July 2009 Ethanol Producer Magazine

INSIDE: THE FINANCIAL FUTURE OF FRACTIONATION JULY 2009

Improving the Process New process technologies could open the door to greater (and cheaper) ethanol yields

Plus: Making the Most of Carbon Emissions Land Use Research Goes High-Tech Sweden’s Drive for E85

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ETHANOL PRODUCER MAGAZINE

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ETHANOL PRODUCER MAGAZINE

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ETHANOL PRODUCER MAGAZINE

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contents

vol. 15 no. 7

62 PROCESS A Triple Play for Higher Yields Industry technology provider EdeniQ Inc has developed a three-step process meant to help ethanol producers obtain more ethanol from each bushel of corn.

–By Ryan C. Christiansen

70 RESEARCH Land Use Research Goes High-Tech NASA researchers are mining satellite data to show the effects of land use change on soil carbon pools, the amount of land dedicated to biofuel feedstocks and the overall productivity of croplands. Results from NASA’s research could influence indirect land use regulations.

–By Erin Voegele

78 FRACTIONATION The Financial Future of Fractionation EPM explores how fractionation has evolved in the past year and what the future holds for this technology.

–By Hope Deutscher

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88 EUROPE Sweden’s Drive for E85 Sweden is the only European Union member allowed to import undenatured ethanol from Brazil at a lower import duty. The situation has led to growing dissent among Union members and speculation as to how long the special treatment will last.

–By Ryan C. Christiansen

102 POLICY The Difficulty with DOE Funding The U.S. DOE loan guarantee program was created to provide millions of dollars for renewable energy projects, but noticeably failed in its mission. EPM analyzes the program’s downfalls and proposed improvements.

features 46 TECHNOLOGY Tiny Bubbles to Make You Happy Arisdyne Systems Inc. believes its controlled-flow hydrodynamic cavitation systems can be used by ethanol producers to increase yields without increasing the use of corn.

–By Ryan C. Christiansen 54 CARBON Getting Creative with Carbon As U.S. ethanol producers continue to prepare for the possibility of federal carbon dioxide emissions regulations, EPM explores some of the options to reduce or creatively use carbon emissions.

–By Erin Voegele

–By Kris Bevill

110 BIOMASS Have Trailer - Will Move Biomass A Texas entrepreneur believes he has the solution for transporting and drying large amounts of wet, woody biomass.

–By Rona Johnson

118 PROFILE Cellulosic Ethanol: Ready, Set…Go Canadian enzyme developer and ethanol producer Iogen Corp. believes it is on the cutting-edge of cellulosic ethanol production.

–By Hope Deutscher

126 CELLULOSIC Changing the Game Coskata Inc. CEO Bill Roe visits with EPM to discuss the state of the cellulosic ethanol industry.

ETHANOL PRODUCER MAGAZINE

–By Sam Nejame July 2009

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contents contributions

departments 134 OIL Big Oil and Biofuels: Bitter Rivals or Best Friends?

As oil companies become more directly involved with the production of ethanol, the industry must re-evaluate its relationship with Big Oil. –By Todd Taylor and Zach Olson

146

12 The Way I See It Thank You for 25 Years of Excellence

By Mike Bryan 18 Business & People 22 Commodities 24 View From the Hill July: Fuel Freedom Month

By Bob Dinneen

134

140

9 Advertiser Index

140 RINS RIN Compliance Becomes a Full-time Job Individual companies are required to fend for themselves when it comes to complying with U.S. EPA renewable identification number regulations. As regulations become more stringent, company responsibilities have also become more time-consuming.

–By David Bennett 146 PROTECTION Protecting Shareholder Value Through Strategic Use of Chapter 11 Bankruptcy Bankruptcy does not have to be used only as a final option. It can sometimes be helpful as an effective strategy to protect a company and its stakeholders from further damages.

–By Scott McDermott

150 SAFETY Proper Safety Equipment Can Prevent Costly Falls Adequate fall protection equipment continues to be a concern for terminal operators tasked with ensuring the safety of their employees.

–By Tom Semiklose

150 ETHANOL PRODUCER MAGAZINE

25 RFA Update 26 BIObytes 28 Industry News 40 Drive Obama Receives High Marks for Ethanol Support

By Tom Buis 42 Legal Perspectives Going Private

By Danielle D. Smid 44 eBIO Insider Plug It In

By Robert Vierhout 154 Events Calendar 156 Marketplace

Ethanol Producer Magazine: (USPS No. 023-974) July 2009, Vol. 15, Issue 7. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices.

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

BPA Worldwide Membership Applied for October 2006

July 2009

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AdIndex 98 2009 Atlantic Bioenergy Conference 86 2010 International Biomass Conference & Expo 76 & 90 2010 International Fuel Ethanol Workshop & Expo 34 ADI Systems Corp.

106 Aecometric Corp.

8 Afton Chemical Corp.

48 & 77 Agra Industries Inc. 135 American Stainless & Supply 41 Anhydro Inc. 60 Ansul - Fire Solutions 49 AquaPower 108 ATEC Steel 51 BetaTec Hop Products Inc. 144 Biodiesel Magazine 152 Biofuels Automation 142 & 162 Biomass Magazine 30 Buckman Laboratories Inc. 84 Buhler Inc. 10 Burns & McDonnell 56 Centrisys Corp.

13 Cereal Process Technologies 136 CGB Enterprises Inc. 36 Check-All Valve Mfg. Co. 124 CHS Reewable Fuels Marketing 137 Christianson & Associates PLLP 58 Clifton Gunderson LLP 85 Cloud/Sellers Cleaning Systems 141 CompuWeigh Corp.

38 & 100 Crown Iron Works Co. Inc. 87 Davenport Dryer LLC 101 dbc SMARTsoftware Inc. 95 Delta-T Corp.

104 Dillon Transport 133 DuPont Chemical Solutions 132 E3 Energy Partners 114 ethanol-jobs.com 65 Eisenmann Corp.

107 Encore Business Solutions 105 ETS Laboratories 3 Fagen Inc. 33 FCStone LLC 122 Ferm Solutions Inc. 43 Fermentis 128 Fisher Tank Co. 35 Flottweg Separation Technology 115 GATX Corp.

61 Gavilon 57 GEA Barr-Rosin Inc. 163 Genencor ® - A Danisco Division 93 Gusmer Enterprises Inc. 96 Harris Group Inc. 91 Hengye USA

ETHANOL PRODUCER MAGAZINE

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99 16 & 17 4 14 &15 109 112 92 143 2 59 97 147 52 74 66 148 53 149 80 6 50 131 45 164 120 130 121 138 37 123 139 113 153 81 & 129 67 151 125 116 31 72 39 145 32 68 82 94 117 75 83 73 64 69

Husch Blackwell Sanders LLP Hydro-Klean Inc. ICM Inc. Inbicon Indeck Power Equipment Co. Intersystems Kennedy & Coe LLC Komax Systems Lallemand Ethanol Technology Louis Dreyfus Midwest Towers Inc. Mist Chemical & Supply Co. MOR Technology, LLC Nalco Co. Natural Resource Group Inc. Natwick Associates Appraisal Services New York Blower Co. Nexen Marketing USA Inc. North American Safety Valve Novozymes Perten Instruments Inc. Pioneer Hi-Bred International Inc. PhibroChem Poet LLC Pro-Environmental, Inc. R&R Contracting Inc. R.J. O’Brien & Associates Renewable Fuels Association Resonant BioSciences Rev Tech Robinson Fans Inc. Rock Hill Mechanical Corp.

Ronning Engineering Roskamp Champion/CPM SafeRack Salco Products, Inc. Scott Equipment Co. Siemems Energy & Automation Inc. Spraying Systems Co. Sulzer Process Pumps Sustainable Development Technology Canada Tranter Phe U.S. Tsubaki UOP VAL-FAB Inc. Vaperma Veolia Water Solutions & Technologies - HPD Victory Energy Operations, LLC Vogelbusch USA, Inc. W. Soule & Co. Wabash Power Equipment Co. WINBCO

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HOW TO REACH US

LETTERS TO THE EDITOR We welcome letters to the editor. Send your letter to: Ethanol Producer Magazine Letters, 4650 38th Ave. S. Suite 160, Fargo, ND 58104 or

EDITORIAL

PUBLISHING & SALES

Kris Bevill Editor kbevill@bbiinternational.com

Mike Bryan Publisher & CEO mbryan@bbiinternational.com

Ryan C. Christiansen Assistant Editor rchristiansen@bbiinternational.com

Joe Bryan Vice President of Media & Events jbryan@bbiinternational.com

e-mail to kbevill@bbiinternational.com.

Letters should include the writer’s full name, address and telephone number, and may be edited for purposes of clarity and space.

SUBSCRIPTIONS Ethanol Producer Magazine is now free of charge

Erin Voegele Associate Editor evoegele@bbiinternational.com

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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

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mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite

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COPYRIGHT Š 2009 by BBI International

ETHANOL PRODUCER MAGAZINE

July 2009

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The Way I See It Thank You for 25 Years of Excellence This issue of EPM is being distributed to everyone attending the 25th annual International Fuel Ethanol Workshop & Expo. I am honored that so many of you are joining us for this year’s event. As the industry grows and matures, BBI continues to strive for an enhanced conference experience—with quality presentations, an expanded expo and more networking opportunities. I hope that each delegate will leave this year’s conference with new and useful information and contacts to succeed in this exciting industry.

From its inception in 1985, the FEW has served as an industry catalyst—a globally recognized event helping facilitate the ethanol industry’s evolution by providing spoton technical workshops and invaluable networking forums alongside the largest, most widely attended expo in the business.

This issue of EPM offers several illustrations of how the industry continues to evolve. New process technologies are being perfected in labs and production facilities and will result in greater production yields and better coproducts.

From a lab in Ohio to a demonstration-scale plant in Canada, industry members are constantly improving the process of producing ethanol.

Current hot topics are always of great importance, both at the FEW and in every issue of EPM. I expect indirect land use change and greenhouse gas emissions regulations to be areas of interest during this year’s event and EPM has provided insightful looks at both of these issues.

As part of this year’s FEW, BBI has given two free full-access passes to every existing and under-construction ethanol plant in North America, facilitating the attendance of hundreds of plant employees, executives and board members. We understand that times are tough for many in the industry and it’s our way of saying “thank you” and do-

ing what we can to ensure the industry’s growth and success.

The FEW is, and always will be, a conference tailored to ethanol producers.

I extend a special thanks to the 2009 FEW Program Steering Committee: John Caupert, director, National Corn-to-Ethanol Research Center Samantha Finck, director of technical services, Cascade Grain Products; Gunner Greene, production manager, Energetics; Mick Henderson, general manager, Common Wealth Agri-Energy; Bob Randle, commercial development, Fuel Ethanol, Genencor International; Larry Russo, senior development manager, U.S. DOE; Carl Sitzman, CEO, E Energy Adams LLC; and Mark Stowers, vice president of research and development, Poet LLC. Their in-depth understanding of important technical issues in the industry played a key role in developing a valuable program that is informative and cutting-edge.

Without the support of the many sponsors and industry partners, we simply could not bring this world-class event to you. Please accept my sincere appreciation for your commitment to the industry. I commend you for helping to make the FEW such a successful and meaningful event.

The FEW’s real power is as a forum for connecting all aspects of the ethanol industry and cultivating a sustainable and profitable path forward for all. That’s what it is after 25 years, and that’s what it will be in another 25.

That’s the way I see it.

Mike Bryan Publisher & CEO mbryan@bbiinternational.com

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ETHANOL PRODUCER MAGAZINE

July 2009

Can fractionation keep ethanol profitable when corn prices go up and ethanol prices go down?

CPT says yes with MarketFlex™, a new way of fractioning that gives you the power to “dial in” the stream fractions the market values most…at any given time.

Fractionation for ethanol just got better. Choose the process with the greatest flexibility. Choose CPT’s MarketFlex™.

ETHANOL PRODUCER MAGAZINE

July 2009

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Making The New Ethanol™ takes mechanizing the biomass.

To convert 460,000 tons of cellulosic biomass a year, you’ve got to handle 460,000 tons. Gathering, bundling, storing, trucking, unloading, stacking, and conveying it bale by bale using highly mechanized and computerized equipment, over and over, day in and day out. It’s a big, tough, complex job requiring specialized machinery, synchronized logistics, a reliable infrastructure, and a smart business model.

Relax. We’ve done this in Denmark for 14 years. Last year Inbicon’s parent company turned 1.6 million tons of biomass into green energy for generating electricity. Now we’re bringing all that expertise to North America to help jump-start your Inbicon Biomass Refinery. And put you years ahead.

We’ve engineered a scale-up of Inbicon conversion technology that will demonstrate commercializa-

tion at 55tph/20Mgpy. Figure 460,000 tons of corn stover or wheat straw.

We’ve invited old-ethanol plants to join us in producing The New Ethanol for North American markets. By integrating our operation with your 100Mgpy plant, we expect to self-generate enough green energy to drive our process 100%. And produce enough surplus to drive yours 50–100%, depending on your business model.

Get the full story from our North American team. Call Thomas Corle at 717.626.0557 or e-mail info@inbicon.com.

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

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

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Business&People Ethanol Industry Briefs

Cupertino, Calif.-based AE Biofuels Inc. recently announced the signing of a strategic agreement to supply San Diego-based Pearson Fuels with cellulosic ethanol and biofuels for use at renewable fuels filling stations in various locations throughout the state.

Pearson Fuels constructed California’s first E85 fueling station six years ago. The two companies said they will also work to utilize available government programs to develop additional renewable fuels filling stations in the state.

Dutch energy company Bateman Litwin N.V. and Delta-T Corp. founders Bibb Swain and Robert Swain recently announced that litigation between the parties has been settled. The litigation was related to the Swains’ July 2007 sale of Delta-T stock to Bateman Litwin. The lawsuit filed

by Bateman Litwin in Dec. 2007 alleged that the Swains misrepresented Delta-T’s financial status during the sale.

While the terms of the settlement are confidential, a statement issued by Bateman Litwin states the company recognizes that the Swains acted properly during the sale of Delta-T.

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Agriculture Secretary Tom Vilsack has appointed Robert Bonnie as senior advisor to the Secretary for Environment and Climate. In this position, Bonnie will help guide broad policy and program decisions with an emphasis on those concerning the nation’s natural resources and climate issues. Bonnie has 14 years of experience working with the Environmental Defense Fund, where he most recently served as vice president for Land Conservation and Wildlife. Bonnie is a leading national expert on the use of markets as a means to reward stewardship on farms, ranches and forest lands, including carbon crediting and conservation banking for endangered species.

Enzyme developer Genencor, a division of Danisco AS, recently announced the commercial availability of three new products for its Accellerase enzyme product line.

Accellerase XY, XC and BG are accessory enzyme products

for small-scale process development that enhance ethanol production from a variety of biomass feedstocks, including agricultural and forestry residues, paper pulp, sugarcane bagasse, corn stover and cob, wheat straw, wood chips, waste paper and switchgrass. Accellerase XY and XC are designed as accessory enzymes to blend with whole cellulases, while Accellerase BG can be used to supplement enzyme complexes for improved beta-glucosidase activity for improved hydrolysis outcomes.

Annawan, Ill.-based Patriot Renewable Fuels LLC recently announced the company has commenced international shipments of containerized DDGS, including shipments bound for Thailand, Taiwan and China. Prior to international shipment, each container is sampled by a USDA-Animal and Plant Health Inspection Service certified inspector. When operating at nameplate capacity, Patriot Renewable Fuels can produce approximately 320,000 tons of DDGS annually.

Omaha, Neb.-based Green Plains Renewable Energy Inc. and BioProcess Algae LLC have executed a grant award agreement with the Iowa Office of Energy Indepen-

dence for a $2.1 million research and development grant with the Iowa Power Fund to construct a pilot algae plant.

The facility will be co-located with the Green Plains’ ethanol plant in Shenandoah, Iowa.

Grant funding will be used to support the installation of a series of photobioreactor units, which will utilize water, heat and carbon dioxide recycled from the ethanol manufacturing process to support continuous algae growth.

Quincy, Mass.-based BioEnergy International LLC has appointed Chris Tewell to the company’s senior management team as chief financial officer. BioEnergy International is a Tewell privately-held developer of next-generation biorefineries and has developed proprietary technology to convert cellulosic sugars into chemicals and fuels. Tewell specializes in the finance and operation of transportation assets and the development of energy and infrastructure projects. Previously, he worked at American Steamship, the Great Lakes shipping unit of transportation leasing company GATX Corp. Tewell also served as president and

ETHANOL PRODUCER MAGAZINE • July 2009

Sponsored by

CEO of Triton Container International Ltd. and president of GE Capital Asia Pacific.

Minneapolis-based Broadhead + Co. has been chosen by the United Sorghum Checkoff Program to provide domestic marketing strategy for a new sorghum checkoff program. Initially, the company will focus on increasing the use of sorghum for ethanol and opening new edible-uses markets for crop. Broadhead + Co. will also partner with the Renewable Fuels Association to build infrastructure for ethanol distribution within key sorghum geographies. “We see sorghum as the natural fit for an advanced biofuel because it’s a viable and available alternative to other grains,” said Bill Greving, USCP chair. Collections for the new checkoff began in July 2008; a referendum is planned for 2011.

Canada’s ecoENERGY for Biofuels program plans to provide up to $72.8 million

to Greenfield Ethanol Inc.’s Chatham, Ontario, facility and up to $14 million to its Tiverton, Ontario, facility to be used for technological advancements. GreenField Ethanol’s facility in Tiverton produces 3.5 million liters (900,000 gallons) of ethanol per year and is a test site for research and development projects. The Chatham facility, one of three dry mill continuous ethanol production plants in North America, produces between 103 and 133 million liters (27 and 35 million gallons) of ethanol per year.

The ecoENERGY for Biofuels program supports and provides incentives for renewable fuels production.

Poet Biorefining– Bingham Lake, Minn., announced it has reduced its water use and eliminated water discharge through the use of zero-liquid discharge technology. The 35 MMgy facility has traditionally required approximately 3.42 gallons of water to produce 1 gallon of ethanol, but according to Poet, the plant has reduced its water usage by 23 percent and now uses an

ETHANOL PRODUCER MAGAZINE • July 2009

estimated 2.64 gallons of water per gallon of ethanol produced. Water leaving the plant is limited to steam and the water content present in coproducts produced at the facility.

BNSF Railway Co. recently honored 86 shippers with its annual product stewardship award for safely transporting hazardous materials by rail during 2008. Honorees included: Abengoa Bioenergy SA, Advanced BioEnergy LLC, Aventine Renewable Energy LLC, Bushmills Ethanol Inc., Chief Ethanol Fuels Inc., CHS Inc., Husker Ag LLC, Nebraska Energy LLC, Plainview Bioenergy LLC, Poet LLC, Red Trail Energy LLC, Valero Energy Corp. and VeraSun Energy Corp.

Forty Norfolk Southern Corp. customers received safety awards for 2008. The award winners included: The Andersons Inc., Cargill Biofuels, and Global Ethanol LLC. The Canadian National Railway Co. also announced winners of its 2008 Safe Handling Awards. Among those honored: Amaizing Energy LLC, Aventine Renewable Energy, Ethanol Grain Processors LLC, Little Sioux Corn Processors, Platinum Ethanol Co., and VeraSun Energy Corp.

William Bathe, president of U.S. Energy Services, has been named as one of 40 Minnesotans on the Move by Minnesota’s Finance & Commerce magazine. Business leaders selected to receive the honor were chosen because it is believed they will make business history. Bathe is one of the founders of U.S. Energy Services and its sister company, U.S. Energy Engineering.

James (Jamie) E. Levine has been appointed executive vice president and chief financial officer of Cambridge, Levine Mass.-based Verenium Corp. Prior to joining Verenium, Levine held various positions with Goldman Sachs & Co., most recently as a managing director in the Power and Utilities Group in New York.

Prior to that, he was a managing director in the company’s energy group in London. The majority of his tenure at Goldman Sachs focused on investment banking in the oil and gas industries, with a particular focus on the refining and marketing sectors. Levine previously held positions with Lehman Brothers Holdings Inc. and Industrial Economics Inc.

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Business&People Ethanol Industry Briefs

Todd J. Guerrero has joined Minneapolis, Minn.-based law firm Fredrikson & Byron P.A. as a partner in the firm’s reGuerrero newable energy group. Guerrero’s experience and industry expertise will help expand the firm’s leadership in wind, biomass, and biofuels project development. Guerrero previously served as lead counsel for a farmer-owned cooperative while it developed, financed, and constructed the nation’s first 30 MMgy biodiesel plant. He will continue to serve as outside general counsel for biodiesel, ethanol and agribusiness clients, assisting them to resolve corporate, finance, and governance issues.

Dr. Jose Laplaza has been appointed director of strain engineering and lab operations for microbial metabolic engineering company Integrated Genomics Inc. He will lead the company’s internal metabolic engineering research.

Prior to joining Integrated Genomics, Dr. Laplaza served as both bioscience team leader and scientist at Cargill Inc.’s Biotechnology Development Center, where he was involved in a variety of new product development, fermentation and enzymatic optimization proj-

20

ects. Prior to Cargill he worked in the laboratory of Dr. Tom Jeffries at the U.S. Forest Service, developing genetic tools and yeast strains for the fermentation of woodderived sugars into ethanol.

French financial services giant Société Générale Group acquired the unfinished 115 MMgy Panda Ethanol Inc. plant in Hereford, Texas, in April for a $25 million credit bid in bankruptcy court. At press time, the deadline for closing the sale had not been determined. The unfinished plant was designed to be fueled by manure furnished from nearby cattle feedlots and to supply wet distillers grains with solubles to local feedlots.

Big River Resources Galva LLC completed its first grind May 14 at its new 100

MMgy ethanol plant in Galva, Ill., and was expected to begin shipping ethanol by June 1, according to Raymond Defenbaugh, president, CEO and chairman for parent company Big River Resources LLC. The $172 million plant is expected to process over 35 million bushels of corn annually.

Carbon Green BioEnergy purchased the former VeraSun Energy Corp.

40 MMgy ethanol plant at Woodbury, Mich., in early May. A lending group led by AgStar Financial Services had acquired the plant during a bankruptcy auction in March. Carbon Green BioEnergy is a partnership between Chicago-based carbon credit management and consulting firm Carbon Green LLC and Energetix LLC. Energetix is headed by Mitch Miller, who will manage the Woodbury facility as CEO for Carbon Green Bioenergy. Previously, Miller held leadership roles at Corn Plus LLLP in Winnebago, Minn., Chippewa Valley Ethanol Company LLLP in Benson, Minn., and Central Indiana Ethanol LLC in Marion, Ind.

Stoel Rives LLP has published a guide to federal clean energy opportunities made available under the American Recovery and Reinvestment Act. The guide, “Show Me the Money,” reviews the various programs and potential sources of funding opportunities for biofuels and other renewable industries. The firm’s lawyers will also track program updates and funding notices. According to the law firm, the guide was created because funding does not apply uniformly to all sectors of the renewable industry and opportunities for particular projects can be difficult to discern.

BBI International has announced that a Caring Bridge Web page for Kathy Bryan, company president and coBryan founder, has been established to offer updates on her health. Bryan was diagnosed with ovarian cancer in early 2008 and has undergone chemotherapy to treat the disease. Caring Bridge is a nonprofit Web-based service established for the purpose of connecting people during times of critical illness. Visitors to www. caringbridge.org can access Bryan’s information by entering kathybryan when prompted.

ETHANOL PRODUCER MAGAZINE • July 2009

Sponsored by

Iowa, according to the Iowa Renewable Fuels Association.

Thousand Oaks, Calif.based Ceres Inc. has partnered with the University of Georgia to develop new high-yielding switchgrass seed varieties and improved crop management techniques for the southeastern United States. Georgia researchers will provide regional experience and a collection of switchgrass breeding materials and germplasm. Ceres, which is funding the multi-year project, will maintain commercialization rights for products developed.

The Samuel Roberts Noble Foundation will also participate in the project.

South Dakota-based KL Energy has partnered with Brazilian renewable energy business developer add blue Ltda. The companies plan to construct a demonstration-scale cellulosic ethanol plant in Brazil. The 1.3 MMgy plant will implement KL Energy’s enzymatic process to utilize sugarcane bagasse as feedstock. The facility will be integrated into a sugar mill and will be expanded to commercial-scale when targeted yields are achieved, according to the company. The demonstration facility is expected to be operational by 2010.

Homeland Energy Solutions LLC has begun production at its 100 MMgy Lawler, Iowa, ethanol facility. Construction of the facility began in 2007. The plant is expected to utilize 37 million bushels of corn annually and will employ 45 people. Homeland’s chairman of the board said the company is grateful it missed the volatile markets of 2008 and plans to make risk management one of its top priorities. The facility is the 39th ethanol production facility to be located in

Potential cellulosic ethanol producer California Ethanol & Power LLC has appointed several people to its management team. CE&P executive vice president of operations, O. Wayne Mitchell has been appointed to the management committee. Mitchell previously served as senior vice president of technology and business development for Fagen Inc. Larry Gilbert will serve as executive vice president of the company’s agricultural opera-

ETHANOL PRODUCER MAGAZINE • July 2009

tions. Gilbert operates a California agri-business and will contribute his expertise in the areas of sugarcane growing operations and water conservation.

Jeffrey Flynn has been retained as the company’s sugarcane variety advisor. Flynn has worked in sugarcane entomology, seed cane production and scheduling, and quality control for more than 30 years.

Minnesota-based Aqua Power, a hydro-blasting and vacuuming services provider that specializes in cleaning ethanol production equipment, has created a new hydro-blasting services company - Premium Plant Services - as the result of a business restructuring plan. According to owner Mark Parenteau, the new company’s personnel have a combined 30 years of experience in the cleaning of process equipment and are committed to exploring new technologies that will improve the safety and efficiency of hydro-blasting.

PerkinElmer Inc., a Massachusetts-based diagnostic instrumentation technologies provider focused on develop-

ing technologies and services to improve the quality and sustainability of the environment, has expanded its biofuels analytical solutions portfolio to include new testing systems for ethanol. The company’s line of EcoAnalytix systems includes a metals analyzer, an alcohol system to determine the right blend of ethanol in gasoline and a fermentation broth monitor. All systems are accompanied by the company’s pre-configured software application and onsite training.

The U.S. Senate recently confirmed U.S. DOE nominees Deputy Secretary Daniel Poneman and Under Secretary for Energy Kristina Johnson. Poneman served as a principal of The Scowcroft Group, an international business advisory firm, since 2001 and has also held several positions on the National Security Council. Johnson was previously the provost and senior vice president for academic affairs at Johns Hopkins University. EP

SHARE YOUR INDUSTRY BRIEFS To be included in Business & People, send information (including photos or illustrations if available) to: Industry Briefs, Ethanol Producer Magazine, 4650 38th Ave. S. Suite 160, Fargo, ND 58104. You may also fax information to (701) 373-0638, or e-mail it to kbevill@bbiinternational.com. Please include your name and telephone number in all correspondence.

21

COMMODITIES REPORT Natural Gas Report

By Casey Whelan, U.S. Energy Services Inc.

Ten-year price trend broken May 11—Over the past decade, natural gas prices have generally been increasing and very volatile but have also displayed some rather consistent underlying trends.

The first price spike shown on the adjacent graph (“A”) occurred in late 2000. The winter started very harsh and storage inventories were drawn down rapidly. There was general concern that with sustained cold weather, there would not be enough gas to meet winter demand. However, winter temperatures moderated in late December and prices dropped dramatically.

The second price spike (“B”) occurred in 2005, after Hurricanes Rita and Katrina. Massive amounts of natural gas production were shut and damaged and there was extreme uncertainty regarding the nature and extent of the damage. Prices dropped through 2006 as production came back on line and storage inventories grew.

The spike last spring (“C”) was due to high demand for all commodities. Commodities were a hot asset class with massive amounts of money entering the long side of the market.

When market prices spike, the market generally would move down to an increasing trend line (line “E”). After each price spike, the market would set a low higher than the last low and the sequence would start over again. Had that occurred again with the most recent price spike, the market would have stalled out at roughly $6.00/ MMBtu. However, we have significantly undershot the 10-year trend line bottom. The market has traded at below $3.50/MMBtu, more

than 40 percent below the expected floor. Why did it happen? First, as financial markets weakened, there was a significant liquidation of market positions. Second, production has continued to rise over the past year. Third, demand has dropped, particularly in the industrial sector. Finally, liquid natural gas from overseas is moving into the U.S. as the Asian and European energy markets collapse. As soon as one or some of those factors change, we should begin to see the market firm and prices will again move up. EP Casey Whelan, vice president of strategic initiatives, can be contacted at cwhelan@usenergyservices.com.

Corn Report

By Jason Sagebiel, FCStone

Supply and demand report reveals surprises May 15—The May USDA supply and demand report offered some unexpected details. Despite perceptions that carry-out would increase due to weakened demand, old crop carry-out was reduced by 100 million bushels. Demand for exports and ethanol increased by 50 million bushels each and global world coarse grains decreased by 2.5 million metric tons.

The May report was the first look at the government’s new crop projections. Harvested acres were placed at 77.8 million acres—91.5 percent of what was thought to have been planted prior to wet spring conditions in the central Corn Belt. Yield was calculated at 155.4 bushels per acre. Total production was projected to be less than last year’s 12.101 billion bushels.

Ethanol demand is expected to increase by 350 million bushels in 2009-‘10 in response to increased production. Export demand is expected to increase by 150 million bushels as world usage is predicted to somewhat recover.

The feed sector is difficult to predict due to greater use of corn for ethanol and greater availability of distillers grains, however the USDA decreased feed demand by 100 million bushels.

Total corn demand is projected to be 12.040 billion bushels.

The result is that carry-out will equate to 1.70 billion bushels, or 22

9.1 percent carry-out-to-use ratio. This assumed lower figure could lead the market into a potential volatile situation again this summer.

Key market indicators will include weather, speculative money and the soybean market. EP ETHANOL PRODUCER MAGAZINE • July 2009

COMMODITIES REPORT DDGS Report

By Sean Broderick, CHS Inc.

Exports dominate market May 19—Exports are making up the bulk of activity on the DDGS market prior to the Memorial Day holiday.

