INSIDE: EPA’S ETHANOL ‘MOVES’ MODEL FLAWED SEPTEMBER 2015
DIRECT SALES Producers Make, Sell E85, Other Blends to Consumers Page 28
E85 Outside The Midwest Page 22
Brand Ambassadors Educate, Promote Higher Blends Page 34
www.ethanolproducer.com
2015:
THE YEAR OF
THANKS FOR BEING SOME OF THE FIRST RETAILERS TO OFFER E15. Growth Energy commends CENEX, Kum & Go, MAPCO, Minnoco, Murphy USA, Petro Serve USA, Protec Fuel, Sheetz and Zarco USA for their pioneering spirit and efforts to expand consumer access to higher blends of renewable fuels. They offer consumers a choice and savings at the pump, while investing in a homegrown industry that supports farmers across the country. Together we’re making progress toward the next generation of sustainable, renewable fuels.
Learn more at GrowthEnergy.org/E15
INSIDE
SEPTEMBER 2015
VOLUME 21 ISSUE 9
AD INDEX
DEPARTMENTS
2015 National Advanced Biofuels Conference & Expo 37
4
EDITOR'S NOTE
5
EVENTS CALENDAR
6
THE WAY I SEE IT
8
Buckman
18
Direct Automation
25
DuPont
40 5
EcoEnginners
3021 9
Fagen Inc. Fluid Quip Process Technologies, LLC
14
Global Refractory Installers and Suppliers
2
Growth Energy Hydro-Klean LLC
19
ICM, Inc.
26
J.C. Ramsdell Enviro Services, Inc.
15
Leaf Technologies
20 7
MPW Industrial Services
Nalco, an Ecolab company
33
POET-DSM Advanced Biofuels
11
Protec Fuel Management
27
Thermal Refractory
32
Tower Performance, Inc.
24
Victory Energy Operations, LLC
10
12
Making it Easy By Tom Bryan
Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for anyone outside the United States. To subscribe, visit www.EthanolProducer. com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or service@ bbiinternational.com. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to hjessen@ bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.
COP21: Opportunity to Relaunch Biofuels Debate By Robert Wright
BUSINESS BRIEFS
Ally or Enemy? By Mike Bryan
16
COMMODITIES
VIEW FROM THE HILL
18
DISTILLED
36
TALKING POINT
RFA Intern Gains Invaluable Experience By Austin Ludowese
DRIVE
US Biofuels Part of Food, Feed Global Solution By Tom Buis
GRASSROOTS VOICE
EPA Cannot Quit On RFS By Brian Jennings
FEATURES
38 39
EPA’s MOVES Could Cripple Higher Ethanol Blends By Dave VanderGriend
BUSINESS MATTERS
EP3 Lessons Learned By James M. Ramm
MARKETPLACE
ON THE COVER
Mitch Miller, CEO of Carbon Green Bioenergy LLC, fuels up at the on-site ethanol plant blender pump. PHOTO: GREEN FROG PHOTO
E85 MARKET
Consumers Attracted by Value, Convenience
Two companies find success bringing E85 to the urban coasts
By Susanne Retka Schill
22
RETAIL
Producers Tackle Blend Wall
Some consumers can buy ethanol straight from the companies that make it
28
By Holly Jessen
PROMOTION
Introducing E15 With a Smile
Teams of brand ambassadors help promote new ethanol blend
Please recycle this magazine and remove inserts or samples before recycling TM
COPYRIGHT © 2015 by BBI International
GLOBAL SCENE
14
30-31
Ethanol Producer Magazine: (USPS No. 023-974) September 2015, Vol. 21, Issue 9. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.
13
34
By Susanne Retka Schill
SEPTEMBER 2015 | Ethanol Producer Magazine | 3
EDITOR'S NOTE
Making It Easy Tom Bryan
President & Editor in Chief tbryan@bbiinternational.com
VOLUME 21 ISSUE 9
EDITORIAL
President & Editor in Chief Tom Bryan tbryan@bbiinternational.com
While opinions differ on the best way to grow the market for higher-level ethanol blends, there’s one truth we can all agree on: Retail sales have to be made easy—for everyone. Consumers,
given a choice and good information, will buy higher-level ethanol blends when the fuel is easy to find and priced right. Likewise, retailers will host higher-level ethanol blends when there’s a financial upside to making room for the fuels under their canopies, and when the tedious work of installing the pumps is handled by someone else. Today, we see this “make it easy” thing playing out on the coasts with two big names in E85. In “Consumers Attracted by Value, Convenience,” on page 22, EPM Senior Editor Susanne Retka Schill reports on how Protec in the East and Propel in California have made it easy for their retail gas station partners to say yes to E85. Propel, for example, pays its retailers rent and a share of its E85 profits. Protec handles the permitting, installation, fuel delivery and pricing of its E85. These companies are creating stress-free E85 experiences for retailers, and it’s paying dividends. Our cover story on page 28, “Producers Tackle Blend Wall,” highlights a few ethanol plants that are blending and selling the fuel they produce directly to consumers. In this piece, EPM Managing Editor Holly Jessen catches up with Carbon Green Bioenergy’s Mitch Miller, who is spearheading the Michigan ethanol plant’s vertical integration into retail sales. After already supplying more than 30 area retail stations with E85, Carbon Green will now own and operate its own convenience stores. The first NuVu Fuels station opened in Ionia, Michigan, in July, offering up to five ethanol blends ranging from E10 to E85. A second station is planned. Carbon Green isn’t the first U.S. ethanol producer to jump into the retail fuel business. Jessen reminds us that Nebraska Corn Processing in Cambridge, Nebraska, has been blending and selling its ethanol at a travel center near the plant since 2013. Zeeland Farm Services owns both the ethanol plant and the gas station. Finally, despite the vital role E85 and other high-level ethanol blends play, it is perhaps E15 that represents the industry’s largest long-term market growth opportunity due to its near-universal engine compatibility. E15 is a fuel that almost every driver can use, but very few know about. That’s why the ethanol industry has recently deployed E15 brand ambassadors across the country. Check out “Introducing E15 with a Smile,” on page 34, for a look at what’s being done to make a lasting first impression on future E15 faithfuls.
Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Holly Jessen hjessen@bbiinternational.com Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com
ART
Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Raquel Boushee rboushee@bbiinternational.com
PUBLISHING
Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com
SALES
Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Sales & Marketing Director John Nelson jnelson@bbiinternational.com Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com
FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 4 | Ethanol Producer Magazine | SEPTEMBER 2015
Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Account Manager Jeff Hogan jhogan@bbiinternational.com Account Manager Tami Pearson tpearson@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com
TWITTER.COM/ETHANOLMAGAZINE
EVENTS CALENDAR
National Advanced Biofuels Conference & Expo October 26-28, 2015 Hilton Omaha Omaha, Nebraska Produced by BBI International, this national event will feature the world of advanced biofuels and biobased chemicals—technology scale-up, project finance, policy, national markets and more—with a core focus on the industrial, petroleum and agribusiness alliances defining the national advanced biofuels industry. 866-746-8385 | www.advancedbiofuelsconference.com
International Biomass Conference & Expo April 11-14, 2016 Charlotte, North Carolina Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all biomass industries. 866-746-8385 | www.biomassconference.com
2016 International Fuel Ethanol Workshop & Expo June 20-23, 2016 Wisconsin Center Milwaukee, Wisconsin Now in its 32nd year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-tobusiness environment. As the largest, longest running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine —that maintains a strong focus on commercial-scale ethanol production, new technology, and near-term research and development. The 2014 event drew more than 1,800 people from over 31 countries and from nearly every ethanol plant in the United States and Canada. 866-746-8385 | www.fuelethanolworkshop.com
7RGD\·V HWKDQRO PDUNHWSODFH SURYLGHV D YDULHW\ RI ZD\V WR H[SDQG -RLQ WKH KXQGUHGV RI VDWLVÀHG FXVWRPHUV ZKR KDYH VHOHFWHG (FR(QJLQHHUV DV D ORQJ WHUP SDUWQHU
285 6(59,&(6 ,1&/8'( 5' 3$57< ,1'(3(1'(17 5(9,(:6 5(*,675$7,216
5)6 &203/,$1&( &$/,)251,$ /&)6 &203/,$1&( *5((7 02'(/,1*
()),&,(17 352'8&(5 3(7,7,216
5,1 0$1$*(0(17 &267 5('8&,1* 62)7:$5(
ZZZ HFRHQJLQHHUV XV 0LNH +DQVPDQ _ _ PKDQVPDQ#HFRHQJLQHHUV XV
THE WAY I SEE IT
Ally or Enemy? By Mike Bryan
Most of us find it strange and frustrating that we are continually at loggerheads with the U.S. EPA over a variety of issues pertaining to the use of higher blends of ethanol and the continuation of the renewable fuels standard (RFS). But it should
not come as any surprise, because when we look at the relationship between the EPA and ethanol, there is a long history of antagonism and sometimes outward hostility by the EPA toward ethanol. There probably has not been a liquid fuel that has endured more testing by the EPA than ethanol. There have been no automotive fuels, that I am aware of that have had as many stumbling blocks put in front of them by the EPA as ethanol. Look at the history—evaporative emissions, permeation, NOx emissions, formaldehyde, land use, fuel economy testing, pump labeling—the list is almost endless. Most, if not all, of these were issues generated by the EPA with oil industry prodding. As a result, many of these draconian policies and ideas were adopted on a state level, with California being the most prominent. Some would argue that the oil industry was forced to reduce emissions as well, with the most significant being octane enhancers like benzene, toluene and xylene (BTX). While that was, in fact, the case, ethanol provided an easy answer. It boosted the octane and replaced large amounts of BTX in gasoline with a clean, domestically produced, renewable energy. The oil industry over the years has essentially had a free ride, thanks to the EPA and federal and state governments.
6 | Ethanol Producer Magazine | SEPTEMBER 2015
Even today, the tax incentive for ethanol was stripped away, but remains in place for an industry that extracts hundreds of billions of dollars in profit every year from the American consumer. The oil industry has not substantially changed its methods of production in the past hundred years. I guess the EPA has simply grandfathered in their right to pollute. The truth be known, the auto industry has done far more to reduce pollution than the oil industry has ever had to do. Tighter restrictions of automotive emissions and their continued quest for better, more fuel-efficient and cleaner automobiles should put the oil industry to shame. Yet, oil gets the EPA’s nod of approval over and over, while at the same time the EPA seems to do everything it can to further restrict the use of ethanol. Way back when, I naively thought that ethanol would become the fuel of choice for the EPA and they would be allies in turning the tide away from oil. In fact, just the opposite has been true. The EPA has fought ethanol tooth and nail all the way and has had to be dragged kicking and screaming into accepting ethanol blends as a major contributor to cleaner air and energy security. With allies like the EPA, we certainly don’t need enemies. That’s the way I see it.
Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com
VIEW FROM THE HILL
RFA Intern Gains Invaluable Experience By Austin Ludowese
After spending time as the Renewable Fuels Association summer intern, I was asked to take charge of this month’s column and reflect on my experience working in the organization’s St. Louis office. My brother, Evan, spent last summer serving as an intern
for RFA, and I was very excited when I received the news that I would be given the same opportunity. Growing up on a farm in Stewart, Minnesota, I have been around the ethanol and agriculture industries my entire life, and realized from a young age that it was the career path that I wanted to follow. When I was not driving a tractor through the fields for my dad, I was a seasonal maintenance worker at Heartland Corn Products, our local 100 MMgy ethanol plant in Winthrop, Minnesota. Through my experiences working on the farm and at the ethanol plant, I have been exposed to the agricultural aspect of what it takes to harvest a corn crop and deliver it to the plant, as well as the production side of how a plant turns corn into ethanol and animal feed. This summer I had the opportunity to see much of the behind-the-scenes work and in-depth analysis that RFA does as an organization. They have done an exceptional job keeping me busy; working on different projects and exposing me to the marketing, analysis, policy and research work that happens on a daily basis. Some of the projects I worked on include researching trends in the media’s coverage of ethanol, tracking warranties for small engines, tracing ethanol plant ownership history, and continually updating the team’s commodity market data and USDA crop progression workbooks. These experiences have helped me to better understand how the ethanol industry works, and have allowed me to complete the circle when it comes to exposure in the agricultural, production
8 | Ethanol Producer Magazine | SEPTEMBER 2015
and the behind the scenes operations in the progressive and innovative ethanol world. I didn’t spend all my time in the office, and had a few opportunities to do some traveling. I was able to return to my home state and attend the International Fuel Ethanol Workshop & Expo in Minneapolis. It was an eye-opening experience for me to see thousands of like-minded individuals, as well as attend seminars and gain valuable knowledge from people who have been in the industry for many years. I had an incredible opportunity to testify at the U.S. EPA’s public hearing regarding the renewable fuel standard in Kansas City, Kansas. I spoke about the positive impact that the ethanol industry has had in my community, as well as the vital role it plays for young farmers, like me, to return to their family farms. I attended the RFA board meeting in Washington, D.C., and I spent a week in Sturgis, South Dakota, assisting RFA with a major ethanol promotion featuring “Free Fuel Happy Hours.” I have known for quite some time now that agriculture will be my future, and I have always been aware of how crucial the ethanol industry is to farmers. But working with RFA has shown me the voice of the ethanol industry is passionate and hard-working. Every day has been an invaluable experience and it gives me motivation and comfort knowing the type of people that help make this industry successful. Author: Austin Ludowese Summer Intern Renewable Fuels Association 202-289-3835
DRIVE
US Biofuels Part of Food, Feed Global Solution By Tom Buis
Expanding the market for ethanol and its coproducts is a top priority for our industry. We’ve
created programs like Prime the Pump to build out the infrastructure for higher ethanol blends across the country and we’ve partnered with NASCAR for nearly 8 million miles of tough, competition racing to ensure that consumers are educated about these blends when they pull up to the pump. We’re also looking beyond our borders for market opportunities. Growth Energy has partnered with the U.S. Grains Council and the Renewable Fuels Association to create an Ethanol Foreign Market Development Steering Committee consisting of members of each organization and senior USDA Foreign Agriculture Service officials. With ethanol and DDGS exports representing about 10 percent of industry sales value, it is of critical importance that we actively explore potential new markets and pursue solutions to trade barriers. The steering committee focuses on providing educational information related to ethanol to our overseas representatives and customers, including USGC and Foreign Agriculture Service staff, initiating additional market assessment missions and engaging with current customers to expand foreign demand through a combination of overseas missions and bringing foreign ethanol industry teams to the U.S. Teams from the three organizations have participated in exploratory market development missions to China, South Korea, Japan, Mexico, Peru, Panama, the Philippines and Singapore to ascertain the potential to expand the export market for U.S. ethanol. Additional missions are in the planning stage for later this year and into 2016. Mission participants were able to meet directly with foreign private and government sector officials, as well as U.S. officials and USGC staff located in each of the countries, to discuss the advantages increased utilization of ethanol can provide in terms of reduced greenhouse gas and other toxic fossil fuel emissions, enhanced octane and consumer economic benefits. These efforts have been a resounding success—in 2014, the industry had a record number of DDGS sales overseas and the
second highest amount of ethanol exports in history. Through May, U.S. exports of ethanol totaled 377.1 million gallons, up about 5.75 percent compared to the same period in 2014, with a value of $801.2 million. U.S. DDGS exports totaled 4.5 million metric tons for the first five months of the year with an export value of $1.1 billion. We are working hard to ensure that these numbers continue to grow by expanding the market development efforts launched in 2014 through additional market analysis and development missions. We are expanding our collaboration with USDA and the Department of Commerce, as well as exploring the potential to broaden our industry exposure through activities such as the Asia-Pacific Economic Cooperation forum and the U.S.-China Biofuels Cooperation Memorandum of Understanding. We have been engaging in market expansion activities for our current trade partners, such as Peru and the Philippines, to support increases in the ethanol blending requirements and assess import constraints, such as infrastructure. We are also participating in technical exchanges and exploratory market development missions to countries that currently do not import U.S. ethanol but could benefit from a cleaner fuel that would improve the environment and reduce toxic engine emissions. Countries that are currently at the top of our list include India, China, Mexico and Colombia. In addition, we are continuing to pursue solutions to trade barriers such as EU countervailing duties, Colombian and Chinese import restrictions, Brazilian tax increases on imported ethanol and domestic content requirements that limit export potential to many countries. Fair trade is essential, and we are committed to working with the Office of the United States Trade Representative and others to resolve these issues. As we all know, cleaner burning, higher performing fuels and their nutritious coproducts are valuable at home and abroad, and have the potential to resolve many of the pressing environmental and public health issues faced by our friends across the globe. We are happy to be part of this solution and will continue to feed and fuel America and the world.
10 | Ethanol Producer Magazine | SEPTEMBER 2015
Author: Tom Buis
CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org
IS MADE HERE.
For years, we’ve been told that cellulosic ethanol is a “fantasy fuel.” And it is.
And now it’s going to change the world. For real.
So we’ve spent a decade planning, researching, and working hard to make that fantasy a reality. ®
POET-DSM.COM
Advanced Biofuels
GRASSROOTS VOICE
EPA Cannot Quit On RFS By Brian Jennings
I’d like to introduce you to some of the people who are proof that good things come when the U.S. EPA and other policymakers in Washington have the courage to do the right thing by the renewable fuel standard (RFS).
Take Jeff Oestmann of American Coalition for Ethanolmember East Kansas Agri-Energy LLC. Jeff ’s 11 years of service in the U.S. Marine Corps instilled a sense of leadership that guides him to this day as CEO of the Garnett, Kansas-based company. He works to fix problems and doesn’t give up. That explains how Jeff helped East Kansas Agri-Energy pursue technology innovations at their plant to make both ethanol and renewable diesel from the same feedstock. Thanks to the RFS, the company will eventually produce corn ethanol and advanced biofuel from one crop. Oil companies aren’t happy about that. They want to lead Americans down a different path, one without the innovation and economic benefits the RFS has sparked in communities like Garnett. For Jeff the RFS is a call to leadership. It is time EPA heeds that call as well. The people of Quad County Corn Processors, another ACE member, would be the first to tell you they were spurred on by the opportunity the RFS presented them to innovate. In fact, QCCP has quietly and humbly made cellulosic ethanol history. They were the first company in the world to produce cellulosic biofuel from corn kernel fiber and the first to commercially produce 1 million gallons of cellulosic biofuel. Like East Kansas Agri-Energy, Quad County is making two renewable fuels from one feedstock. They’re doing it without fanfare, just the devotion, ingenuity, and hard work of people in northwest Iowa like QCCP’s CEO Delayne Johnson and plant engineer Travis Brotherson. Why is it that EPA wants to put the brakes on this kind of innovation by helping oil companies block consumer access to E15 markets? Scott Zaremba, CEO of Zarco USA, knows more than most people what EPA and oil companies have done to make it hard for consumers to have access to E15 and flex fuels. He grew up in the fuel business and experienced oil company strong-arm tactics to stop renewable alternatives to gas. So in 2012 he called their bluff on
12 | Ethanol Producer Magazine | SEPTEMBER 2015
the so-called E10 blend wall, broke away from oil company contract restrictions, and became the first retailer in America to offer E15. Since that time, sales of E15 and flex fuels have grown at his stations scattered across Kansas. Oil companies are supposed to do the same thing—either allow E15 and flex fuel sales or buy renewable identification numbers (RINs) from other obligated parties. Of course, most oil companies haven’t done either. Instead, they’ve convinced some at EPA the blend wall is real and that limits must still be placed on consumer access to cleaner and more affordable fuels. We can only hope Scott and the several retailers like him who testified at the EPA hearing in Kansas City this summer can help open EPA’s eyes up to the benefits of letting the RFS work as Congress intended. Marietta Lakness is a South Dakota farmer and rancher who has seen up close the challenges rural America faces. That’s why she joined with her neighbors to invest in ACE-member Glacial Lakes Energy, their very own hometown biorefinery. Thanks to the RFS, Marietta and the 4,000 other investors in Glacial Lakes Energy have helped unleash a new chapter of prosperity for communities in northeast South Dakota. There’s a new market for her crops, new feed for her livestock, new fuel for her neighbors, and new dollars circulating throughout her community. People like Jeff, Delayne, Travis, Scott and Marietta aren’t just proof of the good things that come when Washington gets policy right. They are also trying to help EPA succeed in fulfilling the goals of the RFS. That’s why it is so mystifying that EPA is siding with oil companies who take the agency to court every time they roll out new renewable fuel blending targets. EPA cannot quit on the RFS. They cannot take sides with oil companies whose ultimate goal is to repeal the RFS. Doing so turns a program designed to promote innovation and clean air into one that chokes innovation and increases pollution. Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org
GLOBAL SCENE
COP21: Opportunity to Relaunch Biofuels Debate By Robert Wright
It’s time to relaunch the debate about the decarbonization benefits offered by biofuels. Last The
use of biofuel reduces damaging GHG emissions and lessens the dependency on oil use in transport. It therefore enables sustainable development and helps mitigate climate change. By fulfilling this core purpose, it provides an important link in the transition from a fossilfuel-dominated economy towards a new, innovative biobased economy. These are key tenets of the biofuel sector which, while often repeated, should not be forgotten. In July, a very long debate and an important chapter in Europe about the use of biofuels came to a close. Amidst all the noise, however, one key element was forgotten by policymakers—namely, that while strict sustainability rules were being agreed for biofuels put on the EU market, little to no discussion was taking place about the development of similarly strict sustainability rules for fossil fuels. The result of such political selectivity is that while the sustainability of biofuels is constantly improving and being challenged, the sustainability of fossil fuels is not. The fundamental purpose of biofuels is to reduce dependency on and use of oil—a finite, nonrenewable and polluting energy source that is the cause of much political instability in the world. While the search for sustainability perfection in biofuels may be a politically laudable objective for politicians, it is in danger of becoming self-defeating because the only fuel alternative to biofuels is more oil use and therefore more GHG emissions. As we head towards the United Nations climate conference in Paris, COP21, and as President Obama announces more ambitious climate change mitigation and prevention measures, we have an opportunity to relaunch the debate about biofuels while reminding global policy makers of the key tenets and advantages of promoting biofuels in contributing to the global fight against climate change. If we look at Europe, concerted action is needed to reduce transport emissions, given that transport is now the second biggest source of our GHG emissions. Since Europe signed the U.N.’s Kyoto Agreement, transport is the only sector where GHG emissions have continued to rise, with GHG emissions rising 36 percent from 1990 levels to now account for 26 percent of Europe’s total emissions. This is a problem of global dimension also because Europe is the third biggest contributor to global GHG emissions.
