October 2011 Ethanol Producer Magazine by BBI International

INSIDE: ACE MEETING PREPS FOR NEW E15 REGULATIONS october 2011

CORN

MATTERS Quality Counts Page 44

Supply/ Demand for Ethanol Page 50

Stover Power Page 58

ALSO Wood Climbs from Supporting Role to Center Stage Page 64

www.ethanolproducer.com

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contents

features 44

october issue 2011 VOL. 17 ISSUE 10

DEPARTMENTS

Editor’s Note

Early Stage to Groundbreaking By Susanne Retka Schill

10 The Way I See It Ethanol Continues

CORN QUALITY

Seeking Sound Corn: Quality Matters Digging into the details of evaluating corn By Holly Jessen

11 Events Calendar

CORN DEMAND

Ethanol: One Market for a Growing Corn Supply

Upcoming Conferences & Trade Shows

A closer look at corn demand and supply By Holly Jessen

to Improve By Mike Bryan

12 View From the Hill Does the ‘Super

Committee’ Matter to Ethanol? By bob dinneen

14 Drive

Grain and Cellulosic

Working Together to Fuel America By tom buis

16 Grassroots Voice Life After VEETC

POWER

Stover for Power—Not Just Biofuels There may be more ways to use crop residue By Kris Bevill

By ron v. lamberty

WOODY BIOMASS

Wood Climbs from Supporting Role to Center Stage

18 Europe Calling

Questions and a defense of woody feedstocks for cellulosic ethanol By Kris Bevill

A Bright Future

for Ethanol By Rob Vierhout

20 Business Matters

Contributions 72

Cash Forward Grain

Contracts—Can I Get That in Writing? By porter j. martin and leah h. ziemba

22 Business Briefs 26 Commodities Report 30 Distilled 82 Marketplace 86 Ad Index POLICY

The Subsidy Debate: Oil vs. Ethanol

Examining the direct, indirect and hidden subsidies and incentives for both industries By Kate Bechen and Porter J. Martin

FEEDSTOCK

Comprehensive Miscanthus Commercialization Model Needed

The perennial energy crop poses many challenges to developers By David R. Robbins and Stephen S. Tam

INSIDE: ACE MEETING PREPS FOR NEW E15 REGULATIONS oCtobeR 2011

On The Cover

CORN

MATTERS Quality Counts Page 44

Supply/ Demand for Ethanol Page 50

Ethanol Producer Magazine: (USPS No. 023-974) October 2011, Vol. 17, 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.

4 | Ethanol Producer Magazine | october 2011

Stover Power Page 58

ALSO Wood Climbs from Supporting Role to Center Stage

A truck dumps corn at Poet Biorefining-Big Stone, located in Big Stone City, S.D.

Page 64

www.ethanolproducer.com

PHOTO: GREG LATZKA

editor’s note

This issue of Ethanol Producer Magazine contains reports on several early-stage concepts—all intriguing developments with real promise. There’s no

Early Stage to Groundbreaking Susanne Retka Schill, Editor sretkaschill@bbiinternational.com

For industry news.

guarantee that they will succeed, of course. Problems emerge in scaling up ideas that work in theory or at a small scale. Sometimes the associated costs that initially look favorable ultimately torpedo the project. In all cases, it can take years from when the idea or initial research is announced until it becomes a reality. We often look back at earlier coverage of companies announcing breakthrough discoveries to learn we’ve been reporting their developments for years. So it’s also exciting to be reporting financing and loan guarantees being received, not to mention licensing agreements. We soon expect to be following the build-out of cellulosic ethanol facilities. I believe Secretary of Agriculture Tom Vilsack’s comment that one day we’ll look around and say, “Where did all these plants come from?” is indeed true. Getting the first ones to the groundbreaking stage seems slow from the current viewpoint, but soon the cranes will be swinging components into position. We’ve been reporting on these first cellulosic ethanol projects since they were early-stage concepts, and we’ll continue to look for such concepts to share. More than once, we’ve learned a story we wrote resulted in phone calls from potential collaborators. Among the new ideas reported in this issue, Associate Editor Kris Bevill’s features a researcher’s proposal to borrow a financing mechanism from wind energy to recruit investors with an appetite for loss to back capital-intensive biomass power islands at ethanol plants. Associate Editor Holly Jessen reports on Ethanol Boosting Systems Inc.’s patent for a system that could optimize engines to take advantage of ethanol’s high octane. The researcher claims it could be used for heavy-duty trucks, too. Then there’s Bevill’s Distilled story about a catalyst discovery that appears to be a cost-effective way to convert ethanol to an intermediate chemical useful for production in rubber alternatives. We’re finding more researchers looking at integrating intermediate chemical and ethanol production. I bet bio-based tires would be a nice-sized market for ethanol-based chemicals, taking some pressure off blend wall concerns.

associate editors Associate Editor Kris Bevill examines a critique that claims the conversion technologies for woodybiomass cellulosic ethanol are much further out than ethanol developers claim, on page 64.

6 | Ethanol Producer Magazine | october 2011

Associate Editor Holly Jessen takes a look at corn in this issue, discussing quality and grading issues on page 44 and the changing dynamics of corn supply and demand on page 50.

EDITORIAL EDITOR Susanne Retka Schill sretkaschill@bbiinternational.com ASSOCIATE EDITORS Holly Jessen hjessen@bbiinternational.com Kris Bevill kbevill@bbiinternational.com COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com GRAPHIC DESIGNER Erica Marquis emarquis@bbiinternational.com

PUBLISHING CHAIRMAN Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com VICE PRESIDENT Tom Bryan tbryan@bbiinternational.com

SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com EXECUTIVE ACCOUNT MANAGER Howard Brockhouse hbrockhouse@bbiinternational.com SENIOR ACCOUNT MANAGER Jeremy Hanson jhanson@bbiinternational.com ACCOUNT MANAGERS Chip Shereck cshereck@bbiinternational.com Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com Dave Austin daustin@bbiinternational.com CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com Senior Marketing Manager John Nelson jnelson@bbiinternational.com

EDITORIAL BOARD Mike Jerke Jeremy Wilhelm Commonwealth Agri-Energy LLC Mick Henderson Pinal Energy LLC Keith Kor Golden Grain Energy LLC Walter Wendland Chippewa Valley Ethanol Co. LLLP Cilion Inc.

Neal Jakel Illinois River Energy LLC Bert Farrish Lifeline Foods LLC Eric Mosebey Lincolnland Agri-Energy LLC Steve Roe Little Sioux Corn Processors LP Bernie Punt Siouxland Energy & Livestock Co-op

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

Please recycle this magazine and remove inserts or samples before recycling TM

october 2011 | Ethanol Producer Magazine | 7

1,197 miles per gal. Not with gasoline or diesel, but with The New Ethanol.

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the way i see it

Ethanol Continues to Improve By Mike Bryan

American agriculture and the domestic ethanol industry are becoming increasingly efficient and as a result, are playing a larger and more important role in reducing greenhouse gas emissions. It was not that many years ago, that it took seven to 10 gallons of water to convert one bushel of corn to ethanol, today it’s just over two. During the same time, it took 25 percent more energy to produce a gallon of ethanol than it does today. The list of technological improvements is long and getting longer with each passing year. According to Geoff Cooper of the Renewable Fuels Association, the current 450 gallons of ethanol produced from an acre of corn is a 50 percent improvement over just 15 years ago and, with future projections using the entire corn plant, that level approaches 800 gallons per acre. While this may seem incredible, so does the fact that over the past 15 years we have seen a 34 percent increase in the per acre yield of corn in the United States. These and other factors all come together to show substantial improvements in the energy efficiency of ethanol production and a corresponding

10 | Ethanol Producer Magazine | october 2011

decrease in the CO2 emissions from field to the consumers fuel tank. Life-cycle analyses on ethanol show CO2 reductions

well in excess of 30 percent, with some approaching 50 percent. The contribution ethanol makes to the reduction of greenhouse gas is no longer in question, only the level of reductions varies slightly from study to study. For years environmental groups have falsely accused agriculture of “pouring on the fertilizer and chemicals,” when, in fact, the use of both has steadily declined. These are not government-mandated changes, but rather changes driven largely by economics. New and better corn hybrids require less fertilizer and are more drought and disease resistant. Better tillage practices, including minimum and no-till, mean better water conservation and fewer trips over the field. Add to that the simple fact that fertilizer and chemicals are among of the most expensive inputs in farming and that any reduction in their use means more money in the farmer’s pocket, and you have a recipe for a smaller carbon footprint. In fairness, the oil industry also has taken steps (albeit federally mandated) to produce a cleaner fuel, not so much in terms of its carbon footprint, but more as it relates to overall air pollution. Low-sulphur diesel and reduced aromatics in gasoline are just some examples. While these have added costs to their production process,

using fewer chemicals and fertilizer in agriculture has reduced costs. At the same time, the ethanol industry continues to produce ethanol better, faster, cheaper by employing newly developed technology, while the refining process has remained relatively unchanged for decades. Frankly, about the only thing oil has going for it is an intricate global system of refining and distribution. As each day passes, ethanol becomes more price competitive, but we still rely exclusively on the oil industry for distribution. This is has become the only reason mandates are essential to the continued growth of our industry. With a smaller carbon footprint, renewable, domestically produced and competitively priced ethanol, if it had its own distribution infrastructure, would quickly become the fuel of choice, as Henry Ford envisioned so many years ago. That’s the way I see it!

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

events calendar

Northeast Biomass Conference & Trade Show October 11-13, 2011

Westin Convention Center Hotel | Pittsburgh, Pennsylvania With an exclusive focus on biomass utilization in the Northeast—from Maryland to Maine—the Northeast Biomass Conference & Trade Show will connect current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utilities, technology providers, equipment manufacturers, investors and policymakers. (866)746-8385 www.biomassconference.com/northeast

Algae Biomass Summit October 24-27, 2011

Calgary to Host Annual Canadian Renewable Fuels Summit

11/28

Growing Our Energy Diversity is the theme for the 8th Annual Canadian Renewable Fuels Summit to be held Nov. 28-30 at the Westin Hotel in Calgary, Alberta. Meeting in the heart of Canada’s oil industry, the conference discussion will be on the future of renewable fuels. “Too often, we find that others seek to pit the oil and gas industry against renewable fuels, and vice versa,” says Jim Grey, chairman of the sponsoring organization, the Canadian Renewable Fuels Association, and CEO of IGPC Ethanol Inc. “Too often we see these industries compete for the favor of the public or government policymakers. In reality, there is a sound basis for a strong partnership.” The Canadian renewable fuels industry outlook will be covered in a number of sessions featuring speakers from all sectors. A global perspective will be given in a presentation on the 2011 Biofuels Roadmap from the International Energy Agency, and there will be a panel featuring industry organization leaders from the U.S. ethanol and biodiesel industries, the EU and Columbia. The day-and-a-half event reflects the ever-changing biofuels industry— assessing how new technologies and feedstocks, sustainability requirements and policy changes are shaping the future of the industry. Two concurrent tracks will give attendees a chance to zero in on policy or technical issues. Developments in aviation fuels will be covered in the policy track along with the potential for adding value to Canada’s vast renewable resources in the New Economy panel and issues of interest for advanced biofuels, among other topics. The technical track will delve into more practical challenges and opportunities to discuss waste water treatment, distribution and marketing, employee retention, rail safety, feedstock options and methods for increased efficiencies. The CRFS offers unique opportunities to network with more than 350 senior ethanol and biodiesel executives from all over the world. “If we are to succeed [as an industry], it will take the contribution of all of us—governments, industry, capital markets, researchers and fuel consumers,” Grey says. ”We all need to invest the knowledge, wisdom and collective will to grow beyond oil. The discussions and debate at this year’s summit will help point the way.” For more information and to register for the CRFS, visit www.greenfuels.org.

Hyatt Regency Minneapolis | Minneapolis, Minnesota Organized by the Algae Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all algae industries. (866)746-8385 www.algaebiomasssummit.org

Southeast Biomass Conference & Trade Show November 1-3, 2011

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 will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers. (866)746-8385 www.biomassconference.com/southeast

Pacific West Biomass Conference & Trade Show January 16-18, 2012

San Francisco Mariott Marquis | San Francisco, California With an exclusive focus on biomass utilization in California, Oregon, Washington, Idaho and Nevada, the Pacific West Biomass Conference & Trade Show will connect the area’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers. (866)746-8385 www.biomassconference.com/pacificwest october 2011 | Ethanol Producer Magazine | 11

view from the hill

Does the ‘Super Committee’ Matter to Ethanol? By Bob Dinneen

The newest creation of Washington, the “super committee,” is hard at work trying to identify trillions of dollars in budget cuts to offset the necessary increase in the cap on the amount of money the federal government can borrow to pay for its prior commitments, such as medicare and social security. While this committee is getting a lot of attention from lobbyists and the media, the impact of this effort remains hard to predict. For ethanol, the impact, if there even is one, is harder to foresee. We all remember the Kabuki theater that led up to the final deal raising the so-called debt ceiling and creating the super committee. This highly partisan, rhetorically charged fight pushed America to the brink of default and, according to some economists, put America’s economic standing the world over on shakier ground. For all its bluster, this debate did offer a glimmer of opportunity and bipartisanship on the important issue of ethanol tax incentives. During this debate, an unlikely trio of senators—John Thune of South Dakota, Amy Klobuchar of Minnesota, and Dianne Feinstein of California—found common ground on ethanol tax policy that would have been instrumental to the industry’s

12 | Ethanol Producer Magazine | october 2011

future. This compromise would have invested in ethanol fueling infrastructure, accelerated the commercialization of advanced and cellulosic ethanol technologies, and helped to pay down the national debt. This deal, while far from perfect, contained enough to garner the support of the grain-based ethanol industry and at least one advanced and cellulosic ethanol group, the Advanced Ethanol Council. Sadly, politics and posturing prevented this deal from being included in the final legislation to raise the debt ceiling and create this super committee. Now, with the clock ticking on both the committee and the ethanol tax incentives already scheduled to expire at the end of this year, the future of any ethanol tax policy compromise is challenging, at best. In order to find the $1.2 trillion in savings required of it, the super committee will have to tackle a wide range of issues, many of which carry price tags and present budget savings far greater than the ethanol tax incentive for the remainder of 2011. Entitlement programs like medicare and social security, along with the budgets of the Department of Defense, U.S. EPA, and other federal agencies will be in the crosshairs. So, too, will be tax cuts and other loopholes for very profitable industries that could garner tremendous budget savings over the next decade. It is in this context that America’s ethanol industry sees a glimmer of hope. While the full compromise offered this summer is no longer in play, a smaller

package that provides for infrastructure investment and next generation commercialization incentives may be possible. It is also conceivable, though challenging given the enormous political sway of the fossil fuel industry, that the lavish tax subsidies provided to the nation’s oil industry could be eliminated. I say all of this is possible as an eternal optimist refusing to stop fighting until the fat lady has sung. Additional legislative vehicles may present themselves as well. But the reality on Capitol Hill is a tough one, and the political headwinds and magnitude of the work before the committee may very well exclude biofuels altogether. Despite the hype of the super committee, it is entirely possible that it will be anything but super for America’s ethanol industry. Fortunately, the expiration of the tax incentive is an event for which the industry has been preparing. A new era of American ethanol production is poised to begin. Author: Bob Dinneen President and CEO of the Renewable Fuels Association (202) 289-3835

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DRIVE

Grain and Cellulosic Working Together to Fuel America By Tom Buis

Four years ago, in December 2007, Congress passed the Energy Independence and Security Act with the intent of moving our nation toward greater energy independence and security. The renewable fuel standard (RFS) portion of EISA called for the increased production of clean renewable fuels, such as ethanol and biodiesel, by 2022. Initially, many people thought we couldn’t meet the stated goals of the RFS but we succeeded in growing the production of ethanol from corn and sorghum and we are on the cusp of producing biofuels from next generation feedstocks. Grain ethanol is now 10 percent of our nation’s fuel supply. It creates American jobs, reduces our dependence on foreign oil, and it is the most competitive fuel in the world today. Nonetheless, just four years into what was meant to be a 15 year plan, critics of ethanol who want to protect their vested interests are once again skeptical of the ethanol industry’s ability to produce next generation biofuels and continue

14 | Ethanol Producer Magazine | october 2011

the efficiency advancements of first generation ethanol. But we can. The RFS and EISA set goals that we could reach, if given the right circumstances and elimination of barriers that prevent the natural expansion of our industry. What can be done to help move us forward? First, we need commonsense legislative and regulatory policies that remove the barriers to the market that stifle innovation. The ethanol industry can create jobs in the United States that can’t be outsourced, improve the environment and give consumers savings and choice at the pump through full implementation of E15, tax credits for installing flexfuel pumps and requirements that all automobiles be flex-fuel capable. Second, we must stop all the political rhetoric to roll back our nation’s commitment to produce 36 billion gallons of renewable fuel by 2022. We are well on the way and while some would try to pit one feedstock against another on the production of biofuel, as a nation, we need to do all. Lastly, we must stop the regulatory efforts to penalize the production of biofuels based on the unproven concept of indirect land use change.

As an industry, we have recognized reform is necessary if we are going to make the advancements that will help our nation become energy independent. And new innovations at existing ethanol plants will continue to increase efficiency, reduce water use and boost the amount of energy derived from cellulosic biomass and algae. When it comes to the debate of grain ethanol versus cellulosic ethanol, we don’t have to choose one or the other—it is both. It is today’s technology as well as tomorrow’s technology that will help our nation succeed. Author: Tom Buis CEO, Growth Energy (202)545-4000 tbuis@growthenergy.org

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GRASSROOTS vOICE

Life After VEETC By Ron V. Lamberty

Most of those who are plugged in to the machinations of our federal government tell us it is virtually certain that the end of this year will also be the end of the Volumetric Ethanol Excise Tax Credit. How that became a political eventuality, and why elected officials would choose to have a feeding frenzy over a public policy that creates jobs, decreases reliance on foreign oil, cleans our air, reduces federal spending by more than it costs, and returns savings to taxpayers’ pockets when they buy ethanol at the pump, is probably a case for future political science and public relations textbooks. And, while debating the point at which the anti-ethanol sharks first smelled blood in the water is interesting and instructive, it is much more important now to use that knowledge to avoid any further bloodletting, and to remember that sometimes, all you can do to stop a shark is to punch it in the nose. At the American Coalition for Ethanol’s annual meeting and ethanol conference last month, ACE Executive Director Brian Jennings summed up the VEETC battle saying, “The lesson that we all need to learn from this process is that we shouldn’t be ashamed of a tax

16 | Ethanol Producer Magazine | october 2011

incentive for ethanol and we damn well should not be ashamed of the [renewable fuel standard].” Jennings talked about going on the offensive against those who have created “an alternate reality about ethanol, filled with misconceptions and myths,” and reminded attendees that money “can’t change the fact that they are wrong on the issues, and it can’t change the real economic benefit that this industry, that people in this room are delivering to this country every single day.” We need to punch some folks in the nose with those facts. We need to go on offense—telling people the truth about ethanol, and reminding people that ethanol is a real product made by real people, not some faceless monolithic government program. In the fuel market, we need to do what we did to get E10 all over the country—show petroleum marketers how they can make more money selling our product and set their minds at ease about the problems they have been told to expect (by those who make the competing product, of course). And, we need to make their customers comfortable buying new blends of fuel such as E15, E85 or other midlevel blends. A gasoline retailer recently told an ethanol plant board member that “it’s hard to sell ethanol when you guys don’t promote your product.” One could argue that in a market that is always driven by price (as the fuel market is) a smart promotional strategy would be fighting

for a tax credit that keeps ethanol prices low. Ironically, the marketer compared ethanol to other products in the store—not gasoline. Probably because gasoline is rarely promoted—mainly because oil companies know that consumers don’t wake up in the morning thinking “YES! I get to buy fuel today!” So, it isn’t wrong to sell based on price, but it is risky to sell based ONLY on price (and it’s kind of lazy). There is a difference between a low price and a good value. Unfortunately, we have promoted the former, and in the postVEETC, fuel marketplace, we will have to make the case for the latter. We will have to remind refiners and tell consumers that ethanol has value in adding octane to fuel, and it increases the amount of gas a refiner can make from a barrel of oil. It keeps fuel systems clean. It cleans the air. It keeps gas lines from freezing up. Race cars use it. It’s made in America by your neighbors, and it keeps those neighbors and your money working in the U.S. economy. There are plenty of reasons to use ethanol. Occasionally, price will still be one of them—we need to make sure motorists know about the others. Author: Ron Lamberty Senior Vice President American Coalition for Ethanol (605) 334-3381 rlamberty@ethanol.org

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Europe Calling

A Bright Future for Ethanol By Robert Vierhout

Each year a report called the Biofuels Barometer is published that tells how much biofuel in the European Union was consumed in the past year. This yearâ&#x20AC;&#x2122;s report (available at http://www.eurobserv-er. org/downloads.asp) gives an interesting picture of how biofuels are doing in Europe, reporting a trend that could very well continue until 2020. As in previous years, we saw a double-digit growth in biofuel consumption in 2010, though the growth curve is getting less steep due to a slowing of growth in biodiesel use. Unlike biodiesel which was up 11 percent, ethanol for fuel increased by a strong 26 percent. Why this difference in growth rate and what will the future bring? First, the main reason ethanol is growing strongly is that compared to biodiesel, ethanol made a slow start. Years ago, Germany strongly promoted the use of biodiesel financially and, as a consequence, production capacity and consumption strongly increased in tandem. Ethanol never had favorable treatment like biodiesel and, as a result, the build out of both production capacity and consumption was a far more gradual process. A couple of years ago, however, Germany gradually started reducing biodiesel support dampening its growth. Thanks to increasing year-

