February 2010 Ethanol Producer Magazine

INSIDE: CANADIAN RENEWABLE FUELS SUMMIT REVIEW FEBRUARY 2010

Driving Up Demand Blender Pumps, Mandates and Other Methods to Increase Ethanol’s Market

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ETHANOL PRODUCER MAGAZINE

February 2010

contents

vol. 16 no. 2

features 38 USE Driving Up Demand While increasing the national mandate for ethanol use is vital to sustaining the ethanol industry, it is not the only way ethanol demand can be extended. Efforts are also underway to increase the use of flex-fuel vehicles and E85 throughout the United States.

–By Erin Voegele 44 MANDATES Incentives: It’s All About Location, Location, Location Many states have taken measures beyond the national requirements to incentivize the production and use of ethanol. EPM explores various state programs and mandates that benefit ethanol producers.

–By Erin Voegele 50 ADVANCEMENTS Searching for the Next Iowa As national demand for ethanol grows, the U.S. industry is expanding its production base beyond the Midwest to include areas that have great demand for ethanol but no local producers.

–By Kris Bevill

54 EVENT Delivering Renewable Results The Canadian Renewable Fuels Summit offered industry members the opportunity to share success stories and positive outlooks for 2010.

–By Susanne Retka Schill

54

ETHANOL PRODUCER MAGAZINE

February 2010

5

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contents departments

contributions 58 TECHNOLOGY Nanotech Products Increase Efficiency and Energy Saving Nanotechnology-derived coatings can provide energy efficient, environmentally friendly methods of insulation on tanks, piping and other ethanol-related equipment.

58

–By Khatereh A. Pishro and Francesca M. Crolley

8 Advertiser Index 10 The Way I See It The Industry Demands Greater Demand

By Mike Bryan 14 Business & People 18 Commodities 20 View From the Hill If Past is Prologue …

By Bob Dinneen 21 RFA Update

60 RESEARCH The Proof is in the Profit The National Corn-to-Ethanol Research Center operates a pilot plant that offers biofuel industry members the opportunity to validate new process technology, products and equipment.

–By Terry Lash

60

22 BIObytes 24 Industry News 32 Drive Green Jobs Waiver is Necessary for Market Expansion

By Tom Buis 34 Legal Perspective State of the Industry—2010 and Beyond

By Gregory J. Lynch and Porter J. Martin 36 eBIO Insider Can Europe Solve the E85 Chicken-and-Egg Problem?

By Robert Vierhout 64 Events Calendar 65 Marketplace

Ethanol Producer Magazine: (USPS No. 023-974) February 2010, Vol. 16, Issue 2. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices.

POSTMASTER: Send address changes to Ethanol Producer Magazine/ Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

ETHANOL PRODUCER MAGAZINE

February 2010

7

AdIndex

26 & 61 2010 International BIOMASS Conference & Expo

47 Gamajet Cleaning Systems Inc. 11 Genencor速 - A Danisco Division

37 2010 International Fuel Ethanol Workshop & Expo 49 2011 National Ethanol Conference 46 Agra Industries Inc. 48 Biomass Magazine 29 BrownWinick Law Firm 2 Burns & McDonnell 17 Cereal Process Technologies 42 CH2M Hill 28 Check-All Valve Mfg. Co. 63 ethanol-jobs.com 30 Fagen Inc. 31 FCStone, LLC 3 Fermentis - Division of S.I. Lesaffre 53 Gavilon

8

68 Growth Energy 40 Hydro-Klean Inc. 4 ICM Inc. 12 & 13 Inbicon 52 Indeck Power Equipment Co. 43 Interstates Co. 33 Lallemand Ethanol Technology 27 Martrex Inc. 57 Mist Chemical & Supply Co. 56 Nalco Co. 41 Natwick Associates Appraisal Services 6 Novozymes 35 Renewable Fuels Asociation 59 Vogelbusch USA Inc.

ETHANOL PRODUCER MAGAZINE

February 2010

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EDITORIAL

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ETHANOL PRODUCER MAGAZINE

February 2010

9

The Way I See It

The Industry Demands Greater Demand 2010 will be a pivotal year for many ethanol producers. The need for increased ethanol demand is at the breaking point and, for many in the industry, greater demand for their product can’t happen too soon.

While we wait for the U.S. EPA’s decision on E15, the industry is working to increase demand in other areas. The Renewable Fuels Association and the American Coalition for Ethanol have teamed up to expand fueling infrastructure by promoting the installation of blender pumps throughout the U.S., and E85 pumps are opening in parts of the country, such as California, where they have been lacking until recently. U.S. automakers say that they won’t produce more flex-fuel vehicles until E85 infrastructure is increased, so the industry is taking the initiative to make that happen.

State mandates and related ethanol programs will also impact demand for ethanol this year. Associate Editor Erin Voegele explores many state renewable fuel standards in her article, “Incentives: It’s All About Location, Location, Location.” At least 32 states currently have some form of ethanol-specific incentive and more will take effect in 2011. As often happens, the states will lead the way for federal programs and should also guide the EPA to greater ethanol utilization.

Editor Kris Bevill tackles the topic of industry expansion in her article, “Searching for the Next Iowa.”

She spoke with several potential ethanol producers who plan to locate in Florida for one main reason: demand for their product. As the Midwest market becomes satu-

rated, producers are moving into parts of the country that do not have a local supply of ethanol, and Florida is one of the hot spots.

The EPA began working on labeling requirements for E15 in December, which gives a strong indication that it will approve the new blend by mid-year. And while approving the waiver is essential to moving the blend wall, the industry won’t sit idly by and wait for a federal agency to dictate demand for its product. The 2010 energy outlook from the U.S. Energy Information Administration predicted that biofuels will account for the entire growth of U.S. liquid fuel consumption between 2008 and 2035 and that renewable fuel standard targets will be exceeded by 2035. Pending commercial cellulosic ethanol production, combined with greater productivity from the corn-based plants, will help the industry exceed these expectations, proving that the supply is there to meet the demand.

That’s the way I see it.

Mike Bryan Chairman mbryan@bbiinternational.com

10

ETHANOL PRODUCER MAGAZINE

February 2010

Open house at the new home for The New Ethanol™.

In November we opened the first Inbicon Biomass Refinery.

Customers came to Kalundborg from Europe, Japan, and the United States. More international visitors stopped by during the climate summit in Copenhagen. “It doesn’t look like any ethanol plant we’ve ever seen,” they said.

It doesn’t because it isn’t. Here we’re spinning 30,000 metric tons of wheat straw a year into 1.4 million gallons of The New Ethanol. Our process also produces a lignin so clean it can be used by power generation plants without further treatment to replace coal and produce greener electricity. In return, the power plant supplies waste steam to cook the refinery’s straw. This energy exchange

creates a dramatic boost in the efficiency of both plants.

The Danish modern design also houses the new Inbicon Biomass Technology Campus. It’s home to R&D as well as our client and partner center. Here we’ll foster worldwide collaboration with scientists, owners, financiers, and construction executives on everything from quality control to revenue enhancement to staff training. Join us in the knowledge exchange that keeps us continuously improving our process.

By spring, we’ll have the plant in full operation, continuing to optimize it. So if you didn’t come for the opening, come for the open house we’ll arrange just for you. Call Thomas Corle at 01.717.626.0557 or e-mail info@inbicon.com.

Inbicon Biomass Refinery. Making ethanol work for the world.™

© 2009 Inbicon, Kraftværksvej 53-Skærbæk, 7000 Fredericia, Tel +45 76 22 20 00 The New Ethanol™ and Inbicon Biomass Refinery™ are trademarks of Inbicon A/S and DONG Energy A/S.

www.inbicon.com

Business&People Ethanol Industry Briefs

Hawkeye Renewables LLC filed for Chapter 11 bankruptcy the end of 2009. The company, which is a subsidiary of Hawkeye Energy Holdings LLC, owns and operates two Iowa-based ethanol plants; a 100 MMgy facility in Iowa Falls, Iowa, and a 115 MMgy facility in Fairbank, Iowa.

Operations are continuing normally at both ethanol plants.

Hawkeye Energy’s other subsidiaries, Hawkeye Growth and Hawkeye Gold, are not a part of the reorganization and are unaffected by the filing. Hawkeye Growth owns and operates two other Iowa ethanol plants in Menlo and Shell Rock.

Hawkeye Gold is responsible for marketing the ethanol and distillers grains produced at all four plants.

Bion Environmental Technologies Inc. is developing a large-scale integrated beef cattle finishing plant and closedloop ethanol project that has received the unanimous support of the Schroeppel, N.Y., town board. The first phase will include finishing facilities for 72,000 beef cattle, ethanol production and an associated beef processing plant. The company will use a patented, proprietary, waste treatment system. Bion expects that as much as 25,000 acres of previously abandoned, or under-utilized farm land will 14

be needed to provide inputs for the project. The pre-construction phase is expected to take as long as two years.

A 55 MMgy ethanol plant in Maricopa, Ariz., has plans to market branded E85 under the trademarks Arizona E85 and AZE85. Pinal Energy LLC is adding storage for the higher grade gasoline needed for blending E85 along with metering equipment for inline blending. Pinal Energy’s sister company, Pinal Jet, will sell the branded E85 in the regional market. The company plans to offer its trademarked E85 to local government, taxi and rental car fleets, as well as to retailers.

“Our main selling point is that it’s a cleaner burning fuel,” said General Manager John Skelly.

“And it’s a U.S. produced product.”

GreenShift Corp. has granted an ethanol plant in Lakota, Iowa, the right to use a GreenShift patented corn oil extraction technology. Global Ethanol LLC operates a 100 MMgy ethanol plant. The ex-

traction technology “drills” into the back-end of first generation corn ethanol plants, tapping into the existing reserve of inedible crude corn oil. Global Ethanol will finance, build, own and operate a facility based on GreenShift’s technology in exchange for an ongoing royalty payment of roughly 20 percent of the market price of the extracted corn oil at the time of shipment.

Blackmer, an operating company within Dover Corp.’s Pump Solutions Group, has created a new brochure specifically for the liquid terminals market.

The brochure describes how the incorporation of Blackmer’s rotary sliding vane and centrifugal pumping technologies can help liquid-terminal operators improve the efficiencies and reliability of their transfer, blending/mixing and transportation applications. The brochure includes an application matrix and schematic drawing that depicts where specific Blackmer pump

types fit into traditional liquidterminal operations.

A Michigan-based agricultural and transportation company has purchased its first ethanol facility. Zeeland Farm Services formed a subsidiary, Nebraska Corn Processing LLC to purchase the 44 MMgy Mid America Agri Products/Horizon LLC (MAAP/H) in Cambridge, Neb., for $30.1 million during a Dec. 17 bankruptcy auction. The facility, which originally began producing ethanol in 2007, has been idle since January 2009. MAAP/H filed for bankruptcy on June 3 and laid off all employees. At press time, the sale to Nebraska Corn Processing was expected to final by early February.

Praj Industries Ltd. and Novozymes AS announced a plan to work together on advanced biofuels. The two companies have worked together for several years within conventional biofuels. The goal of

ETHANOL PRODUCER MAGAZINE • March 2010

Sponsored by

a new collaboration agreement will be to optimize the enzymatic hydrolysis processes and the use of enzymes in the production of advanced biofuel. Praj is completing pilot trials of its cellulose-to-ethanol technology in India. The company has used a variety of feedstocks, including sugarcane bagasse, corn cobs, straw, wood chips and grasses, according to Pramod Chaudhari, chairman of Praj.

The Energy & Environmental Research Center (EERC) Foundation and Whole Energy Fuels Corp. are poised to commercialize cellulosic biofuel technology developed at the EERC. Whole Energy is receiving global, exclusive licensing rights to EERC Foundation’s technology, which converts biomass and other recycled material into liquid biofuels. EERC is located at the University of North Dakota and Whole Energy Foods is headquartered in Bellingham, Wash.

The Louisiana State University Agricultural Center is working to establish the Louisiana Institute for Biofuels and Bioprocessing (LIBBi), a research, education and out-

reach initiative within the AgCenter. The Board of Regents initially approved the project to create a “virtual center” for one year. Initially, the LIBBi will encompass all ongoing research projects within the AgCenter, including those involving the conversion of bagasse, sweet sorghum, switchgrass and algae to biofuels, polymers and specialty chemicals. “As the external advisory board develops and corporate partners emerge, we hope to expand the breadth and depth of our programs,” said John Russin, AgCenter associate vice chancellor and institute director.

Codexis Inc. has filed a registration statement with the U.S. Securities and Exchange Commission in preparation for an initial public offering of shares of its common stock.

California-based Codexis has developed a proprietary technology platform which enables the creation of optimized biocatalysts that make existing industrial processes faster, cleaner and more efficient that current methods, according to the company’s registration statement.

The company believes its technology platform will enable the development of biocatalysts that can be used to produce commercially viable, cellulosederived biofuels.

Fred Zeidman joined process engineer and has been XRoads Solutions Group as a with the company since 2005. principal focused on growing ADF Engineering has corporate headquarters in the firm’s global Miamisburg, Ohio. The energy practice company is an engineerand spearheading ing and consulting firm other growth initiaserving the food-feedtives. Zeidman was fuel and bioscience inCEO, president and dustries in the United chairman of Seitel States and Canada.

Inc., most recently Zeidman served as chief restructuring officer Weaver, an indepenof Transmeridian Exploration Inc. and was interim president dent certified public accountof Nova Biosource Fuels Inc. ing (CPA) firm, has launched Also, notably, President George “The Weaver Renewable and W. Bush appointed him as chair- Clean Energy Source” energy man of the United States Holo- blog. William Newman, CPA caust Memorial Council in 2002. and partner, and Wade Wat“As one of the country’s leading son, CPA, CFE and partner, energy turnaround experts and post articles relating to gasoline a proven thought leader in the and transportation fuel regulaindustry his expertise will be a tions and how they relate to valuable addition to the firm’s the energy industry. Some of capabilities,” said Dennis Si- the topics covered include the E15 ruling to RFS2.The blog mon, managing principal. can be found at www. weaverllp.com/energyblog.

“Offering Two ADF this energy blog gives Engineering Inc. our current and potenemployees passed tial clients additional and the Ohio Profesinformative information sional Engineer as it becomes available,” exam in Chemical Williamson said John J. Mackel III, Engineering. Matt CPA, director of energy Williamson is a services and partner for process departassurance services. EP ment manager and has been with ADF Engineering since May 2008. Beth Hery is a senior Hery

ETHANOL PRODUCER MAGAZINE • March 2010

15

Business&People Ethanol Industry Briefs

SHARE YOUR INDUSTRY BRIEFS To be included in Business & People, send information (including photos and logos if available) to: Industry Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to (701) 746-8385, or e-mail it to sretkaschill@bbiinternational.com. Please include your name and telephone number in all correspondence.

