April 2014 Ethanol Producer Magazine by BBI International

INSIDE: MEETING THE DEMAND FOR HIGH-PURITY LIGNIN APRIL 2014

Looking Up America’s First Big Cellulosic Ethanol Plants Rise to Completion Page 28

Plus:

KiOR’s Teachable Startup Experience

Page 34

And: New and Novel Sugars Arrive

Page 38

www.EthanolProducer.com

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Learn more at GrowthEnergy.org

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CONTENTS

APRIL 2014

DEPARTMENTS 6

EDITOR'S NOTE

AD INDEX

THE WAY I SEE IT

EVENTS CALENDAR

VIEW FROM THE HILL

VOLUME 20 ISSUE 4

FEATURES

Here We Go By Tom Bryan

It's Time to Focus on the Elephant in the Corner By Mike Bryan

Moving Toward a Clean and Renewable Future By Bob Dinneen

DRIVE

The Real Cost of Food By Tom Buis

GRASSROOTS VOICE

EUROPE CALLING

BUSINESS BRIEFS

COMMODITIES

DISTILLED

BUSINESS MATTERS

MARKETPLACE

How RINs Really Work, and Why Big Oil Hates Them By Ron Lamberty

CONSTRUCTION

PROCESS

America’s first big cellulosic ethanol plants will start up in succession this year. By Chris Hanson

KiOR isn’t an ethanol producer, but its successes and setbacks are informing. By Ron Kotrba

Early Risers

Optimization Outlays

EU’s Struggle for E10 By Robert Vierhout

Legal Argument Challenges EPA Authority to Change RFS By Alexander F. Logemann

ON THE COVER Welders work on a distillers grains silo at Poet-DSM’s Emmetsburg, Iowa, cellulosic plant. PHOTO: POET-DSM

INNOVATION

BIOREFINING

Existing ethanol producers are sizing up some sweet next-generation feedstocks. By Susanne Retka Schill

The market wants high-purity lignin. Canada’s Lignol still aims to make it. By Tom Bryan

The Sugar Producers

Lignin’s Big Leap

Ethanol Producer Magazine: (USPS No. 023-974) April 2014, Vol. 20, Issue 4. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

4 | Ethanol Producer Magazine | APRIL 2014

EDITOR'S NOTE

Here We Go Finally, it’s about to happen. Two of America’s first big cellulosic ethanol plants—the kind we’ve all been waiting years to see—are now substantially finished and in startup. I don’t want to jinx

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

their commissioning by overstating their completion, but Abengoa Bioenergy and PoetDSM Advanced Biofuels—and later, DuPont—will be producing big volumes of ethanol from corn residue this year. Taking nothing away from the accomplishments of other cellulosic ethanol plants now operating or being commissioned, the sheer size of these high-profile facilities in Iowa and Kansas simply merits excitement. As we report in “Early Risers,” on page 28, by the end of the second quarter, both Abengoa and Poet-DSM will have their plants online—producing 25 million gallons apiece—and America will be on its way to producing 50 million to 60 million gallons of cellulosic ethanol annually. DuPont is expected to follow, adding another 30 million gallons of capacity by year’s end. History tells us it won’t be simple. To date, there have only been a few large-scale cellulosic biofuel plants commissioned worldwide, and each has faced steep operational hurdles. The Beta Renewables’ cellulosic ethanol plant in Crescentino, Italy, and Ineos Bio’s Indian River BioEnergy Center, for example, continue to wade through optimization challenges. For context, our page-34 story, “Optimization Outlays,” examines the scale-up learning curve that’s being experienced by KiOR in Columbus, Miss. It’s not ethanol that KiOR makes, but rather cellulosic gasoline and diesel fuel from Southern Yellow Pine. We report that the company is working to increase the operational output of its plant, and from the look of its fourth-quarter production numbers, making progress. Examining other advanced biofuel aspirations, we profile two companies employing widely different approaches to produce sugars for next-generation ethanol. “The Sugar Producers,” on page 38, explains that Sweetwater Energy and Proterro are pursuing unrelated platforms that strive for similar ends: supplementing ethanol plant fermentation broths with sugar water. Sweetwater has offtake agreements in place with ethanol plants and is much further along than Proterra, but both platforms are promising. Finally, this month, we revisit the company that essentially introduced the U.S. biofuels industry to the latent value of high-purity lignin. In “Lignin’s Big Leap,” on page 42, we report that Canada-based Lignol Innovations Ltd. is still intent on scaling up its biorefining process and creating a market for its super-clean lignin. But like so many other biobased products, the real challenge is not selling the stuff, but making it. .

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | APRIL 2014

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 20 ISSUE 4

ADVERTISER INDEX EDITORIAL

2014 International Fuel Ethanol Workshop & Expo

8-9

President & Editor in Chief Tom Bryan tbryan@bbiinternational.com

2014 National Advanced Biofuels Conference & Expo

2014 National Ethanol Conference

BetaTec Hop Products

Bilfinger Water Technologies

Buckman

Cashco, Inc.

DuPont Industrial Biosciences

Enerkem

Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Holly Jessen hjessen@bbiinternational.com Senior Editior Susanne Retka Schill sretkaschill@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com Staff Writer Chris Hanson chanson@bbiinternational.com

Fagen, Inc.

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

ART

Fluid Quip Process Technologies, LLC

Greenbelt Resources Corporation

36 2

Growth Energy

Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Raquel Boushee rboushee@bbiinternational.com

ICM, Inc.

Iowa Economic Development Authority

Lallemand Biofuels & Distilled Spirits

PUBLISHING Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com

SALES Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com Senior Account Manager Chip Shereck cshereck@bbiinternational.com Marketing Director John Nelson jnelson@bbiinternational.com

Nalco, an Ecolab Company

Novozymes

POET-DSM Advanced Biofuels

Sulzer Pumps Solutions, Inc.

Tower Performance, Inc.

Vecoplan LLC

Vogelbusch USA, Inc.

Wabash Power Equipment Co.

West Salem Machinery Co.

WINBCO

Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or service@bbiinternational.com. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to hjessen@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

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#FEW14 | @ethanolmagazine

THE WAY I SEE IT

It’s Time to Focus on the Elephant in the Corner By Mike Bryan

Debate rages over the renewable fuel standard (RFS) that mandates the use of biofuels such as ethanol and biodiesel. At the

same time, we have had a market mandate for fossil fuels, in particular gasoline, for more than 100 years because there was no competition. We have gone from sending ships out from Nantucket, Mass., to kill whales for their oil to burning million-year-old dead vegetation buried deep in the earth in the form of oil and coal. It doesn’t seem like much progress has been made in terms of energy, but in reality, it’s the natural progression of things. The sun can generate more power than we could ever use and creates the wind that can generate enormous energy when harnessed. There are billions of tons of biomass energy that go largely untapped and powerful oceans that create enough energy to stagger the imagination. Yet, we plod along, debating whether we should mandate the use of renewable fuels like ethanol and biodiesel as if that were really important in the scheme of things. The world is heating up, and anyone who thinks that human activity is not at the root of that trend is simply ignoring science. It’s time to think big, to think on a global scale, to stop focusing on the gnat on the table when there is an elephant standing in the corner. Ethanol is a transitional fuel, just like fossil fuels have provided a transition from whale oil and wood. But first, we

10 | Ethanol Producer Magazine | APRIL 2014

have to let go of the past and accept the transition to a new era of renewable, cleaner energy. At some point in the future, the ethanol industry may even have to accept the eventual transition from corn-based ethanol to cellulosic ethanol and, eventually, to an entirely new type of fuel altogether. It’s natural to cling to the past, but it’s time to let go, open our arms to the future and embrace the wonderful energy gifts that nature has laid at our feet—the sun, the wind, the oceans, biomass and geothermal energy. I imagine our great-greatgrandchildren will wonder why we continued to pollute their earth with fossil fuels when there was so much clean energy at our disposal. They will be amazed at our lack of energy ingenuity, just as we are stunned that we actually killed whales by the thousands for their oil. In time, automobiles can and will be powered with electricity generated by nature’s clean resources. It’s time to get past the debate about the RFS and accept the fact that ethanol and biodiesel are just logical steps in the energy transition from where we are today, to where we need to be tomorrow. That’s the way I see it!

Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com

EVENTS CALENDAR International Fuel Ethanol Workshop & Expo June 9 -12, 2014 Indiana Convention Center Indianapolis, Indiana Now in its 30th year, the FEW provides the global ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. The FEW is the largest, longest running ethanol conference in the world—and the only event powered by Ethanol Producer Magazine. 866-746-8385 | www.fuelethanolworkshop.com

National Advanced Biofuels Conference & Expo October 13-15, 2014 Hyatt Minneapolis Minneapolis, Minnesota Produced by BBI International, this event will feature the world of advanced biofuels and biobased chemicals— technology scale-up, project finance, policy, national markets and more—with a core focus on the industrial, petroleum and agribusiness alliances defining the national advanced biofuels industry. With a vertically integrated program and audience, this event is tailored for industry professionals engaged in producing, developing and deploying advanced biofuels, biobased platform chemicals, polymers and other renewable molecules that have the potential to meet or exceed the performance of petroleum-derived products. 866-746-8385 | www.advancedbiofuelsconference.com

National Ethanol Conference February 18-20, 2015 Gaylord Texan Resort & Convention Center Grapevine, Texas The NEC provides attendees with timely information on critical regulatory, marketing and policy issues facing the ethanol industry. Experts will speak to the current market situation, and address how we as an industry can continue to grow through innovation, new technologies and feedstocks, and by developing more diverse and global markets.

International Biomass Conference & Expo April 20-22, 2015 Minneapolis Convention Center, Minneapolis, Minnesota Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop – the world’s premier educational and networking junction for all biomass industries. 866-746-8385 | www.biomassconference.com

VIEW FROM THE HILL

Moving Toward a Clean and Renewable Future By Bob Dinneen

The year 1970 marked a distinct turning point in the way Americans view the environment.