European ethanol is proven to have low indirect land use change (ILUC) impacts and reduces emissions by about 60 percent compared to petrol. It also already meets very strict sustainability criteria. Last year the use of our renewable fuel reduced Europe’s GHG emissions by 5 million metric tons, the equivalent to taking 3 million gasoline only cars off Europe’s roads for a year. Climate concerns and the positive role of ethanol as an alternative fuel are not unique to Europe. The challenge facing the world’s policymakers at COP21 is to agree to a climate deal that is achievable in a world of increasing mobility and transport emissions. In the battle ahead, biofuels are not a luxury that society can afford to ignore. Rather, they are a necessary tool to tackle climate change. In the short- to medium-term, biofuels are the only realistic and commercially viable carbon abatement solution to decarbonize transport fuels. There is no alternative to this sustainable fuel alternative. COP 21 must take this key fact on board. The U.N. has just agreed upon a set of new sustainable development goals for 2030 that will underpin its work. These goals include increasing the share of renewable energy and the phasing out of inefficient fossil fuel subsidies. COP21 must reach a deal that is consistent with, and actually helps implement, the U.N.’s new sustainable development goals. And, as Europe begins its own discussions on its climate and energy policy framework up to 2030, increasing the share of ethanol in the transport fuel mix is one of the best options available for decarbonizing transport. COP21 is an opportunity to acknowledge the fundamental role of biofuels in whatever climate deal is agreed upon. The debate in the lead up to this most crucial conference of parties in the past 20 years must focus on how we can best grasp the opportunities of biofuels in the most sustainable way possible. Author: Robert Wright Secretary General, ePURE, the European Renewable Ethanol Assoc. wright@epure.org
SEPTEMBER 2015 | Ethanol Producer Magazine | 13
BUSINESS BRIEFS LanzaTech has appointed Jean Paul Michel as executive vice president of strategy, finance and operations. He will lead a new team that will coordinate all core support functions of the Michel company as it enters the commercialization phase, including safety, finance, human resources, information technology and procurement. Michel previously served as global chief operating officer and group head of operations at OSRAM. The Renewable Fuels Association has named Tony Jackson communications director. He will be responsible for developing and managing the full range of RFA’s communications efforts, including advocacy-oriented communications approaches, traditional and social media strategies, and brand awareness. Jackson previously served as director of external affairs for the USDA’s Farm Service Agency, where he oversaw media relations and congressional relations. He also served as counsel and assistant counsel for the Agricultural Committee of the U.S. House of Representatives. The Biotechnology Industry Organization has announced it will change its name to the Biotechnology Innovation Organiza-
People, Partnerships & Deals
tion early next year. According to BIO, the new name will better express the essence of what its member companies represent.
Standlee Cummings aThe Biotechnology Industry Organization has elected 19 directors to serve on its board executive committee for the 2015-’16 term, including Christopher Standlee of Abengoa Bioenergy and Dan Cummings of PoetDSM Advanced Biofuels. Standlee, executive vice president of Abengoa Bioenergy will serve as the governing board chair of BIO’s Industrial & Environmental Section. Cummings, president of Poet-DSM Advanced Biofuels, will serve as the governing board vice chair of BIO’s Industrial & Environmental Section.
Joule has announced the issuance of an additional patent on the direct, continuous production of hydrocarbon fuels, extending its ability to target the highest-value molecules of the petroleum distillation process and gen-
erate them on demand from sunlight and carbon dioxide. U.S. Patent 9,034,629, issued May 19, covers both the cyanobacterium and the process for directly converting CO2 into medium-chain alkanes, which are the molecular basis of diesel, jet fuel and gasoline. Southern Research has named William Grieco as vice president of its energy and environment division. He will lead the division’s efforts toward cleaner and more efficient energy production, water research at Grieco the industrial and watershed level, new technology development for grid-scale energy storage, creation of carbon fiber production technologies from biobased sources, and new fuel source development from biomass and other feedstocks. Grieco previously served as director of innovation at Owens Corning in Granville, Ohio. Alco Bio Fuel, Messer and IJsfabriek Strombeek are investing €15 million ($16.28 million) in a carbon dioxide recovery unit at ABF’s ethanol plant at the Port of Ghent in Belgium. Captured carbon dioxide can be used in the food and drink industry, in water purification, for refrigerated transports, and as a chemical source. The system
Global Refractory Installers & Suppliers
Ethanol Services
www.globalrefractory.com info@globalrefractory.com
(715) 787-4495 Worldwide Expertise Extensive work in China and India 14 | Ethanol Producer Magazine | SEPTEMBER 2015
Emergency Repairs Equipment Installation Rigging Equipment Demolition/Removal RTO Media Replacement RTO Upgrade Millwrights Bricklayers Project Management New and Used Equipment
Refractory Repair & Installation Refractory Repair Gunning Hot & Cold Shotcrete Pump Casting
Duct Work Design Install Repair
Fiber Module & Lining Solutions
Hot Spot Repair: RTO TO Afterburners Heat Recovery Systems Boilers Solutions: GRIS 66 Topcoat GRIS Interlocking Hardware Guarantees the modules will stay in place
is expected to be operational next summer and will be able to recover at least 100,000 tons of carbon dioxide each year. Anitox has appointed Kim Schaefer as key account manager for Canada, as the pathogen control specialist operation continues to expand its products and services throughout the region. Schaefer Schaefer has more than 10 years of experience in the livestock feed industry and held several business development and account management roles before joining Anitox. Abe Hughes has joined Poet LLC as the senior vice president of business development. In this role, he will help guide Poet’s strategies for continued growth through independent initiatives and partnerships, both in the U.S. and abroad. Prior to joining Poet, Hughes served as vice president of North America for New Holland Agriculture and Construction. He has more than 20 years of corporate and entrepreneurial experience with agriculture, construction and pharmaceutical industry management and deal-making experience in a wide array of manufacturing, retailing and service industries.
SAFE.
The USDA has announced Jonathan Alboum as its new chief information officer, a position formerly held by Cheryl Cook, who retired in March. Alboum has held several positions with Alboum the General Services Administration and the chief information officer position for USDA’s Food and Nutrition Service. Before joining federal service, Alboum worked as a management consultant for PricewaterhouseCoopers and Ventera Corp. Erick Erickson, U.S. Grains Council vice president, retired in August after more than 30 years with the council. In his council tenure, Erickson has served in a variety of roles includErickson ing director of global strategies; executive director for membership, administration and communication; director of planning and evaluation; and vice president on two occasions. Prior to the council, Erickson was an international affairs officer at the USDA Scientific and Technical Exchange Division, Office of International Cooperation and Development.
Royal DSM has announced Atul Thakrar has joined the company as head of its Biobased Products & Services unit. Thakrar will take responsibility for DSM’s involvement in the emerging Thakrar biorenewables industry, including holding board positions on the Reverdia and Poet-DSM Advanced Biofuels joint venture boards. Thakrar previously served as president and CEO of Segetis Inc. Smithfield Food’s Hog Production Division, Murphy-Brown LLC, and Tyton Bioenergy Systems have announced a research partnership to develop new applications for Tyton’s dedicated nonsmoking tobacco crop and the resulting soil amendment, filtration, and feed products within Smithfield’s hog production processes. The companies are establishing field trials with nonsmoking tobacco using hog manure as fertilizer, and are pursuing development of ethanol products using tobacco as raw material rather than corn. asdf
Rail-Guard offers the highest degree of protection for ethanol railroad car containment and spill reclamation.
Call 1.877.658.5571 JCRAMSDELL.COM for your free review and quote. SEPTEMBER 2015 | Ethanol Producer Magazine | 15
COMMODITIES
Prices & Market Analyses
Natural Gas Report
Natural gas delivery change results in lower prices July 31â&#x20AC;&#x201D;The Rockies Express Pipeline (REX) went into service in 2009, running from Wyoming to Ohio. At the time, gas out west was relatively cheap, and the eastern supply sources were in decline. Six short years later, REX is in the process of reversing its flow. The rapid development of these resources is realigning the logistics of natural gas delivery in North America and means lower prices in the Midwest. At the time that REX went into service, Appalachian production was mainly offsetting declining conventional production that served the Northeast portion of the U.S. via long-haul pipelines from West Texas and the Gulf of Mexico. By 2012, production in Appalachia went exponential. Taking advantage of the trend toward regional oversupply, many pipeline systems raced to become bidirectional. By reconfiguring the compression capacity of the existing infrastructure, pipeline companies positioned themselves as potential outlets for excess Appalachian production. In much the same way that the growth of Marcellus and Utica production drove down regional prices in the northeast, the abundance of supply that is now pointed to proximate regions is poised to lower the cost of natural gas in the future for other parts of the country. The REX
by Ben Straus
backhaul is just one of many projects seeking to provide an outlet for excess northeast production, but it is one of the first largest, and longest pipeline reversals. The bottom line for Midwest natural gas consumers is that a supply alternative creates competition and is in the process of driving down prices for Midwest consumers.
Corn Report
Corn prices remain volatile ahead of harvest
by Jason Sagebiel
July 31â&#x20AC;&#x201D;The corn market caught a 53-cent rally from the end of control of the market at this time and will keep the market choppy and June to mid-July. However, the price did a turnabout within 10 days, volatile this summer. Other factors will impact corn trade ranges includdown about 51 cents. During this time, the managed money went from ing soybeans, the U.S. dollar, global production and geopolitical issues. a short position in corn to holding a long position in corn. The upside momentum was in full force as excess rains were causing more planting delays or flooding preventing plantings (for soybeans, in particular). In addition, crop ratings were being affected by excess moisture, in particular areas across southwest Iowa, north and central Missouri, central Illinois and stretching east into Indiana and Ohio. The forecast by mid-July had changed and appeared to be more conducive for crop development and late plantings. Exports may be an area of confusion as an increasing U.S. dollar may create entry point issues. However, trade will monitor weather in Eastern Europe and planting ideas in South America. When the corn market rallied, producers responded and made sales. As a consequence, the corn basis relaxed rather quickly. As futures prices declined, the corn basis steadied and strengthened in selected markets. Therefore, the flat price will determine when producers will make cash sales for the rest of the summer and for new crop. Managed money is in Comments in this column are market commentary and are not to be construed as market advice.
