2016 March Ethanol Producer Magazine by BBI International

INSIDE: LOW CARBON INTENSITY FUEL PRODUCTION MARCH 2016

OCTANE UPGRADE Midlevel Ethanol Blends Offer Significant Benefits

Page 46

Tapping Industrial Waste Gas Power Page 28

Electrical Generation With a Steam Turbine Page 42

www.ethanolproducer.com

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CONTENTS

MARCH 2016 VOLUME 22

DEPARTMENTS 6

EDITOR'S NOTE

AD INDEX

THE WAY I SEE IT

FEATURES

The Energy Behind Ethanol By Tom Bryan

Puppets on a String By Mike Bryan

EVENTS CALENDAR

VIEW FROM THE HILL

Pushing Back Against Misinformation By Bob Dinneen

DRIVE

GRASSROOTS VOICE

ISSUE 3

POWER

Nothing Wasted

An ethanol production company plans to turn waste gases into on-site power By Tom Bryan

'The Best Lobbyists Aren't Really Lobbyists' By Brian Jennings

GLOBAL SCENE

Biofuels ‘Here and Now’ Solution By Jim Grey

ELECTRICITY

Powering Up By Letting Down

BUSINESS BRIEFS

COMMODITIES

CONTRIBUTIONS

DISTILLED

TALKING POINT

REGULATION

Meeting the California Low Carbon Challenge

Ethanol producers west of the Mississippi send corn ethanol to the green state By Susanne Retka Schill

Going Full Throttle By Richard Childress

Some producers tap low-cost steam with a let-down or back-pressure turbine By Susanne Retka Schill

Let’s Not Leave the Discussion in Iowa By Dave VanderGriend

BUSINESS MATTERS

President Signs Tax Extenders, Government Funding Legislation By John Kirkwood

MARKETPLACE

ON THE COVER

Researchers completed E25 and E40 studies on a 2013 Cadillac ATS 2.0 turbo direct injection engine, similar to the one pictured. PHOTO: COPYRIGHT GENERAL MOTORS

4 | Ethanol Producer Magazine | MARCH 2016

STEAM

Energy Center Enhancements Deliver More Steam

Alternative approaches offer a range of costs and benefits By Darrell Pedersen

OCTANE

E25, E40 For the Masses

Researchers wrap up studies into a new midlevel ethanol blend and optimized vehicles By Holly Jessen

BUTANOL

Promising Jet Fuel Market Looms For Upgraded Bioethanol, Butanol

An increasing number of developers are poised to capitalize on butanol’s versatility By Kapil Lokare

Ethanol Producer Magazine: (USPS No. 023-974) March 2016, Vol. 22, Issue 3. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

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EDITOR'S NOTE

The Energy Behind Ethanol The U.S. ethanol industry has, for years, viewed California as both a land of opportunity and a source of immense regulatory aggravation.

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

While the state’s Low Carbon Fuel Standard has historically been a largely dubious prospect for ethanol producers, participating in the program, now, is a serious revenue play for many of them. As we learn in “Meeting the California Low Carbon Challenge,” on page 34, the LCFS is a performance-based regulation aimed at dramatically lowering the carbon intensity (CI) rating of transportation fuels used in the Golden State. Under the program, clean fuels earn credits that are ultimately worth money—sometimes 20 cents a gallon or more—which is captured by the companies that make and sell the fuel. As EPM Senior Staff Writer Susanne Retka Schill reports, the greenest grain ethanol plants in America, at least from CARB’s perspective, are those that sell wet and modified wet distillers grains locally. Other low-CI plants are hosting innovative technologies, utilizing waste streams and deploying advanced energy systems like landfill gas power, cogeneration and steam turbines. In fact, steam turbines are the subject of our page-42 feature, “Powering Up By Letting Down,” also authored by Retka Schill. Many of these let-down, or back-pressure steam turbines, were installed in the ethanol industry over a decade ago. Now, interest in them is picking up once again as electricity rates—and concerns about grid reliability—have risen. Retka Schill reports that producers interested in turbines should plan ahead. For example, by installing a boiler with a higher-than-necessary capacity, a plant would have enough excess steam to power a turbine, should it want to, in the future. In “Nothing Wasted,” on page 28, we introduce the still unfolding story of Ener-Core, a California-based company that’s scaling up a technology designed to enable industrial plants to convert poor-quality waste gases into high-quality heat and power. If everything goes as planned, Pacific Ethanol will install two of the systems at its Stockton, California, ethanol plant. It’s another great example of the ethanol industry’s predilection for efficiency. Finally, our page-46 cover story, “E25, E40 for the Masses,” explores the benefits and barriers of bringing new ethanol blends to market. EPM Managing Editor Holly Jessen reports on how new research being conducted by consorting national labs might breathe new life into the idea of marketing ethanol blends like E25 and E40 as “renewable super premium” fuels. The labs’ researchers discovered that higher blends of this nature can achieve fuel-economy parity with E10 when used in engines optimized for them. Getting automakers on board would of course be challenging, but what about new ethanol blends isn’t?

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

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 22 ISSUE 3

ADVERTISER INDEX

EDITORIAL

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

45 2016 International Biomass Conference & Expo 40 ACE American Coalition for Ethanol 15 BetaTec Hop Products 17 Buckman 25 CHS Renewable Fuels Marketing 3 CompuWeigh Corporation 41 CPM Roskamp Champion 49 D3Max 59 Direct Automation 18 DuPont Industrial Biosciences 60 Fagen Inc. 11 Fluid Quip Process Technologies, LLC 31 Growth Energy 2 Hydro-Klean LLC 24 ICM, Inc. 9 Iowa Economic Development Authority 57 J.C. Ramsdell Enviro Services, Inc. 23 Lallemand Biofuels & Distilled Spirits 5 Leaf-Lesaffre Advanced Fermentations 30 MPW Industrial Services 44 Nalco, an Ecolab company 32 Phibro Ethanol Performance Group 39 POET - DSM Advanced Biofuels 55 RPMG, Inc. 33 Sukup Manufacturing Co. 13 Syngenta: Enogen 26-27 Thermal Refractory 22 Tower Performance, Inc. 19 Victory Energy Operations 36-37 2016 Fuel Ethanol Workshop & Expo

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 Erin Voegele evoegele@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

ART

Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Raquel Boushee rboushee@bbiinternational.com

PUBLISHING

Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com

SALES

Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Sales & Marketing Director John Nelson jnelson@bbiinternational.com Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Account Manager Jeff Hogan jhogan@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

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

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MARCH 2016 | Ethanol Producer Magazine | 7

THE WAY I SEE IT

Puppets on a String By Mike Bryan

The recent statement of American Petroleum Institute CEO Jack Gerard that the renewable fuel standard (RFS) is “a relic of our nation’s era of energy scarcity and uncertainty” reflects the myopic vision of an industry that has become increasingly out of touch with mainstream America. The oil industry is so desperate to hold on to the last

remaining vestiges of an energy source that is fast becoming a relic in its own right, that it will sacrifice anything—including national security—to save itself. Diminishing the importance of renewable energy based on finding more sources of domestic oil, is like touting the discovery of a more deadly nuclear weapon rather than finding a peaceful solution to conflict. Oil has powered the world for generations, but, in truth, it has killed more people in the process than all the American wars combined. With the technology we have today, it’s a disgrace that we still largely depend on oil as our main source of energy. The only reasons we continue do so, is because it is cheap, available and the infrastructure is well-established. One might argue that those are good reasons to continue, until you examine the real cost of oil and the availability of cleaner, more dependable and, in some cases, cheaper alternatives. Oil has become the easy path, the path of least resistance, the energy source that we all know is killing us and polluting our environment but we just turn our heads and hope that the government will save us from this known carcinogenic killer. In fact, the government is in on it. Many are under the spell of dependency, a cheap energy source and the influence bought by the

deep pockets of Big Oil. We have come to expect myopic thinking from the oil industry, but we should not tolerate it from our elected officials. We spend billions on defense to protect us from foreign threats, yet financially support and encourage an industry that has decimated our environment and killed countless numbers of our citizens. As the strongest nation on earth, we have no control over our energy when it comes to oil. We are at the mercy of other countries and cartels. The price of oil goes up, we complain, the price of oil goes down and we cheer. We are the puppet who acts in whatever way the oil cartels want us to act. Perhaps in time, the puppet actually begins to believe they are in control, but a jerk of the string snaps us back into the reality of who is in control. It doesn’t need to be this way. We can be in control. We have the resources, the technology and the capability to actually control our energy destiny. It’s time to tell the puppet master that we are taking over. Oil benefits small pockets of our economy and creates the need for large-scale transportation infrastructure changes, which generate even more pollution. Renewable energy on the other hand is diverse, it can be spread across the entire country, benefiting large swaths of the population, thus minimizing transportation demands. In the final analysis, nature will always return to the default position, and when the oil wells of today are nothing more than rusted relics of a polluted past, nature will still be producing clean, dependable, healthy energy. That’s the way I see it.

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

8 | Ethanol Producer Magazine | MARCH 2016

EVENTS CALENDAR

International Biomass Conference & Expo April 11-14, 2016 Charlotte Convention Center Charlotte, North Carolina Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all biomass industries. 866-746-8385 | www.biomassconference.com

2016 International Fuel Ethanol Workshop & Expo June 20-23, 2016 Wisconsin Center Milwaukee, Wisconsin Now in its 32nd year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-tobusiness environment. As the largest, longest-running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine —that maintains a strong focus on commercial-scale ethanol production, new technology, and near-term research and development. The 2015 event drew about 2,000 people from 45 States, four Canadian Provinces and 25 countries. 866-746-8385 | www.fuelethanolworkshop.com

ACE Annual Conference August 8-10, 2016 Loews Hotel Minneapolis, Minnesota ACE’s annual conference is unique in the world of renewable fuels because it is specifically tailored to the interests and needs of the people of ethanol—the folks who are in the trenches. It’s a gathering of ACE’s commitment to connect ethanol producers with farmers, researchers, retailers, and support businesses to continue what all of them started a long time ago. It’s also an excellent place to learn and share ideas. And it’s got all the fun of a family reunion. Join us August 8-10, 2016 at the Loews Hotel in downtown Minneapolis, Minnesota. 605-334-3381 | www.ethanol.org/conference

MARCH 2016 | Ethanol Producer Magazine | 9

VIEW FROM THE HILL

Pushing Back Against Misinformation By Bob Dinneen

Ethanol and the renewable fuel standard (RFS) have loomed large in this year’s presidential campaign. Those with the desire to occupy the White House

have found themselves being peppered with questions about their stance on these issues. The mainstream media has portrayed ethanol and the RFS as issues which are only of interest to Iowa voters, and they frequently misrepresent important details like whether ethanol receives subsidies. But biofuel policies are not merely local issues and getting the policy details correct is critical to ensure a meaningful public discourse. The Renewable Fuels Association has worked to make sure the mainstream media has the correct information. But often, they’re working off a narrative that gives great deference to their important advertisers—the oil industry. But we keep plugging away, as should everyone who cares about the continued growth of the U.S. ethanol industry. Misinformation is not the sole bastion of the mainstream media. There’s plenty of that on Capitol Hill as well. Of course, there the narrative is shaped by politics. On committees that are dominated by lawmakers from oil states, it is a challenge to be heard through the din of talking points from the American Petroleum Institute. Indeed, in far too many cases, the hearings scheduled ostensibly to provide insight into RFS, ethanol or biofuels issues are decidedly stacked against us, with few if any voices of support from our industry. We expect numerous congressional hearings this year and each will likely hold their own brand of political theatre. Witnesses often use congressional hearings as a chance to perpetuate myths like ethanol has increased food prices. With no pro-ethanol voices, these canards perpetuate unchallenged.

