INSIDE: INDUSTRY CLEARS HURDLES, PREPARES FOR NEW ONES JANUARY 2013
Profitability In-house Laboratories Integral to Success Page 30
Data-Driven Production Page 36
Contamination Prevention Page 38 www.ethanolproducer.com
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JANUARY issue 2013 VOL. 19 ISSUE 1
30 QUALITY CONTROL
Measurable Success In-house laboratories can protect profits By Holly Jessen
Labs Look to Vendors and Each Other for Answers By TOM BRYAN
10 The Way I See It
Chin Up and Keep a Stiff Upper Lip By MIKE BRYAN
11 Events Calendar
Keeping Corn Plus in the Sweet Spot Walking in a lab manager’s shoes By Tim Portz
Upcoming Conferences & Trade Shows
12 View From the Hill
The Year That Was
and Will Be By bob dinneen
Expanding Market Access
By TOM BUIS
16 Grassroots Voice
New Year Challenges
By BRIAN JENNINGS
18 Europe Calling
Setting the Example By Rob Vierhout
38 FERMENTATION Ferm Assurance
Hygiene is key to preventing contamination By Susanne Retka Schill
20 Business Matters
Impact Air Permit By Todd Palmer and Anna Wildeman
22 Business Briefs 24 Commodities Report 26 Distilled 44 Marketplace INSIDE: ASSESSING THE CHALLEGES OF THE YEAR AHEAD JANUARY 2013
CORRECTION Giancarlo Drennan’s name was misspelled in a story published in the December issue of EPM. We apologize for the error.
Proﬁtability In-house Laboratories Integral to Success Page 30
A Day in the Lab
Keeping Bacteria in Check Page 38 www.ethanolproducer.com
Ethanol Producer Magazine: (USPS No. 023-974) January 2013, Vol. 19, Issue 1. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.
4 | Ethanol Producer Magazine | JANUARY 2013
ON THE COVER
Sharon Kipp, lab technician, takes a sample at Homeland Energy Solutions LLC. PHOTO: JOHN C. THOMAS, FISHEYE
In the weeks leading up to the completion of this issue, our editors interviewed personnel at multiple U.S. ethanol plant labs, the National Corn-to-Ethanol Research Center and several laband data-focused service companies to deliver on this month’s important lab innovation theme.
LABS LOOK TO VENDORS AND EACH OTHER FOR ANSWERS Tom Bryan, PRESIDENT & EDITOR IN CHIEF email@example.com
Tim Portz, our executive editor, stepped inside the well-equipped laboratory at Corn Plus LLLP, in Winnebago, Minn., where he met lab manager Courtney Trask, the subject of this month’s Q&A. In “Keeping Corn Plus in the Sweet Spot,” on page 35, Trask says monitoring and adjusting the performance of an ethanol plant has become a truly data-driven process. She tells us that vendors such as HPLC software reps often guide lab personnel through routine troubleshooting and data analyses. And she verifies that the U.S. ethanol industry—if Corn Plus is typical—continues to make capital investments in new lab equipment, despite tight margins. In fact, Trask says, her biggest challenge right now is not a lack of new technology, but getting comfortable with all of the new equipment and practices in her laboratory. “Our situation is difficult right now because we have implemented so many new things at the plant in the past few months,” she tells Portz. Trask will, of course, lean on her vendors for support and guidance as she continues to master new gadgets and roll out new procedures in her space. Likewise, service providers like Efficient Green Energy are also helping lab personnel bridle new technology and harness better data. As Holly Jessen reports in her page-30 feature, “Measurable Success,” the Iowa-based company is enabling producers to capture and cleanse data, train personnel and benchmark their lab practices against competing facilities. NCERC’s Sabrina Trupia says successful ethanol plant labs are built around three intersecting components: “performance, understanding and communication.” Each component, especially the latter, must be methodical and unremitting. After all, even the best data integrity practices fall flat when internal communication breaks down. External communication is important, too. This is a competitive industry, yet metered collaboration between ethanol plant labs is tolerated, and even encouraged by some producers. In addition to Green Energy’s laboratory benchmarking program, companies like PhibroChem, through its Ethanol Performance Group, are engaging lab personnel in training programs that include analytical round robins between multiple facilities. It’s clear that, in today’s environment, datadriven performance strategies require lean producers to build support groups that include vendors, service providers and—now, more than ever—each other.
For industry news: www.ethanolproducer.com or Follow Us:
