INSIDE: GASSING UP D3 RINS APRIL 2015
GROWING GREEN Algae Ethanol Technology Hits Milestones Page 34
Lignin Strategies Unfold At New Biorefineries Page 28
Slow Approval Of New Yeasts Page 38
www.ethanolproducer.com
2015:
THE YEAR OF
THANKS FOR BEING SOME OF THE FIRST RETAILERS TO OFFER E15. Growth Energy commends CENEX, MAPCO, Minnoco, Murphy USA, Petro Serve USA, Protec Fuel, Sheetz and Zarco USA for their pioneering spirit and efforts to expand consumer access to higher blends of renewable fuels. They offer consumers a choice and savings at the pump, while investing in a homegrown industry that supports farmers across the country. Together we’re making progress toward the next generation of sustainable, renewable fuels.
Learn more at GrowthEnergy.org/E15
CONTENTS
APRIL 2015
DEPARTMENTS 6
EDITOR'S NOTE
7
AD INDEX
10
THE WAY I SEE IT
11
EVENTS CALENDAR
12
VIEW FROM THE HILL
14
16
18
FEATURES
Being First Is Risky By Tom Bryan
Failure Is Not An Option By Mike Bryan
More Than Simply Numbers By Bob Dinneen
DRIVE
28
ADVANCED BIOFUELS
Fired Up By Lignin
Cellulosic ethanol producers see value in producing steam and electricity from lignin
34
NOVEL FEEDSTOCKS
Green Expectations
Algenol’s algae technology produces ethanol plus gasoline, diesel and some jet fuel
By Holly Jessen
By Holly Jessen
38
42
E15 A Winner For Retailers, Consumers By Tom Buis
GRASSROOTS VOICE
If It Ain’t Broke, Fix It Until It Is By Ron Lamberty
GLOBAL SCENE
Big Biofuel Implications In LCFS Readoption By Leticia Phillips
20
BUSINESS BRIEFS
22
COMMODITIES
24
DISTILLED
52
BUSINESS MATTERS
54
VOLUME 21 ISSUE 4
Data Breach: No Company Immune By Kathleen Rice
POLICY
RINS
Yearning For New Yeasts
The 2014 D3 RIN Leap—for Biogas
By Susanne Retka Schill
By Susanne Retka Schill
Advanced biofuel yeasts face confusing and puzzling hurdles
CONTRIBUTION
Renewable natural gas is the new player in the cellulosic RINs market
PROJECT DEVELOPMENT
MARKETPLACE
Attract a Megaproject to a Community Near You
ON THE COVER
By Mark Yancey
Advanced biofuel projects present significant economic development opportunites.
50
PHOTO: ERIK KELLER PHOTOGRAPHY
4 | Ethanol Producer Magazine | APRIL 2015
Ethanol Producer Magazine: (USPS No. 023-974) April 2015, Vol. 21, 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.
IS MADE HERE.
For years, we’ve been told that cellulosic ethanol is a “fantasy fuel.” And it is.
And now it’s going to change the world. For real.
So we’ve spent a decade planning, researching, and working hard to make that fantasy a reality. ®
POET-DSM.COM
Advanced Biofuels
EDITOR'S NOTE
Being First Is Risky “Be not the first by whom the new are tried, nor yet the last to lay the old aside.” I’ve heard that smooth Alexander Pope quote used a few times over
Tom Bryan
President & Editor in Chief tbryan@bbiinternational.com
the years to describe the mindset ethanol producers have about taking early risks on new technologies. It turns out that Pope’s advice—and he had lots of it—applies perfectly to how America’s first major cellulosic ethanol players are looking at novel coproducts. In the spirit of Pope’s words, they’re holding off on anything that’s uncertain. In “Fired Up By Lignin” on page 28, we learn that Abengoa Bioenergy, Poet-DSM and DuPont are each taking safe approaches to cellulosic ethanol coproducts. EPM Managing Editor Holly Jessen reports that, for now, the vast array of high-value products that could accompany cellulosic ethanol production are being placed on the back burner while producers get past startup and meet volume expectations. Rather than chasing chemicals, resins, acids or fibers from the lignin that’s left over when corn stover and cobs are converted to ethanol, PoetDSM and Abengoa are simply burning their lignin for power; and DuPont is going to sell its lignin to a third-party buyer. Anything is possible, though, and even substituting ethanol itself for a more valuable product is on the table in the future. The subject of our page-34 cover story, “Green Expectations,” has all but ignored Pope’s eloquent counsel. As Jessen explains, Algenol CEO Paul Woods is quite comfortable being “the first by whom the new” is tried. Algenol has engineered and brought to market a technology that harnesses carbon dioxide, sunlight and saltwater to make algae which, in turn, yields ethanol and green crude oil. You’ll enjoy this story because the company’s platform is so different than anything else being done today to make ethanol. We look at more original things being tried in “Yearning For New Yeasts,” on page 38. EPM Senior Editor Susanne Retka Schill reports that the genetically modified yeasts being developed for cellulosic ethanol are not actually subject to approval by the federal government but rather just cleared from review. Essentially, when the U.S. EPA and Food and Drug Administration stop asking questions about these new microorganisms, the road to market is at hand. Navigating this acronym-laden pathway to GM yeast approval is complicated and fraught with uncertainty, but the fact that a few yeasts have now been successfully reviewed is a positive sign for the whole industry. Finally, this month, we take a look at the instructive world of renewable identification numbers (RINs) for biogas, which has been the hottest segment of the cellulosic, or D3 RINs market lately. In less than a year, D3 RINs associated with cellulosic biogas used as a transportation fuel have soared from almost nothing to more than 32 million units. Our page42 story, “The 2014 D3 RIN Leap—for Biogas,” also by Retka Schill, provides valuable insight on the current dynamics of the exciting D3 market.
FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | APRIL 2015
TWITTER.COM/ETHANOLMAGAZINE
VOLUME 21 ISSUE 4
EDITORIAL
ADVERTISER INDEX
President & Editor in Chief Tom Bryan tbryan@bbiinternational.com
13 2015 International Fuel Ethanol Workshop & Expo 8-9 2015 National Advanced Biofuels Conference 45 2016 National Ethanol Conference 49 BBI Project Development 40 BetaTec Hop Products 19 Buckman 25 DuPont Industrial Biosciences 56 Fagen Inc. 3 Fluid Quip Process Technologies, LLC 24 Gamajet, part of the Alfa Laval Group 31 GEA Westfalia Separator 11 Growth Energy 2 Hydro-Klean LLC 44 ICM, Inc. 37 Iowa Economic Development Authority 15 J.C Ramsdell Enviro Services, Inc. 21 Lallemand Biofuels & Distilled Spirits 33 Leaf Technologies 26 MonitorTech Corporation 32 Nalco, an Ecolab Company 47 Novozymes 17 POET-DSM Advanced Biofuels 5 Renewable Fuels Association 53 Sulzer Pumps Solutions, Inc. 27 Swedish Exergy AB 41 Syngenta: Enogen 55 Thermal Refractory 20 Tower Performance, Inc. 30 2015 International Biomass Conference & Expo
Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Holly Jessen hjessen@bbiinternational.com Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com
ART
Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Raquel Boushee rboushee@bbiinternational.com
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/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Account Manager Jeff Hogan jhogan@bbiinternational.com Account Manager Tami Pearson tpearson@bbiinternational.com Sales & Marketing Director John Nelson jnelson@bbiinternational.com 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 anyone outside the United States. 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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APRIL 2015 | Ethanol Producer Magazine | 7
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THE WAY I SEE IT
Failure Is Not An Option By Mike Bryan
This year’s National Ethanol Conference struck on a theme that I think is often overlooked.
The overriding theme was not one of hope, but one of sheer commitment to press forward with a spirit of unfaltering determination. While Bob Dinneen, president and CEO of the Renewable Fuels Association, very effectively set the tone of the conference as, “We are here to stay,” it was clear speakers and attendees alike felt the same. It reminded me of one of my favorite quotes from Winston Churchill, “Never give in. Never give in. Never, never, never—in nothing, great or small, large or petty—never give in, except to convictions of honor and good sense. Never yield to force; never yield to the apparently overwhelming might of the enemy.” Jeff Broin, co-chair of Growth Energy, urged the industry to move ahead and move faster at this years’ Growth Energy Annual Leadership Conference. These are not words of a depressed industry, but words of determination and grit. I think that pretty well sums up the attitude of this industry and those who represent this industry not only in Washington, but all across the country. We have come too far, worked too hard and given so much of ourselves that we will never, ever give up. That message needs to resonate loudly and clearly throughout the halls of Congress, and to the lawmakers in all 50 states. The oil industry continues to receive at least $5 billion a year in federal subsidies. While indeed challenging, losing our tax subsidies was not the death knell it was expected to be, it only made us more determined to press forward. When you have a product that’s less
10 | Ethanol Producer Magazine | APRIL 2015
expensive, environmentally superior and is easily assimilated into the market, it’s difficult for even the most ardent opponent to find reasons not to use it. I have written on several occasions that we are in an awkward position of having our customer (the oil industry) as our greatest adversary. I was wrong about that. The oil industry is not our customer. The consumer is our customer, the environment is our customer and the planet is our customer. The oil industry is merely our distributor. In order to meet growing environmental regulations, the oil industry has few options, with ethanol providing the greatest opportunity at the lowest possible cost. The RFS is critically important because it keeps the feet of an otherwise recalcitrant industry to the fire. The ethanol industry generates over $80 billion in gross domestic product annually, directly employs over 84,000 people and has investment dollars from tens of thousands of farmers all across the country. The contribution ethanol makes to the environment, the economy and to our national security is beyond question. Are we too big to fail? No. Will we ever let failure be an option? As Winston Churchill said, never, never, never! That’s the way I see it.
Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com
EVENTS CALENDAR 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
International Fuel Ethanol Workshop & Expo June 1-4, 2015 Minneapolis Convention Center, Minneapolis, Minnesota 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
ACE’s annual conference is tailored to the interests and needs of the people of ethanol, the folks in the trenches. It’s a gathering of ACE’s commitment to connect ethanol producers with the farmers, researchers, retailers, and support businesses to continue what all of them started a long time ago. It’s also an excellent place to learn and share ideas. And, it’s got all the fun of a family reunion. 605-334-3381 | www.ethanol.org/events/conference
National Advanced Biofuels Conference & Expo October 26-28, 2015 Hilton Omaha Omaha, Nebraska Produced by BBI International, this national 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. 866-746-8385 | www.advancedbiofuelsconference.com
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VIEW FROM THE HILL
More Than Simply Numbers By Bob Dinneen
The mathematician Shakuntala Devi once said, “Numbers have life; they’re not just symbols on paper.” That is particularly true when the numbers are telling
the story of the U.S. ethanol industry. John Urbanchuk of ABF Economics recently unveiled a study titled “Contribution of the Ethanol Industry to the Economy of the United States in 2014.” The report, produced on behalf of the Renewable Fuels Association, is chock-full of vital and important information that gives a comprehensive overview of the ethanol industry and highlights its benefits to local communities, the national economy and our country’s energy security. The study shows that last year ethanol production hit an all-time high of 14.3 billion gallons, which upheld 83,949 direct jobs, 148,684 indirect jobs and 146,582 induced jobs. The study details the $52.7 billion the industry added to the national GDP in 2014, the $5.7 billion in federal taxes, $4.6 billion in state and local taxes, and $26.7 billion to family incomes. Moreover, the ethanol industry’s 14.3 billion gallons saved the country nearly $49 billion by replacing 515 million barrels of petroleum. The RFA used these numbers to shine a spotlight on the value-added benefit of ethanol production showing that every $1 spent on the input feedstock to produce ethanol yielded $1.83 in finished product and DDGS. Numbers have life and these numbers are a reflection of the personal stories and ways the industry is impacting individuals and communities alike. The numbers reflect the confidence of an employee as they get out of bed each morning and head to a wellpaying, stable job. The numbers reflect the relief in a parent’s
12 | Ethanol Producer Magazine | APRIL 2015
eye whose stable income allows them to afford school supplies for their children. The numbers reflect the joy of a young person who can move back to the community they love because an ethanol plant opened, creating jobs and supporting farm incomes. The numbers reflect the hustle and bustle of a busy street in a rural town where businesses were shutting down before an ethanol plant came to town. Iowa realtor Reed Kuper put it like this: “The ethanol industry has been very positive to the entire Midwest. The communities that were once becoming ghost towns are now thriving, and I am seeing young people interested in agriculture again.” Heartland Bank’s President and CEO Kevin Black put it another way, “I have witnessed firsthand the positive impact that renewable fuels have created for my bank customers and the local economies. The amount of misinformation by those interests wanting to see an end to renewable fuels is extremely troubling and damaging to the consumer and our overall economy.” It is unconscionable that while realtors, bank presidents, parents and teachers understand and appreciate the impact the ethanol industry has on communities and individuals all across America, many politicians and naysayers choose to ignore both the numbers and the personal stories and as they continue their attacks on the industry. We will fight against these attacks as the numbers and personal stories continue to grow. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835
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DRIVE
E15 A Winner For Retailers, Consumers By Tom Buis
The momentum for E15 was set in motion six years ago when Growth Energy filed the Green Jobs Waiver with the U.S. EPA. After 6 million miles of testing
by the Department of Energy on 86 vehicles, the EPA approved the fuel for commercial use. Now, just a few short years later, E15 is being offered across America. In 2011, NASCAR selected Sunoco Green E15 as its official racing fuel, and now the sport is entering its fifth year running on E15 After millions of miles on the road and on the track, the force behind E15 has become unstoppable, and the fuel retail world has taken notice. Major players like Mapco, Minnoco, Murphy USA, Protec, Zarco USA, Petro Serve USA and Cenex recognized the competitive advantage E15 offers, responded to strong consumer demand for a low-cost, highperformance fuel and added E15 to their offerings at the pump. This growing excitement and energy confirms something our industry has long known to be true—E15 is a win for consumers, for retailers and for America. We reached out to a number of retailers across the country that are selling E15 and asked them to candidly share their experiences with us. The feedback we received was glowing—business is up, consumers are satisfied and everyone is excited to help local economies, improve the environment and reduce our nation’s addiction to foreign oil. Here are a few highlights from our retailer interviews. • “Adding higher ethanol blends like E15 is the best thing I've done in 20-plus years of station ownership. It gives me a competitive price advantage and my customers like the new fuel. We've had zero customer complaints.” • “E15 has given us a competitive advantage in an industry that’s severely lacking any product differentiation. All fueling stations fight for the same customers by offering essentially the same product. E15 has allowed us to separate from our competitors by offering a fuel that is nearly identical in performance to regular unleaded (E10) for less money.”
• “We have customers very excited about our adding E15. As soon as they heard we were adding higher blends of ethanol, they started walking in the door of our store asking when the new products will be available. We've only been offering E15 for about three weeks but business has been very good for us.” • “My business has been selling E15 for 13 months and we have had zero misfuelings and zero issues with customer vehicles related to using E15. The customers that are using E15 have noticed no mileage loss, the same engine performance and savings at the pump. It's a winwin for the consumer, the retailer and the environment.” These firsthand accounts are supported by the latest data we’ve received from participating retailers. In January, E15 sales accounted for 18 percent of their total sales, which is tremendous. This percentage has been steadily growing, up from 13.85 percent in November and 16.47 percent in December. In the first months of this year alone, we’ve charted new territories and have seen the footprint of E15 expand to Mountain Express in the heart of Georgia and Caraf Oil by the beaches of Miami. E15 will soon be expanding throughout North Carolina with Sheetz and the suburbs of Houston and Chicago with Murphy USA. E15 is currently available at more than 100 stations across the nation in 17 states: Alabama, Arkansas, Florida, Georgia, Illinois, Iowa, Kansas, Michigan, Minnesota, Missouri, North Carolina, North Dakota, Nebraska, Ohio, South Dakota, Texas and Wisconsin. It’s been a resounding success with retailers that add the fuel and we know it’s only a matter of time before E15 is offered in every state in the nation. We commend these leaders in the fuel retail marketplace for their pioneering spirit and for their efforts to expand consumer access to higher blends of renewable fuels that improve the environment, create jobs at home and strengthen our energy and national security. By introducing more homegrown, renewable fuels into the marketplaces, they’re making it convenient for consumers to make a difference and make 2015 the year of E15.
14 | Ethanol Producer Magazine | APRIL 2015
Author: Tom Buis
CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org
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GRASSROOTS VOICE
If It Ain’t Broke, Fix It Until It Is By Ron Lamberty
I’m conflicted over the sturm und drang that has resulted from revelations that some of the storytelling of NBC News’ anchorman, Brian Williams, was, in fact, the kind usually introduced with a disclaimer saying “based on a true story.” On one hand,
if I were in the second helicopter in a formation of four flying in— or even near—a war zone, and any one of those four got fired at, I think I would probably tell people that someone fired at “us.” And if I were making $10 million a year for telling colorful stories about what I saw during hurricanes, near-hurricanes, and wars, I would look pretty hard for an entertaining way to say, “Yeah, I was there, but nothing really happened where we were,” if I was, and nothing did. But I wasn’t. And neither were most of the people skewering Williams over his above-average-height tales. On the other hand, I was glad to see some media hand-wringing and self-flagellation over inaccuracy in reporting, and the tendency of today’s media to report controversy rather than doing the actual work of being a journalist by discovering the actual truth of a story. A couple weeks earlier, some “news” channels thought it was good news when a media scorecard showed that statements by pundits on the most accurate TV news outlets were “rated as half true or better,” 80 percent of the time. To me, that seems like a massive failure, since the news media’s only job is to find the truth, 100 percent of the time. Even when it’s not the truth they find most interesting. I’m not confident “the media” will get the real message of its current self-examination. Most of the ongoing discussion is— predictably—about what reporters should say about themselves, not whether they are ever going to get back to the work of finding and confirming facts rather than just accepting and printing dueling public relations department statements on controversial topics.
16 | Ethanol Producer Magazine | APRIL 2015
I’ve got some ideas that an actual journalist could start with: As legislators continue to attack the renewable fuel standard (RFS), calling it a “failed policy,” or “broken,” and saying it needs to be “fixed,” can someone just ask a few representatives or senators exactly what they want to fix? Since the RFS was passed, we’ve seen increased fuel availability, hundreds of thousands of new energy jobs, improved air quality and pump prices that are the lowest they’ve been since early this century, all stated goals of the energy bill and RFS2 when it was passed eight years ago. So, what is the fix they’re hoping for? Do they want lower production? Fewer jobs? More pollution? Higher prices? Or maybe elected officials have their own Brian Williams problem? They’ve repeated anti-ethanol stories that they believed were true, while embellishing them so the storyteller will be considered relevant and colorful. Would the media ever give as much attention to those stories as they’ve given to their cannibalism of Williams? Maybe they could ask about the “ethanol uses 40 percent of the corn crop” lie that was only true during one drought year. Or the “blend wall” claim that said cars couldn’t use more than 13 billion gallons of ethanol, during a year they used 14 billion gallons. Perhaps they could ask oil companies why they ban the sale of E15 at branded stations, or check into E15 auto warranties. Take any of those you want, eager journalist, but do yourself a favor: Don’t take my word for it. Don’t take anyone’s word for it. Look it up. Fact check. Do your job.
Author: Ron Lamberty
Senior Vice President American Coalition for Ethanol 605-334-3381 rlamberty@ethanol.org
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GLOBAL SCENE
Big Biofuel Implications In LCFS Readoption By Leticia Phillips
California’s Low Carbon Fuel Standard changed global biofuels markets forever in 2011 when it became the first market-based approach to lowering transportation fuel emissions. By mandating fuel producers
reduce carbon intensity (CI) 10 percent from a 1990 baseline by 2020, the LCFS displaced roughly 2.14 billion gallons of gasoline and 77 million gallon-equivalents of diesel with low-carbon transportation fuels through 2013, according to the University of California-Davis’ Institute of Transportation. But California’s Air Resources Board is proposing major LCFS system revisions and their outcome will impact ethanol industry fortunes. So how could re-adoption play out, what’s changing and what can ethanol producers expect as a result? LCFS readoption began in 2013 when the California Court of Appeals ordered CARB to remedy legal defects from the initial adoption process. CARB proposed amendments, solicited comments, held a public hearing and a readoption vote may occur as soon as summer 2015. While the details won’t be known until the final vote, the outcome will impact America’s largest single transportation fuels market, as well as states like Oregon and Washington, which are launching their own LCFS. Proposed amendments have focused on three major biofuelrelated topics: Revised CI targets: Overall, transportation fuel CI scores have only fallen around 1 percent since 2011, meaning annual CI reduction goals will likely need upward curve smoothing for 2016-2020, depending on projected fuel availability. CARB may also increase its post-2020 CI targets above 10 percent. CI regulatory changes currently center on lifecycle emissions, the overall well to wheel emissions footprint of transportation fuel. CARB proposed updating their model for calculating lifecycle CI values to a newer one based on Argonne National Laboratory’s GREET model. CARB opted to use average electricity mix for production facilities as part of biofuels life-cycle emissions instead of the marginal electricity mix. While this tweak would empower U.S.-based facilities to more accurately calculate their CI through region-specific power supplies, UNICA has urged CARB to reconsider this change, as it does not include emissions reductions from electricity cogeneration at Brazil’s sugarcane mills.
