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Fergus Falls ethanol plant files for bankruptcy

The Otter Tail Ag ethanol plant in Fergus Falls is going through a rough patch after its owners filed for Chapter 11 bankruptcy in November. Otter Tail Ag CEO Anthony Hicks hopes the restructuring will allow the plant to stay open. (Dave Wallis/The Forum)

CALLAWAY -- Otter Tail Ag Enterprises ethanol plant in Fergus Falls has run into financial difficulties with a recent Chapter 11 bankruptcy filing.

But Otter Tail Ag CEO Anthony Hicks said that the filing should help the plant emerge with a good chance to succeed.

He addressed a Detroit Lakes Regional Chamber of Commerce's Agricultural Issues forum in Callaway on Thursday.

The bankruptcy filing was pre-arranged with its creditors, Hicks said.

Otter Tail Ag has $81 million in long-term debt on its books that will be reorganized in Chapter 11.

"The whole objective for us in filing for bankruptcy is giving us a chance to restructure and reorganize our debt as we have an opportunity to go forward with a stronger footing," Hicks said.

Nearly 10 percent of ethanol plants in the United States have declared bankruptcy, with the potential of 20 percent doing so, according to a company filing to the Securities and Exchange Commission.

The plant has been open for close to 18 months, an operation Hicks said provides good jobs in the area.

While the plant had a few good months with low corn prices during the first few months of operation, the price of corn shot up.

"Commodity prices went out the roof, it was ridiculous," he said.

A crash in prices in 2008 resulted in Otter Tail Ag producing ethanol using high-priced corn, but only able to sell it for a bargain price.

"We were paying at least $2 per bushel over market," Hicks said. "That led the company into financial difficulties and challenges in paying our bills."

The eventual goal for the plant is to produce 54 million gallons of ethanol per year.

The plans for the plant came about when ethanol looked like a good bet.

"When they were looking for money, it was the perfect storm," Hicks said. "When you were talking about ethanol, people were opening up their checkbooks. It was a boom industry."

Hicks said that the future of ethanol is bright despite opposition from the oil industry and food producers.

"One of our major critics has been food versus fuel," Hicks said. "That one has been a hard one."

He said a federal renewable fuel mandate draws the ire of the oil industry.

"They don't want to give away 10 percent of their market," Hicks said.

A proposal to increase the amount of ethanol in gasoline from 10 percent to 15 percent would boost the ethanol industry.

The Environmental Protection Agency put off a decision Tuesday to allow an E15 blend. Hicks said that the decision isn't a blow to the ethanol industry.

Besides ethanol, Hicks said that a secondary market for byproducts would be beneficial.

The plant has sold "wet cake" corn in the past to farmers as livestock feed. It also produces dry distillers grain.

The Tharaldson Ethanol Plant in Casselton, N.D. paying farmers to take "wet cake" has hurt Otter Tail Ag's market, though, Hicks said.

Other products include extracting corn oil for biodiesel or putting corn syrup through a digester to turn into a gas that could fuel a generator.

"There are so many things more that an ethanol plant can do to either defray its costs or add value to its products," Hicks said. "I think that's what you are going to see in the future for ethanol plants."