November 2009 Ethanol Producer Magazine by BBI International

INSIDE: ADVANCED BIOFUEL PRODUCTION TECHNOLOGIES NOVEMBER 2009

Cellulosic Shortfall Why 2010 Volume Mandates Won’t be Met and Why Producers Aren’t Worried

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November 2009

ETHANOL PRODUCER MAGAZINE

November 2009

contents

vol. 15 no. 11

features 44 PRODUCTION Coming Up Short The 2010 volume mandate for cellulosic biofuel was set by Congress at 100 million gallons. Producers know they won’t produce enough to meet the goal, but it’s up to the U.S. EPA to determine what will happen as a result. –By Kris Bevill 52 ADVANCEMENT Beyond Cellulosic While cellulosic ethanol continues to be the focus of many producers, some are choosing to develop other technologies to meet future advanced biofuel mandates. –By Erin Voegele 58 FINANCE Public-Private Partnerships In an effort to deploy new technologies and create local jobs, some public and private entities are teaming up to establish mutually beneficial relationships. –By Erin Voegele

72 OIL Big Oil’s Big Entrance After years of non-participation, oil companies have renewed interest in ethanol production from plow to pump. –By Craig A. Johnson

ETHANOL PRODUCER MAGAZINE

November 2009

Do you want to be a frontrunner in the cellulosic bioethanol industry?

Then it’s time we start working together.

Get the odds in your favor Cellulosic bioethanol is key to optimizing the world’s future energy mix. Novozymes is leading the way in marketing cellulosic ethanol a commercial reality by 2010. And Novozymes’ Cellic® products are just what you need to be a leader in the race to cellulosic bioethanol. So let’s start creating the future today. Together we can make cellulosic bioethanol a winning solution. Find out more at www.bioenergy.novozymes.com

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.

WHEEL OF FORTUNE

contents contributions

departments

78 WOODY BIOMASS Filling a Need: Forest Plantations for Bioenergy in the South The growing number of renewable energy projects in the Southern U.S. utilizing woody biomass will require the development of short-rotation bioenergy plantations. –By Ronalds Gonzalez, Jeff Wright, and Daniel Saloni

9 Advertiser Index 12 The Way I See It Change is in the Air By Mike Bryan 16 Business & People 18 Commodities 20 View From the Hill Giving Thanks By Bob Dinneen 21 RFA Update

82 FEEDSTOCK Algae: Cleaning Up Biofuels Algae is in the spotlight as a useful carbon sink. What role can algae play in cleaning up the industry, and the world? –By Sam A. Rushing

24 Industry News 36 Drive Time has Come to Label Fuel with Country of Origin By Tom Buis 38 Taking Stalk Wood Supply Offers Unique Challenges By Eric Kingsley

84 COPRODUCTS Organic Acids Yield Feed Advantages Organic acids and acidifiers are powerful tools that can provide one more barrier to disease transmission in large feeding installations.

22 BIObytes

–By Renata Urbaityte

40 Finance Performance Management System a Valuable Tool By Micki Debbrecht 42 eBIO Insider Renewable Energy Goes International By Robert Vierhout 86 Events Calendar 88 Marketplace

Ethanol Producer Magazine: (USPS No. 023-974) November 2009, Vol. 15, Issue 11. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203. BPA Worldwide Membership Applied for October 2006 ETHANOL PRODUCER MAGAZINE

November 2009

AdIndex

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27 Brown, Winick, Graves, Gross, Baskerville & Schoenebaum, P.L.C. 26 Buckman Laboratories Inc. 10 Burns & McDonnell 83 Cereal Process Technologies 32 Check-All Valve Mfg. Co. 54 Christianson & Associates, PLLP 77 Crown Iron Works Co. Inc. 94 ethanol-jobs.com 64 Ethanol Producer Magazine 57 EISENMANN Corp. 76 ETS Laboratories 28 Fagen Inc.

55 Nalco Co. 60 Natwick Associates Appraisal Services 34 Nexen Marketing USA Inc. 6 Novozymes 37 PhibroChem 96 POET, LLC 71 R&R Contracting Inc. 41 Renewable Fuels Association 31 Resonant BioSciences 61 & 79 Roskamp Champion/CPM 48 SafeRack 68 Salco Products Inc. 47 Victory Energy Operations, LLC.

29 FCStone, LLC 3 Fermentis

69 Vogelbusch USA Inc. 62 Wabash Power Equipment Co.

33 Flottweg Separation Technology

35 Watson-Marlow Pumps Group

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November 2009

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ETHANOL PRODUCER MAGAZINE

November 2009

The Way I See It Change is in the Air There is no better time of year for change than the fall. Change, ironically, has been a reliable constant in the ethanol industry, as producers continue to improve their systems and rise to meet new challenges. This season looks to provide us with new opportunities to prove our adaptability. The U.S. EPA is scheduled to make its final decision on how to enforce the renewable fuel standard, as established in the Energy Independence and Security Act of 2007 (RFS2), by Dec. 1. I doubt the agency will issue a ruling by December, but I don’t doubt that producers will once again meet and beat any challenges put forth by the ruling. And if more time is needed to fully consider the detrimental impact indirect land use change considerations could have on biofuels, I won’t mind waiting. As Editor Kris Bevill reports on page 30, industry members filed comments with the EPA right up until the final hours of the commentary period stressing the importance of this issue as well as numerous others addressed in the RFS2 proposal. In addition to the RFS2 rule, the EPA is also scheduled to determine by the end of this year whether a nationwide increase to E15 is allowable. While I’m always willing to confront change head-on, this kind of change is easy to embrace. The approval by the EPA to allow E15 will open many doors for struggling producers as well as for those anxious to get into the cellulosic game. The addition of cellulosic biofuel into next year’s RFS is sure to bring about big changes beginning this fall and leading into next year. As Editor Kris Bevill reports in her article, “Coming Up Short,” the cellulosic community has been preparing for this for a long time. While many hurdles remain before cellulosic production is part of our mainstream fuel portfolio, make no mistake—next year will mark the beginning of the mass use of a variety of renewable transportation fuels in the U.S. Cellulosic producers know they cannot produce all of the biofuel called for in EISA’s RFS for 2010, but that doesn’t matter. Their place has been marked and will be held until they can meet it. As discussed in Bevill’s

article, very important changes will need to be made before 100 million gallons of cellulosic biofuel can be produced in a year, but there is no time like now to get started. Finally, this issue includes our annual fall plant map. I was happy to see many of the plants that were shut down earlier this year have resumed operations, providing further proof that producers can adapt to changes and bounce back if given even the slightest opportunity to do so. Many of the problems experienced by the industry this year have not gone away; they’ve simply been made less significant by our adaptations. Naysayers argued that corn ethanol production would take away from the available food supply, so what did corn producers do? They harvested a bumper crop. Adversaries claimed that the ethanol production process was environmentally detrimental and unclean. In response, producers have taken measures to install combined heat and power systems and cutting-edge technologies to reduce the environmental impact of production. Will continued challenges and changes need to be met this fall and next year? Certainly. But our industry will forge ahead and set the standard for others to follow. That’s the way I see it.

Mike Bryan Publisher & CEO mbryan@bbiinternational.com

ETHANOL PRODUCER MAGAZINE

November 2009

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Making The New Ethanol™ takes mechanizing the biomass.

To convert 460,000 tons of cellulosic biomass a year, you’ve got to handle 460,000 tons. Gathering, bundling, storing, trucking, unloading, stacking, and conveying it bale by bale using highly mechanized and computerized equipment, over and over, day in and day out. It’s a big, tough, complex job requiring specialized machinery, synchronized logistics, a reliable infrastructure, and a smart business model. Relax. We’ve done this in Denmark for 14 years. Last year Inbicon’s parent company turned 1.6 million tons of biomass into green energy for generating electricity. Now we’re bringing all that expertise to North America to help jump-start your Inbicon Biomass Refinery. And put you years ahead. We’ve engineered a scale-up of Inbicon conversion technology that will demonstrate commercializa-

tion at 55tph/20Mgpy. Figure 460,000 tons of corn stover or wheat straw. We’ve invited old-ethanol plants to join us in producing The New Ethanol for North American markets. By integrating our operation with your 100Mgpy plant, we expect to self-generate enough green energy to drive our process 100%. And produce enough surplus to drive yours 50–100%, depending on your business model. Get the full story from our North American team. Call Thomas Corle at 717.626.0557 or e-mail info@inbicon.com.

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Business&People Ethanol Industry Briefs

Joe Ayers has accepted the position of plant manager at Brock Grain Systems’ Kansas City, Mo. Ayers has more Ayers than 18 years of manufacturing management experience and will be responsible for the daily operations of the plant, which produces on-farm and commercial grain storage products and accessories. Prior to joining the company, Ayers served as vice of president of operations at Continental Disc Inc. Brock Grain Systems is a part of CTB Inc., a global designer, manufacturer and marketer of systems and solutions for agriculture and grain industries.

New Hampshire-based cellulosic ethanol producer Mascoma Corp. has announced several management reconfigurations. Bruce Jamerson, who previously held the company’s CEO position, will now serve as chairman of Mascoma and its Michigan-based subsidiary, Frontier Renewable Resources LLC. The company said Jamerson’s new role will allow him to focus on the financing and deployment of the commercial-scale cellulosic production facility in Michigan 16

as well as execute other strategic initiatives and partnerships. Jim Flatt, executive vice president of R&D and operations, will serve as the company’s interim president until a new CEO is hired.

The American Coalition for Ethanol elected several new members to its board of directors during the group’s 22nd annual Ethanol Conference & Trade Show Aug. 1113 in Milwaukee, Wisc. Newly elected members include: Rand Hahn, CEO, the Renewable Products Marketing Group; Ron Alverson, chairman, Lake Area Corn Processors; Russ Newman, vice president, Tharaldson Ethanol; and Kirk Schaunaman, representative for the South Dakota Corn Utilization Council. “ACE is proud to continue our unique mission of being the grassroots voice for ethanol. We’re strengthening that position by adding these wellrespected and independent voices to our board of directors,” said Brian Jennings, ACE executive vice president.

Winnebago, Minn.-based Corn Plus LLLP pled guilty in federal court Aug. 19 to violating the Clean Air Act by negligently discharging wastewater from its 49 MMgy production facility into a drain tile located on its property. According to the U.S. EPA, the drain tile emptied into the Rice Lake, which caused pollution in the lake. The violations occurred between 2005 and Aug. 2007. The company cooperated with the federal government during a two-year investigation and agreed to pay a $100,000 fine as well as contribute $50,000 toward a Rice Lake environmental project and further enhance its own environmental compliance plan.

The U.S. DOE has awarded a $750,000 grant to Oregonbased Trillium FiberFuels to commercialize its cellulosic ethanol technology, which utilizes an existing industrial enzyme, rather than genetically engineered microorganisms, to convert xylose from straw and other biomass materials to a fermentable sugar. The sugar can then be used to produce ethanol. The grant was part of the DOE’s Small Business Innovation Research Program and was granted to Trillium following two years of successful work by the company. The grant will be used toward Trillium’s two-year plan to transition its technology from laboratory-scale to pilot-scale.

Alfa Laval Group, a heat transfer, centrifugal separation and fluid-handling product manufacturing company, has acquired South Korea-based heat exchanger manufacturing company LHE Co. Ltd. Alfa Laval markets its products to ethanol producers, as well as to food and beverage manufacturers and chemical companies, and employs approximately 12,000 people worldwide. “I’m very satisfied that we were able to acquire LHE, a well-managed company with strong presence in South Korea and with a large potential in Asia,” said Lars Renström, president and CEO of Alfa Laval. “With the acquisition of LHE, the Alfa Laval Group achieves profitable growth by adding an independent channel to the heat exchanger market.”

Colorado-based advanced biofuel company Gevo Inc. recently named Jack Huttner as executive vice president of commercial and public affairs. In his new position, Huttner will be responsible for external affairs, including trade, media and government relations. Prior to joining Gevo, Huttner served as vice president of commercial and public affairs at Dupont Danisco Cellulosic Ethanol and as vice president of biorefinery businesses development at Ge-

ETHANOL PRODUCER MAGAZINE • November 2009

Sponsored by

nencor, a division of Danisco A/S. Huttner was also instrumental in forming the industrial section of the Biotechnology Industry Organization and was appointed co-chair of the Bioenergy Technology Advisory Committee by the Clinton administration, where he oversaw the federal government’s $300 million bioenergy research and development budget.

Glacial Lakes Energy LLC has sold 2,000 units of its ownership share in Granite Falls Energy LLC, a Minnesotabased ethanol plant, to Fagen Inc. The sale was completed in August. Prior to the sale, Glacial Lakes Energy owned 21 percent of the facility. The company now retains approximately 15 percent of the plant’s ownership. In addition, Glacial Lakes Energy announced in conjunction with Redfield Energy LLC that the two companies have mutually agreed to terminate their management agreement, effective Aug. 21. The five-year management agreement originated when the Redfield Energy ethanol facility was constructed in 2005, and was terminated with less than one year remaining on the agreement.

ber. Robert Flynn, Owen Jones who previously served was recently inductas general manager at ed into the South Poet’s 50 Mmgy LadDakota Cooperadonia, Mo., plant, will tive Hall of Fame. now serve as general Jones, who was manager of Poet Biorerecognized for his fining – Fostoria, a 68 lifelong, heroic conJones Mmgy plant in northtribution to the cowest Ohio. Replacing Flynn at operative form of enterprise, has served on the board of di- Poet Biorefining – Laddonia is rectors of Britton, S.D.-based Steve Murphy, a 21- year vet4 Seasons Cooperative. Jones is eran of the Woodbridge Corwidely known as an active sup- poration. Dave Brooks, forporter of ethanol blended fuel mer general manager of Poet’s and was instrumental in the Fostoria plant will now serve as installation of the nation’s first general manager of Poet Bioreethanol blender pump in 2006. fining – Marion, located in central Ohio.

New Zealand-based LanzaTech NZ Ltd. has announced the successful development of a proprietary fermentation technology which utilizes non-genetically modified microbes to produce ethanol from the carbon monoxide and hydrogen components of industrial waste gas and biomass-based synthesis gas. In August, the company was granted Frost & Sullivan’s Green Technology of the Year Award at the annual Frost & Sullivan Asia Pacific Industrial Technologies Awards in Singapore.

Poet LLC announced hiring three general managers since the beginning of Septem-

ETHANOL PRODUCER MAGAZINE • November 2009

CHS Renewable Fuels Marketing has signed an agreement with NuGen Energy to market its ethanol production. NuGen Energy, which is wholly owned by Central Farmers Cooperative, has the capacity to produce approximately 100 million gallons annually at its Marion, S.D. plant. “CHS offers us good exposure to other markets that we would not be able to access on our own,” said NuGen CEO Doug Anderson. “We have nothing but confidence that CHS can find us the best price. We value their marketing and logistical expertise, as well as their risk management services.”

Inc. Magazine has ranked U.S. Energy Services as one of the nation’s fastest growing companies on its 28th annual Inc. 500 list. The list represents an exclusive, comprehensive look at America’s independent-minded entrepreneurs. The Inc. 500 posted aggregate revenue of $18.4 billion, an increase of more than 34 percent from last year. Energy ranked second in total revenue with $2.5 billion. U.S. Energy Services, of Plymouth, Minn., ranked 341 for rate of growth, and fifth overall for total revenue with $439 million.

AE Biofuels Inc. and Pearson Fuels recently announced they have been awarded a $6.9 million grant from the U.S. DOE through its Clean Cities program. Under the terms of the agreement, AE Biofuels will supply Pearson Fuels with cellulosic ethanol. The award proposes that the two companies build and supply 55 public E85 fueling stations across California over the next 42 months. EP

SHARE YOUR INDUSTRY BRIEFS To be included in Business & People, send information (including photos and logos if available) to: Industry Briefs, Ethanol Producer Magazine, 4650 38th Ave. S. Suite 160, Fargo, ND 58104. You may also fax information to (701) 373-0638, or e-mail it to kbevill@bbiinternational.com. Please include your name and telephone number in all correspondence. 17

COMMODITIES REPORT

Natural Gas Report

Unconventional shale plays enter market Sept. 15—The U.S. DOE’s Energy Information Agency published its June production numbers on Aug. 27, confirming the stagnant natural gas supply situation exhibited during second quarter earnings releases. Production rose 0.5 percent in June, but overall has effectively held constant, despite falling prices. Even more conspicuous is that the rig count has fallen 58 percent since Sept. 2008. And while price pressures, significant capital expenditure reductions in 2009, and the potential for third-quarter shut-ins will likely curtail production several percentage points this fall, improved producer balance sheets and lower production costs should equal continued supply-side price pressure into next year. Producers have tapped the market for more than $20 billion in capital so far this year. This is primarily directing investment and rig additions into the shale areas of Appalachia and northeast Louisiana. The result is a changing economic landscape. Unconventional

By Brad Smith, U.S. Energy Services Inc.

shale plays with break-even rates of roughly $3.50 MMBtu; displacing conventional wells with breakeven rates of roughly $6 MMBtu. Forward price forecasts will be heavily reliant on the rate at which unconventional plays, including shale, tight gas and coalbed methane, displace conventional, vertical wells. However, only 8 percent of current supply originates in the more efficient, shale areas. In 2010, as economic recovery increases demand and an undersupplied market requires increased production, shale infrastructure can only provide a portion of the marginal need. The price of natural gas will need to rise to incentivize production at the higher conventional breakeven rates, while the inevitable move to shale will push prices lower over the long term. EP Brad Smith, price risk manager, can be contacted at bsmith@ usenergyservices.com.

