INSIDE: MYCOTOXINS ALWAYS LURKING JULY 2012
FEW 2012 Holding Strong: Evolution through Innovation Page 28
Reducing Ethanolâ€™s Water Footprint Page 34
The Battle for the RFS Page 58
The Minimum Octane Question Page 50
For illustration purposes only. Actual prize may vary.
American Made. American Grown. Powering NASCAR.® American Ethanol has partnered with NASCAR for a greener environment and a stronger nation. Ethanol produces about 59% less greenhouse gas emissions than gasoline alone. And because it’s homegrown, it contributes billions of dollars to our economy while creating American jobs. It’s good for NASCAR. And even better for America.
NO PURCHASE NECESSARY to enter American Ethanol Sweepstakes. Sweepstakes open to legal residents of the 48 contiguous U.S. and D.C., age 18 or older, with a valid driver’s license as of 06/08/12 and Internet access as of 06/07/12. Subject to Official Rules and void where prohibited. Sweepstakes starts 10:00:00 a.m. ET on 06/08/12; ends 10:00:00 a.m. ET on 08/31/12. For Official Rules and entry information, send a SASE to: “American Ethanol Sweepstakes”, PO Box 11487, Bozeman, MT 59719-11487, or go to www.nascar.com/aesweeps. Sponsors: Turner Sports Interactive, Inc. and Growth Energy/American Ethanol. E15 is approved by the EPA for 2001 and newer vehicles. The NASCAR American Ethanol™ logo and word mark are used under license by the National Association for Stock Car Auto Racing, Inc. and Growth Energy. All trademarks and the likeness of the No. 3 race car are used under license from their owners. NASCAR® is a registered trademark of the National Association of Stock Car Auto Racing, Inc.
HPD’s High Efficiency Stillage Concentration System (HESC™) reduces energy consumption in the DDG drying process. This proven, unique design concentrates highly viscous stillage with minimal fouling while decreasing the evaporation load to the dryer. The benefits of the concentrator system include: > More efficient method of removing water from stillage compared to standard drying processes > Concentrates syrup greater than 50% TS with minimal fouling > Reduced natural gas usage decreases emissions to allow more ethanol produced for given air permit > Modular system for simplified integration into existing plants, expansions or new facilities
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JULY issue 2012 VOL. 18 ISSUE 7
FEW: A True Industry Event By Susanne Retka Schill
10 The Way I See It
The Global Energy Market Welcomes US By MIKE BRYAN
11 Events Calendar
By KRIS BEVILL
Dropping Water Use
Though not a water guzzler, ethanol industry drives down water consumption By Holly Jessen
The Battle for the RFS
42 DISTILLERS GRAINS
Opponents stake out positions on renewable energy policy By KRIS BEVILL
12 View From the Hill
Stepping Up to a New Facility
Surveys indicate toxin issues are a moving target By Holly Jessen
Rural Nebraska town welcomes Novozymes’ plant By LUKE GEIVER
Octane: What’s in Your Fuel?
RFS Results in
Enumerable Benefits By TOM BUIS
16 Grassroots Voice
Ethanol’s future lies partly in gasoline’s minimum octane rating
The Wyoming Oil
Embargo of 2012 By RON LAMBERTY
Protecting Ethanol Plants from Catastrophic Combustible Dust Explosions Understanding explosion risk the first step in mitigation By Doan Pendleton
Denaturing Obsession By Rob Vierhout Get Onboard:
Tips to Meeting Success By DONNA FUNK
22 Business Briefs
CONTRIBUTIONS 78 MAINTENANCE
20 Business Matters
Obstacles hamper large-scale commercialization hopes By Rafael A. Nieves
Helps Households Make Ends Meet By bob dinneen
18 Europe Calling
Sweet Sorghum, Other Sugar Crops Show Promise
US Ethanol Industry
Mycotoxins: A Pain in the Ear
Upcoming Conferences & Trade Shows
24 Commodities Report
Stainless Steels: Cost-efficient Materials
Important to match the proper grade to intended use By Kristina Osterman
Ethanol Producer Magazine: (USPS No. 023-974) July 2012, Vol. 18, Issue 7. 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.
28 Distilled 86 Marketplace
ON THE COVER
Ethanol producers speak in a general session panel at the FEW: from left, moderator Tom Bryan, BBI International, Mark Marquis, Marquis Energy, Ray Defenbaugh, Big River Resources, Randy Doyal, Al-Corn Clean Fuel, and Walt Wendland, Golden Grain Energy. See story on page 28. PHOTO: PAUL NIXDORF
4 | Ethanol Producer Magazine | JuLY 2012
Another International Fuel Ethanol Workshop & Expo has come and gone. With 90 percent of the nation’s etha-
FEW: A True Industry Event Susanne Retka Schill, Editor email@example.com
nol production capacity represented in Minneapolis and 300-some exhibitors, the FEW was truly an industry event. It is a great opportunity to visit with industry product and service providers, learn about the latest innovations and get updates on industry issues at the educational sessions. A heartfelt thank you to all the speakers who take the time to hone an informative presentation into a tight time slot. Because EPM’s print date immediately followed FEW this year, our event coverage of it in this issue is focused on the general sessions. The reflections of four ethanol top managers— Mark Marquis, Marquis Energy Inc., Ray Defenbaugh, Big River Resources, Randy Doyal, Al-Corn Clean Fuels and Walt Wendland, Golden Grain Energy—were of great interest. The ethanol industry is at a crossroads. The blenders credit is gone. The blendwall has arrived, the result being price-depressing monthly ethanol stock numbers. It’s not an easy time for the ethanol industry, but these ethanol veterans have seen tough times before. We will continue to cover these issues as they evolve, plus look for more coverage of the companies and innovations showcased at FEW in the months ahead. The nice thing about this year’s FEW occurring early in June is that it puts the busiest days at Ethanol Producer Magazine and BBI International behind us early in the summer, making for a longer summer. Let’s hope the weather holds out and helps deliver that forecast record corn crop (even a near record would be acceptable). Abundant corn was the impetus for starting the ethanol industry decades ago, and abundant corn is needed now to keep prices stable for farmers, feeders and ethanol producers.
For industry news: www.ethanolproducer.com or Follow Us:
Associate Editors Holly Jessen digs into the details of new plant-level, water-consumption improvements, as well as the challenge of balancing costs and benefits, in “Dropping Water Use.” As the corn crop grows in the July heat, she also examines a recurring coproduct issue in her feature, “Mycotoxins: A Pain in the Ear.” The toxin hotspot of the year may move around—last year it was Ohio— but the need to pay attention to it is always important.
6 | Ethanol Producer Magazine | JuLY 2012
Kris Bevill continues to probe the policies and regulations that undergird the industry. In “The Battle for the RFS,” she examines the petroleum industry’s opposition to the renewable fuels standard and the ethanol industry’s response. In “Octane: What’s in Your Fuel?,” she reports on an unsettling development in South Dakota involving the use of lower octane base fuels, even as a group of Ford researchers examines the benefits of raising octane level.
LUKE GEIVER is an associate editor for our sister publication, Biomass Power and Thermal. In this issue, he writes about the impact of a new enzyme facility on a small town in “Stepping up to a New Facility.” Geiver began writing for Ethanol Producer Magazine when he joined BBI International in 2010 and currently writes about issues such as finance and logistics in the emerging bioenergy space.
Susanne Retka Schill firstname.lastname@example.org
ASSOCIATE EDITORS Holly Jessen email@example.com Kris Bevill firstname.lastname@example.org
2012 Algae Biomass Summit
Jan Tellmann email@example.com
2012 National Advanced Biofuels Conference & Expo
Indeck Power Equipment Co.
2013 International Fuel Ethanol Workshop & Expo
Interra Global Corporation
INTL FCStone Inc.
Lindsey Noble firstname.lastname@example.org
Lallemand Ethanol Technology
Ashland Hercules Water Technologies
Lansing Trade Group
BBI Consulting Services
Mist Chemical & Supply Company
BetaTec Hop Products
Mole Master Services Corporation
BrownWinick Law Firm
Burns & McDonell
Natwick Associates Appraisal
Pioneer Hi-Bred International
Marty Steen email@example.com Bob Brown firstname.lastname@example.org Andrea Anderson email@example.com Dave Austin firstname.lastname@example.org
Cloud/Sellers Cleaning Systems
CPM Roskamp Champion
Premiuim Plant Services
DuPont Industrial Biosciences
Renewable Fuels Association
Ethanol Producer Magazine
SGS North America, Inc.
Sukup Manufacturing Co.
Fermentis - Divison of S.I. Lesaffre
U.S. Grains Council
Gamajet Cleaning Systems, Inc.
Vogelbusch USA, Inc.
Wabash Power Equip. Co.
West Salem Machinery Co.
ART DIRECTOR Jaci Satterlund email@example.com
CHAIRMAN Mike Bryan firstname.lastname@example.org
CEO Joe Bryan email@example.com
VICE PRESIDENT Tom Bryan firstname.lastname@example.org
SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor email@example.com
EXECUTIVE ACCOUNT MANAGER Howard Brockhouse firstname.lastname@example.org
SENIOR ACCOUNT MANAGER Jeremy Hanson email@example.com
CIRCULATION MANAGER Jessica Beaudry firstname.lastname@example.org
ADVERTISING COORDINATOR Marla DeFoe email@example.com
Senior Marketing Manager John Nelson firstname.lastname@example.org
EDITORIAL BOARD Mike Jerke, Chippewa Valley Ethanol Co. LLLP Jeremy Wilhelm, Cilion Inc. Mick Henderson, Commonwealth Agri-Energy LLC Keith Kor, Pinal Energy LLC Walter Wendland, Golden Grain Energy LLC Neal Jakel Illinois River Energy LLC Bert Farrish Lifeline Foods LLC Eric Mosebey Lincolnland Agri-Energy LLC Steve Roe Little Sioux Corn Processors LP
2 Customer Service Please call 1-866-746-8385 or email us at email@example.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at (866) 746-8385 or firstname.lastname@example.org. 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 email@example.com. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to firstname.lastname@example.org. 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
3 45 5
COPYRIGHT ÂŠ 2012 by BBI International TM
JULY 2012 | Ethanol Producer Magazine | 7
Power P ow your old There’s more to ethanol plant etha The New Ethanol with with New Ethanol than ethanol. production. prod
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the way i see it
The Global Energy Market Welcomes US By Mike Bryan
First, I want to say thanks to everyone who attended, contributed to and sponsored the 2012 Fuel Ethanol Workshop in Minneapolis: more than 2,200 attendees, nearly 300 exhibitors and more than 90 percent of ethanol producers represented. It was indeed a wonderful event and one that demonstrated the vitality of the ethanol industry. As many of you may know, I live in Australia, and from time to time like to update folks on the biofuels industry here and how things are progressing because not only does Australia provide a potential market for American technology, but the whole of the South Pacific does as well. Australia is mineral rich and has a huge export mining business of coal, uranium, iron ore, natural gas and other commodities. The economy of Australia is one of the best in the world, but the focus has not been on renewable energy. Interestingly, with all of the mineral resources that Australia has, it is very dependent on imported oil. In fact, the refining industry in Australia is in grave danger of totally closing down because it simply cannot compete with the huge refining capacity in places like Singapore
10 | Ethanol Producer Magazine | JuLY 2012
and other Southeast Asian refineries. If this happens, Australia will be forced to import 100 percent of its refined fuel, putting it in a potentially perilous liquid fuel position. Currently, the state of New South Wales has a mandate in place for ethanol and biodiesel. The requirement is that 6 percent of all fuel contain ethanol and 2 percent of all diesel be comprised of biodiesel. The mandate has run into a bit of trouble, however, in that concerns have been raised about performance and compatibility with the existing automobile fleet (all totally nonsense). In spite of the opposition, the current premiere of NSW, Barry O’Farrell is pressing forward with the mandate with some potential modifications. Queensland, the largest state in Australia, has a mandate approved by parliament, but has yet to implement it. There has been a very recent change in government in QLD and the new party in power is reviewing the matter and is expected to make a decision soon. There are several pending ethanol and biodiesel projects that are waiting for a decision on the matter. While other states either have or are considering such legislation, to date NSW and QLD are the only two of the seven states and territories that have adopted a mandate. The South Pacific islands have tremendous potential for biodiesel and ethanol. There are literally several thousand inhabited islands in the South Pacific that depend on clean water,
wastewater treatment, power for their homes and light industry. Not to be flippant, but you can’t simply run an extension cord from the mainland to these islands. Therefore, many of them depend on diesel power to operate their wastewater treatment system, desalinization units, and to power their homes. It is an especially unique opportunity for the biodiesel industry, since many of these islands have ample supplies of feedstocks to facilitate a small biodiesel plant and the available indigenous labor to run the plant. To sum it up: it’s a big world and a world that is growing increasingly hungry for clean, domestically produced energy. The opportunities abound for those who can think outside the borders of the U.S. and venture out into a global market. It takes planning, coordination, investment, establishing contacts and liaisons, but the rewards can be substantial. While the U.S. market may be somewhat constrained, the global energy market has its arms wide open. That’s the way I see it.
