Ethanol Pushers

Under a white tent, a plant employee offers the group a clear glass of 200-proof ethanol, for the purpose of sniffing. The process of creating ethanol is similar to the making of Everclear, that staple ingredient of Jell-O shots. But the plant adds a chemical at the end of the process that keeps the product from being subject to alcohol taxes. The ethanol in the glass smells sweet and bready. One plant employee warns a co-worker, "Careful, that'll make you dance naked again."

Outside, at the end of the tour, a long metal shaft reaches from the building and deposits a byproduct of ethanol production. It looks like wet, orange cake mix. Farmers use the byproduct as feed for livestock, and supporters say this mush may mitigate ethanol production's high energy use. The byproduct will dry on concrete slabs into big pancakes before being scooped into trucks and hauled to farms.

Missing from the tour is Derek Peine, the symbol in Garnett that ethanol equals jobs. His mom reveals later that Peine left Garnett recently. He took a better job at an Illinois ethanol plant.

September brings the corn harvest, and at Glenn Caldwell's farm, combines cut wide swaths of his fields. The rumbling John Deere harvesters send dust and leaves into the air and leave brown, naked corncobs in their wake.

Caldwell operates one of the largest family farms in Garnett — and one of the most technologically advanced. His combines use GPS-guided monitors that help the drivers determine which areas of the field have been sprayed with chemicals or fertilized, so that no valuable resources are used in the same area twice. Caldwell then prints out color-coded sheets that show which areas of his fields have provided him the greatest corn yields.

Caldwell's father started this farm back in the 1930s. Glenn Sr. died two years ago. Caldwell, 59, has grown the farm from 1,000 acres to almost 7,000 acres. "Dad was a hard worker," Caldwell says. "I've been more technologically inclined."

Farmers in Garnett and across the Midwest have begun investing in high-tech equipment for better yields, hoping that ethanol will increase the demand for corn. It's a gamble that won't help farmers' already tenuous financial situation if the fuel isn't successful.

Caldwell was a major contributor of the seed money that helped start the Garnett ethanol plant. He won't say how much he or any other farmers put in, but major contributors such as Caldwell sit on the plant's board of directors.

The idea for the plant was proposed in 1999 by the Anderson County Development Agency, a local pro-business organization. The agency gathered the area's most prominent farmers and businesspeople at a town-square restaurant called Yesterday's. Intrigued by the idea, the farmers chipped in most of the $24,000 to hire Colorado's BBI International to study the impact that a plant would have on Garnett.

After completing the study, BBI CEO Mike Bryan recalls telling the group: "One of the things that is absolutely certain is, within a year after that plant is operational, you will see a new restaurant in town, you will see probably a steel fabrication shop, you will see possibly a new motel. And these things just kind of pop up. It's hard to pinpoint and say it's because of the ethanol plant, but the fact of the matter is, it is."

Armed with Bryan's rosy outlook, the directors persuaded 622 investors in and around Garnett to ante up $24.6 million. The U.S. Department of Agriculture added a $450,000 grant.

But the investors couldn't convince a bank to help finance the rest of the $46 million needed to build the plant. Several banks rejected the project because a 35-million-gallon-capacity plant didn't make sense at a time when other new ethanol plants could produce up to 200 million gallons a year.

So Garnett found outside investors. Some of the money came from a bank in Minnesota, a state that leads the country in ethanol production. The rest came from two companies: ICM, an ethanol-plant developer in Colwich, Kansas; and a Minnesota company called Fagin Inc., which also became the general contractor for the plant's construction. The first ethanol began pouring out of the plant June 22, 2005.

Fagin sold its 25 percent interest in the plant to Ethanol Capital Management of New York City, which invests heavily in ethanol projects around the country.

The owners of Ethanol Capital Management, Gary Schwendiman and Scott Brittenham, have questionable corporate histories. At his Nebraska-based company, Schwendiman Partners LLC, Schwendiman took $60,000 from a fund that should've gone to the company's investors, according to the Securities and Exchange Commission. In July 2002, the SEC censured Schwendiman and fined him $75,000.

Brittenham is the president and founder of Fidelity Mortgage Co. In 2003, the Arizona company had to withdraw dozens of loans promised to customers after it couldn't deliver guaranteed interest rates. Nine homeowners sued the company, and the case was settled out of court, according to an October 2003 article in Tucson's Arizona Daily Star.

Brittenham sits on the Garnett plant's board of directors.

Whereas out-of-town investors may have signed on looking for profits, many Garnett investors, including Caldwell, first want to pay down the plant's 10-year mortgage. A lifetime of farming has made Caldwell and his partners cautious about finances. When the note is paid off, "we'll be in good shape when there's a downturn," he says. "And there will be, because there are always ups and downs."