Corn Report By Jason Sagebiel, FCStone

Prices reflect record corn harvest Sept. 18—The corn crop appears to be getting larger as the growing season comes to a close. The prospects for a bountiful yield have grown from previous estimates of 159.5 bushels per acre to a potential new record yield of 161.9 bushels per acre, according to the USDA’s latest estimates. The corn market had been encouraged by ideas of a frost, but without an early frost in the Midwest the crop will be well-preserved. The collapse in corn prices has led to corn remaining in place with the producer unwilling to make sales. This has corresponded with a tighter cash market (tighter basis) approaching harvest. While the USDA increased its corn production estimates, it did not make big changes to the overall corn carry-over. The carry-overto-use ratio remained at 12.6 percent, compared to 14.1 percent last year. The demand portion of the supply and demand table can be disputed with the USDA’s increased feed demand and exports. A higher feed demand while livestock numbers are waning may lead to some debate. One may also dispute export demand predictions, but a weaker U.S. dollar could potentially verify the increase. Ideal fall weather conditions will guide the market to test last fall’s low; December futures are currently at $2.90 and seasonality’s

typically illustrate that trend. (Note the accompanying seasonality chart.) Caveats to consider in 2010 will be the South America soy crop prospects, the U.S. dollar and inflation. EP

ETHANOL PRODUCER MAGAZINE • November 2009

COMMODITIES REPORT DDGS Report By Sean Broderick, CHS Inc.

Prices increase, export demand continues Sept. 22—As harvest approaches, DDGS prices are starting to pick up steam. Some of it is due to seasonal downtime, some of it is the beginning of fall demand, and some of it is due to heavy demand from the export sector, especially for containers. Traditionally, Chicago has been the predominant area to load containers, but there has been a huge influx in railcar demand from the West Coast. Cars are being transloaded into containers at or near the container ports. Buyers had previously been successful in waiting for the market to come down so were caught off guard by the uptick in values and stepped in to buy, to ensure not missing the market. Barge values have been steady, with increases coming primarily as a response to increased barge freight.

The flurry of business in the Gulf of Mexico at the beginning of the summer was followed by an uneventful August and September. A looming issue that will affect DDGS is the potential for enforcement of regulations that require ships hauling distillers grains, in both containers and bulk, to have CO2 fire suppression equipment. Only roughly half of the bulk fleet possesses this type of equipment, so the requirement could greatly diminish available freight and drive up ocean freight prices. The obvious impact on the market is going to be the corn crop— specifically the quality of the crop and the potential for toxins due to conditions and lateness of the crop. EP

Regional Ethanol Prices ($/gallon as of Sept. 18)

REGION

SPOT

RACK

West Coast

1.7545

1.880

Midwest

1.67

1.750

East Coast

1.77

1.820 SOURCE: DTN

Regional Gasoline Prices ($/gallon as of Sept. 18)

REGION

SPOT

RACK

West Coast

1.8298

2.225

Midwest

1.8677

1.89

East Coast

1.8548

2.9143 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

SEPT. 2009

AUG. 2009

SEPT. 2008

Minnesota

140

California*

135

124

188

Chicago

100

120

Buffalo, N.Y.

112

104

147

Central Florida

120

112

SOURCE: CHS Inc.

Corn Futures Prices DATE

Ethanol Report By Rick Kment, DTN Biofuels Analyst

176

*Central Valley

(Dec. corn, $/bushel)

HIGH

LOW

Sept. 18, 2009

3.29 1/2

3.16 3/4

3.18

Aug. 18, 2009

3.25 1/2

3.18

3.22 1/2

Sept. 18, 2008

5.60

5.24

5.27 1/4 SOURCE: FCStone

Driving demand slips as summer ends Sept. 18—As schools start and summer travel ends, overall demand for gasoline and ethanol has slipped. This year has been slightly different in that overall demand for gasoline has held on slightly longer than in previous years. General weekly demand for gasoline actually grew throughout August, rather than follow the traditional downward slide. However, general overall ethanol demand has been stunted throughout much of the summer due to its connection with gasoline usage. As summer demand ends, renewed bullish expectations in the economy have returned, giving traders incentive to return to the energy markets. This is similar to the levels of interest in 2008, but on a much smaller scale. Improved economic conditions have triggered more buy-

ing activity in energy markets and it is assumed that consumers will return to their old habits once they have money to spend. With energy consumption being a recurring habit over the past several decades, this could draw additional investment funds into the energy market. Gasoline prices may continue to increase significantly over the coming weeks, but ethanol markets might not follow. Over the past several months, corn prices have had a great impact on the price of ethanol, giving the market more of a “cost plus” feel than a true companion market to gasoline. Concerns of an early frost continue to hold the attention of ethanol traders. If the frost holds off, corn production will likely be abundant, indicating lower ethanol prices. EP

ETHANOL PRODUCER MAGAZINE • November 2009

Cash Sorghum Prices ($/bushel) SEPT. 17, 2009 AUG. 25, 2009 SEPT. 19, 2008 Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

2.71 2.69 2.52 3.07 2.59 3.64

2.64 2.85 2.43 3.02 2.57 3.62

4.47 4.42 4.54 4.58 4.57 5.44 SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

SEPT. 2009

AUG. 2009

SEPT. 2008

NYMEX

2.843

3.379

8.394

N. Ventura

2.60

3.35

7.32

Calif. Border

2.69

3.39

7.14

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production Output June 2009

694,000

May 2009

669,000

June 2008

585,000

(barrels/day)

SOURCE: U.S. Energy Information Administration

VIEW FROM THE HILL

Giving Thanks It seems as though in the ethanol industry has been spending too much time moving from crisis to crisis lately, with little time to stop and appreciate just how far we have come. Sure, we have faced our fair share of unfair criticism and scurrilous attack from those seeking to maintain the status quo or searching for an ideal that does not exist. We have seen it in the media, where our opponents have spent vast resources to demonize our industry. We have seen it in Congress, where oil patch members and environmental zealots have sought to limit the expansion of ethanol. And, we have seen it from the administration in its execution of the renewable fuel standard. Focusing solely on these challenges distracts us from celebrating our accomplishments. Our industry will produce a record volume of ethanol this year. As a result, more distillers grains will be fed to livestock, fewer greenhouse gases will be emitted from our tailpipes, and more of our energy dollars will be invested in America as opposed to building indoor ski slopes in the deserts of Arabia. This growing abundance of renewable fuel and feed means more Americans will be at work in rural areas all across the country. The continued growth of the industry also means that the impressive increases in the productivity of American farmers will find new markets and a fair market price. In addition to increases in production, ethanol producers are improving their efficiencies. Whether it is better use of water resources, the creation of new co-products, or the development of new energy technologies to displace fossil fuels, a wave of innovation is sweeping over today’s industry that is far too often underappreciated.

Dinneen

Next-generation technologies are providing even more optimism. Switchgrass, wood chips, corn cobs and a host of other products are joining grains as a source of domestic renewable fuel. Cellulosic ethanol facilities are being planned throughout the country and are poised to take their research from lab bench to commercial scale. All of these exciting advancements will need a home. Our industry has worked hard to build the market for ethanol. The push for higher level blends will ultimately be successful, we believe, but the industry has not waited for this decision. We have worked to expand E85 infrastructure. We have launched new initiatives, such as the Blend Your Own program, to expand blender pump infrastructure. And, we have had some fun along the way. We have taken our message about the future of this industry to new audiences. We are working with our colleagues across the globe through the Global Renewable Fuels Alliance to educate world leaders on the value of renewable fuels to every country. We took our message straight to small engine owners at the annual Sturgis, S.D., motorcycle rally. I will be the first to admit that the challenges we face as an industry are many. But it is equally important we take stock of the accomplishments we have achieved and feel pride in the strides we have made. America’s ethanol producers are leading this country toward a new, renewable energy future. All of the buzz about new, revolutionary technologies would not have been possible without the success and continued innovation of the ethanol industry we have today. On the whole, our cup runneth over, and for that we can all be thankful.

Bob Dinneen President and CEO Renewable Fuels Association

ETHANOL PRODUCER MAGAZINE • November 2009

RFA UPDATE

w w w. e t h a n o l R FA . o r g

Educating the next generation of biofuel visionaries

Summer photo contest winners selected The RFA’s Flex-Fuel Challenge Summer Photo Contest, designed to engage consumers on the use of ethanol by asking them to share their favorite summer picture, received more than 1,100 submissions in June and July. The Grand Prize was awarded to Rich Johnson of Omaha, Neb. His photo, “Smelling the Wildflowers,” was judged on creativity as well as quality. For his effort, Johnson received a $1,000 fueling card. Heather Litton of Westerville, Ohio, received the Most Voted award for her photo submission. She was awarded $100 in fuel. “Educating consumers is all about engaging them where they live and in ways that motivate them to act,” said Robert White, RFA director of market development. “Based on this contest alone, tens of thousands of Americans were exposed to ethanol-related information, many for the first time.” This year’s summer photo contest is the second in a series of similar promotional events by the RFA. The first involved a challenge to college students to explain what renewable meant to them, either by video or picture. Submissions are currently being accepted for the Favorite Photo from Sturgis contest.

ETHANOL PRODUCER MAGAZINE • November 2009

The RFA and the Renewable Fuels Foundation partnered with teachers and the National FFA Organization to provide tens of thousands of high school students information about the opportunities available to them in the field of renewable fuels. In addition, the RFF is offering scholarships for students to attend the February National Ethanol Conference in Orlando, Fla., free of charge. “America’s energy future rests squarely in its high school classrooms today,” said Mike Jerke, chairman of the RFF and general manager of Quad County Corn Processors in Galva, Iowa. “It is these future scientists, engineers and dreamers that will supply both the manpower as well as the brain power necessary to break our addiction to fossil fuels. We are proud to be partnering with the National FFA to make these students aware of the vast opportunities offered by a robust renewable fuels industry.” The curriculum was designed to provide FFA members—many who already have an understanding of agriculture and other related industries—with details about the nature of the renewable fuels industry. The curriculum focuses on the ethanol production process, the benefits of ethanol production, the interplay between renewable fuels and agriculture, and a wide range of other issues. The lessons are available through the Team Ag Ed Learning Center, a website designed to provide agriculture teachers with new and exciting instructional materials, tools and resources. The RFF is offering 10 scholarships to cover the cost of the registration fee for the National Ethanol Conference. Students will be required to submit an essay detailing how attending the NEC will benefit their academic goals, outline their experience with renewable energy industries, supply a copy of school transcripts, and have a grade point average of 3.0 or better. The offer is only open to U.S.-based students and non-commercial individuals. The application deadline for students is Nov. 30. Students will be responsible for costs incurred traveling to/from and lodging at the NEC. More information is available by emailing necscholarship@renewablefuelsfoundation.org.

BIObytes Ethanol News Briefs

NC researchers use switchboard approach to study lignin

Seventeen European nations will participate in a project to develop enzymes for cellulosic ethanol production.

European collaboration to focus on enzyme development VTT Technical Research Centre of Finland, northern Europe’s largest multi-technological applied research organization, is spearheading an €8.2 million ($12 million), four-year project to develop enzymes that can be used to cut lignocelluloses from agricultural and forestry waste feedstocks into sugar compounds suitable for ethanol production. The novel high-performance enzymes and microorganisms for conversion of lignocellulosic biomass to bioethanol (NEMO) project will also focus on tailoring the

metabolism of microbes to be capable of producing large volumes of ethanol from such biomass sugars economically and efficiently. Eighteen participants from 17 European nations will participate in the project, including Sweden-based Sekab E-Technology and Switzerland-based Syngenta Crop Protection AG. The EU has provided €5.9 million for the project, which, if successful, will benefit the EU’s goal of replacing 5.75 percent of traffic fuel with biofuels by 2010.

Brazilian organizations unite to fight climate change Fourteen Brazilian organizations representing the agribusiness, planted forests and bioenergy sectors recently announced the creation of the Brazilian Climate Alliance. The group’s goal is to contribute solid proposals for the negotiations related to the United Nations Framework Convention on Climate Change. The group 22

stresses that Brazil, with more than 40 percent of its makeup originating from renewable sources, should play a leading role in global climate discussions. The Alliance’s position paper highlights the global nature of the challenges linked to climate change as a key factor for organizations to unite behind a single effort.

The National each of the tree’s Science Founda33 pathway genes, tion has granted a one at a time. After $3.72 million grant determining each to North Carolina gene’s role in proState University for ducing lignin, the a four-year project team will then turn aimed at understandthe information Vincent Chiang ing the role of lignin co-director, forest into a mathematiin trees. According biotechnology group cal model to creto the university, North Carolina State ate equations that the study will be the University determine how to most comprehensive create specific types analysis of lignin ever under- and levels of lignin for partictaken. A team of 38 research- ular uses. The study’s principal ers began work on the project investigator, Vincent Chiang, Sept. 15 and will conduct ex- said this type of systems apperiments on a group of more proach could be used for any than 10,000 black cottonwood biological process in any plant trees. and could guide strategies for In order to understand the improved plant productivlignin biosynthesis pathway, ity for materials, energy and researchers will first eliminate food.

Indianapolis Colts promote biofuels The Indiana Corn Marketing Council, the Indiana Soybean Alliance and the Indianapolis Colts have teamed up to promote biofuels. The new partnership, known as Hoosier Horsepower, aims to educate Indiana citizens on the benefits of biofuels. Colts tight end Dallas Clark will serve as the program’s spokesman. The Hoosier Horsepower program will include educational components designed for elementary, middle school and high school students. Students participating in the program will have the opportunity

to win prizes, including scholarships and a classroom visit from the Colt’s mascot, Blue. As part of the program, for each catch Clark makes during the season, the Colts will donate $100 on behalf of Indiana corn and soybean farmers to the program’s scholarship fund. More information on the program is available at www.colts. com/HoosierHorsepower.

ETHANOL PRODUCER MAGAZINE • November 2009

Alternative Fuel Trade Alliance receives DOE grant for Clean Cities will be used to train high-level public spokespeople; increase awareness of sustainability as it pertains to the stated technologies; increase the number of states that enforce fuel quality standards; train stakeholders on fire safety issues; provide an alternative fuels forum for college students, and increase the overall availability of domestic alternative fuels.

PHOTO: MICROBIOGEN

The Alternative Fuel Trade Alliance, a group composed of the Renewable Fuels Association, the National Biodiesel Foundation, the Propane Education & Research Council, the Clean Vehicle Foundation and ASG Renaissance, received a $1.6 million U.S. DOE grant to support educational awareness aimed at Clean Cities coordinators and related stakeholders. Specifically, grant funds

Employees in Microbiogen’s laboratory work to develop the company’s proprietary non-genetically modified yeast.

Microbiogen develops yeast to utilize C5, C6 sugars

The Mississippi Delta region could take a lead role in sorghum-to-ethanol production.

Memphis Bioworks concludes sweet sorghum study The Memphis Bioworks Foundation has completed a study titled “The Potential of Sweet Sorghum in the Delta Region.” The report serves as a macrocosmic analysis of the potential for sorghum as a biofuel feedstock in areas susceptible to drought, or requiring low input. Conducted by the Battelle Technology Partnership Practice, the study in-

cluded participation by companies in Arkansas, Kentucky, Mississippi, Missouri and Tennessee. The study concluded the Mississippi Delta Region, including Memphis, can secure a key leadership role in the emerging multi-billion global bioeconomy by leveraging its assets and attracting technology partners from outside the region.

ETHANOL PRODUCER MAGAZINE • November 2009

Microbiogen, an Australia-based yeast development company, was recently awarded a $2.5 million grant under the Australian government’s Second Generation Biofuels Research and Development Program. The funding will be used to help the company further develop its new non-genetically modified yeast, which is cable of utilizing both C5 and C6 sugars. “Microbiogen’s yeast is an im-

proved variant of yeast that grows efficiently on xylose, ferments glucose and tolerates harsh industrial conditions,” Microbiogen CEO Geoff Ball said. To date, the yeast strain has been tested on a variety of cellulose-rich biomass feedstocks, including corn stover, sugarcane bagasse, pine waste and newspaper. The company is in negotiations with potential collaborators to complete testing on an industrial-scale.

Researchers study infested pines, poplars Genome British Columbia is funding two research projects aimed at increasing the production of biofuels from British Columbia’s biomass by utilizing lodgepole pines killed by pine beetle infestation. Approximately 36 million cumulative acres of trees have been affected by the beetles. The first project, focused on optimizing the trees for ethanol production, is be-

ing co-funded by Novozymes A/S and the Canadian Natural Sciences and Engineering Research Council. The second project will focus on identifying genetic characteristics of wild poplars. The U.S. DOE Bioenergy Sciences Center, USDA Forest Products Laboratory, and Sweden-based Sveriges Lantbruksuniversitet Energypoplar will co-fund the project.

According to EPM’s fall plant map, total U.S. ethanol production capacity is nearly 12 billion gallons.

Plants return to production after idle summer EPM’s biannual fuel ethanol plant map for fall 2009 demonstrates improving conditions for ethanol producers nationwide. Imperative to the ethanol industry’s overall well-being, more plants are online and producing than earlier this year. The spring map included 36 U.S. plants that were not producing, accounting for 2.17 billion gallons of annual production capacity. As the markets have begun to correct and commodity prices came back in line with historical averages, the number of U.S. plants not producing ethanol has dropped to 24, representing 1.45 billion gallons of annual production capacity. As of Sept. 16, total U.S. ethanol production capacity was 11.56 billion gallons from 183 producing ethanol plants. An additional 1.1 billion gallons of capacity is represented by 10 plants currently under construction. At that time, only 169 plants were reported to be producing, with a total capacity of 10.4 billion gallons. In Canada, the numbers are much more consistent. Between the spring and fall plant maps, one production facility came on line, bringing Canada’s total production capacity 24

to 1.4 billion liters per year (approximately 370 MMgy). The Canadian industry, while still significantly smaller than the U.S. industry, reported no plants ceasing production as of Sept. 16. In total, 85 percent of the North American ethanol industry is producing, five percent of the total potential capacity is under construction, and only 10 percent is not producing. For the first time, the fall plant map includes the scope of the industry buildout between 2002 and 2008. Looking back, between 2002 and 2004, ethanol plant construction in the U.S. represented a monthto-month average of approximately 500 million gallons of potential capacity. EPM’s plant construction list over the same time period averaged just 13 plants per month, and 12 plants per year announcing finished construction and operation. By comparison, from 2005 to 2008, average month-to-month capacity rose to 3.1 billion gallons of potential capacity. The plant construction list averaged 52 plants under construction each month and completions rose to 32 per year. Between 2002 and 2004, the industry added an average

production capacity of 344 million gallons per year. From 2005 to 2008, that number leaped to 2 billion gallons per year. Also included on the fall plant map is a list of the five top producing companies in the fuel ethanol industry. Between March and September, two new companies entered EPM’s Top 5 list. Abengoa Bioenergy was replaced by Hawkeye Growth/Hawkeye Renewables in the fourth position and Green Plains Renewable Energy Inc. took the fifth place slot from The Andersons Inc. Archer Daniels Midland Co. continues to be North America’s largest ethanol producer, followed by Poet LLC and Valero Renewable Fuels LLC, which launched itself into the Top 5 this spring after purchasing most of VeraSun Energy Corp.’s bankrupt plants. Every subscriber of EPM will receive a complimentary plant map. For additional information on current production levels in the ethanol industry as well as timely plant updates, EPM’s plant list and map are available online at www.ethanolproducer.com. —Craig A. Johnson

ETHANOL PRODUCER MAGAZINE • November 2009

PHOTO: MASCOMA CORP.

