February 2013 Ethanol Producer Magazine

INSIDE: USHERING E15 FROM CONCEPT TO REALITY FEBRUARY 2013

E15 Marketplace Fuel Choice, One Station at a Time Page 32

ALSO

How Marketers View Headwinds, Opportunities Ahead Page 44

Selling E85 Direct to Retailers Page 52

www.ethanolproducer.com

CONTENTS

FEBRUARY ISSUE 2013 VOL. 19 ISSUE 2

FEATURES

DEPARTMENTS

32 E15

6

Editor’s Note

7

Ad Index

10

The Way I See It

Choice at the Pump

32

Progress on E15 is slow but sure

BY HOLLY JESSEN

40 Q&A

The First Lady of E15

40

Fighting for higher blends

BY TIM PORTZ

44 MARKETS

11

44

52 BLENDING

Direct Connection

52

Events Calendar

Upcoming Conferences & Trade Shows

View From the Hill

14

Drive

16

Grassroots Voice

18

Europe Calling

20

Ethanol producers develop relationships with retailers

BY HOLLY JESSEN

CONTRIBUTIONS

It’s About Time Biofuels Became Cool

BY MIKE BRYAN

12

Optimistic Bearing

Opportunities for success amid challenges

BY SUSANNE RETKA SCHILL

Tearing Down Barriers, Building up Trust

BY TOM BRYAN

End All Trade Barriers

BY BOB DINNEEN Powering the Future

BY TOM BUIS

You Don’t Say?

BY RON LAMBERTY

Working on Infrastructure, Common Standards

BY ROB VIERHOUT

Business Matters

Distribution Infrastructure— a Hurdle to Overcome

BY DONNA FUNK

22

Business Briefs

24

Commodities Report

28

Distilled

64

Marketplace

58 BRAZIL

Are US, Brazil Ethanol Industries Ready to Dance?

58

How the two countries can profit through collaboration

BY DANIEL COELHO BARBOSA

Ethanol Producer Magazine: (USPS No. 023-974) February 2013, Vol. 19, Issue 2. Ethanol Producer Magazine is published monthly by BBI International.

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4 | Ethanol Producer Magazine | FEBRUARY 2013

ON THE COVER

Owner Scott Zaremba stands at one of his seven Kansas gas stations that offer E15.

PHOTO: CATHRYN FARLEY COMMERCIAL PHOTOGRAPHY

Novozymes is the world leader in bioinnovation. Together with customers across a broad array of industries we create tomorrow’s industrial biosolutions, improving our customers’ business and the use of our planet’s resources.

Rethink Tomorrow

EDITOR’S NOTE

Until it approved E15 for use in contemporary vehicles in late 2011, the U.S. EPA hadn’t demonstrably changed its regulatory position on ethanol since the arrival of E10 in 1978. As we learn this month, it’s not easy to change a fuel regulation that’s been on the books for 35 years, but our industry made it happen in 2012.

TEARING DOWN BARRIERS, BUILDING UP TRUST TOM BRYAN, PRESIDENT & EDITOR IN CHIEF TBRYAN@BBIINTERNATIONAL.COM

Today, thanks to the diligent efforts of our industry associations, there are no significant federal regulatory barriers standing in the way of E15, but as Holly Jessen reports in our page-30 cover story, “Choice at the Pump,” the monumental task of bringing E15 to market has shifted to other critical fronts. The industry is now working feverishly to remove state-level regulatory barriers to E15 while, at the same time, convincing retailers to sell the product when they can. Since E15 is now approved for use in all 2001 and newer vehicles, 62 percent of all the cars and trucks on America’s roads (using more than 80 percent of all fuel) can now use this higher blend of ethanol, if and when it’s available.

In this month’s page-40 Q&A, Kristy Moore of the Renewable Fuels Association tells us the industry is now focused on removing state-level obstacles to E15 implementation and moving this industry toward a future where E15 enjoys coastto-coast market penetration. That would open up the U.S. market to more than 7 billion new gallons of ethanol made from a wide variety of feedstocks. And for that to happen—for the industry to grow by 50 percent—America would need to build the equivalent of 140 new 50 MMgy ethanol plants, spurring years of new construction and job creation.

The industry is taking things in stride, though, building trust with one retailer at a time. Our industry needs more relationships like the one it has with Scott Zaremba, owner of several Zarco 66 convenience stores in Kansas that were the first in the nation to offer E15. Jessen reports that the cost advantage, higher octane and locality of E15 are big selling points with station owners. Coincidentally, Zaremba usually purchases ethanol direct from ethanol plants within 100 miles of his gas stations, blending his own E15 at optimal cost. We learn in Jessen’s page-52 feature, “Direct Connection,” that selling higher ethanol blends direct from ethanol facilities is paying off for some plants. Producers like Michigan’s Carbon Green BioEnergy have invested in onsite blending equipment to capitalize on retailer demand for discounted E85 in close proximity to the plant. The returns have been good.

Finally, be sure to check out the ethanol and gasoline data presented throughout our page-45 feature on the domestic and global ethanol market. In “Optimistic Bearing,” Sue Retka Schill reports that ethanol marketers anticipate that the favorable blend economics of ethanol and the growing mandated volume for conventional renewable fuels will drive the adoption of E15. But as Jason Searl of Poet Ethanol Products says, “The full saturation of E15 will be in the course of years.”

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US:

6 | Ethanol Producer Magazine | FEBRUARY 2013

TWITTER.COM/ETHANOLMAGAZINE

AdIndex

EDITORIAL PRESIDENT & EDITOR IN CHIEF Tom Bryan tbryan@bbiinternational.com

VICE PRESIDENT OF CONTENT & EXECUTIVE EDITOR Tim Portz tportz@bbiinternational.com

CONTRIBUTIONS EDITOR Susanne Retka Schill sretkaschill@bbiinternational.com

FEATURES EDITOR

38 2013 International Biomass Conference & Expo

19 Lallemand Biofuels & Distilled Spirits

38 2013 International Fuel Ethanol Workshop & Expo

50 Liquid Controls

42 2013 National Ethanol Conference

49 Louis Dreyfus

39 Ashland Hercules Water Technologies

29 Methes Energies

15 BetaTec Hop Products

30 Mole Master Services Corp.

28 Buckman

59 Nalco, an Ecolab Company

Holly Jessen hjessen@bbiinternational.com

NEWS EDITOR Erin Voegele evoegele@bbiinternational.com

COPY EDITOR Jan Tellmann jtellmann@bbiinternational.com

ART ART DIRECTOR Jaci Satterlund jsatterlund@bbiinternational.com

PUBLISHING CHAIRMAN Mike Bryan mbryan@bbiinternational.com

CEO

51 CHS Renewable Fuels Marketing

Joe Bryan jbryan@bbiinternational.com

SALES

37 Crown Iron Works Co.

27 Phibro Ethanol Performance Group

VICE PRESIDENT, SALES & MARKETING Matthew Spoor mspoor@bbiinternational.com

EXECUTIVE ACCOUNT MANAGER

3 & 68 DuPont Industrial Biosciences

Howard Brockhouse hbrockhouse@bbiinternational.com

5 Novozymes

56 Platts

ACCOUNT MANAGERS Marty Steen msteen@bbiinternational.com Bob Brown bbrown@bbiinternational.com Andrea Anderson aanderson@bbiinternational.com

CIRCULATION MANAGER Jessica Beaudry jbeaudry@bbiinternational.com

13 DuPont Pioneer

21 POET-DSM Advanced Biofuels

67 Eco-Energy Inc.

31 QUALSPEC

26 Fagen Inc.

57 RC Fuels Inc.

35 Ferm Solutions Inc.

63 RPMG Inc.

17 Fermentis - Division of S.I.Lesaffre

47 SGS North America Inc.

ADVERTISING COORDINATOR Marla DeFoe mdefoe@bbiinternational.com

SENIOR MARKETING MANAGER John Nelson jnelson@bbiinternational.com

EDITORIAL BOARD Mike Jerke, Chippewa Valley Ethanol Co. LLLP Jeremy Wilhelm, Cilion Inc. Mick Henderson, Commonwealth Agri-Energy LLC Keith Kor, Pinal Energy LLC Walter Wendland, Golden Grain Energy LLC Neal Jakel Illinois River Energy LLC Bert Farrish Lifeline Foods LLC Eric Mosebey Lincolnland Agri-Energy LLC Steve Roe Little Sioux Corn Processors LP

2 Growth Energy

Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com.

Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 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.

Please recycle this magazine and remove inserts or samples before recycling

43 Syngenta: Enogen

55 Himark bioGas

23 Tower Performance Inc.

22 Hydro-Klean LLC

60 Vecoplan LLC

11 ICM Inc.

62 Vogelbusch USA Inc.

8 & 9 Inbicon

48 Wabash Power Equipment Co.

36 Indeck Power Equipment

61 WINBCO

54 INTL FCStone Inc.

COPYRIGHT Š 2013 by BBI International TM

FEBRUARY 2013 | Ethanol Producer Magazine | 7

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THE WAY I SEE IT

It’s About Time Biofuels Became Cool

By Mike Bryan

In the recent RFA Daily Clips, I read an article about a new ad campaign that was put out by UNICA in Brazil, touting biofuels (particularly ethanol) as “Cool.”

While I know we have had our issues with Brazil, it’s important to give credit where credit is due, and I believe kudos should go to UNICA on this one.

Frankly, ethanol has never been viewed as cool by anyone but those who produce it and those who provide the feedstock. But despite its not-thatcool status, ethanol has done very well and has garnered a significant place in the world’s petroleum pool.

Frankly, fossil fuels were never viewed as very cool either, once the novelty wore off a 100 or so years ago.

They remain not very cool today, in fact have slipped into the shameful-butnecessary category and no amount of bling will ever make fossil fuels look cool again. Ethanol, on the other hand, has gone from not very cool to an easy mark for anyone with an inclination to use it as target practice.

Biodiesel was cool, solar, wind, geothermal, even MTBE, were all viewed as cool. Ethanol was like the nerdy chemistry major, compared to the star quarterback role garnered by other alternative energies. Trouble is, the star quarterback often ends up wishing he would have been the nerdy chemistry major as life unfolds.

10 | Ethanol Producer Magazine | FEBRUARY 2013

In fact, ethanol always has been cool! What could be cooler than to annually grow a new supply of feedstock for a major energy source?

What could be cooler than to go from a few million gallons to providing 10 percent of the America’s petroleum demand? And what could be cooler than to help keep agriculture strong, America safer and improve our environment?

While I firmly believe we chose the correct path by promoting the environmental, economic and security benefits over its coolness, perhaps it is time for ethanol to take off the glasses with the tape holding them together and to don some cool shades.

It’s been said that perception is 90 percent of reality. If that’s the case, then let’s begin to redefine ethanol’s reality. We’ll always be the nerd and proud of it, just with some cool shades.

That’s the way I see it.

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

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International Fuel Ethanol Workshop & Expo June 10 -13, 2013 America’s Center St. Louis, Missouri Where Producers Meet Now in its 29th year, the FEW provides the global ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. The FEW is the largest, longest-running ethanol conference in the world—and the only event powered by Ethanol Producer Magazine. Visit our website to reserve premium booth space now.

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FEBRUARY 2013 | Ethanol Producer Magazine | 11

VIEW FROM THE HILL

End All Trade Barriers

By Bob Dinneen

As America’s ethanol industry continues to fight to expand the domestic market for ethanol through the increased use of E15, more flex-fuel vehicles (FFVs) on the road, and more consumer fuel choice at the pump, the global market for ethanol has been critical to maintaining the health and profitability of our nation’s ethanol industry. Despite the arrival of the E10 “blend wall” for ethanol in the U.S, the ever-increasing demand for ethanol globally has helped the U.S. industry continue to grow and thrive at the same time it fights to combat an artificially constrained U.S fuel market.

While the U.S. ethanol industry historically only exported a small amount of its product every year, that all changed in 2009 when improving industry economics led to the U.S. ethanol industry becoming the lowest-cost producer on the planet. This ultimately led to a dramatic and sustained surge in U.S. ethanol exports around the globe. Amazingly, annual ethanol exports from the U.S. expanded from a meager 113 million gallons in 2009 to 397 million gallons in 2010 to a record 1.2 billion gallons in

12 | Ethanol Producer Magazine | FEBRUARY 2013

2011. Although exports of U.S. ethanol in 2012 are not expected to be much higher than around 750 million gallons, this amount still represents the second-largest export total in U.S. history It is widely accepted that the reduction in U.S. ethanol exports in 2012 is in large part due to the sustained drought conditions suffered in the Midwest that have, in turn, significantly increased ethanol feedstock costs, and thereby hurt global price competitiveness. There is strong evidence, however, to suggest that the reduction of exports in 2012 is not solely the result of recent shifts in industry economics, but has been exacerbated by a recent effort by Brazil to erect new barriers to U.S. ethanol imports. While exports of ethanol to Brazil made up more than one-third of all U.S. ethanol exports in 2011, exports to Brazil have fallen significantly in 2012 due to new protectionist measures put in place over the past 18 months.

