February 2008 Ethanol Producer Magazine by BBI International

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1/7/2008

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INSIDE: ENDURANCE RACERS PUT CELLULOSE-BASED E85 TO THE TEST FEBRUARY 2008

EPM

A New Energy Era Energy Bill Takes Ethanol Industry One Step Closer to the Next Generation

February 2008

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HISTORY WILL LOOK BACK UPON THE ENACTMENT OF THE ENERGY INDEPENDENCE AND SECURITY ACT OF 2007 AS THE MOMENT AMERICA CHOSE A NEW ENERGY POLICY PATH. THE ENERGY BILL IS A TESTAMENT TO WHAT WE CAN DO WHEN WE WORK TOGETHER TOWARD A SHARED VISION OF THE FUTURE. A M E R I C A’ S SOLUTION

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inside

FEBRUARY 2008 . VOLUME 14 . ISSUE 2

features 66 POLICY Priming the Biofuels Pump

130 CONSTRUCTION Construction Economics

The ethanol industry is reenergized by the passage of a new Energy Bill

EPM examines the cost of construction and materials, and gauges how that

calling for a 36 billion gallon renewable fuels standard.

may impact ethanol project development in the near future.

By Ron Kotrba, Anduin Kirkbride McElroy, Jerry W. Kram, Jessica Ebert,

By Craig A. Johnson

Susanne Retka Schill, Bryan Sims, Craig A. Johnson, Michael Shirek,

140 DEBATE How Big is Commercial Scale?

Sarah Smith and Jessica Sobolik

While the U.S. DOE defines a commercial-scale cellulosic ethanol plant as

76 USE Ethanol in the Fast Lane

one that’s able to process 700 tons of biomass per day, some believe the

Regulators in the Southeast are revamping their fuel specifications to

amount of ethanol produced and the operation’s profitability should be taken

smooth the way for more ethanol-blended gasoline. By Ron Kotrba

into account. By Ron Kotrba

Page 76

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Page 158

86 PROCESS In Search of Biomass Storage Solutions

148 Q&A Familiar Face Takes the CRFA Helm

Researchers suggest that adding moisture to biomass may be a better

Gordon Quaiattini may be a new addition to the Canadian Renewable Fuels

way to deal with the hard-to-handle feedstock. By Jerry W. Kram

Association, but he’s well-known in the country’s renewable fuels circles.

94 WHEAT Move Over Corn, Wheat’s King in Canada

Questions by Dave Nilles

Western Canadian wheat producers welcome the opportunity to supply

158 PERFORMANCE Quick Off the Straw

a growing ethanol industry that uses small grains as its primary

This year’s 25 Hours of Thunderhill featured two cellulosic ethanol-powered

feedstock. By Susanne Retka Schill

race cars. Find out how those cars fared in the world’s longest race.

104 TRANSPORTATION Traversing the Waterways As more ethanol production comes on line, the renewable fuel will require

By Tom Bryan

more transportation options via U.S. waterways and on ocean-going

166 EVENT WIREC 2008: A Global Perspective on Renewable Energy

vessels. By Bryan Sims

At the Washington International Renewable Energy Conference attendees from 70 countries will take part in discussions addressing global warming,

112 CELLULOSE Going Beyond the Corn Kernel

economic growth, energy security and air quality. By Sarah Smith

Poet LLC demonstrates different methods to gather corn and corncobs, which it will use in its cellulosic ethanol production project. By Michael Shirek

122 CHEMICALS Costly Chemicals High-priced, hard-to-find chemicals are beginning to impact ethanol producers’ bottom lines. While some search for alternatives, others are creating their own supply. By Jessica Ebert

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

The future of fuel Transforming corn and other grains into biofuels is a major industry today. But what about tomorrow? The future of biofuels will also rely on the next generation of raw materials – biomass. At Novozymes we’re taking a fresh look at all types of biomass, and © Novozymes A /S · Customer Communications · No. 2007-35469-02

considering how we can turn it into something useful. And you know what? Corn cobs and wheat straw are just the beginning. Who knows what other types of waste we can transform into fuel? Novozymes is the world leader in bioinnovation. Together with customers across a broad array of industries we create tomorrow’s industrial biosolutions, improving our customers’ business and the use of our planet’s resources. Read more at www.novozymes.com.

Novozymes North America, Inc. 77 Perry Chapel Church Road · Franklinton, NC 27525 Tel. +1 919-494-3000 · Fax +1 919-494-3485 biomass@novozymes.com · www.novozymes.com

inside

FEBRUARY 2008 . VOLUME 14 . ISSUE 2

departments

contributors

11 Advertiser Index

178 COMPLIANCE The Endangered Species Act’s Hidden Costs for Ethanol Production

14 The Way I See It By Mike Bryan Energy Bill Accolades

Increased ethanol production requires additional corn acres and room for facilities. Therefore, ethanol companies and corn farmers alike need to become familiar with the requirements of the Endangered Species Act. By Francis E. Chin

18 Business & People

184 ANALYSIS The Changing Ethanol Environment

22 Commodities

The ethanol industry saw high highs and low lows in 2007. Higher corn prices and an updated renewable fuels standard throw a new dynamic into the evolving industry. What does 2008 hold? By Rick Kment

24 A View From the Hill By Bob Dinneen A Moment of Change

28 Industry News & BIObytes

190 MANAGEMENT Managing Leadership Stress High-level officials are faced with stress in any industry. Managerial stress creates a heavy burden but can be overcome through several basic steps. By Patrick B. Ropella

38 Plant Construction List 52 Our Plant By Bryan Sims Making Due with Waste Brew

54 In the Field By Susanne Retka Schill Tritcale Provides Biomass, Cover

56 Up Front By Anduin Kirkbride McElroy No. 1 Promoter

58 Flex Factor By Ron Kotrba Variable Compression Concepts

60 Business

196 TECHNOLOGY Biomass Gasification: Any New Environmental Concerns? Gasifying biomass for power has become a viable consideration for dry-grind and cellulosic ethanol projects. Companies need to remain cognizant of the process’ regulatory applicability, air emissions, water discharge and solid waste handling issues. By Todd A. Potas

202 MARKET The Hidden Costs of the Renewable Fuels Standard While the renewable fuels standard helps regulate the amount of renewable fuel in the nation’s motor fuel supply, it can cause headaches for those required to track renewable identification numbers. Companies are developing systems that save money and help lighten the load on the industry. By Clayton McMartin

206 BUSINESS Recalibrating the Board of Directors Proactive companies are more regularly conducting board evaluations, which are already a listing requirement of the New York Stock Exchange. The practice helps boards become more efficient, healthy and productive. By Tracy E. Houston and Cindy Knutson

By Jessica Ebert Time May Be Right for Refinancing, But Will Lenders Lend?

62 Finance By Jesse McCurry Strategic Planning for Ethanol Plant Boards

64 Legal Perspectives By Shannon M. Bielski Understanding Restrictions on Transfers of Membership Units

on the web

210 Events Calendar

EthanolProducer.com reader’s poll results ÍFor the week of Dec. 17

212 EPM Marketplace

Do you purchase E10 when you have the opportunity? Yes, when it's available at the pump—60.7 percent Yes, all gasoline in my state is E10—28.2 percent No—11.1 percent

ÍFor the week of Dec. 10 Ethanol Producer Magazine: (USPS No. 023-974) February 2008, Vol. 14, Issue 2. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203. BPA Worldwide Membership Applied for October 2006

How important will a presidential candidate's position on biofuels be when you cast your vote? Very important—62.6 percent Important—16.7 percent Slightly important—9.1 percent Not important—11.6 percent

ÍThe 2007 Energy Bill The fuel ethanol industry weighs in on the Energy Independence and Security Act of 2007.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Ad Index 73 2008 International Fuel Ethanol Workshop & Expo 125 Abener Engineering & Construction Services LLC 26 American Council on Renewable Energy 132 ADI Systems Inc. 176 Advanced Trailer Industries 15 Afton Chemical Corp. 137 Agra Industries Corp. 20 Agri-Energy Funding Solutions 135 Agri-Systems 44 Air Resource Specialists Inc. 182 Alfa Laval Inc. 102 American Railcar Industries Inc. 134 American Stainless & Supply 6 Anhydro Inc. 106 Antioch International Inc. 139 Aqua Power Inc. 154 Ascendant Partners Inc. 97 Baird Holm LLP 166 Barr-Rosin Inc. 21, 120 & 129 BBI Project Development 204 Best Energies Inc. 98 BetaTec Hop Products Inc. 57 Biodiesel & Ethanol 101 DVDs 92 Biofuels Australasia 146 Biofuels Canada 167 Biomass Magazine 157 Brock Grain Systems 115 Brown, Winick, Graves, Gross, Baskerville & Schoenebaum PLC 32 Brown-Minneapolis Tank 12 Burns & McDonnell 124 Calbrandt 126 Cashco Inc. 71 Central States Group 70 Cereal Process Technologies 116 Christianson & Associates PLLP 152 CHS Inc. 127 Clifton Gunderson LLP 136 Competitive Energy Insight Inc. 121 ConAgra Trade Group Inc. 218 Coverall Building Systems 33 Davenport Dryer LLC 189 dbc SMARTsoftware Inc. 36 & 37 Delta-T Corp. 99 Des Champs Technologies 27 Data Transmission Network 187 Durr Systems Inc. 107 Eisenmann Corp. 55 Electro Sensors 119 Encore Business Solutions 188 Engineered Storage Products Co. 186 ERI Solutions Inc. 177 Ethanex Energy 103 ethanol-jobs.com 194 EthanolProducer.com 72 Ethanol Promotion & Information Council (EPIC) 49 Ethanol Technology 200 Faegre & Benson LLP 3 Fagen Inc. 29 FBA Consulting 100 FCStone LLC 117 Federal Equipment Co. 84 Fermentis 179 First National Mergers & Acquistions 69 Flowserve Corp. 128 Fremont Industries Inc. 101 GATX Corp. 61 Genencor International Inc. 16 & 17 GS CleanTech Corp. 34 Harris Group Inc. 50 & 51 Hydro-Klean Inc. 2 ICM Inc. 4 Indeck Power Equipment Co.

171 International Biomass '08 Conference & Trade Show 183 International Process Plants 40 Interstates Cos. 181 Intersystems 85 John Deere Agri Services 45 Kaltron Absorbents 31 Kennedy & Coe LLC 138 Koppers Inc. 89 Laidig Systems Inc. 5 Layne Christensen Co. 175 Louis Dreyfus 46 Management Recruiters of Atlanta 43 Mapcon Technologies Inc. 35 McC Inc. 201 Metso Automation 208 Midland Manufacturing 88 Midwest Towers Inc. 145 Mongan Bockman 143 Natural Resource Group Inc. 118 Natwick Associates Appraisal Services 144 Nebraska Public Power District 114 Northeast Silicon Technologies 59 New York Blower Co. 108 Nexen Marketing USA Inc. 180 North American Bioproducts Corp. 8 Novozymes 207 OPW Engineered Systems 174 OPW Fluid Transfer Group 68 Ortman Ethanol Water Resources 30 Paragon Trailer Sales 109 Paul Mueller Co. 96 Peters Machine 110 PhibroChem 209 Piper Jaffray & Co. 164 Platts Conference & Events Division 220 Poet LLC 150 Pro-Environmental Inc. 78 ProQuip Inc. 63 Provista 41 RailWorks Track Systems Inc. 169 Rev Tech LC 83 & 147 Renewable Fuels Association 47 R.J. Oâ&#x20AC;&#x2122;Brien & Associates 48 & 219 Robert-James Sales Inc. 111 Robinson Industries Inc. 185 Ronning Engineering 168 SafeRack 142 Salco Products Inc. 82 Screw Conveyor Corp. 165 Seneca Waste Solutions 133 SGS North America 155 SimplexGrinnell 163 Smar International Co. 162 Strongform Nationwide Industrial Builders 205 Sturtevant Inc. 170 Sukup Manufacturing Co. 90 & 91 Sulzer Chemtech USA Inc. 79 Sustainable Development Technology Canada 80 & 81 Swanson Flo-Systems 191 TDC Dryers 156 Tranter Phe 10 Trinity Rail 203 U.S. Water Services 75 Univar USA Inc. 193 U.S. Energy Services 199 Vaperma Inc. 65 Veolia Water Solutions & Technologies 42 Vogelbusch USA Inc. 151 Volkmann Railroad Builders Inc. 153 W.S. Tyler USA 198 Walling Water Management 195 WestLB 197 WestMor Industries LLC 192 WINBCO 74 Yellow Springs Instruments

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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E D I TO R I A L

PUBLISHING & SALES

Kathy Bryan Editor-in-Chief kbryan@bbibiofuels.com

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

Tom Bryan Editorial Director tbryan@bbibiofuels.com

Joe Bryan Vice President of Media jbryan@bbibiofuels.com

Jessica Sobolik Managing Editor jsobolik@bbibiofuels.com

Matthew Spoor Sales Director mspoor@bbibiofuels.com

Dave Nilles Contributions Editor dnilles@bbibiofuels.com

Howard Brockhouse Senior Account Manager hbrockhouse@bbibiofuels.com

Rona Johnson Features Editor rjohnson@bbibiofuels.com

Clay Moore Account Manager cmoore@bbibiofuels.com

Ron Kotrba Senior Staff Writer rkotrba@bbibiofuels.com

Jeremy Hanson Account Manager jhanson@bbibiofuels.com

Anduin Kirkbride McElroy Staff Writer amcelroy@bbibiofuels.com

Chip Shereck Account Manager cshereck@bbibiofuels.com

Jerry W. Kram Staff Writer jkram@bbibiofuels.com

Tim Charles Account Manager tcharles@bbibiofuels.com

Susanne Retka Schill Staff Writer sretkaschill@bbibiofuels.com

Chad Ekanger Account Manager cekanger@bbibiofuels.com

Bryan Sims Staff Writer bsims@bbibiofuels.com

Marty Steen Account Manager msteen@bbibiofuels.com

Jessica Ebert Staff Writer jebert@bbibiofuels.com

Trista Lund Advertising Coordinator tlund@bbibiofuels.com

Sarah Smith Staff Writer ssmith@bbibiofuels.com

Jessica Beaudry Subscriptions Manager jbeaudry@bbibiofuels.com

Michael Shirek Online Editor mshirek@bbibiofuels.com

Tim Greer Circulation Coordinator tgreer@bbibiofuels.com

Jan Tellmann Copy Editor jtellmann@bbibiofuels.com

Erika Wishart Administrative Assistant ewishart@bbibiofuels.com

Craig A. Johnson Plant List & Construction Editor cjohnson@bbibiofuels.com

Christie Anderson Administrative Assistant canderson@bbibiofuels.com

A RT Jaci Satterlund Art Director jsatterlund@bbibiofuels.com Sam Melquist Graphic Artist smelquist@bbibiofuels.com Bizzy Slavens Graphic Artist bslavens@bbibiofuels.com Jack Sitter Graphic Artist jsitter@bbibiofuels.com

HOW TO REACH US

LETTERS TO THE EDITOR We welcome letters to the editor. Send your letter to: Ethanol Producer Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to jsobolik@bbibiofuels.com. Letters should include the writer’s full name, address and telephone number, and may be edited for purposes of clarity and space.

SUBSCRIPTIONS 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. Subscriptions to Ethanol Producer Magazine are available to all ethanol producers and future ethanol producers worldwide, free of charge. Regular subscriptions are available for just $24.95 per year within the United States, $59.95 for Canada and Mexico, and $110 for any country outside North America.

CUSTOMER SERVICE AND CHANGE OF ADDRESS For service, please use our Web site at www.EthanolProducer.com. You can also call (866) 746-8385, or write to: Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203.

BACK ISSUES AND REPRINTS Select back issues are available for $3.95 each, plus shipping. To place an order, contact Subscriptions at (701) 746-8385 or subscriptions@bbibiofuels.com. Article reprints are also available for a fee. For more information, contact Christie Anderson at (701) 746-8385 or canderson@bbibiofuels.com.

ADVERTISING For advertising rates and our editorial calendar, visit www.EthanolProducer.com or call (866) 746-8385.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

The Way I See It

Energy Bill Accolades

s we might expect, there has been a great deal of attention surrounding the passage of the Energy Independence and Security Act of 2007. While we need to applaud this presidential administration for its efforts to support such legislation, we also have to recognize Congress for its overwhelming support of renewable energy. It has long been recognized that the United States needed to muster its national will in order to forward the cause of energy independence. Clearly, the actions of Congress and the president demonstrated that will. The reasons for the broad base support for this bill were as varied as the number of supporters it garnered. Economic development, the war in Iraq, the price of oil, energy independence, the environment … the list goes on. It seems no matter what the reason for supporting the legislation, there was something in it for almost everyone. It truly was an across-the-board action taken for American security. Of course, there is a great deal of chest thumping going on now regarding who played the biggest role in getting this legislation through Congress and to the president’s desk for his signature. While there is ample praise to go around—and there were, in fact, many contributors to its passage—we have to recognize the American farmer as providing the underpinning of success. Also, the Renewable Fuels Association did a remarkable job of building agricultural and industry coalitions in support of this bill. As we move toward the annual National Ethanol Conference in Orlando, Fla., on Feb. 25-27, we need to recognize the Herculean efforts of Bob Dinneen and his team at the RFA. I know there were many others who contributed, and if I start to list them, surely some individual or group will be missed. But please take the time to thank the RFA, the National Corn Growers Association and the American farmer for the work done to reach passage of this landmark legislation. In the years ahead, efforts will continue to expand the renewable energy industry beyond 36 billion gallons. The opportunities are endless, and the need expands with every drop of oil that we extract from the ground. For now, let’s not spend too much time basking in our success. We have much work to do, and 36 billion gallons of production will be here well before 2022. Our sincere thanks go out to everyone who worked so hard to get this legislation passed. You are the pioneers of a new energy frontier. That’s the way I see it!

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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BUSINESS&PEOPLE

Business& People Ethanol Industry Briefs PHOTO: DANE HICKS, ANDERSON COUNTY REVIEW

PHOTO: IOWA AREA DEVELOPMENT GROUP

Business

Taylor, left center, presents EKAE Director Roger Brummel, right center, and other EKAE representatives with the SHARP award.

VeraSun Charles City LLC Plant Manager Todd Church holds an Iowa Venture Award presented by the Iowa Area Development Group.

East Kansas Agri-Energy wins award

VeraSun, U.S. BioEnergy earn awards

East Kansas Agri-Energy, a 35 MMgy ethanol facility in Garnett, Kan., was presented a Safety & Health Achievement Recognition Program award by Occupational Safety and Health Administration representative Glenn Taylor on Dec. 5. SHARP provides incentives to highhazard employers to develop, implement and improve workplace safety and health programs. EKAE, which started production in the summer of 2005, followed several SHARP criteria in order to be considered for the award. One criterion involved having a lost workday injury and illness rate and total recordable case rate below the national average for the ethanol industry. EKAE’s rates were zero for both, according to Plant Manager Doug Sommer. EP

The Iowa Area Development Group honored U.S. BioEnergy and VeraSun Energy Corp. with Iowa Venture Awards at the organization’s 20th anniversary ceremony in Des Moines, Iowa, on Nov. 29. U.S. BioEnergy, nominated by Iowa Lakes Electric Co-op, was recognized for its effort to bring its 100 MMgy ethanol facility on line in Albert City, Iowa. VeraSun was nominated by North West Rural Electric Co-op for its 110 MMgy facility, which is currently under construction in Hartley, Iowa. EP

DuPont introduces tool for predicting ethanol yield Pioneer Hi-Bred International Inc., a DuPont business, recently introduced a new measurement and reporting system for the prediction of ethanol yield per bushel of all commercial grain, regardless of seed source. "[QualiTrak] provides farmers with data to make better seed selection decisions and enables ethanol processors to better manage their procurement programs," explained Russ Sanders, marketing director for Pioneer HiBred. QualiTrak incorporates a proprietary calibration technology used with grain analyzers provided by Foss, an analytical instrument provider. EP 18

Share your Industry Briefs To be included in Business & People, send information (including photos or illustrations if available) to: Industry Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also fax information to (701) 746-5367, or e-mail it to jsobolik@bbibiofuels.com. Please include your name and telephone number in all correspondence.

Astle Corp. changes name Astle Corp., an ethanol industry subcontractor in Deer Creek, Minn., changed its name to Strongform Nationwide Industrial Builders on Oct. 18. The company specializes in industrial structural concrete construction, rebar placement, millwright services, steel buildings and structural steel erection. It has worked on at least 12 U.S. ethanol plants. For a list of completed projects, visit www.strongform.net. The company’s new ownership includes Duane Thomes, president; William Rosselot, vice president of operations; and Pennie Astle, secretary and treasurer. Its office is located at 208 Baker St. N., Deer Creek, Minn., 56527. EP

Vaperma, Dedini partner Vaperma Inc., the Canadian-based maker of Siftek dewatering and dehydration systems, signed a cooperation agreement to market its products in Brazil with Dedini S/A Indústrias. Siftek is a hollow fiber polymeric membrane that allows the selective separation of water from gases and organic vapors. The agreement involves the construction of an ethanol plant using the system in Brazil by the third quarter of 2008. Dedini is an international supplier of manufacturing equipment and plant construction services. It has designed and built plants that produce 80 percent of Brazil’s ethanol and 25 percent worldwide. EP

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

BUSINESS&PEOPLE

Sponsored by

People Hawkeye promotes Stewart Hawkeye Energy Holdings LLC recently promoted Byron Stewart to a new position: director of transportation and logistics. Stewart was working as director of marketing and transportation for Hawkeye Gold, the company’s distillers grains marketing subsidiary. Previously, Stewart directed ingredients marketing and transportation for United Bio Energy. “Hawkeye is leading change in the industry as fuel ethanol advances from a niche additive to 15 [billion] to 20 billion gallons of demand over the next few years,” Stewart said. “Our company is committed to collaborating with important stakeholders in the supply chain to lead the industry in the critical area of transportation and logistics.” EP

Greenfield Project Management names CFO John Scott, a banking advisor with extensive experience in energy start-ups, has been appointed to the board of Dublin, Irelandbased Greenfield Project Management Ltd. and will take on the duties of chief financial officer. He will spearhead the investment and financial structuring for the company’s proposed ethanol facility in Belarus. Construction is set to begin in 2008. The plant will use the country’s vast biomass resources as a feedstock. EP

Winsor, Fishman join Range Fuels Cellulosic technology developer Range Fuels recently hired Rick Winsor as president and chief operating officer, and appointed Robert Fishman to its board of directors. Winsor will oversee the construction of the company’s cellulosic ethanol plant in Soperton, Ga., which broke ground in November, as well as future plants. Winsor most recently served as COO of Horizon Wind Energy. Fishman currently serves as CEO of Ausra Inc., which is developing and deploying utility-scale solar thermal power technology. EP

THE FUNDING EXPERIENCE AND CONNECTIONS TO GET YOUR PROJECT OFF THE GROUND.

Parker, Glade join Green Plains board Gary Parker and Gordon Glade joined the board of directors at Green Plains Glade Renewable Energy Inc. in December. Parker is the president and CEO of Center Oil Co., and founder of Center Ethanol Co. LLC, a 50 MMgy ethanol plant currently under construction in Sauget, Ill. Glade is president and CEO of Axis Capital Inc. He is also president of Central Bio-Energy LLC, a company that is developing three U.S. ethanol production facilities. EP

Agri-Energy Funding Solutions works with lenders and private investors nationally and internationally to secure financing for new or expanding biodiesel, ethanol and biomass plants. Agri-Energy Funding Solutions provides: • Construction/permanent financing • Mezzanine & equity funding • Working capital line of credit • USDA financing

8090 South 84th Street, LaVista, NE 68128 | T: [402] 895-5067 | F: [402] 891-5702 www.agri-energyfs.com | dretherford@agri-energyfs.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Concept

Construction Why hire a project coordinator when you can hire a team of experts to develop your ethanol or biodiesel project? Let BBI guide you down the project development path: Feasibility study

Develop feedstock and risk management plans

Organize your business

Develop a project financing strategy

Develop the business plan

Develop prospectus and offering documents

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Select the best site

Secure project debt financing

Negotiate utility and product offtake agreements

Financial close and begin construction!

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COMMODITIES REPORT Natural Gas Report

2008 natural gas prices: Possible paths Dec. 21—As we enter a new year, it is appropriate to look forward and discuss where natural gas prices may go and what factors are driving price changes. Before looking forward, it is instructive to look at the recent past. The chart below shows the actual annual average price (NYMEX monthly settlement prices) over the past five years and a forecast for the next three years (current NYMEX monthly prices). Clearly, there has been a trend upward in prices from 2003 through 2007. Natural gas prices in 2005 were a bit higher than the trendline, which is not surprising given the impact of Hurricanes Rita and Katrina. Natural gas prices in 2007 were a bit lower than

By Casey Whelan, U.S. Energy Services Inc.

the trendline. However, we had relatively moderate weather during the winter and summer periods and limited hurricane activity. Going forward, the market expects more of the same—annual compound price increases ranging from 5 percent (2003-2010) to 7 percent (2007-2010). It is important to note this rate of increase is greater than the rate of inflation. Based on these numbers, there is likely to be “real” as well as “nominal” increases in natural gas prices. We believe price increases greater than the prevailing inflation rate are reasonable for the following reasons. First, natural gas demand will continue to increase even with higher prices since incremental electric generation needs are being met in large part by natural gas. Second, new domestic supply sources tend to be in high extraction cost areas, notably the Rockies. Third, as we supplement growing demand with imported liquefied natural gas, we will have to compete with the world to bring needed supply to our shores. Finally, oil prices are likely to remain high, which will tend to prop up natural gas prices as well. Bottom line: expect continued high and increasing prices. If your view of the world is different, please drop me an e-mail. EP Casey Whelan, vice president of strategic initiatives, can be contacted at cwhelan@usenergyservices.com.

Corn Report

New RFS, markets affect corn demand

By Jason Sagebiel, FCStone

Dec. 24—The corn market continues to be on a parabolic ride, especially as the renewable fuels standard expands future ethanol demand. Corn has a full force of speculative money behind it that continues to lift the market to new contract highs. U.S. corn production in 2007/’08 is still projected at 13.16 billion bushels. Albeit a big production number, that figure has dwindled since the beginning of harvest. Overall, demand has been static on the domestic side with livestock feed and ethanol demand virtually unchanged. However, with the weak U.S. dollar and shortage of overall world commodities, grain(s) export demand has been on a rampage. With the current market at these price levels economics will have to curb the overall future demand growth. Energy will impact other commodities not only as price due to inflationary reasons, but it will also have a huge impact as a key input. High-priced corn, soybeans and wheat have not thwarted demand in the import sector. Corn will be in competition with soybeans through the late winter/early spring, and watchful eyes will be on South American weather. The bottom line is the corn market is poised for a bullish scenario The USDA will release the prospective plantings on March 31. Almost especially with any inclination of a weather threat as farmers head to the certainly, if ethanol sustains a price rally, corn will be expected to follow field this spring or through the summer. Traders expect to see corn acres the same latitude. EP dwindle by 6 million to 7 million acres with soybeans and wheat gaining. 22

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

COMMODITIES REPORT DDGS Report By Sean Broderick, CHS Inc.

Export market demand continues to rise Dec. 21—As 2007 ended, the annual holiday run-up had, once again, caught many flat footed. The cold weather, increased wet cake sales and pre-holiday buying were all the normal culprits, but this season there are several additional factors. The weak U.S. dollar continued to spur heavy exports to Canada, Mexico and Latin America. Asian demand was stronger than ever but hampered by a container supply that can’t keep up. Another factor is the delay of new plant startups, which seem to be running four to six weeks behind schedule. Many sellers that put on positions in anticipation of this impending supply now have to cover their short sales in a tighter market. All of these factors are contributing to the sharp price run-up that has happened since the beginning of December.

Other factors are contributing as well. Some hog producers are feeding DDGS at levels of up to 30 percent of the diet, which would have been unheard of even one year ago. Chicago Board of Trade futures are rallying, putting grain and soymeal at levels not seen in a long time. All of these things justify the high levels of DDGS. On the other hand, there is a lot of impending production coming to the market in the first quarter of ’08, both from plants that have been delayed and from plants that will be up on time. This will coincide with the onset of warmer weather, which should temper some of the demand. The bottom line is that the U.S. dollar, South American weather and CBOT will determine the direction of prices. EP

Regional Ethanol Prices (Monthly averages in cents per gallon)

SPOT

West Coast

209.227

208.9

210.799

Midwest

201.716

201.4

207.689

East Coast

205.341

----

208.027 Source: OPIS

Regional Gasoline Prices (Monthly averages in cents per gallon)

REGION

SPOT

RACK

RETAIL

West Coast

242.25

248.56

324.821

Midwest

225.908

236.976

298.387

East Coast

232.961

239.354

205.257 Source: OPIS

DDGS Prices ($/ton) DEC. 2007

NOV. 2007

DEC. 2006

Minnesota

145

150

130

California*

205

185

170

Chicago, Ill.

155

137

136

Buffalo, N.Y.

157

150

148

Central Florida

188

170

LOCATION

151

*Central Valley

Source: CHS Inc.

Corn Futures Prices (March corn, $/bushel) HIGH

LOW

Dec. 21, 2007

4.48

4.38 1/2

4.43 1/2

Nov. 27, 2007

4.01

3.98 1/2

4.00 3/4

Dec. 21, 2006

3.7 1/2

3.75 1/4

3.77 1/2

DATE

Ethanol Report

BULK SPLASH/ TRUCK (rack) TOP OFF (rack)

REGION

By Spencer Kelly, OPIS

Source: FCStone

Ethanol spots march higher into 2008 Dec. 20—Ethanol spot markets headed into the new year not only avoiding the most dire forecasts of oversupply and price pressure, but showed substantial resilience as prices gained ground amid growing reports of new blending demand. Chicago spot ethanol for December headed into the Christmas week priced over $2.30 per gallon with January buyers edging into the upper teens. That put spot prices up more than 30 cents in December. Weatherrelated delivery problems may have contributed to what sources said was a tight prompt market, but forward prices also gained substantially. First-quarter material at $2.10 gallon represented a gain of at least 26 cents for the month. At the rack, Midwest top-off prices also stepped higher through the month. On average, Iowa racks at nearly $2.22 per gallon added a hefty 27-plus cents from the end of November into the last week of December.

The rack low price in Des Moines topped $2.20 gallon, up some 21 cents for the month. Spot prices were in an upswing elsewhere as well, though prices often revealed a tight premium for those markets versus Chicago. Spot barge values in New York Harbor and Houston each ran more than $2.35 per gallon for December. At the same time, West Coast railcar spots moved into the upper $2.30s per gallon. One key factor could be refiners gearing up to introduce more ethanol blends, a strategy that gained steam over the last quarter of 2007. Hess, for example, said it would expand its blending program in Florida and all instate stations could be featuring an E10 blend by 2008. EP For more information, contact OPIS Ethanol & Biodiesel Information Service at (888) 301-2645.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Cash Sorghum Prices ($/bushel) DEC. 20, 2007 NOV. 16, 2007 JAN. 8, 2007 3.42 3.39 3.37 3.53 3.46 4.18

3.69 3.71 3.47 3.80 3.45 4.30

4.18 4.13 3.90 4.32 4.00 4.97

Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

Source: Sorghum Synergies

Natural Gas Prices ($/MMBtu) DEC. 21, 2007

NOV. 16, 2007

DEC. 12, 2006

NYMEX

7.23

6.82

6.91

N. Ventura

8.05

6.57

6.58

Calif. Border

6.77

6.50

6.705 Source: U.S. Energy Services Inc.

U.S. Ethanol Production Output (barrels/day) September 2007

441,000*

August 2007

434,000

September 2006

333,000

*all-time monthly high

Source: U.S. Energy Information Administration

VIEW FROM

THE HILL

A Moment of Change “Any change, even a change for the better, is always accompanied by drawbacks and discomforts,” said Arnold Bennett, British playwright and novelist. We find ourselves at a historic moment in time. For the first time in our nation’s history, we have begun to chart a new energy direction that is transforming how America thinks about its energy resources. Ethanol is helping to lead the way. Our industry has undergone an incredible metamorphosis in the past few years. We have gone from a niche, Midwestern novelty to a ubiquitous component of our nation’s motor fuel supply. We have seen our industry grow beyond the confines of the Corn Belt, opening biorefineries and markets all across the country and exposing more Americans to the possibility of energy from sources beyond oil and other fossil fuels. Ethanol is helping to change how Americans think about fueling their cars, and it’s paving the way for the important technologies to follow. Simultaneously, the concept of environmental stewardship has undergone a makeover, going from a vocal subculture to a mainstream movement that recognizes the seriousness and urgency with which we must act to address global climate change. Within this revolution, ethanol is again playing a leading role. It is proving to skeptics that renewable alternatives to gasoline and diesel fuel are essential in reducing greenhouse gas emissions that contribute to global warming. Perhaps most importantly, given the tense geopolitical environment in which we live, altering our reliance on oil on those nations often hostile to the United States is taking on paramount importance. Ethanol and other renewable fuels are already at the forefront, helping to reduce oil imports today and promising to further reduce our reliance on the nations of OPEC for our energy needs. A leadership role in such a paradigm shift does not come without responsibility and bumps in the road. Indeed, traditional energy sources and ethanol naysayers seeking to protect their bottom lines are well-heeled and willing to do what it takes to besmirch and smear the reputation of ethanol and those who provide us the feedstocks. As our industry continues to grow, rest assured so too will the resolve of our critics. A leadership role in a movement away from the status quo requires dogged determination, laser focus on the goal at hand and a bit of Teflon coating. It also requires that we continue working with our friends and reaching out to our adversaries to ensure that, even if we have to pull them along, all Americans are included in the benefits of the changing energy landscape. The evolution underway in how Americans and their government view energy, the environment and national security is providing a golden opportunity for the U.S. renewable fuels industry. We have been given a platform on which to prove to the world we are an indispensable part of our nation’s future. The future success of the U.S. ethanol industry and the renewable technologies that are being developed and will follow is now in our hands. The challenges are many, but by no means insurmountable. The goals are far-reaching, but well within our sights.

Bob Dinneen President and CEO Renewable Fuels Association 24

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

RFA UPDATE

36 billion reasons 2008 will be a good year A great deal of attention has been paid to the increase in fuel economy standards and expansion of the Renewable Fuels Standard as part of the Energy Independence and Security Act of 2007, which was enacted into law in late December. While those provisions are historic and deserve the attention they have received, other provisions included in that legislation will prove vital to the continued success of the U.S. domestic ethanol industry. Other important provisions of the legislation include: Stimulating investment in renewable fuels infrastructure and supporting research and development of new bioenergy sources. With such an ambitious target for renewable fuels use, ensuring that we develop the technology to produce and distribute 36 billion gallons of renewable fuel will be important. Investing in biofuels research to make biofuels production more efficient and environmentally sound by creating a new research component to improve the energy efficiency in biorefinery facilities and reduce energy consumption in the development of biofuels. Investment in cutting-edge research to develop new processes for turning other farm products, such as switchgrass and wood chips, into biofuels. Prohibiting oil companies from preventing franchisees from installing E85 infrastructure. A variety of studies to improve the use of biofuels, focusing on optimization of flexible-fuel vehicles while running E85 and engine durability at differing blend levels of biodiesel.

The blame game concerning the root cause for higher food prices continues to linger. Those in the meat- and foodprocessing industries are still quick to point the finger at the U.S. ethanol industry as the cause for the rise in consumer food prices. A report from Informa Economics roundly refutes that claim. Its analysis found that the marketing bill—specifically the portion of final food costs that exclude grains or raw materials—has a much higher correlation with the consumer price index than the price of corn, the main feedstock for ethanol production in the United States. “This analysis puts to bed the argument that a growing domestic ethanol industry is solely responsible for rising consumer food prices,” said Informa Chairman and CEO Bruce Scherr. “The statistical analysis plainly details that energy-intensive activities such as processing, packaging and transporting, as well as the cost of labor, have a far greater impact on consumer food bills than the price of grain. It may be politically convenient to blame ethanol for rising food prices but it doesn’t make it factually accurate. As far as Informa is concerned, this debate is settled.” The report specificly notes that “there is no statistical evidence to suggest that high and/or rising corn prices are the causative reason behind high and rising retail meat, egg and milk product prices.” It goes on to find that just 4 percent of the fluctuation in consumer food price is attributable to higher corn prices. The Informa report is available at www.informaecon.com.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

www.ethanolRFA.org

Marketing bill driving up food costs

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BIObytes Ethanol News Briefs Three ethanol plants receive air permits The Texas Commission on Environmental Quality recently granted an air permit to Panda Ethanol Inc. for its proposed 115 MMgy ethanol plant in Muleshoe, Texas. Likewise, the Ohio EPA issued its final air permit to The Andersons Inc. for a proposed 127 MMgy dry-grind ethanol facility in Crestline, Ohio. Similarly, the Pennsylvania Department of Environmental Protection approved an air quality plan submitted by Northeast Ethanol and Renewable Resources Ltd. for a proposed 60 MMgy ethanol plant in Mayfield, Pa.

