Ethanol Producer Magazine - October 2010

INSIDE: YEAST MONITORING ENTERS THE COMPUTER AGE OCTOBER 2010

Reaching For Solutions Ethanol Plants Turn to In-House Engineers

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contents

vol. 16 no. 10

features 42 PERSONNEL Engineers on the Ground Some ethanol plants are finding value in having an in-house engineer to troubleshoot and evaluate new technologies.

–By Holly Jessen 48 TECHNOLOGY Keeping an Eye on Yeast The mainstay of yeast assessment—the humble microscope—is being joined by high-tech automated machines.

–By Kris Bevill 54 EQUIPMENT Boosting the Back End’s Bottom Line A new technology that washes pure protein, oil and fiber from the distiller bottoms is being tested in a 52 MMgy plant.

–By Kris Bevill

42 4

ON THE COVER: Don Mork and Kevin Howes, both engineers, work at Homeland Energy Solutions LLC in Lawler, Iowa.

PHOTO BY MATTHEW PUTNEY

ETHANOL PRODUCER MAGAZINE

October 2010

contents departments

contributions

8 Editor’s Note The Controllable and Uncontrollable

By Susanne Retka Schill 9 Advertiser Index 12 Events Calendar 14 The Way I See It Setting the Global Direction

By Mike Bryan 16 View From the Hill Making Your Vote Count

By Bob Dinneen 18 Drive 50 Years of OPEC

By Tom Buis 20 eBio The World Upside Down

By Rob Vierhoust 22 Taking Stalk Overcoming Color Bias

By Bill Greving 24 Business Matters IRS Denies Patronage Dividend Deduction

By Hamang Patel and Craig Johnson 26 Business & People 28 Commodities 30 BIObytes 32 Industry News

60 60 DATA MANAGEMENT Achieving a Sustainable Manufacturing Advantage An information technology solution integrates operations data with financials and any and all other data collected in the modern ethanol plant. –By Charles A. Horth

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62 Marketplace

Ethanol Producer Magazine: (USPS No. 023-974) October 2010, Vol. 16, Issue 10. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices.

POSTMASTER: Send address changes to Ethanol Producer Magazine/ Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

ETHANOL PRODUCER MAGAZINE

October 2010

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Susanne Retka Schill Editor's Note

The Controllable and Uncontrollable he nitty-gritty details of keeping an ethanol plant running smoothly and the fermentation process healthy are always important. In this issue, Associate Editor Kris Bevill takes a look at new methods being developed to make monitoring yeast activity faster and more accurate. For our cover story, Associate Editor Holly Jessen takes a look at another trend in ethanol plant management—hiring in-house engineers to help optimize processes and investigate potential upgrades. Ideally, an engineer working with experienced plant personnel should anticipate problems before they become costly breakdowns. Every step made to fine tune the operations within control can insure a plant’s smooth operations, providing a solid base in the face of the uncontrollable.

Policy is one of those areas outside the control of a plant’s management team. There’s the potential that Washington gridlock will put the ethanol tax credit into the same limbo as the biodiesel credit, in spite of the hard work being done on ethanol’s behalf by many individuals and organizations. One plant manager I visited with recently said he would look for opportunities to hedge a profit of even a nickel rather than risk what may happen after Dec. 31.

T

Market risk is better understood than policy uncertainty and risk management teams have several tools available to hedge.

Those teams may be understandably a bit nervous this fall. While ethanol prices are up, so are corn prices and the speculators are back. Ironically, once again grain market advances are being led by wheat crop failures elsewhere in the world. What is not needed now is an event like the Iowa floods of a couple summers ago or the runaway oil prices that together created a perfect storm and turned what should have been a short-lived weather market into a wild ride for all. Having yet another record-busting corn crop in the field, record soybean yields and abundant U.S. wheat supplies have kept a countervailing downward pressure on the U.S. market. The stage is set, however, for returned volatility should the unexpected happen.

Susanne Retka Schill, Editor sretkaschill@bbiinternational.com

letter to the editor Push for E100 Engines

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hat is needed to assure the growth and stability of the ethanol industry is to make E100 (98/2, ethanol/ iso-propanol) a primary motor fuel in the U.S. To do that, the E100 Ethanol Group believes a government mandate on engines, not the fuel, is necessary. We suggest ethanol producers use their influence in Congress to achieve the following amendments to proposed bills: At least 50 percent of new vehicle inventory in the U.S. be E100 capable by the end of 2016 with a minimum of 30 miles per gallon (mpg) mileage in highway use for small and mid-size vehicles and 24 mpg highway for larger vehicles when running in E100 mode.

No retail franchise agreement may prohibit a gasoline retailer from purchasing E100 from any source.

No retail franchise agreement may prohibit a gasoline retailer from selling E100 under a branded canopy.

These steps would eliminate the main problems with E85— poor mileage and higher cost per mile—that are a disincentive for consumers to buy it. AVL Powertrain, HP2g, Saab, Nissan, Sturman Industries, Ricardo and others have demonstrated competitive engine technology that can get good mileage with

8

ethanol, yet still run on gasoline, even though performance on gasoline may be sacrificed. That is precisely what ethanol producers need—an engine that provides an incentive for drivers to purchase E100 instead of gasoline, a reversal of what we have today with E85 engines.

An engine mandate is necessary. Historically, the automotive industry does not make changes without a mandate. E85 (CAFE regulations), seat belts, air bags, high mount brake lights and unleaded gasoline were all mandated.

Ethanol producers would be able to sell E100 directly to a retail distribution system bypassing the oil companies pricing mechanisms and take the “blender credit” of 45 cents per gal for themselves on every gallon of E100 sold.

The E100 Ethanol Group believes it is madness to continue using 140 billion gallons per year of gasoline to power our lightduty cars and trucks. The ethanol industry could lower this to 70 billion gallons per year in short order if the above were adopted.

Bill Farrah, CEO, and Don Siekes, executive director E100 Ethanol Group Reach them at donsiefkes@aol.com ETHANOL PRODUCER MAGAZINE

October 2010

AdIndex www.EthanolProducer.com 23 2010 Southeast Biomass Conference & Trade Show 66 2010 International Biorefining Conference & Trade Show

E D I T O R I A L

25 2011 International Fuel Ethanol Workshop & Expo Susanne Retka Schill Editor

17 2011 National Ethanol Conference

sretkaschill@bbiinternational.com

40 2011 Pacific West Biomass Conference & Trade Show

Holly Jessen Associate Editor hjessen@bbiinternational.com

44 Agra Industries Inc.

Kris Bevill Associate Editor

47 BetaTec Hop Products

kbevill@bbiinternational.com

56 Biorefining

Jan Tellmann Copy Editor

41 BrownWinick Law Firm

jtellmann@bbiinternational.com

2 Burns & McDonnell E D I T O R I A L

B O A R D

57 CPM Roskamp Champion

Chippewa Valley Ethanol Co. LLLP

51 EISENMANN Corp.

Jeremy Wilhelm

Cilion Inc.

39 Fagen Inc.

Mick Henderson

Commonwealth Agri-Energy LLC

Mike Jerke

Keith Kor Walter Wendland

36 Ferm Solutions Inc. 3 Fermentis - Division of S.I. Lesaffre

Corn Plus LLLP

52 Gavilon

Golden Grain Energy LLC

15 & 21 Genencor® - A Danisco Division Neal Jakel Bert Farrish Eric Mosebey Steve Roe Bernie Punt

Illinois River Energy LLC

68 Growth Energy

LifeLine Foods LLC

5 ICM, Inc.

Lincolnland Agri-Energy LLC

10 & 11 Inbicon

Little Sioux Corn Processors LP

38 Indeck Power Equipment Co.

Siouxland Energy & Livestock Co-op

35 Kennedy & Coe LLC 19 Lallemand Ethanol Technology

P U B L I S H I N G Mike Bryan

&

S A L E S

46 Mettler Toledo 58 Nalco Co.

Chairman mbryan@bbiinternational.com

Joe Bryan

45 Natwick Associates Appraisal Services

CEO

67 North American Bioproducts Corp.

jbryan@bbiinternational.com

Tom Bryan Matthew Spoor

7 Novozymes

Vice President tbryan@bbiinternational.com

13 Pioneer Hi-Bred International Inc.

Vice President, Sales & Marketing

53 Premium Plant Services

mspoor@bbiinternational.com

59 Renewable Fuels Association Howard Brockhouse Jeremy Hanson Chip Shereck

Executive Account Manager hbrockhouse@bbiinternational.com

37 Valero

Senior Account Manager

34 Vogelbusch USA, Inc.

jhanson@bbiinternational.com

50 Wabash Power Equipment Co.

Account Manager cshereck@bbiinternational.com

Marty Steen

Account Manager msteen@bbiinternational.com

Bob Brown

SUBSCRIPTIONS Ethanol Producer Magazine is free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367.

Account Manager bbrown@bbiinternational.com

Gary Shields

Account Manager gshields@bbiinternational.com

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Marla DeFoe

Select back issues are available for $3.95 each, plus shipping. To place an order, contact Subscriptions at (701) 746-8385 or service@bbiinternational.com. Article reprints are also available for a fee.

Advertising Coordinator

ADVERTISING

mdefoe@bbiinternational.com

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

A R T Jaci Satterlund

Art Director

LETTERS TO THE EDITOR

jsatterlund@bbiinternational.com

Sam Melquist

Graphic Designer smelquist@bbiinternational.com

ETHANOL PRODUCER MAGAZINE

Advertising information online: www.EthanolProducer.com

BACK ISSUES AND REPRINTS

Subscriber Acquisition Manager

Please send correspondence to: Ethanol Producer Magazine 308 Second Ave. N., Suite 304 Grand Forks, ND USA 58203 Phone: (701) 746-8385 Fax: (701) 738-4927

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

COPYRIGHT © 2010 by BBI International

October 2010

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Not just a new technology, but a new ethanol industry.

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ETHANOL EVENTS Export Exchange 2010 October 6-8, 2010

Southeast Biomass Conference & Trade Show November 2-4, 2010

Hyatt Regency McCormick Place Hotel Chicago, Illinois The U.S. Grains Council and Renewable Fuels Association are cosponsoring this international trade conference, which will focus on the export of U.S. distillers dried grains and coarse grains and address critical issues facing U.S. exports. The conference seeks to connect international buyers of DDGS and coarse grains with the U.S. market, as well as to educate and build awareness among those buyers. USGC is sponsoring targeted trade teams from more than 25 countries. www.grains.org

Hyatt Regency Atlanta Atlanta, Georgia With an exclusive focus on biomass utilization in the Southeast—from the Virginias to the Gulf Coast—the Southeast Biomass Conference & Trade Show is one of three distinct regional offshoots of the International Biomass Conference & Expo. The program will feature more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance. The preliminary agenda is now available online. www.biomassconference.com/southeast

International Biorefining Conference & Trade Show November 16-18, 2010

7th Canadian Renewable Fuels Summit November 29-December 1, 2010

Omni William Penn Hotel Pittsburgh, Pennsylvania With a focus on strategies to accelerate the growth of the global biorefining industry, this forum will allow technology developers to connect with investors and strategic partners, putting them on a path toward deployment. Organized

by BBI International and produced by Biorefining magazine, this event will include panels on project finance, market development, technology scale-up and more, all focused on the advanced biofuels and biobased chemicals space.

The preliminary agenda is now available online. www.biorefiningconference.com

Hilton Lac-Leamy Hotel Gatineau, Quebec Network with leaders of government and industry at the Canadian Renewable Fuels Association’s seventh annual summit to be held this year in the nation’s capital. The summit attracts participants from across North America and around the world and is open to members and non-members alike, comprised of representatives from all levels of the biofuels industry including grain and cellulosic ethanol producers, biodiesel producers, Canada’s leading petroleum companies and agriculture associations. www.crfs2010.com

Pacific West Biomass Conference & Trade Show January 10-12, 2011

National Ethanol Conference February 20-22, 2011

Sheraton Seattle Hotel Seattle, Washington With an exclusive focus on biomass utilization in California, Oregon, Washington, Idaho and Nevada, the Pacific West Biomass Conference & Trade Show is one of three distinct regional offshoots of the International Biomass Conference & Expo. The program will focus on the vast potential for biomass utilization in the Pacific West, featuring more than 60 speakers within four tracks: electricity generation; industrial heat and power; biorefining; and biomass project development and finance. Speaker abstracts are now being accepted online. www.biomassconference.com/pacificwest

JW Marriott Desert Ridge Phoenix, Arizona Speakers and sessions will focus on opportunities facing the ethanol industry, including policy impacts, decisions, and updates, climate change, and other critical factors shaping the industry. www.nationalethanolconference.com

International Biomass Conference & Expo May 2-5, 2011

International Fuel Ethanol Workshop & Expo June 27-30, 2011

America’s Center St. Louis, Missouri The 4th Annual International Biomass Conference & Expo is the biomass industry’s largest, fastest-growing event. In 2010, the conference was attended by 1,700 industry professionals from 49 states and 25 nations representing nearly every geographical region and sector of the world’s interconnected biomass utilization industries—power, thermal energy, fuels and chemicals. With six tracks, 38 panels, 120 speakers, 400 exhibitors and an anticipated 2,500 attendees in 2011, this event will continue to be the industry’s leading educational, networking and business development forum. Speaker abstracts are now being accepted online. www.biomassconference.com

Indiana Convention Center Indianapolis, Indiana Entering its 27th year, the FEW is the largest, longest running ethanol conference in the world. The FEW is renowned for its superb programming which remains focused on commercial-scale ethanol production—both grain and cellulosic—operational efficiencies, plant management, energy use, and nearterm research and development. With five tracks, 32 panels, 100 speakers, 400 exhibitors and an anticipated 2,500 attendees in 2011, the FEW remains the ethanol industry’s leading production-oriented, educational, networking and business development forum. Speaker abstracts are now being accepted online. www.fuelethanolworkshop.com

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ETHANOL PRODUCER MAGAZINE

October 2010

Right feedstock. Right value.

More Ethanol per Bushel Measuring the Results

Pioneer QualiTrak速 System

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The Way I See It Setting the Global Direction The world is watching America’s renewable energy policy. Living now in Australia and being involved in the biofuels industry here and having had the opportunity to travel to many countries over the last 25 years, one thing is clear to me. Countries may set their own renewable energy policy, but what America does helps to set the tone for renewable energy on a global scale.

The current debate over raising the allowable content level of ethanol to 15 percent is being watched everywhere.

“If cars in America can run on 15 percent ethanol why can’t our cars?” That same question has been asked by Americans about the Brazilian ethanol/auto industry for years. “If Brazilian cars can run on 20 percent ethanol without modification, why can’t American cars?”

In truth, there is no reason. Neither the U.S. EPA, nor the auto or oil industries have been able to come up with one truly credible reason why ethanol cannot be blended at 15 percent with gasoline. We all know it’s the politics of a strong oil lobby, pure and simple. The world is watching America.

I recently traveled to Thailand on a business development trade mission. We met with Prime Minister Vejjajiva for over an hour discussing trade, renewable energy and business development. One thing became clear―while Thailand sets its direction on renewable energy policy, there is an underlying influence that comes from watching what America is doing. The same is true for Australia and many other countries around the world.

