May 2008 Ethanol Producer Magazine by BBI International

INSIDE: MIDLEVEL HYDROUS ETHANOL BLENDS ATTRACT ATTENTION MAY 2008

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Trade Talk Ethanol Producers Say it’s Too Soon to Let the Import Tariff Expire

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inside MAY 2008 . VOLUME 14 . ISSUE 5

features 66 INDUSTRY Testing the Water

104 LEGAL Asian Scandal Cripples U.S. Enzyme Company

Is water in ethanol bad, or just misunderstood? The results of tests involving

Dyadic’s sprint to become a major player in the development of cellulosic

midlevel hydrous ethanol blends could change ethanol’s role in the U.S. fuel

ethanol has slowed to a crawl. The company was rocked by a scandal, fired

supply. By Ron Kotrba

its founder, was delisted from the American Stock Exchange and sued by shareholders. By Sarah Smith

74 TECHNOLOGY Patently Moving Ahead A report by Baker & Daniels LLP reveals exponential growth in biofuel patents

112 EVENT Changing the Climate

from 2002 to 2007. The report’s authors expect a substantial increase in the

The 13th Annual National Ethanol Conference: Policy and Marketing drew

number of cellulosic ethanol patents in light of the 36 billion-gallon renewable

more than 2,000 people to Orlando, Fla., in February, where one of the hot

fuels standard. By Bryan Sims

topics was ethanol’s impact on climate change. By Anduin Kirkbride McElroy and Jessica Sobolik

Page 122

Page 130

Page 144

82 ENVIRONMENT Flocks or Feedstocks

122 FEEDSTOCK A Cheaper ‘Whey’ to Make Ethanol

Wildlife conservationists are concerned that farmers will convert expired

A Wisconsin man uses the waste product from his cheese-manufacturing

Conservation Reserve Program acres into cropland if producer payments can’t

operation to make ethanol at a cost that will turn heads.

compete with rising rental rates. By Kris Bevill

By Susanne Retka Schill

90 TRADE Trade Talk

130 POLICY Will RINs be the Next Environmental Currency?

The ethanol industry prepares to argue its case in favor of the 54-cent-per-

Renewable Identification Numbers, which are currently regarded by some in

gallon duty on ethanol, which is slated to expire at the end of 2008. By Timothy

the biofuels industry as fodder for a headache, could now become a profitable

Charles Holmseth

commodity. By Anduin Kirkbride McElroy

96 CELLULOSE The Path to Commercial-Scale Cellulosic Ethanol Production EPM talks to producers about the challenges they face moving cellulosic ethanol technologies from pilot to demonstration to commercial scale. By Jessica Ebert

international features 138 EASTERN EUROPE Chernobyl’s Harvest

144 INSIGHT Vive la Différence

Ethanol backers say biofuels can help clean up the planet. For the

Biofueling the economies of Europe and the United States have taken

Iowa-sized area around the site of the world’s worst nuclear disaster, it’s not

distinctly different routes. The United States is well-ahead in ethanol, but the

just the air, but the soil, that stands to benefit. By Patti McCracken

second generation may look different. By Jon Evans

ETHANOL PRODUCER MAGAZINE MAY 2008

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

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

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

inside MAY 2008 . VOLUME 14 . ISSUE 5

departments

contributors

11 Advertiser Index

152 OUTLOOK

14 The Way I See It By Mike Bryan Future Fuels May Forever Be Under Media Attack

20 Business & People

The Industry: Yesterday, Today and Tomorrow The demise of the commodity-sensitive ethanol industry has been incorrectly predicted before, which is why one industry veteran finds it difficult to understand today’s negativity. Similar market cycles have previously occurred and normal market forces are already at work to correct them. By Larry Johnson

24 Commodities 26 A View From the Hill By Bob Dinneen The Law of Intended Consequences

27 RFA Update 30 Industry News & BIObytes 38 Plant Construction List 50 Our Plant By Craig A. Johnson Powerful Promise

52 In the Field By Susanne Retka Schill Thwarting Insect Resistance

54 Up Front By Anduin Kirkbride McElroy Venturing Out

56 Flex Factor By Jessica Ebert Flex-Fuel Concepts Unveiled

58 Business By Bryan Sims and Jessica Sobolik Industry’s Tough Times Evident in Quarterly Earnings

60 Drive By Toni Nuernberg Now is the Time to Redouble Efforts

62 Legal Perspectives By James L. Pray Getting Control of Ethanol Spills

154 Events Calendar

on the web EthanolProducer.com’s most-read Web-exclusive news stories for March

156 EPM Marketplace

Ethanol Producer Magazine: (USPS No. 023-974) May 2008, Vol. 14, Issue 5. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

1. Science articles rekindle biofuels contention 2. Ethanex Energy to acquire ethanol plant 3. American Green Holdings unveils patented ethanol reformer 4. BioEnergy International closes financing in Pennsylvania 5. Coskata hosts Web meeting 6. The Andersons, Marathon announce Ohio start-up 7. Chevron, Weyerhaeuser form joint venture 8. EPIC launches Ethanol Retailer magazine 9. GM gears up to produce E85 fleet 10. Redfield Energy declares unit distribution to employees

BPA Worldwide Membership Applied for October 2006

ETHANOL PRODUCER MAGAZINE MAY 2008

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Ad Index 119 2008 International Fuel Ethanol Workshop & Expo

23 DuPont Chemical Solutions Enterprise 65 Eaton Corp. Filtration Division

8 Novozymes 98 OPW Fluid Transfer Group

37 Agra Industries Corp. 135 EBW Expo & Conference

35 Paragon Enterprises LLC

15 American Railcar Industries Inc. 31 Eisenmann Corp.

47 PhibroChem

6 Anhydro Inc. 143 Encore Business Solutions Inc.

133 Primafuel Inc.

99 Aqua Power Inc. 72 Ethanol 2008 Thailand

168 Poet LLC

86 Ascendant Partners Inc. 103 & 106 ethanol-jobs.com

110 R&R Contracting Inc.

78 Barr-Rosin Inc. 57 Ethanol Technology

33 R.J. O'Brien and Associates LLC

95 & 102 BBI Project Development 136 Exothermics Inc. 81 BBI International Community Initiative to Improve Sustainable Energy (CITIES)

48 Faegre & Benson LLP 3 Fagen Inc.

36 Best Energies Inc.

40 Frazier, Barnes & Associates LLC

87 BetaTec Hop Products Inc.

148 FCStone LLC

80 Biodiesel & Ethanol 101 DVDs

41 Ferm Solutions Inc.

129 Biofuels Australasia

89 Fermentis

63, 73 & 137 Biofuels Canada 111 Biofuels Recruiting 121, 132 & 166 Biomass Magazine

16 Buhler Inc. 12 Burns & McDonnell 134 Calbrandt 107 Cashco Inc. 142 Cereal Process Technologies LLC 77 Check-All Valve 85 Christianson & Associates PLLP 92 Clifton Gunderson LLP 22 ConAgra Trade Group Inc. 29 Coverall Building Systems 76 Crown Iron Works/ Harburg Freudenberger 17 Davenport Dryer LLC 61 dbc SMARTsoftware Inc. 55 Delta-T Corp. 84 Distillers Grains Quarterly 71 Dresser-Rand

ETHANOL PRODUCER MAGAZINE MAY 2008

108 Reimer Welding / Granatus Consulting 125 Resonant BioSciences LLC 165 Renewable Fuels Association 167 Robert-James Sales Inc. 149 Romer Labs Inc. 94 SafeRack LLC

93 Gamajet Cleaning Systems Inc.

126 Salco Products Inc.

28 Genencor International Inc.

118 Screw Conveyor Corp.

18 & 19 GreenShift Corp.

53 Buckman Labratories Inc.

32 RailWorks Track Systems Inc.

4 & 5 Hydro-Klean Inc. 2 ICM Inc. 116 Indeck Power Equipment Co. 88 Interstates Cos. 153 Intersystems Inc. 64 ITT Industries Goulds Pumps 151 Kaltron Absorbents 43 Kennedy & Coe LLC 152 Management Recruiters of Atlanta 46 Mapcon Technologies Inc. 109 Martrex Inc. 45 McC Inc. 10 Metso Automation

100 Seneca Waste Solutions 59 Siemens Energy & Automation Inc. 79 Smar International Co. 117 Spraying Systems Co. 120 SPX Flow Technology 70 Strongform Nationwide Industrial Builders 68 & 69 Sulzer Chemtech USA Inc. 49 Syngenta 114 TDC Dryers 42 Trico TCWind Inc. 44 Val-Fab Inc. 147 Vaperma Inc. 124 Victory Energy Operations LLC 34 Vogelbusch USA Inc.

140 National Corn-To-Ethanol Research Center

115 Volkmann Railroad Builders Inc.

146 Natwick Associates Appraisal Services

127 Vooner FloGard Corp.

101 Nestec Inc.

128 W. Soule & Co.

141 Nexen Marketing USA Inc.

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E D I TO R I A L

A RT

PUBLISHING & SALES

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

Jaci Satterlund Art Director jsatterlund@bbibiofuels.com

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

Tom Bryan Editorial Director tbryan@bbibiofuels.com

Sam Melquist Graphic Artist smelquist@bbibiofuels.com

Joe Bryan Vice President of Media jbryan@bbibiofuels.com

Jessica Sobolik Managing Editor jsobolik@bbibiofuels.com

Elizabeth Slavens Graphic Artist bslavens@bbibiofuels.com

Matthew Spoor Sales Director mspoor@bbibiofuels.com

Dave Nilles Contributions Editor dnilles@bbibiofuels.com

Jack Sitter Graphic Artist jsitter@bbibiofuels.com

Howard Brockhouse Senior Account Manager hbrockhouse@bbibiofuels.com

Rona Johnson Features Editor rjohnson@bbibiofuels.com

Clay Moore Account Manager cmoore@bbibiofuels.com

Ron Kotrba Senior Staff Writer rkotrba@bbibiofuels.com

Jeremy Hanson Account Manager jhanson@bbibiofuels.com

Anduin Kirkbride McElroy Staff Writer amcelroy@bbibiofuels.com

Chip Shereck Account Manager cshereck@bbibiofuels.com

Jerry W. Kram Staff Writer jkram@bbibiofuels.com

Tim Charles Account Manager tcharles@bbibiofuels.com

Susanne Retka Schill Staff Writer sretkaschill@bbibiofuels.com

Chad Ekanger Account Manager cekanger@bbibiofuels.com

Bryan Sims Staff Writer bsims@bbibiofuels.com

Marty Steen Account Manager msteen@bbibiofuels.com

Jessica Ebert Staff Writer jebert@bbibiofuels.com

Marla DeFoe Advertising Coordinator mdefoe@bbibiofuels.com

Sarah Smith Staff Writer ssmith@bbibiofuels.com

Jessica Beaudry Subscriptions Manager jbeaudry@bbibiofuels.com

Kris Bevill Staff Writer kbevill@bbibiofuels.com

Jason Smith Subscriber Aquisition Manager jsmith@bbibiofuels.com

Timothy Charles Holmseth Staff Writer tholmseth@bbibiofuels.com

Tim Greer Circulation Coordinator tgreer@bbibiofuels.com

Marc Hequet International Editor mhequet@bbibiofuels.com

Erika Wishart Administrative Assistant ewishart@bbibiofuels.com

Hope Deutscher Online Editor hdeutscher@bbibiofuels.com

Christie Anderson Administrative Assistant canderson@bbibiofuels.com

Jan Tellmann Copy Editor jtellmann@bbibiofuels.com Craig A. Johnson Plant List & Construction Editor cjohnson@bbibiofuels.com Amber Armstrong Administrative Assistant aarmstrong@bbibiofuels.com

HOW TO REACH US

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

SUBSCRIPTIONS Ethanol Producer Magazine is now free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. 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.

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

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

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

ETHANOL PRODUCER MAGAZINE APRIL 2008

The Way I See It

Future Fuels May Forever Be Under Media Attack

he ethanol industry has certainly been taking a lot of hits lately, with the latest being the cover story in Time magazine. The media attacks have almost evolved into a gang mentality or a feeding frenzy, so to speak, against biofuels. Where will it stop? Frankly,

I don’t think it will. I recently attended a two-day North American workshop in Mexico City that was focused on a number of forward-looking issues related to biofuels. The four primary topics were sustainability, technology, feedstocks and public policy. Approximately 50 people from Canada, the United States and Mexico attended, representing government, academia and private industry. I was somewhat surprised by the group’s nearly unanimous consensus that grain-based ethanol no longer represents the future of the industry in North America. That doesn’t mean grain-to-ethanol plants will no longer be built; they will indeed. However, the general feeling from most in attendance was that the future of the industry rests almost totally on second-generation biofuels, such as cellulosic ethanol, biodiesel and renewable diesel from algae and other wastes, pyrolysis oil, biobased fuels derived from gasification and anaerobic digestion, and more. This isn’t bad news for the renewable fuels industry. In fact, it suggests that alternative energy is clearly part of our future. Only the dynamics are changing, and all fuels are transitional. Wood was a transitional fuel to coal, which was a transitional fuel to oil, which is merely a transitional fuel to a variety of renewable fuels, which will eventually transition to other

types of fuels that are even cleaner. I suppose if I was to have one concern, it would be what the next affront will be as the industry evolves. Will we once again find ourselves having to defend cellulosic ethanol as we have grain-based ethanol? Therefore, it is very important that we stand our ground now and defend the current industry with sound science. We are, without question, on the right side of this issue, and we need to demonstrate that with independent scientific research data, not with slogans and emotion. If we don’t take a solid stand now, we will most certainly face it again when the secondgeneration fuels begin to emerge, another study makes accusations based on highly questionable assumptions and the media has a heyday at our expense. That’s the way I see it!

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

ETHANOL PRODUCER MAGAZINE MAY 2008

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BUSINESS&PEOPLE

Business& People Ethanol Industry Briefs Business

Interstates receives construction awards Interstates Cos., an electrical contractor based in Sioux Center, Iowa, was recognized in February for its work on Heartland Corn Products, a recently expanded 95 MMgy ethanol plant in Winthrop, Minn. Interstates received three construction awards from the Associated Builders and Contractors of Iowa during the association’s annual Excellence in Construction banquet. Interstates won the 2007 Project of the Year award in the Electrical, Commercial and Industrial Over $2 Million category for its work on the ethanol plant. The Heartland project also garnered an Award of Excellence and recognition as the outstanding electrical construction project for 2007. EP

United Ethanol to extract corn oil for GreenShift GreenShift Corp. announced in midFebruary an agreement with United Ethanol LLC, which will extract 1.5 MMgy of corn oil from the distillers grains produced at the ethanol plant in Milton, Wis. GreenShift will provide its patent-pending Corn Oil Extraction System to United Ethanol at no cost, and in return, the two companies will share the sale of the corn oil, explained Ed Carroll, chief financial officer of GreenShift. The corn oil will be sold to biodiesel producer NextDiesel in Adrian, Mich. GreenShift’s system reduces overall plant emissions and utility costs by upward of $1 million each year for a 100 MMgy plant that dries all of its distillers grains. EP 20

First Pennsylvania ethanol plant breaks ground

Chevron, Weyerhaeuser form joint venture

BioEnergy International LLC broke ground in March on Bionol Clearfield LLC, a 100 MMgy ethanol plant in Clearfield, Pa. The facility will be the first ethanol plant in the state. At press time, Fagen Inc. was slated to arrive on-site in late March or April. Financing was closed in mid-February. According to Corinne Young, director of government affairs for BioEnergy International, the company also plans to build a corn-based ethanol plant in Lake Providence, La., and a pilot-scale cellulosic ethanol facility adjacent to the conventional ethanol plant in Clearfield. EP

Chevron Corp. and Weyerhaeuser Co., one of the world’s largest integrated forest products companies, will create a joint venture company called Catchlight Energy LLC to focus on developing renewable fuels from nonfood sources. The joint venture is the first step in an alliance announced last year by the companies. Catchlight will research and develop economical technology for converting cellulose-based biomass into ethanol. Weyerhaeuser spokesman Bruce Amundson said Catchlight will initially look at switchgrass as a feedstock for cellulosic ethanol, rather than wood. “We have 6 million acres of land in the United States, which can be used to grow biomass that could be used in fuel,” he said. EP

Bankrupt Illinois plant may be sold to creditors At press time, a bankrupt Illinois ethanol plant was scheduled to be sold April 9. Central Illinois Energy’s 37 MMgy plant in Canton, Ill., was listed in the bankruptcy filing at its $33 million appraised price, the minimum amount for which it can be purchased. Florida-based NexGen Biofuels previously submitted a bid for $20 million to $25 million, but it was rejected by the bankruptcy judge. If there isn’t a buyer by April 9, the facility may go to creditors who are owed $80 million. Investors spent $130 million to build CIE nearly to completion (98 percent). Another $25 million may be necessary to finish construction before the facility produces any ethanol. Check EPM’s Web site for an update on the sale. EP

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

Ethanex files for bankruptcy In late March, Kansas-based Ethanex Energy Inc. filed paperwork with the U.S. Securities and Exchange Commission that terminated the purchase agreement for Midwest Renewable Energy LLC, an ethanol production plant in Sutherland, Neb. Ethanex initially agreed to buy the plant for $220 million, plus Ethanex stock. According to the SEC filing, Ethanex was unable to obtain interim financing of at least $1.5 million. The filing also announced the termination of all but three Ethanex employees, and stated that the company had ceased ongoing commercial operations. The company filed for Chapter 7 bankruptcy protection March 27. EP

ETHANOL PRODUCER MAGAZINE MAY 2008

BUSINESS&PEOPLE

Sponsored by

People

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PHOTO: AMERICAN GREEN HOLDINGS INC.

American Green Holdings ethanol reactor

American Green Holdings unveils ethanol reformer American Green Holdings Inc., headquartered in Crane, Mo., announced in February that its proprietary ethanol reformer technology is commercially available for agricultural use. The reformer uses a patent-pending technology that efficiently processes fuel-grade ethanol in stationary engines, reducing ethanol use in irrigation systems by more than 50 percent while improving emissions. According to Russel Gerhke, inventor of the reformer, the technology uses ethanol’s flame speed to match the engine’s workload in a different and more efficient process than carmakers have achieved using fuel injection and carburetion alone. The reformer was originally developed by EcoSense Solutions LLC in 2006 before AGH acquired the company in late 2006. For more information on AGH, visit www.americangreenholdings.com. EP

ETHANOL PRODUCER MAGAZINE MAY 2008

Hawkeye Gold LLC, a subsidiary of Hawkeye Energy Holdings, hired Kelly Davis in February as director of customer and technical services, a newly created position. Davis is responsible for the corporate quality and compliance program at the ethanol and distillers grains marketing company based in Ames, Iowa. Previously, Davis was the quality manager at Chippewa Valley Ethanol Co. in Benson, Minn. EP

MGPI reorganizes as CEO steps down Ladd Seaberg has retired as chief executive officer of MGP Ingredients Inc. in Atchison, Kan., but he will continue as chairman of the board of directors. MGPI President Tim Newkirk will succeed him. Newkirk joined the company in 1991 and has served as its chief operating officer since May Seaberg 2006. In an effort to increase production at its ethanol plant in Pekin, Ill., MGPI announced several staff changes. Greg Corcoran was named plant quality manager, Monte Ackerman Newkirk was promoted to plant manager, and Chris LeBourdais was named plant safety manager. MGPI has promoted two within its Enterprise Resource Planning staff. George Kelly Jr. is now ERP business manager, and Jennifer Peltzer is ERP system manager. The ERP system enhances the timeliness and availability of information relating to MGPI’s product manufacturing, sales and distribution activities. EP

PHOTO: NATIONAL ETHANOL VEHICLE COALITION

Hawkeye Gold hires CVEC’s Davis

Front row: Phil Lampert, NEVC; Negley; Punt; Greg Krissk, ICM; Moore. Middle row: Mindy Larson Poldberg, Iowa Corn Growers Association; Shirley Ball, Ethanol Producers and Consumers; Theresa Schmalshof, NCGA; Ethan Taylor, Missouri Corn Growers Association. Back row: David Hallberg, Prime BioSolutions; Todd Sneller, Governors’ Ethanol Coalition; Scott Schramm, Chrysler LLC; Omer Sagheer, White Energy; Melissa Ullerich, VeraSun Energy Corp.

NEVC elects new board The National Ethanol Vehicle Coalition elected four new executive officers and two new board members at its annual board of directors meeting Feb. 4-5. Bernie Punt, general manager of Siouxland Energy Livestock and Co-op in Sioux Center, Iowa, was elected chairman. Dwayne Siekman of the Ohio Corn Growers Association is now the vice chairman, Scott Negley of Dresser Wayne is the new secretary, and Roger Moore of the Minnesota Corn Growers Association is treasurer. The 2008-term board members are Kevin Kuykendall, president of White Energy; and Ray Hutchinson, vice president of business development for Gilbarco Veeder-Root. EP

Sure Seal names biofuels sales manager Sure Seal Inc., based in Mineral Point, Mo., appointed Eric Melton to the position of biofuels sales manager in late February. Previously, Melton was Midwestern regional sales manager for Sure Seal and its parent company OPW Fluid Transfer Group's Chemical and Industrial Market Unit.. “Eric has been a major asset for Sure Seal,” said Tim Warning, president of OPW Fluid Transfer Group. EP 21

COMMODITIES REPORT Natural Gas Report

Is natural gas caught up in the commodity rally? March 21—Not long ago natural gas prices were generally driven by fundamental natural gas supply and demand factors. Natural gas prices would rally during a cold winter when storage inventories were drawn down. If slack summer demand rebuilt inventories, prices dropped, often dramatically. Over the past several months, natural gas price changes seem to have less of a connection to natural gas fundamentals and more of a connection to the pricing dynamics of other commodities. For example, natural gas price changes have recently been highly correlated to oil price changes even though supply sources and end use markets are different for each commodity. The correlation (derived using linear regression) between oil price changes and natural gas price changes over the past six months is 81 percent. This means 81 percent of the change in natural gas prices can be

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

explained by changes in oil prices. Over a longer time period this relationship diminishes. Over the past four years, the correlation is 18 percent. Clearly, oil price changes over the past six months have been much more influential in determining natural gas prices than during the past four years. It can be argued that natural gas prices have been recently influenced by more that just oil. Virtually all commodities are trading at or near historic highs, regardless of the underlying commodity-specific fundamentals. Different explanations have been provided as to why all commodity prices are rallying, including 1) due to low returns, significant money has moved from real estate, equity and bond markets to commodities, where the expectation is for higher returns, 2) the weak U.S. dollar has allowed foreign investors to “buy more” commodities on a currency adjusted basis, and 3) geopolitical uncertainty has increased the demand for tangible, hard assets such as commodities. The important question is when will money move out of commodities and allow natural gas prices to again be tied to natural gas market fundamentals? My sense is that it won’t happen in the immediate future since financial markets appear to be far from stable and geopolitical uncertainty isn’t going away. The bottom line: Expect significant price volatility in the future that isn’t necessarily tied to natural gas marketplace fundamentals, but to the general commodity complex. EP Casey Whelan, vice president of strategic initiatives, can be contacted at cwhelan@usenergyservices.com.

Corn Report

Corn hits $5 as demand grows

By Jason Sagebiel, FCStone

March 25—The corn market may have been fundamentally quiet in March, but the markets crumbled as financial woes triggered a massive sell off in the entire commodity complex. At press time the USDA planting projections weren’t available, leaving volatility in the marketplace. The current supply/demand table was left unchanged in the March report. The carry-out still rested at 1.438 billion bushels. The factors that will impact the demand portion will be the value of the U.S. dollar and its impact on exports. The other two factors are corn for feed usage and ethanol production. The ethanol sector could very well see a smaller demand figure than what the USDA has calculated. Hence, could carry-out be slightly increased? With the planting number still lingering, weather will have become a huge factor as this issue of EPM hits the streets. The chart displays the U.S. corn crop at 70 percent planted (horizontal) versus the final percentage of trend yield (vertical). This is by far the best correlation to yields—better than any summer weather data you can find. The “big money” guys think that rain makes grain, but the commercial crowd knows that “plant in the dust and the bins will bust.” We need May 12, the worst yield has only been 1.9 percent below the trend. When to start closely watching the April weather patterns. A dry spring is the best late plantings occur, there is far greater chance of much lower trend yields. thing possible for good yields. When 70 percent of the crop is planted by This cannot be tolerated in 2008. EP 24

ETHANOL PRODUCER MAGAZINE MAY 2008

COMMODITIES REPORT

Regional Ethanol Prices (Monthly averages in cents per gallon)

REGION

DDGS Report

DDGS prices begin early slide March 21—Well, it finally happened. The DDGS market, which had for all practical purposes been following the Chicago Board of Trade as it ratcheted upward, has now begun to fall in tandem with the futures. After hitting spot market highs in the low $230s basis Cal, prices have fallen to the low $190s. Moves like this are not overly unusual, but in times when cold weather is still about, and crops are not even planted, the timing of the move is unusual for DDGS. Generally, the move from spring into summer brings sliding prices as animals eat less, decreasing demand for distillers wet grains and putting more dry product on the market—much of it moving via railcars and barges. I’m not sure if this is just an early seasonal move, but futures prices have obviously influenced all ingredient markets, and will continue to do so all summer.

By Sean Broderick, CHS Inc.

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

SPOT

West Coast

248.946

239.97

252.038

Midwest

239.2282

231.85

234.486

East Coast

251.076

----

254.015 Source: OPIS

In spite of a lot of them being late, a number of new plants are starting up. Many have relatively small forward positions sold and will be putting more product onto the “spot” market, which encourages buyers to be passive about their bids. The good side of this scenario is that DDGS gets exposure to diets that had previously been unavailable due to pricing perceived to be too high. Another positive in all this is that the weak dollar is spurring exports of DDGS, both in containers and bulk vessels. The way things are setting up, that does not look to abate as the summer progresses. There are a number of new “programs” and commitments by a larger grain companies as they see the future of DDGS exports on larger scale. Overseas sales will help to add value to prices as DDGS production continues to ramp up. EP

Regional Gasoline Prices (Monthly averages in cents per gallon)

REGION

SPOT

RACK

RETAIL

West Coast

270.39

272.281

338.044

Midwest

243.584

260.438

313.753

East Coast

249.741

261.43

318.099 Source: OPIS

DDGS Prices ($/ton) MAR. 2008

FEB. 2008

MAR. 2007

Minnesota

155

120

California*

194

190

164

Chicago, Ill.

148

140

125

Buffalo, N.Y.

155

145

138

Central Florida

182

185

LOCATION

Source: CHS Inc.

Corn Futures Prices (May corn, $/bushel) DATE March 24, 2008

HIGH

LOW

5.25 1/2

5.03 1/2

5.24 3/4

5.55

5.38 1/2

5.47

3.99 1/2

3.85

Feb. 25, 2008 March 26, 2007

Ethanol Report

3.91 Source: FCStone

Firm March market starts to waver March 21—Ethanol prices began to stall in late March, but markets ended the quarter confounding the more dire predictions of oversupply. Blending demand for ethanol remained strong with new discretionary markets poised to open. Chicago spot ethanol trading prompt reached more than $2.50 per gallon around mid-March as near-term material tightened. Any-month ethanol deals traded into the high $2.40s per gallon, up some 25 cents from late February. By late March, spot prices backed off to the $2.38 to $2.40 per gallon range for material available into early April. At the same time, any-April ethanol at around $2.35 gallon and second quarter material talked $2.32 by $2.34 per gallon also backed off several cents. A lot of volatility in gasoline markets often had ethanol trading turning silent while generating widely differing bids and offers. For example, Gulf Coast unleaded, at $2.53

151

*Central Valley

By Spencer Kelly, OPIS

per gallon late in the month, rebounded from its low end but traded at a range of about 30 cents through the week. Double-digit swings in NYMEX RBOB futures were not uncommon either. Ethanol blending was encouraged by healthy economics. By mid-month, weekly government numbers showed discretionary blending into conventional gasoline at record highs, nearly doubling year-ago levels. That was bolstered by a lineup of oil majors telling marketers they were moving ahead with expansions on E10 blending. Ethanol remained on an upward track at most Midwest racks. Splash blenders in Iowa paying $2.44 per gallon at the average top-off location found postings up some 21 cents since the end of February. EP For more information, contact OPIS Ethanol & Biodiesel Information Service at (888) 301-2645.

