2015 March Ethanol Producer Magazine by BBI International

INSIDE: ILLINOIS PLAYS KEY ROLE IN EMERGING INDUSTRY MARCH 2015

CORN & SORGHUM EPA Streamlines Petition Process Page 28

EPM Conducts Grain Quality Survey Page 34

Sorghumâ&#x20AC;&#x2122;s Strong Demand, Value Sends Supply Increase Message Page 40

www.ethanolproducer.com

2015:

THE YEAR OF

THANKS FOR BEING SOME OF THE FIRST RETAILERS TO OFFER E15. Growth Energy commends CENEX, MAPCO, Minnoco, Petro Serve USA, Protec Fuel, Sheetz and ZarcoUSA for their pioneering spirit and their efforts to expand consumer access to higher blends of renewable fuels. They are offering consumers a choice and savings at the pump, while at the same time supporting a homegrown industry that supports farmers across the country. Together weâ&#x20AC;&#x2122;re making progress towards the next generation of sustainable, renewable fuels.

Learn more at GrowthEnergy.org/E15

CONTENTS

MARCH 2015

DEPARTMENTS 6

EDITOR'S NOTE

AD INDEX

THE WAY I SEE IT

Short-Term Pain Long-Term Gain By Mike Bryan

EVENTS CALENDAR

VIEW FROM THE HILL

E15’s Big Dance By Bob Dinneen

DRIVE

Taking Power Back From Big Oil By Tom Buis

EMISSIONS

Eﬃcient Producers Up the Ante

Nine corn-ethanol plants land efficient producer status through EPA’s new petition process

By Susanne Retka Schill

CORN QUALITY

2014 Corn Crop: Bumper Bushels, Good Quality Survey reveals producers are doing more testing of incoming grain

By Susanne Retka Schill

Come March With ACE Members By Brian Jennings

GLOBAL SCENE

New Year, New Questions, New Possibilities By Andrea Kent

BUSINESS BRIEFS

COMMODITIES

DISTILLED

TALKING POINT

GRASSROOTS VOICE

FEATURES

Grain Expectations By Tom Bryan

VOLUME 21 ISSUE 3

Evolving Corn Coproducts: Utilizing Fiber Fraction By Kurt A. Rosentrater

BUSINESS MATTERS

GHG Regs: Winners, Losers Among Ethanol Producers By James L. Pray

SORGHUM

PROFILE

Big Demand, Small Supply

Spotlight On Illinois

By Holly Jessen

Milo producers work to get more of the grain into markets like California

A look at the past and present ethanol industry in the Land of Lincoln

ON THE COVER

MARKETPLACE

PHOTO: ILLINOIS CORN GROWERS ASSOCIATION

4 | Ethanol Producer Magazine | MARCH 2015

Ethanol Producer Magazine: (USPS No. 023-974) March 2015, Vol. 21, 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.

IS MADE HERE.

For years, we’ve been told that cellulosic ethanol is a “fantasy fuel.” And it is.

And now it’s going to change the world. For real.

So we’ve spent a decade planning, researching, and working hard to make that fantasy a reality. ®

POET-DSM.COM

Advanced Biofuels

EDITOR'S NOTE

Grain Expectations Our annual look at America’s principal fuel ethanol feedstock typically includes stories on crop science, yield, price trends and risk management. We pivoted this year and took on several alternative editorial pursuits,

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

including an ethanol plant corn quality survey and an update on the state of America’s No. 2 ethanol feedstock, grain sorghum. In an effort to better understand the condition of the current crop ethanol producers are processing, we sent a corn quality survey to the management of 109 U.S. facilities in January. The results are presented on page 34. While the data gleaned from this outreach gives us only an aggregate snapshot of the feedstock ethanol plants have recently received, it also provides insights into what ethanol plants do—and don’t—test for. Senior Editor Susanne Retka Schill reports that most respondents measure every incoming load of corn for test weight, moisture, damage and foreign material. Far fewer, however, measure every load for protein, oil, starch and toxins. The most progressive plants, we found, are testing composite loads for fiber, density, ash and more, hinting at a trend toward more comprehensive corn testing down the road. In “Big Demand, Small Supply,” on page 40, we find out that grain sorghum use by U.S. ethanol plants is down due to increased exports and tighter domestic supply. Still, several producers now using corn see milo as an ideal production feedstock. EPM Managing Editor Holly Jessen reports that each of California’s four ethanol plants are among U.S. producers interested in transitioning to sorghum, which is currently not grown in appreciable bushels in the Golden State. Both Pacific Ethanol Inc. plants, along with Calgren Renewable fuels LLC and Aemetis Advanced Fuels Keyes Inc., received grants from the California Energy Commission last year; a big aim of the funding is to grow milo in California and use it for in-state ethanol production. Trekking off theme, our page-28 story focuses on ethanol plants with an eye on more gallons. In “Efficient Producers Up the Ante,” we dig into the U.S. EPA’s new requirements for ethanol producers seeking to increase the amount of renewable identification numbers (RINs) they’re allowed to generate. Retka Schill reports that the agency’s efficient producer petition process, or EP3, is superior to the original method of pathway approval for several reasons including simplicity. The process calculates a plant’s life-cycle greenhouse gas (GHG) emissions based on four numbers: bushels of corn, gallons of ethanol, standard cubic feet of natural gas and kilowatt-hours of electricity. If a producer achieves a 20 percent reduction in GHG emissions compared to baseline gasoline, it’s allowed to generate RINs above the volume grandfathered in under the renewable fuel standard. So far, nine producers have gone through the new process. More are sure to follow.

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | MARCH 2015

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 21 ISSUE 1

EDITORIAL

ADVERTISER INDEX

President & Editor in Chief Tom Bryan tbryan@bbiinternational.com Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Holly Jessen hjessen@bbiinternational.com Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com News Editor 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 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 Sales & Marketing Director John Nelson jnelson@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

53 2015 International Fuel Ethanol Workshop & Expo 9 2015 National Ethanol Conference 13 BBI Project Development 57 AOCS American Oil Chemists 39 Arisdyne Systems 21 BetaTec Hop Products 15 Buckman 25 CompuWeigh Corporation 46 CPM Roskamp Champion 30 DuPont Industrial Biosciences 60 Fagen Inc. 3 Fluid Quip Process Technologies, LLC 8 Gamajet 31 Growth Energy 2 Hydro-Klean LLC 24 ICM, Inc. 11 INTL FCStone Inc. 44 Iowa Economic Development Authority 38 J.C Ramsdell Enviro Services, Inc. 20 Leaf Technologies 26 Nalco, an Ecolab Company 45 New Holland Agriculture 17 North American Industrial Services 27 Phibro Ethanol Performance Group 59 POET-DSM Advanced Biofuels 5 Premium Plant Services 43 Renewable Fuels Association 47 RPMG, Inc 51 Sukup Manufacturing 19 Thermal Refractory 36 Tower Performance, Inc. 42 United Sorghum Checkoff Program 55 Victory Energy Operations, LLC 52 WINBCO 37 2015 International Biomass Conference & Expo

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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THE WAY I SEE IT

Short-Term Pain Long-Term Gain By Mike Bryan

Low oil prices and the resulting low gasoline prices have certainly been a boon to motorists. If someone were to have asked me, I would have said that oil would never again be this low. But then, when

corn was $7 a bushel, many thought that they would never see corn prices below $5 again. So as the old saying goes, “nothing cures high prices like high prices.” While not everyone would agree, the recent fall in oil prices makes an even stronger case for all forms of domestic energy, both renewable and nonrenewable. In fact, what the oil producing countries are doing makes a strong case for greater energy independence in general. The cost of extraction has not changed, nor has the cost of transportation and refining. What has changed is reduced demand because of shale oil discoveries like the Bakken and a strong and growing renewable fuels industry. The cost of extracting a barrel of oil is likely less than $10, so oil producing regions of the world can and are playing fast and loose with the price in an attempt to decimate the shale oil industry and at the same time cripple the renewable energy industry. This is economics 101, when demand lessens, you reduce your price to maintain market share and then slowly raise your price as the opportunity avails itself, with a side benefit of crippling competition in the process. My point is that we should all be scared out of our wits to really see the power that these oil rich countries have over our economy, our environment and our energy future. When an intentional price cut is imposed by one segment of our energy supply chain that is exclusively designed to eliminate competition, we should not celebrate it, we should be mad as hell.

10 | Ethanol Producer Magazine | MARCH 2015

Whether it is in the first quarter or second quarter of 2015 or sometime later in the year, the price of oil will return to a higher price. The question we must come to grips with is what will be the long-term fallout on domestic oil production and the renewable fuels industry as a result of this short-term drop in oil price? It is, indeed, a shot across the bow of domestic oil and renewable fuels, that “we” can make your industries noncompetitive anytime “we” want. “We” control the market and “we” will decide what domestic energy programs succeed or fail. If ever there was a time when the government should rally behind the domestic energy industry to subsidize or support in any way possible its continued growth, now is that time. Because once new investment dries up because major oil producing countries decide it should, it will never regain its momentum. Who would invest in something that someone else, at their discretion, could make unprofitable overnight? Artificially low oil prices should be seen as what they really are, a wakeup call for the world to vow to never be dependent on a single energy source again. While the price of energy independence may be more in the near-term, long-term the benefits of that independence will be huge. That’s the way I see it.

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

EVENTS CALENDAR International Biomass Conference & Expo April 20-22, 2015 Minneapolis Convention Center, Minneapolis, Minnesota 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

International Fuel Ethanol Workshop & Expo June 1-4, 2015 Minneapolis Convention Center, Minneapolis, Minnesota The FEW provides the global ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. The FEW is the largest, longest running ethanol conference in the world—and the only event powered by Ethanol Producer Magazine. 866-746-8385 | www.fuelethanolworkshop.com

106th AOCS Annual Meeting and Industry Showcases May 3-6, 2015 Rosen Shingle Creek Orlando, Florida The American Oil Chemists' Society's annual meeting is one of the premier international science and business forums on fats, oils, surfactants, lipids, and related materials. Known for its extensive program, the annual meeting features more than 600 presentations within 12 interest areas. Expect four days of networking with more than 1,600 attendees from around the world. www.annualmeeting.aocs.org | 217-693-4843

National Advanced Biofuels Conference & Expo October 26-28, 2015 Hilton Omaha Omaha, Nebraska Produced by BBI International, this national event will feature the world of advanced biofuels and biobased chemicals—technology scale-up, project finance, policy, national markets and more—with a core focus on the industrial, petroleum and agribusiness alliances defining the national advanced biofuels industry. 866-746-8385 | www.advancedbiofuelsconference.com

VIEW FROM THE HILL

E15’s Big Dance By Bob Dinneen

From the first tip-off to the trophy presentation, March Madness brings a unique sense of competition, hope and excitement for basketball fans everywhere as teams emerge and make a run for the championship. In the same way, competition, hope

and excitement abound as E15 is gaining visibility and emerging on the market in a big way. What started off in 2012 as a single station offering the higher-level blend in Lawrence, Kansas, has grown to stations in 15 states selling the fuel. E15—which was approved by the U.S. EPA for 2001 and newer cars, trucks and SUVs—has been in the marketplace for two and a half years. It can now be purchased at stations in Alabama, Arkansas, Florida, Iowa, Illinois, Kansas, Michigan, Minnesota, North Carolina, North Dakota, Nebraska, Ohio, South Dakota, Tennessee and Wisconsin. Not only is E15 expanding into new states, but it is advancing to the next round in other areas as well. Popular automakers such as Audi, Ford, General Motors, Honda, Jaguar and others now approve the use of the higher-level fuel blend in their new 2015 vehicles. In fact, nearly 70 percent of auto manufacturers approve the use of E15 in model year 2015 vehicles. Swish! But no matter how much progress is made, or how well your team is doing, there will always be the naysayers who get in front of the microphone and spew their opinions without knowing the facts or doing the proper research. In the case of E15, Big Oil and its counterparts are ginning up false concern over engine damage and misfueling. But, no matter how little faith Big Oil puts in consumers, drivers know what can and can’t be put in their fuel tanks. In fact, history reveals no known cases of engine damage or inferior performance while using E15. Moreover, there have