6 | Ethanol Producer Magazine | JANUARY 2013
EDITORIAL PRESIDENT & EDITOR IN CHIEF Tom Bryan firstname.lastname@example.org
Vice President of Content & EXECUTIVE EDITOR Tim Portz email@example.com
11 2013 International Biomass Conference & Expo
3 Hydro-Klean LLC
48 2013 International Fuel Ethanol Workshop & Expo
5 ICM, Inc.
CONTRIBUTIONS EDITOR Susanne Retka Schill firstname.lastname@example.org
FEATURES EDITOR Holly Jessen email@example.com
NEWS EDITOR Erin Voegele firstname.lastname@example.org
47 2013 National Ethanol Conference
Jan Tellmann email@example.com
ART DIRECTOR Jaci Satterlund firstname.lastname@example.org
GRAPHIC DESIGNER Lindsey Noble email@example.com
45 BBI Consulting Services
42 INTL FCStone Inc.
13 BetaTec Hop Products
19 Lallemand Biofuels & Distilled Spirits
29 Methes Energies
43 DuPont FermaSure
34 Nalco Company
35 DuPont Industrial Biosciences
15 Phibro Ethanol Performance Group
17 DuPont Pioneer
21 POET - DSM Advanced Biofuels
27 Fagen Inc.
46 Syngenta: Enogen
41 Gamajet Cleaning Systems, Inc.
22 Tower Performance, Inc.
PUBLISHING CHAIRMAN Mike Bryan firstname.lastname@example.org
CEO Joe Bryan email@example.com
SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor firstname.lastname@example.org
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ACCOUNT MANAGERS Marty Steen firstname.lastname@example.org Bob Brown email@example.com Andrea Anderson firstname.lastname@example.org
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EDITORIAL BOARD Mike Jerke, Chippewa Valley Ethanol Co. LLLP Jeremy Wilhelm, Cilion Inc. Mick Henderson, Commonwealth Agri-Energy LLC Keith Kor, Pinal Energy LLC Walter Wendland, Golden Grain Energy LLC Neal Jakel Illinois River Energy LLC Bert Farrish Lifeline Foods LLC Eric Mosebey Lincolnland Agri-Energy LLC Steve Roe Little Sioux Corn Processors LP
Customer Service Please call 1-866-746-8385 or email us at firstname.lastname@example.org. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or email@example.com. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or firstname.lastname@example.org. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to email@example.com. Please include your name, address and phone number. Letters may be edited for clarity and/ or space.
Please recycle this magazine and remove inserts or samples before recycling
2 Growth Energy
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COPYRIGHT ÂŠ 2012 by BBI International TM
JANUARY 2013 | Ethanol Producer Magazine | 7
Power P ow your old There’s more to ethanol etha plant The New Ethanol with New Ethanol with than ethanol. production. prod
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the way i see it
Chin Up and Keep a Stiff Upper Lip By Mike Bryan
First, let me say Happy New Year! I do hope that the coming year for each of you is very rewarding, both on a personal level and a business level.
The coming year will, of course, bring lots of new challenges for the ethanol industry, but, as we have in the past, I suspect we will prevail. I’m not sure if 2012 was our toughest year ever, but it has to rank right up there in the top two or three. But with the U.S. EPA’s decision not to grant a waiver to the renewable fuels standard (RFS), it at least ended on a bit of a high note. So, we press on, moving into the coming year with some trepidation, but at the same time, confident that we remain on the right side of the issue. There will no doubt be new challenges that will test our mettle, along with new opportunities to demonstrate the viability and importance of renewable energy. Hopefully, Congress is a bit more coordinated and supportive in 2013 than it was in 2012 on the issue of ethanol and renewable fuels in general. Of
10 | Ethanol Producer Magazine | JANUARY 2013
course, only time will tell whether the Obama administration will accomplish more with a still-divided Congress than in his first term or face the same recalcitrant challenges. As with all forms of energy, whether fossil or renewable, public policy is a crucial element in its success or failure. The elimination of the oil subsidies would be a good first step, to begin the process of leveling the playing field. We speak of high corn prices like it’s a bad thing. One of the original premises of the ethanol industry was to provide a mechanism that would support commodity prices while providing a cleaner and safer environment. That certainly has been accomplished. Unfortunately, anyone who knows agriculture, knows that the current high corn price rarely makes its way to the average corn farmer—a good price on the farm, perhaps, but $7.50 a bushel, likely not. So these high corn prices that directly affect the profitability of the ethanol industry, generally are not finding their way to the growers. Who actually gets the $7.50 per bushel? I’ll leave that for another column. So as we move into 2013 with corn prices close to an all-time high and oil prices at their lowest level in some time, it looks as though we are still in for a few months of tough sledding. Plants that have a high debt load are generally the first to fail or temporarily shut down, those with lower debt and cash reserves can ride out the market fluctuations.
But isn’t that true for most industries? When times are tough, low debt and cash on hand rule the day. Often, it’s a matter of timing more than bad financial planning. Timing in terms of when the plant was built, how quickly the debt could be paid down, whether the plant was under-capitalized and if there were unanticipated shifts in markets. So, as they say in merry old England, “chin up and keep a stiff upper lip.” 2013 will be interesting ride. That’s the way I see it.