ETHANOL PRODUCER MAGAZINE MAY 2008

Cash Sorghum Prices ($/bushel) MAR. 20, 2008 FEB. 15, 2007 MAR. 23, 2007 Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

3.61 3.60 3.67 3.68 3.88 4.25

4.79 4.89 4.68 4.88 4.71 5.50

4.48 4.58 4.54 4.60 4.67 5.25

Source: Sorghum Synergies

Natural Gas Prices ($/MMBtu) MAR. 21, 2008

FEB. 15, 2007 MAR. 21, 2007

NYMEX

9.06

8.66

6.91

N. Ventura

8.53

8.85

6.55

Calif. Border

7.72

8.15

5.98 Source: U.S. Energy Services Inc.

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

489,000*

November 2007

479,000

December 2006

356,000

*all-time monthly high

Source: U.S. Energy Information Administration

VIEW FROM

THE HILL

The Law of Intended Consequences Critics of ethanol and other renewable fuels are often quick to point to America’s federal renewable fuels policy as a perfect example of the Law of Unintended Consequences. They claim, often well past the point of hyperbole, that this policy is starving children in developing nations, driving farmers to clear the rainforests, and contributing more to climate change than the irresponsible exploitation of our fossil fuel resources. Time and again, we have pointed out the fallacy of our critic’s arguments and attempted to expose the motives behind their allegations. Yet, they are well-funded, benefiting from the indirect consequence of oil dependence (i.e., $112 per barrel of oil) and will not go silently into that good night. Unlike the need these critics express to undermine a growing American industry, our industry has the distinct advantage of being able to tell an uniquely American story Dinneen of optimism and hope. Call it the Law of Intended Consequences. America’s ethanol industry has long held that to truly break our addiction to foreign oil, our nation must begin to diversify its energy portfolio. Ethanol is just one part of that portfolio, but it’s a part that is readily available and growing today. According to economist John Urbanchuk, the use of 6.5 billion gallons of ethanol last year displaced the need for 228 million barrels of oil, saving more than $16 billion for the U.S. economy. Urbanchuk’s analysis was supported by the Energy Information Administration that noted ethanol use is reducing the need for petroleum by 40,000 barrels per day. In addition, increasing ethanol use is also helping to displace the need for imported gasoline. As you know, a new refinery has not been built in the United States in more than 30 years. The result has been steadily rising imports of finished refined products like gasoline. The recent boom in ethanol production and use is starting to change that dynamic. The nation’s largest refiner, Valero, has publicly stated that the growing use of ethanol is offsetting the demand for imports of finished gasoline. The inherent national security implications of decreased foreign oil dependence are reason enough to continue expanding America’s renewable fuel industry. However, the benefits of oil displacement go further, all the way down to your local gas station. An analyst at Merrill Lynch told the Wall Street Journal in March that without renewable fuels, oil and gasoline prices would be 15 percent higher. At that time, such an increase translated to oil at more than $115 per barrel and gasoline at $3.70 per gallon. The list goes on and on: hundreds of thousands of new jobs, millions of dollars added to American families’ bottom lines, and improved air quality and environmental conditions. Critics of our industry will persist, nipping at our heels and trying to mislead policymakers and the American public about tangential issues that skirt the real focus and need for a robust and long-term renewable fuels policy in this country. The Law of Intended Consequences is at work. America is beginning the hard journey toward energy self-reliance, and ethanol is helping lead the way.

Bob Dinneen President and CEO Renewable Fuels Association

ETHANOL PRODUCER MAGAZINE MAY 2008

RFA UPDATE

RFA members fight back Amidt skyrocketing crude oil and food prices, blame for higher costs is falling squarely on the shoulders of the U.S. ethanol industry. Recently, RFA members have begun to fight back against the negative press. Rochester, Minn.’s PostBulletin published a letter to the editor March 22 by Randy Doyal, chief executive officer of Al-Corn Clean Fuel and RFA board of directors member. Doyal dispelled many ethanol myths, including the food-versus-fuel debate and energy efficiency. Doyal’s full letter is available at http://www.postbulletin.com/newsmanager/templates/localnews_story.asp ?z=12&a=334206.

RFA testifies in Congressional hearings The RFA continues to play a role in Congressional hearings. Bob Dinneen, RFA president, has been called to testify several times in the past few months on matters such as the renewable fuels standard, as well as energy security benefits and economic opportunities that are being created by the growth of America’s domestic ethanol industry. Dinneen’s testimonies are available at www.ethanolRFA.org.

The RFA has produced two new brochures that are now available. Produced in conjunction with the Ethanol Emergency Response Coalition, the Foam Performance brochure, which provides information on fighting ethanol fires, was initially passed out to the public at the Congressional Fire Services Institute in early April. It is now available by contacting the RFA at info@ethanolRFA.org. Ethanol-Blended Fuels: A Handling and Conversion Checklist is also now available. The handy checklist outlines basic preparatory steps retailers and marketers new to ethanol-blended fuel should take to ensure a smooth transition. This brochure is meant to be a quick reference tool outlining the most basic steps. If interested in a copy, send an e-mail to info@ethanolRFA.org.

New outlook available online The newest RFA Industry Outlook, Changing the Climate, is now available online as a PDF at http://ethanol rfa.org/industry/outlook/.

ETHANOL PRODUCER MAGAZINE MAY 2008

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BIObytes Ethanol News Briefs Magellan, Buckeye consider pipeline Magellan Midstream Partners LP and Buckeye Partners LP, companies that specialize in the transport, storage and distribution of petroleum, have teamed up to determine the feasibility of constructing a 1,700-mile ethanol pipeline from the Midwest to the Northeast. Various producers and terminals in Iowa, Illinois, Minnesota and South Dakota would send more than 10 million gallons of ethanol per day via this pipeline. Ongoing technical and economic issues need to be addressed before the project can continue. The estimated cost of the pipeline is more than $3 billion.

Poet, ISU partner for BPX research Poet LLC is funding a research collaboration with Iowa State University researcher Jay-Lin Jane to improve the efficiency of Poet’s patent-pending Broin Project X process. The BPX process uses raw starch hydrolysis that converts starch to sugar and then ferments it to ethanol without the use of heat. Jane will be identifying the most suitable starch for the process. The BPX process is used in 20 of Poet's 22 ethanol production facilities in the United States.

Pioneer projects yield increase of 40 percent Pioneer Hi-Bred International Inc. is targeting 40 percent yield increases in the next decade in its corn products, said Pioneer President Paul Schickler at the USDA Agricultural Outlook Forum in February. The increases will come from the company’s accelerated yield technology, Optimum AcreMax insect control, and traits affecting drought and nitrogen responses. The top four leads in breeding for drought resistance are increasing yields 5 percent to 14 percent, and the top seven leads in nitrogen use are reducing nitrogen environments by 10 percent to 25 percent.

INDUSTRYNEWS

Opinions vary on Minnesota E20 test results The Alliance of a Safe Alternative Fuels Environment (AllSAFE) responded in March to the positive results of a year-long, in-depth study conducted by the state of Minnesota and the Renewable Fuels Association on the use of E20 in conventional gasoline-powered vehicles. The group said it believes it’s too early to determine that E20 is safe, and insists more testing needs to be done. “It is much too early to draw definitive conclusions about E20’s compatibility for products or vehicles not designed for use with this fuel,” said Kris Kiser, spokesman for AllSAFE, a coalition that represents various equipment, marine, smallengine and vehicle manufacturers. He said he believes the Minnesota E20 testing may have been incomplete, pointing out that mid-level ethanol blends have different effects on conventional vehicles, boats, chainsaws, lawnmowers, motorcycles, all-terrain vehicles, snowmobiles, hand-held tools and other products. “If you introduce a fuel that has potential effects, we think you should test them on a broad range of products,” he added. “Vehicles must undergo very comprehensive testing, and small engines such as lawn and garden equipment, motor boats and many other products must also be thoroughly studied.” Kiser said neglecting to test the fuel on a wide range of products can cause safety issues. A chainsaw that is running too hot because the fuel isn’t compatible could cause the chain to engage prematurely, he explained. A snowmobile that fails in severely cold weather is a safety issue, he said. Mike Schommer of the Minnesota Department of Agriculture contended that the Minnesota study used nationally recognized standards and protocols to ensure research quality. The study focused on standard passenger vehicles, gaselectric hybrids and delivery vehicles. The vehicles were driven by University of Minnesota employees, who submitted log books, and certified professionals, who drove the vehicles quarterly and submitted their findings, as well, he said. In addition to road tests, researchers conducted laboratory tests to eval-

uate the effects of E20 on materials found in conventional vehicle fuel systems. The test results indicated that E20 was compatible with the vehicle fuel systems, Schommer said. As the renewable fuels standard was being passed in Kiser the Energy Independence & Security Act of 2007 in December, AllSAFE urged Congress to have the U.S. EPA and U.S. DOE further examine the effects of mid-level ethanol. Since August, Kevin Stork, a team leader of the vehicle technologies program at the DOE’s Office of Energy Efficiency and Renewable Energy, has been evaluating the impact of both E15 and E20 on new and older vehicles. His team recently began testing the effects of mid-level ethanol blends on larger non-road and specialty engines such as all-terrain vehicles, boats and motorcycles. Results of the DOE studies could increase the use of renewable fuels “if it makes sense to do so,” Stork said. Preliminary DOE test results showed that small, non-road engines have an increased rate of nitrogen oxide emissions, coinciding with previous test results. Tested engines still met the regulated EPA emissions standard; however, Stork cautions that the EPA will pay close attention to emissions results. Stork said more studies will need to be completed before conclusions can be reached about the impacts of mid-level ethanol blends. The DOE is currently performing full-life catalyst tests and other wear-and-tear studies. This summer, the DOE will release the results of its small-engine tests. Large vehicle test results will be available in approximately one year. “The data we have collected thus far is by no means sufficient to assess in positive or negative ways the impacts of intermediate blends,” he said. —Timothy Charles Holmseth and Kris Bevill

continued on page 32

ETHANOL PRODUCER MAGAZINE MAY 2008

INDUSTRYNEWS

Land-use studies may affect policy New discussion on the indirect impacts of land-use change for biofuel crop production may affect how ethanol is legislated, according to Michael Wang of the U.S. DOE’s Argonne National Laboratory. His comments were in response to one of two controversial studies posted on Science magazine’s Web site in early February that concluded the growing production and use of biofuels could escalate greenhouse gas (GHG) emissions around the globe. In a letter to Science, Wang identified shortcomings in the study titled “Use of U.S. Croplands for Biofuels Increases Greenhouse Gases Through Emissions from Land Use Change,” which was written by Timothy Searchinger of Princeton University and others. Wang challenged the assumptions made on corn yield, the amount of ethanol to be produced from corn, distillers grains displacement, U.S. corn export reductions, biomass resources, ethanol production efficiency and potential land-use changes. He also cautioned the scientific community. “While scientific assessment of land-use-change issues is urgently needed in order to design policies that prevent unintended consequences from biofuel production, conclusions regarding the GHG emissions’ effects of biofuels based on speculative, limited land-use-change modeling may misguide biofuel policy development,” he wrote. One policy in development that might be affected by this study is California's low-carbon fuel standard, which calls for a reduction of at least 10 percent in the carbon intensity of California’s transportation fuels by 2020. The California Air Resource Board is handling that project and will likely use the Greenhouse gases, Regulated Emissions and Energy use in Transportation (GREET) model, which was developed by Wang, to determine the carbon footprint of individual fuels. It includes greenhouse gas emissions from direct land-use changes associated with corn-based ethanol production. Wang admit-

ted that the model needs to be updated to account for “both direct and indirect land-use changes associated with future, much-expanded U.S. biofuel production,” he wrote to Science. “Such an effort requires expansion and use of general equilibrium models at the global scale.” Searchinger’s study acknowledged that biofuel crop production sequesters greenhouse gases, but counters that previous “analyses failed to count the carbon emissions that occur as farmers worldwide respond to higher prices, and convert forest and grassland to new cropland to replace the grain (or cropland) diverted to biofuels.” After some entities criticized the study, including the DOE, Searchinger admitted to EPM that his study won’t be the final conclusion on the issue. “There are plenty of ways to improve upon our analysis,” he said. “However, I don’t think the critics have yet found them.” The DOE called Searchinger’s assumptions “incorrect or unrealistic” and his data obsolete. The government entity also criticized the second Science study, titled “Land Clearing and the Biofuel Carbon Debt,” which was conducted by Joseph Fargione of The Nature Conservancy. The DOE conceded that some of Fargione’s points are “irrefutable,” such as the negative impacts of clear-cutting rainforest or other carbon-rich lands. “We’re not in denial about that,” said Zia Haq, senior analyst with the DOE’s biomass program. “We just want to address the issue of how much of that deforestation is caused by biofuels rather than other factors (such as timbering and forest fires).” The University of Minnesota’s David Tilman, a key researcher on the second study, contended that his paper is “not controversial in terms of its underlying science.” Moreover, it “provides guidance” to help producers comply with the Energy Independence & Security Act of 2007.

ETHANOL PRODUCER MAGAZINE MAY 2008

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BIObytes Ethanol News Briefs continued from page 30

AE Biofuels to build cellulosic demo plant AE Biofuels Inc., which is working to develop next-generation biofuels, broke ground on a cellulosic ethanol demonstration facility in Butte, Mont., in February. The company will integrate cellulosic ethanol production into starch-based processes to lower costs and increase efficiency. The key to this integrated process is AE Biofuels’ patent-pending enzyme technology that converts crop wastes or energy crops, such as switchgrass or Miscanthus, into sugars that can be fermented into ethanol.

EPA sets 2008 RFS In February, the U.S. EPA issued a notice in the Federal Register that set the renewable fuels standard for 2008 at 7.66 percent of all motor vehicle fuel produced nationwide. This was an increase from the 4.66 percent target issued in November, a move that was required by the Energy Independence & Security Act of 2007. The EISA increased the targeted production of renewable fuels in 2008 from 5.4 billion gallons to 9 billion gallons. continued on page 34

INDUSTRYNEWS

Sorghum markets follow corn Sorghum producers are having a good year with excellent 2007 yields and strong markets. Much like corn, the growth of the ethanol industry is impacting sorghum, according to Chris Cogburn, strategic business director for the National Sorghum Producers. There isn’t much corn grown around Russell, Kan., Cogburn said, which means local sorghum prices historically traded at a discount to corn. Sorghum doesn’t have its own futures market, so the basis is reported as the difference between the local sorghum price relative to the nearby SOURCE: NATIONAL SORGHUM PRODUCERS futures contract for Chicago corn. “It’s impressive Sorghum growers near river ports have seen how that ethanol plant in Russell (U.S. Energy strong demand from European markets looking Partners LLC) has helped bring the basis up,” for non-genetically modified feed. “When added Cogburn said of the 50 MMgy ethanol plant that to ethanol demand, it’s helped the sorghum market,” he said. Sorghum was around $2.20 to $2.60 opened in October 2001. Prairie Horizons Agri-Energy LLC, a 40 per bushel in inland locations and $3 at the Gulf MMgy ethanol plant in Phillipsburg, Kan., uses of Mexico in September 2006, he said. In both corn and sorghum as feedstocks, which has February, near the peak of the commodity marnarrowed the spread between the corn and kets, prices were between $4.70 and $4.90 per sorghum basis since that plant opened in mid- bushel at inland locations, and $5.50 at the Gulf. 2006, Cogburn said. —Susanne Retka Schill Strong export markets have also boosted sorghum prices in some regions, Cogburn said.

INDUSTRYNEWS

Coskata Inc., the Illinois upstart planning to produce cellulosic ethanol for under $1 per gallon, has lined up financing, strategic partners and a budding vehicle fleet to use its fuel. Its next steps include site selection and a construction timeline. Coskata Vice President and Chief Marketing Officer Wes Bolsen said all is proceeding according to the company’s strategic plan. First, Coskata announced in January a partnership with General Motors Corp. to produce cheap waste-based fuel and guarantee a GM fleet of vehicles that will use E85—or in this case, Coskata’s trademarked C85. In early February, the automaker affirmed that half of its domestic fleet will be powered by C85 by 2012. Currently, GM has 2.5 million flexible-fuel vehicles (FFVs) on the road in North America and 3.5 million FFVs globally. The company plans to put 11 FFV models on the market this year and have 15 FFV models on sales floors by the end of 2009. Also in February, Coskata selected ICM Inc. to build the commercial-scale cellulosic ethanol plant with an estimated capacity of 50 MMgy to 100 MMgy. A 40,000-gallon pilot plant is scheduled to go on line sometime this year, Bolsen said. On Feb. 21, Bolsen hosted a Web chat

PHOTO: COSKATA INC.

Coskata puts project pieces together

Sr. Research Scientist Bill Levinson looks at the growth of Coskata's proprietary organisms.

with 95 people who were curious as to whether the company could deliver on its promises. “Absolutely,” Bolsen told them. In the meantime, he hosts tours of Coskata’s headquarters in Warrenville, Ill., and fields hundreds of media inquiries. In March, Coskata raised $19.5 million in additional financing. GM Chief Executive Officer Rick Wagoner simultaneously urged government intervention to promote biofuels at the Geneva Auto Show. He said government intervention is necessary to develop the infrastructure and regulatory framework

that will allow ethanol to flourish. Bolsen explains Coskata’s technology as a gasification, fermentation and separation process that “doesn’t use expensive enzymes to break down input material, saving on water, large tanks and slurry.” Multiple inputs will also decrease production costs, he said. “We do not need a specific enzyme for a specific material to make cellulosic ethanol,” he said. “We can use the whole stalk, fiber and cob, or other low-cost material such as fast-growing energy crops, trash, tires and a mixture of ag waste.” Once production ramps up, the company will quickly expand, Bolson said. “We can colocate with a current corn-to-ethanol plant, pulp and paper mill, blending terminal or other user of steam because we recover the hot syngas (estimated at 1,600 degrees Fahrenheit) and cool it to 100 degrees Fahrenheit before it goes to our organisms. This is part of the energy-positive Coskata process.” Bolsen said an announcement regarding site selection should be forthcoming this spring. —Sarah Smith

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INDUSTRYNEWS

Ethanol News Briefs continued from page 32

Shareholders sue SunOpta over financial statements Canadian food processor and cellulosic ethanol developer SunOpta Inc. is facing a class action lawsuit from angry investors alleging fraud. The shareholders accuse SunOpta’s officers and directors of concealing adverse financial dealings from the U.S. Securities and Exchange Commission, and allegedly making false statements about the company’s profitability that misled investors. SunOpta has restated its 2007 earnings, which include losses around $10 million. Company officials declined comment about the litigation, which was filed in February, and no deadline has been set by the court for the company’s response to the suit.

Michigan E85 retailers receive financial boost Michigan now has an extra incentive for retailers to install E85-dispensing capabilities. The state Department of Labor & Economic Growth’s Energy Office awarded $110,000 to the state’s Clean continued on page 36

U.S. DDGS heads overseas In 2004, the USDA released a report outlining the need to increase markets for distillers grains throughout the nation. “Distillers grains is a big issue,” the report said. “Plants must be able to sell their distillers grains, not just dispose of them.” Four years later, the distillers grains market may not have increased the way the USDA initially intended, but so far producers aren’t complaining. Exports of distillers grains have reached record highs. According to USDA statistics, the United States exported 2.3 million tons of distillers grains in 2007, almost quadruple the amount exported in 2003. The weakened U.S. dollar; high wheat and corn prices; the high fat content, protein value and fiber of distillers grains; high levels of customer service provided by U.S. exporters; and competitive container freight rates to Asian destinations have all been factors in the increased demand for U.S. distillers grains. Jamie Williams, merchandiser for U.S. Commodities Inc. in Minneapolis, said producers are thrilled to have such a good overseas market for distillers grains. Increased demand overseas means higher prices for the product at home, which gives ethanol producers reason to celebrate the upswing in exports.

Williams said U.S. Commodities is currently shipping the majority of its distillers grains to southeast Asia, a trend that is expected to continue to rise throughout 2008 as countries like Vietnam and Thailand become increasingly familiar with the product. The U.S. Grains Council has been working since 2003 to increase exports of distillers dried grains with solubles (DDGS) to countries that were previously unfamiliar with the ethanol coproduct. Earlier this year, the council received its first order of DDGS from Tunisian importer Poulina SA. The USGC also recently sent a trial shipment of DDGS to Algeria. Dan Keefe, USGC manager of international distillers grains operations, said the council’s success in increasing exports can be attributed to several things. Offering product introduction through nutritional education, working with local governments to lower import duties and offering weekly market perspective reports to provide market intelligence have all contributed to the council gaining new overseas markets. The USGC also works to create trade links between importers and exporters through trade conferences. —Kris Bevill

ETHANOL PRODUCER MAGAZINE MAY 2008

INDUSTRYNEWS

ICM enters cellulosic ethanol race The U.S. DOE announced in late January that ICM Inc. will receive up to $30 million from the department to develop a small-scale cellulosic ethanol plant. ICM was one of four companies sharing $114 million to develop biorefinery projects. “ICM is excited to have been selected as one of the recipients of this DOE award, and I’d personally like to thank the DOE for its aggressive pursuit of a renewable and sustainable fuel source,” said Dave Vander Griend, ICM president and chief executive officer. The other companies receiving grants were Lignol Innovations Inc., Pacific Ethanol Inc. and Stora Enso North America. ICM is working with a team of companies and research institutions to develop the cellulosic ethanol project, including Ceres Inc., Edenspace Systems Corp., South Dakota State University, AGCO Corp., the National Renewable Energy Laboratory, the National Center for Agricultural Utilization Research, Novozymes, VeraSun Energy Corp. and SunEthanol Inc. The proposed plant will use a variety of feedstocks including corn fiber, corn stover, sorghum and switchgrass, and will integrate

biochemical processing and demonstrate energy recycling within the biorefinery. Preliminary plans call for a pilot-scale facility built next to LifeLine Foods LLC, an existing 40 MMgy corn-based ethanol plant in St. Joseph, Mo., which will reduce the new facility’s infrastructure costs including transportation access, energy, water, wastewater treatment and utilities. LifeLine Foods was also tapped to provide 12,000 gallons of ethanol to fuel cars at all 16 races of this year’s Indy Racing League series. LifeLine is the first plant in the United States to produce both food and fuel from corn in one process. Portions of the corn kernels are processed for use in potato chips, cheese crisps and various other foods, while other portions become ethanol and distillers grains. The goal of the DOE’s grant program is to make cellulosic ethanol cost-competitive within five years. “We have engineered

more than 60 ethanol plants in North America, and this technology has the potential to complement each of those existing facilities,” Vander Griend said. “We’ll gain even further efficiencies in the production process and potentially add more than 5 billion gallons of additional renewable fuel to our nation’s fuel supply annually through this collaboration alone. I believe that ICM’s existing research in this area, supported by the team of experts we’ve partnered with, puts us in a position to successfully achieve and exceed the goals of this project.” In February, Junction City, Kan.-based Edenspace announced it had joined the team as a provider of feedstocks. Edenspace’s primary role will be to provide corn, sorghum and switchgrass bioengineered to reduce the postharvest costs of producing cellulosic ethanol. Earlier that month, ICM tapped Thousand Oaks, Calif.-based Ceres to sow thousands of acres of switchgrass, high-biomass sorghum and other energy crops over the next three years around St. Joseph. —Jerry W. Kram

Ethanol News Briefs continued from page 34

Energy Coalition to assist retail facilities interested in adding E85. Fifty percent of the conversion costs, up to $5,000 per site, will be covered by the CEC. Participants must be operational by Sept. 30. Additional funding for the Biofuel Infrastructure Grant Incentive Program was provided by the Corn Marketing Program of Michigan, part of the Michigan Corn Growers Association.

Enzyme technology boosts DDGS Recent research conducted by Danisco Animal Nutrition, in partnership with Auburn University and Purdue University, found that using an enzyme combination in distillers dried grains with solubles (DDGS) can reduce broiler feed costs while improving broiler weight gain and feed efficiency. During the feed trials, a new-generation phytase (Phyzyme XP)— along with xylanase, amylase and protease enzymes (Avizyme 1502)—were added to corn-soy broiler diets containing 10 percent corn-based DDGS. As a result, weight gains increased 5 percent to 8 percent, and feed efficiency improved by up to 6 percent. EP

INDUSTRYNEWS

GreenField Ethanol, Enerkem partner Canada’s largest ethanol producer GreenField Ethanol Inc. and Enerkem, a Quebec-based leader in the gasification and synthesis of biofuels from cellulose, announced in March they would collaborate on joint projects to design, build and operate commercial-scale cellulosic ethanol plants. These projects will use Enerkem’s gasification, sequential gas conditioning and catalysis technology for the conversion of sorted municipal solid waste and forest residues into cellulosic ethanol. The two companies have secured a location in Canada for their first plant, which will be built in phases. The first phase involves a 10 MMgy facility, according to Vincent Chornet, president and chief executive officer of Enerkem. Enerkem has been piloting its technology at a plant in Sherbrooke, Quebec, since 2003. The plant has run more than 3,000 hours, producing synthetic gas, methanol and ethanol from waste feedstocks. In addition, Enerkem is building a 1.5 MMgy demonstration facility in Westbury, Quebec. Currently, the gasification and gas-conditioning equipment is being installed. The plant is expected to be completed by fall. Leading GreenField’s cellulosic ethanol division will be recently appointed Managing Director Frank Dottori. Dottori founded Tembec Inc. in 1972 and grew the company from a small pulp mill to a leading international forest products company. He served as Tembec’s president and chief executive officer from 1979 until his retire-

PHOTO: ENERKEM INC.

BIObytes

Enerkem Inc. has been piloting its gasification, sequential gas-conditioning and catalysis technology at this plant in Sherbrooke, Quebec, since 2003.

ment in 2006. Now he will lead the expansion of GreenField’s ethanol strategy to include biomassderived cellulosic ethanol. Dottori’s team will work to commercialize cellulosic ethanol in Canada via a two-pronged approach. The first involves extensive laboratory research to develop biochemical process technology for converting plant fibers into ethanol. The second approach hinges on building strategic relationships with leaders in gasification technology. —Jessica Ebert

ETHANOL PRODUCER MAGAZINE MAY 2008

INDUSTRYNEWS

Brazil export plan prods United States The long shadow of Brazilian ethanol fell over North American ethanol producers when Brazil announced a $10 million campaign to promote exports of its sugarcanebased renewable fuel in February. Meanwhile rumblings continue over the future of the U.S. ethanol tariff. Notwithstanding the trade conflict, officials observed some progress at a March meeting in Washington, D.C., between Brazilian and U.S. officials trying to extend cooperation between the world’s two largest ethanol producers. Joel Velasco, chief representative in the United States for Unica, Brazil’s sugarcane trade association, told EPM that ethanol producers around the globe now have “near consensus” on global standards for ethanol as a result of cooperation among Brazil, the United States, the European Union, China, India and South Africa. U.S. and Brazilian producers also share the challenge of countering “the myths and misperceptions regarding biofuels, whether they are produced in Iowa or São Paulo,” Velasco said. Ethanol from sugarcane grown on just 1 percent of Brazil’s arable land displaces 50 percent of the nation’s gasoline consumption, reduces greenhouse-gas emis-

sions by 90 percent and costs half as much as gasoline, he added. Brazil’s criticism of the 54-cent-per-gallon U.S. tariff on imported ethanol remains pointed, however. Unica contends that the tariff keeps ethanol prices artificially high, encourages fossil-fuel consumption and “sends the wrong message to the rest of the world,” Velasco said. With the United States fighting terrorists who threaten Mideastern oil fields, “it seems the height of hypocrisy to tax our friends and allies that are providing an alternative,” he added. Brazilian producers have paid more than $400 million in U.S. duties since the current war in Iraq began, Velasco said.

Room for compromise? U.S. ethanol supporters counter that removing the tariff would be the equivalent of U.S. taxpayers subsidizing foreign production. The Renewable Fuels Association said the tariff offsets the 51-cent-per-gallon tax incentive that U.S. petroleum refiners receive for the ethanol they blend, “regardless of whether it is made in Iowa or Brazil,” said RFA spokesman Matt Hartwig. Without the tariff, he added, American taxpayers would in effect pay Brazilian ethanol pro-

ducers 51 cents for each gallon of ethanol that the United States imports from Brazil. “Admirably, Brazil has built a strong, robust ethanol industry of its own through a wide variety of government supports,” Hartwig said. “We simply believe American taxpayers ought not to have to further subsidize Brazil’s or any other nation’s ethanol industry when we are trying to build one in this nation. The tariff is there to protect the taxpayer, not the ethanol producer.” There may be room for compromise. RFA President Bob Dinneen said his organization might be open to a cut in the import tariff if a similar reduction was made to the blenders' tax credit. “Should the tax credit be altered, he would support harmonizing the two,” Hartwig confirmed. “He is not advocating for either.” In any case, North American producers knew that competition would eventually arrive, said Rahul Iyer, executive vice president at Primafuel Inc. in Long Beach, Calif., “though some in the industry believed that the competition would be confined within U.S. borders.” —Marc Hequet

NEW PROJECT

PROJECT COMPLETE

PLANT EXPANSION

EXPANSION COMPLETE

INDUSTRY

Ethanol Plant Construction Nothing Good Comes Cheap as 13 plants totaling 840 MMgy of capacity recently started production. While several plants are coming on line, it is worth noting PHOTO: LEVELLAND/HOCKLEY COUNTY ETHANOL LLC

he theme of this month’s plant construction list is “completion,”

that no new projects are being added to the list this month. Looking ahead, an increase in productivity in plant design markets may indicate future growth. Early in March, the U.S. Census Bureau reported in its quarterly release on revenue for selected services that the total revenue of architectural and related services firms in the fourth quarter of 2007 rose 4.7 percent from the third quarter of 2007 and 13.5 percent from the fourth quarter of 2006. Third-quarter revenues were up 1.8 percent and 9.4 percent from the prior quarter and one year ago, respectively. Though not perfect corollaries, the Census Bureau numbers indicate an increased future demand for nonresidential construction. It’s difficult to say whether this positive growth in the architecture and engineering sectors will foreshadow an

Levelland/Hockley County Ethanol LLC

increase in ethanol plant construction, but overall expansion in the construction industries could have a positive impact on the ethanol industry. One plant manager said the slowdown in construction “might not be a bad thing” for his plant. He pointed out that giving the market time to absorb

expansions, including Poet Biorefining-Chancellor, which increased capacity from 50 MMgy to 100 MMgy in Chancellor, S.D.; and Siouxland Energy and Livestock Co-op, which grew from 25 MMgy to 55 MMgy.

current ethanol production also gives producers a better advantage when negotiating for feedstocks.

—Craig A. Johnson

Among the 13 plants that started production are: The Andersons Marathon Ethanol LLC, a 110 MMgy plant in Greenville, Ohio; Biofuel Energy Corp., which opened two 110 MMgy facilities in Fairmont, Minn., and Wood River, Neb.; Center Ethanol Co. LLC, a 50 MMgy plant in Sauget, Ill; Greater Ohio Ethanol LLC a 54 MMgy facility in Lima, Ohio; Levelland/Hockley County Ethanol LLC, a 40 MMgy plant in Levelland, Texas; Nesika Energy LLC, a 10 MMgy plant in Scandia, Kan.; Otter Tail Ag Enterprises LLC, a 57.5 MMgy plant in Fergus Falls, Minn.; Poet Biorefining-Alexandria, a 65 MMgy plant in Alexandria, Ind.; Standard Ethanol Cambridge LLC, a 44 MMgy facility in Cambridge, Neb.; and U.S.