16

ETHANOL PRODUCER MAGAZINE • March 2010

COMMODITIES REPORT

Natural Gas Report

By Brad Smith, U.S. Energy Services Inc.

Current oversupply won’t last Dec. 15—2009 began with predictions of a flood of liquefied natural gas (LNG) imports to the U.S. However, global delays and production curtailments, the NBP (United Kingdom) premium to Nymex prices, and continued domestic oversupply combined to prove those predictions wrong. Lack of prior success in predicting LNG imports and the complexity involved has led many analysts to rely on short-term forecasts from specialists. But there are factors signaling a growing likelihood of increased U.S. LNG imports in 2010.

Current LNG capacity is around 33 billion cubic feet per day with another 4 billion cubic feet per day expected to come online

by March. While the vast majority of LNG is under long-term contracts, much of the new capacity is spot cargo, free to export at the highest achievable netback.

In 2010, supplies from Asia and the Middle East will likely outstrip rising Asian demand. Excess existing and new capacity is likely

to sail into the Atlantic where fundamentals between Europe and North America will influence prices and eventual offload locations.

Prices have plummeted in the UK and last year the UK eclipsed the U.S. in imported volumes. But Europe is faced with a storage situation similar to the U.S. and an industrial demand expectation likely to lag the U.S. Increased LNG volumes in the Atlantic will face NBP prices that are currently under Nymex through September 2010.

Prices for LNG are determined under bilateral agreements with undisclosed terms. And while European and U.S. LNG prices trade at a premium or discount to NBP/Nymex, the spread can fluctuate significantly. Based on shipping and ancillary cost estimates, Nymex prices need to exceed NBP prices by only about 70 cents or $1.30 to divert African and Middle Eastern cargoes, respectively. EP Brad Smith, price risk manager, can be contacted at bsmith@ usenergyservices.com.

Corn Report

By Jason Sagebiel, FCStone

Fall conditions could impact spring markets Dec. 18—The corn market had a very interesting fall which could impact how corn is marketed through the new year. A slow, wet harvest offered much support to the corn market with lingering concerns of bushels remaining unharvested. Another concern that will arise as warmer weather approaches is the quality of the corn with high moisture content that was stored away during the fall. This may impact corn basis levels.

Another factor that could impact corn and ethanol crush margins is the ramping up of ethanol production. The market expects to see more ethanol production in mid-2010, which could impact corn demand and ethanol supply, pressuring margins. Today, the USDA projects the U.S. ethanol industry to consume 4.2 billion bushels of the corn crop, or approximately 32 percent of this year’s corn production.

However, placing fundamental issues aside, corn will continue to encounter volatile markets due to commodities being used as an investment tool. Rebalancing of commodity asset class by the funds will make 2010 interesting. This type of volatile price action that can occur could place pressure on ethanol margins.

The accompanying graphic of March CBOT corn futures and

18

the seasonality of that contract illustrates how March corn futures seasonally begin to rally in mid-December. Look for corn to be choppy and expect to see wide price moves. The South American soybean crop and U.S. dollar index will be major factors to consider with what direction the corn market may want to take. EP

ETHANOL PRODUCER MAGAZINE • February 2010

COMMODITIES REPORT

DDGS Report

($/gallon as of Dec. 18)

RACK

REGION

SPOT

West Coast

2.045

2.30

Midwest

1.94

2.15

East Coast

1.985

2.19

By Sean Broderick, CHS Inc.

Vomitoxin scare impacts rail market Dec. 22—The recent theme of the DDGS market has been logistics.

The vomitoxin scare caused many hog producers to lower distillers grains inclusion rates, which pushed more product into the rail market. This increased demand for railcars, depressed local truck markets and tightened up rail markets. Prices have not changed much in the West, but a trade was just made for four unit trains to be sent to Asia for mid-February, which is going to drastically decrease the supply of unit trains.

Ironically, the cheaper local truck prices may incent hog producers to figure out a way to increase their distillers grain inclusion rates via “toxin binders” or ration changes.

Export markets are in the spot time frame, with few buyers looking

Regional Ethanol Prices

out further than a month at a time.

The near-bys have been tight, and deferreds have been a big discount.

Containers have been very strong lately, but they usually drop off after Christmas, so expect January demand to drop in comparison with December. Mexico demand is steady, but that market must pay premiums to offset the added transit time for railcars. Europe approved the last variety of corn that was holding up U.S. DDG importation, so that should eventually come into play on the demand side.

Future focus is on the CBOT and the weather in South America. Ethanol margins will also dictate run times and corresponding DDGS production. Overseas demand could possibly improve which should help DDGS prices for the winter. EP

SOURCE: DTN

Regional Gasoline Prices ($/gallon as of Dec. 18)

REGION

SPOT

RACK

West Coast

2.0025

2.12

Midwest

1.9102

1.9567

East Coast

1.8845

1.9589 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

DEC. 2009

NOV. 2009

DEC. 2008

Minnesota

105

110

120

California*

171

170

152

Chicago

133

135

95

Buffalo, N.Y.

135

145

115

Central Florida

152

153

136

*Central Valley

SOURCE: CHS Inc.

Corn Futures Prices DATE

(Dec. corn, $/bushel)

HIGH

LOW

CLOSE

Dec. 18, 2009

4.01 1/4

3.91

3.97 3/4

Nov. 18, 2009

4.25

4.13

4.13 3/4

Dec. 18, 2008

3.91

3.80 1/2

3.89 1/2 SOURCE: FCStone

Ethanol Report

By Rick Kment, DTN Biofuels Analyst

Commercial buying supports price outlook Dec. 18—Strong investment buying in the energy markets eased throughout the first half of December, but late-month buying activity returned to the crude oil and gasoline markets. This could lead to an additional round of upward moving markets as renewed buying activity may be triggered by predictions of better economic times after Jan. 1.

This could continue to drive the market both higher and lower in a narrow range over the next few weeks.

Gasoline prices on the futures market slipped nearly 15 cents per gallon by Dec. 18, but recent developments in the Middle East may add an additional spark to the already contentious energy markets.

Although gasoline demand remains relatively stable, ethanol demand is beginning to fall throughout most of the country, except for the West Coast. California’s E10 mandate could limit supply across the entire West Coast. Prices through most of the country fell 20 to 35 cents per gallon over the past month and with more production expected to return to the market in early 2010, it is likely that the price spread between gasoline and ethanol markets will remain relatively tight. The weakness in overall demand for ethanol as well as the possibility of additional support in corn prices over the next several weeks could significantly decrease ethanol plant margins from where they currently are. EP

ETHANOL PRODUCER MAGAZINE • February 2010

Cash Sorghum Prices ($/bushel) DEC. 18, 2009 NOV. 19, 2009 DEC. 19, 2008 Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

3.43 3.33 3.06 3.48 3.40 4.18

3.44 3.38 3.17 3.47 3.50 3.93

2.89 2.71 2.95 3.06 2.83 3.67 SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

DEC. 2009

NOV. 2009

DEC. 2008

NYMEX

4.486

4.289

6.88

N. Ventura

4.92

4.81

6.68

Calif. Border

4.79

4.62

5.51

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production Output August 2009

725,000

July 2009

727,000

August 2008

640,000

(barrels/day)

SOURCE: U.S. Energy Information Administration

19

VIEW FROM THE HILL

If Past is Prologue …

“History is a guide to navigation in perilous times. History is who we are and why we are the way we are.” So says famed author of “1776” David McCullough. America’s ethanol industry has just endured what may have been the most perilous year many in the industry can remember. No one is going to suggest that all the dangers have now passed.

It is at this precise time that it behooves us all to step back, take stock of the remarkable achievements we have made as an industry, and gain a greater appreciation of the strong foundation we have built that will ensure this industry’s long term viability and success.

Since 2000, American ethanol has grown from a mere 1.6 billion gallons of ethanol production a year to a capacity to produce nearly 12 billion gallons this year. The industry has migrated beyond the Corn Belt, and today the majority of states are home to at least one ethanol production facility.

Equally as impressive has been the development of ethanol-blending infrastructure and the greater availability of ethanol all across the country. Eight out of every 10 gallons of gasoline sold in the U.S. now contain at least 5.6 percent ethanol.

More than 2,300 gas stations today offer a blend higher than E10 and a growing number are installing blender pumps featuring E20, E30 and E85.

Perhaps in no other arena has the industry been more successful than in securing strong and consistent public policies that have led to unprec-

edented growth of the renewable fuels industry. In the past 10 years, industry members have worked tirelessly with policymakers and legislators at all levels of government to secure a strong future for ethanol. The industry has worked to modify gasoline regulations that have led to increased ethanol blending. We have successfully defended the necessity of the tax incentive for ethanol blenders to expand the marketplace. The list goes on and on.

But in the past five years, the unparalleled commitment of those in the industry who believe that a rising tide lifts all boats have achieved what few other industries dare to dream. We have opened up lines of communication with our petroleum industry customers who once sought only to stand in our way. We have unashamedly defended the industry against unfair criticism and unfounded attacks.

And we twice helped pass historic legislation that demands a growing market for renewable fuels in place of traditional, unsustainable fossil fuels.

All of these achievements, challenges and obstacles have led to one defining moment in time.

Today, we sit upon unparalleled opportunities and technological breakthroughs that stand ripened after three decades of hard work.

Margaret Fairless Barber once wrote, “To look backward for a while is to refresh the eye, to restore it, and to render it the more fit for its prime function of looking forward.” So be proud. Enjoy your accomplishments. And prepare to return our focus to that next horizon.

Bob Dinneen President and CEO Renewable Fuels Association 20

ETHANOL PRODUCER MAGAZINE • March 2010

RFA UPDATE

w w w. e t h a n o l R FA . o r g

RFA applauds House restoration of biofuel loan guarantee funds

Absence of EPA renewable volume obligations could disrupt production In late December, the U.S. EPA submitted its final rule for the expanded renewable fuel standard (RFS2) to the Office of Management and Budget—the final step before it takes effect. However, the EPA has yet to issue the 2010 renewable volume obligations (RVOs) which specify the percentage of an obligated party’s transportation fuel that must be comprised of renewable fuels. In 2009, the law called for 11.1 billion gallons of renewable fuel use. In 2010, the law calls for the blending and sale of 12.95 billion gallons of renewable fuel.

The EPA has signaled that the 2010 RVOs will be specified in the final rule and that the obligations will be retroactive to Jan. 1, 2010. However, to avoid disruptions in the ethanol blending market, obligated parties would benefit from knowing what the RVOs will be for the coming year.

EPA was required to issue volume requirements for 2010 blending by Dec. 1. In both 2008 and 2009, the EPA issued these requirements in the absence of full RFS implementation. Despite the lack of published RVOs, obligated parties under the RFS are still required to increasingly blend renewable fuels.

According to EPA public statements, the RFS is likely to be approved in the mid-January timeframe. It takes an additional 60 days for the approved rule to take effect.

ETHANOL PRODUCER MAGAZINE • March 2010

The U.S. House of Representatives voted Dec. 16 to restore $2 billion to an alternative loan guarantee program that was borrowed to fund the “cash for clunkers” program.

The Renewable Fuels Association is pleased to see the House vote to return those funds.

“This is an important step and one the Senate should replicate as soon as possible,” said RFA President Bob Dinneen. “Restoring these funds is just the first step. Making sure the shovel-ready advanced biofuel projects can gain access to these loan guarantees is vital for them to begin construction and production commercial volumes of next generation renewable fuels. ” “Advanced biofuel technologies are too close to [the] finish line to pull the plug and shift attention to other promising, yet unproven, technologies,” Dinneen said. “As a senator and candidate, President [Barack] Obama spoke clearly about the need to bring next-generation biofuel technologies to the market. Now is the time to match that rhetoric with action. With a final push, cellulosic and other advanced technologies can begin commercial production of biofuels that will greatly help efforts to mitigate climate change, provide jobs, and continue reducing our reliance on imported oil.”

The RFA sent a letter to the U.S. DOE in October, pointing out the difficulties advanced biofuel companies were experiencing in obtaining funds. “A fundamental flaw of the loan guarantee program is that DOE is weighing the applications of emerging technology projects such as cellulosic ethanol using the same criteria as mature technology projects, and against more mature technologies, such as wind and solar, that have been commercialized in other countries,” the letter stated. “The challenges facing next generation advanced biofuels are simply much different than those of the renewable power sector.”

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BIObytes Ethanol News Briefs

Brazilian companies sign MOU Petrobras, its subsidiary Petrobras Biocombustível S.A. (PBio), and Petrochina International Co. Ltd.. recently signed a six-month memorandum of understanding.

Joint studies will assess the economic and technical feasibility of new ethanol production in Brazil and exporting

ethanol to China, according to a Petrobas press release.

China intends to both pursue ethanol production on home soil as well as invest in Brazilian production of ethanol, because China is unable to supply its own market solely with local production.

EPA deems GHGs public health threat

Caption?

Annual world biofuels production has surpassed 100 billion liters (26 billion gallons), displacing 1.15 million barrels of crude oil per day that create 215 million tons of greenhouse gas (GHG) emissions annually, according to a study commissioned by the Global Renewable Fuels Alliance released before the Climate Change Conference in Copenhagen, Denmark.

The study documented biofuels production in major pro-

ducing countries along with estimates of GHG emissions.

Those were compared to the amount of emissions avoided from displaced petroleum.

GRFA did not include indirect emissions, explaining there are no credible assessments for indirect effects of petroleum and available data for indirect effects of biofuels cannot be independently analyzed or verified. The report is available at www.globalrfa. org.

Brazil lowers ethanol blend

N.M. set for biofuels leadership

In response to 8.3 percent reduced ethanol production in Brazil’s Center South, the government reduced its ethanol blend mandate from 25 percent to 20 percent. The three month reduction will last through April.

Ethanol production dropped due to heavy rains plus increased demand for sugar imported to India, said Joel Velasco, UNICA’s chief representative for North America. The Brazil sugar cane industry isn’t startled by the reduction and will simply produce less anhydrous ethanol, which is mixed with gasoline and more hydrous ethanol, which has 4 percent water and is burned 100 percent in Brazilian vehicles.

New Mexico Gov. Bill Richardson and the state’s congressional delegation launched an initiative in December to make New Mexico a leader in the biofuels industry. Approximately 50 experts representing industry, science, education, agriculture, nonprofit and government attended the first meeting entitled, “Toward a New Mexico State Plan for Biofuels

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Leadership.” The goal of the meeting was to create a roadmap that capitalizes on New Mexico’s human and natural resources. By focusing on New Mexico’s unique combination of climate and natural resources, scientific expertise, business infrastructure and economic policies, Richardson said, “we are perfectly positioned to lead the country in the development

ETHANOL PRODUCER MAGAZINE • March 2010

Bunge purchases mills in Brazil Bunge Ltd. entered into an agreement to purchase a Brazilian-based holding company, Usina Moema Participacoes S.A. (Moema Par). which has one wholly-owned sugarcane mill and ownership interest in five additional mills.

