2016 January Ethanol Producer Magazine by BBI International

JANUARY 2016

PRIORITY CLEAN Sanitation Big Player in Microbial Control Page 26

Outlook 2016: Forging Ahead Despite Challenges Page 34

www.ethanolproducer.com

CONTENTS

JANUARY 2016 VOLUME 22

DEPARTMENTS 6

THE WAY I SEE IT The Cost of War By Mike Bryan

EVENTS CALENDAR

VIEW FROM THE HILL Record Production Propels Industry In Face of EPA Rule By Bob Dinneen

DRIVE

A Year of Success, Despite Overwhelming Opposition By Tom Buis

GRASSROOTS VOICE

GLOBAL SCENE

Capitalizing on Ethanol’s Strengths By Brian Jennings

Reboot Global Debate On Biofuels By Robert Wright

BUSINESS BRIEFS

COMMODITIES

DISTILLED

FRONTLINE

SANITATION

Striving for Clean, Infection-free Ethanol Production

Let's Get After It Now By Tom Bryan

AD INDEX

FEATURES

EDITOR'S NOTE

ISSUE 1

How Mechanical Deaerators Help Avoid Steam Boiler Corrosion By Robert Jewell

BUSINESS MATTERS Look Before You Leap in 2016 By Donna Funk

MARKETPLACE

4 | Ethanol Producer Magazine | JANUARY 2016

Illinois and California plants minimize infections, maximize yield

By Susanne Retka Schill

OUTLOOK

Moving into 2016

Industry insiders reflect on 2015 and look ahead at ethanol’s future By Holly Jessen, Susanne Retka Schill

34 CONTRIBUTIONS

MICROBIAL CONTROL

Organic, Inorganic Oxidizers Control Bacteria in Corn Mash Fermentation Peracetic acid, hydrogen peroxide provide effective alternative By Reed Semenza

REGULATION

California LCFS Presents Opportunities for Ethanol Producers

As value of credits jumps, the importance of understanding changes to the regulation increases By John Sens

ON THE COVER Aemetis ethanol plant in Keyes, California. PHOTO: VERSCHELDEN PHOTOGRAPHY Ethanol Producer Magazine: (USPS No. 023-974) January 2016, Vol. 22, Issue 1. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

EDITOR'S NOTE

Let’s Get After It Now For U.S. ethanol producers, 2016 will be defined by some consolidation and temperate growth amidst the backdrop of a virtually make-or-break moment for cellulosic ethanol. 2016 will bring a more visible

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

separation between industry leaders and laggards, and it should deliver satisfactory margins for low-cost, low-debt producers that have made investments in efficiency and diversification. While 2015 was nothing like 2014 in terms of margins and earnings, ethanol producers generally did well. It was a decent year, and most producers would probably take another 12 months like it. At the start of 2016, however, it’s simply impossible to know if the mild profitability of 2015 will carry forward. As we report in our annual CEO outlook story, “Moving Into 2016,” on page 34, a variety of conditions contributed to the ethanol industry’s steadiness last year. Exports held strong and, to everyone’s pleasant surprise, gasoline consumption rose, which helped keep the demand and price of ethanol at suitable levels. The industry did well maintaining and growing exports for both ethanol and distillers grains in 2015. In fact, ethanol exports exceeded 800 million gallons last year and will likely do the same this year. However, producers shouldn’t expect coproduct exports, or prices alone, to fundamentally compensate for thinner ethanol margins this year. As we report, both distillers grains and corn oil are currently experiencing low pricing relative to the highs of the past 18 months. And there’s just not a lot of evidence suggesting that those ancillary product prices will jump up quickly. Vendors highlighted in this year’s outlook story echo the sentiments of producers, saying new contracts and capital projects were established in 2015 despite thinner margins and lots of uncertainty over the renewable volume obligation (RVO) numbers of the renewable fuel standard (RFS). The ethanol industry’s ability to move business deals forward and finance new technologies in the face of policy adversity is a testament to its collective experience and resolve. Ultimately, the U.S. EPA’s final RVO rule, released on Nov. 30, falls far short of statutory levels—by 4 billion gallons—but at least it gives the ethanol industry certainty and a visible footpath ahead for E15 and cellulosic ethanol. The good news is that ethanol consumption is expected to increase from 905,000 barrels per day in 2015 to 918,000 barrels per day in 2016, according to the U.S. Energy Information Administration. Isn’t that going the right direction? The industry leaders featured in this issue seem to think so, and they’re ready to meet and exceed the RFS targets that are finally in front of them. Politics aside, American ethanol producers are getting after it.

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | JANUARY 2016

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 22 ISSUE 1

ADVERTISER INDEX

EDITORIAL

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

2016 Fuel Ethanol Workshop & Expo

2016 International Biomass Conference & Expo

Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com

2016 National Ethanol Conference

AOCS American Oil Chemists Society

Managing Editor Holly Jessen hjessen@bbiinternational.com

BBI Project Development

Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com

BetaTec Hop Products Buckman

Conveyor Engineering & Manufacturing CPM Roskamp Champion

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

Direct Automation

DuPont Industrial Biosciences Fagen Inc.

ART

Art Director Jaci Satterlund jsatterlund@bbiinternational.com

Fluid Quip Process Technologies, LLC

Graphic Designer Raquel Boushee rboushee@bbiinternational.com

Growth Energy

Gamajet

Husch Blackwell LLP Hydro-Klean LLC

PUBLISHING

ICM, Inc.

Chairman Mike Bryan mbryan@bbiinternational.com

Iowa Economic Development Authority J.C. Ramsdell Enviro Services, Inc.

CEO Joe Bryan jbryan@bbiinternational.com

Lallemand Biofuels & Distilled Spirits McC Inc.

SALES

Mist Chemical & Supply Company

Vice President of Operations Matthew Spoor mspoor@bbiinternational.com

Nalco, an Ecolab company Novozymes

Sales & Marketing Director John Nelson jnelson@bbiinternational.com

Phibro Ethanol Performance Group

Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Account Manager Jeff Hogan jhogan@bbiinternational.com

POET-DSM Advanced Biofuels Tower Performance, Inc. Tranter

U.S. Grains Council Urban Air Initiative

Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com

Wabash Power Equipment Co.

59 46 32 47 58 13 41 24 33 18 60 17 3 29 2 40 37 45 51 25 11 23 22 31 55 15 57 28 36 19 5 9

Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

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

Please recycle this magazine and remove inserts or samples before recycling

JANUARY 2016 | Ethanol Producer Magazine | 7

THE WAY I SEE IT

The Cost of War By Mike Bryan

Politics is so political and being politically correct is not always easy. So, I have generally tried to avoid

issues in this small space that are highly politically charged and can generate vastly different views. But there is something that has been on my mind for some time now and the terrorist attacks in Paris and other things compel me to comment. Estimates are that by the time all is said and done the U.S. will have spent nearly $6 trillion on wars in Afghanistan and Iraq. I know there are many varying opinions as to whether or not we should have gone into those countries. Politicians often change their position depending on their audience and most of us can now play Monday morning quarterback as to the efficacy of those wars. Talking about money—and not the human suffering of our servicemen and women and the people of those countries— seems extraordinarily shallow. However, the good we could have accomplished in the world with $6 trillion dollars staggers the imagination. Arguably, we would not have spent $6 trillion dollars had we not been involved in these wars. Think about what that money could have done not only in terms of economic, environmental and social aid to countries in need, but from a very pragmatic perspective, the economic activity it could have created for American technology companies. America has invested billions of dollars in ethanol production alone and hundreds of billions in renewable energy as a whole. We marvel at the economic and environmental impact. Extrapolate the effects of spending a thousand times that amount on developing renewable energy projects around the world. The jobs created, the goodwill generated, the standard of living raised, money to build schools and hospitals, reduced oil and coal imports of oil, greater incentives for a stronger agricultural base and a cleaner environment. Everything that renewable energy has created here

8 | Ethanol Producer Magazine | JANUARY 2016

in America could be created in countries where it is desperately needed and where the ancillary benefits would have an even greater impact on people’s lives. Of the seven-plus billion people living on this planet, 3 billion people live on less than $2.50 a day. That’s 40 percent of the world’s population! Eighty percent of the world’s population live on less than $10 per day. At that level of income, you’re unable to invest in anything, you cannot raise yourself out of poverty, and you can only exist from one day to the next. It’s a vicious circle and unless something changes, it’s your reality for life. Renewable energy projects on a global scale would not eliminate poverty, but it could go much further than simply pouring foreign aid money into countries with little idea or control over where it goes or how it is used. Besides, funding global renewable energy projects can be directly tied to the use of U.S. companies to complete the projects. I’m not talking about matching funds, I’m talking about fully funding, building, managing and possibly owning those facilities until they can be self-managed and owned, sharing agricultural, environmental and production technology while having direct oversight on how the funds are spent. It’s probably a pipe dream. But when I watch the news and see the level of hatred and despair in the world, I can’t help but wonder what that $6 trillion dollars could have bought. That’s the way I see it.

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

EVENTS CALENDAR

RENTAL BOILER EXPERTS

National Ethanol Conference February 15-17, 2016 New Orleans, Louisiana This year’s program, “Fueling a High Octane Future,” will highlight how ethanol’s high-octane content is driving demand for the fuel both domestically and abroad. With a 113-octane rating, ethanol is the highest-rated performance fuel in the market and keeps today’s engines running smoothly. Tomorrow's downsized, high-compression engines will require higher-octane choices at the pump. Ethanol and higher-level ethanol blends are uniquely poised to help automakers and consumers alike achieve stricter fuel economy and emissions requirements at a reduced cost.

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International Biomass Conference & Expo April 11-14, 2016 Charlotte, North Carolina Charlotte Convention Center Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all biomass industries.

Superheated Steam Boiler Rentals

866-746-8385 | www.biomassconference.com

2016 International Fuel Ethanol Workshop & Expo June 20-23, 2016 Wisconsin Center Milwaukee, Wisconsin Now in its 32nd year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-tobusiness environment. As the largest, longest-running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine —that maintains a strong focus on commercial-scale ethanol production, new technology, and near-term research and development. The 2015 event drew about 2,000 people from 45 States, four Canadian Provinces and 25 countries.

Portable Boiler Room Rentals

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JANUARY 2016 | Ethanol Producer Magazine | 9

VIEW FROM THE HILL

Record Production Propels Industry In Face of EPA Rule By Bob Dinneen

Some might call it a twist of fate.