Demand for both Midwest containers and bulk product out of the Gulf has been unsurpassed, with regard to both price appreciation and volume. Asian customers that had been taking product in containers have shifted some of their demand into bulk shipments, creating some great shipping opportunities for U.S. plants. Trucks are being profitably shipped to the Mississippi River from as far away as South Dakota to feed the export market. Typical destinations for western Corn Belt DDGS—California, the Southwest, and the Pacific Northwest—are being forced into placing higher bids just to ensure an adequate supply.

Increased demand for distillers grains can be attributed to a dramatic escalation of soymeal prices. Feeders are able to replace soy with inexpensive synthetic lysine with distillers grains, which results in significant cost savings, especially for hog feeders. Futures markets predict that soy prices will stay strong. Feed demand should decline a bit due to hotter weather, but there will continue to be feeders looking to cheapen their rations.

Increased shipping rates may temper the export bulk demand in the near future and barge freight has been rallying as well. The question of when “hot idled” and impending start-up ethanol plants will begin producing will also hang over the market, but all eyes will stay on the soy complex. EP

Regional Ethanol Prices ($/gallon as of May 15)

REGION

SPOT

RACK

West Coast

1.815

1.7870

Midwest

1.71

1.7375

East Coast

1.815

1.9650 SOURCE: DTN

Regional Gasoline Prices ($/gallon as of May 15)

REGION

SPOT

RACK

West Coast

1.8487

1.8452

Midwest

1.9275

1.7638

East Coast

1.7288

1.5583 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

MAY 2009

APRIL 2009

MAY 2008

Minnesota

135

124

160

California*

185

167

200

Chicago

148

138

155

Buffalo, N.Y.

160

143

160

Central Florida

170

156

SOURCE: CHS Inc.

Corn Futures Prices DATE

Ethanol Report

195

*Central Valley

(May corn, $/bushel)

HIGH

LOW

CLOSE

May 15, 2009

4.31

4.16

4.17 1/4

April 15, 2009

4.04

3.93 1/4

3.94

May 15, 2008

5.99 3/4

5.85 3/4

5.99 SOURCE: FCStone

By Rick Kment, DTN Biofuels Analyst

Seasonal price bump, demand still sluggish May 15—Energy prices rallied during the first half of May, following the traditional seasonal upward market trend prior to the Memorial Day holiday due to expected increased gasoline use for summer vacations and holiday travel. This year is no exception—to a point. Even though seasonal usage of gasoline and ethanol is expected to bounce higher through the summer months and prices will likely move higher through the end of May, overall demand for gasoline used in vehicles is likely to remain sluggish compared to the past several years. The poor economy and overall skepticism of consumers to aggressively spend money on travel or entertainment is expected to se-

verely limit overall product usage for the summer.

The ethanol industry may think this will not directly impact the ethanol market. However, because most ethanol is used as a blended product, any reduction in gasoline demand will directly impact overall usage levels of ethanol.

Prices bounced 20 to 30 cents higher from mid-April to mid-May, and have the potential to increase an additional 20 to 30 cents throughout the summer. However, in order for demand to increase, growth needs to be seen in the stock market and additional buying in outside markets must take place to restore consumer confidence. EP

Cash Sorghum Prices ($/bushel) MAY 18, 2009 APR. 17, 2009 MAY 18, 2008 Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

3.46 3.48 3.28 3.63 3.34 4.02

3.16 3.11 2.92 3.21 2.94 3.81

5.24 5.31 5.31 5.41 5.51 6.07 SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

MAY 2009

APRIL 2009

NYMEX

4.27

3.54

11.54

N. Ventura

3.83

3.23

10.13

Calif. Border

3.82

3.11

9.55

MAY 2008

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production Output January 2009

647, 000

December 2008

630, 000

January 2008

514, 000

(barrels/day)

SOURCE: U.S. Energy Information Administration

ETHANOL PRODUCER MAGAZINE • July 2009

23

VIEW FROM THE HILL

Dinneen

July: Fuel Freedom Month In the sweltering heat of a Philadelphia summer 233 years ago, a select group of men set out to redefine the course of history. In declaring independence from Great Britain, these colonists recognized that there comes a time when bold and determined action is needed to chart a new course, despite the challenges in doing so.

While the energy challenges facing this country are not as monumental as the creation of a new country free from the rule of the world’s then-greatest power, the reaction to these challenges by the current generation of Americans could be no less revolutionary.

The cost born by Americans for our reliance on imported sources of energy is well documented. Hundreds of billions of dollars flow out of this country each year to governments that are far too often at odds with our own. Billions of additional dollars are spent to protect this flow of energy. Occasionally, lives are put in harm’s way.

Like the colonists’ struggle against taxation without representation, this does not have to be the scenario.

Those familiar with America’s ethanol industry are well aware of the statistics: 9.2 billion gallons of ethanol produced in 2009; 321 million barrels of imported oil displaced as a result; $16 billion prevented from being sent overseas; and so on.

While impressive in their own right, when put into greater context these numbers tell an impor-

tant story. The 321 million barrels of imported oil displaced by domestic ethanol production is the equivalent to 10 months supply of oil from Venezuela. Or, such a volume represents more than 33 days of total imports from all countries. That is an entire month that America can say “thanks, but no thanks” to oil-rich nations and despots across the globe.

It is based on this fact that we celebrate this July as Fuel Freedom Month. As we contemplate the unparalleled consequences of the actions taken in Philadelphia, we must also take stock of the challenges we face as a nation today and our collective ability to meet those challenges as our forefathers did.

Perhaps the greatest showman and promoter in American history, P.T. Barnum once said of independence, “Those who really desire to attain an independence have only set to their minds upon it and adopt the proper means, as they do in regard to any other object which they wish to accomplish, and the thing is easily done.”

America’s ethanol producers have their minds set. Each day brings about revolutionary new means to accomplish our goals. And, with consistent public policy and a commitment to finish what we have begun, ethanol can help lead America to energy independence.

Happy Independence Day!

Bob Dinneen President and CEO Renewable Fuels Association

24

ETHANOL PRODUCER MAGAZINE • July 2009

RFA UPDATE

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

Reaction to EPA RFS Rule, Biofuels Working Group The U.S. EPA recently released its proposed rule for implementation of the renewable fuels standard (RFS) as signed into law as part of the Energy Independence and Security Act of 2007. The proposed rule details all aspects of RFS implementation, including calculations of greenhouse gas emissions for all fuels covered by the standard.

One area in which the RFA plans to engage the EPA is the issue of lifecycle greenhouse gas emissions related to the production and use of ethanol. The EPA analyzed both direct GHG emissions, which are those associated with the biofuels supply chain, as well as highly uncertain emissions assumed to occur through indirect impacts.

The RFS in its current form requires specific GHG reductions for the various renewable fuels included in the regulation. Specifically, corn starch ethanol must reduce GHG’s by 20 percent and cellulose-based ethanol by 60 percent when compared to gasoline.

The EPA has also attempted to calculate indirect emissions that occur as a result of purported land use changes and other factors occurring domestically as well as internationally. The controversial notion of indirect land use changes impacts, including those happening outside the U.S., are thought to greatly reduce ethanol’s GHG benefit.

“We welcome an open and robust science-based discussion of the indirect impacts of all fuels,” RFA President Bob Dinneen said. “The science of market-mediated, secondary impacts is very young and needs more reliance on verifiable data, and less reliance on unproven assumptions. Done correctly, such an analysis will demonstrate a significant carbon benefit is achieved through the use of ethanol from all sources.”

Key areas of the proposed rule in which the RFA will focus on improving are: • The value of feed coproducts • Future crop yields • Accuracy of satellite land cover imagery • Carbon stock rates associated with various land types • Indirect GHG impacts from other fuels • Various methods for time accounting of GHG releases

ETHANOL PRODUCER MAGAZINE • July 2009

CAFE standards and ethanol President Barack Obama’s recent announcement to raise the fuel efficiency of American cars should help to reduce vehicle emissions and U.S. dependence on foreign oil, as well increase the use of renewable fuel alternatives.

Bob Dinneen, RFA president, said that Obama’s mission to improve vehicle fuel economy combined with increased use of renewable fuels is the most immediate and effective solution toward meeting the country’s energy and environmental challenges.

“Raising fuel economy standards, allowing for ethanol blends in excess of 10 percent, and continuing to invest in next generation renewable fuel technologies are the kind of forward-looking policies that will begin to change America’s foreign oil habit,” Dinneen said. “President Obama’s announcement, together with his recently reaffirmed commitment to biofuels, are appropriate steps in that direction.”

Dinneen said changes to vehicle efficiency standards will have little impact on ethanol in the marketplace and that new engine technologies will be used to capitalize on the increased octane available from ethanol and reduce mileage differences.

25

BIObytes PHOTO: ANDREW HANCOCK, PURDUE MARKETING AND MEDIA.

Ethanol News Briefs

Green Tech America scientist Abhijit Mukhopadhyay, left, and company founder Nancy Ho examine a sample of yeast used in the production of ethanol.

Green Tech America Inc. has produced a new type of yeast that the company believes will help generate cellulosic ethanol more cost-effectively.

Nancy Ho, founder and president of Green Tech and a research professor at Purdue University’s School of Chemical Engineering in the Laboratory of Renewable Resources Engineering and the Energy Center, developed a yeast to help effi-

ciently produce ethanol from cellulosic biomass feedstocks.

The yeast ferments glucose and xylose; conventional yeasts only ferment glucose. Green Tech, which is based in the Purdue Research Park, has received and optioned for an exclusive license for improvements to the new yeast. The research has been funded by a number of entities, including the U.S. DOE.

Ethanol feedstocks used for methyl halide production Researchers at the University of California, San Francisco, have published a paper titled “Synthesis of Methyl Halides from Biomass Using Engineered Microbes,” which focuses on a process that uses a combination of bacteria and yeast to convert various ethanol feedstocks into methyl halide.

The chemical can then be used in solvents, propellants, and soil fumigants and can be manufac-

26

tured into gasoline and other chemicals using zeolite catalysts.

Principle investigator and UCSF associate professor of pharmaceutical chemistry Christopher Voigt said the bacteria/yeast combination has successfully converted sugarcane bagasse, corn stover, switchgrass and poplar into methyl halide. Researchers are currently focused on improving yields and rates.

SOURCE: LOS ALAMOS NATIONAL LABORATORY

Green Tech America creates new yeast

Researchers at Los Alamos National Laboratory have discovered weak spots within the lignocelluloses of plant cell walls which could be targeted by cellulose enzymes, resulting in more efficient material break-down and more cost-effective ethanol production.

Researchers break through plant cell barrier Los Alamos National Laboratory researchers have identified potential weaknesses among sheets of cellulose molecules comprising the lignocelluloses in plant cell walls - a discovery which could lead to more cost-effective cellulosic ethanol production.

A research team led by Paul Langan used neutrons to probe the crystalline structure of highly crystalline cellulose

and found that although a well-ordered network of hydrogen bonds typically holds cellulose together, the material also displays significant amounts of disorder, creating different types of hydrogen bonds at certain surfaces.

Thus, once the weak spots in the plant cell’s “armor” are identified, producers can attack those areas with cellulose enzymes for a more efficient break-down of the material.

ETHANOL PRODUCER MAGAZINE • July 2009

Brazilian researchers develop method to produce concentrated vinasse Vinasse contains a high concentration of potassium and is used as a fertilizer. Traditionally, the sugarcane ethanol production process creates approximately 10 to 12 liters (2.6 to 3.2 gallons) of vinasse for every 1 liter (0.26 gallons) of ethanol produced.

A more concentrated vinasse coproduct is beneficial because it costs less to pump, transport and apply to fields.

PHOTO: VICTOR DE LA CRUZ

Researchers at Fermentec, a Brazilian consulting company, have developed a process that allows ethanol production facilities to reduce the volume production of vinasse by 50 percent. Vinasse is the coproduct that results from the sugarcane ethanol production process after fermented mash is distilled.

In corn ethanol production, this product is distillers grains.

DOE funds lignocellulose research center The U.S. DOE plans to invest $21 million over the next five years into investigations of the physical structure of lignocellulose in plant cells.

The agency is providing funding via the establishment of a new Center for Lignocellulose Structure and Formation at the DOE Energy Frontier Research Center located at Pennsylvania State University.

Biology professor Daniel Cosgrove will serve as director of the center and will lead efforts to increase understanding of the physical structure of biopolymers in plant cell walls and improve methods for converting plant biomass into fuel.

DOE funding for the center is being provided through the American Recovery and Reinvestment Act of 2009.

Australia funds pilot-scale cellulosic ethanol plant Australia’s Department of Innovation, Industry, Science and Research has awarded $2.9 million ($2.1 million U.S.) to Ethanol Technologies Ltd. (Ethtec)—a subsidiary of forestry products company Willmott Forests Ltd.—to scale up a cellulosic ethanol process technology exclusively licensed from Apace Research Ltd. The technology originally was developed in collaboration with the Uni-

versity of Southern Mississippi, the Tennessee Valley Authority, and the University of New South Wales. Ethtec is building a $20 million ($18.4 million U.S.) pilot-scale biorefinery in Harwood, New South Wales, to be completed in late 2010.

Development of a commercialscale plant is expected to begin in early 2011 with completion planned for late 2012.

An ethanol train passes through Pozaldez in the province of Valladolid, Spain, as it makes its way from Muriedas in the province of Cantabria to Babilafuente in the province of Salamanca.

EU falling short of targets According to a recent European Commission report, European Union member states are unlikely to reach the union’s collective target of using 5.75 percent renewable fuels in the transportation sector by 2010. The Commission found that the EU might only achieve using 4 percent renewable fuels.

Meanwhile, the EU Council of Ministers adopted a legislative package in April that

increases the amount of ethanol to be blended with petroleum gasoline in the EU. The Council opted to increase the share of renewable energy it consumes in the transport sector to 10 percent by 2020.

The Commission expressed approval and said it believes the new directive includes a stronger legislative framework for ensuring increased use of renewable fuels.

ETHANOL PRODUCER MAGAZINE • July 2009

South African group joins Global Renewable Fuels Alliance The Southern African Biofuels Alliance, a non-profit organization that seeks to facilitate the establishment of a viable biofuels industry in South Africa, recently joined forces with the Global Renewable Fuels Alliance to promote biofuel-friendly policies around the world.

The Global Renewable Fuels Alliance is a non-profit organization that seeks to promote the expanded use of renewable

fuels through the advocacy of sound public policy, responsible research, and the development of new technology.

According to SABA president Andrew Makenete, biofuels represent an enormous opportunity for developing countries.

He said a sustainable biofuels industry would help attract investment in agriculture and improve income levels while reducing reliance on imported energy.

27

With the inclusion of indirect land use change emissions, the EPA estimates typical corn ethanol reduces GHG emissions by 16 percent when compared to gasoline.

Without the inclusion of indirect land use change, corn ethanol is shown to reduce these emissions by approximately 60 percent.

EPA issues proposed rule for RFS2 The U.S. EPA released its proposed rulemaking for the second stage of the renewable fuels standard (RFS2) on May 5.

The EPA’s proposed rule for the RFS2 expands the scope of the program to include all transportation fuels, including gasoline and diesel intended for use in highway vehicles and engines, as well as non-road locomotives and marine engines. As directed by the Energy Independence and Security Act of 2007, the proposed rule requires that some renewable fuels achieve greenhouse gas (GHG) emission reductions compared to the gasoline and diesel fuels they displace.

A fuel pathway is established for each fuel that accounts for GHG emissions produced over the fuel’s full lifecycle, including emissions resulting from the production and transport of the feedstock, production, distribution, blending, use and land use. Indirect land use change effects are also included in the fuel pathways of biofuels. With the inclusion of indirect land use change emissions, the EPA estimates typical corn ethanol reduces GHG emissions by 16 percent when compared to gasoline. Without the inclusion of indirect land use change, corn ethanol is shown to reduce these emissions by approximately 60 percent.

Leaders in the ethanol industry have criticized the EPA’s inclusion of indirect land use in the proposed rule for RFS2. Ac-

28

cording to the Renewable Fuels Association, the quantification of land use change emissions included in the agency’s lifecycle GHG analysis of ethanol is highly speculative and driven largely by assumptions. “We welcome an open and robust science-based discussion of the indirect impacts of all fuels,” said Bob Dinneen, RFA’s president and CEO. “The science of market-mediated, secondary impacts is very young and needs more reliance on verifiable data, and less reliance on unproven assumptions. Done correctly, such an analysis will demonstrate a significant carbon benefit is achieved through the use of ethanol from all sources.”

While Growth Energy CEO Tom Buis praised the EPA and Administrator Lisa Jackson for soliciting peer-reviewed science on the life-cycle analysis of biofuels for the purpose of the proposed rule, he said it is important to complete further study on the controversial theory of indirect land use change before finalizing the GHG emissions scores for biofuels. “Indirect land use change theory uses speculative models and incorrect assumptions in an attempt to blame American farmers for deforestation in Brazil,” he said. “As the European Union discovered while developing their biofuels regulations, the science on indirect land use is unsettled and the theory is not ready for regulatory usage.” In addition, Buis said that indirect land use change as currently pro-

posed doesn’t allow an accurate comparison of fuels because it does not include the indirect effects of other fuels. “To include indirect effects in regulations without even considering the indirect effects of other fuels would unfairly bias those regulations against biofuels,” he said.

Poet LLC CEO Jeff Broin issued a statement regarding the EPA’s announcement in which he expressed concern regarding an indirect land use change penalty for corn ethanol. “While many scientists have found significant flaws in the models used to calculate indirect land use change, I think the very concept is flawed and stems from a lack of understanding of ethanol and agriculture,” he said. “Due to increasing efficiencies in our production facilities and the increased corn yields from the fields surrounding them, we don’t need new land to meet the Renewable Fuel Standard.”

The National Corn Growers Association also weighed in on the issue. “In our conversations with the EPA, we understand a great deal of work needs to be done on modeling and a great effort needs to be put into using current and correct data regarding indirect land use,” NCGA President Bob Dickey said. “NCGA will be working closely with the USDA and EPA to ensure scientific data is used.”

—Erin Voegele

ETHANOL PRODUCER MAGAZINE • July 2009

The Chapter 11 bankrupcy filing by VeraSun Energy Corp. on Oct. 31, 2008, left many farmers with questions about the status of their grain supply contracts.

Valero pays premium to corn suppliers with VeraSun contracts In late April, Valero Energy Corp. announced to corn suppliers that if they had contracted to deliver to the bankrupt VeraSun Energy Corp. ethanol plants that Valero had purchased, Valero would honor a percentage of the contract price over the spot price.

According to Bill Day, director of media relations for Valero, the company offered to pay suppliers spot price plus 40 percent of the amount above spot price specified in their previous VeraSun contract. In addition, suppliers whose contracts were set below current market prices were allowed out of their contracts. The South Dakota Corn Growers Association announced it was encouraged by Valero’s move.

“The SDCGA sees this as an act of goodwill on Valero’s part, [which] is a step in the right direction for Valero to build trust with feedstock suppliers,” association president Bill Chase said. “Offering an option for producers implies Valero understands the importance production agriculture will have in the success and viability of their ethanol facilities.”

Earlier in April, Valero acquired eight former VeraSun properties, including facili-

ties in Aurora, S.D.; Albert City, Fort Dodge, Charles City, and Hartley, Iowa; Welcome, Minn.; Albion, Neb.; and a development site in Reynolds, Ind. Together, the plants have a 780 MMgy production capacity.

VeraSun’s Chapter 11 bankruptcy filing on Oct. 31, 2008, raised numerous questions for farmers and grain elevators that had legal relationships with VeraSun, according to Roger McEowen, director for the Center for Agricultural Law and Taxation at Iowa State University. McEowen said the bankruptcy code allows a debtor to decide whether to accept or reject grain supply contracts through the date of confirmation of the bankruptcy plan. The ethanol producer can wait until plan confirmation to decide whether to accept or reject corn contracts while the farmers and elevators that have agreed to sell to the producer are required to honor those contracts until the producer decides whether to accept them.

“Farmers are coming to the realization that when they sell in contractual settings like this, there is a risk that whoever your buyer is could have financial troubles before you get paid,” McEowen said. “Probably the biggest issue that we found [was]

ETHANOL PRODUCER MAGAZINE • July 2009

farmers just didn’t know what an executory contract was. They didn’t understand how the debtor could walk away and they couldn’t sell their grain on the market until the debtor tells them how the contract is going to be treated. That’s the way the bankruptcy code works. It really hit home when the VeraSun bankruptcy was filed, simply because of how big a player they were in the market.”

Monte Shaw, executive director for the Iowa Renewable Fuels Association, said while Valero has not yet joined the IRFA to represent the interests of Valero’s four Iowa ethanol plants, “it’s probably a pretty good-faith effort on their part” to reach out to suppliers who had contracts with VeraSun. “There probably are not too many of those contracts still out there that were in those extreme positions,” he said, “[but] from an ethanol producer standpoint, you have to have good relationships to get the corn to operate these things. We understand it’s a two-way street and you need reliable suppliers.”

—Ryan C. Christiansen

29

Ethanol industry leaders concerned by low carbon fuel standard implications On April 23, the California Air Resources Board voted to adopt the state’s proposed low carbon fuel standard (LCFS). The regulation, aimed at diversifying the variety of transportation fuels available within the state while boosting the market for alternative-fuel vehicles and reducing greenhouse gas emissions, requires refiners, importers and blenders of fuel within the state to ensure the fuels they provide for the California market meet an average declining standard of carbon intensity.

Under the regulation, indirect land use change effects are assigned only to biofuels. CARB’s decision to assign these indirect effects uni-

Although CARB has agreed to convene an expert work group to assist the board in refining and improving the land use and indirect effects analysis of transportation fuels, industry leaders have expressed concern that the regulation will unfairly penalize the ethanol industry.

laterally to biofuels has drawn criticism from leaders in the ethanol industry. Although CARB has agreed to convene an expert work group to assist the board in refining and improving the land use and indirect effects analysis of transportation fuels, industry leaders have expressed concern that the regulation will unfairly penalize the ethanol industry.

“Adopting this standard sets a dangerous precedent about the application of unproven science to industries across the country,” said Bob Dinneen, president and CEO of the Renewable Fuels Association. “This standard is based on flawed analysis and selectively enforced penalties against biofuels only. In unfairly penalizing ethanol, CARB is relegating California to more petroleum use as biofuels are the only viable alternative liquid fuel.”

According to Growth Energy CEO Tom Buis, ethanol is a low carbon fuel, and Growth Energy supports the development of low carbon fuel standards, however it believes California is unfairly assigning indirect land use change effects to biofuels, while other fuels are assessed by direct effects only. “The inclusion of an indirect land use change penalty against ethanol is not based on universally accepted

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ETHANOL PRODUCER MAGAZINE • July 2009

science, puts our industry at an unfair disadvantage and would likely lead to increased dependence on foreign oil and stall efforts to create a greener economy,” he said.

The American Farm Bureau Federation released a statement in response to CARB’s vote stating the board is unfairly punishing biofuels, and has created greater market demand for imported petroleum products. “American-grown renewable fuels have shown in study after study they are good for the environment,” said Bob Stallman, president of the AFBF. “Renewable fuels provide a greater degree of domestic energy security, and they are creating economic opportunity for rural America.”

The National Farmers Union agrees that the LCFS will increase dependence on fossil fuels. “A fairly and appropriately crafted low carbon fuel standard could spur opportunities for renewable fuels, but California’s scientifically dubious interpretation of international indirect land use change is an unnecessary setback to reducing our dependence on fossil fuels,” said NFU President Roger Johnson. “There is currently no clear scientific understanding of international indirect land use impacts. Until there is better scientific certainty, and analysis

accounts for all fuels including petroleum and natural gas, the inclusion of indirect effects should be delayed.”

Bob Dickey, president of the National Corn Growers Association, argues that California’s LCFS does not take into account trends that show an increase in corn yields. “Board members ignored important estimates of corn yield growth trends as well as the expertise of more than 100 scientists, who disagreed with the proposal’s one-sided focus on indirect land use changes that will only penalize biofuels,” he said.

Alternatively, the National Resources Defense Council praised CARB for voting to adopt the LCFS, stating the regulation marks the dawning of cleaner fuels for America. “Business as usual is not going to work for the ethanol industry, and we hope that they will meet this challenge with the same spirit of innovation that makes California the center of clean technology,” said Roland Hwang, transportation program director for the NRDC. “The ethanol industry needs to become a bridge—not a roadblock—to America’s clean energy future.”

—Erin Voegele

Petroleum marketers, refiners battle over ethanol in Southeast

Petroleum refiner and marketer Valero Energy Corp. claims it will close its Memphis, Tenn., oil refinery if legislation requiring refiners to supply marketers with unblended gasoline is passed.

PHOTO: ALLAN FERGUSON

Petroleum marketers in the southeastern U.S. are supporting efforts to force oil refiners to supply them with unblended gasoline so that the marketers can choose to blend ethanol into the gasoline themselves.

According to petroleum marketing groups, their inability to obtain unblended gasoline from refiners is a growing problem. “It’s being clamped down,” said Sherri Cabrera, vice president of the Petroleum Marketers Association of America, a federation of 47 state and regional trade associations representing approximately 8,000 independent petroleum marketers nationwide. “We’re seeing just more and more refiners offering [unblended gasoline] less and less.”

The issue so far appears to be most prevalent in the southeastern U.S., where North Carolina, South Carolina, Tennessee and Georgia have all either pursued legislation or passed laws to address the issue.

In South Carolina, legislators passed a law in June 2008 which required oil refiners to supply marketers with unblended gasoline.

The law was bundled with provisions for sales tax exemptions for energy efficient products and for a sales tax holiday for firearms. The American Petroleum Institute and BP Products North America Inc. sued, claiming the law violated the “one subject” provision in the state constitution which states that “every act or resolution having the force of law shall relate to but one subject, and that shall be expressed in the title.” The state’s Supreme Court agreed. In May 2009, the court repealed the law.

Meanwhile, legislators in Tennessee pursued similar legislation this spring. Petroleum refiner and marketer Valero Energy Corp. reacted by threatening to shut down its Memphis, Tenn., refinery, claiming the company would need to spend up to $150 million over two years for new equipment to comply with the proposed law.

In North Carolina, the National Petrochemical & Refiners Association, a lobbying group of which Valero is a also a member, sued the state for passing a law that requires refiners to sell unblended gasoline to marketers, allowing marketers to be “blenders of record” and obtain federal tax credits for blending ethanol into gasoline. The NPRA said North Carolina’s law “conflicts with federal law by preventing entities with a federal obligation to blend renewable fuels from doing so, and by requiring them to sell unblended fuel to entities that are not obliged by federal or state law to use renewable fuels.”

ETHANOL PRODUCER MAGAZINE • July 2009

Cabrera said petroleum marketers have a lot invested in tanks and infrastructure for blending ethanol with gasoline. “Refiners have tried to lock their business partners—petroleum marketers—out of the option to do that,” she said. “So some states have come in to say to refiners, ‘we’re going to make you do the right thing and work with your marketer business partners.’”

The ethanol industry is supportive of petroleum marketers and their efforts to secure ethanol blending opportunities. “In the history of ethanol, there have always been a number of petroleum marketers that want to do their own splash blending,” said Greg Krissek, board member of industry group Growth Energy. “Where this is an issue for petroleum marketers, we would be supportive of them wanting to have the clear, unblended streams.”

Krissek said the ethanol industry can be a partner in the effort to ensure marketers continue to have ethanol blending opportunities.

“In a number of states, you have plants that have good relationships with the petroleum marketing organizations,” he said, “and this is an area where we can probably work together.”

—Ryan C. Christiansen

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Government report calls for RFS infrastructure investments

The Biofuels Infrastructure Task Force, convened by the National Commission on Energy Policy, recently released a report stating if the U.S. is to meet federal renewable fuel goals, infrastructure incentives, including expanded use of E10 and E85, must be increased to accommodate the expanded use of higher ethanol blends.

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If the U.S. is to meet federal renewable fuel goals, infrastructure incentives in the U.S. must be increased to accommodate a wide variety of biofuels, according to a report released by the Biofuels Infrastructure Task Force. The task force was convened by the National Commission on Energy Policy in 2008 to examine infrastructure implications of the federal renewable fuels standard (RFS) — which calls for the U.S. to produce 36 billion gallons of biofuels by 2022 — and to develop recommendations for advancing the infrastructure investments needed to support timely and cost-effective implementation of the RFS. The task force concluded that significant efforts will be needed to achieve the RFS. “The renewable fuels standard is ambitious,” said task force chairman Norm Szydlowski, former president and CEO of Colonial Pipeline Co. and NCEP commissioner.

“To meet its timetable, approaches to biofuels infrastructure upgrades must also be ambitious. Whether it’s vehicles, pipelines, or pumps, new investment will be needed to meet the 36 billion gallon mandate,” he said.

ETHANOL PRODUCER MAGAZINE • July 2009

Task force members focused on identifying optimal pathways toward an integrated transportation and distribution network for conventional and ethanol fuels and after extensive discussion and analysis, identified three likely phases of biofuels infrastructure expansion.

Between 2008 and 2010, phase 1a will occur. Ethanol production will increase to 12 billion gallons per year. The existing multimodal transportation network will be used to transport ethanol from production centers in the Midwest to demand centers on the coasts; rail will play a major role.

Between 2010 and 2015, phase 1b will occur. During this phase, corn ethanol production will increase from 12 to 15 billion gallons per year. Absorbing this level of ethanol production will require the broad-based uses of a 10-percent ethanol blend and increased usage of higher-ratio blends, such as E85. Existing transportation and blending networks will be stressed from the required blended amounts of ethanol, requiring additional infrastructure investment.

After 2015, the U.S. will enter phase 2, in which ethanol and advanced biofuels production expands beyond 15 billion gallons per year. Further evolution of the transportation and distribution infrastructure will depend on several factors, including the geographic distribution of supply and demand centers, mandate certainty, import volumes, flexible fuel vehicle (FFV) production, and successful

ETHANOL PRODUCER MAGAZINE • July 2009

market penetration of E85 or higher-ratio fuels, if ethanol becomes the cellulosic biofuel of choice.

Based on these findings, the task force developed several recommendations: A growing number of FFVs will be needed to absorb biofuels.

Further consumer and manufacturer incentives may be needed to accelerate the market penetration of FFVs. Simultaneously, consumer acceptance of FFVs will depend in part on expanded access to E85 (or higher-ratio blends) at retail stations in urban and rural areas.

The number of different blends that fuel refiners must produce to meet state-level specifications should be reduced or limited to enable a more efficient biofuels transition.