What we do in the United States has an indirect, sometimes even direct influence on public policy globally. When we speak with a loud and clear voice to Congress, it inspires others to do the same. When President Obama makes it known that he supports biofuels, it has an impact. When farmers across America unite and bring a strong message to Washington on renewable energy, and farm policy, it creates an attitude of “if they can do it…we can do it” in other parts of the world.

America has taken a lot of hits in the past few years, with wars, questionable international policies and the global economic crisis. One of the things we are still admired for however, is our dedication to a strong renewable energy industry. We are looked at as a world leader in adopting energy policies that help our environment and programs that support our farmers and rural communities.

We need to set a biofuels standard that is second to none. Believe it or not…the world is watching.

That’s the way I see it.

Mike Bryan Chairman mbryan@bbiinternational.com

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ETHANOL PRODUCER MAGAZINE

October 2010

VIEW FROM THE HILL Dinneen

Making Your Vote Count

By Bob Dinneen f the polls are right, this November could see a tidal wave election that would swing control of Congress back to Republicans. Then again, these polls change almost daily. But what does remain the same in poll after poll is the concern most Americans have about the direction the country is going. Right or wrong, a majority of Americans are worried about their future, with much of this fretting caused by concerns over economic issues— always the top tier issue in polls.

Other issues, however, also register on these polls. Concerns over national security, our oil addiction and the environment routinely show up as issues of importance to many voters. Not coincidentally, all are key issues that form the foundation for the continued efforts to expand America’s renewable fuels industry.

Let’s break them down.

Renewable fuels, and especially ethanol, are an enormous source of economic activity and opportunity in thousands of communities across the nation. American ethanol production alone is helping to support 400,000 jobs and providing billions of dollars of economic activity and new tax revenue. Many of the jobs directly associated with ethanol production are well-paying and provide employees with important benefits such as health insurance for their families and a sound retirement savings program.

Simultaneously, using domestically produced renewable fuels reduces our trade deficits with oil-rich nations, far too many of which harbor hostile intentions toward the U.S. Using more than 10.5 billion gallons of ethanol last year alone reduced oil imports by 364 million barrels, enough savings to stop imports from Venezuela for 10 months. Displacing these oil barrels also helped improve our trade balance, saving more than $16 billion.

Likewise, reducing the amount of money we spend on oil from hostile nations improves our national security. We spend $1 billion a day importing oil, with too high a percentage of that money going to nations that have interests contrary to ours. Too often, those dollars find their way to groups seeking to do Americans harm.

On the environmental front, ethanol is unparalleled in its ability to reduce greenhouse gas emissions from vehicles. Compared to gasoline, ethanol reduces greenhouse gas emissions by nearly 60

I

16

percent. In 2009, these savings were the equivalent of removing 2.7 million cars from American roads. As new technologies are developed, these benefits will only grow.

With ethanol the only widely available and viable alternative to gasoline, policy decisions on the future of the nation’s renewable fuels are important. I am not one to advocate voting on a single issue, but as you weigh which candidates for federal, state and local office you will support, there are a couple of things to keep in mind: Does this person share our industry’s vision for America’s energy future?

Is the candidate willing to have open and honest discussions about American energy policy, including petroleum and other fossil fuels, in full context?

Does this candidate demonstrate the necessary fortitude to reject misinformation, fairly evaluate the facts, and make informed rather than politically expedient decisions?

In Washington, people are fond of saying that elections have consequences. This is especially true against the current backdrop of Washington gridlock and voter anger. The votes that you cast have the potential to shape the future of American ethanol and energy policy for years to come.

As always, I trust the men and women who make up and support America’s ethanol industry to make sound decisions and vote for candidates who reflect their views. That is what gives me confidence that issues from tax incentives to ethanol blending will be resolved in a manner that benefits the greatest number of people.

Happy voting!

Bob Dinneen is president and CEO of the Renewable Fuels Association. Reach him at (202) 289-3835.

ETHANOL PRODUCER MAGAZINE

October 2010

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DRIVE Buis

50 Years of OPEC

By Tom Buis ast month marked a dubious milestone in our nation’s history: the 50th anniversary of the founding of OPEC, the Organization of the Petroleum Exporting Countries.

That is 50 years of a foreign cartel controlling our economy through the coordinated manipulation of the production of Middle East oil.

The United States has been held over a barrel of oil for far too long, sending more than $300 billion annually to the economies of foreign countries to feed our addiction. As explained by Gen. Wesley Clark, former NATO Supreme Commander and our co-chairman here at Growth Energy, that means every man, woman and child in the U.S. sends a $1,000-a-year tribute to foreign governments.

It may get worse. The International Energy Agency forecasts that as output by non-OPEC nations fall in the next five to 10 years, the global economy will only grow more reliant on OPEC, and more vulnerable to cartel-driven spike shocks.

Increasing the production of domestic, renewable fuels such as ethanol can reduce the power OPEC exerts over our economy. Every gallon of clean-burning ethanol that we produce in this country decreases the demand for foreign oil and keeps U.S. money in the U.S. economy, where it can create U.S. jobs.

In 2009 alone, U.S. production and use of ethanol eliminated the need to import at least 364 million barrels of oil—keeping $21.3 billion in the U.S. economy—and reduced CO2 equivalent green-

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Ethanol’s contributions to our nation are undeniable, but the industry’s potential is constrained because we are arbitrarily denied access to all but 10 percent of the market.

Federal regulations mandate that 90 percent of our transportation fuel come from gasoline refined from oil. But we can eliminate these market barriers. As outlined in Growth Energy’s Fueling Freedom Plan, we can create an open market where we can compete— fair and square—against oil, and against OPEC. It is time we loosen OPEC’s grip over the transportation fuel market and strengthen our nation’s economy and national security.

Fueling Freedom seeks to create permanent access to the fuel market. The benefits of those market reforms and open market benefits would long outlast any public financing of Fueling Freedom.

Ethanol is more than a fuel, it’s a solution. A strong ethanol industry will create American jobs, stimulate economic growth and make our country truly energy independent.

Since 1960, America’s dependence on oil from OPEC has put our country’s security and economic strength at risk. If we really want America to become energy independent, we need to increase the use and consumption of domestic ethanol.

Otherwise, we will be celebrating another 50 years for OPEC. Tom Buis is CEO of Growth Energy. He can be reached at tbuis@ growthenergy.org or (202) 545-4000.

house gas emissions by approximately 16.5 million tons in the U.S., or the equivalent of removing more than 2.7 million cars from America’s roadways. An increase from E10 to E15, as Growth Energy seeks with its Green Jobs Waiver, would create 136,000 new American jobs.

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ETHANOL PRODUCER MAGAZINE

October 2010

eBIO INSIDER Vierhout

The World Upside Down

By Robert Vierhout s all EPM readers know there are several reasons governments promote biofuels. Depending on the location the argument may differ, but there is agreement everywhere that an important driver is a reduction in transport greenhouse gas (GHG) emissions. Within the EU, the environmental driver is certainly the most important, though it makes more sense to promote biofuels as an important and easy solution to reduce imports of crude oil. After all we are highly dependent on imports of fossil fuel at over 80 percent.

For a number of years now many people around the world have been, and still are, looking into the environmental performance of biofuels. A lot of misinformation, often presented as scientific evidence, has been cited trying to convince legislators and society that producing biofuels costs more energy than petrol or diesel. Now we are in the midst of another fantasy: the debate on the carbon intensity of biofuels as a result of the so-called indirect land use changes. The next battle almost certainly will be on the use of water resources.

In all these years of debate on the environmental performance of biofuels there has been relative silence around the question of how environmentally dangerous fossil fuels are. It is as if people simply accept that fossil fuels are bad for the environment and that not much can be done about it. Major oil spills as we have seen recently, or the fact that we rely more and more on non-conventional oil, do not lead to a perception that we need to make structural changes in our energy supply.

As we all know, the environmental performance of biofuels is judged in terms of its GHG emission savings compared to the emissions of fossil fuels. In the relevant European laws, the default value of fossil fuel emissions has been set at 83.8 grams CO2 equivalent per megajule. It is not entirely clear, though, how this emission was calculated—very likely the result of a sort of black box operation, as there is no methodology mentioned in the law nor reference made to a source.

Legislators realized that it was difficult to justify a very complex methodology for calculating emissions from biofuels whilst not having any methodology at all for fossil fuel. This omission was repaired in 2009 when an existing law on fuel specifications

A

20

was amended to require fuel suppliers (both bio and fossil) to report life-cycle GHG emissions. By using actual average emissions from fossil fuels, a better comparator could then be established for biofuels.

Within the European Commission the unit responsible for transport and ozone in the Climate Action department has worked over a year on a methodology for calculating fossil fuel emissions. Recently, this unit circulated a proposal to other commission departments. I was flabbergasted when I saw the document. It proposes biofuel producers inform national authorities what kind of feedstock they use, where it is coming from and what energy source is used for processing the raw material and, in case of sugar beet use, new GHG emission savings have to be set depending on the energy source—a straight blow to biofuel producers that already need to provide lots of information to certify the fuel they produce under a different law.

It gets worse. For fossil fuel, the proposal provides two simple pathways with default (not actual) values for the emissions from crude to gasoline and crude to diesel, without specifying the crude source, which obviously will not result in higher emissions than that now in the law. The use of non-conventional oils is not factored in, as there are no emission data available. Overall, it is argued, actual values cannot be used as it is too difficult to obtain data. No wonder, if one knows that the oil industry was saying all the time that it is impossible to provide actual emission values and it would present an excessive administrative burden.

Of course, the naïve civil servants have no reason to distrust the oil industry and would certainly not want to bring economic hardship upon them. Apparently the biofuel industry, in their view, is a mature and wealthy industry that would and could not object to more administrative burdens.

The proposed implementation rules are being blocked by other commission services for the time being. Like us, they believe that this is the world upside down.

Robert Vierhout is the secretary-general of eBIO, the European Bioethanol Fuel Association. Reach him at vierhout@ ebio.org.

ETHANOL PRODUCER MAGAZINE

October 2010

TAKING STALK Greving

Overcoming Color Bias

By Bill Greving e’ve all heard the saying, “You can’t judge a book by its cover,” and I can’t deny that sorghum has an unusual cover. After the organization of the Sorghum Checkoff, we are seeing sorghum become a more valuable feedstock to the ethanol industry, proving that despite its unusual cover, sorghum is a valuable option for many industries.

Those of us at the Sorghum Checkoff believe we’ve made great progress in the past year raising awareness of the potential of sorghum as a feedstock in the ethanol process. The Sorghum Checkoff is on a mission to increase the inclusion rate of grain sorghum to produce ethanol by 50 percent. We’ve crisscrossed the country, speaking at conferences and trade shows, visiting with sorghum growers and ethanol producers, seeking input and addressing questions and concerns. Managers have learned that using sorghum in ethanol and feed made significant improvements to profit and product quality. In fact, some managers may be leaving money on the table by judging sorghum just by its color.

We’ve also talked with feedlot managers, dairy managers and nutritionists about sorghum distiller’s grains. If you’ve seen this product, well, it’s a little different in appearance. In my experience, some livestock producers have the misperception that the red distiller’s grains from grain sorghum ethanol production are not as nutritious as the typical distillers dried grains (DDGS) from yellow corn. As they say, you can’t judge a book by its cover.

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22

Distiller’s grains from corn and sorghum are a valuable feed for livestock, poultry and swine. When they first came on the market, there was some initial reluctance from feedlots. However, facts overcame fear and now there is a rapidly growing global market for DDGS. China is on pace to become the largest buyer of U.S. DDGS this year, buying some 1.5 million tons.

Sorghum DDGS tends to be lower in fat and higher in protein than corn DDGS. There is no need to make comparisons. Similar to the role of sorghum in the ethanol process, it is another option for those producers in the sorghum belt.

Grain sorghum is unique among all the crops being evaluated as a feedstock source for renewable fuel production in that it can fit into all the proposed conversion schemes currently under review. Not only is the crop drought tolerant and uses less inputs than many other crops, it is highly adaptable to whatever process becomes the dominant commercial vehicle from which biofuels are produced.

The same can be said of the sorghum coproduct in the ethanol process—the DDGS may appear a bit different, but it has proven to be another viable option for a nutritional feed. So I guess the old saying proves true, you can’t judge a book by its cover and you can’t judge sorghum DDGS by its color either.

Bill Greving is the chairman of the United Sorghum Checkoff Program. Reach him at wand@ruraltel.net.

ETHANOL PRODUCER MAGAZINE

October 2010

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BUSINESS MATTERS Patel

Johnson

IRS Denies Patronage Dividend Deduction

By Hamang Patel and Craig Johnson n a newly released internal IRS memorandum, the Internal Revenue Service denied a deduction for some (but not all) of the patronage dividends paid by an ethanol cooperative. This memorandum is notable for being the first time the IRS has opined on this issue in the ethanol industry.

The memorandum released on Aug. 6 was written by the IRS in connection with an IRS audit of an ethanol cooperative. The cooperative in the audit is a non-exempt cooperative taxed under Subchapter T of the federal tax code. Accordingly, the cooperative is taxed as a corporation, but can claim a deduction for patronage dividends.

The cooperative and each of its members entered into a typical marketing agreement where members would be required to deliver a set number of bushels of corn each year to the cooperative. Because the committed bushels were insufficient to meet the production requirements of the ethanol plant, the cooperative purchased additional bushels from both members and nonmembers. On audit, the IRS denied deductions for dividends from earnings attributable to those additional bushels.

I

IRS Position The IRS based its denial on two primary reasons. First, the IRS concluded that the cooperative’s income from the additional bushels were not patronage sourced. This conclusion was based on the IRS interpreting “patronage source income” to require such income to result from transactions that the cooperative was obligated to enter into (among other requirements). The IRS noted that the cooperative was not obligated to buy corn other than pursuant to the marketing agreements. In other words, the IRS claimed that only the income attributable to corn purchased pursuant to the marketing agreements could be patronage sourced. (While the IRS’ interpretation of the definition of patronage source income is debatable, the cooperative apparently conceded the point in the course of the audit). This IRS conclusion was fatal to the deductibility of these dividends, because federal statutes allow a cooperative to deduct only those distributions paid out of patronage-sourced income.

Secondly, the IRS argued that the cooperative’s distribution of earnings attributable to the additional bushels failed to meet the definition of a “patronage dividend.” Federal statutes define a “patron24

age dividend” as a distribution which (among other requirements) is pursuant to an obligation of a cooperative to pay such amount.

Moreover, this obligation to pay the distribution must be in existence prior to earning the amounts that is distributed. The IRS noted that while the cooperative’s bylaws required that net income from patronage business be distributed at least annually, net income from nonpatronage business was distributable at the discretion of the board of directors. Although the relevance of this fact is debatable, the IRS held that this discretion was fatal to the deductibility of the distribution of earnings attributable to the additional bushels.

