The 50-million-gallon Heron Lake BioEnergy plant could be wrapped up by the spring of 2007.

It appears the dirt work for the new Heron Lake BioEnergy plant is set to begin in a matter of days.

On Thursday afternoon, board members representing the plant signed a design build contract with Fagen Inc., a Granite Falls-based firm known nationally for the construction of ethanol plants. A day later, the Heron Lake board signed the final loan agreement with Ag Star, the final financing step for the project.

The 50-million-gallon plant is expected to have a significant impact on the region’s economy. Not only will it offer roughly 38 excellent-paying jobs, it will require the purchase of 19-million bushels of corn annually. That, in turn, should have a positive effect on area corn prices.

Local officials are excited to finally see some activity at the plant site, located just east of Heron Lake.

The $104-million project was initially expected to start last spring. However, it was delayed by an appeal regarding the Minnesota Pollution Control Agency’s initial approval. Then, a small change in the railroad portion of the project created another delay.

Board member Milt McKeown said the project is starting about six months later than expected. Once dirt work is finished, actualy plant construction will begin. At this point, McKeown expects that to occur in November.

Based on a 17-month construction time frame, the project should be finished in the spring of 2007. Of course, everything is contingent on the weather.

For example, if excavation is finished earlier than expected, construction could start earlier and the project completion date would move forward.

The railroad impact

McKeown said a change in the railroad design serving the plant was a key reason for the project hold-up.

The railroad design needed to hold at least 75 ethanol and DDGs cars in order to properly serve the plant. When the original project plan was submitted to the MPCA, it showed a ladder track running alongside the existing track which also parallels Highway 60.

However, the Heron Lake Bioenergy Plant Board ran into a number of problems with this proposal. First, it probably would have resulted in the closing of a township road. Secondly, there was the issue of acquiring additional property.

"It just wasn’t going to work," McKeown said.

Consequently, plant officials began analyzing the "loop track" option. Essentially, this is a track that runs in a loop alongside the plant. To accommodate the loop track, Heron Lake Bioenergy had to purchase another 121 acres of property.

"That necessitated moving the plant site slightly to the west and then rotating it just a few degrees," McKeown said.

As a result, the board contacted the MPCA with a modification to their permit.

Board members were confident that they had covered every base, but were required to meet a seven-day waiting period.

The seven-day deadline passed on Sept. 27 at 5 p.m., meaning the plant’s board could move forward on signing final contracts with Fagen and Ag Star.

"The loop track is actually much more efficient in terms of load out," McKeown said. "We will have two tracks in the loop and we could add a third track in the future, if we go to corn inbound, or other options. Whatever concepts come up, we’re ready for them."

The ground work

Actually, the site work for this project could begin at any time.

The dirt-moving equipment is on site and ready to go as soon as conditions are right.

"It’s just too wet right now," McKeown said. "But they (dirt contractors) were planning to go ahead with whatever they could, as far as hand work. They will be putting in silt fencing for control and containment of runoff."

The ground work portion of the project is expected to take five weeks. Plans are to complete the building site area first.

"They want to get the major portion of the site excavation and compaction done so Fagen can come in as quickly as possible," McKeown said. "They’ll save the railroad loop until spring."

In the meantime, Federated Electric will begin setting up power lines. They will bring in a temporary transformer because they will need power almost immediately.

"A lot of the power will be trenched in right away," McKeown said. "Federated’s goal is to get whatever power requirements in place as soon as they can because most of it is underground."

Office, hiring

Another key step for the project is to get an office constructed and at least some staff members on board.

"We will have personnel coming on board and if we can have an office building accessible as soon as possible, it would be a big help.

"We have already put together plans and requested quotes for that office building."

Currently, Heron Lake Bioenergy employs a general office manager, a secretary and a book keeper.

The next step is to hire a construction manager or general manager.

"We have a recruiting firm putting together a placement list," McKeown said. "We want to eliminate any political situations.

"Everyone who submits an application and a resume will get forwarded to the placement firm. They are all handled the same."

McKeown said there are still pieces to be worked out, regarding the schedule.

"At our next board meeting, we will be discussing a time line," McKeown said. "We will have a number of things to talk about at that meeting."

Public feedback

It appears board members aren’t the only ones eager to see construction on the site.

McKeown said word of the signed contracts has spread like wildfire.

"For a time, we were fielding multiple calls on a daily basis with people asking ‘what’s the progress?’

"At that time, there was still a percentage of people who were frustrated and asking, ‘What are these delays and who caused it?’ But by and large most of the calls came from people who were just checking on the situation and looking for information.

"Now we are receiving a lot of comments like, ‘congratulations’ and ‘good news.’ It’s very, very positive."

Naturally, the six-month delay has resulted in some price increases for products. However, those were built into the project cost and will be absorbed by Fagen Inc. The Bioenergy Plant board had locked in a price with Fagen last spring.

Meanwhile, the ethanol industry has seen a number of positive developments over the past several months. Among them are the new federal energy policy which is good for renewable fuels of all types.

At the state level, Minnesota lawmakers approved a bill that will eventually increase the state’s ethanol requirement from 10% to 20%.

What’s more, the higher gas prices have caused more and more consumers and auto manufacturers to explore options reduce fuel costs. That has led to a greater emphasis on the less-expensive E-85 fuel.

One other development is the dramatic rise in natural gas prices.

The Heron Lake plant will be powered by coal, which McKeown believes was a key factor in the delays for MPCA approval.

"Right now, coal over natural gas looks like the right decision in terms of energy overhead," McKeown said.

A little over a year ago, the board requested a study on the cost of using coal versus natural gas. At the time, it would have cost about 3.5 times more to power the plant with natural gas. Of course some of that is offset by the cost of transporting coal by truck to the plant. Still, the savings appears to be significant.

"Right now, everything is looking good," McKeown said. "We will see an impact with the number of workers constructing the plant.

"Obviously a major crew will be needed here. They are already inquiring about housing and those sorts of things.

"This entire project should be a positive thing for the community, businesses, farmers, residents and shareholders."