Others might

refer to it as the height of irony. Whatever one chooses to call it, there is no denying that within a 10-day span of time in November, the U.S. ethanol industry experienced both an unprecedented high and a frustrating setback. The high came in the form of ethanol production numbers for the week of Nov. 20. According to the U.S. Energy Information Agency, weekly ethanol production for that week topped 1 million barrels per day for the first time ever. On an annualized basis, that equates to 15.33 billion gallons per year. Cue balloons. Start the band. Congratulations! But wait. Why then, just 10 days later, on Nov. 30, did the U.S. EPA decide it was necessary to reduce the volumes called for in the RFS for undifferentiated biofuels (corn ethanol) from 15 billion gallons to 14.5 billion gallons? Cleary, the U.S. ethanol industry had proven it can supply the requisite volume of ethanol. Even more curious, why did the agency choose to ignore more than 2 billion gallons of ethanol in the form of surplus carryover credits, or renewable identification numbers (RINs), available to refiners for renewable fuel standard (RFS) compliance as well? Indeed, the overwhelming body of data available to EPA demonstrated that there was no need for the agency to reduce the RFS levels for corn ethanol by a single gallon. Obligated parties would most certainly have been able to meet the levels called for by the statute. Clearly, what the biofuels industry needs, and what is important for any industry to thrive, is policy consistency and certainty. The most troubling aspect of EPA’s decision is that it has eliminated both. Not only did the agency reduce the gallons required by U.S. Congress, but EPA also introduced a new waiver authority not contemplated by Congress. This newly created authority allows the agency to consider factors such as infrastructure, the so-called

10 | Ethanol Producer Magazine | JANUARY 2016

blend wall and gasoline demand, in the context of a general waiver that was designed by Congress solely to determine the available supply of renewable fuel. As a result, the numbers specified by the statute have little meaning in the future as EPA can now set them based on their own amorphous criteria influenced by the political meme of the day. If gasoline demand falls because the price of oil rises or electric vehicle sales increase, the RFS can be reduced. That is not what the statute intended. If allowed to work as Congress designed, rising credit prices would incentivize investments in new technology and infrastructure. This in turn would drive the market to adopt lower-carbon biofuels and higher ethanol blends. But EPA has embraced the false narrative perpetuated by the oil companies that the marketplace cannot accept higher volumes of ethanol now, and has made the fatal mistake of gutting that market-forcing mechanism in order to slow the growth of biofuels just as those investments were being made. The commercialization of cellulosic ethanol had begun. I fear it now moves overseas. Fueled by the industry’s own Prime the Pump program and the USDA’s Bioenergy Infrastructure Program, infrastructure for higher-level blends was happening. The importance of those efforts now grows exponentially as the push from the RFS evaporates. By failing to enforce the statutory volumes, by ignoring the existence of surplus credits and by artificially mandating a credit reserve, EPA is attempting to manage the biofuels market in a way that Congress never intended and consumers do not want. So, this is my takeaway from 10 days in November. EPA needs to stop micromanaging the RFS—allow the program to work as intended—and the record-setting ethanol industry will continue to perform for American consumers. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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DRIVE

A Year of Success, Despite Overwhelming Opposition By Tom Buis

I hope you all had a wonderful and relaxing holiday season with friends and family. As we move

into 2016, it is important to look back on last year and take stock of all the accomplishments our industry made in helping bring clean, homegrown American fuel to consumers. Reflecting on 2015, I can say with confidence that it was a good year and our industry moved forward, despite overwhelming opposition from special interest groups determined to undermine the renewable fuel standard (RFS) and American-grown biofuels at all costs. Despite overwhelming pressure on Congress from Big Oil and their coalition of special interests, we did not see any legislative changes to the RFS. While many members of Congress attempted to move legislation that would undermine or outright repeal the RFS, none of these efforts were successful. And this success is because of you, the grassroots activists who took action, called your representatives and senators, telling them that a vote against biofuels was a vote against your job, your community and against American innovation. Indeed, we were quite successful in 2015 in derailing any legislative attempts to diminish our industry. At our Executive Leadership conference last year, we said that 2015 would be â&#x20AC;&#x153;the year of E15,â&#x20AC;? and we saw tremendous progress through different programs like Prime the Pump and the Biofuels Infrastructure Partnership with the USDA. Through Prime the Pump, we established several retail partnerships with leading retailers, including: MAPCO, Cenex, Minnoco, Kum & Go, Protec, Murphy USA and Sheetz. Furthermore, the Biofuels Infrastructure Partnership, a federal grant program coupled with matching funds from public and private partners will result in approximately 5,000 new flex pumps installed over the next year or so to offer consumers E15 and higher blends. Just eight months ago, the Biofuels Infrastructure Partnership was an idea on a piece of paper. Currently, we are seeing firsthand the implementation of this program in 21 states to increase market access for cleaner, homegrown, renewable fuels. The speed with

which this program has been implemented clearly demonstrates that USDA and its state and private sector partners can indeed make good things happen. It also proves the demand is there is for higher blends. If consumers did not want higher blends, and if retailers did not see a demand for them, this program would fail, but that is not the case, it has been tremendously successful, with the best yet to come this year. 2016 is a new year, filled with new opportunities. As world leaders return from the Climate Conference in Paris, many have outlined the importance of low-carbon fuels with reduced greenhouse gas (GHG) emissions as a vital tool to mitigate climate change. They have made clear that biofuels are part of the solution and these ongoing efforts create a wonderful opportunity to increase our foreign market exports to help provide countries across the globe with GHG reducing biofuels, like ethanol. Furthermore, gasoline consumption is on the rise, allowing for more biofuels to be blended into the marketplace, providing additional opportunities to expand. Foreign sales of ethanol and DDGS are a another bright spot for the industry. 2014 was a record year for DDGS exports and the nearly 835 million gallons of ethanol exports represented the second-highest level of ethanol overseas sales volumes recorded. Although price levels for both commodities are down from 2014 levels, looking at data through September, the 2015 volume level of ethanol trade is up 7 percent compared to last year, and DDGS exports are up 450,000 metric tons, a 5 percent increase compared to 2014. This is a year full not only of challenges, but also opportunities. I am confident that together we will rise above any challenges. We will also take every opportunity to grow, innovate, and become more efficient. We will continue to provide the cleanest-burning motor fuel to consumers here in the United States and abroad, giving them a better product at a lower price. Ethanol is better for our environment, our economy, our energy and national security. It is helping our nation take the necessary steps to end the reckless status quo of our dangerous dependence on foreign oil and fossil fuels.

Author: Tom Buis

Co-chairman, Growth Energy 202-545-4000 tbuis@growthenergy.org

12 | Ethanol Producer Magazine | JANUARY 2016

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GRASSROOTS VOICE

Capitalizing on Ethanol’s Strengths By Brian Jennings

Each fall the American Coalition for Ethanol brings members together to identify the goals we’ll pursue for the coming year. We did a series of listening

sessions between harvest and football in September, October and November, having candid conversations about priorities, needs and ways to go on offense to ensure more market access for ethanol. The word cloud illustrates the discussion. It should be noted that our listening sessions occurred before the U.S. EPA issued the final renewable fuel standard (RFS) blending targets for 2014, 2015 and 2016 (this column was written in advance of EPA’s rule as well). Obviously, the RFS took up a lot of oxygen, but it was hardly the only topic of conversation. In fact, ACE members discussed several opportunities and challenges, such as commodity prices, the 2016 election, climate change, exports, Low Carbon Fuel Standards, and Reid vapor pressure for higher blends of ethanol, just to name a few. As you can see, the issue of infrastructure for E15 and flex fuels dominated much of our conversation. Part of that was timing, with USDA rolling out its Biofuel Infrastructure Program. Progress is being made as ACE has been helping retailers do the math and marketers increasingly ask us how they can sell more E15 and E85. Perhaps it is evident from the word cloud that the topic which generated the most enthusiasm was how to market ethanol’s clean octane advantages. One ACE member remarked at a meeting, “E15 is a price point. E25/E30 is a technology.” The industry can’t pour all of its trust and work into hoping EPA finally gets the RFS right. We must continue to defend the RFS, but also need to build momentum for new policies and different ways to move gallons of ethanol.

14 | Ethanol Producer Magazine | JANUARY 2016

That’s why ACE is putting our shoulder into the technical and political steps necessary to position blends such as E25 and E30 as clean octane fuels that can help automakers comply with greenhouse gas and CAFE standards and replace benzene and other aromatics in gasoline. That’s also why some ACE members are working with the California Air Resources Board, instead of fighting it, to capitalize on technology innovations in corn and ethanol production to meet the demands for low-carbon fuels in California under the LCFS. We don’t know if EPA is going to hold up its end of the deal with the RFS, but we do know ethanol’s octane and low-carbon benefits are durable and we should build support for policy mechanisms to capitalize on these strengths. Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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GLOBAL SCENE

Reboot Global Debate On Biofuels By Robert Wright

The global media landscape these past few weeks has been dominated by coverage of world leaders meeting at Paris Climate Summit to agree on measures to address climate change. COP21 an excellent opportunity to reboot the debate

about biofuels, and ethanol in particular, and begin a discussion on how to best capture their genuine ability to play a positive role in the fight against climate change. Tackling climate change is one of the biggest challenges we face. Unless we take decisive action to reduce greenhouse gas (GHG) emissions, there is little hope of limiting damaging rises in global temperatures. Achieving the GHG reductions that are needed to stay below a 2-degree Celsius increase in global temperatures will require substantial emission reductions in the transport sector. Today, global transport emissions have increased to 14 percent of the world’s GHG emissions and about a quarter of the total energy-related CO2 emissions. With the United Nation’s Intergovernmental Panel on Climate Change predicting transport emissions could double by 2050, the need for preventative policy measures by world leaders is clear and urgent. It was therefore reassuring that 36 countries had, in their Intended Nationally Determined Contributions plans, highlighted biofuels use as a key component of their climate action policies. Sixty-four countries worldwide, including the European Union, U.S. and Brazil, already have policies mandating the use of biofuels, but more need to do so. Decarbonizing global transport is a huge task, because it is more than 95 percent dependent on oil. We therefore need to find ways of making the existing vehicles, including planes and ships, and infrastructure cleaner. It will undoubtedly be a huge challenge but, according to the IPCC, transport’s growing emissions could be cut by 15 to 40 percent through “aggressive and sustained” policy measures, including reducing the carbon intensity of transport fuels by substituting oil-based products with biofuels. This can be achieved, and sustainably. According to the International Energy Agency, by 2050, sustainably produced biofuels could provide 27 percent of the world’s total transport fuel and avoid around 2.1 billion metric tons of CO2 emissions per year, eventually providing 23 percnet of total emission reductions in the transport sector. This is the emissions reduction potential of biofuels

16 | Ethanol Producer Magazine | JANUARY 2016

that needs to be realized. But the potential can only be realized if policy frameworks at national, regional and global level are stronger, more stable and more ambitious. Ethanol has a vital role to play in global decarbonizing transport because it is the most used biofuel globally and can achieve GHG emissions reductions of between 40 to 90 percent compared to petrol. Because it can be blended with petrol, and used in existing petrol engines, it also allows us to decarbonize the current fleet without needing to replace existing vehicles and infrastructure. It is clean, affordable, and here today. I’m not saying that ethanol is a silver bullet, but it is one of the main technologies that can play an important role in decarbonizing transport. Ethanol is already helping the world to reduce its carbon emissions. Just this week, the Global Renewable Fuels Alliance, in cooperation with (S&T)2 Consultants Inc., released a new report which found that, in 2014, the total GHG emission reductions from global ethanol use were 100 million metric tons—equivalent to the total national GHG emissions of Sweden and Norway combined. The report predicts that even under a conservative, business-as-usual scenario, the total GHG emission savings achieved from global ethanol use could rise to 155 million metric tons in 2030. Along with their climate benefits, biofuels are a key part of the global agricultural complex, facilitating rural development and supporting food production, particularly in poorer regions. Our industry is a key driver of clean technology innovation and investment but we constantly recognize the need to innovate even further. One way we can do this is through investment in advanced biofuels, which are produced from wastes and residues. Ethanol is just one of the technologies that will play an important role in the fight against climate change. But unlike other solutions, it is ready to use today—here and now—and at scale. With ethanol, we can make an immediate impact on reducing global transport emissions. So let’s make that impact. Author: Robert Wright Secretary General, ePURE, the European Renewable Ethanol Association wright@epure.org

JANUARY 2016 | Ethanol Producer Magazine | 17

BUSINESS BRIEFS People, Partnerships & Deals

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(605) 428-4300 www.Direct-Automation.com 18 | Ethanol Producer Magazine | JANUARY 2016

Genera Energy Inc. has hired Chad Covert to join its business development team. Prior to joining Genera, Covert managed U.S. ocean import processing for an international freight forwarder. Growth Energy has committed to provide $90,000 in funds over the next three years to an agricultural education scholarship fund. The Upper Division scholarship from the National Association of Agricultural Educators is for students majoring in agricultural education during the semester they student teach.

