|
Study: Ethanol plant to mean millions to local economy
Tuesday, July 29, 2008 12:49 PM EDT
By Lisa Andrews, Staff Writer
MECKLENBURG COUNTY - Osage Bio Energy's proposed ethanol plant in Chase City is predicted to bring more than a hundred direct, indirect and induced jobs and millions of dollars into the local economy, according to the economic impact study completed by Duff & Phelps, an international provider of independent financial advisory and investment banking services.
The Duff & Phelps study provides estimates of the expected economic and fiscal impacts at the state and local level, resulting from the new plant.
Osage is preparing to construct a plant to operate under the name Bluestone Bio Energy on what is known as the Butler Farm in Chase City. The plant is proposed to be a barley feedstock ethanol manufacturing plant and Osage officials say that the majority of the crop will be Virginia grown.
Osage has been granted the Mecklenburg County permits needed to build the Chase City plant, but officials said this month that construction of the plant has been pushed back to 2009 after announcing that the company will first build a plant in Hopewell and one in South Carolina.
John Warren, Osage's Director of Government Relations and Project Development, said last week that there are a number of assumptions that have gone into the economic impact study and some are rather dated. The study provides the numbers based on a timeline and estimates are based on a certain number of gallons produced.
"We are at least eight months behind any schedule referenced (in the study)," said Warren. "Employment in Mecklenburg (County) is expected to be closer to 65, as opposed to the 45 stated. (The) 65 million gallons may be a little high, we are figuring closer to 55; but are hoping we can do better through increased efficiencies."
The Enterprise spoke with Warren via e-mail and telephone regarding the economic impact analysis, which had been referred to during public hearings but had never been submitted to Mecklenburg county. Warren said he had concerns the study may be misinterpreted. Warren agreed to provide The Enterprise with a summary of the analysis, comment regarding its contents, and with help interpreting the data within.
The Duff & Phelps study says that because of "the activity created by the required barley cultivation, our analysis estimates a direct annual impact of $93.6 million in 2010, with an additional $36.5 million through the indirect and induced impact of this economic activity. This output is expected to increase by approximately 1.2 percent thereafter."
Warren explained via e-mail, "The $93 barley production number basically comes from the expectation that barley feedstock will be procured primarily from within the Virginia region using existing farmland through either winter crop add-ons or the use of currently fallow land.
"We need approximately 24,000,000 bushels. The study assumed 95 bushels per acre and approximately 250,000 acres. The study assumed market price of $3.90 per bushel. 24,000,000 times $3.90 equals $93.6 million," said Warren.
Mecklenburg County is estimated to receive $2.1 million in tax revenues in 2010 with an additional $2.5 million to be collected by the state and other counties in which new economic activity is created by the ethanol plant operations, according to the economic impact study completed by Duff & Phelps.
The barley production is expected to result in Mecklenburg County receiving an estimated $387 thousand in tax revenues in 2010 with an additional $3.9 million to be collected by the state and other counties in which new economic activity is created by the increased agricultural activity.
"The report is a reasonable snapshot," said Warren. "It is probably in the ballpark but things change very fast.
"The numbers are our best approximations and may not be accurate for the near future," said Warren. "We are proud of the fact that we are really creating two industries, ethanol and an agricultural industry. We will use this tool only as an estimate to determine what we may expect to gain out of the project."
The study said that all annual tax revenue growth is expected to be commensurate with increases in forecast revenues for each activity.
The Duff & Phelps study first analyzed the impact of the barley farming and the ethanol production to estimate the potential revenue that would be generated by this new business. They said in the study that they separated the overall activity into three distinct events, which include the ethanol plant construction, ethanol plant operation and barley cultivation.
"A couple of different agricultural products can be made with the barley products," said Warren.
The company then prepared a customized model and other sources to estimate the economic and fiscal impacts of the ethanol industry. Due to the limited history of the ethanol industry, in some cases they used data from similar industries as a proxy using industry specific data collected from other sources including the United State Department of Agriculture, the Virginia Department of Agriculture and Consumer Services and research provided by the Virginia State University and Polytechnic Institute.
The study says that it should be noted that "this study does not evaluate the viability (e.g., profitability) of the businesses proposed by Osage. The study simply estimates the expected economic and fiscal impact in the local and statewide economies given this proposed new activity. Additionally, please note that all results reported are stated on an annual basis except for the estimates of jobs created."
The study estimates the annual employment compensation of this new job creation is estimated at $4.4 million for the direct jobs, with an additional $4.3 million derived from the indirect and induced jobs.
The employment impact of the increased agricultural activity will be 463 temporary farm jobs, according to the study. Duff & Phelps said these jobs are assumed to be temporary given the cyclical nature of the barley growing season and high labor productivity in the grain industry realized through the use of high output planting and harvesting machinery.
The study says that in addition to these temporary opportunities, they expect the creation of approximately 40 additional jobs through the indirect and induced impact. The economic impact according to the study is "assumed that these jobs will be more permanent in nature and will be created in activities that include agricultural support, retail and other service industries that are supported by increased business and consumer spending. The resulting employment compensation of this new job creation is estimated at $302,000 for the direct jobs, with an additional $1.3 million derived from the indirect and induced jobs."
Duff & Phelps estimated that the plant construction phase, which is a one-time process, is expected to create a direct impact of $32 million once it begins
They said an additional $21 million is expected to result from the combined indirect and induced impacts. The temporary direct employment impact over this period is 329 construction related jobs with 167 indirect and induced jobs. The resulting employment compensation of this new job creation is estimated at $13.4 million for the direct jobs and $6.5 million for the employment created by the indirect and induced jobs, said Duff and Phelps study.
The Enterprise asked Angie Kellett, Director of the Mecklenburg County Office of Economic Development, about the economic impact of the Osage plant. "It's hard to give exact numbers on this info because so much is still unknown as far as cost and what type of market will be available for the farmers," she said.
"Based on the estimated investment from Osage the estimated taxes are approximately $841,064 per year," said Kellett.
"(The county" does not know a monetary value of how this will impact the farmers, truckers, etc., but it will provide an additional crop for farmers. Osage will pay the going rate for the raw materials from the farmers and truckers will be making an acceptable wage as well.
"Osage will be a very positive impact on the agricultural industry in this area due to the additional crop needed as well as the possibility of by-product use by the farmers at a reduced cost," said Kellett.
On July 14, Ida O'Sullivan of Skipwith in Chase City addressed the Mecklenburg County Board of Supervisors during the public input portion of the regular meeting. She spoke after they had voted to approve a special exemption application permit filed by Osage. It was the final application of three to be approved by the supervisors.
O'Sullivan said that she had requested a copy of all documents related to the special exemption application permit and had only received a one-page document of the permit. She said that Osage's attorney Thomas Kleine had told her that an economic impact analysis was with the permit application and other documents.
She said that Mecklenburg County Administrator Wayne Carter and Zoning Administrator Robert Hendrick told her that they only have the single page application. Both men agreed by nodding their heads that they only had the one page.
O'Sullivan noted that in the motion made earlier in the meeting by Supervisor Dan Tanner to approve the permit, he spoke of the application and materials. O'Sullivan said, "It is imperative that a copy be provided for the board of supervisors, other county officials, and the publics information. Having the details in this report would make it possible for you to make a more informed decision.
"It is essential that Osage submit this paperwork and that the supervisors seek to obtain this information," said O'Sullivan. |
Jane Forrest wrote on Aug 2, 2008 8:12 PM:
Thank you,
Jane Forrest "