18 | Ethanol Producer Magazine | october 2011

on-year government targets, biodiesel consumption did not shrink. A second important reason is that biodiesel use is limited to 7 percent by volume. A dedicated B100 fleet does exist, but without tax support that market is not sustainable. Ethanol, on the other hand, has an upper limit of 10 percent by volume. The introduction of E10 in some countries, combined with E85, gives ethanol a better growth perspective. Basically, this explains the difference in growth curves in both biofuels, which most likely will continue in the next decade. Notwithstanding that the diesel fuel market is much bigger than the gasoline market and that there is a shortage on diesel that makes biodiesel an attractive biofuel, it is not likely that biodiesel consumption will have a similar, steep growth pattern as ethanol. The market potential for biodiesel is beyond question. A large trucking fleet, a growing fleet of passenger cars, maritime use, jet fuelâ&#x20AC;&#x201D;it all looks good for biodiesel. The problem is not the market; the problem is the availability of economical agricultural raw material. This is where ethanol beats biodiesel. Within the EU, crops for biodiesel are limited in variety, quantity and yield performance. Where ethanol producers can rely on an abundance of cereals and sugary crops with high yields, biodiesel producers will be forced to source crops outside the EU. Obviously, it will be soy and, much more likely, palm oil. The weakness, or to put it differently, the political risks, of

those crops is their lack of sustainability. A possible way out of this dilemma would be more use of animal fat, used cooking oil, HVO (hydro-treated vegetable oil), BtL (biomass to liquid) and maybe, one day, algae. But so far, the last two belong in the wishful thinking category, and HVO is developing poorly. This feedstock problem, combined with the unwillingness of car producers to allow more than 7 percent of biodiesel in fossil fuel, could well create opportunities for ethanol. Fewer sustainability risks, higher production potential and a much better perspective on delivering second generation, cellulosic biofuel all contribute to a brighter future for ethanol. There is little doubt that biodiesel will stay the preferred biofuel in the EU in terms of tonnage. The current 75/25 ratio we have will not change dramatically over the immediate years to come. But it is also clear that the challenge for biodiesel to keep up with demand will be much more of a challenge than for ethanol. Knowing the sensitivity around sustainability, the outcome of the indirect land use change debate could well become a watershed in the EU preference for biofuel. Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

business matters

Cash Forward Grain Contracts—Can I Get That in Writing? By Porter J. Martin and Leah H. Ziemba

Practically speaking, most grain is bought and sold over the phone. Then, a confirmatory contract

is completed by the buyer and mailed to the farmer/seller to sign and return. But, the story doesn’t end there. Depending on whether you are dealing with a “merchant,” the transaction that you thought was final, may not be a valid contract. Nearly every state in the United States has adopted a statute of frauds which requires that certain contracts be in writing. In most states, a contract for the sale of goods in excess of $500 is not enforceable until there is something in writing to indicate that a contract was made. In the business of buying and selling grain (and other goods), it is common for one merchant to send the other merchant a letter of confirmation or an alreadyprepared form contract. The receiving merchant (in this case, the farmer) is expected to sign the form contract, leaving him or her with no opportunity to amend the terms. The Uniform Commercial Code (which has been enacted, with modifications, in every jurisdiction in the United States), provides that unwritten contracts between merchants are enforceable if a written confirmation of the contract is received within a reasonable time, unless written notice of objection to the contract is given within 10 days. The UCC’s “merchant confirmatory memo rule” precludes a merchant that

20 | Ethanol Producer Magazine | october 2011

receives a confirmatory memo from relying on the statute of frauds as a defense, if the receiving merchant does not object to the confirmation. Of course, the initiating merchant must still be able to establish that an oral contract was actually made, and that the written confirmation applies. So, how does this relate to cash forward grain contracts? The farmer you contract with may or may not be a merchant, leaving the contracting merchant at risk of losing the sale contract and, perhaps more importantly, with increased hedge exposure in volatile markets. In deciding whether a farmer is a merchant, courts consider whether the farmer regularly deals in goods of the type involved or is familiar with the practice of buying and selling the goods at issue. Relevant factors in most jurisdictions include such things as the length of time the farmer has been engaged in the practice of selling specific product, the degree of business acumen, the awareness of the operation and existence of sale markets, and the experience and knowledge of practices unique to the particular product. Although most modern courts tend to conclude that a majority of farmers are merchants, the determination is on a caseby-case and state-by-state basis. This means, the contracting party may have to expend litigation costs in order to enforce an oral contract. Therefore, it is never a bad idea to review your contracting procedures considering the following points: • Know your customers. Consider

•

which of your customers would be considered an experienced grain trader and seller, and which would not. Do you require the farmers you contract with to declare themselves a “merchant”? Confirmatory letter procedure. Consider putting oral agreements in writing, request the farmer’s signature, and require that the farmer confirm whether he/she is a merchant or not. Timeliness of confirmatory memo. Also, even if the farmer does meet the definition of a “merchant,” the confirmatory memo must still be sent within a reasonable time. Various courts have considered the time period within which is “reasonable” so you should consider reviewing case law in your jurisdiction. Contract due diligence. Review your contracts for completeness (are the signatures in the file?) and accuracy. Form contracts sometimes get used for years without a thorough legal review. Ask whether the contract you use still provides adequate protection.

Authors: Leah H. Ziemba Member Energy and Sustainability and Agribusiness, Food Processing and Distribution Groups, Michael Best & Friedrich LLP (608) 283-4420 lhziemba@michaelbest.com Porter J. Martin Leader Corporate Mergers and Acquisitions Group, Michael Best & Friedrich LLP (608) 283-0116 pjmartin@michaelbest.com

REG ISTR ATIO N

NOW OPE N!

INDUSTRY INNOVATION

FEBRUARY 22-24, 2012 Gaylord Palms Resort & Convention Center | Orlando, Florida

NationalEthanolConference.com

business briefs People, Partnerships & Deals

W. Wade Robey has started work as Poet LLC’s new chief technology officer, replacing Mark Stowers, to lead company’s research and commercial development Research Director activities. As head Wade Robey has moved from of Poet Research in Novozymes to become Sioux Falls, S.D., he Poet’s chief technology will oversee the comofficer. pany’s technology development programs including cellulosic ethanol, new products and grain-ethanol process efficiency. Robey brings more than 20 years’ experience in the biotechnology, industrial and animal nutrition industries. In his latest role prior to joining Poet, Robey worked for enzymes-maker Novozymes as head of marketing, Americas. “Poet stands out as a company committed to technology and research,” he said. “It has done some incredible work in its 23 years, and I’m excited to now be part of the Poet team and help continue that tradition. In other news, Poet Biorefining-Caro (Mich.) received the Michigan Agri-Business Association’s 2011 Green Agri-Business Designation for incorporating environmental practices such as a total water recovery system to eliminate waste water discharge and a waste heat recovery system, as well as conducting a recycling program. Butamax Advanced Biofuels LLC appointed Peter Matrai its chief operating officer, responsible for the development and implementation of Butamax strategy and business plans. In addition, he will lead the company’s global commercial team, which is currently engaged in activities in the United States, Brazil, Europe and Asia. Prior to joining Butamax, Matrai spent five years with BP Biofuels as a strategy advisor, contribut22 | Ethanol Producer Magazine | october 2011

ing to the development and implementation of BP Biofuels’ global strategy. A joint project of BP and DuPont, Butamax is poised for a global commercialization launch for its biobutanol process in 2012-’13. Aventine Renewable Holdings Inc. announced the retirement of Thomas Manuel from the board of directors and his position as CEO. The board appointed John Castle as interim CEO. Castle had been recently promoted to executive vice president, chief operating and chief financial officer after helping to lead the company through its transition out of bankruptcy as finance officer. In addition, the board of directors appointed Calvin Stewart, the chief accounting and compliance officer of the company, to serve as interim chief financial officer. Superior Industries appointed Matt Voigt as its new conveying equipment application engineering specialist to help territory managers develop material handling Engineering solutions for their Specialist Matt Voigt customers. A graduhas experience within the industries served ate of the University by Morris, Minn.-based of Wisconsin-PlatSuperior Industries. teville with a degree in mechanical engineering, Voigt worked for Metso’s Barmac line for eight years in design, research and development, and in product and technical support on crushers and screening plants. EdeniQ, Inc. appointed Steve Rust its vice president of sales and marketing. He most recently served as director of marketing at Fremont Industries, where he worked to increase Fremont's market share of water treatment solutions for ethanol producers,

along with introducing Fremont's corn oil recovery product into the market. Earlier, he worked with ICM Inc. in a business development role that focused on promoting the ethanol industry, including starting up the Ethanol Promotion Council as director of industry relations, managing the Team Ethanol Indy Car sponsorship in the Indy Racing League and implementing the first blender pump in Kansas. The addition of Rust to the team will allow Richard Root Woods to focus on his role as vice president leading EdeniQ’s commercial development efforts for its Cellunator particle sizing technology and its corn oil extraction product line.

Mid-Atlantic Sales Richard Zakrzewski brings more than 10 years of experience in stainless steel and nickel alloy sales within the aerospace, oil and gas, chemical processing and nuclear industries to his new position at Sandmeyer.

dent–national sales.

Richard Zakrzewski joined Sandmeyer Steel Co. as district sales manager in its Mid-Atlantic sales territory which includes eastern Pennsylvania, New Jersey, Delaware, Maryland, Virginia and southeastern New York. He replaces Shawn Fenerty who was recently promoted to the newly created position of vice presi-

CPM Roskamp Champion appointed Patty Tometich manager of its test center in Waterloo, Iowa, responsible for all applications testing at the CPM’s pelleting and particle size reduction test center. The center processes samples of customers’ materials in a laboratory that simulates full-scale equipment such as hammermills, roll crushers and shredders, to determine the most cost-efficient and effective means to consistently produce customized pelleting and grinding solutions.

BUSINESS BRIEFS Sponsored by

TMO Renewables Ltd. has appointed Peter Allen as nonexecutive director. He has experience in serving on the boards of science-based businesses, including ProStrakan Group plc, Chroma Therapeutics Ltd., Proximagen Neuroscience plc and Oxford Nanoscience Technologies Ltd. TMO built the UK’s first cellulosic ethanol process demonstration unit, in operation since 2008. The TMO process is based on a thermophilic bacterium. Enerkem Inc. announced the closing of $29 million Canadian ($30 million U.S.) in additional financing including equity investments of CA$14.5 million and CA$14.2 million in corporate debt. As part of the equity financing round, The Westly Group, Fondaction CSN and Quince Associates, LP join existing investors Valero Energy Corp., Waste Management, Rho Ventures, Braemar Energy Ventures and Cycle Capital, investors in the earlier CA$59 million equity round. Enerkem operates two facilities in Quebec and in 2010 began construction of a municipal waste-to-biofuels plant in Alberta. The company expects to break ground later this year on a similar facility in Mississippi for which it is receiving financial support from the USDA and U.S. DOE. Codexis Inc. and Chemtex announced a broad collaboration to develop and produce sustainable detergent alcohols from second-generation cellulosic biomass processes for use in the household products market. Made from palm kernel and petroleum sources today, detergent alcohols—a $6 billion worldwide market —are surfactants that stabilize mixtures of oil and water widely used in laundry detergents, shampoos and other consumer products. The collaboration will utilize Chemtex’s pretreatment process with Codexis’ high performance enzymes. The process will be piloted at Chemtex’s research and development facility in Rivalta,

Italy, and demonstration-scale trials are to be conducted at Chemtex’s 40,000 metricton-per-year (13.5 MMgy) cellulosic ethanol plant in Crescentino, Italy, that is expected to be operational in 2012. In other announcements, Codexis appointed Pedro Mizutani to its board of directors. Mizutani is executive vice president-upstream business for Raízen Energia Participacoes S.A. and former CEO of Cosan Sugar and Ethanol. Raízen, Brazil’s largest sugar and ethanol producer, holds approximately 16 percent of Codexis’ outstanding shares of common stock and is the company’s largest stockholder. BinMaster Level Controls introduced its 3D MultiVision, a Windows-based inventory management software for the 3DLevelScanner that enables users to view data for multiple bins in a single window. The software can be used with all versions of the noncontact, dust penetrating scanner. Users can get detailed information for a bin including minimum, maximum and average levels and see the 3D visualization of bin content. The software allows multiple users at multiple locations to view bin level and volume data. Coskata Inc. announced the first close of its Series D round of financing, reporting participation by the major investors from previous rounds, including The Blackstone Group, Khosla Ventures, Total Energy Ventures International, ATV, Globespan Capital Partners, General Motors, Arancia and Sumitomo. “We are very pleased with

the continued commitment of our existing investors and their confidence in our technology platform,” said William Roe, president and CEO. Coskata has been operating a demonstration-scale integrated biorefinery in Madison, Pa., since 2009 and earlier this year received a conditional commitment for a USDA loan guarantee to build a commercial-scale cellulosic ethanol facility in the Southeast. Yokogawa Corporation of America released the CW10 Clamp-On Power Meter. This unit combines the basic functionality of a standard clamp-on tester, digital multimeter and power monitor to diagnose maintenance and electrical issues before more expensive and sophisticated equipment may be required to analyze the performance of motors, generators and other power-related equipment. The CW10 allows technicians and maintenance personnel to measure 600 A AC/DC, 1000 V AC/DC, 600 kW AC/DC, power factor, total harmonic distortion, harmonics from 1st to 25th, resistance, and frequency. Other measurement and diagnostic capabilities include phase rotation, voltage detection, continuity check, diode test, inrush current and low pass filter. Motorcycle enthusiasts attending the August rally in Sturgis, S.D., were greeted at the Legendary Buffalo Chip by the Renewable Fuels Association’s “Fueled with Pride” promotional campaign. RFA produced promotional materials, banners and merchandize for the event, as well as displayed an E85 flex-fuel motorcycle. During the rally it has attended for several years, RFA also sponsors a 50-mile ride, with prooctober 2011 | Ethanol Producer Magazine | 23

BUSINESS BRIEFS

ceeds benefitting two Black Hills charities. In just three years, the event has raised over $150,000 for the Black Hills Special Olympics and the Sturgis Motorcycle Museum and Hall of Fame. Expertune Inc. released its latest version of PlantTriage Finder, designed to find the root cause of process upsets, automating the in-depth analysis previously performed by an experienced engineer. The new technology works by evaluating correlations between instrument readings throughout a plant. Upsets that start in one area are reflected in the data patterns from other parts of the plant. Using advanced mathematical techniques, the Root Cause Finder works without requiring process models. Results are displayed graphically. Lechler Inc. announced the release of its M20 Tank cleaning machine, designed to tackle large cleaning jobs such as cleaning fermentation and storage tanks in ethanol plants or wineries. The geardriven unit is available in a two- or fournozzle model, providing high-impact cleaning at relatively low inlet pressures. For cleaning of long tanks, such as tanker trucks and railcars, Lechler provides the Horizontal M20, a standard M20 with a special attachment which allows more horizontal spraying. Pursuit Dynamics plc and Biomimetics Health Industries Ltd. have agreed to form a joint venture to develop the patented intellectual property of both companies to create best-in-class disinfection and decontamination solutions using PDX’s atomization technology and Biomimetics’ chemistry. The core areas of focus will be healthcare disinfection, environmental disinfection, animal health disinfection and crop protec24 | Ethanol Producer Magazine | october 2011

tion. Biomimetics is a UK-based life sciences organization specializing in the research, development and manufacture of unique nature-replicating chemical products that naturally control pathogens. PDX works in biofuels, brewing, food and beverages and public health and decontamination, deploying its PDX atomizer and reactor technologies.

Rockwell Automation Inc. launched a Biofuels Customer Advisory Council to provide customers with a forum to discuss their needs, challenges and industry opportunities. Rockwell Automation will utilize the customer feedback to guide and validate future strategies and product roadmaps for its Pavilion8 model predictive control and plantwide optimization solutions. The 2011’12 advisory group includes representatives from Cardinal Ethanol LLC, Golden Grain Energy LLC, Kansas Ethanol LLC, Marquis Energy LLC, Trenton Agri Products LLC, Western Plains Energy LLC, Western Wisconsin Energy LLC, White Energy LLC and Zilor Enterprises. As part of their participation, members will have the opportunity to preview new products and take advantage of beta-testing opportunities. Lansing Trade Group LLC has completed the acquisition of feed merchandiser Ackerman Beardsley Bennett Inc. The ABB trade name will be retired and renamed Lansing Vermont Inc. A privately owned firm formed in 1931, Lansing has grown into a national trading company, surpassing its grain roots with growth into the energy market. Current annual revenues for the Overland Park, Kan.-based company are approximately $5 billion. Spraying Systems Co. released its Tankjet B and BX injectors for tank cleaning machines and custom-designed nozzle manifolds. The injectors transform steam

and cold water into high-pressure, hightemperature liquid feeds. For use with cold, low-pressure city water and existing plant steam, the injectors are nonintrusive and can eliminate pumps and heat exchangers. A liquid control valve siphons chemicals or detergents into the hot water stream. Gamajet Cleaning Systems Inc. released its new Intrepid tank rinsing machine, responding to customer requests for a less expensive spray ball to use for light residues that would also reduce water use. The Intrepid offers fast tank rinsing with the 80 percent less water than the standard spray ball at the same pressure. Unlike traditional Gamajet rotary impingement tank cleaners, the Intrepid utilizes a unique directdrive design, requiring no gear reduction while still applying concentrated streams for cleaning in a complete, 360-degree pattern. GreenShift Corp. commissioned its patented corn oil extraction system at Advanced BioEnergy LLC’s 110 MMgy ethanol plant in Fairmont, Neb. GreenShift designed and assisted with the construction of a system based on GreenShift’s process that includes two Alfa Laval disc stack centrifuges for maximum performance. Advanced BioEnergy will receive ongoing technical support and have access to GreenShift’s portfolio of proprietary technologies to support its efforts to further enhance coproduct revenues beyond corn oil extraction. Share your industry briefs To be included in Business Briefs, send information (including photos and logos if available) to: Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to (701) 7468385, or e-mail it to sretkaschill@bbiinternational.com. Please include your name and telephone number in all correspondence.

commodities Natural Gas Report

Is it time to lock in winter prices? Aug. 26—Summer’s end is a good time to look at the forward market and assess whether there is value in deferred prices. The chart below shows the relationship between prompt natural gas prices during the sum-

Seasonal Carry to January 2009

$3.00

2010

2011

$2.50 $2.00 $1.50 $1.00 $0.50 $-

r 5-Ap

ay 5-M

n 5-Ju

l 5-Ju

By Casey Whelan

mer and the January price for the upcoming winter. This is typically called the “seasonal carry.” We have included information from 2009, 2010 and 2011 to date. Notably, the seasonal carry during summer 2011 has been extremely low compared to 2009 and 2010 and the slope of the 2011 curve has been very flat since May. Finally, the current market carry is the lowest in three years and prompt prices are relatively low. When a relatively low market carry is added to a relatively low prompt price, we get a relatively g p 5-Au 5-Se low deferred price. The

current January price $4.39 per million Btu (MMBtu) is within 5 cents of the lowest level at which the contract has traded. In addition, the average January price over the past three years has been $5.39 per MMBtu, 23 percent higher than the current deferred January price. Could the deferred prices for the next winter continue to drop? Certainly. On the other hand, other factors could also result in prices rallying. When, as is the case now, the deferred market offers a relatively low price and a relatively low carry, the opportunity cost of lower prices is often less than the risk of higher prices. We believe now may be a good time to evaluate and consider some deferred coverage.

Corn Report

Price rationing expected with tight corn supplies Aug. 31—Dryness and heat in the Corn Belt during July wreaked havoc on yield potential, pushing markets up. By late August, traders factored in a sub-150-bushel national yield, compared to USDA’s August supply/ demand report projections of 153 bushels per acre, the lowest since 2006’s 149.1. With harvested acres at 84.4 million acres, a 1-bushel decrease reduces carryout by 84 million bushels if demand is constant. The August report estimated carryout at 714 million bushels, so the final number could be 462 million bushels, although price rationing will occur below a 500-million-bushel carryout, boosting carryout as the year progresses. The carryout-to-use ratio at 5.4 percent is the lowest since 1995-’96. Currently, demand for feed is expected to require 4.90 billion bushels, ethanol 5.10 billion bushels and exports 1.75 billion bushels, with the balance 26 | Ethanol Producer Magazine | october 2011

BY JASON SAGEBIEL

in residual and other food Corn Price Analysis based on and industrial sectors. Where August (New Crop) Supply/Demand will the rationing occur? The livestock and poultry industries have already begun to increase inclusion rates of other, more economical feedstuffs. The accompanying chart shows the new crop corn price on the day the August USDA report is released along with the carryout-touse ratio. Global corn carryout continues to decline on U.S. production decreases. World carryout was last projected at 114.53 million consumption at 182.5 mmt. The USDA is metric tons (mmt) versus 122.93 a year ago expecting China to import 2 mmt of corn in and 143.90 mmt in 2009-’10. China is ex- the new marketing year. pected to produce 178 mmt with domestic

report

Regional Ethanol Prices Front Month Futures (AC) $2.929 REGION

SPOT

RACK

West Coast

$3.040

$3.115

Midwest

$2.905

$3.050

East Coast

$2.980

$3.288 SOURCE: DTN

Regional Gasoline Prices

DDGS Report

Nearby DDGS sales dominate as market factors shift BY SEAN BRODERICK Aug. 26—DDGS markets synchronize with corn—always lagging and never too far out of trading range. Looking back at the hot summer, prices stayed on the higher end due to the misfortune in Texas and the Southwest. Most crush margins for livestock feeding have turned negative. The poultry industry is back on shaky ground and while Midwestern hogs were profitable this summer, they are again breaking even, or less. DDGS exports are down less than 10 percent. Bulk volumes are low, though Mexico use is trending up, and Central and South American countries are seeing small upticks. The Chicago container market is picking up, replacing some bulk business, especially to China. There’s cautious optimism for fall

and winter. Saudi Arabia will subsidize DDGS purchases with estimates as high as 500,000 tons and South Korea should rebound to 2010 levels after being down 185 percent due to hoof and mouth disease. The Viptera trait issue in this year’s corn crop will be watched—China approval isn’t expected until early next year and EU approval is an unknown. Ethanol’s margin structure is prompting very nearby DDGS sales— less than a month out. This has worked so far, as corn has rallied, but competing products like corn gluten feed and canola meal will make inroads this year as feed wheat has. As always, corn prices will dictate DDGS prices, but better crops in some areas that did poorly last year will add another dynamic.