Under its agreement with Chevron Technology Ventures, Mascoma Corp. will convert feedstocks provided by CTV into ethanol and lignin at the company’s 200,000 gallon per year demonstration-scale facility, which is located in Rome, N.Y.

Chevron to supply lignin feedstock to Mascoma New Hampshire-based Mascoma Corp. recently announced it has entered into a feedstock processing and lignin supply agreement with Chevron Technology Ventures, a division of Chevron U.S.A. Inc. Under the agreement, CTV will provide Mascoma with a variety of lignocellulosic feedstocks. According to a Mascoma spokeswoman, it is expected that these feedstocks will consist primarily of woodchips, agricultural waste materials and energy crops, such as switchgrass. Mascoma will convert the feedstock material supplied by CTV into cellulosic ethanol at the company’s 200,000 gallon per year demonstration-scale facility in Rome, N.Y. The first step in Mascoma’s production process involves mildly heating and grinding up the lignocellulosic material. This separates the feedstock’s fibers, making it easier for enzymes to digest the material. The company’s proprietary genetically modified microbes are then added to the biomass material. The material is then processed

to produce sugar, which is fermented into ethanol. According to Mascoma’s spokeswoman, the technology is unique because the company’s microbes are able to break down cellulose into sugar as well as ferment those sugars into ethanol. Lignin is created as a byproduct of Mascoma’s cellulosic ethanol production process. Under the agreement formed with CTV, Mascoma will supply the lignin byproduct to CTV for evaluation and testing. According to Chevron spokesman Russell Johnson, CTV is evaluating a variety of feedstock conversion technologies that could potentially be used to produce advanced biofuels. The lignin supplied by Mascoma will be one feedstock used to evaluate those technologies. According to Johnson, Chevron is primarily interested in developing technologies for biofuels that are compatible with current vehicles and infrastructure. Mascoma’s spokeswoman specified that CTV’s experiments will likely focus on evaluating the possibility of converting lignin into petroleum replacement fuels,

ETHANOL PRODUCER MAGAZINE • November 2009

such as renewable jet fuel and diesel products. Although the lignin research will be conducted at CTV’s laboratory, she said CTV and Mascoma will be working collaboratively on the project. “This is an important moment for us at Mascoma,” said Jim Flatt, company president. “The upgrading of our byproduct lignin to high-value transportation fuel is an important step in our effort to prove the effectiveness of integrated biorefineries. It has been our goal all along to make our process as integrated and sustainable as possible.” The company is hopeful that the technology developed with CTV will be suitable for a wide variety of feedstocks, a spokeswoman said. Mascoma is developing a full-scale cellulosic ethanol production facility in Kinross, Mich. Groundbreaking on the plant is planned for the first half of 2010 with commercial production of cellulosic ethanol to begin in early 2013. —Erin Voegele

Connecticut start-up banks on low-cost wood

American Energy Enterprises Inc.’s proposed ethanol facility will utilize local waste wood products to produce low-cost cellulosic ethanol.

The projected high per-gallon cost of many cellulosic ethanol technologies has been a primary factor impeding further development of the industry. To remain competitive in the marketplace, cellulosic ethanol companies must be able to produce ethanol at or below the cost of gasoline. Connecticut-based American Energy Enterprises Inc. has developed a cellulosic ethanol process that is expected to achieve this benchmark. The company is developing a facility that will utilize waste wood and is expected to produce ethanol at between 80 cents to 85 cents per gallon. The project was launched several years ago, but experienced some delays that can be attributed to the current economic crisis. The company is currently awaiting approval of a $50 million U.S. DOE grant. According to Christopher Brown, American Energy Enterprises’ chairman, the agency is expected to award recipients funds during November and December. Brown estimates that American Energy Enterprises’ facility could break ground as early as October and be operational by mid-2010. While the facility will eventually have a production capacity of 80 MMgy to 100 MMgy, it will be constructed in a modular format and feature up to 10 trains of production. Each train will be able to produce approximately 8

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ETHANOL PRODUCER MAGAZINE • November 2009

MMgy to 10 MMgy of ethanol. The facility’s first train of production is expected to be operational by August 2010. Brown said nine additional trains would be added at a rate of one per month. Once operational, the facility will utilize feedstocks that are indigenous to the New England region, including waste hard and soft woods that are currently disposed of in landfills. Brown said feedstock procurement is a primary factor in the ability to produce low cost cellulosic ethanol, and pointed out waste wood disposal fees at local landfills currently cost companies between $17 per yard and $20 per yard. “Having that material brought to us with low cost helps [maintain] low upfront [expenses],” Brown said. In addition, he continued, the company’s dilute acid hydrolysis process also features low overhead costs. While it will primarily employ waste wood as feedstock, Brown said his company is also working with local farmers to revitalize former farmland and use it to grow energy crops, such as miscanthus and switchgrass, which could also be used as feedstock in the future. The company is in the process of licensing yeast developed by Purdue University researcher Nancy Ho. According to Brown, the yeast licensed from Purdue is expected to dramatically increase ethanol yields. While the use of other yeast strains would allow the company to produce 30 gallons to 50 gallons of ethanol per ton of feedstock, Purdue’s yeast are expected to produce between 80 gallons

and 100 gallons of ethanol per ton of feedstock. The high yields achieved through the use of Purdue’s yeast will further help to reduce the per-gallon cost of American Energy Enterprises’ ethanol. Various off-take agreements for the company’s byproducts are also expected to add to the company’s bottom line. According to Brown, off-take agreements have already been formed to sell the facility’s carbon dioxide, furfural and gypsum byproducts. In addition, the facility will feature a 65 megawatt cogeneration system that will be powered by the facility’s lignin byproduct. Additional waste materials produced by the plant will be used to produce a clean fertilizer that will be donated back to the farmers who supply energy crop feedstocks to the company. In addition to developing cellulosic ethanol production facilities, Brown said American Energy Enterprises also plans to help bring additional E85 availability to New England. In the future, the company expects to explore the possibility of producing ethanolblended home heating oil. Brown said he intends for his company’s cellulosic ethanol production facility to serve as a research center, offering student interns real-world experience in biomass processing and major universities a facility to apply the biomass technologies they develop. — Erin Voegele

PHOTO: LANZATECH NZ LTD.

Waste-to-ethanol projects move forward

LanzaTech NZ Ltd.’s pilot facility, located adjacent to the BlueScope Steel plant in Glenbrook, New Zealand, produces ethanol from waste industrial gases.

Several projects that aim to produce ethanol from waste materials have gained traction in recent months. In the southwest region of the U.S., California-based Fulcrum BioEnergy Inc. is developing a project that will use a proprietary gasification process to produce ethanol from synthesis gas (syngas). Fulcrum’s technology transforms post-recycled municipal solid waste (MSW) into syngas, which is composed of carbon monoxide, hydrogen and carbon dioxide. A proprietary catalytic technology is then used to convert the syngas into ethanol. Fulcrum recently announced that it has successfully proven its catalytic technology at its North Carolina pilot facility, the TurningPoint Ethanol Plant. The company is developing a 10.5 MMgy commercial-scale facility near Reno, Nev. According to Karen Bunton, Fulcrum’s administration manager, construction of the Sierra Biofuels Plant is expected to begin in early 2010. Indianapolis, Ind.-based Agresti Biofuels is also developing an ethanol plant that will utilize MSW. The proposed facility, which will be located in Pike County, Ky., was originally scheduled to break ground in late 2008. However, construction was delayed due to the economic crisis. According to Zbigniew “Zig” Resiak, Agresti’s

program director, construction is scheduled to begin as soon as financing is complete, which he estimates will in late 2009 or early 2010. The proposed facility, which will be built adjacent to the existing Pike County landfill, will be constructed in phases, initially producing approximately 1.5 MMgy, later scaling up to 25 MMgy. According to Resiak, Agresti and Pike County have partnered to complete the project. The county has provided Agresti with the landfill-adjacent site, which it is also preparing for construction through grading and utilities work. The county will also be the facility’s sole feedstock provider. Agresti’s process utilizes four well-established technologies which Resiak said will be combined for the first time in one facility. In the first step of the process, MSW is dumped into a pool of water, where it is sorted into three groups: recyclables, cellulosic materials and metals. The cellulosic materials are converted into sugars using a weak acid hydrolysis process that utilizes gravitational pull vessels. The extracted sugars are then fermented into ethanol. In addition to the project in Kentucky, Agresti is pursuing similar cellulosic ethanol projects in Hawaii and Vietnam. In New Zealand, LanzaTech NZ Ltd. has developed a proprietary fermentation technology that can be used to produce ethanol using waste industrial gases or biomass-based syngas. According to LanzaTech’s co-founder Sean Simpson, industrial waste gases,

ETHANOL PRODUCER MAGAZINE • November 2009

such as those that result from steel processing, contain high concentrations of carbon monoxide. Carbon monoxide and hydrogen are also the main components of syngas, which can be created by gasifying any biomass resource, including MSW, organic industrial waste or waste wood. LanzaTech has developed a proprietary non-genetically modified fermentation microbe that can be used to convert the carbon monoxide and hydrogen components of these gas sources into ethanol. “The carbon component is used as a food source for the proprietary LanzaTech microbe during the biofermentation process,” Simpson said. “The microbe uses this energy to produce ethanol.” LanzaTech has tested its fermentation technology at a pilot facility located adjacent to the BlueScope Steel plant in Glenbrook, New Zealand. According to Simpson, LanzaTech expects to have the technology installed on a commercial scale at an established industrial facility by 2013. Golden, Co.-based GeoSynFuels LLC is also working to develop a MSW-to-ethanol process. The company formed a joint research agreement with CleanTech Biofuels Inc., under which CleanTech will provide samples of MSW-derived feedstock for GeoSynFuels to use in its proprietary enzymatic hydrolysis process. —Erin Voegele

US EPA reviewing public RFS2 comments The public commentary period on the U.S. EPA’s proposed implementation of the second stage of the renewable fuels standard (RFS2) officially closed Sept. 25. The agency, which is now reviewing the thousands of comments submitted in response to its proposal, is scheduled to issue its final rule by Dec. 1, although most affected parties believe it will delay its rule until 2010. Many ethanol-related groups filed final-day comments as a way to summarize the many issues being confronted by the complex rule. The most-addressed issue was, not surprisingly, the inclusion of indirect land use change (ILUC) in the EPA’s lifecycle analysis for biofuels. The American Coalition for Ethanol requested that the EPA eliminate ILUC from the rule entirely and said it could not support the rule unless this is done. “By breathing life into the controversial ILUC theory, EPA is setting a dangerous precedent for future sources of biofuels,” ACE Executive Vice President Brian Jennings said. “We recommend that EPA should insist upon greater scientific consensus and real-world data of so-called ILUC effects from biofuels before moving forward to apply them to the final rule.” The U.S. EPA is considering thousands of comments on its proposal for implementing the second stage of the renewable fuels standard, as legislated by the Energy Independence and Security Act of 2007.

The Renewable Fuels Association asserted that Congress never intended for ILUC to be considered in the EPA’s rule, and the agency is overreaching its authority by making those inclusions. Many commenters addressed the EPA’s glaring exclusion of petroleum-based fuels from its ILUC analysis. Minnesota Department of Agriculture Commissioner Gene Hugoson said, “To employ these enormous and game-changing results against biofuels without applying similar rigor to petroleum fuel impacts seems a very shaky foundation on which to build a renewable fuel standard for future generations.” Jennings said the EPA’s exclusion of petroleum’s indirect greenhouse gas emissions as a result of energy spent by the U.S. military to protect oil supplies and transportation routes is “remarkable and, frankly, bizarre. … To ignore these petroleum-related indirect emissions means that EPA’s comparison of emissions from biofuels versus petroleum is at best intellectually dishonest and at worst a deliberate attempt to obfuscate the truth.” Jennings said the EPA, with a “strong backing of groups who do not want to see biofuels succeed,” gave credence to a controversial and untested ILUC theory masterminded by anti-ethanol attorney Tim Searchinger. Jennings said Searchinger devised ILUC to be a market-induced ripple effect that is predicted to occur as a result of the use of increased volumes of corn ethanol and doesn’t

consider that farmers in developing nations and remote regions make decisions based on their immediate need to feed their families rather than corn futures prices in the U.S. Growth Energy President Tom Buis specifically addressed the grandfather provision of the proposed rule as a key issue. “EPA needs to follow the law, and their current proposal would subject today’s production facilities to a confusing array of new requirements that would make it very hard to recover the value of the ethanol industry’s billions of dollars of investment in current ethanol plants,” he said. Growth Energy maintains that corn ethanol plants that were in operation or under construction in 2007 be allowed to operate fully without being hindered by new regulations. Members of the ethanol industry do not oppose a delayed final rule from the EPA but stressed that 2010 volume requirements should be set as soon as possible. The RFA reminded the agency that the EPA has a statutory mandate to ensure RFS volumes are met each year, including 2010, regardless of the implementation of a final RFS2 rule. Jennings urged the EPA to enforce volumetric requirements as soon as practicable, but in a way that does not apply ILUC, adding, “It is more important to our members that the RFS2 rule is done right than done quickly.” —Kris Bevill

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Minnesota Project releases biofuels update

According to a recent Minnesota Project study, corn ethanol has made notable technological advancements in recent years, but cellulosic ethanol is primed to improve the fuel’s environmental impact even more.

The Minnesota Project recently released a study titled “Transportation Biofuels in the United States: An Update,” which details the progress made in cellulosic ethanol and corn ethanol research, and discusses biofuels generally. The study focused on four main cellulosic feedstocks, including: corn stover, miscanthus, switchgrass and wood. Dealing with many of the most divisive issues in the public debate over ethanol, the report specifically rebuts claims made regarding ethanol’s energy efficiency and water usage, as well as land use theory and food versus fuel arguments. Bringing to light facts about biofuels, the study notes a University of Nebraska-Lincoln study which found that for every unit of fossil energy input, 1.5 units to 1.8 units of energy are created in the form of ethanol. The study also pointed out that replacing natural gas with biomass combined heat and power facilities dramatically improves the energy ratio. According to the report, the ubiquitous food versus fuel debate highlights the conflation of entangled facts that make two separate issues seem like corollaries. In 2007 and 2008, along with rising inflation, corn prices constantly increased, leading casual observers to conclude the price increase was caused by ethanol production. Citing the Congressio-

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nal Budget Office, the study stated “the rise in price of corn resulting from expanded ethanol production contributed between 0.5 and 0.8 percentage points of the 5.1 percent increase in food prices over that time.” Along with food versus fuel, the indirect land use change theory is another thorny issue in the public’s perception of ethanol. The Minnesota Project concluded, “For the sake of effectively addressing global warming, we must have accurate analysis of the total carbon impact of biofuels. Just as ignoring some components’ contributions to carbon emissions would limit the effectiveness of biofuels in reducing greenhouse gas emissions, so too would overestimating the carbon impact of biofuels production by inhibiting the growth of replacement fuels for petroleum and transportation fuels.” A key issue for many in the ethanol industry is the use of corn stover to produce ethanol. The report viewed the practice negatively, as corn stover provides needed nutrients for healthy soil. According to the report, “harvesting of corn stover holds the greatest potential for negatively impacting soil erosion and water quality…. Stover also helps prevent soil erosion by slowing surface water runoff and increasing water retention. Removing stover from farmland has the potential to harm soil productivity and increase erosion which can then reduce water quality through increased sedimentation and nutrient runoff.”

ETHANOL PRODUCER MAGAZINE • November 2009

In addition to soil erosion, water use has become a primary concern for ethanol production in areas which experience frequent droughts, or where concerns over consumption or pollution may hinder construction and operation. The report noted that in 2005, the ethanol production process required an average of 4.2 gallons of water to produce 1 gallon of ethanol, with most of the water being lost during cooling. “Corn ethanol facilities have made water efficiency advancements in recent years to cut water usage by 20 percent or more. New technologies that make use of gray water for cooling purposes or recycle water for reuse could dramatically cut the water demand of corn ethanol facilities to below the average 2.25 gallons of water that petroleum refineries consume to produce 1 gallon of gasoline.” And with cellulosic ethanol on the horizon, the gains are even greater. “Cellulosic biofuels, in comparison, have lower estimated water demands. Many technologies extract water from biomass material as part of the process of extracting the cellulose…. Some technologies have even shown promise to produce a net excess of water.” The Minnesota Project is a nonprofit organization that promotes the sustainable production and equitable distribution of energy and food in communities across Minnesota. —Craig A. Johnson

Brazil introduces sugarcane restrictions

Proposed changes to Brazilian policy would greatly limit available areas for sugarcane production expansion in an attempt to reduce the crop production’s environmental impact.

