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INSIDE: WHAT’S REALLY BEHIND RISING FOOD PRICES JUNE 2008

EPM

Dedini Diversifies A Major Brazilian Ethanol Producer moves into Cellulosics and Biodiesel

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inside JUNE 2008 . VOLUME 14 . ISSUE 6

features 72 FEEDSTOCK Ecologically Boosting Corn Yields

134 INDUSTRY A Quiet Giant

Intensifying corn management practices could lead to higher yields on existing

EPM examines the impact of Archer Daniels Midland Co.’s expansion plans.

cropland, while still protecting the environment. By Susanne Retka Schill

The company could potentially produce 820 MMgy of ethanol at its operating wet-mill facility and dry-mill plant currently under construction in

82 TRANSPORTATION Riding the Rails

Cedar Rapids, Iowa. By Craig A. Johnson

The railroad industry is expanding its infrastructure to accommodate the growing ethanol industry. It is also working with fuel terminal operators to

144 CELLULOSE Commercial Biorefinery Update

improve handling facilities and add storage capacity. By Kris Bevill

EPM presents timely information about the state of the emerging cellulosic ethanol industry and the companies racing to commercialize their various processes. By Ron Kotrba

Page 82

Page 124

Page 134

92 RESEARCH The Genetics of Ethanol

154 POLICY Up in the Air

Genome sequencing provides scientists with the blueprint of certain

As the U.S. EPA feverishly works to resolve major questions involving the

feedstocks that could be used to boost ethanol production. By Jessica Ebert

greenhouse gas emissions reduction requirements in the Energy Independence & Security Act of 2007, ethanol producers wait and wonder how

102 OUTLOOK The Other Factors

they will be impacted.

Are biofuels responsible for increased food prices? There’s no doubt that more

By Anduin Kirkbride McElroy

corn is being used in the production of ethanol. However, other factors should be considered. By Tom Bryan

166 EMISSIONS Solid Fuel and Fly-Ash Control A cost-effective fly-ash abatement system that meets the needs of a

114 REGULATIONS Compliance With Compassion A Minnesota air quality inspector believes it’s possible to make ethanol plant compliance friendly and fine-free. By Sarah Smith

124 INNOVATION Microwavable Distillers Grains Minnesota-based Corn Plus LLLP is testing a novel energy-saving distillers grains drying technique. So far, those tests have revealed other benefits such

particular facility is a priority for ethanol producers looking to combust solid fuels. By Ron Kotrba

174 Q&A New Kid on the USDA Block Ed Schafer, the new U.S. agriculture secretary and former governor of North Dakota, has his work cut out for him as he is parachuted into the Farm Bill debate. By Kris Bevill

as reduced water use, air quality improvements and a higher-quality feed product. By Bryan Sims

international features 184 BRAZIL Dedini’s Blend

194 TRADE The World According To Ethanol

An ethanol leader adds biodiesel to its expertise and crosses the border to

Prospects for ethanol exports over the coming three to five years are probably

Colombia. Meanwhile, ethanol still has its attention as Dedini experiments with

good. As to the specifics, it’s anybody’s guess. By Marc Hequet

acid-wash lignin processing. By Elizabeth Ewing

202 EUROPE Wheat Dreams at Ensus The feedstock is a nutrition staple, yet backers of the United Kingdom's biggest ethanol venture did their sustainability homework and claim little net impact on food supply. By Michael Kenward

ETHANOL PRODUCER MAGAZINE JUNE 2008

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© Novozymes A /S · Customer Communications · No. 2007-35469-02

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inside JUNE 2008 . VOLUME 14 . ISSUE 6

departments

contributors

11 Advertiser Index

212 TECHNOLOGY

14 The Way I See It By Mike Bryan Ethanol Causes Marginalization of Women?

20 Business & People 26 Commodities 29 RFA Update

Patent Policy and Sustainable Cellulosic Biofuels Development International rules on patents will be instrumental in the development of biofuels markets. They’ll define how fast that development takes place, and who controls and benefits from the next wave of biofuels. By Steve Suppan

216 BIOMASS

Developing Yeast Strains for Biomass-to-Ethanol Production USDA scientists continue to examine the types of biomass—and the conversion pathways—that will make cellulosic ethanol production a success. By Ronald Hector, Stephen Hughes and Xin Liang-Li

34 Industry News & BIObytes 220 ENVIRONMENT 44 Plant Construction List

Global Warming Intensity: An Opportunity and a Threat

56 Our Plant

The term “global warming intensity” cropped up in California’s Low Carbon Fuel Standard. Now ethanol producers can use the concept to their advantage by benefiting from ethanol’s favorable environmental footprint. By Tyler J. Krutzfeldt

By Craig A. Johnson Perfect Fit

58 In the Field By Susanne Retka Schill Perfect Storm for Fertilizer Prices

60 Up Front By Anduin Kirkbride McElroy Forward Thinker

224 RISK

Managing Lenders’ Expectations: Strategies to Survive Loan Default As the effects of reduced crush margins take their toll on the ethanol industry, some are searching for the appropriate strategy to manage the expectations of their lenders. Options are plenty to keep lenders happy and producers making ethanol. By Todd Alexander and N. Theodore Zink Jr.

228 MANAGEMENT 62 Flex Factor By Jessica Ebert GM Launches E-Flex Propulsion Systems

64 Business By Bryan Sims Impacts of the Weak U.S. Dollar

Builder’s Risk Coverage: An Ounce of Prevention is Worth a Pound of Cure Unfortunately, builder’s risk coverage, which protects a project against loss during the course of construction, is often overlooked. An insurance and risk management expert explains why the coverage is critical during the planning process. By David Weaver

234 DISTRIBUTION 66 Finance By Jesse McCurry DiSC: A Tool to Enhance Team Communication

68 Legal Perspectives

Closing the Distribution Infrastructure Gap Ethanol supply and demand remain strong, but getting the fuel to market still holds challenges. Distribution infrastructure remains expensive, and developing technologies make investors wary. By Thomas Young

By Christopher H. Yetka Understanding Insurance Policy Arbitration Provisions

240 Events Calendar 242 EPM Marketplace

on the web EthanolProducer.com’s most-read Web-exclusive news stories for April

Ethanol Producer Magazine: (USPS No. 023-974) June 2008, Vol. 14, Issue 6. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

1. Verenium discloses cellulosic ethanol struggles 2. Range Fuels secures $130 million for Georgia cellulosic ethanol project 3. ICM reduces its workforce 4. VeraSun appoints executives, managers 5. Poet opens new ethanol plant in Indiana 6. Carbon chaos? Producers face patchwork of pitfalls 7. VeraSun announces staff additions, promotions 8. GPRE receives approval for R&D grant 9. CHS assumes sole ownership of Provista Renewable Fuels Marketing 10.Raven Biofuels, Pure Energy to merge

BPA Worldwide Membership Applied for October 2006

ETHANOL PRODUCER MAGAZINE JUNE 2008

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Ad Index 182 142 2008 International Fuel Ethanol Workshop & Expo 181 159 Abener Engineering & 69 Construction Services LLC 107 158 Adams Building Contractors 61 186 ADI Systems Inc. 126 137 Advanced Trailer Industries 63 160 Aecometric Corp. 198 35 Aeroglide Corp. 3 193 Afton Chemical Corp. 106 37 Agra Industries Corp. 178 117 Agri-Systems 223 217 Air Resource Specialists Inc. 99 65 Alfa Laval Inc. 222 15 American Railcar Industries Inc. 46 233 Amistco Separation Products Inc. 30 6 Anhydro Inc. 152 232 Ansul Inc. 162 218 Antioch International Inc. 81 24 Aqua Power Inc. 221 236 Aquatech International Corp. 53 237 Astoria-Pacific International 204 253 143 Atec Steel 219 80 Barr-Rosin Inc. 18 & 19 91 & 113 BBI Project Development 41 & 97 100 & 123 BBI International Community Initiative to Improve Energy 4&5 Sustainability (CITIES) 2 70 239 Bearing Headquarters Co. 192 & 238 96 Best Energies Inc. 235 BetaTec Hop Products Inc. 225 165 Biodiesel & Ethanol 101 DVDs 121 151 Biofuels Australasia 139 28 & 187 Biofuels Canada 138 132 Biofuels Recruiting 71 22 & 133 & 136 Biomass Magazine 47 196 Biothane Corp. 49 109 Boulay, Heutmaker, Zibell & Co. 229 40 Brown-Minneapolis Tank 226 59 Buckman Laboratories Inc. 227 16 Buhler Inc. 163 12 Burns & McDonnell 23 200 Calbrandt 207 197 Caldwell Tanks Inc. 188 CEM Corp. 206 209 Centrisys Corp. 94 161 Cereal Process Technologies LLC 78 50 85 Check-All Valve 51 122 Chief Industries Inc.—Agri-Industrial Division 86 10 95 Christianson & Associates PLLP 79 153 CIT Group Inc. 230 127 Clifton Gunderson LLP 120 90 ConAgra Trade Group Inc. 54 31 Coverall Building Systems 231 173 Davenport Dryer LLC 205 67 dbc SMARTsoftware Inc. 77 17 Delta-T Corp. 131 183 Distillers Grains Quarterly 201 33 DuPont Chemical Solutions Enterprise 189 EBW Expo & Conference 208

ETHANOL PRODUCER MAGAZINE JUNE 2008

Eclipse Inc. Eisenmann Corp. Emerson Power Transmission Encore Business Solutions Inc. Engineered Storage Products Co. ethanol-jobs.com Ethanol Technology ETS Laboratories Fagen Inc. Farms Technology LLC FCStone LLC Federal Equipment Co. Fermentis Flottweg Separation Technology Inc. Frazier, Barnes & Associates LLC Fremont Industries Inc. FWS Technologies GE Fanuc Intelligent Platforms GE Motors GEA Ecoflex North America Inc. Genencor International Inc. GeoEnergy Inc. Geopier Foundation Co. Gordon Technologies GreenShift Corp. Gusmer Enterprises Inc. Hydro-Klean Inc. ICM Inc. Indeck Power Equipment Co. International Distillers Grains Conference and Trade Show 2008 Interstates Cos. Intersystems Inc. ISCO Industries LLC John Deere Agri Services John Zink Co. LLC Kahler Automation Corp. Kennedy & Coe LLC Laidig Systems Inc. Larox Corp. Louis Dreyfus Louisiana Chemical Equipment Co. MAC Equipment Management Recruiters of Atlanta Manly Terminal LLC Mapcon Technologies Inc. Marcus Construction Co. Martrex Inc. McC Inc. Mechanical Supply Co. Metso Automation Midland Manufacturing Corp. Midwest Towers Inc. Miller Insulation Co. Miner Enterprises Inc. Mist Chemical & Supply Co. Moyno Inc. Munters AB Nalco Co. National Ethanol Conference: Policy and Marketing Natural Resource Group Inc.

87 84 98 43 104 88 8 42 128 141 170 39 89 190 213 52 256 111 & 129 157 32 130 36 172 254 176 255 108 140 210 171 199 148 118 177 147 110 179 76 74 & 75 214 & 215 55 168 149 101 48 164 119 116 180 252 25 146 38 112 150 105 191 156 211 169

Natwick Associates Appraisal Services Nebraska Public Power District Nestec Inc. New York Blower Co. Nexen Marketing USA Inc. North American Bioproducts Corp. Novozymes OPW Fuel Management Systems Ortman Drilling & Water Services Outokumpu Stainless Inc. Papailias Inc. Paragon Enterprises LLC Paul Mueller Co. Perten Instruments Inc. Peters Machine Inc. PhibroChem Poet LLC Praj Industries Ltd. Primafuel Inc. Provista R&R Contracting Inc. RailWorks Track Systems Inc. Resonant BioSciences LLC Renewable Fuels Association Rev Tech LC Robert-James Sales Inc. Roeslein & Associates Inc. Romer Labs Inc. Ronning Engineering Co. Inc. Roskamp Champion SafeRack LLC Salco Products Inc. Seneca Waste Solutions Smar International Co. Spraying Systems Co. SPX Flow Technology SSOE Inc. Strongform Nationwide Industrial Builders Sulzer Chemtech USA Inc. Swanson Flo-Systems Co. Syngenta TDC Dryers The Arnold Co. Tranter Phe Trico TCWind Inc. Trinity Rail Group LLC U.S. Tsubaki Inc. U.S. Water Services Union Iron Works Vaperma Inc. Verenium Corp. Victory Energy Operations LLC Vogelbusch USA Inc. Volkmann Railroad Builders Inc. W. Soule & Co. Wanzek Construction Inc. Watson-Marlow Bredel Pumps WINBCO Yellow Springs Instruments Inc. Zook Enterprises LLC

11


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E D I TO R I A L

A RT

PUBLISHING & SALES

Kathy Bryan Editor-in-Chief kbryan@bbibiofuels.com

Jaci Satterlund Art Director jsatterlund@bbibiofuels.com

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

Tom Bryan Editorial Director tbryan@bbibiofuels.com

Sam Melquist Graphic Artist smelquist@bbibiofuels.com

Joe Bryan Vice President of Media jbryan@bbibiofuels.com

Jessica Sobolik Managing Editor jsobolik@bbibiofuels.com

Elizabeth Slavens Graphic Artist bslavens@bbibiofuels.com

Matthew Spoor Sales Director mspoor@bbibiofuels.com

Dave Nilles Contributions Editor dnilles@bbibiofuels.com

Jack Sitter Graphic Artist jsitter@bbibiofuels.com

Howard Brockhouse Senior Account Manager hbrockhouse@bbibiofuels.com

Rona Johnson Features Editor rjohnson@bbibiofuels.com

Clay Moore Account Manager cmoore@bbibiofuels.com

Ron Kotrba Senior Staff Writer rkotrba@bbibiofuels.com

Jeremy Hanson Account Manager jhanson@bbibiofuels.com

Anduin Kirkbride McElroy Staff Writer amcelroy@bbibiofuels.com

Chip Shereck Account Manager cshereck@bbibiofuels.com

Jerry W. Kram Staff Writer jkram@bbibiofuels.com

Tim Charles Account Manager tcharles@bbibiofuels.com

Susanne Retka Schill Staff Writer sretkaschill@bbibiofuels.com

Chad Ekanger Account Manager cekanger@bbibiofuels.com

Bryan Sims Staff Writer bsims@bbibiofuels.com

Marty Steen Account Manager msteen@bbibiofuels.com

Jessica Ebert Staff Writer jebert@bbibiofuels.com

Marla DeFoe Advertising Coordinator mdefoe@bbibiofuels.com

Sarah Smith Staff Writer ssmith@bbibiofuels.com

Jessica Beaudry Subscriptions Manager jbeaudry@bbibiofuels.com

Kris Bevill Staff Writer kbevill@bbibiofuels.com

Jason Smith Subscriber Aquisition Manager jsmith@bbibiofuels.com

Timothy Charles Holmseth Staff Writer tholmseth@bbibiofuels.com

Erika Wishart Administrative Assistant ewishart@bbibiofuels.com

Marc Hequet International Editor mhequet@bbibiofuels.com

Christie Anderson Administrative Assistant canderson@bbibiofuels.com

Hope Deutscher Online Editor hdeutscher@bbibiofuels.com Jan Tellmann Copy Editor jtellmann@bbibiofuels.com Craig A. Johnson Plant List & Construction Editor cjohnson@bbibiofuels.com Amber Armstrong Administrative Assistant aarmstrong@bbibiofuels.com

HOW TO REACH US

LETTERS TO THE EDITOR We welcome letters to the editor. Send your letter to: Ethanol Producer Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to jsobolik@bbibiofuels.com. Letters should include the writer’s full name, address and telephone number, and may be edited for purposes of clarity and space.

SUBSCRIPTIONS Ethanol Producer Magazine is now free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367.

CUSTOMER SERVICE AND CHANGE OF ADDRESS For service, please use our Web site at www.EthanolProducer.com. You can also call (866) 746-8385, or write to: Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203.

BACK ISSUES AND REPRINTS Select back issues are available for $3.95 each, plus shipping. To place an order, contact Subscriptions at (701) 746-8385 or subscriptions@bbibiofuels.com. Article reprints are also available for a fee. For more information, contact Christie Anderson at (701) 746-8385 or canderson@bbibiofuels.com.

ADVERTISING For advertising rates and our editorial calendar, visit www.EthanolProducer.com or call (866) 746-8385.

COPYRIGHT © 2008 by BBI International

ETHANOL PRODUCER MAGAZINE JUNE APRIL2008 2008

13


The Way I See It

Ethanol Causes Marginalization of Women?

A

s I begin to write this column, another wave of biofuels bashing in the media has occurred. Again, we’re hearing wild claims about food versus fuel. It is difficult to know whether to lash out and rant about the absurdity of some of these accusations or to simply sit in stunned disbelief and hope it passes. Biofuels are being blamed for world hunger, the marginalization of women in third-world countries, and more recently, the global price increase and shortage of rice. The marginalization of women? What in the world are these people talking about, and what information source are they using that would substantiate such absolute rubbish? The price of oil has increased more than 100 percent in the past 12 months, yet I see little, if any, connection being made by the media regarding increased energy costs and its relationship to rising food costs. The cost of fertilizer, which is largely fossil-fuel based, as well as the cost of fuel for tractors and farm trucks, has doubled in the past year. As the cost of food rises, so does the tendency of black market bandits and corrupt governments to profit from these windfall opportunities, which also drives up the price of food. It appears as though the mainstream media is blind to most, if not all, of these seemingly obvious facts. In a recent interview with The Associated Press, Achim Steiner, head of the United Nations Environmental Program, placed the blame squarely on the backs of market speculators for the run-up in world food prices. "We have enough food on this planet today to feed everyone,” he said. "Real people and real lives are being affected by a dimension that is essentially speculative.” Robert Zubrin, author of the book Energy Victory, said in a speech to the Canadian Parliament, “The oil cartel is starving the world’s poor, but that’s not the story you’re seeing in the press these days. The media has been flooded with claims that the world’s biofuels program, in particular the U.S. corn ethanol effort, is causing hunger around the globe. However, such statements are completely false. Here are the facts: In 2002, the United States grew 9 billion bushels of corn and turned 1.1 billion bushels into ethanol (3 billion gallons), with the net product thus being 7.9 billion bushels of corn for other uses. In 2007, U.S. farmers grew 13.1 billion bushels of corn and turned 3 billion bushels of it into ethanol (8 billion gallons) for a net of 10.1 billion bushels of corn available for other uses. Thus, despite the nearly three-fold growth of the corn ethanol industry (or actually because of it) the net corn food and feed product of the United States increased 34 percent since 2002.” I guess there’s not much left to say, other than to encourage everyone to fight with every resource available against this misguided, yet well-organized, campaign to slander biofuels. With that said, I’ll see you all at the Fuel Ethanol Workshop. That’s the way I see it!

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

14

ETHANOL PRODUCER MAGAZINE JUNE 2008


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BUSINESS&PEOPLE

Business& People Ethanol Industry Briefs Business Ethanol producers garner awards

Pacific Ethanol releases quarterly results In its delayed fourth-quarter filing with the U.S. Securities and Exchange Commission on March 27, California-based Pacific Ethanol Inc. announced a $14.7 million loss for 2007 and a need for immediate funding to recover from those losses. Less than two weeks later, the company received $40 million in the form of stock sales and announced it would begin production at its 50 MMgy ethanol plant in Burley, Idaho, in the near future. Losses in 2007 were attributed to high feedstock prices and a lag in ethanol demand. The company expects that increased blending mandates on the West Coast in upcoming years will remedy the problem. EP

CFTC awaits CBOT, CME comments The U.S. Commodity Futures Trading Commission had received one comment at press time in response to proposed rule changes on ethanol swaps and options contracts submitted by the Chicago Board of Trade and the Chicago Mercantile Exchange in March, according to CFTC spokesman R. David Gary. The rule change would apply to contracts that are currently defined as “excluded swap transactions” by the Commodity Exchange Act. The contracts covered by the petition are limited to cleared-only, over-the-counter contracts. The deadline for the CFTC to accept comments was April 8. EP

20

In mid-March, CSX Transportation Inc., a Jacksonville, Fla., rail, intermodal and railto-truck service provider, announced the winners of its annual Chemical Safety Excellence Award. The honor reflects a company’s commitment to railcar maintenance and safety. Several of the 64 shippers recognized were involved in ethanol production, including Ace Ethanol LLC, Archer Daniels Midland Co., Cargill Inc., Glacial Lakes Energy LLC, Global Ethanol, Granite Falls Energy LLC, U.S. Bioenergy Corp. and VeraSun Energy Corp. In addition to the CSX award, Glacial Lakes Energy was recently recognized by Burlington Northern Santa Fe Railway Co. for outstanding stewardship in protecting employees, the public and the environment. The Watertown, S.D.based company was also awarded an Industrial Operation and Maintenance Excellence Award by the state’s Department of Environment and Natural Resources. EP

Fremont Industries creates Biofuels Group Fremont Industries Inc., a Minnesotabased water treatment company, recently created a division devoted entirely to the biofuels industry. The new division, the Biofuels Group, will provide any type of biofuels facility with the technology and equipment needed to recycle and reuse its wastewater streams. The cost of a specialized water treatment program varies, depending on the size of the plant and the quality of water being used. However, the Biofuels Group said it has developed a costcompetitive, zero-liquid and—in some cases—zero-solids discharge technology that is worth the investment. EP

Raven Biofuels, Pure Energy to merge

Share your Industry Briefs To be included in Business & People, send information (including photos or illustrations if available) to: Industry Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also fax information to (701) 746-5367, or e-mail it to jsobolik@bbibiofuels.com. Please include your name and telephone number in all correspondence.

Delaware-based Raven Biofuels International Corp. and New Jersey-based Pure Energy Corp. announced a proposed merger in mid-March aimed at producing cellulosic ethanol. The two companies plan to produce ethanol, furfural and waste heat from several biomass sources using Pure Energy’s technology, which involves a double dilute sulfuric acid pretreatment that creates separate streams of five- and six-carbon sugars, and lignin. The two companies have a combined four plants under development. Pure Energy is also looking for partners to license its technology. EP ETHANOL PRODUCER MAGAZINE JUNE 2008


BUSINESS&PEOPLE

Sponsored by

Business ConAgra Trade Group becomes Gavilon ConAgra Foods Inc. has agreed to sell ConAgra Trade Group to the Ospraie Special Opportunities Fund, part of Ospraie Management LLC. The sale price will be $2.1 billion and is subject to certain adjustments. ConAgra Trade Group will be renamed Gavilon LLC after the sale is complete. The new entity will continue to work with ConAgra’s customers in the renewable energy industry as it makes the transition. “We are excited to acquire this dynamic business and look forward to working with Gavilon’s talented team to build on the success of its agricultural, energy and fertilizer commodities distribution, merchandising and trading,” said John Duryea, portfolio manager for the fund. EP

Ethanol plant pursues corn fractionation technology An unnamed ethanol plant has agreed to install Quick Germ Quick Fiber, a corn fractionation technology patented by the University of Illinois at UrbanaChampaign, and offered by FCStone Carbon LLC and Maize Processing Innovators Inc. Mike Kinley, vice president of technology for FCStone Carbon, said construction at the plant should begin in early summer and take approximately 12 months. The companies say the technology gives dry-grind ethanol plants the flexibility of a wet mill. It utilizes a short soaking step to generate a more pristine germ and fiber fraction. This allows for the use of food-grade corn oil and minimizes the starch loss that accompanies many dryfractionation techniques. “We also offer a financial package, so plants can make it work with their current debt structure,” Kinley said. Other plants are also considering the technology, he added. EP

PhibroChem expands PhibroChem’s Ethanol Performance Group has opened a new lab at the University Enterprises Laboratories in St. Paul, Minn., expanding its research and development capabilities. The company’s new laboratory facilities, which contain state-of-the-art equipment and new customer service facilities, opened in midMarch. PhibroChem said the new laboratory will focus on products and process solutions for the ethanol fermentation industry. EP

ADM sues five major railroads over price fixing Archer Daniels Midland Co. has filed a federal antitrust lawsuit in Minneapolis, alleging that five major railroads conspired to fix fuel surcharges starting in 2003. The suit alleges that chief executive officers of Union Pacific Railroad Co., BNSF Railway Co., CSX Transportation, Kansas City Southern Railway Co. and Norfolk Southern Railway Co. conspired through their board members of the Association of American Railroads to select identical factors that moved in lockstep to trigger the fuel surcharges. Surcharges are levied to help railroads recover unanticipated costs when fuel prices rise, but ADM alleges the railroads used the surcharges to boost their profits. The association, which isn’t a party to the suit, and the five rail carriers deny that their actions were improper or illegal.

Colusa to create separate entity Colusa Biomass Energy Corp. announced in March it will enter an asset purchase agreement transaction to enable the commercial viability of its cellulosic ethanol technology and become a separate entity called Alpine Management Systems Inc. Colusa’s assets, liabilities and business operations will be transferred to British company Pan Gen Global PLC in exchange for a controlling interest in Pan Gen Global. Operations will be conducted by Colusa Biomass Inc. in Reno, Nev. The transaction was $4 million initially, with $40 million in best efforts to follow. EP

Petrobras creates biofuels unit State-controlled Brazilian oil company Petrobras SA has created a subsidiary to coordinate biofuels efforts under one management umbrella. The new subsidiary, launched March 3, will take on biodiesel input acquisition and processing, as well as ethanol production, and coordinate production-chain activities in Brazil and abroad, the company said. Wally Tyner, an agricultural economist and energy-policy analyst at Purdue University in West Lafayette, Ind., compared the Petrobras move with similar tactics at other oil companies investing in renewable energy. “Brazil has tremendous potential to increase ethanol production from sugarcane, so it may be even more attractive,” he told EPM. EP

EP

ETHANOL PRODUCER MAGAZINE JUNE 2008

21


People Biomass Magazine is a trade journal serving companies that use and/or produce power, fuels and chemical feedstocks derived from biomass. Collectively, these biomass utilization industries are positioned to replace nearly every product made from fossil fuels with those derived from plant or waste material. The publication covers a wide array of issues on the leading edge of biomass utilization technologies, from biorefining, dedicated energy crops and cellulosic ethanol to decentralized power, anaerobic digestion and gasification. It’s all here.

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Damman, Portz fill new positions at BBI

Bateman Litwin names new CEO

BBI International Inc. announced that Angela Damman has filled the newly created position of vice president of international business development. Damman, who was Damman previously the vice president of conference and event planning for BBI, will oversee global expansion for the company and develop new business for BBI's service areas, including project development, conferences and events, and media. BBI also hired Tim Portz to conduct business development for its Community Initiative to Improve Energy Sustainability (CITIES) program. He will identify and pursue opportunities to sell CITIES consultation services to interested municipalities, concentrating his initial efforts in the upper-Midwestern states. Portz previously worked in sales management for printing company RR Donnelley & Sons Co. EP

David Lamont will succeed long-time Chief Executive Officer Shuki Raz at Bateman Litwin, effective June 30. Raz, who has been with the company for 16 years (the past six as CEO), will continue a consulting relationship with the company and its development plans with Delta-T Corp., the company’s U.S.-based ethanol process technology venture. EP

Verenium hires enzyme specialist

For additional information please contact us at (701) 746-8385 or at advertising@biomassmagazine.com.

Verenium Corp., a Massachusetts-based cellulosic ethanol producer, has appointed Janet Roemer to serve as executive vice president of its specialty enzyme business. Roemer Roemer will also assume the position of regional executive for Verenium’s West Coast operations. She replaced Bill Baum, who will continue to conduct ongoing strategic operations for the company. EP

VeraSun announces hires, promotions Three executives from U.S. BioEnergy Corp. are assuming new positions with VeraSun Energy Corp, following the merger approval between the two companies. Greg Schlicht will be senior vice president, general counsel and corporate secretary. He will be responsible for acquisitions and project financing. Virg Garbers and Joel West will assume positions as vice presidents on the senior management team. Garbers will be corporate controller, and West will oversee risk management. Todd Church, a former VeraSun plant manager, will assume a vice president role, as well, overseeing the company’s seven biorefineries expected to be in operation by the end of 2008. EP

Brock Grain Systems names design engineer Bun-Hiong (Carls) Chua has been named design engineer for Brock Grain Systems. He will assist in the design and development of the company’s grain storage, handling and conditioning products. Brock Grain Systems is part of Indianabased CTB Inc., which designs, manufactures and markets systems for poultry, swine and egg productions. EP

ETHANOL PRODUCER MAGAZINE JUNE 2008


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COMMODITIES REPORT Natural Gas Report

Natural gas, ethanol prices experience similar trend April 18—A few months ago I closed my monthly column with the following statement: Bottom line—expect continued high and increasing prices. It’s nice to be right occasionally. However, with the current high prices causing energy consumers pain, I take little comfort in being right. Natural gas prices have moved up dramatically over the past several months along with oil and other commodities. Increased prices are directly impacting energy consumers’ production costs and bottom lines—and not in a positive way. For an ethanol producer, higher natural gas prices certainly are not good. However, the impact has been dampened somewhat by

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

the fact that ethanol and ethanol pricing is part of the carbon complex (oil, propane, etc.), which generally has experienced dramatic price increases. For example, the May 2008 ethanol price on the Chicago Board of Trade bottomed out at approximately $1.60 per gallon during September/October 2007. By January 2008, the May 2008 contract price was more than $2 per gallon. Currently, the May 2008 contract price is $2.55 per gallon. From the market low during fall 2007, ethanol prices have increased by approximately 60 percent. Natural gas prices have followed a similar pattern. The May 2008 natural gas price on the New York Mercantile Exchange also bottomed out in September/October 2007 at approximately $7 per MMBtu. Prices rebounded to more than $8 per MMBtu early in January 2008 and currently stand at $10.65 per MMBtu. Natural gas prices have increased 52 percent from the market low last fall, somewhat less than the increase in ethanol prices. Natural gas price increases have been painful for the ethanol industry. Fortunately there has also been a corresponding increase in revenue. Bottom line: Expect significant price volatility in the future that isn’t necessarily tied to natural gas marketplace fundamentals, rather generally to the commodity prices and specifically oil prices. EP Casey Whelan, vice president of strategic initiatives, can be contacted at cwhelan@usenergyservices.com.

Corn Report

Focus turns from planting to weather, demand

By Jason Sagebiel, FCStone

April 21—As this issue of EPM hits the street corn should be March vs. June Planting Intentions (in Million Acres) planted and growing. However, crop conditions will be a major question. Weather will be the issue that allows for volatility to prosper. Looking into the 2008-’09 crop year, does corn acreage increase due to a differing economic situation versus what the U.S. producers observed in February and early March? Something else to ponder: Can 1.5 million to 2 million acres of extra corn be planted that will not be confirmed until June 30? Also, what sector in the demand scenario will have more of an impact? The livestock feed usage figure will evidently be lower as higher corn values wean livestock/poultry producers from their production cycle. It was evident in the March 31 stocks report that demand outpaced trader’s expectations. This would leave one to assume feed demand in the beginning of 2008 had not slowed despite higher corn values. One thing to note is corn stored on the farm versus one year ago was 14 percent higher. The main focus after plantings is the yield estiThe chart illustrates the additional or reduced corn acres from the mation and the implications of that figure on the demand picture of next year’s supply and demand. With the 2007-’08 carry-in of 1.283 bil- March to June planting intentions. One year ago planting intentions lion bushels and the potential demand of 13 billion bushels in the increased by 2.43 million acres, the largest increase in additional acreage. EP upcoming year, the market has no room for yield deviations. 26

ETHANOL PRODUCER MAGAZINE JUNE 2008


COMMODITIES REPORT DDGS Report

Another volatile spring on deck April 16—Distillers grains is being pulled in many directions—literally and metaphorically. Literally, it’s going all over the world via containers, to Canada and Mexico via railcars, and now in vessels. Metaphorically, it’s being pulled into diets for many different reasons—protein, energy and now even the phosphorous levels that partially replace dicalcium phosphate use in rations. With the status of the U.S. dollar and the price of DDGS relative to corn and soymeal, distillers grains looks to be on the low end of the spectrum right now versus its competitors. That said, futures prices are reflecting the fact that the corn crop has yet to be planted, so it remains to be seen how distillers grains will stand up once the season is more underway.

By Sean Broderick, CHS Inc.

Regional Ethanol Prices (Monthly averages in cents per gallon)

BULK SPLASH/ TRUCK (rack) TOP OFF (rack)

REGION

SPOT

West Coast

262.393

256.67

260.729

Midwest

251.839

249.61

256.062

East Coast

262.286

----

271.433 Source: OPIS

As of mid-April, several ethanol plants were just starting up, most with the majority of their feed unsold. Demand has not been robust, rather just keeping up with the supply. A lot of plants took or are taking maintenance downtime, which has definitely kept supply abnormally low on a month-to-month basis. It will be interesting to see how prices sustain with normal production. The various animal sectors are breaking even at best, so they are buying hand to mouth and keeping the nearby market in demand. As we work through the planting season, DDGS will need to keep its value relative to corn, whatever it is. As we pass through the middle of April with spring plantings looking late, it’s setting up to be another volatile spring. EP

Regional Gasoline Prices (Monthly averages in cents per gallon)

REGION

SPOT

RACK

RETAIL

West Coast

289.658

285.472

354.159

Midwest

264.829

273.137

326.078

East Coast

256.155

270.188

327.187 Source: OPIS

DDGS Prices ($/ton) APRIL 2008

MARCH 2008

APRIL 2007

Minnesota

160

155

120

California*

206

194

164

Chicago, Ill.

170

148

125

Buffalo, N.Y.

170

155

138

Central Florida

200

182

LOCATION

Source: CHS Inc.

Corn Futures Prices (July corn, $/bushel) HIGH

LOW

6.16 1/2

6.04

6.13

March 18, 2008

5.62

5.40 1/2

5.59 1/4

April 18, 2007

3.78

3.63 1/2

3.75 1/4

DATE April 18, 2008

CLOSE

Source: FCStone

Ethanol Report

Ethanol springs on new blending April 11—Spot ethanol markets gained ground in the early part of spring amid indications that even though new production was coming on line at a good clip, new blending markets may be outpacing that production. By mid-April, Chicago spot ethanol trading in the upper 2.50s per gallon for prompt and near-prompt material picked up as much as 20 cents from month-tomonth. Any-April ethanol nosed over the middle $2.50s per gallon, with trades touching $2.56 per gallon. While market players found April ethanol availability snug, active forward trading also pushed higher. May ethanol traded up to $2.54 per gallon, while June material garnered up to $2.50 per gallon for a time. At the rack, average prices in Iowa also started to flatten out by mid-April, but on a month-to-month basis added some 12.5 cents to $2.565 per gallon.

151

*Central Valley

By Spencer Kelly, OPIS

East Coast spot ethanol prices popped up earlier in the month, but appeared to stall and hold steady by midmonth. New York Harbor barge deals for April at $2.65 per gallon held that level for several days in a row. Strong petroleum prices, with crude and gasoline markets again at or near new highs in April, helped keep ethanol blending economics healthy. Though at least six new plants with some 550 MMgy of added capacity have come on line since January, the U.S. DOE revealed consecutive weeks of record-high conventional gasoline blending with ethanol, up 80 percent or more year-on-year. EP For more information, contact OPIS Ethanol & Biodiesel Information Service at (888) 301-2645.

ETHANOL PRODUCER MAGAZINE JUNE 2008

Cash Sorghum Prices ($/bushel) APRIL 15, 2008 MAR. 20, 2008 APRIL 26, 2007 Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

3.25 3.19 3.28 3.31 3.52 3.80

4.48 4.58 4.54 4.60 4.67 5.25

5.46 5.50 5.49 5.61 5.56 6.24

Source: Sorghum Synergies

Natural Gas Prices ($/MMBtu) MAR. 21, 2008

FEB. 15, 2007 MAR. 21, 2007

NYMEX

9.06

8.66

6.91

N. Ventura

8.53

8.85

6.55

Calif. Border

7.72

8.15

5.98 Source: U.S. Energy Services Inc.

U.S. Ethanol Production Output (barrels/day) January 2008

510,000*

December 2007

489,000

January 2007

375,000

*all-time monthly high

Source: U.S. Energy Information Administration

27


RFA UPDATE

New Argonne report touts ethanol’s gains A new analysis of the U.S. ethanol industry shows it as made dramatic production efficiency gains in a short period of time. According to an analysis conducted by the Argonne National Laboratory, U.S. ethanol facilities are producing more ethanol while using much less energy and water than five years ago. The Argonne analysis compares ethanol industry data from 2001 to 2006. In the past five years, water consumption dropped 26.6 percent, grid electricity use 15.7 percent and total energy use 21.8 percent. Meanwhile, ethanol production has increased 276 percent in that time frame. “The dramatic improvements in dry mill ethanol production demonstrate this industry’s commitment to developing and utilizing the most efficient technologies available,” said Bob Dinneen, Renewable Fuels Association President and CEO. The Argonne analysis also found two key trends making ethanol more efficient and environmentally friendly. Nearly 25 percent of ethanol producers are capturing their carbon dioxide emissions for use in dry ice production and carbonated beverage bottling. Also, 37 percent of distillers grains is sold in the wet form, reducing the energy needed to dry and transport the product. Visit www.ethanolrfa.org to view the full analysis.

RFA responds to Time magazine’s biofuels cover story

Ethanol helping tame crude oil prices At press time, crude oil prices were touching $120 per barrel, up nearly $70 since early 2007. With little excess oil production capacity and rapidly growing demand, the addition of ethanol to the U.S. gasoline supply not only helps keep gasoline prices down, but also helps keep the price of crude oil lower than it otherwise would be. In 2008, worldwide ethanol production is expected to reach more than 16.2 billion gallons, which is equivalent to 1 million barrels of oil per day. Without ethanol in America’s gasoline supply, gasoline prices could be more than 25 percent higher than they are today. Diesel prices, already higher than gasoline, would be another 16 percent higher.

ETHANOL PRODUCER MAGAZINE JUNE 2008

www.ethanolRFA.org

RFA President and CEO Bob Dinneen recently responded to Time magazine’s April 7 cover story on biofuels, which negatively portrayed ethanol. A wide array of groups, including the American Lung Association of the Upper Midwest and the National Corn Growers Association, provided counterpoints to the article, written by Michael Grunwald. “Mr. Grunwald’s assertion that biofuels are making global warming worse is unsupported by undisputable fact, and his failure to include differing points of view severely question the credibility of his reporting on this subject,” Dinneen said.

29


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BIObytes

INDUSTRYNEWS

Ethanol News Briefs EIA proposes report updates The U.S. Energy Information Administration has proposed some updates and changes to its biofuels production and usage reports. Proposed changes include adding a survey to determine the amount of denaturant used in ethanol and the reorganization of the tracking of ethanol. Rather than categorizing ethanol into “conventional” or “reformulated gas with ethanol,” the EIA would like to split ethanol into two subcategories: E50 and above, and less than E50. Proposed changes that are accepted will go into effect in 2009.

USDA projects corn acreage decrease On March 31, the USDA released the season’s first Prospective Planting Report, which concluded that farmers intend to plant 86 million acres in 2008, an 8 percent reduction from last year’s acreage that was the highest since 1944. Despite the decrease, corn acreage is expected to remain at historically high levels as the corn price outlook remains strong due in part to the continued expansion in ethanol production, the USDA reported.

Ethanol plant projects on hold Development of Indiana Renewable Fuels LLC, a proposed methane-powered ethanol plant near Argos, Ind., has come to a halt after local residents organized and filed suit in February against the city’s rezoning procedures that allowed the agricultural land to be used for heavy-industrial use. In addition, Agri-Energy Products LLC dropped its proposed 108 MMgy corn-based project near Aurora, N.C., citing a lack of financing.