Front Month Futures Price (RBOB) $2.935 REGION

SPOT

RACK

West Coast

$3.244

$3.141

Midwest

$3.070

$3.048

East Coast

$2.916

$3.065 SOURCE: DTN

DDGS Prices ($/ton) location

OCT 2011

sept 2011

Minnesota

190

oct 2010 120

Chicago

205

136

Buffalo, N.Y.

218

220

125

Central Calif.

254

253

168

Central Fla.

228

240

154 SOURCE: CHS Inc.

Corn Futures Prices Date

(Dec. Futures, $/bushel)

High

Low

August 31, 2011

7.75 1/2

7.67

7.67 1/2

July 29, 2011

6.89 1/4

6.65 1/2

6.68 3/4

August 31, 2010

4.44 1/2

4.38

4.39 1/4 SOURCE: FCStone

Cash Sorghum Prices ($/bushel) LOCATION

Ethanol Report

Ethanol markets nervous about corn production BY RICK KMENT Aug. 29—Traders are focused on 2011 corn production expecting supplies to remain tight. This will significantly impact ethanol production costs—corn being the largest input cost. Ethanol demand remains strong, helping to keep futures prices near $3 per gallon while rack and spot markets fetch wholesale prices well above $3. The expectation of tight corn and ethanol supplies is keeping most buyers aggressive. East and West Coast ethanol prices are carrying increased premiums due to strong blending demand. Though discounted for nearly a year, the ethanol discount eroded at the end of August due to softness in energy markets and continued strong buying support in corn and ethanol prices. Ethanol demand may hold, even without a price

discount, but that could quickly change if corn continues to climb. Gasoline remains firm, though falling from midsummer driving demand and increased concern that the fragile economy will keep consumers mindful of transportation budgets. Overall demand for gasoline is sluggish, but tighter supplies could maintain price levels through the end of the year. The stock market’s wild ride in August caused many traders to second-guess expected stock market performance and once again look for a more constant investment vehicle—a move which could increase investment in energy commodities over the next several months, and support gasoline prices.

aug 26, 2011

july 29, 2011

sept 3, 2010

Superior, Neb.

7.12

6.56

4.15

Beatrice, Neb.

7.18

6.26

4.05

Sublette, Kan.

7.08

6.16

3.86

Salina, Kan.

7.34

6.75

4.32

Triangle, Texas

6.89

6.13

4.16

Gulf, Texas

8.12

7.04

4.52

SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

LOCATION

sept 1, 2011

aug 1, 2011

sept 1, 2010

NYMEX

3.94

4.37

3.84

NNG Ventura

4.00

4.37

3.58

CA Citygate

4.23

4.55

3.63

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production

(1,000 barrels)

Per day

Month

End stocks

June 2011

902

27,064

18,833

May 2011

895

27,756

20,387

June 2010

854

25,632

18,565

SOURCE: U.S. Energy Information Administration

october 2011 | Ethanol Producer Magazine | 27

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distilled

Ethanol News & Trends

E15 Hurdles Kristy Moore, director of technical services for the Renewable Fuels Association, speaks at the ACE conference about the remaining hurdles to get E15 to the marketplace.

Preparing for E15

ACE speakers address regulatory hurdles, getting the fuel to consumers Speakers Kristy Moore and Monte Shaw represented two sides of the same coin at the 2011 American Coalition for Ethanol Conference, which had the theme “Rooted in America.” About 225 people attended the event, which was held Aug. 22-24 in Des Moines, Iowa. Moore, director of technical services for the Renewable Fuels Association, went over what it will take to get E15 through the many and complex federal, state and local regulatory hurdles before the fuel can be sold at retail stations. As Executive Director of the Iowa Renewable Fuels Association, Shaw talked about that state’s efforts to move to selling E15 at retail gas stations while stressing the importance of clearing those regulatory hurdles first. “No amount of promotion will undo the damage or the hurt caused if we lose a technical battle,” Shaw said. Starting with some history, Moore 30 | Ethanol Producer Magazine | october 2011

pointed out that the E10, or gasohol, waiver approval of 1978 happened by default. It was approved simply because the U.S. EPA failed to make a decision on the waiver before the deadline. By 2007, 10 percent ethanol was being blended into approximately 50 percent of the nation’s fuel supply, with Minnesota and Connecticut the only states at 100 percent of the supply. By 2010, E10’s market penetration had greatly improved— with 10 percent ethanol being blended into about 90 percent of the U.S. gasoline supply. Only six or seven states are on the lower end with E10 penetrations of 60 to 70 percent. That’s a remarkable transformation, she pointed out. EPA approval of the E15 waiver for passenger vehicles model year 2001 and newer was finalized at the end of January. Although 2000 model vehicles and older were not part of the waiver, it does represent 65 percent of the vehicles on the road

today. Since that time, the RFA and others have been working to take the needed steps to bring this fuel to the marketplace. For example, nearly $1 million has been spent to complete health effects testing/fuel registration requirements. Although progress has been made, there’s more to be done and Moore was not able to say when the process would draw to an end. “I don’t have a date,” she told conference-goers. Some of the remaining impediments include fuel quality/specification issues, octane certification, fuel detergent certification, automaker warranties, missfueling liability, underground storage tank regulations and safety and emergency response information. In some states, regulations will need to be changed, as some have legislated that their fuel supply shall contain no more than 10 percent ethanol. Another issue is that in December, Underwriters Laboratories said that fire marshals could approve existing fuel dis-

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existing infrastructure is vital for the success of E15, he said. One way the industry has stayed afloat is by exporting increasingly larger amounts of ethanol to Brazil, but that option won’t always be available. “We’re one successful sugarcane harvest from having plants shut down, in my opinion,” he said. In preparation for E15, Iowa passed a law this year that says retailers are not liable for damage caused by the use of an incompatible motor fuel. The law says that the fuel must have been chosen by the consumer from a correctly labeled dispenser and it must comply with fuel specifications. Shaw told the audience similar laws need to be passed in other states and that it might be one of the most important steps to bringing E15 to the marketplace. To help retailers sell E15, Iowa also approved a new tax credit that was put into place July 1. Retailers that sell blends of E15 to E66 are eligible for a 3 cent tax credit through 2014, and a 2 cent tax credit from 2015 to 2017, he said. In addition, the state has $3 million allocated annually for infrastructure grants to install blender pumps, E85 pumps and biodiesel dispensers or blending terminals. The funds can be used for up to 70 percent of the installation cost, or a maximum of $50,000. It’s not currently known if E15 system upgrades will qualify under that program, Shaw said. In Iowa, regulations allow E15 to be sold through existing dispensers. That decision was made after the dispenser manufactures stated that their pumps are compatible with and warranted for E15. Also, this was before the UL reversed its decision on existing dispensers, he said. On the underground storage tank side, Iowa previously Recognized for Service Dallas Tonsager, left, under secretary for rural used an E85 compatibility development with the USDA, accepts the Merle Anderson Award from the checklist and will implement namesake of the award. Anderson is the founder of ACE. PHOTO: LACEY DIXON, ACE

penser equipment for the use of E15. Later, the product safety certification organization reversed that decision, Moore said. Make no mistake; changing the nation’s fuel is a serious and complicated process that will take time. “We just want a chance and we just want a fair chance,” she said. Following Moore’s talk, Shaw spoke about the Iowa model for moving E15 to the consumer. “Iowa is going to be ready to go on the first day E15 is legal to sell,” he said. The state has 41 ethanol plants that produce nearly 3.7 billion gallons of ethanol yearly and has been working hard to prepare for the day the technical hurdles have been overcome. “The fact of the matter is, Iowa has a heck of a lot riding on E15,” he said. “If we solve this, there will be a pot of gold at the end of the renewable rainbow,” he added later, to laughter from the audience. E15 is vitally important to the short-term success of the ethanol industry and using

a similar E15 checklist according to recent EPA guidance. As for an E15 ASTM spec, Shaw advocates moving ahead without it, knowing it will happen later on. Stand-up Example Although E10 and Monte Shaw, executive director of the Iowa E85 both have specs, Renewable Fuels Iowa state law doesn’t Association talks about the steps the state has reference an ASTM taken so retailers can spec and was crafted sell E15 as soon as regulatory hurtles are specifically to allow cleared. midlevel ethanol blend sales. “Yes, an ASTM spec is preferable but waiting two years is not,” he said, referring to the time it could take to get an ASTM spec approved for E15. Much work remains to clear up gray areas so more of Iowa’s 3,000 retailers will feel comfortable offering E15 at their stations. What will be needed in the beginning, however, is encouraging retailers willing to “stick their toes in the somewhat murky waters” and go for it. Once that happens, and other retailers see that it works, more will follow. Ron Lamberty, senior vice president of ACE agreed. “Basically, we’ve got to make sure it’s legal and then somebody has got to do it,” he said. Brian Jennings, executive vice president, added that bringing E15 to the marketplace will mean near-term relief and opportunity for the industry. Adding more blender pumps and flex-fuel vehicles will also continue to be a high priority for ACE, he said. In all, more than 30 speakers and moderators spoke on topics such as the likely demise of the Volumetric Ethanol Excise Tax Credit, the health effects of ethanol, the effect of food safety laws on distillers grains production, cellulosic ethanol, managing high margins and more. Keynote speakers included Stephanie Herseth Sandlin, a former S.D. congresswoman; Sen. Tom Harkin, D-Iowa, and Dallas Tonsager, under secretary for rural development with the USDA. —Holly Jessen

october 2011 | Ethanol Producer Magazine | 31

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Safely Securing Energy Crop Acres

mental concerns. “We’ve never intentionally planted pennycress on 200,000 acres, so what does that mean in terms of what BCAP assists in establishing crops you plant?” Atkinenergy crops throughout US son explains. “Is it going to be displacing crops? Is The USDA awarded nine Biomass it going to be grown in flood-prone areas? Crop Assistance Program project areas Does it attract pests that might get into and one nonproject area in fiscal year 2011, corn? There’s all these different things.” consuming the entire $112 million budget When the USDA finalized BCAP last for the first, and possibly only, year of a year, it also issued an environmental improgram designed to invest in the expan- pact statement, which focused on switchsion of energy crops throughout the U.S. grass. For this reason, proposed projects Two of the project areas—switchgrass in intending to use switchgrass did not have Kansas and hybrid poplar in Oregon—will to complete an environmental assessment, directly benefit cellulosic ethanol facilities. but other energy grasses, specifically misOthers are focused on converting energy canthus, were put to the test before those crops to biodiesel, biobutanol and pellet- projects were approved. “If you take a izing biomass for a variety of uses. Poet look at some of the dedicated energy LLC is the beneficiary of the nonproject crops that people have proposed, dependarea. The USDA is providing matching ing on where you grow them, sometimes payments to farmers to cover the cost of they might flirt along the lines of invasiveproviding corn stover to Project Liberty in ness, because you want a hardy crop,” AtEmmetsberg, Iowa. kinson says. “We are intentionally estabTodd Atkinson, chief of staff at the lishing crops at a commercial-scale using USDA’s Farm Service Agency, says more federal dollars, so you need to do an enthan 40 applicants filed to establish BCAP vironmental assessment if we don’t know areas this year, but a relatively tight budget the full environmental impacts.” made it impossible to fund all of them. Approved projects will incentivize the planting of switchgrass and other perenApproved projects will nial native grasses, giant miscanthus, camelina and poplar in areas across Arkansas, incentivize the planting Missouri, Kansas, Ohio, Pennsylvania, of switchgrass and other Oklahoma, Oregon, California, Montana and Washington. Unfunded proposed perennial native grasses, projects would have established a wide giant miscanthus, camelina range of feedstocks, from pennycress to energy cane to pongamia—an oil seed tree and poplar in areas across native to India. Applicants must meet two very imArkansas, Missouri, Kansas, portant criteria to be considered. The first, Ohio, Pennsylvania, which could be difficult for many cellulosic ethanol producers, is that a biorefinOklahoma, Oregon, ery needs to be ready to begin producing California, Montana and when the crop is ready for harvest. The second is a required environmental asWashington. sessment if there is any question as to the crop’s impact on any number of environ32 | Ethanol Producer Magazine | october 2011

The two project areas devoted to energy crops for ethanol production were sponsored by Abengoa and ZeaChem Inc. The FSA approved up to $6.2 million to be used to establish 20,000 acres of switchgrass in Kansas and Oklahoma which will be used to supply the company’s 25 MMgy cellulosic plant in Hugoton, Kan. In Oregon, the FSA will provide up to $17.1 million to establish 7,000 acres of hybrid poplar for ZeaChem’s 25 MMgy in Boardman. (“Trees are more expensive than switchgrass,” Atkinson says.) It is unclear what will happen to BCAP when the USDA’s new fiscal year begins on Oct. 1. The U.S. House of Representatives proposed eliminating the program completely in fiscal year 2012, but the Senate had not acted before the August recess. President Barack Obama requested that $201 million be appropriated for the program. If BCAP is allowed to continue, Atkinson says the FSA will re-evaluate the acreages allotted to previously approved projects, many of which were downsized due to budget constraints, and consider expanding them. In the meantime, farmers in the program can rest assured that program payments will not be suddenly eliminated. “We cannot enter into a contract to pay out for years unless we have that money right now,” Atkinson says. “If you enter into a contract for three years, you will be paid for three years. If it’s for five years, it’s five years. None of these people are at risk of having a funding disruption.” As for future new project areas, the agency is trying to keep an open mind about what crops might be added to the mix. “We want to be as specific as possible so that people have certainty, but we’re also working to be as flexible as possible in order to accommodate entrepreneurs who may have approaches that have not been envisioned,” he says. —Kris Bevill

PHOTO: ABENGOA

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Existing Opportunities Abengoa’s future plans call for the addition of cellulosic facilities at all six of its existing corn ethanol plants in the U.S., including this 55 MMgy plant in York, Neb.

Approved at Last

in Europe,” he says. “The requirements on any loan guarantee are Abengoa CEO offers European very challenging for any company. There are more projects than there view of programs is available money, so competition is very high. We have been competOn Aug. 19, the U.S. DOE offered to ing with other energy technologies that, from guarantee $133.9 million in financing for a commercial standpoint, have more maturity, Abengoa Bioenergy U.S. Holding Inc.’s first less uncertainty and definitely less risk. I think commercial-scale cellulosic facility. With fed- that has been a little bit detrimental to our ineral financial backing in place, the company dustry and, overall, the process for our indusis marching ahead with its plans to establish a try is complex, but our relationship with the 23 MMgy multi-feedstock facility in Hugoton, loan guarantee office has been very good. It’s Kan., by 2013 and expects to begin construc- a tough problem, but I think DOE is going to be able to put in some beautiful projects in a tion by the end of September. The DOE’s loan guarantee approval for very complex environment.” The Hugoton project is a prime example biofuels projects has been notoriously hard to come by, so successfully emerging from the of the complexity of cellulosic ethanol. In adprocess is a major milestone. Poet LLC was dition to producing ethanol, the company will the first cellulosic ethanol project to receive construct a cogeneration facility on-site that a nod, garnering a $105 million conditional will produce 20 megawatts of biomass-based commitment earlier this summer for its fa- electricity to run the ethanol plant. The plant cility in Iowa. But despite the slow start and is expected to require about 300,000 tons of lengthy approval process (Spain-based Aben- corn stover to produce 23 MMgy of ethanol goa filed its initial loan guarantee application using its enzymatic hydrolysis process. In late two years ago), Abengoa Bioenergy President July, the USDA also approved a Biomass Crop and CEO Javier Salgado says he is satisfied Assistance Program to establish 20,000 acres with the program overall and believes the of switchgrass in the area surrounding the U.S. programs can serve as an example for plant. If all goes well, switchgrass will be ready other countries to emulate when determin- to harvest for use at the facility during its ining how best to support biofuels expansion. augural year in combination with stover and “If we were to have 50 percent of the sup- wheat straw already promised to the company port of what this country has had for new-age by 60 area farmers. Salgado says the BCAP technologies and projects, I would be happy project is not vital to the plant’s success be-

cause it already has supply agreements in place with farmers, but it will be helpful in proving the energy crop concept and will serve as an example for the deployment of that concept throughout the U.S. Once the biomass procurement concept has been proven and the Hugoton plant is up and running, Abengoa will target its six existing U.S. corn-based ethanol plants as co-location opportunities for cellulosic facilities and will also entertain the option of serving as a technology provider to third parties. “Globally, there are about 600 biorefineries producing ethanol today,” he says. “We are trying to introduce a new concept, which is a new technology, and the risk associated to develop that technology is going to be mitigated, and the deployment is going to be much faster, if we are able to co-locate those assets with the existing infrastructure. I believe this could become a reality very soon.” For now, however, all of the company’s cellulosic focus is geared toward Hugoton, Salgado says. As of late August, the company had finalized a construction agreement and was expecting to receive its air permit within a few weeks. Executives were working around the clock to finalize the loan guarantee by Sept. 30 and it appeared the company would be able to hold a groundbreaking before the start of October. Approximately 300 jobs will be created during the construction of the plant. The facility will provide 65 full-time jobs when operational. —Kris Bevill october 2011 | Ethanol Producer Magazine | 33

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A Better FFV?

Single nozzle, dual fuel injection could work in heavy-duty trucks, too What if there were a flex-fuel engine on the Fuel management market that was more efmicroprocessor ficient, and provided more power than today’s flexDirect fuel vehicles (FFVs) and Ethanol tank injection Knock was affordable? Better Mixer sensor still, what if that engine Ethanol/gasoline could also be used for tank heavy-duty vehicles that now use diesel engines? Manifold Engine That’s a future that Cambridge, Mass.-based TurboEthanol Boosting Systems charger LLC, an MIT spinoff, has been working toward. In early August, the comAir pany took a step closer when the U.S. Patent and Boosting Performance Ethanol Boosting Systems received a patent for the system outlined in the schematic using single nozzle, direct injection Trademark Office issued a for a spark ignition gasoline engine. patent for a single nozzle, SOURCE: ETHANOL BOOSTING SYSTEMS LLC direct injection system for rapidly variable gasoline/anti-knock agent fuel, he says, because it’s higher octane than mixtures. It utilizes a second tank, which gasoline and can be operated at a higher could contain ethanol or methanol, for direct compression ratio with more turbo charginjection at high power levels. “It could be ing. The problem with conventional FFVs a game changer for engines because it’s the is that it’s not possible to achieve maximum most cost-effective way to get high-efficien- efficiency and torque when the vehicle is run cy engines,” says Daniel Cohn, CEO and co- on gasoline. The performance of the engine founder of Ethanol Boosting Systems. “And has to be degraded, otherwise, when it was it’s good for ethanol because it opens up the running on gasoline the engine would have possibility for flex-fuel heavy duty truck en- issues with knock. “What’s really nice about gines for ethanol—that’s a big potential win our engine is it’s a no compromise FFV, that for ethanol—and it makes flex-fuel light duty is, you design it for the maximum performance of ethanol,” he tells EPM, adding car engines more attractive.” U.S. DOE funded testing in collabo- that while it’s true ethanol has less energy ration with Ford, confirming what Etha- per gallon than gasoline, this engine comnol Boosting Systems’ computer models pensates with higher efficiency. Another piece of good news is that, showed. “This technology opens up the possibility for high efficiency, high torque, flex- with the FFV configuration, there’s no need ible-fuel engines for trucks. These engines for special handling for the second tank. have a lot of advantages over diesel—they Every time the driver fills up with a higher are cheaper, they’re cleaner and they provide ethanol blend, the fuel is directed into the second, smaller tank. “So the second tank is more power.” While critics blame ethanol for a variety always poised to be used,” he says, as long as of engine-related ills, Cohn points to short- the driver fills up with E85 often. comings of gasoline. Ethanol is a superior —Holly Jessen 34 | Ethanol Producer Magazine | october 2011

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Making Progress

Great River Energy advances hybrid corn-cellulosic project A planned hybrid corn-cellulosic ethanol plant near Jamestown, N.D., is one step closer to fruition following recent local approval for a 10-year tax break. Dakota Spirit AgEnergy LLC, a subsidiary of Minnesotabased electric cooperative Great River Energy, wants to build a 50 MMgy corn-based dry mill at Spiritwood, N.D., which will sit alongside an existing Cargill Malt plant and a combined heat and power (CHP) plant that is currently being constructed by Great River Energy. The ethanol plant will be expanded over time to also produce 10 MMgy of cellulosic ethanol using locally obtained corn stover and wheat straw as feedstocks. Sandra Broekema, business development manager for Great River Energy, says construction of the corn ethanol plant could begin in April, pending the completion of project finance. This first phase of the project is expected to cost about $110 million and could be complete by 2014. Broekema says the project will be financed by private investors, adding that other state incentives aside from the 10-year property tax reduction could be applied to reduce the project’s cost.