Author: Mike Bryan Chairman, BBI International email@example.com
Algae Biomass Summit September 24-27, 2012 Sheraton Denver Downtown Hotel Denver, Colorado
Domestic production of advanced biofuels and biobased chemicals will be the focus of the 2012 National Advanced Biofuels Conference & Expo to be held at the Hilton Americas—Houston, in November. Produced by BBI International, the conference and expo will unite existing and future advanced biofuels producers with strategic petrochemical and agribusiness partners, government officials, investors and project finance professionals, technology and biomass supply-chain service companies. This event was successfully launched in 2011 as the International Biorefining Conference & Trade Show. In consultation with sponsors and supporting organizations, BBI changed the name of the event to highlight its critical role in helping the U.S. bioenergy and refining industries meet America’s explicit advanced biofuels quest. “RFS2 requires 21 billion gallons of advanced biofuels to be blended into the U.S. transportation fuel supply by 2022,” says Joe Bryan, CEO of BBI International. “We have now aligned the conference and expo with that national mission.” The National Advanced Biofuels Conference & Expo will continue to focus on the scale-up, commercialization and market development of both advanced biofuels and biobased chemicals. Presentations will focus predominantly on domestic production, research and development, and project development. International industry issues, such as exports and imports, foreign biofuels production and policy, and feedstock issues, will be covered from a domestic viewpoint. The two-day agenda will answer critical questions facing the industry and will offer conference attendees an unparalleled opportunity to gain a broad understanding of where the U.S. advanced biofuels industry is, what challenges it faces, and where it is headed. “This event will bring the entire industry together under one canopy,” says Matt Spoor, vice president of sales and marketing at BBI International. “The name change exemplifies the new direction of the program. It also speaks to the ‘all-of-the-above’ strategy that’s needed to meet our national advanced biofuels targets. Drop-in biofuels, advanced and cellulosic ethanol, biobased chemicals—we’re bringing it all together in Houston.”
Advancing Technologies and Markets Derived from Algae Organized by the Algal 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. Register today for the world’s premier educational and networking junction for the algae industry. (866)746-8385 | www.algaebiomasssummit.org
National Advanced Biofuels Conference & Expo November 27-29, 2012 Hilton Americas - Houston Houston, Texas Next Generation Fuels and Chemicals Make plans to attend the 2012 National Advanced Biofuels Conference & Expo in Houston, Texas. Understand the latest techniques being developed in the industry and continue building relationships that last. Contact a knowledgeable account representative to reserve booth space now. (866)746-8385 | www.advancedbiofuelsconference.com
International Biomass Conference & Expo April 8-10, 2013 Minneapolis Convention Center Minneapolis, Minnesota Building on Innovation Organized by BBI International and produced by Biomass Power & Thermal, 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
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. (866)746-8385 | www.fuelethanolworkshop.com
JULY 2012 | Ethanol Producer Magazine | 11
view from the hill
US Ethanol Industry Helps Households Make Ends Meet By Bob Dinneen
This spring, while gasoline prices approached the $4-pergallon mark for the second time in four years, one factor kept the pain at the pump from getting even worse. Because ethanol makes up 10 percent of the nation’s motor fuel supply, it significantly reduces the demand for oil and puts downward pressure on oil prices. Ethanol reduced wholesale gasoline prices by $1.09 per gallon nationally during 2011 and by an average of 29 cents per gallon from 2000 through 2011. By helping to save $39.8 billion annually in excess gasoline costs, the U.S. ethanol industry helped the average American household to pay about $340 less every year to fuel their cars since 2000. These are among the conclusions of a study released May 15 examining the impact of increased ethanol consumption on wholesale gasoline prices conducted by economists from the University of Wisconsin and Iowa State University for the Center for Agriculture and Rural Development. While ethanol has held down gasoline prices for more than a decade, it helped motorists save even more money in 2011 for two important reasons: First, American ethanol production increased from 13.2 billion gallons in 2010 to a record 13.9 billion gallons last year. Second, the average crude oil price increased from $80 per barrel in 2010 to about $95 per barrel in 2011, which increased ethanol’s discount to gasoline. In
12 | Ethanol Producer Magazine | JuLY 2012
other words, ethanol’s impact on gasoline prices becomes more pronounced as oil prices rise and ethanol production increases. As these findings confirm, the growth of the American ethanol industry has been a bright spot in an economy marred by high unemployment and sky-high gasoline prices. With 209 ethanol biorefineries in 29 states, the industry generates $43 billion in economic activity, supports more than 400,000 jobs, and contributes more than $8 billion in federal, state and local taxes, helping to pay for local public schools and police and fire departments. As ethanol production increases, the industry promotes the nation’s energy security and economic stability. Last year alone, by producing more than 13.9 billion gallons of biofuels, the U.S. ethanol industry reduced the nation’s need for imported oil by 485 million barrels—more than the U.S. imports from Saudi Arabia. By reducing reliance on imported oil, ethanol makes it more difficult for petroleum-exporting countries to increase energy costs in the U.S. by restricting production or raising prices. The emergence of the domestic ethanol industry as a force in the nation’s motor fuel market is beneficial for the basics of the American economy—jobs and prices. The more clean-burning, Americanmade biofuels the industry produces, the more high-paying jobs there will be for American workers and the lower the prices will be for American motorists at the gasoline pumps. The American ethanol industry isn’t only expanding, it is evolving. U.S. companies are devising new technologies
that will turn waste products, such as garbage, woodchips, corn stover and even cooking oil, into renewable fuel and other biobased products. Some companies already have commercial-scale facilities under development and construction, from Oregon to Iowa and from Alabama to Massachusetts. Public policies should encourage the growth of an industry that is good for our country. While the oil companies continue to enjoy federal tax breaks and other advantages totaling between $3.6 billion to $4.5 billion a year, the American biofuels industry believes that tax incentives should be targeted to new technologies, not forever subsidizing mature industries. That is why the American biofuels industry willingly agreed to the expiration of the tax credit for ethanol blenders (the Volumetric Ethanol Excise Tax Credit) at the end of last year. Public policies should promote the development of advanced biofuels by encouraging the expanded installation of blender pumps, a greater proliferation of flex-fuel vehicles, and the growth of innovative startup companies. By requiring that 36 billion gallons of renewable fuel, including 21 billion gallons of advanced biofuels, be blended into transportation fuel by 2022, the renewable fuel standard helps to attract investment to create and commercialize new ethanol production processes. With imaginative policies and innovative technologies, American biofuels can continue to cut prices at the pumps and create jobs in our communities. Author: Bob Dinneen President and CEO, Renewable Fuels Association (202) 289-3835
Don’t be a prisoner to your pH.
Don’t let enzymes determine your plant operating conditions. Let your plant operating conditions determine your enzymes.
Verenium’s Fuelzyme® alpha-amylase works to your conditions so you can break free from the restraints in your process and improve operating margins. Fuelzyme® ɲ-amylase is a highly evolved, high-performance enzyme that is effective at an extraordinary temperature and pH range for starch liquefaction in the production of fuel ethanol. It is the most forgiving enzyme accommodating process variations. This means less time spent worrying about how your enzymes adapt to your operating conditions. Fuel ethanol plants that use Fuelzyme® ɲ-amylase can increase throughput and substantially reduce enzyme dosing while eliminating pH adjustments. Consider also the reduction in chemical usage that can be expected, all while increasing ethanol yields. Can you really afford not to try it? Use enzymes that excel in your process — use Fuelzyme® ɲ-amylase.
Verenium Corporation | 3550 John Hopkins Ct., San Diego, CA 92121 Phone: 1.800.523.2990 or 858.431.8500 | Fax: 858.431.7273 verenium.com | firstname.lastname@example.org U.S. Patent No. 7273740, US Pat. 7666633, US Pat. 7659102 and other patents pending. © 2012 Verenium Corporation. Fuelzyme, Verenium, the Verenium logo, and The Energy of Nature are trademarks of Verenium Corporation.
RFS Results in Enumerable Benefits By Tom Buis
For far too long, America has been dependent on foreign oil. This leaves us at the mercy of the tumultuous Middle East, unsympathetic foreign governments and OPEC. While every president since Richard Nixon has highlighted the importance of reducing our dependence on foreign oil, it always seemed more of a talking point than a true goal. That is, until 2005, with the implementation of the renewable fuel standard (RFS). This was the first realistic policy initiative since the oil embargos of the 1970s that shifted America’s focus toward domestically produced renewable fuel. The RFS is the only substantial energy policy the U.S. has enacted in more than 40 years. In 2007, Congress significantly modified the program, updating to the RFS2, increasing volume goals and encouraging aggressive production of renewable fuels. While we have seen the RFS come under recent attacks, every criticism is based on distorted facts, misinformation and well-funded opposition from oil companies that will not give up their nearmarket monopoly on fuel without a fight. That is why it is increasingly more important to get the facts straight and continue to build support among policymakers for the RFS. One cannot dispute the facts that show the RFS is working. It has contributed to a
14 | Ethanol Producer Magazine | JuLY 2012
true American success story, producing 14 billion gallons of first-generation biofuels and we are on the cusp of the next generation that will spur more investment in America and add jobs to our ailing economy. In 2005, the U.S. was importing 60.3 percent of its oil. As ethanol production and usage increased, foreign oil imports dropped to 45 percent in 2011. This alone demonstrates the tremendous impact the RFS has had on our domestic energy policy and the remarkable promise that lies ahead. The RFS, along with the ethanol industry, has shown it is indeed possible to wean ourselves off our dangerous addiction to foreign oil. Ethanol contributes to enhanced energy security for our nation, while simultaneously providing consumers a choice of a cleaner-burning, less expensive, domestically produced fuel. Currently, ethanol makes up 10 percent of our nation’s fuel supply, with the capability to increase that to 15 percent and beyond. The ethanol industry has also been a major contributor to our nation’s economy and job growth. As refineries continue to open across America, jobs are added and areas of the country that were once lacking in opportunity are being revitalized. In 2011 alone, the ethanol industry created and supported more than 500,000 wellpaying jobs and contributed approximately $50 billion to the nation’s gross domestic product. Currently, there are more than 200 biorefineries in 29 states providing economic opportunity, consumer choice and reduced dependency on fossil fuels. This
is welcome news during difficult economic times, and the ethanol industry is proud to be at the forefront of innovation, pioneering the next generation of renewable fuels and investing right here in America. Further, the production capability is available to change the direction of our nation’s energy policy. In fact, under the RFS2 targets, by 2022, the 36 billion gallons of renewable fuel produced will comprise roughly 27 percent of the nation’s projected gasoline demand, eliminating the need for Persian Gulf imports entirely. Even a recent Congressional Budget Study concluded that the only way to reduce dependence on oil is to transition to renewables. The potential for a paradigm shift is here. We must seize it. As such, Growth Energy has continuously advocated for increased use of ethanol in our nation’s fuel supply. The first step is the implementation of an E15 blend in the marketplace. But we must not stop there. We must actively campaign to educate policymakers and the American people of the enumerable benefits that the RFS and the ethanol industry can provide. The resources are here—flex-fuel vehicles, flex pumps and higher blends of ethanol— we just need to embrace them. For the first time in decades, America has the ability to turn the tide and start the process of increasing our energy production. Growth Energy and the ethanol industry are standing at the forefront of this movement, looking to fundamentally change our future. Author: Tom Buis CEO, Growth Energy (202)545-4000 email@example.com
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The Wyoming Oil Embargo of 2012 By Ron Lamberty
At some point over the past several months, consumer complaints about gasoline purchased at stations in eastern South Dakota led to the discovery that 85-octane gasoline was being sold in those retail stations—labeled as 87-octane gasoline, and in some cases, 89-octane, E10 gasoline. When the state weights and measures department investigated the complaints, most of the violators responded essentially with a statement of “Oops! Sorry!” and continued to sell the suboctane fuel by relabeling their pumps with the correct lower octane number. They told weights and measures that they didn’t see any reason they couldn’t sell 85-octane gas, even though they were outside the area where 85 octane is legally sold under something called “derating,” which allows lower octane fuel at higher elevation. To provide offenders with the “reason they couldn’t sell 85-octane gas,” the state reviewed its regulations, and found something even more interesting. It turns out that even the higher elevation, western third of South Dakota, where stations have been selling the 85-octane gasoline for decades, is supposed to sell gasoline with a minimum octane of 87. The state weights and measures department responded to that discovery by informing petroleum marketers and oil companies that it would begin to enforce the correct regulations. So just add 10 percent ethanol to the
16 | Ethanol Producer Magazine | JuLY 2012
85 octane gas, and it will have an octane rating above 87, right? Nope. A few months ago, some of the refineries quit making a straight 85-octane regular unleaded gasoline, and their primary product now is an 82-ish octane base fuel which they then blend with 10 percent ethanol to get an 85 octane E10. Adding 10 percent more ethanol to that E10 would make it E20, which can’t be used legally in standard cars (and we know how oil companies feel about replacing gas—even low-octane stuff—with more ethanol). Refiners claim they made the change to offset the cost of the renewable fuels standard, conveniently leaving out the fact that because ethanol costs less than gas, E10 made with the 85-octane straight gas they were previously making would actually save them six to ten cents. The truth is that making 82-octane is more profitable, and doing so gives the refiner control of ethanol blending. The oil companies now consider the straight 85-octane gas they made for more than 40 years a “boutique” fuel—and say it would be too costly to make it for legal sale in South Dakota. There was no contrition or offer to find solutions that would provide consumers in the state of South Dakota with the type of fuel required by law. The oil refiners’ response was quite different from their very public hand-wringing over the rollout of exhaustively tested E15. They didn’t express concerns about automobile and small engine warranties. They didn’t ask for more testing. They didn’t seem concerned about liability for damage that could happen to engines that were fueled with this noncompliant, untested,