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

Bio Marion, a 110 MMgy plant in Marion, S.D. Two of the 13 projects were

ETHANOL PRODUCER MAGAZINE MAY 2008

Construction Represents 4.95 Billion Gallons Annually

Aberdeen Energy LLC

Archer Daniels Midland Co.

Location Mina, South Dakota Ethanol marketer undeclared Design/builder Fagen Inc. Distillers grains marketer undeclared Process technology ICM Inc. Carbon dioxide marketer N/A Capacity 100 MMgy Broke ground November 2006 Feedstock corn Target start-up date May 2008 Synopsis of progress Construction of the rail loop continues. Most buildings are being enclosed, and the company planned to bring new employees to the site at the end of March.

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

undeclared undeclared undeclared October 2006 April 2008

Carleton, Nebraska undeclared Vogelbusch 113 MMgy corn

Location Design/builder Process technology Capacity Feedstock

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

undeclared undeclared undeclared undeclared spring 2008

Fairmont, Minnesota The Industrial Co.

Delta-T Corp. 110 MMgy corn

undeclared

undeclared 275 MMgy corn

undeclared undeclared July 2007 fourth quarter 2008

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

Cargill Inc. Cargill Inc. N/A September 2006 March 2008

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

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Start-up date March 2008

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

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

Bridgeport Ethanol LLC The Andersons Inc. The Andersons Inc. undeclared September 2006

Location Design/builder Process technology Capacity Feedstock

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

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

undeclared Colorado Ag Services undeclared September 2007 September 2008

Synopsis of progress Fermentors are set. One of two silos is complete, and the other is nearly complete. All buildings are erected and being enclosed. All tanks in the tank farm are set, and piping work has begun.

Archer Daniels Midland Co. Cedar Rapids, Iowa

Archer Daniels Midland

Synopsis of progress Construction is substantially complete. Congratulations Biofuel Energy Corp.!

Synopsis of progress The plant finished construction and will be dedicated at the end of May. Congratulations The Andersons Marathon Ethanol LLC!

Location General contractor Process technology Capacity Feedstock

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

Biofuel Energy Corp.

Location General contractor Process technology Capacity Feedstock

The Andersons Marathon Ethanol LLC Greenville, Ohio ICM Inc. ICM Inc. 110 MMgy corn

undeclared 275 MMgy corn

Location General contractor Process technology Capacity Feedstock

Project Complete

Synopsis of progress Electrical and piping work is underway.

Project Complete

undeclared

Synopsis of progress Construction is substantially complete. Congratulations Biofuel Energy Corp.!

Altra Nebraska LLC Location General contractor Process technology Capacity Feedstock

Columbus, Nebraska

Synopsis of progress The project is moving forward. No further information was available at press time.

Project Complete

Altra Indiana LLC Location Cloverdale, Indiana General contractor F.A. Wilhelm Construction Process technology Vogelbusch Capacity 92 MMgy Feedstock corn Synopsis of progress Electrical and piping work is underway.

Location General contractor Process technology Capacity Feedstock

Calgren Renewable Fuels LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Archer Daniels Midland

undeclared undeclared June 2007 third quarter 2009

Synopsis of progress This project is moving forward, according to an ADM representative. No further information was available at press time.

ETHANOL PRODUCER MAGAZINE MAY 2008

Location General contractor Process technology Capacity Feedstock

Pixley, California W.M. Lyles Co. Lurgi Inc. 52 MMgy corn

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

Calgren Renewable Fuels

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

Synopsis of progress N/A

Cardinal Ethanol LLC Location Design/builder Process technology Capacity Feedstock

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

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

Murex CHS Inc. N/A February 2007 summer 2008

PHOTO: CARDINAL ETHANOL LLC

Synopsis of progress Work on the water line and electrical substation is nearly complete. The main line connecting the plant to the city system is complete, and work on the rail loop is finished. The task of connecting the rail loop to the main rail was set to begin in early April.

Cascade Grain Products LLC Location General contractor Process technology Capacity Feedstock

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

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

Eco-Energy Land Oâ&#x20AC;&#x2122;Lakes undeclared June 2006 April 2008

Synopsis of progress The first shipment of corn arrived at the site in mid-March. The plant expects to begin grinding in mid-April. Work on internal rail access, electricity and piping remains.

Project Complete

Location General contractor Process technology Capacity Feedstock

Cardinal Ethanol LLC

Center Ethanol Co. LLC

Didion Ethanol LLC

Sauget, Illinois

Ethanol marketer T.E. Ibberson/McCarthy Industrial Distillers grains marketer Delta-T Corp. Carbon dioxide marketer 50 MMgy Broke ground corn Start-up date

Center Oil Co. undeclared undeclared October 2006 March 2008

Synopsis of progress Commissioning is underway, and the first grind was slated for March 31 at press time. Congratulations Center Ethanol Co. LLC!

Location General contractor Process technology Capacity Feedstock

Synopsis of progress N/A

Keyes, California Harris Construction Praj Industries 55 MMgy corn

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

undeclared undeclared N/A October 2006 March 2008

Synopsis of progress N/A

Cilion Ethanol LLC Location General contractor Process technology Capacity Feedstock

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

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

undeclared undeclared N/A July 2006 second quarter 2008

Location Design/builder Process technology Capacity Feedstock

Obion, Tennessee Fagen Inc. ICM Inc. 100 MMgy corn

Ethanol marketer Aventine Renewable Energy Distillers grains marketer CHS Inc. Carbon dioxide marketer undeclared Broke ground December 2006 Target start-up date fourth quarter 2008

Synopsis of progress N/A

ETHANOL PRODUCER MAGAZINE MAY 2008

Hawkeye Renewables

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

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

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

Eco-Energy First United Ethanol undeclared January 2007 summer 2008

Greater Ohio Ethanol LLC

Location General contractor Process technology Capacity Feedstock

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

undeclared undeclared N/A September 2005 March 2008

Location General contractor Process technology Capacity Feedstock

Eco-Energy undeclared N/A July 2007 first quarter 2009

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

O'Neill, Nebraska Adams Construction Vogelbusch 100 MMgy corn

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

undeclared undeclared N/A July 2007 late 2008

Synopsis of progress N/A

GreenField Ethanol Location General contractor Process technology Capacity Feedstock

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

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

Synopsis of progress All construction is â&#x20AC;&#x153;substantially complete,â&#x20AC;? and the plant is undergoing testing. Congratulations Greater Ohio Ethanol LLC!

Indiana Bio-Energy LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Commercial Alcohols Commercial Alcohols

undeclared October 2006 fourth quarter 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

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

Ethanol marketer Aventine Renewable Energy Distillers grains marketer CHS Inc. Carbon dioxide marketer N/A Broke ground November 2006 Target start-up date August 2008

Synopsis of progress Work on the rail loop is nearly complete. All equipment is set, and all buildings are being enclosed. Work on the water treatment center remains.

Hawkeye Renewables Location Designer/builder Process technology Capacity Feedstock

Shell Rock, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Synopsis of progress According to the company, progress is being made.

Synopsis of progress N/A

Project Complete

Location Designer/builder Process technology Capacity Feedstock

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

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

Synopsis of progress According to the company, progress is being made.

ETHANOL PRODUCER MAGAZINE MAY 2008

Eco-Energy undeclared N/A July 2007 fourth quarter 2008

Location Design/builder Process technology Capacity Feedstock

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

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

Poet Ethanol Products

undeclared N/A January 2007 April 2008

Synopsis of progress N/A

PHOTO: LEVELLAND/HOCKLEY COUNTY ETHANOL LLC

Marysville Ethanol LLC

Location Design/builder Process technology Capacity Feedstock

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

Lansing Trade Group Lansing Trade Group Chaparral Energy Inc.

January 2007 February 2008

Synopsis of progress Construction was complete in January, and the plant began production in February. Congratulations Levelland/Hockley County Ethanol LLC!

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

undeclared undeclared N/A August 2006 early 2008

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

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

Ethanol marketer

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

NEDAK Ethanol LLC Location General contractor Process technology Capacity Feedstock

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

Nesika Energy LLC

Location General contractor Process technology Capacity Feedstock

Scandia, Kansas

Free Country Design & Construction Distillers grains marketer

ICM Inc. 10 MMgy corn

Carbon dioxide marketer Broke ground Start-up date

Synopsis of progress The plant came on line March 1. Congratulations Nesika Energy LLC!

Marquis Energy LLC Location Design/builder Process technology Capacity Feedstock

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

Synopsis of progress N/A

Project Complete

Levelland/Hockley County Ethanol LLC Levelland, Texas ICM Inc. ICM Inc. 40 MMgy corn/milo

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

Synopsis of progress N/A

Levelland/Hockley County Ethanol LLC

Project Complete

Location Design/builder Process technology Capacity Feedstock

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

Murex CHS Inc. N/A September 2006 April 2008

Synopsis of progress The plant is nearly complete and has begun receiving some corn. The first grind date is scheduled for April 17.

Location Design/builder Process technology Capacity Feedstock

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

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

Synopsis of progress N/A

Rebuilding Clean Energy

ELECTRIC MOTOR SERVICE

● Electric Motor Sales ● 75k Sq/Ft Repair Facility ● Up to 10,000 HP Rewind ● UL Certified ● New Drives and Installation ● EASA Warranty Shop ● Ventilation Distributor ● Transportation Department

undeclared undeclared undeclared August 2007 late 2008

REBUILDING CLEAN ENERGY

● ● ● ● ● ● ● ●

Gearbox Sales and Repair Pump Sales and Repair On-Site Laser Alignment On-Site Vibration Analysis On-Site Thermography On-Site Motor Maintenance Quality Assurance Program Engineering Department

Phone: 888.694.6200 (Answered 24/7) Fax: 320.693.0243 111 East 10th Street Litchfield, MN 55355 Website: www.tricotcwind.com Email: steveb@tricotcwind.com 42

ETHANOL PRODUCER MAGAZINE MAY 2008

Northeast Biofuels LLC Location General contractor Process technology Capacity Feedstock

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

Pacific Ethanol Magic Valley LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Noble Americas Corp. Perdue Farms BOC Gases July 2006 2008

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

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

Location General contractor Process technology Capacity Feedstock

Pacific Ag Products LLC

undeclared February 2007 April 2008

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

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

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

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

Stockton, California W.M. Lyles Co. Delta-T Corp. 50 MMgy corn

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

Kinergy Marketing Pacific Ag Products LLC

undeclared April 2007 third quarter 2008

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

One Earth Energy LLC Location Design/Builder Process technology Capacity Feedstock

Gibson City, Illinois Fagen Inc. ICM Inc. 100 MMgy corn

Patriot Renewable Fuels LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared October 2007 fourth quarter 2008

Synopsis of progress N/A

Project Complete

Kinergy Marketing

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

Northwest Renewable LLC

Location General contractor Process technology Capacity Feedstock

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

Location Design/builder Process technology Capacity Feedstock

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

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

Murex undeclared undeclared February 2007 spring 2008

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

Provista UBE Ingredients N/A November 2006 August 2008

Synopsis of progress N/A

Otter Tail Ag Enterprises LLC Fergus Falls, Minnesota Harris Mechanical Delta-T Corp. 57.5 MMgy corn

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

RPMG CHS Inc. N/A October 2006 March 2008

Synopsis of progress Construction is complete. Congratulations Otter Tail Ag Enterprises LLC!

THE ROAD TO SUCCESS IS FILLED WITH TWISTS AND TURNS. FORTUNATELY, WE ALREADY KNOW THE WAY.

Location Design/builder Process technology Capacity Feedstock

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

Synopsis of progress N/A

The biofuels industry’s accounting, tax and various consulting needs can be nearly as complicated as the reﬁning process itself. Which is why Kennedy and Coe’s knowledge and experience in the industry can help you identify and capitalize on many opportunities that can add millions of extra dollars to your organization’s cash ﬂow. Our expertise can help you navigate even the most confusing paths, so you can make the most of your operation’s potential.

Call 800-303-3241 or visit us at www.kcoe.com.

Not your average accountants.SM The “e” mark and the “stylized e” are registered service marks of the Ethanol Promotion and Information Council. Used with permission.

ETHANOL PRODUCER MAGAZINE MAY 2008 KAC.9084_7.5x3.375_EPM_4C 1

43 2/18/08 5:28:55 PM

Project Complete

Location Design/builder Process technology Capacity Feedstock

Poet Biorefining-Alexandria

Poet Biorefining-North Manchester

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

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

Poet Ethanol Products

Poet Nutrition N/A February 2007 April 2008

Synopsis of progress Construction is complete. At press time, the plant’s grand opening was slated for April 17. Congratulations Poet Biorefining-Alexandria!

Expansion Complete

Location Design/builder Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Completion date

Poet Ethanol Products

Poet Nutrition N/A October 2006 March 2008

Location Tucumcari, New Mexico General contractor APS/United Stainless Process Technology Process technology United Stainless Process Technology Capacity 10 MMgy Feedstock corn/milo

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

undeclared undeclared N/A October 2007 April 2008

Synopsis of progress The company continues to renovate the facility, modifying the plant with new technology and expanded production capacity. No further information was available at press time.

Poet Biorefining-Fostoria

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

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

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

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

Location Design/builder Process technology Capacity Feedstock

Expansion Complete

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

Richmond, Missouri ICM Inc. ICM Inc. 55 MMgy corn

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

undeclared undeclared undeclared February 2007 May 2008

Synopsis of progress Electrical, piping and instrumentation work is all that remains. Production staff were slated to arrive for training March 31.

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

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

Route 66 Ethanol LLC

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

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

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

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

Poet Biorefining-Chancellor

Synopsis of progress The expansion is complete. Congratulations Poet Biorefining-Chancellor!

Location Design/builder Process technology Capacity Feedstock

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

Location Design/builder Process technology Capacity Feedstock

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

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

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

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Completion date

C&N Ethanol Marketing Farmers Co-op Society

N/A October 2006 February 2008

Synopsis of progress Expansion from 25 MMgy to 55 MMgy is complete. Congratulations Siouxland Energy and Livestock Co-op!

ASME Pressure Vessels, Columns, Evaporators and Tanks

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

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

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

Tharaldson Ethanol LLC Lansing Ethanol Group

Bunge undeclared November 2006 August 2008

Synopsis of progress N/A

Project Complete

Location General contractor Process technology Capacity Feedstock

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

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

undeclared undeclared N/A June 2007 December 2008

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

Provista UBE Ingredients N/A November 2006 second quarter 2008

U.S. Bio Dyersville Noble Americas Corp.

The Scoular Co. N/A April 2006 March 2008

Location Design/builder Process technology Capacity Feedstock

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

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

RPMG undeclared N/A July 2006 March 2008

Synopsis of progress Construction of the Superior ethanol plant is nearly complete. Staffing and training activities were underway in mid-March.

Location Design/builder Process technology Capacity Feedstock

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

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

Provista UBE Ingredients N/A August 2006 second quarter 2008

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

Terra Grain Fuels Inc.

U.S. Bio Janesville

Belle Plaine, Saskatchewan Ethanol marketer EllisDon/VCM Contractors & Engineers Distillers grains marketer

Delta-T Corp. 150 MMly (40 MMgy) wheat

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

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

Superior Ethanol LLC

Location General contractor Process technology Capacity Feedstock

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

Synopsis of progress N/A

Synopsis of progress This facility started production March 1. Congratulations Standard Ethanol Cambridge LLC!

Location General contractor Process technology Capacity Feedstock

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

Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress Piping and electrical work continues with a target start-up date slated for mid-April.

ETHANOL PRODUCER MAGAZINE MAY 2008

undeclared undeclared undeclared September 2006 April 2008

Location Design/builder Process technology Capacity Feedstock

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

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

Provista UBE Ingredients N/A January 2007 third quarter 2008

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

Project Complete

Location Design/builder Process technology Capacity Feedstock

U.S. Bio Marion Marion, South Dakota Fagen Inc. ICM Inc. 110 MMgy corn

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

Archer Daniels Midland Archer Daniels Midland

N/A October 2006 February 2008

Synopsis of progress Production has begun. Congratulations U.S. Bio Marion!

Location Design/builder Process technology Capacity Feedstock

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

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

Location General contractor Process technology Capacity Feedstock

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

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

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

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

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

Jennings, Louisiana Cajun Constructors Inc. Verenium Biofuels 1.4 MMgy

Synopsis of progress On March 17, Verenium filed a statement with the U.S. Securities and Exchange Commission that said the company is experiencing net losses and will not achieve profitability. â&#x20AC;&#x153;We may not be able to fund our operations,â&#x20AC;? the report said. See the EPM Web site for additional information on the filing.

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

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

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

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

Location Design/builder Process technology Capacity Feedstock

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

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

VeraSun Bloomingburg LLC Location Design/builder Process technology Capacity Feedstock

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

Location Design/builder Process technology Capacity Feedstock

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

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

Murex The Scoular Co. undeclared October 2006 first quarter 2008

Synopsis of progress N/A

ETHANOL PRODUCER MAGAZINE MAY 2008

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:OU R P L A N T 50

Powerful Promise

n the fertile farming territory of southwestern Minnesota, the heart of lake country and prairieland, travelers looking for good fishing often come to the small town of Heron Lake. The lake took its name from the countless nesting blackcrowned night herons that the area’s first visitors found there more than a century ago. Today, as the townspeople prepare to celebrate their quasquicentennial this summer, residents will reflect on not only the progress made in the town’s 125year history, but also its promise for the future. Part of that commitment to the future is one of Heron Lake’s newest businesses: Heron Lake BioEnergy LLC. In September, the 50 MMgy coal-fired plant came on line, bringing 47 full-time jobs to the area. As anyone building an ethanol plant knows, location is just as important as financing when it comes to creating a viable plant. According to Robert Ferguson, president of Heron Lake BioEnergy’s board of governors, the plant’s location benefits from many local advantages. “In a stretch of 25 or 30

HERON LAKE BIOENERGY LLC LOCATION DESIGNER/BUILDER PROCESS TECHNOLOGY CAPACITY FEEDSTOCK ETHANOL MARKETER DISTILLERS GRAINS MARKETER CARBON DIOXIDE MARKETER BROKE GROUND START-UP DATE

miles, you have a significant amount of agricultural activity,” he says. This activity creates an “ag corridor” consisting of several processing facilities (not related to ethanol) and Poet BiorefiningBingham Lake, a 30 MMgy ethanol production facility, just minutes away. “We’re

Heron Lake, Minnesota Fagen Inc. ICM Inc. 50 MMgy corn RPMG CHS Inc. N/A October 2005 September 2007

located on a Class I Union Pacific rail with daily service,” Ferguson says. “We have Highway 60, a four-lane road connecting Sioux City, Iowa, and Mankato, Minn.” Access to good roads and wellmaintained rail underpin the plant’s access to feedstocks, and Ferguson also points to the site’s ability to ship ethanol and distillers grains to end-users. “Probably the best distillers market is the West Coast,” he says. “We have rail stor-

PHOTO: HERON LAKE BIOENERGY LLC

ETHANOL PRODUCER MAGAZINE MAY 2008

issues. … Fortunately for us, ethanol prices went up in October.” Also fortunate was the company’s ability to purchase additional load and unload capabilities. “During construction, we had the opportunity to acquire two small truck elevators that were in neighboring towns,” Ferguson says. This increased staffing by seven employees, and he says the gains were well worth it. As the future of the ethanol industry takes shape, producers are looking for ways to improve their advantages, whether it’s through competitive commodities agreements, streamlined efficiencies or the management of day-today needs such as equipment maintenance and business policies. “You’re always looking at new processes and technologies that will enhance productivity and production at these plants,” Ferguson says. “There are technologies very close: corn oil extraction, cogeneration, wind power, corn fractionation—all technologies being enhanced that streamline the capabilities of the plant. Watching that is part of best-management practices.” A final component to the plant is the company’s relationship with the community. “We do our best to estab-

ETHANOL PRODUCER MAGAZINE MAY 2008

lish good relationships with our ag community customers,” Ferguson says. “We buy grain from all the elevators within a 20- to 30-mile radius. Our risk management and procurement people are always working on [those relationships], holding producer meetings and developing a good rapport.” This forthright approach to dealing with customers, always with a sense of fairness in mind, is what the team at Heron Lake BioEnergy sees as a significant strength. “We try to keep a very open door,” Ferguson says. In the end, a big advantage for Heron Lake BioEnergy may just be themselves. “Talk to our board of directors and our management team,” Ferguson says. “We’re all true, genuine people in agricultural businesses. We’re a state-of-the-art plant, Minnesota-owned and hometown-driven.” One thing is clear, as the community takes a moment to look back at where it’s been, no one can deny the promise of their future. —Craig A. Johnson

:OU R P L A N T

age for 100 hopper cars of [distillers dried grains], plus 100 [railcars] of ethanol. We have a good place to load and ship with a unit-train structure.” Future and current ethanol producers faced many challenges in 2007, including high feedstock costs, increased costs for construction labor and materials, and financing. “I think most of the aggressive lenders have gotten their portfolios at the capacity they want right now,” Ferguson says, adding the company had its funding in place well ahead of its construction schedule. The plant has produced ethanol for more than six months, but Ferguson admits the management team at Heron Lake BioEnergy intended for the plant to be on line sooner. A big challenge was permitting the coal-fired plant in the state of Minnesota. “In my estimation, it added as much as a year to the project,” Ferguson says, stressing that Minnesota is no more stringent than other states, but the added steps in permitting did cause delays. “The first month was challenging. You get a plant on line, dealing with start-up

:INTHEFIELD

Thwarting Insect Resistance

olunteer corn in soybean fields is making a comeback due to Roundup Ready soybeans being planted following Roundup Ready corn. The genetically modified corn and soybean varieties that are resistant to Monsanto Co.’s trademarked and patented herbicide Roundup are popular among farmers. The broad-spectrum herbicide kills all weeds, but not the crop with the inserted genes that make it resistant to Roundup, or the volunteer plants from the previous Roundup Ready crop. Not only does that make for untidy fields, but entomologists warn that leaving volunteer corn that also contains the Bt protein could speed up the emergence of Bt-resistant insects. Bt corn has been genetically engineered to express a protein found in the soil bacteria Bacillus thuringiensis. John Obemeyer, integrated pest management specialist in the Department of Entomology at Purdue University in Indiana, explains when larvae or soft-sided insects ingest the protein, it crystallizes in the animal's stomach, perforating the stomach lining and killing it. Inserting the protein expression effective against corn borers into corn genetics has been successful. “In 1996, the corn borer Bt became available,” Obemeyer says. “It is expressed at such a high dose that we’ve not seen one corn borer live through it.” After a decade, corn borer populations are dropping. Bt corn effective against corn rootworm was introduced three years ago. “With corn rootworm, it’s a different expression and a different dosage,” Obemeyer says. “We’re getting roughly a 90 percent kill.” While that’s high enough to satisfy farmers wanting to reduce insect damage, it’s also low enough to worry entomologists. “My winter meetings have been about making sure farmers understand this is a different animal, a different Bt and a whole new game,” he says. “Normally, this is a very boring subject for farmers.” He says he welcomes the farmers’ interest. “They’re asking far more questions

than I’ve ever had on the subject,” Obemeyer says. The main strategy to slow down the development of insect resistance is to leave refuges of non-Bt corn in every Bt cornfield. The goal is to reduce the chance of an insect that survived eating Bt corn mating with another survivor, which would increase the chances of resistance. Entomologists encourage farmers to plant non-Bt corn in 20 percent of the field, preferably in strips. “Farmers got a little lax with refuges,” Obemeyer says, adding that farmers joked they weren’t putting in the recommended refuges because their neighbor’s field would be the refuge. While no insect resistance has been detected, Purdue researchers are concerned about the heightened potential for resistance developing from rootworms feeding on volunteer corn. A survey of volunteer corn plants found 90 percent carried the Roundup Ready genes into the next generation. Two-thirds of that group expressed the rootworm Bt protein, and one-third of that was severely fed upon by rootworms. “As it loses hybrid vigor, there’s something being lost as far as protein expression [goes]," Obemeyer says. The first-year data needs to be supported by further research. In the meantime, Obemeyer is stressing the importance of controlling volunteer corn early enough in the season to starve out the rootworm larvae before they mature into beetles—by mid-June in the central Corn Belt and later

in June in the northern Corn Belt. Companies with herbicides effective at killing volunteer corn are helping to spread the message, such as Gowan Co. Steve Hotovy, regional sales representative, says this new information increases the need for volunteer corn control. “Volunteer corn is a yield robber,” he says. “Especially with current commodity prices, producers are looking for effective control.” Gowan’s Targa herbicide is a post-emergence grass herbicide that controls both conventional and glyphosate-tolerant volunteer corn in soybeans, as well as perennial grasses, and can be tank-mixed with glyphosate. Monsanto is also taking steps to address resistance potential by engineering corn varieties with multiple proteins to slow down the insect’s ability to develop resistance. Obemeyer raises another cautionary note about the increased potential for insect resistance building in continuous cornfields. “Imagine a field of corn with Bt for controlling rootworm and volunteer corn plants scattered throughout,” he says. “The rootworm will feed on this low-expression volunteer corn and can easily move over to the corn expressing the Bt protein. Once [the rootworms] are beyond the just-hatching stage, they can eat right through the protein, and it no longer affects them.”

—Susanne

Retka Schill

PHOTO: PURDUE UNIVERSITY

ETHANOL PRODUCER MAGAZINE MAY 2008

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:UP FRONT

Venturing Out

hen John Skelley saw the opportunity to return to his home state of Arizona, he left his job at Agri Industries in Iowa to preside over a small grain company called Arizona Grain Inc. in Maricopa in 1984. Under his direction, Arizona Grain grew into a large graintrading company dealing in wheat, corn, milo and barley with a 100-car shuttle terminal on Union Pacific's main line. In 2006, Arizona Grain established Pinal Energy LLC and asked Skelley to be the general manager of the ethanol plant. In July 2007, the 52 MMgy facility started production. Today, the company continues to develop strategic relationships and expand its market share. Q: What is unique about your plant? A: We consider our facility a destination plant, which is a facility located next to demand markets for ethanol, carbon dioxide and distillers grains. We are a long distance from corn production. What I’m most proud of is how we have developed this site. This wasn’t a greenfield project. We already had grain, private trackage and a 100-car unloading facility. We are surrounded by feedlots and dairies that we have very active, ongoing relation dairies—our customers. We Name John Skelley

have a good market for carbon dioxide in the Phoenix; Tucson, Ariz.; Las Vegas; and Albuquerque, N.M., areas. We established a joint venture with a gas company, and we'll break ground on a carbon dioxide and dry ice plant in April. We have a joint-venture relationship with a large gasoline-blending terminal in Phoenix to create the company PinalJet that markets the ethanol. We believe we have a successful formula working with a large blender to market ethanol. Not unlike everybody else, we’re struggling with high feedstock costs. We also have higher costs to bring in feedstock, but we are well-positioned to send our products to a nearby market. Q: What are your management strategies? A: We watch our costs closely. We use our futures and derivatives markets to manage costs. Personally, I try to treat my staff like I want to be treated. I like the environment to be serious, but fun. We take our jobs seriously, but we try to have a lot of fun at it. For example, we are going to have a golf tournament in two weeks to get our employees away from the plant. We also like our employees to feel like they know what’s going on. I like to bring in our team managers once a week to tell me about the plant, and then I in turn tell them about the marketing and general environment for ethanol, so they feel like they’re part of the process.

Q: Are there any government policies that you want to see reformed? A: One of the biggest challenges is getting the U.S. government, namely the USDA, to allow farmers to get out of the commitments of the Conservation Reserve Program without penalty if the ground is suitable for row crops. We’re not advocating that we put the plow to all open ground in the Midwest, but we think there is a reasonable amount of acres that could come back into row production. The Energy Independence & Security Act of 2007 has renewable fuels standard mandates that have created greater demand for corn production in the United States. The CRP needs to be tapped for some of those acres. Q: If you could say one thing to our readers, what would it be? A: Things will never be as bad or as good as you may project them to be.

—Anduin Kirkbride McElroy

Title General Manager Plant Pinal Energy LLC in Maricopa, Ariz. Company Arizona Grain Inc. Hometown Casa Grande, Ariz. Education Business Marketing degree from Arizona State University in Tempe, Ariz.; Master of International Business from Thunderbird Graduate School in Glendale, Ariz. Career Chronology Pinal Energy LLC General Manager 2006-present Arizona Grain Inc. President 1984-2006

PHOTO: PINAL ENERGY LLC

ETHANOL PRODUCER MAGAZINE MAY 2008

:FLEXFACTOR 56

Flex-Fuel Concepts Unveiled

n the wake of the announcement of a 36 billion-gallon renewable fuels standard and a 35-mile-per-gallon corporate average fuel economy, major car manufacturers are littering auto shows across the continent with cutting-edge flexible-fuel concept cars. At the North American International Auto Show in Detroit in January, for example, Saab debuted its innovative 9-4X BioPower Concept, a four-cylinder, 2.0-liter turbo engine optimized for E85. “This concept is a clear statement of what our brand is about,” says Jan Åke Jonsson, automobile managing director at Saab. “It is also an important next step in our plans to enter new market segments with distinctive product offerings.” Saab’s current BioPower models are the top-selling flex-fuel vehicles (FFVs) in Europe. The new concept demonstrates Saab’s commitment to “rightsizing,” or achieving sufficient levels of performance with a smaller, more efficient engine. To that end, the BioPower concept uses direct injection to deliver fuel to the combustion chamber to increase power and enhance engine efficiency, and continuously variable valve timing to enhance turbo

response at low engine speeds, which contributes to an even wider spread of torque. On E85, the engine gives 300horsepower and 400 Newton meters (295 foot-pounds) of torque, and produces more power and less carbon dioxide emissions compared with gasoline. In addition, the 9-4X is the first model in which Saab has partnered its BioPower technology with the allwheel-drive feature. In early March, the editors of AutoWeek, a North American automotive enthusiast’s magazine, voted the Saab 9-X BioHybrid, which was unveiled at the 2008 Geneva International Automobile Show, the “best concept.” It combines the E85optimized BioPower turbo engine with General Motors’ next-generation hybrid system. A second GM subsidiary, Hummer, which already announced that all its models would be available with a biofuel power train in 2010, also debuted an environmentally friendly FFV concept at the Detroit show. The HX Concept was conceived by three GM designers fresh from the College

for Creative Studies in Detroit. David Rojas, Min Young Kang and Robert Jablonski designed an efficient E85capable concept that still embodies the off-road capabilities that Hummer is known for. Finally, Ferrari chose Detroit as the venue to present its E85-powered F430 Spider. The Italian car manufacturer has made a commitment to cut the fuel consumption and emissions of its cars by 40 percent by 2012. The new concept represents one effort to reach this goal. Modifications to the fuel feed system and the engine central processing unit allow for the use of two fuels, and result in an increase in maximum power and torque, as well as a 5 percent decrease in carbon dioxide emissions. —Jessica Ebert

PHOTO: SAAB

ETHANOL PRODUCER MAGAZINE MAY 2008

Toulouse Mercure Toulouse Atria

June 2â&#x20AC;&#x201C;6, 2008 A Tradition of Industry Education For 27 years, The Alcohol School has been educating fuel ethanol and distilled beverage producers in the science of alcohol production. The week-long programme in Toulouse, France, is designed for lab, plant, and management personnel and is organized around a series of lectures and laboratory demonstrations presented by a faculty of academic, industry and Ethanol Technology Institute experts. The programme will cover the process of ethanol and beverage alcohol production from milling and mash preparation through fermentation and distillation. Enzyme usage, yeast biology, bacterial contamination and control will also be discussed along with other issues currently affecting both industries.

