For a nation of oil addicts, the new drug is ethanol. Sold by politicians. Part I: A Kansas farm town bets its future on a risky fuel squeezed from corncobs.

Ethanol Pushers 

For a nation of oil addicts, the new drug is ethanol. Sold by politicians.
Part I: A Kansas farm town bets its future on a risky fuel squeezed from corncobs.

If there's one thing that ethanol fuels, it's hype.

The fuel made from corn had its own pep rally at Kansas City's Hyatt Regency Crown Center in August. Bob Scott, the president of the American Coalition on Ethanol, told the crowd of farmers, engineers, energy experts and economists, "Let's keep ethanol the buzzword in Washington, in the coffee shops, in the legislature — anyplace we can get it."

Scott is getting his wish. You can't ignore ethanol these days — the promises that it will solve our dependence on foreign oil, help farmers, stall global warming.

Our politicians have taken hits off the ethanol pipe. At the August conference, the American Coalition on Ethanol gave U.S. Sen. Jim Talent an award for "legislative leadership." Kansas Gov. Kathleen Sebelius and Missouri Gov. Matt Blunt took turns talking up ethanol. Blunt bragged about the new Missouri Ethanol Standard, which requires that all gas sold in Missouri contain 10 percent ethanol by 2008.

Even former U.S. Senate Majority Leader Tom Daschle was there. He told the crowd, "If we can't drill our way to energy independence, we can begin to grow our way there." By next year, he said, the United States should produce 5 billion gallons of ethanol a year.

When we hear that kind of talk, we get skeptical. Looking for a dose of reality, we set out for Garnett, Kansas, a farm town of 3,368 people 70 miles southwest of Kansas City. A year ago, a $46 million plant that converts corn to ethanol went online in Garnett. Unlike most projects of that scale, this plant was financed largely by locals. An economic study told them that the plant would generate new business. Locals saw it as a chance to help stanch the flow of young people moving from Garnett to bigger cities.

Now that the plant has produced the magic fuel for a full year, we wanted to see whether Garnett's gamble with its future had begun paying off.

Aprocession of white-haired people climbs out of a yellow school bus and onto the sun-baked concrete in front of the East Kansas Agri-Energy ethanol plant in Garnett. They squint up at the silver columns reaching into the sky, each embraced by a metal staircase. This Saturday is the first — and last — tour that the ethanol plant managers will give. Visitors must be at least 16, which is fine, because a quarter of Garnett's population is at least 65 years old. Photos are forbidden.

It's June, and Garnett is sticky-hot. Resident John Shannon, who recently spent time in Afghanistan, reported that a 120-degree day in the desert is more pleasant than the humidity of a 95-degree day in a Garnett field.

As she exits the bus, a woman named Wanda Taylor says, "I've been waiting to see the inside of this place for a long time." Taylor, a nurse who directs the town's theater troupe, wasn't interested in going to the fund-drive meetings held at the junior and senior high school and the Garnett community center in 2002 and 2003. But now that it's up and running, she's curious.

The plant has bred the kind of optimism that hasn't been seen in Garnett since the Lake Garnett Grand Prix car races brought big-name drivers and 25,000 spectators each summer. A riot in the town square contributed to the demise of the Grand Prix in 1972.

Now, people in town rave about how Garnett native Derek Peine came back to take a job at the ethanol plant after getting a degree in chemical engineering from Kansas State University. "Derek started that place from the ground up," says Peine's mother, Sandy. "All the big and little-bitty machines, he ordered and brought in."

The plant hums as the group enters the first room, where grain, unloaded from trucks outside, is dumped through a hole in the ceiling, creating a 30-foot golden mountain. One bushel of corn, or about 56 pounds, makes 2.7 gallons of fuel, according to a sign set up for the tour.

In the room where the cooking takes place, rainbow-colored pipes slither over the walls and ceiling. The machines grind corn kernels into flour, which is then cooked to kill bacteria, fermented for two days, boiled and, finally, dehydrated into pure ethanol.

A plant employee named John Alford offers to answer questions as the tour passes. He says that 28 employees work at the plant. Alford himself worked up the chain of command, from team leader to cook operator to material handler to safety manager. "One year ago, I couldn't spell ethanol," he jokes. "Now, I are educated."

Past an emergency eye-wash station, the group comes upon another sign proclaiming one room the "Energy Center." A boiler, the sign says, creates steam to run the plant. The entire plant runs on 3 megawatts of electricity — the power it takes to run 50,000 60-watt light bulbs. The boiler and the dryer run on natural gas. This is a major criticism of ethanol: Its production requires the burning of fossil fuel. Critics say it takes more fuel to make ethanol than is produced in the process, counting oil-based fertilizer for the crops, diesel for the combines, power for the plant and diesel for the trucks to transport it. In the end, they argue, ethanol plants may simply increase the demand for fossil fuels.

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."

