July 2011 Ethanol Producer Magazine by BBI International

INSIDE: VARIABLE TAX INCENTIVE EXAMINED JULY 2011

Cloverdale

Back Running

Full Bore Poet’s First Acquisition Gets Extensive Retrofitting Page 52

ALSO

Conversing with NASCAR’s CEO Page 46

Reviewing a Year of Restarts and Acquisitions Page 58

Benchmarking Industry Performance Page 68

A Look at Brazil’s Ethanol Challenge Page 78

www.ethanolproducer.com

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contents

features

JuLY issue 2011 VOL. 19 ISSUE 7

Q&A

PROFILE

A conversation with NASCAR’s Brian France. By Holly Jessen

$30 million in retrofits brings plant up to Poet standards By Susanne Retka Schill

The France Factor

The Poetization of Cloverdale

PRODUCTION

INDUSTRY

Restarts and acquisitions mark the year in this ethanol production update. By Holly Jessen

Benchmarking report offers glimpse of industry performance. By Holly Jessen

Industry on the Move

Taking the Pulse of the Industry

78 - BRAZIL

104 - EVENT

Ethanol’s market share is enviable, but Brazil’s industry currently struggles. By Kris Bevill

Industry leaders build collaboration in renewable energy policy work. By Erin Voegele

Growing Pains

7 Associations, 1 Goal

96 - INCENTIVES

Setting the Net

A variable incentive, other options considered in VEETC reform. By Kris Bevill

90 - RUSSIA

On the Brink of Sweeping Change

Russia makes plans to modernize and expand its ethanol industry. By Eugene Gerden

JULY 2011

Cloverdale

Back Running

Full Bore Poet’s First Acquisition Gets Extensive Retrofitting Page 52

ALSO

Conversing with NASCAR’s CEO Page 46

Reviewing a Year of Restarts and Acquisitions Page 58

Benchmarking Industry Performance Page 68

A Look at Brazil’s Ethanol Challenge Page 78

www.ethanolproducer.com

4 | Ethanol Producer Magazine | JuLY 2011

On The Cover

INSIDE: VARIABLE TAX INCENTIVE EXAMINED

Dave Brooks is general manager of Poet Biorefining-Cloveredale (Ind.). PHOTO: SHAWN WILLIAMS

contents

CONTRIBUTIONS 112

JuLY issue 2011 VOL. 19 ISSUE 7

118

DEPARTMENTS 8

Editor’s Note

Another Big One By Susanne Retka Schill

14 The Way I See It

ANTIMICROBIAL

Controlling Bacteria During Corn Mash Fermentation

Results from a case study using oxidizers to replace antibiotics are positive. By Reed Semenza

INVESTMENT

2011 Threatens to Repeat 2008-’09 in Ethanol Economics Tough choices face plants with high debt loads. By Rob Carringer

130

Changes By Mike Bryan

15 Events Calendar

Upcoming Conferences & Trade Shows

16 View From the Hill

124

Tweaks and Major

Ethanol’s Proven Power in

Lowering Gas Prices By bob dinneen

18 Drive

Should Oil Keep its Crown?

By tom buis

20 Grassroots Voice

FINANCE

Plant Profitability: Back to Basics

As margins tighten, producers revert to timetested methods By James K. Schmidt

ISOBUTANOL

The Ethanol Industry and Gevo’s Vision of the Future Isobutanol is the natural next step in the evolution of the fermentation alcohol business. By Patrick Gruber

134

138

Invitation to Attend ACE’s

24th Annual Conference By Brian Jennings

22 Europe Calling

Closer to Sustainable

Biofuels By Rob Vierhout

24 Taking Stalk

A Sweet Opportunity for

Biofuels By Florentino Lopez

26 Business Matters

Export Incentive Awaits

your Application By Donna Funk

28 Business Briefs AUTOMATION

HUMAN RESOURCES

Integrating controls for energy and material flow improves efficiency, bottom line. By Maina Macharia

More opportunities than challenges presented when managers move from big to smaller companies. By Patrick Ropella

Plant-wide Optimization Solution Uses Unified, Integrated Control

Jumping into Smaller Ponds

Ethanol Producer Magazine: (USPS No. 023-974) July 2011, Vol. 19, Issue 7. Ethanol Producer Magazine is published monthly. 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.

6 | Ethanol Producer Magazine | JuLY 2011

30 Commodities Report 34 Distilled 142 Marketplace 146 Ad Index

editor’s note

The July issue of Ethanol Producer Magazine is the biggest of the year. Being delivered to the biggest ethanol

ANOTHER BIG ONE Susanne Retka Schill, Editor sretkaschill@bbiinternational.com

EDITORIAL EDITOR Susanne Retka Schill sretkaschill@bbiinternational.com

industry event of the year, the International Fuel Ethanol Workshop & Expo, it is an attractive vehicle for advertisers. Also inserted this month is the first issue of Distillers Grain Production & Markets—a revival of the old Distillers Grains Quarterly, this time as a twice-yearly supplement. It’s a huge effort for a small staff to produce the big summer issues, but we get a lot of satisfaction from the results. It’s great to be able to present features and contributions on a range of subjects written by both our staff and the great contributing writers who frequent our pages. We tease each other about having become ethanol nerds. Who else would get excited about benchmarking data or the latest, cogent analysis of ethanol policy, both domestic and international? When I tell friends and family about my job, I generally say that I know more about ethanol than anybody else wants to hear—unless you know something about ethanol, in which case I know little, and can’t come close to meeting your need for information. Thus, having a month with many stories from and about many ethanol experts feels downright good. Our cover feature comes from my trip to Indiana earlier this year for the grand re-opening of the ethanol plant at Cloverdale. We’re pleased that many of you who are able to attend the tour at the end of FEW will get a chance to visit the plant and see for yourself the retrofitted plant. We thank Poet for agreeing to host the tour. In addition to the features written by the EPM staff (as noted by their pictures below), we have a report from Erin Voegele, an associate editor for our sister magazine, Biorefining Magazine, about a power-packed panel at the International Biomass Conference & Expo held early in May. A freelance writer’s report on the Russia ethanol industry’s potential rounds out the line-up. We all know that those reading this at the FEW will find precious little time to actually sit down and read—there are far too many people to see and booths to visit at the expo. Tuck it into the top level to read on the trip home. We hope you will find it interesting, educational and, occasionally, even thought provoking.

ASSOCIATE EDITORS Holly Jessen hjessen@bbiinternational.com Kris Bevill kbevill@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Lindsey Noble lnoble@bbiinternational.com

PUBLISHING CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com

SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Chip Shereck cshereck@bbiinternational.com Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com Nick Jensen njensen@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com Senior Marketing Manager John Nelson jnelson@bbiinternational.com

For industry news.

EDITORIAL BOARD Mike Jerke Jeremy Wilhelm Commonwealth Agri-Energy LLC Mick Henderson Corn Plus LLLP Keith Kor Golden Grain Energy LLC Walter Wendland Chippewa Valley Ethanol Co. LLLP

Associate Editors Kris Bevill turns her gift for analysis in this issue to the prospects for a variable tax incentive for the U.S. ethanol industry and a closer look at the Brazil ethanol industry.

Cilion Inc.

Holly Jessen digs into the details of the changes in the ethanol industry since last summer’s production issue, tracking down the latest information on the deals of the year. She also discusses some most interesting data gathered in a benchmarking survey of the industry.

Neal Jakel Illinois River Energy LLC Bert Farrish Lifeline Foods LLC Eric Mosebey Lincolnland Agri-Energy LLC Steve Roe Little Sioux Corn Processors LP Bernie Punt Siouxland Energy & Livestock Co-op

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at (701) 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 (701) 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 e-mail to sretkashill@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

Please recycle this magazine and remove inserts or samples before recycling TM

8 | Ethanol Producer Magazine | JuLY 2011

JULY 2011 | Ethanol Producer Magazine | 9

Visit us at FEW booth 619

Put BetaTecÂŽ natural hop extracts to work in your fermentation process to replace antibiotics and enhance yeast propagation. IsoStabÂŽ is the natural way to effectively control gram-positive bacteria while eliminating antibiotics and harsh chemicals. Plus, antibiotic-free DDGS adds value to your co-products. VitaHopÂŽ Silver yeast nutrient enhances yeast performance and vitality, inducing faster fermentations and larger yields. Combined with BetaTecÂŽ fermentation expertise and training, these technologies will significantly increase your plantâ&#x20AC;&#x2122;s efficiency. BetaTecÂŽâ&#x20AC;Śthe natural hop to higher profits. For more information specific to fuel ethanol producers, visit www.bthp.info.

10 | Ethanol Producer Magazine | JuLY 2011

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The New Ethanol. Refined, retailed, and rolling across America now.

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the way i see it

events calendar

Tweaks and Major Steps

International Biorefining Conference & Trade Show September 14-16, 2011 Hilton Americas – Houston | Houston, Texas The International Biorefining Conference & Trade Show brings together agricultural, forestry, waste, and petrochemical professionals to explore the value-added opportunities awaiting them and their organizations within the quickly maturing biorefining industry. Register by August 3rd and save $200 off conference registration. (866) 746-8385 www.biorefiningconference.com

By Mike Bryan

Technological advancement, that’s what it’s been about since the first drop of fuel ethanol was produced. It’s about finding new ways to produce ethanol better, faster, cheaper, with less environmental impact. All one has to do is read this publication to begin to get a sense of the magnitude of change that is happening in this industry. Many of the changes in production efficiency are tweaks to the system, made by the men and women who work in the plants every day. Changes that shave a penny here and a penny there off the cost of production, but over the years, these small steps, often nearly unperceivable on the surface, add up to major cost reductions. However, you can be assured that major step-changes are also happening in parallel with the tweaks. For example, consider new cooling tower technologies that substantially reduce evaporative losses. Water loss from cooling towers accounts for 53 percent of a plant’s total water consumption and the dryer for the distillers grains accounts for 42 percent. Technology is being developed that could cost-effectively capture cooling tower and dryer water vapors, greatly

14 | Ethanol Producer Magazine | JuLY 2011

reducing these evaporative losses. Additionally, ethanol plants are continually improving their ability to recycle various condensate streams. Water use in ethanol production has been reduced 48 percent in just the last 10 years. That’s a major economic and environmental step-change. On another front, membrane technology will be increasingly incorporated into first-generation ethanol production and will certainly play a major role in second-generation ethanol. The removal of water in the ethanol process through the use of membranes will greatly

production efficiencies, other technologies are being created on a separate, but parallel, track that will provide major step changes for new and existing facilities. From reducing energy costs, to improving efficiencies, and creating a smaller and smaller environmental footprint, ethanol production has achieved, in a relatively short time span, what few other industries have. If necessity is the mother of invention, then the evolving needs of the ethanol industry have clearly demonstrated that those who work in plants and those who provide step-change

reduce or eliminate the need for costly, energy-intensive evaporators, and will do so more cost effectively and with far less environmental impact. In growing numbers of plants, monitoring the counts, health and activity of yeast is being upgraded from timeconsuming microscopic analysis to automated systems that are faster and provide a broader range of analysis. Anaerobic digestion, while not a new technology, is helping improve the bottom line profits of some ethanol plants by turning thin stillage and other biomass materials into biogas to help power the plant. So while plant personnel are continually tweaking the system to improve

technology, are up to the challenge. That’s the way I see it.

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

Northeast Biomass Conference & Trade Show October 11-13, 2011 Westin Place Hotel | Pittsburgh, Pennsylvania

Houston: Epicenter of the Refining World

9/14

Biorefining will take the stage in Houston this fall for the three day, 2011 International Biorefining Conference & Trade Show. Set for Sept. 14-16, the conference will bring together hundreds of industry professionals to discuss all things advanced. Organized by BBI International and produced by EPM’s sister magazine, Biorefining Magazine, the conference will offer a comprehensive look into advanced biomass refining including technology scaleup, project finance, policy, feedstock use and more. Geared towards industrial, petroleum and agribusiness ventures, the program will highlight advanced biofuels development and distribution, biobased platform chemicals, polymers and other renewable molecules. The conference will be held at Hilton Americas. The educational sessions will appeal to those in finance (venture, private and institutional equity), petroleum and petrochemical refining, pulp and paper milling, biofuels and biobased products manufacturing and project development, agricultural processing and waste management, and will also be of interest to professionals from auto manufacturing, aviation, government/military, and research and academia. Starting with industry tours of the region’s most innovative bioprojects and facilities, the conference will cover the biggest issues in the biorefining sector today. Included in the discussion will be petroleum industry perspectives on biorefining, converting existing industrial assets into next-generation biorefineries; forging symbiotic relationships; aviation and military perspectives on biobased jet fuel; and among others, the global market outlook for biobased fuels and chemicals. For those startups seeking a foothold in the global industry, the conference will also cover venture capital and private equity viewpoints and overcoming the barriers to market entry. In 2011, there’s one place and one event that will usher in the next phase of the surging biorefinery industry, and for three days in September, you could be there, at the 2011 International Biorefining Conference & Trade Show to listen and learn how the next generation of advanced biofuels and biobased chemicals is succeeding now.

With an exclusive focus on biomass utilization in the Northeast – from Maryland to Maine – the Northeast Biomass Conference & Trade Show will connect current and future producers of biomassderived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utilities, technology providers, equipment manufacturers, investors and policymakers. (866) 746-8385 www.biomassconference.com/northeast

Algae Biomass Summit October 25-27, 2011 Hyatt Regency Minneapolis | Minneapolis, Minnesota Organized by the Algae Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, 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 algae industries. (866) 746-8385 www.algaebiomasssummit.org

Southeast Biomass Conference & Trade Show November 1-3, 2011 Hyatt Regency Atlanta | Atlanta, Georgia With an exclusive focus on biomass utilization in the Southeast – from the Virginias to the Gulf Coast – the Southeast Biomass Conference & Trade Show will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers. Speaker abstracts are being accepted online through July 15th. (701) 746-8385 www.biomassconference.com/southeast JULY 2011 | Ethanol Producer Magazine | 15

view from the hill

Ethanol’s Proven Power in Lowering Gas Prices

Montréal

By Bob Dinneen

InterContinental Montréal

September 18–23, 2011 Gas prices are a hot, hot topic again. Not simply because summer driving season has officially begun, but because of the economic pain that high gas prices are exacting across America on small businesses and family budgets. Elected officials in Washington are beginning to scramble and are looking for ways to quickly address the pain and avoid a political backlash. Analysts at Goldman Sachs and JPMorgan Chase are predicting that by mid-summer the price of oil will be near or higher than $130 a barrel—a number far too close to the July 2008 record peak of $145 a barrel. What does this mean for drivers? Gas prices may rise to their highest levels yet this year. Goldman Sachs has predicted $5 a gallon. And yet in the midst of this economic storm, ethanol is still not getting the credit it deserves for the proven impact it has had in lowering prices thus far or for the fact it is the only solution that is available right here, right now. The increased use of ethanol reduced wholesale gasoline prices by an average of 89 cents per gallon in 2010, according to a new study conducted by economists at Iowa State University and the University of

Wisconsin and released by the Center for Agricultural and Rural Development. The new analysis, an update to a 2009 energy policy paper authored by professors Dermot Hayes and Xiaodong Du, also found that the growth in ethanol production reduced gasoline prices by an average of 25 cents, or 16 percent, over the entire decade of 2000-’10. Further, the study determined that gas prices could double if ethanol production came to an immediate halt. According to the new CARD analysis, the marginal impact of ethanol on gasoline prices in 2010 was even more pronounced, as oil prices rose and ethanol production expanded to 10 percent of the gasoline pool. In 2010 alone, based on data from the Federal Highway Administration, Environmental Protection Agency and Department of Energy, the average household consumed 900 gallons of gasoline at an average price of $2.74 per gallon. That means the average family’s annual gasoline bill was $2,470, but it would have been closer to $3,270 without ethanol. Ethanol reduced the average American household’s gasoline bill by more than $800. The new study, which was sponsored by RFA, also examined what would happen to U.S. gasoline prices if ethanol production came to an immediate halt. The authors found that, “Under a very wide range of

parameters, the estimated gasoline price increase would be of historic proportions, ranging from 41 to 92 percent.” At today’s prices, that means gasoline prices would increase from roughly $4 per gallon to $5.60 to $7.70. Americans deserve better than what they are getting. They simply can’t afford to pay more at the pump. They deserve lower prices, cleaner fuel and alternatives to foreign oil. If 200 small businesses producing more than 13 billion gallons of renewable fuel and sustaining nearly 400,000 jobs across the economy aren’t reasons enough to support ethanol, then ethanol’s proven power to lower gas prices right here, right now should be. Author: Bob Dinneen President and CEO of the Renewable Fuels Association (202) 289-3835

A Tradition of Industry Education For 30 years, The Alcohol School has been educating fuel ethanol and distilled beverage producers in the science of alcohol production. The weeklong program is designed for lab, plant, and management personnel and is organized around lectures, laboratory demonstrations, seminars, and plant visits. The program will cover the process of ethanol and beverage alcohol production from milling and mash preparation through fermentation and distillation. Enzyme usage, yeast biology, bacterial contamination and control will also be discussed, along with other issues currently affecting both industries.

For More Information Registration is open to fuel ethanol, distilled beverage, and allied industries. Now is a good time to invest in education. Registration materials and additional information are available online at www.ethanoltech.com

6120 W Douglas Ave | Milwaukee WI 53218 USA +1 414 393-0410 | Fax +1 414 358-8012 16 | Ethanol Producer Magazine | JuLY 2011

DRIVE

Don’t be a prisoner to your pH.

Should Oil Keep its Crown? By Tom Buis

To the vast majority of Americans, their fuel is an invisible product. They don’t really see it; they see the signs and prices hanging from the canopies of the filling stations. Ethanol is even more invisible; there are no ‘ethanol’ stations, only ‘gas’ stations. This is just one way that Big Oil keeps its place as king. We in the fuel business think of regulatory and legislative problems, and market development programs, on a massive scale. That’s not the way most Americans think of keeping their fuel tank filled: they think dollars and cents, and which of their local retailers has the best price for filling the family minivan or the car in which they commute to work. There are many hurdles that prevent ethanol from gaining a greater share of the American fuels market, and the fact that we are an invisible product is just one of them. Growth Energy is on its way to changing that. Whether it is our American Ethanol marketing partnership with NASCAR—an effort to promote ethanol to NASCAR’s 80 million loyal fans—or our Fueling Freedom proposal to build out the flex-fuel pumps

and other infrastructure to deliver ethanol to the market, Growth Energy is devoted to putting more ethanol within reach of more Americans who want to displace foreign oil. The American Ethanol marketing partnership offers a tremendous opportunity, and has already resulted in some of the best media exposure ethanol has seen, through TV broadcasts of the racing season and in the newspapers of those communities that host NASCAR speedways. Every positive newspaper or TV story is an opportunity for us to demonstrate that NASCAR’s use of E15 as a racing fuel proves that E15 is good enough for today’s street cars. The American Ethanol program puts ethanol into Victory Lane each weekend. And with the budget climate in Washington squeezing every possible source for reducing federal outlays, it only makes sense to phase out the Volumetric Ethanol Excise Tax Credit. We propose, through Fueling Freedom, to redirect the 45-cent-a-gallon VEETC toward a tax credit that would encourage retailers to install flex-fuel pumps. In states like North Dakota, South Dakota and others where we have seen a rapid build-up of flex-fuel pumps, we have seen the market react by buying more mid-level ethanol blends. North Dakota’s ethanol sales have more than doubled since the state government

began a program to encourage flex-fuel pump installations. It is time we put ethanol front and center in the minds of the public. It should not be an invisible product any longer. The American Ethanol partnership with NASCAR puts the American Ethanol logo on millions of TVs every weekend. Growth Energy’s Fueling Freedom proposal will put mid-level ethanol blends into the marketplace; more Americans will want to drive flex-fuel vehicles and fill up at flex-fuel filling stations. At Growth Energy, we are changing perceptions of ethanol for the better. These are just some of the ways we are letting the American public know that Big Oil doesn’t need to be king. Author: Tom Buis CEO, Growth Energy (202)545-4000 tbuis@growthenergy.org

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18 | Ethanol Producer Magazine | JuLY 2011

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GRASSROOTS vOICE

Right Feedstock. Right Value. Invitation to Attend ACE’s 24th Annual Conference By Brian Jennings

The 24th annual conference of the American Coalition for Ethanol takes place in Des Moines, Iowa, this year and I invite you to mark your calendars and join hundreds of others in the ethanol industry during our event Aug. 2224. “Rooted in America,” this year’s conference theme, illustrates the grassroots role ACE members play in the industry and the way American ethanol continues to serve our country well. By far the ethanol industry’s most reasonably-priced event, the ACE conference delivers valuable and useful information to participants. This interactive meeting is ideal for ethanol plant board members, management and staff, investors, employees of goods and service providers to the industry, farmers, students, and any and all individuals interested in catching up on what’s happening in the industry, developing the knowledge and skills needed to promote the industry, and networking with other ethanol industry professionals and advocates. Keeping with ACE tradition, a number of high-level politicians are expected to

20 | Ethanol Producer Magazine | JuLY 2011

address attendees. Among the invited are President Barack Obama, key GOP Presidential candidates, long-time ethanol supporters and Iowa Sens. Tom Harkin and Chuck Grassley, Iowa Gov. Terry Branstad, Secretary of Agriculture Tom Vilsack, and others. Given the high stakes of ethanol policy reform in Washington, we look forward to hearing from these policymakers and their outlook for the future of the industry. Ethanol plant board members can look forward to breakout sessions on the top financial and legal challenges facing board members today. Board members will also have an opportunity to develop their leadership abilities: breakout sessions and general session panels will focus on building attendees’ familiarity with industry hot topics and how to be an advocate for the industry. Many experts and leaders will address attendees throughout the two-day conference, but the real experts you’ll hear from are the backbone and strength of the industry: ACE grassroots members. A number of plant board members, managers and employees will participate as speakers, bringing you the benefit of their firsthand experience. From trips to D.C. to marketing a product, these members will share their stories of how they work to support the industry on a daily basis. Breakout sessions and general sessions will also cover topics such as

managing margins, distillers grains, working with retailers to install blender pumps, EPA greenhouse gas regulations and RINs, exporting ethanol, E15 implementation, NASCAR, and more. Visit www. ethanol.org to view a list of current topics and speakers. Thanks to our sponsors, including BBI International, for supporting our event. We’re proud to partner with BBI to support the FEW as well. If your company would like to have a presence at the 24th Ethanol Conference, a limited number of sponsorship opportunities are available. Please visit the ACE website, www. ethanol.org, to register. We look forward to seeing you at the Downtown Marriott in Des Moines, Aug. 22-24. Author: Brian Jennings, Executive Vice President, American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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Europe Calling

Closer to Sustainable Biofuels

Since mid-December, all EU member states should have been in compliance with the EU rules on biofuels. Having unanimously

adopted the directive in early 2009, one would think all 27 countries would have transposed the European rules into national laws by now. The reality is that the majority of the countries haven’t done it yet, and we don’t really know why. Besides the fact that in general, countries are slow in transposing EU law, in this case it might also be because of the complexity or novelty. In any case, it causes irritation and, above all, legal and market uncertainty at the level of market operators. The biofuel segment of the Renewable Energy Directive seems to be plagued by delays. Clarification documents, as required by the law, came out months late and did not provide the clarification the industry was looking for. Now, two years after the law is published, there still is no clarification on important provisions such as the definition of “highly biodiverse grasslands.” Equally disturbing for the industry was the delay in the recognition of voluntary schemes. According to Article 18 of the law, any stakeholder, be it a company, industry association, consultancy or nongovernmental organizations (NGOs) can develop a scheme that demonstrates that a particular consignment of biofuel

complies with the mandatory sustainability criteria as mentioned in Article 17. These so-called voluntary schemes have legal meaning only if the EU executive authority, better known as the European Commission, has approved them. More than one year ago already, the first schemes were submitted for verification and approval. The EU industry has always been anxious to demonstrate its willingness to comply with sustainability rules on biofuels. A voluntary scheme provides a good opportunity to do this, and to avoid accusations that the industry is green washing. For the industry there was a sense of urgency that seemed to be totally lacking in those that promulgated the law. In the past 16 months, 16 schemes have been submitted and, finally, in late May the first seven got the green light from the European Commission. The 27 member states have also endorsed the seven schemes, audited and assessed by an external consultancy, and the package has been sent to the European Parliament. Once the information period is closed—20 days after publication in the EU Official Journal—the voluntary sustainability schemes have legal value. That should happen by early August. This step is tremendously important for biofuel producers. After all, a recognized scheme makes it possible to sell certified biofuel throughout the entire union. Member states can no longer keep biofuels out of their territory, even though they prefer stricter sustainability standards.

If a member state would not accept a biofuel certified according to a recognized voluntary scheme, asking for more evidence to demonstrate sustainability, it would be acting against one of the principles of the EU Treaty—free flow of goods—and could be sued for treaty noncompliance. Not everyone, however, welcomed the recognition of the first batch of seven schemes. A group of four NGOs went to the EU Court of Justice in late May, arguing they had been refused access to information about the voluntary schemes. It is the second time that this group of NGOs has tried to win its case by going to court. For me, it is obvious that these groups’ objective is to get biofuels out of the world—whatever it takes. Going to court over what should be welcomed is just another exercise in obtaining free publicity from those in the media who report any criticism on biofuel without questioning the source. Industry and regulators should not be distracted by this kind of cheap lobbying. If our objective is to have sustainable biofuels, we should welcome every move towards that goal. Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

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For more information, visit www.fermentis.com or email fermentis@lesaffre.fr 22 | Ethanol Producer Magazine | JuLY 2011

Graphic design s Marie RIO

By Robert Vierhout

taking stalk

Flexible Solutions for Processing Byproduct Streams in Biofuels Production

A Sweet Opportunity for Biofuels By Florentino Lopez

Evaporation & Crystallization Process Equipment

During the past few years, two words seem to be crossing the minds of many in the ethanol industry—sweet sorghum. Its versatility and potential as a green biofuel feedstock have many ethanol producers excited about the future of this “sweet” crop. Just like our dedication in promoting grain sorghum for biofuels production, the Sorghum Checkoff is now looking to the future to find the most profitable possibilities for all sectors of the sorghum industry. Sweet sorghum is offering new opportunities for biofuel production and biochemical producers every day. Unlike its grain sorghum cousin, sweet sorghum stands around 14 feet tall. Its composition is similar to that of sugar cane, but requires much less water to grow. For decades, sweet sorghum was mainly used to make syrup from the sweet juices stored in the stalk. Those same sweet juices make an attractive biofuel feedstock. From Texas and Florida to Oregon and Wisconsin, sweet sorghum can be grown just about anywhere. In warmer climates, sweet sorghum can potentially be harvested as many as two or three times a year, providing a constant supply for a variety of products, including biofuel.

24 | Ethanol Producer Magazine | JuLY 2011

Previous studies have determined sweet sorghum is a preferred energy crop because of its proven agronomic suitability for several regions, its high sugar content, and its ability to be easily inserted into crop rotation patterns. The Sorghum Checkoff and Louisiana State University are working to identify optimal management protocols related to planting and harvest decisions for using sweet sorghum as a biofuel crop. Sweet sorghum has potential as a ratoon crop, allowing multiple harvests from the same planting. It is imperative that we understand the impact of production practices before viable biofuels facilities can be developed. The Sorghum Checkoff is also funding research at LSU to determine if it is a profitable option to grow multiple crops per year and to identify the compatibility of sweet sorghum with other crops. This would make including sweet sorghum in a crop rotation a more profitable option for sorghum producers. And let’s not forget another important element of sweet sorghum biofuels production—bagasse. When the juice is extracted from sweet sorghum stalks, it leaves behind bagasse, a useful byproduct that can be made into cellulosic ethanol or burned to create green energy that could power homes and businesses. Bagasse also has the potential to be utilized as a livestock feed. The high levels of fiber in bagasse, combined with a protein supplement, have feed potential

for beef or dairy producers. There are also possibilities to use bagasse as a green fertilizer in fields. The possibilities for sweet sorghum continue to raise eyebrows of ethanol producers and farmers in many regions of the U.S. Its water sipping qualities, high production potential, ability to grow multiple crops per year, and versatile processing options make it an alluring choice for biofuels. The Sorghum Checkoff will continue working to determine the most valuable ways to grow and process sweet sorghum and bagasse. So, when ethanol producers are thinking “green” there’s no doubt that sweet sorghum can produce many “sweet” opportunities.