16 | Ethanol Producer Magazine | SEPTEMBER 2015
Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.455
DDGS Report
Spot
Rack
West Coast
1.605
1.700
Midwest
1.445
1.715
East Coast
1.515
1.753 SOURCE: DTN
DDGS prices drop, renewing interest in domestic markets July 31—As August approached, values in the DDGS market have rebounded a bit. Chinese cargoes, which last month looked to be a lot more at risk of getting executed, either did get shipped, or got rolled to a deferred month. Values dropped to the point that the domestic demand, which had previously been priced out of local rations, began to work their way back in. Container demand never dropped, so the lower prices created additional interest from other Southeast Asian destinations. The month of July saw river conditions similar to those at the end June, which led to a tightness in barge availability, and increased prices in the gulf, which continued throughout the course of the month. Given the large volume that had been sold
Region
Regional Gasoline Prices ($/gallon) by Sean Broderick
for the second and third quarters to the bulk market, the river conditions were especially influential. Even with the business that rolled, or got delayed, there was still a lot of tonnage that loaded out in bulk. Looking ahead, the biggest factor that is going to influence the price of DDGS in the U.S. is the price of corn and soymeal, and all eyes will be on crop conditions here. But the policies in China also bear watching as well. They have a burdensome amount of corn in storage, and a good crop on the way. How that supply issue gets solved is sure to impact their demand for U.S. DDGS.
Front Month Futures Price (RBOB) $1.823 Region
Spot
Rack
West Coast
1.985
1.946
Midwest
1.806
1.765
East Coast
1.624
1.878 SOURCE: DTN
DDGS Prices ($/ton) LOCATION
Sep 2015
Aug 2015
Sep 2014
Minnesota
140
120
95
Chicago
175
157
105
Buffalo, N.Y.
170
160
130
Central Calif.
200
195
163
Central Fla.
195
178
140 SOURCE: CHS Inc.
Corn Futures Prices
(September Futures, $) Date
Close, bu.
Close, ton
July 24, 2015
3.93
140.18
June 24, 2015
3.72
132.68
July 24, 2014
3.62
129.11 SOURCE: FCStone
Cash Sorghum ($/bushel) Location
Ethanol Report
Ethanol prices decline, follow outside markets July 31—Ethanol futures posted a strong 20-cent-per-gallon price retraction in the latter half of July, following aggressive pressure in corn prices and most outside markets. As of July 27, RBOB gasoline futures had fallen over 30 cents from season highs set in early July. The Dow Jones Index moved well below 18,000 points following the aggressive 600-point slide in late July. There is growing uncertainty about just how much additional buyer support will be seen in energy markets as gasoline and crude oil prices have slowly but steadily eroded through the latter half of July.
by Rick Kment
This points to additional market pressure in both wholesale and retail prices. Although both ethanol and RBOB gasoline prices are still well-above longterm support established in early 2015, the ability of prices to retract from midsummer gains and the speed at which they did so created some additional concerns that long-term support may be hard to find over the next several weeks and months.
July 23, 2015
June 26, 2015
July 25, 2014
Superior, Neb.
3.83
4.13
3.55
Beatrice, Neb.
3.78
4.18
3.28
Sublette, Kan.
4.08
3.89
3.53
Salina, Kan.
4.16
4.28
3.52
Triangle, Texas
4.13
4.04
3.55
Gulf, Texas
5.41
5.85
5.04
SOURCE: Sorghum Synergies
Natural Gas Prices ($/MMBtu) LOCATION
May 31, 2015
Aug 2, 2015
Aug 3, 2014
NYMEX
2.64
2.82
3.81
NNG Ventura
2.57
2.84
3.86
Calif. Citygate
2.67
3.16
4.51
SOURCE: U.S. Energy Services Inc.
U.S. Ethanol Production (1,000 barrels) Per Day
Month
End Stocks
May 2015
957
29,666
20,120
Apr 2015
930
27,910
20,787
May 2014
937
29,039
18,117
SOURCE: U.S. Energy Information Administration
SEPTEMBER 2015 | Ethanol Producer Magazine | 17
DISTILLED
Ethanol News & Trends
US ethanol production breaks weekly record U.S. ethanol production set a new record the week of June 19, when production averaged 994,000 barrels per day. The new record comes only two weeks after the previous weekly record of 992,000 barrels per day was tied. U.S. ethanol producers repeatedly broke the record for ethanol production last year. The week of June 13, 2014, the U.S. produced 972,000 barrels per day of ethanol, breaking a production record set several years earlier in late 2011. The week of Nov. 21, the record was again broken with 982,000 barrels per day of ethanol
USDA updates loan guarantee program
production. In December, new records were set three consecutive weeks, with average daily production of 988,000 barrels per day the week of Dec. 5, 990,000 barrels per day the week of Dec. 12, and 992,000 barrels per day the week of Dec. 19. The week of June 5, the industry tied the 992,000 barrels per day record.
Some chemical companies focus on this
The USDA recently published an interim final rule for the Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program, formerly known as the Biorefinery Assistance Program. The rule incorporates changes required by the 2014 Farm Bill and comments received on the interim final rule published in February 2011. The interim rule introduces several major changes to the loan guarantee program. Most significantly, the program is now open to renewable chemical and biobased product manufacturers. The initial version of the program, the Biorefinery Assistance Program, has funded a variety of biorefinery projects. Sapphire Energy was awarded the first loan guarantee under the program in 2009. The Fremont Community Digester and Ineos New Planet Bioenergy received awards in 2011, while Fulcrum Sierra Biofuels LLC and Cool Planet were each awarded loan guarantees in late 2014.
or that
Buckman takes a wider view. Some chemical companies focus only on process. Some focus solely on water treatment. Buckman takes a comprehensive approach and looks at the bigger picture — return on investment and environment. We look at every aspect of your plant’s operation,
© 2014 Buckman Laboratories International, Inc. All rights reserved.
18 | Ethanol Producer Magazine | SEPTEMBER 2015
tailoring chemistries to boost production and increase profitability — from evaporator efficiency to corn oil recovery to water treatment issues. To find out more or to schedule a system audit, contact your Buckman representative or email ethanol@buckman.com.
.
DISTILLED Boardman, Oregon
EPA approves 9 efficient producer pathways In July, the U.S. EPA approved nine additional efficient producer pathways under the renewable fuel standard (RFS), bringing the total number of plants that have achieved the status to 40. Producers with approved efficient producer pathways have successfully petitioned the EPA to recognize their ethanol yields and energy efficiencies are resulting in greenhouse gas (GHG) emissions that are at least 20 percent less than the baseline gasoline value set in the RFS. The designation allows the ethanol producers to generate renewable identification numbers (RINS) on additional gallons above the volume that was grandfathered in under the RFS. Among the nine new plants to receive efficient producer pathway approval are Valero Energy Corp.â&#x20AC;&#x2122;s plants in Charles City, Iowa, and Aurora, South Dakota; One Earth Energy LLCâ&#x20AC;&#x2122;s plant in Gibson City, Illinois; Iroquois Bio-Energy Co. LLCâ&#x20AC;&#x2122;s plant in Rensselaer, Indiana; Adkins Energy LLCâ&#x20AC;&#x2122;s plant in Lena, Illinois; East Kansas AgriEnergy LLCâ&#x20AC;&#x2122;s in Garnett, Kansas; Nugen Energyâ&#x20AC;&#x2122;s plant in Marion, South Dakota; Poet Biorefiningâ&#x20AC;&#x2122;s plant in Laddonia, Missouri; and Ring-Neck Energy & Feed LLC, a proposed plant in Onida, South Dakota.
40 MMgy plant
Aurora, Nebraska
Stockton, California
110 MMgy and 45 MMgy plants
60 MMgy plant
Burley, Idaho 60 MMgy plant
Pekin, Illinois
Madera, California
100 MMgy and 60 MMgy plants
40 MMgy plant
Pacific Ethanol, Aventine complete merger Pacific Ethanol Inc. announced the completion of its merger with Aventine Renewable Energy Holdings Inc. on July 1, roughly six months after the transaction was first announced. Under the terms of the agreement, Aventine stockholders received 1.25 shares of Pacific Ethanol common stock for each share of Aventine common stock owned at closing. As a result, Pacific Ethanol issued approximately 17.76 million shares in the merger, resulting in 42.5 million total shares outstanding as of July 1. â&#x20AC;&#x153;We are pleased to complete this transformative acquisition, establishing Pacific Eth-
anol as the sixth largest producer of ethanol in the United States,â&#x20AC;? said Neil Koehler, president and CEO of Pacific Ethanol. â&#x20AC;&#x153;In addition to more than doubling our ethanol production capacity, this synergistic transaction expands our geographic footprint, leverages our existing infrastructure to reach new markets and customers and enhances our overall scale and coproduct diversification.â&#x20AC;? The merged company has a total of 515 MMgy of combined capacity.
([SHULHQFH WKH GLIIHUHQFH 2QH FDOO 2QH VHUYLFH SURYLGHU 2QH H[SHULHQFH 6HUYLQJ DOO RI \RXU LQGXVWULDO FOHDQLQJ QHHGV 9LVLW +\GUR .OHDQ FRP WR YLHZ RXU SURMHFW OLEUDU\ DQG OHDUQ PRUH DERXW WKH YDOXDEOH VHUYLFHV ZH KDYH WR RIIHU
2XU VHUYLFHV LQFOXGH Ă&#x201E; (QWLUH HQHUJ\ FHQWHU GLVWLOODWLRQ
Ă&#x201E; 6LHYH EHDG UHPRYDO VHSDUDWLRQ
Ă&#x201E; 6WRUDJH WDQN VHUYLFHV LQWHULRU
Ă&#x201E; *UDLQ ELQ VLOR YDFXXP VHUYLFHV
FOHDQLQJ
H[WHULRU WDQN FOHDQLQJ WDQN LQVXODWLRQ DQG Ă RDWLQJ URRI OHJ SLQQLQJ
DQG GLVSRVDO
Ă&#x201E; 3URFHVV SLSH FOHDQLQJ Ă&#x201E; 'U\ LFH EODVWLQJ
_ 'HV 0RLQHV _ 0DQNDWR _ 5RJHUV _ 6LRX[ )DOOV _ :DWHUWRZQ SEPTEMBER 2015 | Ethanol Producer Magazine | 19
DISTILLED
LanzaTech plans ethanol project in Belgium ArcelorMittal, LanzaTech and Primetals Technologies recently entered into a letter of intent to construct the first commercial-scale production facility in Europe to manufacture ethanol from waste gases produced during the steelmaking process. According to LanzaTech, the proposed facility will have the capacity to produce 47,000 tons of ethanol each year. Each ton of ethanol can displace 5.2 barrels of gasoline while reducing carbon dioxide emissions from ArcelorMittal’s operations by 2.3 tons. Construction of the €87 million ($95.73 million) pilot project, located at ArcelorMittal’s steel plant in Ghent, Belgium, is expected to begin this year, with bioethanol production scheduled to start in mid-2017. Construction will be in two phases. Phase one will result in an initial capacity of 16,000 tons of ethanol per year by mid-2017. Phase two, completed in 2018, will increase the plant’s capacity to 47,000 tons of ethanol per year.
