JACKSONVILLE, Fla. -- The past year has been all about ethanol for Buzz Hooper, president of Jacksonville, Fla.-based Gate Petroleum. Back in April 2005, the company began exploring the idea of building its own ethanol refinery, and by December, the planning was in full swing.
And as recently as late August, Hoover was still crowing about the idea, but all that changed this month, when a complete cost estimate was submitted. [Previously, we said] unless we were shocked by that [estimate], we were going to move ahead, Hoover told CSP Daily News [image-nocss] yesterday. Well, we were shocked by that number.
Hoover said the detailed estimate came in substantially more than our consultants' work had indicated that it was going to. The economics were about the same as they'd be for building a convenience store, but you can build a convenience store for $2 million with a lot less risk than you can build an ethanol plant for. The risk-reward ratio just no longer made any sense.
As a result, Gate has dropped its ethanol dreams for now. It's feasible that we could revise it, but there were too many things that were in motion for us to put this particular project on hold because of the ongoing commitments and expenses we would have had to incur, he said. So we effectively killed this project. It's not inconceivable that we could crank up the idea down the road.
The change of plans hasn't dampened Hooper's interest in ethanol as a product, however. We originally got into the idea of building the plant because we were interested in being able to sell ethanol at our locations, and we still are willing to do so, he said. If we can secure a reliable supply at an advantageous price, we'll still offer E10 and E85 at a number of our locations.
The main issue is that lack of a reliable ethanol supplier in Florida, said Hopper, a situation that at least partially led Gate Petroleum to look into building its own refinery, this one proposed to be powered by woodchips.
That was clearly one of the things [we considered], said Hopper, but also, it's consistent with our overall corporate game plan in that we believe in vertical integration wherever we can. So if we knew we were going to use ethanol, then we said we can probably make it and sell it to ourselves and capture some of the profits that would otherwise go to a middle man. That was a way of ensuring we had a reliable supply if we controlled the supply.
Gate operates 100 stores and supplies another 250. The proposed ethanol plant was originally scheduled to be up and running by 2008 on an 85-acre site. It was to produce 50 million gallons of ethanol each year.
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