Roger Brummel is a gruff guy who answers his cell phone frequently, as he does now, this time to answer a question about a worm infestation in someone's soybean crop. He stands in the lobby of Patriot's Bank, which is in Garnett's town square, across from the red-brick county courthouse. It's on Fourth Street, past two blocks of stately old houses with wraparound porches and Corinthian columns. The bank itself stands out; the theater that was on its west side burned down in the early '80s, and the flea market and sewing store on the east side burned down several years ago.

Brummel wears a dirty ball cap with "Brummel Farm Service" stitched across the front — the feed, fertilizer and fuel company that he inherited from his father. He was there for the meeting at Yesterday's, when the town decided to spend the money for Bryan's feasibility study.

"I said I could raise the money in 24 hours," Brummel says. "Called a bunch of farmers, told 'em to put a thousand bucks in."

Scott Cooper, the president of Patriot's Bank, comes through the doors a few minutes behind Brummel. He's a tall, fit guy with graying hair and tan arms. He wears jeans and work boots. As his appearance indicates, he'd rather be outside remodeling houses than stuck behind a desk at the bank. Cooper's dad is the CEO.

Before joining his dad at the bank, Cooper worked for the Wolf Creek nuclear power plant. "All these years, we've been sitting between Lynn County and their coal plant and Coffey County with their nuclear plant," Cooper says. "Now we got our ethanol plant, so we're moving up in the world."

Garnett invested in ethanol at an optimal time. In 1999, some states began phasing out the use of a gasoline additive called methyl tert-butyl ether (MTBE), in part because some evidence showed it to be carcinogenic. That led to several states looking to ethanol as a replacement. In addition, President Bush last year signed the Federal Renewable Fuel Standard that requires gasoline to be blended with a renewable fuel, which is frequently ethanol.

Once the plant opened, Garnett had itself a major new taxpayer. "Anderson County was real, real, kind of bottom-end-of-the-scale on tax revenue," Brummel says. "Now, with something like this [the plant], you have an increased tax base. Paying utilities and taxes is going to help everybody in Garnett to alleviate some of their tax burden."

Cooper adds: "Right. And because of that, we've got a new hotel out there." He's referring to the Garnett Inn, Suites and RV Park, a new motel near the New Horizon grain co-op. "I think there will be a new restaurant out there in a few years of some sort."

The entire loan for the plant was too big for Patriot's Bank and the town's other lender, Garnett Savings Bank. But both banks lent money to Garnett residents who wanted to invest in the plant. To get the money, locals put up collateral in the form of livestock, equipment or property, Cooper says. Some Garnett residents banded together with friends and neighbors to pool their money and make the minimum $10,000 investment. One such group, Cooper says, was formed by Jeanette and Tim Young.

At the Youngs' property, about a mile from the bank, Jeanette Young is riding a four-wheeler in red jogging shorts, a black tank top and sneakers. She chugs into the drive in front of her gray barn. "Let me put my four-wheeler up," she calls. She re-emerges from her garage wiping her hands on her shorts. Her friendly eyes flash embarrassment at being caught cleaning debris from the ditches. "I promise I'm not the town trash collector," she says.

Young says it took her a year to convince 10 friends and relatives to each pitch in $1,000. The group that eventually formed is called Tenth Degree Investments. In July, the plant sent $3.4 million in revenue to shareholders. Tenth Degree's investors each made $196. Young was delighted with her check. "I've got other thousands of dollars invested in other things where we didn't get that much out of it, so we were pleased," she says. Her other relatives say they wish they'd invested.

Last month, the plant's board sent out another round of dividend checks totaling $3.4 million. Each shareholder made $159. Investors have now earned back about a third of their initial outlay.

But energy experts caution that, given the rate at which newer, bigger ethanol plants are being built, the early success of Garnett's plant likely won't last. Garnett's is one of 105 ethanol production facilities across the country. Another 50 are under construction, including two in Kansas: a 12-million-gallon plant in Garden City and a 40-million-gallon facility in Pratt. And in August, an energy company from Omaha, Nebraska, announced plans for a 100 million-gallon ethanol plant in Dodge City.

In addition, ethanol's success depends heavily on government subsidies and on the price of gasoline remaining high. If subsidies end or the price of gas drops, the demand for ethanol will decrease. Critics also point out that fuel technology could make ethanol obsolete within a few years.

Young isn't worried about that. Part of the reason that she invested was because she recognized the names of the lead farmers and businessmen involved with the project — people she trusts. "If they're going to lose money, we're going to lose money. But if they're going to make money, we're going to make money, too," she says.

Suddenly, a siren slices the air. Garnett still has a noon whistle to tell farmers it's time for a break.

Yesterday's, the restaurant where the ethanol conversation started, no longer exists.

Brown paper covers the storefront's windows. The sign over the sidewalk still reads "Yesterday's," the letters surrounded by a checkerboard pattern and a silhouette of a sundae.

"Hasn't been open for months now," says a waitress at Maloan's, a restaurant across the square from Yesterday's. "Don't think things went too well for them."