Despite repeated pronouncements from Brazil regarding the need for free and fair trade in ethanol with the U.S., American ethanol producers are now being denied fair and equal access to Brazil’s fuel market as a result of several new measures put in place in the South American nation. These measures include a discriminatory tax in Sao Paulo, the primary entrance port for ethanol from the U.S., and the ordered reduction of ethanol blend rates from 25

to 20 percent. As a result of the Sao Paulo tax, an unfair “tariff” is now being placed on ethanol from the U.S. that is deferred or waived for domestic product. And, as a result of the reduction of ethanol blend volumes, the nation of Brazil is artificially controlling U.S. ethanol import demand and instead forcing fuel providers to import more expensive petroleum-based fuel.

It is estimated that this measure alone is reducing exports by almost 30 million gallons a month. Additionally, Brazil’s stateowned oil company is fixing gasoline prices at levels below cost, a practice that erodes demand for hydrous ethanol (used in FFVs) by making it less price competitive at the pump.

While the U.S. government has made every effort to remove all of the perceived barriers to imports of Brazilian ethanol, and is, in fact, now encouraging imports of Brazilian ethanol into the U.S. through the renewable fuels standard, the government of Brazil is repaying this effort by restricting the ability of U.S. ethanol producers to access Brazil’s fuel market. It is time for these barriers to end, and for Brazil to join the U.S. in promoting ethanol as a global commodity.

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

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DRIVE

Powering the Future

By Tom Buis

The renewable fuels industry continues to contribute in so many ways. Our industry has created more than 400,000 well-paying jobs here at home that cannot be outsourced, it has revitalized rural economies across the heartland and it is helping reduce our dangerous addiction to foreign oil, all while improving our environment and providing consumers a choice and savings at the pump.

The ethanol industry is also at the forefront of addressing the difficult challenges of tomorrow. As automakers look forward to meet the increasing fuel efficiency standards, one thing is for sure—cars will be very different from the ones that I grew up with. We have already seen many manufacturers cut engine size to increase fuel efficiency and turbocharge them to maintain horsepower, while cutting the weight that decreases fuel efficiency.

As the automotive industry moves toward smaller, turbocharged engines, they will need increased levels of octane in the fuel to produce the power necessary to continue high performance. This is where our industry helps meet tomorrow’s challenges.

Ethanol provides the most affordable octane source available today. While there are alternatives, one, MTBE, is illegal in 38

14 | Ethanol Producer Magazine | FEBRUARY 2013

states, and others, like aromatics, are toxic and cost roughly twice as much as ethanol.

Our industry produces a fuel that is essential to the future development of automobiles.

Growth Energy believes that the vehicle engines of tomorrow can be optimized for better performance, improved mileage and increased environmental benefits and cleaner air. The engines of tomorrow must be designed to run on the renewable fuels of the future, such as ethanol. We must always be on the cutting edge of innovation, thinking how best our industry can contribute. That is why it is so critical we work with in partnership with auto manufacturers. By highlighting all of the benefits of ethanol and providing concrete examples of how our industry’s fuel can help manufacturers retain performance increasing efficiency, our industry has the opportunity to be a major driver in the future of engines.

Our industry has already demonstrated a willingness to push innovation further and faster. More than three years ago, we pushed to get E15 as an approved fuel in the marketplace and put it to the test on the racetrack. Just this past year, NASCAR cleared over 3 million miles racing on E15 and what they have seen is better performance under some of the most demanding driving conditions. The verdict: E15 delivered increased horsepower and performance without any negative side effects, mileage loss or engine damage.

The bottom line is that E15 delivers.

As we continue our work to bring higher blends into the marketplace in the new year, we must remain focused on clearing the

regulatory hurdles on both the state and federal level to ensure that E15 can enter the marketplace without further delay. We must aggressively educate and advocate for retailers and consumers, to ensure a cleaner-burning, higher-performing and less expensive fuel is available, so that everyday drivers can choose to put it in their car and benefit from the increased octane and lower price.

Furthermore, we must continue to build upon our relationship with auto manufacturers. If we are to successfully secure a place for our product in the liquid transportation fuel of the future, we must continue our collective collaboration and stay engaged.

There is no doubt that ethanol and higher blends with increased octane are a major component for the challenges of tomorrow and increased vehicle efficiency.

We know that we produce a product that is better and cleaner burning, not only for the engines, but for our environment. And in the process, we are creating jobs at home that cannot be outsourced and helping secure our nation’s energy independence by decreasing our addiction to foreign oil.

We are part of the solution, an answer to tomorrow’s challenges, and so, in this new year, we must renew our vigor and continue to advocate for higher blends of ethanol, as they are the transportation fuel of the future.

Author: Tom Buis CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org

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GRASSROOTS VOICE

You Don’t Say?

By Ron Lamberty

Several years ago, a reporter who described himself as “concerned with the environment” asked me, “Why should I use ethanol, if it’s only 16 percent cleaner than gasoline?”

I answered, “Well, because the 16 percent calculation is bogus, but, even if it were correct, you should use it because it’s 16 percent cleaner than gasoline! Hell, you should use it if it’s one percent cleaner.”

It was an odd opportunity for both of us. We both realized that the question, “compared to what?” was not being asked.

Anywhere.

One of the most frequently used arguments against ethanol has been it can’t replace all the gasoline we use in the U.S. Have you ever heard similar concerns that all of the new oil they’re finding can’t replace ethanol? The fact that oil and other energy prices have three to four times the impact on food prices than corn does doesn’t seem to make the news.

So, maybe it shouldn’t be surprising that recent energy outlook reports from the International Energy Agency and the Energy Information Administration have been incredibly selectively reported by big oil sycophants in the media and those who do Big Oil’s bidding in Congress.

The Wall Street Journal took a look at the IEA report and wrote a gushing editorial

16 | Ethanol Producer Magazine | FEBRUARY 2013

entitled “Saudi America,” which actually included this sentence: "Historians will one day marvel that so much political and financial capital was invested in a greenenergy revolution at the very moment a fossil fuel revolution was aborning."

Revolutionary fossils? Really? Finding more of the stuff you’ve always had hardly seems like some sort of moonshot to me.

And “aborning?” Did some out-of-work romance novelist get hired to write editorials for WSJ? I was waiting for a description of gas-fired heat melting “limpid pools” of sandy black Canadian sludge. The subhead of the article was “The U.S. will be the world's leading energy producer, if we allow it.” That was a remarkably incomplete description. A more accurate subhead would have been, “The U.S. will be the world's leading energy producer for 10 or 11 years, if we and OPEC allow it (and by 'it' we mean drilling and fracking wherever Big Oil wants us to, and if we’re OK with the earth’s temperature increasing by about 5.5 degrees).” They probably didn’t have room.

The report also predicts that as North America aggressively depletes its oil, OPEC’s control over the world’s oil supplies would increase to nearly 50 percent.

Conservation is the major factor behind the prediction of energy self-sufficiency for the U.S., and IEA projects a four-fold increase in renewables across all energy sectors.

Somehow those parts of the report received scant mention.

When the EIA’s “Annual Energy Outlook” came out, the reaction was

similar. Many of the news stories were again about increased oil production, but another portion of the report—the part that predicted cellulosic ethanol would not meet the schedule in the renewable fuel standard (RFS)—received far more media attention.

Again, no mention that the report predicts ethanol will reach 30 billion gallons, and no explanation that EIA makes its projections based on market conditions (including Big Oil resistance) and existing technology.

Ten years ago, the EIA outlook said we could only make 3.4 billion gallons of ethanol in the U.S. by 2020. Big Oil used those projections to demand the RFS be limited to 5 billion gallons. Congress deemed that unacceptable, passed the RFS, and we produced almost four times that much ethanol two years ago—10 years ahead of schedule.

The facts are still on the side of ethanol, but Big Oil and their toadies in the media and Congress aren’t going to share those facts with anyone. Unfortunately, the media doesn’t appear inclined to tell the entire story, so if we don’t say it—often—it won’t be said.

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

EUROPE CALLING

Working on Infrastructure, Common Standards

By Robert Vierhout

Without the proper logistical infrastructure and standards, getting alternative fuels into the market is a hard sell—something the European Commission has well understood. After almost three years of public and nonpublic discussions the Commission is about to issue a draft law on the deployment of alternative fuels infrastructure and standards.

The main alternative fuel options are electricity, hydrogen, biofuels, natural gas (in the forms of compressed natural gas, liquefied natural gas or gas-to-liquid) and liquefied petroleum gas. Fueling points and standards are often poorly developed or nonexistent for most of these alternative fuels and thus the need for regulatory attention.

Biofuels are, of course, a special breed among alternative fuels because most are blended with fossil fuels, and do not require an entirely new distribution infrastructure, contrary to other alternatives. The exception is E85, and unfortunately, the draft bill is rather disappointing for its promotion.

Where there is full recognition of the need to roll out recharging points for electric vehicles and refueling points for hydrogen, there is no mention of an E85 network.

For some bizarre reason, the Commission believes that E85 use will be limited to captive fleets—as though the relatively

18 | Ethanol Producer Magazine | FEBRUARY 2013

large noncaptive fleets of E85 cars already found in Sweden, France and Germany are nonexistent.

We still need to do some work to correct this view, but at least the ethanol industry was successful in getting recognition of the need for clear labels and consumer information. Originally, the Commission wanted market forces to sort out labels and consumer information, but that exercise became a total failure. The oil and auto industries, especially the latter, had no intention of designing a simple sticker for both car and pump that would tell every fuel customer immediately what fuel would go into the car and if the fuel would be compatible with the engine or not. One possible scheme, for example, would be black for diesel, yellow for regular (with up to 5 percent ethanol), green for E10 and blue for E85—very simple, colored stickers, perhaps in different shapes. Not truly rocket science, one would dare say.

One would also expect that the oil industry would support such a measure, knowing that they already use something similar for branding their premium fuels. In many cases, it’s far more than just a simple sticker, but rather, big and colorful, hard-tomiss ads at fuel stations. “Difficult, difficult,” said oil. “Not cost-effective,” said the auto industry. “And what about liability: who is going to pay for engine damage if the wrong sticker were put on a car?” In short: like a failed soufflé, the whole voluntary approach collapsed almost overnight, leaving the Commission no other option but to regulate.

Oil and auto lost the poker game.

If the bill is adopted in its present form, member states will be required to ensure that clear and simple information on the compatibility between fuels and vehicles is available at all refueling points, car dealerships and technical control facilities.

The identical information needs to be glued on the fuel dispenser and cars. Older cars will get stickers during a technical check.

Such regulations would prevent a repeat of the saga that happened in Germany, where oil and auto deliberately misinformed consumers on E10.

But we are not there yet. For sure, oil and auto will use all their lobbying tools to say that such measures are too costly and unnecessary, as already enough information for the consumer is available.

The challenge for the European ethanol industry is to create a strong alliance with consumer organizations to convince both Parliament and member states that such a standard is absolutely needed. If we fail to get this legislation adopted, we will miss a crucial instrument in moving beyond E10.

Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

BUSINESS MATTERS

Distribution Infrastructure—a Hurdle to Overcome

By Donna Funk

There’s no mistaking the heightened volatility in the ethanol marketplace. Whether it regards the renewable fuels standard (RFS) or consumer confidence, the questions that surround distribution infrastructure do not have easy answers.

The current market for E15 is growing, which is an exciting statement. The industry is still facing issues associated with federal regulations restricting the sale of E15 and liability concerns from retailers associated with possible misfueling. Due to these hurdles, E15 is not widely available and the public is not well-informed about this fuel choice. In the future, these hurdles can be overcome with more consumer education, enhanced communication and education of auto mechanics.

More efficient distribution solutions are being developed as the ethanol industry matures. Just a few years ago, the industry was growing so rapidly that low-volume transload terminals, or direct railcar-totruck facilities, were a common distribution alternative to markets outside the ethanol production areas in the Midwest. Unit train terminals were capable of receiving 80- to

20 | Ethanol Producer Magazine | FEBRUARY 2013

100-car trains and as ethanol volumes increased, these terminals were built in many major demand areas. Recent examples include unit train facilities in Tampa, Fla., and San Antonio, Texas.

Ethanol delivery by pipeline has emerged as a viable option in some markets.

Kinder Morgan’s Central Florida Pipeline currently moves ethanol from Tampa to Orlando. Dedicated ethanol pipelines that move large volumes from production regions to demand regions have been proposed as well. And at the retail level, blender pumps are available now that are compatible with ethanol blends from E10 to E85.

Mark DeVries, director of business development at Poet Ethanol Products LLC, says the biofuels industry is working with federal agencies including the U.S. EPA and state agencies to resolve several regulatory hurdles, including vapor pressure restrictions, equipment compatibility and potential misfueling concerns.

One example is in the distribution of E15. The EPA currently requires a minimum purchase of 4 gallons of gasoline from any dispenser hose that is used for both E10 and E15. Though the intent was to prevent misfueling of small engines with E15, this solution is impractical for most retailers and has actually hampered retail distribution of E15. The industry is also working to educate fuel retailers on the advantages of blender pumps, which can offer a range of ethanol

blends including E10 to E85 from a single dispenser. This allows customers to choose the ethanol blend that best meets their needs.