Great River Energy’s CHP plant will be completed in 2013 and will be used to provide steam to power both the malt plant and the ethanol plant. Inbicon A/S is serving as technology provider for the cellulosic portion of the project and is currently standardizing a 10 MMgy modular design, Broekema says. After the first phase is operational, Broekema says an economic evaluation will be conducted regarding the cellulosic phase. It is expected that about 240,000 tons of feedstock would be required to supply the cellulosic plant. Great River Energy’s project is one of very few new, corn-based ethanol construction projects expected to commence in the near future. Some industry members have voiced concerns regarding the market for ethanol after the Volumetric Ethanol Excise Tax Credit is eliminated, but Broekema expressed confidence that demand for the fuel will continue to be strong. “We believe that the expiration of VEETC shouldn’t have a material impact on the overall demand for ethanol, since discretionary blending and higher concentrations are small segments of the overall market,” she says. —Kris Bevill

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Surprising Discovery Researchers stumble upon new ethanol application A group of scientists at Washington State University and the U.S. DOE’s Pacific Northwest National Laboratory recently discovered that isobutene, a valuable chemical used mostly to produce rubber for automobile tires,

can be created from ethanol by introducing a low-cost catalyst comprised of zinc oxide and zirconium oxide. The researchers made this unexpected discovery while attempting to extract hydrogen from ethanol. The hydrogen

Secret Pathway The right balance of zinc and zirconium oxides in this catalyst (purple block) converts ethanol to isobutene with low amounts of unwanted byproducts such as acetone and ethylene. SOURCE: PACIFIC NORTHWEST NATIONAL LABORATORY

experiment didn’t work, but the outcome was better than expected, according to lead researcher Yong Wang, a chemical engineer who holds a joint appointment at PNNL and WSU. He says ethanol producers around the country could “absolutely” apply this new finding to their process and begin producing the biochemical to replace its fossil fuelderived counterpart. Isobutene’s many uses make it a good candidate for widespread production at ethanol plants, unlike zein, for example, which could be produced by only a few ethanol plants before the market becomes saturated. “It’s basically a platform molecule,” Wang says. “You can use it for making a solvent, chemicals and also fuel additives. It diversifies the application of ethanol plants. There’s no limitation.” He estimates that for every gallon of ethanol produced, about one-third of it could be used to make isobutene. The catalysts used at PNNL were produced using conventional methods and are “very cheap,” he says, which should make the process even more attractive to cash-strapped ethanol producers. The isobutene discovery was particularly surprising for researchers because while they knew that the conversion was scientifically possible, no one had done it in a one-step reaction before, Wang says. Now that they know it is possible, researchers are working through the usual steps of scaling-up a new technology to apply it at a commercial level. The back-of-the-envelope calculations show that it is economically possible and the chemistry is proven, he says, adding that discussions are ongoing with several ethanol producers to partner with for the scale up to commercial production. —Kris Bevill 36 | Ethanol Producer Magazine | october 2011

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Got a Minute?

Campaign suggests targeting drivers in the one place all goâ&#x20AC;&#x201D;DMVs The Clean Fuels Foundation is in the formative stages of a nationwide education outreach program that will target drivers at the one place they all must go before they hit the roadâ&#x20AC;&#x201D;the Department of Motor Vehicles. Burl Haigwood, director of program development for the Clean Fuels Foundation and program manager for the project, says the DMV Driver Education project provides a unique opportunity to encourage drivers to become aware of their vehicleâ&#x20AC;&#x2122;s fuel capabilities and to warn them of the dangers of fossil fuel use. â&#x20AC;&#x153;If DOT [Department of Transportation] and DMVs can work together on seat belts, distracted driving, aggressive driving, child safety seats, speed limits and voter registration, why canâ&#x20AC;&#x2122;t they work together on the driverâ&#x20AC;&#x2122;s right to know how gasoline and crude oil are impacting their personal lives?â&#x20AC;? he says. â&#x20AC;&#x153;A driver has a right to know that relying on oil has a personal impact on that driver. Our addiction to oil has an impact on every driverâ&#x20AC;&#x2122;s economic, environmental and national security.â&#x20AC;? Local education efforts by ethanol producers are good, Haigwood says, but in order to have a real impact, a nationwide education campaign needs to be implemented. The DMV provides a perfect captive audience for ethanol education and providing drivers with that information can be done in a variety of ways, from questions on driving tests to flyers posted on the walls of the offices. The program will require time and money, however, and ethanol producers are being sought out to participate in the DMV project. â&#x20AC;&#x153;You canâ&#x20AC;&#x2122;t do it one at a time,â&#x20AC;? Haigwood says. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;m not saying, donâ&#x20AC;&#x2122;t do what youâ&#x20AC;&#x2122;re doing. But when you look at your education and investment portfolio, how much are you putting on the DMV? Right now that investment is zero. Weâ&#x20AC;&#x2122;re asking the ethanol industry and all stakeholders to ante up.â&#x20AC;? A national education program has

been difficult to launch so far, due mostly to misinformation campaigns being funded by the wealthy oil companies, Haigwood says. He also believes the federal government needs to become responsible for participat-

ing in order to own up to the renewable fuel standard it implemented. â&#x20AC;&#x153;They need to own it, and indoctrinate that law into their programs,â&#x20AC;? he says. â&#x20AC;&#x201D;Kris Bevill

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october 2011 | Ethanol Producer Magazine | 37

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The Next Phase Producers urged to prepare for Tailoring Rule The second leg of the U.S. EPA’s threetiered greenhouse gas (GHG) emissions regulations came into play on July 1, triggering compliance requirements for many of the nation’s ethanol plants. According to the rule, Prevention of Significant Deterioration permits are now required for any new construction project that will result in GHG emissions exceeding 100,000 tons per year. Modifications at existing facilities, such as adding new equipment, which will increase GHG emissions by 75,000 tons or more per year are also required to obtain PSD permits. Additionally, any facility that emits at least 100,000 tons per year of CO2 equivalent is subject to Title V permitting requirements. Prior to the rule’s finalization, representatives from all aspects of U.S. manufacturing fought hard to prevent the EPA from

implementing emissions regulations that were envisioned to be too costly and complicated. The final rule was a heavily amended version of the proposed rule, reflecting many of the industry’s concerns regarding excessive regulation. While, of course, not everyone was pleased with the final decision (several lawsuits are pending and various members of Congress have suggested eliminating the regulations altogether), it appears that there have been relatively few problems with the rule as affected parties adjust to their new requirements.” “It’s been pretty much business as usual,” says Marnie Stein, senior environmental specialist at the Iowa Department of Natural Resources Air Quality Bureau. “But they still have until next July to apply for their Title V permits.” According to Aimee Andrews, managing consultant of climate change services at environmental consulting firm Trinity Consultants, although the Title V permit applications are not due until next July, producers should not procrastinate in preparing their documents. “It’s a

big process,” she says. “A Title V application is not a two-pager. Most states are requiring a large set of forms to go with that application. It’s a huge exercise in paperwork, but it’s also data collection issues and [possible] delays in getting the data together that you need to build in time for.” Andrews says it will likely take about four weeks to put together a Title V application, but because of those possible delays, producers should not wait until next June to begin the process. While some ethanol plants and other industrial facilities employ environmental, health and safety personnel to focus on environmental compliance issues, Andrews says she has seen an increase in the number of facilities that have cut those positions and therefore have to assign regulatory tasks to employees with other responsibilities who also may not be as skilled at compiling the necessary data. “Companies are trimming everywhere and it’s sad because a lot of people don’t realize that if they’re not compliant, they’ll get shut down,” she says. —Kris Bevill

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SYNTHETIC LEASES

Search for Sugars

Science fair project zeros in on aspen bark for ethanol production Breaking down the cellulose in wood isn’t easy. But—as two Canadian students and their science teacher discovered—bark is a different story. James Ross and Isaiah Saunders, who are today graduates of St. Joseph-Scollard Hall, a Catholic school in North Bay, Ontario, took their bark-to-ethanol science project from a local science fair all the way to an international science fair. With the help of high school science teacher David Chechak, the pair produced ethanol from aspen bark—calculating one tree would produce about 16 gallons of ethanol. The project won one of three awards of merit in the energy and transport category at the Expo Science International for pre-college science exhibition. The event was held in Bratislava, Slovakia, in July, and included projects

by 1,500 students from more than 75 countries around the world. “We weren’t expecting this,” Ross says of winning the Science High Canadian high school students James Ross and Isaiah Saunders won an award of merit at an international science fair for their award. “We couldn’t stop smilproject converting aspen bark to ethanol. ing when we heard the news. It was the biggest surprise of our lives.” contained quite a bit of reduced sugars and The idea of making ethanol from aspen could be fermented into ethanol fairly easily. bark stemmed from the fact that deer and por- Bark isn’t a cellulosic feedstock and, unlike cupine survive on it in the winter. “We figured wheat or corn, isn’t used for feed or food, he if animals eat it, then there must be sugar in points out. there, which, when fermented with yeast, can The project went so well Chechak, Ross produce ethanol,” Ross says. and Saunders are seriously talking about apThe bark of poplar and aspen trees is a plying for a patent. In September, Ross and somewhat toxic waste product that goes into Saunders start classes at Carleton University landfills, Chechak tells EPM. For their science in Ottawa, Ontario. Ross wants to pursue a experiment Ross and Saunders ground up the bachelor of science and Saunders will study bark and wood separately with a chainsaw. engineering. “They were some of my top stuThey found that, unlike the wood, the bark dents,” Chechak says. —Holly Jessen

october 2011 | Ethanol Producer Magazine | 39

PHOTO: Expo Science International

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‘Biofuel Truth Express’

Mobile education center hits road with positive message America has a jobs problem and an energy problem. “As an industry we are doing our part to be part of the solution,” says Dave Sovereign, chairman of the Golden Grain Energy board of directors. “We need to get this message out to the people and help spread it as far and as wide as we can.” In Iowa, a handful of ethanol plants and the Iowa Corn Promotion Board found the vehicle—literally—to do that. The mobile biofuels education center has spread the truth about ethanol at events such as fairs and political rallies. It’s an eye-catching display that tells the story of a fuel that’s good for the environment, reduces greenhouse gas emissions, is good for the economy, creates jobs and keeps American money here in America, Sovereign says. The Iowa ethanol plants onboard with the project are Golden Grain of Mason City, Absolute Energy LLC in St. Ansgar, Homeland Energy Solutions LLC in Lawler,

Eye Catcher The “Biofuels, Moving America Forward” trailer gets some very curious looks as it travels down the road, according to Dave Sovereign, chairman of the Golden Grain Energy board of directors.

40 | Ethanol Producer Magazine | october 2011

and Big River Resources LLC, which operates one plant in Dyersville, and another in Galva, Ill. Besides visual displays, the trailer contains six computers, three DVD players and three television sets, Sovereign says. It’s handicapped accessible and has its own generator for power, which includes air conditioning. One of the most popular displays is a bushel of corn, 2.85 gallons of ethanol and 17 pounds of distillers grains.“People really enjoyed getting in here and running their hands through the corn and the DDGS,” he says.

Sovereign urges others to get involved in ethanol advocacy wherever they are. Ethanol plant boards can do that by forming political action committees or allocating funds for advertizing and promotion. Individuals can make themselves available as sources for local newspapers or to speak at community clubs. “Don’t think for a minute that one person or a place can’t make a difference or an impact,” he adds. —Holly Jessen

distilled

Blender Pump Carrot Missouri, Michigan and Kansas are a few of the states actively working to increase the number of blender and E85 pumps, increasing consumer access to the renewable fuel. Funding for this is available through a variety of federal, state and local programs, including the USDA’s Rural Energy for America Program. In August, USDA Rural Development Business Program Administrator Judy Canales recognized Missouri for the approval of 26 biofuel pumps at fuel retailers—more than any other state in the nation. The pumps will be installed through a program with USDA Rural Development and a partnership with the Missouri Corn Merchandising Council, the Association of Missouri Electric Cooperatives and the Missouri Department of Agriculture. "Missouri's unique team is leading the nation in applications, but more importantly, in actually making this work," Canales said. "But this is not the end of a campaign. This is step one. Our goal is 10,000 blender pumps [in the nation] over the next five years." In Michigan, the 2011 Michigan Ethanol Infrastructure & Marketing Incentive offers funding for gas station to convert to or add blender pumps. In all, $50,000 is available

through the Clean Energy Coalition, which is working with the Corn Marketing Program of Michigan. As of the end of August, $15,000 of the funding had been used. “Ideally, we would like to finish this project no First of Many Chuck Ackman, representing Sen. Amy Klobuchar, D-Minn.; Charlie Poster, assistant commissioner at the Minnesota Department of Agriculture; Dale later than December,” Hegland, manager of the Glencoe Co-op Association; and Colleen Landkamer, says Matt Sandstrom, Minnesota director of the USDA Rural Development office, cut the ribbon on a blender pump at the Glencoe Co-op Association, located about an hour west of Minneapolis, division manager, on Aug. 8. The pump was one of the first to be installed as a result of the USDA’s Clean Energy Mobiloffer earlier this year to provide grants and loans for blender pumps through its Rural Energy for America Program. Glencoe Co-op received a $6,771 REAP grant for its ity. “However, we will pump. The USDA set a goal in 2010 of installing 10,000 blender pumps throughout the extend the program if country within the next five years. necessary.” Retail stations can apply for grants of up to $10,000 per Efficiency Kansas, a microloan program inpump. In addition, stations can get awards for tended to help residents make energy-efficien$5,000 or up to 50 percent of the cost of mar- cy improvements in their homes. However, the program wouldn’t be able to use up all the keting materials and highway signage. In Kansas, an application has been sub- funds by the federal deadline, says Kansas Demitted to the U.S. DOE to use $5 million in partment of Commerce spokesman Dan Lara. federal stimulus money to install E85 pumps The idea is to use more than $20 million in at nearly 40 gas stations around Wichita. En- stimulus funding on this and two other projvironmental reviews were under way in late ects. —Holly Jessen August. The funds had been appropriated to

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october 2011 | Ethanol Producer Magazine | 41

PHOTO: USDA-RURAL DEVELOPMENT

Incentive programs spur growth in ethanol infrastructure

corn quality

44 | Ethanol Producer Magazine | october 2011

corn quality

Seeking Sound Corn:

Quality Matters Do ethanol plants need to improve their grading practices? By Holly Jessen

Inbound corn quality matters. That’s the message Charles Hurburgh Jr. wants to send ethanol plants. Most ethanol plants purchase No. 2 corn, which allows for 5 percent damage. But Hurburgh, professor in charge of the Iowa Grain Quality Initiative at Iowa State University, suspects more damaged corn is sneaking in than is realized. “My observation has been that there’s an awful lot of hand waving that goes along with grading and [grading] is basically not done in an exhaustive way,” he tells EPM.

Digging into the Details Although most corn ethanol plants don’t use third-party grading services, grain expert Charles Hurburgh Jr. believes it is needed. PHOTO: NCGA PHOTO CONTEST WINNERS

october 2011 | Ethanol Producer Magazine | 45

corn quality

vigilance and training of the graders. Plants that don’t make this a priority will receive damaged corn. “I don’t think I am telling any secrets out of school—if grading is not monitoring quality, you’re going to get whatever you’re calling No. 2 corn,” he says. “And if you accepted it, you are calling it No. 2 corn whether it is or it isn’t. That 5 percent will go to 10 in a heartbeat, because the person shipping knows you are not checking.” It isn’t known yet whether the 2011 corn crop will suffer damage, and the 2010 crop looked great. So, why worry about corn damage? It’s the wet and highly damaged supplies from 2009 that are the potential problem. “We still have a lot of 2009 corn put away in storage and actually being blended out,” he says. “I would guess that we have another year or so for the potential

Damaged Kernels

Dryer Damage

Professionals in Place

No two ways about it—ethanol plants need professional grain inspection at grain receiving, Hurburgh says. That could mean hiring a third party grain inspection firm, which is the practice of many large ethanol processors such as Archer Daniels Midland

Blue-eye Mold

Blight

Surface Mold

for high-damage corn.” Even in years with no damaged corn in the system, Hurburgh advocates vigilance. Those are the times that foster the hand-waving mentality for grain grading. “It lulls you to sleep,” he says, adding that plants need to be prepared to react quickly to changes in corn quality. In addition, with corn yield growing yearly, grain grading will become even more important. “The more grain we handle, the more there will need to be discipline in the system,” he says. “That’s what grain inspection does.”

Sprout Damage

Cob Rot

Pink Epicoccum Mold

Sound Kernels

Dirt not Damage

Mold

Insect Damage

Germ not Damage

Germ Damage

Purple Plunule

 on the web Examples of damaged and sound corn kernels can be found on the USDA Grain Inspection, Packers & Stockyards Administration website. Go to education & outreach, eLearning and view visual reference images. Visit: http://www.gipsa.usda.gov 46 | Ethanol Producer Magazine | october 2011

PHOTOS: USDA GIPSA

It’s well known that vomitoxin, a type of mycotoxin that was a big problem in 2009, is concentrated in the distillers grains and can cause problems if fed to livestock. Damaged corn can also impact the fermentation process, requiring additional rescue antibiotics or sulfuric acid between batches. While those problems can be righted, it’s a cost and a hassle best avoided, Hurburgh says. “Professionalism on input quality will pay rewards, no matter what,” he says. Corn Quality Matters The quality of ISU corn quality expert the corn entering an Charles Hurburgh Jr. says ethanol plants ethanol plant is only need to beef up their as good as the gradcorn grading activities at grain receiving. ing program and the

PHOTO: NCGA PHOTO CONTEST WINNERS

corn quality

Clean Stream A farmer checks for corn quality on the farm.

Co. and Cargill Inc. “You won’t find them using house grades,” he says, adding that soybean processors also use third-party services for grain grading. There’s resistance to the idea within the ethanol industry, however. Although he’s talked to many plant managers who say it would be far too expensive, Hurburgh isn’t sure that’s true. “I’ll stick my neck out,” he tells EPM. “I believe that a plan could be worked that would allow the use of thirdparty inspection—certainly in a 100 MMgy plant. I don’t know about a 50 MMgy plant, obviously there is an economy of scale.” Even if an ethanol plant didn’t work with a company that had an on-site grain inspection laboratory—such as is the case at the 35 MMgy Cargill ethanol plant in Eddyville, Iowa— there are ways to incorporate third-party testing. An ethanol plant could contract with a third party to do blind checks, meaning the in-house grader is periodically checked at random against an official grader. “The validation makes sure that they are not getting biased one way or another with respect to the official system,” he says. Hurburgh also recommends in-house

graders receive professional training. This is a step that won’t cost much but will pay off big. “House graders can be just as good with the right training and validation,” he says. There are many avenues for grain grading training. For example, the USDA’s Grain Inspection, Packers & Stockyards Administration offers eLearning opportunities on its website. And, although it varies from state to state, courses or workshops are often offered through extension services. In Texas, grain-grading workshops were offered in May—something the Texas AgriLife Extension Service has been doing for the past 21

‘The biggest issue for us is trucks that are layered and attempt to hide off-grade. This is not an isolated issue.’ - Steve Roe, general manager, Little Sioux Corn Processors

years, says Steve Amosson, professor and economist. Staff from Hereford Renewable Energy, a 105 MMgy ethanol plant in Hereford, Texas, have been among the training’s attendees. “At these grain prices, you cannot afford a mistake,” Amosson tells EPM. Hurburgh also understands that with plants unloading a truck every couple minutes at times, it’s not feasible to do exhaustive grading for every load. He recommends taking composite samples from each seller, for later grading. The trade-off for speed is that not every bad load of corn will be identified up front. In the long run, however, the plant will be able to increase its average corn quality using this strategy. “If someone is taking liberties with you, there are market ways to discipline that,” he explains, adding that it’s typically price. Finally, he recommends plants test protein periodically. Protein levels are the single biggest factor that determines ethanol yield, as protein and fermentable starch are inversely related, meaning if protein levels are high, starch levels will be low. A 1 percent downward shift in protein, from 8 to 7 percent, also will mean the protein conoctober 2011 | Ethanol Producer Magazine | 47

corn quality

PHOTO: NCGA PHOTO CONTEST WINNERS

moisture, broken corn or foreign material don’t affect yield as much. In 2009, damaged corn with low test weight didn’t have a significant impact on yield but did mean more spoilage in storage, he says. In fact, low test weight corn can be lower in protein, translating into higher yields.

Looking Good Corn ethanol plants typically accept No. 2 dent field corn. Although corn from 2010 was of good quality, ethanol plants are still receiving loads blended with damaged corn from 2009.

tent in distillers grains will likely go down about 3 percentage points, from about 26 to 23 percent protein. “They should know, on an average basis, what the protein trends

48 | Ethanol Producer Magazine | october 2011

are,” he says, “because that’s going to affect what their guarantee can be on the distillers grains.” Other factors, such as test weight,

Producers Chime In

What are ethanol producer’s thoughts on corn grading? Steve Roe, general manager of Little Sioux Corn Processors LP, agrees that corn grading is very important business at an ethanol plant. The 92 MMgy ethanol plant in Marcus, Iowa, does not use a third-party grading company because it’s simply too expensive, he says. To avoid accepting off-grade corn, the plant has three to four employees working to weigh trucks and grade corn. Still, he acknowledges that bad corn can sometimes slip by. “We probe trucks twice to determine corn grades,” he says. “The biggest issue for

corn quality

us is trucks that are layered and attempt to hide off grade. This is not an isolated issue.” That practice also occurs within industries other than ethanol, he adds. “If we catch firms sending layered corn, they are discounted very heavily or the load is rejected.” GreenField Ethanol, which operates four ethanol plants in Canada, has a comprehensive corn quality assurance program, says Ken Robertshaw, the company’s director of corn procurement. At the 60 MMgy Johnstown, Ontario, ethanol plant—the largest of GreenField’s plants with a combined capacity of more than 160 MMgy— three full-time corn analysts work to process 70 loads of corn daily, five days a week and 13 hours a day. These employees process all corn and distillers grains at the plant, including the required shipping documentation. Like Roe, Robertshaw says that good quality assurance programs are important in any industry, including the ethanol indus-

try. “Having solid data from the front gate, from the process, and through to the final products gives the plant the understanding it needs to operate at its peak efficiency,” he says. “This knowledge allows us to work with the supplier to set incoming corn specifications that will yield the best results for both parties.” In any crop year, GreenField screens incoming corn for mycotoxins. When the vomitoxin problem was at its peak, the company provided suppliers with load-specific vomitoxin data so they could manage their inventories. The company has observed a significant drop in vomitoxin levels from the bad 2009 crop year, he adds. All GreenField corn analysts are trained to grade in accordance with Canadian Grain Commission guidelines and all loads of corn are sampled and tested using CGC methods. While the company does use in-house staff for corn grading, it also uses third-party validation, including send-

ing a weekly random sample to the CGC and using that data internally to cross-check the accuracy of company grading. Once a year, the plant’s corn grading facilities and procedures are audited by a third party to confirm the plant is complying with CGC regulations. Finally, the truck scale is calibrated quarterly to Canadian weights and measures standards by a third-party vendor. These and other measures help assure the plant’s supplier that its grading practices are consistent and fair, Robertshaw tells EPM. “[It] also allows us to accurately track incoming corn quality and make proactive process adjustments when required.” Author: Holly Jessen Associate Editor, Ethanol Producer Magazine (701) 738-4946 hjessen@bbiinternational.com

october 2011 | Ethanol Producer Magazine | 49

corn demand

50 | Ethanol Producer Magazine | october 2011

corn demand

Ethanol:

One Market for a Growing Corn Supply Frank talk about where the nation’s corn supply goes— fuel, feed and food By Holly Jessen

In July, for the first time, the USDA World Agriculture Supply and Demand Estimate report projected more corn would be used for ethanol than feed. That report suggested that

5 billion bushels of the 2010-’11 corn crop will go for feed while 5.05 billion bushels will get sucked up into ethanol production. For the next corn crop ,the numbers are projected at 5.15 billion bushels of corn for ethanol and 5.05 billion bushels for feed. Those numbers only tell part of the story and when viewed only on the surface, can be misleading, Rick Tolman, CEO of the NCGA cautions. It ignores the fact that corn going into ethanol production isn’t completely consumed. About one third of the corn destined for ethanol production comes out the back end as distillers grains, not to mention multiple coproducts from wet mills. It’s a message the NCGA and, indeed, the entire ethanol industry has declared repeatedly.

