INSIDE: USHERING E15 FROM CONCEPT TO REALITY FEBRUARY 2013
E15 Marketplace Fuel Choice, One Station at a Time Page 32
How Marketers View Headwinds, Opportunities Ahead Page 44
Selling E85 Direct to Retailers Page 52
FEBRUARY ISSUE 2013 VOL. 19 ISSUE 2
The Way I See It
Choice at the Pump
Progress on E15 is slow but sure BY HOLLY JESSEN
The First Lady of E15
Fighting for higher blends BY TIM PORTZ
Upcoming Conferences & Trade Shows
View From the Hill
Ethanol producers develop relationships with retailers BY HOLLY JESSEN
It’s About Time Biofuels Became Cool BY MIKE BRYAN
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
Distribution Infrastructure— a Hurdle to Overcome BY DONNA FUNK
Are US, Brazil Ethanol Industries Ready to Dance?
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. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.
4 | Ethanol Producer Magazine | 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.
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.”
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6 | Ethanol Producer Magazine | FEBRUARY 2013
EDITORIAL PRESIDENT & EDITOR IN CHIEF Tom Bryan firstname.lastname@example.org
VICE PRESIDENT OF CONTENT & EXECUTIVE EDITOR Tim Portz email@example.com
CONTRIBUTIONS EDITOR Susanne Retka Schill firstname.lastname@example.org
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.
59 Nalco, an Ecolab Company
Holly Jessen email@example.com
NEWS EDITOR Erin Voegele firstname.lastname@example.org
COPY EDITOR Jan Tellmann email@example.com
ART ART DIRECTOR Jaci Satterlund firstname.lastname@example.org
PUBLISHING CHAIRMAN Mike Bryan email@example.com
51 CHS Renewable Fuels Marketing
Joe Bryan firstname.lastname@example.org
37 Crown Iron Works Co.
27 Phibro Ethanol Performance Group
VICE PRESIDENT, SALES & MARKETING Matthew Spoor email@example.com
EXECUTIVE ACCOUNT MANAGER
3 & 68 DuPont Industrial Biosciences
Howard Brockhouse firstname.lastname@example.org
ACCOUNT MANAGERS Marty Steen email@example.com Bob Brown firstname.lastname@example.org Andrea Anderson email@example.com
CIRCULATION MANAGER Jessica Beaudry firstname.lastname@example.org
13 DuPont Pioneer
21 POET-DSM Advanced Biofuels
67 Eco-Energy Inc.
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.
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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
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FEBRUARY 2013 | Ethanol Producer Magazine | 7
To grow your Power P ow your old business, lower ethanol e tha plant with w ith carbon New Ethanol your with production. p rod The New Ethanol.
Your best business case for future growth is the low-carbon choice for cellulosic ethanol: the Inbicon )PVTHZZ9LÄULY`The feedstock of the future is still corn—plus corn stalks. Roughly the same acreage (200,000) will supply the corn to feed your 110 MMgy grain-ethanol plant plus the corn stalks to feed `V\Y4;KH`0UIPJVU)PVTHZZ9LÄULY`:HTLSHUKZHTLOHY]LZ[·I\[[^VJYVWZHUK[^V feedstocks. If you start planning now, you can integrate your present operation with a new Inbicon Biomass ReÄULY`I`[OL[PTL[OL<:LJVUVT`OP[ZHOPNOLYNLHYHUKKLTHUKMVYSV^JHYIVUM\LSPZMHYV\[Z[YPWWPUN Z\WWS`7YVK\JPUN;OL5L^,[OHUVSSL[Z`V\L_WHUKZHSLZ[VTLL[[OL9-: But what’s most important is how you do it. With Inbicon technology, you’ll also produce clean lignin HUKV[OLYPUK\Z[YPHSZ\NHYZ<ZPUNUVMVZZPSM\LSZ`V\JHU[\YU[OLSPNUPUPU[VHSS[OLZ[LHTHUKLSLJ[YPJity you need to process the biomass. And you can also generate enough extra energy to offset your grain
plant’s utility costs by 50-100%. The C5 sugar stream can create more celluSVZPJL[OHUVSVYNYLLUWV^LYPTWYV]L++.VYZLY]LHZHMLLKZ[VJRMVYOPNOLY ]HS\LIPVJOLTPJHSZ @V\»SSIVVZ[`V\YLMÄJPLUJPLZZOYPUR./.LTPZZPVUZJHW[\YL905ZJVSSLJ[ 97:WYLTP\TZI`ZLSSPUNNYLLULSLJ[YPJP[`[V[OLNYPKZSHZOVWLYH[PUNJVZ[ZHUK PTWYV]LIV[OÄUHUJPHSHUKLU]PYVUTLU[HSV\[JVTLZ 9LZ\S[!HZ\Z[HPUHISLWYVÄ[HISLI\ZPULZZ(UKHJHYIVUZJVYLSV^LUV\NO[V beat California regs. -VYHUV]LY]PL^NV[V^^^PUIPJVUJVT;VWSHUZ\Z[HPUHISLI\ZPULZZ growth, contact Thomas Corle at 717-626-0557 or firstname.lastname@example.org.
