July 2013 Ethanol Producer Magazine

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Biofuels are Not Optional Bruce Dale Outlines Vision for Food and Fuel Page 44

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contents

JULY issue 2013 VOL. 19 ISSUE 7

features 30

30 PHOTO REVIEW

The 2013 International Fuel Ethanol Workshop and Expo

38 ENVIRONMENT

Culture of Compliance

Executives need to give environmental managers their full support

By Holly Jessen

44 PROFILE

Pretreated Biomass for Food and Fuel

Liquid transportation fuel requirements reinforce need for biofuels

By Susanne Retka Schill

52 Advanced Biofuel

Cellulosic Technology— Pulp and Paper Style

A consulting company turns to biofuel technology

By Chris Hanson

56 Q&A

Driving American Ethanol to the Front

CONTRIBUTIONS 64

ENZYMES

Going Deep With Enzyme Technology Releasing bound oil, boosting saccharification

By Jack Rogers

68

FINANCE

Finding Business Success in a Changing Ethanol Industry Evolving trends will require updated management tactics

DEPARTMENTS 6

7

Editor’s Note

Let's Start Imagining Win-Win-Win Scenarios

By TOM BRYAN

Ad Index

10 The Way I See It

This is War!

By MIKE BRYAN

11 Events Calendar

Upcoming Conferences & Trade Shows

12 View From the Hill

Asking the Right Questions By bob dinneen

14 Drive

Big Oil Talks Out of Both Sides of Mouth

By Tom Buis

16 Grassroots Voice

Overcoming the

Blend Wall With Our Opponents' Medicine

By Brian Jennings

18 Europe Calling

Keep on Fighting the

Fuel-Food Fallacy

By Rob Vierhout

20 Business Matters Strategies to Reduce

Austin Dillon carries the E15 message to NASCAR fans

By TIM PORTZ

58 FEEDSTOCK

24 Commodities Report

Lowering Ethanol’s Carbon Footprint with Energy Beets

Litigation Angst

By Camille urban

22 Business Briefs 26 Distilled 70 Marketplace INSIDE: ENERGY BEET PROJECT GOES DEMO SCALE JULY 2013

Mendota Bioenergy puts $5 million grant to sweet use

By Keith Loria

By SCOTT MCDERMOTT

Biofuels are Not Optional Bruce Dale Outlines Vision for Food and Fuel Page 44

ALSO

Top-down Environmental Compliance Page 38

From Pulp and Paper to Cellulosic Ethanol Page 52 www.ethanolproducer.com

Ethanol Producer Magazine: (USPS No. 023-974) July 2013, Vol. 19, Issue 7. Ethanol Producer Magazine is published monthly by BBI International.

Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices.

POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

4 | Ethanol Producer Magazine | JuLY 2013

ON THE COVER

Professor Bruce Dale stands in the pilot facility on the campus of Michigan State University.

PHOTO: KURT STEPNITZ, MICHIGAN STATE UNIVERSITY

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editor’s note

Last month, Bob Dinneen, president and CEO of the Renewable Fuels Association, aptly pointed out in his “View from the Hill” column that oil—not corn or ethanol—drives food prices. He reminded us that every

Let’s Start Imagining Win-Win-Win Scenarios Tom Bryan, PRESIDENT & EDITOR IN CHIEF tbryan@bbiinternational.com

step of the food chain is reliant on petroleum products. His column was accompanied by a chart that illustrated the near-perfect relationship between global food prices and global oil prices over the past 13 years.

I reflected on Bob’s lucid point after reading this month’s cover story, “Pretreated Biomass for Food and Fuel.” In this page-44 feature, EPM Senior Editor Sue Retka-Schill describes the epiphany-like conclusions that renowned Michigan State University biofuels researcher Bruce Dale, and his colleagues, recently arrived at. To put it simply, they think biofuels done right could save the world. My words, not theirs.

After a thorough examination of global population dynamics, food demand, land use and productivity and the impact of energy and biomass production, Dale and his fellow researchers determined that, by 2050, the world will simply run out of adequate land to grow all the food and feed it needs unless we create new ways to get more of both from existing acres. So why not fuel, too?

As Retka-Schill explains, Dale has a vision of what agriculture could look like 20 or 30 years from now. It’s exciting. He sees a new agriculture that uses land resources super efficiently, and he foresees a number of ways in which biofuel production can enhance, rather than compete with, feed and food production. Talk about believing in abundance theory.

Dale prophesizes all manner of cool things: early harvests, double cropping, biomass processing depots, pretreatment and pelletization strategies, and the like. Flying cars?

Maybe so, but you’ve got to read the piece for yourself to understand his vision. It’s an audacious plan from one of the smartest guys in the business.

So where does the relationship between food prices and oil prices fit into this? Dale, like Dinneen, knows “the age of stable, cheap oil is over” and the only way the world can count on a cheap and abundant supply of food is to guarantee that it also has a cheap and abundant supply of liquid fuels. You see, in Dale’s future more of one thing doesn’t necessarily mean less of something else. “It isn’t hard to imagine a configuration for agriculture that would provide more food, more fuel and more environmental benefits,” he says. “It’s actually quite easy to image win-win-win scenarios once you start thinking that way.”

For industry news: www.ethanolproducer.com or Follow Us: 6 | Ethanol Producer Magazine | JuLY 2013

twitter.com/EthanolMagazine

AdIndex

EDITORIAL PRESIDENT & EDITOR IN CHIEF Tom Bryan tbryan@bbiinternational.com

Vice President of Content & EXECUTIVE EDITOR Tim Portz tportz@bbiinternational.com

MANAGING EDITOR Holly Jessen hjessen@bbiinternational.com

SENIOR EDITOR Susanne Retka Schill sretkaschill@bbiinternational.com

NEWS EDITOR

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ART ART DIRECTOR

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GRAPHIC DESIGNER Lindsey Noble lnoble@bbiinternational.com

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PUBLISHING CHAIRMAN Mike Bryan mbryan@bbiinternational.com

CEO

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SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com

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ACCOUNT MANAGERS Marty Steen msteen@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Kelsi Brorby kbrorby@bbiinternational.com Tami Pearson tpearson@bbiinternational.com

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ADVERTISING COORDINATOR

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EDITORIAL BOARD Mike Jerke, Chippewa Valley Ethanol Co. LLLP Jeremy Wilhelm, Cilion Inc. Mick Henderson, Commonwealth Agri-Energy LLC Keith Kor, Pinal Energy LLC Walter Wendland, Golden Grain Energy LLC Neal Jakel Illinois River Energy LLC Eric Mosebey Lincolnland Agri-Energy LLC Steve Roe Little Sioux Corn Processors LP

2 Growth Energy

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com.

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65 U.S. Water Services

55 Himark bioGas

50 United Sorghum Checkoff Program

68 Hydro-Klean LLC

49 Vogelbusch USA Inc.

11 ICM Inc.

23 Wabash Power Equipment Co.

8-9 Inbicon

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COPYRIGHT Š 2013 by BBI International TM

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the way i see it

This is War!

By Mike Bryan

There should no longer be any question that Big Oil is out to destroy biofuels. Anyone who thinks otherwise is simply not looking at the facts. This is no

longer a little uprising here and a small skirmish there. This, my friends, is all out war!

It’s a war being waged in Congress with millions of dollars of oil money. It’s a war being waged state by state, with Florida being the latest example. It’s a war that has hung the yoke of world hunger and environmental degradation around the neck of biofuels.

This is a war that began almost from the first gallon of ethanol ADM produced in the late '70s. It manifested itself then in the “No Ethanol in Our Gas” signs, in the pushback from mechanics, blaming ethanol for everything from poor engine performance to a faulty battery.

It has continued over the years, encompassing energy conversion,

10 | Ethanol Producer Magazine | JuLY 2013

environmental challenges, food vs. fuel and to the rescinding of the excise tax credits for ethanol. These issues have led to the latest smart bomb dropped on the biofuels industry, “the proposal to rescind the federal mandate for biofuels all together.”

This is a war that is, by nature, terribly one-sided. The people who are responsible for delivering our product to the public are the very people who seem to be bent on destroying it. In addition, they are funded to a depth far beyond that of the biofuels industry.

Let’s be clear, without a mandate the oil industry would cease ethanol blending almost immediately. This fallacious idea that somehow the oil industry would continue blending ethanol because of price or moral responsibility, or logistics without a federal mandate contained in the RFS is a Trojan horse.

On the positive side, we have a number of seasoned generals on our side and a great army of people ready to do battle. But we are underfunded and small by comparison. Our focus is continually being diverted to a number of battles going in different fronts at the same time.

Make no mistake, we are in a fight for our lives. There has never been a time in the history of biofuels that has required more determination, more focus and more coordination than is required today. When sharks smell blood, they circle and move in on their prey. The ethanol industry, in the past

couple of years, has shed quite a lot of blood and the scent of that to those who want to destroy this industry is a powerful motivator to move in for the kill.

We can’t just leave this fight to the generals, it is the responsibility of every one of us to do our part. This is, without a doubt, a war that will determine the future of our industry. Be involved, not just in a passive way, but be involved in speaking with your Washington representatives and on state level, your state representatives. This is not the time for passiveness, this is war!

That’s the way I see it.

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

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view from the hill

Asking the Right Questions

By Bob Dinneen

The numbers don’t lie. When directly compared with gasoline, ethanol reduces greenhouse gas (GHG) emissions by 40 to 50 percent. Ethanol also reduces all criteria

pollutants: carbon monoxide, exhaust hydrocarbons that form ozone, particulates and toxics.

Recently, the House of Representatives Energy and Commerce Committee decided to take a deeper look at the impact of the renewable fuel standard (RFS) on GHG emissions and the environment.

I began answering the questions posed by the committee regarding the RFS and GHG emissions, and what became evident was that they were asking the wrong questions. The committee was delving into ethanol’s impact on GHG emissions, without discussing the negative and harmful impact of its replacement. Their questions fail to compare today’s environmental landscape to a world with no RFS, a world that would be entirely dominated by petroleum, increasingly supplied by Canadian oil sands and tight oils in this country from fracking.

Consequently, I decided to pose 10 questions of my own that should have been asked in order to gain a full understanding of the environmental impact of the RFS. They include:

12 | Ethanol Producer Magazine | JuLY 2013

1. What are the environmental effects of oil exploration, including seismic surveys, drilling and well logging, deployment of marine platforms, and infrastructure development?

2. What are the environmental effects of oil extraction, including fracturing, pumping, and additional infrastructure establishment?

3. What are the environmental effects of crude oil distribution, including transportation (ocean tanker, rail and/or truck) and pipeline?

4. What are the environmental effects of gasoline production at the refinery?

5. What are the environmental effects resulting from gasoline distribution, including transportation, pipeline shipment and storage?

6. What are the environmental and public health effects of gasoline use, including fuel blending, fuel dispensing and driving?

7. What are the GHG emissions impacts of increased unconventional oil production from Canadian oil sands, tight oil from fracking, thermally enhanced oil recovery, and gasoline production, distribution and use?

8. How has the composition of gasoline and resulting emissions changed since 2005?

9. What are the GHG and other environmental impacts of our dependence on imported oil and the national security implications of that dependence?

10. Do current lifecycle analysis tools and models fully capture the environmental and carbon effects of oil exploration, extraction, processing, transportation and combustion?

Context is important. As Congress assesses the merits of ethanol and the RFS, a clear understanding of the fossil fuels being displaced by ethanol and other renewable fuels is imperative. Changes to the RFS would

undoubtedly lead to increased use of marginal petroleum, fuels that have their own distinct environmental, public health and carbon effects.

Moving forward, I hope the Committee realizes the necessity of the RFS and takes a fair and objective look at all aspects of GHG emissions, without omitting the negative effects of petroleum on the environment.

Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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DRIVE

Big Oil Talks Out of Both Sides of Mouth

By Tom Buis

Global Big Oil companies consistently criticize E15 for use by American motorists. Among their litany

of fictitious claims is that E15 is dangerous and will cause engine damage. Without any evidence to back their claims, it is clear that they are employing scare tactics to prevent consumers from choosing a less expensive alternative to foreign oil.

As a matter of fact, Big Oil has erected every possible barrier to prevent higher blends, such as E15, from entering the commercial marketplace, protecting their market share and record profits at the expense of the free market and consumer choice.

They have launched an aggressive and endless public relations campaign designed to deceive and distort the truth about the true benefits of renewables. They have also taken their challenges to the courts. Big Oil’s deep pockets are funding a relentless campaign to lobby Congress to repeal the renewable fuel standard (RFS). Oil companies have made it clear they will do whatever it takes to maintain their stranglehold on the liquid fuels market.

14 | Ethanol Producer Magazine | JuLY 2013

Yet, something odd is occurring. While these companies are fighting biofuels here in America, claiming eminent damage, they are promoting them overseas. Like in Brazil, where they are using a 25 percent blend and in Thailand, where oil companies are using a 20 percent ethanol blend.

So, halfway around the world, they are speaking out of the other side of their mouth as they introduce higher blends of ethanol into the marketplace. Apparently it is safe to use E15 and even higher blends of ethanol.

The Bangkok Post reported May 6 that, “Shell officially began selling the fuel on Friday at 32 petrol stations in Greater Bangkok.” In fact, higher blends are so successful the article goes on to explain that Shell, “plans to expand to 100 pumps nationwide by yearend.”

Shell is confident of the performance and safety of higher ethanol blends, explained Grant McGregor, general manager for retail sales and operations. “We plan to have a communication strategy with our customers to ensure awareness and confidence in our products.” He also noted that, “We expect continued growth in the E20 market, as this segment's sales grew 30 percent in the first quarter.”

Then why are oil companies fighting higher blends of ethanol like E15, at home?

Clearly their research shows it is safe and consumers should feel confident. What is the difference between Bangkok and

Boston, Thailand and Tuscaloosa? What is the difference when it comes to fueling our transportation needs? The answer is none!

If higher blends, such as E20, work in cars in Thailand, NASCAR runs E15 at Talladega and every single one of their other races, and if it is good enough for Shell to sell halfway across the world, then it is good enough for American consumers. They should have the choice to fuel up with higher ethanol blends in Anytown, USA, because it is safe and reliable, period.