Interpreting the Memo It should be noted that this IRS memorandum is merely an internal communication released in redacted form under public disclosure laws, and not an official pronouncement of law. Nonetheless, the memorandum tells us how the IRS currently views the deductibility of patronage distribution. For an ethanol cooperative, this memorandum suggests the cooperative do the following to reduce the risk of problems in an IRS audit: Corn Delivery Requirements: The IRS clearly stated that corn purchases by an ethanol cooperative other than pursuant to a marketing agreement cannot generate patronage source income, even if the corn is purchased from members. Thus, an ethanol cooperative should re-evaluate whether the corn delivery requirements are sufficient to satisfy the needs of the ethanol plant, and if not, consider raising the delivery requirements.

Bylaws: The IRS clearly stated that if the bylaws give the board of directors discretion to declare dividends of patronage source income, then any such dividends may not be deductible.

Thus, cooperatives should re-examine their bylaws to see whether an annual declaration of dividends is required (as compared to being merely permitted).

Hamang Patel is a partner at Michael Best & Friedrich LLP. Reach him at (608) 283-2278 or hbpatel@michaelbest.com.

Craig Johnson is a member of the renewable energy, business and health care practice groups in the Madison office at Michael Best & Friedrich LLP. Reach him at (608) 257-3064 or cjjohnson@ michaelbest.com.

ETHANOL PRODUCER MAGAZINE

October 2010

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Business&People Ethanol Industry Briefs

The executive committee of Renewable Products Marketing Group LLC announced that Doug Punke has accepted the position of CEO. Punke is charged with creating and executing RPMG’s strategic growth plan, which includes adding to both its production and downstream customer base. RPMG is a U.S. ethanol and distillers grains Punke marketer, currently marketing 900 million gallons per year of ethanol. A 27-year veteran of Cargill Inc., Punke’s background includes commodity trading, grain processing and energy risk management. Most recently, he was vice president of Cargill’s Energy Risk Management Solutions group.

BlueFire Renewables Inc., which until a name change in midAugust was known as BlueFire Ethanol Fuels Inc., has appointed Roger Petersen as a new board member. Petersen has more than 20 years of experience dealing with corporate mergers and acquisitions, development, finance, operations and engineering/construction. He served as president of PPL Global LLC, a company he helped create in 1995, and 26

most recently served as president and CEO of Montana Horizons LLC, a company he founded to support utility mergers and acquisitions and energy development projects. BlueFire is currently in the process of developing two cellulosic ethanol facilities in Lancaster, Calif., and Fulton, Miss.

Evolution Markets Inc. has expanded its coverage of the U.S. renewable fuels trading markets and has added three employees. John Dall will serve as the director of the group’s commodity brokerage operations and Tom Solon and Jonathan Auerbach will focus on facilitating structured physical trades of ethanol and biodiesel. Dall, a partner in the company, will lead the biofuels commodity brokerage desk.

Solon will lead Evolution’s efforts to build and expand market opportunities for structured transactions and physical biofuels markets. Auerbach’s focus will be to develop and build the firm’s physical biodiesel structured transaction business.

Fourteen ethanol plants and two technology/manufacturing companies named in a patent infringement lawsuit will have their cases tried in the Southern District of Indiana after a U.S. Judicial Panel on Multidistrict Litigation ruled that the cases will be consolidated. GreenShift Corp. and its subsidiary, GS CleanTech Corp., are suing ethanol plants in Illinois, Indiana, Iowa, Minnesota,

Wisconsin and North Dakota for allegedly infringing on its patented corn oil extraction technology.

Also being sued are ICM Inc. and GEA Westfalia Separator Inc. GreenShift announced Aug. 17 that it has settled the lawsuit with one ethanol plant, Center Ethanol LLC of Sauget, Ill. The company entered into a license agreement for use of GreenShift’s patented corn oil extraction process.

Start-up company Xylogenics Inc. and Lallemand Ethanol Technology have signed an exclusive agreement to develop and commercialize yeasts for the first-generation ethanol industry.

Xylogenics, with its knowledge in genetically enhanced ethanolproducing yeasts, will work in cooperation with Lallemand to engineer a new class of industrial ethanol yeast strains. The goal will be to increase fermentation yield and capacity and reduce fermentation costs. Lallemand, a U.S. business unit of the Canadian yeast and bacteria producer Lallemand Inc., will be responsible for process development, manufacturing and commercialization of the new yeast. Xylogenics will receive patent license fees and royalty payments, under the terms of the agreement.

The Renewable Fuels Association welcomed Randy Klein as its new director of membership. Klein joined RFA from the Nebraska Corn Board where he served as director of market development. He will be based out of the RFA’s Omaha office.“We are pleased to have someone of Randy’s experience and passion for ethanol as part of our team,” said RFA President and CEO Bob Dinneen. “Randy will hit the ground running as the RFA’s representative to the dozens of ethanol producers all across the nation.”

Pursuit Dynamics PLC has contracted to install and validate its Ethanol Reactor System at the 44 MMgy Mid America Bio Energy & Commodities LLC ethanol plant in Madrid, Neb. Installments Schafer at Marquis Energy LLV and Pacific Ethanol Inc’s Boardman plant, which were announced this spring, are Veith progressing well with deployment expected in October, according to the company. All three plants will run the ERS for up to 10 weeks to quantify the operational benefits in a

ETHANOL PRODUCER MAGAZINE

October 2010

Sponsored by

commercial environment.

Pursuit also announced Bill Schafer and Cary Veith will work jointly as general managers of the company’s biofuels business. Schafer brings more than 30 years of energy industry experience including his most recent position as a founder and officer of Range Fuels Inc. Veith has more than 30 years experience in innovations, most recently having led the research and development department at Myriant Technologies LLC, a biotech developer and manufacturer of renewable biochemicals.

ADF Engineering Inc., headquartered in Miamisburg, Ohio, has hired Brian O’Toole as a process engineer. O’Toole is a recent graduate of the U n i ve r s i t y of Dayton with a bachelor’s degree in chemical engineering.

O’Toole With experience in research and process design, he will be focusing on energy conservation and process safety in the bioscience industry.

Dan Simon, co-founder and former executive vice president and chief operating officer of BioFuel Energy Corp., recently left the company to launch Elevant Advisors LLC,

a consulting firm that targets the energy, technology, infrastructure development and manufacturing markets. Elevant specializes Simon in capital raising activities, corporate strategy and development, buy and sell-side transactions, crisis management and operational management. Simon is president and CEO of the company.

Ethanol industry veteran Jeff Roskam, has been named founding CEO of the Kansas Alliance for Biorefining and Bioenergy. Formed last year through a $4.1 million grant from the Kansas Bioscience Authority’s Centers of Innovation program, KABB will focus on resolving technical issues related to the production of bioRoskam chemicals and biofuels, from harvesting feedstocks through the processing and marketing of organic chemicals. As Kansas’ bioenergy center of innovation, KABB will also develop alternative fuels and chemicals and improve carbon capture.

Roskam’s career in the ethanol industry spans two decades and includes positions at some of

ETHANOL PRODUCER MAGAZINE

October 2010

the most well-known companies, including what is now Poet LLC and the now defunct VeraSun Energy Corp. He also co-founded and served as CEO of CAP CO2 LLC, a CO2 enhanced oil recovery firm.

Poet LLC has appointed Mitch Krebs director of public policy for the company’s public policy and corporate affairs group. Krebs formerly served as press secretary for S.D. Gov. Mike Rounds and as assistant vice president of media and community relations for Avera McKennan Hospital and University Health Center in Sioux Falls, S.D. In his position at Poet, Krebs will communicate with state legislators, industry groups and community leaders on initiatives that will increase the use of ethanol.

U.S. Water Services has relocated its headquarters to St. Michael, Minn. The company’s sales, marketing, engineering and equipment manufacturing staff moved into the new corporate facility in June. The facility also houses an expanded research and analytical laboratory as well as operations staff originally located in Cambridge, Minn.

U.S. Water Services said the relocation was necessary in order to bring all of its operations, product development and support staff under one roof. The

move also allows the engineering and equipment division opportunity for increased production capacity.

The Merrick Consultancy, part of Merrick & Co., announced that Daniel Robinette has joined the group as a senior consultant, specializing in water, wastewater and energy.

Robinette has more than 30 years of experience in these areas and has expertise in all aspects of water production and treatRobinette ment, water properties and chemistry, according to the company. He is a member of the American Institute of Chemical Engineers and the National Association of Corrosion Engineers.

The Merrick Consultancy serves the renewable, refining and utilities markets with management, technical and operations consulting services. EP SHARE YOUR INDUSTRY BRIEFS To be included in Business & People, send information (including photos and logos if available) to: Industry Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to (701) 746-8385, or e-mail it to sretkaschill@bbiinternational.com. Please include your name and telephone number in all correspondence.

27

COMMODITIES REPORT

Natural Gas Report

Production growth suggests lower gas prices ahead Sept. 3—The trajectory of the rig count is the leading indicator on production and therefore, pricing for natural gas. As the composition of the rig count (horizontal/directional/vertical) continues to evolve, however, analysts struggle to derive accurate production levels from the overall number. It is further complicated because the gas produced from an individual horizontal well varies by basin and the technology employed. Drilling companies continue to find efficiencies that reduce drill times and increase the productivity of individual rigs. For instance, Petrohawk reported drilling times in the Haynesville having been reduced by 65 percent over the past two years due to advancements. While the market still watches the rig count, it has become increasingly reliant on pipeline flow data for production estimates. Analysts use the flow data to extrapolate current production levels into the future based on drilling expectations and lead times.

The market is very sensitive to the weekly EIA inventory reports because they offer ‘real-time’ corroboration or disputation of the longer term supply and demand expectations. At the end of August, the pipeline flow models were indicating unprecedented production growth.

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

The highest level of production in at least 40 years is going to put significant downward pressure on prices until economics force cut backs. The theory is that sustained low prices will eventually steer those providing capital for shale development to seek higher returns elsewhere. However, in second-quarter analyst calls, the industry consistently hinted at cutbacks while forecasting production growth.

The second quarter was largely profitable as hedges established last winter (such as summer 2010 gas sold at $5.85) have offered decent netbacks this year. In contrast, the industry is under-hedged versus norms for 2011 (35 percent) and poorly hedged for 2012. With the 2011 and 2012 strips below $5.35, the window to lock in profitable returns is closing. If prices remain low, a very gradual turn toward production cutbacks is setting up for late 2011 with the rig count falling aggressively by mid-year. It will take all of 2011 to work out of the growing oversupply, resulting in lower prices in 2011 than 2010. Beyond 2011, the availability of capital and (in)ability to hedge at economically attractive levels will drive production, and therefore pricing. EP

Corn Report

By Jason Sagebiel, FCStone

Bullish market jittery on carry-out-to-use ratios Sept. 7—The corn market has been in a bullish mode on concerns over lower-than-anticipated yields from early harvested corn. Adding more inspiration is the fact that Russia had wheat production issues and has yet to receive beneficial rains as wheatsowing season approaches. The end result is lower world coarse grains carry-out and lower U.S. corn production. As of the August USDA report, the carry-out-to-use ratio for corn was calculated at 9.7 percent compared to 10.7 percent and 13.9 percent in 2009-’10 and 2008-’09, respectively. With lower production and no demand shift, this could shrink, bringing even more volatility into the corn market. As prices move higher, demand could be affected and at some point cap the upside. The trading community will be watching demand—exports, livestock and dairy prices and, of course, ethanol values. Another market fundamental is the length the managed money funds and index funds hold today, which has surpassed the record length established in mid-2008. In addition, this length is a greater percentage of open interest than it was in ’08. Therefore, we have a market that is truly concerned about production decline. Any liquidation by the funds, however, could have some rapid downside pressure.

The accompanying chart illustrates U.S. corn ending stocks (left axis) in million bushels and the carry-out-to-use ratio (right 28

axis illustrating the low carry-out and low carry-to-use ratio that the corn market experienced in 2006-’07 when the rally really began. The August carry-out-to-use ratio is lower than it was during this time frame. EP

ETHANOL PRODUCER MAGAZINE

October 2010

COMMODITIES REPORT

DDGS Report

Regional Ethanol Prices ($/gallon on Aug. 27) Front Month Futures (AC) $1.969

RACK

REGION

SPOT

West Coast

2.085

2.216

Midwest

2.000

2.053

East Coast

2.100

2.017

By Sean Broderick, CHS Inc.

Shipping rates rise on increased demand Sept. 7—Post Labor Day, domestic feed demand is normally still suffering from summer heat effects. This year, however, we are seeing good domestic demand from most animal sectors, no doubt sparked by bottom lines being more black than red. With elevation in the Gulf tight, barge demand is filling done deals. Gulf vessel loaders are seeing increasing demand-based loading fees, making DDGS ship-loading costs prohibitive. Asian demand is moving into the container market, which is reaching the highest prices of the season, and competing for containers with supplementary grains.

Chinese DDGS demand is expected to take a breather. With a poor China corn crop, importation and its resulting strain on infrastructure, is going to supersede some DDGS bulk

business. It is expected to pick up again late October. Europe, feeling the effects of Russia’s wheat crop failure, has been in the market not only for replacement wheat, but also DDGS, out of obvious places like the Gulf, and non-traditional origins such as Superior, Wis. Going forward, exports will be affected by an increase in shipping ratesContainer rates are expected to increase Oct. 1 by $300-400 per container. Rail rates will take an annual new crop increase, and physical rail cars themselves are tight and expensive. Many plants will be taking fall maintenance, but with ethanol margins as strong as they are, off-line times should be abbreviated.

Domestically, DDGS use from the hog sector should pick up after declining last year due to vomitoxin. EP

SOURCE: DTN

Regional Gasoline Prices ($/gallon on Aug. 27) Front Month Futures (RBOB) $1.919

REGION

SPOT

West Coast

1.958

2.216

Midwest

2.080

2.053

East Coast

1.943

2.017

RACK

SOURCE: DTN

DDGS Prices ($/ton) LOCATION

OCT. 2010

SEPT. 2010

Minnesota

120

95

110

Chicago

136

120

130

Buffalo, N.Y.

125

105

150

Central Calif.

168

152

165

Central Florida

154

138

SEPT. 2009

155 SOURCE: CHS Inc.

Corn Futures Prices DATE

(Dec. corn, $/bushel)

HIGH

LOW

CLOSE

Sept. 8, 2010

4.68 1/4

4.61 3/4

4.62 1/2

Aug. 8, 2010

4.25 3/4

4.16

4.18

Sept. 8, 2009

3.10 3/4

3.02

3.07 1/2

Ethanol Report

SOURCE: FCStone

By Rick Kment, DTN Biofuels Analyst

Ethanol price surge continues

Sept. 7—Ethanol futures prices soared higher following corn futures prices shooting up like a rocket ship at summer’s end. The corn futures markets are caught between uncertain production levels following the extremely wet growing season in portions of the Corn Belt, and a tight world supply. The focus on Russia’s tight wheat supply has driven additional speculation, moving corn futures from a low this year of $3.25 per bushel on June 29 to the December corn futures closing at $4.64 in early September.

The surge in corn prices carried through to the ethanol market as traders focused on corn more than any other market factor when establishing ethanol prices. The front month ethanol futures market moved from a yearly

low of $1.467 per gallon on June 29 to $1.969 per gallon on Sept. 3; a 50 cent rally. This move also surpassed the RBOB gasoline futures price which slumped from summer highs at the end of August, falling 15 cents per gallon in the same period of time.