Wisconsin Sen. Gaylord Nelson, along with concerned citizens across the country, began the Earth Day movement that changed America’s priorities for the next 44 years. The creation of Earth Day on April 22, 1970, began to shift the way we think about environmental policies, forcing us to consider the ecological consequences of fossil fuel production and the clean energy potential of renewable fuels. Flash forward to today. It’s now 2014 and the push for clean renewable fuels is in full swing. Ethanol has taken off and is now blended into 97 percent of U.S. gasoline, effectively replacing 476 million barrels of imported oil. A new study conducted by Life Cycle Associates, and commissioned by the Renewable Fuels Association, recently found that, “As the average carbon intensity of petroleum is gradually increasing, the carbon intensity of corn ethanol is declining.” The study delves deeper into the numbers, finding that corn ethanol reduces greenhouse gas (GHG) emissions by 32 percent compared to gasoline, including indirect land use change. Additionally, corn ethanol reduces GHG emissions by 37 percent compared to tight oil from fracking and 40 percent compared to tar sands. Sen. Nelson would have been proud of these environmental enhancing accomplishments. But we won’t stop there. Out of the different feedstocks that produce ethanol, cellulosic is the least carbon intensive of all. Therefore, as we expand and move toward a cleaner, greener future, the commercial success of cellulosic ethanol is critical to both political and market success for all renewables.

12 | Ethanol Producer Magazine | APRIL 2014

As we speak, Ineos Bio is producing ethanol out of vegetative, yard and municipal solid waste. Abengoa BioEnergy and Poet-DSM are expected to start cellulosic ethanol production early this year. Additional facilities are under construction including DuPont Cellulosic Ethanol and Quad County Corn Processors’ bolt-on facility. While we see success both in reducing greenhouse gas emissions and advancement into next generation biofuels, the ethanol industry is under attack today. The U.S. EPA is pushing to reduce the levels of ethanol blended into gasoline. The 2007 passage of the Energy Independence and Security Act led to dramatic expansion of corn-based ethanol. That success laid the foundation for the advancements in cellulosic and advanced ethanol. We will continue fighting to keep the renewable fuel standard at the levels Congress intended so there is stability and growth in the ethanol market and increased investment in next-generation biofuels. Sen. Nelson stated on the 25th anniversary of Earth Day, "The opportunity for a gradual but complete break with our destructive environmental history and a new beginning is at hand…. We can measure up to the challenge if we have the will to do so—that is the only question. I am optimistic that this generation will have the foresight and the will to begin the task of forging a sustainable society." Yes, Sen. Nelson, we are up to the challenge. Is the EPA? Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

FEBRUARY 17-19, 2014 • JW MARRIOTT ORLANDO ORLANDO, FLORIDA

THANK YOU TO OUR SPONSORS!

DRIVE

The Real Cost of Food By Tom Buis

Time and again, we have heard the claims about how ethanol is the cause of rising food prices. The ethanol industry has been accused of driving up

costs for everything from chicken wings to tortillas. Some of these tall tales have even gained traction in the press. Big Oil and some food special interest groups continue to use misinformation to try to convince consumers that they are paying higher prices for food because of the renewable fuel standard (RFS) despite the facts. Corn, the major feedstock for U.S. ethanol production, is only a fraction of overall food and grain costs. For every $1 spent at the grocery store, more than 85.5 cents goes to pay for secondary operations such as processing, packaging and marketing. The less than 15.5 cents remaining goes to farmers and, of that, about 3 pennies to corn producers. Digging deeper, it is obvious the falsehoods about the price of food are even more off base. No. 2 yellow corn used in the ethanol process is primarily used for livestock and poultry feed. Ethanol production uses only the starch from the corn kernel and for every bushel of corn used to produce ethanol, 33 percent goes back into the livestock feed chain in the form of a high-protein, competitively priced animal feed product. This coproduct replaces corn and soybean acreage that would otherwise be devoted to animal feed production. According to analysis by Air Improvement Resource Inc., only 17.5 percent of net corn acres are used to produce ethanol, not the 40 percent claimed by the antiethanol crowd. So, if corn isn’t driving the cost of food, as special interest groups would like you to believe, what is? Well, the answer is quite simple—energy costs. According to the World Bank, United Nations, USDA and countless other objective economic studies, energy costs are the leading contributor to rising food prices. Ethanol is actually reducing fuel costs for consumers and renewable fuels can help constrain the energy costs associated with food production, processing and merchandizing, while reducing our addiction to foreign oil.

The consumer price index for food since the RFS was implemented in 2008 has very closely tracked the increases in the overall index, growing at about 3 percent per year. In 2014, the indices are expected to continue to grow at similar rates. Consumer gasoline prices, however, have increased by more than 25 percent on average per year over the same period. In effect, consumers are getting hit twice by high fuel prices. First, they pay for the gasoline they need for family transportation. Then, they pay higher prices for the food they purchase because of energy costs. Food costs will only drop if Big Food is willing to pass a portion of its high profits on to the consumers. Despite their accusations of unbearable food costs resulting from our renewable energy policy, the National Restaurant Association acknowledged its members have a long record of growth, and expect to reach $683.4 billion in sales in 2014 alone, nearly double their sales in 2000. The most damaging fact to Big Oil’s and Big Food’s false claims is the price of corn itself. Though outside factors, such as adverse weather, can cause price spikes from time to time, farm prices for corn have historically been near the cost of production and the current year is no exception to this trend. Don’t be fooled, the oil and food industries that seek to limit consumer options at the pump and abolish the renewable fuel standard are doing so to protect their control over our food and energy markets, plain and simple. When you peel back all the rhetoric and hype, this is simply a battle about market share—no more, no less, and Big Oil and Big Food will say and do anything to maintain their record profits and near monopolistic control. When the truth is laid out in an open and honest fashion, consumers should realize they don’t have to choose between high quality, affordable food and renewable energy that is reducing their gas bills. First-generation ethanol reduces our dependence on foreign oil, revitalizes our rural communities, improves our environment and employs nearly 400,000 workers while driving down fuel costs for consumers. The next generation will make an even greater impact. America’s farm families will continue to feed us while American workers in the U.S. ethanol industry produce the fuel to power our cars. Author: Tom Buis CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org

14 | Ethanol Producer Magazine | APRIL 2014

GRASSROOTS VOICE

How RINs Really Work, and Why Big Oil Hates Them By Ron Lamberty

One of the central characters in Big Oil’s misinformation campaign on the renewable fuel standard (RFS) continues to be the RIN—short for renewable identification number. As most of you

reading this know, a RIN is a 38-digit number that serves as a “proof of purchase seal” for oil companies to submit to the U.S. EPA as proof they’ve complied with terms of the RFS. Unfortunately, the Big Oil PR machine has so thoroughly demonized and mischaracterized RINs that even really smart people who should understand basic principles of economics have completely “bought in” to the myth that increased RIN prices equal increased prices at the pump. The truth is, RINs can only increase the price of fuel that does not contain ethanol, because ethanol blends come complete with their own RIN attached—no extra charge. In the real world, over the past 15 months, higher RIN prices helped independent gas station and convenience store owners sell more renewable fuel than they’ve ever sold, well above Big Oil’s imaginary 10 percent blend wall—at pump prices well below lower-octane nonblended fuels. Marketers who have sold E85 for years priced more aggressively, knowing that the RINs they would receive would more than make up for lower pump prices. More new E85 fueling locations were added last year than in any of the past five years. Increased RIN prices helped expand the availability of renewable fuels as station owners did the math and realized that an investment in equipment to sell more renewable fuels would have a quick payback. The number of retailers offering E15 and higher ethanol blends continues to expand this year, despite Big Oil contract restrictions and fear of the mythical “liability” bogeyman, because independent station owners recognize the opportunities offered by RINs and greater renewable fuel sales. The ability for independent fuel marketers to sell renewable fuels at lower prices while improving profit margins by selling RINs, has given independent fuel marketers something they have never had before: an advantage over Big Oil. If Joe’s Corner Convenience Store and Exxon/Mobil each get

16 | Ethanol Producer Magazine | APRIL 2014

8,000 gallons of E10, they each get 800 RINs. Exxon/Mobil has to turn theirs in to EPA. Joe doesn’t refine products that harm the environment, so he can sell his RINs. So far this year, Joe’s RINs would be worth about 400 bucks. That means he could sell his E10 for 5 cents less than the oil company or pass 3 cents along to customers and make 2 cents more profit. Or he could put $400 toward a pump upgrade to sell E15 or E85 or any other blend to get him more RINs. Either way, until Exxon/Mobil sells more renewables than the RFS requires, it can’t compete with Joe. And that’s why Big Oil hates RINs. This is not a position familiar to them, and not one I imagine they see themselves in much longer. A couple of years ago, West Virginia Sen. Jay Rockefeller became exasperated at the CEOs of the Big Five oil companies in a Senate hearing, and told them they were “Deeply, profoundly out of touch,” and “deeply and profoundly committed to sharing nothing." Rockefeller said the Big Oil execs got that way because “You never lose. You've never lost. You always prevail. You always prevail in the halls of Congress, and you do that for a whole variety of reasons, because of your lobbyists, because of your friends, because of all the places where you do business. And I don't really know any other business that never loses," he said. Big Oil knows they don’t have to lose on RINs, either. With a minimal commitment to E15 and/or E85, oil companies would have all the RINs they need and extras for future years. RIN prices would retreat to the levels of two years ago—the last time Big Oil bought more renewables than the RFS required. But Big Oil won’t do that, because even minimal E15 exposes 5 percent of a market that Big Oil currently does not have to worry about winning or losing. It may be hubris to amend John D. “Standard Oil” Rockefeller’s great-grandson’s analysis of oil company behavior, but I would suggest that the main reason Big Oil doesn’t lose is that they very rarely have to play the game. Author: Ron Lamberty Senior Vice President, American Coalition for Ethanol 605-334-3381 rlamberty@ethanol.org

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How deep will you go for more ethanol, more corn oil, and less energy?