Food, Feed and Fuel Corn yields have been increasing yearly for decades. PHOTO: NCGA PHOTO CONTEST WINNERS

october 2011 | Ethanol Producer Magazine | 51

corn demand

“Ethanol may be processing more, but basically one-third of what is being processed is coming right back into the livestock ration,” says Paul Bertels, NCGA’s vice president for production and utilization. In fact, the NCGA asserts, when corn coproducts from ethanol production are taken into account, domestic and international livestock is still the No. 1 use for U.S. corn. In all, 1.2 billion bushels of corn are displaced by distillers grains and corn gluten feed, according to the ProExporter Network, or PRX, which tracks the usage of corn and other crops. Adding that to the 5 billion bushels of corn consumed by Removed Consumers U.S. livestock brings Paul Bertels, NCGA’s the total to 6.2 billion vice president for production and bushels of corn for utilization, feels society domestic feed. In addiis so separated from where food comes from tion, another 1.5 billion people can be easily bushels of corn was exmislead. ported in the past year. In all, that means about 7.7 billion bushels per year of U.S. corn goes for feed use in the U.S. and overseas—a much higher number than the 5.15 billion bushels the USDA projects will be used for ethanol. Looking at it this way, 43 percent of the corn supply, including ethanol

coproducts, becomes feed for livestock, 16 percent of corn and distillers grains is exported and 26 percent is used to produce ethanol. “Ethanol is certainly is important Surface Story growing market for us, The USDA WASDE but it is not the largest reports on corn uses are misleading consumer, livestock because they don’t still is,” Tolman says. show that one-third The key message of the corn going into ethanol plants comes that needs to be comback out as livestock municated, he tells feed, says Rick Tolman, CEO of the EPM, is that the U.S. NCGA. corn supply is growing, thanks to increased yield. According to the USDA, corn farmers produced an average yield of 152.8 bushels of corn per acre in 2010, up 30 percent from the average 20 years ago. Most markets for corn, such as feed, exports, food and industrial, have remained relatively flat during the past decade. Corn use for ethanol, on the other hand, has grown dramatically. “Ethanol has taken up that surplus,” he says. “Otherwise it would have been a burden on farmer’s income, because we’d driven prices down, and we would have had a reduction in acres, because there would be no end use for it.” The mistake people make when they fall

Corn for Feed and Ethanol

Source: NCGA

52 | Ethanol Producer Magazine | october 2011

into the food vs. fuel mindset is that the corn supply is of a fixed size, so when more corn is used for fuel, that must mean corn is taken away from uses like food and feed. “People get a little hysterical about the food vs. fuel,” Tolman says. “They believe that we are taking corn away from livestock producers.” That’s not the case, however. “The big difference is the pie is growing. Those pieces that have been going for feed and food are still there—they are not any smaller—it’s just that the pie got bigger.” Of course, current supply concerns have made this topic even more difficult. Weather conditions reduced the crop size last year and when this article was written in August, it was looking as though abnormally hot weather and low precipitation could mean a tight supply for the second year in a row, Bertels says. Ultimately, corn producers can’t do anything about the weather. “I tell people, we basically plant the crop, we spray the crop and then you enter God’s phase,” he says. Although it’s not yet clear what the final numbers for the 2011 corn crop will be, on Aug. 11 USDA estimated 12.914 billion bushels. That number would put it at the third highest corn crop in history, behind 13.038 billion bushels in 2007 and 13.092 billion bushels in 2009.

What’s in a Footnote?

Although the USDA doesn’t add ethanol’s coproducts to the numbers for livestock feed from corn, this spring the agency did make a change to the way it reports the amount of corn going for ethanol production. On the April 8 report, a line in the WASDE report was changed from “ethanol for fuel” to “ethanol & by-products.” In addition, a footnote was added to define the line as “Corn processed in ethanol plants to produce ethanol and co-products including distillers' grains, corn gluten feed, corn gluten meal and corn oil.” The NCGA considers it a step in the right direction. “It at least gives this some credence,” Tolman says. “Previously when we’d raise this issue with critics or the general media out there, the nonfarm media, there was nothing we could relate back to. Now we can at least show them the USDA footnote and at least show them that what we’re saying has some official validity to it.” Bertels agreed the

corn demand

change is a positive. “It has gotten people to start to talk about it,” he says. Of course, it would provide a more accurate picture of total feed from corn if the USDA would expand its feed category to include distillers grains and other coproducts. Ideally, Tolman would like to see the USDA display its feed statistics both ways, the way it does currently, plus showing a figure for livestock feed supply with distillers grains and corn combined. “There’s a story to tell. What they’re doing is direct shipments, and there’s a story to tell [about] what’s actually consumed,” he says. Still, Tolman understands why USDA doesn’t do it that way. “They’re just looking at first purchasers so it’s a little bit of a tricky issue for them,” he says. As much as he’d like to see it happen, Bertels just doesn’t believe the USDA will change its corn-for-feed reporting ways. Part of the problem is nailing down accurate coproduct numbers. “Nobody really knows how much DDG is produced,” he says, adding that doesn’t mean there aren’t some pretty

Where Does the Corn Go?

Estimated Uses for the 2010-’11 Corn Supply (14.2 billion bushels) 16% (2.3 billion bushels

6% (880 million bushels) is surplus “carried out” for the next corn marketing year.

of corn and distillers grains) is exported to other countries.

41%

of the corn supply (5.8 billion bushels) becomes feed for livestock here in the United States. This includes distillers grains and gluten feed, valuable ethanol coproducts.

10%

(1.4 billion bushels) is processed for other uses, such as corn starch, corn sugar or even plastic fiber.

27%

(3.9 billion bushels) becomes ethanol, which helps replace foreign oil and reduces greenhouse gas emissions.

Source: NCGA

good guesstimates out there. PRX, the service NCGA uses, tracks corn and distillers grains, coming up with what the NCGA considers more accurate numbers than those reported by USDA. Yes, it would be wonderful if the

USDA followed the PRX model, Bertels says, but he doesn’t hold out much hope. Another issue is that the USDA doesn’t conduct feed-use surveys. The agency makes many of its projections based on surveys, |article continued on page 56|

october 2011 | Ethanol Producer Magazine | 53

’10

’09

’06

’05

’04

’03

’02

’01

’00

’95

’90

’85

CORN CONSUMPTION

’08

corn demand

’07

Source: USDA, ERS, Feed Outlook, 1/11 Crop year ending 8/31/11 * Estimate, ProExporter Network, calculations based on whole-corn equivalents; see www.ncga.com/usagecalc for details

250

234 1,839

113

1,977

Illinois

1,480

1,485

Minnesota

1,119

1,137

906

113

1,111

1,049

200

327

169

’10

260*

514

489

S * * E

’10*

250* 1,950*

’09

234 2,437 ’07 1,858 250 ’08 1,987

’06

’05

’04 1,818

277 2,134 265 2,125

282

1,900 280

1,588 ’03

’02

1,905

1,941273

’01

1,504 249 ’99 1,979 ’00 258 1,937

’97

’94

’93

1,584 190 ’95 1,660 219 1,327 ’96

135*

2,177 226 2,229 250 ’98 1,794

’85 ’85 ’90 ’90 ’95 ’95 ’00 ’00 ’01 ’01 ’02 ’02 ’03 ’03 ’04 ’04 ’05 ’05 ’06 ’06 ’07 ’07 ’08 ’08 ’09 ’09 ’10 ’10

’10

’09

’09’09 ’10* ’10

134

’08

256

245

256

523

535

545

259

234

245

525

530

238

542

532

231

227

379

227

473

536

4,900***

197*

4,568

194

192 3,709

192 3,049

6,280*

’06’07 ’07 ’08 ’08 135

’10

134

2,119190

’06

136

’03’05 ’04 ’05’06 135

’00 ’03 ’01 ’02’04 132

’08

131

’07

’09

’04

’03

996

’02

5,025

707

’01

’97 3,541 ’01 131

’06

133

630

’00

’98 ’99’02

’10

’09

’10

’08

’09

’08

’07

’06

’05

’04

’03

’02

’01

’00

’95

’07

’06

’05

’04

’03

’02

’01

’00

’99

’98

’97

’96

’95

’94

’93

U.S. CORN USAGE BY SEGMENT, 1993-2010 Million Bushels 7,000

Feed & Residual

197*

194

192

190

189

187

186

Million Bushels 185

North Carolina 0 60 60 Michigan 265 0 265 Arizona 55 0 55 Missouri 261 0 261 FOOD, SEED & INDUSTRIAL (FSI) USAGE, 1985-2010 Idaho 54 0 54 Million Bushels California 123 50 250 Mississippi 54 0 54 Tennessee 177 38 215

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

CEREAL & FOOD, 1985-2010

161

65 353

’90

110 365

0 0

124

0 115

0 343

’92

’91

110 250

*Crop year ending 8/31/11 Exports reportedFuels here do not include distillers grain or other ethanol coproducts. Source: Renewable Association

’85

110 501

’10

’09

’08

’07

’06

’05

’04

’02

’01

’00

’95

’90

’03

103

6,280*

135*

134

136

135

133

132

131

130

498

,938

197*

194

192

190

189

187

186

185

161

54 | Ethanol Producer Magazine | october 2011 125

4,442

396

’95

’96’00

3,019

125

’05

135

’04

83 ’03 ’85

Wisconsin

BEVERAGES & MANUFACTURING, 1985-2010 124 135

130

349124 ’90

’93’90 ’94 ’95 ’95

’85

2,549

2,355

’02

2,062

’01

Source: USDA ERS, Feed Outlook, Jan. 2011 *Crop year ending 8/31/11 Georgia 100

Pennsylvania 16Texas Million Bushels SOURCE: NCGA 2011 World of Corn Report | PHOTOs: NCGA PHOTO CONTEST WINNERS Virginia North Dakota

515*

’06

’05

1,016

’04

’03

’02

South Dakota

’01

’00

Indiana

’10

Nebraska

’09

3,595

’08

’07

3,595

’10

’09

’08

’09

’06

’07

’08

’07

’04

’06

’05

’02

’04

’03

’98

’99

’02

’01

’97

’00

’95

’94

’95

2,707

271 ’85 93

1,950*

1,987

1,858

’10

’09

’00

2,437 1,628 192 1,858 194 1,987 1,977 197*1,950*

’95

’90 ’05

’08’09 ’09 ’10 ’10

’05 ’07 ’06 ’07’08

’04’06

1901,900

’85

’03

1,153

1,818 190 2,134 1,425 192 2,125

’01’04 ’02 ’05 ’03

1,905 189 1,588

’01

1871,941

’00

’98’02 ’99 ’03 ’00

’95 ’00 ’96 ’97’01

1851,794 1,504 186 1,979 187 1,937

’96

’94’95

2,229

2,177

161

1,327

’90

’93

124

1,660

’92

’85

Source: USDA ERS, Feed Outlook, Jan. 2011 *Crop year ending 8/31/11

CEREAL & FOOD, 1985-2010

’09

4,900*** ’10

’09

’08

265

277

280

Total

Iowa

U.S. CORN USAGE BY SEGMENT, 1993-2010

’07

1,603 190

5,938 ’05

1,323 189

1,168 187

187

186

161

185

260* 6,280*

256 5,938

169 1,153 1,584 ’90 200 1,660 1,425 ’95 1,327 227 2,177 1,628 ’00 227 2,229 1,977 1,794 ’01 227 2,062 1,504 ’02 231 1,979 2,355 1,937 ’03 238 2,549 1,941 ’04 234 1,905 2,707 1,588 245 ’05 3,019 1,900 259 ’06 1,818 3,541 256 ’07 2,134 4,442 2,125 245 ’08 2,4375,025

1,584

’91

’91’85 ’92 ’90 ’93

’85

FOOD, SEED & INDUSTRIAL (FSI) USAGE, 1985-2010

250*

282

273

Potential Capacity

Ohio 424 0 538 Source: USDA ERS, Feed Outlook, 1/12/11 CORN SYRUP USAGE, 1985-2010 SWEETENER USAGE, 1985-2010 FOOD, SEED & INDUSTRIAL (FSI) USAGE, 1985-2010 CORN USED FOR ETHANOL PRODUCTION, 1985-2010 HIGH-FRUCTOSE U.S. CORN SEGMENT, 1993-2010 U.S.USAGE CORNBY USAGE BY SEGMENT, 2010 *Crop year ending 8/31/11 Kansas 437 20 512 Million Bushels Million Bushels Million Bushels Million MillionBushels Bushels Million Bushels Wisconsin 498 3 501 CEREAL & FOOD, 1985-2010 7,000 SWEETENER USAGE, 1985-2010 Feed & Residual U.S. ETHANOL PRODUCTION FACILITIES, 2010 Texas 250 115 365 U.S. CORN EXPORTS, 1991-2010 Feed & Residual 5,990 Million Bushels 6,000 Million Bushels Includes corn displaced by DDG/CGF* (790) Million Gallons Million Bushels North Dakota 343 0 353 5,000 FSI Michigan 265 0 265 Potential Export 2,350 4,000 Operating Total Includes DDG/CGF exports* (400)Capacity Million Bushels Exports Missouri 261 0 261 Million Bushels 3,000 Iowa 3,595 0 3,595 California 123 50 250 FSI 4,812 2,000 Nebraska 1,839 113 1,9777,000 Feed & Residual Tennessee 177 38 215 1,000 Source: USDA ERS, Feed Outlook, Jan. 2011 Illinois 1,480 5 1,485 *Crop year ending 8/31/11 Fuel Ethanol 3,710 6,000 New York 164 0 164 Carry-out Source: USDA ERS, Feed Outlook, 1/12/11 **Includes to be used as distillers grain for livestock feed. Source: Pro 0 approximately 1.2 billion bushels1,119 Minnesota 0 1,137 *Crop year ending 8/31/11 Exporter Network Oregon 40 0 148 5,000 HFCS 5151,111 Indiana 906 113 FSI Colorado 125 0 125 Source: USDA ERS, Feed Outlook, 1/12/11 Source:USDA USDAERS, ERS,Feed FeedOutlook, Outlook,1/12/11 1/12/11 Source: Source: USDA ERS, Feed Outlook, Jan. 2011 SouthUSDA Dakota 1,016 33 1,0494,000 Source: USDA ERS, Feed Outlook, Jan. 2011 Source: ERS8/31/11 Feed Outlooks *Crop year ending 8/31/11 *Cropyear yearending ending8/31/11 8/31/11 *Crop *Crop year ending Georgia 100 10 110 *Crop year ending 8/31/11all corn going to ethanol plants, regardless of final product. *Projection Starch 250 FSI reported here includes Exports Exports reported here do not include distillers grain or other ethanol coproducts. FSI reported here includes all corn going to ethanol of final0product. Ohio 424 plants, regardless U.S. ETHANOL PRODUCTION FACILITIES, 2010 5383,000 U.S. CORN EXPORTS, 1991-2010 Pennsylvania 110 0 110 15 Kansas 437 20 Million Gallons Sweeteners 260 512 Million Bushels Virginia 0 0 65 Wisconsin 498 3 5012,000 STARCH USAGE, 1985-2010 CEREAL & FOOD, 1985-2010 BEVERAGES & MANUFACTURING, 1985-2010 U.S. CORN EXPORTS, 1991-2010 Potential North Carolina 0 60 60 Cereal/Other 197 Operating Capacity Total MillionBushels Bushels Texas Bushels 250 115 365 Million Bushels Million Million 1,000 Arizona 55 0 55 Iowa 3,595 3,595 North Dakota 343 00 353 Carry-out Beverage Alcohol 135 Idaho 54 0 54 0 Nebraska 1,839 113 1,977 Michigan 265 0 265 Mississippi 54 0 54 Seed 23 1,485 Missouri 261 05 261 Illinois 1,480 Kentucky 35 0 35 Source: USDA ERS, Feed Outlook, 1/12/11 Minnesota California 123 500 250 1,119 1,137 NewFeed Mexico 30 0 30 Total Uses 13,430 Source: USDA ERS Outlooks *Crop year ending 8/31/11 Tennessee 177 38 215 *Projection Indiana 906 113 1,111 FSI reported here includes all corn going to ethanol plants, regardless of final product. Wyoming 7 FSI reported here includes all corn going to ethanol 7plants, regardless of0 final product. Source: USDA, ERS, Feed Outlook, 1/11 New York 164 0 164 Crop year ending 8/31/11 1,016 South Dakota 33 1,049 Source: USDA ERS, Feed Outlook, Jan. 2011 Louisiana 2 0 2 * Estimate, ProExporter Network, calculations based on whole-corn equivalents; *Crop year ending 8/31/11 see www.ncga.com/usagecalc for details Exports reported here do not include distillers grain or other ethanol coproducts. Oregon 40 00 148 Ohio 424 538 Total 13,508 560 14,631 Source: USDA ERS, Feed Outlook, Jan. 2011 Colorado 125 0 125 Kansas 437 20 512

Million Bushels

515*

514

489 ’08 4,568

’09

3,709

’10* ’07

’06 3,049

2,119

’07

1,603

’05

’06

1,323

1,168

’04

’03

’02

’01

258

Operating

’95

’85

’90

’10

’09

’08 ’09 ’09 ’10 ’10

’08

’07

’05 ’07 ’06 ’08 ’07

’04 ’06

’98 ’02 ’99 ’03 ’00

’95 ’00 ’96 ’01 ’97

’94 ’95

’01 ’04 ’02 ’05 ’03

’02 996

’01 707

’00 630

396’95

349 ’90

271 ’85

’91 ’85 ’92 ’90 ’93

’10

’09

’08

’07

’06

Source: USDA ERS, Feed Outlook, Jan. 2011 Source: USDA ERS, Feed Outlook, Jan. 2011 *Crop year ending 8/31/11 *Crop year approximately ending 8/31/11 **Includes 1.2 billion bushels to be used as distillers grain for livestock feed. Source: Pro Exports Exporterreported Networkhere do not include distillers grain or other ethanol coproducts.

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

’08

’07 ’05

’06

’04 ’05

’04 ’03

’03 996

707

630 ’00

249

250

226

219

190

Million Gallons

1,858 4,568 1,987 4,900*** 1,950*

2,437

U.S. ETHANOL PRODUCTION FACILITIES, 2010

CORN CONSUMPTION

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

523

535

545

525

530

532 ’02 ’02

’01 ’01

’00

’99

396 ’95

’90

Source: USDA ERS, Feed Outlook, Jan. 2011

250*

250

234 2,125

3,049

3,709

2,134

**Includes approximately 1.2 billion bushels to be used as distillers grain for livestock feed. Source: Pro Exporter Network

265

277

280 1,900

1,818

1,588

’05 1,603

’04 1,323

Source: USDA, ERS, Feed Outlook, 1/11 Crop year ending 8/31/11 * Estimate, ProExporter Network, calculations based on whole-corn equivalents; see www.ncga.com/usagecalc for details

’062,119

1,941

13,430

’03 1,168

349

271 ’10

’85

STARCH USAGE, 1985-2010

’09

’08

’07

’06

’05

’04

’03

135

1,905

1,979

1,937

536

473

327 ’10

’09

’07

Source: USDA ERS, Feed Outlook, 1/12/11 ending 8/31/11 Source: USDA ERS*Crop Feedyear Outlooks *Projection FSI reported here includes all corn going to ethanol plants, regardless of final product.