12 | Ethanol Producer Magazine | MARCH 2015

been no known cases of misfueling in small engines, boats, pre2001 vehicles, or other nonapproved equipment, and zero liability claims against retailers, blenders, refiners or automakers have been reported. The fact that E15 is not causing engine problems shouldn’t come as a surprise to anyone given the record-breaking testing E15 went through before gaining the EPA’s stamp of approval for use in vehicles 2001 and newer. The overall testing done on E15 encompassed more than 6 million miles. Separately, 43 studies examined E15 and only one—which was paid for by the American Petroleum Institute—had concerns with the blend. The National Renewable Energy Laboratory has since called a technical foul after reviewing the Big Oil-funded research and finding that “the conclusion that engines will experience mechanical engine failure when operating on E15 is not supported by the data.” It doesn’t get any clearer than that. Since its debut, consumers have driven more than 100 million miles on E15 and the higher-octane, typically lower-priced product is delivering as promised. In fact, retailers who have made the switch over to E15 report that consumers are embracing the higher-level blend. The future is bright as hundreds of E15 stations are in the works with many expected to open in the coming weeks and months. It will take time for E15 to work its way across the country, just as it did for E10, and just as it takes time and hard work for teams to move from the Sweet 16, to the Elite Eight, to the Final Four and beyond. It’s still early in the game for E15, but it's a good bet E15 will be a bracket buster for Big Oil's lobbyists looking to keep consumers from getting in the game. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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速

DRIVE

Taking Power Back From Big Oil By Tom Buis

Our story is one of success, hard work and innovative individuals who looked at an ear of corn and saw a cleaner fuel, nutritious animal feed and countless other coproducts. We know this story well and

write new chapters for it each year. But we cannot forget that in addition to being storywriters, we must be storytellers. Stories are meant to be shared, and in order for our industry to succeed, we must continue to tell our tale to Congress, the administration and the public. The list of the benefits of renewable fuels, like ethanol, is a long one. They provide consumers a choice and savings at the pump, create jobs, revitalize rural communities, improve the environment and increase our nation’s energy independence. We will be most effective in communicating our message to policymakers when we take a moment to consider which of these benefits they might value most. Many have reported that consumer choice, job creation and economic growth are particularly important to them, so as you sit down and talk with your members of Congress and friends or neighbors, consider sharing the following points. Ethanol is a key, American industry. It supports more than 400,000 domestic jobs that will never be outsourced, revitalizes rural communities and contributes more than $44 billion to the American economy. By moving to E15 nationwide, we can create another 136,000 American jobs in cities like Des Moines, not Abu Dhabi. If the people you talk to are hesitant to support the RFS and would like the free market to decide the industry’s fate, remind them that the renewable fuels industry isn’t looking for handouts at home or abroad. We voluntarily gave up our tax credit in 2011 and are simply asking for market access and the opportunity to compete. This competition would give consumers the sorely needed ability to choose a fuel that meets their price and performance needs. Over the past year, ethanol has saved consumers an average of 67 cents per gallon, and in a time when roughly 8 percent of our annual incomes are being used for commuting costs, those savings really add

14 | Ethanol Producer Magazine | MARCH 2015

up. It is estimated that ethanol saves motorists more than $100 billion at the pump annually. The industry is also responsible for improving the livelihoods of all farm families and reducing farm payments by $12.3 billion dollars a year. Imagine how much more our nation could save by moving to higher blends like E15. Reaching out to members of Congress and the administration will help us make sure that the renewable fuels industry and rural America are at the top of their minds and agendas. Make a phone call, write a letter, send an email, set up a face-to-face meeting and share this critical information with policymakers. For our industry to continue to succeed, we need you to stand up, express your concerns and request support for the policies that impact your job, your livelihood and the economic and energy security of this nation. Your voice, your story and your support can go further than you might imagine. The importance of grassroots political activities is immeasurable. Grassroots involvement takes the power away from Big Oil and their allies and places it into the hands of hardworking Americans who are taking action across the country. The strength of our industry’s voice at the local, state and national levels depends on you and your efforts. Reach out to your friends, family and community. Inspire and empower people to become involved in the fight and make their voices heard. Consumers, farmers, plant employees, investors, vendors and community leaders all have great reasons to advocate for the renewable fuels industry. We have the numbers on our side, and the timing couldn’t be better. Let’s rally the troops and win this fight.

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

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GRASSROOTS VOICE

Come March With ACE By Brian Jennings

"Traveling to Washington, D.C., and having the opportunity to meet and talk with members of Congress was quite an experience. Unfortunately there are leaders in our country who are unaware of the many benefits of renewable fuels and the positive effect ethanol has on not only the American farmer but also the country as a whole.” -Kenton Johnson, Granite Falls, Minnesota

Kenton Johnson serves on the board of directors for three Minnesota ethanol plants; Bushmills Ethanol Inc., Granite Falls Energy LLC and Heron Lake BioEnergy LLC. He stood shoulderto-shoulder with fellow ethanol supporters to promote the benefits of our industry to lawmakers during the 2014 Biofuels Beltway March. The American Coalition for Ethanol was the first organization to endorse the idea of the renewable fuel standard (RFS). Our members provided the momentum essential for this proposal to eventually become law. Since the RFS was enacted by Congress and signed into law by President Bush, ACE members like Kenton Johnson have also been proactive about showcasing how it has been a success. One of the primary ways we’ve highlighted the benefits of the RFS is through our annual Biofuels Beltway March fly-in to Washington, D.C., occurring (wait for it) each March. Consider this your personal invitation to join Kenton and other ethanol advocates at our seventh annual fly-in, March 24 to 25. The goal of ACE’s Biofuels Beltway March is to help you tell your personal ethanol story to decision makers in D.C. and demonstrate the breadth and depth of grassroots support for renewable fuels. If you’ve taken part in previous ACE fly-ins, please join us again this year and encourage a colleague 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.

16 | Ethanol Producer Magazine | MARCH 2015

Nearly 80 people from all walks of life, including students, bankers, farmers and industry vendors joined ethanol supporters like Kenton at last year’s fly-in to share their personal ethanol stories with more than 160 members of Congress and top administration executives. Our fly-in also featured some of the first retailers in the U.S. to sell E15, E30 and E85. The retailers explained how they have made money and won new customers because they’ve offered these new fuels at their stations. With opponents’ attacks against E15 and the RFS intensifying and more than 70 new members elected to Congress, active participation in our fly-in takes on greater importance this year. In addition to a large crop of incoming freshmen, just a small fraction of current lawmakers were in office when the original RFS was enacted in 2005 and modified in 2007 by Congress. Moreover, low oil prices and EPA’s mismanagement of the annual volume setting process will be used by our opponents to call for repeal of the RFS. We need you to meet face-to-face with the EPA and members of Congress to help show that the RFS is working, that cellulosic ethanol is real, and how blends such as E15, E30 and E85 are better and cleaner choices for consumers. In addition to meetings with Congress on Capitol Hill, this year we are also planning to meet with officials from the White House, the EPA, and the Department of Transportation and Surface Transportation Board officials about our concerns with the proposed rule on DOT-111 tank cars and ongoing rail congestion. We also expect more 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 higher blends of ethanol. There is no better time for people who have a stake in the success of the ethanol industry to come march with us. I hope to see you March 24 to 25. Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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GLOBAL SCENE

New Year, New Questions, New Possibilities

By Andrea Kent

Albert Einstein said, “to raise new questions, new possibilities, to regard old problems from a new angle, requires creative imagination and marks real advance in science.” Understanding the need for change is standard operating

procedure for innovators like Einstein, and the ethanol industry is really no different. If there is one way to describe the path of the Canadian renewable fuels industry today, it is through innovation, an evolution beyond traditional production methods, and products. The Canadian industry is rich with innovative producers looking at pursuing the opportunities in the broader bioeconomy. We are witnessing the emergence of diversified biorefineries, built on the existing renewable fuels platform, but able to commercialize a number of different bioproducts, using a variety of different feedstocks. With a natural abundance of biomass, Canada is well positioned to become a global leader in the development and production of advanced biofuels and bioproducts. We have seen this happening across our industry already. Enerkem, in a partnership with the City of Edmonton and the Province of Alberta, recently designed and built the first industrial scale waste-to-biofuels facility in the world, now producing methanol from municipal solid waste with conversion to ethanol expected this year. This facility uses Enerkem’s proprietary thermochemical process, a technology that has received international attention, with partnerships for production facilities emerging in Europe and China. GreenField Specialty Alcohols Inc., better known for distilleries producing corn-based ethanol and industrial alcohols, designed and built a biomass pretreatment system called the bazooka, capable of processing agricultural residues and woody biomass into pure streams of cellulose and hemicellulose sugars.

18 | Ethanol Producer Magazine | MARCH 2015

IGPC Ethanol Inc. is the first Canadian adopter of ICM’s fiber separation technology that fractionates the corn kernel at the front end of the fuel making process. This technology allows IGPC to take a fibrous portion of corn kernel and convert it into nextgeneration biofuels and next-generation bioproducts. Enhancing the strong progress of the Canadian renewable fuels industry depends on ensuring the continuation of strong mandates, developing broader market access for producers, a fair valuation for greenhouse gas reductions, and building out infrastructure, ensuring Canadians have choice at the pumps. These forward looking action items were a primary focus of the CRFA’s first annual Canadian Bioeconomy Conference. While we addressed the needs of our existing renewable fuels producers, we also looked at the opportunities arising from where our industry is going, from biofuels to bioeconomy. Like the U.S., we are all looking at the falling price of oil and what it means for the Canadian economy and our ethanol industry. Commodity prices for ethanol and corn, the fluctuating Canadian dollar, and a federal election on the horizon, all promise to make 2015 a dynamic year for Canadian producers and policy makers alike. It also means that we will need to keep doing what we do best: innovate and adapt.

Author: Andrea Kent President Canadian Renewable Fuels Association 613-594-5528 a.kent@greenfuels.org

BUSINESS BRIEFS Joe Glauber has retired from the position of chief economist of the USDA. Robert Johansson, USDA deputy chief economist, has been named acting chief economist. Johansson Glauber has served as the USDAâ&#x20AC;&#x2122;s deputy chief economist since 2012 and holds a doctorate in agricultural economics from the University of Minnesota. Fecon Inc. has released a new website that features a customizable bull hog rotor module that allows users to build and display three different rotor options and nine different tooling options. A new compare section also shows specifications of the different tracked carriers and attachment products side by side, helping the user find the model they are looking for. ERI Solutions Inc. has announced a new program for ethanol producers referred to as the Focused Integrity Testing. The FIT program is a smarter, methodical and cost effective way to manage nondestructive testing and inspection requirements to ensure the integrity of aging assets.

20 | Ethanol Producer Magazine | MARCH 2015

People, Partnerships & Deals

The USDA Foreign Agricultural Service recently awarded funding to more than 60 U.S. agricultural organizations to help expand commercial export markets for American products. The U.S. Grains Council was awarded nearly $2.24 million. Nebraska Gov. Pete Ricketts has appointed David Bracht director of the Nebraska Energy Office. Bracht is a partner at Stinson Leonard Street LLP, where he coleads the renewable energy group and serves as council to companies involved in energy development, including biofuels, biomass and wind energy. He has advised on major wind and ethanol projects, including an advanced cellulosic plant. The Iowa Renewable Fuels Association has announced its board of directors, officers and executive committee for 2015. Brian Cahill of Southwest Iowa Renewable Energy will serve as president, while Tom Brooks of Western Dubuque Biodiesel will serve as vice president. Eamonn Byrne of Plymouth Energy will serve as treasure, while Rick Schwarck of Absolute Energy will serve as secretary and Monte Shaw will serve as executive director. In addition, Steve Bleyl of Green Plains Inc., Brad Albin of Renewable Energy Group and Craig Willis of Archer Daniels Midland Co. will also serve on the executive committee.