illegal fuel. Instead, Rocky Mountain oil companies offered their version of a waiver request: Make 85-octane legal, or we won’t supply South Dakota stations. Yep. Their solution to ongoing violations of the law is to demand the state change the law so that what they are doing becomes legal. Or else. It was further suggested that 85 octane gasoline should be “legal,” not only in the area it was mistakenly allowed previously, but throughout the state. Unfortunately, that is exactly what the South Dakota Governor’s office has proposed, and even more unfortunately, the practice of selling illegal, suboctane fuel in South Dakota will be allowed to continue while comments are accepted for 90 days. In effect, this “Wyoming Oil Embargo” has already given Rocky Mountain refiners the ability to sell illegal fuel in all of South Dakota all summer. And when drivers report bad mileage, poor performance and increased repairs from this substandard fuel, ethanol will be incorrectly blamed, just as it has been blamed nationwide as refiners reduce the octane and quality of the fuel they blend with ethanol. The most disappointing aspect of this situation is that if South Dakota wanted to create its own fuel regulations, it was in a perfect position to counter this oil refiner, manufactured shortage by declaring E15 legal in all vehicles. Refiners’ response to such a ruling would have been quite interesting—and probably very instructive. Author: Ron Lamberty Senior Vice President, American Coalition for Ethanol (605) 334-3381 firstname.lastname@example.org
Europe’s Complete Denaturing Obsession By Robert Vierhout
In the European Union, a considerable portion of ethanol is used as a beverage or as a feedstock for industrial/chemical use. The essential characteristic for beverage use is purity. It is meant for human intake, though moderately. Hence, pure alcohol is very highly taxed: the higher the tax, or excise duty, the less people will drink is the theory. Europe wouldn’t be Europe if this excise duty is not different everywhere. In Bulgaria the duty on 100 liters of pure ethanol is €598 ($126) whereas in Sweden it is almost 10 times as much, €5,474. Sweden also places the highest possible value-added tax on alcohol of 25 percent. The rest of the EU is somewhere between those extremes. These high taxes make fraud attractive. There are basically two ways to fight this fraud. First, there are high financial bonds on the transport of alcohol that are redeemable once the ethanol reaches its final destination. The other method is by denaturing the alcohol to make it unfit for human consumption (oral intake, that is). Sometimes the denaturing is also done for a specific purpose or enduse as in the case of pharmaceuticals or perfumes. The total number of denaturants used in all member states is high. The
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EU database on denaturants tells us that there are 145 denaturants allowed and a total of 159 compositions of denaturing alcohol possible. The European Commission decided two years ago that there are too many denaturants, and too many do not have the chemical properties to denature the alcohol completely, making it irreversible chemically, in theory. In reality, irreversibility is a price issue. Complete denaturing has the advantage, according to the commission, that the risk of fraud—changing denatured alcohol back to potable alcohol—is reduced. As the number of complete denaturing agents is limited—only 34—administrative tax procedures can be reduced at the same time. The Eurodenaturant project was born. The objective of the project is to present a single complete denaturing formulation, plus some formulations for specific end products such as solvents, ink, perfumes or fuel. After laboratory testing, a number of ideal formulas and concentrations of the denaturants were proposed. The ideal, completely denatured alcohol is achieved by adding 3 liters of isopropyl alcohol plus 3 liters methyl ethyl ketone and 1 gram of denatonium benzoate to every 100 liters of alcohol. What is proposed came as a shock to the industry. Even though we had made clear very early that the denaturing is, and should be, driven by customer requirements, and that this works
satisfactorily, the commission proposed something that goes against what industry recommended. It will make the alcohol unnecessarily more expensive, and impossible to use for certain applications. Also, in the case of ethanol for fuel use, a formula is proposed that totally neglects what has been agreed upon for many years in the EU among the oil, car and ethanol industries based on what works best for those sectors. So, why is such a harmonization project started in the first place? Overzealous officials, most likely. Industry didn’t ask for a change of the present practices. Within the EU, we are pumping around billions of liters of alcohol every year. In the 14 years I have been working in this sector, I have never heard about large-scale fraud with alcohol. I am not saying it is not happening, but surely if it were wide-spread and big, it would be known. Complete denaturants will not prevent fraud. The best remedy against ethanol fraud is placing a high financial bond on every batch of ethanol being shipped. The need for changing the rules is questionable. If denaturing is no longer driven by the needs of the industry, the result will be predictable—higher cost. Not a good plan in times of economic and financial austerity. Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org
Get Onboard: Tips to Meeting Success By Donna Funk
A great board meeting can occur thanks to preparation, people and a plan. For ethanol plants, it is fairly typical to have board meetings, but they vary in function and value at each facility. Our involvement in board meetings over the year has given insight into what makes them successful. The number one benefit of board meetings comes from maintaining open lines of communication among the directors and plant management. Whether meetings are held monthly or quarterly, they work best when they are consistent and well-planned. Some plants hold a quarterly meeting of an executive committee and a meeting of the entire board during the other months. Regardless of the timing of the board meetings, agendas that are well-thought-out and meetings that are well-facilitated produce the best results in terms of engagement and decision making. Agendas should not be cookie-cutter but rather creative and even challenging. When building agendas, it is best to survey directors on the kinds of information they want communicated in board meetings. Here are key elements for bringing value to ownership boards: • Reports. Expectations for reports from the management team should be clear, and typically include plant performance, grain movements and grind, and the status of grain, chemical and enzyme costs. • Communication. Managers vary 20 | Ethanol Producer Magazine | JuLY 2012
in their communication styles, but it is never helpful to withhold information and leave directors guessing or questioning the management of the plant. Boards can cultivate closer communication with managers by clarifying expectations and by being professional and proactive in the way they relate with each other and management. • Financials. Board meetings would not exist without some review of financial information. It can be a challenge, however, to provide enough insight, yet not too much. It could be valuable to rotate various aspects of financial reporting among different board meetings. At times, going through the financials can be helpful and educational, including line-item analysis such as repair costs or labor costs including all benefits. It can also be helpful to have a much more concise summary—perhaps a one-page CliffsNotes version of plant performance. • Consultants. Some boards require in-person reports from consultants. These commonly include assessments of new technology or advancements, but can also include presentations about accounting issues, risk management or debt financing. • Customer Service. Boards need to be brought up to speed in the area of customer care, including complaints or commendations and customer adjustments. • Capital Budgeting. Capital investments are monitored and guided by the board and approval is made on a project-by-project basis or above a certain cost threshold.
• Policies and Procedures. This isn’t an exhilarating area and doesn’t belong regularly on the agenda, but boards need to establish and review company policies and procedures. These include aspects of plant management, as well as the function of the office and staff, controls in office management, etc. • Strategic Planning. It is especially important that the company is managed in the present according to future thinking, and much of this responsibility lies with the board. This includes growth strategies, diversification opportunities or significant changes in management tactics, including grain procurement, ethanol and distillers marketing or risk management. Good facilitation, informed decisionmaking and solid record-keeping are important aspects of board management that make the process valuable. Whether the facilitator is the board chairman, manager or a staff person, the important thing is that they have the support of the board and can pull together an effective agenda, draw out positive discussion from all participants and bring issues to successful resolution. We recommend board members go in to their next meetings prepared and enthusiastic about the process. This makes you and your board more effective and, ultimately, gets the job done. Author: Donna Funk, CPA Kennedy and Coe LLC (800) 303-3241 email@example.com
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business briefs People, Partnerships & Deals
Steve Christiansen is the new CEO and general manager at Granite Falls Energy LLC in western Minnesota. He succeeds Tracey Olson who served in the position since the plant opened in 2005. Christiansen had managed Western Wisconsin Energy since August 2005. The 57 MMgy plant at Boyceville, Wis., was purchased by Big River Resources late last year. Granite Falls Energy is currently installing a loop track that will facilitate the loading of unit trains at the 62 MMgy plant.
The Andersons Inc. has appointed John J. Granato to the newly-created role of chief financial officer, reporting to Mike Anderson, chairman and CEO. Most recently Anderson served as a principal of finance and operations for Global Infrastructure Partners in New York. His 20 years of experience spans diverse industries, both domestically and internationally, including multibillion dollar conglomerates and industrial companies as well as private bank/private equity firms.
David Weaver has been appointed the new CEO of United Kingdom-based cellulosic ethanol developer TMO Renewables Ltd. Weaver joins TMO with a deep background in the enTMO CEO ergy sector, holding David Weaver brings 30 years of energy executive roles in enexperience to lead ergy companies CMS U.K.-based TMO Renewables. Energy International, Southern California Edison and British Petroleum (BP) Gas Power and Renewables, where he pioneered BP’s renewable energy program and led the development of BP’s first renewable energy project and wind farm. He has also led several energy development initiatives in Asia, Australia, Middle East, China and India.
Bob Casper, president of Poet Ethanol Products, was named chief commercial officer of Poet LLC. In this newly created position, he will oversee the marketing and distribution of all products as well as risk management for Poet. Before joining Poet Ethanol Products, Casper spent 21 years leading several energy-related divisions for Koch Industries.
ZeaChem Inc. has named Peter Cheesbrough its chief financial officer. He brings more than three decades of experience leading private and publically traded companies in the biotechnology, information technology and mining industries through commercialization, international transactions, venture capital fundraising and IPO execution. “Time and again, Peter has shown the ability to lead companies through periods of robust financial growth,” said Jim Imbler, ZeaChem president and CEO. “With his addition to the team, we are better positioned for long-term growth as we move from demonstration scale to commercial biorefining.” 22 | Ethanol Producer Magazine | JuLY 2012
Marketing Poet Bob Casper, who has led Poet Ethanol Products since 2000, directs marketing of ethanol and carbon dioxide for the company’s 27 biorefineries. His role has been expanded to overseeing Poet Risk Management and Poet Nutrition.
Jennifer Holmgren, CEO of Lanzatech, has joined the board of the Roundtable on Sustainable Biofuels Services Foundation. The foundation is a U.S.-based nonprofit organization formed to Sustainable Oversight manage a broad range With business of operational activities developments in the U.S., China and implementing the RSB’s elsewhere, Jennifer global sustainability Holmgren, CEO of Lanztech, will advise standard and certificathe Roundtable on tion system for biofuels. Sustainable Biofuels Services Foundation as It will manage the certia member of the board. fication process, the use of trademark and oversight of licensing for the RSB Standards Body.
Antonio de Padua Rodrigues has been named interim CEO of UNICA, the Brazilian Sugarcane Industry Association, until the conclusion of a selection process for a new CEO to replace Marcos Jank, who has served since 2007. A member of the executive team at UNICA since 1990, Rodrigues has served as the organization’s technical director since 2003. Prior to that he held government positions supporting sugarcane development. The Renewable Fuels Association has gained three new board member companies since the first of the year. Aemetis Inc. operates a 55 MMgy facility in Keyes, Calif. Bushmills Ethanol Inc. is a cooperative made up of 415 farmers that produces 65 MMgy in Atwater, Minn. E Energy Adams is a locally owned company consisting of nearly 800 investor owners that produces 50 MMgy in Adams, Neb. With the addition of these three, the RFA board of directors consists of 50 companies. Every producing member of the RFA receives one vote on the board. The RFA is the largest trade association for ethanol producers in the world. Eco-Energy Inc. has signed an ethanol marketing agreement with Quad County Corn Processors, a 35 MMgy ethanol plant in Galva, Iowa. Eco-Energy markets for 15 ethanol plants across North America and is focused on adding value by vertically integrating the supply chain, from producer to consumer. Canadian energy company Husky Energy Inc. commissioned a CO2 capture facility in March at its 130 MMly (35 MMgy) ethanol plant in Lloydminster, Saskatchewan. It will capture 250 tons per day of CO2 emissions, which will be utilized to increase heavy oil production. The CO2 is stored in containers, cooled and compressed into a liquid form. It is then transported to fields by truck, where it is injected into reservoirs to increase oil recovery.
BUSINESS BRIEFS Sponsored by
Abengoa Bioenergy New Technologies Inc. has agreed to pay $5.5 million for an expansion of the nonexclusive license agreement first struck with enzyme developer Dyadic International Inc. in 2009. The expanded license agreement gives Abengoa worldwide rights to use Dyadic’s C1 platform technology to develop, manufacture and sell enzymes for use in both first- and secondgeneration biorefining processes to convert biomass into sugars for the production of fuels, chemicals and/or power. In addition to the license fee, Dyadic is entitled to receive royalties and Abengoa will have the right to work with third-party sublicensees to further develop C1 enzymes.