With ethanol and RBOB gasoline prices moving opposite directions, there may additional strength in ethanol markets through the last four months of the year. Even though ethanol prices will likely find strong support following corn, RBOB gasoline futures seem to be oversold and primed for a rebound.

This could help to spark widespread investment buying in both the energy and ethanol markets over the next several weeks and months. EP

Cash Sorghum Prices ($/bushel) Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

SEPT. 3, 2010

AUG. 3, 2010

AUG. 25, 2009

4.15 4.05 3.86 4.32 4.16 4.52

3.44 3.40 3.14 3.70 3.44 3.84

2.64 2.85 2.43 3.02 2.57 3.62 SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

AUG 1, 2010

JULY 1, 2010

JUNE 1, 2009

NYMEX

4.77

4.72

3.38

N. Ventura

4.54

4.63

3.35

Calif. Border

4.32

4.56

3.34

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production Output

(1,000 barrels)

Per day

Month

End stocks

June 2010

854

25,631

19,578

May 2010

847

26,244

19,721

June 2009

704

21,125

14,555

SOURCE: U.S. Energy Information Administration

ETHANOL PRODUCER MAGAZINE

October 2010

29

BIObytes Ethanol News Briefs

EU ethanol production expands again After a nearly 60 percent growth in 2008, European ethanol production increased by 31 percent in 2009. Total EU production in 2009 was an estimated 3.7 billion liters up from 2.8 billion liters the previous year.

The biggest producer was France with an annual output in 2009 of 1 billion liters, an increase of 25 percent compared to 2008. The second largest pro-

ducing country was Germany, which increased its production by 32 percent to 750 million liters. Spain was in third place with 465 million liters, a 46 percent increase from 2008. In six out of 18 producing member states the production declined while the rest either increased or kept production steady.

Corn crop likely to set another record

Minnesota increases ethanol usage in state vehicles Minnesota increased the amount of E85 used in state vehicles by more than 86,000 gallons in the first two quarters of 2010 compared to the same time period last year, according to the American Lung Association of Minnesota. State agencies used 437,063 gallons of E85 to fuel the approxi-

mate 2,500 flex-fuel vehicles in their fleets during the first six months of the year. By comparison, approximately 2.2 million gallons of gasoline were used in state vehicles over the same time period, representing an 83.4 percent share of the fuel used in the state’s fleets.

Another record (or near record) corn crop will be binned this fall, with the USDA projecting a record 165.0 bushels per acre in its August report, 0.3 bushels above last year’s record.

That will total 255 million bushels more than the 2009 crop for a record 13.365 billion bushels.

Domestic use and exports are keeping supplies tight, however, and pre-harvest jitters indicate the market is concerned about reports of smaller-than-expected yields as the early harvest begins. With smaller stocks of old crop corn, the supply of corn for the 2010-’11 marketing

year is expected to be only 11 million bushels larger than last year’s supply. USDA forecasts consumption of U.S. corn during the 2010-’11 marketing year at a record 13.49 billion bushels, led by a 200 million bushel increase in corn used for ethanol production and a 75 million bushel increase in exports.

Year-ending corn stocks for the 2010-’11 marketing year are projected at a four-year low of 1.312 billion bushels, which at 9.7 percent of projected consumption, would be the lowest ratio in seven years.

Ceres to seed sorghum in Brazil

Columbian ethanol plant in the works

California-based seed developer Ceres Inc. has formed a Brazilian subsidiary to focus on expanding sweet sorghum as an ethanol feedstock. Ceres Sementes do Brasil Ltda. will be based in Sao Paulo and will be led temporarily by Ceres Chief Financial Officer Paul Kuc.

Isolux Corsan has signed a contract with the Colombian company Bioenergy for the construction of a $140 million industrial complex. The plant will produce ethanol from sugar cane with a processing capacity of 2.1 tons of cane per year, a 40 MW co-generation plant using bagasse, or sugar cane waste,

30

Sweet sorghum is already being grown in that area of Brazil, but on a very small scale and not as a biofuel feedstock, according to Ceres corporate communications manager Gary Koppenjan. Ceres is also conducting sweet sorghum crop trials in the U.S.

and other facilities for handling vinasse, the residue left in a still after the distillation process. The industrial complex will be built in the Meta Department of Colombia, an area traditionally occupied by cattle ranches which is now converting to agricultural use, including sugar cane.

ETHANOL PRODUCER MAGAZINE

October 2010

Hungary to get Fagen/ICM plant Construction began in late August on an American-style corn ethanol plant 50 miles outside Budapest on the Danube River at Dunafoldvar, Hungary.

Pannonia Ethanol Zrt, an Ethanol Europe project, expects the 50 MMgy plant to be completed in mid-2012. A team from Minnesota-based Fagen Inc. is directing the project using local

subcontractors to build a standard Fagen/ICM corn ethanol plant. The project also includes a natural gas-fired combined heat and power plant that will generate 1.5 MW power. Ethanol Europe’s future plans include a biomass-fired steam/power plant, an ethanol loading facility on the Danube and possible doubling of capacity.

PHOTO: NCSU

Gevo goes public to fund ethanol plant purchases

North Carolina researchers are developing a new technology to convert lignin.

Three universities received grants from the National Science Foundation this summer to further their research into cellulosic technologies.

Two North Dakota State University professors received $309,357 and will conduct their research in collaboration with a professor at Clarkson University, Potsdam, N.Y., who has been awarded $200,978. The objective of the group’s research is to enhance the conversion of cellulosic biomass into fermentable

glucose to convert into ethanol or other chemicals or fuels.

Researchers at North Carolina State University received a $500,000 grant aimed at finding an energy-efficient and environmentally friendly method for breaking down lignin feedstock.

The aim is to develop the science for catalytically transforming lignin by using liquid CO2, creating an economically viable resource for the petrochemical industry.

ETHANOL PRODUCER MAGAZINE

October 2010

Isobutanol technology developer Gevo Inc. announced in August that it had reached an agreement to purchase the 22 MMgy Agri-Energy LLC corn ethanol plant near Luverne, Minn., and expected the sale to be final by the end of October.

Upon completion of the sale, Gevo intends to immediately begin retrofitting the plant to produce isobutanol using its integrated fermentation technology. Agri-Energy founding member and co-op coordinator David Kolsrud said the move to produce isobutanol is in line with the company’s devotion to advancing the technology and best practices of the ethanol industry. “We see biobutanol as the next logical step in the industry’s development,” he said.

“We believe isobutanol can be sold into many markets and has product attributes that make it a

compelling product for current ethanol producers.”

One week after announcing the planned acquisition of Agri-Energy, Gevo filed an initial public offering with the U.S. Securities and Exchange Commission in an effort to raise $150 million to fund not only the Agri-Energy purchase, but future ethanol acquisitions as well. Gevo said it had no other planned ethanol plant acquisitions at the time of the filing, but was in discussions with several plant owners representing 1.8 billion gallons of ethanol capacity.

Gevo is expected to pay $20.7 million for Agri-Energy, plus raise $3.7 million for working capital. Gevo will invest an additional $22 million to retrofit the facility for isobutanol production.

31

PHOTOS: HOLLY JESSEN BBI INTERNATIONAL

Ron Lamberty, left, ACE’s vice president and director of market development, and Dan Gilligan, president of the Petroleum Marketers Association of America, spoke during a panel titled E15 and Beyond. At top right is Wally Tyner, a professor of agricultural economics at Purdue University, and at bottom right is Marc Rauch, executive vice president and co-publisher of The Auto Channel.

ACE speakers: Craft a positive message All too often, the ethanol industry forgets to trumpet the positive messages about ethanol and, instead, gets sidetracked by the negativity, said Lars Herseth, president of the American Coalition for Ethanol. “I think we generally take the bait.”

Telling ethanol’s positive story was an important theme at ACE’s 23rd Annual Ethanol Conference & Trade Show. The event, held in Kansas City in early August, brought together ethanol supporters to talk about the 32

ethanol message, the Volumetric Ethanol Excise Tax Credit, the blend wall and more.

Ron Lamberty, ACE’s vice president and director of market development, also talked up the importance of a positive message.

“Ethanol is getting clobbered in the battle of public opinion,” he said. He made the analogy of a daughter bringing a new boyfriend home and saying ‘he doesn’t gamble much, he’s not an alcoholic and he’s never killed anyone.’ The parents’ impression of the new

boyfriend might not be very good, he said.

And yet, that’s the way that some have tackled introducing ethanol. In recent months, Lamberty said, a lot of money was spent trying to convince people what ethanol will not do—such as not closing beaches due to ethanol spills. Instead, he said, the industry should be focusing on what ethanol can do. After all, that type of message isn’t really giving oil much of a black eye—people use petroleum every day to drive to work and go

ETHANOL PRODUCER MAGAZINE

October 2010

on vacations. “Gasoline might be the black sheep of the family but to most people, he’s still family,” he said. People need to know that ethanol can power their cars to and from work and on vacations. That it can reduce emissions, help keep fuel prices low and create or retain jobs. “Let’s get back to talking about the benefits of ethanol,” he said. “We don’t need to spend the time convincing people oil is bad, it does that itself.”

At another point in the conference, Brian Jennings, ACE’s executive vice president, singled out the Volumetric Ethanol Excise Tax Credit and the blend wall as the two most important policy challenges facing the industry. Although the renewable fuels standard signals the industry to produce more ethanol, there’s a 30-year-old limit in the Clean Air Act that restricts ethanol blending to E10. The EPA has been considering the E15 waiver for a year and a half now and, in June, delayed the decision for the second time. Now there are rumors that E15 will be approved only for model years 2007 and newer, although the ethanol industry has maintained that the blend is safe for all vehicles, regardless the year. ACE has calculated if the EPA goes through with the model year limit it would open up E15 to only two out of every 10 cars on the road. “It sounds like a solution that only a government bureaucrat could come up with,” he said.

Wally Tyner, professor of agricultural economics at Purdue University, told conference attendees that the blend wall isn’t in the future, it’s now. In addition, he had some words of caution for the future of cellulosic ethanol. The renewable fuels standard includes 15 billion gallons of traditional ethanol and 4 billion gallons of “other advanced” biofuels, which includes sugar cane ethanol that could potentially come from Brazil or Central America, he said. If the blend wall ETHANOL PRODUCER MAGAZINE

were increased from E10, or 12.5 billion gallons, to E15, or 19 million gallons, it could all be met with corn and sugar cane ethanol. “If we stay at E10, you can forget cellulosic ethanol,” he said. “Even if we go to E15 there’s no room at the inn for cellulosic ethanol.”

VEETC, another big topic at the ACE conference, is certainly a topic of debate, Jennings told the crowd. The industry can debate about how many jobs would be lost and how many plants would close if it is allowed to expire at the end of the year. “The fact of the matter is that both those things would happen,” he said, adding that the price at the gas pumps would go up for the consumer.

Keynote speaker Anne Korin, co-author of “Turning Oil into Salt” is a slight woman with passionate ideas about fuel choice and the danger of relying on what she called an oil cartel. “We are at the mercy of countries that hate us,” she said. She made a strong case for supporting an open fuel standard.

“We need to be able to choose,” she said, “just like they do in Brazil.” If passed, the law would require mandated amounts of flex-fuel vehicles (FFVs) warranted to operate on gasoline, ethanol, methanol or biodiesel. Vehicles can run on ethanol or methanol with only a slight tweak, she said. Korin rallied hard for the ethanol industry to band together with other alternative fuels, not just for ethanol FFVs, adding that in 20 years or so, FFVs could also be hybrid vehicles, providing further consumer choice. “What we can tackle, and tackle very effectively is the gas part of the equation,” she said.

Laws mandating FFVs have not gone anywhere, Korin asserted, because legislators coming from states outside the Corn Belt have no reason to support ethanol FFVs. If, however, methanol were added to the mix, FFVs would suddenly become much more

October 2010

attractive to legislators from coal and natural gas states, since both are produced right here in the U.S. While most methanol is made from coal, China makes a large amount of it from natural gas. If the producers and supporters of corn, natural gas and coal were to join together to ask lawmakers to mandate FFVs, that would be a nearly unbeatable coalition, she said. “It’s very, very hard to argue against that political clout,” she said.

Marc Rauch, executive vice president and co-publisher of The Auto Channel, a Web-based automotive information site, spoke about ethanol as a “single bullet solution.” Some say there is no one solution for replacing petroleum, no one alternative fuel that is better than the others. “We disagree,” he said. “We think that there is one solution that can be used immediately—ethanol.” Big Oil uses a strategy of divide and conquer to keep ethanol from succeeding. Big Oil buys politicians, buys votes and buys media spokespeople, he said, using misconceptions and outright lies. Some of the lies he listed are that ethanol requires high subsidies to succeed, damages engines, provides low power and is less energy dense and that FFVs are insignificant. “The lies are so pervasive, so well spread that many people in the alternative energy space and the ethanol camp believe some or all of them,” he added.

—Holly Jessen

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Plant updates: Increased earnings, acquisition, startup As summer faded to a close, the ethanol industry continued to grow and develop. In late July and early August, several big-name companies made some feel-good announcements. Notably, Archer Daniels Midland Co., Green Plains Renewable Energy Inc. and The Andersons Inc. all reported increased income. Other news announced during this time included technology upgrades, the purchase of an idled plant and plans to build an ethanol plant in Germany.

ADM ADM reported increased earnings in the fourth-quarter and for the fiscal year, which ended June 30. Compared to the previous year, the company saw an increase of $246 million in net earnings and an increase of $786 million in segmented operating profits. The fourthquarter net earnings increased from $388 million to $446 million and segment operating profit increased from $591 million to $799 million during the [overkill/what other kind of period was there in 2009?] time period in 2009. The company’s profit increased in the corn and oilseeds processing and agricultural services segments. Corn processing came out on top, with a $151 million increase in profit, specifically due to stronger bioproduct results, the company said.

GPRE GPRE, the fourth largest U.S. ethanol producer, also reported good financial news. For second-quarter 2010 the company had net income of $8.7 million, or 27 cents per diluted share. Those numbers

were up considerably from $600,000, or 3 cents per diluted share, from the same period in 2009.

The company also announced plans for technology upgrades.

On July 20, GPRE said it would move forward on a $4.5 million expansion to sequester CO2 using a BioProcess Algae Grower Harvester. Testing at the 65 MMgy GPRE ethanol plant in Shenandoah, Iowa, will scale up to see if the technology will prove out for industrial use, said Jim Stark, vice president of investor and media relations. A few days after the algae project announcement, the company said it plans to install corn oil extraction technology at all six of its plants at a total cost of $18 million, with the projects expected to be completed by the end of first-quarter 2011.

The Andersons Inc. The company reported in early August that its grain and ethanol group set records. In the first six months of this year operating income was $40.3 million and $14.7 million in 2009. The group’s operating income was $19.6 million in the second quarter, significantly higher than its result of $8.9 million one year earlier. The grain business did well due to increased space income, the company said, and the ethanol business benefited from a large portion of ethanol sales being contracted previously, when margins were high.