Audie Sturtewagen has been appointed plant manager of Patriot Fuels Biodiesel LLC. The new 5 MMgy biodiesel plant, located at the site of the 120 MMgy Patriot Renewable Fuels LLC ethSturtewagen anol plant in Annawan, Illinois, is expected to come online during the first quarter of the year. Sturtewagen has been a part of the Patriot Renewable Fuels team since the ethanol plant started production in 2008, serving as safety manager, and later, production manager. Aflalo Guimaraes has joined the board of directors of Ceres Inc. He succeeds Raymond Debbane, who retired from the companyâ&#x20AC;&#x2122;s board. Guimaraes is a managing director of The Invus Group LLC, an affiliate of Artal Luxembourg S.A. Kennedy and Coe, and Matson and Isom, two CPA firms in the foods and agriculture industry, have joined forces. The merged companies now operate under the name KCoe Isom. The new firm serves domestic and international clientele from 17 coast-to-coast offices.

Timothy Zenk has joined Algenol as executive vice president of business development. Zenk previously served as senior vice president of corporate developZenk ment for Sapphire Energy Inc. Richard Cranford, has also joined the company from Sapphire, along with Shaun Bailey and Jon Meuser from Synthetic Genomics, Jay Askander and Christoph Neuendorf from Alstom, Jim Streemke from Amgen, Scott Schuh and Matt Wivinus from Boston Scientific, Mohamed Bekheet from Exterran, and Bill Rodriguez from UBS. In November, the California Energy Commission approved a $3 million grant to Pacific Ethanol Development LLC to develop and use sorghum feedstock. Penford Corp. has entered into a definitive merger agreement with Ingredion Inc., under which Ingredion will acquire all of the outstanding shares of Penford for $19 in cash per share. The transaction is valued at approximately $340 million in the aggregate and has been approved by the boards of directors of both companies. Penford owns a 45 MMgy ethanol plant located in Cedar Rapids, Iowa.

Martin Berardi has acquired SchutteBuffalo Hammermill. Berardi, the incoming CEO, is a recent retiree from Moog Inc., where he served in a variety of roles over 34 years. Ownership of the company has transferred from Thomas Warne and James Guarino, who purchased the company in 2004 following a merger with Buffalo Hammermill Corp. The Brazilian Development Bank recently approved financing for four sugarcane projects in Brazil, including an ethanol project under development by Abengoa Bioenergy SA Agribusiness. Abengoa will receive $309.6 million Brazilian real ($118.12 million) to implement a second-generation ethanol plant with a capacity of 64 MMly (16.91 MMgy). The unit will be integrated with the St. Louis ethanol plant in Pirassununga, SĂŁo Paulo. Quad County Corn Processors and Syngenta have joined the Advanced Ethanol Council. The two companies are engaged in a joint venture to develop, license and deploy Cellerate, a bolt-on cellulosic ethanol process technology easily integrated into existing corn ethanol production processes.

4B Components Ltd. has promoted Brian Knapp to the position of vice president with responsibility for technical sales and service for the companyâ&#x20AC;&#x2122;s electronics Knapp division. Knapp started at 4B in 2005 as an engineer within the electronics department and became tech team manager in 2010. He is an active member of the Grain Elevator and Processing Society and has made numerous industry presentations on the subject of hazard monitoring. Scott Wiebe has assumed the role of president and CEO at the Centre for Research and Innovation in the Bio-Economy, replacing Lorne Morrow who stepped down after a five-year tenure. Wiebe previously spent two years at CRIBE as a program manager before joining AV Terrace Bay as a business analyst. Michael Willick recently accepted the position of chairman of the board, replacing Frank Dottori. Dottori, however, will remain on the board. Douglas Murray of Thunder Bay has also joined the board for a three-year term, while Don Campbell and J.P. Gladu are stepping down from the board.

MARCH 2015 | Ethanol Producer Magazine | 21

COMMODITIES

Prices & Market Analyses

Natural Gas Report

Market fundamentals support low natural gas prices Jan. 23—While the market is not currently looking as oversupplied as it was in 2012, similar dynamics are emerging in the market fundamentals to support the view that prices still have additional room to fall. Natural gas production hit new highs in December, capping off an impressive year of growth. From December 2013 to December 2014, dry natural gas production rose almost 12 percent, according to data from Bentek Energy, compared to 7.6 percent growth over the same time period in 2010 to 2011. Low crude and natural gas prices are already driving drilling rig counts lower and concurrently dropping expectation for future production growth. Production gains helped to alleviate the bullish concerns regarding a massive storage inventory deficit coming out of the prior winter. With higher production slated for 2015, even a repeat of that scenario leaves the market positioned for more supply than storage capacity can comfortably handle. The market is already showing signals that prices will need to fall this summer to avoid running out of inventory space. Looking at the

by Ben Straus

different segments of natural gas demand shows the signal that prices will likely need to remain below $3 MMBtu for the first half of the summer at a minimum. A key feature of the natural gas market revealed in the oversupplied year of 2012 was the capacity for power generation demand for natural gas to increase if prices dropped to a sufficiently low level to compete with coal-fired generation.

Corn Report

Decrease in national corn yield surprising

by Jason Sagebiel Jan. 23—The USDA released the final January supply/demand esCorn price action is limited to the downside by the firm cash martimates for the 2014-’15 corn crop and a surprising fact was that the kets, however, upside limitations will be met by the corn consumptive national corn yield was lowered from 173.4 bushels per acre to 171 end-user observing dwindling processing and, or production margins. bushels. This was the largest yield drop from November to final since 1993, when the yield was dropped by the same 2.4 bushels. It’s notable that January 2014 corn carryout was pegged at 1.631 billion bushels and declined to a final carryout of 1.232 billion bushels, largely due to the rise of exports. World corn ending stocks declined to 189 million metric tons (mmt) in this report, yet this is still an increase of 16.92 mmt and 51.21 mmt greater than in 2013-’14 and 2012-’13 respectively. Brazil and Argentina are poised to produce 75 mmt and 22 mmt respectively. Ukraine is expected to produce 27 mmt. With no great weather concerns this growing season in the Southern Hemisphere, the global marketplace will be ready to buy South American corn. Ukraine and Eastern Europe will have corn for export but political woes could be seen as hampering their ability to fulfill that void. However, with no political fallout that corn has easy acess to the eastern world economies. Now that U.S .corn (and subsequently distillers grains) have been approved to enter the China supply chain, this could be longer-term positive for the U.S. corn producer. 22 | Ethanol Producer Magazine | MARCH 2015

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.353

DDGS Report

Spot

Rack

West Coast

1.520

1.550

Midwest

1.320

1.518

East Coast

1.440

1.719 SOURCE: DTN

Regional Gasoline Prices ($/gallon)

Chinese buyers back in market Jan. 23—All eyes are now on the Chinese and whether their buying will resume at volumes of the beginning of last summer. With Chinese ministry of Agriculture announcement that they were now permitting the importation of Syngenta’s MIR 162, Chinese buyers have been back into the market, particularly in the bulk DDGS market that trades out of the Gulf. Bulk freight has dropped significantly in the past six months and container freight to China has stayed about the same in that time frame, so it has been more competitive to sell bulk, rather than containerized product. Domestically, prices have risen with the Chinese buying. DDGS, which had been as low as 90 percent or below the value of local corn, is now priced closer to

Region

by Sean Broderick

120 percent of corn. In the delivered markets on the coasts, and in Texas, DDGS is facing stiff competition from things like soy and canola meals and corn gluten feed. The price uptick is hurting the domestic demand, to the point that reliance on the export market may reduce domestic use. Moving ahead, Chinese demand is manifesting itself in bulk business, which, anecdotally, has already been traded. The real question is whether that volume will eat into what was traded last year as containers, or whether the bulk will be supplemental to a similar amount of containers that have yet to trade. It would appear as though the market is betting on that.

Front Month Futures Price (RBOB) $1.358 Region

Spot

Rack

West Coast

1.202

1.535

Midwest

1.222

1.492

East Coast

1.337

1.648 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

Mar 2015

Feb 2015

Mar 2014

Minnesota

165

160

185

Chicago

200

195

214

Buffalo, N.Y.

200

220

Central Calif.

254

242

260

Central Fla.

232

225

252 SOURCE: CHS Inc.

Corn Futures Prices

(Dec Futures, $/bushel) Date

High

Low

Jan 16, 2015

3.88

3.79 1/2

3.87

Dec 16, 2014

4.11

4.04

4.06

Jan 16, 2014

4.30

4.25

4.28 SOURCE: FCStone

Cash Sorghum ($/bushel) Location

Ethanol Report

Energy, ethanol prices continue dropping sharply Jan. 23—Ethanol and gasoline prices have seen sharp losses over the first few weeks of 2015, as any support attributed to holiday travel demand has disappeared and additional support is hard to find. Ethanol futures held a strong premium to the gasoline market through December and early January, but growing supplies and increased production levels due to plentiful corn stocks quickly eroded that support. Weakness in gasoline markets comes as world supplies of crude oil continue to climb sharply and uncertainty about global economic security is keeping both com-

by Rick Kment

mercial and investment buyers cautious about stepping back into energy markets. With crude oil futures hovering below $50 per barrel, it is uncertain just how much further prices will move over the next few weeks. However, it appears it may be even harder to draw active support back into the market over the short term. Prices could see some additional marginal losses, but at some point, production levels will start to decline, especially where margins are becoming increasingly narrow.

Jan 16, 2015

Dec 19, 2014

Jan 16, 2014

Superior, Neb.

4.62

4.61

4.20

Beatrice, Neb.

3.97

4.21

3.98

Sublette, Kan.

4.03

4.22

4.14

Salina, Kan.

4.52

4.60

4.37

Triangle, Texas

3.87

4.13

4.20

Gulf, Texas

5.44

5.88

5.33

SOURCE: Sorghum Synergies

Natural Gas Prices ($/MMBtu) LOCATION

Oct 31, 2014

Jan 22, 2015

Jan 22, 2014

NYMEX

3.87

2.90

4.69

NNG Ventura

4.07

2.86

6.87

Calif. Citygate

4.02

3.05

4.77

SOURCE: U.S. Energy Services Inc.

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

Month

End Stocks

Oct. 2014

924

28,641

17,265

Sept. 2014

919

27,577

18,660

Oct. 2013

903

27,995

15,569

SOURCE: U.S. Energy Information Administration

MARCH 2015 | Ethanol Producer Magazine | 23

DISTILLED

Ethanol News & Trends

Minnesota plant to transition to n-butanol, acetone production next year U.K.-based Green Biologics Inc. has purchased a 21 MMgy corn-ethanol plant in Little Falls, Minnesota, previously owned by Central MN Ethanol Co-op. The acquisition was made through Central MN Renewables LLC, an affiliate of Green Biologics Inc. Green Biologics plans to continue to produce ethanol at the facility until sometime next year, when it will transition to produce commercial volumes of n-butanol and acetone. In January, the company announced it had raised $76 million to support the acquisition, conversion activities, and continued development of the companyâ&#x20AC;&#x2122;s process technology platform. The $76 million includes the closing of an internal follow-on equity round of $42 million coled by Swire Pacific Ltd. and Sofinnova Partners. Existing investors Capricorn Venture Partners, Oxford Capital Partners, Morningside Technology Partners and ConvergInce Holdings LLC also participated in the round. The balance of the $76 million includes $34 million that was raised predominantly in debt financing from Tennenbaum Capital Partners, along with equity and debt investment rolled over by existing members of Central MN Ethanol Co-op LLC in Central MN Renewables.