The six mills have a combined

crushing capacity of 15.4 million metric tons, according to Bunge. When finalized, Bunge will own a 60 percent share of Moema Par’s total capacity. The mills produce both raw and crystallized sugar as well as hydrous and anhydrous ethanol.

Caption

Ensus opens wheat ethanol plant DOE engineers new enzyme Scientists at the U.S. DOE’s Brookhaven National Laboratory have successfully engineered an enzyme to aid in the conversion of plant material into cellulosic ethanol. The enzyme breaks down lignin in a plant’s cell walls. Biochemist Chang-Jun Liu, whose work has focused on lignin alteration said the ultimate goal is to apply the enzyme to feedstocks, making

the plants more easily digested and fermentable. Liu’s team compared the genetic code of the new enzyme with information from enzymes involved in lignin synthesis to build the new model. Liu said Brookhaven’s engineered enzyme is “totally changed,” adding that the team still needs time to determine how the enzyme will affect lignin biosynthesis.

Europe’s largest wheat-based ethanol plant began full scale production in January at Wilton, Teesside, U.K. Owned

by Ensus Ltd., the facility’s annual production capacity will reach106 MMgy of ethanol and 386,000 tons of distillers grains. According to Ensus CEO Alwyn Hughes, more than 300,000 tons of carbon dioxide produced at the plant will be captured for use in the food and beverage industries in an effort to improve the plant’s carbon footprint.

India promotes non-traditional feedstocks The government of India recently approved a national biofuels policy. According to information released by the government, the policy aims to make biofuels a major component of the country’s energy and transportation sectors, while contributing to energy security, climate change mitigation and job creation. The policy emphasizes the use of next-generation

technologies that utilize nontraditional, indigenous biomass feedstocks for the production of biofuels. As part of the

ETHANOL PRODUCER MAGAZINE • March 2010

policy, appropriate financial and fiscal measures in the form of subsidies and grants will be considered to support the de-

velopment of biofuels. India expects 20 percent of its fuel be comprised of biodiesel and ethanol by 2017.

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PHOTO: ELIZABETH SLAVENS, BBI INTENRATIONAL

Fiberight LLC plans to produce cellulosic ethanol as well as synthetic oil and biochemicals from municipal solid waste.

Fiberight to produce MSW-based ethanol Fiberight LLC recently purchased the former Xethanol LLC ethanol production facility in Blairstown, Iowa, with plans to produce cellulosic ethanol at a demonstration scale. The plant was acquired for $1.65 million and Fiberight is in the process of converting it to handle municipal solid waste (MSW). Once completed, this would be one of the first facilities in the U.S. to use MSW as a feedstock for ethanol production.

“We’ve been operating in stealth mode because we don’t want to make claims until we can prove them,” CEO Craig StuartPaul said. He told EPM that the technology is now at the point where it can be scaled up to a commercial scale and Fiberight plans to demonstrate that in Blairstown.

Fiberight’s plan to quietly develop its technology has taken the company most of the past three years. Its process, enhanced fiber separation technology, is designed to run in a “mini mill.” Fiberight’s production model involves building numerous plants adjacent to cities with populations greater than 100,000. Each plant would produce around 10 MMgy of ethanol from locally-

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derived MSW, a plan the company believes creates a platform for around 450 production plants.

“Our plans will make sense to communities consisting of about 150,000 people within a 25-mile radius, of which there over 400 in this country,” Stuart-Paul said. Fiberight intends to construct the mini-mills at a cost of $30 million to $50 million.

Fiberight’s unique process begins with the fractionation and homogenization of the MSW, creating a uniform feedstock for the plant. This step is seen as a major hurdle as other proposed MSW processes have not been able to achieve uniformity of the feedstock.

Next, Fiberight has developed a proprietary process for reusing its enzymes. Capturing the recycled enzymes lowers the cost of production and helps Fiberight achieve economies of scale that allow the company to produce ethanol from MSW profitably and with less risk.

Plastics, a common hazard in dealing with MSW, are separated from the waste stream in the company’s multi-stage process.

Removing and subsequently depolymerizing the 10 percent plastic in the waste stream to create synthetic oil allows the company to power the entire facility without the need for fossil fuels.

The remaining pulp will consist of approximately 65 percent cellulose and 20 percent hemicellulose, with the remainder being ash and other unusables. Stuart-Paul plans to convert the cellulose to ethanol and the hemicellulose to biochemicals, which can be used in the plastics industry. The company chose to diversify in this manner because, according to Stuart-Paul, biochemical products from C5 sugars is currently a more economical, financially secure conversion solution for hemicellulose than ethanol production.

Fiberight opened a 50,000-square-foot plant in Lawrenceville, Va., in February to prove its proprietary process for converting MSW into ethanol. The Virginia plant also demonstrates the successful commercialization of its waste extraction processes.

—Craig A. Johnson

ETHANOL PRODUCER MAGAZINE • March 2010

PHOTO: ENERGY & ENVIRONMENTAL RESEARCH CENTER

The Energy & Environmental Research Center headquarters in Grand Forks, N.D.

EERC develops advanced biofuel process The Energy & Environmental Research Center (EERC) Foundation has developed a new approach to producing cellulosic ethanol in a process that converts biomass and other recycled material into liquid biofuels.

The process will be the centerpiece of a new plant design to be used by Mercurius Biofuels, a company formed by Whole Energy Fuels Corp., headquartered in Bellingham, Wash.

According to Atul Deshmane, CEO and president of Whole Energy, the EERC partnership will accelerate the process bringing the technology to fruition. “Partnering with the EERC and obtaining a technology license from the EERC Foundation will jump start Mercurius Biofuels, a new company formed with our help to develop and commercialize advanced biofuel technologies,” Deshmane said. “Mercurius is developing the technology with the intent of building and operating a pilot plant to demonstrate what may be the most energy- and carbon-efficient process for making a cellulosic fuel.”

According to Karl Seck, president of Mercurius Biofuels, the process the EERC

has developed does not depend on changes to the enzymes, fermentation or extreme operating conditions when compared to existing ethanol plants. “This technology is more in line with the petroleum refining model and will benefit from many of the same efficiencies,” he said.

According to senior research advisor Ed Olson, “This project presents an exciting opportunity for the EERC, as it is one of the very first involving the production of advanced fuel additives from cellulosic feedstocks. This technology will ultimately be used to improve engine performance using a renewable product, both in gasoline and diesel engines. In the case of diesel fuel, our additives will boost the cetane levels, improve flow properties and, most importantly, reduce particulate emissions.”

The plant will be located in a retrofitted ethanol plant. Mercurius is in the process of applying for federal assistance to prove the technology and expects the project to come to fruition in the next two years.

Cellulosic materials that will be utilized by the company include wood, grasses, and

ETHANOL PRODUCER MAGAZINE • March 2010

the nonedible parts of crops including wheat straw, soybean hulls and corn cobs. Such diverse feedstocks will allow the company more flexibility compared to first-generation feedstocks such as corn or sugarcane.

Utilizing cellulosic materials as the primary feedstock for biofuels could give the flagging ethanol industry an advantage in that the feedstock is expected to sharply reduce costs and greenhouse gas emissions. In addition, cellulosic feedstocks are often seen as desirable because they are anticipated to be easier to source and may be derived from multiple materials, lessening an ethanol plant’s dependence on a single feedstock, thereby reducing the company’s risk.

The current federal renewable fuel standard requires that 36 million gallons of biofuels must be used in transportation fuel by 2022, including at least 21 billion gallons of advanced biofuels and 16 billion gallons of cellulosic biofuels.

—Craig A. Johnson

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EPA delays E15 fuel waiver rule

The U.S. EPA is expected to issue its decision on the E15 fuel waiver in mid-2010. If approved, the waiver would allow fuel with up to 15 percent ethanol to be used in standard vehicles, effectively increasing the potential market for ethanol by 50 percent.

On Dec. 1, the U.S. EPA announced it would delay its decision on the E15 fuel waiver until mid-2010. The fuel waiver request was submitted by Growth Energy in March 2009. Under the Clean Air Act, the EPA was required to respond to the waiver by Dec. 1.

In a letter addressed to leaders of Growth Energy, the EPA said more time was needed to complete vehicle testing. “As we are evaluating your E15 waiver petition, we want to make sure we have all necessary science to make the right decision,” said the EPA in the letter. “Although all of the studies have not been completed, our engineering assessment to date indicates that the robust fuel, engine and emissions control systems of newer vehicles (likely 2001 and newer model years) will likely be able to accommodate higher ethanol blends, such as E15.”

According to the letter, the U.S. DOE is currently studying E15’s effect on component durability. As part of the study, the department will examine the impacts of higher ethanol blends on 19 vehicles. Testing is expected to be complete by August. The EPA expects testing to be complete on 14 of those vehicles by May. “Should the tests remain supportive and provide the necessary ba-

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ETHANOL PRODUCER MAGAZINE • March 2010

sis, we would be in a position to approve E15 for 2001 and newer vehicles in the mid-year timeframe,” said the EPA in its letter. “Of course, if the data highlight potential problems, then the decision may need to be delayed until all testing is received and reviewed.”

In addition, the EPA said it has begun crafting the labeling requirements that will be necessary if the blending limit is raised.

Growth Energy described the EPA’s announcement as a strong signal that the agency is preparing to approve E15. “We are confident the ongoing tests will further confirm the data we submitted in the Growth Energy Green Jobs Waiver and silence those critics, allowing for more American-produced energy to enter the market,” Growth Energy CEO Tom Buis said.

The American Coalition for Ethanol also expressed confidence that E15 will be approved. “While we would have strongly preferred that EPA approved E15 today for all vehicles, we’re pleased that progress is being made toward this goal,” said Brian Jennings, ACE’s executive vice president. “We are confident that in the long run the data will demonstrate that E15 and higher ethanol blends, such as E20 and E30, can effectively be used in all vehicles.”

The Renewable Fuels Association, however, noted that the EPA’s delay in approving the waiver could negatively affect the

ethanol industry. “This delay threatens to paralyze the continued evolution of America’s ethanol industry,” said RFA President and CEO Bob Dinneen. “As EPA itself indicated, the scientific data to date has demonstrated no ill-effects of increased ethanol use in any vehicle currently on the road. Moreover, this delay will chill investment in advanced biofuel technologies at a critical time in their development and commercialization.” Dinneen suggested the EPA immediately approve an intermediate ethanol blend while the agency evaluates the waiver request.

According to the Union of Concerned Scientists, the EPA’s delayed decision on the waiver request demonstrates the agency’s commitment to put science first. “The Obama administration is respecting the role of science and resisting industry pressure to put private interests ahead of public health and the environment,” said Jeremy Martin, a senior scientist in UCS’ clean vehicles program. “Raising ethanol blend percentages without testing what it would do to air quality and vehicle engines is like going in for surgery before getting a diagnosis. It wouldn’t be good for the industry or the environment to rush ahead only to find out later that we guessed wrong.”

—Erin Voegele

EPA evaluates ethanol as GHG source category

The U.S. EPA says it plans to include ethanol as a source category for its greenhouse gas emissions reporting program in the future, possibly as early as 2011.

The U.S. EPA’s decision to require thousands of industrial facilities to begin reporting greenhouse gas (GHG) emissions in 2010 created much confusion in the ethanol industry as producers tried to determine if their facilities would be affected by the rule. The EPA’s final rule states that any facility that emits more than 25,000 tons per year of carbon dioxide equivalent (CO2e) from stationary combustion sources is required to report emissions to the EPA. However, initial reports that ethanol had been omitted from the EPA’s list of source categories led some producers to believe they had been exempted from the reporting requirements.

During a Nov. 19 training session conducted by the EPA for ethanol industry members, agency officials clarified that ethanol was only temporarily exempted as a source category while it continues to review industry practices, specifically those including co-location with landfills.

The 11 source categories under review, including ethanol, are expected to be source categories in the future, according to the EPA, and officials made clear to producers that if they do not have to report emissions in

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2010, they should reassess the rule for 2011 as they will probably be added to the list of source categories for that year.

It remained unclear in mid-December exactly how many ethanol facilities will be required to report emissions in 2010. Estimates ranged from just 84 facilities to nearly all 184 plants. The EPA created an online estimating tool to aid in determining if specific facilities would be required to participate and provided calculations that determine what stationary combustion units will emit 25,000 tons of CO2e annually during its training session. Trigger amounts for various units include: • A coal-fired unit that uses 10,800 tons of fuel annually • A fuel oil unit that uses 2.3 million gallons of fuel annually • A natural gas unit that consumes 460 million cubic feet of fuel annually Producers who determined their facilities met one of the 25,000 tons of CO2e triggers were required to begin data collection using the best available monitoring methods on Jan. 1. By March 31, all participants must begin using the EPA’s required monitoring methods. Data collection must be complete at the end of 2010, certificates of representation need to be filed with the EPA by Jan. 30, 2011 and 2010 emissions reports are due on March 31, 2011.

During the ethanol-specific training session, several questions

were posed to the EPA on the use of flow meters as a method of calculating GHG emissions. While all emissions from stationary combustion sources must be accounted for, EPA officials confirmed that there are provisions in the rule that allow standard billing meters to be used to determine the amount of gas used and GHG emissions can be calculated based upon those readings. Because of that provision, producers are not required to install flow meters on every stationary gas source, because the billing meter will measure the intake of gas.

Additionally, direct emissions of CO2 into the atmosphere as a result of the ethanol fermentation process will not have to be reported, according to EPA officials. There is no methodology for reporting emissions from fermentation, so the only instance in which a producer would be required to report those emissions would be as a supplier of CO2—either via sequestration or by transferring it to a facility off-site. If the ethanol producer utilizes the CO2 for an on-site process, it will not be required to include those CO2 emissions in its report.

To monitor the EPA’s assessment of ethanol as a source category for GHG emissions reporting, visit www.epa.gov.

—Kris Bevill

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US DOE, USDA invest $600 million in cellulosic

The U.S. DOE and USDA have selected 19 biorefineries to receive nearly $600 million in American Recovery and Reinvestment Act funds to accelerate the commercialization of advanced biofuels, including cellulosic ethanol.

On Dec. 4, the USDA and U.S. DOE jointly announced the selection of 19 biorefinery projects to receive nearly $600 million from the American Recovery and Reinvestment Act for the purpose of constructing and operating pilot, demonstration and commercial-scale facilities. Projects were selected for their ability to validate refining technologies and lay the foundation for commercial-scale biomass industry development in the U.S., according to the DOE, and are part of the government’s efforts to reduce U.S. dependence on foreign oil and to create domestic jobs.

