October 2015 Ethanol Producer Magazine

INSIDE: NEBRASKA GOVERNOR LEADS EU TRADE MISSION OCTOBER 2015

THE BIOMASS ISSUE Corn Stover And Beyond Page 26

Driving the Supply Chain Page 32

Building Baler Systems Page 40

www.ethanolproducer.com

CONTENTS

OCTOBER 2015

DEPARTMENTS 6

VOLUME 21 ISSUE 10

FEATURES

EDITOR'S NOTE Ethanol's Future Fields

By Tom Bryan

7 8

9

AD INDEX THE WAY I SEE IT

Time to Cap Pollution

By Mike Bryan

EVENTS CALENDAR

10 VIEW FROM THE HILL

26

FEEDSTOCKS

32

SUPPLY CHAIN

Feedstocks of the Future

Bringing in the Biomass

By Holly Jessen

By Susanne Retka Schill

Sustainable, noncorn-stover, crops have potential for cellulosic ethanol commercial production

Two companies share strategies gleaned from stepping up to the supply chain challenge

RFS Doing What Congress Intended

By Bob Dinneen

12 DRIVE

Priming the Pump

By Ray Defenbaugh

14 GRASSROOTS VOICE

Leave Light on for Ethanol Consumers

By Ron Lamberty

16 GLOBAL SCENE

US Cannot Abandon Biofuels Global Leadership

By Bliss Baker

40

PROFILE

44

POLICY

From Blueprint To Baler

Biofuels Champion At Home, Abroad

By Anna Simet

By Holly Jessen

Equipment company racks up experience baling nearly all nonwoody biomass

Nebraska governor leads trek to EU, promoting biofuels, bioproducts

CONTRIBUTIONS

18 BUSINESS BRIEFS 20 COMMODITIES 22 DISTILLED 54 BUSINESS MATTERS

Playing it Smart At Year-end

By Donna Funk

55 MARKETPLACE

46

COMPLIANCE

Searching for Effective, Environmentally Friendly Water Treatment Technologies New cooling tower additives reduce phosphorus levels

By Michael Mowbray ON THE COVER PHOTO: PACIFIC AG

50

ANALYTICS

New NIR Models Developed to Rapidly Analyze Biomass Feedstocks Plymouth Energy trials demonstrate performance impacts

By Daniel Hayes

CORRECTION

“Producers Tackle Blend Wall,” a story published in the September issue of EPM, contained an error. NuVu Fuels, a new C-store in Ionia, Michigan, is expected to open for business in September. NuVu Fuels Retail is a managing partner of Carbon Green Bioenergy LLC, a Michigan ethanol plant.

Ethanol Producer Magazine: (USPS No. 023-974) October 2015, Vol. 21, Issue 10. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

4 | Ethanol Producer Magazine | OCTOBER 2015

IS MADE HERE.

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

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

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

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Advanced Biofuels

EDITOR'S NOTE

Ethanol’s Future Fields

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

After reporting on dedicated energy crops for more than a decade, I’d be lying if I said I hadn’t experienced occasional moments of skepticism about more than a few nongrain feedstocks. After all, it seems

like we’ve been telling the same story about some of these novel biomass inputs for a long time. In fact, I believe it’s been nearly a decade since President George W. Bush mentioned switchgrass in one of his State of the Union addresses. That was an exciting moment for sure, but it was 10 years ago. Where’s switchgrass now? Where’s miscanthus? Where are those insanely large Jerusalem artichokes?

With the exception of an update on artichokes—maybe we’ll cover that next year— our team went looking for answers to these and other questions about biomass ethanol feedstocks this month. What we found refreshed my confidence in dedicated energy crops and elevated my belief in crop residues. Starting with “Feedstocks of the Future,” on page 26, we learn that planting and harvesting crops like switchgrass, miscanthus and biomass sorghum is, in fact, happening at a somewhat large scale. That’s good news, and we should give the dedicated energy crop community high marks for sticking to it.

In “Bringing in the Biomass,” on page 32, we shift our attention from purpose-grown crops to supply chain development. This story educates us on something the ethanol industry’s emergent cellulosic ethanol producers know all too well: Building a biomass supply chain from the ground up is an enormous multi-year challenge. EPM Senior Editor Susanne Retka Schill reports that producers lacking a high degree of certainty about their supply should consider a multifeedstock strategy, if possible. Relying on two or more crops with different harvest windows, for example, can help producers achieve the continuous just-in-time feedstock delivery system they need for scaled success.

Ultimately, I think dedicated energy crops like switchgrass will find their rightful place in the ethanol industry. Honestly, however, it won’t happen tomorrow. Just as corn ethanol has paved the way for ethanol from corn fiber and corn residue, so too will those feedstocks pave the way for perennial grasses and other energy crops down the road. As for those enormous artichokes, hey, just give us time.

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

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 21 ISSUE 7

ADVERTISER INDEX

EDITORIAL

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

2016 Fuel Ethanol Workshop & Expo AdvanceBio LLC

Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com

BBI Project Development BetaTec Hop Products

Managing Editor Holly Jessen hjessen@bbiinternational.com

Bilfinger Water Technologies

Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com

Buckman

Direct Automation

DuPont Industrial Biosciences EcoEngineers

Copy Editor Jan Tellmann jtellmann@bbiinternational.com

Fagen Inc.

Fluid Quip Process Technologies, LLC GEA Westfalia Separator

ART

Art Director Jaci Satterlund jsatterlund@bbiinternational.com

Growth Energy

Graphic Designer Raquel Boushee rboushee@bbiinternational.com

ICM, Inc.

Hydro-Klean LLC J.C. Ramsdell Enviro Services, Inc.

Lallemand Biofuels & Distilled Spirits

PUBLISHING

Leaf Technologies

Chairman Mike Bryan mbryan@bbiinternational.com

Louis Dreyfus

Mole Master Services Corporation

CEO Joe Bryan jbryan@bbiinternational.com

MPW Industrial Services

Nalco, an Ecolab company

SALES

Natwick Associates Appraisal

Vice President of Operations Matthew Spoor mspoor@bbiinternational.com

North American Industrial Services

Sales & Marketing Director John Nelson jnelson@bbiinternational.com

Pan American Hydrogen, Inc.

Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com

POET-DSM Advanced Biofuels

Phibro Ethanol Performance Group

Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Account Manager Jeff Hogan jhogan@bbiinternational.com

Sulzer Pumps Solutions, Inc.

Thermal Refractory

Swedish Exergy AB

Tower Performance, Inc.

Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com

Victory Energy Operations, LLC. WestAgro Executive Brands

53 30 43 56 18 22 45 15 39 3 48 9 2 23 29 19 11 51 37 31 13 52 28 49 36 17 5 24 47 41 38 34-35 25

Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

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

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OCTOBER 2015 | Ethanol Producer Magazine | 7

THE WAY I SEE IT

Time to Cap Pollution

By Mike Bryan

Since the ethanol blend wall seems to be the current issue the U.S. EPA is struggling with, I have a crazy idea. Instead of setting a blend wall for ethanol, why not

set a fossil fuel pollution cap (PC). After all, ethanol is not causing major pollution in our cities, it’s not damaging our environment, or polluting our oceans, rivers and streams and causing untold health issues for our citizens, fossil fuels have already cornered that market. It just seems like the EPA is doing everything possible to restrict the use of the wrong fuel. Fossil fuels have a proven track record of nasty effects from health to wars. I don’t recall seeing any health effects or wars that have been attributed to ethanol.

While seemingly an outlandish idea, having a fossil fuel PC would accomplish a number of key objectives for the country and the environment. Unless I’m mistaken, that should be the objective of the EPA, to help protect the citizens of this country through sound environmental policy. Policy that promotes a cleaner environment and better air quality, via minimizing the use of polluting fuels like gasoline and diesel fuel. Besides, the PC could also stand for the politically correct thing to do as we come into the 2016 election cycle.

It’s not terribly complicated. The government, led by the EPA, would enact legislation that caps the use of fossil fuels over the next 30 years to, say, 50 percent of its 2020 level. Let’s say that by 2020, fossil fuel use would be capped at 85 percent of the levels it is today. That would provide an opportunity for ethanol and biodiesel to meet those limits over the course of the next four years.

Then, during the following 10 years from 2020 to 2030, fossil fuel use would have to be reduced from the 2020 level to 70 percent.

Following that, it would have to be reduced to 60 percent and, finally, by 2045 to 50 percent of the 2020 level. It’s a program that would accomplish many things for the environment, air pollution and for the economy as a whole. All by simply addressing the root cause of the problem.

It is difficult to imagine the impact such a policy would have on the economy of this country. Not just the rural economy, but the economy as a whole. We would not have to concern ourselves anymore about protecting our oil interests around the globe. We would reduce air pollution by at least 30 percent or more. We would go far toward achieving our global carbon reduction goals and improve the health and well-being of citizens from coast to coast.

Combined that with the development of new vehicle technology such as electric and improved fuel economy and it may just be an achievable idea.

I know, I could have used this space to talk about something that actually has a chance of becoming policy, but one never knows. The EPA is simply focused on the wrong thing. It’s seems to be intent on restricting the use of a fuel that has contributed enormously to the environment, the economy and energy security, in favor of a fuel that has done almost the exact opposite.

The introduction of a fossil fuel PC is beyond my ability, but perhaps some of our Washington insiders ought to give it a think.

Many things begin with a simple idea.

That’s the way I see it.

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

8 | Ethanol Producer Magazine | OCTOBER 2015

EVENTS CALENDAR

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

866-746-8385 | www.advancedbiofuelsconference.com

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

866-746-8385 | www.biomassconference.com

Now in its 32nd year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-tobusiness environment. As the largest, longest running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine —that maintains a strong focus on commercial-scale ethanol production, new technology, and near-term research and development. The 2014 event drew more than 1,800 people from over 31 countries and from nearly every ethanol plant in the United States and Canada.

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VIEW FROM THE HILL

RFS: Doing What Congress Intended

By Bob Dinneen

It’s that time of year again, when leaves make their seasonal color change and pumpkins are carefully placed on every porch. Another year is on

its way out. Time, it seems, is never on our side; it’s always zipping by us faster than we expect. The ethanol industry had quite the significant “has it been this long?” moment in August when we celebrated the 10th anniversary of what is arguably our nation’s most successful energy policy: the renewable fuel standard (RFS).

Over the past 10 years, the RFS has made an indelible impact on the nation’s economy, environment, and energy security.

The RFS is powering America’s rural economy in ways we could not have imagined before the Energy Policy Act was signed into law by President George W. Bush in 2005. Since then, ethanol industry jobs have more than doubled, driving a threefold increase in annual ethanol production from plants nationwide to its historic height of 14.3 billion gallons in 2014. Farmers are now producing 25 bushels of corn per acre thanks to higher yields—all without expanding onto additional lands—and the doubling of corn prices has saved families from the brink of bankruptcy.

The RFS is, of course, a multifaceted program that was created to tackle critical energy issues gripping the nation at the time of its passage. In 2005, the United States imported three-fifths of its petroleum needs. Today, that number rests at just over a quarter.

Notably, ethanol’s rise to claim 10 percent of the gasoline pool has virtually eliminated all gasoline import dependence. Last year, the Energy Information Administration found that ethanol displaced the gasoline equivalent of 512 million barrels of crude oil, which is more than all the oil America imports every year from Saudi Arabia.