Aventine Renewable Energy Holdings Inc. In mid-August, Aventine completed the acquisition of the Riv-

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ETHANOL PRODUCER MAGAZINE

October 2010

PHOTO: RANGE FUELS

Range Fuels Inc.

Range Fuels has begun producing methanol at its Soperton, Ga., facility, and expects to start ethanol production in the third quarter.

erland Biofuels ethanol plant in Canton, Ill., for a purchase price of $16.5 million. “This is an exciting opportunity to acquire a 38 million gallon facility at a favorable price,” said Aventine CEO Tom Manuel in a press release. “When operational, we will leverage the proximity of the Canton facility to our Pekin, Ill., facility to gain marketing and operational synergies.”

The company has not specifically said when and how the plant would be made operational, however. The plant has had a rocky history, starting out as a farmer co-op that went bankrupt in 2007 and produced ethanol only intermittently as Riverland Biofuels between 2008 and March 2010. The plant shut down this spring after an Illinois Environmental Protection Agency investigation into alleged discharges into nearby lakes.

Cellulosic ethanol producer Range Fuels is one step closer to producing cellulosic ethanol at its Soperton, Ga., plant. The company announced Aug. 17 that it had completed an initial phase of production by producing cellulosic methanol, which is expected to be followed by ethanol production in the third quarter. “The reason for starting up on methanol and then following with ethanol production is that the methanol catalyst is not as costly,” David Aldous, Range Fuels’ president and CEO told EPM. Construction to expand the plant to 60 MMgy of cellulosic biofuels is expected to begin next summer. The plant is permitted to produce a total of 100 MMgy of methanol and ethanol.

Süd-Chemie AG The Munich-based specialty chemical company announced in late July that it would build a cellulosic ethanol demonstration plant in Germany. The company plans to produce up to 2,000 tons of ethanol from agricultural waste such as cereal straw by the end of 2011. The $36 million project will be built near the new Bavarian BioCampus in Straubing. Süd-Chemie has been testing its trademarked process in a pilot plant since the beginning of 2009. “By launching construction of this demonstration plant for our so-called [trademarked] sunliquid technology, we continue to pursue our strategy of developing to market maturity sustainable manufacturing processes for climate-friendly biofuels and chemicals, based on leading expertise in the fields of catalysis, biocatalysis and process engineering,” said Günter von Au, managing board chairman.

—Holly Jessen

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October 2010

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California incentivizes ethanol, just 1 producer to participate In June, the California Energy Commission began accepting applications for acceptance into its Ethanol Producers Incentive Program (CEPIP), the first state incentives ever offered by California to ethanol producers. In August, the CEC said it had approved three producers and four facilities to participate in the program, but it’s unlikely that all of the approved applicants will ever qualify to actually receive funds from the program.

CEPIP is a unique incentive program, according to CEC spokesman Rob Schlichting. “There are other states that have incentive programs, but they pretty much just give money to producers to make ethanol in their state,” he said. “Ours depends on the market and, depending on the crush spread, ethanol producers could get payments from the state or, if the market is really healthy, those same people would be required to return money to the state.” In order to determine the ethanol crush spread, the CEC takes the near month Chicago Board of Trade corn price divided by 2.74, and subtracts that number from the Los Angeles Oil Price Information Service ethanol price. If the monthly average is less than 55

cents per gallon, eligible producers will receive an incentive equal to the difference between 55 cents and the average crush spread for the month times the number of gallons produced, up to 25 cents per gallon. The total amount of incentives allowed for each facility is capped at $3 million per year. During months that the crush spread is greater than $1 per gallon, participating producers will be required to pay back incentives at the amount the average crush spread is above $1 per gallon for each gallon of ethanol produced, up to 20 cents per gallon.

In order to qualify to participate in the program, corn ethanol facilities must be located in California and have an operating capacity of at least 10 MMgy. “And here’s the tough part: you have to be operating,” Schlichting said. There are four companies with facilities in California that meet the first two requirements for program participation, but Schlichting said only one company—Calgren Renewable Fuels LLC—is currently producing ethanol. The company operates a 52 MMgy plant in Pixley and will be the only eligible facility able to receive payments when the program begins.

Matt Schmitt, founder and developer of Calgren, said CEPIP fits well with California’s mission to fund projects that promote renewable and lower carbon alternative fuels through AB 118, which has a budget of approximately $100 million annually for five years. He stressed that money received through the program is not a straight subsidy, and must be paid back to the state when ethanol margins are favorable. Still, every bit of support helps, he said, even when it’s a little later than some might have hoped. “The state of California has not contributed a penny to the development of any ethanol plants in the state,” he said. “A lot of plants around the country have received state and local funding. When you look at the amount of money California is allocating for these four plants, it’s small compared to what we’ve seen in other states.”

California’s lack of funding for ethanol to this point coincides with the technology options for ethanol production. The state has consistently favored other feedstocks and renewable fuels over corn-based ethanol and one of the requirements of CEPIP is that producers meet specific deadlines to either transition

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October 2010

tion in CEPIP, alterations must be comPacific Ethanol Stockton plete.

AE Advanced Fuels Keyes Schmitt said the Pacific Ethanol Madera CEPIP’s timeline should be an achievable goal for Calgren.

AltraBiofuels Phoenix Bio Industries Prior to being acceptCalgren Renewable Fuels ed for CEPIP funding, the company had already taken action Of the five existing corn-based ethanol plants in California, only Calgren to lower the plant’s Renewable Fuels LLC is known to be operating and able to participate in the carbon footprint and state’s new funding opportunity. he expects several of away from corn or implement technologies those features will be applicable to the that will lower the facility’s carbon footprint. program. The plant produces corn oil, which Specifically, according to Schmitt, plants must lowers the carbon rating, and utilizes cogeneraeither lower their carbon footprints by eight tion to provide heat and electricity to the facilpoints from the state’s Air Resources Board ity and eliminate any need for power from the boiler plate rating of 80 gCO2e/MJ or replace grid. Schmitt said the company is also explor20 percent of corn feedstock with cellulose ing the use of biogas to replace natural gas deor waste sugar/starch-based material. At six mand at the cogeneration plant, which would months, producers must submit a plan to the significantly lower the plant’s carbon rating.

CEC outlining their strategy to reduce the Other feedstocks are also being considered, plant’s footprint. Within 12 months, a timeline but not as aggressively. for those changes must be submitted, along As for the other California ethanol plants with estimated costs of changes. At two years, that have gained acceptance into the program, permit applications must be filed for retrofits none are currently operating and therefore and, within four years of the start of participa- will not be eligible to receive funds unless they

resume operations. Pacific Ethanol Inc.’s 60 MMgy facility in Stockton and its 40 MMgy plant in Madera received approval to participate, as did AE Advanced Fuels Keyes/Cilion Inc. for its 55 MMgy plant in Keyes. The only other California ethanol producer with a facility large enough to meet the program’s qualification requirements is AltraBiofuels Inc. It has a 31.5 MMgy facility in Goshen, but Schlichting said the company did not apply for the program. That plant is also not operating.

One of the goals of CEPIP is to increase statewide production of biofuels, but with so many of California companies in financial distress, can the program be effective in its goal if only currently operating producers are allowed to participate? Schmitt thinks so. “If you’re talking to investors or lenders to restart these plants, it makes an investment more attractive because you know you’ll have some support down the road,” he said. “These payments won’t make or break anyone’s operation. If you have a well-running plant, ultimately we all survive or don’t survive on the ethanol-to-corn spread.”

—Kris Bevill

ENGINEERS

Valero Renewables, a division of Valero Energy Corporation, was formed in April 2009 when the company acquired 10 worldscale ethanol plants and one development site from VeraSun Energy and Renew Energy LLC, becoming the first traditional refiner to enter production of ethanol. Our plants are located in the Midwestern United States: Albert City, Iowa; Albion, Nebraska; Aurora, South Dakota; Bloomingburg, Ohio; Charles City, Iowa; Fort Dodge, Iowa; Hartley, Iowa; Linden, Indiana; Jefferson, Wisconsin; and Welcome, Minnesota. The ethanol plants have a production of 1.1 billion gallons per year.

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October 2010

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Refiners display increasing interest in ethanol In their hunt for captive ethanol supplies, petroleum refiners have been pursuing a steadily increasing role in the ethanol production industry. The latest refiner-turned-ethanol producer is Flint Hills Resources LP, a subsidiary of Koch Industries Inc., which agreed to acquire two Hawkeye Growth LLC facilities in August. Flint Hills said in a statement to EPM that it will continue to explore opportunities within new and emerging markets, including renewable fuels. The refining and chemical production company beat out approximately two dozen interested parties in a “highly competitive” private auction for the 115 MMgy facilities located in Menlo and Shell Rock, Iowa, according to Scott Chabina, associate at Carl Marks Advisory Group LLC. Carl Marks represented the secured lenders in the Hawkeye sale and has been involved in numerous ethanol plant auctions and restructurings over the past few years, including several VeraSun Energy Corp. properties which were eventually acquired by refiner Valero Energy Corp.’s renewable fuels division.

Chabina said he believes there remains significant interest from refiners seeking to vertically integrate their operations and expects more of these types of players to step in to acquire ethanol plants in the future. “Refiners have already demonstrat-

ed a meaningful interest in the ethanol industry and I believe there remain a number of additional opportunities given their appetite,” he said. “Refiners have been the consolidators since the VeraSun auction.”

Valero Renewable Fuels LLC was the first refiner to enter the ethanol industry when it purchased seven VeraSun plants through a bankruptcy auction. In the two years since the initial purchases, Valero acquired three more ethanol plants in locations scattered throughout the Midwest and now controls more than 1 billion gallons of the industry’s annual capacity. Valero is also working on next-generation biofuels projects, including cellulosic ethanol and algae-based biofuels.

The company continues to explore other ethanol acquisitions, according to Valero media relations director Bill Day, but is “very particular” as to which ethanol plants it purchases.

“We haven’t [recently] found any sites that meet the criteria we would require,” he said. The VeraSun plants were all relatively new facilities with production capacities of at least 100 MMgy, excellent rail access, steady supplies of corn complete with existing supply contracts, and livestock producers nearby willing to purchase the plants’ distillers grains, he said, adding that the

other three Valero acquisitions had similar characteristics.

Murphy Oil Corp. was another refiner to snatch up a bankrupt VeraSun facility. The company purchased the 120 MMgy plant near Hankinson, N.D., from VeraSun creditors last October for $92 million and immediately began operations at the facility. Hankinson Renewable Energy LLC provides Murphy Oil with approximately one-quarter of its total retail ethanol requirements, according to company treasurer Mindy West. While the Hankinson plant serves an important role in the company’s retail network, Murphy Oil still has to purchase three-quarters of its ethanol from outside sources so, according to West, there’s definitely room for growth. “We obviously have room to do more when the right opportunity comes along,” she said.

“We’ve made no secret about the fact that we might expand in that business.” Murphy Oil announced in August that it would be leaving the refining industry to focus on its upstream and retail businesses, of which West maintained that ethanol would continue to play a vital role for the company.

In September, Murphy Oil had reportedly taken steps to purchase the former Panda Ethanol Inc. plant near Hereford, Texas. The 105 MMgy Panda Hereford Ethanol LP plant was

never fully operational, reportedly due to faulty construction, and the company filed for bankruptcy in January 2009. In April, a federal bankruptcy court approved the sale of the plant to its lead creditor, Societe Generale, for $25 million in credit.

Northeast U.S. refiner Sunoco Inc. recently restarted the former Northeast Biofuels LLC plant, which it purchased last year through a bankruptcy auction for a mere $8.5 million. Substantial retrofits were required to bring the plant, now known as Sunoco Fulton Ethanol Facility, up to grade and the company said it spent approximately $25 million to restart the plant. The 85 MMgy facility began producing ethanol in June. For now, all ethanol produced at the plant will be used to supply Sunoco’s blending needs. The plant will supply up to 20 percent of Sunoco’s demand for ethanol, which leaves plenty of room for more acquisitions. Sunoco has publicly stated that it will continue to consider additional investments in ethanol as well as advanced biofuels.

—Kris Bevill

Canada implements national RFS, allows open mandate for blenders It’s been years in the making, but Canada’s first national renewable fuels standard (RFS) is finally in place. The mandate to require refiners to blend 5 percent renewable fuels into their gasoline supplies went into effect on Sept. 1 and was met with enthusiastic optimism from members of the nation’s ethanol industry, according to Canadian Renewable Fuels Association President Gordon Quaiattini. “This has been a long time coming and there’ve been some dedicated folks in the ethanol market in Canada who have waited a long time to see this national mandate come into force,” he said.

“We’re no longer an industry in its infancy. I think it’s fair to say that we’ve achieved an adolescent stage and there’s more to come.”

The initial RFS allows refiners to use fuels derived from any of the rule’s defined fuel pathways to comply with the 5 percent blending mandate. Ethanol, biodiesel and petroleum-based biofuels all qualify as renewable fuels, so if an oil company is blending biodiesel into its supply, for example, that amount can be counted toward the company’s overall requirements. Quaiattini said ethanol is expected to be the prominent renewable fuel used, however. “Given the viability of what’s in the marketplace, we fully expect that the vast

majority of the renewable fuel content will be ethanol,” he added.

While biodiesel and other renewable fuels can be used to meet the RFS for the current time, the final rule contains an amendment for a 2 percent renewable diesel mandate to go into effect in 2011.

When that happens, refiners will no longer be allowed to use biodiesel and other renewable diesel fuels to meet the 5 percent RFS. Canada’s total gas pool is approximately 40 billion liters per year (11 billion gallons), so the 5 percent mandate will require 2 billion liters (528 million gallons) of renewable fuel to be blended into the nation’s fuel. According to Quaiattini, the Canadian ethanol industry currently produces a total of 1.7 billion liters of fuel.

This puts Canadian ethanol producers in the enviable position of needing to build out its supply to meet demand. In early September, Quaiattini said the industry was awaiting final decisions from Natural Resources Canada on its biofuels program, which is the source of incentives for new biofuels production capacity, and anticipated that ethanol projects would be chosen for financial support in order to bring the industry capacity up to 2 billion liters.

A unique aspect of Canada’s RFS, according to Quaiattini, is

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that it is an “open mandate.” This allows refiners to blend more ethanol in some areas and still be compliant with the RFS as long as the company’s average amount blended is at least 5 percent. While this will likely initially be illustrated in reports of over blending in some areas and very little blending in remote areas, Quaiattini expects it to quickly level out. “We Gordon Quaiattini will see ethanol in all regions of the country president, now because of the national mandate,” he said.

Canadian The decision to allow refiners some flexibility Renewable Fuels Association in where they blend renewable fuels into their supply was a nod to the geographic complexity of a nation that has a very large refining industry. “We recognize that, in the end, these are our customers,” Quaiattini said. “So we’ve worked cooperatively with the oil industry and government to insure that as we bring renewable fuels into the Canadian market through a national mandate, it recognizes how the industry works here and ensures the best transition possible in terms of ensuring that as much ethanol can find its way into the marketplace.”

