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Published April 08, 2013, 09:15 AM

Full steam ahead

Spiritwood's future in energy production moving forward

By: Mikkel Pates, Agweek

SPIRITWOOD, N.D. — Transportation, power and water are the main reasons Spiritwood, N.D., has been chosen for major agriculture-related manufacturing installations, officials say.

The village of 72 people is just five miles east of Jamestown, N.D., in eastern Stutsman County, and will have more than 400 people coming to work when all of the development is complete, probably by the end of 2016.

Spiritwood has long been a visible focal point for the region’s agriculture, as the visage of the Cargill Malt plant has loomed and grown north of Interstate Highway 94 since the 1970s. Now it will be a mega-hub, with ethanol and fertilizer production coming in the next three years.

“Location, location, location — they all come together there,” says Rich Garman, senior project manager for Great River Energy, which has interests in electrical generation and ethanol projects at the location.

The new ethanol and fertilizer plants will be built between now and the end of 2016, with construction schedules expected to slightly overlap.

Connie Ova, CEO of the Jamestown/ Stutsman Development Corp., which is helping to direct all the Spiritwood Energy Park projects, says the potential is tremendous.

“The economic impact to the area is enormous,” Ova says. She says the jobs are important, as is the value-added impact on the agricultural community.

The new realities

Construction on Dakota Spirit AgEnergy LLC, a 65-million-gallon-per-year ethanol plant, is expected to start this summer and continue for 18 months. If all goes as planned, DSA will be commissioned in late 2014.

Construction on a $1.4 billion CHS Inc. fertilizer plant project would start in 2014, just as the ethanol project comes to a close.

The CHS plant is a much larger project than the ethanol plant. Once completed in late 2016, CHS would provide 150 full-time jobs. It will take 80,000 million metric British thermal units (MMBtus) per day of natural gas and produce 2,200 tons per day of various kinds of ammonia, which will make several products including anhydrous ammonia and urea.

A dedicated 12-inch pipeline for CHS would “barely make a dent” in Bakken natural gas production, but will be a “step in the right direction,” in local usage, Garman says. There are three options for delivering the natural gas from pipelines.

Water will be a major input for both facilities. The DSA plant has its gray water supplies from the city of Jamestown and from the Cargill Malt plant lagoons.

DSA will use 23 million bushels of corn. It’ll use 450 gallons of water per minute and 7 megawatts of power. The DSA project will get most of its water needs from the city of Jamestown wastewater treatment plant, Garman says. The project already has a pipe in the ground in place to take the water. The bulk of it will be for a cooling tower. That means it has to have limited salts to prevent equipment from “plating out” with mineral deposits.

If the CHS project comes on board as expected, water needs would increase significantly. The CHS plant will need 5,000 gallons per minute of water. Developers have identified and intend to explore the Dakota Aquifer — a water source 1,000 feet underground that will need processing. It is separate from the Spiritwood Aquifer that is about 200 to 300 feet underground. The northern Spiritwood Aquifer is allocated by state regulators, Garman says.

The two projects together could use 20 megawatts of power, and it isn’t clear who will supply that.

Funding the projects

Garman says the whole project fits into the framework of the Spiritwood Energy Park Association.

That’s the joint association among Great River Energy and Jamestown/

Stutsman Development Corp. The entities jointly purchased 551 acres of land, just west of an electrical energy generation plant and the Cargill malt plant, specifically to develop industry across the road that would use energy coming out of the power plant.

Once any of the anchor tenants signs a lease, JSDC will start investing in roads and rail. The rail development is expected to cost about $7.5 million.

JSDC is financing about half of the energy park project and expects a 5 percent annual return on its money. About $1.8 million will come from a North Dakota Transportation Department revolving rail loan fund, which has been in place since the 1970s for small rail projects in the state. Debt will be serviced by however many tenants are attracted, proportionately.

Northern Plains Electric Cooperative is sponsoring a loan guarantee of $740,000, on a 0 percent interest U.S. Department of Agriculture Rural Economic Development guaranteed loan program. Still short as much as $1.75 million, the project will seek funds from local lenders. First Community Credit Union in Jamestown has shown interest in the program, Garman says.

Rail access

The rail project surrounding the park is shown on the GRE illustration above as a blue oval.

“It’s going to be 25,000 linear feet of rail with about 13,000 open feet of rail, encircling the property,” Garman says. They’ll be able to access trains coming from east or west. The energy park will control logistics of the rail. Rail costs will be charged proportionately as tenants use the rail, on an annual base. The initial design has been pre-approved by Burlington Northern Santa Fe.