Deinove, a biotech company developing processes to produce biobased fuels and chemicals from Deinococcus bacteria, has announced an agreement with Flint Hills Resources, a subsidiary of Koch Industries focused on the refining, petrochemical and biofuels industries, to develop a process for producing ingredients for animal nutrition. The companies aim to develop conditions for an industrial biological production process based on selected bacteria from Deinove and raw materials supplied by Flint Hills Resources. Over the next 17 months, Deinove will screen its library of 6,000 strains, identify and optimize bacteria that are able to grow in good conditions using raw materials supplied by Flint Hills Resources and produce the targeted compounds in acceptable quantities. Flint Hills Resources is covering the cost of the project. If successful, the companies will study the terms of a licensing agreement for the technology developed by the research and development project.

The Iowa Renewable Fuels Association has announced the launch of an updated logo and website, with new features, an enhanced consumer focus, improved tools for retailers, and more. In addition to an enhanced homepage, the website updates include the addition Vertimass LLC has announced the of a dedicated page for motorists, a page for completion of the technology validation that retailers, and improved resources and statistics. verifies the benchmark performance, initial process design and preliminary cost information for a new award of $2 million by the U.S. Department of Energyâ&#x20AC;&#x2122;s Bioenergy Technology Office. The achievement allows the company to begin the process to scaleNovozymes announced the launch of up its technology for converting ethanol into Avantec Amp, an advanced enzyme product hydrocarbons. that improves yield and throughput in cornethanol production, while increasing corn-oil Genera Energy and PrecisionHawk, a and reducing the need for several harsh chemiterrestrial data acquisition and analysis comcals used in ethanol production. Avantec Amp pany, have partnered to develop new analysis continues the success of the original Avantec, algorithms specific to improving the efficiency introduced in 2012. It combines multiple enand quality of sustainable biomass crop prozyme activities into one product, and surpasses duction and distribution. The algorithms will competing enzyme solutions by squeezing convert raw aerial imagery collected by drones more ethanol from each kernel of corn and and satellites into an actionable report for bioenabling increased output from the ethanol mass crop farmers. The tools will be publicly plant. Avantec Amp allows urea use to be cut licensed for use in the Data/Mapper software by more than 70 percent. Surfactants and amplatform. monia use can also be reduced. By switching from standard enzyme technology to Avantec Gevo Inc. has entered into a license agreeAmp, Novozymes said a typical ethanol plant ment and a joint development agreement with with a capacity of 110 million gallons can Praj Industries Ltd. to enable the licensing make up to $2.5 million a year in additional of its isobutanol technology to processors of net profits. noncorn based sugars, including the majority of Prajâ&#x20AC;&#x2122;s global customer base of ethanol plant

BUSINESS BRIEFSÂŚ

owners. As part of the agreements, Praj will invest substantial resources in the development and optimization of Gevoâ&#x20AC;&#x2122;s isobutanol technology for use with noncorn feedstocks, including sugarcane, sugar beets, cassava, rice, sorghum, wheat and certain cellulosic sugars. The development work is expected to lead to process design packages (PDP) designed to accelerate the licensing of Gevoâ&#x20AC;&#x2122;s technology to processors of these feedstocks, particularly in Prajâ&#x20AC;&#x2122;s customer base. The development work is expected to build on the PDP Gevo has already developed for corn. Under the agreements, Praj would be the customer-facing entity marketing Gevoâ&#x20AC;&#x2122;s isobutanol technology to its existing customer base, and would provide the engineering, procurement and construction services for such projects. Gevo would be the direct licensor of its technology to these end customers. The two companies expected to license up to 250 million gallons of biobutanol capacity over the next 10 years under this partnership. In addition to the PDP development, Praj will contribute engineering services to optimize Gevoâ&#x20AC;&#x2122;s Luverne, Minnesota, facility, with the initial focus on optimizing energy and water usage at the plant in order to further lower the cost of the isobu-

The process includes fractionating a biomass feedstock with an acid, a solvent for lignin, and water, to generate celluloserich solids, and then mechanically treating the celluloserich solids with a relatively low amount of energy to form cellulose nanofibrils or nanocrystals. Other patents are pending for the nanocellulose material and compositions that include the nanocellulose, as well as for other aspects of the technology, in the U.S., Brazil, Europe, Japan, China, India, Russia, Canada, Australia, Malaysia, and South Africa.

tanol process.

Bill Levy, CEO and founder of Pacific Ag, recently received a Distinguished Luminary Award from Oregon State University. The award is designed to publicly acknowledge Levy the accomplishments of outstanding alumni, and is given to an individual who made early career and community contributions that clearly identify him as a future leader. Pacific Ag is a biomass supply chain management provider. The companyâ&#x20AC;&#x2122;s customers include U.S. cellulosic biorefineries, forage importers in Asia and the Middle East, U.S. cattle and dairy operations, and others.

U.S. Water, an Allete Co., has announced the acquisition of A and W Technologies, a Georgia-based company that provides specialty chemicals and engineering service for water treatment in data centers, light industrial, institutional and food industries. A $9 million purchase agreement was signed by both parties in November. American Process Inc. has announced the U.S. Patent and Trademark Office has granted the company a patent for its BioPlus nanocellulosic technology. U.S. Patent No. 9,187,865 covers an AVAP process for producing a nanocellulose material, as well as downstream applications using the nanocellulose.

Edward Breen has been named chair and CEO of DuPont. Prior to joining DuPont, Breen served as CEO of Tyco International plc, where he oversaw the design Breen and implementation of a comprehensive action plan to revive the company from near bankruptcy and rebuild its brand and credibility. During his time at Tyco, Breen oversaw a restructuring, including two break-ups of the company resulting in the spin-offs of Covidien, Tyco Connectivity, ADT Corp. and the merger of Tyco Flow Control with Pentair. Breen also previously served as president and chief operating officer of Motorola, and as chairman, president and CEO of General Instrument Corp.

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SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also email information to evoegele@bbiinternational.com. Please include your name and telephone number. JANUARY 2016 | Ethanol Producer Magazine | 19

COMMODITIES

Prices & Market Analyses

Natural Gas Report

Three natural gas trends to watch in 2016 Nov. 23—Several potential shifts in natural gas market dynamics could have an impact on end users in the next year. Market participants have gotten used to a well-supplied situation and generally low pricing, but three issues are indicative of a changing market over the next 12 months and beyond. They include flat to falling domestic production, growing demand from power generators and the continued exports ramp up. Natural gas producers in the U.S. sent volumes to market at a record clip in 2015, but the rapid growth of 2014 has halted. The combination of low prices and limited levels of exploration could set 2016 up to be a flat production year or even the first annual decline since the middle of last decade. This is a factor that could come as a shock to the system as market participants have gotten used to reliable year-over-year supply growth. Along with a new record in domestic production, 2015 also saw record usage of natural gas from the nation’s power-generation sector. This was due to growing capacity, the retirement of coalfired-generation assets and price advantage held by natural gas over coal. Demand from this sector could be even higher in 2016. From

by Andy Huenefeld

a low south of $2 per MMBtu in the first half of 2012, the promptmonth New York Mercantile Exchange natural gas contract was back to well-above $3 per MMBtu by the end of the year. Thanks to new build-out and further coal retirements, power generators are even better positioned to ramp up natural gas consumption. The U.S. currently imports between 5 and 6 Bcf per day from Canada, a volume that has been trending lower for a decade. Meanwhile, pipelines headed south of the border to Mexico are ramping up exports. The U.S. sent an all-time record of more than 2.5 Bcf per day to Mexico in 2015, with daily volumes above 3.0 Bcf per day at times. Exports to Mexico have historically hovered around 0.5 Bcf per day, so this represents a large shift. These volumes are set to increase again in 2016 as the network of pipelines connecting the two nations continues to add working capacity. Additionally, with exports of liquefied natural gas commencing from Louisiana’s Sabine Pass terminal to the tune of 0.5 to 1.0 Bcf per day, 2016 is set to potentially be the lowest year on record for net imports of natural gas.

Corn Report

Yield reports looking better than expected

by Jason Sagebiel

Nov. 23—Harvest has wrapped up and yield reports have been tober vs. yield a year ago. This data leads down the path as to why better than expected. In the USDA’s October supply and demand the Eastern Corn Belt will be short again this year, as state stocks report, the government increased yields to 168 bushels per acre, in these areas are tight. This will keep the cash market exuberant. up from the first new crop yield report in May of 166.8. Excessive rains in areas of the corn belt during May and June had analysts projecting yield cuts. As shown in the chart, aside from the Eastern Corn Belt, most areas are projected to outperform last year’s yield numbers. Although yields are projected to drop substantially in Illinois, Indiana and Missouri, year on year, recent estimates have shown slight rebounds and the departure from normal is not as extensive. Prices are finding support this fall due to lack of movement by the producer. The crop will still be short in areas of the Eastern Corn Belt due to effects of the excess moisture and the shortfall will make the cash market a bit more volatile in the east when compared to the west. The map illustrates the yield difference in OcComments in this column are market commentary and are not to be construed as market advice.

20 | Ethanol Producer Magazine | JANUARY 2016

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.501

DDGS Report

DDGS prices steady, domestic demand rising Nov. 23—With Thanksgiving right around the corner and cold weather still not here in earnest, it seems like DDGS prices have settled into a holding pattern. Prices have been steady the past couple weeks, and have only recently started to see more domestic demand. The lack of colder weather has kept seasonal usage for DDGS on the low side, but that is bound to change soon. There are usually situations in which plants either have too much DDGS in storage, or too little, going into the short Thanksgiving week, but this year it looks as though earlier sales will match up with impending supplies. On the export side, China demand is still the elephant in the room, with the industry waiting to hear whether its Ministry of Commerce will institute an antidumping case vs. the U.S. ethanol industry.

Region

Spot

Rack

West Coast

1.580

1.750

Midwest

1.500

1.695

East Coast

1.570

1.885 SOURCE: DTN

by Sean Broderick

Regional Gasoline Prices ($/gallon)

Front Month Futures Price (RBOB) $1.288

Exports there have dropped significantly since September, mostly due to a combination of traders fearful of getting caught in the middle of governmental action, and China’s own extremely large amount of surplus corn in storage. Barge, bulk vessel and container freight rates are all on the low end of their respective spectrums worldwide. Other importers in Asia look closely at their delivered price of corn in comparison with DDGS, and Brazilian and Ukrainian corn is priced well-below the delivered price of U.S. DDGS, which has also slowed imports. Looking ahead, U.S. domestic demand is expected to increase, as is interest from Mexico. Buyers around the world will watch carefully for signs of what China decides to do with its buying as well as what U.S. farmers decide to do with selling.

Region

Spot

Rack

West Coast

1.310

1.685

Midwest

1.060

1.572

East Coast

1.332

1.636 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

Jan 2016

Dec 2015

Jan 2015

Minnesota

110

Chicago

140

138

125

Buffalo, N.Y.

130

140

130

Central Calif.

178

195

Central Fla.

153

155

160 SOURCE: CHS INC.

Corn Futures Prices

(December Futures, $/bushel) Date

close, bu.

close, ton

Nov. 20, 2015

3.6975

132.05

Oct. 20, 2015

3.8725

138.3

Nov. 20, 2014

3.8625

137.95 SOURCE: FCSTONE

Cash Sorghum ($/bushel)

Ethanol Report

Location

by Rick Kment

Preholiday selling hits ethanol markets Nov. 23—Early November proved to be a trial for ethanol markets, which eroded 10 cents per gallon through the first two weeks of the month. Ethanol followed strong declines in both corn prices and RBOB gasoline markets during the same time period. This year's seasonal pullback in gasoline demand occurred while overall supplies of crude oil continued to grow, thus putting additional focus on price levels through the month of November. This dip in prices may serve as a short-term

seasonal low and establishes the lower end of the price range at $1.44 per gallon. December corn futures contract prices, which continued to hover at $3.63 per bushel at the time of this writing, may draw additional buyer support through early December, although traders are focused on the potential rebound in RBOB gasoline prices surrounding increased holiday demand.

