INSIDE: CVEC CELEBRATES 20 YEARS OF OPERATION AUGUST 2016
DEVELOPING LEADERSHIP Emily Skor’s Goals as Growth Energy CEO Page 38
ALSO
Succession Planning Challenge
Industry Prepares for Tier 3 Compliance
Recruiting, Retaining Top Talent
FEW Review
Page 26
Page 32
www.ethanolproducer.com
Page 44
Page 40
FASCINATING FACTS ABOUT ETHANOL
14.7 527 BILLION GALLONS OF ETHANOL PRODUCED IN 2015 DISPLACES
MILLION BARRELS OF OIL
ETHANOL HELPS
REDUCE TOXIC EMISSIONS ATTRIBUTED TO GASOLINE BIOFUELS, LIKE ETHANOL ARE EARTH-FRIENDLY, AND HELP REDUCE CARBON EMISSIONS BY UP TO 57 PERCENT COMPARED TO GASOLINE, WHICH CONTRIBUTE TO CLIMATE CHANGE.
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2009 Corn oil extraction aids
2011 Knowledge-based control system
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Process Aids Water Treatment Chemistries Monitoring and Control Systems
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CONTENTS
AUGUST 2016 VOLUME 22
DEPARTMENTS 6
EDITOR'S NOTE
7
AD INDEX
8
THE WAY I SEE IT
9
EVENTS CALENDAR
10
VIEW FROM THE HILL
12
14
16
With Pride Comes Responsibility By Mike Bryan
All Smoke, No Fire on RFS Reform, Repeal Efforts By Bob Dinneen
26
LEADERSHIP
32
HUMAN RESOURCES
Filling a Hole in Leadership
Recruiting, Retaining Top Talent
38
40
Succession planning is needed for smooth transitions in key positions By Holly Jessen
Strategies include using recruitment firms, internships and engaging employees By Ann Bailey
DRIVE
Getting Ready for FSMA Compliance By Chris Bliley
GRASSROOTS VOICE
Blend Wall Crumbles in Retailers’ Eyes By Ron Lamberty
GLOBAL SCENE
US, Brazil Demonstrate What’s Possible By Leticia Phillips
BUSINESS BRIEFS
20
COMMODITIES
22
DISTILLED
50
CLEARING THE AIR
54
FEATURES
The Short List By Tom Bryan
18
52
ISSUE 8
Repeat After Me: High Octane, Low Carbon By Dave VanderGriend
BUSINESS MATTERS
Globalization of Ethanol Impacts US Industry By Ryan Strickland
MARKETPLACE
ON THE COVER
Emily Skor, CEO, Growth Energy PHOTO: JAMES HARRIS
4 | Ethanol Producer Magazine | AUGUST 2016
PROFILE
EVENT
Skoring with Personal Connections
All Things Biofuel
44
46
Introducing Growth Energy’s new CEO, Emily Skor By Ann Bailey
REGULATION
Sulfur Compounded
Industry prepares for EPA compliance By Susanne Retka Schill
Photos from the 2016 International Fuel Ethanol Workshop & Expo By Susanne Retka Schill
ANNIVERSARY
CVEC Marks 20 Years Innovators from the start By Susanne Retka Schill
Ethanol Producer Magazine: (USPS No. 023-974) August 2016, Vol. 22, Issue 8. 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.
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EDITOR'S NOTE
The Short List This issue of EPM is largely dedicated to the acquisition and retention of terrific people. All together, this industry’s most valuable assets are
Tom Bryan
President & Editor in Chief tbryan@bbiinternational.com
not facilities that produce ethanol, but the men and women who run them. In “Recruiting and Retaining Top Talent,” on page 32, EPM Associate Editor Ann Bailey reports on the methods, resources and tools producers use to find and keep good employees. It’s no secret that ethanol plants use recruitment firms to secure top executives, but you’ll be intrigued by the process they use to identify, screen and select recruits at every level. Of course, the contest of finding great people is second only to the challenge of retaining them. We learn how ethanol plants keep people happy and engaged through workplace culture: team events, community engagement, open communication, goal setting and recognition. The result is lower turnover and higher organizational loyalty. Growth Energy’s recent appointment of Emily Skor, the association’s new CEO, is a timely example of talent recruitment at its best, and a fortuitously good fit for this issue’s page-38 cover story. Skor represents a change for our industry. Not only is she the first woman to lead one of our national associations, but she’s also skippering a new strategy to win over consumers. In her keynote speech at the 2016 International Fuel Ethanol Workshop & Expo in Milwaukee, Skor was clear about her directive. She believes consumers will ultimately embrace higher ethanol blends if they make a personal connection with their fuel purchase. She thinks promoting higher blends through social media—the world’s pervasive personalization lever—is critical to our industry’s growth. “We have to connect with consumers as individuals—on their terms, in their language, based on their concerns and priorities and experiences,” she said at the 32nd annual FEW (see “Skoring with Personal Connections” on page 38). EPM Managing Editor Susanne Retka Schill turns our attention to ethanol’s regulatory realm in “Sulfur Compounded,” on page 44. She reports on how an approaching set of EPA Tier 3 rules related to sulfur content in fuel will affect producers. Starting in January, plants must prove that their ethanol has 10 parts per million (ppm) or less sulfur content. That’s a big change from the current 30 ppm standard, but it shouldn’t be a problem. Retka Schill reports that ethanol rarely has more than 10 ppm sulfur, and the ethanol industry already has been meeting the new standard for years. Now, however, additional verification and paperwork requirements threaten to trip up unprepared but otherwise compliant plants. Finally, we’re honored to chronicle Chippewa Valley Ethanol Co.’s recent celebration of two decades of production in “CVEC Marks 20 Years,” on page 46. In mid-June, the Benson, Minnesota ethanol plant held an event to mark the moment. In many ways, CVEC’s incredible success is also the result of visionary leadership and remarkable employee loyalty. The plant has been a virtual incubator of progressive ideas, technical aptitude and managerial excellence. Ultimately, the things CVEC has achieved, including what it’s done through RPMG, Glacial Grains and Guardian Energy, is mostly the result of its founders recruiting and hiring the right people, starting two decades ago.
FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | AUGUST 2016
TWITTER.COM/ETHANOLMAGAZINE
VOLUME 22 ISSUE 8
ADVERTISER INDEX
EDITORIAL President & Editor in Chief Tom Bryan tbryan@bbiinternational.com Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Susanne Retka Schill sretkaschill@bbiinternational.com Associate Editor Ann Bailey abailey@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 Sales & Marketing Director John Nelson jnelson@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 Circulation Manager Jessica Tiller jtiller@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com
2017 Fuel Ethanol Workshop & Expo AgCountry Farm Credit Services BetaTec Hop Products
Ringneck Energy Walter Wendland Little Sioux Corn Processors Steve Roe Commonwealth Agri-Energy Mick Henderson Pinal Energy Keith Kor Aemetis Advanced Fuels Eric McAfee Poet Scott Teigen Western Plains Energy Derek Paine
9 25
Buckman
24
Christianson & Associates' Biofuels Financial Conference
51
D3MAX LLC
55
Direct Automation
48
DuPont Industrial Biosciences
56
Fagen Inc.
11
Fluid Quip Process Technologies, LLC
49
Growth Energy
2
Hydrite Chemical Co.
37
Hydro-Klean LLC
35
ICM, Inc.
43
J.C. Ramsdell Enviro Services, Inc.
22
MonitorTech Corporation
18
Nalco Water
36
Phibro Ethanol Performance Group
15
PITSolutions
45
POET LLC
53
Solenis LLC
EDITORIAL BOARD
13
3
Sukup Manufacturing Co.
17
Thermal Refractory
23
Toptech Systems
28
Tower Performance, Inc.
19
U.S. Water Services Victory Energy Operations, LLC
5 30-31
WestAgro Executive Brands
34
Westmor Industries, LLC
29
WINBCO
47
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 sretkaschill@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.
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COPYRIGHT Š 2016 by BBI International TM
AUGUST 2016 | Ethanol Producer Magazine | 7
THE WAY I SEE IT
With Pride Comes Responsibility By Mike Bryan
People can say what they want about the ethanol industry in America, but one fact is abundantly clear, it has spawned an entire global movement toward renewable fuels. The roots of that
movement are here in America’s heartland. That’s not to say that other countries have not thought about renewable fuels or even dabbled in them from time to time, but the real driving motivator for most places in the world are predicated on the success demonstrated by American agriculture. From Australia to Canada and Asia to Africa and across Europe, had it not been for the leadership of the American farmer, much of the world would not have pursued a renewable fuels strategy. I write this as a point of pride and responsibility, not as a boastful brag about America. The successes and failures demonstrated in America’s renewable fuels industry have been and continue to be watched around the world. While every country has its own set of economic, environmental and agricultural circumstances, we have shown that it can and does work, and for that we should not only be proud, but also recognize that what we do here impacts the direction other governments consider when dealing with energy and the environment. Having traveled to many countries over the years on ethanol-related missions, it has become most obvious to me that the world is watching. Watching how we continue to build the industry, watching the political haggling around renewables, and watching the strength and determination of the American farmer.
I have long since lost count of the number of times I have been asked if this latest crisis (pick a year, any year) would be the death knell for ethanol. It is with some pride that I have always been able to say with confidence, no, it’s just another bump in the road on the way to establishing an even-stronger program. To date, the American farmer has never made me eat those words. The impact, for example, of E15 blends on the thinking of those developing renewable fuel programs in other countries is enormous. The obvious question is why should we settle for 5 percent when America is already successfully pushing the envelope to 15 percent and possibly higher? So while the goal in many countries was to eventually get to 10 percent blends, now their goal is 20 percent and higher with the only limiting factor being existing production capacity. So, what we say and what we do is important and how we treat things like the renewable fuels standard has global implication. The battles we fight and win with Big Oil and others are being watched and they inspire others to do the same. The things that happen here in America provide a blueprint for success and failures for the world to follow and avoid. So, with the pride of success comes the burden of responsibility to never give in. The world is watching. That’s the way I see it.
Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com
8 | Ethanol Producer Magazine | AUGUST 2016
EVENTS CALENDAR ACE Annual Conference August 8-10, 2016 Loews Hotel Minneapolis, Minnesota ACE’s annual conference is unique in the world of renewable fuels because it is specifically 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 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 has all the fun of a family reunion. Join us Aug. 8-10 at the Loews Hotel in downtown Minneapolis, Minnesota. 605-334-3381 | www.ethanol.org/conference
2016 Christianson & Associates' Biofuels Financial Conference October 17-18, 2016 Hyatt Regency Minneapolis Minneapolis, Minnesota Produced by Christianson & Associates Organized by BBI International, this year’s Biofuels Financial Conference is focused on the best ways to explore new options in today’s changing ethanol and biodiesel industries. By understanding risks associated with various technology and marketing initiatives, and by exploring various options for making the best use of capital and resources, we’ll learn how to create a well-managed plan for growth and change—a plan which maximizes profitability while ensuring future stability and meeting the expectations of all stakeholders.