Oregon implements phase 2 of Clean Fuels Program In January, the Oregon Environ- Oregon Clean Fuels Program mental Quality Commission voted 4 to 1 implementation to approve rules for the second phase of 0.25% the Oregon Clean Fuels Program. The 2015 program, which is similar to Californiaâ&#x20AC;&#x2122;s 2016 0.50% Low Carbon Fuel Standard, requires a 10 2017 1.00% percent reduction of greenhouse gases 1.50% (GHGs) from transportation fuels over a 2018 10-year period. 2019 2.50% The process to establish the Oregon 3.50% Clean Fuels Program has been ongo- 2020 ing for several years. The program was 2021 5.00% first approved by the stateâ&#x20AC;&#x2122;s legislature in 2022 6.50% 2009. The Oregon Environmental Qual8.00% ity Commission adopted rules for the first 2023 phase of the program in December 2011. 2024 10.00% Those rules allowed the department to 2025 and beyond collect information on fuels that were being imported into the state. While phase two of the Oregon Clean Fuels Program is being implement- of Dec. 31. The stateâ&#x20AC;&#x2122;s legislature must ed, the program could be short-lived. It is consider whether to remove that sunset currently subject to a statutory sunset date date this year.

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24 | Ethanol Producer Magazine | MARCH 2015

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DISTILLED

Iogen starts up cellulosic 2014 RIN Data RIN category biorefinery in Brazil Ottawa-based Iogen Corp. announced its first commercial-scale cellulosic ethanol plant is producing ethanol in Brazil. The first 200,000 liters (53,000 gallons) has been distributed by Brazilian ethanol producer, Raízen, to its network of gas stations, said Ziyad Rahme, senior vice president and general manager of Iogen Energy. According to Rahme, commissioning began in October, with the startup and shakedown phase scheduled to last through the end of December. The facility was scheduled to shut down temporarily once the sugarcane harvest season came to a close, and restart operations in the second quarter. “We will ramp up to full production at that time,” Rahme continued. The company expects to be able to reach full nameplate capacity shortly after. Iogen announced the groundbreaking in late November 2013 for the $100 million, 40 MMly cellulosic ethanol plant colocated with Raízen’s 80 MMly Costa Pinto sugarcane ethanol plant in Piracicaba, São Paulo, Brazil. Raízen handled the engineering and procurement functions for the project.

No. of RINs (millions)

No. of RINs for ethanol (millions)

32.96

0.68

2.69

142.89

90.30

14.33

14.00

0.05

SOURCE: U.S. EPA

33 million cellulosic RINs generated in 2014

U.S. EPA data indicates nearly 17.21 billion renewable identification numbers (RINs) were generated last year, including more than 33.01 cellulosic RINs. Approximately 32.96 million D3 cellulosic RINs were generated in 2014, along with 54,308 D7 cellulosic diesel RINs. According to the EPA, 683,643 D3 RINs were generated for ethanol, 44,168 for cellulosic renewable gasoline, 14.91 million for renewable compressed natural gas and 17.35 million for renewable liquefied natural gas. More than 14.33 billion D6 renewable fuel RINs were generated last year, with 14

Some chemical companies focus on this

billion of those RINs generated for ethanol. The remaining D6 RINs were generated for biodiesel and nonester renewable diesel. Approximately 142.98 million D5 advanced biofuel RINs were generated in 2014, including 90.3 million generated for ethanol. D5 RINs were also generated for biogas, naptha, heating oil, non-ester renewable diesel and renewable compressed natural gas. In addition, nearly 2.69 billion biomassbased diesel RINs were generated last year, with 2.14 billion of that volume generated for biodiesel.

or that

Buckman takes a wider view. Some chemical companies focus only on process. Some focus solely on water treatment. Buckman takes a comprehensive approach and looks at the bigger picture — return on investment and environment. We look at every aspect of your plant’s operation,

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 2015 | Ethanol Producer Magazine | 25

DISTILLED

USDA publishes final REAP rule In late December, the USDA published a final rule for the Rural Energy for America Program. The program, which was established by the 2008 Farm Bill and reauthorized by the 2014 Farm Bill, provides financial assistance to agricultural producers and rural small businesses to purchase, install and construct renewable energy systems. The program also supports energy efficiency improvements and energy audits. The final rule modifies REAP based on comments received on the interim rule, which was published in April 2011, and the proposed rule, published two years later in April 2013. Within the rule, the USDAâ&#x20AC;&#x2122;s Rural Businesses Cooperative Service estimates 1,393 total REAP awards will be made during a typical fiscal year, with more than a third of those awards supporting renewable energy systems (RES). Most of the RES awards are expected to be associated with solar, followed by wind and biomass projects. Bioenergy and anaerobic digestion projects are among those eligible for the program.

E2 predicts growth in advanced biofuels Advanced biofuel capacity topped 800 million gallons last year, up from the previous year and almost double the capacity in 2011, according to a study released by Environmental Entrepreneurs (E2). The E2 Advanced Biofuel Market Report 2014 projects that by 2017, 180 companies could be producing 1.7 billion gallons of advanced biofuel, doubling current capacity. E2 defines advanced biofuel as a nonpetroleum liquid fuel that achieves a 50 percent reduction in carbon intensity compared to a petroleum-fuel baseline, as determined by the U.S. EPA and the California Air Resources Board. According to the report, a total of 181 companies are actively working on advanced biofuels in North America, with 167 commercial facilities and nine dem-

Leaf Technologies is the business unit of Lesaffre dedicated to the biobased ethanol and chemicals industries. At Leaf Technologies we are starting a new path in our development with the will to offer our partners more specialized products and services, to continue innova-

E2's advanced biofuel forecast Year

Capacity (million gallons)

2013

786

2014

818

2015

845

2016

878

2017

1,050

SOURCE: E2 ADVANCED BIOFUEL MARKET REPORT 2014

onstration facilities either operating, under construction or in advanced planning stages. Cellulosic ethanol capacity was estimated to be 58 million gallons in 2014, increasing to between 182 million and 215 million gallons by 2017, with of 26 or 27 production facilities.

ting in the field of first and second generation ethanol and to exceed the industries expectations. Based on our expertise in genetics, scaling up, fermentation, yeast production and through technical support we will be focused on turning science into industrial reality.

DISTILLED

Pacific Ethanol, Aventine announce merger

Pacific Ethanol Inc. and Aventine Renewable Energy Holdings Inc. have entered into a definitive merger agreement. According to the companies, Pacific Ethanol will acquire all of Aventineâ&#x20AC;&#x2122;s outstanding shares in a stock-forstock merger transaction. Under the terms of the merger agreement, Pacific Ethanol expects to issue approximately 17.75 million shares of its common stock upon closing in exchange for all of the issued and outstanding shares of Aventineâ&#x20AC;&#x2122;s common stock. Upon completion, existing Pacific Ethanol shareholders will own approximately 58 percent of the issued and outstanding shares of common stock of the combined entity, and Aventine will nominate two representatives to be named later to Pacific Ethanolâ&#x20AC;&#x2122;s board of directors, increasing the total board count to nine. According to information released on the agreement, Aventine will be operated as Pacific Ethanolâ&#x20AC;&#x2122;s wholly owned subsidiary. The transaction is expected to close during the second quarter of 2015.

Canadian fuel ethanol statistics 2013

2014

2015

Production (million liters)

1,730

1,745

Imports (million liters)

1,214

1,360

1,365

Consumption (million liters)

2,943

3,106

3,110

1,800

96%

97%

Plants Capacity (million liters) Capacity utilization SOURCE: USDA FAS GAIN

Report highlights status of Canadian ethanol industry

The USDA Foreign Agricultural Serviceâ&#x20AC;&#x2122;s Global Agricultural Information Network has published an annual report on the Canadian biofuels industry that estimates ethanol production in Canada increased by 1 percent last year, reaching nearly 1.75 billion liters (460.98 million gallons). Production is expected to hold steady this year. According to the report, Canadaâ&#x20AC;&#x2122;s ethanol industry currently has 1.8 billion liters of production capacity. That level is expected to be maintained in the future unless substantial changes occur in economics.

Canadian production is not sufficient to meet domestic blending targets. To meet mandates, the country must import more than 2 billion liters of ethanol each year. Canada is expected to consume 3.11 billion liters of fuel ethanol this year, increasing to 3.11 billion liters next year. The nationâ&#x20AC;&#x2122;s overall blend rate for this year is expected to reach 7.1 percent, with the blend rate in 2015 expected to drop slightly to 7 percent.

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28 | Ethanol Producer Magazine | MARCH 2015

EMISSIONS

Efficient Producers

Up the Ante Proving GHG reduction to EPA now boils down to four numbers. By Susanne Retka Schill

Four key numbers representing the mass and energy balances of an ethanol plant—bushels of corn, gallons of ethanol, standard cubic feet for natural gas and kilowatt-hours for electricity—plugged into a new U.S. EPA spreadsheet will calculate an ethanol plant’s life-cycle greenhouse gas (GHG) emissions. The thresh-

kWh

old to beat is a 20 percent reduction in GHG emissions compared to the baseline gasoline, which is what is needed for a plant to generate renewable identification numbers (RINs) above the volume grandfathered in under the renewable fuel standard. The EPA’s new petition process—dubbed EP3 for efficient producer petition process—promises to speed up the agency’s review of efficient corn ethanol plants seeking to increase their allowable RINs generation. See the accompanying sidebar for a review of the relevant provisions in the 2007 law establishing the renewable fuel standard regarding grandfathered plants, the petition process established in EPA’s 2010 final rule and the handful of corn ethanol plants approved under the original scheme. EP3 is a big improvement over the old system, although there are some important challenges to consider in the compliance details, explains Brent Riffel, a California-based consultant. “With the new way, it’s a very streamlined greenhouse gas calculation in an Excel file,” he explains. The four pieces of information on inputs and output go into the GHG calculation tool, which calculates whether the plant meets the 20 percent GHG reduction threshold. “For the first time producers don’t have to report their coproduct yields, whether making dried distillers grains with solubles or wet, or whether they are extracting corn oil.” There are three GHG calculation tools, he continues, “corresponding to three subcategories—whether you process only corn, only grain sorghum, or both. So MARCH 2015 | Ethanol Producer Magazine | 29

EMISSIONS Efﬁcient Producers under the new Petition Process Life-cycle GHG Emissions (kgCO2e/mmBtu) EPA 2010 Modeling Baseline life-cycle GHG emissions for gasoline

Upstream emissions

Corn starch ethanol, natural gas-ﬁred dry mill, 100% DDGS, no advanced technologies

Marquis Hennepin

Siouxland Jackson

47.6

46.9

Process emissions

19.2

32.4

29.0

27.5

Downstream emissions

79.0

2.1

Total life-cycle emissions 98.2

81.7

78.0

76.5

Percent reduction

16.8

20.6

22.1

Upstream emissions includes the life-cycle GHG emissions associated with producing the corn feedstock and transporting it to the fuel production facility. Process emissions includes the life-cycle GHG emissions associated with the fuel production process. Downstream emissions includes the life-cycle GHG emissions associated with distributing and using the ﬁnished fuel. Emissions reported at EPA's mean estimate for each stage. SOURCE: EPA PATHWAY APPROVAL LETTERS FOR THE INDIVIDUAL PLANTS

far as I know, EPA has only approved corn ethanol pathways, although I just submitted one based on both corn and sorghum.” The biggest difference, he adds, between the old and new systems is the time it takes. “The producer uploads a ZIP file that contains nine documents and from the time they do that to receiving approval is about four to six weeks,” he says. “Previously, it was four to six months.” Riffel has become quite familiar with the EPA’s petition process. He worked with three of the plants receiving approval under the old system, including Absolute Energy LLC, in St. Ansgar, Iowa, which was the first. Seven of the nine EP3 applications receiving approvals in December were completed by him. The first class of nine graduating under EP3 include: Cardinal Ethanol LLC, Union City, Indiana; CHS Rochelle, Rochelle, Illinois; Husker Ag LLC, Plainview, Nebraska; Little Sioux Corn Processors LLLP, Marcus, Iowa; NuGen Energy LLC, Marion, South Dakota; Patriot Renewable Fuels LLC, Annawan, Illinois; Red Trail Energy LLC, Richardton, North Dakota; Siouxland Ethanol LLC, Jackson, Nebraska; and Marquis Energy LLC, Hennepin, Illinois. The GHG calculation tool solved one of the issues with the old system. “Previ-

30 | Ethanol Producer Magazine | MARCH 2015

ously there was no easy way to determine what your feedstock emissions were going to be,” Riffel explains. Small changes in ethanol yield directly impact bushels used and that ripples through the feedstock lifecycle analysis, with indirect land use change being the largest single component. In the new GHG tool, the complex modeling done for the 2010 rule has been reduced to a single emission factor for corn upstream GHG emissions of 9.73 kilograms CO2 equivalent per bushel of corn at 15.5 percent moisture. “There’s now a distinct number that producers can look at and determine what their emissions are based on ethanol yields on the corn,” he says. In the new petition process, EPA lays out the documentation required in detail, down to the format to use. A professional engineer is needed to sign off on the required detailed process flow diagram, Riffel says. No other verification is needed for the process data that is submitted, beyond keeping records of utility bills to document natural gas and electricity use.