*Crop year ending 8/31/11 Million Bushels

282

273

258

249

226

250 2,229

2,177

1,794

1,504

1,584

1,660

Total Uses

1,327

256

260*

Million Bushels Million Bushels

’98 ’95

Million Bushels

U.S. CORN EXPORTS, 1991-2010 23 CORN USED FOR ETHANOL PRODUCTION, 1985-2010

13,430 245

219

190

Seed 259

’95 ’85

’94260*

’93256

245

256

259

245 ’05

234

’04

250

’06

’10 238 ’03

515*

514

523

489

545

535

530

525

231 ’02

’02

’01

’00

’95

’90

’85

135 Beverage Alcohol

256

379

5,938

532

542

’09

227

’01

227’08 ’00

’95

515

Million Bushels Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

’05

’04

’03

’02

’01

CORNCarry-out USED FOR ETHANOL PRODUCTION, 1985-2010

STARCH USAGE, 1985-2010 197

197

245

238

234

231

227

1,000

260

Source: USDA, ERS, Feed Outlook, 1/11 Crop year ending 8/31/11 * Estimate, ProExporter Network, calculations based on whole-corn equivalents; see www.ncga.com/usagecalc for details

’00

Exports

2,000

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

Cereal/Other

Seed

FSI

’97 ’90

4,442

536

473 379 ’90 200

169 ’85

’07 227

Million Bushels

’06

’05

’04

4,812

260

SWEETENER USAGE, 1985-2010

200

3,000

Sweeteners

Beverage Alcohol

’95

4,000

3,710

250

Cereal/Other

’90

3,541

3,019

2,707

2,549

HFCS

2,350

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11 515 Starch FSI reported here includes all corn going to ethanol plants, regardless of final product.

Total Uses Million Bushels

Feed & Residual

6,000

SWEETENER USAGE, 1985-2010

3,710

Sweeteners

227

’03

’02

’01

Fuel Ethanol

’00

’95

4,812

’90

FSI

’85

2,350

327

FSI

Starch

169

5,990

Export Includes DDG/CGF exports* (400)

HFCS

’85

2,355

1,977

1,628

1,425

1,153

2,062

Export Million Bushels Includes DDG/CGF exports* (400)

Fuel Ethanol

7,000

5,990

HIGH-FRUCTOSE CORN SYRUP USAGE,5,000 1985-2010

U.S. CORN USAGE BY SEGMENT, 2010

Feed & Residual Includes corn displaced by DDG/CGF* (790)

5,025

Feed & Residual Includes corn displaced by DDG/CGF* (790)

Million Bushels

Million Bushels Million Bushels

6,280*

Million Bushels

’96

CORN CONSUMPTION Million Bushels

542

HIGH-FRUCTOSE CORN SYRUP USAGE, 1985-2010 U.S. CORN USAGE BY SEGMENT, 1993-2010

FOOD, SEED & INDUSTRIAL (FSI) USAGE, 1985-2010 U.S. CORN USAGE BY SEGMENT, 2010

’08

World of Corn

2011

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

meal** TOTAL DIGESTIBLE NUTRIENTS

Montana Nebraska NevadaAlabama New Hampshire Arizona

4,900*** 85,982153.9

512

501

Texas

250

115

365

North Dakota

343

353

Michigan

265

Missouri

261

123

250

177

164

4.06

20.5

28.9

’30

’40

1,757

2,206

’30

’40

88,192 152.8

’10 ’10

’30 0.97

| Ethanol Producer Magazine | 55 215

164

3.55*

New York

5.30**

’08 ’08

538

’07 ’07

’04 ’04

1,049

424

’03 ’03

’02 ’02

1,111

1,016

’01 ’01

1,137

’00 ’00

0 113

Wisconsin Source USDA, NASS Crop Production498 2010 Summary, 1/12/11 3

Tennessee

Billions o

1,485

906

6,050

U.S. CO

12,446,865

1,977

1,119

437

81,466 12,447

3,595

’10 ’10

Total

78,570 12,092

152.8

’09 ’09

’08 ’08

502,200 79,490 13,092

2,610

162

121

* Estimated ** Projected Source USD

25,625

’09 ’09

113

3,956

20,770

86,520 13,038

73,631 11,806 0

86,382165.2

4,568

’10

’07 ’07

’04 ’04

’03 ’03

’02 ’02

69,330 8,967

68,768 9,502

70,944 10,087

72,440 9,915

66,952 7,934

81,446

1,839

’90 ’90

’80 ’80

’70 ’70

’50 ’50

’40 ’40

Kansas

3,906

2,764

2,206

Indiana

’60 ’60

Minnesota

.11

,192

,382

,982

93,527 150.7

3,709

80,929 160.3 3,049

’05

81,779 147.9

78,603 2,119142.2

’07

1,603 78,894 129.3

’06

79,551 136.9

75,702 138.2

’04

’01 ’01

’00 ’00

’90 ’90

’70 ’70

’60 ’60

’80 ’80

6,63972,961

4,152 57,358

72,938

71,422

76,443

85,525

88,192

3,595

U.S. CORN PRICES, 1930-2010

3,527

779

Dollars per Bushel2011 (U.S.) october

1,323

1,168

’03

74,166 118.5

84,043 91.0

996

’02

66,863 71.4 707

’01

82,859 ’9538.2396

88,692

349

271 ’85

20.5

’90

’40 ’40

’50 ’50

Dollars p

30,485 74,880

172

U.S. CO

301,600

4.20

197*

194

192

190

189

187

186

310

California

043

859

Source USD 9

569,700

117 145

Source USDA, NASS Crop Production 2010 Summary, 1/12/11

425

Nebraska

Ohio

15 U.S. CORN ACRES PLANTED, 1930-2010 103,915

Pork

Iowa

Source USDA NASS Crop Production 2010 Summary, 1/12/11 CEREAL & FOOD, 1985-2010

,692

Beef

135

PRODUCTION, 1930-2010 U.S. CORN ACRES HARVESTED, 1930-2010

South Dakota

Thousand Acres

Poultry

490

124

Thousand Metric Tons

640

Source USDA, NASS Crop Production 2010 Summary, 1/12/11 Source USDA, NASS Crop Production 2010 Summary, 1/12/11

1,757

’10

306,912

Million Bushels

28.9

103,915

1,950*

1,987

634 Other

Total

2,080

710

2,300

335

4,220

Illinois 1,480 Source USDA NASS Crop Production 2010 Summary, 1/12/11

’09

’08

’07

’06

’05

’03

2,465 Lentils

4,550

116,480

Source: USDA ERS, Feed Outlook, Jan. 2011 *Crop year ending 8/31/11 **Includes approximately 1.2 billion bushels to be used as distillers grain for livestock feed. Source: Pro Exporter Network

’30 ’30

’10

’09

’08

2,437

2,125

1,858

117

Source: USDA ERS, Feed Outlook, Jan. 2011 3,615 Dry Edible Peas 711 Hops *Crop year ending 8/31/11 Exports reported here do not include distillers grain or other ethanol coproducts.

Barley

630 81,425 ’00 54.7

260*

245

256

259

’07 2,134

Corn

1,900

1,818

1,941

1,979

Wheat 1,937

1,794

1,588 ’02

’01

881 Mustard Seed

350

Wisconsin Million Bushels3,900 3,100 Potential 338 Thousand Acres Operating Capacity 265 Wyoming 90 50 168 U.S.

1,004 Peppermint

’00

’99

’98

’97

’96

’95

’94

Tennessee Texas

363

1,156 Sweet Potatoes

273 Sugar Cane

185

’10*

’09

’08

’07

’06

’05

’04

’03

’02

’01

’00

’99

’98

’97

’96

’95

’94

U.S. MEAT EXPORTS BY ANIMAL GROUP, 1993-2010*

128

1,350

Million Gallons West Virginia

1,255 Safflower

4,808 Potatoes

161

’10

’09

’08

’07

’06

’05

’04

’03

’02

’01

’00

’99

’98

’97

’96

’95

’94

’93

Source: USDA ERS Feed Outlooks *Projection FSI reported here includes all corn going to ethanol plants, regardless of final product.

910

Million BushelsAcres Thousand

’30 ’30

Rice

’93

Other

’92

Sorghum (silage) ’91

12 Exports

1,263 Rye

10,707 Sugar Beets

Sorghum (grain)

FSI

533,010

130

418

1,431 Tobacco

Source USDA WASDE, 1/12/11

Hogs

Carry-out * Crop year 0 9/01/10 to 8/31/11. Source: PRX Feed reported here does not include distillers grain or other ethanol coproducts.

3,500 3,000 2,500 2,000

47,637 Peanuts

Cotton

2,000 0 1,000

59,862 Oats

1,905 Soybeans

Wheat

Feed & Residual

76,616 Canola 1,504

Beef

Sorghum

Hay

average price per bushel

163

340

Washington 125 U.S. ETHANOL200 PRODUCTION FACILITIES,205 2010

1,874 Flaxseed

5,567 Dry Edible Beans 1,843 Proso Millet

2,229

MillionBushels Bushels Million

1,584

U.S. CORN USAGE BY SEGMENT, 1993-2010 CORN FED BY LIVESTOCK GROUP, 1993-2010

Soybeans

1,327

$5.30

Oats 1,660

Corn (silage)

81,446 Sunflower

2,177 Barley

Million Bushels

3,270

370

Virginia

U.S. CORN EXPORTS, 1991-2010

Corn (grain)

3,450

Vermont

’04

Thousand Acres

Ohio

Utah

190

corn crop value

Poultry

25.0% Soybeans

1.90

0.19

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

0.70

$65.97 billion

306,912

248,160

South Carolina

’10

’09

’08

’07

’06

’05

’04

’03

’02

’01

’00

’95

’90

’85

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

’06

’05

’04

’03

’02

12.48

’01

’00

’95

’90

’85

bushels produced

76,440

132

Pennsylvania

19.5% Hay

26.5% Corn (grain)

1,880

South Dakota

All Other 5.8%

11,880 31

46 88,500

2,050

Rhode Island

15.5% Wheat

Sorghum (grain) 1.6% Rice 1.2% Barley 0.8% Sunﬂower 0.6%

12.4 billion

256

245

234

238

231

227

200

169

234

250

250*

265

280

277

282

273

258

249

250

226

219

190

81.4 million

Cotton 3.5%

180

150

44,200 U.S. CORN AVERAGE CORN YIELDS, 1930-2010 U.S. ACRES PLANTED, 1930-2010 USED FOR ETHANOL PRODUCTION, 1985-2010 Oregon CORN 70 38 200 7,600 Bushels per Acre

SWEETENER USAGE, 1985-2010 Million Bushels

71 48 8,094

North Dakota Oklahoma

U.S. ALL CROP ACRES HARVESTED, 2010

acres harvested

Dairy

840

117

0.60

38.95

acres planted

STARCH USAGE, 1985-2010

1,500 6,000 1,200 5,000 900 4,000 600 3,000 300

910

Source USDA NASS Crop Production 2010 Summary, 1/12/11

88.2 million

1,800 7,000

590

North Carolina

Source: USDA ERS, Feed Outlook, 1/12/11 *Crop year ending 8/31/11

Million Bushels

140

1,050

114

78,327149.1

’10

’09

’08

’07

’06

’05

’04

’03

’02

’01

’00

’95

’90

’85

New Mexico

Million B

0.55

U.S. CO

’40

New Jersey

Source USD

168 1,469,100

166

’09

65.97

New Hampshire

New York

U.S. CORN AT A GLANCE, 2010

8,850

Bushels

’30

9,150

Nevada

U.S. AV

’40 1.32

Nebraska

Billions of Dollars (U.S.)

Sports and active wear 1,255 Safflower Spray cooking oil Surgical 1,156dressings Sweet Textiles Potatoes Theatrical makeup 1,004 Peppermint Tomato sauces 881 Mustard Vinegar Seed Wallboard and wallpaper Wine 711 Hops Worcestershire sauce 634 Other Yeast

Coatings on paper, wood and metal Instant pudding mix Source USDA NASS Crop Production 2010 Summary, 1/12/11 Wheat 47,637 Peanuts Instant tea Coffee whitener Jams,10,707 jellies, preserves Color carrier for printing Cotton Sugar Beets Laminated building materials Condiments Leather tanning Confections, chocolate Sorghum (grain) 4,808 Potatoes Lubricants Corn bread Sorghum (silage)Mannitol 273 Sugar Cane Corn chips Marshmallows Corn flakes Matches Cornmeal mixes Rice 3,615 Dry Edible Peas Meat products Cosmetics Barley 2,465 Lentils Metal plating Crayons Muffins Disposable diapersTotal Ore and oil refining Doughnuts

’08

U.S. SELECT CROP VALUE, Source USDA WASDE, 2010 1/12/11

’06 ’06

Corn

Soybeans

1.90 Sorghum

Wheat

0.70 Barley

12.48

514

515*

523

489

545

535

530

525

542

532

536

*In dry grind ethanol process. **In wet mill ethanol process. Gluten feed is 20 percent protein and gluten meal is 60 percent protein.

0.19

and $5.30 Million Bushelsaverage priceofper bushel 1.5 lbs. corn oil**

HIGH-FRUCTOSE CORN SYRUP USAGE, 1985-2010

Oats

$65.97 billion of gluten MPTION corn2.6 croplbs. value meal**

473

19.2% Protein & Fiber

70,638 10,531

16% Water 61% Starch

150 8,094 57,000 19511,880 35,100 15188,500182,710

Oregon 70 Dried 7,600 19,800 solvents Acetic and amino acids Idaho 320soups 38 110 200 Organic 180 Paints ALL CROPcups, ACRES 2010 plates HARVESTED, and cutlery Alcoholic beveragesU.S. and brewing Pennsylvania 1,350 Drink 910 128 Pancake116,480 Dusting for pizzas12,400 Antibiotics Illinois 12,600 157mixes 1,946,800 Paper, recycled paper RhodeAspirin Island 2 Dyes and inks Indiana 5,900 5,720 157 898,040 Peanut butter Electroplating and galvanizing Baby food Cotton 3.5% South Bacon Carolina 350 English muffins 335 91 Pet food 30,485 Iowa 13,400 13,050 165 2,153,250 Pharmaceuticals Enzymes Baked goods 15.5% Sorghum (grain) 1.6% South Bakery Dakota 4,550 Fermentation 4,220 135 Wheat 569,700 Pickles and relishes processes products Rice 1.2% Kansas 4,850 4,650 125 19.5% 581,250 Plastics Fireworks Baking powder Hay Barley 0.8% 640 Tennessee 710 117 Potato chips 74,880 Food acids Batteries Kentucky 1,340 1,230 124 152,520 Sunﬂower 0.6% Powdered mixes Food coloring and bedding Texas Blankets 2,300 Food packaging 2,080 145 Powdered 301,600 Bookbinding Louisiana 510 500 140 sugar 70,000 foods Fritters Breadings, coatings and batters 25.0% Utah 70Other 5.8% 23 172 Precooked frozen 3,956 All Rayon Frosting Cake, cookie, dessert mixes Soybeans Maine 28 and icing 26.5% Rubber tires Candies Vermont 92 Frozen and dried eggs Corn Maryland 500pudding 430 106 45,580 Salad dressings Frozen Canned fruits, fruit fillings (grain) VirginiaCaramel color 490 Glues and 310 67 20,770 Salt adhesives Massachusetts 17mixes Sausage Gravy Carbonated and fruit beverages Washington 200 Hams 125 205 Seasoning25,625 mixes Cardboard Michigan 2,400 150 315,000 Shampoo Hot dogs, bologna 2,100 Carpet tile West Virginia 48 29 90 Shaving cream 2,610 Hush puppies Cereals Thousand Acres Minnesota 7,700 7,300 177 1,292,100 Shoe polish Ice cream and sherbets Chalk Wisconsin 3,900 3,100Sunflower 162 1,874502,200 81,446 Flaxseed 418 Snack foods Industrial Charcoal briquettesCorn (grain) Mississippi 750 chemicals 670 136 91,120 and Proso cleaners filters Cheese spreads Corn (silage) Wyoming 90 Industrial 50and 121 Soaps 6,050 5,567 Drywater Edible Beans 1,843 Millet 363 Soups Industrial sweetener Chewing gum Missouri Soybeans 3,150 3,000 123 Tobacco369,000 76,616 Canola 152.8 Spices 1,431 338 U.S. Citric acid 88,192 Insecticides 81,446 12,446,865 Spoon bread Instant breakfastOats foods 34 Cleaners, detergents Montana 80 135 4,590 Hay 59,862 1,263 Rye 265

81.4 million

plus acres harvested 17.5 lbs. of distillers dried grains with 12.4 billion solubles* bushels produced 13.5 lbs. of gluten feed**

’06 ’06

3.8% Corn Oil

390

610

North Dakota 2,050 248,160 19,895 Delaware 1801,880 173 132 115 is a key ingredient 3,450 in numerous food items like cereal, peanut163 butter, snack foods and soft drinks. There Ohio Corn 3,270 533,010 Florida 60 105day. 2,625 are more than 4,200 different uses for corn products, and more25 are being found each Oklahoma 370 340 130 44,200 Georgia 295 245 145 35,525

38.95

acres planted 22.4 lbs. of PLA fiber/polymer

140

CORN ALL AROUND 76,440

Wet Weight

88.2 or million

91,120

corn demand

380 114 180 180 1,050 1,330 590 1,210 150 910 91 26 840

New York Colorado North Carolina Connecticut

COMPONENTS OF YELLOW DENT CORN

ethanol

379

136

.04

327

670

Total 3,000 Acres 123Average 369,000 Acres Harvested Yield Production 80 34 135 4,590 Planted for Grain (bushels/ (1,000 9,150(1,000s)8,850(1,000s) 166 acre) 1,469,100bushels) 4 270 250 116 29,000 15 45 22 210 4,620

New Jersey Arkansas New Mexico California

U.S. CORN AT A 2.8 gal. of fuel GLANCE, 2010

750

3,150

’05 ’05

33 lbs. of sweetener

315,000 1,292,100

Missouri

65.97

Ear corn: 90%

150 177

75,117 11,112

Billions of Dollars (U.S.)

2,100 7,300

U.S. CORN PRODUCTION, 2010

Shelled corn: 88%

31.5 lbs. of starch

2,400 7,700

Mississippi

U.S. SELECT CrackedCROP corn: 90% VALUE, 2010

*In dry grind ethanol process. **In wet mill ethanol process. Gluten feed is 20 percent protein and gluten meal is 60 percent protein.

Michigan Minnesota

’05 ’05

ONE BUSHEL and (56 lbS.) OF CORN 1.5PROVIDES: lbs. of corn oil**

* Estimated ** Projected Source USD

corn demand

|article continued from page 53|

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such as crop yield, exports and even livestock numbers. However, on the feed side, the USDA doesn’t really make good estimates, Bertels says. The feed category covers feed and residual, a term that isn’t defined well. With a large crop, the residual portion tends to grow, and with a tight crop supply residual uses shrink. “It’s like a ledger, everything has got to basically zero out,” he says. “Well, that’s the fudge factor.”

What About Food Use?

Although more than 99 percent of the corn produced in the U.S. is field corn, used primarily for feed and ethanol production, the NCGA recognizes that corn is a key ingredient in food items as well as many industrial uses. “I don’t know that anybody has a fully comprehensive list of all the things that corn goes into,” Tolman says, “from the paper industry, the coating that goes on books and paper, to electronics industry, to the hospital and pharmaceutical industry. That use that goes for food and industrial is relatively small compared to ethanol and feed use but it is still important.” One of the biggest uses of corn for food products is high-fructose corn syrup. The NCGA estimated in its 2010 World of Corn report that 3.7 billion bushels of corn was processed into ethanol that year. Compare that to 515 million bushels of corn processed into high-fructose corn syrup. Corn for beverages and manufacturing has stayed fairly steady since 2000 at 130 million bushels of corn, to 2010 at 135 million bushels of corn. Corn for cereal and food rose from 185 million bushels of corn in 2000 to 197 million bushels in 2010. “There is definitely a very important, although small, segment for human consumption,” Tolman says, adding that, although field corn is used to produce some food products and ingredients, a significant portion of the corn grown for human consumption is white corn, which is kept separate from field corn used for feed and ethanol production. It’s disingenuous, Bertels says, to say that corn use for ethanol is taking food out of the mouths of the hungry. Nearly three times more corn goes into sweeteners for soft drinks than anything the average person

corn demand

would consider a corn food product, such as corn chips or corn flakes—and those markets are still being served by the U.S. corn industry. “If we were taking corn away from anyplace, we would be taking it away from foreign livestock,” Bertels says, “but we are not even doing that.” Corn exports to foreign countries were 1.9 billion bushels in 2000 and peaked at 2.4 billion bushels in 2007. The number did drop to about 1.9 billion bushels for the next three years, although, again, that number doesn’t include exports of distillers grains, which replaced some of the corn that was formerly exported. From 2008 to 2010, distillers grains exports increased by 60 percent. In all, 9 million metric tons of distillers grains were exported in 2010, according to numbers from the Renewable Fuels Association. From January to April this year, 2.6 million metric tons of distillers grains have been exported, nearly identical to the amount exported during the same time period last year. What about developing countries? The leading importers of U.S. corn are Japan, Mexico, South Korea, Taiwan, Egypt, Canada, China, Venezuela, Columbia and the Dominican Republic. The NCGA estimates that 80 percent of the corn exported from the U.S. is used for livestock feed, not food. “We’re not starving the Third World of corn because it wasn’t going there to start with,” Bertels says. “There’s a lot of people that are opposed to ethanol that are looking for any kind of hook to hang their criticism on.” A related criticism is that ethanol production takes corn away from livestock feed, a hardship on those industries. In early August, the NCGA noted that a newly released study found that profits rose for the beef and dairy farm industries since the renewable fuel standard was expanded in 2007. The report, completed by Texas A&M University and Doane Advisory Services, verifies NCGA’s positions that increased ethanol production has not negatively impacted the profitability of key livestock markets. “For years, corn farmers have understood that we have the ability to supply both growing ethanol and livestock producers simultaneously without negatively impacting these valued customers,” says NCGA President Bart Schott, pointing to increasing yields.