Author: Mike Bryan Chairman, BBI International firstname.lastname@example.org
EVENTS CALENDAR National Ethanol Conference February 5 -7, 2013 Wynn Las Vegas Las Vegas, Nevada
Since 1996, the Renewable Fuel Association’s National Ethanol Conference has been recognized as the preeminent conference for delivering accurate, timely information on marketing, legislative and regulatory issues facing the ethanol industry. With numerous networking opportunities, more business meetings are conducted and contacts made at this conference than any other ethanol conference. 866-497-1232 | www..nationalethanolconference.com
International Biomass Conference & Expo April 8 -10, 2013 Minneapolis Convention Center Minneapolis, Minnesota
Building on Innovation Organized by BBI International and coproduced by Biomass Magazine, the International Biomass Conference & Expo program will include 30-plus panels and more than 100 speakers, including 90 technical presentations on topics ranging from anaerobic digestion and gasification to pyrolysis and combined heat and power. This dynamic event unites industry professionals from all sectors of the world’s interconnected biomass utilization industries—biobased power, thermal energy, fuels and chemicals. 866-746-8385 | www.biomassconference.com
International Fuel Ethanol Workshop & Expo June 10 -13, 2013 America’s Center St. Louis, Missouri
APRIL 8-10, 2013
Minneapolis, MN www.biomassconference.com
Make Plans to Attend REGISTER NOW Interested in Speaking? Presentation ideas and poster abstracts will be accepted through December 14, 2012. Submit in one of five tracks: Track 1: Pellets & Densified Biomass Track 2: Industrial & Commercial Thermal Energy Track 3: Biomass Power Track 4: Biogas & Landfill Gas Track 5: Advanced Biofuels & Biobased Chemicals
"The quality of business relationships built here are second to none." - Stephen S. Reidell, Eagle Innovations
Where Producers Meet Now in its 29th year, the FEW provides the global ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. The FEW is the largest, longest-running ethanol conference in the world—and the only event powered by Ethanol Producer Magazine. Visit our website to reserve premium booth space now. 866-746-8385 | www.fuelethanolworkshop.com
Algae Biomass Summit September 30 - October 3, 2013 Hilton Orlando Orlando, Florida
This dynamic event unites professionals from all sectors of the world’s algae utilization industry including, but not limited to, financing, algal ecology, genetic systems, carbon partitioning, engineering and analysis, biofuels, animal feeds, fertilizers, bioplastics, supplements and foods. Organized by the Algae Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, technology providers, equipment manufacturers, project developers, investors and policy makers. The event is the world’s premier educational and networking junction for the algae industry. 866-746-8385 | www.algaebiomasssummit.org
866-746-8385 | email@example.com |
#IBCE13 Follow Us: twitter.com/biomassmagazine JANUARY 2013 | Ethanol Producer Magazine | 11
view from the hill
The Year That Was and Will Be By Bob Dinneen
What a year 2012 has been. We’ve completed the hard work necessary to introduce E15 as a new fuel and now the rollout has begun. E15 is now for sale in Iowa,
RFS Waiver Battle
RFS Legislative Battle
E15 Test Programs
E15 at the Pump
Kansas and Nebraska. We’ve also endured a historic drought that caused economic pain and emotional discomfort for farmers in the Midwest, livestock and poultry producers nationwide, and a 15 percent reduction in ethanol production resulting in a handful of plants shuttering until financial conditions improve. As if that weren’t enough, the fierce battle to protect the renewable fuel standard (RFS) is already underway. Fortunately, the facts proved once and for all that the RFS is working and flexible, thus no waivers were granted by the U.S. EPA this year. 2013 may have a rocky start for the industry, but there is also good news on the horizon, especially as we watch cellulosic companies move from the promising talk of the future to meaningful production of ethanol at market scale. As important as these innovations are and as serious as the challenges facing us are, it is always good to take time and reflect on the year that was and will be, with a certain amount of levity, of course.
RFA Chairman Woodside
RFA Chairman McKinstray
13.2 BGY RFS Ethanol Demand
13.8 BGY RFS Ethanol Demand
RFA Misfueling Mitigation Plan (MMP)
API RFS “Revisions”
API RFS “Repeal”
Commercial-Scale Cellulose Production
EU Countervailing Duty Case
EU Food Crop Biofuel Limitation
Energy Cmte Chairman Bingaman
Energy Cmte Chairman Wyden
Four-Gallon Minimum Purchase
E10 Dedicated Hose
Carbon Accounting Debate
Carbon Tax Talk
UNICA’s Marcos Jank
UNICA’s Elizabeth Farina
E15 Auto Concerns
2013 E15 Auto Warranty Coverage
API RFS Lawsuits
More API RFS Lawsuits
South Dakota’s Suboctane Gas
Higher-Octane Fuel Nationwide
Big Oil Funding Campaigns
As is tradition, I give you 2013’s In and Out list:
Fuels America Campaign
12 | Ethanol Producer Magazine | JANUARY 2013
Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835
Put BetaTecÂŽ natural hop extracts to work in your fermentation process to replace antibiotics and enhance yeast propagation. IsoStabÂŽ is the natural way to effectively control gram-positive bacteria while eliminating antibiotics and harsh chemicals. Plus, antibiotic-free DDGS adds value to your co-products. VitaHopÂŽ Silver yeast nutrient enhances yeast performance and vitality, inducing faster fermentations and larger yields. Combined with BetaTecÂŽ fermentation expertise and training, these technologies will significantly increase your plantâ€™s efficiency. BetaTecÂŽâ€Śthe natural hop to higher profits. For more information specific to fuel ethanol producers, visit www.bthp.info. 4HJ(Y[O\Y)S]K:\P[L >HZOPUN[VU+* ;!-! www.betatechopproducts.com
Expanding Market Access By Tom Buis
Happy New Year to all of you in the ethanol industry, who, in my opinion, are part of one of the greatest success stories in the history of America! While this past year has been one of the most challenging we have ever faced, and we certainly understand we will face more challenges in the new year, we have won every hurdle that Big Oil and Big Food have thrown at us, and we will continue that success this year. We won numerous legal battles against Big Oil and Big Food in 2012—we won the battle over the waiver of the renewable fuel standard (RFS) and we stopped them on the legislative front from dismantling the RFS. In 2013, we will see some of the greatest challenges and opportunities in history for our industry—and we are prepared for both. Big Oil and Big Food will again make an all-out assault on the RFS, we will continue to face unfair trade practices from Brazil, barriers to open trade to the European Union, a bizarre regulatory scheme in California, and every conceivable hurdle to get more market access for E15 and higher blends. And we will succeed.
