Frequently Asked Questions

Q: What is happening with the North Prairie biodiesel plant?

A: As you may recall, North Prairie Productions’ board of directors halted construction of the 45 million gallon biodiesel plant near Evansville in November 2007. The rising prices for commodities including the soybean oil needed to produce biodiesel eroded the profit margin for the fuel. Due to the commodity price volatility, the lead lender failed to secure adequate loan participation from other institutions and withdrew from the financial package necessary to ensure proper capitalization.

Construction was halted in a manner designed to conserve investor equity but also to allow for a rapid restart in the event more favorable market conditions returned. In the intervening months, the directors have reviewed a number of options consistent with the original mission to complete the plant.

Unfortunately, commodity price increases have continued to outstrip the ability to produce and market biodiesel fuel at a profit and the board has voted to terminate the project.

Q: Is this just happening here, or have other biodiesel plants been affected by these same trends?

A: Rising commodity prices and financial uncertainty have affected many biodiesel projects at various stages of implementation nationwide. A Seattle biofuels company, Imperium Renewables, filed to withdraw its initial public offering in January while the biodiesel company Renewable Energy Group of Iowa withdrew its offering in March. Meanwhile, a number of completed plants sit idle to prevent operating losses and the accumulation of additional debt. Currently, the biodiesel industry in the U.S. is operating at less than 20 percent of capacity. In Europe it’s running at about 10 percent. It is likely that this existing idle capacity will be able to meet any increase in demand or mandates for biodiesel for years to come.

Q: Completion of the plant would have been a major benefit to the local economy and a real boost to area farmers. Isn’t there any way to revive it?

A: Along with rising commodity prices, other aspects of the project also have experienced inflationary pressure in recent months. The best estimate of the additional equity needed to restart the project has risen to $30 million. The additional equity would be required to cover escalation in construction costs, increased working capital requirements driven by rising commodity prices and a significant decrease in the percentage of the project that can be financed with long term debt. If an additional $30 million could be raised, it would dilute the value of existing investor equity by more than 50 percent. A plan that created this amount of dilution would need to be approved by more than 50 percent of the members in order to move forward. The board deemed this alternative to be both unlikely and unacceptable.

At the same time, approximately 90 percent of the biodiesel currently being produced domestically is shipped to Europe and there is uncertainty about the potential for this market going forward.

The good news for agricultural producers in Rock County and the surrounding region is that increasing worldwide demand has boosted previously depressed markets for soybeans and other commodities. So, these producers can expect stronger market opportunities in the near term despite the changed outlook for biodiesel development.

Q: What happens to the land being used for the construction of the facility in Evansville?

A: As specified in the land purchase agreement, Landmark has retained ownership of the land on which the biodiesel plant was started because debt financing was not completed. Landmark had agreed to allow the start of construction without closing the land sale as an accommodation to North Prairie to decrease the anticipated construction schedule.