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866-746-8385 | www.biofuelsfinancialconference.com
2017 International Biomass Conference & Expo April 10-12, 2017 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
2017 International Fuel Ethanol Workshop & Expo June 19-21, 2017 Minneapolis Convention Center Minneapolis, Minnesota From its inception, the mission of the event has remained constant: The FEW delivers timely presentations with a strong focus on commercial-scale ethanol production— from quality control and yield maximization to regulatory compliance and fiscal management. The FEW is also the ethanol industry’s premier forum for unveiling new technologies and research findings. The program extensively covers cellulosic ethanol while remaining committed to optimizing existing grain ethanol operations. 866-746-8385 | www.fuelethanolworkshop.com
877-811-4073 s www.agcountry.com Proudly serving customers across all facets of agriculture
VIEW FROM THE HILL
All Smoke, No Fire on RFS Reform, Repeal Efforts By Bob Dinneen
Congress is steamrolling through its second session of the 114th Congress. With it being an election year, aside from must-pass appropriation bills to fund the government, most observers don’t expect much to be enacted into law. That also means that
legislative efforts to reduce or repeal the renewable fuel standard (RFS) likely won’t see any movement this year. A handful of bills to alter or completely dismantle the RFS has been introduced this Congress, including those by Reps. Bob Goodlatte, R-Va., and Bill Flores, R-Texas, and Sens. Bill Cassidy, R-La., Dianne Feinstein, D-Calif., and Pat Toomey, R-Pa. Each time a legislative effort has been mounted to alter the RFS, the Renewable Fuels Association and others have hit back against the blatant misinformation propagated by biofuels opponents. We also offer our RFA Advocacy mobile app, which gives smartphone users free-of-charge access to key ethanol-related information. The RFA Advocacy app empowers any ethanol advocate to challenge efforts to undermine the RFS. In May, Flores introduced legislation that would cap ethanol blends in the U.S. transportation pool to no more than 9.7 percent by volume. Passage of this bill would represent a complete capitulation to the oil industry that steadfastly refuses to provide consumers higher octane, lower cost alternative fuels at the pump. The oil industry whines about a so-called blend wall even as it continues to build it by denying consumer access to E15 and E85. The RFS was made necessary by oil company intransigence. It was intended to break the stranglehold oil companies have on the motor fuel market by forcing access. This bill would gut the RFS and send America’s energy and climate change policy back decades. The RFA also pushed back on RFS repeal or reform efforts while testifying at a late June hearing by the House Energy and Commerce Subcommittee on Energy and Power. The oil industry would like to dramatically reduce or repeal the RFS because the program’s continued implementation would mean a further loss of market share. However, doing so would devastate investment in next generation biofuel technologies and halt progress already made, the RFA testified to the subcommittee.
10 | Ethanol Producer Magazine | AUGUST 2016
The incumbent industry already has lost 10 percent of the market. If the RFS is implemented consistently with the statute, the market will make the final push to see cellulosic ethanol and other advanced biofuels to fruition, resulting in the loss of 30 percent of the market, RFA noted. During the hearing, Chet Thompson, president of the American Fuel and Petrochemical Manufacturers, said consumers don’t want biofuels. RFA responded to that claim by saying there is no consumer that wants benzene or any other toxic aromatics in their fuel, either. The discussion about what consumers want is interesting, but I assure you if you ask consumers, they would want a domestic, clean-burning fuel. My message to the committee was Congress did an excellent job of crafting the RFS, building in a great deal of administrative and market flexibility to deal with issues as they arise. Don’t be bullied by the hyperbole and scare mongering by the incumbent industry that fundamentally disagrees with the need for alternative, low-carbon options for consumers. There is nothing wrong with the RFS that cannot be fixed with what is right with the RFS, and there is no need to legislate changes to a program that is working well today. While Congress will be preoccupied with other legislative issues as it winds down this session, the RFA will continue to be on guard, hitting back at misinformation and making sure the RFS and all its benefits stay put. In the meantime, the next time Big Oil and its supporters in Congress trot out misinformation on the RFS, remember its motivation is to maintain a near monopoly in fueling the transportation sector. Energy diversification is the ultimate goal and ethanol, with all of its benefits, can help the U.S. wean off our addiction to oil and move toward cleaner and domestic fuels. The RFA Advocacy app will help consumers join the effort and fight back against inaccurate statements made against biofuel opponents. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835
DRIVE
Getting Ready for FSMA Compliance By Chris Bliley
While our major regulatory focus within the industry has been the renewable fuel standard and the U.S. EPA’s latest proposal for 2017, it is essential that plants keep an eye on another major federal regulation that will have a significant impact on our industry—the Food Safety Modernization Act. FSMA, enacted in 2011 as a response to a number of high-profile cases of foodborne illness, is the first major update to our nation’s food regulation since the inception of the Federal Food, Drug and Cosmetic act in 1938. FSMA has four major components: risk-based preventive controls, inspection and compliance, imported food safety and recall authority. Since enactment, the Food and Drug Administration has been busy writing specific regulations for both human and animal food facilities. While Growth Energy made a valiant attempt to keep coproducts from further regulation, similar to the exemption that brewers received for spent grains, the FDA did not agree and has included ethanol production facilities and coproducts in its comprehensive regulations for animal food in the final rule released last year. Under the FSMA regulation, larger facilities have to meet the first compliance date Sept. 19 with current good manufacturing practices (cGMPs) in place. The deadline for preventive controls comes one year later. For smaller facilities with fewer than 500 employees the deadlines are extended for another year (cGMP by September 2017 and preventive controls by 2018). There are even longer deadlines for very small facilities with average sales of $2.5 million or less in the three preceding years. Although the near-term compliance deadline only impacts larger producers, everyone in the industry needs to think about how the marketplace will react. In fact, many are already seeing notices from customers about having to be in compliance with FSMA. To that end, plants need a compliance plan that includes a hazard analysis, preventive controls, supplier verification, monitoring
12 | Ethanol Producer Magazine | AUGUST 2016
procedures, recall policy, corrective action and record keeping. A compliance plan requires standard operating procedures that address such things as personnel, pest control, water supply and plumbing, equipment and utensils and plant operations, among others. Growth Energy, working with a producer member advisory board and program registrar Compli Associates, has developed the Animal Food Quality Assurance program. The AFQA is designed to be a comprehensive and practical quality assurance program that is available at cost to lead any biofuel production facility on the path to FSMA compliance. The AFQA is a complete quality assurance package. It includes an annual on-site audit to verify compliance and a summary report of the audit findings and related corrective actions. There will be public documentation of AFQA compliance upon meeting the requirements, along with free program updates as the program continues to develop in response to the changing regulatory landscape and customer needs. We have met with the FDA and presented the AFQA program to them, and have incorporated key feedback into the AFQA development and will continue to do so. For more information on the AFQA program or to get specific pricing for your plant, visit www.afqaprogram.com. Whether you have to meet compliance in September or next year or even 2018, you need to make yourself FSMA-aware now. Equally important, you need to make yourself aware of what your customers may soon demand from the marketplace. Don’t wait until the last minute. The FDA has provided a great deal of material on the new regulation and you can subscribe for email updates at www.fda.gov/ Food/GuidanceRegulation/FSMA. While we have provided a comprehensive program with the AFQA that we think will best help you achieve compliance, no matter which plan or vendor you choose, the most important thing for any facility and for our industry is to ensure that your plant is compliant with the new food safety law. Author: Chris Bliley Director of Regulatory Affairs, Growth Energy cbliley@growthenergy.org 202-545-4000
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GRASSROOTS VOICE
Blend Wall Crumbles in Retailers’ Eyes By Ron Lamberty
When the U.S. EPA held hearings in November 2013, after its first attempt to (illegally) use Big Oil's blend wall argument to reduce the conventional biofuel portion of the renewable fuel standard (RFS), Bruce Vollan, a Baltic, South Dakota, fuel marketer, said, “There is no such thing as a 10 percent blend wall unless petroleum marketers don’t give their customers choices above 10 percent.” Oil companies have done exactly that, using restrictions in supply agreements to prevent station owners from offering blends above 10 percent. Meanwhile, more than half of Bruce’s customers buy blends above E10, and ethanol is 25 percent of his overall sales, with months as high as 32 percent. In the first six months Petroserve USA offered E15 and flex fuels in six of their North Dakota C-stores, overall ethanol volume increased to 13.4 percent—and the E15 price wasn’t even on the street sign yet. Bosselman Enterprises offers higher ethanol blends in 13 of its Nebraska locations, and ethanol makes up almost 15 percent of the overall fuel mix at those stations. Protec Fuel is an E85 wholesaler, supplying 289 stations from Maryland to Texas, with plans to add 300 more locations in the next 12 months utilizing funds from USDA’s Biofuels Infrastructure Partnership. About half of the current customers are newer locations with flex fuels offered on multiple islands. E85 makes up 18 to 28 percent of the fuel business at those locations, using as much as 32 percent renewable fuel in E10 and E85. The other stations Protec supplies are older locations with E85 offered on only one island. E85 makes up 9 to 13 percent of fuel sales at those stores. Now, 9 percent E85 sales may not sound like much, but assuming the other gasoline sold is E10, those stations’ overall ethanol sales are 17 percent—well beyond any so-called E10 blend wall. In fact, a station at the higher end of that group, selling 13 percent of its volume as E85, would hit 11 percent overall ethanol volume, even if every other gallon they sold was E0.
Retailers are proving the RFS is achievable, yet Big Oil persists in its “blend wall” rhetoric and the quest to get rid of the RFS. Having worked in the C-store and petroleum marketing business for over 35 years, that’s no surprise. When lead was being phased out of gasoline 40-plus years ago, the oil industry said it was impossible—and unnecessary. API said “the mass of evidence proves unquestionably that lead isn’t a significant factor in air pollution and represents no public health problem in any way.” It told EPA, if lead was removed from gas, cars would “erode and explode.” It said it would cost tens of billions of dollars to replace infrastructure, put refiners and retailers out of business, waste huge amounts of crude oil, prevent future oil exploration, and, of course, cause huge price increases at the pump. If that sounds familiar, it’s because the oil industry has used that playbook to attack every regulation put in place over the years to make fuels cleaner. In the ’90s, the oil industry said EPA’s new underground storage tank regulations would lead to the disappearance of gas stations from small towns across the country. In the early part of this century, it said reducing sulfur in gas would (again) destroy engines and reducing sulfur in diesel fuel essentially would outlaw diesel vehicles. Each time, EPA stood its ground and the oil industry made the required changes. Air and water quality improved and none of API’s disaster predictions materialized. Today, the oil industry rants about RFS infrastructure cost, engine damage and liability—nothing specific, just scary, scary, “liability.” And, as it did with laws removing lead, API now says the RFS is not necessary. It’s disappointing, but predictable. When you’re Big Oil, it’s what you do. In his 2013 testimony, Bruce Vollan also told EPA, “The secret to getting over the blend wall… is to TRY to get over the blend wall.” Other retailers have proven Bruce right. Now EPA must TRY to get over the blend wall. Stand firm and enforce the RFS. Obligated parties will comply, retailers will offer more ethanol without incident and air and water quality will improve. Just as Congress intended. Author: Ron Lamberty Senior Vice President American Coalition for Ethanol 605-334-3381 rlamberty@ethanol.org
14 | Ethanol Producer Magazine | AUGUST 2016
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GLOBAL SCENE
US, Brazil Demonstrate What’s Possible By Leticia Phillips
As we comment on the “Renewable Fuel Standard Program: Standards for 2017 and Biomass-Based Diesel Volume for 2018; Proposed Rule,” the Brazilian Sugarcane Industry Association—also known as UNICA— wants to make sure to focus this discussion on the importance of advanced biofuels, like sugarcane ethanol. The renewable fuel standard (RFS) is one of the world’s most ambitious programs promoting biofuels and a key policy for the future of sustainable transportation. During the past 30 years, renewable fuels have become a cornerstone of Brazil’s economic and environmental policy. They have helped to reduce oil dependency, increase domestic energy security, create sustainable economic growth and improve the environment. We are very proud of Brazil’s experience with biofuels. That’s why UNICA regularly engages with the U.S. EPA, California Air Resources Board, European Union regulators, and many others to help shape supportive policies. It may come as a surprise that nearly half of Brazil’s energy comes from renewable resources, and sugarcane supplies almost 20 percent of our nation’s total energy consumption. We call this the “Brazilian experience” with biomass and biofuels. Sugarcane ethanol is a big part of that equation. This clean and affordable biofuel is produced by fermenting sugarcane juice and molasses into a high-octane, alcohol-based fuel. Our cars are a little different in Brazil. Flex-fuel vehicles capable of running on either gasoline (which in Brazil is E27) or ethanol comprise about 90 percent of new domestic vehicle sales. Brazilian consumers have a choice at the pump, and they’ve chosen to replace almost 40 percent of our gasoline needs with sugarcane ethanol. Our country is also a pioneer developer of cellulosic ethanol and second-generation biofuels. Brazilian companies Raízen and GranBio are among the handful of firms around the world, joining a few others in the U.S., that are producing cellulosic ethanol on a commercial scale. This technology is still in its infancy, but it holds tremendous potential and it deserves the chance to grow.