Nov. 6, 2015

Oct. 22, 2015

Nov. 20, 2014

Superior, Neb.

3.13

3.38

4.21

Beatrice, Neb.

3.13

3.28

3.68

Sublette, Kan.

3.16

3.39

3.55

Salina, Kan.

3.36

3.33

4.18

Triangle, Texas

3.18

3.33

3.81

Gulf, Texas

4.33

4.53

5.43

SOURCE: SORGHUM SYNERGIES

Natural Gas Prices ($/MMBtu) LOCATION

Nov. 24, 2015

Sept. 30, 2015

Nov. 25, 2014

2.15

2.52

4.27

NNG Ventura

2.28

2.60

4.66

Calif. Citygate

2.375

2.83

4.56

NYMEX

SOURCE: U.S. ENERGY SERVICES INC.

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

Month

End Stocks

Sept 2015

951

28,543

18,904

Aug 2015

956

29,621

19,259

927

27,807

18,724

Sept 2014

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

JANUARY 2016 | Ethanol Producer Magazine | 21

DISTILLED

Ethanol News & Trends

Study shows GHG footprint of UK biofuels lower than previously estimated

Green Plains acquires 2 plants, plans improvements Green Plains Inc. recently acquired two additional ethanol plants. In October, the company purchased a 60 MMgy dry mill ethanol plant located in Hopewell, Virginia, from Future Fuels LLP. The following month, Green Plains purchased Murphy USAâ&#x20AC;&#x2122;s 100 MMgy facility in Hereford, Texas. The new plants bring Green Plainsâ&#x20AC;&#x2122; total production capacity to more than 1.2 billion gallons per year. Green Plains CEO Todd Becker said his company plans to make several capital investments to the Hopewell plant to increase its operational efficiency and production volume. Production at the plant was expected to

begin before the end of 2015, with corn-oil processing expected to come online during the second quarter of 2016. Murphy USA made several improvements to the Hereford plant before offering it for sale. During the companyâ&#x20AC;&#x2122;s third-quarter investor call, Becker noted Green Plains plans to continue to expand ethanol production and acquire ethanol plants. â&#x20AC;&#x153;To us, itâ&#x20AC;&#x2122;s very simple,â&#x20AC;? he said. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s about continuing to add to the base of operations we started with seven years ago. We believe the billion dollars or so we have invested in this company allows us to acquire and make better all types of plants, if they meet our requirements.â&#x20AC;?

The U.K. Renewable Energy Association has announced the results of research showing greenhouse gas (GHG) emissions from the nationâ&#x20AC;&#x2122;s arable sector are significantly lower than previously thought. The report is positive news for the U.K.â&#x20AC;&#x2122;s renewable fuels industry and for national efforts to meet GHG emissions targets. According to the REA, previous estimates have overstated the greenhouse gases emitted from growing arable crops in the U.K. by about 15 percent. This means that renewable fuels produced from U.K. feed wheat and sugar beet actually have an even lower carbon footprint compared to fossil diesel and petrol. The research found that actual levels of nitrous oxide associated with growing arable crops are half the current theoretical value, meaning U.K.-produced ethanol is even cleaner than current calculations would suggest. The results were published in the Minimising Nitrous Oxide report published by the Agriculture and Horticulture Development Board following five years of intensive field research. Approximately 23 organizations contributed to the report.

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22 | Ethanol Producer Magazine | JANUARY 2016

DISTILLED State

Award (in millions)

DOE, NSF fund switchgrass research The U.S. Department of Energy and National Science Foundation recently awarded several researchers grants to study switchgrass. Jeremy Schmutz, faculty investigator at HudsonAlpha Institute for Biotechnology and co-director of the Genome Sequencing Center, will analyze how switchgrass, through natural genetic mechanisms, adapts to its local environment in two separate but related studies. DOE has committed $1.2 million over five years and the National Science Foundation $602,154 over four years. Eleven researchers from seven institutes will contribute to the project awarded DOE funding. In all, the DOE’s Office of Biological and Environmental Research was awarded $15 million. Tom Juenger of the University of Texas at Austin will lead the project to collect and sequence switchgrass genes, studying how genes and environmental factors, affect the plant and its potential as a biofuel. Genomically identical switchgrass planted in 14 sites across North America will be compared for the projects. “This project will be one of the largest common garden experiments that’s been done in the public sphere,” Schmutz said. The project receiving National Science Foundation funding is also led by Juenger and involves growing plants with shuffled genomes from four different switchgrass varieties in 10 different locations.

Proposed stations

Proposed pumps

Proposed tanks

Colorado

$0.6

Florida

$16

130

892

Illinois

$11.98

428

$0.9

110

100

187

Kansas

$1.3

170

174

Louisiana

$1.7

110

Indiana Iowa

Michigan

165

620

Missouri

$2.88

166

171

Nebraska

$2.29

190

$1.2

Minnesota

North Carolina North Dakota

$3.39

148

Pennsylvania

308

South Dakota

$1.5

Texas

$17

148

763

39 20

Ohio

191

West Virgina

$2.5

107

Wisconisn

$3.7

100

120

100

Virginia-Maryland

SOURCE: USDA

USDA awards Biofuel Infrastructure Partnership funding for pump, tank installation In October, the USDA announced $100 million in grants to 21 states under the Biofuels Infrastructure Partnership. The department anticipates 1,486 stations will install 4,880 pumps and 515 tanks as part of the program. “This major investment in renewable energy infrastructure will give Americans

more options that not only will suit their pocketbooks, but also will reduce our country's environmental impact and bolster our rural economy,” Agriculture Secretary Tom Vilsack said.

JANUARY 2016 | Ethanol Producer Magazine | 23

DISTILLED Green Plains, Delek US to build unit train terminal on Union Pacific

USGC announces near-record export of U.S. feed grains in all forms The U.S. Grains Council estimates 100.1 million metric tons of U.S. feed grains in all forms were exported in the 2014-‘15 marketing year, up 800,000 tons from the previous year and the second-highest export total on record. This includes U.S. corn, sorghum, barley, distillers dried grains with solubles (DDGS), corn gluten feed (CGF), corn gluten meal (CGM), ethanol as measured in corn equivalents, meat and poultry as measured in corn equivalents and processed feed grain products. In the marketing year that just ended, USGC said unprocessed feed grain exports

24 | Ethanol Producer Magazine | JANUARY 2016

accounted for less than 15 percent of all U.S. production. However, unprocessed grains plus the grain equivalents for value-added products accounted for 26 percent of U.S. production. According to the USGC, the percentage of value-added products is expected to grow. Using 10-year projections on corn, sorghum, barley, ethanol, meat and poultry, and coproducts like DDGS the council estimates that the grain equivalent of these exports will rise to 131 million tons by 2024-‘25, accounting for roughly 33 percent of U.S. feed grain production.

Green Plains Partners LP and Delek U.S. Holdings Inc. recently announced plans to form a joint venture to build an ethanol unit train terminal in Maumelle, Arkansas, on the Union Pacific rail line. The project is expected to cost approximately $12 million and be completed during the fourth quarter of 2016. The terminal will be capable of unloading 110-car unit trains in less than 24 hours and initially include storage for approximately 4.2 million gallons of ethanol. Green Plains Partners and Delek U.S. will jointly operate the terminal. “We are pleased to move forward with the partnership’s first organic growth project with a strategic downstream partner,” said Todd Becker, president and CEO at Green Plains Partners. “When completed, this new terminal will allow ethanol to be delivered more efficiently into the Little Rock and surrounding markets. This certainly will give the joint venture a platform upon which to build.”

DISTILLED USDA publishes comprehensive ethanol report USDA's Office of the Chief Economist recently released a comprehensive report on ethanol. The 87-page report, “U.S. Ethanol: An Examination of Policy, Production, Use, Distribution, and Market Interactions,” examines the complex interaction of ethanol production with agricultural markets and government policies. In the forward, USDA Chief Economist Robert Johansson, explains the report “intends to bring clarity to the complex interaction of ethanol production with agricultural markets and government policies. While there are many other ethanol studies available, this report is unique in that it centers on the pivotal role that ethanol plays in the crop and feed markets.” The report includes sections dedicated to policy development, industry growth, and the interaction between ethanol, crop and livestock markets. It also features a discussion of corn prices, and detailed analyses of ethanol production costs, profitability, processing technology, infrastructure, blending economics, and state and federal policies.

Plant

Emissions reduction

Andersons Albion

21.60%

Flint Hills Resources Camilla

20.80%

Flint Hills Resources Fairmont

21.40%

Flint Hills Resources Iowa Falls

21.30%

SOURCE: U.S. EPA

EPA approves 4 efficient producer pathways In October, the U.S. EPA approved efficient producer pathways for four additional corn ethanol plants, bringing the total number of plants to receive approval under the efficient producer petition progress (EP3) to 50. The four new plants include a facility operated by the Andersons and three Flint Hills Resources facilities. The new additions mean approximately one-fourth of the U.S. ethanol industry’s ethanol plants have demonstrated to the EPA that their ethanol yields and energy efficiency meet the 20 percent minimum

greenhouse gas (GHG) reduction threshold. Under the renewable fuel standard (RFS), existing ethanol plants were grandfathered in to the program at their registered capacities. Any new ethanol plants and any expansions at existing plants must show GHG reductions better than 20 percent in order to generate renewable identification numbers (RINs) for that volume.

JANUARY 2016 | Ethanol Producer Magazine | 25

REDESIGN TEAM: Mike Rosa, senior engineering vice president, left, and Jarrett Hollis, general manager, worked together on CIP and process changes at Aemetis Advanced Fuels. With years of experience in the dairy industry, Rosa was accustomed to the idea that plants can't shut down for days for cleaning and repairs. PHOTO: VERSCHELDEN PHOTOGRAPHY

26 | Ethanol Producer Magazine | JANUARY 2016

SANITATION

Striving for Clean, INFECTION-FREE Ethanol Production Two producers share stories of how they keep bacteria in check. By Susanne Retka Schill

In the ethanol industry, having a reputation as a clean plant goes far beyond clean floors and all-around tidiness. Clean means infection free—quite a feat for plants that have ideal con-

ditions for microbial growth. The goal, of course, is to maximize the growth and output of ethanol-producing yeast and minimize bacteria growth. Ethanol Producer Magazine talked to managers at two clean plants to learn what helped them accomplish that feat. Amanda Marquis can’t remember the last time there was an infection at Marquis Energy, in Hennepin, Illinois, where she’s been the plant chemist since startup in 2008. The first couple of years, however, were a different story. In California, the team at Aemetis Advanced Fuels took advantage of a prolonged shutdown to make several modifications shortly after the plant started up in 2008. That resulted in plant operations requiring minimal maintenance downtime and where infections are almost nonexistent. The trajectories to reaching that infection-free goal, different at each plant, provide insights on what it takes to keep bacteria levels low.