Author: Florentino Lopez Marketing Director, United Sorghum Checkoff Program (806) 687-8727 Florentino@sorghumcheckoff.com

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business matters

Export Incentive Awaits Your Application By Donna Funk

For manufacturers who sell products internationally, there are only a few export tax incentives in the U.S. that can benefit their company. The Interest Charge–Domestic International Sales Corp. is an export incentive that can offer a company up to a 20 percent lower tax rate for products sold internationally. Generally, the ordinary tax rate for exports of inventory items is 35 percent where the IC-DISC lowers this to 15 percent, an incredible strategy for selling a product in the international market. Under this tax strategy, the exporter pays commissions to the IC-DISC. The commissions are deductible as an ordinary business expense by the exporter. The IC-DISC then pays a qualified dividend to the shareholder(s) of the IC-DISC. So while the exporter receives a deduction for the commission expense utilizing the 35 percent tax rate, the shareholder(s) of the IC-DISC only pay a 15 percent tax rate on the income from the IC-DISC. The end result is a permanent tax saving for U.S. exporters and their shareholders of 20 percent of net export income. IC-DISC is time-sensitive because the benefits do not begin until a separate entity is in place and proper documentation of the relationship between

26 | Ethanol Producer Magazine | JuLY 2011

the manufacturer and the IC-DISC is executed. A manufacturer must establish a separate, domestic corporation, maintain separate bank accounts and accounting books and file a U.S. income tax return— though it generally pays no U.S. income taxes. This year alone, Kennedy and Coe has already helped at least three companies set up this structure. It is also important to note the Internal Revenue Service requires certain filings and elections be in place before a company can qualify. IC-DISC benefits are available on a go-forward basis, but not retroactively, which was the case with the former Extraterritorial Income Exclusion.

manufacturing clients to ensure they are set up correctly and continue to qualify year after year. To begin the process, a company should estimate its foreign sales and call its accounting partner to determine the estimated tax benefit and the next best steps. This estimate will help a company determine if the export incentive is something worth pursuing. Accounting firms with IC-DISC experience can help a client maximize tax savings and ensure benefits take place that are in compliance with IRS rules and regulations. As the U.S. Congress continues to discuss tax rates this spring, there is potential the capital gains tax rate

This means the longer a taxpayer waits to form an IC-DISC, the fewer benefits it will receive. Manufacturers who sell products destined for use internationally and directly export their products are solid candidates for the IC-DISC. This includes pass-through entities, privately held corporations and publicly traded companies. Architect and engineering firms working on products constructed abroad may also qualify for the incentive. In the right circumstances, distributors and wholesales and even business enterprises such as a feedlot may qualify. While the structure and calculations may appear to be straightforward, it is important to set up the entity and structure correctly from the beginning. Our 75-yearold accounting and consulting firm has handled numerous IC-DISC structures for

could change. These up-to-the minute details on tax code changes need to be thoroughly and constantly reviewed to keep current on IC-DISC. It is safe to say that the IC-DISC is one of only a few export incentives still available and not being aggressively attacked by the European Union. It can only help a company to apply for the tax benefits. Consult your tax consultant to take advantage of the potential 20 percent tax savings with IC-DISC.

We offer more than just chemistry — we deliver improved profitability. Armed with innovative chemistries and a thorough understanding of biorefining, Ashland is well positioned to help you operate more efficiently and profitably. Our state-of-the-art product portfolio for biorefineries includes: t 1SPDFTT 4PMVUJPOT – Corn oil extraction aids – Ethanol corrosion inhibitors – Liquid/solid separation aids t 8BUFS 5SFBUNFOU 4PMVUJPOT – Boiler water treatments – Cooling water treatments – Wastewater treatments To learn more, visit us online or stop by our booth at the International Fuel Ethanol Workshop & Expo. ashland.com

Author: Donna Funk Manager, Biofuels Group, Kenney and Coe LLC (800) 303-3241 funk@kcoe.com

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People, Partnerships & Deals

Todd Palmer has joined the law firm of Michael Best & Friedrich LLP as a partner in its Madison, Wis., office. He will lead the environmental Environmental Law law group within the New with Michael Best & Friedrich, Todd firm’s energy and Palmer has authored sustainability indussections of books on environmental law. try team. Throughout his 19-year career, Palmer has focused his practice on environmental law and in particular on assisting clients with the complexities of the Clean Air Act. Prior to joining Michael Best, Palmer worked as an environmental attorney and shareholder with the law firm of Dewitt, Ross & Stevens. While there, he successfully negotiated “Green Tier” agreements with the Wisconsin Department of Natural Resources. Merrick & Company named Robert Berglund vice president, international markets. He will be responsible for international growth strategies, with particular atInternational Markets tention on the firm’s After five years with Merrick, Robert four target markets Berglund serves on of energy, national its board of directors and will now focus on security, life sciences international market and sustainable infragrowth strategies. structure. The firm intends to expand its range of non-U.S. projects beyond the current business locations in both Canada, where Merrick has worked for five years, and in Mexico, where the firm has worked for the past 14 years. Most recently, Berglund served as business unit manager responsible for operations management of the energy, national security and life sciences projects. 28 | Ethanol Producer Magazine | JuLY 2011

Pat Foody Sr., founder of Ottawabased Iogen Corp., received the 2011 Raphael Katzen award from the Society of Industrial Microbiology. Foody was honored for his lifetime achievement in the commercialization of biofuels through the establishment and development of Iogen, and also for pioneering the development of the commercial advanced renewable fuels made from cellulose. “Raphael Katzen was a friend and a renewable fuel visionary and I am honored to receive this award,” Foody said in accepting the award. “I would like to accept the award on behalf of Iogen, and the team that Enzyme Pioneer Pat Foody Sr. received made cellulosic ethaan award named for nol happen.” In ophis old friend Ralph Katzen for his lifetime eration since 1974, achievements. Iogen also develops, manufactures and markets enzymes used to modify and improve the processing of natural fibers within the textile, animal feed and pulp and paper industries. Iogen partnered with Royal Dutch Shell to create Iogen Energy which began producing cellulosic ethanol at its Ottawa demonstration plant in 2004. Victaulic introduced Vic-Press, a pressto-connect pipe-joining system designed for off-the-shelf Schedule 10S stainless steel pipe. Biofuels applications include plant utility services such as potable water, oil, compressed air, noncombustible gases and general chemical services. Pipe is cut to size and deburred, marked for visual verification, and inserted into a lubricated coupling, fitting or valve. The handheld pressing tool is used to press the component onto the pipe-end, providing a positive mechanical interlock and creating a rigid, permanent, leak-tight joint. The Vic-Press system requires 70 percent fewer man hours than welding to install, and significantly reduces rework. No flame or arc is required as with welding.

Yokogawa Corp. of America has released a new series of meters and a new design of field wireless devices. The bidirectional digital wireless networks, based on the ISA100.11a standard, are suitable for monitoring, diagnostics and control. They run on explosion-proof batteries, and the company plans to develop easy-to-maintain solar batteries. The Dura Meter Series is an elapsed time meter designed for severe environmental conditions across multiple industries such as oil and gas, chemical, water treatment and food processing. It is water and dust resistant and is UL rated. Standard options include horizontal vs. vertical mounting, hours vs. minutes, reset vs. nonreset and voltage and frequency rating. The company also announced the release of version R9.04 of its Fast/Tools web-based SCADA system, its platform-independent process management software. Phenomenex Inc. expanded its international subsidiary network to serve India directly from a new office in Hyderabad. It will serve research communities throughout India with sales and service teams. Phenomenex is committed to developing novel analytical chemistry solutions that solve the separation and purification challenges of researchers in industrial, clinical, government and academic laboratories.

Fluid Components International introduced its advanced ST100 Series thermal mass flow meters in response to discussions with a wide range of instrument, process and plant engineers who wanted both more comprehensive measurement information as well as the flexibility to adapt to future plant and process control technology. The ST100 Flow Meter adapts with a plug-in card replacement that can be changed by plant technicians in the field. The comprehensive ST100 measures gas mass flow rate, total flow, temperature and pressure depending on the model family, storing up to five unique calibration groups to accommodate broad flow ranges, differing mixtures of the same gas and multiple gases.

Onset Computer Corp. introduced the Hobo UX120 Pulse Logger, a versatile, 4-channel energy data logger that combines the functionality of four separate data loggers into a single compact unit. The new data logger enables energy management professionals to easily track building energy consumption, equipment runtimes and water and gas flow rates, simultaneously measuring and recording pulse signals, events, state changes and runtimes. It is capable of storing up to 4 million measurements.

Poet Biorefining–Chancellor (S.D) received the 2010 Operation and Maintenance Wastewater Treatment Excellence award from the South Dakota Department of Environment and Natural Resources. The award honors outstanding operation of the wastewater system and compliance with surface water discharge permit in 2010. “Most people take wastewater treatment and disposal for granted, but properly operated wastewater treatment systems are a critical component in protecting public health and the environment from sewage and various pollutants in wastewater,” said DENR Secretary Steve Pirner. “Therefore, we all owe the owners and operators of these systems a huge thank you for a job well done.” Akin Gump Strauss Hauer & Feld LLP announced the addition of several attorneys to its renewable energy practice. Former Chadbourne & Parke LLP partners, Edward Zaelke, Adam Umanoff, Thomas Dupuis and Lloyd MacNeil will be moving into a new Los Angeles office. The team is a nationally recognized practice in project finance and the renewable energy industry. Umanoff and Zaelke will serve as co-chairs of the firm’s global project finance practice. Kerin Cantwell and Daniel Sinaiko have joined the firm’s project finance and renewable energy practice as partners in Los Angeles. They are being joined by five counsel including John Ha, Jennifer Lootens, David Markey, Matthew Nesburn and Bill Salamandrakis and five associates including Thomas Byrne, Tiffany Duong, Juliet Howland, Andrea Lucan and Sharona Toobian. All 16 attorneys previously practiced at Chadbourne & Parke.

Three product suppliers have joined the Rockwell Automation Encompass thirdparty product referencing program. ASD Inc., Advenco Consulting GmbH, and Nidec Shimpo Corp. join the more than 100 Encompass member companies who supplement Rockwell Automation installations in one of three ways: providing built-in connectivity to the Rockwell Automation Integrated Architecture system, offering a critical component necessary to a manufacturer’s application, or providing industry or application expertise using specialized product technology. Ashland Hercules Water Technologies, a commercial unit of Ashland Inc., now has a back-end corn oil extraction aid that it says will help ethanol producers capture up to three times more corn oil while also ending up with a higher-quality oil. “The customers we’ve worked with in developing this value-added product have documented a number of benefits from using the PTV M-5309 corn oil extraction aid,” said McCord Pankonen, global biorefining marketing manager, water technologies. “The real beauty of the product is that refiners don’t have to change their process.” The patentpending extraction aid is chemical rather than mechanical, and therefore requires no additional capital expenditure Share your industry briefs To be included in 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 fax information to (701) 7468385, or e-mail it to sretkaschill@bbiinternational.com. Please include your name and telephone number in all correspondence. JULY 2011 | Ethanol Producer Magazine | 29

commodities report

Regional Ethanol Prices Front Month Futures (AC) $2.660 REGION

SPOT

RACK

$2.8100

$2.99

Midwest

$2.66

$2.03

East Coast

$2.73

$2.99

West Coast

SOURCE: DTN

Natural Gas Report

DDGS Report

Natural gas prices: emotional vs. mathematical May 31—The press is full of stories celebrating the amazing potential of the new natural gas supply from shale formations across the U.S. Technological developments allow natural gas shale formations that once were not economically feasible to now be developable at relatively moderate costs. As a nation, we have moved from declining to increasing production and reserves. Moreover, these strong supply-side fundamentals are occurring at a time when demand is weak due to lagging economic growth. In light of this, one would expect that natural gas prices should be low—and generally they are. Natural gas prices have averaged roughly $4.25 per million Btu (MMBtu) over the past two years and the forward curve is not very steep for the next several years. Have we entered an era

when prices and volatility will be low? The emotional response tends to be yes. While we could very well be entering into a new golden era of low prices, it seems markets always find a way to surprise us. In order to take emotion out of our view of prices, U.S. Energy has developed models that compare current prices to expected prices based on several factors that have historically been strongly correlated with natural gas price movements. We have one long-term model that allows prices to move above $10 per MMBtu—levels seen just a few years ago. We have a second, shorter-term model giving different weights to some factors. Both models

By Casey Whelan

indicate that the market is somewhat undervalued. If the mathematical model is correct, we may see stronger prices than most expect. If emotion wins out, however, we could see prices generally decline as we move through the summer.

March vs. June Planting Intentions (in Million Acres)

Regional Gasoline Prices

Moving markets provide opportunities for plants, buyers BY SEAN BRODERICK May 27—Distillers grains still takes its lead from corn futures prices, yet is slow to move up or down. When the futures market oscillates severely, DDG will alternately be a good, or poor, value as a percentage of corn. Both plants and buyers have been taking advantage of the severe futures moves. Export markets have been very steady to Mexico, Canada and the container markets, but bulk exports are off. Last year, China and South Korea were the featured buyers in the bulk market, but this year, their numbers are off significantly. Containers are up to $30 per metric ton cheaper, delivered in most of Asia. South Korea is still rebuilding from hoof and mouth disease and Chinese traders are still nervous about the

dumping case initiated earlier. Interestingly, Europe has been purchasing bulk once again. Multiple poor crops and tenuous prospects this year have EU traders looking at options they haven’t checked in a while. Domestically, demand is strong. Although cattle and dairy sectors traditionally take the bulk of the DDGS, we have seen a strong surge in hog and poultry buying. Obviously, the corn price is incentivizing additional use. The escalating basis, particularly in the East, is creating conversations about the profit margins of both the poultry and Eastern ethanol plants. Rumors are swirling that some may slow down until the fall.

Front Month Futures Price (RBOB) $3.0920 REGION

SPOT

RACK

West Coast

$2.98

$3.22

Midwest

$3.30

$3.17

East Coast

$3.01

$3.11 SOURCE: DTN

DDGS Prices ($/ton) location

JUL 2011

JUN 2011

Minnesota

190

195

JuL 2010 100

Chicago

208

203

125

Buffalo, N.Y.

205

220

120

Central Calif.

257

244

163

Central Fla.

245

240

147 SOURCE: CHS Inc.

Corn Futures Prices Date

(July Futures, $/bushel)

High

Low

May 31, 2011

7.63 3/4

7.43

7.47 1/2

April 29, 2011

7.61 1/2

7.26

7.56 1/2

May 28, 2010

3.73

3.58

3.59 SOURCE: FCStone

Cash Sorghum Prices ($/bushel) LOCATION

Corn Report

Ethanol Report

Crop projections watched closely as season unfolds May 31—The USDA surprised the market in the May supply and demand report by increasing old crop corn carryout. Traders were expecting the report to generate a slight bullish tone. In addition, the report offered

the first look at the new crop scenario. Old crop corn carryout increased to 730 million bushels as domestic feed demand and export demand eased. Despite a weakening dollar, the government reduced corn exports to 1.9 billion bushels. March vs. June Planting Intentions (in Million Acres) New crop yield projected at 158.7 reflected slowerpaced plantings this spring. Total corn production was estimated at 13.505 billion bushels. Demand this year is expected to weaken to 13.355 billion bushels, compared to 13.450 billion bush-

30 | Ethanol Producer Magazine | JuLY 2011

BY JASON SAGEBIEL

els in the current marketing year and 13.066 billion bushels in 2009-’10. The demand of corn was lowered in the livestock feed sectors and exports by 50 and 100 million bushels respectively. Demand from the ethanol industry is expected to increase by 50 million bushels to 5.050 billion bushels, returning coproduct to the market equivalent to approximately 15 million bushels of corn. With the slow planting pace in areas of the Eastern Corn Belt and wet areas in the Northern Plains, planted acreage could easily decline from projections. In the chart, one can see that last year there was a decrease of 930,000 acres from the March to June report. This had been the largest decline since 1997 when 1.20 million acres were lost. This year may mirror last year’s decline.

Higher prices keep consumer buying subdued BY RICK KMENT May 31—At a time when gasoline prices are traditionally just hitting their summer stride, prices have fallen sharply on the wholesale market on the fears of spending cuts by consumers and uncertain times ahead. RBOB gasoline futures prices have fallen nearly 50 cents over the past three weeks, as increased gasoline stock levels and expected lower demand for gasoline has severely limited futures prices. With retail gasoline prices near $4 at many locations, the average consumer started adjusting spring and summer driving patterns. As this news settled on the market, widespread commercial and noncommercial liquidation developed, which pushed prices to $3 per gallon or lower. There is a disconnect between wholesale and retail prices for gasoline as rack and

spot prices are still holding previous support, based on expected moderate demand through the end of May. Increased pressure on price levels was expected in June. Ethanol futures remained incredibly stable through May as corn production concerns continued to keep the corn market elevated, and the cost of ethanol production high. This kept ethanol prices from following gasoline, although the discount that ethanol holds to RBOB is less than half the level seen just a month ago. Ethanol demand is expected to remain strong, but prices will continue to follow corn extremely closely through the summer with close attention paid to Corn Belt weather.

MAY 21, 2010

APR 27, 2011

MAY 25, 2011

Superior, Neb.

3.19

6.77

6.82

Beatrice, Neb.

3.14

6.72

6.57

Sublette, Kan.

2.88

6.62

6.52

Salina, Kan.

3.38

6.60

6.68

Triangle, Texas

3.24

6.97

6.82

Gulf, Texas

3.75

7.30

6.92

SOURCE: Sorghum Synergies

Natural Gas Prices LOCATION

($/MMBtu)

JUN 1, 2011

MAY 1, 2011

JUN 1, 2010

NYMEX

4.33

4.57

4.15

NNG Ventura

4.30

4.10

CA Citygate

4.54

4.45

4.30

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production

(1,000 barrels)

Per day

Month

End stocks

909

28,194

22,424

Feb. 2011

907

25,400

21,678

Mar. 2010

847

26,270

20,660

Mar. 2011

SOURCE: U.S. Energy Information Administration

JULY 2011 | Ethanol Producer Magazine | 31

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Ethanol News & Trends

Rising Projections

Show Me the Biomass

A report prepared by the U.S. Energy Information Administration suggests that, as long as the renewable fuels standard (RFS) is upheld, rising oil prices will result in increased biofuels production. Specifically, ethanol production could increase by more than 800,000 barrels per day from 2009 to 2035. On an energy equivalent basis, ethanol is projected to displace about 12 percent of gasoline demand in 2035. In the early years, EIA expects most ethanol to be blended with ethanol in the form of E10 or E15. “By 2035, however, ethanol [could be] consumed in roughly equal shares as E10, E15, and E85,” the report says. The Annual Energy Outlook 2011, which was released in April, is not meant to be a statement of what will happen, but what might happen. It contains multiple projections given various assumptions and methodologies, including the reference case, or a “business-as-usual trend estimate, given known technology and technological and demographic trends.” The report also projects that oil imports would meet a major but declining share of total U.S. energy demand. With oil prices at $125 per barrel in 2035, the need for imports is offset by the increased use of biofuels, much of which is produced domestically, the report says. The report projects an increase in renewable fuel production between 2009 and 2022 due to the RFS. However, that production won’t likely meet the RFS requirement of 36 billion gallons in 2022 due to the hurdles facing cellulosic and other advanced biofuel projects. “The reference case assumes that the EPA will continue to set RFS targets after 2022, leading to more capacity builds than would have occurred otherwise,” the report says. “The mandate for 36 billion gallons of biofuel is met by 2030, and total biofuel production increases to 37.2 billion ethanol-equivalent gallons in 2035.” On the E15 side, the report looks at two scenarios for how quickly E15 blend-

Last September, as soon as the USDA opened up the application window for its Biomass Crop Assistance Program, Centerview, Mo.-based Show Me Energy Cooperative was ready and waiting with its proposal. The 612-member group, which was formed in 2008, believed strongly in the conservation benefit of energy grasses and had already been using local varieties to fuel its pellet mill. Its intention was to utilize renewable biomass to feed a fully integrated biorefinery that would help reduce the nation’s dependency on foreign oil, add value to local biomass feedstock of ingenuity Bales of Indiangrass and big bluestem grass at Show Me Energy Cooperative’s storage supply, and provide stable, family-sup Testament facilities near Centerview, Mo., will be processed into pellets for power generation. porting jobs to people in the area. Wantfied strains of energy grasses that show very high tolerance for wet ing to scale up its operations, the group enlisted the assistance of the USDA in elevating the amount of conditions. Show Me Energy expects to begin receiving feedstock through feedstock available in the area. In May, the group was rewarded for its efforts. The USDA agreed to provide about $15 million to Farm the program in about two years, although participating producers are Service Agency offices servicing 39 counties in western Missouri and required to harvest the crops only once during the five-year contract. eastern Kansas to incentivize the establishment of dedicated energy “In a free market enterprise, if he sees that he can make some money and he can harvest it, he’s going to do it,” he says. crops on up to 50,000 acres of marginal land. Show Me Energy has been purchasing a variety of locally availSign-up began May 9 with a steady response from farmers, says Steve Flick, chairman of the board at Show Me Energy. He predicts able energy grasses for two years already, paying between $45 and that more than 1,000 farmers could eventually become involved in $60 per ton for the biomass. The cooperative currently operates a the project, but said it’s really anybody’s guess. “There might be some pellet mill that process 100,000 tons of feedstock annually. It has farmers who come in during the fall and there might be some next begun work on a $50 million expansion project that will double its spring,” he says. “The decision is not made by our cooperative. The feedstock intake and will produce 2 MMgy of biobutanol as well as farmer will go into the local FSA office and it’s going to be up to him enough power to supply the facility with all of its electricity needs. to decide what, or if any, of his farm is going to be eligible to put The expansion is expected to be complete in 2013. Flick says that into an initial application.” The co-op expects two distinct groups to while the co-op considered producing cellulosic ethanol, concerns participate—young farmers interested in becoming a part of a dedi- over the long-term stability of the renewable fuel standard, coupled cated energy production model and farmers nearing retirement who with the differences in chemical composition between the two fuels, may be interested in the low-maintenance aspect of energy grass pro- led the group to settle on biobutanol production. “From a scientific standpoint, we really tried to validate some of the enzymatic reacduction. BCAP will reimburse up to 75 percent of a producer’s establish- tions and it’s easier for us from a standpoint of a four-carbon versus ment cost and participants can receive annual payments for up to five a two,” he says. Flick says that since Show Me Energy’s proposal was accepted, years for grassy crops, which is what has been selected for the area around Show Me Energy. BCAP doesn’t limit acres to marginal land, he’s received many calls from would-be partners, seeking to benefit but Show Me Energy specified in its proposal that only those lands from the groundwork laid so carefully by his co-op members. Does should be used in order to prevent interference with the feedstock he offer them any words of advice? “Whether they’re a co-op or supply of humans and livestock. The co-op defines “marginal” as be- a private business, they’ve got to get private farmers onboard right ing uneconomical or inaccessible for grain production. For example, off the bat,” he says. “If they don’t have the local participation of Flick says flooded areas such as those that are located on levee or the community, no matter what technology they have, it won’t fly.” creek bottoms would work well because seed developers have identi- —Kris Bevill

EIA Report: Ethanol could displace 12 percent of gasoline demand by 2035

34 | Ethanol Producer Magazine | JuLY 2011

ing is adopted. In the high-E15 case, ethanol to be higher because less ethanol is availuse for gas blending increases to 18.1 billion able for blending and more cost recovery is gallons in 2015, compared to only 15.8 bil- need for E85 marketing and infrastructure. lion gallons in the reference case. With the —Holly Jessen low-E15 case total ethanol supply is nearly 2 billion gallons less by 2020 than the ref- Figure 1. U.S. liquids fuel consumption, 1970-2035 erence case. On the (million barrels per day) History 2009 Projections other hand, E85 con- 25 sumption is projectBiofuels including imports ed to increase more 4% 11% rapidly, meaning the 20 10% low-E15 case and Natural gas plant liquids 13% the reference case 3% Liquids from coal reach similar etha- 15 34% 32% Petroleum supply nol levels after 2020. “Rapid increases in E85 consumption 10 in the Reference, High E15, and Low 52% Net petroleum imports 41% 5 E15 cases indicate the importance for ethanol producers of 0 E85 availability after 1970 1985 2000 2009 2020 2035 the motor gasoline blending pool has been saturated, even Figure 98. EISA2007 renewable fuels standard, with an increase to a 2010-2035 (billion ethanol equivalent gallons) 15 percent limit for ethanol blends,” the 50 Corn-based ethanol report says. above 15 billion gallons Whether E15 is accepted quickly 40 or more slowly is expected to have an 30 Corn-based ethanol effect on gas pricEISA2007 target ing. When E15 penetrates the market 20 quickly and well, gas Biomass-to-liquids prices are lower because more ethanol 10 Cellulosic ethanol is used, the report Imports says. If E15 has a Biodiesel Other ethanol low, slow market 0 penetration, gas 2010 2015 2020 2025 2030 2035 prices are projected SOURCE: EIA ANNUAL ENERGY OUTLOOK 2011

Co-op receives first USDA approval for a BCAP-dedicated energy crop

JULY 2011 | Ethanol Producer Magazine | 35

PHOTO: SHOW ME ENERGY COOPERATIVE

distilled

It’s a Bargain

don’t have the pumps in the first place, you’re not going to get the results.” Ron Lamberty, vice president of market Demand for E85 is on the rise, thanks to high gas development for the American Coalition for prices and areas of expanded infrastructure Ethanol, points out that blender pumps first started to receive increased interest on a large When gas prices began spiking during price spread would be like, one only has to scale during the period of high gas prices in the first part of the year, it was suspected look northwest of Iowa. North Dakota is 2008. “Most of the increase we’re seeing in that the situation might drive up consumer in the midst of an aggressive expansion of E85 sales, the increase of interest in blender demand for higher blends of ethanol. By its retail biofuels infrastructure that began in pumps and E85 infrastructure, is all based on late 2009. Since then, more than 135 blender ethanol itself being much lower than gas,” he May, the data was rolling in to prove it. The Iowa Department of Revenue re- pumps have been installed throughout the says, adding that ACE has noted an increase ported that first quarter E85 sales increased state. That additional infrastructure, com- of E85 sales even in locations that typically 27 percent over the previous quarter and 64 bined with rising gas prices, has provided overprice the fuel. Alternative fuel retailer Propel Fuels Inc. percent compared to the first three months what North Dakota Corn Council ExecuCEO Matt Horton attributes consumer frusof 2010. A total of 2.6 million gallons of E85 tive Director Tom Lilja calls “stunning” retration over high gas prices to E85 demand were sold by the state’s 142 E85 retail stations sults. In 2009, about 275,000 gallons of E85 increases on the West Coast. “Couple this between January and March. Iowa Renew- were sold in the state. In 2010, that number with our brand awareness campaigns and inable Fuels Association Executive Director grew by 141 percent to nearly 664,000 galcreased access from our growing network of Monte Shaw says the increase can certainly lons. The impressive growth continued into stations, and we’ve seen sales of E85 nearly be attributed to the price difference between the first three months of this year. In March, E85 and conventional gasoline. “One way to nearly 98,000 gallons of E85 were sold, com- triple across our California locations,” he increase sales is to get more E85 pumps out pared to only about 30,000 gallons sold dur- says. “These prices are motivating drivers to there,” he says. “That could explain it, except ing the same month last year. Lilja says that move beyond the status quo and choose fufor the fact that in this particular time frame while high gas prices probably played a role els that make progress towards reducing our there were only about three new E85 pumps in the state’s ballooning E85 sales, the num- nation’s dependence on petroleum.” Shaw points out that lack of competition opened. So it wasn’t an access boost.” bers most clearly demonstrate the need for is a concern. It’s not uncommon for a retail To get a feel for what the effects of an ethanol infrastructure expansion. “It really is station to be the only source of E85 in an enaccess boost combined with a significant all about the infrastructure,” he says. “If you tire county, so it prices as it pleases. In other areas, such as Des Moines, Iowa, North Dakota E85 Sales E85 is more readily available so retailE85 gallons ers must price it competitively. Shaw says there was a point earlier this year 100000 , when E85 was more than $1 cheaper 80000 , per gallon than conventional gasoline in Des Moines. “That gets motorists’ 60000 , attention.” 40000 , It’s difficult to determine whether sales of flex-fuel vehicles (FFVs) are 20000 , also on the rise, but that wouldn’t be 0 expected to impact fuel sales unless the infrastructure is there to support the influx of vehicles, Shaw says. “Unfortunately in the car market, because 2011 there aren’t many pumps out there rel2010 2009 ative to the overall number of fueling stations I don’t think the normal consumer, even in Iowa, looks at whether Stunning Results Sales of E85 in North Dakota have skyrocketed over the past 12 months. While some of the increase the vehicle is an FFV or not when they is likely due to higher gas prices, the North Dakota Corn Council believes a greater driver has been the installation of purchase it,” he says. —Kris Bevill blender pumps throughout the state. SOURCE: AMERICAN LUNG ASSOCIATION