But what is a comprehensive energy plan without a consideration of its environmental impact? Ethanol continues to be unquestionably cleaner than fossil fuels. Conventional ethanol is reducing greenhouse gas emissions by 34 percent compared to gasoline. That means less carbon monoxide, benzene and other

10 | Ethanol Producer Magazine | OCTOBER 2015

toxic hydrocarbons are polluting our atmosphere. The lowered emissions each year equate to removing more than 8 million cars from the road. If cleaner tailpipe emissions aren’t already a draw, consumers can look forward to cheaper gas prices, thanks to ethanol. On average, ethanol saves drivers about a dollar per gallon at the pump.

The fact is the RFS is doing what Congress intended it to do 10 years ago. The American public recognizes that fact. The U.S. EPA, however, does not seem to want to hear about the public’s satisfaction with the program. Its proposal to drastically slash volumetric blending requirements for refiners proves that the agency instead prefers to listen to the same misinformation that the oil companies have been propagating for years. As the EPA witnessed at its June hearing Kansas City, support for the RFS at the ground level is ubiquitous and strong. EPA’s proposal will only reverse the program’s success in the name of Big Oil profits.

The RFS is just a decade old and its results have been wideranging and long-lasting. Ethanol production, corn yields, and the number of rural American jobs are up, while oil imports, greenhouse gas emissions and gas prices are down. At a time when the White House is making a concerted effort to move America beyond the 20th century kilns of the coal factories, biofuels are now more important than ever. The stability the RFS has brought to the ethanol industry has not only economically rejuvenated the nation, but it has driven the innovation necessary to propel advanced biofuels into the forefront. What was once a niche gasoline supplement has found its footing and is being recognized for what it is: the fuel of the future.

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

5 2 )

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DRIVE

Priming the Pump

By Ray Defenbaugh

The ethanol industry is going on the offense to bring higher blends into the marketplace through the Prime the Pump fund. Prime the Pump is not the work

of any one organization, but rather a broad industry effort to grow the ethanol market by working with major retail chains to accelerate the build-out of higher blend retail infrastructure across the nation.

Weâ&#x20AC;&#x2122;re targeting the top 20 chains in the country that represent well over 60,000 retail outlets nationwide to bring consumers a low-cost, high-performance fuel that improves the environment, creates jobs at home and strengthens our national security.

These efforts have been a tremendous success, thanks to the enthusiastic participation of stakeholders throughout our industry and retail leaders eager to offer the fuel of the future. As of September, there were more than 140 sites offering E15 in 21 states including Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Minnesota, Missouri, Nebraska, North Carolina, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, Texas and Wisconsin. Here is a breakdown of some of our current retail partnerships: MAPCO: In January 2014, MAPCO became the first retail chain in the country to announce its intentions to offer E15. MAPCO has since launched five stores that sell E15 and E85 in Arkansas, Alabama, Kentucky and Tennessee. This chain has the potential to offer E15 at 100 of their megastore locations in the future.

Cenex: The company plans to offer E15 at 13 franchise locations in North Dakota, Nebraska, Minnesota and Iowa later this year. Cenex has 1,400 locations nationwide.

Minnoco: The Twin Cities-based retail chain has played a critical role in convincing other major retailers to sell E15 and E85. Minnoco has announced that 22 of its locations will sell E15. Currently, 15 locations are open and operational in the Minneapolis and St. Paul area of Minnesota.

12 | Ethanol Producer Magazine | OCTOBER 2015

Kum & Go: Based in West Des Moines, Iowa, Kum & Go operates over 400 stores in 11 states primarily located in the Midwest.

There are currently five open and operational E15 stations in Oklahoma, Iowa and Arkansas, and more than 60 are planned.

Protec: The business has 28 locations with approximately 40 million gallons of fuel sales in Texas, Florida and Virginia that plan to offer E15. Currently, 15 locations are open and operational in Texas, Florida and Georgia.

Sheetz: Sheetz, the most awarded and recognized innovator in the convenience store industry, is a new partner for E15 and E85.

This year, the chain will offer E15 at 60 locations in North Carolina.

In addition, Sheetz has a significant number of sites that could offer E15 with equipment upgrades. Sheetz serves more than 1 million people per day.

Murphy USA: Commonly associated with Walmart and seen as a low-cost, highly competitive retailer by the industry, Murphy USA announced that all of its Chicago and Houston new builds in 2015 will offer E15 and E85. Murphy USA has 1,200 stores across the country and serves 1.6 million customers per day.

Not all retailers are ideal candidates for Prime the Pump; weâ&#x20AC;&#x2122;re looking for industry leaders with multiple high-volume locations to prime the markets with higher blends and encourage others to follow.

This strategy has already created an unstoppable momentum. As more and more retailers notice the higher-blend trend and recognize the competitive advantage E15 offers, we know they will also be eager to bring consumers a much needed choice and savings at the pump. Thanks to our united industry efforts, stations offering E15 will continue to pop up across the nation as we work together to make it a standard offering at the pump.

Author: Ray Defenbaugh

Chairman of the Board, Prime the Pump Board Member, Growth Energy 319-753-1100 ray.defenbaugh@bigriverresources.com

GRASSROOTS VOICE

Leave Light on for Ethanol Consumers

By Ron Lamberty

Don't stop me if you've heard this one. It’s a marketing story. Really.

A moth goes into a podiatrist’s office.

The podiatrist greets him and asks, “How can I help you?”

“Geez, Doc, I don't know if you can help me,” the moth answers. “I don't know if anyone can help me …”

“Well, what seems to be the problem?” the podiatrist asks.

“Why don't we just start with that?”

“That’s the problem, Doc. I don't know. I feel like I don't know anything. I'm lost. I've got no confidence,” the moth explains. “I got fired from my job, and actually, I think my boss was right to fire me, because I didn't know what I was doing there. My wife and I are constantly fighting, I’m worried she’s going to leave me …”

The podiatrist, feeling uncomfortable, tries to interrupt, “Oh, sir, I understand, but …” “… and frankly, I'd leave me, too. I mean, she’s tried to be supportive, but she’s been so busy with the kids. And those kids, don't even get me started on the kids. I really have no control there.

But I get it. It's because …”

“Sir,” the podiatrist interrupts, this time more forcefully, “it’s clear that you need help, but you need to talk to a psychologist. I'm a podiatrist.”

“See? I can't even get that right. Sorry I wasted your time,” the moth replied.

“Wait!” the podiatrist said, “Before you go, if you don't mind, can I ask you how you found us? Was it our ads? TV, radio? Our monster truck sponsorship, ‘Big Foot,’ clever, right? Or was it Twitter? Our Facebook page? Instagram? What was it that brought you in here?”

“Dude. I'm a moth,” he answered. “Your light was on.”

There are a number of lessons one could draw from this story.

The most obvious is, despite our best efforts to educate inform and convince people to use our product, sometimes they buy it anyway.

We want to believe drivers are inexorably drawn to the “light” of clean, high-octane, renewable, American ethanol, and some are. In

14 | Ethanol Producer Magazine | OCTOBER 2015

reality, however, the majority of them are unavoidably drawn— begrudgingly—to the nearest gas station with the lowest price, by a blinking “low fuel” light on their dashboard.

Ethanol blends are most often the lowest-priced options at the pump, so whether they like ethanol or not, they’re buying it. And isn’t that what we really want? That’s not to say we shouldn’t try to educate, inform, and convince people to use ethanol, we have to.

Because some people—not very many, but some—want to know what this stuff is that they’re putting in their car. We can’t concede that job to the same serial misinformers who are continually misinforming elected officials, media outlets and the public in general.

Just try to look past the fact that most people don’t love ethanol, or even care about it. They use it because they need gas, and ethanol is in there. If it helps, they don’t love gas, either. Never have, never will. Oil companies have spent billions advertising premium gasoline over the years, and yet annual sales don’t come anywhere close to the amounts that would be sold if people who own premium only cars (it’s on the gas cap and in the owners’ manual) actually put premium in them a fraction of the time. Even requiring branded stations to sell premium for the last 30 years didn’t boost sales into the high single-digit percentages. Premium sales are up recently, because the change in base fuel requires stations to blend some premium with it to offer any gasoline without ethanol, or to sell any fuel with an octane higher than 87.

Maybe people don’t buy ethanol for the reasons we would like them to buy it. But they buy it. And when we turn the lights on at more stations offering higher blends, they’ll be drawn to it. Like moths to a podiatrist.

Author: Ron Lamberty Senior Vice President American Coalition for Ethanol 605-334-3381 rlamberty@ethanol.org

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GLOBAL SCENE

US Cannot Abandon Biofuels Global Leadership

By Bliss Baker

This month the U.S. renewable Countries with biofuels fuels industry celebrated the 10-year friendly policies anniversary of the introduction of the renewable fuel standard (RFS).

As a result, the renewable fuels industry has been forced to repeatedly respond to misinformation and fear-mongering campaigns.

SOURCE: GRFA Most damaging of all has been the success these campaigns appear to have had in influencing But this landmark policy, implemented some within the U.S. EPA. Despite renewable fuel as part of the Energy Policy Act 2005, volumes being explicitly laid out in the original mandated biofuel content in blended legislation, the EPA has repeatedly introduced gasoline to encourage greater use of uncertainty into the industry by delaying the renewable fuels and initiated unprecedented release of annual blending volumes and setting growth in the ethanol industry. Since then blending goals far below the original targets. it has helped the U.S. diversify its energy This policy instability has resulted in an supply mix, eased dependence on foreign estimated $13.7 billion in lost investments that oil and boosted rural economies across the the advanced biofuels industry needed to country. increase capacity and meet RFS goals. It is This success has been envied and extremely regrettable that the EPA has fallen emulated by countries the world over prey to the self-interested fear mongering with steady growth seen in the Canadian, against biofuels by the fossil fuel industry.

Brazilian and European biofuels After a decade as the world leader on industries in recent years. Today, more renewable fuels policy development and than 60 countries have initiated biofuels production, the U.S. is at risk of going friendly policies led by the U.S., which backwards and surrendering this leadership remains the largest producer in the position. As an industry, we cannot afford world. to get complacent with our advocacy. While Of course, this success has not been the EPA deserves credit for eventually without its challenges. The U.S. ethanol releasing renewable fuel volumes for 2015 and industry has shown its resilience against 2016, the delays and significant volume reductions commodity price spikes, severe weather and will undeniably have a negative effect on the industry plummeting oil prices. Through all that, the industry going forward. has continued to grow and prosper. This success has been in large There is now speculation that the EPA will look to further measure due to policies that have created the right conditions for undercut the RFS in the future, and that the program as a success. whole may be under threat. Not only would this be unbelievably Unfortunately, despite the undeniable success of the RFS shortsighted and foolish, but it flies in the face President Obamaâ&#x20AC;&#x2122;s in achieving its objectives, it has come under sustained attack by efforts to address the threat of climate change. vested interests that have been threatened by the growth of the We have accomplished too much, and the future is too bright renewable fuels industry, or it has been used as a scapegoat for for the U.S. to abdicate its leadership on renewable fuels now. other challenges.

Author: Bliss Baker Global Renewable Fuels Association 647-309-0058 info@globalrfa.org

16 | Ethanol Producer Magazine | OCTOBER 2015

BUSINESS BRIEFS The U.S. Grains Council has announced Michael Dwyer as its new chief economist at its Washington, D.C., headquarters. In the newly created position, Dwyer will provide regular reports and Dwyer analysis of developments in global supply and demand for coarse grains and products, help staff and members stay abreast of developments in the global market, and develop and maintain information on Sifferath changing market conditions that will benefit the USGC’s overseas contacts.