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One-sided congressional hearings do a real disservice to the political process. There’s no opportunity to tell “the rest of the story,” as Paul Harvey would say. The ethanol industry has been a boon for rural economies across America, injecting a healthy $53 billion into the GDP and boosting household income by $26.7 billion. A USDA study shows that rural counties with ethanol plants can attribute 32 percent of county-wide employment growth from 2000 to 2008 to those respective biorefineries. The industry single-handedly lifts the energy and agricultural sectors together by providing hundreds of thousands of jobs and financial prosperity to ethanol producers and farmers. Some issues that become the subject of congressional hearings are fairly complicated, such as the carbon impact of ethanol production and use. In such cases, it is even more critical that committees seek balance. Too often, they don’t. It’s easy to level a salacious accusation like corn ethanol is no better than gasoline in terms of greenhouse gas emissions. It’s far more difficult to have an informed discussion about the science of climate change. But there are several recent analyses demonstrating corn ethanol produced today reduces GHG emission by at least 34 percent on average compared to fossil fuels. These views need to be represented as well. Again, too often, they’re not. We in the biofuels industry need to be ever vigilant in pushing back against the myths and misinformation regarding ethanol that is being perpetuated by the media and policymakers. We have a positive story to tell and we need to use all of our various communications channels to make sure our voices are heard on the campaign trail and in the halls of Congress. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

DRIVE

Going Full Throttle By Richard Childress

Ethanol takes the spotlight in two high-octane events in late February in Florida. NASCAR’s season-opening Daytona 500 is Feb. 26 and the seventh annual Growth Energy Executive Leadership Conference is Feb. 20-23. As a former

driver, the team owner of Richard Childress Racing (RCR) and a believer in the importance of homegrown renewable fuels, I couldn’t be more thrilled to see these two events align. This year’s conference theme is Full Throttle and I believe that it’s as important to go full throttle in the real world as it is on the race track. At RCR, we are proud to partner with this American-grown, American-made industry for many reasons. Biofuels, like ethanol, keep money we would normally send abroad for oil in the U.S., creating jobs and economic activity here at home instead of overseas. We have a unique platform to share this message with race fans and to demonstrate that E15 is a reliable, high performance fuel that can withstand the toughest driving conditions. Nationwide, moving to E15 will create another 136,000 American jobs that can’t be outsourced, reduce our demand for foreign oil by 7 billion gallons and reduce greenhouse gas emissions relative to regular gasoline, all while saving consumers between 5 and 15 cents per gallon at the pump. From RCR’s perspective, we should be doing things that help drivers adopt biofuels and encourage companies to produce advanced and cellulosic biofuels. Of course, we didn’t become successful by not paying attention to the performance details of our race cars. In 2011, NASCAR switched to a 15 percent ethanol fuel blend, Sunoco Green E15. After several tests done by our engineers at ECR Engines, we have seen increased horsepower from the higher-octane ethanol fuel blend, decreased emissions and an overall cooler running engine. RCR and ECR Engines have even tested ethanol blends up to E30,

12 | Ethanol Producer Magazine | MARCH 2016

finding no issues. These are areas our team of talented engineers and mechanics are really excited about. The final formulation of Sunoco Green E15 was the result of extensive analysis by Sunoco scientists and the support of over 100 members of the technical areas of the NASCAR Research and Development Center, nearly all of the race teams, their engine shops and the extended NASCAR green team. After over a year and a half of work on the lab bench, the engine dynamometer and in thousands of miles of live on-track endurance testing of a range of fuel blend levels from substantially below to substantially greater than 15 percent ethanol, Sunoco Green E15 was selected. E15 provided the optimal synergy of high performance as reflected by roughly 10 additional horsepower on average over the prior fuel, and 100 percent reliability on the track. E15 is a great fuel for RCR and for the entire NASCAR community. Now in its sixth season of use, the fuel has been used in over 8 million miles of racing with zero reported engine problems or increased maintenance issues. As a lifelong fan of the sport, I am certain that the switch to a higher blend of ethanol has been a great move by NASCAR. The transition has been seamless; we’re proud of our connection to the ethanol industry and all of the good that it’s doing for our country. I hope the attendees of the Growth Energy Executive Leadership Conference enjoy the Daytona 500 and are inspired to go full throttle in 2016. With the right energy, strategy and momentum, I believe that the ethanol industry will finish in victory lane.

Author: Richard Childress Chairman and CEO, Richard Childress Racing 202-545-4000 info@growthenergy.org

GRASSROOTS VOICE

‘The Best Lobbyists Aren’t Really Lobbyists’ By Brian Jennings

Shortly after enactment of the renewable fuel standard (RFS) in Congress, the American Coalition for Ethanol began to organize annual grassroots flyins to help educate policymakers in Washington, D.C., about the importance of the renewable fuels industry.

This year will mark the eighth annual ACE fly-in to the nation’s capital. We label our fly-in the “Biofuels Beltway March,” and as the name would suggest, we normally hold the event during the month of March. But because the 2016 congressional calendar includes an unusually timed Easter recess, we are hosting the fly-in April 13-14. The goal of ACE’s fly-in is to help you tell your personal story to decision makers in DC and demonstrate the breadth and depth of grassroots support for renewable fuels policies. During our 2015 fly-in, 70 people from all walks of life, including ethanol producers, gas station owners, college and high school students, corn growers, bankers, accountants, electric coop employees, industry vendors and others shared their personal ethanol stories with more than 160 Members of Congress and top administration executives. The best advice these prior participants would offer to first timers is to wear comfortable shoes because we will put you through your paces. While our initial fly-ins focused on Capitol Hill, more recently the event has reflected the fact that all three branches of government impact our industry. To be sure, the flashpoint for ethanol in Washington has been with the executive branch and courts. Whether it is EPA oversight of the RFS, Reid vapor pressure limits, and CAFE-GHG rules, the Federal Trade Commission’s new rule modifying pump labels, or USDA’s support of the Biofuels Infrastructure Partnership grants to the states, you can be sure that our fly-in will include federal agencies and issues relevant to your business. To cover the judicial branch, we will provide an update on the status of our pending lawsuit against EPA regarding their misinterpretation of the RFS general waiver authority. Of course,

we will schedule meetings with Congress, as it is imperative to keep educating them about our priorities, especially in an election year. We also expect to bring retailers who are selling higher ethanol blends to join us once again and share how they have new customers and profits because they’re selling E15 and flex fuels. Whether you love or hate politics, have been to D.C. multiple times or never before, are an ACE member or not, I strongly encourage you to join us in the nation’s capital. You don’t need to be a professional lobbyist to take part in this event. In fact, I can tell you from personal experience that the best lobbyists aren’t really lobbyists at all. The most persuasive and effective spokespeople for our industry are real people, whose everyday life experiences and authenticity illustrates how the decisions made in Washington, D.C., impact their businesses and communities. If you’ve taken part in previous ACE fly-ins, please join us again in 2016 and encourage a colleague, board member, or employee to come along. If you haven’t participated, there is no more important time to help protect your ethanol investment and see first-hand how your membership support of ACE makes a strong and positive difference inside the Beltway. It’s vitally important for us to show policymakers that people from all walks of life care about the future of renewable fuels. There is no registration fee to attend, although participants are asked to cover their own travel expenses to and while in Washington. Our staff will schedule all meetings on your behalf, prepare you for those meetings, and provide background material you can leave in each congressional office. Our fly-in headquarters will be The Washington Court Hotel on Capitol Hill; this is where we will hold group briefings before Hill visits and host meetings with EPA, USDA, and others. For more information about the event, please contact Shannon Gustafson, ACE Director of Strategic Projects, at sgustafson@ethanol.org or 605-334-3381, ext. 16. If you need just a bit more encouragement, the cherry blossoms will likely be in full bloom April 13-14, during the event. I hope to see you in Washington then. Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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GLOBAL SCENE

Biofuels ‘Here and Now’ Solution By Jim Grey

World leaders recently gathered for the 2015 Paris Climate Conference (COP21), and, for the first time in over 20 years of United Nations negotiations, sought to achieve a legally binding and universal agreement on climate. COP21

presented an unparalleled opportunity to recognize biofuels as part of the renewable energy mix and as an internal tool in the fight against climate change. Biofuels, such as ethanol and biodiesel, reduce greenhouse gas (GHG) emissions by 40 to 90 percent compared to fossil fuels when incorporated into the transportation fuel pool. Thirty-six countries recognized biofuels at COP21 by including them in their Intended Nationally Determined Contributions plans. And although Canada and the United States are already major producers and consumers of biofuels, neither country specifically mentioned biofuels in their COP21 plans. The Global Renewable Fuels Alliance published a report during COP21 entitled “GHG Emission Reductions from World Biofuel Production and Use for 2015.” The report found that biofuels reduced global GHG emissions by an estimated 168.7 million metric tons in 2014. While substantial, there is room for growth. At the current growth rate, GRFA projects that the 168.7 million metric tons in 2014 will grow to 263.9 million metric tons in 2030. GHG emissions will be reduced by a further 19 million metric tons if the United States, Canada and Europe use E15 by 2030. E15 has been approved by the U.S. EPA for all post-2001 vehicles, meaning this is a solution that can be implemented without major consumer behavior changes and financial or time commitments. The GRFA report’s findings are supported by a national survey conducted by the Canadian Renewable Fuels Association in 2015 that showed more than three quarters (88 percent) of Canadians believe more renewable fuels should be produced in Canada and that government should do more to promote the industry.

16 | Ethanol Producer Magazine | MARCH 2016

The transportation sector accounts for 23 percent of Canada’s emissions, within which biofuels offer immediate environmental and economic benefits. On a life-cycle basis, biofuels blended into Canada’s fuel mix already reduce carbon emissions by 4.2 million metric tons every year, the equivalent of nearly 1 million cars from our roads. It makes sense that increasing the use of biofuels will yield greater environmental and economic benefits in Canada. The Paris Agreement, adopted by 195 countries at COP21, seeks to stop at nothing short of reshaping the global energy landscape. At the same time, recent decisions by Manitoba, Ontario and Quebec to standardize their cap-and-trade systems have set ambitious GHG reduction targets. For these plans to be successful, immediate solutions to cut carbon and reduce emissions are needed. Electrification is one solution, but its application may be limited and its infrastructure requires build-out. Biofuels are making meaningful impacts today. As an industry, we have been supporting governments reach their environmental targets for decades, and we look forward to continuing this work with all levels of government. After all, the ambitions for tackling climate change have never been higher, and neither has what is at stake. Author: Jim Grey Chairman Canadian Renewable Fuels Association 613-594-5528 greenfuels@greenfuels.org

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BUSINESS BRIEFS People, Partnerships & Deals

The South Dakota Corn Growers Association honored Poet as Most Valuable Player in Agriculture during its annual meeting in January. Poet played a lead role in changing the landscape of agriculture in South Dakota, which now uses 370 million bushels of corn to produce 1 billion gallons of ethanol annually. Poet has the capacity to produce 1.7 billion gallons of ethanol, 4.6 tons of distillers grains and 75 million pounds of corn oil annually at its facilities located in seven states. The Broin family began experimenting with making ethanol on its Minnesota farm in 1983. Within a few years, the company got its start at a small ethanol plant in Scotland, South Dakota. Today, the company is one of the largest ethanol producers in the world, with its headquarters located in Sioux Falls, South Dakota. Jeff Broin currently serves as CEO of Poet. Solenis LLC, through its Brazilian subsidiary Solenis do Brasil Químicas Ltda, has completed the acquisition of 100 percent of the shares of Quimatec Produtos Químicos Ltda, a Brazilian manufacturer of specialty chemicals for the sugar and ethanol processing industry; and Locatec de Araraquara Ltda-Me, the associated logistics provider. The acquisition of Quimatec is part of Solenis’ strategy to broaden its process chemical and industrial water treatment offerings in the ethanol market worldwide. Quimatec is located in Araraquara, state of São Paulo, Brazil, and has approximately 110 employees.

responsible for Alfa Laval’s services for the industrial process markets. Three Sorghum Checkoff board members were sworn in during a December meeting. Returning to the board as an at-large member is David Fremark of St. Lawrence, South Dakota. New to the board are Craig Poore of Alton, Kansas and Jim Massey IV of Robstown, Texas. Boyd Funk of Garden City, Kansas, will be sworn in during the next Sorghum Checkoff board meeting. The newly sworn in board members were appointed by the U.S. Agriculture Secretary Tom Vilsack in October and will serve three-year terms. Fremark will serve as chairman, Dan Krienke of Perryton, Texas, as vice chairman, Adam Baldwin of McPherson, Kansas, as secretary and Verity Ulibarri of McAlister, New Mexico, as treasurer.

Corn LP has joined Growth Energy. The facility is located next to its partner GoldEagle Cooperative in Goldfield, Iowa, and has a production capacity of 60 MMgy.