American Energy Enterprises to build cellulosic plant American Energy Holdings and Investments Inc., a subsidiary of American Energy Enterprises Inc. in Brookfield, Conn., bought an abandoned brownfield site in New Milford, Conn., continued on page 36

34

CHS takes ownership of Provista A series of mergers and acquisitions this spring affected the ethanol marketing world. CHS Inc. announced in early April that it had acquired full ownership of Provista Renewable Fuels Marketing LLC, a company it formed as a joint venture with U.S. BioEnergy Corp. in April 2006. CHS purchased the remaining 50 percent interest in Provista as U.S. BioEnergy officially merged with VeraSun Energy Corp. The merger between VeraSun and U.S. BioEnergy was first announced in November 2007, becoming effective April 1. The move converted each outstanding share of U.S. BioEnergy common stock into 0.810 shares of VeraSun common stock. It also combined under the VeraSun name 17 biorefineries in production, under construction or in development. Nine of the facilities were originally VeraSun facilities, while the other eight were previously U.S. BioEnergy facilities. VeraSun markets its own ethanol, as well as a trademarked brand of E85, called VE85. Fuel produced at the eight U.S. BioEnergy facilities brought to VeraSun as a result of the merger will also be marketed by VeraSun, rather than Provista. This amounts to 310 MMgy in production and 440 MMgy in construction that was moved into the VeraSun marketing portfolio. VeraSun’s annual production capacity is greater than 1 billion gallons. VeraSun said it expects to start up five more facilities in 2008, which would increase its overall production capacity to 1.64 billion gallons. Provista still has its fair share of the marketing pie, with more than 500 MMgy under contract, according to CHS Director of Corporate Communications Lani Jordan. She wouldn’t divulge which plants are using Provista. Provista continues to operate under its present name and leadership, but it’s already making some changes. In late April, Provista announced it had signed a letter of intent to partner with Trans Load Ltd. Inc. and Blendstar LLC to construct and operate an ethanol distribution center in Birmingham, Ala. Provista will be the exclusive supplier of renewable fuel products to the terminal, which is

expected to be operational by July. “This project is the latest evidence of our strong commitment to strategically invest in infrastructure that helps to ensure the long-term success of the renewable fuels industry,” said John Litterio, director of renewable fuels wholesale marketing for Provista. “Provista’s vision is to continue to develop partnering relationships and seek opportunities to work together in other markets. It is these types of collaborative efforts that we believe will differentiate biofuels marketers in the future.” In addition to ethanol marketing, CHS also does wholesale and biodiesel marketing, spot sales, logistics, risk management, and related storage and railcar transportation. For nearly 30 years, CHS has been a logistical facilitator for farmers and other small-scale ethanol producers looking to blend their product into gasoline. Last year, CHS acquired Minneapolis-based distillers grains marketer Commodity Specialists Co. CHS is now positioned as a commodity service company focused on servicing the renewable fuels industry—both domestically and internationally. Though CHS will no longer market U.S. BioEnergy’s fuel, it will likely continue to be involved with its former partner. Prior to U.S. BioEnergy and VeraSun’s merger agreement, CHS “owned approximately 20 percent of U.S. BioEnergy Corp., with a carrying value of its investment of $145.6 million,” according to an April 1 filing from CHS with the U.S. Securities and Exchange Commission. The SEC filing also indicated that “post merger, CHS Inc. owns approximately 8 percent of the combined entity (VeraSun and U.S. BioEnergy)." —Anduin Kirkbride McElroy

ETHANOL PRODUCER MAGAZINE JUNE 2008


Capture The Power

INDUSTRYNEWS

After a financially shaky 2007, Massachusetts-based Verenium Corp. is looking for 2008 to be the year of milestones and key developments in its cellulosic ethanol business. “We feel that 2008 is going to be a transformational year for Verenium as we continue to make significant progress at our facilities in Jennings,” said Kelly Lindenboom, vice president Verenium’s demonstration-scale cellulosic ethanol facility in Jennings, La., has completed construction and entered the testing phase. of corporate communications for Verenium. “Our demonstration-scale facili- enough space on our property in Jennings to ty is the first of its kind in the United States, do a commercial facility right there, although and we’re expecting the learning that comes out we haven’t decided if that will be where we of that plant will give us the guidance we need locate the first one.” Lindenboom said to move forward on our first commercial-scale Verenium has determined a plant must be facility by the end of next year. It will be an located within a 50-mile radius of feedstock to important landmark not only for Verenium, be feasible. The company’s future plans are to build, own and operate multiple commercialbut for the cellulosic ethanol industry.” The company recently announced key scale facilities. Sugarcane and energy cane are current developments at its $60 million, 1.4 MMgy demonstration-scale facility in Jennings, La., feedstock sources at the demo plant. Energy where initial groundbreaking took place early cane is similar in composition to sugarcane, but last year. Electricity was recently supplied to the lesser known as a feedstock. “As far as I know, property, and individual systems have begun we are the only ones who are currently propathe start-up phase. Verenium plans to test more gating this,” Lindenboom said. The tall, grassthan 40 separate systems in the next few like perennial has no other purpose than for months to determine their functional capabili- energy, unlike sugarcane. Verenium currently manages small plots ties. “The next several months will be critical in terms of scaling our process and technology,” of energy cane in the Southeast, but said Carlos Riva, president and chief executive Lindenboom said the company wants to contract with farmers to grow the crop on a longofficer at Verenium. Following the initial start-up, Verenium term basis. Sugarcane residue is also currently will move into the “commissioning and opti- being supplied by Southeastern farmers. Verenium was formed in 2007 by a mergmization phase” to validate the implementation of its technology and to process ethanol at er of Celunol Corp. and Diversa Corp. The scale. That phase is expected to continue enzyme technology brought to Verenium by through the end of 2008. Upon successful Diversa has allowed the company to manufaccompletion of those steps, Verenium expects ture enzymes on-site, according to to begin construction of its first commercial- Lindenboom, who added that “having all that in-house has certainly been a competitive scale facility. According to Lindenboom, the 30 MMgy advantage.” commercial plant will cost $185 million. “We —Kris Bevill have roughly six different sites that we’re looking at right now,” Lindenboom said. “We have ETHANOL PRODUCER MAGAZINE JUNE 2008

PHOTO: VERENIUM CORP.

Verenium announces cellulosic advancements

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Ethanol News Briefs continued from page 34

with intentions of building a cellulosic ethanol plant there. Construction of the $100 million facility, to be operated by AEE Distilleries Inc., is expected to begin on the 72-acre site this summer, according to AEE Chairman Christopher Brown. The 50 MMgy facility will use plant biomass and wood waste as a feedstock. AEE has also acquired two retail stations to dispense E85 from the Midwest until AEE’s production comes on line in 2009 or early 2010, Brown said.

SunOpta, Abengoa technology dispute enters arbitration A federal judge has sent SunOpta Inc. and Abengoa Bioenergy to arbitration to settle grievances over allegedly pirated technology. Canada-based SunOpta sued Spanish ethanol giant Abengoa Bioenergy, accusing the defendant of appropriating SunOpta’s biomass-to-ethanol trade secrets without compensation. Abengoa denied using the technology and accused SunOpta of trying to coerce settlement of residual, contractual disputes by filing the suit in January. The case has been stayed continued on page 38

INDUSTRYNEWS

E85 report details optimal conditions for retail The National Renewable Energy Laboratory in Golden, Colo., has released a technical report to help retailers decide if selling E85 fuel makes sense for their businesses. The 40-page report, “E85 Retail Business Case: When and Why to Sell E85,” lays out the factors that retailers need to consider when deciding to sell the ethanol fuel blend, which can be a sound business decision in the highly competitive gasoline market. According to the report, the total number of gasoline retail stations has decreased by 1.5 percent in the past four years, and the average net taxable income of a retail station was $36,000 in 2004. Despite tough competition, the reports said E85 can be an investment opportunity if certain conditions are present. First, a retailer should be in a competitive environment, where differentiating its product lineup could help increase its market share. A low-cost source of E85 is also important. The retailer should also assess the potential market for E85. The report called this a difficult and uncertain process, but retailers can determine potential sales from a survey of E85 retailers conducted by Underwriter Laboratories Inc. in Minnesota and Iowa. Similar considerations were likely observed at Alternative Fuel Distributors Inc. in Wilmington, Del. The company unveiled a three-year plan to

PHOTO: JESSICA SOBOLIK, BBI INTERNATIONAL INC.

BIObytes

Ethanol-blended fuel such as E85 can be a sound business decision in the highly competitive gasoline market, according to the National Renewable Energy Laboratory.

construct and operate 1,000 convenience stores on the East Coast that will provide E85 and other alternative fuels. Created in June 2007, it plans to see 100 stores open by the first quarter of 2009. The stores will be called “Go Green Stations” and will help bolster the existence of fewer than 20 gas stations between New York and Richland, Va. To reach the goal, the company expects to file a registration statement with the U.S. Securities and Exchange Commission for an initial public offering of up to 2 million shares of its Class A membership units. —Timothy Charles Holmseth


INDUSTRYNEWS

Several of the country’s top oil refiners and ethanol distributors have increased the availability of E10 in the Southeast with the help of expanding E10 terminals and the development of a dedicated ethanol pipeline. Kinder Morgan Inc., one of the largest pipeline transporters and terminal operators in North America, will soon make E10 more accessible for Floridians. It’s Southeastern company Kinder Morgan Central Florida Pipeline Co. began physical preparations to send a batch of denatured ethanol through its gasoline-only pipeline in early April, replacing gaskets, pumps, seals and other elastomerintensive parts with compatible parts for ethanol transport. The company expects to be sending routine commercial shipments of batched ethanol through the 104-mile line that runs between the Port of Tampa and the Orlando Airport later this year. The pipeline would be a boon for Florida fuel retailers looking to replace regular gasoline with E10 without having to switch on an intermittent basis, according to Jim Smith, president of the Florida Petroleum Marketers and Convenience Stores Association. “Once we roll this out, I don’t want to have to keep changing back and forth between conventional gasoline and ethanol,” he said. “Our customer base, the people we serve on a daily basis, doesn’t want anything more than an

PHOTO: JESSICA SOBOLIK, BBI INTERNATIONAL INC.

E10 availability gains traction in Southeast

E10 use in the Southeast is on the rise.

affordable, consistent product that performs, and we need to have that.” According to Smith, Florida fuel marketers and retailers are poised to replace gasoline with E10 since the Florida Department of Agriculture acquiesced to the state’s rule changes regarding blend specifications and performance standards of E10 blends in late March. The specification in question was the T-50 standard, which is the minimum distillation point of the fuel. Initially set at 158, the Florida Department of Agriculture finally lowered it to 150, which mirrored similar standards adopted by surrounding states, Smith said. “We’ve all worked tirelessly to get the

department of agriculture to adopt performance standards similar to what has been adopted in other Southeastern states so that oil companies would not be required to produce a Florida-specific boutique fuel,” he said. Meanwhile, Magellan Midstream Partners LP and Buckeye Partners proposed a joint venture to build a dedicated denatured ethanol pipeline from source markets in the Midwest to distribution terminals in Cleveland, Pittsburgh, Philadelphia and Linden, N.J. For more information on this project, visit www.ethanolproducer.com. Additionally, Marathon Oil Co. is offering E10 at 16 of its Midwest terminals. The move, which was scheduled to be effective May 1, is a response to the new renewable fuels standard enacted in December in the Energy Independence & Security Act of 2007, which increased demand for ethanol-blended gasoline. In mid-March, ExxonMobil Corp. declared its intent to sell gasoline blended with E10 in markets where it currently sells conventional unleaded. At press time, the company said the conversion would take effect May 1. The company cited federal legislation as a reason for the change. —Bryan Sims


BIObytes

INDUSTRYNEWS

Ethanol News Briefs continued from page 36

while the arbitration proceedings try to settle the matter.

Melrose Dairy Proteins, Gateway Ethanol halt production Two current ethanol producers are halting operations, but for different reasons. Melrose Dairy Proteins LLC, a 3 MMgy ethanol producer in Melrose, Minn., plans to idle its ethanol facility in September. Instead, it will sell its cheese whey to Proliant Dairy Ingredients Inc. for other purposes, according to Plant Superintendent Joe Kennedy. Meanwhile, Jarrett Hollis, plant manager of Gateway Ethanol LLC, said the 55 MMgy plant in Pratt, Kan., temporarily shut down in late February because of high corn prices. It could restart production once capital restructuring is achieved.

Orion Ethanol to convert plant Orion Ethanol has acquired a renewable fuels facility from Dimmitt Ethanol LP in Dimmitt, Texas. The campus will be developed in three phases, the first of continued on page 40

38

Iogen’s proposed cellulosic ethanol plant moves forward Canada’s Environment Minister John Baird announced March 14 that Ottawa, Ontario -based Iogen Corp.’s funding application for the country’s first commercial-scale cellulosic ethanol plant has progressed to the due diligence phase. Following that phase, Sustainable Development Technology Canada, a nonprofit government foundation that finances and supports the development and demonstration of clean technologies, will make a final funding decision. “Cellulosic ethanol has the potential to help Canada meet its renewable fuels standard in a sustainable way,” said Vicky Sharpe, president and chief executive officer of SDTC. “With an abundance of potential feedstocks that is unmatched, Canada has a huge advantage in the race to bring cellulosic ethanol to market.” Iogen’s application for a Saskatchewan-based cellulosic ethanol biorefinery was submitted to SDTC under the recently launched NextGen Biofuels Fund, which supports up to 40 percent of eligible project costs for large demonstrationscale, second-generation renewable fuels facilities that are first-of-their-kind. After the project’s completion, the contribution is repayable—based on free cash flow—over a 10-year period.

Iogen and its partners Shell Group and Goldman Sachs Group Inc. are developing a process that uses specialized enzymes to convert plant fiber into sugars, which can be fermented to produce ethanol. “Thanks to our government’s allocation of $500 million for next-generation biofuels, Canada is one step closer to making our country’s first full-scale cellulosic ethanol fuel facility a reality,” Baird said. “With technologies such as this, Canada is well-positioned to be a world leader in the renewable fuels industry.” Iogen currently operates a pilot-scale facility in Ottawa that converts biomass to ethanol. In February 2007, the company was one of six cellulosic ethanol projects to receive up to $80 million in funding from the U.S. DOE for an 18 MMgy proposed plant to be built in Shelley, Idaho, using feedstocks such as wheat straw, barley straw, corn stover, switchgrass and rice straw. The NextGen Biofuels Fund was announced by the Government of Canada in 2007 and launched by SDTC in September 2007. It is open for applications at any time. —Jessica Ebert

ETHANOL PRODUCER MAGAZINE JUNE 2008


INDUSTRYNEWS

CVEC receives grant for corn cob conversion study

PHOTO: FRONTLINE BIOENERGY LLC

materials to yield thermal energy that The Minnesota Corn Research can displace the plant's natural gas & Promotion Council and the energy inputs. “Corn cob biomass Agriculture Utilization Research has superior material-handling propInstitute will donate $50,000 to a erties and much lower ash content project led by Chippewa Valley than corn stover, making it a better Ethanol Co. LLLP that will explore thermal energy source for ethanol the use of corn cobs as a biomass plants,” said CVEC General energy feedstock at its 47 MMgy Manager Bill Lee. corn-fed ethanol plant in Benson, While the ethanol plant plans to Minn. use wood biomass as its initial fuel “We plan to collect corn cobs source, the farmer-owned cooperafrom about 5,000 acres of our cotive is eager to develop its members’ op members’ corn crop during the agricultural residues into a second2008 harvest,” said Gene Fynboh, ary—and perhaps preferred—enerbiomass coordinator for CVEC. gy source. “The cobs collected from "With support and risk sharing the same acres that supply corn to from forward-thinking organizations such as [the MCRPC] and Construction of the biomass gasifier at CVEC began in June 2007 and finished the ethanol plant can provide about in April. 75 percent of the plant's gas energy AURI, our members will be able to convert underutilized ag residues such as corn opportunity to support a project like this," said needs,” Lee said. Other members of the project team cobs into valuable energy sources more rapid- Jerry Larson, chairman of the MCRPC. "Having an alternative energy source that is include the University of Minnesota, Morris ly." CVEC and the project team will demon- economical and lower in carbon emissions and the West Central Research and Outreach strate and evaluate two different cob collec- could make ethanol production more efficient Center in Morris, Minn. WCROC staff will provide coordination, testing, and data collection systems during the study. The demonstra- and corn farming more profitable." In early April, CVEC and its Ames, Iowation and analysis for the project. tions will be open to the public. The study will also evaluate the field-to-facility economics of based technology partner Frontline corn cob biomass utilization. The total project BioEnergy LLC fired up a new biomass gasi—Jerry W. Kram cost is estimated at $340,000. "Minnesota's fication system adjacent to the ethanol plant. corn organizations are pleased to have the This system is capable of burning biomass


BIObytes

INDUSTRYNEWS

Ethanol News Briefs continued from page 38

which will convert the corn fructose wetmilling facility into a 60 MMgy ethanol plant. The second phase will add a 10 MMgy cellulose-to-ethanol process. Orion purchased the plant for $2.5 million in cash, a subordinated promissory note of $2.5 million and 8 million common shares.

China corn demand may increase China, the world's second-largest corn producer after the United States, is likely to become a net corn importer this year, according to Interfax News Service Ltd. The nation’s growing appetite for grain will heighten pressure on world corn prices—already at historic highs—likely drawing off U.S. corn supplies and possibly pricing corn out of the market as an ethanol feedstock, said David Harman, Hong Kong-based global head for China commodities at Interfax. EP

Studies look at cellulosic ethanol from different angles Although having different focuses, two studies released in March found that cellulosic ethanol’s contribution to reducing worldwide energy independence needs tremendous impetus to be a significant contributor in the future. Context Network LLC looked at the consumption mandates set in the Energy Independence & Security Act of 2007 and concluded that corn-based ethanol will best fulfill the requirements unless there are major technological developments to hasten cellulosic development. The Context study projected EISA’s impact on agriculture over the next 14 years, and found that biodiesel and cellulosic ethanol as boutique fuels can’t contribute significantly to meeting the mandate unless government support, funding and the economy improve. Context author Jim Murphy took a threephase approach. In the short-term, between 2008 and 2010, he determined that all required biofuels will come from agricultural commodities and the completion of plants under construction. In the medium term, from 2011 to 2015, there will be a transition period when commodities-based biofuels production will peak, and cellulosic ethanol and production from other feedstocks will begin. In the long term, from 2016 to 2022, new production capacity from cellulosic plants and alternative feedstocks will be crucial to meeting the mandate.

The second study, conducted by University of Nebraska-Lincoln researchers, examined the cellulosic ethanol industry from a feedstock perspective, finding that switchgrass is cost-competitive with traditional corn as a feedstock. However, farmers who participated in the study indicated they couldn’t find accessible markets for their crops, so the lower production cost of switchgrass would be offset by higher transportation costs, according to researcher Richard Perrin, an agricultural economist. Perrin’s study looked at switchgrass production costs in three states over a five-year period. Farmers with more experience were able to lower their costs to $39 per ton. The average cost for the producers in the study was $60 per ton. However, finding markets was a challenge, Perrin said, noting that some corn-based plants are turning toward cellulosic feedstocks, which may be the market farmers need. “At least they’re thinking about this, but it’s going to take more than thinking to produce cellulosic ethanol,” he said. “Clearly, we’ll be able to meet the mandate in 2010, but it keeps doubling, so we’ve got to have many more plants under construction, and they haven’t turned many spades of dirt toward it yet.” —Sarah Smith

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40

ETHANOL PRODUCER MAGAZINE JUNE 2008


INDUSTRYNEWS

More than 800 people traveled to Minneapolis for the International Biomass Conference & Trade Show to hear the latest possibilities and challenges facing the biomass industry as a source of fuel, heat and chemicals. The event, hosted by BBI International Inc. with support from the Grand Forks, N.D.-based Energy & Environmental Research Center, started with opening comments from EERC Director Gerald Groenewold, who pointed out, “I have a problem with the term ‘energy independent.’ We’ll never get there, but we will wake up one day and wonder, ‘What were we thinking [in terms of energy use]?’” The event didn’t shy away from the tough issues facing biomass. A panel discussion on sustainability with David Tilman of the University of Minnesota, Lee Lynd of Dartmouth College and Nathanael Green of the Natural Resources Defense Council concluded that using the world’s best farmland to grow biomass for fuel can lead to indirect land use changes that accelerate global warming and increase competition for food worldwide. “Economics and

PHOTO: JESSICA SOBOLIK, BBI INTERNATIONAL INC.

Conference brings several biomass topics to light

A group tours District Energy St. Paul, which gasifies wood to produce energy, at the International Biomass Conference & Trade Show in Minneapolis in April.

ethics will likely mean that our best land will go to food production with ag residue and dedicated energy crops like mixed prairie grasses grown on degraded land going to biofuels,” Tilman said. An international panel highlighted biomass utilization in Argentina, Canada, India

ETHANOL PRODUCER MAGAZINE JUNE 2008

and Europe, particularly Poland. Another panel discussion focused on climate change issues, which can spur more biomass use. For example, burning coal, which has more British thermal units, emits the most carbon into the atmosphere. Wood, although cheap, still isn’t the cleanest biomass resource. Panelists discussed the many biomass options, including grasses, ag residues, municipal solid waste and more. A feature in the July issue of Biomass Magazine will delve into the energy and emissions of these various biomass sources. Concurrent breakout sessions covered various areas of interest in more detail, while two site tours allowed conference attendees to see some of the latest biomass concepts in action. District Energy St. Paul in St. Paul, Minn., is burning wood waste to produce energy for city buildings, while various laboratories on the University of Minnesota campus are exploring algae, biooil and other biomass-based energy sources. Next year’s event will be held in Portland, Ore., on April 28-30. —Jessica Sobolik

41


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NEW PROJECT

PROJECT COMPLETE

PLANT EXPANSION

EXPANSION COMPLETE

INDUSTRY

Ethanol Plant Construction Cooling Construction

B

etween February and April, 13 ethanol plants totaling 840 MMgy

of balance. This shouldn’t be confused with a plateau, which implies only a

of production capacity came on line. Throughout April and into

limited capacity for growth. Rather, it’s more likely that some plants will close

May, six more plants came on line, adding 415 MMgy of capac-

their equity drives and begin to start construction, just not at the pace seen

ity. While the impact of this new ethanol and distillers grains pro-

in 2006 and early 2007. This gradual return to manageable growth may

duction capacity will surely have a strong impact on the markets, it is impor-

simply signify the end of that red-hot market.

tant to note that no new projects have been added to this list in the past two

Among the six plants that started production from March into May is

months. The rate at which conventional ethanol plants are being built has

Cascade Grain Products LLC, the second ethanol plant in Oregon. It near-

indeed slowed.

ly quadrupled the state’s output capacity when the 108 MMgy facility came

Many factors play a part in this deceleration. Clearly, $6 corn and $10

on line in April. In the same month, Didion Ethanol LLC in Courtland, Wis.,

natural gas futures are deterrents to project development. Additionally,

added another 50 MMgy to the nation's production capacity. Despite some

lenders, many of whom are dealing with the weakened housing market,

weather delays, Kansas Ethanol LLC in Lyons, Kan., brought its 55 MMgy

could find it difficult to loan money to all but the most established customers.

plant on line in April, as well. Marquis Energy LLC in Hennepin, Ill., becomes

Another reason could be the increased cost to site a plant. As margins flag,

the ninth plant in the No. 3 ethanol-producing state in April. VeraSun

getting just the right site for a plant becomes increasingly important.

Bloomingburg LLC began production at its 100 MMgy plant in

Looking at changes in the cost of construction inputs, a striking exam-

Bloomingburg, Ohio, in late March. Finally, Verenium Biofuels Louisiana in

ple can be found in the cost of No. 2 diesel. Between March 2007 and

Jennings, La., completed construction of its 1.4 MMgy cellulosic ethanol

March 2008, No. 2 diesel’s price at the pump increased 61 percent. Going

demonstration plant. At press time, it was planning to host a grand-opening

back three years, the price has more than doubled between March 2005

celebration May 29. Look for EPM to review that event on its Web site.

and March 2008, rising 105 percent. Looking back further over 10 years, the increase is 647 percent. These changes not only affect a contractor’s bottom line, but will also affect an ethanol plant’s transportation costs for the foreseeable future. Some producers may be able to realize efficiencies through colocation. Building a plant in cattle country has the advantage of being close to distillers grains customers, which reduces the cost of energy used to dry distillers grains because local customers can use wet cake. Other facilities will have to find creative ways to generate additional revenue streams, if possible.

EPM will remove seemingly inactive projects from this list if: 1. Our good faith attempts to contact project representatives go unanswered for three straight months. 2. Through exhaustive means, we are unable to verify the continued advancement of a project. 3. The Renewable Fuels Association, as well as project representatives, are notified and given a reasonable amount of time to verify the project’s current status. To provide updates to this list, contact Craig A. Johnson at (701) 7468385 or cjohnson@bbibiofuels.com.

With 18 plants coming on line in a four-month period and no new plants starting construction, the industry may be trending toward a position

44

—Craig A. Johnson

ETHANOL PRODUCER MAGAZINE JUNE 2008


Construction Represents 4.21 Billion Gallons Annually

Aberdeen Energy LLC Location Design/builder Process technology Capacity Feedstock Synopsis of progress N/A

Mina, South Dakota Fagen Inc. ICM Inc. 100 MMgy corn

Bridgeport Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A November 2006 May 2008

Location Design/builder Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared Colorado Ag Services undeclared September 2007 September 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Calgren Renewable Fuels

Synopsis of progress N/A

Altra Indiana LLC Location Cloverdale, Indiana General contractor F.A. Wilhelm Construction Process technology Vogelbusch Capacity 92 MMgy Feedstock corn Synopsis of progress Electrical and piping work continues.

Calgren Renewable Fuels LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared October 2006 April 2008

Location General contractor Process technology Capacity Feedstock

Carleton, Nebraska undeclared Vogelbusch 113 MMgy corn

Pixley, California W.M. Lyles Co. Lurgi Inc. 52 MMgy corn

J.D. Heiskell & Co. N/A March 2007 May 2008

Synopsis of progress The final piping and electrical work is being finished. The company is completing a pre-commissioning checklist.

Altra Nebraska LLC Location General contractor Process technology Capacity Feedstock

Bridgeport, Nebraska ICM Inc. ICM Inc. 50 MMgy corn

Cardinal Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared undeclared spring 2008

Synopsis of progress Electrical and piping work continues.

Location Design/builder Process technology Capacity Feedstock

Union City, Indiana Fagen Inc. ICM Inc. 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex CHS Inc. N/A February 2007 fall 2008

Synopsis of progress Foundation work in the water treatment building is being finished. Scales and an underground conveyor are set in the grain receiving area. The cooling tower is complete. Work is complete on the energy center dryers and cyclones.

Archer Daniels Midland Co. Location General contractor Process technology Capacity Feedstock

Cedar Rapids, Iowa undeclared

undeclared 275 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Archer Daniels Midland

undeclared undeclared June 2007 third quarter 2009

PHOTO: CARDINAL ETHANOL LLC

Synopsis of progress This project is moving forward, according to an ADM representative. No further information was available at press time.

Archer Daniels Midland Co. Location General contractor Process technology Capacity Feedstock

Columbus, Nebraska undeclared

undeclared 275 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Archer Daniels Midland

undeclared undeclared July 2007 fourth quarter 2008

Synopsis of progress This project is moving forward, according to an ADM representative. No further information was available at press time.

ETHANOL PRODUCER MAGAZINE JUNE 2008

Cardinal Ethanol LLC

45


Project Complete

Cascade Grain Products LLC

Location General contractor Process technology Capacity Feedstock

Clatskanie, Oregon JH Kelly Ethanol Delta-T Corp. 108 MMgy corn

First United Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Start-up date

Eco-Energy Land Oâ&#x20AC;&#x2122;Lakes undeclared June 2006 April 2008

Synopsis of progress Commissioning is underway at the site, and construction is complete. Congratulations Cascade Grain Products LLC!

Location Design/builder Process technology Capacity Feedstock

Camilla, Georgia Fagen Inc. ICM Inc. 100 MMgy corn

Keyes, California Harris Construction Praj Industries Ltd. 55 MMgy corn

GreenField Ethanol Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A July 2006 second quarter 2008

Synopsis of progress N/A

Project Complete

Location General contractor Process technology Capacity Feedstock

Location General contractor Process technology Capacity Feedstock

Didion Ethanol LLC Courtland, Wisconsin Agra Industries Delta-T Corp. 50 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Commercial Alcohols Commercial Alcohols

undeclared October 2006 fourth quarter 2008

Hawkeye Renewables Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Start-up date

undeclared undeclared N/A October 2006 April 2008

Location Designer/builder Process technology Capacity Feedstock

Obion, Tennessee Fagen Inc. ICM Inc. 100 MMgy corn

Menlo, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Eco-Energy undeclared N/A July 2007 fourth quarter 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Eco-Energy undeclared N/A July 2007 first quarter 2009

Synopsis of progress According to the company, progress is being made.

Ethanol Grain Processors LLC

Hawkeye Renewables Ethanol marketer Aventine Renewable Energy Distillers grains marketer CHS Inc. Carbon dioxide marketer undeclared Broke ground December 2006 Target start-up date fourth quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

46

Johnstown, Ontario SNC-Lavalin Group ICM Inc. 200 MMly (53 MMgy) corn

Synopsis of progress N/A

Synopsis of progress The plant went into full production April 8. Congratulations Didion Ethanol LLC!

Location Design/builder Process technology Capacity Feedstock

Eco-Energy First United Ethanol undeclared January 2007 summer 2008

Synopsis of progress Overall construction is approximately 50 percent complete. All civil work is complete with the exception of the water treatment building. All major process equipment is in place. Steel work is approximately 80 percent complete, and the process building siding and roofing is approximately 75 percent complete. Current work is focused on piping, instrumentation and electrical installation.

Cilion Ethanol LLC Location General contractor Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Location Designer/builder Process technology Capacity Feedstock

Shell Rock, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Synopsis of progress According to the company, progress is being made.

ETHANOL PRODUCER MAGAZINE JUNE 2008


Project Complete

Holt County Ethanol LLC Location General contractor Process technology Capacity Feedstock

O'Neill, Nebraska Adams Construction Vogelbusch 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target completion date

undeclared undeclared N/A July 2007 late 2008

Synopsis of progress N/A

Marquis Energy LLC

Location Design/builder Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Start-up date

Murex CHS Inc. N/A September 2006 April 2008

Synopsis of progress The plant is finishing testing and grinding corn. Congratulations Marquis Energy LLC!

Homeland Energy Solutions Location Design/builder Process technology Capacity Feedstock

Hennepin, Illinois Fagen Inc. ICM Inc. 100 MMgy corn

Lawler, Iowa ICM Inc. ICM Inc. 100 MMgy corn

Marysville Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A May 2007 January 2009

Synopsis of progress Construction is roughly one-third complete. Work continues on the fermentation tanks. Foundations have been poured, and structural steel is being erected.

Location Design/builder Process technology Capacity Feedstock

Marysville, Michigan Fagen Inc. ICM Inc. 50 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A August 2006 early 2008

Synopsis of progress N/A

Indiana Bio-Energy LLC Location Design/builder Process technology Capacity Feedstock

Bluffton, Indiana Fagen Inc. ICM Inc. 101 MMgy corn

Ethanol marketer Aventine Renewable Energy Distillers grains marketer CHS Inc. Carbon dioxide marketer N/A Broke ground November 2006 Target start-up date August 2008

Project Complete

Location Design/builder Process technology Capacity Feedstock

PHOTO: INDIANA BIO-ENERGY LLC

Synopsis of progress More than 35,000 feet of track have been laid, and only main switches need to be installed. All buildings are fully enclosed. Work on the water treatment center continues. All the equipment is on-site.

Kansas Ethanol LLC Lyons, Kansas ICM Inc. ICM Inc. 55 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Start-up date

Synopsis of progress The plant began commissioning in April. Congratulations Kansas Ethanol LLC!

ETHANOL PRODUCER MAGAZINE JUNE 2008

Poet Ethanol Products

undeclared N/A January 2007 April 2008

Indiana Bio-Energy LLC

47


NEDAK Ethanol LLC Location General contractor Process technology Capacity Feedstock

Atkinson, Nebraska Delta-T Corp. Delta-T Corp. 44 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Eco-Energy Frahm and Deitloff N/A June 2006 second quarter 2008

PHOTO: ONE EARTH ENERGY LLC

Synopsis of progress Construction continues. No further information was available at press time.

Nexsun Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Ulysses, Kansas ICM Inc. ICM Inc. 40 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared August 2007 late 2008

Synopsis of progress N/A

One Earth Energy LLC

Northeast Biofuels LLC Location General contractor Process technology Capacity Feedstock

Volney, New York Lurgi Inc. Lurgi Inc. 100 MMgy corn

One Earth Energy LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Noble Americas Corp. Perdue Farms BOC Gases July 2006 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared October 2007 fourth quarter 2008

Synopsis of progress Plumbing work in energy center and process technology building is underway. Evaporators are on-site, awaiting installation. Concrete for silos was slated to be poured in May.

Northwest Renewable LLC Location General contractor Process technology Capacity Feedstock

Gibson City, Illinois Fagen Inc. ICM Inc. 100 MMgy corn

Longview, Washington Makad Construction Corp. Lurgi Inc. 55 MMgy corn

Pacific Ethanol Magic Valley LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

U.S. Ethanol LLC Lansing Trade Group undeclared November 2006 fourth quarter 2008

Synopsis of progress Rainy weather in the Pacific Northwest has slowed construction. Concrete and piling work continues.

Location General contractor Process technology Capacity Feedstock

Burley, Idaho Parsons RCI Inc. Delta-T Corp. 50 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

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Pacific Ag Products LLC

undeclared February 2007 second quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

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48

ETHANOL PRODUCER MAGAZINE JUNE 2008


Platinum Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Arthur, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Provista UBE Ingredients N/A November 2006 August 2008

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products Poet Nutrition N/A August 2007 fourth quarter 2008

PHOTO: ONE EARTH ENERGY LLC

Synopsis of progress N/A

Poet Biorefining-Fostoria Location Design/builder Process technology Capacity Feedstock

Synopsis of progress Construction continues. No further information was available at press time.

One Earth Energy LLC

Pacific Ethanol Stockton LLC Location General contractor Process technology Capacity Feedstock

Stockton, California W.M. Lyles Co. Delta-T Corp. 50 MMgy corn

Poet Biorefining-Marion Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Kinergy Marketing Pacific Ag Products LLC

undeclared April 2007 third quarter 2008

Synopsis of progress Construction continues. No further information was available at press time.

Location Design/builder Process technology Capacity Feedstock

Annawan, Illinois Fagen Inc. ICM Inc. 100 MMgy corn

Marion, Ohio Poet Design & Construction Poet Design & Construction 65 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products Poet Nutrition N/A May 2007 December 2008

Synopsis of progress Construction continues. No further information was available at press time.

Patriot Renewable Fuels LLC Location Design/builder Process technology Capacity Feedstock

Fostoria, Ohio Poet Design & Construction Poet Design & Construction 65 MMgy corn

Poet Biorefining-North Manchester Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex undeclared undeclared February 2007 spring 2008

Synopsis of progress N/A

THE ROAD TO SUCCESS IS FILLED WITH TWISTS AND TURNS. FORTUNATELY, WE ALREADY KNOW THE WAY.

Location Design/builder Process technology Capacity Feedstock

North Manchester, Indiana Poet Design & Construction Poet Design & Construction 65 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Ethanol Products Poet Nutrition N/A third quarter 2007 first quarter 2009

Synopsis of progress Construction continues. No further information was available at press time.

The biofuels industry’s accounting, tax and various consulting needs can be nearly as complicated as the refining process itself. Which is why Kennedy and Coe’s knowledge and experience in the industry can help you identify and capitalize on many opportunities that can add millions of extra dollars to your organization’s cash flow. Our expertise can help you navigate even the most confusing paths, so you can make the most of your operation’s potential.

Call 800-303-3241 or visit us at www.kcoe.com.

Not your average accountants.SM The “e” mark and the “stylized e” are registered service marks of the Ethanol Promotion and Information Council. Used with permission.

ETHANOL PRODUCER MAGAZINE JUNE 2008 KAC.9084_7.5x3.375_EPM_4C 1

49 2/18/08 5:28:55 PM


Route 66 Ethanol LLC Location Tucumcari, New Mexico General contractor APS/United Stainless Process Technology Process technology United Stainless Process Technology Capacity 10 MMgy Feedstock corn/milo

Terra Grain Fuels Inc. Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A October 2007 April 2008

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared September 2006 April 2008

Delta-T Corp. 150 MMly (40 MMgy) wheat

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared N/A June 2007 December 2008

Synopsis of progress N/A

Show Me Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Belle Plaine, Saskatchewan Ethanol marketer EllisDon/VCM Contractors & Engineers Distillers grains marketer

Richmond, Missouri ICM Inc. ICM Inc. 55 MMgy corn

Tharaldson Ethanol LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared February 2007 June 2008

Synopsis of progress Construction is 98 percent complete. Hydro-testing was set to begin in mid-May and scheduled to be complete 30 days later.

Location General contractor Process technology Capacity Feedstock

Casselton, North Dakota Wanzek/Valley Engineering Vogelbusch 100 MMgy corn

Synopsis of progress N/A

Southwest Iowa Renewable Energy LLC Council Bluffs, Iowa ICM Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Lansing Ethanol Group

Bunge undeclared November 2006 August 2008

PHOTO: SOUTHWEST IOWA RENEWABLE ENERGY LLC

Location Design/builder Process technology Capacity Feedstock

Synopsis of progress Ethanol storage tanks are complete. Of the three drilled process water wells, flow testing is complete on one. The plant is permitted for a rate of 1.6 million gallons per day. Structural steel erection for the process building is 40 percent complete. The rail loop is also 40 percent complete, including the finished Pony Creek Bridge.

Superior Ethanol LLC Location General contractor Process technology Capacity Feedstock Synopsis of progress N/A

50

Superior, Iowa Agra Industries Delta-T Corp. 50 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

RPMG undeclared N/A July 2006 April 2008

Southwest Iowa Renewable Energy LLC

ETHANOL PRODUCER MAGAZINE JUNE 2008


Project Complete

Location General contractor Process technology Capacity Feedstock

VeraSun Bloomingburg LLC Bloomingburg, Ohio Fagen Inc. ICM Inc. 100 MMgy corn

VeraSun Janesville Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Start-up date

Cargill Inc. Cargill Inc. N/A November 2006 March 2008

Synopsis of progress Start-up began March 31. Congratulations VeraSun Bloomingburg LLC!

Location Design/builder Process technology Capacity Feedstock

Dyersville, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Provista UBE Ingredients N/A November 2006 second quarter 2008

Location Design/builder Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Provista UBE Ingredients N/A August 2006 second quarter 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

Location General contractor Process technology Capacity Feedstock

Hartley, Iowa Fagen Inc. ICM Inc. 110 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

VeraSun Energy VeraSun Energy N/A November 2006 second quarter 2008

Verenium Biofuels Louisiana Jennings, Louisiana Cajun Constructors Inc. Verenium Biofuels 1.4 MMgy

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground sugarcane bagasse/energy cane Start-up date

undeclared N/A N/A February 2007 May 2008

Synopsis of progress Construction is complete, and testing has begun. A grand-opening ceremony is slated for May 29. Congratulations Verenium Biofuels Louisiana!

VeraSun Hartleyn LLC Location Design/builder Process technology Capacity Feedstock

Welcome, Minnesota Fagen Inc. ICM Inc. 110 MMgy corn

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time

Project Complete

VeraSun Hankinson Hankinson, North Dakota Fagen Inc. ICM Inc. 110 MMgy corn

Provista UBE Ingredients N/A January 2007 third quarter 2008

VeraSun Welcome LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

Location Design/builder Process technology Capacity Feedstock

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

VeraSun Dyersville Location Design/builder Process technology Capacity Feedstock

Janesville, Minnesota Fagen Inc. ICM Inc. 110 MMgy corn

White Energy Plainview LLC Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

VeraSun Energy VeraSun Energy N/A November 2006 second quarter 2008

Synopsis of progress According to the company Web site, construction continues. No further information was available at press time.

ETHANOL PRODUCER MAGAZINE JUNE 2008

Location Design/builder Process technology Capacity Feedstock

Plainview, Texas Fagen Inc. ICM Inc. 100 MMgy corn/milo

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Murex The Scoular Co. undeclared October 2006 second quarter 2008

Synopsis of progress N/A

51


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LACTROL

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The only antimicrobial with a “No Objection” letter from the FDA. LACTROL antimicrobial has an outstanding track record of maximizing ethanol production efficiency. It might even improve the marketability of your distiller’s grains. LACTROL antimicrobial targets only Gram-positive bacteria which negatively impact ethanol production, so it’s a superb ethanol processing aid. In addition, LACTROL antimicrobial is the only antimicrobial with an FDA “No Objection” letter for the use of co-products in animal feeds that were derived from ethanol fermentation. LACTROL antimicrobial is the de facto standard for ethanol processing efficiency and for regulatory compliance of your distiller’s grains. Call your PhibroChem Ethanol Sales Specialist at 800-223-0434 and ask about LACTROL antimicrobial.

The animals don’t object either. A division of Phibro Animal Health Corporation. © 2007. LACTROL is a registered trademark. All rights reserved.


introducing A C C E L L E R A S E ™ 10 0 0 e n z y m e ACCELLERASE™ 1000 is the f i r s t commercially available biomass enzyme specifically developed to provide biorefineries with an enzyme solution to help in the scale up from the laboratory to pilot and demonstration plants. This new breakthrough enzyme reduces complex lignocellulosic biomass into fermentable sugars. ACCELLERASE™ 1000 fills a large unmet need for a reliable biomass enzyme supply and offers the f i r s t true biomass enzyme solution for cellulosic ethanol production available today.

© 2007 Danisco US Inc. Genencor® is a registered trademark and ACCELLERASE™ is a trademark of Danisco US Inc. or its affiliates in the United States and/or other countries.

www.genencor.com


Patented design is ideal for ethanol plant service.

The 42˝ x 42˝ AutoLOK™ II makes unloading DDGS easy! Unload Fast With a 42˝ x 42˝ clear opening, the largest of any gate in its class, Miner’s patented AutoLOK II discharge gate unloads dried distillers grain (DDG), dried distillers grain with soluables (DDGS) and even wet distillers grain (WDG) with ease. Because of its enlarged opening, the 42˝ x 42˝ AutoLOK II improves the flow of the commodity and minimizes the need to manually break up large clumps.

Unload Easy The patented 42˝ x 42˝ AutoLOK II has the same working points and bolt patterns as a standard 30˝ x 30˝ gate for simple retrofitting. The AutoLOK II also features Miner’s rugged patented lost-motion automatic locking/unlocking mechanism which unlocks the gate before the door moves. This locking system allows the opening force to be applied directly to open the slide door – providing safer gate operation, reducing the risk of gate damage, lowering maintenance costs and keeping cars in revenue service.

Unload Reliably With more than 100 years of discharge systems experience and over 750,000 gates currently in service, Miner is the largest and most experienced gate manufacturer in the world.

To find out how the wide open spaces of the 42 ˝ x 42 ˝ AutoLOK II can ease your unloading of DDGS, contact Miner today.

© 2008 Miner Enterprises, Inc.

U.S.P. 6,899,038

www.minerent.com


We’re on the right path. As a world leader in agriculture and plant science, Syngenta is uniquely positioned to help the renewable-fuels industry reach its full potential. Today, our leading portfolio of crop protection, traits and germplasm products puts Syngenta at the forefront of maximizing yield to meet the needs of all corn end users. Meanwhile, as pioneers in plant expression of enzymes, we’re developing innovations that will increase the efficiency of the existing corn ethanol industry and create a platform for breakthroughs in biomass conversion. The next critical step is to apply that skill and knowledge to make cellulosic ethanol a sustainable, cost-effective reality. Syngenta is taking that next step. Now.

© 2008 Syngenta, Inc. The Syngenta logo is a registered trademark of a Syngenta Group Company.