Consumer confidence in the ethanol marketplace is key. There are still gas pump debates on whether higher blends of ethanol fuel are safe for a car engine and about the mileage from using ethanolblended fuel versus regular gasoline. At the retail level, pump infrastructure and regulatory acceptance are what need to be accomplished.

As we write this column in December, there are many unknowns regarding tax law and the growth of the economy. Accounting experts are hoping for clarification, but it remains to be seen. We can hope, though, for the allowance of more ethanol to be blended into gasoline—the industry’s biggest hurdle, and one we believe we can overcome with fewer federal restrictions and debugging misconceptions about misfueling.

Working together is our best chance for a strong, positive future.

Author: Donna Funk, CPA Kennedy and Coe LLC funk@kcoe.com 800-303-3241

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Victory Energy Operations LLC has completed a majority recapitalization with Saw Mill Capital Partners LP in partnership with John Viskup, Victory’s founder, president and CEO. Viskup remains a significant owner of Victory and will continue to serve as the company’s president and CEO. In conjunction with the partnership, Larry Edwards, the former president, CEO and chairman of Global Power Equipment Group will join the Victory team and serve on its board. Saw Mill Capital Partners is the former owner of Global Power Equipment Group. Victory designs, engineers and services boilers, fired package boilers, waste heat boilers, heat recovery steam generators and related equipment.

Infinite Enzymes LLC has announced IE-CBHI, a single activity, plant-based cellulase enzyme, is now available for research and demonstration projects. Infinite Enzyme’s technology produces enzymes in a lower-value part of the corn kernel, thereby creating a new sustainable market for corn processing byproducts. The technology lowers the cost of sugar production. The company advanced its technology through a $450,000 Small Business Innovation Research Phase II grant awarded by the USDA. The IE-CBHI product is available through the Sigma-Aldrich Corp.’s product and services portfolio.

Green Plains Renewable Energy Inc. has announced that Blendstar LLC, its wholly owned subsidiary, has begun operations at its 96-car unit train terminal in Birmingham, Ala. The new terminal is served by the Burlington Northern Santa Fe Railway and has a throughput capacity of 300 MMgy of ethanol.

The terminal current has 160,000 barrels of storage and a covered truck rack, each with expansion capabilities. The location will provide more efficient distribution of ethanol to underserved markets in the Southeast while expanding Green Plains Renewable Energy’s geographic footprint.

Two new employee owners have joined Apache Stainless Equipment Corp. They are Dennis Buehring, vice president of sales and marketing, and Mark Dennis Buehring’s has Nelson, director of en- a history of achieving outstanding results. gineering. Buehring has a well-established career with experience in professional sales management, and engineering systems and methodologies in a manufacturing environment. He is responsible Mark Nelson’s experience and technical for both the Apache knowledge will allow and Mepaco equipment him to achieve Apache’s brands, and for develop- strategic goals. ing and achieving long-term strategic and cohesive goals for the company. Nelson has a history of forging strong relationships with production workforces and has experience in engineering practices and systems.

DuPont Industrial Biosciences has purchased Verdezyne Inc.’s proprietary isomerase technology, which enables the metabolism of five-carbon sugars. Under the terms of the sale, DuPont has purchased rights to the technology, covered by U.S. Patent Nos. 8,114,974 and 8,093,037, for use in the biofuels and biochemical fields.

Illinois Gov. Pat Quinn has appointed Fred Iutzi of the Illinois Institute for Rural Affairs at Western Illinois University to the Illinois Ethanol Research Advisory Board. The board provides oversight for the National Corn to Ethanol Research Center at Southern Illinois University Edwardsville, including guidance on the operations, budget and strategic direction of the NCERC. The center provides pilot-scale research infrastructure and services to industry, academia and government agencies.

Iutzi serves as the agricultural and energy

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program manager for the IIRA and holds ing of a full-scale bioreactor, as well as deleadership roles in several other public and sign completion for a demonstration-scale public-private collaborations to advance re- facility. newable energy in Illinois, including the Illinois Biomass Working Group.

The National Corn Growers Association has launched a new Web-based The Indiana State Department of Ag- resource designed to provide information riculture has announced fuel retail company to people who want to know the single Thorntons Inc. as the winner of the 2012 truth about ethanol so they can continue Paul Dana Excellence in Bioenergy the conversion about how farmers are not Leadership Award. Indiana Agriculture only helping to feed the world, but fuel it Director Joseph Kelsay presented the award too. The website offers links to articles on during the Greater Indiana Clean Cities Co- flex-fuel vehicles, food and fuel, jobs and alition Holiday Reception in Indianapolis. the economy, lower toxic emissions, energy The award recognizes those who have ex- security, and E15. The information can be emplified leadership and innovative vision accessed at www.EthanolFacts.com in the bioenergy industry. It recognizes Indy Racing League driver Paul Dana, who supBP Biofuels has announced its plans ported the state’s biofuels industry and was to invest $350 million to expand its ethanol killed in a 2006 racing accident. Thorntons processing capacity at Tropical, one of its began selling gasoline in 1952. The compasugarcane processing ventures in Brazil. ny was also named the 2012 Greater Indiana The expansion is scheduled to start next Clean Cities Award recipient for the Ethayear and includes the building of a new mill. nol Blends Award.

Tropical’s processing capacity will double to 5 million tons of sugarcane producing 450 Germany-based Direvo Industrial MMly. The mill is expected to be operating Biotechnology GmbH is commercializing at full capacity by the end of 2014 or early its BluCon platform for complete, one-step 2015. conversion of nonfood biomass into carbohydrates for use as feedstock in the biofuel Propel Fuels has closed on the iniand biochemical industry. The platform is tial phase of its Series D round of funding flexible in both the type of biomass it can with $11 million in equity capital from exprocess, and the fuels and chemicals that isting investors Nth Power, Craton Equity can be produced.

Partners and @Ventures as well as a new investor, Gentry Venture Partners. In addiProterro Inc. has closed on a $3.5 mil- tion, the company has secured $10 million lion financing round led by current investor in debt financing from CapX Partners. The Braemer Energy Ventures. Cultivan Ven- new funding will allow Propel to accelerate tures and Middleland Capital joined existing the build-out of its network of stations. As investors, Battelle Ventures and its affiliate, part of the investment by Gentry, Thomas Innovation Valley Partners, in participating B. Raterman, a partner, has joined Propel’s in the round. The funding will help in opti- board of directors. Raterman has more than mizing the genetic engineering of Proterro’s 30 years of corporate finance, investment sucrose-producing microorganism and sup- banking and executive management experiport the expansion of the company’s patent ence with rapidly growing entrepreneurial portfolio. The capital will support the pilot- companies.

FEBRUARY 2013 | Ethanol Producer Magazine | 23

COMMODITIES Natural Gas Report

EIA looks ahead at energy use, sources Dec. 27â&#x20AC;&#x201D;The Energy Information Administration recently released its Annual Energy Outlook 2013, providing a long-range view of energy markets with price and production forecasts through 2040.

Natural gas production is expected to continue growing from current historic high levels of roughly 24 trillion cubic feet (Tcf) per year to 33 Tcf per year in 2040. By 2020, the U.S. will be fully supplied with domestic gas and, in fact, will be a net exporter. There will be a meaningful increase in natural gas demand (CNG/LNG) from the transportation sector and industrial sector, as energy consumers find it economic to switch to natural gas for transportation or locate energy-intensive processes , such as fertilizer production, in the U.S. The relative abundance and low price of natural gas will likely make

BY CASEY WHELAN

it the fuel of choice well into the future. Real natural gas prices, in 2011 dollars, are expected to remain under $4 per MMBtu through 2018, steadily rise to $5.40 per MMBtu in 2030 and $7.83 per MMBtu in 2040.

Crude oil production will rise and peak at 7.5 million barrels per day (bpd) in 2020, then decline through 2040. Production in 2020 will be 11 percent less than peak domestic production levels in 1984 (8.9 million bpd). The U.S. will continue to be a significant net importer of crude, although imports will drop from 45 percent in 2011 to 37 percent in 2040. Real crude oil prices, in 2011 dollars, are forecast to rise from $100 per barrel in 2011 to over $150 per barrel in 2040.

Liquid fuel (light duty) usage is expected to decline as fuel efficiency improves

and more vehicles use electricity and natural gas. Usage is expected to drop from the current 8.5 million to 7 million bpd by 2040.

Real prices for gasoline and diesel are forecast to increase at a somewhat lower rate than crude oil and the spread between gasoline and diesel to increase to 14 percent as distillate demand increases more than gasoline.

Heavy-duty vehicle fuel demand is expected to increase by over 45 percent as industrial production increases. About 20 percent of heavy-duty vehicle fuel demand will come from natural gas as CNG and LNG. Renewable generation will grow from 13 percent of the total today to 16 percent in 2040. Solar will grow the fastest as it starts from such a low base.

In a year, I will compare how this forecast compares to the 2014 EIA forecast.

Corn Report

Corn futures fall on weak demand, year-end liquidation

been under more World FOT Corn Prices (USD/MMT) pressure, which, as 360 a result, is expected 340 to reduce demand 320 for corn. With do300 mestic cash markets remaining firm, 280 however, one could 260 expect to see a bump 240 in domestic feed de- 220 mand.

200 The story in 180 the new year will be 160 spring crop plans. 140 Private analysts are expecting to see a 2 million to 3 million acre increase in corn plantings, and multiple sphere was pretty quiet at year end. Excespotential yield figures will be assessed to de- sive wetness in Argentina could yet alter termine possible production outcomes for plans for plantings of corn and soybeans. next year. Weather in the Southern Hemi-

24 | Ethanol Producer Magazine | FEBRUARY 2013

Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sept-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sept-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sept-12 Oct-12 Nov-12 Dec-12

Dec. 31â&#x20AC;&#x201D;The corn market lost over 70 cents per bushel in December on weak demand and year-end liquidation. Corn futures fell below the $7 per bushel mark for the first time in December, which it had not done since mid-July. The USDA did not make any changes in the December monthly supply/ demand report. However, at the time of this writing, the all-important January report had not been released. Overall demand this fall has been lackluster. U.S. corn exports sales have been disappointing. The USDA is still projecting 1.150 billion bushels. Through mid-December, export sales were 496 million bushel versus 947 million bushels during the same period a year ago. U.S. corn values have been higher than competitor exporting countries such as Argentina, Brazil and even the Ukraine, making U.S. product much less competitive, as illustrated in the accompanying chart. In addition, ethanol margins have

BY JASON SAGEBIEL

REPORT

Regional Ethanol Prices

($/gallon)

Front Month Futures (AC) $2.20 REGION

SPOT

RACK

West Coast

$2.35

$2.75

Midwest

$2.20

$2.68

East Coast

$2.28

$2.89 SOURCE: DTN

Regional Gasoline Prices

DDGS Report

Logistics begin to drive DDGS markets

BY SEAN BRODERICK

Dec. 31—After Christmas, the market began to be dictated by logistics, and for ethanol plants, that means whether they had railcars. When cars are not returning in time, the local truck markets feel the pressure. Together with the issues that inclement weather brings, and three-day holidays, it makes inventory management a day-to-day exercise.

Thankfully, an East Coast dockworkers strike that was to have begun Jan. 1 was stayed by 30 days. The Chicago container market, which supplies the bulk of the Asian container trade, was beginning to feel the effects of a potentially dwindling container supply, and this should alleviate that. There has been a lot of buying that is being attributed to getting product

shipped before the Chinese New Year, which begins Feb. 10.

Low water levels on the Mississippi are causing havoc with barge shippers, increasing shipping costs due to shallower drafts. The way things are today, the river would potentially be almost nonnavigable by mid-January from St. Louis south to Cairo, Ill. This will affect the DDGS bulk market in the Gulf, and most definitely hamper exports.

Plant margins will be affected by all of the above, and DDGS supply will rely on the run times. With distillers trading in the high 90s percentile relative to corn price, and a decent corn oil market, plants that are running today should continue to do so.

($/gallon)

Front Month Futures Price (RBOB) $2.816 REGION

SPOT

RACK

West Coast

$2.83

$2.84

Midwest

$2.54

$2.79

East Coast

$2.81

$3.22 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

FEB 2013

JAN 2012

Minnesota

245

240

FEB 2012 180

Chicago

270

180

195

Buffalo, N.Y.

252

250

186

Central Calif.

308

312

248

Central Fla.

292

280

216 SOURCE: CHS Inc.

Corn Futures Prices DATE DEC 28, 2012

(Mar. Futures, $/bushel)

HIGH

LOW

CLOSE

6.96 1/4

6.88 3/4

6.94

NOV 28, 2012

7.67 1/2

7.58 3/4

7.64

DEC 28, 2011

6.46 1/4

6.30 1/4

6.42 1/2 SOURCE: FCStone

Cash Sorghum Prices ($/bushel) LOCATION

Ethanol Report

Ethanol losing ground on RBOB gasoline price Dec. 27—The ethanol and RBOB gasoline markets were moving in two starkly different directions at the end of the year—sharp losses in corn futures and a steady rise in RBOB gasoline futures. The corn losses were causing a widespread downward movement in the ethanol market. March corn futures moved to the lowest price since July, holding just under $7 per bushel following the Christmas holiday. The combination of lower production costs and lower corn futures prices, as well as ballooning inventory levels caused front-month ethanol futures to fall over 20 cents per gallon through the month of December. On the other hand, RBOB gasoline futures reached what may be a seasonal low in the first week of December, and

BY RICK KMENT

rallied steady over 20 cents higher after the Christmas holiday.