Indirect land use change formula improvements were also proposed by CARB to better measure emissions associated with the conversion of land to agricultural use for biofuel production. UNICA has supported this proposal, as it will allow more accurate identification of how pastures and forests respond to cropland expansion and more realistically represents crop expansion dynamics in regions with large pasture and forest stocks, but we have urged CARB to capture doublecrop systems when measuring crop production expansion. Some stakeholders have warned new CI values will prevent sufficient biofuel supplies from reaching market. CARB projects corn ethanol supplies will decrease as CI standards tighten toward 2020, but sugarcane ethanol volumes and electric vehicles are projected to fill the gap. Two-tiered biofuels system: CARB is proposing a two-tiered CI system for fuel pathways and producer facility certification and registration. Under this system, first-generation biofuels like corn and sugarcane ethanol are placed in tier one and next-generation advanced biofuels in tier two, with any fuel using innovative production methods falling into tier two. Cost-containment provision: Several revisions arose during stakeholder workshops and were added to the re-adoption proposal, including two cost-containment approaches to increase market certainty about the maximum cost of compliance, provide investment and production incentives, and create additional compliance options. Under the first approach, a credit clearance market would allow LCFS participants to carry credit deficits into the next compliance period. All required credits must be purchased during a credit clearance period at the end of compliance years where participants with excess credits sell their supply in a reverse auction format. CARB also proposed a price cap starting at $200 per credit in 2016, indexed to inflation. The second proposed approach would create a credit window approach where LCFS participants who are unable to purchase sufficient credits on the open market may buy compliance-only credits from CARB at set prices, with proceeds going toward the California Air Pollution Control Fund. Regardless of the outcome, CARB’s proposed revisions are a step forward for clean renewable fuels like sugarcane ethanol. As LCFS readoption plays out over 2015, Brazil remains committed to help reduce transportation fuel emissions through reliable biofuel supplies, even as fuel demand rises and carbon intensities fall. Author: Leticia Phillips North American Representative, Brazilian Sugarcane Industry Association, UNICA 202-506-5299 leticia@unica.com.br
18 | Ethanol Producer Magazine | APRIL 2015
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BUSINESS BRIEFS
Alverson
Jones
Kristensen
Herseth
Sovereign
Parsley
The American Coalition for Ethanol board of directors has elected Ron Alverson of Dakota Ethanol LLC as president; Duane Kristensen of Chief Ethanol Fuels Inc. as vice president; Dave Sovereign of Golden Grain Energy LLC as secretary; and Owen Jones of Full Circle Ag Cooperative as treasurer. In addition, Lars Herseth of the Herseth Ranch and Scott Parsley of East River Electric Cooperative, have been elected to serve on the ACE executive committee. Abengoa has appointed Ignacio Garcia Alvear co-chief financial officer responsible for investor relations and capital markets, effective Feb. 1. Alvear previously served as chief
People, Partnerships & Deals
financial officer of Abengoa Bioenergy. He replaces Barbara Zubiria. Alvear joined Abengoa in 1995. Abengoa’s board of directors has also appointed current CEO Manuel Sánchez Ortega as first vice chairman , replacing José B. Terceiro. Independent director Antonio Fornieles Melero was selected to be lead director, second vice chairman and a member of the audit committee and the appointments and remuneration committee.
for two 1.75 MW gas turbines that utilizes Ener-Core technology to convert waste gases into on-site power for the ethanol plant.
Green Biologics Ltd. has closed on a $42 million follow-on equity funding round coled by existing investors Swire Pacific Ltd. and Sofinnova Partners. Additionally, in conjunction with the closing of the Central MN Ethanol Co-op acquisition, certain CMEC shareholders elected to receive their sale proceeds in a debt and equity investment in Central MN Renewables LLC through a new surviving entity, Renewable Partners LLC. Ocean Park Advisors acted as a financial advisor to CMEC on the CMR consideration election structuring and process.
Allete Inc. has signed a definitive agreement to purchase U.S. Water Services Inc. Allete will initially purchase 87 percent of U.S. Water for $168 million, based on a total implied enterprise value of $194 million. Current employees and management of U.S. Water will continue to own the remaining 13 percent. Allete will purchase the remaining the 13 percent interest in the future for a contingent amount based on U.S. Water’s future earnings.
Ener-Core Inc. has won the 2014 New Economy Award for Best Air and Environment Solutions, which recognizes forerunners in the clean tech and renewable energy sectors. The company is a provider of power oxidation technology and equipment that generates clean power from low-quality waste gases. Pacific Ethanol recently entered into a contract with Dresser-Rand
Esker has announced the acquisition of TermSync, a cloud-based accounts receivable platform. TermSync develops and markets an innovative, collaborative portal enabling businesses to modernize their accounts receivable processes.
Microvi Biotechnologies Inc. has closed Series B funding that will help accelerate its growth as it continues commercial projects utilizing its innovative solutions in the water, wastewater and biobased products industries. SKion GmbH, the investment firm of German entrepreneur Susanne Klatten, acquired a minority stake in Microvi. The firm invests in cutting-edge technology in sectors such as material sciences and water.
Thermal Refractory Solutions & Maintenance Give the Thermal team a call today! 612-751-2010 www.thermalrefractory.com We are your Ethanol Refractory Experts! We know your energy center and can provide superior results on your RTO, TO, Boiler, or Dryer. We have installers based from 3 different locations to provide a fast & cost effective solution for your plant. We understand the importance of your operation and will provide the results you need to be running smooth. 20 | Ethanol Producer Magazine | APRIL 2015
Dyadic International Inc. has appointed Michael Tarnok as chairman of the board of directors. He will also continue to serve on the company’s audit and compensation commitTarnok tees. He is the current chairman and former interim CEO of Keryx Biopharmaceuticals Inc. and a former senior executive of manufacturing and finance at Pfizer. Green Biologics Ltd. has appointed James J. Hohman to a nonexecutive director position on its board of directors. Hohman was formerly president of Omnova Solutions’ performance Hohman chemicals business unit and a corporate senior vice president of Omnova. He has also held general management, business and marketing management positions with BP Chemicals and BFGoodrich. Lallemand Inc. has appointed Antoine Chagnon as president and CEO and William Nankervis as executive vice president and chief operating officer. Antoine Chagnon succeeds his father Jean Chagnon, who has served as CEO the past 34 years and will remain a
board member and continue to support the company’s leadership team as one of its senior vice presidents and special advisors. Antoine Chagnon previously worked at Audi and at Siemens AG. Nankervis joined Anchor Yeast in 1992 and was serving as director of bakers yeast and baking specialities business when the company was acquired by Lallemand in 2006. Dan Cummings has been appointed president of Poet-DSM Advanced Biofuels. Cummings will oversee day-to-day operations of Poet-DSM, repreCummings sent the joint venture publicly, and coordinate functions between the parent companies. He will also act as the central point of contact for external relations, which includes all technology licensing activities for Poet-DSM worldwide. Cummings joins Poet-DSM after serving as president and director of INEOS New Planet BioEnergy, and as global vice president of commercial and external affairs for INEOS Bio. Previously he held senior business, corporate and legal positions at INEOS and BP.
have been designed to optimize desired trait efficacy and potentially accelerate product development, follows the successful identification and validation by Evogene of more than 1,000 genes that have entered Monsanto's product development pipeline. The collaboration, which was initiated in 2008 and extended in 2013, is focused on transgenic approaches for improved yield and enhanced stress tolerance in corn, soybean, cotton and canola. Bob Gilmore has been appointed managing director and chief sales officer at Vecoplan LLC. He joins Len Beusse, managing director and chief operating officer, on Gilmore the strategic planning team charged with positioning Vecoplan for sustainable long-term growth, as well as day-to-day management of the company. Gilmore’s responsibilities also include the supervision of all internal and external sales staff, and overseeing the expansion of Vecoplan markets.
Evogene Ltd. has announced that its recently developed comprehensive gene optimization program is being incorporated into its multiyear collaboration with Monsanto Co. The addition of these new capabilities, which
APRIL 2015 | Ethanol Producer Magazine | 21
COMMODITIES
Prices & Market Analyses
Natural Gas Report
Natural gas prices probably won’t hit 2012 $2 level Feb. 23—Parallels to 2012 invite natural gas users to dream of prices below $2 per MMBtu. However, different conditions with respect to storage inventories are likely to drive a more typical seasonal pattern for prices with the low price for the year coming in the third quarter rather than in April. Production is going gangbusters, and even with flat production from month to month through the summer, 2015 will post year-overyear production growth through the summer north of 4 billion cubic feet (Bcf) per day. Three years ago, production was at record highs and prices were cratering. In fact, looking purely at price trends, there is an eerie similarity between futures pricing. However, in 2012, two fundamental drivers were necessary to drive prices to trade below $2. Production was strong and there was massive inventory surplus driven by a very moderate end to winter. In 2012, the end of the withdrawal season saw inventories at a 911 Bcf surplus to the five-year average. Typically a “lower low” happens around Q3 of each year. In 2012, low was posted early for the year, with storage as a key driver. With an entire summer of large production-driven injections ahead of the market and abundant inventory, there wasn’t flexibility for the market to absorb
by Ben Straus
excess production. Instead, the market dropped to a price that was capable of clearing the excess supply without concern of running out of inventory capacity. Unlike 2012, inventory levels leaving the withdrawal season are anticipated to be near normal, suggesting that the market has at least 800 Bcf more capacity at its disposal.
Corn Report
Producers watching for a spring or summer weather rally Feb. 23—The corn market stayed in a constant trade range during February. Overall, one must look at the corn end-user margins. Ethanol, as well as other industry margins, have decreased after very impressive margins in the beginning and during the fourth-quarter time frame. To some extent, this has a limited corn’s ability to sustain a rally. In addition, corn has limited downside as producers hold onto corn inventory. The USDA increased corn for ethanol demand by 75 million bushels. This is in line with current ethanol production run rates so any changes to the run rate could affect the number later on in the old crop year. Due to increases in ethanol production, the USDA was compelled to lower corn utilized in feed demand by 25 million bushels, attributing it to more coproduct production. Currently impacting the corn market is a relatively tight cash situation. Producers seem to be content and are waiting for a weather rally, whether it arrives during spring planting or during the growing season. Nonetheless, they are eager to receive $4 cash corn at the local level and are reluctant to deviate from that price scenario at this time. This is Comments in this column are market commentary and are not to be construed as market advice.
22 | Ethanol Producer Magazine | APRIL 2015
by Jason Sagebiel
limiting the downside for corn. So if weather issues do not come up, it may be a change in the calendar that forces bushels into the marketplace later in the summer. Nearby corn futures should seem comfortable on either side of $4.
Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.445
DDGS Report
Spot
Rack
West Coast
1.610
1.650
Midwest
1.390
1.622
East Coast
1.500
1.566 SOURCE: DTN
DDGS traded, destination China Feb. 23—The DDGS market is still waiting to see what China is going to do in the container markets, and if it will be in addition to, or in lieu of, what has already traded in January and February in the bulk markets. With as many as 35 boats having been reported as traded for the upcoming March through September time frame, intuitively the container market seems as though it should feel some pressure. Logistics are playing into the equation as well. For most of February, it felt like the West Coast container ports were teetering on the verge of a strike, with slowdowns turning three-day unloads into 10 to 12 days. However, over the weekend of Feb. 21, there was an agreement signed, so now they can begin cutting into the backlog, which is substantial. Empty con-
Region
Regional Gasoline Prices ($/gallon) by Sean Broderick
tainer supplies should now be more readily available, and hopefully that translates into more business. The per-ton price spread between bulk and container freight had favored containers in the past, but has now switched pretty dramatically to favoring bulk. Domestically, rail movement has improved, so there are a lot fewer fire sales in the local truck markets, since plants now have a better supply of cars to move the product further afar. With the robustness of the bulk boat market mentioned above, there is a lot more DDGS moving via rail to river points that are not frozen. Cash delivered prices are at 120 to 130 percent or more the price of corn, which continues to eat into domestic demand.
Front Month Futures Price (RBOB) $1.640 Region
Spot
Rack
West Coast
2.121
2.253
Midwest
1.639
1.902
East Coast
1.619
2.647 SOURCE: DTN
DDGS Prices ($/ton) LOCATION
Apr 2015
Mar 2015
Apr 2014
Minnesota
160
165
180
Chicago
192
200
225
Buffalo, N.Y.