:OU R P L A N T 56

Perfect Fit

J

ust after the Civil War, a group of Swedish settlers escaping famine and oppression in their home country made their way to north-central Kansas. There, they found a lush countryside, a dependable river and hearty soil for farming. These settlers were so taken with the natural beauty of the environment that they named it after their homeland Scandia, or “New Scandinavia.” Today, Scandia, Kan., is a small town with a population of 436. It might be easy to overlook this quiet community. Certainly, most travelers on U.S. Highway 36 would never guess that Scandia is also home to one of the smallest ethanol plants in the United States. At 10 MMgy, Nesika Energy LLC started production March 1. In 2001, representatives from Nesika began working with Dave Vander Griend of ICM Inc. on a way to utilize local resources more effectively. According to Andy Hill, plant manager of Nesika, the main exports from the area were “crops, cattle and kids.” Young people had a difficult time making a living in

the rural economy. Although bringing new industries to the area won’t be a “silver bullet,” it is a step in the right direction. The size of the plant may seem abnormal at a time when 100 MMgy facilities are the norm. However, in working with Vander Griend, the team at Nesika developed a careful strategy to use locally grown corn to produce ethanol and market the distillers wet grains (DWG) to local cattle producers, for which the smaller capacity was ideal. According to Hill, Nesika is a scaled-down version of a 110 MMgy plant. The company owns a 28-acre site west of Scandia, but the facility, including roads, only requires five acres. The management team at Nesika believes a similar facility could be developed on only two acres of land, yet still produce 10 MMgy. A plant built on this “two-acre” model would be able to fit into an urban environment, realizing a savings in many of its shipping costs.

ETHANOL PRODUCER MAGAZINE JUNE 2008


LOCATION GENERAL CONTRACTOR PROCESS TECHNOLOGY CAPACITY FEEDSTOCK ETHANOL MARKETER DISTILLERS GRAINS MARKETER CARBON DIOXIDE MARKETER BROKE GROUND START-UP DATE

Scott Whitefoot, general manager of Nesika, points out that the plant doesn’t have dryers or thermal oxidizers because the 76, 000 tons of DWGs produced anually are going to local cattle producers, primarily Premium Feeders. He says this allowed Nesika to realize a significant savings. “We save 10 percent on our initial investment and 30 percent of our operating costs,” he says. According to Hill, a significant savings is also realized in not using unit trains.

Scandia, Kan. Free Country Design & Construction Inc. ICM Inc. 10 MMgy corn Poet Ethanol Products Nesika Energy LLC N/A December 2006 March 2008

“Our plant is small enough that we can ship all our ethanol by truck,” he says. Hill believes if this style of plant were to be built in Africa or Europe, which lack rail infrastructure for unit trains, a plant with a smaller footprint has a distinct advantage. “They don’t have the capacity for [unit trains], but they do have the capacity for trucking,” he says. For now, the company is focused on producing ethanol in Scandia quickly and efficiently. “Our goal is to get the most out of a kernel of corn,” Whitefoot says. By limiting its reliance on fuel ethanol as the

primary source of revenue, Nesika believes it’s a better fit with its geographic region, and an indication of things to come. Nesika is located in Republic County and estimates that the county and adjoining neighbor counties produce 56 million bushels of corn per year. The plant will consume 3.6 million bushels of corn grown by north-central Kansas and southcentral Nebraska producers. All in all, Nesika doesn’t expect to have to go further than 50 miles to procure corn. Nesika Energy shipped its first load of ethanol 110 miles to McPherson, Kan., on March 13. It remains to be seen if this smaller design will catch on. However, in the current economic climate, smaller may indeed be better.

—Craig A. Johnson

PHOTO: NESIKA ENERGY LLC

ETHANOL PRODUCER MAGAZINE JUNE 2008

:OU R P L A N T

NESIKA ENERGY LLC

57


:INTHEFIELD

I

t isn’t only grain prices that are skyrocketing these days. Prices for all three major plant nutrients—nitrogen, phosphate and potash—have climbed dramatically, as well. The market for diammonium phosphate in Tampa, Fla., for example, was $1,100 per metric ton in early April, compared with $255 in January 2007, which doesn’t include transportation costs in a farm or retail margin. “When you see price increases of this magnitude, it’s not just one fundamental driver,” says Mike Rahm, vice president for market analysis and strategic planning for Minneapolis-based The Mosaic Co. “It’s typically from a number of different things.” First on the list of multiple factors is increased demand. While India and China are often cited as the two growing economies increasing demand across the agricultural sector, Rahm says increases in soil nutrient use are also seen in Brazil, Argentina, Malaysia, Indonesia, Vietnam, Thailand and Pakistan. “It seems like in every corner of the globe, farmer economics—in spite of the increase in many crop input prices—are still very, very good,” Rahm says. “Producers are expanding planted acres and using crop practices to boost yields. It all boils down to the doubling of the pace of growth for crop nutrients worldwide.” That increase in demand is added to an increase in input costs for fertilizer manufacturers. “If you follow natural gas markets, they climbed up to $10 to $11,” Rahm says. Parts of the world where natural gas had been historically cheaper—such as the Commonwealth of Independent States

Perfect Storm for Fertilizer Prices (formerly the Soviet Union), which is a large supplier of nitrogen in the world market—have seen prices approach market value. In the case of phosphate, the sulfur used in the manufacture of diammonium phosphate has leapt from less than $100 per metric ton in India in early 2007 to $700 per metric ton in April 2008. Lastly, the fertilizer industry is emerging from a decade of difficult times, Rahm says. “Fertilizer prices are high now, and fertilizer companies are making money now, but during the first part of this decade, that certainly was not the case,” he says. As a result, the United States lost production capacity with nearly 24 anhydrous ammonia plants closing during the downturn. Today, U.S. anhydrous capacity is 40 percent less than it was at its peak in the late 1990s. However, total world nitrogen supplies have been helped by increases in urea production in the Middle East and China. Similarly, phosphate producers consolidated and closed plants during the past decade, resulting in today’s U.S. rock phosphate production being 30 percent less than in the mid-1990s. The loss in capacity has made it difficult for suppliers to respond to the demand surge and higher prices. The world’s supply of potash, the third plant nutrient, comes from just 12 countries, led by Canada, Russia and Belarus. “When the demand surge hit, after a long period of stable demand, it tightened things up quickly,” Rahm says. “To complicate things, there was a mine in Russia that flooded in late 2006 that exac-

erbated the situation.” Much of the increased demand for potash is coming from China, India, Brazil and Southeast Asia, he adds. The combined impact on farm fertilizer costs is significant. Rahm’s economic analysis shows that if a Midwestern farmer was paying spot prices this spring, he would be paying $155 per acre for nitrogen, phosphate and potash. “That’s roughly a $100-per-acre increase in fertilizer cost from five to six years ago,” he says. “On the other hand, when the price of corn goes from $2 to $6 [per bushel], the farmer economics still look very good to us.” Such high fertilizer prices are expected to stimulate further innovations in crop management and nutrient efficiency, which have steadily been improving. In the early 1970s, USDA data shows three pounds of nitrogen, phosphate and potash was applied for each bushel of corn harvested. Today, 1.5 pounds is used for each bushel of corn harvested. While much of that has come from corn genetics improving crop yields, another portion has come from improved application practices. Some of the newest—precision agriculture technologies and time-release fertilizers, for example—are likely to become more attractive and cost-effective for American corn growers. —Susanne

Retka Schill

PHOTO: SUSANNE RETKA SCHILL, BBI INTERNATIONAL INC.

58

ETHANOL PRODUCER MAGAZINE JUNE 2008


When it comes to treating your water problems ... we don’t kid around. When you need experience, you need Buckman. For over 60 years, we have been solving water-related problems for our customers. We are committed to delivering solutions that are uniquely designed to help you increase productivity, improve quality, and give you a return on your investment. Other suppliers have chemicals.... only Buckman adds experience and knowledge for a total system approach.

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:UP FRONT

Forward Thinker

K

erry Nixon has nearly 30 years of experience in agricultural management, first in the livestock feed industry and, for the past nine years, as general manager for an ethanol plant. In 2001, he moved from Golden Triangle Energy Co-op Inc. in Craig, Mo., to Central MN Ethanol Co-op in Little Falls, Minn. He says he wishes he’d been able to join the ethanol industry when he was a lot younger, but his experience has proven useful to CMEC. Under Nixon’s management, the ethanol plant has invested in new technologies that could ease its dependence on increasingly volatile commodities. In 2006, the co-op installed a wood-waste gasifier that would eliminate its need for natural gas. This year, it began a feasibility study with SunOpta Bioprocess Inc. and Bell Independent Power Corp. to explore an adjacent wood-based cellulosic ethanol plant that would tie in with the gasifier. Q: How has your job changed since you started? A: Quality control over incoming corn and outgoing distillers dried grains is becoming a more important part of my job, and has changed everyday requirements of the plant. When the ethanol industry first started, quality wasn’t a major deal. Now we’re being inspected by the U.S. Food and Drug Administration for antibiotic residues, and we’re trying to hold distillers dried grains more consistent so the feeders know they’re getting a consistent product.

Q: Why did you pursue a gasification system and a cellulosic ethanol plant? A: We have to look at protecting our shareholders’ investments, and make sure that the future of the plant is viable and profitable. We look at this co-op as being a manufacturer of energy. If this cellulose plant comes in, we should be totally energy self-sufficient. The only things we’ll buy are corn and wood. We’re in the northernmost region of the Corn Belt and the southernmost region of the woodlands. We only have corn to the southwest of us, and we are surrounded by other ethanol plants, which is why we didn’t expand our corn-based plant. Yes, there’s more corn available, but at what price? Water is another issue. A good thing about the cellulose plant is we won’t need additional water. We will capture the moisture inside the wood, and that will be used in the fermentation process. We’re also looking at a technology to be more of a closed-loop system to preserve water during corn fermentation.

Q: What’s the biggest challenge facing the industry? A: I hope readers evaluate the publicity that’s out there. There’s so much negative press. A lot is so off-the-wall or wrong that I think our biggest challenge is to educate the public, and make it aware of what this industry is and what it can do. They’re blaming us for the price of everything, but we’re just a small portion of the inflation. Energy is what’s driving up the price. Because we’re new, we’re easy to pick on. We have a big challenge in front of us to get the message out. We also need to get automobiles to use a higher percentage of ethanol and make blender pumps available so consumers can decide how much ethanol to put in. Q: Do you have any suggestions for the industry? A: Slow down expansion to let the demand catch up with the supply and investigate all new technologies of manufacturing cellulosic ethanol. —Anduin Kirkbride McElroy

Q: What’s the most rewarding aspect of your job? A: I really enjoy what I do. After working for this many years, it’s really rewarding to be able to work in a dynamic industry that’s creating jobs and markets for all types of families. We’re helping employees and also local communities. When we create a market for farmers, they spend those dollars in the local community, not overseas. It’s not just the industry, but it’s also the people I work with at the plant, other general managers, and people at the Renewable Fuels Association and Renewable Products Marketing Group.

Name Kerry Nixon Title General Manager Plant Central MN Ethanol Co-op in Little Falls, Minn. Hometown Frederick, S.D. Education Bachelor of Science in Business Administration from Northern State College in Aberdeen, S.D.

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ETHANOL PRODUCER MAGAZINE JUNE 2008


Rise Above the Rest Glass-Fused-to-Steel Process Tanks Faster Construction. Sidewalls are built from the ground up with no need for cranes.

Superior Quality. Factory engineered Vitrium glass coating handles temperatures and pressures. TM

Easy Maintenance. Smooth interior coatings are less porous than stainless steel.

Economical Cost. Glass-fused-to-steel tanks are cost effective in terms of materials and construction time.

16 weeks â&#x20AC;&#x201C; submittal until delivery.

To learn how glass-fused-to-steel process tanks can be utilized in your ethanol production operation, call 815-756-1551. Engineered Storage Products Company I 345 Harvestore Drive I DeKalb, IL 60115 815-756-1551 I www.aquastore.com Š 2007. Engineered Storage Products Company. Vitrium is a trademark of Engineered Storage Products Company.


:FLEXFACTOR 62

GM Launches E-Flex Propulsion Systems

I

n mid-January 2007, General Motors Corp. unveiled its vision for a future world of automobiles driven by electricity. At the center of its commitment to this view is a family of electrically driven propulsion systems dubbed EFlex. The “E” stands for the electric motor that turns the wheels, and “Flex” represents the flexibility in fuel sources that can be used to generate the electricity that powers the motor, including E85, biodiesel and synthetic fuel. The E-Flex system is being engineered specifically for small and mid-size cars, the first of which the company is calling the Chevrolet Volt. The Volt isn’t GM’s first foray into electric vehicles. In 1996, the company launched the EV1 to comply with California’s zero-emissions vehicle mandate. The company ultimately disbanded the program, an act that became the focus of a 2006 documentary, titled “Who Killed the Electric Car?”

“The EV1 ‘died’ because it had limited range, limited room for passengers or luggage, couldn’t climb a hill or run the air conditioning without depleting the battery, and no device to get you home when your battery charge ran low,” says Robert Lutz, GM vice chairman of global product development. “The Chevrolet Volt is a new type of electric vehicle. It addresses the range problem, and has room for four to five passengers and their stuff. You can climb a hill or turn on the air conditioning and not worry about it.” This will all be accomplished with a 6-foot-long, 375-pound, T-shaped lithium-ion battery located down the center of the vehicle and under the rear seats. The battery can be fully charged by plugging it into a 110-volt outlet for approximately six hours, which is expected to deliver 40 miles of all-electric city driving. To extend that range, a one-liter, three-cylinder, turbocharged engine—fueled with E85, gasoline or even potentially a fuel cell—would create enough electricity to replenish the battery. For a 60-mile daily commute, drivers could expect to average approximately 150 miles per gallon. GM aims to roll out the Volt by 2010.

In the meantime, the company has been conducting durability tests of lithium-ion batteries from two companies, A123Systems Inc. and Compact Power Inc., using an advanced computer program that duplicates real-life vehicle speeds and cargo-carrying conditions. “Production timing of the Volt is directly related to our ability to predict how this battery will perform over the life of the vehicle,” says Frank Weber, global vehicle chief engineer of the Chevrolet Volt and E-Flex Systems. “The challenge is predicting 10 years of battery life with just over two years of testing time.” The company is also preparing to integrate the batteries into test vehicles, called mules, for on-road tests. “Extensive analysis in our battery labs is an important step in proving this technology,” Weber says. “We expect to further validate these batteries when they are integrated into engineering development vehicles.” —Jessica Ebert

The GM E-Flex management team stands with the Chevrolet Volt concept car at the New York Auto Show on March 19 in New York. PHOTO: EMILE WAMSTEKER, GENERAL MOTORS CORP.

ETHANOL PRODUCER MAGAZINE JUNE 2008


WE HAVE ETHANOL FERMENTATION

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We think before we act, and use our industry leading technical experience to help make you successful. Our knowledge is your knowledge.

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TRUSTED FERMENTATION INGREDIENTS When you buy from Lallemand Ethanol Technology, you get the highest quality fermentation products.

EDUCATION Our Alcohol School held annually was the first to bring higher learning to the ethanol industry. Check out “The Alcohol Textbook” we publish at www.ethanoltech.com

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TM The “e” mark and the “stylized e” are registered service marks of the Ethanol Promotion and Information Council.


:BUSINESS 64

Impacts of the Weak U.S. Dollar

A

s uncertainty about the general economy continues to rise, one result could be of concern to the ethanol industry: the weakening U.S. dollar. Historically, the U.S. dollar has experienced an incremental downturn decade by decade. It is the economy’s natural response to a trade imbalance. How will this affect the ethanol industry? One result that affects all existing corn-based ethanol producers is the rising corn export market. In addition to high corn prices, this rise in international corn demand could be problematic for producers, according to John Ewen, senior vice president of investment banking for Ardour Capital Investments LLC. “Of the commodities that the corn ethanol plants themselves are exposed to on the input side, a weak dollar is generally not positive for their business,” Ewen says. “The 2 billion-bushel corn export market is even more sought after now. Because of the weak dollar, our corn looks like a bargain from an international standpoint.” In addition, although most

ethanol producers are currently earning profits through the domestic market, the United States could become a net exporter of ethanol in the future, according to Kermit Nash, officer with Minneapolis-based law firm Fredrickson & Byron. “What I see is an increased look at marketing ethanol internationally,” he says. “If you look at ethanol as a commodity and a product that would be useful for trade, people are going to start looking internationally at how we get ethanol off of the shore.” The weak U.S. dollar also impacts project development, particularly through the increased cost of building materials, such as stainless steel, because much of the materials come from other countries, according to Nash. “If we were to buy [stainless steel] here, we’re paying for it to be sourced from somewhere else (outside the United States), and in turn, we’d be paying a premium for those goods,” he says. “Because some of the larger builders aren’t buying in large volumes like they were before, they can’t leverage buying power because they’re not as busy as they were in the past.” Meanwhile, a weak U.S. dollar hasn’t dampened foreign investor appeal because foreign currency is valued more in the United States, according to Nash. Even with an

unstable credit market—both domestically and internationally—equity investments continue to be coming into Wall Street banks amid regulatory and monetary policy changes imposed by the federal government, which influences internal policies for lending and credit. “The credit market hasn’t leveled out, so we’re seeing an uptick in the involvement of larger or parent banks looking at projects in the U.S.,” Nash says. “The credit market has affected the world, no question.” Like ethanol, the U.S. dollar is a commodity that is susceptible to cyclical downturns in terms of its value, whether domestically or internationally. Despite its current shortfalls, optimism remains underpinned by positive state and federal regulatory support, along with project ingenuity that could ease the bearish condition on the weak U.S. dollar. “Whether it’s an infusion of foreign equity or debt sources for funding projects, or even the extra effort by some of the larger ethanol producers to find ways to make projects work, I wouldn’t be depressed about the market at all,” Nash says. “There are certainly a number of sites that have a lot of strengths and technology improvements that will continue to get financed in order to endure the tough economics, regardless of the devalued U.S. dollar.” —Bryan Sims

ETHANOL PRODUCER MAGAZINE JUNE 2008


The power of G Answering the global call for ethanol

Hereâ&#x20AC;&#x2122;s great news for fuel ethanol plants: a brand new Alfa Laval decanter for the 50-110 MGY plant capacity. At a whopping 3,500 G, the SG2-700 decanter produces the driest stillage and the clearest centrate in its class. Yet it uses no more energy than a much smaller unit. And with the renowned reliability of all Alfa Laval spent-grain decanters, the SG2-700 curbs maintenance costs as well. Sending the power NEW! SG2-700 of G straight to your bottom line. Come see us at FEW 2008 in Booth 420.


:FINANCE 66

DiSC: A Tool to Enhance Team Communication By Jesse McCurry

P

Many organizations utilize DiSC for supervisor training, coaching and employee developeople are different. ment. The results inform employPersonality styles and approaches ees what his/her dominant style(s) to communication, while making us are and supervisors can use the unique, can also create tension framework to make informed choicand uncertainty in the workplace. es on how to deliver tough mesRather than letting unstated differ- sages and resolve conflict. For ences go unchecked, a tool exists example, high “Ds” tend to be to identify, appreciate and build on forceful, strong willed, driving and ambitious. A high “S” those differences. tends to be more calm, “We’ve found a tool patient, predictable and that has very much unemotional. One can become part of our firm imagine a situation culture,” says Donna where these two personFunk, member of ality types might clash. Kennedy and Coe LLC. The role of DiSC is not to “It helps new employees say one style is better and supervisors alike than another. It is a tool communicate better for to help us recognize the the benefit of the client.” differences and provide DiSC, a behavioral McCurry strategies for mitigating assessment, has been used for years by more than 50 mil- and building on those differences. High “Ds” can be dealt with by lion people. A group of psychological tests developed by John Geier focusing on results, and by providand based on the 1928 work of ing options so that they don’t feel a psychologist William Moulton loss of control. High “Is” want peoMarston, the four-quadrant model ple’s involvement and recognition, tests four aspects of behavior by and they fear rejection or loss of exploring one’s preferences in approval. A supervisor will know word associations. DiSC is an that a staffer who scores high in acronym for Dominance, Influence, this category will tend to wing it, Steadiness and Conscientiousness. trust people over facts, and tend to Ethanol managers need test- be disorganized. Each personality ed tools not only to enhance plant trait has its own inherent strengths production but also to enhance and weaknesses. Understanding the different their most critical resource: their behavioral styles is a powerful tool people. “When it comes to behavioral that can also be applied in sales styles, there is no right or wrong,” and vendor relationships. An says Robyn Heinz, human ethanol plant employee may need resource consultant at Kennedy and Coe. “We just have to recognize the differences and adapt our approach to fit the style of the person we are working with.”

to secure a piece of land for an expansion. If the seller of land is conscientious, one will learn to key in on performance, logic, questions that will allow the seller to demonstrate their knowledge, and respond to requests with information and evidence. A chief executive officer can use lessons from DiSC in governance issues. If a board member is unusually blunt and focused on the bottom line, strategies exist to enhance communication by focusing on efficiency and results. Rather than get defensive, DiSC teaches an appreciation of differences in behavioral styles and enhances team communication skills. Supervisors have the most day-to-day contact with your employees, and good communication is one of the keys to their success and that of your organization. DiSC is a powerful communication tool that allows people to understand themselves and how to adapt their approach to maximize their relationships with others.

Jesse McCurry is a business development specialist at Kennedy and Coe LLC. Reach him at jmccurry @kcoe.com or (316) 691-3758.

ETHANOL PRODUCER MAGAZINE JUNE 2008


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:LEGALPERSPECTIVES 68

Understanding Insurance Policy Arbitration Provisions By Christopher H. Yetka

A

rbitration provisions are is often as expensive as full-fledged litcommon in first-party igation, and includes discovery and property insurance poli- motion practice. 4. It can be difficult to get a strong cies. Appraisal clauses are invoked when an advocate as an arbitrator. While arbiinsurer and policyholder cannot come trators are supposed to be neutral, insurance companies use to agreement on the value the same arbitrators time of property damage. and again, and they are Pursuant to the provision, almost universally strong each party selects an imparadvocates for the insurers’ tial appraiser, who in turn positions. Policyholders selects an “umpire.” A decimust make sure that their sion by any two is binding. arbitrators are equally Parties typically bear the strong, or run the risk of loscosts of their own appraiser ing control of the process. and half the cost of the This is particularly important umpire. since the two arbitrators are Similar language has Yetka typically picking a third, begun to creep into thirdparty liability policies, including direc- “neutral” umpire. Because insurers will tors’ and officers’ policies, and since come before umpires time and again, 1985, by endorsement to commercial it is important to make sure that the general liability policies. Rather than umpire is not biased in any way. An simply requiring parties to arbitrate the umpire can unconsciously be swayed amount of coverage, the new provi- by the prospect of future work. 5. Policyholders should not be sions require the parties to arbitrate forced to travel to participate in the existence of coverage. For many companies, arbitration mandatory arbitrations if they could provisions are initially attractive have instituted a lawsuit in their home because they are thought to reduce jurisdictions. 6. The arbitration provision can the expense of litigation. However, the threaten legal presumptions in the opposite may be true. For example: 1. In litigation, most courts require interpretation of insurance contracts. some form of alternative-dispute-reso- Most courts treat insurance contracts lution procedure before trial. The par- as contracts of adhesion, and all ambities can select arbitration, or some guities and uncertainties must be interother form of alternative-dispute-reso- preted in the policyholder’s favor. There is a risk that those same prelution, such as mediation or mini-trial. 2. A binding arbitration provision may take away the right of appeal. Arbitrators may be more inclined to “split the baby” when not subject to review. When the very existence of coverage is at stake, an unfavorable and inequitable outcome in arbitration can eliminate coverage. 3. Arbitration, particularly before the American Arbitration Association,

sumptions will not be applied by arbitrators, especially if the arbitrators are not lawyers or familiar with insurance law. 7. If more than one policy is triggered, an arbitration provision may double the litigation costs. For example, if an action against a company and its directors implicates both employment practices liability and directors’ and officers’ coverage, and only one policy contains an arbitration provision, a policyholder may be forced to invoke arbitration to obtain coverage under one policy and litigation for the other. For the reasons listed above, when an arbitration provision shows up in a liability policy, policyholders are well advised to seek the advice of counsel and their broker to determine if the provision threatens to reduce the very coverage they are seeking.

Christopher H. Yetka is a trial attorney with Lindquist & Vennum PLLP whose practice is devoted to commercial litigation, particularly insurance recovery disputes. Reach Yetka at cyetka@lindquist .com or (612) 371-2416.

This article is only a general summary for information purposes and does not constitute legal advice. Consult a qualified and experienced legal advisor for your specific situation or particular questions.

ETHANOL PRODUCER MAGAZINE JUNE 2008


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ETHANOL PRODUCER MAGAZINE JUNE 2008


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Ecologically Boosting Corn Yields Nebraska researchers studying intensified corn management systems believe itâ&#x20AC;&#x2122;s possible to increase corn production by 50 percent without using any more land, and at the same time improve its environmental impact. By Susanne Retka Schill

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decade ago the world population was burgeoning just as Thomas Malthus, the English demographer and political economist, had predicted 200 years earlier. Although ironically, the widespread famine he also said would be inevitable didn’t happen. Indeed, the United States was experiencing such huge surpluses in corn supplies that producers were looking for new markets to remedy low prices. Ken Cassman, director of the Nebraska Center for Energy Sciences at the University of Nebraska-Lincoln, recalls that major corn organizations officially adopted policies to not support research that would further increase corn yields. Other corn producers began to organize efforts to build ethanol plants with the intent of using up some of the local surplus. In spite of those surpluses, and with one eye on Malthus’ predictions of the dire consequences of population growth, Cassman and his fellow Nebraska researchers launched long-term studies on the ecological intensification of corn and soybeans, or ways to reach the crops’ maximum yield potential. In light of today’s high corn prices, the need to produce more corn for both feed and fuel is even more pressing. If the researchers can learn how to intensify corn production, total production could increase by about 50 per-

A

‘The challenge is how do we massively increase yields on existing land and at the same time protect the environment better than we ever have before.’

cent, without using more land and without factoring in yield gains from the modern genetic manipulation of corn germplasm. The maximum yield potential for corn is the highest yield possible in a given location taking into account solar radiation, temperature, length of the growing season


PHOTO: ACHIM DOBERMANN, UNIVERSITY OF NEBRASKA-LINCOLN

FEEDSTOCK

One goal of the ecological intensification project at UNL is to capture the maximum amount of energy from the sun and convert it to corn. This photo shows three plots in continuous corn rotations, at three fertilizer levels with the population density kept at 44,000 plants per acre. The canopy of corn leaves on the far right closes early in the growing season and captures nearly all the incoming solar energy.

and genetics of the crop itself, says Dan Walters, soil scientist in the Department of Agronomy and Horticulture at the

University of Nebraska. “In the Midwest, if there is no limitation in water and nutrients, corn’s yield potential is probably about 300 bushels per acre,” he says. “If you look at average productivity, we’re running about 60 percent of that, and that’s with irrigated corn. It’s lower with rain-fed corn.”

More With Less

Cassman

“If it was just a question of increasing yields we could do a great job,” Cassman says. “And if it was just the job of protecting the environment without worrying about yields that would be really easy: cut back fertilizer and don’t use irrigation. But the challenge is how do we massively increase yields on existing land and at the same time protect the environment better than we ever have before. That’s what’s being asked of corn ethanol systems.” Cassman continues, “What we have is proof of concept.” It requires producers to look at the whole system; coordinate every management decision synergistically with every other one; use greater precision in determining nitrogen rates and timing, and irrigation rates and timing; and to pay attention to the optimal planting date and optimal plant-


FEEDSTOCK

PHOTO: UNIVERSITY OF NEBRASKA-LINCOLN

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P.O. BOX 315 208 BAKER ST. N. DEER CREEK, MN 56527 PHONE 218.462.2607 FAX 218.462.2508 The intensively managed corn plot on the left is visibly more robust, in spite of its plant population being significantly higher. The plots are in a corn-soybean rotation, with two population density rates. M2 is the intensive management plot with nutrient inputs precisely matched to crop demand, and M1 follows standard recommended fertilizer rates.

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ing population for a given site, and not just for a region. “Putting all that together in one package we’ve shown you can get a substantial increase in yield and at the same time reduce the amount of fertilization and water that’s required,” he says. Nebraska researchers developed a tool, called the Hybrid-Maize Model (www.hybridmaize.unl.edu), that allows producers to simulate the growth of a corn crop, using current and historical weather data. Producers use that information and evaluate changes from different combinations of planting date, hybrid maturity and plant density. “In the first years of our research we tried to plant as early as possible with a target date of April 20 and we could never achieve greater than 260 bushels per acre,” Walters recalls. “We knew we should be able to get more.” After the Hybrid-Maize

model was completed, they altered the planting dates. “We discovered that for Lincoln, Neb.,—this heat island of a city—if we planted one month later we could approach yield potential.” The climate modeling and corn growth information built into the model matched the growth cycle of the corn plant with typical weather conditions. For two years, they hit 285 bushels per acre and 287 bushels per acre, by only changing the planting date. The third year was extremely hot, and the irrigated test plots reverted to more normal irrigated yields of 230 bushels per acre. Walters says that outside of the city’s heat island, the change in the optimal planting date was only one week later than the traditional planting date. “Every single farm is going to be specific based on analysis of the long-term climate data, which determines the optimal planting

ETHANOL PRODUCER MAGAZINE JUNE 2008


FEEDSTOCK

‘As we improve the amount of organic matter in the soil we also improve the sequestration of nitrogen and build up the amount of indigenous soil nitrogen.’

date and maturity level for the corn hybrid that gives the highest probability of maximum yield potential,” he says. Plant population studies sought to find the optimal population to maximize the amount of leaves in the crop canopy, which harvest energy from the sun, Walters says. They had to be careful, however, that the canopy wasn’t so large that the plants had to use more energy to stay alive and thus not as much making grain. Plant populations of 44,000 plants per acre worked best in some years, but when growing conditions weren’t favorable yields crashed, he says. The researchers concluded that plant populations of between 34,000 and 37,000 plants per acre were optimal. “We’ve never put economics to this,” Walters adds. “We’re looking at physiology.” Producers may be skeptical of the risk involved in increasing plant populations and the cost of buying more seed. Hybrid-Maize modeling is now being used in a series of experiments involving the fine-tuning of water use in irrigated fields. “In typical years, we find it is possible to cut back on water use during the vegetative growth periods,” Walters says. “You get more

bang for your irrigation dollar during grain fill.” The first year of a threeyear study has been completed comparing paired fields on eight farms. One field was under pivot irrigation managed normally by the farmer, and the other was managed by the researchers. “We learned you can reduce water use by 25 percent and garner the very same yield, just by using the model to evaluate the impact of water stress on various stages of plant growth,” he says. Actually, in six out of the eight farms, the researchers’ corn yielded four to six bushels more per acre than the farmer’s corn. “We could have failed, but we had the inside track on the odds because we had the analysis of weather data and a crop development model,” Walters says. Work is now underway to analyze optimal nitrogen fertilization by splitting the fertilization applications into four smaller applications through the irrigation system (a process dubbed fertigation among irrigators). “In large fertigation studies we increase nitrogen use efficiency by approximately 10 percent by splitting nitrogen applications versus applying it all pre-plant,” Walters says. On rain-fed fields, he adds, it is more economical to do a

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PHOTO: KEN CASSMAN, UNIVERSITY OF NEBRASKA-LINCOLN

single split application, putting some of the nitrogen down when planting and side-dressing the remaining nitrogen a month later.

Sequestering Carbon and Nitrogen In a series of experiments on soil sequestration, the researchers studied what would happen if the corn residue were managed differently in a high-intensity corn system. They choose a corn variety that produced a lot of residue and planted it at populations of about 37,000 plants per acre. Right after harvest, they applied 40 to 50 pounds of nitrogen per acre directly on the stover and plowed it under using a conservation plow. The conservation plow leaves about 30 percent of the residue on the surface. In the studies, they found that a normally managed irrigated corn crop that yielded 230 bushels returned about 4,000 pounds of carbon per acre per year to the soil. The intensively managed plots contributed 6,500 pounds per acre per year. “As we improve the amount of organic matter in the soil we also improve the sequestration of nitrogen and build up the amount of indigenous soil nitrogen,” Walters says. “The soil supplies more nitrogen to the crop in the following year and that reduces the amount of fertilizer needed.” Over the six years of the study, the soils with intensified, continuous corn have

Researchers at UNL experimented with managing the large amount of crop residue left after harvesting intensively managed corn fields with a goal of improving soil carbon sequestration capacity. Heavy residue from high-yielding fields such as the one shown here is treated after harvest with 40 pounds of nitrogen per acre to speed up the decomposition rate and promote formation of soil humus. They’ve found that, in turn, both carbon and nitrogen are converted to more stable forms that lead to carbon sequestration.

seen about a one-half ton positive gain of sequestered carbon per acre per year, he says. In comparison, the no-till irrigated corn, managed with current recommendations and not


FEEDSTOCK

pushed to maximize yields, was actually losing carbon at about one-half ton per year. The sequestration study turns current wisdom upside down because it uses some plowing, which many conservationists would like to ban as older methods were the source of much soil erosion. The researchers also looked at the globFixen al warming potential of the systems under study, factoring in fossil fuel consumption, carbon losses and trace gas emissions. The carbon sequestration capability of the intensive continuous corn system had lower net global warming potential. Compared with corn/soybean rotations, the carbon sequestration potential of continuous corn is four times greater, they found. The UNL work evaluating greenhouse warming potential of intensive corn production is important, says Paul Fixen, research director for the International Plant Nutrition Institute. “There is just a handful of studies in North America,” he says. The most important dimension of UNL’s work is the concept of refining a production system for local conditions using crop models like Hybrid-Maize, he adds. Fixen says the research that’s been demonstrated on a small scale in research plots needs to be scaled up. “We can grow

more corn using advanced techniques and we can markedly improve efficiency,” he says. “We need to refine these practices.” Getting that done will require the ethanol industry to get behind the research. “I’ve been amazed that the ethanol industry is not more involved in what goes on in the field— the production of feedstock supply and the cost of feedstock,” he says. While genetic manipulation techniques have helped the seed industry make great advances, at the same time, resources devoted to applied research to improve production practices have been dropping, Fixen says. He would like to see the ethanol industry become more involved, and to put political pressure on the USDA Agricultural Research Service and university agricultural programs to work more on productivity, efficiency and environmental impacts. EP Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her at sretkaschill@bbibiofuels.com or (701) 7384962.

Reduce Your Risk During Ethanol Rail Car Loading, Transportation and UnLoading 1

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TRANSPORTATION

RIDING

the Rails Railways are essential to an ethanol producer’s business. Ships are a viable option for only a small number of facilities and trucks can’t handle all of the volume. So rail it is. As the ethanol industry expands, so must the railroad’s capability to handle this commodity. By Kris Bevill Photos By Arian Schuessler

An Iowa Northern Railway locomotive moves tanker cars at Manly Terminal near Manly, Iowa. 82

ETHANOL PRODUCER MAGAZINE JUNE 2008


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TRANSPORTATION

I

n 1995, 32,000 carloads of ethanol were moved by rail, according to the Association of American Railroads. That number increased to 146,000 in 2006. “The ethanol industry is growing and, up until now, the railroads have not really had any problems handling that growth,” says Tom White, AAR communications director. “Rail is the most efficient way to ship ethanol at this point. I think rail is shipping 70 percent of what’s being produced now.” Although railroads ship the majority of U.S. ethanol, it’s a fairly insignificant amount when compared with the total commodities moved by rail. For instance, ethanol shipments made up less than 1 percent of the 32 million carloads of freight moved by rail in 2006. However, despite its insignificance when compared with other commodities, ethanol represents a growth opportunity for the country’s railroads. White anticipates ethanol

84

CARGO CAPACITY COMPARISON Capacity (units) Grain (bushels) Ethanol (gallons) Distillers Grains (tons)

Railcar 3,500 29,400 100

Barge 52,500 630,000 1,500

Truck 910 8,000 25

Shipping by rail has its benefits, but so does shipping by truck and barge. Trucks offer flexibility and producers are able to move product when it is most profitable. Barges allow the producer to save money by transporting the product in mass volume. However, rail is still the most used method of transportation for ethanol products and is predicted to remain the No. 1 choice for the foreseeable future. SOURCE: USDA

transportation via railway will continue to grow, and infrastructure needs to be expanded to accommodate that growth. New legislation has been introduced that, if passed, could help to speed that expansion. The Freight Rail Infrastructure Capacity Expansion Act would provide a 25 percent tax credit for investments made to increase rail capacity. White says the AAR-backed proposal was introduced in both the U.S. House and Senate last year but is still in the

committee process. So far, he says, the bill has received bipartisan support and he’s confident that with increased support it will be passed into law. The incentive could make a real difference for railroads because they would have more money to invest in improving other areas. “It may in fact lead to an increase in the capacity of the rail network,” White says. “The network has, in certain corridors, been operating at close to capacity for a few years. So there is defi-

ETHANOL PRODUCER MAGAZINE JUNE 2008


TRANSPORTATION

Transportation Capacity Facts Total rail freight is forecast to increase nearly 88 percent by 2035. Truck freight is expected to almost double by 2020, and driver shortages are projected to reach 219,000 by 2015. The lock and dam system of the country’s inland waterways is aging. According to the most recent ethanol transportation backgrounder released by the USDA in September 2007, all three modes of ethanol transportation—rail, barge, truck—are at or near capacity. SOURCE: USDA

nitely some need to increase capacity, especially when we look toward the future where the Department of Transportation is predicting the demand for rail freight service will almost double by 2015.” The proposed incentive would apply to railroads, and any business that wants to invest in railroad expansion. “For example, if an ethanol producer or a refinery made an investment in rail ter-

minal facilities so that they could make use of unit trains—that would be an eligible type of investment,” White says.

The Perfect Couple: Railroads and Terminals Railroads are willing to work with facilities from the start so that everything goes smoothly, according to White. As it becomes more popular for terminal operators to team up with railroads, pro-

ducers can expect to see better options and increased reliability from the transportation sector. One of the busiest terminals in the Midwest was born out of a partnership among Manly Terminal LLC, the Iowa Northern Railway Co. and Hawkeye Energy Holdings LLC. Manly Terminal opened for business in December in the heart of Iowa’s ethanol producing region. Company President Lee Kiewit says the terminal was built in response to a need for flexibility and reliability when transporting ethanol. He knew area producers were suffering because cars weren’t returning on time, and there was a lack of destination and off-site storage options. Kiewit and his partners decided to build a terminal that offered all of those things and in addition direct truckto-rail and rail-to-truck transloads. The 164-mile Iowa Northern short line runs diagonally from the terminal down to Cedar Rapids, Iowa, and offers several

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Tanker cars are filled with ethanol at a loading facility at the Manly Terminal in Manly, Iowa.

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Class 1 railroad connections along the way. Because of the short line’s route, Manly customers have more flexibility in choosing where and when to ship their commodities, Kiewit says. The partnership between railroad and terminal allows him to offer a permanent daily schedule so producers don’t have to come up with their own schedule. Lincoln Oil Co., a Greenville, S.C.based petroleum marketing business, began splash blending in 2005. In July 2007, the company started offering ethanol on a wholesale basis. After a frustrating summer spent trying to ship blended fuel, President Jim Farish read about the impact of mandated splash blending on the shipping industry and decided to build a terminal. He teamed up with a local short-line railroad, Greenville & Western Railway, to design and construct a terminal capable of offloading 96 cars in 18 hours. Farish will

invest up to $15 million to build the facility, which includes 13,500 feet of rail, and says he’s banking on mandatory blending increases to make his terminal successful. By partnering with a local short line, Farish’s customers will be able to connect with larger Class 1 railroads to more efficiently transport their goods. He expects his terminal in Belton, S.C., will be operational by the end of the year.

The Train of the Future Kiewit, Farish and White all consider unit trains a vital element in increasing the efficiency of the railroad infrastructure. Units usually consist of 85 to 95 cars loaded with the same product. Unit trains have been utilized by railroads for years to haul coal and grains. The recent increase in demand and production of ethanol has made shipping by unit trains more efficient than single-

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car trains. According to the USDA, the industry “rule of thumb” is that the ethanol railcar utilization rate for a unit train is 30 turns per year, compared with 12 turns per year for a single-car shipment. The benefits of using unit trains to haul ethanol are economic. Railroads need fewer cars because large volumes of ethanol can be shuffled from origin to destination. Producers and refiners benefit by paying less in shipping and car rentals. Farish is convinced a bulk loadout facility is the way to go and plans to accommodate units at his terminal. “It is taking us 10 to 22 days to deliver single cars to the Southeast markets that we serve,” Farish says. “Therein lies the problem.” Manly Terminal runs unit trains through on a regular basis, but Kiewit says they will probably fill more single cars than units in the near future. He believes

that, although units will become more common, there will always be a need for single-manifest cars and has no plans to discontinue that service.

Problems and Improvements Although unit trains make sense economically, some small producers can’t make enough ethanol to fill a unit train in one cycle. Therefore, more storage is needed in order for unit trains to be costeffective for them. Manly offers rental storage space, which has steadily remained two-thirds full since opening, Kiewit says. The added storage allows him to fill unit trains with ethanol from several producers. That option comes in handy for producers when considering that it takes three weeks for a 50 MMgy plant to fill a unit, he says. “By the time you figure all your costs and expense in filling that one train, for a 50 MMgy plant all the savings are gone and there’s no cash flow to

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ETHANOL PRODUCER MAGAZINE JUNE 2008

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TRANSPORTATION

‘The ethanol industry is in its infancy stage and as it has grown the railroads have been great at working with everybody and continuing to grow with the industry.’

the plant while they’re waiting for that last bit [of ethanol] to be produced.” More tank cars are also needed to accommodate the large amounts of ethanol being shipped by rail. White says tank car manufacturers have ramped up production to alleviate the back log that was created by increased demand for ethanol. Shortages are not substantial, although there may be a few producers who would disagree, White says. Blenders like Farish aren’t accustomed to tank shortages. “Petroleum refiners are used to putting product in a pipeline and taking it off a very dependable number

of days later,” Farish says. “I anticipate a lot of pain and suffering in the next year during the learning curve to find out what works and what doesn’t work. I’ve been doing it for seven or eight months and it’s not fun. It’s been good for us, but it’s just not easy to manage getting cars.” Farish predicts that a battle could evolve between producers and refiners for tank cars, and that’s another reason adequate storage is a must for producers. “Producers are not going to be able to tie up the number of cars that petroleum refiners can financially afford to sit on,” he says.

