An Interview with Ron Miller

Ron Miller is president of Williams Bio-Energy. He graduated from Southern Illinois University at Carbondale with a bachelor of science degree in engineering and received his master’s degree in business administration from the University of Illinois
His career began with Texaco, joining Pekin Energy Company 10 years later as director of marketing. Miller was promoted to vice president and then named senior vice president in 1993.

In 1995, Pekin Energy Company was purchased by The Williams Companies, Inc., and in 2000, Miller was named president of Williams Bio-Energy. Williams is the nation’s second largest producer and marketer of ethanol and global provider of bio-products.

Miller is past chairman of the Renewable Fuels Association, the national trade association for the domestic fuel industry, and currently serves as its vice chairman. He also serves on the boards of Herget National Bank, Pekin Chamber of Commerce, Pekin Salvation Army, Junior Achievement of Central Illinois, and on the business advisory board of Pekin Hospital.

He and his wife, Natalie, have six children and live in Pekin.

Editor’s note: On February 20, The Williams Companies announced they had reached a definitive agreement to sell Williams Bio-Energy L.L.C. to a new company formed by Morgan Stanley Capital Partners for approximately $75 million. The sale is projected to close in the second quarter, subject to completion of necessary closing conditions and Hart-Scott-Rodino review. Roughly 240 Williams employees in the Pekin facility support the ethanol operations. “This is good news for the employees of Williams Bio-Energy, the ethanol industry, and the local areas around our plants in Pekin and Aurora, Neb. We’re very excited about our future with Morgan Stanley,” said Miller.

Tell us about your background, schools attended, etc.

I moved a lot growing up because my father worked in sales for Texaco Inc. I was born in Wichita, Kan.; moved to Coffeyville, Kan.; back to Wichita; then to Omaha, Neb., when I was 10; to Minneapolis, Minn., at 17; and finally to Illinois for college when my father was transferred to Chicago. I went to four high schools in three years, so I had plenty of opportunity to meet new people, which has helped me in life.

I played football and baseball in high school but now confine myself to golf and scuba diving. I’ve lived all over Illinois—in Carbondale, Peoria (twice), Galesburg, Champaign, Chicago, and for the last 21 years, in Pekin. I believe I’m the only non-Caterpillar person ever to move to the Peoria area three times. I met my wife, Natalie, in 1985, and together we have six children and four grandchildren—a sort of expanded “Brady Bunch.”

Tell us about the history of Williams Bio-Energy as it relates to Pekin Energy, formerly Corn Products Company. How has the company changed since its beginning?

The cornerstone of my office building reads: “Illinois Sugar Refining Company—1899.” That was the original plant built to process locally grown sugar beets. Unfortunately, the central Illinois climate wasn’t favorable to sugar beets, so farmers switched to corn around the turn of the century. In 1904 the Corn Products Refining Company converted the plant to process corn using the wet milling process. The wet milling process separates the corn kernel—we don’t get the corncob—into its starch, fiber, oil, and protein components. The most valuable components are starch and oil. For years the starch was used to make corn syrup and Argo CornStarch, and the oil was used to make Mazola Corn Oil.

Corn Products eventually became CPC International Inc., which in 1980 formed a 50/50 joint venture with Texaco Inc. to make fuel ethanol from the starch instead of corn syrup because they were building new plants on the east and west coasts, nearer the market. Ethanol made sense because of the two oil embargoes America suffered during the 1970s. The joint venture was named Pekin Energy Company, which began operations in December 1981, producing 60 million gallons per year of fuel ethanol.

Since then, the Pekin plant has been expanded to 100 million gallons per year, including up to 30 million gallons of high quality grain neutral spirits (beverages), and a 48 million pounds-per-year brewer’s yeast plant. In 1995 Texaco and CPC sold Pekin Energy Company to The Williams Companies, Inc., which was building a 30 million gallons-per-year ethanol plant in Aurora, Neb. That plant was placed under the direction of Pekin Energy’s president, Jack Huggins, and has since been expanded to 35 million gallons per year. In 1998 the business was renamed Williams Bio-Energy in conjunction with a Williams-wide branding initiative.