14 | Ethanol Producer Magazine | JANUARY 2013
Our biggest challenge and opportunity in the New Year is market access. One of the reasons Growth Energy was formed was to anticipate and respond to what our industry needs to succeed. We recognized that one of the biggest obstacles for our industry was the impending blend wall. In March 2009, we filed the waiver to increase the ethanol blend up to 15 percent, recognizing that fuel consumption in America was declining and that our industry had the capacity to produce more than enough to meet the 10 percent regulatory cap. While our opponents have erected every regulatory and legal hurdle imaginary to prevent higher blends, we expect to overcome these hurdles this year. Our big focus will be working with retailers to get E15 and flex-fuel pumps into more retail establishments nationwide. We will continue to work with pump manufacturers to offer minimal cost retrofit kits for retailers. And, we will pursue regulatory changes to address the Reid vapor pressure problem, the minimum purchase requirement obstacle and all the other regulatory hurdles impeding the adoption of higher blends. This year we will have a new Congress and an Obama administration supportive of renewable fuels, creating an opportunity to further promote our industry. We cannot take things for granted, however, we need every one of you to engage with your members of Congress to ensure our industry’s future. Everyone recognizes what a tough year 2012 was. Our industry is a winner, and winners succeed, and we will succeed
because we have the facts on our side. Whether it’s food versus fuel, environmental benefits or savings to consumers, we are a great benefit to all Americans. But we cannot sit back and hope for success, we must stand up and fight for our industry. At Growth Energy, we will be leading the fight for our industry and urge you to do the same. American ethanol is a win for America. We have reduced our dependence on foreign oil. We are now 10 percent of America’s fuel supply. We have created more than 400,000 jobs in the U.S.—jobs that cannot be outsourced overseas. We generate more than $50 billion in gross domestic product. We have improved our nation’s air quality and our environment, revitalized our rural economy, and saved consumers money at the pump. Because of you, our industry is one of the greatest American success stories. Let’s continue to spread the message. On behalf of everyone at Growth Energy, we wish you a Happy New Year! Author: Tom Buis CEO, Growth Energy 202-545-4000 firstname.lastname@example.org
Protect your productivity.
You know that bacterial contamination affects yield. A recent study shows that infections can decrease yield up to 27%*. LACTROL® from Phibro Ethanol Performance Group controls troublesome bugs. It keeps your plant running better and longer between CIP treatments. LACTROL is the proven solution to maximize yields and productivity. It keeps input costs down by helping you squeeze more ethanol out of every kernel of corn. No wonder LACTROL is used in more ethanol plants than any other antimicrobial. ® Prevent, protect, and produce. Take microbial control seriously; make sure your plant knows about LACTROL . Contact your Phibro Ethanol Performance Group Sales Specialist at 800-223-0434.
*5-year study by USDA-ARS National Center for Agricultural Research, Peoria, IL © 2010, Phibro Animal Health Corporation. LACTROL is a registered trademark of Phibro Animal Health Corporation and its affiliates.
New Year Challenges By Brian Jennings
The new year rings in a number of daunting challenges for U.S. ethanol producers. Gasoline use continues to fall off and the blend wall remains at a standstill, so producers are selling into a market that is on the decline and artificially limits ethanol use. Otherwise, uneconomical imports from Brazil are flooding the U.S. due to biased trade policy and bizarre indirect land use change scoring by the U.S. EPA, adding to ethanol’s supply/ demand imbalance. Corn supplies are tight and margins are even tighter. If that weren’t enough, the battle over the renewable fuel standard (RFS) continues. Against this backdrop, producermembers of the American Coalition for Ethanol recently met to help determine the action plan that our grassroots advocacy needs to pursue in 2013. Among the many priorities identified by these members, a few rise to the top. Market access is clearly our industry’s top priority. ACE provides unmatched expertise in helping petroleum marketers understand the benefits of ethanol blends and blender pumps, so we will focus on expanding ethanol use by continuing to collaborate with petroleum marketers and automakers this year. E15 is the most important opportunity to expand ethanol use in the short-term. ACE will prioritize educating retailers about the benefits and
16 | Ethanol Producer Magazine | JANUARY 2013
availability of E15 and launch some new and creative ways to overcome the hurdles standing in the way of more E15 use. We are also working with automakers to identify the higher ethanol blends that will provide the valuable octane needed for future engine technologies. Developing the market for E15 in the short-term and higher ethanol and octane opportunities in the long-run depend upon the market access created by the RFS. That’s why another priority for ACE in 2013 will be to win the RFS battle to secure a place in the market for higher ethanol blends. It would be nice if free market principles cleared the path to more ethanol use. Let’s recall, however, what a truly free market does: it rewards low-cost alternatives, it promotes innovation, and a free market fosters competition. Despite the fact that ethanol is the low-cost alternative and ethanol producers are innovating and becoming more efficient, left to their own devices, oil companies—our customers— wouldn’t use as much ethanol as called for under the RFS because they control the market. An old saying about Capitol Hill applies to our industry’s relationship with oil companies: there’s no such thing as a permanent victory or permanent defeat, just permanent battles. Yes, oil companies are our customers. But make no mistake, in D.C., they are our fierce competitors. Winning the EPA decision over whether the RFS should be waived was anticlimactic because we knew the facts and law were on our side. But the battle continues as Big Oil and other opponents simply turn the page in their game plan to now seek repeal of the RFS in Congress. Given all the tax benefits and artificial market advantages enjoyed by
oil companies, the RFS is the only tool we have to try and level the playing field. As the first group to advocate for an RFS, ACE will be aggressive in drawing attention to its success. Our opponents will claim to Congress the RFS is broken and in need of “repair” (i.e. repeal). Our job will be to explain that the RFS is working and delivering important benefits to America. ACE will also continue to be active in mobilizing strong grassroots support for ethanol, taking steps to activate members to stand up and promote the benefits of ethanol in their communities, states and with federal policymakers. Several years ago we initiated the first ethanol industry fly-in to the nation’s capital; this grassroots event will be held again March 13 and 14. The facts are on our side, but if our opponents are louder and more visible in the halls of Congress, the alternative reality they are trying to create about ethanol becomes fact. We are also supporting the Fuels America campaign designed to go on offense and reframe the public conversation about ethanol, an effort that is long overdue. Our forward-looking action plan to expand market access alongside automakers, retailers and policymakers will only succeed with your support and involvement. That’s why it is critical to remain engaged. Join us in D.C. for the ACE fly-in. Take action in your communities. Be part of our grassroots team and take an active role in ACE’s mission of making American ethanol the consumer fuel of choice.