Railroads also continue to work with developers to build terminals that can unload the large volumes of ethanol being shipped by unit trains. Currently, not many facilities are capable of handling unit trains but that will change, White says. “It all comes down to destination,” Kiewit adds. “There are going to be 20-car markets [and] there are going to be markets that can only take in two cars at a time. I think there’s going to be a large pull, with the Class 1 rails working with the short-line rails. Then, these short-line guys can kind of gather all those gallons off the Class 1 and distrib-

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TRANSPORTATION

just need to be patient. “It takes time to get permitting done, build tankage, get construction crews, get tanks certified and things like that,” Kiewit says. “And it’s all being done on a daily basis, and in different markets. The ethanol industry is in its infancy stage and as it has grown the railroads have been great at working with everybody and continuing to grow with the industry. You’re going to run into the average producer who doesn’t have his cars back this week and he’s going to cuss the railroad, but all in all it’s a big business and it’s a big world out there.” EP Each tanker car carries 24,900 gallons of ethanol, leaving some room for expansion.

ute 20 cars to this market and five to here and service those people on a daily basis. The Class 1 railroads can do what they do best, which is run the long miles.”

Kris Bevill is an Ethanol Producer Magazine staff writer. Reach her at kbevill@bbibiofuels.com or (701) 3730636.

Both terminal operators and railroad companies are confident that all these issues will be addressed and handled in an effective manner. Producers

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RESEARCH

THE GENETICS OF ETHANOL PRODUCTION

To sequence the maize genome, scientists first collect and purify DNA from maize plants in the laboratory. Purified DNA is "chopped up" to produce DNA small enough to analyze. A sequencing machine determines the actual order of about 1,000 DNA bases (abbreviated G, A, T, or C) at a time. By analyzing the sequence data with sophisticated computer programs, the fragments can be aligned by overlapping their ends. Repeated sequences throughout the genome make it difficult to match up the correct pieces. When the project is completed, researchers will know the sequence of all 2.5 billion DNA bases in the maize genome. SOURCE: NICOLLE RAGER FULLER, NATIONAL SCIENCE FOUNDATION

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RESEARCH

Two recently released genome studies are expected to provide answers to how to bolster the production of ethanol from corn and biomass. By Jessica Ebert

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L

ike the blueprint of a home showing all its support beams, plumbing and wiring, the genetic information carried in the cells of all living things provide information about the growth, development and persistence of those organisms. Boiled down to its basic building blocks, the deoxyribonucleic acid (DNA) of every human, plant, animal or microbe consists of four chemical components called nucleotides, which are denoted A, T, C and G. These molecules are grouped into segments called genes, which are the basic units of heredity. Genes direct the production of proteins and other molecules that ultimately define things such as how an organism looks, how it moves and how it responds to changes in its environment. To have access to the complete sequence of an organism is like being given an instruction manual for the construction of that form of life. Scientists mine these genetic sequences to learn such things as how bacteria cause disease because unlocking the genetic cues that lead to sickness can also reveal the key to prevention. Scientists hope the same will hold true for the production of biofuels; that by unraveling the information trapped in the DNA of various bioenergy feedstocks or the organisms associated with them, researchers will uncover the means to improve or optimize these feedstocks or to identify better enzymes for degrading cellulose and hemicellulose or for converting biomass into fuels. The genomes of several organisms linked to biofuels production have already been sequenced including the poplar tree and the microbes found in the termite gut. Now, researchers report the results of two sequencing efforts—one to sequence the corn genome and one to sequence a fungus that plays a pivotal role in the growth and productivity of the poplar tree.

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‘The first draft of the genome sequence is exciting because it’s the first comprehensive glimpse at the blueprint for the corn plant. Scientists now will be able to accurately and efficiently probe the corn genome to find ways to improve breeding and subsequently increase crop yields, and resistance to drought and disease.’

Corn’s Genetic Blueprint The effort to sequence the corn genome was initiated in the late 1990s. At this time, the National Corn Growers Association worked with Sen. Kit Bond, R-Mo., to advocate for the establishment of the National Plant Genome Initiative. This research program was ultimately established in 1998 with the long-term aim of exploring the structure and function of the DNA of certain plants, including corn. However, the sequencing technology available in the late 20th century was not advanced enough to deal with the corn genome. “The corn genome is as big as the human genome but more complex,” explains Patrick Schnable, a geneticist at Iowa State University who has been studying the

ETHANOL PRODUCER MAGAZINE JUNE 2008


maize genome since the early 1980s. “It was the corn geneticists who suggested that we first develop the techniques and reagents that we would need to sequence the genome. A lot of energy went into building these tools.” For example, because it’s not feasible to sequence an intact genome of billions of bases, an organism’s DNA is chopped into small fragments and sequenced. Those sequences are then pieced together and assigned to their respective chromosomes to provide a complete genome sequence. This latter step takes a significant amount of supercomputing power, which requires advanced software technology. ISU researchers led by Srinivas Aluru have developed algorithms and software that allow for more information to be extracted from genome sequences more quickly. By 2005, the time was right for the National Science Foundation, under the auspices of the NPGI, the USDA and the U.S. DOE to fund a three-year, $32 million project to sequence the corn genome. The effort is led by Richard Wilson who directs the Genome Sequencing Center at the Washington University School of Medicine in St. Louis, Mo. The team includes researchers from the University of Arizona in Tucson, Cold Spring Harbor Laboratory in New York and ISU. The completion of the first draft of the sequence was announced at the 50th Annual Maize Genetics Conference in Washington, D.C., on Feb. 28. “The first draft of the genome sequence is exciting because it’s the first comprehensive glimpse at the blueprint for the corn plant,” Wilson says. “Scientists now will be able to accurately and efficiently probe the corn genome to find ways to improve breeding and subsequently increase crop yields and resistance to drought and disease.” This draft

ETHANOL PRODUCER MAGAZINE JUNE 2008

PHOTO: IOWA STATE UNIVERSITY

RESEARCH

This experiment conducted in the Schnable lab at Iowa State University is designed to identify mutant plants (potential mutants tagged with orange stakes). Knowing the sequence of the genome gives the researchers the ability to identify genes which are responsible for mutant phenotypes or even specific traits.

covers 95 percent of the 2.5 billion nucleotides or A, C, G, T bases that make up the corn genome. “Although it’s still missing a few bits, the draft genome sequence is empowering,” Wilson says. “Virtually all the information is there, and while we may make some small modifications to the genetic sequence, we don’t expect major changes.” The variety of corn used in the project was developed by ISU and USDA researchers. Dubbed B73, this line is known for conferring high-yield properties to hybrids and is widely used to produce many commercial hybrids. Although scientists will

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PHOTO: IOWA STATE UNIVERSITY

RESEARCH

Research associate Mitzi Wilkening of the Schnable lab at Iowa State University works in the winter genetic nursery on Molokai, Hawaii. Sequencing the maize genome enables functional genomics studies.

spend the remaining year of the grant refining and finalizing the sequence, the genetic data is available to the public at www.maizesequence.org. Researchers are already studying the genetic data to find ways to make the corn plant more nutritious, more drought-resistant or more efficient for ethanol production among other things. Schnable’s team was one of several that, for instance, recognized that the corn genome contains twice as many genes as the human genome. Although it’s not intuitively obvious why this would be, he explains that the human genome directs the development of elements like the nervous system, which allows for thinking and responding to the environment. Plants don’t

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have this ability to reason. “Plants, in a sense, are more hardwired for solutions,” Schnable says. “They need more of that than we do.” Hence, they need more genes. In Schnable’s lab, they’re trying to mine the 50,000 to 60,000 genes of corn to find those associated with a phenomenon called hybrid vigor, or the likelihood that when you cross two varieties, the resulting hybrid plant will exceed the parents in height, yield and biomass—simply their vigor. “It’s like pulling the lever on a slot machine, sometimes it works, sometimes it doesn’t,” Schnable explains. “We’d like to figure out what’s going on inside the slot machine so that when we pull the lever we know it’s going to work.” In other words, the goal is to be able to predict which varieties should be crossed to make the best hybrid for properties like yield, starch content for ethanol production or lignocellulose for cellulosic ethanol. In addition, Schnable is trying to identify the genes that determine the plants’ cell wall composition. Whereas most researchers are trying to engineer lignocellulose crops with cell walls that are more easily digestible, Schnable is going the other way. “If we grow crops with cell walls that don’t break down easily, soil organic matter will increase and move carbon dioxide will be removed from the atmosphere,” he explains. It’s another form of carbon sequestration. “Having a genome sequence opens the door to all kinds of improvements,” Schnable adds.

A Fungal Genome In a second genome study, researchers associated with the U.S. DOE Joint Genome Institute recently reported in the journal Nature, the sequence of the fungus Laccaria bicolor. The mission of the JGI is to sequence and conduct data analysis on genomes selected by the DOE’s new bioenergy research cen-

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RESEARCH

The researchers will place the plant-fungus system under various constraints such as drought stress, nitrogen stress, cold and heat stress, and identify the genes involved in the organism’s ability to interact and collaborate to deal with those exposures. ters. The genetic information generated by JGI will aid in the centers’ mandate to develop biobased alternatives to fossil fuels. L. bicolor is a target organism for sequencing because it forms beneficial partnerships with plants. “Laccaria is a symbiotic associate of poplar,” says Jerry Tuskan, a plant geneticist and program lead for JGI’s Laboratory Science Program. “It’s a fungus that infects the root systems of poplar trees but the infection is actually beneficial to both organisms.” L. bicolor produces long, branching filaments that form a sheath around the root. These filaments also extend into the surrounding soil where they take in elements like nitrogen, phosphorus and potassium and transfer these nutrients to the plant. In return, the plant provides the fungus with sugars and phosphates, which the microbe needs to grow. “There’s a mutualistic exchange of responsibilities in a way,” Tuskan says. But how does this relate to bioenergy? Plants intended for biofuel production such as poplar, willow, switchgrass or miscanthus have to compete with land destined for raising food crops. So the lands that are economically available for biomass crops tend to be more marginal areas—lands where you would have to add nutrients or water to maximize productivity. “By modifying the relationship between poplar and Laccaria, we can plant or deploy poplar onto marginal lands without irrigating or fertilizing,” Tuskan explains. “The symbiotic relationship allows poplar to obtain more nutrients and tolerate drought better

ETHANOL PRODUCER MAGAZINE JUNE 2008

because the root system is enhanced by Laccaria.” This allows producers to capitalize on lands that may not have been available otherwise. Optimizing the relationship between poplar and L. bicolor for various soil conditions requires an understanding of the genes involved in the interactions between these two organisms. “The genome is a predictive catalog of genes contained in an organism,” Tuskan says. “Without the catalog we can do informative studies. We can make crosses and measure progeny and predict a genetic gain, but we do that without understanding the genes behind that gain. When you have the genome available it allows you to target and predict candidates.” Tuskan led the effort to sequence poplar in 2006, the first tree genome to be sequenced. He is also a member of the team of scientists who wrote the proposal to have JGI sequence the L. bicolor genome. “Now we have both genomes,” he explains. “We can maximize the benefits of that mutualistic relationship by studying how they interact and what they do to benefit each other.” This is the research direction that Tuskan is currently pursuing. One of the major insights into the Laccaria-poplar interaction provided by the fungal genome is that L. bicolor harbors a wealth of genes for the production of proteins that get excreted from the organism’s cells. “It turns out that these proteins are signals,” Tuskan explains. “When the protein comes in contact

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PHOTO: D.VAIRELLES & F. MARTIN

RESEARCH

This image shows mushrooms produced by the fungus Laccaria bicolor colonizing the seedlings of the Douglas fir.

of proteins was unexpectedly found in the Laccaria genome that allows the fungus to interact with plant cell walls, which favors the growth of the microbe. The Laccaria team is now trying to bring out the subtleties of these interactions by inoculating poplar with Laccaria and studying gene expression in both organisms all the way through maturation. “We’re trying to understand how the genetic networks between the two organisms communicate with each other.” Then, the researchers will place the plant-fungus system under various constraints such as drought stress, nitrogen stress, cold and heat stress, and identify the genes involved in the organism’s ability to interact and collaborate to deal with those exposures. “Hopefully we’ll learn from that and be able to regulate how poplar will be able to tolerate drought or nitrogen limits in the field,” Tuskan explains. “Natural selection optimized the relationship for survival in the wild,” he says. “But what we can do now is optimize this community for bioenergy production.” EP Jessica Ebert is an Ethanol Producer Magazine staff writer. Reach her at jebert@bbibiofuels.com or (701) 738-4962.

with poplar it is recognized by poplar.” This chemically mediated familiarity allows the fungus to intercalate between the cells of poplar and infect the root system. In addition, a second class

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OUTLOOK

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The Other Factors As the media pegs corn ethanol as a principal driver of high food prices and escalating world hunger, are more powerful causes being overlooked? By Tom Bryan

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OUTLOOK

et off by the reproach of central bankers, the scorn of international finance ministers and the anxiety of world leaders, critics of ethanol now hold the renewable fuel partly-to-wholly liable for mounting food prices and world hunger. While prominent columnists like Paul Krugman of The New York Times join in, painting ethanol as the barefaced culprit of food riots and starvation, more serious drivers—skyrocketing oil prices, rising populations, mounting beef consumption—enjoy amnesty in this debate because they are seemingly irrepressible. Ethanol, on the other hand, is a product of choice, its ardent new critics say. It is an expendable alternative that can and should be stopped. The rising cost of food and its ugliest manifestation, hunger, togeth-

S

Finally, if our planet is truly becoming increasingly food constrained, what role—what piece of the planet’s new energy puzzle—should ethanol and other biofuels be consigned to?

er represent a grave planetary dilemma. The World Bank estimates that a doubling of food prices over the past three years could potentially push 100 million people in low-income countries deep into poverty. Complex problems can sometimes be solved with simple solutions, and that’s precisely what well-intentioned folks seek in calling for an end to ethanol. But are they misguided? Is their rush to blame ethanol for rising food prices and world hunger shortsighted or worse, perilous? To even begin to answer those questions it is necessary to examine the other, some might say primary, factors driving up food costs and causing food shortages worldwide. While considering these drivers, it’s important to question pervasive claims that each, unlike ethanol, can’t be stopped, controlled or reduced.

Population Growth Earth’s human population is growing. The amount of arable land on the planet is not. That alone is enough to increae the value of crops, land and food. Speaking at the Biomass ’08 Conference & Trade Show in Minneapolis in April, University of Minnesota ecologist David Tilman said the world’s population has exceeded 6.3 billion people and is headed toward 9.5 billion by 2050. “We’re on a steep population growth curve,” he said. “People around the world are consuming more of everything—not just food—and in the

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OUTLOOK

World Population Growth 10

8 Population in billions

next 50 years the population will grow by another 3 billion people.” Population experts like Werner Fornos, head of Global Population Education, a think tank in Washington D.C., say the vast majority of the world’s population growth is occurring in parts of the world where people already face social unrest and “brutal poverty.” On his Web site, www.globalpopulationeducation.com, Fornos says it took all of recorded history for the earth’s population to reach 1 billion people by 1830; it doubled to 2 billion by 1930; 3 billion by 1960; 4 billion by 1975; 5 billion by 1986 and in the past decade hit 6 billion. Most of the growth, of course, is occurring in developing regions of the world where massive urbanization and a rising middle class mask the extreme poverty and hunger that

6

4

2

0

1830

1930

1960

1975

1986 Years

The World’s population is projected to hit 9.5 billion by 2050. SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

1995

2007

2050


OUTLOOK

still remain. Some experts are saying that the world is simply experiencing the early stages of “overshoot”—consumption beyond capacity to sustain it. At a recent speaking engagement in Witchita, Kan., Fornos called population growth the “real issue facing humanity” and suggested four solutions to curbing it, the Witchita Falls (Texas) Times Record News reported on Earth Day, April 22. Fornos said it is imperative to eradicate female illiteracy; provide employment opportunities

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for women; reduce infant mortality rates so families in developing nations are not enticed to have more children to make up for those that may die; and establish universal access to the knowledge and means to voluntarily control family size, the Times Record News reported. If these things occur, Fornos said, he believes the world population could be stabilized at 8 billion people by 2050. Therefore, despite widespread claims that population growth can’t be

reined in, experts like Fornos say it would be perilous not to try.

Rising Beef Consumption Tilman, best known in the biofuels industry for his groundbreaking work with mixed-prairie grasses, said that in addition to growing populations in developing parts of the world, rising incomes there are allowing millions of people to transition from subsistence diets of mainly grains to those including beef. This dietary shift is accelerating the demand for grain around the world at a rate that is “much greater than the world’s farms can produce,” and that is contributing to higher grain, land and food prices, he said. In 50 years, Tilman said, the typical person living in the world is projected to be 140 percent more wealthy, with constant buying power. But the world doesn’t have to wait a half century to witness this phenomenon, says Brian Jennings, executive vice president of the Sioux Falls, S.D.-based American Coalition for Ethanol. China and other rising economic powers are competing with the western world for scarce resources (oil, food, land), driving up the price of almost all commodities. “The growing middle class in China and India are acquiring wealth and they want to upgrade their lifestyle and live like Americans do,” Jennings says. “Now, instead of eating rice, vegetables and maybe chicken, they’re adding more beef to their diet. They’re moving to higher quality and higher cost products. That appetite—that demand—is causing a significant increase [in grain and food prices] globally.”

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OUTLOOK

‘Maybe part of the problem is that we, as an industry, have not done an effective enough job explaining to the media that only one-third of the corn kernel is the starch used in the ethanol production process and another one-third of the kernel ends up as very high-quality, high-protein livestock feed.’ Tilman points out that it takes about 7 pounds of grain to produce 1 pound of beef. In fact, by the time a feedlot steer is slaughtered it has consumed 2,700 pounds of grain yet weighs just over 1,000 pounds. Given these facts, it’s not hard to see why more than one-third of the world’s grain is now used to feed livestock—and why that amount will inevitably increase unless per capita beef consumption decreases or plateaus. Reductions are unlikely, though. According to a recent report by the Food and Agriculture Organization of the United Nations, annual per capita meat consumption in developing countries rose from 24 pounds per person to 64 pounds per person during the past four decades. Total meat consumption in the developing world has increased nearly five-fold in the same period, and global meat production overall is expected to double by 2050. This makes livestock the fastest growing sector of global agriculture, the FAO says.

at $119. The U.S. dollar is continuing to fall against the euro. At the pump, the national average price of a gallon of

regular unleaded gasoline was more than $3.50 at press time; diesel hit $4.20.

Skyrocketing Oil Costs Crude oil prices, and subsequently gas and diesel prices, are pushing further into record territory each day. At press time in late April, crude had settled at $117 a barrel after peaking earlier

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OUTLOOK

Rising Cost of Crude Oil

120

Average cost per barrel

100

80

60

40

20

0

1968

1978

1988 Year

1998

2008

(projected)

Ten years ago, crude oil prices fell to less than $16 per barrel. This year, crude is expected to average $101.

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

Oil prices have more than doubled since last spring, and they’ve increased 20 percent since the start of 2008. In fact, that single driver—wildly high oil prices—is arguably the pre-

dominant force driving up food prices worldwide, many experts say. “There is no doubt in my mind—and independent studies show this—that energy costs are the primary culprit of high

food costs,” Jennings says. “There’s no single culprit, but the cost of oil is at the top of the list.” Jennings explains that the high cost of oil impacts the entire food production, processing and delivery supply chain. “Just think about the fuel needed to grow, harvest, process, package and ship food from the farm to the warehouse to the grocery store,” he says. “There’s simply no doubt that energy is the main culprit in this.” Indeed, the rising cost of oil might be impacting food costs and food availability in less transparent ways, too. The United States spends roughly $1 billion a day on imported oil. “A fraction of these funds would more than make up for the shortfall in the World Food Program,” Toni Nuernberg, executive director of the Ethanol Promotion and Information Council, recently stated in a media release. Likewise, Securing America’s Future Energy, a Washington, D.C.based nonpartisan organization, released a report in mid-April warning that a confluence of factors including high oil prices, a growing U.S. trade


OUTLOOK

deficit, and a sinking U.S. dollar have created a “self-reinforcing cycle” that is adversely affecting the nation’s economy. “The more oil we import, the more dollars we send overseas, increasing our trade deficit and weakening the dollar, which pushes the price of oil up even further,” said SAFE President and Chief Executive Officer Robbie Diamond. “That cycle has to be broken.” Contrary to some reports, there’s solid evidence that ethanol production has actually helped keep oil and gas prices down. The Wall Street Journal reported in March that a notable Merrill Lynch analyst said world oil prices would be 15 percent higher than they currently are had U.S. and Brazilian ethanol not been serving as a volume extender on the global market. In fact, many experts agree that ethanol represents one of only a handful of practical options the world currently has to immediately decrease its reliance on oil.

Weak Dollar Hedging While Jennings isn’t willing to link corn prices to oil prices, he’s certain

‘Almost all developing countries have benefited on net from the increase in global economic activity. So part of what we're observing is perhaps an unavoidable side effect of rising prosperity worldwide.’

that high commodity prices—corn, oil, gold, etc.—are linked to the diluted U.S. dollar. “As the financial market finds itself in turmoil and the housing and credit markets are in a place of considerable difficulty, hedge funds, speculators and traders are trying to find a home for their money,” he explains. “There’s no doubt that commodities have been hot spots for them. I think the current price of corn (trading at $6 a bushel) is artificially high because of this speculation. … How much, I don’t know.” In other words, Jennings is saying

oil, corn and other commodities are "inflationary hedges"—something traders buy when the dollar is weak. Some experts say this is why a weakening American dollar not only causes higher food prices at home, but indirectly higher food prices abroad, despite increased exports. The thinking goes something like this: A weak U.S. dollar inflates oil prices, which causes higher food prices, which prompt more food shortages (in the world’s poorest nations), which equates to a higher probability of people going hungry somewhere on the planet.


OUTLOOK

Meanwhile, there is also strong evidence that rising grain and food prices are, in part, a result of a marked, overarching uptrend in the value of all global commodities. While not letting biofuels off the hook, the International Monetary Fund recently acknowledged this uptrend. “Higher commodity prices should elicit a supply response with some lag, and almost all developing countries have benefited on net from the increase in global economic activity. So part of what we're observing is perhaps an unavoidable side effect of rising prosperity worldwide,” one IMF analyst recently said in a column posted on the organization’s Web site. Farmers in poor countries stand to benefit from higher grain prices, too, the analyst added. Nathanael Greene, senior policy analyst at the Natural Resources Defense Council, agrees with this logic to an extent. Joining a panel discussion at the ’08 Biomass Conference & Trade Show that included Tilman and Mascoma Corp. founder Lee Lynd, Greene said commodity prices are being bolstered by all sorts of factors, biofuels included. “If you step back a little bit, it’s easier to see the complexity of this issue. We’ve got an increasing population, increasing incomes, changing diets, more demand for beef,

increased energy demand … and obviously increasing demand for biofuels from food crops,” he said. “All of these things are attributed to increased grain prices. Increased grain prices are leading to higher prices for land. We’ve already seen land prices go up substantially in the United States and that’s going to trickle throughout the rest of the world.” Population growth … rising beef consumption … the skyrocketing cost of oil … a weakening U.S. dollar: The list of factors causing high food prices doesn’t stop here. There is clear evidence that poor harvests caused by drought and bad weather played a huge role in driving up global food prices in the past 18 months. Ironically, climate change induced by the world’s dependence on fossil fuels might be to blame for the increased frequency of extreme weather. In fact, the UN's World Food Programme claims that the single most important factor contributing to food insecurity worldwide is, not biofuels, but drought. Urban and rural sprawl, too, is eating up more and more of the world’s arable cropland each year. It’s possible that these and other drivers of high food prices are downplayed by the mainstream media as often as the impact of corn ethanol is overplayed. Ethanol produc-


OUTLOOK

ers say their detractors ignore or trivialize the fact that U.S. corn exports grew last year, that distillers grains is playing a greater role in meeting the world’s protein needs, and that the corn ethanol industry won’t go on expanding forever.

Forgetting Something? The United Stated used nearly 20 percent of its corn for ethanol production last year. Of course, the type of corn used to make ethanol, yellow No. 2 field corn, is not directly consumed by humans. “Ethanol production uses field corn—most of which is fed to livestock with only a small percentage going into cereals and snacks,” Nuernberg recently stated. “In fact, only the starch portion of the corn kernel is used to produce ethanol. The vitamins, minerals, proteins and fiber are converted to other products including sweeteners, corn oil and high-value livestock feed, which helps livestock producers add to the overall food supply.” In fact, the U.S. Grains Council has reported significant increases in distillers grains exports, which are now being shipped all over the planet. In 2007, the U.S. ethanol industry produced 14.6 million metric tons of distillers grains for the global livestock market.

“Maybe part of the problem is that we, as an industry, have not done an effective enough job explaining to the media that only one-third of the corn kernel is the starch used in the ethanol production process and another onethird of the kernel ends up as very high-quality, high-protein livestock feed,” Jennings says, adding that it is even justifiable to assert that had it not been for the ethanol industry increasing the demand for corn, the United States might not have been able to meet the unprecedented new global demand for protein. “Without ethanol—without distillers grains—how would we be feeding all of these livestock species?” he asks. “We can and should make the case that thanks to ethanol we are able to provide significantly more feed than we otherwise might be. We’ve got to do a much better job of hammering that point home.”

Corn Surplus, Exports Rise Just how much credit—or blame—should be given to biofuels for driving up global food prices is debatable. The International Food Policy Research Institute in Washington says biofuels production accounts for onefourth to one-third of the recent increase in global crop

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prices. Last year, the UN’s FAO said biofuels are on track, under current polices, to drive food costs up by 10 percent to 15 percent. These reports are being questioned by ethanol industry experts who argue that while a record amount of corn went to ethanol production in 2007, the U.S. corn surplus grew to more than 1.4 billion bushels and exports grew by 6 percent. “That’s another remarkable point that a lot of people are overlooking,” Jennings says. “The National Corn Growers Association expects corn to reach another record this year in light of $5 and $6 corn prices. This idea that we’re not exporting corn—that we’re not feeding the poor—is totally wrong.” Jennings points out that in April the USDA released its World Agricultural Supply and Demand Estimates report. The report projects that corn use for ethanol production will be down by 100 million bushels this year. “That’s not a huge decrease, but the fact that it’s a decrease at all is significant,” Jennings says. “They’re saying corn use will be down because the rate of the ethanol industry expansion is slowing. More importantly, they said corn use for animal feed will be up by 200 million bushels, and corn for exports will be up by 50 million bushels. So the latest, best available data from the USDA says corn for ethanol is on the decline, while corn for exports and feed is on the rise. This is an incredibly important point for us to be making in the midst of all these criticisms.” In addition, the NCGA maintains that trend-line yields for corn are going up significantly. In 2007, U.S. farmers produced more than 13 billion bushels of corn—an all-time

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record—and the NCGA thinks they can get to 15 billion bushels per year by 2015. American farmers get about 150 bushels per acre today, but seed technology companies like Monsanto think they’ll be getting 200 to 300 bushels an acre by 2030. Finally, while few in the U.S. corn ethanol industry are willing to say corn ethanol production is nearing its limits, there’s good reason to believe that it will forever be consigned to a fixed percentage of the U.S. corn crop. In fact, the U.S. corn ethanol industry’s rate of growth has slowed dramatically in the past few months as existing plants and plants under construction now bring the industry to within 1.5 billion gallons of its 15-billion gallon pseudo-ceiling prescribed by the new renewable fuels standard. “I have mixed feels about that,” Jennings says. “I would certainly hesitate to send any sort of signal to the public that the end of corn ethanol is near … or that we’re reaching a ceiling. On the contrary, I would suggest that with biotechnology, improved hybrids and improved farming technologies, we’re going to continue to see yields increase. I think we’re going to be able to make more ethanol from corn than most people realize—and we’ll do it while keeping corn available for food and feed worldwide.” EP Tom Bryan is editorial director of Ethanol Producer Magazine. Reach him at tbryan@bbibiofuels.com or (701) 738-4962.

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PHOTO: CURTIS DALE

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COMPLIANCE WITH C O M P A S S I O N A surprise visit from the ethanol compliance inspector doesn’t have to be an adversarial event. A Minnesota woman is trying to make her regulatory work educational, proactive and fine-free— wherever possible. Her simple advice is to know your permit’s inclusions and limitations, keep your records organized and up-to-date, and appoint a point person responsible for your plant’s compliance. And, if your plant receives a warning letter, act quickly, cooperate with regulatory authorities and take immediate corrective measures. A lapse in compliance doesn’t have to escalate into a fine. By Sarah Smith

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thanol plant developers, plant managers, energy attorneys and farmers often grouse about regulatory agencies impeding their progress. Regulatory work can be a difficult job, and Sarah Kilgriff, an air quality inspector, understands that the welcome mat isn’t always put out to greet her. But she and her employer, the Minnesota Pollution Control Agency, are making a concerted effort to work with developers and plant operators to arrive at a mutually satisfactory goal—ethanol plants that operate within the bounds of a regulatory framework and by doing so are publicly palatable. Regulatory work by its very nature can be adversarial and, too often, offending operators or unsuccessful developers, although a distinct minority, can highlight the darker side of regulation when violations come to light and receive public attention. That was the case in late 2007, when an ethanol refinery in Granite Falls, Minn., received one of the largest fines in state history, $300,000, for numerous violations and a recalcitrance for compliance that prompted a change in plant leader-

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REGULATIONS

ship. In March 2008, developers of another Minnesota plant said they might not build after the MPCA ordered them to undergo a costly Environmental Pribble Impact Statement process. The study is estimated to cost $500,000. For the most part, however, the state’s 17 ethanol plants operate quietly— and out of the public eye.

The Permitting Process: Nuts and Bolts Developers proposing to build an ethanol plant “would be well-advised” to consult the MPCA’s Web site, advises Public Information Officer Ralph Pribble. “We have a guidance document that walks them through all the things they would need to get their necessary applications in line, ready for expedient processing,” he says. Although that sounds easy enough, permits are where both developers and operators stumble. The permits, reviewed and issued for plant developers by a team of state engineers, spell out the laws that need to be complied with. It’s a comprehensive document, Pribble says. “With some years of experience now in ethanol we’ve got good insight into what works and what doesn’t, insight into siting facilities, lining up their supplies, their transportation, that sort of thing,” he says. Developers who skimp on the early stages, submitting only the bare essentials and incomplete or incorrect information, can find the later stages arduous and time consuming. Time is money. Construction cost increases can eat up a budget while a developer waits for permit approval. Because there are so many new facilities under construction, the MPCA assigns ethanol plants to reviewers on the biofuels sector team for processing. “It’s really important that when regulated parties are proposing a new facility

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they pay attention to what needs to be submitted and make sure they submit good quality information so we can process those applications as quickly as possible,” Kilgriff says. One hiccup in the application can lengthen the review time, and that can be frustrating for developers.” The operating permit is vitally important in other ways: it’s what Kilgriff will use during a compliance inspection. It spells out conditions such as production capacity, emissions guidelines and, most importantly, recordkeeping requirements. “A large portion of our inspections will include a thorough review of record keeping and that can include records of inspections of control equipment and records of monitoring parameters in the facility,” Kilgriff says. If plant operators or developers have an information gap, she’s there to assist. “The agency doesn’t provide any formal training, however, I think it goes a long way for these folks to know that it’s OK to contact their regu-

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latory agency and be familiar with the compliance and enforcement staff who are assigned to them. I would far and away rather answer questions ahead of time than to see compliance issues get out of hand.”

Assessing Environmental Impact One of the thornier issues the agency deals with are environmental studies. Environmental assessment worksheets (EAW) and environmental impact statements (EIS) are, according to the agency, a standardized public process designed to disclose information about the potential negative environmental effects of a proposed development and ways to avoid or minimize them before the project is permitted and built. Typically an EIS is a more thorough, costly and time-consuming process than an EAW, depending on the scope of the project. “Minnesota’s initial threshold for mandatory environmental review is

expansion or new production of 5 million gallons [per year],” Pribble says. “Anything above that is a mandatory EAW. The threshold for a mandatory EIS is 125 million gallons [per year] new or expanded but the MPCA also has discretionary authority to order an EAW or EIS for any facility for which we are the responsible governing unit.” Developers can also voluntarily complete an EIS, but Pribble says that hasn’t happened yet with an ethanol plant. A bill that never made it to committee this session would have lowered the mandatory threshold for an EIS to 50 million gallons, adding to the costs of development. The proposal came at the same time the Minnesota Environmental Quality Board convened an interagency group to examine the impact of the state’s ethanol plants— existing and proposed—on the state’s groundwater supply. Critics say the added burden was unnecessary since proposed plants already undergo a rigorous review.

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The MPCA’s discretion to order an EIS, even for a smaller plant, recently shocked the industry when a proposed 70 MMgy plant near Erskine, Minn., was ordered to undergo such a review. Plant officials said the estimated cost, $500,000, and the delay—estimated at 500 days—would essentially halt the proposal altogether. “We believe a wellscoped project with timely communications and cooperation could be done in less time,” Pribble says. It was the first time the MPCA had exercised such discretion for an ethanol plant. “During consideration of public comments on the draft EAW we reassessed the data provided in the EAW and determined we had inadequate information on the location and connectivity of groundwater and surface waters in the area, including nearby wetlands,” Pribble says. “We requested more data on those issues but in the end we didn’t have enough information to determine potential for significant environmental impacts. The recommendation for an EIS in this case

doesn’t mean we’ve determined the potential for significant environmental impacts, rather it means we don’t have enough information to make that determination.” Meanwhile, developers of the proposed Agassiz Energy LLC plant are reassessing whether they will proceed, and question whether they were being singled out for unnecessary scrutiny. Although there was some discussion as to whether the coal-fired plant would encounter some air quality issues, Pribble says that wasn’t the basis for ordering the EIS. It was the impact on local wetlands.

When Things go Wrong, and How to Avoid This Path Kilgriff got involved with one of the worst-case scenarios—the type she tries to prevent—in 2006 when she inspected Granite Falls Energy LLC. It was not operating in compliance with its permit, she quickly learned during an unannounced inspection.

Kilgriff is a seasoned inspector. A graduate of the University of Minnesota’s College of Natural Resources with a bachelor’s degree in conservation biology, she has been with the MPCA since 2002. She earned her stripes reviewing stationary source testing for her first two years. The past four years, she has worked in compliance and enforcement, inspecting 20 to 40 commercial facilities annually, depending on a schedule of commitments coordinated with the U.S. EPA. That schedule could include one to two ethanol plants a year, or as many as five to seven. Mostly spot inspections are conducted, just to keep the regulatory playing field even, she says. Minnesota’s 17 refineries currently produce 680 MMgy, according to the state Department of Agriculture, with four plants under construction. Yearend production could reach 1 billion gallons, the department estimates. In 2006, Kilgriff found that Granite Falls Energy had significantly exceeded

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‘I realize that not everyone is thrilled to see me show up at their facility and sometimes I get nervous glances from some of the facility staff but I have always been treated with respect on the job. I’m there to help.’

its rolling sum permit limits of 45 MMgy. The resulting overproduction in turn caused a host of ancillary violations. A facility with this type of permit must calculate its production each month and add it to the previous 11 months’ production to determine compliance with its 12-month rolling limit. Once the facility completes 12 months of production it can start doing the monthly “look-back” in which each month, total production must be within permitted capacity for the preceding 12 months. MPCA records show that GFE had regularly exceeded its production during that first year, and both the plant and agency differed on whether it was a deliberate act to increase revenues, or an oversight. GFE began producing ethanol in November 2005. At the time of Kilgriff ’s inspection, GFE did have permits pending to increase its production above the MMgy and to pursue other revenue streams for the plant, including oil separation, steam turbine electrical generation and anaerobic digestion. But the permits had not been approved, and weren’t likely to be as long as the facility was operating out of compli-

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ance. Kilgriff found that GFE was also producing wet distillers grains without a permit and exceeding water quality discharge limits. Kilgriff discussed air pollution issues and the failure to maintain pollution control equipment, inadequate record keeping and other issues with GFE. Then, GFE took an ill-advised path. Instead of issuing an immediate mea culpa and a pledge to decrease production and cease the violations, plant officials continued operating above the limit even after they received a formal notice of violation in early 2007. MPCA suggested issuing an Administrative Order to stop the violations. GFE argued that the agency was dragging its feet on the pending applications, frustrating attempts to make the plant profitable. But with the agency escalating the pressure like a snowball rolling downhill, GFE finally took some remedial steps. Company officials put Chief Executive Officer and General Manager Tracey Olson in charge to remedy its untenable situation. Olson immediately started scaling back production, and cooperating with the agencies. But his efforts came too late, GFE was already on

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track to receive a hefty fine. Olson declined to discuss the situation, but he likely saved GFE from itself. The penalty was assessed two years after the plant’s debut. It currently has a permit pending that would allow it to increase annual production to 70 MMgy. GFE entered into a Stipulation Agreement in which the plant agreed to take corrective actions and stay in compliance. It has. The Granite Falls fine was the largest ever levied against an ethanol plant. And although penalties have steadily escalated since 1999, neither Pribble nor Kilgriff see a trend that differs from other industry types. “Many of the original or earlier ethanol facilities in Minnesota have been in the business for some time and have had the opportunity to work out the kinks, with regard to how compliance with the air permits is managed,” Kilgriff says. “We have had many new plants come on line in Minnesota in the past couple of years and some of the larger penalties have been with those newer facilities not starting out on the right foot.” The MPCA understands the difficulties operators can encounter with a new facility, new technology and new equipment, so she suggests taking a proactive approach, Kilgriff says. That includes knowing your permit limitations, keeping your records in order, keeping current with maintenance and any new requirements, and keeping a line of communication open with the agency. It’s helpful if one employee is appointed as the “point person” during an inspection, one familiar with the records, their location and their provisions. Even though inspections are generally unannounced, they are regularly conducted and plants that keep track of the inspection schedules can help themselves by being prepared.

Kilgriff says she hasn’t encountered any hostility as a woman coming into a male-dominated environment, advising plant operators how to run their facilities. “Thankfully, by and large, I have an excellent relationship with the facilities I work with,” she says. “I realize that not everyone is thrilled to see me show up at their facility and sometimes I get nervous glances from some of the facility staff but I have always been treated with respect on the job. I’m there to help.” And, Kilgriff says, if in doubt about

ETHANOL PRODUCER MAGAZINE JUNE 2008

any compliance issue, ask. There’s no such thing as a dumb question. “Compliance takes cooperation and working together and that’s what I’m all about,” she says. EP Sarah Smith is an Ethanol Producer Magazine staff writer. Reach her at ssmith@bbibiofuels.com or (701) 6635002.

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MICROWAVABLE DISTILLERS GRAINS Winnebago, Minn.-based Corn Plus LLLP is interested in an innovative distillers grains microwave drying technology that could bring the facility one step closer to becoming energy independent. By Bryan Sims Photos By Doug Wollin

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ith more than 20 years experience in the industry, Keith Kor knows the impact of high energy costs on an ethanol plant, and how important it is to capitalize on existing resources to optimize energy efficiency. That experience and knowledge has prompted Kor, who became general manager of the 44 MMgy Corn Plus LLLP ethanol plant in Winnebago, Minn., in 1994, to implement several cutting-edge energy saving technologies. “Getting more value out of what you already have,” Kor tells EPM. “That’s the key right there.” Corn Plus is also driven to reduce its energy costs because of the potential for higher corn prices as fewer acres will Kor be planted this spring, compared with the previous year, and a growing demand for the commodity in the United States and overseas. With that in mind, it wasn’t surprising when in midMarch Corn Plus hosted a three-day pilot test on a distillers wet grains microwave drying process. Corn Plus is the first ethanol plant to express interest in such technology. The process was developed and patented by Cellencor Inc., an Ames, Iowa-based technology research company focused on developing processes that enhance ethanol production. The pilot test was designed to determine the economic feasibility of the unit in an operating ethanol plant. Madison, Wis.-based Alliant Energy Corp., the utility service provider for Corn Plus and marketer of Cellencor’s microwave drying unit, introduced the two companies. Alliant Energy met with Cellencor representatives about a year ago to help the start-up firm make connections with businesses such as Corn Plus, which was the first ethanol plant in Alliant Energy’s service territory. According to Dave Wentzel, strategic account manager for Alliant Energy, the facilitation of the pilot

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‘Microwaves use less energy to dry the product than natural gas systems because they work from the inside of the product out, as opposed to the outside of the product in.’

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A field engineer from The Ferrite Co. Inc. and visiting ethanol producers tour the 150-kilowatt mobile microwave test unit. The process is proving to be significantly more efficient and reliable than traditional dryers.

test at Corn Plus is one of a suite of services the utility company offers its customers. “Our goal is for our customers to be low-cost producers in the industry,” Wentzel says. “Cellencor is certainly a key component of that going forward.” In tests conducted at Iowa State University’s BECON Facility, Cellencor’s industrial microwave drying line was proven to be more efficient and reliable than traditional energy-intensive, natural-gas-fired distillers wet grains dryers. Initial calculations indicate the system should start paying for itself in two to five years, but the partners are hopeful that the commercial testing at Corn Plus will yield more conclusive data. Cellencor gets its microwave drying equipment from New Hampshire-based The Ferrite Co. Inc., which touts itself as the world’s largest industrial microwave manufacturer. Cellencor holds exclusive marketing rights to Ferrite’s technology globally. Using this technology, Corn Plus predicts it will result in a reduction in operating costs of up to 20 percent. “Microwaves use less energy to dry the product

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Corn Plus Operations Manager Matt Rynearson inspects a sample of the dried distillers grain product as it comes out of the microwave dryer. The material exits the dryer at approximately 10 degrees Fahrenheit cooler than it entered. The low temperature used by the microwave drying preserves the nutritional quality of the DDGs.

ing temperatureâ&#x20AC;&#x201D;200 degrees Fahrenheitâ&#x20AC;&#x201D;damage to amino acids in the distillers grains is reduced. That damage can dramatically impact distillers grains quality, according to Wicking. â&#x20AC;&#x153;It actually worked out very well,â&#x20AC;? Kor says. â&#x20AC;&#x153;The product dried well, looked very nice and smelled nice. With conventional drying you get variations in smell or color based on whatever dryer you have or how much syrup you have on it and so forth. This system didnâ&#x20AC;&#x2122;t affect those factors.â&#x20AC;? Although not all of the pilot test results were available at press time, the parties involved expect the results will be positive. So far, â&#x20AC;&#x153;the results we got from Corn Plus are very encouraging in terms of energy usage, environmental benefits, generation of carbon credits and lower water usage,â&#x20AC;? Wicking says. For Corn Plus, the microwave drying technology will not only allow the company to save on natural gas costs, but also to be a model for others in the industry looking to curb production costs.

