2016 September Ethanol Producer Magazine

Page 1

INSIDE: OCTANE AND REID VAPOR PRESSURE LIMITATIONS, OPPORTUNITIES SEPTEMBER 2016

MOVING ON OUT WITH ETHANOL E15 Retail Challenge Page 24

Ethanol Terminal Situation Page 28

Racing Promotion Page 32

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CONTENTS

SEPTEMBER 2016 VOLUME 22

DEPARTMENTS 6

8

THE WAY I SEE IT

New Generation Drives Global Economy By Mike Bryan

9

EVENTS CALENDAR

10

VIEW FROM THE HILL

The E15 Consumer Disconnect Retailers evaluate best approach to selling the new fuel By Susanne Retka Schill

24 INFRASTRUCTURE

Terminal Challenge

HWRT Offering Pre-Blended E15 at Terminals By Bob Dinneen

12

DRIVE

14

GRASSROOTS VOICE

16

GLOBAL SCENE

Ethanol storage is widely available, but with little excess capacity By Ann Bailey

Time to Address RVP By Mike Lorenz Got Octane? By Brian Jennings

28 RACING

King of the Corn Drag Racing

EU Cannot Ignore Ethanol’s High GHG Savings By Robert Wright

18

BUSINESS BRIEFS

20

COMMODITIES

22

DISTILLED

36

FRONTLINE

42

RETAIL

Building Around Ethanol's New Brand By Tom Bryan

AD INDEX

40

FEATURES

EDITOR'S NOTE

7

38

ISSUE 9

Retaining Knowledge in the Face of Attrition By Robert Jewell

Ignite Racing sponsors high-blend race in Nebraska By Ann Bailey

32

CLEARING THE AIR

What Could Have Been By Ray Defenbaugh

BUSINESS MATTERS

Sustainability Market Play By Donna Funk

MARKETPLACE ON THE COVER

Thortons has branded its E15 offering as Unleaded 15. PHOTO: THORTONS

4 | Ethanol Producer Magazine | SEPTEMBER 2016

Ethanol Producer Magazine: (USPS No. 023-974) September 2016, Vol. 22, 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.

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EDITOR'S NOTE

Building Around Ethanol’s New Brand The introduction of E15 into the U.S. fuel marketplace is gaining critical mass. With several top-20 fuel retailers now offering the new ethanol Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

blend, and at least one major terminal operator selling it pre-blended, the fuel is finding its place under filling station canopies nationwide. We learn this month, however, that E15 is catching on despite low consumer awareness of it, good or bad. Our cover story, “The E15 Consumer Disconnect,” on page 24, examines the driver edification challenge and opportunity—cliché as that always sounds—in front of early E15 retailers. As EPM Managing Editor Susanne Retka Schill reports, recent polling suggests that most drivers don’t know exactly what E10 is. So, how are retailers supposed to get them excited about E15? It’s a question that’s being answered in a number of different ways. Giving in to consumer indifference toward ethanol, some retailers are dropping the “E” altogether in their marketing, going with names like Unleaded 15 and Regular 88, while others are calling it what it is—E15—to keep things straight. Ultimately, though, how we market E15 probably will matter much less to consumers than how we price it. If it’s a nickel cheaper than regular unleaded at the pump, it will sell. It’s been said that E15’s widespread adoption will create an infrastructure glide path for the advent of higher ethanol blends like E25, E30 and E40. If that’s true, America’s existing 1,300 fuel terminals would need to undergo major changes to accommodate the nationwide distribution of ethanol for midlevel blends. In “Terminal Challenge,” on page 28, we look at a recent National Renewable Energy Laboratory study that determined U.S. terminal capacity is essentially maxed out, and too many terminals are confined to truck transport and unable to accommodate ethanol unit trains. As EPM Associate Editor Ann Bailey reports, however, a number of terminal construction and expansion projects are underway. That’s good news, but the NREL report makes is clear that future ethanol distribution and storage infrastructure requirements must be addressed today. On page 32, we switch gears and look at the fast side of our business in “King of the Corn Drag Racing.” In this story, Bailey reports on a historic milestone achieved in late July when an E98-powered car won the first street car drag race at the inaugural Ethanol Nationals in Kearney, Nebraska. All the cars in the event were fueled on ethanol blends ranging from E50 to E98. It was a big day for event organizer and ethanol racing pioneer Dan Schwartzkopf, who tells us consumer questions about E15, if they have any, disappear when they see race cars running on high and midlevel blends.

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | SEPTEMBER 2016

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 22 ISSUE 9

ADVERTISER INDEX

EDITORIAL President & Editor in Chief Tom Bryan tbryan@bbiinternational.com Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Susanne Retka Schill sretkaschill@bbiinternational.com Associate Editor Ann Bailey abailey@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

2017 Fuel Ethanol Workshop & Expo

31

BetaTec Hop Products

34

Biomass Engineering & Equipment

37

Buckman

22

CPM Roskamp Champion

30

D3MAX LLC

43

DuPont Industrial Biosciences

44

EISENMANN Corporation

25

Fagen Inc.

Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com

SALES

17

Fluid Quip Process Technologies, LLC

23

Growth Energy

2

Hydro-Klean LLC

35

ICM, Inc.

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 Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Account Manager Jeff Hogan jhogan@bbiinternational.com Circulation Manager Jessica Tiller jtiller@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

EDITORIAL BOARD

9

J.C. Ramsdell Enviro Services, Inc.

18

Lallemand Biofuels & Distilled Spirits

41

Nalco Water

29

Pannonia Ethanol POET-DSM Advanced Biofuels Premium Plant Services, Inc.

15 19

Salco Products, Inc.

3

Syngenta: Enogen

13

Trinity Rail Group

Ringneck Energy Walter Wendland Little Sioux Corn Processors Steve Roe Commonwealth Agri-Energy Mick Henderson Pinal Energy Keith Kor Aemetis Advanced Fuels Eric McAfee Poet Scott Teigen Western Plains Energy Derek Paine

5

Victory Energy Operations, LLC.

11 26-27

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 sretkaschill@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

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SEPTEMBER 2016 | Ethanol Producer Magazine | 7

THE WAY I SEE IT

New Generation Drives Global Economy By Mike Bryan

While protectionism and isolationism may make good headlines during an election cycle, they seldom are good options in a global economy.

A large part of the oil-producing region of the world is in turmoil, with no real end in sight. And when the current strife does come to an end, if it ever does, what’s to follow? History has taught us that we cannot assume that a new form of governance means all is well and the future is bright. Most of us have lost count of the number of times we have been wrong in assuming that. Given the instability in the world, there never has been a time in the history of the ethanol industry when it has been more important. Important to our national security, important to our energy security and important to our economy, all of which are being threatened. Ethanol, no matter where in the world it is produced, promotes peace. No wars have been fought over ethanol. No invasions of other countries or clandestine operations have been launched because of ethanol. So, while we need to shy away from isolationism, we need to act with a sense of urgency toward becoming more selfreliant by continuing to develop renewable fuels, wind and solar resources and our domestic oil and natural gas reserves. These are not mutually exclusive objectives, but can act in unison to build a stronger economy, a cleaner environment and a greater degree of self-reliance. As young people around the world exchange ideas and ideologies on Facebook, Twitter and a host of other social

networks, the world becomes much smaller. What happens in rural China does not seem so distant to a student in Central Europe or America. Viewing the world from a classroom in Libya can inspire to action those who clearly can see a better way. The youth of today represent our future and, luckily, they don’t cling to the ideas of past generations. In time, oil will once again become prehistoric. Ethanol and other renewable forms of energy that we have today will be joined by even newer, cleaner and more energy efficient solutions. Around the world, young people are rejecting the status quo, as they always have, and demanding that the world change to embrace new ideas and technologies. Today’s energy sources are all just stepping-stones to tomorrow. If we stop and listen, we hear the drumbeat of a new generation, a generation that’s connected on a global scale, a generation that will look at energy, the environment and, we hope war, in a whole new light. At the recent International Fuel Ethanol Workshop & Expo in Milwaukee, I once again was so proud of how many young people were there and how many women now are in the industry compared to just a few years ago. I said to one of the attendees, “Look around. You see the future of our industry and most of them are in their 20s. How exciting is that!” That’s the way I see it.