These widespread shifts in both the ethanol and gasoline markets have caused ethanol futures to widen the discount to the RBOB gasoline market from 26 cents per gallon in early December, to over 60 cents per gallon in the last week of December. The wide discount to the gasoline market is not expected to help move additional product due to the concern that overall driving demand may fall significantly following the holiday season. Ethanol is expected to continue to hold a significant discount to the gasoline market through the early part of the year, with growing concerns about the ability to disperse additional product through early 2013.

DEC 28, 2012

NOV 21, 2012

DEC 20, 2011

Superior, Neb.

6.64

7.14

5.85

Beatrice, Neb.

6.54

7.04

5.75

Sublette, Kan.

6.73

7.22

5.77

Salina, Kan.

6.74

7.21

5.98

Triangle, Texas

6.97

7.48

5.97

Gulf, Texas

6.98

7.36

6.76

SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

LOCATION

DEC 21, 2012

DEC 1, 2012

NYMEX

3.44

3.70

3.08

NNG Ventura

3.49

3.26

2.87

CA Citygate

3.73

4.09

3.42

JAN 1, 2013

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production

(1,000 barrels)

PER DAY

MONTH

END STOCKS

OCT 2012

818

25,352

18,762

SEP 2012

817

24,511

20,044

OCT 2011

904

28,013

18,038

SOURCE: U.S. Energy Information Administration

FEBRUARY 2013 | Ethanol Producer Magazine | 25

26 | Ethanol Producer Magazine | FEBRUARY 2013

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FEBRUARY 2013 | Ethanol Producer Magazine | 27

DISTILLED

Ethanol News & Trends

USGC reports high quality for 2012 crop In its Corn Harvest Quality Report Corn use statistics 2012/13, the U.S. Grains council reported that the overall quality of the 2012 U.S. corn crop is high, and improved over the prior year across a range of test factors. While total U.S. corn production last year fell due to the drought, the crop showed year-over-year improvement in average test weight, protein levels and density, as well as lower moisture and broken corn and foreign material.

For the harvest quality report, samples of U.S. corn were gathered from the 12 states that produce a combined 99 percent of the U.S. corn exports. Tests conducted on the samples cover grading factors, such as test weight, physical factors such as stress cracks, and other items, including moisture, protein starch, oil and mycotoxins. â&#x20AC;&#x153;The samples tested demonstrate that this yearâ&#x20AC;&#x2122;s U.S. corn crop, while smaller due to the drought, is of outstanding quality overall,â&#x20AC;? said Erick Erickson, USGC director of global strategies.

Million metric tons 0 | 25 | 50 | 75 | 100 | 125 | 150

Food, Seed, other non-ethanol industrial use Marketing year 08/09 33 Marketing year 09/10 35 Marketing year 10/11 36 Marketing year 11/12 36 Marketing year 12/13 (projected) 34 Million metric tons 0 | 25 | 50 | 75 | 100 | 125 | 150

Ethanol and coproducts Marketing year 08/09 Marketing year 09/10 Marketing year 10/11 Marketing year 11/12 Marketing year 12/13 (projected)

94

117 128 127 114

Million metric tons 0 | 25 | 50 | 75 | 100 | 125 | 150

Feed and residual use Marketing year 08/09 Marketing year 09/10 Marketing year 10/11 Marketing year 11/12 Marketing year 12/13 (projected)

132 130 122 115 105

SOURCE: U.S. GRAINS COUNCIL, 2012/13 CORN HARVEST QUALITY REPORT

Oregon implements phase one of Clean Fuels Program The Oregon Environmental Quality Commission has voted four-to-one to implement the proposed rules for phase one of the stateâ&#x20AC;&#x2122;s Clean Fuels Program. Phase one of the program requires entities that produced fuel in Oregon, or import it into the state, to register and report to the DEQ the volumes of fuel they provide within Oregon. According to the DEQ, the mandatory reporting will allow it to gather data on the Oregon transportation fuel market, which will help assess the feasibility of implementing phase two at a later date.

The Clean Fuels Program program is similarâ&#x20AC;&#x201D;but not identicalâ&#x20AC;&#x201D;to Californiaâ&#x20AC;&#x2122;s Low Carbon Fuel Standard.

During the second phase of the program, regulated parties would have to reduce the greenhouse gas emissions associated with the fuels they provide by 10 percent when compared to 2010 levels.

Scaling back costs.

How a U.S. ethanol plant cut acid usage and evaporator cleaning frequency by switching to BulabÂŽ 8301 scale control from Buckman.

The challenge.

A Midwestern ethanol plant relied heavily on sulfuric acid to lower pH. Unfortunately, acid availability was tight, driving costs up signiďŹ cantly.

The solution.

Buckman applied FDA-allowed BulabÂŽ 8301 just ahead of the ďŹ rst evaporator resulting in outstanding scale control and process pH control.

The savings. s 3AVED ON PLANT SULFURIC ACID USAGE RESULTING IN NET SAVINGS OF TO YEAR s 4EN #)0 S PER YEAR WERE ELIMINATED SAVING LABOR DOWNTIME AND CHEMICAL COSTS FOR ACID WASH s (YDROBLASTING FREQUENCY AND TIME WAS REDUCED s /VERALL HEAT TRANSFER PERFORMANCE HAS BEEN IMPROVED WHICH PROVIDES ADDITIONAL mEXIBILITY TO optimize water balance and backset usage. s ! REDUCTION IN $$' SULFUR CONTENT WAS OBSERVED

Find out more.

4O LEARN MORE ABOUT OUR "ULABÂŽ SCALE CONTROL PROGRAM FOR EVAPORATORS OR HEAT EXCHANGERS

contact your local Buckman representative. Let us give you a story worth telling.

Š2012 Buckman Laboratories International, Inc.

DISTILLED

Patriot Bioenergy looks to hemp Patriot Bioenergy Corp. sees value in industrial hemp as a possible feedstock for cellulosic biofuel production and for cofiring with coal in power plants. The company has joined the Kentucky Hemp Growers Association and is exploring the possibility of growing the crop on post-mining reclamation and marginal lands in Kentucky. The goal is to complete laboratory testing and issue a report by February.

Hemp can yield a large amount of biomass on a per-acre basis, making it an attractive biomass crop. Although a few states have registered farmers to grow industrial hemp, its cultivation is currently banned on the federal level. Efforts are underway to change that. Patriot Bioenergy is interested in growing the crop, in part, because it fits into its energy park concept.

Patriot Bioenergy is also planning to establish a nonprofit energy/sugar beet growers cooperative in the Cumberland Valley Area Development District region of Kentucky.

Final rule published for sorghum pathways Grain sorghum ethanol now qualifies as a renewable fuel and, in some cases, an advanced biofuel, under the renewable fuel standard (RFS). The U.S. EPA published the final rule in mid-December.

According to the EPA, its analysis determined that when grain sorghum ethanol is produced at dry mill facilities fired with natural gas, the 20 percent greenhouse gas (GHG) emission threshold for renewable fuel is met, qualifying it for RFS compliance use. Where grain sorghum ethanol is produced at dry mill facilities, that use specified forms of biogas for process energy and most electrical production, the resulting fuel achieves GHG reductions of more than 50 percent, qualifying the ethanol as an advanced biofuels for RFS compliance purposes.

DISTILLED

Report shows progress in cellulosic industry Commercial-scale facilities

The Advanced (Under construction/commissioning) 1 Ethanol Council has 1. Enerkem Edmonton, AB, Canada MSW published a report Syngas, biomethanol, acetates, cellulosic ethanol profiling cellulosic Capacity: 10 MMgy 3 2 9. Fiberight biofuel projects un- 2. Poet-DSM Advanced Biofuels Lawrenceville, VA 6 Emmetsburg. IA 9 MSW, commerical waste, energy crops der development in Waste forestry biomass Cellulosic ethanol/biofuels, cellulosic 5 Ethanol, biogas 8 sugars, biochemcials 4 Capacity: 20 MMgy (expanding to 25 MMgy) the U.S. and Canada.

8. LanzaTech Capacity: 1 MMgy 5.

Kior 7 Soperton, GA Fiberight It also highlights ef- 3. Blairstown, Columbus, MS Waste forestry biomass IA Forestry residue Ethanol, chemicals, aviation fuel MSW, non-food waste Cellulosic gasoline forts in China, DenCapacity: 4 MMgy Cellulosic ethanol, Capacity: 13 MMgy 6. Abengoa Bioenergy 4.

Enerkem 7. Ineos Bio biobased chemicals mark, Germany, Italy Hugoton, KS Pontotoc, MS Vero Beach, FL Capacity: 6 MMgy Agricultural residues, dedicated MSW, wood residues Vegetative/yard waste, MSW energy crops, prairie grasses Syngas, biomethanol, Cellulosic ethanol, renewable and Spain. The paper Cellulosic ethanol, renewable power acetates, cellulosic ethanol power Capacity: 25 MMgy Capacity: NA Capacity: 8 MMgy clearly shows how much progress the SOURCE: ADVANCED ETHANOL COUNCIL, CELLULOSIC BIOFUELS: INDUSTRY PROGRESS REPORT 2012-2013 industry has made since the renewable production, the cost of production continues fuels standard was amended to include celluto come down. Over the past decade, the losic biofuels 5 years ago.

AEC estimates that enzyme costs have been The report points out that despite the reduced by 80 percent. “Cellulosic biofuels global recession, the cellulosic biofuels inare being produced for $2 per gallon or less dustry has facilities and projects under detoday,” the organization said. velopment in more than 20 U.S. states. These projects represent billions of dollars in investment. As more facilities near commercial

30 | Ethanol Producer Magazine | FEBRUARY 2013

DuPont breaks ground on cellulosic plant Construction is now underway at DuPont’s 30 MMgy cellulosic ethanol facility in Nevada, Iowa. The facility, which will cost more than $200 million to construct, is expected to be complete by mid-2014. Once complete, the plant will be among the first and largest commercial-scale ethanol biorefineries in the world. Original plans for the facility called for a nameplate capacity of 28.5 MMgy. Optimization work, however, allowed DuPont to increase the plant’s capacity.

The facility will take in corn stover as feedstock. To supply feedstock to the plant, DuPont will contract with more than 500 local farmers to gather, store and deliver more than 375,000 dry tons of stover per year. The company has spent three years working with local farmers to design and test a supply chain to bring stover to the plant gate.

DISTILLED

RIN stocks down, but no shortage expected Sweet sorghum ethanol produced in Kentucky Last year marks 2012 U.S. Ethanol RINs and Dec. Corn Prices the first time since the

U.S. Ethanol RINs Prices ($/gal)

Dec 2012 Corn Futures Settlement ($/bu)

$0.060 $9.00 U.S. EPA began using $8.00 renewable identifica$0.050 $7.00 Dec Corn Futures tion numbers (RINs) to $0.040 $6.00 track compliance under $5.00 $0.030 the renewable fuel stan$4.00 dard (RFS), there was $0.020 $3.00 no year-over-year RIN Ethanol RINs $2.00 $0.010 carryover. University $1.00 $0.000 $0.00 of Illinois economist 12/31/11 1/30/12 2/29/12 3/30/12 4/29/12 5/29/12 6/28/12 7/28/12 8/27/12 9/26/12 10/26/12 1/15/12 2/14/12 3/15/12 4/14/12 5/14/12 6/13/12 7/13/12 8/12/12 9/11/12 10/11/12 Nick Paulson suggests, however, that the RIN SOURCE: UNIVERSITY OF ILLINOIS, FARMDOC DAILY stock wonâ&#x20AC;&#x2122;t be depleted, According to Paulson, the result is 2012 offering additional flexRIN generation of just under 12.5 billion. ibility for 2013, if needed.

Analysis published in the universityâ&#x20AC;&#x2122;s â&#x20AC;&#x153;Given the 13.2 billion gallon renewable ethanol FarmDocDaily newsletter, says statistics sug- mandate in 2012, this will require RIN stocks to gest a 2012 domestic production level of just be drawn down somewhere below the 2 billion under 13.2 billion gallons, with exports of 742 gallon level,â&#x20AC;? he said in the analysis. â&#x20AC;&#x153;The immillion gallons. Earlier analyses showed that plication for 2013 is continued flexibility in the 2011 wrapped up with approximately 2.64 bil- demand for corn-for-ethanol of approximately lion RINs, that could be used for compliance in 700 million bushels relative to total demand implied by the 2013 non-advanced mandate of 2012.

13.8 billion gallons.â&#x20AC;?

Delta BioRenewables LLC has announced its collaboration partner Commonwealth AgriEnergy LLC has produced sweet sorghum ethanol at its Hopkinsville, Ky.-based corn-ethanol plant. The project utilized sugars sourced from sweet sorghum hybrids developed by Ceres Inc. â&#x20AC;&#x153;The sugars in sweet sorghum were fermented in the same way as corn, without any significant changes to our process. I believe that our co-op could produce 5 percent or more of our overall annual ethanol production using sweet sorghum grown on nearby marginal land and under-utilized pasture,â&#x20AC;? said Mick Henderson, general manager of Commonwealth AgriEnergy. â&#x20AC;&#x153;Everything came off without a hitch.