DuPont technology to power cellulosic plant in China DuPont and Jilin Province New Tianlong Industry Co. Ltd. recently announced a licensing agreement to develop a cellulosic etha- CELEBRATING FUTURE DEVELOPMENT: Jan Koninckx of nol plant in Siping City, Jilin DuPont (left) and Sun Guojing of New Tianlong Industry Co. Ltd. Province, China. The agree- sign a cellulosic ethanol collaboration agreement. ment allows NTL to license PHOTO: DUPONT DuPont’s cellulosic ethanol technology and use its Accellerase enzymes renewable fuels in their region,” said Jan to produce ethanol from corn stover. NTL Koninckx, global biofuels leader for Duis working to secure necessary government Pont Industrial Biosciences. “We are honapprovals and support to implement the ored to have found such a strong partner in NTL. The company’s reputation for agreement. “As we bring online the largest and producing world-class grain ethanol makes most sophisticated cellulosic facility in the it a superior candidate to put DuPont’s adworld, in the state of Iowa, in the United vanced technology to work to realize the States, we are simultaneously working additional economic and environmental with leaders who share the same vision benefits of cellulosic biofuel in China.” of producing the next generation of clean
www.leaftechnologies.com
When you’ll head to cellulosic ethanol you’ll want to de-risk your fermentation process. CelluXTM is Leaf Technologies bioengineered yeast with proven results in operating second generation ethanol plants. Pioneers chose CelluX™ in their fermentation operations, so should you. Because when it comes to reliability, performance and yield, CelluX™ makes the difference.
reliability
performance
yield
DISTILLED
EPA publishes expanded RIN data
EIA updates capacity data
The U.S. EPA has begun publishing new renewable identification number (RIN) data. In early July, the agency released RINs sales data aggregated by renewable fuel standard (RFS) party type for the first time. â&#x20AC;&#x153;[This] release provides new annual data aggregated by type of organization selling the RIN or holding the carry-over RIN,â&#x20AC;? said the EPA. â&#x20AC;&#x153;EPA is providing this data to increase the transparency of the RIN market under the RFS program.â&#x20AC;? The agency intends to update the RIN sales data on an annual basis. According to the EPA, the data shows RINs are traded an average of 1.8 times by nonrenewable volume obligation (RVO) parties, while obligated account for one RIN sale on average. â&#x20AC;&#x153;The RIN holdings data show that the majority of the RINs are ultimately acquired and held by obligated parties to meet compliance obligations or to carry-over to future years,â&#x20AC;? said the EPA. The EPA also noted that while the total volume of RIN sales has risen over the years with increasing mandates, the overall pattern of RIN sales has remained largely consistent on a year-to-year basis.
The U.S. Energy Infor- PADD 2 13,151 12,504 mation Administration recent442 442 ly released updated data on U.S. PADD 3 190 190 fuel ethanol plant production PADD 4 capacity. The EIA reports that PADD 5 510 285 as of Jan. 1, the U.S. was home SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION to 195 ethanol plants with a combined capacity of 14.757 billion gallons. Capacity has increased pacity in 2014. Plant and capacity numcompared to Jan. 1, 2014, when the U.S. bers have held steady in PADD 3, the had 187 ethanol plants with a combined Gulf Coast, and PADD 4, the Rocky capacity of 13.681 billion gallons. Mountain region. PADD 3 has five ethaPADD 1, which includes the East nol plants with a combined capacity of Coast, currently has five ethanol plants 442 MMgy, while PADD 4 has five plants with 464 MMgy of capacity, up from with a combined capacity of 190 MMgy. 3 plants and 260 MMgy of capacity in The number of plants in PADD 5, which 2014. Capacity also increased in PADD includes the West Coast, has held steady 2, which includes the Midwest. PADD at seven. However, capacity increased 2 currently has 173 plants and 13.151 from 285 MMgy in 2014 to 510 MMgy billion gallons of capacity, up from 167 in 2015. plants with 12.504 billion gallons of ca-
U.S. nameplate capacity (in MMgy) PAD District
2015 capacity
2014 capacity
464
206
PADD 1
3URFHVV 7HFKQRORJLHV
3URWHLQ IURP 6WLOODJH
<HDUV RI )XOO 6FDOH 2SHUDWLRQ 06&Â&#x152; 7HFKQRORJ\
3DWHQWHG 6\VWHP 3DWHQWHG (TXLSPHQW
6WLOO3UR Â&#x152;
Â&#x2021; &RQVLVWHQWO\ 7UDGHV DERYH 6R\EHDQ 0HDO Â&#x2021; <HDU 52, Â&#x2021; ,QFUHDVH LQ 2LO <LHOG Â&#x2021; 3ODQW 7KURXJKSXW *DLQ
3URWHLQ 3XULW\
ZZZ )437HFK FRP 86 3DWHQW
SEPTEMBER 2015 | Ethanol Producer Magazine | 21
E85 MARKET
22 | Ethanol Producer Magazine | SEPTEMBER 2015
E85 MARKET
Consumers Attracted
by Value, Convenience Getting the right business model drives E85 sales. By Susanne Retka Schill
The Corn Belt might be where most ethanol gets produced, but the bulk of potential consumers are on the urban coasts.
Protec in the East and Propel in California are learning what it takes to drive E85 sales. With both companies reaching about a decade of experience in working out their business models, each is seeing solid growth in the number of locations served and volumes handled. In California, Propel’s model is to partner with strategically located retailers with space to add a fuel kiosk offering Propel’s Flex Fuel E85 and, in many cases, renewable diesel. “We build, own and operate,” says Rob Elam, CEO. “We have found very, very little cannibalization of existing customers when we go onto a gas station site, so it’s almost all new customers. We give them a base rent and a revenue share of the upside of gallons. We offer them more C-store purchases, additional branding and visibility and media attention.” The company has 47 E85 kiosks in prime California markets. Elam reports the E85 typically outsells the midgrade and premium offered on the traditional gas stations pumps, “many times by a lot.” Further East, Protec has built on the business started in 1999 to serve small and midsize retailers and fleets as their equipment and fuel supplier, along with risk management services. Offering a turnkey operation to a retailer drives its business model, CEO Todd Garner explains. “Once the retailer determines they’re going to put in the money, they don’t have to do another thing. We pull all the permits; we do all the construction; we change out all the signage; we bring in the dispensers. We deliver the fuel and we price the fuel out.” Protec helps the retailer access any available grant money and will invest in the project as well. Educating the gasoline-oriented retailer comes first, Garner says. “Nothing ever changes in the gasoline business, they only know it to work one way, but the E85 market doesn’t necessarily work that way. There’s a lot more moving parts.” Retailers need to understand the economics and what it takes to move the product, as well as embrace the advantages of higher ethanol blends. “We will not take a retailer in unless they follow our model,” he adds. “Over the last decade we’ve gone through all these iterations on how to make it work and we feel we finally have the right model to be successful.”
SEPTEMBER 2015 | Ethanol Producer Magazine | 23
E85 MARKET
Propel Fuels 47 E85 pumps 2014 E85 sales: 7.8 million gallons California 2009-’14 E85 growth: 600%
SOURCE: PROPEL
Price and Convenience
Garner and Elam both stress that success in offering E85 requires managing the pricing of the fuel, selling the product at a big enough discount to gasoline to drive the business forward. That means moving away from the spot market and relying upon risk management tools to maintain the needed spread between gasoline and ethanol. Both companies are blenders, separating the renewable identification number (RIN) and passing its value along to the consumer and managing that price risk as well. “It’s not a simple thing to do,” Garner says. In one area Protec serves, they’ve even seen a major oil company struggle to price E85 competitively. “They’re fluctuating with the market, going up and down and their price of ethanol could be only 20
24 | Ethanol Producer Magazine | SEPTEMBER 2015
cents under gasoline when ours is consistently 40, 60, 80 cents below,” Garner says. That spread between gasoline and E85 may seem low to Midwesterners, Garner admits, “but we’ve got a lot of cost to get the ethanol to those locations.” Getting the infrastructure in place to keep logistic costs down has been a big part of Protec’s expansion strategy. Garner reports having nearly 400 retailers interested in the Protec program, but those in places lacking infrastructure won’t be economically feasible until the logistics are aligned. Some areas, like Atlanta and parts of Florida, now have the logistics in place and are seeing strong E85 growth. While California is known for its tough environmental regulations, the state’s consumers are much like anywhere
E85 MARKET
Protec Fuel Serving more than 300 stations in 15 states
For all your Automation, DCS, IT, and Data needs. We offer control system migrations with a payback, IT support you can count on, plant wireless that takes your DCS and field personnel to the next level, the industry’s best data portal for all your plant’s information, second to none in DCS service and support, and wireless machine health, among many other Automation, IT and Electrical services.
2014 E85 sales: 18 million gallons 2006-’14 E85 growth: 160%
SOURCE: PROTEC
else in the U.S., Elam says. “People are not paying a premium for environment. It’s about price. It’s about convenience.” The company’s commitment to its customers is to deliver consistent value. “We have sophisticated strategies on the supply side that positions the product where we think it needs to be at a discount to gasoline,” Elam says. “And we do that consistently.” There are a couple of pieces to Propel’s pricing strategy, Elam adds. One is threshold pricing, which he describes as when the prices cross from $2.50 to $2.51 or $3.99 to $4. The second component is the discount to gasoline on a percentage basis, which Propel keeps in the 15 percent ballpark. Elam adds that the mileage reduction from using E85 is not nearly as bad as people say.
“To a large extent ethanol and E85 has been unfairly characterized as having this 25 percent mileage loss and it needs to be priced accordingly. The 25 percent number is inaccurate and the pricing is a market based logic,” he explains. The actual mileage reduction will vary from car to car, he says. “It’s clearly not a 1 to 1 relationship based on energy density. That should be no surprise. Any fuel has variable performance when it’s in use based on environmental conditions or duty cycle.” Customers will pay what they think they should pay for a product in the marketplace, he continues. “You have people paying $135,000 for an electric car—that seems to be mispriced product, if you ask me.”