Daily Data Collection

The issues and challenges surrounding the EP3 system are found in the compliance requirements. Corn ethanol producers are already collecting data on all but one

EMISSIONS

EP3 Approvals in First Group Red Trail Richardton

Patriot Annawan

46.6

46.7

46.6

46.4

45.4

46.5

46.2

28.8

29.4

28.0

26.5

23.9

29.2

28.3

2.1

77.5

78.2

76.7

75.0

71.4

77.8

76.6

21.1

20.4

21.9

23.6

27.3

20.8

21.9

NuGen Marion

Little Sioux Husker Corn Plainview Processors Marcus

piece of information required for compliance, frequency of data collection is the issue. “The regulation is based on the 365-day rolling average of [a plant’s] data, not monthly data,” Riffel explains. “That has caused quite a lot of consternation because of the physical challenge—feedstock consumed and ethanol produced are done on a monthly basis and those readings are much more accurate than daily readings. The EPA is unwilling to do it on a monthly basis because RINs need to be generated daily and they are very concerned that RINs not be generated for batches of ethanol that don’t qualify.” “Producers have to come up with methods to collect data daily, measuring their volumes of ethanol produced and bushels of corn at exactly the same time each day and reading utility meters exactly at the same time each day, which they haven’t necessarily done before,” he continues. The data is recorded every day as a line item in the GHG calculation tool and submitted quarterly to the EPA. “The really advanced plants already have systems that are designed to collect this data and they just need to designate a person to validate the data is accurate,” Riffel adds. “Some of the others that might not have the expensive automated technology have to create a protocol and assign personnel.”

CHS Rochelle

Cardinal Ethanol

Some plants are using the more accurate monthly calculations to improve their accuracy going forward. There is an incentive to be sure data is recorded daily. The emission level for the baseline gasoline is to be used on any day with missing data. The requirement to measure the moisture on every load of incoming corn will not be an issue since nearly all plants probe and measure each incoming load already. Once the bushels and moisture are recorded, the GHG calculation tool automatically adjusts the volume to a standard 15.5 percent moisture. The missing piece of data is the temperature of ethanol at measurement. “The EPA regulation is based on ethanol volume at 60 degrees Fahrenheit,” Riffel says. “In the initial draft of EP3, the EPA required producers to include the temperature recorded at the time of ethanol volume measurement, which a lot of plants don’t do. They have a temperature-corrected meter, but they don’t take separate temperature measurements.” Riffel was involved in the beta testing of the regulations, and in the end, EPA changed that requirement to allow either the temperature-corrected values meter or to record the volume and temperature. |article continued on page 33| MARCH 2015 | Ethanol Producer Magazine | 31

EMISSIONS

First Pathway Petition Used By Few Grandfathered Corn Plants Petitions under the 2010 rule Life-cycle GHG emissions (kgCO2e/mmBtu) EPA 2010 modeling Corn ethanol, natural gas-ﬁred, dry mill, 100% dry DGS, no advanced technologies

E-Energy Adams (8% DDGS, 92% MDGS)

Absolute Energy* (100% DDGS)

Marquis Wisconsin (94% DDGS)

Net domestic ag (w/o land use change)

Net international agriculture (w/o land use change)

Domestic land use change

-4

International land use change, mean (low/high)

32 (21/46)

31 (20/45)

Baseline gasoline

Fuel production

Fuel and feedstock transport Tailpipe emissions

Total emissions in mean (low/high)

82 (71/96)

75 (64/89)

77 (66/91)

76 (65/90)

GHG reduction from the baseline (percent)

*Others approved under the Absolute Energy Pathway: Guardian Energy, two Valero Renewable Fuels plants and Hankinson Renewable Energy SOURCE: EPA PATHWAY APPROVAL LETTERS FOR THE INDIVIDUAL PLANTS

Revisions to the renewable fuels standard were authorized in the 2007 Energy Independence and Security Act, but it took EPA more than two years to flesh out the details. EISA grandfathered in existing biofuel plants, including those under construction as of December 2007, and said any new gallons must show at least a 20 percent GHG reduction when compared to the baseline gasoline. The final rule published in February 2010 established the rules for RINs used to track the gallons applied to the diﬀerent fuel categories, with existing corn ethanol plants approved to generate D6 RINs in the category of renewable fuels. In the modeling done as part of the 2010 rule, EPA found that the average dry mill using natural gas and drying 100 percent of its distillers grains realized GHG reductions of 17 percent, which included controversial international indirect land use change emissions. The EPA also evaluated the GHG impacts of several advanced technologies, including corn oil extraction, membrane ethanol dehydration, raw starch hydrolysis and combined heat and power. The 2010 rule established three pathways for dry mills that would meet the 20 percent GHG threshold, including those drying no more than 50 percent of their distillers grains and those drying no more than 65 percent of their distillers grains, 32 | Ethanol Producer Magazine | MARCH 2015

plus using one of the advanced technologies. Plants utilizing two of the advanced technologies were also determined to meet the 20 percent GHG reduction threshold. A fourth corn-starch pathway named wet mills using biomass or biogas for process heat as meeting the GHG threshold. In essence, a big chunk of the industry’s producers processing 100 percent DDGS were limited to their grandfathered volumes, unless they petitioned the EPA. The 2010 rule established a process for producers wanting to demonstrate their efficiencies were better than the average used for the pathway modeling. A handful successfully petitioned EPA, providing data the agency used in its model to determine they met the 20 percent GHG reduction threshold. Reading the publicly available approval letters provides insights into how the process unfolded, even as the agency keeps most of the plant’s detailed information confidential, such as reported ethanol yield and actual energy use. Absolute Energy was the first to get its petition approved in February 2013. The EPA letter of approval notes that the company reported a 16 percent improvement in energy efficiency since start up. Four other plants were approved under that pathway: Guardian Energy LLC, in Janesville, Minnesota; Valero Renewable Fuels plants in Ft. Dodge, Iowa, and Welcome,

EMISSIONS Minnesota; and Hankinson Renewable Energy in Hankinson, North Dakota. The approval letters indicate these plants met the same metrics as Absolute Energy for energy efficiency. All those under that pathway are required to demonstrate they use no more than 26,000 Btu of natural gas per gallon of ethanol produced and no more than 1,970 Btu of grid electricity. Two other plants were approved separately. E Energy Adams’ letter includes a discussion on the accounting of energy used in a tower grain dryer at the Adams, Nebraska, plant and states the natural gas use for corn drying could be excluded, as long as it

was separately metered, because it was included in the modeling for the corn feedstock. Marquis Energy-Wisconsin’s letter mentions higher electrical energy and slightly lower natural gas use at the Necedah, Wisconsin, plant than the Absolute pathway. Marquis’ letter also includes a discussion on the plant achieving ethanol yields better than the 2.71 gallons of ethanol per bushel of ethanol used by the EPA in its modeling for the 2010 rule. The accompanying chart shows the impact of improved energy efficiency and how above-average ethanol yields aﬀect the indirect land use change modeling.

|article continued from page 31|

natured ethanol and for the sustainability certification required for exporting ethanol. Marquis says the effort is worth it. “I think there’s more efficient ways for plants to get ideas on how to improve their energy efficiency than going through this EPA process, but anytime you have to take a detailed approach into things you might not otherwise have to look at, it certainly can’t hurt. I think there’s one or two things they want to document on a more frequent basis than we were doing,” he continues. “But honestly, with the different oversight that we have from different regulators, it certainly wasn’t onerous beyond the point where we thought there was value in doing it.” One of the big benefits for Marquis Energy’s COMPLIANCE CHECK: The combinations of electricity and natural gas use per gallon are shown for several levels of ethanol two plants is that their production, yield, giving a quick way for producers to see what kind of production performance is required to meet the 20 percent GHG while still needing to meet air perreduction threshold. mit limits, is no longer limited to the SOURCE: RIFFEL CONSULTING registered, grandfathered-in volume. “As long as we can show on an onup the ante on the data collected,” he says. going basis that the gallons we’re producing Producer Experience Some things needed to be done prior to the [at each location] meet that threshold that Marquis Energy has the distinction of application, such as adding meters to be is spelled out on our pathway, then we can being the only company, to date, to have pe- able to separate out the electrical and natuproduce gallons.” And as a result, Marquis titions approved under the original and new ral gas use in the administration building Energy’s longstanding plans to double the processes. Riffel adds Marquis was also the from the energy used in the process. “You capacity at Hennepin by building a second first to work through the EP3 application. inherently do close to what is needed,” he facility identical to the fi rst have been mov“They provided EPA with the tough ques- adds, “but it wasn’t easily documented or it ing forward. “It should be functional near tions and made them think through some wasn’t broken down into the components the close of this year,” he said. of these issues.” you need or at the frequency you need, be it Jason Marquis, production manager at daily or weekly or monthly, where traditionAuthor: Susanne Retka Schill Marquis Energy, says the experience in get- ally it was done only annually or monthly.” Senior Editor, Ethanol Producer Magazine 701-738-4922 ting the Wisconsin plant approved under He adds they had some of the data issues sretkaschill@bbiinternational.com the old system was helpful in knowing what figured out already as part of getting the was needed at the Illinois plant. “We had to distilled spirits permit needed to sell unde-

Corn Ethanol Compliance Combinations under EP3

MARCH 2015 | Ethanol Producer Magazine | 33

CORN QUALITY

34 | Ethanol Producer Magazine | MARCH 2015

CORN QUALITY

2014 Corn Crop:

Bumper Bushels, Good Quality EPM survey provides a snapshot of the new crop. By Susanne Retka Schill

A bumper crop of corn was harvested in 2014, guaranteeing healthy supplies for ethanol production, feed and other uses. Overall, the quality was

good, although cold weather toward the end of the growing season dented the final numbers in Iowa. “Even though we had record yields in Iowa, we would have had record-record yields,” says Charles Hurburgh, Iowa State University extension corn quality expert. “If it hadn’t been quite so cold right at the end of the grain fill season, we could have added another 3 to 10 bushels per acre. The potential was there. We had plenty of moisture, but with the cold weather at the end of grain fill, the starch didn’t pack into the kernels quite as well as if that last two or three weeks had been mid-70s, low 80s.” Tracking the impact of corn quality for ethanol production has not been done in the past, Hurburgh says. With his help, Ethanol Producer Magazine prepared a survey sent to management at 109 plants. The responses from Iowa, Minnesota and Wisconsin, showed the impact of that late, cool season, with test weights all over the board, from less than 54 pounds per bushel to 57 or better. The accompanying map shows the average quality reported by state, with the replies from non-Corn Belt states aggregated into one response. MARCH 2015 | Ethanol Producer Magazine | 35