195
200
215
Central Calif.
246
254
280
Central Fla.
228
232
262 SOURCE: CHS Inc.
Corn Futures Prices
(Dec Futures, $/bushel) Date
High
Low
Close
Feb 23, 2015
3.94
3.85 1/2
3.86 3/4
Jan 23, 2015
3.96 3/4
3.90
3.95 1/4
Feb 24, 2014
4.58 3/4
4.52
4.57 3/4 SOURCE: FCStone
Cash Sorghum ($/bushel) Location
Ethanol Report
Summer demand supports energy prices Feb. 23—Ethanol and gasoline prices began to move higher through the month of February as the focus on spring and summer driving demand created additional buyer support over the past couple of weeks. Ethanol futures have rallied more than 14 cents per gallon in the past month as buyer interest in gasoline markets is building. RBOB gasoline futures prices at the end of February have moved to their highest point since early December, as the
by Rick Kment
demand growth in gasoline has helped to draw both commercial and investment traders back into the market. The focus continues to be on support from upcoming driving demand, which traditionally builds through the spring and early summer months. Even though both gasoline and crude oil inventory levels continued to build through the month of February, expectations of growing demand could push prices moderately higher over the short term, based on seasonal buying patterns.
Feb 16, 2015
Jan 16, 2014
Jan 20, 2014
Superior, Neb.
4.65
4.62
4.46
Beatrice, Neb.
4.00
3.97
4.14
Sublette, Kan.
4.38
4.03
4.30
Salina, Kan.
4.78
4.52
4.44
Triangle, Texas
3.98
3.87
4.37
Gulf, Texas
5.55
5.44
5.57
SOURCE: Sorghum Synergies
Natural Gas Prices ($/MMBtu) LOCATION
Nov 28, 2014
Feb 26, 2015
Feb 26, 2014
NYMEX
4.09
2.70
4.86
NNG Ventura
4.42
4.93
20.44
Calif. Citygate
4.43
3.07
5.35
SOURCE: U.S. Energy Services Inc.
U.S. Ethanol Production (1,000 barrels) Per Day
Month
End Stocks
Nov. 2014
952
28,573
17,029
Oct. 2014
924
28,641
17,265
Nov. 2013
931
27,915
15,569
SOURCE: U.S. Energy Information Administration
APRIL 2015 | Ethanol Producer Magazine | 23
DISTILLED
New government app to aid in biofuels, clean energy exports
The International Trade Administration has announced the U.S. Department of State, U.S. Department of Commerce and U.S. Department of Energy are providing U.S.-based suppliers and providers of certain energy solutions the opportunity to participate in the pilot phase of an interactive directory of renewable energy and energy efficiency solutions. An interagency government team is currently developing an interactive app that will serve as a mobile business directory for U.S. clean energy exports. The app will highlight sustainability improvements at U.S. diplomatic missions and provide potential business partners around the globe with a searchable interface to find information on U.S. technology and service providers. Biofuels and renewable energy equipment are among the diverse array of goods and services the app will showcase. “Through the app, a global audience, as well as the American public, will be invited to learn more about environmental diplomacy efforts overseas, and the innovative U.S. companies powering them,� said the International Trade Administration in a Federal Register notice.
Ethanol News & Trends
Top 10 2014 export markets (in million gallons) 2013 total
2014 total
Canada
324
335.9
Brazil
45.5
112.2
UAE
37.6
68.3
Philippines
52.1
67.6
India
21.2
41.6
4.7
36
Mexico
29.5
30.4
Netherlands
11.3
24
Tunisia
3.9
21
Spain
0.1
18.6
South Korea
SOURCE: RENEWABLE FUELS ASSOCIATION
Exports increase in 2014, second only to 2011 U.S. ethanol exports hit 836 million gallons in 2014, 6 percent of the total 14.3 billion gallons produced nationwide. The export number for 2014 is second only to the 1.193 billion gallons exported in 2011. “We are working diligently to increase demand for this product abroad,� said Bob Dinneen, president and CEO of the Renewable Fuels Association, adding that U.S. ethanol has now been exported to all six inhabited continents. “U.S. ethanol is now exported to 51
countries across the globe, including regions that once seemed far-fetched as renewable fuel destinations such as the Middle East and North Africa,� he said. The RFA distributed a publication on exports, titled “2014 U.S. Ethanol Exports and Imports: Statistical Summary,� at the National Ethanol Conference in February. The document shows several countries significantly increased importation of U.S. ethanol last year, including Brazil, South Korea and Tunisia.
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3URWHLQ 3XULW\ 24 | Ethanol Producer Magazine | APRIL 2015
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DISTILLED
Valicor acquires patent for protein coproduct recovery Valicor Inc. has acquired a patent that covers the extraction of protein from corn ethanol stillage and is designed to help ethanol producers maximize their coproduct recovery and value. The patent covers a system and method that isolates gluten as a coproduct of ethanol production. The protein product can be dried to produce a high-value, high-protein meal. “This latest patent complements our VFRAC Stillage Optimization Platform. Working together, these technologies transform protein product so it’s easier to recover and has higher digestibility ratios and enhanced flow characteristics,” said Phil Schoof, senior vice president of separation technologies at Valicor. “This IP (intellectual property) is a cornerstone patent on protein extraction from corn ethanol stillage, it has the earliest priority date of any technologies in the space, and the technology has been proven on commercial scale.”
China fuel ethanol statistics 2013
2014
2015
Production (million liters)
2.64
2.79
2.91
Consumption (million liters)
2.64
2.8
2.91
6
7
7
2.7
2.8
3
1,612
1,650
1,750
95
100
105
No. of plants Nameplate capacity (million liters) DDGS (1,000 MT) Corn oil (1,000 MT) SOURCE: USDA FAS GAIN
Ethanol production grows in China A report recently filed with the USDA Foreign Agricultural Service’s Global Information Network estimates China’s fuel ethanol production reached 2.8 billion liters (739.68 million gallons) last year, up 6 percent from 2013. In 2015, production is expected to reach 3 billion liters. The GAIN report estimates 76 percent of ethanol in China is produced from corn, with 14 percent produced from wheat, 8 percent produced from cassava, 1 percent produced from sweet sorghum, and 1 percent produced from corn cobs. The country currently has seven plants
Some chemical companies focus on this
licensed to produce fuel ethanol, including one cassava plant with a capacity of 200,000 tons, and one sweet sorghum plant in Inner Mongolia with a capacity of 50,000 tons that began operations in June 2014. Cellulosic ethanol production reached an estimated 42 million liters last year, up 3 percent from 2013. China has one cellulosic ethanol plant that takes in corn cobs as feedstock. That facility, which has an estimated capacity of 63.4 MMly, is located in the Shandong province and began operations in October 2012.
or that
.
Buckman takes a wider view. Some chemical companies focus only on process. Some focus solely on water treatment. Buckman takes a comprehensive approach and looks at the bigger picture — return on investment and environment. We look at every aspect of your plant’s operation,
tailoring chemistries to boost production and increase profitability — from evaporator efficiency to corn oil recovery to water treatment issues. To find out more or to schedule a system audit, contact your Buckman representative or email ethanol@buckman.com.
© 2014 Buckman Laboratories International, Inc. All rights reserved.
APRIL 2015 | Ethanol Producer Magazine | 25
DISTILLED
Blume Distillation announces investment
IOWA
NEBRASKA
• Arthur, Iowa • Camilla, Georgia • Fairbank, Iowa • Fairmont, Nebraska
• Iowa Falls, Iowa • Menlo, Iowa • Shell Rock, Iowa
GEORGIA
Flint Hills acquires Georgia plant Flint Hills Resources LLC, a wholly owned subsidiary of Koch Industries Inc., recently announced it has finalized the acquisition of Southwest Georgia Ethanol LLC, a 120 MMgy ethanol plant located near Camilla, Georgia. The facility is now known as Flint Hills Resources Camilla. The Camilla plant began operations in 2008. In addition to ethanol, it produces more than 310,000 tons of dried distillers grains each year, along with approximately 21 million pounds of nonfood-grade corn oil.
Flint Hills Resources’ biofuels business now includes seven ethanol plants with a combined annual capacity of 820 million gallons, a biodiesel plant and investments in biofuels technology and feedstock development. The Camilla facility is the company’s first ethanol plant located outside of the Midwest. In addition to the Georgia plant, Flint Hills Resources also owns five ethanol plants located in Iowa and one facility located in Nebraska.
Graphic design www.marierio.fr
Blume Distillation has doubled its Series B capitalization with a $1 million capital infusion from cleantech seed and venture capital fund, Climate Change Investigation, Innovation and Investment Co. CC3IC’s investment is expected to accelerate the company’s intellectual property filings and licensing, as well as the design, development and commercial roll-out of the Blume Distillation technology. Blume Distillation’s modular and containerized flexible feedstock system is targeted at carbohydrate and sugar waste streams from bottling plants, food processors and organic streams from landfill operations, as well as purpose-grown crops. The system utilizes the basic core components of the standard ethanol process with energy reducing solutions in dehydration. “We’ve developed a method that would reduce the 81 percent energy consumption [in the final dehydration step] by 70 to 79 percent,” said Tom Harvey, vice president of Blume Distillation. A demonstration chassis was nearly complete in February. Completion is expected later this spring and the first commercial units are expected to be delivered late in the year.
Leaf Technologies is the business unit of Lesaffre dedicated to the biobased ethanol and chemicals industries. At Leaf Technologies we are starting a new path in our development with the will to offer our partners more specialized products and services, to continue innova-
ting in the field of first and second generation ethanol and to exceed the industries expectations. Based on our expertise in genetics, scaling up, fermentation, yeast production and through technical support we will be focused on turning science into industrial reality.
DISTILLED
E15 availability expands in southeastern US
In January, Protec Fuel announced the opening of several new E15 locations. The company is now offering the fuel at two convenience stores in the Atlanta metro area. According to Protec, eight more locations in the region are expected to begin offering E15 soon. Protec also recently announced the opening of an E15 station in South Miami, Florida. Also in January, Sheetz Convenience Stores announced plans to offer E15 to customers in North Carolina. The company will begin to install E15 in early this year. By spring 2016, the company expects installation to be complete at 60 of its North Carolina stores. According to the Renewable Fuels Association, E15 is now available at fuel stations in 16 states. In addition to the new locations in Georgia and Florida, the ethanol blend is also available in Kansas, Nebraska, South Dakota, North Dakota, Minnesota, Wisconsin, Iowa, Tennessee, Alabama, North Carolina, Michigan, Ohio, Illinois and Arkansas.