Granite Falls Energy receives environmental fine On the second anniversary of its start-up, Granite Falls Energy in Granite Falls, Minn., got an unwelcome gift—a $300,000 fine from the Minnesota Pollution Control Agency. Regulators said the 45 MMgy ethanol plant exceeded permitted production and water quality discharge limitations, kept inadequate records and illegally produced distillers wet grains, which requires special handling and storage. GFE agreed to make sweeping changes in management and record-keeping in a stipulation with the MPCA.

EPA sets 2008 renewable volume obligation As required, the U.S. EPA recently set the 2008 standard used to calculate the renewable volume obligation for parties to comply with the renewable fuels standard. The EPA requires that 4.66 percent of each party’s motor vehicle fuel be renewable fuel. This amount should result in compliance with the requirement that 5.4 billion gallons of renewable fuel be blended in 2008. A report from the U.S. Energy Information Administration projects even greater consumption than required; the Annual Energy Outlook 2008 projects ethanol consumption to grow from 5.6 billion gallons in 2006 to 13.5 billion gallons in 2012 and 17 billion gallons in 2030.

INDUSTRYNEWS

VeraSun, U.S. BioEnergy merger: A sign of the times The November merger agreement announced between Brookings, S.D.-based VeraSun Energy Corp. and St. Paul, Minn.-based U.S. BioEnergy Corp. was a clear indication that the industry is gaining more velocity toward consolidation. According to industry analysts, the move came at the right time in light of the Energy Independence and Security Act of 2007 that was signed by President George W. Bush in December. “I really don’t think this came as a surprise to the industry,” said Rick Kment, ethanol analyst for Data Transmission Network. “I think this goes back to the focus of current companies in the ethanol industry looking at the market maturing, going through the general market changes and [moving] from an early-entrance type of market to more of a maturing industry.” The merger agreement, which has been unanimously approved by the board of directors of each company, is expected to close sometime in the first quarter of 2008, pending shareholder approval, anti-trust regulatory clearance and the completion of other customary conditions. The combined company will retain the VeraSun name and trade under VeraSun’s existing New York Stock Exchange ticker symbol. U.S. BioEnergy CEO Gordon Ommen will serve as chairman, while VeraSun Senior Vice President and Chief Financial Officer Danny Herron will become president of the combined company. Under terms of the deal, 0.81 shares of VeraSun common stock will be issued for each outstanding share of U.S. BioEnergy, representing a premium of approximately 11 percent based on Nov. 23 closing prices. The existing VeraSun shares will remain outstanding and will represent approximately 60 percent of the shares outstanding after the merger. VeraSun also inherited U.S. BioEnergy’s $347 million of debt. “You’ve certainly seen stocks for these companies coming back to life where there’s some of that future uncertainty kind of taken away,” said Matt McHale, senior consultant for SJH & Co., a leading renewable energy and fuel consulting firm based in Boston. “It’ll be interesting to see how this

Combined VeraSun, U.S. BioEnergy facilities

Nine plants in operation Seven plants under construction One plant under development

deal affects the [other] plants that are in various stages of construction at this point.” Upon completion of the merger, the combined company will have nine ethanol plants producing a combined 870 MMgy. By the end of 2008, the company expects that to increase to 16 ethanol plants producing more than 1.6 billion gallons per year. The merger agreement will affect several strategic alliances that the companies had prior to the deal. For example U.S. BioEnergy has its own distillers grains business and a joint marketing agreement with CHS Inc. under the Provista brand name, while VeraSun has its branded E85 business and a corn oil extraction venture. “It makes you wonder if U.S. BioEnergy is looking to realign its core competencies and focus on the marketing side, allowing VeraSun to focus on the production side,” Kment said. According to McHale, this alignment of interests between the two major ethanol players signifies an accelerated trend for enhanced competitive positioning, something that could bring equilibrium to a volatile ethanol market. Of course, the passage of the energy bill changes things a bit. “You have to work with what the known future is,” McHale said. “Before the new bill was signed into law, the previous mandates were viewed as how they would be leveled out. The meaning of ‘equilibrium’ has now changed.” —Bryan Sims

continued on page 30 28

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

INDUSTRYNEWS

Fuel economy study shows promise for mid-range ethanol blends A new study indicates that higher ethanol blends in gasoline might be optimal for better fuel mileage. Funded by the American Coalition for Ethanol and the U.S. DOE, the study found that ethanol blends between 20 percent and 30 percent, and possibly as high as 45 percent, will yield a higher fuel economy than revealed in the past. The study was conducted by the Minnesota Center for Automotive Research in Mankato, Minn., and the University of North Dakota Energy & Environmental Research Center in Grand Forks, N.D. Four ethanol companies— VeraSun Energy Corp., Poet LLC, Fagen Inc. and ICM Inc.—contributed to ACE’s share of the funding. ACE has heralded the results as revolutionary, especially in light of a fivefold increase in ethanol use mandated in the Energy Independence and Security Act of 2007 (see page 66). Ron Lamberty, ACE vice president of marketing development, called the study “groundbreaking.” Meanwhile, EERC chemist Ted Aulich is more reticent. Aulich, process chemistry research manager, said much more research is warranted before such conclusions can be drawn. The study appears to debunk popular assumptions that ethanol’s lower energy content corresponds with lower gas mileage. However, it also supports the industry’s push for blender pumps across the country. “We need to put this in perspective,” Aulich cautioned. “We don’t want to oversell this small, small study.” Four 2007 model vehicles—three nonflexible-fuel cars and one flexible-fuel car—were road- and laboratory-tested: a Toyota Camry, a Ford Fusion and two Chevrolet Impalas. One Impala was the flex-fuel vehicle. Researchers started with regular gasoline and performed nine separate tests, increasing the ethanol blend at 10 percent increments up to E85. Vehicle speeds ranged from 0 to 60 mph, with an average speed around 20 mph. Scientists noted the point at which each vehicle engine experienced a “fault code”—when the vehicle detected either an ethanol or oxygen level that wasn’t operable. Each test was conducted in triplicate for verification purposes. The vehicles had varying responses to the

How cars are tested by the EPA Fuel economy is measured under controlled laboratory conditions using standard test procedures specified under federal law. A passenger vehicle’s drive wheels are placed on a dynamometer, which simulates city or highway driving conditions, and can be adjusted to account for wind resistance and vehicle weight. A hose is connected to the tailpipe to collect exhaust and calculate the amount of fuel burned during the test. Because the EPA has been criticized in the past for fuel efficiency ratings that were too high and not achievable for consumers in real-world conditions, three new tests will be added in 2008: 1. Faster speed and acceleration 2. Use of the air conditioner 3. Colder outside temperatures Source: www.fueleconomy.gov

test blends of ethanol compared with gasoline. “It’s conceivable that [the results] are vehicle-specific,” Aulich said. “The optimal blend could vary from vehicle to vehicle.” The Toyota and Ford operated best with an E30 blend, while the flex-fuel Impala gained 15 percent over its standard fuel economy with an E20 blend. Unexpectedly, the nonflex-fuel Impala’s optimal blend appeared to be E40. “Some of the results surprised us,” Lamberty said. “The study shows that the correlation between [British thermal units] and mileage is a myth.” Fuel economy had previously been based on the per-gallon Btu content. A secondary aspect of the study concluded that vehicle emissions weren’t significantly impacted by the increased amount of ethanol. Both Lamberty and Aulich said they hope the DOE and U.S. EPA will continue the testing methodology on a larger scale in hopes of sanctioning the use of mid-range ethanol blends. “From an energy security standpoint, the study might be used to decrease our dependence on foreign oil,” Aulich said.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

—Sarah Smith 29

BIObytes Ethanol News Briefs continued from page 28

Murphy Oil to expand E10 offerings in Alabama Murphy Oil Corp., an international oil and gas exploration and production company with operations in 20 U.S. states, is expanding its offering of E10 to the company’s Super Wal-Mart retail stations in Alabama. “We’re simply offering a product that our customers are asking for,” said Angelos Lambis, pricing manager for Murphy USA. Murphy Oil is currently offering the fuel at approximately 35 sites in Alabama with plans to expand within the state, as well as in other Southeastern, Midwestern and Gulf Coast states.

AgriEnergy eyes U.S. biofuel market Aussie biofuel producer AgriEnergy Ltd., formerly Australian Ethanol Ltd., has sold its Swan Hill ethanol project in Victoria, Australia, for $1 million due to unfavorable market conditions. Instead, it has inked refinancing deals that will enable its wholly owned subsidiary U.S. Canadian Biofuels Inc. to complete its 60 MMgy biodiesel project in Beatrice, Neb. The facility was under construction at press time but is expected to be fully operational in February, according to U.S. Canadian Biofuels CEO Bud Cummins. continued on page 32

INDUSTRYNEWS

Canadian bill would provide additional biofuel funding At the Canadian Renewable Fuels Summit in Quebec City in December, Federal Agriculture Minister Gerry Ritz announced a new federal biofuels bill and the details of the federal ecoEnergy for Biofuels program. Both items were welcome news to summit attendees. The proposed biofuels bill would make the necessary changes in law to ensure that the federal government meets its goal of an average renewable fuel content of 5 percent ethanol and 2 percent biodiesel nationwide. This would result in an estimated 4.2-megaton reduction in net greenhouse gas emissions annually, equivalent to removing more than 1 million cars from Canadian roads. However, the Canadian Renewable Fuels Association, which hosted the event, will continue its efforts to raise the goals to 10 percent ethanol and 5 percent biodiesel, according to CRFA President Gordon Quaiattini. The ecoEnergy for Biofuels program will invest up to $1.5 billion over nine years to boost homegrown biofuels production. It aims to make investment in production facilities more ideal by partially offsetting the risk associated with volatile feedstock and fuel prices. Recipients will be entitled to receive incentives for no more than seven consecutive years. The program runs from April 1 to March 31, 2017, and will be administered by

Natural Resources Canada. There are other federal programs that aim to spur the Canadian biofuels industry. The ecoAgriculture Biofuels Capital Initiative and the Biofuels Opportunities for Producers Initiative Ritz provide assistance to farmers who pursue opportunities in biofuels production. These initiatives are led by Agriculture and Agri-Foods Canada. The NextGen Biofuels Fund offers support for demonstration-scale, next-generation biofuels facilities. It is managed by Sustainable Development Technology Canada, a foundation created by the government of Canada. The CRFA estimates that 20 biofuel facilities will come on line in Canada in the coming years, creating more than 14,000 new jobs in rural communities and providing a new market for more than 200 million bushels of Canadian grains and oilseeds. —Jessica Sobolik

INDUSTRYNEWS

Two integrated ethanol plant/cattle feedlot developers are undaunted by the recent filing of bankruptcy under Chapter 11 provisions by E3 BioFuels LLC in Mead, Neb. For the most part, Growing Power Hairy Hill LP in Alberta is following the same closedloop concept used by E3 BioFuels, said General Manager Mike Kotelko. “There are some different dynamics at [the Mead] plant in the ownership structure and also the integration of the technologies.” GPHH is completing its third year of producing biogas for electrical power from an anaerobic digester colocated with the Highland Feeders Ltd. feedlot. Dirt work began this fall for a 40 million-liter-per-year (11 MMgy) ethanol plant and expansion of the biogas facility. “The strength of the operational model is in reducing operating costs of the ethanol plant and feedlot,” Kotelko said. “We’re intentionally keeping these as separate businesses.” Panda Ethanol Inc. is nearing the completion of its 115 MMgy ethanol plant in Hereford, Texas, which will gasify manure to provide heat for the ethanol production process. “We’re not discouraged whatsoever,” said Bill Pentak, director of corporate communications and investor relations, of E3 BioFuels’ bankruptcy filing. “We’re utilizing a different technology.” Panda

PHOTO: TONY PETERSON

Developers undeterred by E3 BioFuels bankruptcy

A view of E3 BioFuels LLC as it neared completion in the late fall of 2006 in Mead, Neb.

considered anaerobic digestion but decided that it would be unrealistic to build a digester large enough to power an ethanol plant designed to utilize economies of scale, he said. E3 BioFuels was the first closed-loop ethanol facility that planned to convert manure in an anaerobic digester to power the ethanol plant, which in turn would provide distillers grains for the colocated feedlot supplying the manure. Construction of the 25 MMgy ethanol plant and anaerobic digester began in October 2005, and ethanol production began in April 2007. E3 filed for Chapter 11 bankruptcy protection Nov. 30 with the U.S. Bankruptcy Court in Kansas City, Kan. In its announcement, the

company said construction delays and mechanical failures delayed the start-up of the plant and prevented full production. “The deterioration of the ethanol market, coupled with the plant operating at materially less than full capacity, made the economics untenable and the reorganization allowed under Chapter 11 necessary,” the company said. “[If not] for the construction failures, we would have reached substantial completion months earlier, if not a year ago, and never would have been in Chapter 11,” said company spokesman R.J. Wilson. “We’ve been told by the attorneys that these [mechanical] failures may be the subject of litigation.” The company stressed that the science, the process and the patent supporting E3 have been proven successful. The Chapter 11 filing will allow the company time to seek additional capital financing necessary to repair the ethanol plant, which was damaged during start-up, the company said. Wilson added, “We are progressing toward a reorganization plan with the court and creditors. This is a process, and we are committed to seeing it through.” —Susanne Retka Schill

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INDUSTRYNEWS

Ethanol News Briefs

Poet to power Chancellor plant with wood waste

continued from page 30

Panda Ethanol cancels Nebraska project In a quarterly report filed with the U.S. Securities and Exchange Commission in November, Panda Ethanol Inc. said it has canceled its plan to develop an ethanol facility in Lincoln, Neb. Its decision was based on current market conditions. Its facility in Hereford, Texas, wasn’t affected by the decision because it is fully financed and in the late stage of construction, the report said. The company will continue to manage its proposed projects in Yuma, Colo.; Haskell, Kan.; and elsewhere, but will limit development activities and costs until the ethanol markets improve and/or the Hereford facility begins to cover the company’s working capital needs.

Monsanto joins climate exchange Monsanto Co. joined the Chicago Climate Exchange in December. The company will reduce its direct carbon emissions by 6 percent by 2010 or buy carbon offsets as part of its agreement with the exchange. Monsanto will also work with agricultural organizations to promote no-till farming continued on page 34

Poet Biorefining-Chancellor, an ethanol production facility in Chancellor, S.D., is currently expanding its capacity from 50 MMgy to 100 MMgy. As part of the expansion, the company is installing a solid waste fuel boiler that will burn wood chips to produce enough steam for up to 60 percent of the expanded plant’s power needs. “The boiler will allow us to double our production capacity without increasing our natural gas usage,” said General Manager Rick Serie. Sioux Falls, S.D.-based Mueller Pallets LLC will supply the 150 to 350 tons of wood chips that are estimated to be needed every day. The company currently serves customers within a 350-mile radius by providing pallets, custom crates and pallet services, such as stocking supply, remanufacturing and recycling. It also provides recycled wood products for livestock bedding, landscape mulch and wood chip fuel. “Our services relieve city landfills, tree services and construction companies from the waste wood problem,” said John Kirchner, sales and marketing director for Mueller Pallets. “Our process converts a former liability into an energy asset at less than a quarter of the cost of natural gas per [British thermal unit].” Mueller Pallets can produce 18 to 20 tons of processed wood per hour. It will be responsible for collecting the wood waste and transporting the processed wood to the Poet facility. Kirchner said his company would deliver between seven

PHOTO: POET LLC

BIObytes

The solid waste fuel boiler at Poet BiorefineryChancellor will look similar to this one, which was constructed by Factory Sales & Engineering Inc.

and 13 semi-loads of wood chips per day, five days per week. Processing and transportation of the wood chips make up a majority of their cost, he added. The wood chips will be stored in two bins that can each hold a seven-day supply. A reclaiming system will pull them out of the silo and into the boiler, according to Serie. The boiler is being constructed by Covington, La.-based Factory Sales & Engineering Inc. It will be 20 feet wide, 70 feet tall and 15 feet deep. At press time, Poet said it had finished pouring the concrete for the solid waste fuel boiler. The expansion is expected to be complete in the third quarter of 2008. —Jessica Ebert

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ETHANOL PRODUCER MAGAZINE JANUARY 2008

INDUSTRYNEWS

K-State: Too soon to tell about E. coli, DDGs More research is needed before reaching any conclusions about the impact of distillers dried grains (DDGs) on E. coli O157 in cattle, according to researchers at Kansas State University. Research by T.G. Nagaraja, a professor of microbiology, and Jim Drouillard, professor of animal science, found that feeding beef cattle a diet that included 25 percent DDGs increased the prevalence of the pathogenic strain of E. coli in the animals’ manure. The announcement caused a storm of publicity over the increased use of DDGs produced by the growing ethanol industry. However, Nagaraja said it was too soon to rush to conclusions about the food safety implications of DDGs. “We’ll need to look at the entire body of evidence before we can make any recommendations,” Drouillard said, noting that many other universities are working on similar studies. The KSU researchers said there is no evidence to suggest that the growth in the use of DDGs has anything to do with a recent uptick in the number of meat product recalls related to E. coli O157. “It is

important for people to know that not all cattle have E. coli O157,” Nagaraja said. “In fact, usually a relatively small percentage of cattle carry detectable levels of this organism in their manure.” Drouillard said it is also important that people know that DDGs don’t carry E. coli. The KSU results contrasted similar studies at the University of Nebraska, which found that DDGs had no impact on cattle shedding E. coli in manure. Terry Klopfenstein, a Nebraska professor of ruminant nutrition, said this wasn’t surprising because many studies of the effect of livestock diet on E. coli O157 have produced inconsistent results. “It is kind of the nature of research with E. coli O157,” he said. “It’s just inconsistent. That isn’t a criticism of the Kansas State work. It’s just that I think within their research and within ours, there is a lack of consistency.” Klopfenstein said studies have shown that barley and steamed grain flakes also increase E. coli shedding in cattle, and he doesn’t understand why. His study of DDGs provided variable results. “At the 20 [percent] and 30 percent levels of feeding,

which would have been similar to [the KSU studies,] we actually saw a reduction in shedding of E. coli,” Klopfenstein said. “When we went to higher levels, it picked up again. That’s part of the inconsistency in our work. At some levels, it made it better, and at other levels, it didn’t. So it’s hard to evaluate that.” Work is being conducted at the two universities and elsewhere to develop a vaccine for cattle against E. coli O157. If successful, it would help livestock producers manage the pathogen and make the U.S. beef supply safer. Nagaraja said the vaccine work at KSU has produced some encouraging results. “One of the things that has been consistent between Kansas State and our work is that the vaccine has been helpful,” Klopfenstein said. “It would be very helpful if we could get those on the market. We’re more interested in doing things that are good interventions than we are trying to figure out the difference of different feeds.” —Jerry W. Kram

BIObytes Ethanol News Briefs continued from page 32

as a method for reducing carbon emissions. No-till farming sequesters carbon in the soil. Farmers can benefit financially by selling carbon offsets to other businesses through the climate exchange, according to Jerry Steiner, Monsanto’s executive vice president.

Abengoa Bioenergy defends itself in legal disputes Sedgwick County (Kansas) District Court is becoming familiar with Abengoa Bioenergy, defendant in two separate cases. Alison McKenney Brown, city attorney for Colwich, Kan., told EPM that local citizens and/or businesses are pursuing legal action against Abengoa to revoke the zoning permit that allows the company to expand its 20 MMgy ethanol plant in Colwich. Process technology provider ICM Inc. also has a pending lawsuit against Abengoa and the city of Colwich over a disputed access road that Abengoa claims is private, but ICM has used it for years to haul equipment in and out of its manufacturing headquarters. EP

INDUSTRYNEWS

Sweden marks ethanol milestones In October, the 1,000th E85 station opened in Sweden, and by the end of November, the number of registered ethanol cars was expected to surpass 80,000, according to Sweden-based environmental vehicle organization Gröna Bilister, the Swedish Association of Green Motorists. “The first 100 E85 stations took 10 years,” said Mattias Goldmann, editor and publisher of the organization’s quarterly newsletter Traffic and the Environment. “Now 100 stations take two months.” Goldmann said Sweden also set a new record for environmental cars, which are defined as very fuel efficient or capable of running on high blends of renewable fuel. In October, 6,047 environmental cars were registered, which represented 21 percent of all sales. “That is 121 percent more than in the month of October 2006,” Goldmann said, adding that through October, environmental cars represented 16.7 percent of total new car sales, compared with 12.7 percent in the same period of 2006. Ethanol-compatible cars have been the topselling environmental cars, according to Goldmann. Through October, the most common environmental car purchased in 2007 was the Saab 9-5 BioPower, which sold 7,680 cars. The Ford Focus Flexifuel was second with 6,232 cars sold. Third was the new model of Saab 9-3 BioPower, selling 5,044. The fourth most common was the

Volvo V50 Flexifuel at 3,903 cars sold. Rounding out the top five is the only nonethanol car on the list: the Toyota Aygo. The ethanolcompatible cars run on 75 percent ethanol in the winter and E85 the rest of the year, Goldmann Goldmann said. The popularity of ethanol cars is partly due to the wide availability of fuel. “By law, every major petrol station has to carry a renewable fuel,” Goldmann told EPM. “They were given liberty to choose whatever fuel they want to, but it’s cheaper infrastructure to put in E85 rather than biogas.” He continued, “The market is growing very fast, but if you want to enter the market, you need to show a big reduction in carbon emissions. Most of American ethanol will not qualify—not only in Sweden, but the European Union will soon have minimum standards for ethanol that will demand a 40 percent decrease in carbon emissions compared to petrol. I challenge producers to produce a product that is energy and climate-change efficient. Otherwise, the EU market will be closed to them.” Seventy percent of ethanol used in Sweden comes from Brazilian sugarcane, and the rest is produced in Sweden from paper-mill waste. —Anduin Kirkbride McElroy

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INDUSTRYNEWS

Ethanol Solution: Just Add Water? Adding anhydrous ethanol to gasoline at 10 percent concentration has been the U.S. standard blend protocol for years, but a different perspective reveals phenomena with the power to reduce the intensity of production and make transporting ethanol easier and less costly. According to Frits Dautzenberg, founder of San Diego-based consulting company Serenix Corp., molecular chemistry defies the conventional wisdom of drying ethanol and blending it with gasoline in low percentages. “If you have a fuel-alcohol and gas mix, and it picks up water from the atmosphere, you get three phases—water, Source: Serenix Corp. gas and alcohol,” he said. “If the ethanol concentration is beyond 10 percent, then we asked ourselves, ‘Why not use gasoline to dry the water in the mix is taken up by the alcohol, the ethanol?’ The hydrous ethanol and gasoline and then water and gasoline are completely com- mix should not have been miscible, but it was fully miscible.” As a result, a ternary equilibrium patible.” Dautzenberg and Netherlands-based client diagram was formed. “We went to Shell in Process Design Center BV were investigating Holland with this information, and they said, new ways to dry ethanol and stumbled across ‘This cannot be true,’ but they investigated it furunexpected interactions among water, ethanol ther only to arrive at similar results,” and gasoline. “We knew of the problems in dry- Dautzenberg said. Following the nonlinear evaporative curve ing ethanol,” he said, referring to the capital- and energy-intense employment of molecular sieves for ethanol blends, which displays the worst in dehydration. “We tried to find another way, so property characteristics at 6 percent and

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

improves dramatically when percentages surpass 10 percent ethanol, water problems in ethanol-blended fuel are much the same. “Five or 6 percent ethanol is a very dangerous area,” Dautzenberg said. “Even if there is only a little water present, it will separate with the water on the bottom.” The simple solution: Add more azeotropic ethanol (96 percent alcohol, 4 percent water). “We could go up to 20 percent to 30 percent,” said Dautzenberg, adding that a U.S. EPA waiver is needed to do so. Eliminating ethanol drying could offer producers a 20-cent-pergallon production savings and drop investment costs. The reduction of energy consumption at the plant could also make U.S. ethanol production more sustainable—by up to 50 percent, Dautzenberg contends. While more studies are needed to look at pipelining 15 percent or more hydrous ethanol in gas through petroleum pipelines, Dautzenberg said the principles should hold steadfast. “If you premixed a certain higher percentage of hydrous alcohol and gas, the watergas-ethanol mix will remain homogeneous— and therefore no corrosion concerns,” he said. —Ron Kotrba

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Ethanol Plant Construction Diesel among culprits of rising construction costs f all the costs that impact construction in the ethanol industry, No. 2 diesel is one input that may be overshadowed by more well-known inputs like concrete and steel. Volatility in the petroleum market pushed No. 2 diesel up 19 percent from November to December 2007, according to the producer price index (PPI). The change is part of a much larger trend. From November 2006 to December 2007, No. 2 diesel prices rose 50 percent, and from December 2003 to December 2007, they rose 202 percent. The price of steel has also significantly increased. Gerdau Ameristeel, a U.S. steel manufacturer that produces more than 8.4 million tons of finished steel products in the eastern United States, raised their published price for many finished steel products by $25 per ton, or about 3 percent. The adjustment was brought on by more than the increased cost to process steel. With the declining value of the U.S. dollar abroad, imported steel is becoming more expensive for American contractors. Rather than sell their products for less than competitors, steel producers are incentivized to raise prices to keep them in line with foreign producers. In addition to the rising costs of construction inputs, labor for heavy construction—including the ethanol industry—has continued to increase. Figures released by the Bureau of Labor and Statistics in the December 2007 Monthly Labor Review show that construction employment is projected to rise by 780,000 jobs, or 1 percent per year, between now and 2016. These jobs will outpace all other sectors by 5 percent to 6 percent per year. Moving forward, the slowdown in plant construction will probably continue into late 2008. With the passage of the Energy Independence and Security Act of 2007, some project managers are speculating that plant construction will pick up going into 2009, or possibly sooner. This is good news for entrepreneurs looking at the industry as an investment. However, the Bureau of Labor and Statistics numbers show that the industry will have to write these projections into their proposals. With the PPI outrunning the consumer price index (CPI) by twice as much, that’s no minor feat. Developers that didn’t expect the PPI’s divergence with the consumer price index are seeing their projects cancelled, delayed or redesigned.

In light of these changes in the current market, Pacific Ethanol Imperial LLC suspended its planned construction project after initial dirt work had begun. The company intends to begin the project at an undisclosed time in the future. On a positive note, Arkalon Energy LLC began production in December. The 110 MMgy plant in Liberal, Kan., is the first of two ethanol plants being built by Conestoga Energy Partners to come on line. Glacial Lakes Energy LLC also completed its 50 MMgy expansion in Watertown, S.D. Other sites reported no significant delays other than mild weatherrelated problems. At press time in December, it is likely that many construction schedules were impacted by the holiday season instead of delays in labor or equipment. Moving into 2008, many projects reported that productivity remains high, despite some of the aforementioned concerns. —Craig A. Johnson

EPM will remove seemingly inactive projects from this list if: 1. Our good faith attempts to contact project representatives go unanswered for three straight months. 2. Through exhaustive means, we are unable to verify the continued advancement of a project. 3. The Renewable Fuels Association, as well as project representatives, are notified and given a reasonable amount of time to verify the project’s current status. To provide updates to this list, contact Craig A. Johnson at (701) 7468385 or cjohnson@bbibiofuels.com.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Construction Represents 4.65 Billion Gallons Annually

Aberdeen Energy LLC Location Design/builder Process technology Capacity Feedstock Synopsis of progress N/A

Mina, South Dakota Fagen Inc. ICM Inc. 100 MMgy corn

The Andersons Marathon Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A November 2006 2008

Location Design/builder Process technology Capacity Feedstock

Greenville, Ohio ICM Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

The Andersons Inc. The Andersons Inc. undeclared September 2006 first quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

Project Complete

Absolute Energy LLC Location Design/builder Process technology Capacity Feedstock Synopsis of progress N/A

St. Ansgar, Iowa Fagen Inc. ICM Inc. 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

RPMG CHS Inc. N/A July 2006 February 2008

Arkalon Energy LLC

Location Design/builder Process technology Capacity Feedstock

Liberal, Kansas ICM Inc. ICM Inc. 110 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex Conestoga Energy Partners

undeclared August 2006 December 2007

Synopsis of progress Corn grinding began in late December. Congratulations Arkalon Energy LLC!

Biofuel Energy Corp.

Altra Coshocton Ethanol LLC Location General contractor Process technology Capacity Feedstock Synopsis of progress N/A

Coshocton, Ohio The Industrial Co. Delta-T Corp. 60 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Start-up date

undeclared undeclared undeclared July 2006 2008

Location General contractor Process technology Capacity Feedstock

Fairmont, Minnesota The Industrial Co.

Delta-T Corp. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Cargill Inc. Cargill Inc. N/A September 2006 first quarter 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Cargill Inc. Cargill Inc. N/A May 2006 first quarter 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared September 2007 October 2008

Synopsis of progress N/A

Biofuel Energy Corp.

Altra Indiana LLC Location General contractor Process technology Capacity Feedstock Synopsis of progress N/A

Cloverdale, Indiana F.A. Wilhelm Construction Vogelbusch 88 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared October 2006 April 2008

Location General contractor Process technology Capacity Feedstock

Wood River, Nebraska The Industrial Co. Delta-T Corp. 110 MMgy corn

Synopsis of progress N/A

Altra Nebraska LLC Location General contractor Process technology Capacity Feedstock

Carleton, Nebraska undeclared undeclared 113 MMgy corn

Bridgeport Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress Tanks are being erected.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

undeclared undeclared undeclared undeclared spring 2008

Location Design/builder Process technology Capacity Feedstock

Bridgeport, Nebraska ICM Inc. ICM Inc. 50 MMgy corn

Synopsis of progress All tanks are complete, and fermenters and boilers are placed. Work on the fire loop, the perimeter of hydrants necessary in case of an emergency, is complete.

Calgren Renewable Fuels LLC Location General contractor Process technology Capacity Feedstock

Pixley, California Lurgi Inc. Lurgi Inc. 52 MMgy corn

Center Ethanol Co. LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Calgren Renewable Fuels

J.D. Heiskell & Co. N/A March 2007 February 2008

Synopsis of progress At press time, hydro-testing was set to begin in January. Piping and electrical work is underway.

Location General contractor Process technology Capacity Feedstock

Union City, Indiana Fagen Inc. ICM Inc. 100 MMgy corn

Ethanol marketer Carbon dioxide marketer Broke ground Target start-up date

Center Oil Co. undeclared undeclared October 2006 January 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Cargill Inc. Cargill Inc. N/A May 2006 2008

T.E. Ibberson/McCarthy Industrial Distillers grains marketer

Delta-T Corp. 50 MMgy corn

Synopsis of progress N/A

Cardinal Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Sauget, Illinois

Central Illinois Energy Co-op Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex CHS Inc. N/A February 2007 summer 2008

Synopsis of progress Structural steel is being erected in the process building and energy center. Construction continues on the rail spur.

Location General contractor Process technology Capacity Feedstock

Canton, Illinois Lurgi Inc. Lurgi Inc. 37 MMgy corn

Synopsis of progress According to the Oil Price and Information Service, this company has filed for bankruptcy. Central Illinois Energy representatives were unavailable to comment at press time.

Cascade Grain Products LLC Location General contractor Process technology Capacity Feedstock

Clatskanie, Oregon JH Kelly Ethanol Delta-T Corp. 108 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Eco-Energy Land O’Lakes undeclared June 2006 March 2008

PHOTO: CASCADE GRAIN PRODUCTS LLC

Synopsis of progress Track for the rail spur is being laid. Piping and electrical work are underway, and tanks are being set.

Castle Rock Renewable Fuels LLC Location Design/builder Process technology Capacity Feedstock

Necedah, Wisconsin Fagen Inc. ICM Inc. 50 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex CHS Inc. undeclared September 2006 2008

Synopsis of progress N/A

Cascade Grain Products LLC

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Cilion Ethanol LLC Location General contractor Process technology Capacity Feedstock

Keyes, California Harris Construction Praj Industries 55 MMgy corn

Greater Ohio Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A July 2006 second quarter 2008

Synopsis of progress The company was expecting the delivery of distillation columns at the end of December.

Location General contractor Process technology Capacity Feedstock

Courtland, Wisconsin Agra Industries Delta-T Corp. 50 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A October 2006 2008

Location General contractor Process technology Capacity Feedstock

Johnstown, Ontario SNC Lavalin ICM Inc. 200 MMly (53 MMgy) corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Commercial Alcohols Commercial Alcohols

undeclared October 2006 fourth quarter 2008

Synopsis of progress Structural steel erection and mechanical installations continue. Work also continues on the field-erected tanks, process building and energy center.

First United Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Camilla, Georgia Fagen Inc. ICM Inc. 100 MMgy corn

Plant Expansion

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Eco-Energy First United Ethanol undeclared January 2007 summer 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

undeclared undeclared N/A September 2005 2008

GreenField Ethanol

Synopsis of progress N/A

Expansion Complete

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress N/A

Didion Ethanol LLC Location General contractor Process technology Capacity Feedstock

Lima, Ohio Alberici Constructors Inc. Benchmark Products Inc. 54 MMgy corn

Location Design/builder Process technology Capacity Feedstock

Heartland Grain Fuels LP Aberdeen, South Dakota ICM Inc. ICM Inc. from 8 MMgy to 48 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Target completion date

Aventine Renewable Energy

Dakotaland Feeds N/A September 2006 January 2008

Synopsis of progress Overall construction is more than 95 percent complete. Hydro-testing is underway. Some electrical work remains, but all piping is complete. The distillers grains and load-out areas are 80 percent complete, and the rail loop is 60 percent complete.

Glacial Lakes Energy LLC

Holt County Ethanol LLC

Watertown, South Dakota Ethanol marketer

Aventine Renewable Energy

ICM Inc. ICM Inc.

Glacial Lakes Energy N/A December 2006 November 2007

Distillers grains marketer Carbon dioxide marketer from 50 MMgy to 100 MMgy Start date corn Target completion date

Synopsis of progress Three days after expanded production began in late November, the plant was producing at full capacity. Congratulations Glacial Lakes Energy LLC!

Location General contractor Process technology Capacity Feedstock Synopsis of progress N/A

O'Neill, Nebraska Adams Construction Vogelbusch 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target completion date

undeclared undeclared N/A July 2007 late 2008

Indiana Bio-Energy LLC Location Design/builder Process technology Capacity Feedstock

Bluffton, Indiana Fagen Inc. ICM Inc. 101 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Aventine Renewable Energy

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products

CHS Inc. N/A November 2006 June 2008

Synopsis of progress N/A

Lyons, Kansas ICM Inc. ICM Inc. 55 MMgy corn/milo

PHOTO: KANSAS ETHANOL LLC

Kansas Ethanol LLC Location Design/builder Process technology Capacity Feedstock

undeclared N/A January 2007 April 2008

Synopsis of progress Mechanically, the plant is 80 percent complete. The energy center is nearly finished, and the administration building was slated to be complete by the end of January.

Kansas Ethanol LLC

Levelland/Hockley County Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Levelland, Texas ICM Inc. ICM Inc. 40 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Lansing Trade Group Lansing Trade Group

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex CHS Inc. N/A September 2006 March 2008

Chaparral Energy Inc.

January 2007 February 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

Hennepin, Illinois Fagen Inc. ICM Inc. 100 MMgy corn

PHOTO: MARQUIS ENERGY LLC

Marquis Energy LLC

Synopsis of progress Work on the roadways and administration building is complete. The rail spur is nearly complete.