Of the provinces that already have blending requirements, Manitoba has the highest mandate and requires all gasoline to in-

clude 8.5 percent renewable fuels. Saskatchewan has a 7.5 RFS, while Ontario and British Columbia each have 5 percent mandates.

Alberta will implement a 5 percent RFS beginning next year. The national mandate doesn’t override these requirements.

Looking ahead, the CRFA has already begun talks with industry members to discuss the industry’s logical growth pattern and what needs to be done to continue to increase demand for their products. There is “no question” that cellulosic ethanol will play a role in future renewable fuels mandates, according to Quaiattini.

But whatever steps are taken to include cellulosic biofuels in a Canadian RFS, they are likely to be as measured as the initial move was to establish a national mandate. “We are absolutely looking at not only having commercialization happen here but, different from the U.S. experience, we are quite keen to talk to the government about an appropriate regulatory mechanism that ensures there is a market for that fuel,” he said. “We are looking at insuring that there is both a linkage between the government’s existing next-generation biofuels fund and timing it to what would be an appropriate mandate to have that fuel actually used.”

—Kris Bevill

PERSONNEL

Homeland Energy Solutions LLC in Lawler, Iowa, is an example of an ethanol plant that employs in-house engineering staff. Don Mork, left, is a mechanical engineer and the plant’s maintenance manager, and Kevin Howes, right, is a chemical engineer and the plant manager.

PHOTO: MATTHEW PUTNEY

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ETHANOL PRODUCER MAGAZINE

October 2010

PERSONNEL

Engineers on the Ground The expertise of on-staff engineers pays off in troubleshooting, systems optimization and evaluation of new technology.

By Holly Jessen

ETHANOL PRODUCER MAGAZINE

October 2010

43

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dding an in-house engineer to the payroll may seem like a hefty commitment, but facilities that have done so reap the benefits of the investment. In northeastern Iowa, Golden Grain Energy LLC and Homeland Energy Solutions LLC employ three engineers between the two ethanol plants. “It’s really been key to Golden Grain and Homeland’s success— having that expertise,” says Walt Wendland, president and CEO of the two plants. “It certainly makes my job easier.”

The two companies have a lot of commonalities, Wendland says, including some shareholders and directors. Golden Grain and Homeland have a cooperative agreement for shared management, including the chief operating officer Chad Kuhlers, an electrical engineer. The other two engineers are Kevin Howes, a chemical engineer, and Don Mork, a mechanical engineer. Although Howes

say that it’s only people with engineering degrees that are valuable resources, Mork adds. “You need to use a combination of looking at technical solutions as well as hands-on experience.”

Engineers can help an ethanol plant with cost-saving projects, such as energy reclaim/reduction, yield optimization and chemical usage reduction, says John Kwik, president of Dominion Energy LLC, an Ohio-based consulting firm for the renewable and corn wet milling industries. He’s not just talking about hiring an engineer to work as a consultant as he does—he believes all ethanol plants should have an engineer or engineers on staff at critical times, particularly during periods of growth.

That may sound odd, but Kwik believes that if more ethanol plants had on-site engineers, it would actually create more work for consulting engineers like him. An ethanol plant without a plant en-

'It’s really been key to Golden Grain and Homeland’s success—having that expertise,' says Walt Wendland, president and CEO of the two plants. 'It certainly makes my job easier.'

Walt Wendland, president and CEO, Golden Grain and Homeland Energy

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and Mork work principally at Homeland as plant manager and maintenance manager respectively, the three of them have consulted about projects at both plants.

“When those three engineers put their heads together, there are a lot of things that can happen,” Wendland says.

Many ethanol plants don’t have inhouse engineers, Mork says, typically contracting out their engineering work instead. With two engineers on-site at Homeland, however, Mork and Howes can get the job done internally, often saving valuable time. Of course, that’s not to

gineer may be so busy keeping the plant running that there isn’t time to troubleshoot or recognize the potential for improvements. “I believe there are a lot of two- to three-year payback projects out there,” he tells EPM. As a general rule, he says, having a dedicated engineer on staff should save an average ethanol plant five times that person’s salary. In other words, an engineer with a salary of $70,000 should be able to save that plant $350,000 a year. At a larger plant, that number may be as high as 10 times the engineer’s salary. However,

ETHANOL PRODUCER MAGAZINE

October 2010

PERSONNEL

'You kind of have to have ethanol plant engineers on staff for doing the crazy things we do,' he says.

Andy Zurn, engineering manager, Chippewa Valley Ethanol Co.

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employs three other engineers, including a mechanical, electrical and chemical engineer. The plant also hires outside consulting engineers to take advantage of specialty skills as needed. “It is a fundamental limitation in many plants that do not have certain critical skill sets,” he says.

Although Jakel isn’t sure how many ethanol plants have engineers on staff, he wonders if it is on the rise. He points out that the listings for companies seeking engineers on www.ethanol-jobs.com seem to be up recently. As of late August,

• • • •

Kevin Howes, plant manager for Homeland Energy Solutions LLC, looks on as Nathan Scheidel works in the control room. Homeland and its sister plant, Golden Grain Energy LLC, both employ on-staff engineers.

ETHANOL PRODUCER MAGAZINE

October 2010

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Kwik estimates that only about 20 percent of the ethanol industry has a dedicated process engineer on staff. Some plants do have management staff with engineering degrees, but other job duties mean they aren’t focused on engineering matters.

Neal Jakel, general manager of Illinois River Energy LLC, believes that a poor understanding of the technical processes of an ethanol plant has led to many project and plant failures over the years.

Besides Jakel, a chemical engineer, the 100 MMgy ethanol plant in Rochelle, Ill.,

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riencing growth, particularly on the food products side, says Rick Stoecklein, chief operating officer. “We found ourselves really at a resource deficit,” he tells EPM. Although Lifeline can utilize the resources of its parent company, ICM Inc., having an engineer on staff will mean it will have the resources to complete a broader range of projects internally. Another consideration is that as the facility ages, more work will need to be done on infrastructure.

Two engineers—one chemical and one mechanical—work at Chippewa Valley Eth-

PHOTO: CVEC

there were four ads for engineers, including two listings for multiple engineers in multiple plants. Three of the ads were asking for process or plant engineers and one was looking for an engineering manager. All four ads either preferred or required a degree in mechanical engineering, with chemical, electrical or civil engineering also mentioned as preferred or required degrees.

Lifeline Foods LLC, a 50 MMgy ethanol plant and corn milling facility, hired its first on-staff engineer this summer. The facility, located in St. Joseph, Mo., is expe-

Chippewa Valley Ethanol Co. LLLP in Benson, Minn., has two on-staff engineers.

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46

anol Co. LLLP, a 45 MMgy plant in Benson, Minn. CVEC is in a bit of a unique position points out Andy Zurn, the company’s engineering manager. The typical ethanol plant takes in corn, makes fuel grade ethanol utilizing natural gas and some electricity and ships it out. CVEC takes in field corn, organic corn, wheat and rye and ships out fuel, industrial grade alcohol, both regular and organic, and beverage alcohol, both regular and organic. On top of that, the company has a biomass gasifier to decrease its natural gas use. “You kind of have to have ethanol plant engineers on staff for doing the crazy things we do,” he says.

Zurn sees a benefit for all ethanol plants in hiring staff engineers. Innovation is common and fast moving in the ethanol industry—like no other industry he’s ever seen. “The [ethanol plants] that don’t have separate heads to think and consider and apply some of these technologies, boy I think maybe they’re missing out,” he says. Typically, an operations manager is so busy running the plant there is little extra time to evaluate new ETHANOL PRODUCER MAGAZINE

October 2010

PERSONNEL

technologies. “The engineer is somebody who can evaluate and research new technology so when you integrate, it goes smoothly and you are highly successful,” he says.

That means digging deep into the details, to determine if a new technology is a good fit for a particular plant. An engineer needs to ask a lot of questions, such as whether the technology is reliable and operator friendly. Does it have a good payback, such as in reduced energy or production of more ethanol with less corn? What effect will it have on the rest of the ethanol plant processes? What other companies produce this technology and have they been at it longer, with a better reputation? Does the company provide technical support after the equipment has been installed, or does it disappear? “We do all that due diligence work,” he explains.

Zurn agrees that an engineer can help save ethanol plants money, but says those savings can be hard to quantify.

One obvious path to savings is when an engineer helps the plant write a grant for a new project. “I can tell you one thing for sure, your ethanol plant will be much slower to innovate and save money without an engineer,” he says.

The positive impact on the community is a plus, too. As has been said over and over, ethanol plants bring jobs to rural areas. And it’s not just any job, either.

“We have quite a few professionals on staff and it’s ethanol that brought those jobs out here,” he says with pride.

Not all plants employing engineers are large or unusually diverse. Travis Brotherson is the plant engineer at Quad County Corn Processors, a 30 MMgy ethanol plant at Galva, Iowa. He first worked at the plant as a night operator and went back to school, earning a degree in aerospace engineering since he didn’t think he’d be returning to the ethanol plant. When he finished his degree, he was talked into returning to the plant as its engineer and is glad he did.

Quad County, which started production in 2002, went without an on-staff engineer until Brotherson began in January 2009. His first dug into any and all ETHANOL PRODUCER MAGAZINE

data the plant had on file and went to work identifying and smoothing out process upsets. “Things were operating very well when I came in, but I think it helped us to understand things that had happened in the past to cause process upsets,” he says. Another project on Brotherson’s plate is to evaluate possible upgrades to the distillers grains line to increase the diversity of the products produced and tap into other feed markets.

On-staff engineers aren’t very common in his area of northwest Iowa, Brotherson says, making Quad County, a smaller and

October 2010

somewhat older plant, a bit unusual. That having been said, Brotherson believes it would make sense for more ethanol plants to hire engineering help. “Seeing as how I am an engineer at an ethanol plant, I’m probably a little bit slanted,” he adds with a laugh. EP Holly Jessen is associate editor of Ethanol Producer Magazine. Reach her at (701) 7384946 or hjessen@bbiinternational.com.

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TECHNOLOGY

PHOTO: NEXCELOM BIOSCIENCE

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ETHANOL PRODUCER MAGAZINE

October 2010

TECHNOLOGY

KEEPING AN EYE ON

YEAST Microscopes have long been the tool for counting yeast cells in fermentation tank samples. Automated yeast monitoring may soon change that.

By Kris Bevill

ETHANOL PRODUCER MAGAZINE

October 2010

49

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n the current era of rapid technological advancements, it’s hard to believe that the majority of ethanol plants still rely on a basic microscope to evaluate yeast cells. And yet, there they sit in almost every ethanol plant—remnants of a time before computers, when a skilled eye was the only method of determining how yeasts were holding up throughout fermentation. While microscopes are an effective instrument to count and evaluate yeast cells, are they still the best option for monitoring what can arguably be one of the most important components of ethanol production? Perhaps not for long. A handful of companies believe yeast monitoring methods are due for improvement and have developed products that could give ethanol producers a boost in keeping an eye on the fungi.

Yeast Activity Monitor

cause there’s nothing about your personal bias that’s going to come into play, unlike a cell count. That’s definitely a nice characteristic.”

Each YAM system includes a touch screen computer that is connected to a digital balance and up to four probes. To use the equipment, a lab technician first weighs a sample from the plant’s fermentation tank on the balance. The computer determines the amount of reagent required for the test and prompts the user to add the correct amount. Next, the technician inserts a probe into the sample and views the results on the touch screen monitor. Bradley says the entire measurement process takes approximately three minutes and is very user friendly. “One of the key things is that because you’re doing it on a balance, it’s very flexible,” he says. “You can actually overshoot or undershoot the target [of reagent] that the computer gives you and it’s perfectly fine because the computer will know how much you put in and will accommodate

Naperville, Ill.-based Nalco Co. began developing its Yeast Activity Monitor a few years ago, according to YAM researcher and developer Michael Bradley.

Nalco researchers sent prototypes to ethanol producers and brewers, most of whom were using microscopes to evaluate yeast activity, for firsthand feedback on the device’s functionality. The company released the final product in May and has al- Nalco Co.’s Yeast Activity Monitor measures the metabolic activity of yeast cells. ready installed the equipment at 10 to 15 U.S. ethanol plants and several outside for that when it’s calculating the result.”

Bradley says YAM is unique because the U.S., according to Bradley. The greatest appeal of the product is its accuracy it doesn’t count yeast cells at all. Instead, when compared to microscopic monitor- it measures the metabolic activity of the ing methods. “It’s not a subjective mea- yeast cells in the sample. “There’s a reason surement,” he says. “To put it simply, if for that,” he explains. “We think that this you did the measurement or if I did it, idea of counting cells and using a viability we’re going to get the same answer be- stain to classify the cells that you count as ETHANOL PRODUCER MAGAZINE

October 2010

PHOTO: NALCO CO

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PHOTO: NEXCELOM BIOSCIENCE

TECHNOLOGY

Nexcelom Bioscience’s Cellometer allows users to automatically count yeast and view images of the cell sample at the same time.

being either dead or alive is a limiting type of approach. We know from biology that cells are not just alive or dead. There’s a whole scale of ‘how alive are they?’ And that’s what you can’t see with something binary like a viability stain. What we try to do is fill in that in-between space.”

One of the benefits of looking through a microscope is that the user can evaluate overall health of the yeast cells, but Bradley says YAM can also detect stressed cells through a measured reduction in activity. “I would even argue that if your cells are stressed and you can’t see it, and you don’t know it, we would probably pick it up because we have a quantitative, non-subjective measurement that is a lot more in-depth than just ‘what does the cell look like?’ It really tells you what the cell is doing on the inside of the cell, where it actually does all of the work.”

Cost of the YAM system varies depending on plant size, of course. Nalco estimates that a 100 MMgy plant would spend approximately $2,000 per month for reagents. Nalco provides the equipment to the plant at no cost, provided the plant purchases at least $1,300 of reagents per month. The equipment is a plug-andplay system, so total installation time is less than one hour and staff training can be completed in less than two hours, according to Bradley.

ETHANOL PRODUCER MAGAZINE

Cellometer Instrument developer Nexcelom Bioscience LLC gears most of its equipment toward the life sciences industry, mainly in the areas of cancer research and drug discovery. But President and CEO Peter Li says the company began receiving inquiries from people in the brewery/ winery/biofuel industries regarding cell counting and yeast viability a few years ago and decided to explore developing something useful to those industries. Developers soon discovered that everyone’s yeast samples were very different, with corn mash samples being the most complex. “People asked if we could do it and, in the beginning, we couldn’t,” Li says. As a result of continued interest from customers and hands-on research conducted with ethanol plant and brewery samples, Nexcelom invented a special application for the Cellometer, which Li says provides reliable, consistent data from samples containing high amounts of debris, which is a typical characteristic of corn mash samples.

The Cellometer functions basically as a digitized microscope. It is an automated cell counting system that uses software to view sample images just as a person would. A technician places a fermentation sample into a disposable counting chamber and loads it into the Cellometer,

October 2010

TECHNOLOGY

where the instrument captures an image, analyzes the data and creates concentration and viability results. Depending on the complexity of the cell sample, a reagent may need to be added to help the software identify live and dead cells. The entire process is completed in less than a minute according to Li, compared to an average time of 10 to 15 minutes for a microscopic count.