Corn ethanol improvements Ethanol manufacturing energy use
Down 25%
Corn farming energy use
Down 24% Down 3%
Corn fertilizer and chemical use
Up 3%
Volume of ethanol per bushel of corn SOURCE: RE-THINKING THE CARBON REDUCTION VALUE OF CORN ETHANOL FUELS
ACE white paper highlights ethanolâ&#x20AC;&#x2122;s carbon reduction improvements A white paper written by Ron Alverson, president of the American Coalition for Ethanol board of directors, reveals how scientists are applying technology innovations by farmers and ethanol facilities to improve the accuracy of carbon intensity modeling for biofuels. The result is a dramatic improvement in the low carbon value of corn-based ethanol. The paper cites new research and improved modeling by the Department of Energyâ&#x20AC;&#x2122;s Argonne National Laboratory, which indicates corn ethanolâ&#x20AC;&#x2122;s carbon intensity (CI) is trending lower. In the paper, Alverson notes ANL has documented significant reductions in corn eth-
anolâ&#x20AC;&#x2122;s CI since 2008. Through updates to the GREET model, ANL researchers have shown ethanol manufacturing energy use, corn farming energy use, corn fertilizer and chemical use are all down, while the volume of ethanol produced from each bushel of corn is up. â&#x20AC;&#x153;Unfortunately, low carbon fuel market regulators, such as the U.S. EPA and the California Air Resources Board, have yet to acknowledge these improvements and update their models with this new science,â&#x20AC;? Alverson said. â&#x20AC;&#x153;Because fossil fuel CI is getting worse and corn ethanol CI is improving, failure to account for these trends unfairly penalizes biofuels in low carbon markets.â&#x20AC;?
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APRIL 2015 | Ethanol Producer Magazine | 27
ADVANCED BIOFUELS
28 | Ethanol Producer Magazine | APRIL 2015
ADVANCED BIOFUELS
Fired Up By Lignin The three big U.S. cellulosic ethanol producers have different approaches to lignin and future coproduct possibilities. By Holly Jessen
Adhesives, chemicals, resins, acids and carbon fibers are just a few of the potential coproducts that could, someday, be produced at a cellulosic ethanol biorefinery. Poet-DSM Advanced Biofuels, Abengoa Bioenergy and DuPont all
tell Ethanol Producer Magazine they are keeping a close eye on the future. But for now, all three companies see value in lignin. Poet-DSM and Abengoa both plan to burn the lignin produced at their facilities, to provide on-site power, with small differences in the two company’s strategies. In contrast, DuPont’s facility is natural-gas powered and the company is marketing its lignin-rich coproduct to third-party customers. Lignin burned at the Project Liberty cellulosic ethanol plant in Emmetsberg, Iowa, will produce process steam for that facility and the colocated corn-ethanol plant. “We know it works, it’s proven technology,” says Steve Hartig, calling it the easy solution. The company also has an onsite anaerobic digester, which will produce methane from the liquid lignin stream. “Between the two of them, it’s a significant energy cost savings,” he says. At the time Hartig spoke to EPM, he was general manager of licensing
APRIL 2015 | Ethanol Producer Magazine | 29
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STEAM FREEWAY: Poet-DSMâ&#x20AC;&#x2122;s strategy is to produce process steam by burning lignin at its cellulosic ethanol plant. Excess steam is piped to the corn-ethanol plant from the cellulosic ethanol facility. PHOTO: POET-DSM
for Poet-DSM. In mid-February, prior to press time, it was announced that he would pursue a a career outside Poet-DSM. At Abengoaâ&#x20AC;&#x2122;s facility in Hugoton, Kansas, lignin-fired boilers will produce steam and electricity to power the plant, and additional electricity to sell to the electrical grid. Although the company continues to consider other possible markets for lignin or other potential coproducts, for right now, the highest-value use is to power the plant. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re pretty much an island when it comes to energy needs,â&#x20AC;? says Chris Standlee, executive vice president of Abengoa Bioenergy. â&#x20AC;&#x153;We are self-sufficient and that is primarily because we use that lignin for the fuel.â&#x20AC;? DuPont, on the other hand, is approaching lignin a little differently at its facility in Nevada, Iowa. Although the company believes burning lignin for onsite power is a good option, the goal is to offer those interested in licensing its technology flexibility, says Steve Ogle, cellulosic
ethanol commercial leader with DuPont Cellulosic Ethanol. Taking this path allows DuPont to demonstrate the sale of the lignin-rich material to third-party customers. Another option is that a producer may want to use the material for power generation at an alternate location. â&#x20AC;&#x153;We believe that our coproducts strategy really helps to differentiate us from our competition,â&#x20AC;? he says, adding that future licensing partners may already have alternate means of powering a cellulosic ethanol plant. Depending on where it is taken off the process, the lignin-rich material produced at the DuPont facility takes on two main forms. One is wet filter cake, which is dried and pressed, and the other is liquid syrup. These two coproducts can be combined in various ways to create a customized granular form, depending on the customerâ&#x20AC;&#x2122;s needs. â&#x20AC;&#x153;We have found that there is interest in all three varieties at this point,â&#x20AC;? Ogle says. Currently, DuPont has â&#x20AC;&#x153;opportunities for a significant volumeâ&#x20AC;? of the
ADVANCED BIOFUELS
MULTIPLE COPRODUCT FORMS: Depending on where it is taken off in the process, DuPont’s lignin-rich coproduct has different forms. From top left are syrup, wet cake and the granulated form, which is a mixture of varying amounts of the other two forms. PHOTO: DUPONT
lignin-rich material produced at its facility, and is working on offtake agreements for the remaining amount. Among DuPont and its customers, there’s a lot excitement about using the material to lower greenhouse gas emissions by replacing fossil fuels, Ogle says. Although the initial application is burning the material to produce power, DuPont does have some other ideas as well. “The more that we evaluate and develop our coproducts, the more we understand the wide variety and the potential of these coproducts,” he says, adding that he is unable to get into specifics due to confidentiality agreements.
Other Products
Burning lignin produces ash, which also has potential beneficial uses, says Hartig. While there’s some work yet to be done, Poet-DSM believes analysis will show it is safe to use as a soil amendment for farmland. “We expect it to have some
advantages because it has some of the minerals that are coming from the corn stover, which can go back on the land,” he said. Other potential coproduct ideas might be interesting, but still a generation or two away from becoming a reality. Another possible challenge is the size of the market for a particular product. For example, Hartig says, there’s some R&D into carbon fiber that’s lower performance and lower cost. “The challenge at an ethanol plant is that about three or four days of our lignin could produce all the carbon fiber you could use in your lifetime,” he says. “So it could be a nice application but it’s not really going to drive anything from the cellulosic ethanol side.” He also mentioned Borregaard Group, an overseas company that produces pure lignin for building materials and other products as well as a small amount of ethanol. Other companies are investigating the idea of producing aromatic
APRIL 2015 | Ethanol Producer Magazine | 31
BIOPOWER: Using steam produced from burning lignin, Abengoa’s electric-cogeneration facility produces enough power for its cellulosic ethanol plant as well as some excess for the grid. PHOTO: ABENGOA
compounds. “We don’t see that as something that we need to invest in directly, but we are watching companies that are investing in that, and talking to them,” he said. “If one of those succeeds, it could certainly become an opportunity.” Although Abengoa is currently focused on getting its facility up to full ethanolproduction levels and producing cellulosic ethanol, the company is open to wherever the market leads it in the future. “What we are doing most of our work on, frankly,” Standlee tells EPM, “is diversifying our ultimate end products, taking the cellulosic sugars and looking to turn that into some other product besides ethanol.” While ethanol is the easiest conversion, there are other possibilities. “We are interested in finding new and different chemicals that are currently made from petroleum
32 | Ethanol Producer Magazine | APRIL 2015
bases that we can make from renewable sugars,” he says. “We think there’s potentially a huge market for that.” Although it would most likely be an either or proposition, with the company transitioning to a completely new end-product, Abengoa has also talked about the possibility of adding on a tail-end processing facility for chemical production. The idea is to add product diversification in a way that would allow the company to produce cellulosic ethanol or another product and flip back and forth as efficiently as possible, depending on market drivers, Standlee says. Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com
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NOVEL FEEDSTOCKS
GROWING GREEN: There are about 3,600 ethanol-producing algae bags per acre of land, Paul Woods says. PHOTO: ERIK KELLAR PHOTOGRAPHY
34 | Ethanol Producer Magazine | APRIL 2015
NOVEL FEEDSTOCKS
Green
Expectations A Florida algae-to-ethanol operation is poised to go commercial scale with a project colocated with a natural-gas-fired power plant. By Holly Jessen
By harnessing CO2, sunlight, saltwater and algae, Algenol’s technology takes only 25 days to produce maximum concentrations of ethanol. Imagine trying to
replicate that timeline in the corn-ethanol industry, including planting, harvest and ethanol production. “It’s not possible,” says Paul Woods, founder and CEO of the company. “But it is possible with algae, because it grows so fast.” How fast does algae grow? Woods likes to tell people in Florida that all they need to do is turn off their pool pumps to witness the power of algae. The technology also uses significantly fewer acres of land than corn-ethanol production. At a yield of 170 bushels per acre and 2.8 gallons per bushel, a corn ethanol plant produces 476 gallons of ethanol per acre of corn. A corn stover cellulosic facility will be able to sustainably remove 2 or more tons of corn stover per acre, which will yield 140 gallons of ethanol, according to an industry expert. Algenol’s technology, on the other hand, can produce, on average, 8,000 gallons of ethanol per acre in a year, Woods says, adding that at peak production in the sunny summer months, Algenol produced more than 10,000 gallons of ethanol.
APRIL 2015 | Ethanol Producer Magazine | 35
GREENBACKS: Even in hot, sunny places like Florida, there are still seasons when production slows down due to weather. PHOTO: ERIK KELLAR PHOTOGRAPHY
How It Works
The clear plastic bags used in the direct-to-ethanol technology look like giant hanging file folders, Woods says. Each bag is 10 feet by four feet, 2 inches deep and has capacity of 50 liters. The bag is filled with saltwater, which is inoculated with algae culture. All green plants, including algae, take in water and CO2 from the atmosphere, and combine those elements as a precursor to sugar, which, with Algenol’s two-step direct-to-ethanol process, is immediately converted to ethanol. In the end, 85 percent of the carbon consumed produces ethanol and the remaining 15 percent is spent algae. When that process is complete, a simple centrifuge is used for separation, Woods says. Spent algae goes one way and liquid goes another. Next comes a two-step ethanol purification process, the first of which is patented by Algenol and the second is no different than the method used by the cornethanol industry, he adds. The remaining biomass, or spent algae, is turned into green crude in a six-minute process, which can potentially be sent to a refinery to produce mostly gasoline or diesel and some jet fuel. The four fuels can be produced for about $1.30 a gallon each, the company says. At Algenol’s demonstration facility near Fort Meyers, Florida, the CO2 feed-
36 | Ethanol Producer Magazine | APRIL 2015
stock arrives in tanks. The company is focusing first on colocation with carbon dioxide emitters in Florida and Arizona. “We are going to take CO2 that is about to be emitted into the atmosphere and instead we’re going to capture that carbon and recycle it or reuse it,” Woods says, adding that the CO2 is collected by a giant straw at the stack, transported by fans and blowers and injected into the algae-inoculated bags. “We’re actually going to turn these emissions into something that is a very useful and valuable product.” The company has already demonstrated that CO2 collection works, by building a machine to gather and compress it. The next step was to see if there was anything in the flue gas that would be detrimental. Although there were concerns, four tests show the algae actually performed 3 to 5 percent better on flue gas than bottled compressed CO2. It turns out that post-combustion gas is significantly depleted in oxygen, resulting in faster and more efficient photosynthesis. In Florida, there are three types of CO2 sources, the first two of which are natural gas- or coal-fired power plants. Algenol has already signed a 24-year supply agreement with a natural gas-fired power plant in which it agreed to pay the company $1 per ton. Compared to the approximately $40 a ton charge for pure CO2 from a pipe-
line, Algenol is scoring a cheap feedstock, Woods says. Plus, that $1 flows back to the power plant’s electric customers. The goal is to announce the name of the facility this spring and break ground this year. Algenol wants to eventually expand to 8,000 acres of algae-producing modules, with a target production of 8,000 gallons of ethanol per acre, per year, or about 64 MMgy. “We’re not there yet,” he says, adding that the project is currently in the planning and engineering phase. “We’re really evaluating all of the costs and making sure that it really can be done on this land. There’s a lot of moving parts.” The third CO2 source in Florida, is the DOE-funded carbon capture program, which Woods is very interested in having access to someday. Underground carbon storage is very expensive, adding up to somewhere between $40 and $100 per ton and most likely on the higher end of the scale. “That is ugly,” he says, adding that Algenol offers a very different approach to carbon mitigation or reduction strategies.