(605) 428-4300 www.Direct-Automation.com SEPTEMBER 2015 | Ethanol Producer Magazine | 25
CONVERSION PROGRESS: Once a station agrees to the program, Protec manages permits, pump installation, fuel supply and pricing. PHOTO: PROTEC
Getting the Word Out
“It’s really about educating the customer,” Elam says. “The customer seeing the value, understanding the value and wanting the product. That combined with the pricing will get you a satisfied customer.” And, while customers will buy as low as a company is willing to go, Elam cautions against going too low. “You don’t want to box yourself in. You’re not going to have a valuable product going forward, if you’re bouncing off the bottom. If it’s going to be a sustainable growth product and market, it’s got to be priced fair for everybody. And that includes the retailer.” It requires relentless effort to attract new E85 consumers, convincing them the fuel is better and removing barriers. That
E85 MARKET
includes aggressive marketing of the benefits of ethanol, strong branding on site, direct mail campaigns and 24/7 customer service, he says. To remove a barrier for first-time customers, Propel calls the fuel Flex Fuel E85 to match up with the labeling on vehicles that mention the one but not the other. Propel also offers a store locator app that gives real-time pricing and information on which vehicles are FFVs. Interested customers can track their renewable fuel use through the company’s CleanDrive software. Elam adds that an interesting customer base for CleanDrive are fleets trying to hit goals for greenhouse gas reductions and air quality improvement. Garner concurs with his western counterpart on the importance of consumer education. “We do everything we can to get the word out. We spend a lot of time, whether it be through mailings or through apps, or trying to educate consumers at the station using brand ambassadors.” Protec works with the Clean Cities Coalition, distributes news releases and sends out postcards to local residents. For the past year, Protec has also been working with Prime the Pump in the nonprofit’s mission of expanding E15 locations. As E15 is not yet available from terminals, that has meant adding blender pumps so E85 is available to blend into E15. As a result, sales of both are growing, Garner says. “Not only have we seen E15 take off, but we’ve seen an increase in our E85 business, because now it’s more convenient. It’s at every dispenser instead of just one.” Education for those other than the local consumer is important, too. “We started to notice some significant divergence from what the market assumptions were and the general narratives and what we were seeing,” Elam says. “We wanted to help the industry overall, and the policymakers understand what was really happening.” While sales volume and customer demographics are normally confidential information, Propel released a white paper in June titled “E85: A California Success Story,” to share what it’s learned about its E85 customers. “When we realized that Propel pumps sell 10 times the national average on a per pump basis and we have single dispensers selling
over 50,000 gallons a month, which has got to be the highest in the country, and that we have a way of attracting and retaining customers to our high-blend ethanol product that nobody else seems to be able to figure out—we wanted to release information about those facts,” Elam says. In addition to helping the industry and national policymakers think about how the E85 offering can be improved, the Propel white paper is also aimed at California, which is preparing to distribute $2.2 billion in cap-and-trade revenue this year to low-carbon projects. The social equity side of carbon accounting needs to be a part of the discussion, Elam says. “You can see in the white paper what the average incomes are, what the demographic breakdown is. For instance, in the Central Valley and Inland Empire of the Los Angeles basin, 49 percent of our customers are Latino, which in California compares to 37 percent of the
overall population being Latino.” Fairness is a strong value in California, Elam says, and E85 is a means of bringing renewable energy benefits to working and middle class citizens today. He argues California needs to balance its investments in expensive new technologies for the future, like hydrogen, with renewable energy that’s available now. Ethanol can help the state meet the Low Carbon Fuel Standard and the new goal recently announced by the governor to cut the state’s petroleum use in half by 2030, Elam says. His personal goal is to see just how much E85 California can consume. After all, the state is the third largest petroleum market in the world, behind the U.S. as a whole and China. Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com
To expand your product, near or far, from your facility: Protec Fuel leads the way with turnkey solutions for retail and fleet ethanol fueling: • Station installation • Fuel supply • E15-E85 • RINS and hedging • All things in between, from analysis to transportation to marketing
“The Future of Fuel” www.protecfuel.com
Twitter: @ProtecFuel | Facebook: Protec Fuel
(561) 392-3667
SEPTEMBER 2015 | Ethanol Producer Magazine | 27
NU C-STORE: Matt Lee, manager of the NuVu Fuels C-store, left, and Mitch Miller, CEO of Carbon Green Bioenergy LLC, stand in front of the gas station, which is expected to open for business in September. It is located only seven miles from parent company Carbon Green BioEnergy. PHOTO: GREEN FROG PHOTO
28 | Ethanol Producer Magazine | SEPTEMBER 2015
RETAIL
Producers Tackle
Blend Wall A small number of ethanol producers sell E85 and other ethanol blends directly to consumers with on-site blender pumps or, in a few cases, own retail gas stations. By Holly Jessen
Mitch Miller, CEO of Carbon Green Bioenergy LLC, believes more ethanol producers should start selling the fuel they produce directly to consumers.
“I really believe, as leaders in the industry, we have to complete the supply chain,” he says. “There’re many ways to do that, but the way you best learn about the supply chain is actually being in it yourself. I’ve learned much more about how the system works, how the margin works, how the supply chain works, and how I can best fulfil the needs of that supply chain to actually break the blend wall, by actually being in it myself. Part of this is just, I needed to learn about this because it’s way better than secondhand information.” The 50 MMgy ethanol plant located in Lake Odessa, Michigan, sells E85 and other blends at a blender pump located on the ethanol plant grounds. But the company’s newest venture into the retail world is to own and operate two of its own convenience store locations, where it will offer Michigan drivers ethanol blended fuel as well as the snacks and drinks typically sold at C-stores. As was written about in Ethanol Producer Magazine previously, Carbon Green is also part of a small group of ethanol producers that sells E85 directly to area retailers. Carbon Green calls that its Yellow Hose Program, which supplies more than 30 area gas retailers with E85. Direct sales to the consumer are, however, a related but slightly different project Carbon Green took on about the same time. It’s all part of the company’s strategic diversification plan, Miller says. EPM talked to several ethanol producers selling direct to consumers in Michigan, Nebraska, Indiana, Wisconsin and Minnesota. While there are others, so far, only a small percentage of the industry is in the direct-sales business, whether to gas retailers or consumers. So what’s holding them back? “As producers, we are constantly focusing on inside our walls, and there are opportunities outside our walls,” Miller says, adding
SEPTEMBER 2015 | Ethanol Producer Magazine | 29
ANEW WAY TO BUY FUEL: Zeeland Farm Services built this travel center which offers drivers E10, E15, E30 and E85, across the street from the ethanol plant it owns in Cambridge, Nebraska. On July 30, the company announced it would build another Anew fueling station and convenience store in Ottawa County, Michigan. PHOTO: ANEW BUSINESS DEVELOPMENT
0RUH 67($0 0RUH <,(/'
'LG \RX NQRZ WKDW 9LFWRU\ (QHUJ\ ERLOHUV DUH RSHUDWLQJ LQ PRUH WKDQ RI WKH HWKDQRO SODQWV DFURVV 1RUWK $PHULFD" 1R ERLOHU VXSSOLHU NQRZV \RXU ERLOHU URRP RSHUDWLRQ EHWWHU
)2//2: $ /($'(5
8SJUDGH \RXU IDFLOLW\ QRZ DQG WDNH DGYDQWDJH RI DGYDQFHG WHFKQRORJLHV WKDW 9LFWRU\ (QHUJ\ KDV HQJLQHHUHG DQG EXLOW LQWR PRGHUQ GD\ ERLOHUV DQG KHDW UHFRYHU\ V\VWHPV WKDW DUH GHVLJQHG WR \LHOG PRUH VWHDP ZLWK JUHDWHU HIILFLHQFLHV
RETAIL that, while itâ&#x20AC;&#x2122;s a step he believes is worth taking, it does take a leap for ethanol producers to go into other markets.
The E-store
In late July, a newly constructed C-store and gas station was to open for business in Ionia, Michigan, just seven miles from Carbon Green, Miller says. Branded NuVu Fuels, it will offer drivers E10, E15, E25, E85 and, possibly, E50, Miller said. Gasoline supplier Petersen Oil and Propane is a partner with NuVu Fuels Retail. The ethanol will come from Carbon Green, through its Yellow Hose program. At about the same time, the company hopes to close on the acquisition of an existing gas station in the Grand Rapids, Michigan, area, he adds. The acquisition was pending in late July. The goal is to reopen that gas station, which will be rebranded as NuVu Fuels as well, by Memorial Day 2016. There are multiple motivating factors behind what the company is doing, Miller says. First, the goal is to â&#x20AC;&#x153;do our part to take down the blend wallâ&#x20AC;? by increasing consumersâ&#x20AC;&#x2122; access to higher-level ethanol blends. Secondly, itâ&#x20AC;&#x2122;s about educating consumers about the benefits of ethanol. Finally, itâ&#x20AC;&#x2122;s about promoting a homegrown, domestically produced fuel. â&#x20AC;&#x153;Iâ&#x20AC;&#x2122;ve been in the ethanol industry over 20 years and our main goal has always been to do our part to contribute to energy independence,â&#x20AC;? he says.