The reality is that Big Oil will stop at nothing to protect their market share and keep their pockets deep and well-lined.

Author: Tom Buis CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org

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GRASSROOTS vOICE

Overcoming the Blend Wall With Our Opponents’ Medicine

By Brian Jennings

Remember when ethanol opponents hired a Beltway public relations (PR) firm back in 2008 to tarnish ethanol with a misleading food vs. fuel campaign?

Documents written by that PR firm, obtained by Sen. Chuck Grassley and posted on his website at the time, outlined their strategy: “First, we must obliterate whatever intellectual justification might still exist for corn ethanol among policy elites. ... Second, we must demonstrate to policy makers that there is a political price to allowing ethanol policy to drive up the cost of food.”

The deceptive attacks continue today, but the primary focus of our opponents has shifted to renewable identification number (RIN) prices and the impossibility of the E10 blend wall. Instead of being preoccupied with whose idea the blend wall is (Big Oil’s), ACE has been putting our own twist on our opponents’ 2008 strategy to show lawmakers that petroleum marketers are using RINs to overcome the blend wall.

It goes like this: “First, we must obliterate whatever intellectual justification might still exist for the imaginary E10 blend wall among policy elites. … Second, we must demonstrate to policy makers that there is a political price to helping Big Oil wipe out their competition and allowing them to continue driving up the price of fuel."

ACE is capitalizing on the gnashing of

16 | Ethanol Producer Magazine | JuLY 2013

teeth by oil companies over RIN prices to help petroleum marketers “do the math.” Indeed, it helps when Big Oil whines so loudly about RIN prices, because it has resulted in enterprising petroleum marketers paying much closer attention to the economic incentive for those who aren’t obligated parties to blend ethanol and acquire RINs. It requires a bit more cost and paperwork on the part of marketers, but we’re able to help show them that it’s a wise business decision.

A recent example of how we’ve put this strategy to use is through a congressional staff briefing Ron Lamberty, ACE senior vice president, helped organize with the Iowa Renewable Fuels Association in Washington, D.C. Ron worked with a South Dakota petroleum marketer who revealed to a standing-room-only crowd of congressional staffers that since he began offering E15 along with other choices, including straight gasoline, ethanol has comprised, on average, between 18 and 28 percent of his overall sales. Congressional staffers were surprised to learn that this petroleum marketer was able to do what the oil companies suggest cannot be done, and to make money doing it, not to mention passing savings to his customers.

Instead of putting the emphasis on the fact that he’s offering E15, Ron and the station owner emphasized that when motorists have a choice, including fill-up on gasoline without ethanol, the real-world experience at his station was an ever-increasing percentage of sales containing ethanol.

As Ron has remarked to me, “We used to get calls all the time from petroleum marketers asking, ‘how do I get my hands on

that blenders’ credit (VEETC)?’ Now we’re getting calls from the same marketers asking, ‘how can I get my hands on RINs?” Petroleum marketers aren’t the only ones taking action. Ethanol producer members of ACE, such as Absolute Energy LLC, recently began blending and directly selling ethanol blends such as E85 and E30. Rick Schwarck, Absolute president and CEO, has pointed out that by taking this step, they’re much more price competitive than other fuel suppliers, saving motorists money and creating additional demand for ethanol.

The bottom line is, we don’t have to play defense about RINs and the blend wall.

Instead, ACE is turning tables on Big Oil, using RINs as yet more proof for how the renewable fuel standard is working, and can help drive the expansion of all kinds of ethanol offerings.

The resulting benefits are real. The business case is made to petroleum marketers that blender pumps and higher ethanol blends can make them money and generate customer loyalty. From a policy standpoint, it enables us to show lawmakers we can overcome the blend wall and sell increasing volumes of ethanol to consumers.

Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

Europe Calling

Keep on Fighting the Fuel-Food Fallacy

By Robert Vierhout

Earlier this year, in January, version zero of a report on biofuels and food security was published.

The UN Committee on World Food Security requested this report. The work was carried out by a specially composed project team under the aegis of the High Level Panel of Experts on Food Security and Nutrition. The HLPE is based in the same building as the Food and Agriculture Organization.

The task given was to “conduct a science-based comparative literature analysis” assessing “the opportunities and challenges that biofuels may represent for food security so that biofuels can be produced where it is socially, economically and environmentally feasible to do so.”

The result was devastating. Not a single positive word on biofuels came out.

It was almost 50 pages of accusations against biofuels.

Considering the composition of the project team, carefully avoiding the participation of an expert favorable of biofuels, a balanced report could not have been produced. It reminded me of the way the inquisition worked in the Middle Ages.

The version zero report triggered a lot of responses, some highly critical of the “analysis” presented. Even the FAO itself didn't like it.

18 | Ethanol Producer Magazine | JuLY 2013

A new version has now come to light and an extract was circulated to a small group of stakeholders (not me).

I was prepared for the worst.

Remarkably it has become a much more balanced report. I don't know who drafted it, but I cannot believe it was the same group of experts.

Still, there are statements in the summary that do not reflect reality. In this column I cannot address all the concerns I have, but there are two that need to be highlighted.

In the summary is stated “given the overwhelming use of feed and food crops, concern over competition between biofuels and food production has been particularly acute.” The report mentioned in another paragraph, “When crops are used for biofuels, the first direct impact is to reduce food and feed availability.”

Neither of these statements is objective.

I don't know what the researchers had in mind when they wrote “overwhelming,” but I personally would not want to characterize a net use of less than 3 percent of all cereals globally for biofuels as overwhelming.

The second statement totally ignores the softening effect of animal feed production. It is remarkable, but the entire document does not mention coproducts at all. I have the feeling that the experts did not take the trouble to include in their analysis a 550-page FAO report from 2012 on biofuel coproducts that shows the importance of the distillers grains for the feed and food market. It is what I would call selective science.

The report becomes forced and implausible when the experts try to establish the isolated effect of biofuels on food prices “everything else being equal.”

This is what I would like to call nonsense science. It is simply not possible to design an equilibrium model that still has explanatory value if major factors in food price setting like energy price, climate, dietary habits, trade restrictions, labor, food waste and speculation are all kept constant.

Certainly not if biofuel demand accounts for less than 3 percent of all cereals available: Illusion presented as scientific fact.

Reports like these need to be correct, impartial and balanced. Certainly peerreviewed. If, however, simple facts like the impact of coproducts are left out of the assessment, the biofuel-food fallacy will continue to exist.

Regulators and the public at large deserve a more honest assessment.

Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

business matters

Strategies to Reduce Litigation Angst

By Camille Urban

One cannot help noticing the number of lawsuits swirling in the renewable energy industry. They are big, expensive, and equally as important, they consume time and resources with the voracity of a tornado. Is there a strategy to eliminate drawing the attention of a plaintiff looking for a vehicle to make its position known in the industry? Not to my knowledge.

Instead, the best thing a renewable fuel producer can do is position itself to minimize the disruption of its business when a lawsuit occurs.

When a company is named as a defendant in a lawsuit, the first thing it will be asked to do is provide information. United States law allows both parties in a lawsuit to request documents and information for use in support of their respective positions.

Responses are required within a certain time limit and may be in the form of documents.

Example requests include documents such as “the company’s marketing materials since 2003” or “copies of all of the board meeting minutes and notes since 2004” or “any and all documents related to production.” Sound like a headache? It is.

Being named in a lawsuit creates angst.

Receiving document requests results in near panic for a company not prepared. At the very least, the requests start a mad scramble just to determine what documents exist. It requires days of sorting through offices and computer hard drives. Each document must be examined by your counsel to determine

20 | Ethanol Producer Magazine | JuLY 2013

if it must be produced and whether there is any information present that can be withheld.

Some duplicates can be culled; some cannot because handwritten notes appear thereon.

Determining what documents previously existed but have since been destroyed is also required.

A company will also be asked to identify individuals who were employed or contracted during the timeframe in question and may have knowledge regarding certain facts. Soon thereafter, each such individual will be interviewed to determine his knowledge, what documents he possesses, and why documents expected to be in his possession are missing.

The entire process is tedious, time consuming, and expensive. Without clear document retention and destruction policies, the more inefficient a company will be in locating and producing these documents.

And the more its lawyers will need to bill in order to comply with the discovery requests or to argue about why compliance is impossible.

What to do? Right now, before becoming part of a lawsuit: 1. Draft and store detailed descriptions of your current document retention and destruction policies.

2. Distribute document policies and routinely educate all employees so that they understand what to archive and how.

3. Determine which employees are the pack rats and offer them assistance.

4. Determine past document policies and create detailed descriptions of each including the time frame of effectiveness.

5. Limit the number of copies retained by designating a record keeper for each area such as purchasing, storage, production, maintenance, sales, lab, board, office.

6. Require all those not designated as recordkeepers to cull documents not on the “retain” list.

7. Meet with your IT professionals. Take an active role in creating and documenting archive policies for emails and e-documents.

8. Archive e-documents such that each may be searched using criteria, e.g., date created, date last accessed, author(s), to and from, document type and key words, so that exact copies may be de-duplicated.

9. Create an employee handbook.

Include policies regarding confidentiality and document destruction. Keep track of past employees with key roles.

10. Perform exit interviews with every employee. Obtain a signed confirmation of each exit interview and employee’s ongoing obligations of confidentiality.

These strategies will allow a company to manage angst and panic related to launch of a lawsuit. Even better, they provide avenues for reducing expenses. So what are you waiting for? Get ready, get set, go!

Author: Camille Urban Attorney, BrownWinick Law Firm 515-242-2451 curban@brownwinick.com

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business briefs

People, Partnerships & Deals

The American Coalition for Ethanol has joined the ASTM Technical Committee D02 on Petroleum Products and Lubricants. The organization is represented by Ron Lamberty, senior vice Lamberty’s 30 years of experience in the president of ACE. The ethanol industry and committee meets twice as fuel retailer and a year, and currently has station owner will him with a jurisdiction over 580 provide unique perspective. standards.

Standards developed during committee meetings play an important role in all aspects relating to the standardization of petroleum products and lubricants.

The Renewable Fuels Association has added Dawn Schueller Moore to its staff as communications director. Prior to joining the RFA, Moore served as press secretary to Sen. Moore says she is Herb Kohl, D-Wis., for anxious to put her nearly three years. She press and social has publicized issues media skills to work at the RFA. and events related to agriculture, rural development, and antitrust legislation. Moore rounds out RFA’s communications team, which is led

by Christina Martin, executive vice president.

She will serve as a point person for day-to-day press activities and will actively participate in social media.

The U.S. Grains Council, the National Corn Growers Association, Maizer, which represents Argentina producers and the corn supply chain, and Abramilho, the Brazilian Association of Corn Producers, have signed a memorandum of understanding to form an alliance of North and South American corn producers named Maizall—The In-

22 | Ethanol Producer Magazine | JuLY 2013

ternational Maize Alliance. The alliance members will collaborate on a global basis to address issues concerning food, security, biotechnology, stewardship, trade and producer image. The primary focus of the alliance is to emphasize the need for better consumer understanding of production agriculture.

Maizall will also conduct outreach to governments and stakeholders on the need for tradeenabling biotechnology policies and regulatory procedures.

The board of directors of Betaseed have appointed John Enright as president, effective July 1. Enright joined the company in late 1995 and has held a number of roles in accounting and admin- Enright says is he confident Betaseed istration, most recently has the leadership as chief financial of- and staff to build on ficer. He has been a its strengths and member of the Beta- meet the needs of customers. seed senior leadership team for more than six years, contributing to the development and implementation of the company’s strategic plan. Enrick replaces outgoing President Kurt Wickstrom. Betaseed has also promoted Jason Evenson to the position of regional sales manager in the American Crystal Sugar Co. market. Evenson became a sales representative for the company Evenson formerly in 2006. Headquartered held positions at in Shakopee, Minn., Bayer Crop Science Betaseed is a leading and American Crystal marketer of sugar beet Sugar Co. seed.

Friesland, Wis.-based United Wisconsin Grain Producers LLC has joined Growth

BUSINESS BRIEFS Share your industry briefs To be included in Business

Sponsored by

Energy. UWGP began producing ethanol in 2005 and now has the capacity to produce 58 MMgy, along with 200,000 tons of distillers grains. The facility’s ethanol yield rate is 2.86 gallons per bushel, and the company has recorded more than $100 million in total earnings since beginning operations. UWGP brings Growth Energy plant membership to 79, with an additional 78 associate members.

Atlas Commodities LLC has announced that Joshua Bailer has joined its management team as managing director. In his new position, Bailer is charged with leading the firm’s new suite of brokered products under the name Next Generation CommodiBailer has 15 years ties. Based in Miami, of experience NGC includes coverand deep age of biofuels, credits relationships within the commodities and other alternative industry. energy projects. Prior to joining Atlas Commodities, Bailer spent three years as head of U.S. biofuels at Sucden Americas Corp.. He has also worked with Morgan Stanley in its oil and refined products trading division.

The Biotechnology Industry Organization has welcomed several new members, including Lignol Energy Corp. and LanzaTech. Burnaby, British Columbia-based Lignol Energy is developing biorefining technologies for cellulosic biofuels, renewable chemicals and biobased products. LanzaTech, which is based in New Zealand and has U.S. headquarters in Chicago, has developed a fermentation process to produce fuels and chemicals, including ethanol, from waste gas.

With the addition of these companies, BIO’s Industrial and Environmental Section membership now includes more than 85 companies.

Briefs, send information (including photos and logos if available) to: Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to 701-7468385, or email it to evoegele@bbiinternational.com. Please include your name and telephone number in all correspondence.

Brazil-based GranBio has announced it will open a U.S. operations office in the San Francisco Bay Area of California. The company has also named Vonnie Estes as managing director-U.S. In her new role, Estes will lead GranBio’s efforts to access new technologies and establish key public and private collaborations for the company’s continued global expansion in advanced biorefinery development. Estes has more than two decades of experience leading technology and commercial development programs for global chemical companies, including building new business through multibillion dollar partnerships and new value chains in technologyfocused businesses. Prior to joining GranBio, Estes served as vice president of corporate development at Codesix Inc. She has also held positions at DuPont Danisco Cellulosic Ethanol and Syngenta.