EUROPE CALLING

EU’s Struggle for E10 By Robert Vierhout

We all know how much the American industry is struggling to get E15 onto the market. The

powerful opposition of fossil fuel, automobile and food industries is effectively blocking the rollout, scaremongering car owners that E15 is bad for their engines. Even though E15 is probably the most tested fuel in the U.S., this idea that E15 could harm has an effect. Only a shred of doubt seems to be enough to make consumers concerned and sceptical. For European ethanol producers, E15 is still a distant dream. For us, the struggle is to get from E5 to E10. The legislation to offer E10 has been in place since 2009 but its use, even five years after the legislation came into force, is still very disappointing. There are only three countries in Europe where one can buy E10: France, Germany and Finland. Sweden, the Netherlands, Belgium, Lithuania, Bulgaria and the U.K. are considering E10 in the future, but the “accidents” that occurred when E10 was introduced in Germany are not yet forgotten and explain the slow pace of implementation elsewhere. The argument revolving around potential engine damage from E10 was used by the German car and oil industries. It resonates with the average motorist who gets scared that one day his car will stop if he fills up with E10. Not surprisingly, E10 sales had a poor start in Germany when the fuel was introduced in early 2011. But remarkably, its share is continuously increasing and now stands at around 17 percent of gasoline sales—not entirely bad for a fuel that was held with such suspicion. E10 is not only cheaper, but it performs well too. Since its introduction, not a single car failure has been reported. So much for the scaremongering. In France, the E10 share is now close to 30 percent of gasoline sales. And, as in Germany, the growth is on the back of shrinking gasoline consumption. France is topping Germany because the E10 introduction was handled better by the government and car/fuel stakeholders. In the U.K., the government postponed the introduction of E10, referring to the problems in Germany (what problems?) and saying indirect land use change policy should be resolved first at the EU level.

18 | Ethanol Producer Magazine | APRIL 2014

Now a new witch hunt has started. A U.K. car magazine measured fuel consumption and emissions from cars running on E10. Tests on four cars found that compared to 100 percent fossil gasoline, the average fuel consumption was 7.7 percent higher higher with E10, and as a consequence, increased tailpipe emissions. This contrasts markedly with Finnish research from 2011 that found little difference between E5 and E10 consumption. Some basic errors must have been committed during the U.K. tests; fuel consumption cannot rise that much when using E10 as suggested by this research. The higher tailpipe emissions are understandable, but do not reflect the true lifecycle emissions of the two fuels. Only if the emissions of biofuels are measured on a well-to-wheel basis can we have accurate data on the greenhouse gas emissions of biofuels compared to fossil fuels. The writers of the U.K. magazine article gave the final blow to E10 by using the old argument: "The new E10 fuel will cost U.K. motorists more." But the article didn't indicate in any way how much that additional cost would be. The messages they gave were clear: “More fuel consumption, more emissions and more expensive. Let's forget about E10.” Why did the writers not bother looking at other EU countries that have introduced E10? If they had done so, they would see that E10 is cheaper, there are no car damages reported and a Finnish study concluded E10 fuel consumption is just 1.5 percent higher compared to E5. Also, several very technical studies demonstrate ethanol’s higher octane delivers benefits to engine performance, improves the combustion process and increases fuel efficiency. The negative E10 story, however, fits well with the many other supposed negative impacts of biofuels that appear in the media, of which most, if not all, have been proven to be false. Just like the myths that biofuels cause food price inflation, massive land use effects and land grabbing—the U.K. E10-study is bogus, too. Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

Put BetaTecÂŽ natural hop extracts to work in your fermentation process to replace antibiotics and enhance yeast propagation. IsoStabÂŽ is the natural way to effectively control gram-positive bacteria while eliminating antibiotics and harsh chemicals. Plus, antibiotic-free DDGS adds value to your co-products. VitaHopÂŽ Silver yeast nutrient enhances yeast performance and vitality, inducing faster fermentations and larger yields. Combined with BetaTecÂŽ fermentation expertise and training, these technologies will significantly increase your plantâ&#x20AC;&#x2122;s efficiency. BetaTecÂŽâ&#x20AC;Śthe natural hop to higher profits. For more information specific to fuel ethanol producers, visit www.bthp.info. 4HJ(Y[O\Y )S]K :\P[L >HZOPUN[VU +* ;! -! www.betatechopproducts.com

BUSINESS BRIEFS

People, Partnerships & Deals

trial uses for corn, domestic and international markets. He has also represented the board on national research, production and stewardship committees, in addition to being chosen to participate in two national strategic planning initiatives.

Brunkhorst

Hutchens

The board of directors of the Nebraska Corn Board has selected Kelly Brunkhorst to serve as the organizationâ&#x20AC;&#x2122;s new executive director, effective July 30. He will replace Don Hutchens, who will retire after holding the position for 27 years. Brunkhorst currently serves as the director of research for the Nebraska Corn Board. He began working for the organization in 2004 after serving as the vice president of operations and education for the Nebraska Grain & Feed Association. During his employment with the Nebraska Corn Board, Brunkhorst's work included research, grant writing, seed industry and first purchaser relations, and leadership on issues related to transportation, indus-

20 | Ethanol Producer Magazine | APRIL 2014

Vecoplan Integrated Controls has added Henry Gilliland to its electrical engineering team. Gilliland graduated from North Carolina State Gilliland University in 2012 and brings three years of practical experience to his new position. He worked on a co-op basis at Highland Industries while earning his degree and later worked as a full-time engineer with the company. His responsibilities include working with senior engineers to coordinate the design and development of individual machine

control panels and turnkey integrated control systems for industrial processing lines and manufacturing plants.

Aventine Renewable Energy Inc. has named Pam Cooksey as purchasing manager of its 165 MMgy wet mill and dry mill ethanol plants in Pekin, Ill. Prior to joining Aventine, Cooksey Cooksey spent 20 years with Tate & Lyle in Lafayette, Ind. Her responsibilities included purchasing capital expenditures equipment and negotiating contracts and contractor labor rates on a national and global level. She also spent 13 years at Archer Daniels Midland Co., where she worked in purchasing for the corn sweetener division.

Lallemand Biofuels & Distilled Spirits, a global provider of fermentation ingredients to the fuel and beverage alcohol industries, has appointed Angus Ballard Ballard as its new general manager. Ballard joined Lallemand in 2002 as director of operations for the North America Baker’s Yeast division and then transitioned into the role of corporate director of procurement and supply chain for Lallemand Inc. in 2007. He has 18 years of experience in the yeast industry and has most recently been responsible for Lallemand’s Global Dry Yeast export business.

DuPont has joined the Advanced Ethanol Council. The company’s commercial-scale cellulosic ethanol facility is currently under construction in Nevada, Iowa. Once complete, the 33 MMgy facil-

ity will utilize a fully integrated end-to-end production system that will be available to license globally. DuPont also operates a demonstration facility in Vonore, Tenn., that has confirmed the economics of its biomass procurement strategy and demonstrated the value proposition of its technology.

Garner Industries, manufacturer of BinMaster inventory management systems and bin level indicators, has promoted Jenny Christensen to vice president of marketing for both the Garner and BinMaster divisions. She is responsible for driving the company’s brand strategy and revenue growth through new products and the use of innovative marketing platforms to expand the company’s diverse customer base. Christensen joined Garner in 2008 as director of marketing.

organization provides training for a variety of professions, including those involved in transload operations, unit train operations, and agricultural rail terminals. Licht’s experience includes transload terminal site development, industrial and military railway training and safety programs.

The NCERC at Southern Illinois University Edwardsville has expanded its research team with the addition of Arun Athmanathan, a postdoctoral fellow specializing in celluAthmanathan losic and advanced biofuels research. He has experience in the characterization and fermentation of many cellulosic and advanced feedstocks, including corn stover and sweet sorghum bagasse.

Rail Safe Training Inc. has hired John Licht has market director. The

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APRIL 2014 | Ethanol Producer Magazine | 21

COMMODITIES

Prices & Market Analyses

Natural Gas Report

Advantage to spot pricing natural gas disappears Feb. 10—End users of natural gas enjoy a range of pricing options: buy gas in the spot index, on a monthly index or at a fixed price for a variety of terms ranging from a single day to multiple years. Budget-oriented consumers tend to favor longer-term fixed price purchases to avoid volatility in pricing and more easily forecast costs. The ethanol industry leans toward shorter-term monthly index or spot priced purchases, owing to the margin-driven nature of the business and the uncertainty of future markets. An examination of historical pricing shows a slight pricing advantage for spot transactions. Looking at the Ventura Hub in Iowa from January 2008 through November 2013, spot prices were discounted an average of 5 cents to the corresponding monthly index. Although spot prices were as high as 89 cents over, they also averaged as much as $1.67 below. This is a function of a number of drivers, including a declining price trend, an upward-sloping forward curve and a stronger relationship to the futures market for monthly indexes than the spot. Thus, purchase portfolios have been heavily weighted toward the spot market. The past three months flipped the historical script. December 2013 spot pricing at Ventura averaged 87 cents above the monthly

by Ben Straus

index, and when the dust settled after January, the spot averaged a $3.07 premium to the monthly. Including the newest data in the aggregate calculation erased any meaningful pricing advantage for the spot market. Consumers focused on short-term pricing instruments might want to revisit their thinking on spot versus monthly index pricing, potentially splitting purchases between the two.

Corn Report

Lower corn values stimulate feed, export demand Feb. 10—The corn market has been aggressive toward the upside, giving corn producers higher prices in February. Through the fall, managed money pushed values lower, but a lower-than-anticipated carryout report in January allowed the market to find a bottom. Managed money pushed values higher on short liquidation, and the bounce was met with producer selling. Old crop values reached the upper $4.40s as producers pondered new crop sales. The first glimpse of planting intentions comes March 31. Until then, the market assumes demand is increasing on corn exports. The upside may be limited due to GMO issues in China. Currently, the USDA projects 1.6 billion bushels of corn to be exported, up from 869 million a year ago. Feed demand is projected at 5.3 billion bushels, up 965 million. This figure could be adjusted in the coming months as grain animal consuming units have declined in recent years, if the USDA can confirm this with the March stocks report. Subtle declines in feed demand could very well be offset by increases in exports. Globally, many analysts lowered Southern Hemisphere corn projections on less-than-optimal growing conditions, especially later in the production cycle. World ending stocks declined in February due 22 | Ethanol Producer Magazine | APRIL 2014

by Jason Sagebiel

to lower carryout in the U.S. and a reduction of Argentina corn production. The market that no one pays close attention to is FSU-15 (Ukraine), where production and exports increased. Despite “buying in” demand at lower values, corn’s upside is limited due to a near 1.5 billion bushel carryout.