On Sept. 17, Brazil President Luiz Inácio Lula da Silva proposed a bill that, if passed, will greatly restrict land available for sugarcane farming and processing in the world’s largest sugarcane-producing country. Promoted as an “unprecedented initiative,” the bill would effectively make 92.5 percent of Brazilian land off-limits to the sugarcane industry. The bill was drafted in response to findings from the National AgroEcological Zoning for Sugarcane (ZAE Cana) study, which was the first study conducted in Brazil that incorporated economic and social considerations into its sustainability model. “Environmental preservation is a top priority of the Brazilian government,” said Celso Manzato, environment unit chief of the Brazilian Agricultural Research Corp. “Sugarcane is an integral crop for Brazil’s domestic food supply, renewable energy market and our national exports, and therefore there is a great demand for growth. These measures have been proposed to ensure that sustainable development models are in place to promote the responsible development of this industry.” Specifically, areas of native vegetation, as well as all protected lands in the Amazon, Pantanal and Upper Paraguay River Basin regions would be restricted from use. Expansion of sugarcane production plants would

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eas and reiterate that UNICA’s stance has historically argued there is no need to clear forests for sugarcane expansion. Current sugarcane production area occupies 2.4 percent of the country’s arable land, and only 1 percent of the land has been dedicated to ethanol production, according to UNICA. Of the 1 percent of arable land used for ethanol production, the country has benefited by supplying 50 percent of its fuel needs with domestically produced ethanol. The president’s proposal came during a tumultuous sugarcane harvest season. Brazilian producers had to endure weeks of heavy rains at the height of harvest, which resulted in a significant loss of volume as well as quality of the crop. September predictions estimated an overall 20 million ton loss for the 2009 harvest season as compared to 2008. However, domestic demand for ethanol has steadily increased as more flexible fuel vehicles (FFVs) have entered the market and as ethanol costs have managed to stay competitive with gasoline. UNICA reported that domestic hydrous ethanol sales rose 24.4 percent in August compared to the same month last year. Brazil’s National Association of Automobile Manufacturers reported that 88 percent of light vehicles sold in-country are FFVs and predicted that 65 percent of Brazil’s entire fleet will be flex-fuel capable by 2014.

be limited to unrestricted areas that do not require irrigation and have slopes less than 12 percent, which would allow for mechanized harvesting and eliminate the need for crop burning to clear the ground. Credit extension policies will favor expansion of sugarcane facilities to areas that consist of underused or degraded pasture land. Currently operating industrial facilities will be granted exemptions from the proposed policy changes. According to the Brazilian government, the proposed criteria leave approximately 64 million hectares (158 million acres) available for sugarcane production. The sugarcane industry currently utilizes approximately 8.89 million hectares for sugarcane fields. The Brazilian Sugarcane Industry Association (UNICA) said while it supports the ZAE Cana concept, various aspects of the proposal demand greater analysis. The association said it was not allowed to review the full proposal prior to its release. One specific concern that UNICA has declared needs to be addressed involves defining the concept of food security, since sugarcane is used to produce both food and energy. “The proposed approach could lead to restrictions in growing sugarcane that would have the reverse effect in terms of food security, by restricting the production of additional sugar,” the association stated. While the association will continue to analyze the proposal, members welcome the restrictions on deforestation in protected ar-

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DRIVE Buis

Time has Come to Label Fuel with Country of Origin By Tom Buis t is often said that American consumers can move the world’s economy with their spending decisions. In most cases, there is federal policy to help consumers make well-informed decisions, based on knowledge about the product’s quality, its maker or its origin. Country-of-origin labeling is an effective way to inform consumers. Almost all consumer products, from clothing to cars, from fresh tomatoes to canned tuna, have a federally mandated label telling the consumer the identity of the country of origin. That label ensures consumers can make informed decisions about how to spend their dollars—decisions that sometimes have major implications. It is time for country-of-origin labeling standards to be applied to the automobile fuel market in the United States. Consumers should know at the pump whether the gasoline they are pumping is derived from foreign oil. Why is this important? Because, as concluded in a widely available study conducted by the Center for Forensic Economics, every dollar spent on foreign oil means the U.S. economy loses as much as $1.55 to foreign economies. That massive transfer of wealth amounts to more than $1 billion per day leaving the United States— as much as $500 billion when gasoline prices spike. On top of that $1 billion-per-day leak from our economy, taxpayers must also pay an average of $50 billion annually for the costs of protecting oil shipping routes, according to a study by Institute of the Analysis of Global Security. This is the true cost of our nation’s addiction to foreign oil, and it is hidden from consumers. By mandating country-of-origin labeling on automotive fuel, consumers will be able to find out if their gasoline is

refined out of oil from Canada, Venezuela, the United Arab Emirates, or whether it includes domestically produced gasoline. It can be labeled as simply as: “This gasoline is refined from oil imported from Canada and Niger, and is blended with ethanol made in the United States.” Market transparency based on country-of-origin labeling is a key to changing spending habits and increasing demand for ethanol. American ethanol is the only existing alternative to gasoline today that is creating jobs in the United States, while cutting greenhouse gas emissions and reducing our dependence on foreign oil. Country-of-origin labeling for fuel will let consumers know if they are pumping a domestically produced fuel, such as ethanol, or fuel from a foreign source. Gen. Wesley Clark, Growth Energy’s co-chairman, unveiled the labelmyfuel.com initiative at the Farm Progress Show in Decatur, Ill., where it was warmly received by farmers, ethanol producers and the media. Growth Energy has already begun talking to lawmakers in Washington, D.C., about a bill that would establish standards for country-oforigin labeling on fuel. It is our intention to move on this as soon as we can, but we expect stiff resistance from our opponents, who would do anything to put ethanol out of business and fully intend to keep consumers in the dark about the ramifications of their spending choices. The American ethanol supporters who make up Growth Energy intend to fight for country-of-origin labeling on fuel. It is an idea whose time has come. Tom Buis is the CEO of Growth Energy. Reach him at TBuis@GrowthEnergy.org or (402) 932-0567.

ETHANOL PRODUCER MAGAZINE • November 2009

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TAKING STALK Kingsley

Wood Supply Offers Unique Challenges By Eric Kingsley

lmost one-quarter of the U.S. is covered in timberland—land growing a commercial timber crop that can be used to make lumber, paper, energy and other products. Throughout the Southeast, Northeast, Great Lakes region and parts of the West, forests are the dominant land use. This fact hasn’t escaped the attention of cellulosic ethanol and advanced biofuel developers. As some have focused on switchgrass, corn stover and other agricultural crops and residues, others have pursued wood as their feedstock of choice. Wood is abundant, and more than 70 percent of the timberland in this country is in private hands, providing ample opportunity to harvest wood in a sustainable manner. However, forest-derived wood has some very real differences from agricultural feedstocks. Project developers, financial backers and others need to be aware of and account for these differences. Wood has many uses. In addition to lumber and paper production, there are long-proven and established technologies that use biomass for thermal applications (heat) and electricity production. Cellulosic ethanol projects need to find locations where competing with existing facilities is economical. There is no “harvest imperative” for wood. Unlike crops that have to be harvested at a certain time in order to capture value, wood can be left “on the stump” for decades if landowners are unhappy with the price offered for their wood. While left alone, the wood continues to grow and add value, providing a landowner as many reasons not to harvest as there are to harvest. Wood is not a fungible commodity. There is a wide variety of species, each with unique characteristics that may work well in some conversion processes and poorly in others. Some facilities can take a mix of species while others are species selective. Some technologies require a clean, bark-free chip; others can utilize the tops, limbs and other parts of a tree less desired by competing users.

Wood does not have a transparent marketplace with known pricing. Unlike corn or oil, wood is bought and sold the old-fashioned way—with wood buyers finding loggers and landowners willing to shake hands on a deal. This is done at small sawmills buying a few truckloads of wood each day and at large pulp and paper mills using millions of tons of wood each year. While there is much to admire in a system where two individuals develop long-standing relationships in order to conduct business, it leaves questions for financial backers of any project. What will the price be? How do I know that someone can deliver at this price? What happens if they don’t? Longterm, known price contracts have not been the norm in the forest industry, sometimes causing bankers to take a step back from an otherwise strong project. Even with its challenges, wood provides great opportunities for cellulosic ethanol projects. Wood is available year-round, and does not degrade quickly after harvest. The pulp mills and biomass electricity industry have paved the way by supporting the harvesting equipment and supply infrastructure that new projects can utilize. More than 11 million U.S. landowners have timberland, most of them family owners. The emerging energy markets could be coming at an opportune time in many areas, providing new markets as old ones fade. Many developers looking at wood projects see opportunity, and rightly so. Some of them assert that landowners will be willing and able to grow, harvest and transport wood to facilities for little or no money. This, of course, is false. Cellulosic projects that understand their wood needs, their competitors, pay a fair price for wood, and position themselves as a stable and reliable market will have a strong chance for success. Others may have a press release announcing the project as their first and last activity. Eric Kingsley is a vice president at Innovative Natural Resource Solutions LLC. Reach him at kingsley@inrsllc.com or (207) 772-5440.

ETHANOL PRODUCER MAGAZINE • November 2009

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FINANCE Debbrecht

Performance Management System a Valuable Tool By Micki Debbrecht valuating an employee’s performance can be the least favorite task on a manager’s to-do list. However painful the experience may seem, using a sound performance management system can ease the headache. The goal of a performance management system is to support your organization’s mission and strategy. Performance measures are results-based and will give both employees and supervisors information they need to improve productivity. In addition, the organization benefits from an overall increase in effectiveness.

Job Descriptions Once a person is hired, an evaluation is recommended to be given after 90 days and then on an annual basis. Be sure the discussion occurs in a neutral environment and is positive, yet truthful, about an employee’s work behavior and skills. If a manager anticipates the evaluation will take a negative turn, refer to the employee’s job description and be sure the employee understands their specific tasks. Oftentimes, a negative evaluation takes place simply because the employee does not fully understand what is expected of them. Utilizing measurement tools will ensure objectivity and provide an opportunity for clear, concise communication, leaving little room for misinterpretation. Job descriptions are an important tool to document overall job expectations. When an employee is brought in to discuss work behavior, a manager can easily refer back to the description and review expectations for their assigned position. If a job description is not used during an evaluation, it may seem that the employee is being rated subjectively rather than objectively. Conducting evaluations is unpopular because asking an employee to do a better job seems hurtful and unfriendly. Remember the performance evaluation should also include positive feedback about what the employee has done well. This should be an opportunity to discuss a “snapshot” of the evaluation period and set goals for the forthcoming year.

Performance Gaps The process will also help identify gaps in performance— the difference between actual and expected behaviors. Gaps in performance identify skill sets that need further development. If necessary, a plan for improvement can be established or it may be determined the employee is not suited for their assigned position. Again, the system’s intent is to support your organization’s mission and strategy. If an employee lacks the competencies or skills needed to perform well, they may need to be reassigned or asked to leave the organization. A performance management system can also help managers be consistent in the amount of time they spend with average- to lower-performing employees. Documentation is only one component of delivering the message. When conducting the review, schedule uninterrupted time to discuss the written evaluation and allow time to solicit employee feedback. Often, managers don’t like to verbally deliver performance reviews because it feels confrontational and causes anxiety. Providing positive, yet truthful, objective feedback is healthy and employees are often grateful for the one-on-one opportunity to clarify and discuss expectations. Common errors in performance management systems include a lack of documentation of both positive and negative behaviors; allowing one performance factor to weigh too heavily among others; and tendencies to rate employees as average or to favor one employee over another. In order for the performance management system to be effective, a manager has to identify and address objective facts about the employee’s actual performance and modify job-related behavior. Although it is often overlooked, implementing a sound performance management system can prove to be an effective tool in reducing legal liability, improving employee productivity and increasing morale. Micki Debbrecht is a human resource consultant at Kennedy and Coe LLC. Reach her at mdebbrec@kcoe.com or (316) 691-3736.

ETHANOL PRODUCER MAGAZINE • November 2009

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eBIO INSIDER Vierhout

Renewable Energy Goes International he International Renewable Energy Agency is a new organization formed to promote the use of 100 percent renewable energy worldwide. Driven by Germany and its ministry of environment, it was officially established earlier this year in Bonn, Germany. A total of 136 countries became members. Almost all European nations are members, as are the U.S., India and numerous African nations. Missing, however, are China and, rather remarkably, Brazil. The agency’s mission is straightforward: advocate the promotion and use of renewable energy. Clearly, this can be done by a dedicated organization more effectively than has been done by the International Energy Agency which, after all, is primarily associated with fossil fuel and for which renewable energy is just one of 23 topics it addresses. IRENA’s website indicates that it aspires to become the main driving force for promoting a rapid transition towards the widespread and sustainable use of renewable energy on a global scale. It wants to provide practical advice and support for both industrialized and developing countries, thereby improving frameworks and building capacity. Collecting reliable data, facilitating financial mechanisms, disseminating best practice and technological expertise are also part of its core tasks. Knowing the complexity of renewables and the potential opposition against their further development, it seems to be an ambitious agenda. So far, only six of the 25 minimum necessary nations have ratified the implementation agreement. IRENA is still in an interim phase, but an interim director-general has been appointed and the seat of the organization has been chosen. The choice of its seat—Abu Dhabi—is quite remarkable. IRENA has been put smack in the middle of oil wells. Now, why would an institute to promote renewable energy locate itself in a fossil fuel region? Was it because the United Arab Emirates provided the money? Does the U.A.E. want to boost its image as being renewable energy friendly? It is not clear to the outside world. The other two applicants to host the interim secretariat, Bonn and Vienna, will host IRENA’s center of innovation and technology and

the agency’s liaison office for cooperation with other organizations active in renewable energy. The interim director-general is France’s Madame Hélène Pelosse, who previously headed the cabinet of the French Minister for the Environment. During last year’s French Presidency of the EU, Pelosse led negotiations on the EU energy and climate package. Negotiations were concluded successfully and Pelosse has most likely earned her new position because of that result. I recently had the opportunity to speak with Pelosse. From that meeting a few things became clear. It is too early to say what IRENA’s political priorities will be but emphasis will most likely be given to best practice. Pelosse spoke with great enthusiasm about having one developing country, most likely in Africa, as a showcase for renewables. This is tremendously important. Many African countries can no longer cope with the heavy financial burden of importing fossil fuel for their energy needs. Renewable energy is the obvious way out. There is plenty of opportunity for wind, sun and biomass energy in Africa. What is lacking is technology and money. IRENA could do a great job in that part of the world. I became concerned when Pelosse discussed biofuels. She believes biofuels cannot be considered sustainable unless the issue of indirect land use change (ILUC) is resolved. This surprises me. The topic of ILUC is, to a large extent, a fabrication created by political fractions that hope it will deliver the final blow to the biofuels industry. Trying to solve the problem of ILUC by penalizing biofuels will not change the situation. Hopefully, Pelosse will soon see the positive effects of biofuels, because a director-general of IRENA that is not able to advocate biofuels would be a great setback for our industry. Aside from this, I believe an organization such as IRENA is long overdue. Renewable energy policy, technology and best practice need to be defended by a dedicated organization. Robert Vierhout is the secretary-general of eBIO, the European Bioethanol Fuel Association. Reach him at vierhout@ebio.org.

ETHANOL PRODUCER MAGAZINE • November 2009

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PRODUCTION

ETHANOL PRODUCER MAGAZINE

November 2009

PRODUCTION

COMING UP

Short

As the U.S. EPA ponders comments submitted in response to its proposed rule for the second stage of the renewable fuel standard, cellulosic biofuel producers wonder how they will produce enough fuel to meet a 2010 mandate, and what will happen to the industry if they donâ&#x20AC;&#x2122;t. By Kris Bevill

ETHANOL PRODUCER MAGAZINE

November 2009

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he U.S. EPA’s proposed rule for the second stage of the renewable fuel standard (RFS2) is filled with complicated issues that address everything from indirect land use impacts to definitions of feedstocks and greenhouse gas emission reduction rates. A final rule is not expected from the EPA until at least Dec. 1 and could possibly be delayed until next year due to the complexity of the issues being addressed. Nevertheless, in its proposal, the agency calls for 2010 mandate requiring 100 million gallons of cellulosic biofuel to be produced and, so far, there is no indication the agency plans to lessen the volume requirement.

A Harsh Reality

PHOTO: KRIS BEVILL, BBI INTERNATIONAL

The mandate, considered aggressive even at that time, was initially established in the Energy Independence and Security Act of 2007. The aggressive nature of the mandate, which typically would a positive for the renewable fuel industry, could prove to be too optimistic and potentially damaging for the industry, as it appears U.S. producers will struggle to produce even half of the 100 million gallons of cellulosic biofuel required next year. David Woodburn, a senior research analyst at Chicago-based research, brokerage and investment banking firm

ThinkEquity LLC, says there is no way the industry can produce 100 million gallons of cellulosic biofuel next year. He authored a report earlier this year that estimated a total of 39 million gallons of cellulosic biofuel is a more likely amount to be produced next year. “Unless there are plants that have been built under the market’s nose, there’s really no way we can reach 100 million gallons either with U.S. production or, in my view, international production in 2010,” he says. “It’s not necessarily bad news or a failure. They were aggressive goals to start with.” Woodburn and his colleagues regularly track the status of biofuel projects and producers and used in-house information as well as EPA and U.S. DOE estimates to reach the 39 million-gallon conclusion. In his report, Woodburn disputes the EPA’s inclusion of several producers on its list of 2010 cellulosic biofuel contributors— specifically Alabama-based Cello Energy. The EPA expects the company to contribute three-quarters of the cellulosic biofuel mandate by producing a cellulosic biomassbased diesel fuel substitute at four separate facilities. However, Woodburn says until he obtains evidence of construction at three of the four sites or is made aware of further funding received by the company, he can only expect Cello to contribute 20 mil-

Verenium Corp. has been producing cellulosic ethanol from sugarcane bagasse and energy cane bagasse at its 1.4 MMgy facility in Jennings, La. since last year. The company doesn't expect to commercialize its process until 2012.

ETHANOL PRODUCER MAGAZINE

November 2009

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What is “cellulosic biofuel?” In its proposed rule for the second stage of the renewable fuel standard (RFS2), the U.S. EPA defines cellulosic biofuel as: “any renewable fuel, not necessarily ethanol, derived from any cellulose, hemicellulose or lignin, each of which must originate from renewable biomass.” The fuel must also achieve a 60 percent greenhouse gas emission reduction when compared to gasoline or diesel fuel. By contrast, the first RFS qualified any ethanol as being cellulosic regardless of whether cellulosic feedstock was used, as long as the facility used animal wastes or other waste materials to displace at least 90 percent of the facility’s fossil fuel needs. The difference in definitions could cause significant confusion as to what types of fuel qualify for next year’s cellulosic biofuels mandate and create a regulatory nightmare if the RFS2 rule is implemented in mid-2010 as opposed to the beginning of the year.

lion gallons of cellulosic biofuel to the total volume mandate. Woodburn also points out that many of the facilities expected to produce cellulosic biofuel next year are pilot-scale or demonstration-scale facilities and are likely to produce less than their nameplate capacities. Delays in construction and start-up of facilities are also likely to occur. Therefore, Woodburn says that speculating a cellulosic biofuel production shortfall is “just admitting reality.”