Permitting processes need to be streamlined and simplified to reduce costs and lead times for infrastructure investment.

Market confidence in the government’s commitment to the RFS is a prerequisite for timely private large-scale biofuels investments. Current public incentives and subsidies should be refocused to include a greater emphasis on biofuels transport, refueling infrastructure and related vehicle technologies given the industry’s current state of development. Loan guarantees or tax credits could be effective ways to support needed infrastructure investments.

—Hope Deutscher

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California adopts renewable fuels program

The California Energy Commission plans to focus on new fuels and vehicle technologies to spur a reduction in the state’s total greenhouse gas emissions.

The California Energy Commission recently adopted the state’s first Alternative and Renewable Fuels and Vehicle Technology Program Investment Plan, which will allocate $176 million over the next two years to stimulate green transportation projects and encourage innovation to help meet the state’s aggressive climate change policies.

California is aggressively working to reduce greenhouse gas (GHG) emissions to 80 percent below 1990 levels by 2050, decrease petroleum fuel use to 15 percent below 2003 levels by 2020, and increase alternative fuel use to 20 percent of total fuel consumed by 2020. To achieve those objectives, the California Energy Commission plans to focus on new fuels and vehicle technologies.

“Vehicles are the major contributor to global warming pollution.

More than 38 percent of the carbon dioxide and other greenhouse gases in California come from burning gasoline and diesel in cars and trucks,” commission vice chairman James Boyd said. “The investment plan promotes sustainable development. With it, California is embarking on a fundamental transformation of its transportation system to substantially decrease greenhouse gas emissions and petroleum use.”

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The energy commission plans to invest $12 million over the next two years to advancing ethanol production facilities and increasing the number of E85 fueling stations. There are currently only 13 E85 fueling stations in California. The commission also plans to invest $3 million towards the financing of up to 20 feasibility studies of lowcarbon ethanol feedstock and modifying existing plants. According to the report, the multitude of feedstocks available in California from biomass waste streams and crops such as sweet sorghum and sugarcane make expanding in-state production of ethanol a realistic goal.

The emphasis will be on cellulosic technologies, but the energy commission will also consider near-term use of alternate sugar and starch feedstocks to displace imported Midwest corn as well as improve the process efficiency in existing plants. Four million dollars has also been allocated to support the construction of low-carbon ethanol production pilot plants.

The commission has also allocated $40 million for hydrogen fueling stations; $46 million for electric vehicles, public charging stations and manufacturing plants; $43 million for natural gas vehicles, fueling stations and biomethane production facilities; $6 million for advanced renewable diesel and biodiesel facilities; and $2 million for propane vehicles. An additional $27 million will go towards funding workforce training programs, research, public education and technical assistance programs.

According to the guidelines of the investment plan, existing federal, state and local funding will be leveraged with public and private cost sharing. On April 22, the California Energy Commission released its first grant solicitation, which focused on transportation projects applying under the American Recovery and Reinvestment Act. At least one fuel retailer has already taken measures to reduce GHG emissions from vehicles. In January, Sacramento-based Propel fuels launched a state-wide network of low-carbon fueling stations offering both E85 and biodiesel. In addition, the company recently announced a partnership formed with Enterprise Rent-A-Car to offer E85 to its rental customers. Enterprise will make flexible fuel vehicles available to its customers at all 12 of its Sacramento-area locations and will include a map to Propel’s five local fueling stations in each of the vehicles.

“We continue to increase our offerings of alternative technologies and environmentally friendly vehicles, and this includes flex fuel vehicles, but up until now there were few places for our customers to purchase E85 fuel. With Propel’s launch, and their plans to expand, we can now offer our customers more options and better access to low-carbon fuels,” said Chris Littlejohn, Sacramento area manager of Enterprise.

—Hope Deutscher

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Public comments on E15 waiver request

The U.S. EPA is expected to decide by December whether it will approve the nationwide use of up to 15 percent ethanol in standard gasoline.

Comments regarding the March 6 document submittal by ethanol industry representatives requesting the U.S. EPA approve the nationwide availability of fuel blended with up to 15 percent ethanol are being accepted by the EPA through July 20. The original deadline for comments was slated for May 21, but the agency granted a request from the National Corn Growers Association to extend the period for 60 additional days to allow farmers an opportunity to comment.

NCGA president Bob Dickey said the waiver issue is of great importance to the farming industry and the extra time was requested to allow farmers time to comment after completing spring plantings.

While farmers were hurriedly planting crops, representatives from both sides of the issue were busy submitting early comments to the EPA. More than 600 comments from both sides of the issue were submitted to the agency within the first 30 days of the period.

Iowa Gov. Chester Culver submitted a request on behalf of the state of Iowa in support of the waiver request. “The people of Iowa know that increasing the amount of ethanol that can be blended into the nation’s fuel supply will create green jobs, environmental benefit

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and help eliminate our nation’s dependence on foreign oil. The combination of the current economic challenges, lower oil prices and the near saturation of the 10 percent ethanol blend market are weakening the foundation of an industry that saved the nation hundreds of billions of dollars in oil imports in the past several years, while reducing greenhouse gas emissions,” he said, adding that an increase in the blend rate is needed to achieve an advanced biofuels future.

A letter signed by 28 members of the U.S. House of Representatives in support of the waiver request was delivered to EPA Administrator Lisa Jackson. “Allowing the use of ethanol blends up to E15 will help us preserve and enhance infrastructure that is critical to the timely development of cellulosic ethanol and advanced biofuels, have significant environmental benefits, foster our nation’s energy independence, create thousands of jobs and stimulate economic development in communities across the nation,” the letter said.

A number of opposing viewpoints came from private citizens concerned with the well-being of legacy vehicles. Specifically, several commentators noted that their vehicle’s owner’s manuals prohibits the use of fuel blends greater than 10 percent. The boating community, as well, has expressed frustration over the waiver request. Concerns with outboard motor performance as well as fiberglass tank corrosion and overall boat performance compiled the majority of boating-related comments.

Historically anti-ethanol industries have expectantly rallied against the waiver request. A coalition of cattle organizations, led by the California Cattlemen’s Association, urged the EPA to deny the blend rate increase request. “Keeping the allowable blend ratio to 10 percent will send a clear message to biofuel producers and the market that alternative fuels should transition to sustainable secondgeneration biofuels in order to promote industry growth, increase production capacity and provide a needed solution to our current food and fuel crisis,” the group stated.

Don Jackson, President and CEO of Pilgrim’s Pride Corp., said the EPA should deny the ethanol industry’s request on the grounds that there is no scientific proof that the use of higher ethanol blends will not be harmful. “We have a fleet of more than 1,800 vehicles which could be impaired, or have their pollution control systems impaired, by higher ethanol blends,” he said, adding that the company is concerned on behalf of its chicken suppliers that generators used to power their facilities could be harmed by increased ethanol blends.

The EPA will review all public comments before holding public hearings to further examine the issue. A final ruling is expected to be issued by the agency by Dec. 1.

—Kris Bevill

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DRIVE Buis

Obama Receives High Marks for Ethanol Support

By Tom Buis ime after time over the past three decades, our nation has witnessed the economic consequences of our addiction to foreign oil. But in his first six months in office, President Barack Obama has demonstrated he is not willing to sit back and wait for the next oil shock. With the presidential directive on biofuels announced this spring, the Obama administration is advancing our nation’s production of renewable energy, creating green-collar jobs, and reducing our dependence on foreign oil; however, some challenges still lie ahead on the regulatory front for ethanol producers.

The presidential directive has several important components, chief among those is the establishment of a Biofuels Interagency Working Group. The Working Group, led by U.S. Agriculture Secretary Tom Vilsack, U.S. Energy Secretary Stephen Chu and U.S. EPA Administrator Lisa Jackson, will help our nation do what it should have done long ago – implement sound policies to advance the production of renewable fuels. The president charged the cabinet members with three tasks: develop the nation’s first comprehensive biofuel market development program, which should include policies to increase flexible fuel vehicle production and assist with retail marketing efforts; coordinate infrastructure policies to help with the supply, transport, and distribution of biofuels; and work with the industry to improve the sustainability of biofuels feedstock production. The group will solicit peer-reviewed, scientific feedback to ensure its decisions are based on the best science available.

In addition to the goals laid out for the working group, the directive also tasks Vilsack with assuring rural America’s health and prosperity through support of biofuels, which we know is a crucial component of many American communities. Last year, the ethanol industry created and supported nearly half a million jobs. Vilsack is directed to refinance existing investments to preserve those jobs, and make funding opportunities available that will encourage production of advanced biofuels and help us produce existing fuels in greener ways. It’s clear the Obama administration under-

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stands that the ethanol industry has already made a significant contribution to our economy and has played a big part in reducing our dependence on foreign oil, which is why we’ve petitioned the EPA to increase the blend of ethanol in our fuel supply up to 15 percent.

The presidential directive on biofuels also instructs the interagency working group to conduct peer-review analyses of the indirect land use change (ILUC) theory before the EPA finalizes a rule that would take indirect effects into account as part of the revised renewable fuel standard (RFS). I support this review because I believe it is unfair to penalize American biofuels producers for land use decisions made in countries that they have no control over. The fact is, land use decisions are enormously complicated and involve many factors that have nothing to do with renewable fuels, including changes in currency, monetary policy, export needs, productivity gains, and weather, just to name a few. Meanwhile, the EPA has failed to examine the indirect effects of petroleum and is giving gasoline an unfair advantage. The carbon emissions that result from protecting the oil supply in the Middle East alone could double the carbon footprint of foreign oil. In short, the ILUC component of the Energy Independence and Security Act of 2007 needs to be repealed.

I give President Obama and his team high marks for recognizing the positive impact that the production of ethanol has had on our economy and national security. We hope to work with the Biofuels Interagency Working Group as they determine the final rule governing the RFS and we look forward to working with the Obama administration to meet its goal of utilizing biofuels for a greener, more economically secure future.

Tom Buis is the chief executive officer of Growth Energy.

Reach him at TBuis@GrowthEnergy.org or (402) 9320567.

ETHANOL PRODUCER MAGAZINE • July 2009

LEGAL PERSPECTIVES Smid

Going Private

By Danielle D. Smid any companies have been considering going private as a part of their efforts to reduce expenses.

“Going private” describes the process of reducing the number of a company’s shareholders to fewer than 300, thereby suspending the company’s obligation to file public reports with the U.S. Securities and Exchange Commission. There are benefits and detriments associated with a going private transaction and a company should consider both before determining whether going private is in the best interest of a company and its shareholders.

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Why Go Private?

Reporting companies are required to expend significant resources in connection with their ‘34 Act obligations, including, but not limited to, higher external auditing and accounting costs, higher costs of internal controls, increased SEC reporting costs, increased legal consulting costs, increased D&O insurance costs, and special board meeting fees. In addition, the high cost of disclosure and compliance of remaining a public company has been exacerbated by the requirements of the Sarbanes-Oxley Act of 2002 (“SOX”). Suspending a company’s reporting obligations will help reduce or eliminate these costs.

In addition, reporting companies are required to disclose information to the public, including to actual or potential competitors, that may be helpful to these competitors in challenging a company’s business operations and to take market share, employees and customers away. Suspending a company’s public reporting obligations will help to protect sensitive information from required or inadvertent disclosure to its competitors.

Moreover, operating as a non-SEC reporting company will reduce the burden on management and employees that arises from SEC reporting requirements, thus allowing management and employees to focus more of their attention on the company’s core business. Operating a non-SEC reporting company may eliminate the pressure and expectation to produce short-term per share earnings and may increase management’s flexibility to consider and initiate actions that may produce long-term benefits and growth.

Finally, smaller companies may receive limited benefits from being reporting companies because of the company’s small size, the lack of analyst coverage and the limited trading of shares.

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Detriments of Going Private By going private, a company will no longer have access to the public capital markets and may experience increased difficulty in raising capital from only private sources. This may limit a smaller company’s ability to expand its business or raise additional working capital necessary to continue operations. Among the ethanol companies who have gone private, who must raise new capital, there is some consternation with the increased difficulty and the possibility of once again becoming public.

By going private, a company’s shareholders will lose the benefits of registered securities such as access to information concerning the company that is required to be disclosed in periodic reports to the SEC. Additionally, the company’s shareholders will lose certain statutory safeguards because the company will no longer be subject to the requirements of the SarbanesOxley Act. The value and liquidity of a company’s shares may be reduced as a result of the company no longer being a publicly reporting company. In addition, a company’s directors and officers will have an increased potential for liability resulting from a going private transaction.

Additionally, should a company again exceed the threshold number of shareholders, the company would have to incur significant costs associated with filing past reports and/or filing a new registration statement. Finally, the going private transaction will include significant costs in time and money to complete the necessary filings with the SEC. It may be useful to note that going private transactions are not usually initiated by the shareholders who will lose the benefits of information provided by SEC compliance, but by management seeking to avoid the burdens. Although going private transactions may save companies money, the long-term price to be paid in the form of shareholder dissatisfaction is yet to be determined in the ethanol industry.

Danielle D. Smid is an attorney at BrownWinick, a Des Moines, Iowa-based law firm serving the renewable fuels industry. Reach her at smid@brownwinick.com or (515) 242-2476.

ETHANOL PRODUCER MAGAZINE • July 2009

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eBIO INSIDER Vierhout

Plug it in he electric car has become the new buzz in Europe.

Last year’s fierce and emotional discussion on higher food prices and the alleged role of biofuels, combined with high oil prices, made electric cars fashionable again.

There is a clear correlation between high oil prices and people’s interest in electric vehicles. At least this is what the statistics say if we look at the number of Google searches for electric cars paired to the oil price.

At first glance, it seems to make sense to shift away from the combustion engine if oil prices go through the roof. To drive a car that is completely silent, odorless and emission free and above all no longer dependent on volatile oil prices is kind of attractive. But a closer look makes it all far less romantic.

The electric car is only affordable for the few. A Norwegian company, Think, introduced a nano-type of car called the Think City - priced at $54,000. And with a top speed of 100 km/h, a range of around 200 km and a recharging time of 13 hours it is a kind of a non-starter.

Another not very persuasive element is that batteries need to be replaced once every 2-3 years of which the costs vary between $3,000 and $5,400, according to the Electric Auto Association Europe. Add to this the costs for disposing or recycling the batteries. Considering that, one can come to the conclusion that regular maintenance of an electric car costs more than that for a liquid fuel-powered car.

A benefit of electric cars is that they produce no emissions.

But how clean and renewable is the electric energy used to power the vehicle? I haven’t seen any life cycle analysis on a coal-powered electric car but my guess is that the emission savings will be disappointing. Some seem to believe that the win-win option is nuclear power. The United Kingdom, for example, has plans to expand its nuclear capacity heavily and is now subsidizing electric cars. High oil prices have had a positive impact on public support for more nuclear energy, but this form of energy is expensive, requires long-term planning and is uncertain over time due to its waste problem.

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Lacking infrastructure to ‘fill-up’ your car is a big obstacle in the promotion of electric car. It is similar to the challenge faced by many European countries as they consider the introduction of E85. Auto manufacturers argue against making more flexible fuel vehicles because they claim there are not enough filling stations, whereas fuel distributors argue the other way around. Infrastructure for electric vehicles is a major issue because the grid is simply not yet able to cope with such demand.

Another issue confronting the electric car is the response from Big Oil. Why would the oil industry ever support this technology? It undermines the industry’s special relationship with the car industry and would deprive it of oil’s most attractive market. I wouldn’t be surprised if electric cars are very likely higher on Big Oil’s not-to-do-list than biofuels.

It also seems that the automotive industry itself is not so hot (yet) about the electric mode. Some manufacturers say they would consider producing electric models, but most of them have remained dead silent. This is most likely because the car is expensive to produce, there is no charging infrastructure in place and production of electric cars could damage the automakers’ relationship with the oil industry. Hybrids are then a far more attractive alternative, and we see the result in the market.

So, those who believe that we will see a major shift toward plug-in cars now or in the near future are mistaken. Certainly, there will be demand for electric vehicles but its use will be limited for quite some time. As proof, the European Commission believes no more than 1 percent of its 10 percent renewable energy target will be fulfilled by electric cars.

Will the hype on electric cars threaten the biofuel industry’s development? Given all the problems mentioned, probably not any time soon. There could, however, be an opportunity here: electric cars running on electricity generated by biofuels. In that case - let’s plug it in.

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

ETHANOL PRODUCER MAGAZINE • July 2009

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TECHNOLOGY

Bubbles

Tiny to Make You Happy The ethanol industry is feeling the heat and pressure to remain profitable. One way to ease the pressure is to increase yields. Arisdyne Systems Inc. wants to help ethanol producers increase yields by increasing heat and pressure (on a microscopic scale) using controlled-flow hydrodynamic cavitation.

By Ryan C. Christiansen

A

s a retired U.S. Navy captain and a mechanical engineer, Fred Clarke knows a thing or two about cavitation. In the Navy, cavitation would be the sudden formation and collapse of low-pressure bubbles in liquids by means of mechanical forces, such as those resulting from rotation of a marine propeller. However, at Arisdyne Systems Inc., it has a different application. Clarke is the executive vice president for Arisdyne a Cleveland, Ohio-based company that wants to bring the benefits of controlled-flow hydrodynamic cavitation to the ethanol industry.

Hydrodynamic cavitation can be produced by passing a liquid through a constricted channel at a specific velocity. The formation and implosion of bubbles in the liquid releases tremendous localized energy in the form of shockwaves.

“The collapse of those bubbles has been measured at temperatures around 5,000 degrees Celsius and pressures near to the equivalent of the bottom of the ocean or 1,000 atmospheres of pressure—very, very high,” Clarke says. “When that happens, you end up with a micro-shockwave that is not altogether different than the blast of a bomb. That shockwave happens at the microscopic

level in the fluid, and whether the waves are destructive or productive depends on your ability to control the process," he says.

“You're talking about a phenomenon that every engineer in this country was told never to let happen—never let cavitation occur, because it will tear apart a pump or a propeller or something that you don't want to have eroded away. That happens when you don't control the zone in which the cavitation occurs," Clarke says. However, Arisdyne’s controlled-flow cavitation technology controls the location, size, density, and intensity of the implosion of bubbles in the zone to create optimum process conditions, he says.

Higher Yields For ethanol producers, using controlled-flow hydrodynamic cavitation could mean obtaining higher yields of ethanol from the same amount of corn. In a dry mill ethanol plant, the process could be used to reduce the size of mechanically milled starch particles inside the slurry, thereby increasing the surface area of the particles, resulting in a faster hydrolysis of starch to sugars.

Arisdyne Systems Inc.’s controlled-flow hydrodynamic cavitation technology effectively breaks open the cellular structure of starch particles.

PHOTO: ARISDYNE SYSTEMS INC.

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TECHNOLOGY

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TECHNOLOGY

“The analogy I use is that it's the difference between putting a sugar cube in hot tea versus putting powered sugar grains in the tea,” Clarke says. “The dissolving occurs tremendously faster [with granular sugar] because more of the tea can surround the sugar and cause it to disappear.”

Arisdyne is working with ethanol technology firm Delta-T Corp. to determine just how much more ethanol might be produced using slurries processed using controlled-flow hydrodynamic cavitation. Arisdyne is cavitating corn slurries at its lab in Cleveland and then sending them to Delta-T’s lab in Williamsburg, Va., for performance testing.

“I found Arisdyne through my normal patent searching and I was intrigued that they have a patent application out there where they are looking at enhancing yield through hydrodynamic cavitation and, specifically, in dry mill ethanol plants,” says Mark Shmorhun, director of research and product development at Delta-T. “We're looking to confirm both enhancements in yield and whether there are any other unexpected benefits or drawbacks to the technology.”

Clarke says so far, test results are positive. “Our early tests are confirming,” he says. “The release of starch has been more than 5 percent above what is handled at a current plant,” which Clarke says is just the starting point; it might easily be increased through optimization.

Delta-T is hopeful, Shmorhum says, because there is good evidence that the technology should work as proposed.

“There is a good body of work on cavitation and what it can do for particle size reduction,” Shmorhum says. “Cavitation has applications, broadly, [and] this is a new application of an existing and fairly well-understood technology.

The theory and the body of evidence out there points to what I would say is a reasonably high probability of success for this technology.”

Shmorhum says Arisdyne’s technology is attractive in that it should be easy

48

to implement in an existing dry mill plant. “The Arisdyne technology is attractive to me because of the simplicity of the concept,” he says. “I like things that are elegant and straightforward and this one has those attributes. Relatively speaking, it's not a complex operation to deploy and, in theory, it should be able to enhance yield through particle size reduction and by better preparing the starch for hydrolysis and fermentation.”

Award-Winning Technology Arisdyne’s proposed use of controlled-flow hydrodynamic cavitation to increase yields at dry mill ethanol plants helped the company to win a 2009 Northeast Ohio Technology Coalition (NorTech) Innovation Award.

Arisdyne also secured more than $7.5 million in funding during its first year of operation, including an investment from Chevron Technology Ventures.

“One of the things that really sets them apart is their partnerships,” says Dave Karpinski, vice president for technology innovation, manufacturing and electronics at NorTech. Karpinski notes that Arisdyne has managed to secure a $1 million Third Frontier grant from the state of Ohio. “That program is vetted by the National Academy of Sciences, so it was kind of a reinforcement of the merits of the technical case that their technology had," he says.

Karpinski also notes that Arisdyne has partnered with the Ohio Agricultural Research and Development Center at Ohio State University—Wooster where Arisdyne benefitted from the expertise of Dr. Frederick Michele Jr., an associate professor of biosystems engineering who worked on cellulosic ethanol biorefinery process technology at the National Renewable Energy Laboratory in Golden, Colo.

“One of the things that I realized at NREL was that the cost of particlesize reduction is very high once you get to a small particle size,” Michele says. “However, the energy input for [Arisdyne’s technology] to reduce par-

ETHANOL PRODUCER MAGAZINE

July 2009

TECHNOLOGY

PHOTO: ARISDYNE SYSTEMS INC.

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The Arisdyne Systems Inc. ethanol research and engineering team includes Oleg Kozyuk, chief technology officer, Scott Incorvia, director of operations, and Parker Lyle, design engineer.

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ticle size beyond those very small sizes is very lowâ&#x20AC;&#x201D;much lower than doing something like hammer-milling. And so it dawned on me that there may be an application here that may improve starch yield from corn, being able to reduce the particle size and make it more accessible to enzyme conversion.â&#x20AC;?

Michele says under current dry mill process conditions, as much as 3 percent to 8 percent of starch is not converted to sugars. â&#x20AC;&#x153;There is the potential to release that additional starch and to improve yield at the ethanol plant,â&#x20AC;? he says, to as much as three gallons of ethanol or more per bushel of corn. â&#x20AC;&#x153;Our results indicate that [using hydrodynamic cavitation], we can get anywhere from a 4 percent to 7 percent increase in the glucose equivalent in a liquid fraction.

Our initial tests look promising.â&#x20AC;?

The Arisdyne Team A Harvard Business School graduate, Clarke is part of a team that includes Dr. Peter Reimers, president and CEO. Prior to joining Arisdyne, Reimers worked for Archer Daniels Midland for more than 10 years overseeing biodiesel operations in the European Union

ETHANOL PRODUCER MAGAZINE

and in the U.S. Most recently, he was the managing director of long-term technology strategy at ADM and was responsible for launching a new research and development center that focuses on bioenergy technologies. He has served on the board of directors of the European Biodiesel Board, the National Biodiesel Board, and was a member of several biofuel and alternative energy working groups sponsored by the European Commission and the German government.

Clarke and Reimers are joined by Oleg Kozyuk, the chief technology officer responsible for developing new applications for the companyâ&#x20AC;&#x2122;s patented cavitation technology. Kozyuk pioneered the concept of using hydrodynamic cavitation in technological processes in the Ukraine and has more than 180 issued or pending patents worldwide in a variety of areas including hydromechanics, mixing, homogenization, dispersion, nanomaterials, sonochemistry, and biotechnology, which have formed the basis for the launches of a number of companies in a diverse range of industries.

July 2009

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TECHNOLOGY

Other Applications Prior to promoting its technology for use in dry mill ethanol plants, Arisdyne developed a continuous process technology using cavitation for the production of biodiesel. The first reactor was installed at the Middletown Biofuels LLC biodiesel plant in Middletown, Pa., in January 2008.

Reimers says ethanol producers might also consider using Arisdyne’s technology for converting corn oil to biodiesel.

“I believe that the ethanol producer

today has expertise in originating agricultural goods and they have good knowledge for how to sell and how to handle fuels,” Reimers says. “Why not harvest the corn oil, which is still in the distillers grains, and turn it into biodiesel? Wouldn't that be a nice addition to an ethanol plant?”

For ethanol producers, there may be more applications for cavitation beyond improving ethanol yields from starch and producing biodiesel from corn oil. Michele says Arisdyne is also looking at us-

It takes a lot ...

ing cavitation to improve the anaerobic digestion of ethanol coproducts for producing methane. He says the company is working with Cleveland-based Schmack BioEnergy to use cavitation to reduce the size of anaerobic digestion reactors and to decrease retention times.

Michele says cavitation might be used to improve cellulosic ethanol processes. “There may be some applications in cellulosic ethanol similar to what we're doing with corn,” he says, “because, after the pretreatment of the feedstock, you have this material that's been digested, but it still may have greater potential for sugar release if you did something like this with a cavitation approach.”

Shmorhun says Delta-T is also looking at how Arisdyne’s technology might be used elsewhere in the ethanol production process. “We are having a look at the cavitation technology and its applicability to our dry mill designs first and foremost, and potentially where else the technology might be applicable. We're having a look at it," he says.

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Increasing yields from corn ethanol is important because using less corn increases the sustainability of the fuel.

“In selling our proposal to the state of Ohio, what they liked was the fact that we might be able to reduce the corn input (at a 100 MMgy ethanol plant) by 2 million bushels,” Clarke says.

NorTech agrees. “What was compelling for us was the ability of the technology to reduce the cycle time of the process,” Karpinski says. “Any time you reduce the cycle time of a process, it improves your cost position. The environmental impacts of ethanol and biofuels are great, but they suffer from economic disadvantages. We saw this as a great lynchpin to help overcome

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ETHANOL PRODUCER MAGAZINE

July 2009

TECHNOLOGY

those cost barriers so that this fuel can have a broader impact on the environment and society.”

Reimers says Arisdyne’s solution can help to assuage multiple sustainability concerns. “If the goal is to make biofuels feasible and to improve the economics, we have a good solution here,” he says. “If the goal is to reduce overall greenhouse gas emissions and to make corn-based ethanol a better fuel, then we have a solution here.”

Improving the sustainability of corn ethanol should be the first priority, Reimers says. “Under the renewable fuels standard, we need more capacity,” he says. “Do you want to do that with new construction or with improvements to existing plants?”

Because Arisdyne’s technology might also be used to improve cellulosic ethanol processes, an ethanol producer potentially could increase the sustainability of corn ethanol by utilizing more of the corn plant. “If this works in the corn area, it should clearly give us the ability to step over into stover, and that will make the whole debate about corn being inefficient a lot less a matter of debate," Clarke says.

However, Clarke says Arisdyne is focusing on improving corn starch processing first. “We came to the party with the dance partners that we have and they are in corn,” he says.

terial. I could put a 100 MMgy cavitation device in the back of my Mini. Our scaleup is not a concern.”

Implementation logistics aside, Shmorhun says established corn ethanol producers need to move forward with increasing yields. “The economics are straightforward,” he says. “The number one cost of production of fuel ethanol is corn and any enhancement in yield of ethanol per bushel of corn is a significant contributor to the profitability of an etha-

nol producer. The Arisdyne technology is one approach to enhancing yield and as an industry, we need to be looking at yield enhancement as a top priority.” EP Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at rchristiansen@bbiinternational.com or (701) 373-8042.

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Looking Ahead Delta-T hopes to confirm the performance of Arisdyne’s controlled-flow hydrodynamic cavitation technology before the fourth quarter of 2009 “and if we're successful, we'll be looking for a full-scale trial sometime toward the end of 2009," Shmorhun says.

Clarke says scaling up the cavitation technology should be fairly straightforward. “The only thing that will limit our scale is the capability and cost of pumps so if a pump can operate at 100 gallons per minute at pressures that are less than 1,000 psi, we can cavitate ma-

ETHANOL PRODUCER MAGAZINE

July 2009

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CARBON

GETTING

CREATIVE WITH CARBON Federal regulations already place caps on a wide range of industrial emissions so it seems inevitable that carbon dioxide will soon be one of them. If the U.S. adopts a carbon cap-and-trade program, many ethanol producers will be faced with a choiceâ&#x20AC;&#x201D; adopt new production technologies or absorb the expense of purchasing carbon credits. Those choosing to adapt will not only avoid incurring another expense, but may be able to realize an additional revenue stream as well.

By Erin Voegele

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CARBON

T

he United States is one of the few westernized nations that has yet to place a cap on industrial carbon emissions. Over the past several years, federal lawmakers have introduced countless legislative measures that seek to regulate carbon dioxide. As of early 2009, none of the initiatives have been able to garner the political support necessary to move forward. This political climate, however, is quickly changing.

Under the new administration, it seems imminently possible that carbon legislation will gain the traction needed to become law.

According to the White House Web site, President Barack Obama's administration supports measures that would take immediate action to reduce the carbon pollution that threatens the nation’s climate. Although the U.S. has long placed emissions limits on many pollutants, including sulfur dioxide and nitrogen dioxide, no such policy has been enacted to stem carbon emissions. The administration clearly states that it will work to close this carbon pollution loophole.

While it is impossible to forecast exactly what kind of policy will be put in place to close this loophole, many have theorized the possibility of a carbon tax or the development of a cap-and-trade program. A discussion draft of legislation that would establish a carbon capand-trade program, known as the American Clean Energy and Security Act of 2009, was recently released by lawmakers in the U.S. House of Representatives.

In a committee hearing regarding that legislation, U.S. EPA Administrator Lisa Jackson provided testimony comparing pending carbon legislation to the Acid Rain Trading Program that was signed into law in 1990. She asked committee members to recall claims that the law would cause "death for businesses across the country." In reality, that legislation, according to Jackson, resulted in $120 billion in annual health and welfare benefits at an annual cost of only

ETHANOL PRODUCER MAGAZINE

July 2009

$3 billion. Furthermore, she says the economy grew by 64 percent while acid rain pollution was reduced by more than half.