Benefits Upon Benefits than natural gas systems because they work from the inside of the product out, as opposed to the outside of the product in,â&#x20AC;? says Cellencor President and Chief Executive Officer Bruce Wicking. Additionally, by using a lower heat-

In addition to reduced energy use and the resulting cost savings, there are other advantages to using the microwave technology, including reducing a plantâ&#x20AC;&#x2122;s water use. In a typical corn-based plant, it takes 3 to 4 gallons of water to pro-

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duce 1 gallon of ethanol. With the Cellencor microwave drying system, the company estimates that it could retain 20 percent to 25 percent of the water used in the drying process. “We can get the vast majority of the [water] and recycle it back into the plant,” Kor says. “My goal is to not only reduce energy costs but also reduce water consumption. Ethanol plants are getting bombarded with the water usage issue.” The microwave drying technology also reduces harmful volatile organic compound (VOC) emissions. Compared with traditional natural-gas-fired rotary drying drums, Cellencor’s microwave drying technology reduces the amount of dryer vapors from entering the regenerative thermal oxidizer (RTO) before exiting a plant’s outside emissions stack. “The emissions results looked very encouraging,” Kor says. ISU researched Cellencor’s enzyme-enhancement process on another ethanol plant coproduct—dried distillers grains with solubles. The technology adds enzymes prior to the low-temperature drying, improving the nutritional value of the coproduct 10 percent to 20 percent. After its tests at Corn Plus, Cellencor will continue to refine the design of its microwave drying process and conduct feed trials this year. As part of a long-term trial arrangement with ISU, Cellencor will compare dried feeds using the microwave technology

Patrick McIntyre, left, president of Lauridsen Group Inc. and Kurt Kimmerling, system sales manager of The Ferrite Co. Inc., discuss how uniform the wet cake product presentation is entering the microwave dryer.

with feed produced using conventional natural-gas-fired rotary drying drums, according to Wicking. “Obviously, we have further objectives in terms of extra benefits that come from using microwave dying, particularly in the area of

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Wentzel of Alliant Energy, left, and Wicking of Cellencor meet outside the testing facility. Their companies have partnered to market and install advanced microwave dryers in ethanol plants across the country.

nutritional advantages, but they’ll largely come in as a second tier development,” he says. The microwave technology can be applied both to new facilities and as a retrofit to existing plants, Wicking says. Depending on the physical nature of a particular ethanol plant, one method would be to remove an existing dryer, or locate the microwave dryer in a vacant building. Another option would be to install it outside in a 40-foot shipping container. This option would be especially useful for producers looking to supplement existing drying capacity with a modular type add-on. “[Installation] would be very noninvasive in terms of the way in which the technology can be placed within the plant structure,” he says. “It doesn’t affect operating conditions.” Cellencor stresses that its customer relations doesn’t end after installation. The company intends to offer additional products and services, including a warranty package to support the 20- to 30-year lifespan of the technology and a 24/7 maintenance service arrangement, which is part of its licensing and intellectual property

agreement with Ferrite, Wicking says. Cellencor’s technology has attracted the interest of four or five other ethanol producers both here and abroad. For the time being, however, the company is concentrating on the analysis derived from the pilot test at Corn Plus, its first potential commercial customer, Wicking says. “Once that is done and we’ve got our own understanding of the commercialization process and the full suite of benefits that are available from the technology to the plant, we’ll be able to rapidly expand the marketing of the technology across 2009 and 2010,” he says.

Synergizing Energy Efficiency Cellencor’s microwave drying technology would complement the variety of innovative technologies that already exist at Corn Plus as it evolves into a fully-integrated and energy independent “island.” The company’s innovative fluidized bed reactor began operation in 2005, enabling Corn Plus to cut its natural gas consumption by 52 percent. Similar to the microwave drying techETHANOL PRODUCER MAGAZINE JUNE 2008


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Environmental Sustainability, Process Efficiency. Wet distillers grains dried with the microwave process are tested to confirm proper moisture content. During the Corn Plus pilot test in March, the microwave consistently dried from a 65 percent moisture content to 10 percent in a single pass.

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nology, Alliant Energy helped Corn Plus adopt the fluidized bed reactor technology. According to Wentzel, these two technologies working in tandem would negate running a natural gas line to the facility. “We envision with the fluidized bed reactor and the Cellencor microwave technology that you would have a natural gas-less ethanol facility,” Wentzel says. Corn Plus also created a new revenue stream by installing two pelletizers—one for ash and the other for distillers grains. Corn Plus pelletizes or “prills” the ash residue from the syrup that’s burned in the bed reactor process and turns it into fertilizer. The company also pelletizes distillers grains at a maximum rate of 10 tons per hour. Corn Plus was the first ethanol plant in the United States to install wind turbines. The two turbines came on line in March and generate 4.2 megawatts per hour when operational. The wind turbines are used in tandem with an on-site electrical substation that Corn Plus added in 2002. For Kor, the reduced cost in natural gas usage coupled with naturally produced electrical power affixed on site is a crucial

step in meeting the plant’s target of energy independence. “The electricity that we produce is under a nickel per kilowatt,” he says. “You’re still using electricity to dry the distillers grains so you’ll have energy, but you’ll reduce all your natural gas from drying. You’ll still have electrical power at a reduced cost so you’re just swapping energy there.” To top off its accomplishments, Corn Plus joined the Chicago Climate Exchange in October 2007, making it the first independent ethanol producer to join and monetize carbon credits through the CCX. Carbon Green LLC and its partner Environmental Credit Corp. facilitated Corn Plus joining CCX. Reducing natural gas costs provided Corn Plus with $240,000 (63,000 tons) worth of carbon credits on the CCX and in April it was the first to execute carbon trading electronically via the CCX Trading Platform. EP Bryan Sims is an Ethanol Producer Magazine staff writer. Reach him at bsims@bbibiofuels.com or (701) 7384962

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BBI International

Biofuels Recruiting Staffing the Biofuels Industry

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Biomass Magazine is a trade journal serving companies that use and/or produce power, fuels and chemical feedstocks derived from biomass. Collectively, these biomass utilization industries are positioned to replace nearly every product made from fossil fuels with those derived from plant or waste material. The publication covers a wide array of issues on the leading edge of biomass utilization technologies, from biorefining, dedicated energy crops and cellulosic ethanol to decentralized power, anaerobic digestion and gasification. Itâ&#x20AC;&#x2122;s all here.

www.BiomassMagazine.com

For additional information please contact us at (701) 746-8385 or at advertising@biomassmagazine.com


INDUSTRY

A Quiet Giant Archer Daniels Midland Co. has kept the nameplate capacities of each of its plants a closely guarded secret for many years. After discovering its Cedar Rapids, Iowa, facility could produce as much as 820 MMgy, EPM wondered how such a large plant might impact the industry. By Craig A. Johnson Photos By Mark Trade

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ETHANOL PRODUCER MAGAZINE JUNE 2008

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ven as guarded companies go, Archer Daniels Midland Co. keeps company information extremely close to the vest. The company refrains from publicizing any capacity numbers associated with its individual plants, choosing instead to report its production total as a single sum of 1.1 billion gallons per year that it attributes to its Decatur, Ill, headquarters. When asked for individual plant capacities, ADM officials say they don’t distinguish between plants. Early in 2008, EPM was able to confirm, through various state environmental regulatory agencies, the nameplate capacity of each of ADM’s plants, which when added up equals 1,215 MMgy. The list includes what are now revealed to be three of the largest ethanol plants in the country. The three wet mills in Decatur (290 MMgy), Clinton, Iowa, (237 MMgy) and Cedar Rapids, Iowa, (420 MMgy) account for 947 MMgy of ADM’s overall capacity, or roughly 80 percent of its total production. Although these numbers have been verified by third-party sources, ADM declined to comment on the figures, or to be quoted in this feature. Also, these plants may not be producing at nameplate capacity. In July 2007, ADM announced plans to build two 275 MMgy dry-mill ethanol plants adjacent to its existing Cedar Rapids and Columbus, Neb., wet-mill facilities. For most ethanol industry observers, that announcement is consistent with the company’s commitment to biofuels. The two plants combined will add 550 MMgy to ADM’s current nameplate capacity of 1,215 MMgy for a grand total of 1,765 MMgy.

E

Biomass Magazine is a trade journal serving companies that use and/or produce power, fuels and chemical feedstocks derived from biomass. Collectively, these biomass utilization industries are positioned to replace nearly every product made from fossil fuels with those derived from plant or waste material.The publication covers a wide array of issues on the leading edge of biomass utilization technologies, from biorefining, dedicated energy crops and cellulosic ethanol to decentralized power, anaerobic digestion and gasification. It’s all here.

www.BiomassMagazine.com

Plant Name

MMgy

Status

Cedar Rapids, Iowa

420

Nameplate

Cedar Rapids, Iowa

275

Q3 2009

Clinton, Iowa

237

Nameplate

Columbus, Neb.

100

Nameplate

Columbus, Neb.

275

Q4 2008

Decatur, Ill.

290

Nameplate

Marshall, Minn.

40

Nameplate

Peoria, Ill.

100

Nameplate

Walhalla, N.D.

28

Nameplate

1,765 TOTAL

For additional information please contact us at (701) 746-8385 or at advertising@biomassmagazine.com.

Mega Complex Estimates With these new plant capacity numbers, the unearthing of ADM’s plan for Cedar Rapids, where the bigger of the two new plants is being built, is especially significant. The new plant is a dry mill designed to be expandable up to 400 MMgy. The current 420 MMgy plant, a coal-fired, wet-mill

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Pictured is ADM’s 420 MMgy wet-mill facility in Cedar Rapids Iowa.

facility, adds to this capacity, allowing for the production of 820 MMgy from a single site. It’s not clear, however, if ADM will produce 100 percent ethanol or both ethanol and sweeteners such as high fructose corn syrup (an option that’s available to a wet mill). If ADM chooses to dedicate the site just to fuel ethanol production, Cedar Rapids would produce at almost half the total capacity of Poet Energy or VeraSun Energy Corp. If Cedar Rapids were a state its ethanol production capacity would rank seventh, behind Indiana and ahead of Kansas once ADM’s construction and expansion are complete. There are many unknowns about the site, but the size of the facility poses some interesting questions for an industry already dealing with expensive feedstocks and negative press. According to Rick Kment, an analyst with DTN, a big consideration is going to be “feeding” the plant. Based on his calculations, a plant with that capacity would require 250 million to 300 million bushels of corn per year. The large gap between those numbers comes from uncertainty about the wet-mill process. It’s not clear how efficient the existing wet-mill plant is, and it could require more corn than a typical dry mill to produce the same amount of ethanol. Depending on the plant’s efficiency it could require anywhere from 685,000 to 800,000 bushels of corn a day. At the higher rate, that would require two 110-car unit trains seven days a week if the plant were in operation 365 days a year. When approaching this scale, considerations like power generation, transportation and general infrastructure characteristics are massive. “There are very few locations that are going to facilitate what they are doing,” according

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‘Between the business [ADM will do], the jobs they’ll create and the savings farmers will get by not having to ship their corn away from Cedar Rapids, I think it’s a real good thing.’

to Art Wiselogel, a manager in BBI International’s project development division. Synergies and economies of scale can be assumed, but because the existing plant is a wet mill, there are components that will not “carry-over” to a dry mill. Energy production is one aspect that would however, lend itself to the 275 MMgy dry-mill expansion. The current wet-mill facility uses coal for power generation. ADM could save money by expanding the capacity in the power generating part of the facility, rather than building a new power plant, Wiselogel says.

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The company’s ability to leverage existing infrastructure will be key to the plant’s expansion, Wiselogel says. Because ADM has the land and the infrastructure in place to expand, adding to the facility becomes a matter of how much risk they are willing to take.

Why So Big? Nathanael Greene, a senior policy analyst with the Natural Resources Defense Council in Washington, D.C., has seen the trend toward larger plants develop over the past few years. Most companies in the ethanol industry were

building 55 MMgy and 60 MMgy plants a few years ago, increasing to 110 MMgy more recently. ADM’s 275 MMgy drymill facility will be one of the biggest plants to come on line, once completed. “I don’t know why you’d want to have so much capital in one area,” Greene says. “It’s certainly out of step with what I understand the rest of the industry to be conceiving of these days.” There has in fact been a mini resurgence in the construction of smaller plants—one of them a 10 MMgy plant in New Mexico and another 20 MMgy facility in Kansas—but most new plants are still built to produce

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50 MMgy to 100 MMgy of ethanol. There may be some advantages, however, to building even bigger and utilizing economies of scale, Kment says. It doesn’t take that many more employees to staff a 55 MMgy plant than it does to staff a 110 MMgy plant. Most 55 MMgy plants employ 25 to 30 employees, while 110 MMgy facilities will only increase that to about 40 employees. Scaling the size of the labor force may be a distinct advantage for the company. Kment goes on to explain that ethanol production in the United States today is based on a manufacturing model. “Companies are looking for ways to cut the marginal cost per gallon,” Kment says. “By using such a large plant, processing more gallons per employee hour, there is a savings.” The real advantage, however, is in the company’s merged processes. Four 110 MMgy plants would require four loading segments, four fermentors, four rail loops, etc. In the same way that a 110 MMgy

ADM is constructing a 275 MMgy dry-mill ethanol plant adjacent to its existing wet-mill facility in Cedar Rapids, Iowa. The facility is expandable to 400 MMgy.

plant can realize economies of scale over a 55 MMgy competitor, ADM’s 820 MMgy facility could be designed to take advantage of these same economies,

albeit at a scale most companies cannot imagine. It would be difficult for another company to replicate what ADM is doing


INDUSTRY

in Cedar Rapids, according to Wiselogel. Finding a site is a significant challenge for companies interested in building new ethanol plants, and one that requires the kind of inputs this ADM plant requires will put it in a class by itself. “The primary reason you see corn-based facilities … reach a certain size is that the [area from which feedstocks are sourced] is increased to such a level that it doesn’t make economic sense,” Wieselogel says. “It is all about the transportation cost.”

It’s not yet clear how far ADM will have to go to procure its corn. Even using a feedstock as energy-dense as corn, there is a limit to how far the company can transport its feedstocks and still maintain the plant’s efficiency. The key to ADM’s strategy may be its location. The two 275 MMgy plants under construction in Cedar Rapids and Columbus are in the heart of corn country. Cedar Rapids is colocated with Class 1 rail serviced by Union Pacific Railroad and Canadian National Railway.

In addition, two short lines service the area and could possibly bring in feedstocks, or ship unit trains of ethanol. Although bigger may be better when it comes to economics, Greene is concerned about the environmental impacts of a plant of this size. He points out that a plant this large is bound to place a huge demand on the local aquifer. “The bigger you are the less of an excuse you have for not spending the right amount of money and doing the right amount of engineering to develop a good air and water pollution control system,” he says. Smaller companies can get caught off guard by state and federal air quality mandates, leading to expensive work arounds and retrofitting. However, for a giant like ADM, there is no place to hide. The tacit expectation is that a company like ADM has fully assessed its environmental impact and is prepared to comply with all local and federal laws.

Boost for the Local Economy For local corn growers, having a giant new customer will be beneficial. Iowa has a current production capacity of 2.3 billion gallons of ethanol, and another 1.14 billion under construction. Despite all of this ethanol being produced, about 2.1 billion bushels of corn left the state last year destined for export markets. Exporting is a marketing option that some growers are finding burdensome as transportation costs skyrocket. A redirection of corn from the export to the local market is a powerful advantage for local grain elevators as well. Rob Ball started working at the Lin Co-Op Oil Co. elevator in Springville, Iowa, when he was 18. Today he manages the elevator and has worked closely with ADM during his career. According to Ball, one of the biggest problems an elevator has is making sure grain is shipped out at the

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same rate it comes in. “[Demand from the ADM facility] is going to help the elevators in the fall because they’re going to have more daily consumption,” Ball says. Fall is a time when the shipping balance is most difficult to achieve because that’s when the corn is being harvested. According to Ball, having a plant that requires more corn is good news for local growers, but it may present a problem for ADM. The company will have two options for procuring their feedstock. “Either they’re going to pay to ship [corn in] or bump their local price,” Ball says. Shipping corn in may appear the cheaper feedstock option on paper, but any gains may be offset by transportation costs that continue to rise as fuel prices increase. In the end, more locally grown corn is going to stay and be processed by ADM in Cedar Rapids and that will be a boon for the local economy. “I think this plant will help the local economy much more than it could hurt it. Between the business [ADM will do,] the jobs they’ll create and the savings farmers will get by not having to ship their corn away from Cedar Rapids, I think it’s a real good thing.” Ball believes that despite the company’s secrecy about its true size, and production numbers, ADM has a positive effect on the local economy. “ADM takes a ton of grain out of this area, which saves the local farmers from having to ship it to Des Moines for export,” he says. At a time when transportation costs are soaring, this could be a lifesaver.

full capacity would require 250 million bushels of corn per year, at a cost of about $1.5 billion dollars. ADM has no doubt done the math and believes that this is the best way for it to grow. Looking around, it is clear that other companies have chosen a different path. Poet Energy currently operates 23 plants with a combined capacity of 1,236 MMgy with roughly another 200 MMgy under construction. VeraSun, after completing its merger with U.S. BioEnergy Corp., will

The Future of the Industry? All signs point to ADM’s model of the “mega plant” as being an anomaly. As this article goes to print, corn futures for December delivery are peaking at $6.20 a bushel. Even if the Cedar Rapids site were the model of efficiency, in order to produce at its

ETHANOL PRODUCER MAGAZINE JUNE 2008

own and operate 1,640 MMgy of nameplate capacity from 16 plants. None of these producers would comment for this story, but clearly they have a business model that doesn’t include focusing production in only a few areas. Evidently ADM sees the future of the industry differently. EP Craig A. Johnson is the Ethanol Producer Magazine plant list and construction editor. Reach him at cjohnson@bbibiofuels.com or (701) 738-4962.

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Commercial Biorefinery Update The clock is ticking on public acceptance of ethanol as the United Statesâ&#x20AC;&#x2122; corn-based industry is under relentless attack. With cellulosic conversion technologies as the ostensible lone saving grace for ethanol, EPM takes a look at what fruits the first-quarter â&#x20AC;&#x2DC;08 produced. By Ron Kotrba

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wo years ago the U.S. DOE began its long and arduous task of technology optimization and risk mitigation for commercial production of cellulosic ethanol. This was done through an award of $385 million to six large-scale projects. Even though the DOE is still cutting checks from this original award allotment, first quarter 2008 has seen a project funding revitalization of sorts as the department moves ahead with more grants totaling $114 million slated for four smaller demonstration projects. And there’s more—the department also issued a few separate grants in recent months to fund specific technology advances. But it’s not just taxpayer money fueling second-generation ethanol schemes, although federal backing certainly helps attract private investment. “We are tied into a lot of what’s happening in the private arena,”

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says Larry Russo, biorefinery technology manager within the DOE’s Biomass Program. “There’s been a tremendous amount of private money in the past 18 months—mostly venture capital— flowing into a lot of these projects making them catch fire a little bit, and getting the technologies out there.” But doing the research is not enough. “We need to do the research of course, but then we need to do the pilot testing with our partners, and then scale these things up to get to the point where it can attract financing on its own,” he says. “That’s what we’re doing at DOE—we’re buying down the risk by our involvement.” One of the big challenges still facing a U.S. biorefinery build-out is “techno-economical” in nature as Russo characterizes it. In other words, loose technology ends still need cinching up before big-money lenders have enough faith to strike a loan deal for

biorefinery projects. Thermochemically, this means improving syngas clean up. “We know that clean up is a very important step so we had a solicitation that was issued just this week (at the end of March) to address not only the clean up, but to address catalyst selection as well,” Russo reveals. Biochemically speaking, there is still the lingering need for more cost-effective and higher performing enzymes and more fruitful ethanologens. Despite all of this, Range Fuels Inc., which broke ground on its 20 MMgy wood-to-ethanol thermochemical plant in Soperton, Ga., is finding success. On April 1, the company announced that it had raised more than $100 million in series B equity financing. This is in addition to the $76 million DOE grant Range Fuels received along with a $6 million grant from the state of Georgia. The company says the $100-plus million will go toward

ETHANOL PRODUCER MAGAZINE JUNE 2008


the completion of construction on the 20 MMgy biorefinery. Russo confirms that Range Fuels is the only commercial-scale cellulosic ethanol plant under construction by the end of the first quarter of 2008. Three more projects that were part of the original $385 million award have completed what’s called a Phase One award. “We’re awarding these large projects in two phases,” Russo tells EPM. “This allows work other than construction to get started to meet the compliance issues—it allows them to dot their i’s and cross their t’s prior to construction.” Because federal money is involved, the national environmental protection act requires proof that a biorefinery project will not detrimentally affect the environment and, if there is a potential for ill effects, tactics to mitigate them must be presented. “All of this takes about a year,” he says. To enable progress to start earlier, the

PHOTO: RANGE FUELS INC.

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Range Fuels held a groundbreaking for its Soperton cellulosic ethanol plant, which will use wood and wood waste from Georgia’s pine forests and mills.

DOE decided to cut initial checks post haste to Range Fuels, Poet Energy, Abengoa Bioenergy and BlueFire

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acid hydrolysis pretreatment—BlueFire Ethanol. The company recently completed testing on decrystalizing, hydrolyzing and filtration equipment from B&P Process Equipment, a vendor out of Saginaw, Mich. B&P Process Equipment engineer Abbey Martin says decrystalization tests using its equipment yielded better results than data from the Izumi, Japan, pilot plant. “We believe that we can now design a commercial unit that will perform better and cost less than a design based solely on the pilot data,” Martin says. The vendor equipment testing is part of a larger, “integrated investigation” being conducted for final engineering of BlueFire’s full-scale 17 MMgy municipal solid waste biorefinery, the location of which will be at a landfill in Corona, Calif.

Recent ‘10 percent’ Demos The more recent DOE grant award of $114 million announced in first-quarter of 2008 is for four “10 percent” demonstration facilities with two additional projects to be named later. These projects are smaller scale than the original six and are expected

to demonstrate commercial viability by building biorefineries producing 10 percent of an intended commercial volume. Recipients of this latest grant are ICM Inc., Lignol Innovations Inc., Pacific Ethanol Inc., and Stora Enso North America. Awarding the 10 percent projects before announcing funding for the six commercial-scale biorefineries may have made more sense to some, but there is a method to the DOE’s madness. “When Congress did the Energy Policy Act of 2005, they decided they wanted to do something to get commercial deployment of cellulosic biofuels out the door,” Russo says. “Those first six projects have been worked on for years and years, and were the closest to being ready— the closest to deployment.” Ten percent is not a magic number either—it’s what Wall Street and conventional financiers told DOE they require to even consider a finance package. Co-recipient ICM plans to have a 1.5 MMgy pilot plant in operation by the end of 2010, to be located at its St. Joseph, Mo., facility. Its design will be based on a biochemical platform and will use corn fiber, switchgrass, forage

sorghum and corn stover as feedstocks. ICM says its 750 employees and support staff will be ready to take the pilot technology to commercial scale by 2012, and existing ICM-designed dry mills have already expressed interest in incorporating the new technology. Lignol Innovations received funding to help build a 2 MMgy biorefinery using hard and soft wood residues, and will make ethanol, furfural and highquality lignin. The demo plant will be positioned near a Suncor Energy petroleum refinery in Commerce City, Colo., which intends to purchase all the ethanol produced by Lignol. With its newly awarded DOE money Pacific Ethanol’s 10 percent demo plant will be colocated with the company’s Boardman, Ore., cornbased ethanol plant. At 2.7 MMgy, Pacific Ethanol says it will use the BioGasol proprietary conversion process to make ethanol out of the wheat straw, corn stover and poplar residuals from a 50-mile radius surrounding the plant. According to Pacific Ethanol, the demo plant will be operational some time next year with expansion to commercial scale by


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2012. Compared with the six commercial projects, these three new recipients, in addition to Stora Enso North America’s proposal, constitute the “next lowest hanging fruit” on the path to commercial production of cellulosic ethanol, Russo says.

Verenium Corp.’s 1.4 MMgy demonstration facility in Jennings, La., was expected to reach “mechanical completion” by March 31, according to the company. EPM could not verify if this was achieved as calls to Verenium spokespeople were unanswered. At the late-February National Ethanol Conference in Orlando, Fla., the DOE announced an additional $34 million to further advance the cost-effectiveness and functionality of enzymes for saccharification of biomass. Verenium, Novozymes Inc., Genencor Inc. and DSM Innovation Center Inc. were all part of that award. In Upton, Wyo., a 1.5 MMgy plant converting wood waste to ethanol began operating in January. Designed

ETHANOL PRODUCER MAGAZINE JUNE 2008

PHOTO: NREL

More Projects, Pilots and Considerations

Calvin Feik of the National Renewable Energy Laboratory explains to visitors how the thermochemical pilot plant at the Golden, Colo.-based DOE lab works.

by KL Process Design Group in cooperation with the South Dakota School of Mines, the plant is named Western Biomass Energy and is the culmination of six years of development.

Abengoa Bioenergy’s $35 million pilot plant in York, Neb., is operating and other companies with operating pilot plants include Iogen Corp. and Mascoma Corp.

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PHOTO: ABENGOA BIOENERGY

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Abengoa Bioenergy’s biochemical pilot plant in York, Neb., was just recently completed.

Tracking down every company with plans to develop cellulosic ethanol plants would be a daunting task. Central Minnesota Ethanol Co-op and SunOpta Inc. are working together with intentions to build a 10 MMgy commercial plant located next to

“techno-economic” challenges to the commercialization of cellulosic ethanol, critics of biofuels pose a challenge that perhaps even the DOE cannot surmount. “It’s plaguing the entire biofuels development and commercialization,” Russo says. The notion that it takes more energy to make ethanol than what the fuel itself can put out is what he finds himself addressing most. “We’ve addressed that for years and years, yet every six months we go through it again. When you’re relying on not only the technology but that positive message to draw the financing to establish your momentum, it’s a kick in the shin and slows down the developments we could make.” EP Ron Kotrba is an Ethanol Producer Magazine senior writer. Reach him at rkotrba@bbibiofuels.com or (701) 7384962.

CMEC’s existing dry mill. The plant is equipped to gasify wood chips to power its ethanol production process—and the same feedstock is intended for its commercial plant. The list goes on. While the DOE is addressing the

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Up in the Air The Energy Independence & Security Act of 2007 was passed in December, and the U.S. EPA is scrambling to meet its December 2008 deadline to issue the rule. Answers to the myriad of questions on the ruleâ&#x20AC;&#x2122;s details will have to wait until then. By Anduin Kirkbride McElroy

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he ethanol industry has received more than its fair share of scrutiny in the past few months regarding the fuel’s sustainability and emissions profile. Even cellulosic biofuels have been criticized for their potential to cause greenhouse gas emitting land use change. While industry experts, scientists, environmentalists, petroleum representatives and the media debate the merits of every argument, the federal government finds itself asking similar questions. It has been only six months since the passage of the Energy Independence & Security Act of 2007, and the U.S. EPA

Perhaps it’s coincidental, or perhaps it was inspired by EISA, but discussion of ethanol’s greenhouse gas emissions has dramatically increased in the past few months.

has just six more months to resolve major questions about the greenhouse gas emissions reduction requirements that are included in the bill. The EPA is required to develop a federal rulemaking on the 310-page document by Dec. 19, 2008, and make it effective Jan. 1, 2009. Just as the Energy Policy Act of 2005 was heralded as a boost for the ethanol industry, EISA has been promoted as the catalyst for advanced biofuels, cellulosic biofuels and environmental sustainability criteria. “While the RFS (renewable fuels standard) program established under EPAct 2005 provides a solid foundation from which to begin developing the new regulations, EISA includes new elements which add complexity to the program,” said Robert Meyers, principal deputy assistant administrator for the EPA office of air and radiation, in his testimony to the Senate Committee on Energy and Natural Resources in February. The new bill raised the bar for all renewable fuel; it increased the new RFS to 36 billion gallons per year by 2022. It differentiates between starch-based ethanol and other feedstock sources, capping conventional biofuel (starch-based ethanol) at 15 MMgy in 2015, thus requiring that other fuels fill the gap and eventually take over for what’s often been called a transitional fuel. continued on page 158

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New Definitions in the EISA The Energy Independence & Security Act of 2007 introduces several new definitions applicable to biofuels: Conventional biofuel means ethanol derived from corn starch. Those facilities that commence construction after the date of enactment must achieve at least a 20 percent reduction in lifecycle greenhouse gas emissions compared with baseline lifecycle greenhouse gas emissions. Advanced biofuel means renewable fuel, other than ethanol derived from corn starch, that has lifecycle greenhouse gas emissions that achieve at least a 50 percent reduction over baseline lifecycle greenhouse gas emissions. The types of fuels eligible for consideration as â&#x20AC;&#x153;advanced biofuelâ&#x20AC;? may include: ethanol derived from cellulose or lignin, sugar or starch (other than corn starch), or waste material, including crop residue, other vegetative waste material, animal waste, and food waste and yard waste; biomassbased diesel; biogas produced through the conversion of organic matter from renewable biomass; butanol or other alcohols produced through the conversion of organic matter from renewable biomass; and other fuel derived from cellulosic biomass. Cellulosic biofuel means renewable fuel derived from any cellulose or lignin that is derived from renewable biomass and that has lifecycle greenhouse gas emissions that achieve at least a 60 percent reduction over baseline lifecycle greenhouse gas emissions.

Biomass-based diesel means renewable fuel that is biodiesel as defined in section 312(f) of the Energy Policy Act of 1992 and that has lifecycle greenhouse gas emissions that achieve at least a 50 percent reduction over baseline lifecycle greenhouse gas emissions. Biomass-based diesel is included as a component of advanced biofuels. Baseline lifecycle greenhouse gas emissions means the average lifecycle greenhouse gas emissions for gasoline or diesel (whichever is being replaced by the renewable fuel) sold or distributed as transportation fuel in 2005. Lifecycle greenhouse gas emissions means the aggregate quantity of greenhouse gas emissions (including direct emissions and significant indirect emissions such as significant emissions from land use changes) related to the full fuel lifecycle. This lifecycle takes into consideration all stages of fuel and feedstock production and distribution, from feedstock generation or extraction, through the distribution, delivery and use of the finished fuel, to the ultimate consumer. Mass values for all greenhouse gases will be adjusted to account for their relative global warming potential. (Compiled by Stoel Rives LLP from the legislation text)


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Energy Independence & Security Act of 2007 Renewable Fuels Standard (in billions of gallons) Year

Advanced Biofuel

Cellulosic Biofuel

Biomassbased Diesel

Undifferentiated Advanced Biofuel

Total Renewable Fuel

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

0.6 0.95 1.35 2.0 2.75 3.75 5.5 7.25 9.0 11.0 13.0 15.0 18.0 21.0

0.1 0.25 0.5 1.0 1.75 3.0 4.25 5.5 7.0 8.5 10.5 13.5 16.0

0.5 0.65 0.8 1.0 * * * * * * * * * *

0.1 0.2 0.3 0.5 1.75 2.0 2.5 3.0 3.5 4.0 4.5 4.5 4.5 5.0

9.0 11.1 12.95 13.95 15.2 16.55 18.15 20.5 22.25 24.0 26.0 28.0 30.0 33.0 36.0

* At least 1.0 (specific amount to be determined by the administrator)

continued from page 156

EISA Renewable Fuels Standard The reason for the advanced biofuel and cellulosic biofuel requirement

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(beyond the limitations of corn acreage) is to improve greenhouse gas emissions. In order to qualify as “cellulosic biofuel,” the renewable fuel’s life-

cycle greenhouse gas emissions must be at least 60 percent less than baseline lifecycle greenhouse gas emissions of the gasoline or diesel fuel it replaces. Cellulosic biofuels are part of a broader group of “advanced biofuels” that require a 50 percent reduction. EISA also requires starch-based ethanol to clean up its act. Renewable fuels must now meet a 20 percent lifecycle greenhouse gas threshold relative to the gasoline or diesel fuel they displace. It’s possible that these percentages were derived from previous EPA calculations of fuel emissions reductions. In April 2007, the EPA released a fact sheet, “Greenhouse Gas Impacts of Expanded Renewable and Alternative Fuels Use.” The EPA used the Greenhouse Gases, Regulated Emissions, and Energy Use in Transportation (GREET) model of lifecycle analysis to estimate the percent change in lifecycle greenhouse gas emissions, relative to the petroleum fuel that is displaced, of a range of alternative and renewable fuels and then compared them on an energy equivalent basis. Under this analysis, a

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ETHANOL PRODUCER MAGAZINE JUNE 2008

Percent Change in GHG Emissions 120% 100% 80% 60% 40% 20% 0%

-8.5%

-20%

-28.5%

-40% -56.0%

-60% -80% -100%

-46.8%

-22.6%

3.7%

6.5%

8.6%

118.5%

-21.8% -19.9%

-41.4%

-67.7% -90.9%

Ce llu los ic Et ha no l Bio die se l Su ga rE th an ol Ele c tr Ga ici se ty ou sH Co yd m pr ro es ge se n dN at Liq ur a ue lG fie as dN Co at ur rn a lG Et ha as no Liq l (A ue ve fie ra dP ge ) et ro leu m Co Ga als to -Li M qu et ids ha no w/ l Ca rb on C& Liq S uid Hy dr Ga og Co s-t en aloLiq to -Li u id qu Di ids es w/ el oC ar bo nC &S

typical existing starch-ethanol plant qualifies under the EISA regulations; the EPA found that for every British thermal unit (Btu) of gasoline that is replaced by corn ethanol, the total lifecycle greenhouse gas emissions that would have been produced from that Btu of gasoline would be reduced by 21.8 percent. The percent change in greenhouse gases for corn ethanol can range from a 54 percent decrease for a biomass-fired dry-mill plant to a 4 percent increase for a coal-fired wetmill plant. Sugar ethanol, which is considered an advanced biofuel in EISA, had a 56 percent reduction and cellulosic ethanol had a 90.9 percent reduction. It’s important to note that these calculations may not matter under the final rule. Each of the fuel definitions in the legislation includes the caveat that the lifecycle greenhouse gas emissions criteria will be determined by the administrator and opened for comment. The bill doesn’t specify the models or mechanisms to be used. “The agency has done a substantial amount of work on lifecycle analysis

In April 2007, the U.S. EPA analyzed the greenhouse gas emissions of alternative and renewable fuels, using the GREET model. The results were published in the fact sheet, “Greenhouse Gas Impacts of Expanded Renewable and Alternative Fuels Use.” According to the EPA, “This chart represents the best available information about current or projected production practices and the impact of those practices on lifecycle greenhouse gas emissions.” SOURCE: EPA OFFICE OF TRANSPORTATION AND AIR QUALITY

over the past year, and has made significant advances, honing the overall methodology, updating data inputs and including new inputs for land use,

in particular from corn production,” Meyers said. “However, even with these advances, additional new and improved analyses will be necessary to

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implement the statute’s lifecycle greenhouse gas performance standards. Given our experience in this area and the statute’s utilization of lifecycle greenhouse gas performance standards as part of the definitions of different renewable fuels mandated in the act, we would anticipate extensive comment from all stakeholders on both lifecycle analysis inputs and methodology.” Paul Machiele, fuels center director for the EPA’s office of transportation

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and air quality, agreed that determining the lifecycle performance of each fuel and accounting for factors such as emissions resulting from international land use changes will require significant effort from the EPA. “The most challenging issue is going to be direct and indirect land use change impacts, in my opinion,” says Michael Wang of the U.S. DOE’s Argonne National Laboratory and the brain behind the GREET model.

“Any lifecycle calculation will be a very contentious process,” says Kevin Book, senior analyst for Friedman, Billings, Ramsey & Co. Inc. an institutional brokerage, research and investment banking firm. “It’s a major hot button. The notion of lifecycle analysis is understood in the abstract but it’s not articulated in law in any finite way. Everyone will agree that there’s a way to go from the well to the wheels for liquid fuels, but not everyone agrees on the same way.” Therein is the rub. Depending on whose numbers are used, ethanol either has a good or a bad emissions profile. “We’re sure that EPA will be the arbiter,” Book says. “There’s no uniformly agreed upon international standard. Debate has careened from one extreme to the other—from ethanol is salvation to a growing suspicion that ethanol is damnation.” Science across the spectrum will likely be used to influence what criteria will be used to measure greenhouse gas emissions. Can this contentious debate, which is ricocheting through the international media, be resolved in the next few months so the EPA can write this rule? Because this legislation preceded enactment of federal greenhouse gas regulations it presents a major challenge for those writing the rule. “I would suggest this puts the FFV (flexiblefuel vehicle) before the horse,” Book quips. “It’s a regulatory challenge. Articulating these standards with no guidance from the administration, and prior to codification of lifecycle is going to be unclear unless we have swift codification somewhere else. If they establish standards under administrative law and those standards are overruled or obviated by subsequent law,

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you’re going to have conflicts with businesses predicated on these standards.” In light of this, Book says the EPA could defer judgment until it has an informed basis for decision making.

More Questions There are many more questions about the scope of the rule as it relates to greenhouse gas reductions that the EPA is evaluating. How does this rule apply to imported fuel? To whom will these standards specifically apply? According to the legislation, facilities that have commenced construction prior to the enactment of EISA are exempt from the 20 percent emissions reduction requirement. Machiele told attendees at the 2008 National Ethanol Conference that “commenced construction” has yet to be defined, meaning that plants in development may or may not be exempt. Based on other energy policies, Book says, “The earliest it could be is the first time you spent money, and the latest could be the first time you broke ground.” Another issue Machiele said that is yet to be determined, is what changes to an existing starch-ethanol plant— expansions, feedstock changes, energy source changes—warrant it to fall under the new 20 percent emissions reduction requirement. So what happens if a plant doesn’t meet these emissions reductions requirements? “The requirements are enforced by the EPA, which accepts renewable identification numbers for compliance purposes,” Book says. “You might be able to produce and sell ethanol, but you might not be able to earn RINs for compliance purposes.” The compliance onus is on refiners, blenders and importers,

who must own a certain number of RINs to comply with the RFS and may be less inclined to purchase renewable fuel that is not attached to a RIN. Mandatory emissions reductions requirements may eventually affect how ethanol plants are handled in carbon trading markets. Right now, a plant could theoretically get credit for voluntary emissions reductions, which is called additionality. For example, Corn Plus LLLP was able to qualify for car-

ETHANOL PRODUCER MAGAZINE JUNE 2008

bon credits on the Chicago Climate Exchange because it voluntarily reduced its natural gas consumption through the use of a biomass gasification system. Will the requirement of emissions reductions negate a plant’s ability to qualify for emissions reductions credits? Book says these questions are premature, as the United States doesn’t have a federal carbon regulatory market. “The Chicago Climate Exchange, while a clear pioneer in U.S. voluntary markets, is not

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the final arbiter of additionality,â&#x20AC;? he says. â&#x20AC;&#x153;They may have determined that they were going to admit something like a biomass boiler for an ethanol plant, but thereâ&#x20AC;&#x2122;s no guarantee that federal law will admit it.â&#x20AC;? Because the time is so short between when the rule is issued and when it must go into effectâ&#x20AC;&#x201D;just two weeksâ&#x20AC;&#x201D; there is considerable interest in knowing whatâ&#x20AC;&#x2122;s being developed in advance of the ruleâ&#x20AC;&#x2122;s issue. All plants in development need to know what will be required in order to be recognized as having reduced greenhouse gas emissions. It will be of particular interest to plants considering a source of energy other than natural gas. Indeed, the entire industry wants to know how these percentages were arrived at, how they will be defined and how those definitions will affect new constructionâ&#x20AC;&#x201D;and ultimately the future of the industry. The answers to these and other questions are in deliberation right now. The effect of this legislation on this industry could be great, but those who are in a position to forecast details on just how great cannot comment. As usual, while itâ&#x20AC;&#x2122;s in the rulemaking process, the EPA is mum on details of the rulemaking, as are those who are working with the agency. Several sources contacted for this story declined to comment, as there is no public information available. The

EPA says it is working diligently to gather stakeholder input. However, information on stakeholder meetings was also not available at press time. What was available was a sea of information ready to influence the formation of this rule. Perhaps itâ&#x20AC;&#x2122;s coincidental, or perhaps it was inspired by EISA, but discussion of ethanolâ&#x20AC;&#x2122;s greenhouse gas emissions has dramatically increased in the past few months. Stakeholders who will comment on this rule include all kinds of special interests who are opponents and proponents of ethanol, as well as the majority looking for a way to responsibly develop a renewable fuel. Meyers, the EPA administrator, assured the Senate committee that his agency would draw from its experience in developing the original RFS regulations, and that stakeholders would be involved. The challenge for the ethanol industry is to participate as a stakeholder, as it did before. EP Anduin Kirkbride McElroy is an Ethanol Producer Magazine staff writer. Reach her at amcelroy@bbibiofuels.com or (701) 7384962.

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Solid Fuel and Fly-Ash Control Plants intending to swap their natural gas boilers for those capable of combusting solid fuels must to consider which fly-ash abatement technology will best meet their needs at the right price. By Ron Kotrba

The Green Circle Bio Energy plant in Cottondale, Fla., uses a wet electrostatic precipitator. PHOTO: GEOENERGY

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E

thanol producers whose process energy comes from a natural gas line, and will remain so indefinitely, may want to skip over this article. For those investigating boiler retrofits or new installations involving biomass or coal, however, it’s important to make the right decision on which fly-ash control technology to install for meeting state regulations and protecting downstream equipment from fouling. There is no need to reinvent the wheel. Ethanol makers in search of an alternative energy path may benefit from the wood-products industry and its many years of experience. Before a veneer manufacturer applies heat, pressure and glue to make its final product, the moisture content of the incoming green wood must be dried down considerably. Green wood can contain up to 50 percent water by weight, which must be reduced to 5 percent moisture before becoming veneer, particle board or wood pellets. Many of these companies burn their wood waste as a means to dry the good wood. In Florida, what’s been billed as the largest wood pellet manufacturing facility in the world—the 500,000-ton per year Green Circle Bio Energy plant in the panhandle city of Cottondale producing wood pellets for the European power industry—generates heat for its biomass dryers by combusting pine bark. The options for fly-ash abatement technology available to the company included a dry electrostatic precipitator (ESP), a wet ESP, a baghouse ash collection system, a wet scrubber and a multiclone fly-ash collector. Gerry Graham of PPC Industries wrote a paper in which he compared various fly-ash control technologies. In that paper, he explains what a wet scrubber is and details its shortfalls: “A scrubber saturates the gas stream in order to remove the dry fly ash.