Maple Energy plc, an integrated energy company that operates a sugarcane ethanol plant in Peru, has announced that Rex Canon, CEO and co-founder, is stepping down from the company and its subsidiaries effective July 31. Canon led the Maple organization for nearly 20 years. Following his departure, Canon will pursue other business interests in the Americas, but has agreed to remain as a consultant to Maple Energy through Dec. 31.

Guillermo Ferreyros has been appointed to replace Canon. He most recently served as general manager of Maple’s ethanol business. Ferreyros will immediately take the position of chief operating officer and CEOdesignate, and will become CEO following Canon’s July 31 departure.

The Iowa Renewable Fuels Association has announced that Sperry One Stop in Coon Rapids, Iowa, has become the state’s sixth retailer to offer E15 as a registered fuel.

Sperry One Stop is located on Highway 141 in Coon Rapids. The IRFA works with retailers offering E15 to ensure they comply with federal and state regulations.

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commodities Natural Gas Report

LNG exports: Moving closer to reality May 31—In late May, the U.S. DOE issued an export license to the Freeport liquefied natural gas terminal. Once operational, the facility will have the capability to export 2 billion cubic feet (Bfc) per day of natural gas to foreign markets. This approval comes on the heels of DOE’s approval of Cheniere’s Sabine Pass project last year which initially will export 2 Bcf per day and could expand significantly beyond that level.

These two projects alone will increase domestic natural gas demand by over 5 percent and more than 20 additional projects are in various stages of development. Even if fewer than half of these projects are approved and built, market demand will increase dramatically, possibly to a level that will test the ability to supply domestic and export natural gas markets at reasonable prices. There is a possibility that U.S. natural gas prices will rapidly move toward world natural gas prices.

The relatively high natural gas prices in Europe and Asia explain why developers are trying to move natural gas out of the U.S. and into higher value markets. Naturally, as supply moves out of the U.S. and into foreign markets U.S. prices will tend to move up. How much is a function of the amount of supply that is exported. Over the next few years,

By Casey Whelan

U.S. Energy Services will continue to monitor the development of LNG export facilities since it’s believed they will have an impact on natural gas prices in the U.S.

Corn Report

Volatile market expected as production estimates decrease

BY JASON SAGEBIEL

73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13

Million Units

May 31—Rain makes grain was the old adage but too much rain USDA Grain Consuming Animal Units makes an uneasy volatile market. The month of May saw snow, a nar97.50 row planting window and flooding. The market has two adjustments 95.00 to make between now and the June 30 planting intentions report. How 92.50 much acreage has been lost, and have yields been negatively impacted?

90.00 For old crop, the issue will be the cash markets as this market continues 87.50 to exhibit an aggressive approach.

85.00 The USDA was indicating a new crop carry-out of 2 billion bushels 82.50 with 89.5 million acres harvested and a yield of 158 bushels per acre.

80.00 Demand was considered high at 12.92 billion bushels compared to the 77.50 past two years of 11.135 billion bushels and 12.527 billion bushels. Ul75.00 timately, multiple changes in both the supply and demand table are ex72.50 pected in the coming months. It could be argued the corn use in the feed 70.00 and ethanol sectors was too high in the initial report. Feed demand for 67.50 next year was projected at 5.325 billion bushels compared to 4.40 billion Source USDA 65.00 bushels and 4.545 billion bushels the past two years.

Last year was the other side of the spectrum in the weather arena but at least the acres were planted. Expect to see volatile markets this summer as production estimates decrease and demand adjusting accord- remain at the low $5 price level until there is a much clearer picture of ingly. There is no room for error and support for new crop corn should production possibilities.

24 | Ethanol Producer Magazine | JuLY 2013

report

Regional Ethanol Prices Front Month Futures (AC) $2.743

($/gallon)

REGION

SPOT

RACK

West Coast

2.860

2.850

Midwest

2.735

2.730

East Coast

2.780

3.019 SOURCE: DTN

Regional Gasoline Prices

DDGS Report

Corn supply will affect DDGS prices

BY SEAN BRODERICK

May 31—Post Memorial Day markets have advanced, mostly because of the strength in the Chicago container market. Most of this demand has been from China, partly because of the strength in protein prices, and the delays in shipments from South America. Some boats are waiting more than 2 months to get loaded.

Domestically, we have seen good demand for DDGS in the Eastern U.S., as that market fights the demand pull from Chicago. In the Western and Southern Plains markets, competition from other commodities is tempering demand for distillers grains, but feeders' coverage for the July forward time frame is no better than the ethanol plants’. Everyone looks at the discount in the corn futures markets going ahead and wants to pay less, but farmers still have a pretty good hold on it.

DDGS prices going ahead will be affected both by the price of corn and ethanol plants' ability to procure it for the remainder of the summer. The margin structure past the nearby time frame (greater than a month out) has made people question whether all plants will run, but that is the way it has been for quite a while. Deferred margins have not given much opportunity for plants to commit to running more than a month or two ahead. Ethanol prices have been escalating lately and margins look like they will start to improve again through the end of the summer, leading to a commitment to forward run time. There’s hope that the increased demand from China will offset any increase in production. Overall, the growing season has had a pretty crazy start and it looks like this summer is going to be no different than the past couple of unusual ones!

Ethanol Report

Gasoline demand: Better late than never

($/gallon) Front Month Futures Price (RBOB) $2.7795

REGION

SPOT

RACK

West Coast

2.849

3.076

Midwest

3.320

3.639

East Coast

2.622

2.885 SOURCE: DTN

DDGS Prices ($/ton) location

JUN 2013

JUL 2013

Minnesota

220

225

215

Chicago

238

255

226

Buffalo, N.Y.

230

230

230

Central Calif.

280

277

275

Central Fla.

258

264

240 SOURCE: CHS Inc.

Corn Futures Prices Date

(July Futures, $/bushel)

High

Low

Close

6.65 3/4

6.52 1/4

6.62

APR 30, 2013

6.69

6.47 3/4

6.50

MAY 31, 2012

5.68 1/4

5.53 1/2

5.59 1/2

MAY 31, 2013

SOURCE: FCStone

Cash Sorghum Prices ($/bushel) LOCATION

MAY 31, 2013

APR 25, 2013

MAY 22, 2012

Superior, Neb.

6.67

6.21

5.46

Beatrice, Neb.

6.82

6.17

5.58

Sublette, Kan.

6.53

6.22

5.68

Salina, Kan.

6.82

6.22

5.61

Triangle, Texas

6.67

6.27

5.92

Gulf, Texas

6.22

6.80

6.47

BY RICK KMENT

May 31—Despite the preholiday spike in gasoline prices throughout the country, the main focus of the ethanolto-gasoline market has not been based on overall demand up to now. Instead, the contributing factors are falling ethanol inventory levels due to moderate downward pressure in ethanol production because of weak plant margins and high corn prices over the past year. Total ethanol supplies fell to the lowest levels since the U.S. Energy Information Administration started tracking ethanol inventory in June 2010, bringing inventory levels down to 672 million gallons. The annual uptick in demand

JUL 2012

SOURCE: Sorghum Synergies

for ethanol and gasoline during the summer driving season will continue to drive decreasing ethanol inventory levels.

The low levels have ultimately resulted in strong ethanol price increases. The ethanol price is currently just 3 cents per gallon below the price of RBOB gasoline prices. This is the lowest price spread seen between ethanol and RBOB gasoline since November 2011. Despite the current corn prices, the expected demand for ethanol could continue to push ethanol prices higher through the summer months.

Natural Gas Prices

($/MMBtu)

LOCATION

MAY 1, 2013

JUN 1, 2013

JUL 1, 2012

NYMEX

4.32

3.98

2.33

NNG Ventura

4.30

4.01

2.29

CA Citygate

4.45

4.25

2.64

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production

(1,000 barrels)

Per day

Month

End stocks

MAR 2013

828

25,681

18,941

FEB 2013

809

22,645

19,580

MAR 2012

828

25,681

18,941

SOURCE: U.S. Energy Information Administration

juLY 2013 | Ethanol Producer Magazine | 25

Sweet sorghum juice successfully combined with corn mash

Ethanol yield (g/g)

distilled

Ethanol News & Trends

Enerkem expands into drop-in biofuels

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The Sorghum Checkoff has announced a successful benchscale evaluation of sweet sorghum juice sugars with corn mash of the production of ethanol. The reFIGURE 3: Average ethanol yield for all treatments expressed as grams ethanol per grams of dry corn (except treatment search was conducted in late 2012 juice only is expressed as grams ethanol per grams juice). Error bars represent one standard deviation of three independent replicate fermentation flasks. in collaboration with the NCERC at Southern Illinois University, Edwardsville (for- increase production above nameplate capacity merly the National Corn-to-Ethanol Research through the use of sweet sorghum juice.

“In addition to increased yields, sorghum Center), and expands on a commercial-scale trial conducted by Commonwealth Agri-Energy LLC, juice inclusion may reduce enzyme and nutrient Delta BioRenewables LLC, Ceres Inc. and the usage per gallon of ethanol produced. Sweet sorghum juice sugar can also help ethanol proSorghum Checkoff.

The new study evaluated fermentation per- ducers diversify their feedstocks and serve as a formance at different levels of sweet sorghum bridge to the next generation of biofuels,” said juice inclusion in corn mash. The juice was used Sabrina Trupia, NCERC assistant director of as a replacement for process water, demonstrat- research. ing the potential for existing ethanol producers to

Natural Resources Canada is contributing $1.1 million towards a new research project being undertaken by Enerkem Inc. The project aims to develop new catalytic processes for the conversion of waste into drop-in biofuels, such as gasoline, diesel and jet fuel. The project will be conducted by Enerkem’s research and development facility in Sherbrooke, Quebec, in collaboration with the University of Sherbrooke.

“Enerkem’s core business is the commercial production of cellulosic ethanol, and we now intend to take advantage of our flexible technology platform to gradually expand our line of biofuels and chemical products,” said Vincent Chornet, president and CEO of Enerkem. “This research project is part of our growth strategy and demonstrates our commitment towards innovation and a greener economy.”

Construction of the Enerkem Alberta Biofuels plant in Edmonton, Alberta, is progressing. The plant is expected to begin commissioning this summer, followed by ethanol production in 2014.

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Edeniq demo plant gains new benchmark

Ethanol meets vast majority of California 2012 LCFS requirement

Edeniq Inc.’s demonstration plant in Visalia, Calif., has completed a successful performance test that exceeded 1,000 hours of continuous operation. The corn-to-cellulosic migration plant features Edeniq’s proprietary technology and can convert more than 1 metric ton of feedstock per day into cellulosic ethanol.

The plant was supported by a $20.5 U.S. DOE grant as part of the Integrated Biorefinery and Biomass program.

The project was carried out in partnership with Logos Technologies LLC, which took on the role as the project’s primary contractor and administrator. Edeniq was the primary subcontractor, technology provider and operator.

In addition to achieving more than 1,000 hours of continuous operation, Edeniq noted that the plant has also exceeded the DOE’s target of a minimum 90 percent up time.

Edeniq will continue to operate the plant under the co-sponsorship of the California Energy Commission. The facility will undergo additional process enhancements. In addition, Edeniq is designing larger-scale facilities, including a demonstration plant capable of processing 20 metric tons per day of bagasse into high-purity sugars.

The University of California-Davis Institute of Transportation Studies has published a new status review of the state’s low carbon fuel standard (LCFS).

Low carbon fuels displaced approximately 6.2 percent of California’s gasoline and diesel fuels in 2012. By the close of the year, the ITS said that the LCFS recorded net excess credits of approximately 1.285 million metric tons of CO2 equivalent, which equates to approximately half the credits needed to meet the 2013 obligation level.

Approximately 78 percent of the LCFS credits were generated from ethanol in 2012.

On a volume basis, corn ethanol and ethanol made from mixed corn/sorghum/wheat feedstock accounted for 95 percent of the fuel volume under the LCFS, with the corn/ sorghum/wheat mixed ethanol contributing 19 percent of the biofuel credits.

Total transporation fuel volume reported in LCFS program (in billion gallons of gasoline equivalent) 2011 2012 CARBOB (gasoline)

12.9

12.78

Ultra-low sulfur diesel

3.91

4.021.02

Ethanol

1.02

1

Biodiesel/renewable diesel

0.013

0.022

CNG/LNG

0.074

0.084

Electricity

0.00012

0.00106

SOURCE: UC Davis Institute of Transporation Studies

Sugarcane ethanol was also used to meet the 2012 compliance requirement. California consumed 19 percent of total imported sugarcane ethanol last year, but accounted for only 10 percent of the nation’s total fuel and corn ethanol consumption. The ITS said this usage pattern could be due to more favorable treatment of Brazilian sugarcane ethanol under the LCFS.

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juLY 2013 | Ethanol Producer Magazine | 27

distilled

Ethanol producers continue to reduce GHG footprint Title here?

2012 Yield (anhydrous/undenatured, gallon/bushel) Thermal Energy (Btu/gallon, LHV)

2.82 23,862

Electricity use (kWH/gallon)

0.75

DDG yield (dry basis) including corn oil (lbs/bu)

15.73

Corn oil separated (lbs/bushel)

0.53

Water use (gallon/gallon)

2.7

SOURCE: 2012 Corn Ethanol: Emerging Plant Energy and Environmental Technologies

A recent study has found the carbon footprint of ethanol is continuing to improve. The study, titled “2012 Corn Ethanol: Emerging Plant Energy and Environmental Technologies,� was authored

by Steffen Mueller, a researcher at the University of Illinois-Chicago Energy Resources Center, and John Kwik, president of Dominion Energy Services LLC.

Canergy selects technology supplier for California plant

The study included questions answered by 84 2008 of the 162 ethanol plants operating in 2012. Results 2.78 of the study determined 26,206 that the average plant had 0.73 reduced its thermal energy consumption by ap15.81 proximately 9 percent when 0.11 compared to results of a 2.72 similar survey completed in 2008, resulting in 23,862 Btu of energy per gallon of ethanol. Water use per gallon of undenatured ethanol also decreased, by 2.7 gallons. The average yield, however, increased from 2.78 gallons per bushel in 2008, to 2.82 gallons per bushel in 2012. Corn oil extraction increased by nearly five-fold between 2008 and 2012, reaching an average of 0.53 pounds per bushel of corn.

