July 2015 Ethanol Producer Magazine

INSIDE: ETHANOL COOKSTOVES FIGHT POLLUTION, DEFORESTATION JULY 2015

BOOSTING SHELF LIFE

Antioxidant Addition Protects Distillers Grains, Corn Oil Page 28

New Coproducts Wait in the Wings Page 34

Consumer-Driven Changes To Food Chain Impact DGs Page 40

www.ethanolproducer.com

2015:

THE YEAR OF

THANKS FOR BEING SOME OF THE FIRST RETAILERS TO OFFER E15.

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Together we’re making progress toward the next generation of sustainable, renewable fuels.

Learn more at GrowthEnergy.org/E15

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CONTENTS

JULY 2015

DEPARTMENTS 6

VOLUME 21 ISSUE 7

FEATURES

EDITOR'S NOTE Change Defines

Ethanol’s Coproducts

By Tom Bryan

7

AD INDEX

10 THE WAY I SEE IT Ignorance or Ignoring is Bliss

By Mike Bryan

11 EVENTS CALENDAR 12 VIEW FROM THE HILL

28

QUALITY

Creating a Quality Image Adding commercially available antioxidants to distillers grains and distillers corn oil improves shelf life

By Holly Jessen

34

DIVERSIFICATION

Cracking the Kernel for Higher Value Products

Will zein and phytate make it as the next coproduct success story?

By Susanne Retka Schill

New Poll Shows RFS Support

By Bob Dinneen

14 DRIVE

Fueling Freedom

By Tom Buis

16 GRASSROOTS VOICE

ACE: Protecting RFS, Expanding Market Access

By Brian Jennings

18 GLOBAL SCENE

Opportunity Knocks, But Who Will Answer?

By Andrea Kent

40

ANTIBIOTICS

48

OUTREACH

Wanted: Antibiotic-Free Chicken

Stoves that Save

By Susanne Retka Schill

By Janna Farley

Ethanol producers evaluate their antimicrobial programs

Clean cooking stoves powered by ethanol improve life in Haiti

CONTRIBUTIONS

20 BUSINESS BRIEFS 22 COMMODITIES 24 DISTILLED 62 TALKING POINT

DDGS Challenges, Old and New

By Kurt A. Rosentrater

64 BUSINESS MATTERS

Equity Redemption Plans Can Provide Liquidity, Tax Relief

By Joe Leo

66 MARKETPLACE ON THE COVER

PHOTO BY UNIVERSITY OF MINNESOTA

4 | Ethanol Producer Magazine | JULY 2015

56

CARBON DIOXIDE

60

SORGHUM

Energy-Related Carbon Dioxide Opportunities Can Enhance Ethanol Projects

Fueling the Sorghum-Ethanol Corproducts Engine

By Sam A. Rushing

By Lyndon Anderson

CO2 can replace water-based hydraulic fracturing in regions where water is scarce

An ethanol producer in Kansas is producing distillers grains, oil and other coproducts from grain sorghum

Ethanol Producer Magazine: (USPS No. 023-974) July 2015, Vol. 21, Issue 7. Ethanol Producer Magazine is published monthly by BBI International.

Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

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EDITOR'S NOTE

Change Defines Ethanol’s Coproducts The spec for fuel ethanol doesn’t change—the ASTM standard is the same all the time, no matter what—but its coproducts are modified, tweaked and reinvented with striking regularity. The stern requirements of

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

distillers grains customers has driven many coproduct decisions over the years. The allure of underserved markets has driven others. Now, two other factors are in play: regulation of food and consumer attitudes about food. This month’s issue touches on each of these pillars of coproduct change, starting with alterations born from customer care.

The stability of the ethanol’s two principal coproducts, distillers grains and distillers corn oil, is the subject of this month’s cover story. By stability, the experts mean the degree to which the products are susceptible to fouling during transport and storage. In “Creating a Quality Image,” on page 28, EPM Managing Editor Holly Jessen reports that the shelf life of distillers grains and DCO is especially important anywhere the coproducts are stored in hot or humid conditions. There has been little research done on coproduct stability, but a new study indicates that distillers grains and DCO, like other unsaturated oils, are prone to lipid degradation over time under steamy conditions. The good news, however, is that there are effective antioxidant additives on the market.

We turn from coproduct quality to coproduct invention on page 34, as EPM Senior Editor Susanne Retka Schill reports on a University of Minnesota research team’s effort to make phytate the industry’s next big coproduct. Bringing a new product to market is never easy, but this potential new coproduct has several appealing uses, and removing it from the production stream could enhance distillers grains. Low-phytate distillers grains equals lowphosphorous distillers grains, and that’s appealing to hog and poultry producers who must prevent phosphorous leaching on their properties. Moreover, lower phytate makes other nutrients in distillers grains more available and useful to animals. On a parallel front, Retka Schill also gives us an update on efforts to commercialize the production of zein, another novel but promising coproduct.

Finally, we wade into the complex subject of antibiotics in this issue. In “Wanted: Antibiotic Free Chicken,” on page 40, Retka Schill reports on how consumer-driven changes in the food and restaurant industries are inevitably affecting distillers grains producers. Several big food companies and restaurant chains including McDonalds, Chipoltle Mexican Grill, Perdue Farms and Tyson Inc. have recently declared their intentions to go antibiotic free.

We report that an estimated 70 percent of U.S. ethanol plants still rely on antibiotics to ward off yield-robbing bacteria in the production process. Today’s producers are using antibiotics discerningly, and studies have shown that traces of antibiotics that sporadically show up in distillers grains are “magnitudes lower” than FDA limits. Despite the fact that antibiotics are effective and safe, however, some ethanol producers are committing to alternative antimicrobials to win over—or keep—their big customers. Oh, and those antibiotic-free DDGS premiums are reportedly starting to come. Time will tell if this is a niche opportunity or an unstoppable trend.

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: 6 | Ethanol Producer Magazine | JULY 2015

TWITTER.COM/ETHANOLMAGAZINE

VOLUME 21 ISSUE 7

ADVERTISER INDEX

EDITORIAL

President & Editor in Chief Tom Bryan tbryan@bbiinternational.com Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Holly Jessen hjessen@bbiinternational.com Senior Editor Susanne Retka Schill sretkaschill@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

ART

Art Director Jaci Satterlund jsatterlund@bbiinternational.com Graphic Designer Raquel Boushee rboushee@bbiinternational.com

PUBLISHING

Chairman Mike Bryan mbryan@bbiinternational.com CEO Joe Bryan jbryan@bbiinternational.com

SALES

Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Sales & Marketing Director John Nelson jnelson@bbiinternational.com Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Account Manager Jeff Hogan jhogan@bbiinternational.com Account Manager Tami Pearson tpearson@bbiinternational.com Circulation Manager Jessica Beaudry jbeaudry@bbiinternational.com Traffic & Marketing Coordinator Marla DeFoe mdefoe@bbiinternational.com

ACE American Coalition For Ethanol BetaTec Hop Products Buckman Cereal Process Technologies CHS Renewable Fuels Marketing Direct Automation DuPont Industrial Biosciences EcoEngineers Fagen Inc. Fluid Quip Process Technologies, LLC Growth Energy Hengye USA Hydrite Chemical Co. Hydro-Klean LLC ICM, Inc. Interra Global Corporation Lallemand Biofuels & Distilled Spirits Leaf Technologies Louis Dreyfus Mist Chemical & Supply Company Mole Master Services Corporation Nalco, an Ecolab company NCAT, Inc.

New Holland Agriculture North American Industrial Services Phibro Ethanol Performance Group POET-DSM Advanced Biofuels

Premium Plant Services, Inc.

Renewable Fuels Association RPMG, Inc Salco Products, Inc.

Solenis LLC

Swedish Exergy AB

Thermal Refractory

Tower Performance, Inc. Tranter Trinity Rail Valicor Separation Technologies Victory Energy Operations, LLC. WestAgro Executive Brands WINBCO

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Customer Service Please call 1-866-746-8385 or email us at service@bbiinternational.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for anyone outside the United States. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or service@bbiinternational.com. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to hjessen@bbiinternational.com. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

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COPYRIGHT Š 2015 by BBI International TM

JULY 2015 | Ethanol Producer Magazine | 7

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THE WAY I SEE IT

Ignorance or Ignoring is Bliss

By Mike Bryan

Over the years, we have had a host of articles, books, press releases and talking heads highlight the shortcomings of biofuels, in particular ethanol.

Almost all of these “experts” fail to account for the contributions of ethanol or, in many cases, simply ignore those contributions in order to make their point, sell their book, or get published in the newspaper.

They ignore the economic impact to the countries in which ethanol is produced and ignore the hundreds of millions, and in some countries billions, of dollars of economic growth that is created by a robust ethanol industry.

They ignore the true cost of fossil fuels, the damage to the environment, the billions of dollars in added healthcare cost as a result of fossil fuel use. In addition, most seem to gloss over the cost of military intervention to protect sources of oil, the pipelines, the oil spills and the utter environmental devastation that fossil fuels have caused in the world. Instead they focus on the small contribution that ethanol has on the price of food, as if fossil fuels had no impact on food cost worldwide.

They ignore the contributions made by the high quality distillers grains that feeds a myriad of livestock for human consumption.

Distiller’s grains is shipped to countries rich and poor all around the world. Rather, they focus on the price of corn tacos in Mexico, or the cost of a loaf of bread in Uruguay, and blame ethanol.

They ignore the impact ethanol production has in keeping farmers in business so they can help feed a hungry world. The biofuels industry has helped to stabilize farm prices, has been a tremendous tool in keeping farmers on the farm. It has not only served to keep existing farmers in business, but has been instrumental in encouraging young people to stay on the farm.

It’s not just the money, but often for the younger generation the

commitment that they have to not only help feed a hungry world, but to contribute to a cleaner environment in the process. It’s a pride thing and they wouldn’t understand.

They ignore the cost reduction to consumers at the pump.

Ethanol has been a significant contributor to reducing gasoline prices and has saved consumers hundreds of millions of dollars.

This is money that often would have gone to someone outside the country. One can only assume that by ignoring this, they would prefer that we pay more at the pump and make an oil baron a little richer. I’m not sure how that helps a subsistence farmer in the Baltics, but perhaps I just don’t get it.

They ignore the hundreds of thousands of jobs that are created and the impact on the economy that those jobs have. They ignore the contribution capabilities of those with good jobs have to contribute financial aid to a hungry world, or to make someone’s life a bit easier by helping build a home in the U.S. or a foreign country. People in poverty can’t do those things, people who are fortunate enough to have good jobs can and many do. Rather than focusing on the wealth created and the contributions made to the world because of that wealth, they focus on the price of wheat in Chile and make a feeble attempt to pin it on biofuels.

As I have said many times, ethanol is not a perfect fuel, it is a fuel that over time will transition us into an even better fuel, one that probably will be cleaner, cheaper and have fewer negatives. But until that happens, let’s stop ignoring the benefits of ethanol and embrace its attributes. I guess if you are looking for a story, writing a book or publishing a paper on the negatives of ethanol, ignoring can be as blissful as ignorance.

That’s the way I see it.

Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com

10 | Ethanol Producer Magazine | JULY 2015

EVENTS CALENDAR ACE Conference August 19-21, 2015 Omaha, Nebraska Hilton Omaha

ACE’s annual conference is tailored to the interests and needs of the people of ethanol, the folks in the trenches.

It’s a gathering of ACE’s commitment to connect ethanol producers with the farmers, researchers, retailers, and support businesses to continue what all of them started a long time ago. It’s also an excellent place to learn and share ideas. And, it has all the fun of a family reunion.

605-334-3381 | www.ethanol.org/events/conference

National Advanced Biofuels Conference & Expo October 26-28, 2015 Hilton Omaha Omaha, Nebraska Produced by BBI International, this national event will feature the world of advanced biofuels and biobased chemicals—technology scale-up, project finance, policy, national markets and more—with a core focus on the industrial, petroleum and agribusiness alliances defining the national advanced biofuels industry.

866-746-8385 | www.advancedbiofuelsconference.com

International Biomass Conference & Expo April 11-14, 2016 Charlotte, North Carolina Organized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all biomass industries.

866-746-8385 | www.biomassconference.com

2016 International Fuel Ethanol Workshop & Expo June 20-23, 2016 Wisconsin Center Milwaukee, Wisconsin Now in its 32nd year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-tobusiness environment. As the largest, longest running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine —that maintains a strong focus on commercial-scale ethanol production, new technology, and near-term research and development. The 2014 event drew more than 1,800 people from over 31 countries and from nearly every ethanol plant in the United States and Canada.

866-746-8385 | www.fuelethanolworkshop.com

VIEW FROM THE HILL

New Poll Shows Clear RFS Support

By Bob Dinneen

Every Fourth of July, in the slowly darkening moments between dusk and the first pop of fireworks, I take advantage of the down time to read the Declaration of Independence to my family. The Fourth of July gives us all a moment to reflect on

the freedom our forefathers envisioned and how those hopes transformed into the freedom Americans now have—through the Bill of Rights—to express their thoughts, views, and beliefs without the looming threat of repercussions.