KmX Chemical Corp., a privately held Ontario company founded in 2005, will provide Fiberight LLC exclusive rights to its membrane-aided concentration and dehydration technologies for the conversion of municipal solid waste into ethanol. These membrane technologies replace the need for energy-intensive distillation columns and molecular sieves in refining cellulosic ethanol, according to KmX. Through the selectivity of KmX’s hydrophobic membranes Y to ethanol molecules, the small fraction of Technology cellulosic ethanol in the fermented broth of around 6 percent can quickly be concenCE esel plants. trated to 50 percent, and then to fuel-grade quality using KmX’s hydrophilic membranes. E Fiberight is developing a 6 MMgy cellulosic ree and with catalyst), Distillation ethanol facility in Blairstown, Iowa. on
DuPont Industrial Biosciences has chosen Fagen Inc. to build its commercial cellulosic ethanol biorefinery in Nevada, ION adjacent to the existing Lincolnway iciency and Iowa, best in the class technology Energy LLC corn-ethanol plant. Fagen, which has constructed more than 85 etha(Esterification and Transesterification) to nol plants (approximately 60 percent of U.S. (catalyst free) facilities), also recently entered into a collaboration with Butamax Advanced Biofuels LLC, a joint venture between BP and DuPont, for a retrofit project to commercially produce biobutanol. KBR Inc. will execute the front-end engineering, procurement and detailed engineering design work for the Ne-
vada project, which plans to use corn stover to produce 27 MMgy. The company is operating a fully integrated cellulosic ethanol demonstration plant in Vonore, Tenn., in collaboration with the University of Tennessee and Genera Energy, plus ongoing stover supply chain testing with Iowa State University. Cellulosic sugar developer Virdia opened a demonstration facility at its new technology center in Danville, Va., located in the Institute for Advanced Learning and Research, established by the state in 2002. A private, venture-capital backed company, Virdia has developed its CASE process to convert a wide range of cellulosic feedstock, including plantation/industrial wood, energy crops and agricultural residues, into highly re-
fined sugars and lignin. The low-temperature process delivers a high yield of sugars from biomass, according to the company, and has a very light environmental footprint due to the near complete recycling of acids and solvents used in manufacturing. In March, the company announced a name change from HCL CleanTech and introduced its new CEO, industrial biotech veteran Philippe Lavielle who replaces Virdia’s co-founder, Eran Baniel. Baniel is now acting as Virdia’s vice president of business development. Share your industry briefs To be included in Business Briefs, send information (including photos and logos if available) to: Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to (701) 7468385, or email it to firstname.lastname@example.org. Please include your name and telephone number in all correspondence.
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JULY 2012 | Ethanol Producer Magazine | 23
commodities Natural Gas Report
Experts provide energy outlooks at conference May 25—U.S. Energy recently held its 24th Annual Energy Conference in Phoenix. The event gives us a chance to share timely industry information, as well as provide our clients with an opportunity to interact with industry service providers such as energy producers, pipeline and utility companies. Following is a short summary of several presentations among the outstanding group of speakers. James Harger, Clean Energy Fuels, the largest natural gas transportation fuel services provider in the U.S. Natural gas as a transportation fuel (CNG/LNG) will continue to grow rapidly due to low cost and superior environmental profile. Clean Energy is currently developing a “natural gas highway” that will allow trucks to fuel with LNG from border to border both north/south and east/west, beginning in Texas.
E. Russell Braziel, RBN Energy. There were four major takeaways from the energy consultant’s presentation. First, natural gas production will remain flat over the next five years, keeping prices moderate even with demand increases from electric generation and transportation fuels. LNG exports may occur, but not until 2015 or later. Second, hydrocarbon liquid volumes, such as propane and ethane, will continue to grow dramatically, encouraging petrochemical manufacturing to move back to the U.S. Third, domestic crude oil production will continue to grow and the spread between domestic and world prices will continue to be wide until additional pipeline facilities can be built to move supply from constrained production areas to existing refineries. Fourth, based on current trends, North America could be energy in-
By Casey Whelan
dependent by 2017. The U.S. will be a net importer of energy from Canada. James Albin, Harris Bank. The U.S. economy is moving ahead, albeit very slowly. One bright spot is manufacturing where job growth has been relatively strong. Housing continues to be a drag on the economy, however, it appears the worst is behind us. Europe has challenges far greater than the U.S., particularly southern Europe. Elwynn Taylor, Iowa State University. The long-time climatologist said the warm winter shouldn’t be overly surprising given the strength of the La Nina, which is now weakening and likely to go away this summer. Based on hundreds of years of climate data, Taylor expects we are entering a 25-year volatile weather cycle with higher highs and lower lows.
Old crop corn tight, record new crop forecast May 25—Cash markets screamed for corn in mid-May, but higher prices moved some bushels and poor export sales eased global demand. Corn production for 2012-’13 is projected at a record 14.8 billion bushels, up 2.4 billion from 2011-’12. The USDA’s May projections show a 5.1 million-acre increase in harvested area and higher expected yields. Corn planting was completed and 76 percent of the crop had emerged before the end of May. In the first condition rating for this year’s crop, 77 percent of the corn was rated good to excellent. Not much weight can be placed on early ratings, but it confirms this year’s crop is off to a good start. The USDA’s yield estimate for 2012-’13 is 166.0 bushels per acre, a tad on the high side with some heat and dryness concerns growing across the Corn Belt in late May (especially in the southern belt). Gener24 | Ethanol Producer Magazine | JuLY 2012
ally, heat and dryness in late May to early June can be good because it forces the developing plant to send its roots deeper in search of moisture. However, if the soil moisture is not recharged soon, producers will face lowering yield prospects. Export sales have been very slow, cumulatively down 12 percent from last year with USDA forecasting annual exports down 7 percent. Factors include the EU economy, China’s economic slowdown and recent commodity import cancellations. The current pace suggests falling about 75 million bushels shy
BY JASON SAGEBIEL
of the USDA’s projection. The Ukraine has become a new corn exporter in the global marketplace.
Regional Ethanol Prices Front Month Futures (AC) $2.141 REGION
$2.495 SOURCE: DTN
Regional Gasoline Prices
Weak domestic demand, cash corn availability impacts DDGS BY SEAN BRODERICK May 25—As Memorial Day approached, the DDGS markets felt the effects of a rollicking cash corn and futures markets. A “May squeeze” occurred when those futures approached expiration and cash corn was tight. DDGS appreciated about $10 to $15 per ton, mostly due to the export markets. With corn expensive, and difficult to procure, we saw bulk DDGS exports increase, and a strengthening of demand in the container markets, particularly Chicago. With that behind us, the Chicago market has remained steady, but bulk in the Gulf has dropped off, which will eventually affect the container market. Domestically, end users are “paying the number,” but doing it with lot less enthusiasm, and only in the nearby time slot. Milk futures weakness is killing demand
from the dairies, poultry numbers are poor and cattle margins are unprofitable—not good, with July, August and September looming when feedlot numbers typically drop. And, while hog margins are currently positive, they are well below historic goals. It is tough to be a feeder these days. With ethanol margins that are poor at best, production intensity seems to be lagging, with some plants extending downtimes, or running at diminished rates. And, although production rates were up on the most recent report, we do have expectations of lower DDGS production as we progress through the summer. The lack of domestic feed demand, along with cash corn availability, is going to drive prices this summer.
Front Month Futures Price (RBOB) $2.8765 REGION
$2.956 SOURCE: DTN
DDGS Prices ($/ton) location
jun 2011 190
245 SOURCE: CHS Inc.
Corn Futures Prices Date May 25, 2012
(July Futures, $/bushel)
Apr. 25, 2012
May 25, 2011
7.42 1/4 SOURCE: FCStone
Cash Sorghum Prices ($/bushel) LOCATION
Gasoline prices tumble pre-Memorial Day holiday BY RICK KMENT May 25—The traditional market trend is not holding up very well this spring, with crude oil and RBOB gasoline prices tumbling lower at a time when the highest prices of the year are traditionally seen. The Memorial Day holiday seems to be the center point in overall gasoline demand, when the unofficial start to summer is recognized and traders are looking for sharply increased demand by consumer driving patterns. Although overall usage is still expected to increase, the demand for gasoline remained subdued through much of the spring, leaving many unwilling to step back into the energy sector. Both crude oil and RBOB gasoline futures are currently trading at or below short term support levels, with June RBOB gasoline
futures trading at $2.8765 per gallon— nearly 50 cents under prices seen at the end of March. This additional pressure in the market could limit investor buyer interest in energy markets over the coming weeks, as uncertainty surrounds the global economy, especially issues throughout the European Union. Ethanol prices have moved higher and lower over the last several weeks, following the direction of the corn market. Although strong corn production numbers are expected at the end of the year, current supplies remain tight with wide futures and cash market swings. Wide price shifts are likely to continue in ethanol markets even when summer demand increases.
may 22, 2012
APR 20, 2012
may 25, 2011
SOURCE: Sorghum Synergies
Natural Gas Prices
may 17, 2012
may 1, 2012
jun 1, 2011
SOURCE: U.S. Energy Services Inc.
U.S. Ethanol Production
SOURCE: U.S. Energy Information Administration
JULY 2012 | Ethanol Producer Magazine | 25
PHOTO: BBI International, Susanne Retka Schill
Candid Observations Four ethanol producers commented on the state of the industry and their plants in a morning general session panel. From left, Ray Defenbaugh, Big River Resources, Mark Marquis, Marquis Energy, Walt Wendland, Golden Grain Energy, and Randy Doyal, Al-Corn Clean Fuel.
Ethanol producers share strategies for success in FEW panel Executives of four ethanol plants formed a panel to address, “Holding Strong: How U.S. Ethanol Producers are Achieving Profitability without the Volumetric Ethanol Excise Tax Credit,” at the June 5 general session of the International Fuel Ethanol Workshop & Expo in Minneapolis. One executive leads family-owned Marquis Energy Inc., while the others are CEOs of farmer-owned cooperatives. Tom Bryan, vice president of BBI International, served as moderator. There were some short term effects, with blenders buying up more ethanol at the end of the year before the tax credit expired, but Ray Defenbaugh, president and CEO of Big River Resources LLC, said it was ultimately a good thing for the industry. The tax credit was benefiting blenders, while the ethanol industry was “catching flack” for it. 28 | Ethanol Producer Magazine | JuLY 2012
A bigger impact to the industry is the delay of E15, said Walt Wendland, president and CEO of Golden Grain Energy LLC. “They took away an incentive before we could grow the market,” he said, adding that it’s like getting handcuffed and then being told to fight. Clearly, Big Oil has drawn a line in the sand and is fighting not to give up any more of the consumer’s fuel tank. Randy Doyal, CEO of Al-Corn Clean Fuel, said that in the many years he has been part of the ethanol industry, it has always fought Big Oil. However, the fight has seemed more frightening recently, and he encouraged the industry to be more active, writing letters and making calls to lawmakers. The panelists also discussed the human factor in success. Although Mark Marquis, president and general manager of Marquis Energy, said he could list a dozen things that could help put an ethanol plant in the “upper class” of the industry, on the top is the importance of hiring talented management staff. That can be difficult for a plant that isn’t doing well, he said, as employees seek strong companies to work for. Defenbaugh agreed, adding that staff loy-
Ethanol News & Trends
alty is also important. And, although a plant may be able to save money with fewer staff members, he didn’t consider it a bad thing if his company had one more person on staff than another plant. “The skinny is not always the best,” he said. Doyal said his company has great employees with a passion for learning. By giving staff the freedom to ask questions and try new things, the company has identified things that are not best practices and also many that are excellent ways of doing things. Marquis talked about not losing sight of the fact that the ethanol industry is a good industry, not a villain. The opposition is speaking with a loud voice, spreading misinformation far and wide. “We want to make sure staff at our plant are proud of what we do,” he said. Defenbaugh stressed the importance of access to adequate capital, comparing capital to a jugular vein. The industry will have its up and downs and adequate capital will keep a company going in those hard times. “You don’t want the bank to make all your decisions for you because its goals and your goals aren’t always the same,” he said. The speakers also talked about the fact that their companies are open to investing in or purchasing additional ethanol plants. That’s particularly important for Al-Corn, Doyal said, as the 45 MMgy plant is older than 90 percent of the rest of the industry and smaller than 75 percent of the rest of the industry. Instead of expanding the size of its facility, the company has diversified by investing in other ethanol plants. “That’s a huge plus for us,” he said. Golden Grain Energy has also worked to form helpful relationships, including an agreement to share management with Homeland Energy Solutions LLC. Although the company prefers to invest inside the fence, it has invested in and sits on the board of three other ethanol production companies. The advantage, he said, is sharing ideas and experiences for mutual progress. —Holly Jessen
Brace for the Fight
Dinneen tells ethanol industry to expect brutal RFS fight Renewable Fuels Association President and CEO Bob Dinneen covered a wide range of topics during his keynote address to the 2,200 attendees at the FEW, but as the “Don’t Mess with the RFS” button prominently displayed on his lapel indicated, the renewable fuel standard and the need for ethanol producers to combat the efforts of Big Oil to unravel the policy were the core of his message. “We will not be misled, nor will we allow the American people to be misled by their misinformation,” he said. “We are going to come together, we are going to defend the RFS [renewable fuel standard], we are going to ensure that this industry continues to grow and evolve because of the innovation that you will show at the plant and because of the passion that we will bring to Washington, D.C., to remind them of the importance of this industry, the importance of the RFS and the importance of the continued evolution of this industry. Expanding the domestic market for ethanol is crucial to meeting the escalating biofuels volumes mandated under the RFS. The U.S. EPA’s approval for E15 to be used in vehicles manufactured in 2001 and later could provide some market expansion opportunities, but the regulatory steps required to introduce the fuel to the market have notably delayed that process. Dinneen told attendees he expects the final regulatory issues to be resolved within days, but warned that the oil industry will “do everything possible” to shut E15 out of the fuel supply. Anticipating misinformation campaigns similar to those historically lobbied against ethanol’s impact on vehicle operations, he said, “It’s going to be up to all of us to explain to people how E15 can’t hurt your radiator and how one fill-up can’t hurt your fuel pump. Brace yourselves. It will be brutal. We are going to have to be vigilant for when this occurs.”
The oil industry has more political strength than ever before, according to Dinneen, and therefore the ethanol industry must also be proactive in reminding lawmakers of the benefits ethanol provides in lowering gas prices and reducing oil imports. He drew applause from the audience when he called for a “war-to-wheels analysis” of oil production as a comparison with the seed-to-wheels analysis of ethanol suggested by some members of Congress.