“Now, the ‘no we can’t’ crowd will spin out doomsday scenarios about runaway costs,” she says. “But EPA’s available economic modeling indicates that the investment Americans would make to implement the cap-and-trade program of the American Clean Energy and Security Act would be modest compared to the benefits that science and plain common sense tell us a comprehensive energy and climate policy will deliver.”

While ethanol as a finished product is a clean, low-carbon fuel, the production process leaves room for improvement. This is because ethanol production generally consumes a large amount of energy, which tends to be supplied primarily by natural gas and other fossil fuels.

The burning of fossil fuels generates large quantities of carbon dioxide. Under a federal carbon tax policy, ethanol producers would likely be taxed on these emissions. Under a carbon cap-and-trade program, they would be forced to purchase carbon credits to offset their production processes.

Either way, most ethanol producers would find it extraordinarily difficult to absorb the additional expense of a carbon regulation. However, a cap-and-trade program could provide opportunity as well. Producers who employ low-carbon technologies will be in a position to generate and sell carbon credits, which could create a whole new stream of revenue.

There are two basic ways in which ethanol producers can work to reduce their carbon footprints. The first is by implementing technologies that employ carbon neutral fuel to power the production process. The second is by finding creative ways to capture and utilize the carbon dioxide created during the ethanol production process.

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CARBON

the public and private sectors ICM’s technology is designed of how to reduce your carbon footprint, and that is usually reto utilize organic Many technologies will soon ducing your fossil fuel use,” he feedstocks, such as be widely available that will alagricultural wastes says. “This type of energy conlow ethanol producers to replace servation system fits nicely into and wood chips. Acfossil fuel with carbon neutral cording to Bennett, that approach.” renewable sources of power, Krissek also notes that a fathe system will also including the use of landfill gas, Bert Bennett Greg Krissek cility implementing this type of be able to utilize a anaerobic digestion and gasifica- principle scientist, government affairs technology wouldn’t necessarily processed municipal ICM Inc. director, ICM Inc. tion. ICM Inc. is working to dehave to wait for a federal capsolid waste, known velop one such technology. as refuse derived fuel. and-trade program to be estabThe company has developed The refuse derived lished to benefi t through the sale an “air-blown” gasification techof carbon credits.

Those producers could fuel could include components such as nology that can be used to produce carbon generate revenue now through the sale of paper products, cardboard and green yard neutral fuel from renewable resources. Accarbon credits in a voluntary trading marwastes. cording to Bert Bennett, a principal sci“We started on this path to look at ket, such as Chicago Climate Exchange. entist at ICM, the company’s gasification In addition, federal funding may be ways that we could cut our demand for technology involves directly heating fuel in available to assist producers in implementnatural gas and go to a biomass-based the presence of limited oxygen. The process creates combustible gases that can be fuel,” Bennett says. “The reason we chose ing this type of technology at existing faused as an alternative to natural gas and gasification is it is very flexible...and with cilities. In May, Obama issued a presidenburned directly in a boiler to create steam the right technology capable of handling tial directive to Agriculture Secretary Tom for process heat and electrical power gener- a broad range of fuel types and moisture Vilsack to expedite and increase producation. With some equipment modifications content.” The unit can also coproduce a tion of and investment in biofuel producand loss in efficiency, the gas can also be high-carbon biochar fertilizer, which when tion by making renewable energy financing cleaned for use as a direct replacement in used under the right conditions can poten- opportunities from the Food, Conservaexisting natural gas fired dryers and pack- tially allow for carbon negative operations. tion and Energy Act of 2008 available Greg Krissek, ICM’s government af- within 30 days. A portion of that funding age boilers. fairs director, says that the gasification is meant to encourage biorefineries to disBennett says ICM’s gasifier technology technology can potentially lower the cost continue fossil fuel use in plant operations is very close to being ready for commercial of energy at an ethanol plant while also re- by either installing new biomass energy deployment. The system is currently beducing the facilty’s carbon footprint. "Ob- systems or producing new energy from reing tested at the Harvey County Landfill in viously ... there is a very strong interest in newable biomass. “There is more than $1.1 Kansas.

Becoming Carbon Neutral

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CARBON

billion of opportunity here, created by the Congress to assist in building biorefineries and helping existing refiners convert from fossil fuel power to renewable power,” Vilsack says.

Using Carbon Creatively In addition to moving to a carbon neutral source of energy, ethanol producers may be able to generate carbon credits by finding innovative ways to capture and utilize the carbon that they produce. While many of these technologies are in the early stage of development, some may provide the additional benefit of producing another revenue stream through the sale of coproducts produced. This means that ethanol producers who choose to employ alternative technologies would not only add to their bottom line through the sale of carbon credits, but may be able to benefit through the sale of coproducts that are generated from their carbon waste stream.

Sequestration Carbon sequestration may be the most well-known carbon capture technology.

While it does not produce any useful coproducts, the technology may have important implications in the capture and storage of large quantities of carbon dioxide.

Archer Daniels Midland Co., the Midwest Geological Sequestration Consortium

'We’ve got a serious carbon dioxide problem.We think there are no silver bullets – there is silver buckshot, and we’re just a part of that. I would love to see all these things come into play – all these different technologies. There are some pretty neat solutions out there. We just have to put them into play.'

Larry Kristof, CEO of Manta Venture Group Ltd.

and the Illinois State Geological Survey are working together on a project that seeks to capture and store the carbon dioxide produced at ADM’s ethanol plant in Decatur, Ill. According to an ADM spokeswoman, the project will help determine whether it is viable to store carbon emissions from manufacturing operations far below the earth’s surface. “It may also determine whether geologic sequestration can further improve the environmental footprint of alternative fuels such as ethanol by capturing and storing carbon emissions associated with their production,” she says.

The project involves drilling an injection well that is approximately 7,200 feet deep. Beginning in early 2010, a total of 1 million metric tons of carbon dioxide produced by the ethanol plant will be captured,

compressed and injected into the Mount Simon Sandstone, a large underground saline water-bearing rock formation.

According to Sallie Greenberg, the sequestration communication coordinator for the MGSC, several factors contributed to the decision to partner with ADM to complete the project. “ADM had a readily available source of carbon dioxide in suitable quantities for demonstration purposes,” Greenberg says. “The carbon dioxide comes away from the fermenting process at 99.9 percent pure, which was beneficial for research purposes and avoided separation costs associated with capturing carbon dioxide. In the case of the Illinois Basin – Decatur Project, we have the excellent juxtaposition of a high purity source, available land, and suitable geology deep below the plant.”

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July 2009

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Dry Ice The purity of carbon dioxide emissions produced at ethanol plants is also cited by Pain Enterprises Inc. as a primary reason the company recently constructed a liquid carbon dioxide and dry ice production facility adjacent to Global Ethanol’s plant in Riga, Mich. According to Pain Enterprises President Jack Pain Jr., ethanol plants are a good candidate for this type of technology because they produce cleaner emissions than many other industrial processes.

The facility built by Pain Enterprises can produce up to 300 tons of liquid carbon dioxide, which is used to carbonate beverages, or 200 tons of dry ice per day. The facility, which began operations in March, currently captures and utilizes 75 percent to 80 percent of Global Ethanol’s carbon dioxide emissions.

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Green Plains Renewable Energy Inc. and BioProcessAlgae LLC are working to develop a pilot algae plant production facility that will be located adjacent to Green Plains’ ethanol

ETHANOL PRODUCER MAGAZINE

July 2009

CARBON

plant in Shenandoah, Iowa. Water, heat and carbon dioxide will be recycled from the ethanol manufacturing process and used to produce algae.

A series of self-contained, modular photobioreactor units are being installed at the ethanol plant, and, in mid-May, were expected to be operational by midyear. According to Scott Poor, Green Plains’ corporate council, it's expected that the algae used in the system will be able to capture approximately 60 percent of the carbon dioxide that is fed into the system.

While Green Plains expects to explore using the algae produced at the pilot plant as a source of animal feed, others are researching the use of algae as a feedstock for biodiesel and cellulosic ethanol production.

Chemicals Mantra Venture Group Ltd. is working to develop a technology that can convert carbon dioxide into high value chemicals. The process, called electro-reduction of carbon dioxide (ERC), works by combining electricity with water, carbon dioxide and an electrolyte, which produces a useful industrial organic chemical called formic acid.

Formic acid could be used as a replacement for hydrochloric acid in the steel pickling process. This may also have applications in fuel cell technology. In addition, the process can be adapted to produce ammonium formate, a potential additive that could be used with diesel to reduce nitrous oxide emissions.

There may be opportunities to use the technology to produce other products such as hydrogen or methanol as well.

“These chemical processes, with a few little changes here and there, we can create different products,” says Larry Kristof, Mantra’s CEO. “With a few changes in the way we set up the system or some of the chemicals we add, we can definitely change the dynamics of it and create different products.”

Kristof says there may even be potential in the future for a cellulosic ethanol plant to employ this kind of technology to use its own waste carbon stream to produce acids that would be used in the fuel production process.

Kristof notes that there are many ways to deal with carbon, but that his company’s solution offers a great way to help industries reduce their carbon footprint in a way that is profitable. “We’ve got a serious carbon dioxide problem,” he says.

“We think there are no silver bullets – there is silver buckshot, and we’re just a part of that. I would love to see all these things come into play – all these different technologies. There are some pretty neat solutions out there. We just have to put them into play.” EP Erin Voegele is an Ethanol Producer Magazine associate editor. Reach her at evoegele@bbiinternational.com or (701) 3738040.

ETHANOL PRODUCER MAGAZINE

July 2009

59

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n baseball, a triple play is the act of making three outs during the same play. Most triple plays are initiated by the shortstop. Because more balls tend to be hit to the shortstop than any other position on the field, it’s only natural the shortstop should be involved in triple plays.

In business, Larry Gross is a shortstop of sorts. He positions himself to be a part of the action and he has played the game in both Silicon Valley and in the Corn Belt. A former executive for computer technology companies Idealab and Cendant Software, Gross is now the CEO for EdeniQ Inc., an ethanol technology company that hopes to make a triple play to increase yields in the ethanol industry. EdeniQ recently began commercial trials of its Corn3 Yield Enhancement Program, which uses three separate-but-complementary technologies—improved yeast, a proprietary milling and mixing device, and enzymes—to increase yield at an ethanol plant.

Red Trail Energy LLC is one of the first ethanol producers to use EdeniQ’s Corn3 program. The company’s 50 MMgy ethanol plant near Richardton, N.D., has been making ethanol this year from what CEO Mick Miller says is essentially U.S. No. 3 Yellow grade corn—a high-moisture, low-weight, low-starch corn—as the result of a late start to last year’s growing season, cooler temperatures in the spring and summer, and a harvest season filled with heavy rains and early snow.

“The crop just didn't mature,” Miller says, “so it's been really key for us to be able to hold— and actually increase—our yield as we move forward. One would expect that, running on a lower grade corn, you're going to see a significant yield loss. One of our goals is to alleviate that concern.”

Instead of trying to influence the weather for the health of the North Dakota corn crop, Red Trail has turned to EdeniQ for help, a company with a name that joins the concepts of edenic—of or pertaining to the Garden of Eden—and IQ, or intelligence.

Corn3 offers what EdeniQ says could be a 10 percent overall increase in yield for the ethanol producer or a tenth-of-a-gallon increase in yield from each phase of the technology. The company says these increases have been proven at EdeniQ’s large-scale pi-

lot plant in Visalia, Calif., and they are now being proven in commercial trials.

“As we all know, the industry's profitability is probably under more stress today than they Larry Gross ever expected it to be, CEO, which calls for innovative EdeniQ Inc. solutions and improvements in efficiency,” says Larry Peckous, vice president of sales for EdeniQ. Peckous has more than 28 years experience in the starch and biofuels industries. Most recently, he spent two years in China as principal scientist for Novozymes. “While a lot has been done in computer controls and enzymes, very little has been done to actually improve the yield of ethanol from starch,” he says. “EdeniQ has this suite of three different but complementary and additive technologies that each increase the amount of ethanol that Mick Miller you can obtain from a CEO, Red Trail Energy bushel of corn.”

LLC Peter Kilner, vice president of business development for EdeniQ, explains. “The first phase is drop-in yeast that reduces byproduct glycerol formation and channels that into ethanol, so it optimizes fermentation. The second phase goes after some of the starch that is in large particles and that doesn't [normally] get converted. It reduces the size of the large particles, bringing up more surface area for the enzymes to get at all of the starch. That's done through a proprietary milling device called the Cellunator. That device also frees up the cellulosic fiber in the corn kernel, which enables our phase three, which is a proprietary cocktail of enzymes that gets at the cellulosic fiber, giving us a further boost in yield by converting that into ethanol.” Kilner brings business development experience to EdeniQ as a former executive for Catalytica Energy Systems Inc. and Arbor Vita Corp.

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Company History

Improved Yeast

EdeniQ was formed in early Phase one of the Corn3 2008 out of AltraBiofuels Inc., program is EdeniQ’s patented an ethanol producer with plants LGY-100 Yeast, which can be in Goshen, Calif., and Coshocused in the industry’s current ferton, Ohio. AltraBiofuels made menters, giving ethanol producheadlines in 2006 when it secured ers immediate increases in yield, significant venture capital from Peckous says.

Peter Kilner several prominent private equity vice president of According to Galvez, the investors, among them Khosla business key improvement in the yeast Ventures and also Kleiner Per- development, is its ability to convert starch to EdeniQ Inc. kins Caufield & Byers. Now head glucose while producing approxiof EdeniQ, Gross is the former mately one-third less glycerol CEO of AltraBiofuels. than what is produced using conventional EdeniQ has been working with research- yeast. ers at the Life Sciences and Bioengineering Miller says Red Trail is convinced that Center at Worcester Polytechnic Institute in phase one works as promised. “We have been Worcester, Mass., to identify the bacteria in on the yeast for about a month and we have the stomachs of termites that produce en- found the positive results that we were hopzymes to break down cellulose in plants and ing for,” he says. “We have recently signed on to optimize the behavior of those bacteria, long-term with EdeniQ as a licensee.” according to the Institute. The Worcester Miller says before signing on with Edeteam has also been adapting niQ for the yeast, Red Trail evalEdeniQ’s proprietary strains of uated the risks and rewards and Saccharomyces cerevisiae, more comalso put a premium on getting to monly known as brewer's yeast know the team at EdeniQ. “We or baker's yeast, to be more resisfound a comfort level to be able tant to ethanol, enabling the yeast to go ahead and get into a trial,” to ferment higher concentrations he says. “EdeniQ was very flexiof the fuel. EdeniQ has also lible as far as doing more of an incensed technology from Tianjin ternal trial before going full-scale Adrian Galvez University in Tianjin, China. into fermentation, just to build a chief technology EdeniQ’s chief technology officer, little bit of mutual trust back and officer is Adrian Galvez, who EdeniQ Inc. forth. We wanted to be able to helped to bring the AltraBiofuexplain and show how we operels biorefineries online and who ate our facility so that they could has also worked for Archer Daniels Midland trust what our people are doing and also to Co., Grain Processing Corp., and Delta-T get a feel for how the yeast are going to reCorp. “We all come from some very diver- act in more of a true ethanol environment. sified backgrounds,” Galvez says, “but we're We ran some smaller fermentation trials— a process technology company. We were re- much smaller than a full-scale 750,000 gallon searching the conversion of cellulosic mate- fermenter—and we found the results to be rials and because of that, we looked at the very appealing, so we moved right into the installed capital that's out there in the exist- full-scale trial and found really good results ing infrastructures and said, ‘You know, these from that, also.” plants are basically our brothers and we need Miller says implementing EdeniQ’s to make sure these plants continue to evolve LGY-100 Yeast was a straightforward proand have some way to progress systematical- cess. “In today's environment, most plants ly to a future state. Let's not look at putting are a little more careful as far as what they're $250 million in capital into some place that doing and what they're working on,” he says, gets you 10 MMgy of ethanol.’ I mean, let's “because yield is very important, especially face it, that's not profitable.” today when margins are as slim as they are.

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all knew what we were looking for and that we were all on the same page. We quickly found that things were going as planned and it was simply just a replacement. We didn't really make any operational changes.”

The result, Miller says, is a higher yield for Red Trail. “We have definitely found increases,” he says. “We're still trying to work together to formulate exactly what they are. The more data, the more accurate your numbers become. So the longer we run, the more confidence we will build in what we believe is a good program here; but we have definitely seen the reduction in glycerol and an increase in protein levels in our distillers grains. I think those are some real key indicators that this is having a very positive impact on Red Trail's yield.”

The Cellunator EdeniQ’s chance to win the ethanol equivalent of a Golden Glove for higher yields could prove to be its proprietary piece of milling and mixing equipment known as the Cellunator.

Kilner says the primary role of the Cellunator, a rotary milling device about the size of a small van, is to reduce the particle size of larger starch particles and to break down cellulose so that yeast and enzymes can be more effective. The Cellunator complements but doesn’t replace a plant’s existing milling equipment.

“From the hammer mill you'll get a broad distribution of particles. This device will reduce the larger particles and create a more uniform

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particle size without touching the smaller end of the particle size distribution.” Kilner says the Cellunator avoids making fines that would cause downstream separation problems. “It's well-known that if you were to just grind the heck out of the corn, with a finer particle size you would get a higher yield,” he says, “but then it would be impossible to operate the downstream separation.”

Galvez says incorporating the Cellunator at an ethanol plant is also straightforward.

“This is a plug-n-play device,” he says. “What's nice is that this is a skid-mounted unit. It goes in like a pump. We don't believe it's going to be any kind of equipment that has a tremendous amount of wear or will bring any new tremendous maintenance cost to the plant.”

Galvez says the energy requirements for the Cellunator are less than .02 kilowatts per gallon of ethanol produced. “The plant is going to hardly see an increase [in energy requirements],” he says. “That will be offset by the fact that you will have some reduced drying energy [costs] and you will have some other energies in the plant that will actually go down.”

Miller says Red Trail found the Cellunator to be very straightforward to install. “We had existing tie-ins within our plant that allowed us to run in and out of this thing and to be able to bypass it if needed,” he says. “Most plants would probably have the ability to implement something like this very easily.”

Enzymes So far, Red Trail has implemented phase one and phase two of EdeniQ’s Corn3 program. The ethanol producer will be ready to implement the phase three enzymes, which requires using the Cellunator to break down cellulose, as soon as EdeniQ is ready. EdeniQ officials say the commercial launch of the phase three enzymes will be in late 2009 or early 2010.

When that happens, Red Trail will begin producing what has been touted as a home run in the ethanol industry: cellulosic ethanol.

“When you get into phase 3, you will really begin to start making cellulosic biofuels,” Galvez says. “Now you're talking about 4 to 6 percent (ethanol) that could qualify from a [renewable identification number] credit standpoint.”

Gross says EdeniQ’s Corn3 program can help the existing corn ethanol industry to supply the 100 MMgy cellulosic biofuels requirement mandated by the renewable fuels standard for 2010. “With a dozen or so customers, we could get a pretty substantial share of the cellulosic (ethanol) mandate for next year,” he says. “While some of the naysaysers are saying [the ethanol industry] is not going to be able to produce that, with this technology it may be possible to do that in this near timeframe.”

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proximately 1.6 to 1.7 fewer pounds of distillers grains for every pound of ethanol gained, Galvez says. The distillers grains produced will have a higher protein content, which Galvez says command a premium in the marketplace.

“Now you have a new way to receive that benefit without the expense of corn fractionation,” he says. “Typically, along the phases you will see roughly about an 8 to 10 percent decrease in distillers grains volumes for phase one and two and then you'll see almost about a 17 percent decrease in phase three, because you're converting all of the cellulosic material.”

Kilner notes that producing less distillers grains means drying less, too. “Any change in the value or revenue from distillers grains across the phases should be in the same magnitude in savings in energy,” he says. “The biggest impact on the economics of the ethanol producer is the reduction in corn costs.”

Looking Ahead Beyond an increase in ethanol yield and the production of high-protein distillers grains, ethanol producers might consider other drivers for adopting the enhancements that EdeniQ has to offer, including the need to reduce lifecycle carbon emissions through using less corn and energy inputs.

Miller says Red Trail, one of the first coal-fired ethanol plants in the nation, is very aware of the need to improve its carbon footprint. He said originally, Red Trail’s

model was to use less energy by using coal.

“If that's going to penalize us in the future we need to continue to seek and find ways to make our plant more efficient and, ultimately, more cost-effective," Miller says. "There are a lot of hurdles coming at us in the future and there are still a lot of unknowns.

I think it's important for our industry to continue to optimize and reduce our carbon footprint. If we can ultimately produce a portion of our ethanol from the fiber that is currently in that corn, I think that's huge.

Long-term, if cellulosic ethanol is going to be implemented and viable, I think this is going to be one of the major pathways to get us there. Clearly, the more efficient your facility is, the better off you are in so many different ways.”

Kilner notes that increasing efficiencies at the nation’s corn ethanol plants can also help to quiet the food versus fuel debate. “No matter where you are on [that] debate,” he says, “all of us can get excited about dramatically reducing the cost and the consumption of corn in our existing ethanol plants.”

Increasing yields is one way to build the industry with less capital. “There are so many of these ethanol plants that have been built in this country using yesterday's concrete and copper and cement prices,” Gross says. “It's prohibitive today with high metal prices and higher construction costs and fuel

costs. We really think this is the way with the products— that we have to retool these existing plants to become more efficient and to ultimately make cellulosic biofuels.”

With his head in the game, Gross says he has read the signs and as a player, he’s ready for whatever curveballs might be thrown at the industry.

“I'm an engineer by training and as you can see, there is a lot of technology involved in this field,” Gross says. “I was involved in software businesses after coming out of grad school and a lot of the same attributes that I saw in those industries—which were big, rising-tide industries that lifted all people’s boats—are the same here. It's a gargantuan industry. The mandate in the 2007 energy bill calls for 21 billion gallons of advanced biofuels [in 2022]. At $1.50 per gallon, that's a $30 billion industry being created out of nothing over the next dozen years—the size of a Google or more—so this is a real emerging, high-growth industry that is also substantial. One of the things that you did see in a lot of the software and Internet companies was companies that didn’t have anything substantial. This is real; this is here and now.” EP Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at rchristiansen@bbiinternational.com or (701) 373-8042.

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RESEARCH

PHOTO: NASA

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NASA researchers are mining satellite data to show the effects of land use change on soil carbon pools, the amount of land dedicated to biofuel feedstocks, and the overall productivity of croplands. When complete, the research may prove useful in determining where high-yield crop production can be maintained for long periods of time and provide an accurate estimation of greenhouse gas (GHG) emissions caused by various crop management decisions.

By Erin Voegele

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A

n ongoing research project being completed at NASA’s Ames Research Center utilizes current and historical satellite data to track how much land is being dedicated to producing crops that can be used to manufacture biofuels. The research also seeks to determine how land use changes affect soil carbon pools and greenhouse gas emissions (GHG) emissions.

“One of our main targets is to look at how soil carbon is changing,” says Christopher Potter, a research scientist at the Ames Research Center, located in California’s Silicon Valley.

Potter says the techniques have two fundamental aims that his team is trying to develop. “One is how much is being produced on an acre-by-acre basis in any given crop,” he says. “The other is how many new acres of a crop are being planted, presumably for biofuel generation.”

The project currently focuses on two main regions in the United States - the Midwest and California. To date, research conducted in the Midwest has centered on Iowa and its surrounding areas and has focused on cropland used to grow corn, soybeans and switchgrass. Research centered in California has focused more on the aspects of soil carbon and GHG emissions. “In the case of California, it’s more of generally looking and supporting our state’s own greenhouse gas inventory,” Potter says.

The Midwest Research To complete the research, Potter and his team are compiling satellite data on Midwestern croplands spanning from 2000 to the present. The researchers are using data sourced from NASA's Moderate Resolution Imaging Spectroradiometer, which collects data on what Potter refers to as the “green-up and green-down curve” of agricultural lands.

“Wherever people are growing soybeans and corn, the shape

Satellite data collected by Potter's team is used to create images displaying a region's "green cover" conditions. By combining data over an entire year, the team can estimate carbon gains and crop production cycles.

SOURCE: NASA AMES RESEARCH CENTER

of that green-up and green-down curve…seems to have a very characteristic shape to it,” he says. In other areas, such as fallow land or pasture, the curve has a different shape. The shape of this green-up and green-down curve allows the researchers to determine how the land is being utilized. “Right now we are in the process of characterizing what those shapes are for different crops and different mixtures of crops,” Potter says.

Potter compares the data sourced from the satellites to the scrolling ticker that shows the rise and fall of stock prices on financial news websites. Although the satellites gather data on the Midwest region nearly every day, not all of that data is useful.

RESEARCH

Researchers at the USDA Agricultural Research Service Hydrology and Remote Sensing Laboratory are using satellite data to develop new ways of assessing the residue cover of croplands.

Residue cover is currently evaluated using a technique in which a long string with beads on it is stretched over the rows of a field. At each bead, the researchers must determine where there is soil or residue. “That doesn’t really scale up very well if you want to look at a lot of fields,” says Craig Daughtry, a research agronomist with the USDA. “We are trying to get more of a regional assessment of many fields in an area.”

The goal of Daughtry’s research is to develop a more robust way to measure crop residue cover, which is an important component in reducing soil erosion. “What we are trying to do is use the satellite data to assess residue cover and then combine that with information on soil type and soil location in a GIS [geographic information systems] database,” he says. “When we combine those sources of information, we can identify what areas within the watershed are most sensitive – or should have more residue cover to protect the soils.”

Cropland with 30 percent residue cover is generally considered to be a product of conservation tillage. However, Daughtry stresses that there is nothing magic about that number. “Some soils might need much higher residue cover to protect them, while with other soils, erosion is not a problem,” he continues.

When complete, Daughtry’s research should allow

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PHOTO: AGRICULTURAL RESEARCH SERVICE, USDA

ARS project employs satellite data in crop residue research

USDA research Craig Daughtry uses a line-point transect - a 50-foot string with 100 evenly spaced beads - to measure crop residue cover.

those directing conservation programs to have a better understanding of where the most vulnerable soils are located, which will help direct conservation resources. While the research does not focus on how removing crop residue for cellulosic ethanol production could affect soil, it may prove useful in determining which areas of cropland are the best candidates for residue collection.

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In addition to finding how much farm land is dedicated to each crop, this research should also be able to determine how much land is transformed from a low-production system, such as fallow grassland, to a high-production corn system each year. It is expected to offer some insight into yield potential as well.

This is because cloud cover and other conditions may prevent a satellite from collecting optimal data. “We take the best day over a two-week period, and it becomes part of our scrolling ticker for that area that year,” Potter says.

“We wait until the whole growing cycle is completed, and then we look at the shape of that whole crop growing profile, and things seems to separate out pretty well.”

A work group in the University of Minnesota’s department of computer science and engineering is assisting Potter’s team in analyzing the raw satellite data that is collected for each year. “Basically, we are analyzing the data sets from satellites, and using data mining algorithms to find patterns of interest,” says Vipin Kumar, department head.

One such pattern, says Kumar, is how the use of cropland changes over time.

Data mining is a technology that is used to analyze large amounts of information and find useful patterns.

“The job of data mining researchers is to develop algorithms that can produce meaningful patterns – meaningful results – that are useful,” Kumar says.

In other words, Kumar’s team uses computer algorithms to convert large amounts of raw, low-quality satellite data into something useful. “Our job is to look at the data and see if we can find something actionable, something useful, something from which you can draw some conclusions,” Kumar continues.

Putting the Research to Use

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Researchers normally deal with crop statistics that are collected by county agencies. This data, however,

usually provides only a rough mapping of where the best croplands are located.

Potter’s research should provide a clearer picture. “With the satellite imagery we can get down to a large farm plot and see individual plots and how they are producing,” he says. “That gives us a big advantage in understanding within a county where the best areas seem to be for generating high yields and sustaining those high yields through several different kinds of years.”

Besides finding how much farm land is dedicated to each crop, this research should also be able to determine how much land is transformed from a low production system, such as fallow grassland, to a high production corn system each year. It is expected to offer some insight into yield potential as well.

The researchers can also plug data mined from the satellites into computer models to simulate how soils may be affected; taking into account the removal of biomass sources – such as corn stover – that may be removed from the field for biofuel production. “If the soils become progressively depleted over several years of cropping because more and more of the plant material… is being taken away for biofuel, the thinking is that will detrimentally affect the soil carbon,” Potter says.

According to Potter, his team is using the CASA model to determine these effects. “What it does is takes that satellite data and simulates how much carbon is being fixed and transferred into the roots below ground,” he says. “In that case, we get the full carbon cycle – not just what you see above ground – but also below ground. [The model]

SM

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also keeps track of the nitrogen used to grow a crop and all the greenhouse gases that are emitted during the production of that crop.” The CASA model, which has been used for more than 15 years, can also take into account farming practices and can be used to analyze emissions of nitrous oxide and methane.

Potter’s research may also be used to measure the productivity of idle land by building on data published yearly by the USDA using the historical data that shows there has been a major change in land use. Potter’s team can then analyze the available satellite data on that piece of land to see how production was maintained in years following the conversion. Potter says the strength of this kind of research is that it goes beyond simply mapping conversions by supplying data on the productivity of converted lands as well as carbon soil levels.

Ultimately the research will be able to produce a very accurate estimate of how much land is brought into production each year, as well as what kinds of crops are being grown on that land.

The team will also be able to estimate the soil quality of idle land before it is brought into production, and determine how the conversion to active cropland will affect that soil.

Potter says there are three main ways in which this research will be useful to farmers, biofuel producers and policy makers. First, it will provide a map of where the most productive lands are and where production levels can be maintained for a significant period of time. In this way, the research will compliment other sources of information, such as inventories, that are available on the county level. Second, the research will provide an accounting of all the GHG that are or are not being emitted – into the atmosphere under different crop management decisions. Third, there is potential to extend the monitoring of converted lands into other areas of the globe, where a need exists to verify what land use changes

ETHANOL PRODUCER MAGAZINE

are being reported by international organizations.

“We are trying to use this data in a way that would benefit the environmental community,” Potter says. “We are pretty confident we can use these satellite records to help improve public policy and help improve industry decisions.” The next step in the research project is to extend the study into other areas of the Midwest, such as Illinois and the Dakotas. There may be opportunities to do the same sort of work in Brazil as well. “There are people in Brazil who would like to do the same thing, and we want to be responsive to their needs,” Potter says.