Of the $564 million awarded, up to $483 million will go toward 14 pilot-scale and 4 demonstration-scale biorefinery projects. The remaining $81 million will be used to accelerate construction of projects that have previously received funding. Recipients of the awards will collectively contribute more than $700 million in private and non-federal cost-share funds.

Many of the projects selected to receive funding plan to build out cellulosic ethanol production facilities, and all of the 19 projects selected for funding plan to ultimately produce biobased chemicals and/or drop-in replacement fuels. In response to EPM’s inquiry about a possible shift in focus away from ethanol entirely, the DOE said it supports

all biofuels that meet renewable fuel standard (RFS) definitions, adding that the RFS includes 16 billion gallons of cellulosic biofuels in 2022.

One of the projects to receive funding was a collaborative effort between Ineos Bio and New Planet Energy LLC. The Ineos New Planet BioEnergy joint venture received $50 million for its proposed 8 MMgy waste-to-ethanol facility to be located in Indian River County, Fla. Ineos Bio chief operating officer Mark Niederschulte said he hasn’t received any indication that the DOE is moving away from ethanol. “I think [it’s] focus right now is having someone produce commercial-scale cellulosic ethanol,” he said. “Certainly, they’d like to see quick follow-on of people building cellulosic gasoline, butanol or jet fuel or something, but right now they just want cellulosic ethanol at a commercial scale.” Ineos anticipates beginning construction on its commercial-scale facility in the by mid-year and to be fully operational at the end of 2011.

ZeaChem Inc., which broke ground in November on its semicommercial scale cellulosic production facility in Oregon, received $25 million to further its project. “This award accelerates deployment of ZeaChem’s integrated biorefinery and our progress to commercial production of advanced biofuels and biobased chemicals,” ZeaChem President and CEO Jim Imbler said.

BlueFire Ethanol Fuels Inc. received $81 million as the second installment of DOE funding given to the company for its commercialscale project. The DOE’s total investment in the company is now approximately $88 million. President and CEO Arnold Klann said the

ETHANOL PRODUCER MAGAZINE • March 2010

company will use the money for Phase II of its Fulton, Miss., project, which will utilize BlueFire’s patented concentrated acid hydrolysis process to produce ethanol from waste wood and trash.

ICM Inc. was selected to receive $25 million for its project to modify LifeLine Foods’ 1 MMgy St. Joseph, Mo., facility to produce ethanol from switchgrass and sorghum. According to ICM, the co-location of the cellulosic demonstration facility with LifeLine’s corn-based facility will demonstrate the capability of corn ethanol production facilities to increase total renewable fuels capacity by also producing ethanol from nonfood cellulosic materials.

EdeniQ Inc. and Logos Technologies Inc. were awarded $20.4 million to modify and operate EdeniQ’s refinery site in Visalia, Calif., as a cellulosic ethanol facility, using corn stover and switchgrass as feedstocks. Logos will manage the project and EdeniQ will provide the technology. The companies’ cost share for the project is approximately $5 million.

The U.S. subsidiary of Montreal-based Enerkem Corp. received $50 million to further its waste-to-biofuels facility in Pontotoc, Miss., which is projected to initially produce 10 MMgy of cellulosic ethanol but will be doubled in size once fully operational.

Finally, Algenol Biofuels Inc. was awarded $25 million for its project to use algae to produce ethanol from carbon dioxide and seawater.

—Kris Bevill

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DRIVE Buis

Green Jobs Waiver is Necessary for Market Expansion

By Tom Buis he United States has more than 300 million gallons of planned cellulosic ethanol production capacity waiting to come online. But that fuel production is stalled, partially because of the lack of an available domestic market, due to the regulatory cap on the amount of ethanol that can be blended into gasoline.

The E15 Green Jobs Waiver, filed with the U.S. EPA by Growth Energy, would raise the regulatory cap by 50 percent, opening the market for ethanol and drawing fresh investment into cellulosic projects.

One thing is certain: if this nation is ever going to advance to cellulosic ethanol, it must raise the market for all ethanol. Without E15, there is no market for cellulosic ethanol.

And without grain ethanol producers, there would be no cellulosic ethanol producers, because it is the grain producers who are leading the cellulosic development.

How important is cellulosic ethanol to our industry? For many, it is crucial because of its low-carbon qualities. The U.S. DOE’s Argonne National Laboratory has found that cellulosic ethanol promises to reduce carbon emissions by 86 percent compared to gasoline. That is a remarkable feat, and the more that the American public learns, the more it will drive up demand for this low-carbon fuel.

At Growth Energy, we have launched several initiatives in Washington, to expand the market for both corn-based and cellulosic ethanol.

As many of you know, the EPA declared it will make a final decision on the Green Jobs Waiver seeking E15 by midyear, but indicated that engine testing data was proving that today’s cars could run just fine on E15. We see it as a strong signal that the EPA intends to raise the blend wall.

Growth Energy has also engaged in a robust effort to move public opinion back in favor of ethanol by making clear

T

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the facts about cellulosic ethanol’s low-carbon properties and its potential to create green-collar jobs in regions of the country that do not yet produce ethanol.

Another of our efforts deals with the renewable fuel standard (RFS). Growth Energy’s position is that Congress should maintain and implement RFS regulatory rules and supporting programs to help ethanol producers meet the nation’s longterm goal of utilizing 10 percent of U.S. transportation fuel derived from cellulosic biofuels by 2022.

Growth Energy is also devoted to extending the blender’s tax credit and tariff on foreign-subsidized ethanol, and has already begun speaking with members of Congress about these important items. The blender’s tax credit just makes sense.

Ethanol competes with an oil industry that has received approximately $150 billion in tax incentives since 1968. Extending the import tariff on ethanol is crucial to ensuring a domestic demand for U.S. ethanol. Maintaining both the credit and tariff will help ensure market success for ethanol and spur the continuing investment necessary to commercialize cellulosic ethanol.

Ethanol—whether corn-based or cellulosic—has an important role in our country’s future. Every gallon of ethanol produced in the U.S. helps reduce our dependence on foreign oil, cleans our environment, and creates jobs that can never be outsourced.

But if we are to have a strong ethanol industry capable of doing all these things, we must raise the regulatory cap on our clean, renewable fuel and expand the market for ethanol.

Growth Energy is committed to that goal.

Tom Buis is the CEO of Growth Energy. Reach him at TBuis@GrowthEnergy.org or (402) 932-0567.

ETHANOL PRODUCER MAGAZINE • March 2010

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Martin

State of the Ethanol Industry–2010 and Beyond

By Gregory J. Lynch and Porter J. Martin hat a difference a year makes. Twelve months ago the ethanol industry, like the financial markets, appeared to face a very uncertain future. Negative margins and bankruptcies were the big news. One year later, things appear to have changed. Ethanol margins have turned positive and many plants are able to show several months of positive earnings. We believe the following three major trends that were manifested during 2009 will continue in 2010 and beyond.

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Oil Enters the Industry Perhaps the biggest news of 2009 was that the oil industry jumped into ethanol in a major way. Valero Energy Corp., the nation’s second largest oil refiner, is also now the third largest producer of ethanol in the United States with over one billion gallons of ethanol capacity.

Valero’s entry also provides a new twist on a successful ethanol business model. Many of the most successful ethanol plants already had some type of vertical integration in the form of ownership by agricultural companies or producers. This structure created a built-in hedge against corn price fluctuations. Valero is achieving similar vertical integration on the oil refining side, helping to hedge against negative gasoline prices and provide it with a competitive advantage compared to other refiners. Valero also directly benefits from the blenders tax credit. We believe it is possible that other refiners or oil companies will become active in acquiring ethanol capacity.

ruptcy sale to Valero in which Valero acquired 760 MMgy of production capacity for less than 63 cents per gallon. Other bankrupt plants were sold for a higher nominal amount, but many buyers did not have to put any money down and assumed only a portion of the former debt.

Unlike the housing market, valuations appear to have increased as well. In December, Valero announced the acquisition of three more plants with 330 MMgy of production capacity. Valero paid 91 cents per gallon for the two most directly comparable plants. Although this valuation is still below replacement cost, it represents approximately a 45 percent increase from comparable valuations earlier in the year.

Investment in Next-Generation Biofuels Considering the financial factors of 2009, it is not surprising that there was not much investment in new first-generation ethanol plants. In contrast, the U.S. DOE and USDA recently announced awards of nearly $600 million to 19 next-generation biofuels projects. The renewable fuel standard calls for 2 billion gallons of advanced biofuels by 2012, which creates tremendous opportunities for companies that can cross the technical and economical commercialization hurdles within three years.

2009 proved to be a tale of two halves for the ethanol industry. The first half was a continuation of a very challenging 2008.

However, the second half (and especially the last quarter) showed strong signs of positive momentum for both first- and second-generation ethanol companies, trends which will continue in 2010 and beyond.

Improving Margins and Plant Values Increased ethanol margins and plant values were also experienced in 2009.Despite some challenging times in the first half of 2009, most ethanol companies were in the black for the last quarter of 2009 and look to continue to be so into 2010.

Ethanol company valuations also improved in 2009. The bottom could perhaps be traced to the VeraSun Energy Corp. bank-

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Gregory J. Lynch is co-chair of the renewable fuels group and managing partner of the Madison office of Michael Best & Friedrich LLP. Reach him at (608) 283-2240, gjlynch@michaelbest.com or http://twitter.com/Renewable_Energ. Porter J. Martin is a partner with the law firm of Michael Best & Friedrich LLP and is a founding member of the firm’s renewable energy group.

Reach him at (608) 283-0116 or pjmartin@michaelbest.com.

ETHANOL PRODUCER MAGAZINE • March 2010

RFA

The voice of the ethanol industry.

Since 1981, the Renewable Fuels Association (RFA) has been the authoritative voice of the ethanol industry. Our efforts have yielded an unequaled record of legislative and regulatory victories. But we consider our track record just the beginning, and are expanding our efforts with a focus on market development.

The RFA is a trusted source for reliable LQIRUPDWLRQ DQG VFLHQWLĂ€F DQDO\VLV IRU the industry, policymakers, and media alike. The RFA is the leading expert on ethanol standards and guidelines for safety. We are also the preeminent authority on E10 and E85.

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eBIO INSIDER Vierhout

Can Europe Solve the E85 Chicken-and-Egg Problem?

S

weden excluded, E85 cars in the European Union are a rare phenomenon. The E85 market is expanding very slowly and could be nonexistent within a few years if proposed rules on the monitoring of vehicle emissions materialize. Why is E85 in Europe such a slow business and why is there a risk it could stop altogether?

The main reason is the gasoline-to-diesel fuel use ratio. Europeans love diesel engines. We all know diesel cars are smelly, noisy and emit a lot of particles (and therefore are not good for public health), but at the same time, carbon dioxide emission reduction performance is unbeatable.

Not that the average consumer really cares about emissions reduction. For the driver, it’s all about taxes. The popularity of diesel engines is caused by high fuel efficiency combined with low fuel prices, thanks to diesel’s lower fuel tax.

These lower taxes were introduced to decrease costs for the economically important trucking sector in countries such as Germany, France, Belgium, Spain and the Netherlands.

But because the fuelling logistics between trucks and passenger cars are not separated, the consumer can enjoy the same low taxation of the fuel. The low diesel price triggered a strong increase in demand for diesel cars and auto manufacturers invested substantial money into the production of more fuel efficient diesel engines rather than gasoline engines. As a result, there are many more diesel-fueled vehicles in Europe. In Belgium, for example, 90 percent of passenger vehicles are diesels. Europe imports around 25 million tons of diesel fuel annually, mainly from Russia.

Another reason we could see a decrease in E85 use or even see consumption halt has to do with proposed European rules on measuring car emissions. Earlier this year the EU set tough emissions standards for vehicles. Most of the saving needs to come from improved fuel efficiency. However, the rules also allow part of the savings to be achieved

36

through the use of biofuels. For auto manufacturers, this could be a way to achieve a substantial saving, but only if E85 is available. Here is where the dilemma lies: oil companies have no interest in expanding the network of E85 filling pumps hence the European Commission argues no emissions credit for flex-fuel vehicle (FFV) manufacturers.

The commission’s logic is that giving a credit upfront to an FFV will result in massive FFV production whereas the fuel will not be there. Therefore, the commission proposed to measure FFV emissions as if the car would be running on gasoline only.

The proposed rules underline once more the chickenand-egg problem we face. There are no FFVs, so no need for E85 and there is no E85 so no need to manufacture FFVs. Instead of making the future of E85 impossible, the proposed rules should be changed to assume that every FFV runs on E85. The emissions benefits auto manufacturers can claim will result in greater FFV production and, most likely, greater pressure from automakers on oil companies to increase the number of E85 filling pumps. The oil companies in return could insist that car manufacturers produce more fuel-efficient gasoline cars so that this type of vehicle becomes more attractive for consumers.

The 27 EU member states need to determine how to measure emissions. If they support the commission’s view, it will mean a slow and certain death for FFVs because auto manufacturers will only produce FFVs if they can get the emissions benefits that E85 deserves. Governments also need to undo the discrimination between the taxation of diesel and gasoline. If this big wheel can be turned, the E85 chicken-and-egg problem will be solved one day as well.

Robert Vierhout is the secretary-general of eBIO, the European Bioethanol Fuel Association. Reach him at vierhout@ebio.org.

ETHANOL PRODUCER MAGAZINE • March 2010

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ETHANOL PRODUCER MAGAZINE

February 2010

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Driving Up

Demand

Overcoming the E10 blend wall and increasing the market for ethanol-blended fuels is not only important in sustaining first-generation producers, but is also vital to ensuring industry growth and support for second- and third-generation producers. An important component in lifting the blend wall is increased use of flex-fuel vehicles and E85.

By Erin Voegele

ETHANOL PRODUCER MAGAZINE

February 2010

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n the preamble to its proposed rule for the second stage of the renewable fuels standard (RFS2), the U.S. EPA explored ways in which the U.S. fuel market can absorb the immense biofuels mandates that were established by the Energy Independence and Security Act of 2007. According to the EPA, the U.S. will reach the E10 blend wall when annual ethanol production reaches 14.5 billion gallons per year, assuming 100 percent E10 utilization nationwide. Using these parameters, the agency estimates the blend wall will be reached by 2013.

However, the EPA also states this benchmark could be reached sooner if demand for gasoline falls or if E10 cannot be distributed nationwide.

While the approval of a midlevel blend such as E15 could postpone reaching the blend wall, the EPA states that it will not provide a way to completely overcome it. Current estimates show implementation of E15 could delay the blend wall issue by one to six years, depending on how quickly E15 is adopted by fuel retailers. This indicates that an E15 waiver will offer more time to instigate greater utilization of flex-fuel vehicles (FFVs) and E85, but will not offer a total solution for meeting EISA mandates.