What products are actually produced at Williams Energy in Pekin?

At Pekin we separate the corn kernel to make the following products: corn germ, for processing into corn oil for cooking, etc.; corn gluten feed (fiber), for use in cattle feed in Europe; corn gluten meal (high protein), for use in poultry rations, making the egg yolks yellow and the broiler skin golden; ethanol, for fuel, industrial, and beverage use; carbon dioxide, for dry ice and soft drinks; corn condensed distiller’s solubles, a liquid cattle feed supplement that tastes like candy to cows and provides moisture and protein; and brewer’s yeast, for animal, fish, and human uses as a high quality nutrient.

Talk about the Pekin brewer’s yeast products produced by Williams Bio-Products. What are these products used for? Is this division relatively new?

Brewer’s yeast is a new product for us, with the plant being constructed in 1999. We’ve always propagated our own yeast for the ethanol fermentation process. Until the plant was built, the spent yeast was part of the Corn Condensed Distiller’s Solubles stream and sold for about 2 cents per pound. By separating and drying it we can sell the same brewer’s yeast for 25 to 90 cents per pound. In the animal feed sector, brewer’s yeast is used as protein nutrient in dog foods, starter rations, and aquaculture. In the human sector, it’s used in flavorings, sauces, spices, and all natural foods.

What research and development efforts are underway for greater production?

We conduct joint R&D with various universities and governmental agencies to improve the production economics of ethanol, as well as find new uses, such as ethanol fuel cells. We’re currently working on a joint project with DOE, DCCA, Caterpillar, and Nuvera to demonstrate an ethanol fuel cell project to power our visitor’s center at the Pekin plant. We also work with USDA and the State of Illinois on the Ethanol Production Research Center at SIU—Edwardsville.

What is and will be the role and future of ethanol in the U.S. and world energy market?

In my 22 years in the industry, the future of ethanol has never been brighter. For the most part, it’s a public policy industry to help solve the three E’s: energy, environment, and economy. The industry was borne out of the multiple energy crises of the 1970s and is still viable today as we struggle with global terrorism based in the Middle East. Soldiers don’t have to defend cornfields. The environment benefits from ethanol’s clean burning properties and renewable nature. It reduces carbon monoxide, carbon dioxide, nitrogen oxides, and many toxics found in gasoline. In fact, it’s the only gasoline component you can drink.

Finally, rural America benefits from the economic activity ethanol brings. Our Pekin plant pumps more than $100 million per year into the Pekin economy. We expect ethanol to grow to 3 to 5 percent of the motor gasoline demand in the U.S. over the next 15 years. In addition, a large-scale ethanol program has existed in Brazil for more than 20 years. Ethanol programs are being developed in Australia, China, Thailand, India, Japan, Europe, South Africa, and several South American countries.

How does corn make the journey from the field to the gas tank in our cars?

Corn is grown by the toughest of individuals—farmers. The markets and transportation of corn are extremely efficient. The Chicago Board of Trade (CBOT) price is the recognized benchmark, and actual transactions are done as a function of that price. Corn moves freely by rail, truck, or barge, with freight costs taken into account against the CBOT price. Since the export market at New Orleans determines the “free stocks” market price, the farther the farm is away from the Gulf, the lower the on-farm price of corn. So many new ethanol plants are being built in Nebraska, South Dakota, and Minnesota to raise local demand for corn and thus the price.

At Pekin, we use the advantage of great outbound logistics, especially the Illinois River, to reduce product-shipping cost, which offsets the higher corn cost of this area. On the outbound side we ship ethanol by truck, rail, barge, and/or ocean vessel to a petroleum terminal, where it’s stored. Ethanol is blended with gasoline as it goes into the transport truck to be delivered to your neighborhood service station or convenience store.