Complement Vs Competition
In case there’s any confusion, Woods clarifies that he sees Algenol’s second-generation technology as a complement to the first-generation industry. “I get asked all the time, ‘Are you guys competitors to corn and are you going to destroy the corn ethanol market?’” he says, the day after returning from a trip to the White House to talk policy needs, including a functioning renewable fuel standard. “I’ve got to tell you, I think that is disappointing that people think that. In my opinion, there wouldn’t be an ethanol market without corn producers.” So what about a partnership with cornethanol plants? Could Algenol colocate with a first-generation facility and capture CO2 to produce more ethanol? The idea does have limitations, particularly in the Midwest. “The problem is, of course, you can’t freeze algae cultures,” he says, adding that algae grows best in areas where it is hot and the sun shines year-round. Woods also doesn’t believe it makes sense to build on valuable and viable farmers’ fields. “I’ve got to say, I think algae is really suited for the lowest-quality land,” he says.
NOVEL FEEDSTOCKS
Recent Milestones
Algenol was founded in 2006, based on an idea Paul Woods had in 1984. Bringing the concept to this point took a lot of time and money. “I think right now we have around $270 million invested in making this a commercially viable solution,” he says. Here’s a rundown of several big announcements the company has made recently. Jan. 13: The U.S. EPA ruled Algenol’s ethanol qualifies for D5 RINs. Jan. 21: A demonstration module was deployed at the largest petroleum refinery in India. Feb. 10: A Mexican-based business group invested $25 million in Algenol, following an investment of $40 million last year.
Still, there are some places, such as California, where colocation with an ethanol plant could work, depending on available land. “The CO2 that comes off fermentation is damn near pure, so the thought is really fantastic,” he says, adding he believes that there will be a time when Algenol’s feedstock could be captured at ethanol plants and transported by pipeline or rail for conversion at an Algenol facility. Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com
POLICY
38 | Ethanol Producer Magazine | APRIL 2015
POLICY
Yearning For New Yeasts What’s holding up approvals for modified microorganisms? By Susanne Retka Schill
The new yeasts being developed for cellulosic ethanol face confusing and somewhat puzzling hurdles, starting with the regulatory language. Agencies don’t approve genetically modified organisms (GMOs). The U.S. EPA reviews the Microbial Commercial Activity Notices that developers are required to submit, and if the agency has no questions, the submission is “dropped from review.” For yeasts that will end up in feed, the Food and Drug Administration also doesn’t call it an approval in the Generally Recognized as Safe program, known as GRAS, but rather says, “FDA has no questions,” or, in the opposite case: “The notice does not provide a basis for a GRAS determination.” Digging further into the regulations raises even more complexities. Kristi Smedley, vice president of the Center for Regulatory Services Inc., helps companies navigate the FDA regulatory process. “FDA has put the ethanol industry on notice that anything that goes into ethanol production, in which the DDGS is used for feed, should be cleared or authorized as a feed ingredient,” she says. She adds that microorganisms and other processing aids for converting feedstocks like corn stover—with no coproducts going into animal feed—are not regulated by FDA. Regulatory approval—ahem, clearance—is a big issue, however, for first-generation corn ethanol plants considering bolt-on cellulosic processes that coferment or return the solids left after fermentation to the distillers grain stream. Currently, cellulosic process developers are talking about using the standard yeast and getting a smaller yield boost from the liberated C6 sugars
(glucose) in the corn fiber fraction, until such time that modified yeasts or new C5 fermenters are cleared for use in feed. The most formal of the three paths toward getting a new feed ingredient recognized is a food additive petition through the FDA, which includes a notice of filing published in the Federal Register and a formal review process. “You end up with a regulation in the Code of Federal Regulations,” Smedley says. A more informal, and thus more popular, route starts with applying for a new feed definition with the Association of American Feed Control Officials, which leads many to initially think they can circumvent FDA entirely. “That’s not the case at all,” Smedley says. While a more informal process, the memorandums of understanding between AAFCO and FDA put the agency in the driver’s seat. FDA provides the scientific review function, decides whether an application is suitable for the AAFCO process and makes its recommendations to the AFFCO Ingredient Definitions Committee. The AAFCO submission is extensive, Smedley says. “You have to submit a significant amount of information to FDA to prove that your product is safe for the intended use. Safety is defined as safe for the animal that is consuming the product and safe for the human that would consume the eggs, meat or milk from animals that have consumed the product.” The company has to show the manufacturing process is safe as well and that the new ingredient is consistently produced. For yeast, that means the organism is stable—the yeast produced two years ago was the same a year ago and this year. The AAFCO submission has to cover all of the same points that must be addressed for a feed additive petiAPRIL 2015 | Ethanol Producer Magazine | 39
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40 | Ethanol Producer Magazine | APRIL 2015
Companies about to introduce GM microorganisms must file a Microbial Commercial Activity Notice with the U.S. EPA under the Biotechnology Program in the Toxic Substances Control Act. Since 1998, just over 50 MCANs have been dropped from review, clearing the organism for manufacture. There is a second review process for environmental release applications, which do require approval from EPA, and there are exemptions for R&D in contained structures. Most MCANs listed on the EPA website are for modified organisms producing various enzymes, many from wellknown companies offering familiar enzymes to the ethanol industry. Details on the microbial strains and, in many cases, the company names themselves are withheld as confidential business information. In addition to ethanol process enzymes, other microbial products are intended for the manufacturing of detergents or unspecified chemicals. About half the MCANs listed show a date for the required notice of commencement of manufacture—nearly all for enzyme production and just two yeasts. While it may seem that the agency is efficient in publishing determinations within 90 days of listing, an ethanol industry insider points out that if the agency has a question, the 90 days starts over, and a second question might reset the clock.
tion, she adds, “but the feed additive petition is just a little more rigorous and there’s also an environmental component.”
Going For GRAS
The FDA’s voluntary notification program for GRAS determination is quite different, and wrongly considered a shortcut by some, Smedley says. “There is no prescriptive way of doing it,” she explains, turning to the language of the regulation that says “generally recognized as safe may be based on the views of experts qualified by scientific training and experience to evaluate the safety of substances directly or indirectly added to food.” Part B of that section goes on to say the scientific procedures used for GRAS “shall require the same quantity and quality of scientific evidence as required to obtain approval of food additive regulation.” In practice, FDA has interpreted the expert view to include information published in peer-reviewed scientific literature, which is primarily used for ingredients that have been developed through academic research. Another way people have historically demonstrated expert agreement on a new ingredient is to put together a panel, Smedley continues. In the case of a modified yeast, that panel might include experts in the ethanol industry and its coproducts, a microbiologist and someone understanding the safety concerns. The panel could review a company’s documentation or even help draft a dossier demonstrating the product is safe. “The bottom line is there is no prescriptive way. FDA hasn’t said this is how you make a GRAS determination. Under the law, you can market products backed on that GRAS determination.” That includes self-determined GRAS. Within the ethanol industry, insiders have noted, self-determined GRAS has been the most popular route taken for a number of additives that end up in distillers grains. The acceptance of self-determined GRAS is dependent upon a high degree of comfort level within the industry that there’s little risk of a liability issue. But, with genetic traits already an issue in new varieties of corn and DDGS exports embargoed in foreign ports on the basis of GMO contamination, it’s no sur-
POLICY prise that the industry wants some assurance that GM yeasts will be considered safe, if they end up in the feed. FDA has a voluntary GRAS determination notification program, where companies submit their documentation for review, Smedley says, “to see if they raise questions—not if they would agree to it.” The human food side, the Center for Food Safety and Applied Nutrition, listed its first GRAS notification in 1998 and has entered 562 ingredients since then. About 40 of those are pending and 420 received FDA letters saying the agency had no questions. The feed side under the Center for Veterinary Medicine started the voluntary GRAS determination program in 2010 and since then there have been 18 applications, of which three are pending. Five determinations say: “FDA has no questions,” five say: “Notice does not provide a basis for a GRAS determination,” and the other five were withdrawn. Smedley explains the regulators on the food side have adopted the practice of phoning the applicant if questions were arising, rather than continuing the practice of publishing a negative letter explaining what was lacking, thus giving the applicant a chance to withdraw the notice. When the agency’s feed side began reviewing GRAS notifications, the regulators didn’t give any notice of pending questions and, instead, published detailed, negative letters outlining deficiencies in the GRAS determinations that Smedley says frankly, shocked the industry. “What business would want to get a negative letter like that?” In 2011, the notices that didn’t receive negative letters were withdrawn and it wasn’t until late 2012 before an enzyme notification cleared the FDA with no questions. Nearly a year later, another enzyme cleared and since then, three other notifications have been filed. One of those pending is a modified Saccharomyces cerevisiae to be used in the fermentation of corn to produce ethanol, filed by DSM Nutritional Products. Whether that yeast is intended for first- or second-generation processes is not indicated. Mascoma has gone the route of getting its modified S. cerevisiae yeasts approved via the AAFCO/FDA process. In February 2012, EPM reported Mascoma’s bioengineered yeast had received a new feed ingredient definition. At the time, Mascoma CEO Bill Grady said he believed it was the first bioengineered yeast accepted for use in corn ethanol production of distillers coproducts for animal feed. Lal-
lemand, Mascoma’s manufacturing and marketing partner, acquired Mascoma late last year and two months later, in early January, AAFCO added another GM yeast from Mascoma Smedley to the definitions list. Both yeasts produce enzymes intended for yield enhancements in first-generation corn ethanol plants. The AAFCO definitions name the modified organisms and the organisms used as the source of the genetic insertions to express named enzymes. The definition also states that distillers products for use in animal feed contain no live bioengineered yeast. The small number of yeasts successfully reviewed or pending might be an indication the tide is about turn for the new yeasts, but for two huge unknowns. Smedley explains that GRAS determinations on the human food
side of FDA have become highly controversial and one opposition group has won a lawsuit that may force changes to the system. That process may take a couple of years to play out, but whatever happens will eventually impact the animal food GRAS process. Just as big, or potentially bigger, is FDA’s final rule for the Food Safety Modernization Act, due out in August. The rule is expected to include new good manufacturing practice regulations affecting everyone in the feed industry. No one in the industry is predicting what changes the FSMA rule might bring to new ingredient approvals. Some say it is quite early in the FSMA process and changes affecting the introduction of novel yeasts and new processing aids may be further down the road. Some are hoping, though, that any changes will make the process less confusing. Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com
APRIL 2015 | Ethanol Producer Magazine | 41
RINS
Waste Haulers Run On LNG The liquefied natural gas (LNG) plant near Livermore, California, is a joint venture between Waste Management and European technology provider Linde Group. The companies invested approximately $15 million in the plant, which yielded more than 2 million gallons in the first year of operation in 2009, fueling more than 300 refuse trucks. Around 200 cubic meters of landfill gas is obtained from each ton of waste via vertical collection pipes. The gas liquefaction facility then compresses and purifies the biogas, removing sulfur, CO2, nitrogen, alcohols and other impurities. Finally, the gas is converted to LNG as it is cooled to minus 162 degrees Celsius in a heat exchanger.