The position was created in an effort to expand the USGC’s strategic thinking about the global marketplace. Prior to joining the USGC, Dwyer served as director of global policy analysis at the USDA’s Foreign Agricultural Service, where he was responsible for conducting and coordinating analyses on a variety of issues that affected U.S. and world agricultural trade, including those that affected the emerging global biofuels market. The USGC also announced Kimberly Atkins, a long-time staffer and previous director of global programs, as the council’s next vice president and chief operating officer. Atkins has been with the USGC for 10 years, working in roles focused on management and execution

People, Partnerships & Deals

of the council’s global operations. Cary Sifferath, who previously served as USGC’s regional director for the Middle East and Africa, will take oversight of the organization’s global offices as senior direcAtkins tor of global programs. With the USGC for 22 years, Sifferath has run regional offices in Southeast Asia and North Africa and country offices in Japan and China. In addition, the USGC announced HakKim soo Kim has joined its staff as assistant director in the USGC’s Korea office. He will work with the director in Korea to develop a strategy and plan to identify and address relevant trade, technical and policy-related factors relevant to building and maintaining the market for U.S. coarse grains and coproducts in Korea.

In addition, he will assist in directing programs, including strategic analysis, program planning, implementation and evaluation, budget and accounting, personnel, administration and communications. Prior to joining the USGC, Kim was employed by Korea Agro-Fisheries & Food Trade Corp. He also has experience with the USGC from his time as president of aT Grain Corp. when he served as a USGC delegate and sat on the Asia Advisory Team.

The Advanced Biofuels Association has elected Wayne Simmons, president and CEO of Sundrop Fuels, as chairman; Neville Fernandes, president of Neste Oil U.S. Inc., as vice chairman; Wes Bolsen, head of business development and public affairs at Cool Planet, as treasurer; and Phil Caplan, partner at Ensyn Development Partners, as secretary. Appointed as new members to its executive committee were Paul Woods, president and CEO of Algenol; Laurel Harmon, vice president of government relations at LanzaTech; and Rebecca Boudreaux, president of Oberon Fuels.

New Holland has appointed Bret Lieberman to lead the brand as vice president of North America.

Bret joined New Holland in 1990 with a position in service parts. Most recently, he served as head of Lieberman North America manufacturing, where he has been responsible for all agricultural and construction manufacturing plants since 2009. asd UNICA, the Brazilian sugarcane industry association, has joined the Global Renewable Fuels Alliance. Created in 1997, UNICA is the largest organization in Brazil representing sugar, ethanol and bioelectricity producers. The associ-

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

ation’s members represent more than 50 percent of all the ethanol produced in Brazil and 60 percent of the country’s sugar production. GRFA members now represent more than 90 percent of the global biofuels production from 45 countries.

The USDA has named Robert Johansson as its chief economist. Johansson has served as USDA’s acting chief economist since January and as deputy chief economist since 2012. He joined USDA in 2001. As Johansson chief economist, Johansson is responsible for USDA’s agricultural forecasts and projections and for advising the secretary of agriculture on economic implications of programs, regulations, and legislative proposals. His responsibilities include the Office of the Chief Economist, the World Agricultural Outlook Board, the Office of Risk Assessment and Cost-Benefit analysis, the Global Change Program Office, and the Office of Energy Policy and New Uses. He also serves as chairman of the federal crop insurance board of directors.

Gevo Inc. has appointed Johannes Minho Roth to its board of directors. Roth is the founder and CEO of FiveT Capital Holding AG, a Zurich-based independent asset management

firm that specializes in investment solutions for high net-worth clients, family offices and institutional investors. He is also a member of the board of directors for Plug Power Inc. Ganesh Kishore, who joined the Gevo board in 2008, has resigned.

The National Corn Growers Association President Chip Bowling recently presented the NCGA’s President’s Award to Sen. Heidi Heitkamp, D-N.D. The award is given annually Heitkamp to a leader who has worked to advance issues important to corn farmers and agriculture. Heitkamp sits on the Senate Committee on Agriculture, Nutrition and Forestry, on which she helped write, negotiate and pass the 2014 Farm Bill. She has been a leader in pressing the U.S. EPA to set strong renewable volume obligations for renewable fuels, helped introduce bipartisan legislation to require the EPA to redo its proposed Waters of the U.S. rule, and to help support and improve the export of American agricultural commodities to Cuba.

Blume Distillation LLC has announced the sale of its first African-based biorefinery to Numbitrax LLC, based in Touwsriver, Western Cape, South Africa. Numbi-

SECURE.

trax has completed a purchase agreement and fund transfer for a Blume biorefinery system. The company plans to produce ethanol and additional high-return offtake products.

The Advanced Ethanol Council has expanded its scope and changed its name to the Advanced Biofuels Business Council. Founded in 2011 to represent advanced and cellulosic ethanol producers and technology providers, the rebranded organization has expanded its organizational charter to include other types of advanced biofuels. As part of the expansion, two existing members, Poet-DSM and Cellerate, a cellulosic biofuel joint venture between Quad County Corn Processors and Syngenta, will take seats on the board of directors. New member company Aemetis will also join the board, while Sweetwater Energy will join the ABBC as a corporate member.

Delegates at the National Corn Growers Association’s Corn Congress elected five farmers to serve as the organization’s corn board. Taking office Oct. 1, are new board members Jim Reed of Illinois, Bruce Rohwer of Iowa and Jeff Sandborn of Michigan. Current board members Keith Alverson of South Dakota and Anthony Bush of Ohio were re-elected.

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OCTOBER 2015 | Ethanol Producer Magazine | 19

COMMODITIES

Prices & Market Analyses

Natural Gas Report

Natural gas prices linked to weather patterns Aug. 24—Seasonal pressure is coming to bear on the natural gas market. In between the winter and summer peak demand periods, natural gas prices tend to swoon, and it appears that as the peak of summer moves into the rearview, and winter snowflakes remain on the distant horizon, the natural gas market is positioned for short-term price weakness.

The broad context for natural gas prices throughout the summer has been a tension between robust year-over-year growth in domestic production and strong power generation demand driven by warmer than normal temperatures for June through August and attractive natural gas prices. The balance struck between demand and supply has put the market on a nice track to comfortable storage inventories ahead of the upcoming winter. With stocks of natural gas not too high and not too low, prices have remained tightly range-bound and remarkably stable since May. To a great degree, the warm weather has enabled this equilibrium in supply and demand for natural gas to remain in place. But, as the chart indicates, demand will struggle to keep up as the calendar turns to September. Even with warmer than normal temperatures and low prices, power generation demand is set to decline from peaks above 35 billion cubic feet (Bcf) per day to less than 25 Bcf per day by the start of

by Ben Straus

October. Commensurate with this drop in demand, natural gas prices will face pressure to move lower, testing the lower end of the trading range for the year.

Corn Report

USDA report surprises traders Aug. 24—Corn is trying to make headwinds but outside influences will limit upside momentum. In August the USDA increased the corn yield and ultimately production, which sent futures plummeting 36 cents from high to low during the session. The USDA posted a yield of 168.8 bushels per acre with a production level of 13.686 billion bushels. The average yield trade guess was 164.5 bushels per acre and 13.327 billion bushels of production. The USDA may have been too aggressive with yield data in areas of the eastern Corn Belt. These larger-than-expected yields brought a bit of a shockwave to the trade. The yield numbers may have been overinflated due to stalk counts and plant population but no hard samples had been taken for this report. Traders will anxiously be waiting the September USDA report.

Outside influences will limit the upside for corn. China’s economy will weigh on the entire commodity and equity marketplace impacting soybeans, energy, etc. China’s change in currency is seen weighing on the commodities it imports. The U.S. dollar will impact these products as well. Brazil will be going to the fields optimistically planting a soybean crop, which will weigh on U.S. values. The USDA needs to offer some Comments in this column are market commentary and are not to be construed as market advice.

20 | Ethanol Producer Magazine | OCTOBER 2015

by Jason Sagebiel

hope for corn when it reports September yield and production. Will there be in a reduction in planted acres? That may not be seen until the October report. Therefore, upside potential may short-lived. Any upside may come in the form of the cash market if producers are reluctant to make sales this fall.

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.577

DDGS Report

Spot

Rack

West Coast

1.680

1.750

Midwest

1.435

1.623

East Coast

1.510

1.713 SOURCE: DTN

Regional Gasoline Prices ($/gallon)

DDGS prices drop to July levels Aug. 24—With Labor Day approaching, DDGS prices dropped back down to early July values, at best, after rebounding a bit at the end of July and early August.

Chinese Gulf demand, which was evident in the huge June and July export numbers (and which shipped to the river in May and June), began to drop. The contracts made in the first and early second quarters are near completion, and the only early fall business left to execute is tonnage that was rolled ahead from the summer to the third quarter, when prices dropped in July. Container demand and sales have been steady, but this year a much smaller percentage moved to China in comparison to bulk.

Domestically, lower prices began to increase demand in the Midwest, with more expected as the summer heat dissipates, especially from the hog and poultry

Region

by Sean Broderick

sectors. A lot of the poultry business in the Southeast is shipped via rail, and buyers are cautious about buying too much rail in the summer, due to unloading challenges, but are taking a hard look at it starting in October. Cattle demand tends to kick in more toward the late fall and dairy is not profitable enough to do anything more than continue with hand-to-mouth buying.

So it will be a while before U.S. demand will increase prices. Values are still running pretty close to 100 to 110 percent the value of local corn, and soymeal is getting more expensive, so more should be used domestically.

Looking ahead, harvest yields will influence international demand, but the question is what degree China re-enters the DDGS arena, with good crops of its own, remains the biggest unknown.

Front Month Futures Price (RBOB) $2.020 Region

Spot

Rack

West Coast

1.680

1.750

Midwest

1.435

1.623

East Coast

1.510

1.713 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

Oct 2015

Sept 2015

Oct 2014

Minnesota

125

140

120

Chicago

155

175

130

Buffalo, N.Y.

158

170

115

Central Calif.

185

200

167

Central Fla.

178

195

155 SOURCE: CHS INC.

Corn Futures Prices

(September Futures, $/bushel) Date

close, bu.

close, ton

June 26, 2015

3.81

135.89

May 26, 2015

4.03

143.84

June 26, 2014

3.68

131.25 SOURCE: FCSTONE

Cash Sorghum ($/bushel) Location

Ethanol Report

Stock market steals the show Aug. 24—Over the past month, the Dow Jones Index posted significant losses nearing 3000 points, with over 2,000 of those erased in the week of Aug 17-21.

Concerns about the devaluing of China's currency and distress in other global economies have created widespread pressure across the market. Worries are that our domestic economy and still-strong healthy demand for gasoline may not be able to maintain the pace previously seen this

by Rick Kment

summer, and could erode through the fall.

Ethanol production has remained strong through late summer, with costs remaining manageable due to cash corn prices hovering below $3.50 per bushel.

But continued uncertainty about stock market values, overall economic support and corn production levels will create a lot of uncertainty for ethanol markets in the coming months.

Aug. 20, 2015

July 23, 2015

Aug. 22, 2014

Superior, Neb.

3.13

3.83

3.34

Beatrice, Neb.

3.40

3.78

3.31

Sublette, Kan.

3.58

4.08

3.51

Salina, Kan.

3.55

4.16

3.51

Triangle, Texas

3.66

4.13

3.56

Gulf, Texas

4.42

5.41

4.79

SOURCE: SORGHUM SYNERGIES

Natural Gas Prices ($/MMBtu) LOCATION

Aug. 27, 2015

June 30, 2015

Aug. 28, 2014

NYMEX

2.65

2.83

3.94

NNG Ventura

2.61

2.76

3.90

Calif. Citygate

2.94

3.26

4.29

SOURCE: U.S. ENERGY SERVICES INC.