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.957 Region

Spot

Rack

West Coast

2.250

2.850

Midwest

1.930

2.300

East Coast

2.330

2.574

DDGS Report

SOURCE: DTN

Logistics, hard winter conditions slow DDGS movement, markets remain strong by Sean Broderick Feb. 10—By mid-February, the market had rebounded even higher from the early January lows. The talk of Chinese rejections has abated, and business is close to being back to normal, albeit with an underlying fear of when, or if, the other shoe will drop in China. The hope is that approval is imminent for the MIR 162 corn trait that caused the rejection issue. Domestic buyers took advantage of January price drop, particularly in the West Coast markets. With positive cash flows for the first half of 2014, dairies there were locking in feed costs. Nearer to the plants, buyers are still operating hand to mouth. With railcars for DDGS moving very slowly, local truckloads have been trading at a steep discount—up to $35 per

ton below what a loaded railcar garners. Also, we have been hearing about plants slowing or shutting down due to ethanol cars not returning and tightness in natural gas supplies. Over all, the winter weather is not helping at all. DDGS pricing will continue to be influenced by what China does, or does not do, with its import pace and regulatory actions. South American crop conditions and early season planting prospects in the U.S. will also have an impact, making DDGS prices tough to predict. It does look as though plants will have opportunities to lock in most of their year at more than 120 percent of the value of local corn prices.

Regional Gasoline Prices ($/gallon)

Front Month Futures Price (RBOB) $2.748 Region

Spot

Rack

West Coast

2.901

2.833

Midwest

2.689

2.626

East Coast

2.737

2.837 SOURCE: DTN

DDGS Prices ($/ton) Location

Apr 2014

Mar 2014

Apr 2013

Minnesota

180

185

260

Chicago

225

214

285

Buffalo, N.Y.

215

220

267

Central Calif.

280

260

315

Central Fla.

262

252

309 SOURCE: CHS Inc.

Corn Futures Prices

(May Futures, $/bushel) Date

High

Low

Feb 7, 2014

4.50 1/2

4.45 3/4

4.50

Jan 7, 2014

4.38 1/4

4.33

4.33 3/4

Feb 7, 2013

7.23 1/2

7.11 1/4

7.12 SOURCE: FCStone

Cash Sorghum ($/bushel) Ethanol Report

Location

Tighter gasoline supplies lift ethanol futures Feb. 10—Continued reductions in gasoline supplies through early 2014 have created increased buyer interest in both the RBOB gasoline and ethanol markets. Total gasoline stocks fell steadily for each of the first five weeks of the year, according to Energy Information Administration data. With gasoline stocks well below the level a year ago and the five-year average, traders are expecting additional price strength to develop ahead of the traditional spring and summer driving seasons. Gasoline prices have continued to show strength in not only futures markets, but also in the spot and rack markets, as buyers try to gain access to additional product, while focusing on growing demand.

by Rick Kment

Ethanol futures have benefited from the tightness of gasoline supplies, but rising corn prices have weighed on production levels through early February. This is creating some additional price support in ethanol futures. Front-month markets rose 15 cents per gallon above the previous month’s levels as traders tried to keep up with expected demand growth as well as increased production costs due to higher corn prices. Supplies of both gasoline and ethanol are expected to tighten even further through the upcoming months as demand increases. This is likely to cause even further support in nearby energy prices.

Feb 7, 2014

Jan 16, 2014

Feb 22, 2013

Superior, Neb.

4.46

4.20

6.68

Beatrice, Neb.

4.14

3.98

6.58

Sublette, Kan.

4.30

4.14

6.72

Salina, Kan.

4.44

4.37

6.65

Triangle, Texas

4.37

4.20

6.63

Gulf, Texas

5.57

5.33

7.13

SOURCE: Sorghum Synergies

Natural Gas Prices ($/MMBtu) Location

Dec 31, 2013

Feb 12, 2014

Feb 13, 2013

NYMEX

4.23

4.82

3.23

NNG Ventura

4.86

8.20

3.29

CA Citygate

4.65

6.42

3.59

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production (1,000 barrels) Per Day

Month

End Stocks

Nov 2013

931

27,915

15,572

Oct 2013

903

27,995

15,771

Nov 2012

825

24,744

19,992

SOURCE: U.S. Energy Information Administration

APRIL 2014 | Ethanol Producer Magazine | 23

DISTILLED

Ethanol News & Trends

Cellulosic E20 fleet tested at demo plant in Germany Cellulosic ethanol is undergoing fleet testing in Germany. Clariant, Haltermann and Mercedes-Benz recently announced a 12-month project to test an E20 fuel made with cellulosic ethanol produced using Clariantâ&#x20AC;&#x2122;s sunliquid process at the companyâ&#x20AC;&#x2122;s 1,000-ton-per-year demonstration plant in Straubing, Germany. Haltermann, a German-based oil refiner, will blend the resulting ethanol with select components at its plant in Hamburg. According to Clariant, the specifications of the resulting fuel reflect potential European E20 fuel quality. A gas station on the Mercedes-Benz sites in Stuttgart-UntertĂźrkheim will dispense the E20 blend to test fleet vehicles. â&#x20AC;&#x153;The fleet test will demonstrate that the fuel is ready for market and technically compatible within series vehicles at a blending rate of 20 percent with super gasoline. This shows that second-generation biofuels based on agricultural residues are now technologically ready and available, not only in production but in application as well,â&#x20AC;? said Andre Koltermann, head of group biotechnology at Clariant.

2013 Cellulosic Fuel Production (in gallons)

Cellulosic Volumes

Statutory 2013 RFS Cellulosic Requirement

1 billion

Final 2013 RFS Cellulosic Requirement

D3 cellulosic biofuel

D7 cellulosic diesel

281,819

232,808

Cellulosic RINs Generated in 2013

6 million

D3 cellulosic biofuel

D7 cellulosic diesel

422,740

395,777

SOURCE: U.S. EPA

EPA to reconsider 2013 RFS cellulosic volumes The U.S. EPA has announced it will reconsider the cellulosic volume requirements of the 2013 renewable fuel standard (RFS). Last August, the agency finalized the 2013 RFS rulemaking, setting the cellulosic standard at 6 million gallons. The industry generated less than 1 million cellulosic renewable identification numbers (RINs) last year, however. The American Petroleum Institute and American Fuel & Petrochemical Manufacturers filed respective petitions with the EPA in October, asking that the 2013 cellulosic standard be revised.

In response to the petitions, EPA Administrator Gina McCarthy issued letters to the API and AFPM in January confirming that the petitions demonstrate that â&#x20AC;&#x153;the statutory criteria for reconsideration are satisfied.â&#x20AC;? Specifically, the petitions included information on reduced 2013 production estimates made by a cellulosic producer. McCarthy also indicated that the EPA will initiate a notice and comment rulemaking to reconsider the cellulosic portion of the final 2013 RFS rule.

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DISTILLED

Southeastern fuel retailer to offer E15 at C-stores Mapco Express Inc., a convenience store operator based in Tennessee, has announced it will begin offering E15 to customers at new build and select megastore locations beginning this year. â&#x20AC;&#x153;Based on the performance of this product, our goal will be to add the E15 fuel option to our megastores as we continue to increase the number of these locations in the future. Assuming a successful program, our goal is to have 100 stores offering E15,â&#x20AC;? said Dan Gordon, vice president of business development at Mapco. Mapco operates 362 convenience stores under a variety of brand names. The company is one of the largest company-operated convenience store chains in the U.S. and a leading Cstore operator in the Southeast. More than half of its locations are in Tennessee, the remaining are located in Alabama, Georgia, Arkansas, Mississippi, Kentucky and Virginia.

The Economic Engine of Ethanol in Iowa Jobs

GDP (in millions) Direct Indirect

$221.80 $665.00

Induced Total

$257.70 $1,144.50

2,253 6,885 4,022 13,161

Income (in millions) $204.50 $333.20 $143.20 $680.80

SOURCE: ABF ECONOMICS

Iowa RFA: Ethanol benefits stateâ&#x20AC;&#x2122;s economy The Iowa Renewable Fuels Association has released the results of an economic impact study conducted by John Urbanchuk of AVF Economics. The report highlights the impact of the renewable fuels industry on Iowaâ&#x20AC;&#x2122;s economy. The analysis shows that the overall renewable fuels industry, including ethanol and biodiesel producers, generated nearly $5.6 billion in economic activity in Iowa last year, which equates to approximately 4 percent of the stateâ&#x20AC;&#x2122;s gross

domestic product (GDP). The renewable fuels industry also generated about $4.1 billion in household income and supported more than 62,000 jobs in Iowa, a volume equivalent to approximately 4 percent of total state employment. The stateâ&#x20AC;&#x2122;s ethanol industry alone generated $10.62 billion in purchases, $5.04 billion in GDP, and $3.74 billion in household earnings. It also supported 55,161 jobs.

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APRIL 2014 | Ethanol Producer Magazine | 25

DISTILLED

Obama signs farm bill, launches new initiative President Obama signed the 2014 Farm Bill into law during a Feb. 7 ceremony at Michigan State University. During his speech, Obama also announced the launch of a new Made in Rural America export and investment initiative. â&#x20AC;&#x153;Despite its name, the Farm Bill is not just about helping farmers,â&#x20AC;? Obama said during his speech at MSU. â&#x20AC;&#x153;Secretary Vilsack calls it a jobs bill; an innovation bill; an infrastructure bill; a research bill; a conservation billâ&#x20AC;&#x201D;itâ&#x20AC;&#x2122;s like a Swiss army knife,â&#x20AC;? he continued, noting the legislation helps create jobs and provides an economic lift for rural communities. The new Made in Rural America initiative is expected to further benefit the U.S. agriculture community and related businesses. The program is charged with bringing together federal resources to help rural businesses and leaders take advantage of new investment opportunities and access new customers and markets abroad.