In early April, Morning Consult—on behalf of the Renewable Fuels Association—asked more than 2,000 Americans to share their views on a wide variety of topics and issues. They answered questions ranging from how well they believed the president is governing the country to their views on America’s key energy policy, the renewable fuel standard (RFS). Once the poll numbers were tallied, one thing was clear: The RFS has the support of the American people.

The poll shows that of the 2,047 individuals asked, 62 percent of Americans came out in support of the RFS, while only 18 percent opposed the popular policy. These numbers just go to show that despite all of the false rhetoric and fear tactics thrown at the American public from the petroleum industry, support for the RFS remains high.

As you may know, there is currently an RFS that requires a certain amount of the fuel produced each year to come from ethanol, biodiesel and other renewable sources that aren’t fossil fuels.

Do you support or oppose this requirement?

Support = 62 percent Oppose = 18 percent Don’t know/no opinion = 20 percent Respondents were also asked a variety of other biofuels and energy related questions. The results found that 65 percent of Americans support tax incentives for clean, renewable cellulosic ethanol while on the flip side of the coin only 34 percent supported tax incentives that would continue to help Big Oil boost its profits.

12 | Ethanol Producer Magazine | JULY 2015

The government has considered giving tax incentives to help fund the expansion of a new fuel known as cellulosic ethanol, which is a biofuel produced from wood, grasses and other non-edible parts of plants.

Do you support or oppose the government giving such tax incentives?

Support = 65 percent Oppose = 18 percent Don’t know/no opinion = 17 percent As you may know, oil companies receive $4 billion to $5 billion in government tax incentives to help pay for things like equipment depreciation, oil depletion allowances and foreign investment tax credits for taxes they pay in foreign countries.

Do you support or oppose these tax incentives?

Support = 34 percent Oppose = 51 percent Don’t know/no opinion = 15 percent Last, but certainly not least, individuals were asked about their support of alternative fuel vehicle programs which would require auto manufacturers to produce vehicles such as those that run on flex-fuel. Nearly 70 percent came out in support of these types of programs.

Do you support or oppose the federal government requiring automobile manufacturers to build cars that will run on fuel sources other than oil, such as electricity, natural gas and biofuels?

Support = 69 percent Oppose = 20 percent Don’t know/no opinion = 11 percent As the Fourth of July rapidly approaches and communities get ready for parades and fireworks, it’s time for Washington to think outside the beltway and take a good, hard look at the people it represents. Washington should take into account the American people’s strong and steady support for biofuels before doing anything to harm or undercut the RFS. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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DRIVE

Fueling Freedom

By Tom Buis

Major players in the fuel retail world, like Kum & Go, Mapco, Minnoco, Murphy USA, Protec, Zarco USA, Petro Serve USA and Cenex, are not only fueling cars; they’re fueling freedom. By offering E15

at their stations, they’re bringing consumers the freedom of choice, giving farmers the freedom to earn a good living doing the job they love and providing our nation with freedom from the instability of foreign oil. As we celebrate all of the many freedoms that we are fortunate enough to enjoy in this great nation over the Fourth of July, let’s not forget to thank those retail leaders as well.

E15 has entered the market and continues to grow across the country. If our industry embraces a can-do attitude, it will only be a matter of time before E15 is available in every state. As they say, your attitude determines your altitude. There have been and always will be naysayers, but we cannot allow them to drown out the voices of yes. If Lincoln had listened to the naysayers, we wouldn’t have had a transcontinental railroad. If Eisenhower had listened to the naysayers, we wouldn’t have the interstate highway system. If Kennedy had listened to them, we wouldn’t have put a man on the moon. None of these achievements would have been possible without a can-do attitude.

As an industry, we’ve risen to challenges and will rise to new challenges, all because of our positive thinking. The naysayers out there who are making noise and spreading misinformation to protect their dwindling market share will not hold us back. When critics ask if we can protect the RFS, the answer is yes. Can we get E15 into the marketplace and provide consumers with a much needed choice and savings at the pump? Yes. Can we improve our environment?

Yes. Can we strengthen our nation’s rural communities, economy and energy independence? Yes. Yes, we will.

The renewable fuel standard is our nation’s most successful energy policy in the past 40 years. Since its introduction in 2005,

14 | Ethanol Producer Magazine | JULY 2015

the RFS has helped us cut our dependence on foreign oil nearly in half—from 60 percent to 33 percent—cracking the monopolistic stranglehold that the oil industry has on our transportation system and supporting nearly 400,000 jobs here in America. It also allows the United States to lead the world in biofuel innovation, driving the research and development of next-generation biofuels that will break our dangerous addiction to fossil fuels.

What’s more is that all of this significant progress has been made while providing consumers with a choice and much needed savings at the pump. High-performance, low-cost ethanol fuel blends like E15 are well on their way to becoming a standard offering at retail locations across the country. The demand for E15 is strong, and we believe that when consumers are given the choice, they will choose the less-expensive fuel that is better for their engines and our environment.

Nationwide, moving to E15 would create another 136,000 American jobs that can’t be outsourced, reduce the demand for foreign oil by 7 billion gallons and eliminate up to 8 million metric tons of greenhouse gas emissions per year—the equivalent of taking 1.68 million vehicles off the road—all while saving consumers even more money at the pump. We know that E15 is the right move at the right time for America, and if every member of our industry embraces that can-do attitude, it won’t be long before consumers across the country will be able to fuel up with freedom.

Author: Tom Buis

CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org

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GRASSROOTS VOICE

ACE: Protecting RFS, Expanding Market Access

By Brian Jennings

As we celebrate our independence this month, here’s a rundown of what the American Coalition for Ethanol has been working on and a preview of what’s to come for the remainder of the year. On the

policy front, ACE has united with other groups to get the renewable fuel standard back on track. The U.S. EPA has finally proposed the direction it intends to take with the RFS going forward. The agency is under a court order to finalize the blending levels for 2014 and 2015 by Nov. 30, and they have promised to meet the same deadline for determining the 2016 blending target. Our priority is to ensure oil companies are held legally responsible for making cleaner and less-expensive fuel choices, such as E15 and E85, available to consumers. We are all committed to preventing EPA from using the so-called blend wall as an excuse to reset the RFS. While EPA has been in the RFS spotlight, we have not neglected Capitol Hill. Three out of every five members of Congress were not in office when RFS2 was enacted, so we need to educate them about the benefits of ethanol.

In March, 70 ACE members and supporters helped us meet with more than 160 congressional offices representing 43 states during our 2015 fly-in. People from all walks of life took part in our fly-in alongside ethanol producers and corn growers. Our grassroots advocates met face-to-face with policymakers and talked about the RFS, E15 and flex fuels, but most importantly their own personal stories about why ethanol needs to remain a national priority. We also joined with the Fuels America campaign during the fly-in to help convince nearly 40 U.S. senators to sign a letter to EPA Administrator Gina McCarthy, urging her to seize the opportunity to get the RFS right by reversing course from the 2014 proposed rule and craft targets for 2015 and 2016 that reflect Congress’ intended goals.

Expanding market access for E15 and flex fuels is ACE’s top priority this year, and for that reason we launched a new retailerfocused campaign called Flex Forward. It is based upon the real-

16 | Ethanol Producer Magazine | JULY 2015

life experiences of retailers who were able to break free of oil company restrictions, get over the “blend wall,” and make money by offering E15 and flex fuels to their customers. Our campaign includes print and digital advertisements with the most popular and trusted magazines, newsletters, and websites for retailers. Monthly readership of these publications surpasses 300,000 people and one of the websites boasts over 30,000 unique visitors each month.

ACE has also unveiled a new retailer website, www.flexfuelforward. com, which includes videos of retailers who have made the switch to E15 and flex fuels in addition to all the technical information retailers need to offer their customers more choices at the pump.

Our Power by People campaign has highlighted many ACE members in print and digital ads to promote the RFS or ethanol industry, in general. Two ads that have been particularly effective feature Delayne Johnson, CEO of Quad County Corn Processors, and Marietta Lakness, a rancher and investor in Glacial Lakes Energy. Delayne’s ad brings to light the ingenuity that enabled Quad County to become the first facility in the nation to produce one million gallons of cellulosic biofuel. Marietta’s ad emphasized the importance of the RFS during President Obama’s recent visit to her home town.

Finally, I encourage you to join ACE in Omaha, Aug. 19 to 21, for our annual conference. We will meet retailers who are making the switch to E15, learn about a new campaign designed to promote the health benefits of ethanol to consumers, and discover why corn ethanol producers are innovating to produce advanced and cellulosic biofuels. Conference topics will also highlight the new tank car regulations coming down the pike, efforts to promote ethanol and DDGs exports, and a series of breakout sessions designed for plant board directors and staff.

Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

GLOBAL SCENE

Opportunity Knocks, But Who Will Answer?

By Andrea Kent

Climate change is one of the defining challenges of the 21st century. And it's especially tough because it isn't just a scientific concern or activist cause or industrial issue. Climate change is a global problem that brings to light serious environmental and economic challenges.

CRFA recently conducted a national survey of 1,750 Canadians.

The gross majority (79 percent) of people polled believe that climate change is happening and is caused by human activity. And more than half (61 percent) of respondents said they want more government action to fight climate change.

With Canada’s next federal election later this year, environmental policy is poised to become a sword or a shield for politicians.

As it stands, Canada does not have a sterling reputation on the environment. A recent report prepared by Environment Canada suggested Canada has little hope of meeting its international commitment to reduce greenhouse gas emissions by 17 percent from 2005 levels by 2020. As I write this, Canada’s post-2020 targets, and those of many provinces have not been released. The only thing that is known going into the fall federal election is that climate change will continue to be a political issue or an opportunity.

Enter, renewable fuels. Despite the criticism on Canada’s progress on greenhouse gas reductions, using biofuel in our fuel mix removes 4.2 megatons of carbon from Canada’s environment annually. This is the equivalent to removing 1 million cars from our roads every year. It’s hard to imagine reaching any reduction targets without renewable fuels, let alone the ambitious standards being called for internationally and by some here at home. Biofuels are an easy fix for any government looking for efficient, low-cost pathways to reducing greenhouse gas emissions. Investing in renewable fuel infrastructure and making higher-level ethanol blends available to consumers at the pump is the best way to achieve even greater emissions reductions from the transportation sector.

Those on the campaign trail should also know that Canada is home to well-established federal and provincial biofuels policies.

18 | Ethanol Producer Magazine | JULY 2015

This spans the federal mandates announced in 2007 to the more recent Greener Diesel Mandate in Ontario. Of those surveyed about one-third (35 percent) were aware of Canada’s ethanol mandate.

However, when told about the impact of the mandate, 31 percent said their impression of the government’s record on climate change improved. By comparison, only a fraction (6 percent) said their impression was negative. And there’s more: • 85 percent of Canadians have a favorable impression of Canada’s renewable fuels industry.

• Support for the Government of Canada doing more to promote renewable fuels was high across the country (88 percent).

• Almost all Canadians (91 percent) have heard of ethanol before the survey, and most Canadians (64 percent) support the federal ethanol mandate.

• Eight in 10 Canadians believe that renewable fuels are innovative, sustainable, clean, and efficient products that they need, which help create great jobs that are good for their province.

• The majority (61 percent) of Canadians want the federal government to do more to deal with climate change.

It all goes to show what our industry, and our champions in public office, have known from the beginning: Supporting renewable fuels has many upsides, and few downsides. The upcoming federal election presents an opportunity for politicians and voters alike.

Opportunity is knocking, let’s hope we are all ready to answer.

Author: Andrea Kent President Canadian Renewable Fuels Association 613-594-5528 a.kent@greenfuels.org

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BUSINESS BRIEFS Michael Best & Friedrich LLP has announced Eric J. Callisto, former chairperson of the Public Service Commission of Wisconsin, has joined the firm’s Madison, WisCallisto consin, office as a partner on the firm’s Energy and Environmental teams. Callisto has extensive experience with state, regional, and national energy and utility issues, and will assist clients in these areas as well as with environmental law matters.

Husky Corp. has announced its fuel nozzle valves for dispensing ethanol blended gasolines, diesel, and biodiesel fuels meet enhanced Underwriters Laboratories safety standards that took effect April 30. The stringent new standards ensure fuel nozzle valves can safely dispense enhanced ethanol and biodiesel blended fuels. Husky nozzle products recently listed under UL 2586 include the Husky X family of fuel nozzles, Husky VIII family of fuel nozzles, Husky 1A/1HS/IGS, and Husky V34.

NCAT Inc. has announced the launch of a new website that focuses on a long-standing opportunity for the ethanol industry—leveraging plant data from an operational cost to a financial asset. Rapidly evolving technology and new ways of viewing and using data are

People, Partnerships & Deals

merging to create this new asset. According to NCAT, realizing this opportunity requires a coherent strategy, effective use of the latest information technologies, and the right partner.