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

8 | Ethanol Producer Magazine | SEPTEMBER 2016

EVENTS CALENDAR 2016 Christianson & Associates' Biofuels Financial Conference October 17-18, 2016 Hyatt Regency Minneapolis Minneapolis, Minnesota Produced by Christianson & Associates and organized by BBI International, this year’s Biofuels Financial Conference is focused on the best ways to explore new options in today’s changing ethanol and biodiesel industries. By understanding risks associated with various technology and marketing initiatives, and by exploring various options for making the best use of capital and resources, we’ll learn how to create a well-managed plan for growth and change—a plan that maximizes profitability while ensuring future stability and meeting the expectations of all stakeholders. 866-746-8385 | www.biofuelsfinancialconference.com

2017 International Biomass Conference & Expo April 10-12, 2017 Minneapolis Convention Center Minneapolis, Minnesota 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

2017 International Fuel Ethanol Workshop & Expo June 19-21, 2017 Minneapolis Convention Center Minneapolis, Minnesota From its inception, the mission of the event has remained constant: The FEW delivers timely presentations with a strong focus on commercial-scale ethanol production— from quality control and yield maximization to regulatory compliance and fiscal management. The FEW is also the ethanol industry’s premier forum for unveiling new technologies and research findings. The program extensively covers cellulosic ethanol while remaining committed to optimizing existing grain ethanol operations. 866-746-8385 | www.fuelethanolworkshop.com

2017 National Advanced Biofuels Conference & Expo June 19-21, 2017 Minneapolis Convention Center Minneapolis, Minnesota With a vertically integrated program and audience, the National Advanced Biofuels Conference & Expo is tailored for industry professionals engaged in producing, developing and deploying advanced biofuels, including cellulosic ethanol, biobased platform chemicals, polymers and other renewable molecules that have the potential to meet or exceed the performance of petroleum-derived products. 866-746-8385 | www.advancedbiofuelsconference.com

icminc.com/epm

VIEW FROM THE HILL

HWRT Offering Pre-Blended E15 at Terminals By Bob Dinneen

A few months ago, a game changer rocked the gasoline retailer world when HWRT Oil Co. LLC announced it would become the first company in the United States to offer pre-blended E15 at the terminal, beginning Sept. 16.

Specifically, HWRT will include E15 in its slate of product offerings at terminals in Hartford, Illinois; North Little Rock, Arkansas; Norris City, Illinois; and Seymour, Indiana. The Renewable Fuels Association has been working with HWRT on a number of issues related to offering E15 at the terminal, including regulatory compliance, participation in the U.S. EPA’s required fuel survey and adoption of RFA’s Misfueling Mitigation Plan. So, why is this a game changer? To date, retailers across the country interested in offering E15 have not had access to the fuel blend at their local fuel terminals. As a result, retailers have offered E15 by diluting a higher ethanol blend such as E85 with regular unleaded, a process that takes additional storage and equipment. This announcement will allow retailers with existing compatible equipment to begin offering E15 immediately to consumers with vehicles manufactured in 2001 or subsequent years, along with all flex-fuel vehicles. In other words, any marketer, whether it has E85 infrastructure in place or not, now will be able to offer E15 to consumers. That will greatly expand E15’s U.S. footprint, growing the fuel blend’s presence throughout the Midwest and the Southeast. The Hartford, Illinois, terminal especially is notable as it provides reformulated gasoline with low volatility to the St. Louis market. That means the terminal will have E15 available that meets

10 | Ethanol Producer Magazine | SEPTEMBER 2016

EPA volatility requirements year-round and retailers served by the terminal will be able to sell E15 all year without interruption. HWRT plans to eventually expand the E15 offering to 17 terminals where the company holds positions. This means E15 will be offered at terminals in seven states. This seismic shift is phenomenal news for retailers who want to offer consumers choices at the pump. All gasoline dispensers dating back to the mid-2000s are guaranteed for up to E15 and, if the fuel system is compatible, retailers only may need a labeling change to start offering E15. Meanwhile, 80 percent of today’s automotive fleet is approved to use E15. A December 2015 analysis by RFA of 2016 model year warranty statements and owner’s manuals shows that auto manufacturers explicitly approve E15 use in more than 70 percent of new vehicles. This is up from 2015, when just over 60 percent of model year 2015 automobiles clearly were approved for E15. Ultimately, efforts by HWRT and others to offer higher ethanol blends are about offering more consumer choices. Ethanol is the highest-octane, lowest-cost fuel on the planet, and ethanol blends being offered at the pump have been to date cheaper than conventional fuel. Why wouldn’t consumers want to fill up with a fuel that is better for the planet and costs less? It’s a win, win. The oil industry has kept a near-monopoly at retail stations for far too long. The RFA applauds HWRT’s efforts and we will continue to push for more companies to provide greater consumer choices at the pump. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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DRIVE

Time to Address RVP By Mike Lorenz

Summer is coming to a close, which means people are wrapping up vacations, kids are back in school and the summer driving season is coming to an end. For many, the summer driving season simply means more

people out on the road and generally higher gas prices, but for fuel retailers the period presents a special problem. Back in 1990, Congress limited the amount of evaporative emissions from vehicle fuel at 9 pounds per square inch (psi) Reid vapor pressure (RVP) in the Clean Air Act. While pure ethanol has a 3 psi RVP, when combined with gasoline at low levels, the RVP of the total fuel blend exceeds 9 psi. To accommodate ethanol blends, Congress specified that fuel with 10 percent ethanol would receive a 1 psi RVP waiver, and extended that relief to blends below 10 percent. Unfortunately, EPA has shown no willingness to extend the waiver to blends above 10 percent, which severely restricts the sale of E15 during the summer driving season, June 1 to Sept. 15. The restrictions placed on E15 due to the statutory RVP limits cause a number of problems for retailers who want to offer consumers a wide variety of choice at the pump. First off, it creates a gray area at our retail locations and leaves us with a menu of unappealing options. We either have to block off the hoses that pump E15, which confuses customers into thinking our facilities are broken, or sell E15 as a flex fuel, which limits the market for the fuel and isn’t explicitly regulated by the EPA. All of those options obviously are problematic and discourage some retailers from offering the fuel altogether simply to avoid having to deal with the hassle of making those costly adjustments in the summer. Having an obscure statute from 1990 preclude retailers from offering such an outstanding product, especially considering E15 actually has a lower RVP profile than E10, seems counterproductive and, frankly, silly. Furthermore, these RVP restrictions hurt consumers. At Sheetz, we take pride in offering our consumers many fueling options, which includes a cleaner burning, high-performance fuel that is better for the environment and saves consumers money. E15 clearly provides a great value to consumers and these restrictions confuse them or prevent them

12 | Ethanol Producer Magazine | SEPTEMBER 2016

from accessing E15 altogether. When customers go to the pump any other time of the year, they see E15 at the dispenser, but when they go to fill up their cars in the summer, they see it presented as a flex fuel. It is understandably confusing for anyone who is not intimately familiar with these technical restrictions. In cases where retailers stop carrying the fuel entirely during the RVP season, consumers show up to the pump expecting to fill their cars with E15 as they’ve done all year, only to find it’s no longer offered. In the worst case scenario, when retailers choose not to offer E15 at all because of the summer hassle and financial constraints of complying with the RVP regulations, consumers are robbed of another gasoline choice at the pump during the other eight and one half months of the year without even knowing it. Retailers and consumers are both hurt by E15 not being available for use with 2001 and newer vehicles during the busy summer driving season. All because of an archaic technicality from 26 years ago. Now that the summer driving season is coming to a close and Congress is reconvening, we urge you to reach out to your elected officials and ask them to remove this unnecessary barrier. It constricts retailer freedom and inhibits consumer choice. We know that consumers are more environmentally conscious than ever before and, at the end of the day, we want to help them make a positive impact on the environment by filling up with E15, and offer them savings at the pump. Tell your officials to vote yes on bills S. 1239 and H.R. 1736, which would extend the RVP waiver to ethanol blends above 10 percent so we can continue to expand the available fuel options for consumers across the country.

Author: Mike Lorenz Executive Vice President of Petroleum Supply, Sheetz 814-946-3611

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GRASSROOTS VOICE

Got Octane? By Brian Jennings

It’s the Holy Grail for many in the ethanol industry to increase demand for our fuel based on its octane value proposition.

The American Coalition for Ethanol has been working on octane for a long time. Nine years ago, in response to anecdotal evidence that E20 and E30 had performed well in legacy cars, we did a research project with the U.S. DOE to investigate the optimal blend of ethanol in gasoline. We found that certain cars traveled farther on higher ethanol blends than straight gas. For the Toyota Camry it was E30. The Ford Fusion performed best on E40. E20 was the optimal blend in the Chevy Impala. By the way, these cars were not flex fuel (FFVs). While preliminary, ACE’s study helped serve as a catalyst for the interest that has been building for higher octane and ethanol blends nowadays. Also several years ago, ACE began huddling with U.S. automakers and ag groups to better understand how a higher octane fuel with upward of 25 to 30 percent ethanol could help OEMs comply with future fuel economy and carbon reduction regulations. Today this effort is called the Ag-Auto-Ethanol Working Group, an active coalition of interests trying to find common ground on the octane issue. Just last year, the DOE announced it was embarking on a multimillion dollar research project called Co-Optima. Octane is a major thrust of this public-private partnership, whose goal is to develop an optimal fuel specification for future engine technologies. Future engine technologies are the reason there’s so much interest in octane. Engines traditionally are made to tolerate fuel. There’s tremendous interest in better harmonizing engines and fuels in the future, finding the near-perfect match in which a new high-octane, low-carbon fuel helps engines run more efficiently and cuts down on greenhouse gas emissions. Ethanol isn’t the only fuel that threads the high-octane, low-carbon needle, but many engineers and technical experts believe a blend between 25 and 30 percent ethanol is the ideal way to get that 95 minimum RON fuel of the future.