,QVWDOODWLRQ RI EDIĂ H DVVHPEO\ UHTXLUHV UH X H UHTXLUHV PLQLPDO GRZQ WLPH DQG FRVW DDQG FRVW QG FRV G FRVW
5HWURĂ&#x20AC;W 6ROXWLRQV IRU (QKDQFHG +HDW 5HFRYHU\ 'XH WR (WKDQRO SODQWV VWULYLQJ WR LQFUHDVH VWHDP SURGXFWLRQ IRU KLJKHU FDSDFLWLHV VV 9LFWRU\ (QHUJ\ KDV GHYHORSHG LGHDO UHWURĂ&#x20AC;W VROXWLRQV WKDW UHPRYH PRVW FRQVWUDLQWV RI QWV R QWV RI QWV RI RULJLQDO HTXLSPHQW GHVLJQ 2XU EDIĂ H DVVHPEO\ LPSURYHV +56* SHUIRUPDQFH E\ LPSURYLQJ Ă RZ GLVWULEXWLRQ RI WKH R RI WKH RI WKH Ă XH JDV RYHU +56* KHDW WUDQVIHU VXUIDFHV 7KH LQFUHDVHG KHDW WUDQVIHU SURPRWHV HVV V PD[LPXP SURGXFWLRQ UDWHV ZKLOH GHFUHDVLQJ IXHO XVDJH )LQG RXW KRZ WR 237,0,=( DQG 021(7,=( \RXU ERLOHU URRP RSHUDWLRQ
3UH IDEULFDWHG EDIĂ H 3UH IDEULFDWHG EDIĂ H 3UH IDEULFDWHG EDIĂ DVVHPE DVVHPEO\ DVVH E\
RETAIL
EARLY ADOPTER: Corn Plus Co-Op & LLLP in Winnebago, Minnesota, has had on-site unmanned fuel dispensers for more than a decade. The company sells E10, E15, E20, E30, E40 and E85 from four blender pumps. PHOTO: CORN PLUS
Another example of the direct-sales model was put into place in 2013 by a diversified agribusiness and transportation company. Family-owned Zeeland Farm Services made the leap to selling ethanol blends direct to drivers when the company built a 24-hour travel center across the street from Nebraska Corn Processing ethanol plant, in Cambridge, Nebraska, says Beth Westemeyer, director of Anew Business Development. The 44 MMgy plant is a subsidiary of Zeeland Farm Services, which restarted the idled facility in spring 2010. Ethanol blends sold at Anew Travel Center, including E10,
E15, E30 and E85, are blended from ethanol produced across the street. The close proximity of the two businesses has been mutually beneficial. “We are able to save in many areas and work together to benefit both the plant and the fuel stop,” she said. “Savings on transportation, as well as a direct supply of ethanol, are two large advantages.” The company considers the venture a great success. “Consumers have taken well to the new business plan of selling ethanol blends as opposed to regular, midgrade and premium,” she says. “As we have continued
to educate the consumer on these blends, we have seen an increase in our higher blends. Our E10 and our E85 are the highest sellers, but we are seeing an increase in E15 as well.” But that’s not the only location where Zeeland Farm Services sells ethanol blends. The company purchases E85 through Carbon Green’s Yellow Hose program and sells it at a fuel dispenser at its headquarters in Zeeland, Michigan. Part of the motivation for both these projects is to educate consumers about ethanol and its benefits. Another aim is to increase market access to the fuel. “After becoming involved in the ethanol industry, we realized that consumers did not have adequate access to the ethanol blends, and when they did, the ethanol products were not priced correctly,” she says. “We felt that if we could give the consumer access to these products at the fair market price, consumers would realize the benefits of these products and begin to use them more regularly. So far, we have seen this to be true.” Another company that owns an ethanol plant and also owns retail gas stations is United Cooperative. Like Zeeland Farm Services, United Cooperative is a diversified agribusiness company with its fingers in multiple pies, including owning feed mills, grain elevators, a restaurant and more. Based in Wisconsin, United Cooperative
Thermal Refractory Solutions & Maintenance Give the Thermal team a call today! 612-751-2010 www.thermalrefractory.com We are your Ethanol Refractory Experts! We know your energy center and can provide superior results on your RTO, TO, Boiler, or Dryer. We have installers based from 3 different locations to provide a fast & cost effective solution for your plant. We understand the importance of your operation and will provide the results you need to be running smooth. 32 | Ethanol Producer Magazine | SEPTEMBER 2015
RETAIL also owns and operates United Ethanol LLC, a 40 MMgy ethanol plant located in Milton, Wisconsin, and owns more than 10 Cenex gas stations. Although EPM was unable to confirm the exact number of gas stations or whether all of the stations utilize blender pumps, the company’s website revealed a promotion for 85-cent E85 at seven of the gas stations on dates in June and July.
On-site Dispenser
Carbon Green’s first step into retail came about two and a half years ago, when it installed an unmanned blender pump on the facility’s grounds, after requests from employees, area farmers and others. The pumps are open for business 24 hours a day to credit card users. There was nowhere to buy E85 and other higher ethanol blends in that area and the requests were coming in daily, Miller says. Although the thought was that only a few hundred gallons would be sold a day, the reality is that Carbon Green sells about 1,000 gallons a day, and, in mid-July had sold nearly 550,000 gallons in all. The project had a quicker-than-expected, two-year payback period. Also in July, the company eliminated E10 and replaced it with E15. For ethanol producers already selling E85 direct to area gas retailers, like Carbon Green, putting in an on-site blender pump might not make sense. However, in the situation where E85 is sold in the area, but it isn’t being priced properly, such as was the case at NuVu Fuels managed Iroquois Bio-Energy Co. LLC, selling ethanol blends at the ethanol plant can help correct the market, Miller says. Iroquois Bio-Energy, a 40 MMgy ethanol plant located in Rensselaer, Indiana, was installed this spring and offers E10, E15, E30 and E85. According to an April press release, initial fuel sales were more than 75 percent E85, and E30 was in the second most-popular category. Badger State Ethanol LLC installed two unmanned blender pumps, one on-site at its 55 MMgy facility in Monroe, Wisconsin, and another in nearby Platteville, Wisconsin, about an hour away. “The purpose was to educate our communities about ethanol blends by letting them use them and
see the financial benefits and performance for themselves,” says Erik Huschitt, general manager. “To that point it has been extremely successful. Since all of our blends are ethanol blends, we are very excited to give the community an opportunity to buy local, made local. People in the Midwest are loyal and get that.” Corn Plus Co-Op & LLLP in Winnebago, Minnesota, has had on-site unmanned fuel dispensers for more than a decade. The company sells E10, E15, E20, E30, E40 and E85 from four blender pumps. Educa-
tion was the main reason the company imitated the project. “We want to get folks to use higher blends,” says Rick Serie, general manager. Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com
Need to rethink your Boiler Treatment before the season changes?
Nalco’s 3D TRASAR™ Boiler Technology delivers reliable, safe and cost-effective steam via a total system approach. More reasons to partner with Nalco: \ FDA-approved oxygen scavengers, internal treatment & condensate corrosion inhibitor \ Monitoring & control of real-time internal treatment & pre-boiler system corrosion \ Steam system protection with customized programs \ Water and energy savings through system optimization
Call Jason Van’t Hul today at 605-360-6657 to find out more. ©2015 Ecolab USA Inc. Ecolab, Nalco and the logo are trademarks of Ecolab USA Inc.
SEPTEMBER 2015 | Ethanol Producer Magazine | 33
34 | Ethanol Producer Magazine | SEPTEMBER 2015
INTRODUCING E15
PROMOTION
With a Smile Brand ambassadors target consumer education for lasting results. By Susanne Retka Schill
Brand ambassadors are the newest tactic in introducing E15 across the country. “You can only
do so much on radio and billboards,” explains Street Factory Media’s director of operations Corey Spoden. Street Factory is a Minneapolisbased company that specializes in guerilla marketing, creating events to promote clients’ businesses and products. This past year, the company has been tapped to train teams of brand ambassadors to help with the rollout of E15. “There’re 130 stations selling E15 today, another 230 in the pipeline and, hopefully, over 500 on top of that next year with the USDA program,” says Mike O’Brien, vice president of market development with Growth Energy. “Just knowing that wave was coming, we looked at it six to eight months ago and realized there are going to be a lot of grand openings.” Nobody has the staff to handle the kind of growth that’s coming, so the promoters of E15 looked for a way to extend the reach of ethanol supporters. “There needs to be some consumer education,” O’Brien continues. “These flex dispensers can be confusing at times. We found the Street Factory and brand ambassadors that brought to the table the kind of professionalism that we wanted. We found that they’re very scalable. We’re able to do events in Florida at the same time as we are doing events in Iowa.” Gina Zappa, program manager and talent recruiter for Street Factory Media, has been hiring and training the teams to serve the different markets where E15 will be rolled out in the months ahead. “We look for outgoing, positive, upbeat people who can deliver the right messaging to the consumer,” she says. Then, working with American Ethanol, the new brand ambassadors learn the primary talking points on the benefits of ethanol blends, as well as which cars can use E15 and how to identify a flex-fuel vehicle. Role playing is part of the training as the ambassadors practice approaching customers and engaging them in a short conversation. Zappa adds that wearing flashy neon vests helps identify the ambassadors as working at the station, plus they carry literature to hand out, in case someone doesn’t want to engage in a conversation. Being friendly and respectful is key. Brand ambassadors help relieve some of the confusion when customers roll up to fuel at the new pumps in a newly converted stations, O’Brien says. With fuel terminals not yet offering the blended fuel, stations have been adding blender pumps in order to be able to offer E15 by blending E85. That means the dispensers that once had one hose and three grades of gas now have three hoses and five grades. “I’ve watched people with E15,” O’Brien says. “They’ll pull up and see that price point and you can see the wheels turning in their head. ‘Should I be buying this? Is it safe for my car? What’s going on here? Do I take this hose, that hose?’”