Industry View “We do not believe that the cellulosic biofuels mandate will be met in 2010,” says Range Fuels Inc. CEO David Aldous. Many industry experts have been anxious to see the company begin producing cellulosic biofuel at a commercial-scale at its Soperton, Ga., facility and believe Range Fuels to be a front-runner in the cellulosic field. However, the company is only expected to produce 10 million gallons of cellulosic biofuel next year. Aldous is confident that longerterm production mandates are achievable, but will hinge on the federal government’s commitment to mandates and a comprehensive energy policy. “A comprehensive energy policy must include significantly reduced dependence on foreign oil, material short-term and long-term reduction of greenhouse gases from transportation fuels

ETHANOL PRODUCER MAGAZINE

and incentives for green job creation in biofuels,” he says. “A minor delay in achieving the first target in a 15-year schedule is not significant in and of itself,” says John Howe, vice president of public affairs at Verenium Corp. “It is widely recognized that the industry will not be in a position to produce 100 million gallons during 2010. What is crucial to the industry is to keep the schedule of the mandate in place, as it provides the basis for this emerging industry’s access to the capital required to develop and commercialize these important new technologies.” Verenium, also a front-runner in the lead-up to commercialized cellulosic ethanol production, has for some time known it would not produce at a commercial-scale until 2012, although the company initially called for a 2010 start-up. Howe says Verenium expects to produce no more than 1 million gallons of cellulosic ethanol at its 1.4 MMgy Jennings, La. facility next year, but that it’s on track to bring its first 36 MMgy facility into production in two years. Brian Jennings, executive vice president of the American Coalition of Ethanol, says the ethanol blend wall, logistical challenges regarding biomass production, collection and handling, and high construction costs coupled with technology conversion hurdles have all contributed to stalled or delayed cellulosic biofuel projects. “This is a

November 2009

consequence of how the economic downturn and technology challenges run head-on into a policy that’s more prescriptive than it needed to be,” he says. “Ask who came up with 100 million gallons in 2010 and why they came up with that number. I’d be fascinated as to what that answer might be.” According to Jennings, cellulosic and advanced biofuels could be promoted by the federal government without being overly regulated and many legislators agree. However, the mandate model has been put into play and now the industry must work to meet its demands or to modify the mandate to a more reasonable level. According to the proposed rule, the EPA recognizes that cellulosic biofuel is in the infant stages of comBrian Jennings mercialization and the executive vice president, current economic climate American Coalition could impact its progress. for Ethanol Due to the complexities involved in projecting achievable production volume levels next year, EPA officials asked for comments and additional information that could influence its final rule, possibly resulting in a lowered mandate. Despite its request, nearly all of the comments presented to the agency prior to the Sept. 25 commentary deadline addressed

PHOTO: RANGE FUELS INC.

PRODUCTION

Range Fuels Inc. is one of few companies on schedule to begin producing cellulosic biofuels in 2010. The company plans to produce 10 million gallons of cellulosic biofuel from woody biomass at its facility in Soperton, Ga.

indirect land use change and virtually ignored the EPA request for input regarding cellulosic biofuel production mandates.

Safety Net? So what are the implications of an unmet goal? If the cellulosic biofuel volume mandate is reduced, it is likely that some form of a precautionary measure proposed by the EPA to counteract a shortfall would be put into effect. According to the proposal, one way to make

up the production shortage would be to allow excess advanced biofuels to fill the gap left by a shortfall of cellulosic biofuel. According to the proposal, “For instance, if we determined that sufficient biomass-based diesel was available, we could decide that the required volume of advanced biofuel need not be lowered, or that it should be lowered to a smaller degree than the required cellulosic biofuel volume.” The agency proposes that it would then also lower the total renewable fuel volume to the

PRODUCTION

same degree so as to not allow conventional biofuels to meet standards that were put in place to support cellulosic or advanced biofuels. The EPA would also issue credits to replace not-produced gallons of cellulosic biofuel in the form of renewable identification numbers (RINs), which refiners would be required to purchase to meet their obligatory non-petroleum fuel requirements. The price for these RIN credits would be calculated by determining the difference between the cost of a gallon of gasoline and $3, with a minimum price set at 25 cents. Revenue generated through the sale of these credits would be placed in the U.S. Department of Treasury general fund, according to EPA senior press officer Cathy Milbourn. The total number of RIN credits issued by the agency would be no greater than the total reduced cellulosic biofuel standard, but would be allowed to be used by refiners to meet advanced biofuel and total renewable fuel standard mandates as well as cellulosic biofuel mandates. It is this item that has caused concern among ethanol industry members. “If we’re unable to meet the threshold and EPA wants to reduce the target and make these credits available for sale, we don’t want them to be used to qualify for the obligations for other categories of renewable fuel use,” Jennings says. “It’s a very serious issue and it’s only one of dozens of very serious issues [in the proposed rule].”

At the request of an ACE member, whom Jennings declined to name, Jennings drafted a comment to the agency stating that the proposed handling of credit issuances is not in line with Congress’ intentions for cellulosic biofuel production. “It was, and remains, the intent of Congress to increase, not diminish, the use of renewable fuels, and in particular, to help launch an ambitious platform for cellulosic biofuels,” Jennings commented, adding that this proposed revised RIN system could inhibit cellulosic biofuels commercialization. In addition, the proposed price system for the credits could result in cellulosic biofuels being placed at a price disadvantage, further negatively impacting investment in the industry. “The mandate in 2010 will not be met by the industry and thus the use of RIN credits is necessary,” Aldous says. “A pressing issue is there are no clear and defined indications of how these RIN credits will be administered by the market. If the RIN credits are structured properly, it will mean increased investment in cellulosic biofuel production.” Clayton McMartin, president of Clean Fuels Clearinghouse, which owns and operates the RINStar Renewable Fuels Registry, says if cellulosic biofuel RINs were being issued today they would sell for approximately $1 each, compared to 10 cents for each ethanol RIN. He says the 25-cent price floor for credits could offer some reassurance to investors, but there remains much uncertainty. “If

you’re building a capital project and you’re banking on that credit, you know the least amount of money you’re going to get for your cellulosic RINs, what we call a Type C RIN,” he says. “The most you’re going to get, we really don’t know. The EPA Administrator is really the wildcard and could change the market instantaneously depending on if they issue those cellulosic RINs.” Howe says the RIN credit program is “a common sense response” by the EPA. “If production cannot be achieved, then it is a logical step for EPA to provide these credits as a substitute for the production shortfall. EPA’s proposal is to issue the quantity of credits required to compensate for any production shortfall at the end of the calendar year, so that its action does not distort the market for cellulosic ethanol.” Woodburn says the RIN credit proposal could give the early cellulosic biofuel producers an added boost, but he doubts their business plans are beholden to revenues generated through RIN sales. “I think that’s the least of their concerns,” he says. “I think everybody right now is just trying to scale up.” EP Kris Bevill is the editor of Ethanol Producer Magazine. Reach her at (701) 373-8044 or kbevill@bbiinternational.com.

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November 2009

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Beyond Cellulosic

While cellulosic technologies receive the most attention as related to scale-up of next-generation ethanol production, other technologies are also being developed to meet future advanced biofuel mandates. By Erin Voegele

ETHANOL PRODUCER MAGAZINE

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esearch and development efforts to establish viable, economical, commercial-scale cellulosic ethanol technologies have been ongoing for decades and always seem to be five years away. Approaching advanced biofuel mandates as established in the Energy Independence and Security Act of 2007 has increased interest and investment in many of these technologies. And while many cellulosic ethanol companies have made recent breakthroughs and are on the verge of reaching commercial-scale production levels, a diverse range of advanced ethanol technologies is nearing or, in some cases, entering commercial-scale production as well. In many cases, these alternative technologies have managed to circumvent several of the challenges that still face cellulosic ethanol production. Some of these companies have developed advanced biofuel technologies that effectively negate problems associated with high input costs, feedstock handling and logistics, and scale-up issues. In addition, many of these alternative processes are employable in areas that cannot easily support either traditional corn ethanol production or cellulosic production, including urban and desert areas.

Gasification and Syngas Conversion Technologies While cellulosic technologies typically employ either an enzymatic or an acid hydro-

lysis process that requires pretreatment and a predominantly homogeneous feedstock, both Warrenville, Ill.-based Coskata Inc. and Montreal, Quebec-based Enerkem Inc. have developed gasification and syngas conversion technologies that are feedstock flexible and require no pretreatment. In addition, while both traditional and cellulosic ethanol technologies are only able to convert the sugar-based portion of any feedstock into fuel, Coskata and Enerkem’s technologies are able to transform the entire feedstock into ethanol. During the front-end gasification process employed by both technologies, carbon-rich feedstock is heated in a controlled environment with pressure and a little oxygen. Rather than causing combustion, the heating process results in a gaseous mixture of hydrogen and carbon monoxide known as synthesis gas (or syngas), which is similar to natural gas. The hydrogen and carbon monoxide molecules can then be reconfigured into a variety of end products, including ethanol. “It’s sort of as if you would suspend the [feedstock] material and raise it to its gaseous state, halfway between a solid state and combustion,” Enerkem CEO Vincent Chornet says. Although both technologies utilize similar and well-established front-end gasification processes and can employ any carbon-rich feedstock, including post-recycled municipal solid waste (MSW), cardboard, wood chips,

crop waste or glycerin, that’s where the similarities between the two technologies end. In Enerkem’s process, feedstock is converted into syngas inside the company’s proprietary gasification system. It is then cleaned. “We remove particulates and tar, and we also condition [the syngas] in terms of making sure we get it to the right hydrogen and carbon monoxide quantity,” Chornet says. “The result is a clean, chemical-grade gas that is very similar to natural gas.” The hydrogen and carbon monoxide molecules contained in the syngas are then recombined into methanol using a copper-based metal catalyst. In the final step of the process, the methanol is used to build ethanol molecules. Enerkem was formed in 2000 and established a pilot facility in 2003. The pilot facility has operated more than 3,500 hours and has been used to test Enerkem’s technology using more than 20 different feedstocks. In 2007, Enerkem commenced construction on a 1.3 MMgy commercial-scale facility in Westbury, Quebec. The facility is designed to utilize decommissioned electric poles as feedstock. To date, the Westbury facility has produced conditioned syngas. It is expected to begin alcohol (methanol/ethanol) production near the end of this year. While Enerkem’s production technology is feedstock flexible, Chornet says his company’s primary focus is on post-recycled MSW because it is widely available and has a costnegative nature.

ETHANOL PRODUCER MAGAZINE

November 2009

According to Chornet, Enerkem currently has four additional projects in the pipeline that are expected to produce a combined 90 million gallons of ethanol annually, including a 10 MMgy facility in Edmonton, Alberta, that will utilize post-recycled MSW. “The [company’s] next step is to build the Edmonton project,” he says. “It is now fully permitted and we are looking for construction to begin by the end of the year.” That facility is expected to be operational by mid2011. Enerkem is also working to develop a 20 MMgy facility in Pontotoc, Miss., that is expected to utilize post-recycled MSW, wood residues, construction and demolition debris and treated wood. While the front-end gasification process utilized by Coskata’s syngas conversion technology is similar to Enerkem’s, the back-end ethanol production process is markedly different. Instead of using a metal catalyst to drive conversion of hydrogen and carbon monoxide into fuel, Coskata uses a biological catalyst to ferment the syngas into ethanol. “The core of Coskata technology is a set of anaerobic bacteria that breathe in syngas,” says Wes Bolsen, Coskata’s chief marketing officer and vice president of government affairs. Because the process creates only ethanol rather than a mixed stream of alcohols, Bolsen says the technology is able to realize high yields. According to Bolsen, the anaerobic organisms employed by the technology

ETHANOL PRODUCER MAGAZINE

PHOTO: ENERKEM INC.

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Enerkem Inc.'s 1.3 MMgy facility in Westbury, Quebec, will produce ethanol from decommissioned electric poles.

are not genetically modified. “Our baselevel organisms came out of the Oklahoma Biofuels Consortium, and we’ve spent the past three years really transforming them through mutations and selective breeding.” By using anaerobic organisms rather than a chemical catalyst, Bolsen says Coskata is able to ferment the syngas into ethanol using low temperatures and low pressure,

November 2009

which reduces the technology’s energy consumption. “It’s the simplicity of the process that really makes it one of the leading conversion technologies,” he says. Coskata was formed approximately three years ago and has since developed a pilot facility adjacent to its headquarters near Chicago. In addition, the company has established a semi-commercial facility near

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Pittsburgh and is in the process of developing a commercial-scale 55 MMgy facility in the Southeast that will utilize woody biomass to produce ethanol. Bolsen says the design and engineering of the facility is complete and a location has been selected. Construction is expected to begin as soon as financing is in place.

Photosynthetic Technology While Coskata and Enerkem have developed feedstock-flexible production technologies, Cambridge, Mass.-based Joule Biotechnologies Inc. and Bonita Springs, Fla.-based Algenol Biofuels Inc. have managed to eliminate feedstocks entirely. Instead, Joule and Algenolâ&#x20AC;&#x2122;s respective technologies utilize photosynthetic processes that consume carbon dioxide and sunlight and directly secrete ethanol. Because the primary inputs of these two photosynthetic processes are not plant-based feedstocks, they are employable in areas that have been traditionally unable to support biofuels technologies, including desert and coastal areas that lack agricultural land.

According to Algenol CEO Paul Woods, his companyâ&#x20AC;&#x2122;s technology is completely different than second-generation ethanol technologies. There is no biomass that needs to be processed or additional inputs, such as chemicals or enzymes, that need to be added. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s all done in one algae cell,â&#x20AC;? he says. The algae employed by Algenolâ&#x20AC;&#x2122;s technology are like tiny ethanol factories. â&#x20AC;&#x153;I think everything about our technology is just a little simpler and a little more elegant and a little easier,â&#x20AC;? Woods says. â&#x20AC;&#x153;We have algae and sunlight and seawater. We introduce carbon dioxide, and thatâ&#x20AC;&#x2122;s it.â&#x20AC;? The algae are housed in bioreactors, which are large, durable, sealed plastic containers that measure approximately 5.5 feet wide by 50 feet long. The bottom third of the bioreactor houses the algae culture, while the top third is headspace in which the ethanol evaporates into as it is produced. The ethanol is collected from the headspace and purified. Fresh water is the primary byproduct of the technology. â&#x20AC;&#x153;Right now, for every gallon of ethanol we are producing, we are provid-

ETHANOL PRODUCER MAGAZINE

November 2009

ADVANCEMENT

ing one gallon of fresh water,” Woods says. “We are not a net user of fresh water; we are actually a net provider of fresh water.” Depending on where Algenol establishes its algae farms, the fresh water could be used to supplement municipal water supplies or for agricultural purposes. Algenol currently has more than 200 region-specific enhanced algae strains. Woods stresses the enzymes are genetically “enhanced,” rather than genetically modified. “Algae normally make tiny quantities of ethanol,” he says. “We enhanced them and we make them so they are very specific to the regional climate that they are going to be living in. Right now, we have algae that produce more than 6,000 gallons [of ethanol] per acre per year.” Although Algenol was formed only three years ago, Woods has been working to develop the technology in his spare time for more than 25 years. He says when oil prices rose in 2006 he decided it was time to pursue the technology on a commercial level. Woods says the technology is ready to deploy in pilot-scale and demonstrationscale facilities, but Algenol is awaiting U.S. EPA and USDA approval before moving forward. “I think we’ve taken a very conservative approach,” he says. “We clearly don’t think we have genetically modified organisms, but they are genetically enhanced, so I think we took a very conservative approach by going straight to the EPA and USDA and telling them exactly what we are doing. We are hoping these organizations give us the go-ahead to work on this on American soil.” Joule’s technology, known as Helioculture, also uses a photosynthetic, direct-toethanol process. The technology combines sunlight and carbon dioxide in a solar converter that holds a solution of brackish or gray water, nutrients and highly engineered photosynthetic organisms which secrete ethanol. Joule CEO Bill Sims compares his company’s solar converters to a field of existing solar panels. The difference is, instead of capturing sunlight and converting it into power, Joule’s technology harnesses sunlight and carbon dioxide to produce a liquid fuel. “These are flat panels that you can imagine being tilted toward the sun, and ETHANOL PRODUCER MAGAZINE

the solution is running through them in a continuous process,” he says. The solution eventually ends up at a central plant where the ethanol is separated and the solution is re-circulated back through the process. While Sims says Joule is not prepared to disclose exactly what kinds of organisms are employed by the process, he notes that the technology is projected to be able to produce 20,000 gallons of ethanol per acre per year. Joule was established approximately two years ago, but only recently announced it was working on an ethanol production technology. “We were operating in stealth mode and made our introduction to the market at the end of July,” Sims says. “We felt it was appropriate to function in stealth mode since we knew we were working on a transformational technology in a huge marketplace.” According to Sims, Joule has entered into final negotiations for a pilot plant location. Construction on that facility is expected to begin during the first quarter of next year. “Because the technology is modular, and therefore very scalable, we expect to scale the pilot facility to an industrial-sized facility also within 2010,” Sims says. A commercial facility is expected to be established by 2012. Although the technologies being developed by these companies are markedly different from both traditional corn-based and cellulosic ethanol technologies, the leaders of each company stress that a wide variety of technologies will be needed to produce 36 billion gallons of renewable fuel by 2022 and therefore the various ethanol production technologies shouldn’t be pitted against one another as competition. “It’s not an either-or situation in my mind,” Woods says. “I think the country really needs all these technologies to come together and provide domestic fuel sources.” EP Erin Voegele is an Ethanol Producer Magazine associate editor. Reach her at evoegele@bbiinternational.com or (701) 373-8040.