For More Information Registration is limited, with preference given to fuel ethanol and distilled beverage producers. Registration materials and additional information are available online at www.ethanoltech.com. 6120 W Douglas Ave | Milwaukee WI 53218 USA +1 414 393-0410 | Fax +1 414 358-8012

:BUSINESS 58

Industry’s Tough Times Evident in Quarterly Earnings

ecord-high corn prices and low ethanol prices impacted publicly traded ethanol companies three different ways in their fourth-quarter financial earnings, which were released throughout February and March. Two companies saw profits go up, two companies saw a profit that was less than the same quarter a year ago, and two companies reported losses. Meanwhile, Pacific Ethanol Inc. announced March 10 that it would delay the filing of its annual report until March 31. The two companies that saw profits go up—Archer Daniels Midland Co. and The Andersons Inc.—have business dealings outside of the ethanol industry, but ethanol certainly impacted both companies in different ways. The Andersons Grain & Ethanol Group’s 2007 operating income of $65.9 million was more

than double its previous income record of $28 million achieved in 2006. Total revenues generated for the year were at $1.5 billion. This included $407 million of grain and ethanol sales made through origination and marketing agreements between the company and its ethanol joint ventures. Total revenues in the Grain & Ethanol Group have increased for both the quarter and year due to a considerable increase in both the volume and price of grain sold, which was attributed mainly to an increase in gallons of ethanol sold. ADM posted record highs for its fourth-quarter earnings ending Dec. 31, 2007. The Decatur, Ill-based company posted a net income of $473 million for the quarter, up nearly 7.3 percent compared with $441 million earned in the same quarter in 2006. However, the company said its profits were boosted by demand for protein meal and seed oil, and improved results in its wheat and malt processing operations. Its corn processing profits were down 18 percent quarter-to-quarter to $275 million, while its sales and other operating income rose 50 percent to $16.5 billion for the quarter, up from less than $11 billion in the same quarter in 2006.

Meanwhile, Aventine Renewable Energy Holdings Inc. and VeraSun Energy Corp. reported profits that were down from the same quarter last year. Aventine posted a net income of $3.3 million in the fourth quarter of 2007, a 25 percent drop from a net income of $12.8 million from the same quarter last year. However, according to Eitan Bernstein, energy and ethanol analyst for Friedman, Billings, Ramsey & Co., Aventine’s decline in profits shouldn’t raise concerns. “Aventine’s decrease in profits is an overreaction,” he says. “I think people ran with the scenario of, ‘Does Aventine have the cash to continue with its plans?’ I think they do.” VeraSun reported an 80 percent drop in net income in its fourth-quarter 2007 earnings. Its net income was $4 million, compared with $21.4 million for the same period last year. U.S. BioEnergy Corp. and Green Plains Renewable Energy Inc. were hit hardest in their quarterly earnings. U.S. BioEnergy, which is merging with VeraSun, reported a $7.2 million net loss for the fourth quarter of 2007, compared with a profit of $21 million over the same period last year. GPRE reported a net loss of $1.8 million for the fourth quarter of 2007, during which time its inaugural ethanol plant began operating in Shenandoah, Iowa. The company is building a second plant in Superior, Iowa, which is slated to start production this spring.

—Bryan Sims and Jessica Sobolik

ETHANOL PRODUCER MAGAZINE MAY 2008

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:DRIVE 60

Now is the Time to Redouble Efforts By Toni Nuernberg

gy. Survey after survey finds Americans support cleaner energy. They’re proud to support a movelthough I never fre- ment that creates American jobs. quented New York’s Studio 54 nor As gasoline prices continue to been a big fan of “pop art,” I am reach record highs with no relief in drawn to the words of Andy Warhol sight, Americans are searching for as I take the reins of the Ethanol answers. Since the OPEC oil Promotion and Information embargo 35 years ago, little has Council. “They always say time been accomplished. Now there is changes things, but you actually the opportunity to reverse that trend. Ethanol is part of have to change them the solution. yourself,” he said. The ethanol industry The ethanol indusis still in its infancy and try is in a unique position continually evolving. to chart its own course Success brings scrutiny, for the next decade. By and this industry is cerworking together as an tainly up to the challenge. industry, our legislative In fact, I relish the opporefforts have resulted in a tunity to participate in the renewable fuels stanprocess. In my nearly dard that was unheard of three decades with the just a few years ago. Nuernberg Minneapolis-based Ethanol is now a critical of Credit and component of our nation’s long- Association term energy security. It is contin- Collection Professionals (ACA), gent upon all of us in the industry to negative press was a fact of life. ensure that now that we’ve talked However, when the truth is on your side the message will eventually the talk, we walk the walk. Our industry continues to face resonate with the public. ACA’s significant challenges even as it dedicated efforts contributed nearexperiences record growth and ly $40 billion back into the U.S. expansion. Anyone who reads the economy. Those numbers speak latest headlines, follows their for themselves as does the nearly investments or has put their house $50 billion the ethanol industry on the market, realizes the econo- contributed to the nation’s gross my has slowed. Some analysts say domestic product in 2007. Mark Twain once said, “A lie the country is headed into a recession, and the ethanol industry is can travel halfway around the not immune to the economic down- world while the truth is putting on turn. While we must always focus its shoes.” Misinformation should on the bottom line, we must not not always be viewed in the neganeglect the critical public relations tive sense—it is an opportunity to and marketing initiatives that have reinforce the truth. On a level playpaid tremendous dividends for the ing field, the ethanol message will not fall on deaf ears. Complacency renewable fuels movement. Driving consumer demand for is not in EPIC’s vocabulary. We ethanol can be a daunting task when confronted with the deep pockets of our naysayers. It is essential that we have a unified voice in cutting through the smoke and mirrors of the opposition and provide a clear, concise message to consumers. We must continue to break down the myths and stereotypes surrounding renewable ener-

respond in a timely fashion to misinformation and promote the truth about ethanol. We will continue to operate in this manner. That being said, the industry cannot be a house divided. Our members are critical to the success of this movement. Now more than ever, there is tremendous value in becoming a member of EPIC. Driving consumer demand benefits us all but it is contingent upon an effective campaign against our detractors. We are fighting the battle on all fronts, but it is imperative that we have more industry participation. This is a long-term campaign that will be waged for the foreseeable future. Every one of us must participate in this process. This is not the time to hibernate until a rosier economic forecast emerges. This is the time to lend a hand rather than take a hand out by letting others fund the fight. This is the time to redouble our efforts to reach our audience. The future is now.

Toni Nuernberg is the executive director of the Ethanol Promotion and Information Council. Reach her at tnuernberg@epicinfo.org or (402) 932-0567.

ETHANOL PRODUCER MAGAZINE MAY 2008

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:LEGALPERSPECTIVES 62

Getting Control of Ethanol Spills By James L. Pray

Training needs to also consider ecent news reports suggest that the ethanol the fact that a railroad tank car is not industry is experiencing under the effective control of the plant an increase in accidental once it begins its journey. The plant is releases of ethanol into powerless if employees unloading the the environment. While most of these car do not properly shut the valves once the car is emptied. If spills are the result of train tank car valves are not propderailments and truck accierly inspected when they dents that may be outside arrive back at the ethanol the control of ethanol plant plant, fuel can be released managers, some of the as the tanks are filled. spills are occurring at plants Likewise, valves and seals during the transfer of can work loose or fail over ethanol or denaturant. time, a problem that is likely One explanation for the to increase as railroad tank recent increase in reported cars built to transport spills is the steep increase ethanol begin to age. In fact, in ethanol production in the Pray the age of the railroad tank United States. A four-fold increase in production from 1999 to cars has been a factor in a number of 2008, matched by a proportionate spills. Complicating liability concerns increase in the handling of denaturant is the fact under applicable law that by ethanol plants, means that the the plant may be found liable for any industry has had to hire and train equipment failures experienced by its many new employees. I estimate that tank cars even if those failures take the industry handles 250,000 transfer place while being hauled by the railoperations each year. If those opera- road. In addition to worker safety, envitions have a 99.99 percent success rate, 25 spills per year will still occur ronmental and lost production conacross the country. A quick search cerns, plants need to be aware of the through Internet reports suggests that regulatory burdens. Both state envithe success rate is even better than ronmental agencies and the U.S. EPA 99.99 percent. The industry must be can impose substantial fines. The EPA is quick to fine any company that does doing something right. Still, even a few high-profile spills not report spills to the National involving fires or destruction of habitat Response Center (800-424-8802) will trigger a request for additional regulation and oversight. With ethanol production poised to nearly double over the next several years as plants currently under construction are finished, this industry has an obligation to study its own procedures and training in order to reduce the number of spills and avoid the new burdensome regulatory oversight that might follow.

within 15 minutes of discovery. Spill investigations involving railcars are also overseen by the Federal Railroad Administration, a division of the U.S. Department of Transportation. If there were not enough federal agencies getting involved, the Department of Homeland Security has recently issued final regulations creating new reporting, recordkeeping and site security requirements. So what can the industry do to prevent additional regulatory burdens? Hire good consultants to properly train your workforce. Work with local emergency responders so that they know how to assist in handling an ethanol or denaturant spill. Inspect equipment and be prepared to replace or repair any defective items immediately. Finally, have all documentation in order.

James L. Pray chairs the environmental practice group at BrownWinick, a Des Moines, Iowa-based law firm serving the renewable fuels industry. Reach him at pray@brownwinick.com or (515) 2422404.

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

ETHANOL PRODUCER MAGAZINE MAY 2008

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INDUSTRY

Testing theWater Conventional wisdom says water in ethanol is bad, but a new technical understanding is emerging that could dramatically improve corn-based ethanolâ&#x20AC;&#x2122;s environmental footprint while revolutionizing how the alternative fuel is made, transported and used. By Ron Kotrba

Consultant Frits Dautzenberg is one of a growing number of people around the world advocating midlevel hydrous ethanol blends. PHOTO: FRED GREAVES

ETHANOL PRODUCER MAGAZINE MAY 2008

INDUSTRY

ETHANOL PRODUCER MAGAZINE MAY 2008

INDUSTRY

lot of attention is being focused on midlevel ethanol blends. If that’s considered a hot topic then issue of midlevel hydrous blends reaches the magnitude of a Super Nova. A convincing message is reaching influential ears in government and private industry, and it turns conventional wisdom on its head. The accepted truth is that water in ethanol is bad—period. As such, anhydrous “water-free” ethanol has been the norm in the United States since the blend component’s debut in gas supplies 25 years ago. Now enter a serendipitous, convincing find. “This just happened last year—it’s very new,” says Frits Dautzenberg, a San Diego-based consultant. “How is it possible everyone missed this point?” Dautzenberg is retained as a consultant by the Netherlands-based Process

Design Center Inc. What Dautzenberg is talking about is a new understanding of hydrous ethanol’s relationship to gas and ambient moisture. This “new science” reveals midlevel hydrous ethanol (96 percent ethanol, 4 percent water, i.e., azeotropic) blends will not phase separate and can absorb five times more water than anhydrous ethanol blends. The implications of this are widespread, potentially affecting every aspect of ethanol’s role in fuel supplies. PDC works with many major oil and petrochemical companies, and owner Hans Keuken tells EPM how it all started. One of his researchers was interested in challenging conventional ethanol drying methods using mol sieves and membranes. The goal was to find ways to reduce the cost and energy intensity of dehydration. A little bored by this proposal, Keuken said to

his team, “If you really want to innovate—and the fuel-ethanol is going in the gasoline anyhow—maybe look for ways to separate ethanol and water with gasoline.” Keuken’s reasoning was that gasoline is full of aromatics also used in azeotropic distillation. “In principle, one can use a liquidliquid extraction column to extract ethanol from an ethanol-water mixture into a gasoline stream,” he says. This presumes that the two liquids then can be totally separated, but the researchers found this was not exactly the case. In the top of the extractor the densities of the two liquids were similar and took a long time to completely disengage, which led to prohibitively large extractor volumes that were operationally too expensive. An idea immediately followed, which was, “If we can’t get the water out, why not leave it in?” Keuken says. “So what appeared to be a show

INDUSTRY

stopper for extraction promised to be an opportunity for hydrous ethanol blending—some call this serendipity.”

Gaining Acceptance The oil industry looks at refinery streams as continuous mixtures of hydrocarbons with certain common behaviors which typically do not mix with water. “But ethanol is a substance that seriously disturbs this regular picture,” Keuken says. “Refiners were deceived by their intuitions.” PDC however approached gas-ethanol mixtures from more of a chemicals angle. Many major oil companies are PDC clients. “Although they were reluctant to initially believe us, we are also in the lucky position to have enough technical credibility to be taken seriously,” Keuken says. After giving a presentation in Brussels, Belgium Walter Mirabella, an methyl tertiary

butyl ether and ethyl tert-butyl ether lobbyist, was in the audience and asked Keuken, “Do you think the entire fuel industry is stupid?” Shell Oil was approached with this information and according to Dautzenberg the oil major’s response was, ‘This cannot be true—we know everything about this.’ But everyone is using 20-year-old data,” he tells EPM. “They said they needed to repeat it and they did and conferred with us. They were surprised.” Everyone working in ethanol thought they knew the whole concept of water separation and the necessity of extremely low water, says Tom MacDonald, who spent 30 years with the California Energy Commission as an ethanol fuels specialist. He retired last year and started his own consulting firm called MacDonald Associates. Dautzenberg and Keuken approached

the CEC shortly before MacDonald’s retirement and asked if they could present their findings. “We were all skeptical in the beginning,” MacDonald says. After leaving the CEC, MacDonald went to Europe to meet with PDC officials who spun off a company called HE Blends BV, on the wet alcohol concept. He came back convinced. “I’ve had people looking hard at this to find any flaw, any problem, and it all looks very solid,” MacDonald says. MacDonald still does some work for the CEC, but also finds interest in the Brazilian fuels industry where both hydrous and anhydrous blends exist. According to him, not much needs to be done in Brazil to transition to a hydrous ethanol economy. What’s harder though is convincing the U.S. federal and state governments, oil companies, pipeline operators and vehicle

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manufacturers that midlevel hydrous blends are a prudent evolution. The team took its message to influential people in government and private industry in January, starting in Minnesota, the ethanol hotspot. The state passed the first E20 mandate in the United States a few years ago. “Minnesota is a place that could really do this the soonest,” MacDonald says. After visiting with the state agriculture department the team met with Kelly Davis the Renewable Fuels Association technical committee chair and ethanol specification guru. ASTM revisited its water specification for ethanol (less than 1 percent) but the tests employed to verify PDC’s findings were bunk, McDonald says. “They had a procedure where you put anhydrous ethanol in the gasoline and then add water,” he says. “That’s a whole different animal than when it comes chemically bound in the ethanol itself.”

Implications and Research An ethanol plant builder based in Minnesota is conducting a pro bono study to pinpoint the energy savings that result from skipping the dehydration step. The results are expected early this spring. Depending on the technology employed, Keuken suggests between 10 percent and 45 percent energy savings will be gained by eliminating dehydration. “The benefit of HE Blends’ discovery stem primarily from the avoided capital, operating and energy costs of eliminating the need for the hydrous-to-anhydrous ethanol step,” says Eric de Jager, marketing and sales manager with HE Blends. Jager also points out that a 4 percent product volume increase happens while reducing energy consumption and costs. “Overall a transition from anhydrous to hydrous ethanol for gasoline blending is expected to make a significant contribution to

ethanol’s cost-competitiveness, fuel cycle net energy balance and greenhouse gas emissions profile,” he says. Hydrous ethanol may be the key to ethanol’s acceptance in the mainstream fuel pipeline distribution network. “Conventional pipelining with [anhydrous] ethanol picks up water, and when it separates out corrosion is a concern,” Dautzenberg says. With higher concentrations of wet ethanol able to homogeneously retain up to five times more moisture than dry ethanol blends, the fear of phase separation is significantly reduced. Keuken backs up this point. “People associate water with corrosion but in this case the water is dissolved on a molecular level and completely sealed off by hydrocarbons, so these corrosion effects will not occur,” he tells EPM. Even international trade could benefit. “Stringent water specs on ethanol, which attracts water, oftentimes force people to dry twice,” Keuken says. This negatively impacts the alternative fuel’s overall energy balance. Perhaps one of the most important aspects of hydrous ethanol blends is its effect on vehicle performance and emissions. Preliminary tests have already been done in Europe and the results on performance, fuel economy, emissions and engine wear for midlevel hydrous ethanol blends are all favorable, if not unexpectedly so. “Water injection in combustion engines increases the thermodynamic efficiency and this will increase mileage, which has never been properly investigated for normal cars,” Keuken says. “The water cools the mixture somewhat, which may allow for more mixture to enter the cylinder,” Jager explains. “But the greater effect comes later during combustion when the water takes in significant amounts of heat energy as it converts from liquid

ETHANOL PRODUCER MAGAZINE MAY 2008

PHOTO: HE BLENDS BV

INDUSTRY

PDC researcher Jo Sijben, left, and HE Blends BV Marketing and Sales Manager Jager, right, stand beside the test cars that were fueled with midlevel hydrous ethanol blends in the Netherlands.

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to gas, increasing piston pressure— torque—and reducing the peak temperature,” which reduces nitrogen oxide (NOx) formation. Preliminary results of this kind were seen in a standard Volkswagen Golf 5 FSI tested on hydrous E15 by the SGS Drive Technology Center based in Austria and TNO Automotive in the Netherlands. A marginal increase in fuel efficiency coupled with hitting European Union 4 exhaust emissions targets and a cleaner engine internally were achieved. According to Jager, these results helped steer the Dutch and German governments to agree to fund an E0 to E85 performance curve research program for midlevel hydrous and anhydrous blends. Anhydrous and hydrous blends of E10, E25, E50 and E85, will be tested for blend optimization with respect to fuel consumption and engine emissions. MacDonald says he hopes to begin his own vehicle testing in the

ETHANOL PRODUCER MAGAZINE MAY 2008

United States once he can convince an automaker to donate a car or two. “In our view it’s a win-win for almost everybody,” Keuken says. “Producers can skip the drying step, sell 4 percent more volume, save on energy costs and operational headaches, maintenance and capital investments. International trade will benefit. Oil companies benefit from allowing higher water tolerances in their distribution systems. The car owners can benefit from a higher mileage per gallon and cleaner engine interior. The world can benefit from less overall greenhouse gas and NOx emissions.” EP Ron Kotrba is an Ethanol Producer Magazine senior writer. Reach him at rkotrba@bbibiofuels.com or (701) 7384962.

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TECHNOLOGY

Patently Moving Ahead Biofuels patents have increased steadily over the past six years, according to a report published by Baker & Daniels LLP. The data also provides proof that there is an earnest effort underway to patent technological advances toward the commercialization of cellulosic ethanol production. By Bryan Sims

ETHANOL PRODUCER MAGAZINE MAY 2008

TECHNOLOGY

ETHANOL PRODUCER MAGAZINE MAY 2008

TECHNOLOGY

he passage of the 2007 Energy Independence & Security Act in December further spurred the development of commercial-scale production technology for cellulosic ethanol. As the United States gears up to meet the 36 billion gallon renewable fuels standard (RFS)—16 billion gallons of which must be cellulosic ethanol— it will be interesting to see who comes up with the innovative pretreatment technologies required to efficiently break down the inherently complex cellulosic materials and can take those technologies to the commercial-scale level. Several innovative concepts have already surfaced and time will tell which players will change the biofuel patent landscape by addressing the most cost-effective means of production. A report released in January by law firm Baker & Daniels LLP, showed that published biofuel patents have experienced exponential growth from 2002 to 2007. The study, conducted by Ronald Kamis, a part-

ner at Baker & Daniels, and Mandar Joshi, a technical specialist with the firm, concluded that in the past six years, a total of 2,796 biofuels-related patents have been published in the United States, with the number increasing by more than 150 percent in 2006-’07. In 2007 alone, the number of biofuel patents (1,045) was more than the combined total of solar power (555) and wind power (282) patents in that same year. To understand the report, Kamis and Joshi stressed that one must look at the numbers not as an indication of what is happening today, but instead at what happened 18 months ago. In the United States, a patent is not only expensive to procure and maintain but it’s normally published no sooner than 18 months after it’s filed. Obtaining patents should be an integral part of a company’s business model, according to Kamis. “There are a lot of companies that don’t have an intellectual property patent filing strategy in the renewable energy industry,” he says. “They’re starting to see

that as valuable now and that’s something I thought I would get a sense of in researching this report. I also thought that the report would be useful for the industry.” Kamis Kamis and Joshi broke down the biofuel-related patents published in 2006-’07 into five technology areas: agricultural biotechnology, biodiesel, biomass, ethanol and other alcohols, and enzymes. The number of patents published in those technologies was: biodiesel 299; agricultural biotechnology 110; ethanol and other alcohols 42; enzymes 35; and biomass 41. They also assessed the number of cellulosic-related patents published in 2006-’07 and found the following distribution: biodiesel 1; agricultural biotechnology 1; ethanol and other alcohols 4; enzymes 5; and biomass 5. Although biodiesel garnered the most

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TECHNOLOGY

patents, the authors stressed that many, if not all of the numbers designated for each classification are not mutually exclusive. Rather, they’re all interrelated depending on the intended applications of each. “Our classification is somewhat arbitrary,” Kamis says. “Some patents in the report could have been placed in several different categories. [For example], some of the patents listed as directed to enzymes could also have been classified under the biomass category because they are directed to using an enzyme for biomass conversion to make ethanol or cellulosic ethanol.” In order to understand the empirical nature of the report the data must be sorted out in a context that reflects how the gap between traditional corn-based ethanol and the commercialization of cellulosic ethanol could be closing.

Behind the Numbers The data compiled by Baker & Daniels conveys an excellent snapshot of the

growth in cellulosic and cellulosic-related technologies and/or microbiological patents directed at cellulosic applications. According to Joshi, a total of 32 patents were published related to ethanol and other alcohols, biomass and enzymes for 2004-’05. Of the 32 patents published during that time, six were ethanol related, 13 were biomass related and 13 were enzyme related patents. “I don’t see a trend in enzymes and biomass but I do see a trend in ethanol, other alcohols and cellulosic ethanol,” he says. “When we searched for a keyword as biofuel we got a lot of different hits and several were not directly related to the technologies we were interested in. So, we actually went through the hits sorted out the ones in the technical areas we list in the report.” Kamis echoes his colleague’s sentiments. “I think if we were to look at this [report] 18 months from now, which would be today’s filings, I’d say you’d probably see an increase of cellulosic ethanol patents and cellulosic directed applications,” he says.

“Patent filings are typically the first phase in any technology. Patents typically are filed at the very early stages of proof of concept. Because of this, I think that you’ll see a lot of patent filings even though the legislative minimums for cellulosic ethanol won’t get put into place for a number of years.” Broken down by ownership entity, the report indicated that patents published in the selected technologies in 2006-’07 were 57 percent owned by corporate entities, 11 percent by universities or other academic institutions and 32 percent undesignated. These numbers are likely to increase as cellulosic companies continue to incorporate joint ventures into their plans for expanding or establishing patent portfolios. According to Kamis, this is not a “flash in the pan.” “This is what happens anytime you have a technology push,” Kamis says. “However, the figures you don’t see every year are the amount of joint venture and partnership money being put into biofuels and/or renewable energy.”

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Biofuel Patents Compared to Solar Power and Wind Power Patents in 2007

SOURCE: BAKER & DANIELS LLP

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Of course, with partnerships and joint ventures, the question of crosslicensing technology creeps up as a potential thicket for achieving exclusivity in the marketplace, Kamis says. “I think the question that remains to be seen is how the industry develops from the standpoint of cross-licensing,” Kamis says. “Some industries, like the biotechnology industry, as a rule, don’t cross where other industries extensively crosslicense. I’m not sure which way the cellulosic ethanol industry will go. It’s too early to say.”

Defining Uses and Applications According to the World Trade Organization agreement on intellectual property, a patented product or process must be “new, involve an inventive step and be capable of industrial application.” In U.S. law, this criteria is defined as “nov-

elty, non-obviousness and utility.” As more cost-saving technology is engineered into the already price-significant feedstock supply, the economics of cellulosic ethanol production will likely crown feedstock patent portfolios as some of the most valuable throughout the biofuel patent landscape. But, where do enzymes fit in this equation? According to Joshi, enzymes can be Joshi included in the biomass category if they are ligninase or xylanase, but they could also apply to alcohol or ethanol production. “However, I think there are other enzymes like lipases, diesterases and such, which will go into the biodiesel category,” he adds. Additionally, there is an ongoing debate over whether enzymes used in synthetic biology, such as breeding

ETHANOL PRODUCER MAGAZINE MAY 2008

Intellect Driven by Investment In 2007, investors funneled $2.9 billion into the U.S. biofuels industry. Under the Suppan new Energy Bill, $500 million in federal grants are to be allocated from 2008 to 2015 to promote the development of advanced and cellulosic biofuels. Many emerging companies are looking for that one patented technology that could trigger an intellectual ripple effect whether it’s incentivized or not because patents are a way for companies and investment groups to obtain a return on their investment, according to Kamis. “I think what is differ-

ETHANOL PRODUCER MAGAZINE MAY 2008

Bryan Sims is an Ethanol Producer Magazine staff writer. Reach him at bsims@bbibiofuels.com or (701) 738-4962.

www.smar.com

ent in the renewable fuels space now is that the technology decisions, which are interrelated to patents, are driven in part by legislative incentives and regulatory policy,” he says. “That’s different than a lot of your other major established technology fields like software or consumer products.” Another debate that looms is whether patents are truly pro-competitive. Some in the industry believe that forwarding a particular concept, eventually patenting it and then protecting it could potentially impede innovation. “I believe [patents] are procompetitive because they incentivize investment in research,” Kamis says. “If you don’t have patent protection, you have the problem of competitors getting a free ride.” As the cellulosic ethanol industry develops, its future relies on innovation. However, the options for technology will narrow over time as regulatory standards are promulgated. For now, it’s anyone’s guess who will take the engineering lead to establish a commercial, cost-effective cellulosic ethanol industry for years to come. “The patent filings will follow the investments,” Kamis says. “That’s how it usually goes and I don’t think the cellulosic technology industry will differ from this general rule.” EP

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enzymes or microbes into switchgrass or other perennial biomass, will broaden the cellulosic scope because patent claims have been so broad and the licensing of patent use is so complex, according to Steve Suppan, policy analyst for the Institute of Agriculture and Trade Policy, a nonprofit organization based in Minneapolis. “One of the issues I think will arise if there are biogenetically altered feedstocks is whether the patent monopoly will correspond with the degree of innovation,” he says. “As far as I know, genetically engineering a plant to effectively preprocess the cellulose is a pretty new development. It seems to me it would be potentially a different kind of patent application.”

Ethanol, Bio-Diesel, Nuclear Power, U.S. NAVY, Oil & Gas, Water & Wastewater, Food & Beverage, Pulp and Paper, Sugar…

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Biofuel Patents from 2006-2007 [Selected Technologies]

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TECHNOLOGY

ENVIRONMENT

FLOCKS OR FEEDSTOCKS The Conservation Reserve Program encourages landowners to protect environmentally sensitive acreage. Increased demand for biofuels and a growing world population have driven crop prices to record highs. At the same time, many farmers are struggling to make a profit due to increased operating costs, and are considering letting CRP contracts expire so they can farm more land. That has prompted conservationists to wonder how the conversion will affect wildlife. By Kris Bevill

ETHANOL PRODUCER MAGAZINE MAY 2008

ENVIRONMENT

ETHANOL PRODUCER MAGAZINE MAY 2008

ENVIRONMENT

The ‘Duck Factory’ One area that has specifically been impacted by CRP, and some believe stands to lose the most from an acreage reduction, is the Prairie Pothole Region of the Northern Plains. This 300,000-square-mile region encompasses a large portion of North Dakota, and parts of South Dakota and Montana. It is referred to by the U.S. Fish and Wildlife Service as the “duck factory” of North America. Approximately 7 million pairs of breeding ducks are supported annually by the Prairie Pothole

PHOTO: USDA NATURAL RESOURCES CONSERVATION SERVICE

he Conservation Reserve Program is the largest private-lands management program in the United States. As of Jan. 31, 2008, there were 34.6 million acres enrolled in the CRP. The program consists of landowners, mostly farmers and ranchers, who voluntarily enroll eligible acreage in 10- to 15-year contracts with the USDA Farm Service Agency. Participants receive annual rental payments from the USDA’s Commodity Credit Corp. as compensation for planting appropriate vegetative cover to control soil erosion, improve water and air quality, and enhance wildlife habitat. According to the USDA, in the 20 years since the program was created, soil erosion has been reduced by 450 million tons per year. CRP can be credited for a reduction in sediment and nutrient runoff into rivers and streams. The program has also been responsible for increased wildlife populations. Long-absent prairie chickens have reappeared in Texas and big game numbers are rising in Western United States. But if farmers allow CRP acreage to expire, previously protected wildlife habitat could be lost to the plow and some are concerned that that will have a negative effect on our nation’s wild bird and game populations.