36 | Ethanol Producer Magazine | JuLY 2011

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The Denser the Better

Collaborators across three states explore biomass densification Researchers in three states are making headway in developing pretreatment and densification methods to better process cellulosic materials for biofuels production. Funded largely by the North Central Sun Grant Center, the $1.1 million research project is scheduled to be completed next June. “The overarching goal of this project is to develop and validate the performance of an integrated biomass pretreatment and densification process that will reduce the logistical hurdles facing second-generation biofuels,” says Kasiviswanathan Muthukumarappan, a professor at South Dakota State University’s agricultural and biosystems engineering department. He and other researchers believe logistical issues could be alleviated. “We think it’s better to think in terms of what we call ‘regional biomass processing depots,’” says Bruce Dale, a chemical engineering professor at Michigan State University and collaborator. “The idea is to pretreat the biomass at these regional centers and densify it there so that you can preserve and make the biomass more uniform as close as you can to the field. This gives the opportunity for local interests, farmers or co-ops, to own one of these regional depots and thereby participate more in the value chain.” In the project, SDSU researchers gather samples of switchgrass, cordgrass and corn stover and mill them to specified sizes. The samples are then shipped to Dale at MSU, where they are subjected to the university’s ammonia fiber expansion pretreatment process (AFEX). The treated samples are then sent west again, this time to Fargo, N.D., where they are compacted using a device designed by engineers at Federal Machine Co. Michael Flaherty, project manager, says Federal Machine engineers were first inspired to design the pelletizing machine by the obvious need for alternatives. “With fuel

prices and energy prices escalating, we looked for an opportunity to develop equipment that would service people in need of energy,” he says. Typical pelletizing machines are bulky and require a large amount of horsepower to operate. He saw a need for a smaller machine that could produce up to a ton per hour of compacted biomass more efficiently than the existing devices. “That is what our machine does,” he says. The machine being used to compact biomass samples for this project is the second-generation, and a third-generation, commercial model is now being designed. After SDSU compacts the biomass samples, the density of the paks increases from about 7 pounds per Improving Logistics SDSU professor Kasiviswanathan Muthukumarappan cubic foot (similar to straw) says densifying biomass is a first step toward making biofuels that require to 45 to 50 pounds per cu- less energy on the front end. bic foot, which more closeusing separate hydrolysis and fermentation ly resembles the density of corn or other grains. This is good, because to convert the samples into ethanol. William it means conventional grain handling equip- Gibbons, a professor in SDSU’s biology and ment should be able to also handle the paks, microbiology department, is using simultaneDale says. The project has also shown that ous saccharification and fermentation. Lew larger-sized particles can be compacted than Christopher, an associate professor at the previously thought. “What it means is that South Dakota School of Mines and Technolit’s going to require less energy in pre-pro- ogy, is exploring whether microbes obtained cessing biomasses,” Muthukumarappan says. from the Homestake Gold Mine in western Biomass pieces up to 12 millimeters in size South Dakota could be useful for conversion (nearly one-half inch) have worked success- to biofuels. Finally, Michael Twedt at SDSU fully in the process. Muthukumarappan adds and Chris Saffron, an assistant professor at they have not yet discovered what the size MSU, are evaluating the technical and ecolimit will be. “However, I know that we can nomic feasibility of the entire biomass procompact alfalfa that has been run through cessing operations. Other issues being addressed by this exa hay grinder producing 50 millimeter-long tensive collaborative study include how long pieces.” the densified paks can be stored, how well Multiple university labs in North Dathe material will flow when it is unloaded at a kota and South Dakota are employing variprocessing facility, and how much biofuel the ous techniques to process the compacted densified paks can produce as compared to biomass samples. At North Dakota State University, assistant professor Scott Pryor is uncompacted biomass. —Kris Bevill JULY 2011 | Ethanol Producer Magazine | 37

PHOTO: SOUTH DAKOTA STATE UNIVERSITY

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Keeping CEPIP

The handful of corn ethanol producers operating in California’s ethanol California weathered producers successfully stiff policy attacks rally to defend incentives when state legislators recently considered making them ineligible for any state funding. Two state committees also reviewed the state’s ethanol producer incentive program (CEPIP) after legislation was introduced to revoke the program. The measure passed the first committee but was solidly defeated by the transportation committee on May 2, retaining the program and corn ethanol producers’ right to apply for any applicable state funding opportunities. CEPIP, which came into effect in January, is a unique program in a few ways. It is based on ethanol crush spreads, rather than oil prices or other more commonly known triggers. It also requires producers to repay most of the incentives during times of good margins. Qualifying producers are able to receive up to 25 cents per gallon of ethanol produced, capping at $3 million annually per facility, during months when the ethanol crush spread is less than 55 cents per gallon. During months when the spread it more than $1 per gallon, producers are required to repay money received at a rate up to 20 cents per gallon. The program also requires producers to invest in technologies to transition theirAdfacilities away1:46 from LWC629-RJS-0446 Biorefining #3 1/11/11 PMcorn Pagein1favor of

distilled

nonfood, lower-carbon feedstocks. Pacific Ethanol Inc., Calgren Renewable Fuels LLC and AE Biofuels Inc. are the only producers in the state who qualify to participate in the program and all three actively protested the proposal to revoke CEPIP. Representatives from the ethanol companies, as well as construction and electrical groups, testified at hearings in defense of the program. They pointed out the necessity of corn ethanol production as a bridge to the commercialization of cellulosic biofuels and said that without assistance, a transition will not occur and the state would run the risk of losing its existing ethanol production. They faced off against the state’s dairy and livestock producers, as well as environmental groups, who claimed that corn ethanol is damaging to the environment and devastating to the livestock industry. Ultimately, it was the prospect of jobs that won the support of legislators. Following the bill’s defeat, Tom Kohler, policy advisor for Pacific Ethanol, commended the state for confirming its support of the growing industry. “These plants are job creation machines and the CEPIP program is directly responsible for stimulating innovation and jobs,” he said. While CEPIP may be viewed as an effective program for California, Geoff Cooper, vice president of research and analysis at the Renewable Fuels Association, says it would not be a popular proposal at the federal level because basing incentives on the crush margin essentially guarantees a profit margin for producers. It would also be an exorbitantly expensive program to implement in Corn Belt states. —Kris Bevill

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38 | Ethanol Producer Magazine | JuLY 2011

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Iowa Grabs the Honor It’s the first state to incentivize E15

! !! ! ! Other provisions in the bill include: ! ! ! ! !! ! ! " ! ! ! ! • A 4.5 cent per gallon tax ! ! ! !! ! ! ! ! ! ! ! " ! ! " ! credit for retailers selling ! ! ! ! ! ! ! Iowa biodiesel blends of B5 or ! ! ! ! ! ! greater. ! • A three-year production tax credit of 2 to 3 cents per gallon for biodiesel producers. • The approval of $3 million per year for three years to fund the state’s Renewable Fuels Infrastructure Program. The program provides cost share grants of up to 70 percent for the installation of retail biofuels infrastructure, including blender pumps and biodiesel stations. Iowa Renewable Fuels Association Executive Director Monte Shaw says the newly enacted legislation finally makes Iowa a leading state in terms of ethanol policy. “While we’ve led in production for years, a lot of times our neighbors have led on the policy side, at least on a state level,” he says. “Iowa’s never been in the forefront on some of the other issues.” Taking a good-natured jab at Iowa’s neighbor to the north, Shaw expressed a little pleasure in finally one-upping Minnesota on policy measures. “They’ve carried the burden for awhile and when you’re from Iowa it’s embarrassing to get teased that you’re behind Minnesota in anything,” he says. “So it provides a bit of extra motivation.” —Kris Bevill !

No h Dakota Nort k

On May 26, Iowa Gov. Terry Branstad signed into law a comprehensive renewable fuels package that included a specific incentive for E15, making Iowa the first state to enact financial incentives for retail sales of E15. Fuel retailers in Iowa will become eligible to receive a 3-cent tax credit for each gallon of E15 sold beginning July 1, or as soon as the U.S. EPA gives final approval for the fuel’s use in vehicle models 2001 and newer. In 2015, the tax credit will be reduced to 2 cents per gallon. In addition, the bill provides misfueling liability protection for retailers. The bill also modifies the existing E85 Promotion Credit. The tax credit was previously set at a sliding scale, providing 20 cents per gallon of E85 last year but decreasing to 10 cents per gallon for 2011. The legislature approved modifications to provide 16 cents for each gallon of E85 sold for the next six years, beginning in January. This modification will provide more stability to the program, according to Mindy Larsen Poldberg, director of government relations for the Iowa Corn Growers Association. Another important modification is an increase from 6.5 cents per gallon to 8 cents per gallon paid to retailers whose renewable fuel sales comprise at least 12 percent of a station’s total fuel annual fuel sales.

Min nnesota

Sout S outh Dakota Dakot

Wisc W Wi iscco onsiin onsi

Nebraska sk

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Kansas

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Farmers Breathe Sigh of Relief

PHOTO: Hopewell News & Patriot, KJ Burnell

more in 2011, to fulfill the feedstock Osage is the city of Hopewell, which exneeds of the ethanol plant. “We will be pected to collect $2 million in machinery and able to find another home for the bar- tools tax revenue from the plant every year, ley,” Forsthoffer tells EPM. The com- on top of real estate taxes, which it has been pany, which works globally on agricul- collecting. According to a contract between Barley contracts for failed tural commodities merchandising, will Osage and the city, the company must post Osage plant will be honored look at “the full range of options,” he a $5 million letter of credit, whether it is opadds. For confidentiality reasons, Forst- erating or not, and Hopewell could withdraw Despite everything that is not known hoffer didn’t say exactly how many acres of $1 million for missed tax revenue immediateabout the fate of the barley-to-ethanol plant barley were under contract. He did say it is ly. “I think everybody is still trying to digest in Hopewell, Va., one thing is known. Farmsignificant, however. “The bottom line is, the what it means that they are not opening, and ers won’t be left in the lurch. “Perdue Agriproducers that are raising barley for Osage, that they have the plant for sale,” City AttorBusiness will honor all of its 2010 and 2011 do not have to worry,” he says. “Those con- ney Tom Lacheney says. “I don’t know what barley contracts despite what is happening tracts are being honored.” kind of market there is for a barley ethanol with the Osage Bio Energy plant,” Joe ForstOne of the parties that has been un- plant.” —Holly Jessen hoffer, company spokesperson, tells EPM. successfully seeking more information from Osage, the company that built Appomattox Bio Energy, a 65 MMgy ethanol plant, said in a press release May 23 that the plant, while production ready, would not start up. Instead, the plant is up for sale due to unfavorable market conditions. “Osage Bio Energy would like to recognize and acknowledge the efforts of the many employees, community leaders and supporters that came together to develop this project over the past few years,” Heather Scott, company spokesperson, said in the press release. A few days after the Osage announcement, Perdue AgriBusiness made it clear what it planned to do. The company had For Sale The Osage Bio Energy plant in Hopewell, Va., had an equipment explosion during commissioning and never contracted for a few barley acres in 2010 and reached full start up. The board decided in late May to look for a buyer.

40 | Ethanol Producer Magazine | JuLY 2011

On the Cusp

GreenField launches G2BioChem to build cellulosic demo Cellulosic ethanol technology developed by GreenField Ethanol Inc. is “on the cusp,” with a demonstration plant planned for Chatham, Ontario, and, eventually, a commercial-scale plant either in Canada or the Midwest, says Barry Wortzman, president of G2BioChem and vice president of business development for GreenField Ethanol. “We’re doing it incrementally,” he says. “We have proven out our technology at pilot scale, now we’re moving it up to continuous demonstration scale and from there we will roll it out commercially.” G2BioChem, launched in early May, includes some big-name partners and collaborators such as Novozymes, Andritz, Harvest Technologies and others. A 1,600-gallonper-day demo plant will be built in Chatham, Ontario, integrated with the existing pilot plant and laboratory. This is an exciting time for GreenField and its partners, Wortzman says. “It’s been awhile coming.” In the future, the demo plant will be scaled up to 670,000 gallons per day. Chatham is also the site of one of Green-

Feedstock Tests GreenField Ethanol has established test plots of energy sorghum, used in testing the G2BioChem process. Other feedstocks successfully used include corn cobs, corn stover, bagasse and wood chips.

Field ethanol’s four grain-to-ethanol facilities located in Ontario and Quebec, that produce a total of 600 MMly (158 MMgy). The company expects the first demonstration phase on continuous pretreatment and lignin extraction to last six months. Phase 2 will test the hydrolysis and fermentation processes for three months, followed by six months for Phase 3 work on distillation, water recycling

and energy optimization. In all, the company expects all three phases to wrap up by June 2013. The commercial-scale plant could also be built in Chatham, although the Midwestern U.S. is being considered. Wherever it is built, the cellulosic ethanol plant will be colocated with a first-generation ethanol plant. —Holly Jessen

JULY 2011 | Ethanol Producer Magazine | 41

distilled

International agencies confirm biofuels’ vital role The International Energy Agency released a long-term roadmap for biofuels that illustrates the important role biofuels will continue to play in the global market, saying they have the potential to make up 27 percent of global transport fuels by 2050. Sustainability is a major focus of the IEA’s biofuels report, which states that there are three pillars of sustainability that must be considered—environment, economic and social—and current trends of energy supply and use are unsustainable in all three. The IEA says biofuels, if developed and expanded thoughtfully, can contribute to a sustainable energy future. “Through careful management and appropriate project choice and design, negative impacts can be minimized or avoided, and biofuel projects can, in fact, have positive impacts,” the agency

reports. Authors of the report warn that conventional biofuels producers must make improvements to their conversion technologies to improve overall sustainability. They also recommend policymakers phase out fossil fuel subsidies and implement greenhouse gas (GHG) emission pricing mechanisms to encourage the deployment of lower carbon technologies. Continued federal financial support is also recommended to aid commercialization of advanced biofuels. “Mandates alone are not enough to promote the deployment of those technologies that perform best in terms of land use, energy efficiency, GHG reductions and social and economic impacts,” the authors say. The Intergovernmental Panel on Climate Change also address the sustainability of biofuels, specifically second-generation biofuels, in a comprehensive special report for governments and policymakers. In its report, IPCC researchers also state the need for supportive policy measures in order to continue to increase renewables’ share of

the energy markets. They, too, say policies to monetize GHG emissions will be vital. “This report shows that it is not the availability of the resource, but the public policies that will either expand or constrain renewable energy development over the coming decades,” says Ramon Pichs, co-chair of the IPCC’s Working Group III, the group which authored the report and is responsible for assessing all areas of climate change mitigation for the IPCC. The report notes that policies must be created to match the particular factors of the technology in question and be flexible to keep pace with the evolving industries. Factors to consider include the level of technological maturity, affordable capital, ease of integration into the existing system and the local and national renewable energy resource base. “Policy frameworks that are transparent and sustained can reduce investment risks and facilitate deployment of renewable energy and the evolution of low-cost applications,” the authors say. —Kris Bevill

Gevo on the Move

Isobutanol company works to convert ethanol production facilities The conversion of a Luverne, Minn., ethanol plant to isobutanol production has begun, and two 50 MMgy Midwest ethanol plants— as yet unnamed—have signed letters of intent with Gevo Inc. “We expect in 2012 to have two operating plants, with a third under construction,” says Jack Huttner, executive vice president of corporate development and public affairs. A groundbreaking ceremony was held May 31 at Agri-Energy LLC, a 22 MMgy ethanol plant Gevo expects to have retrofitted and fully transitioned to 18 MMgy isobutanol production by June 2012. Because isobutanol has a higher energy content than ethanol, the actual Btu produced will be the same, the company explains. The only new construction required is a separations unit. “Butanol is a little more toxic than ethanol and it inhibits the yeast a little bit, if you don’t separate out the butanol as you ferment it,” Huttner tells EPM. The second unique eleJumbo™ ment of Gevo’s technology is the yeast that produces isobutanol instead of ethanol. Every other operating parameter remains the

same. “Corn in, butanol out,” he says. It’s a simple switch to go back to ethanol production. At the end of a run, ethanol yeast replaces isobutanol yeast, and the valve to the separator unit is turned off.” Luverne, though, may not need to switch often. “We’ve pretty much sold out the capacity for butanol so we are not anticipating making ethanol there,” he says, “but we could.” Gevo has an exclusive engineering and construction alliance with ICM Inc. When the separations facility is complete, another two to four weeks will be needed for finalizing the plumbing and connecting the plumbing and connecting the production facility with the new unit. —Holly Jessen

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Q&A

The

rance

actor

Brian France, NASCAR’s Chairman and CEO, exploded into the collective consciousness of the ethanol industry in 2010—when he announced NASCAR would fuel its race cars with E15. By Holly Jessen

Brian France has a rich history backing his leadership of the largest stock car racing organization in the world. His

Announcing E15 Brian France, chairman and CEO of NASCAR, and retired driver Rusty Wallace, announce the partnership with American ethanol. Wallace is a program spokesperson for American Ethanol.

grandfather Bill France Sr., a 6-foot, 5-inch man they called “Big Bill”, founded and led NASCAR until 1972, when his son, Bill Jr., stepped in until his son, Brian, took over the wheel in 2003. France will talk more about NASCAR’s historic move to E15 on June 28, the first full day of the Fuel Ethanol Workshop & Expo in Indianapolis. While important, the use of E15 is just one of the facets of a six-year deal to promote ethanol at NASCAR events. For example, green American Ethanol flags are used at the start and finish lines as well as passed out to the fans. NASCAR is also airing commercials, with a pro farming and pro ethanol message. The list goes on, but the point is: ethanol promotion will be a highly visible part of NASCAR racing. In the weeks leading up to the FEW, EPM had a conversation with Brian France about NASCAR, sponsorship and E15. Here’s what he had to say.

PHOTO: Chris Trotman/Getty Images for NASCAR

46 | Ethanol Producer Magazine | JuLY 2011

JULY 2011 | Ethanol Producer Magazine | 47

Q&A

Sponsorship in your sport is more intentional than any other sport and your fan base really seems to embrace your sponsors. Why do you think that is? A: Year after year, NASCAR fans rate as the most brand-loyal fans in sports. They understand the critical role sponsorship plays in putting on events and running race teams. Therefore, NASCAR fans make it a point to purchase partner products and services. In fact, according to a recent independent study published in the Sports Business Journal, NASCAR fans ranked first amongst the major sports leagues in five sponsorship categories, including ‘recommend,’ ‘regularly consume’ and ‘consider trying’ when asked how they support sponsors. Also, Forbes recently listed NASCAR drivers Jimmie Johnson, Dale Earnhardt, Jr. and Jeff Gordon as three of the top 10 influential athletes in American sports today, based upon data from E-Poll and Nielsen Media Research. Johnson topped the list, beating out the biggest names in sports. That is a great testament to the power of our sport and our fan base.

You’ve pioneered many of NASCAR’s biggest partnerships including relationships with SIRIUS Satellite Radio and many television networks. What makes NASCAR so appealing to these media outlets? A: Our brand-loyal fan base has consistently made NASCAR the No. 2-rated regular season sport on television as more than 100 million unique viewers tune in to NASCAR programming each year on FOX, ABC, ESPN, TNT and SPEED. Combining that with the thrilling action on the race track makes NASCAR a very compelling product for our media partners. Our broadcast partners are drawn to the great content and loyal audience that only NASCAR can deliver week in and week out. With fan interest and television ratings on the upswing, we’ve got great momentum heading into another exciting chase for the championship this fall. :

Introducing a new fuel blend into the highest performance automobiles in the world is a big deal. How

48 | Ethanol Producer Magazine | JuLY 2011

Q&A

rigorous was the fuel testing employed by NASCAR and the various race teams with the new Sunoco Green E15 fuel? A: It was very rigorous. The testing was done in several phases and there was extensive formulation work done by our official fuel partner Sunoco. Many months of testing was first done on the dyno to check performance and endurance. Once the dyno testing checked out, we had extensive live on-track testing done, running thousands of miles at race speeds to make sure we would be in good shape before we announced the partnership last fall and debuted the fuel blend this spring at the Daytona 500. The testing process involved our R&D team, multiple race teams, drivers, engine builders, as well as Sunoco. It has been truly a team effort across the board. I’ve heard some teams are reporting increased horsepower with Sunoco Green E15. What can you tell us about that? A: Early on in the dyno testing, we heard there was additional horsepower, which was encouraging. This is also now being seen on the track. We’re hearing all good things in the garage on the E15. The drivers and crew chiefs are excited and pleased about the transition.

Fuel ethanol production is currently a Midwestern phenomenon. That said, some experts suggest that half of the biomass in this country that may be used to manufacture next generation biofuels are located in the Southeast. Do you think NASCAR fans in the heart of your sports fan base are becoming more aware of the economic opportunities presented to them by ethanol? A: Part of the value of this partnership is that NASCAR gives a platform for greater awareness of the facts and figures with American Ethanol. We think the visibility that NASCAR offers is helping to get the basic messages and facts out to our fans about American Ethanol. It’ll be a work in process over the long run as the program evolves, but we are working very hard to maximize the impact on the awareness that NASCAR offers.

What is NASCAR’s biggest hope for its partnership with American Ethanol? A: That this partnership really moves the needle for the American farmer and for the country in terms of advanced thinking about energy independence going into the future. Together with the Ameri-

can farmer and Growth Energy, we are showing that NASCAR is a stage where you can accomplish that in a very positive and very practical way. Author: Holly Jessen Associate Editor, Ethanol Producer Magazine. (701) 738-4946 hjessen@bbiinternational.com

NASCAR’s Rise

In the years immediately following World War II, stock car racing experienced the greatest popularity it had ever seen. Tracks throughout the country were drawing more drivers—and bigger crowds. Nonetheless, there was a serious lack of organization. From track to track, rules varied and some were downright makeshift. In December 1947, Bill France Sr., of Daytona Beach, Fla., organized a meeting at the Streamline Hotel to discuss the problems facing stock car racing. France operated a local service station and also promoted races on the city’s famed beach-road courses, often racing himself. By the time that meeting at the Streamline Hotel was completed, the National Association for Stock Car Auto Racing was born. Not even France, who believed a sanctioning body was exactly what the sport of stock car racing needed, could have envisioned what NASCAR has become. Things came together quickly. The first NASCARsanctioned race was held in Daytona just two months after the organizational meeting. In the first race, fans were treated to something that each year still brings millions of fans to NASCAR races—close competition. The winner of the first Daytona 500 wasn’t declared for three days—it took that long for officials to study a photograph of the finish between Petty and Johnny Beauchamp before declaring Petty the winner. In 1976, NASCAR’s premier series took the lead in worldwide motorsports attendance for the first time with more than 1.4 million spectators making their way to events. Television exposure grew as well. The 1979 Daytona 500 became the first 500-mile race in history to be telecast live in its entirety. By the mid 1980s, Fortune 500 companies not only were involved in sponsoring NASCAR, but individual races and teams as well. By 1989, just 10 years after the first 500-mile race to be broadcast live flag-to-flag, every race on the NASCAR Sprint Cup schedule was televised, nearly all of them live. Today, NASCAR is the world’s largest stock car racing organization. Millions of fans pack NASCAR venues across the country each year. Source: NASCAR JULY 2011 | Ethanol Producer Magazine | 49

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50 | Ethanol Producer Magazine | JuLY 2011

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PROFILE

The

Poetization

of Cloverdale

An idled Indiana plant restarts with $30 million in retrofits By Susanne Retka Schill PHOTOS BY SHAWN WILLIAMS

Pulling off Interstate 70 heading west from Indianapolis, one can barely see the ethanol plant, but coming over the hill on the drive into the campus, the structures of Poetâ&#x20AC;&#x2122;s newest ethanol plant spread out in front of you. For those familiar with the 26 other Poet-built plants, Poet Biorefining-Cloverdale is not quite the same. For one, most Poet plants have nearly all equipment enclosed in buildings while the Vogelbusch design has fewer enclosures, and a larger footprint. The Cloverdale plant, with a nameplate capacity of 90 MMgy, was built for AltraBiofuels. Groundbreaking took place in October 2006, and construction was completed early in 2008. A sister plant in Coshocton, Ohio, broke ground a few months earlier. Coming online in early 2008, the plants began

Producing Again General Manager Dave Brooks looks over the plant at Cloverdale, Ind., that is back running after being run just a few months, then idled for two years.

52 | Ethanol Producer Magazine | JuLY 2011

JULY 2011 | Ethanol Producer Magazine | 53

PROFILE

ter company, EdeniQ Inc., broke ground in May on its Corn-to-Cellulosic Migration pilot plant at EdeniQ’s headquarters in Visalia, Calif. The Cloverdale plant, however, was put on the auction block. Cloverdale is Poet’s first acquisition. “We looked at every plant for sale,” Poet CEO Jeff Broin said in an interview following the re-opening ceremonies in March. “Cloverdale was very attractive—it had the grain supply, good electric rates, natural gas, road access. This facility was on the top.” The facility had good rail access on CSX rail, and a state highway and Interstate 70 provide good truck access. Just as importantly, it would lend itself East Bound Ethanol produced at Cloverdale is mostly headed to eastern to installing Poet’s technolU.S. markets while nearly 70 percent of the DDGS is used locally. ogy in key areas. The purproduction in the midst of high-priced corn, chase price and refitting, Broin said, “were tight ethanol margins and the broader reslightly less than a new facility—a 20 percent cession. By the end of the year, both were savings.” The purchase was announced June idled. AltraBiofuels still has the Ohio plant, 2010 and the Poet engineering staff was on plus one in Goshen, Calif. In addition, its sis-

54 | Ethanol Producer Magazine | JuLY 2011

PROFILE

site by late summer, making modifications. “We wanted to take the technology up a notch and Poetize the facility.” When considering ethanol plant locations, the first consideration is whether there is enough corn in the area. Allen Cline, an area farmer attending the opening ceremonies, explained Cloverdale is on the southern edge of Indiana’s prime row crop land. Putnam County, where Cloverdale is located, raises around 9 million bushels of corn annually. The next county north raises 22 million bushels while the next county south raises 2 million bushels. Having the ethanol plant in the market has improved the local price for corn by 15 to 20 cents per bushel, he added. Local residents are a bit skeptical about the plant, though, considering two large new ethanol plants in Indiana ran into problems in 2008, he said. Many of those farmers and area residents were on hand for the brief opening ceremonies and the lunch and plant tours that followed in mid-March. The ceremonies included remarks from Poet representatives and state dignitaries. “The Poet investment means a lot to Indiana,” said Lt. Gov. Becky Stillman. She recalled how the closing of the AltraBiofuels facility a few months after it started up in 2008 was “a drain on the economy and a drain on local morale as well.”