Hood

Kokare

asdfLee Enterprises Consulting has announced the addition to its team of five new engineers and two additional team members who hold doctorates. The company has also divided into four internal teams to handle biodiesel, ethanol, emerging technologies, and solar/wind. The company has promoted Gerald Kutney to lead the emerging technologies team and Bob Parkins to lead its solar/wind team. The new team members are as follows: Elizabeth Hood will work in industrial enzymes, foreign gene expression, plant cell wall structure and protein targeting. Kapil Kokare will work in biomass upgrading, biobutanol, biorenewables, lignin (hydrothermal upgrading) and catalytic valorization of biomass, methane-to-methanol conversion, butanol biosynthesis, conversion of ethanol to higher hydrocarbons/higher value products, and

selective deconstruction of biomass. Doug Proctor will focus on overhead and underground transmission projects. Dave Collier will work on the group’s solar energy team, with an emphasis on low-voltage solar design and construction. Charles Cuhna and Edmund Peterson will work on solar and wind projects. Mark Carey will work on solar and wastewater projects, specializing in civil engineering, energy efficiency and management consulting services for the water industry.

Propel Fuels has announced it will move its headquarters in California from Redwood City to Sacramento. As California’s low carbon economy grows over the next decade, Sacramento will be home to the people and policies shaping its future.

Solenis LLC celebrated the grand opening of its new world headquarters on April 27.

Located in Wilmington, Delaware, the headquarters will accommodate approximately 120 employees supporting a variety of corporate functions for the specialty chemicals company, which was previously known as Ashland Water Technologies. Space for additional expansion has been allocated. The opening of the world headquarters follows the opening of the company’s European headquarters in Schaffhausen, Switzerland, last year.

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20 | Ethanol Producer Magazine | JULY 2015

Hydro-Klean announced that it has acquired Infratech. This acquisition allows Hydro-Klean to offer additional specialized trenchless rehabilitation services to municipal clients throughout the Midwest.

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asdThe National Corn Growers Association has announced a restructure that aims to bring greater focus on building corn demand. As part of this restructure, NCGA has promoted Fred Stemme to vice president of marketing and operations. Paul Bertels will continue to serve as the organization’s vice president of production and sustainability while Rodger Mansfield has stepped down after 19 years of service. In April, the NCGA also launched a search for vice president of market development. The professional chosen to fill that position will be responsible for managing marketing initiatives to build demand for ethanol, livestock feed, biobased products and food uses of corn.

SJC Bioenergia, a joint venture between Cargill and Group USJ, has purchased Fluid Quip Process Technologies’ systems to integrate corn ethanol production at its sugar-cane ethanol facility located in Quirinopolis, Brazil.

SJC Bioenergia will utilize FQPT’s SGT milling, BOS front-end corn oil, Fiber Separation, and MSC Protein Recovery technologies.

Maizall, the international maize alliance, has announced the election of Sergio Bortolozzo as its new president. A farmer from Brazil, Bortolozzo succeeds U.S. Grains Council Past Chairman Julius Schaaf, who had served as president since Maizall was formed in 2013. Maizall is a strategic partnership formed by the USGC, the National Corn Growers Association, Abramhilo and Maizar, the major corn producer organizations of the United States, Brazil and Argentina.

CSX has announced the winners of its 21st annual Chemical Safety Excellence Award, which recognizes customers for their commitment to the safe transport of hazardous materials by rail. The 70 companies recognized include Archer Daniels Midland Co., Buckeye Partners LP, Eco-Energy, Green Plains Inc., Louis Dreyfus Commodities, Poet Ethanol Products, Southwest Iowa Renewable Energy, and Valero Renewable Fuels Co. LLC.

asdAnitox has appointed Eric Sumner to its biofuels division, strengthening technical support for its new antibiotic-free ethanol processing aid OptimOH, a new technology capable of controlling bacteria in Sumner ethanol plants, protecting fermentation and improving yields without the need to modify pH, enzymes or other parameters. Sumner has more than 10 years of experience in the biofuels market. Prior to joining Anitox, he was employed at DuPont, where he held a number of managerial roles. asdArcher Daniels Midland Co. has announced Chris Cuddy, president of ADM’s corn processing business unit, has been named a senior vice president of the company.

Cuddy previously served Cuddy as president of sweeteners and starches in ADM’s corn processing business unit. In that role, he was responsible for all commercial activities of the company’s North American sweetener, starch, fiber and acidulant businesses. He joined ADM in 1998.

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COMMODITIES

Prices & Market Analyses

Natural Gas Report

Summer air-conditioning season becomes second price driver May 18— Many markets are influenced by seasonal changes and the natural gas market is no exception. While summer consumption is far less dramatic than the winter, the increasing prevalence of natural gas as a fuel for power generation makes peak summer heat and the associated air-conditioning demand an increasingly influential (second) seasonal driver of natural gas prices. Following this seasonal pattern, there has been a notable run in natural gas prices over the first few weeks of May with prices rising from $2.50 per MMBtu for the June contract to close to $3 per MMBtu. Before anything else, natural gas is a weather sensitive commodity.

Its primary use is space heating in the residential and commercial sector and to a lesser extent the industrial sector in the winter. Over the past decade, natural gas-fired power generation has been gaining additional market share at the expense of coal, mainly as a result of more stringent regulatory environment but also because of fuel economics.

The chart gives a mechanism for quantifying and demonstrating the seasonal pressures in the gas market by summing the differences between the population-weighted average temperature and a 65 degree Fahrenheit normal for each day in a weekly period. Obviously, summer deviations from normal are far less extreme than winter cold, but as the

by Ben Straus

domestic gas market is getting a hint of warmer-than-normal temperatures heading into the start of June, natural gas prices have rallied in response to the implications for stronger seasonal demand.

Corn Report

Ample corn supply, carryover creates price pressure

by Jason Sagebiel

May 18—The market had the opportunity to get an updated look Another factor that can impact demand will be the action of the U.S. at the old and new crop scenarios in the May USDA supply and demand dollar. report. Old crop supplies have been plentiful and carryout was increased slightly to 1.831 billion bushels. New crop planted acreage is projected to be 89.2 million acres and harvested 81.7 million acres. New crop yield was calculated at 166.8 bushels per acre compared to 171 bushels a year ago and 158.1 bushels in 2013-’14.

With plantings running ahead of last year’s pace at this time, one can understand how the USDA yield was aggressive at 166.8 bushels per acre. With a carryin of 1.851 billion bushels and calculated production at 13.630 billion bushels, total supply was at 15.506 billion, allowing for some imports. Carryout is calculated at 1.746 billion bushels. This would leave the market comfortable two years in a row with ample supplies and carryover. Ultimately this places pressure on the corn values.

Factors affecting prices during the growing season will be obvious weather issues that will arise. Moreover, the market will follow any impacts of outside influences such as weather in other global production areas and issues that could be short term affect livestock feed demand.

Comments in this column are market commentary and are not to be construed as market advice.

22 | Ethanol Producer Magazine | JULY 2015

Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.678

DDGS Report

Rack

1.840

1.850

Midwest

1.690

1.797

East Coast

1.730

1.842

Regional Gasoline Prices ($/gallon)

by Sean Broderick

of the lower-priced DDGS, as well as the corn and soymeal that normally competes with distillers grains in feed rations. This catastrophe has kept a lid on any big upward price moves in the U.S. market in the near future.

But the Chinese market is still going to be the biggest influence in the weeks ahead.

DDGS are still well priced versus China’s domestic corn that is being offered for sale, hence the reason for demand. But another good crop year would strain whatever storage capacity the Chinese have left, and current supplies will more than likely need to be priced to move. For a U.S. DDGS market that is being overly influenced by Chinese demand, that will determine prices as much, or more, than the condition of the U.S. crop.

Front Month Futures Price (RBOB) $2.057 Region

Spot

Rack

West Coast

2.606

2.747

Midwest

2.215

2.438

East Coast

1.888

2.641 SOURCE: DTN

DDGS Prices ($/ton) LOCATION

Jul 2015

Jun 2015

Jul 2014

Minnesota

160

170

210

Chicago

185

192

233

Buffalo, N.Y.

175

185

255

Central Calif.

214

234

270

Central Fla.

204

206

261 SOURCE: CHS Inc.

Corn Futures Prices

(July Futures, $/bushel) Date

High

Low

Close

May 18, 2015

3.71 1/4

3.64

3.68

April 20, 2015

3.88 1/2

3.82 1/4

3.84 3/4

May 20, 2014

4.81 1/4

4.73

4.73 1/2 SOURCE: FCStone

Cash Sorghum ($/bushel) Location

Ethanol Report

All eyes on the road ahead May 18—This is the time of year when what happened from January through May seems to have very little impact on overall direction of the market.

Traders are squarely focused on the road ahead. During the next couple of months, traders and market watchers not only study the direction of the market, but also examine the amount of activity and how much time will be spent driving for holiday and summer activities. Even though increased driving has been a factor through most of the spring and winter, drivers out logging miles through the summer months make up the lion's share of seasonal demand support.

Spot

West Coast

SOURCE: DTN

Price decline brings DDGS back into US rations May 18— Going into Memorial Day, DDGS pricing was still being overly influenced by Chinese demand. There were a lot of tons booked earlier in the year for the first and second quarters, and a medium amount for the third quarter. The resulting demand pushed prices above what made sense for U.S. domestic feeders. Since the middle of March, demand has slowed, and the resulting price decline has created prices that have begun to work back into U.S. rations.

At the same time DDGS is getting cheaper, the market is also now being faced with the effects of the H5N1 bird flu, which is decimating the poultry industry, mostly in the Midwest. To date, it has resulted in the deaths of more than 34 million birds, which in the central part of the U.S., would have been potential consumers

Region

by Rick Kment

Both ethanol and gasoline inventory levels are holding above year ago levels, in some cases significantly above average.

But expectations of strong demand over the next several weeks have kept buyers active in the market, looking for further inventory pullbacks. Although prices are not expected to see outrageous jumps through the spring and summer, the steady support developing during late spring could maintain active consumer demand; as more time is spent on the road, more gasoline and ethanol are consumed.

May 15, 2015

April 24, 2015

May 15, 2014

Superior, Neb.

4.41

4.40

4.48

Beatrice, Neb.

3.91

4.15

4.39

Sublette, Kan.

3.66

4.24

4.59

Salina, Kan.

4.36

4.74

4.59

Triangle, Texas

3.91

3.79

4.76

Gulf, Texas

5.57

5.60

5.57

SOURCE: Sorghum Synergies

Natural Gas Prices ($/MMBtu) LOCATION

May 19, 2015

Mar 31, 2015

May 20, 2014

NYMEX

2.95

2.64

4.47

NNG Ventura

2.98

2.45

4.37

Calif. Citygate

3.07

2.58

4.84

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production (1,000 barrels) Per Day

Month

End Stocks

Feb. 2015

957

26,788

20,979

Jan. 2015

960

29,755

20,543

Feb. 2014

907

25,401

20,979

SOURCE: U.S. Energy Information Administration

JULY 2015 | Ethanol Producer Magazine | 23

DISTILLED Retrofit schedule by tank car and service type United States Nonjacketed DOT-111 (PG I)

1/1/2018

Jacketed DOT-111 (PG I )

3/1/2018

Nonjacketed CPC-1232 (PG I)

4/1/2020

Nonjacketed DOT-111 (PG II)

5/1/2023

Jacketed DOT-111 (PG II)

5/1/2023

Nonjacketed CPC-1232 (PG II)

7/1/2023

Jacketed CPC-1232 (PG I, PG II, all remaing tank cars carrying PG III materials in a HHFT

5/1/2025

Canada Nonjacketed DOT-111 (crude oil)

1/1/2017

Jacketed DOT-111 (crude oil)

3/1/2018

Nonjacketed CPC-1232 (crude oil)

4/1/2020

Nonjacketed DOT-111 (ethanol)

5/1/2023

Jacketed DOT-111 (ethanol)

5/1/2023

Nonjacketed CPC-1232 (ethanol)

7/1/2023

Jacketed CPC-1232 (crude oil, ethanol, all remaining tank cars carrying PG III materials in a HHFT

5/1/2025

Ethanol News & Trends

DOT issues tank car rule, retrofit schedule

Europe caps crop-based biofuels

In May, the U.S. Department of Transportation released a final rule unveiling a new enhanced tank car standard and risk-based retrofitting schedule for older tank cars carrying crude oil and ethanol. While certain tank cars in crude oil service must be retrofitted as soon as 2017, the initial retrofit requirements for tank cars carrying ethanol don’t begin until 2023.

The rule, developed by the Pipeline and Hazardous Materials Safety Administration and Federal Railroad Administration, in coordination with Canada, focuses on safety improvements that are designed to prevent accidents, mitigate consequences in the event of an accident, and support emergency response.

The European Parliament recently voted to approve a cap on first-generation biofuels, providing a degree of closure to the long-debated measure.

The law caps first-generation biofuels from crops grown on agricultural land at 7 percent of energy consumption in transportation by 2020. It also requires fuel suppliers to report the estimated level of greenhouse gas (GHG) emissions caused by indirect land use change (ILUC), requires the commission to report and publish data on ILUCrelated emissions, and obligates the commission to report back to the parliament and ministerial council on the scope for including ILUC emission figures in the existing sustainability criteria.

EPURE, the European ethanol industry association, welcomed closure of the ILUC file in order to restore regulatory and market certainty, but called the absence of binding targets for advanced biofuels and ethanol a missed opportunity.