California-based Canergy LLC has announced the selection of Chemtex and Beta Renewables for the development of its 25 MMgy cellulosic biofuels facility.

The proposed plant will be built in the Imperial Valley of California.

Construction on the project is expected to begin during the first quarter of 2014, pending the successful completion of permitting and financial activities. According to Canergy, the facility is scheduled to be operational in 2016.

Beta Renewables’ PROESA technology will be used to convert Canergy’s energy cane feedstock, bagasse and residual cane straw into cellulosic ethanol. The technology is currently being employed on the commercial scale at a plant in Crescentino, Italy. It will also be used in a series of plants built by GranBio in Brazil. “We are excited to be moving this project forward,� said Tim Brummels, Canergy CEO. “California is the country’s largest retail gasoline market and this first project’s biofuel will facilitate obligated parties compliance with California policy directives to reduce their carbon footprint through 2020.�

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Brazilian ethanol production expected to increase Cane, sugar and ethanol production: 2012-'13 crop 585.74 million metric tons Cane 38.06 million metric tons Sugar 9.64 billion liters Anhydrous ethanol 13.71 billion liters Hydrous ethanol 23.35 billion liters Total ethanol SOURCE: Brazil Sugar Annual Report, USDA GAIN

Brazil’s Agricultural Trade Office has filed its annual sugar report with the USDA Global Agricultural Information Network, noting the country’s 2013-’14 marketing year sugarcane crop is forecast to reach 640 million metric tons, a 48.9 metric ton increase compared to last year’s harvest. The report predicts 52 percent of the harvest will be used as feedstock for ethanol production. Last year only 50 percent of the 591.1 million metric ton sugar harvest went to ethanol production.

Total ethanol production during the 2013-’14 marketing year is expected to reach 26.82 billion liters (7.09 billion gallons). The Brazil Ministry of Agriculture, Livestock and Supply estimates that 23.35 billion liters of ethanol was produced from the 2012-’13 crop through Feb. 28.

The report also addresses Brazilian ethanol imports and exports from marketing years 2011-’12 and 2012-’13. During the 2011-’12 marketing year, an estimated 483 million liters of ethanol was exported to the U.S. Exports to the U.S. increased to 1.768 billion liters the following marketing year. During the 2011-’12 marketing year, Brazil imported approximately 965 million liters of U.S. ethanol, dropping off to 111 million liters in marketing year 2012-’13.

Advanced Biofuels to install BPI cellulosic technology at legacy plant Advanced Biofuels Corp. plans to retrofit a legacy ethanol plant in Washington to produce cellulosic ethanol. The company bought an existing 7 MMgy facility in Moses Lake, Wash., and intends to retrofit existing systems and install new pretreatment process equipment. Once complete, the updated facility will have the capacity to produce 6 MMgy of cellulosic ethanol.

According to Rhys Dale, vice president and director of development for process provider Bio-Process Innovation Inc., the plant is expected to produce 5 MMgy of cellulosic ethanol from wheat straw, and an additional 1 MMgy from waste alcohol.

The Moses Lake project will be the first commercial application of BPI’s biomass technology. BPI began developing cellulosic processes 15 years ago. Clark Dale, company president and CEO, describes BPI’s pretreatment process as a lowtemperature steep delignification that produces concentrated cellulose/hemicellulose stream at low temperatures, pressures and chemical loading levels. The company has also developed a multistage continuous reactor separator that combines hydrolysis, fermentation and separation of ethanol from biomass feedstocks.

juLY 2013 | Ethanol Producer Magazine | 29

EVENT

Bob Dinneen, president and CEO of the Renewable Fuels Association, at right, speaks during the FEW general session. He was joined on stage by (from left to right) moderator Tom Bryan, president of BBI International, Tom Buis, CEO of Growth Energy, and Brian Jennings, executive vice president of the American Coalition for Ethanol.

Brooke Coleman, executive director of the Advanced Ethanol Council, left, moderated a panel of cellulosic ethanol company leaders during the general session. Panelists included Henrik Maimann, vice president of DONG Energy Power, center, and Mark Niederschulte, chief operating officer of INEOS Bio. 30 | Ethanol Producer Magazine | JuLY 2013

Steve Mirshak, global business director of cellulosic ethanol for DuPont Industrial Biosciences, also spoke during the cellulosic ethanol production roundtable, as did Chris Standlee from Abengoa Bioenergy and Wade Robey from Poet–DSM Advanced Biofuels.

EVENT

‘Where Producers Meet’ Industry representatives from 26 countries met in St. Louis, June 10 -13, for the world’s largest and longest- running ethanol conference.

By Holly Jessen PHOTOS BY WHITNEY CURTIS

The 29th Annual International Fuel Ethanol Workshop & Expo brought together a diverse group of stakeholders, including ethanol producers representing 146 U.S. ethanol plants and nine Canadian plants as well as producers from four other countries.

Jeff Broin, founder and chairman of the board for Poet LLC, kicked off the event June 10, at the ribbon cutting ceremony. Broin talked about past and present struggles facing the ethanol industry, including attacks on the renewable fuel standard and

An overflow crowd enjoyed the appearance of three U.S. association leaders together on the same stage.

juLY 2013 | Ethanol Producer Magazine | 31

EVENT

Mike Bryan, chairman of BBI International, left, presents the Award of Excellence to Kevin Hicks, research leader at the USDA’s Eastern Regional Research Center. ICM Inc. employee Dan Schwartzkopf was presented with the High Octane Award.

M. Annie Mullin of Schiff Hardin LLP presents during a breakout session on environmental and regulatory compliance.

Ashland Water Technologies representative Lee Hollimon discusses the company’s technologies with an FEW attendee.

32 | Ethanol Producer Magazine | JuLY 2013

EVENT

breaking past the blend wall. “Don’t kid yourself, we’re at war,” he said. “We’re at war for billions of dollars of revenue that others do not want to give up.”

The general session, held June 11, was packed for a mid-year policy update and updates from the cellulosic ethanol world. First, the top executives of the Renewable Fuels Association, Growth Energy and the American Coalition for Ethanol gathered to address fighting to preserve the RFS, E15 and higher blends and other important topics.

That was followed by reports from DONG Energy Power, INEOS Bio, DuPont Industrial Biosciences, Abengoa Bioenergy and Poet, some of the global pioneers in reaching for commercial-scale cellulosic ethanol production.

The agenda also included concurrent breakout sessions covering production and operations, leadership and financial management, coproducts and product diversification, and cellulosic and advanced ethanol. In all, about 120 speakers and moderators participated.

Awards were also presented to a USDA researcher and an advocate for ethanol as a race fuel. Kevin Hicks, research leader for the Sustainable Biofuels and Coproducts Research Unit of the USDA’s Eastern Regional Research Center, received the Award of Excellence, while ICM Inc. employee Dan Schwartzkopf was presented with the High Octane Award.

This year, for the first time, industry tours were held

Hundreds of companies had booths in the expo hall.

Greg Bergon of Highwater Ethanol LLC meets and greets at the expo.

juLY 2013 | Ethanol Producer Magazine | 33

EVENT

PHOTO: SUE RETKA SCHILL, BBI INTERNATIONAL

The Clydesdale stable on the grounds of Anheuser-Busch in St. Louis is explored during the tour of the brewery, the evening of June 12.

on two days. The Monsanto Chesterfield Campus and Bunge-SCF Grain Elevator hosted a bus full of FEW attendees on June 10. The second tour, on June 13, was of the National Corn-to-Ethanol Center, which is celebrating 10 years of operation. In addition, tour-goers also stopped at the Melvin Price Lock and Dam, near East Alton, Ill., on both days.

The 2014 FEW is set for June 9-12 in Indianapolis, Ind. It will be the 30th anniversary of the event.

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

A tour of the Bunge-SCF Grain Elevator was held on the first day of FEW.

Dan Mahon of Vogelbusch USA Inc. listens intently during a breakout session presentation.

34 | Ethanol Producer Magazine | JuLY 2013

Tim Portz, vice president of content and executive editor of Ethanol Producer Magazine, looks on as Jeff Broin, founder of Poet LLC, cuts the ribbon as part of the Expo Grand Opening held June 10.

EVENT

PHOTO: HOLLY JESSEN, BBI INTERNATIONAL

Shane Chrapko, CEO of Himark bioGas Inc, speaks during a breakout session. Next to him is moderator Richard Weiner of Fredrikson & Byron P.A. Other speakers represented ICM Inc., Meridian Biotech, Recycled Energy Development and the National Corn-to-Ethanol Research Center.

John Caupert, director of the National Corn-to-Ethanol Research Center, shows off a cake decorated with a mock-up of an Ethanol Producer Magazine cover. NCERC kicked off its 10-year celebration during the FEW attendee tour held June 13.

Douglas Haefele of DuPont Pioneer gestures while speaking to Kathleen Clarkson of DuPont Industrial Biosciences. juLY 2013 | Ethanol Producer Magazine | 35

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1 Based on 2007–2012 Syngenta Trials. © 2013 Syngenta. Enogen,® the Alliance Frame, the Purpose Icon and the Syngenta logo are trademarks of a Syngenta Group Company. Syngenta Customer Center: 1-866-SYNGENT(A) (796-4368). www.FarmAssist.com MW 11CR3009-SS-R 5/13

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ENVIRONMENT

38 | Ethanol Producer Magazine | JuLY 2013

ENVIRONMENT

Culture of Compliance Keeping an ethanol plant in compliance with environmental rules and regulations isn’t just a one-person job.

By Holly Jessen

Most ethanol plants employ one or possibly two individuals charged with making sure the facility stays up-to-date with all permitting and reporting requirements. Considering the sheer amount of work involved and the fact that an environmental manager’s job description typically also includes safety management duties, it’s crucial that the department receives the full support and assistance of everyone, from top management on down to employees working in the plant itself.

“Everybody at the plant, especially the executives, need to understand these complex requirements and the ramifications of not complying,” says Jessica Karras-Bailey, principal with RTP Environmental Associates Inc., which helps ethanol plants obtain environmental permits and maintain compliance. “In order to comply, it takes more than one or two people doing record keeping to make that happen.”

M. Annie Mullin, partner in the law firm Schiff Hardin LLP, agrees.

Schiff Hardin LLP is a general practice law firm that counts ethanol producers among its clients, helping facilities set up compliance programs, primarily regarding the Clean Air Act, and respond to information requests or notices of violation from the U.S. EPA. Mullin also stressed the importance of a top-down focus on environmental compliance.

“Starting at the board of director, plant manager level, the folks at the top need to create a culture of compliance,” she says.

Obviously, staying in compliance is about avoiding fines, which can be hefty. Karras-Bailey also talks about the multiple benefits ethanol plants can reap from an environmental compliance program that’s coordinated and team-based. For one thing, it increases system efficiency while reducing staff stress level, she said. Another benefit is that the

juLY 2013 | Ethanol Producer Magazine | 39

ENVIRONMENT

â&#x20AC;&#x2DC;The plant manager canâ&#x20AC;&#x2122;t just look at the environmental guy and say, â&#x20AC;&#x2DC;Is everything correct?â&#x20AC;&#x2122; and the environmental guy says, â&#x20AC;&#x2DC;Yes.â&#x20AC;&#x2122; They need to actually dig down into the details and actually do an inquiry into whether everything is right.â&#x20AC;&#x2122; â&#x20AC;&#x201D;M. Annie Mullin, partner in the law firm Schiff Hardin LLP

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40 | Ethanol Producer Magazine | JuLY 2013

facility is always prepared for agency inspections. A company with a solid environmental compliance plan can quickly and easily access requested records, even if the environmental manager happens to be on vacation. That can go a long way toward developing a positive relationship with environmental agencies, she said. In order to accomplish this, ethanol plants need to practice â&#x20AC;&#x153;good housekeepingâ&#x20AC;? in its record keeping, she says.

Mullin talks about the same issue by saying itâ&#x20AC;&#x2122;s actually fairly common for clients to tell her they know they completed certain required records, but they are unable to locate the piece of paper that is the only proof of that. She tells a story of one ethanol plant that couldnâ&#x20AC;&#x2122;t find manually completed paper records of baghouse inspections because they were accidentally thrown out. In this case, the problem was discovered after an EPA inspection. The facility admitted its mistake and fixed the problem by switching to an automated system and, as a result, wasnâ&#x20AC;&#x2122;t fined. â&#x20AC;&#x153;It resulted in more consistent compliance and also a way to demonstrate compliance,â&#x20AC;?

Mullin says.

Another bonus is that, by maintaining excellent records, companies can identify and correct possible deficiencies before itâ&#x20AC;&#x2122;s in hot water with the EPA or a state agency. â&#x20AC;&#x153;Having a compliance system doesnâ&#x20AC;&#x2122;t mean you will never have deviation, but when do you find out about that development?â&#x20AC;? asks Karras-Bailey. â&#x20AC;&#x153;Did you know within a day or two of it occurring?â&#x20AC;?

This puts the company in a better position to take advantage of voluntary disclosure programs, she adds, telling of an ethanol plant that missed filing a required report. In the end, the company wasnâ&#x20AC;&#x2122;t fined because it self-reported the problem, along with a description of the corrective action it planned to take to avoid future issues. â&#x20AC;&#x153;From a negotiation standpoint, you are in a better position if you figure out youâ&#x20AC;&#x2122;ve made a mistake, or there has been an oversight, and you contact the agency versus the agency coming in and doing an inspection and finding all the things you didnâ&#x20AC;&#x2122;t do right,â&#x20AC;? she says.

ENVIRONMENT

Another key point is the importance of honesty. Mullin says she sees it all too often—someone responsible for recording something for a required report, such as a scrubber water pressure reading, forgets to do it and then falsely fills it in later. That kind of thing often comes out eventually and results in a big problem for the company. In contrast, a company that simply admits that one or two records are missing on its quarterly report might only receive a small fine or no fine at all. “If you send in a quarterly report that says we did everything perfectly, that sometimes is more suspicious than one that indicates occasional human failure,” she says.