JANUARY 2016 | Ethanol Producer Magazine | 27

CLEAN SYNERGIES: Area dairies are among the customers for Aemetis wet cake, which is fitting, since the dairy industry experience in continuous operations was applied in the ethanol plant. PHOTO: VERSCHELDEN PHOTOGRAPHY

California Clean

Aemetis is a unique plant—the first Praj Industries-designed plant to be built in the U.S. While Praj designed more than 300 plants worldwide, converting sugar to ethanol, this was the company’s first grainbased plant in the U.S. Jarret Hollis, plant general manager, explains the distillation, dehydration and evaporation systems are quite robust. However, in the few months the plant ran after the original developers started it up in 2008, the operators decided several modifications would make the front end run more smoothly. Aemetis first leased, then purchased the plant. Hollis and senior engineering vice president, Mike Rosa, sat down to design the improvements completed over the next couple of years. It restarted in April 2011. On the top of the list was a better clean in place (CIP) system for the fermenters. “Our fermenters are unusually large, 1.1 million gallons, each,” Hollis explains. Rosa redesigned a CIP flushing system with 16 spray nozzles used to clean the fermenters with hot water. The vigorous cleaning leaves no residues, Hollis says. “One of the biggest problems I’ve experienced in the

28 | Ethanol Producer Magazine | JANUARY 2016

past is being able to get a fermenter completely clean. With those fermenters whisper clean every time, there is not an issue with infections.” Other changes included removing piping deadlegs, with a particular focus on the mash fill line, plus more powerful pumps to get the correct reverse flow for cleaning heat exchangers. “It has been very beneficial and worked very well,” Hollis says. The design tweaks went even further. “The next thing that was done to conserve chemical cost was an air purge. Every time we do a caustic wash or acid wash, we purge that line with air to push the liquids back to the reserve tank instead of flushing with water and diluting them,” he says. “We’ve gone from one tanker of caustic every seven to 10 days to one every six weeks.” Then, the company enlisted the aid of software developers to fully automate the CIP process, greatly reducing the chance for human error. Finally, several changes were made to the process itself to simplify and reduce areas of potential contamination. Hollis explains they removed the hydroheater, cook tube and flash tank.

“We also discovered that the unique design of our plant and the size of our fermenters requires longer fill times,” he says. “Dry pitching the yeast worked as well or better for us than propagation. Cook to ferm is now a simple process—no hydroheater, no cook tube, no flash vessel and no propagation. Chances for contamination are greatly reduced.” “It did create another issue because the plant runs in near aseptic mode due to an elevated pH,” Hollis adds. “There’s a little more chemistry occurring because we don’t have the low pH returning in the backset. We have to lower the pH of our mash so the yeast will ferment properly.” Eliminating infections has also meant the Aemetis team can focus on pinpointing and minimizing other stresses to yeast. The modifications at Aemetis accomplished another goal—creating a process with minimal downtime for routine maintenance. Rosa, with 40 years of experience in the dairy industry, was accustomed to the idea that a facility needs to be cleaned and maintained without shutdowns. After all, cows do not handle missed milkings. Aemetis went 18 months after restarting

in 2011 without a shutdown, but has since decided to plan one day a year to go offline for certain maintenance. This year’s shutdown in April lasted 12 hours. One reason for the minimal downtime is the plant’s robust distillation, dehydration and evaporation system. “Our distillation system is all direct heat, there are no heat exchangers,” Hollis explains. The evaporators operate at around 32 psi steam pressure, thus minimizing the tendency for burn on. The evaporator system is designed so one or two units can be taken offline for CIP without losing production capacity. “We’re cleaning two to three units every week on a rolling basis,” Hollis says. “It’s been about a year and half since we’ve had to hydroblast any vessels.” Another benefit of the redesigned process is the backset is recycled without any type of treatment. “It’s just a straight run back,” Hollis says. “It’s been a very successful move and has really simplified the system. We’ve discovered the cleaner it is, the more useable the byproducts of the yeast are—the amino acids, sterols and FAN [nitrogen] can be better utilized. We run a slightly higher backset because it’s JANUARY 2016 | Ethanol Producer Magazine | 29

CLEAN FEAT: Beginning operation in 2008, the Marquis Energy team worked to eliminate sources of infection. The original footprint pictured is now being expanded to nearly double production at the Hennepin, Illinois, plant. PHOTO: MARQUIS ENERGY

KEEPING IT SIMPLE: Many modifications were made at Aemetis Advanced Fuels that eliminated sources of infection and simplified key areas of operation, reducing the chance of operator error. PHOTO: VERSCHELDEN PHOTOGRAPHY

beneficial to the yeast. And we have a very low salt content because of the reduction of chemicals being used in the plant.”

Marquis Experience

Optimizing the CIP process has been a big part of the path followed by Marquis Energy in becoming an infection-free facility. Amanda Marquis remembers the challenging early days. “When it started out, we had several infections in our first year,” she recalls. “We quickly discovered that antibiotics are not the route to becoming infection-free, but they are a safety measure. We immediately realized the value of a proper CIP process.” Operators began focusing on meeting the target temperature and strength for CIP solutions, as well as maximizing time. “The most important thing that we did was to focus on having the proper amount of flow through the train when we were CIPing,” Marquis explains. Many of the first-year infections were coming from the beer mash exchanger. That was fixed once booster pumps were installed to in-

30 | Ethanol Producer Magazine | JANUARY 2016

Marquis

We quickly discovered that antibiotics are not the route to becoming infection-free but they are a safety measure.

crease the flow through the exchangers during CIP. Marquis recalls the effort to find and eliminate other places where bacteria could accumulate and grow. “In the first two years, the production manager and I worked pretty diligently whenever I saw elevated lactics, hunting down the source. Usually it would be some kind of piping deadleg where there was stagnant material.” She can’t remember the last time the protocols were used, but in those first two years they would pull mul-

tiple samples from various locations and let them incubate to see where the bacteria were hiding out. The motto became “let’s not just keep cleaning it, let’s change it so we’re going to be assured it’s going to stop.” Plant manager Jeremy Frerichs wasn’t there at startup, he joined the company this past year, but he gives the company credit. “Marquis is very nimble. If something needs to be changed, it gets changed and in pretty quick order.” Being new, he adds he can clearly see the value of the company’s focus on well-trained operators. “You can put in the best technology in the world and still have issues if your SOP isn’t followed, or the strength isn’t right, or the temperature isn’t right—just go down the list.” Marquis monitors bacteria by tracking the level of lactic acid produced by the most common bacteria that competes with yeast in fermentations. “My target delta is 0.1,” she says. “I don’t typically treat anything that is under 0.2, but if I get close, I’m definitely searching for the problem.” These days, she says, any infections tend to

SANITATION than a few hours, you’re putting yourself at risk of infection, because bacteria love to grow in nice calm conditions,” Marquis adds. “When you have stagnancy, that’s typically when you see your fastest growth. The generation time for some bacteria is 20 minutes. So it can happen fast.” Marquis praises the operations teams at the plant. “We do a great job here in that the operators follow the proper SOPs and

immediately contact me for nonstandard issues. If we are at risk of infection, we’re working as a team to find the source and treat it accordingly. Marquis has a fantastic operations team and we do an excellent job of working together.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com

Partner with Nalco to Increase your Corn Oil Yield

be isolated cases, with the cause quickly figured out, and the infection doesn’t spread. Ethanol plants don’t operate at foodgrade levels, Frerichs points out, so there’s always a background level of bacteria. “The idea is to keep the bacteria to a level where the yeast will take over before the bacteria,” he says, plus it’s important to keep the yeast healthy. “The sugar is present for the yeast, and if they don’t take it, the bacteria will.” Marquis adds that the biggest risk for infection in a fermenter is in the first 12 hours. “That’s when you have the lowest population of yeast and when the yeast has the task of outcompeting the bacteria for the food source,” she says. “So if you have an unhealthy batch of yeast or something that’s not optimal going into the fermenter, you’re at your biggest risk of infection because bacteria have a fast generation time and they’re ready to go.” The team also pays close attention to conditions that might allow bacteria to grow. “Any time where the flows in the plant are going to be stagnant for more

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A GOOD YEAR: A tanker fills up at the Andersons Marathon Ethanol Plant in Greenville, Ohio. PHOTO: MARATHON PETROLEUM CO.

The high level of demand was the most positive note for ethanol producers in 2015 says Hal Reed, chief operating officer at The Andersons Inc. The largest piece

Hal Reed, chief operating officer at The Andersons Inc.

34 | Ethanol Producer Magazine | JANUARY 2016

of that was exports, he says. “Our export markets were clearly needed, as we saw lower oil prices create some concern early in the year, wondering whether we would see the kind of export demand that we had seen in the past with the wide spread between gasoline prices and ethanol.” The fact that export demand held up well speaks volumes, he says. “It shows the value of the oxygenate and the octane that ethanol provides, that’s a huge deal for the industry.” On the domestic demand side, the upside to cheaper gasoline was the 2.5 percent increase in motor fuel demand this year from consumers driving more, thus increasing demand for E10. Reed is one of six industry insiders Ethanol Producer Magazine spoke to for this issue. The list includes three ethanol producers, a corn producer leader, a financial services representative

and two technology providers. Here’s what they had to say, looking back on 2015 and forward to the industry’s future. Reed says that while the U.S. EPA’s recent announcement regarding the renewable fuel standard (RFS) renewable volume obligation (RVO) numbers fell short of the original mandates, it does increase the RVO for conventional ethanol by 1.6 billion gallons over the next three years. “It will continue to enhance the build-out of infrastructure that will allow ethanol blending beyond the blend wall,” Reed says. “As such, it is a positive event for the U.S. corn-based ethanol industry, the U.S. consumer and The Andersons.” Though nothing like the past year, this year has been a good one for The Andersons. In the third-quarter earnings call, the company reported pre-tax earnings for the ethanol group of $20.8 million for the year to date. “We saw increases again this year in our total production and our efficiency and effectiveness rates. We also had a year with no recordable accidents, which is a big deal,” Reed says. “It’s been a good year, though margins weren’t what they were the year before.”

OUTLOOK

Moving Into

2016

Optimism about the ethanol industry’s future is high, despite challenges. By Holly Jessen, Susanne Retka Schill

Indeed, earnings for just Q3 2014 were virtually the same as the combined earnings for the first three quarters of 2015. Margins were more normal this past year, given the history of the ethanol business, Reed continues. “But the ethanol business has been normal in a pretty wide range and we’re much at the lower end of that range.” Last year’s corn-versus-ethanol margins, based on front month futures, set a nine-year record in most months. 2015’s margins were at or below the nine-year average for all months except June. January 2015 was breakeven and the rest of the year on the positive side. A publicly traded company headquartered in Ohio, The Andersons is a diversified agribusiness with five business units: ethanol, grain, rail, plant nutrient and retail. The Andersons operates four ethanol plants with a combined nameplate capacity of 330 million gallons, located in Logansport, Indiana; Albion, Michigan; Greenville, Ohio, and Denison, Iowa. Its average ownership share of those plants is 50 percent. One partner in three of the plants provides The Andersons with

a unique perspective, Reed adds. “We have Marathon Petroleum Co. as our partner. They bring a perspective and a wealth of knowledge that is very helpful to us.” The company’s decades of experience in its core business of grains is equally helpful for the ethanol business, especially in risk management. This year was a challenging one in the eastern Corn Belt, Reed explains. Generous rains in late spring and early summer helped drive the basis up, along with the farmer tendency to hold grain when prices are low. Basis, the difference between a local cash price and the nearby futures price, reflects local supply and demand. By mid- to late-harvest, the difference between the eastern and western Corn Belt was unusually large. “A 70-cent difference in basis is a huge deal,” Reed says. “Very seldom have we seen anything like that in our careers.” In previous years, periods of tight ethanol margins were helped out by strong markets for distillers grains and corn oil, but that is not the case this year, Reed continues. Distillers grains prices relative to corn value are fairly low right

now and corn oil prices are depressed. “We try to do everything we can to build the value of the process,” he says. “We’re trying to turn the dials on all the various pieces to make that gross sale value of that kernel of corn coming as high as we can make it.” E85 is one of the long-term opportunities for the U.S. market, Reed says. The company blends and supplies E85, and in spite of the higher ethanol prices today relative to gasoline prices, The Andersons has seen its E85 market continue to grow in 2015. “We’re excited to be in the ethanol business,” Reed says, adding that it was 10 years ago when The Andersons started adding value to corn by producing ethanol. “We continue to grow and be more efficient,” he says. “We think the whole octane value and environmental nature that ethanol provides are both sound long-term. We’re still very excited about the business, the industry. We’re happy to grow the business and be part of a growing industry in the future.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com JANUARY 2016 | Ethanol Producer Magazine | 35

OUTLOOK

LOOKING ON THE POSITIVE SIDE Randall Doyal, CEO of Al-Corn Clean Fuel

For Doyal, one of the highlights of 2015 was seeing the vast spectrum of people in Kansas City in June, show their support for the RFS. It was

encouraging to see people from all walks of life and representing multiple business types there to testify and participate in a rally for rural America, prior to an EPA hearing about the proposed RFS RVO numbers.