The Andersons Inc. has announced Chief Operating Officer Harold M. (Hal) Reed will step down from his current Ross Glendinning position on Feb. 1 and has been appointed senior oversee special company vice president of the serReed initiatives until his retirevices division of Alfa Laval ment in July. He held various positions withInc. He is charged with in the agriculture group before serving as the driving consistent profitpresident of the Grain & Ethanol Group beable growth, and developtween 2001 and 2012, and becoming COO ing new sales opportuni- Glendinning in January 2012. He is also a past chairman ties for the service business of Alfa Laval in the U.S. His responsibilities of the National Grain and Feed Association. include leading parts sales, reconditioning serDeinove has been granted six new patents vices, field services and technical support activities. Glendinning joined Alfa Laval in 1982 in the U.S. One, titled “Process for chromoas marine engineer for the company’s military somal engineering using a novel DNA repair products group. He worked in various areas of system,” Deinove’s founding patent, is already the organization, holding positions in regional registered in Europe and describes the mechaand national service, global business develop- nism behind the biodiversity and resistance of ment, as well as capital equipment marketing Deinococcus bacteria, a major discovery made and sales management. He was most recently by Miroslav Radman’s team and which led 18 | Ethanol Producer Magazine | MARCH 2016

BUSINESS BRIEFS¦

to the launch of Deinove. The second, titled “Methods for isolating bacteria,” protects a method for selecting and identifying bacteria that has enabled the company to build a strain library with over 6,000 bacterial strains, all resistant to UV radiation. The company was awarded four additional patents pertaining to Deinococcus bacteria that are associated with producing biofuels as part of the Deinol program. Deinove now holds a portfolio of 170 patents internationally. The United Sorghum Checkoff Program board of directors invested nearly $6.2 million, the largest investment made by the board since its establishment, to fund proposals targeted at furthering sorghum growers’ productivity and demand. The commitment, which was approved during the Dec. 9 board meeting, concludes the request for proposals that began July 2015. A total of 114 preproposals were received and 37 full proposals were requested. The board of directors awarded funding to 30 projects. The Biotechnology Industry Organization has changed its name to the Biotechnology Innovation Organization. The change aims to better reflect the progress and groundbreaking innovations its members achieve in healing, fueling and feeding the world. The organization, which is the largest biotechnology trade association in the world, will continue to use the shortened “BIO” name. BIO represents biotechnology companies, academic institutions, state biotechnology centers and related organizations across the U.S. and in more than 30 other countries. The organization was founded more than 22 years ago, uniting scientists, entrepreneurs, policymakers and the public to advance breakthrough cures and products in fields ranging from health, food and agricultural to industrial and environmental. Growth Energy and New Holland Agriculture announced Bill Howell as the 2015 Growth Energy Individual Member Sweepstakes winner. In December, Howell was presented with the Boomer 47, a 47 hp tractor customized with Growth Energy racing decals at Haley Equipment in Carroll, Iowa.

Nancy Ho, founder and president of Green Tech America Inc. and a research professor emerita in Purdue University’s School of Chemical Engineering, has received the National Ho Medal of Technology and Innovation from President Barack Obama. Ho has focused her research on using recombinant DNA techniques to improve industrial microorganisms, particularly for production of renewable biofuels and bioproducts by using renewable cellulosic resources as the feedstocks. Her most noted work has been the development of recombinant Saccharomyces yeast that can effectively produce cellulosic ethanol from all types of cellulosic plant materials such as corn stalks, wheat straws, wood and grasses. The original Saccharomyces yeast used for producing ethanol from corn and other edible feedstocks cannot ferment cellulosic sugars to produce transportation fuel such as ethanol. She founded Green Tech America Inc. in 2006 at the Purdue Research Park to produce and market the yeast and provide other services for cellulosic ethanol production. Archer Daniels Midland Co. has announced an agreement with Kinder Morgan Inc. and Bailey Feed Mill to construct a new unit train rail facility and ethanol off-loading system in Selma, North Carolina. KMI will invest in and construct the new facilities, which will be located at the Bailey Feed Mill and will have the ability to off-load up to 96 railcar-long unit trains in a 24-hour period. KMI will also build a 2.6 mile pipeline to connect the unit train off-load system to its vast tank farm in Selma, allowing ethanol to be distributed to blending terminals in Selma and the surrounding markets. The Sunoco Fulton Ethanol manufacturing facility in Volney, New York, has received a $700,000 Central New York Regional Economic Development Grant. The REDC grant will be used to help fund a new $9.1 million barley malting facility that will be integral to the growth of the state’s craft beer industry.

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

COMMODITIES

Prices & Market Analyses

Natural Gas Report

Record warmth impacts natural gas market Jan. 18—The data is in and according to the National Oceanic and Atmospheric Administration, December 2015 was the warmest December on record across the United States. Warm temperature had a drastic effect on natural gas consumption. Natural gas storage inventories are typically drawn down at an increased rate throughout December, but fell by 34 percent less than normal. The prompt-month NYMEX futures contract plunged to a 16-year low south of $1.70 per MMBtu midmonth, as traders reacted to reduced consumption amid a robust supply environment. On an inflation-adjusted basis, this amounted to a new all-time low for NYMEX natural gas. Weakness was not confined to just the front of the forward curve, as the 12-month continuous forward strip dipped below $2.20 per MMBtu for the first time since March 1999. Delivered physical gas in major markets dipped as well. Prices staged an impressive recovery in the second half of the month, as speculative traders entered buy orders to cover profitable short positions ahead of the new year. Still, as the dust settled in the first weeks of January, the impact of December weather on natural gas pricing was clear. Even after several intense cold snaps and a more seasonable overall temperature pattern, NYMEX prices for

by Andy Huenefeld

most of the remainder of 2016 sit at levels rarely seen in the midst of winter, well below $2.50 per MMBtu. Weekly drawdowns of natural gas inventories have picked up, but storage levels are still on pace to finish the winter withdrawal season at or above 2 trillion cubic feet, which would be the second highest reading on record going into the injection season.

Corn Report

Corn production numbers, demand slip Jan. 18—The anticipated USDA report released in January was friendly for the soy complex and that supported corn. However, overall world economics, growing global grain stocks and a precipitous decline in energy prices have limited upside movement in grains/oilseeds. The reported corn yield was reduced, which led to slightly lower production at 13.601 billion bushels. This was the smallest production figure since 10.780 billion bushels was produced in 2012’s drought. Despite production slipping, demand slipped too. Export demand continues to wane. U.S. product is more expensive on the global market as global currencies impact prices. Ultimately, corn carryout increased to 1.802 billion bushels, up from the previous estimate of 1.785 billion bushels and 1.731 billion bushels a year ago. World coarse grains and corn stocks have continued to increase the past few years. World corn stocks today are at levels higher than what they were in the late ’90s and the mid-’80s. World carryout has increased dramatically the past two years and is one of the major reasons corn prices have declined. The market will need a producComments in this column are market commentary and are not to be construed as market advice.

20 | Ethanol Producer Magazine | MARCH 2016

by Jason Sagebiel

tion issue this spring planting or this summer growing season to dramatically influence corn prices. One would need to see a steady depletion of stocks from production declines since demand has plateaued domestically and abroad.

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.399

DDGS Report

Chinese antidumping case now more than rumors Jan. 18—The big news is that the Chinese government proceeded with an antidumping case vs. U.S. ethanol producers. The only good news is that it is a now known fact, with a more definitive time line. The bad news is that it will definitely affect the market, in that demand from China will more than likely slow while exporters try to determine if, and when, temporary tariffs might be applied to shipments. No one wants to be holding the hot potato when tariffs are announced. Because the announcement had been expected, the price impact will not be as severe as in 2010 when a similar action was suddenly initiated, and which caught the market off guard. Lately, international end users had been holding off purchases in anticipation of the market dropping once the announcement came to fruition. So far, prices have held steady. Values to-

Region

Spot

Rack

West Coast

1.460

1.873

Midwest

1.320

1.550

East Coast

1.430

1.642 SOURCE: DTN

by Sean Broderick

day are closer to 100 percent the value of corn here in the U.S., keeping DDGS in domestic rations. The market had already dropped in anticipation of this announcement. There’s still good demand from Canada and Mexico. Traders are starting to see inclusion rates creep up a bit in the poultry rations in the southeast, which had been slower this year due to the weather. Feeders have not had much profit potential lately, so using competitively priced DDGS has been a good recipe for them. Chinese demand has been up to 60 percent of DDGS exports in the past and replacing that demand will be a daunting task. The timeline for the dumping investigation could be as long as 18 months, so this will create more opportunity for the domestic meat industry.

Regional Gasoline Prices ($/gallon)

Front Month Futures Price (RBOB) $1.261 Region

Spot

Rack

West Coast

1.114

1.327

Midwest

0.861

1.042

East Coast

1.016

1.235 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

Mar 2016

Feb 2015

Mar 2015

Minnesota

120

110

165

Chicago

140

200

Buffalo, N.Y.

140

130

200

Central Calif.

177

178

254

Central Fla.

152

153

232 SOURCE: CHS INC.

Corn Futures Prices

(March Futures, $/bushel) Date

close, bu.

close, ton

Jan 15, 2016

3.6325

129.73

Dec 15, 2015

3.7725

134.73

Jan 15, 2015

3.8

135.71 SOURCE: FCSTONE

Ethanol Report

Cash Sorghum ($/bushel) by Rick Kment

Crude oil futures fall below $30 per barrel, market pressured Jan. 18—Active pressure continued in most commodity markets with concerns coming from commercial and investment traders through early January. Global worries created widespread stock market pressure in the United States and several foreign markets. For the first time in more than 13 years, crude oil markets were trading below $30 per barrel for the first time in more than 13 years in midJanuary, when this article went to press. Concern about the recent price decline is based on lackluster world and domestic demand, as well as abundant supplies of crude oil.

Although ethanol prices continue to be the most stable of the energies, they remain at the lowest levels since 2005, which is when ethanol futures were newly formed and the industry was in its infancy. The only thing keeping ethanol prices at this level is that corn futures are able to hold near $3.60. If pressure grows in corn markets through the next couple months, additional pressure will develop in ethanol prices. Spring and summer driving will help bolster demand by late March, creating some stability in gasoline and, hopefully, ethanol markets.

Location

Dec 17, 2015

Nov 20, 2015

Nov 19, 2014

Superior, Neb.

4.62

3.19

3.08

Beatrice, Neb.

3.97

3.20

3.13

Sublette, Kan.

4.03

3.22

3.09

Salina, Kan.

4.52

3.34

3.26

Triangle, Texas

3.87

3.27

3.13

Gulf, Texas

5.44

4.32

4.21

SOURCE: SORGHUM SYNERGIES

Natural Gas Prices ($/MMBtu) LOCATION

Jan 17, 2016

Nov 30, 2015

Jan 17, 2015

2.10

2.24

3.233

NNG Ventura

2.46

2.05

3.22

Calif. Citygate

2.355

2.33

3.38

NYMEX

SOURCE: U.S. ENERGY SERVICES INC.

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

Month

End Stocks

Oct 2015

972

30,139

18,889

Sept 2015

951

28,543

18,904

924

28,644

17,341

Oct 2014

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

MARCH 2016 | Ethanol Producer Magazine | 21

DISTILLED

Ethanol News & Trends

Ethanol production (million gallons) Iowa production

U.S. production

2014

Year

3,900

14,339

2013

3,700

13,312

2012

3,700

13,218

2011

3,700

13,929

2010

3,500

13,298

SOURCE: IOWA RENEWABLE FUELS ASSOCIATION

Iowa sets new annual production record The Iowa Renewable Fuels Association recently announced that Iowa’s 43 ethanol plants produced more than 4 billion gallons during 2015, up from 3.9 billion gallons in 2014. The increase came from efficiency gains and debottlenecking at existing plants, as well as ethanol production from cellulosic feedstocks such as corn stover and corn kernel fiber. Iowa continues to be the No. 1 ethanol producing state, accounting for approximately 27 percent of national production in 2015. The state’s 43 ethanol plants have a combined nameplate capacity of 3.9 billion gallons, including 55 million gallons of cellulosic capacity.

“While Iowa took a modest step forward in production this year, we have the corn supplies to really expand ethanol production,” said Monte Shaw, executive director of the IRFA. “What we don’t have is access to the market for higher ethanol blends. The USDA blender pump grant program will help move the needle forward in 2016 and we hope the EPA will get the RFS back on track when they propose the RFS levels for 2017. If we can crack the petroleum monopoly on fuel choice, it will benefit consumers, farmers and the environment.”

CARB certifies sorghum, sugarcane pathways In early January, California Ethanol & Power LLC announced the California Air Resources Board had certified of the carbon intensity (CI) pathway for its anticipated sugarcane and sweet sorghum ethanol. CE&P’s sugarcane ethanol will have a CI of 54.47, and sweet sorghum ethanol will have a CI of 39.0, which will provide CE&P a blended average CI of approximately 49. CARB’s readopted model, which was expected to be implemented in January, was set to improve CE&P’s sugarcane ethanol to approximately 26.23, and it will revise the sweet sorghum to approximately 40.66, which will bring the blended CI to approximately 32. In its original 2009 LCFS regulation, CARB provided default indirect land use change (ILUC) impact values calculated using the Global Trade Analysis Product model, an agricultural economic model developed by Purdue University. Since that time, CARB has had working groups examining the issue of ILUC to ensure that the default numbers used are as accurate as possible. CARB readopted the LCFS in September 2015, and the updated version of the LCFS regulation was set to become effective in January of 2016, at which time ILUC default values will be applied to all LCFS pathways.