The oil industry is threatened by cellulosic ethanol’s looming commercialization, Dinneen added, and believes it must thwart biofuels expansion plans before cellulosic biofuels become readily available. According to Dinneen, cellulosic ethanol is likely to be commercialized in the U.S. within two years. “The oil industry then has a two-year window with which to try to stop this program, before we can demonstrate the success of the RFS.” —Kris Bevill
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2012 FEW Awards Ethanol Answer Man, DDGS researcher honored
For the 12th year, two members of the ethanol industry were honored with awards at the 2012 International Fuel Ethanol Workshop & Expo. Larry Johnson of LLJ Consulting and Business Development received the High Octane award, given to individuals that have helped the ethanol industry grow. Gerald Shurson, a University of Minnesota professor who was traveling in Japan during FEW, was selected as the winner of the Award of Excellence, given to those that have made significant technical contributions. Johnson served as Minnesota’s Ethanol Answer Man for 10 years, working to educate consumers, manufacturers and mechanics about ethanol. He helped get legislation passed in 1986 for a 20-cent-per-gallon incentive on the first 15 million gallons of ethanol produced. “That’s Ethanol Booster Larry Johnson, right, received the High award at the 2012 FEW, in recognition of his long the key piece of legisla- Octane service in promoting ethanol. The award was presented tion that got the Minne- by his longtime friend, Mike Bryan, chairman of BBI sota industry started,” he International. said. In 1998, Shurson, a professor in the U of M’s department of animal science, was asked to meet with a group of general managers from Minnesota ethanol plants and a marketing company. Wanting to expand beyond the cattle industry, they sought to learn why swine producers or animal nutritionists weren’t willing to use DDGS in swine diets. A voluntary 10-cent-per-ton checkoff program was established and the funds were used to conduct the first experiments on whether the coproduct was a suitable feed for swine, he said. That led to other groups funding similar research, which led to a large body of research on the use of DDGS in swine production. Shurson also developed and manages a U of M website about DDGS, which he calls a one-stop shop for research-based information. The website helps him manage his time, he said, as he is often “bombarded by emails and phone calls” about DDGS.
In addition, two students were named as the winners of the 2012 Kathy Bryan Memorial Scholarship, each receiving a $2,000 scholarship. Jason Croat of Rushmore, Minn., has worked as an intern on the fermentation research team for Poet Research and is working on a double major in biotechnology and microbiology at South Dakota State University. Lamberton, Minn., resident Hillary Kletscher, the daughter of the CEO of Highwater Ethanol LLC, is a student at Iowa State University majoring in biological systems engineering with a biorenewables emphasis. —Holly Jessen
PHOTO: BBI International, Susanne Retka Schill
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Cellulosic Ethanol Here Today Protecting the RFS is critically important “Don’t mess with the RFS” was the mantra of several speakers at the International Fuel Ethanol Workshop & Expo, including Tom Buis and Jim Collins. “[The renewable fuel standard] was a visionary piece of legislation and it really put the U.S. on the map as a world leader in biofuel production,” said Collins. Buis, CEO of Growth Energy, gave opening remarks the morning of June 6 at the conference in Minneapolis, followed by a keynote presentation by Collins, president of DuPont Industrial Biosciences. The RFS is likely safe from appeal in an election year, Buis said, but efforts to repeal it are brewing. “If we roll the RFS back we will pick winners and losers and the winner is oil,” he said, adding that it will halt the progress of advanced biofuels as well. Buis urged every person in attendance to get involved immediately. “Write a letter to every congressman and senator in your area,” he said, adding that there
are plans to create a large coalition in support of the RFS. Collins seconded Buis, adding that the industry must stay on track with a unified and consistent message. Besides writing letters, Collins urged attendees to talk to their neighbors about the positives of ethanol. Employees working in the ethanol industry need to hear the story, too. “Fire them up as well, get them involved,” he said. Cellulosic ethanol is finally becoming a reality, with companies building commercialscale facilities. DuPont has operated a pilot plant in Vonore, Tenn., for the past two years and is now building a 28 MMgy corn stover cellulosic ethanol plant adjacent to Lincolnway Energy LLC, a corn-ethanol plant in Nevada, Iowa. The location was chosen partially due to a good supply of corn, access to rail and existing infrastructure. Being next to a well-run plant was also a draw. “We chose to work with
Lincolnway so we can build on each other’s strengths,” he said. DuPont is in good company, Collins said, mentioning BP, Abengoa Bioenergy and Poet-DSM Advanced Biofuels as three othBooster ers working on major Biomass Jim Collins, president commercial-scale plants. of DuPont Industrial Altogether, the facilities Biosciences, described the progress made in will produce about 100 the commercialization MMgy cellulosic ethanol of cellulosic ethanol by several major and create more than developers in his 500 direct jobs. “All of remarks at the FEW. these numbers start to tell a story,” he said. “Ladies and gentlemen, that story is, commercial development of cellulosic ethanol is a reality. It’s here today.” —Holly Jessen
Developers report synergies, challenges
Sharing Strategies A morning general session panel at FEW brought attendees up-to-date on projects. From left, Doug Rivers, ICM, Steve Hartig, Poet-DSM, Patrick Gruber, Gevo, Chris Standlee, Abengoa, and Toby Ahrens, BioProcess Algae.
Multiple commercial-scale cellulosic and advanced biofuel facilities are currently in various stages of development throughout the U.S. and on June 6, leaders of a few of those companies gathered for an International Fuel Ethanol Workshop & Expo general session panel, hosted by BBI International Program Director Tim Portz, to provide project updates. St. Joseph, Mo., is home to a pilot-scale facility constructed by ICM Inc. to test its cellulosic ethanol process. Doug Rivers, ICM research and development director, said corn stover, switchgrass and energy sorghum have been targeted as feedstocks for the 10-ton-per-
day facility. He listed strategic reasons for colocating cellulosic ethanol facilities with corn ethanol plants, including shared infrastructure and synergies with steam, water and some process streams. Steve Hartig, vice president of biobased energy at DSM, said that since the official groundbreaking in March, construction of the Poet-DSM Advanced Biofuels LLC 20 MMgy corn cob-based ethanol facility has steadily continued at the site in Emmetsberg, Iowa. The cellulosic plant, expected to begin operations in late 2013, is co-located with Poet’s 55 MMgy corn ethanol facility. Biogas produced at
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the cellulosic plant will be used to power both facilities. It is expected that the same farmers who provide feedstock for Poet’s corn ethanol plant will also provide corn stover. Hartig said that while the current co-location model is effective for the first wave of next-generation facilities, he expects the industry will move toward an all-in-one concept, producing multiple products from a single facility. Construction of Abengoa Bioenergy’s first cellulosic ethanol plant is also underway in Hugoton, Kan., and due to be completed late next year. Chris Standlee, executive vice president, showed photos of the completion of roads and installation of fermentation tanks. All equipment for the 23 MMgy multifeedstock facility has been ordered and biomass is already being stored onsite. Abengoa decided to construct its first cellulosic facility as a greenfield project, although co-location with existing corn ethanol facilities is likely in the future. “It’s our firm belief that having multiple feedstocks significantly reduces financial and business risks for a new facility,” Standlee said. While there are indeed many co-location synergies, Standlee pointed out several challenges as well, including the flowability of feedstocks, varied fermentation parameters and the need to keep feed coproduct streams segregated. Another option for corn ethanol to participate in the next generation of biofuels is to switch end-products entirely. Gevo Inc. is currently starting up its first commercial-scale butanol facility in Luverne, Minn., a former corn ethanol plant that will produce up to 18 MMgy of isobutanol. Gevo CEO Patrick Gruber commended the ethanol industry for successfully building out its capacity and constantly evolving to improve efficiencies, but he made the case for producers to begin considering other products. “All of us need to think of ourselves has having biorefineries,” he said. “The product doesn’t have to be ethanol. It can be other things too.” —Kris Bevill
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Dropping Water Use Ethanol producers balance cost and conservation when reducing consumption By Holly Jessen
The results of a Google search of the words ethanol and water use are varied and interesting. Some of the information is up-
to-date and lays out the industry’s dramatic reduction in water use in the past 10 years, to an industry average of less than 3 gallons of water per gallon of ethanol produced. Other articles contained dated and downright sensationalized information, pigeonholing the ethanol industry as a water guzzler. That’s simply not the case, says Nandakishore Rajagopalan, associate director for applied research at the Illinois Sustainable Technology Center. While a few groups have either looked into building or have built an ethanol plant in a poorly chosen site where water is in short supply, the majority are located in places where there is enough water to go around. Just one negative story can paint the whole industry in a bad light, however, and that’s often what sticks in people’s minds. “They are worried that an ethanol plant will suck out all the water and leave them high and dry,” he says, adding that the truth is there are other industries that use much more water than the ethanol industry. How much water the industry uses depends on whether the source is looking at water consumption or total water footprint, which examines the full life cycle, starting with the water (including rainfall) required to grow the crop. According to Water Footprint Network, from which the U.S. Geological Survey takes some of its water use statistics, the global average water footprint of corn is 1,222 liters of water per kilogram of corn. On the ethanol side, it estimates a global water footprint for corn ethanol at 2,854 liters of water per liter of ethanol produced (more than 750 gallons of water per gallon of ethanol produced)— a number that is vastly larger than the water consumption figure cited by the JULY 2012 | Ethanol Producer Magazine | 35
An Iowa Tale of Water Use Mitchell County, north central Iowa
1” rain on 1 acre = 27,154 gallons water 35.44” 10–year county average annual rainfall 962,347 gallons per acre per year
350,000 gallons of water needed to grow 1 acre of corn 180 bushels per acre 2011 county yield 222,200 acres needed to grow 40 million bushels 77.8 billion gallons water needed to grow 40 million bushels
THE RELATIVE WATER USE
40 million bushels of corn processed 115 MMgy gallons ethanol produced 330 MMgy water used at Absolute Energy
0.0042 % It takes 42/100ths of 1 percent of the water to process the corn as it took to grow it.
Source: Rick Schwarck, chairmen, president and CEO of Absolute Energy LLC, St. Ansgar, Iowa
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ethanol industry. To keep that in perspective, however, the global average water footprint of beef is 15,400 liters per kilogram and the global average water footprint of chocolate is about 17,000 liters per kilogram. Ethanol’s opponents have really blown the industry’s water use out of proportion, says Rick Schwarck, chairmen, president and CEO of Absolute Energy LLC, a 115 MMgy ethanol plant in St. Ansgar, Iowa. The water use of ethanol plants operating in northeast Iowa and southeast Minnesota is what he calls a “flea on the back of an elephant.” Absolute Energy is located in Mitchell County, which has had 13 floods and not one drought in the past 10 years. “Worrying about ethanol water usage here is like someone in Phoenix, Ariz., worrying about not getting enough sunshine in July for a good tan,” he says. Schwarck points to information from the National Weather Service, USGS and Colorado State University to back up his data. For one thing, water consumed by crops such as corn doesn’t just disappear into thin air. It be-
comes part of the water cycle, which USGS refers to as evapotranspiration. This is basically the combination of water evaporation and transpiration from plant leaves. About 10 percent of the moisture in the atmosphere comes from transpiration with nearly 90 percent provided by bodies of water on the earth, the USGS says on its website.