Doyal was especially impressed by the number of Future Farmers of America members in attendance. “One of the things that really moved me personally, was seeing the number of young people in their blue jackets, helping,” he says. “That’s a particular soft spot of mine. I enjoyed my time in FFA and we continue to support it today.” Of course, certain aspects of 2015 have been very frustrating as well. The RVO proposal and the lack of support from the administration for biofuels have been big challenges. However, Doyal is a positive person and says he believes, as a whole, it was a good year for the ethanol industry. One of the positives is the ongoing efforts to increase exports of distillers grains and ethanol. Increasing consumer access to higher blends around the U.S. is also vital to the industry and groups like Prime the

Pump are doing good things in that area. “I think that’s been a great effort,” he says. Yes, margins are thinner these days, especially compared to the previous year. “We are a commodity business, and commodity businesses have swings,” he says. “That’s the nature of the market. 2014 was phenomenal. As a matter of fact, there was a 16, 17 month period where we were generating profits that I have never seen before and I have been in the business for over 30 years. It was huge.” Things slowed down in 2015. The price of oil and gasoline went down and the industry produced at a rate that resulted in growing ethanol stocks. “All of that has an impact on your margins,” he says, “but there are margins to be had, that’s for sure. We are making income. Not like 2014 but not the worst year ever by any means. It’s, I would say, pretty steady.”

OUTLOOK

Al-Corn Clean Fuel has a growth strategy and is currently looking at ways to expand its facility, hinting at possible future announcements. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve got interesting things coming down the pike,â&#x20AC;? he says. Looking ahead for the industry as a whole, thereâ&#x20AC;&#x2122;s likely to be some additional consolidation, while work to increase export markets and infrastructure is put in place domestically for higher blends. â&#x20AC;&#x153;We have the ability to produce more than the market today, and that always puts the industry in a squeeze,â&#x20AC;? he says. â&#x20AC;&#x153;So there may be a little bit of weeding out that occurs. And weâ&#x20AC;&#x2122;ve gone through periods of time like that before.â&#x20AC;? One thing Doyal thinks will change is that the creativity and the ingenuity of ethanol producers will finally be recognized outside the industry. Ethanol plants are producing more

PROUD SUPPORTERS: Doyal speaks at the rally held June 25 in Kansas City, prior to the EPA public hearing on the RFS RVO numbers. More than 250 people were scheduled to testify and biofuels supporters gathered nearby to show their support for the RFS. PHOTO: CINDY ZIMMERMAN

gallons of ethanol from the same amount of corn, reducing energy consumption and water use as well as diversifying coproducts. â&#x20AC;&#x153;We continually strive to improve,â&#x20AC;? he says. â&#x20AC;&#x153;And we do.â&#x20AC;?

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

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OUTLOOK

REALIZING THE VALUE OF DIVERSIFICATION

Michael Franko, vice president of business development, Fluid Quip Process Technologies LLC

When people find out Michael Franko works within the biofuels industry, they often assume business must be bad. But

Fluid Quip, which Franko is vice president of business development, is actually in a position of needing to mitigate its growth, which tells the opposite story. “Although we got into some uncertainty later in the year on the RFS and profit margins going down for [producers,] the highlight for us was we still had a lot of people pull the trigger and sign the contract on some pretty large capital projects,” he says. “Really, I think that’s a testimony to looking long term and not just living by what does next month look like, what does next week look like.” Fluid Quip has installed its Wet Fractionation System, which includes selective milling, front-end corn oil, fiber separation and protein recovery at a sugarcane ethanol production facility in Brazil. It’s a game changer, Franko says, which will allow the production facility to maximize capacity year round by blending corn at off-peak times and running sugarcane during the two harvest seasons. The system includes its Maximized Stillage Co-Products Protein Recovery System which is also under construction at United Wisconsin Grain Producers LLC and has been in operation at Badger State Ethanol LLC for several years. 38 | Ethanol Producer Magazine | JANUARY 2016

DIVERSIFY, DIVERSIFY: Franko stands with a Fluid Quip grind mill used for the company’s Selective Grind Technology systems. PHOTO: FLUID QUIP

In addition, the company will commission its fourth Fiber By-Pass System early next year. The system, which separates corn fiber prior to fermentation, was first installed at Ace Ethanol LLC a year ago. Additionally, the company was commissioning its 11th Selective Grind Technology and fourth front end oil separation system by the end of the year. Fluid Quip’s success is a bellwether for the industry as a whole. “It shows that there is a strength in the industry,” he says. “It’s

not going away and, even as margins fluctuate, people still see the value in the industry and investing in their plant.” Certainly 2015 came with some difficulties, such as lower margins and uncertainty about the outcome of the RFS RVO announcement. But the overall reaction wasn’t one of fear. “I don’t feel the doom and gloom that we saw a couple years ago,” he says. “I think in some ways, going through that adversity in the past has thickened people’s skin a little bit. Was this the

OUTLOOK best year ever for ethanol? No. But I donâ&#x20AC;&#x2122;t see people running for the exit.â&#x20AC;? Although Franko admits heâ&#x20AC;&#x2122;s biased, he feels strongly that coproduct diversification is essential for the future of the industry. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve been kind of lucky, in a way, to do so well for so long with basically two products, ethanol and DDGS,â&#x20AC;? he says. â&#x20AC;&#x153;And the DDGS basically goes back to corn, which is your input price, relative to corn.â&#x20AC;? Following some of the difficult times the industry has been through, ethanol producers do have very strong interest in diversification. â&#x20AC;&#x153;People are realizing that you canâ&#x20AC;&#x2122;t just sit and hope that the RFS stays forever and the margins stay good and corn is cheap and oil stays high,â&#x20AC;? he says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re going to have to diversify.â&#x20AC;? The ethanol industry is well-positioned to produce new, high-protein distillers grains, new fuels, specialty chemicals or other coproducts. Exactly how that will look at an individual ethanol plant will be influ-

TOOLS OF THE TRADE: Members of Fluid Quip's management team, from left to right, Chris Fields, John Kwik, Neal Jakel and Franko, stand around a paddle screen. A disc/nozzle centrifuge is shown in the background. PHOTO: FLUID QUIP

enced by factors such as where the facility is located geographically and what partnerships or co-owners it may have, within other industries. â&#x20AC;&#x153;Right now we are all kind of in the same boat and I think weâ&#x20AC;&#x2122;ll see people

start to get into different, smaller boats and spread out as an industry,â&#x20AC;? he says. Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

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OUTLOOK

STRONG MANAGEMENT TEAMS BALANCE FINANCIAL GOALS

Jason Johnson, vice president of renewable fuels for AgStar Financial Services

The extraordinary margins of 2014 put the ethanol industry in a good place for the tighter margins of 2015. “I don’t think anybody in the

industry expected 2014 to happen. But it did and it did great things for the industry,” Johnson says. The bank saw extraordinary amounts of debt service paid off during the

18 months of record margins in 2013-’14, Johnson says. “A massive amount of debt was paid down. Then you saw shareholders getting returns and you saw plants balancing that with increased working capital positions. Towards the end, a lot of plants have started looking at different capex projects to modernize the plants where needed or debottleneck.” Based in Minnesota and

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part of the Farm Credit System, AgStar has helped finance a number of ethanol projects across the Corn Belt. There may be a few outliers that sent out too much in cash distributions, at the expense of building working capital and making continued improvements, Johnson adds. “I would say by and large the management teams that we work with did a pretty

OUTLOOK good job of balancing those different factors.” Strong management, healthy working capital and investment in efficiency are the keys to getting through the cycles the industry faces, Johnson explains. “In any five-year period, you could have a couple of good years, a couple of break-even and you’re going to have a low- to negative-margin year. And, you don’t know what order those are going to come in.” In looking ahead, Johnson says corn has moved from a short supply scenario to ample ending stocks. “I don’t see anything that’s going to change that significantly,” he says, pointing out the USDA’s five-year outlook supports that view. On the energy spectrum, Johnson expects the outlook for oil prices and ethanol margins to be more like 2015 than 2014. The calendar year 2015 started off very slow, with a low- to negative-margin environment that improved in the second and third quarters. “The year has turned out to be more of a break even scenario for some, but overall we’re seeing a year that is pretty

strong historically for the plants.” There are regional differences, he adds, with the financial performance of eastern Corn Belt plants affected by the significantly higher basis. Looking further ahead, some ethanol producers are facing big decisions. For aging plants, the question is whether they’ve held enough cash back for ongoing capex to keep the plant competitive. And, there’s the question for smaller plants on how they compete on efficiencies with the larger plants, he says. “If you are a smaller plant, how do you stay competitive long-term? Do you need to get to that 100 MMgy? That’s a very fair conversation that each one of the plant’s management and boards probably already have discussed or need to discuss. How you get there is a whole different piece.” Being set up for the future requires a strong working capital position, Johnson says. “That is the one thing that has shown the ability to get through the down times, low-margin periods—having a strong work-

Some chemical companies focus on this

ing capital position. Second, you need to be an efficient plant.” Keeping up on maintenance, investing in debottlenecking and modernization are all needed to maintain a level of efficiency that allows a plant to stay online during a down margin environment. “That’s where we see a lot of discussions happening right now. What will we do? Not just maintenance capex, but what will be need to do to modernize our plant or look at other value-added products?” “Overall AgStar has been a supporter of the industry and it continues to be, based off the management teams we work with,” Johnson says. “We will go forward despite the noise of an RFS. I think the plants that have figured out long-term supply and demand will manage through that. There are very strong management teams out there.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com

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JANUARY 2016 | Ethanol Producer Magazine | 41

OUTLOOK

COOPERATION FOR A COMMON GOAL

Chris Novak, CEO of the National Corn Growers Association

There’s a lot to celebrate about what happened in 2015, according to Novak. The first on

that list is the cooperation between corn farmers and ethanol producers to protect the RFS. “We’re working more closely together on political outreach, consumer marketing, and communication strategies that emphasize the importance and value of providing more consumer choice at the fuel pump,” he says. Specifically, Novak points to efforts in increasing ethanol exports overseas as well as bringing higher ethanol blends to consumers across the U.S. Farmers have been working with state corn checkoff organizations to support Prime the Pump, an initiative to increase the number of E15 pumps. He also pointed to USDA’s Biofuel Infrastructure Program grants, which will install nearly 5,000 E15 pumps at more than 1,400 U.S. gas stations. “These new pumps will ensure long-term demand for corn ethanol as we continue to build and develop the fuel infrastructure of the future,” he says. NCGA also started promoting legislation and regulatory action that may help increase the Reid vapor pressure threshold for E15. “Our progress on this front is 42 | Ethanol Producer Magazine | JANUARY 2016