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DISTILLED

Proposed South Dakota ethanol plant moves forward Development work is progressing on the proposed 70 MMgy corn/milo Ringneck Energy ethanol plant in Onida, South Dakota. Walt Wendland, president and chairman, is confident the last details will be finalized in the first months of the year. Fagen Inc. has a project manager on site and dirt work began Nov. 2 to make use of the exceptionally late onset of winter in central South Dakota. “They’ve got the roads in around the plant site and the over excavation is done under the fermenters, process building and distillation units to remove the softer dirt and refill with engineered soil,” Wendland said. All but one permit is in place, and Wendland said he expected that one—the air permit—to be finalized within the first two months of 2016. The project was tying up loose ends with investors in late 2015, and was expecting to have that work finished by the end of January. “Most investors are from South Dakota by far,” Wendland reported, but the project did attract investors from Texas, Kansas, Iowa, Minnesota and Illinois. “Generally, from areas where they understand the ethanol investment,” he added. When completed, there will be between 150 to 200 investors putting up the $74.5 million in equity. The total cost for the project is estimated at just under $140 million.

SAFE.

The Andersons ethanol plants

Denison, Iowa (55 MMgy)

Albion, Michigan (55 MMgy) Greenville, Logansport, Ohio Indiana (110 MMgy) (110 MMgy)

The Andersons to double capacity at Albion plant The Andersons Inc. has announced plans to double production capacity at its Albion Ethanol LLC facility in Albion, Michigan. The facility, built by ICM Inc. in 2006, was engineered for future expansion. ICM is contracted to build the expansion, which is scheduled to be completed in April 2017. Approximately 10 new full-time production positions will be added when the new capacity becomes operational. “The supply and demand situation in Michigan relative to corn and ethanol is very favorable,” said The Andersons

CEO Pat Bowe. “Advancements in farm practices and technology continue to increase the size of Michigan’s corn crop and enhance its quality. This added production capacity enables more ethanol to be produced and used in the state.” “This dynamic combined with the highly efficient operations at the Albion facility, makes it a compelling investment for expansion,” he continued. Managed and operated by The Andersons, the facility is co-owned by Marathon Petroleum Corp.

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DISTILLED

2014 ethanol consumption (100,000 barrels) State

Commercial

Industrial

Transportation

Total

1,188

4,151

314,756

320,095

United States California

482

35,819

36,329

Texas

444

30,230

30,704

Florida

202

18,489

18,748

New York

213

12,925

13,157

Ohio

104

11,814

11,928

170

11,231

11,410

167

11,200

11,384

Pennsylvania Illinois Michigan

331

10,679

11,108

113

10,309

10,428

10,025

10,131

Georgia New Jersey

EIA publishes state-level consumption data In December, the U.S. Energy Information Administration published 2014 state-level estimates for fuel ethanol consumption. The data shows the U.S. consumed nearly 320.1 million barrels (13.44 billion gallons) of ethanol in 2014. California was the top ethanol-consuming state, with 35.82 million barrels consumed

in 2014. Texas consumed 30.7 million barrels, followed by Florida with 18.75 million barrels. New York, Ohio and Pennsylvania were also top ethanol consumers. The District of Columbia consumed the least ethanol in 2014, at 256,000 barrels, followed by Alaska and Wyoming.

Notice includes projected 2017 RFS rulemaking time line A notice published in the Federal Register in mid-December by the Regulatory Information Service Center includes a projected time line for the U.S. EPAâ&#x20AC;&#x2122;s rulemaking for the 2017 renewable fuel standard (RFS) volume obligations. Regarding RFS rulemaking, the notice indicates the administration intends to issue a notice of proposed rulemaking by June 2016, with a final issued by December 2016. In addition to setting 2017 renewable volume obligations (RVOs) for renewable fuel, advanced biofuels and cellulosic biofuels, the rulemaking is also expected to establish the 2018 RVO for biomass-based diesel. Information published by the EPA in its regulatory development and retrospective review tracker shows the agency initiated the rulemaking process for the 2017 RFS rule in August 2015.

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DISTILLED Pacific Ethanol’s Stockton plant begins cellulosic production Pacific Ethanol Inc. has begun producing cellulosic ethanol at its Stockton, California, facility using Edeniq Inc.’s pathway technology. The 60 MMgy facility is expected to produce up to 750,000 gallons of cellulosic ethanol per year. Edeniq’s pathway technology integrates its Cellunator high shear equipment with cellulase enzymes to convert corn kernel fiber to fermentable sugars. The technology includes a proprietary technical validation process that enables customers to quantify the amount of cellulosic ethanol produced within their plants and comply with the registration, recordkeeping, and reporting required by the U.S. EPA to generate cellulosic D3 renewable identification numbers (RINs) as defined by the renewable fuel standard (RFS). “We are working with Edeniq and the [EPA] to qualify these gallons for generating D3 cellulosic RINs, which carry a premium over conventional ethanol, and we expect to receive EPA approval in the first quarter of 2016,” said Neil Koehler, president and CEO of Pacific Ethanol.

Top 5 states for U.S. ethanol capacity in 2014 State

Annual capacity (million gallons)

Iowa

3,985

Nebraska

1,991

Illinois

1,434

Minnesota

1,129

Indiana

1,046

SOURCE: NATIONAL RENEWABLE ENERGY LABORATORY

NREL publishes ethanol 2014 Data Book The National Renewable Energy Laboratory recently released its 2014 Data Book, showcasing increased use of renewable energy. According to the report, U.S. ethanol production increased by nearly 7.6 percent in 2014, reaching 14.3 billion gallons. The increase was experienced despite sharp ethanol and gasoline price decreases. In comparison, only 1.622 billion gallons of ethanol was produced in 2000. The U.S. produced an estimated 58 percent of the world’s ethanol in 2014. Brazil produced 25 percent, while the European Union produced 6 percent, China

Some chemical companies focus on this

produced 3 percent and Canada produced 2 percent. On a global basis, ethanol production increased from 10.77 billion gallons in 2004 to 24.57 billion gallons in 2014. Of the 19,282 alternative fueling stations in the U.S. in 2014, NREL reports 15 percent supplied E85. Approximately 57 percent supplied electricity, while 15 supplied propane, 8 percent supplied compressed natural gas, 4 percent supplied B20, 0.6 percent supplied liquefied natural gas, and 0.3 percent supplied hydrogen.

or that

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tailoring chemistries to boost production and increase profitability — from evaporator efficiency to corn oil recovery to water treatment issues. To find out more or to schedule a system audit, contact your Buckman representative or email ethanol@buckman.com.

MARCH 2016 | Ethanol Producer Magazine | 25

Ironically, the latest breakthrough in the field of energy, is a field. While most innovation begins with the seed of an idea, the greatest advance in the making of ethanol starts with a seed. The first corn seed technology specifically developed to increase the efficiency of ethanol production, Enogen corn can reduce costs by up to 10% and helps generate more ethanol per bushel than any corn feedstock ever grown. Recently named AgriMarketing’s Product of the Year, Enogen is definitely making waves in the field of energy. ®

©2016 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 1ENG6003_17.5 x 10.875 01/16

POWER

28 | Ethanol Producer Magazine | MARCH 2016

POWER

Nothing

WASTED With a 2-MW Power Oxidizer built and being tested, and Pacific Ethanol waiting, Ener-Core’s CEO is determined to start changing the way industrial facilities handle low-value waste gases. By Tom Bryan

A century ago, J.D. Rockefeller amassed one of the greatest fortunes of all time— an equivalent of $340 billion today—by cornering the market on petroleum refining leftovers. Turn-of-the-century kerosene

producers were dumping gasoline and other undesirable oil derivatives anywhere they could—including rivers—because the products were ostensibly worthless. Rockefeller, despising wastefulness, rejected this and used gasoline to make thermal energy for his kerosene plants. Automobiles arrived and the rest is history. Alain Castro, CEO of Irvine, California-based Ener-Core, doesn’t claim to be the next Rockefeller. But he does believe his company’s technology could be a catalyst for transforming unwanted industrial waste gases into new fortunes. “What we

think of today as low-quality waste gases will only be considered that for a short time longer,” he says. “We have a technology that could cause industries to really shift.” By that, Castro means he believes Ener-Core’s patented Power Oxidizer, which turns low-value industrial waste gases into base-load, on-site power, is poised to change the way industries manage and utilize the gases most of them currently consider a liability. The oxidizers come in 250-kW and 333-kW sizes, and Ener-Core recently completed the primary construction of a highly anticipated 2-MW unit, which will be integrated with a DresserRand gas turbine. One of the first major adopters of the modified turbine will be a Pacific Ethanol plant in Stockton, California, which is waiting for the 2-MW unit to be fully tested. “They’re planning to install two of our systems,” Castro says. “And they’ve determined that once the systems are in-

POWER PACK: Ener-Core CEO Alain Castro (right) poses in front of a model of the Power Oxidizer with Mike Cormier, Dresser-Rand business development director, and Boris Maslov, Ener-Core chief technology officer. PHOTO: DAVID BRAUN

MARCH 2016 | Ethanol Producer Magazine | 29

POWER

GOING BIG: Ener-Core completed construction on its 2-MW Power Oxidizer in December. The unit was assembled at an industrial staging site managed by Combustion Associates Inc. in Corona, California. PHOTO: ENER-CORE

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reliability

stalled—and we expect that to happen this summer—they will drop their operational costs by $3 million to $5 million a year. That’s a huge cost advantage for an ethanol plant.” Rather than sell directly to Pacific Ethanol, Ener-Core will sell its oxidizers to Dresser-Rand, a Siemens-owned company that’s been working with Ener-Core for about two years. “We view this as a gamechanger that’s going to allow customers to do something they couldn’t do before—utilize their own low-energy fuels,” says Mike Cormier, business development director for Dresser-Rand. As planned, Pacific Ethanol will install two Dresser-Rand KG2-3GEF 2-MW gas turbine generators coupled with integrated Power Oxidizers. The deal was made official last spring when Ener-Core received nonbinding notification from Dresser-Rand stating its intent to issue a formal purchase order, valued at $2.1 million, pursuant to Ener-Core’s ability to complete a subscale acceptance test. “We wanted to simulate

performance

yield

How the Power Oxidizer Works: Most industrial energy is derived from combustion-based processes. Combustion works well with clean, high-Btu fuels like natural gas but it is ineffective for converting poor-quality industrial gases to energy. As a result, most industries flare off waste gases or destroy them with emissions mitigation technology. Ener-Coreâ&#x20AC;&#x2122;s gradual oxidation process is based on a chemical reaction in a controlled pressure vessel (i.e., the Power Oxidizer). Inside the vessel, a reaction occurs at pressure and temperature that destroys contaminants and releases energy in the form of heat. The heat is then used to power a turbine which spins a generator to create electricity. Ener-Core CEO Alain Castro says the companyâ&#x20AC;&#x2122;s technology replicates the natural process of oxidation, which is responsi-

ble for aging thingsâ&#x20AC;&#x201D;like the rusting of an old nail. EnerCoreâ&#x20AC;&#x2122;s Power Oxidizer does, in one second, what takes 10 to 20 years in nature. Using proprietary technology, the unit simulates the perfect atmospheric condition for instant oxidation to occur, releasing a lot of heat in the process. â&#x20AC;&#x153;There is no flame,â&#x20AC;? Castro says. â&#x20AC;&#x153;If you could look inside the Power Oxidizer, there would not be fire inside it. You would see a bright orange glow. We are oxidizing the gas quickly, but weâ&#x20AC;&#x2122;re not igniting it.â&#x20AC;? Ener-Coreâ&#x20AC;&#x2122;s technology interfaces with a turbine or boiler, taking the place of the combustion chamber. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re like Intel in your computer,â&#x20AC;? Castro says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;re inside. Weâ&#x20AC;&#x2122;re the reason the turbine or boiler can run on waste gases.â&#x20AC;?

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POWER how the full-scale unit would operate on a small-scale acceptance test,” says Doug Harmin, vice president of engineering for Ener-Core. “To do that, we used our multifuel test facility to simulate the conditions of the 2-MW gas turbine.” That test was successfully completed last summer and Dresser-Rand followed through with a purchase order. Now, a fullscale acceptance test of the large unit is all that remains before Pacific Ethanol adopts the technology.