Has the company’s vision or products changed since it was purchased by Williams?

The Company’s vision has always been to be the supplier of choice in the markets we choose to enter. That vision didn’t change with Williams; however, we did add the two new products: grain neutral spirits and brewer’s yeast. Today we remain the nation’s second-largest producer and marketer of ethanol, with a 16 percent market share and the best reputation in the business.

What percentage of the nation’s ethanol is produced in Pekin? Is that an increase or decrease since it began there?

We produce about 7 percent of the nation’s ethanol, about the same as in 1981; however, we have a market share of 16 percent due to our marketing alliances and purchasing activities. Besides our two plants, we market for 11 other operating plants and have six more under contract that are in various stages of development. We have 50 ethanol storage terminals from coast to coast that allow us to buy ethanol from competitors and resell at a profit due to the service we can provide to our customers. Having a strong reputation for service delivery with our customers doesn’t hurt.

What government regulations have hindered the production of ethanol?

Some regulatory models don’t adequately describe ethanol’s benefits to the environment. We’re working with USEPA and some states to better address these deficiencies. As time moves on, the models are becoming more accurate, but there’s still much work to be done. For the most part, government has been very supportive of ethanol development. 

All businesses are challenged and influenced by different market forces. Which ones are most significant to Williams Energy in Pekin? How do you manage them?

We buy corn and sell a gasoline component, so market forces that don’t work in concert sometimes buffet us. High corn prices don’t necessarily mean high ethanol prices if gasoline is cheap. We manage this risk through futures hedges, portfolio management, and our marketing program. It isn’t always easy, but we’ve managed to survive and thrive for more than 20 years through $5-per-bushel corn and $9-per-barrel oil. Fortunately, both of those didn’t occur in the same year. As the nation becomes more dependent on environmentally friendly gasoline, ethanol’s clean air value also reduces this risk somewhat.

How are you marketing the products and services of Williams?

For the most part, the ethanol industry is a very decentralized industry of small farm cooperative plants. We’re selling into a highly concentrated petroleum industry, so the need for some aggregation is there. We use the terminal distribution system, which is the largest in the industry, to facilitate this effort. Customers needing large ethanol volumes to satisfy metropolitan markets like Chicago and Los Angeles look to us for the quantities needed. Small producers look to us as a means of getting to these expensive large markets they couldn’t otherwise penetrate. Our reputation for integrity and service delivery makes both the customer and the producer comfortable. That reputation was there long before Williams.

The energy bill that would have tripled the amount of ethanol used by the nation’s gas refiners by 2012 was declared dead last month. What were the sticking points? What efforts are being made to ensure its passage next year?

Most of the problems of the comprehensive Energy Bill were outside the ethanol issue, predominately ANWR, electricity reform, and conservation. We expect the Renewable Fuels Standard to be reintroduced in the 108th Congress, which will increase ethanol demand from about 2 billion gallons per year today to 5 billion gallons by 2012. There likely will be some minor changes in the legislation, which is being supported by the corn growers, the ethanol industry and, believe it or not, the petroleum industry. The Bush administration is strongly supportive of ethanol, as is the Speaker of the House and Minority Leader of the Senate. Ethanol enjoys strong bipartisan support particularly in the Midwest.

How supportive are area businesses of ethanol? State government? Consumers?

Area businesses have been very supportive of ethanol, as evidenced by Caterpillar’s involvement in our fuel cell demonstration project. Many small area companies depend upon Williams for a significant business relationship. State government representatives from both parties have always been supportive, as has Congressman LaHood. More than 60 percent of the gasoline sold in Illinois contains 10 percent ethanol. You don’t achieve that market penetration without good consumer acceptance.

What can citizens do to support the ethanol bill?

Let Congressman LaHood know of your support for ethanol. Ray is an ethanol champion, and letters from his constituents support him in this effort. IBI