The wet ash has to separate from the water in settling ponds or through a de-sludging unit, which increases the annual labor and operating cost. It is not uncommon to see 150 to 300 horsepower fans on scrubber installations in the wood industry. The energy necessary to separate the particulate from the gas stream can require 15 to 20 [inches] wc (water columns) of pressure drop through a typical venturi. These are huge and wasteful power consumers, increasing the plant's overall operating cost.” With today’s high energy costs and narrow production margins, plants want to minimize energy consumption. Amidst those and additional concerns of equipment corrosion, cold weather performance and the regulatory push to decrease water discharge from industrial facilities, wet scrubbers may not be the best choice for abating fly ash.

Baghouse Technology A technology with which most ethanol plant operators are familiar is baghouses, which are used to control fugitive dust from distillers grains. Red Trail Energy LLC, a 50 MMgy coal-fired ethanol plant in Richardton, N.D., employs baghouse technology from the Industrial Accessories Co., to capture its fugitive coal ash. Plant Manager Edward Thomas tells EPM the baghouse technology was part of the plant’s inclusive design. “Red Trail didn’t have a whole lot of extra control in the picking of its abatement equipment on the back end of the plant,” Thomas says. “It was primarily handled through ICM Inc.” An ethanol plant combusting coal for process energy must not only mitigate fly ash but also sulfur emissions. “This particular facility on the back end has an SBC [sodium bicarbonate] system,” Thomas says. SBC essentially is a sulfur scrubber. To make its 50 MMgy of ethanol, Red


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Trail consumes approximately 100,000 tons of coal a year and produces 11,000 tons of ash. At Red Trail, fly ash created in the coal boiler is taken through an ash collection system, which works off a set of blowers. “The ash collection system is going to take ash from the boiler itself and from our fly-ash baghouse on this facility,” Thomas says. “The ash is pneumatically conveyed then to a holding silo which has a baghouse on it to clean the air that we are essentially blowing in there. From there, there’s an unloading system which shares the same baghouse as the pneumatic conveying system, so that when we load ash out we put a little bit of negative pressure on the dump spout and control dust through that.” Environmental regulations differ from state to state so some agencies might require fugitive dust testing on the baghouse for the ash silo itself—but not in the largely rural North Dakota area where Red Trail is located. “At this facility, all we are required to do is watch the pressure drop,” he says. “We don’t have a physical test that we have to do.” Not only would this vary from state to state but also within a region where a major emitter may have to meet different regulations than a minor emitter. Graham notes the most common problem attributed to using baghouses as ash control devices: “The high temperatures and periodic cinders from the plant boiler can cause fire problems with baghouses.” Ron Renko, regional sales manager for the Geoenergy Division of AH Lundberg Associates Inc., expresses the same safety concerns to EPM that Graham writes about. “One big concern is fire,” he says. Geoenergy is an emissions controls vendor for biomass-powered plants. Renko says baghouses reside somewhere at the bottom of his fly-ash tech list. Geoenergy Manager Steve Jaasund tells EPM that baghouses just

won’t work for fly-ash control in a plant like the Florida pellet mill. His company supplied the monster wood pellet mill with its wet ESP equipment. “A baghouse is not feasible,” Jaasund says. “The reason is three-fold: First, the gas stream exits the dryer much too close to the water vapor dew point so water condensation would be a big worry. Second, the condensible hydrocarbons (from the drying of wood biomass) at high temperatures will tend to plug the filter media. And finally, the great majority of the particulate— large fiber and condensible hydrocarbons—are combustible.” On safety and the potential for baghouse fires, Thomas says Red Trail has not encountered any problems with its baghouse system. Graham, Renko and Jaasund all mention the possibility of moisture, tars and plugging of the fabric filter media. Thomas says Red Trail has experienced minor interruptions in production due to media clogging, but nothing debilitating. “We’ve had a little bit of that, but what we’ve done is work with the baghouse manufacturer and through some of the controls we’ve been able to work what’s in the PLC [programmable logic controller] and fine tune the cycles of when the bag is cleaned,” he says. “Our baghouse in this facility has six cells and we can run with five of them while one is off-line. If one was off-line, obviously you’re reducing your air capacity and you could see some plants go down because of that, but to date it hasn’t been limiting for us. A lot of that comes into play with the type of fuel being used and its ash content, the different additives used and how those materials are combusted.” Thomas mentions, however, some unforeseen factors which could affect the performance and longevity of baghouses. “The temperature of that flue gas going into it can degrade your bags over time,” he says. Graham agrees. “Periodic bag replacement is a definite operating cost consideration,” he writes. Thus, while


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capital costs to install a baghouse are much lower than that of installing the more sophisticated ESP, all aspects— including state regulations and plant operational needs, performance, safety, longevity, and capital and operational costs—must be weighed heavily before project leaders make a decision.

Electrostatic Precipitators The term “electrostatic precipitator” is not as sexy as “extrasensory perception,” but a sixth sense will not appease state regulators or protect a regenerative thermal oxidizer from fouling. A wet ESP, however, can effectively do both. In the wood products industry, hot gas from wood combustion is usually routed to the dryer for heat. In most cases, the fly ash from wood combustion is high in alkaline earth metals such as sodium, potassium, magnesium and calcium, which Jaasund says are aggressive against the heatexchange media in the regenerative thermal oxidizers. The point of an ESP system wet or dry is to effectively isolate and trap particles in a hassle-free system, which cleans itself as needed. “The gas goes into the electrostatic precipitator and it passes adjacent to a high-voltage discharge electrode, which charges all the particles,” Jaasund tells EPM. There are three types of particles: fly ash, largerthan-fine particles introduced from the high-velocity air in the dryer and condensed organics from drying biomass. “Because of the high voltage on the discharge electrode, it gives off electrons and the electrons attach to the particles. Then, because of the electric field—the high voltage on the discharge electrode versus the ground potential of the collecting electrode—those particles are all pushed over to a collecting surface where they accumulate.” An ESP works like a giant particle magnet. When it’s time to unload the material for disposal, the magnet reverses its charge to force the particles away instead of attracting them. Upon exiting

the ESP, the gas stream is largely free of particles and ready for the RTO where the volatile organic compounds (VOCs) will be thermally oxidized and released. In 2005. Central Ethanol Co-op in Little Falls, Minn., broke ground on its new energy system—a Primenergy gasifier and combined-heat-and-power system—designed to consume 280 tons of wood chips per day. The system came on line last year but has been plagued with operational setbacks. Also, the fly-ash collection system included in the engineering package failed to meet Minnesota’s particulate matter, 10 micron regulations. “We had problems with our combustion tube so our gasification technology is down right now, but the method of abatement we were employing simply didn’t work,” General Manager Kerry Nixon tells EPM. As the plant’s energy island was being built the ash collection system chosen was a multiclone. That is essentially a very small cyclone inside of a steel structure, and the drop in pressure going through it was supposed to drop the fly ash out—collect it out—and the air would continue to the exhaust,” he says. “But the fly ash was so light that it could not take it out. We even tried to spray moisture to add weight to the ash so it would come out, but it just wouldn’t work.” Shortcomings in the gasification technology are being addressed, and Nixon says he hopes it will be worked out sooner rather than later. In the meantime, engineers are weighing the pros and cons of baghouse systems and ESPs so an informed and effective decision can be made—the second time around. “I think they’re leaning toward an ESP, but we’ve talked with others using baghouses and they’ve not had many problems,” Nixon says. “So it all depends on the temperature of the fly ash and how it’s all handled up until that point— it all comes down to what’s going to work best for the dollars.”

For a complete catalog call 201/767-4027 or visit www.papailias.com 170

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Wet ESP In his comparative document, Graham writes that wet ESPs have found “renewed interest from oriented strand board (OSB), particle board, and plywood veneer manufacturers for controlling dryer exhaust.” He also says that dry ESPs are still considered the best available control technology for wood-fired boilers. Jaasund, however, gives compelling reasons why wet is better. “Biomass dryers typically operate near the dew point of the gas stream,” Jaasund says. “You want your dryer to be as efficient as possible, so you don’t want to be spitting red-hot gases out of the dryer—that’s just money down the drain.” He says if a dry ESP is employed to treat the gas stream at a near-dew-point condition, condensation is coating the machinery all the time. This leads to excessive corrosion and buildup. Also, a dry ESP must still contend with the larger combustible particles coming out of the dryer in some industrial arrangements. Given the high oxygen content of the dryer off-gases and the sparking characteristics of any ESP, Jaasund says, “It’s a big invitation for a fire.” Condensing tarry materials and heavier solids from the drying process can also present problems downstream when a dry ESP is in play. The heavier materials will condense at relatively high temperatures and cause trouble in the RTO. “They buildup on the front of what’s called the cold face of the heat-exchange media,” he tells EPM. Facing those three problems— increased potential for fire, condensation and condensible organics is “when you throw in the towel and make the whole system wet,” Jaasund says. “You spray water in there and quench it down to the lowest possible temperature and you just deal with the goo.” This is how the wet ESP system Geoenergy installed at the Green Circle Bio Energy wood pellet plant works. Hot gas from the dryer enters the system. It’s not saturated or at the dew point yet, so

large quantities of recycled water are sprayed to quench the gas to its dew point between 140 and 170 degrees Fahrenheit, cooling it down but not losing energy. “This is an adiabatic process so we’re just exchanging sensible heat—temperature—for latent heat, which is the evaporation of the energy tied up in evaporating water,” Jaasund says. Below the ESP unit sits a pool of recycled water. A pump carries the water to spray nozzles for quenching and it drains back down into the pool. The heavier solids mixed in the spray water descend to the pool while other condensed solids make their way in through the fan-driven exhaust stream to the ESP system above. The particles moving upward accumulate inside the surface of the ESP’s array of tubes. Eventually, the material amassed on the ESP’s charged surfaces tubes must be discharged, which occurs as infrequently as once every four hours or as often as every 90 minutes. The removal process lasts about a minute-and-a-half. The system uses hot water to flush the tubes free of particles. Geoenergy also mixes caustic soda in the ESP flush-water from above to help dissolve the material from the collecting surfaces. “All that stuff runs down off the tubes and then feeds into that recycle tank,” Jaasund says. “So all solids from the quench step and the precipitation step end up in that recycled water,” which must also be cleared to avoid clogging in the tank, pump or spray nozzles. A decanter centrifuge is constantly treating a side stream of the recycled water, isolating and removing the “organic goo” while returning the centrates— the nonsolids—back to the tank. While the centrifuge removes the suspended solids, the plant needs to bleed off 1 or 2 gallons every minute to keep the dissolved solids equilibrium within the tank. Where that bleed stream goes is plant specific, but in the pellet mill’s case it goes back into the dryers. “One might say, ‘Now you’re just going to get it back,’ but you don’t because that stream is water

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with dissolved solids and the dryer will dry off the water but leave the solids in the dryer with the biomass—it actually goes out with the product,” Jaasund says.

Downstream: RTOs and Beyond The whole point of an RTO is to oxidize VOCs with heat as a nonregenerative thermal oxidizer does, but using less energy to do so. Through the utilization of heat-exchanging media the plant consumes less energy thereby dropping operational costs, but the RTO costs more than a thermal oxidizer does. “The RTO is what I call a box of rocks,” Renko says. “It’s a heavy-metal structure filled with ceramic media and you have burners and fans and your typical electrical motor controls.” Jaasund says that, as energy gets more precious and margins thin out, people will begin to look for ways to reduce costs. “The next logical thing is to make the RTO a catalytic system,” he says. “The way an RTO becomes a catalytic RTO is by putting a layer of catalyst on top of media beds so now you’ve got 8 feet of stoneware media and 1 foot or 6 inches of catalytic media.” A catalytic RTO can be made with with base metals, typically manganese dioxide, or noble (precious) metals such as platinum or palladium. “Either approach would allow the oxidization to occur at much lower temperatures,” he continues. “So the combustion chamber is no longer really a combustion chamber because you can set your

burner operation down from 1,600 to 800 degrees—the catalytic RTO consumes way less energy.” Of course, the capital costs are higher for a catalyzing oxidizer than a noncatalytic one, but nevertheless Renko says his company is providing three catalytic RTOs to Pacific Ethanol Inc., for three ethanol plant projects. The question is, with a wood-fired dryer, is catalytic oxidation feasible in the presence of even small amounts of sub-micron inorganic particulate? “We believe that the answer lies in the performance of the upstream wet ESP,” Jaasund says. “While today’s wet ESPs provide good RTO media protection they are not sized to clean the incoming gas to a level that will also protect the catalyst. However, they can be. The important technical hurdle is not whether we have the tools to operate catalytically but rather how to adapt them. This information will come as we go down the road so that when energy prices get too high, operators will be able to consider solid-fuel-fired-dryers with catalytic RTOs.” EP Ron Kotrba is an Ethanol Producer Magazine senior writer. Reach him at rkotrba@bbibiofuels.com or (701) 738-4962.


Q&A

The New Kid on the USDA Block U.S. Secretary of Agriculture Ed Schafer is optimistic about the Farm Bill and the support it will provide for biofuels. Shortly after he was appointed, the former North Dakota governor talked to EPM about his new role and the Farm Bill negotiations. By Kris Bevill

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d Schafer was sworn in as the 29th secretary of the USDA on Jan. 28. EPM caught up with the two-term former governor of North Dakota in March when he was in Fargo, N.D., for the state Republican Convention. This was his first trip back to his home state after accepting his federal appointment. Q: How did your role serving as governor of an agricultural state such as North Dakota help you prepare for this job? A: As governor you manage a number of agencies with different missions. The USDA has 28 separate agencies and three budget slots. So, from a management standpoint, that has all worked out well. Having been in the middle of the policymaking process—the interaction with the executive and legislative branches—is immensely helpful, especially going through the Farm Bill negotiations. Agriculture is 15 percent of [the total] Farm Bill. It’s also food and food nutrition, energy, telecommunications, utilities … all of which I dealt with in the governor’s office. There are rural parts of every state, but agriculture and rural are probably married. Having the Midwest background and growing up in that rural arena and having had a chance to operate both in the public and private sectors and seeing how it relates to everything is amazingly beneficial. Q: What is your role as secretary of agriculture when it comes to crafting a new Farm Bill? A: I kind of got parachuted down into the midst of it. There are several roles—my first role is to represent the administration. We’re developing our team to interact with Capitol Hill to craft a piece of legislation that the administration would recommend to the president to sign. That includes oneon-one time with senators, meeting with negotiating teams on both the U.S. House and Senate and whatever there may be

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externally. Chuck Conner is our lead negotiator, but I’ve still been pretty involved. (Conner was acting secretary of agriculture before Schafer came on board.) It’s kind of unfair in a way because the administration went through a couple of years of the process before I got there. A lot of work has been done—a million meetings, a lot of angst—and I come in as the new kid on the block and say, ‘How does that really work?’ Internally, we have USDA departmental experts in almost every conference committee meeting. They’re there to provide technical expertise. Of the seemingly hundreds of conference meetings that take place every week, we’re there. We have a Farm Bill meeting every day at the USDA to see what’s on the agenda, where we are with negotiations and how we need to represent the technical facts about how things work as well as the direction of the administration. Internally, it’s mostly putting our arms around the team. Externally, it’s whatever needs to be done whether its phone calls, personal meetings or whatever needs to be done with the leadership— Democrat and Republican, in the House and the Senate. Q: It’s clear that you have a personal relationship with President George W. Bush. How much influence does your relationship have when it comes to the passage of a new Farm Bill? A: I don’t know. At first I was kind of shocked when—I think it was the second or third day I was at USDA—the president was up in the helicopter and he relayed a message through somebody at the White House to ask me what I thought about something. I thought, ‘Really? He wants to know what I think?’ He’s very engaged. He understands farm policy. I think he’s got a strong confidence in the USDA and values our opinion. I’m the one who has the access to him and carries the message. Certainly our relationship is helpful, and when he nominated me for this we talked about the fact that we could work

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Q: What have been some of the major difficulties in drafting a final version of the Farm Bill? A: I was just talking to [Rep.] Earl Pomeroy, D-N.D., and told him how I got parachuted down into seemingly one of the most contentious negotiations ever. He said that’s because the administration’s been involved. In previous Farm Bill negotiations, Congress just went off and wrote the bill. This time the president said ‘no, we’re going to generate the Farm Bill, put it on the table and let them debate it.’ That’s caused some turf issues, directional issues and anxieties about who’s running the show. Jurisdictional issues remain between the House and Senate. The House Ways and Means Committee isn’t interested in

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running the Farm Bill. In the Senate, the Finance Committee wants to run the Farm Bill. So you’ve got those kinds of things going on. They need to solve that. I think the biggest difficulty that we have is differences between the House and the Senate. In the initial versions there were big differences in spending levels. There were big differences in funding sources. We’ve been able to narrow that down quite a bit. The administration has moved toward the hill on the level of funding over baseline. We started out at $4.5 billion; we pretty quickly went up to $6 billion over baseline. Now the House and the Senate are kind of narrowing in on $10 billion and we’ve built a pathway to show them how to get to $10 [billion]. If they get there I think we can come together. We’ve moved on some of the reforms of the adjusted gross income. We started with $200,000 now we’re looking at $500,000. Funding sources are a big issue. The Senate has different ideas than the House on how to fund the $10 billion. Sixteen months ago, USDA provided Congress with a detailed Farm Bill— and followed up with complete text for the bill. Throughout the past year, USDA attended the agriculture committee meetings and provided specific funding suggestions of reform that producers told us they expected. During all that time, the Farm Bill expired in September of last year, and Congress passed several extensions, and as you are putting this article into publication (the last week of April), they have passed another extension. We have provided the suggested funding sources to offset the increased

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together. When I went through the interview process, one of the things I was concerned about was that I wasn’t interested in just being a token or a mouthpiece for the administration. I wanted to be involved in policy and the direction of the agency. And he agreed. Can we influence him? He’s taken some strong stances. He Schafer wants us to pass a Farm Bill that meets the needs of the taxpayers, protects farmers, ranchers and landowners with a good, strong safety net, and he wants to do it without raising taxes. The expertise lies at the USDA and I think he’ll strongly consider our recommendations.

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spending, and made clear we will not accept gimmicks that are funded in part by additional tax revenues. They must provide reform to better focus Farm Bill support where it is needed and in the most effective manner of support. Q: Were you familiar with renewable fuels before you became the U.S. ag secretary? A: When I was governor we had two ethanol plants in North Dakota that we championed, and a corn syrup plant that was convertible to ethanol. I called a special session to provide some incentives to put that facility in place and in doing so, kind of became immersed in why ethanol, why highfructose corn syrup and what difference does it make if you can convert the plant or not. There’s also a soy biodiesel and canola plant in North Dakota. It’s a huge interest of mine coming from an agriculture arena. Certainly I didn’t know anything about it on the national level, but I knew the process and the products. Q: Do you get a sense that there’s bipartisan support for increased funding for biofuels? A: Very much so. I think we’re looking at it as a pathway. We understand the feed versus fuel issue and the ethanol capacity restrictions right now. There’s a huge effort in the new Farm Bill to provide money for cellulosic ethanol research pilot projects. If we’re going to meet the goals set forth, our researchers and economists say we’re at maybe 25 percent of the corn crop today going into ethanol. By 2012, we’ll see that up at maybe 33 percent or 34 percent and then it will level off because then you’ll start to get into biomass. I’ve been saying that we import 4

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One of my three goals this year is to create the USDA as a department that’s on the leading edge of agriculture and energy.

billion barrels of oil annually in this country, and often from countries we’re not particularly friendly with. If we could in 10 or 12 years convert a quarter of that to renewable fuels it would double the farm income in this country. If you double the farm income in this country, you revitalize rural America. It’s important not only from a national security standpoint but from the economic value that could be created in this country. Lights were first installed in the cities and trickled out into the rural areas and telephones were installed in the cities and trickled out to the rural areas. Now you’d be seeing power generated in rural areas and being sent into the cities. It reverses everything that goes on here. I think renewable fuels could change the face of agriculture and the economy in this country. Q: Is there any funding for biodiesel, or to increase the efficiency of corn ethanol in the Farm Bill? A: Yeah, big time. We’re doing fermentation studies now and there is funding to continue that. That’s huge in trying to get more ethanol out of an acre of corn. It’s the same with biodiesel. We’re looking at canola crushing and soybean crushing and trying to figure out how to do it better. We’ve spent $12 billion in the past seven years on renewable energy in this country. People think the United States is far behind. Well guess what, we’re not. I’m pleased at the research and the funding and our ability to manage our way through the changes that are going to come as we focus more on renewables. Q: What’s your opinion of the food versus fuel debate? It’s one of those unfortunate byproducts of what’s going on in the industry. Agriculture prices are the highest they’ve ever been. Exports are the highest they’ve ever been. That causes some pressure on crop prices. Weather has been a big factor. Australia’s wheat crop was in the tank last year. Europe was in the tank. South America had bad weather. The reality is that only about 25 percent of the corn is used in ethanol production, so it’s not driving the market, but it’s affecting it. There’s no question that a portion of the food price increase

ETHANOL PRODUCER MAGAZINE JUNE 2008

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is due to an increased demand for corn, but fertilizer costs are high, fuel is high, input costs are going through the roof. It’s not just corn. We need to keep that in perspective. Q: In your opinion what is the longterm outlook for biofuels? A: I’m extremely excited about the longterm outlook for biofuels. One of my three goals this year is to create the USDA

as a department that’s on the leading edge of agriculture and energy. As I mentioned, some of the changes that will take place with the economic output of this country from rural areas are huge. We can’t even imagine what is ahead. The more we’re out there, the more research gets done, the more we bring biomass into the deal … we have trouble running buses on biodiesel in the winter in North Dakota because it’s cold. They’re going to

solve that. And the more that we can become a less dependant nation on foreign oil sources, the more people are going to say, ‘Yeah, that’s a good deal and I support it. Let’s put money into that.’ The trick is to continue to invest in the present while we do a lot of investment for the future. We’ve got to keep things going today. We can’t abandon traditional fuels. But we can manage the current while we sock the investment into the future. And I think it’s going to accelerate. You start [by] solving some of the technical, infrastructure and delivery problems, and you get biomass into the arena. Then you have more than one feed source, which means it’s a market-driven feedstock and not just a singular-driven feedstock. In the minds of the citizens as to where our public policy and our public dollars ought to be going, in my opinion, that just gets better and better. Q: Do you see cellulosic ethanol production overtaking corn-based ethanol or will it have to remain a combination of cellulosic, biodiesel and traditional ethanol? A: I don’t know. What I’m excited about is that I think the marketplace will sort that out. I’m a big free-market, supply-side economics supporter. From a government standpoint I think we need to provide the public policy so that those options are in the marketplace. The market will sort it out—what’s the most efficient, what’s the least costly and what runs best in their cars. That’s market stuff and consumers will figure that out. They’re pretty astute at it. EP Kris Bevill is an Ethanol Producer Magazine writer. Reach her at kbevill@bbibiofuels.com or (701) 3730636.

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Dedini’s Blend: An Ethanol Expert Moves to Biodiesel Brazil’s ethanol icon spreads out, adding biodiesel to its expertise, crossing the border to Colombia and experimenting with acid-wash lignin processing. By Elizabeth Ewing

Dedini’s landmarks now include the Barralcool ethanol-biodiesel prototype in Brazil’s main soybean-producing state of Mato Grosso. PHOTOS: DEDINI

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fter 88 years as the leading turnkey sugar- and ethanol-plant supplier in Brazil, Dedini Industrias de Base S.A. has turned to biodiesel—and now has its first foreign contract to supply a biodiesel plant to neighboring Colombia. Jose Luiz Oliverio, Dedini’s vice president for technology and operations, says the Colombian plant is relatively small. When it opens in 2010, its expected output will be 100,000 metric tons of palm-based biodiesel annually (30 MMgy) or 2,000 barrels a day. Most of the output is likely to go to the Colombian market, but some may be exported to the United States and Europe. The plant will be constructed in the refinery city of Barrancabaermeja, Colombia, for Ecodiesel Colombia S.A., a subsidiary of Ecopetrol S.A. The parent Oliverio company has seven palm-oil production companies that will supply Ecodiesel with feedstock. The venture is part of a program by the Colombian government to improve the quality of diesel in the country. Dedini has already outfitted four biodiesel plants in Brazil—100,000 metric-ton-per-year plants (30 MMgy) for

A

‘Building a biodiesel plant onto an existing cane mill reduces required investments and costs and makes maximum use of acreage around the plant.’

beef producer Bertin, soybean crusher Granol and oilseed crusher Caramuru; and Dedini’s 50,000 metric-ton-per-year (15MMgy) joint venture with Joao Nicolau Petorni, the owner of the Barralcool sugar and ethanol mill. Dedini is also under contract to supply three biodiesel plants for a total output capacity of 121 MMgy to Brazilian agricultural conglomerate Agrenco and another 60 MMgy plant for Brazilian biofuels startup Bionasa. In the case of the Ecodiesel plant in Colombia, Dedini teamed up with Italian biodiesel-plant equipment supplier DeSmet Ballestra, which


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will be responsible for the pretreatment of the vegetable oils and for equipment of the biodiesel plant. Dedini was founded by Mario Dedini and Pedro Ometto. Ometto’s family controls Brazil’s largest sugar and ethanol producer Cosan. Based in Piracicaba in Brazil’s southeastern state of Sao Paulo, Dedini has relationships that extends to all of the 300-odd Brazilian sugar and ethanol plants. Its segue into biodiesel was in part based on the synergies of integrating a biodiesel plant with an existing ethanol mill. “I think that is the biggest advantage that our biodiesel system offers,” says Dedini’s Oliverio.

Lower Costs Well before Brazil’s government made biodiesel blends mandatory this year, Dedini introduced the model of an integrated ethanol-biodiesel system and launched its first integrated ethanol-biodiesel prototype at the Barralcool plant in 2006 in Brazil’s main soybean-producing state of Mato Grosso. The cane bagasse-fired cogeneration plant of the sugar and ethanol mill provides all the energy for the integrated mill operations, while the biodiesel output fuels the farm machinery such as the cane harvesters. The workforce serves both plants. The company has not fully

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Dedini has already outfitted four biodiesel plants in Brazil, including this 30-MMgy plant for beef producer Bertin.

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‘Ethanol production from this technique will be able to compete with gasoline as long as oil is above $40 a barrel.’

explored the carbon-credit potential of such plants. The model of building a biodiesel plant onto an existing cane mill reduces required investments and costs and makes maximum use of acreage around the plant. It starts with an opportunity to plant oilseed crops in sugarcane fields: Cane is a grass that grows back every season after cutting. Producers replant 15 percent to 30 percent of the land around a mill for yield purposes every three to five years. The balance of the land is available for a single rotation of soybeans, peanuts or sunflowers. In the case of the Colombia plant, the biodiesel facility is a standalone operation—yet the international expansion accentuates Dedini’s growing skill at both biofuels.

Tailspin Brazil launched its biodiesel program 30 years after implementing its Pro-Ethanol Program in the 1970s to reduce its dependence on foreign oil. At the time, Latin America’s agricultural giant was one of the world’s largest petroleum importers, bringing in nearly 90 percent of its

domestic needs from abroad. The oil crisis at the time sent the economy into a tailspin and the military dictatorship, in addition to stepping up domestic oil exploration and production, bet that sugarcane producers could make their own automobile fuel in Brazil if the government would guarantee them a captive market. Nastari Now, Brazil has one of the most advanced biofuels programs in the world with more than 30,000 filling stations offering pure hydrous ethanol as well as gasoline with a mandatory blend of E20 to E25. Dedini’s interest in the biodiesel side is logical. Brazil’s government made a 2-percent biodiesel blend in all commercially sold diesels mandatory on January 1 and in March decided to accelerate the program with plans to have B5 in place by 2013—though recent discussions have raised the possibility of a B5 blend as early as 2010. In any case, on July 1, Brazil will raise its mandatory blend to B3. The decision was made in order to soak up some of the slack capacity in the biodiesel industry, which officials believe inhibited investment that would get Brazil closer to B5. In the first half of 2008, Brazil’s National Petroleum Agency (ANP) reports purchasing 480 million liters (127 million gallons) of biodiesel to supply the market at B2 for the first half of 2008. With the B3 mandate, demand for biodiesel should jump by 50 percent in the second half of 2008. The government’s political commitment to developing Brazil’s biodiesel market bodes well for Dedini as an equipment supplier in the sector.


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Parallel Growth Ethanol, however, remains Dedini’s bread-and-butter business. Among Brazil’s cane-sugar and ethanol mills, existing and under construction, Dedini mills account for 80 percent of the national production of ethanol—roughly 25 percent of global ethanol production. The company’s penetration into Brazil’s biodiesel output capacity now is the same at around 80 percent. The company is supplying sugar and ethanol plants to other countries in Latin America such as Jamaica and Venezuela as well as to Africa. The company’s performance parallels much of the growth in Brazil’s ethanol industry in the past three decades, during which cane output grew more than fivefold from 91 million metric tons in 1975 to 490 million metric tons in 2008 (100 million to 540 million U.S. tons). In the same period, ethanol output rose 40-fold from 560 million liters to more than 22 billion liters (148 million to 5.8 billion gallons). Brazil’s cane industry has been driven since its inception during the colonial period by world demand for sugar, but the impetus behind Brazilian cane expansion has changed just in the last few years, says Plinio Nastari, president of Datagro. The firm, based in Alphaville near the city of Sao Paulo, analyzes sugar and ethanol. “Ethanol will now be the force behind Brazil’s cane crop expansion, in large part due to the success of the flex-fuel motor,” says Nastari.

Cheap Bagasse Since the 2005 debut of the flex-fuel motor, which runs on any mix of gasoline and ethanol so motorists can choose the cheapest fuel, the technology has taken over the

Dedini is building this biomass cogeneration boiler at its biodiesel plant in Colombia.

Brazilian auto industry, accounting for nearly 90 percent of all new-car sales. The success came after years of challenges. The Brazilian government placed price caps on ethanol when a bad harvest in the late 1980s caused a shortage of ethanol on the local market, leaving motorists stranded. The government phased out price controls in the 1990s at the same time it ended subsidies and tax credits for the ethanol industry— which at the time was fairly inefficient by today’s standards. The cane industry eventually became highly competitive globally under free-market rules, but at first ethanol was slowly dying as motorists hesitated to buy old cars run sole-

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ly on ethanol. Flex-fuel cars—which run on gasoline as well as ethanol and perform better than all-ethanol cars—have been a boon for the cane industry. Brazilian mills now scramble to feed mushrooming domestic demand from the flex-fuel fleet, and to meet growing export demand as well (see “The World According to Ethanol.” (page 194) Datagro forecasts that Brazilian ethanol output will more than triple to 70 billion liters (18.5 billion gallons) by

2025, and only about a third of that will be exported. The country’s cane crop— 490 million tons in 2008-09—is growing at more than 10 percent annually and is expected to continue at that pace for the unforeseeable future, thanks to improved cane varieties. Traditionally, Brazil has diverted about half of the sucrose that it crushes from its cane crop to sugar production and the other half to ethanol, but over the next decade or so this will shift

toward about 60 percent going to ethanol. Nearly all of Brazil’s sugar and ethanol mills use leftover cane, or bagasse, to fire cogeneration of thermal electric power plants that provide heat for refining and distillation and electric energy for operations. But the rapid expansion in cane has sent bagasse prices through the floor. Mills are accumulating large stockpiles of the biomass— which Dedini next wants to tap as feedstock for cellulosic ethanol production.

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Meanwhile, Dedini has been working on a rapid hydrolysis cellulosic technique over the past decade in which it has invested more than 12 million reals (R$12 million or U.S. $7 million) in partnership with Brazil’s massive sugar and ethanol cooperative Copersucar. The company secured a $R50 million (U.S. $29 million) grant in 2007 from the Foundation for the Expansion of Scientific Research in Sao Paulo (Fapesp) to develop cellulosic technologies. Dedini will match that sum with its own in investments to develop new cellulosic techniques in hydrolysis. “The rise of world interest in biofuels has intensified the search for technological advances based on scientific research,” says Carlos Henrique de Brito Cruz, Fapesp’s scientific director. Dedini has constructed a prototype cellulosic ethanol plant called the DHR project—Dedini Rapid Hydrolysis—in its Sao Luiz mill, in Pirassununga in Sao Paulo state. The Center for Cane Technology in Piracicaba, Brazil, a research spin-off of Copersucar, was also instrumental in early hydrolysis testing before the installation of the DHR at the Sao Luiz plant. The experimental plant has a 5,000-liter (1,320-gallon) daily capacity.

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“Ethanol production from this technique will be able to compete with gasoline as long as oil is above $40 a barrel,” claims Dedini’s Oliverio. He acknowledges that the prototype plant has encountered obstacles—it needs improved filters to remove sand, for example. “We haven’t been able to run the plant continuously because of the corrosiveness of the sand that gets into the system,” says Oliverio. “We are shutting down weekly.” Yet Oliverio doesn’t think sand removal will be a difficult obstacle to overcome.

Brazil will likely need hundreds of millions of tons of enzyme to break up the lignin in its annual 500 million-ton cane crop. “This type of acid method typically inhibits fermentation of the sugars in the bagasse, so mills will have to figure out how to overcome this,” says researcher Carlos Rossel of the Unicamp university. For the time being, Dedini’s blend—a dilute acid that doesn’t impair fermentation—is as promising as

Trend Bucking After nine decades, Dedini still innovates. Its DHR plant’s core process uses a diluted acid wash to break down the lignin that holds the C5 and C6 sugar molecules in the bagasse. So far, there is only a fermentation method for the C6 sugar. The C5 molecule would add about 25 percent more sugar and ethanol production to the hydrolysis system. According to tests of the prototype plant, conventional ethanol production at a mill could double from 6,000 liters per hectare (641 gallons per acre) of cane by simply using the bagasse to make cellulosic ethanol in addition to the ethanol made from the sucrose that comes from crushing the cane stalk. Questions remain regarding allocation of biomass. Most of the bagasse created in sugar and ethanol production now goes to thermoelectric cogeneration. And a third of the biomass from the cane plant is also left in the field. Dedini’s choice of a mild acid wash to break up lignin bucks a trend. Most scientists and researchers believe that the future of cellulosic ethanol production will be enzymes, but cheap mass production of required enzymes is difficult.

enzymes to become commercially viable in cellulosic ethanol production. In short, Dedini—a historic presence in Brazilian biofuels—is still very much in the game. EP Elizabeth Ewing is a journalist covering biofuels from Sao Paulo, Brazil.

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The World According to Ethanol Prospects for ethanol trade over the coming three to five years are probably good. As to the specifics—it’s anybody’s guess. By Marc Hequet

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t’s an exotic mix: mounting demand in spite of skyhigh feedstock costs, oil prices off the charts, a weak dollar, fierce political pressures for and against trade barriers, equally fierce agitation for sustainability— all in the vortex of economic downturn. Forecasting the prospects for international ethanol trade isn’t simple at the moment. Let’s just say more production, more demand and more trade overtopping trade barriers— all are likely. Whatever happens, expect interesting times. Darin Newsom, senior analyst with DTN, the Omaha, Neb., commodities-information service, is among those waiting for good old supply-and-demand economics to settle in. But first, he thinks, ethanol is going to have to get through its wild youth. “The corn markets are rallying on projected ethanol demand,” Newsom notes, “but at the same time ethanol demand could start to shut down because that demand is helping to push the market too high. We’re still feeling our way around with prices—what’s too high, what’s too low, how high is too high.” So let’s not get ahead of ourselves—as Brazil may have. “Brazilian producers are very clear that they are expanding, that there is a lot of additional production on the way,” says

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Arnaldo Vieira de Carvalho, based in Washington, D.C., as a sustainable-energy specialist with the Inter-Americas Development Bank. “In fact they were a little bit ahead of the market and too much ethanol has been produced lately, so the prices came down. I think in that sense they were too fast.” Carvalho And yet world ethanol supply is limited. “Remember, there are only two suppliers in the world for large quantities,” says Nelson Rodrigues de Matos, an investment analyst with DIMEC/Divisão de Pesquisa in Rio de Janeiro: Brazil and the United States.

Brazil Can Grow Brazil is better positioned to grow exports, despite the counterweight of rising internal demand. Brazil produced about 22 billion liters (5.8 billion gallons) of ethanol last year, and exported only 15.9 percent of it. “That tells you right there that what Brazil produces is going essentially to service the local market, not for export,” says Adhemar Altieri, a spokesman for the Brazilian Sugarcane Industry Association, Unica.

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Yet Brazil is laying the groundwork for more export. Japan appears to be a key emerging trading partner. Accentuating the relationship, Japan's Crown Prince Naruhito was scheduled to visit Brazil in June to boost trade ties. Brazil has the largest overseas Japanese community, an estimated 1.5 million. Sumner Growing global demand for alternative fuels will mean more Brazilian exports, predicts the research firm Fitch Ratings in New York City. Climate, geography and geology, cheap land, low labor costs and government incentives all give Brazilian ethanol an edge. More than half of Brazil’s sugarcane crop now goes to ethanol, and the balance may well continue to tip in that direction. Daniel A. Sumner, director of the Agricultural Issues Center at the University of California-Davis, thinks that Brazil has limited capacity to expand sugar production—but with prices high enough “there is certainly room to push out ethanol supply there,” says Sumner. As for importers, the United States is a prospect for growth, its protective tariff notwithstanding. California’s Low Carbon Fuel Standard takes effect in January 2010, just 18 months from now. Demand for low-carbon fuels will rise

dramatically in that state. “California will likely be the first battleground between domestic and foreign ethanol producers,” says Rahul Iyer, executive vice president at Primafuel Inc. of Long Beach, Calif.

Not So Far Apart Wherever the epicenter turns out to be, producing nations are laying the groundwork for more trade. Key players took an important step in February when the United States, European Union and Brazil released an analysis of quality and emissions standards—and found that they’re not so far apart. Eventual agreement on ethanol-quality standards is likely to mean lower costs for producers and shippers, who would no longer be required to meet a patchwork of specifications nation by nation and region by region. The joint analysis by the U.S. Commerce Department’s National Institute of Standards and Technology and corresponding agencies in Brazil and the EU showed nine of 16 ethanol specifications the governments reviewed are “in alignment” and all but one of the remaining specifications could be aligned short-term. The hard-to-align standard is water content.

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ETS

Will U.S. import more Brazilian ethanol?

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By Elizabeth Ewing in Sao Paulo

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U.S. direct imports of Brazilian ethanol will likely mount sharply in 2008

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even with a protective tariff in place, a key sugar and ethanol analyst told EPM. Meanwhile, world supplies will remain tight even as production rises significantly, according to Christoph Berg, managing director of F.O. Licht, said on the sidelines at the March annual seminar conducted by Licht, the UK-based firm specializing in commodities analysis. World ethanol production will rise in 2008 to between 70 billion and 75 billion liters (18.5 billion to 19.8 billion gallons), Berg says—up 20 percent or more from 62 billion liters (16.4 billion gallons) in 2007. In 2008 between 62 billion and 63 billion liters (16.4 billion gallons) will go to fuel use and the balance to industrial purposes, predicts Berg, and “demand should just meet supply for fuel ethanol this year.” The U.S. tariff notwithstanding, Berg thinks direct ethanol imports into the U.S. may more than double, U.S. ethanol buyers directly importing 200 million to 700 million liters (53 million to 185 million gallons) in 2008 over the 2007 level of 500 million liters (132 million gallons). Such direct imports incur the U.S. tariff of 54 cents per gallon. Total U.S. imports of Brazilian ethanol in 2008 will reach 2 billion liters (528

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million gallons), up from 1.5 billion liters (396 million gallons) in 2007. A capped amount of foreign ethanol—much of it originating in Brazil—is allowed to enter the United States tariff-free each year through countries including Jamaica, Trinidad Tobago and El Salvador. Those nations are covered by the Caribbean Basin Initiative and Central American Free Trade Agreement, accords that remove most trade barriers. Brazil ethanol bound for Europe in 2008 will rise to 1.3 billion liters (343 million gallons) from roughly 1 billion liters (264 million gallons) in 2007, according to Berg.

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Total Brazilian ethanol exports in 2008 will reach 4 billion liters (1 billion gal-

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lons) versus 3.5 billion liters (924 million gallons) in 2007. Berg sees Brazil's ethanol output at 24 billion to 25 billion liters for the 2008-2009 crop year (about 6 billion gallons)—up from 20 billion liters (5.3 billion gallons) last season. More sugarcane is available for ethanol, he notes, because of a persistent

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world sugar oversupply. All told, says Berg: “The competitiveness of Brazilian ethanol has risen dramatically.” Elizabeth Ewing is a journalist who covers biofuels from Sao Paulo, Brazil.

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Counterproductive? Back in the United States, some argue for a lower tariff on ethanol imports—noting, for example, that it may be more economical for Florida to import from Brazil than from the U.S. Midwest. Others also think the tariff ’s days are numGreene bered as Washington’s attention shifts to reducing greenhouse gases. “As soon as we start basing policy on carbon reduction and sustainability, then this tariff we have on Brazilian ethanol is going to start to look more and more counterproductive,” says Primafuel’s Iyer. Imports from Brazil would help the U.S. meet its energy objectives without drawing political heat about food-vs.-fuel issues, thinks Sumner because Brazilian ethanol is from land already devoted to sugar. Yet U.S. ethanol interests make a strong case for maintaining the tariff. Removing it would amount to U.S. taxpayers subsidizing foreign production, tariff backers argue. The Renewable Fuels Association contends that the tariff offsets the 51-cent-per-gallon tax incentive that petroleum refiners receive for ethanol they blend, no matter whether it originates in the United States or Brazil. Without the tariff, says RFA, American taxpayers would in effect pay Brazilian ethanol producers 51 cents for each gallon of ethanol the United States imports from Brazil. If the U.S. persists in protecting its own ethanol industry, Brazil is unlikely to resort to protectionist measures in agriculture, says economist Sumner—but another kind of retaliation may come from China, Japan and Korea. A Japanese econo-

mist told Sumner of UC-Davis about pressure to raise Japanese grain and oilseed tariffs to encourage domestic production of feed grains, wheat and oilseeds in Japan “because with the big price jumps and demand for ethanol production,” says Sumner, “the U.S. is considered as perhaps not a reliable supplier.”