14 | Ethanol Producer Magazine | SEPTEMBER 2016

The fact that so many people are fascinated with octane doesn’t mean a future high-octane fuel with upwards of 25 to 30 percent ethanol is going to happen any time soon, or at all. Left to their own devices, oil companies aren’t going to supply the market with a higher-octane fuel. The government will need to force them to do so. Even if that occurs, oil companies won’t accept corn ethanol as the octane of choice. They will point to the premium already on the market, the toxic aromatics they make today, or suggest they can produce their own high-octane ethanol from natural gas. Likewise, auto company CEOs aren’t going to green light the kind of new engines that need more octane unless the federal government issues more stringent rules to improve fuel economy and reduce greenhouse gas emissions (CAFE-GHG). ACE and others are exploring the various regulatory pathways available to secure a high-octane future for ethanol. Part of that involves the dialogue we’ve been having with automakers. It also involves navigating the sometimes rough waters at ASTM and U.S. EPA. The immediate pathway we are pursuing is the EPA and National Highway Traffic Safety Administration midterm evaluation of the 2022-'25 model-years CAFE-GHG program. If the next president determines that future rules need to require even greater efficiency from engines and further carbon reductions, it is highly likely that octane will be one of the best solutions to get there. There may be other pathways we follow to create octane-driven demand for ethanol, but the CAFEGHG program presents the best near-term opportunity. This process will take time but we have confidence in the technical evidence which makes a persuasive case for ethanol to be the key ingredient in the high-octane, low-carbon fuel of the future. Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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GLOBAL SCENE

EU Cannot Ignore Ethanol’s High GHG Savings By Robert Wright

At COP21 last year, the EU committed to cutting its total greenhouse gas (GHG) emissions by at least 40 percent by 2030. As part of its climate and energy plans, the EU

also has set an objective to achieve at least 27 percent renewable energy use by 2030. The European Commission already has signaled that these ambitious objectives will require substantial 12 to 20 percent GHG emission reductions and 12 to 14 percent renewable sources in transport. Decarbonizing Europe’s transport sector is vital because it accounts for 25 percent of Europe’s total GHG emissions, recently becoming the largest source. With combustion engines expected to dominate still in 2030, increasing the use of ethanol blends is the most immediate and cost-effective solution to achieve these objectives. But, without a binding policy framework that promotes low carbon fuel replacements for petrol and diesel fuels used in Europe, the needed emissions reduction in transport simply will not be achieved. This is confirmed by a recent study by E4Tech that found the absence of a binding policy to decarbonize traditional transport fuels will lead to increased use of fossil fuels in transport, completely undermining Europe’s 2030 climate strategy. This is why ePURE is calling for the Fuel Quality Directive to be strengthened by introducing an ambitious and binding target to reduce the carbon intensity of transport fuels by at least 12 percent by 2030 compared to a 2010 baseline, with at least a quarter coming from advanced biofuels. Reducing the emissions of traditional transport fuels through low-carbon fuel alternatives is vital because other options, such as electric vehicles, simply will not grow fast enough to make the needed emissions reduction in time. The European Commission published its long-awaited Communication on a European Strategy for Low-Emission Mobility that explores potential policy options on July 20. The EC proposal to increase the deployment of advanced biofuels is welcome news, but the commission must ensure that demand growth in advanced biofuels comes in addition to, not at the expense of, existing conventional ethanol production. Any plan to phase out conventional ethanol is simply not justified, even by the commission’s own research, and would damage investor

16 | Ethanol Producer Magazine | SEPTEMBER 2016

confidence and hinder the deployment of advanced ethanol. The commission really should prioritize the phasing out of oil use in transport, which is responsible for 95 percent of all energy used in the sector. The science shows that some conventional biofuels are better than others for the climate and instead of seeking to phase out all conventional biofuels, the commission should support only those biofuels that actually reduce emissions. Conventional ethanol produced in Europe has 63 percent GHG savings compared to petrol, has low, land-use impact (LUC) and no negative effect on food prices. It is the type of good biofuel that Europe should support. The commission should examine the implications of its proposed policy orientations through a proper and fully objective impact assessment, based on the latest available science and its correct reading. Such an impact assessment should consider objectively all low-carbon fuel options. A science-led approach will show that renewable ethanol, both conventional and advanced, is an essential part of Europe’s climate tool kit and the phasing out of conventional ethanol would harm the EU’s overall climate ambitions. Since the revised biofuels policy framework was adopted, many anti-ethanol myths have been debunked and there has been mounting evidence of the sustainability and climate benefits of ethanol. It has been proven that increased ethanol demand in Europe does not alter food prices or undermine food security. The recent GLOBIOM, commissioned by the European Commission, also confirmed that ethanol has high net GHG savings and low risk of adverse LUC impacts. According to a recent study by Ricardo Energy and Environment, the higher use of ethanol in Europe could contribute to a 14.1 percent GHG emission reduction in European transport, even after possible LUC emissions have been taken into account. European transport policy simply cannot afford to miss out on ethanol’s significant climate contribution. All options that significantly and sustainably reduce emissions from the current vehicle fleet must be kept on the table. Member states already expressed their need for flexibility to meet future targets, so no low-carbon option, including ethanol, should be excluded or limited from contributing to the EU 2030 objectives. Author: Robert Wright Secretary General, ePURE, the European Renewable Ethanol Association wright@epure.org

BUSINESS BRIEFS People, Partnerships & Deals

Green Plains Partners LP has announced John D. Chandler was appointed by Green Plains Inc. as an independent director to the board of directors of its independent partner, Green Plains Holdings LLC. Chandler will also serve as a member of the board’s audit and conflict committees. He is the partnership’s third independent board member. From 2002 to 2014, Chandler served as chief financial officer, treasurer and chief accounting officer of Magellan Midstream Holdings GP. Before joining Magellan, he was director of planning and strategic development for a subsidiary of The Williams Companies Inc. and held various accounting and finance positions at MAPCO Inc. He currently serves on the board of directors and is the chairman of the audit committee of USA Compression GP LLC. Chandler also is a member of the board of directors and audit committee of Cone Midstream GP LLC.

since 2010. Davis also is currently directing the Enabling Technologies Focus Area for the BioEnergy Science Center, an Energy Department-sponsored effort led by Oak Ridge National Laboratory. Since joining NREL, Davis has served as the group manager for Chemical and Catalyst Sciences in NREL’s National Bioenergy Center. In addition, he has authored or co-authored more than 90 peer-reviewed publications and three book chapters.

R.J. O’Brien & Associates, a Chicago-based brokerage and clearing firm, has added Jordan Stern as senior vice president of ethanol. Stern will be focused on building out Stern the firm’s futures, swaps and physical brokerage capabilities in ethanol and other biofuels. He was previously employed by SCB Group, an Mark Davis has interdealer broker who specializes principally been named director of in biofuels, where he served as co-head of the the Biosciences Center firm’s ethanol desk and was instrumental in at the Energy Departhelping SCB ascend to a leading position in ment’s National Renewethanol futures, ethanol options and physical able Energy Laboratory. brokering of ethanol. Prior to his work with He joined NREL in 1993 ethanol, Stern spent nine years as a corn opDavis as a post-doctoral research tions trader on the floor of the Chicago Board associate and has served as the platform pro- of Trade. gram manager for thermochemical processes

Syngenta has announced the appointment of J. Erik Fyrwald as CEO. He succeeds John Ramsay, who has been ad interim CEO since November 2015. Fyrwald Prior to joining Syngenta, Fyrwald served as president and CEO of Univar Inc. He also spent 27 years at DuPont and previously served as chairman, president and CEO of Nalco and as president of EcoLab following EcoLab’s acquisition of Nalco. Iowa Gov. Terry Branstad, the nation’s longest serving governor, was recently honored by renewable fuels industry leaders, the Governors’ Biofuels Coalition and the Branstad National Corn Growers Association at a breakfast commemorating his steadfast leadership in renewable fuels. The event was part of the National Governors Association summer meeting, and was hosted and sponsored by the Iowa Renewable Fuels Association, Governors’ Biofuel Coalition, Nebraska Ethanol Board and several other biofuels industry partners.