USGC Survey: Top Quality Across Corn Belt For the fourth year, the U.S. Grains Council provided a survey-based report and narrative on the year’s weather and crop conditions for foreign buyers of U.S. corn. In its report on the 2014 crop, the USGC averages the results of 629 samples collected on incoming corn at local grain elevators in 12 of the top corn-producing and exporting states. The overall quality of the corn crop is high, the USGC reports. The average test weight was 57.6 pounds per bushel, with nearly 95 percent of the samples above the limit for No. 2 corn. “While lower than 2013 and the [three-year average], this test weight indicates good kernel filling and maturation,” the report says. The survey found low levels of broken corn and foreign material at 0.8 percent on average, although 1.7 percent higher total damage levels than previous years. Nearly 95 percent of the samples, however, were still below the limit for No. 2 corn. Moisture was 16.6 percent, lower than 2013, but higher than the three-year average. Protein at 8.5 percent dry basis was lower than 2013, 2012 and the three-

TW 57.6

Pro 8.5

year average. Starch concentrate was 73.5 percent dry basis and the oil concentration of 3.8 percent dry basis was higher than last year, as well as the three-year average. All the USGC samples tested below the FDA aflatoxin action level. There were significantly lower incidents of aflatoxins compared to the 2012 crop and similar to the 2013 crop. All of the samples tested below FDA action levels for DON (vomitoxin) for all animal species, although somewhat higher than the previous two crops. Besides making the report available on its websites, USGC representatives have begun presenting the findings to customers in overseas markets to provide them “the critical information they need to make informed purchases and build confidence in the quality of this year’s corn crop,” the USGC says in a report on some of those first meetings.

Starch 73.5

Oil 3.8

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CORN QUALITY While the 41 percent response rate for this survey is considered extremely good, realistically, with just one or two, or up to seven responses from each state, this survey provides only a snapshot of this year’s corn crop quality as experienced by the ethanol industry. Hurburgh adds that agriculture surveys of this type usually get good response rates, as did this one, and comparing this data to the U.S. Grain Council’s corn quality survey indicates this survey’s results are in high agreement. “I’ll bet that you had maybe over 2 billion bushels of consumption represented. If you can get that much of the product represented you’ve got a pretty good idea of what the situation is.” A survey like this is helpful for a particular plant to gauge how its corn supply compares to others in the industry, and should be particularly helpful for marketing distillers grains, Hurburgh explains. While the quality parameters of anhydrous ethanol are not impacted so much by corn quality, any issues with the raw material are amplified by three in the distillers grains, he says, adding, “There’s no question that at some point, information that covers an industry like this goes from being helpful to becoming a competitive issue,” he says, “which is why reporting at the aggregate level is as far as we can go.” The survey provides other insights. “We did a survey in 2006 in Iowa, and plants said then that they measured just test weight and moisture.” He’s very pleased to see that most

respondents measure every incoming load of corn for the four standard grade factors of test weight, moisture, total damage and broken corn and foreign material, although a much smaller number report measuring every load for protein, oil and starch. “It doesn’t surprise me at all that only a few test for oil and protein and few more for starch and toxins. Those things are not so easy to get, although protein and oil are easier to get on a load-by-load basis with an NIR (near infrared grain analyzer), just like starch is.” That intensive measurement may not be needed, he adds, because that level of data isn’t helpful. “You notice, though, there are more who do the composition testing on a composite sample. That’s more like what will come out of the tanks.” About three-fourths of the respondents were testing composite samples of corn for starch content, a few less test for protein or oil and a similar number test composites for aflatoxin or vomitoxin. The survey also gives hints of what may be ahead, as one plant reported composite loads are checked for fiber, another plant checks for density, and one other tests for ash, calcium, phosphorus, magnesium, potassium and sulfur. “With the degree of raw material acquisition we have now, chances are producers just want to know the averages that will reflect the average content of the DDGS,” Hurburgh explains. “As we go forward and plants begin to ask questions like, ‘What can we do about it?

Can we make it better?’ Then you have to measure every incoming load.” Toxin testing is slow and expensive, he continues. “You’re not going to check every load, except in extreme cases like 2009. We got some really bad corn in the eastern Corn Belt that year and they had to test every load. They couldn’t afford not to. But most of the time, the composite will tell if there’s going to be a problem in the DDGS.” As the industry matures, Hurburgh says measuring corn quality will become more important. “The more that we do with the corn, other than just grind it and put in a fermentor, the more the properties of the incoming corn become important,” he says, “For example, with front or back end fractionation, all of a sudden the oil content has a great deal to do with how difficult or easy it’s going to be to get a good yield of oil per bushel.” He also predicts that as the industry moves toward consolidated management, a more industrial thought process will emerge as the new managers bring a different mindset. “They come from other industries that don’t regard their raw material as a commodity,” he says. “Agriculture has always regarded its raw material as a commodity, because there was a lot of it and it had relatively low value, but that’s all changed.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com

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PROFILE

EYE CATCHING CROP: Red sorghum starts to color in the field. Sorghum grain heads are green to start out with, and as they ripen, turn red, bronze, tan, cream, white or black. PHOTO: UNITED SORGHUM CHECKOFF PROGRAM

40 | Ethanol Producer Magazine | MARCH 2015

PROFILE

Big

Demand, Small Supply

Even while taking advantage of recent export opportunity to China, the U.S. sorghum industry continues developing long-term markets, like supplying Californiaâ&#x20AC;&#x2122;s ethanol plants with bigger volumes of feedstock. By Holly Jessen

If it were available and priced competitively, Lyle Schlyer, president of Calgren Renewable Fuels LLC, would run the 58 MMgy California ethanol plant on 100 percent sorghum. This year, however, the plant is grinding

very little of the feedstock, which is also known as milo. The four ethanol producers in California share an interest in sorghum. This summer, Calgren, which is located in Pixley; Pacific Ethanol Inc., which has plants in Stockton and Madera; and Aemetis Advanced Fuels Keyes Inc., which has a plant in Keyes; each received three-year $3 million matching grants from the California Energy Commissionâ&#x20AC;&#x2122;s Alternative and Renewable Fuel and Vehicle Technology Program in late summer. Although each company will use the grant money differently, the overall goal is to develop a sorghum feedstock program and use more sorghum in California ethanol plants, Schlyer says. That includes work to increase the supply of sorghum grown in California, which is currently nearly nonexistent.

MARCH 2015 | Ethanol Producer Magazine | 41

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SHADES OF SORGHUM: White sorghum and red sorghum grow in a California field trial. Red sorghum is the most common and recognizable sorghum, according to information from the United Sorghum Checkoff Program. Although true white sorghum can be categorized as food grade, it can also be used as an animal feed or to produce ethanol. PHOTOS: JEFF DAHLBERG, KEARNEY AGRICULTURAL RESEARCH & EXTENSION

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42 | Ethanol Producer Magazine | MARCH 2015

But even as the companies started working toward those goals, market dynamics shifted significantly, sucking larger-than-normal amounts of sorghum into exports, particularly to China, which increased the price and tightened supply. Although that means sorghum use at ethanol plants, including Calgren is down, it doesnâ&#x20AC;&#x2122;t change the fact that Schlyer sees it as an ideal ethanol feedstock, particularly in California, which has been in the midst of a drought. â&#x20AC;&#x153;The fact that sorghum isnâ&#x20AC;&#x2122;t available at a commercially attractive price this year doesnâ&#x20AC;&#x2122;t bother us, because we needed to do some front-end agronom-

ic work anyway,â&#x20AC;? he says. â&#x20AC;&#x153;Weâ&#x20AC;&#x2122;ve always viewed this as a long-term program.â&#x20AC;?

The China Factor

Two big catalysts for increased sorghum exports to China were the tariff rate quota on corn and extreme demand for feed grain, says Florentino Lopez, executive director of the United Sorghum Checkoff Program, adding that in a typical year about 30 to 40 percent of U.S. sorghum is exported. â&#x20AC;&#x153;The last 22 months have been somewhat different considering the need from China,â&#x20AC;? he told Ethanol Producer Magazine in late January, adding

PROFILE

that demand from China had pushed that number to 57 percent and it was still growing. Carrie Williams, merchandising manager for AgMark LLC, a Kansas-based grain company, says in the 2012-’13 marketing year, 76 million bushels of sorghum was exported. Thanks to Chinese demand for nongenetically modified grains, for 2013’14, the USDA is estimating 212 million bushels of sorghum exports. For 2014-’15 the projection is 230 million bushels. China’s announcement that it wouldn’t be accepting shipments of corn containing Syngenta’s genetically modified trait MIR 162 corn was another factor in strong demand. In January, following the December announcement that China would again accept GMO corn, things did appear to be slowing down on the sorghum export side. But it wasn’t yet clear if that was because Chinese buyers were purchasing less sorghum or just because the sorghum supply was getting low. “It certainly feels like there is still some depth in the demand for the Chinese market, there’s just not depth in supply,” Williams says. “A lot of sorghum has been fairly aggressively sold into that market. So it’s depleting stocks as you would anticipate that it would, at that sort of premium market.” The demand pushed prices up, Lopez says. In 2010 to 2013, the average sorghum price was about 95 percent the price of corn. In 2014, with the full year impacted by an increase in sorghum exports, the value of sorghum soared to 102 percent the price of corn. “These are average values based on the USDA prices paid to farmers, so in many areas this would be significantly higher,” he says. Export-induced supply constraints and price increases did have an impact on other markets, both domestically and internationally. Ethanol producers that use sorghum as a feedstock are one of the end users that have been impacted. Increases in exports had to come from somewhere, Williams says, pointing to the January USDA report, which projected a 40 million bushel increase

China’s Appetite For Sorghum Marketing Year

Total Exports

Exports to China

2012-‘13

1.616 million mt

58,376 mt*

2013-‘14

5.063 million mt

4.494 million mt

**2014-‘15

6.306 million mt

4.963 million mt

In metric tons, *China’s first sorghum commitment, **first 19 weeks of year SOURCE: USDA FOREIGN AGRICULTURAL SERVICES

in exports and a 35 million bushel decrease in the food, seed and industrial category, which includes ethanol production. “We don’t have an endless supply of sorghum,” she says, contrasting the projected 433 mil-

lion bushel sorghum supply for this year with the 14.3 billion bushel corn supply. The goal of the sorghum checkoff program is to increase the profitability of U.S. sorghum producers, advance the use

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PROFILE

SEEING RED: Distillers grains produced from sorghum is high in protein and consistent in composition, says the United Sorghum Growers Association. PHOTO: UNITED SORGHUM CHECKOFF PROGRAM

%QOOQFKVKGU

of sorghum as an ethanol feedstock and develop foreign markets for the crop. In December, $3.65 million was invested in research and other projects to increase grower productivity and demand, including research projects for biofuels enhancement. â&#x20AC;&#x153;This strong demand and value seem to be sending a message that a supply increase is needed,â&#x20AC;? Lopez says. â&#x20AC;&#x153;We feel domestic and international markets can be meeting with proper supply, consistent demand and reliable values.â&#x20AC;?