The boost in local morale was evident at the opening ceremony and the lunch and plant tours that followed. The ceremonies were the culmination of several months of hard work, held just a week before the first grind was scheduled and the long process of restarting the plant begun—not a simple restart due to all the retrofits accomplished in the previous nine months. It was also Poet’s first retrofit—all of its other 26 plants were Poet designs from the ground up. “We were able to draw from our experiences and relationships building new plants,” General Manager Dave Brooks says. “We have continually updated Poet plants with the latest technologies available, which helped us prepare for this opportunity.” The retrofit included adding two 650,000 bushel bins, doubling corn storage to 2.4 million bushels. Even as the new construction began, corn was being delivered to fill the existing bins. The seven new mills for grinding corn were installed to replace the ones originally installed . The plant’s cook process was replaced with Poet’s BPX no-cook technology, and the fermentation alley was enclosed. Work was done on the dryers to make them more efficient and the regenerative thermal oxidizer was replaced with two five-chamber RTOs. The retrofits also included installing Poet’s Total Water Recovery System, replacing the water treatment system that created issues during AltraBiofuel’s startup. “We will not discharge any process water,” Brooks says. The Poet technologies are aimed at improving efficiency and environmental performance. The BPX technology, for example, reduces energy costs by 15 percent, compared to a cook process, while it increases production yield, improves the distillers grain nutrient profile and reduces air emissions. The Total Water Recovery eliminates water discharge, a new technology now installed at about half of Poet’s facilities. Many areas, of course, were left unchanged. “One of the realities involved with retrofit projects is that there are certain mechanical and application issues that don’t economically justify modification,” Brooks adds. Local farmers and truckers saw im-

provements, too. “A lot of people who were familiar with the plant, tell us they’ve seen a tremendous improvement in how we’re bringing in grain and loading out DDGS,” Brooks says. A Poet plant typically scales trucks at a separate scale house, but in Cloverdale, the weighs were built over the pits. With attention paid to improving flow patterns, trucks are moving in and out at a much quicker pace. As the Poet engineering group worked with local contractors to complete the retrofits, Brooks, who joined Poet a couple of years ago after a 20-year career in plastics manufacturing, was on-site Oct. 1 to begin the hiring process. Five key positions were filled by Poet employees coming from other plants, most of whom like Brooks, were relatively new with Poet. Seven AltraBiofuels employees were hired back, several of whom worked for the company that maintained

the facility while it was idle. In all, the plant added 48 direct jobs to the community. Of those, 26 technicians were hired through the state’s WorkOne program, and in April the plant was honored by the Indiana Workforce Develop with its achievement award. The total bill for Poetizing the plant came to $30 million, accomplished within budget and in nine months. “The plant achieved nameplate capacity on schedule,” Brooks says. “We’re very proud of how quickly we’ve been able to bring the plant to this production level. The plant was shut down for two years, so there were bound to be a few hiccups as we started production, but we’ve been able to overcome those issues.” Author: Susanne Retka Schill Editor, Ethanol Producer Magazine (701) 738-4922 sretkaschill@bbiinternational.com

JULY 2011 | Ethanol Producer Magazine | 55

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PRODUCTION

Reviewing a year of restarts and acquisitions By Holly Jessen

Mergers. Acquisitions. Increasing capacities. Start ups. Layoffs. Bankruptcies. Examine the headlines about ethanol producers from May 2010 to May 2011 and these words jump off the page. The spring 2011 ethanol plant map, distributed with the May issue of Ethanol Producer Magazine, shows the U.S. industry has 211 ethanol plants, both producing and idled, with a combined capacity of 14.31 billion gallons yearly and an average plant size of 67 MMgy. Canada has 15 plants contributing another 480 MMgy

Moving Ethanol Tankers line up at AE Advanced Fuels Keyes Inc., a California ethanol plant that will someday produce ethanol from cellulosic feedstocks as well as corn. PHOTO: AE BIOFUELS

58 | Ethanol Producer Magazine | JuLY 2011

JULY 2011 | Ethanol Producer Magazine | 59

PRODUCTION

PHOTO: GPRE

LDCommodities.com

Greenfield Plant Green Plains-Obion, (Tenn.), came online in 2008. Itâ&#x20AC;&#x2122;s one of four the company built from the ground up.

of capacity. Compare that to the spring 2005 EPM map, which listed 92 ethanol plants with a combined capacity of only 3.85 billion gallons. The average plant size back then was just 42 MMgy. A look back to the spring 2007 map illustrates how dramatically the climate has changed in just four years. That map listed 57 plants under construction. Today, for traditional grain-to-ethanol production facilities,

acquisitions and retrofits are more common than building greenfield ethanol plants. Of the three ethanol plants listed as under construction on the spring 2011 ethanol plant map, twoâ&#x20AC;&#x201D;Hereford Renewable Energy LLC in Texas and the Aventine Renewable Energy Inc. plant in Mount Vernon, Ind.â&#x20AC;&#x201D; are now producing ethanol. In May, Aventineâ&#x20AC;&#x2122;s plant in Aurora, Neb., had completed construction but had yet to begin commis-

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sioning while some final technical details were ironed out, says Jennifer Borgen, Aventineâ&#x20AC;&#x2122;s director of communications. All three of these projects saw construction put on hold during the recession, to be completed in the past year. The Aurora plant is the last on our once lengthy list of plants under construction. Moving forward, the action will be in the arena of cellulosic ethanol development. (See the accompanying sidebar for a rundown of cellulosic ethanol plants under construction or likely to break ground in 2011.) Moving Up Out of all the North American ethanol producers, it can be easily argued that Green Plains Renewable Energy Inc. is the company that has made the most news in the past year. Indeed, the company has been quite busy since 2007, when its first green field ethanol plant came online in Shenandoah, Iowa. In 2008 and 2009, GPRE moved steadily forward while others struggled mightily, or even went bankrupt. In that two-year period, the company completed construction at three plants and acquired two former VeraSun Corp. plants and majority interest in Blendstar, a biofuel terminal operator. That strategy continued in late 2010 and early 2011 as the company acquired three distressed ethanol plants in Lakota, Iowa; Riga, Mich.; and Fergus Falls, Minn. The most recent purchase pushed the company into new territory. GPRE now owns and operates five acquired ethanol plants, in addition to the four plants it built from the ground up. That puts GPRE at nine ethanol plants with a total capacity of 740 MMgy. Todd Becker, president and CEO, sums up the companyâ&#x20AC;&#x2122;s history this way. â&#x20AC;&#x153;We went from zero revenue and zero profits way back in â&#x20AC;&#x2122;07 to right around $3 billion of revenues in 2011, and in 2010 we made $50 million on the bottom line,â&#x20AC;? he tells EPM. â&#x20AC;&#x153;And that was while some of the industry was going through uncertainty and turbulent times.â&#x20AC;? It isnâ&#x20AC;&#x2122;t just through acquisitions that the company is increasing its capacity numbers. The company regularly provides capacity updates to EPM, which include increases of 3 MMgy to 10 MMgy at most of its plants

in the past year and more than once in 2010 at several locations. In fact, debottlenecking in newly acquired ethanol plants is an important part of the companyâ&#x20AC;&#x2122;s strategy. â&#x20AC;&#x153;We took the low-hanging fruit out of the equation, thatâ&#x20AC;&#x2122;s what we went after first,â&#x20AC;? Becker tells EPM. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t think weâ&#x20AC;&#x2122;re done but itâ&#x20AC;&#x2122;s not going to be the leaps and bounds like we have had Explosive Growth over the last couple years.â&#x20AC;? GPRE went from zero Besides increasing capacities, GPRE revenues in 2007 to $3 billion estimated for this announced last summer that it would install year, says President corn oil extraction at all its plants. The eighth and CEO Todd Becker. installation was due to be completed in June and the ninth and final corn oil installation is scheduled to be complete in the third quarter of 2011. That project will add an estimated $25 to $30 million in operating income to GPRE, based on prices in May, Becker says. The companyâ&#x20AC;&#x2122;s activities have resulted in some impressive capacity numbers. GPRE first broke onto the top producers list on the fall 2009 EPM plant map, at No. 5 with a total capacity of 345 MMgy. By the spring of 2010 that number had increased to 480 MMgy and put the company in the No. 4 spot, a place it occupies to this day.

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Cellulosic Ethanol Projects The following commercial-scale cellulosic ethanol projects have begun construction or expect to break ground in 2011: â&#x20AC;˘

Abengoa Bioenergy Biomass of Kansas, Hugoton, Kan., 25 MMgy, corn stover/wheat straw

Groundbreaking Summer 2011

â&#x20AC;˘ BlueFire Renewables, Fulton LLC, Fulton, Miss., 19 MMgy, wood waste Site work underway

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Dupont Danisco Cellulosic Ethanol LLC, Iowa, 25 MMgy, corn stover

Groundbreaking Summer 2011

â&#x20AC;˘ Enerkem Alberta Biofuels LP, Edmonton, AB, 36 MMly, MSW

Under construction, in production in 2012

â&#x20AC;˘ Enerkem Mississippi Biofuels LLC, Pontotoc, Miss., 10 MMgy, MSW Groundbreaking 2011

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Frontier Renewable Resources LLC, Kinross, Mich., 40 MMgy, wood biomass

Groundbreaking Summer 2011

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â&#x20AC;˘ Fulcrum BioEnergy Inc., McCarran, Nev., 10.5 MMgy, MSW Groundbreaking Summer 2011

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Ineos New Planet BioEnergy LLC, Vero Beach, Fla., 8 MMgy, vegetative waste, MSW

â&#x20AC;˘

Poet LLC Project Liberty, Emmetsburg, Iowa, 25 MMgy, corn residue

Under construction

Groundbreaking fall 2011

â&#x20AC;&#x201D;Kris Bevill

JULY 2011 | Ethanol Producer Magazine | 61

PRODUCTION

Running full Steam The former Otter Tail Ag Energy plant in Fergus Falls, Minn., is GPREâ&#x20AC;&#x2122;s latest acquisition.

Its current total capacity of 740 MMgy positions the company behind Valero Renewable Fuels, which has a capacity of 1,110 MMgy. Asked if the company hoped it could take over the No. 3 spot someday, Becker made it clear GPRE isnâ&#x20AC;&#x2122;t too concerned

about that. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t really worry about numbers,â&#x20AC;? he says. â&#x20AC;&#x153;We like to buy good assets, good location, good technology. We donâ&#x20AC;&#x2122;t get too concerned about whether we are third or fourthâ&#x20AC;&#x201D;we just want to make sure we are profitable and successful. If that

means that we buy more plants and get ahead of somebody, thatâ&#x20AC;&#x2122;s fine. If it means we continue to have what we consider one of the best platforms in the industry and move behind somebody, weâ&#x20AC;&#x2122;re OK with that.â&#x20AC;? Still, the company isnâ&#x20AC;&#x2122;t shy about its intent to grow the business. â&#x20AC;&#x153;We are actively looking across the whole platform,â&#x20AC;? Becker says, â&#x20AC;&#x153;not just in the ethanol segment but also in our agribusiness segment and our distribution segment. Weâ&#x20AC;&#x2122;re looking to grow all of those segments.â&#x20AC;? Its marketing and distribution segment handles more than a billion gallons of ethanol yearly. On the agribusiness side, GPRE operates grain storage facilities as well as agronomy and petroleum businesses in Iowa, Minnesota and Tennessee. Earning revenue through those other businesses has been a key part of making GPRE a successful, well-balanced company, he adds. â&#x20AC;&#x153;Instead of just being a single stream

GPRE Timeline 2004

GPRE formed to develop new ethanol plants.

2005 2006

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2007

Operations commence at Shenandoah, Iowa, plant (new construction).

2008

Operations commence at Superior, Iowa, Obion, Tenn., and Bluffton, Ind. (new construction).

2009

Acquires Central City, Neb., and Ord., Neb., former VeraSun plants. Acquires majority interest in Blendstar, biofuel terminal operator.

2010

Acquires Lakota, Iowa, and Riga, Mich., former Global Ethanol plants.

2011

Acquires Fergus Falls, Minn., a former Otter Tail Ag plant. Grand opening of BioProcess Algae LLC bioreactor at Shenandoah plant.

of revenue and income, based on a single industry, we are growing a multi-facetted, conglomerated company. We use that platform to outperform in more cyclical downturns. That formula has been the right formula.â&#x20AC;? Movers and Shakers AE Biofuels Inc. spent the past year working to restart an idled 55 MMgy ethanol plant in Keyes, Calif., and in mid-May announced it had reached that goal. AE Advanced Fuels Keyes Inc. is operating the plant under a lease with Cilion Inc., the company that started up the plant in November 2008. AE Keyes spent $8 million to retrofit and restart the plant. The company is also working to build a 1 MMgy pilot plant for its cellulosic conversion technology at the same location. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re very pleased that the AE Keyes plant is now fully operational and delivering product to our California biofuels and animal feed customers,â&#x20AC;? says Eric McAfee, chairman and CEO of AE Biofuels Inc. In Hereford, Texas, the 105 MMgy eth-

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PRODUCTION

Back Running AE Advanced Fuels Keyes Inc., a 55 MMgy ethanol plant in Keyes, Calif., is now operating after an $8 million retrofit.

anol plant purchased by Murphy Oil USA is finally producing ethanol. The former Panda Hereford Ethanol LP plant was 90 percent completed before construction was halted when that company filed for bankruptcy in 2009. Hereford Renewable Energy LLC started up in March, on schedule and on budget, Tom McKinlay, executive vice president of worldwide downstream operations, said

in a May 10 shareholder presentation. The company purchased the plant for $40 million and spent another $25 million to upgrade it to equal the companyâ&#x20AC;&#x2122;s other ethanol plant in Hankinson, N.D., McKinlay said. Every single area of the plant was improvedâ&#x20AC;&#x201D;grain handling, mash and liquefaction, fermentation and distillation, evaporation, centrifuges and wet cake. The destination plant has the

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Following is a list of other notable transactions in the ethanol industry during the past year:

• Poet LLC purchased a 90 MMgy ethanol plant in Cloverdale, Ind., and celebrated its reopening in March.

• Pacific Ethanol Inc. restarted its 60 MMgy plant in Stockton, Calif., in December 2010. • The Scoular Company acquired Gate- way Plant LLC in February, planning to extensively renovate the 55 MMgy ethanol in Pratt, Kan., and get it fully operational by fourth quarter 2011. • Kawartha Ethanol Inc. completed its first ethanol plant in Havelock, Ontario. The 80 MMly (21 MMgy) ethanol plant was fully operational in January. • In April, Suncor Energy St. Clair, an ethanol plant in Sarnia, Ontario, announced it had completed an expansion from 200 MMly to 400 MMly. • After nearly two years of sitting idle, the 30 MMgy Abengoa Bioenergy Corp. plant in Portales, N.M., restarted in early 2011. • Cargill Inc. announced in March that it was purchasing the completed, but never fully operational, Tate & Lyle corn wet mill ethanol plant in Fort Dodge, Iowa, with plans to create a biorefinery campus to produce ethanol and other biobased products, similar to its Blair, Neb., campus. • Flint Hills Resources Renewables LLC acquired plants in Shell Rock and Menlo, Iowa, in September 2010 and plants in Iowa Falls and Fair banks, Iowa, in February. All four plants were previously owned by Hawkeye Renewables LLC, which filed for Chapter 11 bankruptcy in December 2009. • AltEn LLC is working to restart the former E3 Biofuels plant in Mead,

Neb., a closed-loop ethanol plant colocated with a feedlot and anaerobic digesters. • The 85 MMgy ethanol plant in Ful- ton, N.Y., began producing again in July after being purchased at bankruptcy auction by oil refiner Sunoco Inc. • ADM held a ribbon-cutting ceremony in July 2010 to commemorate startup of its 300 MMgy dry mill ethanol plant in Columbus, Neb. • Tharaldson Ethanol Inc. in Cassel- ton, N.D., increased its capacity from 120 MMgy to 150 MMgy in early 2011. • Guardian Energy Holdings LLC acquired a majority share in a 54 MMgy ethanol plant in Lima, Ohio. A retrofit is under way with the facility expected to be operational by the second quarter of 2011.

advantage of being close to the markets for ethanol and wet distillers grains (WDGs). Ethanol is railed to California and the Gulf Coast, while WDGs have found a ready market with the 3.5 million head of cattle in feedlots around the ethanol plant. The disadvantage, of course, is corn supplies are railed in. On the other hand, with 4.8 million bushels of corn storage at the plant the company may be able to develop trading opportunities with the corn it brings in from the Midwest. Another idled plant currently in the process of being restarted is the former Cascade Grain Products plant in Clatskanie, Ore. The 108 MMgy ethanol plant operated for about six months in 2008 before shutting down. It is now owned and being restarted by JH Kelly, one of the contractors who built the plant, and a creditor when the company entered bankruptcy. Renamed Columbia Pacific Bio-Refinery, the ethanol plant is currently undergoing a retrofit with the hope of restarting the Delta-T designed plant this fall,

says Mark Fisler, partner and managing director of Ocean Park Advisors, the company retained to develop strategic alternatives for the facility. One important step in the process of restarting the plant is hiring a general manager. The company recently brought on Dan Luckett, who worked previously for Delta-T, now Applied Process Technology International LLC, and also served as a project engineer at a Michigan ethanol plant, Fisler says. Marquis Energy LLC is a nother company with big plans. Just before the end of 2010 the company acquired a 50 MMgy ethanol plant in Wisconsin. The former Castle Rock Renewable Fuels plant, now renamed Marquis Energy–Wisconsin LLC, is the company’s second ethanol plant, joining the 140 MMgy Marquis Energy plant in Hennepin, Ill. But that plant won’t remain that size much longer. This spring the company announced it would begin construction in the fall to double the capacity to 280 MMgy,

• DENCO II, a 34 MMgy idled Morris, Minn., ethanol plant was restarted in October. • Renova Energy Idaho LLC, a 20 MMgy Heyburn, Idaho, ethanol plant was sold off, piece by piece at auction. Natural Chem Holdings LLC, purchased the on-site anaerobic digester and plans to produce biogas from thick stillage or syrup from area ethanol plants. • Clean Burn Fuels LLC, a 60 MMgy ethanol plant at Raeford, N.C., filed for bankruptcy in April. The plant is idle but the company hopes to restart this year.

bringing the production facility in line with Archer Daniels Midland Co.’s monster ethanol plants. The company has had expansion in mind since construction began on the plant, says Mark Marquis, president of Marquis Energy. It is well situated to produce large amounts of ethanol, with sufficient local corn supplies. The plant is located near the Illinois River where the company operates a barge terminal, plus it has rail access with the Norfolk Southern Railroad. Marquis complimented the plant’s staff for its work to increase the capacity in the existing plant, even before the full-scale expansion begins. “Between the production team, and the logistic advantages here, it’s really a unique site that justifies the size of plant,” he says. Author: Holly Jessen Associate Editor, Ethanol Producer Magazine. (701) 738-4946 hjessen@bbiinternational.com

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INDUSTRY

Taking the of the Industry The storyline for the ethanol industry in 2009 and 2010 was increasing health and maturity By Holly Jessen

After the turmoil of 2008, the past two years have brought much improved conditions for the ethanol industry. Through its Biofuels Benchmarking program, Christianson & Associates PLLP has the statistics to back that up, showing it was a period of healing. “The data suggests that 2009 and 2010 provided a substantial recovery for the ethanol industry,” says John Christianson, principal partner with Christianson & Associates. “Management was focused on strengthening their balance sheets to prepare their companies for future volatility. Companies want to be in a position to weather the storms that may arise.”

68 | Ethanol Producer Magazine | JuLY 2011

JULY 2011 | Ethanol Producer Magazine | 69

INDUSTRY

The Willmar, Minn.-based accounting firm recently released its 2010 benchmarking report. In its second year, the report is a summary of inMaturing Industry formation gleaned John Christianson, principal in the from those ethanol accounting firm bearing producers particihis name, says ethanol producers hunger for pating in the proinformation to gauge gram that Christianthemselves against. son & Associates has offered since 2003, says Paula Emberland, business analyst for the company. For 2010, a total of 63 ethanol plants participated, an increase of 10 from the previous year. Average production was 68.9 MMgy, with 44 participating plants classified as small and 19 as large. Jon Buyck, a business consultant for Christianson & Associates, says managers at newer plantsâ&#x20AC;&#x201D;many of whom have backgrounds in the grain and petroleum industriesâ&#x20AC;&#x201D;have become very adept at correlating the purchase of grain and ethanol. â&#x20AC;&#x153;I think their management has matured a lot in the last two to three years,â&#x20AC;? he says. Christianson agrees. â&#x20AC;&#x153;We are seeing the industry maturing and a thirst for information as companies are analyzing how their performance compares to their peers,â&#x20AC;? he says. By the Numbers In general, balance sheets strengthened quarter by quarter from 2009 through 2010. In the first quarter of 2009, the averLess Volatile Year age ethanol plant Better correlation in basic commodities had more liabilities prices was a significant than net worth. By factor in healthier balance sheets in the end of 2010, 2010 says Jon Buyck, thanks to consisbusiness consultant. tent profits and debt reduction efforts, the average plant had improved its net worth substantially. In 2010, despite soaring feedstock prices 70 | Ethanol Producer Magazine | JuLY 2011

INDUSTRY

in the second half, ethanol producers increased profitability by about 8 cents per gallon. This was due, in part, to increased ethanol and coproduct netbacks as well as the low price of natural gas and reduced costs for items like chemicals and administration. From Dec. 31, 2008, to Dec. 31, 2010, total liabilities expressed as a percentage of assets decreased from 52.79 percent to 42.97 percent, and total equity grew from 47.21 percent to 57.03 percent. With better profitability and increased working capital, long-term debt steadily declined. In the first quarter of 2009 ethanol plants had 60 cents per gallon in long-term debt, while by the fourth quarter of 2010 that number had decreased to 40 cents per gallon. Participating ethanol plants saw an improvement of 5 cents per gallon in working capitalâ&#x20AC;&#x201D;the difference between current assets and current liabilities. â&#x20AC;&#x153;This additional liquidity has led to a reduction in inMeasuring Progress terest expense per Improvements are hard to make gallon by 3 cents without measuring per gallon from performance, says Paula Emberland, 2009 to 2010 and business analyst. ultimately helped plants be more profitable in 2010,â&#x20AC;? the report says. Due to a number of factors, the grind margin was the most stable since 2007, with margins in 2009 and 2010 nearly equal. The margin for industry leaders dropped 1 cent to 47 cents per gallon grind margin in 2010 and the average increased 1 cent to 38 cents a gallon. The laggards, plants with below average results, went up 2 cents to 28 cents per gallon. Looking at grind margin on a quarterly basis showed that in 2010 it only varied 3 cents while in 2009 the variance was 5 cents. â&#x20AC;&#x153;The grind margin improved throughout the industry in the second half of 2010 â&#x20AC;Ś and has continued trending upward into 2011 according to data recently collected,â&#x20AC;? the report says. While not the biggest cost for an etha-

nol plant, stable and his- 2.60 Ethanol and Co-Product Pricing $ / Gallon torically low energy prices 2.40 2.20 have had a positive effect 2.00 on grind margin and 1.80 profitability. Notably, en- 1.60 ergy expense to ethanol 1.40 1.20 revenue settled at about 1.00 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 7.7 percent in the fourth quarter of 2010â&#x20AC;&#x201D;the Ethanol Co-Products lowest it has ever been since the benchmarking 31,000 program started in 2003. 29,000 In 2008, energy expense 27,000 to ethanol revenue was 25,000 Energy Usage BTU's / Gallon at about 15 percent for 23,000 most of the year. On the 21,000 other hand, energy us- 19,000 2.20 age per gallon of ethanol 17,000 Ethanol Netback vs Feedstock Price 2.00 produced stayed about 15,000 1.80 the same in 2010. â&#x20AC;&#x153;The Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 1.60 industry appears to have DRY WET 1.40 hit a plateau for energy 1.20 consumption gains, until 1.00 ethanol, Buyck adds. In other words, plants a technology improveQ1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 ment enters the marketplace en masse,â&#x20AC;? didnâ&#x20AC;&#x2122;t own or price any corn that they sold ethanol against. â&#x20AC;&#x153;People Ethanol Feedstock the report says. â&#x20AC;&#x153;Currently, the biggest dif- hadnâ&#x20AC;&#x2122;t already were taking a lot less risk in the industry,â&#x20AC;? ference between the leaders and average he says. â&#x20AC;&#x153;They were correlating their corn is the leaders typically produce primarily to their ethanol and not going out and takWDGS.â&#x20AC;? ing high risk corn futures.â&#x20AC;? Another, more significant factor in The combination of reduced volatility profitably and healthier balance sheets, plus more equity and less debt may mean was decreased volatility, Buyck says. Unlike new capital investments. Producers are in 2009, commodity pricesâ&#x20AC;&#x201D;sugar, corn, once again considering a variety of potenethanol and gasolineâ&#x20AC;&#x201D;were generally all tial projects. â&#x20AC;&#x153;Technological improvements correlated to each other in 2010. That alare now back on the table,â&#x20AC;? Saeger says, lowed producers to employ successful risk â&#x20AC;&#x153;whereas two years ago, those were just management strategies. nonconversation starters because lending Specifically, corn and ethanol prices were nearly perfectly correlated, says Brad did not exist.â&#x20AC;? The report also delves into a regionSaeger, also a Christianson & Associates al analysis of how ethanol plants in the business analyst, characterizing the past east, west and central U.S. performed in two years as a period of healing for the ethvarious areas, such as grind margin, ethaanol industry. That allowed ethanol plants nol netback, feedstock cost and more. to buy commodities on the spot market. Christianson will share the analysis at â&#x20AC;&#x153;Essentially in the past, ethanol and corn the International Fuel Ethanol Workdidnâ&#x20AC;&#x2122;t always react exactly the same, which shop & Expo on the afternoon of June caused for greater fluctuations in profit29 during a panel called Qualifying For ability,â&#x20AC;? he says. â&#x20AC;&#x153;In 2010 the commodity and Selling Your Fuel into New Markets. prices acted very similarly, reducing the risk to the industry and stabilizing profits.â&#x20AC;? There werenâ&#x20AC;&#x2122;t any cases of ethanol Economies of Scale Last yearâ&#x20AC;&#x2122;s report from Christianson plants being long on corn or short on

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2009

Q1 09

2010

Q2 09

INDUSTRY

Q3 09

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$0.80 $0.70 $0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00

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Q2 09

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INDUSTRY

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2010

$0.040

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$0.030

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$0.020

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$0.000

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On the other hand, large plants had an advantage over small plants in 2010 in the areas of labor, administrative expenses, de$0.50 preciation and energy. For example, large Grind Margin plants lagged behind small plants in the area $0.40 of overall net income with realized hedging $0.30 Leaders in 2009 but pulled ahead of small plants by 2 Average to 3 cents in 2010. Another area where large $0.20 plants showed improvement over smaller Laggards $0.10 plants was in feedstock costs, ending up with $0.00 a slightly lower cost per gallon in 2010. That’s 2009 2010 quite significant, considering feedstock acquisition averaged 72.6 percent of total plant costs. & Associates revealed that ethanol plants Large plants outperformed small plants smaller than 60 MMgy were actually slightin labor costs during both 2009 and 2010, ly more profitable than larger plants. With ending up with a 1.5 cent per gallon advansome exceptions, that proved true in 2010 as tage. Current operating systems allow moniwell—something that could raise a few eyetoring of a plant, large or small, with the same brows. “When it comes to production capacteam size, the report explains. Other areas of ity in$0.80 a manufacturing setting, common thea plant also require the same amount of em- Quarterly ory $0.70 suggests that more is better,” the report Grind Marginployees to do the job whether large or small. says.$0.60 “However, in looking at two groups of In administrative expense, which includes ofethanol $0.50plants based on production capacity, fice supplies, memberships, dues and profeswe find $0.40that more production does not necsional fees, but not administrative labor, large essarily mean more profitability.” $0.30 plants had a consistent advantage of half a Small plants had higher revenues and cent per gallon over small plants. “Gener$0.20 higher overall margins in the past two years ally, the administrative expense has declined $0.10 when viewing ethanol and coproduct netsteadily amongst the industry participants $0.00 backs together. Part Q2 of 09 that has to doQ4with Q1 09 Q3 09 09 Q1 10 Q2 10 in Q3the 10 lastQ4two 10 years reflecting some of the DGs supply. Because a smaller plant isn’t operating efficiencies gained as the industry Average Leaders Laggards flooding the marketing with DGs and drivmatures,” the report says. “This is due in part ing prices down, it is able to maximize the loto tight margins and increased efficiencies of cal market. The smaller plants are more likely staff. In many cases, as staff members have to sell WDGS, which resulted in a 2 cent per left, other members have matured and taken gallon coproduct sales advantage over large on additional responsibilities.” plants. In addition, smaller plants located Large plants brought in nearly 4 cents $0.60 near a good customer base will have a freight more net income than smaller plants before $0.50 and competition advantage—not having to any other income and expenses per gallon. $0.40 ship long distances and compete for customHowever, once other income, such as the $0.30 ers worldwide, the report suggests.

Small

Overall Ethanol Industry Analysis

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$0.60 $0.50 $0.40 $0.30 $0.20 $0.10 $0.00

Yearly Grind Margin Quarter 1 Quarter 2 Quarter 3 Quarter 4 2009

2010

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JULY 2011 | Ethanol Producer $0 Magazine | 73

INDUSTRY

Benefits in Participation One plant that signed up for the benchmarking program is Adkins Energy LLC, a 43 MMgy ethanol plant in Lena, Ill. Adkins Energy has subscribed to the service for the past five years, says Ray Baker, chief financial officer for the plant, and has used the information to help identify areas that need improvement and track progress

Corn Cost Considering feedstocks average 72.6 percent of total costs, the slight advantage that large-scale plants show in the cost of feedstock procurement has a significant impact on the bottom line. The 110 MMgy Iowa ethanol plant, Platinum Ethanol LLC, pictured above, contributes financial and production data for the benchmarking program and yearly report.

toward that improvement. “The ethanol industry is becoming increasingly competitive and the C&A Benchmarking program provides a valuable tool to help us measure

our operational and financial performance against various segments of the industry,” he tells EPM. It’s something he would recommend

74 | Ethanol Producer Magazine | JuLY 2011 ADI SYSTEMS INC AD 02.pdf 1

PHOTO: MARQUIS ENERGY

PHOTO: PLATINUM ETHANOL

small producers tax credit, was added into the equation smaller plants actually had a 1 cent per gallon advantage over larger plants in net income with realized hedging per gallon. Large plants also lagged behind small plants in grind revenue in both 2009 and 2010. On the other hand, they had a lower grind expense than smaller plants in 2010. “Thus, it appears that in 2009 and 2010 the large plants are improving and benefitting from the economies of scale as one would expect as they adjust to the industry and continue to work on efficiencies,” the report says.