Top DDGS Destinations China

Mexico

Canada

Japan

Vietnam

Jan.-Nov. 2012

1,967,445 1,387,950 542,071 354,249 362,033

Jan.-Nov. 2013

3,936,826 1,197,704 449,470 342,618

334,414

SOURCE: U.S. GRAINS COUNCIL

Experts discuss DDGS export market opportunities, challenges Experts in the distillers grains industry discussed current market opportunities and challenges during a recent webinar hosted by Ethanol Producer Magazine. Distillers grains exports approached a new record as 2013 came to a close, and the big story was China, which now tops the list of importers. While distillers grains export markets are strong, buyers in many of these markets are imposing new requirements on U.S. distillers dried grains with solubles (DDGS). In addition, the continued diversification of coproduct streams at U.S. etha-

nol plants presents new challenges with regard to changing DDGS compositions. Gerald Shurson, a professor in the University of Minnesotaâ&#x20AC;&#x2122;s Department of Animal Sciences, opened the event with a discussion of feeding trials, consumer needs and changing DDGS oil content. Sean Broderick, DDGS marketing manager at CHS Inc., spoke about supply and demand, while Randy Ives, director of ethanol services at Gavilon, closed the webinar with a discussion of the Chinese export market and upcoming regulatory changes.

Vecoplan builds turnkey systems that process biomass to be used in biorefining applications. Our systems can be used to shred and process corn stover, switchgrass, bagasse, or any other type of biomass. They are used in the production of cellulosic ethanol and other second-generation biofuels. Vecoplan systems provide application specific shredding, stone & metals removal, screening, separation, conveying, loading & unloading, storage, and metered feeding of biomass prior to its conversion to advanced biofuels. Contact us or visit our website today, to learn more about our biomass prep systems.

YHFRSODQOOF FRP 26 | Ethanol Producer Magazine | APRIL 2014

DISTILLED

Iogen announces biogas-to-renewable hydrogen process Iogen Corp. has developed and patented a new method to make drop-in cellulosic biofuels from biogas using existing refinery assets and production operations. The company estimates enough refining capacity is already in place to produce 5 to 6 billion gallons of the fuel. The technology involves processing biogas to make renewable hydrogen, which is then incorporated into finished transportation fuels in selected refinery hydrogenating units. The company developed the biogas-tocellulosic fuels approach as it examined sending the tail end of fermentations to an anaerobic digester as a way to increase the efficiency of its cellulosic ethanol process. Iogen plans to implement the process at large-scale cellulosic ethanol plants it plans to develop in Kansas and North Dakota.

2013 RIN Roundup D3 cellulosic biofuel

422,740

D4 biomass-based diesel

2,724,275,779

D5 advanced biofuel

556,267,369

D6 renewable fuel

13,335,259,120

D7 cellulosic diesel

395,777

SOURCE: EPA

EPA reveals 2013 RIN data U.S EPA data indicates nearly 16.62 billion renewable identification numbers (RINs) were generated last year, including more than 13.31 billion D6 renewable fuels RINs. Most D6 RINs were generated for ethanol, with a minority generated for biodiesel, nonester renewable diesel and butanol. Approximately 442,740 D3 cellulosic biofuel and 387,445 D7 cellulosic diesel RINs were generated in 2013, bringing the total for cellulosic RINs to about 830,185 RINs.

More than 550.98 million D5 advanced biofuel RINs were generated last year, including 457.2 million for ethanol. About 2.72 billion D4 biomass-based diesel RINs were also generated last year. EPA data shows that nearly 15.39 billion RINs were generated by domestic producers, with 745.24 million generated by importers and 483.24 million generated by foreign entities.

APRIL 2014 | Ethanol Producer Magazine | 27

CONSTRUCTION

LAST LIFTS: Abengoa's cellulosic ethanol plant in Hugoton, Kan., began commissioning in February. Getting the job done, more than 1,000 construction workers were on site over the last six months of 2013. PHOTO: ABENGOA BIOENERGY CORP.

28 | Ethanol Producer Magazine | APRIL 2014

CONSTRUCTION

Early Risers Following multiyear feedstock procurement campaigns and vast investments of capital, resources and time, America’s first big cellulosic ethanol plants are nearing startup. By Chris Hanson

Early 1900s entrepreneur and business theorist Roger Babson said that people who wish to enjoy a good future should not waste the present. In that vein, the near-term prize of

being first to market with large-scale cellulosic ethanol production belongs to the companies meeting plant construction milestones today. In the advanced biofuels sphere, no U.S. cellulosic ethanol projects have been watched more closely than those being built by Abengoa Bioenergy, Poet-DSM Advanced Biofuels and DuPont Industrial Biosciences. Together, these facilities now rise from the landscape of American corn country like prairie lighthouses beaconing an industry looking for new light. Abengoa’s 25 MMgy cellulosic plant in Hugoton, Kan., began its construction in mid-2011 and was one of the first big Midwest cellulosic ethanol facilities to begin its commissioning process this year. “We are just on the verge of a startup here,” Christopher Standlee, executive vice president of Abengoa Bioenergy told EPM in late January. “We started commissioning the boiler and electric cogeneration unit and sold our first power back to the grid on Dec. 27.”

APRIL 2014 | Ethanol Producer Magazine | 29

CONSTRUCTION Beginning last summer, Abengoa drove especially hard to complete the build. â&#x20AC;&#x153;Starting in about July, we had the big final push to get construction completed,â&#x20AC;? Standlee said, adding that more than 1,000 construction workers were on site from July through December. He said it was awe-inspiring to attend morning safety meetings and see the entire workforce assembled, donned in hardhats and reflective vests. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s a pretty massive undertaking.â&#x20AC;? With primary construction complete, contractors were busy setting minor components, finishing up the electrical systems andâ&#x20AC;&#x201D;in the feedstock pretreatment and yeast propagation areasâ&#x20AC;&#x201D;completing panel instrumentation and controls, Standlee said. The plant began moving through its second phase, initiating the whole startup scenario, at the end of January. While going through its "ramp-up and debugging" period at press time, Abengoa was preparing to begin initial production runs, according to Standlee. For the most part, all major construction is complete, Standlee said. The next

step for the facility is the commissioning process, which is expected to take some time. â&#x20AC;&#x153;I donâ&#x20AC;&#x2122;t think weâ&#x20AC;&#x2122;re going to finish our commissioning for a while,â&#x20AC;? he added. â&#x20AC;&#x153;It could very well take a period of months.â&#x20AC;? He expected the process would start in the first quarter of the year, probably in February.

Another Q2 Start

More than 500 miles northeast of the Abengoa facility, Poet-DSMâ&#x20AC;&#x2122;s Project Liberty plant is standing tall amongst the prairie and farmland in Emmetsburg, Iowa. The 25 MMgy plant broke ground in early 2012 and is expected to be the second commercial-scale cellulosic plant to complete its construction and commissioning this year. Sitting adjacent to Poetâ&#x20AC;&#x2122;s corn ethanol plant, the facility has taken shape over the past two years and is now beginning to tower over the Emmetsburg skyline. Since last year, the site has gone from having a few tanks and construction activities to resembling of a cellulosic plant, explained Steve Hartig, general manager of

licensing at Poet-DSM. â&#x20AC;&#x153;When youâ&#x20AC;&#x2122;re in Emmetsburg, it kind of looms in the skyline,â&#x20AC;? he said. Photographs of the site confirmed recent progress. Fermentation and enzymatic hydrolysis tanks were in place, and construction was being completed on the biomass receiving area where feedstock pretreatment occurs. Other components unique to the biorefinery were also in place in late January, including an anaerobic digester that handles the liquid waste stream from the ethanol process. As each project is finished, personnel begin the commissioning process on the unit, Hartig told EPM. The pretreatment machinery was being completed and undergoing some commissioning, such as powering up and functionality testing. The main hydrolysis and fermentation tanks were, for the most part, mechanically complete and had been filled with water to test the pumps and scan for leaks. As February approached, crews were focusing on the substantial completion of the plantâ&#x20AC;&#x2122;s front-end pretreatment equipment, along with its solid fuel boiler and

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CONSTRUCTION the anaerobic digester. The boiler and digester will utilize the liquid and solid waste streams to generate steam for both the cellulosic ethanol plant and the neighboring corn ethanol plant. “Basically, the plant will be mechanically complete at about the end of [the first quarter of 2014], and we’ll be starting up in Q2,” Hartig said. “As we finish a piece of the plant, we start doing the testing and the work on that piece. So it’s kind of a rolling process.”

Nose to Grindstone

More than a two-hour drive southeast from Emmetsburg, the DuPont cellulosic ethanol plant lays claim to the frosty, winter soil near Nevada, Iowa. The DuPont facility broke ground on a chilly November morning in 2012, and has moved through various construction stages since then. The plant, which is expected to be completed by midyear, will utilize 590,000 bales of corn stover each year to produce 30 MMgy of cellulosic ethanol. Rather than sharing frequent updates on its construction progress, DuPont has played its cards relatively close to the vest, concentrating more on internal benchmarks than external communications. “I think the team is almost singly focused on getting this plant up and running in 2014 and meeting that milestone,” said Wendy Rose, global

STANDING TALL: The multistory steel framework of the Poet-DSM cellulosic ethanol plant rises high above the skyline of Emmetsburg, Iowa.

public affairs leader at DuPont. The company is working with its teams—Fagen and KBR—to start producing cellulosic ethanol once the last pieces of the project are finished, she added. “We’re pretty happy that construction is continuing on track, and we’re going to deliver this in 2014.” As construction progresses, it certainly catches the attention of those passing though. “Folks that are in the area, they drive by and say, ‘Wow! This is incredible,’ because it is an enormous undertaking, and

we have state-of-the-art technology going into this plant,” said Rosen. The plant is still expected to finish construction in the fourth quarter of this year, Rosen told EPM. “This team is incredibly focused on hitting these marks because all of that plays right into our capital expenditures here,” she said. “We did a groundbreaking when we said we were going to do it, and we’ll see an opening when we said we would do it in 2014.”

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32 | Ethanol Producer Magazine | APRIL 2014

PHOTO: POET-DSM ADVANCED BIOFUELS

PHOTO: ABENGOA BIOENERGY CORP.

SHAPING UP: (top photo) Poet-DSM has secured corn residue from 200 farmers near Emmetsburg, Iowa. (lower photo) Abengoa needs less than 15 percent of the corn residue available within about 50 miles of Hugoton, Kan. Both companies secured about 100,000 tons of biomass in the 2013-’14 harvest.

Farmer Followings

One of the most daunting tasks in creating a cellulosic facility might not be so much the technology and equipment challenges, but the procurement of feedstock. “We’ve built numerous ethanol plants of our own and we know what the construction process is like,” Standlee said. “We know our technology works, we’re comfortable with our ability to handle the product once it’s there, but one of the biggest challenges is the massive amounts of feedstocks that you have to deal with.”