November 2009

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ETHANOL PRODUCER MAGAZINE

November 2009

FINANCE

PUBLIC-

P RIVATE PARTNERSHIPS

In an effort to deploy new technologies and create local jobs, some public and private entities are teaming up to establish mutually beneficial relationships. By Erin Voegele

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November 2009

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public-private partnership is a contractual agreement between a public entity and a private entity in which skills and assets are shared in order to ultimately provide a service or facility for use by the general public. Involved parties share the risk in exchange for the potential to reap the rewards. While this kind of relationship has traditionally been employed to provide municipal services, such as wastewater treatment services, or for projects designed, built and maintained by a private entity but owned by a public entity, a variety of communities are expanding the scope of these relationships to provide resources and support to technology startups as a way to create jobs in their communities. According to Anita Molino, vice president of programs and energy institute chair at the National Council for Public-Private Partnerships, partnerships designed to spur job creation are likely to become more common in the future. She says these types of relationships may or may not include some type of financial component. “I think [public-private partnerships] have been a big boon to the emerging technologies world,” Molino

says. Although many public entities, such as city and state governments, are struggling with the same recessioninduced financial limitations that currently plague the private sector, there is a wide variety of resources—other than direct financial support—that cities and states can offer startup companies. Examples of this type of non-financial support include access to city resources and work spaces. “The fact is [small start-ups] are the future provider of green jobs and it is, in fact, small businesses that continue to provide the most job growth,” Molino says. The creation of jobs not only helps a municipality retain and attract citizens, but also benefits the local government through the expansion of the tax base and new sources of revenue, she says.

Toledo Takes a Risk The city government of Toledo, Ohio, recently established a public-private partnership with SuGanit Systems Inc., a cellulosic ethanol start-up company headquartered in Virginia. SuGanit was established in 2006 by Praveen Paripati, who also serves as the company president and CEO. Since its inception, the company has been work-

ETHANOL PRODUCER MAGAZINE

November 2009

PHOTO: DAN MILLER, UNIVERSITY OF TOLEDO

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SuGanit Systems Inc. utilizes office and laboratory space at the University of Toledo's Clean and Alternative Energy Incubator.

ing in collaboration with the University of Toledo to develop a feedstock flexible cellulosic process. “We’ve been working on a technology that will be able to make cellulosic ethanol from grasses such as switchgrass, agricultural residues like corn stover, and forest waste and trees,” he says. “The technology is able to convert very different types of feedstock into sugars. From those sugars we can make ethanol or other chemicals.”

technologies have been licensed from and co-developed with the University of Toledo. “[The pretreatment process] is based on ionic liquids that help make cellulose and hemicellulose amenable to enzymatic hydrolysis,” Paripati says. The second component of the technology uses a chemical process to convert certain C5 sugars into sugars that traditional yeast can utilize. In this way, Paripati says the process does not require the use of genetically modified yeast. Ryan Reiter, a development technician in Toledo Mayor Carty Finkbeiner’s office, spearheaded the efforts to form a relationship between SuGanit and the city. He says the whole concept of the partnership is to help expedite the development of SuGanit’s technology. “To do this, we are sharing some of our resources with him,” Reiter says. Paripati and Reiter first met in mid-2008. “My initial task was basically to convince him to open up shop here in Toledo,” Reiter says. “My job [in the economic development office] is to help create jobs.” This includes helping start-up companies reach the point where they can begin to hire employees.

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When considering the formation of a public-private partnership with an entity, Reiter says the city analyzes two aspects of the potential project— its ability to create jobs in the community and the potential for a clear payoff for taxpayers. The relationship formed with SuGanit is expected to achieve both. “In the short term, this project is going to save the city of Toledo more than $250,000 on an annual basis,” he says. “Long-term, it is going to create jobs.” The project is expected to save the city a substantial amount of money because SuGanit’s future facility will utilize waste feedstocks that the city currently has to pay to dispose of, including leaves, grass clippings and tree waste. Although not all public-private partnerships include a financial component, the city of Toledo is offering SuGanit some financial incentives. According to Reiter, the company will receive a 30 percent rebate on its local payroll taxes for three years under the Toledo Expansion Incentive program. In addition, if SuGanit selects a qualifying property in which to establish its full-time operations, the company could also qualify for some property tax abatements. In the event SuGanit hires more than 25 people, it would also be eligible for some state tax incentives. The city is also offering SuGanit a variety of non-financial resources. It is assisting SuGanit in the procurement of feedstock and is willing to act as a resource in connecting Paripati with others in the community. When the time comes, Reiter says he will also help SuGanit navigate the red-tape of the permitting processes for both the pilot-scale facility and a commercial-scale facility. The local port authority has also offered SuGanit assistance with the possibility of locating a cellulosic ethanol production facility at the local port. While Reiter says the city government is not currently involved

with the establishment of SuGanit’s pilot facility, it is willing to offer assistance in that area as well. Once pilot-scale production of cellulosic ethanol begins, the city plans to fuel select vehicles in its fleet with SuGanit’s ethanol. The city will also conduct mileage and emissions testing on these vehicles, as well as supply SuGanit with a fuel storage tank and pump to be used to fuel the test vehicles. “The University of Toledo is also playing a critical role in this project,” Reiter says. The university houses the Wright Center for Photovoltaics Innovation and Commercialization, which is a business incubator with available office and lab space in which SuGanit has set up temporary operations. Forming relationships with city governments can benefit start-ups in other ways as well. “The fact that you’ve got the local mayor’s office and economic development on board [with your project], helps give you credibility,” Reiter says. “Right now, a lot of these alternative energy startups need credibility. It is very hard to get funding as a start-up.” This credibility can often help start-ups secure needed grant funding. “It does give companies a leg up from a federal and state funding standpoint when they show they are getting local government support,” Reiter continues.

Partnership Considerations Molino says a private entity should consider a variety of factors before establishing this type of relationship with a local government. This includes gauging the willingness of the public entity to become actively involved in the project, as well as the regulatory environment of the community. She says regulation can be a real burden for start-up companies. “To the extent that communities can provide one-stop shopping for permitting and other forms of regulation is very helpful to these companies,” Molino says.

ETHANOL PRODUCER MAGAZINE

November 2009

FINANCE

'Having the kind of support we are receiving from both the city of Toledo and the state of Ohio has convinced us to try to do the whole development process and also have a commercial-scale process in the Toledo area. It’s always good to have a broad base of support in the community you are trying to develop a business in. When the local authorities and the state are not keen in creating these new technology developments, it is hard to develop commercial plants.'

new technology developments, it is hard to develop commercial plants.” Reiter says that given the current economic climate, he thinks public-private partnerships make a great model for helping new businesses develop. He notes that the city has no equity stake in SuGanit or its projects. “We are not getting in the business of cellulosic ethanol, we are just helping [SuGanit] out and sharing our resources with [the company] in an attempt to create jobs.” Paripati encourages other start-ups

Praveen Paripati, president and CEO SuGanit Systems Inc.

to be open to forming similar types of relationships with public entities. “Government institutions are typically meant to help the economy develop,” he says. “We should take the long view and try to develop long-term partnerships that [benefit] both the local government and the company.” EP Erin Voegele is an Ethanol Producer Magazine associate editor. Reach her at evoegele@bbiinternational.com or (701) 373-8040.

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Although money is always a primary concern for start-ups, Molino says it is important not to overlook the tremendous benefits of the many nonfinancial resources a community may be able to offer. “Money is important, but one should certainly not overlook the tremendous benefit a willing, able public participant can be,” she says. “The city of Toledo has turned out to be an enthusiastic supporter of this new technology,” Paripati says. “[City leaders] are looking for economic development [opportunities], and cellulosic ethanol seems to have caught their fancy. Having the kind of support we are receiving from both the city of Toledo and the state of Ohio has convinced us to try to do the whole development process and also have a commercial-scale process in the Toledo area. It’s always good to have a broad base of support in the community you are trying to develop a business in. When the local authorities and the state are not keen in creating these

ETHANOL PRODUCER MAGAZINE

November 2009

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PROFILE

Raphael Katzen circa 1977 PHOTO: KATZEN INTERNATIONAL INC.

ETHANOL PRODUCER MAGAZINE

November 2009

PROFILE

The Project of a Lifetime Raphael “Ray” Katzen dedicated his life to achieving commercial-scale cellulosic ethanol production from a variety of feedstocks at a competitive price. The following article, which first appeared in the Feb. 2006 issue of EPM, highlights the lasting impact he had on the industry. By Ron Kotrba

n journalism, the opportunity to interview a person whom history has credited great feats doesn't come along too often. What if, for example, it were possible to score an interview with Alexander Graham Bell on his invention of the telephone, and the nature of its necessity in modern society? Likewise, imagine springing quotes from James Watt, the guy who drastically advanced steam engine technology. For an ethanol industry reporter, a conversation with Raphael Katzen holds nearly the same weight and historical import—and that’s not surprising considering he is known as one of the industry’s founding fathers. Not only has Katzen been instrumental in developing modern dry mill ethanol plant technologies, he has been simultaneously absorbed in advancing the technologies for lignocellulosic conversion, and drafting the framework needed to build a tried-and-true cellulose industry, both in the U.S. and abroad. Katzen’s pet undertaking, Project 20, has been on the table now for almost a decade, but its development has spanned a lifetime. Project 20 is an ambitious charge to produce 20 billion gallons of cellulosic ethanol by 2020. According to the man behind the legend—and with only 15 years before the target date—Katzen told EPM that realizing Project 20 is still fully possible.

An Industry 50 Years-plus in the Making “Ray Katzen was contemplating ethanol from lignocellulosic feedstocks when he was in college, before people even knew how to spell

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‘cellulosic ethanol,’” said Philip Madson, president of Katzen International Inc., the well-known technology company that Katzen founded in the 1950s. In 1953, Katzen resigned from Vulcan Cincinnati (formerly Vulcan Copper and Supply Co.) and started a sole proprietorship. Later that same year, Katzen took on partners and changed the company name to Raphael Katzen Associates. Two years down the road, Katzen’s company went international, changing the name once again to Raphael Katzen Associates International Inc. (RKAII), which it remained until 1997 when Katzen and his wife retired. Upon retiring, they sold their stake in the business back to the company, and set up a private consulting engineering practice in Florida. After Katzen’s exit from RKAII, the company shortened its name to Katzen International Inc. But before Katzen formed his company and became an internationally known, compelling figurehead for the ethanol industry, he worked for the aforementioned Vulcan Copper and Supply Co., which had a Defense Department plant contract with the federal government to build a cellulosic ethanol plant during the height of World War II. Converting wood waste to ethanol in Springfield, Ore., Katzen began working on that project in Cincinnati, Ohio, in 1942. The plant was completed as the war ended, however, with the war over, the government no longer needed the surplus ethanol so it closed the plant. It did operate for a few months though— successfully, according to Katzen. “Vulcan ran the plant for a few months, mainly to prove its capac-

ity of 300 dry tons of wood per day and yield of 50 gallons of ethanol per ton,” Katzen told EPM. But ethanol could be made much cheaper from ethylene then, so Vulcan recommended abandoning the project. Even more than 50 years ago, techniques for converting lignocellulosic biomass to ethanol were on people’s minds—especially Katzen’s. “The plant was using obsolete technology,” Katzen said in reference to the Springfield wood-to-ethanol plant. “There were scaling problems with the tars and resins, plus calcium sulfate that was produced in degrading the sugars. It was difficult to run. Technology has changed radically since then. Now I recommend a mild acid pretreatment followed by enzymatic hydrolysis.” While still with Vulcan, Katzen became deeply acquainted with Cuba. This was before Castro and his Marxist Revolutionaries grasped hold of political and military power in 1959, much to the dismay of the fallen Fulgencio Batista, the United States and Katzen. “Castro and I are enemies,” Katzen said without mincing words. “He ruined my business down there.” Prior to that, Katzen designed the Bacardi family’s first modern distillation systems. Originally based in Santiago, Cuba, the still-famous rum makers moved major operations to San Juan, Puerto Rico,

PHOTO: KATZEN INTERNATIONAL INC.

PROFILE

From left to right, Otto Hohnerlien, Ray Katzen, Oscar D'Arte and Guillermo De La Vega, at Katzen International's 50th anniversary party.

before Castro’s reign began. Katzen International still continues its service to Bacardi, even after all those years. Pre-Castro Cuba enchanted Katzen. “After [World War II], we saw a market in Latin America, especially in Cuba, which

was an energized and developing country,” Katzen said. “I bought some property for a combined home and office in Varadero Beach, the most beautiful beach in the world. Before Castro, 85 percent of my business was in Cuba.”

PROFILE

Although many consider Brazil as the first country to build a successful ethanol industry, chances are they learned much from Katzen. “After World War II, Ray was virtually solely responsible for the building of the fuel ethanol program in Cuba,” Madson said. “Brazil took all the credit for making ethanol from sugarcane juice and molasses, but it is believed that the Brazilians learned much from Katzen’s work in Cuba. There are certainly incestuous roots there—none of this happens in a vacuum.” According to Madson, the Cuban people are still grateful to Katzen for revolutionizing the sugarcane industry in Cuba. “He is forever known down there as the doctor who turned on the lights [at Centrol Fransisco] in Cuba,” Madson said. Back then, electricity for the rural villages didn’t come from the government, but rather the sugar mills as a benefit to its workers, Madson explained. After 1959, Katzen and his partners fled Cuba and the political tumult, returning to Cincinnati, Ohio, where the future held much work for them.

Foreseeing the Future of Two Ethanol Industries In the late 1970s, before Madson began working for RKAII, he was searching for an ag-oriented job in chemical

engineering. He kept hearing the name “Katzen,” but he couldn’t get in touch with the man. “It wasn’t until after looking coast-to-coast to find an ag-related chemical engineering job that I found Ray Katzen right in my backyard—literally,” Madson said, sort of laughing. “I could see the roof of Ray’s house (the home Katzen lived in when he founded the company) from my dining room window. Of course, I didn’t know that was his former house until after we met.” According to Madson, Katzen had the ear of everyone in the industry then, as he still does. “At the time we met, I didn’t yet appreciate the industry or his standing in it,” Madson said. Back then, the distillation and dehydration systems varied from industry to industry. Katzen created the blueprint for what a proper system should be, and then Madson and others helped bring that vision to life. They delivered Katzen’s model of an efficient continuous mashing, cooking and liquefaction process, and simultaneous saccharification and fermentation distillation dehydration system for a disjointed ethanol industry, as it were. This is just one of many examples of Katzen’s keen foresight. Lonnie Ingram, director of the Florida Center for Renewable Chemicals and Fuels in the University of Florida’s De-

partment of Microbiology and Cell Science, met Katzen long ago. “He spoke, and it was clear that he was way ahead of his time,” Ingram says. Ostensibly, the U.S. DOE agreed. In 1978, after the two Organization of the Petroleum Exporting Companies energy crises of that decade, Katzen’s company got a call from the DOE to look into ethanol as a possible source of feedstock for butadiene (synthetic rubber) production. The DOE wanted studies on the energy balance, yield and the “food versus fuel” issue. “We preferred business from industry over government, but we did what they asked,” Katzen told EPM. The whiskey business is the original dry mill industry, so that was looked at first. That study’s findings demonstrated that fuel ethanol could be made on a large scale using one-third the energy used to make whiskey then. The study, published by the DOE, sold more than 30,000 copies and was reprinted. “Even today, we occasionally see someone pull out a dogeared copy of that study the company did so many years ago,” Madson said. Along with the reduced energy finding in the study, it made an amazingly accurate prediction of the optimal capacity for dry mill ethanol plants. Almost 30 years ago, before Fagen Inc., ICM Inc. and Broin Companies (now Poet LLC) plants

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dotted the Midwest, RKAII’s study foretold that the optimal capacity for a fuel ethanol plant would be 50 MMgy. “Now isn’t that incredible? He had the foresight so many years ago to envision what is true today—most plants in the U.S. are approximately that size," Madson told EPM. Katzen also predicted that there could be 350 50 MMgy plants across the United States. That’s a grand production total of 17.5 billion gallons a year. The USDA told Katzen that if the nation’s capacity to produce ethanol exceeded 5 billion gallons, corn prices would spike due to the laws of supply and demand.

Project 20 What does this historical account have to do with Project 20? Simply put: Everything. “It was clear that the concept of Project 20 was there from the beginning,” Madson stated. “But the actual words for the project came later, around the early 1990s. It was written in very simple and concise terms. He had hoped it would be

the ‘battle cry’ of the industry.” Basically, Project 20 has been 50-plus years in the making, consciously or not. It was clear to Katzen that the USDA’s suggestion on the theoretical maximum availability of corn for ethanol production was on target. “There is a limit,” Katzen said. “That’s why and when we started pushing cellulosic ethanol.” To get Project 20 rolling—and without spending time considering whether the government would certify blends of 20 percent gasoline and/or diesel as EPAapproved fuels—a commercial cellulosic ethanol industry must be started. “The key is putting together a total system package that’s economically competitive,” Madson said. “When ethanol [or corn] prices rise, that opens the door for other economically competitive technologies.” Katzen, however, had a narrower definition of the catalyst to spark commercialization of cellulosic ethanol. “The key to making a cellulosic ethanol industry economically competitive is the cost of enzymes,” Katzen told EPM. Accord-

ing to him, the DOE/National Renewable Energy Laboratory research and development program with Novozymes and Genencor, which has already significantly lowered the cost of enzymes needed for lignocellulosic conversion, is on the right track. So the technology is there, but a few obstacles still exist to commercializing the production of cellulosic ethanol, one of which is sort of a chicken-and-egg conundrum. “You don’t get commercial optimization of anything … until you’re in the commercial arena, until you start commercializing,” Madson said. Nevertheless, at least four more obstacles are readily apparent: passing the needed government legislation such as loan guarantees, state, local and federal incentives, and uniform fuel standards; encouraging lending reforms to stimulate more willing, yet protected, financing of cellulosic ethanol plants (because institutions are much more willing to lend money on a project like 50 others that have passed before it, rather than on a first-of-a-kind project);

ETHANOL PRODUCER MAGAZINE

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PROFILE

continued research and development to look at things such as lowering the investment costs of these plants, which are high, by developing lower-cost material alloys, for example; and, lastly, building and optimizing a biomass collection and distribution infrastructure. On the finance issues, Ingram hit the nail on the head. “We need to mitigate risk and incentivize investors,” he said. Also, biomass collection is a big barrier. “There are billions of tons of waste in the United States, but no one knows how to collect it economically,” Katzen said. That’s why Katzen has been talking to John Deere on modifying its harvester. “We’re looking at the harvester throwing the corn kernels into a truck on one side, blow the light stuff into the field and then the stalks and cobs get put into a second truck.” Piles of biomass left sitting in the fields rot away. “We need to keep it off the ground at harvest time,” Katzen forewarned. Both Madson and Ingram agreed that a good point to start collection is where the biomass has become a financial burden. “The first commercial plants need to be built where companies are paying to dispose of their waste materials,” Ingram said. “It would be profitable for both sides.” Getting financing for—and building—demonstration plants is a necessary first step, according to Katzen. Abengoa Bioenergy currently retains Katzen as a consulting engineer to do just that. Katzen is working on engineering Abengoa’s cellulosic ethanol demonstration plant in Spain and its pilot plant in York, Neb. The capacity for the Spanish demonstration plant is 5 million liters per year (1.32 MMgy) using wheat and barley straw, and is expected to be operational by mid-year. “Project 20 is achievable,” Katzen told EPM. “The process technology is available, enzyme effectiveness and costs are good, but the investment costs

ETHANOL PRODUCER MAGAZINE

are higher than in [grain] dry mill plants.” Biomass as a feedstock is much cheaper than corn though, and lignin residues can be burned to provide energy, steam and electric power. Spanning more than half a century, Katzen’s unprecedented work with ethanol and cellulose is indeed a solid starting point for bringing Project 20 full-circle. “Since Ray retired from the company, Katzen International hasn’t changed its fundamental business strategy,” Madson said,

November 2009

reflecting on Katzen’s lifetime of engineering and business achievements. “It’s been 50 years, and we’re still growing on the same philosophy. That tells me Ray Katzen’s original philosophy was right.” Katzen died July 12 at the age of 93. EP Ron Kotrba is the editor of Biodiesel Magazine. Reach him at (701) 738-4942 or rkotrba@bbiinternational.com.