16 | Ethanol Producer Magazine | AUGUST 2016
The United States and Brazil have shown what’s possible when the policies are right, when markets are open and when trade and innovation are encouraged. Our two countries are the world’s largest ethanol producers and exporters, and have an obligation to work together to build a global biofuels market providing clean, affordable and sustainable solutions to the planet’s growing energy needs. That goal brings us back to the RFS. Congress clearly intended this program to foster development of advanced and cellulosic biofuels that cut carbon emissions significantly. EPA manages the RFS and identifies Brazilian sugarcane ethanol as an advanced biofuel because it reduces greenhouse gases by 61 percent compared to gasoline—a reduction similar to cellulosic biofuels. California also considers sugarcane ethanol as an important component for meeting that state’s low-carbon fuel standard. As a result, Brazilian sugarcane ethanol plays a modest but important role supplying the United States with clean renewable fuel. For the past four years, nearly 1.2 billion gallons of sugarcane ethanol flowed into American cars. During this time, Brazilian sugarcane ethanol comprised only 2 percent of all renewable fuels consumed by Americans, but provided one-tenth of the U.S. advanced biofuel supply. Our members are making investments to expand production, and Americans can depend on more advanced biofuel from sugarcane. Brazil is expected to produce 8 billion gallons of sugarcane ethanol during the current harvest and we hope the RFS creates the market conditions to receive part of this volume in the United States. Congress designed the renewable fuel standard to stimulate advanced biofuels that generate fewer greenhouse emissions compared to gasoline and other fossil fuels. Sugarcane ethanol and cellulosic biofuels from Brazil are reliable options for diversifying energy supplies so Americans are not dependent on any one source or country. Americans deserve access to these cleaner fuels, UNICA will continue to support preserving a strong role for advanced and cellulosic biofuels under the RFS. Author: Leticia Phillips North American Representative, Brazilian Sugarcane Industry Association, UNICA 202-506-5299 leticia@unica.com.br
BUSINESS BRIEFS People, Partnerships & Deals
Solenis LLC and Buckman Laboratories Inc. have announced the resolution of a pending lawsuit filed by Buckman in the U.S. District Court for the Western District of Tennessee against Solenis regarding its patent for using polysorbate as an additive for corn oil extraction aids. As a result of the settlement, Solenis has licensed the use of its corn oil extraction technology to Buckman. Under the royalty-bearing license agreement, Buckman will become an authorized licensee of Solenis technology in the U.S. and Canada. U.S. Water’s Cambridge, Minnesota, facility was awarded a Meritorious Achievement in Occupational Safety 2015 Governor’s Safety Award during the 2016 Minnesota Safety & Health Conference in Minneapolis. The event was organized by the Minnesota Safety Council. The board of the Advanced Biofuels Association has welcomed BIOX, Louis Dreyfus and the Brazilian Sugarcane Industry Association as members. With these three new members, the ABFA represents 9.6 billion gallons of domestic and international biofuels production. The board also elected Neville Fernandes, head of sales and marketing and a board member at Neste U.S. Inc., as chairman. In addition, Michael Whitney, general manager of renewable fuels at Musket Corp.; Len Federico, manager of biofuels and oils at Louis Dreyfus; Jeffrey Jacobs, president and CEO of Ensyn; Paolo Carollo, executive vice president of Beta Renewables/ BioChemtex; and John Cummings, vice president of Wilmar North America were added to the ABFA executive committee. Former chairman Wayne Simmons, CEO of Sundrop Fuels, will remain as the ex-officio member of the committee. Toptech Systems has released MultiLoad Slate hardware. Slate opens the benefits MultiLoad II has provided to terminals to other markets involved in the movement of fluids. Slate is designed to help compa-
18 | Ethanol Producer Magazine | AUGUST 2016
nies with fluid loading and offloading applications. The new device stores information a company needs before a transaction begins, tracks every transaction, and sends it to the user’s software system for a fraction of the cost of PLC/PC based solutions. The Andersons Inc. has announced that Ethanol Group President Neill C. McKinstray retired July 1. Michael S. Irmen, vice president and general manager of the Ethanol Group, as- McKinstray sumed the group’s leadership as president. McKinstray began his career with The Andersons in 1976 as a grain buyer in Champaign, Illinois. He worked in a variety of management, merchandising, sales and marketing positions before being named manager of grain transportation and market development in 1997. Instrumental in leading The Andersons into the ethanol business, McKinstray was named vice president of the Ethanol Division in 2005 and president of the Ethanol Group in 2012. Between July 2015 and February 2016 he assumed additional duties as president of the Grain Group. He served as chairman of the Renewable Fuels Association from 2012 to 2014. Irmen has served as a member of senior leadership for the ethanol team since its inception in 2005. He brings to his new role 40 years of experience in grain merchandising, commodities risk management and ethanol administration. He has served as a vice president in the Ethanol Group since 2012 and was also named as general manager in 2015. Irmen serves as a special advisor to the market risk committee at GreenField Specialty Alcohols Inc. He is The Andersons’ representative to the board of directors for the RFA and has served on the technical committee. A member of the National Grain and Feed Association, Irmen has served on the country elevator committee and chaired the arbitration committee.
BUSINESS BRIEFSÂŚ
The Canadian Renewable Fuels Association has relaunched as Renewable Industries Canada. The change reinforces the nonprofit associationâ&#x20AC;&#x2122;s mission to promote the use of value-added products made from renewable resources. The National Corn Growers Association has added Mary Hagan as vice president of communications. She has more than 20 years of experience developing and implementing complex communication strategies with high-profile agriculture and consumer product companies. She most recently served as managing director of Osborn Barr, an agriculture-focused ad agency. Hagan also previously served as senior vice president with the Leo Burnett ad agency in Chicago, where she had various roles in media and account services.
He also previously worked for IPS sister company Premium Plant Services, where he served in various roles, including crew supervisor. In addition, Nathan Anacker has been added to the IPS team as environmental health and safety manager. In this newly created position, Anacker is responsible for the development and implementation of all health and safety programs for IPS and PPS. He also is responsible for ensuring compliance with all applicable federal, state and local requirements, including meeting or exceeding Occupational Safety and Health Administration and other standards, and ensuring the safety of IPS and PPS equipment and processes. His duties also include supervising safety coordinators throughout four locations operated by IPS and PPS. Before joining IPS, Anacker served as a dangerous goods specialist and hazardous material spill cleanup specialist at FedEx Express in Hibbing.
Western Plains Energy LLC has joined the Renewable Fuels Association. The company operates a 50 MMgy ethanol plant in Oakley, Kansas. The plant began operations in 2004 and takes in corn and grain sorghum as feedstock. In addition to Anacker Farris ethanol, the facility produces more than Premium Plant Services, an indus- 400,000 tons of wet distillers grains per year. trial cleaning services provider based in The Indiana Corn Marketing CounHibbing, Minnesota, has formed a sister company, Innovative Plant Solutions, to cil recently recognized two Hoosier renewmeet the needs of ethanol, biodiesel and able energy leaders for their commitment food processing plants throughout the to providing ethanol-blended fuel options Midwest. IPS attributed the decision to the to consumers across Indiana and beyond. continuous demand for unique, industrial Mike and Ann Ackerman of Circle A plant cleaning solutions. The company also Food Mart and John DiMartini of The recently announced that Steve Farris has Andersons Inc. were presented awards by joined the company as vice president. In ICMC President David Gottbrath at the this role, Farris is responsible for all com- 2016 Indiana Ethanol Forum in Indianappany operations, including supervising 12 olis to commend their support of ethanol employees and overseeing process develop- and Indiana corn farmers. ment, safety and sales. He brings nearly a decade of industrial cleaning experience to his role at IPS. Before joining IPS, Farris was employed at New Age Cryo, where he served as the hydro division manager. SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also email information to evoegele@bbiinternational.com. Please include your name and telephone number. AUGUST 2016 | Ethanol Producer Magazine | 19
COMMODITIES
Prices & Market Analyses
Natural Gas Report
Natural gas prices rally on falling production, heavy cooling load June 28—Beginning in late May, the natural gas market came under intense upside pressure. After becoming the prompt-month NYMEX contract, July 2016 rallied sharply, dragging deliveries for the balance of summer upward with it. The day after the June contract expired at $1.96 per MMBtu—the fourth consecutive NYMEX contract expiring south of $2—July rolled to the front of the curve at $2.15 per MMBtu. From there, forecasts for widespread heat and indications of tightening domestic supply brought buyers into the marketplace. Upward momentum pushed the prompt-month contract as high as $2.79 per MMBtu on June 21, completing a rally of nearly 30 percent in just more than three weeks. This was the highest trade for any prompt-month contract since last September. Contracts deliverable for the remainder of the summer were impacted proportionately throughout this stretch. The winter 2016-’17 strip also increased, but by a lesser magnitude. It seems as though the market is beginning to reconcile the impacts of last winter’s price collapse on the fundamental balance. A primary consideration remains reversal in domestic production volumes. More than a decade’s worth of consistent and reliable annual growth in U.S.
by Andy Huenefeld
production is in jeopardy in 2016. Most estimates show year-to-date volumes marginally behind the same stretch last year, and barring a dramatic and unexpected reversal in trend, 2016 is setting up to show the first year-over-year production decline since 2005. On the demand side of the ledger, the most significant increases compared to last year are coming from the electric generation sector. The ongoing shift in the U.S. generation mix away from coal and toward natural gas and a pricing structure that favors maximum usage of gas-fired generation means that conditions are rife for a record year in demand from this sector. These factors have been exacerbated so far this summer due to widespread warmer-than-normal weather leading to heavy cooling load. On the surface, the storage situation is bearish. Inventories began this summer at unprecedented levels, and as of late June, remained at a record for that time of year. However, the rate of injection has been historically slow, leading to a quickly shrinking surplus to last year and the five-year average. Storage levels are in danger of falling below both of these benchmarks between now and the end of the year.
Corn Report
Corn volatility reflects shifting market dynamics
by Jason Sagebiel and Geoffrey Utecht
June 28—The corn market experienced abrupt swings the past month. Growing concerns for the arrival of La Nina and a South American harvest coming in well below expectations increased managed money flow into commodity markets that evaporated in three days in late June. Adding to volatility was a rally of the dollar due to investor concern about Britain’s exit from the EU. The June 10 supply-demand report increased old-crop export values by nearly 100 million bushels and increased imports by 5 million bushels, resulting in old-crop carryout decreasing by 95 million bushels. Ending stocks declined from 1.8 billion bushels in May to 1.7 billion in June. The lower carry-in and projected increased exports of 50 million bushels resulted in a 145 million bushel decrease in new crop carryout to 2.008 billion. Brazil exports declined—old crop by 3.5 mmt and new crop by 1 mmt due to unfavorable weather impacts on the second corn crop. Argentina weather woes had a major impact on its soybean production that spilled over into global corn values. Seasonal volatility will attract investment dollars to agricultural commodities, with positive and negative affects. Any weather concerns focused on margins, not the price direction of one commodity. The acmay reel in this market in seemingly unjustified price swings that can companying chart illustrates corn’s volatility, comparing this year’s new present opportunities. Keep in mind the ethanol processor should be crop to last year’s.