From Milo To Ethanol

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44 | Ethanol Producer Magazine | MARCH 2015

Since it is typically priced at a discount to corn, sorghum is a cost-effective feedstock for ethanol producers. The grain has a comparable ethanol yield to corn and produces a good distillers grains product, says Tim Lust, CEO of National Sorghum Producers and the Sorghum Checkoff. Sorghum use for ethanol production has been fairly static over the past few years. In a typical year, about 120 to 130 million bushels of U.S. sorghum, or onethird of the crop, goes into ethanol production, Lust says. There are about 12 ethanol plants that are consistent and regular users of sorghum, with the grain making up 10 to 100 percent of the plantâ&#x20AC;&#x2122;s feedstock ratio. Another 12 ethanol plants are in good locations to step in or out of the sorghum market, depending on supply and price. Finally, another 12 ethanol plants have previously used sorghum. The checkoff program is working to build sorghum supply in the right place and help ethanol producers build relationships with sorghum producers, he says. The White Energy plant in Russell, Kansas, is one that uses a lot of sorghum to produce ethanol. The plant, which was built in a sorghum growing area adjacent to a gluten facility, utilizes two-thirds sorghum and one-third wheat starch, a waste stream of the gluten plant, says Michael Ernst, plant manager. The 55 MMgy facility was impacted by the situation in China and he says heâ&#x20AC;&#x2122;s relieved to see the situation resolving. While contract price varied,

PROFILE

he saw some that were $5 or more a bushel, compared to prices ranging from $3.80 to the low $4 range last year. As a result, the company did supplement some with corn, although the last truckload was scheduled to come in in mid-January. “It’s starting to loosen up a little for us,” he says. In California, Calgren will spend the largest portion of the grant money it was awarded to actually purchase sorghum. While the grant doesn’t specify that the money has to be spent on California-grown sorghum, that’s the company’s goal. The point of the program is to develop reliable supply lines of sorghum to California ethanol producers. “In my humble opinion, that’s done with California growers,” he says, adding that a long-term solution is what is needed. “We believe that there are selected areas in California that can grow sorghum as an alternative to other crops, and have that make sense for the grower. And, if we are right, that helps us secure a California source of feedstock for our ethanol plant. We bring in way too much of our feedstock, in my view, from the Midwest. We’d love to find a way to team with California growers that makes sense to California policy makers.” In early 2014, a kickoff meeting was held with California agronomists working on the research side of the equation. One is Jeff Dahlberg, director of the University of California division of Agriculture and Natural Resources Kearney Agricultural Research and Extension Center, who says the center is in the midst of a couple programs that examine how forage and grain sorghum grows in various areas of the state. Work is also being done to come up with water-use efficiency numbers on the drought-tolerant crop. “As with most crops in California, it comes down to profitability and markets,” he says. “Can you profitably grow sorghum and are there markets? The answer is yes to both, but your profit margins would not be the same as growing a high-value crop.” He does believe there are good opportunities for sorghum as an ethanol feedstock in California and elsewhere. “Sorghum is

one of the few agronomic crops that can fit into all the renewable schemes being proposed. It can be used like corn in grain-toethanol production, sweet sorghum can be used like sugarcane in production of ethanol, forage and bioenergy sorghums can be used in both lignocellulosic and cellulosic strategies for renewable fuels,” he says. “Unlike many of the other crops being pro-

posed for renewable feedstocks, sorghum has a robust seed industry in place and also a good amount of research on its agronomics, diseases, and insect issues.” Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

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MARCH 2015 | Ethanol Producer Magazine | 45

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S P OT L I G H T on

Illinois

Some of the most influential players in gaining federal support for the early ethanol industry have roots in the Land of Lincoln. By Holly Jessen

Illinois, the No. 3 ethanol producing state, has a unique history that goes back to some of the earliest days of the ethanol industry. Before

the farmer-cooperative model developed, companies like Archer Daniels Midland Co. and Pekin Energy Co. worked hard to secure federal tax credits and find a market for ethanol as transportation fuel. “Those companies had a lot to do with the early industry,” says Dave Loos, technology and business development director for the Illinois Corn Growers Association. Today, ADM still operates two plants in the state, located in Decatur and Peoria. According to ADM’s company timeline, the Arab oil embargo of the early 1970s prompted President Jimmy Carter to ask Dwayne Adreas to convert a new beverage alcohol plant in Decatur to a fuel ethanol plant. That project was completed in 1978. Pekin Energy Co., a joint venture of Texaco and Corn Products Co., operated an ethanol plant in Pekin, Illinois, which is now operated by Aventine Renewable Energy. The coal-fired wet mill was built as a sugar processing facility in 1899 and was converted to ethanol production in 1981, according to Aventine’s website. That company also operates a second plant, a dry mill built in 2007, at the same location on the east bank of the Illinois River. Notably, a third facility in Pekin was owned by Midwest Grain Producers until 2009, when Illinois Corn Processing Holdings took over. An article published in the January 1981 Illinois Times estimated that about half of the fuel ethanol produced in the U.S. was made in Illinois. At that time commercial ethanol plants operated in 18 Illinois counties and there were another 21 small on-farm stills. The story, “Illinois: The Land of Ethanol,” was written by James Krohe Jr., the then associate editor of the monthly magazine on public affairs. Krohe also wrote about ADM’s Decatur plant and the company’s belief that there would be a market for fuel ethanol as a gasoline substi|article continued on page 52|

48 | Ethanol Producer Magazine | MARCH 2015

PROFILE

Illinois corn as an ethanol feedstock

151

Wet mills use

and

million bushels

343

Dry mills use More than

million bushels

1/2

the corn processed in Illinois is made into ethanol. Illinois ethanol could displace about

30%

of the stateâ&#x20AC;&#x2122;s fuel demand. SOURCE: PROEXPORTER NETWORK , ILLINOIS RENEWABLE FUELS ASSOCIATION

MARCH 2015 | Ethanol Producer Magazine | 49

HANDS-ON LEARNING: NCERC is part of a consortium of five community colleges in Illinois that are developing and enhancing training programs in bioprocessing and water management. The goal is to quickly help students find well-paying jobs. PHOTO: TIM MARTEN, NCERC

Industry Research Gem The National Corn-to-Ethanol Research Center is a not-for-profit research center located at Southern Illinois University, Edwardsville. It was established through the 1997 Farm Bill, with $14 million in federal money and $7 million in funds from the state of Illinois. John Caupert, director, touched on some high points:

When NCERC opened its doors in 2003, most of our research focused on process optimization and efficiencies in the corn ethanol industry. For the first five to seven years, the Center had many diﬀerent contractual clients conducting a diverse range of research and seeking validation and scale-up services in traditional corn-to-ethanol and advanced biofuels projects. These clients were often startup businesses, backed with venture capital funding. Today, many of our clients are household names, and the research spans well beyond traditional ethanol and biofuels projects into specialty chemicals and biobased products. While client names and day-to-day research projects may have shifted, one thing remains constant: NCERC is the only facility in the world at which corn ethanol, cellulosic ethanol, advanced biofuels and specialty chemical research is conducted simultaneously. Over the past 11 years, more than 50 technologies have passed through the Center’s doors to enter the commercial marketspace, generating in excess of $5.6 billion in annual revenue. We are very proud of our renewed eﬀorts in workforce training and education. A $10 million U.S. Department of Labor’s Trade Adjustment Assistance Community College Career Training program grant represents a new and exciting chapter in training the next generation of workers in the bioprocessing industries. Our past successes with internship programs and training for dislocated workers demonstrate the center’s expertise at developing and implementing successful education programs. Of our 62 past interns, 57 went on to immediate employment, with the remaining five going on to pursue further educational opportunities.

Ethanol History Book

EYE ON INDUSTRY: Manuel's first book, “North Country Blues: The Struggle to Sustain Mining on Minnesota's Iron Range, 1915-2000," is due out in September. Behind him is an abandoned factory, related to his first book. PHOTO: SOUTHERN ILLINOIS UNIVERSITY EDWARDSVILLE MARKETING AND COMMUNICATIONS

50 | Ethanol Producer Magazine | MARCH 2015

For the next couple of years, Jeﬀ Manuel, an assistant professor in the Southern Illinois University, Edwardsville, department of historical studies, will be researching the history of U.S. alcohol-based fuels in preparation to publish a book. In 2014, he spent one semester focusing on the project after he was selected by the National Cornto-Ethanol Center for a faculty fellowship program, which is sponsored by the Illinois Corn Marketing Board. He’ll be reading

PROFILE official documents on national and state energy policies as well as accepting personal histories from people with stories to tell about the history of the ethanol industry. Here’s what he had to say about the project: RETROSPECTIVE: Alcohol fuels have a history that goes way back. The plant typically considered the first major fuel ethanol plant in the United States was in Atchison, Kansas. It was run by the Chemical Foundation during the Great Depression of the 1930s. The Carter administration was a crucial era for U. S. energy policy and ethanol, or gasohol as it was known in the late 1970s and early 1980s. The 1970s energy crisis caused Americans to reevaluate their energy use and spurred development of many alternative energy sources, including ethanol. Ethanol was not central to Carter’s energy policies at first. It was only at the end of the 1970s that Carter embraced ethanol, mainly due to grassroots pressure from Midwestern farmers who made their problems known through protests such as the Washington, D.C., tractorcades of 1978 and 1979. Influential members of Congress from the farm belt also ensured that gasohol was included in Carter’s policies for alternative energy.

interest in converting surplus crops into fuel. ICE BREAKER: Once it’s published, I hope my book will contribute to the national conversation about ethanol and energy in several ways. I’m always surprised how few people in the general public realize that ethanol fuel dates back over a century. Much of the national discussion over ethanol

has ignored this important historical angle. Second, ethanol is a wonderful case study for examining how politics, technology, and even popular culture shaped U. S. energy policies over the past century. I think we can learn a great deal about the present and future of our national energy system by looking at ethanol’s past.

PRAIRIE STATE: Illinois has a long history with ethanol. One story that stands out to me is Beshers Plan for Bringing Back Better Times. This was a grassroots movement of farmers in 1933—the depth of the Great Depression—to require that all petroleum sold in the United States be blended with 10 percent ethyl alcohol made from U. S.-grown grains. It originated with a man named Paul Beshers around Peoria and quickly spread across the Midwest. Although Beshers’ plan was never adopted by the federal government, it spurred a lot of

MARCH 2015 | Ethanol Producer Magazine | 51

PROFILE |article continued from page 49|

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ADVANCED TECHNOLOGIES: Adkins Energy will soon be producing biodiesel from corn oil and, in the future, will have the opportunity to produce cellulosic ethanol. The plant also produces all its own electricity and some of its own steam with a CHP system. PHOTO: HILLSIDE STUDIO

tute. However, the article characterized ADMâ&#x20AC;&#x2122;s success in producing commercial quantities of fuel at a profit as what helped Charles Duncan, then U.S. energy secretary, to convince President Carter of the feasibility of the ethanol industry. â&#x20AC;&#x153;It might be more accurate to describe Illinois not as the Land of Ethanol, but the Land of ADM,â&#x20AC;? Krohe wrote in the 9,000 word article. While Illinois companies had a running start in the early days of the ethanol industry, with corn processing giants like ADM taking the lead, the state eventually fell behind, Loos says. Other states used the farmer-cooperative model to leapfrog ahead of Illinois for about 10 years. â&#x20AC;&#x153;Even now, although we have a very solid industry, we donâ&#x20AC;&#x2122;t have the capacity that an Iowa does, or even a Nebraska,â&#x20AC;? he says.