OIL

Oil companies were noticeably absent during the ethanol industry boom from 2004 to 2007. Now, as some of those first-generation ethanol plants struggle to survive, Big Oil has begun to take an interest. By Craig A. Johnson

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ETHANOL PRODUCER MAGAZINE

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ith the implementation of the renewable fuel standard (RFS) in 2003, a mandate to blend ethanol into gasoline was created, and the ethanol industry boomed. For the next several years, construction of ethanol plants accounted for most of the industry investment. Builders were in short supply, or booked for months in advance. Newspapers were filled with stories of ethanol plants going up across the Midwest. Many of them turned out to be just stories, but the build had begun and ethanol became a household word almost overnight. Existing fuel producers and refiners, companies such as Royal Dutch Shell plc, BP plc and Exxon Mobil Corp., were initially caught flat-footed by the explosion of growth in the ethanol industry. "I don't know much about farming, I'm not an expert on biofuels, and there's not a lot of technology I can add to moonshine," Exxon Mobil Chairman and CEO Rex Tillerson said at a Houston energy conference in May 2007. "There is really nothing

we can bring to that whole issue. We don't see a direct role for ourselves with today's technology." Statements regarding the utility of ethanol as a gasoline additive notwithstanding, companies such as Shell have turned their focus to the next generation of biofuels—specifically cellulosic. A recent statement from Shell points to the likelihood it sees second-generation biofuels as realistic for investment. “Shell is investing in second-generation biocomponents, which can offer around 90 percent reduction in 'well-to-wheels' CO2 production (when used neat, compared with conventional gasoline/diesel); [will] use non-food feedstocks (such as straw and wood); and [notes] some types can offer better engine performance. However, second-generation biocomponents will not be available in significant commercial quantities for five to 10 years and in this time, demand for first generation biocomponents will continue to grow as a result of government policy and mandates.”

The message from Shell seems clear— corn-derived ethanol is not where its interest lies. Most oil companies prefer to be vertically integrated. Owning the means of production from well-to-pump costs less and streamlines the process as companies can realize many economies of scale.

Valero’s Biofuel Ambitions In recent years, the ethanol industry has been hit hard by extreme economic challenges, from high feedstock and energy costs, to large loans and thinning margins. Everyone knows that some plants found these challenges insurmountable, which led to bankruptcies across the industry, the largest of which being VeraSun Energy Corp.’s liquidation in 2008. Its failure opened a path to ownership for any company interested in entering the ethanol industry at a greatly-reduced cost. Initial speculation that anybody could buy up these plants for pennies on the dollar was soon replaced by the conventional wisdom that an oil refiner might be the perfect buyer for these distressed facilities.

PHOTO: CRAIG A. JOHNSON, BBI INTERNATIONAL

OIL

The former VeraSun Energy Corp. ethanol plant in Charles City, Iowa, is one of seven production facilities now owned and operated by Valero Renewable Fuels LLC.

The largest oil company to enter the ethanol industry so far is Valero Energy Corp., a San Antonio-based Fortune 500 company. The company is currently the

nation’s largest oil refiner, processing 3 million barrels of oil per day—just shy of 1.1 billion barrels per year. In the ethanol industry, Valero made news in March when

it purchased six of VeraSun’s plants. At present, Valero owns seven of the former VeraSun plants, and controls an impressive 780 MMgy, making it the third largest

OIL

Getting into corn ethanol may be new specifically, but vertically integrating themselves in the energy industry is what oil companies have been doing for years. Just like an ethanol plant, oil companies are sometimes forced to exist in a liminal space between profit and loss. ethanol company in the U.S. According to Bill Day, manager of corporate communications for Valero Energy, all seven of the former VeraSun plants are operating at capacity. Valero’s interest in ethanol began with the implementation of the RFS. “[Valero] looked at getting into the ethanol producing business for a couple years, prior to buying those plants,” Day says. “Of course, Valero’s been in the ethanol purchasing business since the renewable fuels standard [required us] to blend into our gasoline. Since we were going to be re-

quired to blend ethanol into our gasoline, we figured it might be a good idea to get into the production business.” For Valero, the timing could not have been better. “When we started looking at ethanol production, it was not an attractive time to get into the business. There was a lot of building going on and costs were pretty high.” That was a few years ago, when ethanol construction boomed. According to EPM’s plant construction lists, construction represented about 560 MMgy per month in 2004. Three years later, construction was almost 10 times that, representing an average month-to-month construction capacity of 5.3 billion gallons. Anyone who might have wanted to build a plant had to get in line. “Values for ethanol plants started dropping as a lot of overcapacity was introduced into the marketplace,” says Day, chronicling the events leading up to Valero’s purchase. “The price of fuel got very high, the price of corn got very high and a lot of ethanol plant operators started having financial problems. Many were looking to sell their plants, or had been forced into bankruptcy, which was the case with VeraSun. We were able to pick up these seven plants out of the VeraSun bankruptcy auction for about 30 percent of what it would have cost us to build the ethanol plants from scratch.”

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The predator-prey analogy may seem apt at first but Day quickly points out that were it not for Valero, the cities and towns that these plants call home might have struggled even more. “The timing was great in terms of Valero getting a good deal on these plants, and it also worked out well for the employees of the plants because we’ve kept them on and kept them in their jobs.” The employees are a part of Valero’s new subsidiary Valero Renewables, which also oversees the company’s wind farm in the Texas panhandle.

Second-Generation Ethanol One question in the energy sector has been whether oil companies will invest in first-generation plants such as Valero, whose plants are all corn-fed, or wait for cellulosic ethanol to be commercialized. According to recent reports, companies such as Houston-based KBR Inc., historically an oil industry engineering/construction firm, have been evaluating emerging biofuels technologies to see if they can get beyond bench scale. All seem to be struggling with how these processes scale-up. Valero’s move constitutes the first major move towards first-generation ethanol production by an oil company, and as such has attracted the attention of many industry analysts and observers. “It’s very interesting to see the oil companies—

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especially the independent refiners, those not tied to the upstream—dive into the biofuels space, ” says Craig Moyer, co-chairman of the energy, environment Craig Moyer and natural resourcco-chairman, es practice at law energy, environment and firm Manatt, Phelps natural resources, & Phillips. “They’re Manatt, Phelps & taking plants that Phillips Law turn feedstocks into transportation fuel, and then they will market those transportation fuels. It’s not that far from their core business.” Getting into corn ethanol may be new specifically, but vertically integrating themselves in the energy industry is what oil companies have been doing for years. Just like an ethanol plant, oil companies are sometimes forced to exist in a liminal space between profit and loss. “The refining business has always been one of feast and famine,” Moyer says. “Refining transportation fuel has always been a narrow margin and sometimes supply outstrips demand and those margins go negative and poorly capitalized companies go belly-up.” Valero, by purchasing plants that produce a key component of its fuel blend, realizes a savings over other fuel producers and refiners. According to Day, Valero blends about 50 percent of its ethanol into its own fuel and sells the rest on the open market. Getting the ethanol at cost is healthy for the bottom line, and gives the company a competitive edge. For Moyer, the Valero purchase makes good sense in the short-term, and in the long-term, when cellulosic ethanol is likely to be the dominant form of fuel in the industry. “At some point in the future, cellulosic ethanol will be out there…. These plants will [use] corn, but someday, all ethanol refineries will be cellulosic running on waste.” This not only improves the environmental benefits, but removes ethanol producers from arguments over food versus fuel. ETHANOL PRODUCER MAGAZINE

“The plants that we bought from VeraSun are all very modern,” Day says. “They have the ability to add on new technologies as they become available. We are interested in cellulosic technologies and are doing some investment in that area. And we would be interested [in placing] cellulosic technology onto our plants once that technology becomes commercially viable.” Inasmuch as Valero entered the ethanol industry by purchasing first-generation plants, it’s clear that it doesn’t expect corn

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EXTRACTION

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ethanol to be its only investment. Clearly, Valero didn’t feel it necessary to wait for second-generation fuels to be available, and commercially viable. Rather, buying VeraSun’s former plants may be the direction the energy industry was headed in all along. EP Craig A. Johnson is the contributions editor of Ethanol Producer Magazine. Reach him at (701) 738-4946 or cjohnson@ bbiinternational.com.

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WOODY BIOMASS. BY RONALDS GONZALEZ, JEFF WRIGHT AND DANIEL SALONI Contribution

Filling a Need: Forest Plantations for Bioenergy in the South The growing number of renewable energy projects in the Southern U.S. utilizing woody biomass will require the development of short-rotation bioenergy plantations.

ardly a day passes in the U.S. without an announcement of a new bioenergy facility or expansion of an existing one. This list of projects includes, but is not limited to, wood pellet, cellulosic ethanol, biodiesel, co-generation and biomass combustion. A number of these facilities are running at capacity with plans to expand. Others are in the permitting or early construction phase with plans to go live in the coming years. The U.S. forest products industry is already the nationâ&#x20AC;&#x2122;s largest producer of

renewable energy and the southern region is no exception. For many decades, the forest products industry has been utilizing, harvesting and manufacturing residues in boilers and kilns for on-site energy usage as well as selling excess energy into the grid. This trend is increasing in light of the recent and expected future volatility in other energy sources such as coal and natural gas. Against this backdrop are a number of published studies on logging residuals available for bioenergy. What is increasingly obvious is that the amount of truly

available logging residues will be nowhere near enough to supply the current and announced bioenergy processors in the Southern U.S. This indicates that appropriate technology for short-rotation bioenergy plantations must be rapidly developed to fill this growing need.

Forest Plantation Concept Forest plantations have been sustainably grown in many parts of the world. While exact records do not exist, it is commonly understood that the Japanese have been planting forests since the

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

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10th century. Forest yields continue to increase on these sustainably managed acres. In the Southern U.S., the history of forest products and forest plantations is long and successful. It is projected that more than one-half of the wood harvested for processing will be obtained from planted forests in this region. This could not have been possible without the utilization of outreach, education and research from land grant universities, the U.S. Forest Service, state forestry services, private and state forestry associations and the participation of literally millions of private landowners as well as large timber land companies. The typical forest plantation today in the Southern U.S. is planted to loblolly pine (Pinus taeda L.) on average at 600 seedlings per acre, on a 25-year rotation with a thinning at the age of 15 years. The thinning typically removes trees for pulpwood while the final harvest is for saw timber and pulpwood. This management scheme has been derived to fill the wood needs of current pulp and lumber processors. In addition, plantation acres have been established for other conifer or hardwood species in the Southern U.S. This work is supported by highly trained forestry and logging professionals and land grant universities, among others, that yearly yield more than 100 masters and doctoral students.

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Screens Rotors

This 24-month-old stand of Eucalyptus sp. trees is being grown in Florida.

Novel, But Not New Idea Bioenergy forest plantations have been practiced in the Southern U.S. since the oil embargoes in the 1970s. In countries such as Brazil and South Africa, eucalyptus plantations have been managed for bioenergy production for decades. What makes the current Southern U.S. situation novel is the short timetable given to develop existing genetic improvement programs and their required silvicultural

Bearings

systems for widespread early adaptation. A forest bioenergy plantation can take 18 months to eight years to reach financial maturity, and the sooner it is planted the sooner it will be ready for commercial harvest. The tried and tested forest plantation concept in the Southern U.S. produces conifer wood because it is the

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backbone of the forest products industry for both pulp and lumber. The bioenergy plantation, however, will be more complex and many questions need to be addressed. Does the bioenergy stream allow bark, branches, leaves and wood or is only wood preferred? Does the bioenergy stream need higher lignin content typical for certain species and tree ages? What will be the usage of the ash in co-generation or single-source biomass combustion? How will the development of enzymes change the tree species or rotation age? What are the logistics of harvesting and transporting feedstock cost effectively? At this time, a number of landowners, research institutions and government entities are researching forest bioenergy plantation management schemes. Early phase testing is also underway on feedstock suitability for wood pellets, cellulosic ethanol and combustion. These research efforts are rapidly expanding due to both funding, and private company interests. The forest bioenergy plantation will have more trees per acre, possibly 1,000 to 2,000, and shorter rotations. In fact, for hardwood species that re-sprout (coppice) after harvest, the rotation lengths can be 18 to 36 months. New harvesting systems are being developed for this

PHOTO: RONALDS GONZALEZ

WOODY BIOMASS.

This six-year-old stand of sweetgum trees is being grown in South Carolina as future bioenergy feedstock.

smaller material and most of these have an on-site chipping or grinding capacity so that the delivered feedstock is ready to be processed directly into bioenergy.

One type of forest plantation takes both traditional and bioenergy concepts to a nonconventional system. This utilizes one row of widely spaced, high-value

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genetics for saw timber (lumber) while the adjoining row is tightly spaced for bioenergy. This system will work with loblolly pine with a bioenergy harvest at six to eight years and a saw timber final harvest at 18 to 22 years, allowing farmers and forest landowners to increase the possibility of positive cash flow in the first years, capturing new markets for bioenergy and retaining existing markets for saw timber.

Findings, Finances Needed The authors believe that the region’s seedling nursery capacity, genetic improvement programs and land management technologies (silviculture) are robust and more than adequate for developing highly productive forest bioenergy plantations. Two areas are in need of continued investment. First, the organizations involved in bioenergy processing need to share their findings on what is and will be the desired biomass processing characteristics, such as whether softwood or hardwood is preferred, as well as the most suitable species for biofuels. Sharing this with landowners is crucial to their forest management decisions. Second, additional effort is needed to conduct financial modeling of the various forest bioenergy plantation systems

with regard to species, trees per acre, rotation lengths and harvesting systems. North Carolina State University, in partnership with state and federal institutions, private companies and other universities, is actively working to identify the most promising biomass and the most profitable pathways for biofuel production. The NCSU wood and paper science department is performing complete analysis of the supply chain with strong technical basis in process design while also accurately measuring the financial impact. From current research, the major features identified for ideal biomass for biofuel are: Maximum delivered cost of $62 per bone dry tone of biomass Carbohydrate content of 65 percent to 70 percent on dry mass basis (mostly true for chemical pathways for biofuel production) A crop that may be harvested and supplied year-round (instead of threeto five-month harvesting windows for switchgrass and sweet sorghum, requiring further logistics and storage) Fast-growing, short-rotation forest plantations can fulfill these requirements and be used for bioenergy including but not limited to electricity generation, wood pellets and biofuels.

The increasing scale of forestry biomass for bioenergy will only be possible with developments in forest bioenergy plantations as there will be insufficient feedstock from logging residuals for all announced and planned facilities. Existing technologies can be utilized to rapidly establish forest bioenergy plantations and research is underway to expand these possibilities. Bioenergy processors and forest plantation managers must continue to interact to ensure that woody feedstock demand does not exceed supply. EP Ronalds Gonzalez is a doctoral student at North Carolina State University in Raleigh working on cellulosic ethanol from various feedstocks. Jeff Wright is an adjunct professor at NCSU. Daniel Saloni is an assistant professor at NCSU working on supply chain and life-cycle analysis of woody biomass and biofuels. Reach them at rwgonzal@ncsu.edu; patula1@msn.com, and danielsaloni@ ncsu.edu.

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FEEDSTOCK. BY SAM A. RUSHING Contribution

Algae: cleaning up biofuels The role of algae as a component of a successful carbon sequestration program is gaining interest in the biofuels industry.

ew methods of carbon sequestration are essential to meet the changing political and environmental tone set by the U.S. House of Representatives and the U.S. EPA. Algae can be a partial solution for greenhouse gas reduction as CO2 is an important ingredient used by algae for normal growth, during photosynthesis. A range of 1.5 pounds to 3.0 pounds of CO2 is required for every pound of algae cultivated. There is also strong interest in using algae as a source of feedstock material for biodiesel, and perhaps fermentation. Algae cultivation as a carbon sink is fast becoming a popular consideration among those in the power generating business. The call for a meaningful reduction of atmospheric CO2 content creates a constructive opportunity for carbon-emitting power generators. Power plant projects, with their higher-thanaverage emissions of CO2, are under the greatest pressure to reduce emissions. Most of the testing for CO2 fixation by algae has been via the coal-fired power plant, which produces lean CO2 compared to a fermentation

project. The difference in CO2 content can make for a broad range in capital expenses and production costs. Also, while particular algae strains will accept the use of a raw flue gas, selecting a viable algae strain to use depends on raw gas specifications for nitrogen oxides and sulfur oxides. In addition, larger fermentation projects and chemical manufacturing plants are also viable CO2 source targets. The U.S. DOE or industry sponsored demo projects have produced most of the headlines in this area recently. Typically, the algae project is located around or near the power facility, chemical manufacturer, or other projects that have a significant CO2 output. In algae fuel, this can represent up to 30 times more energy value per acre than a crop such as soybeans. Given the high oil yield from algae, it is estimated that approximately 1 percent of todayâ&#x20AC;&#x2122;s 1 billion acres used in the United States for farming and grazing would be sufficient (as land, pond, or ocean space) to produce enough algae to replace all petroleum-based diesel fuel used in the U.S. today. That is a significant number, and algae should be utilized and developed to take advantage of opportunities such as this.