SUPPORT FARMERS: Novak, center, shows his farmer pride at the rally for rural America, held in Kansas City, Kansas, the same day as the EPA hearing on the proposed RFS RVO rule. At left is Chip Bowling, NCGA president from Maryland, and, right, Martin Barbre, NCGA chairman from Illinois. PHOTO: NCGA

slow,” he says, “but corn farmers and the ethanol industry are continuing to work together to eliminate an artificial barrier that is restricting consumers from year-around access to E15.” Of course, there were some challenges as well. At the top of the list is the EPA

backing down on the RFS, starting with the RVO proposal that came out in the spring. The final rule that came out the end of November was a step forward, yes, but didn’t go far enough, the NCGA believes. No. 2 on the list of challenges is the escalation of attacks by a desperate oil indus-

OUTLOOK

try, Novak says. â&#x20AC;&#x153;On the one hand, it is understandableâ&#x20AC;&#x201D;weâ&#x20AC;&#x2122;ve displaced more than 10 percent of a fuel market they dominated and controlled. It is easy to understand that the oil industry does not like competition. At the same time, it is hard to believe the oil industry continues to perpetuate the myths around food vs. fuel when weâ&#x20AC;&#x2122;ve just produced three of the four largest crops on record in the United States.â&#x20AC;? The challenge facing corn producers is growing profitable demand for corn. â&#x20AC;&#x153;With much of the livestock industry still in recovery and a slowdown in corn exports, our corn farmers have needed ethanol growth to help restore profitability to the corn marketâ&#x20AC;&#x201D;and that hasnâ&#x20AC;&#x2122;t happened,â&#x20AC;? he says. â&#x20AC;&#x153;We remain optimistic for the futureâ&#x20AC;&#x201D; based upon the growing export demand and the increasing number of mid-level blend pumpsâ&#x20AC;&#x201D;but we desperately needed

LOOKING AHEAD: Corn producers can provide first generation feedstocks as well as second generation feedstocks, such as corn stover and corn fiber, for advanced biofuels production. PHOTO: MARLA THRALL, 2014 NCGA FIELDS-OF-CORN PHOTO CONTEST

faster demand growth to ensure a full recovery from our current market situation.â&#x20AC;? Although heavy rains in the Southern and Eastern Corn Belt meant another national record wasnâ&#x20AC;&#x2122;t set, overall, 2015 was a good corn production year. In fact, many in the Upper Midwest told Novak this was

their best crop ever. â&#x20AC;&#x153;Very few farmers I know will complain about a full grain bin,â&#x20AC;? he says. Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

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OUTLOOK

STRONG ENOUGH TO WEATHER STORMS Ron Beemiller, president and CEO of WB Services LLC

In general, most ethanol production companies are cautious while also taking a longterm view of the market. “If it

is prudent for a plant to be more efficient or expand or add products in higher margins, it is also true in lower margin times,” Beemiller says. “The challenge for WB and for many of our customers is that it is difficult to make long-term strategy decisions when there are so many moving parts and uncertainties.” The Sedgwick, Kansas-based company provides the ethanol and biodiesel industries bolt-on technologies for production of biodiesel or renewable diesel. WB is currently at work on two 3 MMgy renewable diesel plants under construction at two Kansas ethanol plants, with East Kansas Agri-Energy LLC expected to begin operations in early 2016 and the project at Prairie Horizon Agri-Energy LLC expected to wrap up in the second quarter. In addition, construction is complete on a 2 MMgy biodiesel plant integrated into the Adkins Energy LLC facility in Illinois, Beemiller said. In the past decade, the ethanol industry has survived two dramatic drops in energy prices, one of the worst droughts in recent history, which resulted in high corn prices, and wild changes in export markets 44 | Ethanol Producer Magazine | JANUARY 2016

GEN2 IS NOW: WB Service's renewable diesel plant is in operation in Sedgwick, Kansas, the company's headquarters. The company is also working to construct two bolt-on renewable diesel plants at ethanol plants, which are also located in Kansas. PHOTO: WB SERVICES

for ethanol and its coproducts. Then there’s the unfavorable regulatory pressures and attacks from Big Oil. “In spite of that, the ethanol industry is strong, more efficient and more forward thinking than ever,” he says. “Generally, the industry is conservative, financially stronger than ever and better able to come out of tough years like 2015 without being in trouble.”

Although margins were thinner in the past year, it helped tremendously that the industry had brought in phenomenally high margins the previous year. “The good news is that, generally, the ethanol industry is healthy and much better positioned to weather periods of lower margins,” Beemiller says. “In addition, we see that much of the industry does not overreact to margin

OUTLOOK

swings, having been through them before.” The current financial state does prove the ethanol industry can be competitive even in a low-margin environment. “Regardless of margin, RVO uncertainty and blend economics, ethanol is still the very best, most efficient and cleanest octane available to the fuel market,” he says. Beemiller is interested to see what the ethanol industry will look like in five or 10 years. One thing he says he feels certain about is that the industry will remain strong. “We see the industry now driven more by things like carbon intensity, efficiency, diversifying products, creating niche advantages and moving more towards an industry of diverse biorefineries rather than simply ethanol plants,” he says. “As a company, WB is moving more towards an engineering and technology company, focused on the above; helping our customers improve and achieve carbon intensity, product diversity, increased yield and efficiency.” Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

46 | Ethanol Producer Magazine | JANUARY 2016

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MICROBIAL CONTROL

PHOTO: SUSANNE RETKA SCHILL

Organic, Inorganic Oxidizers Control Bacteria in Corn Mash Fermentation Ethanol plant case study examines effectiveness of antimicrobial alternative. By Reed Semenza

Ethanol plants strive to control lactic and acetic acid bacteria in corn mash fermentation tanks to minimize competition with ethanolproducing yeast for the sugars, plus, acid forming bacteria can create low pH conditions that tend to inhibit the growth of the yeast. In order to control bacteria

oxidizer, peracetic acid (PAA), in combination with an inorganic oxidizer, hydrogen peroxide, in the corn mash. Mist Chemical has worked with several ethanol producers to test DeLasan CMT, a 22 percent PAA distributed by DeLaval, and hydrogen peroxide (HP). The combination, even when used in minute quantities, has proven to have sufficient antimicrobial effect such that lactic acid and acetic acid concentrations in the fermenter were maintained at acceptable levels. An unexpected benefit was a significant growth, many ethanol plants utilize antibiotics, increase in final fermenter ethanol percentage. while some are trialing new approaches. One This case study reports the test done at of those new approaches utilizes an organic a 65 MMgy Delta T-design ethanol plant in

California. The management desired to reduce or eliminate the use of antibiotics in an effort to produce distillers grains that are free of antibiotics. A second objective was to increase ethanol yield. The primary objective of the test was to determine the most economical dose of PAA and HP and to determine the relationship between lactic and acetic bacteria reduction and dose. Secondary objectives included measurement of final fermentor ethanol percentage as well as the decay rate of the PAA and HP in order to determine residual levels in the distillers grains. In the plantâ&#x20AC;&#x2122;s process flow, the corn mash enters the stage 1 cooler at 180 degrees

CONTRIBUTION: 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).

48 | Ethanol Producer Magazine | JANUARY 2016

MICROBIAL CONTROL Fahrenheit and is cooled to 140 F. It then enters the stage 2 cooler and is cooled to 90 F. Flow through the cooler is 600 gallons per minute (gpm). From the stage 2 cooler, the mash is sent to the fermenter. Once in the fermenter, the corn mash is recirculated through a plate-and-frame mash cooler. The fermenter takes about 18 hours to fill. Thirty minutes into the filling process, yeast is added to the recirculating corn mash. Once filled, fermentation begins to accelerate, releasing heat, which is dissipated in the fermenter cooler. About 50 hours after the fermenter is filled, the fermenter mash is sent to distillation. The system parameters for the 1,500-gallon mash cooler include a recirculation rate of 600 gpm, pH range of 5.5 to 6.5 and temperatures of 180 F in and 90 F out. Parameters for the 850,000-gallon fermenter include a recirculation rate of 1,000 gpm, pH range of 4 to 5.5 and temperatures of 95 F in and 90 F out. 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 F to 95 F. The typical process parameters include the following: • 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 percent and stays mostly below 0.2 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 percent. • Acetic acid generally starts in a range of 0.03 to 0.05 percent and rises to 0.1 percent. A rise above 0.15 percent results in reduced final ethanol and indicates that bacteria counts are out of control. • Typical end fermenter process parameters include 16 percent ethanol, 0.20 lactic acid, 0.05 acetic acid, pH of 4.6, cell count of 250 and viability count of 97 percent.

CHART COMPARISON 1: Lactic acid and acetic acid at drop with and without DeLasan CMT

Test Procedure

In the test, the 22 percent PAA and 31 percent hydrogen peroxide were added at a rate of 3 and 1.5 gallons per hour respectively to a stainless steel pipe that carried the mixture to a header located between the stage 1 and stage 2 mash coolers. At the point of injection, the mash temperature was 140 F and the mash flow rate was 600 gpm. Diaphragm pumps fitted with Teflon liquid ends were used to pump

CHART 2: Comparison of glycerol percent at drop with and without DeLasan CMT

JANUARY 2016 | Ethanol Producer Magazine | 49

MICROBIAL CONTROL

CHART 3: Comparison of sugars percent at drop with and without DeLasan CMT

CHART 4: Comparison of ethanol percent at drop with and without DeLasan CMT

both solutions. The dose was 15 ppm PAA and 40 ppm HP. However, they were fed for only eight hours of the 18-hour fermenter fill time, making the overall dose 7.0 ppm of PAA and 22 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. A 3-milliliter sample was added to a test tube, then one DPD powder pillow was added and stirred gently for five seconds when a pink color was observed at the bottom of the test tube. Peracetic acid concentration was estimated based on the hue of pink color after 30 seconds. Hydrogen peroxide concentration was estimated after six minutes. Normal corn mash tests on carbohydrates, ethanol, and organic acids were taken by plant personnel

50 | Ethanol Producer Magazine | JANUARY 2016

every six hours. Results were compared with normal historical averages when antibiotics were used.

Results

Seven days of test results indicated the following: • Both lactic and acetic acids stayed within normal ranges. Lactic acid generally ranged from 0.1 to 0.2 percent. Acetic acid generally ranged from 0.05 to 0.10 percent. Overall, the organic acids at drop were the same concentration with DeLasan CMT as with antibiotics (see Chart Comparison 1). • Glycerol is a stress indicator for yeast. Higher stress results in higher glycerol. The glycerol level was 7 percent lower (see Chart 2) with the alternative program vs. antibiotics.

The significantly lower glycerol indicates the PAA-HP combination stresses the yeast less than antibiotics or that bacteria competing with the yeast were better controlled. • Total sugars were lower at drop with the program indicating more efficient conversion of sugars to ethanol (see Chart 3). • Ethanol production was 0.44 percent higher with DeLasan CMT vs antibiotics. (see Chart 4). 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. The most logical reason for the ethanol increase was a decrease in glycerol and residual sugars. Reduced glycerol and sugar levels resulted in increased available glucose and the extra glucose was converted into ethanol. Overall test results were extremely positive, and are comparable to tests done at other ethanol plants. The tests indicated that the alternative 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. Also, yeast cell counts and viability tests were all in the normal range. In addition to helping the plant achieve antibiotic-free distillers grains, the program was cost-effective, due to the low dose used. There was a net increase in ethanol production of 0.44 percent. In a 65 MMgy plant, that amounts to increased profits of approximately $700,000 per year. The PAA-HP mixture is easy to feed and test for. It is added directly from totes into the corn mash pipe with no mixing other than the natural turbulence in the pipe required. The control test is a modified total chlorine test and is taken at the mash cooler discharge. Unlike antibiotics and sodium chlorite, the DeLasan does not contribute antibiotic residue or inorganic salts to the distillers grains or backset. Author: Reed Semenza Business and Technical Manager, DeLaval reed.semenza@delaval.com 209-996-3657 Co-author: Michael Welker Technical Service, Mist Chemical Michael@mistchem.com 630-935-7049

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JANUARY 2016 | Ethanol Producer Magazine | 51

REGULATION

California LCFS Presents Opportunities for Ethanol Producers CARB readopts standards, and sets time lines and treatment for legacy pathways. By John Sens

In the first three quarters of 2015, California Low Carbon Fuel Standard credits increased in price by 212 percent. October saw

another big jump with average prices for the month touching $60 per metric ton of CO2 equivalent in greenhouse gas (GHG) reduction. The GHG reduction schedule in the LCFS rule is intentionally back-loaded in order to allow advanced low-carbon fuel and vehicle markets to develop and mature. As the

compliance pressure intensifies, credit prices are projected to increase, creating greater incentive for biofuel producers to lower the carbon intensity (CI) of their fuel through efficiencies and improved technology. Domestic ethanol producers can benefit from these market forces by aggressively lowering their CI to increase the value of their product in the California market. With the readoption of the LCFS on Sept. 24, there are some specific actions that need to be completed to take advantage of this opportunity.