We wanted to see the sweet sorghum juice in a full truckload lot, run our own analytical profile, and then introduce the juice in our fermentation system at full scale.â&#x20AC;?

In the coming year, Ceres will work with Delta BioRenewables and Commonwealth, which has 2,300 farmer members, to expand plantings of its trademarked Durasweet hybrids.

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E15

32 | Ethanol Producer Magazine | FEBRUARY 2013

E15

Choice at the

Pump E15 is currently cleared for sale in a handful of states, with work ongoing to bring it to the rest of the U.S.

BY HOLLY JESSEN

Scott Zaremba, owner of Zarco 66 convenience stores, didn’t just open the first E15 retail pump in the nation. Not long after of-

E15 TRAILBLAZER Zaremba owns seven convenience stores in Kansas that sell E15 to light duty vehicles model year 2001 and newer.

fering 15 percent ethanol at the first station in Lawrence, Kan., he expanded to six more locations—the only seven E15 pumps in Kansas to date and the highest number of E15 pumps owned by one company.

Zaremba is the second generation in his family to work in the transportation energy business, he tells Ethanol Producer Magazine. In his lifetime he’s witnessed the 1973 oil embargo, the 1991 Gulf War and crude oil price increases. Although it didn’t ultimately work out, his family considered purchasing an ethanol plant in the 1980s. He recognizes that ethanol is cleaner, renewable and can be produced locally, reducing the need for foreign oil. He first started blending ethanol and biodiesel back in 2007. “It just makes sense to me,” he says, adding that he doesn’t think it’s right to utilize U.S. military forces to protect U.S. oil interests overseas. “Whatever it takes for us to be energy independent is what we need to do,” he says.

The fact that ethanol is a renewable fuel is one of its

PHOTO: CATHRYN FARLEY COMMERCIAL PHOTOGRAPHY

FEBRUARY 2013 | Ethanol Producer Magazine | 33

E15

June 2011 Final approval of pump label

October 2010 E15 approved for model year 2007 and newer

key selling points for Zaremba. This year’s drought and the resulting higher corn prices represent a temporary situation that will eventually resolve itself with adequate moisture, if not with the next crop, the crop after that, he says. Still, current economic conditions have had an impact on his business. On Oct. 1, the Garnet, Kan., ethanol plant Zaremba was sourcing ethanol from idled temporarily, meaning he’s had to travel further to get ethanol. “From a retailer perspective, it’s a little more difficult for me now, because there’s not the cost advantage that there was for me before,” he says, adding that the situation has simply required flexibility. “We’re still within a 100 or so miles within our locations.”

When Zarco 66 stations first started offering E15, it was priced less than E10, a factor that helped the fuel quickly account for 20 percent of total sales. In early December, when EPM talked to Zaremba, the two fuels were priced virtually the same. Value can instead be seen in the fact that E10 is an 87 octane product while E15 is 90 octane. “You’re getting almost a premium product, for the same as unleaded,” he says. “As we move forward, the customers are seeing that.”

Depending on the rules and regulation of each state, it can be a difficult task. In some cases, it will require legislative action at the state level. One example is Missouri, a state with an E10 mandate and an agriculture department that is generally friendly to ethanol, White said. But, because the law specifically mentions E10, it will require a change to allow the sale of E15. “It was probably something we did to ourselves, not thinking that level would ultimately be raised,” he says.

There’s a lot of variability in the rules and regulations from state-to-state, agrees Mike O’Brien, vice president of market development for Growth Energy. The organization is actively working to recruit retailers to introduce E15 in high-volume markets in 2013.

The plan of attack is to first find interested retailers and then assist them with the needed federal registration to sell E15, followed by lobbying the state to allow the sale of E15. The approach should help the states understand the commercial need for E15 as well as the practical needs of retailers who will sell the fuel. “Like all new products, most traction is gained with innovative people willing to introduce new ideas and technology,” he says. “The challenge is with finding those people then helping them with getting the new product launched.”

A two-headed approach is definitely needed, White says. Getting state-level approvals is important, yes, but those efforts will be wasted if retailers aren’t convinced E15 is a good product to offer consumers. Unfortunately, E15’s critics have been very successful in spreading misinformation about the fuel, so that’s a constant battle.

One way the group is reaching out to retailers is through the Blend Your Own program, a joint effort of RFA and the American Coalition for Ethanol.

Reid Vapor Pressure is another challenging matter facing the fuel blend. “Most believe that’s going to be an issue that’s not going to go away anytime soon,” White says. The U.S. EPA allows E10 to exceed the 9.0 pounds per-square-inch RVP requirement by

History of E15

E-Hurdles Although the fuel has cleared the necessary federal hurdles for commercial sale for use in 2001 and newer vehicles, it’s a different story in each individual state, says Robert White, director of market development for the Renewable Fuels Association. Kansas, Iowa and Nebraska were the first states to officially announce E15 was available to consumers. The fuel is also available at one station in South Dakota and although Illinois doesn’t yet have any E15 pumps, everything is in place and there are several retailers going through the process to offer it. “What we’ve done is try to get the low-hanging fruit, which we could consider these five,” he tells EPM. “Now we are going out and looking at the other states.”

34 | Ethanol Producer Magazine | FEBRUARY 2013

1 pound from June 1 to Sept. 15 but did not give E15 the same waiver. In order to offer E15 in the summer months, low-volatility blendstock can be pulled from markets that require reformulated gasoline. The catch, White says, is the cost of transporting reformulated gas into new markets, which adds to the price of the fuel.

RFA’s position on RVP is that E10 and E15 should be treated the same. Both fuels should have the RVP waiver or neither fuel should, White says. If the E10 waiver is removed, refiners will continue to blend ethanol due to the renewable fuel standard, possibly even making E15 more attractive as a fuel. Extending the waiver to both fuels would work too. “We just need you to go one way or another,” he says about EPA’s decision on the matter. In the meantime, retailers really only have three options, the first of which is to blend with reformulated gasoline in the summer months. They could also stop offering E15 during the summer months or simply sell it only to flex-fuel vehicle owners. “The options for summer months are limited and that’s really too bad,” he says.

It’s true RVP is a challenge, O’Brien says. However, not all mar-

PHOTO: CATHRYN FARLEY COMMERCIAL PHOTOGRAPHY

E15

Premium Fuel In early December, E15 was only slightly cheaper than regular gasoline.

The benefit to drivers is that it’s a higher octane product, Zaremba says.

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E15

LOOKING GOOD This Zarco 66 gas station in Lawrence, Kan., offers 90 octane E15 right next to 87 octane regular gasoline.

kets are subject to RVP seasonality. In fact, Growth Energy sees areas requiring reformulated gas as ideal starting points for E15.

Reformulated gasoline is required in cities with high smog levels, such as in St. Louis, and Fort Worth—in other words, large population centers. About 30 percent of the gas sold in the U.S. is reformulated and is currently required in parts of 17 states, according to the EPA.

Minimum Purchase Rule One of the hiccups in final federal approval for commercial sale of E15 was over pumps with a single hose dispensing multiple fuels. The EPA was concerned, White

says, that a consumer purchasing E10 would get a higher percentage of ethanol due to the residual fuel left over in the hose. A lot of noise was made by the American Motorcycle Association as well as other small engine groups representing lawnmowers, chainsaws and more. RFA argued that in order for a consumer to get a higher than desired blend, a driver seeking E10 would have to fill at a single hose pump immediately after a customer that purchased E15.

In addition, the E10 consumer would have to purchase only one gallon of fuel. “The odds of this happing are similar to someone winning the massive Powerball,” White said, adding that not all gas pumps have

36 | Ethanol Producer Magazine | FEBRUARY 2013

single hose configurations. “But EPA was not going to budge.”

So, the 4-gallon minimum purchase rule was added to the RFA’s E15 retailer handbook. Basically any retailer selling E10 and E15 from a single hose was required to add an additional sticker telling consumers that if a minimum transaction wasn’t adhered to it may violate federal law. On the one hand, the agreement allowed the EPA to move forward with the first misfueling mitigation plans in June—opening the way for the commercial sale of E15. But it wasn’t a perfect fix. Next the AMA started complaining that it would soon become difficult for consumers with small engines to purchase E10. “Which is again, nearly ludicrous, because every station would have to sell E15,” he says. Another question White has is, why would consumers with small engines have to have access to E10 at every station? Diesel is an example of a fuel that consumers aren’t able to purchase at every fueling station.

In the meantime, retailers who have been ready and willing to sell E15 haven’t able to because the EPA doesn’t feel this issue has been fully resolved, White says. That explains why there were several announcements of new E15 stations in the beginning, followed by silence in late fall and early win-

E15

ter. As of early January a compromise was being worked out. If approved, retailers that sell E15 from the same hose as E10 and/or straight gas, must do two things.

First, each station must offer consumers at least one fueling position for which E15 is not an option. “This would allow anyone to purchase whatever volume they would like without fear the blend would be above 10 percent ethanol and squelch the concerns from the anti-E15 community,” White says.

In addition, the dispensers must be labeled, alerting consumers to the non-E15 fueling option.

ceptance. Sneller recalled in the late 1970s, when General Motors first announced its 1979 model and newer vehicles were compatible with E10. Over time, as more automakers got on board and as the fleet started turning over, E10 gained ground. “We saw, in about a decade, going from a novelty fuel in the Midwest, to a fuel that was used across the country,” he says.

The process has begun to repeat itself already. In October, General Motors an-

nounced that E15 can be used in model year 2012 and newer vehicles, while Ford Motor Co. approved E15 for use in 2013 models and newer. Automakers’ acceptance of E15 is critically important to consumer and retailer confidence moving forward, he says.

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

Slowly But Surely E15 will be successful for the same reason E10 was successful, White says.

He’s confident that consumers, when given a choice, will purchase the fuel for its lower price and higher octane. But it’s going to take time to get the fuel in pumps across the U.S. so drivers can take advantage of it. “It took essentially 30 years to get E10 in 95 percent of the fuel sold in our country,” he says. “To think E15 is going to have overnight success is a little short sighted.

It will be successful, but it will take some time. Progress is happening but it is going to be slow.”

Todd Sneller, administrator of the Nebraska Ethanol Board, agrees. The state has the second highest ethanol production capacity in the U.S. and was the third in line to officially offer E15 to consumers.

There’s still more work to do to bring additional retail locations on board, however.

“At this point, it’s a novelty item,” he says.

“There’s literally one location [in Nebraska] at which to purchase the fuel.”

Sneller was involved in the process of bringing E10 to the marketplace, which began in the 1970s, so he’s been feeling a sense of déjà vu lately. Opposition from the petroleum industry and the constant battle against misinformation were issues back then too. “We’ve been down this path before and it’s a challenging process,” he says. “But nonetheless we saw success with E10 and we hope that we will see some more success with E15 and higher blends.”

Automakers were key to E10’s acSOURCE: ICM

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Q&A

The First Lady of E15 Kristy Moore recalls her beginnings in the ethanol industry, her fondness for American agriculture and the long road to bringing E15 to market.

INTERVIEW BY TIM PORTZ

The story of the approval of E15 for use in model year 2001 and newer vehicles cannot be told without highlighting and recognizing the efforts, expertise and dogged determination of Kristy Moore, vice president of technical services for the Renewable Fuels Association. With gasoline forecasts in the United States predicting lower and lower usage, the approval and widespread adoption of higher percentage ethanol blends become vitally important to an established industry poised for another round of growth. Moore has piloted the industry’s effort to the approval of E15 and now sets her sights—and the industry’s—on making the fuel available to consumers, one station at a time.

You’re from Illinois. Did you grow up around agriculture?

Yes, I consider myself a farm kid, as my extended family farms. My father worked the farm during the summer break from teaching and my mother worked for a large company that was in the crop protection business. When I graduated from Illinois State University with a degree in chemistry, I knew agriculture would be a part of my work career and I wanted to remain in central Illinois. Staying involved in farming, crops, essentially all things representing rural America, is all good with me. Agriculture is in my blood.

You’ve spent time on the production side of this industry. How does this inform what you do in your work at the Renewable Fuels Association?

I went to work for ADM [Archer Daniels Midland Co.] right out of college at their distillery in 1994. We were making dozens of different alcohols that would be used in hairsprays, lotions, hand sanitizers and a wide range of fuels and industrial products. Of course, we also pro-

duced some of the premier beverage alcohols in the world. ADM let me gain experience in corn wet milling, product research and development and I ultimately worked for them in ethanol technical support. It was quite a training ground.

The work we did to expand ethanol transport and storage throughout the United States was groundbreaking. This type of hands-on experience really prepared me to assist the broad ethanol industry during the most expansive growth period. In most cases, I’m able to say that I’ve been there and done that.

The road to E15 approval reaches back to the first quarter of 2009.

How difficult was it to maintain momentum as you drove this effort?