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

Month

End Stocks

May 2015

957

29,666

20,120

Apr. 2015

930

27,910

20,787

937

29,039

18,117

May 2014

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

OCTOBER 2015 | Ethanol Producer Magazine | 21

DISTILLED

Ethanol News & Trends

Economic impacts of Poet State

Business revenues (millions)

State level GDP Employment (millions)

$2052.00

$636.30

4,553

Iowa

$2694.20

$843.40

6,178

Minnesota

$1,064.40

$376.90

3,039

Indiana

$1,926.70

$376.90

5,327

South Dakota

$649.50

$174.60

2,356

$1,370.50

$412.10

4,520

$339.90

$95.20

1,086

Missouri Ohio Michigan SOURCE: POET LLC

Report outlines Poet’s contribution to US economy Poet LLC has released its first economic impact study, revealing the company generated $13.5 billion in sales for U.S. businesses last year.

Poet also added $5.4 billion in national gross domestic product, supported approximately 39,978 full-time jobs, and contributed $3.1 billion in income to American families.

The report also provides details on Poet’s contribution to economic prosperity in the seven states where it operates. Headquartered in Sioux Falls, South Dakota, Poet operates 27 dry mill

ethanol plants with a combined capacity of 1.7 billion gallons, accounting for more than 11 percent of total U.S. ethanol output.

“Ethanol provides us the means to produce our own clean fuel and keep the enormous economic benefits within America’s borders,” said Poet CEO Jeff Lautt. “The impact flows from the plants to farmers, communities, throughout the states in which they operate and across the nation.”

Some chemical companies focus on this

UAI: Ethanol-free gasoline increases toxic emissions The Urban Air Initiative confirmed ethanol-free gasoline not only costs more than E10, but also burns dirtier in the engine, putting more toxic emissions into the air.

UAI tested samples of every E0 in Wichita, Kansas, and compared them to regular gasoline that contains 10 percent ethanol. The testing found toxic aromatics such as benzene and toluene were about 45 percent higher with E0. Benzene and toluene, which are known carcinogens, are added by oil refineries to boost octane in vehicles. However, these toxins create harmful emissions that cause air pollution which impact public health.

According to the UAI, a similar study conducted by Clean Fuels Omaha also found higher toxic emissions associated with E0 in Omaha, Nebraska, when compared to E10.

or that

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22 | Ethanol Producer Magazine | OCTOBER 2015

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

.

DISTILLED Gevo announces first isobutanol pump sales In July, Express Lube of Fredericksburg, Texas, became the first U.S. service station to sell gasoline blended with Gevo Inc.â&#x20AC;&#x2122;s renewable isobutanol at the pump. Gevo reported it anticipates this location will be the first of many retail locations to offer its product as the company rolls out its isobutanol to the marina, outdoor equipment and off-road gasoline markets.

According to Express Lube owner Adam Sheffield, he decided to sell isobutanol-blended gasoline because its moisture resistance and capacity to reduce engine corrosion are ideal for equipment and vehicles that are used intermittently. Sheffield learned about Gevo's renewable isobutanol from Kino Oil, a local distributor that sells the product in drums. â&#x20AC;&#x153;We welcome Express Lube as the very first retail service station to sell gasoline made with our isobutanol. Itâ&#x20AC;&#x2122;s only a matter of time before other distributors and gas stations across the U.S. and in other parts of the world discover the benefits of isobutanol, and begin to offer our product commercially as well,â&#x20AC;? said Patrick Gruber, CEO of Gevo.

EU ethanol blend rate to increase slightly through 2016

Top EU ethanol producing countries (in million liters) Country

2014

2015

2016

France

1,180

1,180

1,180

A report recently filed with the Germany 920 975 1,010 USDA Foreign Agricultural SerBenelux 1,000 1,000 1,000 viceâ&#x20AC;&#x2122;s Global Agricultural Informa460 635 640 tion Network reports the ethanol Hungary 760 540 510 blend rate in the European Union U.K. was approximately 3.5 percent last SOURCE: USDA FAS GAIN year. The blend rate is expected to increase to 3.6 percent this year and 3.8 per- tained this year and next. Of that volume, cent in 2016. According to the report, ad- 75 million liters was cellulosic ethanol. The ditional consumption of biofuels in the EU European Union had 71 ethanol refinermoving forward will depend primarily on ies last year, with a combined capacity of the successful introduction of higher-level 8.48 billion liters. Capacity is expected to be blends, such as E10 and E85. maintained at current levels through 2016.

Data included in the report shows the Capacity use was 62 percent last year. That EU produced 5.25 billion liters (1.39 bil- level is also expected to be maintained this lion gallons) of fuel ethanol last year. That year and next. production level is expected to be main-

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_ 'HV 0RLQHV _ 0DQNDWR _ 5RJHUV _ 6LRX[ )DOOV _ :DWHUWRZQ OCTOBER 2015 | Ethanol Producer Magazine | 23

DISTILLED

New ND ethanol plant reaches commercialization phase An event was held at the Dakota Spirit AgEnergy ethanol plant in Spiritwood, North Dakota, in July, to mark the facility reaching its full commercialization phase. The 65 MMgy facility is the first corn-ethanol plant built in the U.S. in more than five years.

Gregory Ridderbusch, president of Midwest AgEnergy Group, Tom Buis, CEO of Growth Energy, and Katie Andersen, mayor of nearby Jamestown, were among those who spoke at the event. Ridderbusch described the plant as unique, pointing to the fact that process steam is purchased from Great River Energyâ&#x20AC;&#x2122;s nearby Spiritwood Station. Midwest AgEnergy Group first used that concept at the Blue Flint Ethanol plant located near Underwood, N.D. In addition to ethanol, the plant will also produce 6,900 tons of distillers corn oil annually, along with 198,000 tons of distillers grains. The plant purchases 23 million bushels of corn each year from area farmers.

Nearly 50M cellulosic RINs generated in first half of year The U.S. EPA recently released renewable identification number (RIN) data for June, reporting that nearly 8.58 billion RINs were generated during the first half of the year.

On a net basis, 49.31 million D3 cellulosic RINs were generated during the first six months of this year, including 971,527 for ethanol, nearly 27.15 million for renewable compressed natural gas and more than 21.31 million for renewable liquefied natural gas. The majority, 46.09 million, D3 RINs have been generated by domestic producers, with 3.34 million generated by importers. An additional 156,385 D7 renewable diesel RINs were also generated during the

RIN generation (Jan.-June) RIN type

Net RINs generated

D3

49.31 million

D4

1.23 billion

D5

39.60 million

D6

7.26 billion

D7

156,358

SOURCE: U.S. EPA

first half of the year, all by importers for cellulosic heating oil.

A net total of 39.6 million D5 advanced biofuel RINs were also generated during the first six months of the year, along with 7.26 billion D6 renewable fuel RINs. EPA data also shows a net total of 1.23 billion D6 biomassbased diesel RINs were generated during the first half of the year.

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24 | Ethanol Producer Magazine | OCTOBER 2015

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DISTILLED

CCP acknowledges benefits of carbon utilization technologies On Aug. 3, the U.S. EPA released its Clean Power Plan, which aims to reduce carbon dioxide emissions from the nationâ&#x20AC;&#x2122;s power plants. According to Algenol, the final rule for the CCP acknowledges for the time the value of carbon dioxide utilization as a method for utilities to reduce emissions from power production and comply with Clean Air Act requirements for carbon dioxide emissions.

The cornerstone of Algenolâ&#x20AC;&#x2122;s Direct-to-Ethanol technology is carbon dioxide utilization. â&#x20AC;&#x153;I want to acknowledge President Obamaâ&#x20AC;&#x2122;s leadership to clean up power plant emissions of CO2 pollution from electricity production by issuing this rule,â&#x20AC;? commented Paul Woods, founder and CEO of Algenol. â&#x20AC;&#x153;Our carbon utilization technology turns the economic and environmental liability of carbon pollution into low-carbon fuels and revenue for ratepayers. It reduces the costs of emissions and improves our environment, creating a win-win for utilities and ratepayers.â&#x20AC;?

Thailand ethanol production 2014

2015

2016

Fuel ethanol production (million liters)

1,058

1,265

1,400

Fuel ethanol consumption (million liters)

1,053

1,270

1,400

Number of plants

21

21

22

Nameplate capacity (million liters/day)

4.4

4.8

5.2

68%

73%

75%

Capacity use SOURCE: USDA FAS GAIN

Ethanol production to increase in Thailand An annual biofuels report recently filed with the USDA Foreign Agricultural Serviceâ&#x20AC;&#x2122;s Global Agricultural Information Network provides an overview of Thailandâ&#x20AC;&#x2122;s ethanol industry, reporting production of fuel ethanol is expected to grow this year and in 2016.

According to the report, Thailand currently has a goal in place that targets the use of 9 million liters (2.38 million gallons) of ethanol per day by 2021. During the first four months of this year, ethanol consumption averaged approximately 3.5

million liters per day, up from 3.2 million liters per day last year.

The report indicates the government of Thailand currently promotes the use of E20 and E85 blends through price incentives. Those subsidies, paid by the State Oil Fund, make E20 and E85 blends 20 to 40 percent cheaper than E10. The government also supports the manufacture of vehicles that are compatible with E20 and E85 blends.

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DROUGHT FRIENDLY: Biomass sorghum requires less water than other annual crops, making it a good fit for drought-prone areas.

PHOTO: GENERA ENERGY

26 | Ethanol Producer Magazine | OCTOBER 2015

FEEDSTOCKS

Feedstocks Of the Future Commercial-scale production and harvest of several annual and perennial biomass feedstocks is under way, paving the way for biofuels, biopower and biobased products.

By Holly Jessen

Focusing solely on the big three cellulosic ethanol producers, corn is still king, even in second-generation advanced biofuels. Corn stover is the feedstock of choice of

Abengoa Bioenergy, DuPont Advanced Biofuels and Poet-DSM, at least in the near-term.

There are, however, a handful of other feedstocks that are gaining traction as potential feedstocks of the future, says Kelly Tiller, president and CEO of Genera Energy Inc. Specifically, switchgrass, miscanthus, biomass sorghum, sweet sorghum and energy cane are all currently being grown at commercial-scale production levels. Although there are other crops of interest, of course, Tiller zeros in on those six, counting corn stover, because they’ve been shown to work on the large-scale and are economically feasible, she tells Ethanol Producer Magazine.

Genera Energy provides biomass supply solutions to a variety of industries, including advanced biofuels. The company works with farmers and landowners, in some cases handling everything from land management, planting, harvest, transportation and storage. Although the company isn’t able to go into specifics, due to confidentially agreements with clients, Tiller said Genera is actively working in 10 states.

Corn Stover

Poet LLC, Abengoa and DuPont provided EPM with statements about the feedstock of today as well as what might come down the line.

“We are certainly looking into additional feedstocks for the future, but our efforts today are primarily focused on corn crop residue in our joint venture with DSM,” says Matt Merritt, director of public relations for Poet. “Corn crop residue offers many benefits, not the least of which is feedstock logistics and the opportunities for colocation with grain ethanol plants.”

OCTOBER 2015 | Ethanol Producer Magazine | 27

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28 | Ethanol Producer Magazine | OCTOBER 2015

HOME SWEET HOME: Switchgrass has multiple benefits, including providing good ground cover and travel corridors for small mammals and nesting birds.

PHOTO: GENERA ENERGY

Abengoa is currently most interested in corn stover and wheat straw at its Kansas biorefinery, says Chris Standlee, executive vice president of global affairs for Abengoa Bioenergy, because of the large amount of those crops available locally. “In short, we are still ramping up production capacities at Hugoton, and at this point the only feedstock we have used there is corn stover,” he says. “We will use wheat straw as we increase production rates closer to capacity, but even at full capacity we will probably only use 10 percent to 20 percent wheat straw and almost all the rest will be corn stover.”