EcoEngineers staff members attended the re-adoption public workshop in Sacramento and gathered the required information for a biofuel facility to successfully navigate the transitional period over the next 12 months. Key points of the readopted LCFS include: â&#x20AC;˘ Cost containment measures, including a price ceiling of $200 per LCFS credit in 2016. â&#x20AC;˘ A two-tiered system in GREET 2.0 for pathway applications. Tier 1 consists

52 | Ethanol Producer Magazine | JANUARY 2016

REGULATION of conventional fuels, including sugar and starch ethanol, biodiesel and renewable diesel from conventional feedstock, natural gas and landfill gas. Tier 2 consists of all fuels not included in tier 1, such as cellulosic alcohols or electricity, and tier 1 fuels using one or more innovative production methods. • Revised indirect land use change (ILUC) values. The new ILUC value for corn ethanol is 19.8 grams CO2 per megajoule. • An electronic registration system on the Alternative Fuels Portal with a revised application process. • A legacy pathway option for currently certified GREET 1.8b pathways that were approved under a method 2 application. One of the biggest changes under the re-adopted LCFS is the replacement of GREET 1.8 with GREET 2.0. All fuel producers are now required to use the GREET 2.0 model to measure the carbon intensity of their fuels. As a result, all currently registered fuel pathways modeled under GREET 1.8 will only remain valid for one year from Jan. 1, 2016, the effective date of the new regulation. On Jan. 1, 2017, these pathways will be automatically deactivated. During the one-year transitional period, the California Air Resources Board allows for the recertification of method 2A2B pathways to gain legacy status.

Recertifying Pathway

Applicants seeking to recertify a legacy pathway must first complete an online account registration in the Alternative Fuels Portal, and submit an electronic request indicating that they are seeking recertification for their pathway. This must happen before Feb. 1, 2016, for guaranteed approval before Dec. 31, 2016, when all the current pathways are automatically deactivated. Applicants will also be required to attest that the inputs they originally submitted in the GREET 1.8 and the 2A2B application have either remained the same or decreased (resulting in no increase in GHG emissions). CARB staff will pull the information from the previous 2A2B application and GREET 1.8 to create the legacy pathway with the new GREET 2.0 model. At this point, CARB may ask applicants to provide additional information for review. When CARB completes its modeling of the legacy

pathway in GREET 2.0, the applicant will be given the opportunity to accept the value modeled, or decline and apply for a new GREET 2.0 modelled pathway. CARB is promising that all legacy pathway recertification requests received before Feb. 1, 2016, will be reviewed and modeled in GREET 2.0 before Dec. 31, 2016. The recertification of a previous 2A2B pathway to gain legacy status is not guaranteed. If a recertification application is denied, the producer must apply for a new tier 1 or tier 2 pathway using the GREET 2.0 model in order to participate in the LCFS program. Recertifying a pathway to gain legacy status may be the better option for facilities with stable operations, as remodeling in GREET 2.0 can consume valuable staff time and resources. Obtaining recertification assumes that the facility operations and fuel delivery methods have not changed significantly since the facility was initially registered. If there have been changes, and the changes result in a net reduction in GHG emission, then the fuel producer has the option of both recertifying the pathway for legacy status and applying for a new pathway application. However, if changes

at the facility result in a net increase in GHG emissions, then the low-carbon fuel producer is ineligible for recertification and must remodel the pathway in GREET 2.0. CARB has stated that all applications for recertification and new GREET 2.0 pathways received by Jan. 31, 2016, will be guaranteed to be reviewed and approved by Jan. 1, 2017, assuming the applications are valid. CARB has not guaranteed that applications submitted after Jan. 31, 2016 will be reviewed in 2016. The biggest risk to a low-carbon fuel producer is being denied a recertification under a legacy pathway and not getting approval for a new pathway before Jan. 1, 2017. EcoEngineers has worked with CARB staff and renewable fuel producers to register more than 30 LCFS pathways. The most important thing is to make sure that you are not caught without a pathway in 2017 due to poor planning. Author: John Sens LCFS Program Manager, EcoEngineers 515-309-1279 jsens@ecoengineers.us Co-author: Zhichao Wang, PhD, lead carbon analyst, EcoEngineers

FRONTLINE

How Mechanical Deaerators Help Avoid Steam Boiler Corrosion By Robert Jewell PHOTO CREDIT: ROBERT JEWELL

One cause of corrosion in steam plants that power the ethanol process is the presence of dissolved gases in boiler feedwater, in particular oxygen and carbon dioxide. Oxygen is the more aggressive, causing corrosion in the form

of pitting. The corrosion is generally localized and occurs over a relatively small area, but it can result in serious and costly damage. It can occur even where overall system corrosion rates are found to be very low. Elevated temperatures in particular accessories such as feedwater economizers can accelerate and magnify pitting where sufficient concentrations of oxygen exist. Mechanical deaeration using a pressure deaerator is a common method for managing and removing oxygen, although it is usually supplemented by the addition of chemical oxygen scavengers. A number of equally important factors are simultaneously involved in achieving proper and adequate deaeration. One factor is the solubility of a gas in a liquid. Water is sprayed into the deaerating section where steam is also injected. As the feedwater is heated to within a few degrees of the saturated steam temperature, the solubility of the oxygen in the feedwater is reduced and most of the dissolved oxygen in the water is released. This is because the solubility of a gas in a liquid decreases with increasing liquid temperature. In other words, increasing the temperature of the water will reduce the amount of gas the water can hold. Another factor is the partial pressure of the gas at the water surface. Steam is injected, a portion of which is also vented, and serves to reduce the partial pressure of the oxygen in the deaerator. The solubility of a gas in water is proportional to the partial pressure of the gas at the water surface. This solubility is manipulated by the venting rate. Insufficient venting will result in an increased partial pressure of the specific gas, hindering its release. The vented steam carries with it the oxygen and other noncondensable gasses that were released from the water, lowering the partial pressure of oxygen at the surface, thus allowing more oxygen to be released. Yet another factor is the thorough mixing and scrubbing of the water and steam, which improves the efficiency of oxygen removal. A deaerator is typically a counterflow design that facilitates greater contact of the steam to the water, efficient heating and vigorous scrubbing of the water with the steam. Pegging steam, as it’s referred to in this application, is used for mechanical pressure deaeration. Steam is most often chosen for the purge

gas because it reduces of the solubility and partial pressure of oxygen. Also a relatively small amount of steam must be vented. A portion of the steam used to scrub the water is condensed, resulting in less than the full amount injected being vented. The more consistent and stable the operating conditions are, the more effective the mechanical deaeration will be. Other considerations include: •Minimizing pressure fluctuations in the deaerator that potentially contribute to reoxygenation of the feedwater. •Using dedicated pressure regulating valves to maintain the deaerator at a constant, controlled pressure. •Returning high-temperature condensate streams to the deaerator to allow them to flash and be adequately deaerated. •Not using flash steam from high temperature returns as pegging steam because the pressure or volume may be variable or inadequate. •Using pressure-regulated steam injection to achieve adequate deaeration. • Minimizing temperature fluctuations. The more constant pressure and temperature, the more efficient and effective the deaerator will be. • Avoiding erratic or intermittent excessive makeup water flow rates. • Monitoring the operating parameters for proper functioning. Lower than normal temperatures are an indicator of insufficient steam flow, insufficient venting, excessive feedwater flow or excessive makeup rates, to name a few. • Monitoring the storage section temperature, which should be within 5 degrees Fahrenheit of the deaeration section temperature. Low storagesection temperatures may indicate problems with faulty nozzles, poor feedwater distribution, or shifted, plugged, or broken trays. Mechanical deaerators are essential in the removal of dissolved gases and perform a vital function in the safe, efficient and effective production of steam. Knowledge of how deaerators work, and how they should be operated, maintained and monitored is necessary if they are to perform effectively and efficiently in the prevention of oxygen-related corrosion, and ensure safety in operations and the protection of assets.

Author: Robert Jewell Energy Systems Chief Engineer, Chippewa Valley Ethanol Company bjewell@cvec.com

Frontline appears periodically in Ethanol Producer Magazine, offering industry-written best practices and troubleshooting tips for ethanol producers, whether in detail or covering broader topics from the frontlines of plant operations. . CONTRIBUTION: 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).

54 | Ethanol Producer Magazine | JANUARY 2016

BUSINESS MATTERS

Look Before You Leap in 2016

By Donna Funk

If someone tells you exactly what will happen in the ethanol industry in 2016, be warned: They might have oceanfront property in Arizona. I’m not going to make any predictions. I just want you to be prepared.

Why You Plan

Many operators built up nice cash reserves in the past few years and plowed them right back into expansion and acquisition. Others took a more cautious approach. What should you do? My advice is to use your head, not your heart. Every decision you make has an enormous impact on your business and your shareholders down the road. Every bushel of grain procured, every gallon of fuel sold makes a difference. Plan for a range of scenarios. You don’t want to deplete your cash and get stuck where you can’t expand as markets strengthen. But if you expend your resources too rapidly, you might have too little cash in an extended soft market or when other opportunities with better paybacks present themselves.

What to Expect

Experts expect input prices and demand to remain volatile. The good news is that many think feedstock prices will remain weak while global economic recovery will boost demand for fuel. Here are some of the questions our clients are asking as we head into 2016. Q: How far out should I think about booking delivery of feedstock? A: Chicago Board of Trade corn futures for March delivery recently hit a contract low of $3.645, down from $4.60 in July. USDA revised exports and total corn use down in its most recent supply and demand projection for 2015-’16. Consider buying in smaller chunks to take advantage of potential lower prices. You

56 | Ethanol Producer Magazine | JANUARY 2016

can buy an option, purchase larger amounts or book farther out if prices start to climb. Q: What is the outlook for petroleum prices? A: Economists tell us petroleum prices are strongly tied to demand; meaning economic growth in Asia, Europe and the U.S. is the biggest driver of prices. Pay close attention to economic indicators such as construction, wage growth and durable goods sales. Weak numbers in these areas put pressure on oil prices.

How to React

Continued weakness in commodity prices and upside in petroleum demand paint a rosy picture. That might be the case, but given the uncertainty of an interconnected global economy, here is a three-pronged approach to consider. 1. Be cautious in feedstock bookings to take advantage of likely weakness in grain markets and avoid too much inventory. Keep a close eye on your cash position. 2. Plan for an uptick in petroleum prices and demand, and take a measured approach. Be cautious about selling forward into a bull market. 3. Talk to your financial consultant and have all your ducks in a row so you are ready to expand when you get clear market signals. Look before you leap. Author: Donna Funk, CPA Principal, K-Coe Isom 800-303-3241 funk@kcoe.com

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