The report looked at the 2011-’16 economic outlook of six representative beef cattle ranches and six representative dairy farms. The baselines in the Food and Agricultural Policy Research Institute for 2007 and 2011 were compared to reflect changes since the Energy Independence and Security Act of 2007 was enacted. The 2011 baseline did reflect higher feed price, meaning higher feed costs per head for beef cattle ranches and dairies. On the other hand, net cash farm

incomes were projected to be higher in 2011 due to higher beef and milk prices. “While it is easy to reiterate artificial arguments against the use of ethanol, we believe this study clearly illustrates the fallacies on which they are often based,” Schott says. “This study again concludes that, in reality, we do not have to choose between using corn for food or fuel.” Author: Holly Jessen Associate Editor, Ethanol Producer Magazine (701) 738-4946 hjessen@bbiinternational.com

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october 2011 | Ethanol Producer $0 Magazine | 57

power

58 | Ethanol Producer Magazine | october 2011

power

Power Stover for

—Not Just Biofuels Partnering to produce energy from stover could be an attractive option for corn ethanol plants. By Kris Bevill

In mid-July, right around the time the area’s corn crop was beginning to mature and farmers could start looking ahead to the season’s harvest, a number of ethanol producers, farmers and researchers gathered for a daylong meeting at the University of Minnesota to discuss ways to best use the aftermath of the harvest. Corn stover has long been pegged as a po-

tential feedstock for cellulosic ethanol, but this group focused instead on a more immediate application—energy generation. An increasing number of studies are showing that in order for farmers to maintain high yields of corn, some of the remaining stover will need to be removed from the fields. For corn-based ethanol plants this represents an opportunity to displace at least some of their fossil fuel consumption with a renewable resource readily available from their existing corn suppliers. Researchers also believe that it represents an opportunity for new partnerships in the power generation sector.

october 2011 | Ethanol Producer Magazine | 59

power

Power Island

Gasification of biomass is not a new technology. It’s relatively easy to install and has been used effectively for generations to produce heat and power for varying-size facilities. While it’s not as widely deployed in the U.S., countries across Europe and Japan often install combined heat-and-power (CHP) systems to operate their facilities. The reason for this, of course, is that those countries do not possess the same abundant supplies of cheap fossil fuels as can be found in the U.S. When every strategic move can be boiled down to dollars and cents, it just makes economic sense for U.S. facilities, including ethanol plants, to use the cheapest fuel available to them. In 2008, when natural gas prices soared to painful levels, gasification of biomass was an attractive option for ethanol producers seeking to reduce the cost of their highest input after corn. But in the past couple years, natural gas has regained the lead as the most affordable, widely available fuel for U.S. ethanol producers. As a result, the few producers who had installed biomass gasification systems in 2008-’09 idled their equipment and switched back to the cheaper option. During the conference at the University of Minnesota, researchers proposed a new strategy for ethanol producers to use renewable resources such as corn stover to power their facilities and still profit. They believe that by partnering with entities that have an appetite for short-term losses, ethanol producers can afford to gasify enough corn stover to power their plants and be electricity producers as well.

Wind as an Example

University of Minnesota extension production economist Doug Tiffany is part of a group of renewable energy researchers who analyzed technologies to gasify biomass for steam and electricity generation at ethanol plants. They identified technologies and possible feedstock options fairly quickly, including corn stover, syrup and distillers grains. Many ethanol plants already have power islands that house the power generation units for the facility that could be updated to also produce electricity for sale back to the grid. But the researchers soon found the difficult part of this concept would be to make the improved power island an economic ben60 | Ethanol Producer Magazine | october 2011

Capital Cost Allocations: Ethanol Plant and Power Island 160,000,000

Power Island Capital Cost

140,000,000

Ethanol Plant Capital Cost

120,000,000 100,000,000

$87,524,280

80,000,000

$80,808,840

$139,157,349 $132,716,166

$67,872,654

60,000,000 40,000,000 20,000,000 0

v v as nal ver ver Sto Sto atG Sto Sto + + ntio N e p p v r n rid CC Syr CC Co - Sy IG d+G i B r NG CC P G G H I C B P+ CH Deep Pockets Required Constructing a power island capable of producing waste heat for an ethanol facility and electricity for the grind is a capital intensive project. In some cases, the power island could cost twice as much as the ethanol facility. The most expensive option would employ biomass integrated gasification combined cycle technology (BIGCC). Natural gas combined cycle (NGCC) technology is the least expensive option. SOURCE: DOUG TIFFANY, UNIVERSITY OF MINNESOTA

efit for the ethanol plant. They also needed to find a way to finance the construction of these new islands. They found their inspiration in the wind. Wind power projects are notoriously expensive to construct and require years of operation to repay the investment. Therefore, those projects require hefty investments up front from parties who have an appetite for tax losses. Power island projects using stover at ethanol plants are expected to experience similar situations regarding up-front capital and sustained losses. Because ethanol plants generally are smaller companies with a group of owners who cannot utilize long-term paper losses, Tiffany suggests modeling corn stover power islands after wind projects by bringing in partners who take on the losses and also have the experience and capability to handle the day-to-day business of power supply contracts. The power island can be siphoned off from the ethanol plant and function as its own entity, allowing the plant to use waste heat produced from the gasification of biomass to power its operations, but pro-

tecting its owners from the inherent first few years of loss. “Here’s a distinct business and it would have some opportunities for depreciation and use of provisions in the tax code and might be in a better position to negotiate with power companies than an ethanol plant itself,” Tiffany explains. “It may be attractive to investors and it may be more attractive to bankers if they’re dealing with investors who own the power island. And it may be a very good deal for the ethanol plants themselves, especially if they’re rewarded for ethanol that uses steam that came from biomass or electricity that came from biomass.” Major electric companies are an obvious choice to partner with for such a project. Companies such as Florida Power & Light Co. and Xcel Energy Inc. have invested in wind projects and have enough passive income from other operations that can be shielded from taxes by showing losses on renewable energy projects, such as wind. Oftentimes, these companies participate in wind projects by taking a 99 percent share of the valuation of equipment and earnings for the

power

first 10 years, which are the years of largest losses, according to Tiffany. After the first decade, majority ownership flips back to the land owners. Aside from the tax benefits, power companies may be interested in partnering to produce this form of renewable energy as a way to meet environmental standards. Energy policy in the U.S. is currently fragmented. Some states have initiated renewable energy standards and many expect that a future nationwide energy standard will include requirements for renewable energy generation. Also, companies currently investing in renewable energy stand to benefit from the positive publicity of being an early adopter of this technology. Additionally, ethanol plant power islands serve as a more reliable source of electricity than wind projects, which often produce power only about 35 percent of the time, Tiffany says. “This could run 95 percent of the time. We’d only be stopping the generation of power for repairs and times of the year when there isn’t quite as much demand,” he says. “In that way, this would be power that

‘Our primary focus is hedging against the cost of natural gas. If the economics relative to natural gas make sense, we’ll run the gasifier and spend those energy dollars in our local community. The carbon markets, if they come along, that’s gravy.’ —Andy Zurn , plant engineer, Chippewa Valley Ethanol Co. would be more attractive for power companies to manage. That’s why we were attracted to this whole concept. These ethanol plants are running basically year-round. They have a constant demand for steam or thermal en-

ergy and they could be using biomass and be a reliable source of renewable energy. This is a perfect marriage. The ethanol plant and the power island essentially need each other. The power island needs to have a place to discharge the heat and drying the distillers grains or doing some cooking at the ethanol plant is a way to use that heat. The corn stover is out there. We need to see some businesses get organized, the farmers themselves, and say they can be contracted to bring in this biomass. That still has to happen, but what we’re trying to do is to jump ahead a little bit and determine how some of these things might come together.” Tiffany says that while power companies are certainly prime partner targets for ethanol plant power generation projects, he’s also seeing increased interest from municipalities in smaller communities that might be willing to take some losses in order to become part owners of their own reliable power supply. A power island at a 50 MMgy ethanol plant could produce up to 25 megawatts of electricity, enough to service up to 25,000 people, he

october 2011 | Ethanol Producer Magazine | 61

PHOTO: CHIPPEWA VALLEY ETHANOL CO. LLLP

power

Front-runners The Frontline Bioenergy gasifier at Chippewa Valley Ethanol Co. LLLP enables the plant to utilize corn cobs and other biomass sources for power when natural gas prices skyrocket.

says. And with ethanol plants already located in rural areas, partnering with those smaller municipalities is an option that makes good sense. A handful of ethanol plants have done this already, but are using natural gas to power the generators and capturing waste heat for process heat.

Simple Economics

Vance Morey, professor of bioproducts and biosystems at the University of Minnesota, admits that ethanol producers are not

likely to switch from natural gas to biomass as long as natural gas prices stay low. Not unless they entertain the option of becoming electricity producers as well as users. â&#x20AC;&#x153;The key is the ability to generate electricity and get more efficiency out of the process,â&#x20AC;? he says. â&#x20AC;&#x153;There are two things that I think will make that happen: if the price of natural gas goes up biomass starts to get more attractive, and if we eventually go to some type of carbon credits and low-carbon electricity.â&#x20AC;? Chippewa Valley Ethanol Co. LLLP in

Benson, Minn., was one of the first ethanol plants to adopt biomass gasification when it installed a gasifier at its 48 MMgy plant in 2008. But plant engineer Andy Zurn says the monetization of carbon played a secondary role in the plantâ&#x20AC;&#x2122;s decision to utilize area biomass. â&#x20AC;&#x153;Value for low carbon ethanol is icing on the cake,â&#x20AC;? he says. â&#x20AC;&#x153;Our primary focus is hedging against the cost of natural gas. If the economics relative to natural gas make sense, weâ&#x20AC;&#x2122;ll run the gasifier and spend those energy dollars in our local community. The carbon markets, if they come along, thatâ&#x20AC;&#x2122;s gravy.â&#x20AC;? CVEC installed a Frontline Bioenergy gasifier in 2008 and used it to fire corncobs for cogeneration in 2008 and 2009. The first yearâ&#x20AC;&#x2122;s harvest was a small, grassroots production, Zurn says, but in 2009, the operation was expanded to include more farmers and more acres. With the help of a 50-50 funding promise from the USDAâ&#x20AC;&#x2122;s Biomass Crop Assistance Program, CVEC agreed to pay farmers $80 per ton for their cobs, a generous offering in order to convince first-time cob harvesters that participation would be worth their effort. Area farmers signed up and made good on their end of the bargain, but when it came time to pay, BCAPâ&#x20AC;&#x2122;s funding was cut and it backed out of the project. â&#x20AC;&#x153;We went to get our money from BCAP and they said they werenâ&#x20AC;&#x2122;t funding it,â&#x20AC;? Zurn says. â&#x20AC;&#x153;CVEC already had an agreement with these

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power

farmers. We already had the corn cobs.” CVEC settled on paying farmers $60 per ton for the cobs—$20 less than the farmers expected, but $20 more per ton than CVEC had originally planned on contributing—in order to make up at least somewhat for the federal government’s failure. Rightly, CVEC is leery of participating in any future BCAP projects and would likely pay farmers outright for their cobs in future harvests. “If you don’t trust that it’s going to be there for you, why are you going to do all the work to set up and get the whole logistics supply chain arranged?” Zurn says. “It fooled us once in 2009. We’re not going to play that game again.” Despite the less-than-expected payout, Zurn says Minnesota farmers would likely participate in cob harvests again. “These farmers are businessmen,” he says. If there’s additional money to create a new supply stream, which is corn cobs in our world, and it doesn’t hurt their business, it just makes good business sense.” But CVEC doesn’t plan on asking for cobs again until the economics of fuel sources demands it. The plant is set up to switch between biomass and natural gas pretty simply and the biomass gasifier has been shut off since gas prices took a nosedive two years ago. CVEC doesn’t currently possess the capability to produce additional electricity for a power partner and the low cost of natural gas doesn’t justify the use of cobs to displace fossil fuel right now, Zurn says. In the future, if the plant expands its gasification abilities and entertains the option of becoming a renewable energy generator, switching fuel sources to respond to the lowest cost would be less of an option. Power purchase agreements may require a specific feedstock to be used and deviating from that protocol could void the contract. CVEC may be interested in producing excess power in the future, Zurn says, but that would likely happen only after the plant has met its own power needs for a couple of years and ensured that its system is up to par.

Cellulosic Considerations

University of Minnesota researchers believe that of the three gasification

options most readily available at ethanol plants—distillers grains, syrup and corn stover—stover is hands down the best candidate for energy production. But is that still the case when considering stover as a feedstock source for cellulosic ethanol production? How do the two compare? Morey and Tiffany say that using corn stover as an energy source could provide ethanol producers with some needed experience in handling the biomass. “We wouldn’t use nearly as much of it as would be needed for cellulosic ethanol, but this would be the time for us to learn the lessons on how to put together businesses and maybe removal rates and enforce all these things,” Tiffany says. “Some people have some experience collecting stover for feed or livestock bedding, but not large amounts,” Morey adds. “I think developing this is a way of getting more people producing stover and starting to develop the technologies and markets for that. It’s an interim step.” Producers seem to agree with this approach as well. Poet LLC used some of the stover it collected in Iowa last year to feed the gasifier at its 100 MMgy plant in Chancellor, S.D. In August, Poet entered into a project focused on establishing energy grass sources near the Chancellor plant and said it plans to gasify the grasses while scientists perfect the complicated task of producing cellulosic ethanol from them. Zurn says CVEC isn’t really worried about potential feedstock competition from cellulosic producers. “Cellulosic ethanol is coming along so slow and there’s a variety of different uphill battles for the cellulosic folks,” he says. “We recognize there will be more demand for biomass, but will it be five years from now? Ten years from now? We think that if we can get the local biomass supply system set up, there’s probably going to be room for all of us. The whole ethanol world is stacked up against the fossil fuel world. If fossil fuels are dirt cheap, renewable energy is going to be pretty hard pressed without any incentives.” Author: Kris Bevill Associate Editor, Ethanol Producer Magazine (701) 540-6846 kbevill@bbiinternational.com

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www.intlfcstone.com Commodity trading involves risks, and you should fully understand those risks before trading. october 2011 | Ethanol Producer Magazine | 63

woody biomass

Enough for Everyone In Oregon, the USDA recently launched a Biomass Crop Assistance Program for GreenWood Resources Inc. to develop hybrid poplar plantations for ZeaChem Inc.â&#x20AC;&#x2122;s nearby ethanol production facility. Biofuel developers interested in wood as a feedstock believe there will be ample supply for their uses, as well as for other industries. PHOTO: GREENWOOD RESOURCES INC.

64 | Ethanol Producer Magazine | october 2011

woody biomass

Climbs from Supporting Role to Center Stage Wood-to-ethanol projects approach feasibility By Kris Bevill

In the classic children’s tale “The Giving Tree,” a lone tree willingly serves up all it has to offer to a growing boy in order to please him— providing first shade, food and shelter, then transportation, and, finally, a stump for the boy, who is now an old man, to rest his weary body on. While the moral of the story is up for interpretation, when taken in a literal sense the book highlights well the critical role trees play in providing resources to the human race. Trees have played a supporting role in the story of humankind since the dawn of time. As humans moved from cave to city, woody biomass has been a readily available resource to help advance society and expand technology. It seems a natural progression that as we seek renewable resources for alternative fuels, trees would be there once again for our benefit. But as it turns out, trees guard their precious C5 and C6 sugars, those necessary to produce cellulosic ethanol and biochemicals, with a nearly impenetrable system of natural defenses that has yet to be overcome by our best scientists. While significant advances have been made in solving this puzzle, there are some who say it is just too complicated to be completely conquered in the near future and perhaps wood is best left to be used for its many other purposes.

october 2011 | Ethanol Producer Magazine | 65

woody biomass

will produce fewer gallons per dry ton of feedstock than renewable diesel. Therefore, it is more likely that wood will be used for renewable diesel production first. Of the production processes evaluated, gasification ranked first as the most promising technology, specifically those that employ microbes and catalytic, fast-pyrolysis processes. In the time since Forisk’s study was released, the number of proposed and operating bioenergy projects using wood that it tracks has increased slightly—from 453 in May to 457 in late July—but the number of wood-using biofuels projects has decreased by one, down to 35. Brooks Mendell, principal investigator at Forisk, points out that the number of cellulosic ethanol projects targeting wood as a feedstock is already a small subset of the total number of proposed cellulosic ethanol projects in the U.S., and he thinks that number will get even smaller. Mendell says Forisk’s study results have been reinforced by investment firms that purchased the report to check their own analysis and while a few technology companies have contacted his firm to make the case that they are farther along than reported, Mendell doesn’t see any reason to update their status. “We have no proof that they can function at

commercial scale,” he explains. “We would be the first to call a project and congratulate them when they build a commercial-scale facility and are able to run it at capacity for six to 12 months. That would be great.”

Headway

PHOTO: COSKATA INC.

In May, timberland analysis firm Forisk Consulting LLC released a comprehensive study it conducted that concluded woodbased biofuels will not be commercially viable on a wide-spread basis for at least 10 more years. The technology to produce biofuels using wood products is extremely complex, the firm found, and while a few projects could produce biofuels commercially within the next decade, others will require up to 20 more years of development before they can be successful. The study was conducted by examining 12 conversion pathways to produce liquid biofuels using gasification, hydrolysis and fermentation or pyrolysis methods and evaluating the proposed production methods of 36 renewable diesel and cellulosic ethanol projects under development. Among the cellulosic ethanol projects evaluated for the study were those being developed by Coskata Inc., Mascoma Corp./Frontier Renewable Resources LLC, Ineos New Planet Energy LLC, ZeaChem Inc., American Process Inc., and Range Fuels Inc. When compared to projects being developed to produce renewable diesel and/or jet fuel from wood sources, Forisk concluded that cellulosic ethanol projects face greater technical hurdles and

Intermediate Proof Coskata Inc.’s demonstration-scale plant in Madison, Penn., is currently processing pine into ethanol using a hybrid gasification-fermentation technology, proving that the concept of wood as a feedstock is economically viable, according to the company. 66 | Ethanol Producer Magazine | october 2011

It’s true that no commercial-scale woodbased cellulosic facility is operating in the U.S., but several project developers insist that they are close to proving wood’s commercial viability as a biofuel feedstock. In Pennsylvania, Coskata is currently using woodchips to feed its demonstration-scale facility. Wes Bolsen, chief marketing officer and president of government affairs for Coskata, says Forisk did not contact his company prior to its study and likewise, Coskata has not been in contact with Forisk to dispute its study results, but he doubts it will take a decade to commercialize wood-to-ethanol. In January, Coskata received a conditional commitment for a $250 million USDA loan guarantee for its proposed 55 MMgy cellulosic facility in Boligee, Ala., and plans to be operating the facility in about 24 months. “Ten years versus two is quite a difference,” Bolsen says. “The USDA understands the technology and that it will return the taxpayers their money. It’s much closer than many people give it credit.” Bolsen admits that wood is a “somewhat difficult” feedstock to extract sugars from, and says that is why he agrees with Forisk’s findings that gasification is the best technology for wood-based biofuel production. “When you gasify it, you utilize the entire feedstock—the lignin, the cellulose and the hemicellulose,” he says. “Gasifying wood biomass is a fantastic front-end wood process. That’s what the core of our technology is. What we’re adding is a back-end syngas fermentation that makes the platform technology very viable. I don’t think anyone should worry about wood biomass being the downfall. I think, in fact, we’ll embrace wood biomass as an early leader in biofuel production.” ZeaChem CEO Jim Imbler doesn’t wholly agree that gasification is the best process for producing biofuels and chemicals from wood, but he does believe that wood-

based biofuels will soon be commercially viable. ZeaChem is in the midst of constructing its demonstration-scale facility in Oregon and will begin producing chemicals by the end of the year. Cellulosic ethanol production is expected to commence early next year. ZeaChem’s hybrid biochemical-thermochemical approach will utilize a bacteria that occurs naturally in termites and converts mixed sugars to acetic acid in high-temperature, harsh environments. This is what enables ZeaChem to break down difficult wood products, he says, adding, “If you can make wood work, it works out pretty well.” Both Imbler and Bolsen claim their technologies are capable of producing high yields. Coskata is already churning out 100 gallons of ethanol per dry ton of feedstock at its demo plant, according to Bolsen. ZeaChem is projecting to produce 135 gallons of product per dry ton. To compare, Mendell says Forisk’s analysis shows diesel and jet fuel processes using wood can produce up to 60 gallons per dry ton. In addition to the project developers, several other end-users and suppliers, as well as the federal government, appear to have confidence in wood as a biofuel feedstock. The U.S. DOE has invested in ZeaChem’s demonstration-scale plant, the USDA awarded a Biomass Crop Assistance Program to develop hybrid poplar supplies for the facility, and the company has been busy in recent months announcing offtake and feedstock supply agreements. Agreements are nice, but Mendell says they mean very little until the process is proven. “Until the technologies prove that they’re actually going to be consuming wood at a significant level on an ongoing basis, all feedstock programs basically have minimal implications,” he says. “The same is true for offtake agreements. Until they prove the ability to produce at significant volumes over time, they have no implication on the market.” Many people in the timber sector will be “thrilled” when these projects finally become viable, he says, but supply agreements for a plant are not enough to cause concern that ethanol plants will become competition for wood resources any time soon. Fair enough, says Imbler, who says the

PHOTO: BORREGAARD

woody biomass

Here and Now Borregaard’s existing commercial-scale, wood-to-ethanol facility and its under-construction pilot plant are both located in Sarpsborg, Norway, about an hour’s drive from the capital city of Oslo.

october 2011 | Ethanol Producer Magazine | 67

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woody biomass

mature technology already used in the timber industry makes its members less likely to respond enthusiastically to new ideas. “The forestry world doesn’t change that fast,” he says. “This will be a transformative change. But it’s up to us to prove it. When people figure out how to make it work, it’ll be big.”