For the past four years, Abengoa had experts in Hugoton, negotiating and visiting with growers to develop a mutual understanding about how to be good stewards of the land and avoid overharvesting corn stover. “We certainly don’t want to spend hundreds of millions of dollars building a facility and shoot ourselves in the foot by having a farmer find out he’s taking too much stover off his land and didn’t leave enough to stop erosion and (needed to) leave some of the nitrogen and nutrients back in the soil,” Standlee said.

CONSTRUCTION

In addition to the summer construction push, Abengoaâ&#x20AC;&#x2122;s other milestone was being able to harvest more than 100,000 tons of stover by the end of November. â&#x20AC;&#x153;As you imagine, that is a massive amount of feedstock that required a lot of coordination to get it off the land and into some sort of storage. Weâ&#x20AC;&#x2122;re very proud of that milestone,â&#x20AC;? Standlee said. Abengoaâ&#x20AC;&#x2122;s plant is able to operate on less than 15 percent of the available corn stover within a 50-mile radius, which allows the facility to exist in a noncaptive market situation, he added. For Poet-DSM and DuPont, feedstock procurement has also been a massive, multiyear undertaking. A group called Poet Biomass has worked for Poet-DSMâ&#x20AC;&#x2122;s outreach the past seven years to develop the stover collection procedures and has been stepping up its efforts each year to collect additional biomass, Hartig said. â&#x20AC;&#x153;This year, we have about 200 farmers under contract to supply biomass and weâ&#x20AC;&#x2122;ve harvested about 100,000 tons of biomass,â&#x20AC;? he explainied. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s enough to get us really up and running through the next harvest. Itâ&#x20AC;&#x2122;s going well, but itâ&#x20AC;&#x2122;s taken a lot of time because itâ&#x20AC;&#x2122;s a new crop.â&#x20AC;? Poet-DSM has established multiple lanes of outreach to local farmers in order to secure its corn stover. In addition to brochures and informational videos for farmers dropping off corn at the neighboring ethanol plant, the company has worked with university researchers to study corn stover harvesting and manages booths at local county fairs to meet growers and local residents. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s a lot of different outreach, teaching and talking,â&#x20AC;? Hartig said. Leveraging its existing grower relationships through Pioneer, DuPont also had a successful year securing corn stover for its cellulosic ethanol plant, with more than 200 farmers participating in its procurement process. â&#x20AC;&#x153;This is our fourth harvest and we have had incredible responses year over year,â&#x20AC;? Rosen said. â&#x20AC;&#x153;The best thing I can say about it is that we practically have

a 100 percent return rate on folks that have participated the year before.â&#x20AC;? DuPont is on track to have enough feedstock supply once the plant opens. â&#x20AC;&#x153;When we license this technology, a lot of potential licensees and customers will feel really solid about our expertise in the supply chain piece,â&#x20AC;? Rosen said. â&#x20AC;&#x153;That is a very complicated piece in this whole puzzle, which is figuring how to build a sustainable

supply chain to fuel a plant that is going to be producing 30 million gallons of fuel per year. Itâ&#x20AC;&#x2122;s a big deal.â&#x20AC;? Author: Chris Hanson Staff Writer, Ethanol Producer Magazine chanson@bbiinternational.com 701-738-4970

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PROCESS

LEARNING CURVE: KiOR's 15 MMgy cellulosic gasoline and diesel plant in Columbus, Miss., has been operating for a year, but at far less than capacity. A series of optimization efforts are scheduled to boost performance, yield and output. PHOTO: KIOR INC.

Optimization Outlays Learning while producing, KiOR plans to invest another $10 million to maximize production at its commercial-scale cellulosic biofuel plant in Mississippi. By Ron Kotrba

34 | Ethanol Producer Magazine | APRIL 2014

PROCESS

MOVING PRODUCT: In the fourth quarter of last year, KiOR moved 385,000 gallons of product, including cellulosic gasoline, diesel and fuel oil. This was more than half its production for all of 2013. PHOTO: KIOR INC.

In a world where Big Oil thinks of cellulosic biofuel as imaginary “pixie dust,” KiOR Inc. is among the few companies proving early, and convincingly, that the fuel can be made at commercial scale.

The Pasadena, Texas-based company produces commercial volumes of not ethanol but cellulosic gasoline and diesel fuel from Southern Yellow Pine at its 15 MMgy refinery in Columbus, Miss. It’s the first of several plants the company hopes to replicate with its “copy exact” strategy. Before construction was complete on the Columbus facility in 2012, KiOR signed offtake agreements with Hunt Refining, Catchlight Energy—a joint venture between Chevron Corp. and Weyerhaeuser Co.—and FedEx Corporate Services. KiOR and Catchlight Energy also have a feedstock supply agreement for the facility. The engineering, procurement and construction firm in Columbus was KBR. While KiOR’s drop-in fuels are not directly subject to the highly contentious ethanol blend-wall debate, the company does find kinship with corn ethanol producers and cellulosic project developers in its stance against the U.S. EPA’s 2014 renewable volume obligation (RVO) proposal under the federal renewable fuel standard (RFS). “The EPA’s 2014 RVO proposal is one of the biggest obstacles our industry currently faces when it comes to expansion and development,” says Fred Cannon, KiOR’s president and CEO. “The EPA’s current proposal has the potential to significantly hamper the industry’s ability to obtain affordable capital to grow and compete with conventional fuels. A stable regulatory policy is of vital importance for the continued growth and advancement of the renewable fuels industry.”

It’s not just the investment-blocking regulatory uncertainty that impedes the progress of KiOR, not to mention every other advanced biofuel project under development. Technical obstacles encountered on the commercial scale-up learning curve abound as well. This story is all too familiar to cellulosic ethanol producers, whose commercial realization perpetually seems just a few years away. But these kinds of hindrances can be expected when working to revolutionize the world’s energy production paradigm. On a recent operational update conference call, Cannon spoke about his company’s plan to increase the performance and operational output of the Columbus facility. He opened the call with an overview of KiOR’s 2013 biofuel production. During the fourth quarter of 2013, Cannon said KiOR produced 385,000 gallons of fuel, 41 percent of which was cellulosic gasoline, 37 percent cellulosic diesel, and 22 percent fuel oil. Total fuel production for 2013 was 597,000 gallons—far less than the plant’s 15 MMgy nameplate capacity. To boost performance, the company plans to complete a series of optimization projects and upgrades. KiOR will also continue its research and development efforts aimed at increasing yields while improving operational efficiency and operational economics. KiOR’s technology works similarly to an oil refinery, which involves catalytic cracking and hydrotreating, but instead of using petroleum crude as feedstock, it uses woody biomass. “KiOR’s biomass fluid catalytic cracking unit (BFCC) is similar in concept to the fluid catalytic cracking (FCC) unit in a refinery, but has been modified to accommodate a solid feed rather than a liquid feed,” Cannon tells EPM. “KiOR has a proprietary catalyst with physical properties similar to a typical FCC catalyst to promote the desired reactions needed to convert the solid biomass into a liquid fuel.” According to Cannon, the biomass contacts a hot catalyst, vaporizes and forms coke and both noncondensable and condensable gases. APRIL 2014 | Ethanol Producer Magazine | 35

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“The coke stays on the catalyst and is burned off in the regenerator to provide heat for the process,” he explains. “The noncondensable gases are burned in a waste heat boiler and turn a steam turbine generator to provide electricity for the process. The condensable gases are separated and result in renewable crude, which we upgrade into our cellulosic fuels.” The optimization projects to be made this year include making changes to the BFCC unit, hydrotreater and wood yard to eliminate bottlenecks. The Columbus facility can currently process between 250 and 300 tons of biomass daily, yielding around 30 gallons per ton. When operating at nameplate capacity, the facility should be able to process 500 bone-dry tons daily with significantly higher yields. Optimization to the BFCC unit will include integration of next-generation catalysts. “We have relationships with multiple catalyst suppliers and work closely with them to manufacture our catalyst while guarding our intellectual property,” Cannon says. “Our world-class team of scientists works around the clock on different types of catalysts along with tweaks on existing platforms.” At KiOR’s research and development facilities in Pasadena, the company has multiple hydrotreaters that it uses to

conduct research. More specifically, Cannon says, KiOR is building optimization know-how that yields minimum volumes of fuel oil and offspec product. Furthermore, the company intends to reduce its natural gas consumption at the Columbus facility through more heat integration throughout the plant and, in the case of natural gas used for hydrogen generation, reduced consumption of hydrogen at the hydrotreater itself. “More broadly, wherever natural gas is solely used for heat duty, it can be replaced with biomass, like in the case of biomasspowered dryers and other sorts of technology present in the forest products industry today,” Cannon says. He continues, “We expect the various projects—which we have determined are necessary to optimize the facility based on our operating experience and learnings over the last year—will require approximately $10 million of capital investment over the course of 2014. We are actively pursuing a number of ways to finance this project.” The successful execution of KiOR’s optimization efforts in Columbus is critical to getting future plants financed, including the Columbus II project, which seeks to replicate the optimized Columbus facility at the same location. Bigger yet,

PROCESS KiOR is looking at developing its flagship facility, scaled at three times the size of its Columbus plant, in Natchez, Miss. â&#x20AC;&#x153;KiORâ&#x20AC;&#x2122;s process works, and it works well, based on thousands of hours of research and development at our lab, pilot- and demonstration-scale facilities in Pasadena,â&#x20AC;? Cannon says. Since its inception, KiORâ&#x20AC;&#x2122;s pilot facility has accrued more than 10,000 hours of operation and evaluated more than 250 catalyst systems. Its demonstration plant has 400 times the processing capacity of its pilot plant and produces 15 barrels of renewable crude a day. The companyâ&#x20AC;&#x2122;s â&#x20AC;&#x153;copy exactâ&#x20AC;? strategy is not quite what it seems, though. Rather than duplicating the Columbus facility, which contains the BFCC technology to convert woody biomass to renewable crude and hydrotreating to upgrade the crude oil to diesel and gasoline, the â&#x20AC;&#x153;copy exactâ&#x20AC;? strategy intends to develop multiple BFCC facilities that deliver renewable crude oil to a centralized upgrading processing plant. â&#x20AC;&#x153;Developing a new technology is always a challenge, and we are learning more about our technology every day,â&#x20AC;? Cannon says. â&#x20AC;&#x153;Our commitment to innovation and research and developments has been, and will continue to be, what drives our progress and success.â&#x20AC;? When asked what advice he could share with other cellulosic biofuel project developers from experiences gained in commercial scale up, Cannon says he has nothing to add. â&#x20AC;&#x153;Let them learn the hard way like we have,â&#x20AC;? he says. As for what the company has learned in its commercial experiences to optimize its own production, Cannon says, â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve learned that creating a strong foundation is the best way to generate sustainable, long-term success. Weâ&#x20AC;&#x2122;ve learned that continued research and development efforts are a great way to improve yields, operational efficiency and the economics for our existing and future commercial facilities.â&#x20AC;?