Comments in this column are market commentary and are not to be construed as market advice.
20 | Ethanol Producer Magazine | AUGUST 2016
Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.620
DDGS Report
DDGS prices continue roller coaster ride following grain June 28â&#x20AC;&#x201D;Demand still is very acute in the near term, but the drop in prices has convinced DDGS buyers that waiting to buy still is the best thing to do. Ethanol margins have been satisfactory, incenting aggressive run times. In late June, there were plants that had not had much of a forward book that still needed to sell, so the patient buyers were being rewarded. Overseas demand still is strong, as delivered soymeal remains expensive. The intense Chinese buying of DDGS seen in years past has been tempered by the looming antidumping decision that folks expect to be announced soon. Meanwhile, demand from places like Indonesia, Thailand and Vietnam has increased substantially. Container rates still are inexpensive, as is bulk vessel freight. The amount of grain moving toward the river is limiting what DDGS
Region
Spot
Rack
West Coast
1.790
1.800
Midwest
1.610
1.778
East Coast
1.676
1.751 SOURCE: DTN
by Sean Broderick
could be put onto the river since an elevator can load eight grain barges in a day versus one DDGS barge. Thus, there has not been as much movement of bulk DDGS. All of the newer non-Chinese business has moved via containers. Domestically, the prices that feeders are paying for DDGS are economical compared to soymeal. As a percentage of corn, DDGS is nearer to the higher end of the range, but with river access being limited, local availability still is plentiful. There has not been as much talk lately about the Chinese antidumping decision, but with the current exports to China of about 200,000 tons per month, the decision still will have a significant impact. And so will corn crop conditions.
Regional Gasoline Prices ($/gallon)
Front Month Futures Price (RBOB) $1.483 Region
Spot
Rack
West Coast
1.659
1.985
Midwest
1.578
1.560
East Coast
1.378
1.557 SOURCE: DTN
DDGS Prices ($/ton) LOCATION
Aug 2016
Jul 2016
Aug2015
Minnesota
135
135
120
Chicago
165
168
157
Buffalo, N.Y.
165
160
160
Central Calif.
190
200
195
Central Fla.
168
170
178 SOURCE: CHS INC.
Corn Futures Prices (Sept. Futures) Date
close, bu.
close, ton
June 20, 2016
4.2675
152.411
May 20, 2016
3.9675
141.696
June 19, 2015
3.5875
128.125 SOURCE: FCSTONE
Cash Sorghum ($/bushel)
Ethanol Report
by Rick Kment
Ethanol prices firm despite gasoline price pull-back June 28â&#x20AC;&#x201D;Ethanol market prices have broken away from the energy and gasoline markets and refocused on the aggressive up-and-down movements in the corn market. Front-month July corn futures peaked in mid-June, moving to $4.37 per bushel, which pushed buyer support into ethanol markets. Concern about tight corn supplies and weather impacting short- and long-term availability of corn to produce ethanol caused ethanol futures to rally. Prices continued to erode through the end of June with corn futures falling more than 50 cents per bushel and ethanol futures trimming 10 cents per gallon off the front-month contract.
Production costs may continue to drive ethanol traders through most of the summer. RBOB gasoline futures quickly moved past seasonal demand support and fell more than 15 cents per gallon from recent highs. Ethanol prices moved from a narrow discount to the RBOB gasoline futures price to a 13-cents-per-gallon premium in the last week of June. That was expected to spark additional uncertainty for both ethanol and gasoline buyers through and after the Fourth of July holiday weekend.
Location
June 24, 2016
May 20, 2016
Jun 26, 2015
Superior, Neb.
3.15
3.29
4.13
Beatrice, Neb.
3.15
3.21
4.18
Sublette, Kan.
3.01
3.11
3.89
Salina, Kan.
3.10
3.20
4.28
Triangle, Texas
3.21
3.30
4.04
Gulf, Texas
3.94
3.82
5.85
SOURCE: SORGHUM SYNERGIES
Natural Gas Prices ($/MMBtu) LOCATION
Jun 27, 2016
May 20, 2016
Jun 29, 2015
NYMEX
2.716
2.062
2.805
NNG Ventura
2.520
1.815
2.640
Calif. Citygate
2.850
1.870
3.160
SOURCE: U.S. ENERGY SERVICES INC.
U.S. Ethanol Production (1,000 barrels) Per Day
Month
End Stocks
Apr 2016
935
28,059
20,992
Mar 2016
994
30,812
20,787
930
27,910
22,301
Apr 2015
SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION
AUGUST 2016 | Ethanol Producer Magazine | 21
DISTILLED Ethanol News & Trends
Total economic contribution of grain and grain products exports Jobs
Labor income (millions)
GDP (millions)
Output (millions)
Ethanol
25,250
$1,570
$2,968
$8,870
DDGS CGF
38,978
$2,424
$4,581
$13,692
SOURCE: U.S. GRAINS COUNCIL
Report quantifies value of ethanol-related exports A new analysis conducted by Informa Economics and commissioned by the U.S. Grain Council and National Corn Growers Association has determined exports of U.S. corn and corn products generated $74.7 billion in annual economic output in 2014, with sales of all U.S. feed grain products contributing $82 billion. The study specifically addresses the impact of ethanol and ethanol coproducts distillers dried grains with solubles (DDGS) and corn gluten feed (CGF). According to the analysis, the direct economic contributions of ethanol exports include 938 jobs, $115 million in labor income, $238 million in GDP and $2.07 billion in output. The direct contributions of DDGS and CGF coproducts include 1,448 jobs, $177 million in labor income, $367 million in gross domestic product (GDP), and $3.19 billion in output. The total economic contribution of ethanol exports was 25,250 jobs, $1.57 billion in labor income, $2.97 billion in GDP and $8.87 billion in output. For DDGS and CGF, the total economic contribution was 38,978 jobs, $2.42 billion in labor income, $4.58 billion in GDP and $13.69 billion in output.
22 | Ethanol Producer Magazine | AUGUST 2016
Biomass checkoff established by Ontario farmers Ontario Biomass Producers Cooperative Inc., a group of Ontario farmers producing and marketing biomass, recently launched an effort to make it easier for its members to sell the miscanthus and switchgrass they produce to various markets. The cooperative adopted a central-desk selling system and checkoff collection mechanism to help connect biomass producers and buyers. The central-desk selling system will be used to develop an advertising strategy to give the cooperative’s members the opportunity to sell into multiple markets and for the markets to go to one place to source material, said Larry Davis, vice president of business with the Ontario Biomass Producers Cooperative. “It’s an information gathering source,” Davis said. “Producers can learn who the buyers are and what they are using it for, and the grower themselves can put their information on a website. It’s just a way for everybody to know what material is out there and how much is available at any one time.”
DISTILLED
Valero petitions EPA to redefine obligated party under the RFS Valero Energy Corp. issued a petition to U.S. EPA Administrator Gina McCarthy in June asking the agency to redefine obligated party under the renewable fuel standard (RFS). Valero is asking EPA to redefine obligated party as “the entity that holds title to the gasoline or diesel fuel, immediately prior to the sale from the bulk transfer/terminal system…to a wholesaler, retailer or ultimate consumer.” Refiners and importers are currently considered obligated parties under the RFS. According to Valero, “currently the obligation for RFS is placed on refiners and importers—the point of obligation is the refinery gate and the entity that imports—regardless whether the refiner or importer have the ability to affect the amount of renewable fuels blended and sold to consumers.” Valero claims this placement has created problems that impair the RFS program’s proper functioning and prevent it from ensuring that renewables enter the transportation fuel market.
IRENA releases renewable energy jobs report The International Renewable Energy Agency has released a report, “Renewable Energy and Jobs—Annual Review 2016,” that has determined more than 8.1 million people worldwide are currently employed by the renewable energy industry, up 5 percent from last year. According to the report, global employment in liquid biofuels declined 6 percent in 2015, reaching 1.68 million. The decline is attributed to mechanization in countries such as the U.S. and Brazil, along with falling production in others, such as Indonesia. Liquid biofuels jobs increased in the European Union, Malaysia and Thailand. Brazil has the largest liquid biofuels workforce, with 821,000 jobs. Reductions of approximately 45,000 jobs in the country’s ethanol industry due to ongoing mechanization of sugarcane harvest-
Renewable energy jobs (in thousands) Solar photovoltaic
2,772
Liquid biofuels
1,678
Wind energy
1,081
Solar heating/cooling
939
Solid biomass
822
Biogas
382
Hydropower (small)
204
Geothermal energy
160
CSP
14
SOURCE: INTERNATIONAL RENEWABLE ENERGY AGENCY
ing were partially offset by job growth in biodiesel. Even with reduced ethanol employment in Brazil, production increased in 2015. Employment also declined 2 percent in the U.S. despite an increase in both ethanol and biodiesel production. Biofuel employment in the EU increased 8 percent in 2014, and the report indicates continued growth in production last year likely resulted in additional job creation.
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. AUGUST 2016 | Ethanol Producer Magazine | 23
DISTILLED
USDA announces payments to advanced ethanol producers On May 27, the USDA announced more than $8.8 million in awards through its Advanced Biofuel Payment Program, which makes payments to biofuels producers based on the amount of advanced biofuels produced from renewable biomass, other than corn kernel starch. Examples of eligible feedstocks include crop residue, food and yard waste, vegetable oil and animal fat. Eligible fuels include wood pellets, biodiesel, advanced and cellulosic ethanol, and biogas. The program was established by the 2008 Farm Bill. To date, the USDA has made $308 million in payments to 382 producers in 47 states and territories.
Advanced biofuel payments for ethanol Usl Parallel Products of California
$845
Quad County Corn Processors Co-Op
$2,011
Central Indiana Ethanol LLC
$4,320
Arkalon Ethanol LLC
$1,061
Bonanza Bioenergy LLC Diamond Ethanol LLC Parallel Products of Kentucky Inc.
$601 $1,013 $976
SOURCE: USDA
“Advanced biofuels expand America’s energy options and increase our sources of homegrown, renewable energy,” said Agriculture Secretary Tom Vilsack. “These payments not only help to spur biofuel production, but also protect the environment and help create jobs by building a renewable energy economy in rural areas.”
Some chemical companies focus on this
US weekly ethanol production sets new record The U.S. ethanol industry set a new weekly ethanol production record the week ending June 10. Data published by the U.S. Energy Information Administration shows production reached an average of 1.013 million barrels per day. The previous record was set the week ending Nov. 20, 2015, when production averaged 1.008 million barrels per day. As of the close of June, the U.S. ethanol industry had surpassed the 1 million barrel per day mark only six times, all within the past year. The first was the previous record-setting week of Nov. 20, 2015. Less than a month later, during the week ending Dec. 11, 2015, production reached an average of 1 million gallons per day. During the week ending Jan 8, 2016, production again topped the 1 million barrels per day mark, reaching 1.003 million barrels per day. The week ending June 3, production reached near-record levels of 1.006 million barrels per day.
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,
© 2014 Buckman Laboratories International, Inc. All rights reserved.
24 | Ethanol Producer Magazine | AUGUST 2016
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.
.