Europe Hesitates Europe, meanwhile, has been rethinking its own biofuels mandates, worried about feedstock sustainability. Exporters hold their breath. “If you don’t have mandates, our trade would be significantly reduced,” says the Inter-American Development Bank’s Carvalho. Europe’s fixation on sustainability means certification must be thorough, says Carvalho. Any scandal suggesting that presumably certified feedstock is otherwise would make headlines around the world, he cautions, and careless certification “will bring harm. You have to do it right. One project wrongly done may affect the whole future of the market.” Bad news, adds Carvalho, brings “a wave of worries” and unnerves politicians. Sustainability will affect ethanol price, predicts Nathanael Greene, senior policy analyst in New York City with the Natural Resources Defense Council. Ethanol from feedstock that doesn’t meet sustainability standards will become less valuable. “I think you’ll see pressure on the market to move away from some feedstocks that have the worst types of land-use-related impacts, like palm oil,” says Greene. U.S. producers may even gain an edge in sustainability as the cellulosic market develops, environmentalist Greene thinks. “We may find ourselves quite possibly an exporter

ETHANOL PRODUCER MAGAZINE JUNE 2008

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of low-carbon biofuels if we were really aggressive about finding these options that don’t interfere with food and feed and fiber,” he says. The reason? Language in the federal Renewable Fuels Standard “is more aggressive in that it has a broader scope” than the EU’s prescriptions for sustainability, notes Greene. “It seems entirely possible we would end up in a place where our standards and regulations are stricter,” he muses, “and therefore be ones that the European Union would be willing to accept.” The biggest obstacle to growth in both Brazilian and U.S. ethanol production is success in getting the world to use it. Who goes first? Nations won’t require an ethanol blend unless they are convinced enough production is available. As that comes to pass, if it does, it creates an opportunity for ethanol producers wherever they are. “Brazil alone would never be able to produce sufficient ethanol to service a global demand,” says Revisson Bonfim, director of the Latin America Corporates Group for Fitch Ratings. “Therefore other countries will need to produce ethanol in scale, commoditizing it. Only then could fears of a shortage diminish.” If ethanol trade barriers fall, Sumner expects “more imports into the U.S. maybe a doubling.” That would drop U.S. ethanol prices and result in more U.S. use of ethanol— meanwhile raising world prices because U.S. imports would draw down world supply. It would also mean “some reduction” in U.S. ethanol production and in use of corn for ethanol, says Sumner. High corn prices make U.S. ethanol less competitive, and

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have the effect of pulling in more ethanol imports even over the high tariff wall, he adds.

‘Voodoo Economics’ And so it goes. As if the international ethanol market isn’t already wacky enough, consider this: In March, Oanda plc, Nigeria’s biggest energy company, was fined by the Nigerian government for importing E20 that reportedly damaged thousands of vehicles. In subsequent weeks, however, the company’s share price actually rose 60 percent on the Nigerian Stock Exchange. Observers speculated darkly about “wanton manipulation.” “It is only here in Nigeria you find such voodoo economics happening,” an official told The Vanguard, a newspaper in Lagos, Nigeria’s largest city. Unless voodoo has bewitched the whole sector, ethanol will correct eventually. “That’s the expectation,” says Carvalho of the Inter-Americas Development Bank, “because we believe it is a good solution.” Meanwhile, if you can find the fundamentals, cling to them. It’s going to be wild out there and things will change. Check back with us again—in about 20 minutes. EP Marc Hequet is international editor with Ethanol Producer Magazine. Reach him at mhequet@bbibiofuels.com or (701) 6360636.

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Wheat Dreams at Ensus

Its feedstock is a staple, yet backers of the UK’s biggest ethanol venture did their sustainability homework and claim little net impact on food. By Michael Kenward

The plant’s home will be the 2,000-acre Wilton International site at Teesside in northeastern England, a ready-to-go industrial complex with much of the infrastructure Ensus will need. PHOTO: ENSUS

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ollowing recent media coverage, you would think that biofuels threaten doom and destruction to the planet. The United Kingdom’s prime minister, Gordon Brown, even went so far as to call for biofuels to be on the agenda for the G8 economic summit in Japan in July, a meeting of the eight most powerful nations in the world. This would not seem to be an auspicious environment in which to set up a new British business to turn wheat into biofuels. Yet the people behind Ensus Ltd. believe that the company’s plan to make ethanol for transport fuels is more sustainable than alternatives. When lining up investors, the fledgling firm went beyond writing the usual business plan. Presentations to prospective backers detailed the company’s sustainability analysis and production processes. Such is the need to make the

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‘The question is not about whether biofuels are good or bad. It is about differentiating between good and bad biofuels.’ case for biofuels in the UK that Ensus even contributed peer-reviewed evidence to the Royal Society, the UK’s leading science academy. For Alwyn Hughes, the Ensus chief executive, sustainability analysis is essential when considering approaches to biofuels production. “The question is not about whether biofuels are good or bad,” says Hughes. “It is about differentiating between good and bad biofuels.” Hughes wants to prove that Ensus is among the good guys.

Ensus has its roots in the UK’s chemicals industry. Hughes and Ensus Chairman Sir Rob Margetts first worked together at ICI, at one time among the UK’s largest and most respected companies and a world player on the chemicals market. Imperial Chemical Industries Ltd. lost its way in the 1990s, selling off most of its bulk-chemicals businesses and focusing on specialty chemicals. ICI finally succumbed to a takeover by Dutch rival Akzo Nobel nv earlier this year.

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By then both Margetts and Hughes had moved on from ICI. In Hughes’s case, after leaving the chemicals company he ran an startup. Sir Rob held a number of senior board positions, including chairing Legal & General Group plc, one of the UK’s biggest insurance companies information-technology.

While at ICI, Hughes was responsible for a number of billion-dollar capital projects. In contrast to those massive initiatives, Hughes calls Ensus relatively modest £250 million venture ($500 million) “a process engineer’s dream.” Work on the new plant, boldly labeled Ensus One, began in May 2007. Ironically enough, it’s going up in Teesside, in the UK’s northeast—on land once occupied by a polymer plant that Hughes had built while at ICI. This time, though, technical demands are fewer.

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In Their Dreams

Hughes (left) and Margetts worked together at chemical giant ICI before setting out to break ground with the UK’s biggest ethanol plant.

Continued on page 208

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No fool like a biofuel? By Michael Kenward

It is ironic that the debate in the and the rest of Europe on biofuels coincided with an industrial dispute that briefly threatened to halt the flow of boring old fossil oil from the country’s North Sea oil fields. Days before striking oil workers shut down the Grangemouth refinery in Scotland in late April, 50 biofuels protesters, some dressed as orangutans, demonstrated outside the London headquarters of Unilever, the consumer-products conglomerate, calling for an end to using palm oil for biodiesel. The environmentalists were there to protest purported destruction of the Indonesian rain forest, which the environmentalists blame at least in part on biofuels. Throw in confusion about soaring food prices, talk of a trade war with the United States over its subsidization of biofuels—and what could have been good news for the United Kingdom’s fledgling biofuels sector now whithers in the sputtering flame of illunderstood conflicting forces. When it comes to the idea that Europe's biofuels production is taking food out of the mouths of the world’s poor, the numbers do not add up. The United Nations Food and Agricultural Organization (FAO) does warn that “Rapid increases in the large-scale production of liquid biofuels in developing countries could exacerbate the marginalization of women in rural areas, threatening their livelihoods.” However, the FAO does not support the idea that biofuels are behind the rises in food prices. Jeff Tschirley, the chairman of the Inter-Departmental Working Group on Bioenergy at FAO in Rome, quoted in the respected international newspaper Financial Times, says “Biofuel has been made a culprit, but

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we don't see it as the major [factor] responsible for high food prices.” Most observers point out that soaring oil prices have had a much more marked impact on food prices. Doerte Bieler, of Germany's ethanol industry association LAB, cites some numbers on the argument about biofuel’s impact on food prices. She says that only 2.6 per cent of Germany’s grain harvest of 45 million U.S. tons was used to produce ethanol in 2007. In Europe as a whole, only 1.5 percent of its 294-million-ton (U.S.) grain crop was used for ethanol.

Falling Grain Prices “Grain prices have risen because of other factors such as poor harvests and speculation,” she said at the biofuels conference of the Clean Moves Expo, part of the at Hannover Fair in April. “Grain prices have fallen by 30 percent in the last few weeks, which is probably an indication that a huge volume of speculative money is currently moving in grains markets.” Germany likes to describe itself as “one of the global front-runners in the development of biofuels,” according to Andreas Schütte of the Agency for Renewable Resources. The country, he adds, “is focusing on establishing international sustainability standards for both the cultivation of biomass and the production of biofuels.” No one denies that biofuels can have detrimental effects. The usual example put forward of unsustainable biofuels is clearing rain forests to grow palm oil for biodiesel. Alwyn Hughes, Ensus’s chief executive, says the question isn’t whether biofuels are good or bad—it’s about differentiating between good and bad biofuels. Adding to this debate, no less a figure than Prime Minister Gordon Brown of the UK clearly does not buy the line that

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there is only a tenuous link between biofuels and the price of food. Brown held a meeting on food prices at 10 Downing Street at the end of April. One outcome of this event was the launch of yet another review of the sustainability of biofuels. As the statement after the Downing Street event put it: “We need to look closely at the impact on food prices and the environment of different production methods and to ensure we are more selective in our support. If our UK review shows that we need to change our approach, we will also push for change in EU biofuels targets.” Brown should know much of this already. After all, as chancellor of the exchequer he had commissioned Julia King, vice chancellor of Aston University, to report on “low-carbon cars.” In her introduction to the final report, “The King Review of Low-Carbon Cars,” she wrote, “Another theme is the need to ensure new technologies are developed sustainably, taking account of indirect effects, such as deforestation, changing land use and the potential impact of new and exotic materials during both production and disposal. In order to do this we need to develop ways of measuring CO2 reductions, and indeed broader environmental impact, in terms of life-cycle emissions that take into account both the direct and indirect effects.” King’s final report reminded readers that the first part of the review had “urged caution in the expansion of global biofuel demand until improved technology and comprehensive sustainability safeguards are in place.”

Tracking Food Impact The UK’s leading scientific academy, the Royal Society, had already picked up King’s baton by launching its own study

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of biofuels, “Sustainable Biofuels: Prospects and Challenges.” This stated: “The key goal for these future biofuels must be the generation of substantially better results in terms of net greenhouse-gas emissions. Additional sustainability metrics need to be agreed to guide developments in the supply chain, including energy efficiency, amount of fossil energy used, cost per unit of energy and environmental impacts such as local air and water pollution.” The report of the Royal Society also called for a “major research and development effort … in both public and private sectors.” Alongside a series of technical challenges, the report said that a key objective of this effort should include “internationally agreed methods of assessing sustainability.” One recent personnel change in UK government may have played a part in altering the line on biofuels and shifting the emphasis to food. As soon as he started his job as government chief scientific adviser at the beginning of the year, John Beddington, a fisheries expert at Imperial College in London, began to talk about food as one the world’s biggest challenges. Beddington’s predecessor, Sir David King, is already credited with having done much to bring climate change to the top of the political agenda in the UK. Early in the new chief science adviser’s tenure, Beddington told an interviewer, “It is very hard to imagine how we can see a world growing enough crops to produce renewable energy and at the same time meet the enormous increase in the demand for food which is quite properly going to happen as we alleviate poverty.” In short, the battle over food and biofuels won’t go away anytime soon. In the meantime, producers of biofuels must, like Ensus, do their homework to show the impact of their feedstock not only on greenhouse-gas emissions, but on food.

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An ethanol plant is really just a big whiskey distillery, and the technology has been around since Cleopatra. Continued from page 205

The facility has none of the complexity of the chemical plants Hughes and Margetts helped build for ICI. Indeed, Hughes jokes that the ethanol plant is really just a large whiskey distillery, and the technology has been around since Cleopatra. Nevertheless, thanks to its ICI heritage, the 2,000-acre Wilton International site at Teesside is a ready-to-go industrial complex with much of the infrastructure needed to support Ensus process technology. The context is global: Singapore-based SembCorp Utilities Pte Ltd owns the site and the Ensus One’s technology is from Katzen International Inc. of Cincinnati, Ohio, in the United States. Ensus One is scheduled to start operations in early 2009. The facility will need about 1 million metric tons (1.1 million tons or 37 million bushels) of wheat per year, but will also be able to process other grain crops, including corn and barley. The plan is to start with an annual production capacity of 400 million liters (100 million gallons)—about a third of the UK’s estimated demand for ethanol. This demand arises from the nation’s Renewable Transport Fuel Obligation, which took effect in April. The RTFO requires that 2.5 percent of all transport fuels be biofuels, rising to 5 per

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cent in 2010—a target that has come under much scrutiny recently.

A Safety Net of Deals Ensus already has long-term commitments from big partners. Oil giant Shell International bv of the Netherlands contracted to take all the ethanol that Ensus One produces. Cargill Inc., the big U.S. agricultural-products company, will provide feedstock and take the distillers grain coproduct. Atop the $500 million that Ensus raised for the venture, a further £60 million pounds ($120 million) comes from its strategic partners. The arrangements were a part of an imaginative business plan that persuaded Sir Rob to become the company’s chairman. More such deals further reduce the venture’s risk. As well as the commitments on inputs and outputs, Ensus has arrangements with SembCorp, which will supply energy to run the plant, and Royal Vopak, a Netherlands-based bulk-logistics specialist that manufactures tanks to hold the output. Ensus has even found someone to buy the carbon dioxide from the plant.

Still in the Food Chain Energy for the facility will come from a combined heat and

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power plant. This, says Hughes, gives Ensus a smaller carbon footprint than some rival biofuel projects—yet another factor that may put the venture ahead of the pack in sustainability. The company’s sustainability analysis also takes into account the controversial topic of impact on food. Europe already has surplus wheat production. Ensus insists that turning wheat into alcohol doesn’t remove the crop from the food chain. A byproduct of ethanol—distillers grain, with a significant protein component—goes back into the food chain as animal feed. “Fuel is about carbohydrate, food is about protein,” Hughes explains. “We don't want the protein, so we hand it back anyway.” Hughes is careful not to claim that every bit of the crop’s protein ends up in food. However, he insists that the plant’s “sidestream” does a pretty good job of this, so much so that Hughes argues that using locally grown wheat for biofuel could make the EU more self-sufficient in both food and energy. Biorefined wheat is richer in protein than the original cereal, removing the need for imported soy supplements in cattle feed. Wheat is also more efficient at capturing the sun’s energy, making better use of agricultural land. When it comes to protein production, soybeans produce around 2.5 metric tons per hectare against 8 metric tons per hectare for wheat 1.1 U.S. tons per acre vs. 3.5 U.S. tons per acre. According to Ensus calculations, it takes 0.24 hectares or one-tenth of an acre to produce a metric ton of animal feed using a combination of wheat and soybean meal—about one U.S. ton for every eight-hundredths of an acre. This turns out to be about the area needed to produce a ton of animal feed using protein concentrate made from wheat alone—and that

ETHANOL PRODUCER MAGAZINE JUNE 2008

wheat can produce biofuel as well as animal feed. In other words, as Ensus puts it, “biofuel produced this way therefore requires theoretically no net increase in land.” Hughes has another way of putting this: “Biofuel from wheat is almost for free.”

Starting Somewhere Ensus plans to become “a leading player in its target markets, with a number of world-scale biorefinery facilities across Europe,” says Hughes. In its search for a site for Ensus Two, the company is talking to European development bodies including the group called Invest in Germany. Here too the quest is for locations with the same sort of process-industry infrastructure and access to transport and crops that already exist in Teesside. On top of the usual list of criteria for a new site, Ensus insists that it will also assess the carbon footprint and sustainability of its prospective locations. Hughes sees Ensus One as the first of a new generation of ethanol plants. “We aren't saying that we are building the perfect biofuel plant,” Hughes says. “We are suggesting that you aren’t going to get better unless you start.” To put it another way, you can't have a second-generation plant before you have built the first generation. EP Michael Kenward is journalist who covers biofuels and other subjects from Sussex, United Kingdom.

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began our business around one important notion: to build a team of engineers and scientists r #VJMEJOHUIF1SFNJVN%%(44PMVUJPO â&#x20AC;&#x201C; While we look to the future of biomass and cellulosic energy production, we are with a passion for delivering committed to provide the ethanol industry of today with the premium solution for DDGS production â&#x20AC;&#x201C; a solution that delivers the worldâ&#x20AC;&#x2122;s best ingredient the high-protein, good tasting light-gold feed that is so valuable in your markets. preparation and production systems. Five decades later, weâ&#x20AC;&#x2122;re r %FMJWFSJOH&OFSHZBOE$PTU4BWJOH5FDIOPMPHJFTâ&#x20AC;&#x201C; We know that the future success of biofuels hinges on our ability to still pursuing that goal along deliver manufacturing systems with lower energy, water, and emissions needs. Thatâ&#x20AC;&#x2122;s why Ronning is focused on building the Waste Heat Evaporation solution of the future â&#x20AC;&#x201C; one that can cut dehydration costs in your existing facility while integrating with a commitment to meet with a wide range of process technologies. For customers thinking of biomass-fired energy systems, Ronning has the field the unique challenges involved installations to prove that we know how to deliver cost savings without sacrificing quality, reliability, or safety. in converting diverse biomass r 4FSWJOHPVS$VTUPNFST â&#x20AC;&#x201C; In the end, it all comes down to an attitude of service to our customers. Our goal is to lead your feedstocks into energy.

supply chain in delivering value with flexibility and a spirit of teamwork. We invite you to experience the Ronning difference on your next project. Visit us at FEW Booth #386

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TECHNOLOGY

Patent Policy and Sustainable Cellulosic Biofuels Development By Steve Suppan

N

ational patents and international rules on patents will be instrumental in the development of biofuels markets— defining how fast that development takes place and who controls and benefits from the next wave of biofuels. Patents granted by governments to applicants confer commercial (often monopoly) privileges in exchange for a product or process that meets three main patent criteria. The patented product or process, in the words of Article 27.1 of the World Trade Organization agreement on intellectual property, must be “new, involve an inventive step and [be] capable of industrial application.” In U.S. law, these criteria are usually characterized as novelty, non-obviousness and utility. Investment plans for biofuels component products, such as in joint ventures, include patent portfolios as a key element. Yet the patent policy debate from which changes in patent law and regulations emerge goes unmentioned in global biofuels market planning. This article outlines some of that general debate and its application to the synthetic biology (sometimes called nanogenomics) patents that will be instrumental in the development of cellulosic biofuels.

Taken for Granted in Global Plans In the Brazilian Agroenergy Plan 2006-2011 there is not a single word about patents. In the United Nations Energy Task Force report “Sustainable Bioenergy: A Framework for DecisionMakers,” neither patent policy, patent enforcement, royalty and

licensing fee costs nor the role of traditional knowledge and genetic resources in patented biomass products are considered to be sustainability factors. The UN Food and Agriculture Organization’s International Bioenergy Platform does not consider patent issues to be part of its “knowledge management” program. There are at least two reasons why patents are left out of such public planning for a global biofuels market. First, patents are considered in law and trade policy to be a private and individual right, even though the “natural persons” applying for patents are typically corporations, universities or governments, all of which are chartered, subsidized and/or financed by the public. Public subsidies, tax exemptions, research grants and fuel blending mandates power much bioenergy development. However, the patenting application, renewal and enforcement process that converts public support into market privileges for the patent holder is largely a private affair—a “dialogue” between governments (patent examiners or courts) and lawyers representing patent applicants or holders. Second, patent issues are absent from public planning for the biofuels market because the economic costs and benefits of patents are held as confidential business information. Even the World Intellectual Property Organization (WIPO), which registers patents for international application and is the venue for intergovernmental patent negotiations, has little data for research about the economic costs and benefits of patents. Hence, the claims

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

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made about the contribution of patents to innovation and research are often hortatory, without specific evidence about legal, licensing and royalty costs relative to nonpatent innovation incentives.

Patent Pathology, Reform and Thickets As the U.S. government tries to glob-

ETHANOL PRODUCER MAGAZINE JUNE 2008

alize the U.S. patent process through WIPO negotiations and bilateral trade agreements (“harmonization” in the regulatory jargon), there is mounting criticism by patent scholars that patents, particularly in the United States, are being granted on dubious or occasionally even fraudulent grounds that fail to satisfy basic patenting criteria. Adam Jaffe and Josh Lerner in

Innovation and Its Discontents, have characterized the legal culture in which such patents are granted as a “patent pathology” that could impede the innovation that patents are supposed to reward. An October 2003 Federal Trade Commission report, “To Promote Innovation,” cautiously ventured that the increasing rate of U.S. patents granted and their strategic use to prevent research by competitors might be stifling innovation. One sign of such pathology is a too liberal granting of patents by understaffed patent examiners’ offices whose financing depends in part on patents granted, registered and renewed. For example, a “Resources for the Future” study in 2003 reported that the U.S. Patent and Trademark Office examiners had just 20 to 30 hours per application to determine whether the applicant met the basic criteria of patent. Even with the aid of computerized patent search databases, it is often exceedingly difficult to determine in such a short time whether a product or process really is truly innovative and ready to commercialize or contribute to a commercial product. Hence, the tendency, noted by one agriculture biotechnology lawyer cited in Peter Drahos’ and John Braithewaites’ Information Feudalism, for the examiner to rule in favor of the applicant, meaning

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The components to improve your plant • Single source for controls, instrumentation and valves • Over 150 combined years of experience in the biofuels industry • Proactive customer service

Whether cellulosic biofuels can become environmentally and economically sustainable does not, of course, depend simply on the technological success of open-source synthetic biology nor on patent reform. “you can get utility if you can spell it.” There is some evidence of jurisprudential momentum for reform that may instigate legislation and/or regulation against patent pathology. For example, in 2007, the U.S. Supreme Court, ruled (KRS International Inc. v. Teleflex Inc. et al.) that patent applicants had to better document that their products met the criteria for granting of a patent. Coming from the most “pro-business” court in the history of the United States, the ruling will set a precedent for cases in which the validity or breadth of a patent is challenged.

What is a Patent Thicket? Most complex technologies, such as biofuels, are composed of more than one patent. Usually all the patents for a complex product are not held by one company, hence the creation of joint ventures based in part on interlocking patent portfolios and technological capacities to pursue research and development. To take a simple and theoretical example, a genetically engineered biofuels feedstock with a high starch content trait and a proprietary pesticide trait might result from a joint venture that would require patented technology to acquire and “stack” these traits. But if a patent holder pursues a “strategic use” of patents to deny a competitor access to a component technology, then a patent thicket is created against innovation. Remember, there is no legal requirement that a patent be applied or “worked” in industry, only that it is “capable” of being applied. While creative patent and technology licensing lawyers can sometimes cir-

cumvent the thicket, the expense of doing so may not be worth the risk and cost for a small firm. Among the technologies that would create cellulosic biofuels on an economically viable scale, perhaps none is more complex scientifically and legally than synthetic biology. Synthetic biology joint ventures, such as that between British Petroleum and the University of California-Berkeley, hope to engineer plants at the molecular level to break down cellulosic fiber resistance to enzymes. Whereas agricultural biotechnology companies have moved genes between species (e.g., a fish gene into a tomato) to develop certain traits, synthetic biology techniques move molecules to create computer-like “operating systems” in living organisms. The molecular operating systems are first designed on a computer and then are replicated as genetic “circuits” constructed with parts of DNA. Perhaps as early as 2015, there may be synthetic biology modifications specifically for biofuels production, such as breeding enzymes or microbes into trees or perennial grasses to break down cellulose to extract sugars for ethanol. The designer organisms on the synthetic biology drawing board would bypass much of current ethanol technology. In “Extreme Genetic Engineering: An Introduction to Synthetic Biology” at www.etcgroup.org, Aristides Patrinos, a former U.S. DOE official and now CEO of Synthetic Genomics, says “The ideal situation would be just one big vat, where in one place you stick the raw material—it could be switchgrass—and out the other end comes fuel.” If the day

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TECHNOLOGY

when such a technology becomes commercially viable is postponed into the distant future, one cause may be patent pathology and/or thickets. Patent claims on synthetic biology products and processes have been so broad and the licensing of patent use so complex that a May 2006 editorial in Scientific American warned such patent and licensing practices could throttle the discipline in its infancy. Very broad patent claims, if enforced, could result in very expensive licensing, draconian limits on scientific communication among researchers, and/or time-consuming circumvention to avoid prosecution for patent violation. For example, “syn-bio” patents have been claimed on whole classes of naturally occurring bio-molecules (e.g., zinc) commonly used in the computerized simulations to reprogram genes to carry out functions that would not occur in nature. Any contribution that cellulosic biofuels might make to reducing the contribution of transportation to climate change and its devastating anticipated effects, could be delayed or even vitiated by patent pathologies and patent thickets. For example, development of a cellulase enzyme could be made prohibitively expensive if the cost of licensing an indispensable component patent on a class (e.g., fungi or bacteria) of synthesizing molecules were too high, and the validity of such a patent were upheld in court. Not all synthetic biology developers patent every plausibly inventive step of their work. A few university scientific entrepreneurs have eschewed patenting and the attendant confidentiality agreements that can impede critical scientific communication. Instead, they have sought to develop “open-source biology” along the lines of Linux, the non-proprietary computer software that has been developed cooperatively by thousands of volunteer programmers. Synthetic biologists at the Massachusetts Institute of Technology have made available to researchers a patent-free Registry of Standard Biological Parts (sometimes

called BioBricks) used in designer organisms. The registry contains more than 2,000 molecular arrangements of genetic code that can be freely accessed, provided that improvements on them can likewise be accessed and improved free of patent restrictions. Open-source synthetic biology may avoid some of the impediments to research that broad and overlapping patents create, though not, of course, risks such as the environmental consequences of syn-bioengineered plants.

Conclusion Whether cellulosic biofuels can become environmentally and economically sustainable does not, of course, depend simply on the technological success of open-source synthetic biology nor on patent reform. Land clearing for planned biofuels feedstock investments in Malaysia, Indonesia and Brazil alone could release greenhouse gases far in excess of any greenhouse gas reductions resulting from the use of second-generation or even third-generation biofuels. Nevertheless, an effective assertion of the public interest in patent reform and technology policy could help make biofuels investments and product use more sustainable. For example, legislation could incentivize local ownership of biofuels firms by requiring relevant patent holders to set preferential licensing fees for companies that source biofuels feedstocks, produce local economic multiplier effects and meet environmental sustainability criteria within a certain radius around a biofuels plant. Such a legislative debate would be informed in part by the broader patent reform community. EP

The knowledge to improve your vision •

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Knowledge-based training and continual support

Steve Suppan has been a policy analyst since 1994 at the Institute for Agriculture and Trade Policy, a non-profit organization based in Minneapolis with an office in Geneva, Switzerland. He works in the Trade and Global Governance Program (www.tradeobservatory. org), which started work in 2007 on international policy aspects of bioenergy. Reach Suppan at ssuppan@iatp.org.

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BIOMASS

Developing Yeast Strains for Biomass-to-Ethanol Production By Ronald Hector, Stephen Hughes and Xin Liang-Li

significant monosaccharide concentrations prior to fermentation. Anticipated costs of enzymes and pretreatment make the process of converting biomass to ethanol more expensive than the presently used and well-established starch-based processes. These costs are partially offset by the use of less expensive and abundant sources of lignocellulose from trees, shrubs, switchgrass or agricultural crop residues. Further economic advantages might be attained through more streamlined processes such as simultane-

PHOTO: USDAAgricultural Research Service

A

lthough grain supplies will likely meet the immediate short-term needs for ethanol production, expansion beyond this to meet more ambitious targets will require alternative feedstocks. Lignocellulosic biomass from agricultural residues, municipal paper waste, dedicated energy crops and multiple other sources is projected to be a major renewable feedstock for sustainable production of biofuels. The conversion of lignocellulose to ethanol involves a series of enzymatic steps for hydrolysis or saccharification of the constituent polysaccharides, and subsequent fermentation of the released hexose and pentose sugars. Additionally, a pretreatment step is required to disrupt the tightly packed cellulose structure and allow access to the enzymes. Many popular pretreatment conditions are not mild, and the yeast and enzymes must survive the chemicals used in the process. According to Joseph Rich, leader of the USDA Bioproducts and Biocatalysis Research Unit in Peoria, Ill., â&#x20AC;&#x153;Industry is awaiting the microorganism that can produce high levels of ethanol in large-scale fermentation containing the hydrolysate consisting of both pentose and hexose sugars released by mechanical, enzymatic and chemical treatment of lignocellulosic feedstocks.â&#x20AC;?

Streamlining the Process Many of the enzymes proposed for use in separate hydrolysis and fermentation processes are inhibited by their products, necessitating the addition of large quantities of enzyme to reach

Left to right: NCAUR scientists Cotta, Hector, Hughes, Liang-Li and Rich

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

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the released sugars to ethanol, all occurring in a single reactor. â&#x20AC;&#x153;To achieve the DOE 30xâ&#x20AC;&#x2122;30 plan goal of 60 billion gallons of biofuels, [or] 30 percent of the motor gasoline supply by 2030, will certainly require advancements such as the one-step bioprocessing with Saccharomyces cerevisiae,â&#x20AC;? according to Seth Snyder at Argonne National Laboratory. Lee Lynd of Dartmouth College and Willem van Zyl of the University of Stellenbosch have succeeded in expressing cellulases in S. cerevisiae. As a promising first step toward a consolidated bioprocessing process, the recombinant yeast strain they generated was able to produce some ethanol from cellulose without added enzymes.

Pentose Fermentation

ous saccharification and fermentation, and consolidated bioprocessing. The simultaneous saccharification and fermentation process combines polysaccharide hydrolysis and fermentation in one step, but still relies on the addition of exogenously produced enzymes. The simultaneous saccharification and fermentation that occurs in this type of process is

an attractive method for keeping monomeric sugars at low enough concentrations to avoid enzyme inhibition, thus reducing costs by decreasing the amount of enzyme needed for the process. The consolidated bioprocessing process takes streamlining a step further and combines the production of enzymes with the same organism used to ferment

ETHANOL PRODUCER MAGAZINE JUNE 2008

Organisms that can ferment pentose sugars such as xylose and arabinose, in addition to glucose, are essential for an economical process. Hemicellulose, which accounts for approximately 25 percent to 40 percent of lignocellulose, is mainly composed of xylose. While S. cerevisiae is good at converting glucose to ethanol, it does not have the metabolic capacity to utilize xylose. Many years of research have been applied to engineer a yeast strain that can

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SOURCE: USDAAgricultural Research Service

SOURCE: USDAAgricultural Research Service

BIOMASS

Lignocellulose model showing lignin, cellulose and hemicellulose A depiction of xylose metabolic pathways

metabolize xylose as well as the hexose sugars found in biomass. Much of this research has recently focused on enhancing the fermentation performance of S. cerevisiae strains expressing heterologous enzymes from bacterial or fungal xylose utilization pathways. Research labs around the world have been trying to solve the problem of poor xylose utilization. Identifying the limiting metabolic steps that block efficient conversion of xylose to ethanol in these strains has been one of the goals for Thomas Jeffries at the

USDA Forest Service’s Forest Products Laboratory in Madison, Wis. Various xylose-fermenting yeast strains have been produced and some have found industrial application for processes using lignocellulosic feedstocks. Jack Pronk and his group at Delft University of Technology recently achieved rapid anaerobic fermentation of xylose and arabinose by engineered S. cerevisiae strains that express heterologous, pentose-isomerase-based pathways. “Now that the hurdle of efficient pentose fermen-

tation by yeast is being overcome, functional expression of hydrolyzing enzymes in the yeast is an important next challenge for yeast metabolic engineering,” Pronk says. Xylose fermenting yeast strains that express the fungal xylose pathway genes have also been improved upon and are being used in industrial processes, such as the yeast strain from Purdue University’s Nancy Ho and strains being developed at Lund University by Bärbel Hahn-Hägerdal. Yeast strains developed at the National

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BIOMASS Center for Agricultural Utilization Research have been engineered for enhanced pentose utilization by adding metabolic correction genes in addition to the genes required for growth on xylose. These genes were obtained from collaborations with Josh LaBaer, director of the Harvard Institute of Proteomics. To further improve these ethanologenic yeast strains for industrial use, scientists at NCAUR are also engineering yeast to express proteins that increase uptake of pentose sugars.

sufficient levels to maintain hydrolysis and fermentation of biomass to ethanol. Enzymatic conversion of cellulose to sugars that yeasts can ferment requires the concerted action of three types of cellulase. Due to the heterogeneity and complexity of hemicellulose, its conversion requires an even larger list of enzymes. For robust and complete conversion of polysaccharides locked in biomass, the ultimate ethanologens will need to produce at least a dozen enzymes of different catalytic activities.

Enzyme Requirements for Lignocellulosic Feedstocks

Developing New Biocatalysts

Although S. cerevisiae is a proven industrial ethanol producer in traditional starchbased processes, it will be no easy task to provide this microorganism with the ability to convert lignocellulosic biomass to ethanol. The carbohydrate components of lignocellulose (cellulose and hemicellulose) are tightly bound to lignin, making the sugars largely inaccessible to enzymes. “Before enzymatic hydrolysis, pretreatment with acid or alkali is generally needed to fully maximize the release of sugars from any lignocellulosic biomass,” says Badal Saha at the NCAUR Fermentation Biotechnology Research Unit. For consolidated bioprocessing, S. cerevisiae must not only ferment both hexoses and pentoses under industrial conditions with high ethanol yield and productivity, it must also express and produce enzymes at

Producing a yeast strain with optimized sets of cellulases and hemicellulases requires screening thousands of combinations of these biomass-degrading enzymes for enzyme activity. Automation is essential in carrying out these operations. A team of scientists at the NCAUR laboratory has been successful in designing a robotic platform and creating the automated molecular biology routines necessary to screen for the most effective set of enzymes. The genes for these enzymes may exist in organisms contained in the ARS culture collection and from organisms isolated from environments such as cattle rumen, hot springs, termite guts and ocean thermal vents. Sookie Bang at the Center for Bioprocessing Research and Development located at the South Dakota School of Mines and Technology is isolating extremeophiles

ETHANOL PRODUCER MAGAZINE JUNE 2008

from the National Science Foundation-sponsored Deep Underground Science and Engineering Laboratory as a source of novel enzymes that have been selected for more than 125 years at temperatures in excess of 140 degrees Fahrenheit in the harsh deepmine conditions. These enzymes hold great promise for use in producing lignocellulosedegrading yeast strains. Assuming appropriate enzymes are identified, a critical question remains. Is S. cerevisiae capable of simultaneously expressing the genes for all the different enzymes necessary to hydrolyze cellulose and hemicellulose as well as ferment pentose sugars? Indications are increasing that ethanol production by an ethanologen that has the ability to efficiently hydrolyze pretreated biomass and metabolize the resulting sugars is feasible. However, says Michael Cotta, leader of the Fermentation Biotechnology Research Unit at NCAUR, “Considerable research and development are still needed to develop the optimum enzymes, organisms and processes that will be able to generate a sustainable biomass to ethanol process.” EP Ronald Hector, Stephen Hughes and Xin LiangLi are research molecular biologists with the USDA’s Agricultural Research Service. Reach Hector at ronald.hector@ars.usda.gov or (309) 681-6098. Reach Hughes at stephen.hughes@ars.usda.gov or (309) 6816176. Reach Liang-Li at shin.li@ars.usda.gov or (309) 681-6327.

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ENVIRONMENT

Global Warming Intensity: An Opportunity and a Threat By Tyler J. Krutzfeldt

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ecently the technology journal Science released papers that called the economic and environmental benefits of corn-based ethanol into question. Economists asserted that corn ethanolâ&#x20AC;&#x2122;s dependence on indirect land use change will lead to more greenhouse-gas emissions than petroleum-based fuels. Although the papers have been criticized as highly speculative scenarios, land use change is a real issue which has spurred opposition to corn ethanol in the environmental community. How can the ethanol industry respond? The first response is that ethanol producers must model and understand the global warming intensity of ethanol fuel sold directly from their plant. The term global warming intensity was originated from the California Low Carbon Fuel Standard, which itself was born largely from the U.K. Renewable Transport Obligation. Global warming intensity is defined as a carbon dioxide equivalent per energy unit of fuel sold. All greenhouse gases, including nitrogen oxide and methane, are measured in terms of a carbon dioxide equivalent. Carbon dioxide has a global warming potential of 1:1, while more potent gases such as methane have a factor of 25:1. Global warming intensity is measured by a process called lifecycle analysis, which is an analytical process of determining environmental impacts of products and processes. Lifecycle analysis follows specific standards so that the model itself and results are transparent and easily verified. However, there is no

regulatory lifecycle analysis standard. Lifecycle analysis includes greenhouse gas emissions from combustion of fuels in the production process due to required steam and electricity consumption in the plant, transport of feedstock to the plant and to the fuel blending location, and cultivation of lands to produce feedstock. Ethanol producers and investors have a vested interest in making sure this work is done now. For corn ethanol producers, the conclusions reached by some in the academic and environmental community threaten their survival. There is wide discrepancy in what policymakers are hearing, reading and acting upon. According to an article in the magazine Chemistry & Industry (C&I), German proposals indicate ethanol made from U.S. corn offers lifecycle carbon savings of more than 40 percent. In the same article, the USDA concludes a 22 percent saving while the United Kingdom assessed corn ethanol at 20 percent carbon negative. A European Union executive has suggested that biofuels must deliver a lifecycle carbon dioxide savings of 35 percent to count toward their 10 percent blending target. A second step is lowering the global warming intensity of ethanol fuels. Carbon abatement strategies should be financially modeled prior to investment, taking into consideration the value of carbon emission reduction credits. Carbon abatement strategies include: Fuel switching Switching a plantâ&#x20AC;&#x2122;s thermal energy source from coal or natural gas to solar, wind or biomass gasification

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

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ENVIRONMENT

Ethanol – fuel to power our future Plate heat exchangers for the ethanol fuel industry

decreases lifecycle emissions. For example, a Brazilian sugarcane project switched to bagasse cogeneration and generated carbon emission reduction credits. Over a seven-year crediting period, approximately 196,000 tons of carbon emission reductions resulted in approximately $2.5 million of revenue, which helped finance the project. This analysis helped meet the requirement of financial additionality (economically nonviable project becoming viable as a direct result of carbon emission reduction credit revenues). Energy efficiency Lowering the energy usage and increasing efficiency of plant operations via investment in process engineering improvements lowers lifecycle emissions. Whitefox Technologies Limited, a process engineering firm and membrane-based systems integrator, claims lower energy requirements. Quantifying and verifying energy efficiency improvements such as membrane technology are important in the carbon value creation process. Carbon capture and sequestration Capturing carbon at the end of the distillation process and sequestering in underground oil and gas formations enhances oil and gas recovery while mitigating carbon dioxide. Sequestration was highlighted at the recent United Nations meeting in Bali as having significant promise in lowering greenhouse gas emissions. Archer Daniels Midland Co., near its ethanol plant in Decatur, Ill., is scheduled to begin drilling a 6,500-foot injection well to inject carbon dioxide into porous sandstone deposits.

ETHANOL PRODUCER MAGAZINE JUNE 2008

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Wind

Landfill gas Hydro HFCs EE industry Biomass energy Agriculture

0%

10%

20%

30%

40%

50%

60%

SOURCE: UNITED NATIONS FRAMEWORK CONVENTION ON CLIMATE CHANGE

N2O

A breakdown, by percentage, of the industries in which qualifying Clean Development Mechanism projects operate.

At Stake for Ethanol Producers Producers will be paid a premium for low global warming intensity fuel, at least in the short term. Under the California Low Carbon Fuel Standard, ethanol will be classified according

to itsâ&#x20AC;&#x2122; global warming intensity. The standard requires fuel suppliers to lower the global warming intensity by 10 percent in 2020. The U.S. EPA will likely follow suit at a national level, and lifecycle analysis will be an important foundation. The 2007 Energy Independence and Security Act encouraged fuel pro-


ENVIRONMENT duction which meets “lifecycle greenhouse gas emission” standards. “Advanced biofuels” are defined to have a global warming intensity less than or equal to 50 percent of that of petroleum-based fuel. The act also redefines cellulosic ethanol to be ethanol from “renewable biomass” with a global warming intensity at least 60 percent less than that of gasoline. Gasoline has a baseline global warming intensity which was established in the Argonne Labs Greenhouse Gases, Regulated Emissions and Energy Use in Transportation model. One example as defined is a Mont Vista Capital client in Florida, U.S. EnviroFuels, who is developing a cellulosic project which will produce low global warming intensity ethanol with zero fossil fuel use. U.S. EnviroFuels was awarded a $7 million grant from the Florida Department of Agriculture and Consumer Services in January 2008, and we expect Florida to follow California in implementing a low-carbon fuel standard. The Energy Independence and Security Act will require close to 15 billion gallons of corn ethanol, but it does not prohibit additional corn ethanol above 15 billion gallons if the ethanol meets the lifecycle emission standards. This is a key consideration for corn ethanol producers. Investments in low global warming intensity fuels will generate carbon emission reduction credits. However, the methodology needs to be validated and registered before the carbon benefit can be realized. Lifecycle methodologies for ethanol have not been

ETHANOL PRODUCER MAGAZINE JUNE 2008

approved under the Clean Development Mechanism of the Kyoto Protocol, a regulatory carbon market valued at more than $6 billion in 2007. As of November 2007, 828 projects have been registered by the Clean Development Mechanism Executive Board as qualifying projects. These projects reduce greenhouse gas emissions by an estimated 171 million tons of carbon dioxide-equivalent per year. However, we expect lifecycle analysis will be approved by the Clean Development Mechanism Executive Board in the near future, creating a path to value creation for low global warming intensity ethanol producers in developing countries. This may also set precedence for U.S. policymakers. Lifecycle analysis was the proposed methodology in Clean Development Mechanism proposal No. NM0253 for an ethanol project in Sinaloa, Mexico. Although the proposal has shortcomings (similar to those highlighted in Science papers), the methodology itself is transparent and encourages critique. In conclusion, rigorous analysis of sustainability standards such as global warming intensity of ethanol is needed. We believe corn ethanol producers have more to gain than lose. However, producers will need to be proactive and make strategic investments in anticipation of such standards in a regulatory carbon market. This is a time to conserve cash or raise external financing, and spend wisely. EP Tyler J. Krutzfeldt is managing director of Mont Vista Capital, an investment banking firm dedicated to financing alternative energy and carbon reduction. Reach him at tjk@montvista.com.