Water Conservation Winners
It’s one thing to point out that the ethanol industry is not, in fact, the water guzzler that some have portrayed it, but that doesn’t mean the industry isn’t actively working to conserve water either. Like many other ethanol production facilities, Absolute Energy has taken steps to reduce the amount of water used in its ethanol production process. The company has employed advanced water recycling technologies, including a proprietary technology in the company’s CO2 scrubber and others, Schwarck says. According to a 2010 report completed by Steffen Mueller of the University of Illi-
nois at Chicago, on average, a dry mill cornethanol plant used 2.72 gallons of water to produce one gallon of ethanol in 2008. It also revealed that ethanol production facilities discharged an average of 0.46 gallons of water. “Our survey showed that ethanol plants have been very successful in reducing their water consumption,” he says. “The survey also indicated that many plants had plans to reduce their consumption even further.” Those are the most recent figures available and there are no specific plans to update them at this time. Currently under consideration, though, is a best-practices book to showcase all the energy and water efficiency measures ethanol plants have put into place since 2008, Mueller says. Industry giant Poet LLC has made significant strides in achieving a 22 percent reduction in water use—or a total of 1 billion gallons—at all its facilities by 2014. The company, which operates 27 ethanol plants in seven states, announced the Ingreenuity initiative in March 2010, which is aiming for an
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average of 2.33 gallons of water per gallon of ethanol produced. Poet is saving water at its plants primarily by installing its proprietary Total Water Recovery process, which recycles cooling water rather than discharging it. “We believe that water is a precious natural resource and we are committed to using as little of it as possible in our ethanol production process,” says Nathan Schock, director of public affairs and corporate social responsibility at Poet. As of May, 18 Poet ethanol plants were operating with Total Water Recovery and installation was under way at a 19th plant. “Poet plants have cut their cumulative water rate by about 770 million gallons per year, which is ahead of the pace necessary to achieve our goal,” he tells EPM. The company is closing in on its goal to install the system at all its ethanol plants, with two possible exceptions. The Poet Research Center located in Scotland, S.D., may not have the water recovery system installed because of its smaller size of 11 MMgy, Schock says. The other one is the 73 MMgy plant in Corning, S.D., which reclaims water from a wastewater treatment plant that won’t work in Poet’s water recovery process. In addition to reducing water use at its ethanol production facilities, Poet is working to survey corn producers that deliver corn to its plants to see how much of that corn is irrigated. “Our initial findings suggest that all of the plants are located in areas with little or no irrigation and that only a small percentage of the corn that we grind comes from irrigated acres,” Schock says. In Illinois, Rajagopalan conducted a water conservation study at Illinois River Energy LLC, a 110 MMgy plant in Rochelle. It concluded that, using easily implemented methods, the ethanol plant studied could reduce its water use by 6.5 percent to 12 percent. A more dramatic total water-use savings of 25 percent could be achieved with more innovative methods and, in some cases, regulatory changes would be required, Rajagopalan says. The study identified opportunities to increase water-utilization efficiencies, including minimizing cooling tower waste to potentially reduce water use by up to 11 MMgy
water and increasing reverse osmosis (RO) efficiency for an estimated 5 to 17.5 MMgy in water savings. Finally, it was found that there was another 4 MMgy in potential water savings if the ethanol plant reused its filter backwash water. Rajagopalan found that although current practices were to dump all backwash water into the sewer system, some of that water was clean enough to reuse within the plant. “If you actually look at the water quality at different time points, you would find, maybe the first few minutes, the water quality is really bad but after that it does look pretty good,” he says. “You are just wasting water at that point.” Illinois River Energy has implemented several of Rajagopalan’s report recommendations and is considering others. “One of the ones we implemented right from the beginning was looking at our cooling towers and trying to optimize the cost on those,” says David Files, process engineer. By increasing the amount of RO-treated water vented to the cooling tower, the company was able to save money on chemical use, such as bleach and sulfuric acid. “We’re aiming for a good mixture of RO water and city water,” Files says. “We use about 50/50.” Using too much city water in the cooling tower means increased ions and minerals, which cause fouled pipes and plating on heat exchanger plates, meaning lost efficiency, says Neal Jakel, general manager of the ethanol plant. The goal is maximizing the amount of times water can cycle though the cooling tower loop. Increasing the amount of RO water used to 50 percent has reduced the amount of blowdown, or water discharged from the cooling tower. That change was “low hanging fruit,” Files says, easy to implement immediately with a quick payback in savings of both water and chemical costs. And, there are other ethanol plants out there that could easily do this. In order to evaluate it, plants just need to do a cost-benefit analysis to discover what point gives the best return on investment. Illinois River Energy is also working on optimizing heat reclamation. Although the project has taken more time to implement, it has had a very good cost return, Files says. By expanding the use of heat exchangers,
the company has been able to recover and reuse heat while also reducing the use of cooling towers, which ultimately saves both chemicals and water. “It’s kind of a cascading cycle,” he says.
Gray Water to the Rescue
One of the more difficult to implement recommendations from Rajagopalan’s report was using wastewater from nearby municipalities that would typically get discharged. The idea is not new. Tharaldson Ethanol LLC, a 153 MMgy ethanol plant in Casselton, N.D., has been using treated wastewater pumped in from Fargo, N.D., since the plant was built. The $15.3 million project included building a wastewater treatment plant and installing 26 miles of underground pipelines. About 15 percent of the water used at the ethanol plant is piped back to Fargo as gray water, where it is retreated to drinking water standards. The former Levelland Hockley County Ethanol LLC ethanol plant, renamed Diamond Ethanol LLC after being purchased at auction by Palmer Energy in mid-May, began utilizing city wastewater for its water needs when the 40 MMgy plant began operations four years ago, Rick Osburn, city manager, tells EPM. The company went bankrupt and put the Levelland, Texas, plant in cold idle in December 2010 but is expected to be restarted by its new owners, a company formed by Conestoga Energy Partners LLC. Although the city has an adequate supply of water, it wasn’t “comfortable” selling the ethanol plant city drinking water, considering the plant would need up to 10 MMgy of water monthly at full capacity, Osburn says. Instead, about $70,000 in grant money was used to build a 3-mile pipeline so the ethanol plant could utilize city wastewater. The ethanol plant paid for the needed water filtration system, plus it purchases a small amount of city water for things like drinking and eye wash stations on a separate meter and water system, he says. Using city gray water is a good way to conserve water, Jakel says, adding that it’s something the Illinois River Energy is currently investigating. There are two major roadblocks, however. The first is that the ma-
jority of ethanol plants are located in rural areas with their own on-site wells. Not many ethanol plants “have the luxury” of being co-located next to a city that could supply them with both freshwater and gray water. “It’s probably only a handful, probably only less than 20 or 25 max,” he says. Cost is also a big factor. Unlike the plants in North Dakota and Texas, both located in areas where getting access to water would have been challenging or impossible, Illinois River Energy has access to plenty of low-cost water. A gray water project would require an additional treatment facility and a 3- or 4-mile pipeline to be built under a major highway, a river and railroad tracks. Such a multimillion dollar project is hard to justify when the $40,000 currently paid monthly for water is considered. “We need to have a driver here,” he says, “like some sort of tax incentive or grant to help augment the investment.” On the plus side, the treated water could be used for both fermentation and cooling towers. That would add up to a significant amount of well water displacement, considering that nearly 65 percent of the plant’s water use is for cooling tower water. There are some additional boxes to check, including looking at the possible impact to the plant’s permit for the vapors released from the cooling tower, as well as coming up with a cost estimate. “By the end of this year we hope to have a final decision,” Jakel says, adding that the company is hoping for public/private cooperation to make the project happen. Corn-ethanol plants aren’t the only ones that could use treated effluent water to reduce the amount of water consumed. Currently, Rajagopalan and other researchers are working on a study that shows it is feasible to reduce the water consumption of cellulosic ethanol production with the use of treated effluent water and other water-saving methods. Cellulosic ethanol production is expected to use 6 to 10 gallons of water per gallon of ethanol produced. “There is even more interest in seeing if we can conserve water in those operations,” Rajagopalan says. Author: Holly Jessen Associate Editor, Ethanol Producer Magazine (701) 738-4946 firstname.lastname@example.org
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Looks are Deceptive A healthy appearing ear of corn, like this one, may still contain above the threshold levels of mycotoxins, while a moldy ear of corn could possibly contain less mycotoxins than might be assumed, according to Pierce Paul, Ohio State plant pathologist. PHOTO: NCGA PHOTO CONTEST WINNER
42 | Ethanol Producer Magazine | JuLY 2012
A Pain in the Ear Whether ethanol producers need to worry about toxic levels in distillers grains depends upon Mother Nature By Holly Jessen
Although itâ€™s too early to tell what the 2012 corn crop will look like, mycotoxin-contaminated corn is a recurring issue for ethanol producers.
Mycotoxins are produced by an organism of the fungus kingdom, according to information from the National Corn Growers Association. Fungi spores are found almost everywhere in small quantities, consuming organic matter in conditions where humidity and temperature are sufficient. Mycotoxin development occurs at temperatures from 86 to 110 degrees Fahrenheit, 62 to 99 percent relative humidity and kernel moisture from 13 to 20 percent. Ethanol producers are well aware of what mycotoxins mean for the industry, including
JULY 2012 | Ethanol Producer Magazine | 43
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44 | Ethanol Producer Magazine | JuLY 2012
the fact that the ethanol production process concentrates the toxins in distillers grains by about three times the levels found in incoming corn. Recent surveys of mycotoxin levels in corn and distillers grains show overall levels have been low in the 2011 corn crop, although there are some â€œhot spots.â€? Two separate surveys of DON (deoxynivalenol, also known as vomitoxin) and ZEA (zearalenone) levels in distillers grains, conducted in late 2011 and early 2012, showed Ohio was an area of concern for mycotoxin contamination in distillers grains. Another mycotoxin study in Iowa is part of a five-year cooperative agreement program through the U.S. Food and Drug Administration. With the help of a $250,000 yearly grant, the Iowa Department of Agriculture and Land Stewardship is recording toxin levels and other information in samples of corn as well as distillers grains and corn gluten, says Travis Knight, laboratory bureau chief for the stateâ€™s ag department. The survey, which began in 2010, with the first full year in 2011, is recording the levels of four mycotoxins: aflatoxin, DON, ZEA and fumonisin. Although the projects may differ from state to state, Knight confirms that the FDA awarded grant money to multiple states. Aflatoxin can be a big problem in the southern states. It does, however, occur in other climates, including Iowa. â€œItâ€™s usually when thereâ€™s some kind of insult to the corn crop, be it a hail storm, or wind damage, or drought stress that can allow some kind of injury that can allow these molds to start to grow,â€? Knight says. Other mycotoxins, such as ZEA and DON, were a problem in 2009, a wet crop year in many areas. DON and ZEA contaminations start in the field during extended cool, wet and humid conditions in the weeks after corn silk emergence, says Pierce Paul, an Ohio State pathologist. The mycotoxins can also crop up during a wet harvest or in moist storage conditions. â€œThe biggest problems occur when all three of these conditions coincide, wet in field, harvest and storage conditions,â€? he adds. So which mycotoxins are of most concern? NCGA points to aflatoxin and fumonisin as the primary toxins affecting
corn. As far as the Iowa ag department is concerned, aflatoxin is at the top of the list, partially because itâ€™s the most toxic, points out David McFarland, feed chemist. In fact, before it started on the recent survey of four mycotoxins, Iowaâ€™s ag department had focused solely on aflatoxin. When the fiveyear project is completed, the state and the FDA should have a better handle on the question of which toxin is of most concern, Knight says. Charles Hurburgh Jr. has an allencompassing answer for ethanol producers. â€œAll [mycotoxins] are important,â€? he says, â€œespecially now with the Food Safety Modernization Act.â€? Hurburgh is an Iowa State University professor in the Agricultural and Biosystems Engineering department and a grain quality expert. As part of the food and feed supply chain, food and feed safety laws apply to ethanol plants, just as they apply to feed mills or food processing plants. Beginning this year, every ethanol plant must register as a food facility and develop a food safety plan for preventative controls, as well as submit to FDA inspections, Hurburgh says. The law, which the FDA calls â€œthe most sweeping reform of our food safety laws in more than 70 years,â€? went into effect Jan. 4. â€œIt aims to ensure the U.S. food supply is safe by shifting the focus from responding to contamination to preventing it,â€? the FDA says on its website.
The results of two mycotoxin surveys were presented March 21 in Des Moines, Iowa, during a half-day meeting sponsored by Nutriquest. Mason City, Iowa-based Nutriquest and David Schmale of Virginia Polytechnic Institute and State University conducted a survey of ZEA and DON levels while Poet LLC did a similar survey on DON levels. Both surveys pointed to a problem with DON in Ohio, said Ken Purser, general manager of Nutriquest. Looking at the survey results gathered by Nutriquest, Ohio had the highest concentration of DON in DDGS. In fact, there was one sample that contained 16.99 parts per million (ppm.) On average, however, the samples from Ohio
Breaking it Down Topic
Information on mycotoxin concentration in feed
Lowest action level by FDA is 20 ppb in dairy animals and up to 300 ppb in finishing beef cattle diets
Source of toxin (fungal)
Liver disease, decreased production and immunosuppression
Strictest advisory level by FDA in total ration of swine is 1 ppm and up to 5 ppm in feedlot cattle
Fumonisin Guidance levels are lowest for Equids and rabbits at 1 ppm and up to 100 ppm for poultry
Fusarium moniliforme and Fusarium proliferatum
Gastric upset, feed refusal and decrease in weight gain
Estrogen mimic that causes reproductive problems in swine especially
Lung edema in swine; particularly toxic to horses and donkeys
SOURCE: IOWA DEPARTMENT OF AGRICULTURE, FDA
contained more than 10 ppm, more than double the FDA advisory level maximum of 5 ppm for swine. â€œThese were samples taken from our customers as well as ethanol plants, so these DDG samples were actually in the feed industry,â€? Purser said. The Poet survey showed samples taken in Ohio contained, on average, more than 12 ppm DON. ZEA levels were also higher in Ohio, according to the Nutriquest survey. The samples collected in that state contained an average of more than 0.6 ppm ZEA. Purser recommended that DDGS fed to swine in Ohio be carefully monitored for high DON levels and potential ZEA contamination. On the other hand, DON and ZEA contamination in DDGS samples in many other states were of less concern. Nutriquestâ€™s survey looked at a total of 141 samples from 83 ethanol plants from 12 states while Poet tested 193 samples of distillers grains from the Western Corn Belt plus Ohio, Indiana, Michigan and Missouri. â€œThe DDGS from other states really appeared to be less affected,â€? Purser said. Nutriquest found Indiana, Nebraska, Wisconsin, Iowa, North Dakota, Minnesota, South Dakota, Illinois and Missouri all had DON levels of less than 2 ppm. Likewise, Poetâ€™s testing in the Western Corn Belt found about 1 ppm DON and little to no DON in Missouri. ZEA testing showed slightly less than 0.2 in Michigan and 0.1 or less ZEA in the remaining states on the list. Why did Nutriquest conduct the survey? Although itâ€™s not something the company does routinely, the company is frequently asked about mycotoxin levels, Purser said,
adding that itâ€™s probably the second most common question. The company decided to look at DON levels due to a lot of interest in that mycotoxin, as well as the fact that it was a problem during the 2009 crop year. Ohio did have a mycotoxin problem last year, Paul confirms, however, it was localized and occurred in fields planted and harvested late under wet conditions. â€œThere is no reason to believe that Ohio is prone to having any greater mycotoxin problems than any other state,â€? he clarifies. â€œIn any given year, these same set of conditions are equally likely to occur in any other state.â€? In Iowa, the mycotoxin survey under way by the stateâ€™s ag department showed 2011 probably wasnâ€™t a big year for mycotoxins, Knight says. What they are finding, however, is that itâ€™s fairly common to find detectable levels of all four types of mycotoxins, especially in the ethanol coproduct samples. Part of the reason for that is the fact that the ELISA testing method used is very, very sensitive, he adds. The detection limits for aflatoxin were the most sensitive, at greater than 3 parts per billion (ppb) and the ZEA detection limit was at greater than 20 ppb. On the other end of the scale, DON and fumonisin detection limits were set at greater than 0.2 ppm. While there werenâ€™t many corn samples that contained detectable limits of aflatoxin and ZEA, the majority of the corn samples contained detectable limits of DON and fumonisin. On the other hand, virtually every sample of both wet and dry distillers grains and corn gluten contained detectable limits of all four. The lowest level of incidence was
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SOURCE: TRAVIS KNIGHT, IOWA AG DEPARTMENT
Looking for ‘Glowers’ One method of spot checking for mycotoxin contamination is illustrated in this photo of corn in regular light, right, compared to ultraviolet light. If florescence (glowers) are spotted, at left, the next step would be to test the sample to confirm whether it contains mycotoxins.
for the ZEA found in wet distillers grains, which showed up in 17 of the 25 samples. Aflatoxin, DON and fumonisin showed up in every sample of wet gluten. In addition, DON was found in every sample of distillers grains and wet distillers grains. Still, there weren’t very many samples that contained mycotoxin levels that were high enough to cause health problems to animals. “We’re not finding anything that
looks very alarming,” Knight said. “In general, there’s not a problem with the amount of mycotoxins.” For this study, the ag department collected samples on farm, before the corn or coproducts were fed to animals. The goal was to have a more “real world” look at the product animals are actually consuming. “Our numbers might be slightly higher than the numbers you
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would take if you were to sample [coproducts] directly from an ethanol plant,” he says.