Author: Brian Jennings Executive Vice President, American Coalition for Ethanol 605-334-3381 email@example.com
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Setting the Example By Robert Vierhout
The decision by the U.S. EPA to deny a waiver on the renewable fuel standard (RFS) was the right decision. With this statement I will
probably only echo what many colleagues in or related to the ethanol sector have said already. Clearly, the decision is good news for the American ethanol sector, but it should also be important for those who design policy and adopt laws at the other side of the pond in Europe. The EPA decision gave at least two clear messages to those who favored the waiver and to the rest of the world: First of all, the food/fuel issue was greatly exaggerated, and secondly, the RFS has an in-built flexibility that makes a waiver on the mandate unnecessary. The EPA officials were able to distinguish fact from fiction when they made their assessment on the impact of ethanol production on commodity prices, the food and the feed market. Hopefully, European regulators will take note of what has happened. If they are intellectually honest, they should acknowledge that if the U.S. biofuel policy has no real negative impact on the food/feed market, then surely the European policy cannot have any impact at all. Compared to the U.S. volumes, the European volumes are simply too small to have any significant impact. Even the estimated volumes for 2020 are small,
18 | Ethanol Producer Magazine | JANUARY 2013
comparable in size with today’s ethanol production in the U.S. Unfortunately, EU regulators seem to be under the spell of Big Food and the self-righteousness NGOs no one seems to question. I have always wondered why there is this anxiety in the EU around food. Europe has become the biggest food importer in the world since it reformed the European Common Agricultural Policy. This reform was partly the result of international trade agreements. Land the size of Germany (35 million hectares, or 86 million acres) is needed outside Europe to feed Europeans. The result is that Europe has taken arable land out of production year-onyear and we have created a huge protein deficit. It is not that we couldn’t produce these proteins ourselves, but we cannot do it competitively with soymeal. As the EU common agricultural policy no longer allows production support for farmers, we have no other option but to import protein, importing 35 million metric tons of soymeal annually to feed animals. We reduced arable land use in Europe for another reason. In 2006, under pressure of a World Trade Organization ruling, Europe reduced its sugar production by 6 million tons, equal to 700,000 hectares. A total of 83 sugar refineries had to be closed. Europe was restricted in its sugar exports and mainly Brazil is benefiting from this situation. This 700,000 hectares can be used for growing wheat or corn for ethanol production. It would not impact on land outside the EU, nor commodities for food use. According to the Food and Agriculture Organization of the United Nations, the EU
is taking 500,000 hectares of arable land out of production each year. Yet, it seems that this is not enough; another 7 million hectares should be taken out of production to boost green farming. At least that is what the European Commission proposed as part of another reform of Europe’s agricultural policy. All in all, Europe seems to have too much land. In any case, there certainly seems to be enough land to produce biofuels and at the same time reduce the protein deficit via distillers grains. These land facts, plus the EPA decision, should have an impact on European politicians who are gifted with common sense thinking. The EPA has set a clear example and the EU should follow. In any case, Europe’s plan to limit conventional biofuel, and even prevent its production beyond 2020, will not change America’s view on its biofuel policy. America’s ethanol is needed to reduce America’s addiction to oil and to become less dependent on the Middle East—considerations Europe doesn’t yet care about.
Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org
Co-location Plans Impact Air Permit By Todd Palmer and Anna Wildeman
Given the state of the economy and the high price of corn, many ethanol producers are exploring cost-reduction strategies, including partnering and co-locating with innovative noncorn feedstock producers and grain storage facilities. These strategies may create excellent opportunities for consolidation and new growth, however, they may also have significant permitting implications pursuant to the federal Clean Air Act and stateimplemented air permit programs. For stationary sources that emit pollutants above certain thresholds, including most ethanol production facilities, the CAA requires permits be issued prior to construction and operation. Such permits are typically issued to an individual facility owner or operator and dictate very specific operational, pollution control and recordkeeping requirements. In the CAA, if certain factual criteria are met, two different stationary sources may be considered a single stationary source and regulated as such, requiring each to account for the others’ emissions, construction projects, modifications and compliance determinations. The test for determining if two facilities should be considered a single stationary source is well-defined in federal and state-delegated statutes and rules. For two facilities to be considered a single stationary source, they must: 1) be on contiguous or adjacent property, 2) belong to a single major industrial grouping, and 3) be under common control by the same entity. (CAA 20 | Ethanol Producer Magazine | JANUARY 2013
40 C.F.R. § 52.21(b)(6). In other words, two facilities must satisfy all three criteria before an agency can regulate them as a single stationary source. The first criteria is not always a straightforward analysis. If two facilities are physically located on contiguous or adjacent properties, then this criteria is satisfied. U.S. EPA guidance has broadened this concept, however, such that two facilities that are physically separated by several miles can nonetheless be considered a single source, if the two are functionally related. Courts have added uncertainty by challenging EPA on this broadened interpretation. Therefore, a source may want to consult with an attorney if two projects are to be separated by less than 20 miles. The second criteria, belonging to a single major industrial grouping, may appear straightforward, but as with most elements of the CAA, this analysis is complicated by EPA guidance. The Standard Industrial Classification code system classifies facilities to determine applicable federal and state regulatory programs. There are 10 divisions of SIC codes, each representing an industry sector, and within each division are multiple subsets called “Major Groups.” (See www. osha.gov/pls/imis/sic_manual.html for more information on the SIC code system.) A plain reading of the second criteria indicates that if two facilities operate under the same SIC code, the second criteria is satisfied; and if under different SIC codes, it is not. EPA has issued guidance, however, suggesting that the regulator can completely disregard the SIC codes, even if different, and require an
additional “support facility” analysis based on various criteria developed by EPA. Importantly, the “support facility” analysis and criteria have never been promulgated as a rule by EPA; rather, the concept is discussed in a preamble that has never been promulgated as a rule. The third criteria, common control, requires a more fact-intensive evaluation. To determine if two facilities would be considered under common control, EPA generally relies upon the Securities and Exchange Commission definition, which is “the possession, direct or indirect, of the power to direct or cause the direction of management and polices of a person, whether through the ownership or voting shares, by contract, or otherwise.” This criteria has been the subject of numerous administrative interpretations and judicial decisions, resulting in significant case precedent and EPA guidance. Because this criteria is highly fact-specific, facilities must carefully consider available guidance and should consult with an attorney prior to determining whether two facilities satisfy this criteria. In summary, ethanol producers considering new partnerships and colocations must be aware of potential air permitting implications, and resulting operational and management complications that can arise.
Authors: Todd Palmer Partner, Michael Best & Friedrich 608-283-4432 firstname.lastname@example.org
Anna Wildeman Associate, Michael Best & Friedrich 608-283-0109 email@example.com
People, Partnerships & Deals
RSB Services Foundation, the implementing entity of the Roundtable on Sustainable Biofuels, which has developed a Global Sustainability Standard and Certification System for Slade has worked as biofuel production, a scientist and held has added John Slade sales positions in North America, Asia, India and as regional director Australia. for business development in North America. Slade has nearly 20 years of experience in the biofuels industry in North America and Asia. He has spent most of his career in the enzyme business. Prior to joining the RSB, Slade served as a strategic consultant for DSM NV, and spent 17 years at Novozymes. He has also held positions at Cargill Inc. and currently holds two biotechnology application patents. Archer Daniels Midland Co. has named Gary Towne as vice president of ADM Corn Processing. Towne previously served as chairman of the management board of Alfred C. Towne joined ADM in 1997 and most Toepfer Internarecently led the ACTI tional G.m.b.H., a organization. global grain merchandising company that is 80 percent owned by ADM. He also previously served as ADM’s manager of Global Risk and Ethanol. In addition, ADM has named Domingo Lastra as chairman of the management board of ACTI. He previously served as president of ADM South America and as ADM’s vice president of Business Growth.
22 | Ethanol Producer Magazine | JANUARY 2013
Highwater Ethanol LLC has added Luke Schneider as its chief financial officer. Prior to joining Highwater Ethanol, Schneider served as chief financial officer for Heron Lake BioEnergy LLC., where he also held a variety of other positions, including senior accountant and staff accountant. The appointment became effective Dec. 3, and coincided with the resignation of Brian Kletscher from the position of interim chief financial officer. Kletscher will continue as the company’s CEO. Platts, a division of the McGraw-Hill Companies Inc., has completed its acquisition of Kingsman SA, a privately held, Switzerland-based provider of price information and analytics for the global sugar and biofuels markets. The acquisition will expand Platts’ capabilities in biofuels, provide an entry into the agriculture markets and add skills in fundamental market analysis. Kingsman offers a range of daily, weekly and monthly reports covering ethanol, biodiesel and sugar. As a unit of Platts’ new agricultural group, Kingsman will continue to offer its existing product portfolio under the Kingsman brand led by its founder, Jonathan Kingsman. Industrial enzyme producer Novozymes and cellulosic biofuel company Beta Renewables, part of Gruppo Mossi & Ghisolfi, have announced an agreement to jointly market, demonstrate and guarantee cellulosic biofuel solutions. As part of the agreement, Novozymes will acquire a 10 percent share in Beta Renewables, paying approximately $115 million for the equity, marketing fees, other intellectual property rights and milestone payments. The two companies will offer customers looking to produce biofuels from agricultural residues, energy crops and other cellulosic feedstocks a combination of Novozymes Cellic enzymes and Beta Renewables’ Proesa engineering and production technology.