Marquis Energy LLC

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Marysville Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Marysville, Michigan Fagen Inc. ICM Inc. 50 MMgy corn

Northeast Biofuels LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A August 2006 early 2008

Location General contractor Process technology Capacity Feedstock

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

Noble Americas Corp. Perdue Farms BOC Gases July 2006 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

U.S. Ethanol LLC Lansing Trade Group undeclared November 2006 fourth quarter 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

RPMG CHS Inc. N/A October 2006 March 2008

Northwest Renewable LLC

Atkinson, Nebraska Delta-T Corp. Delta-T Corp. 44 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Location General contractor Process technology Capacity Feedstock

Eco-Energy Frahm and Deitloff N/A June 2006 first quarter 2008

Longview, Washington Makad Construction Corp. Lurgi Inc. 55 MMgy corn

Synopsis of progress Foundation work continues, despite rain delays.

Synopsis of progress N/A

Otter Tail Ag Enterprises LLC

Nesika Energy LLC Scandia, Kansas

Ethanol marketer

Free Country Design & Construction Distillers grains marketer

ICM Inc. 10 MMgy corn

Carbon dioxide marketer Broke ground Target start-up date

Location General contractor Process technology Capacity Feedstock

Poet Ethanol Products Nesika Energy LLC N/A December 2006 February 2008

Fergus Falls, Minnesota Harris Mechanical Delta-T Corp. 57.5 MMgy corn

Synopsis of progress N/A

Synopsis of progress Final piping is underway.

Pacific Ethanol Magic Valley LLC

Nexsun Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress N/A

NEDAK Ethanol LLC

Location General contractor Process technology Capacity Feedstock

Volney, New York Lurgi Inc. Lurgi Inc. 100 MMgy corn

Ulysses, Kansas ICM Inc. ICM Inc. 40 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared August 2007 2008

Location General contractor Process technology Capacity Feedstock

Burley, Idaho Parsons RCI Inc. Delta-T Corp. 50 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Kinergy Marketing Pacific Ag Products LLC

undeclared February 2007 second quarter 2008

Synopsis of progress N/A

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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Patriot Renewable Fuels LLC Location Design/builder Process technology Capacity Feedstock

Annawan, Illinois Fagen Inc. ICM Inc. 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex undeclared undeclared February 2007 spring 2008

PHOTO: PATRIOT RENEWABLE FUELS LLC

Synopsis of progress Construction of the eight-mile rail loop is complete. Tank farm and electrical work continues.

Patriot Renewable Fuels LLC

Platinum Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Stockton, California Parsons RCI Inc. Delta-T Corp. 50 MMgy corn

Kinergy Marketing Pacific Ag Products LLC

undeclared April 2007 third quarter 2008

Plant Expansion

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Aventine Renewable Energy

Panda Ethanol undeclared August 2006 first quarter 2008

Synopsis of progress Hydro-testing is underway. Field instruments and devices are being installed, and the interiors of control lab, utility area and administration building are nearly complete. Initial grain deliveries have been slated for January.

Location Design/builder Process technology Capacity Feedstock

Alexandria, Indiana Poet Design & Construction Poet Design & Construction 65 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products

Poet Nutrition N/A February 2007 second quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

Panda Hereford Ethanol LP Hereford, Texas Lurgi Inc. Lurgi Inc. 115 MMgy corn

Provista UBE Ingredients N/A November 2006 August 2008

Poet Biorefining-Alexandria Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress Steel erection continues on bins and tanks.

Location General contractor Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress Most of the structural steel is erected. A majority of parts and equipment are on-site.

Pacific Ethanol Stockton LLC Location General contractor Process technology Capacity Feedstock

Arthur, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Poet Biorefining-Chancellor

Location Design/builder Process technology Capacity Feedstock

Chancellor, South Dakota Poet Design & Construction Poet Design & Construction from 50 MMgy to 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Target completion date

Poet Ethanol Products

Poet Nutrition N/A October 2006 second quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Poet Biorefining-Marion Location Design/builder Process technology Capacity Feedstock

Marion, Ohio Poet Design & Construction Poet Design & Construction 65 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products Poet Nutrition N/A May 2007 December 2008

PHOTO: PLATNUM ETHANOL LLC

Synopsis of progress Construction continues. No further information was available at press time.

Poet Biorefining-North Manchester Location Design/builder Process technology Capacity Feedstock

North Manchester, Indiana Poet Design & Construction Poet Design & Construction 65 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products Poet Nutrition N/A third quarter 2007 first quarter 2009

Synopsis of progress Construction continues. No further information was available at press time.

Platnum Ethanol LLC Poet Biorefining-Fostoria Location Design/builder Process technology Capacity Feedstock

Fostoria, Ohio Poet Design & Construction Poet Design & Construction 65 MMgy corn

Renova Energy of Idaho LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products Poet Nutrition N/A August 2007 fourth quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

Leipsic, Ohio Poet Design & Construction Poet Design & Construction 60 MMgy corn

Plant Expansion

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Heyburn, Idaho Dilling Corp. Katzen International 20 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Renova Energy Renova Energy Renova Energy February 2007 first quarter 2008

Synopsis of progress Construction halted in mid-December but was expected to resume after Jan.1. No further information was available at press time.

Poet Biorefining-Leipsic Location Design/builder Process technology Capacity Feedstock

Location General contractor Process technology Capacity Feedstock

Poet Ethanol Products Poet Nutrition N/A December 2006 first quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Location Design/builder Process technology Capacity Feedstock

Siouxland Energy & Livestock Co-op Sioux Center, Iowa ICM Inc. ICM Inc. from 25 MMgy to 55 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Target completion date

C&N Ethanol Marketing Farmers Co-op Society

N/A October 2006 2008

Synopsis of progress N/A

Southwest Iowa Renewable Energy LLC Location Design/builder Process technology Capacity Feedstock

Council Bluffs, Iowa ICM Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Tharaldson Ethanol LLC Lansing Ethanol Group

Bunge undeclared November 2006 August 2008

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A June 2007 December 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Provista UBE Ingredients N/A November 2006 second quarter 2008

Synopsis of progress N/A

Standard Ethanol Cambridge LLC Location General contractor Process technology Capacity Feedstock

Cambridge, Nebraska The Industrial Co. Delta-T Corp. 44 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

U.S. Bio Dyersville Noble Americas Corp.

The Scoular Co. N/A April 2006 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

Dyersville, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

Superior Ethanol LLC Location General contractor Process technology Capacity Feedstock

Superior, Iowa Agra Industries Delta-T Corp. 50 MMgy corn

U.S. Bio Hankinson Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

RPMG undeclared N/A July 2006 March 2008

Synopsis of progress Start-up was moved from January to March because of delays with the plantâ&#x20AC;&#x2122;s water treatment facility. Mechanically, the rest of the plant is complete, including the extensive rail loop designed to meet new requirements from the railroad industry.

Location Design/builder Process technology Capacity Feedstock

Synopsis of progress N/A

Belle Plaine, Saskatchewan Ethanol marketer EllisDon/VCM Contractors & Engineers Distillers grains marketer Delta-T Corp. Carbon dioxide marketer 150 MMly (40 MMgy) Broke ground wheat Target start-up date

Hankinson, North Dakota Fagen Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Provista UBE Ingredients N/A August 2006 second quarter 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

Terra Grain Fuels Inc. Location General contractor Process technology Capacity Feedstock

Casselton, North Dakota Wanzek/Valley Engineering Vogelbusch 100 MMgy corn

U.S. Bio Janesville undeclared undeclared undeclared September 2006 2008

Location Design/builder Process technology Capacity Feedstock

Janesville, Minnesota Fagen Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Provista UBE Ingredients N/A January 2007 third quarter 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

U.S. Bio Marion Location Design/builder Process technology Capacity Feedstock

Marion, South Dakota Fagen Inc. ICM Inc. 110 MMgy corn

Verenium Biofuels Louisiana Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Archer Daniels Midland Archer Daniels Midland

N/A October 2006 January 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

Location General contractor Process technology Capacity Feedstock

Bloomingburg, Ohio Fagen Inc. ICM Inc. 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground sugarcane bagasse/energy cane Target start-up date

White Energy Hereford LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Cargill Inc. Cargill Inc. N/A November 2006 February 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

Location Design/builder Process technology Capacity Feedstock

Hartley, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Hereford, Texas Fagen Inc. ICM Inc. 100 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex Quality Distillers Grain N/A July 2006 fourth quarter 2007

Synopsis of progress N/A

White Energy Plainview LLC

VeraSun Hartley LLC Location Design/builder Process technology Capacity Feedstock

undeclared N/A N/A February 2007 first quarter 2008

Synopsis of progress Overall construction is more than 50 percent complete. The plant is due to be mechanically complete by the end of the first quarter of 2008.

VeraSun Bloomingburg LLC Location Design/builder Process technology Capacity Feedstock

Jennings, Louisiana Cajun Constructors Inc. Verenium Biofuels 1.4 MMgy

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

VeraSun Energy VeraSun Energy N/A November 2006 first quarter 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

Location Design/builder Process technology Capacity Feedstock

Plainview, Texas Fagen Inc. ICM Inc. 100 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex The Scoular Co. undeclared October 2006 first quarter 2008

Synopsis of progress N/A

VeraSun Welcome LLC Location Design/builder Process technology Capacity Feedstock

Welcome, Minnesota Fagen Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

VeraSun Energy VeraSun Energy N/A November 2006 first quarter 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

:OU R P L A N T 52

Making Due with Waste Brew In 1996, Merrick Co. built an ethanol production facility colocated with the Coors Brewery in Golden, Colo., in an effort to recover a viable resource and recycle beverage waste. Now, at 3 MMgy, the plant continues to hold firm its unique competitive advantage within a highly volatile ethanol market.

rewing operations have been around for a long time. In fact, the oldest proven records of brewing are about 6,000 years old, dating back to the Sumerians who discovered the fermentation process. While the beer-making process isn’t novel in itself, Aurora, Colo.based Merrick Co. has experienced success by capitalizing on the process’ waste streams and creating value-added coproducts such as ethanol. For 12 years, MMI-Etoh Inc., a wholly owned subsidiary of Merrick, has thrived in the volatile ethanol industry by converting brewery residuals such as aged discards, off-spec beer, packaging losses and yeast concentrate into ethanol obtained from Coors Brewing Co.’s brewery in Golden, Colo. The engineering and construction firm initially built the ethanol facility at a capacity of 1.5 MMgy in 1996, but Merrick doubled the production capacity to 3 MMgy in 2005. The addition of the ethanol facility adjacent to the brewery has proven to be a unique, viable and sustainable operation that has also been profitable and mutually beneficial for Merrick and Coors, according to Steve

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

LOCATION GENERAL CONTRACTOR PROCESS TECHNOLOGY CAPACITY FEEDSTOCK ETHANOL MARKETER COPRODUCT MARKETER CARBON DIOXIDE MARKETER BROKE GROUND START-UP DATE

Wagner, Merrick vice president of energy process systems. “[Coors] brews most of its beer here in one location, producing approximately 20 million barrels per year,” Wagner says. “There is a viable market for ethanol as fuel, and it reduces the disposal cost, so it’s a resource recovery and waste recycling benefit.” The Merrick/Coors partnership began when Total Petroleum Inc. asked Merrick to construct an ethanol plant at Total Petroleum’s refinery in Denver in 1995. According to Wagner, the cost of transporting the waste to the site made it unfeasible. Instead, Merrick leased land from Coors and built the continuous production process plant at the Golden brewery. “The idea is to minimize the discharge from the brewery from those operations, and that’s what the ethanol processing plant does,” Wagner says. Merrick assumed the project development role, secured the financing, provided engineering and design services, procured new equipment and materials,

Golden, Colo. Merrick & Co. Merrick & Co. 3 MMgy beverage waste Valero Energy Corp. Coors Brewing Co. N/A February 1995 October 1996

and constructed the facility. Merrick owns and maintains the ethanol recovery operation, while Coors is under contract to operate the facility, and supply the feed stream and utilities for the ethanol plant. Valero Energy Corp., another member of the project team, is responsible for transporting the ethanol and providing longterm purchase agreements, shipping approximately 168 truckloads of ethanol annually. Merrick’s ethanol-making process starts when the plant receives brewing residuals such as spilled or off-spec beer, which is about 6 percent alcohol. Residuals are heated and distilled in a stripper to increase the ethanol content. After the ethanol is further concentrated through a second step of distillation in the rectifier, the remaining water is extracted in a molecular sieve, and wastewater is sent to a treatment plant concurrently throughout the process. Merrick’s ethanol facility helps the brewery to eliminate approximately 70 tons of volatile organic compounds from its emissions annually. In addition, Coors

and Merrick have been able to return nearly 20 million gallons of water to Clear Creek in the Front Range region of Colorado during each year of operation, according to Wagner. “[Water management] is something you’ve got to do no matter what in brewing operations,” Wagner says. “We just reduce the cost of doing it by stripping off the ethanol. It significantly reduces the wastewater treating costs.” Merrick’s ethanol facility is similar to conventional corn-based ethanol plants with the exception of three major differences: free feedstock supply, carbon dioxide sequestration for brewery use and water discharge quality. Much of the company’s success is attributed to taking advantage of Coors’ existing transportation infrastructure and the plant’s negative feedstock cost, according to Wagner. “The corn costs for fuel ethanol are the single-largest cost associated with the production of ethanol,” Wagner says. “The corn cost for a gallon of ethanol today is somewhere around $1.20 per gallon. If you take that corn cost away from your operating expenses, you’ll significantly make more money by converting a waste stream instead of corn into ethanol." Merrick began its ethanol recovery project when the industry was fledgling. Wagner asserts that if current volatile market conditions persist, attaching a waste recovery facility to a brewery could lure more companies to undertake such a venture, depending on how a particular brewery disposes of its waste. “It’s just been in the past two or three years that we’ve seen $70, $80, $90, $100 crude oil and $3 per gallon gasoline prices,” Wagner says. “As people look at $3 per gallon gasoline, they begin to think it’s going to be here for a while, so these kinds of operations look very attractive in the long term.” —Bryan Sims

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

:OU R P L A N T

MERRICK/COORS ETHANOL RECOVERY PLANT

:INTHEFIELD

Triticale Provides Biomass, Cover

riticale, a cross between rye and durum wheat, may join corn and soybeans in the Corn Belt crop rotations of the future. Iowa State University researchers are experimenting with triticale (pronounced tri-te-CAY-ley) and other crops to increase the total amount of biomass harvested in a year while addressing environmental concerns such as nitrates leaching into watersheds from heavily fertilized corn crops. ISU agronomist Matthew Liebman is testing a system in which winter triticale is planted in the fall into soybean stubble. The triticale is cut for biomass when it is still green in early June, followed by a summer crop—either a short-season corn variety or a sorghumSudan grass hybrid—seeded directly into the triticale stubble. The triticale acts as a cover crop to prevent winter soil erosion and as a sponge to soak up nitrates. Triticale promises to be a lowinput crop that requires little or no additional fertilizer and, because it grows so vigorously in the spring, little or no herbicides. As a biomass crop, triticale has reached its maximum vegetative growth by early June and can be harvested before it sets kernels, Liebman explains.

Trial plots throughout Iowa indicate the biomass yield for triticale should be between three and four tons of dry material per acre, Liebman says. With the triticale using the leachable nitrogen in the soil, a following corn crop will require more fertilizer than is usually applied following a soybean crop, he adds. Late-planted corn crops in the research trials produced grain yields between 125 and 175 bushels per acre, which is less than corn planted in April. The other summer crop option, sorghum-Sudan grass, is quite competitive with corn in the amount of biomass that is harvestable per acre, he says. Using the U.S. DOE’s estimated yields of 120 gallons of ethanol per dry ton of corn and 79 gallons of ethanol per dry ton of biomass, Liebman calculates that corn yields 500 to 600 gallons of ethanol per acre. Adding the ethanol yield from corn stover would increase that to 600 to 800 gallons per acre. The additional biomass from a winter triticale crop would boost the ethanol yield per acre between 725 and 900 gallons. The calculated ethanol yields give an idea of the system’s potential, although there are many issues to be worked out. Most cellulosic ethanol sce-

narios now being considered are based on dry feedstocks harvested after a killing frost and not a green, wet feedstock such as chopped triticale. Ensiling a green-chopped biomass crop may act as a preprocessing step for an enzymatic fermentation ethanol process. “We’re waiting for similar advances on the engineering side to complement the advances in agronomy,” Liebman says. Along with the triticale trials, Liebman and his colleagues are evaluating a tropical legume as a potential nitrogen-fixing biomass crop. “In warmer regions of the United States, crotalaria can fix 150 to 200 pounds of nitrogen,” he says. He’s currently conducting studies to quantify the nitrogenfixing performance in Iowa’s growing conditions. While crotalaria doesn’t produce as much dry matter per acre as corn stover or sorghum-Sudan grass, the ability to fix its own nitrogen may make it an attractive crop when compared with corn and its high-fertilizer requirements. “We haven’t tested the system yet, but it’s intriguing,” Liebman says. —Susanne Retka Schill

Fall-planted triticale is harvested and chopped as a biomass crop in Iowa in June, followed by late-planted corn. The corn in the foreground was planted in April. PHOTO: ANDREW H. HEGGENSTALLER, IOWA STATE UNIVERSITY

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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:UP FRONT

No. 1 Promoter

an Schwartzkopf first got involved in ethanol in 1993 when he helped to start operations at Wyoming Ethanol LLC in his hometown of Torrington, Wyo. After just six months, he was promoted to general manager, where he stayed until 2007. Last fall, he left the ethanol plant owned by Londonbased Renova Energy PLC to work as a field representative for ICM Inc. Over the past 15 years, Schwartzkopf has been an inexhaustible promoter of ethanol. He is probably best known for his work in introducing ethanol to the world of auto racing. Schwartzkopf has won numerous awards in recognition of his work from groups and individuals such as Clean Cities; the American Coalition for Ethanol; and U.S. Sen. Mike Enzi, RWyo. Schwartzkopf tells EPM that his most recent award was the most meaningful: Bandimere Speedway in Morrison, Colo., presented him with the Superman of the Year award, which is in memory of a fellow racer who died in an accident. Q: Tell us about your involvement with the National Hot Rod Association. A: My son Jamie and I are the entrepreneurs of ethanol in the drag racing field for the NHRA. We’ve been doing that for 15 years. We’ve grown our drag team into a six-car team, and we race national, divi-

sional, track and special events. In working with our race program, we were able to develop intricate pieces of parts that work quite well with ethanol. Within the past year, my son and my teammate Dave Slatten developed an E85 carburetor. We use these cars not only to race with, but we also use them as educational tools. We’ve taught people to use the fuel; we’ve had Ethanol 101 workshops. We’ve displayed a number of performance-type vehicles. If you can get a performance vehicle to run on ethanol or E85, you make a huge statement. I race in front of a crowd of 50,000 people, and we have open pits. If they see ethanol in our car, they aren’t afraid to put it in theirs. I was recognized by the NHRA for making fuel available for the Sport Compact Racing Series. It was the fastest-growing series in the NHRA. Ethanol wasn’t a legal fuel, and we changed that. Q: What other racing programs are you working with? A: Because of our strong involvement in making ethanol a performance fuel, my son and I were chosen to work with the IndyCar Series. While I was at Renova, the facility was chosen as the fuel provider. We not only designed the fuel specification for the Indy fuel, but we also produced and hand-blended every gallon of it. Because the fuel has to be denatured, we also chose denaturants. I also worked with the American Power Boat Association and the American Le Mans Series. In regard to people going out and promoting ethanol

as a performance fuel, not too many people have grabbed the groups that I have. We have been promoters beyond anyone else in the industry. Q: What are some other programs/activities you’ve done to promote ethanol? A: At Renova, we worked with junior colleges in Wyoming to develop a math curriculum that was used in the Cheyenne School District and the college in grades 10 through 14. They used 12 businesses; drag racing was one of them, and the ethanol plant was another. They were showing how math was applicable in everyday lives, and even in what you use in motor sports. We use math like you wouldn’t believe, so it was a natural fit. I’ve also sat on the energy panel [of former U.S. Sen. Craig Thomas, RWyo.], and I worked extensively with Wyoming Gov. Dave Freudenthal. I sat on a number of boards, including the Renewable Fuels Association, Renewable Fuels Foundation, Ethanol Producers and Consumers, and the Ethanol Promotion and Information Council. Q: What’s the greatest lesson you’ve learned in your career? A: You’re only as good as the people that are around you. It takes a lot of people to make this happen, to want to work with you, to share your thoughts and dreams, and show monetary support to help you to achieve what needs to be done. You’re only as good as what’s provided for you, and it’s how you apply what’s been made available. —Anduin Kirkbride McElroy

Name Dan Schwartzkopf Title Field Representative Company ICM Inc. Hometown Torrington, Wyo. 56

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

:FLEXFACTOR 58

Variable Compression Concepts

variable compression ratio (VCR) engine that can be produced commercially has been equated to the Holy Grail for automotive mechanical engineers. In 2000, Saab unveiled its variable compression engine, dubbed SVC (Saab Variable Compression), which at the time held great commercial promise, but the project has since been disbanded. However, all that went into the SVC wasn’t lost. Saab USA spokesman Jan-William Vester tells EPM the concept brought considerable interest, although he couldn’t say exactly why the concept never reached its commercial potential. Instead, he says it led to the development of components used in the Saab BioPower engine. “As concepts go, the SVC was a good starter,” Vester says. “Now, we’re the only ones combining turbo-charging and ethanol fuel.” Following in Saab’s footsteps, FEV Engine Technology Inc. unveiled at the 2007 Society of Automotive Engineers’ World Congress in April a developmental gasoline/E85 turbocharged direct-injection engine featuring VCR technology. The company says the engine avoids the “traditional drawbacks associated with the use of alternative fuels that typically have lower energy densities.” Offering the power of a V-8 from a V-6 engine, the design is expected to produce up to 25 percent better fuel economy. Robert Last, vice president of FEV, says coupling turbocharged direct injection with VCR will allow the customization of engine controls to adjust for ethanol concentration.

The fixed compression ratios of conventional engines are designed to compromise various operating conditions: stop-and-go city traffic, constant high speeds and low torque on the highway, and more. Conversely, the benefits of a variable compression engine would allow for the continual adjustment of the combustion chambers and therefore the compression ratio, optimizing combustion for efficiency, performance and emissions. Saab’s SVC was designed as a 1.6liter engine, offering fuel efficiency with the power of a 3-liter engine under necessary conditions. Eight years ago, General Motors was well-aware of the benefits that variable compression could offer in the combustion of ethanol. “Since the compression ratio can be varied and adjusted to suit the properties of the fuel, the engine will always run at the compression ratio that is best suited to the fuel being used,” GM said when it announced its SVC concept. Not only did the SVC concept possess variable compression, but the idea was to maximize its benefits by simultaneously supercharging the engine while downsizing its displacement. The SVC concept consists of the cylinder head with integrated cylinders, called the monohead, and the lower part of the engine—the block, crankshaft and pistons. According to GM, “The compression ratio is varied by adjusting the slope of the upper part of the engine in relation to the lower part. This alters the volume of the combustion chamber with the piston at top dead center (highest position of the piston in the cylinder), which also changes the compression ratio.”

Small engines are more efficient than large ones, but there is only so much load or performance to gain from a small engine. Supercharging, the forcing of more air into the engine than could otherwise be drawn, helps to provide big-engine performance with small-engine efficiency, and is an area in which Saab has 30 years of experience, Vester says. Supercharging allows the injection of more fuel with the appropriate amount of air for superior performance. In general, the higher the compression ratio, the better the energy resident in the fuel is utilized. However, if the compression ratio is too high, fuel will pre-ignite, cause knock and damage the engine. The SVC concept seems to overcome these issues, allowing the changing of ratios from 8:1 to 14:1, accomplished by a hydraulic actuator pivoting the monohead and adjusting the size of the combustion chamber. In other words, the bigger the chamber, the lower the compression. Unlike the SVC concept, which utilized a pivoting head, Nissan’s own VCR concept design called for a newly developed multi-link piston/ crank mechanism for the adjustment of compression ratio. In 2003, the Japanese original equipment manufacturer applied for a patent on its “Variable Compression Ratio PistonCrank System,” which, like the others, has yet to gain commercial status. —Ron Kotrba

Saab BioPower 100 Concept Car PHOTO: GENERAL MOTORS CORP.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

:BUSINESS 60

Time May Be Right for Refinancing, But Will Lenders Lend?

n mid-December, the Federal Reserve System’s Federal Open Market Committee voted to reduce the federal funds rate by a quarter of a percentage point to 4.25 percent. The action came in the face of slowing economic growth and increasingly strained financial markets. “Recent developments, including the deterioration in financial market conditions, have increased the uncertainty surrounding the outlook for economic growth and inflation,” the committee explained. “Today’s action, combined with the policy actions taken earlier, should help promote moderate growth over time.” So how does this affect the ethanol industry? More specifically, should an ethanol plant consider reorganizing its financing to take advantage of this lower rate? The simple answer to these questions is: It depends.

The new monetary policy doesn’t necessarily directly affect loan decisions. Rather, the decision affects an index called the prime rate, which is “the rate which banks charge their best or ‘prime’ customers,” explains Mark Baratta, vice president and manager of First National Bank of Omaha’s Renewable Fuels Group. However, the index is only one of several pricing tools that lenders use. Another is the London Interbank Offering Rate. “The LIBOR rate tends to be a little more real-time,” Baratta says. “It’s based on the supply and demand for money, and moves independent of the Federal Reserve.” Refinancing is a way for equity investors to take additional money out of a project, says Todd Alexander, a partner with law firm Chadbourne & Parke LLP. He gives the example of an initial $100 million project for which investors borrowed $50 million of debt. “Say they’ve repaid $25 million of that debt,” he explains. “Now they could take out a new loan for another $50 million, pay off the $25 million that’s still payable to the outstanding debt and then keep $25 million for themselves.”

This can be an attractive option for a plant that’s been in operation and has a proven track record, says Len Cisek, an associate vice president at Ocean Pacific Capital, a commercial lender based in Irvine, Calif. He explains that construction loans are generally for one to three years, after which time investors look to refinance to a permanent loan. “Right now, the prime [rate] is going down, so it’s a good time to refinance,” he says. However, Baratta advises that the interest rate is only one factor in a refinancing decision. “Interest rates enter into the conversation but generally not as the No. 1 topic,” he says. “A banker’s first question is going to be, ‘What are you going to use the money for?’ and in the end—through [the bank's] underwriting process—[the banker will] make some decision as to the repayment capacity of the borrower.” Ultimately, a lender’s decision to provide funds for refinancing may come down to its view of the industry as a whole. At this time, lenders seem reluctant to extend additional credit to the ethanol market. “We’ve been working to refinance existing facilities, but the debt market is very tight right now, so it’s difficult to obtain financing,” Alexander explains. —By Jessica Ebert

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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:FINANCE 62

Strategic Planning for Ethanol Plant Boards By Jesse McCurry Often leaders see this exercise as too soft or touchy-feely, and many have good reason. Busy leaders have experienced far too many poorlythanol plant board mem- organized and little-executed sessions bers face increasing complexity and that have proven fruitless. Fancy ideas thorny issues, from risk management stay on the shelf collecting dust while and human resources, to their own others continue to operate as before. time management and fiduciary That’s why there needs to be a strucresponsibilities. Far too often compa- tured process. Dr. Hubert Brown, mediation and nies are content to operate in an urgent setting where issues are faced planning consultant for Kennedy and only as they come up. As our industry Coe, works firsthand with plants and matures and margins tighten, boards sees value in addressing organizationneed more formal processes for long- al planning needs. “In today’s global economy, ethanol plants term planning and need a streamlined planning strategic thinking. process that enables them That’s where to face challenges, create a a good, facilitated vision for the future and think strategic-planning strategically,” he says. process comes in. The first step is com“A successful mitting to the process. strategic planning Getting started involves a process really has decision to plan and conto be done in a setvene key people who can ting away from the make the plan a reality. The buzz of a busy McCurry second step is designing the office, humming plant and distractions of e-mail, phone process so that it fits a company’s calls or drop-in visitors,” says Donna unique organizational culture to Funk, manager of the biofuels group ensure its particular needs are met. at Kennedy and Coe LLC. “Getting the Major corporations institutionalize this right people in a room for even a day strategic process, define their goals can bring a lot of ideas and open dis- and update the plan on a regular cussion to the forefront that are basis. For many board members, the absolutely essential in building and responsibility of serving on the board maintaining a strong, flourishing busi- of a $100 million operation with 40ness. It goes along with the saying ‘If plus employees is a first. However, the you always do what you’ve always rewards are great for personal leaderdone you only get what you already ship development, and expertise is available to help navigate the opportuhave.’” nities and pitfalls of organizational leadership.

“Strategic planning is invaluable,” says Mike Erhart, chief executive officer of Prairie Horizon Agri-Energy LLC, which operates a 40 MMgy plant in Phillipsburg, Kan. “To place a monetary value on the process limits the overall value it brings to a company. If you have a train and the engine on the front and the engine on the back are pulling two different directions, the train goes nowhere, but when everyone is pulling the same direction you have success no matter how steep the hill.” Experienced, neutral facilitators specializing in mediation, planning and executive coaching can bring fresh ideas to a project. Investing the time and spirited discussions necessary isn’t easy and takes proper planning, but the investment pays off. “The advice I would give other plants is those that don't will not be as efficient, productive and profitable as those that do,” Erhart says. “Great companies plan, and our intent is to be among the top 10 percent of the operating plants in the industry.” Jesse McCurry is a business development specialist at Kennedy and Coe LLC. Reach him at jmccurry @kcoe.com or (316) 691-3758.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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:LEGALPERSPECTIVES 64

Understanding Restrictions on Transfers of Membership Units By Shannon M. Bielski The securities laws restrictions espite disclosures that accompany the on transfers differ from the tax law issuance of most mem- restrictions in that they depend on bership units in limited how units were originally acquired. All liability companies, sales of securities must be registered many investors are unaware of the with the U.S. Securities and strict limitations placed on transfers of Exchange Commission or qualify for LLC units by tax and securities laws. an exemption from registration. In general, “restricted securities” The truth is that LLC units are not freely tradable like shares of corpo- are acquired in a private offering exempt from registration with the rate stock. Restrictions on transfers SEC. Any certificated securities likely imposed by tax laws apply to all LLCs bear a restrictive legend. “Control securities” are acquired that wish to maintain pass-through taxation. Although restrictions on by affiliates in any manner, including in a company’s registransferability are frustered offering. In most trating to many cases, an affiliate is a investors, the restricdirector, executive offitions due to tax laws cer or beneficial are actually advantaowner of more than geous to a company 10 percent of the comand its members. In pany’s outstanding order to be taxed as a units. Often, affiliates partnership and ciracquire their units in cumvent the dreaded private placement “double-tax” imposed offerings that were on corporations, an exempt from registraLLC must take meastion with the SEC. As ures to avoid Internal Bielski such, their securities Revenue Service qualify as restricted classification as a publicly-traded partnership. These securities for a period of two years measures include limiting the number but remain control securities so long of transfers that can occur in a given as they are an affiliate. Nonaffiliates year, which is often accomplished by who have held their units for more establishing bulletin board trading than two years may sell their units systems on which a certain percent- free of the restrictions described age of transfers may occur during a below. Note, however, that the transgiven year. The company monitors fer will likely have to be approved by and requires approval of transfers in the company for tax purposes. order to stay within the IRS limit. Most operating agreements contain detailed provisions regarding transfers in order to ensure that members stay within the confines of the tax laws.

If a member owns restricted or control securities, Rule 144 provides the most commonly used safe harbor from registering the resale of units. Under Rule 144, five conditions must be met before restricted or control securities may be sold to the public. First, adequate public information about the company must be available. This requirement is satisfied if the company is current in its reporting obligations with the SEC, but it is more difficult for non-reporting companies. The second condition of Rule 144 requires that units were held for at least one year. Third, a volume limitation on resales is imposed. During any threemonth period, a member may not transfer units exceeding the greater of 1) 1 percent of the company’s outstanding units or 2) the average trading volume of the units over the past four weeks. Further, Rule 144 resales of restricted or control securities must be made in unsolicited brokerage transactions. Finally, if a member intends to sell more than 500 units or expects to receive more than $10,000 from the sale of units, a notice of the proposed sale must be filed with the SEC. In conclusion, if you are considering a transfer of LLC units and own restricted or control securities, consider the availability of the safe harbor under Rule 144, which may be a useful tool for allowing you to sell units to the public. Shannon M. Bielski is an associate with BrownWinick, a Des Moines, Iowa-based law firm serving the renewable fuels industry. Reach her at bielski@brownwinick.com or (515) 242-2455.

This article is only a general summary for information purposes and does not constitute legal advice. Consult a qualified and experienced legal advisor for your specific situation or particular questions.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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PRIMING THE RENEWABLE FUELS PUMP Renewable fuels got the best holiday gift ever in Decemberâ&#x20AC;&#x201D;an Energy Bill with an unprecedented 36 billion gallon renewable fuels standard. Right after it was signed, EPM talked with a number of corn-ethanol producers and those advocating cellulosics to gauge their reactions. By Ron Kotrba, Anduin Kirkbride McElroy, Jerry W. Kram, Jessica Ebert, Susanne Retka Schill, Bryan Sims, Craig A. Johnson, Michael Shirek, Sarah Smith and Jessica Sobolik

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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n August, U.S. Rep. Collin Peterson, D-Minn., and chair of the House Agriculture Committee, said a 36-billion gallon renewable fuels standard was â&#x20AC;&#x153;a bit much.â&#x20AC;? In October, legislative aides to those in power said chances were slim that an Energy Bill would pass out of both chambers this year. By that time, penetrating media reports on ethanolâ&#x20AC;&#x2122;s contribution to rising food prices, and its limited ability to achieve energy independence, were putting significant pressure on corn producers. Now, in late December shortly after the Energy Independence and Security Act of 2007 (H.R. 6) became law, the U.S. ethanol industry celebrates the landmark occasion and continues to decipher the billâ&#x20AC;&#x201D;and its massive 36 billion gallon RFS. One of the biggest winners in the Energy Bill is the next generation of ethanol. H.R. 6 is a step forward for all biofuels, especially cellulosic ethanol, says Carlos Riva, president and CEO of Verenium Corp. â&#x20AC;&#x153;The science [of cellulosic ethanol] is well known and understood, but there have been a number of challenges in scaling it up,â&#x20AC;? he says, noting that the entire supply chainâ&#x20AC;&#x201D;starting with the agronomicsâ&#x20AC;&#x201D;needs to develop. â&#x20AC;&#x153;By providing market access certainty, this legislation gives the whole supply chain confidence to continue to invest and develop at a much faster rate. This legislation will galvanize the industry to move forward to meet these goals and demands.â&#x20AC;? BlueFire Ethanol Fuels Inc. is also developing a commercialscale cellulosic ethanol process. BlueFireâ&#x20AC;&#x2122;s waste-to-ethanol technol-

ogy earned the company a spot with five others to receive funding from the U.S. DOE for its proposed cellulosic ethanol plant that will convert landfill waste to ethanol in southern California. BlueFire Chief Executive Officer Arnold Klann is pleased with the federal governmentâ&#x20AC;&#x2122;s commitment to the biofuels industry. â&#x20AC;&#x153;Not only does the Energy Bill solidify Americaâ&#x20AC;&#x2122;s goal of independence from foreign oil but it positions the [U.S.] as a world leader in the battle against global warming while simultaneously recognizing the need for increased biofuels production from nontraditional sources.â&#x20AC;? Without significant pressure on technology providers, fuel distributors and automotive companies to optimize production, increase blending and warranty higher blends, respectively, much of the debate on renewable fuels is a vicious circle. â&#x20AC;&#x153;Part of this chicken and egg discussion has just been broken loose,â&#x20AC;? says Mitch Mandich, Range Fuels chief executive officer. Range Fuels recently broke ground on its 20 MMgy conversion refinery in Georgia. The company will employ a thermochemical conversion process taking wood chips to ethanol. The new RFS will put the â&#x20AC;&#x153;right typeâ&#x20AC;? of pressure on companies to further develop their technologies; specifically on enzyme manufacturers and those projects relying on them for hydrolysis pretreatment, Mandich says. â&#x20AC;&#x153;Most are saying the enzymatic route is still four to five years out,â&#x20AC;? he says. â&#x20AC;&#x153;Even then, big subsidies will be needed.â&#x20AC;? The billâ&#x20AC;&#x201D;as impressive as it isâ&#x20AC;&#x201D;still lacks appropriate incentives and financial support, Mandich says. â&#x20AC;&#x153;While we are pleased with the bill, it is only the first in a series of

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things needed,” he says adding that the next step is the passing of a Farm Bill with ample subsidies. “Thirty-six billion gallons tells investors in the venture capital world, in the hedge fund world, that there is a market and will help free funds for companies—especially with federally backed loan guarantee programs,” he says. Tom Bowers, chief executive officer of Colusa Biomass Energy Corp., a California-based company preparing to use the Sacramento Valley’s rice straw to produce fuel-alcohol and sodium silicate, says the new Energy Bill will change the way people view harvest residues, if that’s not already happened. “Not only will the residues have a value that makes them worth gathering and processing to ethanol and other chemicals, a whole new set of industries will be spawned that will give the rural and agricultural regions a new area to develop that will require thousands of local workers,” he says.