A good compliance program can also have financial benefits, although actual numbers are difficult to quantify. A facility with a positive relationship with environmental agencies as well as the community it is located in can achieve permit approvals faster and easier than one that has a history of violations, Karras-Bailey says. For example, say an ethanol plant wants to modify its permit to increase its ethanol production levels. A facility that has angered its local community may find the process slowed down during the required 30-day public notice period, when community members have the opportunity to comment. A three-month permitting process could be increased to six or nine months, during which the facility won’t be able to hit the desired increased production level.

‘[Management] needs to make sure environmental compliance is important, enough that the environmental manager is getting the support that they need.’

—— Jessica Karras-Bailey, principal with RTP Environmental Associates Inc.

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So why can’t a plant’s board of directors or general manager simply hire a good environmental manager and leave the details to that person? There are multiple reasons, Mullin and Karras-Bailey say. One is that the environmental manager may compile the required paperwork but it’s a member of the management team that signs it.

With their signature they are certifying that they have determined everything in the report is correct and that they have conducted a reasonable inquiry into making sure that is true. “In other words, the plant manager can’t just look at the environmental guy and say, ‘Is everything correct?’ and

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ENVIRONMENT

the environmental guy says, ‘Yes,’” Mullin says. “They need to actually dig down into the details and actually do an inquiry into whether everything is right.” If it’s later proven that the manager didn’t actually do this, it can result in criminal penalties.

“Most things that a plant manager does can’t land them in an orange suit, but this is one thing that can,” she adds.

Karras-Bailey shared the way this is worded on documents from the Minnesota Pollution Control Agency. “I certify under penalty of law that I have reviewed this facility’s compliance status with respect to all permit conditions for the above specified calendar year,” it says. “I have determined, to the best of my knowledge, that this facility has been in continuous compliance with all permit conditions with the exception of those requirements listed in the above deviations report(s).”

This is why both women recommend management takes the time for a thorough

review of all elements of the facility’s environmental compliance program. KarrasBailey says managers need to know what to expect. A good place to start is to compile a master list of permits, with a daily, weekly, monthly and yearly schedule of what compliance activities are required. Keep in mind that some activities, such as review of a water permit, need only take place every four or five years, she adds.

Mullin recommends that the relevant people sit down together and go through the facility’s permits. The goal should be to determine how the company will comply with the various requirements, including identifying what employee is responsible for what and who is that employee’s supervisor. It’s OK to have a lawyer or environmental consultant in the room, she says, but she doesn’t recommend simply hiring someone to implement environmental compliance systems. In the end, management may not understand the sys-

tem, which is crucial in helping them avoid possible future criminal penalties. She adds that most of the managers she has met are very nervous about signing their names to these documents. Going through this process helps them feel more confident.

Another reason management must understand and be involved in the compliance program is to demonstrate to all employees the appropriate priority level for these activities. The reality is that there are simply too many compliance duties for one person to keep up with on a day-to-day basis. Realistically, the environmental manager typically relies on plant-level employees to take readings and submit data, Karras-Bailey says. For example, daily baghouse compliance activities, which include recording the results of a visual inspection, may be completed by employees in grain receiving.

As a result, the environmental manager is dependent on those employees to complete and turn in the data. Karras-Bailey

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ENVIRONMENT

has worked with environmental managers who ask her what to do when they aren’t getting the information they need after repeated requests. Ultimately, it comes down to lead by example. “[Management] needs to make sure environmental compliance is important, enough that the environmental manager is getting the support that they need,” she says.

A good place to start is to have the environmental manager sit in on weekly operations meetings. One benefit is that she or he will be involved from day one if the plant is considering implementing new technology, which could require permit modifications, Karras-Bailey says. That will lead to a better-informed discussion and possibly shortened permitting time.

Mullins recommends that environmental compliance become a standard part of all employee evaluations, from management level down to plant employees. “That’s one mechanism to make everyone in the plant

aware of environmental compliance and accountable,” she says.

Both women have heard employees complaining that they shouldn’t have to do certain compliance activities or that the requirements just don’t seem reasonable.

What it boils down to, however, is that the requirements are part of the permit and without that permit the facility cannot continue to operate. That’s why proper training is very important, including telling employees why they are required to do something, not just that they must do it. “I find that message can be really effective with people, if they understand why they are doing it,” Mullin says.

In fact, every single ethanol plant employee should pay attention to what’s happening and speak up when there could be a problem, Karras-Bailey says. She told of visiting an ethanol plant and every single person smiled at her or gave her a friendly greeting but not one person inquired who

she was, why she was there or directed her to the front office. Although she was there for a reason, ethanol plant employees should know that random visitors aren’t allowed to just enter an industrial facility whenever they want. Another example she gave was of a solvent spill of less than a gallon that an employee reported to the EPA. It’s always a good idea to report spills, of course, but if that employee had known what the chain of command was and reported it internally first, he or she would have found it that it wasn’t necessary to report that small spill to the EPA. “They need to have that bigger picture understanding,” she says.

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

PROFILE

Pretreated Biomass for Food and Fuel Bruce Dale urges careful thought about energy and agriculture.

By Susanne Retka Schill 44 | Ethanol Producer Magazine | JuLY 2013

PROFILE

PHOTO: KURT STEPNITZ, MICHIGAN STATE UNIVERSITY

A 1-ton-per-day pilot facility on the campus of Michigan State University geared up this spring to produce pretreated biomass for feed trials. It’s part of a demonstration that professor Bruce Dale hopes will show others how pretreating biomass for feeding animals can be successfully integrated with biofuels production, ultimately producing both more food and fuel.

While ethanol skeptics claim it’s obvious that food needs trump the use of agricultural resources for fuel, Dale will tell you biofuels are not optional. As a scientist, he’s ready to back that up with databased reasoning. His motivation, though, comes from his childhood, growing up in the copper mining town of Ruth in eastern Nevada and seeing what happens when the mine runs out and a ghost town is left behind. He thinks of that when he considers

our country’s dependency on oil. “Copper is potentially recoverable and recyclable,” he says, “but when you burn oil, it’s gone.”

Dale is far from a doomsday prophet, however. “I’m an optimist. I’d much rather have an optimistic view of the future and try to figure out how to get there.”

In a recent conversation with Ethanol Producer Magazine, Dale expounded on his vision for an agriculture that sustainably provides food, feed and fuel. As a profes-

PROFILE

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46 | Ethanol Producer Magazine | JuLY 2013

Cellulosic Pioneer Bruce Dale has long been an advocate for biofuels, starting his research on the AFEX pretreatment process three decades ago.

sor of chemical engineering at MSU, Dale is known for a biomass pretreatment process dubbed AFEX, for ammonia fiber expansion. He is also known for his strong advocacy for biofuels, receiving the International Fuel Ethanol Workshop & Expo’s Award of Excellence in 2011.

Dale recently co-authored a peerreviewed paper for the Council for Agricultural Science and Technology called “Food, Fuel, and Plant Nutrient Use in

the Future,” along with an economist, a plant nutritionist and a soil scientist. The authors conclude the world will be capable of meeting its needs for food, fuel and fiber in 40 years, and biofuels can play a key role in fostering more efficient use of land resources.

Looking ahead to 2050, the paper finds that adequate world food production cannot depend upon expansion of harvested area. “Instead, scientists and food

PROFILE

producers need to look at the way land is currently used and the best practices for how to move forward,” the CAST committee writes. The paper examines population dynamics, food demand, land use and productivity and the impact of energy and biomass production. The authors include Dale, David Zilberman, department of agricultural and resource economics, University of California-Berkeley, Paul Fixen, International Plant Nutrition Institute, Brookings, S.D., and John Havlin, department of soil science, North Carolina State University.

There is a clear relationship between a country’s wealth and its access to cheap energy, the paper says, pointing out that the “the age of stable, cheap oil is over.”

As fossil fuel supplies shrink relative to demand, price volatility is likely to increase.

“The world has had cheap food in no small part because it has had cheap energy, led by cheap oil. The production, processing and distribution of all agricultural and food commodities are intimately linked with the price of energy.”

Energy Services

The importance of biofuels is underestimated, Dale suggests, in large part because people haven’t been trained to think carefully enough. “They just talk about energy, but we don’t pay for energy. What we want are the services energy gives us.” If we paid for energy, he points out, the cost of a Btu would be equal, regardless of its source. Instead, we pay about five times as much for a Btu of oil as for coal. Of the three primary services provided by energy, two—heat and electricity—have multiple options to complement petroleum: natural gas, coal, nuclear, hydro, solar, wind or biomass. But for the third service, mobility, fully 96 percent comes from petroleum, with the remainder coming from biofuels and compressed natural gas (CNG).

CNG and electric will play a role in the future, he adds, but both have limita-

‘As we get this industry going, we’re going to see some very interesting side benefits for countries that don’t have much in the way of liquid fuels. It will help jump-start a lot of economic development there, in the same way that having the cheap petroleum for so many years did here. It’s not cheap anymore, so we’re suffering from that now. But a lot of places that aren’t blessed with the petroleum we’ve had will be able to grow their own fuel. And, because they’ll be incentivized to do it in a landefficient way, there will be more food as well.’

—Bruce Dale,

tions. “[Electric vehicles] don’t have the power-to-weight ratio. It’s a matter of physics. You can’t pack enough energy in a battery to do certain types of things. You can’t get a jet aircraft off the ground with a battery. You can’t run a long-distance trucking fleet very well on batteries.” In addition, CNG is likely to be more widely utilized only by truck fleets, partly because engine conversions and refueling stations are extremely costly.

When thinking carefully about energy, juLY 2013 | Ethanol Producer Magazine | 47

PROFILE

2.5 x more biomass possible

An analysis cited in the Council for Agricultural Science and Technology paper, “Food, Fuel, and Plant Nutrient Use in the Future,” shows that total biomass production potential, including both grain and cellulosic biomass, could be increased 2.5 times over current levels. “This is enough biomass to produce approximately 400 gigaliters of ethanol per year, roughly the energy equivalent of all imported petroleum used for gasoline production, while still providing all the food and feed currently produced on this acreage. This approach to integrated food and biofuel production also decreases total U.S. GHG emissions by approximately 700 teragrams carbon dioxide equivalents per year, roughly 10 percent of the total U.S. GHG emissions.” ethanol’s value is much greater than when considering just its energy return on investment. Dale points out that most of the energy used in ethanol production doesn’t come from petroleum, but rather natural gas. “What you get for liquid-out for liquidin is 20-to-1 for ethanol,” he says.

“That’s why biofuels, liquid fuels from plant material, are so critical,” he explains, largely due to the potential to significantly

scale up production. “It’s going to be difficult for grains to do it at large scale, but it’s not difficult to do with cellulosic at large scale—it’s grasses and trees, woody material.” Many of the cellulosic feedstocks being considered have multiple benefits, he adds. “If we take reasonable care with how we grow them, how we develop them, then over time you get better water quality because perennial grasses improve water

quality. You get more fertile soils because grasses improve soils. You get a lot of greenhouse gas (GHG) reduction because they are essentially carbon neutral and, if they are building up soil organic matter, they are probably carbon negative.”

The concerns raised in opposition to biofuels, including food versus fuel and land conversion impacts, are also not being thought through carefully, he says.

“Agriculture today is nothing like it was 50 years ago, or 100 years ago,” he says, and it will change again. It isn’t hard to imagine a configuration for agriculture that would provide more food, more fuel and more environmental benefits. “It’s actually quite easy to image win-win-win scenarios once you start thinking that way.”

Dale lays out a vision for the agriculture of the future that will use land resources more efficiently. He points out that currently 85 to 95 percent of U.S. agricultural land is used to feed animals, and not to feed humans directly. There are a number of ways in which biofuel production can utilize biomass resources without competing with feed use, and actually enhancing supplies. Biofuel production would allow

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PROFILE

the early harvest of feedstocks such as alfalfa and grasses when the protein content is high, utilizing the cellulosic fraction for biofuel production and concentrating the protein for animal feed. Additional feed protein can be coproduced with biofuels via the spent yeast. In addition, a ready market for biomass would stimulate double cropping, turning cover crops utilized for their environmental benefits into cash crops.

Biomass Processing

Dale envisions the development of regional biomass processing depots that serve both the livestock feeding and biorefining industries. MSU is part of a research effort looking at ways of converting biomass into dense, stable, shippable intermediate commodities with uniform characteristics. Also researching the concept are Iowa State University, Idaho National Laboratory and Pennsylvania State University.

At MSU, a pilot facility began operating in late May, making feed pellets from AFEX-treated biomass. “I’ve always known it would increase the animal feed value,” Dale says of the pretreatment process he

and his colleagues have developed and refined over three decades. They are getting a boost from the Michigan Biotechnology Institute, formed at MSU to help move the commercialization process forward on university research. “They’ve made some notable advances in reducing the cost of the AFEX process and because of what they’ve done, we’re now in a position to commercialize animal feed first,” Dale says.

“Then we can use the animal feed markets as a pull-through for the biofuels market.”

MBI obtained more than $5 million in funding from the U.S. DOE and the MSU Foundation to build a pilot-scale AFEX reactor at its facility in Lansing, Mich. The goal is to produce 10 to 15 tons of AFEXtreated biomass, which will be used in large animal feed trials being led by Stephen Rust with the MSU animal science department.

“After pretreatment, we pelletize the material and it essentially has the behavior of corn,” Dale says. “It’s as dense as corn, it’s stable like corn, it flows like corn.” He adds that preliminary feed trials indicate it will have 80 percent of the value of corn in convertible sugars.

“If all goes well—and we have smaller-

scale ruminant feeding tests that show us it will—there’s a lot of people who are interested in licensing it. We intend to license it very broadly and let as many people use it as want to,” he says. Ultimately, building a base market as livestock feed will allow the supply of pretreated biomass pellets to build to a point where a biorefinery would be assured of sufficient feedstock, solving the chicken-and-the-egg problem of building out the cellulosic ethanol industry.