Scale Benefits The large plants among the 63 participating in the Biofuels Benchmarking program have an advantage in labor costs per gallon of ethanol produced. The 100 MMgy Marquis Energy LLC plant, Hennepin, Ill., pictured here, participates in the program.

other ethanol plants use to their advantage. The most valuable part of the benchmarking program is the staff of Christianson & Associates, who are dedicated to constantly improving the service, he explains. “Their responsiveness to our questions and requests has always been great and helped to add value to our operations,” he says, adding that as the ethanol industry has evolved, so has the online system of the benchmarking program, the data collected and the reporting capabilities. That value seems to be reflected in the number of ethanol plants using the service. The first year Christianson & Associates offered its Biofuels Benchmarking program only eight ethanol plants subscribed—a number that grew to 63 in 2010. Participating plants enter production and financial data on a secure website every quarter. In return, the data is analyzed and reports are generated that help those plants identify areas for improvement. “It offers real-time analytic information quarterly,” Saeger says. The benchmarking program is a tool that allows management and board members to measure the plant’s production and financial situation, as well as identify areas for improvement. “It’s pretty hard to make an improvement if you don’t know where you are sitting currently, and you need to measure those improvements going forward,” Emberland says. It can serve as a catalyst for producers to start asking themselves ques-

at where you are not the top of the list,” Buyck says. A secondary benefit has to do with the annual report the company has developed the past two years. That report summarizes some of the most interesting information collected during the year-long benchmarking program. In recent years, it seems the ethanol industry has had a large target painted on its back and it’s nice to be able to provide some statistical information to the media to help combat misinformation. “The benchmarking program allows plants to put their information together so we’ve got good statistics to put out there in the public for the industry and we can show a good reflection of what’s happening,” Emberland says.

tions about where they are and researching what others are doing. “I always tell every plant not to look at where you excel, but look

Author: Holly Jessen Associate Editor, Ethanol Producer Magazine. (701) 738-4946 hjessen@bbiinternational.com

ETHANOL REACTOR SYSTEM HIGHER YIELD GREATER THROUGHPUT REDUCED ENZYMES EPM@pdx.biz www.pdx.biz/biofuels JULY 2011 | Ethanol Producer Magazine | 75

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Brazilâ&#x20AC;&#x2122;s sugarcane ethanol industry hits a snag By KRIS BEVILL

78 | Ethanol Producer Magazine | JuLY 2011

JULY 2011 | Ethanol Producer Magazine | 79

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80 | Ethanol Producer Magazine | JuLY 2011

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Contracts and Pricing “Every year there’s a big challenge to have enough stocks to comply with the off-season period,” says Marcos Sawaya Jank, CEO and president of UNICA. “What we have learned from these last

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Make-up of the Market Brazil began developing its domestic ethanol industry in the 1970s in response to the worldwide oil crisis that hit countries with little to no oil production, including Brazil, extremely hard. Country leaders tasked the state-owned integrated energy firm Petrobras S.A. with developing new domestic oil production capacity, but also focused heavily on Brazil’s agricultural opportunities for alternatives. Sugarcane ethanol, which could be produced at the nation’s existing sugar mills, quickly rose to the front of the pack as a desirable fossil fuel replacement. Automakers began producing ethanol-fueled vehicles and the government provided incentives for consumers to purchase the new vehicles. Additionally, retailers installed hydrous ethanol pumps to distribute pure ethanol to consumers in response to growing demand for the alternative fuel.

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The program appeared to work well for the country until about 1990 when oil prices dropped and demand increased for gasoline-fueled vehicles. Demand for ethanol waned and mills converted more of the sugarcane crop to sugar. It wasn’t until the early 2000s that ethanol experienced a rebirth of sorts, brought on by the introduction of flex-fuel vehicles and spiking oil prices. Like the U.S., Brazil’s ethanol industry enjoyed substantial growth through the middle part of the decade. According to UNICA, Brazil’s Sugarcane Industry Association, sugarcane production in Brazil grew 10.3 percent every year between 2000 and 2008, ultimately doubling the nation’s historical output levels. But in 2008, Brazil’s ethanol industry, like its U.S. counterpart, took a nosedive. The global economic crisis took its toll on financing options and mergers and acquisitions began to occur, effectively shrinking the sugarcane industry’s growth from the expected average of 10.3 percent down to only 3 percent. This stunted growth was compounded by undesirable weather conditions for the sugarcane crop—too much rain in 2009 and a drought in 2010—leading to a nationwide shortage of ethanol stocks during the harvest off-seasons last year and earlier this year. American producers happily stepped in to supply some of the ethanol needed by Brazil, exporting more ethanol to the country earlier this year than had been brought in since the mid1990s. It filled a gap, but Brazil has no desire to become a habitual importer of U.S. ethanol. Determined to regain control of its own domestic supply, the industry must now weave its way through a complicated set of issues that need to be resolved so that it can return to its prior pattern of growth.

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did this situation develop and does it represent possible things to come for the U.S.?

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• • • •

n some ways, Brazil represents what the United States aspires to become in terms of ethanol use. While U.S. producers continue to fight for expanded infrastructure, Brazilian companies are building a pipeline to more easily transport ethanol from one region to another. The U.S. industry is banking on promises from auto manufacturers to crank out a greater number of much needed flexfuel vehicles in the coming years. Brazil’s highways are already loaded with vehicles that use ethanol-blended fuel or even pure ethanol. The U.S. EPA approval for E15 to be used in some American vehicles has yet to scale legal hurdles before it can be put to the test. Brazil currently has in place a nationwide E25 mandate. But everything is not coming up roses in the Brazilian ethanol industry, as illustrated by supply shortages this year, which were alleviated in some part by U.S. imports. Considering the envious progress made by Brazil throughout the past few decades in implementing ethanol usage, how

BRAZIL

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hƐĞ ůĞƐƐ ƉƌŽĚƵĐƚ ƚŽ ŐĞƚ ŵŽƌĞ ƌĞƐƵůƚƐ ĂŶĚ ĞǆƉĞƌŝĞŶĐĞ ƚŚĞ ďĞŶĞĮƚ ĚŝƌĞĐƚ ƚŽ ǇŽƵƌ ďŽƩŽŵ ůŝŶĞ͘ h^ tĂƚĞƌ ^ĞƌǀŝĐĞƐ KZΡ ƉƌŽĚƵĐƚƐ ĂƌĞ ĂŶ ĞŶŚĂŶĐĞŵĞŶƚ ĂĚĚŝƟǀĞ ƉƌŽǀĞŶ ƚŽ ŝŶĐƌĞĂƐĞ ƚŚĞ ƌĞŵŽǀĂů ŽĨ ĐŽƌŶ Žŝů ĨƌŽŵ ŵĞĐŚĂŶŝĐĂů ƐĞƉĂƌĂƟŽŶ ƐǇƐͲ ƚĞŵƐ Ăƚ ĚƌǇ ŵŝůů ĞƚŚĂŶŽů ƉůĂŶƚƐ ŵŽƌĞ ĞĸĐŝĞŶƚůǇ ƚŚĂŶ ŽƚŚĞƌ ƉƌŽĚƵĐƚƐ ĂǀĂŝůĂďůĞ ŝŶ ƚŚĞ ŵĂƌŬĞƚ͘ KƵƌ ƉƌŽĚƵĐƚƐ ƵƟůŝǌĞ Ă ĐŽŵƉůĞƚĞ ƉƌŽĐĞƐƐ ĂƉƉƌŽĂĐŚ ƚĂŝůŽƌĞĚ ƐƉĞĐŝĮĐĂůůǇ ƚŽ ƚŚĞ ĞƋƵŝƉŵĞŶƚ ĂŶĚ ĐŽŶĚŝƟŽŶƐ Ăƚ ĞĂĐŚ ĨĂĐŝůŝƚǇ͘ ^ĐĂŶ ǁŝƚŚ ǇŽƵƌ ƐŵĂƌƚƉŚŽŶĞ ƵƐŝŶŐ Ă ĨƌĞĞ YZ ĐŽĚĞ ƌĞĂĚͲ Ğƌ ĂŶĚ ďĞ ŝŶƐƚĂŶƚůǇ ůŝŶŬĞĚ ƚŽ ƉƌŽĚƵĐƚ ŝŶĨŽƌŵĂƟŽŶ ĂŶĚ h^ tĂƚĞƌ ƐƵĐĐĞƐƐ ƐƚŽƌŝĞƐ ƌĞůĂƟŶŐ ƚŽ ĐŽƌŶ Žŝů ƌĞĐŽǀĞƌǇ͘ ŽŶ͛ƚ ŚĂǀĞ Ă ƐŵĂƌƚƉŚŽŶĞ͍ EŽ ƉƌŽďůĞŵ͘ sŝĞǁ ŽƵƌ ďůŽŐ Ăƚ ǁǁǁ͘ƵƐǁĂƚĞƌƐĞƌǀŝĐĞƐ͘ǁŽƌĚƉƌĞƐƐ͘ĐŽŵ

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JULY 2011 | Ethanol Producer Magazine | 81

BRAZIL

PHOTO: NIELS ANDREAS, UNICA

BRAZIL

Not enough Brazil needs to build about 100 new sugarcane mills by the end of the decade in order to meet growing demand, according to the countryâ&#x20AC;&#x2122;s sugarcane industry association.

two years is that we needed to have more stocks. We needed to have more strategic stocks and need to be more prepared in terms of storage.â&#x20AC;? Currently, gasoline is marketed separately from anhydrous ethanol in Brazil and is controlled by Petrobras, the only gasoline producer in the country. In order to prevent future stock deficiencies, one of UNICAâ&#x20AC;&#x2122;s main goals is to convince ANP, Brazilâ&#x20AC;&#x2122;s national petroleum, natural gas and biofuels agency, to begin requiring contracts for ethanol that are linked to gasoline contracts. Jank says this will help to assure sup-

ply from ethanol producers, who currently canâ&#x20AC;&#x2122;t be certain whether anhydrous ethanol they produce will actually be used. Requiring contracts for ethanol to be blended with every liter of gasoline sold throughout the year will also alleviate uncertainty surrounding the E25 mandate, which the government has been known to temporarily lower in the past in response to reduced supply, he says. Fixed gas prices are another issue of major concern to the ethanol industry. Hydrous ethanol, which can be used in Brazilâ&#x20AC;&#x2122;s flexfuel vehicles, makes up 75 percent of Brazilâ&#x20AC;&#x2122;s

ethanol market, according to Jank. However, because consumers with those vehicles are able to switch between ethanol and gasoline to suit their needs, the ethanol industry needs to be able to price its product competitively with gasoline. Currently, hydrous ethanol is getting beaten out by low gasoline prices because Petrobras has not raised ex-refinery gas prices substantially since 2005. â&#x20AC;&#x153;Thereâ&#x20AC;&#x2122;s a monopoly here because the only supplier is Petrobras,â&#x20AC;? Jank says. â&#x20AC;&#x153;This is what makes investors not confident to invest in new plants right now.â&#x20AC;?

Raphael Hudson, Hart Energyâ&#x20AC;&#x2122;s director of Latin American Research and Consulting, says frozen gas prices are one concern of several facing Brazilâ&#x20AC;&#x2122;s ethanol industry. He believes that while Brazilâ&#x20AC;&#x2122;s gas prices have remained largely unchanged since the end of 2005, they have responded somewhat to market volatility, although not enough to compare to the inflating cost of ethanol production and subsequent higher price at the pump for hydrous ethanol. â&#x20AC;&#x153;My impression is their costs are going up, they have loans that they have to pay for and theyâ&#x20AC;&#x2122;re having a hard time keeping up,â&#x20AC;? he says. â&#x20AC;&#x153;When youâ&#x20AC;&#x2122;re competing against gasoline and the price hasnâ&#x20AC;&#x2122;t moved much, thatâ&#x20AC;&#x2122;s a problem.â&#x20AC;? Petrobras says its market price for gasoline reflects two things: the productâ&#x20AC;&#x2122;s value and state and federal taxes. As it heads down the distribution chain, ethanol prices, distributor and retail costs and marketing margins are factored in and ultimately are reflected in the price paid by consumers for C-grade (ethanol blended) gasoline. Sugarcane mills, meanwhile, are facing high land costs, competition for feedstock, and high input costs. Hudson says the pressure put on ethanol producers by Petrobras to lower their prices will likely require government intervention. ANP recently announced plans to review its pricing policy and is in discussions with ethanol industry representatives and Petrobras to explore solutions, according to Jank. Financing and Expansion Brazil needs more sugarcane mills to meet its growing demand for ethanol and right now thatâ&#x20AC;&#x2122;s just not happening, Jank says. â&#x20AC;&#x153;What we see in terms of investments since 2008 is companies buying other companies,â&#x20AC;? he says. â&#x20AC;&#x153;Mergers and acquisitions. The big discussions we are having with the government is how to grow 8 to 10 percent a year again, which is the number we would need to comply with the demand we believe will grow in the next years.â&#x20AC;? Jank predicts that 130 new mills need to be built in Brazil by 2020, ramping up sugarcane crushing capacity to 1.35 billion tons by that year. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s not impossible,â&#x20AC;? he

82 | Ethanol Producer Magazine | JuLY 2011

says. â&#x20AC;&#x153;In 2005, we had more than 10 new mills per year. We need to grow again at the same levels weâ&#x20AC;&#x2122;ve been growing in the mid-2000s.â&#x20AC;? The expansion of the industry could be more solidly accomplished now as compared to around 2005 because of the recent consolidation of the industry, he says, and the government is participating in talks with UNICA to achieve the industryâ&#x20AC;&#x2122;s expansion goal. One of the industryâ&#x20AC;&#x2122;s relatively new players is Petrobras. The firm entered the industry when it established its biofuels arm in 2008 and now holds stakes in 10 plants, representing a combined capacity of 900 MMly. It also recently announced plans to increase its investments in the coming years in order to expand its ethanol output capacity. Hudson also views this as a potential positive for the industry. â&#x20AC;&#x153;As you get bigger players like Petrobras itself moving into the sector, youâ&#x20AC;&#x2122;re probably going to have larger-scale players that can access other sources of financing, not exclusively in Brazil, and that could help build up the scale of crushing capacity and feedstock production,â&#x20AC;? he says. But Hudson also sees the need for the Brazilian government to play a role in the industryâ&#x20AC;&#x2122;s expansion. â&#x20AC;&#x153;The availability of financing needs to improve to a certain extent, thatâ&#x20AC;&#x2122;s something on the private backing sector, but a lot of it can be addressed by the government because it still has a pretty significant role as a provider of rural credit and also through the provision of agro-industry credit through BNDES, its development bank,â&#x20AC;? he says. â&#x20AC;&#x153;If people in the sector can get better access to financing that will definitely help things.â&#x20AC;? U.S. Impact Even if financial conditions improve and the government gets its pricing mechanisms under control, there is about a twoyear lead time before the first set of new mills can be constructed and begin operating. The U.S. has played a small, but very important role in providing ethanol to Brazil this year when it came up short. Will those opportunities continue? Probably not, Hudson says. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s a difficult situation

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PHOTO: NIELS ANDREAS, UNICA

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High-priced Plants Increasing costs related to sugarcane production have made it difficult for producers to compete with Brazilâ&#x20AC;&#x2122;s fixed gas prices.

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now and itâ&#x20AC;&#x2122;s a good relief valve for them to be able to use,â&#x20AC;? he says, adding that once the sugarcane harvests are in full swing in July and September, Brazil should be able to get back on its feet in terms of ethanol supply. Jank, who never misses an opportunity to address the U.S. ethanol import tariff issue, points out that Brazilâ&#x20AC;&#x2122;s lack of import tariff made it easier for U.S. exports to enter the country when it was needed this spring. â&#x20AC;&#x153;We really think this was extremely good and helpful and we hope that the U.S. people would understand that this would also be good for the U.S.,â&#x20AC;? he says. â&#x20AC;&#x153;What we imported was extremely important during this off-season period. We really believe open markets are extremely important for ethanol markets everywhere because it makes us more independent of oil, it makes our industry much more competitive, itâ&#x20AC;&#x2122;s important for the environment and itâ&#x20AC;&#x2122;s important because of the weather problems. This year it was in Brazil, next year it could be in the United States. Climate problems happen everywhere.â&#x20AC;? Of course, Brazil still believes its sugarcane ethanol is superior to U.S. corn ethanol, a sentiment that was echoed by the U.S. EPA when it classified sugarcane ethanol as an advanced biofuel. But because of the import tariff, Brazilian producers say they are locked

out of the market. Jank doesnâ&#x20AC;&#x2122;t buy the argument that a tariff is necessary in order for the U.S. to establish its own advanced biofuels industry. â&#x20AC;&#x153;The U.S. could be a very important market for us, but never gave us any signal that it could happen,â&#x20AC;? he says. â&#x20AC;&#x153;We are now exporting 70 percent of our sugar and only 10 percent of our ethanol. We could increase that very easily, but only if there is a clear signal that this could happen. Who would benefit from a reduction of the tariff? U.S. consumers, because they would be diversifying from oil imports. There would be more competition at the pump level. There would be less risk in terms of weather conditions. Of course, we would benefit, too, but I think there are many reasons why it would benefit the U.S.â&#x20AC;? An opportunity to export product to the U.S. would invite greater investment in

â&#x20AC;&#x2DC;We really believe open markets are extremely important for ethanol markets everywhere because it makes us more independent of oil, it makes our industry much more competitive, itâ&#x20AC;&#x2122;s important for the environment and itâ&#x20AC;&#x2122;s important because of the weather problems. This year it was in Brazil, next year it could be in the United States. Climate problems happen everywhere.â&#x20AC;&#x2122; Marcos Sawaya Jank, CEO and president, UNICA

the Brazilian industry, he says, adding that many U.S. companies have already begun to invest there. Hart Energy consultants recently conducted an analysis on issues facing the global ethanol industry over the next five years. One of the issues addressed in the report, titled â&#x20AC;&#x153;Renewable Ethanol: Navigating the Rapids: 2011-2015,â&#x20AC;? is whether Brazil will be able to supply sugarcane ethanol to the U.S. to meet its advanced biofuels requirement under the renewable fuel standard. Hudson says they anticipate the amount of Brazilian ethanol available for exports to remain small over the next few years, but the situation should improve over time. â&#x20AC;&#x153;We donâ&#x20AC;&#x2122;t expect the exportable surplus that UNICA and others in Brazil have forecasted, but we expect enough where if purchasers in the U.S. are ready to pay a surplus for it, there should be enough to meet that need,â&#x20AC;? he says. A complex set of issues faces the Brazilian industry, but once they are resolved, the industry is believed to be primed to contribute an even larger role to Brazilâ&#x20AC;&#x2122;s economy and the global ethanol markets. Jank firmly believes the country is at a point of opportunity, rather than crisis. â&#x20AC;&#x153;We are not talking about a country that is facing a depression or something like that. We are talking about a country that is growing 5 to 6 percent a year and our industry is growing 3 percent when we should be growing 8 to 10 percent, which is very good news actually,â&#x20AC;? he says. Hudson also views the current situation as a potential positive. â&#x20AC;&#x153;Because of the very nature of flex vehicles and because of the greater sensitivity to the carbon intensity of fuels, that is going to create an additional potential demand for ethanol,â&#x20AC;? he says. â&#x20AC;&#x153;If these problems are dealt with properly, it can be read as an opportunity. This current situation is merely a bump in the road.â&#x20AC;? Author: Kris Bevill Associate Editor, Ethanol Producer Magazine (701) 540-6846 kbevill@bbiinternational.com

JULY 2011 | Ethanol Producer Magazine | 85

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RUSSIA

Russian Crops Potato—25 to 37 million tons per year harvested in the Central Black Earth, Volga and western part of the Urals Sugar beet—2.7 to 2.8 million tons per year harvested in the Central Black Earth and North Caucasus Corn—2.5 to 4 million tons per year harvested in the North Caucasus and Central Black Earth Wheat—58 million tons per year harvested, winter wheat in the North Caucasus and Volga, spring wheat in the southern regions of the Urals, Western Siberia and Eastern Siberia.

On the

Brink of Far East

Northwest

Northern Eastern Siberia

Central

Change Russia plans to tap into bountiful resources to expand ethanol production By EUGENE GERDEN

Central Black Earth

Volga

North Caucusus

88 | Ethanol Producer Magazine | JuLY 2011

Urals

Western Siberia

The Russian government is considering the implementation of a state program to develop a biofuel and ethanol industry in Russia. Amid dwindling hydrocarbon reserves and the ever-rising costs of oil exploration and production, the increase of production and use of ethanol may provide alternative sources of fuel to Russia in the near future.

JULY 2011 | Ethanol Producer Magazine | 89

RUSSIA

Currently about 9 percent of the worldâ&#x20AC;&#x2122;s tors plans to complete reconstruction of exland resources suitable for growing crops isting ethanol plants and construction of up is in Russia. Most of this land is not used, to 30 new facilities, with a goal of increasing which means that the country has a huge po- domestic ethanol production up to 2 million tential for the production of ethanol. Until tons per year (670 MMgy). According to the recently, however, the industry had not been plan, production capacity of an average Rusdeveloped due to the presence of large re- sian plant is expected to reach at least 150 serves of conventional energy sources and million liters per year (40 MMgy). At the same administrative barriers. time, construction of plants with a producAs part of the federal program, the tion capacity of less than 70 million liters per " " " "

"!"" ! ! ""!! government partnering with private invesyear" "" "! is considered economically inadvisable.

The payback period for such projects is expected to be four and a half to seven years, depending on capacity. The investments in plants with a 250 to 1,000 metric ton capacity is expected to be between â&#x201A;Ź100 million to â&#x201A;Ź130 million ($140 million to $180 million), taking 18-24 months to complete. One such recently announced project is being planned by OAO-Nafis Cosmetics. One of Russiaâ&#x20AC;&#x2122;s largest producers of household chemicals, it plans to start construction of the countryâ&#x20AC;&#x2122;s largest ethanol plant, with a processing capacity of more than 1 million tons of wheat per year, producing up to 350,000 tons of ethanol and 120,000 tons of protein annually. If successful, the company may establish similar plants throughout Russia. Small and Uneconomical During the Soviet times, ethanol production in the USSR was mostly based on the hydrolysis of plant biomass. The country had more than 40 hydrolysis and biochemical plants, which used waste products from wood processing and the pulp and paper industries, as well as agricultural residues, as raw materials. At present, the annual production of ethanol in Russia is estimated at 700 million liters, most of which is used in the production of vodka. There are nearly 140 plants in Russia, with a total capacity 1.5 billion liters. Only 10 to 12, however, utilize modern ethanol production technologies at industrial sites. Most of the existing distilleries, due to their small size, low level of automation

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90 | Ethanol Producer Magazine | JuLY 2011

Upgrades Ahead Russian officials expect many of the countryâ&#x20AC;&#x2122;s 140 distilleries will retrofit to produce fuel ethanol if proposed changes make it more economically viable.

and high energy consumption, are unable to produce ethanol at an acceptable cost. In addition, a high excise duty on ethanol production limits its production for the domestic market. At present, ethanol is still not considered a component of motor fuel in Russian tax legislation, but only an alcoholcontaining product subject to a high excise duty of 8 cents, which makes its production unprofitable in Russia. The government is currently considering abolishing that excise duty on ethanol, which is considered one of the most important steps for a significant increase in ethanol production and could reduce the cost of ethanol by Tax Barrier almost 30 percent. If excise taxes and other barriers are â&#x20AC;&#x153;If the government removed, fuel ethanol decides to abolish the will be attractive for blending with gasoline excise tax on ethasays Alexei Ablaev, nol, its production president of the Russian Biofuel Association. will become highly profitable,â&#x20AC;? says Alexei Ablaev, president of the Russian Biofuel Association. â&#x20AC;&#x153;The cost of ethanol produced from domestic grain is about 10 rubles (30 cents), while the cost of high-octane gasoline is more than 20 rubles.â&#x20AC;? Another measure being considered is stimulating the production of gasoline with improved characteristics, with the possibility of a 5 percent ethanol blend mandate. In addition, the government may establish new fuel and engine standards and require oxygen-containing additives in fuel. According to estimates of the Russian Ministry of Agriculture, a 5 percent ethanol mandate is expected to boost the demand for ethanol in Russia up to 1.25 million tons per year. The Russian government believes that creating favorable conditions for an increase in ethanol production will bring most current Russian ethanol plants to full capacity. Also, the production of 1.5 billion liters of ethanol a year will require about 2,400 tons of grain or sugar beet molasses, which, in turn, could benefit local agricultural producers financially.

According to Ablaev, other measures that could be implemented to boost domestic ethanol production would be the adoption of fuel standards requiring at least 2 percent oxygen in automotive fuel; providing tax incentives and duties for ethanol producers for up to eight years, as well as developing export infrastructure, in particular port terminals. Subsidies to producers of ethanol feedstocks would also boost domestic production.

Abundant Potential Russia currently has the resources for the production of both first- and second-generation ethanol. The government is considering creating conditions for a gradual shift from the further use of outdated cellulosic ethanol hydrolysis technology, to an active use of other raw materials such as molasses, potato starch, sweet sorghum and others. According to analysts of the Ministry of Agriculture of Russia, there are more than 20

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| Ethanol JULY 2011Brock Producer Magazine | 91 Grain Systems Ethanol Producer

RUSSIA

million hectares (50 million acres) of unused arable land in Russia. Bringing that land back into production is expected to produce about 1 billion cubic meters of biomass, similar to estimates for U.S. biomass resources. By adding cultivated acres and certain agricultural practices, Arkady Zlochevsky, the chairman of the Russian Grain Union, says Russia could increase production of corn and some grain crops fivefold—underscoring the huge potential for the increase of production of bioresources for both the ethanol and food industries. Revenues from ethanol produced from such a large number of raw materials could amount to almost $10 billion. In contrast to Brazil and the U.S., corn and sugar cane are rarely used in the production of ethanol in Russia. Sugar cane is simply not grown, while most of the domestic corn crop is used in the production of animal feed. According to experts of the Russian Ministry of Agriculture, corn is currently more expensive than milling wheat in Russia. However the increase of its acreage,

as well as more efficient production of other traditional crops, may provide conditions for a significant increase of their supplies for the needs of the Russian ethanol industry. The most promising Russian crops for first-generation ethanol include sugar beet, sweet sorghum and potato. Potatoes are considered an ideal ethanol feed- Switch to Fuel Moscow Interrepublican Distillery, one of Russia’s largest distilleries, is considering a retrofit for the production of fuel ethanol. stock, according to Viktor Starovoitov, deputy director of All-Russian Future Markets Potato Research Institute, due to the availOne way to make the Russian ethanol ability of specialized agricultural machinery production more profitable at the initial stage and the vast potato production experience of expansion is to develop exports, mainly to in Russia. About 10 kilograms of potatoes those countries already using ethanol as an produce 1 liter of ethanol at an approximate additive to fuels and those that provide benecost of 35 to 45 rubles per liter ($1 to $1.50).

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fits to importers. According to some Russian experts, the EU and Japan could be considered potential destinations for Russian ethanol, with Siberian plants supplying Japan. Still some analysts warn that focusing on the production of first-generation ethanol could be a high-risk business for Russia, taking into account the likelihood of intense competition not only with the U.S. and Brazil, but even with such countries as Ukraine and Belarus. Both of these countries are currently considering launching massive projects in the field of ethanol production, with the use of corn, potatoes and molasses as raw materials. In this regard, some analysts of the Russian Ministry of Agriculture suggest it would be advisable for Russia to pay more attention to the production of second-generation ethEditor’s note:

The author, Eugene Gerden, lived in Moscow for 10 years where he worked for the local association of grain and ethanol producers. He currently resides in Geneva and writes about the renewable energy industry.

anol, utilizing its huge forest resources. This, however, would require the development of modern cellulosic conversion technology. According to Vadim Yakovlev, a scientist of the Novosibirsk Institute of Catalysis, Russia currently harvests about 140 million cubic meters of timber annually from mature timber harvest and forest maintenance, which is expected to reach 200 million cubic meters in the next five to seven years. Forest waste accounts for more than half of the total harvested volume in the country. During forest thinning and maintenance, up to 60 percent of the wood is considered low quality with no market value. The total volume of wasteand low-grade wood is projected to be greater than 40 to 45 million cubic meters a year, capable of producing at least 10 to 12 million tons of cellulosic ethanol. In addition, the use of crop residues and peat in Russia is also inefficient. The volume of crop residues, which are thrown to the wind, is at least 10 million tons per year, which is equivalent to 3.4 million tons of potential fuel.