Response from Current Producers The bill should provide a shot in the arm for existing producers as well. Mark Hanson, a partner with the law firm Stoel Rives LLP says Congress’ commitment to biofuels shows that ethanol and biodiesel will continue to grow and that should increase stability and help open new markets. “I think this new legislation will provide renewed comfort and stability to existing producers and in some cases opportunities for expansion,” he says. “I think it is very encouraging that Congress has gone this far and provided support to the

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biofuels but that is not to say that we don’t have a ways to go yet.” The final version of the Energy Bill is more than 800 pages and it will take time to understand all of its implications. “In any large piece of legislation, a number of the provisions are fairly technical,” he says. “They need to be that way because of the different areas they are involved in.” The main thrust of bill is fairly clear, however, and will be good for the industry, according to Hanson. “The biggest thing for the industry is this: Congress again has affirmed that biofuels will be part of the fuel supply in an even greater way.” Industry giant Poet LLC applauded passage of the bill. “The Energy Bill obviously creates a solid foundation in gallons of demand in the cellulosic ethanol industry,” says Poet Chief Executive Officer Jeff Broin. “It will continue to drive research and development at Poet, within the industry and even outside the industry. It will drive research around the enzymes and microorganisms to make cellulosic ethanol development happen.” Broin acknowledges that meeting the cellulosic goals in the time frame set by the bill will be a challenge. Poet, which operates 21 production facilities in the United States with six more being constructed or expanded, has invested a lot of resources into developing a cellulosic initiative called Project Liberty. It was one of six cellulosic projects funded this year by the U.S. DOE. “Six hundred million gallons of cellulosic ethanol in 2009 may be a bit challenging, but we believe that cellulosic ethanol can be commercialized sometime in the next five years,”

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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Broin says. “Project Liberty is scheduled to come on line in 2011. Certainly the Energy Bill does make obvious the market that will keep our company moving and keep developing the commercialization of cellulosic ethanol.”

Project Development The high volume included in the new RFS means there should be no shortage of work for project developers in coming years. “I think people are really waking up and see-

ing that we need to do something large scale—we need something big if we’re going to make a difference in the balance of trade and oil imports,” says Mark Yancey, vice president of BBI International’s project development division. “Just raising the current RFS to 15 billion gallons would have been nice, but that’s still a small fraction of our fuel consumption. If we’re going all the way to 36 billion it’s showing that we need to produce more of our own fuel.” Ramping national production capacity of renewable fuels to 36

billion gallons won’t come easy. “It’s going to be tough to reach 36 billion gallons in 14 years, and the industry has a lot of work to do,” Yancey says, adding that BBI will help meet those goals through its technology, development and design efforts. BBI recently agreed to engineer cellulosic ethanol plants for Colusa Biomass Energy. In addition to engineering Colusa’s plants, BBI is working on developing its own internal projects. “There was already significant interest in cellulosic ethanol and this really adds more fuel to the fire of really moving cellulosic technologies forward,” Yancey says. In the meantime, there’s essentially a mandate for 15 billion gallons of corn ethanol, he says, which should relieve a lot of concerns about the market. For technology and construction companies like ICM Inc., the Energy Bill and particularly its RFS component sends a clear message that renewable fuels will become a bigger part of our energy equation. And with this greater role comes the opportunity and impetus for the industry to grow in new directions. “We’ve had great success providing starch-based technology through our partner Fagen Inc. and we’ll continue to work with the starch base,” says Greg Krissek, ICM’s director of government affairs. “At the same time we’ll keep pushing forward on the nonstarch opportunities. For us, that includes looking at things like corn fiber and the work we’re doing on the research and development, and commercialization of all sorts of biomass feedstocks from agricultural residues like corn stover, wheat straw and sorghum stubble to energy crops.” The goal is to develop those areas and implement them in their existing family of plants.

Financial Considerations “I think it was a long time coming,” says Todd Taylor, a biofuels attorney with Fredrikson & Byron. “In fact, I’m surprised they even got it done this year because a lot of reports were that we wouldn’t see an Energy Bill or Farm Bill

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until the first quarter.” The increased RFS should stabilize the traditional corn-based ethanol industry. “You may see a little difference in what people expect as far as consolidation,” Taylor says. “There was a lot of talk going around that plants would start failing or be bought up cheap so they wouldn’t go broke because they couldn’t sell their product. That dynamic will likely change now because a lot of people will feel with a new Energy Bill that they will be able to sell enough of their product so a lot of these shareholders and board members should not be in so much of a panic.” The bill has already rekindled interest from financial markets in both cornbased and cellulosic ethanol, Taylor says. “This morning (Dec. 20) I already had a call from a bank looking for deal flow. Believe me, that hasn’t happened in the last six to nine months,” he says. Deal flow is the rate at which investment offers are presented to funding institutions. One of the strengths of the bill is that it treats advanced biofuels separately from traditional ethanol. This will ease the mind of potential project backers and make more avenues of funding available, Taylor says. “If you are a financing source and are going to drop three times as much money in a cellulosic or gasification plant as a traditional corn-based ethanol plant, you wouldn’t have done it,” he says. “Now, there are government incentivized economic reasons for [investing in advanced biofuels]. So we are seeing more interest in the past few days from investment groups wanting to capture that 21 billion gallon market.”

Not Everybody is Elated

Security Act of 2007 saying it will drive up costs to taxpayers and consumers and will compromise vehicle safety. In order to increase fuel efficiency, CEI says, manufacturers will have to build lighter cars and trucks, a move that will diminish the safety of the vehicles. “American families now face the prospect of paying more for food, gas and vehicles,” says CEI Director of Energy Policy Myron Ebell. “Under the guise of addressing our energy problems, the Congress and president have made them worse.”

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Jerry Gidel, an associate with North America Risk Management Services Inc. specializing in the cash and futures grain markets, says at current price levels for feedstocks, construction and production overhead, the 9 billion gallon standard called for in 2009 is not enough. “[The act] isn’t super friendly to the market … the mandates are not high enough in comparison to capacity.” He thinks the Energy Bill will give the struggling ethanol industry some buoyancy heading into 2008, but will do little to actually increase margins

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Although H.R. 6 is receiving a warm welcome from biofuels producers and the agriculture industry, not everyone is lining up to praise Congress and President George W. Bush. The Competitive Enterprises Institute (CEI) released a statement Wednesday titled “President Signs Anti-Energy Bill.” The group objects to the Energy Independence and

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

E THANOL/ RE NE WABLE FUE LS DI V I S I ON

800-318-2747 www.centralstatesgroup.com/ethanol 71

POLICY

WE’RE HELPING EVERYONE BREATHE EASIER. The word is out; cleaner, renewable ethanol fuel is an important way to reduce the effects of greenhouse gases and pollution. That’s good news for anyone who’s concerned about the environment and America’s energy independence. The Ethanol Promotion and Information Council (EPIC) is a nonproﬁt alliance of ethanol producers and industry leaders showing the world how cleaner, greener ethanol-enriched fuels can help our cars and our planet. We’re asking consumers to look for ethanol at the fuel pump and be part of the solution for a better environment, too. We’re growing the market and the demand. But there’s more work to be done, and your support is essential. Discover what EPIC is doing to help everyone – producers and consumers alike – breathe a little easier. Then, encourage your company to join us. Be a part of EPIC, and help drive the future of ethanol. For a membership prospectus, call 402-932-0567, or email: info@EPICinfo.org. WE’RE CLEARING THE AIR ABOUT ETHANOL ©2007 Ethanol Promotion and Information Council, Inc. All Rights Reserved. The “e” mark and “stylized e” are registered service marks of the Ethanol Promotion and Information Council.

for producers. In order for that to happen, Gidel is watching oil prices and corn futures. As of the end of December 2007, December 2008 corn is selling for $4.40 a bushel on the Chicago Board of Trade. Projections into the beginning of 2009 put the price of corn at $4.50 a bushel or higher. Unless crude oil prices stay high— or go higher—the mandate may not have much effect on the demand for ethanol. “There’s been a lot of talk about changing [the 10 percent ceiling for ethanol blended with gasoline] which could increase demand by a factor,” Gidel says. The American Petroleum Institute was another group opposed to some provisions in the Energy Bill. According to Al Mannato, API fuels issues manager, some parts of the bill were satisfactory, while others weren’t. “We’re concerned about the size of the renewable fuels standard that was passed, and basically we think we need a reasonable and workable standard,” he says. “Also, the provisions aren’t as comprehensive as they should have been. There are some advanced biofuels that aren’t covered, but most are, so we’re happy about that.” Although a federal RFS has passed, U.S. states are still free to create their own varying fuel mandates. “That’s a real concern because if you want to get renewables into the marketplace in the most efficient way, we now have a large federal program that says how to do it in a complicated way, and [individual state legislation] could make it even more complicated.” The API was pleased with at least one provision: a waiver for cellulosic biofuels if the minimum volume requirement isn’t met. “That was very important and one of the things we tried to get into that legislation,” Mannato says. “As we move into the future, if the technological breakthroughs that people are predicting don’t occur we need [a waiver].” EP

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Ethanol in 76

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the FAST LANE Oil companies and distributors in the Southeast are taking advantage of sustained lower ethanol prices, which has led to a rather interesting series of events. By Ron Kotrba

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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Figure 1 Ethanol Blend RVP HC Volatility Increase

HC Volatility Decrease

80 70 Vapor Pressure at 37.8 C, kPa

remendous ethanol-blending activity is underway south of the Mason-Dixon Line and east of the Mississippi River. Sustained lower ethanol prices have attracted the attention of oil companies and fuel distributors, which in turn has brought apprehension about changes in the volatility of fuels purchased by consumers. Certain fuel specifications, which were of little concern when ethanol was out of the picture, are being re-examined by state watchdogs at the behest of those who could suffer under the regulatory status quo. In order to facilitate increased blending of ethanol without regulatory hang-ups, state regulators across the Southeast and ASTM itself are considering revamping its rules regarding ethanol-blended gasoline. Some of the first movements in adjusting fuel specifications in the Southeast occurred in Tennessee, where a state regulating division within the agriculture department promulgated emergency rules amending its kerosene and motor fuels quality inspection regulations, covering standards for ethanol-blended gasoline. While issued in September, the state had been in a fact-finding mode well before then. If the phrase “emergency rules” were not alarming enough, the second paragraph of the document reads, “It has been determined that the current rules for finished gasoline blended with ethanol will impede the lawful blending of such fuels, and that the current rules can be amended to account for

60 50 40 30 20

0 10

100

Ethanol, vol.%

Ethanol’s volatility peaks at low levels and decreases when concentrations are higher. SOURCE: SOCIETY OF AUTOMOTIVE ENGINEERS (PAPER 852116)

the testing variances that occur when ethanol is blended into finished gasoline, while still ensuring vehicle operability and thus protecting the consumer.” The document details changes to its motor fuels code covering adjustments to the minimum temperature at which 50 percent of a tested fuel is vaporized (T50); the temperature at which the vapor-to-liquid ratio (TVL) is 20 percent; and Reid Vapor Pressure, or the vapor pressure of fuel in a closed ves-

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Fuel Evaporation Characteristics and Potential Vehicle Operability Issues Oil dillution Combustion deposits

200

Poor warm-up Rough acceleration Poor short-trip economy

Temperature oC

150

Poor long-trip economy

Poor Cold Starting

100

Increased icing 50 Poor Hot Starting Vapor Lock High evaporative losses

0 0

100

% Evaporated

How temperature and the evaporation properties of a given fuel could affect vehicle performance. SOURCE: ENVIRONMENT CANADA

sel, is at 100 degrees Fahrenheit. As E100 and unblended gasoline are mixed, the changes in volatility are not linear as ethanol blend levels increase (see Figure 1). Randy Jennings, a regulator with Tennessee’s department of agriculture, says E10 blends in the winter would have a tough time passing the vapor-to-liquid ratios prior to the promulgation of those emergency rules. “But volatility in the summertime is not such a big deal,” he says. Vapor lock, or too much heat and pres-

sure (measured in pounds per square inch) in the fuel lines, can hinder the proper flow of fuel and adversely affect vehicle performance. Realistically, vapor lock is more of an issue with old carbureted engines rather than with fuel-injected vehicles. Nevertheless, David Au, a chemist for the state of Georgia, quips that old and new cars deserve equal protection under the motor fuels law. Blenders adjust RVP for the season, lowering it in the summer and increasing it during the winter. Georgia is making moves similar to those made in Tennessee. So is North Carolina, Alabama, Florida and more southeastern states. Prior to the exacting spread of ethanol from the Corn Belt outward, fuel inspectors in many southeastern states had never tested retailers’ fuel samples for some of these items because there was no need to. “No one’s been running these tests,” Jennings tells EPM. “The vapor-to-liquid ratio has not been an issue with unblended gasoline. There’s not going to be a lot of testing when 99.9 percent of the fuel samples pass.” Add the growing reality of much more E10, and the heightened sense of attention the renewable fuel has received and the story changes.

Florida and Alabama Florida consumes 8.6 billion gallons of gasoline a year, according to state numbers, and ranks third in the nation behind California and New York. The Ethanol Promotion and

Help Build the New Bio-based Economy Sustainable Development Technology Canada and the Government of Canada have launched the new $500 million NextGen Biofuels Fund. The NextGen Biofuels Fund supports the establishment of first-of-kind commercial scale demonstration facilities for the production of next-generation renewable fuels. SDTC is Now Accepting Applications for Funding

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10 v olu

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10 vo

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eth

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ano

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100 0

80 20

60 40

40 60

20 80

0 100

With Reid Vapor Pressure measured in pounds per square inch on the left over varying percentages of fuel additives represented by the different curves, the effect of base gasoline RVP on RVP increase due to the addition of ethanol can be seen in the third curve from the top. SOURCE: ENVIRONMENT CANADA

Information Council and other advocacy groups for renewable fuels compared this high fuel-consumption ranking with the state’s minimal use of ethanol. Soon after, these groups and state agencies went fullon with campaigns, especially Ag Commissioner Charles Bronson, who spearheaded the Florida Farm to Fuel summits to increase awareness and boost availability of E10 and E85 at strategic retail outlets. The EPIC even went so far as to fly banner planes up and down long stretches of Florida’s beautiful beaches during spring break, the most crowded time of year. In August, the state ag department announced that midstream major Kinder-Morgan was purchasing ethanol from an Alabama-based fuel broker, The Ethanol Corp., which gained corporate status in Alabama in late November 2007. The filing was issued to the fuel distribution company named HiTech Fuels Inc. Kinder-Morgan blends gasoline with ethanol at its new Port of Tampa blending facility and sells it to Murphy Oil Inc. Murphy Oil distributes the E10 to 47 retail stations in central Florida. “These companies have stepped up to the plate and are getting the product out to consumers,” Bronson says. “It is proof that by working together, clean,

renewable energy is at our fingertips.” Matthew Curran, chief of Florida’s Bureau of Petroleum Inspection, tells EPM the number of stations carrying ethanol blends is increasing rapidly. “In order to distribute and sell such products, the proper infrastructure has to be in place,” he says. Kinder-Morgan’s new Port of Tampa blend facility is a prime example. Also, a New York-based energy company, Hess Corp., has more than 350 retail stations in the Sunshine State and plans to begin selling E10 at all of them soon—that is, once changes to state specs on T50, TVL and RVP take place. In neighboring Alabama, the state petroleum council, a lobbying group consisting largely of the Chevrons, the ExxonMobiles and the Shells, approached state officials and asked them to review the rules and regulations on ethanol blends, says Jeff Webb, legal advisor to Alabama Ag Commissioner Ron Sparks. “We were kind of confused at the time because we have had ethanol blends sold in the state since 1982, and they continue to be sold today,” Webb tells EPM. “The [petroleum council] wanted us to consider an exemption or modification of some rules they claimed they needed to be able to start having more ethanol

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blends offered in the state. Our response to them when they said they needed a change or else they wouldn’t be able to blend or offer blends in the state was, ‘We’ve got three companies—smaller, independent companies—that have been selling an ethanol product for a number of years. Why can they do it and you can’t?’” It is an interesting question, but the answer is quite simple. Independent companies don’t handle the volume of fuels the majors do, so ethanol blends have been approved in Alabama for 25 years but historically the numbers of stations carrying E10 have been few. This means the gross majority of instate fuels had no problems meeting these specifications. If a blend failed here or there because of ethanol, no big deal. This phenomenon of low volumes of ethanol blending in these states led many of them to stop testing certain parameters, just like Jennings from Tennessee says—if 99.9 percent of the fuels are passing the tests, why bother? Furthermore, studies show that blended fuels that fail some of these specs would not have adversely affected the operation of most vehicles on the road anyway. This opened the door to look at adjusting the specs to more easily accommodate E10 as it would be showing up more frequently in test samples as major oil distributors smell profit from blending low-priced ethanol into fuel supplies despite high transportation costs to deliver the fuel predominantly from the Midwest.

Evidence Suggests Spec can be Flexible In a Marathon Petroleum Co. LLC corporate presentation on “changes to promote and protect but not impede E10,” the company states it is unaware of any drivability issues associated with lower T50 and TVL values from fuels sold in its stores. Marathon claims to be one of the largest retailers of ethanolblended gas. “Available E10 data suggests T50s below ASTM minimums are not

detrimental to drivability,” states the corporate document. In early 2007, Coordinating Research Council Inc. released its “2006 Hot-FuelHandling Program Final Report (No. 648),” which Tennessee found quite valuable, Jennings says. “A study was done under brutal conditions in Arizona at General Motors Corp.’s proving grounds,” he says. “The altitude was 1,000 feet and ambient temperatures of 120 degrees F. There were some E10 T50 results as low as 153 degrees, and low TVL’s to 118 degrees, and showed no statistically different [operational results] in the tested vehicles. They ran the whole gamut of vehicles and they were fine. You can get vapor-to-liquid ratio down in hot weather quite a bit lower than one might expect.” While this CRC report states T50 can dip to 153 degrees, Marathon states acceptable vehicle performance with T50s as low as 140 degrees under worst-case conditions. Jennings says many Midwestern states don’t have this issue of adjusting the specs because they’ve waived these tests altogether. At ASTM’s December meeting they entertained a ballot to lower the TVL spec, but too many nonadjudicated negatives caused the measure to fail, Jennings says. “As a concession we are all looking at options as to what we can do with TVL,” he says. Until then, Tennessee has its emergency rules in place.

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North Carolina With its sandy barrier islands to the east where famous pirates once plundered and the Great Smoky Mountains in the west, North Carolina has been a burgeoning biofuels hot spot for some time, thanks in part to Anne Tazwell with North Carolina State University. She is the transportation program manager in the North Carolina Solar Center, which houses the university’s alternative energy projects. Tazwell says increased ethanol blending in the Tar Heel State is totally driven by economics. She has tracked the

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ups and downs of ethanol blending there over the past few years. “In the western part of the state there are some hot spots now,” she tells EPM. “But in 2006, there was a big drop due to ethanol’s higher prices. Meanwhile, during that same time, state agency usage increased dramatically.” That’s because state agencies were operating under a petroleum displacement plan passed in 2005. One beneficial outcome has been the establishment of at least one

E10 pump in all 100 counties in the state for state vehicles. “So while marketers stopped blending [in 2006], state vehicles alone used 7.5 MMgy of E10, or 750,000 gallons (of ethanol),” Tazwell says. In 2004, North Carolina’s total gas consumption was about half that of Florida’s, or 4.4 billion gallons. In 2005, the volume of E100 sold retail (blended as E10) topped out at 4.4 million gallons, but with 2006’s higher prices distributors stopped blending

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ethanol, and volume sales of E100 dropped significantly to 1.9 million gallons. “We’re seeing them come back now,” Tazwell says. With more ethanol comes the need for more bulk storage capacity for the renewable fuel. Tazwell says while certain regions like Charlotte are capacity deficient, other bulk storage terminals such as the one in Greensboro, N.C., are increasing ethanol storage capacity. Art Rupard, program manager for gas and oil in the state motor fuels lab, says a few distributors have been “dabbling in ethanol” for years (United Energy Fuel Distributors and Ray Thomas Petroleum), and one new major distributor, Wilco Energy Corp. recently started blending ethanol. EPM’s calls to these North Carolina fuel distributors were unanswered. Rupard says he understands that pending changes to fuel specs have been requested by the oil companies. “Maybe they think they will have a problem meeting the specs because they are asking for this change,” he says. “Actually, we haven’t even been testing TVL. We are not testing it but they are asking for a complete waiver on it.” Right now, North Carolina’s T50 spec is 70 degrees Celsius, or 158 F. “We have not condemned any yet,” Rupard says. “The proposal is to drop it to 64 degrees Celsius, 147.2 F.” Rupard is more concerned about phase separation in underground storage tanks than anything else. “We have had a couple of pretty bad cases of phase separation,” he says. “We stop sale when we find it.” The state also grants a one-pound waiver on RVP for E10. North Carolina has 11 retail E85 pumps, and one federal, one state and one parks pump. Several ongoing programs in the state will fund more conversions in coming months. EP Ron Kotrba is an Ethanol Producer Magazine senior writer. Reach him at rkotrba@bbibiofuels.com or (701) 7384962.

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Silage bags are already used to store biomass for livestock feed. Some day they may play a major role in converting biomass into fuel ethanol. PHOTO: TOM RICHARD, PENN STATE UNIVERSITY

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When it comes down to the best way to move biomass from the field to the factory, the dry look may be out. Wet biomass offers advantages that may send the big bale back to the ranch to feed cattle. By Jerry W. Kram

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PHOTO: CEA INC.

hot, dry wind sweeps across the prairie landscape. A spark ignitesâ&#x20AC;&#x201D;from a casually tossed cigarette or some over-enthusiastic microbe deep inside a bale, no one ever knowsâ&#x20AC;&#x201D;and hundreds of bales containing thousands of pounds of potentially valuable biomass go up in smoke. The company waiting to convert the now-combusted cellulose takes a major financial hit. Fire from accidental ignition or spontaneous combustion is just one potential problem with gathering large quantities of dry biomass for processing into cellulosic ethanol. Biomass sources such as corn stover and straw have a low density. That means it takes a large area to store enough biomass to operate a commercial-scale plant. Low density also means it takes more trucks to move that biomass to the plant site and those trucks would be operating below their maximum weight capacity. Harvesting crop residues such as corn stover can be disrupted by inclement weather because the stover still needs to dry down after the grain is harvested, says James Hettenhaus, founder of CEA Inc. â&#x20AC;&#x153;In 1997, after Halloween it was too wet to pick up corn stalks. If you asked how you would deal with that youâ&#x20AC;&#x2122;d be told, â&#x20AC;&#x2DC;Move west,â&#x20AC;&#x2122;â&#x20AC;? he says. A better way to deal with hard-to-handle biomass feedstocks is to not worry about letting them dry down at all. In fact, an extra shot of water might be just the thing to add value to biomass feedstocks, Hettenhaus says. His idea comes from the pulp and paper industry, one of the few industries with years of experience gathering, moving and storing large amounts of cellulosic biomass. Hettenhaus looked at companies that processed bagasse, the fiber left over after sugar is extracted from sugarcane. The bagasse came out of the sugar

Hettenhaus, along with collaborators from Oxbo International Corp., Colorado State University and Imperial Farmers and Ranchers, stand in front of a biomass pile being stored using a variation of the Ritter method of cellulose storage.

plants at about 50 percent moisture and had to be dried to prevent the fiber from rotting. Since the 1960s, the processors have been adding water to the bagasse to accomplish the same task. In a system called the Ritter process, cellulosic fiber is mixed with water and piped into large piles. The water is collected and recirculated through the pile. Lactic acid bacteria consume the residual sugar in the bagasse and make organic acids that inhibit other bacteria that would prevent the fiber from rotting. Drainage built into the pilesâ&#x20AC;&#x2122; pads collects dirt and solubles such as phosphorus and potassium which can be returned to farm fields as fertilizer. As the pile ages, the biomass becomes denser and more economical to handle. Hettenhaus says the Ritter process or a similar system should

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work as well for corn stover as it does for bagasse. In a demonstration project in conjunction with the National Renewable Energy Laboratory, Hettenhaus and other researchers built a 700-ton pile of corn stover in Imperial, Neb. “This is the third harvest season, so the pile has been there more than two years,” he says. “We’ve sampled the pile and sent the samples to Purdue [University] and the system works great.” By removing soluble materials, the concentration of desirable materials—cellulose, hemicellulose and lignin—is increased by the process. The density of the pile doubles as it matures making transportation more economical. In the samples from the demonstration piles, there was very little loss of dry matter so the cellulosic materials were intact after more than two years of storage. “There was hardly any loss because of the density and low pH,” Hettenhaus says. “There was some degradation on the surface but depending on the size of the pile there will be less than 5 percent loss.” Another major advantage of a wet storage system is that it makes one-pass harvesting of corn grain and stover possible, Hettenhaus says. Corn is usually harvested when the grain is at about 15 percent moisture. The moisture level of the stover can be 25 percent higher than that or more during harvest, much too high to be safely stored in dry bales. “Instead of drying the stover, you would just store it wet,” he says. Also, because there is no fire hazard, the size of the piles is limited only by the height pumps can lift the mix of biomass and water. Hettenhaus says the same amount of biomass stored wet would require one-tenth the area for the storage of dry bales.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Even with the increase in density of wet-stored biomass, a commercial-sized cellulosic ethanol plant will still take a lot of biomass to keep running. A processing plant requiring 2,000 dry tons of biomass per day would need 100 deliveries per day by truck, 350 days per year. “Whether it’s baled or wet you get about the same dry tonnage in a truck,” Hettenhaus says. “But trucks are a problem because you need so many of them.” In a 2003 paper, he proposed that wet biomass could be stored on farms near the fields where it was harvested. By locating the ethanol plants on railway hubs and using 50 to 70 gondola railcars, the biomass could be moved more economically than by truck. Rail transport is favored by the pulp and paper industry for moving bulky fibers like bagasse.

Preprocessing in a Bag Removing cellulose from the plant cell wall and breaking it down into fermentable sugars will be expensive. An NREL study cited by Tom Richard, director of the Penn State Biomass Energy Center, shows that pretreatment, saccharification and cellulases could make up 39 percent of the cost of making a gallon of cellulosic ethanol. That’s more than the feedstock for cellulosic ethanol is expected to cost. Richard is looking at how wet storage of biomass could reduce those costs. “We are working outside the stainless steel vessels,” he says. “We are doing that to look at some of the opportunities for cost reductions in the overall process. A lot of them have to do with the sugar conversion from the feedstock.” Richard, whose work is supported by the Morgan Family Foundation and the U.S. DOE Idaho National Laboratory, is enthusiastic about ensiling biomass for many of the same rea-

PHOTO: DEEPTI TANJORE, PENN STATE UNIVERSITY

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Bags of corn stover were inoculated with various species of lignin-digesting fungus to see if they would make the biomass easier to process into cellulosic ethanol.

sons as Hettenhaus, including fire safety and increasing the amount of biomass that can be stored in a given area. Richard believes wet storage of biomass will become dominant as the cellulosic energy industry grows. He points out that most biomass resources in the United States have a relatively high moisture level at harvest and would have to be dried for storage. Adding water to biomass is easier and more energy effi-

cient than removing water. Because bacteria in the wet biomass create a dilute acid environment, some of the reactions that would occur in the first step of cellulosic ethanol production could take place in a silo. “One of the things that we are excited about is that this is a way to potentially move some of the processing out of the refinery and onto the landscape in a more decentralized fashion,” Richard says. “That will impact transport, logistics and the quantities of biomass you have to move. One of the nice things about weakening the structure of lignocellulosic material during ensilage is that it is a lot softer. You can compact it better, and it’s cheaper to move compacted material even if you have added water to it.” One of the advantages of this line of research is that it scales well, Richard says. The same reactions occur whether the biomass is stored in sealed gallon-sized plastic bags, silage bags hundreds of feet long, or large bunker silos that could conceivably serve a cellulosic ethanol plant. Richard says he could imagine a silage system the size of Beaver Stadium, where Penn State plays its football games. “Scale doesn’t matter a lot in these systems,” he says. “As a matter of fact, the bigger piles perform better than the small bags in which we do most of our experiments.” Richard and his group screened different varieties of

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commercial cellulose enzymes to see how they worked in a silage system. They found that the enzymes had a significant effect in silage at much lower doses than would be used in a cellulosic ethanol reactor. The enzymes do degrade over time but continue to have significant activity at least 21 days into ensilage. Analysis shows that ensilage with enzymes releases mostly mannose and xylose, showing that the treatment is breaking down hemicellulose rather than cellulose. Fiber analysis of the silage led to a similar conclusion, Richard says. One of the disadvantages of pretreating silage is that the naturally occurring bacteria that preserve the silage consume the sugar that could be converted into ethanol. If more sugar is released during storage, it could be taken up by bacteria and not be available for fermentation into ethanol. Some products produced by the bacteria are known to inhibit ethanol fermentation by yeast. Richard says that by managing the species of bacteria, the ratio of the stronger inhibitors like acetic acid can be reduced. Silage could prove a useful feedstock for consolidated bioprocessing. In experiments with Clostridium phytofermentens, an anaerobic bacteria that can break down cellulose and produce ethanol, Richard found that the bacteria produced significantly more ethanol from silage than from unprocessed corn stover or switchgrass.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Work is ongoing in other labs that have the potential for increasing the practicality of ensiling biomass. Richard cites research being done on lignin-degrading enzymes. Several species of fungus produce enzymes that can degrade lignin, the “glue” that holds cell walls together. If the lignin can be broken down, it will be easier to get to the valuable cellulose. The downside of ligninase is that it requires oxygen to work, and ensiling is an anaerobic process. If an aerobic phase was added at the beginning of the ensiling process, the enzyme might be able to do its job. Richard says a promising line of research shows fungi that digested lignin in preference to cellulose grew very well in tests and out competed bacteria that could damage the quality of the cellulose. Richard says ensiling biomass has a lot of potential if it can be successfully integrated into the operation of a cellulosic ethanol plant. “We can get some benefits which may not be too dramatic,” he says. “We have a storage system that is relatively robust and will probably make sense for a lot of the nation. But we really haven’t tackled the interaction and interface with pretreatment systems yet to try and optimize that. That’s something we are putting a lot of energy into.” EP Jerry W. Kram is an Ethanol Producer Magazine staff writer. Reach him at jkram@bbibiofuels.com or (701) 738-4962.

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Move Over Corn,

WHEATâ&#x20AC;&#x2122;S KING In Western Canada Western Canadian wheat growers anticipate ethanol will energize the wheat market there in the same way it has the U.S. corn market by creating a new use for the dominant grain crop. Using wheat to produce ethanol, however, has its challenges. By Susanne Retka Schill

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or more than 25 years, ethanol has been produced in a small way on the Canadian prairies. This year, two new plants coming on line will boost total ethanol capacity. In 2006, when Husky Energy Inc. brought its 130 MMly (34 MMgy) ethanol plant at Lloydminster, Saskatchewan, on line, it more than doubled western Canada’s ethanol output, which was 79 MMly (21 MMgy). Ethanol capacity will more than double again this year with Husky’s second 130 MMly plant commissioned in December at Minnedosa, Manitoba, and Terra Grain Fuels Inc.’s 150 MMly (40 MMgy) plant at Belle Plaine, Saskatchewan, scheduled to start up this spring. While eastern Canada relies on corn for ethanol, western Canada’s growing industry is turning to wheat as the primary feedstock. “We really are in the early stages of a large-scale biofuels industry in western Canada so it’s diffiJolly-Nagel cult without a crystal ball to predict the

Canadian wheat farmers view ethanol plants as an alternative market for their low-quality feed wheat, which is primarily downgraded hard red spring wheat damaged by early frost, disease or rains during harvest.

full impacts,” says Cherilyn Jolly-Nagel, president of the Western Canadian Wheat Growers Association. But it’s not too soon to foresee the possible benefits of an increase in ethanol capacity. In her presentation at the Canadian Renewable Fuels Association’s fourth annual Canadian Renewable Fuels Summit in December, she listed five reasons wheat growers welcome the ethanol industry growth. Increased ethanol production will help reduce Canada’s dependency on foreign grain markets. JollyNagel points to the export market’s vulnerability to tariff and nontariff barriers as well as disruptions caused by incidents such as last year’s railway strike and a trucker walkout at the Vancouver, British Columbia, port. Increased local processing reduces the dependency on shipping via western Canada’s two main railways, which haul about 65 percent of the grain produced. Ethanol plants provide an additional local market. “As we have discovered in the canola, oats and pulse sectors, there’s nothing like a local user of grain to help support local prices,” she says. Ethanol plants create jobs and economic activity in rural areas. Ethanol plants promise environmental benefits. Although Jolly-Nagel declined to weigh in on the debate about ethanol’s impact on greenhouse gas reductions, she says that at the very least, having local markets will reduce the fuel used to export grain. The biggest challenge for Canadian ethanol plants may be encouraging farmers to switch from high-protein wheat that commonly garners a premium, to raising lower protein wheat

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

PHOTO: HUSKY ENERGY INC.

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Husky’s Lloydminster ethanol plant opened in the fall of 2006 and relies upon wheat as the primary feedstock.

classes. On the other hand, Canadian wheat farmers view ethanol plants as an alternative market for their low-quality feed wheat, which is primarily downgraded hard red spring wheat damaged by early frost, disease or rains during harvest. “The plants focused on the ethanol yield as the primary product and distillers grains as the secondary product are not as keen on utilizing these feed grains unless they’re really, really dirt cheap,” says Anita Brule-Babel, a professor of plant sciences and wheat breeder at the University of Manitoba. Ethanol producers avoid using Western Canada’s dominant

wheat class, Canadian red spring, because of its lower starch content and its high protein levels, which increase the viscosity of the mash in the ethanol process. And, other nonstarch polysaccharides create additional problems, Brule-Babel says. “It’s not insurmountable,” she says. “The proper enzymes will break down some of those components.” While additional enzymes help, ethanol plants are turning to the low-protein, high-starch classes such as soft white wheat, the midprotein and midstarch winter wheats, and Canadian prairie spring. The protein content of soft white wheat ranges from 8 percent to

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WHEAT

Wheat-Based Ethanol Struggles in the UK, Europe The ethanol scene in Europe which relies upon wheat has been hit hard. “Roughly 50 percent of European ethanol capacity is currently mothballed due to [high] grain prices and low ethanol values,” says John Waltham, director of planning and infrastructure with United Kingdom-based Green Spirit Fuels Ltd. “All are expected to restart once the economic climate improves.” Some newly built plants have yet to begin production and investors have been frightened away from new projects, he says. Green Spirit’s proposed wheat ethanol plant at Henstridge, England, is one of those projects waiting for a turnaround. The permits are in place and the design/build team is ready to go once funds are in place, Waltham says. The 130 MMly (34 MMgy) plant will be located next to Green Spirit’s parent company, Wessex Grain. A second, larger plant is in the planning stages and will be built in the Humberside region. Waltham says wheat prices in England went from £70 per ton ($3.90 per bushel)

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to a high of £190 per ton ($10.67 per bushel) and back to around £140 per ton ($7.84 per bushel) by early November. As happened in the United States, grain prices jumped while ethanol prices sank from 43 pence per liter ($3.33 per gallon) to a low of 35 pence per liter ($2.72 per gal). The price of ethanol was expected to rise at the turn of the year as oil companies return to the ethanol market to buy supplies to meet their inclusion requirements. “Obligations of this sort are expected to spring up all over Western Europe over the next year or so,” Waltham says. In April, the United Kingdom’s inclusion rate was 2.5 percent for ethanol, rising to 5 percent by 2010. “This represents a requirement of 1 million metric tons (335 million gallons) by 2010 of ethanol for the UK petrol market,” he says. Once ethanol gets above 46 pence per liter ($3.60 per gallon) and wheat drops below £130 per ton ($7.30 per bushel), Waltham says the Green Spirit ethanol plant will once again be viable. “We have investors waiting in the wings.”