“It’s a very good fit for pollution control—it is the best available control technology—and it helps reduce our operating costs,” says Pat McKenzie, director of corporate engineering at Pacific Ethanol. “When we’re finished with the installation of the power oxidizer at our Stockton facility, we’re going to take those results and look at how it fits into our operations in the remainder of our facilities in North America.”

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32 | Ethanol Producer Magazine | MARCH 2016

Castro says completing construction of the 2-MW unit represents a big milestone for Ener-Core. “It’s a big step towards final validation,” he says. “At some point, most utility-scale power technologies must prove that they can surpass the 1-MW-size threshold. We are on the cusp of making this historic step in the next few months.” Pacific Ethanol will reduce its operating costs and become an inordinately clean ethanol plant when it adopts oxidizer-integrated turbines. But Castro says the latter benefit is not the ethanol producer’s chief motivation for change. “They’re not doing this just to be clean,” he says. “This goes way beyond state and federal air emissions standards. They don’t have to go this far. They’re doing this because it gives them a cost advantage and because they’ll be better prepared for the next ethanol price drop.”

Baseload Power

Castro says Ener-Core is on the leading edge of a transformative distributed energy generation movement that’s hungry for clean, baseload power. “I believe distributed generation is not just a trend that’s here now and going to pass,” he says. “This is a big shift in the energy industry. We’re going away from the concept of massive centralized coal and nuclear power, and huge thermal energy plants, and moving toward small generation at the load.” With wind and solar energy at the forefront of the renewable and distributed energy transformation, Castro says there is a growing need for sources of energy that are not intermittent. “You need baseload energy,” he says. “You can’t just make this transition with wind and solar because consumers need power all the time. That’s why we need baseload power generation assets like gas turbines.” But Castro says companies that are installing their own gas turbines, often in the form of combined heat and power, are still exposed to fuel price volatility. “Natural gas prices have been cheap lately—we’ve all been spoiled—but I don’t think it can last much longer,” he says.

Regulatory Transcendence

In addition to energy price swings, Castro says industries are also susceptible to the

POWER volatility of environmental regulation. “We don’t know what the EPA is going to propose next month or next year, but we are pretty sure that it is not going to go easier on industries with waste gases,” he says. “It’s never going to get easier to emit waste gases into the atmosphere. It’s always going to get tougher. It’s only a question of how steep and how challenging the EPA’s rules will be.” At a recent technology showcase for the Power Oxidizer, former U.S. EPA administrator Stephen Johnson, an EnerCore’s advisory board member, said he expects no letup in U.S. industrial regulation in the future. “The policy and regulatory trend is not for relaxation on air quality,” he said. “It is definitely toward tougher air emissions standards.” There are countless types of manufacturing and industrial plants that emit, flare, mitigate or otherwise manage waste gases. Castro’s list of prospective Power Oxidizer buyers includes ethanol plants, distilleries, oil refineries and petrochemical plants, semiconductor manufacturing plants, animal rendering plants, coal mines, wastewater treatment plants and more. “We think we can make them all more efficient and more cost competitive,” he says. “They all have waste gases, spend lots of money on energy, and are exposed to increasingly strict air-emissions standards. All three of those problems can be taken care of with our technology.” According to the U.S. EPA, industrial and commercial emissions represent about one-third of all greenhouse gas emissions. If all of the industrial waste gases flared around the world were converted to energy, Castro says, 70 to 100 gigawatts of power would be generated—enough power for every home in the United States for a year. Castro thinks of industrial emissions as a symptom of inefficiency and misdirected environmental solutions. He says industries would gladly stop emitting waste gases if they had a financial incentive to do so. “We just need to give industries a reason to change for capitalistic reasons rather than by force-feeding them more rules and new costs,” he says. “Here’s something that can make them cleaner and more competitive at once. Everyone has been focused on the

problem, and that’s why there are hundreds of technologies on the market that focus on destroying waste gases. That’s like throwing aspirin at a disease. You might feel better, but you haven’t really tackled the problem. Let’s focus on the underlying root cause. Let’s focus on inefficiency.” Ultimately, the Power Oxidizer’s adoption in the industrial marketplace will depend on its ability to align economic and environmental goals for early adopters like Pacific Ethanol. “When you align capital-

ism with environmental solutions, it’s powerful,” Castro says. “I’d like to think companies would deploy this solution even in a world where there wasn’t environmental regulation,” he says. “They would do it because it’s a way for them to utilize a resource that will make them more profitable—just like Rockefeller did with gasoline.” Author: Tom Bryan Editor in Chief, Ethanol Producer Magazine 701-746-8385 tbryan@bbiinternational.com

MARCH 2016 | Ethanol Producer Magazine | 33

REGULATION

34 | Ethanol Producer Magazine | MARCH 2016

REGULATION

Meeting the California LOW CARBON CHALLENGE Eighty-nine ethanol producers west of the Mississippi River prepare for the revised LCFS. By Susanne Retka Schill

After a couple of years in limbo due to challenges to the Low Carbon Fuel Standard, the California carbon credit market is heating up again. In

mid-January, LCFS credits were worth $115 per ton, rising from the mid-$20 range a year earlier. A revised LCFS was readopted by the California Air Resources Board, putting the stateâ&#x20AC;&#x2122;s goal of reducing the carbon intensity (CI) of its fuels by 10 percent by 2020 back on track. In 2016, the required reduction is 2 percent from the 2010 baseline, double from the 2015 requirement and increasing steadily until 2020. Ethanol has contributed a big part of the CI reductions realized so far from the LCFS. A December 2014 CARB staff report laying out the upcoming changes to the LCFS said that cumulatively through mid-2014, 60 percent of the credits were generated from ethanol, followed by renewable diesel at 15 percent, biodiesel at 13 percent and natural gas at 10 percent. Intended to be a fuel-neutral, performance-based regulation, all fuels are given CI ratings, expressed as grams of CO2 equivalent per megajoule (gCO2e/MJ). The average CI requirement for gasoline in 2016 is 96.5, which will be lowered each year to reach 88.62 in 2020. Fuels used by

obligated parties with ratings above that CI rack up deficits, while those below earn credits. Unlike RINs values (the renewable identification numbers used to demonstrate compliance with the renewable fuel standards to the U.S. EPA), which are given away free by the ethanol producer, the LCFS credit values are getting back to the plants. At the very beginning, they were worth $10 to $15 per metric ton, the CARB staff report said, rising to between $50 and $85 before settling to as low as $27 when the 2013 LCFS compliance curves were temporarily frozen. CARB staff project that in 2020, assuming a corn ethanol CI of 67.24 and a CI credit of $100 per metric ton, the credits will bring 18 cents added value per gallon of ethanol. Cellulosic ethanol, with an assumed 2020 CI of 20, would earn credits worth 56 cents per gallon. In January, ethanol shippers into the California market were working to get paperwork filed with CARB to have their pathways accepted as the updated LCFS takes effect. Those who made the Jan. 31 deadline were guaranteed to have their pathways reviewed and likely approved before the old ones expire at the end of the year. There are 89 U.S. ethanol plants on CARBâ&#x20AC;&#x2122;s list of approved pathways. Almost MARCH 2016 | Ethanol Producer Magazine | 35

REGULATION half of the approved plants accepted the default CI value for ethanol found on a lookup table. Under Method 1’s lookup table, ethanol produced with a DDGS coproduct had a CI of 98.40 and, if produced with WDGS, a CI of 90.1. Or, producers could apply under Method 2 to have a CI score calculated by CARB using more site-specific data. Under the readopted LCFS, Methods 1 and 2 are replaced with Tier 1 and Tier 2. Tier 1 will encompass nearly all first-generation facilities with simplified modeling using the revised CaGREET 2.0. Second-generation facilities, new fuels and new feedstock pathways are to use the Tier 2 model, plus qualifying Tier 1 facilities can petition to become a Tier 2 fuel. “Tier 1 application and calculation is much simpler than Tier 2,” explains John Sens, LCFS manager for EcoEngineers. “Before, you could claim small variations, now you have to have a very efficient process to qualify for Tier 2.” One of the most visible effects of the change will be that most plants will get a single CI number, rather than multiple CI scores, Sens continues. “It will simplify the reporting

a lot. Before, CARB was saying producers had to have one pathway for DDGS and another for wet or modified and allocate their reporting, but that turned out to be difficult.” Under the new system, an aggregate number will reflect the historical coproduct mix, and producers will have to attest that actual production equals that or, if different, would result in a lower CI. Plants using multiple feedstocks will still have separate pathways. The default lookup CI rating will go away, and all plants will use the CaGREET model to calculate their CI. In revising the model, CARB revisited the controversial indirect land use change (ILUC) issue. While they did not remove ILUC from the analysis, they did revise the numbers. While the previous value for corn ethanol and sorghum ethanol was set at 30 g CO2e/MJ, CARB recalculated it using more recent analyses, and set corn ethanol’s at 19.8 and sorghum at 19.4. Thus, with no other changes, all producers will see about a 10 point drop in their CI rating. There will be a lot of variation, however. Sens explains that in the Tier 1 calculator, producers need to include more than ethanol

yield and energy consumption. “In Tier 1, you put in what region you’re in, your transportation values for sourcing feedstock and how far away you are from California.” If you look at the multiple pathways approved for a couple of plants in the original LCFS, one can estimate the impact of transportation. White Energy’s plant in Hereford, Texas, received a CI of 78.76 for its ethanol when using Texas sorghum and producing WDGS. CARB’s lookup value for sorghum was 85.81. Pacific Ethanol’s two plants in California, along with Calgren’s, are listed as “Corn ethanol-California,” with CIs of 80.7 associated with WDGS. Pacific Ethanol’s Idaho plant, listed as “Corn ethanol-Midwest,” has a CI of 90.1. Thus, West Coast plants do have an advantage on transportation, but only if they use locally produced feedstocks. This transportation factor is partly reflected in the fact that, right now, all of the plants with certified pathways are located west of the Mississippi River, although that is also a function of rail logistics. There are a handful of plants east of the Mississippi on the pending list—seven out of 31 pending ethanol plants.

REGULATION

CI Credit Value Calculator Year

Gasoline Compliance Curve

Fuel Pathway CI (gCO2e/MJ)

Volume Amount of CI Credits

Market Value of CI Credits ($)

Number of CI Credits Generated

Total $ Value of Credits

$/Gallon of fuel

2015

97.96

70.00

1,000,000

$100.00

8,388.0

$838,800.00

$0.8388

2016

96.5

70.00

1,000,000

$100.00

2,160.0

$216,001.50

$0.2160

2017

95.02

70.00

1,000,000

$100.00

2,039.4

$203,938.02

$0.2039

2018

93.55

70.00

1,000,000

$100.00

1,919.6

$191,956.05

$0.1920

2019

91.08

70.00

1,000,000

$100.00

1,718.2

$171,823.08

$0.1718

2020

88.62

70.00

1,000,000

$100.00

1,517.7

$151,771.62

$0.1518

CI Credit Value Calculator Year

Gasoline Compliance Curve

Fuel Pathway CI (gCO2e/MJ)

Volume Amount of CI Credits

Market Value of CI Credits ($)

Number of CI Credits Generated

Total $ Value of Credits

$/Gallon of fuel

2015

97.96

80.00

1,000,000

$100.00

1,463.9

$146,391.96

$0.1464

2016

96.5

80.00

1,000,000

$100.00

2,160.0

$134,491.50

$0.1345

2017

95.02

80.00

1,000,000

$100.00

2,039.4

$122,428.02

$0.1224

2018

93.55

80.00

1,000,000

$100.00

1,919.6

$110,446.05

$0.0903

2019

91.08

80.00

1,000,000

$100.00

1,718.2

$90,313.08

$0.0903

2020

88.62

80.00

1,000,000

$100.00

1,517.7

$70,261.62

$0.0703

VALUE PROPOSITION: The value of ethanol fuel pathways with a CI of 70 and 80 can be compared in these excerpts of a calculator developed by EcoEngineers. The decreasing gasoline compliance curve each year is intended to incent continued carbon reductions. SOURCE: ECOENGINEERS

REGULATION Low CI Scores Ethanol producers with carbon intensity scores under 83 gCO2e/MJ

Bonanza BioEnergy, KS

Pathway Description

73.39

WDGS sorghum

Arkalon Energy, KS

76.22

WDGS sorghum

Bonanza BioEnergy, KS

76.75

WDGS corn

KAAPA Ethanol, NE

78.56

WDGS

79.9

WDGS 1% milo

Hereford Renewable, TX Trenton Agri Products, NE

79.99

WDGS

Siouxland Ethanol, NE

77.88

MDGS 18% landfill gas (6 ratings for varying levels of landfill gas, all under 81.41, this is the lowest)

Arkalon Energy, NE

80.17

WDGS corn

80.7

WDGS corn ethanol - California

80.7

WDGS corn ethanol - California

Pacific Ethanol Madera, CA, Stockton, CA Aemetis, CA Siouxland Energy, NE

80.78

WDGS

Green Plains Central City, NE

82.17

partially dry DDGS, plant energy not to exceed confidential value

Golden Grain, IA

82.23

MDGS

Little Sioux Corn Processors, IA

82.36

MDGS

Siouxland Ethanol, NE

82.38

DDGS 16% landfill gas

White Energy Russell, KS

56.56

35% wheat slurry, sorghum, corn, WDGS

White Energy Hereford, TX

78.76

WDGS Texas sorghum

White Energy Plainview, TX

77.83

WDGS Midwest sorghum (White Energy plants have multiple pathways with CIs under 83, the lowest are shown here)

Poet Chancellor, SD

63.88

DDGS, 19% landfill gas, 15% biomass, fuel use and grid electricity not to exceed confidential value

Poet Chancellor, SD

67.5

Midwest sorghum, DDGS, 19% landfill gas, 15% biomass, fuel use and grid electricity not to exceed confidential value

Poet Coon Rapids, IA

80.26

WDGS, corn fractionation, fuel use and grid electricity not to exceed confidential value

Poet Ashton, IA

80.01

WDGS, raw starch hydrolysis, CHP, fuel and grid electricity not to exceed confidential value

Poet Emmetsburg, IA, Gowrie,

81.41

WDGS, raw starch hydrolysis, fuel and grid electricity not to exceed confidential value (Some of these Poet plants have additional CIs under 83, the lowest are shown here.)