Sources of CO2, Direct Source Application Coal-fired electricity generating plants account for about 40 percent of current CO2 emissions and reductions in this sector would have a substantial impact on greenhouse gases (GHG). When considering relatively large CO2 emitters, the ethanol industry has been in the spotlight due to a substantial amount of CO2 emitted in a concentrated form as a direct byproduct of fermentation. As to fermentation, anhydrous ammonia and certain hydrogen by-products, CO2 raw gas content generally falls around 97 percent to 99 percent by volume, often in a water-saturated state. In the United States, CO2 is now being recovered from the flue gas produced from coalfired cogeneration plants. The economic model works due to a prior energy law which fosters the use of cogenerated steam which is used in an mono-ethanol amine (MEA) solvent recovery processâ&#x20AC;&#x201D;a method of concentrating the CO2 from a lean content in the flue gas. When comparing with emissions from fossil fuel combustion, CO2 levels range within the

ETHANOL PRODUCER MAGAZINE

November 2009

12 percent to 15 percent by volume, though volume increases by orders of magnitude. Gas-fired turbine exhaust in cogeneration can be below 3 percent CO2 by volume; and heavier hydrocarbons have higher concentrations of CO2 accordingly. Some consider the need to concentrate the CO2 via traditional processes, such as MEA, which is quite expensive. If using MEA, this would represent between three and five times the cost of applying CO2 from a concentrated source, such as those named above. Other novel or test applications are underway with so-called proprietary processes, including membrane and refrigeration systems. The economics behind what type of CO2 source is used is driven by the raw CO2 content in the gas source type, as well as the impurities found in this CO2 source. If the source is relatively clean, and well-concentrated, direct application for CO2 fixation by certain algae strains is entirely feasible. Separately, when concentrating a flue gas versus using a highly concentrated source (chemical manufacturing byproduct for example), the economics are highly disparate. On the other hand, if these projects are DOE sponsored, or within the forthcoming GHG laws and CO2 emissions regulations perhaps the need for concentrating or refining is a viable possibility.

When considering algae fixation as a means of sequestering CO2, and a further means of producing a substantial raw material for the manufacture of biodiesel, it is technically feasible to transport CO2 via pipeline. Consideration has been given to projects which use high pressure from enriched sources of CO2, such as fermentation for various destinations such as EOR. In the end, CO2 from fossil fuel combustion in the U.S. power sector can amount to 20 million tons daily on a global scale. Total world output is on the order of 75 million tons of CO2 daily emitted by all sources. When taking this into consideration, all means of containing, sequestering, or fixing CO2 via an environmentally friendly and extremely useful product such as algae is an extraordinary opportunity. The end result is twofold—the production of an extremely useful and energy-rich value versus grain and other organic matter feedstock materials such as soy and palm oil.

CO2 Transportation, Algae Cultivation Sites Traditionally, CO2 has been transported via pipeline, truck and rail in a liquid form—always purified when used in the merchant markets. The exception to much or any purification has been for enhanced oil recovery (EOR). It is important to remember that liquid CO2 would represent a great deal more CO2 presence versus trying to transport a gaseous, dilute, power plant product. The construction of a liquid carbon dioxide pipeline can easily cost $1 million per mile; and when transported as a liquid via pipeline, this distance can be substantial. Pipelines which transport liquid CO2 to EOR sites are often long distance lines, up to one hundred, and even hundreds of miles, requiring sufficient compression on the front end and compression sub-stations in route. ETHANOL PRODUCER MAGAZINE

November 2009

The greatest level of CO2 content would be found among select byproduct streams in the chemical manufacturing industry; and the larger scale plants are probably those to be targeted in the planned new legislation and EPA directives. The first 25,000 tons per year are exempt from any cap and trade, or other mechanism proposed by the House of Representatives or the EPA; however, other mechanisms beyond cap and trade may take place with the new CO2 related directives. Sequestering CO2through algae is unique since it represents carbon fixation in plant life, and is an ingredient essential for the growth of an energy rich product for the biofuels industry. EP Sam A. Rushing is president of Advanced Cryogenics, Ltd, a carbon dioxide consulting firm based in Tavernier, Fla. Reach him at rushing@terranova.net.

Can fractionation keep ethanol profitable when corn prices go up and ethanol prices go down? CPT says yes with MarketFlex™, a new way of fractioning that gives you the power to “dial in” the stream fractions the market values most…at any given time. Fractionation for ethanol just got better. Choose the process with the greatest flexibility. Choose CPT’s MarketFlex™

COPRODUCTS. BY RENATA URBAITYTE Contribution

Organic Acids Yield Advantages Organic acids and acidifiers are powerful tools that can provide one more barrier to disease transmission in large feeding installations.

revention of disease transmission and enhancement of growth and feed efficiency are critical factors in modern animal production. When pathogenic bacteria contaminate feed, it becomes a potential route of transmission of disease to animal and human populations, and is consequently of great concern to producers and consumers. Food-producing animals (e.g., cattle, chickens, pigs, and turkeys) are the main reservoirs for many of these microorganisms, which include non-Typhi serotypes of Salmonella enterica, Campylobacter species, Shiga toxin producing strains of Escherichia coli, and Yersenia enterocolitica.

The microflora found in feed materials comes from a variety of ecological niches such as soil and the animalsâ&#x20AC;&#x2122; gastrointestinal (GI) tract. The GI tract pathogens can be introduced into food chain by animals defecating in the farm environment or by fertilization of crops with manures, consequentially making feed a carrier for animal and human pathogens. Feed materials may be inoculated with microorganisms, mostly bacteria and fungi, at any time during growing, harvesting, processing and storage. Counts of microorganisms vary depending on the function of materials, location of its origin and climatic conditions. It is known that microfloral growth is de-

pendent on moisture, pH value, temperature and composition of feed materials. For example, the optimal temperature for E. coli O157:H7 is 37 degrees Celsius, with a minimum of 7-8 degrees C and a maximum of 46 degrees C. The optimal pH is between 6 and 7, however it might stand a pH range between 4.4 to 9.0. The E. coli O157:H7 doubles in number approximately every 24 minutes at the optimal temperature and pH value. Some microorganisms including, E. coli, may adapt to conditions without water and can actively grow in stored feed. Various authors have reported that grains and oilseed crops possess a diverse microflora, with populations ranging from 5x103

to 1.6x108 colony-forming units (CFU)/g that are highly resistant to low moisture conditions. Experimentally, very low doses of E. coli O157:H7 may result in colonization of some piglets. Once some piglets are colonized, they may amplify E. coli O157:H7 and transmit it to other piglets via contact. Enterotoxigenic E. coli strains are a major cause of diarrhea and death in neonatal and newly weaned pigs. Enterotoxigenic E. coli deliver toxins when it adheres to the small intestinal microvilli and produces enterotoxins that act locally on enterocytes. This action results in hypersecretion of water and electrolytes, and reduced absorption. Heat treatment, usually dur-

ETHANOL PRODUCER MAGAZINE

November 2009

ing conditioning, pelleting or extrusion of feeds has been shown to be an effective way to reduce microbial loads in feed materials and compound feed. Reduction of the bacterial contamination by heat is dependent on the temperature and treatment time. However, these methods do not prevent a recontamination of feed materials and compound feed afterwards. Dietary acidification with organic acids has been shown to contribute to environmental hygiene preventing feed raw materials and compound feed from microbial and fungal deterioration. Moreover, constant treatment with organic acids has a residual protective effect in feed, which helps to reduce recontamination and also to reduce the contamination of milling and feeding equipment. Supplementation of organic acids in feed tends to decrease the feed pH, buffer capacity, and to prevent undesirable microbial growth. However, for each acid, its specific inhibiting effect on bacteria, yeast and mold has to be considered when recommendations for feed supplementation are made. For example, some organic acids, such as formic and propionic have broader antimicrobial activities and can be effective against bacteria and fungi, including yeast. Dietary acidification is important to create unfavorable conditions for microorganisms and for reduction of pH and stimulation of GI tract enzymes. Optimum pH is needed for enzyme activation, for example, pepsinogens are rapidly activated at pH 2, but very slow at pH 4. Pepsin has its optimum between

pH 2 and 3.6, and remains inactive at pH 6. Due to insufficient production of HCl and pancreatic enzymes, and sudden changes in feed consistency and intake, piglets have limited digestive capacity and absorption at weaning. Moreover, the stress associated with weaning is known to disturb the intestinal microflora. Various studies show that acidification of the diets decreased pHvalue in feed and consequentially reduced the coliform and E. coli counts along the intestinal tract, decreasing scouring and mortality of piglets. It has been shown that acid conditions favor the growth of lactobacilli in the stomach, which possibly inhibits the proliferation of E. coli and produces lactic acid and other metabolites which lower the pH and inhibit E. coli The reported pH levels of the swine diets in these studies range from 4.36 to 5.79. Dietary acidification by a mixture of organic acids decreased the pH value in swine diets by 0.15 to 0.98 pH units. The decrease in pH values was dependent on the inclusion levels of organic acids, which varied from 0.5 to 3 percent, and composition of the diet. This was in agreement with a recent study, where a blend of formic and propionic acids at an inclusion level of 0.3 percent reduced the pH by 0.11 pH units in starter and grower diets. A higher inclusion level of 0.5 percent of the same acid blend reduced pH of the diet by 0.23 and 0.21 pH units in the starter and grower diets, respectively. Another factor affecting the response of acidifiers would be

ETHANOL PRODUCER MAGAZINE

November 2009

the buffering capacity of the diets. By definition, the buffering capacity (B-value) is the change in the pH value of a defined volume or mass after the addition of a strong acid. A more practical definition in the feed industry is that the B-value is the amount of 1 M hydrochloric acid (HCl) solution which needs to be added to a 10 percent slurry of feed or a feed ingredient in 100 ml of water in order to obtain a pHvalue of 5, in some cases a pH value of 4 or 3. This definition is the reason why we find different values for the same expression in practical applications. For example, various studies have reported B-values ranging from 380 to 700 mEq per kg feed. Acid-buffering capacity is lowest in cereals and cereal byproducts, intermediate or high in protein feedstuffs and very high in minerals. It might be reasonable to assume that the buffering capacity of pig feed can be considerably influenced by selection of feed ingredients, and it may in part result in differences in the effectiveness of acidifiers. It is recommended that swine diets should not exceed 700 mEq/kg of feed B-value. High protein and mineral content of feed ensures rapid animal growth, but generates high buffering capacity, thus reducing levels of HCl in the stomach. Results of some studies demonstrated that high B-value of the diet increased gastric pH and resulted in decreased amino acids digestibility. Lowering dietary buffering capacity, via acidification with organic acids, has been shown to inhibit luminal growth of

enterotoxigenic microflora and to enhance swine performance. The results of one in vitro study showed that an acidifier consisting of a blend of formic and propionic acids at an inclusion level of 0.3 percent decreased B-value by 16 and 17 percent in starter and grower pig diets, respectively. Moreover, the inclusion level of 0.5 percent of the same acid blend decreased B-value by 18 and 19 percent in starter and grower pig diets, respectively. The decrease in Bvalue was directly related to the inclusion level of acidifier and the diet composition. Acidifiers are powerful tools to maintain animal health and improve their performance, as well as to control feed and environmental hygiene. Consistent beneficial effects on productivity in weaned pigs have been reported in numerous scientific studies with results showing the decreased microbial counts in feed and improved animal growth performance, reduced diarrhoea, morbidity and mortality rates. Furthermore, an overwhelming portion of livestock producers consider acidifiers as an outstanding solution to enhance performance and, therefore, profitability. EP Renata Urbaityte is technical manager for Biomin. Reach her at renata.urbaityte@biomin.net

EVENTS CALENDAR

World Ethanol 2009 November 2-5, 2009 Mexico City, Mexico Le Meridien Montparnasse Hotel Paris Industry experts, including senior representatives from the oil and automotive industry, will assess the outlook for agricultural commodities and nonfood feedstocks. Attendees will include senior executives from all sectors in the value chain. +44 (0)20 7017 7500 www.agra-net.com/worldethanol

Cellulosic Biofuels Summit 2009 November 16-19, 2009 Almas Temple Club Washington D.C. Members of the feedstock, industrial biotech, biofuel technology, plant development, financial, and oil and transportation communities will gather to report on their activities, consider the next steps forward and share perspectives on reaching commercial-scale production of cellulosic biofuels. (818) 888-4445 http://guest.cvent.com/EVENTS/Info/Summary. aspx?i=a7845b8d-3f05-4b63-a9f2-ae191ddcb59c

E3: 2009 November 17, 2009 St. Paul RiverCentre St. Paul, Minn. Hosted by the University of Minnesotaâ&#x20AC;&#x2122;s Initiative for Renewable Energy and the Environment, the conference will showcase current technologies, environmental benefits and market opportunities in renewable energy. (612) 626-1202 www1.umn.edu/iree/e3/index.html

Nov

Pacific Rim Summit on Industrial Biotechnology & Bioenergy November 8-11, 2009 Hilton Hawaiian Village Beach Resort & Spa Honolulu, Hawaii Hosted by the Biotechnology Industry Organization, the fourth annual summit will address the latest issues in industrial biotechnology including algae for fuels, marine bioresources, advanced biofuels and dedicated energy crops. (202) 962-9200 www.bio.org/pacrim/index.asp

Biofuels Environmental and Economical Sustainability Summit November 16-18, 2009

Canadian Renewable Fuels Summit November 30-December 2, 2009

Washington D.C. Industry leaders and government officials will review and discuss the major economic and legislative restraints and future strategies affected the biofuels industry. Topics to be discussed will include increasing financial stability, risk management, lowering carbon emissions and the commercial viability of cellulosic ethanol. (800) 882-8684 www.biofuelsindustrysummit.com/Event. aspx?id=209906

Westin Bayshore Hotel Vancouver, British Columbia, Canada This annual event, hosted by the Canadian Renewable Fuels Association, will focus on topics including the new Canada-U.S. clean energy dialogue, second-generation biofuels, low carbon fuel standards and the industryâ&#x20AC;&#x2122;s economic outlook. (613) 594-5528 ext. 223 www.crfs2009.com/

ETHANOL PRODUCER MAGAZINE

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A Biofuels Overview December 7-9, 2009

Introduction to Biofuels November 30-December 1, 2009 London The conference will offer an overview of biofuels technologies and markets, including: the basics of how biofuels are derived, the factors and debates influencing the market and its competitive framework. Speakers will also review current and upcoming market activity, with a focus on transportation biofuels.

Oxford, England Presentations will include new process technologies and feedstocks, specifications, performance, environmental aspects and second-generation biofuels. Current and future challenges faced by automobile manufacturers, oil and additive industries will also be addressed. Emphasis will be placed on the practicalities of biofuels and their contribution to mitigating global warming.

www2.greenpowerconferences.co.uk/v8-12/Prospectus/Index.php?sEventCode=TBF0911UK

www.oxfordprinceton.com/search/coursedetails. asp?ID=367&PLP=BF0

Dec

Cleantech Forum XXV December 2-3, 2009 Beijing Entrepreneurs, investors, corporations, policymakers and economic development agencies will gather to explore the latest developments in climate change, energy independence and resource scarcity driving markets for clean technologies. http://cleantech.com/cleantechforum/beijing09/ index.cfm

ETHANOL PRODUCER MAGAZINE

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DuraTech Industries / Haybuster 701-252-4601 www.haybuster.com

Storage-DDGS Laidig Systems, Inc. 574-256-0204

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www.laidig.com

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

WINBCO Tank Company 641-683-1855

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Harris Group Inc. 206-494-9422

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www.harrisgroup.com

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PeopleFlo Manufacturing 847-929-4774

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WINBCO Tank Company 641-683-1855 www.peopleflo.com

Valley Equipment Co. Inc. 423-753-3541 www.valleyequipment.com

www.winbco.com

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QA Test Products

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Producer Magazine not only contains top editorial content but also

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www.rjsales.com

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

ICM, Inc. 877-456-8588

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www.saferack.com

Mills-Hammer

Perten Instruments, Inc. 801-936-8165

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Mechanical Solutions, LLC 515-332-7035

ICM, Inc. 877-456-8588

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Agra Industries, Inc. 715-536-9584

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www.phenomenex.com

John Deere Agri Services 800-518-0472 www.johndeereagriservices.com

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

Scales-Truck

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ETHANOL PRODUCER MAGAZINE

November 2009

EPM MARKETPLACE Thermal Oxidizers

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815.455.4100 es.info@eisenmann.com

Natwick Associates Appraisal Services 800-279-4757 www.natwick.com

Due Diligence Harris Group Inc. 206-494-9422

www.harrisgroup.com

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Pro-Environmental, Inc. 909-989-3010

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Kent Group, Inc. 715-358-7528

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

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North American Safety Valve 800-800-8882

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

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Water Treatment Aquatech International Corporation 724-746-5300 www.aquatech.com

November 2009

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ETHANOL PRODUCER MAGAZINE

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CHS Renewable Fuels 651-355-6271 Gavilon 402-595-5678

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Transportation Marine Evolution Markets, Inc. 914-323-0259

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Rail Ameritrack RailRoad Contractors, Inc. 765-659-2111 www.ameritrackrailroad.com

Railcar Moving Shuttlewagon, Inc. 816-767-0300

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

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Terminals & DSP ERS Rail Transload 205-322-8312

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EPM MARKETPLACE 94

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November 2009

poet.com