Throughout 2008, Bob Dinneen (RFA president and CEO) and I worked diligently to understand all of the regulatory requirements for introducing new ethanol blended fuels into the marketplace. We understood what the Energy Independence and Security Act was going to require and higher blends of ethanol in gasoline would be mandatory. Keep in mind that the last time an ethanol waiver was approved by EPA was 1978. We knew we had a lot of research to do. Ultimately, we developed the regulatory pathway for higher level blends then started putting the plan into action. For nearly two years, we worked with the U.S. EPA, toxicologists and other scientists developing the required health impact information. This project culminated in a multimillion-dollar, nearly 700-page report of E15 emissions, a report full of very heavy technical information. Our next effort was to study the EPA’s conditional decision of E15, which lead RFA to receive the only approval of a model Misfueling Mitigation Plan. We capped off our

40 | Ethanol Producer Magazine | FEBRUARY 2013

regulatory effort by developing the E15 Retailer Handbook. This RFA document is more than a regulatory reference manual for E15, it’s a must have for all segments of the fuel distribution system. We really knocked it out of the park with this industry guide. Follow-up efforts for us were the creation of the E15 Education Outreach Coalition, which is a group of broad industry stakeholders joined together to support consumer education of E15.

E15 is already being sold commercially in a small but growing number of gas stations.

What would you say motivated these early adopters to add this fuel to their product mix?

There are marketing and financial benefits with offering E15, which creates a win-win for both consumers and retailers themselves. Most retailers want to offer a new ethanol fuel blend.

The benefits of E15 being acceptable for sale to over 62 percent of all vehicles on the road today is attractive.

The best part of the E15 introduction for me has been the opportunity to work with retailers and touting the benefits of broadening their product profile, which brings opportunities for additional profits. With more than 60 percent of retailers now being single- or two-store owners, these small businesses need every opportunity to stay in business. E15 offers retailers a chance to set themselves apart by offering a new, exciting fuel to their station that not only confirms their commitment to domestic renewable fuels but also offers them a competitive advantage. I love our E15 marketing materials that state “50 percent more homegrown.” That says it all for me.

Q&A

Now that E15 has achieved federal approval, can you explain how that process carries forward on a state by state basis?

There are federal level requirements for gasoline due to the environmental harm that decades of gasoline-only use has done.

Agencies like the EPA control certain characteristics of gasoline to curb ozone and other toxic gasoline component impacts to air quality. However, each state has the authority to regulate all of the other gasoline properties. It’s quite amazing the level of detail in gasoline specifications that has been incorporated into state level regulations.

I spearhead an effort at the RFA to investigate any state-level impediments to higher-level ethanol content in gasoline. It’s a great opportunity to work with state-level experts across the nation.

The RFA produced the E15 Retailer Handbook, a 48-page handbook to help retailers understand the process for offering E15 at their location. How vital are convenience store owners in the effort to grow the E15 marketplace?

New ethanol fuel blends are vitally dependent on both vehicles and infrastructure. We work diligently with auto manufacturers who need to make vehicles to not only be compatible with ethanol but take advantage of the benefits ethanol brings to transportation fuels like increasing octane. We also work closely with petroleum marketers and store owners to evaluate their equipment to ensure a successful offering of E15 and other any other ethanol fuel blends.

What is the single biggest advantage for a retailer to come aboard and offer E15 for sale at their location?

Preparing for the future while finding new profit opportunities. The Renewable Fuels Standard has been the single most effective legislation weaning the U.S. off foreign oil and it’s not going away. Retail store owners who complete the process to ensure their fueling equipment, like tanks, dispensers, and hoses, are suitable for higher ethanol fuel blends, position themselves to be a step ahead for the future. As ethanol prices have become more attractive, marketers are doing the math and recognizing the bottom-line advantages that can be gained by adding ethanol to their product mix.

How critical is it to grow consumer interest and demand for E15 and how does our industry engage in that effort?

Consumer interest is critical. E15 was approved for more than 62 percent of all vehicles on the roads today, which constitutes more than 85 percent of all fuel consumed. That said, every gas station in the country already sells a fuel these vehicles can use and it works just fine. Convincing consumers to break their norm and try something new is no easy task.

The “if it ain't broke, why fix it” mentality is strong with most consumers, and we have to reach back to the core benefits of ethanol to make consumers give it a shot. There are many benefits to using ethanol and different ones resonate with different consumers—its renewable, domestic and cleaner-burning. The RFA has prepared promotional materials that are already being used in the field to promote E15 at retail locations to educate consumers. You can text in for information, visit the websites or simply call. As more stations offer E15, this effort will ramp up.

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FEBRUARY 2013 | Ethanol Producer Magazine | 41

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MARKETS

44 | Ethanol Producer Magazine | FEBRUARY 2013

MARKETS

OPTIMISTIC BEARING Staying bullish on ethanol even in the trough of negative margins.

BY SUSANNE RETKA SCHILL

Ethanol might experience strong headwinds in 2013 but four marketers still see good things ahead. Yes, ethanol stocks have

climbed, indicating the blend wall is here.

Corn prices have been at record heights and supplies are tight, pushing the basis up for many corn buyers. On the other hand, ethanol prices have remained at a discount to gasoline, the renewable fuel standard (RFS) was not waived and the adoption of E15 is under way.

“Ethanol’s value proposition, as a very cost-effective molecule in the motor gasoline pool, has proven itself over time, and we’re very confident of that in the future,” says Jason Searl, vice president of ethanol marketing and trading at Poet Ethanol Products. “From January to November of last year, ethanol traded between 55 and 65 cents a gallon on average underneath gasoline,” he says. Looking back even further, ethanol has competed with gasoline very effectively. “Its high octane benefits are really necessary to end users who have largely converted their gasoline refineries to subgrades.”

For Doug Punke, CEO of the Renewable Products Marketing Group LLC, the drop in gasoline prices before Christmas was a positive sign. “Ethanol demand is dependent on gasoline demand,” he says. “I’m

encouraged with the recent drop in gasoline prices. It will certainly slow down the demand destruction we’ve had due to higher gas prices.” He also believes that the ethanol margins have bottomed out, although he can’t project how long the trough could last.

John Litterio, head of CHS ethanol marketing group, finds declining inventory levels an encouraging sign. “Since December of last year, we’ve had 34 to 36 days-ofdemand in inventory,” he points out. “Since that time, we’ve gone to 23 days-of-demand in supply. Once you’re in the low 20s, that’s when you may see some shortages in some areas of the country.” That, in turn, gives some negotiating room for ethanol marketers, he explains. In December, the U.S. ethanol industry was operating at 12.4 billion gallons on an annualized basis, compared to a fundamental demand of 13.2 billion gallons, he says. “That is why the inventory is coming down pretty quickly.”

Commodity markets are notoriously cyclical and the frequent tight, negative margins have ethanol marketers looking to shave pennies off costs. “In our marketplace, one-half of one cent per gallon is a big deal to us,” says Josh Bailey, vice president of marketing and trading for Eco-Energy Inc., a Tennessee-based company that couples distribution services with ethanol

FEBRUARY 2013 | Ethanol Producer Magazine | 45

MARKETS

U.S. Ending Stocks of Fuel Ethanol Jan. 2007 to Sept. 2012

15000 10000 5000

Global Markets

0 2007

2008

2009

2010

2011

2012

Steady Climb Ethanol ending stocks hit a peak in the spring of 2012, as shown in this chart from January 2007 to September 2012.

SOURCE: EIA

16

Annual U.S. Ethanol Production and RFS Mandates

14

Billions of gallons

12 10 8 6 4

2021

2018

2015

2012

2009

2006

2003

0

2000

2 1997

Bailey is also bullish on the future for the global ethanol market. As the industry is maturing, ethanol is joining the many commodities that have transitioned to a global market. “We’ve opened our trade opportunities with the globe. And, even with reducing tax subsidies and trade barriers, we are the lowest priced and most efficient octane enhancer when you compare ethanol with other octanes. We are a very competitive product in the motor fuel supply chain, and I think that is a tremendous statement, especially considering we did have a bad corn crop this, and corn prices are relatively high.”

Bailey sees some real opportunities in international trade, which Eco-Energy has acted upon in a new partnership with Copersucar, the largest sugar and ethanol trader in Brazil, finalized just before Christmas. Brazilian ethanol is being imported into the U.S., Bailey points out, to fulfill the advanced biofuels requirement in the renewable fuels standard, which “creates a trade flow between us and them, and that creates opportunity.”

University of Illinois economists, Scott Irwin and Darrel Good, wrote in their Dec. 7 FarmDocDaily newsletter that ethanol imports from Brazil have been driven more by the imported ethanol’s price relative to biodiesel than to U.S. ethanol. They noted that Brazilian ethanol delivered to the U.S. Gulf was $2.85 on Nov. 29, when U.S.-produced ethanol at Gulf terminals was $2.60 per gallon. That same day, conventional blendstock for oxygenate blending (CBOB) was $2.52 per gallon—a 33-cent spread. That is far more favorable than ultra-low sulfur diesel at the Gulf at $3.03 per gallon and B100 at $4.08, a spread of $1.05. “One final conversion must be done to make a fair comparison,” the analysis continues. “Since biodiesel is worth 1.5 gallons of ethanol in the RFS math, we need to divide the net profit for

20000

1994

marketing. “We are making investments and working with blenders and railroads to really reduce the supply chain costs and create something that is long term and efficient, that ultimately will result in a better price for the blender and for the producer.”

Thousands of Barrels

25000

RFS1 Mandates RFS2 Mandates U.S. Ethanol Production SOURCE: RFA, EPA, NATHAN KAUFFMAN

diesel blending by 1.5 to arrive at a net profit of -$1.05/1.5 = -70 cents per gallon. This makes biodiesel almost twice as expensive as imported Brazilian ethanol when it comes to meeting the advanced RFS mandate. And that is the reason why Brazilian ethanol imports are surging into the U.S. during recent months.”

There are other factors suggesting the global ethanol industry can cooperate more.

The two countries’ seasons mirror each other, says Bailey. “They’re producing at a time when our demand is typically the highest— June, July and August—and that’s typically at the same time when we are at the end of our corn crop. As we start to get new corn in October, November, December, they stop

46 | Ethanol Producer Magazine | FEBRUARY 2013

producing ethanol. It is summer for them, so their driving season is at a peak.” The two biggest ethanol-producing companies in the world can also cooperate to stimulate greater ethanol use in global markets, Bailey adds.

Brazil has additional market flexibility— another positive for ethanol marketers— Searl points out. “That’s a luxury that we don’t have in the U.S. Brazil has announced that in June they’ll move from 20 to 25 percent blends.” The blend rate was restored to 20 percent this past year, after being dropped due to a poor sugar crop and resulting reduced ethanol production the year before.

Brazil’s increasing ethanol blend mandate is a good sign that there will be room for U.S. exports to Brazil.

MARKETS 150

U.S. Gasoline Consumption and RFS Ethanol Mandates

15

140 EIA Forecast

120

Markets Drive Ethanol Production, Not RFS

13

11

110 100

A seven-page report, prepared by Nathan Kauffman, economist with the Federal Reserve Bank of Kansas City, concludes that ethanol production wouldn’t decline significantly even if the renewable fuel standard were waived. Charts included in that report show ethanol’s relationship to gasoline, the renewable fuels standard, renewable identification numbers and corn and oil prices. In 2007, when gasoline consumption was at its peak, Kauffman points out the Energy Information Administration forecast U.S. gasoline consumption to reach 150 billion gallons by 2015 and the RFS target would have equaled E10 blending. Kauffman argues that blending economics have driven ethanol production more than the mandate. These charts underlie his analysis; for the narrative see Issue 5, 2012, of The Main Street Economist, at the website. For another ethanolrelated chart, see the online version of this story at www. ethanolproducer.com.

Billions of gallons

Billions of gallons

130

9

90 80 70 2000

2002

2004

U.S. Gasoline Consumption (Left Scale)* Ethanol Production (Right Scale)**

2006

2008

2010

2012

2014

7 2016

2012 Mandate (Right Scale) 2014 Mandate (Right Scale) 2013 Mandate (Right Scale) 2015 Mandate (Right Scale)

* When read from the right axis, this number represents the 10 percent ethanol blend wall. ** Ethanol production is net of trade

Source: Energy Information Administration The EIA Short-term Energy Outlook, September 2012, is used for the projection to 2013. The EIA Annual Energy Outlook, June 2012, is used for the projection to 2015.

SOURCE: NATHAN KAUFFMAN

E15 Expansion In the U.S., the move from E10 to E15, a long, still hotly contested battle, is seen as essential for the ethanol industry. The U.S. EPA’s published volume for conventional renewable fuel (predominantly corn ethanol) to meet the renewable fuel standard amounted to 13.2 billion gallons for 2012. It goes up for each of the next two years until corn-toethanol volume fulfilling the RFS is capped at 15 billion gallons in 2015. Total U.S. cornethanol capacity is currently estimated at being very close to that already, depending on

how one categorizes certain plants. In late December, however, production had slowed significantly. “There’s a good amount of ethanol capacity that is curtailed and plants that are not running full out, but running 10 to 15 percent slower,” Litterio says. He estimates that 500 million to 600 million gallons of capacity won’t likely be returned to production.