SOURCE: U.S. DEPARTMENT OF TRANSPORTATION

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TECHNOLOGIES

reliability

performance

yield

DISTILLED

Pacific Ethanol upgrades Madera plant Pacific Ethanol Inc. is completing upgrades at its 40 MMgy ethanol plant in Madera, California. The company recently announced corn oil production at the plant has commenced. In addition, an industrial-scale membrane system is scheduled to be installed at the facility.

In May, Pacific Ethanol announced commercial production of corn oil had begun at the Madera plant utilizing Valicor’s proprietary VFRAC corn oil recovery system.

The membrane system is scheduled to be installed by Whitefox. According to an agreement announced in May, Whitefox was expected to deliver a stand-alone, containerbased membrane system to the facility later that month. Commissioning and startup of the system was scheduled for June. According to Whitefox, the membrane unit will be used to assess the impact of treating certain side streams in the ethanol production process and optimize the design of a membrane solution to remove bottlenecks and improve ethanol production efficiency.

Projected E85 consumption (quadrillion Btu per year) 2020

2030

2040

Reference case

0.03

0.2

0.28

Low economic growth

0.03

0.26

0.29

High economic growth

0.03

0.19

0.3

Low oil price

0.02

0.14

0.16

High oil price

0.19

0.52

0.76

High oil and gas resource

0.03

0.17

0.28

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

EIA outlook predicts increased E85 consumption

The U.S. Energy Information Administration has released its Annual Energy Outlook 2015, which presents updated projections for U.S. energy markets through 2040 based on six different cases that reflect updated scenarios for crude oil prices.

Regarding ethanol, the reference case predicts that a modest penetration of E85 and a small increase in renewable liquids blended into diesel fuel will result in a slight increase in consumption of renewable liquid fuels for transportation. This increase is expected to occur despite a projected overall decrease in motor gasoline consumption.

In the reference case, ethanol consumed in motor gasoline and E85 is expected to increase from 1.12 quadrillion Btu in 2013 to 1.27 quadrillion Btu in 2040. Motor gasoline consumption, however, is expected to decrease from 16.36 quadrillion Btu in 2013 to 12.96 quadrillion Btu in 2040. Of that volume of motor gasoline consumption, the EIA’s reference case predicts the share of E85 will increase from 0.02 quadrillion Btu in 2013 to 0.28 quadrillion Btu in 2040, a 10 percent annual growth rate.

The Hydri-Maize Index

Does your plant make the grade?

Request your complimentary Corn Oil Extraction report card to find out. www.hydrite.com/COE | marketing@hydrite.com JULY 2015 | Ethanol Producer Magazine | 25

DISTILLED

Kum & Go to offer E85 at 65 stores

Poll shows public support for RFS

Kum & Go recently announced it will begin offering E15 as a fuel option. Over the next two years, the company plans to make E15 available at more than 65 stores across Iowa, Nebraska, Arkansas, Colorado, Missouri, Oklahoma, and South Dakota.

The first station, located in Windsor Heights, Iowa, opened in late April.

The company was among the first to begin offering E10 blends in the 1970s and began offering E85 in 1997. Kum & Go currently offers E85 at more than 160 locations across 11 states, and also carries biodiesel blends at many stores. “We have a strong tradition in our company to implement sustainability within our business and at our locations. From our 100 LEED-certified stores, to our selection of alternative fuels, E15 was a natural addition to our fuel offering,� said Jim Pirolli, vice president of fuels at Kum & Go. “Having E15 in our portfolio allows Kum & Go to offer our customers a quality product at a great value.�

A recent poll conducted by Morning Consult on behalf of the Renewable Fuels Association determined that the majority of Americans support the renewable fuels standard (RFS).

According to the poll, 62 percent of Americans support the RFS while only 18 oppose the program.

The poll also determined 65 percent of voters support federal tax incentives to assist funding of cellulosic ethanol, with 51 percent opposing tax incentives for oil companies to pay for such things as equipment depreciation, oil depletion allowances, and foreign investment tax credits for taxes they pay in foreign countries. In addition, 69 percent of respondents said they

Morning Consult poll results Support the RFS Women

58%

Men

65%

Voters with a bachelors degree

70%

Government employees

69%

Democrats

65%

Independents

61%

Republicans

57%

Total registered voters

62%

SOURCE: RENEWABLE FUELS ASSOCIATION

support requiring automobile manufacturers to build cars that run on fuel sources other than oil, such as biofuels, natural gas and electricity.

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Renmatix acquires former Mascoma facility Renmatix Inc. has acquired the existing assets of a 56,000-square-foot manufacturing facility in Rome, New York, previously owned by Mascoma Corp. According to Renmatix, the new feedstock processing facility (FPF) is dedicated to the first step in the conversion of biomass to cellulosic sugars using proprietary Plantrose process conditions. The FPF officially opened in April, becoming the third U.S. location for Renmatix.

With the FPF now in place, Renmatix said the acquisition creates a secure supply for the company and its development partners at the Integrated Platrose Complex in Kennesaw, Georgia, where the second step in production of Plantro sugars is performed.

The acquisition is the latest in a series of strategic moves for Renmatix since mid-2014, including a series D investment from Total, the acquisition of Sweden-based REAC’s intellectual property portfolio, and an expansion of the IPC facility.

Q1 RIN generation (net, in millions) Ethanol

Total

Cellulosic biofuel (D4)

0.29

19.73

Advanced biofuel (D5)

6.05

14.58

3,466.77

3,567.91

Renewable fuel (D6) SOURCE: U.S. EPA

Nearly 20 million cellulosic RINs generated in Q1 The U.S. EPA recently published renewable identification number (RIN) data for the first quarter of this year, reporting approximately 4.75 billion RINs were generated during the quarter.

A net total of 19.73 million D3 cellulosic biofuel RINs were generated during the first three months of 2015, including 286,237 for ethanol, with 9.28 million generated for renewable compressed natural gas and 10.25 million for renewable liquefied natural gas. All 19.81 million D3 RINs gen-

erated during the first three months of 2015 were generated domestically. No D7 renewable diesel RINs have been generated so far in 2015.

In addition, 14.58 million D5 advanced biofuel RINs, including 6.05 million ethanol RINs, and 3.57 billion D6 renewable fuel RINs, including 3.47 billion ethanol RINs were generated during the quarter, along with 472.28 million D4 biomass-based diesel RINs.

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QUALITY

PHOTO: UNIVERSITY OF MINNESOTA

28 | Ethanol Producer Magazine | JULY 2015

QUALITY

Creating a Quality Image New research suggests that ethanol producers can improve the long-term storage stability of distillers grains and distillers corn oil.

By Holly Jessen

In 15 years of traveling to foreign countries with the U.S. Grains Council to promote distillers grains and now distillers corn oil (DCO), Jerry Shurson says one of the most frequently asked questions is, how stable is distillers grains? Shurson, a professor in the University of Minnesota department of animal science, says it comes up in particular in Southeast Asia, where customers want to know if the oil in distillers grains and DCO will go rancid in transport or storage. “All I could tell them, up until recently, is, nobody has ever conducted a study to ask that question and find how bad or how good it could be,” he says, adding that the only small pieces of data he had were from field trials conducted in Mexico and Taiwan.

Shelf life of distillers grains and DCO is especially important anywhere the coproducts are stored in hot or humid conditions, which includes export markets like Southeast Asia as well as southern U.S. After a coproduct leaves an ethanol plant, depending on where it is going, two or even three months can pass before the end-user receives it. That includes time in transport but also just sitting at port or at a feed mill, Shurson says. An added factor is that exported coproducts are sometimes transported in containers, which are essentially sealed steel boxes that can get very hot. “These customers were asking very reasonable and legitimate questions, in my opinion,” he says. “So we were finally able to cobble together enough funding to do a fairly simple initial experiment.”

The results confirmed what researchers suspected. Peroxidation, or lipid degradation, does occur in distillers grains and DCO. “Peroxidation is an impact of time, temperature, oxygen, minerals and other factors,” says

JULY 2015 | Ethanol Producer Magazine | 29

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MINOR TO MAJOR: MIU content of 1.8 percent, compared to 1.3 percent, makes a big difference in how susceptible DCO is to peroxidation, according to a study that subjected distillers grains to heat and humidity to measure lipid degradation.

PHOTO: BOB MODERSOHN

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Brian Kerr, animal scientist for the USDAAgricultural Research Service’s National Laboratory for Agriculture and the Environment, adding that it’s not unique to ethanol coproducts. Other unsaturated oils with double bonds, such as soybean oil or canola oil, also degrade over time.

Specifically, the study looked at the effects of exposing distillers grains and DCO to temperatures of 38 degrees Celsius at 94 percent relative humidity for a period of four weeks. As researchers suspected would be the case, peroxidation was greater for distillers grains samples with 13 percent oil than samples with 5 percent distillers grains. For DCO, peroxidation was greater on the DCO samples with 1.8 percent moisture, insolubles and unsaponifiables (MIU) than the samples with 1.3 percent MIU. The exciting part, Shurson says, is that applying two commercially available antioxidants did reduce damage to the samples of distillers grains and DCO. “It didn’t

totally eliminate it, but it cut it by half,� he says, “which I think is pretty significant.�

Exposing More Questions

The study of peroxidation in distillers grains and DCO is the latest in a long string of related studies conducted by Shurson and Kerr, with the help of others.

It started about six years ago, with research into 4-hydroxynonenal, or 4HNE, a compound found in French fries, which has been associated with Parkinson’s disease, Alzheimer’s and various forms of cancer.

In other words, “a lot of nasty, adverse health effects,� Shurson says. As increasing amounts of restaurant grease is funneled into the livestock industry as a feed ingredient, Shurson and Kerr realized research was needed on what effect this has on animal health and performance.

In theory, peroxidized oils, which yield aldehydes and other undesirable compounds, have a negative effect on digest-

DRAMATIC EFFECT: Adding antioxidants commercially available from Novus International Inc. and Kemin Industries reduced peroxidation in distillers grains and DCO by 50 percent.

PHOTO: UNIVERSITY OF MINNESOTA

ibility, Kerr says. While there have been some studies done on this topic, some are decades old, and additional study is needed as the type of lipids used in animal feed has changed over time. “We really haven’t worried much about it in the past, because it’s been minor,” he says, “but with more and different sources of lipids, such as distillers corn oil, more yellow grease, and also with competition for oil, such as the biodiesel industry using distillers corn oil, there’s a lot of different lipids out there that may become available to livestock.”

With every study completed, researchers learn more and expose more questions, Shurson says, adding that a comprehensive literature review turned up several studies showing that feeding peroxidized oils to pigs and poultry reduces food consumption, feed conversion and growth rate.

“The real question is, is there a magical threshold where this happens and below that we don’t have to worry about it?” he

asks, adding that he believes dietary thresholds for maximum lipid peroxidation do need to be established. “I think we’ve got a pretty strong body of evidence that indicates it’s not a good thing.”

Kerr agrees there are a lot of questions that need to be answered through additional study. Specific to the ethanol industry, one question is whether the naturally occurring vitamin E, an antioxidant, provides any protection from peroxidation. Another one is whether the heat applied to distillers grains during the drying process has an impact on lipid peroxidation.

Coproduct Evolution

When Shurson shares the results of this study, he’s commonly asked if any ethanol producers currently add antioxidants to distillers grains or DCO. “Unless I am missing something, my answer is no,” he said, adding that producers are willing to JULY 2015 | Ethanol Producer Magazine | 31

QUALITY do it if customers specifically ask for it but that would likely come with an additional cost.

In that same vein, ethanol production facilities could implement changes to their individual production processes in order to produce DCO with lower MIU levels, and therefore, longer-term shelf stability. Free fatty acids, or FFAs, are another possible indicator of DCO quality. Many different parts of the production process could be tweaked to improve the quality of the DCO and distillers grains produced, including enzymes used in the process, surfactants used for corn oil extraction, process temperature and more.

Shurson hopes the results of the study will raise awareness among ethanol producers and prompt them to think about how to produce a higher quality product from a lipid standpoint. However, he suspects producers will wonder why they should spend money to tweak their production processes or add antioxidants if it won’t result in getting paid more for the coproducts. “My response to that is, it’s work that needs to be done to maintain or sustain your market,� he says. “Because if people start getting

concerned about lipid degradation in corn coproducts, it may hurt your demand.�

As feed prices go up and down, there are times when nutritionists and livestock producers put more emphasis on shopping for higher-quality feed ingredients, he points out. “Even though producers won’t necessarily get paid more for doing something to improve product quality, over time it does end up paying returns by having established a reputation for better-quality products compared to lower-quality products.�

The ethanol industry has come a long way from the days when producers were trying to get rid of the ethanol process byproduct. Although the main focus is still ethanol yield, he says, in the past five years, the ethanol industry has become much more focused on the revenue it can gain from coproducts like distillers grains and DCO. More producers are diversifying their coproduct portfolio, first with corn oil extraction, and, in the future, with other coproducts, leading the industry closer to the true biorefinery model.