9 percent, which is much closer to corn protein levels, while hard red spring wheat ranges from 13 percent to 15 percent protein. Corn will still have a higher proportion of starch than lower protein wheat because of its larger kernel. Winter wheat may also be attractive for wheat producers because it out yields spring wheat by 30 percent to 40 percent. Husky expects to buy 700,000 tons (26 million bushels) of grain to supply its two ethanol plants and would like to keep grain purchases within a 100-mile radius of its plants. “If we have to go further out to get the supply of feed grain we need, that costs us more,” says Greg Seamchuk, Husky’s marketing coordinator for grains and distillers grains. He says farmers have already started to grow more wheat tailored to

ethanol production. Jolly-Nagel has joined the ranks of western Canadian farmers who are beginning to grow the classes of wheat favored by the ethanol industry. This year, however, the winter wheat grown on her farm near Mossbank, Saskatchewan, tested at more than 15 percent protein. “We certainly don’t want to sell it as feed wheat,” she says.

Designing for Wheat The key to building an efficient ethanol plant that’s optimized for wheat is to make allowances for the grain’s characteristics. Kansas-based ICM Inc. is completing the design for its first wheat ethanol plant this winter. “We’re trying to move forward with wheat because it is the predominant starch in Canada and overseas,” says

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

WHEAT

Wheat Versus Corn Using wheat to make ethanol in western Canada is more complicated than using corn in the U.S. Corn Belt. While there are other classes such as flint corn, popcorn and white corn in the United States, growers overwhelmingly grow feed corn. Western Canada has eight classes of wheat each with its own food use, from soft white and winter wheat used for pastries to the hard red spring wheat varieties preferred by bread bakers. In addition, western Canadian farmers grow durum wheat, a particularly large-kernelled, hard wheat that is ground into the semolina granules used to make pasta. A ninth class of wheat is being added in western Canada this year called general purpose for the livestock and ethanol industries. Wheat quality is also more sensitive to weather than corn. Excess rain or humidity during critical growth periods can cause diseases. Hot winds during the kernel filling stage or an early frost can damage the kernel. Rains during harvest bleach the color of the wheat kernels. The test weight, color and amount of damage determine whether the wheat is graded as No. 1, 2 or 3, or as feed wheat. When the market is fickle, each of these grading factors can result in big discounts. There are also hurdles to be cleared when introducing new wheat varieties in Canada as regulations require new wheat varieties to be visually distinct. â&#x20AC;&#x153;This spring, a winter wheat variety with an 8 percent yield advantage over existing varieties was submitted, and yet it was rejected because it looked too much like other varieties in the Canada western red spring class,â&#x20AC;? says Cherilyn Jolly-Nagel, president of the Western Canadian Wheat Growers Association. While the new general purpose class will not have the kernel visual distinguishability requirement (KVD), she advocates the KVD be dropped for all wheat classes and varieties, making it easier for breeders to introduce new varieties for the ethanol industry. Another issue that complicates wheat production in Canada is the requirement that all milling wheat be sold through the Canadian Wheat Board, which handles export marketing and pays growers a pooled price over several installments. Many growers welcome the ethanol market as an opportunity to bypass the CWB and sell their grain directly.

Mark McCorkle, director of international project management. ICM was chosen to supply the design for Cyprus Agri-Energy Inc. which is proposing a plant at Shaunavon, Saskatchewan. ICM is working with two other Canadian wheat ethanol plants that are in the early planning stages, McCorkle adds. The company plans to build on its solid reputation for engineering efficient corn ethanol projects to design a plant optimized for wheat. Wheatâ&#x20AC;&#x2122;s higher viscosity levels and its tendency to foam are the biggest challenges, McCorkle says. Adding an extra

enzyme at the beginning of the process helps to thin the slurry allowing a throughput and flow rate similar to corn. In addition to new enzymes, equipment modifications also help manage foaming issues. ICM has seen good results in foaming control by blending 10 percent corn into the wheat rather than using a more costly foaming agent such as corn oil. At the back end of the process, the amount of wet cake leftover after fermentation and distillation also increases when wheat is used as opposed to corn, which in turn increases the load on the centrifuges and driers, McCorkle

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

WHEAT

Meeting the federal mandate for a 5 percent ethanol blend by 2010 will require a doubling of ethanol capacity in western Canada.

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explains. Once the wheat design is optimized, ICM will continue researching other feedstocks to meet its goal of developing a truly multi-grain feedstock facility for the international ethanol market. Western Canada’s ethanol capacity will need to expand even further to meet increasing mandates. Husky’s two plants will produce the ethanol volume needed to meet the provincial mandates of 7.5 percent in Saskatchewan and 10 percent in Manitoba. Meeting the federal mandate for a 5 percent ethanol blend by 2010 will require a doubling of ethanol capacity in western Canada, Husky’s Seamchuk says. Don’t expect that to be met with the 100 MMgy-plus ethanol plants becoming popular in the Corn Belt. With wheat yielding one-third the bushels per acre of corn—and at the best, only close to half for the top yielding winter wheat varieties—ethanol plants will be sized smaller to keep the available feedstocks within a cost-effective distance. EP Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her at sretkaschill@bbibiofuels .com or (701) 738-4962.

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The Jo Sequoia chemical tanker vessel leaves Bergen, Norway, after a naming ceremony. Although it carries many other diverse chemicals, the tanker has been known to haul ethanol on occasion. PHOTO: JO TANKERS AS

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TRANSPORTATION

TRAVERSING THE WATERWAYS The convergence of the marine transport sector and the ethanol industry is relatively new. EPM talks with maritime trade experts to see if the shipping industry can keep up with growing demand from the ethanol industry. By Bryan Sims

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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TRANSPORTATION

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n economic theory, a business is only as strong as its central components: finance, labor, risk management, production efficiency and transportation. Like spokes in a wheel, these components work together and have the potential to help meet or exceed expected profit margins—the driving force behind any enterprise. However, managing a fluid distribution model is widely considered to be the one aspect that can ultimately determine whether a company succeeds or fails. Today, ethanol producers and marketers have three transportation options—train, truck and barge—to get renewable fuel from its point of origin to the market where it can be blended and consumed. Before ethanol’s most recent growth spurt, the renewable fuel was most commonly shipped by rail or truck from the Midwest, where much of the corn-based fuel additive is produced, to the East and West Coasts. Although these methods have worked in the past, as new markets open up in other areas of the country and overseas, another mode of transportation may be more heavily relied upon. In the United States, the rail and truck industries have had to grow in tandem with the ethanol industry and have shouldered the bulk of the supply and demand logistics. Ethanol proponents have speculated about whether the worldwide supply and demand cycle could lead to shortages of inland or ocean-going tanker vessels—similar to what has occurred with the U.S. rail industry during ethanol’s early years. “There are plenty of ships today to take ethanol,” says Michael Cooper, president of Biofuel Brokers LLC, a Michigan-based marketer of ethanol and biodiesel. “The chemical tanker market is tight, but it’s tight because

you need to have the right ship at the right place,” he says adding that shippers should check on storage, loading and unloading, and the demurrage risk—the time a ship has to spend at a port—involved in transporting ethanol. Although ships are available, a tight market has pushed shipping prices higher. U.S. ethanol capacity was pegged at about 8 billion gallons last year, and was expected to settle at about 11 billion gallons by the end of 2007. As a result, the demand for barges Cooper to ship ethanol and corn has risen. “Ethanol has impacted the ability to obtain competitively priced barging, and some barges are being built as a result of this increased demand,” says Eric Koehne, director of business development for Network Chartering Americas Inc., a ship brokerage and marine logistics services company that specializes in bulk liquids and gases. “The rise in [shipping] rates has occurred because the demand has outstripped supply out of the global market base for all products. One Koehne could say biofuels has contributed to the shipping market’s success recently.” To keep up with rising demand, ship orders are up. At the same time, however, most U.S. shipyards are faced with a backlog because it takes so long to order a ship. According to Cooper, it takes nearly a full decade for a shipping company to envisage

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

TRANSPORTATION

that it needs a ship, let alone the time it takes to follow through with the process and pay for one that meets its full potential. “Ship orders are very healthy today,” Cooper says. “They’re mostly going to be on the larger size. The expectation is that over time the capital will have been spent and the tanks to load those tankers will be ready to go. This is a concert where everybody has to play the same tune—biofuels producers, feedstock suppliers, the marine transport sector, the port sector, the terminal and the labor to unload the commodity. All of that has to be playing together and we’re just getting there now.” The bigger ships are expected to be able to hold more cargo and cut down on long wait times, according to Brent Dibner, president of Dibner Maritime Associates, a Massachusetts-based management consulting firm specializing in the maritime industry. “What we’re seeing on the international side is a trend towards larger and larger petroleum products Dibner tankers,” Dibner says. “This is a trend I think, and we’re seeing a greater globalization of the petroleum products markets where shortages and needs are being more aggressively met by larger and larger products tankers.” The move to larger ships has its drawbacks though as larger cargos can translate into increased demurrage risk in addition to restricted terminal capacity. “Those can offset

all the scale-based savings that you thought you were achieving by using a very big ship,” Dibner adds. “That’s why in many aspects of marine mode cargos they tend to focus on a certain size because it just makes sense.”

reality is... satisﬁed customers

Growth Potential Though healthy and active, the marine transportation sector has yet to experience the degree of growth the U.S. rail and truck industries have in the past three to four years to keep up with ethanol production. Industry experts agree that it will take time for waterborne transportation to scale up and meet the distribution and transportation requirements to ship ethanol more efficiently, Cooper says. “The main blockage in the ramping up of marine transport is to understand that everyone’s profit margin is directly related to the cost of transportation,” he says. “The net value of that product would be much better serviced on inland and oceangoing vessels than truck or rail today. You have to be in a certain economy of scale to be able to make it worth your while though.” The ramping up of U.S.-based inland barge and intercoastal transportation systems is being hampered to some extent by the disparity in economics among integrated ethanol players such as Archer Daniels Midland Co. and Cargill Inc., and smaller ethanol producers. It’s costly for ethanol producers to compete for inland barges and international trading vessels in the current economic climate so smaller producers probably wouldn’t be able to utilize that type of transportation. Some integrated ethanol

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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This ocean-going vessel is a 10,400 million ton deadweight oil/chemical tanker owned by Clipper Wonsild Tankers Holding A/S of Denmark. It can carry mineral oil products, lubeoils, biofuels, fish oil, vegetable oils, palm oils, molasses, caustic soda, ethanol, benzene and many other chemicals.

producers, however, may be able to afford to order/lease barges for transporting their product, and in some cases it could actually be cheaper than other transportation options. “A well-defined market like marine transport has desires in new markets and biofuels is perceived to be a very fine new market, but people have questions,” Cooper says. “I think for ethanol producers today where margin is everything, shaving

a couple pennies off the net back due to the use of barging and marine transport would be valuable.” Then there are the issues of what to do with the ethanol once it reaches its destination. “You don’t have a shore tank necessarily built for pure ethanol,” Cooper says. While the option of having a healthy and active waterborne transportation means for shipping ethanol are at producers’ disposal, the demand for distributing the fuel additive has rippled into the domestic and international shipbuilding industries.

Global Demand for Ships The global shipbuilding industry has experienced a dramatic rise in new orders and completions since 2000, driven by economic globalization and the consequent increase in marine freight, and by last-minute purchasers trying to beat the implementation of new structural regulations enforced by the International Maritime Organization. The IMO is a specialized agency of the United Nations established in 1948 to deal with various aspects of the regulation of international commercial shipping. According to the most recent IMO report “International Shipping and World Trade Facts and Figures,” world trade by sea has increased in the past 20 years from 3.3 billion tons of cargo in 1980 to 4.3 billion tons in

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TRANSPORTATION Figure 1.

China’s Shipbuilding Completion and Proportion Worldwide 900

20.00%

800

18.00%

700

16.00% 14.00%

600

12.00%

500

10.00%

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95 19 96 19 97 19 98 20 00 20 01 20 02 20 03 20 04 20 05 20 06 20 07

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200

China’s Shipbuilding Completion

Its Proportion Worldwide

SOURCE: RESEARHINCHINA

1995 and a projected 5.5 billion tons in 2010. World shipbuilding has generally kept in step with the increases and declines resulting from significant events such as world conflicts, major changes in oil prices and economic recessions. The “China Shipbuilding Industry Report 2007” estimated that the global shipbuilding output will amount to 50 million compensated gross tons (CGT) in 2010, up 63 percent from the current output level (see Figure 1). In 2010, the gross weight of shipbuilding in China will take a quarter of

the world’s CGT total and that figure is projected to rise 30 percent in 2015, according to the report. “The [global] shipping community has certainly experienced a boom in the past four to five years,” Koehne says. “As a result, it seems clear that the shipping market has tightened and the ship owners are experiencing wonderful times and henceforth there’s some speculation as to what the future holds.” As for what the future holds for marine transport to be viewed as a viable and economical fit for ethanol producers to sustain increased production and demand in the U.S., experts believe it will be a matter of time until the competition between rail and marine finds a stable medium. “The question is competition,” Dibner says. “The question is to find out where the marine mode can provide shippers with lower cost competition than rail. I think the answer is that in many instances where the routes are either potentially circuitous or the volumes are significant, it certainly is possible for marine [transport] to be competitive [in the ethanol industry].” EP Bryan Sims is an Ethanol Producer Magazine staff writer. Reach him at bsims@bbibiofuels.com or (701) 738-4962

Custom is the standard at Mueller®. Established in 1940, Mueller specializes in the design and manufacture of a full range of tanks and vessels, but we do more than tanks — we provide process solutions. We offer integrated systems, modular fabrication, field construction, and complete project execution. Paul Mueller Company’s state-of-the-art shell-and-tube designs are built to last, minimize the effects of fouling, provide trouble-free start-ups, and increase your operation’s run times. Contact us for your process solution.

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391-4

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CELLULOSE

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

CELLULOSE

Going Beyond the Corn Kernel Poet LLC didnâ&#x20AC;&#x2122;t have far to travel to find a feedstock that it can use to turn the corner on cellulosic ethanol. During the 2007 corn harvest, the company showcased its plans to use corncobs as the primary feedstock for Project Liberty, its cellulose-to-ethanol expansion project at Poet Biorefining Emmetsburg in Iowa. Story and Photos By Michael Shirek

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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CELLULOSE

eff Broin is no stranger to corn fields. As the chief executive officer of Poet LLC, the nation’s secondlargest dry-mill ethanol producer, his business is tied directly to the Midwest corn growers. As the company begins to explore the world of cellulosic ethanol, however, a corn field might not seem like the obvious place for Broin to address the media regarding his company’s future in the next-generation production of ethanol. As it happens, Broin spent a windy afternoon in October at a podium situated just beyond the rows of a standing corn field near Hurley, S.D. He talked about Poet’s plans to extract 38 percent more ethanol from each acre of corn already dedicated to producing the fuel from starch at some of its 21 operating ethanol plants and another five that are under construction. The company is expanding its Iowa-based Poet Biorefining Emmetsburg facility, which will serve as the blueprint for its cellulosic ethanol future, and using 4,000 acres of South Dakota corn to conduct its first round of testing on corncob harvest and storage processes. Poet used those 4,000 acres as its laboratory during the fall corn harvest. The company conducted experiments on equipment used to harvest the grain and cobs, and worked extensively with corncob piles, trying to find the best combination of harvest technique and storage. Although the

Broin addresses the media at Poet’s cob harvest day in October near Hurley, S.D.

testing concluded in November, Poet is still analyzing those results and plans to release some of its findings to the public early in 2008. “I think the time is getting very close where

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

CELLULOSE

opportunity to develop a process which I think our company has the capability to do, it’s the enzyme companies’ interest in developing an enzyme at a price that we believe is viable and it’s the evolution of multiple microorganisms that have the potential to process the ethanol. In my opinion, those things are all coming together in the next few years.” Although Poet can only control the first part of that equation, it’s well on its way to developing the processes that will allow the company to efficiently gather cellulose for conversion to alcohol. Is this the turning point for commercial-scale cellulosic ethanol? Will Poet’s 25 MMgy of ethanol produced at Emmetsburg be the first competitively produced cellulosic ethanol on the market? Will Poet’s corncob harvest techniques find their way to a large number of America’s corn growers who are already making a pass through fields with harvest equipment that could be easily modified to pick up a second valuable product? Mayberry describes the company’s piling strategy as a practical demonstration takes place in the background.

Harvest and Storage

we’re going to be able to make large amounts of ethanol from cellulose,” Broin said at the harvest demonstration in South Dakota. “It’s the alignment of multiple things. It’s the

It’s not exactly breaking news that farmers are harvesting corncobs, and Poet isn’t the first company to hatch the idea of removing the cob from the field when the grain is harvested. Farm implement manufacturers have already developed equipment that can harvest the cob in the same

CELLULOSE

Equipment demonstrations highlighted Poet’s cob harvest day. The company rolled out a technique to harvest corncobs in the same tank as the grain.

pass as the grain. But Poet is looking beyond simply harvesting the corncobs when Project Liberty comes on line in 2011 and needs a steady supply of cellulosic feedstock. Poet biomass manager Reed Mayberry says the compa-

116

ny’s fall harvest experiments were designed to test as many permutations of harvest and storage as was feasible. The company is hoping to develop a catalog of techniques that can be used by individual farmers to execute the most efficient method of adding value to their corn crop. “We’re trying to provide options for a guy that farms 300 acres just as well as a guy that farms 3,000,” Mayberry says. The one-sizefits-all approach will not work in the real world where not every farmer is equipped with the same implements, and not every farmer gives the corn harvest the same priority. With that in mind, Poet focused on two harvest techniques. The first involves little modification to combines and uses equipment already available commercially to harvest whole corncobs. The second involves more modification to the combine and gathers the grain and cob in the same tank, requiring a second process to separate the two. Mayberry says both techniques have a place in the company’s plans and both were on display at the company’s harvest day. The first method modifies a combine with nothing more than a hitch used to pull a cob caddy. Mayberry says this technique is the simplest way to harvest cobs and is available to virtually every farmer who currently harvests corn. “The only real modification is that hitch,” Mayberry says. “[The combine] was a standard, stock machine that was pulling a cob caddy. It catches everything that comes off the

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

CELLULOSE

back of the combine and separates the cob from the rest of the stover.” The advantage of this technique is easy to see: No significant modification to the combine with the whole cob completely separated from the grain. After a pass through the field, the farmer simply dumps the caddy and piles the cobs. The second method doesn’t come in a neat package from an equipment manufacturer. In order to harvest a corn and corncob mix (CCM), a farmer must change combine settings and some minor parts. “[We change] several things in the inside of the rotor combine that allows it to now capture not only grain, but cobs in a commingled fashion in the grain tank,” Mayberry says. The process involves minimal costs and isn’t very complex, something that’s important to its viability. “We wanted to make a system that was very flexible that had the [ability] to go from soybeans to corn within a couple hours of modification,” he says. “By the end of the season we feel pretty comfortable that it can be done in less than about 20 minutes—that modification from corn and corncob mix either back to straight corn or back to soybeans or wheat or any other crop.” The CCM consists of grain mixed with cobs that are broken up as they pass through the combine. The downside to CCM is that the mix must be separat-

The corn and corncob mix as it enters the separating mechanism.

ed. Poet’s engineers have developed a process that separates the grain and cob. Right now, the separation process involves two pieces of machinery. The company hopes to have the

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process simplified as the 2010 harvest comes along and farmers are producing cobs for Project Liberty. Poet is focusing on more than one harvest method because it wants corn growers to have more than one option for bringing in the cob harvest. “Different systems fit in differently with different farms,” Poet feedstock development engineer Mark Dilts said at the harvest day. “One of the reasons we’re doing the study this fall is so we can tell farmers how it will affect their production.” Not only is Poet developing more than one harvest technique, the company is also working with many storage options. Unlike the cob harvest equipment, the long-term storage required for Project Liberty hasn’t been developed. The company started from scratch and came up with 20 different techniques for piling cobs in order to find the method that will preserve the crop and allow Project Liberty to operate with a steady supply of quality feedstock throughout the year. Poet worked with approximately 120 piles in the experiment, three replications of each of the 20 techniques for both whole cobs and the broken cobs produced with the CCM method, Mayberry says. The material difference between the whole cobs and the broken cobs is significant, but Poet is still looking at data to determine the longevity difference between the 4- to 6-inch

whole cobs and the 2- to 3-inch broken cobs.

The Future “With Project Liberty coming on line in 2011, we have to be producing corn cobs from the farmers in 2010 to some magnitude,” Mayberry says. “That allows us to have a 2008 test plant as well as a 2009 test plant, which we are evaluating right now. It will take place in South Dakota and Iowa as we roll into 2008 and beyond.” Although Poet has no definitive plans regarding the size and scope of the 2008 test plant, Broin told EPM that the company will be active in refining its methods in the new year. “We are certainly going to wait and see some of the early test results on the research happening here before we make that decision,” he said. “I would assume it would be at least as large or larger next year.” When Project Liberty at Emmetsburg is operating, Poet estimates that it will require the cobs from 275,000 acres of corn to produce cellulosic ethanol. Mayberry says the company is optimistic that it can meet its goals in harvesting that amount of feedstock and that it will have developed methods to store the material by 2011. “One of the things that I like about it is that our feedstock for Project Liberty is being grown today everywhere in the Midwest,” he says. “It’s not an adaptation to a new

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CELLULOSE

crop, a new cropping system [or] new equipment. It’s being raised on every acre of corn that’s out there today. It’s a value-added opportunity for people to not only capture corn, but cobs for cellulosic ethanol.” If Project Liberty is a success, Poet says it can take the technology to virtually any of its other biorefineries and expand those with a cellulosic ethanol component. “I think the interesting thing about our plan is that it’s very replicable,” Mayberry says. “As we now have 21 plants in the U.S., I like the idea that the footprint on each plant is built to be very replicable. When Project Liberty is up and going, this is a footprint that could be added to any of the other Poet biorefineries.” Poet says that harvesting the corncob and using it to produce cellulosic ethanol will increase the yield of fuel ethanol from an acre of corn by 27 percent. The company will also use its BFRAC fractionation technique to separate the hull from the corn kernel and plans to use that fiber in its cellulosic ethanol process to get 11 percent more ethanol from an acre of corn. That 38 percent gain is the culmination of more than a decade of work by Poet to develop a cellulosic ethanol process. “Our company’s been looking at cellulosic ethanol for about 15 years and we just recently decided that cellulosic was the direction to go,” Broin said in October. “About a year and a half ago we got very interested in the area and really started targeting the processing of cobs as well as the corn fiber into ethanol. Our original interest in cellulosic ethanol goes all the way back to the invention of our BFRAC process over seven years ago.” Mayberry says the company will release some of its findings from the

cob harvest early in 2008 and from there will determine how to conduct its 2008 harvest testing. Poet is working with original equipment manufacturers such as Case IH and John Deere, whose level of participation will have some bearing on the scale of the operation. Broin said he’s confident that 2007’s findings will be trumped by 2008’s and that Poet will be ready to roll out simple, efficient and effective methods to harvest corncobs by the 2010 harvest. “We’ve already

found some efficient ways to collect cobs in the field and I think that there will be even better methods in the future,” he said. EP Michael Shirek is the Ethanol Producer Magazine online editor. Reach him at mshirek@bbibiofuels.com or (701) 7384962.

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CHEMICALS

The once abundant and relatively cheap chemicals indispensable for the production of ethanol are now hard to get and expensive. Although the rapid rise of the industry is partly to blame for this, other factors are influencing the increasing cost of these compounds including high natural gas prices, the demands of the metal industry and incresing demand for fertilizer. By Jessica Ebert

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COSTLY CHEMICALS

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lthough sulfuric acid, caustic soda, urea and anhydrous ammonia represent a small portion of the total cost of producing a gallon of ethanol, the prices for these chemicals are rising and producers, already beleaguered by high corn and low ethanol prices, are feeling the crunch. “We’re very concerned,” says Walter Wendland, chief executive officer and president of Golden Grain Energy LLC. “Even though these chemicals represent a fairly small portion of the total cost of operating a plant, those 2 to 3 cents may be somebody’s entire margin with high corn prices.” To operate Golden Grain Energy’s 100 MMgy ethanol plant in Mason City, Iowa, for one year requires about 2,000 tons of sulfuric acid, 1,000 tons of caustic soda, 5,000 tons of urea and 600 tons of anhydrous ammonia. Although these numbers vary from plant to plant, the importance of these chemicals in the efficient production of ethanol is undeniable: sulfuric acid and caustic soda are used to clean tanks, urea is used to feed yeast in the fermentation process and anhydrous ammonia is used in the early stages of the process to balance the pH and improve the action of enzymes used in the slurry system, Wendland explains. Since 2006, prices for sulfuric acid and urea have doubled and caustic soda costs about $100 more per ton, according to Steve Grohs, regional industry manager of biofuels for Univar USA, an industrial chemical distribution company. In the case of ammonia, natural gas prices and increased fertilizer demand have nearly tripled prices since 2002. “Chemicals used to be everywhere and were dirt cheap,” Grohs says. “Now there’s no indication that this price escalation will change.”

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150 125 100 75 50

JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJO 96 97 98 99 00 01 02 03 04 05 06 07

Prices are reported each January, April, July and October and are based on various standards used in international trade contracts such as free on board or FOB. SOURCE: FERTECON

Production Challenges Securing sulfuric acid is of greatest concern to those in the ethanol industry. “If there’s one chemical that’s going to be the Achilles’ heel of the industry, it’s going to be sulfuric acid,” Grohs says. “I can get urea, I can get caustic. It may not be as cheap as it was two years ago but I can get it. Sulfuric acid may not be as cheap as it was two years ago but in some cases I can’t get it and neither can other suppliers.” With applications ranging from fertilizer production to the processing of ores and oil refining, sulfuric acid has earned the prestige of being called the “workhorse” of all industrial chemicals. The traditional method of mining metals

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like zinc, copper and nickel involves a thermocatalytic process that releases a sulfurous gas, which is captured and mixed with water to produce an oily, colorless liquid—sulfuric acid. Most of the ethanol industry is supplied by this smelters acid, Grohs says. “Although a lot of sulfuric acid is produced in North America, the U.S. relies heavily on import product as well,” he says. “However, the import market has all but dried up due to the global demand for sulfuric acid, and high prices being paid compared with the U.S. acid market. Those consumers that relied on the import acid are now turning back to the North American producers adding more pressure to their supply.” One reason is that prices for metals are at an all-time high and sulfuric acid is used in a leaching process to extract metals from ore, imports of the chemical to the United States are being diverted to countries like Chile with leaching operations that are willing and able to pay exorbitant prices. In addition, the fertilizer industry is one of the largest global consumers of sulfuric acid. “Demand for fertilizers is astronomical,” Grohs says. “Sulfuric acid is a feedstock for a tremendous amount of fertilizer so the fertilizer guys are consuming every ton of sulfuric acid they can get their hands on.” Some companies such as Texas-based Martin Midstream Partners LP have chosen to secure a sulfuric acid supply and lower fertilizer feedstock costs by building their own plant. The Martin Midstream Partners sulfuric acid plant, which came on line this past spring, is located at its Plainview, Texas, fertilizer production facility. “Despite some initial operational delays with the third-quarter startup of the sulfuric acid plant, we have been running at full capacity for more than 30 days and expect to realize our first full quarter of benefit from sul-

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Price of Urea Fertilizer Based on Monthly Averages $US/MT 400

FOB NOLA Barge $/ST

FOB Middle East (prills)

FOB Yuzhnyy (prills)

350 300 250 200 150 100 50 0

JAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJOJAJO 96 97 98 99 00 01 02 03 04 05 06 07

Prices are reported each January, April, July and October and are based on various standards used in international trade contracts such as free on board or FOB. SOURCE: FERTECON

furic acid operations in the fourth quarter,” Ruben Martin, president and chief executive officer of the company announced in early November. Despite this, construction of facilities that would lessen the strain on the sulfuric acid supply are not expected to come on line in the United States anytime soon, Grohs says. Therefore, there is not really going to be any relief until the U.S. market is attractive again. “Whoever pays for the acid in ’08 and ’09 is going to get the acid,” he says. The situation for urea is similar although somewhat less severe: most of the urea used in the United States is imported and prices have never been higher but the supply is not so tight. “You can get urea,” Grohs says. “You just have to pay

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for it.â&#x20AC;? Urea is made from anhydrous ammonia, which itself is a product of the conversion of natural gas into hydrogen. A series of chemical reactions transforms this gaseous hydrogen into ammonia. Although natural gas prices in the United States have been fairly stable after reaching an all-time high following Hurricanes Katrina and Rita in 2005, the cost of natural gas in the states is still significantly more expensive than in the Middle East or eastern Europe. But the price of natural gas is not the major driver for high nitrogen costs, says Mark Morrissey, chief executive officer of United Services Association, an Iowa-based chemical procurement and risk management service for the agriculture industry. â&#x20AC;&#x153;I would say the cost of natural gas is one factor in determining the price of anhydrous ammonia but I wouldnâ&#x20AC;&#x2122;t say that it is the major factor today.â&#x20AC;? A few years ago the latter was true but since then, â&#x20AC;&#x153;we have moved from a supplycost driven valuation to a demand-driven valuation,â&#x20AC;? Morrissey says. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s crop acres. It is corn acres jumping 15 million acres in one growing season. This jump in demand has put a lot of strain on supply.â&#x20AC;? A significant portion of the blame for this strain can be placed on the shoulders of the ethanol industry. In addition, in the past few years, a lot of the stateside production of anhydrous ammonia has shut down, due to ongoing increases in natural gas costs. â&#x20AC;&#x153;At that time, the production economics here were rising much more than elsewhere in the world,â&#x20AC;? Morrissey explains. However, in the past 12 months, he says, natural gas prices are starting to reach a kind of equilibrium. â&#x20AC;&#x153;We see gas prices moderating here stateside, and elsewhere in the world weâ&#x20AC;&#x2122;re seeing natural gas prices increase,â&#x20AC;? Morrissey says. Regardless, the United States is dependent on imports to meet its nitrogen diet and there is little in the way of new construction of nitrogen plants on the drawing board. Although the story behind the pinch in caustic soda supplies is not as bleak as that of sulfuric acid, urea or anhydrous ammonia, itâ&#x20AC;&#x2122;s still unique and significant. Caustic is a byprodETHANOL PRODUCER MAGAZINE FEBRUARY 2008

CHEMICALS

uct of the synthesis of chlorine gas, which is consumed in large part by the plastics industry for the production of polyvinyl chloride plastic (PVC). The PVC market follows the commercial building market. When the housing market is soft, the demand for PVC drops and likewise, chlorine production falls. As a result the availability of caustic soda dips as well, Grohs explains. “Again it’s controlled by another industry,” he says. “We simply get what’s available to us based on that industry’s fluctuations in demand.” In addition, U.S. exports of caustic soda are surpassing imports mainly in response to the weak U.S. dollar. With lower production rates here in the states, that makes the market “balanced to tight,” he explains. High chemical prices and limited supplies have put many ethanol producers on the hunt for alternatives to these compounds. For example, through September 2007, imports of caustic were down 22 percent while exports were up 28 percent. “We’re all trying to find alternatives but the alternatives still come at a higher price,” Wendland says. Grohs on the other hand recommends that producers be proactive about determining where their chemical supplies are coming from. “If some plants align themselves with the right distributors then they should be OK, but they need to look at this more seriously than they did in the past,” he says. “Supply is of great importance. If you don’t have supply, pricing doesn’t really matter. Focus on supply and what your particular network of supply is doing.”

Dependence Conundrum Perhaps as disturbing as the price of these chemicals is the notion that in an effort to wean the country off the sweet milk of one commodity, that dependence has been transferred to others. “We’re doing our best to reduce dependence on foreign oil but in a way we’re still dependent,” Wendland says. In addition, what once seemed to be a mutual interaction between the farmer and ethanol producer is now becoming a competitive one. “What you have here are two industries that are kind of cannibalizing themselves,” Grohs says. “In a weird way they’re competing with each other for the same products. The ethanol guys need the sulfuric acid but so do the fertilizer guys so they can make fertilizer for the farmers growing the corn. Ethanol guys need the urea but so do the farmers. It’s going to be very interesting to see what happens in 2008 because at this point there’s really no sign of any of this escalation in pricing or supply shortages changing.” EP Jessica Ebert is an Ethanol Producer Magazine staff writer. Reach her at jebert@bbibiofuels.com or (701) 738-4962

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CONSTRUCTION

Constructing Economics The bottom line is a big concern for those in the ethanol industry today. EPM takes a detailed look at whatâ&#x20AC;&#x2122;s changed on the construction side of the equation in the past year that could impact the industry in the coming year. By Craig A. Johnson

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ighway 75, a lonely rural route winding through the Iowa countryside, passes scores of small towns, most without a gas station, bar, convenience store or church. It’s December, and the fields once lush with green corn stalks are now cleared, encrusted in snow and waiting for the next planting. Along this forlorn road is Arthur, Iowa, population 245. A few years ago, Arthur was a town held together by the business that came to the town’s grain elevator and truck stop. In 2006, it became the construction site of Platinum Ethanol LLC’s 110 MMgy plant. John Handel serves as the Platinum Ethanol project manager. Wind rocks the trailer that houses his office where he views the work of industry analysts through the lens of firsthand experience. Handel has heard about plants in trouble; a nearby biodiesel plant—its foundations already laid— recently had to halt construction to sort out financing issues. Plant construction is a stressful business, but Handel is relaxed, leaning back in his chair with a warm grin. The current slowdown in ethanol plant construction hasn’t stopped work at his site. “We still have deadlines to meet. [Construction workers at the site] are doing their best to keep us on target for startup in the summer of 2008,” he says. Handel acknowledges, however, the increased cost of

PHOTO: CRAIG A. JOHNSON, BBI INTERNATIONAL

Platinum Ethanol LLC a 110 MMgy ethanol plant under construction in Arthur, Iowa, is targeted for startup in the summer of 2008.

labor has been an issue. “Specific costs for things like concrete workers, welders…there’s been an increase in the costs to get those people on site, but it hasn’t delayed construction,” he says.

CONSTRUCTION

According to figures from the Bureau of Labor and Statistics, construction employment is projected to rise by about 1 percent each year through 2016. This increase represents 781,000 construction jobs for 2008.

This is still the case at the majority of ethanol plants under construction. Rising costs have slowed the rate at which projects announce they intend to begin construction, but only a handful have been immobilized by financial issues. The reason may be as simple as the fact that no one makes a profit until fuel is being produced, or as significant as strategic management through complicated changes. Throughout 2007, ethanol plant construction slowed with only four projects begun in the last six months of the year. Some analysts point to high feedstock costs, market saturation and “Big Oil’s” stranglehold on the fuel industry as impediments to progress. Dave Vander Griend, president and chief executive officer of ICM Inc., attributes some of

the construction slowdown to “lender fatigue.” “We’re seeing plants that [future producers] were trying to get equity for and the price of the plant kept going up,” he says. “If the lender has already decided that a project gets so much per gallon of production, then the [future producer] needs to raise more money, and when we had such a floating target, it made [raising equity] a challenge. I think you’ll begin to see the price of plants come back down.” Vander Griend’s optimism stems from his belief that the country can support more ethanol before any kind of market saturation is reached, or feedstock supplies run out. “We have adequate grain stocks to support more Vander Griend ethanol from grain, but it’s a political football to determine where we go from here.” Of concern to all is the rising cost of doing business in the ethanol industry. One of the factors driving the increase in plant construction costs is the shrinking labor pool for projects, and thus a premium is placed on skilled workers. “This isn’t new, this declining labor pool; we’ve seen this happening over the past five to 10 years,” Vander Griend says. The waning pool of potential workers is a cost producers can generally account for in their budgets and proposals,

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CONSTRUCTION

Overall, figures for construction labor actually declined by 1.6 percent between November 2006 and November 2007, however, the declines came entirely from the residential side.

but, according to Vander Griend and others, this is a cost that will not decrease in the near future. According to figures from the Bureau of Labor and Statistics, construction employment is projected to rise by about 1 percent each year through 2016. This increase represents 781,000 construction jobs for 2008. After food service and the health care industries, construction is the third-fastest growing in terms of the number of jobs to be added. As demand for skilled labor increases, plant operators will be forced to pay more to get the best people. “That’s the reality of the industry,” Vander Griend says. “Everything in the construction trade is getting more expensive.”