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18 | Ethanol Producer Magazine | SEPTEMBER 2016

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BUSINESS BRIEFS¦

A proposed ASTM standard will provide a means to test and evaluate alternate fuel sources, such as biofuels, for metals. The proposed standard, WK54683 Test Method for Determination of Metals in Biofuels by Microwave Plasma Atomic Emission Spectrometry (MPAES), is being developed by Committee D02 on Petroleum Products, Liquid Fuels, and Lubricants. The National Corn Growers Association President Chip Bowling recently presented the NCGA President’s Award to Sen. Joe Donnelly, D-Ind. The award is given annually Donnelly to a leader who has worked to advance issues important to corn farmers and agriculture. Bowling called Donnelly a true advocate for farmers and noted he is one of ethanol’s biggest champions in Congress. The Renewable Fuels Association has announced Power Energy Corp. has been awarded a $1.44 million grant from the Illinois’ Department of Commerce & Economic Opportunity to offer higher ethanol blends at 20 retail stations in the Chicagoland areas as part of the USDA’s Biofuels Infrastructure Partnership Program. The funding will be used to help install underground storage tanks and new dispensers that will offer E15, E30 and E85, as well as biodiesel. Growth Energy announced that RaceTrac is joining a growing list of retailers as part of the Prime the Pump initiative. Growth Energy works in collaboration with Prime the Pump members to make higher biofuel blends, E15, available to more Americans across the United States. RaceTrac joins Sheetz, Kum & Go, MAPCO, Minnoco, Thorntons, Murphy USA, Protec, and several others as the newest retailer to offer consumers a cleaner-burning, home-grown American fuel. SHARE YOUR INDUSTRY NEWS: To be included in the Business Briefs, send information (including photos and logos, if available) to Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also email information to evoegele@bbiinternational. com. Please include your name and telephone number.

Xylogenics Inc. officially has launched its ethanol plant fermentation modeling services, which provide big data analytics to plant managers that empower informed and efficient implementation of new technologies, techniques, and resources. Xylogenics’ goal is to aid in maximizing the efficiency of fuel ethanol production by providing extensive and objective fermentation models that enable plant managers to agilely deploy the most valuable strategies for their plants. As part of the modeling services, Xylogenics performs a full analysis of all plant materials and historical data, then designs and conducts customized models of the plant fermentation, at lab scale. These models enable testing of an array of variables affecting plant fermentation operations and produce a large amount of fermentation data. This data is analyzed and reviewed with the plant manager to aid fermentation strategy or new technology assessments.

The American Society of Agricultural and Biological Engineers has completed a standard that establishes a framework for charting progress toward sustainable agriculture production. The standard is intended for application with all typical farming operations found around the world. Known as ANSI/ASABE S629, or the Framework to Evaluate the Sustainability of Agriculture Production Systems, the standard includes provisions for defining and benchmarking key performance indicators, setting goals, implementing strategies for continuous improvements, and reporting improvements.

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SEPTEMBER 2016 | Ethanol Producer Magazine | 19

COMMODITIES

Prices & Market Analyses

Natural Gas Report

Natural gas burn from power generators hits record levels July 25—Intense heat across populous areas of the U.S. in the second half of July fueled record usage of natural gas from power generators. Some estimates showed demand as high as 40 Bcf on peak generation days for the first time. Average burn continued to outpace year-ago levels by 1 to 2 Bcf per day. The landscape of power generation has favored natural gas usage heavily in recent years, but a perfect storm materialized in 2016 with recent retirements of coal-fired assets, a price structure that economically favors natural gas generation and heavy cooling requirements so far this summer. These factors combined to lead to unprecedented usage of natural gas from this key demand sector. With natural gas storage inventories exiting last winter at record levels, a major shift in the supply and demand balance was needed to prevent storage from reaching capacity this summer. As expected, the power generation sector—which has proven to be able to ramp up consumption in response to low prices to help rebalance the natural gas market—stepped up to the plate. Since the spring, consumption from

by Andy Huenefeld

this sector consistently has outpaced year-ago levels, helping to erode the surplus in underground storage levels. June saw record heat across the country according to NOAA. On an average-temperature basis, June 2016 was the hottest June in at least 122 years. July appeared as though it would set a record as well and longer-range forecasts that encompass the remainder of the cooling season strongly favor a widespread warmer-than-normal season. These outlooks lent support to the idea of a record summer for natural gas demand from power generators. Prices across the forward curve rallied sharply from March through June, but were relatively stagnant in late July. However, as long as warmer-than-normal temperatures dominate the landscape, an element of upside price risk remains prevalent in the marketplace. Price seasonality begins shifting to the downside in mid- to late-August, but heavy demand, falling production and record exports were expected to continue to provide a level of fundamental support to the market beyond the end of the summer.

Corn Report

Potential for big corn crop pressures prices

by Jason Sagebiel and Geoffrey Utecht

July 25—The July supply-demand report showed a one-half million acres increase in planted corn due to the increase shown on the June 30 acreage report that increased domestic production estimates by 110 million bushels to 14.54 billion bushels. Export demand jumped 100 million bushels as Mexico and Japan are expected to increase their demand for U.S. corn. With bigger stocks and production from the June reports, projected carryout increased 73 million bushels from June, catching the market off guard. Planted acres were expected to decline by 1 million and ending stocks were expected to be 200 million bushels lower than the report indicated. These surprises in the report caused pressure on the corn market, which slowed movement in the cash market from producers. The USDA decreased last years’ Argentina production by 1 million metric tons (mmt) Brazilian production saw a 2 mmt decrease from last month and now is 7.5 mmt lower than last year’s production. Many areas of the Corn Belt saw extended dry periods during June and weather models predicted above normal temps and below normal precipitation in July and August. Dry areas got relief with timely rains into the month of July as weather experts pushed back high heat forecasts into August. The report data combined with the timely rains lent midsummer compared to the five-year average rating in the mid-60 and lack of heat prompted managed money to liquidate their positions percent. The chart illustrates the change in positions over time particularly from roughly 250,000 long contracts in June to nearly even by mid-July. Crop conditions have been steady: nationally 76 percent good to excel- noting the recent managed money position. Comments in this column are market commentary and are not to be construed as market advice.

20 | Ethanol Producer Magazine | SEPTEMBER 2016

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.463

DDGS Report

DDGS prices weaken with corn price slide July 25—As the corn crop progressed and futures prices slipped with improving conditions, DDGS values slid as well. Buyers were not aggressive at all in getting any forward coverage and were seeing consistently lower offers, which kept them in a wait-and-see mode, until things turned. DDGS prices were hovering near the value of corn, after seeing prices as high as 120 percent of corn. Domestically, most feeders kept profitable using DDGS as part of the ration. Soymeal prices spiked in June and July, and the protein component of distillers grain became more relevant, which increased its value versus corn both in the U.S., and

Region

Spot

Rack

West Coast

1.620

1.700

Midwest

1.465

1.681

East Coast

1.526

1.630 SOURCE: DTN

by Sean Broderick

abroad. In the export markets this year, with Chinese buying only about 20 percent of what was purchased during the biggest months in 2015, most other countries have stepped up their buying, especially places like South Korea, Turkey, Mexico, Vietnam and Thailand. Looking ahead, traders still expect a decision about the Chinese antidumping to affect the DDGS market direction, especially if it provides some resolution or pathway to define the governmental costs (tariffs, if any) of selling DDGS there. But, until then, crop conditions and futures gyrations will be affecting the DDGS market a lot more.

Regional Gasoline Prices ($/gallon)

Front Month Futures Price (RBOB) $1.357 Region

Spot

Rack

West Coast

1.304

1.482

Midwest

1.406

1.340

East Coast

1.298

1.390 SOURCE: DTN

DDGS Prices ($/ton) Sept 2016

Aug 2016

Sept 2015

Minnesota

120

135

140

Chicago

155

165

175

Buffalo, N.Y.

145

165

170

Central Calif.

180

190

200

Central Fla.

160

168

LOCATION

195 SOURCE: CHS INC.

Corn Futures Prices (Sept. Futures) Date

close, bu.

close, ton

July 22, 2016

3.350

119.643

June 22, 2016

3.983

142.232

July 22, 2015

4.028

143.839 SOURCE: FCSTONE

Cash Sorghum ($/bushel)

Ethanol Report

by Rick Kment

Ethanol futures tumble on lower production costs July 25—Sharp losses developed in ethanol futures during July with traders extremely cautious concerning recent pressure in corn prices as well as consistent losses in other energy markets throughout the month. Demand was expected to continue to erode through the last half of the summer driving season, which created additional widespread market pressure. Ethanol futures fell 24 cents per gallon between late June and late July as traders remained concerned that demand growth through the rest of the year will not continue.