Trend Setter

While the U.S may not have an example of commercial-scale, wood-to-ethanol production, Norway does. In Sarpsborg, about an hour outside of Oslo in southeast Norway, Borregaard operates a biorefinery that currently produces 5 MMgy of wood-based ethanol. In fact, the company has been producing lignocellulosic ethanol since 1938. Borregaard favors the use of enzymes to produce ethanol from wood because it enables the company to utilize more of the feedstock’s potential, says Klaus Neumann, vice president of business development. “Our approach is to fractionate the biomass and work with what you get there because we see a lot of value in that,” he says. Fermenting sugars from wood to produce ethanol was a big business throughout Scandinavia and parts of Russia for many years, according to Neumann, but was pushed out due to regulatory issues and the rise of cheap oil. Borregaard still operates the Sarpsborg facility profitably, but the company’s current view toward wood-based biofuels production is that it can hardly be done economically if ethanol is the only revenue stream. “In Scandinavia, it would be quite hard to be profitable only producing ethanol from woody biomass,” he says. “One idea is to diversify and make a lot of products out of the same type of biomass. We have developed a lot of interesting new applications with the lignin coming out of the process as a performance chemical. We don’t really look at the lignin as a fuel, but in order to have the maximum value addition of the raw material, we try to convert as much as possible off the fractions, both from the lignin and the fiber, into commercial products.” Borregaard’s process converts more

than 90 percent of the incoming biomass into various products, including lignin, vanillin, carbon dioxide and biofuels. Neumann points out that woody biomass is a more affordable feedstock in the U.S. and in other parts of the world, like Southeast Asia, but the concept of diversifying revenue streams to produce products other than just ethanol is one that is already being embraced by wood-to-ethanol producers here. ZeaChem touts its technological ability to produce a variety of valuable biobased chemicals and Coskata, though not as vocal about it, has a platform that will also produce chemicals. Bolsen says diversified revenue streams play an important role in Coskata’s business strategy, but for now, it is publicly focused on ethanol. “As a young company, you have to focus on what you believe is the best ready-now, commercially viable technology,” he says, adding that, for now, that’s cellulosic ethanol. Mendell agrees that projects using wood as a feedstock to produce biochemicals as well as ethanol have a leg up on commercialization potential over singlestream production models. It makes sense economically and there are fewer technical hurdles that need to be overcome in order to produce chemicals as opposed to ethanol, he says. “If you’re going to pursue this really hard-to-get technology, you have to do things that work along the way to pay your bills,” he says. “That’s what these firms are doing when they’re producing chemicals, which seems like a good cash-generating strategy. Diversifying away from transportation fuels seems like a really smart move on all measures.” Biofuels industry observers such as Forisk are also noting a trend toward diversifying away from wood as a sole feedstock. ZeaChem and Coskata both say they can, and probably will, use more feedstocks than just wood. Borregaard has also recently begun construction of a pilot-scale facility in Sarpsborg to demonstrate a new process to produce ethanol and chemicals from other feedstocks. The process, dubbed BALI for its ability to process bagasse and lignin into perfor-

woody biomass

mance chemicals, is extremely efficient in breaking down C5 and C6 sugars and allows flexibility in the pretreatment phase, according to Neumann. â&#x20AC;&#x153;We can actually select how to break down the fibers and how to work up the different types of sugars,â&#x20AC;? he says. The technology is expected to allow Borregaard to enter markets other than biofuels in locations around the world through partnerships with other biofuel or biochemical producers. â&#x20AC;&#x153;If we can put together a concept where they would become a biofuel producer and we would produce specialty chemicals from the remainder of the biomass, thatâ&#x20AC;&#x2122;s one way we think it will be quite possible to commercialize those types of technologies,â&#x20AC;? he says. Borregaardâ&#x20AC;&#x2122;s BALI pilot plant is scheduled to become operational in the second quarter of next year and will process up to 1 dry ton of various feedstocks per day. Borregaard would like to partner with biofuel or biochemical producers to establish commercial plants using its BALI process because, according to Neumann, while his company has lengthy experience as a biorefiner, its specialty lies in producing chemicals from biomass. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s the area where we feel we have competency and we would like to expand the market, and where we see the opportunities,â&#x20AC;? he says. â&#x20AC;&#x153;Also, in developing new biorefinery concepts where we try to sell multiple products, I think it will add a lot to the speed if you can do that together with other companies who have expertise in

complimentary areasâ&#x20AC;&#x201D;maybe technology, or feedstock or even marketing for those products.â&#x20AC;? The U.S. is an ideal area to launch this new concept due to its emphasis on technology development as well as policies that promote the production of cellulosic biofuels and interest in biochemicals, he says. Biofuels producers may see the benefit of using wood to produce liquid fuels and chemicals, but Mendell says that, for now, the U.S. forestry industry will be content to watch the development of wood-based biofuels from the sidelines, and instead focus on the use of wood to produce energy. â&#x20AC;&#x153;Thatâ&#x20AC;&#x2122;s smart for the forestry industry,â&#x20AC;? he says. â&#x20AC;&#x153;Today 71 percent of the wood-fired electricity produced in the country is within the forest products industry. Many of these projects represent extensions of what they already know how to do. I suspect that's one reason why even in the case of electricity projects or these liquid-fuel projects there's been less emphasis on wood. Projects are learning it's a little more complicated than saying you're going to use forest residues that have been left untouched out in the woods. It's a more complicated story than that." Author: Kris Bevill Associate Editor, Ethanol Producer Magazine (701) 540-6846 kbevill@bbiinternational.com

Whatâ&#x20AC;&#x2122;s Wood Got to Do With It? The most notorious user of wood for ethanol production to date has been Range Fuels Inc., which briefly produced methanol from wood sources early this year but unexpectedly ceased operations and locked the doors at its Soperton, Ga., facility before it could make good on a promise to produce measurable amounts of cellulosic ethanol. While there has been no official statement from the company explaining what went wrong, others in the industry say the plant suffered technological constraints and that the facilityâ&#x20AC;&#x2122;s

failure had nothing to do with its choice of feedstock. Wes Bolsen, chief marketing officer and president of government affairs for Coskata, says that, in fact, Georgia is an ideal location for a wood-to-biofuels project. â&#x20AC;&#x153;Alabama, Georgia, Mississippi and Arkansas are the heart of what we call the wood basket,â&#x20AC;? he says. â&#x20AC;&#x153;I canâ&#x20AC;&#x2122;t speak to their [Range Fuelsâ&#x20AC;&#x2122;] technology, and clearly Coskataâ&#x20AC;&#x2122;s technology is different, but gasifying wood biomass is a fantastic front-end wood process.â&#x20AC;?

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policy

CONTRIBUTION

The Subsidy Debate: Oil vs. Ethanol Direct, indirect and hidden subsidies and incentives benefit both industries, and need to be acknowledged By Kate Bechen and Porter J. Martin

Much has been said and written about whether the ethanol industry is sustainable without tax credits and tariffs. But what often is missing in criticisms of ethanol is an acknowledgement that the oil industry significantly benefits from a variety of tax credits, incentives and other publicly-funded subsidies. Bloomberg New Energy Finance estimated that worldwide governments provided approximately $43 billion to $46 billion in direct subsidies to renewable energy and biofuel technologies, projects and companies in 2009. According to an International Energy Agency study in 2008, fossil fuels received an estimated $557 billion, not factoring in security and

public health costs associated with fossil fuels. The oil and ethanol industries, as well as the energy sector more generally, are subsidized by taxpayers through state and federal subsidies, incentives, tax credits and other governmental policies. It is a significant challenge to compare oil subsidies and ethanol subsidies because there is no consensus on the definition of “subsidy,” “public financial support,” “incentives” or similar terms. For example, the oil industry would not characterize the tax benefits associated with oil and gas exploration and development expensing as a “subsidy,” even though it is the only major industry that benefits from these specific tax provisions. On the other hand, the

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s). 72 | Ethanol Producer Magazine | october 2011

ethanol industry may agree that the Volumetric Ethanol Excise Tax Credit (VEETC) is a subsidy, but disagree that it should be characterized as an “ethanol-only subsidy” because gasoline blenders (i.e. oil companies) are the ones who actually receive the credit, not ethanol producers.

Ethanol Subsidies

The ethanol industry receives a variety of federal and state incentives. When state incentives are factored in, some estimates put ethanol subsidies at around $30 billion, though this number is only an estimate because there is an inherent difficulty in measuring state-level incentives. Given the multitude of state programs, this article focuses on the three federal programs: VEETC, the Small Producers Tax Credit and the import tariff, all of which are set to expire on Dec. 31. While our focus is

policy

on these three federal programs, it is important to note that state programs have played pivotal roles in the development of the ethanol industry. For example, Iowa’s retailer tax credit played a significant role in establishing E10 ethanol at pumps throughout the state and eventually across the country. The VEETC (or the blenders credit) provides a tax incentive in the amount of 45 cents per gallon of pure ethanol blended with gasoline. Thus, while VEETC is a subsidy benefiting the ethanol industry, the credit actually goes entirely to oil industry blenders, not ethanol producers. The credit, calculated by the Congressional Budget Office to be about $6 billion in 2009, is first taken as a credit against the blender’s fuel tax liability, but any excess is claimed as a direct payment from the Internal Revenue Service. It is difficult to accurately measure what portion of VEETC benefits the oil industry versus ethanol, but most likely oil has been in the best position to retain the value of VEETC, especially since 2006 when the supply of ethanol exceeded the renewable fuel standard (RFS), allowing oil companies to be price setters and consume ethanol when the price is in their favor. The small ethanol producer tax credit is a tax incentive in the amount of 10 cents per gallon of ethanol that is sold or used by a producer in an ethanol fuel mixture. Qualified facilities produce not more than 60 million gallons of any type of alcohol and the incentive applies to the first 15 million gallons produced. The import duty for fuel ethanol has two features, a 2.5 percent ad valorem tariff on the import of ethanol for use in fuel and a duty of 54 cents per gallon of ethanol. It is important to note that the 54-cent duty applies to imports from most countries to offset VEETC, an important point often ignored by critics of ethanol subsidies. Ethanol imports from countries that are party to one of several international trade agreements with the U.S. are not subject to the 54-cent duty, as long as the ethanol is produced from feedstocks originating in those nations. The tariff is in place to ensure that the U.S. is not subsidizing foreign ethanol by allowing foreign companies to benefit from VEETC. The national RFS also has likely had a

subsidizing effect on the ethanol industry. The RFS calls for 36 billion gallons of renewable fuel to be produced by 2022, although conventional biofuel will be capped at 15 billion gallons in 2015. Corn and sorghum growers also benefit from direct payments and crop insurance premium subsidies.

Oil Subsidies

At the turn of the 20th century, the federal government realized the importance for national security in developing oil reserves. As such, the government created many beneficial taxation, subsidy and other incentive programs geared specifically to aid the then young and struggling oil industry. This close historical relationship between the oil industry and the federal government has resulted in significant benefits for the oil industry. The oil industry benefits from longstanding tax incentives not enjoyed by ethanol or any other major industry. One example is the favorable taxation of oil and gas exploration and development expenses that allow the oil industry to pay about $1 billion less in taxes each year, roughly the equivalent of the industry’s research and development expenditures. This deduction allows for a majority of expenses that do not have a salvage value to be expensed in the year incurred, rather than amortizing the costs over a longer period of time. Historically, the federal government sought to entice a fledgling industry into locating and developing oil and gas reserves in the name of national security. Over 100 years later these incentives still exist. In addition to exploration and development expense deductions, the oil industry, given its size and level of dependency upon equipment and leases, also significantly benefits from various accelerated depreciation provisions for equipment and leases. Estimates have placed oil’s tax benefit at $4 billion due to accelerated depreciation. While the same deductions are available to ethanol, oil utilizes these tax deductions to a greater extent because of its size and the prevalence of leasing arrangements in the oil industry. According to a 2010 article in the New York Times, “As Oil Industry Fights a Tax, It Reaps Subsidies,” a 2005 Congressional Budget Office study found that, “capital investments

like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry.” Lower taxes due to preferential treatment of a particular industry is equivalent to a subsidy. Oil also benefits from a domestic production activities deduction. Due to the large scale of oil companies, this deduction is significant, but it is also a deduction available to any U.S. manufacturer. In fact, the oil industry only receives a 6 percent deduction, while all other industries receive 9 percent. The oil industry also benefits significantly from foreign tax credit provisions and deferral of income from controlled foreign corporations.

Hidden Subsidies

The oil industry benefits from the U.S. strategic petroleum reserve, as a result of the federal government purchasing extra oil supplies to be used in emergency situations. Other less obvious benefits and incentives received by the oil industry include taxpayer support of the transportation infrastructure, public liability for plugging and remediating onshore wells, environmental costs associated with air pollution and environmental clean up costs associated with oil spills. A University of California-Davis study by Mark Delucchi and James Murphy with the Institute of Transportation Studies con-

VEETC Capture It is difficult to determine which segment best captures the value of the blenders credit, but most likely, the oil industry benefits most. october 2011 | Ethanol Producer Magazine | 73

policy

cluded that “if the U.S. motor vehicles did benefit from tax increment financing, enternot use petroleum, the U.S. would reduce its prise zones, high-quality job creation incentives peace time and war time defense expenditures and new capital investment programs offered in the long run by roughly $1 [billion] to $10 by states. The ethanol industry has benefited billion per year.” Most oil proponents disagree from a variety of state programs, especially in that these types of government expendi- Corn Belt states. While the ethanol industry has not been tures should be characterized as subsidies to the oil industry. Roughly half of the world’s as successful as the oil industry in securing daily consumption of oil flows through one of and maintaining tax advantages at the federal seven or eight narrow sea passages, including level, it has, or will be, a beneficiary of stimuthe Panama Canal, Bab el-Mendab, Strait of lus spending directed at the renewable energy Malacca, Strait of Hormus, Suez Canal and industry in general. The size of ethanol’s porSuez-Mediterranean Pipeline, Bosporms and tion of the stimulus funds is not clear. The Dardeanelles and Danish Straights. Ensuring Biomass Crop Assistance Program, the clean the steady flow of oil through these diverse oil cities portion of the stimulus money and varitransit chokepoints is of considerable value to ous earmarks for advanced biofuels research the oil industry, and many current measures all will directly or indirectly lend support to the to ensure stability would not be necessary if ethanol industry. It is very difficult to assign a portion of the passageways were not significant oil check points. Ethanol has no such check points and a public expenditures to a particular industry. U.S. military presence is not needed to protect It is also difficult to quantify and compare ethanol shipping and distribution channels. the financial benefits of complex tax proviBut, is Gas and ethanol production facilities also LWC629-RJS-0446 Biorefining Ad #3 1/11/11 1:46sions. PM Page 1 there anything wrong with sim-

ply acknowledging that the oil industry derives significant economic benefit from public financing of infrastructure, the U.S. tax code, environmental cleanup initiatives and military protection of the foreign oil supply? These factors have been largely excluded from articles and commentary that criticize ethanol’s dependence on tax credits and tariffs. Simply acknowledging that a subsidy, benefit or incentive exists doesn’t mean that there are not good reasons to continue such support. We all drive cars and are heavily reliant on the oil industry. But this also doesn’t mean that there aren’t also good reasons to reevaluate certain subsidies that become out dated, ineffective or excessive. Authors: Kate Bechen Attorney, Energy & Sustainability Group, Michael Best & Friedrich LLP klbechen@michaelbest.com (414) 225-4956 Porter J. Martin Partner, Michael Best & Friedrich LLP pjmartin@michaelbest.com (608) 283-0116

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feedstock

CONTRIBUTION

Comprehensive Miscanthus Commercialization Model Needed A systematic look at feedstock development offers ideas for reducing costs, ensuring success By David R. Robbins and Stephen S. Tam

Miscanthus x Giganteus (MxG) has great potential to become the energy crop of choice in the United States. It has been explored in Europe for two decades but has not been actively pursued in the U.S. until very recently. Many

reasons can be cited, such as the lack of long-term yield data in different U.S. regions, high establishment costs and the relatively low yield from direct conversion of cellulosic biomass into bioethanol based on todayâ&#x20AC;&#x2122;s technology. Lack of political support

for green initiatives such as proliferation of carbon credits adds to the woes for adoption of miscanthus as a viable energy crop of the future. The key issue to be addressed, therefore, is the apparent lack of sustainable economics. In general, many studies have pointed to the fact that miscanthus should be a more suitable candidate than switchgrass as an energy crop. MxG dry mass yield reaches

feedstock

twice that of switchgrass with a rotation cycle of up to 20 years. Typically, dry mass yield can be 12 to 20 tons per acre, with the highest reported yield of 24 tons per acre. Nevertheless, large-scale commercialization of MxG has not yet appeared, and there remain very few, if any, economically viable integrated commercialization or business process approaches. It is crucial to the successful scalability and sustainability of MxG commercialization that the individual process MxG blocks—propagation, farming and densification—be profitable. This will significantly enable the national targets for conversion of biomass to ethanol to be achievable. At least three U.S. companies have developed MxG commercialization methodologies that, while subtly different, can supply only a small portion of a large and growing market. In addition, through the Biomass Crop Improvement Program, the USDA has aided the establishment of four planting zones totaling 200,000 acres in the U.S. for growing miscanthus as a dedicated energy crop and feedstock for cellulosic eth-

anol production. Federal programs such as BCAP, local government subsidies, carbon credits and other forms of subsidies are market accelerators, but not enablers. Key features of a successful integrated approach will lie in balancing the business risks with innovative technology and business solutions, imposing rigorous financial assessment of the returns on investment in various segments.

Challenges and Solutions

By choosing state-of-the-art technology in all stages, a robust feedstock farming operation can be built to supply hundreds of thousands of tons of biomass for multiple markets in the U.S and specifically cellulosic ethanol. Earth Sense Energy USA Inc. and other companies are developing strategies to address the challenges facing successful MxG development, including the following: • Addressing extremely high establishment costs, often estimated at more than $2,000 per acre, by maximizing automation to reduce labor costs, and using plantlets and rhizomes to reduce costs.

The MxG Value Chain

Miscanthus Ecosystem Many areas need further research and development before the potential of MxG to become an energy crop for cellulosic ethanol production is realized. SOURCE: Earth Sense Energy USA Inc

•

Matching field stock genetics to geographical requirements to ensure field establishment success. • Ensuring top yields by using precision planting technology to achieve high plant density. • Managing market growth and nursery/ greenhouse utilization by identifying a product mix for nursery business during the demand ramp-up phase for miscanthus that includes propagation of vegetables, fruits or ornamentals. In addition to using various technology and business processes to mitigate risks, as described above, the success of the integrated MxG commercialization model requires developers to combine knowledge and experience with MxG agronomy, plantlet multiplication rates and environmental conditions suitable for planting miscanthus. For example, it has been established experimentally that the multiplication rate of vegetative propagation can reach 90-to-1 compared to conventional rhizome field planting that can only reach plantlet multiplication rates of up to 20-to-1 in one calendar year in temperate zones. In tropical zones, however, multiplication of rhizomes can also reach 90-to-1 or higher in any one year. Attention will need to be paid, if this model is adopted, to the unit costs of production and logistics to ensure the economic success of the supplier and the customer. Other strategies can reduce costs as well. One is to use miscanthus transplants during the seasons when rhizomes are unavailable. Plantlets can be regenerated continuously and planted in regions that are temperate, unlike rhizomes that have a particular harvest window. By choosing farmland at various latitudes and growing zones, miscanthus planting can be performed six to 10 months per year, facilitating better crop planting schedules and equipment utilization, reducing capital requirements. Manpower can be cross-utilized between planting, harvest and densification. Densifying feedstock minimizes logistics costs and facilitates storage. In addition, the different quality specifications for october 2011 | Ethanol Producer Magazine | 77

feedstock

Projected Investment and Return

Investment Gross profit margin Earnings before interest, taxes, amortization Net profit after tax Return on investment to cash flow Return on investment (present value k=10%) Internal rate of return

MxG Nursery only $16 million 31% 31% 16% 2.1 1.3 15%

MxG Plantation only $3.5 million 45% 41% 22% 3.3 2.1 27%

MxG Pellet Plant only $7.5 million 27% 27% 14% 6.3 4.0 47%

Integrated MxG Commercialization $27 million 31% 31% 16% 5.0 2.9 34%

Table 1 The chart shows target returns on investments for individual and integrated risk-balanced MxG commercialization blocks. SOURCE: Earth Sense Energy USA Inc.

years before MxG crop yield stabilizes. Government support for carbon trading, such as through the Chicago Climate Exchange or some other federal program, would also help stabilize and enhance the income of MxG farmers. A cap and trade program to reduce carbon emissions would accelerate the demand for dedicated energy crops. Additionally, government grants targeting each process block will help generate innovations and lower production costs of MxG for biofuels production. For instance, BCAP will provide financial support up to $45 per ton for feedstocks for biomass energy projects. The development of a miscanthus supply chain with a multi-objective optimization model allows an organization to determine the variety and product type of the field stock genetic material, to select the farming geography compatible with the source genetics, to utilize the most advantageous den-

sification technology, to manage distribution costs to the served market and to participate in government support programs to make miscanthus the feedstock of choice for cellulosic ethanol production. Authors: David R. Robbins CEO/Cofounder, Earth Sense Energy USA Inc. (805) 439-1154 david@earthsenseenergyusa.com Steven S. Tam Chief Research Officer/Cofounder, Earth Sense Energy +852-62120616 (Hong Kong) Sctam2005@hotmail.com Additional information was contributed by Jimmy Holliman, consultant to ESE and David Croxton, ESE director and with Renewable Energy Crops of Great Britain, a pioneer of miscanthus for biomass in the EU.

PHOTO: PHOTOS: EARTH SENSE ENERGY

domestic and commercial heating, cofiring with coal, as well as cellulosic ethanol feedstocks, will create opportunities for developing densification product lines. Similar to the risk mitigation strategy for nurseries/greenhouses, we suggest initial densification operations be designed for multiple feedstock densification. A profitable, scalable and sustainable MxG supply chain can be built if business risks are balanced and financial returns on the various process blocks are vigorously assessed. Table 1 shows projected investment and returns for a nursery, plantation and densification plant as individual units, as well as an integrated system. The commercialization of process blocks are each economically viable without government subsidies. Nevertheless, state and federal grants will be most helpful in supporting the MxG field establishment

Growing Green Automated processes from the development of plantlets to planting will be needed to make MxG economically sustainable. 78 | Ethanol Producer Magazine | october 2011

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