DISTILLED
Trestle Energy, Larksen partner to develop fuel pathway management platform
Global biofuel production
Trestle Energy LLC and Larksen LLC announced a collaboration to commercialize a new fuel pathway management platform. The platform is designed to enable ethanol producers to substantially reduce their fuel carbon intensity and to facilitate cost-effective use of biomass fuel pellets at existing power plants. Trestle and Larksenâ&#x20AC;&#x2122;s integrated approach furthers ethanol producersâ&#x20AC;&#x2122; ability to scale up production of low-carbon biofuels and allows existing power plants to generate electricity with the
SOURCE: REN21
cost and reliability of coal and with carbon emissions similar to wind. This will expand supplies of dispatchable, renewable energy and substantially reduce greenhouse gas emissions from domestic energy supplies. According to Trestle, the partnership charts a cost-effective path for American energy companies to comply with ambitious climate and energy programs, such as low-carbon fuel standards, thereby enabling greater access to premium regulated markets.
Ethanol
74%
Biodiesel
22%
Hydrotreated vegetable oil
4%
REN21: Global ethanol production up REN21 recently published its annual overview on the state of renewable energy, reporting 2015 was a record year for renewable energy installations. Renewable power and renewable heat both increased, along with renewables used in transportation. According to the report, global biofuels production increased 3 percent last year, reaching 133 billion liters (35.13 billion gallons). Although ethanol production was up, biodiesel production was down slightly. Fuel ethanol production was up 4 percent last year, reaching 98.3 billion liters. The U.S. and Brazil accounted for 86 percent of global ethanol production in 2015. China, Canada and Thailand were the next largest producers. In the U.S., ethanol production increased an estimated 3.8 percent, reaching 56.1 billion liters. Ethanol production in Brazil was up 10 percent, reaching a record 28.2 billion liters. Production in Canada was down 1 percent, at 1.7 billion liters.
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AUGUST 2016 | Ethanol Producer Magazine | 25
FILLING A HOLE
in Leadership
Succession planning involves candid discussions that pave the way for smooth transitions when facing retirements, or worse, unplanned vacancies in key positions. By Holly Jessen
26 | Ethanol Producer Magazine | AUGUST 2016
LEADERSHIP
AUGUST 2016 | Ethanol Producer Magazine | 27
LEADERSHIP While the majority of ethanol production companies have discussed succession planning, fewer have documented, actionable succession plans in place.
Putting it in writing is key, says Jason Johnson, vice president and team instruction specialist with AgStar Financial Services. “We all know it’s a lot better to react if there’s a plan in place ahead of time, versus trying to react and make decisions in a time of crisis. It’s a lot easier to follow a blueprint,” he says, adding that AgStar asks companies about succession planning as one part of assessing a risk management plan. Scott McDermott, partner and chief operating officer for Ascendant Partners Inc., concurs. “If somebody gets hit by a bus, you have a day-to-day operation that needs to run. You have to have some combination of backups, procedures and documentation.” John Christianson, principal of Christianson and Associates PLLP, tells Ethanol
Producer Magazine succession planning is critical for the continuation of a comIf, all of a sudden, pany’s strategic direction and vision. Without it, a there’s an empty spot, company is left scrambling to fill an open position, can you continue to when it should be moving operate normally? forward. “You become a plant that is just treading water,” he says, “Status quo, McDermott trying to get things done, but not really working at propelling yourself forward with your vi- will see more changeover in senior management. sion.” Christianson has noticed increased inFive years ago, McDermott says many terest in succession planning as well. In the ethanol production companies hadn’t put past year and a half, Christianson and Asmuch thought into succession planning. sociates has facilitated about a dozen strate“I think today, it’s far improved,” he says, gic planning sessions with ethanol company estimating that about a third of the indusboards of directors where succession plantry is lagging in this area, continuing to do ning is on the agenda. He sees it as a natuthings the way it’s always been done. One ral progression, as the industry moves out reason for the increased interest in succesof tough times when companies focused sion planning is that seasoned veterans are on surviving and paying off debt. With starting to retire. McDermott expects that, low long-term debt, thanks to good profits in the next five years, the ethanol industry
LEADERSHIP in 2014 and 2015, many boards are setting very specific goals for the future. When most people think about succession planning, replacing a retiring CEO is what comes to mind. But experts say there’s a lot more to it than that. Succession plans should be in place for multiple positions in top management from plant managers to commodity managers, and even board members. David Holm, executive director of the Iowa Institute for Cooperatives, which includes two Iowa ethanol plant members, says there are three scenarios to consider. The first, and easiest to deal with, is when a top manager comes to the board with plans to retire in 18 months. The second scenario is unplanned and happens when someone leaves the company abruptly. Long-term disability is the most difficult scenario to handle, in Holm’s opinion. An example would be a CEO facing a cancer diagnosis. Although the prognosis is good and the CEO will return to work, there will be an extended period of time when that person will be distracted, undergoing medi-
cal treatment and unable to work full time. “In the interim, you still have to run a multimillion dollar company,” Holm says.
Practical Tips
It’s a lot better to react if there’s a plan in place ahead of time, versus trying to react and make decisions in a time of crisis.
A good first step in succession planning, Johnson says, is to take stock of the company’s human capiJohnson tal. List the key managers and personnel who would leave a big hole if they were no longer with planning means looking outside to hire new the company—individuals with a long his- senior managers. tory and in-depth knowledge about the faAnother vital step is to document what cility. key personnel do and how they do it, for It’s helpful to make a chart of those continuity in times of change. “If, all of a individuals and include known informa- sudden, there’s an empty spot,” McDermott tion, such as when they may retire, Johnson asks, “can you continue to operate normalsays. Then, look below them in the ranks ly?” That’s true, he says, across senior manand identify talented employees with poten- agement roles, from the general manager to tial. The next question to answer is, what the lab manager. “Succession planning, in would be needed to get those people ready our mind, is broader than the next person to move up into senior management posi- you want in that position or the type of pertions? Of course, sometimes succession son you want in that position,” he says. “It’s
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AUGUST 2016 | Ethanol Producer Magazine | 29
LEADERSHIP In the past five years, Holm has worked with three If you think it’s hard to companies that have gone have the conversation through a situation like the example of a CEO with cancer, hypothetically, wait where the individuals eventually returned to work full until it’s real. time. In two cases, the plan in place was to spread job duties among senior leadership. Although that did work, it still Holm was difficult, he says, because the company lacked the focus all the things around that person’s role at the of having a single person at the helm. management level that allows the company The CEO, as someone who knows the to be effective, not only in the transition in capabilities of the staff, should also be asked leadership, but also in the gap in leadership.” for input on succession plans for other key For successful succession planning, the personnel. The board may not take all of the board of directors needs to talk candidly to CEO’s suggestions, Holm says, but that’s a the CEO. “If you think it’s hard to have the good place to start. conversation hypothetically, wait until it’s Something else to decide is exactly how real,” Holm says. Get the CEO’s input on to communicate succession planning decipossible retirement plans, as well as what the sions, Holm says. An employee who is told company should do if he or she is killed to- he or she will be the interim CEO, should the morrow or somehow unable to work, such need arise, may think he or she is in line to as with the cancer scenario, Holm suggests be the next CEO, when that may not be the
case. And, if other staff members are told, they may come to the same incorrect conclusion. The board and CEO need to think very carefully about how, and to whom, they should reveal these plans, Holm cautions.
Getting the Best Board
Succession planning isn’t just for top management. It’s for board members too, even when those board members are elected, not appointed. “The practical reality is, even when they have a vote of the membership, often times it’s the board members that basically ask those candidates to run,” McDermott says. “Frankly, we don’t think it matters whether it’s a vote or appointed or recommended by the existing board.” He sums it up like this: “Plan for the board you want, otherwise you’ll get the board you get.” Board members fulfill a critical function for ethanol production companies and having highly active and engaged board members is vital to the future of the company, Christianson says. “You can see the difference in boards of directors that are engaged.
LEADERSHIP the industry. “You want people who want to be You want people who on the board, with high want to be on the board, expectations, who want be part of driving the with high expectations, to business forward,” he says, adding that holdwho want to be part of ing board members acdriving the business countable may result in some no longer wanting forward. to be on the board. Christianson McDermott points to some progressive These are the companies that are moving boards that have appointed one or two forward, have a strategy, a vision, a plan nonvoting associate board members, to and are moving forward and executing on work with the board in an advisory capacity that plan, versus plants that are just moving as one way companies can identify future along—just an observer of what’s going on, board members. “It allows them to almost instead of determining the path.” test run board members,” McDermott says. Christianson believes the first step “And it also allows potential board memis compensating board members well for bers to see how it works, so when they actuwhat they do. Secondly, companies should ally become a board member they hit the raise the bar and hold board members ac- ground running.” A new board member, countable. That includes things such as with no experience, can take two or three reading the board packet, attending industry years to get up to speed on how to be a events and learning about issues affecting good board member, he adds, while an as-
sociate board member would have a much faster learning curve. Another good strategy, Christianson says, is for boards to form membership committees to seek out the best talent for open board seats. For this to work, however, the committee must be active and effective, he adds. Another important element, he says, is communication from the board to shareholders through newsletters, the website and shareholder meetings. Effective communication helps the membership understand the board’s function, actions and strategy for the future. This can help encourage more people to pursue getting a seat on the board. Because, although strategic board nominations are important, ultimately, elections with healthy competition for board seats are a good thing, Christianson says. Author: Holly Jessen Freelance writer hollyjessenmedia@gmail.com
HUMAN RESOURCES
Recruiting, Retaining
TOP TALENT
Ethanol plants use a variety of strategies to find and keep engaged employees. By Ann Bailey
Finding and keeping good employees is a challenge. Throw
also must manage the bottom line, Weihs says. The 36-year-old firm starts the in considerations such as a need for emrecruiting process utilizing keyword ployees with specific professional and searches in its own data base as well as technical skills, and the typical rural locadigital data bases such as LinkedIn to tion, and it can be a daunting task for ethfind the people with qualifications that anol producers. Finding talent through match what its clients are seeking. The recruitment firms, utilizing internships search team screens 400 to 500 potential and engaging employees in the work and candidates and from that pool typically industry culture are all strategies used. contacts 100 to 200 people for each po“There’s pressure on profitability tosition. After Kincannon and Reed has day because of the blend wall and low oil narrowed the search to 20 to 30 interprices. What we see ethanol companies ested people with the right background, looking for, in many cases, is a higher levit selects about a dozen to show clients el of executive talent,” says Gary Weihs, who then decide which three or four to managing director and renewables secinterview. “It’s not like running an ad and tor leader at Kincannon and Reed, an hoping that people respond. A lot of the agricultural-focused recruitment firm. In people who are looking at want ads are the early days of the industry, managers not theunique people we’re lookingwith for,” Weihs WORKING Plant Solutions has developed tools and processes who simplyCLEAN: couldInnovative run the plant efficientsays. “Ninety percent of the people we’re the goal of reducing time requirements at ethanol plants by up to 20 percent. lyPHOTO: were sought for the lead position, but INNOVATIVE PLANT SOLUTIONS researching aren’t looking for a job.” now general managers of ethanol plants 32 | Ethanol Producer Magazine | AUGUST 2016
AUGUST 2016 | Ethanol Producer Magazine | 33
Kincannon and Reed searches for top talent, a person who has a superior, focused work ethic, he says. Those are the leaders who get things done. They also need to be able to work both strategically and tactically, Weihs says. “They might be dealing with a scheduling problem or an operational failure in the morning, and in the afternoon, doing a five-year plan for the board meeting. They’ve got to be really good thinkers.” Another quality critical to the success of a manager is the ability to embrace the gray and drive it to black and white, Weihs says. That is, managers who have top talent will collect, in a timely manner, all the information that is available to them and make a decision based on the input they receive.