Corn futures again have fallen below $3.50 per bushel, to $3.35 at the time of this writing. That's over $1 per bushel below the seasonal high set just one month ago. Additional widespread pressure continues in rack and spot prices as buyers are unwilling to aggressively step up, given recent market losses. Additional seasonal pressure may continue to develop in ethanol, but the recent heat seen through the country could bring some volatility to corn and ethanol prices, if we see yield reductions.

Location

July 22, 2016

June 24, 2016

July 23, 2015

Superior, Neb.

$4.13

3.15

2.45

Beatrice, Neb.

$4.18

3.15

2.60

Sublette, Kan.

$3.89

3.01

2.48

Salina, Kan.

$4.28

3.10

2.61

Triangle, Texas

$4.04

3.21

2.60

Gulf, Texas

$5.85

3.94

3.77

SOURCE: SORGHUM SYNERGIES

Natural Gas Prices ($/MMBtu) July 25, 2016

June 27, 2016

July 27, 2015

NYMEX

2.747

2.716

2.789

NNG Ventura

2.705

2.520

2.795

Calif. Citygate

3.620

2.850

3.075

LOCATION

SOURCE: U.S. ENERGY SERVICES INC.

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

Month

End Stocks

May 2016

975

30,228

20,792

April 2016

935

28,059

20,992

957

29,666

20,120

May 2015

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

SEPTEMBER 2016 | Ethanol Producer Magazine | 21

DISTILLED Ethanol News & Trends

DuPont unveils fermentation system

DOE issues updated billion-ton report

DuPont Industrial Biosciences has announced the launch of its DuPont Synerxia Fermentation System, an approach to fermentation that aims to help ethanol producers improve yields by up to 2 percent, while lowering total sugar levels at drop by up to 25 percent. The system includes Synerxia Prime ADYT, a bioengineered yeast paired with commercial dry trehalase. It also features Synerxia Prime LC, a new glucoamylase blend that delivers three times the debranching activity of conventional glucoamylase. According to DuPont, glucoamylase included in the Synerxia Fermentation System liberates more glucose for the yeast to ferment, improving ethanol yield.

The U.S. Department of Energy and Base-case yield scenario (million tons) Oak Ridge National Laboratory have re- Roadside at ≤ $60 per ton 310 679 leased 2016 Billion-Ton Report, an update Delivered ≤ $84 per ton 217 467 to previous report that determined the U.S. 217 564 has the potential to sustainably produce at Delivered ≤$100 pre ton least 1 billion dry tons of nonfood biomass Unused 93 114 resources annually by 2040. These renewable resources include High-yield scenario (million tons) agricultural, forestry, and algal biomass, as Roadside at ≤ $60 per ton NA 985 well as waste. They encompass the current 825 and future potential of biomass, from cur- Delivered ≤ $84 per ton rently available logging and crop residues to Delivered ≤ $100 per ton 825 future available algae and dedicated energy 160 crops—all usable for the production of bio- Unused SOURCE: U.S. DEPARTMENT OF ENERGY fuel, biopower, and bioproducts. New to the 2016 report is novel assessments of potential biomass supplies from algae; from new energy crops, such as miscan- considers how the cost of preprocessing and thus, energy cane, eucalyptus; and from munici- transporting biomass to the biorefinery may impal solid waste. For the first time, the report also pact feedstock availability.

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Feedstock availability Forecast

or that

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22 | Ethanol Producer Magazine | SEPTEMBER 2016

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.

Near term

.

Long term

DISTILLED

Greenyug to build chemical plant adjacent to ADM wet mill Greenyug LLC recently announced that it will build an industrial-scale ethyl acetate manufacturing facility adjacent to Archer Daniels Midland Co.’s wet mill corn processing facilities in Columbus, Nebraska. The chemical plant will take in ethanol produced by the ADM facility as feedstock. ADM will also provide other services to the project. Prairie Catalytic LLC, a subsidiary of Greenyug that will own and operate the facility, recently executed a conditional commitment with USDA Rural Development for a loan guarantee under its Business and Industry Loan Guarantee program. Construction of the facility is expected to start late this year, with production set to begin about one year later.

Life cycle GHG emissions (kgCO2e/mmBtu) Corn starch ethanol, natural gas, dry mill, 100% DDGS, no advanced technologies

Corn starch ethanol, Baseline life Heartland Winthrop cycle GHG, process gasoline

Upstream emissions

47.6

45.3

*

Process emissions

32.4

29.8

19.2

2.1

2.1

79

81.7

77.2

98.2

16.80%

21.40%

Downstream emissions Life-cycle emissions Percent reduction SOURCE: U.S. EPA

Minnesota plant achieves efficient producer status The U.S. EPA recently approved an efficient producer fuel pathway for Heartland Corn Products’ 104 MMgy ethanol plant in Winthrop, Minnesota. The facility is the 54th facility to achieve an efficient producer pathway approval. Information published by

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the EPA indicates Heartland Corn Products’ production results in a 21.4 percent carbon reduction when compared to baseline gasoline, compared to 16.8 percent for a standard natural gas-fired ethanol plant with 100 percent dry distillers grains and no advanced technologies.

Plants that have approved efficient producer pathways are able to generate renewable identification numbers (RINs) for production volumes above those grandfathered under current renewable fuel standard regulations.

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PHOTO: THORTONS

The E15 Consumer

DISCONNECT

Sheetz, Thortons executives give careful thought to strategically offering the new fuel. By Susanne Retka Schill

24 | Ethanol Producer Magazine | SEPTEMBER 2016

RETAIL Almost weekly, another announcement is made about a retail location offering E15. The rollouts,

large and small, are indicators E15 is gaining steam and, in late July, HWRT Oil Co. announced it will offer pre-blended E15 at four of its terminals in mid-September, with plans to add 17 more terminals in seven states. Getting E15 available at the terminal level is a big step. While these are signs E15 momentum is building, the story told by executives at two major convenience chains illustrates the challenge ahead still is significant. For one, E15 has a brand problem, one that’s shared by E10— consumers don’t know what it is. “The problem is there’s nothing that calls it E10,� says Mike Lorenz, executive vice president of petroleum supply for Sheetz. “So, while the dispenser says—and the wording changes from state to state: ‘contains up to 10 percent ethanol, contains 10 percent ethanol, may contain 10 percent ethanol’—there’s no place it says E10.� That’s the disconnect, he says. “Even if I know it’s 10 percent ethanol, I don’t know that it means E10. So when you

say, ‘How about buying E15?’ they say, ‘What are you talking about?’� Jeff Gallic, vice president of fuels for Thortons, concurs. “Consumers are familiar with unleaded, midgrade and premium. They don’t know what E10 is, so how can they know what E15 is? And they buy E10 every day when they purchase unleaded fuel.� A recent poll of 1,500 drivers conducted by Reuters and Ipsos confirms the retailers’ observations. More than half of respondents said they were unfamiliar with ethanol and a similar number said they pay little or no attention to whether the gasoline they bought contains ethanol. Both the survey results and interviews with motorists show cost and convenience trump everything, with 93 percent of those surveyed saying price influenced their decisions and 80 percent said location of a gas station was a priority. The approach to overcoming the disconnect varies. Thortons, which is rolling out E15 in its Chicago market, has trademarked its chosen name. “We call it Unleaded 15, instead of E15, because it seems easier for the consumer to understand,� Gallic says.

Lorenz points to Minnesota retailers who call it Regular 88 or Regular Plus. Sheetz decided to stick with E15 when it started its rollout in North Carolina. “If you call it Regular 88, it really doesn’t tell you what it is. It really doesn’t tell you it’s got 5 percent more ethanol,� Lorenz says. “There was a concern that we want to be upfront and honest with people, and not be deceptive. That’s why we went with E15.� Having a consistent brand nationwide would be helpful in gaining consumer acceptance in the future, he adds, as the fuel offering spreads. Sheetz and Thorton executives, who both have offered E85 for years at some locations, say their teams’ familiarity with ethanol made the discussions about offering E15 easier. The availability of grants to help with the infrastructure was a key factor for both in giving the projects a green light—grants from the Prime the Pump industry-supported fund and the USDA Biofuels Infrastructure Program.