Gasoline demand is looking to remain steady at around 133 billion gallons, and E10 provides room for just 13.3 billion gallons of ethanol. Consumers choosing higher blends for their flex-fuel vehicles create some demand above that, but ethanol marketers are

looking for E15 to take the pressure off the blend wall and to make room for the expanding renewable fuel volumes called for by the RFS. “I am very encouraged by what I see as we look beyond 2013 from a demand standpoint,” says Punke. “That will lift the supply and demand ratio to the point where we will have positive margins. Specifically, I look at E15 and the demand for the RINs (renewable identification numbers used to show compliance with the RFS).”

The combination of favorable blend economics due to ethanol’s discount to gasoline along with the growing mandated

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FEBRUARY 2013 | Ethanol Producer Magazine | 47

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6

0.03

4

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$/RIN

0.04

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2010 RINs (Left)

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0.01

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0

Corn (Right)

2011 RINs (Left)

Note: The gap in successive RIN year prices is due to the storage provision of the RFS which implies that current year RINs are always valued at least as high as previous year RINs. SOURCE: OIL PRICE INFORMATION SERVICE, COMMODITY RESEARCH BUREAU, NATHAN KAUFFMAN

U.S. Drought Monitor S

L SL L L

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L L

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SL S

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Intensity: D0 Abnormally Dry D1 Drought - Moderate D2 Drought - Severe D3 Drought - Extreme D4 Drought - Exceptional

S

Drought Impact Types: Delineates dominant impacts

S =S hort-Term, typically <6 months (e.g. agriculture, grasslands) L =Long-Term, typically >6 months (e.g. hydrology, ecology)

The Drought Monitor focuses on broad-scale conditions. Local conditions may vary. See accompanying text summary for forecast statements.

January 1, 2013 Valid 7 a.m. EST

http://droughtmonitor.unl.edu/ Released Thursday, January 3, 2013 Author: Brian Fuchs, National Drought Mitigation Center

Still Dry Drought conditions are ongoing this winter, although the extreme and exceptional drought conditions have been moving westward.

SOURCE: U.S. DROUGHT MONITOR

volume for conventional renewable fuel is going to help drive the adoption of E15.

Searl points out that it really wasn’t until midsummer that the EPA finalized its E15 rules.

“The stakeholders have had time to digest it the last half of 2012. 2013 will be when they initiate their plans by company and by region, trying to solve how they can utilize

E15 most appropriately in their systems.”

Logistics and compliance issues have to be worked out state-by-state, he points out, but he expects a steady increase in E15 throughout 2013 and 2014. “The full saturation of E15 will be in the course of years,” he adds.

For one, the state of California—the nation’s single largest market—limits blending

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to 10 percent, in addition to its low carbon fuel standard that favors sugarcane ethanol over corn ethanol.

Litterio agrees that E15 inclusion will slowly build in 2013.

“We’ve got to have a billion gallons to find its way into E15 by 2014,” he adds, predicting that the smaller retailers will bring it on first. “If ethanol prices stay lower than gasoline, E15 will be competitively priced. Retailers will have to step up, or be left behind.” Litterio’s ethanol marketing group at CHS works with eight ethanol producers, but on the retail side, the nation’s largest farmer-owned cooperative has 1,300 retail gas stations. “We’re the largest single retailer with blender pumps and E85,” he says, adding that CHS is committed to higher blends and will move into E15 as various issues are overcome.

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New Crop Outlook Based as it is on corn, ethanol’s fortunes for late 2013 and into 2014 lie with the new crop prospects: Will the drought become history and production rebound and perhaps even set new records? By mid-December, eastern Corn Belt moisture conditions had greatly improved, says Rich Tinker, a meteorologist who works on the U.S. Drought Monitor. “The drought seems to have moved westward.”

Winter is usually a dry season for much of the western Corn Belt, he adds, generally receiving just 5 to 10 percent of its annual precipitation in December, January and February, while the eastern Corn Belt will get 15 to 20 percent in that time period. In mid-December, Tinker says his team was expecting higher-than-normal temperatures for the Corn Belt, “but as far as wet or dry, we’re just not sure.” The months of March, April and May are the critical time of year for making up a soil moisture deficit, Tinker says, when climate data shows the Corn Belt receiving one-quarter of its annual rainfall. Heading into those months, he says, “it’s not too late to set us up for a decent spring season.” Summer is actually the wettest time period, he adds, when Corn Belt states receive a greater proportion of rainfall during the growing season itself. What no one can predict is whether a hot summer will exacerbate lingering dry conditions.

Like the weather and the corn market, it’s well known that the ethanol industry is cyclical. “This industry has seen difficult times numerous times in the past five years,” Bailey says, “but I am optimistic. We have a great product. We have the capacity to produce it.

We’ve shown that our industry can be somewhat disciplined and we will reduce production. And we also have a mandated structure that has today worked very well in allowing obligated parties to meet their mandate with RIN credits. I think that those speak to very positive things. There are the obvious headwinds that we have to overcome in the short term with the 10 percent blend wall and the state-level issues with E15, but as those get solved it’s a good opportunity for the industry.”

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BLENDING

52 | Ethanol Producer Magazine | FEBRUARY 2013

BLENDING

Direct Connection Developing a retail relationship with area fuel stations is a potential perk for ethanol plants, retailers and consumers.

BY HOLLY JESSEN

In some areas of the U.S., drivers filling up with ethanol blends have one more reason to proudly choose the fuel. It's locally sourced, providing consumers with the unique opportunity to purchase ethanol produced by their neighbors— area corn farmers and the employees of a local ethanol plant. “It’s just all around a win,” says Mitch Miller, CEO of Carbon Green BioEnergy LLC, a 50 MMgy plant that sells E85 directly to retailers in Michigan.

Although the details vary from plant to plant, it generally involves installation of on-site blending infrastructure, allowing an ethanol plant to sell E85 directly to area retailers. E15 and other ethanol blends represent another area of opportunity. For example, Zarco 66, the first retailer to offer E15 in the nation, purchases ethanol directly from ethanol plants located within 100 miles of his seven gas stations that sell E15. In this case, the retailer does his own blending. (For more information about E15, see the Choice at the Pump story in this issue.)

The advantage to ethanol plants is a higher netback for its product, Miller says. “It’s a piece of our production that can have a little higher level of pricing control,” he says, adding that the cost of transporting the fuel is reduced and blending markups are eliminated. “The value is kept between the retail station owner and the ethanol plant,” he says.

Carbon Green started supplying retailers with E85 in July 2011. The company spent about $75,000 to install the equipment needed to do onsite blending at any ratio. With marketing assistance from Noble Mansfield Renewable Energy, Carbon Green sells about 1 million gallons of E85 a year, directly to fuel stations in close proximity to the plant. “There are currently 135 (E85) pumps in the state of Michigan and we supply about 50 of them,” he says.

FEBRUARY 2013 | Ethanol Producer Magazine | 53

BLENDING

Retailers like it because they can typically purchase the fuel at a discount compared to other sources, although the price depends on the spread between ethanol and gas. â&#x20AC;&#x153;During high spread times we sell more than in low times, so we are looking at strategies to lock that spread when it widens out,â&#x20AC;? he says.

At Carbon Green, the E85 is blended with natural gasoline, or gas thatâ&#x20AC;&#x2122;s recovered from natural gas, which is also used as

a denaturant. The bonus is that the blended E85 isnâ&#x20AC;&#x2122;t a petroleum fuel, meaning it contains fewer highly hazardous pollutants, or HAPs, and, itâ&#x20AC;&#x2122;s a 100 percent domestically produced product.

Although there are ethanol producers who sell directly to retailers, Miller believes more should. â&#x20AC;&#x153;Companies are reluctant to put in the capital expenditure for a seemingly small market,â&#x20AC;? he says, countering that itâ&#x20AC;&#x2122;s a growing market and the cost is worth

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it. â&#x20AC;&#x153;We have been able to get a return on investment thatâ&#x20AC;&#x2122;s pretty short, weâ&#x20AC;&#x2122;re talking about a 2 to 3 year return on investment at our Michigan plant,â&#x20AC;? he says. In fact, Carbon Green has a goal to double its E85 sales in 2013.

But this isnâ&#x20AC;&#x2122;t just about revenueâ&#x20AC;&#x201D;he sees it as simply the right thing to do. â&#x20AC;&#x153;It helps build out higher ethanol blends locally and gets the consumer the lowest price fuel,â&#x20AC;? he says. â&#x20AC;&#x153;If every plant was doing this at the same time we would make strides as a nation.â&#x20AC;?

Miller, who has worked in the ethanol industry for 18 years, has been a player in bringing the direct retail marketing system to five separate ethanol plants. It started in the late 1990s, when he was part of launching the program at Chippewa Valley Ethanol Co. in Benson, Minn. His next job took him to Central Indiana Ethanol LLC in Marion, Ind., where he helped replicate CVECâ&#x20AC;&#x2122;s successful program. His work at Carbon Green came after that, followed by introducing direct marketing at two more plants through Energetix LLC, an ethanol plant consulting, acquisition and management company, of which Miller is a managing partner. Energetix manages two ethanol plants that also sell E85 to area retailers, DENCO II LLC, a 24 MMgy plant in Morris, Minn., and Iroquois BioEnergy LLC, a 40 MMgy facility in Rensselaer, Ind. The number of retail stations that purchase E85 from CVEC varies, says general manager Mike Jerke. At peak times, such as during Hurricane Katrina, CVEC has supplied more than 100 area gas stations with E85 it blended on site. Currently, the number is below 100. Jerke confirmed that selling E85 locally is a benefit to the ethanol plant and retailers. â&#x20AC;&#x153;We like it because it is a value-added proposition to our bottom line and we think it has the same impact to the retailer who doesnâ&#x20AC;&#x2122;t have to go through a third party or the rack,â&#x20AC;? he says. Drivers also benefit. â&#x20AC;&#x153;We know that having that direct connection, retailers are able to provide a more competitively priced product to the consumer.â&#x20AC;?

Educating retailers about the benefits of higher percentage ethanol blends is also part of it, Jerke adds. CEVC is using its relationship with area retailers to promote E15 and the installation of flex-fuel or blender pumps. That means connecting them with the appropriate resources to answer their questions about new products and opportunities.

Although CVEC has had good luck with selling E85 directly to retailers, not every ethanol plant is prepared to take on the challenge. “I think it really depends on the philosophy at the plant,” he says. “There is extra work involved.” Beyond the cost to install the needed equipment, it does require additional paperwork for tax purposes as well as the effort required to build up a network of customers.

In his years working on direct marketing ethanol to retail stations, Miller has learned that there are three keys to selling higher ethanol blends. The first is that the price needs to be predominantly displayed on the marquee sign, next to E10 or regular gas. “The customers driving by the stations, see that price difference, recognize it and that drives sales,” he says. “We’ve found that drives sales up, by up to five times.”

His next two points are the importance of reaching consumers and station owners. The company is continuing efforts to sit down to talk with station owners about higher percentage ethanol blends.

Carbon Green has also hosted plant tours, to allow area retailers to see where the fuel is produced. Using a database of FFV owners, Growth Energy assisted in sending out postcards advertising directly to the drivers who can use the fuel. The postcard lets them know they can use E85, an American-made fuel that can save them money, and that the fuel is available in their area. Carbon Green also produced a map it plans to send out to the owners of all E85 and flex-fuel pumps in Michigan. Printed in early December, the map contains a list of all existing FFVs and a map of the locations in Michigan with E85 and flex-fuel pumps. There’s also information about the

PHOTO: CARBON GREEN BIOENERGY

BLENDING

Employees of Carbon Green BioEnergy LLC pose with the first load of E85 blended on site.

Renewable Fuels Association’s smart phone app, which helps consumers locate flex-fuel stations. “People need to know about that,” Miller says. The first printing of 5,000 maps will be paid for by the Michigan Corn Growers and will be sent to every flex-fuel pump station in the state, as a way of contacting

the station owner and asking them to pass out the maps to FFV owners. “It gets us in the door,” he says.

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

FEBRUARY 2013 | Ethanol Producer Magazine | 55

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BRAZIL

PHOTO: LUISA COLIN

CONTRIBUTION

SWEET HARVEST Truckloads of sugarcane are brought into harvest in this 2008 photo taken at the Mirriri ethanol mill, a traditional mill in Paraíba.

Are US, Brazil Ethanol Industries Ready to Dance?

Making the case for the world’s ethanol powerhouses to work cooperatively

BY DANIEL COELHO BARBOSA

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers.

All questions pertaining to this article should be directed to the author(s).

58 | Ethanol Producer Magazine | FEBRUARY 2013

For many years, the U.S. ethanol industry saw Brazil primarily as a competitor. In 2012, as ethanol trade barriers disappeared and weather forced market adjustments in both countries, corporations are noticing that together, the U.S. and Brazil can reach better results faster.

I would like to pose a question for the U.S. biofuels industry, especially those with a penchant for ethanol-based chemicals with higher added value: Have you ever dared to think your business could improve if Brazil were on your agenda?