Economic Pressures

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Construction in the ethanol industry has dropped dramatically in the past six months, and could be a reflection of the overall turbulence in the construction industry itself. During the late 1990s, cost increases for materials such as concrete, stainless steel, asphalt and diesel were minimal, or at least predictable. 2004 saw prices begin their ascent, continuing into 2006. The cumulative increases are reflected in figures from the Bureau of Labor and Statistics’ producer price index for these and other construction inputs. Since December 2003 (and adjusted seasonally), the price of concrete products in general increased by 31.5 percent, with readymixed increasing by 36.2 percent. Stainless steel prices have risen 50.5 percent through October 2007. Asphalt at the refinery has increased by 117.2 percent, but prepared asphalt costs only increased by 26 percent over the same period. Finally, No. 2 diesel, which is most commonly used in heavy machinery, rose by an astounding 154.4 percent in less than four years. In the five key areas for construction indicators—highway, heavy, nonresidential, multi-unit residential and single-unit residential—inputs climbed by 28 percent. Of most importance to ethanol builders, nonresidential construction inputs alone rose by 26.7 percent.

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CONSTRUCTION

The figures are compelling when compared with the 13 percent rise in the consumer price index, which the Bureau of Labor and Statistics uses to calculate total inflation. For plant builders this means that proposals prepared using the 2003 through 2005 figures under the assumption that construction costs Simonson would grow at a slower pace, may explain why so many projects in ethanol and biodiesel have been delayed, redesigned or altogether canceled. The U.S. Census Bureau reports that between 2006 and 2007, nonresidential construction spending increased by an average of 14 percent, accounting for $545 billion dollars overall. While the Census Bureau doesn’t mention ethanol specifically, the increase does signify a changing landscape. Ken Simonson, chief economist for the Associated General Contractors of America, which represents more than 30,000 general contractors, subcontractors and industry suppliers of goods and services, says the construction industry has been expanding in the past several years. “We’ve seen eight straight quarters in which investments in private, nonresidential structures have grown faster in gross domestic products (GDP). That’s the longest string of expansion and expanse of the GDP since the 1950s.” This extended period of growth has tightened reserves of materials and labor. “Certainly, energy projects take very specialized labor so there is already a relatively small pool of those workers to draw upon,” Simonson says. The volatility seen in the construction industry overall, and ethanol in particular is surprising to many because

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the situation seems to be unique. “Most other businesses are not experiencing the kinds of cost increases that have hit construction,” Simonson says. This comes as a surprise to some groups focused on the labor side of the equation. Overall, figures for construction labor actually declined by 1.6 percent between November 2006 and November 2007, however, the declines came entirely from the residential side. Simonson points to the lack of transfer-

ability between industries as key to understanding this phenomenon. “You can’t take a carpenter’s helper from a single-family home and put him on top of a tower crane.” There is only limited crossover in these two markets. Moving forward, a key indicator of potential growth opportunities may be found in the Federal Reserve’s move to lower short-term interest rate targets to encourage lending. The decline in residential construction may be having an

impact on the nonresidential side of the industry. As the Federal Reserve takes steps toward improving lending opportunities for families, a side effect may be the potential easing of credit restrictions for ethanol plants. That said, it may be that with these lending opportunities will come tighter restrictions and standards, cooling the construction industry to a more sustainable growth pattern. Lowering interest rates may be good for borrowers in the short term and make debt-to-equity solutions more bearable by easing the requirements banks place on borrowers, but this good news may be followed by a continued depression of the dollar, driving inflation. In the end, the Fed’s action may be a double-edged sword for construction as prices on imported petroleum and materials are pushed higher by such a move.

Looking Forward In Iowa, it’s business as usual at Platinum’s construction site. The possibility of lower cost materials may benefit the project, or may be seen as too little, too late. To look at a single indicator, the diesel the site uses in its engines would have to drop nearly 20 percent by early 2008 to be in line with January 2007’s prices. This is unlikely with a barrel of oil hovering in the $100 range. Analysts and future producers will be watching the price of these indicators closely. Once the cost of materials moves back to a reasonable level, it should only be a matter of time before steady growth in the ethanol industry is realized. EP Craig A. Johnson is the Ethanol Producer Magazine plant list and construction editor. Reach him at cjohnson @bbibiofuels.com or (701) 738-4962.

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DEBATE

How big is a commercial-scale cellulosic ethanol plant, and will we know it when we see it? By Ron Kotrba

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DEBATE

HOW

BIG IS?

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DEBATE

hrough the efforts of pure science, ethanol can be made a million different ways. Add the economic and efficiency constraints of the real world, however, and many of the more eccentric approaches fall by the wayside without significant, expensive advances. “And you’re really talking about labs and toys and it’s fun to experiment and it’s fun to try these things at universities and maybe some companies are going to try them in their backyard,” says the proud chief executive officer of Range Fuels Inc., which broke ground on its modular 20 MMgy thermochemical wood-toethanol refinery in November. The CEO’s name is Mitch Mandich, and while his words out of context read like the ravings of a madman, they make perfect sense when properly framed. Mandich is talking about how the race to “be the first” has triggered the onset of frenzied discoveries and with it, overstated claims about novel and perhaps idealistic approaches to commercializing ethanol production from cellulose. He is not uninvolved in this race. In fact, Mandich like all the

‘I’ve talked with a number of constituents across the industry and if you can’t get something to 10 MMgy, then it’s just not commercial scale at all. And even that is probably small for some processes.’ others is declaring himself the winner. “We asserted we would be the first in February 2007, when we were putting together our plant project, and again when we were one of the recipients of the [U.S.] DOE grant, and we asserted it again in front of colleagues, and then during our November groundbreaking we asserted it again,” he says, tongue in cheek. Whether Range Fuels will be the first operating commercial-scale cellulose plant, who knows? Maybe. Range Fuels and six other demonstration projects gained their legitimacy in the public’s eye upon receiving news of their large DOE grant awards. Joining Range Fuels in this upper echelon of the cellulose cast is Abengoa Bioenergy Biomass of Kansas LLC, Alico Inc., BlueFire Ethanol Inc., Poet LLC and Iogen Biorefinery Partners LLC. The diversity of technologies

represented in those six projects is great, but will they all pan out? They each displayed their respective “states of readiness” for the DOE. As for the projects that didn’t receive DOE funding, can they build small and still be successful? There is a huge discrepancy between a beaker full of alcohol retrieved through some obscure process and producing 100 million gallons a year and turning a profit. Some technoloMandich gies and approaches— and certainly feedstock choices—are fated to encounter problems during scale up. Verenium Corp. formed in 2007 when enzyme company Diversa Corp. merged with Celunol Corp. (formerly

PHOTO: RANGE FUELS INC.

DEBATE

Range Fuels held a ground breaking for its Soperton cellulosic ethanol plant, which will use wood and wood waste from Georgia’s pine forests and mills.

BC International), taking on the new name to signify the green millennium. It lays claim to having broken ground on the first demonstration-scale cellulosic ethanol plant in the United States, sized at 1.4 MMgy. The company’s chief executive officer, Carlos Riva, spoke at Infocast’s Cellulosic Ethanol _705_EthanolAdUpdate OL.ai 7/17/07 2:27:21 PM Summit in Washington, D.C., this fall, and said Verenium’s plans to imple-

ment a 20-fold scale-up from the demonstration plant would encounter feedstock procurement issues using only bagasse from U.S. sugar mills. This is why specialty bred energy cane is planned to supplement the relatively limited availability of U.S. produced bagasse. The 1.4 MMgy demonstration plant will be complete in early 2008. Verenium is a public company and

although it wasn’t one of the six DOE grant recipients, its encompassing approach seems promising. The energy department defines the ability to demonstrate commercially producible ethanol from cellulose if the process consumes 700 tons of biomass a day. Interestingly, there is no gallons-per-ton of ethanol stipulation. Mandich wouldn’t disclose the gallonsper-ton ratio his plant achieves, saying, “We don’t talk about that because, well, that’s the Holy Grail, right? You’ve got the enzymatic guys going after this, and the acid hydrolysis guys, and we think we have a far superior approach but if you start getting into gallons per ton, all you’re doing is giving away your secrets.” An unconfirmed source claims Range Fuels can get 65 gallons of ethanol per ton, which, when multiplied by 700 tons per day, 365 days a year, comes to an unofficial tally of 16.5 MMgy. “I’ve talked with a number of constituents across the industry and if you can’t get something to 10 MMgy, then it’s just not commercial scale at all,” Mandich says. “And even that is probably small for some processes.” Depending on the feedstock, the

DEBATE

Celunol, which merged with Diversa to form Verenium, held the groundbreaking for its demonstration-scale cellulosic ethanol plant near its pilot-scale plant that is already producing ethanol from sugarcane bagasse and energy cane.

economic livelihood of a plant is constrained by its size—or vice versa. Some have it better than others. Poet, for example, was innovative enough to

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devise the fractionation of corn and use the fiber that’s already there to supplement additional incoming corncobs, a dense and practical feedstock for

delivery to its Emmetsburg, Iowa, drymill plant under conversion for its cellulosic ethanol development project. Conversely, if a company is looking at straws, stover or soybean stubble, this could equate to the collection of residues from millions of acres of land, for one large plant. Yields and hauling distances are important. But Mandich says, “In the end, it will be constrained by the productivity of the technology. If you can get more gallons per ton you can build a bigger plant with less of a geographic footprint.” Ultimately, there are practical limits to how big most biomass refineries can be, but clearly on the other end there are issues with size (i.e. productive capacity) and how small a plant could get and still be considered a player in the commercial arena, right? But small plants cannot capture economies of scale, unless of course they are integrated into existing facilities, as some

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of the leading grant winners and self-starters are doing. EPM’s sister publication, Biodiesel Magazine, classifies biodiesel plants producing at least 1 MMgy as commercial-scale and therefore creditable for placement on its popular proposed plant map printed twice a year. If biodiesel plants at 1 MMgy are commercialscale but “demo” ethanol plants like the Jennings, La., plant aren’t, how does this wash? At the Cellulosic Ethanol Summit an audience member stood up during a question and answer session and somewhat admonished the experts in attendance for not recognizing that six alcohol plants using cellulose as feedstock are operational around the world today. There must be constraints on the bottom side of the size argument if six or more cellulosic pilot or demonstration plants are not classified as commercial. After the audience member’s remark there was silence—no one responded. A key Bransby showman at the event, Auburn University Professor David Bransby, later retorted that the aforementioned plants were pilot and demonstration scale. “Shouldn’t the decision on whether a cellulosic ethanol plant is commercial or not depend on whether it makes money?” Bransby asked. “Shouldn’t it matter whether or not it can turn a profit? Can’t small plants make money?” One potential factor limiting the profitability of small enzymatic hydrolysis conversion plants is the high transportation costs to deliver these enzyme cocktails, which at this stage of development require lots of water to remain useable. While much of this exercise was

done in fun, it’s clear that confusion exists concerning what elements are needed for individual plants small and large to meet the threshold of commercialization. If cookie-cutter designs such as those used in the corn-ethanol industry are held in mind, then experts say forget it. So what is a commercial-scale cellulosic ethanol plant? Sure, it’s one that can process at least 700 tons of biomass a day as the government defines it, or a minimum of 10 MMgy as Mandich

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says. In the end, it comes down to having a reproducible and robust conversion process; a long-term feedstock arrangement and the ability to efficiently get the material into the plant; access to abundant capital; keeping costs below sales; and at this point government subsidies. EP Ron Kotrba is an Ethanol Producer Magazine senior writer. Reach him at rkotrba@bbibiofuels.com or (701) 7384962.

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Quaiattini delivered a visionary address at Decemberâ&#x20AC;&#x2122;s Canadian Renewable Fuels Summit in Quebec City, Quebec. PHOTO: BRIGITTE BOUVIER

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FAMILIAR

FACE TAKES THE CRFA HELM

Following the departure of longtime Executive Director Kory Teneycke the Canadian Renewable Fuels Association looked for government experience for his replacement. New CRFA President Gordon Quaiattini has taken the lead and is providing the Canadian biofuels industries with an experienced voice. Questions by Dave Nilles

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ordon Quaiattini was named president of the Canadian Renewable Fuels Association on Sept. 24. The 14-year-old nonprofit association’s mission is to promote the use of renewable fuels for transportation through consumer awareness and government liaison activities. As president, Quaiattini is the principal advocate for renewable fuels in Ottawa and the provinces, as well as the main national media industry spokesman. Prior to his appointment as CRFA president, Quaiattini was a partner at The Wellington Strategy Group, an Ottawa-based government relations firm. While there he played a lead counsel role to biofuels clients. Quaiattini previously worked in federal and provincial politics, as well as Agriculture and AgriFood Canada. His extensive government experience is playing a pivotal role in developing a national biofuels plan in Canada. Quaiattini was a key speaker at December’s Canadian Renewable Fuels Summit, which, despite snow-plagued travel, drew approximately 400 attendees to Quebec City, Quebec. Following the event, he provided his insight and vision of the future to EPM. Q: Talk about your new role as president of the Canadian Renewable Fuels Association. What are the CRFA’s priorities in 2008? A: Energy and the environment are the defining issues of our time. Together they are driving massive change in consumer behavior, commercial expansion and public policy. At

the same time, the emergence of the bioeconomy is no longer pure speculation; it is a reality. For renewable fuels such as ethanol and biodiesel, all this adds up to increased demand, greater opportunity and steady expansion. Biofuels is no fad. It is, to be certain, an industry of the future. For the CRFA, this means our work is far from over. In the immediate term, we are focused on ensuring the timely passage of the government of Canada’s legislation to implement the national renewable fuels standard for ethanol and biodiesel. In addition, we will be working on the overall regulatory package required to bring into force the legislation as well as finalizing the program details for the federal government’s $1.5 billion (US$1.49 billion) ecoENERGY for Biofuels program. In the longer term, we need to keep pace with expanding continental and global opportunities and start setting new federal targets for future growth and production expansion. We also want to maintain Canada’s lead in next-generation biofuels development such as cellulose ethanol. Q: Tell us a little about yourself. How did you get involved in the renewable fuels industry, and how did you get started with the CRFA? A: I began my work with the biofuels industry in Canada more than five years ago when we had only a couple of ethanol facilities in operation and no provincial or federal mandates in place. I was very fortunate to be part of a team that helped implement the framework for tremendous growth and expansion in the biofuels industry. My back-

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ground is in public policy and government relations. For the past 11 years, I was a partner in The Wellington Strategy Group, an Ottawa-based government relations firm. Q: You have extensive experience working with government. You are known as a “veteran political insider and government relations specialist.” How does that experience relate to your role as CRFA president? A: My time in government and my experience in government relations over the years have allowed me to develop the necessary skills to understand public policy development and the decision-making dynamic within government. As CRFA president, not only am I the lead spokesperson for the sector in Canada, but I am also the industry’s chief lobbyist. It is my job to work with our member companies and organizations to engage federal and provincial political and bureaucratic decision makers in support of growing the biofuels industry in Canada. Canadians are asking industry and government to lead the effort to address critical energy, agriculture and rural development issues, while at the same time ensuring Canada is meeting its climate change responsibilities. A robust renewable fuels industry addresses each of these public policy drivers, and it is my job to work with governments, the industry and Canadians to ensure the right policy and programs are in place to develop this critical sector in Canada. Q: Canada’s federal government has done a lot to help biofuels. One of the more significant moves was a RFS that requires 5 percent of gasoline be renewable by 2010. Also included is a separate 2 percent requirement

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

for renewable content in diesel and heating oil by no later than 2012. How important is this standard for the country’s renewable fuel industries? In other words, what role does it play in furthering them? A: The RFS is extremely important to our industry. Quite simply, it will drive the demand for ethanol and biodiesel in Canada. The RFS will not only ensure biofuels are blended in our national transportation fuel supply, it will ensure that farmers and rural communities in Canada benefit, and Canadians benefit from a reduction in greenhouse gases by filing their cars and trucks with a renewable fuel. Q: The U.S. fuel ethanol industry was largely kick-started by farmer/investors. Likewise, the Canadian federal government’s ecoAgriculture Biofuels Capital Initiative helps give agricultural producers an opportunity to invest in biofuels facilities. How important is farmer investment to Canadian ethanol and biodiesel development? A: Canadian farmers’ participation both in terms of growing the renewable feedstock and investing in building biofuels facilities is critical to the sector’s success in Canada. The CRFA membership actually consists of several grower groups and farmer-led biofuels projects, and we work closely with other stakeholders in the larger agricultural sector as well. The CRFA championed the creation of the federal government’s ecoABC program that provides direct capital support for biofuels projects that have important farmer investment within the project. Thousands of Canadian farmers are investing in ethanol and biodiesel projects across Canada and the CRFA will be working to ensure that even more

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opportunities exist for Canadian farmers to not only provide the feedstock to these facilities but also see the opportunity to diversify their farm-gate revenue by investing in these projects themselves. Q: In early November, you as head of the CRFA, European Bioethanol Fuel Association Secretary General Robert Vierhout, Renewable Fuels Association President Bob Dinneen and Marcos Jank, president of Brazil’s Sugarcane Industry Association, made a collective statement supporting increased biofuels production and availability. Why was there a need for a collective statement from such a diverse group, and what does it say about the role international partnerships play in expanding biofuels? A: Each of our industry associations is working to engage governments and citizens on the critical role that biofuels can play in addressing energy security, agriculture, rural economic development and environmental issues and needs within our respective regions of the globe. Collectively, through a global partnership, we are better able to communicate the positive role biofuels can play in addressing these important public policy drivers in forums right across the globe and engage and educate others who are interested in

the potential for biofuels where they live and work. Unfortunately, our industry has critics who are misinformed, and this is happening on a global basis. Therefore, it is critical for us to work collectively to get the real biofuels story out—the real benefits to farmers and rural economies, the positive environmental benefits and greenhouse gas reductions, and the absolute need to diversify our global energy supply utilizing clean, renewable fuels. This is a great story where everyone wins, and it needs to be told more at that international level. Q: Besides sharing a border, there is a great deal of commonality between the Canada and U.S. biofuels industries. Both nations face detractors, such as those who criticize ethanol’s energy balance, the food-versusfuel debate and its impact on animal feed costs. What are the most prominent negative claims the CRFA is facing, and how are they being countered? A: Canadians and Americans enjoy a unique friendship that transcends well beyond the fact that we are each others largest trading partners and benefit from a continental economic partnership that is not easily duplicated anywhere else in the world. The future of a robust and dynamic biofuels industry is shared equally between our two countries.

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Yes, we do have our detractors. That is unfortunate given all the positive benefits I shared earlier with you. Grain farmers in Canada have long suffered from economic cycles over the past 20 years that saw them more often than not selling their grains and oilseeds at below the cost of production. This is not the case today as commodity prices have risen because of world demand, economic prosperity in developing regions like China and India, and the growth of the biofuels sector. However, Canada and the United States remain large grain exporters. Even after diversifying our energy supply with a clean fuel, we are still going to be large grain exporters feeding and fueling the world. The so-called food-versus-fuel debate is one where the facts do not seem to matter as they are seldom reported in the media. The facts are that are a very small amount of grain costs exist within the retail price of food, and that distillers grains is an important coproduct of ethanol production and a valuable high-protein livestock feed.

Biofuels program. The CRFA supports an open border for biofuels and believes that as both countries continue to expand the demand for biofuels, new opportunities for production facilities will exist on both sides of the border. Q: You recently attended the fourth annual Canadian Renewable Fuels Summit. What role do you feel the event, or those similar to it, play in bringing together the Canadian biofuels industry? What “take-away” point did you get from it? A: Despite some challenges presented to us by Mother Nature in Quebec City, the Canadian Renewable Fuels Summit was a success. Participants heard from the Canadian Minister of Agriculture and Agri-Food Gerry Ritz during the opening keynote address when he announced

that the government of Canada would be tabling the implementation legislation for the national RFS as well as the release of the program details for the ecoENERGY for Biofuels Program. Quebec Premier Jean Charest also addressed the summit and shared his government’s plans for renewable energy and renewable fuels for the province of Quebec. The Canadian Renewable Fuels Summit provides an excellent opportunity for all stakeholders in the sector to come together to network, share ideas, do business, and hear from dynamic speakers on the critical issues of the day for our industry. Q: While both the ethanol and biodiesel industries have grown considerably in Canada, the country’s biodiesel industry has lagged some-

Q: The U.S. ethanol tax credit, and the import tariff, have created contentious debate in Washington, D.C., and in the mainstream U.S. media. What impact is the credit having on the development of the Canadian ethanol industry? Is the more competitive exchange rate having an impact? A: Canada, thus far, has been a net ethanol importer. Our industry is just beginning to grow and take shape. Federal and provincial governments in Canada have worked with the CRFA to ensure that the biofuels industry can be as competitive here as in the United States by investing in critical policies and programs such as the national RFS, the ecoABC program and the ecoENERGY for

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PHOTO: BRIGITTE BOUVIER

several provincial jurisdictions moving ahead with their own commitments to expand the use of biodiesel, thus growing the demand. Industry is responding by expanding existing and building new biodiesel facilities, and exploring the use of higher-yielding varieties of canola and seeing new feedstocks such as algae come on line.

Approximately 400 people attended the fouth annual Canadian Renewable Fuels Summit in December.

what in terms of increasing production capacity. Why is this, and what do you expect from the biodiesel industry in 2008? A: There was no biodiesel industry in Canada just a few years ago, and today we have a couple of world-class facilities producing almost 100 million liters per year (26 MMgy). There are several projects being financed and constructed that will significantly grow the size of the Canadian biodiesel industry using a variety of feedstocks such as soybeans, canola and tallow. Many large government and private fleets are moving to biodiesel blends, including several large city bus fleets across Canada. In addition, the federal government is proceeding with the national RFS for biodiesel as well as

Q: Canada clearly has great potential to supply its domestic—and potentially international—market with homegrown biofuels. What potential do you feel ethanol and biodiesel holds in Canada in the next five years? What role will the CRFA play in that future? A: From my perspective, the potential is unlimited. The national RFS in Canada of 5 percent and 2 percent for ethanol and biodiesel is just the beginning as the CRFA begins to champion higher blends of 10 percent and 5 percent, respectively. With the recent passage of the new U.S. Energy Bill, the potential for Canada to be part of a significantly larger continental and global biofuels market is very real. Canada is also leading the way in developing next-generation feedstock and technology including the commercialization of cellulosic ethanol. The CRFA will continue to play a proactive role of engaging governments and Canadians to inform and educate them on the innovations taking place within the biofuels sector and to ensure that we are part of Canada’s permanent renewable energy and transportation fuel supply today and in the future. EP Dave Nilles is the Ethanol Producer Magazine contributions editor. Reach him at dnilles@bbibiofuels.com or (701) 373-0636.

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THE STRAW A team of amateur race car drivers made history in December, powering a pair of Le Mans prototype race cars on cellulose-based E85 in the world’s longest road race. By Tom Bryan

PHOTOS: JIM PARKS AND GREEN ALTERNATIVE MOTORSPORTS

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t is 2 a.m., 15 hours into the world’s longest auto race and seemingly the most precarious stretch of the 25 Hours of Thunderhill. Some 70 cars zip around an unlit track, exceeding 140 mph at times. The road is imperfect—it’s no glass-like European surface—and sporadic bumps and dips send sparks flying, headlights flickering in the California night sky. Surprisingly, the real hazard is yet to come. “When a few hundred drivers who haven’t slept in 30 or 40 hours pack up and drive home … now that’s scary,” quips Steve Zadig, vice president of a Silicon Valley startup and the driver-in-chief behind Green Alternative Motorsports’ successful demonstration of cellulose-based E85 in a sanctioned auto race. Sleep deprivation jokes aside, Zadig and his teammates are now as serious about using E85 as they are about winning races. What’s more, they plan to burn cellulose-based E85 whenever possible, and at the 25 Hours of Thunderhill in early December, they did. The endurance race is held each year in Willows, Calif. This year about 70 cars and 280 mostly amateur drivers raced for a title that, by duration if not prestige, trumps even the famed 24 Hours of Le Mans and the Rolex 24 at Daytona, Fla. “It’s the poor man’s version of those races,” Zadig says. In 2006, Zadig’s team finished third overall at Thunderhill, running a car with a gas-guzzling rotary motor—a good engine but one that consumed a lot of fuel, Zadig explains. “I liken it to pouring gasoline on an open flame,” he says. Zadig and his team returned to Thunderhill this

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year with a new name, a pair of new cars and a new fuel, making history with cellulose-based E85. They didn’t win, but the No. 87 GAM car finished second and the No. 28 car, the one Zadig helped drive, recorded the fastest lap. No one was surprised that the fuel performed flawlessly. Serious racing enthusiasts already know ethanol is a high-performance fuel—Indy Racing League’s total switch to ethanol from methanol in 2007 proved that. What Zadig’s team demonstrated, however, is more applicable to the public. GAM confirmed that E85, a fuel consumers can buy, performs as well on the track as it does on the highway. Second, it advertised the fact that cellulosic ethanol, with more than 80 percent fewer lifecycle greenhouse gas (GHG) emissions than conventional gasoline, is real. “We’re showing people that there are technologies out there today, cellulosic ethanol in particular, that when brought to a certain level of scale and consumer adoption, provide solutions,” Zadig says.

Conflicting Passions Despite his longtime fervor for car racing, Zadig has always been an enviornmentalist. “As a child, I got all sorts of wonderful exposure to the country and the mountains, which imbedded in me a strong sense of caring about the environment,” he says. In addition to his deep-seated respect for the nature, Zadig, an engineer and entrepreneur, has an appreciation and talent for business and invention. He now oversees the global operations for Telegent Systems, a start-up semiconductor company that’s bringing mobile TV to cellular phones and portable media devices. “I wouldn’t typify myself as someone who is a fanatical environmentalist, but one who sees the need for balance between reducing the human mark on the world and the need to make the economies of it all work,” he says. “Going green” is no flight of fancy for Zaidig. He holds a patent for a wave energy converter for use in offshore and deep-sea locations. So how does Steve Zadig, the entrepreneurial inventor, become Steve Zadig, the environmentally conscious race car driver? As it turns out, he’s been interested in racing longer than he’s been successful in business. In fact, Zadig dropped out of college in 1970 to pursue racing full time. He planned to work principally to finance his need for speed, but ended up in another race: the booming semiconductor business. In the late ’70s, he decided to focus on his career and his family. “I stopped racing for the better part of three decades,” he says. Then, in 2001, after guiding a few companies through initial public offerings, Zaidig retired. But he didn’t slow down. “I decided to take up the sport of racing again,” he says. “It was an unfinished piece of business for me.” This time around Zadig got his fix from endurance racing, otherwise known as road racing. “I got hooked on the team aspect of it,” he explains. Working with teams is one of his many talents, and it’s something he enjoys as much as racing itself. “That’s really what I do best,” he says. “I build teams. In my professional career it was building teams to develop chips. In this case, it’s winning endurance races.” Bear in mind that the type of racing Zadig is involved with is characteristically amateur. These drivers pay to play. With the exception of the world’s elite racing leagues—Indy, NASCAR, Formula One, etc.—auto racing is not a sport in which wealth is created, but burned up. “The best

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way to make a small fortune in racing is to start with a big one,” Zadig quips. By 2005, Zadig set his sights on Thunderhill. He found a good racing partner in businessman and fellow driver Richard Hatfield. They took their purposebuilt sports racer, landed the pole position in 2006 and at one point led the 25-hour race. Ultimately, they finished third overall, but it was the highest finish by a sports racer in the event’s 10-year history. Zadig was living his dream. Then guilt set in. Seeing his rotary motor-powered race car refuel a dozen times, burning more than 500 gallons of fuel in 25 hours, didn’t sit well. He was torn between his passion for racing and his responsibility to the environment. “My interest in renewable fuels in the context of global warming and greenhouse gas reduction strategies—especially considering my long history as someone interested in environmental issues—placed me in a rather peculiar conflict,” he says. After the 2006 Thunderhill, Zadig told his partner he was through with racing unless he could do it in a more sustainable way. “I didn’t feel I could continue racing unless we made a dramatic change and tried to take our success and use it as a vehicle to promote alternatives,” he says. That was the start of Zadig’s search for a clean, renewable racing fuel.

Finding a New Fuel In early 2007, with Hatfield’s backing, Zadig marched off on a quest to find an alternative fuel that would allow him to indulge in a hobby not typically deemed environmentally sound. He evaluated an array of fuels and technologies, from electric hybrids to hydrogen fuel cells. He considered biodiesel but couldn’t get past one major sticking point. Despite great advances, diesel passenger vehicles haven’t gained widespread U.S. acceptance. “We wanted to demonstrate a technology with a race car that was applicable to a large number of U.S. consumers,” he says. “We just couldn’t do that with diesel.” Zadig is quick to point out, however, that diesel-powered race cars are gaining considerable attention in the world of motor sports. For example, diesel-powered vehicles (some running on synthetic diesel and/or biodiesel) are now competing in sanctioned Le Mans events. Unfortunately, Europe’s excitement over diesel power continues to get lost in translation with Americans. Meanwhile, the American Le Mans series switched to E10 in 2007 and at the sametime the IRL made a full leap to pure denatured ethanol. The answer was clear. If Zadig wanted to use a fuel Americans could relate to, ethanol was the way to go. He discovered that corn ethanol had about 20 percent fewer lifecycle GHG emissions than gasoline and that cellulosic

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

refinery in Montreal, Quebec, Canada

Summer 2004 Mission Green: 8,700-mile cross-Canada cellulosic ethanol road test. Fueled GMC Yukon with cellulosebased E85

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2004-’06 Fueled fleet of 24 flexible-fuel vehicles with cellulosebased E85 for Natural Resources Canada

2004-present Fueling Iogen’s fleet of flexible-fuel vehicles with cellulose-based E85

ethanol—if he could get it—had about 80 percent less GHG emissions than gas. He could run straight denatured ethanol (E98) like Indy was doing, but that lacked the “demonstration” effect he sought because consumers can’t get pure ethanol at the pump. What he really needed was cellulosebased E85. “We saw a connection between what consumers could get at the pump, particularly in the Midwest, and what we could use in competition,” Zadig says. Until recently, San Diego, Calif., had the only E85 pump in the state. Now, according to the National Ethanol Vehicle Coalition, California has four public E85 pumps. For Zadig, coupling the consumer applicability of E85 with the environmental benefits of cellulosic ethanol was a winwin prospect. It was no longer if, but how he’d make it happen.

Getting at the Source Once he decided to use cellulosebased E85, Zadig set out to find it and was swiftly disappointed. “It just wasn’t available,” he says. “I learned about all of these wonderful things, all of this activity and all

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of these people proposing to start biorefineries. Then, to my disappointment, I discovered that only one company in all of North America made any amount of cellulosic fuel that a person could even propose to acquire. That’s Iogen.” Iogen Corp., one of Canada’s leading biotechnology firms and perhaps one of the most well-known players in the global race to commercialize cellulosic ethanol, has operated a demonstration/research and demonstration facility in Ottawa for years. Once in a territory all its own, Iogen is now competing against a hoard of aggressive new entrants to the cellulosic ethanol game. Established corn ethanol giants like Poet LLC, Abengoa BioEnergy and VeraSun Energy Corp. all have ambitious cellulosic ethanol programs, while new players like Range Fuels, BlueFire Ethanol Fuels Inc. and Colusa Biomass Energy Corp. have also entered the fray. Still, Iogen stands as the only company that is able to produce and occasionally deliver significant quantities of ethanol produced from biomass. The company primarily uses wheat and barley straw, but has also experimented with corn stover and other ag residues. As it were, fortuitous association would eventually connect Zadig with Iogen. One of Zadig’s fellow company board members is close friends with the Foody family, which owns Iogen. That allowed Zadig to create a dialogue in the summer of 2007 with Iogen Executive Vice President Jeff Passmore. “I met Jeff and he quickly agreed that Iogen would seriously look at this,” Zadig says. “Everything started to fall into place from there.” Passmore was excited about the idea from the get go. “Our reaction was, ‘Absolutely. We would be thrilled to provide you with the fuel,’” Passmore says. “Of course, we needed to know the volume. He told us 850 gallons and we said, ‘Yes. We can provide that.’ Up until then, he had been unable to procure a single gallon from anyone else.” With a handshake, the delivery arrangement was set. Iogen would supply what ended up to be 845 gallons of cel-

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lulosic ethanol to GAM in time for the 25 Hours of Thunderhill. For Iogen, supplying the fuel was simple. “We’ve got that in stock,” Passmore says. Transporting the fuel, however, wasn’t easy for a company that’s not in the distribution business. “When somebody wants to procure fuel from Iogen, we don’t have a fleet of trucks to deliver it all over North America,” Passmore explains. Zadig called a friend and fellow “car nut” who owns an international shipping and logistics company, JSI Shipping, which helped get the fuel from Ontario to California in accordance with all federal and state regulations. The E99—all fuel ethanol is denatured with 1 percent lowsulfur natural gasoline in Canada—arrived a few weeks before the race with a certificate of analysis that gave GAM the detailed fuel specs it needed for accurate blending. The fuel was made from either wheat and/or barley straw, according to Passmore. In the months leading up to the 25

Hours of Thunderhill, Zadig was intent on running E85 in its two new imported race cars, identical Le Mans prototypes. Aside from the 845-gallon shipment coming from Iogen for the December race, sourcing cellulose-based fuel for warm-up events was next to impossible. Corn-based E85 would have to suffice. Zadig could have purchased E85 at the pump, but he wanted to control the blend ratio. He knew that deviations in the blend could potentially change the engine performance. “We wanted to get pure, denatured ethanol and mix our own gas with it,” he says. Getting E85 at the pump, even in California, is relatively easy. Sourcing pure, denatured ethanol for custom blending with race-grade gasoline is more challenging. “It never occurred to me that ethanol would be so difficult to get, but it really was,” Zadig says. “Finding it was not the problem—it was handling it, meeting all federal and state regulations, management of the fuel vapors

… that was the challenge.” Ultimately, Zadig was able get InterState Oil Co., a full-service, multi-line wholesale fuel distributor, to deliver the ethanol he needed. “It took a lot of work, but today I can make a phone call and have any amount of fuel delivered to our shop the next day,” he says. With denatured ethanol in hand, Zadig was able to precisely blend the alternative fuel with Sonoco GT-plus racing gas to exacting specifications.

Modifying the Cars Most racing leagues are governed by sanctioning bodies that endorse and organize events. Whether it’s NASCAR or the International Motorsports Association, these groups establish racing venues, write the rules, maintain legal and insurance requirements and essentially govern every aspect of each race. The 25 Hours of Thunderhill is run by the National Auto Sport Association, or NASA (not to be confused with the U.S.