The Prairie Pothole Region could slowly be lost to the plow if farmers convert more CRP land to crops.

Region. A 2007 study conducted by the FWS determined that CRP grassland in this area produces 2 million ducks each year. The study found this to be a 30 percent increase compared with expected duck production from the same area without CRP cover. Of the 44 million acres of land in North Dakota, 3 million acres (mostly in the Prairie Pothole Region of the state) are currently enrolled in the CRP. According to Jim Jost, North Dakota’s FSA conservation coordinator, contracts for 400,000 acres of CRP land in North Dakota were not renewed at the end of the 2007 fiscal year last September. North Dakota led the

ETHANOL PRODUCER MAGAZINE MAY 2008

ENVIRONMENT

‘It comes down to the government making a decision as to whether or not this is an important program. If the government believes it’s important, they’ll have to suck it up and increase those payments.’

nation in loss of CRP land in 2007, and South Dakota came in second with 300,000 acres in expired contracts. Lack of interest in the program can be attributed to high crop prices driven by crop disasters in some parts of the world, a growing demand for food worldwide and increased production of ethanol and other alternative fuels. “We’re having record-high commodity prices and it’s an economic decision made by the participants,” Jost says. “There are other economic options out there. Land values have gone up and rental rates have gone up. And our CRP rents … it’s difficult for us to keep up with those things.” Cash rents for cropland have climbed steadily over the past few years and continue to rise as commodity prices increase across the board. Jost says CRP rental rates are reviewed annually but simply can’t compete with the high cash rents. “Our current national policy is that new CRP rents are based on the prior three years of cash rents paid by farm operators,” he says. “If we’re looking at the prior three years and we’re in a period of escalating rents—we can’t catch up.” CRP payments in North Dakota range from $18 per acre in Sioux County in the southwestern part of the state, to $93 per acre in Richland County in the southeastern Red River Valley

ETHANOL PRODUCER MAGAZINE MAY 2008

region, Jost says. He’s quite sure landowners in Richland County can make three times that amount per acre by renting that land to an operator. “Whenever anyone considers enrollment into CRP, they’ve got to look at why they are doing it,” he says. “If they’re doing it as an economic alternative to cropping, it’s difficult for us to compete. But there are other reasons to enroll land in CRP. There are people who are interested in wildlife benefits. There are people who are interested in maybe taking some of their lesser-productive land out of production and putting it into CRP to reduce risk on that farm.” This fall, 160,000 acres of CRP in North Dakota are scheduled to expire. Even if none of it is renewed, that wouldn’t be a significant drop in CRP acreage, Jost says. Total enrollment is down only 11 percent from the all-time high of 3.4 million acres registered in the state between 1997 and 2007, he adds.

The Lag Effect Some wildlife enthusiasts may argue that there have been no real noticeable signs of CRP loss affecting habitat. Hunters

ENVIRONMENT

have enjoyed record deer and pheasant harvests over the past few years, which may provide proof as to the abundance of wildlife. However, Scott McLeod, Great Plains regional biologist for Ducks Unlimited, says that those who think loss of CRP land in the Prairie Pothole Region is insignificant are just plain wrong. According to McLeod, deer and pheasant populations have been high in recent years due to mild winters and large areas of habitat. CRP land has just started to be converted to crop land in large acres, so it will take some time to realize its full effect. “Before CRP acres started expiring in 2007 we had about 8.4 million acres (in that region),” McLeod says. “We lost about 820,000 acres in 2007 alone and we expect to lose 5.6 million acres, two-thirds of the total acreage, by 2012. Loss of CRP acres equals a loss of nesting grounds for waterfowl, and we will begin to see the effects of that habitat loss this fall. Those acres that have been tilled up last fall and this spring won’t be available for nesting now. There will be a lag effect, but we’ll start to see it over time. Once we lose a lot of these acres, if we get a nasty winter, it’ll just start to take them out by the hundreds of thousands. There just won’t be cover for them to stay protected. Then we’ll start to see the same thing with the deer population.” Hunters and those who benefit economically from wildlife-related activities pay close attention to the CRP program. According to the most recent statistical data from the FWS, North Dakota has one of the highest percentages of hunters in the country and almost half of all North Dakotans participated in wildlife activities in 2006. Combined revenue from those activities totaled more than $150 million. For McLeod, the solution always boils down to money. “There are a lot of [farmers] who would still go for CRP if it was

Expiration schedule for all CRP contracts (million acres) 2007

2.6

2008

1.3

2009

3.9

2010

4.5

2011

4.4

2012

5.6

CRP enrollment as of Jan. 31, 2008—34.66 million acres SOURCE: USDA

North Dakota CRP expiration schedule (acres) 2007

407,807

2008

160,532

2009

249,799

2010

261,832

2011

389,470

2012

815,148

Current CRP enrollment as of Jan. 2008—3,023,661 acres SOURCE: USDA

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ENVIRONMENT

PHOTO: USDA NATURAL RESOURCES CONSERVATION SERVICE

competitive,” he says. “The bottom line is they need to run a business. It comes down to the government making a decision as to whether or not this is an important program. If the government believes it’s important, they’ll have to suck it up and increase those payments.”

Other Options Ducks Unlimited and other conservation groups have been lobbying the USDA to increase CRP rental payments to land operators. McLeod says the White House Office of Management and Budget can raise rental rates without looking for offsets, as long as the USDA signs off on the increase. But until rates are raised, what are land operators to do? The USDA has begun a new conservation practice as part of the CRP program titled State Acres for Wildlife Enhancement or SAFE. It was established to improve, connect or create higher quality habitat to promote healthier ecosystems in areas essential to “high-priority” species. The program is similar to CRP in that operators receive rental payments, incentives and cost-share assistance for land enrolled. Enrollment for SAFE has not yet begun in North Dakota, but the potential is there for 26,000 acres of native sagebrush, tallgrass and wetlands to be restored, Jost says. The FWS has a Grassland Easement Program for landowners interested in committing acres to permanent grassland. The program is ideal for owners of poor farmland or grazing land, according to Scott Ralston, assistant private lands and easement coordinator for the North Dakota FWS. “It’s an alternative to CRP, but is best for those who want to graze land,” he says. “The farming community is not so interested in it because most people getting out of CRP are doing it to crop.”

Young soybean plants thrive in the residue of a wheat crop. This form of no-till farming provides good protection for the soil from erosion and helps retain moisture for the new crop.

Compared with yearly rental payments for CRP land, the FWS offers a one-time payment as compensation for signing a perpetual agreement preventing all current and future owners of the land from planting it to crops. Ducks Unlimited launched a pilot program in October 2007 to offer additional carbon credit payments to landowners who enroll native prairie or expired CRP into the FWS Grassland Easement Program. Landowners receive a one-time payment from Ducks Unlimited as an addition to the easement payment from FWS in exchange for reducing carbon loss from the soil and emissions from tractors and other machinery associated with growing crops. The Ducks Unlimited program is currently available for selected areas of North Dakota.

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ENVIRONMENT

However, since launching the program, Ducks Unlimited has signed agreements for 4,600 acres and McLeod expects it will be expanded to include more of the Prairie Pothole Region by 2009. “I think people are starting to understand that there are some other values to these grasslands,” McLeod says. “The landowners do the best job of educating their neighbors. Once they start talking at the coffee shop about what kinds of payments they’re getting, word tends to spread fairly quickly.” McLeod estimates cost comparisons to be fairly significant, at least in the short term. Combined one-time payments from FWS and Ducks Unlimited for easement agreements can total $250 per acre. CRP payments on similar land average $35 per acre annually. The National Farmers Union also offers a carbon credit program. The program was begun by the North Dakota Farmers Union in early 2006 and was expanded to include other states later that year. Liz Mathern, carbon credit program specialist at the NDFU, says the program recently experienced tremendous growth. Approximately 2,300 producers enrolled 2.5 million acres in the program in 2007, a more than 100 percent increase from the number of producers that participated in 2006. Mathern sees the Farmers Union carbon program as a viable alternative to cropping undesirable land. “From our standpoint, yes there is land that probably should not be farmed,” she says. “It’s just simply too erodible and would be best left to grass. However, there are a lot of young producers who would like to farm that land if it is questionable as to its erodibility. Maybe it should never have been enrolled as CRP. We look at how we can bring that land back into production in a nice, healthy, good for the environment and good for the soil kind of way.” The Farmers Union carbon credit program allows opera-

tors to work the land, so long as soil disturbance is 30 percent or less. Options include haying, prescribed grazing, strip tilling and no-tilling. Many people in North Dakota are convinced no-till is the way to go, Mathern says. An alternative cropping option agreed upon by Ducks Unlimited and the Farmers Union that would benefit both land operator and wildlife is the planting of switchgrass. “Growing that for ethanol is perfect,” Mathern says. “It’s a no-till crop and because it’s a perennial crop you can remove residue [and still qualify for carbon credits].” According to recent USDA projections, more than half of current CRP acres could be suitable for growing switchgrass. Harold Collins, a soil scientist for the USDA Agricultural Research Service who recently spoke at the National Alliance of Independent Crop Growers annual meeting in Seattle, believes most of the proposed switchgrass production would come from pastureland. “From my point of view, wheat, corn and soybean growers are not going to grow switchgrass,” he says. “I believe it’s going to be the hay growers and the alfalfa growers. They already have the equipment. They’re already set up. They know how to collect it and transport it.” “We realize that if large blocks of grass, be it switchgrass or whatever, were used to replace some cropland there would be huge positives for waterfowl,” McLeod says. “We’re just working on a lot of different things to try and keep things in balance.” EP Kris Bevill is an Ethanol Producer Magazine staff writer. Reach her at kbevill@bbibiofuels.com or (701) 373-0636.

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ETHANOL PRODUCER MAGAZINE MAY 2008

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TALKTRADE

U.S. ethanol producers insist the 54-cent tariff on ethanol imports needs to be in place or the government will be subsidizing Brazilian ethanol. By Timothy Charles Holmseth

ETHANOL PRODUCER MAGAZINE MAY 2008

TRADE

he 54-cent-per-gallon duty on all ethanol imported into the United States is set to expire at the end of 2008. Most affected by the tariff are the United States and Brazil. Assuring the renewal of the tariff has now become a destination point on the map of economic viability for U.S. ethanol producers, who say the recent talk of dismantling the tariff would be like shutting off the beacon just as a ship is approaching the harbor. The industry insists the tariff must stay. Concerns began to arise in January of this year when U.S. Secretary of Energy Samuel Bodman addressed the U.S. Chamber of Commerce and hinted that changes may lie ahead. He said he believed the U.S. ethanol industry is close to being able to stand on its own. Bryan Sherbacow, chief executive officer of Ethanex Energy Inc., a Kansas-based ethanol producer, was perplexed by Bodman’s statement. He says if the U.S. ethanol industry is no longer in its infancy; it is certainly no more than toddling. “This industry has not had its legs underneath itself until now—if it has them now,” he says. Sherbacow is not alone, and the producer’s primary concerns is focused on the world’s largest ethanol producer—Brazil. The sentiment throughout the ethanol industry is that lifting the tariff would be grossly unfair to U.S. producers and farmers. While the Brazilians argue that ethanol should be treated the same as all other fuels when it comes to imports and exports. Integrated Environmental Technologies LLC President and Chief Executive Officer Jeff Surma, says his company has been attentive to all renewable fuel issues, and he believes the industry has some strong allies. “The biggest lobby against eliminating the import tariff, of course, is the farm lobby,” he says. “They have a very strong voice.” Andy Foster, corporate spokesman for American Ethanol LLC in Illinois, says the disadvantage would be akin to a mouse fighting a gorilla. A small group of farm-

‘In light of $5 corn and everything that’s gone upside down in terms of the commodities markets, I think the government needs to re-authorize that (tariff).’

ETHANOL PRODUCER MAGAZINE MAY 2008

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ers from the Midwest should hardly be expected to compete with the Brazilian government, Foster says. “The Brazilian government paid for most of the infrastructure built up down there, it wasn’t private industry,” he says. “In order for the industry to really gain its legs and be able to compete on a worldwide basis, we can’t have a friendly competitor come in from the south and bomb out the price of ethanol on us.” Foster explains just how different the situations are between the United States and Brazil. “They certainly have a greater advantage in that the private companies weren’t saddled with trying to figure out how to do logistics and [install] E85 gas pumps and all the rest of it—the government paid for all that,” he says. Sherbacow is concerned that the years of hard work and extensive efforts put forth to building up the ethanol industry could be undermined if the tariff were to be lifted, and now more than ever it plays a crucial role in allowing the industry to mature. “We have just made a significant investment as a country into this platform and it’s immature right now—[the United States] needs more time before it can properly compete,” he says. Foster agrees saying that he believes this is not the time to suddenly change course. “The government has made a commitment to the industry which is well appreciated,” he says.

U.S Producers Versus the Brazilian Government The proverbial David versus Goliath scenario that would play out if small co-ops and Midwest farmers were forced to become global contenders against an economically and financially supported competitor, in essence, a foreign government, is not the only problem U.S. producers see in their future if the tariff is removed. “[We would be] paying Brazilians to produce ethanol, because we’ll have removed the tariff for bringing it into the country, yet we’re crediting them or they’re going to benefit from the blenders’ credit,” Sherbacow says. The possibility that the tariff could be lowered or even removed compounds issues that producers already face such as the high cost of corn. All eyes are on farmers in the Corn Belt as they decide what’s more profitable to plant—corn or soybeans. Corn prices could rise even higher if acres are reduced substantially. “In light of $5 corn and everything that’s gone upside down in terms of the commodities markets, I think the government needs to re-authorize that (tariff),” Foster says. Ethanol producers are also often forced to defend

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TRADE

‘I think the whole intent behind [the tariff] was not to stifle free trade, but to give American ethanol producers a level playing field.’

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themselves when discussions arise about food versus fuel. Although the ethanol industry is using a greater share of the corn crop as production has increased, there are other factors to consider, including record-high fuel prices, a greater demand for food in developing countries and crop disasters in some parts of the world. Unfortunately, ethanol often shoulders much of the blame for high food prices. “There’s actually more corn available this year than last year, even when you subtract the new demand from ethanol,” says Don Endres, chief executive officer of VeraSun Energy Corp. “Clearly, market dynamics in addition to ethanol are at work driving corn and other commodity prices.” It’s not all doom and gloom for the ethanol industry as it enjoys healthy bipartisan support on Capitol Hill. That should be a plus once debate over extending the tariff gets underway. In January, U.S. Sen. Chuck Grassley, R-Iowa, issued a strong statement in response to Bodman’s suggestion. “By lifting the ethanol tariff, we’d end up subsidizing Brazilian ethanol,” he said. “I can’t figure out why Secretary Bodman would want to risk the United States becoming dependent on Brazilian ethanol when we’re already dependent on Middle East oil. His comments really do a disservice to President Bush who has been the most pro-ethanol president we’ve ever had.” Despite Bodman’s thoughts regarding the tariff, the administration supports renewable fuels. In March, President George W.

Bush addressed the International Renewable Energy Conference in Washington, D.C. Bush made it clear that it’s in the best interests of this country to wean itself from foreign oil. “If there’s tight supply and demand, all it requires is one terrorist disruption of oil and that price goes even higher,” he said. “The vast majority of ethanol is coming from corn, and that’s good. I’d rather have our corn farmers growing energy than relying on some nation overseas that may not like us.” Discussions over the fate of the tariff are expected to begin later in the year. Most U.S. producers seem to believe that the day will come when the tariff will be lifted, but simply believe now is not the time. “Status quo is what we would hope for,” Foster says. “I think the whole intent behind [the tariff] was not to stifle free trade, but to give American ethanol producers a level playing field,” Foster says. Sherbacow believes that the efforts of those who would want the tariff dismantled will ultimately fail. In the meantime, U.S. producers hold no animosity toward their counterparts in South America, and they look forward to a day when imports are not subject to a tariff. EP Timothy Charles Holmseth is an Ethanol Producer Magazine staff writer. Reach him at tholmseth@bbibiofuels.com or (701) 738-4962.

ETHANOL PRODUCER MAGAZINE MAY 2008

CELLULOSE

The Path to Commercial-Scale Cellulosic Ethanol Production It’s not a leap of faith that’s going to make cellulosic ethanol production on a commercial level a reality. In most cases, it’s going to take a plotted course that sequentially informs the evolution of cost-competitive and efficient technologies. EPM spoke with companies about the significance of piloting their technologies before scaling up to a demonstration-size facility. By Jessica Ebert

Enerkem’s gasification, sequential gas conditioning and catalysis technology converts sorted municipal solid waste and forest residues into cellulosic ethanol and other biofuels. The company has piloted its technology at a plant in Sherbrooke, Quebec, since 2003. PHOTO: ENERKEM INC.

ETHANOL PRODUCER MAGAZINE MAY 2008

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ETHANOL PRODUCER MAGAZINE MAY 2008

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CELLULOSE

ast year, California-based AE Biofuels Inc., a worldwide developer of next-generation biofuels, acquired an enzyme technology company called Renewable Technology Corp. For the principals of the Montana-based corporation, Bob Kearns and Clifford Bradley, the deal was a long time coming. The pair has been developing enzymes capable of breaking down starch and cellulose into fermentable sugars for more than 20 years. “While the U.S. DOE funded a lot of the work in the ’80s on these enzymes until AE Biofuels got involved, nothing had happened to them,” explains Kearns, who now serves as a consultant to AE Biofuels. Next month, however, the company is set to showcase its newly acquired technology at a demonstration plant in Butte, Mont. The keystone of the AE Biofuels process consists of three pieces of intellectual property: an enzyme that hydrolyzes starch, a cellulosic enzyme complex and a piece of technology that integrates cellulosic ethanol production, and a starch ethanol process. The starch degrading enzyme converts raw starch to sugar at ambient temperatures (about 85 degrees Fahrenheit optimally), which relieves the requirement for an upfront cooking process. This in turn reduces water consumption because when the heating step is eliminated the evaporative cooling that goes along with it is nil. “There’s a substantial energy savings from not having to do the cooking as well as from not having to do the cooling,” Kearns says. In addition, by integrating the production of ethanol from cellulosic feedstocks such as corn stover, switchgrass and grass straw into a conventional corn-based ethanol production system, the capacity of an existing plant can be increased by another 3 percent to 5 percent without any real capital changes, he says. “Our view of the future is that you’re not going to have 100 percent cellulosic plants or 100 percent starch plants,” says Andy Foster, a corporate spokesman for AE Biofuels. “It’ll be a combination. Economics will demand a balanced approach where you can mitigate risk by having multiple feedstocks that may include starch as well as mul-

CELLULOSE

tiple lignocellulose feedstocks. This is really the vision of the future.” To make that vision a reality, the company has been piloting its ambient temperature starch hydrolysis (ATSH) technology and cellulosic ethanol technology in 200-gallon fermentation vessels. One of the key lessons learned at this stage was the limitations of the system in treating slurries with a weight percent of solids greater than about 10 percent, Kearns says. The company was also able to optimize the production of their cellulose enzymes and to determine the effective dose of enzymes to lower the enzymes cost of producing a gallon of ethanol to 23 cents. AE Biofuels is currently retrofitting this pilot plant to demonstrate its technology in 4,000gallon vessels. “That’s large enough so that we can answer real-world questions concerning how to design a commercial plant,” Kearns says. One of those questions is how to integrate a cellulosic ethanol production stream with a starch-based process. This integration was piloted as two separate processes—the beer from the cellulosic fermentation was filtered to separate the solids and then supplemented with starch and yeast. The demonstration plant will showcase a continuous flow-through process. “We’ll integrate a starch stream into the cellulosic fermentation and end up with a final concentration of close to 15 percent ethanol the upper limit of the alcohol tolerance of the yeast,” Kearns explains. In addition, the company will continue Chornet to optimize its enzymes for particular feedstocks. Although the technology works for a wide variety of starch and lignocellulosic materials, optimizing the process for a readily available feedstock will reduce operating costs. Since AE Biofuels’ enzymes are produced in solid culture—from fungi growing on a solid substrate such as grain pellets— rather than liquid culture, which is the conventional method for making the enzymes used in ethanol production, optimizing the ETHANOL PRODUCER MAGAZINE MAY 2008

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CELLULOSE

By integrating cellulosic ethanol production into starch based processes, AE Biofuels’ patent pending technology lowers capital costs, increases alcohol concentration and reduces energy and water consumption. SOURCE: AE BIOFUELS INC.

process involves finding the right fungus and its ideal growth substrate, and identifying the environmental conditions that favor enzyme production. “The advantage of this is that you get some very powerful enzymes but they’re crude enzymes,” Kearns explains. “We don’t have to purify them. We simply take the whole enzyme complex or the enzyme mush that comes out of our growth chambers and put it into the system.”

100

Demonstrating a Different Approach Whereas AE Biofuels’ cellulosic ethanol production process is biological in nature, Enerkem Inc., a Montreal, Quebecbased technology company, aims to complete a 1.5 MMgy demonstration facility for its thermochemical gasification process this fall. The company has piloted its technology at a plant in Sherbrooke, Quebec, since 2003. The bubbling fluidized bed gasifier

turns a variety of carbon-rich feedstocks, ranging from sorted municipal solid waste to forest biomass, into a synthesis gas. But the key to the technology is the gas conditioning process. “If you don’t know how to clean up and condition the gas there’s not much you’ll be able to do with it other than burn it for steam and power,” explains Vincent Chornet, president and chief executive officer of Enerkem. A conditioned gas can be rearranged into a fuel using a catalyst. Although many groups working on thermochemical processes focus on developing catalytic methods for producing cellulosic ethanol, Enerkem’s approach is different. “In our case, we decided this magic catalyst would take a lot of time to develop so we decided to focus on what we know best, which is to condition the gas for existing catalysts,” Chornet says. To that end, Enerkem has piloted its technology for 3,000 hours, testing about 20 different feedstocks and tailoring its conditioning process for catalysts that are known to speed the synthesis of alcohols from gas. The pilot plant is well instrumented to meas-

ETHANOL PRODUCER MAGAZINE MAY 2008

CELLULOSE

ure the composition of the gas. It’s information such as the ratio of hydrogen to carbon monoxide in the gas, particulate matter or the amount of tars and nitrogen present that is used to tweak the process. For example, at one point during the pilot phase, high particulate levels were poisoning the catalyst, Chornet says. To alleviate this problem, the Enerkem team added a piece of equipment to the gas conditioning stream. “These are the things you learn as you go through the hours you take to trial your facility,” he says. “Right now we feel the pilot has responded well enough throughout the years so we’ve decided to move forward. All of the design parameters whether it’s for a reactor or gas conditioning equipment, all of that has been derived from the data we’ve generated at the pilot.” A demonstration plant such as the one Enerkem is currently building in Westbury, Quebec, doesn’t signal the demise of the pilot facility, however. “We’ll always go back to the pilot,” Chornet says. In fact, in the midst of the construction of the demonstration plant, Enerkem is using the pilot

facility to measure certain components of the gas to determine the effect of using more oxygen during the gasification step. “We just found out that there’s an oxygen system out there cheaper than what we thought possible so maybe it’s worth trying to put more oxygen in,” he says. In addition, the company will continue to improve the efficiencies of the catalysts. “It’s key to have a pilot,” Chornet says. “It’s where you are allowed to make mistakes and learn.” Carlos Riva, president and chief executive officer of Verenium Corp., expresses the same sentiment. “It’s very difficult to take large leaps in scaling up the facilities and assume that you’re going to get everything right,” he says. The company’s 1.4 MMgy demonstration facility in Jennings, La., was mechanically complete at the end of March, after which the company will spend a few months starting up the facility and optimizing and fine-tuning its process systems. Verenium actually has two pilot plants, one at the company’s laboratories in San Diego, Calif., and a larger, industrial-scale pilot plant, which is also in Jennings. “We

use both of them quite a bit to test a variety of different conditions,” Riva explains, including finding the optimal conditions for pretreatment of cellulosic feedstocks and identifying different strategies for growing fermentative microorganisms as well as propagating the enzymes Verenium uses in its production process. “It’s a continuous learning process,” says John Malloy, executive vice president of the company’s biofuels business. “Part of what you’re trying to do with the pilot plant is refine design points and process set points so that the demonstration plant has a much narrower operating range. Making modifications over time continues to drive down a commercial plant’s operating and capital costs and ultimately the cost to produce ethanol.” EP Jessica Ebert is an Ethanol Producer Magazine staff writer. Reach her at jebert@bbibiofuels.com or (701) 7384962.

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ASIAN SCANDAL CRIPPLES U.S. ENZYME COMPANY Once a premier bioscience company making major inroads into the ethanol industry, Dyadic is now only limping along. In the past year, it was delisted from the American Stock Exchange, ousted its founder Mark Emalfarb, was sued by angry shareholders, and released a scathing audit report detailing corruption, bribery and a dummy company skimming profits from its Hong Kong factory. By Sarah Smith

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Florida-based enzyme company once had a promising future in the ethanol industry, unleashing its mutant Russian enzymes onto biomass and quickly extracting the sugar. But company founders invested in an Asian subsidiary to sell enzymes to the Chinese textile market, and the ensuing scandal threatens Dyadic’s very existence. Marl Emalfarb, its fired founder calls the investigation into its Chinese dealings a “witch hunt” that was skewed to protect company problems that he was unaware of, and to hide the perceived shortcomings of professionals he trusted who let him down. He’s suing to wrest control back. Dyadic International Inc. started life in 1979 as a pumice supply division of a landscaping business run by Emalfarb’s father. Its raison d’être was to supply blue jeans companies with stonewashing technology and equipment. Emalfarb, a journalism graduate from the University of Iowa, started working at his father’s landscaping business upon graduation, but he possessed an entrepreneurial spirit. The pumice division began when Emalfarb traveled to Russia to scout for lava stone mines and learned that pumice was the future of the blue jean industry because it softened and faded denim. While selling pumice to clothing manufacturers, a major enzyme company approached Emalfarb to sell its products to his customers and Emalfarb agreed. Enzymes were touted as a way to solve many industrial problems, with a recurring revenue stream that looked tantalizing to an entrepreneur. Emalfarb started selling his supplier’s enzymes while simultaneously contracting with Russian scientists to develop his own. He eventually lured the enzyme company’s chief science officer to Dyadic. Emalfarb’s Russian connections led to the discovery of a wild fungus that he adapted for use in the blue jeans industry. But Dyadic languished in Florida for 15 years as an enzyme provider to the paper and pulp, and textile industries. Emalfarb eventually became frustrated that his company was just another small niche business, unable to rise to a higher level. He contemplated leaving Jupiter, Fla. In 2003, Emalfarb loaned the company $2.2 million to stabilize it and perpetuate enzyme research. For collateral, he took the company’s assets—and assurances that he would remain at the helm.

The Jeans to Genes Roller Coaster Dyadic’s scientific staff, through experimentation, discovered that C1, the fungus found on the Russian forest floor, not only faded denim by breaking down the cotton plant’s cell walls, but could also, under ultraviolet radiation, break down most plant fibers. C1 had a voracious appetite and was amenable to being genetically altered to mutate quickly. When unleashed on cornstalks, straw, switchgrass, wastepaper and any cellulose-rich material, it was like bringing a starving man to a hotdog eating contest. Instead of a 106

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satisfied belch, the end product was sugar, at high speeds. The commercial prospects were unlimited. C1 mutated its founders to richer pastures. In 2004, the scientific community finally took notice of Dyadicâ&#x20AC;&#x2122;s research. California-based Scripps Research Institute, the world's largest private, nonprofit biomedical research facility, opened a branch in Florida, on the campus of Florida Atlantic University in Jupiter. Scripps researchers discovered Dyadicâ&#x20AC;&#x2122;s promising technology and took the company under its wing. Scrippsâ&#x20AC;&#x2122; affiliation gave Dyadic the high-profile cachet it lacked. The company went public and raised $32 million in 2004 from stockholders, institutional investors, high net worth individuals and speculators taking a risk on Dyadicâ&#x20AC;&#x2122;s enzyme prospects in the biomedical industryâ&#x20AC;&#x201D;two years before Dyadic ventured into ethanol. In early 2005, Emalfarb hired a chief financial officer, Wayne Moor, to conduct internal controls and oversee the Securities and Exchange Commission filings. When President George W. Bush touted cellulosic ethanol in a 2006 speech, renewable energy fever gripped Floridaâ&#x20AC;&#x201D;and Dyadicâ&#x20AC;&#x2122;s investors. The companyâ&#x20AC;&#x2122;s C1 enzyme proved it was ready to enter the ethanol sweepstakes. What the investors, and many company officials were unaware of, was that an anonymous whistleblower, who called himself â&#x20AC;&#x153;Blue Devil,â&#x20AC;? had begun to bring chaos into Dyadicâ&#x20AC;&#x2122;s good fortunes.