“You can get at least two 100-plus car trains in there at any one time to offload or load different products for CHS,” Garman says. “Fertilizer will go by either rail or truck, depending on if it’s local or long haul situation.”

For the ethanol plant, corn will come in primarily by truck and ethanol will go out primarily by rail, with some crossover on each. The park itself will be managed by the Spiritwood Energy Park Association, which will function as a landlord, and like a cooperative. “They’ll operate the rail and will maintain the internal roads,” Garman says.

The land on the east side of the energy park is closer to GRE’s electrical generation plant, and will be nearer to the steam source, so will be called a “steam corridor.” Properties closer to the power plant will be for customers that would like to use the steam, which will be created from GRE’s Spiritwood Station electrical and steam generation plant. That plant is fired by coal that is dried and railed in from GRE’s facilities in Underwood, N.D.

Steam customers

The first steam customer will be DSA, which will have a sister plant — Blue Flint Ethanol, in Underwood, N.D., which is 100 percent owned by GRE. Those two companies will come together to form a new parent company — Midwest Ag Energy, which will manage them both.

GRE is contributing its Blue Flint equity to build and be a partner in the new DSA plant and the Midwest Ag Energy parent. Officials are seeking new accredited investors. The DSA investments could be closed by early summer, which would be immediately followed by ground-breaking.

A couple of other projects that have seen significant interest include an iron plant that would take iron ore tailings from Minnesota to produce iron ore pellets.

The GRE Spiritwood Station power plant, completed but not yet running, is designed to make extra steam to sell to customers. Besides selling to the ethanol plant, the plant expects to sell some steam to Cargill, which runs a large malt plant. (The CHS fertilizer plant doesn’t need steam, but instead needs natural gas, power and water.)

“We’re about two-thirds to three-quarters subscribed on steam by the time we get the ethanol plant built,” Garman says.

Infrastructure issues

Some local residents have raised concerns about road traffic as the projects converge.

There are nearly three miles of roads from Interstate 94 to the facilities, Garman says. An existing blacktop will be upgraded with a new asphalt overlay and other roads will be made concrete — built by the county and then specialty-assessed taxes will be paid by GRE and the energy park. The energy park will pass its specialty tax assessments on to tenants.

Ova and Garman are hoping that creating the better roads will “push” traffic onto those, but Garman acknowledges there is nothing to stop traffic from going on “Old Highway 10,” which goes east-and-west through Spiritwood.

Housing also is an issue.

“There’s a need, for some housing,” Garman says. The city and county are looking at having appropriate ordinances in place, in case the issue for temporary housing arises. Generally, that’s handled by an outside logistics company.

There are concerns about housing and the workforce, Ova acknowledges. A Hampton Inn will open a 90-room hotel this spring. “That will take a little of the pressure off,” she says. U.S. Sen. Heidi Heitkamp, D-N.D., is holding a meeting in Valley City, N.D., to discuss the federal role in meeting needs.

Seventeen houses are available for sale in a 20-mile radius, Ova says. The JSDC is reaching out to developers, encouraging them to look into the opportunities. Some of the housing needs are temporary, she says.

“We’re also feeling a pinch with the rest of the sectors, of a lack of employees,” she says. “It goes back to the fact that we have no place for them to live.”

Some of the employee needs will be retraining people because of needs for industrial plant operations and maintenance. Ova says many of the jobs will start in the $40,000 range and higher.

Agricultural impact

Any way you cut it, the project will be a big deal for the region’s agriculture and for input providers.

On the output side, it will produce 65 million gallons per year of ethanol and 173,000 tons per year of distillers dry grains, and 5,400 tons of corn oil per year. It will create 35 full-time jobs.

And that may not be all. DSA has plans for a second phase that would include cellulosic ethanol production

The technology is “very promising” but “not quite there yet,” Garman says.

“We’re proceeding with a corn plant with the ability to expand and do a bolt-on of another technology,” Garman says. “What the technology is, we don’t know right now, and, frankly, we don’t care. Whatever the technology is at the time, we’re ready. That could be biomass like corn stover and wheat straw. It could be energy beets. It could be something completely different. It could be another corn ethanol plant. We don’t know what the next phase is going to be.”

Ova says that beyond the jobs, the agricultural impact makes the project special. “Agriculture still overshadows the energy and oil industry in North Dakota. Ag is still No. 1, and whatever impacts ag flows around the most times” in the economy, she says.

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