It is also possible that future satellite data research could be used to support policy decisions regarding indirect land use change or to verify the accuracy of land use change models used in public policy, such as the controversial models recently proposed by the California Air Resources Board and the U.S. EPA. While Potter says he believes that current research may not be adequate for that exact purpose, he adds that after more data has been amassed and researchers become more experienced in interpreting the data, it could be used effectively for that purpose. The federal government has taken an interest in using data for biofuels policy purposes and might assist in speeding up that process. In May, the EPA announced it plans to look to satellite data in the future to project land use changes, GHG emissions and overall life-cycle GHG estimates. Some of that data could be used as evidence in the on-going review of the agency’s proposed GHG emissions reduction rule which includes calculations for indirect land use change.

Potter’s team expects to submit results of the research for scientific review in a technical journal by the end of this year. EP Erin Voegele is an Ethanol Producer Magazine associate editor. Reach her at evoegele@bbiinternational.com or (701) 373-8040.

July 2009

FRACTIONATION

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FRACTIONATION

The Financial of Fractionation

Future

Just a year ago, dry fractionation providers were educating ethanol plant managers and owners about the technique's potential for generating multiple revenue streams. Today, fractionation is still causing excitement in the industry, but finding equity sources to finance the installation of fractionation equipment is a challenge.

By Hope Deutscher

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ith high commodity prices coupled with lower revenue and tightened financial markets, ethanol plant managers and owners are looking for new revenue sources. One way to help an ethanol plant diversify is dry fractionation, which involves separating a kernel of corn into endosperm, germ and bran to provide more coproducts, such as corn oil, high protein distillers grains, and feed or fuel. At a fractionated dry mill ethanol plant, using either mechanical or abrasion milling equipment, incoming corn is separated into its main components – starch, germ, and bran. Further particle size reduction and refining cleans and isolates the streams of endosperm (mostly starch), germ and pericarp bran.

With dry fractionation installed, technology providers say an ethanol plant could survive high feedstock and lower energy costs, while seeing an increase in the facility’s efficiency, capacity and coproduct revenue.

A Changed Industry “I can go out and talk to every ethanol plant out there and give a presentation [on dry fractionation] and at the end they’ll say ‘great, I understand this, this makes perfect sense. Do you have money for me?’

And that’s the key thing right there. No one has the money to invest in it,” says Neal Jakel, fractionation program Jakel manager for Delta-T Neal program manager, Corp.

Delta-T Corp.

Jakel says ethanol producers understand and accept dry fractionation as a proven technology; however, with the current economic situation in the U.S., the challenge is finding potential funding sources, especially non-bank investors, to finance the installation. One option, he says, is

FRACTIONATION

Fractionation is the most expensive and the single most important risk management tool an ethanol producer can invest in, Jakel says, but it also allows an ethanol plant to more tightly hedge or price the coproducts to raw material price.

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to work with the USDA to include investments in the form of federal funding and low interest loan guarantees for such technology.

“The concern that’s out there today is – is the base ethanol plant stable?" Jakel says. "The banks say the technology can benefit ethanol plants but question investing $15 to $30 million dollars in a technology at an ethanol plant where its base financial stability is uncertain," he says.

Since 2002, Delta-T and milling partner Ocrim of Italy have been developing a dry separation technology that retains as much starch as possible going into the ethanol plant and adds as little water as possible into the process, while producing high quality coproducts, such as bran and germ. Ocrim currently has more than 1,300 milling systems installed at dry milling facilities around the world; however its dry separation technology is not installed in an ethanol plant yet. Delta-T is currently working with several ethanol companies that want to install dry fractionation. Jakel says the companies are examining alternative funding, such as looking at back-end integrators who could use the coproducts. "Most of my time is spent talking to people that I think might have an interest in investing in fractionation because either they want the coproduct, i.e., they want the germ to process it for corn oil, or they want to take the fiber and process it for making cellulosic etha-

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nol,” Jakel says.

Fractionation is the most expensive and the single most important risk management tool an ethanol producer can invest in, Jakel says but it also allows an ethanol plant to more tightly hedge or price the coproducts to raw material price.

“It gives [ethanol plants] hedging mechanisms because instead of just putting in corn and coming out with distillers grains and ethanol, you now have corn in and you have germ, bran, high protein distillers and various combinations that you can mix and match. And so now you’ve got flexibility.”

Had ethanol plants installed dry fractionation a year ago, their financial picture today might be different. With dry fractionation, Jakel says plants could see an approximate savings of 9 to 15 cents per gallon.

“A lot of them are now saying ‘I’ve got to find a way. How do I do this?

Because when this market turns around I want to make sure that I’m in a position to fully capitalize on it.’

Because we will have another downturn like we have today where we’ve got low ethanol prices and high corn prices —that will happen. It’s happened several times over the last 20 plus years and it will happen several times over the next 20 plus years.”

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Evolving Technology In an effort to provide dry fractionation to more ethanol facilities, ethanol technology firm and fractionation pioneer ICM Inc. recently

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agreed to have Minnesota-based Crown Iron Works Co. as a preferred technology provider. “We are working closely with Crown Iron Works Co., both for their Jeff Scharping dry fractionation and director of product their food-grade corn management and sales, ICM Inc. oil extraction system.

And that goes into our trademarked TKO – Total Kernel Optimization – package,” says Jeff Scharping, director of product management and sales for ICM. The Crown Iron fractionation system is a combination of de-germinators, aspirators, screeners and roller mills in sequence to refine a germ and starch stream from whole corn. In analyzing a dry fractionation system, producers and technology providers look at the ideal cut or yield of each pile of endosperm, bran and germ; evaluate how the fractionation system handles the various corn moistures; determine the system’s flexibility in fluctuating between piles; and examine the economics of installing such a system. “ICM really likes the Crown Iron system because it has met those requirements for us,” says Scharping. He admits that many potential customers may have

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PHOTO: PUREVISION TECHNOLOGY INC.

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PureVision Technology Inc.’s half-ton per day fractionation equipment in Fort Lupton, Colo., undergoes shakedown in March 2009.

difficulty in acquiring $1 million, much less the potential $30 million or more for dry fractionation or $100 million for the entire TKO process, which includes dry fractionation of corn, solid fuel combus-

tion, corn-oil extraction, food-grade protein extraction from the germ, single-cell protein feed from syrup, and cellulosic ethanol capabilities.

In 2004, ICM and Applied Mill-

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ing Systems Inc. began collaborating on a food-grade fractionation system.

One of those systems is operating at LifeLine Foods LLC in St. Joseph, Mo., which is the first facility in the country to use ICM’s proprietary technology to produce both food and fuel coproducts.

ICM is technology neutral, meaning that if through due diligence a customer wants to have a fractionation system from another dry fractionation technology provider, ICM will make sure that the system can be integrated into ICM’s proprietary design.

"Nearly 15 months ago the market was phenomenal for justification of the TKO process and dry fractionation,” Scharping says. “What we are ultimately doing is creating more revenue streams for the plant. What we want to accomplish with our TKO process, besides feeding the world and bringing foodgrade proteins and food products to the world, is to diversify. We want to diversify the plants so that they are not so dependent on two commodities – corn and ethanol prices. When you get into food-grade proteins, they actually have no correlation to corn or ethanol. So one market can be down and the other market can be up.”

Scharping says there is a lot of interest from both existing ethanol plants

ONLINE: Learn More about Fractionation Ethanolproducer.com offers a comprehensive history of fractionation in the ethanol industry. To view any of the following articles, please visit www. ethanolproducer.com.

“A Renewed Future” (January 2009) By Anna Austin Cereal Process Technologies LLC’s dry-fractionation system was recently installed and implemented at Renew Energy LLC’s 130 MMgy ethanol plant in Jefferson, Wis., now the world’s largest corn dry-milling operation. EPM looks at the benefits of installing the system.

“Concentrating on Coproducts” (April 2009) By Anna Austin MOR Technology LLC’s advanced fractionation system specifically made for the ethanol industry maximizes food-grade production and product yields.

“Is Fractionation the Cure for High Corn Prices?”

(November 2008) By Amanda Watkins FWS Technologies in Winnipeg, Manitoba, has been developing fractionation systems since 2004. The company has designed a unique technology adapted from grain cleaning and machine milling systems which is sparking the interest of many U.S. and Canadian ethanol producers.

“Food and Fuel Technology Bundle” (September 2008) By Ron Kotrba In 2006, ICM Inc. began a project to integrate a 40 MMgy ethanol plant with an existing food-processing facility. The same engineering firm that standardized the dry-grind ethanol plant design is now preparing to deploy its latest technology package—and dry fractionation is just the beginning.

“Ethanol Producers Face Key Considerations When Assessing Corn Oil Extraction” (December 2008) By Mark Warren, Ascendant Partners Inc. As a result of high commodity prices affecting the profitability of renewable energy plants, one option that could potentially increase shareholder profitability for ethanol plants is the extraction of industrial-grade crude corn oil from the ethanol process for use as an alternative feedstock for biodiesel plants.

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July 2009

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and potential funders to add dry fractionation to a facility. “Equity says we want an existing ethanol plant that is running profitably and is stable so that we can have something nice and secure to partner with. ICM is very diligent in coming at this from that angle. It’s not a situation any more where we can just build it and they will come. We are going to the markets first and bringing back to our customers something that is viable and proven.”

The Cellulosic Fractionation Future Since 1999 when PureVision Technology Inc.’s chief scientist Dr. Dick Wingerson conceived the company’s biomass fractionation system, it has been preparing for the future of cellulosic ethanol. Throughout the years, the company has conducted lab-scale proof of concept testing in Colorado; applied for patents; received a U.S. DOE grant to increase from lab-scale to bench-top scale scale doing batch fractionation work

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'When we started using biomass fractionation in 1999 nobody had ever heard of that and now it’s kind of become a buzzword. But we have stuck with it and that’s what we do. We’re taking biomass and we’re taking the different fractions apart so we end up with a fraction of cellulose, a fraction of lignin and a fraction of hemicellulose or xylose-rich liquor. We’ve got a very elegant technology and an elegant way to fractionate the cellulosics.'

Ed Lehrburger, President and CEO, PureVision Technology Inc.

at the Western Research Institute in Laramie, Wyo.; procured its continuous process development unit; and in 2004 through a second DOE grant, pursued fractionation of corn stover.

"Since 2004 we have developed a lot of favorable data on extracting the hemicelluloses and most of the lignin and all of the extractives from the biomass and ended up with primarily a purified cellulose solid product,” says Ed Lehrburger, founder, president and CEO of PureVision Technology. “This relatively pure cellulose, which is a pulp and can be sold as a pulp, is easily hydrolyzed into glucose,

The solution behind the solution.

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which is then the basic raw material to make industrial chemicals and biofuels such as ethanol and butanol. We have had successes with extracting out lignin that can be used either as a boiler fuel or a coproduct and we have had successes with a collaborator utilizing all of the C5 sugars in our fractionation process.”

In 2008, after developing significant data at the process development unit scale, PureVision completed the design of a scaleup unit and procured the equipment for a half-ton per day reactor. Shakedown began in March and the company expects to be completed by the second quarter of 2009. With the financial support of strategic partners, the company is already planning to build its next-scale unit – a 20-tonper-day fractionation reactor that will be part of a fully integrated cellulosics-to-biofuels pilot plant that should be operational by early 2011.

The company has received quite a few inquiries about its technology and is currently working with a number of industrial clients, including some internationally, to make inexpensive fermentation sugars from a variety of cellulosics, such as corn stover, wheat straw, bagasse, trees, and energy crops. ”We are planning to be able to come up with the design specifications to build any size biorefinery with any kind of cellulosic feedstock to make biofuels and raw materials to make industrial chemicals and consumer products,” Lehrburger says.

“When we started using biomass fractionation in 1999 nobody had ever heard of that and now it’s kind of become a buzzword. But we have stuck with it and that’s what we do. We’re taking biomass

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and we’re taking the different fractions apart so we end up with a fraction of cellulose, a fraction of lignin and a fraction of hemicellulose or xylose-rich liquor.

We’ve got a very elegant technology and an elegant way to fractionate the cellulosics,” he adds.

Lehrburger says the future of fractionation in the ethanol industry looks bright. “What we are advocating is taking non-edible plants and abundant cellulosics to convert those into liquid fuels, chemicals and animal feed. One of our

coproducts we’re advocating is to actually make protein from the fermentation sugars. So as the world needs more and more protein to feed animals and human beings, we believe converting abundant cellulosics into fuel, chemicals and feed is a logical roadmap.” EP Hope Deutscher is an Ethanol Producer Magazine associate editor. Reach her at hdeutscher@bbiinternational.com or (701) 373-8046.

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EUROPE

The European Commission has agreed to continue to allow Swedish ethanol supplier SEKAB to import low-cost Brazilian ethanol at a lower import duty until early next year. Sweden is unique among European Union member states in its promulgation of E85 and flexible-fuel vehicles. Can Sweden continue to secure its import privilege in the face of opposition from the European ethanol industry?

By Ryan C. Christiansen

PHOTO: VOLVO CAR CORP.

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PHOTO: CHRISTIAN STANTON

A

ccording to the European Automobile Manufacturers’ Association, approximately 30 percent of European cars are diesel-powered and slightly more than half of all new cars sold are diesel models. Meanwhile, in Sweden the government says it is spending €69 million ($91 million) to ensure that there will be 2,000 E85 fueling stations by the end of this year — approximately the same number of E85 fueling stations in all of the U.S. as of May 2009. Fifty percent of all new car models on the Swedish market are offered as flexible-fuel vehicles (FFVs) and approximately 25 percent of all new cars sold in Sweden in 2008 were FFVs. That portion is expected to have risen to 35 percent by this summer, which will bring the Swedish FFV total to 300,000 vehicles by the end of 2010.

The number of FFV models offered in Swedish showrooms has increased from just three to 28 in the span of two years.

Swedish drivers are increasing E85 to be 10 percent of the transportation fuel

In Sweden, the government says it is spending €69 million ($91 million) to ensure that there will be 2,000 E85 fueling stations by the end of this year - approximately the same number of E85 fueling stations in all of the U.S. as of May.

market in the country by 2012.

“If you look at the development of E85, it has been fantastic!” says Anders Fredriksson, CEO of SEKAB BioFuels & Chemicals, Sweden’s primary ethanol

marketer and importer. “It has been a big investment and it has a very promising future.”

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Price vs. Principles The promise of pervasive E85 in Sweden is in jeopardy, however. Lower oil prices have supported cheaper E5blended petroleum gasoline prices at the pump. So long as consumers can opt to fill their FFVs with cheaper, lower blends, they will do so.

“The problem with E85 as fuel is that the cars that run it are flexi-fuel cars and the customers always have the choice of using either gasoline or E85, which means it's basically like Coke or Pepsi,” Fredriksson says. “If you're a Coke fan, you always buy Coke; but if for some reason Coke is suddenly $1 more expensive per can than Pepsi, then you would probably switch to the other brand. Here you have the same thing.”

According to the U.S. DOE, E85 contains approximately 27 percent less energy per gallon. Swedes understand that using E85 means getting lower gas mileage compared to using pure petroleum gasoline. Fredriksson says to remain competitive, E85 must not retail for more

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than 70 percent of the price higher than just any Brazilof the E5 blend at the pump. ian ethanol, however, to help When the price of the regular cover the additional overhead blend in Sweden fell to less involved with administering than the equivalent price for sustainability criteria.

E85 in the fall of 2006, sales For Swedes, using ethanol of E85 and also FFVs declined that meets sustainability criteas a result. ria is a main attractor, but high Anders Because E85 is more sen- Fredriksson prices at the pump can trump sitive to ethanol price fluctua- CEO, SEKAB principles. “Every liter of pettions than petroleum prices, the BioFuels & rol that is replaced with a refuel is more dependent on less Chemicals newable fuel such as ethanol costly sources of ethanol. To represents an environmental supply Swedish drivers with competitively benefit,” says Ulf Roos, technology coorpriced E85, SEKAB has been importing dinator for BIL Sweden, the organization cheap ethanol from Brazil. The company that represents manufacturers and importclaims the ethanol is “verifiable, sustain- ers of cars, trucks and buses in Sweden. able ethanol”, produced by a handful of “Thousands of Swedes have already purselect producers and independently certi- chased flex-fuel vehicles that run on E85. fied to reduce fossil fuel carbon dioxide It is important that these vehicles—which emissions by 85 percent compared to in practice can run on petrol, ethanol, or petroleum gasoline and produced with a mixture of the two—are actually run on zero tolerance for abusive labor practices E85. If not, the environmental benefit is or the conversion of rainforest land into lost. If ethanol is much more expensive agricultural land. The wholesale price of than petrol, there is a great risk that ethaverifiable sustainable ethanol is slightly nol vehicles will be run on petrol.”

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Nearly four years ago, the country had the highest fossil fuel carbon dioxide emissions in Europe from new cars sold. By October 2008, after strong measures to move toward using more ethanol, Sweden had the lowest CO2 emissions in the EU.

A Temporary Solution To continue to import cheap, certified undenatured ethanol from Brazil, SEKAB and Sweden have had to annually petition the European Commission’s Customs Code Committee for permission to classify the ethanol as a chemical product for blending with petroleum gasoline, thereby exempting the product from the much higher duties that are imposed on imported agricultural products.

The Commission granted SEKAB the privilege in early 2008 and in April 2009, extended the privilege for one year, provided the ethanol is used only for E85 blends and in Sweden. SEKAB imports the ethanol to Sweden and then blends the ethanol with petroleum gasoline under customs control. The company then pays duty on the final E85 blend as a chemical product.

SEKAB blends E85 in both summer and winter varieties. While the E85 sum-

mer variety must have a vapor pressure of at least 35 under Swedish standards, the E85 winter variety must have a vapor pressure of at least 50, which is accomplished by increasing the amount of petroleum in the winter blend to assist with ignition and operations in colder climates.

SEKAB and Sweden will petition the Commission again this year to extend the import privilege. "It could be a hard fight," says Ewa Björling, Sweden’s Minister for Trade, in a statement.

“It's a big problem that this permit goes from one year to the next,” Fredriksson says. “Basically, it's just a Swedish problem, also, because E85 is only a market in Sweden. There is hardly any volume in any other country in Europe.

Just getting a permit from one year to the next, it's not a very stable business environment. Consumers, they want to know, ‘If I buy this car, is the fuel go-

SOMETIMES, CHOOSING THE WRONG PATH CAN COST A LOT MORE THAN YOU THINK.

ing to be 30 percent more expensive next year because of higher tariffs?’ So we will be working very hard and still are working very hard on the lobby side to try to get politicians and other interest groups to realize this. If we pay the higher customs tariff, there is no way that we can compete with gasoline. There would be no market.”

Greenhouse Gas Reductions If Swedes do switch from using E85 to using the standard E5 blend, the environment may suffer, the Swedish government said. In its petition to the European Commission, Sweden notes that nearly four years ago, the country had the highest fossil fuel carbon dioxide emissions in Europe from new cars sold. By October 2008, after strong measures to move toward using more ethanol, Sweden had the lowest CO2 emissions in the EU. Sweden is doing its part as a member state to help the EU stick to its greenhouse gas (GHG) emissions reduction goals, which were established in part by the Kyoto Protocol to the United Nations Framework Convention on Climate Change. Under the treaty, the EU commits its member states to reducing their collective GHG emissions at least 8 percent by 2012.

Sweden’s contribution to the EU’s

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overall goals in the transportation sector is important. The latest progress report from the European Commission says that collectively, member states are unlikely to reach the EU’s target for using 5.75 percent renewable fuels—including ethanol, biodiesel and other renewable fuels—in the transportation sector by 2010. While some member states already have reached their own targets, other countries are falling behind, and the EU as a whole might only achieve using 4 percent renewable fuels in 2010.

Under an EU directive, member states are required to submit annual progress reports to the Commission. By 2007, only Germany had managed to surpass the 2010 goal, using 7.4 percent of transport fuels from renewable sources.

Austria, Bulgaria, France, Lithuania, and Sweden individually achieved more than half the 5.75 percent target by that year.

The EU as a whole achieved less than half of the target at 2.6 percent overall.

The European Union Council of Ministers adopted a legislative package in April that increases the amount of ethanol to be blended with petroleum gasoline in the EU. The EU plans to increase the share of renewable energy it consumes in the transport sector to 10 percent by 2020. The measures were first proposed by the Commission in January

2008 and were amended by the European Parliament in December. EU member states must now adopt national plans by June 2010 and enact national laws by the end of that year. In its progress report, the Commission says it believes that this new directive includes a stronger legislative framework for ensuring increased use of renewable fuels in the EU. “This target cannot be achieved without increased use of imported green fuels such as ethanol,” Roos says.

A Large Impasse From the Swedish point of view, importing ethanol from Brazil at a competitive price advantage over Europeanproduced ethanol is absolutely necessary if the country is to continue to reduce GHG emissions by adopting E85 in the transportation sector.

“The customs tariffs are there for a reason,” Fredriksson says, “and the reason is that it is much more expensive to produce ethanol in Europe than in Brazil and from sugarcane.”

Fredriksson says the higher import duty on ethanol, when classified as an agricultural product, is only necessary when the tariff is used to protect the market for domestically produced ethanol for use in low-level blends. “There is no market for European ethanol in E85 as long as gaso-

line is as cheap as it is today,” Fredriksson says. “For European producers, it's either having zero percent of a small market or having 100 percent of no market at all.

[On the other hand], for a low blend of ethanol in gasoline, it's not a competition issue. It's not that the consumer can choose zero percent ethanol or 5 percent ethanol; we have 5 percent in all gasoline.

It's not a price-sensitive market in that sense. You keep the high tariff for that.”

Under current production levels, European producers could not supply Sweden and every other member state with enough ethanol. While producers in the EU made 2.8 billion liters (740 MMgy) of ethanol in 2008, up from 1.8 billion liters (476 MMgy) in 2007, Europe increased its imports of ethanol by an estimated 400 million liters (106 million gallons) in 2008 to an estimated 1.9 billion liters (502 million gallons), with most of the ethanol (between 1.4 and 1.5 billion liters, or between 370 and 396 million gallons) coming from Brazil, according to the European Bioethanol Fuel Association (eBIO).

“Looking at the EU, then, if you want to have 5 percent or 10 percent of gasoline in the EU, then we're talking about 10 million cubic meters of ethanol, which means we can develop our current production more than 10 times for just a continued on page 96

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low blend,” Fredriksson says. “The important thing is that there is no way that we can produce so much ethanol within the Union. We want ethanol production to be developed within the Union as much as we can, without interfering with food production, and that is about 7, 8, 9, or 10 million cubic meters— and that is about it. We cannot produce more of it in terms of the photosynthesis and the land to produce more.

And so by keeping high tariffs for low blends, that means there is an incentive to develop as much production as we possibly can within the Union.”

Understandably, European ethanol producers can’t agree that Brazil and Sweden should be granted a privileged trade arrangement, thereby bypassing higher-priced, domestically produced European ethanol, especially when so much Brazilian-produced ethanol is being imported into all of Europe, anyway.

“We are very, very much concerned by this lack of a coherent approach in terms of trade,” says Valérie Corre, director general for the European Union of Ethanol Producers (UEPA). “We are not supporting the way the EU is actually conducting its policy in terms of letting in more and more and more and more ethanol on the market. It's not that

PHOTO: PETER SEIFERTH.

continued from page 93

By 2007, only Germany had managed to surpass the European Union's goal of using 5.75 percent of transportation fuel from renewable sources by 2010, using 7.4 percent. Here a locomotive hauls ethanol from the CropEnergies AG ethanol plant in Zeitz, Germany.

we are, per se, against imports, it's that we are very much against the fact that there is no sort of balanced approach.

We want to have a sustainable, balanced approach in terms of how we manage imports in the EU, just like [in the U.S.], because in the States you are not completely flooded with cheaply produced ethanol from Brazil. We are just talking about Brazil here. Brazil is very com-

petitive for many, many reasons, which need to be, actually, also clarified. Even the [U.S.], with the strongest industry in the world, even now can't compete with Brazil, for obvious reasons, and for reasons that we, perhaps, don't know about.”

Other industry leaders agree. “Obviously, we were not really thrilled with what was agreed to by the mem-

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EUROPE

'Instead of allowing these kinds of requests, we believe that the community should first solve the trade issue in general.

We believe that all of the ethanol going into the fuel market should be treated in a similar way, the way that you're doing it in the United States.'

Robert Vierhout, secretary general, European Bioethanol Fuel Association

ber states,” says Rob Vierhout, secretary general for eBIO. “The decisionmaking is a simple majority where one member state has one vote. There was a slim majority in favor of agreeing to this request.”

Vierhout says European ethanol producers are placed in a difficult position when having to lobby against Sweden and E85. “Of course E85 is very attractive,” he says. “It's kind of a sexy car fuel and it makes ethanol very visible and so it has an attractive side, really, but if it means for us that we can never supply this market because it's really a cost issue, then we better not have [the market]. We better go for an

E10 market or an E15 market, because that market we can supply. But I believe that it is possible to supply even [the E85] market with European ethanol.”

The issue is not whether Sweden should be granted special permission, Vierhout says, it’s that special cases should not be granted at all. “It is not the way that we should handle imports of ethanol from third countries that normally pay the full duty,” he says.

“Instead of allowing these kinds of requests, we believe that the community should first solve the trade issue in general. We believe that all of the ethanol going into the fuel market should be treated in a similar way, the way that

you're doing it in the United States. We are seeing huge imports in the past two to three years. This is a growth market and a very attractive market where you can earn a lot of money on your margins. But still, the price in general for ethanol for fuel is set by the Brazilian spot in Rotterdam. Everyone looks at that particular price and then knows for what price he can sell.”

According to the Port of Rotterdam Authority, approximately 2.4 million metric tons of ethanol passed through the port in 2008, a 50 percent increase over 2007, with 1.7 million tons coming from imports, mostly from Brazil, but also from Argentina, Costa Rica, Venezuela, Peru, and Guatemala. More than 30 percent of the ethanol through Rotterdam is destined for Sweden.

Corre says granting Sweden a special case is not an economically sustainable scenario. “I just don't understand why we continue doing things which are not going to be really helpful, neither for Sweden and its constant promotion of E85, nor for the overall global objective of the EU,” she says. “We can understand that it is much more convenient to buy cheap ethanol for high volume and high blends—it makes sense, especially with a barrel [of oil] at such a low-level price—but we need

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to go much further than just the simple thought that we need to suppress the import duty and that's the solution to a problem. No, I don't think free trade is, necessarily, the solution to all of the problems.”

Vierhout agrees. “I can understand that the Swedes would argue that this is so attractive for us and to keep it attractive, we need to source our materials as cheap as possible,” he says. “We're not going to say that this cannot be discussed.

But what we prefer to do first is to get clear rules for how ethanol for fuel enters the European market. If that, in the end, would mean that we would need to give specific access to the Brazilians for specific markets—niche markets—that would be an issue to discuss. We believe that first you need to have a good system in place. The system is not good. Once that is solved, then we can look at maybe allowing access to the market under special conditions for special suppliers.”

A Carbon Tax In order to continue to support the European ethanol industry, Corre suggests a carbon dioxide tax on petroleum gasoline is needed. “It's obvious that if you introduce a CO2 tax on petrol, then it's going to make it more expensive and then you are also acknowledging the fact that petrol is detrimental for the environment,” she says. “One of the most efficient tools at the disposal of humanity, so far, is a tax because—with a tax—you clearly orient and push the consumer in a certain direction. That's good. I don't understand why it is taking so long to actually have one in place. But, of course, one should not underestimate that politicians and industry sometimes are very much connected—one with the other— and it's difficult.”

Vierhout said European tax laws need to be examined. “Maybe our entire tax system is wrong,” he says. “We [in Europe] tend to treat diesel fuel very favorably, and that means that petrol

prices are quite high; it means that we have built very efficient diesel engines and never invested a lot of money in improving the quality of gasoline engines.

If you also would have high-efficiency gasoline cars—if you would adopt your taxation structure in such a way that biocomponents become more attractive to use—I think the overall picture could very well change.”

A proposal is on the table at the EU level that would tax all fuels based on their CO2 emissions, Vierhout says.

“That would mean that a biofuel is not going be taxed for CO2 because it is supposed to be CO2 neutral compared to fossil fuels,” he says. “And all of the fuels and all of the energy products would be taxed on their energy content; that is again attractive for biocomponents because their energy content is lower than the energy content of fossil fuels. And so in that way you can promote the use of biofuels because they become more attractive in the market, because they are lower-taxed.”

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Corre says a carbon tax would help lawmakers to steer policy. “It's very important to know what is going to be the price of a barrel [of oil],” she says. “As a decision-maker, you need to make sure that you're establishing a system whereby this very volatile element is not going to disrupt your efforts overnight. Otherwise, that's not policymaking, it's just a waste of time. You can't be fooling around when you have people investing billions of euros [in biofuels]. It's not responsible.”

Fredriksson notes the price of oil can be deceptive. “The challenges that we're facing are enormous, completely enormous,” he says. “Just look at the situation that we have today. We have the worst economic downturn in about 100 years.

The world is on its knees and still you pay $50 per barrel of oil and then you have to remember that the dollar has strengthened a lot in the last year. So if you recalculate the currencies, we're paying about $75 to $80 per barrel. And nobody is talking about that. Oil is extremely expensive.”

Priorities One of the reasons the European ethanol industry has lagged behind the U.S. is because the U.S. has made energy security a priority, Corre says.”[The U.S. has] established a system where you finally achieved the objective,” she says, “the objective being reducing energy dependency more than reducing CO2 emissions.

At the beginning, it was about energy security, but it's also a support for farmers and it's good for sustainability because, somehow, it is easier to control what is happening on your territory than importing from God-knows-where. As far as the European industry is concerned, it's more difficult for us than what is happening in the States. You actually have much more support from your politicians than what we have here in the EU, so far.”

Vierhout says he is hopeful. “We do have a mandate now,” he says, “but the mandate really only kicks in in 2020.

That's a big difference [compared to] the U.S., where there is a renewable fuels

standard [and] certain volumetric objectives. We don't have these volumetric objectives, we have a percentage objective or relative objective by energy and we don't know what that means in terms of volume and so it's a bit of a question. We can make some assessment, but still it remains a question mark. The U.S.—much more than Europe—has created a clear perspective for their home production by having a duty wall that works much better than in Europe. We have some holes in our wall.” EP Ryan C. Christiansen is the assistant editor of Ethanol Producer Magazine. Reach him at rchristiansen@bbiinternational.com or (701) 373-8042.