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Although the number of FFVs on American roadways has increased exponentially in recent years, overall E85 utilization is extremely low. The EPA estimates that 7 million FFVs were on the road in 2007, but only about 12 million gallons of E85 was sold at retail during that year. This means that on average in 2007, each FFV utilized only approximately 1.7 gallons of E85.

The U.S. DOE’s Alternative Fuels and Advanced Vehicles Data Center (AFDC) estimates there are nearly 8 million FFVs on the road today. According to the AFDC, 36 models of FFVs were offered for sale in the U.S. during model year 2009, which is a substantial increase from the 6 FFV models that were avail-

While the approval of a midlevel blend such as E15 could postpone reaching the blend wall, the EPA states that it will not provide a way to completely overcome it.

able 10 years ago. The number of FFV models is expected to continue to grow as Ford Motor Co., General Motors Corp. and the Chrysler Group LLC move forward with their commitment to produce 50 percent FFVs by 2012. But the question of whether those vehicles will be fueled with E85 remains.

According to Peter Hardigan, manager of Ford’s sustainable business strategy group, although his company is continuously increasing its FFV offerings, Ford hasn’t seen much consumer interest in FFVs outside of the few regions in the U.S. that are heavily saturated with E85.

Mary Beth Stanek, GM’s director of energy and environmental policy, says most of the company’s new models are flex-fuel capable. However, she says it is difficult to gauge whether consumer interest in those vehicles is related to their E85 capability because consumers make purchase decisions for a wide range of reasons. “Our flex fuel offerings are on very popular models,” Stanek says. “Every individual is different, so it’s difficult to say if the distinctive purchase reason was for flex-fuel capability.”

ETHANOL PRODUCER MAGAZINE

February 2010

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Adding Infrastructure, Value Although Ford and GM are working to put more FFVs on the road, E85 sales statistics show that most FFV owners are not taking advantage of their vehicles’ flex-fuel capability. Stanek and Hardigan agree that more fueling infrastructure and a better price point is necessary to increase E85 utilization.

“I think one important piece of the puzzle is making [E85] available to more consumers,” Hardigan says. It’s also important to make sure there is a clear value for consumers in buying the fuel. This means ensuring the price of E85 reflects the true energy content of the fuel in relation to standard gasoline. “Over the past year, I've seen where E85 is priced a penny or two below gasoline, and that is

ETHANOL PRODUCER MAGAZINE

not providing value to customers,” Hardigan says. “It’s not just making the fuel available. It’s making sure there is a value there for consumers.”

Stanek says that fuel is a commodity purchase. “If you have E85 priced correctly in FFV dense markets, sales and consideration will go up a lot,” she says.

“Truly, I think you need to have gasoline over $3 per gallon to really see a substantial switch from one fuel choice to the other. That’s when we’ve really begun to see increased consideration.”

Although a few more E85 stations have come online recently, Stanek says the truth is that many more E85 locations are needed in areas of the country with high concentrations of FFVs. “We have quite a few underserved markets for choice,”

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Black - Number of E85 Stations Beige - Number of blender pump locations

* Vehicle registeration data sourced from U.S. DOT, 2007 registrations * E85 location data sourced from the National Ethanol Vehicle Coalition * Blender pumps data sourced from the American Coalition for Ethanol

she says. “We need to get more stations to offer the fuel, we really do. I think that will increase use more than anything.”

If E85 availability expands sufficiently

in the future, it may even be possible for vehicle manufacturers to optimize FFVs to run on ethanol. However, before that would happen, there needs to be consistent and

widespread E85 infrastructure, Hardigan says. “It’s clearly doable, but we wouldn’t head down that path until there is [increased E85] availability,” he continues.

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'It’s going to take more than just the commitments by Ford, GM and Chrysler. It’s going to take all automakers getting into the mix.'

Peter Hardigan, Ford Motor Co.

“It’s clear that we need biofuels,” Hardigan says. “We are a big supporter of biofuels.” However, he also notes that to get enough FFVs on the road to meet EISA’s mandates, other vehicle manufacturers need to produce FFVs as well. “It’s going to take more than just the commitments by Ford, GM and Chrysler,” he says. “It’s going to take all automakers getting into the mix.”

BYOethanol While auto manufacturers continue to produce more FFVs, a new campaign jointly spearheaded by the American Coalition for Ethanol and the Renewable Fuels Association aims to expand fueling infrastructure.

That initiative, the BYOethanol campaign,

seeks to install 5,000 ethanol blender pumps nationwide over the next three years.

Unlike earlier blender pump and E85 initiatives, the BYOethanol campaign does not directly provide funding to petroleum marketers to install pumps. Instead, the campaign aims to educate fuel marketers on why it makes financial sense to install them. To this end, the group has established a website that serves as a central clearinghouse for information of interest to petroleum marketers, including information on existing infrastructure incentives, taxes, E10, E85, midlevel blends, equipment, laws and renewable identification numbers. Essentially, the site is designed to answer any questions a fuel marketer might have about selling ethanol.

According to Ron Lamberty, ACE’s president of market development, the initiative’s goal is to educate petroleum marketers while dispelling many of the ethanol myths they might believe to be true. “What we’ve found as we’ve talked to [petroleum marketers] is that they think this BYOethanol program is all about putting E30 in standard vehicles and breaking the law, and that’s NOT what it’s all about,” he says.

“We’re really talking about giving [FFV] owners some options.” While FFV owners have traditionally only had the choice of filling up on E85 or standard gasoline, Lamberty says ACE has found that in plac-

es where alternative blenders such as E20 or E30, are offered those options tend to sell better than E85.

The BYOethanol campaign stresses the economics of ethanol blender pumps. Unlike dedicated E85 pumps, blender pumps allow petroleum marketers to recoup the costs of the pump through the fuel they sell. This is because a blender pump can offer standard gasoline, E85, or any ethanol fuel blend in between. This option allows petroleum marketers more flexibility in the types of fuel they sell, while offering customers a wider range of fuels. In addition to allowing station owners to economically supply their FFV customers with E85 or a midlevel blend, those who install blender pumps will also be equipped to sell alternative fuel blends to the general public in the event the E15 waiver is approved by the EPA. “If you are looking at putting new pumps in at a gas station, there really isn’t a good reason not to put in blender pumps,” Lamberty says. EP Erin Voegele is a BBI International associate editor. Reach her at evoegele@ bbiinternational.com or (701) 850-2551.

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ELECTRICAL CONSTRUCTION • ELECTRICAL ENGINEERING • AUTOMATION • INSTRUMENTATION ETHANOL PRODUCER MAGAZINE

February 2010

43

MANDATES

Incentives:

It’s All About Location, Location, Location Although federal programs and policies that support the production, distribution and use of ethanol are crucial to the continued development of the industry, many states have taken additional measures to ensure ethanol’s success.

By Erin Voegele

44

ETHANOL PRODUCER MAGAZINE

February 2010

MANDATES

E

thanol producers are well aware of the federal programs that have been implemented to support the growth of the industry. Federal programs, however, are not the only incentives available to aid the ethanol industry. In recent years, many state governments have passed laws that establish a variety of programs designed to make the production, distribution and use of ethanol more feasible within their borders.

These state programs can generally be divided into three broad groups: state renewable fuel mandates, infrastructure incentives for equipment to distribute E85, and incentives that directly benefit ethanol producers. At least 32 states currently employ some type of ethanol incentive, according to information provided by the American Coalition for Ethanol.

To date, 10 states have passed legislation to establish state-specific RFS programs, including Florida, Hawaii, Iowa, Kansas, Louisiana, Minnesota, Missouri, Montana, Oregon and Washington. Pennsylvania has enacted a mandate for cellulosic ethanol. The use of ethanol is also essentially required in California because the state has enacted a low carbon fuel standard that gives preference to biofuels over gasoline.

Several other states have attempted to establish an RFS, including Colorado, Indiana and Wisconsin. However, the legislation either failed to gain the traction needed to become law or was vetoed by the governor.

Twelve states currently offer incentives designed to aid in the establishment of retail infrastructure for ethanol-blended fuels, while 22 states provide some type of incentive to ethanol producers. Only Hawaii, Minnesota and Kansas currently offer all three types of incentives.

State Standards Although the federal RFS currently requires the blending of 36 billion gallons of renewable fuel into the national fuel supply by 2022, the standard does not specify how much renewable fuel must be used in each state.

According to Ron Lamberty, ACE president of market development, many of the ethanol Ron Lamberty mandates that have been established on the state president of market development, level date back to when the federal RFS program American Coalition was first established by the Energy Policy Act of for Ethanol 2005. At that time, the standard, which has since been expanded by the Energy Independence and Security Act of 2007, required the use of substantially less renewable fuel.

“I think that most of the states that passed E10 mandates did it earlier to make sure that they got a bigger ethanol share of the RFS,” Lamberty says. “With an 8 billion gallon mandate, there was a possibility that whole sections of the country would just decide not to [participate in the program].” By enacting state ethanol mandates, certain states essentially ensured they would take part in the RFS program, he says.

Even though the federal RFS has expanded significantly since the time when most state ethanol mandates were established, Lamberty says state policies are still helpful in supporting infrastructure development.

According to Lamberty, the biggest advantage of state ethanol ETHANOL PRODUCER MAGAZINE

February 2010

mandates—whether they require the use of E10, E15 or E20—is that the state government is sending a strong indicator that ethanol-blended fuels must be made available to the public. “E10 mandates…help establish a market that allows the infrastructure and equipment to be put into place,” Lamberty says.

Showing the EPA the Way As the U.S. works to meet the RFS goals, the likelihood will increase that a mid-level ethanol blend, such as E15, will be approved for use in standard vehicles. While many state ethanol mandates require the use of traditional blends of ethanol, such as E10, several mandates require the use of more substantial quantities of the fuel, despite the U.S. EPA’s hesitation to approve higher ethanol blends for use. In these states, higher ethanol mandates may help spur the development of additional infrastructure that will be needed to meet the sizable federal standard.

Minnesota was one of the first states to enact ethanol legislation, implementing an E10 mandate beginning in 2003. In 2005, its Ethanol Use Standard was amended to declare that if ethanol did not already comprise at least 20 percent of all gasoline consumed within the state by Dec. 31, 2010, a mandate would be triggered to require gasoline blends to contain at least 20 percent ethanol by Aug. 20, 2013. The amended law is contingent, however, upon EPA approval of E20 for use in standard vehicles.

In 2006, Iowa passed legislation requiring renewable fuels to replace 25 percent of gasoline used within the state by Jan. 1, 2020. The mandate began by requiring the use of 10 percent renewable fuel in 2009. The percentage is then to be increased on an annual basis through 2020.

Kansas also enacted an incremental RFS that began with a 10 percent renewable mandate in 2009, which while increasing at a slower pace, essentially requires fuel to contain 25 percent renewable content by 2024.

In some states, a trigger must be met before a mandate takes effect.

Louisiana’s Ethanol Use Standard requires ethanol to comprise 2 percent of the state’s total gasoline sales within six months of in-state ethanol production reaching 50 MMgy. The fuel must also be produced from state-produced feedstock.

Similarly, Montana’s Ethanol Use Standard will take effect once 40 million gallons of ethanol have been produced within the state on an annualized basis for three months. Once the trigger is met, all gasoline sold within the state is required to contain 10 percent ethanol.

Florida’s Ethanol Use Standard is currently expected to be the next state ethanol mandate to take effect. Beginning Dec. 31, 2010, the program requires that all gasoline offered for sale within the state be blended gasoline. The standard defines “blended gasoline” as a fuel mixture containing 90 to 91 percent gasoline and 9 to 10 percent ethanol.

The mandate is significant because Florida consumes approximately 8.7 billion gallons of gasoline annually. However, according to Jim Smith, president and CEO of the Florida Petroleum Marketers & Convenience Store Association, the pending E10 mandate isn’t expected to have a significant impact on Florida petroleum marketers. “We’ve already started implementing it,” he says. “Almost all of the gasoline sold in Florida now is E10.”

Smith says at least 90 percent of petroleum marketers in Florida 45

MANDATES

State RFS

States Alabama Alaska Arizona Arkansas California* Colorado Connecticut Delaware Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky Louisiana Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire New Jersey New Mexico New York North Carolina North Dakota Ohio Oklahoma Oregon Pennsylvania Rhode Island South Carolina South Dakota Tennessee Texas Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming Q

Incentives for retail pumps distributing ethanol

Incentives for ethanol producers

x x x x

x x

x x

x x x x x

x x x x x

x x

x

x

x x

x x x x x x x x

x x x

x

x x

x x

x x

x

x x

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* (low carbon fuel standard) (cellulosic ethanol standard) Information sourced from the American Coalition for Ethanol's Status ‘09 handbook Q

46

are already offering ethanolblended fuels. “The only place in the state where you do not have a consistent supply of E10 is in the panhandle, but it is sparsely populated,” he says.

Cellulosic Incentives While only 10 states have enacted mandates to spur the increased consumption of ethanol, ACE estimates that at least 22 states offer some sort of incentive for ethanol production. These programs are generally designed to make the state a more attractive place for potential ethanol producers to locate. Although several of the programs benefit producers of traditional corn-based ethanol, some programs have been designed specifically to attract cellulosic development.

Indiana’s Production Incentive program offers benefits to producers of both cellulosic and corn ethanol. A tax credit of $2 million is available for companies producing between 40 MMgy and 60 MMgy of grain ethanol.

The tax credit increases to up to $3 million for those that produce more than 60 MMgy. For cellulosic ethanol, a tax credit of $20 million is available for the production of at least 20 MMgy. The Ethanol Production Tax Credit in Kentucky currently allows producers of cellulosic ethanol to be eligible for a $1-per-gallon tax credit. The program has an annual cap of $5 million. In the event the cap is reached, the tax credit would then be pro-rated among all eligible producers. The state also currently offers a $1-per-gallon tax credit for grain-based ethanol, which caps at $10 million.

Virginia’s Advanced Biofuel Production Incentive program allows qualified producers of

ETHANOL PRODUCER MAGAZINE

February 2010

MANDATES

advanced biofuels to receive an incentive grant of 10.5 cents per gallon of advanced biofuel that is sold. Under the program, “advanced biofuel� is defined as a fuel derived from cellulose, hemicellulose or lignin that is derived from renewable biomass or algae.

Unique Incentives Rather than offer producers a benefit based on the quantity of fuel produced or sold, several states offer unique incentives that can benefit those working to develop advanced biofuel projects. Michigan has developed a tax incentive designed to incent the purchase of agricultural machinery that can be used to harvest biomass specifically for energy production.

In Maryland, a tax credit is available for individuals and businesses that invest in cellulosic ethanol technology and development. The credit covers10 percent of the qualified expenses paid or incurred by an individual or corporation during the previous tax year.