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.
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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 email@example.com
EVENTS CALENDAR National Ethanol Conference February 5 -7, 2013 Wynn Las Vegas Las Vegas, Nevada Since 1996, the Renewable Fuel Association’s National Ethanol Conference has been recognized as the preeminent conference for delivering accurate, timely information on marketing, legislative and regulatory issues facing the ethanol industry. With numerous networking opportunities, more business meetings are conducted and contacts made at this conference than any other ethanol conference. 866-497-1232 | www..nationalethanolconference.com
International Biomass Conference & Expo April 8 -10, 2013 Minneapolis Convention Center Minneapolis, Minnesota Building on Innovation Organized by BBI International and coproduced by Biomass Magazine, the International Biomass Conference & Expo program will include 30-plus panels and more than 100 speakers, including 90 technical presentations on topics ranging from anaerobic digestion and gasification to pyrolysis and combined heat and power. This dynamic event unites industry professionals from all sectors of the world’s interconnected biomass utilization industries—biobased power, thermal energy, fuels and chemicals. 866-746-8385 | www.biomassconference.com
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. 866-746-8385 | www.fuelethanolworkshop.com
Algae Biomass Summit September 30 - October 3, 2013 Hilton Orlando Orlando, Florida This dynamic event unites professionals from all sectors of the world’s algae utilization industry including, but not limited to, financing, algal ecology, genetic systems, carbon partitioning, engineering and analysis, biofuels, animal feeds, fertilizers, bioplastics, supplements and foods. Organized by the Algae Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, technology providers, equipment manufacturers, project developers, investors and policy makers. The event is the world’s premier educational and networking junction for the algae industry. 866-746-8385 | www.algaebiomasssummit.org
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
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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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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
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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 firstname.lastname@example.org
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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 email@example.com
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
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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
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
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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 firstname.lastname@example.org 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€”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 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€”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
Regional Ethanol Prices
Front Month Futures (AC) $2.20 REGION
$2.89 SOURCE: DTN
Regional Gasoline Prices
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.
Front Month Futures Price (RBOB) $2.816 REGION
$3.22 SOURCE: DTN
DDGS Prices ($/ton) LOCATION
FEB 2012 180
216 SOURCE: CHS Inc.
Corn Futures Prices DATE DEC 28, 2012
(Mar. Futures, $/bushel)
NOV 28, 2012
DEC 28, 2011
6.42 1/2 SOURCE: FCStone
Cash Sorghum Prices ($/bushel) LOCATION
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
SOURCE: Sorghum Synergies
Natural Gas Prices
DEC 21, 2012
DEC 1, 2012
JAN 1, 2013
SOURCE: U.S. Energy Services Inc.
U.S. Ethanol Production
SOURCE: U.S. Energy Information Administration
FEBRUARY 2013 | Ethanol Producer Magazine | 25
26 | Ethanol Producer Magazine | FEBRUARY 2013
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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€œThe samples tested demonstrate that this yearâ€™s U.S. corn crop, while smaller due to the drought, is of outstanding quality overall,â€? 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)
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€™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€”but not identicalâ€”to Californiaâ€™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 #)0S 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 $$'