IA, Jewell, IA, Lake Crystal, MN SOURCE: CARB APPROVED PHYSICAL PATHWAYS, 10/31/15

Looking at the published pathways provides other insights on how the ethanol industry is reducing its carbon footprint. In all, 26 plants have CI ratings in the low 80s or below. While it is difficult to know exactly what is contributing to that, higher proportions of wet and modified distillers grains production that result in lower energy costs is one obvious cause. Good ethanol yields and lower transport distances contribute as well. The biggest factor for most of the low-CI scoring plants is the proportion of wet distillers grains sold locally. Richard Hanson, plant manager at Arkalon Energy in Liberal, Kansas, attributes their low score to the plant’s local market for WDGS, although it also has a let-down turbine that lowers its use of grid electricity. Arklon’s CI for ethanol with WDGS coproduct using sorghum was 76.22 and for corn 80.17. 38 | Ethanol Producer Magazine | MARCH 2016

Energy efficient technologies are noted for several plants. Arkalon’s sister plant, Bonanza BioEnergy in Garden City, Kansas, is noted for its cogeneration on the CARB approved pathway list, receiving a rating of 76.75 for its corn ethanol produced with WDGS. Poet Biorefining Chancellor, South Dakota, has several CI scores for varying combinations of landfill gas and biomass fuel, one of the lowest being 67.50 for a sorghum-corn blend using 19 percent landfill gas and 15 percent biomass. Poet Chancellor isn’t the only one using landfill gas. Siouxland Ethanol in Jackson, Nebraska, has multiple pathways for varying amounts of landfill gas, the lowest being 82.38 for using 16 percent landfill gas along with natural gas while producing 100 percent DDGS. Archer Daniels Midland has received multiple CI ratings for its Columbus, Nebraska, dry

mill, showing various proportions of coal and biomass. No grid electricity is used and a note specifying that total plant energy use must stay within a certain, confidential, value indicates a lower-than-normal energy efficiency. The Columbus dry mill’s lowest rating, with 15 percent biomass blended with coal, is 83.96. Coal alone for process energy resulted in a CI of 120 for another ethanol producer. Several Poet innovations are earning low CI scores. Corn fractionation is mentioned for its Coon Rapids, Iowa, plant, which received a CI of 80.26 for fuel produced with WDGS. The combination of raw starch hydrolysis and efficient energy consumption earns a number of Poet plants a CI rating between 7 and 9 points lower than the default. Poet has LCFS pathways for 15 of the 29 plants it manages— all west of the Mississippi. Converting waste streams to ethanol results in big CI reductions. Parallel Products in California uses waste beverages to produce ethanol, earning a CI of 71.4. White Energy’s Russell, Kansas, plant is colocated with a wheat gluten facility, with the wheat slurry being turned into ethanol. The Russell plant has multiple CI ratings for varying amounts of wheat slurry combined with sorghum and corn as feedstock, with CI scores ranging from 56.65 up to 77.66. The value of achieving lower CI ratings is clear. Sens and his colleagues at EcoEngineers have developed a spreadsheet that can be used to calculate the return to a plant at varying monetary values for the California LCFS credits and different CI ratings. The two examples (shown on page 36) illustrate the difference between CIs of 80 and 70, if the market value of the credit is $100. “It’s a pretty significant drop,” Sens says. In the 2016 comparison an 80 CI earns carbon credits worth 13.5 cents per gallon while a CI of 70 earns 21.6 cents per gallon. When multiplied across a unit train of ethanol heading to California, the incentive to keep improving that CI score is clear. And, with the value of those credits continuing to increase, more ethanol producers are likely to explore whether going California green makes sense for them. Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922

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ELECTRICITY

POWERING UP BY

LETTING DOWN Installing a turbine where steam pressures are being dropped generates power and reduces carbon intensity. By Susanne Retka Schill

Arkalon Energy has been generating nearly one-third of the electrical needs for the 110 MMgy plant since start-up eight years ago. “When they were plan-

ning the facility, ICM offered the option,” explains plant manager Richard Hanson. A let-down turbine was installed in the steam line between the boilers and the evaporators. “We’re using the steam twice,” he says. “Once to turn power and then to do its job in evaporation.” The technology is not new, says John Graham, proposal development engineer with the Dresser-Rand business, part of Siemens Power and Gas. The turbines are widely used in refineries and combinedheat-and-power projects, and have been used in the ethanol industry since the early 2000s. “I think we’ve installed about 50 steam turbine generator sets in various corn-to-ethanol plants in the U.S. and a few in other countries.” He adds, the interest was higher for a while and dropped off, most likely because all those who benefited most had already installed turbines, but it once again is building. After a few years of few inquiries, interest is building again. “From my experience the plant has to produce at least 50 MMgy to have a large enough volume to make a steam turbine practical,” he says. Most plants he’s worked with produce steam at 150 pounds per square inch, the 42 | Ethanol Producer Magazine | MARCH 2016

highest pressure needed in the process, while the lowest pressure required is nearatmospheric for the evaporators. Rather than releasing pressure through a valve, those plants can install a turbine, called either a let-down or back-pressure turbine. A 50 MMgy plant generally has enough steam for a 1 MW turbine that can generate up to 30 percent of its electrical power. Graham adds that it isn’t exactly free, however. “All of the energy that the steam turbine takes out has to be made up with additional fuel burn in the boiler in order to have the energy available in the exhaust steam needed for the evaporator. It isn’t free power, but generally it’s very inexpensive.” The steam turbine takes 10 to 20 percent of the heat energy out of the steam, he explains. One ethanol producer took the idea one step further, Graham adds. “They generate steam at higher pressure than they need in the process and use a topping steam turbine to drop all of their steam down to the higher process pressure needed. Then, they use a separate stream turbine to drop the steam to the lower process pressure required by the evaporator.” As plants expand, Dan Sonnek, principal with IntegroEnergy Group Inc., recommends they consider installing an oversized boiler. “Right now they’re running 150-pound boilers,” he explains. “We may spec out a 400-pound or 600-pound boiler so we have additional steam pressure that we can spin a turbine with and make more electricity down the road.” The boiler is run at a lower pressure until the time when elec-

TAPPING LOW-COST STEAM: A 1 MW Dresser-Rand backpressure turbine is ready for shipment. It generates power when placed in steam lines where a pressure-reducing valve is used. The power can be used to drive a generator, pump, compressor or other machine. PHOTO: DRESSER-RAND

tric costs cross a line at which it will pay to add the turbine. How quickly a turbine gives a return on the investment (ROI) depends largely upon a plant’s cost of electricity. A 1 MW turbine costs about $1 million itself and the entire project, with auxiliary equipment and installation can range from a total of $1.5 million up to $3 million on the high end, Sonnek says. “If they’re still running on a 5-cent per kWh electric contract, it will take a long time to pay it back: It’s not making the electric bill go away, it’s just reducing it some. If you’re just dropping it 15 percent, it may not justify it. You may be able to spend that money else-

where and make more ethanol.” Typically, plants aren’t interested unless the ROI is 2.5 years or less, he adds, the exception being plants that are trying to reduce their carbon intensity score to ship ethanol into the California market. The number of facilities approaching that ROI is increasing as many plants are seeing their electric costs go up each year. There is a difference between plants served by investor-owned utilities (IOUs) and those getting electricity from rural electric cooperatives (RECs), Sonnek continues. Many ethanol projects were welcomed by the RECs because the plants added to their

base load, and evened out demand. Because RECs generally do not generate their own power, they often view a plant’s interest in installing a turbine as a negative. Many IOUs have a different perspective, Sonnek says. “The IOUs have more incentives for this type of thing. They’re more open to it because they generate themselves. At a soybean facility, we actually got money back from the investor-owned utility as incentive to install the turbine, to reduce their electric load. They like having the distributed generation throughout their system.” Among the services his engineering firm offers to plants is to work with the util-

ity. “We never advocate making the utility go away, because if something happens to our system, we still need the electricity. We don’t want to shut down. We want to be able to work with the utility.”

Installation, Maintenance

Installing a back-pressure turbine requires proper planning. “It’s not just taking a valve and replacing it with a turbine,” Sonnek says. Integration with the plant and the interconnect with the utility are key to maximizing the electrical output. There are added piping, controls, safeties and switch gear, plus the system has to be designed to handle MARCH 2016 | Ethanol Producer Magazine | 43

ELECTRICITY

TWICE-BAKED STEAM: The let-down turbine at Arkalon Energy, pictured in back, was installed when the plant was built. It started up in December 2007. PHOTO: ARKALON

turbine condensate. It’s also important the turbine controls and the front end are set up correctly, he adds. “If the plant backs off its run rate, the turbine can become very, very inefficient, almost insignificant. We’ve addressed some issues with that, and there are ways to make them efficient on the lower end.” Maintenance on the turbines is much like anything else in the plant, says Hanson

44 | Ethanol Producer Magazine | MARCH 2016

about Arkalon’s system. “It’s there turning seven days a week, 24 hours a day, so there’s things we check such as vibration analysis of bearings. There’s some yearly maintenance. We did a three-year tear down of the turbine and rebuilt whatever needed to be and we just completed our five-year turbine and generator rebuild. So, there is some expense, but it’s no different than anything else in the plant.”

Sonnek adds that back-pressure turbines are a good way for plants to get into generation. “It’s a fairly simple operation and fairly simple install and they can get used to having a generator on-site,” he says. He got his start working in the wet milling industry, where full-scale cogeneration systems are the norm. Ethanol plants, with their 24-7 power loads, are considered prime candidates for cogeneration through combined-heat-and-power installations. A back-pressure turbine is a good first step, Sonnek says. “They’re all going to be capable of it. You can see the maturity in the ethanol industry with operations, with management. They’re getting better control, better analysis of their system at all times, and that’s what you need when you get into generation.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922

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MARCH 2016 | Ethanol Producer Magazine | 45

OCTANE

E25, E40 For the Masses Widely introducing consumers to 'super premium' ethanol blends could offer substantial benefits, but the barriers to making it happen are significant as well. By Holly Jessen

Which needs to come first, a new high-octane midlevel ethanol blend or new vehicles optimized to more efficiently take advantage of the higher octane content?

“It is that classic chicken and egg thing,” says Timothy Theiss, bioenergy technologies program manager at Oak Ridge National Laboratory. “The analysts say it's the simultaneous introduction of a new fuel and a new vehicle, which is very difficult.” Brian West, deputy director of the Fuels, Engines and Emissions Research Center at ORNL, offered a slight tweak to that perspective. “All we are talking about doing, and I don't mean to make it sound easy, is just changing that ratio a little bit,” he says, adding that the nation already has a gasoline and ethanol infrastructure. “It would certainly seem to me to be a much simpler thing than putting in a whole new infrastructure of, say, hydrogen.”