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The stateâ&#x20AC;&#x2122;s first small dry mill ethanol plant to embrace the cooperative model was Adkins Energy LLC, Loos says. Construction began at Atkins Energy in 2001 and the plant began operations in August 2002, says Ray Baker, general manager of the facility. When the plant started up, it was majority owned by two cooperatives, the Pearl City Elevator Coop and the Atkins Energy Co-op, made up of area farmers who signed up with a grain delivery requirement. In 2011, Adkins Energy Co-op was liquidated and the grain delivery re-

quirement was eliminated, Baker says. Today, the general membership owns 50 percent of the plant and the elevator co-op the other 50 percent. â&#x20AC;&#x153;Our main focus has been on operational efficiency improvements, improving our yields, as well as incremental expansion,â&#x20AC;? he says. â&#x20AC;&#x153;When the original plant was built, it was probably a nameplate capacity of about 38 MMgy and weâ&#x20AC;&#x2122;ve moved it up to a peak capacity of 52 MMgy.â&#x20AC;? A secondary focus is on product diversification and advanced biofuel opportunities. In late January, the company was producing batches of biodiesel at a 2 MMgy biodiesel plant colocated with the ethanol plant to take advantage of the corn oil separated at the ethanol plant as a biodiesel feedstock. The company hoped to reach full capacity sometime in February, Baker told Ethanol Producer Magazine. In addition, Adkins Energy is one of only a few U.S. ethanol plants that has an on-site, combined-heat-and-power system.

Strengths

Illinois has a strong transportation system via river and rail, plus access to nearby highvolume markets. Loos named the majority of the stateâ&#x20AC;&#x2122;s 14 ethanol plants located on or near the Mississippi or Illinois rivers, including two located at port authorities and one with its own river load-out facility. â&#x20AC;&#x153;The rest of the

PROFILE

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

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plants are connected to large rail systems that have easy access to containers for export,” he says, adding that the state’s transportation system removes some of the risk facing ethanol production facilities. Currently, only the ethanol plant in Canton, Illinois, is shut down. Central Illinois Cooperative filed for bankruptcy in 2007 before construction was completed on that facility. Overall, the state’s ethanol industry is strong. “I think Illinois ethanol plants have some of the best managers in the country,” he says. “We haven’t had the ebb and flow in the industry that other states have had.” Looking at corn production in Illinois, more than half goes to the state’s ethanol plants, according to numbers from ProExporter Network. In 2014, Illinois corn growers harvested 11.7 million acres of corn, with an average yield of 200 bushels per acre. “That’s just amazing,” says Jeff Jarboe, the vice president of ICGA board of directors. According to yield numbers from 2004-’05 on, that’s the highest yield on the list. In 2012-’13 Illinois had an average yield of 105 bushels compared to 178 bushels last season. The state’s ethanol producers do meet as the Illinois Renewable Fuels Association, Baker says, adding that it’s been very positive for the industry. “I think we’ve had a lot of success working together and I would hope we’d see continued success.” Perhaps someday the association will have paid full-time staff but for now Loos works with the group part time. Funding comes from the members and collaborative work with ICGA and Illinois Corn Marketing Board. The groups are currently working to encourage the state of Illinois to discontinue an E10 tax incentive for retailers and turn it into an E15 incentive. Since E10 is already a permanent part of the gasoline supply incentivizing the sale of that fuel is not effective, Baker says, adding that the change would help advance E15 offerings in the state and save the taxpayers money. Jarboe also pointed to work going on in Chicago to pass an ordinance that would require fuel retailers to offer E15. He’s hopeful that if the initiative is successful in that city, it could spread to the whole state. “I think it’s an excellent start,” he says, adding that it’s expected to come before the full city council for a vote in February or March.

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TALKING POINT

Evolving Corn Coproducts: Utilizing Fiber Fraction By Kurt A. Rosentrater

The biofuels story is not yet completely written.

Many exciting developments are on the horizon and some are actually within our grasp. Indeed, cellulosic ethanol is here and is being commercialized. But, first-generation, dry-grind plants are continuing to operate, increasing their operational efficiencies and evolving over time. Indeed, the industry isnâ&#x20AC;&#x2122;t standing still. Engineers and scientists at new startups, as well as long-established companies, continue to find ways to extract more uses and value from both the upstream kernels of corn and the downstream coproduct. These include fiber, proteins and other nutrients. Which of these new technologies will become commercial reality? Or, if they are already commercialized, which will be successful in the long term? It is difficult to predict the future. Utilization of fiber may indeed be the next big thing. Fiber is an effective dietary component in ruminant diets as they are natureâ&#x20AC;&#x2122;s ready-made cellulosic processing factories. For monogastrics, however, corn fiber has historically not been a key source of energy, as it is relatively indigestible. Recent swine and poultry research, however, has found that corn fiber in dried distillers grains with soluables (DDGS) plays a greater role as a dietary energy source than previously thought. From a downstream processing point of view, fiber is not terribly useful either. It absorbs water, is difficult to grind and it does not bind well with other constituents during processing operations such as pelleting or extrusion. But, corn fiber (or DDGS fiber) is a ready source of cellulose at first-gen ethanol plants. Thus, utilizing this fiber may be the next stepping-stone on the road to cellulosic ethanol. And, if converted into ethanol, corn fiber qualifies for cellulosic RINs (renewable identification numbers used to show compliance with the renewable fuels standard). So, how do we separate fiber for further use, cellulosic ethanol or otherwise? Fiber separation can be a tricky business. There has been a long history of researchers who have attempted to fractionate corn fiber, including from the corn itself in prefermentation processes, from the DDGS, postfermentation, or from other coproducts upstream from the DDGS. Which is the best approach for separation? It all boils down to costs, returns and payback. In terms of fiber fractionation from the DDGS, there are a few key mechanisms that are commonly used. These include by particle size and shape through screening or sieving or by particle weight or density using air aspiration, for example. Combinations of these can also be used, gravity tables being a common example. All of these approaches are relatively inexpensive, and have been 54 | Ethanol Producer Magazine | MARCH 2015

Crude Protein: 22.1% (db) Crude Fat: 1.8% (db) NDF: 51.6% (db) Crude Fiber: 10.2 (db) Ash: 4.0% (db) FIGURE 1: Fiber fractionated from DDGS still has other nutrients remaining in the material, with neutral detergent fiber (NDF) comprising just over half by dry basis (db). Obtaining a complete separation of nutrients can be difficult to accomplish.

extensively tested since the early 1980s, with varying degrees of success. Major differences in these approaches include the sequence of operations, geometries used in the equipment, shaking speeds, air speeds and orientations or configurations of the equipment. Fractionation efficiencies have been shown to increase when the DDGS was milled prior to the separation process, because this makes particle densities more consistent, which will thus allow protein-rich particles to be better separated from fiber-rich materials based on density differences. But this approach does increase the cost of fractionation. Some have examined wet fractionation of fiber from the whole and thin stillage wet streams prior to the drier. These wet fractionation techniques have not gained popularity in the dry grind industry, though, because they are more expensive than working directly with the dry products. Unfortunately, it appears that highly efficient fractionation of fiber from the wet or dry coproducts can often be difficult to accomplish. This is predominantly the case because most ethanol plants use hammer mills to grind their corn, which leads to a fairly wide dispersion in ground corn particle sizes going into fermentation. This variability is compounded during drying, when the condensed distillers solubles bind various corn kernel components together into agglomerations as shown in Figure 2. Postfermentation-dissolved constituents, such as proteins, lipids, minerals, etc., solidify on the solid particles during drying, adding

Agglomerated corn proteins & ﬁbers

Corn ﬁber (pericarp) tissues

Corn tip caps

FIGURE 2: DDGS is composed of heterogeneous particles with a variety of sizes and shapes. Note that each major type of particle shown has a visible sheen, which is due to solidification of the CDS during the drying process.

a layer of complexity to an already variable material, as shown in Figure 1. In recent years, a promising work-around solution has been the treatment and fermentation of the fiber into ethanol without separation from either the DDGS or the wet coproduct streams. Keys to this approach are the enzymes that are used to break the fiber into fermentable substrates, and the microbes are then used to ferment the substrates. In this approach, after fermentation the nonfermentable components are then converted into a DDGS product, much like traditional dry grind plants. Initial research on these new coproducts indicates performance similar to that achieved with traditional DDGS.

Upstream fiber fractionation from the corn kernels themselves will be a topic for a future article. If you have any questions or need any assistance with your DDGS or other coproducts, please feel free to contact us. We look forward to helping you as the industry continues to evolve. Author: Kurt A. Rosentrater Executive Director, Distillers Grains Technology Council Iowa State University 515-294-4019 karosent@iastate.edu

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MARCH 2015 | Ethanol Producer Magazine | 55

BUSINESS MATTERS

GHG Regs: Winners, Losers Among Ethanol Producers By James L. Pray

The U.S. EPA and the U.S. Supreme Court have laid out two divergent paths for the regulation of greenhouse gas (GHG) emissions by ethanol producers. It could create marketplace disparities between very

large producers with prevention of significant deterioration permits (PSD) who will be subject to best available control technology or other limitations for GHG emissions, and smaller producers who will mostly escape the impact of upcoming GHG emission regulations. In 2010, the EPA issued regulations that tailored both PSD and Title V programs to phase in permitting requirements for GHGs, including sources that were not currently holding Title V or PSD permits. During the implementation phase, various parties challenged the tailoring rule in court, with some arguing that the rule was too lax and others that the regulations were overbroad. Last summer, the U.S. Supreme Court issued its decision in Utility Air Regulatory Group v. EPA. The losers are current PSD permit holders and the winners are minor source permit holders that do not have a PSD permit. In the United States, there are both winners and losers among ethanol producers. Oddly, even though some plants are nearly identical, they may end up being treated differently for GHG emissions. The court first tackled the question of whether a source should be subject to PSD and Title V simply because of the source’s potential to emit GHGs. For ethanol plants, this is an important question as ethanol plants produce enormous amounts of GHG. The court held that the term “air pollutant” was narrowly implemented in the Title V and PSD programs and that it would be unreasonable for the EPA to use the more expansive definition to include GHGs as triggers for non-Title V and PSD sources. The court drew from the EPA’s own estimate of the catastrophic effect that forcing Title V and PSD regulations would have on both the EPA and industry, essentially 6 million new permit applications, billions of dollars in extra costs, and decade-long delays in getting any plant changes approved. The cost of this regulation also outweighed the benefit as these industries are only responsible for about 3 percent of GHG emissions. Because the court recognized that an unprecedented level of complexity, cost and economic inefficiency was far beyond the 56 | Ethanol Producer Magazine | MARCH 2015

intention of Congress when it passed the Clean Air Act, it threw out the tailoring rule for these industries. Subsequent to the decision, the EPA now suggests that any sources that changed their permit status to become Title V or PSD solely because of their potential GHG emissions should consider modifying their permit to drop the Title V and PSD aspects of the permit. The court next addressed the second question: Are sources that are already subject to the PSD program because of other regulated air pollution emissions subject to GHG emission limits under the tailoring rule? The court noted that these sources generate 83 percent of GHG emissions and that there was reason to believe that the regulatory burden of adding GHGs to the permit would not be unreasonable. What does this mean for the ethanol industry? For minor sources, the decision should come as a great relief. Unless they are situated in a state that allows air rules to exceed EPA requirements, those plants should not be burdened by additional regulatory control over GHG emissions. For ethanol producers currently holding PSD permits, the EPA will be looking to fashion controls over their GHG emissions. What form that will take is not yet clear as the EPA has been slow to provide real guidance on how ethanol plants should be expected to reduce their GHG emissions, though it has made some preliminary suggestions. Meanwhile, it may be important for policymakers to focus on what makes ethanol plants unique. As the industry has already argued many times, most of the carbon dioxide created by ethanol plants is carbon neutral as it originated in corn and other plant material used to create the ethanol in the first place. As much as one-third of a kernel of corn is carbon dioxide by volume. Those plants had only recently captured that carbon dioxide and the ethanol plant is really just borrowing that gas until it is recaptured by next year’s crop. In this respect, the ethanol industry is very different than industrial operations that are generating GHGs from fossil fuels. These distinctions need to be articulated while the EPA is still formulating its rules. Authors: James L. Pray Attorney, BrownWinick Law Firm 515-242-2404 pray@brownwinick.com

MARCH 2015 | Ethanol Producer Magazine | 57

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