At present, the Russian government is considering the implementation of certain projects in the field of production of second-generation ethanol, the details of which have not yet been disclosed. Payback periods of each of them are estimated at six to eight years. Although there is a possibility that implementation of a national program to stimulate ethanol production will meet with stubborn resistance from the oil lobby, most Russian analysts predict a bright future for the Russian ethanol industry. Michael Sutyaginsky, an executive with the Titan Group, one of Russia’s largest producers of motor petrol components and chemical rubbers, predicts that 10 to 15 ethanol plants will be built in Russian during the next five to seven years. This is expected to result in oil companies shifting from the use of traditional fuel additives to environmentally friendly ethanol. Author: Eugene Gerden Freelance Writer Gerden.eug@googlemail.com

INCENTIVES

Setting the Net

$ $ $

$ $

The concept of replacing VEETC with a variable tax credit is gaining popularity. Will it work? By Kris Bevill

Recently it’s been difficult to navigate a 24-hour news cycle without hearing at least some mention of the U.S. deficit. Discussions of the nation’s debt have dominated the political scene at the national and state levels as governments struggle with the task of regaining positive growth after a difficult economic recession. The situation has made the ethanol industry an easy target for those seeking ways to reduce government spending. The Volumetric Ethanol Excise Tax Credit and ethanol import tariff have been on some legislators’ chopping blocks for several years, and their repeated attempts to entirely eliminate the programs have been consistently defeated, but after December’s last-minute, one-year extension of both

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INCENTIVES

STEP UP provisions, it was made clear that even proethanol legislators would no longer support the continuation of VEETC or the import tariff at their current levels beyond 2011. Ethanol industry groups consented and agreed to combine their efforts and work with lawmakers to form a long-term reform plan for VEETC. By late May, the ethanol industry’s official long-term road map had yet to be unveiled, but recently introduced legislation offers a feel for what the industry’s preferred modifications look like. On May 4, Sen. Chuck Grassley, R-Iowa, introduced the Domestic Energy Production Act of 2011, which he offered as “a good starting point” for ethanol tax policy reform. The bill recommends reducing VEETC from its current rate of 45 cents per gallon to 20 cents per gallon beginning in 2012, and reducing it again to 15 cents per gallon in 2013. Beginning in 2014, the credit would become a variable tax credit, allowing ethanol blenders to claim a 30-cent-per-gallon tax credit during times when oil prices are $50 per barrel or less. For those times when oil prices range from between $50 per barrel and $90 per barrel, the credit would vary based on the price of crude oil. If oil prices are $90 per barrel or higher, there would be no ethanol tax credit because blenders would have enough market incentive to participate in discretionary blending without additional tax credits. The import tariff would follow the blenders’ credit, but would not vary after 2013 and instead remain steady at 15 cents per gallon. Safety Net The concept of a variable tax credit for ethanol blenders has been floated around for some time, according to those familiar with efforts to modify the program. Initially, there was some skepticism as to whether the program would be too cumbersome or novel for the concept to gain widespread acceptance. However, there are other instances of this type of program being used, most notably in the agriculture industry in the form of deficiency payments for corn farmers in years past, and the notion of a variable incentive

has now become the preferred option for reform among ethanol industry groups. Wally Tyner, energy economist and professor of agricultural economics at Purdue University, is known as the foremost researcher of the variable tax credit approach and says it represents an efficient option to reduce both government financial obligations and private sector risk when compared to the current VEETC. “That’s the real advantage of this,” he says. “There’s a win-win zone where government outlays go down, but private risk also goes down.” A variable credit based on oil prices, such as was proposed by Grassley, offers no support when prices of oil, gas and ethanol are high, because none is needed, Tyner says, adding that the credit would basically exist to provide producers with a safety net for times when oil prices are low. Geoff Cooper, vice president of research and analysis for the Renewable Fuels Association, admits that the term “safety net” as related to agriculture policy has had negative connotations in the Evaluating Options past, but he says the Ag economist Wally term fits when deTyner from Purdue scribing the variable University has considered the impact ethanol tax credit of a number of ethanol concept. “That’s the incentive options. idea here,” he says. “It’s a backstop to ensure that at times when oil prices are low, ethanol blenders downstream will continue to have an incentive to blend as much ethanol as possible.” The RFA has been committed to exploring the possibility of a variable tax credit since it became obvious that VEETC wouldn’t be extended in its current form, Cooper says, and believes it to be the most attractive option for reform. “It can work and we’re excited by the prospect of having a variable credit and think it will provide assurance when the oil market crashes,” he says. Considering the current run-up in oil prices and the number of institutions that have predicted high crude oil prices for the foreseeable future, an obvious question is

whether it is even necessary to implement a the blending margin, which could be calprogram to protect ethanol against low oil culated monthly by subtracting the previprices. Cooper believes it is. “People forget ous month’s wholesale ethanol price from that when the commodities bubble of 2008 the wholesale gasoline price. “The level of burst, oil prices crashed, and they crashed crude oil prices is not perfectly correlated hard—to less than $40 per barrel of oil,” with blending margins,” says Scott Irwin, he says. “At that point, we saw ethanol professor of agricultural economics at the University of Ilprices higher than linois and co-augasoline and, had thor of the analythe VEETC not ‘There’s a win-win zone sis. “It’s possible been in place at you could have that time, you cerwhere government higher crude oil tainly would have prices, but ethaseen a decrease outlays go down, but nol above gasoin discretionary private risk also goes line prices, and blending. That’s you wouldn’t be exactly the type of down.’ getting a subsidy scenario that this under the crudetype of program Wally Tyner, energy economist and oil based variable is intended to proprofessor of agricultural economics, policy. But you tect against.” Purdue University would under the Tyner says blending margin that while oil proposal.” Basprices probably will not go down, the possibility is there. ing the tax credit on the blending margin “I’m not saying it’s the most likely scenario; would also reduce the government’s outit’s not,” he says. “The most likely is that it lays even further than if it were based on will stay in this $90 to $100 range, in which crude oil, Irwin says, because the incentive case there’s no subsidy. But in the event of would likely come into effect in fewer inanother recession or another giant oil field stances. Another option for VEETC reform find, the safety net is there.” was introduced earlier this year by Sens. Amy Klobuchar, D-Minn., and Tim JohnOther Options While Grassley’s proposal suggests son, D-S.D. The Securing America’s Future basing the variable ethanol tax credit on with Energy and Sustainable Technologies crude oil prices, there are other market Act would immediately reduce the credit factors that could also be used to trigger a to 20 cents per gallon beginning next year variable incentive. Economists at the Uni- and then simply ratchet it down by 5-cent versity of Illinois recently released a paper increments annually until the credit zeroes exploring the viability of a variable ethanol out in 2016. Money saved from the evapoblenders tax credit and concluded that us- rating blenders’ credit would be diverted ing crude oil as the trigger may not always toward biofuels infrastructure expansion. be beneficial. Because crude oil is used to Johnson says that while VEETC has played produce a wide variety of products, the an important role in assisting the domestic price of crude is not always related to the biofuels industry gain a foothold in the blender’s margin, the authors wrote. Basing marketplace, he believes this option would the credit on gasoline prices, specifically serve to reform and reduce the tax credit Reformulated Blendstock for Oxygenate as needed, while also making necessary Blending, may be a better option because investments in infrastructure. Grassley’s it would eliminate the influence of those proposal, meanwhile, does little to address other factors. An even better choice, how- infrastructure expansion. Growth Energy was the lone ethanol ever, might be to base the incentive on

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industry group to publicly endorse the Klobuchar-Johnson proposal. Grassley’s proposal received the backing of an ethanol alliance including Growth Energy, the RFA, the American Coalition for Ethanol and the National Corn Growers Association. Growth Energy CEO Tom Buis says his group spoke out in support of a variable tax credit program last year, but that the group also believes a greater emphasis should be placed on confronting infrastructure constraints. “Almost anyone you talk to in the industry is really about clearing those infrastructure barriers by getting more flex-fuel vehicles on the road and combining that with flex pumps at the nationwide retailers so that the American consumer can choose the blend they want,” he says. “The tax policy is important. I’m not saying it’s not. But right now we don’t have that distribution mechanism. We don’t have the cars capable of a wide range of blends. Those two, I think, is where you’re going to see Growth Energy continue to keep its focus, because that’s our future.” There are risks and concerns with any type of incentive program. For ethanol incentives, the major concern is how they might affect corn prices. This can be extremely difficult to quantify, according to economists. “It’s a really tough question because it depends on what you want to assume,” Tyner says. “If the blend wall is still there, it doesn’t really matter because not much would get to the producer anyway.” In a scenario where blend wall restrictions are eliminated, a variable credit could relieve some pressure on corn prices when the incentive is not in effect. Irwin says a reduction from the current VEETC rate could have some effect on corn prices as the impacts of a lesser incentive filter down to corn farmers, but it likely would be minimal. “There’s some risk that it would lower on average the price of ethanol and therefore lower the price of corn as well,” he says. “But I think the magnitude of those impacts is hard to assess because we don’t have them pinned down very well for the current 45cent program.”

More Options

It appears likely that some type of variable tax credit will eventually be used to replace the current fixed-rate Volumetric Ethanol Excise Tax Credit. However, according to Wally Tyner, energy economist and professor of agricultural economics at Purdue University, there are several other options for VEETC reform. Some of the more interesting options include: • Shifting the credit from the blender to the biofuel producer. Under this option, ethanol producers would receive the tax credit, but Tyner cautions that they wouldn’t necessarily retain the benefit because ethanol prices would still be determined by supply and demand. Therefore, what would appear to be an improvement for the producer would “likely result in no change,” he says. A method would also have to be developed to ensure that ethanol receiving the credit is not exported, a concept that could be very difficult to implement. • Providing a credit only for the quantity of ethanol produced in excess of the renewable fuel standard. This option would substantially reduce the government’s financial requirements, but would have no impact on corn prices, according to Tyner. A program of this type could be implemented through the renewable identification (RIN) markets. • A credit based on the energy content of the fuel produced. Basing an incentive on the fuel’s energy content, rather than the volume, would be a more technology-neutral approach and would level the playing field among biofuel technologies, Tyner says. The U.S. EPA uses a similar approach for RINs. • A credit based, at least partially, on the facility’s reduction of greenhouse gas emissions. This approach could provide an overall environmental benefit by rewarding producers for reducing their carbon footprint. However, implementing a program of this type could be quite costly as it would require the certification of each ethanol facility’s carbon footprint.

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INCENTIVES

Irwin says the most likely participant in the ethanol production chain to be affected by a change to the tax credit program are the blenders themselves. â&#x20AC;&#x153;They havenâ&#x20AC;&#x2122;t been forced to confront the true cost of the biofuels mandates as it relates to ethanol because of VEETC,â&#x20AC;? he says. A variable incentive makes possible a scenario in which blenders may be required by the renewable fuel standard to use ethanol at a loss. The current VEETC appears to make up for that loss, but that is not guaranteed under variable incentive program. Tyner says his only concern regarding a variable tax credit is its potential impact on the renewable identification numbers (RINs) markets. â&#x20AC;&#x153;My view is that if it were done instantly, it would be disruptive early on of the RINs market,â&#x20AC;? he says. â&#x20AC;&#x153;But markets adjust. Once people figure out that all it means is they need to take into consideration oil fu-

tures in the thinking about RINsâ&#x20AC;&#x201D;do we need to buy more? sell more?â&#x20AC;&#x201D;markets can and would do that. It just might take them a little while to learn how to do it.â&#x20AC;? Reforming Reform One main point politicians and ethanol group representatives all make clear is that the Grassley bill, as well as any other option on the table for VEETC reform, is not a final offer. Johnson, for example, says that while he believes in his proposal for reform, heâ&#x20AC;&#x2122;s not opposed to entertaining other options. â&#x20AC;&#x153;I am open to different approaches to reforming the tax credit and I have worked with my colleagues to develop various legislative proposals that will be part of the debate on energy policy,â&#x20AC;? he says. â&#x20AC;&#x153;Ethanol plays an important role in our transportation fuel mix and has been shown to keep gas prices lower than they would otherwise be. Particularly as

gas prices are skyrocketing, we should not haphazardly pull support for ethanol with no fall-back but greater oil dependence.â&#x20AC;? The general consensus among industry supporters is that tax credit support for ethanol should not be entirely eliminated in one fell swoop, but the concept of a gradual shift to a variable program, as suggested by Grassley, has not been whole-heartedly embraced either. â&#x20AC;&#x153;If a variable tax credit makes sense, it makes the most sense to go to it right away,â&#x20AC;? Irwin says, adding that there is no economical reason to fix the price for two years. Tyner agrees that the decision to ease into a variable program is entirely a political decision, and says he doesnâ&#x20AC;&#x2122;t have a strong feeling toward implementing the program now versus two years from now, as long as the industry has some time to prepare for whatever change is headed its way. Ethanol groups appear to now be focusing on doing some of their own blending, hinting that provisions from several of the ethanol reform bills could be included in a comprehensive energy package. Buis says the delay in implementing the variable tax credit as proposed by Grassley would offer the industry and lawmakers time to hammer out the finer details, such as the preferred incentive trigger. Cooper says the RFA is very happy with Grassleyâ&#x20AC;&#x2122;s bill because it achieves its goal of addressing ethanol tax policy. He mentions other legislation, such as the Open Fuel Standard proposed by Rep. John Shimkus, R-Ill., as presenting opportunities for infrastructure expansion. Itâ&#x20AC;&#x2122;s unlikely that any of these pieces of legislation have a chance of being approved on their own, but Cooper believes Congress is inching toward considering a comprehensive energy bill, which would improve the chances for a number of the ethanol-related provisions to pass. â&#x20AC;&#x153;When we look at the fact that weâ&#x20AC;&#x2122;re paying $4 for gas, and probably on the way to $5 for gas, thatâ&#x20AC;&#x2122;s really going to light a fire under Congress to take a hard look at our energy policy and see what things can be done to move us in a better direction,â&#x20AC;? he says. Author: Kris Bevill Associate Editor, Ethanol Producer Magazine (701) 540-6846 kbevill@bbiinternational.com

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EVENT

7 Associations

1 Goal

Bioenergy industry leaders discuss policy objectives and collaboration at the International Biomass Conference BY ERIN VOEGELE PHOTOS BY WHITNEY CURTIS

St. Louis is not only the Gateway to the West, it also acted as the gateway to the future of the biomass industry in May as nearly 1,400 professionals representing all aspects of the sector descended upon its Americaâ&#x20AC;&#x2122;s Center convention hall May 2-4 to network, conduct business and learn about recent technological and agronomic breakthroughs. The 2011 International Biomass Conference & Expo was organized by BBI International and co-sponsored by EPMâ&#x20AC;&#x2122;s sister publications, Biomass Power & Thermal and Biorefining Magazine. Sending a Message RFA President Bob Dinneen, left, and the CEO of NBB Joe Jobe, middle, look on as AFBA president Michael McAdams tells the audience to let Capitol Hill know that we need second-generation biofuels and biobased chemicals, and sound federal policy supporting them, today.

104 | Ethanol Producer Magazine | JuLY 2011

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EVENT

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BIOGAS-TS

EVENT

A highlight of the event was the Tuesday morning plenary session, titled Association Executive Roundtable: Our Industry in a Changed Political Landscape. Leaders of seven biomass trade associations shared the stage during the session, discussing policy objectives, cooperation strategies and methods to overcome common obstacles. Those participating in the discussion included Algal Biomass Organization Executive Director Mary Rosenthal, Biomass Thermal Energy Council Chairman Charlie Niebling, Biomass Power Association President and CEO Robert Cleaves, American Biogas Council Vice Chair of External Affairs Norma McDonald, Renewable Fuels Association President and CEO Bob Dinneen, National Biodiesel Board CEO Joe Jobe, and Advanced Biofuels Association President Michael McAdams. While different segments of the biomass industry have, at times, unintentionally worked against rather than with each other, the tide seems to be shifting. In fact, McAdams commented on how far the organizations represented in the panel had come in a single year, noting that many cooperative policy efforts between the organizations were a direct result of a similar session at last year’s 2010 International Biomass Conference & Expo. Today, organizations like the ABFA, NBB, RFA and ABO are working together to support areas of common policy goals and objectives.

perative algae-based fuels are eligible for the same tax incentives that cellulosic fuels and other advanced biofuels qualify for. “The other key with this 112th Congress is education,” Rosenthal continued. There is a continual need to educate federal lawmakers on the energy security benefits and advantages of algae-based fuels. According to Rosenthal, the ABO will also continue to advocate for continued renewable fuels funding through the U.S. DOE, USDA and the U.S. Department of Defense. While the RFA also has plans to focus on educating members of Congress, Dinneen stressed that his organization must also work to maintain certainty for the ethanol industry. “It’s not that we don’t support parity—we do—but, we’re looking at a situation where our tax incentive expires at the end of this year,” he said. “When the tax incentive was extended [last year] it was made clear by friend and foe alike that going into the future there needs to be a fairly significant meaningful reform of that tax incentive. That’s what we’ve been working on.” According to Dinneen, the RFA is working to reform some of the existing incentives in a way that reflects the

Near-term Objectives

Clean Air & Energy Technology www.eisenmann.us.com es.info@eisenmann.com

To open the panel, each association leader provided the audience with an overview of its respective nearterm policy goals. Rosenthal kicked off the discussion by stating the ABO will continue to push to achieve parity for the algae industry with regard to tax credits. “[The algae industry] receives no fuel credits at this point in time,” she said, noting that it is im-

Results Oriented ABFA president Michael McAdams says while other associations are worried about securing long-term federal policy, the ultimate goal for his members is to put steel in the ground and get plants built.

Changing the World Leaders of seven renewable energy trade groups discussed important policy and industry goals during the 2011 International Biomass Conference & Expo May 2-5 in St. Louis.

EVENT

fact that the ethanol industry has grown. â&#x20AC;&#x153;There needs to be a fiscally responsible approach to this that will allow the industry to continue to grow, and more important to evolve,â&#x20AC;? he added. Extending tax incentives is also a primary goal of the NBB, Jobe said. â&#x20AC;&#x153;Our top priority is successful implementation of the RFS2, and a big part of that is extension of our tax credit in order to help buffer the cost of compliance and get this program more mature,â&#x20AC;? he said. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s going to be very difficult given the focus on debt reduction in this Congress, but we believe that weâ&#x20AC;&#x2122;ve got a good chanceâ&#x20AC;ŚOur tax credit is a quarter of a century younger than the ethanol tax credit. We just need a little bit more time to get a little bit more mature.â&#x20AC;? Responding to a question posed by a member of the biomass industry regarding speculation that some members of the biodiesel industry would prefer to see the credit lapse, Jobe reiterated that extending the biodiesel tax credit is the No. 1 goal

EVENT

Capitol Hill Challenge Entrenched, powerful, well-healed interests like the status quo, RFA President and CEO Bob Dinneen says, and it will take time to build support for clean-burning, renewable energy.

of the NBB. He elaborated by explaining 2011 is the first full implementation year of the RFS2 program. â&#x20AC;&#x153;Really, this is the first yearâ&#x20AC;&#x201D;and the only yearâ&#x20AC;&#x201D;weâ&#x20AC;&#x2122;ve ever had the tax credit and the RFS2 working in tandem,â&#x20AC;? he said. â&#x20AC;&#x153;And guess what? It works.â&#x20AC;? In addition to helping to increase the favorability of blending economics, Jobe also noted that the tax credit also plays an important role in driving investment in next-generation feedstocks, such as algae. Although many of the association leaders taking part in the panel spoke about policy goals, McAdams said the primary goal of ABFA members is to get plants built. â&#x20AC;&#x153;The number one objective of the advanced and cellulosic industries is to deploy new technologies to build new plantsâ&#x20AC;&#x201D;put steel in the ground,â&#x20AC;? he said. One policy element that McAdams said could help support this objective would be for federal lawmakers to alter the fuel procurement requirements of the U.S. military in a way that would allow the formation of long-term off-take agreements. â&#x20AC;&#x153;What we are really trying to do is deploy these technologies,â&#x20AC;? McAdams said. â&#x20AC;&#x153;If we could extend the procurement process, particularly with the Department of Defense, by extending the period of time in which the military can buy renewable fuels or jet, for instance, that would be enormously helpful.â&#x20AC;?

New Sectors, Old Debates

Industry leaders who participated in the panel also briefly discussed recent energyrelated environmental disasters, such as Japanâ&#x20AC;&#x2122;s nuclear crisis and the oil spill in the gulf. These events did not spur a significant, widespread public demand for renewable technologies, and seem unlikely to do so in the future. There has also been a noticeable lack of renewed political support for renewable sources of energy following these disasters. â&#x20AC;&#x153;I think itâ&#x20AC;&#x2122;s just a reflection of the dysfunction that is the United States Congress today,â&#x20AC;? Dinneen said. â&#x20AC;&#x153;Congress does not do thoughtful policy on much of anything. It reacts to negative events, they give speeches, there is a lot of fervor but not much that really happens as a consequence. Biofuels

are not radioactive; they are not going to degrade the ecological system of the Gulf of Mexico; you donâ&#x20AC;&#x2122;t need a no-fly zone for biofuels and bioenergy, and yet trying to get members of Congress to focus on the importance of growing these domestic clean energy supplies has been a real challenge,â&#x20AC;? he said. â&#x20AC;&#x153;There are entrenched, powerful, well-healed interests that like the status quo. We have to accept that, but we also need

to figure out what we can to do change it. It doesnâ&#x20AC;&#x2122;t happen overnight, and it doesnâ&#x20AC;&#x2122;t happen because of a catastrophic event. You have to build support for these clean-burning energies. It takes time. We will this weekâ&#x20AC;&#x201D;on averageâ&#x20AC;&#x201D;top $4 a gallon gasoline. If thatâ&#x20AC;&#x2122;s not a clarion call for doing more to extend our domestic energy supplies, I donâ&#x20AC;&#x2122;t know what would be.â&#x20AC;? The panelist also addressed the food vs.

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Stronger Today This is the first year that biodiesel has had both an RFS and a tax credit in place, and it works, said Joe Jobe, CEO of the National Biodiesel Board.

fuel debate. While on the surface it may seem as though second- and third-generation biorefining industries should be immune to the issue, Dinneen cautions the ABO and others to be wary. â&#x20AC;&#x153;You need to take a much more educated and robust look at what is really driving food price inflation and then you need to consider that the food vs. fuel debate isnâ&#x20AC;&#x2122;t about food; itâ&#x20AC;&#x2122;s about land,â&#x20AC;? Dinneen said. â&#x20AC;&#x153;As soon as there is land that is being used to produce algae, if [that land] could be used to produce a food crop [the debate will focus on algae]â&#x20AC;ŚI think we all have a responsibility right now to make sure that this debate doesnâ&#x20AC;&#x2122;t continue to undermine the growth and evolution of our industry.â&#x20AC;? According to Dinneen, the food vs. fuel debate has focused nearly exclusively on corn ethanol to date because it was the first biofuel to achieve commercial success. That will change as other forms of biofuel find increasing success.

A Look Ahead

RFS2 was also a hot topic addressed by the panel. Dinneen noted that he doesnâ&#x20AC;&#x2122;t think the U.S. EPA has done a particularly stellar job implementing the program, specifically when it comes to some areas of

congressional intent around carbon scoring. â&#x20AC;&#x153;Theyâ&#x20AC;&#x2122;ve [also] been overly restrictive on feedstocks,â&#x20AC;? he said. â&#x20AC;&#x153;Theyâ&#x20AC;&#x2122;ve been very slow to certify some of these new pathways, and when theyâ&#x20AC;&#x2122;ve done it, theyâ&#x20AC;&#x2122;ve done it in a way that almost defines some of these technologies out of existence before they get going.â&#x20AC;? However, Dinneen also noted that the agency canâ&#x20AC;&#x2122;t be faulted for lowering the cellulosic targets within the RFS2. â&#x20AC;&#x153;The RFS was never intended to be something that cellulosic companies could take to the bank to help them gain financing,â&#x20AC;? he said, noting, however, that the targets do create an important market lenders should consider. McAdams also spoke about the reduced cellulosic targets under RFS2. It was very significant that the agency shifted the cellulosic volumes into the advanced biofuel pool rather than reducing the volume targets as a whole. â&#x20AC;&#x153;That is verification that they believe that biodiesel and renewable diesel and advanced fuels are going to fill that number for the advanced pool,â&#x20AC;? McAdams said. â&#x20AC;&#x153;That looks good going forward.â&#x20AC;? In addition, McAdams stressed the importance of EPA moving forward to certify new feedstocks, molecules and path-

Support Needed It is imperative that algae-based biofuels receive the same tax incentives that cellulosic fuels and other advanced biofuels qualify for, said Mary Rosenthal, executive director of the Algal Biomass Organization.

ways in a swift, efficient manner. â&#x20AC;&#x153;EPA needs to get in placeâ&#x20AC;Śthe [regulations] that allow these feedstock processes and products to be compliant with RFS2,â&#x20AC;? he said. â&#x20AC;&#x153;That is a key mission for them in the next six to eight months.â&#x20AC;? During the panel discussion, McAdams also responded to a question posed by a member of industry regarding possible competition between biofuel and biochemical producers for investment funds. McAdams stressed he disagreed with the assertion that the financial and investment communities are showing a reluctance to support the developing advanced biofuels industry while support for biochemical is flowing exclusively from traditional chemical companies. â&#x20AC;&#x153;I would suggest to you that biobased chemicals and biofuels go hand in handâ&#x20AC;&#x201D;particularly with a lot of the synthetic biology companies,â&#x20AC;? McAdams said. â&#x20AC;&#x153;What they may be able to do in the short-term is actually make a chemical that will make them profitable to where they can get the funding to do the fuel following the chemical.â&#x20AC;? Furthermore, McAdams noted that several ABFA members have completed highly successful IPOs in recent months. â&#x20AC;&#x153;What you are beginning to see with those technologies that have really done their R&D and have really done their homework, you are beginning to see private capital fly in to give them the wherewithal to build commercial facilities,â&#x20AC;? McAdams continued. â&#x20AC;&#x153;All those companies have models in conjunction with fuels and chemicals. I think they leverage each other. Itâ&#x20AC;&#x2122;s very similar to our current refining chemical structure and I think youâ&#x20AC;&#x2122;ll see more of it, not less of it.â&#x20AC;? Author: Erin Voegele Associate Editor, Biorefining Magazine (701) 540.6986 evoegele@bbiinternational.com

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Antimicrobial

CONTRIBUTION

Controlling Bacteria During Corn Mash Fermentation Oxiders can replace antibiotics in fermentation, boosting ethanol yields By Reed Semenza

In ethanol production, yeast converts sugar into ethanol. Other micro-organisms, however, including lactic acid and acetic acid bacteria, and others, can contaminate the process. When acid bacteria grow, they compete for the supply of sugar with yeast, resulting in less sugar for ethanol production. Also acid-forming bacteria can

Process Parameters

create low pH conditions that tend to inhibit the growth of the ethanol-producing yeast. In order to control the growth of acid producing bacteria, many ethanol plants add antibiotics to the fermentation tanks. The antibiotics allow the yeast to kill much of the acid bacteria but the antibiotics apparently do not harm the yeast. The current method calls for 3 to 5 pounds of antibiotic, usually Virginiamycin, per 500,000 gallons of corn

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s). 112 | Ethanol Producer Magazine | JuLY 2011

Food and Drug Administration is currently considering banning the use of antibiotics in ethanol production due to the carryover of trace amounts of antibiotics. A second disadvantage of antibiotics is that acid bacteria can become resistant over time, rendering the use of antibiotics less effective and resulting in ethanol production losses. DeLaval conducted trials examining the elimination of antibiotics through the use of a blend of oxidizers added to the fermenter—the trademarked organic oxidizer DeLasan MP, a 15 percent peracetic acid (PAA) distributed by DeLaval, plus the inorganic oxidizer, hydrogen peroxide (HP). The primary objective of the test was to determine the most economical dose of Delasan MP and to determine the relationship between lactic and acetic bacteria reduction and dose. Secondary objectives included measurement of the final fermentor ethanol percentage as well as the DeLasan MP decay rates. Decay rate is measured in order to determine residual levels of PAA and HP in the DGs. The trials were conducted at a 20 MMgy plant in Torrington Wyo., a modified Delta T design. The management wanted to reduce or eliminate the use of antibiotics in an effort to produce antibiotic-free distillers grains with a second objective of increasing ethanol yield.

mash in the fermenter. The actual dose of antibiotics is determined by the level of lactic acid in the corn mash during the first 30 hours of fermentation. The main disadvantage of antibiotics is that they carry through the fermentation process and distillation process and end up in the distillers grains. The DGs provide a valuable feed product but with trace antibiotics, many cattle feeders are reluctant to use DGs or must ration the DGs in the animal feed. Trace antibiotics in the DGs are thought to cause bacteria in cows to mutate to an antibiotic-resistant strain. The U.S.