The Stock Market Roller Coaster Dyadic had no trouble luring investors after the 2004 influx of money. Thanks to C1, by 2006 it was at the forefront of the biomass-to-ethanol conversion race. But it was in for a bumpy ride. 2005 was a tough year for Dyadic. Its stock price declined an alarming 70 percent. By late 2005, shares rose 13 percent on news that the company had restructured an agreement with a research partner. During the first half of 2006, when the price dipped more than 100 percent, investors hung in. In December 2006, The Motley Fool stock publication christened Dyadic one of its â&#x20AC;&#x153;scorching seven stocks,â&#x20AC;? giving investors a 227 percent return for the year. During this comeback, Dyadic inked a $10 million research and development contract in October 2006 with an ethanol industry giant to apply C1â&#x20AC;&#x2122;s technology toward commercial-scale conversion, as part of a U.S. DOE research grant. In November 2006, T. Rowe Price and other institutional investors injected $13 million into the company in a Private Investment in Public Equity (PIPE) transaction, a deal in which accredited investors purchase securities directly from a publicly traded company often at a discount. PIPE transactions are used by many small companies to raise capital in difficult economic times when they have fewer financing alternatives and need an immediate cash transfusion. The sales are then immediately registered for resale into the public markets by those investors. ETHANOL PRODUCER MAGAZINE MAY 2008

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One month before the scandal was discovered, The Motley Fool warned that Dyadic faced risks commercializing its cellulosic ethanol technology because it was investing much of its money in research and development. The publication also boosted the company’s fortunes—temporarily—by praising the 2003 Emalfarb loan, and conversion of additional loans to shares of company stock as an unorthodox demonstration of his commitment to his own company. And Dyadic’s successful pulp and paper divisions provided a cushion against the cellulosic technology risk, a writer for The Motley Fool noted.

The Asian Scandal: Blue Devil’s Prophecy In 1998, Dyadic bought Puridet, a textile enzyme manufacturer in Hong Kong. Some preliminary due diligence hinted that the company had shady ways of doing business: funneling cash through companies that may or may not have been real and avoiding Chinese taxes; creating shadow accounts controlled by Puridet’s three partners; and numerous financial irregularities. One of Puridet’s founders became the manager of a newly formed company after the acquisition. The independent audit commissioned by Dyadic after the scandal broke, notes that by 2005, ‘06, Puridet’s sales reflected 40 percent of Dyadic’s overall sales. “Puridet did not, however, contribute materially to Dyadic’s bottom line,” the auditors wrote. In those years, Puridet was actually operating in the red, the audit states. Emalfarb states, “We did not buy their past, we invested in their future,” referring to Puridet. What remains a heated debate today is when Emalfarb became aware of this tax evasion scheme and what steps he took to curb the abuses. In December 2003, Emalfarb received an e-

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mail from the anonymous whistleblower, in which “Blue Devil” detailed an intricate scheme that was allegedly diverting large amounts of cash from company profits. Puridet’s largest customer, a vendor called South Dragon, was actually a dummy company set up by the Puridet manager to funnel cash sales and evade Chinese reporting and taxes. The factory manager was receiving bribes from materials suppliers, there were thefts of raw enzymes destined for unreported cash sales, and expense accounts were manipulated. More e-mails and letters followed, some from a man calling himself “Deep Throats,” detailing “criminals behind curtains” and financial looting of Puridet. Emalfarb, who engages in lengthy discussions about every nuance of the case to defend himself, sent EPM numerous documents he claimed support his assertions that he was in the dark about the problems. However, he then acknowledged taking steps to deal with the abuses. “South Dragon was shut down before we went public,” he maintains. “We had some issues in China and we thought we put them to bed.” The audit pinpoints South Dragon’s demise in 2004, but faults Emalfarb for not informing the company of potential problems. It’s unclear if South Dragon went bankrupt, was phased out when South Dragon’s manager died, or closed because the Chinese government fined Puridet for having two sets of books. Puridet’s manager is quoted as saying he paid off Chinese authorities to end their probe. But upon South Dragon’s death, a successor immediately arose, Pui Shing, which resumed the corrupt business methods, using an identical address, with the same accounts receivable. Emalfarb is adamant that he was unaware of Pui Shing’s existence and claims professional accountants failed to detect the new scheme. The audit voices skepticism of his denial

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and states he knew about the problems dating back to Puridet’s acquisition. Many audit exhibits directly contradict Emalfarb’s accounts and he argues at length that they don’t. The scandal came to light in April 2007, when Puridet’s manager died suddenly of a heart attack. Moor, the company chief financial officer, went to Hong Kong and found a mess. Six months earlier, he did initiate an inquiry into irregularities at Puridet, but that investigation was just beginning when the scandal broke. Emalfarb claims throughout the growing scandal that he was kept in the dark by the parent company, auditors and employees he sent to China to keep an eye on the operations there. The audit takes issue with his assertions that he was a naïve chief executive officer. They allege Emalfarb kept the scandal quiet because he “recognized that disclosure would negatively impact Dyadic’s revenues, its reputation and its efforts to raise capital,” the auditors wrote. Auditors found no evidence that Emalfarb was personally enriched at his company’s expense.

Aftermath of the Scandal The discovery of the Asian accounting irregularities sent shock waves through Dyadic. Within days of Moor’s April 2007 trip to Hong Kong, Emalfarb took a temporary leave of absence. Moor was installed as the interim chief executive officer by Dyadic’s board, which commissioned the audit. Because Dyadic was unable to determine just how much money had been siphoned off the balance sheets, it announced in late April 2007 that it would be unable to make timely quarterly filings with the SEC and that past financial reports should be considered “unreliable.” It voluntarily froze trading on its shares. In May 2007, the American Stock Exchange began initiating delist-

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ing proceedings. Shares that were previously traded at $9.06 were now halted at $5.30. The audit was completed in August 2007 and by then the company had abandoned its Hong Kong operations. Auditors noted the investigation was a dangerous job—previous auditors had been held hostage by suspicious factory workers. The audit was highly critical of Emalfarb, alleging that he had deceived the company by concealing the scandal. It was made public in March 2008, and contains 550 pages of conclusions and exhibits. “I’m the one being lied to, being deceived by the people I hired,” Emalfarb says in reaction to the report’s conclusions. Emalfarb was fired Sept. 24, 2007, two weeks after he returned from leave, and immediately filed a grievance with an arbitration board. The case, at press time, was pending. The chief science officer he had hired away from his enzyme supplier years earlier left the company and the state three days later. Moor was appointed permanent chief executive officer. Emalfarb was asked to resign from the board. He refused. The lawsuits began on Oct. 8, 2007. Six separate shareholders suits were filed through the fall of 2007 against the company and various employees including Emalfarb and Moor for allegedly violating SEC rules by filing false and misleading financial statements and concealing negative information that artificially inflated Dyadic’s stock. The alleged violations, although different in each suit, occurred from April 2006 to April 2007. Bloggers on Google Finance’s Web site complained about “unloading this dog stock” and commiserated about losing their investments, mainly through Vanguard accounts. On Oct. 11, 2007, T. Rowe Price demanded recession of its purchase of 1.2 million shares of stock during the PIPE transaction,

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and warrants to purchase 240,000 more shares, and demanded return of the $5.6 million purchase price. The investor claimed Dyadic falsely represented its financial status in the purchase agreement. On Oct. 23, 2007, Dyadic hired an investment banker and financial advisor to sell the company or explore other strategic and financial options. “Though the company is facing many challenges, we believe Dyadic’s financial resources are sufficient to fund the company’s operations at least through 2008 and implement the [advisor’s] value maximization process,” Moor announced. In late 2007, Emalfarb sued to get access to company records. The case was eventually settled in his favor. He also brought suit to force the company to hold an annual meeting for the election of new board members. Because Dyadic is incorporated in Delaware, this is allowed under state law if a corporation hasn’t held a shareholder annual meeting for 13 months. Dyadic’s last annual meeting was in June 2006. Emalfarb, who controls 35 percent of company stock, said he has mustered the support of an additional 17 percent of shareholders, giving him the majority he needs to elect new board members and to reinstate himself. He says he launched this effort “to protect and enhance shareholder value.” In January 2008, Emalfarb called in his $2.2 million note, even though it wasn’t due for another year, citing various company actions adverse to his position. By February 2008, the six shareholder lawsuits were consolidated into a single class action. The company has until late March 2008 to respond. Amex successfully delisted Dyadic from the exchange in February and relegated it to the Pink Sheets, an over-thecounter trading board for penny stocks. Dyadic’s stock was selling for about 25 cents. That prompted two institutional investors to write Dyadic’s board demanding Emalfarb’s reinstatement and the ouster of Moor and two board members on grounds they were incompetent and

had no company loyalties because the board members were not shareholders. The two hedge fund managers are part of Emalfarb’s majority army in the Delaware lawsuit trying to regain control. Meanwhile, Emalfarb has bombarded the company with letters demanding his inclusion in company business, presenting evidence he claims auditors overlooked, or rehashing evidence in the records. He says if the Delaware court allows the shareholder meeting, he will have the support to regain control of Dyadic.

A Great Buy–—If You Overlook the Elephant in the Corner Emalfarb is probably correct when he maintains that Dyadic’s stock is currently undervalued. The company sells around 45 liquid or dry enzymes to 200 customers in 50 nations. It owns two dozen patents and patent applications and C1 has a promising future in the cellulosic industry. But any potential buyer would likely have to deal with the litigation, major capital infusion, and Emalfarb, who insists that he has a future with his company. He faults the company for not pursuing his cellulosic ethanol quest with the same religious fervor. “I just attended two national ethanol conferences and the company didn’t have a representative at either,” he says. He maintains that his ethanol “contacts and relationships are necessary to restore order.” Dyadic officials, who did announce that they are pursuing the $10 million cellulosic venture, have declined to comment beyond news releases and the audit. They say the audit speaks for itself. But one company official, who spoke on the condition of anonymity, says there has been considerable interest in the company. Potential buyers know of its troubled past, but still believe it has a promising future. EP Sarah Smith is an Ethanol Producer Magazine staff writer. Reach her at ssmith@bbibiofuels.com or (701) 6635002.

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Changing the

Climate The National Ethanol Conference gave ethanol industry leaders a venue to discuss how the industry is changing the climate for the economy, environment and consumers. By Anduin Kirkbride McElroy and Jessica Sobolik

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he 13th Annual National Ethanol Conference: Policy and Marketing opened to an inspired roar as Bob Dinneen, president and chief executive officer of the Renewable Fuels Association, asked if the attendees were up to meeting the challenges facing the ethanol industry. He is often referred to as “reverend” for his booming voice and inspiring speeches, and he lived up to his nickname as he delivered his annual state of the industry address to the group of 2,148 industry leaders in February. The attendees descended upon Orlando, Fla., in the last week of February. “The state of the industry remains strong,” Dinneen said. He proceeded to list the accomplishments of the year, such as the 7 billion gallons of ethanol consumed in 2007, more than 6 million flexible-fuel vehicles on the road, and 120 million gallons of E85 consumed in 2007. He highlighted the tax savings that ethanol provides—even with the federal tax credit—because it is reducing oil consumption and easing oil refinery bottlenecks. Another accomplishment was the passage of the new Energy Bill, the Energy Independence

Continued on page 118

Keep Talking to the Media The biggest challenge for the ethanol industry last year was the continued attacks on ethanol in the media, said Bob Dinneen at the National Ethanol Conference. As a result, two conference sessions were dedicated to the topic. To understand the climate of public opinion, the Renewable Fuels Association commissioned Peter Hart, a public opinion pollster with Peter D. Hart Research Associates, to ascertain the real public opinion of ethanol, not what the media says it is. In general, his research determined that the public doesn’t know much about ethanol. “Seventy percent of Americans have no idea who you are,” he said. “Most Americans don’t think or know about ethanol. Most have heard of it, but they know very little about it. Ethanol is well known, but not known well.” Hart stressed the importance of education efforts from the ethanol industry. “Do you educate the American public, or does the other side?” he poignantly asked the audience. Education is important because when the public knows the facts, ethanol is the winner, Hart’s research shows. After those being polled were informed about ethanol, 56 percent favored the fuel, while 30 percent opposed it. With this knowledge, Hart recommended that the industry develop a proactive communication strategy. He encouraged the industry to introduce itself to the public now, stay on message and stay on the offense. “Don’t overreact to every criticism,” he said, adding that the facts are on ethanol’s side. Panelists discussing the changing nature of the media agreed that the industry is often on the defensive. “The industry finds itself in a punch, counter-punch and must react,” said Tom Waterman, publisher of the Ethanol Monitor. Regardless of how exhausting the fight can be, panelists encouraged the industry to keep talking to the media. “Sometimes the media distorts the information, but please continue to talk to the media,” said Matt Hartwig of the RFA. “While you may be frustrated, it’s important to involve them. Communicate how we are doing a better job.” “You can engage or disengage,” said Bryan Gruley, Chicago Bureau chief of the Wall Street Journal. “If you engage, eventually some of this tide will change.” He added that the media is not out “to get” ethanol. “We’re not supposed to have a passion about subjects. We just reach out and try to understand. We’re just looking for interesting stories.”

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Ethanol’s Impacts on Climate Change Two weeks before the National Ethanol Conference commenced on Feb. 25, two studies were published in Science magazine that concluded that indirect land use changes from increased biofuel crop production could result in dramatically increased greenhouse gas emissions. Before the ethanol industry responded, a flurry of articles printed in the mainstream media claimed ethanol was worse for the environment than gasoline. Misconceptions about the studies abounded. The Renewable Fuels Association quickly lined up a special presentation to give conference attendees more background on the studies, as well as talking points on the issues. Michael O’Hare, professor of public policy at the Goldman School of Public Policy at the University of California, Berkeley, addressed the crowd first. He is part of a research team that has studied land use change and life cycle analysis for biofuels. Land use change analysis is important when considering greenhouse gases because it doesn’t matter where the carbon enters the atmosphere, O’Hare said. Land use change analysis works within a complicated, theoretical model. O’Hare outlined the potential change: ethanol from crop plants will induce additional cultivation somewhere in the world, or reduce grain consumption as food. Three kinds of change will occur: people will eat less or eat less meat; agriculture will become more intensive; and/or land will be converted from something else to crops. In traditional life cycle analyses, the greenhouse gas releases from the second and third scenarios are not counted. Research is still sparse, but the releases have the potential to be very large, especially in the scenario involving forest conversion. Land conversion creates a spike in greenhouse gas emissions because carbon is released from the soil and from the decaying plants, and because the land is no longer sequestering carbon. The timing of greenhouse gas discharges also is an important consideration. “A unit of greenhouse gas discharged now is much worse than a unit discharged 20 years

ETHANOL PRODUCER MAGAZINE MAY 2008

from now,” O’Hare said. For these reasons, he said simply increasing corn ethanol content in vehicle fuel should not be considered the typical means of compliance with a low-carbon fuel standard. These studies are premature, said Brooke Coleman, executive director of the New Fuels Alliance. Coleman agreed that it is important to “get it right” about alternatives to petroleum, yet he expressed frustration with the new studies. “We’ve gone from not talking about indirect impacts to talking recklessly about them,” he said. “Indirect impacts are a black hole. These studies polarize groups and marginalize efforts.” In particular, he observed how such analyses have the potential to polarize the agri-biofuels supporters from the nonagri-biofuels supporters. He gave several examples of how the support from the former sector has resulted in development of the latter. Coleman went on to point out the errors in the Science studies. A glaring error is the preliminary assumption that there will be 30 billion gallons per year of ethanol from corn produced, he noted. The study ignored the fact that the new renewable fuels standard has advanced biofuels requirements and has land use protection. The studies were also exaggerated by looking at the worst case scenario of land use changes, he said. Instead of looking at the conversion of Conservation Reserve Program land or low-value land, the studies look at the impact of pristine land conversion, such as rainforests, to crop production. In addition to those issues with the study, Coleman also addressed the challenges of using this type of analysis. There are many questions for which there are no answers yet, such as who pays the price for indirect impacts? How will petroleum face indirect impacts? How do tomorrow’s biofuels compare to tomorrow’s petroleum? Coleman said life cycle analysts have known about indirect impacts for years, but it’s hard to calculate. “It’s hard to legislate and regulate something we can’t model or understand,” Coleman said.

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Ethanol Myths Addressed Ethanol naysayers were targeted at the National Ethanol Conference, where various speakers and panelists addressed several ethanol myths that circulate in the mainstream today. For starters, some detractors question how much land will be used up by an increase in ethanol feedstocks, such as corn and switchgrass, including land protected by the Conservation Reserve Program. However, RFA President Bob Dinneen pointed out to conference goers that since 1950, America has lost 2 million acres of farmland annually to other uses such as shopping malls and subdivisions. Emily Olson, director of public policy for the National Corn Growers Association, noted that a majority of CRP acres are in states such as Texas (3.9 million acres), Montana (3.3 million acres) and North Dakota (3 million acres), which are predominantly wheat-growing states. Internationally, reports of a reduction in Amazon rainforest land in direct correlation with the ethanol industry were negated when Joel Velasco, a representative of the Brazilian sugarcane industry association Unica, said Brazil has 1.1 billion acres of arable land, 150 million of which is currently in use, leaving 950 million acres of land available for additional crops. The ethanol industry’s use of water is also a concern, starting with feedstock production. Although 95 percent of ethanol plants use corn as a feedstock, NCGA Chief Executive Officer Rick Tolman told conference attendees that 87 percent of U.S. corn is nonirrigated. He added that an acre of corn transpires 4,000 gallons of water per day. “We’re actually putting water into the atmosphere,” he said of corn producers. “We are a net contributor to water.” Furthermore, the ethanol industry isn’t the only industry that uses water. Although it takes approximately three gallons of water to produce one gallon of ethanol, Gordon Quaiattini, president of the Canadian Renewable Fuels Association, said it takes six gallons of water to extract one barrel of oil from the Alberta oil sands. Alberta’s oil industry recently received approval from the federal government to use more water than it takes to run the city of

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Calgary, with a population of more than 1 million people. The efficiency of E85 has always been in question. Despite the fact that E85 causes a decrease in fuel economy compared with gasoline, General Motors Technical Fellow Kevin Cullen acknowledged a lesser-known fact: E85 is 3 percent more energy efficient when it comes to miles per British thermal unit. Velasco pointed out that Brazilians are using blends of E25 to E100 in flexible-fuel vehicles with no problem. He said several Brazilian vehicles are American-made, but they run on hydrous ethanol as opposed to the anhydrous ethanol used in the United States. Even distillers grains, a coproduct of the ethanol production process, has been under attack for outpacing supply. However, Geoff Cooper, director of ethanol and business development for the NCGA, said nearly all the distillers grains that comes out of ethanol plants has a destination. Two studies recently posted online by Science magazine got the ethanol industry’s attention by concluding that corn-based ethanol worsens global warming, and several claims countering the studies followed. At the conference, Brooke Coleman, executive director of the New Fuels Alliance, pointed out that the study conducted by Tim Searchinger of Princeton University was based on 36 billion gallons of ethanol production, four times less than that is produced today (6.5 billion gallons). The second study mentioned land use in Brazil, but Velasco said the study’s author visited Brazil only after he wrote the article. “[The researchers] say sugar and corn’s carbon debt will take years to pay back, but they didn’t tell you that the oil industry will take 100 years,” he said. Overall, speakers at the NEC acknowledged “campaigns” against ethanol. “I think there has been an organized campaign to smear [corn and ethanol],” Tolman said. “All of us need to work together to [set the record straight].”

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Session Highlights Ethanol Safety Safety is an increasingly important issue for the ethanol industry. Ethanol is the largest hazardous material on the rail today, and it now makes up 12 percent of all rail releases, according to Bill Schoonover, chief of the Hazardous Materials Division of the Federal Railroad Administration. A breakfast session at the National Ethanol Conference highlighted the latest rules, regulations and statistics about ethanol safety on the rail. Ethanol has dramatically changed the structure of the rail system, Schoonover explained. Seventy percent of the country’s ethanol is shipped via rail; this volume has added 143 new shippers, thousands of additional hazardous materials employees, more than 30,000 additional tank cars, thousands of new consignees and three new manufacturing sites (previously there were just four tank car manufacturers). Because ethanol travels the entire rail system, safety training is becoming more important. Ethanol safety incidents are typically nonaccident caused releases. They are typically found in rail yards during required inspections, are caused by the shipper, and are leaks from valves and fittings, overloaded cars or cracks in tank shells. While there have not been any deaths from ethanol accidents, the increasing number of releases is a cause for concern, Schoonover said. The Department of Transportation and the RFA have turned their attention to funding activities in support of ethanol safety. The RFA recently released an ethanol safety training video for first responders, which can be accessed at www.ethanolrfa.org. The 20-minute video, “Responding to Ethanol Incidents,” provides information that first-responders—firefighters, in particular—will need if they are called to an ethanol incident. Another organization, Transportation Community Awareness and

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Emergency Response (Transcaer), has also been active in providing training for regional hazardous materials response teams, fire departments and other first-responders. Schoonover announced that Transcaer would be offering free, hands-on training using rail equipment and highway transportation vehicles at a series of eight rail safety training sessions across Iowa in April and May. This educational tour will emphasize the production, packaging and shipping of ethanol. The module-based training curriculum covers safety precautions for locomotives and tank cars; toxic inhalation of hazardous materials and flammable gases; valves, fittings and leak repair; and a tank truck course. The training will also educate communities near major rail routes about rail equipment, chemical transportation and the importance of planning for potential hazardous material emergencies. For more information, training dates and locations, and to register, visit http://programs.iowadnr.gov/transcaer/. In May, a two-day class is planned in Avondale, Pa., by Transcaer, Kenan Advantage and East Penn Railroad in conjunction with the opening of a new transfer facility, said Denny Day of Sun Pro Services. The program will take place at the Avondale Fire Co. headquarters. Another ethanol safety tour is being planned for Ohio, likely in the fall, Day said. Transcaer is a voluntary outreach effort of the U.S. Department of Transportation’s Federal Railroad Administration. It is focused on helping communities to prepare for and respond to a possible hazardous material transportation incident. Members consist of volunteer representatives from chemical manufacturing industries, transportation industries, distributors, emergency response groups and the government. Previous ethanol training tours were held in Nebraska and Kansas.

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‘This past year will truly be remembered for ushering in a new energy era for America, one that will “change the climate,” both literally and figuratively.’ & Security Act of 2007, which greatly increased the ethanol requirement. As the U.S. ethanol industry continues to grow into an established industry, its influence on the economy and environment has also grown. For this reason, the

RFA chose the theme, “Changing the Climate.” “This past year will truly be remembered for ushering in a new energy era for America, one that will ‘change the climate,’ both literally and figuratively,” Dinneen wrote in a letter to conference

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attendees. Of course, the new era also brings with it a series of challenges that the industry must meet.

Corn Production Ethanol continues to demand a steady supply of corn, which Rick Tolman, chief executive officer of the National Corn Growers Association, assured attendees would be there. Last year’s concerns that there wouldn’t be enough corn were unfounded—the total corn supply this year was 14.6 billion bushels—and corn farmers would continue to boost average yield, he said. Meanwhile, ethanol yield would increase, and more corn in feed would be displaced by distillers grains. “Critics look in the rearview mirror, but you can’t judge this industry by its past,” Tolman said. Increased yield will be important to fulfill the increasing demand brought on by the new Energy Bill. Policy changes to assist farmers and open up Conservation Reserve Program land for crop production are waiting for Congress to move on in the Farm Bill—a subject that even a panel of Washington insiders couldn’t shed much light on. The conference also addressed international policies and markets, transportation issues, cellulosic ethanol advances and continued attacks from the news media, which Dinneen said was the biggest challenge of the year. In light of all of these challenges, Dinneen encouraged the attendees to face them head on. “Change is hard, but change prevails,” Dinneen said. “The challenge is to bring the change you want to see. Are you ready to meet these challenges?” As the crowd thundered “Yes.” Dinneen offered the final challenge: “Be the agents of change.” EP Anduin Kirkbride McElroy is an Ethanol Producer Magazine staff writer. Reach her at amcelroy@bbibiofuels.com or (701) 738-4962. Jessica Sobolik is the Ethanol Producer Magazine managing editor. Reach her at jsobolik@bbibiofuels.com or (701) 373-0636.

ETHANOL PRODUCER MAGAZINE MAY 2008

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A Cheaper

â&#x20AC;&#x2DC;W h ey â&#x20AC;&#x2122; to Make Ethanol A Wisconsin cheese maker is expanding his bacteria-tending skills to include nurturing yeast to make ethanol and growing algae to produce oil for biodiesel in an intriguing energy-integrated, waste-to-power process. By Susanne Retka Schill Photos By Brian Taylor

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eople who visit Joe Van Groll’s ethanol plant in Stratford, Wis., typically look around and say, “This is it? You don’t have much here.” To which he replies, “Exactly, that’s why I can [make ethanol] so cheap.” Van Groll has experimented with a wheyto-ethanol process part time for more than a decade and full time for the past four years. He believes he can produce ethanol for less than $1 per gallon. The feedstock he uses is whey permeate, the waste product of cheese manufacturing. Although it may sound more complicated than producing ethanol from corn, Van Groll’s philosophy is to avoid waste and keep things simple. The energy integration he is targeting, however, is anything but simple. Besides turning the whey permeate into ethanol, he separates and dries the yeast coproduct for feed; utilizes the waste heat from fermentation and distillation for biodiesel production; and is now demonstrating that the waste heat, water and carbon dioxide can be used to raise oilbearing algae for biodiesel. He can also incorporate an anaerobic digester that turns wastes into methane to power the process. While the integration appears complex, the machinery is rather basic. The plant relies upon the same kind of tanks and liquid transfer systems utilized in cheese plants, Van Groll says. “The receiving tanks for the whey permeate are milk silos,

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Van Groll has adapted cheese-making equipment. The small square bulk milk tank in the foreground is used for yeast propagation and the milk silo in back is used for fermentation.

which become the fermenters,” he says. “We make a couple of pumps do a lot of work for us.” The major difference is the distillation system for the ethanol process. Van Groll’s whey-to-ethanol process solves a waste disposal problem for the cheese industry, and at the same time side-

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steps some of the criticisms regarding corn ethanol. Whey permeate is the liquid that remains after cheese makers extract the protein from whey. Large cheese makers dry the whey permeate and sell it as a feed supplement. Smaller cheese plants often can’t justify the capital investment required to purchase dryers; furthermore rising energy costs are pushing drying costs higher. Each year the United States produces 10 billion pounds of cheese, which results in 86 billion pounds of whey permeate. Wisconsin alone produces about 18 billion pounds of whey annually. Because the whey permeate has a high biological oxygen demand that requires pretreatment before it can be disposed of in municipal water treatment facilities, much of that permeate is spread onto farmers’ fields, with the cheese plant paying the cost. There is a limit, however, as to how much can be dumped on a given field and environmental regulators are beginning to restrict the practice, Van Groll says. “My process takes a cost center and turns it into a profit center,” he says. With 15 years in the cheese industry, Van Groll knows the issues cheese makers are facing. During that time, he was often charged with making arrangements for disposing of the whey permeate. That might have been just the impetus he needed to look for new uses for the cheese byproduct. Van Groll and a friend began to experiment by making ethanol from the liquid waste starting with batches in 5 gallon

Van Groll expects to add dried algae solids to the array of products he produces.

pails in Van Groll’s garage. Four years ago, he purchased the closed Grand Meadow Co-op cheese plant at Stratford, Wis., to scale his project up to the next level. He formed Grand Meadow Energy LLC to hold the intellectual property, and DuBay Ingredients LLC owns the plant.

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The ‘Whey’ to Cellulosic Ethanol Researchers in New York seeking new uses for cheese whey permeate are looking at whey-to-ethanol research from a different angle. John Fieschko, director of the Central New York Biotechnology Research Center in Syracuse has followed the research at Cornell University, which is working with grasses for cellulosic ethanol, and at projects utilizing wood at the College of Environmental Science and Forestry at Syracuse. Fieschko hopes to test the concept of using cheese whey permeate in those cellulosic ethanol processes. A major limitation for whey-to-ethanol projects is the high cost of trucking the low-solids, high water content feedstock to a centralized ethanol plant that is large enough to take advantage of economies of scale. On the other hand, cellulosic ethanol processes create concentrated sugars from wood and grasses that are lacking in other necessary elements. In the case of hydrolyzing wood, there are compounds created such as ascetic acid and furfurals that need to be removed or diluted. Whey permeate may fit into the process by supplying an additional sugar for fermentation with a high water content to help with dilution. Cheese whey permeate is essentially sterile, and in addition to lactose contains salts, nitrogen and other compounds useful for the cellulosic ethanol process, Fieschko says. In his concept, the highly concentrated sugars from pretreated wood or grass would be trucked to sites near cheese plants producing whey permeate with its highly diluted lactose sugar source. The goal would be to utilize a waste product, reduce water needs and boost the ethanol output.

Van Groll developed the whey-toethanol process with help from Clay Boeger, his sole employee who contributed his skills as a stainless steel fabricator to make modifications as the two developed the processes. In their work,

they established that every 100 gallons of whey permeate at 16 percent solids will produce 8 gallons of ethanol, 8 pounds of dry yeast, 60 pounds of carbon dioxide and 16 gallons of water. The energy spent to produce 1 gallon of ethanol is

30,000 British thermal units, according to Van Groll, which is a favorable energy balance compared with ethanol’s 84,000 Btus per gallon.

Greener than Corn One of the criticisms directed at the corn ethanol industry is that it takes about 3 gallons of water to make 1 gallon of ethanol. Water isn’t an issue when it comes to Van Groll’s process. “Cheese whey permeate is 85 percent water to start with,” he explains. No water is added, and the water leftover from the process is recycled and used for tank washing. Energy savings can also be achieved, particularly when the permeate arrives from the cheese plant at 90 degrees Fahrenheit. Sometimes the cheese plants chill the permeate to 40 degrees for holding, in that case Van Groll says to keep energy costs low the waste heat from the distillation process should be recycled to heat the chilled permeate before fermentation. The expense and equipment required to carry out the saccharification process in a corn-based ethanol plant aren’t required in Van Groll’s process because whey permeate is pri-

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marily water and lactose—the form of sugar found in milk. While it’s considered a difficult sugar to ferment, through trial and error Van Groll discovered the right combination of yeasts, nutrients and conditions to make it work. “The existing Carberry process is a 30-year-old patent using a simple yeast strain, but it could only use 10 percent solids with lactose. I can use up to 20 percent solids and get a greater content of alcohol in a shorter period of time,” he says. Last summer, when commodity markets took off and some feared that corn was going to be in short supply because of new ethanol plants coming on line, whey permeate prices also increased, prompting Van Groll to diversify his process. He decided to take the pure ethanol from his process to make biodiesel. Ethanol isn’t widely used to make biodiesel because the denaturant required to transport the ethanol off-site isn’t tolerated in the biodiesel process, he explains. He proved the biodiesel concept using canola oil, but quickly decided that with oilseed prices also on the rise, oil-bearing algae would be a better feedstock.