A Challenge

Dale lays out a challenge to the ethanol industry—both the corn-based and nascent cellulosic industry. “We need to start being proactive in the development of these fuels,” he says. “The thing is, in the U.S., the people who have the most easily converted and most abundant cellulosic material are the corn farmers with corn stover.” It is essential that corn stover for biofuel be done right, he emphasizes. He also thinks there is an opportunity to promote double cropping as a way of tapping into the benefits of cover crops while growing biomass for biorefineries.

He urges biofuel producers and farm-

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ŽŵĞ ƚŽ sŽŐĞůďƵƐĐŚ ĨŽƌ ƐƚĂƚĞ ĨŽƌ ƐƚĂƚĞͲͲŽĨ ŽĨͲͲƚŚĞ ƚŚĞͲͲĂƌƚ ĨĞƌŵĞŶƚĂƚŝŽŶ͕ ĚŝƐƚŝůůĂƚŝŽŶ͕ ĚĞŚLJĚƌĂƚŝŽŶ͕ ĞǀĂƉŽƌĂƚŝŽŶ͕ ĂŶĚ ďLJƉƌŽĚƵĐƚ ƌĞĐŽǀĞƌLJ ƚĞĐŚŶŽůŽŐLJ ƚŚĂƚ ĐĂŶ ůŝŵŝƚ ŽǀĞƌĂůů ƉƌŽũĞĐƚ ƌŝƐŬ ĂŶĚ ŐĞƚ LJŽƵƌ ƉƌŽĐĞƐƐ ƚŽ ŵĂƌŬĞƚ ƋƵŝĐŬůLJ

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sŽŐĞůďƵƐĐŚ h^ ͕ /ŶĐ͘ ͻ ǁǁǁ͘ǀďƵƐĂ͘ĐŽŵ ͻ sŽŐĞůďƵƐĐŚ h^ ͕ /ŶĐ͘ ͻ ǁǁǁ͘ǀďƵƐĂ͘ĐŽŵ ͻ ϳϯϳϰ sŽŐĞůďƵƐĐŚ h^ ͕ /ŶĐ͘ ͻ ǁǁǁ͘ǀďƵƐĂ͘ĐŽŵ ͻ ;ϳϭϯͿ ϰϲϭ ;ϳϭϯͿ ϰϲϭͲ ;ϳϭϯͿ ϰϲϭͲϳϯϳϰ juLY 2013 | Ethanol Producer Magazine | 49

PROFILE

ers to “start embracing a positive vision of the future.” The vision to communicate, he suggests, goes like this: “We understand the environmental concerns, we want to improve the environment too. We're going to start harvesting our corn stover, and at same time we’re going to plant cover crops and double crops. We’re going to build up soil organic matter, reduce erosion and we’re going to trap some of those nitrates so they don’t get into water and head down to the Gulf of Mexico.”

Globally, similar systems for animal feed coupled with biofuel production can play an important role. “We underrate people’s ability to produce from the land if they have the right incentives and the right tools,” Dale says. Well-intentioned hunger programs of the past that distributed cheap surplus U.S. grains in developing countries had the unfortunate side effect of under-

mining local agricultural systems. “Here’s the bottom line. Those are places that are essentially without fossil fuels. They’re too late. They’re not going to get into the fossil-fuel bonanza. We will have burned it all up before Malawi or Mali or Kenya or other places in Africa and elsewhere ever get the chance,” he adds. “The only way they are going to develop and have the living standards we take for granted is to figure out how to produce sustainably—and that means in an environmentally sound way— lots of liquid fuels. That’s only going to come from plant matter. As we get this industry going, we’re going to see some very interesting side benefits for countries that don’t have much in the way of liquid fuels.

It will help jump-start a lot of economic development there, in the same way that having the cheap petroleum for so many years did here. It’s not cheap anymore, so

we’re suffering from that now. But a lot of places that aren’t blessed with the petroleum we’ve had will be able to grow their own fuel. And, because they’ll be incentivized to do it in a land-efficient way, there will be more food as well.”

These systems won’t be instantly perfect and mistakes will be made, he predicts.

Also, one of the lessons of the past is that productive agriculture often produces price-depressing surpluses for which biofuel production provides an alternative market. “We’ve learned people can only eat so much, but there’s apparently no limit to how much we would like to travel around if we could,” he quips.

Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com

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Sugar Solution Paper industry experts working with American Process Inc. apply pulp and paper expertise to extracting cellulosic sugars.

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52 | Ethanol Producer Magazine | JuLY 2013

ADVANCED BIOFUEL

Cellulosic Technology— Pulp and Paper Style American Process applies forestry products know-how to cellulosic conversion.

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Though a relative newcomer unique resource that we had and took adto the ethanol world, Georgia- vantage of.” based American Process Inc. is no stranger in the forest prod- Bolt-on Conversion API’s GreenPower Plus and AVAP ucts industry. The company has demonstrated its consulting expertise in 500some projects, logging more than 2 million work hours of project experience in nearly two decades. Founded in 1995 by Theodora Retsina as an engineering consulting firm, API has been increasing its presence in the cellulosic ethanol market with its bolt-on and stand-alone technologies utilizing woody biomass and crop residues to produce cellulosic sugars.

In 2006, API began investing its own funds into developing two technologies for cellulosic sugar production. Kim Nelson, vice president of governmental affairs at API, says the move was spearheaded by the need to keep the forest products industry thriving and viable. “We were consultants to the pulp and paper industry,” Nelson says, adding that it’s fairly unusual for consulting firms to develop their own processes. “Most of our employees at the time had advanced degrees in pulp and paper science engineering, biomass chemistry, wood chemistry, etc. If they did not have those advanced degrees, they had worked in the industry for many years. So we had this great understanding of the existing processes, and in handling, treating and extracting biomass. So it was kind of a

(which was originally developed as American value-added pulping) technologies are utilized to extract sugars that may be used to produce biofuels and biobased chemicals from a variety of feedstocks. The GreenPower Plus technology first treats biomass, including hardwood, softwood or bagasse, through a hot water extraction process. The hemicelluloses are removed from the wood in this process and then treated with acid to form sugars. Last, the sugars are concentrated until it can be converted into biochemicals or fermented into cellulosic ethanol by organisms able to process C5 and C6 sugars. Any residual solid material containing lignin and cellulose is then processed to create pellets, combusted in a boiler or used for pulp and paper applications. Retsina, CEO of API, describes GreenPower Plus as a bolt-on technology for plants that are already aggregating biomass, such as a first-generation sugar-to-ethanol plant.

Basil Karampelas, president of API, says one of the main benefits of using GreenPower Plus is it upgrades a portion of the biomass to a higher value product at a capital cost of less than $10 per annual gallon of capacity. “We are only takjuLY 2013 | Ethanol Producer Magazine | 53

ADVANCED BIOFUEL ing the hemicellulose fraction of the biomass, which is typically 20 to 25 percent,” Karampelas adds. “Whatever we’re not using goes back to the original user. You have the possibility to generate cash flow from that 25 percent that could be approximately equal to the cash flow from the burning of the other 75 percent of the biomass in the boiler or pelletizer.”

Currently, API’s GreenPower Plus technology is being demonstrated at the Alpena Biorefinery in Alpena, Mich. Co-

54 | Ethanol Producer Magazine | JuLY 2013

located at the Decorative Panels International hardboard facility, the refinery began operating in the second quarter last year utilizing a DPI waste stream of woody biomass extract. It has a nameplate capacity of 894,000 gallons of cellulosic ethanol and 696,000 gallons of potassium acetate per year. The project was named a Center of Energy Excellence and a Renewable Energy Renaissance Zone by the state, and awarded $22 million in 2010.

Stand-alone Technology

AVAP is API’s stand-alone technology that converts biomass into sugars for cellulosic ethanol or biochemical production.

It uses sulfur dioxide and ethanol pretreatment chemistry to extract hemicelluloses and lignin, Nelson explains. The lignin and hemicelluloses are processed by autohydrolysis. The hemicellulose is used to produce sugars while the lignin is transported to a boiler to generate energy for the facility. Meanwhile, the separated cellulose is either sold as a coproduct or is processed through enzymatic hydrolysis to produce cellulosic sugars, which can be converted along with the hemicellulose sugars into biochemicals or biofuels such as cellulosic ethanol.

On the AVAP technology, Retsina says it “takes any biomass, it is completely feedstock agnostic, and converts all the biomass to fungible intermediate feedstock, which is sugars. Those cellulosic sugars can be converted to chemicals and fuel on site or shipped to another site and dropped into another operation.”

API set up an affiliate in 2011, AVAP Co. LLC, to commercialize the AVAP technology it uses at its demonstration plant in Thomaston, Ga., which came online in May. “With any first-of-its-kind facility,” Karampelas says, “we’re anticipating there will be different things we’ll be doing to tweak and optimize as we start up, which is what we did with Alpena.” The plant can handle a variety of feedstocks at rates up to 10 tons per day, with an annual capacity of about 300,000 gallons per year. He mentions one way API is optimizing the site in Thomaston is by relocating API’s corporate R&D capabilities onsite.

“AVAP is a technology that will fractionate the entire biomass and in doing so it gives us a lot of optionality around what we can ultimately produce,” Karampelas says. He then clarifies that since the technology is fractionating the feedstock into cellulose, lignin and hemicelluloses, the plant can decide to skip the celluloseto-glucose conversion stage and use the separated cellulose to produce coproducts, such as fluff pulp, while using the hemicellulose sugars for biochemical or biofuel production.

ADVANCED BIOFUEL nies and 13 institutions are using or evaluating the program that can simulate biorefining and energy equipment.

PHOTO: AMERICAN PROCESS INC

Brazilian Boost

API recently got a boost when the Brazil-based biotech company, GranBio acquired a 25 percent equity stake in API, giving the company access to API’s cellulosic sugar technologies. “The association with a demonstrated cleantech leader such as GranBio strengthens American Process and makes it possible to aggressively grow our business,” Retsina said in a press release about the agreement. “We believe that the production of low-cost clean sugars is key to unlocking the potential of biomass as a versatile feedstock for fuels, chemicals and products. We are actively partnering with ‘sugar converters’ to complete the supply chain and convert the sugars to high-valueadded products. We are excited and very optimistic about the prospects of building

the first commercial-scale plant with API technology in Brazil followed by one in the United States.”

Karampelas views the deal as mutually beneficial for both API and GranBio. “The way it benefits API is we’ve got a partnership with a world-class company based in South America, specifically Brazil, where we see tremendous potential for both of our technologies,” he says. He adds that by working with GranBio, API may gain insight in attracting international customers interested in using cellulosic sugars to produce their products. He says the relationship will help GranBio gain more exposure and a better understanding of API’s home market of North America.

Author: Chris Hanson Staff Writer, Ethanol Producer Magazine 701-738-4970 chanson@bbiinternational.com

Georgia Demo API’s demonstration plant in Thomaston, Ga., uses its stand-alone AVAP technology.

“Our plan for both Thomaston and Alpena for the remainder of 2013 is to really perfect and optimize the two technologies at the demo facilities,” Karampelas says. API was not prepared to share any specific yield estimates, since yield values are dependent on the feedstock and configuration, which can vary from site to site, he adds.

In addition to API’s sugar extracting technologies, it has developed two energy management software tools for the pulp and paper industry. Energy Targetter is used to identify energy consumption problems, track performance of projects and improve energy efficiency. The Performance Indicator Benchmarking program is a Web-based tool that utilizes data from mills in the pulp and paper industry to help users benchmark their steam, water, electricity and thermal energy consumption.

API’s newest software, apiMax, is a biorefinery simulator developed in 2009 for industries such as cellulosic biofuel and biochemical, pulp and paper and pellet production. API’s website notes 30 compa-

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juLY 2013 | Ethanol Producer Magazine | 55

Q&A

Driving American Ethanol to the Front Austin Dillon shares his earliest memories of a life spent in motorsports, his love of dirt track racing and the role ethanol plays in NASCAR’s sustainability push.

Interview by Tim Portz

In Daytona in 1998, a then 8-year old Austin Dillon witnessed history at victory lane. Dale Earnhardt, the famed driver of his grandfather Richard Childress’s No. 3 car, had finally won the Daytona 500.

Video footage of victory circle clearly shows Austin standing next to his younger brother Ty and Earnhardt. Fifteen years later Dillon races in NASCAR’s biggest series and is the driver face of American Ethanol, the ethanol industry’s standard bearer in this country’s most watched spectator sport. Paired with NASCAR’s commitment to and use of E15 as a racing fuel, Dillon and the American Ethanol car carry the industry’s message of clean and domestically produced fuel to millions of race fans.

You were 5 years old when your father made his driving debut in the NASCAR Busch series.

What are some of your earliest memories of growing up around motorsports?

Growing up in a racing family and going to the track and being at the track and seeing things that people dream of seeing my entire life, it’s been pretty awesome, and I’ve been fortunate to see the things I’ve seen. Probably one the coolest memories I can think of is being at Daytona 500 when Dale Earnhardt won in 1998—being at the track and getting scooped up by my grandmother and taken to victory lane and doing the hat dance and not knowing the kind of history that I was being a part of and how much fun it was at the time.

56 | Ethanol Producer Magazine | JuLY 2013

When did you first drive in a competitive event? Where were you and what were you driving?

I was in a Bandelero, which is like a full -bodied race go-kart. We were at the quarter mile at Lowe’s Motor Speedway inside the track. We raced right before the qualifying night, and me and my brother both ran the race and we were racing for dead last, wrecking each other. That was our first race I think. We both spun out three times.

You, like lots of drivers racing at the highest levels of competition in NASCAR, have raced in a number of different series and different vehicles. How difficult is it to get a feel for the differences in horsepower, driving surface and racing styles in each of the different formats?

The learning curve is always a little tough to get used to but the great thing is to be able to drive a bunch of different race cars.

My family pushed us to run dirt. In dirt you have so much horsepower. From the time you get into a late model on, it’s just a bunch of horsepower. So you get used to sliding around and using that horsepower. I think that is what helped me to adapt to different series and different cars.

Speaking of different racing surfaces, you’ve certainly done very well on dirt. It seems like a lot of drivers have an affinity for dirt track racing. Why do you think that is?

I think you can get away from all of the pressures at an asphalt track and just relax and have a good time. Also, you are with the core group of racers that you grew up with.

