkered vehicles, what is the
gross vehicle weight? Our roads are built to code.
Dean: Will mail that back to you.
Adjournment
The Work Session ended at 3:05 p.m.
Submitted by
Valarie F. Bishoff
Clerk of Council