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For decades, energy companies have relied on Husch Blackwell Sanders for guidance in financing, development, operation, and purchase and sale of renewable energy and biofuels assets. We have served regional and national companies involved in production, transportation and marketing of renewable energy and biofuels. Energy demands are again driving renewable energy development and our team brings a broad range of expertise to the renewable energy industry.

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THE DIFFICULTY WITH DOE FUNDING The U.S. DOE controls the majority of federal funding opportunities for ethanol and renewable energy producers. The agencyâ&#x20AC;&#x2122;s loan guarantee program was created specifically to provide millions of dollars for renewable energy projects - but in its first four years failed to award a single recipient. What was the hold-up and is a fix on the way?

By Kris Bevill

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A

cquiring financing from the government has never been easy.

And for good reason: taxpayers are generally skeptical about how their money should be used for and the government has a system of checks and balances to try to ensure that public money is funneled to the best possible projects and most-deserving applicants. Programs that were formed with the best intentions can sometimes be bogged down by tedious language and rules that—while created as a protectionary measure—can ultimately make a difficult process nearly impossible to navigate. The unintended result is that projects don’t get funded and good intentions are never realized.

The U.S. DOE has had its fair share of difficult-to-navigate funding programs. Not to say that the agency is never successful in getting money to the right place at the right time, but historically it has been plagued with too few resources to handle a wide variety of loan and grant programs.

One program in particular that has become notorious for its lack of progress is the agency’s loan guarantee program. Created by the Energy Policy Act of 2005, the program was established to provide loan guarantees for renewable energy projects. Title 17 of the act allows the DOE to provide loans for projects if “there is reasonable prospect of repayment of the principal and interest on

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'Many of the projects and technologies seeking loan guarantees involve interesting applications of technologies with significant potential to reshape the energy landscape.

Hopefully new leadership can transform the program and make it live up to its promises and potential.'

Henry Scott, associate, Milbank, Tweed, Hadley & McCloy LLP

the obligation by the borrower.” If that were the only requirement for projects to qualify for funding, the possibilities would be endless—therefore, additional language is necessary. However, the amount of additional qualifications in the program’s guidelines has made it quite difficult for producers to qualify for funding. So difficult, in fact, that in the four years following its formation, not a single loan was granted. In April, newlyappointed Secretary of Energy Stephen Chu announced the first loan guarantee - a $535 million guarantee for a solar project - but by mid-May actual funding still had not made its way to the recipient.

Too Many Rules BlueFire Ethanol Fuels Inc. CEO Arnold Klann says his company began dealing with the DOE loan guarantee program in 2007.

“It’s been a long slog, so to speak,” he says, attributing most of the problems his company has experienced to the program not being well-founded. “They were kind of making it up as they went along and initially were trying to figure out what [the agency] could do without legislative backing,” he says. One of the program’s initial requirements included a risk assessment, a step that Klann believes was impractical and disqualified many biofuels projects. “Any first-of-a-kind technologies always have inherent risks, so the ratings agencies would bounce you out or give you the lowest rating,” he explains. Low ratings resulted in high premiums for the agency’s unfounded guarantees, which Klann says is why BlueFire made the decision to discontinue its bid for a DOE guarantee. “At the end of the day we didn’t put it in because we felt we didn’t qualify and the principal payments were going to be very high,” he says.

Klann “Qualification for Arnold CEO, BlueFire the existing DOE loan Ethanol Fuels Inc. guarantee program involves an extensive, ex-

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pensive, time consuming process,” says Karen Wong, a global project finance partner at Milbank, Tweed, Hadley & McCloy LLP. “Application packages have regularly been in the thousands of pages [and] must include descriptions of the technical aspects of the project, detailed documentation with respect to financing plans, and draft forms of a majority of project contracts.”

As an attorney specializing in financial transactions for the renewable energy and ethanol sectors, Wong has extensive experience in acquiring government financing and has assisted several clients as they Karen Wong weed their way through global project DOE-related funding finance partner, projects. She says the Milbank, Tweed, Hadley & program’s rulemaking McCloy LLP process has been cumbersome and interagency disputes regarding appropriations have further added to its lack of implementation.

Wong points to a specific list of requirements which have posed problems for companies working to secure loan guarantees.

“First, loan guarantees are generally limited to 80 percent of project costs and require a significant equity commitment,” she says.

“In today’s constrained capital and credit en-

Politics

Appropriations Oversight

The current DOE structure exposes the loan guarantee program to political externalities and dependency on "Year Money," limiting technology choices.

SOURCE: CLEARVIEW ENERGY PARTNERS LLC

vironment, finding equity investors to bridge the non-guaranteed portion of project costs can be challenging. Second, under the existing Section 1703 program, applicants must pay for the government’s credit support. And solicitations thus far have provided that this often significant payment is due when the loan guarantee is issued. Third, even applying for a DOE loan guarantee is expensive.

In addition to the time, effort and profes-

sional fees associated with an application, applicants are required to pay an application fee - in addition to facility fees and maintenance fees that apply should a project be awarded a loan guarantee.

Finally, artificial time constraints have acted as a further limitation for potential applicants. Applications have been accepted only after formal solicitations by the DOE. And these generally, have been over-sub-

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scribed. While the solicitation process has allowed the DOE to alert applicants to the type of projects it would like to guarantee, there is no ‘open window’ for loan guarantees.”

Henry Scott, an associate at Milbank, says that the loan guarantee program has the potential to play a transformative role in the introduction of new technologies to the marketplace. “Many of the projects and technologies seeking loan guarantees involve interesting applications of technologies with significant potential to reshape the energy landscape,” he says. “Hopefully new leader-

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ship can transform the program and make it live up to its promises and potential.”

Risky Business Flaws in the loan guarantee program’s protocol haven’t gone unnoticed. In late April, Senate energy committee chairman Jeff Bingaman (D-N.M.) and ranking member Lisa Murkowski (R-Alaska) introduced the “21st Century Energy Technology Deployment Act,” which seeks to improve the loan guarantee program. Included in S.949 is the formation of a clean energy investment

Additional DOE programs The U.S. DOE is responsible for funneling hundreds of millions of federal dollars into renewable energy projects. Several new potential funding options have been recently created to further energy and biofuels-related technologies in order to comply with President Barack Obama's energy strategy.

Among them: Advanced Research Projects Agency - Energy. ARPA-E was formed in late April with the sole purpose of funding research and development of transformational energy-related technologies.

The agency was given $150 million to aid in financing potentially disruptive technologies and has the potential to provide funding for ethanol-related projects that have so far been unable to secure financing due to the highrisk and unproven nature of their technologies.

American Recovery and Reinvestment Act. The DOE plans to invest nearly $800 million of its Recovery Act funding towards the acceleration of biofuels. Previously awarded cellulosic ethanol DOE grantees will be eligible for additional funding in order to reduce risk and ultimately accelerate the timeline for start-up and commissioning. Nearly $500 million will be used to validate integrated biorefinery technologies and $20 million will be used to further explore the impact of higher ethanol blends in conventional vehicles as well as the impact of upgrading current infrastructure to become capable of utilizing E85. To follow the progress of these programs, visit www.energy.gov/recovery.

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fund, which would be used to support technology deployment, and a Clean Energy Deployment Administration, which would be an independent administration charged with providing credit for “risky” technology projects. According to a release from the Senate energy committee, this new administration would encourage deployment of technologies that are perceived as too risky by commercial lenders; thus encouraging the advancement of riskier technologies, which have a high potential to address climate and security needs. The senators’ vision for CEDA is for it to act as a “clean energy bank” and balance risky investments with revenues from other services and less-risky investments, thus becoming self-sustainable over time. That notion sits well with future cellulosic ethanol producers such as Klann. “The DOE or someone has to step up and take those inherent first-ofa-kind risks,” he says. “And they’re finally doing it.” Klann believes that if the proposed changes are made to the program, more money will certainly be made available for young technologies such as what is being used at BlueFire.

Wong is optimistic about the proposed re-vamp of the program, but warns that it is vital that the new administration be used as a supplement to the loan guarantee program and that Congress not disrupt or further delay pending loan guarantee applications if it approves the merger of the loan guarantee program and CEDA. “While public sector investment is crucial, private sector involvement in the loan guarantee program as holder of guarantee loans is also essential,” she says. “The loan guarantee program is key to bringing additional participants to the project finance marketplace.”

Several additional welcome changes would be brought about if the bill is passed, according to Wong. Included on her list: the re-definition of “commercial technology” to disqualify demonstration projects, a requirement to review and decide on applications within 180 days of receipt and reduced fees for “breakthrough technologies” projects.

At a Senate committee hearing to discuss modifications to the loan guaranETHANOL PRODUCER MAGAZINE

July 2009

tee program, DOE representative Matthew Rogers stated that Chu has made the agency’s loan programs an urgent priority and is committed to making them successful. However, he noted, the program will only be successful if the federal government becomes a secondary lender over time. “The goal should be to have the federal government focus on its unique role in accelerating market development for advanced technologies,” Rogers testified. “[The loan guarantee program] should not be a long-term financing solution for troubled energy companies—nor should the

federal assistance crowd out private lenders who provide better commercial underwriting capabilities than the federal government. The DOE has a clear role to play, and we will provide strong returns to the American taxpayer if we remain focused on our unique role in filling a gap in advanced energy technology markets.” EP Kris Bevill is the editor of Ethanol Producer Magazine. Reach her at kbevill@ bbiinternational.com or (701) 373-8044.

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BIOMASS

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Have TrailerWill Move Biomass Randy Hill believes he has the solution for transporting and drying large amounts of wet, woody biomass. The president of Advanced Trailer is working with the University of Idaho to evaluate the economic and environmental benefits of using his agricultural crop drying trailers to move biomass.

By Rona Johnson

ETHANOL PRODUCER MAGAZINE

July 2009

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O

ne of the problems plaguing the ethanol industry when it comes to using biomass for fuel production is the efficient transport and storage of mountains of biomass. In situations where wood chips are used, the product may be handled several times before it reaches its final destination.

That takes time and energy. Then there’s the issue of drying wet biomass so it can produce the maximum amount of British thermal units, while releasing the least amount of carbon dioxide.

Randy Hill, president of APT Advanced Trailer and Equipment LP and the University of Idaho are betting they can solve this issue by using Advanced Trailer’s agricultural drying trailers. Although prior testing has proven Hill’s trailers can do the job, he wants to be able to show biomass processors the benefits of using his trailers. To do this, he is providing a grant and the use of a trailer to the university so it can be tested in a realworld situation.

After talking with the people at UI, Hill saw their interest as a perfect opportunity

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to develop the specifications he needed to get into the biomass industry. “We know it works, we know it removes moisture from product,” Hill says. “The question has been, is it feasible cost-wise for energy production to remove that moisture? We started these discussions last summer with the University of Idaho and initially the university was interested in just purchasing the equipment and putting it into use. But I saw that there would be value in using the equipment and having some research from professors who say here’s how you do it, here’s how long you do it and here’s what the benefits are.”

UI took him up on his offer and has already developed plans to use the trailers.

“The short-term goal is to look at how the technology of the trailer works,” said Darin Saul, sustainability coordinator for UI. “The long-term goal is to integrate the trailer into a larger system that uses the waste heat from the steam plant to pre-dry the chips before they are burned.” Initial testing will use natural gas to dry the chips, but the university believes that greater benefits will be realized when they are able to use their own waste

heat. “My involvement in this is looking at how more effectively we can use biomass so we can further reduce our natural gas use on campus,” Saul says. “We do that by better utilizing our biomass boiler.”

Mike Lyngholm, steam plant manager at UI, says they are still trying to get the process established by working with the utility company and the natural gas supplier, but he hoped to be using the trailers by the first week in May. The university has a wood-fired boiler that they use to heat 80 percent of the buildings on campus, he says. The problem is that Lyngholm has to have a huge stockpile of chips to keep up with the demand for heat in the dead of winter. The outside of that pile gets wet and freezes. “Right now I have a big wind-row of wet half-frozen fuel from the pile that we threw off to one side as we dug in,” he says. “I’ve looked at driers to install at the plant to dry everything but the energy needed to dry all the fuel would be rather expensive and the equipment is quite expensive.”

Lyngholm thinks he may be able to solve his dilemma by using one or two of the

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PHOTO: ADVANCED TRAILER

Advanced Trailers agricultural drying trailers to haul and dry the wood chips in the winter and then park the trailers in the summer when they aren’t needed.

Ultimately, Lyngholm wants to improve the efficiency of the boiler. “I’ve got some of the researchers here from the College of Natural Resources who are going to help me out and through the next 12 months run some test loads, put some probes in the loads and tweak the trailers for dying wood,” he said. Those tests will determine how long the wood chips need to dry, what kind of temperatures are needed and if the process is efficient.

From Peanuts to Wood Chips The idea to use his trailers to transport biomass wasn’t just a shot in the dark. Hill has been in the trailer business since the mid-90s, first working for GE’s Dallas Trailer Fleet Services (formerly Transport International Pool) and then forming Advanced Trailer, a semi-trailer storage rental and sales business. When he was working for GE,

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July 2009

Hill would like to see his trailers used to transport dry wood chips and other biomass materials.

people would call asking for storage trailers, “but GE wasn’t in that business and wasn’t interested in that market,” Hill says.

Storage trailers are outdated and retired 18-wheelers, which Hill buys and hauls to Texas where they are cleaned, painted and

decaled. “I was the first guy in Dallas who really aggressively approached that market,” he says. “I saw opportunity not only to build my own rental fleet but to sell to other companies in the rental business.”

Shortly after he started his business, there

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was a change in the west Texas landscape that had a profound affect on his company. Peanut growers from central Texas started to see the area as a perfect place to grow their crop in a rotation with cotton. “The climate and the soil were perfect for growing peanuts and there was a good supply of water,” Hill says.

“West Texas became a new frontier for the peanut industry.” There was only one hitch.

The fields in central Texas were 65 to 300 acres, and in west Texas they were 1,000 to 2,000 acres. “The problem was that when they harvested those big fields they didn’t

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have a piece of equipment that could handle it,” Hill said.

At the time, peanuts were hauled out of the field using small wagons 16 to 20-feetlong pulled by pickups. The peanuts were loaded into the wagons in the field, brought back to a buying point where they were graded and tested for moisture content, which determined how long the peanuts would have to be dried before they could be stored in a warehouse.

The wagons had been used for 50 years but were quickly becoming obsolete in areas

with 1,000-acre fields. It just so happened that farmers in Lubbock, Texas, were helping with a Texas Tech study on the feasibility of using the wagons. “They came up with a concept that we should be able to haul and dry peanuts in semi-trailers and 18-wheelers,” Hill said.

Then in 1996, a farmer from west Texas bought 100 semi-trailers from Hill with the intention of using them to dry peanuts. That purchase opened up a whole new market for Advanced Trailers. The farmers would buy Hill’s trailers and then convert them so they could be used with their stationary driers. “And it worked—drying the peanuts in the semis worked,” he says. To accommodate the semi-trailers, the dryer maker manufactured a new dryer with a bigger motor, fan and heating element that could be used to push the hot air under the floor of the trailer, Hill said.

News of Advanced Trailers’ peanut drying semi-trailers soon spread to the Southeast where 85 percent of the peanut crop is grown. Once it was determined that the trailers worked there, Hill was asked if he could develop a completed product so the growers didn’t have to convert the trailers themselves. “I called one of my customers in west Texas and asked if I could look at a trailer,” Hill said. “I brought in an engineer and we looked at the trailers—we looked at broken trailers, we looked at trailers that were operating— and we basically said here are the specific needs for the trailer, and we designed and developed one that would do the job.”

The first year he was in the peanut trailer converting business he sold 50 trailers.

“The next year it was like we were the peanut trailer drying experts and these people started coming from Georgia. Our little market in west Texas had been going on for six or seven years, but now we were embarking on the big market—the Southeast.”

In 2002, Hill sold his rental business but retained the company name, the sales business and his intellectual property. “I could see that there were other opportuni-

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ties for this trailer and we were just starting to embark on this becoming something very special,” he says.

In 2004, Hill opened a plant in Georgia so he could build the trailers closer to the customers. The plant produced 360 trailers in its first year and 670 the second year.

Entering the Biomass Market Because of the seasonality of the peanut industry, Hill decided it was time to look into some new markets. Two years ago he received a phone call from the Herty Advanced Materials Development Center in Savannah, Ga. They wanted to try drying wood chips in one of his trailers. That was just the spark that Hill needed. “We kept hearing discussion about the need to remove moisture from biomass—there is a big market for that so I started looking into it a little bit further,” he says. “I started having a lot of discussions with the U.S. Department of Energy and different owners of biomass facilities around the country and we came up with the idea that this market could be 10 times the size of the peanut industry, especially with the popularity and the focus on carbon emissions and renewable alternative energy.”

Hill also did some advertising, which led him to UI. “The university told me that if they can take that moisture content from 50 percent or 60 percent, which is common, to 30 percent their burning and Btus will be twice as efficient,” he says.

“They are burning roughly five trailer loads a day. If you take that and you cut off one trailer load a day, just one, that’s a savings of $300,000 a year.”

Hill was encouraged when he first arrived at UI and saw the system that the university had set up to fuel its boiler. “I drove to that facility and it was as if I was going back 12 years and driving into a peanut town because the facility, the equipment that they use in the process, the way that they unload the trailers everything was just like peanuts.”

The testing at UI is important be-

cause it will determine whether it’s economically feasible to use the trailers for biomass.

“In peanuts, we are talking about a load of peanuts that’s worth $35,000,” he says. “A load of wood chips is worth about $1,000.

You can’t afford to spend $200 to $300 drying a load of wood chips like you can with peanuts.”

Hill would also like to see the benefits of using waste heat to dry the chips, which they will be testing at UI. “When we use these trailers in big applications with 100 trailers in one facility and build a ducting

system that takes dry, hot, free excess heat and we put it into a fan, we are using our exhaust to dry our product before it goes into a burner. That’s what we see as the future, and the future is here today.” EP Rona Johnson is an editor at BBI International. Reach her at rjohnson@ bbiinternational.com or (701) 738-4940.

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PROFILE

For 40 years Ottawa-based Iogen Corp. has researched and developed enzymes to turn cellulosic material into low carbon dioxide-based cellulosic ethanol. Today, the company is in its fourth year of producing ethanol at one of the worldâ&#x20AC;&#x2122;s first demonstration-scale cellulosic ethanol plants, manufacturing enzymes and continually improving operations.

By Hope Deutscher

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PROFILE

PHOTO: IOGEN CORP.

I

n 1978, Patrick Foody Sr., a civil engineer and Montreal financier, began researching how to turn forest and farm waste, such as straw, grass or wood, into animal feed and fuel. After initially using enzymes to break down wood into cattle feed, Foody turned his attention to using enzymes to produce renewable fuel.

“Back in the early 1980s, the price of oil was forecast to hit $80 a barrel and the world was going to need alternative fuels, and so we started looking at whether we could take fiber and use enzymes to turn that fiber into fermentable sugars to make alcohol. Indeed, that is what we do,” says Jeff Passmore, executive vice president of Iogen Corp. “As it turned out, of course, the price of oil didn't go to $80 a barrel in the 1980s, but in the meantime Iogen learned a lot about how enzymes behave with fiber.”

And so began Iogen’s commercial enzyme business. Today, the company owns and operates a large-scale, state-of-the-art enzyme manufacturing facility in Ottawa that provides enzymes for the pulp and paper, textile and animal feed industries. As well, Iogen says, its cellulosic ethanol process combines innovations in pretreatment, state-of-the-art enzyme and fermentation technologies to produce ethanol from biomass. Using enzymes, pretreated fiber is converted to sugars, which are subsequently fermented and then distilled to make ethanol.

Since the 1980s, Iogen has moved from conducting fundamental basic research to applied research to pilot-scale, to demonstration-scale. Since 2004, the company’s 2 MMly (500,000 gallons) demonstration plant has been producing cellulosic ethanol from wheat and barley straw. The facility can process up to about 30 tons of feedstock daily. As a result of operating a demonstration plant, Passmore says, Iogen has learned a lot about the integration of the various processes that combine to develop the fuel and has upgraded the plant several times.

Iogen Corp. uses advanced microorganisms and fermentation systems capable of converting both C6 and C5 sugars into ethanol at its demonstration-scale facility in Ottawa. The “beer” produced by fermentation is then distilled using conventional technology to produce cellulosic ethanol for fuel grade applications.

Use “I think it is fair to say we are on the cutting edge,” Passmore says, as he proudly talks about the company’s success stories of demonstrating cellulosic ethanol. His own car, a flexible

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fuel Chevrolet Impala, runs on the company’s straw-based E85.

“It always amazes me that there are all these straw bales here at the plant, and I go and fill up and the fuel I run my car on comes from that straw. I never cease to be amazed by that,” he says.

Not only does Iogen’s own vehicle fleet run on its fuel, but the company has also provided E85 to various departments within the Canadian federal government.

To demonstrate the environmental benefits of Iogen’s fuel, during the summer of 2004, renowned Canadian adventure traveler Garry Sowerby drove a GMC Yukon fueled with the company’s E85 more than 9,000 miles, from Halifax, Nova Scotia, to Victoria, British Columbia, stopping in 85 communities along the way. The “Mission Green” trip was sponsored by General Motors Canada.

For the past two years, Green Alternative Motorsports has used Iogen’s E85 to fuel its high-performance race vehicles for the 25 Hours of Thunder Hill Endurance Race in Willows, Calif.

In 2007, GAM team member and driver Steve Zadig wanted to use cellulosic E85 to reduce his environmental footprint as he raced two GAM LeMans Prototype (LMP3) cars. “So he went out to procure some and, not surprisingly, he couldn't find anybody to sell him any cellulosic ethanol other than a company in Ottawa called Iogen,” Passmore says. Iogen shipped GAM the requested 800 gallons of fuel. In the fall of 2008, Iogen again supplied the company with 300 gallons of E85 for one of its racecars.

“For two years in a row, Iogen has been the only firm actively producing cellulosic ethanol and able to reach into its inventory to provide us with the volume we need – enabling us to ‘go green’ again,” Zadig said in a press statement.

The Canadian government has set a 5 percent renewable fuel mandate by 2010; and a renewable fuels standard enacted in the U.S. Energy Independence & Security Act of 2007 estab-

PHOTO: IOGEN CORP.

PROFILE

Iogen Corp., based in Ottawa, produces cellulosic E85 for use in its own fleet of vehicles, as well as for vehicles used by the Canadian federal government.

lishes annual renewable fuel volume targets, reaching 36 billion gallons in 2022, of which 16 billion gallons is mandated to be cellulosic biofuels.

Even if oil prices remain below $100 per barrel, Passmore hopes that the U.S. and Canadian federal governments will continue to establish renewable fuels targets. “We need the kind of initiatives that governments have established, such as mandates.

You need mandates and you need price signals,” he says. “If the goal here is to get off that addiction [imported fossil fuel from the Middle East], then you want to ensure that when conventional energy prices are low, you don't walk away from your commitment to alternative fuels because, if you do, then there

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PROFILE

won't be any when oil prices go back up again. We need regulatory certainty and we need those kinds of price signals and mandated fuel use. Our customers are the oil companies and some are being very progressive in terms of their involvement in the field, like Royal Dutch Shell plc, but there are others who would prefer not to use ethanol. So, I think that you create a market for the product through mandating it.”

Working With Partners What has led to Iogen’s success?

Perseverance, dedication and hard work, Passmore says, adding that it also includes strategic partnerships with major oil companies such as Shell and Petro-Canada, global investment banker Goldman Sachs & Co. and the government of Canada.

Goldman Sachs & Co. of New York invested $30 million in May 2006 to help accelerate commercialization of Iogen’s renewable cellulosic ethanol technology.

Shell first took an equity stake in Iogen in 2002. In July 2008, the two companies announced an extended commercial alliance to accelerate development and deployment of cellulosic ethanol. The agreement includes a significant investment by Shell in technology development with Iogen. Just a few months later Iogen shipped the first 100,000 liters (26,417 gallons) of

122

cellulosic ethanol to Shell for use in fuel applications.

Passmore says the Shell partnership is on-going. “Last July we announced that Shell had increased its share in Iogen from 26 percent to 50 percent. As far as the use of the fuel is concerned, immediately following the conclusion of the new strategic partnership they stepped up the amount of fuel that they were purchasing from us and so we have been shipping fuel to them pretty much every few weeks.” As for how the fuel is being used, Passmore says announcements will be made in the future.

“Obviously, we want to have some commercial use of the cellulosic fuel.”

Another benefit of having a partnership with a company such as Shell, says Passmore, is the proven project management and methodology of advancing from one stage to the next.

Public and private investments are extremely important, he adds. Through different federal government departments, the government of Canada has been a development partner with Iogen for several years. In January 1999, Iogen secured a $10 million loan from Technology Partnerships Canada. “Because they know that the government is involved and the government is spending money and the government has done due diligence, this helps leverage private sector investment,” Passmore says.

“When Shell came to the table, they were quite encouraged by the fact that we already had commitments from and partnerships with the government of Canada.”

The strategic investments by Shell and Goldman Sachs are critical to the longterm success of an emerging technology company, he adds. “We are a technology company, but the model for commercialization, especially in today's world, is a joint venture between large companies with large financial resources like Shell, partnering with governments. Financing high capital cost cellulosic ethanol commercial facilities isn’t going to come from venture capital.

Commercialization of our first plant here in Canada will be the private sector jointventuring with government.”

Passmore says that model has already been established in the U.S., as the federal government awards grants and loan guarantees to biofuels projects. In 2007, it was announced that the U.S. DOE would support Iogen’s proposed commercial-scale cellulosic ethanol facility in Idaho. However, last year, Iogen turned its focus to building the facility in Saskatchewan, opting out of any potential DOE funding. The company has applied for funding from Sustainable Development Technology Canada and plans to start construction on a commercial-scale facility in 2010, with production beginning the summer of 2012.

ETHANOL PRODUCER MAGAZINE

July 2009

PHOTO: IOGEN CORP.

PROFILE

Jeff Passmore, executive vice president of public affairs for Iogen Corp., speaks at the 2008 Canadian Renewable Fuels Summit.

The Past, Present and Future Passmore says he has seen many changes in the ethanol industry in the 11 years since he joined the Iogen team.

“When I first started working at Iogen, the current level of public interest and support didn't exist,” he says. “Governments over the past 10 years have come to the realization that there is a huge advantage in cellulosic ethanol, so we

ETHANOL PRODUCER MAGAZINE

July 2009

have lots of new legislation. Governments around the world are supporting renewable fuels because they can deliver on four policy initiatives – environment, energy security, new economic opportunities for agriculture, and science and innovation.”

In addition, Passmore says legislation and loan guarantee programs have brought more players into the field. He

also sees more conferences dedicated to cellulosic ethanol. “When I first started in the business, there were only ethanol conferences. Nobody took cellulosic ethanol seriously. Now it is a major part of biofuels conferences.”

Once Iogen’s first commercial-scale facility is completed, Passmore says the company plans to do multi-plant rollouts, selling technology licenses and becoming a leading contributor to the North American market, helping to fulfill Canadian and American biofuels mandates and targets.

“I imagine a future where we are doing commercial rollouts in Canada and in the U.S., potentially in Europe as well; but the U.S. has set the most aggressive targets and we're anxious to compete in that market. Cellulosic ethanol will soon be a key industry – certainly well within the next 10 years. Iogen expects to be a leader in that industry globally.” EP Hope Deutscher is an Ethanol Producer Magazine associate editor. Reach her at hdeutscher@bbiinternational.com or (701) 373-8046.

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CELLULOSIC

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As the race to produce cellulosic ethanol commercially progresses, companies such as Coskata, Inc. need to remain at the top of their game, or in some cases, change the way the game is played.

By Sam Nejame

ETHANOL PRODUCER MAGAZINE

July 2009

127

CELLULOSIC

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Q: General Motors Corp. doesn't fool around. It's in a situation with public relations where it needs to look smart.

GM investing in Coskata, makes a powerful statement. How did the relationship come about?

A: We were feeling out the major auto firms to understand what interest there might be in what we were doing. We didn't know it when the call went into GM, but one of their research departments was doing a very comprehensive study of next-generation ethanol companies. GM is committed to developing an array of propulsion and fuels systems. On one hand, the company was working on increasing mileage on existing internal combustion engines, but also looking at flexible fuel, electrics, hydrogen fuel cells and hybrids. They came to the conclusion that the electric and hydrogen fuel cell vehicles are part of the solution, but biofuels can have the most near-term impact. It takes 17 years to turn over the car park and the infrastructure build-out would require either a lot of imagination or fantastic development.

So they concluded that E85 and flex-fuel vehicles were the short term solution.

This investment was nothing material to GM, but it certainly was important to us, because it legitimized what we were doing, having passed their tests in terms of speed to market, integrity of the technology and our management team. This is about is mak-

PHOTO: COSKATA INC.

-' p\Xij f] \og\i`\eZ\

n early 2008, when General Motors Corp. announced an investment in Coskata Inc., the little known start-up was thrust into the public spotlight and everyone wanted to know what all the fuss was about. Coskata said it could make ethanol from cellulose, municipal waste, old tires and you name it, for less than a $1 a gallon. The fuss was about a potentially game-changing technology. In the whirlwind year that followed the announcement, the country saw $148 a barrel oil and the worst Wall Street banking crisis since the great depression. In these interesting times and in the heat of raising a third round of financing, Coskata CEO, Bill Roe, took time out to talk with EPM about the current and future state of the biofuels industry.

Wagoner announced his company’s partnership with Coskata at the North American International Auto Show in Detroit in January.

ing the statement that they are committed to ethanol, they are committed to flex-fuel vehicles and they're committed to helping build out the infrastructure so that people will have a choice.

Q: What are your thoughts on the Big Three automakers committing to make 50 percent of their fleets flex-fuel capable by 2012?

A: The actual technology to produce a flex-fuel vehicle is well in hand, but it has to happen on the manufacturing floor not as a retrofit. You need to make a couple of changes to the fuel injection system, add some corrosion resistance and a computer chip to sense the ratio of ethanol to gasoline in the tank. At the factory this amounts to

ETHANOL PRODUCER MAGAZINE

July 2009

PHOTO: COSKATA INC.

CELLULOSIC

Coskata’s technology allows for the production of ethanol from various biomass sources, such as woods chips, wood waste, grasses, corn stover and cobs, wheat straw, and municipal solid waste.