It's good racing and you can slide and take positions that sometimes you wouldn’t be able to take on an asphalt track. You follow the grip lines. You follow the lines on the track. You follow the dirt and how it changes. Everybody loves that because it's real racing, and we enjoy anytime you can go out there and slide around and have a good time and mess around with your buddies afterwards, stay up all night and go race again.

Talk about getting that first NASCAR victory in the truck series at the relatively new Iowa Speedway back in summer 2010.

It was great. To get your first victory behind you, it’s just a whole weight comes off your shoulders. Not only that, but my grandmother and my grandfather were there to be with me and that was just something I’ll never forget. That memory will always be etched in my mind. The first one, there’s nothing like it. It was a blast.

Q&A

When you win at a track, does it feel like you have more confidence the next time you run at that track?

The ethanol industry feels strongly that its partnership with NASCAR will get its message out to a key audience. What makes NASCAR unique in its ability to connect its fans with products and ideas?

Yeah, it does. Any time you go to a place you can run well at and that you know you can go out there and win, there is just more confidence.

You get into the car and you’re excited and you have a feel that you are looking for, to try and find again. You are always looking for that same feel that you won with and if you can get it, man, it’s another good weekend.

It’s probably just the brand awareness and that people love seeing their drivers. They connect to something and that’s what’s on your car, what’s on the side of your car. And for sponsors with a product, like American Ethanol that is used on the track, fans also get to see it get used and proven. That’s the greatest thing, that ethanol is used on the track!

We try and hunt a little bit of everything.

We love being in the outdoors. I love fishing. I love hunting. I’ll hunt anything.

Talk about how you feel about NASCAR’s commitment to be the greenest and most sustainable spectator sport out there.

It’s great. Everybody needs to look toward a greener country. That’s the greatest thing about our sport is that NASCAR has taken lots of steps to make sure that we are going green. We’re doing it with our fuel and we’re doing it at the tracks. You saw the first track last year (Pocono) actually go to all solar power. It’s great to see all the pushing that NASCAR is doing.

PHOTO: HAROLD HINSON PHOTOGRAPHY/RICHARD CHILDRESS RACING

You’re an outdoorsman.

What do you do?

Has anything surprised you about being the driver face of our industry’s historic American Ethanol partnership with NASCAR? I think there are a lot of people that are passionate about ethanol and what we’ve been able to do with it in NASCAR. You see a lot of fans that are really interested in it, people that want to learn about it. There are a lot of people out there that don’t know what the benefits of ethanol are. Being able to show them a clean fuel that runs good on the track is pretty awesome.

juLY 2013 | Ethanol Producer Magazine | 57

FEEDSTOCK

Sweet Energy Energy beets grown in the Mendota area of Fresno County will soon be used for ethanol production, thanks to California Energy Commission funding of nearly $5 million for a demonstration project. When harvested, these gnarled beets weigh up to 10 pounds apiece.

PHOTO: MENDOTA BIOENERGY LLC

58 | Ethanol Producer Magazine | JuLY 2013

FEEDSTOCK

Lowering Ethanol's Carbon Footprint with Energy Beets Mendota Bioenergy’s plan to turn energy beets to ethanol moves to demonstration scale in California’s San Joaquin Valley.

By Keith Loria

The future of advanced biofuels is in beets. At least that’s the thinking of those behind Mendota Bioenergy LLC, a California energy beet-to-ethanol project that last year received an approximately $5 million grant from the California Energy Commission to build a demonstration plant in the Mendota area of Fresno County to test out its theory.

The project is in motion with the money being used to help turn 250 acres of beets into 285,000 gallons of ethanol per year, through advanced enzyme and microbial techniques.

Jim Tischer, project manager with Mendota Bioenergy, says the

juLY 2013 | Ethanol Producer Magazine | 59

FEEDSTOCK beet crop delivers ethanol yields that are greater per acre and have a lower carbon index than Brazilian sugar cane or North American corn. “This is an excellent reestablishment of an old crop to a new end, to make advanced biofuels,” Tischer says.

“This is the first energy beet project to advance to the pilot and demonstration phase in the United States.”

If the pilot program is successful—and everyone involved expects it will be—construction of the nation’s first commercial-scale biorefinery in Mendota will begin with a 2016 target date. The goal of the commercial biorefinery is to produce 40 MMgy with about 15 percent of that production being cellulosic ethanol.

That would put nearly 80 beet growers and 35,000 acres back into beet production.

Tischer says the biorefinery will also process waste pulp from the beets to produce biomethane for compressed natural gas, produce fertilizer and recycle water for irrigation. Based on projections, the biorefinery will create about 100 long-term jobs and 150 seasonal agricultural jobs and lead to millions of dollars of local economic activity.

Both the demo plant and the commercial plant would operate year-round and use beets grown by local farmers. Additionally, the plants would burn almond prunings and other wood waste to generate

‘This [project] has as good a chance as any of what I have seen of succeeding, if beets can be produced profitably in the region and harvested or stored so they can be more than a short-season feedstock. What is really encouraging is that beet yields have been rising around the world fairly steadily over the last couple of decades and they continue to increase without increasing the inputs that are needed to produce them.’

—Steve Kaffka, agronomist at the University of California-Davis

electricity for internal use and will convert some of those prunings into ethanol.

New Uses, Old Crop

Currently, nearly 95 percent of U.S. ethanol is made from corn but the renewable fuel standard (RFS), established

by Congress in 2005, caps the amount of ethanol produced from corn at 15 billion gallons. That set the wheels in motion for the idea to use sugar beets for this purpose.

After all, beets produce about 1,200 gallons per acre of ethanol, compared to 450 to 500 gallons per acre of corn.

Mendota Bioenergy LLC was created in 2011, but the idea harkens back a few years to when the Spreckels Sugar Co.

plant closed and a dozen former beet farmers united to form the Mendota Advanced Bioenergy Beet Cooperative to seek out a new market for beets. They teamed up with agronomist Steve Kaffka and engineering expert Ruihong Zhang, both of the University of California-Davis.

Kaffka has a storied history of working on sugar beet crops and is considered a specialist on crop performance in the region. It’s his belief that the plan will be a success and he’s looking forward to the results of the pilot program. “My role in helping the growers is to advise them about the potential for the crops. I have been a member of advisory committees and know about a fair number of projects, but this

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60 | Ethanol Producer Magazine | JuLY 2013

FEEDSTOCK has as good a chance as any of what I have seen of succeeding,â&#x20AC;? he says, â&#x20AC;&#x153;if beets can be produced profitably in the region and harvested or stored so they can be more than a short-season feedstock. What is really encouraging is that beet yields have been rising around the world fairly steadily over the last couple of decades and they continue to increase without increasing the inputs that are needed to produce them.â&#x20AC;? â&#x20AC;&#x153;The introduction of energy beets will enable farmers to have another competitive crop in California and at the levels we think we can make the advanced ethanol, it should be a sustainable crop,â&#x20AC;? Kaffka says. â&#x20AC;&#x153;They grow year round, unlike other areas of the upper Midwest or Europe, they can grow in lower-quality soils (Class 2 or Class 3), they grow quite well with lesser quality water and they fit in well with rotations.

What weâ&#x20AC;&#x2122;re seeing in tests is that beets may even fit in well with the canary tomato rotation, which opens up a whole new vista.â&#x20AC;?

New feedstocks and advanced fuels are essential if California is to meet the stateâ&#x20AC;&#x2122;s climate change policies and reduce greenhouse gas emissions, says Robert Weisenmiller, chair of the California Energy Commission. â&#x20AC;&#x153;The energy commission believes it is critically important to develop new feedstocks for the advanced biofuels industries and move away from reliance on a single feedstock crop like corn. The current drought and price spike for corn illustrates the risks of over-investment in a single crop feedstock for such an important component of our fuel supply in California,â&#x20AC;? Weisenmiller says. â&#x20AC;&#x153;We also need feedstocks with lower carbon content than corn. The average carbon content from Midwest ethanol just doesnâ&#x20AC;&#x2122;t move the needle enough in California to reduce the carbon content of our transportation fuels as laid out in our Low Carbon Fuel Standard.â&#x20AC;? For that reason, the CEC is investing in technologies and companies that can develop very low-carbon biofuels from waste-based and renewable resources, helping to create a more diversified portfolio of feedstocks and reducing the pressure on its farm systems. â&#x20AC;&#x153;The energy commission will continue investing funds in companies and technologies that will produce low carbon,

sustainable fuel products for the next generation of vehicles that California will need in order meet our carbon reduction and emissions reductions mandates,â&#x20AC;? Weisenmiller says. â&#x20AC;&#x153;On the biofuels front, we want to take advantage of regionally available feedstocks. We donâ&#x20AC;&#x2122;t want to recreate the Midwest model of a monoculture feedstock feeding a single biofuels product. We want a variety, and we are confident that California companies will continue to work toward development of drop-in fuels that are compatible with modern engines and

fully fungible with our existing fuel supply infrastructure.â&#x20AC;?

Mendotaâ&#x20AC;&#x2122;s plan makes it a bellwether for the types of advanced technology, low impact, sustainable biofuels project that the CEC is helping to develop in the state. â&#x20AC;&#x153;First, on net, this is nearly a carbon neutral and water negative project. Plus, itâ&#x20AC;&#x2122;s an integrated biorefinery, which means it has multiple processing loops to squeeze out the highest possible amount of sugar, starch and Btu from the beet and waste feedstocks,â&#x20AC;? Weisenmiller says. â&#x20AC;&#x153;It is a

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PHOTO: MENDOTA BIOENERGY LLC

FEEDSTOCK

Green Power Bill Pucheu, beet farmer and president of the board of Mendota Bioenergy, surveys a field of energy beets in Mendota.

highly efficient project design. It will produce more clean water than it consumes by taking nonpotable process water from a neighboring operation and integrating it into the biorefinery.”

Mendota estimates the final fuel products will have very low carbon scores: 39.3 MMgy of ethanol with a carbon score of 17.6 grams of CO2 equivalent per megajoule (gCO2e/MJ) and 773,000 dieselgallon-equivalent of biogas. The plan is to also produce 151,000 gallons of biodiesel from locally grown canola and used cooking oil.

“California sugar beets will use less water, fertilizer and pesticides than traditional corn cultivation for ethanol. There is tremendous cultivation expertise for this crop with the farmers and with the 62 | Ethanol Producer Magazine | JuLY 2013

UC-Davis agronomy team,” Weisenmiller says. “Their goal is a 12-month cultivation cycle with yields of 40 tons per acre, which would translate to 1,000 gallons per acre.”

Energy, Water, Carbon

Tischer believes that one of the project’s biggest competitive advantages in the California market is that the initial energy-beet-to-ethanol carbon intensity rating came in below 20 gCO2e/MJ. When you compare that to the 58.40 gCO2e/MJ rating that the best Brazilian sugarcane ethanol and a carbon intensity rating of 80.7 for California dry mills using natural gas and producing wet distillers grains, the numbers are quite eye catching. “Until we produce it through the demonstration plant, which will start in February, we

FEEDSTOCK haven’t figured out how to do it,” he says. “UC-Davis indicates the carbon index will be less than 20 and the significance of that is the carbon index of gasoline is 85. Our plant will be one of the lowest in the U.S.” Energy integration is a big part of the carbon score. As with any biorefinery, Mendota Bioenergy has a sizable energy component. Maximizing the use of the energy beets is obviously the primary concern, but the area surrounding the proposed plant also has a sizable almond crop. Plans include a biomass gasifier to convert almond prunings into steam and electricity, providing all the steam and 40 percent of the electrical power needs for the plant. “The gasifier means we do not have to burn coal [or natural gas] to make our process heat like some, which will keep costs low and keep the carbon index down. We’re also capturing the biomethane from an anaerobic digestion process and using that for transportation fuels.” The planned biodiesel production will be used by farmers in field operations to reduce their carbon footprint.

Another green aspect of the biorefinery is that woody plant matter, as well as beet pulp, will be used to produce about 15 percent of the ethanol as cellulosic at the Mendota plant. Also, the water in the beets will be captured during processing and recycled so that little fresh water will be used in the plant.

In California, water is a big factor that needs to be thought through in project planning. Depending on when the water districts were settled, some have surface water rights for the water that comes out of the mountains, while others have to pump it. “We had a short rain season last year, total precipitation was down, and it had an impact on crops,” Tischer says. “How that plays out in Mendota’s case is that three-quarters of the area we pull from has surface irrigation rights and they get water when no one else does. The other quarter is constrained by that. What that says is when we do our sourcing plan for beets (which looks to be 35,000 acres at this stage), we have to be sensitive to the traditional growing districts but also what the status is of water event districts. You may have to taper back, but you’ll still be in production.”

Next Steps

Mendota picked up its official contract from CEC on April 3 and is currently in the process of mobilizing its 34 subcontractors to move forward, with construction expected to begin in July and scheduled to be completed by December.

“By mid-2014 we should have optimized the pilot plant and have a good idea if the turnout on ethanol from the energy beets is close to where we projected and if the economics will hold up,” Tischer says. “If that’s the case, we can move beyond the pilot plant to the commercial full-scale development and the 40 MMgy plant. Depending on where the finance community is, we could have the plant in operation towards the end of 2017.”

Author: Keith Loria California-based freelance writer 703-691-3607 freelancekeith@gmail.com

Process Innovations Project Management Technical Services Fax/Telephone 217-875-2683 Mobile 217-412-1150 langhauserlg@att.net www. LanghauserAssociates.com LANGHAUSER ASSOCIATES, INCORPORATED “SUSTAINABLE VALUE ADDED TECHNOLOGY” Continuous SUSTAINABLE Cereal Grains, Tubers and LignoCellulose Processing for FOOD #I , FEED and FIBER with the balance to FUEL. Food feedstock #2 yellow com quality at 10-30% moisture ..

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I. Soluble Protein, 2. Corn Germ, 3. Dietary Fibre, 4. Corn Gluten Meal, and 5. A Premium quality cut of refined starch for food processing and fermenter feedstock.