The aviation sector demonstrates faith in a new strategy that has reviewed old concepts and identified new trends: protectionism is out; cooperation is the new driver to leadership. Today Boeing, Embraer and the FAPESP, a research agency in Brazil’s state of São Paulo, are working together on jet fuel research. As the aviation industry is increasingly under pressure to find environmentally

BRAZIL

friendlier substitutes for kerosene for planes, there isn't an alternative to liquid fuel in sight.

There's no time to lose—the International Air Transport Association plans to be carbon neutral by 2020. Consequently, whether a major aircraft manufacturer or a small technology company, all are feverishly seeking alternatives to reduce air traffic emissions. In the race for the jet fuel of the future, many sources, from waste to algae, may become raw material to power the turbines. Realizing that the solution to this puzzle can be so rewarding, stakeholders have wisely chosen to join forces.

There are further examples of the growing interest in collaboration.

In September, former U.S. Treasury Secretary Lawrence Summers made a memorable speech in São Paulo, drawing many parallels between North America and South America. The director of the Center for Agricultural and Rural Development at Iowa State University, Bruce Babcock, was also a speaker at the conference.

If anyone still thought Brazil has little to offer, the visions these gentlemen presented should have overhauled those opinions.

Generally speaking, companies that take the time to analyze potential partners in Brazil usually find promising counterparts. For instance, if the goal is research and development in sweet sorghum, the IAC, the institute for sugar and ethanol that is part of São Paulo’s Agency for Agribusiness Technology (APTA), is certainly one of the best partners. The IAC coaches many projects that are regularly showcased at its annual agro-energy workshop. In 2012, the IAC's workshop focused on energy cane varieties with higher yields and low-water needs that are designed to meet future demands, delivering more fiber and less sugars.

If you prefer to have your own X-ray of the ethanol sector, consider attending FENASUCRO, the biggest event in South America for agribusiness equipment and technology. Whatever your goals are, you will certainly find valuable information there.

Removing Barriers With the removal of ethanol import barriers by both the U.S. and Brazil, traders and the industry in both countries have experienced a

new freedom. This clear win-win is surely the better policy and in the long term, the impetus for bigger accomplishments. Consider a statement made by Iowa Gov. Terry Branstad in a Reuters interview: "I think there's a clear sense now that we should be collaborating instead of fighting each other." The declaration was received with great satisfaction, a clear indication that a growing number of people are

envisioning the magnitude of strategic teamwork possible, and the benefits for their own economies.

One might think that the U.S. EPA ranking of cane ethanol as an advanced biofuel would be a cause of resentment between the two countries, but I would argue not at all.

Corn ethanol is selling fine and a lot more must be blended to meet the U.S. renewable

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FEBRUARY 2013 | Ethanol Producer Magazine | 59

BRAZIL

fuels standard. Looking at it pragmatically, now that import hurdles are gone, a company in Iowa could own corn farms or a cane mill in South America and profit from it as well.

In Brazil, drivers don't mind if their ethanol is imported. In the U.S., nobody worries where the oil for their gasoline comes from. The simple truth is that Brazilian ethanol paves the way for biofuels in the American market and corn ethanol eases the supply bottleneck in Brazil.

The time has come to consolidate biofuels as a viable global solution. Whether from cane or corn, ethanol has been just the first step in the energy transition process. Together, Brazil and the U.S. definitely play a significant role to evangelize the rest of the world.

Free trade was a first step towards economic prosperity and there's still a lot more to come if the governments keep that approach.

No matter if it's manufacturing flex-fuel/

electric hybrids, producing fuels from municipal solid waste or developing jet fuel, the potential for companies of all sizes is simply huge.

Second-gen Opportunities This year, we should see the promise of cellulosic ethanol production come true and, as ethanol starts to unlink from food and feed crops, its acceptance should improve. Markets for biofuels will heat up as further nations, such as China, become more receptive.

Years ago, when I told my friends in Los Angeles that the true jackpot lies beyond dominance, they were amused. Now that the first load of American-made cellulosic ethanol has shipped to Brazil, please allow another prediction: When the North American and South American giants succeed in strengthening their ties, it will positively impact businesses on both ends of the hemisphere.

It's not only biofuels. According to ABIQUIM, the Brazilian chemical industry association, the federal government is preparing a bundle of incentives for renewable chemicals.

That should stimulate new investments up to $20 billion by 2020 and, although green chemicals are still niche products, margins could double.

Thanks to the first American-Brazilian joint ventures, cane-based diesel has become a reality and new specialty chemicals from algae grown on cane sugars are being intensely researched. Further cellulosic ethanol projects will be concluded this year, and there's still plenty of room for synergies of many kinds— from biotech to polymers or other technologies combined. Undoubtedly, the U.S. and Brazil are set to play a central role in the profitable transition from the oil-based economy to bioenergy.

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BRAZIL

Potential for new investments in renewable chemicals 2010 to 2020 Forecast after a study from the Brazilian Chemicals Industry Association (ABIQUIM) Investment type Chemical Plants

Description Saccharose extraction Green naphta production Basic green chemicals production

Downstream

Total

Biobased chemicals production

Million tons/year Billion $ 24 7.2 5.5

7.2

$3.30 $7.20 $3.30

$6.50

$20.30

Embracing New Partners Brazil's ethanol industry suffered in 2012 from numerous quarters: the world crisis, drought followed by heavy rains, blend reductions and artificially low gasoline prices.

2012 is called “a year to forget” by many in the business. Marcos Françoia, the director of MBF Agribusiness, saw many traditional mills collapse. The longtime consultant to Brazil sugar companies and foreign companies in the ethanol sector, explained, "The [cane] mills were forced to adapt or succumb—there was nothing to sweeten that pill. The management philosophy had to be reset, targets reviewed, if someone wanted to survive. It was tough, but the mills that managed to navigate the crisis re-emerged much stronger."

Cane ethanol faced corn ethanol imports at a very delicate moment for the Brazilian industry. What is curious about it is that, although we heard complaints of all kinds, even

FEBRUARY 2013 | Ethanol Producer Magazine | 61

BRAZIL

Ethanol Associations in Brazil While UNICA is best known in the United States, the Forum Nacional Sucroenergético, with its 15 affiliated associations, is the national organization officially representing the sugar and ethanol industry in Brazil.

FNS members in the national sugar and energy forum are sugarcane mill associations representing the country’s cane-producing states. For example, UNICA and UDOP in the state of São Paulo, Biosul in Mato Grosso do Sul, Sismig in Minas Gerais, Sifaeg in Goiás, Sindacucar-AL in Alagoas, Sindacool-PB in the state of Paraíba.

UNICA is surely the best known among the FNS affiliates, and many people abroad tend to think it is the only institution in Brazil. With 131 mills represented out of 430-plus, UNICA plays an important role, but its members aren't exclusively national ethanol producers anymore. Oil companies that are increasingly advancing

into biofuels markets, as well as multinational companies trading agriculture commodities, have also joined the association.

The smaller, regional ethanol associations have their virtues: they normally act closely with their mills, know their local political arenas very well, enjoy good support in the nation’s capital, Brasilia, and are frequently pioneers in innovation. Here is a taste of what's been going on in Brazil's second-largest cane-producing region, the Northeast: In Paraíba, the state in Brazil's easternmost corner, Sindacool-PB addressed biodiversity long before nongovernmental organizations began campaigning. Association members created the first ecological corridor to preserve animal life in cultivated areas.

Sindacool-PB was also among the first to support a biogas project using cane vinasse in the country.

In the state of

Pernambuco, two hours away from Paraíba by car, a small Austrian company started the first project in Brazil to grow algae using CO2 from fermentation in a cane mill in 2012. In addition to sugar and/ or ethanol, modern mills also produce bioelectricity, CO2 for the food industry and biogas, and now, algae, compliments of Austria.

In Alagoas, the next northeastern state, the Brazilian company Graalbio announced the first secondgeneration ethanol plant in Brazil, being built with Italian technology from Mossi & Ghisolfi.

The Northeast offers some advantages for ethanol producers. Port facilities are not as crowded as Rio, Santos or Paranaguá, plus, the whole region has an affinity for biobased chemicals.

FNS Members • ALCOPAR, Associação dos Produtores de Bioenergia do Estado do Paraná; Miguel Rubens Tranin, president.

• SIAMIG, Sindicato da Indústria da Fabricação do Álcool no Estado de Minas Gerais; Mario Campos, president.

• SIFAEG, Sindicato da Indústria de Fabricação de Etanol do Estado de Goiás; André Luiz Baptista Lins Rocha, executive president.

• SINDAAF, Sindicato Fluminense dos Produtores de Açúcar e de Álcool; Geraldo Benedicto Hayem Coutinho Filho, president.

• SINDAÇÚCAR-PE, Sindicato da Indústria do Açúcar e do Álcool no Estado de Pernambuco; Renato Augusto Pontes Cunha, president.

• SINDAÇÚCAR-AL, Sindicato da Indústria do Açúcar e do Álcool no Estado de Alagoas; Pedro Robério de Melo Nogueira, president.

• SINDAÇÚCAR-PI, Sindicato dos Produtores de Açúcar, de Álcool e de Cana de Açúcar de União e Região; Luiz Fernando Pereira de Melo, president.

• BIOSUL, Sindicato da Indústria da Fabricação do Álcool do Estado de Mato Grosso do Sul; Roberto Hollanda Filho, president.

• SINDÁLCOOL-MT, Sindicato das Indústrias Sucroalcooleiras do Estado de Mato Grosso; Piero Vincenzo Parini, president.

• SINDÁLCOOL-PB, Sindicato da Indústria de Fabricação de Álcool no Estado da Paraíba; Edmundo Coelho Barbosa, executive president.

• Sindicato da Indústria do Açúcar e do Álcool no Estado da Bahia; Carlos Gilberto C. Farias, president.

• UDOP, União dos Produtores de Bioenergia; Celso Torquato Junqueira Franco, president.

• UNICA, União da Indústria de Cana-de-Açúcar, Elizabeth Farina, president.

• SONAL, Sindicato da Indústria de Álcool dos Estados do Rio Grande do Norte, Ceará e Piauí; Arlindo Farias, president.

• SINDIQUÍMICOS, Sindicato da Indústria de Produtos Químicos Para Fins Industriais, Produtos Farmacêuticos, Preparação de óleos vegetais e Animais, Sabão e Velas, Fabricação do Álcool, Tintas e Vernizes e de Adubos e Corretivos Agrícolas do Estado do Espírito Santo; Ernesto Mosaner Jr., president.

• SINDICANALCOOL, Sindicato de Produtores de Cana, Açúcar e Álcool do Maranhão e do Pará; Cintia Cristina Ticianelli, president.

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BRAZIL

If one had corn stocked in both countries, he could supply his own market in case of harvest losses. But more than that, think of the profit margins with your own share of cane ethanol in the domestic markets!"

So, could business in Brazil improve profits in the U.S.? The answer is a clear yes. Could cooperation make those profits even bigger?

No doubt. It's remarkable how fast a growing

number of American partners are discovering the lucrative details. Let the music play!

Author: Daniel Coelho Barbosa Germany-based Agribusiness Analyst +49 163 81 69 221 dcb@traceconsult.ch

 ON THE WEB IAC: http://www.iac.sp.gov.br/ Agroenergy Workshop organizer: Dr. José Roberto Scarpellini, jrscarpellini@apta.sp.gov.br FENASUCRO: http://www.fenasucroagrocana.com.br/

DESTILARIA ETANOL Distillation columns at the Cortesia Sindalcool ethanol plant.

when ethanol imports were at a record high, there wasn't a single protest against the U.S. Françoia, who knows the "cane soul" inside and out, explains "the agreement between the U.S. and Brazil was a big step forward—this way we could guarantee supply. And we have to deal with that, if we want to stay competitive internationally. If we have problems now, it's our fault." Embracing U.S. imports that strongly may sound surprising, but this opinion is widely shared.

Françoia closed our conversation with the statement: "There are fantastic knowledge resources about cane in Brazil. Our experience is huge, our researchers have international qualifications. That, allied with U.S. American know-how is a powerful combination. Together, it would be much easier to build stable markets, not only for biofuels, but there are other products to be explored. Take Coca-Cola for instance, its PET bottles use plastic from cane. Actually, the potential for partnerships is much broader. The U.S. uses corn to produce ethanol and Brazil is also a big corn producer.

FEBRUARY 2013 | Ethanol Producer Magazine | 63

EPM MARKETPLACE Ag Products & Services

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Buckman 800-937-5548 64 | Ethanol Producer Magazine | FEBRUARY 2013

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Vecoplan, LLC 336-861-6070

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DYNATEK Articulated Loading Systems 888-853-5444 www.dynatekloadingsystems.com

Membrane Dehydration Systems Hitachi Zosen U.S.A. Ltd. 212-883-9060 www.hitachizosen.co.jp/english

Truck Receiving/Dumpers Airoflex Equipment 563-264-8066 www.airoflexequipment.com

Molecular Sieves Interra Global 847-292-8600

Used Equipment www.interraglobal.com

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Paint & Protective Coatings Elevation Coating, LLC 763-742-2067 www.elevationcoating.com

FEBRUARY 2013 | Ethanol Producer Magazine | 65

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66 | Ethanol Producer Magazine | FEBRUARY 2013

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