Testing Inbound Corn
Although mycotoxins are a concern, testing all the time, every time at ethanol production facilities just isn’t practical, Hurburgh says. The 10 minutes it takes to complete beta tests and cost of the tests are two reasons for that. Instead, ethanol producers should step up testing as needed. “I have suggested that in every season, the plants keep a running composite for the day and test those for a while in new crop, to see if there is a problem,” he says. “If not, then stop testing.” Early this year, Charm Sciences Inc. received approval from the USDA’s Grain Inspection, Packers and Stockyards Administration (GIPSA) for a new 5-minute test kit that detects DON in corn and other grains. That’s half the time of previously approved test kits. The enzyme linked immunosorbent assay (ELISA) test utilizes rapid onestep assay (ROSA) technology and requires fewer steps, helping to prevent user errors, says Mark Tess, mycotoxin product manager for Charm Sciences. Unlike other testing methods that require a standard curve be run for each sample to calibrate the system, this test uses a lateral flow methanol that allows for single or batch testing using a calibrated reader. “The ROSA FAST5 DON Quantitative Test has been manufactured to reduce the assay time and meet the new GIPSA specifications required to quantitate DON in the field.” Tess says. The new tests take advantage of high volume output with batching. In other words, the ROSA incubators can run four test strips at a time and multiple incubators can be used. Another benefit of the test is that it utilizes water for mycotoxin extraction, rather than ethanol or methanol used for extraction by other testing methods. Testing time is a barrier for farmers, as well, confirmed Charles Ring, a Texas farmer and vice chair of the NCGA Mycotoxin Task
Force. The task force met in April in Corpus Christi, Texas, and watched an on-farm demonstration of aflatoxin testing at his farm. “It was interesting to find out what farmers thought after watching a standard test for mycotoxin,” said Ring. “The group expressed their surprise at the amount of time the test requires, about 15 minutes on average. To those outside of farming, this might not sound burdensome, but, during the busy season, it can add a difficult delay into already rushed schedules. While the test is certainly important, it is vital that we continue research on mycotoxin to improve the ways we both manage and test for it.” NCGA’s Mycotoxin Task Force evaluates the problem, searches for solutions, compares testing procedures and analyzes available research on mycotoxins, Ring says. The group also works with the Aflatoxin Mitigation Center of Excellence, a coalition of southern land grant universities and producer organizations that pool funding sources to study the aflatoxin issue. “We funded six proposals for 2012 with pool money of close to $400,000,” he says. “Unfortunately that was less than half of what was requested. New funding will be one of our goals.” The task force also follows the labeling of products such as Aflaguard and AF36, a biological control approved by the U.S. EPA for fighting aflatoxin spread in Texas, which it would like to see approved for use elsewhere. Aflatoxin is a big problem for corn producers. Finding a solution could save millions in crop insurance money that is paid out almost every year in the southern states. “The more northern states have less of a frequency problem, but even then an isolated case could cause alarm with our foreign buyers such as Japan,” Ring says. “Storage problems and long distances will make the problem worse.” Author: Holly Jessen Associate Editor, Ethanol Producer Magazine (701) 738-4946 email@example.com
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50 | Ethanol Producer Magazine | JuLY 2012
Octane: What’s in Your Fuel?
Minimum octane rating decisions could greatly impact ethanol’s future market opportunities By Kris Bevill
At a time when ethanol’s high-octane rating is touted as its most valuable asset, a situation in South Dakota shows a lower-octane gasoline scenario could also emerge. In March,
officials at South Dakota’s Office of Weights and Measures began receiving calls from members of the state’s petroleum industry, warning that cheaper 85 octane gasoline had been making its way from the higher elevations in the western part of the state, where it has been historically sold, and into areas where the minimum octane rating is 87. South Dakota, like other states, requires octane labeling, and there was concern that the subgrade 85 octane was being marketed as 87 octane to unsuspecting customers. David Pfahler, director of the weights and measures office, dispatched inspectors who quickly confirmed that some of the stations suspected of selling 85 octane were not labeling the fuel as such. Word of the inquiry spread quickly among the fuel suppliers, however, and within the first few hours of the inspection blitz, Pfahler says officials began encountering hastily applied 85 octane labels on pumps at stations where the fuel was being dispensed, a last-minute attempt to ward off potential fines. As a result, the state identified just 29 stations of mislabeling 85 octane fuel as 87 or even 89 octane. By mid-May, the situation remained under investigation and inspectors were continuing to conduct fuel label compliance checks, but charges had not yet been filed against any retailer or supplier. Fines for mislabeling fuel, however, are
PHOTO: BBI INTERNATIONAL, KRIS BEVILL
JULY 2012 | Ethanol Producer Magazine | 51
relatively small, punishable by up to 30 days in jail, a $500 fine, or both.
Why 85 Octane?
The use of 85 octane gasoline dates back to carbureted vehicles manufactured before 1984. Engine knock was known to occur in that type of engine due to a number of factors, with altitude being one of the most significant. The American Society for Testing and Materials identified regions, primarily in the Rocky Mountains, where lower octane gasoline performed as well in those engines as 87 octane at sea level, and to this day, 85 octane is sold in those regions, despite the fact that vehicles now use computer-controlled systems unaffected by high altitudes. Western South Dakota receives its gasoline from suppliers in neighboring mountain states, so 85 octane has served as the regionâ€™s regular unleaded gasoline for decades. The legality of the octane level was never made an issue, but the stateâ€™s regulations actually prohibit the sale of 85 octane fuel throughout the state.
Suppliers were notified of the regulatory discrepancy after 85 octane use was discovered in eastern South Dakota this spring, but rather than comply, they told the state that 85 octane is the only gasoline provided by area suppliers, so if 87 octane is required, the western region of the state would face gas shortages. Caught in a difficult situation, the state agreed to allow 85 octane gasoline to continue being sold, if properly labeled. Then, in a surprising move, the state said it would propose to legalize 85 octane throughout the entire state. As of May 17, an official rulemaking had not yet been proposed, but it was anticipated that the state would soon issue an emergency rule to legalize 85 octane temporarily statewide before moving forward with the traditional rulemaking process.
Lower Octaneâ€™s Impact on Ethanol
While perhaps not immediately recognizable, the South Dakota situation bears signifi-
cant potential consequences for the ethanol industry. No vehicles are currently approved for use with fuel containing an octane level below 87, and because the 85 octane fuel being used in South Dakota is being blended with ethanol, there is concern that ethanol will take the blame for vehicle damage actually caused by lower octane gasoline. â€œWe think people will have problems with it and when they do weâ€™re reasonably certain, from what weâ€™ve seen elsewhere in the country, that itâ€™ll be blamed on ethanol,â€? says Ron Lamberty, senior vice president at the American Coalition for Ethanol, the Sioux Falls, S.D.-based ethanol industry group. Additionally, because lower octane gasoline can be produced more cheaply, if 85 octane is officially allowed into the eastern part of South Dakota, refiners in neighboring Minnesota may feel pressured to lower octane ratings, beginning a domino effect of refiners reducing octane rating. â€œEventually you create a system where refiners have decided to do something that makes them more money and forced the govern-
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PHOTO: FORD MOTOR CO.
Small but Mighty Ford Motor Co.’s 1.0-liter EcoBoost engine is designed to offer fuel efficiency without detracting from the vehicle’s performance.
ment to accept it,” Lamberty says. “That can’t happen. That’s why there are standards in the first place.” Perhaps most important in the long run is the potential for octane itself to decrease in value. Ethanol’s 113 octane rating makes it a desirable octane booster in gasoline-ethanol blends, but if low-octane fuels begin to become acceptable in the marketplace, despite automaker warnings and environmental concerns, ethanol’s high-octane rating won’t carry as much value. To be fair, refiners would probably continue blending ethanol to bring the lower octane base fuels up to whatever the newest minimum is, but a regulatory decision to lessen octane’s importance would be a blow to future market possibilities for highoctane fuels.
Ford On Board
Increasing fuel economy standards for vehicles will require auto manufacturers to design smaller, more efficient engines that continue to satisfy the consumer’s desire for
power. Some automakers have already begun introducing these types of engines into the market, the most well-known being General Motors Co.’s Ecotec engine and Ford Motor Co.’s Ecoboost engine. High-octane fuels have been shown to be the most effective fuel for these types of engines, and some experts have suggested that higher octane gasoline could be beneficial in existing engines as well. Ford researchers noted in a March article in the scientific journal Fuel, that while more research is needed to quantify and optimize the costs and benefits, “substantial societal benefits” may be realized by capitalizing on ethanol’s high-octane rating. In the paper, titled “High octane number ethanol-gasoline blends: Quantifying the potential benefits in the United States,” the Ford researchers, led by Jim Anderson, examine the critical role octane rating plays in the design, operation, efficiency and emissions of spark-ignited engines. The researchers state that higher minimum octane ratings would enable higher compression ratios in
JULY 2012 | Ethanol Producer Magazine | 53
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Growing Supply In Europe, Ford Motor Co. plans to more than triple its annual production of vehicles equipped with fuel-efficient EcoBoost engines, cranking out more than 1.3 million EcoBoost engines for vehicles from 2012 to 2015. EcoBoost engines combine turbocharging, direct fuel injection and variable valve timing to deliver the power of a larger engine with the fuel efficiency of a smaller unit. Higher octane fuels can be used to further boost this type of engine’s performance and efficiency.
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future vehicles, improving efficiency, and benefit all spark-ignited engines and hybrid vehicles. “Incorporating ethanol with its inherent high-octane rating is one opportunity to enable an increase in the minimum octane rating for regular-grade fuel,” they said. Anderson and his colleagues point out that despite increasing blending of ethanol into the nation’s gasoline, the octane ratings of regular gasoline have remained unchanged for 40 years. The researchers attribute this lack of octane increase to petroleum companies modifying their base fuels to take full advantage of ethanol’s octane at a 10 percent blend. In the paper, Anderson’s group says that even if ethanol content is increased, the oil industry can be expected to continue to reduce the octane ratings of its blend stocks so that the final product meets minimum octane requirements, unless government policies raise the minimum octane rating. And, because automakers design the vast majority of their vehicles to operate on the minimum octane rating, the opportunity to increase vehicle efficiencies through the use of higher octane gasoline is limited. “If vehicle manufacturers knew with certainty that the minimum octane rating of fuel would increase at a known future date and remain at these levels, it would be possible to provide future engines that are designed with higher [compression ratios] and operate with correspondingly higher thermal efficiencies, which could also provide the potential for engine downsizing and turbocharging to further improve fuel economy,” the researchers said. Interestingly, the researchers note that the “logical first step” towards improving the nation’s octane rating would be to eliminate the use of 85 octane fuel in high altitude regions and establish a nationwide minimum octane rating. “This relatively simple change would affect a very small fraction of fuel produced, but would have an immediate efficiency benefit for vehicles using such fuel in those areas of the country, and would allow more efficient future use of nearly all fuel used by the [light-duty vehicle] fleet in the U.S.,” the researchers wrote. Anderson and other Ford researchers also contributed to a paper recently published by global automotive engineering association
SAE International that details research funded by ICM Inc. and conducted by AVL Powertrain Engineering Inc. to examine several aspects of increased ethanol blends as related to vehicle fuel systems. The paper, titled “Effect of Heat of Vaporization, Chemical Octane, and Sensitivity on Knock Limit for Ethanol-Gasoline Blends,” was co-authored by experts at AVL, Ford, BP Products North America Inc., Deere & Co., and Steve Vander Griend, head of research and development of ethanol engines at ICM. AVL researchers tested a number of ethanol blends during the study, ranging from E0 to E98, and found that when ethanol content is increased, the knock-limited performance and the thermal efficiency of engines significantly increases, particularly in turbocharged direct-injection engines. Vander Griend says the most exciting part of the study is that it demonstrates ethanol’s full value as a fuel. “There is value beyond E10 by simply adding ethanol,” he says. “When you give more octane via ethanol, you increase the range of efficiency.” Auto manufacturers still need to determine what their ideal octane rating will be before the ethanol industry can begin targeting a specific blending ratio, but based on current and previous research data, Vander Griend says he believes E30 could be “a great starting point” because it offers the increased cooling effect desired for fuel efficient engines and a research octane number, or RON, of about 100. The Ford researchers stop short of identifying an optimal ethanol DRYING TECHNOLOGY, INC. blend in their paper, but note that large increases in octane could be possible by blending 10 to 20 percent more ethanol into the 10 percent ethanol blends currently on the market. Not surprisingly, the petroleum industry has yet to express a willingness to increase the U.S. minimum octane level. “We feel the three levels of octane currently available serve the customer best,” says Bob Greco, downstream director for the American Petroleum Institute. He admits that refiners have adjusted their blend stocks to produce gasoline that meets minimum octane requirements when blended with ethanol. Ethanol’s high-octane rating is its most desirable property to blenders, he says, but he declined to discuss the
financial benefits for refiners who take full advantage of ethanol’s high-octane by using lower-cost blend stocks, stating that the costs vary on a refinery-by-refinery basis. According to Greco, consumers have the option of purchasing higher-octane fuels so there is no need to increase the minimum. But Anderson and his fellow researchers pointed out in their paper that as long as fuel with a high ethanol content and/or high octane number is classified as a premium grade gasoline, manufacturers will not optimize their vehicles to use the niche fuel. “Ideally, for a maximum societal benefit and to ensure a successful transition, the minimum octane ratings of all U.S. gasoline should be increased, rather than positioning the high ethanol content/high octane number fuel as a premium grade,” the researchers say in the paper. ACE’s Lamberty also believes the future
of the ethanol industry will focus greatly on its octane rating and the benefits of high-octane fuel. Ethanol is currently the cheapest, cleanest, highest-octane fuel available, and Lamberty says producers who were focused primarily on expanding and improving production just a few years ago will be paying more attention to increasing the value of their fuel now that the industry has matured. And if value is the focus, octane will be the subject of interest. “Anything we can do to maximize ethanol’s position as an octane product rather than just as an extending product is where we’ve got to move that product eventually,” he says. “Overall, the volume of gasoline or gasoline replacements being sold is not going to go up, so other than just making gallons, the next thing we have to establish as an industry is our value as octane.”