Energy sorghum, which Standlee says looks promising as a feedstock, is grown locally in one of several test plots, managed by an Abengoa subsidiary that is dedicated to developing new feedstocks for the production of cellulosic sugars. The company also has a small 30-acre plot of switchgrass planted on the land where the ethanol plant is built. Finally, the facility could also convert other grasses harvested locally, de-

pending on factors such as price, availability and accessibility. “Other feedstocks will be used when it makes economic sense for us to do so, or when we want to run a test for a particular feedstock for possible use at other facilities,” he says.

DuPont, Nevada, Iowa, facility will focus on maximizing production and productivity using corn stover says Jan Koninckx, global business lead for advanced biofuels.

However, the company, which will celebrate its cellulosic ethanol plant grand opening on Oct. 30, is investigating the potential of other feedstocks, including sugarcane bagasse, switchgrass, biomass sorghum and empty fruit bunch, a residue of palm oil production, all of which can be processed using DuPont's design. “We are using our pilot plant in Tennessee to validate other feedstocks,” he says.

Sam Jackson, vice president of business development for Genera Energy, describes corn stover as an opportunistic feedstock. It’s secondary to corn-grain production and, in some cases, can actu-

FEEDSTOCKS

Yield Comparisons Feedstock

Expected Yield

Biomass Sorghum

10+ dry tons

Corn Stover

1.5 dry tons

Energy Cane

15-20 dry tons

Hybrid Poplar

4-10 dry tons per year

Hybrid Willow

3-5 tons per year

Miscanthus

10-12 dry tons 8-10 dry tons

Sweet Sorghum Switchgrass

6-8 dry tons in southern climates; 3-5 dry tons in northern climates

SOURCE: GENERA ENERGY

ally help solve problems when some is removed from the field. “But the same circumstances that offer economic advantages for collecting stover biomass also introduce some disadvantages in material handling and processing,” he says. “Dirt and other materials picked up off the ground when harvesting stover can cause significant problems in downstream processing and stover moisture content can be highly variable, which can introduce costs and processing challenges.”

Perennial Grasses

With corn stover taking up a lot of attention, there hasn’t recently been as much buzz about purpose-grown energy crops such as switchgrass and miscanthus. But planting and harvesting of these crops is actually happening at fairly large scale, Tiller says. Today, the crops are more commercially viable because the time needed to establish plantings has been reduced. It is possible, Tiller says, to harvest switchgrass and miscanthus in the first year, but

VISIONARY: Planting miscanthus and other perennial grasses may mean growing it for the next decade or even two, meaning a long-term relationship is needed with the grower.

PHOTO: GENERA ENERGY

full productivity is now possible by about the second year.

Native grasses also offer the second benefit of conservation value. The crop provides wildlife habitat, soil stabilization and even the ability to improve degraded soils over time. Harvest of perennial grasses can also be spread out over three or four months, or perhaps longer, in some cases, Tiller adds.

Crops like switchgrass and miscanthus, which are harvested dry, produce feedstocks that are consistent, clean and have low variability, Jackson says. On the flip side, the grasses also have low bulk densities, which results in challenges and additional costs in storage and transport.

Sorghum Varieties

There’s also commercial activity happening with the annual energy crops biomass sorghum and sweet sorghum, Tiller says. One big advantage of sorghum is that is requires less water than other row crops, so it’s particularly attractive in areas under drought stress or more mindful of water conservation. The crop also has some value as a silage or forage crop. “So that gives you a lot of flexibility in terms of being able to diversify those market outlets,” she says.

In addition, since sorghum is an annual crop that is already produced and harvested in a similar manner to other row crops, it can be harvested with existing equipment and knowledge. In other words, there’s less of a learning curve.

Biomass sorghum is a crop that provides high yield and flexibility in land use from year to year, Jackson says. On the other hand, it’s typically harvested at about 50 percent or higher moisture levels. “High moisture may limit the ability to cost-effectively mill a feedstock to fine particle sizes, store it for long periods of time, or use in some combustion processes,” he says.

Energy Cane

This crop can be grown in a limited geographic area, such as in the Gulf Coast

30 | Ethanol Producer Magazine | OCTOBER 2015

FEEDSTOCKS

or Southern California, Tiller says. Energy cane requires tropical conditions. Still, itâ&#x20AC;&#x2122;s a crop worth mentioning due to its tremendous yield potential, she says.

Feedstock Value

One exciting advancement in recent years, as more of these crops are planted and harvested on commercial scale, is yield information. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s one thing to have yields that are coming out of a laboratory or a designed experiment, but what we are seeing is very good documentation of very good, real world data on large scale,â&#x20AC;? she says. â&#x20AC;&#x153;And, they are quite good. I think, again, itâ&#x20AC;&#x2122;s validation for the true yield potential and information that some of the assumptions are valid and achievable in real world situations.â&#x20AC;?

Still, Tiller and Jackson agree, all tons are not created equal. While itâ&#x20AC;&#x2122;s true that tons are an easy way to compare feedstocks, such as comparing the number of tons harvested per acre or the cost per ton of delivered material, thereâ&#x20AC;&#x2122;s more to consider. â&#x20AC;&#x153;While these are useful data points, they only tell part of the story,â&#x20AC;? Jackson adds.

For example, in a comparison of a crop that yields 7 tons per acre, with a delivered price of $75-per ton and a crop yielding 12 tons per acre with a delivered price of $60 per ton, high yield and lower cost might not necessarily make the $60 crop the most attractive feedstock, he points out. If the $75 a ton crop is of a consistent and high quality with good storability, low handling costs and good conversion rates, it may actually be the better deal in the end. â&#x20AC;&#x153;The true cost associated with any biomass feedstock is the accumulation of cost from preparing the land for planting, crop production and management, harvesting, aggregation, logistics, storage, material handling, preprocessing and conveyance into the conversion facilityâ&#x20AC;&#x2122;s process,â&#x20AC;? he says. â&#x20AC;&#x153;To truly compare each feedstock, that total cost should be calculated as the starting point for comparing the cost of feedstock A vs. B. But to truly understand the relative value of a given feedstock, a more appropriate metric is the total cost of that feed-

stock represented in one or more marketable products derived from the biomass.â&#x20AC;?

In the end, there isnâ&#x20AC;&#x2122;t one single best feedstock. â&#x20AC;&#x153;All feedstocks have comparative advantages and disadvantages,â&#x20AC;? Jackson says, â&#x20AC;&#x153;and any feedstockâ&#x20AC;&#x2122;s value in a finished product depends on the region and the specific downstream material handling, preprocessing and conversion process, in ad-

dition to all of the characteristics and costs that are feedstock-specific.â&#x20AC;?

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

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30 OCTOBER 2015 | Ethanol Producer Magazine | 31

SUPPLY CHAIN

HOW MANY BALES? A 30 MMgy cellulosic plant will consume roughly 400,000 dry tons of biomass yearly. That's around 700,000 big square bales. If those 8-foot-long bales were placed end on end, they would stretch over 1,000 miles, or from southwest Kansas north across the border to Winnipeg, Manitoba. If all those 3-foot-high bales were stacked, they would soar 400 miles into the exosphere, 160 miles higher than the International Space Station's average orbit.

PHOTO: PACIFIC AG

32 | Ethanol Producer Magazine | OCTOBER 2015

SUPPLY CHAIN

BRINGING IN THE

BIOMASS Building a supply chain from scratch demands attention to detail and high agricultural IQ.

By Susanne Retka Schill

A multitude of questions surround the challenge of bringing in the mountains of biomass needed to feed a commercial-scale cellulosic ethanol plant: Are crop residues a reliable resource? Will farming communities support the development of this

new supply chain? Will farmers make long-term commitments? Pacific Ag and Genera Energy Inc., both with roots outside the Corn Belt, bring different perspectives to these questions.

Pacific Ag has two decades of experience harvesting forages and crop residues in the Pacific Northwest, exporting to Japan and Korea. The company describes itself as a service provider, aiding farmers with residue management while providing consistent feedstock quality and supply to customers.

Genera Energy’s roots are in the Tennessee state government and university initiative to create a comprehensive and integrated switchgrass-to-ethanol biofuels project that resulted in partnering with DuPont to build a demonstration facility in Vonore, Tennessee. Genera Energy spun out from those early efforts, launching in 2012 to pursue commercial biomass supply business opportunities. While working on equipment optimization and logistics strategies, Genera Energy has also focused on supply-chain modeling aimed towards just-in-time supplies of both energy crops and residues.

Genera Energy’s chief operating officer Keith Brazzell cautions that, for many, being dependent upon a single feedstock could be a trap—be it corn stover or miscanthus. “It’s one thing if you’re in the middle of Iowa and thousands of acres of corn and if somebody’s corn doesn’t come in, you can get somebody else’s,” he says. Furthermore, relying upon crop residues requires large storage yards for a year’s worth of stover or straw. “We’ve spent a lot of time on what crop mixes

OCTOBER 2015 | Ethanol Producer Magazine | 33

EXPANDING THE LEGACY: Those familiar with the traditional bedding and forage markets quickly learn the quality requirements for bioenergy uses.

PHOTO: PACIFIC AG

work out for just-in-time supply,â&#x20AC;? he says, adding there is a place for some inventory.

Generally, baling grain crop residue requires a compressed harvest window to meet the farmerâ&#x20AC;&#x2122;s need for fall field work. Looking at other crops provides multiple harvest windows throughout a season. A biomass sorghum might be harvestable in July and could stand for several weeks, Brazzell says.

Switchgrass that goes into dormancy in the fall has a long harvest window while the spring harvest of winter cover crops could fill another time frame. Energy crops can also greatly reduce the number of acres needed to supply a biorefinery. While corn stover is reportedly yielding between 1.5 to 2.5 tons per acre, Brazzell points out, grass can yield 8 tons and a biomass sorghum

even more at 10 or 12 tons per acre. Winter cover crops could supplement as well, with biomass yields around 3 tons per acre, he says.

Genera Energy has been working on modeling the mix of crops and related factors to meet the feedstock needs of a biorefinery. The database being built will be useful for contingency planning and adjusting

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SUPPLY CHAIN

to changing conditions. â&#x20AC;&#x153;One of the worst things you can do is build a 20 or 30 million gallon plant, and run out of biomass,â&#x20AC;?

Brazzell says.

While working with a mix of feedstocks addresses the risks associated with relying upon a single residue, the time and cost associated with establishing perennial energy crops raises another issueâ&#x20AC;&#x201D;the need

for long-term contracts. â&#x20AC;&#x153;Once you invest in the establishment of a perennial crop, you cannot afford to have that land go away three years later because somebody sells it out from under you,â&#x20AC;? Brazzell says. Most farmers are in their upper 50s and many are 70 years or older, he points out. â&#x20AC;&#x153;You have to think long-term leases and what happens as it passes from one generation

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to the next.â&#x20AC;? In interviewing landowners, they have found while some are not willing to enter into five- or 10-year leases, others are. â&#x20AC;&#x153;Itâ&#x20AC;&#x2122;s harder to get a row-crop farmer to tie up his land long term, and thatâ&#x20AC;&#x2122;s not best utilization anyway. His land might be better for biomass sorghum,â&#x20AC;? he adds. Perennial crops are more appropriate for underutilized land, perhaps reclamation acres, land coming out of conservation or unused pastureland.

Pacific Ag takes a different approach.