“The other topic we talk about for talent is self-awareness,” Weihs says. “People have to be confident because confident people are followed.” He looks for a oneto-one, ego-to-capability ratio. “It’s very important that their ego isn’t bigger than their capability. They have to be confident, but they can’t have a huge ego because that turns people off, which limits teamwork.” Another important leadership quality of top talent managers is a willingness to “get their hands dirty,” Weihs says. “It’s not that they do peoples’ jobs for them, but they can effectively relate to the front line. A strategic doer is someone who can relate to the front line and also relate to the board, and they have an action orientation. They
can lead people at all levels of the organization and implement the strategies after they design them. There are lots of people who are good at creating strategies, but there are lots of strategy booklets sitting on the shelf that never got implemented.” Managers who are strategic doers have the support of their employees and the leadership capability to move the team forward to accomplish their goals, Weihs says. Conducting behavior-based interviews is one of the key ways that Kincannon and Reed identifies top talent, he says. “What we’re looking for is evidence of behavior where they’ve accomplished things in the types of areas the client is interested in. For instance, if [a client] is looking for someone
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People have to be confident because confident people are followed â&#x20AC;Ś They have to be confident, but they canâ&#x20AC;&#x2122;t have a huge ego because that turns people off, which limits teamwork. â&#x20AC;&#x201D;Weihs who wants to increase market share for a fuel or chemical and if [the prospects] have two or three good examples of increasing market share in the past, youâ&#x20AC;&#x2122;ve got strong evidence that their behavior from the past is going to continue in the future.â&#x20AC;?
Demonstrated Behavior
Poet hiring teams also find that the answers to behavior-based questions are help-
ful in making good hiring decisions, says Mike Dishman, Poet regional vice president in Sioux Falls, South Dakota. â&#x20AC;&#x153;We make sure we cover all of our bases on asking those behavior-based questions.â&#x20AC;? Hiring employees who have the same mindset and culture as the company also is important, so job interviews also include culturally based questions, Dishman says. â&#x20AC;&#x153;Do you have the same vision as we do? Are you passion-
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ate about what weâ&#x20AC;&#x2122;re doing, changing the world?â&#x20AC;? Poetâ&#x20AC;&#x2122;s strong, vibrant internship program also is a good recruiting tool for the ethanol company, he says. â&#x20AC;&#x153;We hire a lot of interns.â&#x20AC;? The interns, especially in the areas of science and engineering, come to Poet from across the United States, Dishman says. Poet gives the interns meaningful work during their time with the company
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We look for candidates with strong communication skills and a positive attitude. We want candidates who can work well in teams, set goals for themselves and can remain flexible.—Hudak and when their internship concludes, asks them to do a report on their experiences. “We feel proud about our internship programs and the results we get out of it. It’s
great for Poet and the person doing our internship.” Poet’s hiring teams talk to its job candidates about internal promotion opportuni-
ties and programs such as wellness or mentorship, Dishman says, adding that those are the kinds of programs that world-class companies offer to attract and retain employees. Retaining employees involves other strategies as well. “We try and provide the very best atmosphere for our team members to work in. We promote as many teamoriented activities as possible. We have a lot of competitiveness that may or may not be in line with working on ethanol. We encourage team-oriented events that help out in the community, volunteering. We encourage people to be leaders in the community,” Dishman says.
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36 | Ethanol Producer Magazine | AUGUST 2016
Understanding community impact is an important way to help employees feel a part of something bigger and build loyalty and staying power, says Justin Mentele, senior associate, manufacturing and biofuels group, K-Coe Isom LLP. Plant employees need to know biofuels not only add value to corn and sorghum and to the ag economy, but that ethanol companies also boost the rural economy as a whole through job creation. It isn’t easily seen and doesn’t show up directly in a paycheck, he says, but the true impact of the industry goes beyond distillers grains and ethanol sales. Talking to employees about the ways in which their jobs are part of the big picture also improves their staying power. “I think there has to be a much more focused effort now than what there used to be,” Mentele says. “What we see has worked best is that employees have to not only understand their piece of the pie in the whole process and project, but also how what they do affects others in the company itself. If purely the production of ethanol and profit is the goal, then you’re not going to have employees who are really engrossed in what they do and what happens in that company.” Communicating with employees about what is expected of them and how they can better themselves in the company also is important when it comes to retaining them, Mentele says. Without that, “it makes it a whole lot harder to have that buy-in.” Knowing what is expected of the company is important as well. “That’s a piece that
HUMAN RESOURCES sometimes gets overlooked,” Mentele says. “What do we expect you to do in your performance and what do we expect the company to do in its performance?’ Once the company and employee know what the expectations are, they need to set goals, he says. “With that, there has to be some motivation, and the motivation at some point, is monetary, but there’s also nonmonetary motivation that drives that.” That could be something as simple as a “thank you” in a monthly safety meeting or an employee-of-the-month honor in a local newspaper, Mentele says. Whether they are recognized and appreciated for their work may be the difference between employees leaving or staying with a company. “It’s a series of little things that build up that either drive that loyalty or cause a reason to leave,” Mentele says.
candidates who can work well in teams, set goals for themselves and can remain flexible. Dependable applicants with integrity, creativity, organization and intelligence can make for top-notch employees at Green Plains.” The company wants its workers to feel like they are part of a family, while recognizing each plant is different. “Every Green Plains location has its own unique culture,” Hudak says. “To support this, we give
holiday gifts, sponsor community events, host potluck meals, have multiple softball leagues, share a quarterly newsletter and more. No one knows our communities like the people who live and work there do so every location is its own work family.” Author: Ann Bailey Associate Editor, Ethanol Producer Magazine abailey@bbiinternational.com 701-738-4976
Creating Opportunity
Engaging employees from the get-go also is important at Green Plains Inc. “We have an engaged culture with an experienced management team who is willing and open to hear input from employees who are just starting out with us,” says Mark Hudak, executive vice president of human resources. “Everyone’s opinion really matters here. We also provide regular incentives and prefer to promote people within the company, when possible.” The company also works to keep its long-time employees involved in Green Plains. The ethanol producer focuses on the company’s growth and creates advancement opportunities, Hudak says. “We provide ongoing training and development programs at every location in order to create internal promotions. At Green Plains, if individuals have a passion for a specific project, they are encouraged to own it and they have access to top management for guidance and support. This creates personal development opportunities for employees and possibly new business strategies to be implemented by the company,” Hudak says. Green Plains seeks to attract employees with high-level descriptions of job responsibilities and specific qualifications, he says. “During the interview process, we look for candidates with strong communication skills and a positive attitude. We want AUGUST 2016 | Ethanol Producer Magazine | 37
Skoring
with Personal Connections Emily Skor, Growth Energy’s new CEO, speaks about connecting with consumers, building relationships and tapping the power of social media. By Ann Bailey
For new Growth Energy CEO Emily Skor, it’s personal.
PHOTO: JAMES HARRIS
38 | Ethanol Producer Magazine | AUGUST 2016
Rather than solely using intellectual arguments to promote and defend the ethanol industry, Skor wants industry producers and members to share their stories about how the renewable fuel makes Americans’ lives better. Growth Energy has done a good job of promoting ethanol in the past and now it’s time for industry members to begin telling their stories in a different way and empower neighbors to talk to neighbors about the benefits of the renewable fuel, Skor says. She believes neighbors talking one-on-one to neighbors is one of the best ways to spread the word about the advantages ethanol has over fossil fuels.
PROFILE
“We have the facts on our side. But you don’t win politically charged discussions on facts alone. So often it is emotion that trumps fact,” Skor said at the International Fuel Ethanol Workshop. Skor was the keynote speaker at the 32nd annual FEW held in Milwaukee in June, a few weeks after taking over the reins of Growth Energy. A graduate of Wellesley (Massachusetts) College, Skor most recently worked as Consumer Healthcare Products Association vice president and was the CHPA Educational Foundation executive director. She led public affairs campaigns, integrating strategic communications into legislative campaigns and coordinated ally development at CHPA, a member-based trade organization advocating for consumer health care products. Skor brings to Growth Energy her experience in building campaigns in ways that mobilize policy and leaders, an ability to engage the organization’s members and knowledge of how to work with regulatory agencies such as the U.S. EPA, Food and Drug Administration and USDA, she says. Though a natural tension exists between those agencies and the industries which they regulate, such as ethanol, there are common areas where they share objectives, Skor says. “If you find the area of commonality, you can establish trust.”
Personal Touch
Forging personal relationships with consumers also is one of her goals, Skor says. “We have to connect with consumers as individuals—on their terms, in their language, based on their concerns and priorities and experiences,” she says. Ethanol producers and members are motivated by their knowledge of and experience with the biofuel, but they must figure out what influences the rest of Americans who are making choices at the pump, she believes. “What motivates the New York City cab driver, the Arizona college student who commutes to her classes from home to save on rent, the Boston mother of young kids who is starting to feel like a long-haul truck-
er just to make soccer practice? If that last one sounds personal, it is. “I know these stories because I am part of the target audience. My son Dominic is six years old. My daughter India is eight. And anyone who tells you that life gets simple after they start kindergarten, well, they know something I don’t. As a mom, I am ready to listen when someone tells me I can save money and help my kids breathe cleaner air.” Consumers, including Skor herself, crave personalization of the information, images, food, medicines, products and experiences they take in, she says. “I am not just a demographic. I am an individual. I have my own values and goals and aspirations. And when I buy something, it needs to speak to my values and goals and aspirations.” But, it’s not just enough to have an experience, it also should be documented and shared, Skor says, and that’s where technology comes into play. In today’s world, in which people live online, simple transactions become public statements of what they support and why they support it, it, she says. That means a transaction at the pump can become a public statement. Social media is the ultimate grassroots way to spread the good news about ethanol and to engage the public, Skor says. “It is absolutely a tool we should be using. It reaches all around the country and around the world.”
Spreading the Word
“Let’s encourage an earnest conversation with consumers about how ethanol makes life a little better and why they can feel good about their decisions at the pump,” Skor suggests. “When my family drives to the lake for the weekend, of course, I should be able to tap an app for directions to the closest gas station selling E15. But I should be able to find retailers with blender pumps, whether I’m using Waze, Apple maps or any other GPS navigation.
“After I fill the tank, I want to post a photo of my happy family on Instagram. I want to tweet a shout out to my gas station for saving me a few bucks. I want to alert all my friends on Facebook to the great savings with ethanol. And then I’ll text an emoji of the American flag to my girlfriend.” The ethanol industry can harness the digital arena to initiate one-on-one conversations with consumers, reminding them about the benefits of ethanol to their pocketbooks, country and environment, Skor says. Research conducted by Growth Energy shows that Americans need to be reintroduced to ethanol, she says, noting that too many people still question ethanol’s reputation and others don’t understand its benefits. “We’ve got to turn this thing around.” The research showed that consumers respond favorably when the ethanol industry explains that the renewable fuel burns cleaner and increases octane, benefitting the environment and engines, she says. Environmental facts speak the loudest and the ethanol industry needs to communicate them to the public. “Parents will change their purchasing habits when they hear that ethanol reduces the need for toxic gasoline additives that have been linked to cancer, smog and groundwater contamination. Millennials will consider buying higher blends when they understand ethanol has cut 589 million metric tons of greenhouse gas emissions, and even greener options are on the way. “That’s why we need to start evangelizing this message, so that consumers from coast to coast know ethanol is moving forward,” Skor says. The ethanol industry’s membership motivates her to be a strong advocate for the industry, she says. “This an industry with heart and soul. I’m so excited to be working in this industry that is making a difference.” Author: Ann Bailey Associate Editor, Ethanol Producer Magazine abailey@biinternational.com 701-738-4976
AUGUST 2016 | Ethanol Producer Magazine | 39
Tom Buis, outgoing CEO of Growth Energy, above and in the center, received the High Octane award from BBI Internationalâ&#x20AC;&#x2122;s Mike and Tom Bryan. Lower left, Tom Bryan presents the Award of Excellence to Charles Abbas, director of yeast and renewables research at Archer Daniels Midland Co.