South Carolina offers a similar research and development (R&D) tax credit that began in 2007 and will be available for the taxable years until 2012. The credit can be used for up to 25 percent of qualified R&D expenses in feedstock and production development for cellulosic processes. A tax credit can also be claimed for up to 25 percent of the cost of constructing or renovating a commercial biofuels plant.

In North Dakota, a recently established incentive program allows the state board of higher education to establish biomass energy centers at institutions of higher learning. In addition, a state program also appropriates funds that are available to carry out certain renewable energy development activities. Various forms of assistance are available, including grants or loans that can be used to complete feasibility studies, apply research, and develop demonstration projects.

Virginia has put in a place a program that may also spur job growth. The state currently provides corporations an income tax credit of up to $700 for each full-time clean fuel vehicle job created.

Qualifying jobs include those in the manufacturing of vehicles that are designed to operate on clean special fuels, as well as the manufacturing of components that allow these vehicles to be converted to operate on clean fuels.

The credit can also be claimed for jobs that are created in the manufacturing of components that are designed to produce, store or dispense these kinds of fuels. The tax credit, which will expire on Dec. 31, 2011, can be used in the taxable year in which the job was created, as well as each of the following two years as long as the job is continued.

While federal incentive programs will remain vastly important to the continued development and expansion of the ethanol industry, incentives offered on a state level are likely to play an important role as well. EP

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ETHANOL PRODUCER MAGAZINE

February 2010

47

Power, Fuels and Chemicals.

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ADVANCEMENTS

As the number of corn ethanol producers stabilizes, companies are expanding their efforts out of the Corn Belt and into regions of the country that currently use ethanol, but do not produce it.

Florida has many proposed projects and a massive market for ethanol, but no local producers. Could the Citrus State be poised to become the next Iowa?

By Kris Bevill

50

ETHANOL PRODUCER MAGAZINE

February 2010

ADVANCEMENTS

Searching for the Next Iowa

I

n recent years, Iowa has become primarily known in other parts of the U.S. for two things: corn and ethanol. The state is home to 39 ethanol production facilities and boasts more than 3 billion gallons of annual production capacity, according to the Iowa Renewable Fuels Association. The most recent data from the Iowa Corn Growers Association shows that in 2008, 2.1 billion bushels of corn—82 percent of the entire U.S. crop—were harvested from Iowa fields. Iowa has earned its reputation for corn and ethanol and the two have served the state well. But while corn yields continue to increase year to year, the number of corn ethanol plants is expected to stabilize. The plants that exist now will probably continue to produce cornbased ethanol for many years, and at increasing levels as technologies improve.

The demand for ethanol, however, specifically cellulosic ethanol, will increase at a faster rate, which means Iowa and other Corn Belt states may soon share the ethanol spotlight with some unexpected candidates.

ETHANOL PRODUCER MAGAZINE

February 2010

Market-Friendly As the fifth largest consumer of transportation fuels in the nation, Florida represents a gigantic distribution market, but currently lacks any homegrown production. The state uses 8.7 billion gallons of gasoline annually and is implementing an E10 mandate in 2011, but without in-state production it will have to rely on other states for its ethanol supply. This scenario led state leaders to begin exploring alternatives years ago and continues to drive the state’s interest in ethanol and other alternative fuels.

Florida began to expand its energy and fuel portfolio in 2005 when thenGov. Jeb Bush signed an executive order calling for the state to develop an energy plan that would include, among other elements, an analysis of the state’s ability to generate, store and distribute fuel, including ethanol. The resulting official Energy Plan, released in 2006, demonstrated Florida’s near-total reliance on other states and nations for its fuel supply. According to the state’s findings, Florida’s transportation fuel needs in 2006 were approximately 28.1

million gallons per day and were expected to increase to 32.3 million gallons per day by 2016. At the time of the report’s release, there were no publicly available ethanol filling stations in the state.

In the report, energy recommendations made by the state’s Department of Environmental Protection were: to raise public awareness for alternative fuel vehicles, to provide grant funding for research and development projects associated with alternative fuel vehicles and other emerging technologies, and to provide corporate sales and income tax incentives to improve production, develop distribution infrastructure and increase availability of clean fuels, including biodiesel and ethanol.

That same year, the Florida legislature created the Florida Energy Commission, to be housed with the environmental protection office, to provide further recommendation for the state’s energy policy. The commission’s first report was released to the legislature on Dec. 31, 2007. It showed some signs of progress (the number of retail stations selling E10 had increased from 0 to 50, for instance), but also pointed out again

51

ADVANCEMENTS

that there were no operational ethanol facilities in the state.

In 2008, state legislators unanimously passed energy policy that included a renewable fuel standard mandating the use of E10 beginning in 2011, in addition to expanding the grants programs meant to encourage development in alternative fuel and energy technologies.

Incentivizing Success The Florida legislature established a Renewable Energy Technologies Grants program in 2006 as a method of stimulating capital investment in the state and to promote and enhance statewide utilization of renewable technologies. The environmental protection agency was initially in charge of distributing grant money and received 183 proposals seeking nearly $215 million, nearly 15 times more than the $15 million that was allocated for the 2006-’07 program, in response to its first solicitation. A similar number of applications were received in response to the state’s 2007’08 and ’08-‘09 grant programs.

To date, more than $67 million in fund-

ing has been provided by Florida for renewable energy projects. Additionally, the state energy office controls the $126 million Florida received through the American Recovery and Reinvestment Act of 2009 and has many incentives plans and grant programs planned that could benefit renewable energy projects.

Market Makes the Difference Despite the state's efforts to supply grants to alternative fuel projects, plentiful grant programs may not be Florida’s key to successfully establishing a local ethanol supply. While all of the projects making progress in Florida have received state funding, most company leaders say the No. 1 factor leading to their decision to locate in Florida is the available market for their product, followed closely by the availability of feedstock.

“One of the obvious things that we wanted to do was find a location that had a good market for the ethanol and Florida certainly meets that criteria,” says Mark Niederschulte, chief operating officer for INEOS Bio. INEOS and New Planet Energy LLC recently formed a joint venture, INEOS New

Planet BioEnergy, which will break ground on an 8 MMgy waste-to-ethanol plant in Florida by the second half of this year and be fully operational at the end of 2011. “There’s a large market, a renewable fuel standard and no ethanol producer, so the state relies on ‘imported’ ethanol, which provides a logistical advantage,” Niederschulte continues. “From a feedstock perspective, we’re looking at the ability to take really any kind of biomass to stick into the front end of the production process. Florida meets that criteria quite well because it has a large quantity of varying types of biomass, not just pine trees or something like that. It has everything from sugarcane bagasse to trees and other kinds of vegetative waste.”

According to Jay Levenstein, deputy commissioner of Florida’s agriculture department, the state represents between 7 percent and 10 percent of U.S. biomass resources available to be used for renewable fuel or power generation. “I don’t know how much beyond the grants that we’ve really done to entice companies to come here other than there’s a market,” he says. “Depending on who’s tech-

ADVANCEMENTS

nology and what feedstock they’re using, there’s certainly availability here.”

Several proposed Florida projects plan to take advantage of the state’s climate to supply them with tropical feedstocks.

Southeast Renewable Fuels LLC will use sweet sorghum to produce ethanol at its facilities. In December, the company entered into the permitting process for a 20 MMgy sweet sorghum-to-ethanol facility to be located in Hendry County near Clewiston and is also reviewing sites for two additional plants, for a total production capacity of 100 MMgy. “We believe we can get all of those sited in Florida,” says executive vice president and chief operating officer Don Markley. “Feedstock is everything. [Florida] is where we believe we can get the acreage to grow sweet sorghum in the quantities that are needed to support the facilities.”

Markley says Southeast Renewable Fuels expects to use 1.1 million tons of sweet sorghum annually for a 20 MMgy facility and that the company has preliminary feedstock procurement agreements in place.

U.S. EnviroFuels LLC is also planning to utilize sweet sorghum, as well as sugarcane, for its 30 MMgy Highlands EnviroFuels LLC plant in Highlands County.

President Brad Krohn says the company completed Phase 1 process engineering in December and plans to break ground on the facility this year. He says that if someone is interested in cellulosic biomass, Florida has the supply. His company has the ability to bolt on cellulosic capabilities to utilize sugarcane bagasse in the future, but the company remains focused on producing sugar-based ethanol in the near-term.

“The technology is low-risk [and] we believe sugar-based ethanol can be a bridge to cellulosic,” he says.

INEOS, Southeast Renewable Fuels and U.S. EnviroFuels have all received state grants to further their projects. Other wellknown projects to receive state funding include the Verenium Corp.-BP plc joint venture, Vercipia Biofuels, and Coskata Inc.

created to utilize Florida-grown biomass, such as citrus or sweet sorghum, rather than biomass that will most likely need to be shipped in from the Midwest. “As we get into the ethanol business, it’s going to be next-generation and advanced biofuels that come out of Florida, not corn ethanol,” he says.

Leon Dupree Hatch Jr., secretary for East Coast Ethanol LLC’s board of directors and Florida project manager, says it has been more difficult to establish its corn-based project in Florida than in Georgia, South Carolina or North Carolina, where the company is also working to develop corn-based production facilties. “State government officials haven’t really knocked our doors down to try to help us because it seems the objective in Florida is to look at second-generation biofuels,” he says.

“I think that has hindered us some.”

The fact that Florida lacks corn production can also be a contributing factor to the state’s delayed entry into ethanol production.

“The challenge with these projects is, we’re not

Kris Bevill is the editor of Ethanol Producer Magazine Reach her at kbevill@ bbiinternational.com or (701) 850-2553.

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No Room for Corn One specific type of ethanol project notably missing from Florida’s list of grant recipients is corn-based ethanol. Levenstein says this is because the grant programs were ETHANOL PRODUCER MAGAZINE

Iowa,” Levenstein says. “It’s not an off-theshelf plant, where the model is already there.

[Corn ethanol producers] have been doing it for decades and they’ve pretty much got all the questions answered. With what we’re doing, it’s all new. There’s more unknowns and it’s not been proven at a commercial scale yet.”

Having said that, Levenstein says Florida has enormous potential to become the next Iowa as far as ethanol production, “emphasis on ‘potential’,” he says. “Admittedly, we’re not at the point today where we had hoped we would be five years ago. We’ve created the demand, now it’s just a question of whether we’ll be able to fill our own demand with production facilities in the state.” EP

February 2010

LOGISTICAL MANAGEMENT T R A N S P O R TAT I O N & S T O R A G E

w w w. G a v i l o n . c o m

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EVENT

Delivering Renewable Results Solid Canadian backing for renewable fuels mandates and positive benefits from biofuels energized the Canadian Renewable Fuels Summit.

Story and photos by Susanne Retka Schill

A

single phrase captures the essence of the Canadian biofuels industry—“We’re delivering,” said Canadian Renewable Fuels Association President Gordon Quaiattini at the organization’s annual summit held in Vancouver, British Columbia, in early December. “We’re delivering the jobs and growth that Canadians so badly need. We’re delivering greenhouse gas (GHG) reductions that Canada requires. We’re delivering for farm families looking to diversify. We’re delivering for the forestry sector that sees renewable fuels as a new source of growth and vitality and we’re delivering for all those who worry about the security and abundance of clean and affordable transportation fuels.”

Quaiattini cited three recent reports supporting his claim.

The day the summit opened, the CRFA released an analysis of the economic benefits from the southwestern Ontario farmerowned corn ethanol plant, Integrated Grain Processors Cooperative. When it was being built, the IGPC plant had a net job creation of 1,152 “person years” and a direct investment in the region of $276 million. Local governments gained $7.7 million in direct benefits to the municipal tax base while the provincial government benefitted $44.24 million and the federal government close to $70 million. With the 150 MMly (40 MMgy) plant in production since fall 2008, it now provides 55 jobs and $53.7 million in additional local spending each year, according to the economic analysis done by Doyletech of Ottawa. The municipality realizes reduced

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welfare costs and increased property taxes totaling $629,000 annually while the provincial and federal governments see benefits of $5.2 million each.

Quaiattini also cited a life-cycle analysis (LCA) conducted on renewable fuel production from Canadian plants between April 2008 and March 2009. Ontario-based Cheminfo Services Inc. used the GHGenious model to conduct the analysis and found that ethanol reduced GHG emissions by 62 percent compared to traditional fossils.

Eight corn- and wheat-based ethanol plants representing 648 MMly of ethanol production, about 65 percent of the country’s active ethanol capacity, were analyzed during the data reporting period.

Such results have earned impressive support for renewable fuels, as illustrated by a public opinion survey released by CRFA at the summit. The survey, conducted by Praxicus Public Strategies, showed 89 percent of Canadians believe renewable fuels are part of a move toward a low-carbon economy; 84 percent recognize renewable fuels boost economic activity and employment in rural communities; 82 percent believe any plan to tackle climate change should include renewable fuels to lower GHGs; and 85 percent view renewable fuels as a source of value-added production and new high-tech employment. Support for a renewable fuels standard was only slightly lower at 78 percent, while 86 percent of Canadians believe the country needs a long-term plan to boost production of renewable fuels in Canada.

“I’ve worked in politics for over 20 years,”

Quaiattini added, “and these are numbers any politician would die for.”

Politicians Voice Support Two government officials addressing the summit demonstrated the degree of public support is understood by politicians.

The British Columbia Minister of Energy, Mines and Petroleum Resources, Blair Lekstrom, voiced strong support for Canadian biofuels in his welcoming remarks. “Anytime we work towards diversifying markets for our agricultural sector, it is a good thing,” he said.

Lisa Raitt, the Canadian Minister of Natural Resources, also expressed support for biofuels in a videotaped presentation to the summit. She pointed to the stakeholder roundtables her department hosted in 2009 as the government began to implement its $2.2 billion investment in a renewable fuels strategy. Of the 57 applicants to the ecoEnergy program, 23 agreements have been signed, she said, supporting existing Canadian producers and new projects under development.

The Canadian renewable fuels standard takes effect in September, mandating a 5 percent renewable content in gasoline, followed by a 2 percent renewable content in diesel and heating oil in 2012. In a panel discussing the political landscape in Ottawa, Scott Reid, a partner in Feschuk-Reid, referred to the government support—the mandates and $2 billion in financing—as “monster wins” with both conservatives and liberals including renewables in their platforms. “Your

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Incoming Canadian Renewable Fuels Association Chair Doug Hooper, CEO of Canadian Bioenergy Corp., tells conference attendees that "green protectionism is going to be normal" during the 2009 Canadian Renewable Fuels Summit.

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fundamental job is to remind and reinforce that [supporting renewable fuels] is good politics,” he told the Canadian industry. Reid’s fellow panelist, Tim Power, Summa Strategies, echoed that, adding that in the next election cycle “biofuels need to frame themselves in the economic discussion rather than the environmental.”

Expansion Anticipated The mood among ethanol producers at the summit was upbeat.