While the company strives to build longterm relationships with farmers, Harrison Pettit, vice president corporate development, says they donâ&#x20AC;&#x2122;t ask for long-term agreements. â&#x20AC;&#x153;Our belief is that growers need to feel that they are not locked in, or backed into a corner,â&#x20AC;? he says. â&#x20AC;&#x153;Conditions change. Itâ&#x20AC;&#x2122;s better that growers have the psychological parachute.â&#x20AC;?

Managing Residue

Pacific Ag has built its business around providing residue management services for

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growers. A large part of bigger yields in wheat and corn crops has come through higher plant populations, Pettit points out. “That means as grain yields grow, so does the amount of residue per acre.” Managing the residue by removing some of it eliminates the need for multiple field passes to incorporate the residue, saving fuel, time and equipment. Removing some residue can also mean easier planting and better emergence for the next crop, improving yields the following year. “And we’re paying them something,” Pettit adds.

For a business based on offering residue management services, Pacific Ag had a challenge on its hands when it took on the contract to supply Abengoa’s cellulosic ethanol plant in southwest Kansas—the region was in the middle of a multiyear drought. “It was a matter of being very selective on which fields were harvested at all,” explains Pacific Ag’s vice president of supply Steve Van Mouwerik. “And all of them were harvested much more lightly, because it really is all about what you leave and not what you take.”

Starting in the teeth of the drought meant starting slowly and spending the time with growers, he continues, “giving them an opportunity to decide for themselves if they like what you’re doing, the timing of what you’re doing and how it fits with their cropping schedule. It’s going to be different for someone who plants cornon-corn versus someone who is rotating between corn and wheat or corn and soybeans or milo.” This year, the area is experiencing more than double the normal rainfall, and with it, no shortage of residue. After experiencing both extremes, he adds with a chuckle, “We’re looking for five normal years.”

Areas like southwest Kansas, in or near cattle country, are familiar with baling straw and stover for feedlots, and it’s a good

Creating Opportunity Since 1851.

PERENNIAL CHOICE: Dormant switchgrass can be left standing and harvested as late as January, extending a harvest season. Forage-chopped switchgrass leaves the field at 13 to 15 percent moisture and less than 1 inch in particle size.

PHOTO: GENERA ENERGY

base to build upon, says Van Mouwerik, but there are big differences. The legacy model, which people are used to, alternates between harvesting little or nothing and, the next year, harvesting everything possible due to high demand for forage supplies. “When you have consistency of demand, you can really settle down to growers seeing a consistency of residue management.”

One lesson learned in building the supply shed for the Hugoton, Kansas, project is that the ideal 20- or 30-mile supply radius around a biorefinery can’t be the initial target. “What you really are mapping, when you first go in, are the early adopters, the innovators in the community,” Van Mouwerik says. “You went where the people who wanted to try something new were located and what you did with them was watched by the neighbors.” The following year, the innovator would be adding fields and the neighbor would give it a try. “We learned the speed of success was really relying on how we could create experiences that could be viewed and talked about. That provides you with your growth curve and supply.”

Payments to growers do not reflect the distance from the biorefinery, he adds, reflecting the fact there are other markets for the residues, typically dairies and feedlots. As the supply fills in closer to the plant and demand becomes more consistent and the market matures, he adds, a distance-based discount evolves. Growers also begin to quantify the benefits of residue management. In the two decades of working in the Pacific Northwest with grass seed growers, harvesting and shipping the residue to Japanese markets, he watched the market mature. “When growers saw it wasn’t going to be hot and cold, they settled down. The pricing came to reflect the avoided costs that they had in their entire farming operation, the distance it was from a point of demand, and the benefits that they

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OCTOBER 2015 | Ethanol Producer Magazine | 37

SUPPLY CHAIN

HARVEST TRAIN: Pacific Ag began working in the Midwest by transporting equipment from its Oregon base.

It is now adding equipment and crews to building a more national footprint.

PHOTO: PACIFIC AG

were enjoying. It takes time to mature those dynamics in the stubble fee or the biomass feedstock markets.”

Another big difference from the legacy forage and bedding markets is in quality.

The traditional markets have much higher tolerances, and there’s a “go-along and getalong” framework that defines that activity, Van Mouwerik says. Equipment operators recruited from the traditional baling operations quickly learn the ropes of meeting higher quality demands. Good communication is needed to meet the growers’ needs, while helping them understand the end user’s needs.

Moisture levels are well understood, and not much different for biorefineries than other markets. Ash content is a greater concern for biorefineries, however.

“We have operating rules of thumb, so that [equipment operators] run their equipment and heights and speeds on fields with different types of soil such that they’re minimizing the amount of ash that’s in the bale,” Mouwerik explains.

National Footprint

In expanding its residue management business from the Pacific Northwest into the High Plains, Pacific Ag is pursuing a national footprint. “The fall corn harvest

38 | Ethanol Producer Magazine | OCTOBER 2015

is the big harvest season,” Van Mouwerik says, “but you need to find complementary harvest windows and products that will keep equipment and human resources operating.” The Pacific Ag team has followed the custom combine crews north, even into North Dakota, to supply dairies, feedlots, mushroom operations and other emerging markets. The company is finding that as end users realize they can count on consistent supply and quality, more markets develop. Plus, it gives market options for varying conditions. For example, moisture-damaged wheat straw that won’t meet specifications for an ethanol plant might work well for a mushroom customer, he says. “It makes it more resilient and lower cost for everyone when you have a number of markets pulling their quality out of the pile,” he says.

“Six years ago, when we began this, we saw how to connect the dots, but we had to go prove it to ourselves and it’s proving true.” End users of residue have struggled with a fragmented supply base and inconsistency. “We see there’s strong demand for the kind of quality control and logistics, reporting and reliability of supply that isn’t so hyper local that it’s hard to have clear supply profiles,” he says. And, in working with end users, Pacific Ag provides the ag-

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Similarly, says Van Mouwerik, “As growers experience residue management provided on a consistent basis that is only made possible by steady demand from cellulosic ethanol plants like DuPont and Abengoa and Poet, they will begin finding opportunities in their operations that will help them achieve lower costs, new cropping opportunities.”

He cautions against being too hasty to judge the emerging biomass supply chain.

“What we’ve signed up for is to go on a journey where we all learn how to take advantage of a completely underutilized slice of a crop or family of crops,” he says. There will be opportunities when growers and users learn how the new crop mixes will complement each other, and their operations.

“We’re going to learn a lot together in the next five or 10 years.”

285 6(59,&(6 ,1&/8'( 5' 3$57< ,1'(3(1'(17 5(9,(:6 5(*,675$7,216

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

ZZZ HFRHQJLQHHUV XV 0LNH +DQVPDQ _ _ PKDQVPDQ#HFRHQJLQHHUV XV OCTOBER 2015 | Ethanol Producer Magazine | 39

PROFILE

BIOMASS BALE: AGCO balers are used exclusively by Pacific Ag, which does 100 percent of the feedstock supply for Abengoa.

PHOTO: AGCO

40 | Ethanol Producer Magazine | OCTOBER 2015

PROFILE

FROM BLUEPRINT

TO BALER

AGCO is well-equipped to aid the first U.S. cellulosic ethanol plants in devising efficient and effective feedstock supply chain models.

By Anna Simet

Name the crop, and AGCO has baled it. Extensive

work with kenaf, hemp, miscanthus, energy sorghum, energy cane, switchgrass and corn stalks—nearly all nonwoody biomass—has allowed the company to build a tremendous knowledge base of how to treat each material and bring success to a project, says Glenn Farris, AGCO North American biomass and industrials segment strategy manager. “We can bale it all, but we’ll just say some are certainly more challenging than others,” he quips.

It hasn’t come without trial and error, but that’s the name of the game in this burgeoning industry, according to Farris. Of late, the focus has been on corn stover, and on what he dubs the Big Three—Abengoa’s, DuPont’s and Poet-DSM’s commercialscale cellulosic ethanol plants in Hugoton, Kansas; Nevada, Iowa; and Emmetsburg, Iowa, respectively. At Abengoa, Pacific Ag does 100 percent of the feedstock supply, and uses AGCO balers exclusively. Investment for the machines needed to complete the feedstock supply chain amount to much more than one might think—a typical-size, 25 to 30 MMgy cellulosic ethanol plant requires around 350,000 dry tons of stover per year, which equates to as many as 60 balers and windrowers when the project is fully open, and a total of around 350 pieces of equipment. Therefore, on top of the roughly $200 million cost to build a plant, an additional $40 million investment is required for machines alone.

Right now, the market for large square balers in this industry is around 1,600 units, Farris says, but potential is vast. If cellulosic fuel production projections are achieved—1

billion gallons by 2023—that could ratchet up the market to roughly 4,000 balers, for corn stover specifically. “That’s more than two and a half times the existing market, including the other uses the balers are used for,” Farris says.

With corn stover in mind, the company’s 2200 Series large square baler has a simplistic, robust design, with high throughput and density. AGCO’s WR9870 windrower with biomass attachments has a Twin Max double conditioning system, which Kyle Kitt, marketing manager of hay cutting, preparation and forage, says no other player in the market offers. But regardless of a machine’s capability or reliability, if the operator isn’t well-trained, overall efficiencies can plummet. “No matter how great a product is, if you don’t have the knowledge to make it shine, it will only get you so far,” Kitt says.

Practice Makes Perfect

AGCO has developed a service and training coaching model that has served the company and its customers well. “Two years ago, we had 100 new operators at a project, and of those 100, approximately 82 of them had never participated in a baling activity before,” Farris says. “Out of those 82, 56 had never sat in a tractor before.

Within three weeks of the start, they were doing an outstanding job and achieved every goal that was set for them.”

“We don’t have 30-year veterans running this equipment, and that’s why technology is so important—it allows these companies to monitor performance and see efficiencies improve over time,” Kitt adds.

For example, in 2012, AGCO spent time analyzing what was going on with sev-

eral of the projects it was involved in, and found its baler performance to be right on, but the learning curve was how to optimize them in each environment. “That’s what generated all of our training—we believed our piece of the puzzle was very good, but it has to start at the operator and their understanding—we’ve found that less than 30 percent of the issues are on equipment,” Kitt says.

And despite many years of preparation, even beyond operator performance, learn-as-they-go is the only way to perfect operations, as there is no point of reference to look back on. “They don’t have what the corn starch ethanol industry had—a system already in place, a commodities market, storage areas, the logistical chain. It all already existed, it just needed to expand for the new demand for supply,” Farris says. “When these project developers are planning, they can’t sit down and look at a historical price and predict what they think it will be; there is nowhere they can pick up a phone and ask if someone can send 100,000 tons of corn stover next month.”

And that’s where the biggest challenge lies—the development of a system, which couldn’t be done in earlier project development stages, when the focus was elsewhere.

“When you look at how the industry has evolved, for years they [cellulosic ethanol companies] spent all of their time on their technology, and rightly so, as they are technology companies to a great degree,” Farris says. “So they solved problems there first.”

Now, with the Big Three all underway, the preferred feedstock system is in the making, and may or may not be one-sizefits-all. “We don’t know which is going to be

OCTOBER 2015 | Ethanol Producer Magazine | 41

PROFILE

LOOKING GOOD: AGCO’s 2200 Series large square baler is working the fields around the newly completed U.S. cellulosic ethanol facilities.

PHOTO: AGCO

‘the one’, but we’re really getting into the knowledge of spare parts, the consumables, ways to keep costs down and how to optimize the machines,” Farris says.

Though AGCO has been wheels-deep in stover logistics, its work with biomass continues to expand beyond that crop and the U.S. market.

Other Markets, Road Ahead

One developing and two operational power projects in Chile and sugarcane baling in Brazil and Argentina are some examples of AGCO’s latest global biomass sector involvement, offers Ken Wagenbach, senior marketing specialist. Also attracting the company’s attention are developments in China, where the company already has operations and sees significant growth opportunity, and the EU, where AGCO is a major market force.