ETHANOL PRODUCER MAGAZINE MAY 2008

This spring he is adding an algae propagation system to his operation. Van Groll likes the synergies that algae can provide. The carbon dioxide from the fermentation process will be used to support algae growth, and he’s identified algae strains that will grow on still bottoms. Algae yield about 50 percent oil that can be used to make biodiesel, and the remaining solids would make a good feed ingredient as it contains 40 percent to 50 percent protein. The highprotein algae coproduct will complement the dried yeast coproduct from the fermentation process, which contains 26 percent to 32 percent protein. The Division of Animal Feed of the Center for Veterinary Medicine approved Van Groll’s yeast coproduct for use as a feed supplement last fall. “That was a huge hurdle,” he says. The feed supplements complete the circle— cows produce the milk for cheese and whey, microbes create products from the whey and waste, and the dried yeast and algae are fed back to the cows to produce more milk.

Entrepreneur’s Challenge Van Groll, who has a degree in dairy

Van Groll pulls a sample of biodiesel from a tank. He integrated biodiesel production into his operation to diversify his whey-to-ethanol system when commodity prices took off last year.

science from the University of Wisconsin, River Falls, is a classic example of a grassroots entrepreneur. He

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developed an idea in his garage, invested all he had to build a demonstration plant, and has struggled to overcome investor and lender reluctance to back a commercialZaydman scale plant for a new, yet unproven technology. “I have a nice simple setup,” he says. “What’s the hurdle? Nobody’s done it. Everyone says, show me a commercialization.” A $29,000 Wisconsin state grant supporting Van Groll’s work generated a round of publicity which caught the attention of New Yorker Eduard Zaydman who discovered it while researching opportunities in bioenergy. “I got interested and researched the old process. I called Joe and visited Wisconsin,” he says. “I came to the conclusion that this is a great opportunity.” As chief executive officer of DuBay Ingredients, Zaydman is developing the financial backing to take the process to the next level. “We came up with a business plan and we’re going after several financial tools to raise funds,” he says. Zaydman is targeting a number of

The Grand Meadow cheese plant has been converted into an ethanol plant. The tallest white tank is the 15,000-gallon fermentation silo.

groups involved in biofuels investments with a private placement memorandum to raise the first round of equity for commercialization. They are also pursuing federal and state grant opportunities. Van Groll is hoping that the first project will be built in Wisconsin, but he will be hosting a group from Poland this spring, and possibly another from Spain, who are

interested in licensing the process. Whey to ethanol may not be common in the United States but New Zealand has several large plants, he says. “We don’t offer anything brand new we’re just making it much better.” EP Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her

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Will RINs be: The Next Environmental

Currency?

Renewable Identification Numbers are becoming increasingly important not just for people in environmental compliance or accounting, but also for those in marketing, investing and sustainability. By Anduin Kirkbride McElroy

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assage of the Energy Independence & Security Act of 2007, and the dramatically increased renewable fuels standard (RFS) within it, took Renewable Identification Numbers from a necessary pain to a marketable commodity. Between December and late February, the value of RINs grew from 0.25 cents to 5 cents, according to Paul Machiele, fuels center director for the U.S. EPA. The program is in its infancy and RINs aren’t well understood, but initial indicators show they have the potential to be a significant environmental currency. RINs are mechanisms the EPA created to ensure compliance with the first RFS. The Energy Policy Act of 2005 mandated that obligated parties, which include refiners, importers and gasoline blenders, fulfill a renewable volume requirement. The requirement is that a certain percentage (released by the EPA every November) of each party’s motor vehicle fuel be renewable fuel. This necessitated the development of a flexible accounting mechanism to track compliance with the new renewable fuel blending requirements. A RIN is a unique, 38-digit serial number assigned by producers to each gallon or batch of renewable fuel produced. An obligated party acquires RINs by blending renewable fuel, or it can purchase RINs to satisfy its requirement. The EPA issued the final rule on RINs in May 2007, and

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it went into effect that September. Just three months later, long before the kinks were worked out, Congress passed EISA along with an even greater and more complex RFS. EISA requires that the EPA issue a rule for the second RFS by Dec. 19, 2008, which would be effective by Jan. 1, 2009. The EPA is simultaneously enacting the rule while updating it within what Machiele told attendees at the National Ethanol Conference in February is an extremely short time frame. The beauty of the RIN system is that it was developed as a foundation upon which other regulations could be built. Machiele said the RIN system should remain virtually intact with 38 digits, but the values of some of the digits may need to be redefined. In the first RFS, the EPA needed to keep track of two types of fuels: cellulosic and everything else. The renewable type code is the 22nd digit; cellulosic ethanol is designated as a 1 and other fuels are designated with a 2. This ensured that the cellulosic requirement was met when required. Under the new RFS there are more numbers that must be tracked. In addition to cellulosic biofuel, EISA has separate inclusion requirements for biomass-based diesel and advanced biofuel. “With RFS1, we put in a code to prepare for cellulosic ethanol,” Michiele said. “With RFS2, instead of 1 or 2, we’ll

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now have 1-4. There will still be one RIN code, but the RIN will have a different value.” The difference in these numbers will be reflected in the RIN’s value its market price. Fuels other than corn-based ethanol have qualified for RINs by an equivalence value, which are represented by the 20th and 21st digits. Equivalence values are based on volumetric energy content in comparison with corn ethanol, and determines how many RINs the fuel is worth. For example, 1 gallon of cellulosic biomass ethanol receives 2.5 RINs, while 1 gallon of corn ethanol receives one RIN. For fuels not already designated within the rule, the EPA created a formula to determine the energy equivalence value of the fuel compared with corn-based ethanol. This makes an easy transition to accommodate the advanced biofuels required in the second RFS. TThe advanced biofuel requirements can be built into the existing system, but there are other more difficult changes the EPA is addressing. Machiele said one of the greatest challenges, on which most of the EPA’s time will be spent, is the new lifecycle greenhouse gas criteria. EISA requires that renewable fuels must meet a 20 percent lifecycle greenhouse gas threshold relative to the gasoline or diesel fuel they displace. The EPA must determine the lifecycle performance of the various fuels, and will address how to

Equivalence value for various renewables based on volumetric energy content in comparison to ethanol: Corn ethanol Biodiesel (alkyl esters) Renewable diesel Biofutanol Cellulosic biomass ethanol*

1 1.5 1.7 1.3 2.5

*(mandated by act through 2012) SOURCE: U.S. EPA

include emissions resulting from international land-use changes. “If you thought RFS1 was interesting, RFS2 will have you on the edge of your seats,” quipped Jim Redding, vice president of external relations for Aventine Renewable Energy Inc.

RIN Markets and Values While these changes to the rule are being discussed among stakeholders, RINs on today’s market are increasing in value, and are seeing trade activity. Several companies

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At current RIN prices of about 3 cents, a fleet manager could offset the annual fuel consumption of 1,000 vehicles for just $30,000.

have sprouted to accommodate RIN trading. On Jan. 30, a trading platform for RINs opened, called RINXchange. RINXchange is a Web-based trading platform that enables buyers and sellers complete transparency and price discovery. It’s open to the expected customers, such as producers, refiners, blenders, marketers and importers, as well as the occasional speculator. Like RIN trading in general, this trading platform is still in its infancy. “The lion’s share of RINs is currently traded on a bilateral basis,” says Clayton McMartin, president of the Clean Fuels Clearinghouse, which operates the RINSTAR Renewable Fuels Registry. “They’re being traded as direct negotiations from buyer and seller. By a long margin, most RIN transactions are being done as an extension of the physical product that’s being traded.” He adds that his company’s product, RINSTAR, facilitates RIN transactions, but it doesn’t get involved with price discovery.

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As previously mentioned, RIN values have increased since the passage of the 2007 Energy Bill. Future RIN values will certainly be affected by availability, but likely even more so by type. For example, when the new RFS goes into place, there will be a premium paid for cellulosic biofuel RINs. In 2011, obligated parties must blend 250 million gallons of cellulosic ethanol. “The fuel will have the same physical properties, but there will be a premium paid for the RIN that’s derived from cellulose,” McMartin says. “If the obligated parties have to bid up the price for the RIN attached to that cellulosic ethanol, they’ll do it.” To keep the market from going out of control, the EPA has a relief valve. The agency will have the authority to mint RINs or waive the requirement under certain conditions. The cellulosic biofuel waiver, required in the legislation, allows the EPA to reduce the standards for advanced biofuel and total renewable fuel accordingly, and to make EPA credits available for sale at the greater of 25 cents per gallon or $3 per gallon less the wholesale price of gasoline. At today’s prices, this equates to approximately 70 cents per gallon. There’s a wild card that may or may not affect RIN values, McMartin says. “It hasn’t developed yet, but it could,” he says. He points to other markets, where companies, academic institutions and government entities voluntarily purchase renewable energy credits or join the Chicago Climate Exchange to reflect sustainability values. “To date, RINs have not been recognized as a vehicle from a sustainability or environmental stewardship motive,” he says. “If they are, that will drive the value of RINs. For instance, a sustainabil-

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Carbon Credit Exchange The RIN system may also be the foundation of a carbon cap-and-trade system. RINs could act as the currency for carbon credit trading and compliance, just as they do now for renewable fuels, Machiele said. This scenario may become reality as soon as 2012 if proposed legislation is enacted. In October 2007, Sens. Joseph Lieberman, IDConn., and John Warner, R-Va., introduced Senate Bill 2191 as America’s Climate Security Act. It creates an economywide greenhouse gas cap-and-trade program that provides maximum flexibility for the marketplace to meet a level of emission reductions that is environmentally credible. In December, by a vote of 11-8, the Senate Environment and Public Works Committee favorably moved the LiebermanWarner Climate Security Act to the full Senate with a bipar-

PHOTO: OFFICE OF SEN. JOSEPH LIEBERMAN

ity purchaser buys RINs, takes them off the market and doesn’t make them available to obligated parties, that increases the market for RINs.” At current RIN prices of about 3 cents, a fleet manager could offset the annual fuel consumption of 1,000 vehicles for just $30,000, he says. If it goes forward, McMartin says environmental stewardship purchases would drive the value of RINs more than anything else. If not, RIN value will likely be dictated by simple transportation logistics. “Unless there’s a new dynamic like sustainability or another environmental wild card, RINs will likely stay in the 3- to 5-cent range, a number driven by transportation costs,” he says. “It costs nothing to move a RIN, but it costs to move a gallon of gasoline—about 3 to 5 cents.” The Lieberman-Warner Climate Security Act, introduced by Sens. Lieberman, left, and Warner, would institute a carbon cap-and-trade-system. RINs could act as the currency for carbon credit trading and compliance.

tisan list of cosponsors. This is the first time in the United States that a bill mandating economywide reductions in greenhouse gas emissions has reported out of committee in the Senate or the House. According to Lieberman’s office, the full Senate is expected to consider the measure in June. The fact that RINs could be used in a carbon cap-andtrade system didn’t happen by accident. Before Congress passed the first Energy Bill, Machiele’s team at the EPA was

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‘Today’s RFS is an energy-content based standard. Instead of being based on energy, it could be based on carbon impact.’

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working on a metric for carbon levels, as part of a U.S. Supreme Court interpretation of the Clean Air Act that carbon dioxide is an environmental pollutant. “I think it goes beyond the boring compliance,” says Douglas Cummins, managing director of RINXchange. “The EPA created the market by separating the person who generates the RINs from the person who has to use it. Usually, EPA doesn’t create a system without it being applied to another product.” McMartin explains how the same equivalence values and renewable type code previously described could be used to move RINs from a volume-based program to a carbonbased program. “Today’s RFS is an energy-content based standard,” he says. “Instead of being based on energy, it could be based on carbon impact. The way the program is set up today, only three numbers would have to change.” McMartin is careful to admit that this is just his own educated guess. “I have no idea, nor does anyone else, what the future holds on fully integrating cap and trade with the RFS and RIN program,” he says. “My guess is the RIN program will continue to expand to even encompass stationary sources like power plants. There’s no reason it can’t. The EPA is pretty sharp on this. You could tell they were anticipating changes and made accommodations on RIN numbering and programming to accomplish that.” EP Anduin Kirkbride McElroy is an Ethanol Producer Magazine staff writer. Reach her at amcelroy@bbibiofuels.com or (701) 738-4962.

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EUROPE

Chernobyl’s Harvest

For the Iowa-size area around the site of the world’s worst nuclear disaster, it’s not just the air, but the soil, that stands to benefit from biofuels. By Patti McCracken

The area closest to Chernobyl is abandoned, too radioactive for occupation. Farther from the nuclear-disaster site, the soil is still too contaminated for food crops—but might be used to grow feedstock for ethanol.

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t was 1:23 a.m. local time, April 26, 1986, when the operator flipped a switch to shut down Reactor 4. As he did so, a power surge triggered a blast of steam that blew the lid off of the top of the reactor, releasing a surge of radioactive particles into the spring night. A second explosion, again caused by the sudden buildup of pressure, turned part of the reactor into a fireball, sending more radioactive poison into the atmosphere. The contamination fell onto vast areas of land that will remain radioactive for centuries. What was supposed to be a routine shutdown turned into the worst industrial accident in human history. More than 20 years after the nuclear accident in Ukraine,

Hypothetically, repeat harvesting would remove the radioactive substances faster than if the land lay fallow.

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an 18-mile perimeter around the Chernobyl Nuclear Power Plant remains abandoned— the exclusion zone, still too radioactive for human occupation. Farther out are huge toxic swaths in Ukraine as well as in neighboring Belarus and Russia—at least 70,000 square miles, an area larger than Iowa. These zones are less conMcClain taminated than the exclusion zone but still too radioactive to grow crops as food. Chernobyl is just four miles from the border with the nation of Belarus, where 20 percent of the land remains poisoned with radioactive fallout from the disaster. These less-contaminated areas have the attention of Greenfield Project Management Ltd. of Dublin, Ireland. “With the right kinds Miller of crops, technology, safety systems and processing,” says Basil Miller, Greenfield’s chief communications officer, “pure fuel ethanol can be safely produced from the nuclear zone.” Scientists estimate that contamination in Belarus, the country hardest hit by the fallout, is severe enough to prevent

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the safe cultivation of food for 300 to 600 years. Through repeat harvests of grain for ethanol feedstock, however, Greenfield thinks that the land will be safe for food production in as little as 60 years. That’s the dream, in any case. Greenfield’s chair, Ann McClain, says she and the nation of Belarus agree that ethanol is an “economically sustainable way of remediating and redeveloping the contaminated Chernobyl lands,” according to a release on the Greenfield Web site. McClain calls the effort a “long-term humanitarian and social project.” And, she claims, it’s good business—with stable supplies of feedstock in market conditions that are volatile in much of the world.

Belarus may nevertheless be a daunting place to do business. The government, led by President Alexandr Lukashenko, controls prices and currencyexchange rates and intervenes in management of private business, according to the U.S. Central Intelligence Agency Web site. Central and local governments in Belarus have pressured businesses with “arbitrary changes in regulations, numerous rigorous inspections, retroactive application of new business regulations, and arrests of ‘disruptive’ businessmen and facto-

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Chernobyl was the exclamation point at the close of the Cold War, the nuclear meltdown that foreshadowed a political meltdown.

ry owners,” according to the CIA. Foreign investment is limited. In any case, the government seems to welcome Greenfield. Belarus and

Greenfield agreed in late 2007 to launch an ethanol production project that would use grains and sugar beets—perhaps from contaminated areas—as feedstock.

A first Greenfield plant at the city of Mozyr would generate 550 MMly (145 MMgy) of ethanol annually. The target market is Europe, which currently imports ethanol from Brazil. The European Union has set 2020 as the year by which member states must derive at least 10 percent of their fuel supply from biofuels (see “Vive la Difference” on page 144). It’s likely that many EU member states will resort to importing biofuels to meet the target—some already are, in fact—and sourcing ethanol from producers closer than Brazil would be advantageous. Greenfield plans research to test the extent to which radioactivity can be removed by harvesting. Vegetation draws radioactive contamination from the soil and incorporates it into the plants themselves. Hypothetically, repeat harvesting would remove contamination faster than if the land lay fallow.

Ensuring Consumer Safety “There are many scientific bodies behind our approach," claims Greenfield’s Miller. “Not just the Belarusian and Ukrainian research institutes, but the U.S. Department of Energy, the Swedish University of Agricultural Sciences and the Danish National Laboratory have all been involved in studies supporting this.” Of course, Greenfield also needs a process to reduce the level of radioactivity in its ethanol to levels acceptable under international standards—and therefore safe for use in vehicles. “There is the perceived notion that the final product will contain radioactivity, which it won’t,” says spokesman Miller. “There was a headline in an Irish paper that said ‘Will Your Car Glow in the Dark?’ That’s just ridiculous.” Observers agree it could work. “I can see the idea of letting the crops

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absorb the radioactive isotopes and upconcentrate them in a boiler, where they would be collected together with the fly ash and slag,” says Anders Jensen, sales manager at biomass specialist Bioener APS of Copenhagen. Didier Louvat, head of the Waste and Environmental Safety Section at the International Atomic Energy Association, says radioactivity could remain in the fuel, but only at acceptable background levels that are present worldwide. “After the oil processing,” says Louvat, the remaining radioactivity “doesn't make a big difference.” Greenfield wants to begin field tests on crops harvested this year. It seeks to identify plant species that offer both rapid radioactivity absorption and high ethanol yield. Prime candidates are wheat and sugar beet. Wheat is expensive, to be sure, but available more cheaply under Belarusian price controls. Danish and Swedish technology already exists to remove radioactivity from feedstock, says Greenfield’s Miller. Workers at the production facilities handling contaminated feedstock would follow existing international standards in what Miller describes as a setting that handles “medium to low” radioactivity. In any case, Greenfield is going step by step. A plant at the city of Mozyr on the Pripet River would start producing ethanol as early as 2010— but at first with uncontaminated feedstock. Meanwhile, Greenfield anticipates building a pilot plant further north at Bobruisk less than one-fifth the size of the Mozyr facility to test ethanol production from contaminated feedstock. Success at the pilot plant would mean production using radioactive feedstock at the bigger Mozyr plant, all perhaps within five years. Greenfield, which has already invested €8 million ($12.6 million) in the project, announced in late March it would spend another €65 million ($120 million) this year in its Belarusian initia-

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tive toward an anticipated total of €220 million ($345 billion). Chernobyl was the exclamation point at the close of the Cold War, the nuclear meltdown that foreshadowed a political meltdown. And although the living conditions in much of the former Union of Soviet Socialist Republics have generally improved since the fall of communism, sometimes dramatically, the nuclear disaster has hurt Belarus and Ukraine economically. Belarus caught 70 percent of the Chernobyl radiation. The government esti-

mates that the resulting economic loss has reached $235 billion. If ethanol can help Belarus improve its economic situation, particularly in the areas devastated by Chernobyl, “this would be a very good solution,” says Louvat. “They need development there.” EP Journalist Patti McCracken writes about energy and other subjects from Vienna, Austria.

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This plant in Sweden is a pilot facility to test enzyme systems and microorganisms for cellulosic ethanol production. PHOTO: SEKAB E-TECHNOLOGY

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Vive la DiffĂŠrence

Biofueling the economies of Europe and United States has taken distinctly different routes. The Yanks are well ahead in ethanol, but the second generation may look different. By Jon Evans

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rom beer-loving Germans to vinophile Mediterranean types, Europeans love alcohol—but not in fuel tanks. The biofuel of choice elsewhere is ethanol, but in Europe biodiesel holds sway. Diesel passenger vehicles are simply more prevalent than gasoline-powered cars in Europe, and that alone has diminished ethanol production and encouraged biodiesel production over the past decade. However, Europe’s ethanol industry is also a product of complex interactions between fuel demand and feedstock supply that have made it different—not just smaller—than the U.S. ethanol sector. It’s not unthinkable that this could change, however. The predicted rise of cellulosic ethanol may provide just the kick-start ethanol needs to challenge the dominance of biodiesel in Europe, and perhaps even to test American and Brazilian domination of the industry. Biodiesel’s supremacy in Europe is pretty emphatic at the moment, with biodiesel accounting for more than 70 percent of production and consumption of transport biofuels in the 27 member countries of the European Union. The European ethanol industry counts just 38 plants, mostly in France and Germany, which produced 1.6 billion liters (424 million gallons) of ethanol in 2006. In contrast, the 185 biodiesel plants dotting Europe, most again in France and Germany, produced 4.5 billion liters (1.2 billion gallons) in 2006, according to Eurostat, the European Union’s information service. The situation is completely different in the United States, where the ethanol industry’s 110 plants in 2006 produced 18.3 billion liters (4.9 billion gallons)., and at press time in late March had 150 ethanol plants producing 8.4 billion gallons per year, according to Ethanol Producer Magazine’s own plant list. Also in 2006, the latest year for which reasonably comparable numbers are available for both Europe and the United States, the U.S. biodiesel industry produced 850 million liters (212 million gallons). Indeed, globally, ethanol emphatically trumps biodiesel. Worldwide ethanol production

in 2006 was 51 billion liters of all grades of ethanol compared with 6 billion liters of biodiesel (13.5 billion gallons to 1.5 billion gallons). However, this global dominance of ethanol merely reflects its dominance in the two largest biofuel markets—the United States and Brazil. In many other regions of the world, such as Europe and Asia, biodiesel accounts for a much greater proportion of the biofuels market.

‘Diesel-Centric’ So what determines whether a country plumps for biodiesel or ethanol as its main biofuel? Well, according to Jeremy Tomkinson, chief executive at the UK National Non-Food Crops Centre, it all comes down to fossil fuels. With ethanol and biodiesel primarily used as additives to fossil fuels, Tomkinson where they usually comprise at most 10 percent of the fuel, it’s not surprising that the share of the biofuel market taken by ethanol and biodiesel reflects the share of the fuel market held by gasoline and diesel. “In the UK and Europe, we are becoming more diesel-centric,” Tomkinson says. “The majority of the cars now sold on the forecourts are diesel. So if you look at the bio alternatives, obviously bioethanol goes into petrol and biodiesel goes into diesel, and that simply explains why bioethanol is not as popular.” But that isn’t the whole story, for the European ethanol sector is not only constrained by European consumers’ liking for diesel but also by the make-up of its agricultural sector. Western Europe doesn’t have an equivalent of the massive agricultural plains of the U.S. Midwest and isn’t able to grow huge amounts of corn for ethanol production. In 2006, EU member states harvested just one-fifth as much corn as the 308 million U.S. tons—11.1 billion bushels to the EU’s 1.9 billion bushels, according to the U.S. Grains Council. The record U.S. harvest in 2007 of 13.1 billion bushels only widens the gap. The European ethanol industry must draw upon a greater variety of feedETHANOL PRODUCER MAGAZINE MAY 2008

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stocks, with wheat and sugar beet both more important feedstocks than corn— and this causes problems.

Fragmented Facilities designed to turn wheat to ethanol can’t use corn. “It’s quite a different material,” explains Tomkinson. “So the UK and EU plants that are configured to use wheat cannot easily change to use corn.” This means that different facilities operating different processes have to be developed for each feedstock, with the associated costs for the European ethanol industry. It also means that different countries have tended to focus on different feedstocks. So while Germany uses cereals, especially wheat, as its main ethanol feedstock, three-quarters of France’s ethanol comes from sugar beet. The result is that the European ethanol industry is fragmented and unable to take advantage of a central feedstock supply network, as exists in the United States with corn. All of which acts to restrict the European industry’s growth. Furthermore, European agriculture is simply unable to supply even the level of feedstock required at the moment by the ethanol Tyner industry, let alone that required in the future. The UK government estimates that for it to meet the commitments of its Renewable Transport Fuel Obligation legislation requiring that biofuels make up 5 percent of transport fuel by 2010, using home-grown feedstocks would require between 10 percent and 45 percent of the country’s arable land. Over the EU as a whole, meeting the commitment of the EU Biofuels Directive for biofuels to make up 5.75 percent of transport fuel by 2010 has been estimated to require between 4 percent and 18 percent of the region’s arable land. Land use on this scale for biofuel production is almost certainly not practical and may well mean that imports of both plant feedstocks and ethanol will ETHANOL PRODUCER MAGAZINE MAY 2008

increasingly be needed to make up the shortfall. This is already the case in Sweden, which is by far the largest European consumer of ethanol as a fuel, accounting for around 80 percent of Europe’s ethanol imports. Consequently, in Europe the use of all biofuels, including ethanol, will grow over the next few years, driven by European and national legislation for biofuels to make up a certain proportion of the fuel supply—but much of this growth will probably have to be met by imports. It will thus tend to benefit farmers and ethanol producers in other regions rather than just those in Europe. This is completely different from the situation in the United States, where the government has been promoting home-grown ethanol for around 30 years via tax credits and has been keen to ensure that any financial benefits from ethanol remain within the country. The scale of these benefits was recently highlighted in a report published by LECG Inc., a California-based industrial-analysis firm, which estimated that the U.S. ethanol sector now contributes almost $50 billion a year to the country’s gross domestic product.

Drop in the Ocean This may be somewhat of a drop in the ocean—barely one-third of a percent of the overall U.S. GDP of $14 trillion and too small to have much of an influence on national economic growth. The effect at smaller scales, however, can be pronounced. “I doubt one could perceive at the national level any difference in economic growth due to ethanol,” comments Wallace Tyner, a professor of agricultural economics at Purdue University. “Certainly, it might be possible for certain regions.” Indeed, another recent report from LECG looked at the contribution of the biofuel industry to the economy of Iowa, which is the largest ethanol producer among the states, and found the renewable fuel responsible for a 10 percent increase ($12.7 billion) in Iowa’s GDP. This difference between the U.S. and 147

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Europe reflects not just the availability of feedstocks but also the different forces driving the promotion of biofuels in the two regions. Historically, Americans have promoted biofuels “for two reasons: fuel security and supporting farmers,” says Tomkinson. “Whereas in Europe it’s climate change, climate change and climate change.” So the European Commission is focusing on promoting the most effective environmentally sustainable biofuels for reducing greenhouse-gas emissions, while the U.S. government wants to promote biofuels that can be produced domestically. Whereas the U.S. approach is clearly the one most likely to stimulate the growth of the domestic ethanol industry in the short term, the European approach could end up stimulating growth in the longer term. This is because ethanol produced from Brazilian sugarcane doesn’t look so environmentally friendly if the greenhouse gas emissions generated in transporting the ethanol from Brazil to Europe are taken into account. If, as seems likely, the European Commission starts to rank biofuels according to the greenhouse gases produced during their production, then ethanol produced from Europegrown feedstocks will start to look a lot more attractive. This could potentially open the way for cellulosic ethanol—currently much more expensive to produce than ethanol from grains or sugar. Yet cellulosic ethanol would neatly solve Europe’s feedstock problem. For experts believe there is more than enough agricultural and industrial waste material, such as straw, to meet Europe’s future ethanol needs.

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As such, there are a number of European research projects trying to develop more efficient production processes for cellulosic ethanol. One of the largest is the far-flung New Improvements in Lignocellulosic ETHANOL PRODUCER MAGAZINE MAY 2008

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Ethanol (NILE) project, which comprises 21 industrial companies, research institutes and universities and runs until the end of 2009. The project involves developing the technology necessary for transforming straw and softwood into ethanol, including developing systems of enzymes for obtaining sugar molecules from cellulose and new strains of microorganisms that can ferment a wide range of these sugars molecules into ethanol. The project is focusing on wheat straw and spruce wood as the feedstocks because they are representative of plant resources widely available in Europe. “Spruce is a good model in terms of the composition of the raw material and because it is representative of raw material that you could obtain in Northern Europe,” says Frédéric Monot, a biotechnologist at the Institut Français du Pétrole near Paris and manager of the NILE project, “while wheat straw is a good model for the agricultural residues that can be obtained in central and southern Europe.” The enzyme systems and microorganisms being developed by NILE will be tested in a pilot plant in Örnsköldsvik, Sweden. Depending on the results, Monot hopes to encourage a commercial company to invest in a demonstration plant upon completion of the research project. Another European biofuel project is known as RENEW, as part of which the Spanish energy company and biofuel producer Abengoa Bioenergy leads a team developing cellulosic ethanol production processes. These are the two main cellulosic ethanol projects in Europe, but they are surpassed by U.S. investment in cellulosic ethanol technology. NILE has funding of nearly €13 million ($8 million) and RENEW nearly €20 million ($13 million) but in January 2008 the U.S. Department of Energy announced it would invest up to $33.8 ETHANOL PRODUCER MAGAZINE MAY 2008

million for development of six cellulosic ethanol biorefineries. Yet we’re all in this together, of course: One of these U.S.funded cellulosic ethanol biorefineries uses novel production technology developed by a small Danish company BioGasol ApS. If Europe and the United States both begin to adopt cellulosic ethanol on a large scale, perhaps their ethanol sectors will begin to resemble each other a bit more. For, as U.S. and EU member

state politicians are keen to remind us, there is more that unites Europeans and Americans than divides them—something to which both sides of the Atlantic can raise a toast. EP Jon Evans is a freelance science writer and editor based in Chichester, UK. He mainly focuses on the chemical and life sciences, covering everything from biofuels to nanotechnology, and is a regular contributor to a number of scientific magazines and Web sites, including Chemistry World and Biofpr.