Chicago Introduction

Based out of Louisville, Kentucky, Thortons Inc. is an integrated independent fuel retailer with its own terminal, a fleet of fuel

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SEPTEMBER 2016 | Ethanol Producer Magazine | 25

tankers and biofuel blending infrastructure. Thortons got into E85 early, first offering it in 2005 and building up to 90 retail stations, along with E30 at nine locations in Indiana. It operates 181 C-stores in six states: Illinois, Kentucky, Indiana, Ohio, Tennessee and Florida. With a long-time relationship with the ethanol and biodiesel industries, Thortons was receptive when Prime the Pump came to the company suggesting the USDA Biofuels Infrastructure Program could be a good opportunity. The company chose to focus the rollout in Chicago with its concentration of 44 stores and the fact that it is a reformulated gasoline (RFG) market. Due to air quality issues, the U.S. EPA requires low-volatility RFG be sold in the Chicago area, making it possible to offer E15 year-round to all vehicles 2001 and newer. By late July, Thortons had nine stations selling Unleaded 15, with the expectation that all 44 will be done by early 2017. “We’re really pleased with the results so far,� Gallic says. “The volume we’re selling is higher than we expected. It varies, but we’re satisfied with the amount of unleaded 15 we’re selling. We’re discounting it 3 cents a gallon, compared to unleaded.�

PHOTO: THORTONS

There are three categories of stores. Newer stores already have E85 tanks in the ground and many have the piping in place, so changing out the dispensers takes about a week, Gallic reports. Some locations have the tanks, but need additional piping along with new dispensers, taking about two weeks. The big disruption comes when a new tank needs to be buried, often requiring the property to be closed. “You lose revenue every day you’re closed, which adds to the cost of project. The grant money is available for the equipment and installation, but the grant does not include reimbursement for revenue lost while your location is shut down,� Gallic says. “Our expense is fairly substantial for this project.� Once all stores are complete, the company will be rolling out a promotional campaign.

Mid-Atlantic

Pennsylvania-based Sheetz ranks in the top 20 convenience store chains nationwide with 525 stores as of midsummer. That number keeps changing though, as it’s been adding 30 stores a year. The goal, Lorenz says, is 750 stores in the six states served: Pennsylvania,

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RETAIL Maryland, Virginia, West Virginia, Ohio and North Carolina. It chose North Carolina for its E15 rollout due to the concentration of 83 stores, with most located in two urban markets. “The grant we got from Prime the Pump was the No.1 impetus for introducing and putting in E15,� Lorenz says. The company has long anticipated adding a fuel, so tanks already are in the ground in most places. Once they complete the North Carolina rollout, and with the help of the USDA Biofuels Infrastructure Program, the company plans to introduce the fuel in four other states. With the price sensitivity of consumers, Sheetz sees the 7 to 10 cent discount it offers for E15 a great way to attract customers. Located in a conventional gasoline market, E15 sales dropped off during the summer months when the fuel had to be limited to flex-fuel vehicles. Once the summer is over and any 2001 or newer vehicle can once again use E15 and the last of the stores are converted, the company plans to launch its promotional campaign. “E15 is a great product. It’s a good value proposition for the customer, we can offer it

more cheaply than 87, it’s higher octane,� Lorenz says. “And then you have the story behind ethanol: it’s cleaner burning, so it’s good for the environment; it’s U.S. made, so it’s American jobs; and you’ve got energy independence, reducing our dependency on foreign oil.� With such a great story, Lorenz is pondering the best way to promote it. “There are people buying it. But if you look at the value, there should be more people buying it. That’s our goal, but how do we get there? It’s not as simple as it seems.� Consumer education is important, but he points out you can’t force someone to get educated. It’s well-known that the consumer is sensitive to gas pricing, he adds. “They should be all over this. It’s one of those deals where it should sell itself, but it doesn’t.� He has given a lot of thought to crafting the right message. “It’s not that people are anticorn or ag or ethanol, necessarily. Our research has shown 90 percent of the people are oblivious, while 5 percent are pro-ethanol and 5 percent are antiethanol,� he says. “The majority of the people don’t have a reason to want to know. What’s going to convince them?�

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One of the functions of the Prime the Pump program beyond helping with grants is to share what is working as E15 is rolled out in different markets, says Mike O’Brien, vice president, market development for Growth Energy. Sheetz and Thortons are just two of the 30 top retail chains being recruited by Prime the Pump. It can take two or even three years from the first discussion with a company about introducing E15 until it appears at the pump, O’Brien says. “It’s important to understand, if we’re going to make E15 successful, that’s the kind of effort it’s going to take.� The long-term potential is significant. The targeted chains operate more than 4,800 stores representing nearly 12 billion gallons in total gasoline sales. If the projected overall 17 percent blend rate is achieved, that could generate 815 million new gallons of ethanol sales. Author: Susanne Retka Schill Managing Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com

INFRASTRUCTURE

TERMINAL Challenge

NREL finds more infrastructure is needed for more ethanol and high-octane fuels. By Ann Bailey

28 | Ethanol Producer Magazine | SEPTEMBER 2016

Changes to existing terminals will need to be made if higher octane fuels are added to the U.S. fuel supply, says Kristi Moriarty, National Renewable Energy Laboratory senior analyst. While a groundbreaking NREL study

indicated that there are few technical issues associated with storing and distributing ethanol, there are several significant factors that could limit increased distribution of ethanol.

INFRASTRUCTURE Terminal companies indicate that most of their tanks are in use, which means that accommodating ethanol at a volume of 25 to 40 percent likely will require that new tanks and other equipment be installed, the NREL study says. The Department of Energy conducted the research into terminal availability because the agency previously had spent a lot of time studying retail stations and no time on terminals, Moriarty says. The U.S. expects to distribute more biofuels so it is important to understand the impacts, opportunities and barriers across the fuel supply chain, the NREL report says. The study, “High Octane Fuel: Terminal Backgrounder,” included interviews with personnel at terminal companies and visits to several to learn how ethanol is handled, about issues with storage of the biofuel and about the potential for terminals to store more ethanol. “We decided to publish a report with some background information on [terminals] with the understanding of how they work and the fuels flow through them, so there’s a more complete picture supplied by those industries and the Department of Energy,” Moriarty says. The study focused on gaining an understanding of terminals and determining if they could handle more ethanol if a high-octane fuel (HOF) of a 25 to 40 percent ethanol blend entered the marketplace. Previous fuels infrastructure studies funded by DOE looked at retail and fleet stations and whether they could store and dispense ethanol blends, E10 and other biofuels, the NREL report says. The new backgrounder study focused only on terminals. According to the Oil Price Information Service, there are 1,296 terminals across the United States storing transportation fuel and nearly all—more than 1,200 terminals in all 50 states—either do or can store ethanol, the NREL study says. For the 363 terminals reporting ethanol capacity, the nationwide average was 12,867 barrels (540,000 gallons), varying from a low of 238 barrels to a high of more than 490,000. Before she conducted the study, Moriarty assumed that ethanol arrived at terminals via rail. “I was surprised that most of the ethanol was delivered by truck to

the terminals,” she says. “Prior to the study, we weren’t aware they weren’t able to deliver unit car trains, in most cases. Certainly some of the terminals can.” According to the study, the majority of ethanol is delivered by rail to transmodal facilities where it is then trucked to terminals. The inability of terminals to accommodate unit trains presents a challenge for the ethanol industry, Moriarty says. “Because if you’re receiving by truck you’re going to have to have more land available

and more off-loading facilities,” Moriarty notes. Meanwhile, some terminal owners require that staff is on-site to receive ethanol, which means that the terminals only can receive ethanol during daytime hours, Moriarty says. The study also found other factors that could limit additional ethanol being delivered to terminals include: • Permitting and regulatory processes to add tanks have become more time-consuming and challenging in recent years, ac-

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SEPTEMBER 2016 | Ethanol Producer Magazine | 29

INFRASTRUCTURE cording to all of the terminal companies interviewed for the study. Equipment is aging, but it is difficult to upgrade or replace equipment while maintaining permits and normal operations. • There are few existing tanks that are not already in use. • It will be necessary to reconfigure the existing loading racks and bays to accommodate additional equipment to fill trucks.

• A significant amount of capacity is leased to customers under long-term contracts to store specific fuels and volumes. Terminals are capable of handling more additional ethanol if the market indicates there is enough long-term demand to warrant building more infrastructure, the NREL report says. But terminals now are designed to serve the current market and generally don’t have extra tanks or the ca-

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pacity within their existing tanks, the NREL study says. The report says that when terminal companies were interviewed for the study in spring 2015, they indicated that they had few unused tanks and weren’t able to supply E15 to all of their customers because they didn’t have enough infrastructure to handle it and the same would be true for a high-octane ethanol blend. That meant if they were going to store more ethanol, that typically would require the addition of a new tank and equipment such as piping, valves and pumps to connect it to the loading equipment. Some members of the ethanol industry took issue with the idea that new tanks might be needed, Moriarty says. She disagrees. Many of the existing tanks are leased under a 10-year contract, which means that the company, which could be a retailer, fuel marketer or other business would have to be on board with any changes, she notes. “You would have to commit them, who have this long-term contract for a particular fuel.� While some companies will be able to repurpose tanks, new tanks also will need to be installed, Moriarty says. “To be clear, that’s to service a high-octane market in the E25 to E40 range. All of the tanks in this country are in use and they’re either storing a BOB (blendstock for oxygenate blending) or a diesel or a jet fuel or asphalt or some other product.� During the past year, the industry has taken concrete steps to increase the number of terminals that store ethanol. Companies that have announced they are building terminals include Flint Hill Resources, which is constructing its first ethanol terminal at its Buda, Texas, hub. Meanwhile, Green Plains Partners LLP and Delek Holdings Inc. said last year they planned to form a 50-50 joint venture to build a $12 million ethanol unit train terminal in Maumelle, Arkansas, on the Union Pacific rail line, and this summer JP Energy Partners LP revealed it began expanding its rail facilities in its North Little Rock refined products terminal to accommodate unit train deliveries of ethanol.