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

space program). NASA has a series called the Western Endurance Racing Championship—a seven race series with a number of different classes, and the only sanctioned endurance race series on the West Coast. This is the type of race where you’ll see modified Mazdas and Hondas running alongside Le Mans prototypes. The endurance sports racing (ESR) class has very few rules related to alternative fuels and drive train capabilities. “You can basically race just about anything you want as long as it meets the safety, sound and maximum fuel load requirements,” Zadig says. “Those lax rules tend to attract the fastest vehicles out there.” With financial backing from some of GAM’s other drivers, Zadig purchased two $120,000 cars from Norma Auto Concept, a boutique European chassis builder. Both cars are built around an M20 F chassis, a style that has dominated the European amateur endurance racing world for the past half decade. The Norma M20 F normally comes

PHOTO: JIM PARKS

PERFORMANCE

Each of GAM’s race cars were modified for E85, including the installation of slightly larger fuel tanks.

with a 20-gallon fuel tank. “We reconfigured that for E85, which requires about 40 percent more fuel by volume,” Zadig says. In endurance auto racing, cars are typically designed to carry enough fuel to make fuel stops only every two hours. “The ES and ESR classes are allowed to carry as much as 44 gallons of fuel, so if you’re running a

big block V8 with 500 to 600 horsepower to carry it around the track, you’ll want that much fuel capacity,” Zadig says. On the other hand, the Honda 2.0 liter VTEC engines Zadig’s new cars are equipped with (the K-20R motors in these cars are a slightly different version of what’s in regular Honda Civics and Accords in the

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United States) don’t require the maximum fuel tank size. They come standard with 20gallon tanks. “In a car like ours, where weight is a huge issue, you really want to carry a minimum amount of fuel. So you calculate the smallest possible tank size.” However, because E85 has less energy content than gas, it’s necessary to carry more fuel to go the same distance volumetrically. So GAM’s technicians added larger 28-gallon fuel tanks to the vehicles. “The cars actually lend themselves to adding additional tank capacity,” Zadig says. “These are technically two-seater cars, so we were able to fill that passenger area with some additional tank space.” The team also “mapped” the cars’ fuel systems and engines to optimize operating ranges for E85. “We went from burning about 9 gallons per hour with the stock setup to a little less than 12 gallons per hour with E85, which gave us more headroom than we expected.” Because the stock engines and components in GAM’s cars were basically set up for straight gas or E10, specialists at the Irvine, Calif.-based Automotive Technology Group Inc. made sure everything was E85 compatible. In addition to changing out the fuel tank, they swapped out filters, pumps, and fuel injection rails and injectors. One technician had extensive engine tuning experience and was familiar with ethanol. “That allowed us to plan for and order the proper parts and components so that when the cars arrived from Europe in the middle of September, we pretty much had everything ready to go,” Zadig says. The conversion process was completed at a cost of about $10,000 per car, which included a day of tuning on a chassis dynamometer, a machine primarily used to measure torque, power and emissions characteristics. The conversion from gasoline to ethanol was “flawless,” Zadig says. “It went totally perfect. Almost everything else we did to get these cars prepared for racing seemed to have been tormented by issues—vendors sending the wrong pieces and that sort of thing—but the conversion

to E85 went perfectly smooth. In fact, we derived about a 12 percent horsepower gain (they expected only a 7 percent gain) and about an 11 percent gain in torque. In racing, any time you get added, unexpected horsepower it puts a smile on your face.” In the run up to Thunderhill, GAM ran one or both cars in three different endurance races, with mixed results. The team ran both cars on E85 in competition for the first time at an event in Monterey, Calif., and led the race before springing a leak and falling back to second overall. A subsequent event in Sonoma, Calif., was less successful but was still valuable preparation for Thunderhill. “None of the problems we had in those races were in any way related to E85 or the motors, but rather getting to know these new cars,” Zadig says.

Race Day When the big day finally arrived, the battle-scarred and tested GAM team was as prepared as they could be. GAM’s team, including drivers, mechanics and support crew, was nearly 30 people strong. “You plan and plan and plan … and then you just have to let go when it all starts,” says Zadig, a self-confessed control freak. Zadig says the team came to the 25hour event with a “degree of trepidation.” The favorite going into the race was a team running an expensive Daytona Prototype race car, a world-class vehicle that would normally run in the Rolex Grand-Am series. Setting their nerves aside, the team’s No. 28 car managed to turn the second and third fastest laps in qualifying. “We were

The Drivers Car No. 28: 1.

Steve Zadig

Richard Hatfield

Dave Allen

Umberto Milletti

Car No. 87: 1.

Dennis Pavlina

Michael Kantor

Mark Gillies

Nik Johnson

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

PHOTO: GREEN ALTERNATIVE MOTORSPORTS

PERFORMANCE

More than 70 cars of various styles and classes competed in the 2007 25 Hours of Thunderhill.

pretty pleased about those qualifying times,” Zadig says. The race started at 11 a.m. on Dec. 1 and ended at noon the next day. The No. 87 car managed to stay in second place for almost the entire race, even jumping into the lead for bit. That car eventually “limped” across the finish line in the runner-up position (behind the Daytona Prototype), running the last 50 laps without a nose. “We learned that these cars are really built for smooth European tracks,” Zadig says. “Next year, we’ll have the cars re-engineered for that.” Zadig’s No. 28 car also fared well, running third for a while but later encountering electrical problems unrelated to the fuel or the motor. That kept the car sidelined in the pits for more than three hours. The crew got the car back on the track at about 10 p.m. and it performed flawlessly over the next 14 hours. “The motors performed tremendously,” Zadig says. “I can’t say enough about the E85 and how it performed. The engines were strong from the moment we started to the last lap, and indeed, our lap times [barely increased throughout the race]. That’s a testament to E85—not only its power but how good it is on motors.” For drivers like Zadig, endurance races like the 25 Hours of Thunderhill are their Super Bowl. “We all get pretty excited about this,” he says. “I was amazed in June of this year when I started communicating with

some other teams just how much effort was going into the preparation for this race. Of the 70 teams that entered this year, I would wager that 30 or so are already scheming about next year.” GAM will return to the 25 Hours of Thunderhill in 2008, but it’s uncertain if they’ll be using cellulose-based fuel. “We’ll see,” Zadig says, explaining that he’s already been in communications with cellulosic players like Georgia-based Range Fuels, which broke ground on a cellulosic ethanol plant in November. However, Zadig would prefer to acquire cellulosic fuel closer to home. California-based BlueFire Ethanol and Colusa Biomass, two promising celluosic ethanol startups, might one day provide him with that option. In the meantime, GAM will likely burn corn-based E85 and look for ways to promote its mission. “The team is already talking about next year,” Zadig says. “We hope we have the opportunity to run cellulose-based E85 because that’s where our hearts are, but we’ll run corn.” Ultimately, these guys just want to win races without harming the environment. “We took third place in 2006 and second place in 2007. So you know what’s next? We’ve gotta win, right.” EP Tom Bryan is editorial director of Ethanol Producer Magazine. Reach him at tbryan@bbibiofuels.com or (701) 7384962.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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EVENT

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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he Washington International Renewable Energy Conference is a public-private partnership aimed at the global deployment of worldwide renewable energy systems. Official host of this third annual global policy forum is the U.S. Department of State, which has to date issued formal invitations to delegates from 70 countries around the globe. Each invited country is allowed a delegation of 10 invitees, which will include energy ministers, chiefs of staff, legislators and other state officials. The State Department is being assisted in the conference planning and execution by the American Council On Renewable Energy. Event sponsors anticipate anywhere from 2,000 plus attendees overall as the conference dates near and enthusiasm grows. “We invite the worldwide renewable energy community to assemble for this conference, which uniquely brings together the thousands of key people in government, industry, finance, and civil society,” Eckhart Michael Eckhart, ACORE president, said in a news release. In addition to the invited countries, nongovernmental delegate spaces have been set aside for private sector attendees around the world, allowing all participants to share energy experiences, practices and strategies. Proposed conference goals include: Advancing energy security, climate change, air quality and sustainable development goals, including agriculture, forestry and rural development Demonstrating global leadership in renewable energy research, policy development, technology innovation, commercialization and deployment

EVENT

Fostering collaboration between industry and government to help solve global energy challenges Examining policy initiatives for state and local governments that will facilitate the rapid scale-up of renewable energy.

Organizers have already booked more than 300 exhibitors and are expanding the original trade show floor by one-third to accommodate more exhibits.

Organizers of WIREC 2008 have raised more than $2 million to host the ministerial events, which evolved from the 2002 World Summit on Sustainable Development in Johannesburg, South Africa. There, world leaders and energy entrepreneurs acknowledged an urgency to develop renewable sources of energy that would address the challenges of global warming, economic growth, energy security and air quality. Subsequent conferences attracted thousands of participants to Bonn in 2004 and Beijing in 2005, where participants reached unanimous consensus and support for energy sources such as wind and solar power, biofuels, biomass, hydro energies and geothermal power. In Bonn, participants formulated 197 imperatives to allow market development of renewable energies, secure cost-effective public-private financing of energy needs and coordinate research and development of energy technologies. In Beijing, 80 countries promulgated a Status and Action Plan to promote and advance a global renewable energy strategy. Representatives then signed a declaration affirming their commitment to renewable energy while acknowledging the challenges facing the industry. Eckhart spearheaded efforts for Washington to host a subsequent event as soon as practical. In 2007, the State Department approved the 2008 conference, and planning began immediately. He reasoned that such a conference was best situated in a capital city, Washington, which has the infrastructure and motel space for such a gathering, and it would be an invaluable opportunity for U.S. federal agencies to participate.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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EVENT

Numerous federal agencies and quasi-governmental entities have teamed up with the State Department to host WIREC 2008 events, including the USDA, the U.S. EPA, the U.S. Commerce Department, the Interior Department, the White House Council on Environmental Quality, the Overseas Private Investment Corp. and the ExportImport Bank. The conference includes a ministerial meeting for energy and environment ministers and a parliamentary meeting for members of elected legislatures. There organizers hope to launch a global crusade in which stakeholders, both public and private, will voluntarily commit to adopting, promoting and disseminating strategies for renewable energy programs sustained by both public and private funding. One session will focus exclusively on voluntary participant pledges to increase renewable energy deployment, meant to further the goals advanced in Bonn and Beijing.

Trade Show An accompanying trade show also scheduled for March 4-6 is expected to attract thousands more participants. Organizers have already booked more than 300 exhibitors and are expanding the original trade show floor by one-third to accommodate more exhibits. Jim Pierobon, director of communications and external relations for ACORE, says this event might double in size from the 3,000 participants originally anticipated. This is a rare opportunity for vendors to get perspectives on local markets and to network with world leaders and multinational organizations, Pierobon says. Both events, the ministerial conference and the trade show, will be located in the Washington Convention Center in Washington, D.C. Additionally, 50 to 100 official side events will be held by various states, foreign governments, nongovernmental organizations and multinational corporations. Some of the side event sponsors include BP, Good Energies, Renewable Capital and Stoel Rives LLP. Although three days have been allotted for the conference, Pierobon says organizers expect the scheduled events to spill over into a week-long forum and business conference. For more information about the event visit the Web site at www.wirec2008.gov. EP Sarah Smith is an Ethanol Producer Magazine staff writer. Reach her at ssmith@bbibiofuels.com or (701) 663-5002. 176

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COMPLIANCE

The Endangered Species Act’s Hidden Costs for Ethanol Production By Francis E. Chin

uring his Jan. 23, 2007, State of the Union address, President George W. Bush announced an ambitious renewable and alternative fuels standard that includes an initiative to achieve production of 35 billion gallons of renewable and alternative fuels by 2017. The president's new targeted amount is approximately five times the current Congressionally mandated production target of 7.5 billion gallons by 2012. In 2007, the USDA reported that a staggering 90.5 million acres of corn will be planted in 2008. If realized, it would be the largest planted acreage since 1944 and 12.1 percent more than 2007. Much of the increase reflects greater demand for corn that will be turned into ethanol, as well as government incentives to produce ethanol. The combination will foster continued growth in the corn-based ethanol sector for the near future. Corn farmers will need approximately 129,000 square miles of additional farmland—an area the size of Kansas and Chin Iowa—to meet the mandate. With the need for this much land, farmers and corn-based ethanol producers will inevitably have to understand, navigate and comply with the Endangered Species Act. The ESA is a powerful piece of legislation that has already been used against farmers who have mistakenly violated it. The costs associated with navigating and complying, or not complying, with the ESA's regulations will increase and must be included in the cost of corn-based ethanol production. The hidden environmental impact, which has only been discussed tangentially in the press, may be substantial. Current discussions regarding the environmental impacts of corn-based ethanol have focused primarily on environmental compliance regarding air, soil and water standards. None of the discussions, however, have analyzed the costs associated with the increasing need

for arable land and the resulting inevitable confrontation with the ESA’s requirements for that land. A detailed discussion of the permitting process required by the ESA illustrates the barriers that corn growers may have to overcome if they want to devote new cropland to ethanol production.

The ESA’s Effect, 'Taking' Prohibition When the ESA was passed in 1973 it gave the secretary of the interior the authority to promote, preserve and protect the continued existence of threatened and endangered species. In addition to protecting the species themselves, the secretary could establish critical habitat for them. The ESA thus preserves not only threatened and endangered species, but also “the ecosystems upon which endangered species and threatened species depend.” It gives the federal government the power to take “appropriate” steps to achieve its purposes, including the establishment of programs to preserve endangered species and their habitat. One of the ESA’s primary enforcement mechanisms is the prohibition against the “taking” of endangered and threatened species. Taking occurs in one of two ways. The first occurs if private landowners or governmental entities conduct or attempt to engage in activities on their land that might incidentally “harass, harm, pursue, hunt, shoot, wound, kill, trap, capture or collect” a listed endangered species. The second occurs if the critical habitat of an endangered species is either modified or degraded to the point where it actually kills or injures the listed species by significantly impairing essential behavioral patterns, including breeding, feeding or sheltering. The latter type of taking need not be intentional to violate the ESA. Any agricultural use of land may be enough to trigger a violation. Recognizing that there is significant potential for unintentional taking of endangered species and their habitat, Congress amended the

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).

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ESA in 1982 to create permitting procedures that would allow for an “incidental take” that happens unintentionally when landowners are carrying out an otherwise lawful activity.

The Permitting Process for an 'Incidental Take' Initially, an applicant for an incidental take permit must submit a habitat conservation plan that specifies the impacts that are likely to result from the activity being pursued and the measures that the landowner will undertake to minimize and mitigate those impacts. After the landowner develops a habitat conservation plan, it must be submitted along with the application for an incidental take for federal agency review, which involves the publication of the permit application in the Federal Register to allow for public comment. Because issuing an incidental take permit is a federal action, the permitting process is also subjected to National Environmental Policy Act procedures. NEPA promotes the analysis and disclosure of the environmental issues and impacts that involve a proposed federal action. NEPA requirements can be satisfied in three ways. First, an environmental impact statement is required when the project or activity would significantly affect the quality of the human environment. Second, a categorical exclusion can be granted to activities that do not have a significant effect on the environment. Third, an environmental assessment can be prepared when it is unclear whether an environmental impact statement is needed or when the project does

An applicant for an incidental take permit must submit a habitat conservation plan that specifies the impacts that are likely to result from the activity being pursued and the measures that the landowner will undertake to minimize and mitigate those impacts.

not require an environmental impact statement but is not eligible for a categorical exclusion. In addition, issuing an “incidental take” permit is also subject to the ESA. Section 7 of the ESA requires all federal agencies, in consultation with the Fish and Wildlife Service or National Marine Fisheries Service, to ensure that any federal action is not likely to jeopardize an endangered species or threatened species or destroy or harm critical habitat.

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COMPLIANCE

Processing an “incidental take” permit application is a four-step process that can take 10 months or longer. It consists of: Publishing the habitat conservation plan and NEPA analyses in the Federal Register and making them available for public review and comment Evaluating the comments received Conducting a consultation under Section 7 of the ESA Determining whether the habitat conservation plan meets all the criteria of the ESA. In order to expedite the process, the services developed a category of habitat conservation plans called “low-effects habitat conservation plans” which apply to activities that are minor in scope and impact. Even so, the process of issuing low-effects habitat conservation plans can take up to three or more months.

ESA Violations and Permit Costs

Corn farmers would need to plant an additional area the size of Kansas and Iowa in order to meet the demand created by a 35 billiongallon-per-year renewable fuel mandate based solely on corn-based ethanol.

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If a private landowner does not obtain an incidental take permit and subsequent land development activities result in a taking of a threatened or endangered species, the private landowner could face both civil and criminal penalties. Civil penalties range from $500 per violation for an "unknowing" violation to a maximum of $25,000 per violation for a “knowing taking.” The maximum criminal penalty for knowing violations is a $50,000 fine and one year of imprisonment for each taking. If a take or other violation of the ESA occurs, the act also allows

NABC has identified the need for a comprehensive, economical, and centrally located training program for the aggressively growing fuel ethanol industry. The Ethanol Short Course provides practical, relevant training focused specifically on the production of fuel ethanol. To register, or learn more about our Ethanol Short Course, please visit us at www.ethanolshortcourse.com or contact Brandi Phillips at 866.342.7026 ext. 121.

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private citizens to file suits for such violations against private landowners. These citizen suits require private citizens to file a 60day notice of intent to sue with the landowner and the agency. If the citizen suit is successful, the private citizen may recover litigation costs, including attorneys' fees. The costs for permitting are also high. They can range from thousands to hundreds of thousands of dollars if litigation is involved and take years to reach a resolution. Additionally, since a habitat conservation plan is part of the NEPA process, other environmental impacts unrelated to the species or its habitat must be analyzed, resulting in additional costs relating to compliance and project delays. Furthermore, both the habitat conservation plan and NEPA analysis processes are open to the public for comment, which allows scrutiny of the cropland expansion and lays the basis for a citizen suit after the permitting process is completed.

The primary motivation for the USDA in proposing these changes to the CRP was to allow these lands to be used for the increased production of corn-based ethanol. Both Ducks Unlimited and the Audubon Society argued that a probable consequence of such a decision was the encroachment on wildlife habitat. These confrontations with the ESA will likely continue as the United States bases expansion of its renewable fuel standards on corn-based ethanol. Farmers and others in the corn-based ethanol industry should start

to familiarize themselves with the ESA, its regulatory framework and how it impacts the cost of their industry. EP Francis Chin of Bracewell & Giuliani LLP has extensive experience in commercial and environmental regulatory litigation. Reach him at francis.chin@bgllp.com.

Conflicts Involving Ethanol Production Confrontations between the preservation of wildlife and corn-based ethanol production are already occurring. Seneca White Deer Inc. and Empire Green Biofuels recently entered into a memorandum of understanding to allow for public wildlife tours on the Empire Green Biofuels' premises. The controversy erupted from Empire Green Biofuels' planned construction of an ethanol and biofuels electricity production center on the white deer preserve. As soon as Empire Green Biofuels' plans were announced, Seneca White Deer Inc. stated it would fight the proposed development, including filing a lawsuit if negotiations failed. Earlier this year, Ducks Unlimited and the Audubon Society, among others, effectively pressured the USDA to reverse its two previous decisions to halt enrollment into its Conservation Reserve Program for 2007 and 2008 and to allow landowners, primarily farmers, to withdraw lands already in the program without penalty.

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ANALYSIS

The Changing Ethanol Environment By Rick Kment

ooking back on 2007, I am reminded of the old sports saying, “Don’t let the highs get too high; don’t let the lows get too low.” In the past year, the ethanol industry has experienced a true rollercoaster of highs and lows being hailed as a savior one month and a travesty the next. Would it be a stretch to think the ethanol industry might have been the victim of this old adage? For much of early 2007, politicians—Republican and Democrats alike—stood in support of corn-based ethanol. It was viewed as a boon for the American farmer and a remedy for the quickly rising gasoline prices that pained consumers at the pump. Sparked by President George W. Bush’s State of the Union address on Jan. 23, 2007, the general public was eager to learn more about this exciting new industry, and investors were eager to get in on the action. At that time, the ethanol industry seemed to be a win-win for everyone involved. By the end of last summer, however, the social and political environment had become Kment much more hostile as environmentalists, humanitarians and some politicians voiced concerns regarding the validity of ethanol as a solution to the country’s energy woes. Ethanol production has since been blamed for higher food costs and water shortages. In the most severe case, an outside expert speaking to a United Nations committee referred to the use of food crops to produce biofuels as “a crime against humanity,” although the comment was later dismissed by the U.N. Food and Agriculture Organization. Let’s face it, corn-based ethanol might have been over-hyped by the media, investors and politicians in early 2007 and then given

an unfair amount of blame by year’s end. Moving into 2008, what type of environment should the ethanol industry expect to help keep things on a more even keel?

Production Slows Slightly Overall, the ethanol industry is expected to see continued production growth. Although production is not expected to increase at the same rate as it did in 2007, there are still many plants under construction scheduled to be operational near the end of 2008. In addition, the announcements of new plants, which should be expected to continually decrease as the year progresses, have significantly slowed. As the expansion of the ethanol industry continues to slow, the structure of the industry will continue to change. Most notably, lower profit margins have led to consolidation in the form of mergers and acquisitions. At press time, the merger between VeraSun and U.S. BioEnergy was the largest to date. Many believe mergers of this size are merely the beginning of a larger consolidation movement. As the ethanol industry transitions out of its initial growth stages, larger companies are focusing on the economics of scale and searching for ways to build and maintain market share, profitability and an increased sustainability for years to come. In the past six months, it has not been uncommon to hear rumors of other large ethanol companies reportedly looking to acquire smaller ethanol producers. However, 2008 stands to see an interesting contrast in plant operation as some smaller, independent ethanol plants remain strong and resistant to consolidation. Most smaller, local plants focus on paying down debt, work on a more-equity basis and strive to develop the markets for local owners and growers. It is a stark contrast that I refer to as the difference between Main Street

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and Wall Street operations. Wall Street operations will usually be publicly traded companies that look to increase market share and stock value by focusing on short-term revenues and gains. Locally-owned Main Street operations remain focused on the long-term viability of the industry and are not as concerned with the ebbs and flows of their initial stocks. In fact, many of these types of operations are not publicly traded and generally try to build a market for those in their local community. Although different in philosophy, both types of ethanol-producing operations will help stabilize the industry as it continues to mature.

The Food-Versus-Fuel Debate One of the ethanol industry’s greatest challenges in 2007 was defending itself in the food-versus-fuel debate. Food prices have dramatically increased in the past year. This rise in food costs was felt by all consumers as the price of dairy, meat and grain items rose an average of 6 percent for the first nine months of 2007. Much of the blame, whether founded or unfounded, has been placed on the ethanol industry due to direct correlation to corn prices. Unfortunately, this has

Average ethanol plant net profit over 2007 SOURCE: DTN

been a heavily publicized topic in the media and is a key reason why support for the ethanol industry has begun to falter in recent months. A variety of studies support and disprove ethanol’s correlation to the rise in food costs. For example, a recent study funded by the Renewable Fuels

Association indicated that, based on 20 years of price data, raw corn prices have a minimal impact on the U.S. Consumer Price Index for food. The study says that consumer food costs are far more complex in the long U.S. food chain and the cost of corn is just one of a number of different factors coming into play.

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ANALYSIS

amount of discretionary income a family has to help support the economy.

The Political Environment

Ethanol future prices from March 2005 to December 2007 SOURCE: DTN

In a Dec. 7 interview with CNN “Money,” Jacinto Fabiosa, co-director of the Food and Policy Research Institute at Iowa State University, said, “Only about 25 percent of the price of pork at the retail level reflects costs on the farm. So if the price of corn goes up 10 percent, the farmers' overall cost might go up 5 percent, but the ultimate retail price for a

pork chop may only rise 1 (percent) or 2 percent.” One element that surely should share in the blame is continuously rising oil prices. As crude oil prices continue to hover near $100 per barrel, transportation costs continue to rise. The increased transportation costs play a much larger role in the price of food as well as the

Although public impressions of ethanol began to waver in late 2007, political support still remains in favor of the advancement of biofuels. At press time, President George W. Bush signed a bill that passed through the House of Representatives and Senate and calls for another massive increase in ethanol production. The 2005 energy bill called for the production of 7.5 billion gallons by 2012, a mark that the United States is poised to meet by the end of the year. The 2007 energy bill increases production to 36 billion gallons by 2022, and calls for 15 billion gallons per year of corn-based ethanol and another 21 billion gallons from "advanced biofuels" that use materials other than food crops. Although this bill demonstrates a significant amount of support for the ethanol industry, an increased amount of debate will continue to circle around the support of the 51-cent blenders’ credit and the 54-cent import tariff as pressure continues to build from other ethanolproducing countries such as Brazil. It will also be interesting to see how the many

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presidential hopefuls will handle ethanolrelated questions during the 2008 primary elections. If the general public’s ethanol impressions do not improve, many candidates could face some pointed questions regarding the country’s energy initiatives and ethanol.

Research and Development In 2008 and continued into the foreseeable future, corn-based ethanol will remain the leader in ethanol production. However, in the past year there has been a significant amount of research and development conducted toward cellulosic ethanol. With added pressure from the food-versusfuel debate, the industry will continue to search for a more economical way to develop an alternative to corn-based ethanol. As highlighted in the 2008 energy bill, the direction of the biofuels industry will eventually move to a cellulosic-centric plan. It is not likely that these types of advancements will be made and implemented in the coming year, but a number of larger ethanol

companies are continuing to research and develop methods for extracting ethanol without feed crops. Yes, 2008 will be different in many ways from 2007. It is unlikely 2008 will begin with the same trumpets and fanfare the ethanol industry received a short year ago. Nor should it expect a continued backlash. The industry is still relatively young and will continue to mature as it moves through a number of growing pains. The lesson learned from 2007 is that the ethanol industry should not be judged based on a

one-year period of highs that were too high and lows that were too low. EP Rick Kment is a DTN biofuels analyst with more than 15 years of experience in the agribusiness industry. For more information, visit www.dtnethanolcenter.com.

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MANAGEMENT

Managing Leadership Stress By Patrick B. Ropella

ight budgets, accountability for results, corporate politics, employee retention woes, litigation concerns—the mere mention of these stressors may accelerate your heart rate. If so, you might be in a leadership position such as a manager, key executive or chief financial officer. Factor in global manufacturing concerns, research and development challenges, time-to-market pressures, strict quality standards and today’s tough governmental guidelines, and chances are you’re not just any leader, but one in the ethanol or biofuels industries. Workplace stress is a fairly common ailment, lurking among 40 percent of the general workforce, according to recent studies. However, leadership stress differs greatly from that suffered by typical employees. For instance, a scientist might lose sleep over an especially complicated calculation not testing as expected in the lab. His or her supervisor, the head of the research and development department, may be stressing over whether his or her inability to secure more government fundRopella ing will cost that scientist a job. While the sales department administrative assistant feels overwhelmed by a cubicle mate’s annoying daily habits, his or her manager is wondering how they are going to motivate 25 people to increase their sales figures by 30 percent before month’s end. The responsibility and accountability leaders bear can be a heavy burden. The pressure to meet objectives, manage people and make tough—sometimes life-changing—decisions often weighs heavily on the hearts and minds of decision makers as they struggle to keep a balance between effectively moving the company toward its goals and keeping those around them happy. Many times, the responsibilities come at the expense of

the leader’s personal time and peace of mind. However, not all stress is negative. Certain types of stress actually help drive performance and can be the foundation for extraordinary innovation and accomplishment. The pressure to succeed, meet goals and beat the competition can be positively channeled into research and development, performance management and competitive strategies that enable individuals, teams and entire organizations to develop breakthrough technologies, devise creative solutions to seemingly insurmountable problems and deliver results that were beyond expectations. For executives, the problem with stress occurs when the pressure becomes more dominant than the objective. During these times, management styles tend to become more blunt and dictatorial, decisions become rushed, and ultimately, the executive and organization suffer very real costs as performance falters. In worst cases, the executive suffers mental and physical illness. What is the solution to stress? As an executive, simple techniques can be used to manage leadership stress and possibly even maneuver it to an advantage.

Become a Better Delegator As a leader, you’re the one who’s accountable for results. Your career rides on the performance of others. As a result, you may be tempted to “do it all yourself ” or micromanage every task. According to Kayleen Schaefer's article in the Wall Street Journal, “The reason so many leaders have trouble giving up projects is because they’ve risen up the corporate ladder by doing everything themselves.” The higher one rises in an organization, the less feasible the do-it-yourself strategy becomes. As responsibilities grow, so does the need to effectively get work done through others. To

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Successful leaders typically have little or no free time in the workday. However, one of the keys to beating stress is to give the mind and body occasional chances to recharge.

become a better delegator, expand skills in the following areas: Do you hire people who are smarter and more technically capable than you are? Most executives say that they want to hire the best. In reality, they tend to hire people who are slightly less competent than they are. If you are going to be an effective delegator, you need to build a team you can trust, and hiring the right people is the most important first step. Once the right people are on staff, it’s

important to make sure the team’s skills are kept up-to-date. Create a proactive plan to regularly evaluate each person’s skills and knowledge, and plan for their future training needs. The more current people’s skills are, the easier it will be to delegate with confidence. Of course, competence alone does not make delegation work. You also need effective managerial systems. While it is beyond the scope of this article to review different management structures and philosophies, the challenge is to find the methods that best provide the information and fit the culture of the organization. Ideally, the system ensures people clearly understand their goals—and your expectations—while providing key indicators to monitor performance and ensure those goals are being met. With the right people and processes, delegation is a much easier task. All that remains is to determine what and to whom to delegate. As a starting point, prioritize the tasks that only you can do, and then get everything else off your desk. Anything that can be done by someone else should be done by someone else. During delegation, provide a concise explanation of what is expected and a clear deadline when it’s expected to be done. Ask follow-up questions to ensure that the person being delegated to understands the project and is willing and able to meet the deadlines.

Force Yourself to Take Breaks Successful leaders typically have little or no free time in the workday. However, one of the keys to beating stress is to give the mind and body occasional chances to recharge. In other words, take a break once in a while. The following provides a few ideas for creating a healthy balance.

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Schedule daily mini-breaks, and plan several mental breaks throughout the day. For example, if you’re in front of a computer most of the day, schedule two or three daily three-minute walks. If you’re going to be locked in meetings most of the day, use breaks to step outside, stretch, walk or listen to music. If your job requires constant movement, schedule a five- or 10minute sit-down break every few hours. Balance is about not doing the same thing all day long. Strike a better work/life balance. It almost goes without saying that vacation time is crucial to beating stress. That means a vacation where you’re not attached to a laptop, cell phone or other remote device. Yes, it’s hard to get away from the office, but that’s the only real way to unwind. Getting beyond vacations, make time to take stock of personal priorities and the role that work plays in helping achieve your objectives. Often, stress is

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The Little Things Make a Big Difference Here are a few simple tactics to try to control stress: Arrive 15 minutes early. Just a few extra minutes to plan the day can provide a big boost to productivity. Know your priorities. Prepare a daily to-do list to keep focused on the real priorities for the day. Also, tackle the more difficult or problematic issues on the list first thing in the morning while at your peak energy level. De-clutter. Get rid of as much clutter and chaos in your life as possible. Whether it’s cleaning the office or canceling subscriptions to unread publications, simplifying and organizing life is a great stress reducer. Confront the uncomfortable. Address problems right away before what may seem like insignificant issues “snowball” into major obstacles. The longer one waits to confront an uncomfortable situation, the more painful it gets later on. Keep fit. There’s no need to become a Pilates expert; but just 30 minutes, three times a week of good, old-fashioned exercise like jogging or biking is all it takes for the body’s relaxing endorphins to release built up stress. Plus, regular fitness prevents many of the negative physical effects of stress such as back and neck pain. Practice saying “no.” Personally and professionally, saying “no” can be quite liberating, and that can definitely beat stress. There is no need to accept each invitation, attend every meeting or join all the company sports teams. People will understand. Keep relaxing reminders nearby. Photos of loved ones and the places you long for (that beach you lazed on in Honolulu last fall, for example) serve as constant reminders of what there is to look forward to at the end of a long stressful day and on the next well-deserved vacation.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

MANAGEMENT

caused by a feeling of being out of control. The simple act of putting things in perspective can help regain control and have a very positive impact on mental well-being. Tune out at the end of the day. Most leaders take their work home with them each night. Whether you’re physically checking e-mail or just thinking about issues at the office, there comes a time when you need to leave work and leadership responsibilities behind. Set personal time boundaries and stick to them. For example, decide to turn off your cell phone as you walk in the front door each evening, or stop checking email after 9 p.m. To ensure that work time is as productive as possible, have time that is truly down time.

Maintain a Positive Attitude When leadership stress is at its peak, one may feel down or even doubtful about their abilities. You may find yourself dwelling on the “shoulds” in

your professional life—I should be making more money, I should be handling this latest project better, My staff should like me more, etc. This is just stress wearing down self-confidence and resolve. Don’t give in. This is the time to refocus on something positive. One easy solution is to remind yourself of something pleasant in another area of life, such as your daughter’s softball team’s big win last night or the pride felt when you climbed Mount Rainier last month. Another solution is to write down a physical list of assets and accomplishments, and when feeling overwhelmed by stress, pull out the list and remind yourself of all the things you have done and the people whose lives you have positively impacted. Certain stressors inherent to the ethanol industry will never disappear. In fact, they may become exacerbated with fluctuations in the economy and availability of skilled employees. Whether it's

the pressure of keeping up with industry standards or dealing with tight budgets, leadership stress can have a negative impact not just on your performance, focus and well-being, but that of the company. CEOs, senior executives and managers dictate the level of stress throughout the organization. If you efficiently delegate, properly maintain balance and think positively, you will be able to rise above leadership stress and take the team and the company with you. EP Patrick B. Ropella is president and CEO of Ropella & Associates, an executive search and consulting firm. Reach him at (850) 983-4777 or www.ropella.com.

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Corporate Banking

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TECHNOLOGY

Biomass Gasification: Any New Environmental Concerns? By Todd A. Potas

iomass gasification has become a viable commercial-scale option for both conventional dry-grind and cellulosic ethanol facilities. In fact, biomass gasification capacity may be quickly added to existing facilities to take advantage of their infrastructure, assuming proven, dependable technologies exist commercially. A variety of technologies is available to provide renewable power or displace fossil fuel for process steam generation. Itâ&#x20AC;&#x2122;s also possible to provide additional ethanol or other alcohol production by thermochemically converting biomass-generated gasifier synthesis gas, or syngas (Figure 1). Thermochemical conversion at cellulosic ethanol plants will help mitigate the higher construction costs associated with these facilities and help diversify corn-based feedstock use.

Several regulatory issues arise with the addition of any gasification process. This article presents some of these environmental issues related to regulatory applicability, air emissions, water discharge and solid waste (ash) for some typical biomass gasification designs. The discussion includes not only supplementing or replacing natural gas-fired steam and drying energy with synthesis gas combustion, but also issues related to separation and reformation of synthesis gas for production of ammonia, carbon dioxide, sulfur, and alcohols such as methanol, ethanol and/or butanol. Several types of gasifier designs are available for biomass (Figure 2).

Gasification

Gasifer Designs

Figure 1. Gasification provides a wide array of useful end products. SOURCE: J.SCAHILL, U.S. DOE

Figure 2. A variety of gasification designs provide for feedstock flexibility. SOURCE: J. SCAHILL, U.S. DOE

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Updraft/Downdraft Gasifiers One advantage of the updraft and the downdraft gasifier designs is that larger feed sizes can be used with less concern for incoming moisture content. For example, these systems can use 2-inch or less diameter chipped wood to produce synthesis gas for subsequent combustion to produce steam and/or electric power, similar to PrimeEnergy LLC’s updraft gasifier used at Central MN Ethanol Co-op in Little Falls, Minn. The subsequent combustion unit burning the synthesis gas can be designed for use as a thermal oxidizer. This allows for control of volatile organic compound emissions from drying spent grain from an ethanol facility. This type of system can replace natural gas-fired boilers and regenerative thermal oxidizer emission controls used for the spent grain dryer exhaust at existing ethanol plants. The gasifier/thermal oxidizer system can also have natural gas back-up for biomass gasifier downtime. Several additional environmental compliance issues are related to this type of gasifier solid fuel system. First, additional air emission units are needed for wood handling and storage. Particulate emissions can be generated from the unloading, chipping, handling and storage of the wood or other biomass brought on-site. Wood generates less dust due to its larger size and higher moisture content. Therefore, baghouse or cyclone control may not be required for particulate control. Second, different gasifier and thermal oxidizer operating parameters are required for proper combustion performance. Due to the reduction conditions of the gasification reaction, many potential combustion pollutants are never generated because key elements remain in the ash. This pertains especially to pollutants formed from sulfur and other potentially hazardous inorganic compounds such as acid gases. Once the synthesis gases are formed and utilized for combustion, the same pollutant formation issues that arise during fossil fuel combustion will

Due to the reduction conditions of the gasification reaction, many potential combustion pollutants are never generated because key elements remain in the ash.