DRIVING ON LANDFILL GAS: Since September 2009, Waste Management trucks around San Francisco have been filling up with LNG at the Altamont landfill. PHOTO: LINDE GROUP
42 | Ethanol Producer Magazine | APRIL 2015
RINS
The 2014 D3 RIN Leap â&#x20AC;&#x201D;For Biogas
Introducing renewable natural gas, the new player in the cellulosic RINs market. By Susanne Retka Schill
Cellulosic biofuel production took a giant leap in 2014, mostly from renewable natural gas and not so much from the two commercial-scale ethanol facilities brought online last year. In July, the U.S. EPA announced
that cellulosic biogas used as transportation fuel could earn D3 RINs and in one monthâ&#x20AC;&#x2122;s time, D3 RINs generation soared from the 4,000 recorded for July to 3.49 million for August. In September, that more than doubled to 7.56 million. The total for the year stood at 33.02 million D3 RINs. Of that, 683,000 came from cellulosic ethanol. RINs are the renewable identification numbers used to identify and track biofuel production that obligated parties need to demonstrate blending for compliance with the renewable fuel standard (RFS). D3 is the RIN code for cellulosic biofuel, which includes ethanol, renewable diesel and, now, renewable natural gas. Biogas is nothing new. For more than 30 years, large landfills have been capturing methane emitted by decomposing organic material. Some wastewater treatment facilities, large farms and dairies, and food processing plants also produce biogas through anaerobic digestion. Historically, raw or minimally cleaned biogas has mostly been used to generate electricity to power the facility or sold to the grid. Green power earns renewable energy certificates (RECs), traded in both voluntary markets and in markets with state-level renewable portfolio standards requiring power companies to use specified levels of renewable power. In recent years, rising diesel prices prompted some biogas facilities to upgrade their biogas, removing CO2 and impurities to bring the
APRIL 2015 | Ethanol Producer Magazine | 43
RINS
GREENING THE FLEET: Corporate greening efforts often turn to planting trees, but Clean Energy Fuels says a company would need to plant enough trees to fill 11 football fields to equal the greenhouse gas reduction from switching one heavy-duty truck to renewable natural gas. PHOTO: CLEAN ENERGY FUELS
methane content up to the same specifications required of fossil-based natural gas. The resulting high-Btu biogas is pipeline quality and can be used for transportation fuel when compressed (CNG) or liquefied (LNG). CNG has been the most common fuel used by fleets where medium-duty
trucks are close to the fueling station, such as city fleets, local delivery trucks and waste haulers. LNG is typically used for heavyduty trucks traveling along the growing network of LNG fueling stations. RNG and high-Btu biogas are terms being adopted by the industry to differen-
tiate from natural gas, explains Johannes Escudero, executive director of the Coalition for Renewable Natural Gas. â&#x20AC;&#x153;Chemically or molecularly, fossil natural gas and renewable natural gas are the same; they are primarily methane and carbon, with the primary distinction between the two being the source.â&#x20AC;? The potential for RNG growth is substantial, he adds. â&#x20AC;&#x153;Nationwide, there are 1,750 landfills that have not been developed. There are 17,000 wastewater treatment facilities that have potential to be RNG production facilities that have not been developed. There are more than 8,000 large farms and dairies and an average 66.5 million tons of food waste each year.â&#x20AC;? If all those resources were converted into RNG, he estimates it would displace 7 billion gallons of diesel fuel. But, only a small fraction has been tapped to date. There are about 1,200 wastewater treatment facilities producing low-grade biogas, 240 anaerobic
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44 | Ethanol Producer Magazine | APRIL 2015
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digesters at agricultural facilities and 636 landfills capturing gas. The landfills with high-Btu RNG facilities number just 42. The biggest barrier to biogas project development has been the $5 to $12 per million Btu (MMBtu) needed to develop a high-Btu project. â&#x20AC;&#x153;When you compare the cost of RNG to fossil natural gas, especially with the current low rate of $3.50 or so Henry Hub pricing, how do you make those costs up in order to develop these projects?â&#x20AC;? Escudero asks. â&#x20AC;&#x153;The industry needs the incentives offered by policy programs like the federal renewable fuel standard and the state-level, low-carbon, clean fuel programs.â&#x20AC;? The RNG coalition he leads spearheaded the effort to get EPA to approve RNG transportation fuel as a cellulosic biofuel generating D3 RINs. â&#x20AC;&#x153;Last year, we testified before the U.S. EPA that there would be upwards of 100 million ethanol gallon equivalents of biogas generated for fuel
UPGRADING GAS: The CAPEX for developing high-Btu RNG facilties, such as the one pictured here, ranges anywhere from $5 to $12 per MMBtu, depending on multiple factors. PHOTO: COALITION FOR RENEWABLE NATURAL GAS
purposes in 2014,â&#x20AC;? Escudero says. â&#x20AC;&#x153;The delayed RVO (renewable volume obligation) has impacted that, and reduced that number.â&#x20AC;? The coalition recently surveyed its members and reported to EPA in a lateFebruary meeting that they expect to produce 212 million ethanol equivalent gallons
in 2015 and 363 million ethanol equivalent gallons in 2016.
Market Dynamics
The ability to earn D3 RINs has significantly improved the economics for highBtu RNG, says Randy Lack, chief market-
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APRIL 2015 | Ethanol Producer Magazine | 45
D3 RINs Generators (Part 80 EPA registered facilities, by fuel category, as of late February) Cellulosic Ethanol
Abengoa Bioenergy Biomass of Kansas LLC, Hugoton, Kan. Alpena Biorefinery, American Process Inc., Alpena, Mich. BioďŹ&#x201A;ex Agroindustrial S/A, [GranBio], Sao Miguel dos Campos, Algoas, Brazil Ineos New Planet BioEnergy LLC, Indian River BioEnergy, Vero Beach, Fla. Poet Research Center Inc., Scotland, S.D. Poet-DSM Project Liberty LLC, Emmetsburg, Iowa Quad County Corn Processors, Galva, Iowa Western Biomass Energy, Upton, Wyo. ZeaChem Inc., Boardman Demo Plant, Boardman, Ore.
Renewable Diesel Blendstock
KiOR Columbus LLC, Columbus, Miss.
Renewable Natural Gas (LNG, CNG, biogas)
AMP Americas, Renewable Dairy Fuels, Fair Oaks, Ind. Cambrian Energy/South-Tex Fort Smith, Ft. Smith, Ark. Canton Renewables LLC, Canton, Mich. CERF Shelby LLC, Millington, Tenn. City of Riverview, Riverview, Mich. Dallas Clean Energy McCommas Bluff, Dallas, Texas East Texas Renewables LLC, Tyler, Texas EIF KC Landfill Gas LLC, Shawnee, Kan. Element Markets Renewable Energy LLC: Blue Skies Energy, Davison, Mich. Johnstown Regional Energy-Raeger, Johnstown, Penn. Johnstown Regional Energy-Shade, Cairnbrook, Penn. Johnstown Regional Energy-S. Alleghenies, Davidsville, Penn. GHI Energy LLC, Fort Bend Landfill, Needville, Texas High Mountain Fuels LLC, Altamont Liquefied Biogas Plant, Livermore, Calif. JDP Renewables LLC, Welsh, La. LES Renewable NG LLC, Grove City, Ohio Montana-Dakota Utilities Co., Billings Regional Landfill Biogas, Billings, Mont. Montauk Energy Holdings LLC: GSF Energy LLC-McCarty Road LFG, Houston, Texas GSF Energy LLC-Rumpke LFG, Cincinnati, Ohio Monroeville LFG, Monroeville, Penn. Valley LFG, Harrison City, Penn. Pinnacle Gas Producers LLC, Moraine, Ohio Puget Sound Energy, Cedar Hills LFG, Maple Valley, Wash. Quasar Energy Group LLC: Central Ohio BioEnergy, Columbus, Ohio Zanesville Energy, Zanesville, Ohio Seneca Energy II LLC, Seneca Falls, N.Y. St. Landry Parish Solid Waste Disposal District, Washington, La. Westside Gas Producers LLC, Three Rivers, Mich. SOURCE: U.S. EPA PART 80 FUELS PROGRAMS LIST
46 | Ethanol Producer Magazine | APRIL 2015
D3 RINS GENERATED by month
April 2012 June 2013 July 2013 September 2013 October 2013 November 2013 December 2013 January 2014 February 2014 March 2014 April 2014 July 2014 First Biogas D3 RINs Generated
August 2014 September 2014 October 2014 November 2014 December 2014
20,069 84,580 56,460 109,142 44,372 59,119 69,067 58,415 7,072 6,624 643 4,156 3,492,106 7,555,432 7,047,762 6,280,214 8,532,518
SOURCE: U.S. EPA OTAQ 2014 RFS2 DATA
Projected RNG Volumes Earning D3 RINs 2015
212 million 2016
SOURCE: COALITION FOR RENEWABLE NATURAL GAS
363 million
RINS
ing director for Element Markets LLC. The company specializes in the marketing of environmental commodities such as renewable energy credits, emissions, greenhouse gasses, renewable fuel credits and biogas. “We essentially partner up with biogas producers to take the biogas at the tailgate and do everything needed to realize the value,” Lack says. Municipalities and small producers, he explains, generally do not have the capacity to handle all the details. Element Markets manages the agreements to generate renewable portfolio or renewable fuel credits. It manages the marketing of the RINs and hires the QAP (quality assurance) required by EPA for verification. Also, it can be difficult for a single player to establish itself with a large oil refiner looking to buy D3 RINs to fulfill its RVO quota. With its work in multiple environmental commodities, Element Markets has developed those relationships. “I know that the market is still waiting on the RVO to be set, especially for 2015 and 2016,” he says. “We haven’t seen the buying interest by the refiners pick up to the extent that it will, once the RVO is published.” Refiners can meet their cellulosic obligation by buying and blending the fuel, buying D3 RINs or buying D5 RINs and paying the waiver price set by EPA. Thus the base value of a D3 RIN is a D5 plus the waiver credit, which is set in the RFS and adjusted based on the consumer price index. The traded value of D3 RINs is much more difficult to determine. “Most of the transactions have been private party transactions and the D3 market isn’t a quoted market,” Lack says. “A reason for that is that in 2014, there were 33 million D3 RINs generated in a market that needs 18 billionplus RINs for all types. This is a very small sliver of a refiner’s compliance. And it’s a small enough amount of RINs that you are not going to see a bid-offer spread from a broker on a daily basis.” The RINs value is a strong incentive. The average landfill site produces around
2,000 dekatherms a day, Lack says. (Each dekatherm earns about 11.73 RINs and 1 dekatherm equals 1 MMBtu). Thus, an average site would generate about 8.5 million RINs per year, if all the production were going to renewable transportation fuels. But the cost of extraction per MMBtu is highly variable and dependent upon not only the volume of gas produced, but its quality, and the proximity to a pipeline and
the pipeline’s quality specifications. California, for instance, has tight pipeline specifications that double the capital expense for a project, compared to other states. How fast RNG for transportation will grow also depends upon multiple factors in the power market. “In the old days, when we had high electric prices, high natural gas and high-priced RECs, you were getting really nice long-term power purchase agree-
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APRIL 2015 | Ethanol Producer Magazine | 47
FUELING UP: Clean Energy Fuels, a member of the Coalition for Renewable Natural Gas, is building a natural gas fueling station network. The circular "R" logo, seen at bottom right, stands for Redeem—Clean Energy's brand name for renewable natural gas. . PHOTOS: COALITION FOR RENEWABLE NATURAL GAS
ments,” Lack says. Today, especially in the Midwest and Southeast markets, there are no good long-term price contracts for renewable power. The large CAPEX for highBtu is another factor. “In power, you can scale very well,” Lack says. “You put on one engine or two engines or more.” There’s an absolute economy of scale for gas upgrades, however. “You cannot realistically do a high-Btu project, meaning into a pipeline, on a small-scale landfill project.” “The move to D3 is certainly motivating new development of biogas, but it’s going to be hard to develop these facilities,” he says. The lack of long-term offtakes is one factor, as well as RFS uncertainties. “It takes a company with a large balance sheet and the ability to take on some regulatory and legislative risk to come in and develop
