MITCHELL – The $500 million soybean processing plant coming to Davison County is set to be among the highest costing projects in South Dakota history.
The facility is almost certain to be built, according to Jeff Bathke, Davison County Planning and Zoning Administrator. The next step in the process for its construction will be at an upcoming Davison County Commission meeting, where officials will green-light a tax break for assistance in infrastructure costs.
Tom Kersting, the CEO at South Dakota Soybean Processors, told the Mitchell Republic on Wednesday that the company is still "quite a ways down the road from securing funding," and that "there are a lot of moving parts, but we are excited to hopefully bring this project to the area."
South Dakota Soybean Processors is the company that will own and operate the Mitchell facility. It also has soybean processing sites in Volga and St. Lawrence.
If the plant gets built, it will become one of the most expensive projects in South Dakota history. But even at $500 million, it could be bumped down the list rather quickly.
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The Mitchell plant is part of a wave of mega-projects that have taken shape across the state in the last couple of years, none of which have been built yet.
“Just the size of this plant is unprecedented,” Bathke said.
A jet biofuel facility that is expected to cost $1 billion is set to be built in Lake Preston, located 80 miles northeast of Mitchell. Another $1.1 billion proposal for a meatpacking plant is being discussed in Rapid City. There are also plans in the works for a $500 million Pork processing plant in Sioux Falls.
Another significant project in South Dakota was the Dakota Access Pipeline, which cost $820 million but it is currently inactive.
But there are many wondering — why does the plant cost so much money? What is going into that $500 million price tag?
One reason for the high cost is inflation.
Trends as of 2021 suggest that recent surges in construction prices can be attributed to increased inflation of the cost of building materials, and construction labor shortages.
Evidence of this can be seen in the way building costs have risen in recent years, and how the cost of the soybean plant itself has ballooned since being rolled out in 2022.
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An ethanol plant in Onida created by Ringneck Energy in 2018 had $150 million in construction costs. In 2019, Agropur built expansions to its cheese processing plant in Lake Norden costing $250 million.
Since then, building costs have significantly increased.
“When the project was announced in February of 2022, SDSP had it pegged at $400 million and we have been combating inflation and supply chain issues to keep costs manageable,” says Kyle Peters of A1 Development Solutions, the development group South Dakota Soybean Processors hired to handle permitting and public and government relations.
Those numbers have since then increased to their current figure of $503 million. With an increase of approximately $100 million in the past year, it is clear that inflation has greatly bloated the price, and could potentially cause it to rise further.
As to what the money will be used for, a cost estimation was released on Feb. 10 showing a breakdown of how that $503 million will be used.
Conducted by KFI Engineers, the group chosen by South Dakota Soybean to engineer the project, the numbers reveal that the majority of the money, $367 million, is going toward construction costs, including $82 million in equipment; $52 million in a line item titled "grains;" $51 million for mechanical contractors; $50 million for electrical / controls construction; $28 million for structural steel; $21 million for site work and underground utilities; $15 million for concrete and masonry; $12 million for rail construction; and other costs including specialty contractors.
There are $36.8 million set aside for project contingency funds.
The date for the Davison County Commission's hearing to approve the tax increment financing for the plant has not been set. It was originally to be held on April 18, but was postponed due to a scheduled absence.
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