Li suggests the Cellometer would be a useful tool for producers who have microscopes but “are looking for a better solution.” Because the software presents an image of the cell sample on a computer screen, the producer retains the ability to evaluate the cell sample with a trained eye, unlike other automated counters. “The user will always have the ability to interact and understand what the measurement results mean to them,” he says. “It’s different than if you use optical density, for instance, where you will never see the cells. In this case, you can see the cells, the uniformity of size, cells that

have buds versus no buds, things like that.”

Nexcelom’s equipment package varies widely in price depending on the determined complexity of a customer’s samples. Instrumentation costs, including software and a computer, range from $5,000 to $27,000 for the most complex sample analysis requirements. The reagent cost is relatively low at less than $1 per sample.

Another benefit of automated systems, according to both Li and Bradley, is their ability to record and store data. “If you’re doing a measurement, I think it’s important to get consistent data and have a good quality control record, and this will certainly do that,” Li says.

“We thought data management was really lacking around the current practices of yeast handling,” Bradley says. “There were people keeping notes on pieces of paper and sometimes those notes were getting transferred to a spreadsheet at the end of the month, but it was highly variable and

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you never knew what was going to happen. The biggest concern we had was that even if there was some attempt at data management, there was no attempt to actually proactively use that data during the process. We put a lot of focus on that while we were developing this product. We wanted it to be able to deliver the information real-time and to do it in a standard way.”

The Best of Both Worlds Chris Richards, global sales manager for Lallemand Ethanol Technology, says nine out of 10 plants his company works with still use a microscope to evaluate yeast activity. He sees advantages and disadvantages to both manual and automated methods and says the decision to use one method over another really depends on each particular plant’s needs and staff.

Microscopes are at a disadvantage in that it takes more time to complete a count and the accuracy of the count relies on the skill of the person looking through the scope. A skilled, experienced lab worker, however, may be able to detect certain anomalies when viewing cell samples that a machine could miss. And microscopes are very cheap. “The manual count is a bit of time and maybe 10 cents for the stain,” he says. “If somebody has a well-trained team and they’ve got the time to do this, the manual cell counts are the most cost effective.”

Machines, on the other hand, offer reliable, consistent measurements and produce results faster than a microscope method. Any automatic device is more costly to acquire than a microscope, but with some creative thought, plant managers can further utilize the equipment when making process control decisions or trouble shooting when optimizing fermentation.

“To be honest, the best solution is a blend of both worlds,” Richards says.

“As a plant manager, I would never want to lose that human interaction because it’s always good to have someone looking at the yeast. If you don’t look at yeast on a routine basis, when you do have a problem and you start looking at the

402.889.4300 ETHANOL PRODUCER MAGAZINE

October 2010

TECHNOLOGY

yeast you don’t know what you’re looking at.� One course of action could be to conduct both manual and automatic tests on key parameters and run automated tests for the remaining items. “That gives you somebody looking at the cells each fermenter and it also gives you a manual calibration check against the machine,� he says.

In late August, Illinois River Energy had just begun testing Nalco’s YAM equipment at its 100 MMgy plant in Rochelle, Ill. Lab staff used a microscope to count yeast prior to testing YAM’s automated equipment, and quality assurance lead Stephanie Brainard says they are interested in evaluating what an automated system might be able to provide in addition to a simple yeast count. “A yeast count is pretty cut and dry,� she says. “It’s either alive or dead or budding. This tells you the activity level of the yeast and is a pretty simple method.� If comprehensive data can be gained that wouldn’t otherwise be attained, Brainard believes the investment would be worth the price. “If it gives us a benefit and lets us see more of what’s going on with our fermentation, I would say it’s worth it,� she says.

industry is that we count cells in a medium that has its own chunks of other things. You have to recognize what’s yeast and what are other things.�

The NCERC began a research project in August to validate automatic counting methods, beginning with Nexcelom’s Cellometer. In late August, Trupia told EPM the validation process was still underway but that early results were “really good.� NCERC lab staffers enjoyed using the machine and she found it was becoming increasingly difficult to enforce manual cell counting in addition to instrumentation evaluations, a signal that the equipment was easily accepted by the users.

For all the differences—cost, subjectivity, ease and speed of use—the choice between a microscope and an automated system really comes down to the lab staff ’s ability to evaluate cell samples and/or the desire for comprehensive data. Accuracy is key. If a plant employs experienced lab staff

who are skilled at counting yeast through a microscope and expect to stay employed at the facility indefinitely, then an automated system may not be worth the price. But, if accuracy is an area that could be improved within the lab, the initial investment required to purchase an automated system may pay for itself many times over in the long run. “If you don’t have an accurate idea, you might end up making a decision that is expensive, wrong or detrimental,� Trupia says. “The yeast is what makes it all happen, so it would be nice to know what it’s doing at any given time. It’s expensive to add yeast because you didn’t count correctly. Maybe you didn’t need to, or maybe there’s a problem in the nutrients that need to be added, and so on. It’s like any other mistake—the bottom line is affected.� EP Kris Bevill is an associate editor at Ethanol Producer Magazine. Reach her at kbevill@ bbiinternational.com or (701) 850-2553.

Validation The National Corn-to-Ethanol Research Center trains plant employees for all aspects of ethanol production, including counting yeast cells. Sabrina Trupia, assistant director of biological research, says there’s a definite learning curve when it comes to counting yeast and even when one becomes familiar with the process, there remains a large opportunity for error. “We currently in the lab have a very skilled staff, and they have spent many long hours perfecting their craft,� she says. “In an ethanol plant, you maybe can’t have people that are immediately that skilled at cell counting, so the counting method with a microscope is timeconsuming and requires a lot of practice.

We started looking at other ways and we know the brewing industry uses other ways of counting that are automated. Automated cell counters exist for bioscience.

But basically, the problem in the ethanol

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EQUIPMENT

Fluid-Quip Inc.’s Maximized Stillage Co-products system uses whole stillage to produce three separate coproducts from ethanol.

PHOTO: FLUID-QUIP INC.

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ETHANOL PRODUCER MAGAZINE

October 2010

EQUIPMENT

Boosting the Back End’s Bottom Line A new technology targeting whole stillage produces enchanced coproducts and new possibilities.

By Kris Bevill

ETHANOL PRODUCER MAGAZINE

October 2010

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which allows for improved corn oil recovery, as well as a high-protein coproduct that Fluid-Quip has named StillPro. Franko says the result is a win-win for ethanol producers. “You get the protein without affecting ethanol yield,” he adds.

Coproducts The fiber coproduct created in FluidQuip’s process has a few distinct differences compared to traditional distillers dried grains (DDG). “We’ve basically taken the DDGs, lowered the protein and lowered the oil slightly,” Franko says. “So, they take a slight discount on it, but the nice part is that the plant is able to sell it through their traditional DDGS channels.” Frankos says some of the producers he has introduced the system to have been more excited about the fiber product’s potential for co-generation use or cellulosic ethanol conversion than marketing it as a feed product. Corn oil produced through the MSC system can be marketed for biodiesel production, which is a typical use for that coproduct.

The protein product, which Franko compares to soybean meal or corn gluten meal, has diverse application possibilities.

“We have a mix that’s part protein and

ILLUSTRATION: FLUID-QUIP INC.

ith concerns about the distillers grains market reaching saturation, tight margins, and the possibility of increasing energy costs, a new technology is being tested at the plant level to produce enhanced and new coproducts.

Fluid-Quip Inc. is a Springfield, Ohiobased equipment manufacturing firm that has been engineering and manufacturing wet-mill separation equipment for more than 20 years. The company recently developed a a new filtration centrifuge and system to recover coproducts from whole stillage at dry grind plants, called the Maximized Stillage Co-products system.

“This patent-pending process is focused on recovering protein from whole stillage,” says Michael Franko, technical projects manager at Fluid-Quip Inc. Whole stillage is sent to a filtration centrifuge, where the distillers grains are washed to remove the proteins, solubles and oil away from the fiber material. The fiber is sent through dryers just as traditional distillers grains would be, while the corn oil and protein are sent through a second centrifuge. There, the oil and solubles are washed away from the protein, creating a cleaner stream for evaporation

Fluid-Quip Inc. manufactures a filtration centrifuge that can be used to recover coproducts at ethanol plants.

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ETHANOL PRODUCER MAGAZINE

October 2010

EQUIPMENT

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part yeast, so it’s a unique type of protein, which is why the amino acid profile is somewhat unique,” he explains. The content of the product makes it a good possibility for feeding poultry, swine and possibly fish and can demand a higher selling price, similar to meal produced at wet mills. “The plant we’re working with is doing a great job of developing those markets and conducting feed studies,” Franko says. “They’ve conducted some initial poultry market studies [and] they’re moving into some other areas working with major nutritionists, because we want to make sure that everyone’s very comfortable with the products.”

Field Test The 52 MMgy ethanol plant conducting tests on MSC system’s coproducts, which declined to be named for this article, began operating Fluid-Quip’s system a year ago. It recently commissioned a second filtration centrifuge, which increased yield and allowed for greater throughput. A third centrifuge will be in-

stalled this fall, which will allow for full operation of protein production, according to Franko. He says a 50 MMgy plant could temporarily get by with only two centrifuges, but a third is strongly recommended and is automatically included in the base equipment package. Franko recommends four centrifuges for a 100 MMgy plant.

Capital equipment costs for a 50 MMgy base package, which includes three centrifuges and a dryer, is less than $7 million, says Franko. Installation and construction costs will vary depending on the situation. The module is designed to be a stand-alone building, which can be constructed next to an energy center at a typical ethanol plant. Construction and commissioning of the system can be completed within one year and, depending on construction and installation costs, producers can expect to achieve a return on their investment in only two years.

“The dependency there is on installation and engineering—how the plant is set up and where we can do the tie-ins,” Franko 800-366-2563 | WWW.CPM.NET

WATERLOO, IOWA ETHANOL PRODUCER MAGAZINE

October 2010

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EQUIPMENT

adds. Fluid-Quip estimates that a 52,000 bushel-per-day dry mill can generate $10 million in annual revenue through products created in its MSC system while discounting DDGs.

No Interruptions One of the complaints producers have with front-end fractionation is the length of installation time and disruption of ethanol production. Franko says Fluid-Quip’s system does away with both of those concerns. “The idea is that we do not interfere with the pro-

duction of ethanol on the front-end at all,� he says. “That’s their main business, that’s what they do best, so we don’t want to disturb that. We want to take the whole stillage from the distiller bottoms after they’re done and improve their fractionation on the backend side of things. The nicest part is, for tying into the plant operation, our engineers have designed it so that tying in and plant interruption really should be minimal. We are able to tie-in with scheduled shutdowns so that there are no interruptions other than possibly one day to start up the process.�

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847-452-4745 e-mail: foodandbeverage@nalco.com www.nalco.com/ethanol Essential Expertise for Water, Energy and Air

58

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Because the system is relatively easy to start up, itâ&#x20AC;&#x2122;s also easy to shut down. â&#x20AC;&#x153;If, for some reason, we want to shut down, we want to go back to making DDGS, you can take it offline very quickly,â&#x20AC;?

Franko says. The plant that is currently using the MSC system has tested shutting down the equipment and was able to do so in a one hour.

The MSC system requires no additional natural gas usage and demands only slightly more electricity use, which Franko says has not been a drawback for any of the plants where heâ&#x20AC;&#x2122;s introduced the equipment. No additional water is required to operate the system because wash water used in the centrifuges can be taken from various sources within the plant. The system has also shown potential benefits in the maintenance requirements for a plantâ&#x20AC;&#x2122;s evaporation system. â&#x20AC;&#x153;Many plants are running their DDG dryers and evaporators to the limit,â&#x20AC;? Franko says. The plant currently operating the system discovered during a scheduled shut down for cleaning that the evaporation system required minimal cleaning. Franko attributes that to the systemâ&#x20AC;&#x2122;s process of removing protein from the evaporation stream.

Overall, Franko believes that forward thinking members of the ethanol industry realize a back-end fractionation system offers them an opportunity to increase bottom line revenues at a fraction of the cost of front-end systems. â&#x20AC;&#x153;What I hear from plants is the significant difference in capital costs,â&#x20AC;? he says. â&#x20AC;&#x153;Trying to get money for capital projects right now is not easy, as everyone knows, so a smaller capital cost is a big attraction. The people that are looking forward in the industry are seeing [the hedging opportunity] as the real value in a system like this. Not only do you want a diverse group of byproducts so that youâ&#x20AC;&#x2122;re in multiple markets, youâ&#x20AC;&#x2122;re not living and dying by the corn and ethanol prices.â&#x20AC;? EP Kris Bevill is an associate editor at Ethanol Producer Magazine. Reach her at kbevill@bbiinternational.com or (701) 850-2553.

ETHANOL PRODUCER MAGAZINE

October 2010

RFA

The voice of the ethanol industry.

Since 1981, the Renewable Fuels Association (RFA) has been the authoritative voice of the ethanol industry. Our efforts have yielded an unequaled record of legislative and regulatory victories. But we consider our track record just the beginning, and are expanding our efforts with a focus on market development.

The RFA is a trusted source for reliable LQIRUPDWLRQ DQG VFLHQWLĂ&#x20AC;F DQDO\VLV IRU the industry, policymakers, and media alike. The RFA is the leading expert on ethanol standards and guidelines for safety. We are also the preeminent authority on E10 and E85.

The RFA is a member-centered, member-driven organization. Join with us to help build a strong future for the industry. For more information, visit www.ethanolrfa.org, or call (202) 289-3835.

Renewable Fuels Association, One Massachusetts Avenue NW - Suite 820 - Washington, DC 20001 - (202) 289-3835.

DATA MANAGEMENT. BY CHARLES A. HORTH Contribution

A graphical display shows in a glance at the dials whether the key performance indicators are on target or not.

SOURCE: STICORP

Achieving a Sustainable Manufacturing Advantage An innovative IT solution can dramatically improve the operating environment and the bottom line at ethanol plants.

Ethanol manufacturers that want to achieve a sustainable manufacturing advantage and effectively compete in the fuel market will appreciate the help of an innovative information technology (IT) known as a manufacturing execution system (MES), also called a manufacturing operations management (MOM) system. This IT solution allows plant managers to make decisions quickly as market conditions change because it delivers real-time and accurate information about various systems in an ethanol plant. An MES helps a plant reach its optimal performance, resulting in improved revenues and profits.

In the pulp and paper industry—another commodity in-

dustry that has faced challenges similar to the ethanol industry’s— MES was embraced with major success by many mills. In fact the mills that deployed an MES prospered in a very tough environment while those that did not implement an MES were challenged to survive and in some cases had to close. The ethanol industry today is facing what the pulp and paper market has faced for the past 15 years. Following this roadmap for success, an MES would be the next step in invigorating plants and operations in the ethanol industry.

Some ethanol manufacturers might not be familiar with the term manufacturing execution system, a generally accepted term for a software system that

integrates business and plant operations data. An MES provides real time and historical data that generates reports and key performance indicators for plant managers and operational staff to effectively manage their plant(s) and improve quality, efficiency and productivity.”