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INNOVATION

NEW PATHS: Sweetwater Energy hosted tours of its demonstration facility, incorporating a Wizard of Oz theme to lead guests along a yellow brick road with color-coded tanks. “It helps people remember,” says CEO Arunas Chesonis. PHOTO: SWEETWATER ENERGY

The Sugar Producers Sweetwater Energy and Proterro aim for low-cost sugar that may give today’s corn ethanol plants a glide path into advanced ethanol production. By Susanne Retka Schill

38 | Ethanol Producer Magazine | APRIL 2014

INNOVATION

BALLOONING REACTION: Proterro’s photobioreactor is made from off-the-shelf components. The Orlando pilot project includes four full-size units that measure 5 meters long by 1 meter in diameter. PHOTO: PROTERRO

Fundamentally, ethanol production is about feeding the insatiable sweet tooth of the actual ethanol producer—yeast. Two companies using widely different approaches, Sweetwater Energy Inc. and Proterro Inc., are pursuing business models to supplement fermentation broths with sugar water. Sweetwater promises to soon deliver C5 and C6 sugars derived from cellulosic feedstocks while Proterro intends to bring ethanol producers sucrose produced by its patented cyanobacteria. Sweetwater is reaching the commercialization stage, with a demonstration plant in place at its Rochester, N.Y., headquarters. The company has teamed up with Naturally Scientific Technologies Ltd. to build a commercial facility in the Eastman Business Park in Rochester. The details of the project are close to finalization and construction could begin soon. Simultaneously, Sweetwater expects to break ground this spring on a commercial-scale facility in Wisconsin, followed by two others. The company has signed long-term offtake agreements with Ace Ethanol LLC in Stanley, Wis., Front Range Energy LLC in Windsor, Colo., and Pacific Ethanol Stockton LLC, in Stockton, Calif. It has completed the permitting process for a facility to be located on 10 acres next to Ace Ethanol, and the land purchase was being finalized in January. A petition to create a pathway for the cellulosic sugars-to-ethanol process has been filed with the U.S. EPA. CEO Arunas Chesonis says the Wisconsin project represents $25 million in capital investment and will employ around 15 people, producing cellulosic sugars that will displace up to 7 percent of Ace Ethanol’s corn purchases. Permitting for the other two projects will begin this spring. While the facility in Colorado will

be in the same business park as Front Range, a site has not been finalized in California, although it will be within 50 miles of the Stockton-based ethanol plant. All of the plants are located in areas with multiple feedstocks. “You want to be in places where you can get different kinds of woods and the climate allows different feedstocks,” Chesonis says, explaining that Sweetwater’s process is feedstock neutral. Sweetwater is using cellulosic pretreatment technology from Denmark-based BioGasol ApS that uses a dilute acid, he explains. “It’s a pretty good system for reducing particle size that allows us to not to have to use heavy acids or very high temperatures.” That is followed by enzymatic hydrolysis, using enzymes developed by others. Sweetwater’s proprietary technology lies in the separation of C5 and C6 sugars. “We squeeze out the C5s right in the first hour of the process, and then spend the next two or three days breaking out the C6s from the fiber and the lignin,” Chesonis says. Ethanol producers are expected to initially use just the easily fermentable C6 sugars. “If Ace doesn’t have a cofermenting yeast it is comfortable with, getting the same economics as the one used today, and it doesn’t have the acceptance by the folks who they sell their DDGS to, then we’ll take the C5 out,” he explains. That will drop the corn displacement from 7 to about 5 percent, he adds. The C5 fraction will initially be shipped to New York to be used in the Naturally Scientific process, until a customer base for cellulosic sugars is built. Sweetwater intends to build production facilities to serve multiple customers. The $250 million joint venture with Naturally Scientific has other synergies. For one, Sweetwater will be supplying its cellulosic sugars to Naturally Scientific to convert into higher-value oils for use as feedstocks for diesel or jet fuel production or in biochemical facilities. Both companies have tested their processes at

APRIL 2014 | Ethanol Producer Magazine | 39

INNOVATION

demonstration scale––Naturally Scientific’s demo plant in Nottingham, U.K., has been operational for two years, and Sweetwater completed its demo in Rochester, N.Y., about a year ago. They also plan to build a commercial facility in Rochester, which Naturally Scientific will use to scale up its other new technology that converts carbon dioxide into C3 sugars. As the final details for both the Wisconsin and New York projects are finalized, Chesonis says his team is making the final push on raising money. The company also expects to receive a loan guarantee through the export bank of Denmark, due to the use of Danish technology. Raising capital and launching startups is not new to Chesonis. “My [chief financial officer] and I raised $4 billion in our last company,” he says, but then adds, “Any time it’s a new technology that hasn’t been proven at scale yet, it’s always a challenge.” Chesonis comes from the telecommunications sector, where he led and sold two successful companies. He brought key executive officers with him when he took on the leadership at Sweetwater as they decided to shift focus to cleantech. One reason, he explains, was to avoid the sort of market dynamics that drove the telecomm prices down 75 percent over a decade, although commodity markets have their own headaches, he admits. The company’s goal is to be able to produce its sugars for 10 to 12 cents per pound and, including the return to investors, sell them for 17 to 18 cents per pound, Chesonis says. That will be competitive with the price of dextrose, which is in the low 20-cent range, although he adds his company is currently paying 25 to 30 cents per pound for dextrose to supplement its cellulosic sugars for Naturally Scientific’s development work.

Mimicking Nature

Proterro’s ambition is to provide an even lower-cost sugar. Its unique sugar platform harnesses the power of the sun in

40 | Ethanol Producer Magazine | APRIL 2014

SIMPLIFYING THE PROCESS: Chief technology officer John Aikens, co-inventor of Proterro technology and a cofounder of the company, shows the bioreactor in collapsed form. PHOTO: PROTERRO

a photobioreactor where microbes convert carbon dioxide and nutrients into easily fermentable sucrose. CEO Kef Kasdin says the company’s economic projections indicate a production cost around 5 cents per pound. A pilot facility with four fullsize reactors has been in operation since September in Orlando, Fla., collecting data to confirm those projections. The Proterro bioreactor mimics a leaf by growing cyanobacteria microorganisms on a fabric surface, providing maximum exposure to sunlight while a thin layer of water and nutrients flows across the surface. The fabric is enclosed in a polyethylene balloon filled with air and carbon dioxide. At ambient temperatures, the cyanobacteria secrete sugars which are carried away in the flowing water. “That sugar water could go directly into ethanol production or we may need to further concentrate it,” Kasdin explains. Using off-the-shelf components— plastic, the special fabric and plumbing—

the capital cost for the photobioreactors is very different from the typical biorefinery system. The entire research and development program has cost $9 million to date, according to Kasdin. “It looks more like agriculture and not at all like a chemical plant,” she adds. While the modular system is relatively simple, what will contribute to the cost is the number of photobioreactors needed and the land area to support them. Current estimates are that a system of photobioreactors would produce the same amount of sugar as sugarcane on one-thirtieth of the land. With a minimum temperature of 50 degrees Fahrenheit needed for the microbes to be productive, the outdoor systems are not meant for winter climates, although power or chemical plants would be able to utilize waste heat and CO2 in the systems, potentially extending their reach from the far south. Kasdin says the sugar water produced in the South can be concentrated for shipment to northern ethanol plants,

INNOVATION

plus the company is looking at the Brazilian industry for potential customers. The advantages to the Proterro system will be its low cost and the modular approach that will allow incremental expansion, plus the ability to use waste carbon dioxide to produce a clean sucrose that contains no inhibitors. As the pilot work continues, Proterro is now raising capital to finance a demonstration-scale project and looking for potential partners with waste carbon dioxide to host it. Proterro’s R&D efforts to date have been backed by Battelle Ventures, Braemar Energy Ventures, Cultivian Ventures and Middleland Capital. With patents in place on the latest designs and the demonstration phase approaching, the company is laying the groundwork to clear the regulatory hurdles. The use of a genetically modified organism requires preparing a Microbial Commercial Activity Notice for review by the EPA. The company will have to describe any potential problems should there be an accidental escape of organisms, although Kasdin says the cyanobacteria are quite safe, producing sugar and no toxins, and multiple conditions would have to be just right for them to survive outside the reactor.

Future Thinking

Both executives say that while the ethanol industry is their initial target, they are looking toward broader applications in the future. “Ethanol’s the big existing market for turning sugar into an industrial product,” Kasdin explains. Others would include a number of second-generation fuels, biochemicals or even the production of amino acids for the feed market. “The people who have the volume now that can use cellulosic sugar on a dropin basis are the ethanol guys,” Chesonis agrees. While the ethanol industry can provide a base to build a supply and establish a price, the ultimate target is biobased chemical production. His vision is that his ethanol customers will be part

of that transition. The initial agreements with the three ethanol producers call for displacing 7 percent of their feedstock with sweetwater, but he expects that will grow to 30 to 50 percent within a few years, and ultimately, the ethanol producers will redirect production into higher value chemicals. “That’s the program for us, but that takes time,” Chesonis says. “We’re doing an aggressive research program here and at MIT where we come up with

customized products with our sugars so that we can have that as [intellectual property], so we can convert people from ethanol to chemicals in the future. But that’s another story.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922

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APRIL 2014 | Ethanol Producer Magazine | 41

BIOREFINING

DEMO DAYS: Lignol began running its demonstration-scale biorefinery in 2009. Multiple years of production enabled the company to produce ample inventories of high-purity lignin, which the company now shares with collaborators. PHOTO: LIGNOL ENERGY CORP.