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The Industry: Yesterday, Today and Tomorrow By Larry Johnson

feel fortunate to have seen and participated in a truly historic event: the birth and development of the U.S. ethanol industry. Some of us can remember the early struggles and the numerous times that experts predicted an imminent end to this “silly biofuels phase.” We have seen policies change, loan guarantees rescinded, the “payment-in-kind” corn reduction program, $9 per-barrel crude oil, 80 cents-per-gallon ethanol, countless articles about damaged engines, net energy nonsense, questionable air modeling studies, the rise and fall of MTBE, shortages of investment capital, foreign competition, $5 perbushel corn (twice) and a continual stream of special interest opposition who ignore any analysis of the big picture. Having seen the predicted demise of this industry several times, it becomes difficult to understand today’s negativity and even panic caused by high corn prices and ethanol prices lower than RBOB. This is particularly true when we have experienced similar market cycles before and normal market forces are already at work to correct them. The American farmer is impatiently waiting for spring to increase production in response to these profitable prices, and gasoline terminals are racing to install ethanol infrastructure to take advantage of huge blend margins. Let’s face it, we are in a very commodity-sensitive business. However, our objective is not to gamble on fickle commodities markets, but to add value through investment, technology, smart decisions and hard work. In addition to saving the world, that is

our mission. The opportunities to add value to raw agricultural commodities and even waste products have never been greater. Understandably, there are reasons for caution and respect for the unknown because we are truly in uncharted territory. We can’t remember when the “century of oil” began, but we have all heard stories Johnson about the demise of the whale oil industry when kerosene was introduced and the opposition to the automobile by the infrastructure servicing the horse transportation industry. In fact, as a kid, I would yell “get a horse” out the window when we passed a stalled car, never having any idea where the concept came from. We are moving rapidly into the new era of renewable energy. We have already done much of the heavy lifting by overcoming introductory hurdles of efficient processing, product distribution, consumer acceptance and attracting capital. We are now a market force that upsets the status quo. Many of the earlier barriers to ethanol production were overcome through technology and perseverance that either improved our product or exposed the opposing arguments as myths. Let’s take a look at the current opposition to our industry and see which concerns are legitimate and which myths might be exposed.

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

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Concern No. 1: We are overproducing for the market. Our recent growth can be attributed to attractive crush margins, but also to the fact that it is a product whose time has finally come. There is no doubt that ethanol prices are currently depressed relative to gasoline and that large ethanol supplies are a contributor. However, we

ETHANOL PRODUCER MAGAZINE MAY 2008

are still only about halfway to a saturated market for E10 and there is a rapid buildup of infrastructure to take advantage of attractive blend margins. There is also a growing momentum for both E85 and higher blends that will impact the marketplace in the years ahead. While the distribution and blending infrastructure continues to build, there is

no doubt that the rate of new plant expansion is dramatically slowing. No one knows the exact pace of each of these market factors, but momentum in a free market economy is always a bit slow to turn. It is inevitable that we will see ethanol demand once again outpace production. Each of us must study the available data, our financial position and appetite for risk to determine how best to position ourselves over the coming years. These decisions must not be based on special interest reports or sensational headlines, but on market factors, price cycles and the rich heritage of an industry that has overcome every obstacle it has faced. Concern No. 2: Ethanol has lost its value relative to gasoline. The current ethanol price discount to gasoline is purely a factor of supply and demand combined with market psychology. Why would any buyer bid higher for a forward contract when current supplies are adequate and rumors of an additional 5 billion gallons coming on line this year are in every news story? Ethanol has taken some recent abuse for its British thermal unit value, but the positive attributes of octane, oxygen, performance, gasoline replacement and carbon footprint will prevail as markets adjust and

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public policy favors domestically produced and environmentally friendly fuels. Concern No. 3: There will no longer be a place for independent greenfield plants. Consolidation is taking place, but not at the level predicted by many financial analysts. There will no doubt continue to be some very large producers, but that is positive, as it provides credibility and comfort to many of our oil company customers who seem a bit befuddled by dealing with small producers. After the initial “ADM era,” this industry was built by farmers and individual investors who invested for the long term, anticipating a reasonable return on investment and a growth in value. This model is still viable, as a well-managed plant will continue to provide value in excess of many opportunities available in rural America. Renewable resources can be produced forever in our fertile heartland, while petroleum is finite and we have already exhausted the majority of our domestic supplies. Historically, agricultural prices have been depressed far more than they have been above the cost of production and

As soon as the current fear of the unknown leaves the commodity markets, investors will once again focus on the real balance sheet items and the potential return on investment from investments in renewables.

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farmers have depended on government payments. Farmers have never failed to respond to high prices and market demand, resulting in short-lived bull markets. Obviously, the current demand-driven rally appears to be one of historical significance, but that only means that it will probably get a historical response. Beyond that, it only seems logical that converting agricultural products (including biomass) to energy will provide an opportunity for value-added profits until we discover a new and sustainable source of energy beyond petroleum. Moreover, the longer term future for ethanol must certainly come from using a variety of biomass feedstocks. By their very nature of variety and transportation logistics, cellulose will support the concept of smaller and more localized processing centers, providing a wide range of new opportunities for rural communities and investors. Concern No. 4: Project financing has dried up. That’s the current word on Wall Street, but maybe Wall Street is not the best source for financing. This industry was built on private investors that believed in what they were doing. After all, brokerage houses and hedge funds now say that a commodity-based business is “too risky,” yet the current commodity boom is being fueled by those same funds because it is reported that “commodities are a safe haven.” Go figure. As soon as the current fear of the unknown leaves the commodity markets, investors will once again focus on the real balance sheet items and the potential return on investment from investments in renewables. Well-managed ethanol plants over the past decade have provided investors with returns far higher than bonds, mutual funds, the stock market or most other investment opportunities. Let’s not lose sight of the fact that energy demand, global

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warming and the instability of oil economies led to the passage of a 36 billion-gallon renewable fuels standard. Full implementation of this standard will require a capital investment of close to $100 billion over the next 14 years. In fact, some delegates to the recent Washington International Renewable Energy Conference said the world must spend as much as $3 trillion by 2030 to avert a global environmental crisis. These funds will become available when the focus moves away from the sensational headlines and returns to the hard facts that consumers are demanding alternatives to oil. Biomass is a solution that will only get better as infrastructure is built and technology continues to improve. The current myths that beg us to believe ethanol will cause mass starvation, deforestation and global warming are only tools used by the opposition to protect their own turf. Sometimes it helps one’s perspective to revert to some basic facts when determining where fingers should be pointing. For instance: In 1973 a bushel of corn and a barrel of oil both traded for about $3. The United States is the world’s greatest agricultural producer, but 60 percent of our oil is imported. Corn yields continue to increase, while oilfield yields continue to decrease. Ethanol technology is still in its infancy while oil technology is mature. Ethanol production enhances our gross domestic product while oil imports diminish it. Domestic ethanol stimulates our economy, oil imports are recessionary. American consumers are finally reacting to high gasoline prices and are beginning to realize that alternatives to oil are necessary. Future ethanol will have greenhouse gas emissions criteria, enabling further differentiation from oil. All ethanol is not created equal. The Energy Independence and Security Act of 2007 will require future ethanol production to define its “carbon footprint” as related to greenhouse gases. The footprint will be determined by the U.S. EPA, using

Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions and Energy Use in Transportation Model and the Food and Agricultural Policy Research Institute model from Iowa State University. Different carbon values will result in different prices, creating opportunities, public support and a cleaner environment. It is going to be a fascinating time ahead where opportunities will far outnumber the pitfalls, but it will take vision, discipline, management, a lot of hard

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work and, of course, a certain amount of risk. Then again, those are the same values that got us to where we are today. To be honest, today’s industry is what many of us dreamed about 20 years ago; it just snuck up on us and is no longer a dream. EP

Larry Johnson operates LLJ Consulting and Business Development. He has been an ethanol industry consultant since 1986, including six years with Delta-T Corp. Reach Johnson at ljethanol @aol.com or (952) 466-3363.

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Alternative Fuels & Vehicles National Conference + Expo

Second Generation Biofuels Development Summit

2008 Energy Conference

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

May 13-16, 2008

Las Vegas Rio All-Suite Hotel Las Vegas, Nevada

Sheraton Inner Harbor Hotel Baltimore, Maryland

Radisson Hotel and Conference Center Plymouth, Minnesota

This 14th annual event focuses on alternative fuels, alternative fuel vehicles, advanced transportation technologies, vehicle emissions and policy. Agenda topics include concurrent breakout sessions that will discuss ethanol, biodiesel, biogas, emissions, local governments' roles in alternative fuel, federal incentives for fleets and fuel infrastructure. The expo will include a technology showcase. There will also be a ride-and-drive event; three preconference sessions; and tours of fleet management, maintenance and operation facilities.

The first half of this event will focus on innovations in biofuels, while the second half will address the commercialization of second-generation biofuels. Topics in the first portion include conventional and cellulosic ethanol. Topics in the second portion will discuss financing biofuels development, strategy, alliances, international development, and emerging feedstocks and process technologies. There will also be a hands-on workshop to discuss the implementations of the Energy Independence & Security Act of 2007.

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

(781) 972-5400 www.biofuels-summit.com

EVENTS

May 15-16, 2008

More than 200 key business decision-makers are expected to attend this annual event hosted by U.S. Energy Services Inc. Current energy issues, future trends and industry concerns that may affect future business will be addressed. Presentations and panel discussions given by industry experts will tackle critical topics and challenges surrounding energy management, including green energy management strategies. (763) 543-4600 www.usenergyservices.com

CALENDAR

The Alcohol School June 2-6, 2008 Mercure Toulouse Atria Compans Caffarelli Toulouse, France This program, presented in English, is designed for lab, plant and management personnel. A series of lectures and laboratory demonstrations will cover the process of ethanol and beverage alcohol production. Enzyme usage, yeast biology, bacterial contamination and control will also be discussed, along with other issues currently affecting both industries. Registration is limited, with preference given to fuel ethanol and distilled beverage producers. (800) 583-6484 www.ethanoltech.com

2nd Annual Station Conversion Clinic

World Biofuels Forum 2008

June 9, 2008

Prague Congress Centre Prague, Czech Republic

Hyatt Regency Chicago, Illinois This event will educate attendees on how to convert retail fuel stations to offer E85, secure the fuel product and profitably market E85. In addition, it will address negotiate a good price for E85, keep construction costs and station down-time under control, comply with regulatory agencies, store and handle E85 to maintain product integrity, and blend E85 to maximize profits. The agenda includes a 10-year supply and demand outlook from National Ethanol Vehicle Coalition Executive Director Phil Lampert and an expert panel that will conduct five brainstorming sessions with audience participation.

J u n e 9 - 11 , 2 0 0 8

This event will address how to overcome complex political challenges and avoid costly mistakes to profit from the biofuels market. It will highlight major biofuels projects across the globe, next-generation biofuels, current factors influencing international trade and the distribution of biofuels, strategies for integrating biofuels into refineries, government policies and investment incentives, and the latest technology innovations. There will also be a pre-event workshop focusing on project finance and investment, and a tour of a local biodiesel production facility currently under construction. +44 (0)20 7202 7511 www.wbfevent.com

(866) 620-5940 www.opisnet.com/E85

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Renewable Energy Finance & Investment Summit

12th Distillers Grains Symposium

May 19-21, 2008

May 21-22, 2008

June 2-4, 2008

FireSky Resort & Spa Scottsdale, Arizona

Westin Crown Center Kansas City, Missouri

Kansas City Marriott Downtown Kansas City, Missouri

This third annual event, themed “Exploring Key Deals & Developments in the Renewable Fuel & Renewable Power Markets,” will discuss state-ofthe-art finance structures, deal mechanics, tax incentives, investment trends, more efficient technologies, regulatory changes and creative financing solutions. Three tracks will address renewable power, biofuels, and carbon and greenhouse gas emissions. A separate workshop will detail renewable energy project finance fundamentals.

This event will provide the latest information on issues for distillers grains marketing and merchandising, animal nutrition, processing technologies, and governmental regulations. Agenda topics include the possible link between distillers grains and E. coli, increased rations, the low starch content of distillers grains and corn silage, quality control, shelf life, transportation challenges, corn fractionation, antibiotic use, and sulfur content. It will cover suggested distillers grains feeding rations for beef and dairy cattle, swine, poultry, and goats.

The theme for this sixth annual event reflects the continued growing importance of corn as a keystone to a carbohydrate-based economy. Topics will include wet milling, dry-grind technologies, enzymes, value-added products from corn, and new uses for distillers dried grains that will be of value to ethanol producers and livestock interests. A full agenda will be available as the event approaches.

(704) 889-1287 www.frallc.com

24th Annual International Fuel Ethanol Workshop & Expo

(636) 733-9004 www.corntechconf.org

(502) 852-1575 www.distillersgrains.org

Biofuels 2010: The Next Generation

EPAC Ethanol Conference Hilton Garden Inn Kalispell, Montana

June 16-19, 2008

June 23-24, 2008

Opryland Hotel & Convention Center Nashville, Tennessee

Hilton Americas Houston, Texas

This conference will follow the record-breaking 2007 event, in which more than 500 exhibitors participated and more than 5,300 people attended. The preliminary agenda includes an Ethanol 101 pre-conference seminar, general sessions, concurrent technical workshops and various networking opportunities. Attendees can also tour Commonwealth Agri-Energy LLC, a 33 MMgy corn-based ethanol facility in Hopkinsville, Ky.

This event will cover the latest innovations, developments and regulations within the global biofuels industry. The agenda highlights emissions, trade considerations, feedstocks such as Miscanthus and sorghum, and trade and distribution. It also includes a panel discussion on sustainability. Concurrent breakout sessions will focus on cellulosic ethanol, commercialization, demand and infrastructure, financing, biofuels in Argentina, distribution, pipelines, technological advancements, and feedstock prices.

(719) 539-0300 www.fuelethanolworkshop.com

Corn Utilization & Technology Conference

July 20-22, 2008

This 18th annual event, hosted by Ethanol Producers and Consumers and themed “Ethanol: Fuel and Food,” will address the issues surrounding the food-versus-fuel debate, E85 fuel performance and new technologies including cellulosic ethanol. (406) 785-3722 www.ethanolmt.org

(416) 214-3400 www.biofuels2010.com

ETHANOL PRODUCER MAGAZINE MAY 2008

155

EPM MARKETPLACE Ag Products & Services

Water Treatment

Hybrid Corn

Fremont Industries Inc. 952-445-4121

Pioneer Hi-Bred International, Inc. 800-247-6803 www.pioneer.com

Associations/Organizations Trade Ethanol Promotion & Information Council (EPIC) 402-932-0567 www.drivingethanol.org

www.fremontind.com

www.gtsieve.com

www.lactrol.com

North American Bioproducts Corporation 866-342-7026 www.na-bio.com

Ferm Solutions 859-402-8707

www.ferm-solutions.com

SAFELY DISSOLVES THE TOUGHEST DEPOSIITS OF ...lime, magnesium, calcium, dirt, corrosion & rust.

Dryer Systems Hydro-Klean, Inc. 515-283-0500

Inland Waters 313-841-5800

www.hydro-klean.com

Hydro-Klean, Inc. 515-283-0500 www.lactrol.com

CIP www.univarusa.com

www.hydro-klean.com

www.inlandwaters.com

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

Reach your customers Your Solution. Advertise Today.

EPM MARKETPLACE

EPM MARKETPLACE one convenient location, Ethanol Producer Magazine not only contains top editorial content but also a useful

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com Inland Waters 313-841-5800

www.inlandwaters.com

With all contact information placed in www.inlandwaters.com

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

Inland Waters 313-841-5800

www.hydro-klean.com

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P.O. Box 131359 Tyler, TX 75713 www.klsummit.com

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• NSF Registered & Biodegradable • Non-Hazardous • Non-Corrosive • Changes color when spent

800.749.5823 www.inlandwaters.com

Ductwork

Desiccant

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

Fermentis-Division of SI Lesaffre 800-558-7279 www.fermentis.com

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

Univar USA Inc. 402-733-3266

www.hydro-klean.com

Summit Industrial Products 800-749-5823 www.klsummit.com

Yeast

Cleaning

Anti-Microbial

PhibroChem 800-223-0434

Hydro-Klean, Inc. 515-283-0500

North American Bioproducts Corporation 866-342-7026 www.na-bio.com

Chemicals PhibroChem 800-223-0434

Gordon Technologies 570-279-8086

Heat Exchanger

directory in each publication. Whether a first-time advertiser wanting to raise awareness of your business or a frequent display advertiser looking for

www.inlandwaters.com

Filter Media

added exposure, EPM Marketplace is the perfect solution.

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com 156

ETHANOL PRODUCER MAGAZINE MAY 2008

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

Tank Cleaning Equipment www.hydro-klean.com

Spraying Systems Co. 630-665-5000

Plant Construction www.spray.com

JIC

JOULÉ Industrial Contractors

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

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com Inland Waters 313-841-5800

www.inlandwaters.com

Construction Fabrication VAL-FAB Inc. 877-482-5322

www.valfab.com

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com Macomber Welding & Fabricating, Inc. 616-698-0819 macwelding@triton.net W. Soule & Company 1-877-976-8531

www.wsoule.com

Grain Storage Coverall Building Systems 800-268-3768

www.inlandwaters.com

Plate-Frame Hydro-Klean, Inc. 515-283-0500

Mavo Systems 763-788-7713

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

Agri-Systems 406-245-6231 www.mavo.com

wanzek.com

www.agraind.com

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com W. Soule & Company 1-877-976-8531

Reach your customers www.wsoule.com Your Solution. Advertise Today.

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EPM MARKETPLACE

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one convenient location, Ethanol Producer Magazine not only contains

Smoke Stack Hydro-Klean, Inc. 515-283-0500

www.agrisystems.net

Wanzek Construction,Inc. 701-282-6171 Agra Industries, Inc. 715-536-9584

Railcars

Inland Waters 313-841-5800

Toll Free: (800) 445-6853 email-bbosher@jouleinc.com

www.coverall.net

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We provide: • Experienced Supervision • Multi-craft Staff • Logistical Support For: • Plant Outages • Plant Construction and Expansion • Relocations • Capital Projects • On and off site pipe Fabrication To: • Ethanol and Alternative Fuel Plants • Pharmaceutical Manufacturers • Food Plants • Building Material Facilities

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Insulation Inland Waters 313-841-5800

OVER 40 YEARS OF PROVIDING QUALITY COST EFFECTIVE SOLUTIONS TO THE INDUSTRIAL INDUSTRY.

top editorial content but also a useful directory in each publication. Whether a www.hydro-klean.com

Your Ad HERE

first-time advertiser wanting to raise

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ETHANOL PRODUCER MAGAZINE MAY 2008

157

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

Inland Waters 313-841-5800

www.inlandwaters.com

Feasibility Studies Harris Group Inc. 206-494-9422

www.harrisgroup.com

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

Personnel Recruiting

•

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Building what’s next for over 50 years

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

Plant Optimization Harris Group Inc. 206-494-9422

www.harrisgroup.com

Build Your Career at Mortenson Contact Us Today! 1-877-MORTENSON (toll free) energyjobs@mortenson.com www.mortenson.com

HIRING ALL POSITIONS NATIONWIDE

Reimer Welding Inc. 218-773-0886 CYC Construction 402-333-1652

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

www.reimerwelding.com

Tanks www.cycconstruction.com

Railroad Tracks R & R Contracting, Inc. 800-872-5975 Railworks 913-888-4091

DCI, Inc. 320-252-8200 WINBCO Tank Company 641-683-1855

Project Development www.dciinc.com

www.winbco.com

www.rrcontracting.net Eagle Tanks, Inc. 888-678-0698

www.eagletanks.com

www.railworks.com

Consulting

EPM MARKETPLACE With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains top editorial content but also a useful

Ethanol Productions 813-968-6867

www.harrisgroup.com

jim.plautz@verizon.net

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

Business Plans ICM, Inc. 316-796-0900

Harris Group Inc. 206-494-9422

www.icminc.com

Environmental

Your Ad HERE Your Solution. Advertise Today.

Air Resource Specialists,Inc. 970-484-7941 www.air-resource.com

EPM MARKETPLACE

directory in each publication. Whether a first-time advertiser wanting to raise

ICM, Inc. 316-796-0900

www.icminc.com

awareness of your business or a frequent display advertiser looking for added exposure, EPM Marketplace is the perfect solution.

158

Seneca Companies 800-369-5500 www.senecacompanies.com TKDA 651-292-4602

Reach your customers Your Solution. Advertise Today.

www.tkda.com

EPM MARKETPLACE ETHANOL PRODUCER MAGAZINE MAY 2008

EPM MARKETPLACE Iowa Biofuels Training International 641-969-4167 www.biofuelstraining.org

Equipment & Services Air Pollution/Odor Control

Employment

Ceco Abatement Systems, Inc. 630-493-0624 www.cecoenviro.com/Abatement

Recruiting SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago Hobbs & Towne 610-783-4600x108

ICM, Inc. 316-796-0900

www.icminc.com

www.hobbstowne.com

Engineering Civil Antioch International, Inc. 402-289-2217 www.antioch-intl.com TKDA 651-292-4602

Quality Assurance Eurofins Scientific, Inc. 551-580-9140

www.tkda.com

Control Systems www.eurofinsus.com

Control System Integrators, Inc. 319-377-6538 x19 www.csystemi.com Bachelor Controls 785-284-3482

www.bachelorcontrols.com

Design/Build Agri-Systems 406-245-6231

Optimize the Value of Your Co-Products

Grading, sampling, mycotoxins, proximates, residues, GMOs. QA / QC Consulting: HACCP, GMPs, SOPs, NIR calibration Co-products: Quality assurance testing; Lot certiﬁcation; Export assistance 504-297-4330 ethanol@euroﬁnsus.com

Regulatory Air Resource Specialists.Inc. 970-484-7941 www.air-resource.com

Risk Management National Fuel Marketing 303-996-6781 www.NationalFuelMarketing.com

Education Iowa Lakes Community College 800-242-5108 www.iowalakes.edu Iowa BioDevelopment 641-969-4167 www.iabiodevelopment.com

ETHANOL PRODUCER MAGAZINE MAY 2008

www.agrisystems.net

Delta-T Corporation 757-941-0188

www.deltatcorp.com

ICM, Inc. 316-796-0900

www.icminc.com

Wanzek Construction, Inc. 701-282-6171

wanzek.com

Agra Industries, Inc. 715-536-9584

www.agraind.com

GS CleanTech Corp. 678-566-3588

www.gs-cleantech.com

Ethanol Productions 813-968-6867

jim.plautz@verizon.net

Analytical Instruments Anton Paar +1-804-550-1051

www.anton-paar.com

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

Boiler Systems

Process Design Agri-Systems 406-245-6231

www.agrisystems.net

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

Vogelbusch USA, Inc. 713-461-7374

www.vogelbusch.com

Rentech Boiler Systems, Inc. 325-794-5701 www.rentechboilers.com

ChemSim 781-248-5057

www.chemsim.com

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

Catwalks Lean Technologies LLC 701-352-9620 www.leantechnologiesllc.com

159

EPM MARKETPLACE Centrifuge Repair

Distillation Equipment

Nosnhoj Services Inc. 317-887-6436

www.nosnhojinc.com

Centrifuges

Gordon Technologies 570-279-8086

www.gtsieve.com

Dryers—Flash

Westfalia Separator,Inc. 201-784-4322

www.wsus.com

Barr-Rosin,Inc. 630-659-3980

Combustion Equipment

Dryers—Fluid Bed

Eclipse.Inc. 815-637-7213

Aeroglide Corporation 919-851-2000

www.eclipsenet.com

John Zink Company LLC 800-421-9242

www.johnzink.com

www.barr-rosin.com

www.aeroglide.com

FlaktWoods 716-845-0900

www.flaktwoods.com

dbc SMARTsoftware, Inc. 770-427-7633 www.dbcsmartsoftware.com Integrated Business Solutions 888-697-3060 www.ibsolutions-llc.com John Deere Agri Services 770-238-5100 www.johndeereagriservices.com Encore Business Solutions 204-989-4330 www.encorebusiness.com

www.barr-rosin.com

ICM, Inc. 316-796-0900

www.barr-rosin.com

www.icminc.com

Ronning Engineering Company, Inc. 913-239-8118 www.ronningengineering.com

www.niroinc.com

HRS Process Technology, Inc. 623-915-4328 www.hrs-americas.com

WINBCO Tank Company 641-683-1855

www.winbco.com

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

Filters Eaton Filtration 800-656-3344 ext 581 BruceClaw@eaton.com

Control Systems FeedForward, Inc. 770-426-4422

Evaporators

Fermentors

Dryers—Rotary Drum Barr-Rosin,Inc. 630-659-3980

www.lantecp.com

GEA NIRO Inc 410-997-8700

Dryers—Ring Barr-Rosin,Inc 630-659-3980

Computer Software

Emissions Testing & Reduction Lantec Products, Inc. 617-265-2171

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

Compressors

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

Larox 301-543-1200

www.larox.com/cpi

www.feedforward.com

Filtration Equipment

Control Systems—Distributed

Fluid Engineering 814-453-5014

www.fluideng.com

BWF America 800-733-2043

www.bwf-america.com

W.S. Tyler 1-800-321-6188

www.wstyler.com

Fractionation—Corn Buhler Inc. 763-847-9900

Control System Integrators, Inc. 319-377-6538 x19 www.csystemi.com Aeroglide Corporation 919-851-2000

Conveyors—Enclosed Grisley Components, Inc. 303-756-6474

www.sturtevantinc.com

www.aeroglide.com

Gas Detectors www.grisley.com

Conveyors—Pneumatic Blower Engineering 800-388-1339 www.blowerengineering.com 160

Sturtevant Inc. 781-829-6501

www.buhlergroup.com/us

FEECO International, Inc. 920-468-1000

www.feeco.com

UE Systems, Inc. 914-592-1220

www.uesystems.com

Emission Monitoring Systems MonitorTech Corp. 866-682-6771 www.monitortechgrp.com

ETHANOL PRODUCER MAGAZINE MAY 2008

EPM MARKETPLACE Gaskets

Laboratory—Supplies

Allegheny Coupling Company 814-723-8150 www.alleghenycoupling.com

Midland Scientific, Inc. 800-642-5263

Grain Handling & Storage

Laboratory—Testing Services

Molecular Sieve Desiccant

Midwest Laboratories 402-334-7770

Gordon Technologies 570-279-8086

Sukup Manufacturing Co. 641-892-4222

www.sukup.com

Millwright www.midlandsci.com

www.midwestlabs.com

Eurofins GeneScan, Inc. 504-297-4330 www.gmotesting.com

Heat Exchangers Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

Trilogy Analytical Laboratory 636-239-1521 www.trilogylab.com SGS North America, Inc. 281-478-8234 www.sgs.com/alternativefuels

Agri-Systems 406-245-6231

www.agrisystems.net

www.gtsieve.com

Molecular Sieves Vaperma, Inc. 418-839-6989 Gordon Technologies 570-279-8086

www.vaperma.com

www.gtsieve.com

Motors

Loading Equipment SafeRack 866-761-7225

www.saferack.com

Trico TCWind, Incorporated 320-693-6200 www.tricotcwind.com

Packing & Tray Installation

Lubrication Systems

Gordon Technologies 570-279-8086

www.gtsieve.com

Pipe

Summit Industrial Products has lubricants and greases for conveyors, dryers, cooling tower pumps, gearboxes, blowers, compressors, motor bearings and CO2 recovery. Call today for a distributor in your area.

800.749.5823

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

www.klsummit.com

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

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

Joule’ Industrial Contractors bbosher@jouleinc.com www.jouleinc.com

Instrumentation

Maintenance Software

Shimadzu Scientific Instruments 800-477-1227 www.ssi.shimadzu.com

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

Instrument Associates 708-597-9880 www.instrumentassociates.com

Mills—Hammer

www.rjsales.com

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

Pipe—Flanges

Maintenance Services

www.rjsales.com

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

P.O. Box 131359 Tyler, TX 75713

Incinerators

Process Sensors Corp. 508-473-9901 www.processsensors.com

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

www.rjsales.com

Pressure Vessels WINBCO Tank Company 641-683-1855

www.winbco.com

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

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

Jet Cookers

CBT Wear Parts, Inc. 888-228-3625

ProSonix Corporation 800-849-1130, x. 801

Prater-Sterling 630-679-3254

Harris Group Inc. 206-494-9422

www.harrisgroup.com

Your Ad HERE www.cbtwearparts.com Your Solution. Advertise Today.

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ETHANOL PRODUCER MAGAZINE MAY 2008

www.prater-sterling.com

EPM MARKETPLACE 161

EPM MARKETPLACE Outokumpu Stainless 847-517-4050

Pumps

www.outokumpu.com

Storageâ&#x20AC;&#x201D;DDGS Laidig Systems, Inc. 574-256-0204

www.laidig.com

Structural Fabrication Cherokee Steel Fabricators, Inc. 903-759-3844 www.cherokeesteelfabricators.com

Tanks WINBCO Tank Company 641-683-1855

www.winbco.com

Agra Industries, Inc. 715-536-9584

www.agraind.com

Federal Equipment Company 800-652-2466 www.fedequip.com Brown-Minneapolis Tank 281-252-9809

www.bmt-tank.com

Paragon Trailer Sales 800-471-8769 www.paragontrailer.com Greenberry Industrial 541-757-8458 www.greenberryinc.com Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

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

QA Test Products Phenomenex 310-212-0555x3328

Thermal Energy

Lantec Products, Inc. 617-265-2171

www.lantecp.com

Safety www.phenomenex.com

SimplexGrinnell 800-746-7539

www.simplexgrinnell.com

Sensors

EPM MARKETPLACE

Electro Sensors 800-328-6170

EPM MARKETPLACE www.electro-sensors.com

Separation Equipment

one convenient location, Ethanol

Fluid Engineering 814-453-5014

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

EPM MARKETPLACE www.fluideng.com

With all contact information placed in

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

one convenient location, Ethanol

Separators