“Prices have recovered, relative profitability is not too bad,” said Tim LaFrance, president of Terra Grain Fuels, a 150 MMly wheat ethanol plant at Belle Plaine, Saskatchewan. “The ethanol industry is looking forward to September 2010 when the E5 mandate creates a market for 2 billion liters a year,” said Jeff Passmore, executive vice president public affairs for Iogen Corp. and the outgoing chairman of CRFA. “We need 400 million liters of new capacity to cover that.” He expects most of that will come from grain-based ethanol because the Canadian standard has no carve out for cellulosic ethanol, unlike the U.S. However, while so much of Canadian biofuel policy and industry development lags behind the U.S., the Canadian cellulosic ethanol industry is on an equal footing with its neighbors to the south. “We are at the same stage in both countries,” said Vincent Chornet, CEO of Enerkem Inc. Several companies at the summit described their technology developments occurring on both sides of the border, and spoke of the disadvantage to Canadian production when U.S. policies, such as the Biomass Crop Assistance Program, provide new areas of support to U.S. projects. As Passmore pointed out during the conference, the Canadian industry is dwarfed by its neighbor. U.S. ethanol production alone is about the same size as Canada’s entire gasoline consumption. The Canadians are also well aware that the debates surrounding land use issues and GHG reduction estimates would impact their industry, with presentations from several U.S. speakers, including Bob Dinneen from the Renewable Fuels Association, covering the controversy and the industry response.

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Company executives brought the CRFS up to date on their progress towards advanced biofuels. From left, Tim Haig , Biox Corp.; Vincent Chornet, Enerkem Inc.; Ross MacLachlan, Lignol Energy; Christian Morgen, Inbicon.

Global Update Despite the controversies surrounding biofuels, a recent market analysis conducted by the Global Biofuels Centre concluded ethanol will see an 80 percent increase in demand worldwide from 2009 to 2015.

Tammy Klein, executive director of the Global Biofuels Centre for Hart Energy Consulting, said the growth drivers are not just the U.S. and Europe. “Many countries see biofuels the same way as Canada and the U.S.—supporting rural economic development, reducing greenhouse gases and also, many of these countries are energy insecure.” With next generation biofuels not likely to be available commercially in sufficient quantities by 2015 to meet GHG-driven biofuels targets, she expects expansion of sugarcane-based ethanol in not only South America but in the Asia Pacific region as well. The ethanol share of the market is expected to reach a 30 percent penetration in Latin America, with Brazil continuing to supply 89 percent of the exportable surplus. In North America, gasoline demand is expected to decline by 2015 driven by gains

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members to be proactive about involvement in policy development and the work being done on sustainability standards, not only in dialoguing with nongovernmental organizations but engaging with governments and organizations such as the Roundtable for Sustainable Biofuels. “The complaint from the RSB is they don’t have enough industry participation, and not enough producer involvement,” she said.

Perspectives on the Decade Ahead

Avrim Lazar, CEO of the Forest Products Association of Canada, says the third generation of climate change response will include a deep retooling of the economy.

in fuel efficiency. Ethanol’s penetration into the North American market could increase with intermediate blends. Brazil is likely to quadruple ethanol exports to the U.S. to help meet renewable fuels standards that won’t be attainable with advanced biofuels produced domestically, she added.

As for Europe, Klein said the standards in development ultimately may exclude most imports. “We don’t know how the EU can meet its renewable energy directive targets,” she said. She also predicted that the anticipated EU sustainability standards for biofuels will be challenged in the World Trade Organization as a protectionist trade barrier. At a recent international meeting, she noted “the change in tenor was astonishing” from the European Commission representative who openly admitted they would have to consider WTO implications. “Brazil is watching the EC closely,” she added, “and Brazil has a history of winning WTO cases.” If a WTO suit successfully challenges Europe’s sustainable biofuels policy, it could also impact U.S. policy as well.

Klein urged the group of Canadian Renewable Fuels Association

In his remarks, CRFA’s incoming chairman, Doug Hooper, CEO of Canadian Bioenergy Corp., reflected on the state of the Canadian industry at the close of a decade. “This has been the coming of age decade for biofuels with capacity being built,” he said. “We got the attention of government and held on to it.” In the next 10 years, the energy sector will be transformed with emerging carbon policies presenting opportunities and challenges, he said, predicting that trade disputes will grow over different views on the proper carbon accounting. “Green protectionism is going to be normal,” he said.

Avrim Lazar, CEO of the Forest Products Association of Canada, also described a progression in the development of climate change policy that indicates where the discussion surrounding renewable energy is headed. The first generation of climate change responses involved finger pointing, platitudes and good will gestures, followed by a second generation of policy development. “Kyoto was second generation because it was done in slices,” he said. “Cap and trade offsets are a second generation response because it’s like paying someone else to diet,” he added. The third generation response is beginning to emerge now, and ultimately requires “a deep retooling of the economy, the changing of the fuel source.” The third generation will be holistic, including total carbon accounting and incorporating nature’s cycles, he predicted. “If any industry is well situated [for the third generation of climate change policy developments], it is this industry,” he said. EP Susanne Retka Schill is an editor at BBI International. Reach her at sretkaschill@bbiinternational.com or (701) 738-4922.

TECHNOLOGY. BY KHATEREH A. PISHRO & FRANCESCA M. CROLLEY

PHOTO: NANSULATE

Contribution

A worker applies a coat of Nansulate thermal paint to a pipe at the Grupo Modelo Brewery in Mexico.

Nanotech Products Increase Efficiency and Energy Saving More than 800 manufacturer-identified nanotech products are publicly available, with three to four new ones hitting the market each week.

T

he biofuel industry has been on a roller coaster ride lately.

Those in the industry are now in survival mode, working to keep plants and facilities profitable, reducing costs and protecting assets while they await a predicted upswing in the market. Despite the current condition of the industry, experts at Pike Research expect biodiesel and ethanol markets to triple by 2020, utilizing fuels based upon advanced feedstocks.

A potential solution is found in one of today’s newest sciences—nanotechnology, which is the

study of the control of matter on an atomic or molecular scale.

Nanotechnology generally deals with structures 100 nanometers or smaller and involves the development of materials or devices of that size. Nanotechnology is very diverse, ranging from novel extensions of conventional device physics, to completely new approaches based upon molecular self-assembly, to developing new materials with dimensions on the nanoscale, even to speculation on whether scientists can directly control matter on the atomic level.

Nansulate coatings, patented

and manufactured by Industrial Nanotech Inc., are materials based on nanotechnology that offer combined benefits not possible with conventional materials. The coatings offer an energy efficient and environmentally friendly method to insulate, prevent corrosion and even reduce carbon emissions on all types of tanks, piping and equipment such as boilers, steam lines, heat exchangers and processing tanks.

But better yet, they are affordable, meaning the payback time is short (typically reported between 6 and 18 months), and can be implemented incrementally.

How Nansulate Works Nansulate coatings incorporate a nanocomposite with an extremely low thermal conductivity.

Passage of thermal energy through an insulating material is an attempt by hotter, fast-vibrating molecules to transfer energy to cooler, slowvibrating molecules in order to reach equilibrium. It occurs in three ways: solid conductivity, gaseous conductivity, and radiative (infrared) transmission. The total of these is the thermal conductivity of the patented material.

Thermal conduction through the solid portion is hindered by the tiny size of the connections

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).

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between the particles making up the conduction path and the solids that are present, which consist of very small particles linked in a three-dimensional network (with many “dead-ends”). Therefore, thermal transfer through the solid portion occurs through a very complicated maze and is not very effective. Air and gas in the material can inherently also transport thermal energy, but the gas molecules within the matrix experience what is known as the Knudsen effect, and the exchange of energy is virtually eliminated.

Conduction is limited because the “tunnels” are only the size of the mean-free path for molecular collisions; (smaller than a wave of light), and molecules collide with the solid network as frequently as they collide with each other. The unique structure, comprised of nanometer-sized cells, pores, and particles results in poor thermal conduction. Radiative conduction is low due to small mass fractions and large surface areas.

The properties that make the material a poor heat conductor make it an effective insulation that can be coated onto a variety

of surfaces to reduce heat loss or gain and energy consumption.

Three coats of Nansulate reduce thermal flow by 34.8 percent in laboratory tests. In addition, Nansulate has excellent corrosion protection, and when used in applications on metal eliminates the corrosion under installation (CUI) problem that many other traditional insulations cause.

Evaporation/Vaporization Nansulate patented technology can also be an effective insulation in a high humidity environment. One large petrochemical facility needed to prevent corrosion of carbon steel tanks and stop vaporization of methanol by insulating tanks efficiently. Methanol evaporates at 64.7 degrees Celsius (148 degrees Fahrenheit).

When the methanol reaches the storage tanks, the temperature of the liquid is 15 C and the goal is that it should not exceed 33 C. The chemical plant’s location in the Middle East, where humidity levels are between 75 percent and 90 percent, makes traditional insulation materials impractical to use because fast absorption of moisture would cause CUI. A

layered application of two coats of Nansulate High Heat and one application of Nansulate Top Coat (tinted blue) was spray-applied to the large methanol tanks.

Nansulate stopped vaporization of methanol and offered corrosion protection and resistance to moisture penetration.

Implementing this type of insulating material in biofuel production facilities noticeably reduces surface temperature to safer levels in addition to reducing heat loss, thereby saving money and energy. Spray-applying Nansulate paint to hot water pipelines or tanks, insulates and provides corrosion protection under insulation and moisture resistance at the same time. Energy and cost savings are the main reasons manufacturers in the textile industry and many others are utilizing this technology in their plants, and planning to coat equipment, walls and ceilings to save on heating and cooling costs. Nansulate has proven to be an energy saving solution for more than five years.

Industrial customers receive payback on their investment in as little as 6 to 18 months on average and energy-savings are documented at

an average of 20 percent. Affordability and the fact that the technology is green and low in volatile organic compounds, make it one that every plant manager should consider for cost savings.

Biofuel companies looking for solutions to keep their doors open and their facilities running while waiting out the economic storm can benefit from the combination of solutions this technology provides: reduced energy costs, reduced product evaporation and corrosion resistance.

With payback being seen so quickly, the technology offers an attractive and easy-to-apply solution for many who are in need of fast fixes to return their plants to profitability. EP Khatereh A. Pishro is a bioprocess & chemical engineer and co-founder and R&D manager at Nanofan Industrial Coatings, F.Z.E. Reach her at UAE@ nanofan.net Francesca M. Crolley is vice president of business development at Industrial Nanotech, Inc. Reach her at fcrolley@ industrial-nanotech.com

VOGELBUSCH The Bioprocess Company

Designing state-of-the-art ethanol plants in the U.S. for over 30 years

We Make Biotechnology Work Vogelbusch USA, Inc. • 1810 Snake River Road • Katy, TX 77449 • (713) 461-7374 • office@vbusa.com www.vogelbusch.com ETHANOL PRODUCER MAGAZINE

February 2010

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PROFIT. BY TERRY LASH Contribution

The National Corn-to-Ethanol Research Center provides ethanol industry members the opportunity to test new methods of production.

The Proof Is In the Profit Ethanol research center investigates new technologies to benefit the biofuel industry

The National Corn-toEthanol Research Center in Edwardsville, Ill., operates a roundthe-clock pilot plant facility for producing and analyzing biofuels and their coproducts. Public and private entities such as biofuel manufacturers, seed-trait producers, enzyme manufacturers, equipment providers, and other clients use the NCERC. The Center’s core mission is demonstration research for the validation of new process technologies, products, and equipment that could potentially improve biofuel production and optimize the value of coproducts such as distillers dried grains. The facility’s clients use the data generated from the piloting studies to make their own processes more

efficient and productive.

The NCERC’s 36,000square-foot facility contains research labs where ideas can be tested and perfected on a small scale before being scaled-up in the pilot plant. In addition the Center has provided laboratory and process training to more than 500 people. NCERC is continually searching for and implementing new state-of-the-art laboratory analytical methods and process measurement technologies to expand and improve the quality of the data the center provides the client.

Ethanol Distillation Process Rapid feedback on changes in distillation performance is im-

portant for the successful operation of fuel ethanol plants. Any upset in the purity of the final product can be detrimental to the plant’s smooth operation and its profits.

The distillation unit operators in fuel ethanol plants typically depend on a semi-hourly hydrometer to determine the proof or alcohol concentration of the final product. This method involves drawing an alcohol sample and using a hydrometer to determine the specific gravity of the fluid.

To determine the ethanol concentration from a specific gravity measurement, the operators must measure the temperature and consult a table to determine the alcohol concentration.

On a more infrequent basis,

laboratory personnel will use the Karl Fischer titration method to determine the alcohol concentration. The accuracy and precision of this laboratory bench method is excellent, but the time needed to collect and analyze the samples can be problematic when operators are troubleshooting distillation unit problems. The lag time between a change in the reported ethanol concentration and the plant operators being notified to make adjustments to bring the distillation unit under control can be substantial.

A drop in ethanol proof can occur for many reasons. For example, flooding of the rectifying column may cause material that is not fully distilled to be carried over into the plant’s 190 proof

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).

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tank or molecular sieves. The molecular sieves are designed to remove water from a 95% pure ethanol stream. So, a carryover of incompletely distilled ethanol can cause the molecular sieves to become overloaded and unable to absorb the excess water.

Lower ethanol proof can also result from a failure within the molecular sieve system itself.

For instance, failure of a purge valve would prevent removal of the water collected in the sieve material during the regeneration cycle, which would inhibit the absorption of water when the next absorption cycle begins.

Also over time, the molecular sieve’s ability to absorb moisture can decline due to foreign material clogging the pores.

Economics Another concern for ethanol producers is to manufacture ethanol with an acceptable water content, which is specified by the ethanol buyer. The situation of producing ethanol with a higher concentration of alcohol than required can be a major cost to the plant. For example, if a 50 MMgy plant sells ethanol at $1.75 a gallon and produces ethanol that is 0.1 proof (.05 percent) higher than required by their contract, the plant will lose about $0.000875 per gallon. This is approximately $44,000 per year or $88,000 per 0.1 proof in a 100 MMgy plant. This savings goes straight to the bottom line.

Distillation Unit Performance Monitoring As a fermentation piloting facility, NCERC performs many dissimilar fermentations to optimize a process during a research trial. Typically the complete fermentation of a material takes place between 40 and 80 hours depending on the organism and the feedstock. Fermentation research can involve adjusting some parameter in each fermenter set to find out which process condition results in the best alcohol yield. The fermenter batches containing different levels of alcohol are pumped to a distillation unit to remove the alcohol and send the remaining solids and water for further processing into coproducts.

In one test, plant operators

needed a method to continuously monitor the performance of the plant’s distillation unit.