No stranger to ethanol blends, Iowa-based Kum & Go began offering E85 in 1997. Today, 170 out of its 430 stores offer E85. In the past year, Kum & Go added E15 at seven stores and has plans for more. Kum & Go has experimented with midlevel ethanol blends in the past, although they were never promoted, says Jim Pirolli, vice president of fuels. “The midlevel blends are great products, but the consumer base is small and the message was confusing. The brand ambassadors really help in this aspect as we roll out E15. Not only do they explain the benefits of E15 to customers, but they also train our store associates and give some tips on up-selling. When they leave, our associates are prepared to have the conversations with customers around E15—who can use E15, the benefits, etc.” Kum & Go creates a festive atmosphere in its promotional events used to introduce ethanol blends. “Most promotions run from 10 a.m. to 2 p.m. with a discount on the fuel grade we’re promoting, such as E85 for 85 cents per gallon,” Pirolli explains. “We work with industry partners to run radio and print ads to promote the event in advance, and often host a live radio broadcast during the promotion.” The company sees the promotions and fuel discounts as a way to thank its regular customers, as well as giving new customers an economic incentive to try it. Offering a discount for a couple of hours, doesn’t drive long-term sales without the educational component, he adds. “It takes time, investment, and dedication to increase consumer awareness around fuel options. Our best E85 markets, for example, are communities in which we have been part of a collaborative effort to promote E85 for several years. These efforts are based on long-term, consistent advertising and outreach programs focused on the benefits of higher ethanol blends.” Pirolli says. “E15 represents a new challenge, as there is a larger potential market, but lower awareness and understanding of the fuel. The brand ambassadors have been a tremendous help in the product launch. I can’t say enough for the effort they put in and the excitement they bring to the promotions. The brand ambassador program offers many benefits to retailers and consumers, and I hope it continues.” In addition to working a promotion event, Street Factory’s brand ambassadors can also be deployed for a full week, working the morning and later afternoon rushes. Not only does that approach increase the number of conversations, but over five days it reaches the vast majority of regular customers. “This is a new endeavor, a young program that we continue to build on,” Spoden says. “We’re very proud of being part of this program and making a difference in the communities we’re introducing ethanol into. We’re looking for ways to strengthen the message and to get out there, educate people and get them to use the fuel.” Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com SEPTEMBER 2015 | Ethanol Producer Magazine | 35
BUSINESS MATTERS
EPA’s MOVES Could Cripple Higher Ethanol Blends
By Dave VanderGriend
Anyone even remotely connected to the ethanol industry knows these are tough times. Having gone from
being the hero of the 2007 Energy Security and Independence Act, which created the expanded renewable fuels standard (RFS), to being vilified by the petroleum industry and its friends in the press, we are running out of cards to play in a stacked deck, with the U.S. EPA as the dealer. The RFS is very important to our industry, but focusing on it alone, has caused us to take our eye off the dealer. The down card trumps everything in the deck and it’s called the MOVES model, which stands for Mobile Vehicle Emissions Simulator. Unfortunately, this model relies on faulty, manipulated data, resulting in inaccurate emission increases that will cripple any hope for ethanol expansion and the use of higher blends. And, this is taking place as the EPA gets closer to imposing tighter ozone controls, which could put another third of the U.S. into ozone nonattainment, and therefore under federal control. Once that happens, states have to develop a state implementation plan to tell the EPA how they plan to get back into attainment. Here is why the MOVES model matters: When states plug in higher ethanol blends, the model says ethanol raises emissions. How can this be? The basis for the MOVES model stems from fuel blending studies conducted by the EPA in a laboratory that, rather than looking at real world consumer fuels, used test fuels that became synthetic caricatures of how fuels are really blended. Even experts in a highly respected paper from the Society of Automotive Engineers said there was no justification for the EPA to conduct the fuel testing the way it did. The Urban Air Initiative hired a reputable fuel blending consultant to test the model and our fears were confirmed. Data proves the MOVES model is biased against ethanol and blocks the goal of reducing toxic emissions and promoting a cleaner fuel. We have clear data to support that when simply adding ethanol to consumer E10 gasoline via splash blending, the result is a fuel with fewer toxic emissions. However, the manipulation of test fuels in the MOVES model tells a different story regarding ethanol. An analogy from the ethanol process illustrates what’s being done with the test fuels. If your yields are off and fermentation is underperforming, you might change the temperature, the enzymes and five other variables. But each change is made separately in order to identify the true influencing factor. The EPA did the exact opposite in its testing, changing many of the fuel components at once, while increasing ethanol. Each time emissions increased, the EPA blamed ethanol. That would be akin to blaming enzymes no matter what other changes you employed in your fermentation. We must stop the MOVES model from being implemented, or all of the industry’s other initiatives will be undermined. States will have 36 | Ethanol Producer Magazine | SEPTEMBER 2015
their hands tied and will simply not be allowed to approve higher blends. That’s why we are fighting back, and we need your help. The Energy Future Coalition and the attorneys general of Nebraska and Kansas joined UAI and its supporters to file legal action against the EPA to block the MOVES model from being enforced. We believe winning this legal battle is critical to the future of our industry. The most recent filing in U.S District Court calls on the EPA to develop a new model, reflecting real world consumer fuels and blending practices. If we splash blend on a consumer E10, we know vapor pressure decreases, particulate emissions are reduced, carbon emissions are lowered, and importantly, we give automakers the octane they need for the next generation of cars. Waging this legal fight and communicating the health benefits of clean burning ethanol requires resources and support from all of you who want to open the market for higher blends. Please visit us at www.urbanairinitiative.com and click on the “Get Involved” button to learn how you can help us ensure we have something to prime the pump with. Author: David VanderGriend, CEO, ICM Inc.; President, Urban Air Initiative DaveV@icminc.com 316-796-0900
5(*,67(5 72'$<
6$9( RQ 5HJLVWUDWLRQ
:LWK (DUO\ %LUG 5DWHV 'HDGOLQH 6HSWHPEHU
Ă / /ŶƚĞƌŶĂƟŽŶĂů ĞǀĞŶƚ
2FWREHU +LOWRQ 2PDKD 2PDKD 1(
ZZZ $GYDQFHG%LRIXHOV&RQIHUHQFH FRP
*DLQ ([FOXVLYH ([SRVXUH %RRN <RXU 6SRQVRUVKLS 7RGD\ $V D VSRQVRU RI WKH $GYDQFHG %LRIXHOV &RQIHUHQFH ([SR \RX ZLOO KDYH DQ RSSRUWXQLW\ WR SRVLWLRQ \RXU RUJDQL]DWLRQ DV D OHDGHU DQG VXSSRUWHU RI WKH UHQHZDEOH IXHOV LQGXVWU\ LQ LPSRUWDQW LQWHUQDWLRQDO PDUNHWV )RU SULFLQJ DQG DGGLWLRQDO LQIRUPDWLRQ SOHDVH FRQWDFW \RXU %%, ,QWHUQDWLRQDO $FFRXQW ([HFXWLYH DW RU VHUYLFH#EELLQWHUQDWLRQDO FRP
1(7:25. :,7+ 352'8&(56
7:2 )5(( 3URGXFHU 3DVVHV 3HU %LRIXHOV )DFLOLW\
(WKDQRO _ %LRGLHVHO _ $GYDQFHG %LRIXHOV _ &HOOXORVLF
BUSINESS MATTERS
EP3 Lessons Learned By James M. Ramm
Since the U.S. EPA released the Efficient Producer Pathway Petition (EP3) process last fall, a number of grain ethanol producers have submitted their applications to participate in the program.
EcoEngineers successfully completed a number of these projects and can share some of the lessons learned from the process. Under the renewable fuel standard (RFS) program, the lifecycle greenhouse gas (GHG) emissions from renewable fuels must be at least 20 percent less than the 2005 baseline GHG emissions from fossil fuels. The only exception is renewable fuel produced from facilities that are grandfathered under the rules. The grandfathered facilities are almost all ethanol plants that were either producing fuel or under construction when the rules were promulgated in 2007. For these exempt ethanol plants, the EPA took the position that it is not the facility that is grandfathered, but the baseline volume of fuel produced at the facility at the time it was grandfathered, or specifically, the permitted capacity of the facility as of December 2007. Most ethanol facilities in the country have been hamstrung by their inability to generate renewable identification numbers (RINs) for fuel beyond their 2007 permitted capacity due to this restriction. In some cases, it can affect up to 15 percent of their fuel production. EP3 producers must demonstrate that their fuel attains a 20 percent reduction in life-cycle GHG from the 98.2 kgCO2e per MMBtu baseline (the average life-cycle GHG emissions for gasoline sold as transportation fuel in 2005). Thus, the life-cycle GHG emissions for the ethanol cannot exceed 78.56 kgCO2e per MMBtu. The lower life-cycle carbon intensity for the fuel is achieved through process efficiencies at the plant. The producer is required to maintain records to prove that the process efficiency requirements are being met on a rolling 365-day average in order to maintain EP3 status. Improved efficiency measures can be derived from reduced on-site energy consumption, increased fuel output, and, or, use of biomass or biogas from certain sources to reduce process energy GHG emissions. All efficiency improvements including motors, clean power, LED lighting, grind technologies and more are accounted for by evaluating net inputs vs. outputs. Regional utilities can play an important factor depending on the amount of wind or solar energy available.
38 | Ethanol Producer Magazine | SEPTEMBER 2015
Carbon modeling programs provide significant variations in results. Different program models, such as the California GREET model and the EPA EP3 tool, produce different results. It is important to understand the cause of these variations to best position a facility under different compliance programs. This is especially important for producers selling into multiple markets, each with its own carbon intensity requirements, such as California or the European Union. The first step in the two-step process is completion and submission of the EPA EP3 Tool. The EPA typically reviews the submittal in about four weeks and sends back a conditional EP3 approval letter setting requirements to complete the registration process. The second step is registration. The EPA will typically complete its review of this phase in about six weeks and, if approved, will activate the EP3 pathway on the EPA Moderated Transaction System. A Compliance Monitoring Plan is required in order to utilize the EP3 pathway. It is the recordkeeping requirement specified in the signed pathway determination document that applies to the facility. When a fuel producer wishes to generate RINs for a batch of fuel using an approved EP3 pathway, the producer must calculate the average life-cycle GHG emissions for the renewable fuel produced at the facility over the previous 365-days or the number of days since EPA activated the EP3 pathway, whichever is less, and demonstrate that the fuel meets the applicable lifecycle GHG reduction threshold. It is presently unclear whether activation means the date of the EPA conditional approval or the date of the EMTS activation of the EP3 pathway. The EPA has not yet responded to our request for clarification. The next step for EP3 approved producers close to the 78.56 kgCO2e per MMBtu is to create a greater buffer against the EP3 ceiling by installing efficient technologies. A comprehensive evaluation of these technologies should not only look at their impact on the producer’s EP3 status and the value of additional RINs generated, but should also consider any additional cost savings that can be achieved through the displacement of fossil energy consumption. The impact of installed process efficiencies on participation in other incentive programs, such as the fuel’s carbon intensity number under California’s Low Carbon Fuel Standards, should also be considered at the same time. Author: : James M. Ramm Senior Engineer and Founding Partner EcoEngineers jramm@ecoengineers.us
EPM MARKETPLACE
763-427-1101 NON DESTRUCTIVE INSPECTION SERVICES
CHEMICALLY RESISTANT
Epoxies & Polysulfides
directory.ethanolproducer.com directory. y ethanolpproducer.co maintenance services| BROWSE CATEGORIES
line aatt online nd it onlin find fifin Inspection services include but not limited to: • Heat exchanger eddy current • Tank Inspection • Boiler tube inspection • Pipe inspection For more information about services Call: 815-802-1363 Email: ew@magnetec-inspection.com
Media Blasting Services
Adhesive compounds withstand: Acids
•
Bases
•
Organic Solvents
ETHANOL PRODUCER IS THE
#1 SOURCE
Advertise Today!
OF INFORMATION FOR AND ABOUT ETHANOL PRODUCERS AND INDUSTRY PROS. With subscribers in more than 43 countries, Ethanol Producer Magazine is the world’s largest and longest-running ethanol magazine. The only magazine in the world exclusively focused on ethanol.
Regardless of the surface, Mole•Master has a media blasting solution for you. From Dry Ice to Walnut Shells, Mole•Master does Abrasive Blasting safely and efficiently.
5,000+ monthly circulation Distributed to all attendees of the International Fuel Ethanol Workshop & Expo and National Ethanol Conference
Each issue is distributed to every ethanol plant in North America
Advertisement design is free of charge
Toll Free: 800.322.6653 • Fax: 740.374.5908 info@molemaster.com
www.molemaster.com
Need more information on advertising opportunities? service@bbiinternational.com (866) 746-8385 www.ethanolproducer.com twitter.com/EthanolMagazine
One FREE Listing per Company
FIND
BROWSE COMPANIES COMPANIE
% w/v in hours Why compromise on yield? TPS
TOTAL PERFORMANCE SYSTEM Your plant is unique, your enzyme solution should be also. Find out how you can maximize the performance of your plant with the Total Performance System by contacting your DuPont representative or calling 1-800-847-5311.
Copyright© 2014 DuPont. All rights reserved. Dupont™, Genencor®, and the Leaf Globe are trademarks or registered trademarks of E. I. du Pont de Nemours and company or its affiliates.