48 | Ethanol Producer Magazine | APRIL 2015
these projects and make the investment, predicated upon selling RINs.” The market for RNG is there, he adds. “When diesel prices were higher, there was a tremendous adoption of CNG and LNG structure across the U.S. It happened pretty quickly, led by companies like UPS and Waste Management and Republic Waste. A lot of larger fleets made conversions and are using significant amounts of CNG or LNG. And that far outstrips the biogas supply.” In supplying renewable content to natural gas, RNG is not competing with other biofuels, Lack points out, and the biogas and cellulosic ethanol producers have become brethren. “We’re not fighting. We’re not keeping information from each other. We’re at the table together. We want the cel-
lulosic program to stay.” Indeed, cellulosic biogas has instantly boosted the volume of cellulosic biofuel, muting the critics somewhat. “We’re going to give the cellulosic ethanol industry more time to ramp up and get to larger production volumes,” Lack says. “We’re producing a zero carbon fuel, which EPA loves, into what has been an undersupplied and criticized market. I think the efforts of the biogas industry are going to do a lot to ensure the cellulosic market is functioning well.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com
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PROJECT DEVELOPMENT
Attract a Megaproject to a Community Near You Advanced biofuel projects present significant economic development opportunities. By Mark Yancey
With cellulosic ethanol plants developed by Abengoa, IneosBio, Poet-DSM, Dupont Cellulosic Ethanol currently or soon to be in commercial operation, and companies such as American Process, Chemtex, Enerkem, Fiberight, Sweetwater Energy, and others poised to enter the market, the production of advanced biofuels is expected to accelerate in the future. These second-generation biofuels are generally a fuel additive like ethanol, but made from plant materials other than corn
50 | Ethanol Producer Magazine | APRIL 2015
starch. The cellulosic or advanced biofuel can be ethanol, butanol, jet fuel biodiesel or renewable diesel, to name a few. What resources are needed to attract one of these megaprojects to your community? First and foremost is the feedstockâ&#x20AC;&#x201D; the organic material or biomass that will be converted into a biofuel. Common feedstocks for advanced biofuels include corn stover, rice straw, switchgrass and miscanthus, among other energy crops and crop residues. Woody biomass, urban wood waste and even garbage (municipal solid waste) are also good candidates. The accompanying biomass resource map published by the National Renewable Energy Laboratory shows concentrations of crop,
PROJECT DEVELOPMENT
Theoretical Ethanol Yields of Selected Feedstocks (gal/dry ton of feedstock) Corn Grain Corn Stover Rice Straw
124.4 113 109.9
Cotton Gin Trash
56.8
Forest Thinnings
81.5
Hardwood Sawdust
100.8
Bagasse
111.5
Mixed Paper
116.2
Switchgrass
96.7
SOURCE: U.S. DOE BIOMASS PROGRAM, THEORETICAL ETHANOL YIELD CALCULATOR AND BIOMASS FEEDSTOCK COMPOSITION AND PROPERTY DATABASE
forest and mill residues, plus urban wood wastes by county within the U.S. As you can see, there are very large amounts of biomass available within the U.S., except in very mountainous or arid areas.
How Much Feedstock?
The available feedstock needed to manufacture biofuel depends on the feedstock type and the conversion technology used. Theoretical yields of ethanol from a biochemical process for various types of biomass are shown in the accompanying table. A corn stover ethanol plant with a yield of 80 gallons per dry ton of stover (about 70 percent of theoretical) would require 12,500 dry tons of stover for each million gallons of ethanol produced. A 25 MMgy corn stover-to-ethanol plant will require 312,500 dry tons of stover each year (about 850 tons per day). On average, the dry matter weight of a corn plant is split equally between the grain and stover. Many counties in the Corn Belt produce more than 20 million bushels of corn each year, yielding about 476,000 dry tons of stover. While it is not advisable to remove all of the stover from a corn field, two or three highcorn producing counties could easily supply enough corn stover feedstock for a 25 MMgy cellulosic ethanol plant. At a delivered price of $70 per dry ton, the stover feedstock for one such facility
would create over $20 million in direct economic impact. Similar scenarios are possible for other crop residues, woody biomass, energy crops and other biomass feedstocks appropriate for a given area. While there is plenty of biomass available for the production of advanced biofuels in most areas, the logistics and cost of delivering large quantities of biomass to a plant are still being debated. The U.S. DOE has said the success of the U.S. bioenergy industry relies on many factors, “including a reliable, adequate supply of highquality biomass, available at a cost that enables meeting business profitability targets.” DOE is supporting the development of a logistics system concept that incorporates distributed biomass preprocessing depots located near biomass production sites. Processing technologies such as milling or densification can reduce variability early in the feedstock logistics chain. The biomass depot concept is gaining acceptance in the private sector. Ethanol Producer Magazine reported that one such company, Chip Energy, broke ground in mid-2013 on a biomass recycling and pelletizing plant. Once complete, the prototype plant will be capable of producing 100 tons per day of densified biomass from a variety of feedstocks, including wood waste, purposegrown energy crops, and agricultural residues. Several biomass depots could be built to support an advanced biofuels plant in your community. Most communities have the other resources required to attract an advanced biofuels project—a trainable workforce, water, natural gas and electricity. Large advanced biofuels projects may also need access to rail or barge to ship products to more distant markets. Another local resource that can be very critical to attracting an advanced biofuels project to your community is human capital, defined as the knowledge, talents, skills, abilities, experience, intelligence, training, judgment and wisdom possessed individually and collectively by individuals in a community. There are many successful biofuel plants in the U.S. that came to be because of a local project champion—an individual or individuals that worked hard to bring that project to their community. Economic development agencies can spearhead or be the catalyst for an advanced biofuels project. A feasibility study done early on can document the biomass resources available in your area and match the resource to the appropriate technologies and products. This will give you a head start on developing a viable business concept and creating local interest in the project. Developing a large advanced biofuels project will not be easy, but the path is fairly well-established, based on past successes. Author: Mark Yancey Vice President, Project Development BBI International 701-738-4924 myancey@bbiinternational.com
APRIL 2015 | Ethanol Producer Magazine | 51
BUSINESS MATTERS
Data Breach: No Company Immune By Kathleen Rice
If your boss asked you to guarantee that your company would never suffer a data breach, would you do it? That may be a little extreme, but what if he simply
wanted your assurance that every reasonable step had been taken to prepare for, prevent, or respond to a breach? Could you give it? If you answered no to the second question, you're not alone. If any good has come from the high-profile data breaches over the past year, it is that more companies are recognizing that no company and no sector of the economy is immune from the threat of a compromise. The prospect of class action litigation, regulatory action, harm to reputation and significant financial losses are just a few consequences. But even with the many reports of breaches, as well as the increasing and unpredictable threats to data security, many companies have still not done enough to prepare for, prevent, and respond to an incident. Today, technology seems to be everywhere. From agriculture to energy to retail to financial institutions and health care, technology influences how we produce energy, grow food, work, communicate, and live our daily lives. These technological advances may not only save time and improve productivity, but many can help make us more secure or save our lives. But what about the information that is gathered, analyzed, used, and stored by all this technology? The same technology that can help a farmer produce more or better crops, an energy company develop or market energy resources, or a financial institution quickly manage corporate accounts could itself be compromised in a data security incident, potentially jeopardizing the security of sensitive, confidential, or proprietary information. For many companies, this could not only damage their competitive edge, but open them up to extensive legal liability or regulatory action. For their customers or employees whose information may have been compromised, a breach can bring long-term anxiety over identity theft or stolen funds and destroy consumer confidence. Over the past year, a number of American businesses and consumers have seen firsthand these and other results of significant data breaches. As companies have worked to respond and recover from such breaches, some important lessons have been learned along the way. Regardless of the sector of the economy in which a company operates, regardless of its size or success, it could be at risk for a data security incident. Itâ&#x20AC;&#x2122;s smart to be proactive. Identify the threat 52 | Ethanol Producer Magazine | APRIL 2015
landscape as it applies to your companyâ&#x20AC;&#x2122;s specific business model. Assess the risk. Ask basic questions about the very information that could be subject to compromise. Who is collecting the data? For what purpose? What specific information is being collected? Is it business or personal? What is being done with the data? How will it be usedâ&#x20AC;&#x201D;for marketing, regulatory, or other government purposes? Who has access to it? Will it be stored, and if so, for how long? Will it be shared with the government or with third parties? Are there legitimate privacy concerns that must be considered, and if so, what is the reasonable response? Are there tangible measures that can and should be taken to reduce the impact on privacy? Why are these questions important? Because the answers will help you shape and implement reasonable and responsible measures to reduce the risk and effects of a compromise, long before such an incident occurs. Some of those measures might include: identifying and setting appropriate limits on the type of information collected; specifically assessing who should have access to the information, and then defining that category; clarifying under what conditions data may be shared more broadly; stating clearly how long it will be retained, and developing a clear and effective incident response plan. There should be effective policies and procedures in place that guide and inform how a company acts to prevent or mitigate the risk of a compromise. As we have learned from recent data breaches, a proactive and responsible approach by individual companies to think through risk and compliance issues before a breach occurs will put a company on much better legal, regulatory, and technical footing if a breach does, in fact, occur. This not only benefits the company as it looks to rebuild its reputation, but its customers, shareholders, and employees as well. And it means that when your boss asks you how well-prepared your organization is, you can finally give him that assurance he's looking for.
Author: Kathleen Rice senior director, FaegreBD Consulting 574-239-1958 kathleen.rice@FaegreBD.com Contributors: Mary Bono and Andy Ehrlich, FaegreBD Consulting
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