NCERC chose a novel approach to continuously monitor alcohol concentration of its distillate using a Coriolis type mass flow meter. Providers of Coriolis flow measurement technology (density, mass flow) can provide an optional software programming function that allows the process engineer to program the instrument with data tables that relate temperature, density and concentration data. NCERC engineering wanted to validate and apply this technology to turn the instrument into a proof-meter to relieve the plant operations team of the responsibility of measuring the alcohol content using the manual hydrometer method and temperature reference chart.

IN TER N ATIONAL

SAVE THE DATE! MAY 4-6, 2010

MINNEAPOLIS CONVENTION CENTER MINNEAPOLIS, MINNESOTA

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PROFIT. BY TERRY LASH Figure 1 Ethanol Density from Promass 83 vs. Anton Paar

Figure 2 Ethanol Concentration from Promass 83 vs. Karl Fischer

An Endress+Hauser Promass 83F mass flow measuring system was supplied to NCERC with the “special density” calibration option, which optimizes the density measurement so that the flow meter can also be used as a densitometer. With this calibration, if the process fluid changes, the special density calibration compensates for the temperature effect on both meter and fluid.

The instrument manufacturer then also programmed the unit to measure alcohol proof using ATF tables, and the flow meter was programmed to indicate and transmit concentration, density, and temperature.

Validating Method for Proof Measurement NCERC installed the Pro62

mass instrument in a pumped recirculation loop on the plant’s shift tank containing 200 proof alcohol. As the 200 proof alcohol circulated through the instrument, the displayed data indications for density, concentration and temperature were logged.

At the same time, a sample was collected, and the ethanol concentration was measured by Karl Fischer titration and the density was measured using an Anton Paar densitometer.

The laboratory measurements of concentration and density were compared to the Promass values. The temperature of the 200 proof alcohol was varied over time and multiple data sets were collected from the Coriolis instrument, the Karl Fischer titration and Anton Paar labora-

tory density instrument. The alcohol was then diluted with water progressively over time, and the Coriolis meter temperature, concentration and density readings were compared with the laboratory measurements. Data was collected at eight concentrations ranging from 200 to 195 proof (100 percent to 97.5 percent) and a map relating ethanol concentration to temperature and density data was generated.

Analysis In Figure 1, the pilot test showed that the Promass Coriolis meter achieved accurate and repeatable density readings compared to the Anton Parr laboratory instrument, with the original calibration coefficients entered by the instrument manufacturer.

The average offset between the two densities was 0.0004 gm/cc, which is within the Coriolis instrument manufactures specification of 0.0005 gm/cc maximum measuring error for density. This average offset was then used to adjust the density coefficient within the meter to obtain a more accurate reading.

Figure 2 compares the ethanol concentration displayed by the Promass meter to the concentration calculated using Karl Fischer titration, which is the laboratory standard for the industry. The average error was 0.12 percent (v/v), which corresponds to about 0.24 proof. This demonstrates that once properly calibrated, the Promass 83F is capable of determining ethanol proof with acceptable accuracy.

The immediate feedback that the instrument can provide to operations staff should improve overall distillation performance in the typical ethanol plant.

Experiencing 199-Proof Results These tests show that a Coriolis-based mass flow and density instrument equipped with special software has the accuracy and repeatability comparable to established laboratory methods. Therefore, this technology is a reliable solution for on-line proof measurement.

While this instrument will not replace established laboratory methods for determining ethanol proof, it is a valuable supplement to these methods.

This instant on-line measurement will give the producer better information to control their alcohol content in the ethanol, which is especially important in light of tight profit margins. For the plant operations and maintenance staff, it will serve as an excellent troubleshooting tool by providing an earlier indication of process upsets than current industry methods. This technology also has the potential to cut production costs by identifying upsets sooner, thus saving time and money by reducing the amount of rework required to correct an off-spec ethanol stream.

Other applications of this measurement technology can be applied in an ethanol plant: • Monitor the solids level of syrup produced in the evaporators • Monitor the solids level of the corn slurry • Monitor the sodium hydroxide concentration for clean in place fluids. EP Terry Lash is a research engineer with the National Corn to Ethanol Research Center. Reach him at tlash@ethanolresearch.com

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EVENTS CALENDAR

Developing and Commercializing Next Generation Biofuels February 9-11, 2010 Kingsway Hall Hotel London The conference focus will be on utilizing new technologies to deliver increased cost efficiency and greenhouse gas savings of ethanol and other biofuels. Attendees will also examine the prospects for bringing next-generation biofuels to market. www.agra-net.com/portal/marlin/system/render.jsp ?siteid=20000000062&marketingid=20001839302 &MarlinViewType=MARKT_EFFORT

Agricultural Outlook Forum 2010 February 18-19, 2010 Crystal Gateway Marriott Arlington, Virginia The forum, hosted by the USDA, will include session tracks focused on developments in renewable and clean energies, global commerce, climate change, rural communities, conservation, sustainability and food price trends and farm income. www.usda.gov/oce/forum/

Feb

New Energy Finance Summit March 17-19, 2010 InterContinental London Park Lane Hotel London Sessions will focus on clean energy, carbon markets and innovation in the areas of advanced transportation, bioenergy, wind and solar. www.newenergyfinancesummit.com/

Mar

National Ethanol Conference February 15-17, 2010

World Biofuels Markets March 15-17, 2010

Gaylord Palms Resort & Convention Center Orlando, Florida Speakers and sessions will focus on historic opportunities facing the ethanol industry, including climate change, the increase of ethanol’s marketshare and technology practices.

Amsterdam, The Netherlands Topics will include algae fuels, energy crops, policy, indirect land use change and biobased products. An introductory course in transport biofuels will also be available. www.worldbiofuelsmarkets.com/index.html

www.nationalethanolconference.com/

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February 2010

EPM MARKETPLACE Heat Exchanger

Associations/Organizations

Tank Cleaning Equipment

EPPIC Environmental Index 334-277-1364 www.eppicenv.com

Gamajet Cleaning Systems Inc 877-GAMAJET www.gamajet.com

Chemicals

Spraying Systems Co. 630-665-5000

Anti-Microbial

Tank Cleaning Services

Bio-Cide International.Inc 405-329-5556 www.bio-cide.com

Hydro-Klean, Inc. 515-283-0500

Resonant BioSciences, LLC. 866-933-0408 www.puremash.com

www.hydro-klean.com

Construction

Enzymes

Fabrication

CTE Global, Inc. 847-564-5770

www.cte-global.com

Andy J.Egan Co. 616-791-9952

Genencor 585-256-5249

www.genencor.com

VAL-FAB Inc. 877-482-5322

Novozymes 919-494-3101

www.novozymes.com

www.andyegan.com www.valfab.com

Insulation

Water Treatment

Hydro-Klean, Inc. 515-283-0500

Buckman Laboratories, Inc. 901-278-0330 www.buckman.com

Hydro-Blasting

Yeast

Hydro-Klean, Inc. 515-283-0500

Martrex,Inc. 952-933-5000 Ext 18

www.spray.com

www.hydro-klean.com

Petrochem Insulation 707-644-7455 www.petrocheminc.com

Management www.hydro-klean.com

Marcus Construction Company 800-367-3424 www.marcusconstruction.com

Railroad Tracks

www.martrexinc.com

Cleaning Dryer Systems Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

Premium Plant Services, Inc. 888-549-1869 www.premiumplantservices.com

Plate-Frame Ductwork Hydro-Klean, Inc. 515-283-0500

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

www.hydro-klean.com

Railcar Spill Response Emergency Spill Response Hydro-Klean, Inc. 515-283-0500

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

www.hydro-klean.com

Railcars Evaporators Hydro-Klean, Inc. 515-283-0500

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

www.hydro-klean.com

ATEC Steel 620-856-3488

Scrubbers Fans Hydro-Klean, Inc. 515-283-0500

Hydro-Klean, Inc. 515-283-0500

Tanks

www.hydro-klean.com

www.hydro-klean.com

Westmor Industries 320-589-2100

www.atecsteel.com www.westmor.biz

Smoke Stack Filter Media Hydro-Klean, Inc. 515-283-0500

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

www.hydro-klean.com

ETHANOL PRODUCER MAGAZINE

February 2010

65

EPM MARKETPLACE Consulting

Boiler Systems

Fire Suppression

Environmental

Hurst Boiler & Welding Co., Inc. 800-666-6414 www.hurstboiler.com

FLAMEX Inc. 336-299-2933

Aquaterra Environmental Solutions, Inc. 877-913-8200 www.aquaterra-env.com

Control Systems

Fractionation-Corn

ICM, Inc. 877-456-8588

ICM, Inc. 877-456-8588

www.icminc.com

Feasibility Studies Harris Group Inc. 206-494-9422

www.harrisgroup.com

www.icminc.com

Harris Group Inc. 206-494-9422

www.harrisgroup.com

ICM, Inc. 877-456-8588

www.icminc.com

Crown Iron Works 651-639-8900

Conveyors–Drag

ICM, Inc. 877-456-8588

Harris Group Inc. 206-494-9422

www.intersystems.net

Conveyors–Mechanical Superior Industries 320-589-2406

www.harrisgroup.com

Employment Recruiting

www.ustsubaki.com

www.searchpath.com/chicago

Engineering Design/Build

Alaqua Inc.

Evaporators, Crystallizers, Distillation, Columns, Solvent Recovery, Heat-Exchangers, Process Engineering 7004 Boulevard East, Ste.28A Guttenberg, NJ 07093 USA Tel: 201.758.1577 Fax: 201.758.1522 info@Alaquainc.com

www.alaquainc.com

ICM, Inc. 877-456-8588

www.mccormickconstruction.com

Instrumentation

Corn Oil Recovery

Miller Insulation Co., INC 701-297-8813 www.millerinsulation.com

ICM, Inc. 877-456-8588

www.icminc.com

Perten Instruments, Inc. 801-936-8165

Total-Yield Diesel from Distillers 402-640-8925 www.total-yield.com

Loading Equipment

Distillation Equipment

Carbis, Inc. 800-845-2387

SRS Engineering Corpration 951-526-2239 www.srsbiodiesel.com

Dryers-Rotary Drum ICM, Inc. 877-456-8588

www.icminc.com

www.icminc.com

www.carbis.net www.determan.com

ICM, Inc. 877-456-8588

www.icminc.com

Moisture Analyzers Perten Instruments, Inc. 801-936-8165

www.perten.com

Molecular Sieves

MAC Equipment, Inc. 816-891-9300 www.macequipment.com

Fermentors

www.perten.com

Determan Brownie, Inc. 800-835-6074

www.perten.com

Maintenance Software

Dust Control Systems

WINBCO Tank Company 641-683-1855

www.perten.com

Laboratory-Equipment

DDGS Diesel

Equipment & Services Perten Instruments, Inc. 801-936-8165

763-477-4774

Insulator

www.icminc.com

Analytical Instruments

McC, Inc.

MAC Equipment, Inc. 816-891-9300 www.macequipment.com

ICM, Inc. 877-456-8588

Process Engineering Associates, LLC 865-220-8722 www.processengr.com

MOR Technology, LLC 618-522-8324 www.mortechnology.com

Perten Instruments, Inc. 801-936-8165

Dryers-Rotary Steam Tube

Process Design

www.icminc.com

Conveyors–Pneumatic

SearchPath of Chicago 815-261-4403, x100

www.crowniron.com

Grain Handling & Storage

www.superior-ind.com

U.S. Tsubaki 847-459-9500

Project Development

Cereal Process Technologies 217-779-2595 www.cerealprocess.com

Revere Control Systems 800-536-2525 www.reverecontrol.com

Intersystems 800-228-1483

Plant Optimization

flamex@sparkdetection.com

ICM, Inc. 877-456-8588

www.icminc.com

Parts & Services www.winbco.com

ICM, Inc. 877-456-8588

www.icminc.com

Filtration Equipment Fluid Engineering 814-453-5014 66

www.fluideng.com ETHANOL PRODUCER MAGAZINE

February 2010

EPM MARKETPLACE Process Control

Valves

Harris Group Inc. 206-494-9422

www.harrisgroup.com

VFTechnical Services, LLC 423-794-6747 www.vftechserv.com

Research & Development

Check-All Valve Mfg. Co. 515-224-2301

www.checkall.com

Wastewater Treatment Services

Pumps

ADI Systems Inc. 1-506-452-7307

PeopleFlo Manufacturing 847-929-4774 www.peopleflo.com

Hydro-Klean, Inc. 515-283-0500

Valley Equipment Co. Inc. 423-753-3541 www.valleyequipment.com

ICM, Inc. 877-456-8588

www.icminc.com

QA Test Products

UEM, Inc. 561-385-7515

www.uemgroup.com

Perten Instruments, Inc. 801-936-8165

www.perten.com

www.adisystemsinc.com

Dynamometer Testing Roush Industries 734-779-7736

www.roush.com

Transportation Rail

www.hydro-klean.com

Ameritrack RailRoad Contractors, Inc. 765-659-2111 www.ameritrackrailroad.com

Railcar Parts Salco Products, Inc. 630-783-2570 www.salcoproducts.com

Yield Enhancement

Appraisals

Tanks

Natwick Associates Appraisal Services 800-279-4757 www.natwick.com

Due Diligence Harris Group Inc. 206-494-9422

www.harrisgroup.com

Insurance ERI Solutions, Inc. 316-927-4294

erisolutions.com

Mergers & Acquisitions Moglia Advisors 847-884-8282

www.mogliaadvisors.com

Legal Services Attorneys BrownWinick Law Firm 515-242-2400 www.biofuellawyers.com

bs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.c

Finance

om

www.truck-scales.com

www.EdeniQ.com

s.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.c

Weigh-Tec Inc. 1-800-461-4153

ob

om www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-j

EdneiQ, Inc. 310-592-4158

Scales-Truck

www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jobs.com www.ethanol-jo

Marketing Fuel Ethanol CHS Renewable Fuels 651-355-6271

www.chsinc.com

Reach your customers

Miscellaneous Maas Companies 507-424-2640

Thermal Oxidizers Pro-Environmental, Inc. 909-989-3010

www.pro-env.com

ETHANOL PRODUCER MAGAZINE

Your Solution. Advertise Today. www.maascompanies.com

EPM MARKETPLACE

Nelson Ink Promotional Products 218-222-3831 www.nelsonink.com

February 2010

67

EPM MARKETPLACE

WE ARE GROWTH ENERGY. YOU ARE, TOO. WE’RE A GROUP OF LEADING ETHANOL COMPANIES DEDICATED TO FUELING AND FEEDING THE WORLD THROUGH ETHANOL AND AGRICULTURE.

Growth Energymeans meansbusiness. business.

We taken led the oght against food industry’s “food Growth Energy We’ve a forceful stand the on the food industry’s “foodvs. vs.fuel” fuel”smear smear campaign. are set leading the effort raise the regulatory cap on ethanol. is not easy work.

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GrowthEnergy.org 68

ETHANOL PRODUCER MAGAZINE

February 2010