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It may not be particularly good for thermochemical conversion to hydrogen or other compounds like alcohols because the synthesis gas from these units is not as refined as might be needed to conduct thermochemical conversion.

occur (e.g., nitrogen oxides, carbon monoxide, particulate matter and VOCs). Controlling NOx formation and carry-over of fine particulates is critical for low-emission performance. Particulate carry-over in the updraft/downdraft systems can be a concern and is often controlled with add-on control technologies. The quality of the synthesis gas from updraft/downdraft systems is well-suited for combustion applications. However, it may not be particularly good for thermochemical conversion to hydrogen or other compounds like alcohols because the synthesis gas from these units is not as refined as might be needed to conduct thermochemical conversion. A more refined synthesis gas will provide more efficient conversion. Gas membrane separation can be used to separate hydrogen as a product. This process is being conducted at Community Power Corp.â&#x20AC;&#x2122;s Biomax 25 downdraft gasifier used at the Natural Resources Research Instituteâ&#x20AC;&#x2122;s Coleraine Minerals Research Laboratory in Coleraine, Minn. Finally, there is the issue of ash charac-

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terization, utilization and/or disposal. Updraft and downdraft gasifiers produce both bottom and fly ash. Each of these ash streams has different properties making collection, characterization and utilization more challenging. Due to the larger size of the incoming wood, sandy soils from harvest and storage are more difficult to keep out of the gasifier. This can lead to operational problems in these types of gasifiers, depending on the ash separation systems employed. Because ash is removed at two locations, composite characterization of the ash is difficult. However, this characterization is helpful in determining the potential uses for the ash products. For example, if the level of leachable metals is low, the ash may be sold for land application. However, the alternative may also be true. If the levels are too high it may add costs to the ash disposal. It is important to have the ash characterization early in the project to determine its potential uses and their effect on the economic feasibility of the project.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

TECHNOLOGY Fluid Bed and Circulating Fluid Bed Gasifiers Bubbling and circulating fluid bed gasifiers operate by maintaining a highly turbulent mixing zone for the gasification reactions. Air, oxygen or steam can be used to control the gasification conditions, including the bed velocities. Circulating a fraction of the fluidized materials assists the steady-state conditions in the fluid bed and allows for some bottom-ash removal. The majority of the ash is carried out the top of the gasifier in the circulating systems and all the ash is carried out in bubbling bed systems. The fluidized nature of these gasifiers requires the size of the feedstock to be much smaller than for fixed-bed gasifiers. For example, wood chips need to be sized to less than three-quarters of an inch. This allows more sands and soil material to be separated prior to being fed to the gasifier, minimizing the carry-over of sandy particulates. Corn stover, especially corn cobs, is projected as a promising feedstock for these types of gasifiers. An example of this system is Frontline BioEnergy LLCâ&#x20AC;&#x2122;s fluid bed gasifier at Chippewa Valley Ethanol Co. in Benson, Minn. The synthesis gas from fluid bed systems is well-suited for combustion applications, similar to updraft/downdraft units. The synthesis gas, with some clean-up of tars and potentially desulfurization, can be used for thermochemical conversion to alcohols.

Entrained Flow Gasifiers Entrained flow gasifiers are more complex systems requiring even smaller particle size and, thus, lower moisture content than fixed- or fluid-bed systems. This additional up-front processing produces a higher quality synthesis gas better suited for thermochemical conversion to methanol, ethanol and/or butanol. The gasifier can operate on dried, finely ground corn stover, but also other biomass, such as wood or other crop residues. Particle sizes can range to as low as minus 200 mesh. This biomass converter system is proposed for Range Fuels Inc.â&#x20AC;&#x2122;s planned ethanol plant in Treutlen County, Ga. With the drying and fine milling necessary for these systems, additional emission

sources are generated. The drying emissions will need to be controlled or integrated into other process operations to prevent uncontrolled VOCs from being emitted to the atmosphere. Baghouse control will be required for the milling. For optimum milling and gasifier performance, the process will benefit from further sands/soils removal prior to these operations. By producing a higher quality synthesis gas, thermochemical conversion to alcohols is projected to be very efficient at a commercial scale.

Summary There are many advantages to utilizing gasifiers as part of ethanol production facilities. Biomass feedstock is cleaner, renewable and less expensive than traditional solid fossil fuels, and synthesis gas from gasifiers can be converted into alcohols to supplement cornor sugar-based ethanol production. However, with each type of gasification process, there are also environmental and regulatory considerations. Additional particulate and VOC controls may need to be integrated into current ethanol plant or new gasification/combustion design to mitigate emissions. The ash byproducts of gasification may prove difficult to collect and characterize, and can cause operational issues. Future research and development will pave the way for biomass gasification to become more environmentally compliant and commercially viable. EP Todd A. Potas, PE, QEP, is a principal at Natural Resource Group LLC and manages air quality and environmental services for the ethanol industry. Reach him at (612) 3476789 or www.nrg-llc.com.

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The Hidden Costs of the Renewable Fuels Standard By Clayton McMartin

illions of dollars in operating capital are being wasted as the ethanol industry struggles to comply with the renewable fuels standard. A survey conducted during an Oct. 30 web conference attended by 234 industry stakeholders indicates that as many as 61 percent of renewable fuel suppliers are out of compliance. Each of these facts are directly attributable to the requirements set forth in the RFS regulations requiring new documentation for product transfers throughout the renewable fuel supply chain. Many players have attempted to satisfy these requirements by modifying their existing production account systems, resulting in a short-term solution with long-term consequences. Although the threat of $32,500-per-day fines for Clean Air Act violations is significant, even greater daily costs have come to McMartin bear upon the entire industry by those mixing business systems with regulatory compliance systems. Millions of dollars in extra operating capital are required for those who have adopted this ill-advised operating practice, which comes at a time when most in the biofuels business are experiencing painfully low profit margins. The root of the problem stems from the U.S. EPA requiring the use of a product transfer document to signify transfer of title to both renewable fuel and any associated renewable identification numbers. RINs are the serial numbers assigned to each gallon of fuel under the RFS program and tracked throughout their life in the supply chain. The product transfer document serves to record the transfer of title from one party to the next and must be kept

on record for five years. The document is analogous to a warranty deed received when purchasing a house or other piece of real estate.

Regulations Result in More Paperwork Prior to Sept. 1, 2007â&#x20AC;&#x201D;the effective date of the RFSâ&#x20AC;&#x201D;the industry had no product transfer document. In practice, the closest legal document satisfying this purpose would have been a written contract between buyer and seller stating all terms and conditions, including title transfers. Of course, this type of contract served more as a static document, where numerous individual sales could be executed over weeks, months or even years. Faced with the impending deadline, two schools of thought formed. One developed new documents called the product transfer document and associated RIN certificate. The other modified existing invoicing systems in an attempt to satisfy the new requirements. The product transfer document and RIN certificate approach, like that used by those on the renewable fuel registry, allows for documents to be generated independent of any corporate financial function. This approach avoids costly delays in payment for product. On the other hand, the use of invoices almost always results in delays, which can be attributed to the inherent nature of the process itself. Invoices always have some time delay after shipping, and make a company dependent on its supplier to send RINs before they can complete their own invoicing. These delays are further compounded whenever product is traded multiple times before finally reaching its end user.

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Conservatively, the time delays resulting from the invoicing methodology cost $1.50 per 1,000 gallons transferred. This does not count any additional cost for increased personnel or computing systems.

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Inherent Costs of Delayed Paperwork To illustrate the impact of these delays, consider a railcar of product that is produced at an ethanol manufacturing facility. The title is transferred to a marketing company that sells it to a trader that turns around the same day and trades it to yet another marketer before it is ultimately shipped to a petroleum refiner, which is the end user. This series constitutes four transfers of title to the product and the associated RINs. If each party attempts to handle the product transfer document requirements with its existing invoicing processes, and considering a minimal two-day lag time for each of the invoicing steps, the RINs will lag the product by at least eight days. The example is a real-life case seen every day throughout the industry. Letâ&#x20AC;&#x2122;s look at the dollars and cents.

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Another proven approach to handling the product documentation requirements of the rule is to prepare a separate product transfer document and accompanying RIN certificate.

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Let’s assume the railcar holds 28,500 gallons of ethanol at $2 per gallon, or $57,000 in working capital. Also assume a cost of capital at 10 percent, 250 working days per year and a two-day lag costing each company just over $45. Applying that to everyone in the supply chain in the example means more than $180 was wasted as a result of inefficient compliance management systems. Conservatively, the time delays resulting from the invoicing methodology results in a cost of $1.50 per 1,000 gallons transferred. This does not count any additional cost for increased personnel or computing systems. With renewable fuel production levels at approximately 7 billion gallons per year, and assuming an average of three title transfers during the life of each gallon, the industry is tying up $31.5 million annually by handling the product transfer documentation through modifications to invoicing systems. Again, this is a conservative estimate, as experience has shown many companies experience as many as fouror five-day delays in their invoicing, as well as the need to increase staff levels. Many companies simply can not afford to wait for their RINs before invoicing. However, the regulations clearly state that RINs must be transmitted on the same day as the product transfer document—the invoice in this instance. To not abide by this requirement places these companies out of compliance with the RFS and subject to hefty fines. It’s possible that two-thirds of the industry is still out of compliance with the basic product transfer document requirements of the regulation. This is supported by polling conducted during a late October webinar that showed that only 39 percent of participants receive RINs on the same day they receive their invoices.

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

MARKET

A New Approach Offers a Better Way The regulations do not force companies to transmit RIN information on invoices. The regulations only state what information must be transmitted and that it must be done on the same day as title to the product is transferred. Titleto-product transfers occur well before any invoices are prepared. Early on in the program, and at the request of many throughout the industry, EPA loosened up on its interpretation to allow for invoices to serve the product transfer document requirements. However, EPA still maintains that RINs be transmitted no later than the same day as the invoice, so transferring RINs seven to 10 days after the invoice is clearly not permissible. Another proven approach to handling the product documentation requirements of the rule is to prepare a separate product transfer document and accompanying RIN certificate. This is the approach utilized by participants on the renewable fuel registry. Regulatory compliance documents are generated independent of any corporate invoicing processes. The registry approach to product transfer documents minimizes costly delays in payment for product and saves the industry millions of dollars in working capital. Counterparties are notified immediately of RIN transfers, allowing members to operate their accounts receivable and compliance programs independently and in parallel. This approach allows for minimal disruption to commercial operations while avoiding regulatory violations. With registry participants now accounting for more than 1 billion gallons per year of biofuel transfers, millions of dollars are being saved across the industry with a simple change in operational procedures.

developing payment policies that require RINs be transmitted on the invoice before payment is made. The regulations do not mention the word “invoice” at all, and certainly do not require that RIN information be transmitted on invoices. However, the law requires that RINs be transferred on the same day title to the product is transferred so it is reasonable for a customer to expect RINs no later than their supplier’s invoice. In the case of the product transfer document/RIN certificate approach, however, RINs can show up well in advance of any invoice. Denying payment in this scenario would have no regulatory support. Formal recognition of this issue will almost definitely come as a result of attestation engagements as required by the RFS regulation. The first of these independent outside audits are not due until May 2008, with many already qualifying to delay until May 2009. Proactive compa-

nies will certainly not want to wait until an outside auditor brings this to EPA’s attention before taking action. Fines for such willful violations are tallied on a daily basis, so the sooner a company acts to correct this issue the better. Companies finding themselves in this situation should seriously consider taking proactive measures by notifying EPA’s Office of Transportation Air Quality Enforcement Division and implementing corrective solutions as soon as possible. EP Clayton McMartin is the president of the Clean Fuels Clearinghouse, a company formed in 2001 for the sole purpose of cost effective implementation of clean fuel regulations. Reach him at (575) 377-3369 or www.rinregister.com.

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Recalibrating the Board of Directors By Tracy E. Houston and Cindy Knutson

n its listing requirements, the New York Stock Exchange requires boards, along with nominating, governance, compensation and audit committees, to conduct annual evaluations. According to Ram Charan’s 2005 book “Boards That Deliver: Advancing Corporate Governance from Compliance to Competitive Advantage,” progressive boards have known all along that self-evaluation is a vital process, one that ensures continuous improvement and renewal. Even if a company is not subject to the Sarbanes-Oxley Act of 2002’s requirement of conducting an annual board evaluation like NYSE companies, shareholders, co-op members and stakeholders are asking quesHouston tions and evaluating the company as though it has the same requirements. A company’s members, investors, shareholders, community and employees are expecting—and even presuming—the board of directors is using an objective approach to hold themselves and the company to the “best business practices” that have been a positive result of the Sarbanes-Oxley legislation. It’s unfortunate that something that Knutson can raise the board to a higher level of performance is called an “evaluation,” which may create anxiety and avoidance. Many boards see past the nomenclature and realize the positive results for board development that a well-designed and executed board evaluation process

can provide. A well-designed board evaluation focuses on key functions of the board and provides a “gap” analysis that draws weak areas to the forefront. It looks at the disbursement of responses and identifies their “tone.” Board evaluation is most meaningful as a productive activity when it focuses on board development rather than compliance. This takes knowledge not only of board function, roles and responsibilities, but also how the information links to market changes, and current business and industry trends. A vibrant board evaluation moves the board to a higher level of performance on business issues while enhancing group dynamics. Overall, a board evaluation can transform a group of strong individuals into a collective body of focused board members who enhance their value to the chief executive officer, senior management team and all stakeholders. A skillful board evaluation that causes directors to say “I’m glad we did that” typically includes several important items. It provides clear board objectives and receives reports and feedback from a knowledgeable third party. The evaluation should also facilitate follow-up discussion with the board to identify board development actions. A board evaluation should also integrate its results into strategic leadership and planning. Eventually, the evaluation should provide insights that lead to greater team effectiveness. At times, every board finds itself showing up for a meeting and going through the motions. Knowing the vital signs that a board needs to complete an evaluation can help it move to a productive oversight role. Realizing it’s time to conduct an evaluation can emanate from a number of signals.

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Basic Elements of a Good Board Evaluation Anonymous Neutral third party Identify specific goals the board wants to achieve Identify a gap between current and desired performance Director comments included Director interviews How to get started on recommendations

Questions to review when considering a board evaluation include: Is the board engaging in a full-fledged debate over key issues? Is there confusion over the board’s role of oversight versus micromanaging? Is there a common vision that the board agrees on and is moving toward? Are the fiscal responsibilities of the board members clear? Is the board recruitment based on the strategic plan? Matching a board’s objectives, dynamics of tenure and stage of business are just a few elements that should be considered by a board as it thinks about evaluation. Boards need to be thoughtful and deliberative when considering the type of evaluation to use. Evaluations progress from simple compliance orientation to a comprehensive approach involving written responses and discussion with individual directors in a safe environment. Our practice with boards has taught us to be mindful of the important stages they go through while becoming more effective working together and with the senior management team, and while providing important strategic guidance for the business that is received and acted upon.

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BUSINESS

In the early stages of a business, the entrepreneurial venture begins to build systems, establish relationships with the community, and hear from management about return on investment, staffing and key employee issues. The board is entering into an understanding of its role with management, representing and understanding the organization, and establishing the initial boardroom dynamics. At this stage the board evaluation involves establishing a baseline of questions that focuses on fundamental board oversight, management/board relations, key industry compliance areas, regulatory agencies and ensuring transparent financial reporting standards. The board evaluation can be handled in a quick and simple manner, yet provide meaningful information for the board to grow to the next level of oversight and performance. Many ethanol and biodiesel companies are new, having spent approximately five years in the industry. As the industry

Benefits of Engaging In Board Evaluation Identifies new strategic issues and direction Promotes richer discussion of activities and practices that affect the board and the organization Surfaces new solutions and a fuller understanding of current practices Creates an objective atmosphere to discuss and resolve sensitive issues Facilitates new ideas, approaches and clarifies viewpoints Identifies important action items for the board and management Reveals new opportunities to improve meetings, the director nomination process, director development and board structure (to name a few) Provides a safe environment for all directors to provide their viewpoints Accelerates board integration and promotes focus and direction for boards following mergers and consolidations Enhances public perception of the board Defines the board culture Lays the foundation for more favorable directors and officers Enhances board effectiveness

Reduce Your Risk During Ethanol Rail Car Loading, Transportation and UnLoading 1

As consumer and industrial demand for ethanol continues to grow, the responsibility to reduce incidents of rail tank car NARs (Non-Accidental Release of Hazardous Materials) falls on the shipper. Although NARs have continued to decrease overall from year to year, alcohol has risen to become the second-highest commodity for NARs in 2004.* Reduce your risk and protect your investment by specifying high-quality Midland valves for all of your rail tank cars.

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Enlightened boards are engaging in board evaluations even if not required as part of their development goals.

matures, the next five to eight years will require talented management and critical board decisions as to how the company fits within the overall biofuels industry. It’s at this stage that critical decisions to sell, merge or continue as an independent operator come into the boardroom. The board needs to adapt new attitudes and behaviors to successfully navigate the transitions during this period. If the board decides to remain independent, it needs to choose a board evaluation tool that will allow a “deeper dive.” This more comprehensive approach, combined with a consultant who has governance expertise and understands the state of industry’s business cycle, can provide deeper insight and needed shifts in board performance required at this business juncture. Integrated with strategic planning, the board evaluation can be a tool that assists the board in developing action plans. Transformations often come fast and require a board to be positioned to handle decisions to keep the current business viable while adding new direction to ensure its future position in the industry. Anticipation, implication and asking deep and thoughtful questions to understand the big strategic picture are vital actions of the board and should be tested in the board evaluation process

during this stage. Enlightened boards are engaging in board evaluations even if not required as part of their development goals. Overcoming the resistance to a board evaluation can enhance the strategic planning process. It creates a strategic intelligence that is an essential part of the board’s oversight role at any stage of company growth. A philosophy of continuous improvement from board leadership sends an excellent message to stakeholders and the community about the character of

the company. The board evaluation is a great tool to create and sustain positive change. EP Tracy E. Houston, M.A., is a senior consultant in governance with Summit Point Consulting. Reach her at tracy. houston@summitpointconsulting.com or (303) 721-3219. Cindy Knutson is the vice president of organizational effectiveness for Summit Point Consulting. Reach her at cindy.knutson@summitpointconsulting. com or (303) 721-3277.

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Ethanol Short Course F e b r u a r y 11 - 1 5 , 2 0 0 8 Renaissance Hotel and Convention Center Schaumburg, Illinois

Power-Gen Renewable Energy & Fuels

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February 19-21, 2008

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North American Bioproducts Corp. is organizing this biannual course, which educates participants on the basics of fuel ethanol production and offers an in-depth study of similar principles. Agenda items will cover each part of the ethanol production process. There will also be hands-on workshops. Plant operators and managers, lab technicians and managers, and maintenance staff should attend.

This fifth-annual event aims to address the most important trends and issues impacting the renewable energy and fuels industry. Session topics include financing and market trends (cleantech infrastructure investments, renewable energy credits and carbon), bioenergy policy and local opportunities, waste-to-energy facilities, feedstocks, technologies, and biopower, among many others.

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February 21-22, 2008

This 84th annual event, themed “Energizing Rural America in the Global Marketplace,” will address several issues facing today’s agriculture sector. Besides general ag and foreign trade outlooks, the agenda is broken down into five concurrent session tracks: Rural America, Energy & Technology, Policy & Trade, Food Risk & Security, and Conservation. The Energy & Technology track will discuss biofuels (specifically ethanol) and biomass for energy. (202) 720-5447 www.usda.gov/oce/forum

CALENDAR

Canadian Renewable Energy Workshop

Ethanol 2008 Australia

March 16-18, 2008

Sydney Convention & Exhibition Center Sydney, Australia

IPSCO Place Regina, Saskatchewan This inaugural event will facilitate the continued development of Canada’s ethanol and biodiesel industry. Decision-makers and key stakeholders will network and discuss emerging technologies and operating practices. More information will be available as the event approaches. (519) 576-4500 www.crew2008.com

A p r i l 8 - 11 , 2 0 0 8

This third annual event will continue to build Australia’s ethanol industry by bringing together industry leaders, ag business firms, investors, technology providers, vendors, governments, trade associations and other stakeholders to discuss development opportunities. More information will be available as the event approaches. Australia: +61 7 3360 7000 U.S.: (719) 539-0300 www.ethanol2008.com

International Biomass Conference & Trade Show April 15-17, 2008 Minneapolis Convention Center Minneapolis, Minnesota This event, which stemmed from the Energy and Environmental Research Center’s biomass conference last year in Grand Forks, N.D., aims to advance the near-term and commercial-scale manufacturing of biomass-based power, fuels and chemicals. Topics include biopower, bioproducts, biochemicals, biofuels, intermediate products and coproducts, which will be presented through general sessions, technical workshops and an industry trade show. (719) 539-0300 www.biomassconference.com

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ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

13th Annual National Ethanol Conference February 25-27, 2008

Washington International Renewable Energy Conference

World Biofuels Markets Congress

March 4-6, 2008

March 12-14, 2008

JW Marriott Orlando, Grande Lakes Orlando, Florida

Washington Convention Center Washington, D.C.

Brussels Expo Brussels, Belgium

This Renewable Fuels Association (RFA) event, themed “Changing the Climate,” will include RFA President Bob Dinneen’s annual State of the Industry Address, along with various panel discussions and concurrent breakout sessions. Breakout sessions topics include technology, E85, future feedstocks, distillers grains, financing, cellulose and safety. Panel discussions will include economic impacts, international markets, infrastructure demands, cellulosic ethanol technology and the annual Washington Insiders’ Roundtable.

This event will present the latest developments in renewable energy. Speakers will discuss the status of key renewable energy technologies, plus systems costs, economics, markets, manufacturing and financing. Biofuels and biomass technologies will also be discussed. A trade show will be colocated with the conference.

The sessions at this event will focus on ethanol on a local and global scale. More detailed topics of discussion include feedstocks, trading and pricing, quality and distribution, fleets, pipelines and shipping, and transport manufacturers and users. Precongress conferences will address finance and investment, next-generation biofuels, sustainability and certification, and policy and regulation.

(202) 393-0001 www.wirec2008.org

+44 20 7801 6333 www.worldbiofuelsmarkets.com

(719) 539-0300 www.nationalethanolconference.com

Alternative Fuels & Vehicles National Conference + Expo

Renewable Energy Finance & Investment Summit

24th Annual International Fuel Ethanol Workshop & Expo

M a y 11 - 1 4 , 2 0 0 8

May 19-21, 2008

June 16-19, 2008

Las Vegas Rio All-Suite Hotel Las Vegas, Nevada

FireSky Resort & Spa Scottsdale, Arizona

Opryland Hotel & Convention Center Nashville, Tennessee

This 14th annual event focuses on alternative fuels, alternative fuel vehicles, advanced transportation technologies, vehicle emissions and policy. The preliminary agenda includes discussions that will educate vehicle fleet operators and endusers on the options available in alternative fuels. The expo features auto manufacturers, technology developers, fuel suppliers and many others. There will also be a ride-and-drive event.

This third annual event is themed “Exploring Key Deals & Developments in the Renewable Fuel & Renewable Power Markets.” Among many sessions, it will provide an outlook for ethanol and other biofuels, and discuss cellulosic ethanol facilities and new technology. It will also highlight strategies for improving the profitability of biofuel plants. More information will be available as the event approaches.

(702) 254-4180 www.afvi.org/NationalConference2008

(704) 889-1287 www.frallc.com

This conference will follow the record-breaking 2007 event, in which more than 500 exhibitors participated and more than 5,300 people attended. The preliminary agenda includes an Ethanol 101 pre-conference seminar, general sessions, concurrent technical workshops and various networking opportunities. Attendees will also have the chance to tour Commonwealth Agri-Energy LLC, a 33 MMgy corn-based ethanol facility in Hopkinsville, Ky. More information will be available as this event approaches. (719) 539-0300 www.fuelethanolworkshop.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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EPM MARKETPLACE Chemicals PhibroChem Ltd. 800-223-0434

Construction Fabrication www.lactrol.com

Macomber Welding & Fabricating, Inc. 616-698-0819 macwelding@triton.net

Anti-Microbial PhibroChem Ltd. 800-223-0434

VAL-FAB Inc. 877-482-5322

www.lactrol.com

Grain Storage

CIP Univar USA Inc. 402-733-3266

Coverall Building Systems 800-268-3768

www.univarusa.com

Mavo Systems 763-788-7713

Dryer Systems

www.mavo.com

Plant Construction

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

Agra Industries, Inc. 715-536-9584

Ductwork

Agri-Systems 406-245-6231

Hydro-Klean, Inc. 515-283-0500

www.coverall.net

Insulation

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

www.valfab.com

www.agraind.com

www.agrisystems.net

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

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

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

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

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

Railcars

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Career Growth Opportunities

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

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Smoke Stack www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com Build Your Career at Mortenson Contact Us Today!

Heat Exchanger

Tank Cleaning Services www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

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

Hydro-Klean, Inc. 515-283-0500

Filter Media

Hydro-Klean, Inc. 515-283-0500

Plate-Frame

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com HIRING ALL POSITIONS NATIONWIDE

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

Reach your customers

Reimer Welding Inc. 218-773-0886

www.reimerwelding.com

Railroad Tracks www.hydro-klean.com

Your Solution. Advertise Today.

EPM MARKETPLACE 212

1-877-MORTENSON (toll free) energyjobs@mortenson.com www.mortenson.com

R & R Contracting, Inc. 800-872-5975

www.rrcontracting.net

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

EPM MARKETPLACE Railworks 913-888-4091

www.railworks.com

Volkmann Railroad Builders, Inc. 262-252-3377 www.volkmannrr.com

Tanks Caldwell Tanks 502-964-3361

www.caldwelltanks.com

Eagle Tanks, Inc. 888-678-0698

www.eagletanks.com

WINBCO Tank Company 641-683-1855

www.winbco.com

Consulting Business Plans ICM, Inc. 716-796-0900

www.icminc.com

Quality Assurance Environmental

Eurofins Scientific, Inc. 551-580-9140

ICM, Inc. 716-796-0900

www.eurofinsus.com

www.icminc.com

Seneca Companies 800-369-5500 www.senecacompanies.com

Feasibility Studies Harris Group Inc. 206-494-9422

Plant Optimization www.harrisgroup.com

Optimize the Value of Your Co-Products

Groundwater Services Leggette, Brashears & Graham, Inc. 651-490-1405 www.lbgweb.com

Personnel Recruiting

SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago

EPM MARKETPLACE With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains top editorial content but also a useful directory in each publication. Whether a first-time advertiser wanting to raise awareness of your business or a frequent display advertiser looking for added exposure, EPM Marketplace is the perfect solution.

Harris Group Inc. 206-494-9422

jim.plautz@verizon.net

www.harrisgroup.com

Public Relations Lanser Public Affairs, LLC 262-797-7876 www.lanserpublicaffairs.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

Employment Recruiting

Project Development Ethanol Productions 813-968-6867

504-297-4330 ethanol@euroﬁnsus.com

www.harrisgroup.com

Terratec Biofuels of Solutia 800-742-1476 www.TerratecBiofuels.com

Grading, sampling, mycotoxins, proximates, residues, GMOs. QA / QC Consulting: HACCP, GMPs, SOPs, NIR calibration Co-products: Quality assurance testing; Lot certiﬁcation; Export assistance

Hobbs & Towne 610-783-4600x108

www.hobbstowne.com

SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago

Engineering Civil Antioch International, Inc. 402-289-2217 www.antioch-intl.com

213

EPM MARKETPLACE Control Systems Bachelor Controls 785-284-3482

Analytical Instruments

Control Systems FeedForward, Inc. 770-426-4422

www.bachelorcontrols.com

www.feedforward.com

Design/Build Agra Industries, Inc. 715-536-9584

www.agraind.com

Agri-Systems 406-245-6231

www.agrisystems.net

Ethanol Productions 813-968-6867

jim.plautz@verizon.net

GS CleanTech Corp. 678-566-3588

www.gs-cleantech.com

ICM, Inc. 716-796-0900

www.icminc.com

General

, Inc.

MTA

Mechanical Wear

Revere Control Systems 800-536-2525 www.reverecontrol.com

Welding

Plant Equipment Failure Analysis

Control Systems—Distributed

Corrosion mikeblum@mtalabs.com

916-705-5510

Process Design

Blowers & Fans

Agri-Systems 406-245-6231

www.agrisystems.net

ChemSim 781-248-5057

www.chemsim.com

New York Blower Company 800-208-7918

www.nyb.com

Robinson Industries, Inc. 724-452-6121 www.robinsonfans.com

Process Engineering Associates, LLC 865-220-8722 www.processengr.com

Boiler System

Vogelbusch USA, Inc. 713-461-7374

Factory Sales and Engineering, Inc. 985-867-9150 www.fsela.com

www.vogelbusch.com

Equipment & Services

Centrifuge Repair

Air Pollution/Odor Control

Nosnhoj Services Inc. 317-887-6436

ICM, Inc. 716-796-0900

www.icminc.com

214

Grisley Components, Inc. 303-756-6474

www.grisley.com

Conveyors—Pneumatic www.nosnhojinc.com

Computer Software Encore Business Solutions 204-989-4330 www.encorebusiness.com

Reach your customers

Integrated Business Solutions 888-697-3060 www.ibsolutions-llc.com

Your Solution. Advertise Today.

John Deere Agri Services 770-238-5100 www.johndeereagriservices.com

EPM MARKETPLACE

Conveyors—Enclosed

Blower Engineering 800-388-1339 www.blowerengineering.com

Dryers—Fluid Bed Aeroglide Corporation 919-851-2000

www.aeroglide.com

Dryers—Other Davenport Dryer, LLC 309-786-1500 www.davenportdryer.com

dbc SMARTsoftware, Inc. 770-427-7633 www.dbcsmartsoftware.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

EPM MARKETPLACE Sukup Manufacturing Co. 641-892-4222

Dryers—Rotary Drum Aeroglide Corporation 919-851-2000

www.aeroglide.com

Pipe—Fittings www.sukup.com Robert-James Sales, Inc. 800-666-0088

Heat Exchangers Des Champs Technologies 540-291-1111 www.deschamps.com Dracool-USA 937-743-5899

www.rjsales.com

St. Louis Pipe & Supply 800-737-7473 www.stlpipesupply.com

www.dracooloflykens.com

Instrumentation Instrument Associates 708-597-9880 www.instrumentassociates.com Shimadzu Scientific Instruments 800-477-1227 www.ssi.shimadzu.com

Laboratory—Testing Services Eurofins GeneScan, Inc. 504-297-4330 www.gmotesting.com Midwest Laboratories 402-334-7770 ICM, Inc. 716-796-0900

www.icminc.com

www.midwestlabs.com

Trilogy Analytical Laboratory 636-239-1521 www.trilogylab.com

Emission Monitoring Systems

Loading Equipment

MonitorTech Corp. 866-682-6771

SafeRack 866-761-7225

www.saferack.com

SafeRack 866-761-7225

www.saferack.com

www.monitortechgrp.com

Continuous Emissions Monitoring Systems Easiest installation, operation and maintenance Meet or exceeds EPA requirements NOx, O2, CO, SO2 and others Turnkey systems for under $100,000.00 P.O. Box 9271, Columbus, Oh 43209 866-682-6771 sales@monitortechcorp.us

Pipe—Flanges

Mapcon Technologies, Inc. 800-922-4336 www.mapcon.com

CBT Wear Parts, Inc. 888-228-3625

WINBCO Tank Company 641-683-1855

CPM/Roskamp Champion 800-366-2563 www.cpmroskamp.com

www.cbtwearparts.com

www.winbco.com

Process Control Harris Group Inc. 206-494-9422

Mills-Hammer

www.rjsales.com

Pressure Vessels WINBCO Tank Company 641-683-1855

Maintenance Software

Fermentors www.winbco.com

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

www.harrisgroup.com

EPM MARKETPLACE With all contact information placed in

Filtration Equipment Fluid Engineering 814-453-5014

Millwright www.fluideng.com

Agri-Systems 406-245-6231

Fractionation—Corn

Molecular Sieves

Buhler Inc. 763-847-9900

Vaperma, Inc. 418-839-6989

Sturtevant Inc. 781-829-6501

one convenient location, Ethanol Producer Magazine not only contains www.agrisystems.net

top editorial content but also a useful directory in each publication. Whether a first-time advertiser wanting to raise

www.buhlergroup.com/us

www.vaperma.com

awareness of your business or a frequent display advertiser looking for

Pipe

added exposure, EPM Marketplace is

American Stainless & Supply 800-845-5511 www.americanstainless.com

the perfect solution.

Grain Handling & Storage McC, Inc. 763-477-4774 www.mccormickconstruction.com

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

www.sturtevantinc.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

www.rjsales.com 215

EPM MARKETPLACE Pumps

Tanks

Used Equipment

Agra Industries, Inc. 715-536-9584 Brown-Minneapolis Tank 281-252-9809

www.agraind.com

www.bmt-tank.com

Federal Equipment Company 800-652-2466 www.fedequip.com Paragon Trailer Sales 800-471-8769 www.paragontrailer.com WINBCO Tank Company 641-683-1855

www.winbco.com

Thermal Oxidizers

PROVEN RELIABILITY for VOC, CO & PM ABATEMENT

Yamada America, Inc. 800-990-7867 www.yamadapump.com

EISENMANN Corporation Crystal Lake, Illinois

Valves

815.455.4100 es.info@eisenmann.com

Central States Group 800-318-2747 www.centralstatesgroup.com

Safety SimplexGrinnell 800-746-7539

Check-All Valve Mfg. Co. 515-224-2301

www.simplexgrinnell.com

Metso Automation 508-852-0215

Sensors Electro Sensors 800-328-6170

Biothane Corporation 856-541-3500x501 www.fluideng.com

Puritan Magnetics, Inc. 248-628-3808 www.puritanmagnetics.com

ICM, Inc. 716-796-0900 Pro-Environmental, Inc. 909-989-3010

www.icminc.com

www.pro-env.com

Laidig Systems, Inc. 574-256-0204

Your Ad HERE

216

Your Solution. Advertise Today. www.laidig.com

Fluid Engineering 814-453-5014

www.fluideng.com

Siemens Water Technologies 800-525-0658 www.siemens.com/water

Finance

davidj@chapelsteel.com

Storageâ&#x20AC;&#x201D;DDGS

www.biothane.com

Water Treatment

Steel Suppliers Chapel Steel 800-320-6042

www.metsoethanol.com

Wastewater Treatment Services

www.electro-sensors.com

Separation Equipment Fluid Engineering 814-453-5014

www.checkall.com

EPM MARKETPLACE

Accounting Kennedy and Coe, LLC 800-303-3241

www.kcoe.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

EPM MARKETPLACE Noble Americas Corporation 626-585-1705 www.thisisnoble.com

Appraisals Federal Appraisal & Consulting, LLC. 908-823-0607 www.federalappraisal.com Natwick Associates Appraisal Services 800-279-4757 www.natwick.com

Natural Gas Provista Renewable Fuels Marketing 651-355-8519 www.provistafuels.com

Transportation Heavy Highway Transport

Due Diligence Harris Group Inc. 206-494-9422

Utilities

www.harrisgroup.com

Landstar Carrier Group 920-487-3877

www.landstar.com

Equity Procurement

Rail

Greenman Funding 888-802-7678 greenman.funding@verizon.net

Blacklands Railroad 903-439-0738 www.blacklandsrailroad.com

Insurance

Rail Consulting

Chubb Insurance 312-454-4250 ERI Solutions, Inc. 316-927-4294

chubb.com

erisolutions.com

Antioch International, Inc. 402-289-2217 www.antioch-intl.com

Agri-Energy Funding Solutions 402-895-5067 www.agri-energyfs.com

124 W. Broadway, Suite 300 Madison, Wisconsin 53716 www.integrysenergy.com

Railcar Moving Heyl & Patterson Inc. 412-788-9810

Lender Representatives

Contact Mark Rundle at marundle@integrysenergy.com or (608) 222-5170.

www.heylpatterson.com

RAILCAR MOVING

Utility Integrys Energy Services 608-235-2547 www.integrysenergy.com

Greenman Funding 888-802-7678 greenman.funding@verizon.net

Risk Management www.rjobrien.com

R.J. O’Brien 800-621-0757

www.rjobrien.com

The CUB™ is an electromechanical machine designed to move single railcars or groups of cars. Some advantages of the CUB™ are:

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Ethanol Producer Magazine will position your company, your product, your service, and your message within the ethanol industry.

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For more information please contact Ethanol Producer Magazine at (701) 7468385 or visit www.EthanolProducer.com

•Safety of Personnel •One Person Operation •Little Maintenance Requirements •Low Investment/Operating Costs

Software—Accounting Encore Business Solutions 204-989-4330 www.encorebusiness.com

Legal Services P

Attorneys BrownWinick Law Firm 515-242-2400 www.biofuellawyers.com Faegre & Benson, LLP 612-766-6930

412-788-9810

412-788-9822

info@heylpatterson.com

Railcar Parts Salco Products, Inc. 630-783-2570

www.salcoproducts.com

www.faegre.com

Marketing Distillers Grains ConAgra Trade Group 402-595-4125 www.conagratradegroup.com

Your Ad HERE Your Solution. Advertise Today.

EPM MARKETPLACE Fuel Ethanol ConAgra Trade Group 402-595-4125 www.conagratradegroup.com

ETHANOL PRODUCER MAGAZINE FEBRUARY 2008

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R.J. O’Brien 800-621-0757

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