And, Shurson says, it’s true there are ethanol production companies, ethanol

plant boards and individual managers who do pay more attention to the quality side of coproduct production. It’s a sign of progress, he says, that more ethanol producers are aligning themselves with animal feed companies, to add to their knowledge base on how to better serve their customers. And yet, Shurson would like to see an even greater emphasis on coproduct quality. “My challenge to the industry is, let’s move a little bit further in that direction, and let’s start looking at ways that individual plants can improve on minimizing some of these less desirable characteristics of the products they are producing,� he says. “They may not see immediate returns in terms of cents per pound or dollars per ton but, long term, they will be creating a quality image that hopefully will help sustain and grow the coproduct market.�

Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

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DIVERSIFICATION

34 | Ethanol Producer Magazine | JULY 2015

DIVERSIFICATION

Cracking

The Kernel

For Higher Value Products Researchers hope phytate replicates the corn oil extraction success story, but the history of zein shows it can be a slow and difficult road to success.

By Susanne Retka Schill

Diversification of coproducts is increasingly important to the ethanol industry, as the widespread adoption of corn oil extraction has demonstrated so well. Penetrating markets with a new coproduct is no easy task, though. Zein, for instance, has shown promise for decades, but has gained little traction. Now, a team from the University of Minnesota is working on a new coproduct—phytate. In addition to providing a new coproduct with multiple uses, the remaining distillers grains could be considered enhanced with distinct market advantages.

Plants hold on to phosphorus in their seeds in the form of phytate, explains Doug Tiffany, a University of Minnesota extension economist. “It’s useful. If you think about the grain, it’s the source of phosphorus for germination.” However, it’s not always so useful in feed, he continues. “There’s little problem for cattle to utilize the phosphorus, but the poor digestibility of phytate is an issue with monogastrics. That’s what leads to overfeeding and more of it ends up in manure.” For Southeast poultry producers or North Carolina pork producers, phosphorus leaching out of the soils is a growing environmental issue.

JULY 2015 | Ethanol Producer Magazine | 35

DIVERSIFICATION

There would be other benefits for low-phosphorus distillers besides reducing an environmental concern, Tiffany says. “Lower phytate levels make other nutrients more available and useful to the animal, such as the protein and the vitamins.” The new DDGS would be attractive in feed rations for monogastrics like poultry and swine, as well as for fish, a new and potentially big market for distillers.

A team from the Department of Bioproducts and Biosystems Engineering, led by Professor Bo Hu, has developed a process to extract various forms of phytate from distillers grains. U of M nutritionists Jerry Shurson and Pedro Urriola and economists Tiffany and Won Lee are working on other aspects of the project. With a year of research completed, the team hopes to launch a two-year pilot study, working with cooperating ethanol plants. “It’s nice to have cooperators in the industry offer us guidance on how to make something like this fit into a plant,” Tiffany says. “That integration is key, you don’t want to upset the process.” The goal is to design a bolt-on process that will divert a portion of the whole stillage stream for chemical extraction of phytate. In addition to working out the integration with the ethanol process, the pilot facility will aid in predicting costs and efficiencies and provide more material for further testing.

“A big challenge is to understand the marketing side,” Tiffany continues. The U.S. currently imports phytic acid, a commercial form of phytate, from China and Japan, where it is extracted from the byproducts of rice milling. “They have a lot of experience and they have some high-purity production of phytic acid that goes for

pharmaceuticals and different food products,” he explains. Phytic acid is used as a preservative and antioxidant by the food, pharmaceutical and cosmetic industries. One industrial market is as an anticorrosive treatment for metal surfaces. The researchers are now learning more about the different markets, the range of formulations and quality specifications.

Tiffany knows well the challenge of creating a viable new coproduct. He was involved in the research team headed by Pavel Krasutsky at the Natural Resources Research Institute at the University of Minnesota-Duluth, who began researching alternative products from distillers grains in 2004, zein among them. Phytate has been known for some time as well, Tiffany says. “People pick these things up and set them aside and, after a while somebody will start some research and maybe see a new technique and the whole proposition will be much closer.”

Zein Debute

The corn protein extract zein falls into the category of an idea that has been set aside and revisited several times. Discovered in 1821, the first patented process for extraction of zein from corn gluten used ethanol as a solvent. It became commercially available in 1938 and reached a peak production of 7 million kilograms (15 million pounds) per year in 1956, according to a 2009 paper found on the webpage of University of Illinois professor emeritus, Munir Cheryan. “Today there is one known manufacturer of zein in the U.S. and one in Japan. The cost of purified zein is $20 to $70 per kg, depending on the grade and purity. However, this price makes

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PHYTATE TEAM: Bo Hu, professor of Bioproducts and Biosystems Engineering, center front, leads the phytate research. In front of him is Yan Mei Zhang, post-doctoral fellow, and in the back, from left, is Doug Tiffany, assistant extension professor, Ara Rajendran, post-doctoral fellow, and Cris Reis, post-doctoral fellow.

PHOTO: UNIVERSITY OF MINNESOTA, DAVID L. HANSEN

zein an uneconomical material for large industrial uses such as biodegradable plastics, since petroleum-based polymer resins sell for much lower prices (35 to 70 cents per kg),â&#x20AC;? the paper says.

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brane technology allowed selective low-energy, low-cost separation of zein and for the recycling of the ethanol solvent â&#x20AC;&#x153;without the substantial evaporation costs that now limit other zein extraction process,â&#x20AC;? Cheryanâ&#x20AC;&#x2122;s description reads. Zein has multiple uses. The protein has been the subject in more than 3,400 patents since 1976 and has the potential to become many things such as biodegradable

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ZEIN AHEAD: A 15,000-square-foot zein production facility is nearing completion colocated with Big River's ethanol plant at Galva, Illinois.

plastic, food and paper coatings, chewing gum base, biodegradable textile fiber, pharmaceutical encapsulation for time release medicines and much more.

In 2006, Prairie Gold Inc. was formed to license the University of Illinois technology. Philip Shane, who worked at the Illinois Corn Marketing Board and the Illinois Corn Growers Association which funded the research, became its president. Prairie Gold, however,

is not the first to attempt to reclaim the zein market. In 2009, Poet LLC announced it had commercialized a patent-pending process to produce zein, which it dubbed Inviz. While some zein has been produced by Poet, full-scale production has yet to take off.

Shane, now director of zein operations and sales for the JV, declined an interview for this article due to Prairie Gold being in the quiet phase of an equity fundraising drive.

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38 | Ethanol Producer Magazine | JULY 2015

DIVERSIFICATION

‘People pick these things up and set them aside and, after a while somebody will start some research and maybe see a new technique and the whole proposition will be much closer.’

Prairie Gold’s project got off to a good start, with a USDA grant to help with development and collaboration with Katzen International Inc. to work on integrating the COPE technology in a pilot plant. By the fall of 2009, the pilot facility was under construction in Rochelle, Illinois, next to Illinois River Energy (now under new ownership and renamed CHS Rochelle).

The timing was unfortunate, but unlike many projects that expired in the Great Recession, Prairie Gold rose again. In October 2013, the company announced a joint venture with Big River Resources LLC. Big River Prairie Gold LLC began construction a year later on a zein production facility near Galva, Illinois, on the site of one of Big River’s 110 MMgy ethanol plants.

Nearing completion, the 15,000 square foot facility will produce a high-quality, food- and pharmaceutical-grade zein protein.

The first-of-its-kind plant will process about 600,000 bushels of corn per year, extracting zein at the front end of the plant after the corn is ground, and recycling the ethanol solvent into the plant while returning the starch component to the ethanol process. In early May, the plant was on track to come online this summer and begin its shakedown and start-up period.

Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine 701-738-4922 sretkaschill@bbiinternational.com

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ANTIBIOTICS

40 | Ethanol Producer Magazine | JULY 2015

ANTIBIOTICS

Wanted:

Antibiotic-Free Chicken Consumer-driven changes peck their way up the food chain to distillers grains producers.

By Susanne Retka Schill

In late April, Tyson Inc. joined the ranks of food companies and restaurant chains declaring their intentions to go antibiotic free. The list includes big poultry producers like Perdue Farms and Pilgrim’s Pride Corp. and restaurant chains such as McDonalds, Chick-fil-A and Chipotle Mexican Grill. The move to minimize or eliminate nontherapeutic use of antibiotics in meat production is a response to the increasing concerns about drug resistant bacteria affecting people.

Drug resistance in tuberculosis cases and antibiotic-resistant staph bacteria (MRSA) are two that receive a lot of attention these days.

It is far from a new issue, however. The U.S. Food and Drug Administration first proposed restricting the use of antibiotics in feed in the mid-1980s, when producers were increasingly using them as growth enhancers and preventative aids in confinement feed operations. Industry successfully stayed the FDA’s hand in the U.S., even while European countries moved to ban nontherapeutic antibiotic use in animals, the first being Sweden in 1986. In the past two years, FDA has developed a voluntary approach to “achieve the common goal of more judicious use of medically important antimicrobials in animal agriculture.” The feed industry is getting on board, agreeing to move toward reserving certain antibiotics for use under a veterinarian’s supervision to treat animal illnesses.

The impact on the ethanol industry could be significant. The industry has long used low doses of antibiotics in propagation and fermentation tanks to keep yield-reducing bacteria counts at low levels. A fullblown bacterial infection is a serious issue that can halt production. The miles of pipes, hundreds of valves and dozens of tanks in an ethanol plant provide multiple places for bacteria to hide and proliferate. As a result, sanitation procedures have become much more sophisticated, with clean in place (CIP) systems now commonly used and close monitoring of infection indicators standard operating procedure. Nonetheless, some JULY 2015 | Ethanol Producer Magazine | 41

ANTIBIOTICS

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42 | Ethanol Producer Magazine | JULY 2015

estimates say 70 percent or more of U.S. ethanol producers still routinely rely upon antibiotics.

The likelihood of problematic antibiotic residues getting into the final distillers grains product is low, according to research conducted at the University of Minnesota.

A team led by Jerry Shurson, professor of swine nutrition and a known expert on distillers grains, studied the question in 2011, publishing a paper, â&#x20AC;&#x153;Presence and biological activity of antibiotics used in fuel ethanol and corn coproduct production,â&#x20AC;? in the Journal of Animal Science. Over a yearâ&#x20AC;&#x2122;s time, the team gathered 159 samples of wet and dry distillers grains from livestock feeders getting product from multiple ethanol plants. â&#x20AC;&#x153;Not all samples had antibiotic residues, and those that did were very lowâ&#x20AC;&#x201D; many magnitudes lower that what FDA allows,â&#x20AC;? Shurson recalls. The research went one step further, examining the premise that the high temperatures and pH conditions in the ethanol process after fermentation deactivate any residual antibiotics. To test that, the samples were exposed to two sentinel bacteria, a strain of E coli and one of listeria. Bacteria grew on all cultures but oneâ&#x20AC;&#x201D;and that was a sample where no antibiotic residues had been detected. Based on that research, Shursonâ&#x20AC;&#x2122;s assessment is that the risk of residual antibiotics in distillers grains is low, given the relatively low incidences of low concentrations found in the samples that are not very biologically active.

There is a further dilution affect, he adds, when the distillers grains are incorporated into rations at rates of between 5 and 30 percent.

Despite those findings, the antibiotic question is not likely to go away, Shurson adds. And, it has a global reach. Last November in Bangkok, at a distillers grains seminar hosted by the U.S. Grains Council, the question of antibiotic residues in distillers was raised. Many poultry producers in Thailand export to the European Union, which has strict standards on antibiotic residues. Not one to give a pat response when asked about a scientific question, Shurson found the presentation on his laptop and

ANTIBIOTICS

â&#x20AC;&#x153;If there were a problem with residues, they wouldnâ&#x20AC;&#x2122;t use distillers,â&#x20AC;? Shurson says, â&#x20AC;&#x153;and thatâ&#x20AC;&#x2122;s not the case.â&#x20AC;?

Dennis Bayrock, research director for PhibroChem Ethanol Performance Group, reinforces the case that little antibiotic residue is found in distillers grains. More than 300 samples were tested by Phibro without any detection of virginiamycin residues above limits, Bayrock says, and other studies

have reaffirmed levels of virginiamycin in samples below the detection limit. Virginiamycin is the most widely used, although not the only, antibiotic in the ethanol industry.

A focus on minute antibiotic residues could be misplaced, Bayrock suggests. For one, while antibiotics and other chemicals can be detected in extremely low amounts, he says, a zero tolerance approach is not practical. â&#x20AC;&#x153;A subtler point that most people

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GREEN LEAP: Ethanol producers are evaluating longknown hops-based programs or newer antimicrobial chemistries.

PHOTO: BETATEC HOP PRODUCTS

walked the Thai audience through the university study, explaining not only the findings but issues surrounding the methodology. It is challenging to measure minute amounts of antibiotics, he explains. There are questions surrounding the best analytical methods and a lack of standardization that makes comparisons difficult. â&#x20AC;&#x153;Many people think that because I sent my sample to the laboratory, the results are the gospel truth,â&#x20AC;? he adds, explaining there can be issues with false negatives and positives.

While the science is indicating the risk for antibiotics in distillers grains is low, Shurson told his listeners in Bangkok that the science is backed by experience. There are two sensitive markets in the U.Sâ&#x20AC;&#x201D;dairy and laying hensâ&#x20AC;&#x201D;where the milk and egg products are closely monitored and tolerances for antibiotic residues are quite strict.