$100 to $500. We believe that it is critical that the Big Three live up to this commitment, or go even further than making 50 percent of their fleets flex-fuel capable by 2012 to provide the consumer with choice at the pump.

It is even more important that they use flexfuel vehicles as a path to selling additional vehicles and economic recovery.

Q: What do you think about the oil companies? Some have embraced renewable fuels and others are sticking to their core competencies.

A. Well, there is a spectrum. I think Exxon Mobil is simply truthful right now about its position and they seem indifferent at best. Then I would say not on the absolute opposite, but certainly behaving very differently, would be Chevron Corp., who seems to be not only embracing alternatives, but doing something about it. This joint venture with Weyerhaeuser that they call Catchlight Energy LLC appears to be very real and very forward thinking—lining up massive amounts of biomass. They've put together the right infrastructure and technologies to convert biomass to a variety of different fuels and they've certainly got the marketing outlet. They're very progressive. I think some of the oil companies are dragging their feet because they see this as a nuisance. It's a pain to figure out how to do fuel blending. It's a pain to be mandated. It's all

done on such a huge scale—150 billion gallons, there's nothing small about it. It’s just staggering what has to happen for all of us to get fuel conveniently and we all take it for granted. The American Petroleum Institute certainly has an interesting task representing so many different views.

Q: Right now we have about 150 regional petroleum refineries—none built since 1976. If it’s decided that biorefineries need to be co-located with biomass resources, this could mean that thousands of smaller facilities need to be built. How will this happen?

A: It truly could be thousands, depending on the scale. The reality is that you want to produce the fuel near where the population centers are. You want to produce fuel from locally grown crops, because you don't want to get into the massive transport of fuel or feedstock. The sweet spot is going to be 100 million gallons plus or minus. You can't get economics to work if you're moving feedstock much more than 50 miles.

You can't really go smaller because the capital costs will eat you up. I've heard idealistic stuff about small towns converting their own garbage, but if we want to get to 50 billion to 60 billion gallons of ethanol by 2030, biorefineries in the 50 to 100 MMgy capacity are necessary.

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CELLULOSIC

Q: How will we pay for this?

A. You get there over extended periods, which coincide with the rate you can get engineering firms to design and build, the rate at which the agricultural complex will evolve and change and the rate the fuel marketing complex will change. We're talking really about an evolution over a 20-year period. Our particular model is a licensing model. It basically gets a footing under the company before we think of investing in operating assets. Our models have us maxing out at a rate of 12 to 15 plants per

year. We gut checked it against ICM [Inc.]. The [engineering and construction firm] commissioned around 40 ethanol plants in one year at its peak.

I think the financing will be somewhat similar to what we've seen in the grain belt. Some of these were built by giants and financed off balance sheets and levered up. Some were built by co-ops and financed by a combination of equity and debt. I think it’s essentially the cornethanol model, but over a much broader geographic expanse and much closer to the cities.

Instead of doing it in a couple of years, we'll be

doing it over a 20-year horizon if we want to take a big bite out of oil consumption.

Q: The mandates for undefined fuels are small, but growing. While Coskata is about commercialization, many nextgeneration technologies still seem to be about science. What are your thoughts about other methods?

A.: It may even be proven technology, but there may be scale up and integrative details to be worked out. The notion that there could be an engineered organism that can produce heavier hydrocarbons is a great thing. And I hope it happens. I do think the time lines are very different for some of these things.

This is the kind of problem or opportunity that brings out the best in entrepreneurial endeavors. Some of these companies will never get out of the lab and some will fail during start-up. What I think is fascinating is that for a lot of these biological approaches—whether it's algae or super bugs or engineered enzymes—the technology is advancing so rapidly that I don't know if anyone can really tell what these time lines might realistically be. A few years ago, it took a life's work and millions of dollars to decode the genome of an organism.

Now it involves weeks of work, a modest investment of thousands and you’re there.

The science is speeding up exponentially.

So, as soon as we say something is futuristic and a science experiment, the answer is "yes, but watch this space" because at some point there will be technologies that eclipse what we're doing. It makes me very hopeful. It's just unfortunate that we're doing this under duress. We should have done it 20 or 30 years ago when the OPEC valves started to close and we had the first oil crisis. It just wasn't done and, true to form, when the valves opened up again a lot of this stuff went on the shelf. The difference this time is the valves are wide open and we still don't have enough. The world has moved and now we have a crisis. EP Sam Nejame is an Ethanol Producer Magazine freelance writer. Reach him at sam@promotum.com.

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OIL. BY TODD TAYLOR AND ZACH OLSON Contribution

Big Oil and Biofuels: Bitter Rivals or Best Friends?

As oil companies become more directly involved with the production of biofuels, the ethanol industry must evaluate its relationship with Big Oil and determine whether to cooperate, compete, or co-exist.

S

ince the renewable fuels standard (RFS) was enacted in 2005, many Big Oil companies have partnered with, invested in and acquired biofuels companies.

The trend has increased recently as oil companies have realized that the American public wants to make sure that biofuels have a permanent role in the transportation fuels market. For many in the biofuels industry, this encroachment by oil companies is an unwelcome and troubling sign of how they are unwill-

For right now and for the near future, oil companies vastly out-produce biofuels, control the infrastructure and have far more resources, making them the 800-pound gorilla.

So when oil companies start to actively participate in biofuels, the biofuels industry needs to look and learn.

ing to let the biofuels industry succeed as a true independent alternative to petroleum. To others, it is viewed as a positive

sign that biofuels are finally being treated seriously. But before considering whether the biofuels industry should be pleased

or horrified, there needs to be an understanding of how biofuels actually measures up against petroleum.

The United States is the worldâ&#x20AC;&#x2122;s leader in petroleum consumption. In 2007, the U.S. consumed more than 390 million gallons of gasoline per day, amounting to approximately 142 billion gallons of gasoline consumed in one year By contrast, the U.S. consumed just 17.7 million gallons of ethanol. In total, we consumed approximately 6.5 billion

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

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ETHANOL PRODUCER MAGAZINE

age to 15 percent, U.S. ethanol production is still a relatively small component of the U.S. liquid fuel transportation system.

The good news for biofuels is that there is significant political, societal and even economic pressure to increase our use of biofuels. The RFS2 is a significant driver for biofuels usage and billions of dollars of federal funding are being directed towards advanced biofuels project development. Carbon legislation may also make using carbon intensive fuels cost prohibitive compared to lower carbon biofuels. Public pressure is also increasing to move away from petroleum to a renewable alternative.

Economic pressures may be the ultimate trump card, as most experts agree that oil will eventually run out, be it in 50, 75 or 100 years. As oil becomes scarce, it will become more expensive, making biofuels price competitive, an advantage that biofuels can exploit as technological development drives down the production costs for biofuels.

However, for right now and for the near future, oil companies vastly out-produce biofuels, control the infrastructure and have far more resources, making them the 800-pound gorilla. So when oil companies start to actively participate in biofuels, the biofuels industry needs to look and learn.

British Petroleum plc has been very active in the renewable fuels industry in recent years. The company has invested $112.5 million in a partnership with Verenium Corp. and together they plan to develop the world’s largest cellulosic biofuels production facility in Florida. BP has also invested $500 million to establish the Energy Biosciences Institute, a research endeavor between BP, the University of California at Berkeley, the University of Illinois at Urbana-Champaign, and the Lawrence Berkeley National Laboratory.

Chevron has said it expects to invest more than $2.5 billion in alternative and renewable energy technologies between 2008 and the end of 2009. Chevron also

July 2009

Born in South Carolina…but serving the nation

gallons, or 4.5 percent of the country’s annual gasoline consumption. In 2008, gasoline consumption decreased slightly due to the economy, and ethanol production increased to approximately 9 billion gallons, approximately 6.3 percent of total U.S. gasoline consumption.

Before the 2005 RFS, ethanol constituted an even smaller percentage of the U.S. fuels market. Blending was discretionary. If it was required at all it was only as an oxygenate to be used in place of methyl tertiary ester butyl ester (MTBE). After the 2005 RFS however, oil companies were required to blend a certain amount of ethanol. They did it rather reluctantly, generally viewing ethanol as competition. With the enactment of the RFS2, the amount of biofuels required to be blended increases yearly from 9 billion gallons in 2008 to 36 billion gallons by 2022.

A major concern associated with the RFS and the current climate of renewable fuel production is that the mandate’s goals will be undone by the huge gap between mandated blending levels and actual renewable fuel production. For example, at the beginning of 2009, the installed ethanol capacity was 12.5 billion gallons. Many plants, however, are now either sitting idle, producing well under their nameplate, or in bankruptcy. According to the Renewable Fuels Association, almost 2 billion gallons of capacity was sitting on the sidelines. This underproduction will seriously hinder the ability of renewable fuels producers to meet the RFS in the future.

There are also significant doubts about whether there will sufficient cellulosic ethanol production to meet the RFS 2009 and beyond requirements. And low carbon fuel standards such as those California has adopted and the EPA is reviewing will also likely significantly hurt the industry’s ability to produce.

So, while ethanol production is becoming an increasingly significant (almost 10 percent) portion of U.S. transportation fuel supply and efforts are underway to increase the maximum blending percent-

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announced in January 2008 that it had entered into an agreement with Solazyme to develop and test feedstocks for biodiesel production.

Valero Energy Corp. entered the biofuels arena through asset acquisition. Earlier this

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year, it bought seven ethanol plants from bankrupt VeraSun Energy Corp. Valeroâ&#x20AC;&#x2122;s purchase of ethanol plants was the first by a traditional oil refiner. Valero has also invested in ZeaChem Inc., which intends to build a cellulosic ethanol plant, and So-

lix Biofuels, which plans to harvest oil from algae to produce biocrude, a product with the same properties and refinable qualities as standard crude oil.

Royal Dutch Shell plc has spent $1.7 billion since 2004 on alternative and renewable fuels

projects. Shell intends to focus on biofuel development in 2009 and 2010, with a specific focus on cellulosic biofuels and algae to biofuels research and development. It has also collaborated with Codexis Inc. to develop biocatalysts in the hope of us-

ETHANOL PRODUCER MAGAZINE

July 2009

ing such catalysts to accelerate commercialization of next-generation biofuels.

ConocoPhillips Co. has been very active in research in conjunction with universities and other groups. The company has sponsored and invested $5 million into a multi-year research agreement with the Colorado Center for Biorefining and Biofuels. In 2008, it formed a strategic research alliance with the U.S. DOE’s National Renewable Energy Laboratory and Iowa State University for researching renewable and alternative biofuels applications. In addition to its partnership with NREL, ConocoPhillips has provided more than $4.75 million to Iowa State University to begin biofuels related research projects— and plans to invest $22.5 million over an eight year period with the university. ConocoPhillips has also partnered with Archer Daniels Midland Co. to develop biocrude.

Marathon Oil Co. has made a $10 million equity investment in Mascoma Corp., a company

working on the development of cellulosic ethanol. Marathon has also partnered with The Andersons Inc. to build and own ethanol plants in Albion, Mich., Clymers, Ind., and Maumee, Ohio.

ExxonMobil Corp., the world’s largest oil company, is also the most reluctant, some might say hostile, towards biofuels. Exxon has not made any publicly announced investment in biofuels to date, although during a third quarter financial conference call it mentioned that it is considering buying distressed ethanol plants so as to control ethanol supply for its blending requirements.

Even a not-so-careful observer will notice that with few exceptions, oil companies are not involved with first generation biofuels. When they are, as in the case of Valero, they invested to fulfill an immediate need to secure their own ethanol for blending. Mostly, however, they are involved with advanced biofuels projects that utilize non-food feedstocks for production. Cellulosic ethanol,

ETHANOL PRODUCER MAGAZINE

July 2009

renewable diesel, green gasoline and other biofuels are where oil companies are focusing.

Biofuels companies have three choices related to oil companies: cooperate, compete or co-exist. Cooperation can mean investment, acquisition, or joint R&D, but it means accepting oil companies as a significant and powerful partner. Competing is a hard choice given the advantages enjoyed by the oil companies, but if a biofuel company can develop a fuel that is a direct replacement for gasoline, diesel or another petroleum fuel like jet fuel, the rewards of creating a seismic market change can be enormous. Co-existing is the status quo, accepting a role where biofuels are a small component of the overall fuels market and blended into the existing supply.

So should the biofuels industry be pleased or horrified about Big Oil’s entrance into their industry? Given the current market dominance of the oil companies, biofuel companies would be wise to at least consider working with an oil

company. Oil companies have money, access to or control of blending, distribution and sales channels and R&D resources that can be critical to the success of a project. On the other hand, there still lingers significant concern that oil companies view biofuels as a necessary evil and are only dabbling in order to mollify public and governmental pressures to use renewables. Regardless of how biofuel producers may view the situation, they should be aware of how oil companies may be involved in their specific field and develop a strategy for dealing with them. EP Todd Taylor is the lead shareholder in the biofuels group at the law firm Fredrikson & Byron.

Reach him at ttaylor@fredlaw. com or (612) 492-7355. Zach Olson is an associate attorney with Fredrikson & Byron’s renewable energy, energy, securities, corporate and mergers and acquisitions groups. Reach him at zolson@fredlaw.com or (612) 492-7432.

137

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RINS. BY DAVID BENNETT Contribution

RIN Compliance Becomes a Full-time Job The U.S. EPA is the regulating body of renewable identification numbers, as determined by the Energy Independence and Security Act of 2007. However, it is up to individual companies to wade through the evolving regulatory requirements and to comply with the EPA’s rules.

I

n April 2007, the U.S. EPA issued guidelines for the renewable fuels standard (RFS) program that went into effect Sept. 1, 2007.

These regulations described, among other things, the recordkeeping, reporting and annual attestation requirements for renewable identification numbers (RINs). The first year of the program comprised only four months and required all regulated companies to have an attestation performed by an external certified public accountant. The

attestation is the end result of elements contained in the regulations; therefore, companies needed to begin managing their RIN activity with focus on the attestation in order to ensure effective compliance.

The second year’s guidelines introduced many elements that contribute to a host of issues for regulated companies. Among these elements are recordkeeping and reporting for significant increases in the amount of data for a full 12-month period; two years of RIN codes, (2007 and

2008) technical amendments to the program issued in the fourth quarter of 2008 by EPA; trading activity of RINs as a distinctive commodity; the economic landscape; staff turnover at regulated companies; and, probably most noteworthy, dealing with invalid and recalled RINs. In early 2009, EPA introduced the concept of the Modified Transaction System — a database that will serve as a centralized repository for all RINs passing through the supply chain. The efficacy of this

system continues to be evaluated. Additionally, the EPA introduced its “notice of proposed rulemaking” for RFS2 on May 5, 2009.

The agency’s proposal included a significant expansion to the existing David Bennett RFS regula- owner, Renewable Energy tions. RFS2 Compliance and increases the Advisory Services annual stan-

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

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dards for not only cellulosic and non-cellulosic biofuels, but also biomass-based diesel and other advanced biofuels as well. These are incorporated via the D-code component of the RIN code.

All of this results in a significant increase by regulated companies of how they manage the RFS program. It also increases the procedures required as part of the annual attestation process.

Two of the procedures are the independent third-party engineering reviews and validation of feedstock purchases and transfers.

People, Processes and Systems In order to more readily comprehend the impact that these changes will have on regulated companies, it is helpful to

classify the RIN lifecycle into the following five components – knowledge, recordkeeping, reporting, compliance and attestation. All regulated companies have strengths in one or more of these areas; however, far fewer have strengths in all of these areas. A company’s effectiveness at managing the lifecycle generally revolves around three key elements – people, processes and systems.

People are the key ingredient of the components of RIN management. Knowledge of the regulations is critical to the dayto-day operations of a company’s business activities. Knowledge is also critical in designing the processes around RIN management. While it may not be necessary for one individual in the company to possess com-

ETHANOL PRODUCER MAGAZINE

July 2009

Proper Management is Key RIN management, like many other concepts, is vulnerable to what is referred to as the 80/20 rule.

That is, if not proactively managed, 20 percent of the work and effort will take up 80 percent of the time.

The 20 percent component revolves around areas such as recalled RINs, invalid RINs, error correction, and amended filings of quarterly reports.

Companies must adhere to strict guidelines when dealing with recalled and/or invalid RINs. These become more complex when the discovery and correction occurs in a quarter subsequent to the original transaction. This is an area where EPA devotes significant effort to manage and enforce and the complexity of the issue is expected to only increase over time. Employing day-to-day RIN management is one way companies can work to avoid the timeconsuming task of correcting previous errors.

141

RINS.

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142

prehensive knowledge of the regulations in totality, it is necessary to understand how they relate to their company. Since there are multiple types of regulated companies, the extent of knowledge will vary.

For example, an obligated party needs to possess more knowledge than a blender or marketer.

Building a base of knowledge can be difficult.

Companies are experiencing significant turnover in staff that focuses on the RIN program. This has been due to a variety of factors, not the least of which is the economic downturn in the past year.

In addition, the person responsible for RIN management is generally not a dedicated resource; they most likely have other areas of responsibility. In some companies this might be sufficient, but for most companies it is a hindrance.

Processes are also a key ingredient of effective RIN management and compliance. While one person may be accountable for the recordkeeping and reporting, there may be many people with responsibility in the business cycle — legal, operations, finance, risk and treasury. All individuals need to be involved in the design and execution of the relevant processes in order to ensure that compliance is effective.

Systems are the culmination of people and processes. If people and processes are effective, then systems should follow suit. The system must be appropriate for the business activities of a regulated company. For instance, an obligated party or producer that uses a generic spreadsheet program as their RIN management “system” is going to experience significant difficulties, and risk devoting far too much time to making corrections than to compiling and analyzing the relevant data. This is a critical factor because companies that have the ability to properly analyze their data also have the ability to generate more profit, i.e. through RIN trading activity, and also to reduce costs, staff turnover and potential EPA penalties, which can amount to as much as $32,500 per day. The ultimate objective should be to use a system that can accommodate recordkeeping, quarterly reporting and the annual attestation. Many companies only consider the attestation as an afterthought and risk boxing themselves into a corner in terms of compliance and attestation findings. Therefore, a concept that will serve companies well is to design their processes and systems specifically with the attestation as the end result. One way to achieve this is to utilize a ETHANOL PRODUCER MAGAZINE

July 2009

certified public accountant as a key stakeholder in the design and development of the processes and systems.

RINs as a Commodity In addition to compliance as it relates to RINs associated with renewable fuel, RINs themselves are a tradable commodity. In the past year, companies with the sole objective of RIN trading activities have begun to emerge. This is in addition to companies that also trade RINs as part of their renewable fuel programs. There are two primary factors involved in RIN trading —compliance and economic — and many companies are involved in both.

RINs, like any other commodity, have a value that is subject to market conditions, availability and environmental factors.

These also serve to increase complexity of effective RIN management. For publicly-traded companies, this introduces additional financial reporting considerations and Financial Accounting Standards Board regulations, such as FAS 157 and the fair value assigned to RIN-related assets on a company’s balance sheet. While renewable fuel itself is also subject to FAS 157 valuation, RIN valuation is quickly becoming a factor as well. This can also have an impact on the results of the annual attestation and should be taken into consideration at all times.

The bottom line is that RIN requirements associated with RFS2 will force regulated companies to focus more time and resources toward ensuring proper recordkeeping, reporting and compliance. Outsourcing of day-to-day RIN management may now become a favorable option for many companies that are better served focusing on their core business activities in addition to compliance in these areas. EP David Bennett is a CPA and CFF and is the owner of Renewable Energy Compliance and Advisory Services located in Stamford, CT. Contact him at rins@att.net or (203) 216-1972.

ETHANOL PRODUCER MAGAZINE

July 2009

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PROTECTION. BY SCOTT MCDERMOTT Contribution

Protecting Shareholder Value Through Strategic Use of Chapter 11 Bankruptcy Many companies believe bankruptcy should only be considered as a final option.

However, filing for Chapter 11 bankruptcy can sometimes be used as an effective strategy to protect a company and its stakeholders from further damages.

E

veryone knows the market environment in the ethanol industry has been challenging over the past 18 months.

This cycle downturn is the latest of many downturns experienced in the ethanol industry and several companies have had to make the uncomfortable decision to file for bankruptcy.

Unfortunately, too often companies seem to view bankruptcy in one bucketâ&#x20AC;&#x201D;as the end and as something that happens

when the money runs out and all else is lost. This is Chapter 7 liquidation and, more often than not, it is triggered by a lack of proactive diagnosis and action. Things donâ&#x20AC;&#x2122;t have to get that far. The fact is, the threat of or filing for Chapter 11 bankruptcy, when managed effectively and proactively, can represent a powerful tool to protect shareholder value and can provide precious time to realign the business to better fit the market environment.

Ethanol plants are facing margin pressure, but some plants are better positioned to endure the challenging environment than others. Some of the plants filing bankruptcy became insolvent because of hedging and speculating losses or because the plants never operated at designed capacity. Other plants that are struggling are undercapitalized or have contracts and cost structure that were established in a structurally higher market, which makes them higher cost

and more susceptible to margin and cash flow pressure. The majority of these plants were built in the past three to four years.

And many are now seeking to refinance, recapitalize and/or are filing for bankruptcy.

Firms may not control the realities of the market, but they do control how their firm responds. Preparing the company to manage through a challenging environment and the prospects of filing bankruptcy are the responsibility of the board and

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

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senior management. They are responsible for protecting the shareholder value of the firm.

Boards and management must be sure to work closely together to understand risk and devise plans to maneuver the uncertain waters. Management is the “eyes and ears” and will be the first to see signs of increased risk.

Management must communicate increased risk to the board, and the board must ask probing questions of management in order to identify potential issues early and have time to address issues and adjust.

The board has a fiduciary responsibility called “duty of care,” which obligates them to identify risks to the firm and make plans to manage those risks. Board members face personal liability if they are not actively engaged in assessing the risks to the business. “I did not know” may not be good enough to protect a board member from negligence. Some of the common failures of board members include the failure to act when

action by the board is necessary, failure to provide proper management oversight, failure to manage risk, failure to attend board meetings and be prepared, and most important, failure to investigate further after learning of red flags in the business.

Directors have heightened duties when the company is facing a serious crisis. In this “zone of insolvency,” directors have a fiduciary duty to creditors as well as shareholders. There is no hard and fast rule for when these duties begin; however, if the board believes there is a strong likelihood that the company may be unable to pay its debts when they become due, the company should be considered to be in the zone. Companies enter the zone long before missing payments or declaring bankruptcy.

This is why a board must consider how it would position the firm to maneuver through bankruptcy long before the situation is eminent and even though the firm may not actually go into bankruptcy. One of the biggest

risks to shareholder value is not having a good understanding of the current and potential financial position of the firm, including not understanding the firm’s position with its creditors, being heavy-handed with creditors because the firm thinks it has power it does not have, or trying to work with creditors when it is too late.

Once a firm is in the zone, the board must be aware of additional duties, including avoiding taking riskier actions that have big payoffs and maximizing the value of assets for payment to creditors. Under the “absolute priority rule,” secured and unsecured creditors’ claims to the company’s capital trump claims of shareholders. The board must be diligent in working with creditors to manage and negotiate through the prebankruptcy and bankruptcy process to protect shareholder value. This rule plays a major role in dictating how the board sets negotiating strategy.

When it comes to protect-

ing shareholder value in the presence of the possibility of bankruptcy, the key ingredient is to proactively plan for the worst and hope for the best. One of the things boards and managers can do to improve the odds for success is to avoid denial. Being proactive and having a detailed understanding of the firm’s position and the creditor’s position is critical to setting strategies to protect shareholder value. This entails having a clear handle on the firm’s financial position, having a detailed understanding of the terms of all major contracts, gathering a war team, and communicating thoughtfully and consistently with all stakeholders to educate, manage expectations and avoid m i s u n d e rstandings.

O n e important Scott McDermott factor that partner, Ascendent Partners Inc. is often un-

PROTECTION.

$3.00

6.00

$2.50

5.00

$2.00

4.00

$1.50

3.00

$1.00

2.00

$0.50

1.00

$0.00

$/unit

7.00

Ethanol Capacity 2 Billion

4 Billion

Margin $/gal

Ethanol Margin Analysis (Chicago)

10 Billion 9/18/2008

1/18/2008

5/18/2008

5/18/2007

9/18/2007

1/18/2007

9/18/2006

1/18/2006

5/18/2006

9/18/2005

5/18/2005

9/18/2004

1/18/2005

5/18/2004

9/18/2003

1/18/2004

1/18/2003

5/18/2003

9/18/2002

5/18/2002

9/18/2001

1/18/2002

5/18/2001

1/18/2001

9/18/2000

($0.50) 5/18/2000

0.00

Within the last 12 months

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Policy and public perception of biofuels have become negative

Ethanol Price per Gallon

Credit markets are in the worst condition since the great depression

Corn Price per Bushel

Plant cost and contracts negotiated in a different environment

Ethanol Margin

derestimated is the importance and power of communication. As part of the homework, it is critical for the firm to proactively manage communications with advice from its legal counsel. Planned communications with creditors, banks, shareholders and other stakeholders is critical to maneuvering through the Chapter 11 process to preserve shareholder value. This is where the board and management determine how to position the firm to get to the win-win position as much as possible. Everyone involved has money at risk; and if the plant is forced into liquidation in a difficult environment, almost everyone loses everything except for the senior lender who is now banker and ethanol plant operator. Making sure everyone understands this reality is an important point of leverage for shareholders because there is incentive for secured and unsecured parties to negotiate an equitable settlement to save their investment.

Management and boards should have a detailed understanding of the drivers of profitability, commodity market-to-market

ETHANOL PRODUCER MAGAZINE

July 2009

positions and risks, and operating costs for the plant. Firms need to do their best to perform an honest assessment of how cost competitive they are to their peers. In the end, ethanol production is a commodity industry and understanding where each plant is on the cost curve is critical. Firms also need to have detailed pro-forma projections at weekly, monthly and annual intervals to understand their projected cash flow and risk to cash flow. This allows the board and management to have a clear and detailed understanding of their working capital position and risks to working capital. Even if a plant is not the lowest cost facility, in the current environment a well-capitalized plant with a good capital preservation strategy can endure in the end over a lower operating cost plant. Barring mistakes, all of these factors are key selling points to creditors and stakeholders and show that the board and management are up to the job of running a viable company.

Oftentimes, a project with a high probability for a successful restructuring that

early, even if it is not a full-court press to maneuver through prebankruptcy. Remember, it will be war and the right team makes the difference between shareholders maintaining interest in their investment and losing everything. Key team capabilities include experienced executive board members and managers that can dedicate the time required, experienced bankruptcy legal counsel, experienced and sophisticated financial advisory support as well as other capabilities on a as-needed basis. Often management and boards try to maneuver through the process by themselves in order to save money, but mistakes in the prebankruptcy process can be devastating to investors. In the current environment, several of the plants that have tried to save money have lost 100 percent of their equity investment in the plant. EP

would strengthen the firm is derailed when a contract term “land mine” that puts the firm at risk is uncovered. Many of these land mines could have been diffused if the company had uncovered them early and put in place a plan to mitigate.

Managers and boards need to proactively get a detailed understanding of the key terms of the company’s contracts and the counterparty’s position in those contracts.

Often people perceive these contracts as being zero sum games. One person has to lose for the other to win, but this is not always the case. Contracts may not have been made to be broken, but they are certainly made to be renegotiated in the current environment.

Legal contracts and documentation are painful to work through; however, with the help of qualified legal council and a seasoned financial team, board and management members can understand their risks, mistakes, leverage and opportunities to position the company to preserve shareholder value.

The final point is to organize a turnaround team and have that team in place

Scott McDermott is a partner at Ascendant Partners Inc. Contact him at mcdermotts@ ascendantpartners.com or (303) 221 4700.

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149

SAFETY. BY TOM SEMIKLOSE

PHOTO: SAFERACK LLC

Contribution

Proper Safety Equipment can Prevent Costly Falls Adequate fall protection equipment continues to be a concern for agencies tasked with ensuring employee safety. Terminal operators striving to make their storage facilities as safe as possible should consider various safety systems to help employees avoid possible accidents.

T

o the well-known list of the unalienable American rights of life, liberty and the pursuit of happiness, one more should be added: a safe and healthful workplace for all employees. From the clerk at the local gasoline station to the ethanol processing plant operator, every American worker wants, and is entitled to, appropriate protection from workplace hazards.

The United States Department of Labor’s Occupational Safety & Health Administration is responsible for ensuring that employers are providing these conditions to their employees.

The agency is required to guarantee the safety and health of America’s workers by setting standards, providing training, outreach and education, establishing partnerships, and encouraging continual improvement in workplace safety and health.

Workplace safety in the U.S. became standardized nearly four decades ago with the enactment of the Occupational Safety and Health Act of 1970. At the heart of this legislation is what is referred to as the General Duty clause, which requires employers to “furnish to each of his or her employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physi-

cal harm to his or her employees” and to “comply with the occupational safety and health standards promulgated under this act.”

In addition to looking out for the health and well-being of workers, the OSH Act of 1970 also serves a dual purpose of safe-guarding all industries from excessive employee absences since personal injuries and illnesses arising out of work situations can impose a substantial

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

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burden on interstate commerce in terms of lost production, wage loss, medical expenses and disability-compensation payments.

The Best-Laid Plans While OSHA and the OSH Act of 1970 have done a tremendous job protecting the worker from workplace hazards, no system is perfect and workplace accidents and incidents do continue to happen. One area that annually features a notable number of incidents is fall protection. In fact, according to OSHA’s list of most frequently cited workplace violations, lack of—or inadequate—fall protection ranked third in 2006 and second in 2007.

On top of that, the U.S. Department of Labor lists falls as one of the leading causes of traumatic occupational death.

According to the U.S. Bureau of Labor’s 2007 National Census of Fatal Occupational Injuries, a total of 5,488 fatal work inju-

ries were reported in the United States in 2007. While this was a decrease of 6 percent from the 5,840 fatal work injuries recorded in 2006, the number of fatal falls rose to 835, a 39-percent increase from 1992 when the CFOI program was initiated and an overall series high. In addition, the number of fatal falls in 2007 accounted for nearly 15 percent of the number of fatal work injuries during the year.