Lignin’s Big Leap

Still seeking commercial-scale opportunities, Lignol continues to collaborate with companies that are eager to buy its product in bulk. By Tom Bryan

Lignin has long been considered an abundant, lowvalue byproduct of pulp and paper milling, and somewhat of a burden to biorefining, but Lignol’s Mike Rushton remains confident that the substance is poised for new and higher uses. As research is

conducted globally to find ways to mitigate the challenges of separating lignin from the most prized parts of biomass—cellulosic sugars— Rushton says industrial buyers are ready and waiting for big volumes of a super clean product no one is currently making. “There aren’t any commercial producers of high-purity lignin, and we aren’t one either, yet,” Rushton admits. “We’re aspiring to be.” So for now, the most common use for existing lignins remains decidedly low-tech—it’s often a boiler fuel for mills and biorefineries— but the promise of large volumes of new and better lignin products, along with a plethora of markets for them, is alive and well. In North Carolina, researchers have developed 42 | Ethanol Producer Magazine | APRIL 2014

an inexpensive technique for removing lignin from plant material used to make ethanol. In Belgium, scientists are modifying the lignin in poplar trees, through biosynthesis, to more readily extract sugars. And in Finland, one company is developing ways to isolate lignin and produce myriad products from the ubiquitous organic substance. Years ago, before the current swell of lignin research began, Lignol Energy Corp. and its wholly owned subsidiary Lignol Innovations Ltd. introduced the American biofuels industry to the enticing idea of high-purity lignin as a coproduct of cellulosic ethanol production. While ethanol is no longer LIL’s target, the Burnaby, British Columbia-based company remains committed to its vision of building an industrial-scale biorefinery: a plant that would consume wood and turn out large quantities of high-purity lignin and biobased chemicals. Rushton calls the company’s process its “big differentiator” because it allows lignin to emerge as a pure product that’s distinct from lignins produced through conventional pulp and paper milling and even other biorefinering

techniques. The characteristics of lignin are determined by how it is extracted from biomass, chemically. LIL uses an organic solvent rather than an inorganic one, Rushton says, and the company’s process operates in a mildly acidic pH range rather than running at high alkalinity. “The lignin we make is quite different from other lignins that are out there,” he says, explaining that most lignins produced from the kraft and sulfite pulping processes contain sulfur and inorganic materials— sodium, magnesium and calcium—that are baked into the product. “Our lignin contains virtually no sulfur and very low ash content.” According to the International Lignin Institute, between 40 million and 50 million tons of lignin are produced globally each year, mostly as noncommercial waste. Rushton says there are, in fact, sulfur-free lignins on the market today that are exclusively made by pulp and paper mills using sulfite processes. While those products are relatively free of sulfur, they’re not absent of other inorganics. “Sulfur isn’t the only issue, nor the only obstacle,” Rushton says, explaining that the value of lignin is relative to

FINE STUFF: The characteristics of each lignin product are variable and contingent on process. Lignol’s product is light brown and about the consistency of powdered instant coffee. PHOTO: LIGNOL ENERGY CORP.

its end-use compatibilities. “The name of the game with lignin is to find applications where the product will work with other chemicals in varied formulations. Typically using it as a substitute for petrochemicals is the main goal.” In industrial terms, lignin is an aromatic compound made of benzene rings, varied molecular structures that typically have six carbon atoms surrounded by six hydrogen atoms. “Different types of plants contain different types of lignin,” Rushton says. “These structures vary a lot, and they’re ultimately responsible for how lignin behaves.” The appearance and consistency of lignin are also quite variable and highly contingent on process. Kraft lignin is brown in color and has the consistency of powdered instant coffee. “Its particle size is typically around 20 microns, so it’s quite fine,” Rushton says, adding that the so-called organosolv lignin that results from LIL’s process is also a brown powder. Lignosulfonates—a product that comes out of sulfite pulping processes— is water soluble and the type of lignin sold in the largest volumes globally. While the markets for future lignin products are nearly endless, using high-purity lignin as a petrochemical substitution in resin manufacturing is particularly promising. Phenolic resins, or phenol formaldehydes, which are produced from benzene and natural gas, are used in a wide range of products including coatings, adhesives and molding compounds. “It’s a product with a fairly high carbon footprint, so if you could substitute high volumes of phenol with lignin, you could produce a much greener product,” Rushton says. “But you have to be able to do it at a competitive price and without loss of performance. That’s the opportunity we’re working on.”

With a virtual sea of applications awaiting high-purity lignin in manufacturing, material science, agriculture and even human health industries, the market opportunity is huge. “It is certainly a billion-dollar business, and probably bigger than that,” Rushton says. “We see the market for our lignin being hundreds of thousands of tons per year in a short time. Once we have the material available, there are lots of places where we believe we’ll be able to sell it—where it will be a good substitute for petrochemicals at a competitive price.” Still on path to commercial-scale production, LIL continues to share its lignin with collaborators. Starting in 2009, the company built up large lignin inventories through production campaigns at its Burnaby demonstration plant, which remains operational. “The next step is to build a largescale plant, which we are hoping to do with partners,” Ruston says. “We have quite a few active project opportunities at the moment.” If and when LIL’s large-scale plant gets built, it will likely consume 300 to 400 tons of woody biomass and produce about 20,000 tons of lignin per year. As many as 30 companies worldwide have tested LIL’s lignins, including Kingspan, a manufacturer of rigid foam insulation; Huntsman, a maker of polyurethanes; and AJ International, a producer of resins used in the foundry industry. “Almost universally, they’re waiting for us to be able to sell them the stuff,” Rushton says. “That’s the hurdle for us. To develop a commercial supply.” Author: Tom Bryan Editor In Chief, Ethanol Producer Magazine tbryan@bbiinternational.com 701-738-4916

BUSINESS MATTERS

Legal Argument Challenges EPA Authority to Change RFS By Alexander F. Logemann

The U.S. EPA’s decision to propose a 2014 renewable fuel standard (RFS) below the statutorily mandated volumes has generated vigorous debate. For

those in the ethanol industry, it is important to understand the legal objections to EPA’s proposal, not just the public policy objections, because the legal arguments may determine the outcome of the dispute and set the legal precedent that limits the agency’s ability to adjust the RFS in the future. Section 211(o)(2)(B) of the Clean Air Act expressly states the RFS mandated volume of renewable fuel to be included in gasoline: The total for 2014 is 18.15 billion gallons. However, section 211(o)(7)(A)(ii) provides a “general waiver” authority under which the EPA may modify these amounts if “there is an inadequate domestic supply.” On Nov. 29, the EPA proposed reducing the total renewable fuel volume to 15.21 billion gallons. EPA specifically found that there was an “inadequate domestic supply” and asserted the phrase is ambiguous. According to EPA, this ambiguity empowers the agency to consider not only the production of renewable fuels, but also “factors affecting the ability to distribute, blend, dispense and consume those renewable fuels” when assessing supply. Relying on this broader interpretation, EPA contends that current limitations regarding the ability to incorporate ethanol fuels into gasoline for consumers (the ethanol blend wall) justify the proposed volumetric reductions. Iowa Attorney General Thomas J. Miller submitted comments to the proposal outlining several objections to EPA’s interpretation of the waiver authority, based on the well-known Chevron test used by the courts to assess a federal agency’s interpretation of a statute: 1) If the statute is clear, the court must enforce the law’s unambiguous language; and 2) If the statute is not clear, the agency’s interpretation must be permissible. Miller argues that the statute unambiguously prohibits EPA from considering the distribution capacity of blended fuel. Under section 211(o)(7)(A)(ii), the term “supply” unambiguously refers to the “quantity of renewable fuel” required under section 211(o)(2). Therefore, in order to reduce the RFS for total renewable fuel, EPA must find that there is an “inadequate domestic supply” of “renewable fuel.” The term “renewable fuel” means “fuel that is produced from renewable biomass” and “used to replace or reduce the quantity of fossil fuel present in a transportation fuel.” Because this definition does not include “blended fuel,” EPA cannot consider the distribution capacity of blended fuel when assessing the adequacy of the “supply.” 44 | Ethanol Producer Magazine | APRIL 2014

This interpretation is buttressed by the fact that the term “distribution capacity” is expressly included in other parts of section 211, as well as legislative history demonstrating that the U.S. Senate removed the term “distribution capacity” from the legislation. To the second point, Miller further argues EPA’s interpretation is not permissible. The purpose of enacting the RFS is “to move the United States towards greater energy independence and security” and “to increase the production of clean renewable fuels.” The statutory RFS achieves these objectives by incrementally increasing renewable fuel volumes so that the fuel industry may adapt. By lowering the RFS due to distribution capacity rather than supply, EPA manipulates this framework and undermines the statutory objective of changing the country’s fuel composition. Anticipating the objections to its interpretation of the waiver authority, the EPA provided preemptive counterarguments. The agency disputes that “supply” modifies only the renewable fuel categories in section 211(o)(2), and asserts that the word “is best understood in terms of the person or place using the product.” Accordingly, EPA contends that it may consider factors that affect the “supply” of renewable fuel before it reaches “consumers.” EPA distinguishes other subsections of the statute that include a mandate to consider “distribution capacity,” and argues these provisions highlight the ambiguity in section 211(o) (7)(A)(ii). EPA also dismisses the legislative history of section 211(o) (7)(A)(ii) as having minimal “interpretative value” because there is no explanation accompanying the Senate’s alteration of the operative provisions during the legislative process. The 2014 RFS rule may bring disputes regarding EPA’s authority to alter the statutorily mandated renewable fuel volumes to a head. Other aspects, such as the advanced biofuels mandate, are also generating serious legal and public policy pushback. Given that EPA’s critics have solid legal arguments, the final rule may prompt a judicial response that impacts the agency’s discretion when setting renewable fuel volumes in the future. Iowa’s attorney general has left the door open to that possibility. Miller has had considerable success leading multistate litigation in his eight terms as a state attorney general. Author: Alexander Logemann Associate, Faegre Baker Daniels LLP environmental group 303-607-3748 alexander.logemann@FaegreBD.com Contributing Author: Andrew Ehrlich, principal, Faegre Baker Daniels Consulting

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