ETHANOL BOOST: Scott Sluder evaluates a range of compression ratios and fuels with a range of octane numbers in this Ford EcoBoost engine at ONRL. With technical support from Ford, Scott and his colleagues are working to understand the role of ethanol and other high-octane blendstocks on engine and vehicle efficiency in multiple related projects. Research efforts are sponsored by the DOE Optima Program, the Coordinating Research Council and the Illinois Corn Marketing Board. PHOTO: ORNL

46 | Ethanol Producer Magazine | MARCH 2016

MARCH 2016 | Ethanol Producer Magazine | 47

CUSTOM CAR: A 2013 Cadillac ATS with a 2.0 Turbo gasoline direct injection engine was used in multiple midlevel ethanol blend studies at ONRL and will be used in future studies. The Cadillac engine was modified with an instrumented cylinder head, to support combustion analysis, and fabricated high-compression pistons. The work was supported by the DOE Vehicle Technologies Office with engine and technical support from General Motors and the Coordinating Research Council. PHOTO: ORNL

West believes a new E25 or E40 blend, perhaps marketed as a “renewable super premium,” could be sold in a way that is a win for consumers, retailers and everybody involved. In fact, vehicles optimized for the new fuel could be manufactured today. “I often say, there's not a good technical reason we couldn't see this in the marketplace in five or 10 years,” West adds. “That doesn't mean I think it will happen in that time frame. There's just too many parties that need to be in agreement.” Thiess and West are two of many researchers at ORNL, Argonne National Laboratory and the National Renewable Energy Laboratory who have been engaged in a study since 2013. The goal of the U.S. DOE-sponsored scoping study was to assess the potential of an E25 to E40 midlevel blend. In mid-January researchers were wrapping things up, preparing to provide a short, high-level summary to the DOE. The last of the data will be released in publications 48 | Ethanol Producer Magazine | MARCH 2016

‘There's not a good technical reason we couldn't see this in the marketplace in five or 10 years.’ within the next year, West says. Up next is the Optima initiative, which will focus on developing new, co-optimized fuels and engines to maximize performance and carbon efficiency. While the high-octane fuel study focused specifically on ethanol, Optima will look at fuels like ethanol as well as other high-octane fuels, Thiess says.

Significant Findings

The high-octane fuel study found that E25 and E40—when used to fuel a vehicle optimized for the blend—could achieve volumetric fuel-economy parity with E10.

In other words, each additional gallon of ethanol added would displace a full gallon of gasoline and fuel economy would be the same as one of today's vehicles using E10. Vehicle efficiency would also increase, at 5 percent for E25 and 10 percent for E40. Of course, fuel economy varies according to multiple factors, such as how fast the vehicle is driven and engine design. “Not everybody is going to see all of this across the board every time,” Theiss says. “Your mileage may vary.” An ANL report concluded that, compared to E10, when 40 percent corn ethanol was used for blending, total greenhouse gas emissions were reduced by 18 percent. If corn stover were the feedstock, E40 achieved a 32 percent GHG emission reduction. NREL was involved in the high-octane fuel study in several capacities, says Robert McCormick, principal engineer and platform lead in fuels performance R&D. For

OCTANE

example, a market analysis concluded that high-octane vehicles could make up 43 to 79 percent of light-duty vehicle stock by 2035. Another thing NREL completed was an infrastructure assessment. â&#x20AC;&#x153;There are no technical issues in deploying equipment for higher ethanol blends, only cost considerations and station knowledge of their equipment,â&#x20AC;? he says. That's what's exciting to Thiess about the high-octane fuel study. â&#x20AC;&#x153;In this, we're finding we have a lot of ands,â&#x20AC;? he says. â&#x20AC;&#x153;We can get better fuel economy. And. When ethanol is traditionally priced a little less than gasoline, we can get a fuel that is a little bit less because we are using less petroleum and more ethanol. And. We're showing that we'd get pretty nice greenhouse gas emission reductions. And. We're showing that the vehicle manufacturers would be favorably inclined to build those vehicles. And. We're showing that the biofuel infrastructure could pretty much be adapted to handle it. And. We're showing that there's a lot of feedstock out there that could be used to make it. So, there's a lot of ands, and not the major ors, where we have to make very big trade-off decisions right up front. Now, that's not to say that it's not a difficult thing. It is very difficult to introduce any new fuel. And this would be no exception. But there are a lot of benefits that stack on top of each other.â&#x20AC;?

Making It Happen

In order to make high-octane fuels and vehicles a reality, quite a few players, including the U.S. EPA and the auto industry, have to get on board. â&#x20AC;&#x153;For manufacturers to build cars that are dedicated for this fuel, I think a number of things have to happen,â&#x20AC;? West says. â&#x20AC;&#x153;It has to be widely available. They have to believe the consumer is going to buy it all the time, or they aren't going to get the fuel economy benefit that they are getting in the certification test. In order for the consumer to buy it all the time, it has to be on a cost-parity basis with E10.â&#x20AC;?

But that doesn't mean that the fuel can't be sold until that happens. In fact, E30 is already being sold at some blender pumps across the nation and work to increase the infrastructure for higher ethanol blends is ongoing. And, most flex-fuel vehicles on the road today can already use midlevel ethanol blends and actually see a performance benefit doing so. Thiess sees the FFV fleet as a

bridge across the chicken and egg dilemma in establishing a new midlevel ethanol blend and new vehicles optimized for that fuel. Author: Holly Jessen Managing Editor, Ethanol Producer Magazine hjessen@bbiinternational.com 701-738-4946

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MARCH 2016 | Ethanol Producer Magazine | 49

STEAM

STEAM BOOST: Installing baffles redirects flue gas to a more efficient pathway, increasing steam capacity. SOURCE: VICTORY ENERGY

Energy Center Enhancements Deliver More Steam Six approaches provide range of solutions to squeeze out more power for production. By Darrell Pedersen

Many ethanol producers are facing considerably complex decisions regarding the age-old quandaryâ&#x20AC;&#x201D;how to increase production. The need to increase production universally affects each and every plant, be it new, large, small and particularly those that are aging and find themselves in a competitive battle. The challenges are as diverse as the ethanol industry itself. Large plants want to seize

on expanding markets. Smaller plants need to enhance their production efficiencies to compete against the larger competitors that have economies of scale. Aging plants find themselves struggling with major potential capital expenditure decisions to remain competitive. All want to be sure that theyâ&#x20AC;&#x2122;re in position to withstand the inevitable down times and low-profit margin periods that the ethanol industry faces by having an efficient and optimized plant thatâ&#x20AC;&#x2122;s running at peak. The common link is production efficiency. It is critically important for plant

operators to stay current on all maintenance requirements, while at the same time removing the bottleneck and modernizing to allow plants to remain competitive in periods where margins are diminished. The dilemma of how to squeeze more production has been faced at every ethanol plant from the day they were built. There are a multitude of product solutions that have been implemented to help address the fundamental issue of increased production. With the majority of ethanol plants running wellabove their original nameplate design, there

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

50 | Ethanol Producer Magazine | MARCH 2016

STEAM

is one consistent element that they’re running short of—steam. The ability to generate more steam is an integral component in the long term strategy to increase production. There are several tangible and proven approaches to achieving more steam from the boilers in a plant’s operation. Implemented either separately or in tandem, they are sure to have a significant impact on production. Each comes with capital investment, both large and small, and with short- and long-term implications from a budgeting standpoint. What may be right for one plant may not be the answer for another. It depends upon the number of years the plant has been in operation, the production metrics requirement and the available budget dollars. There are six approaches to delivering on the requirement to realize more steam: 1. Add boiler capacity: The most rapid way to gain more steam for production is through either replacing existing boilers or adding new ones. This is especially true in aging plants operating original boilers. This involves planning for a capital expenditure and allowing for the potential downtime for installation. With Victory Energy’s boilers serving the majority of the ethanol plants across North America, this experience and industry understanding minimizes downtime. 2. Conduct proper maintenance: There is an industry adage that you either “schedule your downtime or it will schedule you.” It is proven that boilers run far more efficiently when operators follow the recommended annual boiler manufacturer maintenance recommendations, as well as the daily, weekly, monthly and semimonthly routine maintenance. Victory Energy’s end-market team is aligned to help ethanol plants stay ahead of unplanned shutdowns through comprehensive preventative maintenance programs. 3. Maintain proper boiler water chemistries: Overlooking this element in proper boiler maintenance is the largest single direct cause of boiler outages. When boiler feedwater and boiler water fail to receive proper preparation and treatment, the results are scale and sludge deposits that cause corrosion and pitting of boiler surfaces—all of which is preventable. Always seek a qual-

TYPICAL MAINTENANCE SCHEDULE SOURCE: VICTORY ENERGY

ity water treatment company or a qualified boiler feedwater consultant to monitor your boiler’s water chemistries. It is preventative maintenance that pays for itself. 4. Install economizers: Defined as a “device that utilizes the waste heat from a boiler flue to preheat the feedwater,” economizers are not limited to feedwater and can be airto-air or air-to-liquid. It is generally accepted in industry that boiler efficiency is increased by 1 percent for every 40 degrees Fahrenheit reduction in flue gas temperature. In addition to a faster response to load changes, using economizers greatly reduces the emissions and carbon footprint of a plant, reducing fuel and power costs. The payback is rapidly realized. In the United States, every year, over 5 to 13 quadrillion Btu are lost as waste heat, representing anywhere from 20 to 50 percent of industrial energy. 5. Install baffle assemblies: The installation of baffle assemblies in waste heat boilers down-stream of thermal oxidizers (TO) delivers a multitude of benefits across the plant. The baffle assemblies redirect flue gas into a designated flue gas path. The overriding benefit of baffle assemblies is the ability to increase steam capacity, a critical component for achieving better production metrics. It is a cost-effective retrofit solution with minimal downtime that pays immediate dividends with increases in plant production. 6. Install steam separators: As an increasing number of ethanol plants are be-

ing operated above nameplate, a common issue facing operators is carryover, generally comprised of entrained liquids, though it can include solid or vapor contaminants. This can lead to steam control valves sticking, corrosion and erosion, formation of mineral deposits and contamination of the process steam. Dealing with the effects of carryover is potentially costly in downtime, maintenance and repair man-hours associated with on-the-fly fixes. One proven way to overcome carryover issues is through steam separators that remove liquids and improve steam quality. Many plants that have installed steam separators have virtually eliminated false low water indications and TO trips. All of these approaches are time-tested methods to enhance and increase production by adding more steam or assuring the steam being produced is at an optimum state. They’ve been proven in multiple boiler applications in ethanol plants throughout North America. Victory Energy can assist in helping implement a boiler strategy that is right for what you’re trying to accomplish through productivity increases. Author: Darrell Pedersen Regional Account Manager, End-Market Sales, Victory Energy depedersen@victoryenergy.com 918-231-9258

MARCH 2016 | Ethanol Producer Magazine | 51

BUTANOL

SOARING FUEL: Considering potential conversion volumes and the interest in renewable content in aviation fuels, there could be adequate volumes for blending. SOURCE: KAPIL LOKARE

Promising Jet Fuel Market Looms For Upgraded Bioethanol, Butanol Developers make progress towards renewable aviation fuels. By Kapil Lokare

Upgrading bioethanol and, subsequently, butanol is a challenging science. Practitioners have to

contend with numerous important considerations such as process safety, waste streams and chemical toxicity, recycling of solvents and catalysts, process economics, low oil prices, and a multitude of engineering and technology considerations. Nevertheless, despite the challenges, the ideal outcome of these efforts

when accomplished is quite satisfying: a simple, efficient, green, robust and safe manufacturing process. Butanol, with a global market of about 350 million gallons per year, is an important industrial chemical. It is currently produced by the Oxo or Aldol processes. The Oxo process starts from propylene combined with hydrogen and carbon monoxide (usually in the form of synthesis gas) over an expensive rhodium catalyst. The Aldol process starts from ac-

etaldehyde. These approaches using petroleum-derived components like propylene and synthesis gas are inherently â&#x20AC;&#x153;not green.â&#x20AC;? The Oxo process was developed and licensed to the industry beginning in 1971 in a collaboration among Johnson Matthey & Co. Ltd., The Power-Gas Corporation Ltd. (formerly Davy Process Technology Ltd., now a subsidiary of Johnson Matthey PLC) and Union Carbide Corp. (now a subsidiary of The Dow Chemical Co.).