The process flow for the fermenter begins when the corn mash enters the Stage 1 cooler at 180 deCase Study grees Fahrenheidt and Trials done at a 20 MMgy ethanol plant is cooled to 140 F. It show positive results then enters the Stage using oxidizers instead of antibiotics, says 2 cooler and is cooled Reed Semenza. to 90 F. Flow through the cooler is 110 gallons per minute (gpm). From the stage two cooler, the mash is sent to the fermenter where it is recirculated through a plate and frame mash cooler. When the fermenter has

Alcohol production was 8.5 percent higher than the previous six months, even when organic acids did not decrease from normal. This result was not expected as alcohol production is thought to be inversely correlated with organic acids. been filled for 30 minutes, yeast is added to the recirculating corn mash. The fermenter takes about 23 hours to fill. Once filled, fermentation begins to accelerate, releasing heat, which is dissipated in the fermenter cooler. The fermenter mash is sent to distillation about 56 hours after the fermenter is filled. The 700-gallon mash cooler has a recirculating rate of 110 gpm, a pH range of 5.5 to 6.5 and in/out temperatures of 180 and 90 F. The 185,000 gallon fermenter has a recirculation rate of 400 gpm, a pH range of 4 to 5.5 and in/out temperatures of 95 and 90 F. During fermentation, carbohydrates, ethanol and organic acids are monitored in order to insure that the fermentation process is occurring normally and to insure that undesirable bacteria are kept under control. Also, the mash temperature is kept in a range of 90 to 95 F. Typical ranges for pH and organic acids are as follows:

• pH starts at 6.0 then slowly drops to 4.2 after 18 hours. Toward the end of fermentation, pH rises to 4.6. • Lactic acid percent starts at 0.1 and stays mostly below 0.4 percent when lactic acid bacteria are under control When lactic acid bacteria are present in larger numbers, the lactic acid percentage can rise to as high as 0.8. • Acetic acid generally starts in a range

of 0.03 to 0.05 percent and rises to 0.1. A rise above 0.15 percent results in reduced final ethanol and indicates that bacteria counts are out of control.

The Test

In the trial, DeLasan MP and 31 percent hydrogen peroxide (HP) were added at a rate of 0.8 and 1 gallon per hour, respectively, through a stainless steel pipe carrying the mixture to a header located between the first- and second-stage mash cooler. At the point of injection, the mash temperature was 140 F and the mash flow rate was 110 gpm. The pumps used to pump both the HP and DeLasan MP were Prominent diaphragm pumps fitted with Teflon liquid ends. The dose of the Delasan MP was 15 ppm (as PAA) and the dose of the HP was 40 ppm (as peroxide). However, the two oxidizers were fed for only 15 hours of the 23 hour fermentor fill time, making the overall dose 9.8 ppm of Delasan MP and 26 ppm of HP. Samples were taken every hour at the mash cooler exit and fermentation tank and tested using a Hach DPD total chlorine test. One DPD powder pillow was added to a 3 milliliter sample in a test tube, stirred gently for 5 seconds and a pink color was observed at the bottom of the test tube. PAA concentration was estimated based on the hue of pink color after 30 seconds. HP concentration was estimated after six minutes. Normal corn mash tests on carbohydrates, ethanol,

Typical End Fermenter - Process Parameters Ethanol

15.0

Lactic acid

Acetic acid

0.30

0.05

Cell count

Viable count %

4.6

250

JULY 2011 | Ethanol Producer Magazine | 113

Antimicrobial

antimicrobial

Monthly final ethanol avg V/V%

Final ethanol %, before and after PAA

Monthy final ethanol avg V/V%

Final ethanol %, before and After PAA

18.0

16.0 15.5

12.0

10.0

2009 2010 2011

8.0

6.0

final ethanol % v/v (monthyly avg)

final ethanol % (monthly avg)

14.0 15

14.5 before after

13.5

4.0 13

2.0

0.0

12.5

Jan

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

month

Chart 1: The percent ethanol from the final fermentor shown as the monthly average from January 2009 to March 2011. The trial started October 2010.

Chart 2: The ethanol yield from the final fermentor show as the monthly average percentage for the six months before and after the Delasan trial program.

SOURCE: DELAVAL

and organic acids were taken by plant personnel every six hours. Results were compared with normal historical averages when antibiotics were used. Four months of test results indicated the following:

• In the mash cooler, PAA concentrations consistently measured at 3 to 4 ppm. HP was always positive

with an estimated concentration of 10 to 15 ppm. • In the fermenter, the corn mash was positive for PAA up to two hours into filling. After two hours, PAA was not detectable. HP was not detectable after three hours. • Both lactic and acetic acids stayed

higher than the previous six months (see Charts 1 and 2), even when organic acids did not decrease from normal. This result was not expected as alcohol production is thought to be inversely correlated with organic acids. Higher organic acid concentration usually results in lower ethanol concentration. It is likely that the removal of biofilms on transfer, heat exchanger and tank surfaces resulted in decreased glucose losses and that the extra glucose was converted into ethanol.

The overall test results were extremely positive, indicating that the DeLasan program can effectively replace the use of antibiotics in preventing ethanol loss due to the formation of organic acids. No negative effects of the program were noted based on the balance of carbohydrates, ethanol and organic acids taken in all three fermenters. Also, yeast cell counts and viability tests were all in the normal range. In addition to helping the plant

within normal ranges. When both DeLasan MP and antibiotics were used, lactic acid and especially acetic acid levels were lower than when only antibiotics were used. Lactic acid generally ranged from 0.2 to 0.5 percent. Acetic acid generally ranged from 0.05 to 0.12 percent. • Alcohol production was 8.5 percent

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achieve antibiotic free DGs, the DeLasan program met the following objectives: • Because the DeLasan is effective at very low dose, the program cost was less than the cost of the antibiotics plus Fermasure.

• The DeLasan program resulted in a net increase in ethanol production of 8.5 percent, which in a 20 MMgy plant amounts to increased profits of $3.5 million per year.

• The DeLasan is added directly from the totes into the corn mash pipe. No mixing, other than the natural turbu- lence in the pipe, is required. The control test is a modified total chlorine test and is taken at the mash cooler discharge.

• Unlike antibiotics and sodium chlorite, DeLasan does not contribute antibiotic residue or inorganic salts to the DGs or backset. Author: Reed Semenza Business and Technical Manager, DeLaval (209) 996-3657 Reed.Semenza@Delaval.com

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INVESTMENT

CONTRIBUTION

05/28/2011

05/21/2011

05/14/2011

05/07/2011

04/30/2011

04/23/2011

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04/09/2011

04/02/2011

03/26/2011

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for those tax breaks, for using too much of the nation’s heartland water supply and for driving up the price of corn and thereby food, among other flak. Now because of the commodity squeeze, the nation’s 200-plus ethanol plants face another dim prospect in the face of rising commodity prices: A return to the bankruptcy-ridden years of 2008’09 and the continued shift in the ownership mix from small independents to major food and oil conglomerates.

01/29/2011

as more ethanol-friendly engines are built

and governments mandate ethanol blended gasoline, both demand and production for the corn-based fuel is at all-time highs. Despite continued government support through tax credits and the federal fuel mix standard, it’s not all roses for ethanol producers, however. The industry receives criticism

01/22/2011

Since its introduction as an alternative to fossil fuel-based gasoline in the 1980s, ethanol has proudly worn the patriotic green alternative badge to shipping dollars overseas for oil. And

01/15/2011

By Rob Carringer

01/08/2011

High corn prices and lower ethanol prices will squeeze independents out

01/01/2011

2011 Threatens to Repeat 2008-’09 in Ethanol Economics

try was driven by the 10 percent mandated The government could decide to inMargin Squeeze In 2007-’08, 137 ethanol plants were blend in all U.S. gasoline, so as gasoline sales crease the blend of ethanol to gasoline from either built or expanded, according to the go, so goes ethanol. With the continued po- 10 to 15 percent, driving up the market 50 Renewable Fuels Association. All of those litical upheaval in the Middle East, oil prices percent. The EPA’s efforts to implement the plants were built on the promise of $1 per have risen and taken gas prices along. As gas higher blend standard were temporarily degallon profits available at the time. Investors prices increase, people drive less and con- railed in Congress this year and only applied built a $200 million plant that produced 100 sumption goes down and with it less etha- on a voluntary basis for owners of newer vemillion gallons per year, with plans to recoup nol is used. As a result, ethanol inventories hicles, so there’s no immediate help there. their investment within a short period and are rising steadily, month by month, putting pressure on prices. According to the RFA, Tough Choices enjoy substantial profits thereafter. Of the 200-plus ethanol plants in the Immediately, the scenario crashed. With there is now a 25 day reserve, compared to a 2010 average of 16.6. To be sure, farmers U.S., well over 100 of them are smaller inall of the capacity, the demand on corn rose planted more corn this year, but it will have dependents. Conglomerates such as Archer and so did prices of what comprises about 85 percent of the cost of producing a gallon little impact. Any lower prices in 2012 will be Daniels Midland Co. and Cargill Inc. can exof ethanol. Scores of ethanol producers filed too late for many ethanol producers, many pand market share at bargain prices in bankfor protection under the bankruptcy code in of whom are staggering under heavy debt ruptcy sales. I also expect the large oil com2009-’10. The industry did not contract as loads. Fitch Ratings Ltd. has also warned of panies to get more into the industry this year expected, however, as the plants emerged problems in ethanol, fearing bondholder ac- as demonstrated by Valero and Murphy Oil purchases last year. By producing ethanol, from bankruptcy under new ownership and tivism in the industry. kept producing. Already this year, three plants—Levelland/HockSpread/Gallon ley Ethanol in Texas, Clean $0.350 Burn Fuels in North Carolina and Southwest Georgia Ethanol—have filed for $0.300 bankruptcy reorganizations. They won’t be the last. Here’s $0.250 why. In an industry known for running on thin margins, $0.200 those margins have been reduced to pennies on the gal$0.150 lon and even losses on some days. Corn is threatening the $0.100 $8 per bushel mark while ethanol is selling for $2 a gal$0.050 lon. As the industry heads into the next few months, $0.000 the stocks of corn remaining from last year’s harvest are dwindling, which may cause -$0.050 prices to climb higher. A plant that I am familiar with -$0.100 was making 22 cents per gallon last October. In April it made 4 cents per gallon. The prospect of margins improving is not bright. Margin Squeeze Over the past few months, the profit spread between the cost of corn and the value of the resulting ethanol has dropped from the 20-cent-per-gallon range to a loss position per gallon. Daily prices used for the chart are from the One driver behind ethanol Chicago Board of Trade for corn and the NY Harbor Swap for ethanol. price is volume. The indusSOURCE: CRG PARTNERS

JULY 2011 | Ethanol Producer Magazine | 119

INVESTMENT

Price of Corn vs. Ethanol Normalized $2.90

$2.80

$2.70

$2.60

Restructuring Options It is unlikely new investors will come into struggling ethanol investments with hundreds of millions in bank debt. If companies are operating with substantial debt, they need to restructure that debt to remain competitive in the marketplace with all the other companies who have already done

$2.50

$2.40

$2.30

$2.20

$2.10

$2.00

Ethanol

SOURCE: CRG PARTNERS

they control one more component of their supply chains. The largest ethanol player is a private company, Poet Inc. While not a part of a conglomerate, the family-owned business had the financial strength to buy and refit the former Altra Biofuels Cloverdale, Ill., plant bringing its total to 27 plants.

CBOT Corn ÷ 2.8

Inversion The price of a bushel of corn divided by 2.8 is shown compared to ethanol. The ethanol curve should be above corn to make a profit, but this year the curves have been close, and even flipped.

this. They have few options and can restructure in three ways. First, they can restructure out of court by gathering up all their secured creditors and resizing their debt to a level reasonable for the amount of cash flow the company produces. The lenders will want equity in return for downsizing their debt. This will be a long and difficult process to Turnaround Manager gain agreement. Companies should act now beA certified turnaround fore they run out of cash and have to shut down professional, Rob Carringer has filled to force decisions. interim C-level roles Secondly, restructuring can happen in court. as well as Chapter 11 trustee roles, and taken In bankruptcy, a company can restructure its on multiple bioenergy balance sheet and exit bankruptcy via a plan of assignments. reorganization whereby the secured lenders will reduce their debt levels but take equity in return. Odds are the existing equity players will lose most if not all of their position in the highly levered companies. The company can sell itself via a bankruptcy asset sale. The sale proceeds would be used to pay down the debt in priority sequence. The buyer would then own the company’s plant as of the closing free of the original debt load. Third, the company can toss the keys back to the bank group. The current owner agrees to the lenders foreclosing on the equity of the company and taking it over. This process can be cumbersome and varies often state by state. Many lenders aren’t comfortable with this procedure and steer the company toward the bankruptcy court. None of the prospects is attractive. Many of these 110-milliongallon plants costing $200 million to $250 million have been valued at $75 million in recent bankruptcy sales. The pain will be shared by others, including by most ag banks with ethanol loans. Ethanol as a Cautionary Tale Many investors have jumped into the renewable energy space with the hopes of making money from breakthrough technology. While these investments can be an admirable example of the American Dream, it is wise to understand the dynamics in your marketplace. The ethanol business operates between two commodity markets, corn and gasoline, either of which can pressure margins. Any commodity business requires an enormous amount of capital and diversified holdings to withstand the swings of supply and demand. People in the ethanol business thought they could go in small with one plant and make a fortune, but it isn’t turning out that way. Conglomerates continue to purchase the investor’s expensive assets for a small percentage of the cost. New investors need to understand the challenge of scale when competing in a business where the profits are measured in pennies. Author: Rob Carringer Managing Partner, CRG Partners rob.carringer@crgpartners.com

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PROVIDING CREATIVE SOLUTIONS

FINANCE

CONTRIBUTION

Plant Profitability: Back to Basics Considering the factors that impact margins in a changing industry By James K. Schmidt

The natural question for a business of any kind to ask their accountant is, “What can we do to increase the profitability of our operations?” Members of the ethanol industry are no exception, and we receive this question often from clients and others in the industry. We could provide all sorts of fancy formulas or suggestions, but the answer to the question is really quite simple: Maintain your margins.

Unfortunately, the only thing simple about this is the answer. As those who have worked in the ethanol industry for many years know, implementing procedures, processes and management philosophies to actually do this is quite complex. Managing the expectations of investors and board members, especially during the past several years, is a challenging, on-going task. There are methods that can be utilized to help plants maintain their margins and

thereby, the profitability of their operations. Knowing your costs and matching purchase and sales cycles are two of the most critical things management and the board must do to ensure that a plant achieves its desired margins. Cost Factors Know your input costs, your processing costs and what you can sell for. Again —sounds simple, but this is one area where many plants can make enhancements that will result in more positive margins. During the latter part of the past decade, many plants—buoyed by several years of strong

growth, product demand and the ability to contract sales into the future, and expecting more of the same—unknowingly engaged in greater speculation as part of their previously successful hedging strategies. These factors, coupled with the unexpected changes to the world and national economies, contributed to significant decreases in profitability for many ethanol plants. Obviously, corn and natural gas prices play a significant role in managing costs; however, two other factors that should be taken into consideration are transportation costs and the ability to sell distillers grains locally as wet Managing Risk distillers grains. If Maintaining your margins is the simple corn is readily availanswer to plant able within a reasonprofitability, says James Schmidt, but able geographic dishow to accomplish that tance, a plant’s corn is anything but simple. costs related to transportation can be reduced considerably. As the availability of corn diminishes, and corn is imported from a larger geographic area, the price needed to induce sellers to transport that corn increases to offset the seller’s transportation costs. Inversely, the further the market for distillers grains is from the plant, the more transportation cost and potential drying costs are incurred for distillers grains. Additionally, as natural gas prices rise, the costs of drying distillers grains increase, thus reducing overall margins. By selling the wet distillers grains into the local market, ethanol plants can reduce natural gas and transportation costs, and depending on the difference between drying costs and transportation costs, and the sales price of wet versus dry distillers grains, can increase their margins. In addition, markets have changed related to how ethanol is sold and marketed. During earlier years, there was the ability to market and lock in a substantial portion of a plant’s production with a fixed price contract. This, when combined with fixed-price

contracts for purchasing corn (and perhaps fixed-price distillers grain contracts), provided the ability for a stable margin within the production process. As markets have become driven by other economic factors such as world oil prices, fluctuations in the value of the U.S. dollar, perceived or real shortages of corn and other commodity price fluctuations, to name a few, the ability to contract at fixed prices has diminished. More and more contracts for the purchase of corn are not fixed, such as basis contracts, hedge to arrive, etc. In addition, contracts to sell ethanol tend to be shorter term and can also be tied to other market factors including crude oil prices, RBOB, or other futures markets, that are not converted to a fixed price until delivery of the ethanol. With these multiple moving targets, and markets that do not always move parallel to each other, plants face increased risks to maintaining their margins. Match Purchase, Sales Cycles Increasing globalization, along with changes in supply and demand, has forced plant risk management committees to reevaluate many of their risk strategies. These committees are now actively discussing such topics as the level of speculation the plant should be involved with and what levels of risk are considered to be “acceptable.” It has always been a challenge to balance the appropriate levels of risk to maintain the desired margins for the plant. We are finding that today, many plant owners and their lenders have lower risk appetites than they had in prior years. Many of these plants are now utilizing a “back to basics” model, where they match the purchase cycle and sales cycle simultaneously. While matching the sales cycle and the purchase cycle are noble causes, there are still risks, even when you can manage your costs and selling prices. Let’s look at an example. An ethanol plant is in the fortunate position that it can lock into purchase contracts for corn each month, get a fixed-rate natural gas contract for the next year, plus fixedcontract selling prices on ethanol negotiated each month. Contracts for corn and ethanol

are entered into two months in advance of production. Plant managers know how much other production costs are and can calculate a reasonable margin based on this information. The sale of distillers grains, however, is based on the local spot market. To minimize this risk, the plant managers enters into contracts to sell their distillers grains for a price based on a trailing monthly average that uses the price of corn as its base. Overall, the plant managers have done a good job of locking in their margins. In periods when the price of corn is rising, they will have greater margins on their distillers grains than if they had priced the distillers grains when the corn contract was entered into. In periods where corn prices are falling, they will have reduced margins. As long as there are no large swings in corn prices that impact the distillers grains margins, there should be no surprises. As history has shown, volatile markets create situations that are not anticipated, and which can have devastating financial impacts, even to the point of bankruptcy.

‘Identifying potential risks in the process, managing those risks, and setting risk management tolerances are the first steps to providing a profitable future.’ Different strategies, pricing mechanisms and hedge scenarios either reduce or enhance the risk that an ethanol plant takes in the marketplace. Identifying potential risks in the process, managing those risks, and setting risk management tolerances are the first steps to providing a profitable future. When identifying risks, plants should JULY 2011 | Ethanol Producer Magazine | 125

FINANCE

take numerous factors into consideration. These include the obvious, such as regulatory issues, mergers and consolidations, rate risks and natural disasters. Many plants are now also considering the “what-ifs” in their risk assessments and discussing such issues as lawsuits and damage to reputation, socio-political issues and potential terroristic threats involving the food supply. Additionally, plants are considering risks associated with internal factors such as fraud, financial issues and maintaining strong leadership. By reviewing both internal and external risks, as well as the relationships between these two, management and boards have the opportunity to discuss how risk is currently being managed and opportunities for managing it in the future. In-depth risk discussions should occur at least annually at the board level and be an ongoing part of other management discussions. Over the past several years, boards and plant management have learned—in some cases, the hard way—that it can be very challenging to outguess the market and, as a result, have reverted to strategies successfully employed in the past. It may be tempting for boards and management to make the above-noted changes now and, once things get better with the economy and the state of the ethanol industry, revert to more speculative behavior. The strategies noted above have stood the test of time and have been utilized since well before the ethanol industry’s birth. Author: James K. Schmidt, CPA Eide Bailly LLP (952) 918.3599 jschmidt@eidebailly.com

A GLOBAL UNDERSTANDING

Ethanol is a global industry, and it takes a company with a worldwide reach to understand it. That’s FCStone, LLC. Whether your operations are centered in Brazil, Europe, Australia, China or the United States, we can make your world a little easier to manage and understand. With deep roots in agribusiness, we have a wealth of resources to help you cope with uncertainty and price volatility in grain, energy, ethanol, and other renewable fuels. FCStone, LLC is a wholly owned subsidiary of International Assets Holding Corporation. With customers in more than 100 countries around the world and wide-ranging expertise in interest rate and currency risk management, we’ve got you covered no matter where you are or what you need.

Renewable Fuels Group West Des Moines, Iowa 2829 Westown Parkway, Ste. 100 renewablefuels@fcstone.com 800.422.3087, ext. 3728

www.intlfcstone.com Commodity trading involves risks, and you should fully understand those risks before trading. 126 | Ethanol Producer Magazine | JuLY 2011

TWO FUELS

ONE BLEND

ONE MULTILOAD

There is a simple, straightforward solution to the perfect ethanol blend—Toptech Systems’ MultiLoad load rack controllers and Liquid Controls’ flowmeters. The MultiLoad II’s new 2-meter internal I/O board provides just the right amount of control for ethanol blends. And selecting blending recipes is easy. The MultiLoad II’s full alphanumeric keypad and intuitive user interface provide quick access to the correct recipe. Toptech’s family of MultiLoad products are available in Division I and Division II enclosures, so you can choose the best load rack control system at the best price. For the exact measurement portion of the perfect blend, Liquid Controls positive displacement and Sponsler turbine flowmeters guarantee every drop of fuel is accounted for. When you choose LCG, we get you the most for your dollar and your effort.

LIQUID CONTROLS GROUP

CORKEN � FAURE HERMAN � LIQUID CONTROLS � SAMPI � SPONSLER � TOPTECH SYSTEMS

LOAD TOAD® JUST MIGHT BE YOUR EMPLOYEE OF THE MONTH EVERY MONTH OF THE YEAR. That’s because Load Toad can lower your grain shipping costs by 5%*. The Toad's patented technology loads railcars more evenly than traditional methods, resulting in 5% more grain loaded into every railcar. It has been used extensively with Dried Distillers Grains, filling thousands of railcars, resulting in hundreds of fewer railcars used. The Toad has had similar results with soybean meal and can be customized to work with similar applications. *Results may vary. Meet the Toad at LoadToad.com and find out what it can do for you.

ISOBUTANOL

CONTRIBUTION

Retrofit Underway Gevo purchased the 22 MMgy AgriEnergy plant in Luverne, Minn., with plans to retrofit it to produce isobutanol.

The Ethanol Industry and Gevo’s Vision of the Future CEO lays the case for isobutanol and a spirit of cooperation By Patrick Gruber

By now, you’ve probably heard a thing or two about Gevo Inc. Some may be true, some are not. But there is one thing everyone knows if they know us at all—we like straight talk. Since we’re the new kid on the block I would like to make sure there is no confusion about our positions and aspirations. Some people wonder whether we might be a threat to the ethanol industry. Nothing could be further from the truth.

In fact, our entire business model centers on converting ethanol capacity to produce isobutanol through joint ventures with existing ethanol producers, and we are in discussion with numerous plants controlling more than a billion gallons of capacity. We think an isobutanol fermentation industry is the natural next step in the evolution of the fermentation alcohol business and will provide corn growers and rural communities a sustainable and profitable future. There

is no reason ethanol and isobutanol cannot co-exist in the market. Indeed, together they might be able to expand the market for all. The Upside of Isobutanol Isobutanol is a four-carbon alcohol that can be made by refining petroleum or via fermentation. Whether made from fossil or renewable carbon, the isobutanol molecule is the same, hence its “drop-in” label. Renewable isobutanol is used as a solvent and is currently approved for blending in gasoline to 12.5 percent. Isobutanol can be easily converted using known chemistry into butenes, which are critical four-carbon platform chemicals that can used in the production of

40 percent of all chemicals and 100 percent of all hydrocarbon fuels. The primary commercial advantage of isobutanol is its market versatility. And, there are important market dynamics that drive interest by the chemical sector. The significant drop in natural gas prices has caused the petrochemical industry to use natural gas to replace petroleum as the feedstock in the production of some materials. This widespread development has caused a worldwide shortage of butenes. It is a development many believe will continue to grow. Specialty chemical company, German-based Lanxess AG, the world’s largest producer of synthetic rubber, has invested in Gevo and expects to become a customer so it can access our isobutanol for the manufacture of butyl rubber. Why? Their business is growing and they need an alternative to oil for raw material supplies. Chemical companies are also interested in finding alternative sources of raw material to hedge against oil price volatility. These two market dynamics are driving significant customer interest and willingness to negotiate long-term off take agreements. Gevo’s business plan forecasts sales primarily into the chemicals markets for the production of our first few plants. Gevo plans to eventually serve the liquid fuels market with the first target being the biojet market. Isobutanol can be converted into kerosene for jet fuel. We are pursuing fuel certification with the U.S. Air Force and ASTM, and plan to be ready for commercial sales in 2013. We are also interested in gasoline markets where the properties of isobutanol add value to refiners in complying with either their clean air requirements or renewable fuel obligations. Gevo’s Role With our unique ability to produce a fermentation alcohol with hydrocarbon drop-in characteristics, we have connections to the ethanol, advanced biofuels, petrochemical and refining industries. While we don’t share every concern of each of these industries, we share some with all. We are members and participate on the boards of the Renewable

Fuels Association, the Biotechnology Industry Organization and the Advanced Biofuels Association. We are associate members of the National Petrochemical & Refiners Association and American Petroleum Institute. This presents us with some interesting challenges in Washington. Our trade association work is guided by these basic values: we strive to be transparent about our commercial interest, work as best we can to support the broader biofuel industry’s progress and, finally, remain neutral in matters that do not impact us, even if they do not benefit us. At the highest level, we believe that policy makers should focus on the “whole barrel” and not just fuels. Energy policy should treat all biofuels equally so Collaboration they may compete Welcome on price and perforGevo CEO Pat Gruber mance. When U.S. says isobutanol will not compete with policy was crafted, corn ethanol, but the only economicalrather create new opportunities. ly viable biofuel was ethanol. That is no longer the case. The nation’s energy policy needs to be revised to allow new biofuels into the market. This may mean modifying some existing regulations, like the Reid Vapor Pressure rules, so isobutanol can be blended with ethanol gasoline blends and still comply with the one-pound waiver. On the blenders credit extension, we will support the industry’s consensus position and have a particular interest in the alternate alcohol provision. We oppose using federal policy to support ethanol-only infrastructure, unless there is an equal level of support offered to infrastructure supporting the development of other biofuel molecules and cellulosic conversion. And, we oppose any change to the renewable fuel standard at this time. Gevo, Corn and Cellulosic Fuels First of all, on the food vs. fuel debate, we have a clear and concise position. Food always wins because people come first. We

work hard to educate our stakeholders that the fermentation alcohol industry uses corn starch, not corn. And, the highest food value portion, the protein, is returned in an upgraded form to the food chain as animal feed. While we have our target set on retrofitting existing ethanol capacity, we are readying our technology for deployment on cellulosic biomass. We do not intend to process the biomass, but instead to be buyers of fermentable cellulosic sugars. Indeed, the long term off-take agreements we should be able to secure from our customers might very well be the missing ingredient to “bankable” project financing for biomass conversion facilities. Maybe because many of us were born and raised in the Upper Midwest, we have a strong affinity for rural communities and want to see them remain strong and vital. We like working with people we can depend on, people who are the best at what they do. We found those kinds of people in Luverne, Minn., where our first plant will come online next year. Employees, community leaders and farmer suppliers are all great assets to our operations there. The executive team at Gevo has invested decades in developing products and advocating for the biobased economy. Our commitment to seeing that vision through to the end is strong. Now that we’ve successfully completed our initial public offering, we believe we have the wherewithal to do it. No longer is the promise of replacing petroleum a vague and distant dream. Gevo plans to begin production of isobutanol by mid-2012. Many other companies are poised to join us. It is our hope that the existing ethanol industry opens its mind to the possibilities and makes room for a new generation of biomolecules. Gevo may be one of the first to realize this vision but we will surely not be the last. We pledge to cooperate with anyone who shares our vision and to be a positive force everywhere we have a leadership voice. Author: Patrick Gruber CEO, Gevo (303) 858-8358 info@gevo.com

JULY 2011 | Ethanol Producer Magazine | 131

AUTOMATION

CONTRIBUTION

Plant-wide Optimization Solution Uses Unified, Integrated Control Highly volatile, razor-thin margins require maximum plant efficiency By Maina Macharia

Cardinal Ethanol LLC started operations in 2008, formed by a group of local farmers and investors who did their research, procured an excellent plant design and hired an experienced plant management staff to operate the plant with the highest standards and best practices. Knowing that the ethanol business is affected by large swings in corn feedstock costs and fuel ethanol prices, Cardinal hired qualified commodity strategists and risk managers. From the start, clear mission goals were set:

• Maximize value of the facility through strategic and efficient plant operations. • Improve productivity of the fuel ethanol facility with best-in-class technologies. • Optimize overall production margin. • Fuel America’s economic development.

