Another One Bites the Dust

October 7, 2008 | Roger McEowen


As we've been saying for sometime now, there is going to be a major shake- out in ethanol production with most of the currently existing plants not producing corn-based ethanol by the end of the next five years.  The inefficiencies of the fuel, the high-cost of the inputs, and concerns over pollution will make things tough for ethanol production - all in spite of massive, government-mandated taxpayer support.  So much for the free-market, politicians love tax subsidies coming into their states and districts - especially when they come largely from people that can't vote for (or against) them.

Gateway Ethanol of Pratt, Kansas, is the latest victim of the downturn in the ethanol market.  They recently filed Chapter 11 bankruptcy, estimating their liabilities between $50 and $100 million.  This past May, Gateway's financier moved to foreclose on the facility.  Gateway had only been in business for 11 months and had a 21 million bushel capacity for corn and grain sorghum on an annual basis. 

Gateway's bankruptcy is the result of a domino effect in the industry.  Gateway's May loan default occurred after Alternative Energy Sources, Inc., (a publicly owned ethanal facility) stated it would shut down, and Ethanex Energy (Basehor, KS) declared bankruptcy.  Last year, E3 Biofuels of Shawnee, KS, also filed for bankruptcy. 

As you could probably guess, Gateway's largest creditor is Cargill, with a claim in exess of $7 million.

For an excellent article detailing the economic impossibilities of ethanol, see "If Ethanol is the Answer, What is the Question," published in the Spring 2008 edition of the Drake Journal of Agricultural Law. 

...And another one gone, and another one gone, and another one bites the dust....