A replica of the Statue of Liberty, about 25 feet tall, stands in the square in front of the courthouse. It's surrounded by a few newer-looking businesses, such as the H&R Block on one corner, and a dozen run-down-looking façades. Two thrift stores sell old clothes and records. There's a Chinese restaurant off the square; a business sells hearing aids out of a handsome building with "1892" painted in mint-green above the door.

Inside the cool, dim Trade Winds Bar and Grill, an elderly woman takes orders behind the bar from a handful of older men. A pool table sits in back, and keno machines await gamblers up front. In the middle of the room is a "Turkey Hunting USA" game with a neon-orange gun.

In one of the only occupied booths, four high school kids sip Cokes. The girls wear thick, black eyeliner. The boys wear Anderson County Junior/Senior High School T-shirts. They're all eager to leave Garnett.

"I want to get out of here as soon as possible," Chris Nungesser says. He and his brother, Cody, who sits next to him, are two of three 16-year-old triplets. They're juniors. The girls are senior Whitney Hughes, 17, and junior Tristan Lutz, 14.

None of them care about the ethanol plant. There's only one thing about the plant that affects teenagers here, Cody says. "It stinks, that's about it."

"I don't really notice it," Tristan says.

"You don't smell that funky smell every morning?" Cody asks her.

Chris says the place will eventually bring money to town.

"But not while we're here," Cody adds. "Ten years down the road, maybe."

By then, Cody says he'll be a construction foreman. Chris says he'll join the Air Force. Tristan says she wants to be a pediatrician. Whitney says she wants to get into "some sorta psychology." All of them say they'll live somewhere else — anywhere but Garnett.

At the counter, Donna Carr, one of the sisters who own this bar, says she didn't invest in the plant. "I thought I was too poor," she says. "It helped me out financially the year they were building it. There were lots of men in town who needed a place to eat and drink. They got in about Thanksgiving time two years ago. It's been a year since they left." Business soon returned to normal.

Business also appears to be slow at the Garnett Inn, Suites and RV Park — the place that everybody in town points to as a sign that ethanol has brought Garnett good fortune. A brand-new road leads to the inn. Inside, the air smells of sawdust. The 24-room lodge opened June 5.

The managing owner of the Garnett Inn, Phil Griffen, lives in Overland Park. He says he and the other co-owners and developers considered the Garnett location for years. The ethanol plant helped seal the deal, but the real draw to the area, Griffen says, was the Spirit Trail, a walking path similar to Missouri's Katy Trail. The Spirit Trail follows the old railroad line from Ottawa to Iola, straight through Garnett.

Outside the motel, 11 stalls await RVs to join the single travel trailer already plugged in.

A flex-fuel Chevrolet Tahoe with an obnoxious green-and-yellow paint job sits in the lot at Beckman Ford, Chevy, Buick and Pontiac on Maple Street, Garnett's main drag.

The Tahoe's driver is Robert White, a 31-year-old Garnett native. The car belongs to his former employer, Jefferson City's National Ethanol Vehicle Coalition. The coalition's goal is to expand the availability and consumption of E85, a blend of fuel that's 15 percent gasoline and 85 percent ethanol. About 6 million U.S. cars can run on E85, but few gas stations carry it. Even here in corn country, only Petro Plus sells E85 in Garnett.

White wears a tattered yellow shirt with a picture of a corncob on it. At his job with the coalition, White says he gets one of two answers when he tells gas station owners they should carry E85: "I don't know what that is" or "I've never had anyone ask for it." He compares the experience with what must have greeted the first bottled-water salesmen. "You walk into a store and say, 'We think you should sell bottled water,' and at that time, they always said, 'Well, there's a water hose out back, get however much you need.'"

White just took a new job with the Ethanol Promotion and Information Council in Omaha, Nebraska. He's here at Beckman Ford shopping for a flex-fuel Chevy Monte Carlo so that he can return the Tahoe to his former employer.

White sits in the wood-paneled office of the dealer's owner, Raymond Beckman. Sales haven't gone up at the dealership because of the plant, Beckman says. More customers ask about cars that can run on E85, but Beckman acknowledges a problem with ethanol that's discussed even in Garnett: E85 gets about 20 percent less mileage than regular gasoline.

White adds that the price of ethanol will fluctuate substantially over the next few years as more gas stations offer it. And even with increased demand, White says, Garnett's small plant could be made obsolete by better fuels or simply because larger ethanol plants can produce it more cheaply. The future of ethanol, he explains, could be selling the plant's byproduct as feed.

All that uncertainty has kept the value of Garnett farms steady, even as the value of ethanol has spiked.

That's clear at Glenn Caldwell's farm. Caldwell can't pass his farm on to his two sons, the way his father did for him. His sons lent him a hand when they were in high school, but they've left Garnett for Kansas City. One is a pharmacist, and the other is an accountant. So Caldwell will sell his farm one of these days.

Next week, Part 2: Politicians, funded by the agricultural lobby, dump taxpayers' money into a crop that's wasteful to grow and an allegedly clean fuel that's dirty to make. Then we pay more at the pump, even though ethanol yields fewer miles per gallon than regular gasoline. Despite the hype, this corn-based fuel won't help us in the search for energy independence.


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