Tom Bryan, left, moderated a general session panel on marketplace access with Dave VanderGriend, Urban Air Initiative, Bob White, Renewable Fuels Association, and Mike Oâ&#x20AC;&#x2122;Brien, Growth Energy.
40 | Ethanol Producer Magazine | AUGUST 2016
EVENT
All Things
BIOFUEL Producers meet in Milwaukee. By Susanne Retka Schill PHOTOS BY JAMES HARRIS
Biofuel producers of all stripes converged on Milwaukee for the 32nd annual International Fuel Ethanol Conference & Expo on Monday evening, June 20.
Emily Skor, left, gave her first keynote address as CEO of Growth Energy. Geoff Cooper, Renewable Fuels Association, above, and Anne Steckel, National Biodiesel Board, below, spoke on a general session panel addressing issues in the broader biofuels industry.
Colocated with the National Advanced Biofuels Conference this year, the event drew nearly 2,000 producers and industry representatives from the ethanol, biodiesel and advanced biofuels sectors. Nearly a third of the attendees represented biofuel production plants, coming to learn about the latest advancements in the industry. The attendees represented 83 percent of installed ethanol capacity and 75 percent of all U.S. plants, along with cellulosic ethanol and biodiesel producers. Canadian ethanol producers were represented together with attendees from production facilities in Uruguay, Argentina, Brazil, Ireland, Sweden, Australia, India, China and Hungary, and attendees from a total of 25 countries. The FEW is the largest gathering of the biofuels industry each year, bringing together producers and representatives from 270 companies exhibiting in the expo hall. In addition to opening-day general sessions, the event featured four tracks of educational sessions covering production and operations, leadership and financial management, coproducts and product diversification and infrastructure and market development. The colocated advanced biofuel event had two tracks, one covering advanced and cellulosic ethanol and the other, biodiesel and other advanced biofuels. Monday events included a golf tournament and a preconference seminar, Ethanol 101, designed to give an overview of the industry and the process for professionals new to working in the sector. For those interested in getting a ground view, the FEW closed with an industry tour, this year hosted by United Ethanol, Milton, Wisconsin. AUGUST 2016 | Ethanol Producer Magazine | 41
Four FEW and two advanced biofuels tracks presented a wide range of topics. Dennis Glass, D. Glass Associates, standing, spoke in a panel on regulations and the Food Safety Modernization Act along with Gary DeLong, Degart Global, left, Chris Bliley, Growth Energy, and Sue Retka Schill, moderator.
BBI Internationalâ&#x20AC;&#x2122;s Tim Portz and John Nelson, above left, drew names for the producer cash give-aways. Above right, Ray Runde, United Wisconsin Grain Producers, center, checks out the Tracerco exhibit. Below, Mick Henderson, Commonwealth Agri-Energy, and Kris Plamann, SEH Design Build, chat at the Wednesday evening social held at the Harley-Davidson Museum.
42 | Ethanol Producer Magazine | AUGUST 2016
Thomas Jeffries, Xylome Corp., above, asks a question during the general session. BBI Internationalâ&#x20AC;&#x2122;s Tom Portz and Syngentaâ&#x20AC;&#x2122;s Enogen business head Jack Bernens, below, cut the ribbon to officially open the show.
icminc.com/epm
PHOTO: SUSANNE RETKA SCHILL, BBI INTERNATIONAL
Sulfur
Compounded The U.S. EPA’s Tier 3 rules are not new—they were finalized two years ago—but a compliance deadline is approaching that may catch a few ethanol producers unprepared. Come Jan. 1, ethanol must prove it meets the lower 10 parts per million (ppm) standard for sulfur content. Sulfur levels are important for air quality measures, primarily because sulfur compounds kill the catalyst used to clean up automobile exhaust. Tier 2 rules finalized in 2000 required 30 ppm limits on sulfur, Tier 3 has tightened it further. Regulators expect an immediate benefit from the cleaner fuel, and future benefits as the tighter emissions enable more fuel-effi44 | Ethanol Producer Magazine | AUGUST 2016
As the Tier 3 deadline approaches, it's important to understand the difference between EPA and ASTM treatments of the element. By Susanne Retka Schill
cient engine designs that are incompatible with current emissions control systems. It’s a more difficult rule for the oil refiners to meet, Kelly Davis, Renewable Fuels Association director of regulatory affairs, explains. “They have to remove the sulfur during processing.” Pure ethanol is not a known source of sulfur, she adds. “We typically do not see sulfur above 10 ppm in our ethanol, but as part of the fuel supply chain, we have to prove that we comply, so it’s more of bureaucratic issue—paperwork.” The industry actually has been meeting the standard for years. It first was adopted in California in 2003 and, due to the fungibility of the ethanol supply, the RFA has encouraged all ethanol be under 10 ppm ever since. What’s different, Davis says, is that it is now an EPA rule with reporting requirements. “One of my concerns is if producers don’t have to
do anything except paperwork, it’s put off until the end,” she says. While ethanol itself has little sulfur, plants can have low levels, Davis says. “Every ethanol plant will have a different base sulfur content, because we’re all using different sulfur chemistries in our process.” Most of the sulfur comes from the denaturant used to make sure the fuel ethanol won’t end up in a glass, in which case it should be taxed. Natural gasoline is the most economical denaturant, and thus the most commonly used. Also called wellhead gas, drip gas or casing head gas, it is a coproduct of natural gas production. Petroleum-based gasoline can also be used, but generally isn’t due to price. There should not be a problem for the ethanol industry to meet the new 10 ppm standard, Davis says. The industry has demonstrated it can for more than a decade of compli-
REGULATION ance with the California regulation. Moreover, with sulfur levels in natural gasoline typically ranging between 50 to 120 ppm, using it in a 2 percent blend brings those levels down to well below the allowable maximum, assuming the ethanol is near zero. Ethanol producers have two ways to demonstrate compliance, Davis says. “They can buy a sulfur analyzer and take on the regulatory responsibility, certifying all their batch loads and making sure their sulfur analyses are valid. There’s also details like product transfer documents and annual EPA reporting.” Sulfur analyzers cost around $70,000, she says, and will require trained operators. The second option is a calculation method. “EPA is allowing us to certify that we are 10 ppm on a batch level basis, if we know our denatured amount and take a certification of analysis from the supplier and do the calculation.” She expects most ethanol producers will use the calculation method, although the new requirement that the natural gasoline supplier be EPA certified may be an issue in some cases. While the new rule takes effect Jan. 1, the system for reporting compliance to the EPA has not been revealed yet.
eral deposits from forming.” U.S. Water introduced a unique technology several years ago to break up the anionic portion of the minerals before they form deposits, reducing sulfuric acid needs by 60 to 80 percent. Sulfites are another issue. “Sulfites are really nasty from the standpoint of final product sulfur,” McCoy says. Bisulfites are used for air emission compliance. “There’s a small amount of some aldehydes in fermentation gas that are classified as hazardous air pollutants by the EPA and tightly regulated,” he explains. Bisulfite compounds react with those aldehydes, enabling their removal in the scrubber system. “The reason the chemistry is important is that sulfates, like those you get from sulfuric acid, are nonvolatile, so most of the sulfuric acid that gets used drops out in the coproduct,” McCoy says. Early on, the ethanol industry learned those levels need to be controlled closely to avoid problems when distillers are fed. “Sulfites are different because those are weak acids,” he continues, “essentially sulfur dioxide in water.” Sulfur dioxide is volatile
and will come off the beer and work its way through the distillation and dehydration system to end up in the ethanol. “That’s your real enemy,” McCoy says. A separation unit is available that can remove sulfates, ideally from the 200 proof. U.S. Water has used it to treat denatured fuel in tanks and railcars. There may be some changes coming with ASTM standards, McCoy says, and it’s important the ethanol industry gets involved, as some suggestions would make the sulfate specifications even tighter in higher blends. “I would like to see more people join,” he says. “It’s $75 a year and you can get in the queue to become an official voting member. Then these plants can start having some impact on the way these standards are written.” Right now, he adds, the members from the auto and oil industries heavily influence the process. Author: Susanne Retka Schill Managing Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922
Beyond Tier 3
Meeting sulfur tolerances goes beyond the new EPA Tier 3 rules, explains Monty McCoy, director of technology in the ethanol process group at U.S. Water Services. The Tier 3 rules are looking at reducing total sulfur in fuels with the goal of improving air emissions from gasoline engines. The new standards cover organic sulfur that is in the gasoline, he explains. “That is determined with a separate method and behaves in completely different ways than the sulfate that’s in the ethanol, which is inorganic. There are separate methods and separate limits for that.” The sulfate requirement to meet ASTM specifications has been around since the mid2000s, and with producers occasionally running into issues meeting those specifications, U.S. Water has been working to reduce the use of sulfur compounds in the process, McCoy says. “Sulfuric acid is used for pH control. There normally is some pH control to make the enzymes work well and to suppress bacterial growth.” The majority of sulfuric acid is used after fermentation. Controlling pH in the beer minimizes mineral deposits that drop out when the beer hits hot heat exchanger plates or in the beer column or in the evaporators. “Plants use sulfuric acid in that case to keep equipment operational by keeping those minAUGUST 2016 | Ethanol Producer Magazine | 45
ANNIVERSARY
CVEC Marks 20 Years Stories reveal a can-do spirit. By Susanne Retka Schill
Chippewa Valley Ethanol Co. started up 20 years ago in April 1996, and, in June, the company marked the milestone with a noon meal, industry speakers and public tours. Anni-
versaries are a time for celebrating and storytelling. Board member Dale Tolifson recalls the effort that went into raising the money to build the plant in the early 1990s. After the farm crisis of the 1980s, there wasn’t a whole lot of extra cash around, but more than 600 farmers invested, agreeing to deliver corn as part of their membership in Chippewa Valley Agrafuels Cooperative. Area businessmen wanted to invest as well, but couldn’t because of the cooperative structure and requirement to deliver corn. So, a corn pool was created to accommodate nonfarmers who could invest in that organization to technically qualify and deliver their quota of corn. Employees have become owners as well through the corn pool.
46 | Ethanol Producer Magazine | AUGUST 2016
That still wasn’t enough, recalls Jan Lundebrek, an ag lender at the time and an original board member. They got 10 or 11 area banks to participate in letters of credit, she says, “and as security, our farmers agreed to put up a nickel per bushel of corn delivered.” No small feat when that required more than 600 farmers to agree, but that and the builder’s ownership stake put the project financing over the final hurdle and construction began on the 15 MMgy plant. The farmers’ nickel a bushel paid off that part of the debt within nine months, Lundebrek says. Bill Lee recalls arriving at the construction site a few days after he started working with Delta-T. “It was the first plant DeltaT built,” he says. “Bibb Swain had it about 90 percent perfect.” He went on to manage CVEC for its first 15 years, describing his first job as being to figure out the other 10 percent. Mike Jerke succeeded Lee as manager, leaving two years ago to manage Guardian Energy Management. Chad Friese, who was hired by Lee as commodity manager, is the current general manager.