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Evogene Ltd., a developer of improved plant traits for the food, feed and biofuel industries, has announced the launch of its Phenomix platform, which utilizes advanced proprietary technologies for the collection, storage and integrated analysis of vast amounts of phenotypic data directly from the field. Through the use of Phenomix, Evogene researchers can evaluate crop behavior in environments closely resembling growth conditions existing in commercial agriculture. The two key data types utilized by Evogene’s infrastructure for improving plant traits are phenotypic and phenotypic. Phenomix provides a direct field-to-computer research communication channel that constantly streams physiological, structural and environmental data inputs from the field. The platform was successfully validated in an 18 acre field trial of various wheat varieties. Atlas Commodity Markets has announced the promotion of Bob Shults to president of Atlas Commodity Holdings. Shults is a cofounder of the firm, and has been responsible for daily operations and development of its business since July 2006. In his new role, Shults will ensure strategic focus on new opportunities and manage the changing regulatory environment. Prior to founding Atlas, Shults served as managing direct of commercial services and a member of the executive management committee for APX Inc. He also served on the board of directors of the Environmental Markets Association. He has more than two decades of experience in the energy sector in trading, origination, risk management, technology, operations, accounting, regulatory, strategy, project management, and project development.
Green Plains Renewable Energy Inc. has entered into an asset purchase agreement to sell 12 grain elevators located in northwestern Iowa and western Tennessee to the Andersons Inc. The sale involves approximately 32.6 million bushels, or 83 percent, of its agribusiness storage capacity and all of its agronomy and retail petroleum operations. The estimated sales price for the facilities and certain related working capital is $133.1 million, including the assumption at closing of term debt of approximately $28.3 million. RC Fuels has announced the addition of Rex Roehl as its business development director. In his new position, Roehl will further develop the company’s growing portfolio of national and regional accounts for its Rich Yeast product portfolio. Prior to joining RC Fuels, Roehl served in business development and asset management roles at Indeck Energy Services. He has also served on the boards of several ethanol plants for Indeck, including Big River Resources and Highwater Ethanol. RC Fuels’ Rich Yeast is a proprietary product designed as a drop-in replacement for conventional yeast for fermentation that reduces the need for preprocess enzymes, reducing production costs for a typical plant. The U.S. Grains Council has announced the official approval of the Syngenta corn variety MIR 162 Agrisure Vipterra in the EU, opening the door for exports of U.S. distillers dried grains with solubles. The decision came after years of industry leadership and efforts, especially those partners of the USGC in the EU, including COCERAL, FEFAC and the Irish Feed Millers Association.
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JANUARY 2013 | Ethanol Producer Magazine | 23
commodities Natural Gas Report
2012 saw record low prices, increased demand Nov. 26â€”Two notable developments emerge, looking back at the year just closed. First, natural gas prices hit a 13-year low in the spring of 2012 with NYMEX prices under $2 per MMBtu. The price collapse was driven by a combination of record-high natural gas production volumes and anemic demand due to soft weather-related demand over the winter and continued lagging industrial demand. As the accompanying chart shows, the industry exited winter with storage inventory levels drastically higher than fiveyear average levels, fueling concerns that existing production would have to be curtailed by late summer if storage facilities filled and there was no place for natural gas production to go. This potential outcome is shown by the broken black line that assumed inventory builds would follow historic patterns. This
fear pushed prices down close to variable operating cost levels in anticipation of stranded supply. The second development is tied to the first. With low natural gas prices, demand was stimulated. Both industrial users and electric generators that had burned coal as a primary fuel source for years found that natural gas was now cheaper. As industrials and electric utilities switched to natural gas, demand picked up significantly. The chart shows that post-spring storage inventories built at a much slower rate than the five-year average fill rate due to higher de-
By Casey Whelan
mand. A supply crisis was avoided and natural gas prices rose during most of the summer season. Interestingly, natural gas prices are now roughly double the level experienced last spring.
Corn market vulnerable to South American developments Nov. 26â€”The corn market is trying to balance this yearâ€™s short supply with potentially big plantings next spring. Corn demand could be impacted by higher prices as the rationing began in earnest early this past summer. For example, corn exports sales this marketing year have been 470 million bushels compared to 860 million bushels last year at this time, with the USDA projecting export demand at 1.150 billion (bln) bushels. As a result, will the current corn carry-out of 647 million bushels increase as the marketing year continues? Overall the USDA has ethanol corn consumption at 4.50 bln bushels. Ethanol production in this corn marketing year can justify the current rate. Livestock feeding leaves corn demand at 4.15 bln bushels. Therefore, with total demand at 11.167 bln bushels, and a supply of 11.814 bln bushels, the U.S. corn carry is projected today at 647 million bushels.
BY JASON SAGEBIEL
Now with world carry-out sitting just Traders will be keeping an eye on the U.S. under 119 million metric tons compared and global economy while evaluating the to 132 mmt last year, one must understand potential wheat crop in the hard red winter the potential impact of Argentina and Bra- wheat areas. zil weather. Any production concerns will leave this market vulnerable to sharp US Corn Exports (million bushel) Source: USDA and violent price 2600 swings. The tight 2400 world soybean situation can easily im2200 pact corn direction 2000 during the Southern Hemisphere grow1800 ing season. 1600 In addition to the concerns above, 1400 U.S. producers have 1200 been slow to move corn into the pipe1000 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 line after harvest.