According to the labor bureau, the increase in falls overall was driven primarily by an increase in the number of same-level falls, which were up 21 percent from 2006, and falls from nonmoving vehicles, the reports of which increased 17 percent from the previous year. And overall, about one-fourth of all occupational fatalities in 2007 involved workers in transportation and materials-moving occupations, although the number of fatalities among these workers declined by 5 percent in 2007.

Without a doubt, these

numbers are sobering, made more so by the fact that when it comes to fall protection, the standards and regulations are open for interpretation. The Department of Labor says that any time a worker is at a height of four feet or more, the worker is at risk and needs to be protected, while, regardless of the distance, fall protection must always be provided when working over dangerous equipment and machinery. However, OSHA’s actual fall-protection requirements are somewhat nebulous: “a…site must maintain a ‘safe’ work environment.” With no exact definition offered for the word “safe.” This means that, potentially, one man’s simple stubbed toe could be another’s just cause for a multi-million dollar lawsuit.

Terminal Worries Falling into the sweet spot in the debate over what constitutes employment that is “free from recognized hazards

that are causing or are likely to cause death or serious physical harm” are the workers at the nation’s terminal, tank-farm and bulk-plant facilities. Workers at these facilities spend their days scrambling to the tops of railcars and tank trucks to unload bulk liquids—be it mainstream chemicals, petrochemicals, biofuels or niche chemicals—before they are shepherded into aboveground storage tanks that can range in size from 5,000 to 500,000 gallons at be as much as 10 stories tall.

To help ensure that employees at these facilities are kept safe and aware of the standards that govern fall protection, the Safe Tank Alliance, which is a partnership formed between OSHA, the National Fire Protection Association and the American Petroleum Institute, has created a brochure titled “Fall Prevention for Aboveground Storage Tanks.” The brochure states that proper use of equipment such as guardrails, stair rails, travel-re-

PROTECTION.

PHOTO: SAFERACK LLC

When it’s not designed for your needs, performance suffers.

Employees tasked with unloading bulk liquids from railcars are at risk of falls and should be offered protection to help ensure their safety. According to the U.S. Department of Labor, any time a worker is at a height of four feet or more, they are at risk and need to be protected.

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152

straint systems, safety nets, arrest systems (harnesses), self-retracting lifelines/lanyards and ladder-safety devices have been designed to keep terminal workers from falling or, if a fall does occur, avoiding a hard landing. The brochure also offers a comprehensive list of do’s and don’ts regarding fall protection: Do: Look for hazards and ways to avoid them Get enough light to see what you’re doing Choose and use proper procedures and equipment Use walkways, especially on tank dikes Keep walking and climbing pathways clear Make sure a tank roof will support your weight before walking on it; reinforce roofs, if needed Have reliable communication when working alone Check sour tanks for hydrogen

sulfide before climbing on top, and have respiratory protection available Check scaffolds and their inspection tags Use a helper to hold an extension ladder when climbing to tie-off the ladder Don’t: Ignore a hazard if it can hurt someone Go on a floating roof without required permits—it may be a confined space Run or jump from elevators Stand on the top two rungs of a ladder or allow two or more people on the same ladder Carry tools while climbing Use unknown scaffolds Walk on wind girders without railings Use safety belts, harnesses or climbing devices without training Expect someone else to prevent a fall

ETHANOL PRODUCER MAGAZINE

July 2009

Tools of the Trade In many instances, the use of common sense by the worker can be enough to prevent the most obvious fall-protection incidents, but when terminal employees are required to walk along the tops of railcars or 40-foot storage tanks, there is obviously the need for some type of equipment that will either prevent or arrest a fall incident.

With this in mind, there are several types of equipment that have been designed specifically for use in terminal and bulk-plant applications, including: Lifeline Cables: These pre-engineered, usually synthetic, cables are lightweight and have excellent resistance to weather and chemicals. These cables are hung between supports along a railway bed, or truck depot, allowing the worker to hook onto them and traverse the car or truck without fear of a fall to the ground.

Recent technological advances have led to the creation of lifeline-support systems that have pass-through devices that allow workers to walk past intermediate supports without having to disconnect their lifeline.

Trolley Beam Fall Protection: In this application, an I-beam (used to capture the load requirement that the fall protection system puts on a structure) is suspended over the truck or railcar loading position and workers clamp onto it before making their way along the vessel.

The system can be sized for single or multiple trucks or railcars, can be retrofitted to existing structures and can be designed for one to four users at a time. If no other roof structure exists, vertical supports would still be required.

Safety Cages: A wide variety of safety cages for tank-car use have been created. In general, they are portable and come with a variety of mounting options.

Their operation allows for the cage to adjust with the height of the gangway and allows them to be raised or lowered to the railcar Permanent Platforms, with Gangways/Safety Cages: These permanent structures can be equipped with both single- and double-sided platforms that ETHANOL PRODUCER MAGAZINE

can be track-mounted on a tracking system that is virtually maintenance-free. The system is built with two tracking sections on each end with handrails in between.

In a railcar application, tracking gangways may be used if the railcars vary in length or cannot be uncoupled.

Mobile Access Units (Trucks): These types of units, which are easily moved into place by an individual, are ideal for loading and unloading operations for tank trucks. They can adjust to the height of the vehicle and come in parallel or perpendicular configurations depending on the amount of space needed to complete the operation. The safety cage at the top of the unit protects workers from falls.

Mobile Access Units (Railcars): Able to be easily moved into place, these units feature a telescoping ladder that can be raised or lowered to conform with the

July 2009

varying heights of railcars. A safety cage with a handrail height of approximately 42 inches keeps the worker safe.

While the prevention of falls can, in many cases, be as simple as workers doing (or not doing) the things that their parents have been telling them since they were children, many industries—including the liquid bulk terminal industry—present unique challenges in preventing falls, fatal or otherwise. In addition to knowing the do’s and don’ts of fall protection, the best companies—with oversight from OSHA and other agencies—provide their employees with the equipment they need to best ensure that no catastrophic accidents do happen. EP Tom Semiklose is vice president of SafeRack LLC. Reach him at tsemiklose@ saferack.com or (866) 761-7225.

153

EVENTS CALENDAR 2009 Farm to Fuel Summit July 29-31, 2009 Rosen Shingle Creek Orlando The summit is a major gathering place for stakeholders to assemble to advance the development of Florida’s bioenergy industry. The event promotes the production, distribution and use of renewable fuels, particularly ethanol. This year’s featured international, national, and state speakers will discuss the research, production, and distribution of biofuels and bioenergy.

(850) 488-0646 www.floridafarmtofuel.com/summit_2009.htm

Biofuels Markets Asia & Jatropha Executive Briefing June 29 – July 1, 2009 Millennium Hotel Jakarta, Indonesia The conference will provide a platform to learn about the latest trends as well as regional and international developments in the biofuels market. Leaders in the biofuels industry will speak on ethanol, biodiesel, next generation biofuels and jatropha. Ethanol sessions will cover developments of bioethanol, refining, production and distribution, and cellulosic ethanol. Discussions will target policies, refining and blending, downstream logistics and the transport sector. +44 (0)207 099 0600 www.greenpowerconferences.com/ biofuelsmarkets/biofuelsmarkets_asia09.html

June

Ethanol Conference & Trade Show Aug. 11-13, 2009 Milwaukee The American Coalition for Ethanol’s 22nd annual conference will highlight public policy, technology and education related to the ethanol industry, among many other topics. The conference will include: updates from high level political officials, updates on technological innovations and efficiencies in corn and cellulose, discussions on blending economics, risk management techniques, and updates on biofuels role in reducing greenhouse gas emissions. A more detailed agenda will be available as the event approaches.

The Alcohol School September 13-18, 2009

(605) 334-3381 www.ethanol.org

(800) 583-6484 www.ethanoltech.com

July

World Congress on Industrial Biotechnology & Bioprocessing July 19 - 22, 2009

From Crude Oil to Biofuels: A U.S. – Brazil Energy Relationship September 9-10, 2009

Palais des congrès de Montréal Montreal This 6th Annual World Congress will focus on relevant topics in the field of industrial biotechnology, including advanced biofuels, feedstock collection, ethanol and cellulosic ethanol. Individuals with diverse experience will provide “real world” scenarios, present an overview of the latest technological developments, and offer unparalleled networking opportunities.

Hotel Sofitel Rio de Janeiro, Brazil Session topics for this two-day conference will include the future of ethanol in the Brazilian and global markets, biofuels sustainability, fuels market outlook, Western Hemisphere ethanol policy and new technology developments.

(202) 962-6630 www.bio.org/worldcongress/

(703) 891 4804 www.hartenergyconferences.com/index. php?area=details&confID=124

Montreal This week-long course will educate fuel-ethanol and distilled beverage producers in the science of alcohol production. The program will cover the ethanol production process from milling and mash preparation through fermentation and distillation.

Enzyme usage, yeast biology, bacterial contamination and control will also be discussed, along with other issues currently affecting both industries.

Registration is limited, with preference given to fuel-ethanol and distilled beverage producers.

Aug

Biofuels Supply Chain Summit 2009 September 15-17, 2009 Ghent, Belgium The Biofuels Supply Chain Summit will allow key players to debate and address all major issues within the biofuels industry. Leading authorities from Europe and Brazil will showcase their experiences. Discussions will cover the latest EU policies, legislations and economic effects, current developments and future initiatives for the transportation and logistics of biofuels. Attendees can also take part in three interactive panel sessions covering the evolution and recent developments of custom taxes and how they impact the European import/export market; the current and future outlook of EU’s biofuels market; or current country legislations and what influence they have had on the future of biofuels trading, transportation and sustainability. +44 (0)20 7753 4268 www.vibenergy-events.com/biofuels/ programme.htm

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World Bioenergy â&#x20AC;&#x201C; Clean Vehicles & Fuels September 16-18, 2009 Stockholmsmässan Stockholm, Sweden This conference will focus on the practical implementation of bioenergy and sustainable transport systems. A variety of commercial examples from Sweden will be highlighted. Topics to be covered include socio-economic drivers, impact of international trade in biofuels, emergence of bio-refineries, coproduction of fuels, chemicals, power and materials, and the development of markets for clean vehicles and fuels will be covered. Attendees will include delegates, officials, researchers, and visitors from Europe and beyond. +46 (0)18-67 38 03 www.wbcvf2009.se

Biomass & WtE: Waste to Energy October 28-29, 2009 Shanghai, China Attendees at this event will include producers of biomass, biodiesel, ethanol and cellulosic ethanol; local, municipal and provincial government representatives; enzymes and catalyst providers; and other industry experts. The conference will focus on power generations, cellulosic ethanol and biotechnology for fuels and chemicals, dedicated energy crops, agricultural residues and energy from municipal solid waste.

(65) 6345 7322 www.cmtevents.com/aboutevent

Sept

Oct

Atlantic BIOenergy Conference September 21-23, 2009

Air Quality VII October 26-29, 2009

Biofuels 2009 October 27-29, 2009

Delta Beausejour Moncton, New Brunswick The Atlantic BIOenergy Conference, hosted by BBI Biofuels Canada, will focus on growth and sustainability and renewable energy opportunities in Atlantic Canada. The conference will feature dynamic sessions and discussions on biomass-based energy generation, anaerobic digestion, waste management technologies, government incentives and more. The conference promises lively debates, action-oriented discussions and world class presentations on the latest developments, applications and technologies in the bioenergy fields.

Crystal Gateway Marriott Arlington, Virginia This event will be is a forum to review the current state of science and policy in conjunction with air quality, particularly as it relates to the energy industry. The focus will be on related air quality impacts regarding policy; markets; health and ecosystems; measurement methods; separation, capture, and storage; emission control and prevention; and atmospheric reactions and modeling.

Budapest, Hungary Industry leaders from more than 50 countries and 5 continents are expected to attend this event, hosted by the World Refining Association. Attendees will discuss global business issues that will impact sustainability and future growth of the industry. Session topics will include a global overview on the biofuels industry, strategies of refineries within the biofuels field, new supplies and processing for feedstocks, and a bioethanol market outlook.

(701) 777-5000 www.undeerc.org/AQ7

+44 (0) 20 7067 1800 www.wraconferences.com/2/4/articles/57.php

(888) 501-0224 (North America) (519) 576-4500 (International) www.atlanticbioenergy.ca

ETHANOL PRODUCER MAGAZINE

July 2009

155

EPM MARKETPLACE Ag Products & Services

Enzymes

Grain Origination Services

Genencor 585-256-5249

www.genencor.com

Novozymes 919-494-3101

www.novozymes.com

Agnetic, LLC 317-696-2824

blog.agnetic.com

Hybrid Corn Pioneer Hi-Bred International, Inc. 800-247-6803 www.pioneer.com

Associations/Organizations EPPIC Environmental Index 334-277-1364 www.eppicenv.com

Trade

Filter Media

Hydro-Klean, Inc. 515-283-0500

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

Seneca Companies 800-369-5500

Yeast

Hydro-Blasting

Ferm Solutions 859-402-8707

www.ferm-solutions.com

www.hydro-klean.com

Heat Exchanger

Water Treatment

Fermentis-Division of SI Lesaffre 800-558-7279 www.fermentis.com

API Credit Exchange 202-682-8192

Hydro-Klean, Inc. 515-283-0500

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com www.senecaco.com

www.hydro-klean.com

Premium Plant Services, Inc. 218-929-2166 www.premiumplantservices.com

www.api.org/ace

Chemicals PhibroChem 800-223-0434

www.lactrol.com

Stabilized Liquid Yeast, Thermosacc,® Superstart™

Anti-Microbial Bio-Cide International.Inc 405-329-5556

www.bio-cide.com

MAXIMIZE Your Ethanol thanool Yield!

Lallemand Ethanol Technology 800-583-6484 www.ethanoltech.com

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

With MaxETTM a Non-Antibiotic Antimicrobial for Fermentation, Propagation, and CIP

Seneca Companies 800-369-5500

www.hydro-klean.com www.senecaco.com

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

www.hydro-klean.com

Emergency Spill Response t 405.329.5556 www.bio-cide.com bi id d 405 329 5556 Ferm Solutions 859-402-8707

Seneca Companies 800-369-5500

www.hydro-klean.com

Plate-Frame www.senecaco.com Hydro-Klean, Inc. 515-283-0500

www.ferm-solutions.com

Lallemand Ethanol Technology 800-583-6484 www.ethanoltech.com PhibroChem 800-223-0434

Hydro-Klean, Inc. 515-283-0500

www.lactrol.com

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

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

Railcar Spill Response www.hydro-klean.com Hydro-Klean, Inc. 515-283-0500

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

www.hydro-klean.com

Railcars www.hydro-klean.com Hydro-Klean, Inc. 515-283-0500

156

www.hydro-klean.com

www.hydro-klean.com

ETHANOL PRODUCER MAGAZINE

July 2009

EPM MARKETPLACE VAL-FAB Inc. 877-482-5322

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

www.hydro-klean.com

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

Foundations

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

Management www.valfab.com

WWW.STRONGFORM.NET

Mechanical

www.hydro-klean.com

Tank Cleaning Equipment Spraying Systems Co. 630-665-5000

www.spray.com

Tank Cleaning Services Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

P.O. BOX 315, 208 BAKER ST. N. DEER CREEK, MN 56527 PHONE 218.462.2607 FAX 218.462.2508

Professional Environmental Cleaning Services 402-212-0949 www.professionalECS.com Seneca Companies 800-369-5500

www.senecaco.com

Construction

SPECIALIZING IN structural concrete foundations rebar placement steel buildings structural steel erection anaerobic and aerobic digesters

Mid-States Mechanical Services, Inc. 800-950-0279www.mid-statesmechanical.com

Plant Construction Agra Industries, Inc. 715-536-9584

www.agraind.com

SERVICES TO INDUSTRIES INCLUDE

Buildings-Modular

alternative energy agriculture mining cement fertilizer food and beverage power and other industrial projects

EXCELLENT WORKMANSHIP ON AGGRESSIVE SCHEDULES TOP SAFETY STANDARD Lipten 800-860-0790

Insulation

Reimer Welding Inc. 218-773-0886

www.lipten.com www.reimerwelding.com

Railroad Tracks R & R Contracting, Inc. 800-872-5975

www.rrcontracting.net

Railworks 913-888-4091

www.railworks.com

Tanks Agra Industries, Inc. 715-536-9584

www.agraind.com

ATEC Steel 620-856-3488 Caldwell Tanks 502-964-3361

Miller Insulation Co, Inc. 701-258-4323 www.millerinsulation.com

Fabrication Agra Industries, Inc. 715-536-9584

www.agraind.com

ETHANOL PRODUCER MAGAZINE

July 2009

Petrochem Insulation 707-644-7455

www.atecsteel.com www.caldwelltanks.com

WINBCO Tank Company 641-683-1855

www.winbco.com

www.petrocheminc.com 157

EPM MARKETPLACE SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago

Management Services

Consulting Central Energy Plant

The Richmond Group USA - BioEnergy Search Division

804-285-2071

Lipten 800-860-0790

www.trgbioenergy.com

www.lipten.com

Engineering

Environmental

Biomass Energy

Air Resource Specialists,Inc. 970-484-7941 www.air-resource.com ICM, Inc. 877-456-8588

Lipten 800-860-0790

www.icminc.com

www.lipten.com

Design/Build

Natural Resource Group, LLC. 612-347-6789 www.nrg-llc.com

Agra Industries, Inc. 715-536-9584

www.agraind.com

Alaqua Inc.

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

www.alaquainc.com

Pinnacle Engineering Inc. 507-280-5966 Seneca Companies 800-369-5500

Process Design www.pineng.com www.senecaco.com

Weaver Boos Consultants 888-645-5240 www.weaverboos.com WEAVER BOOS CONSULTANTS

Integrated Solutions for Every Challenge Providing turnkey civil & geotechnical engineering & environmental services for industrial, commercial & residential land development projects.

A full-service engineering firm, integrating many disciplines for each project, saving our clients time and money.

Greenway Consulting,LLC 320-589-3085 www.greenwayconsulting.net

Plant Optimization

Harris Group Inc. 206-494-9422

ProQuip, Inc. 330-468-1850

ICM, Inc. 877-456-8588 Lipten 800-860-0790

www.harrisgroup.com www.icminc.com www.lipten.com

www.proquipinc.com

Air Pollution/Odor Control Ceco Abatement Systems, Inc. 630-493-0624 www.cecoenviro.com/Abatement

Analytical Instruments

Project Development

Education

www.vogelbusch.com

Equipment & Services Agitation Equipment

888-645-5240 877-645-5242 www.weaverboos.com

www.harrisgroup.com

Iowa Lakes Community College 800-242-5108 www.iowalakes.edu

www.harrisgroup.com

Vogelbusch USA, Inc. 713-461-7374

Granatus Consulting, Inc. 218-773-0005 www.granatusinc.com

Harris Group Inc. 206-494-9422

Harris Group Inc. 206-494-9422

www.icminc.com

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

Colorado•Florida•Illinois•Indiana Michigan•Missouri•Ohio•Texas

Feasibility Studies

158

ICM, Inc. 877-456-8588

Gusmer Enterprises, Inc. 847-277-9785 www.gusmerbiorefining.com Perten Instruments, Inc. 801-936-8165

www.perten.com

Blowers & Fans

Employment

Robinson Industries, Inc. 724-452-6121 www.robinsonfans.com

Recruiting

Boiler Systems

McDermott & Bull-Energy Practice 415-722-8966 www.mbsearch.net

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

July 2009

EPM MARKETPLACE Boilers-Reboilers

Control Systems-Distributed

Dust Control Systems

Wabash Power Equipment CO. 847-541-5600 www.wabashpower.com

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

Combustion Equipment

Emission Monitoring Systems

Eclipse.Inc. 815-637-7213

MonitorTech Corp.

866-682-6771

www.eclipsenet.com

www.monitortechgrp.com

Computer Software

Fermentation Monitoring

dbc SMARTsoftware, Inc. 770-427-7633 www.dbcsmartsoftware.com

ETS Laboratories 707-963-4806

Conveyors–Mechanical U.S. Tsubaki 847-459-9500

Fermentors www.ustsubaki.com

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

You produce fuel.

We fuel your success.

Delta Cooling Towers, Inc. 800-BUY-DELTA www.deltacooling.com

www.icminc.com

SRS Engineering Corporation 800-497-5841 www.srsbiodiesel.com

800.518.0472 JohnDeereAgriServices.com

Littleford Day, Inc. 859-525-7600

www.winbco.com

Fluid Engineering 814-453-5014

www.fluideng.com

FLAMEX Inc. 336-299-2933

flamex@sparkdetection.com

Buhler Inc. 763-847-9900

www.buhlergroup.com/us

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

Dryers-Fluid Bed Aeroglide Corporation 919-851-2000

WINBCO Tank Company 641-683-1855

Fractionation-Corn

Distillation Equipment

Integrated business management system for purchase/sales contracting, risk management, plant production and material usage data collection, and automated receiving and loadout.

www.atecsteel.com

Fire Suppression

Corn Oil Recovery

Ethanol Efficiency.

ATEC Steel 620-856-3488

Filtration Equipment

Cooling Towers

ICM, Inc. 877-456-8588

www.etslabs.com

www.aeroglide.com

Crown Iron Works 651-639-8900

www.crowniron.com

www.littleford.com

FWS Technologies 204-487-2500

www.fwsgroup.com

© 2009 John Deere Agri Services, Inc.

ICM, Inc. 877-456-8588

Dryers-Ring Encore Business Solutions 204-989-4330 www.encorebusiness.com

Barr-Rosin,Inc 630-659-3980

Control Systems

Dryers-Rotary Drum

FeedForward, Inc. 770-426-4422

Barr-Rosin,Inc. 630-659-3980

ICM, Inc. 877-456-8588

www.feedforward.com www.icminc.com

ICM, Inc. 877-456-8588

www.barr-rosin.com

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

Grain Handling & Storage www.barr-rosin.com www.icminc.com

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

Ronning Engineering Company, Inc. 913-239-8118 www.ronningengineering.com

SoftPLC Corporation 512-264-8390

Dryers-Rotary Steam Tube www.softplc.com ICM, Inc. 877-456-8588

www.icminc.com

Agra Industries, Inc. 715-536-9584

July 2009

www.agraind.com

McC, Inc. 763-477-4774 www.mccormickconstruction.com

Heat Exchangers Munters - Des Champs Products 540-291-1111 www.deschamps.com

Instrumentation Endress+Hauser, 317-535-2174

ETHANOL PRODUCER MAGAZINE

www.icminc.com

www.us.endress.com 159

EPM MARKETPLACE Perten Instruments, Inc. 801-936-8165

Millwright

WIKA Instrument Corporation 888-945-2872, x5127

Agra Industries, Inc. 715-536-9584

www.agraind.com

Moisture Analyzers

Industrial Construction & Engineering 636-970-1650 www.ic-e.cc

Perten Instruments, Inc. 801-936-8165

www.perten.com

www.harrisgroup.com

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

Molecular Sieve Desiccant 3 Angstrom 630-980-5205

SGS North America Inc. 281-479-7170 www.sgs.com/alternativefuels

Laboratory-Supplies CHATA Biosystems customerservice@chatasolutions.com

www.phenomenex.com

www.3Angstrom.com

Molecular Sieves ICM, Inc. 877-456-8588

www.icminc.com

Vaperma, Inc. 418-839-6989

www.vaperma.com

Pumps

Zeochem, LLC 502-634-7600

www.zeochem.com

ITT Industries Goulds Pumps 315-568-2811 www.gouldspumps.com Valley Equipment Co. Inc. 423-753-3541 www.valleyequipment.com

Laboratory-Testing Services

Motors

Midwest Laboratories, Inc. 402-829-9877 www.midwestlabs.com

Trico TCWind, Incorporated 320-693-6200 www.tricotcwind.com

Romer Labs, Inc. 636-583-8600

Paint & Protective Coatings

www.icminc.com

www.carbis.net

Pipe www.hemcocpm.com

SafeRack 866-761-7225

www.saferack.com

Maintenance Services Jouleâ&#x20AC;&#x2122; Industrial Contractors bbosher@jouleinc.com www.jouleinc.com Mechanical Solutions, LLC 515-332-7035

www.mecsol.com

Maintenance Software ICM, Inc. 877-456-8588 Mapcon Technologies, Inc. 800-922-4336

ISCO Industries 800-345-4726

www.mapcon.com

Mills-Hammer CPM/Roskamp Champion 800-366-2563 www.cpmroskamp.com

www.perten.com

Eco-Tec, Inc. 905-427-0077

www.eco-tec.com

Scales-Software www.isco-pipe.com

Robert-James Sales, Inc. 800-666-0088

www.rjsales.com

Robert-James Sales, Inc. 800-666-0088

www.rjsales.com

Pipe-Flanges www.rjsales.com

Pressure & Temperature WIKA Instrument Corporation 888-945-2872, x5127

John Deere Agri Services 800-518-0472 www.johndeereagriservices.com

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

Pipe-Fittings

Robert-James Sales, Inc. 800-666-0088 www.icminc.com

Perten Instruments, Inc. 801-936-8165

Resource Recovery

ICM, Inc. 877-456-8588

Carbis, Inc. 800-845-2387 Hemco Industries, Inc. 877-347-7106

Mongan / Bockman 260-748-7655 www.monganbockman.com

Parts & Services

Loading Equipment

Watson-Marlow Bredel Pumps 800-282-8823 www.watson-marlow.com

QA Test Products

www.romerlabs.com

Trilogy Analytical Laboratory 636-239-1521 www.trilogylab.com

160

Harris Group Inc. 206-494-9422

www.perten.com

Laboratory-Outsourcing

Phenomenex 310-212-0555

www.winbco.com

Process Control

Sartorius Mechatronies-Omnimark 800-835-3211 www.sartorius-omnimark.com

Laboratory-Equipment Perten Instruments, Inc. 801-936-8165

WINBCO Tank Company 641-683-1855

www.wika.com

Insulator

877-246-2428

Pressure Vessels

www.perten.com

www.truck-scales.com

Seals Aesseal Inc. 865-531-0192

www.aesseal.com

Utex Industries, Inc. 432-333-4151/800-873-0946

www.utexind.com

Separation Equipment www.wika.com

Fluid Engineering 814-453-5014

www.fluideng.com

Puritan Magnetics, Inc. 248-628-3808 www.puritanmagnetics.com ETHANOL PRODUCER MAGAZINE

July 2009

EPM MARKETPLACE Size Reduction-Shredders

Thermal Oxidizers

Used Equipment

DuraTech Industries / Haybuster 701-252-4601 www.haybuster.com

Storage-DDGS Laidig Systems, Inc. 574-256-0204

www.laidig.com

Structural Fabrication Agra Industries, Inc. 715-536-9584

www.agraind.com

Tanks Agra Industries, Inc. 715-536-9584

www.agraind.com

ATEC Steel 620-856-3488 Brown Tank LLC 651-747-0100

www.atecsteel.com

PROVEN RELIABILITY for VOC, CO & PM ABATEMENT EISENMANN Corporation Crystal Lake, Illinois 815.455.4100 es.info@eisenmann.com

www.browntank-mn.com

Federal Equipment Company 800-652-2466 www.fedequip.com

Pro-Environmental, Inc. 909-989-3010

www.pro-env.com

EPM MARKETPLACE

WINBCO Tank Company 641-683-1855

a useful directory in each publica-

tiser wanting to raise awareness

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play advertiser looking for added exposure, EPM Marketplace is the

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Biothane Corporation 856-541-3500x501

of your business or a frequent dis-

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North American Safety Valve 800-800-8882

in one convenient location, Ethanol

tion. Whether a first-time adverwww.winbco.com

www.checkall.com

Wastewater Treatment Services

tains top editorial content but also www.paragontrailer.com

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

With all contact information placed

Producer Magazine not only conParagon Trailer Sales 800-471-8769

Valves

Hydro-Klean, Inc. 515-283-0500

www.biothane.com www.hydro-klean.com

ICM, Inc. 877-456-8588

www.icminc.com

UEM, Inc. 561-385-7515

www.uemgroup.com

Water Treatment Aquatech International Corporation 724-746-5300 www.aquatech.com Fluid Engineering 814-453-5014

www.fluideng.com

161

EPM MARKETPLACE Ethanol Production

Fuel Ethanol

Existing Producers

Gavilon 402-595-5678

www.gavilon.com

Louis Dreyfus Commodities 402-844-2680 LDCommodities.com

Miscellaneous

POET LLC 605-965-2200

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

www.poetenergy.com

Finance

Transportation

Accounting

Marine

Christianson & Associates PLLP 320-235-5937 www.christiansoncpa.com

Evolution Markets, Inc. 914-323-0259

Eide Bailly LLC 605-977-2703

Railcar Moving

www.eidebailly.com

Appraisals

Shuttlewagon, Inc. 816-767-0300

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

Railcar Parts

Due Diligence

Salco Products, Inc. 630-783-2570

Harris Group Inc. 206-494-9422

www.harrisgroup.com

ERS Rail Transload 205-322-8312

Kent Group, Inc. 715-358-7528

Utilities

www.salcoproducts.com

www.ersrail.net

www.BiomassMagazine.com

Utility

Risk Management First Capitol Risk Management 800-884-8290 www.firstcapitolrm.com R.J. Oâ&#x20AC;&#x2122;Brien 800-621-0757

www.shuttlewagon.com

Terminals & DSP

Mergers & Acquisitions www.kentgroupinc.com

www.evomarkets.com

Biomass Magazine is a trade journal serving companies that use and/or produce power, fuels and chemical feedstocks derived from biomass.

Collectively, these biomass utilization industries are positioned to replace nearly every product made from fossil fuels with those derived from plant or waste material. The publication covers a wide array of issues on the leading edge of biomass utilization technologies, from biorefining, dedicated energy crops and cellulosic ethanol to decentralized power, anaerobic digestion and gasification. Itâ&#x20AC;&#x2122;s all here.

www.rjobrien.com

Integrys Energy Services 608-235-2547 www.integrysenergy.com

EPM MARKETPLACE

Software-Accounting Encore Business Solutions 204-989-4330 www.encorebusiness.com

With all contact information placed in one convenient location, Ethanol

Software-Commodity John Deere Agri Services 800-518-0472 www.johndeereagriservices.com

Producer Magazine not only contains top editorial content but also

Legal Services

a useful directory in each publica-

Attorneys

tion. Whether a first-time adver-

BrownWinick Law Firm 515-242-2400 www.biofuellawyers.com

tiser wanting to raise awareness of your business or a frequent dis-

Faegre & Benson, LLP 612-766-6930

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play advertiser looking for added

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July 2009

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