Hugoton branches out with new dairy plant

8/17/2012

Brownback on hand for groundbreaking.

BY RACHAEL GRAY

rgray@gctelegram.com

HUGOTON — Realizing some avenues of industry may not be sustainable long-term, Stevens County commissioners and economic developers are developing another form of revenue in the area — dairy processing.

Gov. Sam Brownback visited Hugoton Thursday to help break ground for Kansas Dairy Ingredients, a dairy ingredient and cheese processing plant that will create 60 jobs in Stevens County upon completion.

The first phase of the $20 million project could be implemented by Jan. 15, 2013, according to KDI officials. Representatives from JE Dunn Construction, which houses an office in Topeka, said they would be hiring local workers to help complete the project.

The project has been in the works for about five years, KDI representatives said.

Dave Bezone, chairman of the Stevens County Commission, has been a commissioner for 12 years. In those years, he said he's learned Stevens County is very fortunate in development and industry.

He said the oil and gas base that the county has helps the valuation and pays for a lot of projects that are necessary in the community.

"But we start to realize that gas and oil isn't going to be here forever because it is a depletable asset, so we're going to lose it," he said.

Bezone said he's glad commissioners and developers took the initiative to move on the dairy processing plant.

"Hopefully, this is just the beginning," he said.

Steve Morris, R-Hugoton, state senate president, said Thursday was an exciting day for Hugoton, Stevens County and southwest Kansas.

"Twenty years ago, you didn't see dairy cows around this part of the state, maybe a few milk cows here and there. Now there's 130,000. That's quite a transformation over that period of time. With this project, I anticipate that number will grow significantly over the next several years," he said.

Morris said, as far as economic development goes, it's difficult for this side of the state to lure industry.

"But what we do get, we draw to our strengths. And our strength is agriculture," he said.

Morris said the dairy processing plant, coupled with the Abengoa Bioenergy plant, makes Stevens County the envy of other cities and towns in the state.

The Abengoa plant is a $350 million commercial-scale facility which aims to turn crop residue like corn stalks and materials such as switchgrass into biofuel. The plant originally was proposed in 2007 and is slated to produce 23 million gallons a year of ethanol fuel from the plant matter, known as cellulosic ethanol. The Spain-based company received a $132.4 million loan guarantee from the U.S. Department of Energy in 2011 to assist in development of the project.

Morris thanked commissioners for their foresight in developing the dairy processing project.

Neal Gillespie, director of Stevens County Economic Development, said the project diversifies the economy and adds to the tax base, in addition to providing good jobs that will support business.

Gillespie said the development may help spur additional development.

"I think there's going to be some spin-off businesses," he said.

Brian Heman, a dairy farmer in Stevens County, said he's been involved first-hand with the project. He's been a dairy farmer in Stevens County for seven years and for 12 years in southwest Kansas.

Heman said the plant will help level the volatile dairy markets and promote dairy development in the region.

"It's a great day for us in our business. We actually worked on a partnership that will enable us to be sustainable for a long time. It's a bargain-based model, so it won't be susceptible to the volatility of the markets," he said.

Heman said the markets have been volatile, and 2009 was particularly hard on the dairy industry. Many Kansas families pulled out of the business, he said. With high feed prices, the dairy market is again seeing volatility.

"Under this model it will allow people to forecast their futures and be able to willingly invest in the dairy industry without having the risk of the volatility in markets. ... So we're trying to change the industry so it's beneficial for everyone involved," he said.

Tim Gomez, chief operating officer for Kansas Dairy Ingredients, agreed.

"This generates a case for stability, as well as an opportunity for supporting businesses," he said.

"I think this means a lot not just for us, but for the entire area of southwest Kansas from a standpoint of bringing manufacturing to an already-thriving industry. ...," he said.

Brownback said the move is the logical next step in expanding the dairy industry in Kansas.

"This is critical for building the dairy complex in Kansas," he said. He said this project and the Abengoa project will help recruit workers to Stevens County.

Brownback also said the development of oil and gas in southwest Kansas may bring more people and industry to the area.

But the backbone is agriculture, he said.

"It builds on our strengths. We are good at agriculture. We've really gotten the beef processing industry. Now we want to do a similar movement with dairy and the dairy processing industry," he said.

Brownback said he sees more cheese and processing plants coming to the area, in addition to more dairy cows. He said he would like to see the High Plains develop more animal agriculture. He said that's dependent upon the preservation of the Ogallala Aquifer.

"We need to work on preserving the long-term viability of this aquifer," he said.

Upon opening, the KDI facility will begin processing approximately 1 million pounds of milk per day to produce fractionated dairy ingredients. Company officials said the plant will expand to produce cheese and other dry-milk ingredients and be on track to process up to 2.5 million pounds of milk per day by the end of 2013.

Officials have said last year's legislation to create Rural Opportunity Zones in counties with declining populations, including several in western Kansas, will add an incentive for people to seek employment and residency in the area. Stevens County is not among the counties included in the ROZ initiative, but Kansas Secretary of Commerce Pat George has said that Hugoton is close enough to ROZs in Stanton and Morton counties that people may settle there and commute.