BISMARCK, N.D. (AP)--Great River Energy and a Utah company intend to build an ethanol plant near Great River's Coal Creek electric power plant, using surplus steam heat to help process corn into fuel, company officials said.

The $65 million project is the second ethanol factory planned for construction in western North Dakota this summer. Red Trail Energy LLC, which wants to build a separate ethanol plant near Richardton, announced in early March it had raised the minimum $25 million in investment funds it needed to go ahead.

Both factories, as planned, will produce 50 million gallons of ethanol annually when they begin operating in the fall of 2006, each using 18 million to 20 million bushels of corn to do so. North Dakota's two existing ethanol plants at Walhalla and Grafton, in northeastern North Dakota, now have a combined capacity of about 39 million gallons.

Headwaters Inc. of South Jordan, Utah, an energy technology and construction materials company, will be the ethanol factory's majority owner, said its chief executive officer, Kirk Benson.

Great River, which is based in Elk River, Minn., will be a minority owner. The company owns the Coal Creek and Stanton power stations in western North Dakota, which supply electricity to 28 rural electric cooperatives in Minnesota and Wisconsin.

Headwaters buys and markets Coal Creek fly ash, a waste product from coal burning that is used to make a lightweight type of concrete. Benson said the North Dakota ethanol plant will be the company's first.

Benson and Jim Van Epps, president of Great River, said surplus steam from the Coal Creek plant will be used in place of a boiler during the ethanol manufacturing process. The plant already generates high-pressure steam to rotate turbines, and produce electricity.

John Weeda, Coal Creek's plant manager, said not having to install a boiler in the new ethanol plant will save $15 million to $20 million in construction costs. The plant will require less to operate as well, he said.

"The analysis that we have done, with the experts in the business, tell us that this will be one of the lowest-cost producers of ethanol in the country," Weeda said.

Benson estimated the new factory's production cost advantage will be 3 percent or more when compared to ethanol made by more modern factories. Its advantage could be 10 percent to 15 percent over older suppliers, he said.

Normally, ethanol plant boilers are heated by natural gas. Coal Creek has a long-term coal supply contract, and Headwaters' ethanol plant does not have to worry about big swings in natural gas prices, Benson said.

"In fact, if natural gas were the source of the energy to make the ethanol, it would be much more difficult for Headwaters to want to participate," he said. "It's absolutely critical for this project going forward."

He expects the plant will employ at least 30 people, and produce enough distillers' grain, which is a byproduct of ethanol manufacturing, to feed more than 220,000 cattle.

The project had its genesis about a year ago, when the Falkirk lignite mine near Underwood was exploring a coal supply contract for Red Trail Energy's proposed ethanol plant. Red Trail is using lignite as fuel for its boiler, although project organizers decided to buy it from BNI Coal Ltd.'s Center mine.

The Coal Creek station is the Falkirk mine's principal customer. Conversations eventually turned to whether steam heat from the plant, which is normally wasted, could be used as part of the ethanol manufacturing process, Lt. Gov. Jack Dalrymple said.

Van Epps said other ethanol projects, linked to power plants, are possible.

"We have no definite plans for that at the moment, but the answer to your question, I believe, is an absolute yes," Van Epps said. "It's a very nice synergy, between generating electricity and producing ethanol."

The Coal Creek plant was chosen over Stanton for the project because "at Coal Creek station, we have a lot of space. We have a lot of excess steam," Van Epps said. "The plant lends itself a little bit better, probably, to the production of steam, and moving it into an ethanol plant."

Date: 3/23/05