Tolifson and Lundrebrek remember sitting in the offices of what is now CoBank, not long after starting up. The bankers told them, “You guys have to start working together. You’re never going to make it, if you’re competing with each other.” CVEC got together with four other Minnesota farmer-owned ethanol producers—Corn Plus, DENCO, Heartland Corn Products and Al-Corn—and launched the Renewable Products Marketing Group. It made it possible for single, farmer-owned plants to compete with the large commodity corporations, Lee pointed out in his remarks at the anniversary celebration. In 1998, CVEC took advantage of the flexibility in the Delta-T design to begin producing industrial alcohol under its Glacial Spirits subsidiary. Industrial alcohol is a narrow, niche market, David Thompson, longtime board member and current chairman, says. It wasn’t easy to get into, but it has brought good returns when fuel ethanol margins were tight. Potable alcohol was added to the product line, and CVEC became the producer of Shakers Vodka.
ANNIVERSARY
CELEBRATION TALES: CVEC board chairman David Thompson receives a plaque from American Coalition for Ethanol executive vice president Brian Jennings. General Manager Chad Friese visits with association leaders. Former general managers Bill Lee and Mike Jerke catch up. Original board member Dale Tolifson and Chairman Thompson share stories of the early years. Jan Lundebrek, another original board member, visits with Renewable Fuels Association president and CEO Bob Dinneen. PHOTOS: TIMOTHY BAKKEN, CVEC
Shakers no longer exists, but today the company is producing organic vodka for Phillip’s Prairie Organic Spirits, which requires meeting organic certification requirements for ingredients and handling. Friese describes the diversity as like having three separate processes: fuel ethanol, industrial and organic. In 2002, the plant was expanded to 45 MMgy and when the boom years began in 2006, the board seriously considered doubling production by adding a second, ICM-
design plant alongside the existing facility. “We pulled the plug on that when we realized the industry had more capacity under construction that was online,” Thompson says, recalling that at the time, national production was about 6 billion gallons with an equal amount under construction. The board and management rightly figured once those new gallons came online, some facilities would get in trouble, although no one anticipated the economic downturn that multiplied the impact. CVEC joined other
partners in RPMG to form Guardian Energy and buy the never-run Janesville, Minnesota, plant out of the VeraSun bankruptcy proceedings. Later, they would participate in two other Guardian Energy investments in ethanol plants in Hankinson, North Dakota, and Lima, Ohio. Some years, the investments in RPMG, Guardian Energy and product diversification have contributed more to the bottom line for the company than CVEC’s fuel ethanol production, the board members will tell you. All told, the
AUGUST 2016 | Ethanol Producer Magazine | 47
TEAM PURPLE: CVEC employees were easy to spot at the anniversary celebration in their purple shirts. Together, they keep the 20-year-old plant, seen in back, operating smoothly. PHOTO: TIMOTHY BAKKEN
ANNIVERSARY
ROI For every
$1 invested,
original investors received
$11.70
company has seen 19 profitable years out of 20. Over the years, the company has been among the leaders in the industry, lobbying in the Minnesota legislature to get one of the first state mandates, lobbying in Washington for the renewable fuel standards, being among the first plants to offer direct E85 sales from the plant and among the first adopters of corn oil extraction. Not all innovations were successful in the long run, however. The company invested in Frontline BioEnergy LLC and built a gasification unit to power the plant from biomass. It
Efficiency Improvements
Safety 780 days
without an incident 4,400 days without a lost- me incident
1996 2016
Gal/bu 2.57 2.85 Btu/gal 35,000 27,000
made sense when natural gas prices were high, but sits idle since natural gas prices plummeted. Capital investments continue. A year ago more distillation capacity was added. This past winter a new boiler was installed and this summer a new water cooling system is under construction. â&#x20AC;&#x153;We want to keep this plant as new and up-to-date as possible,â&#x20AC;? Tolifson says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re a very active board,â&#x20AC;? Thompson says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve had other industry people tell us weâ&#x20AC;&#x2122;re among the most active, but we try not to micromanage.â&#x20AC;? The boardâ&#x20AC;&#x2122;s goal
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has been to think long term and look for ways to grow the company, while paying out as much as possible in dividends. â&#x20AC;&#x153;Never be complacent,â&#x20AC;? he says. â&#x20AC;&#x153;No matter how good things are going, weâ&#x20AC;&#x2122;re always looking for the next thing.â&#x20AC;? Another important factor is the right attitude. â&#x20AC;&#x153;What makes the company successful is that we have a lot of people saying weâ&#x20AC;&#x2122;ll make it work, instead of people who say it wonâ&#x20AC;&#x2122;t work.â&#x20AC;? Author: Susanne Retka Schill Managing Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922
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CLEARING THE AIR
Repeat After Me: High Octane, Low Carbon By Dave VanderGriend
The signs are everywhere highlighting our product and how it can find its true value as an octane enhancer while lowering carbon emissions.
Using our research at the Urban Air Initiative and in conjunction with our industry trade groups, we have been banging on the U.S. EPA's door for years for recognition that octane matters. It matters in terms of emissions, performance, fuel economy and cost. And now, with a global emphasis on lowering CO2 and greenhouse gases, octane matters even more when it comes to reducing carbon. This is not an incidental value, or a throw-in to ethanol's portfolio. It needs to be a core component of our value proposition going forward. The auto industry is facing a double-edged sword in meeting tough new mileage and carbon standards. But, the good news is that help could be on the way in the form of higher ethanol blends. Higher octane fuels allow automakers to make small-bore, highcompression engines that can achieve impressive efficiency gains. The challenge is to do so while also reducing carbon tailpipe emissions. If that octane comes from the oil barrel, there will be problems. On the other hand, ethanol blends in the 25 to 30 percent range can provide a premium fuel with a significantly lower carbon footprint and reduced emissions. A 92 to 94 octane at the pump opens a world of possibilities; achieving that level should be among our industry’s top priorities. A recent U.S. DOE report indicated more than 80 percent of new cars by 2020 will be turbocharged to allow for downsizing while maintaining performance and emissions. Again, that only works with a high-octane, low-carbon fuel. OK, so let’s go make high-octane fuel, right? Well, it’s not quite that simple, although it should be. As usual, the shadow falling over us is cast by our friends at the EPA. The EPA’s regulatory roadblocks such as the RVP restriction, MOVES model and certification fuels, to name just a few, are making it difficult for higher ethanol blends to enter the market. Plus, what makes no sense is the failure of the EPA to consider octane and ethanol in order to meet mileage and carbon reduction rules. Before signing onto the mileage and carbon changes, the auto industry insisted that the EPA conduct a midcourse evaluation (MTE)
50 | Ethanol Producer Magazine | AUGUST 2016
for the 2022-’25 period to reassess the viability of the targets. That process has begun, and what is frustrating to us is that EPA is insisting that the evaluation be limited to vehicle technologies and not include the fuel that powers these engines. The EPA assumes a world of continued 85 and 87 octane, when the auto industry has been pleading for higher octane fuels for years. Our work at Urban Air, in regular consultation with the auto industry, confirms we can achieve huge gains in mileage while reducing carbon through higher ethanol blends. The EPA needs to make that part of the discussion. What purpose is served by putting blinders on to a practical solution that is readily available? Studies by Ford and others have determined that E30 high-octane fuel would allow increased fuel efficiency and reduced tailpipe carbon emissions by 7 percent each. This is an immediately available and easily adopted technology requiring little, if any, change in consumer driving and fueling habits with no cost to taxpayers. In addition, numerous USDA studies confirm that high-yield corn acres sequester substantially more carbon than previously believed. New data suggests that corn ethanol’s carbon footprint is 50 to 80 percent smaller than gasoline and shrinking, while gasoline's carbon footprint is growing. For that reason, I am very supportive of a new initiative called the High Octane Low Carbon Alliance, which is an effort initiated by UAI and includes organizations such as ICM, RFA, National Corn, CFDC, Fuel Freedom Foundation and others to work with Tom Daschle to ensure we are part of those discussions. The icing on the cake would be, after years of requesting, the EPA updates its lifecycle analysis of corn ethanol, accurately showing our ability to significantly reduce our fuel’s carbon intensity.
Author: David VanderGriend CEO, ICM Inc., President, Urban Air Initiative DaveV@icminc.com 316-796-0900
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BUSINESS MATTERS
Globalization of Ethanol Impacts US Industry By Ryan Strickland
It’s a big world out there and ethanol is primed to explore it—finding new markets through competitive pricing, high octane and low-carbon advantages that no other fuel on the planet today can match. The proliferation of international ethanol trade during the
past decade has been impressive to watch. The current global market for ethanol stands at 30 billion gallons, with 1.2 billion gallons trading hands overseas. There is no denying the globalization of ethanol that is taking place and the impact it has on U.S. production margins. The U.S. has been a net exporter of ethanol since 2010. With 15 billion gallons of annualized production and 14.2 billion gallons of domestic demand, it’s clear that growing export markets should be a primary focus for our industry. Mandated foreign markets short on domestic production are allowing for a ratable flow. However, growth opportunities for our industry lie where economics, environment and relationships are the deciding factors. In nonmandated markets, price and octane are the primary selling points for U.S. ethanol. Ethanol is an octane booster for gasoline as well an attractive option in programs to reduce greenhouse gas emissions. Although the U.S. continues to be the world’s low-cost ethanol producer, the massive sell off in crude oil prices has reduced year-overyear flows. Even in the midst of oil’s deepest downturn in decades, ethanol cargoes continue to be booked, highlighting the value placed on ethanol’s octane. Roughly 40 million gallons per month are ratably exported to mandated markets, primarily Canada and the Philippines. Nonratable, mandated countries that offer the greatest potential for U.S. exports include Brazil, India and China. Brazil has one of the most progressive ethanol mandates of any nation and is the second-largest ethanol producer in the world and, thus, is uniquely positioned to influence global ethanol trade. Brazil is also the largest sugar producer in the world. Expectations for a global deficit have spiked sugar prices to a four-year high, resulting in sugarcane mills shifting production to sugar in an attempt to capture higher earnings. This shift in the supply mix is expected to limit or reduce ethanol production for the current crushing season. This impending
52 | Ethanol Producer Magazine | AUGUST 2016
vacuum offers an opportunity for the U.S. ethanol industry to fill Brazil’s shortfall, as well as displace a portion of Brazil’s market share abroad— either of which would dynamically support U.S. ethanol fundamentals and margin. One of the world’s fastest growing economies, India is set to overtake Japan as the world’s third-biggest consumer of oil this year with an annual economic growth of 7 to 8 percent. The government is investing $14 billion in 2016-’17 to expand and improve the country’s road network and infrastructure. Sales of passenger cars and utility vehicles are expected to grow by as much as 12 percent in the next fiscal year. Recent indications from India’s government point to increasing the blend rate from 5 to 10 percent in coming years and actually enforcing it, which historically has not been done. India’s domestic production currently is enough to meet beverage demand and a portion of the fuel and chemical markets as well. While India does not allow imports of fuel ethanol, U.S. ethanol fills the deficit in chemical usage. If India moves to a 10 percent fuel mandate, the U.S. stands ready to help fill any resulting ethanol shortfall. In late 2015, China rapidly emerged as one of the largest ethanol U.S. export markets. Although volumes were substantial through April, it appears China will not be a ratable buyer, primarily driven by corn policy. Instead of buying corn at a high fixed price for its state reserves, the government announced it will allow markets to set prices for the grain and subsidize farmers directly. This move is set to close the import arbitrage from the U.S. in the short term. However, if the government intends to enforce its current E10 mandate, or expand it nationwide, China will likely need to import as it is opposed to the depletion of corn stockpiles. Domestic employment and social stability are the primary policy drivers for China’s government, which frames the party’s negative view of imports. Nonetheless, air pollution mitigation is increasingly becoming a strong driver to expanding ethanol blending.
Author: Ryan Strickland Commercial Manager, Alliance Marketing, Eco-Energy ryans@eco-energy.com 615-786-0783
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