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The integrated process plant provides no nutrition losses vs typical Dry Grind loss of 30% or Wet Grind loss of 6%, reduced energy use, improved quality, reduced net-com-costs with Value Added Distillers Grain pre-fermentation fractionation, reduced environmental emissions and increased recycles for no process waste waters LANGHAUSER ASSOCIATES, INC. PATENT ABSTRACTS Langhauser I, Pat. No. 7,452,425, Nov. 18, 2008, CORN REFINING PROCESS. A grain containing starch is refinied. The grain is steeped in water at a temperature of about 125 to 160 oF, which water is essentially free of sulfurous acid and contains recycled enzymes from downstream processes, in a counter-current steeping reactor for about l 0-20 hours to produce an aqeous slurry of steeped grain having a moisture of about 40-50 percent.

The various components of the grain are then separated and the starch is converted to ethanol.

Langhauser II, U.S. Pat. No. 7,488,390, Feb. 10, 2009, CORN AND FIBRE REFINING. Plant materials such as corn kernels which contain starch and fibre comprising cellulose, hemicellulose, lignin, and pectin are refined.

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juLY 2013 | Ethanol Producer Magazine | 63

ENZYMES

CONTRIBUTION

Enzyme Action Corn treated with conventional glucoamylase, left, shows how the enzyme can hydrolyze on the surfase, but not access starch bound in the corn fiber matrix. At right, corn treated with the new Spirizyme Achieve shows how the enzyme degrades cell walls to access more starch, allowing for greater conversion and higher yields.

PHOTOS: NOVOZYMES

Going Deep With Enzyme Technology No part of the corn kernel goes unexplored.

By Jack Rogers

The ethanol industry’s remarkable corn oil recovery trend is certainly getting its share of media attention this year—and why not?

It’s an interesting story. Corn oil revenue

has been key in times of tough margins and, in some cases, has meant the difference between continuing operations and idling the plant, reported Holly Jessen, managing editor, in the May issue of this magazine.

This is no surprise to those of us working with ethanol plants across the country. We, at Novozymes, saw up close and personal how last year’s corn quality and prices negatively impacted

our customers. Reducing chemical and energy usage has become a sharp focus of producers.

We’ve seen how even small improvements in ethanol yield can have a huge impact on profitability. Any opportunity to increase revenue or reduce cost is being pursued. Novozyme’s R&D group has been successful extracting and converting more starch from corn, so we decided to investigate opportunities to increase corn oil yields as well.

Our research started with the insight that a significant amount of oil remains bound inside the corn kernel. These oleosome bodies are not broken up during front-end processes, and there-

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).

64 | Ethanol Producer Magazine | JuLY 2013

fore the oil inside is unrecoverable using conventional methods. We needed to develop an enzyme that was strong and specific enough to penetrate the oleosin protein layer that stores these oil bodies in order to release them for extraction.

In a nutshell, or corn kernel, that’s what we did. We launched Novozymes trademarked Olexa in June at the International Fuel Ethanol Workshop & Expo in St. Louis. It’s the first enzyme designed to break through the oil-binding protein layer within the corn kernel to release more oil for extraction. In our five industrial-scale trials, we saw an average increase of 13 percent in corn oil yields, exceeding our expectations.

But what really thrilled us was that in those same trials, plants saw on average 2 percent more ethanol. As Olexa is added in fermentation, we expected to see a noticeable ethanol yield in-

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crease, but 2 percent was impressive. We also saw an energy savings of 3 percent at the dryers. With Olexa added to fermentation, plants can set a new baseline for their oil yield, while preserving a full range of choices to improve their backend oil extraction processes.

Leveraging Cellulases for Saccharification

At the same time we were developing our oil recovery solution, we were also developing an idea we had to leverage cellulase activity for the next installment of our Spirizyme saccharification series.

Here in the U.S., our main business is starch-based ethanol. But we are also making inroads into advanced biofuels with our cellulosic technology, which is becoming key in markets in South America and Europe, where biomass is more prevalent. We knew that our saccharification solutions could be more effective if we could remove more of the corn fiber matrix that was blocking some of the starch molecule from conversion. And then we discovered that advanced cellulase activity was the key.

At FEW, we also launched Spirizyme Achieve, which deploys advanced cellulase activity to degrade the corn-fiber network, releasing starch thatâ&#x20AC;&#x2122;s inaccessible to traditional glucoamylases. Then, specialized component activities in the glucoamylase are able to work synergistically to convert the starch into glucose. Across six industrial-scale plant trials, we saw ethanol yield increases between 1 and 2.5 percent and an average energy savings of 3 percent.

These two launches came just eight months after we released Avantec, our yield-enhancing liquefaction solution, which is seeing an average ethanol yield increase of 3 percent and energy savings of 2 percent. We believe the combined benefits of these technologies represent a new phase for the fuel ethanol industry. Imagine what plants can achieve if they can realize 5 percent more ethanol and 13 percent more corn oil, using 8 percent less energy. A 100 MMgy plant deploying all three of these technologies could generate more than $5 million in additional annual profits.

I think we all know itâ&#x20AC;&#x2122;s been a challenging year in our industry. Whether it was commodity markets, corn prices, weather or politics, we often felt we were swimming against the tide. But hopefully, with advancements in enzyme technology that go deep into the tiniest, innermost molecules of the corn, no challenge is too big to overcome and the future economy of the industry looks bright.

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Author: Jack Rogers Bioenergy Marketing Manager, Novozymes jckr@novozymes.com

Setting i A New Industry Standard.

FINANCE

CONTRIBUTION

Finding Business Success in a Changing Ethanol Industry Independent producers will require new strategies to stay viable.

By Scott McDermott

The makeup of the ethanol industry has changed in the past five to seven years. As we look at some of the

largest ethanol companies today, the 12 companies listed in the accompanying chart account for

Ethanol Production Capacity Estimates Million Gallons

almost certain there will be more new faces and changes to the company mix in the next six years.

Independent ethanol companies still number more than 100, operating about 130 plants that account for about 47 percent of capacity.

almost 53 percent of ethanol production capacity and comprise about 38 percent of total plants.

Of the 12, more than half had little or no presence in the industry prior to 2007, but now account for a quarter of ethanol production. It is

|------------------Expansion Phase--------------------| |------------Consolidation Phase------------|

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

ADM

907

1,112

1,070

1,070

1,070

1,070

1,070

1,070

1,170

1,695

1,695

1,695

1,695

Cargill

110

118

118

118

120

120

120

120

120

120

230

230

230

45

45

145

145

145

145

145

165

165

Louis Dreyfus The Andersons

55

Valero

275

275

275

364

364

910

1,130

1,160

1,220

1,220

230

445

445

555

Flint Hills Resources 100

210

210

210

215

215

215

Poet

Murphy Oil 68

163

339

476

641

886

1,036

1,518

1,583

1,583

1,626

1,626

1,626

Abengona Bioenergy Corp.

50

70

70

70

80

80

198

198

198

198

374

374

374

40

40

Big River Resources Green Plains Renewable Energy Aventine Renewable Energy

52

52

210

210

310

310

350

350

100

207

367

427

427

740

740

740

135

135

135

135

135

192

192

240

240

240

350

350

350

1,270

1,598

1,732

1,909

2,086

2,555

3,185

4,143

5,488

6,563

7,565

7,757

7,867

% of Volume

68%

65%

59%

58%

54%

45%

41%

36%

42%

47%

51%

52%

53%

% of Plants

26%

33%

33%

34%

32%

29%

30%

29%

33%

34%

37%

37%

38%

587

843

1,198

1,369

1,764

3,121

4,629

7,318

7,452

7,363

7,225

7,257

7,068

32%

35%

41%

42%

46%

55%

59%

64%

58%

53%

49%

48%

47%

Total Largest Companies

Total Independants % of Volume % of Plants Total Capacity

74%

67%

67%

66%

68%

71%

70%

71%

67%

66%

63%

63%

62%

1,857

2,441

2,930

3,278

3,850

5,676

7,814

11,461

12,940

13,926

14,790

15,014

14,935

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).

66 | Ethanol Producer Magazine | JuLY 2013

FINANCE

EBITA per Denatured Ethanol Gallon Relative to Midwest Ethanol Companies 2007

2008

2009

2010

2011

2012

Average

Max

0.66

0.39

0.35

0.33

0.45

0.16

0.39

Percent Above Average

39%

267%

100%

53%

75%

255%

84%

Average Percent Below Average Min Plant Count

0.48

0.11

0.17

0.22

0.25

0.04

0.21

-41%

-327%

-118%

-69%

-73%

-289%

-95%

.028

(0.24)

(0.03)

0.07

0.07

(0.08)

0.01

15

23

28

31

31

30

The table shows the dramatic changes in size, capacity and plant numbers; but it masks another important dynamic. It is the makeup of these industry players and the business they do outside the ethanol industry that will have important implications for independent ethanol companies going forward.

There is a growing influence from industries other than ethanol represented by the companies listed, as well as many independents not listed. Some of the outside industries represented among ethanol companies include energy/petroleum, grain/diversified agribusiness, advanced biofuels, cellulosic biofuels, sugar/sugarcane ethanol, food/alternative feedstock, bio-industrial, beverage and industrial alcohol.

Historically, ethanol processing margins were driven by supply and demand fundamentals in ethanol, energy and corn, plus feed and policy

INT

UC ROD

ING

impacts. As more ethanol companies diversify, the economic incentives to expand or contract production are changing. For a growing number of companies, at least part of production decisions will be based on considerations outside the core ethanol-making business.

One example is the corn wet miller, whose decision to make ethanol is one part of a larger corn-processing optimization equation, including many factors outside the ethanol and petroleum industries. Another is among petroleum companies, where the decisions to make ethanol and invest in their captive ethanol plants are not only based on ethanol margins, but also on blending economics, the prices for renewable identification number (RIN) credits and their obligated volume requirements under the renewable fuel standard, as well as other factors.

Over time, the implication of these outside

influences will be seen more noticeably in the EBITDA (earnings from the business before the capital structure items like depreciation, interest and taxes) competitiveness of ethanol producers and how those companies respond to difficult margin environments. Between 2008 and 2012, in a pool of plants that grew from 23 to 31, the average range of EBITDA from lowest to highest was 38 cents per ethanol gallon. During that period, the narrowest spread was 24 cents per gallon and the widest spread was 64 cents per gallon of ethanol. Most of the variance in margin spreads today among companies is driven by the difference in business decisions, price volatility and individual hedging activity.

New technologies like corn oil extraction, fractionation, better corn component separation and advanced/cellulosic biofuels technology will give some companies direct EBITDA advantages, while others will fail to monetize new technology and take losses. The earnings diversification and outside business influence will have indirect impacts on EBITDA margins and on the supply and demand fundamentals in ethanol.

Today, when ethanol supply outpaces demand, margins tighten and plants idle until supply and demand comes back into line and margins improve. This scenario played out from 2012 to the present with average EBITDA margins at 4 cents per gallon of ethanol. Similarly, when etha-

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nol demand outpaces supply, margins expand, plants increase production and idle plants start to produce. Supply and demand comes back into line, and margins compress. This scenario played out through 2011 with average EBITDA margins at 25 cents per ethanol gallon.

The net effect of increasing outside business influence will likely drive more volatility in earnings, a wider margin spread between lowand high-EBITDA companies and could cause market downturns to be deeper and/or longer because the ethanol production decision will go beyond basic corn, ethanol and coproduct processing margins.

So what does this mean for independent ethanol companies? They will not only have to invest to continue to become more competitive, but they will have to get better at selecting and deploying new technology investments. Some will look to leverage scale economics through mergers or acquisitions to fund performance improvements and new technology, and some may need to look at diversifying or vertically integrating their business in order to be competitive in the longer term. All this points to the importance of returns to managementâ&#x20AC;&#x201D;the board and managers whose leadership and vision is needed to move the business to the next level.

Oil Refining Proxy

If we use the oil refining industry as a proxy, there were similar dynamics that drove some industry participants to great opportunity and displaced others. Again, looking at the refining numbers and history only tells part of the story. Today, 90 percent of U.S. oil refining capacity is owned by eight companies. The ethanol industry is not likely to scale up to the same degree as the petroleum industry because of grain logistics and the renewable fuels standard. We have seen some scaling, though, as we moved from building 25 MMgy to 55 MMgy to 110 MMgy plants, and we will likely see more in the future.

The richer part of the petroleum consolidation and restructuring story was the upgrading of low-value byproducts into higher-value coproducts. This evolution of the petrochemical industry brought us polymers, packaging, fibers, lubricants, construction materials, paint coatings, healthcare and pharmaceutical products. These products touch almost every part of our lives today, but the industry was born out of a simple business of providing heating oil more than 140 years ago.

For ethanol companies, the harsh market reality means that some will not make it to this next level. It is imperative that independent ethanol companies assess and understand their

FINANCE

position regarding economic competitiveness and value in the marketplace and conduct strategic and tactical planning for attaining the best value for their shareholders. Independent ethanol companies will need to implement a disciplined new-ventures assessment process that goes beyond annual capital-expenditure budgeting. They will also need more robust capital planning to support performance improvements and new technology implementation.

Almost all operating ethanol companies today still have value commensurate with the investment the owners made, although some have more and some less value. This means most ethanol companies still have options.

If independent ethanol companies choose to monetize their business through sale, they should time and plan their exit to maximize their valuation just as they would for any business venture. It is important that you sell when the market is right and before there is a technology innovation that requires capital investment just to maintain your current valuation in the marketplace.

At some point in the not too distant future, it will not be enough for independent ethanol companies to simply have good financial and plant management. The board and management will have to position the business to be viable and sustainable in a changing market environment. We are pleased to work with many independent ethanol companies that are leading the industry in making such changes to their businesses today.

At face value, this seems intimidating, but we are still fairly early in this transition so ethanol companies have some time. Unlike industry consolidations where the only option is scale or die, there are great opportunities and numerous options for ethanol companies that engage in taking their business to the next level of improved returns and performance.

The biggest risk to independent ethanol companies is not in having the wrong plan, but rather, in not having a plan.

Author: Scott McDermott Partner, Ascendant Partners Inc. 303-221-4700 Mcdermotts@ascendantpartners.com

juLY 2013 | Ethanol Producer Magazine | 69

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