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JULY 2015 | Ethanol Producer 30 Magazine | 43

ANTIBIOTICS

PROCESSING AID: Antimicrobials can be introduced at several points in the process. Shown is the equipment used to add Anitox's thermostable OptimOH into the slurry line at a 110 MMgy plant that participated in the company's commercial-scale trials.

PHOTO: ANITOX CORP.

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44 | Ethanol Producer Magazine | JULY 2015

don’t realize is that the clinical bacteria that do or do not show resistance in human medicine are just not isolated to any significant levels in an industrial ethanol plant,” he says. While some studies have isolated E coli in stored grain and soil at facilities the bacteria are likely destroyed as processing begins, as they are not found in plant microbiological audits, he adds. Furthermore, there is no virginiamycin-related human drug approved for any serious and unique human disease.

The industry’s approach has matured, he says. The team with Phibro Ethanol Performance Group helps ethanol producers fine tune the process to minimize upsets.

“Putting good practices and CIP practices and auditing at a plant comes first,” he explains. Procedures are audited and yeast health and microbiology are monitored.

“The philosophy I train our field staff in is to look at process first, help the plant, and then use our products with what contamination is remaining. In the old school way of thinking, they’d say: ‘if 2 parts per million [of antibiotics] worked, let’s throw some more in; if it worked over here it should work over there.’ We have moved away from this trial-and-error thinking. We make sure everything is working correctly, and then use our products when necessary.”

Bayrock is adamant that antibiotics are necessary. “You need to have both an effective CIP cleaning program in place to take care of the bulk of the contaminants present and organics. You also need to have an effective antibiotic regimen. There are areas of the plant you can’t CIP. For example, in the fermenter when you are actually fermenting. You can’t put caustic or harsh chemicals in there. Likewise, there are areas where antibiotics are ineffective. You can’t use antibiotics for CIP. A proper and optimal combination of both CIP and antibiotics is the best approach for maximizing the performance of the plant.”

Ready Alternatives

Tyson’s announcement that it was moving away from antibiotic use in chicken

FERM ATTENTION: Antimicrobials keep bacteria growth in check, but at the same time must aid and not impede yeast health. Here a BetaTec hops formulation is being added to the mix tank for yeast propagation.

PHOTO: BETATEC HOP PRODUCTS

rations, though, has had a quick impact on the ethanol industry. Three weeks after the announcement, BetaTec Hop Products personnel had received several calls from ethanol producers wanting to learn more about the BetaTec program, says John Forte, vice president. “We’ve worked with a couple just recently who have said, ‘I’ve signed a commitment that I won’t use antibiotics. I need to make a change.’”

BetaTec’s products are derived from hops plants, a natural solution for antimicrobial action, yeast nutrition and flavoring that predates the antibiotic era by centuries.

Forte’s company, for instance, goes back 250 years in Europe. Going green and using a nonchemical approach is a conscientious decision that isn’t made overnight, and can’t be switched on and off, Forte says. “First a plant has to rationalize it, because a green program, let’s face it, costs more money.

And that expense, rightfully so, has to be justified at the shareholder level. When somebody like a Tyson says we’ll only buy certified product, then there’s a price justification and reason beyond it’s the right thing to do.” Antibiotic-free distillers grains has been offered within the ethanol industry for a few years, but it hadn’t caught on partly because there was no offsetting premium.

Forte says that’s changing, “There’s definitely a premium that’s starting to be captured.”

“There’s a cost to the plant to switch from antibiotics to us or a different program,” he continues. BetaTec approaches it as a value-added proposition and a partnership with a plant. “You can work with a plant to clean it up, get it off antibiotics and nurture the yeast in a green way where you do get higher yields to justify the price.”

JULY 2015 | Ethanol Producer Magazine | 45

Regulatory Shift Ahead New FDA regulations in the pipeline on two fronts will impact distillers grains producers and all companies providing processing aids. On the human side of FDA, the entire GRAS system is being challenged in court. It is expected that any changes to human food GRAS determinations will impact the animal food side of the regulatory agency.

Coming first, though, are new regulations implementing the Food Safety Modernization Act, with the final rule due out at the end of August. All feed ingredient suppliers will need to evaluate their ingredients and processes to identify any potential significant hazards. Ethanol producers will need to formally adopt good manufacturing practices (GMP) and standard operating procedures (SOP) for distillers grains.

Shurson says FSMA represents a fundamental shift. “The traditional mindset in our U.S. food system has been to sample, test and monitor for the presence of bad stuff,” he explains. “It could be antibiotics, E coli or heavy metals.” FSMA is turning that around to rely less upon testing the final product and more toward preventative measures built into GMPs and SOPs that

46 | Ethanol Producer Magazine | JULY 2015

are verified by outside parties. “In other words, write down what you do and, in compliance with regulations, do what you say and have a third-party auditor come in and say, ‘Yep, here’s what they said they’d do and they are doing it—we can certify their process.’”

In the traditional approach, Shurson explains, by the time test results come Shurson back, the product may have gotten into the food chain, requiring costly recalls. If the use of antibiotics and other antimicrobials and process additives follow approved protocols that are verified by outside auditors, he adds, “there should be no reason to test.” Many don’t want to go through those layers of control, he admits, but there are benefits to operational controls. “It’s not only a proactive way of avoiding issues, but at the end of the day, it improves efficiency and profitably because things are being done the way they are supposed to be and things aren’t getting ignored.”

ANTIBIOTICS

Other companies are introducing new chemical-based antimicrobials. Two, Solenis LLC and Anitox Corp., rolled out new product offerings at the International Fuel Ethanol Workshop in Minneapolis that they’ve been testing at cooperating ethanol plants for the past couple of years.

Known in the ethanol industry for its water treatment and oil extraction aids, Solenis (formerly Ashland Water Technologies) is introducing a new line of fermentation aids designed to be yeast friendly while degrading or killing competing bacteria.

The goal has been to provide options that work in conventional fermentations as well as in the elevated pH required for cellulosic and isobutanol processes, explains Allen Ziegler, global biorefining marketing director. One of the three formulations is for use in yeast propagation and fermentation processes currently using minimal or no antibiotics. The second formulation has stronger antimicrobial action and the third combines the chemistry in the first two with chlorine dioxide to address upstream scaling issues, if needed. Ziegler, who also leads antimicrobial technology development, explains Solenis begins its development process for new chemistries by being sure the product will qualify as generally recognized as safe (GRAS). “We look long term,” he adds. “We want to be sure we won’t have regulatory issues in the future but still meet the requirements of the industry.”

Anitox Corp. introduced itself, as well as its new antimicrobial OptimOH, to the ethanol industry at FEW. The Georgia-headquartered company has offered pathogen-control and processing aids for the poultry, livestock, pet food and grain milling industries for almost 40 years. For the past couple of years, it has worked globally with several ethanol producers as well as the National Corn-to-Ethanol Research Center to bring its chemically based antimicrobial to the ethanol process. The company describes OptimOH as a thermostable, antibiotic-free, broad-spectrum, broad pH processing aid for ethanol production that leaves no residues in the distillers grains. “What we’re seeing in the field is that clients can remove antibiotics and maintain a consistent yield improvement,” says Eric Summers, who recently joined Anitox as technical business development manager biofuels.

Even if their customers aren’t supplying companies like Tyson or Chipotle, ethanol producers will be looking closely at the products and programs of companies featured here, along with others offering process aids such as DuPont, Lallemand and Ferm Solutions. Regulatory changes coming in the Food Safety Modernization Act are expected to require all plants to better understand potential hazards and upgrade their procedures in handling all inputs—chemicals, antibiotics and even incoming corn.

Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922

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OUTREACH

TIME SAVER: Replacing wood-burning stoves with clean, ethanol-fueled cookstoves means Haitians won’t have to spend hours cooking every day.

PHOTO: PROJECT GAIA

Stoves � a h � SAVE Poet partners to fight pollution and deforestation in Haiti with ethanol cook stoves.

By Janna Farley SOMETHING TO SMILE ABOUT: Appliance brand Dometic is supplying the cookstoves that eventually will be made in Haiti; and local partner Novogaz is organizing distribution.

PHOTO: PROJECT GAIA

HELPING HAND: The cost to use an ethanol-fueled cookstove is significantly less than using wood or charcoal.

In addition to the economic benefits, the cookstoves also eliminate the household air pollution caused by burning wood and charcoal indoors, resulting in healthier, happier families.

PHOTO: PROJECT GAIA

Decades ago, Haiti was a popular stop for luxury cruise liners. The country’s tropical weather,

miles of beautiful Caribbean coasts and a rich history (not to mention the rum) enticed tourists to explore the island.

Fast forward to today. Deforestation and pollution have distressed the country’s environment and beauty. The chronic effects of disease, economic instability and social unrest, coupled with the infrastructure devastation from the 2010 earthquake, have positioned Haiti among the poorest countries in the world. The extreme poverty makes life on the island hard, particularly when it comes to meeting one of life’s basic needs: food. Not only do Haitians have to worry about where their next meal is coming from. They also have to worry about how to cook it.

“Cooking is something that most of us here in the United States do all the time

without even thinking twice about it,” says Brady Luceno, assistant director for Project Gaia, a Gettysburg, Pennsylvania-based nonprofit organization dedicated to promoting and implementing projects based around clean cookstoves powered by alcohol fuels.

Haitians, however, like many people in developing countries, cook over open fires, using solid fuels such as charcoal, wood and other biomass substrates. But wood and charcoal are expensive and often hard to get. “People are suffering because they can’t afford to cook their daily meals,” Luceno says. Not to mention that burning these solid fuels is bad for the environment—and the residual smoke and carcinogens are bad for people’s health. “It’s gotten to the point where we’ve reached a crisis,” Luceno says.

“Something has to change.”

The solution could be found in a very familiar substance—ethanol. And if all goes as planned, it not only will help fight

pollution and deforestation in Haiti, but also stimulate and revive the Haitian economy. That’s where Poet LLC, one of the nation’s largest producers of ethanol, comes in. Through a new partnership with Project Gaia, Poet hopes to help replace woodburning stoves in Haiti with clean, ethanolfueled cook stoves.

For decades, ethanol has been used in the United States primarily as an automotive fuel. But as good as it is for cars, ethanol is an even better home cooking fuel, says Shon Van Hulzen, director of quality control for Poet plant management in Sioux Falls, South Dakota. “The characteristics of ethanol as a fuel and its combustion chemistry make it an ideal home cooking fuel,” he says. “Ethanol is safe to handle from both a toxicity and flammability standpoint, and the emissions from burning ethanol are virtually nonexistent, with the primary combustion byproducts being simply carbon dioxide and water vapor.”

JULY 2015 | Ethanol Producer Magazine | 49

A HAND UP: Poet and Project Gaia hope to improve the standard of living and drive positive socioeconomic change with the project in Haiti.

PHOTO: PROJECT GAIA

To jump-start the project, Poet donated 12,000 gallons of ethanol, shipping two loads from its production site in Jewell, Iowa, to Port-au-Prince, Haiti. The first rollout of stoves and fuel began earlier this year. A couple hundred stoves have been distributed so far.

Haitians are excited about the possibilities these cookstoves hold, Luceno says, and are thrilled with the speed of cooking.

“One of the first users said she would have had to wake up at 5 a.m. to light her charcoal stove to make coffee in the morning.

Now, she only needs 10 minutes.”

But more than saving time, Haitians will be saving money. “We found that in Haiti, people were spending 56 cents to cook one meal because of the fuel cost,” Luceno says. “It’s our hope that with ethanol, they’ll be able to cook more meals with the same amount of money.”

Abounding Benefits

The benefits don’t stop there. Improved cooking conditions will also help improve Haitians’ health. Household air

50 | Ethanol Producer Magazine | JULY 2015

pollution—essentially kitchen smoke resulting from burning wood and charcoal indoors—“is the silent killer in the kitchen,” Luceno says. The United Nations estimates that the average lifespan in Haiti is shortened by 6.6 years due to illnesses caused by household air pollution.

The use of ethanol as a cooking fuel also stands to help the environment. The nation has experienced extreme deforestation over the years, and now less than 2 percent of Haiti’s forest cover remains.

Alternative cooking fuels, like ethanol, will help put an end to that, Luceno says.

But ethanol’s potential as a cooking fuel in Haiti goes far beyond the family meal. And that’s what makes the project so exciting, Luceno says. “The stoves themselves are not the solution,” she says.

“They merely provide the spark.” Ethanol could be just what Haitians need to stimulate their economy. The country of Haiti is testimony to the fact that you cannot give people out of poverty. Despite the best intentions of hundreds of nonprofit organizations and millions of donated dollars,

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‘It’s a wonderful project that a lot of us here are rallying around. We used Haiti initially as a test site to see if we could get a product flowing, to get a market developed. Now we’re looking at other geographies.’ the country of Haiti has made very little progress toward sustaining its own people.

“Economic opportunity is what they need, not another handout,” Van Hulzen says.