Author: Kris Bevill Associate Editor, Ethanol Producer Magazine (701) 540-6846 firstname.lastname@example.org
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June 10-13, 2013 Americaâ€™s Center St. Louis, MO
58 | Ethanol Producer Magazine | JuLY 2012
Battle for the
RFS Cellulosic biofuels, the blendwall, E15 and future fuel economy standards become weapons in the grudge match between Big Oil and ethanol By KRIS BEVILL
What would life be like for the biofuels industry without the renewable fuel standard (RFS)? Would there be a domestic market for even a small portion of the billions of gallons of ethanol produced each year in the U.S., or would producers be forced to export all of their product? Or worse, would they have to shutter plants for good? Would consumer gas prices skyrocket? Would refiners openly celebrate the revival of petroleumâ€™s unchallenged grip on the U.S. transportation fuels market, or would they struggle to meet domestic demand and turn back to foreign supplies for help? The RFS was created in 2005 to establish regulations ensuring that trans-
JULY 2012 | Ethanol Producer Magazine | 59
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60 | Ethanol Producer Magazine | JuLY 2012
‘The RFS is a critical issue for our industry and is growing in importance as we get closer to the blendwall. We’re starting to find that it’s becoming increasingly unworkable and unrealistic in its current form.’ —Bob Greco, American Petroleum Institute
portation fuel sold in the U.S. would contain a certain amount of renewable fuels. Congress modified that policy in 2007 to increase the minimum volume of renewable fuels to be blended into the supply and to set new categories, and related volume requirements, of renewable fuel sources. The basic goals of the policy are to reduce greenhouse gas (GHG) emissions, reduce the demand for imported petroleum, and expand the domestic renewable fuels sector. By most accounts, the RFS has already overwhelmingly succeeded in these goals and will continue to do so as biofuels volume mandates continue to increase through 2022. But petroleum groups, disgruntled with the notion of having to share an already shrinking gasoline market with biofuels producers, are ramping up their efforts to do away with the RFS, filing a lawsuit against the U.S. EPA to challenge its RFS mandates for cellulosic biofuels volumes and threatening consumer price hikes as the consequence of implied forced noncompliance as biofuels volume requirements grow in coming years. “The RFS is a critical issue for our industry and is growing in importance as we get closer to the blendwall,” says Bob Greco, downstream and industry operations director for the American Petroleum Institute. “We’re starting to find that it’s becoming increasingly unworkable and unrealistic in its current form.”
Regarding the “unrealistic” aspect of
the RFS, API has zeroed in on the cellulosic biofuels portion of the mandate. EPA was given the authority to waive or reduce portions of the RFS if the predetermined annual volume is deemed unachievable, and it has done precisely that for the first few years of the cellulosic biofuels category’s existence. This greatly reduced the amount of cellulosic biofuels obligated parties are required to blend, or purchase replacement credits for, in the event that actual gallons are not available. In 2012, for example, the mandated volume for cellulosic biofuels set by the Energy Independence and Security Act of 2007 would have been 250 million gallons, but the EPA reduced that number to just 8.65 million gallons to reflect much lower anticipated actual volume from qualifying biofuels producers. Still, API says that number is too high. It believes the agency is exercising improper use of its authority by setting an unattainable level that will ultimately require refiners to pay for cellulosic credits when no actual fuel is available. “Since we have zero gallons of those cellulosic biofuels commercially available, we don’t understand how the EPA could actually raise the 2012 mandate to a higher level when we have yet to see any fuel,” Greco says. “It becomes a fairness and equity issue and whether EPA is arbitrarily setting a standard without any basis in reality.” Refiners would prefer that cellulosic volume requirements be based on several months of proven production. They have proposed this alternative repeatedly, but the
‘When the RFS was first enacted, we were 60 percent dependent on foreign oil. As a direct consequence of the RFS, we are now only 45 percent dependent. The RFS has been a huge success. Big Oil doesn’t like it. Big deal.’ —Bob Dinneen, Renewable Fuels Association
EPA has said it believes it necessary to be optimistic when setting standards for cellulosic biofuels in order to encourage investment in the new industry. Supporters of cellulosic biofuels expansion have pointed out that the fees paid by refiners to purchase cellulosic credits has been minimal compared to the profits generated by those companies each year, but Greco says fines aren’t the issue. “The issue at hand is whether EPA is fully utilizing its existing authority to adjust the biofuel mandate to what it should be: recognizing available production,” he says. “Right now, it seems to be based on press releases and promises.” The lawsuit filed by API to challenge EPA’s regulatory authority over RFS volumes was still in the very early stages in midMay and no briefing schedule had been set, but the court did agree to allow six biofuel industry groups to intervene on behalf of the EPA and defend its implementation of RFS requirements. Bob Dinneen, president and CEO of the Renewable Fuels Association, says the EPA has demonstrated the flexibility of the RFS in reducing cellulosic biofuels mandates and he believes cellulosic biofuels producers will soon be able to meet production goals. “We’re all disappointed that cellulosic hasn’t come on as rapidly as anybody anticipated, but no one anticipated the economic collapse in 2008 either, and it
is that situation and the devastating impact that it had on the financial sector that made it so difficult to secure funding for new projects like cellulosic ethanol,” he says. “That’s beginning to turn around.”
API indicated in legal documents that it may also address possible Clean Air Act violations made by the EPA in failing to decrease the 2 billion gallon advanced biofuel volume requirement or the overall 15.2 billion gallon renewable fuel volume for the 2012 RFS. Concerns related to the advanced biofuel mandate were somewhat substantiated by a recent Hart Energy report, which found that a lack of Brazilian sugarcane ethanol supply could make it difficult for obligated parties to meet advanced biofuel requirements as early as this year. Sugarcane ethanol is deemed by the EPA to meet the 50 percent GHG emissions reduction required to qualify as “advanced” and has therefore supplied a significant portion of the advanced biofuels volume until recently. If Brazilian ethanol is not available, obligated parties will need to turn to more expensive advanced biofuels such as biodiesel or renewable diesel, but the availability of those fuels is also limited and Hart Energy analysts predict that there simply will not be enough to satisfy RFS mandates. Some ethanol advocates have sug-
Source: Renewable Fuels Association
JULY 2012 | Ethanol Producer Magazine | 61
gested that improved production techniques should qualify at least some of the nation’s corn ethanol supply as “advanced,” but Dinneen says the scientific community has yet to reach a consensus on the issue and it would be premature to request that type of policy change at this time. “We are not in favor of changing the RFS right now,” he says. “We think it’s a risky political strategy.” Over time, corn ethanol could meet the 50 percent re-
duction in carbon, he says, but the chances of convincing Congress to modify the RFS to allow corn ethanol into the advanced biofuels category will be better after more evidence is amassed. Meanwhile, API is doing what it can to convince legislators to downgrade RFS requirements, or eliminate the policy completely. Greco says he believes pressure is growing in Congress to act in response to the various
issues brought up by the petroleum groups, including cellulosic biofuels production, the blendwall and invalid renewable identification numbers in the biodiesel industry. Dinneen expressed confidence that no action will be taken this year. However, it’s up in the air what will happen when a new Congress enters Washington, D.C., next year. “Certainly there will be legislative activity,” he says. “The long arm of Big Oil is going to make sure there is a constant drumbeat of negative attention on the RFS. Our job is to make sure there is a constant response so that members of Congress and the public understand the real benefits of the RFS.”
It’s true that demand for gasoline is diminishing as consumers drive more fuel efficient vehicles and travel fewer miles. This shrinking gasoline pool brings the E10 blendwall ever closer and refiners say it will soon be very difficult to comply with total renewable fuel volume requirements because the market is already nearly saturated with E10. This situation makes the introduction and expansion of E15 “critically important” to the continued success of the RFS, according to Dinneen, who says increased market opportunities for various renewable fuels and ethanol blends, including E85, will be needed to meet future RFS mandates. But the petroleum industry would rather not have E15 as an option and is awaiting a decision in a lawsuit it filed against the EPA based on its belief that the EPA’s decision on E15 was premature and could potentially damage millions of consumer vehicles. Besides, Greco says, even if E15 were compatible with all vehicles, 50 percent of the current retail infrastructure cannot be used with E15. API predicts that E15 implementation would at best delay the blendwall by two years. “It doesn’t get to the underlying problem of these large mandated volumes of ethanol that we will be unable to blend into fuels,” he says.
By 2017, the RFS as it currently stands will require 24 billion gallons of renewable fuel to be blended into the nation’s transportation fuel. President Barack Obama’s 62 | Ethanol Producer Magazine | JuLY 2012
Source: U.S. DOE ENERGY INFORMATION ADMINISTRATION
administration has also proposed continuing to increase fuel economy standards for vehicles that, if approved, will require passenger cars to achieve 40 miles per gallon in 2017. Greco admits the combination “raises challenges” with regard to oversupplies of gasoline and excessive refining capacity in the U.S., but he suggests that the petroleum industry is not trying to push ethanol out of the market. “Ethanol has a number of desirable blending properties, octane being first and foremost,” he says. “Regardless of whether or not there’s a mandate, ethanol has a use and a place in the gasoline pool.” He concedes, however, that the RFS is certainly the driving force behind the volumes of ethanol currently being used. If the RFS is reducing the market share for refiners, then it’s just more evidence that the policy is working as intended, Dinneen says. “The desperate need to reduce our dependence on foreign oil, to generate domestic renewable energy resources, is as critical today as it was in 2005 when the RFS was passed,” he says. “When the RFS was first enacted we were 60 percent dependent on foreign oil. As a direct consequence of the RFS, we are now only 45 percent dependent. The RFS has been a huge success. Big Oil doesn’t like it. Big deal.” Author: Kris Bevill Associate Editor, Ethanol Producer Magazine (701) 540-6846 email@example.com
JULY 2012 | Ethanol Producer Magazine | 63
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66 | Ethanol Producer Magazine | JuLY 2012
Stepping Up to a New Facility Nebraska town grows enzymes and community By Luke Geiver
If you’ve never heard of Blair, Neb., no worries—if you know anything about ethanol, someday you will. Just ask Kris
Ronnei, a chemical operator who lives in Omaha, 30 minutes south of Blair, about his place of employment and why he makes that drive to work every day. When people ask Ronnei what he does, or who he works for, he says, Novozymes in Blair. “Most folks ask what that is,” he says. After he tells them what enzymes do for ethanol, he goes into a different story, telling them how “someday very soon, with the use of our enzymes, people could theoretically make ethanol fuel out of any plant material, yard waste, tree branch, grass clippings or corn stalk. That usually gets their attention.” But for the folks who already know about the promise of cellulosic ethanol, there’s more to the story of Blair. Speak to Mark Young, another chemical operator who makes the drive from Omaha to Blair every day, or Fred Reikowsky, who after living in North Carolina for 15 years, moved to Blair to manage the facility. Both of them could tell you what the largest, newly operating enzyme production facility in North America has already done. PHOTO: NOVOZYMES
JULY 2012 | Ethanol Producer Magazine | 67
Producing Enzymes Novozymes held the grand opening May 30 for its new enzyme manufacturing facility located in Blair, Neb.
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 $$'