Opportunities abroad and outside the U.S. border are vast, but AGCO is still keep-

ing a close eye on new and developing markets in the U.S. “I think there will continue to be a significant amount of growth in the pellet industry, not just for export, but for home and district heating,” Farris says. “A lot of that is woody biomass, but you might see ag waste and purpose-grown crops become a robust part of that market. There is a different set of economics around that, and it’s fairly compelling. I think another thing we’re starting to hear rumblings about is the use of wheat straw and miscanthus for pulping material.”

Although a watchful eye is kept on the renewable fuel standard (RFS), business doesn’t start or end there for AGCO, as the reality is that for them, growth will continue to happen, regardless of policy direction. “I think [liquid] fuels will continue to grow, but each one of these companies is devoting a lot of their resources into the chemical areas, too, things that are used for building blocks for plastics, cosmet-

ics and other higher-value products with large markets, so I think we’ll start seeing more of that in the near future,” Wagenbach says.

There are many more pieces to the puzzle than just fuel, from his perspective. “It’s also about agronomics and sustainability,” he says.

“We’re not just totally interested in it for fuels; I think we’re looking at this as residue management from major cropping sources, as yields increase and crop genetics change.

Farris points out corn yields are steadily rising and current national averages hover around 175-plus bushels per acre, with forecasts to reach 200 within the next 15 years. “Yields for wheat are in the mid-40s; when you see them hit 65 to 70, there will be a need to take it off because it will be a detriment to yields.”

Therefore, the once-heavily debated argument surrounding crop residue removal will become nearly obsolete, and the concept will move from a potential detriment to an extra revenue stream. “All of a sudden, it’s going to go beyond a niche market for one company,” Kitt adds. “It will become every corn farmer’s opportunity.”

Author: Anna Simet Managing Editor, Biomass Magazine asimet@bbiinternational.com 701-738-4961

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42 | Ethanol Producer Magazine | OCTOBER 2015

OCTOBER 2015 | Ethanol Producer Magazine | 43

POLICY

Biofuels Champion At Home, Abroad There’s no question biofuels and a strong RFS are important to the future of the Cornhusker State.

By Holly Jessen

MEET AND GREET: Holk Nielsen of Novozymes, at left, shakes hands with Ricketts at Novozymes’ headquarters in Denmark. Ricketts has made international trade missions a priority of his administration.

PHOTO: NOVOZYMES

Nebraska Gov. Pete Ricketts knows the value of renewable fuels. His state, No. 2 on the list of ethanol producing states, has 24 ethanol production facilities that produced a combined total of 1.8 billion gallons of ethanol in 2014. The industry supports 4,400 jobs in Nebraska.

At the end of July, Ricketts and Iowa Lt. Gov. Kim Reynolds held a news conference at Novozymes’ Blair, Nebraska, enzyme production facility, to discuss the potential impact of the U.S. EPA’s RFS proposal. In June, Ricketts led a 30-member trade team to the European Union, including stops in Italy, Belgium and Denmark.

While in Denmark, a roundtable on renewable fuels and bioproducts was held at 44 | Ethanol Producer Magazine | OCTOBER 2015

Novozymes’ headquarters. Some of the participants included Nebraska ethanol producers Paul Kenny, chairman of the KAAPA Ethanol LLC board of directors and representative on the Nebraska Ethanol Board, and Jeff Briggs, Green Plains Inc. chief operating officer; and representatives from DuPont, DONG Energy and Leifmark.

The governor and other members of the trade mission also met with Novozymes CEO Peder Holk Nielsen. "We've always known that Nebraskans support biofuel production, including the local and federal elected officials,” said Holk Nielsen. “Gov. Ricketts and others have written to EPA recently defending the renewable fuel standard and we appreciate their unwavering support.”

The RFS was the main topic at the roundtable, Kenny told EPM. “We just need

to have a clearer, more concise vision of ethanol and the future in the United States before people can expand and spend money.”

Briggs told EPM that he felt the meeting at Novozymes was helpful to provide a better understanding and relationship with a key supplier. “[It’s] important to communicate to Novozymes the support of the RFS and continued support of their business and operations in Nebraska,” he said.

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

EDUCATION CAR: Ricketts checks out Novozymes’ Zymobile, a 2011 Dodge Charger flex-fuel vehicle, on July 24, when a news conference was held at Novozyme’s enzyme plant in Nebraska.

PHOTO: NOVOZYMES

Rooting forNebraska a Robust RFS Gov. Pete Ricketts

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Q. In the many issues facing you as

governor of Nebraska, how high up does the RFS rank? What does the EPA need to do to get it right on the RFS?

A. The EPA is changing the rules of game in the middle of the game, and they are pull-

ing the rug out from underneath Nebraska’s farmers and our ethanol industry. Nebraska is the second-largest producer of ethanol in the United States, and the industry has invested over $5

billion in capital investments in our state. The EPA’s plan to slash billions of gallons of ethanol from the RFS creates uncertainty for the future of the industry, and limits opportunities for

continued investment by ethanol producers and their partners. My administration is urging the EPA to make a firm commitment to a robust RFS, so that American consumers continue to have a variety of choices at the pump.

Q. Tell us about your visit to

Novozymes’ headquarters in Denmark.

A. Novozymes has been a great investor in Nebraska, and we met with CEO Peder Holk

Nielsen to thank him for their continued commitment to our state. At this meeting, Peder

shared some of their concerns about the regulatory environment in the United States. Because of the EPA’s proposed changes the renewable fuel standard, Novozymes has had to rethink

some of their expansion plans in the United States. This is a concrete example of the U.S. EPA’s actions potentially costing Nebraska jobs.

Q. Tell us about the roundtable

on biofuels held there.

A. Nebraska delegates presented U.S. market trends and regulations to the group, with a

focus on coproducts, revenue opportunities and biorefinery developments. The group summa-

rized opportunities for businesses in the U.S. that partner with Nebraska and its companies. The

Nebraska team also showcased the dynamic interaction between the corn, cattle, and ethanol sectors and their important roles in Nebraska’s success in agriculture.

(605) 428-4300 www.Direct-Automation.com OCTOBER 2015 | Ethanol Producer Magazine | 45

COMPLIANCE

PHOTO: U.S. WATER SERVICES

Searching for Effective, Environmentally Friendly Water Treatment Technologies Phosphorus-free cooling tower treatment offers viable alternative.

By Michael Mowbray

There is a heightened focus on environmental sustainability today, and for good reason.

Gone are the days of it being acceptable to open valves and discharge unregulated waste streams into the environment. As time has progressed, industry has seen the impact of heightened scrutiny of the public and regulatory bodies. There are strong trends in protecting our natural resources from excessive usage and compromising their quality. Companies, and now even municipalities, are being subject to thorough review and comment periods to justify a facility’s proposed discharge rates and water composition.

Historically, one area that has come up during the environmental review cycle is the evaluation of the additives used to treat cooling tower systems. The plot of the movie “Erin Brockovich” was centered on the use of the cooling tower chemical additive chromate and, when it was discovered that chromates were carcinogenic, the use of chromates was banned.

Today there is a new focus on cooling tower additives. This time, phosphorus (P) discharges have gained significant attention as a result of the impact they can have on the eutrophication of lakes and other waterways.

Phosphorus has long been recognized as the controlling factor in plant and algae growth for many lakes and streams. A minor

increase in phosphorous can fuel substantial increases in both aquatic plant and algae growth, which can have severe impacts on a community. Phosphorus originates from municipal and industrial water discharges, as well as agricultural runoff. Many parts of the country, including the Great Lakes and Chesapeake Bay watersheds, are regulating the acceptable P discharge levels well below those commonly employed in traditional cooling water treatments for scale and corrosion control. The state of Wisconsin, for example, is regulating P discharges at levels in the range of 0.04 to 0.075 parts per million (ppm). This represents a significant challenge for facilities operating under direct discharge permits.

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

46 | Ethanol Producer Magazine | OCTOBER 2015

COMPLIANCE The use of phosphorus-bearing compounds in industrial cooling water treatment programs has been commonplace since they replaced chromates as corrosion inhibitors in the early 1970s. Typical alkaline all-organic cooling water programs where phosphonates are present as scale inhibitors can have phosphorus levels from 0.3 to 2.5 ppm as P, while stabilized phosphate programs can have phosphorus levels as high as 6.0 to 7.0 ppm. Alternative corrosion inhibitor options may not be viable since they are often based on metals such as zinc or molybdate that are also being closely regulated in terms of acceptable discharge levels. Without an effective corrosion and deposit (scale) control program in place, industrial cooling systems could be compromised in a relatively short time.

Facilities could experience significantly higher operating costs as well as potentially impact production capacities, for example, from a loss of vacuum in the surface condensers.

SOURCE: U.S. WATER SERVICES

any successful water technology program for control of potentially harmful bacteria, such as legionella. Organic inhibitors based on the phosphorus molecule do not meet the discharge requirement for P due to the reversion of some of the organic phosphonate to orthophosphate.

Unfortunately many alternative programs have failed to properly control the corrosion rates in systems without the use

of phosphorus-bearing inhibitors. Table 1 illustrates an evaluation of green chemistry alternatives conducted by scientists at St. Michael, Minnesota-based U.S. Water Services Inc. The various alternatives were subjectively rated, with 4 being the best score and 1 the worst.

Informed by their review of the alternatives, scientists at U.S. Water developed new cooling water treatment

Evaluating Alternatives

Specialty chemical providers have recognized the challenges facing the industry for some time and have been diligently working to find an economically viable solution that can deliver the protection required. Suppliers have investigated nonmetallic corrosion inhibitors and have made them commercially available. These organic inhibitors are often based on low molecular weight polymers, phosphonates and amino phosphonates. Some of these organic molecules have proven to be successful carbon steel corrosion inhibitors. Although they show improved environmental acceptability, they too may have some technical concerns. Organic molecules may be more susceptible to oxidizing biocides than inorganic molecules.

Many azole-based copper corrosion inhibitors are susceptible to degradation by oxidizing biocides. Hydroxyphosphonic acid has shown susceptibility to chlorine, even at low levels. This presents a problem because oxidizing biocides are a necessary part of

OCTOBER 2015 | Ethanol Producer Magazine | 47

COMPLIANCE technology, working with a Midwest ethanol plant to reduce phosphorus concentrations in its discharge. The plant had two different cooling towers due to different process conditions.

Both utilized induced draft counterflow cooling towers. The first cooling tower, comprised of mild steel, copper and 304 stainless steel, ran for six months from May to October at an estimated 18,000-gallons-per-minute (GPM) recirculation rate, while the second cooling tower, comprised of only mild steel and 304 stainless steel, ran year round at an estimated 12,600 -GPM recirculation rate.

Traditional water treatment programs were being utilized SOURCE: U.S. WATER SERVICES in the treatment of the cooling towers. The program for Tower No.1 utilized an all-organic program with an azole supplement along with a Corrator, a specially designed probe that gives a direct due to the copper metallurgy contained within the system. Tower electrochemical measurement of corrosion rate. Corrators are good No. 2 did not have an azole supplement. The results obtained from tools to measure trends and instantaneous relative corrosion rates. the first chemical program were satisfactory, but U.S. Water tried Corrosion coupons are an alternative method to monitor the same an alternative all-organic program and corrosion rates actually parameter. Corrosion coupons are samples of pertinent metal increased slightly from the first program to the second program in (i.e., mild steel or copper) that are preweighed to a high degree of Tower No. 2. accuracy. These metal samples are put into a system and exposed to Needing a viable chemical treatment alternative due to discharge the water in the system for an extended duration. After a period of regulations, the client implemented the new U.S. Water program, time, the metal samples are removed and sent in for analysis where trademarked PhosZero. In order to ensure proper system protection, they are first cleaned of debris and then reweighed. The difference in corrosion rates were carefully monitored using corrosion coupons the metal mass (i.e., metal loss) and the length of exposure (in days)

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48 | Ethanol Producer Magazine | OCTOBER 2015

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COMPLIANCE

SOURCE: U.S. WATER SERVICES

are used to calculate the corrosion rates. In this study, corrosion coupons were employed in addition to the Corrator to monitor the cumulative corrosion rates over a 45-to 60-day exposure period. The results are summarized in Table 3.