52 | Ethanol Producer Magazine | MARCH 2016

BUTANOL

A second, greener pathway is the ABE fermentation process (acetone, butanol, ethanol) that was pioneered by Chaim Weizmann during World War I. The petroleum-derived approach, however, proved to be economically advantageous and most of the facilities using fermentation processes closed, with a few exceptions, after World War II when the rapid development of the petrochemical industry took place. Today, as interest grows in transitioning from nonrenewable carbon to renewable resources, researchers and startups around the globe have made staggering progress toward the production of butanol from renewable resources. The ABE process is making a comeback to match mandates around the world. Since early 2000, the number of startups has been growing steadily and those pursuing various aspects of butanol production are flourishing more than everâ&#x20AC;&#x201D;from capturing carbon dioxide or developing new microbial strains for efficient conversions to butanol, along with feedstock analysis and downstream processing. Butanol has successfully made the transition from a commodity chemical to a fuel additive, especially when compared to a more hygroscopic and less energy-dense ethanol. Butanol is versatile for many reasons. It can be used as a fuel additive or chemically transformed into to high-value, high-volume precursors such as butanal (global production around 6.6 million tons per year), glycol ethers, butyl acrylates or solvents. Butanol by itself can be used as a solvent or converted to the more widely used, workhorse plasticizer, 2-ethyl hexanol (global production around 2.5 million tons per year.)

Jet Fuel Potential

Another large-scale market attracts developers in alcohol-to-jet fuel blends. For example, a Boeing 747 consumes approximately 1 gallon of fuel per second. Over the course of a 10-hour flight, it burns about 36,000 gallons, or approximately 5 gallons per mile. Multitude volume of the fuel will be required to meet the blending requirements in the aviation department. Here we argue that: since the ethanol industry is relatively mature and represents a major chunk of biomass-derived biofuel, the

annual volumes of ethanol production becomes the ideal proxy for potential volumes of alternative jet fuel. The consumption of Jet A-1 fuel used by commercial operators was 72.2 billion gallons in 2013, according to the Air Transport Action Group. The global production of ethanol in 2014 was 24.57 billion gallons. In considering the de novo design of systems that upgrade existing biofuels (such as ethanol to n-butanol or to Jet Fuel A-1), it is imperative to design working systems that are relatively inexpensive to keep investments, and final fuel cost, low. A simple back of the envelope calculation would suggest the following: With 100 percent conversion of ethanol to n-butanol the mass yield would be 80 percent. Similarly, for 100 percent conversion of ethanol to C16 hydrocarbon (carbon atoms per molecule; Jet Fuel A-1 contains C8 to C16) the mass yield would be 61 percent. If you started from butanol converted to Jet Fuel A-1, the mass yield would be 75 percent. Thus, theoretically, if all global ethanol produced in 2014 were converted, one would obtain 15 billion gallons of Jet Fuel A-1. That would amount to 21 percent of the 2013 Jet A-1 fuel consumption of 72.2 billion gallons.

Fermentation Prospects

Where does the ABE fermentation stand? The best results ever obtained for the ABE fermentation to date are in the vicinity of 20 grams per liter in butanol concentration from fermentation, 4.5 grams per liter per hour in butanol productivity and a butanol yield of less than 25 percent (w/w) from glucose, or about 1.29 gallons per bushel. Therefore, if the fermentation route were to be utilized, the limiting step would be a conversion of ethanol to butanol. Global ethanol production of 24.57 billion gallons would give only 4.6 billion gallons of Jet Fuel A-1, which amounts to 6.4 percent of the total requirement of the commercial operators. One critical policy hurdle for commercializing aviation biofuels is the difference in incentives for renewable fuels between onroad and aviation use. The on-road applications have been encouraged by measures such as tax breaks and mandates that do not differentiate between biofuel qualities. Under the

EUâ&#x20AC;&#x2122;s Renewable Energy Directive, it is left up to the market operators to use any biofuel as long as the sustainability criteria of the RED and the relevant technical specifications are met. Regarding aviation incentives, the Emission Trading Scheme qualifies aviation biofuel as noncarbon-dioxide emitting fuel, but the incentive is being undermined by the current difficulties with ETS application to the aviation sector. In the aviation sector, only high physical quality biofuels with low freezing points can be used to ensure the operability of the jet engines. The current political framework and international competition has led to a paradoxical situation, where high-quality biofuels are finding applications in road transport, although lesser-quality biofuels could also satisfy the road transport needs, while they can not be used in aviation due to the absence of incentives. A small- or medium-sized startup with a novel idea working on designing a proof-ofconcept pilot has much to consider before venturing into a full-scale demo or commercial plant, or even just planning to expand its patent portfolio. Big conglomerates are also considering the technology, especially those planning to be brand ambassadors for developing sustainable solutions for tomorrow. All those considering an ethanol upgrading platform will want to consider a range of factors including market studies, value and volume chain analysis, process economics, industrial fermentation, separation technology, green chemistry, engineering technology, off-take agreements, and more. The growing number of developers is about to set up a chain of events that will be disruptive in how we look at energy and its utility. The list of factors to consider definitely presents a challenge, but it is a challenge that needs a global perspective and is most certainly not trivial. Author: Kapil S. Lokare, PhD Biomass Consultant, Emerging Technologies Division, Lee Enterprises Consulting Inc. Kapil.lokare@lee-enterprises.com 501-833-8511

MARCH 2016 | Ethanol Producer Magazine | 53

TALKING POINT

Let’s Not Leave the Discussion in Iowa By Dave VanderGriend

Driving through small town Iowa today, the scenery is quite different from this time around a month ago. The TV cameras, the throngs of reporters, and the

seemingly endless rounds of town meetings and forums are gone. The Iowa Caucuses, the first step on the road to the presidency, are now a memory and Iowa is no longer the center of the political universe. As the spotlights are turned off and the candidates move on, with them go the very important discussion of ethanol and how important it is to rural America. But we need to keep the discussion going. Regardless of where candidates stood on ethanol, having this first step on the road to the White House begin in Iowa provides an opportunity to talk about an issue that affects everyone and should not be regarded as a Midwest phenomenon. Energy security, domestic jobs, clean air and protecting public health are all part of any discussion about ethanol and are relevant to voters everywhere. I promised myself I would write a column without mentioning the renewable fuel standard (RFS), but I can't, although for good reason. In the course of the Iowa campaign, the RFS was a constant subject but too often we never got into why it was important. For me, the answer is simple: the RFS provided entry into the market so we could provide ethanol. While that is a good thing, it was rarely what we discussed in Iowa. We all know the lifeline ethanol provides to rural America and agriculture, but let’s look at how it should appeal to everyone from Los Angeles to New York. Who in our country would not like cleaner, healthier air? And who in these other states would not at least directionally agree that reducing carbon and CO2 is a positive thing? We can contribute to both of these public policy objectives. I will continue to talk about the health benefits of clean octane ethanol, but to some extent it begins with reducing carbon. Like it or not, we are seeing a slow but sure global evolution of energy policy that suggests low-carbon fuels will be a defining criteria in the future. Trendsetter states on the West Coast like California and Oregon are laying the foundation for the next value proposition for ethanol by committing to substantial carbon reductions. Oregon alone has pledged to reduce CO2 emissions by a whopping 75 percent by 2050, starting with a 10 percent cut by 2025.

54 | Ethanol Producer Magazine | MARCH 2016

That is great news for corn ethanol because we have a significantly better carbon footprint than we are credited with, a reality that even the majority of the ethanol industry may not appreciate. The California Air Resources Board and the Oregon Department of Environmental Quality are beginning to embrace the improved modeling coming out of the U.S. DOE energy labs. The dreaded ILUC—indirect land use change—is being recognized for the flawed science that it is and ethanol is being penalized much less than in the past. The result should be a more prominent role in these low carbon fuel programs and recognition of ethanol's true value. What's changed, you might ask? It starts with the corn itself. More and more peer-reviewed studies confirm that high-yield corn, with its extensive below ground root structure, restores soil organic CO2. Corn acres are not a carbon source, but rather a significant carbon sink. According to agronomist and South Dakota State University fellow Ron Alverson, an acre of corn will sequester one ton of CO2 per year. EPA’s models require significant updating to reflect corn ethanol’s carbon sequestration benefits. An acre of corn converted to feed and ethanol produces nearly 450 gallons of fuel ethanol, which further reduces CO2 emissions. This means that a properly managed U.S. corn industry, when corn ethanol’s CO2 tailpipe emissions are also factored in, could significantly reduce the carbon footprint of corn ethanol. The bottom line is that putting more ethanol in U.S. gasoline would result in significantly less CO2 emissions. As November gets closer, this value proposition of ethanol needs to be part of the national discussion and not a forgotten campaign issue of Iowa. Author: David VanderGriend CEO, ICM Inc., President, Urban Air Initiative DaveV@icminc.com 316-796-0900

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BUSINESS MATTERS

President Signs Tax Extenders, Government Funding Legislation By John Kirkwood

Prior to recessing for the holidays, Congress passed the Protecting Americans from Tax Hikes Act of 2015, known as the PATH Act, and an omnibus funding bill for fiscal year 2016 known as the 2016 Consolidated Appropriations Act or the Appropriations Act, which the president signed on Dec. 18. These companion pieces of legislation contain a number of

significant provisions for the energy and renewable energy industries. Second-generation biofuels producer credit: The PATH Act extends the $1.01 per gallon producer credit for qualified secondgeneration biofuel production occurring after Dec. 31, 2014, and prior to Jan. 1, 2017. Special allowance for second-generation biofuel plant property: PATH extends through 2016 the 50 percent bonus depreciation for cellulosic biofuels facilities for property placed in service after Dec. 31, 2014. Credits relating to alternative fuels: PATH extends, through 2016, the 50 cents per gallon alternative fuel tax credit and alternative fuel mixture tax credit effective for fuel sold or used after Dec. 31, 2014. Biodiesel and renewable diesel incentives: PATH extends the $1 per gallon biodiesel fuels incentives through Dec. 31, 2016, for fuel sold or used after Dec. 31, 2014. Other facilities producing energy from certain renewable resources: The PATH Act extends the production tax credit for certain other projects the construction of which begins before Jan. 1, 2017. These projects include closed-loop biomass facilities, openloop biomass facilities, geothermal or solar energy facilities, landfill gas facilities, trash facilities, qualified hydropower facilities and marine and hydrokinetic renewable energy facilities. The PATH Act also provides that the investor tax credit in lieu of production tax credit is extended for projects that begin construction before Jan. 1, 2017. New markets tax credit: PATH extends this tax credit through 2019 and allocates $3.5 billion of credits for each of years 2015 to 2019 effective for calendar years beginning after Dec. 31, 2014. Bonus depreciation: PATH Act extends bonus depreciation for property acquired and placed in service during 2015 through 2019 (with an additional year for certain property with a longer production

56 | Ethanol Producer Magazine | MARCH 2016

period). The amendments provide for a phasedown of bonus depreciation, as follows: • Jan. 1, 2015, through Dec. 31, 2017—50 percent. • Jan. 1, 2018, through Dec. 31, 2018—40 percent. • Jan. 1, 2019, through Dec. 31, 2019—30 percent. In order to benefit from bonus depreciation, the requirements of Section 168(k)(2)(A) for qualified property must be met. Additionally, the amendments permit a taxpayer may elect to accelerate the use of alternative minimum tax (AMT) credits in lieu of bonus depreciation under special rules for property placed in service during 2015. During 2016, the provision modifies the AMT by increasing the amount of unused AMT credits that may be claimed in lieu of bonus depreciation. Reference is made to Section 143 of the PATH Act for the various effective dates of these amendments. Increased expensing limitations: The PATH Act permanently extends the expensing limitation and phase-out amounts currently in effect from $25,000 and $200,000, respectively, to $500,000 and $2 million, and provides for indexing both the $500,000 and $2 million limits to inflation beginning in 2016. Additionally, the amendments permanently extend the provisions for expensing of computer software and qualified real property, and modify the expensing limitation for qualified real property by elimination of the $250,000 aggregate cost that may be taken into account for any taxable year. Research tax credit: The PATH Act permanently extends the R&D tax credit. Additionally, beginning in 2016, certain eligible small businesses (those having $50 million or less in gross receipts) may claim the R&D tax credit against AMT tax liability, certain qualified small businesses (those having $5 million or less in gross receipts), may use the R&D tax credit against the employer’s payroll tax liability. Also included in the Omnibus Act were extensions to a production tax credit and investment tax credit for wind energy, as well as an investment tax credit for solar energy. And, restrictions on oil exports were lifted, except in certain situations. Author: John Kirkwood, Partner Faegre Baker Daniels LLP Energy & Natural Resources Industry Group 317-569-4602 John.kirkwood@FaegreBD.com

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