An MES is an information and control system that manages and monitors work-in-process, data on production infrastructure, control monitors and employee activities. The end result is a real-time view or a digital map that displays the entire manufacturing enterprise, activities and processes—providing vital information at a glance.

In the past, an MES operated as a self-contained system.

Today’s MES systems are increasingly being integrated with enterprise resource planning software as well as a myriad of other applications such as maintenance, lab reporting and, most strikingly, financial reporting systems—a key feature of the STI Corp. MES. With a fully integrated system everyone in the plant has access to the same real time information to help maintain seamless operations. With the ability to access any piece of information, from daily corn usage to monthly income statements, plants will be better equipped to enhance their operations and, most importantly, continue producing ethanol profitably.

An MES is designed to address productivity gains, reduce

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).

60

ETHANOL PRODUCER MAGAZINE

October 2010

proved ability to optimize batch results through traceability.

Resolving Pain Points

The main menu of an MES system shows the array of reports generated on different areas of a plant and management subjects.

SOURCE: STICORP

energy consumption, reduce raw material costs (or increase yield with the same amount of feed stock) and increase product traceability as well as many other benefits. In addition, real-time information on key functions such as laboratory data, batch fermentation analysis, process/product traceability and material balance controls, adds to the return on investment.

U.S. ethanol plants participating in a 2009 survey by Christianson and Associates produce an average of 2.73 gallons of ethanol per bushel of corn. For an ethanol plant that produces 70 million gallons per year (an average U.S. plant) an MES can realize a very attractive return on investment. Assuming a 2.6 percent yield increase of approximately 1.79 million gallons at a 70 MMgy facility—a yield increase to 2.8 gallons per bushel of corn—and an average market price of $1.55 per gallon, that extra yield with the same amount of feed stock used results in about $2.7 million in increased revenues. This estimate does not include increased bottom line profits through decreased energy

costs and other gains in efficiencies. Current corn and ethanol rack prices will determine the expected ROI. A typical MES investment for a plant producing 70 MMgy is around $600,000 to $700,000 for software and implementation. This indicates a very attractive return on investment which can be achieved in approximately six months or less.

Additionally, to improve manufacturing efficiencies and production results, plant management will have information tools and processes that generate important data about plant operations that may not be available to them without an MES. Examples include communicating production data in a standard company-wide reporting system; capturing key performance indicators (KPI) for quality control; identifying and scheduling maintenance needs; extending production runs by minimizing start-up time and maximizing uptime; and supplying process monitoring tools for research and development. An MES system can also help a plant react and respond quickly to changing markets and customer needs through the im-

ETHANOL PRODUCER MAGAZINE

October 2010

An MES system should provide detailed information on the following critical processes that in many cases present “pain points” that need to be resolved.

Process traceability is necessary for production staff to be able to diagnose issues and optimize processes. The system must allow for full traceability of all operational activity, producing records of real time operational performance. An MES can even anticipate the effect of process changes by extrapolating from prior performance at the plant.

The fast access accorded by an MES provides a valid and precise picture of production. If an operational parameter is out of specification, an MES will quickly identify the production segments associated with this problem and provide the operators with instant access to the associated key performance indicators. Then, operators can begin to take corrective actions to remedy the root cause of the problem and minimize the negative cost effects of a process deviation.

An MES collects information such as flows and downtime directly from the programmable logic controller (PLC) and/or from other systems and sources.

The PLC or control layer will supply the MES with an event— for example the duration of a distillation downtime—that could cause a production delay if not dealt with promptly. The equipment failure can be logged and a root cause analysis can be performed to prevent reoccurrences.

MES also provides real-time downtime tracking, identifying possible causes with automated

data collection where possible.

It records operational parameters associated with production performance that can be tracked by various parameters such as throughput, operator, shift, etc.

The MES publishes efficiency information and reports to the entire plant.

MES also creates rootcause screens that include Pareto charts and reports to identify and reduce downtime, waste and performance issues. It develops screens to display the summary of production of all shifts and fermentation batches for use by foremen and operators.

An MES will manage byproducts as well as end products and manage all manual and lab data entry such as specifications management, control specifications and customer specifications (with automated certificates of authenticity). Recipe management of raw materials and process conditions, alarms capability; quality alarms, set point change alarms and conditional adjustments can also be managed with an MES system. It also has statistical quality control capability, document management for the lab allowing technicians to consult online work instructions, quality tracking of manual entries and control systems data, by both time and by events. Simple and complex calculations can also be executed.

Market feedback indicates the three most important attributes of an MES are the ability to integrate with financial reporting systems, report data on a real time basis and measure overall equipment effectiveness. EP Charles A. Horth is founder and CEO of STI Corp. Reach him at chorth@sticorp.com or (819) 373-3332.

61

EPM MARKETPLACE Associations/Organizations

Evaporators

Growth Energy 202-545-4000

Hydro-Klean, Inc. 515-283-0500

www.growthenergy.org

www.hydro-klean.com

Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com

Clean Cities Red River Valley Clean Cities 651-227-8014 www.CleanAirChoice.org

Fans

Twin Cities Clean Cities Coalition 651-223-9568 www.CleanAirChoice.org

Hydro-Klean, Inc. 515-283-0500

Chemicals

Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com

Anti-Microbial Ferm Solutions 859-402-8707

www.hydro-klean.com

Filter Media www.ferm-solutions.com

Desiccant

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

Heat Exchanger

Interra Global 847-292-8600

www.interraglobal.com

Enzymes CTE Global, Inc. 847-564-5770

www.cte-global.com

Novozymes 919-494-3101

www.novozymes.com

Yeast Ferm Solutions 859-402-8707

Plate-Frame www.ferm-solutions.com

Martrex,Inc. 952-933-5000 Ext 18

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

www.martrexinc.com

Railcar Spill Response

Cleaning

Hydro-Klean, Inc. 515-283-0500

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

Railcars www.hydro-klean.com

Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com Seneca Companies 800-369-5500

www.senecaco.com

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

www.hydro-klean.com

Hydro-Klean, Inc. 515-283-0500 Seneca Companies 800-369-5500

www.senecaco.com

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

www.hydro-klean.com

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

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

www.hydro-klean.com

www.hydro-klean.com

www.hydro-klean.com

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

www.hydro-klean.com

Emergency Spill Response Hydro-Klean, Inc. 515-283-0500 Seneca Companies 800-369-5500

62

Tank Cleaning Equipment www.hydro-klean.com

Cloud/Sellers Cleaning Systems 800-234-5650 www.sellersclean.com

www.senecaco.com

Gamajet Cleaning Systems Inc 877-GAMAJET www.gamajet.com

ETHANOL PRODUCER MAGAZINE

October 2010

EPM MARKETPLACE Westmor Industries 320-589-2100

Tank Cleaning Services Hydro-Klean, Inc. 515-283-0500 Seneca Companies 800-369-5500

www.hydro-klean.com www.senecaco.com

Construction Fabrication Agra Industries, Inc. 715-536-9584 Andy J.Egan Co. 616-791-9952

Process Design www.westmor.biz ADF Engineering Inc. 937-847-2700

Consulting Environmental

ICM, Inc. 877-456-8588

Aquaterra Environmental Solutions, Inc. 877-913-8200 www.aquaterra-env.com

Equipment & Services

Cantley Inc. 865-360-4080 www.agraind.com www.andyegan.com

Plant Construction

Perten Instruments, Inc. 801-936-8165

Golden Specialty 888-472-9898

www.perten.com

www.goldenspecialty.com

Biogas Scrubbers

ICM, Inc. 877-456-8588

www.icminc.com

Seneca Companies 800-369-5500

Harris Group Inc. 206-494-9422

www.senecaco.com

www.harrisgroup.com

ICM, Inc. 877-456-8588

Plant Optimization

Blowers & Fans www.flaktwoods.com

Centrifuges

Control Systems Harris Group Inc. 206-494-9422

www.agraind.com www.harrisgroup.com

ICM, Inc. 877-456-8588

www.eco-tec.com

Aaron Equipment 630-350-2200 www.aaronequipment.com www.icminc.com

Harris Group Inc. 206-494-9422

Eco-Tec, Inc. 905-427-0077

FlaktWoods 716-845-0900

Management Services

Railroad Tracks

www.icminc.com

Analytical Instruments

Feasibility Studies

Agra Industries, Inc. 715-536-9584

adfengineering.com

www.icminc.com

Project Development

www.harrisgroup.com

ICM, Inc. 877-456-8588

www.icminc.com

Kahler Automation Corp.

507-235-6648 www.kahlerautomation.com

Conveyors–Drag

Harris Group Inc. 206-494-9422

www.harrisgroup.com

Safety Rail Safe Training, Inc. 712-212-4145 www.railsafetraining.com

Intersystems 800-228-1483

www.intersystems.net

Conveyors–Mechanical Superior Industries 320-589-2406

www.superior-ind.com

Employment Cooling Towers

Recruiting RenewableEnergy-Careers.com 815-261-4480,x111

RenewableEnergy-Careers.com

S.E Weinstein Company 800-258-1701 www.seweinstein.com SearchPath of Chicago

Tanks Agra Industries, Inc. 715-536-9584 ATEC Steel 620-856-3488

815-261-4403, x100

www.agraind.com

www.searchpathofchicago.com

Engineering

J.C. Ramsdell Enviro Services, Inc. 877-658-5571 www.jcramsdell.com ETHANOL PRODUCER MAGAZINE

Agra Industries, Inc. 715-536-9584

October 2010

Corn Oil Recovery ICM, Inc. 877-456-8588

www.icminc.com

DDGS Diesel Total-Yield Diesel from Distillers 402-640-8925 www.total-yield.com

Design/Build www.atecsteel.com

Delta Cooling Towers, Inc. 800-BUY-DELTA www.deltacooling.com

Distillation Equipment www.agraind.com

SRS Engineering Corpration 951-526-2239 www.srsbiodiesel.com 63

EPM MARKETPLACE Dryers-Fluid Bed

Laboratory-Equipment

Buhler Aeroglide 919-851-2000

www.aeroglide.com

Dryers-Rotary Drum

Perten Instruments, Inc. 801-936-8165

Sensors www.perten.com

Laboratory-Testing Services

Custom Rotary Driers for DDGS & Biomass Feedstocks

Foundation Analytical Laboratory 712-225-6989 www.foundationanalytical.com Midwest Laboratories, Inc. 402-829-9877 www.midwestlabs.com

With rotary drying technology

by Ronning Engineering www.aeroglide.com/ethanol or call +1 919-851-2000

From simple point level controls to advanced computer-based inventory management

Loading Equipment Determan Brownie, Inc. 800-835-6074

www.determan.com

Maintenance Software ICM, Inc. 877-456-8588

www.icminc.com

Dryers-Rotary Steam Tube ICM, Inc. 877-456-8588

www.icminc.com

Quality Kiln and Dryer Inc 318-335-2001 www.qualitykilnanddryer.com

WINBCO Tank Company 641-683-1855

www.winbco.com

www.icminc.com

Agra Industries, Inc. 715-536-9584

www.agraind.com

www.perten.com

Fluid Engineering 814-453-5014

www.fluideng.com

Fractionation-Corn

ICM, Inc. 877-456-8588

www.icminc.com

Parts & Services www.buhlergroup.com/us

ICM, Inc. 877-456-8588

Cereal Process Technologies 217-779-2595 www.cerealprocess.com

Process Control

ICM, Inc. 877-456-8588

Harris Group Inc. 206-494-9422

www.icminc.com

ATEC Steel 620-856-3488

www.agraind.com www.atecsteel.com

Spokane Industries Inc. 509-921-8868 www.spokanemetalproducts.com

Reach your customers www.icminc.com

Your Solution. Advertise Today.

EPM MARKETPLACE www.harrisgroup.com

Grain Handling & Storage

Productivity Enhancements

Agra Industries, Inc. 715-536-9584

ICM, Inc. 877-456-8588

www.agraind.com

www.agraind.com

Tanks Agra Industries, Inc. 715-536-9584

Molecular Sieves

info@binmaster.com 800-278-4241

Structural Fabrication Agra Industries, Inc. 715-536-9584

Moisture Analyzers

Grace Davison Renewable Technologies 410-531-8731 www.gracebiofuels.com

Filtration Equipment

3DLevelScanner

www.binmaster.com 402-434-9102

Millwright

Perten Instruments, Inc. 801-936-8165

Fermentors

Buhler Inc. 763-847-9900

ICM, Inc. 877-456-8588

3DLevelScanner Smart%ob 5otary DiapKragm SZitcK 9ibrating 5ods &apacitance Probes 7ilt SZitcK $eration Dust FloZ Detection

EPM MARKETPLACE

www.icminc.com

With all contact information placed in one convenient location, Ethanol

Instrumentation

Pumps

Perten Instruments, Inc. 801-936-8165

PeopleFlo Manufacturing 847-929-4774 www.peopleflo.com

www.perten.com

Producer Magazine not only contains top editorial content but also a useful directory in each publication. Whether

Insulator DG Skouse Company 816-779-7427

QA Test Products dgskouseco@aol.com

Miller Insulation Co., INC 701-297-8813 www.millerinsulation.com

Perten Instruments, Inc. 801-936-8165

a first-time advertiser wanting to raise awareness of your business or a frewww.perten.com

quent display advertiser looking for added exposure, EPM Marketplace is the perfect solution.

64

ETHANOL PRODUCER MAGAZINE

October 2010

EPM MARKETPLACE Wastewater Treatment Services

Transportation

ADI Systems Inc. 1-506-452-7307

Marine

www.adisystemsinc.com

Odin Marine, Inc. 203-969-3400

Hydro-Klean, Inc. 515-283-0500

www.odingroup.com

www.hydro-klean.com

Rail

ICM, Inc. 877-456-8588

www.icminc.com

Water Treatment H2O INNOVATION 763-566-8961 www.H2OINNOVATION.com

Finance

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

Rail Consulting Rail Safe Training, Inc. 712-212-4145 www.railsafetraining.com

Railcar Gate Openers

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

The Arnold Company 800-245-7505 www.arnoldcompany.com

erisolutions.com

Mergers & Acquisitions Thermal Oxidizers

Moglia Advisors 847-884-8282

www.mogliaadvisors.com

Legal Services Attorneys

PROVEN RELIABILITY for VOC, CO & PM ABATEMENT

WOHLSIFER & ASSOCIATES, P.A. 850-219-8888 www.wohlsifer.com

Marketing Fuel Ethanol CHS Renewable Fuels 651-355-6271

EISENMANN Corporation Crystal Lake, Illinois

Miscellaneous

815.455.4100 es.info@eisenmann.com

Maas Companies 507-424-2640

www.chsinc.com

www.maascompanies.com

bs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.c

ERI Solutions, Inc. 316-927-4294

www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jo

Insurance

om

www.harrisgroup.com

s.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.c

Harris Group Inc. 206-494-9422

ob

om www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-j

Due Diligence

Research & Development Engine Testing Roush Industries 734-779-7736

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

EPM MARKETPLACE

ETHANOL PRODUCER MAGAZINE

October 2010

65

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For more information: 701-746-8385 service@bbiinternational.com

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