The client wanted to maintain the same water efficiency (i.e., not reduce the cycles of concentration) that yielded a Langelier Saturation Index of approximately 2.25. This LSI represents a relatively high scaling potential. The heat transfer surfaces were monitored closely as well, and during the course of the entire trial there was no observed accumulation of scale that would impede the heat transfer efficiencies. Table 2 shows the pertinent cooling tower values during the trial. Corrosion rates improved dramatically within the first five hours of implementation of PhosZero. The corrosion rates for the mild steel, as measured by an online Corrater showed

significant improvement during the implementation phase, falling from greater than 2.5 mils per year (mpy) to less than 0.5 mpy. The results were better than anticipated and the primary objective of eliminating phosphorus from the cooling tower chemical treatment program was attained. In addition, the zero phosphorus treatment program provided a significant reduction in the corrosion rates. The corrosion rates dropped from an approximate average of 4 mpy to an average around 1.3 mpy.

The results signify a significant shift in paradigm in the water treatment industry. The norm used to be for facilities to have to settle for compromised results or additional water use when using alternate chemicals that didn’t contain phosphorus. Now, industry is able to meet low P concentrations in their discharges while still protecting their critical assets.

Author: Michael Mowbray Technical Marketing Manager, U.S. Water Services 763-497-1293 sarah.haug@uswaterservices.com Contributing Author: Gary Engstrom, Technology Manager, U.S. Water Services

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ANALYTICS

PHOTO: CELIGNIS

New NIR Models Speedup Feedstock Analysis Process

Current chemical methods take days and are dependent on analystâ&#x20AC;&#x2122;s skill.

By Daniel Hayes

Efficient cellulosic ethanol processes will depend upon the accurate analysis of lignocellulosic feedstocks. The relative importance

of various biomass constituent properties depends largely on whether enzymatic hydrolysis or thermochemical technologies are used, with sugar compositions being paramount in hydrolysis and thermal properties more important in thermochemical processes.

The analytical techniques for biomass used in thermochemical processes are well-established, relatively rapid and lowcost, largely due to their use in the fossil fuel industry. Moisture and ash contents are determined using ovens and furnaces, respectively. Heating values are determined using an oxygen bomb calorimeter and applying corrections based on the elemental (carbon, oxygen, hydrogen, nitrogen, sulphur) composition of the sample, found using an elemental analyzer. The washings of the

calorimeter can also be used to find the chlorine content. Other important elements in the ash can be determined by digesting the sample and subsequent analysis using equipment such as an ICP (inductively coupled plasma). The ash melting behavior can be determined using a special furnace with a digital camera to monitor ash deformation.

These methods place the onus of analysis on dedicated equipment, rather than the analyst, and can be completed within one day.

It takes significantly longer to determine the properties relevant to hydrolysis processes, however, and these methods are much more reliant on careful work by the analyst. The National Renewable Energy Laboratory has developed a widely used series of laboratory analytical procedures (LAPs) for lignocellulosic analysis. The LAP used to determine constituent sugars and lignin takes approximately three days for the two-stage acid hydrolysis procedure. Before hydrolysis, however, it is usually necessary to

remove extractives from the sample. In trials in our laboratory, we have found that not removing the extractives prior to hydrolysis can lead to significant overestimations of the Klason lignin. While various solvents can be used to remove extractives, the NREL LAP recommends water and ethanol.

Removing extractives using soxhlet requires up to 24 hours per sample. The remaining solid needs to air-dry prior to hydrolysis and the extractives content can be determined indirectly from the solid mass loss or directly by evaporating the solvent and weighing.

Once the extractives are removed, the two-stage acid hydrolysis procedure specified in the NREL LAP involves mixing the sample with 72 percent sulphuric acid and incubating it in a water batch at 30 degrees Celsius for one hour, during which the sample needs to be periodically mixed. The analystâ&#x20AC;&#x2122;s mixing technique is key in ensuring that the sample is fully hydrolyzed. After one hour, the hydrolysate is diluted to 4 percent acid,

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

50 | Ethanol Producer Magazine | OCTOBER 2015

ANALYTICS 90

100

Klason Lignin

60

Total Structural Sugars

90 80

50

80 70

NIR - Predicted (%)

20

60

60

50 15

50

30

40

40 20

20

20

5

10

10

0

20

40

60

0

10

30

30

10

0

Xylan 25

70 40

30

Glucan

0

Reference (%)

20

40

60

Reference (%)

80

100

0

0

20

40

60

80

0

0

10

20

30

Reference (%)

Reference (%)

CORRELATION: Scatter plots correlate the data obtained for a sample via chemical analysis (x-axis) and the data obtained for the same sample via NIR-prediction (y-axis).

SOURCE: CELIGNIS

the pressure tube sealed and placed in an autoclave at 121 C for another hour. The hydrolysate is then filtered and analyzed using chromatography equipment to identify the sugars. The residue is dried and ashed to determine the Klason lignin content, while acid-soluble lignin content is determined using ultraviolet spectroscopy.

Given that it takes approximately two weeks to follow the NREL LAPs, the cost of analysis can be very high.

Rapid Biomass Analysis

Fortunately, there are rapid analysis methods available for lignocellulosic composition. Near-infrared spectroscopy (NIR) involves light just beyond the visible part of the electromagnetic spectrum being directed toward the sample where it is reflected from, transmitted or refracted through, or absorbed by the matter it interacts with. Whether absorption occurs

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will depend on whether the photons have a frequency resonant to that of the rotations or the characteristic vibrations of the chemical bonds that constitute the molecules of the sample. Typically, most of the fundamental vibrational absorptions occur in the mid-infrared region (MIR), called the fingerprint region because distinctive spectra can be obtained for specific molecules and compounds. In contrast, the NIR region consists of the much weaker absorbance-

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ANALYTICS intensity overtones and combination bands.

The number and complexity of these, and their interactions, result in spectra that cannot easily be evaluated on visual inspection.

Because of this, NIR is not a direct analytical method. Statistical models based on Chemometric methods can be developed to relate the spectra variations with the chemical variations seen in the samples.

Once robust models are developed, they can be applied for rapid and direct analysis of unknown samples, becoming primary NIR analytical tools.

NIR models work best when the samples used in their development are comparable to the targeted unknownsâ&#x20AC;&#x201D;a model developed on grass samples is unlikely to be accurate in predicting the composition of a wood sample.

Given the huge variability in both biomass types and compositions seen in advanced biofuel feedstocks, NIR models need to be developed from a large and broad calibration set in order to predict analytes with confidence.

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52 | Ethanol Producer Magazine | OCTOBER 2015

in models for predicting a range of properties, such as protein in grain, its application for analyzing biomass feedstocks for lignocellulosic properties has been limited until recently.

While there have been a number of research publications in this area, these typically only involved one feedstock, or at most a handful.

There have also been some in-house NIR models, usually also feedstock-specific, developed by companies in the advanced biofuels sector. Historically, the only means of lignocellulosic analysis for a user without access to these models would have been through the chemical analysis methods, either carried out themselves or by a companies that undertake the NREL LAPs as a commercial service (with prices being approximately $1,000 per sample for full sugars, lignin and extractives analysis).

To meet the emerging need, Celignis Ltd. was launched in August at the Nexus Innovation Center at the University of Limerick, Ireland, to provide 24-hour, relatively low-cost laboratory analytical services for the characterization of biomass samples, including NIR analysis. Over 1,300 samples, covering a wide variety of biomass types, have been used to develop the Celignis models. They can predict each of the polysaccharide sugars (glucose, xylose, mannose, arabinose, galactose and rhamnose), lignin (Klason and acid soluble), ash and ethanol-soluble-extractives, covering a broad concentration range for each of the constituents.

Of course, the most accurate means of analysis will always be the chemical method, providing the analyst is suitably trained.

However, we consider the accuracy of NIR predictions more than satisfactory for the evaluation of advanced biofuel feedstocks.

In the future, biomass NIR devices may be integrated online at biofuel production facilities.

We have demonstrated in our laboratory that models using wet, whole biomass samples can be highly accurate on a feedstock-specific basis, though slightly less accurate than models based on dried, ground samples. Such a rapid means of online analysis will allow for efficiency improvements in feedstock evaluation and payment to the supplier, and even more rapid process adjustments.

Author: Daniel Hayes, CEO, Celignis Ltd. (+353) 61 518 440 dan@celignis.com

OCTOBER 2015 | Ethanol Producer Magazine | 53

BUSINESS MATTERS

Playing It Smart At Year-end

By Donna Funk

Each fall, the pace picks up in the K-Coe Isom offices. The company works to help clients assess their current

financial performance, determine tax options and cash-flow impacts and plan for the new year. Ethanol producers would do well to zero in on those same issues in the fourth quarter, before closing the books on 2015. As an ethanol producer winding down from this year’s tighter margins, there are numerous end-of-year decisions to make.

Here are some key things to consider:

Taxable income

Since most ethanol plants are formed as a limited liability company and taxed as a partnership, with income passing through to members, knowing the year’s taxable income is important for a business and its membership.

Prepayments

Consider the impact of receiving prepayments from customers.

For example, livestock producers may want to prepay for future distillers grains purchases. That means the company would receive the cash before it produced or delivered the product. It’s important to be thoughtful and proactive in this kind of situation. Forecast future distillers grain production as well as anticipated market prices. What terms will the company offer, such as discounts or cash price contracts upon delivery, if customers want to prepay?

Taking it a step further, careful thought should be given to whether it makes sense to prepay expenses, especially if a discount can be negotiated. Certain items can be prepaid in 2014 that allow the company to accelerate the deduction on its tax return while saving the deduction for 2015 financial reporting. This could be the best of all situations: Defer tax payments and see a minimal adjustment in the timing of cash outlay since the company was

54 | Ethanol Producer Magazine | OCTOBER 2015

going to prepay those expenses soon after year-end and it might actually reduce the cash outlay if discounts were effectively negotitated.

Depreciation

Pay careful attention to the expensing and depreciation elections you made on past tax filings as well as those available for the current year. Will the company accelerate deductions? Balance cash flow and taxable income based on your company’s goals.

Cash flow

End-of-year financial planning will almost certainly affect your cash flow: A question to ask: How much cash reserves does the company absolutely have to have at all times versus how much cash can be used in late 2015 for planning—to save taxes, defer taxes and, hopefully, net a larger cash balance than if no planning were done?

While reassessing 2015 and your tax-related decisions, think about the year ahead. Are the decisions made today simply kicking the can down the road? Will 2016 put the company in a different tax bracket? If there were a proverbial crystal ball to show where corn and oil prices were headed, if it were known what to expect from the gasoline and export markets, plans could be made accordingly.

But it doesn’t exist. So it’s important to go through the end-ofyear planning process. Carefully think through the pros and cons of your decisions and how they will impact taxes and cash flow this year and next.

Author: Donna Funk, CPA Principal, K-Coe Isom 800-303-3241 funk@kcoe.com

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