Cardinal Ethanol is located in Union City, Ind., in the Midwest agricultural heartland. The $168 million, 100 MMgy facility processes over 36 million bushels of locally grown corn per year and produces 320,000 tons of DDGS. Cardinal Ethanol is operated and managed by a staff of 49 highly skilled employees. The plant is located on the CSX

railroad mainline, facilitating the shipment of DDGS and ethanol to eastern markets. The plant produces more than ethanol, it’s making the next generation of transportation fuel from Indiana-grown crops. Cardinal’s management and operations staff was tasked with ramping up to capacity within a short time after construction was completed. In addition, this team was to focus on using value-adding technology to unearth greater return from the corn feedstock to maximize the economic margin that could be derived from operations. The Challenge Within the first nine months of operation, Cardinal had ramped-up its production to nameplate capacity. Just as it reached its

production targets, the economic downturn occurred, causing margins to become razorthin. The new operating challenges posed by this economic climate were especially troubling to the new plant, and to survive, it looked at several capital projects to improve its margins. Finding a solution to maximize operating margins proved especially difficult. Cardinal Ethanol’s dry mill plant is highly integrated. All process units— from milling to fermentation, distillation and the dryer systems—are interconnected by energy and material flow, and the extensive process interactions between these units make it difficult to optimize the process. While existing proportional-integral-derivative (PID) controller strategies automate individual portions of plant, these simplified controls do not capture all interactions that can be adjusted to optimize the plant. So even with well-trained operators, accurate lab measurements and best-in-class PID controls to control each part of the production process, there was still an undesired level of fluctuation seen in key plant variables, including slurry solids, fermenter yield, 200-proof product quality, DDGS product quality and energy per gallon. Each of these variables had gradual swings and a degree of inconsistency. It was clear that an effective solution would need to capture, analyze and control all parts of the plant under a single, unified model. Cardinal Ethanol turned to Rockwell Automation’s trademarked Pavilion8 technology for model predictive control (MPC), which has the ability to stabilize and drive peak efficiency with a single model of the entire plant. The system could be built and then added as a supervisory control system without modifying existing process equipment. Cardinal was pleased to learn this technology had been implemented in more than 30 ethanol plants in the U.S. and had a track record of making significant margin gains in each operating facility. Having seen these proven results, Cardinal Ethanol chose to install this technology as a plant-wide optimization solution.

in feedstock quality. The average of residual Plant-wide Optimization To install the Pavilion8-based MPC sugars was reduced by more than 40 persolution, Rockwell Automation application cent. In addition, the standard deviation was engineers came on-site to build nonlinear reduced in excess of 70 percent. The plant dynamic response models and Soft Sensor now produces 2.2 percent more ethanol inferential models based on plant tests and from each bushel of corn. This higher conhistorical data for slurry solids, fermenter version of starch to ethanol, on a consistent HPLC data and syrup solids. Soft Sensor basis, essentially yielded more ethanol for the models are inferential measurements that same amount of corn. This was the key facreplace lab values and provide continuous tor in the increase of overall margin. In another area of the plant, Cardinal control of key lab measurements. Over the course of the project, the Car- Ethanol was inefficiently using energy to dinal Ethanol operators were fully trained separate and purify ethanol. The distillation in the MPC technology, and the system was and dehydration control application reduced gradually implemented in each of the opera- the variability of energy use by over 50 pertion areas, until finally given the entire degree cent. By optimizing the energy trade-offs of freedom to make optimum control, mar- between the sieve and distillation operations (within the evaporator energy constraints), gin and energy decisions. The milling and slurry control applica- energy was reduced. The application also ention reduced the variation of feed quality to abled the ethanol to be tightly controlled to the fermenters and helped the plant to safely the desired moisture specification. Dryer and evaporator process units rerun at mill amperage limits without tripping the hammermills. In addition, the application move moisture out of the stillage to form improved the water balance of the plant, a DDGS. This application controlled evaporacritical factor in overall economics—more tor solids and dryer moisture while managing water results in higher energy costs. The ap- stillage inventory and syrup usage. It also conplication helped ensure that the slurry had a trolled the DDGS quality and yield. Since the consistent quality, which in turn, improved evaporators are connected to distillation by the batch fermentation performance with a material and heat, the application considers 54 percent reduction in standard deviation these interactions and minimized energy use within the process requirements and equipof ethanol from the fermenters. The application linked the milling and ment constraints. The combined energy reslurry process units with the distillation sieves duction resulting from optimization of both and the dryer/evaporators process units. It anticipated constraints Plant-wide Optimization Solution: Corn and ran at higher energy Grain MPC Objectives: (1) Milling/Slurry MPC Receiving efficiency and higher • Optimize plant throughput Corn Meal • Maximize ethanol and DDGS yield capacity, increasing pro• Minimize energy/gallon ethanol Ammonia Mash Preparation duction by 7.2 percent. Enzymes Corn Mash The batch fermen(2) Fermentation MPC Fermentation C0 tation control applica(3)Distillation/Sieves MPC Beer tion adjusted the tem200 Proof 190 Proof Fuel Product Distillation Ethanol Ethanol Dehydration Ethanol Storage perature conditions and Whole Stillage helped to ensure that Wet DDGs DDGs DDGs Dryer Centrifugation + Residual Sugars Grains Storage enzyme levels are added + Fuel Ethanol Losses Thin Stillage + Residual Starch using the optimal dyThermal Evaporation Syrup Process Oxidizer namic ratio to feedstock Condensate (4)Dryers/Evaporators MPC and the best trajectories that respond to changes SOURCE: ROCKWELL AUTOMATION 2

JULY 2011 | Ethanol Producer Magazine | 135

AUTOMATION

distillation and dehydration, and evaporation and drying was approximately 7.7 percentâ&#x20AC;&#x201D; each of these major sections contributing 50 percent of the energy improvements. Measuring Value Both Rockwell Automation and Cardinal Ethanol insisted that the results of the plant-wide optimization solution be mea-

sureable and clear. To achieve this, the ValueFirst engagement methodology was used which entails: (a) completing a process assessment and establishing the potential gains from the project, (b) evaluating if the project met Cardinalâ&#x20AC;&#x2122;s investment criteria and (c) auditing the results. The magnitude of improvements achieved with plant-wide optimization was

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unanticipated since Cardinal Ethanol was a very well-run plant. The Pavilion8-based MPC solution greatly improved overall plant stability and reduced variability on all key process variablesâ&#x20AC;&#x201D;especially the batch fermentation operations. A summary of the key results that made the project successful included: â&#x20AC;˘ Ethanol yield increase of 2.2 percent. â&#x20AC;˘ Ethanol production increase of 7.2 percent. â&#x20AC;˘ Energy per gallon reduction of 7.7 percent. â&#x20AC;˘ Increased stability on all key process variables and reductions in standard deviation between 40 to 70 percent. â&#x20AC;˘ Great operator acceptance. â&#x20AC;˘ Payback in less than 12 months. Overall, the project met and exceeded the expectations of Cardinal Ethanol and the management learned some key lessons through the implementation of the project. The joint work by Rockwell Automation and Cardinal Ethanol throughout the project helped uncover and resolve complex process factors to enable higher production, yield and energy efficiency. Cardinal Ethanol has also contracted with Rockwell Automation for sustained solution support, which includes remote monitoring and one or two site visits per year. As part of the sustained support agreement, minor changes to the plant configuration will be incorporated into the plant-wide optimization solution. Today, the service factor of the system exceeds 99 percent for all variables. The significant commercial increase in the operating margin of the facility has ensured that Cardinal Ethanol is not only a well-positioned, low-cost producer of ethanol, but that its carbon footprint is much lower than the industry average. Author: Maina Macharia Biofuels Industry Manager, Rockwell Automation mmacharia@ra.rockwell.com

3URXG WR EH WKH YRLFH RI WKH HWKDQRO LQGXVWU\ IRU \HDUV Since 1981, the Renewable Fuels Association has proudly served our members as the voice of the ethanol industry, delivering the landmark legislative, regulatory, and tax policy victories that helped create the industry we enjoy today. And our work continues. From our industry-leading technical and research expertise to our market development activities that continue to expand opportunities, we owe our success to all of our ethanol producer members. Thank you for 30 years of commitment.

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136 | Ethanol Producer Magazine | JuLY 2011

JULY 2011 | Ethanol Producer Magazine | 137

HUMAN RESOURCES

CONTRIBUTION

Jumping into Smaller Ponds Managers moving from big to small companies can be mutually beneficial By Patrick Ropella

Two years ago, Kevin Robinson was sailing his way through the management structure at Grain Bio Energy as market manager of its $300 million ethanol production division. When GBE merged its ethanol division with National Energy, Robinson was slotted to move up to GBE’s corporate staff. Instead, he jumped ship and landed on the bridge of a company

called NuGen Ethanol, an Atlanta start-up that processes biomass from switchgrass. He transformed from one of a dozen GBE market managers into the second-ranking executive at NuGen Ethanol. His fortune was put into his own hands. Four years ago, Cincinnati-based Midwest Biofuels reached a crossroad in its business life. At 18 years, it should have been past corporate adolescence and steaming on

its way toward lofty heights in the renewable energy market. After all, it had developed unparalleled proprietary plant production processes and had a history and presence in the market its competitors could not match. Unfortunately, MBF was not flying high. It was lumbering along, making just a $1.5 million profit on $39 million in sales at a time when industry profits were soaring. The answer to its woes came in the person of Mark Wiggins, a 17-year veteran of Pine Bio Refining, which is now part of United Producers. Wiggins infused MBF with “big-company”

management and discipline that the smaller enterprise had never known. Since his arrival, the company has whipped off nine record quarters in a row, nearly doubling its sales, allowing profits to soar threefold. Two companies, two executives, two stories? While the names of individuals and companies in this article were changed to protect the confidentiality of both, the experiences describe two sides to the same scenario: a big-company manager, a big fish, jumping into a small pond. Conventional wisdom holds that success means working your way up, going from small to big, reaching the top of mountain and then going on to the next and bigger one. But the reverse of that—going from big to small, can hold some tremendous returns for both the manager and the new company. For the executive, the adage that good things come in small packages often holds true. Going to a small or midsized company can be vastly rewarding, both professionally and personally. It can also be more lucrative than working for the biggest and best corporation. Conversely, small- or medium-sized companies usually do not have home-grown management talent to sustain growth and build for the long-term. That talent, however, lies in abundance in the corridors of big business, where executives thoroughly learn the disciplines that small companies need, but frequently lack. The greatest attraction of small or medium-sized companies is the chance to be the boss, to run your own show. In doing that, NuGen Ethanol’s Robinson says, “You can put a personal stamp on the company you are building. Your actions have an impact [on yourself], both financially and emotionally.” Small-company life can also be more fast-paced. “I like the freedom, the looseness,” says Robinson. “You can react almost instantaneously to information and not have to go through layers of management. How you get things done is almost irrelevant, as long as you get them done.” Donald White, who left Southern Energy in 1985 to head up Equip Biomass, a Boulder, Colo., maker of biomass processing equipment, agrees: “You

get a chance to move rapidly and live by the results. That doesn’t happen in big companies.” The main reason it does not happen is the bureaucracy inherent in large firms. Legions of committees, approvals and matrices come along with the prestige of big-company names. Most small companies are free of plodding and frustrating management structures. In other words, the small pond can be a pretty nice place in which to work. At NuGen Ethanol, you can forget about “management layers”—the company has only 12 employees. That kind of environment gives an executive a measure of control over his surroundings not possible in big companies. “If there’s something I don’t like,” Robinson exclaims, “I can change it.” As for financial returns, they, too, can be greater in a small company. The cash salary may be similar, but there are stock options and other incentives in a small company, Managers Recruiting Talent Patrick B. Ropella can get more credit for is chairman and their work in a small CEO of the Ropella Group, a 25-year-old company. There’s international executive more of a spotlight on search, leadership transformation and performance. corporate consulting The executive firm based in Florida is not the only one whose well-being comes into play in a move to a small company. The ultimate success or survival of companies sometimes hinges on acquiring “big company” business expertise. “Small companies are usually based on the founder’s invention or new technology. That drives growth for a while, but once the technology reaches the end of its life cycle, the company must change. Then it needs a market orientation to determine the character of the next product,” Equip Biomass’s White observes. “One of the values of going to outsiders is making the transition from an invention-driven company to a market driven one.” Big-company experience is often well

suited to running small companies. Very often, large companies train their people well, and managers in large organizations frequently do the same things they would have to do in small companies. They run as a profit center. Along with a shortage of experienced, well-trained managers, small companies usually also lack experience with Wall Street and investment community. “Unlike most engineers or scientists, well trained managers often speak the language of the investor,” Equip Biomass’s White explains. White was instrumental in securing investment capital for Equip Biomss, a private company formed in a merger of two startups. “The investors,” he says, “were uncomfortable with the thought that both of the founders were the right people to grow a company of this size.” But given his Southern Energy background, the investors gave the nod. Their capital helped launch new product lines that have pushed annual revenues from $3 million to about $10 million. Not all big company executives, however, are well suited to swimming in small ponds. Many observers agree that there is a certain temperament an executive must have in a small company. “You can have no pride. You can’t be hung up on titles,” asserts NuGen Ethanol’s Robinson. “The easiest way to kill a small company is for people to say, ‘It’s not my job.’ (Robinson recently spent a morning driving around the countryside making site visits and spot repairs.) The small-company manager, White adds, “must be comfortable working without the support staffs of larger organizations. You sort of do it all, make copies, raise money, lock up at night, and turn out the lights. [Managers] who are uncomfortable with that will become ineffective and unhappy.” Some executives don’t understand that fact when they come out of a large company. They all of a sudden are not going to have assistance to get things done. Of course the support groups in large companies do provide a “comfort factor.” Supplied with input from several sources, executives are insulated from their mistakes. But there is no hiding in a small outfit. JULY 2011 | Ethanol Producer Magazine | 139

HUMAN RESOURCES

Smart Hire Patrick B. Ropella authored the book and Web-based training program, â&#x20AC;&#x153;The Right Hireâ&#x20AC;&#x201D; Mastering the Art of SMART Talent Management.â&#x20AC;? The SMART Talent Management System covers sourcing, marketing, assessing, recruiting, retention, training and transforming top talent.

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One of the biggest mistakes a small company can make is bringing in a top executive who doesnâ&#x20AC;&#x2122;t fit the organizationâ&#x20AC;&#x2122;s culture. Cultural fit is more important than function fit. Small companies have a great deal of pride, and a lot of them are built around the founderâ&#x20AC;&#x2122;s personality. MBFâ&#x20AC;&#x2122;s CEO Joe Jernigan notes that one contender for Wigginsâ&#x20AC;&#x2122; position wanted to bring his own management team along with him. â&#x20AC;&#x153;The company feared that they would alter the fabric it had already built; it wanted someone who could build on the company, not reconstruct it,â&#x20AC;? Jernigan says. â&#x20AC;&#x153;And although Wiggins seemed to fit the bill, many employees were anxious about how the change would turn out.â&#x20AC;? Aware of that, Wiggins worked to balance his hard-driving revenue thrust with programs to benefit the company in the long term. In his second quarter with the company, he launched a million-dollar research project that predicts to

push MBFâ&#x20AC;&#x2122;s technology even further ahead. â&#x20AC;&#x153;We proved with our deeds, not just our mouths, that we were going to balance the long and short term,â&#x20AC;? Wiggins says. Lastly, managers suited to small companies have to be risk takers. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s hard to imagine TE going bankrupt,â&#x20AC;? NuGen Ethanolâ&#x20AC;&#x2122;s Robinson says. â&#x20AC;&#x153;A little company is not like that. You have to have a stomach for risk, and live with it hanging over your head.â&#x20AC;? Even with risk hanging over their heads, Robinson, Wiggins, and White all enthusiastically endorse working in small ponds. â&#x20AC;&#x153;There are days I wouldnâ&#x20AC;&#x2122;t trade this for anything in the world,â&#x20AC;? says Robinson. Author: Patrick Ropella Chairman and CEO, The Ropella Group (850) 983-4997 ropella@ropella.com

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Clean Cities

Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com

Red River Valley Clean Cities 651-227-8014 www.CleanAirChoice.org

Seneca Companies 800-369-5500

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Emergency Spill Response Hydro-Klean, Inc. 515-283-0500

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140 | Ethanol Producer Magazine | JuLY 2011

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Seneca Companies 800-369-5500

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Evaporators Hydro-Klean, Inc. 515-283-0500

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Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com

Fans Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com JULY 2011 | Ethanol Producer Magazine | 141

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EPM MARKETPLACE Conferences/Trade Shows & Meetings

Heat Exchanger

Algae Biomass Summit 763-458-0068 www.algaebiomasssummit.org Algal Biomass Organization 763-458-0068 www.algalbiomass.org

Construction

www.hoffmanninc.com

Agra Industries, Inc. 715-536-9584

www.agraind.com

Andy J.Egan Company 616-791-9952 www.andyegan.com

Grain Storage Hoffmann, Inc. 563-263-4733

www.freezitcleen.com

www.hoffmanninc.com

Mechanical

Seneca Companies 800-369-5500

L&M Ethanol Maintenance Contracting, Inc. 515-955-2010 www.lmethanol.com

Hydro-Blasting Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

Tank Cleaning Equipment Gamajet Cleaning Systems Inc 877-GAMAJET www.gamajet.com Scanjet, Inc. 281-480-4041

www.scanjetinc.com www.tankjet.com

Tank Cleaning Services

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Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com Seneca Companies 800-369-5500

www.senecaco.com

Tank Cleaning Systems Spraying Systems Co. 800-95-SPRAY

142 | Ethanol Producer Magazine | JuLY 2011

www.hydro-klean.com

www.agraind.com

Roeslein & Associates, Inc. 314-729-0056 www.roeslein.com

Stack

Harris Group Inc. 206-494-9422

www.harrisgroup.com

ICM, Inc. 877-456-8588

www.icminc.com

Rail Safe Training, Inc. 712-212-4145 www.railsafetraining.com

Education Bismarck State College 701-224-5735 www.BismarckState.edu/energy

Employment SearchPath of Chicago 815-261-4403, x100 www.searchpathofchicago.com

Agra Industries, Inc. 715-536-9584 Burns & McDonnell 816-333-9400

www.agraind.com www.burnsmcd.com

www.hoffmanninc.com

Process Design ADF Engineering Inc. 937-847-2700

Centrifuges Aaron Equipment 630-350-2200 www.aaronequipment.com

ICM, Inc. 877-456-8588

Wolf Material Handling Systems 763-576-9040 www.wolfmhs.com

Agra Industries, Inc. 715-536-9584

adfengineering.com

www.agraind.com

Consulting

Reach your customers

Environmental Cantley Inc. 865-360-4080

www.icminc.com

Vogelbusch USA, Inc. 713-461-7374 www.vogelbusch.com

Equipment & Services Biogas Scrubbers Eco-Tec, Inc. 905-427-0077

www.eco-tec.com

Blowers & Fans FlaktWoods 716-845-0900

J.C. Ramsdell Enviro Services, Inc. 877-658-5571 www.jcramsdell.com

ICM, Inc. 877-456-8588 www.tankjet.com

Cellulosic Pretreatment

Design/Build

Tanks

Spraying Systems Co. 800-95-SPRAY

Hydro-Klean, Inc. 515-283-0500

Agra Industries, Inc. 715-536-9584

Hoffmann, Inc. 563-263-4733

Feasibility Studies

Engineering

Plant Construction

Railcar Spill Response

www.senecaco.com

Recruiting

Heat Exchanger Services 303-947-7864 www.hexservices.com www.senecaco.com

L&M Ethanol Maintenance Contracting, Inc. 515-955-2010 www.lmethanol.com

Safety

Fabrication

Freez-it-Cleen 612-597-9337

Seneca Companies 800-369-5500

Plant Optimization

Concrete Silos Hoffmann, Inc. 563-263-4733

Catwalks

RTP Environmental Associates 516-333-4526 www.rtpenv.com

www.flaktwoods.com

Control Systems ICM, Inc. 877-456-8588

www.icminc.com

Kahler Automation Corp. 507-235-6648 www.kahlerautomation.com

Cooling Towers Delta Cooling Towers, Inc. 800-BUY-DELTA www.deltacooling.com

Corn Oil Recovery ICM, Inc. 877-456-8588

www.icminc.com

DDGS Diesel

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Total-Yield Diesel from Distillers 402-640-8925 www.total-yield.com

Dryers-Fluid Bed

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Buhler Aeroglide 919-851-2000

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JULY 2011 | Ethanol Producer Magazine | 143

EPM MARKETPLACE Dryers-Rotary Drum ICM, Inc. 877-456-8588

Sukup Manufacturing Co. 641-892-4222 www.icminc.com

Dryers-Rotary Steam Tube ICM, Inc. 877-456-8588

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Heat Exchangers Pick Heaters, Inc. 800-233-9030

www.buhlergroup.com/us

Jet Cookers

Hammertek Corp. 717-898-7665

Hoffman, Inc. 563-263-4733

www.rjsales.com

Robert-James Sales, Inc. 800-666-0088

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Hoffmann, Inc. 563-263-4733

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ICM, Inc. 877-456-8588

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144 | Ethanol Producer Magazine | JuLY 2011

www.pft-alexander.com

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Agra Industries, Inc. 715-536-9584

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Pumps

ICM, Inc. 877-456-8588

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L&M Ethanol Maintenance Contracting, Inc. 515-955-2010 www.lmethanol.com

Productivity Enhancements

www.hoffmanninc.com

Structural Fabrication Agra Industries, Inc. 715-536-9584

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Grain Handling & Storage Agra Industries, Inc. 715-536-9584

www.hammertek.com

Robert-James Sales, Inc. 800-666-0088

www.icminc.com

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Storage-DGS

Pipe-Fittings

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Cereal Process Technologies 217-779-2595 www.cerealprocess.com

ICM, Inc. 877-456-8588

Thermal Oxidizers

www.pickheater.com

Airoflex Equipment 563-264-8066 www.airoflexequipment.com

Fractionation-Corn Buhler Inc. 763-847-9900

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UPM Machine 713-440-8200

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www.upmmachine.com

Molecular Sieves ICM, Inc. 877-456-8588

www.icminc.com

Parts & Services ICM, Inc. 877-456-8588

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Pipe L&M Ethanol Maintenance Contracting, Inc. 515-955-2010 www.lmethanol.com Robert-James Sales, Inc. 800-666-0088

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EPM MARKETPLACE

117

Cashco, Inc. 785-472-4461

www.cashco.com

Wastewater Treatment Services ICM, Inc. 877-456-8588

www.icminc.com

Water Treatment

132 & 133 67

EdeniQ, Inc. 559-302-1780

www.edeniq.com

2011 Northeast Biomass Conference & Trade Show

Inbicon

108

Indeck Power Equipment Co.

121

Jordan Technologies Inc

Kennedy and Coe, LLC

Lallemand Ethanol Technology

123

2011 Southeast Biomass Conference & Trade Show

2012 Pacific West Biomass Conference & Trade Show

Louis Dreyfus

ACE American Coalition For Ethanol

Maas Companies

Miller Insulation Company

74 70 & 116

Yield Enhancement

2011 International Fuel Ethanol Workshop & Expo

12 & 13

128

H2O INNOVATION 763-566-8961 www.H2OINNOVATION.com

2011 International Biorefining Conference & Trade Show

ADI Systems Inc. Agra Industries

Aqua Power

Ashland Hercules Water Technologies

Liquid Controls

129

Load Toad

107 73 136 80

Mist Chemical & Supply Company Mole Master Services Corporation Nalco Company Natwick Associates Appraisal Services

BetaTec Hop Products

Finance

Brock Grain Systems

126

Nelson Engineering, Inc.

BrownWinick Law Firm

Insurance

109

Neogen Corporation

Burns & McDonnell

ERI Solutions, Inc. 316-927-4294

Cashco, Inc.

CHS Renewable Fuels Marketing

Phibro Ethanol Performance Group

Cloud/Sellers Cleaning Systems

Pioneer Hi-Bred International, Inc.

CPM Roskamp Champion

erisolutions.com

Mergers & Acquisitions Moglia Advisors 847-884-8282

www.mogliaadvisors.com

90 85 115

Marketing

Fuel Ethanol CHS Renewable Fuels 651-355-6271

www.chsinc.com

Maas Companies 507-424-2640 www.maascompanies.com

Crown Iron Works Company

Premium Plant Services, Inc.

Davenport Dryer, LLC

Pursuit Dynamics (PDX)

Dedert Corporation

101

R3 Fusion

Distillers Grains Production & Markets

137

Renewable Fuels Association

America. Praj Industries, a globally leading provider of bio-

in Houston, Texas. He should be a Chemical/Mechanical

ethanol plants is looking at expanding its business in the

Engineer or a Technologist with Chemistry or

USA and Canada. Praj offers innovative, end-to-end

Biotechnology as a major. The candidate should have 5-10

120

Roeslein & Associates, Inc.

Eco-Energy

140

Scherer Corrugating

EISENMANN Corporation

SGS North America, Inc.

ETS Laboratories

Spraying Systems Co.

Fagen Inc.

solutions that significantly add value in ethanol, water &

years of experience in marketing and sales related to

Sturtevant, Inc.

wastewater treatment systems and process equipment that

biofuels or clean technologies or in the oil & gas or

address a wide range of applications in the industry. The

chemical industry. The person will be responsible for

Sulzer Process Pumps (US) Inc.

company is also engaged in research and development of

developing market and driving sales for ethanol plants and

Texas Rope Rescue

second generation ethanol from ligno-cellulosic feedstock

process equipment in the Nor th American territory.

127

Sukup Manufacturing Co.

Sulzer Chemtech Ltd

Freez-it-Cleen

51 & 148

GENENCOR速 - A Danisco Division

Gevo, Inc.

Grace Davison Renewable Technologies

102

FCStone, LLC

Engine Testing

The Arnold Company 800-245-7505 www.arnoldcompany.com

who will operate out of its subsidiary, Praj Americas Inc.

Robert-James Sales, Inc.

Dynamic Pricing Platform

Foundation Analytical Laboratory

Railcar Gate Openers

for bio-ethanol plants and process equipments in Nor th

Transportation

Praj is looking forward to appoint a Marketing Manager

Rev Tech LC

Fermentis - Division of S.I. Lesaffre

www.roush.com

If yes, we invite you to an oppor tunity to develop business

DuPont

PRAJ Industries Limited

Research & Development Roush Industries 734-779-7736

147

Novozymes

106

Miscellaneous

103 55 7

Tranter Phe

U.S. Tsubaki

U.S. Water Services

Verenium

110

Victory Energy Operations, LLC.

Growth Energy

Vogelsbuch USA, Inc.

Hammertek

Wabash Power Equipment CO.

HPD

WCR Incorporated

111

HTH Companies

WINBCO

122

Hydrite Companies

Zeochem

100

Hydro-Klean Inc.

114 25

ICM, Inc.

in co-operation with US and European Companies.

Quadrant 4165

Valves

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