24 | Ethanol Producer Magazine | JANUARY 2013
Regional Ethanol Prices Front Month Futures (AC) $2.392
$2.891 SOURCE: DTN
Regional Gasoline Prices
DDGS supplies adequate on weak demand BY SEAN BRODERICK Nov. 26—Just before Thanksgiving, DDGS prices had dropped from the previous month. Export demand, particularly from the container market in Chicago, was down significantly, mostly due to DDGS prices being well above the price of delivered corn. As the weather gets colder and more cattle go into the feedlot, we normally start to see domestic demand start to pick up this time of year, which we are starting to see now. Feeding margins are mildly positive, a contrast to ethanol margins, which are negative to break-even. With most plants running at full production, it does not appear as though DDGS supply will be compressed. Looking ahead, several factors will af-
fect DDGS prices, corn supply being foremost. Water levels on the Mississippi that are near historic lows are likely to impact Gulf exports. Asian demand, especially from China, needs to pick up from what it is now. We are keeping our eye on their new mandate requiring U.S. ethanol plants to be registered, which has been an arduous process. South American shipment issues will need to improve, or we will be shipping more out of the U.S. Gulf, even if it is higher-priced, because we actually are able to do it efficiently. Overall, though, the market has, and will continue to be, dictated by the overall demand for export containers.
Front Month Futures Price (RBOB) $2.744
$3.216 SOURCE: DTN
DDGS Prices ($/ton) location
JAN 2012 195
223 SOURCE: CHS Inc.
Corn Futures Prices Date
(Mar. Futures, $/bushel)
NOV 26, 2012
OCT 26, 2012
NOV 26, 2011
5.90 SOURCE: FCStone
Cash Sorghum Prices ($/bushel) LOCATION
Ethanol supplies move in wide ranges BY RICK KMENT
Nov. 26—The impact of Hurricane Sandy and winter storms in the Northeast created some wild and unexpected reactions in the ethanol market. The challenge of returning to normal for many in New York and surrounding states caused a swift and strong decrease in ethanol inventory levels through the first half of November. This also started a yo-yo effect through the market, creating additional build-up in overall supplies just before the Thanksgiving holiday, with total ethanol stocks 8.5 percent higher than last year. This could add challenges in the ethanol market through the first half of 2013 when demand for gasoline and ethanol starts out extremely sluggish across the country. The inability to significantly reduce inventory levels on a consistent
basis, even with total ethanol production trailing 2011 levels, may create additional long-term pressure on the industry and keep overall plant margins extremely thin, if positive at all. The corn market softened after harvest and it appears nearby prices will remain comfortable in a narrow-to-moderate range between $7.20 and $7.50 per bushel. This will likely keep ethanol plant margins either in the red or extremely narrow for the foreseeable future, and may continue to limit overall production levels. Unless a significant shift is seen before the end of the year, the industry is expected to carry large inventory levels and steady production into 2013. This may create the same concern over an “ethanol glut” that cast a shadow over the first half of 2012.
NOV 21, 2012
OCT 19, 2012
NOV 28, 2011
SOURCE: Sorghum Synergies
Natural Gas Prices
Nov 26, 2012
NOV 1, 2012
DEC 1, 2011
SOURCE: U.S. Energy Services Inc.
U.S. Ethanol Production
SOURCE: U.S. Energy Information Administration
JANUARY 2013 | Ethanol Producer Magazine | 25
distilled The global energy map is changing
Ethanol News & Trends
Global Renewable Energy Subsidies $1200 billion
A new report pub$150 lished by the International Energy Agency predicts $2600 billion $100 drastic changes in the world energy market. The report, $50 titled â€œWorld Energy Out$960 billion look 2012,â€? indicates that 2011 2015 2020 2025 2030 2035 global energy demand will Biofuels *Data sourced from Electricity increase by more than oneInternational Energy Agency 2011-2035 2012-2035 Existing capacity third by 2035, with China, India and the Middle East global bioenergy resources are more than sufficient accounting for 60 percent of the increase. The report also noted that the U.S. to meet the worldâ€™s projected biofuel and biomass is on track to become the worldâ€™s largest oil produc- supply without competing with food production. Energy-related CO2 emissions are also expecter in the world, becoming a net exporter by 2030. ed to increase, from 31.2 gigatonnes in 2011 to 37 Regarding renewable energy, the IEA says that gigatonnes in 2035. In response to the report, the consumption of biofuels and biomass is expected Global Renewable Fuels Alliance pointed out that to increase four-fold, with increasing volumes beethanol production alone can reduce greenhouse ing traded internationally. The report also notes that gas emission by 100 million tons globally.
Scaling back costs. How a U.S. ethanol plant cut acid usage and evaporator cleaning frequency by switching to BulabÂŽ 8301 scale control from Buckman. The challenge. A Midwestern ethanol plant relied heavily on sulfuric acid to lower pH. Unfortunately, acid availability was tight, driving costs up significantly.
The solution. Buckman applied FDA-allowed BulabÂŽ 8301 just ahead of the first evaporator resulting in outstanding scale control and process pH control.
The savings. s 3AVED ON PLANT SULFURIC ACID USAGE RESULTING IN NET SAVINGS OF TO YEAR s 4EN #)0S PER YEAR WERE ELIMINATED SAVING LABOR DOWNTIME AND CHEMICAL COSTS FOR ACID WASH s (YDROBLASTING FREQUENCY AND TIME WAS REDUCED s /VERALL HEAT TRANSFER PERFORMANCE HAS BEEN IMPROVED WHICH PROVIDES ADDITIONAL mEXIBILITY TO optimize water balance and backset usage. s ! REDUCTION IN $$'