As more Haitians start using the cookstoves, there will be a bigger market for ethanol in the country. Ethanol imported from the United States will help meet that demand for the home-cooking fuel. But eventually, Haitians could produce their own. “Ethanol offers perhaps the greatest opportunity to revitalize the agriculture sector and offer families a clean and

affordable alternative to charcoal,” Luceno says. “Haiti was once a leading alcoholproducing nation but currently produces only a fraction of its potential. Those sugar cane mills and alcohol distilleries represent a ready infrastructure for a clean energy future. If ethanol were produced there, it could be cost-competitive with charcoal, kerosene and liquid petroleum gas.” This kind of socioeconomic development is the most effective way to teach a man to fish, or, more aptly, to “give a man a market,” Van Hulzen says.

“This creates a viable market for clean burning ethanol in Haiti and, in addition, a viable agriculture market Haitians can take advantage of in the future,” says Jeff Broin, founder and executive chairman of Poet. “If agriculture can regain a foothold by producing sugarcane, corn and other crops for cooking fuel, we can do even more than improve health and deforestation issues in Haiti. We can literally see people pull themselves out of poverty.”

It won’t happen overnight. “Developing an economy takes time. It takes a

(605) 428-4300 www.Direct-Automation.com JULY 2015 | Ethanol Producer Magazine | 51

OUTREACH

‘One of the first users said she would have had to wake up at 5 a.m. to light her charcoal stove to make coffee in the morning. Now, she only needs 10 minutes.’

PRECIOUS CARGO: Justin Easterday, commodities supervisor for Poet Biorefining, Jewell, Iowa, loads the first ethanol shipment to Haiti as part of Poet’s effort to provide the country with clean, ethanol-fueled cookstoves.

PHOTO: GREG LATZA

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long-term vision and an unwavering commitment to make it happen,” Van Hulzen says. “But it’s worth the investment as it is arguably the only method of creating a sustainable country.”

Haiti is just the beginning. The potential for ethanol to be used as a home-cooking fuel extends to many other countries around the world. “It’s a wonderful project that a lot of us here are rallying around,” Van Hulzen says. “We used Haiti initially as a test site to see if we could get a product flowing, to get a market developed. Now we’re looking at other geographies.”

African countries, such as Kenya, are on the list, Van Hulzen says. Project Gaia estimates that if every home in Africa, developing Asia, Latin America and the Middle East that is currently using traditional solid fuels would switch to ethanol fuel for cooking, the resulting demand would be more than 27 billion gallons of ethanol annually. “That’s almost exactly double the entire United States market today,” Van Hulzen says. “It’s a huge market.”

It’s projects like these that illustrate, as the people of Poet believe, that ethanol is more than just an automotive fuel. “It’s something that literally changes lives,” Broin says, “whether that’s a farmer who has a new market for grain, a city with air quality issues that needs a cleaner-burning fuel or, in this case, a woman in Haiti who wants to cook dinner for her family without fouling the air she and her husband and children breathe.”

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It isn’t the first time Poet has worked to improve lives in Africa.

A project dubbed Mission Greenfield is improving the lives of farmers in rural

LIFESAVER: A Haitian woman prepares food. The United Nations estimates that the average lifespan in Haiti is shortened by 6.6 years due to illnesses caused by household air pollution. Switching to an ethanol cooking fuel would reduce that pollution.

PHOTO: PROJECT GAIA

Kenya. When Broin took part in a church mission trip to Kenya, he was struck by how bad the local corn crop appeared. A drought factored into the problem. But Broin also determined that traditional farming practices were starving the crop of nutrients and moisture.

Land in Africa is traditionally hoed by hand. Because there’s no freeze-thaw cycle there, there’s a hard pan below the topsoil that’s probably been there for hundreds of years. So the roots would simply spread out when they hit the hardpan, and in periods of dry weather, it could cause a poor to no yield. Broin and a charitable foundation set up by Poet found a local partner, FIPS (Farm Input Promotions) Africa to help teach African farmers new farming, tillage and fertilization techniques.

In addition, Poet also supports Mission Greenhouse, a multiyear project to grow a school for disadvantaged girls in Kenya.

Author: Janna Farley South Dakota-based freelance writer janna.farley@gmail.com 605-366-7732

JULY 2015 | Ethanol Producer Magazine | 53

JULY 2015 | Ethanol Producer Magazine | 55

CARBON DIOXIDE

Energy-Related Carbon Dioxide Opportunities Can Enhance Ethanol Projects Growing industrial gas applications will diversify markets beyond carbonation.

By Sam A. Rushing

For decades, carbon dioxide has been recovered from concentrated sources like fermentation and sold to a handful of merchant markets, primarily beverage carbonation, food and meat processing.

There are several industrial applications of note as well. As we have all noticed in the press, there is increased pressure being placed

on hydraulic fracturing projects, due to water contamination and absolute water shortages. Opportunities exist for ethanol plants to provide their CO2 product for both dry frac demands to replace the water-based hydraulic fracturing applications and large, ongoing sums of CO2 for supply to enhanced oil recovery projects.

With the dire need to reduce or slow ongoing carbon emissions and atmospheric carbon content, which many claim to be reaching

CONTRIBUTION: 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).

56 | Ethanol Producer Magazine | JULY 2015

CARBON DIOXIDE

â&#x20AC;&#x2DC;With the proper ingredients surrounding sources, destinations, logistics and infrastructure, coupled with geological and well characteristics, there will be opportunities for CO2 to supply EOR projects in the future.â&#x20AC;&#x2122; 400 parts per million these days, a dent in turning the tide can be achieved via novel techniques for replacing water and fluids in concrete curing, and the generation of power and geothermal energy using CO2 as a working fluid. Other opportunities for CO2 are growing in the industrial sector. Novel chemistry is creating opportunities in polymer processing, renewable methanol and the production of formic acid, all using CO2 as a feedstock. In the advanced biofuels industry, algal biofuels fixation is an excellent means of utilizing carbon dioxide in renewable energy. Other energy twists include using the commodity in wind energy projects as a cushion gas, enhancing the recovery of natural gas in coal bed seams and in situ uranium leaching.

Dry Frac Delivers

Many CO2 marketing firms are expanding dry frac technology, as opposed to the currently more common hydraulic fracking technique. In regions where water is scarce, unavailable, or where recycling and spillage is a problem, CO2 is the logical choice and solution. In dry frac, CO2 replaces water, tapping into the energized nature of CO2 as it rapidly expands from a liquid to a vapor. The technology can deliver the well much better than water and is sometimes applied along with foam, sand and other materials to save water and eliminate the need for clean-up, recycling and the risk of spills from hydraulic fracturing techniques.

Before hydraulic fracturing took hold, dry frac provided abundant CO2 demand. Today, many CO2 refiners and marketers are returning to this service, as pressure on the hydraulic fracturing industry grows. Many of those firms buy raw gas across the fence from ethanol producers, supplying one grade of CO2 commodity to a variety of markets, including frac, beverage and food.

Ethanol for EOR

It is hoped that enhanced oil recovery (EOR) will be one of the best options for both sequestration of CO2 emissions as well as making money from otherwise depleted oil wells. Of the

approximate 140 CO2-based EOR projects found in the United States, there is one project of particular interest to the ethanol industry.

The U.S. DOE-funded CO2 demonstration project started in 2002 at the regional Russell County, Kansas, Hall - Gurney oil field, aimed at both carbon sequestration and enhanced oil recovery.

This oil field, on a 10-acre patch of land some seven miles from a 48 MMgy ethanol plant near Russell, Kansas, has produced more than 150 million barrels of oil since the original discovery in 1931.

However, oil production dropped significantly into the 2000 era, when the EOR process began reviving oil production.

The integrated White Energy (sometimes referred to as the Energy Partners) ethanol plant at Russell receives its process heat from a nearby cogeneration plant. A colocated CO2 facility captures the gas and delivers it via pipeline to the central Kansas oilfield.

When launching an EOR project, smaller quantities of CO2 are usually trucked or railed in as an initial test. This project planned a truckload per day of CO2 for six months, followed by alternating injections of CO2 and water for about four years. This EOR project pumps liquid CO2 about 3,000 feet underground to reach the cracks and crevices among rocks, clay and other geologic formations. CO2 acts as a solvent and reduces the swelling of clay, dissolves carbonate compounds, and much more. The oil is swept to nearby wells for recovery. Some estimates indicated an additional 20,000 barrels of oil could be recovered over the four-year period, in order to be successful. From this data, a greater expanse of EOR projects will be evaluated for CO2. If industrial (anthropogenic) sources of CO2 are not adequate, some of this demand could be serviced by natural, geologic sources from regional New Mexico Bravo Dome and Colorado natural sources Given the highly agricultural nature of the region, raw CO2 sources from both ethanol and ammonia are fairly abundant, albeit, CO2 is already recovered for the merchant markets from some of the plants. Ethanol sources could well supply at least part of this EOR demand in various regions of the United States, including the West, Southwest, Central and Middle Atlantic regions. The consideration of EOR as a mechanism for both sequestration and additional oil production, linked with CO2 byproduct from ethanol represents many benefits, from increased oil production, to creating a form of carbon sequestration, to the development of business opportunities and more jobs.

Cost Comparison

Supplying CO2 for such energy-related projects is a function of source type, location and infrastructure costs of the oil wells.

Supply of CO2 to the Russell, Kansas, project is integrated with nearby cogenerated process heat from the power plant for ethanol fermentation, aided by DOE funding. The cost of recovering CO2 is a function of the raw gas composition. In the case of large anthropogenic sources, such as power production, the flue gas is weak in CO2 concentration when compared to ethanol sources

JULY 2015 | Ethanol Producer Magazine | 57

CARBON DIOXIDE

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that are often 98 percent CO2 by volume in a water-saturated sample. Power plant flue gas holds 12 to 20 percent by volume at best, meaning the CO2 would have to be concentrated upstream of liquefying and purifying, making it a very expensive form of EOR product. Ethanol projects often average 430 to 800 tons per day of raw CO2; indeed, some larger CO2 ethanol projects do exist and are flourishing. Some EOR projects could be candidates for 1,000 to 2,000 or even 5,000 tons per day.

While that could be recovered from the large amounts of flue gas emitted from coal-fired power plants, these sources are expensive to construct. Not only does the gas need to be concentrated prior to liquefaction, most require an expensive MEA (monoethanolamine) recovery plant.

Given this, industrial sources such as ethanol are already concentrated, and are often located within a reasonable distance of a wide variety of markets, and in some cases, prospective EOR ventures. The ultimate goal is locating the most economical source of raw CO2 gas for liquefaction and possible purification. Then, there is the hurdle surrounding the costs and existence (or new construction) of a pipeline plus, of course, oil well infrastructure asset costs. It is believed the demand for EORbased CO2 long term will outstrip supply capabilities. I have often evaluated CO2 opportunities for all markets including captive and sequestration options such as EOR, particularly with a sequestrationand energy-producing slant. Findings have represented potential EOR markets throughout the continent; therefore, this is an avenue to explore for the ethanol project owner near oil producing regions. With the proper ingredients surrounding sources, destinations, logistics and infrastructure, coupled with geological and well characteristics, there will be opportunities for CO2 to supply EOR projects in the future, particularly when value-added elements are included in the equation.

Author: Sam A. Rushing President, Advanced Cryogenics Ltd. rushing@terranova.net 305-852-2597

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SORGHUM

QUALITY RED: Sorghum and corn are essentially interchangeable in the ethanol process as starch and handling characteristics are similar. Sorghum distillers are red, however, which can be problematic for buyers accustomed to judging corn distillers quality by the golden color.

PHOTO: NATIONAL SORGHUM PRODUCERS

Fueling the Sorghum Ethanol Coproducts Engine

Producers work to expand markets for sorghum distillers and oil.

By Kelli Fulkerson

While exports are undeniably the hottest market for grain sorghum right now with China set to buy over 70 percent of the 2014-’15 U.S. crop, sorghum's advantages as an ethanol feedstock remain evident and vital to end-users. Grain sorghum ethanol producers have recognized the benefits inherent to sorghum and are working to exploit the feedstock’s numerous advantages, including coproducts.

An innovator in this is Kansas Ethanol LLC, located in Lyons, Kansas. In addition to about 60 million gallons of ethanol annually, Kansas Ethanol produces wet and dried distillers grains, oil, and protein

and forage supplements. Taking advantage of value-added coproducts does add cost, but extracting value from every component of grain pays big dividends, says CEO Mike Chisam. “We see the economic importance of utilizing the added value that every kernel of grain provides.” Kansas Ethanol typically grinds a blend of one-third corn and two-thirds grain sorghum.

Chisam and his team began working with ICM Inc. to implement the company’s Advanced Oil Separation system, which utilizes a proprietary process to maximize the recovery of nonfood grade oil from centrifugally separated syrup.

“Grain sorghum fit into the oil extraction process very easily,” Chisam says. “ICM made a few alterations in the evaporation and oil

CONTRIBUTION: 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).

60 | Ethanol Producer Magazine | JULY 2015

SORGHUM extraction process to ensure the oil remained a liquid rather than solidify because sorghum contains more wax than corn, necessitating slightly different procedures."

Grain sorghum oil extraction—like corn oil extraction—is quickly becoming a key component for financial health during times of tight margins. However, this can vary from plant to plant dependent upon the amount of oil that is being extracted. Chisam says oil extraction has had a positive contribution to Kansas Ethanol's net income. “We could earn more on every gallon, but we choose to hold back during extraction to ensure our feed tag will read 4 to 5 percent fat for the livestock feeders we work with,” he adds.