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RACING

CHAMPION: Larry Larson, center, King of the Corn champion racer in Kearney this summer, has the world’s fastest street car, having pegged 5.95 seconds at 244 mph in his Chevrolet S-10 pickup at an earlier drag race. He’s pictured with Jay Berry, Ignite Racing, left, and Todd Sneller, Nebraska Ethanol Board. PHOTO: KEVIN COX, STREET CAR MAGAZINE

32 | Ethanol Producer Magazine | SEPTEMBER 2016

KINGof the Corn DRAG RACING Ethanol Nationals shines a spotlight on high ethanol blends in inaugural street car race. By Ann Bailey

SEPTEMBER 2016 | Ethanol Producer Magazine | 33

RACING BLOOD: Dan Schwartzkopf, right, and his son Jamie, middle, introduced ethanol to racing circuits in the mid-'90s with the National Hot Rod Assoc. Grandson Jamie Newman will be the third generation to champion ethanol’s performance. PHOTO: JAMIE SCHWARTZKOPF

Larry Larson made history this summer when he won the Ethanol Nationals, the first street car drag race using high ethanol blends. The world-renowned street car rac-

er and owner of Larson Race Cars from Oak Grove, Missouri, won a $24,000 purse for his first-place finish in the King of the Corn Outlaw class at the Ethanol Nationals drag-strip event held July 29-30 at Kearney (Nebraska) Raceway Park. The inaugural event is a big milestone for ethanol, says Dan Schwartzkopf, Ignite Racing

FLYING LOW: This ’64 Chevy Impala is outfitted with a fiberglass body in the back to get a down pressure to help with traction in a race. PHOTO: JAMIE SCHWARTZKOPF

Fuel technical director and one of the of the Ethanol National’s organizers “It’s huge. It’s a big to-do. No other venue in the country has done this. These are street cars, so that’s what makes it unique,� he says. Larson, who used E98 ethanol to fuel his pick-up, had never used ethanol in his vehicle until the afternoon before the race, Schwartzkopf says. The week before the race, he coached Larson over the phone about how to tune up his pick-up, but Larson didn’t put any of the biofuel in the vehicle until after he arrived at the raceway. All of the Ethanol National racers—about 80 in all—were running a minimum of 50 percent ethanol in their

vehicles and most were using E85 or above, Schwartkopf says. The rules for the race were that vehicles must run on a blend of 51 to 98 percent ethanol, says Jay Berry, Ignite Racing Fuel vice president. Ignite Racing Fuel was the first to develop an ethanol-based racing fuel. Berry founded Ignite Racing Fuel because eight years ago he noticed that there was a need for high-performance E85. “Due to the inconsistencies in the fuel, I created Ignite. I did a lot of research, did a lot of testing. The ethanol industry has really backed me. In our earlier years when we first got started, ICM and Urban Air Initiative gave

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34 | Ethanol Producer Magazine | SEPTEMBER 2016

BURNING RUBBER: When preparing for a drag race, the drivers warm up the tires by burning them out, backing up on the rubber that was laid down, gaining better traction in the race itself. PHOTO: JAMIE SCHWARTZKOPF

us the first chance. We worked together and sponsored the Torque Series in USAC [United States Auto Club] so they really kind of springboarded us to get where we are today,� Berry says. Berry, also the founder of Central Indiana Ethanol, has worked over the years with people at Kearney Raceway Park and when they heard he wanted to hold an ethanol race, they invited him to have it at their facility, Berry says. The state’s ethanol plants, ICM, Urban Air and American Ethanol helped to sponsor the event. “This really proves to the people and shows the people you can run higher to mid-

level blends and not be affected and it works very, very well,� Schwartzkopf says. “What’s significant to the industry, it’s proving to the industry that these cars are capable of running higher to midlevel blends so E15 and above is not something our general public needs to be afraid of.� The street cars racing included Corvettes, Vipers, Toyotas and Nissans, he says. Larson won with a Chevrolet S-10 pick-up truck. The Ethanol Nationals drew a big crowd, Schwartkopf says. “The stands were full. [There were] people standing on the fence.� The ethanol race will spread a positive message about the biofuel, Berry says. “We’re

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having a major impact on the world and the high-performance world. Because of what I’m doing, it’s opening the doors to other countries that are trying to learn more about ethanol. I work with Norway, Sweden, Dubai, eight islands down in the Caribbean, Germany. These are just a few of them that are all buying ethanol made here in the United States. “What we do over here they replicate over there.�

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FRONTLINE

RETAINING KNOWLEDGE in the Face of Attrition By Robert Jewell

Recent surveys show that industries are beginning to face dire shortages of skilled staff. Various survey results have revealed that this issue is expected to worsen. New workers are not entering the sector as fast as veterans are or will be retiring. Some survey results indicate a backlog of baby-boomer retirees is expected to turn over 30 to 40 percent of the industrial sector workforce. Our young people also seem to be choosing career paths other than biofuels. All of these factors are problematic, but that is not all to be said regarding the subject. Increased complexity of systems necessary to remain competitive in challenging economic and operating environments means companies must attract and retain all of the experience and knowledge they can to be successful in progressively competitive markets. This will become more challenging as highly desired skill sets transfer extremely well between various utilities (power generation), some institutional sectors and other sectors of industry, including the biofuels industry. As the pool of experienced, knowledgeable individuals in these sectors shrinks, companies likely will 36 | Ethanol Producer Magazine | SEPTEMBER 2016

find they increasingly are dependent on inexperienced personnel. The shrinking pool of experienced individuals will lead to greater and greater competition to attract and retain those individuals. Some plants have utilized consultants to fill the gaps in the available workforce pool and that trend probably will grow. In the ethanol plant, if there are interruptions in operation or excursions from normal operating parameters, the implications can be great. Even slight deviations from optimal parameters, if not identified and corrected in a timely manner, can result in downtime, reduced plant efficiency, lost production, diminished product throughput or quality, off-spec product, lost revenue or increased cost of operations, to mention just a few. Furthermore, diligence must be exercised in monitoring the day-to-day operations of the plant to sustain operating efficiencies and control the costs of operations. Ethanol plants are complex systems. Diligence must be exercised to appreciate and understand the inherent complexity of these plants and the various and numerous subsystems involved, which means experienced and knowledgeable personnel are needed. The individuals operating and maintaining the plant

need to be proficient in all aspects of the plant and the nuances associated with assuring prolonged and sustained safety in operations including operating efficiencies, system reliability, operating consistencies and protection of assets. When faced with attrition, this can be a daunting challenge. That is where tools such as written procedures become helpful. Common examples of written procedures include standard operating, shutdown and startup, maintenance and emergency. Several visual guides also are used frequently for maintenance, inspection and cleaning. Often, these procedures are basic and lack the detail required to be useful, so the value and usefulness of these tools also is limited. When procedures are well-written, clear, concise and include the degree of detail appropriate for the task, they are more likely to be found useful and used on the frontline. Procedures also need to be updated frequently to assure accuracy is maintained when conditions, equipment or operating parameters change. Procedures that provide useful information and clear and easy-to-follow instructions include:

FRONTLINE

• The purpose or scope of the operation. • Equipment and tools required to perform the operation. • Personal protective equipment and other equipment or materials required. • References to other useful documents such as safety data sheets, lockout-tagout procedures, original manufacturer manuals. • A specific sequence for tasks to be completed. • Considerations such as other systems or subsystems impacted by the work. • Visual references such as flowcharts, pictures, diagrams or illustrations. Good procedures provide more predictability in completing tasks and can be valuable in helping employees improve their skills and become more proficient in the task at hand. It also can result in improved confidence of the employee regarding the task at hand and reduced stress levels. Procedures provide instructions that tell them what to do and how to do it. In addition, procedures should not just be thought of as a tool to tell someone how to do something. Well-written and useful procedures also introduce a way to communicate practices and procedures that can: • Save time and resources. • Prevent accidents and injuries. • Convey best practices and procedures. • Reveal practices and procedures that can have practicality in other applications. • Prevent recurring mistakes. • Reduce the time required to train new employees. • Facilitate and ease the periodic retraining of employees. • Ensure consistent results by reducing variability for identical tasks being completed by multiple individuals. • Facilitate the transfer of knowledge and skills when experiencing attrition. Losing talented and experienced individuals creates a real challenge for many sectors of industry, including the biofuels industry. Written procedures can help to facilitate the transfer of knowledge and skills that reduces variability and mistakes and can help to ensure ethanol plant performance is not compromised even when experiencing elevated levels of employee attrition. Furthermore, it may be desirable for the users of the procedures to participate in the creation of these documents. Those same users could be considered subject matter ex-

perts and can provide valuable input in the initial creation of those documents as well as assuring the ongoing accuracy of these living documents. Additionally, individuals who participate in the process of creating procedures have been found to more readily accept and use them. This opportunity to participate also fosters a sense of ownership. Procedures and guides come in many types and forms and are used for various purposes and numerous applications. Implement-

ing the utilization of well-written procedures is just one tool in the arsenal available for managers to use in combating the implications of employee attrition. Author: Robert Jewell Energy Systems Chief Engineer, Chippewa Valley Ethanol Company bjewell@cvec.com

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SEPTEMBER 2016 | Ethanol Producer Magazine | 37

CLEARING THE AIR

What Could Have Been By Ray Defenbaugh

Ah, summertime ..., and the livin' is easy, as the song says. But if not for the U.S. EPA, it could have been even easier.

Easier on our customers, easier on consumers and easier on our lungs had we not been restricted in selling higher blends of ethanol. With summer almost gone as we get into September, I can't help but think of what might have been had we been able to offer a cleaner, higher-octane and less-expensive fuel. The good news is that this completely unfounded, irrational restriction on selling E15 due to an interpretation of the vapor pressure rules (RVP) will be lifted at summer’s end and, we hope soon, year-round. As an early supporter of the Urban Air Initiative, I understand the games EPA plays and how their testing and certification procedures mask the true value of ethanol and, in fact, literally present the opposite of what real world results show. Higher ethanol blends dilute toxics, dilute sulfur, reduce tailpipe emissions and reduce carbon inputs at the refinery level, among other things. The rationale EPA uses to not allow blends above E10 during the summer is that the original allowance of an extra pound—the much ballyhooed 1-pound waiver—is defined as being for fuels containing 10 percent ethanol. Well, I have news for the mathematically challenged folks at EPA: E15 and higher blends contain 10 percent ethanol. More to the point is that the increase in vapor pressure after ethanol is added peaks at just under 10 and actually begins to decrease, so any concerns about increased evaporative emissions is nonsense. UAI first rang the alarm bell with Steve VanderGriend's excellent white paper on the flaws of the underlying testing and emissions profiling EPA used in the EPAct Study. The paper, “Understanding the Emissions Benefits of Higher Ethanol Blends: EPA Modeling Fails to Tell the Whole Story,” is available on www.EthanolAcrossAmerica. net. The EPAct study was the basis for the MOVEs (Motor Vehicle Emissions Simulator) Model that states are required to use to gauge the emissions impacts of motor fuels, including E10 and higher blends. When they do so, based on the flawed methodology, it does not bode well for ethanol. This decades old, ingrained fixation by EPA and many environmental groups on vapor pressure dates back to the early days of

38 | Ethanol Producer Magazine | SEPTEMBER 2016

federal reformulated gasoline and low RVP programs. It was assumed that simply reducing vapor pressure and adding oxygenates would address most regulated emissions. In fact, vapor pressure alone was considered an equal option to the federal formula. EPA never has fully embraced the notion that the oxygenates such as ethanol in gasoline are what really provide the most benefit, and to the extent evaporative emissions need to be reduced, increased ethanol volume over 10 percent lowers RVP. If the sights, sounds and smells of your summer include gasoline, that alone should tell you something. The escaping vapors have nothing to do with ethanol and everything to do with the high aromatic content of the gasoline, which is the root cause of material degradation and escaping fumes. Urban Air has conducted simple but clearly revealing tests comparing E0 to E10 and the ethanol-free gasoline has proven to be the real problem in terms of breaking down materials and causing fuel permeation that leads to increased evaporative emissions. In addition to being an early board member and supporter of the Urban Air Initiative, I also have been very active in the Prime the Pump program—a critical piece of the puzzle in terms of getting the fuel into the market. However, without the recognition of ethanol's true value, we cannot get past the current blend wall and maximize the results of Prime the Pump. For that reason, these two very important initiatives have to work together. And, let’s not for a minute think this discussion stops at E15. Automakers, the Department of Energy, governors and even health experts are getting behind E30 as an optimum blend level, and why not? Adding ethanol to gasoline improves it in every way. It lowers carbon, reduces common air pollutants contributing to smog formation, lessens CO2 emissions, and provides clean octane to replace toxic aromatics. And the more the better. Let’s vow that this is the last summertime we will ever be restricted in the amount of ethanol we can offer consumers. Author: Ray Defenbaugh Co-chair Urban Air Initiative, CEO Big River Resources 319-753-1103

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Sustainability Market Play By Donna Funk

The next few decades will be an incredible time of volatility, opportunity and risk for ethanol producers. Questions surrounding the renewable fuels standard

and biofuels’ place in the overall energy picture remain, but increasing numbers of companies are looking to alternative fuels and byproducts as part of their supply chain to reduce their carbon footprint and put forth a positive public image. To do that successfully, they have to document and make transparent the data that supports their sustainability stories. Food companies are facing significant challenges these days. They want to maintain the quality, safety and taste of their products that loyal customers have come to expect and love, while also connecting with a new generation of food consumers. They often need to focus more on explaining and defending how the ingredients were grown, providing some assurance that they and their suppliers are managing the environmental and social impacts of that process well. That can be a tall order when you don’t know exactly where all the ingredients you are using to make your products are originating—as in the case of commodities such as corn, wheat or rice. While it is challenging, this increased interest by millennials about how things are produced and their desire to support products that contribute positively to the local community and the environment also provides a great opportunity for the entire food and agricultural supply chain. But it will take a coordinated effort between food companies and biofuels producers to bring the vision to life. One way food companies can connect to this new consumer mindset is to expand the role of biofuels in their supply chain and to actively communicate the benefits of doing so to consumers. That can mean something as simple as using more biofuels as a mix in the transport of food and sharing the positive environmental and local economic benefits of that decision. It can also come from highlighting the less-known ways in which the production of ethanol is contributing to a positive overall environmental and social outcome. Building and deepening engagement with these new consumers is critical. Ethanol and other biofuels can and should be thought of as part of that important process. In fact, biofuels companies should be reaching out to food companies to increase transparency and leverage the inherent social and environmental strengths the industry can bring to the table.

40 | Ethanol Producer Magazine | SEPTEMBER 2016

For biofuels producers, the key to minimizing the negatives, capturing new markets and mitigating higher costs is in having a deeper understanding and better risk management of their supply chain. This includes the ability to find and create new shared value streams with the most resilient, productive and sustainable companies in the chain. A critical enabler of this competitive advantage is the collection of data. This is good news for biofuels companies, if they can document their best practices. The ultimate buyers of the products biofuels producers make are increasingly feeling the need to make informed decisions about their supply chain, focus on sustainability priorities and create more transparency. The only way to accomplish that is to gather data from the ground up, which means the push for sustainability assessments or audits is going to only increase. The decision before the biofuels industry increasingly is becoming how and who will provide data about its performance, and not whether the data will be collected. We speak often to biofuels companies and associations about the importance of capturing data and making sure it is working for them first, before reporting it to the greater supply chain. Taking a more systematic approach toward layering a wider array of sustainability and financial data into long-term business planning processes can help companies make better decisions and reduce long-term costs. It also will get these entities ready for the sustainability reporting onslaught coming their way. As the retail industry continues to ask questions about the sustainability of the products they sell, fuel and shipping will be further impacted. Ethanol and other fuels will be viewed through the sustainability lens even more closely. This is a good thing, if producers can produce information that demonstrates environmental, social and financial consciousness. Author: Donna Funk Principal, K·Coe Isom 800-303-3241 funk@kcoe.com

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September 11–16, 2016 36 Years of Industry Education Now in its 36th year, The Alcohol School has been educating fuel ethanol and distilled beverage producers in the science of alcohol production. The weeklong program is designed for lab, plant, and management personnel and is organized around lectures, laboratory demonstrations, seminars, and plant visits. The program will cover the process of ethanol and beverage alcohol production from milling and mash preparation through fermentation and distillation. Enzyme usage, yeast biology, bacterial contamination and control will also be discussed, along with other issues currently affecting both industries.

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