Grain sorghum oil is primarily used as a feedstuff in the swine, poultry, beef cattle and dairy cattle industries. The swine and dairy industries in particular have found extra value in grain sorghum ethanol coproducts, as protein content and even the contents of lesser-known micronutrients like iodine can become important. Research also suggests that sorghum can help keep the glycemic index of dairy cows in check and can boost meat quality scores in swine.

Like corn oil, another outlet for sorghum oil is the biodiesel market. Currently the National Sorghum Producers and several industry partners, including Kansas Ethanol, are working with the U.S. EPA to develop a pathway for sorghum-based biodiesel to generate renewable identification numbers (RINs).

Another effort led by the Sorghum Checkoff is working with USDA on a research project devoted to sustainable sorghum biofuels and coproducts. A major focus of this work is adding value to sorghum ethanol plants by relying on the unique properties of grain sorghum.

Value-added DDGS

Ethanol plants in 2014 produced approximately 39 million metric tons of feed, according to the Renewable Fuels Association, making the renewable fuels sector one of the largest animal feed processing segments in the U.S. With such a large market of so many participants producing the same products, Kansas Ethanol has worked to differentiate its products by working with Rayeman Elements Inc. to develop DDGS cubes and tubs for cattle producers. “We knew our WDGS and DDGS were being utilized in feedlots and dairy operations, respectively, but also wanted to develop products for the cow-calf producers,” Chisam says.

Rayeman Elements and Kansas Ethanol developed the 100 percent DDGS range cube and supplemental tub products and Furst-McNess has been helping with marketing the products.

The cubes, trademarked Bova Cubes, are a convenient, quality feed for cows, stockers or calves that can be fed on the ground without high waste or wind loss. The tubs, trademarked Bova Tubs, are 200-pound lick tubs offering expected intake of 1 to 3 pounds per head per day.

Both products feed at a 30 percent crude protein and 8 percent crude fat rate. "I'm feeding my heifers Bova Cubes during fall grazing," says Furst-McNess customer J.P. Conrad, manager of Lazy 9 Ranch. "The fat content is outstanding. It really boosts the heifers along their way."

“Our customers have been impressed with the cube and tub products,” Chisam says. “The sorghum DDGS do offer a little higher protein content, making the product development even easier on our end.”

Sorghum Background

Sorghum has been a regionally important feedstock to the ethanol industry since the late 1970s with approximately one-third of the U.S.

VALUE-ADDED DISTILLERS: Mike Chisam, CEO, and his team at Kansas Ethanol worked with Rayeman Elements to successfully pelletize sorghum distillers to make supplementing range-fed cattle easier.

PHOTO: NATIONAL SORGHUM PRODUCERS

crop typically used to produce fuel. Naturally drought-tolerant sorghum can be used to produce starch, sugar and cellulose-based ethanol.

Grain sorghum is an excellent option for ethanol production because it produces the same amount of ethanol per bushel as corn and can be grown using one-third less water.

Sorghum and corn are virtually interchangeable in ethanol production, as there are few differences in yield or handling through the process. The advantage for sorghum is seen when ethanol producers are mindful of coproduct challenges and opportunities when formulating a feedstock procurement strategy centered on sorghum. Sorghum DDGS tend to be higher in protein and slightly lower in fat than corn DDGS, while starch content remains basically the same.

The most common states in which sorghum is used to produce ethanol are California, Kansas, Missouri, Nebraska, South Dakota and Texas. Producers in several other states also use sorghum when market conditions are favorable. Two states lead the way as pioneers of sorghum-based ethanol: Kansas with a total capacity of 510 MMgy and Texas with 390 MMgy. As more learn about sorghum’s advantages in low-water demand for growers and added value in distillers grains and oil, there is potential for sorghum-based ethanol production to grow. “Even though we don’t have as much sorghum running through our plant today as we normally do, we have many alternative markets we are exploring when supply increases,” says Matt Durler, vice president of marketing for Conestoga Energy Partners, in Liberal, Kansas.

Author: Kelli Fulkerson Communications Director, National Sorghum Producers kellif@sorghumgrowers.com 806-749-3478

JULY 2015 | Ethanol Producer Magazine | 61

TALKING POINT

DDGS Challenges, Old and New

By Kurt A. Rosentrater

Several years back someone asked me if everything that could be done with distillers grains was done. It is amazing how innovation continues to percolate through the industry and distillers coproducts continue to evolve, as do the industries that produce as well as consume them.

At the recent Distillers Grains Technology Councilâ&#x20AC;&#x2122;s 19th Distillers Grains Symposium in Kansas City, the latest and greatest issues to impact distillers grains production and use, and thus the fuel ethanol and beverage alcohol industries, were discussed. Of course, the main concerns that affect the partnership between alcohol plants and livestock producers include DDGS price and availability.

To fully explore the issues, the symposium consisted of several tracks. These included: 1) economic issues, including supply and demand, sales and marketing, both domestic and export; 2) livestock nutrition; 3) new processes and new coproducts; 4) effects of manufacturing processes on coproduct properties and quality; 5) leveraging and integrating systems to obtain greater value for DDGS; and 6) regulatory issues, including the Food Safety and Modernization Act and implementing hazard analysis and critical control point (HACCP) programs at ethanol plants.

In terms of markets and economics, quality and consistency is still critical for the industry. Beef and dairy cattle still consume the lionâ&#x20AC;&#x2122;s share of distillers coproducts, and the new USDA coproducts survey has been a very useful tool so far. Surprisingly, almost onethird of ethanol coproducts in the U.S. are marketed as wet feeds.

More important to coproduct values, however, is the international export market. In recent years, China has become the primary importer of DDGS. Due to this demand, the sales price of DDGS was actually higher than that of corn in recent years. In fact, when the Chinese government decided to restrict DDGS imports last summer, the price of DDGS collapsed here in the U.S. The silver lining to that situation, though, was that U.S. livestock producers decided to start using more in their rations again, as the price of DDGS was substantially discounted compared to the price of corn, at least on a short-term basis. This year, Chinese imports are again on the rise.

It will be very interesting to see how the export market ultimately affects coproduct prices here in the U.S. during the coming year.

As always, the livestock nutrition portion of the program addressed current knowledge in terms of feeding recommendations, challenges and opportunities for the beef, dairy, swine and poultry 62 | Ethanol Producer Magazine | JULY 2015

industries. As coproducts have evolved in recent years to a lower oil (and thus energy) level with the rapid implementation of corn-oil extraction systems throughout the industry, livestock nutritionists and researchers have endeavored to understand how best to use these new coproducts vis-a-vis traditional distillers grains. From the presenters this year, it is clear that the livestock industry has progressed significantly, and lower-oil coproducts are becoming wellunderstood via many ongoing feeding trials. Not only do distillers grains offer price advantages compared to other ingredients, but they also offer nutritional and digestibility benefits as well. And we are seeing greater inclusion levels than ever in not just ruminant diets, but also swine and poultry diets.

During the discussion of new processes and new coproducts, several speakers provided insights on their approaches to process innovation and next-generation coproducts that are being commercialized. In fact, several fractionated coproducts are hitting the market. These are primarily high-protein feed ingredients, and arise from upstream separations, not fractionation from the DDGS (see my column in the March issue on utilizing the fiber fraction).

How much more will livestock producers be willing to pay for these new ingredients? Feeding trials will be necessary to help establish these new values. For certain, protein content of these new products is much higher than traditional DDGS. And, not only can protein be economically concentrated, but corn fiber can be as well. This fiber is a material that can be broken down by enzymes and then fermented into cellulosic ethanol at the ethanol plant (which then qualifies as an advanced biofuel). Indeed, as these systems become commercialized and implemented throughout the industry, we will need a better understanding of how best to use these in the livestock industry.

Not only does fractionation allow ethanol plants to obtain truer nutrient values for DDGS, but so does integration of ethanol plants with livestock feeding operations. One of the talks reviewed the economic advantages that can occur by this type of synergism.

And, as the industry evolves into Generation 1.5 and Generation 2.0 ethanol production, these types of integrations could show even more economic benefits.

At the end of this summer, the U.S. Food and Drug Administration is slated to release the final rules for FSMA and guidance on current good manufacturing practices. Our speakers discussed the issues that your companies should be worrying about and preparing for. Although the new regulations arenâ&#x20AC;&#x2122;t requiring an

HACCP plan, the components in such a plan provide one way to help meet some of the FSMA requirements. Yes, FSMA will change the way that many companies do business, but implementing steps to comply should be well underway at most plants.

All in all, our 19th annual symposium covered many facets of coproducts, from grain kernels all the way through the animals consuming the coproducts, and everything in between. Hopefully we offered something for everyone. There were several major takeaway messages from our speakers. First, coproducts are continuing to change in both physical and nutrient properties. The true value of the nonfermentable materials in ethanol plants are becoming apparent not only to the ethanol plants, but also to the livestock producers as well as affiliated industries. Yes, starch is used to produce alcohol, but ethanol plants are also feed-manufacturing plants, and all of the other nutrients have considerable value. Additionally, as our industry becomes more globalized due to exports (of both the DDGS and ethanol), the market values we are used to seeing may be subject to unanticipated shifts.

To answer the question that I led the article with: Yes, we still have much work to do to improve the value and utilization of ethanol coproducts. Our industry recognizes these challenges (both old and new) and continues to grow and evolve.

Next year we will be holding our 20th annual symposium in St. Louis.

We hope to see you there!

Author: Kurt A. Rosentrater Executive Director, Distillers Grains Technology Council Iowa State University 515-294-4019 karosent@iastate.edu

GOLDEN COPRODUCT: A barge (shown in the background) is loaded with distillers grains at a CHS Inc. facility in Winona, Minnesota.

PHOTO: DAVID LUNDQUIST, CHS INC.

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tailoring chemistries to boost production and increase profitability — from evaporator efficiency to corn oil recovery to water treatment issues. To find out more or to schedule a system audit, contact your Buckman representative or email ethanol@buckman.com.

JULY 2015 | Ethanol Producer Magazine | 63

BUSINESS MATTERS

Equity Redemption Plans Can Provide Liquidity, Tax Relief

By Joe Leo

Due to recent reductions in profitability in the ethanol industry, now may be a perfect time for ethanol production companies to implement equity redemption plans. Equity redemption plans can provide

important liquidity for investors and at the same time provide important tax relief for certain companies and an enhanced return for those that continue as owners. While equity redemption plans are typically considered when margins are favorable and companies are flush with cash, those are frequently the most difficult times to find willing sellers. However, when margins are less favorable, sellers may be more willing to consider a sale of their investment. In addition, due to less favorable commodities prices, many owners may welcome the ability to convert their ethanol plant investment into cash.

Ethanol production companies that have little or no debt can leverage the strength of their balance sheet in order to implement these equity redemption plans. For large-scale redemption programs, it may make sense to seek debt financing specifically tailored to this use. Further, for smaller redemption programs, ethanol production companies may be able to utilize existing lines of credit to implement a redemption program. Due to lower corn prices, many ethanol production companies are carrying large lines of credit that are not being used that could be tapped for equity redemptions.

Many ethanol production companies were capitalized through local equity drives spearheaded by local grain producers. These producers understood that ethanol would provide a market for their corn in addition to the other benefits provided by ethanol. Further, a significant number of these ethanol production companies were organized as limited liability companies to capture favorable tax treatment and have now fully depreciated their assets. Without generous accelerated depreciation deductions, these limited liability companies are allocating a significant amount of taxable income to their owners. On the heels of the record profits generated last year, owners are feeling the tax impact. At the same time, the age of the investors in these ethanol production companies continues to increase. Many of the investors who financed the ethanol production

64 | Ethanol Producer Magazine | JULY 2015

companies in the heart of their careers are now a decade older and considering retirement. Older owners are in many cases looking for a way to liquidate their investment but are finding a limited number of buyers in the market. While these two industry trends may seem unrelated, it is possible to marry the two in a way that presents a winwin for all involved through an equity redemption plan.

There is an important tax benefit to limited liability companies which may be able to treat a portion of the price paid to redeem the companyâ&#x20AC;&#x2122;s equity as a new asset that would allow additional depreciation for the company. For companies that have fully depreciated their assets, this can provide important tax relief to their owners, especially for larger-scale redemption plans.

In addition, some ethanol production companies that are SEC reporting companies could use redemption plans to terminate their Securities and Exchange Commission registrations. If this is your goal, companies would focus their redemption efforts on redeeming all of the ownership interests of a large number of small investors in order to meet applicable SEC thresholds for deregistration.

Structuring an equity redemption plan involves a number of legal and accounting considerations to be implemented successfully.

Limited liability companies need to consider whether the equity redemption plan they implement will meet IRS rules related to publicly traded partnerships. For larger redemption plans, there may be SEC issues related to tender offers and insider trading regulations to consider. While these rules may limit your flexibility in implementing an equity redemption plan, with careful planning almost any program can be successfully pursued. If you think repurchasing equity may be something that could benefit your company, now may be the perfect time to start.

Author: Joe Leo Attorney, BrownWinick Law Firm 515-242-2462 leo@brownwinick.com

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