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RISK

Managing Lendersâ&#x20AC;&#x2122; Expectations: Strategies to Survive Loan Default By Todd Alexander and N. Theodore Zink Jr.

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s the effects of reduced crush margins begin to take their toll on ethanol producers, a number of our clients are searching for the appropriate strategy to manage the expectations of their lenders. Given that each producer confronts a somewhat unique set of circumstances, there unfortunately is no universal strategy that can be employed. We, however, can share some of the lessons learned from advising clients in these situations. These can be sorted into three broad categories: 1) understand which covenants in the debt agreements you are likely to breach, 2) understand the mindset of the lenders, and 3) use the tools available to offer the lenders a proposal that will be mutually beneficial.

Typical Debt Structures In general, there are two types of obligations that ethanol producers are most likely to breach in their loan documentation. The first type is financial covenants. The second is the obligations to repay interest, fees and principal. Regional banks, which have financed the majority of the ethanol plants in operation today, tend to have more restrictive financial covenants than either the money-center banks or the capital markets. For instance, it is typical for regional banks to include tangible net-worth tests and minimum debt-service coverage ratios in their documentation. As a result, it is quite possible that many of the producers who have borrowed from the

regional banks are, or will be, in breach of their financial covenants as a result of the current crush spreads even if they are currently able to service their debt. The good news is that banks are generally reluctant to accelerate a loan solely as the result of the breach of a financial covenant. Instead, lenders typically use these breaches as an advanced warning mechanism to alert them that the loan requires additional attention, or to require their borrowers to provide them with additional access to their financial information. They do, however, usually take advantage of this opportunity to block further distributions to the owners until the breach has been cured. On the other hand, lenders tend to take missed payments more seriously. Here again, the regional banks tend to have more aggressive principal amortization schedules than either the money-center banks or the capital markets and, accordingly, are more likely to find their borrowers unable to service their debt. The regional banks often adopt mortgage-style or straight-line amortization for their financings. In contrast, the money-center banks typically require only 6 percent of principal to be repaid in any year. Many of the capital markets transactions require only 1 percent of principal to be repaid.

Lendersâ&#x20AC;&#x2122; Mindset If you are in breach or in potential breach of the loan covenants, take some comfort in the fact that as a general rule

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

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commercial banks turn to foreclosure only as a last resort. For several reasons, commercial banks are highly incentivized to work through any short-term liquidity issues that a producer may be confronting. One reason is that they are required to reclassify the loan as non-performing if they decide to exercise remedies. Banks are required to increase their reserves once a loan is classified as non-conforming.

II

This has a de-levering effect on its own business. Another reason is that, unless a bank views the liquidity issue as having been caused by poor management, a foreclosure will not solve the underlying credit issue. As a result, if high corn prices, rather than poor management, are viewed as the culprit, lenders are likely to express a willingness to re-work the terms of their

debt to accommodate the realities of the situation. A third reason is that foreclosure can wind up being an expensive and time-consuming process for the banks. In a foreclosure, the banks will be required to devote substantial time and energy to a process that in many cases will not leave them in a significantly better position to recover the value of their outstanding loan. The forecloAlexander sure process requires the lenders to put in place a management team to preserve the value of the ethanol facility. It also forces the borrower's junior creditors to do their best to preserve their own rights to the collateral, which may involve taking legal actions that compel the participation of the senior Zink lenders. One exception to this rule is where an ethanol company's debt has been acquired by a hedge fund or others who specialize in buying distressed

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RISK debt. These entities have been known to “loan to own.” In other words, they may be seeking an opportunity to initiate a foreclosure with a view toward acquiring an operating facility at a fraction of its original cost.

Consensual Workout Companies that find themselves in breach or on the cusp of a breach have many proven tools from which to choose as a means of finding a solution to their liquidity problems. Usually the first step is to request that the lender agree to enter into a forbearance agreement. Under the terms of the forbearance agreement, the lender agrees, for a set period of time, not to exercise remedies to which it is entitled under the loan documentation. In exchange for this commitment from the lenders to “standstill,” the borrower may agree to provide its lenders with additional reports and possibly restrict the use of operating cash flow. The borrowers may also grant the lenders’ consultants access to the facility and its personnel. It is generally important at this stage to increase the flow of information from the borrower to the lender to increase the level of trust between the parties. During the standstill period, the lenders and borrower will attempt to modify the terms of their relationship in such a way as to allow the borrower to cure its defaults under the loan documents. The lenders will also likely try to assess whether the business has positive operating cash flow before debt service. If the lenders conclude that the business is likely to have positive operating cash flow, the lenders are usually willing to offer the borrower several types of relief from a fairly well-accepted menu of options. These include reducing the borrower's current principal payments, along with an extension of the term of the debt or by creating a bullet payment at the loan maturity date. The theory behind relying on a bullet payment at maturity is that the borrower will refinance the existing debt as soon as operating margins improve. In addition to reducing the principal, the lenders may also agree to reduce the interest rate on the loan. This may be necessary to allow the borrower the breathing space necessary to recover, but is usually offered in conjunction with some form of compensation to the lenders, such as warrants in the company's equity. Such warrants may entitle the lenders to purchase equity in the company in the future if the company's financial condition recovers. This equity will often have the right to receive distributions on a preferential basis to the existing equity in the company. Finally, the lenders often relax the financial covenants that may have been the cause of the default in the first place. The modification of the financial covenants may be done in exchange for tighter reporting requirements, increased access to the company's records, and in some cases an agreement to change existing management. If the lenders conclude that the business is not likely to have positive operating cash flow before debt service, the lenders are less likely to be lenient. In these cases, the borrower may be in a position where its owners are asked to contribute additional capi226

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While a bankruptcy may disadvantage the lenders, it often completely wipes out the value of any equity in the company.

tal to the company or otherwise increase the lenders' collateral by contributing some other type of asset to the project, such as the right to receive delivery of corn at prices below the current market or a grain-handling facility owned by an affiliate of the borrower.

Filing for Bankruptcy In cases where additional collateral is not available, borrowers may be forced to consider a voluntary bankruptcy. Bankruptcy offers the enticing feature of allowing owners to “reject” or terminate agreements, subject to court approval. This can be a nice tool for increasing the value of a business if an ethanol company has a particular set of contracts that have become unprofitable. For instance, if the ethanol facility agreed to pay a corn originator an above-market price for its services, the company could reject the agreement and then enter into an agreement with a new corn originator on more favorable terms. Lenders dislike bankruptcy proceedings for many of the reasons stated earlier with respect to foreclosure. In addition, filing for bankruptcy introduces the concept of a bankruptcy judge with oversight over the debtor’s estate. It also invokes an automatic stay, which precludes any creditor from enforcing any of its remedies against the borrower without the court’s approval. While a bankruptcy may disadvantage the lenders, it often completely wipes out the value of any equity in the company. As a result, it is customarily used by owners only where they either see little or no value in the ownership under the current contractual arrangements and is often better used as the “stick” to persuade a group of lenders to accept the “carrot” offered as part of a consensual workout. In conclusion, if corn prices remain at their historic highs, many ethanol producers may be required to open a dialogue with their lenders regarding breaches and potential breaches of their loan documentation. If these discussions are well managed, they have the potential to increase the level of trust between lender and borrower, as well as create a more durable financial structure. EP Todd Alexander is a partner in the project finance practice at Chadbourne & Parke LLP. N. Theodore Zink Jr. is a partner in the bankruptcy practice at the firm. Reach Alexander at talexander@chadbourne.com or (212) 408-5269.

ETHANOL PRODUCER MAGAZINE JUNE 2008

Fueling the Future Kcpaf_lbgqgle_lbRp_bgle Dgmak <j]q^mk ;geeg\ala]k `Yk Z]]f gf] g^ l`] d]Y\af_ e]j[`Yf\ak]jkYf\ljY\]jkg^_jYafk$gadk]]\kYf\ja[] af afl]jfYlagfYd Y_ja[mdlmjYd [geeg\alq eYjc]lk kaf[] )0-)&Af Y\\alagf lg ]phgjl Yf\ \ge]kla[ \akljaZmlagf Y[lanala]k$o]g^^]j[mklgear]\jakceYfY_]e]flkgdmlagfk lgeYfY_][geeg\alqhja[]jakck& @gmdscjqMncp_rgmlq D<;geeg\ala]k`YkY_jgoaf_hj]k]f[]afl`]Zag^m]dk k][lgj&L`] _jgmh ak ]phYf\af_ alk ]l`Yfgd hjg[]kkaf_ gh]jYlagfkaf:jYradYf\`Yk[gee]f[]\gh]jYlagfkYl alk]l`YfgdYf\Zag\a]k]dhjg\m[lagf^Y[adala]kafl`] Mfal]\KlYl]k& Alak[gfkljm[laf_Y\\alagfYd]l`Yfgd[YhY[alq afl`]Mfal]\KlYl]kYko]ddYkY\\alagfYdZag\a]k]d [YhY[alqaf9j_]flafY& ?pmslbrfcUmpjb G^^a[]kYf\^Y[adala]kaf:]abaf_$:m]fgk9aj]k$;Yd_Yjq$ <]d`a$?]f]nY$@gmklgf$CYfkYk;alq$E]eh`ak$HYjak$ Hgjl%;Yjla]j$K‚gHYmdg$K]Ylld]$Kaf_Yhgj]Yf\Oadlgf _an]mkYeYbgjhj]k]f[]afgn]j-([gmflja]klgk]jn] gmj[mklge]jk& uuu,JBAmkkmbgrgcq,amk

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Builder’s Risk Coverage: An Ounce of Prevention is Worth a Pound of Cure By David Weaver

W

hile many checkmarks are needed to complete the to-do list during the builder’s risk phase of an ethanol project, one of the most important—placement of the builder’s risk coverage itself—is often overlooked. A builder’s risk policy serves to protect the project against loss during the course of construction. While one might think that this would be one of the higher priority items during this stage, often it is not. In fact, it is often a last-minute decision, which is not in the best interest of any involved. Why this oversight happens is not clear. It may be due to the number of parties involved in the project during this time. Contractors, sub contractors, engineers, and lenders and equity partners are all providing input which, at times, can blur the lines of who has, and will take, responsibility for each different part of the construction process. It may be that the excitement of finally having enough cash available to get the project underway dulls the focus on some of the key issues that should be addressed. It could even be that there just isn’t enough time to spend on each critical component, and so a path of least resistance is chosen. Regardless of the reason, it is important to know that the builder’s risk coverage can be one of the most critical parts of the project. It can set the tone for the facility and can have an impact long after the actual policy has expired.

Who Secures the Policy? One initial, proactive decision that should be made related

to builder’s risk coverage is deciding who will secure the policy in the first place. Contractors often include the provision of a builder’s risk policy within the scope of their responsibilities. While, from a simplistic point of view, that may seem like the easiest way to handle it, there are a number of reasons why it may be preferable for the owner to control the process instead. First, within most projects, there are often parts outside the scope of what the general contractor will provide. Office buildings, storage sheds and even tank farms can be designated as the responsibility of the owner. If that is the case, it is likely that these items would not be included within any builder’s risk coverage a contractor may provide. In that instance, an owner would have to secure a separate policy for the work they are responsible for, which would then mean that there are multiple policies in force. That may not be ideal from a coverage or expense standpoint. A second reason an owner should seriously consider purchasing builder’s risk Weaver coverage themselves is that a contractor may not include delay in startup coverage within their policy. A contractor’s main concern is the property on site during the construction process and the replacement of that property in the event of a loss. While that is good, the lost income a plant would experience should there be a loss during

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

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an owner to consider purchasing the builder’s risk policy themselves is the fact that, in the event of a loss during the construction process, it is much better, from an owner’s perspective, to have control of any settlement rather than to defer that to someone who may have competing interests.

Design Considerations

the course of construction should also be considered. During the operational phase of a plant, this is called business interruption or business income coverage. During the construction phase, this is called delay in start up. The absence of this coverage could be a real problem for lenders and investors who have significant dollars committed to the project. Additionally,

even if delay in start-up coverage is included within the contractor’s policy, often such items as soft costs and extra expense are overlooked in the calculations. Both of those items could be critical in the event of a loss and would be something an owner would want to make sure to include. One final and important reason for

ETHANOL PRODUCER MAGAZINE JUNE 2008

After the decision has been made regarding who will ultimately carry the actual builder’s risk policy, the next critical area of focus should be the design of the coverage to be implemented. Many potential landmines could remain hidden until a loss occurs, which is the absolute worst time to find out. The following are several such areas that are often overlooked: Contractual obligations—Equity and lending agreements, feedstock and offtake arrangements, and lease contracts all carry expressed or implied insurance obligations. It is critical to any project owner to review any and all contracts to determine exactly what responsibility each party is taking on and who is indemnifying who for what. Sublimits terms and conditions—Each insurance market within the ethanol space and even each

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Items such as tank farms, office buildings, storage sheds and fire protection are often outside the scope of an EPC contractor.

policy written by each company will carry different sublimits, terms and conditions. Deductibles are one of the most obvious areas of difference, but there may be variance on many others including offsite storage, transportation coverage, earthquake and flood limits, and even how service interruption issues are handled. All sublimits, terms and conditions vary considerably from policy to policy. Until one understands and evaluates the differ-

ences and thus compares the options on an apples-to-apples basis, a risk exists that there will be a big surprise in the event of a loss. Exclusionsâ&#x20AC;&#x201D;This is another area often overlooked when binding or crafting coverage. What is considered a covered cause of loss and what particular events are excluded from that definition? Exclusions are an incredibly important part of any coverage and should therefore

be addressed with care. Often, because of a lack of understanding, knowledge or time on the part of the owner or insurance broker, they are not, and that can make a huge difference in the event of a loss. Carriers involvedâ&#x20AC;&#x201D;Obviously one will want to make sure to understand something about the insurance carrier that will ultimately be providing the protection desired. How long have they been in the ethanol business? How many similar plants do they write? What is their long-term commitment to the industry? What support will they provide through the process? What lines of insurance will they carry and what lines will they not? Will there have to be layers of coverage or are they able to handle the full total insured value? All of these are important questions that should be answered before any coverage is bound. Finally, how testing coverage works and how fire protection is designed must be addressed during this coverage phase. Testing coverage is important because every insurance carrier views it differently and each has a different definition as to how and when that coverage starts and stops. It will be critical for an owner to understand this within the scope of the project and to make sure there are no gaps in coverage at any time. Fire protection is also critical because the ultimate

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Selecting a broker without significant experience in this field means that someone else has to pick up the slack and often that simply does not occur.

design of the fire protection program could have a significant impact on the availability and/or pricing of the insurance coverage down the road. Today, while the insurance markets are soft, it is easy to find a carrier that will cover a project as long as some sort of fire protection is in place. However, when the insurance markets tighten up, it will be critical that the fire protection design will be able to stand up to the scrutiny of those carriers still interested in writing biofuel facilities. A tighter market means tighter requirements. For that reason, it is imperative for an owner not to cut corners.

Who Will Provide Assistance? Finally, maybe the most important decision an owner can make, even before the builder’s risk coverage is placed, is that of selecting an insurance broker to help navigate the minefield of issues. Many times this decision is made based on who an owner knows or who happens to be an investor in the project. Unfortunately, however, that choice is often not in the best interest of the project. Insuring an ethanol facility is different than insuring a building, business or even another manufacturing operation. A number of issues must be managed, including, but certainly not limited to, those mentioned earlier. Selecting a bro-

ker without significant experience in this field means that someone else has to pick up the slack and often that simply does not occur. The inexperienced broker does not have the knowledge, owners and boards of directors don’t have the time, contractors, engineers and technology providers each have a different set of issues to worry about, and even insurance companies have a singularity of focus. Ultimately, it is important to select a broker that has the experience and ability to assist and coordinate through all aspects of the project and to make sure that there are no surprises at a time when they are needed least. As mentioned earlier, the builder’s risk phase and the placement of builder’s risk coverage is one of the most important phases of the entire project. The key for any project owner is to make an early, proactive decision as to how each of those items will be addressed and who might be chosen to assist in that process. In the end, those owners that pay heed to the phrase, “an ounce of prevention is worth a pound of cure,” will be well on their way to success both in the present and the future. EP David Weaver is with the biofuels practice group of The IMA Financial Group Inc. in Wichita, Kan. Reach him at david.weaver@imacorp.com or (316) 266-6203.


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DISTRIBUTION

Closing the Distribution Infrastructure Gap By Thomas Young

H

igher prices at the pump and dire warnings about climate change have not caused significant lifestyle changes in the transportation choices made by most Americans. The seemingly conflicting issues of U.S. appetite for unlimited energy and a belief in the benefits of bolstering its energy independence will keep biofuels in the spotlight for many years to come. Thatâ&#x20AC;&#x2122;s good news for the ethanol industry. Supply and demand are strong. In 2007, 134 plants produced more than 6.5 billion gallons of ethanol, up from less than 2 billion gallons produced in 2000. The rapid expansion of the industry has been phenomenal. As ethanol supply and demand continue to increase, the industry faces several hurdles. One of the largest hurdles at the present time is simply how to get the increasing quantities of ethanol to the end user. Strong supply and demand are great for any product, but if the producer canâ&#x20AC;&#x2122;t efficiently move the product to the user, demand can evaporate. Because ethanol is produced predominantly in the Corn Belt states of the Midwest while demand is strongest in the heavily populated coastal regions of the United States, getting the product from producer to user has emerged as a significant hurdle to overcome to keep the industry on its strong forward trajectory. One might wonder why this is such a problem when so much petroleum is moved through a well-established pipeline system that has performed safely and efficiently for many decades. Why

not just move ethanol the same way? The problem is two-fold. First, ethanol cannot be easily transported in petroleum pipelines because it picks up impurities that prevent proper blending with gasoline at the distribution end-point. The second issue is that pipeline infrastructure is sparse in the Midwest, where the bulk of ethanol plants have been built over the past decade. That leaves transport by rail, barge or truck. Today, approximately 75 percent of ethanol is moved by rail, with the remainder by truck and barge. The growth in ethanol production and subsequent increase in the volume of ethanol, corn and distillers grains being shipped by rail has occurred at the same time during which the railroads are experiencing congestion due to the increase in rail traffic across many commodities, notably coal, grain and intermodal. The unit train is the most efficient way to transport bulk commodities such as ethanol by rail. This involves loading a minimum of 80 railcars with one product for transport from one origin point to one destination point, with an expedited (usually 24hour) turnaround time at the destination. The challenge for unit train operations is finding adequate infrastructure on both ends of the supply chain to support such operations. Currently, a limited number of terminals in the United States are capable of receiving unit trains of ethanol. These terminals are operated by companies such as Motiva Enterprises, Kinder Morgan, U.S. Development Group and LogiBio, among others. In todayâ&#x20AC;&#x2122;s ethanol marketplace, the construction of trans-

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

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IsoStab

TM

portation infrastructure is challenged to keep pace with ethanol production capacity, leaving a transportation gap that is challenging the industry. Developing a rail-served ethanol distribution terminal is often a complex, costly and time-consuming undertaking. These attributes, combined with an industry that is buffeted by change in multiple arenas—from politics to perceptions to technology—tend to make potential investors wary of funding these projects. However, over the past several months, an increasing number of petroleum distribution companies, investors and developers appear to be willing to face these challenges, as the potential return-on-investment for properlyplanned projects can be very attractive.

Project Planning Perhaps the greatest challenge is that the distribution end points are typically located in dense, urban industrial centers where real estate is more expensive and the permitting environment is more complex than in the rural areas that host most ethanol production facilities. Therefore, developing a successful ethanol distribution infrastructure project requires under-

standing the needs of the host community and building appropriate mitigations into the initial development plans, as well as complying with federal, state and local permitting requirements. In addition to community and permitting coordination, the commercial issues require a significant amount of coordination. The commercial development of an ethanol distribution project typically includes several steps. First, one must determine the market need through coordination with petroleum companies that blend ethanol from the distribution terminal into their gasoline. Second, one must determine the “all-in” costs of transport and handling that will be required to receive and distribute product through a terminal. This requires coordination with transportation and distribution providers (terminal operators, railroads, pipeline distribution, trucking and barge companies) to estimate these costs. Once the market needs and the transportation and handling costs are estimated, there must be coordination with ethanol producers or traders as to who will supply ethanol to the terminal. With demand for ethanol showing a

ETHANOL PRODUCER MAGAZINE JUNE 2008

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DISTRIBUTION

There is a risk that a project that made good financial sense at the feasibility stage may become untenable when other projects move into development in the same market, thereby potentially decreasing the projected throughput volumes.

decade-plus record of rapid expansion and continuing federal pressure to bolster energy independence through legislative mandates for alternative energy including biofuels, one might ask why more distribution projects are not coming on line. The answer partially lies in the inherent, or at times perceived, risks that an investor must endure during the period of time that is required for permitting and project development. A major concern for potential investors is identifying the right market. Generally, there is a perception that each market has a fixed amount of demand for ethanol distribution infrastructure. Therefore, most believe that each market can absorb only so many viable ethanol distribution projects. There is a risk that a project that made good financial sense at the feasibility stage may become untenable when other projects move into development in the same market, thereby potentially decreasing the projected throughput volumes. However, there is also an upside to this situation. With increased ethanol distribution infrastructure in a market, there is the potential for increased acceptance and use of ethanol in that market. Due to the increased efficiency of receiving ethanol, petroleum companies would have an increased incentive for discretionary blending of ethanol. There is also the possibility of increased blending proportions of ethanol into gasoline, which would increase ethanol demand. Another set of risks is based on several unknowns in the future of ethanol. There is the inherent risk of cellulosic ethanol plants

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Whenever there is a gap in a growing market, there are opportunities for investors and developers to find solutions to bridge this gap.

being built within close proximity to these rails and barge-based terminals, thereby potentially competing to deliver ethanol to the same set of customers. Also, the potential to develop technology that will allow ethanol to be shipped via existing or newlyconstructed dedicated pipelines is a risk that must be calculated by potential investors of terminals dependent on receiving ethanol via rail or barge. While both of these risks must be estimated and calculated into project viability plans, the notion of fixed ethanol demand for each market should be questioned, as mentioned above. While many hurdles exist, there has been recognition across the industry of a deficiency, or gap, in the logistics chain. Whenever there is a gap in a growing market, there are opportunities for investors and developers to find solutions to bridge this gap. As companies become more comfortable with the longer-term outlooks for their ethanol marketplace and better understand how to overcome the challenges of developing these projects, we expect to see a significant increase in ethanol distribution infrastructure projects coming on line over the next several years. The industry is hopeful that this infrastructure will pave the way for further increases of ethanol usage across the United States. EP Thomas Young is a management consultant with Omaha, Neb.-based HDR Inc. Reach him at thomas.young@hdrinc.com or (617) 357-7721.

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June 2-4, 2008

Mercure Toulouse Atria Compans Caffarelli Toulouse, France

Kansas City Marriott Downtown Kansas City, Missouri The theme for this sixth annual event reflects the continued importance of corn as a keystone to a carbohydrate-based economy. Topics will include wet milling, dry-grind technologies, enzymes, value-added products from corn, and new uses for distillers dried grains that will be of value to ethanol producers and livestock interests. (636) 733-9004 www.corntechconf.org

EVENTS

Biofuels International Expo & Conference

June 2-6, 2008

June 4-5, 2008 The Ahoy Rotterdam, Netherlands

This program, presented in English by the Ethanol Technology Institute, is designed for lab, plant and management personnel. A series of lectures and laboratory demonstrations will cover the process of ethanol and beverage alcohol production. Alternative feedstocks, enzyme usage, yeast biology, bacterial contamination and control will also be discussed, along with other issues currently affecting both industries. Registration is limited, with preference given to fuel ethanol and distilled beverage producers. (800) 583-6484 www.ethanoltech.com

CALENDAR

Renewable Energy Finance Forum Wall Street

Biofuels 2010: The Next Generation

June 18-19, 2008

June 23-24, 2008

The Waldorf Astoria New York City, New York

Hilton Americas Houston, Texas

This fifth annual event will discuss the state of the renewable energy industry, including biofuels. The biofuels session will specifically review the role of big oil companies and agribusiness in shaping the future of the industry. Other topics include market drivers, consolidation, venture capital, carbon finance and an outlook for the renewable energy industry as a whole (including solar and wind). (800) 437-9997 www.reff-wallstreet.com

This event will cover the latest innovations, developments and regulations within the global biofuels industry. The agenda highlights emissions, trade considerations, feedstocks such as Miscanthus and sorghum, and trade and distribution. It also includes a panel discussion on sustainability. Concurrent breakout sessions will focus on cellulosic ethanol, commercialization, demand and infrastructure, financing, biofuels in Argentina, distribution, pipelines, technological advancements, and feedstock prices. (416) 214-3400 www.biofuels2010.com

240

This two-day event is targeted at medium- to largescale ethanol producers. Concurrent conference tracks will address areas such as legislation and regulation, best practices, and future growth and outlook trends, as well as a more in-depth look at new technology. Jon Ake Jonsson, managing director of Saab Automobile AB, will be the keynote speaker. +44 208 648 7092 www.biofuelsinternationalexpo.com

Biomass â&#x20AC;&#x2122;08 Technical Workshop: Power, Fuels and Chemicals July 15-16, 2008 Alerus Center Grand Forks, North Dakota Last year, this event attracted nearly 400 people and 40 exhibitors from more than 230 entities. Hosted by the Energy & Environmental Research Center, this yearâ&#x20AC;&#x2122;s workshop will offer presentations on new technology developments, and opportunities for the economic production of power, transportation fuels and chemical feedstocks from biomass. (701) 777-5246 www.undeerc.org/Biomass08

ETHANOL PRODUCER MAGAZINE JUNE 2008


Station Conversion Clinic

World Biofuels Forum

June 9, 2008

J u n e 9 - 11 , 2 0 0 8

Hyatt Regency Chicago, Illinois

Prague Congress Centre Prague, Czech Republic

This second annual event will educate attendees on how to convert retail fuel stations to offer E85, how to secure the fuel product and how to profitably market E85. In addition, it will address how to negotiate a good price for E85, keep construction costs and station downtime under control, comply with regulatory agencies, store and handle E85 to maintain product integrity, and blend E85 to maximize profits. The agenda includes a 10-year supply and demand outlook from National Ethanol Vehicle Coalition Executive Director Phil Lampert and an expert panel that will conduct five brainstorming sessions with audience participation. (866) 620-5940 www.opisnet.com/E85

This event aims to present how to overcome complex political challenges, avoid costly mistakes and profit from the potentially lucrative biofuels market. It will highlight major biofuels projects across the globe, next-generation biofuels, current factors influencing international trade and the distribution of biofuels, strategies for integrating biofuels into refineries, government policies and investment incentives, and the latest technology innovations. There will also be a pre-event workshop focusing on project finance and investment, and a tour of a biodiesel production facility currently under construction. +44 (0)20 7202 7511 www.wbfevent.com

EPAC Ethanol Conference

Farm to Fuel Summit

July 20-22, 2008

July 30-August 1, 2008

Hilton Garden Inn Kalispell, Montana

Rosen Shingle Creek Orlando, Florida

This 18th annual event, hosted by Ethanol Producers and Consumers, and themed â&#x20AC;&#x153;Ethanol: Fuel and Food,â&#x20AC;? will address many of the issues surrounding the ethanol industry. Agenda topics include the food-versus-fuel debate, distillers grains in human diets, an update on the Canadian ethanol industry, flexible-fuel vehicles and E85, marketing and consumer polls, pricing, financing, and cellulosic ethanol. (406) 785-3722 www.ethanolmt.org

Registration is now open for this event, which stemmed from the Farm to Fuel Initiative developed by Florida Agriculture Commissioner Charles Bronson to promote the production and distribution of renewable energy from Florida-grown crops, agricultural wastes and other biomass. The agenda is currently being developed. (850) 488-0646 www.floridafarmtofuel.com/summit_2008.htm

ETHANOL PRODUCER MAGAZINE JUNE 2008

24th Annual International Fuel Ethanol Workshop & Expo June 16-19, 2008 Opryland Hotel & Convention Center Nashville, Tennessee This conference will follow the record-breaking 2007 event, in which more than 500 exhibitors participated and more than 5,300 people attended. The preliminary agenda includes an Ethanol 101 pre-conference seminar, general sessions, concurrent technical workshops and various networking opportunities. Attendees will also have the chance to tour Commonwealth Agri-Energy LLC, a 33 MMgy cornbased ethanol facility in Hopkinsville, Ky. (719) 539-0300 www.fuelethanolworkshop.com

Ethanol Conference & Trade Show August 12-14, 2008 Qwest Center Omaha, Nebraska Registration is now open for this 21st annual event, hosted by the American Coalition for Ethanol. The conference reviews the status of the ethanol industry each year, while looking ahead to the future. An agenda will be available as the event approaches. (816) 333-9400 www.ethanol.org

241


EPM MARKETPLACE Ag Products & Services

Yeast

Filter Media

Hybrid Corn

Fermentis-Division of SI Lesaffre 800-558-7279 www.fermentis.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

North American Bioproducts Corporation 866-342-7026 www.na-bio.com

Heat Exchanger

Pioneer Hi-Bred International, Inc. 800-247-6803 www.pioneer.com

Associations/Organizations

Hydro-Klean, Inc. 515-283-0500

Trade

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

Ethanol Promotion & Information Council (EPIC) 402-932-0567 www.drivingethanol.org

Summit Industrial Products 800-749-5823 www.klsummit.com

Chemicals PhibroChem 800-223-0434

www.lactrol.com

Anti-Microbial

Cleaning

North American Bioproducts Corporation 866-342-7026 www.na-bio.com

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PhibroChem 800-223-0434

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Ferm Solutions 859-402-8707

www.hydro-klean.com

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Seneca Waste Solutions 800-369-5500 www.senecacompanies.com Inland Waters 313-841-5800

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

• NSF Registered & Biodegradable • Non-Hazardous • Non-Corrosive • Changes color when spent P.O. Box 131359 Tyler, TX 75713 www.klsummit.com

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Hydro-Blasting Hydro-Klean, Inc. 515-283-0500

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Seneca Waste Solutions 800-369-5500 www.senecacompanies.com Inland Waters 313-841-5800

SAFELY DISSOLVES THE TOUGHEST DEPOSIITS OF ...lime, magnesium, calcium, dirt, corrosion & rust.

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

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EPM MARKETPLACE With all contact information placed in one convenient location, Ethanol

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Producer Magazine not only contains top editorial content but also a useful www.hydro-klean.com

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Water Treatment

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

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Fremont Industries Inc. 952-445-4121

Inland Waters 313-841-5800

frequent display advertiser looking for

Gordon Technologies 570-279-8086

242

www.fremontind.com

www.gtsieve.com

www.inlandwaters.com

awareness of your business or a added exposure, EPM Marketplace is the perfect solution.

ETHANOL PRODUCER MAGAZINE JUNE 2008


EPM MARKETPLACE Tank Cleaning Services

Insulation

Hydro-Klean, Inc. 515-283-0500

Mavo Systems 763-788-7713

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com Inland Waters 313-841-5800

www.mavo.com

Management

www.inlandwaters.com

Construction Buildings-Modular

Mechanical Gortech Global Fabrication 570-279-8086 www.gortechglobal.com Inland Waters 313-841-5800

W. Soule & Company 1-877-976-8531

www.inlandwaters.com

www.wsoule.com

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

Reach your customers www.hydro-klean.com Your Solution. Advertise Today.

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

EPM MARKETPLACE

Railcars Seneca Waste Solutions 800-369-5500 www.senecacompanies.com

Fabrication

Inland Waters 313-841-5800

VAL-FAB Inc. 877-482-5322

www.inlandwaters.com

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

www.hydro-klean.com

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com Inland Waters 313-841-5800

www.valfab.com

With all contact information placed in

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

one convenient location, Ethanol

Macomber Welding & Fabricating, Inc. 616-698-0819 macwelding@triton.net

top editorial content but also a useful

Producer Magazine not only contains directory in each publication. Whether a

W. Soule & Company 1-877-976-8531

www.wsoule.com

first-time advertiser wanting to raise awareness of your business or a

www.inlandwaters.com

Tank Cleaning Equipment Spraying Systems Co. 630-665-5000

EPM MARKETPLACE

Grain Storage

frequent display advertiser looking for

Coverall Building Systems 800-268-3768

added exposure, EPM Marketplace is www.coverall.net

the perfect solution.

www.spray.com

ETHANOL PRODUCER MAGAZINE JUNE 2008

243


EPM MARKETPLACE

JIC

JOULÉ Industrial Contractors

OVER 40 YEARS OF PROVIDING QUALITY COST EFFECTIVE SOLUTIONS TO THE INDUSTRIAL INDUSTRY. We provide: • Experienced Supervision • Multi-craft Staff • Logistical Support For: • Plant Outages • Plant Construction and Expansion • Relocations • Capital Projects • On and off site pipe Fabrication To: • Ethanol and Alternative Fuel Plants • Pharmaceutical Manufacturers • Food Plants • Building Material Facilities Toll Free: (800) 445-6853 email-bbosher@jouleinc.com

JIC

Wanzek Construction,Inc. 701-282-6171 Agra Industries, Inc. 715-536-9584

Industry Leading Career Learning & Development

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Build Your Career at Mortenson Contact Us Today! 1-877-MORTENSON (toll free) energyjobs@mortenson.com www.mortenson.com

HIRING ALL POSITIONS NATIONWIDE

Tanks

Reimer Welding Inc. 218-773-0886

Plant Construction Agri-Systems 406-245-6231

www.agrisystems.net

wanzek.com

www.agraind.com

CYC Construction 402-333-1652

DCI, Inc. 320-252-8200 WINBCO Tank Company 641-683-1855

R & R Contracting, Inc. 800-872-5975

www.rrcontracting.net

www.railworks.com

Volkmann Railroad Builders, Inc. 262-252-3377 www.volkmannrr.com

With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains top editorial content but also a useful directory in each publication. Whether a first-time advertiser wanting to raise

Your Ad HERE Your Solution. Advertise Today.

Eagle Tanks, Inc. 888-678-0698

www.winbco.com

www.eagletanks.com

Consulting Business Plans ICM, Inc. 316-796-0900

www.icminc.com

Environmental Air Resource Specialists,Inc. 970-484-7941 www.air-resource.com

EPM MARKETPLACE

Global Issues. Local Solutions.

awareness of your business or a frequent display advertiser looking for added exposure, EPM Marketplace is

www.dciinc.com

www.cycconstruction.com

Railroad Tracks

Railworks 913-888-4091

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www.reimerwelding.com

Reach your customers

Engineering, Environmental, Health and Safety Services

the perfect solution. Your Solution. Advertise Today.

www.golder.com 1.800.275.3281

EPM MARKETPLACE 244

ETHANOL PRODUCER MAGAZINE JUNE 2008


EPM MARKETPLACE ICM, Inc. 316-796-0900

Iowa Biofuels Training International 641-969-4167 www.biofuelstraining.org

www.icminc.com

Seneca Companies 800-369-5500 www.senecacompanies.com

Employment Recruiting

TKDA 651-292-4602

www.tkda.com

Inland Waters 313-841-5800

www.inlandwaters.com

SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago Hobbs & Towne 610-783-4600x108

www.hobbstowne.com

Feasibility Studies

Engineering

Harris Group Inc. 206-494-9422

www.harrisgroup.com

Civil

Groundwater Services

Antioch International, Inc. 402-289-2217 www.antioch-intl.com

Leggette, Brashears & Graham, Inc. 651-490-1405 www.lbgweb.com

Personnel Recruiting

TKDA 651-292-4602

Quality Assurance

SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago

Eurofins Scientific, Inc. 551-580-9140

Control Systems www.eurofinsus.com

Plant Optimization

Control System Integrators, Inc. 319-377-6538 x19 www.csystemi.com Bachelor Controls 785-284-3482

Harris Group Inc. 206-494-9422

www.tkda.com

www.bachelorcontrols.com

www.harrisgroup.com

(WKDQRO3ODQW:LGH&RQWURO 6\VWHPV Optimize the Value of Your Co-Products Â&#x2122; Â&#x2122; Terratec Biofuels of Solutia 800-742-1476 www.TerratecBiofuels.com

Â&#x2122;

Project Development Harris Group Inc. 206-494-9422 Ethanol Productions 813-968-6867

Grading, sampling, mycotoxins, proximates, residues, GMOs. QA / QC Consulting: HACCP, GMPs, SOPs, NIR calibration Co-products: Quality assurance testing; Lot certiďŹ cation; Export assistance

Â&#x2021;)URPSUHOLPLQDU\HQJLQHHULQJ WKURXJKFRPPLVVLRQLQJ Â&#x2021;([SHULHQFHGZLWKDOOPDMRU HTXLSPHQWEUDQGVÂ&#x2021;&6,$&HUWLILHG Â&#x2021;(OHFWULFDOGHVLJQEXLOGVHUYLFHV Â&#x2021;6HDVRQHG H[SHULHQFHGHWKDQRO HQJLQHHULQJWHDP

504-297-4330 ethanol@euroďŹ nsus.com www.harrisgroup.com

Regulatory jim.plautz@verizon.net

Air Resource Specialists.Inc. 970-484-7941 www.air-resource.com

Public Relations Lanser Public Affairs, LLC 262-797-7876 www.lanserpublicaffairs.com

Your Ad HERE Your Solution. Advertise Today.

EPM MARKETPLACE

Risk Management National Fuel Marketing 303-996-6781 www.NationalFuelMarketing.com

Education Iowa Lakes Community College 800-242-5108 www.iowalakes.edu Iowa BioDevelopment 641-969-4167 www.iabiodevelopment.com

ETHANOL PRODUCER MAGAZINE JUNE 2008

Â&#x2021;)D[ ZZZDXWRPDWLRQDOOLDQFHQHW Design/Build Agri-Systems 406-245-6231

www.agrisystems.net

Delta-T Corporation 757-941-0188 ICM, Inc. 316-796-0900 Wanzek Construction, Inc. 701-282-6171

www.deltatcorp.com

www.icminc.com

wanzek.com

245


EPM MARKETPLACE Agra Industries, Inc. 715-536-9584 GS CleanTech Corp. 678-566-3588 Ethanol Productions 813-968-6867

Centrifuges www.agraind.com Westfalia Separator,Inc. 201-784-4322

www.wsus.com

www.gs-cleantech.com

Combustion Equipment jim.plautz@verizon.net

Eclipse.Inc. 815-637-7213

www.eclipsenet.com

Process Design John Zink Company LLC 800-421-9242

Agri-Systems 406-245-6231

www.agrisystems.net

Vogelbusch USA, Inc. 713-461-7374

www.vogelbusch.com

dbc SMARTsoftware, Inc. 770-427-7633 www.dbcsmartsoftware.com

www.chemsim.com

Integrated Business Solutions 888-697-3060 www.ibsolutions-llc.com

ChemSim 781-248-5057

www.johnzink.com

Computer Software

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

John Deere Agri Services 770-238-5100 www.johndeereagriservices.com

Equipment & Services Agitation Equipment

Encore Business Solutions 204-989-4330 www.encorebusiness.com

Custom Metalcraft Inc. 417-862-0707 www.custom-metalcraft.com

Control Systems

Air Pollution/Odor Control

FeedForward, Inc. 770-426-4422

Ceco Abatement Systems, Inc. 630-493-0624 www.cecoenviro.com/Abatement

Kahler Automation Corp. 507-235-6648 www.kahlerautomation.com

ICM, Inc. 316-796-0900

Analytical Instruments www.icminc.com

Your Ad HERE

Anton Paar +1-804-550-1051

www.feedforward.com

Automation Alliance 205-271-9743 www.automationalliance.net www.anton-paar.com

Control Systems-Distributed

Blowers & Fans Your Solution. Advertise Today.

EPM MARKETPLACE

Robinson Industries, Inc. 724-452-6121 www.robinsonfans.com FlaktWoods 716-845-0900

EPM MARKETPLACE With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains

www.flaktwoods.com

Boiler Systems Factory Sales and Engineering, Inc. 985-867-9150 www.fsela.com Rentech Boiler Systems, Inc. 325-794-5701 www.rentechboilers.com

Control System Integrators, Inc. 319-377-6538 x19 www.csystemi.com

Catwalks

Conveyors—Enclosed

Lean Technologies LLC 701-352-9620 www.leantechnologiesllc.com

Grisley Components, Inc. 303-756-6474

Centrifuge Repair

Conveyors—Pneumatic

top editorial content but also a useful directory in each publication. Whether a first-time advertiser wanting to raise awareness of your business or a frequent display advertiser looking for added exposure, EPM Marketplace is the perfect solution.

Nosnhoj Services Inc. 317-887-6436

www.nosnhojinc.com

www.grisley.com

Gusmer Enterprises, Inc. 847-277-9785 www.gusmerenterprises.com Blower Engineering 800-388-1339 www.blowerengineering.com

246

ETHANOL PRODUCER MAGAZINE JUNE 2008


EPM MARKETPLACE BWF America 800-733-2043

Decanters

www.bwf-america.com

W.S. Tyler 1-800-321-6188

www.wstyler.com

Fractionation-Corn Buhler Inc. 763-847-9900

www.buhlergroup.com/us

Sturtevant Inc. 781-829-6501

www.sturtevantinc.com

Gas Detectors UE Systems, Inc. 914-592-1220

www.uesystems.com

Gaskets Allegheny Coupling Company 814-723-8150 www.alleghenycoupling.com

Aeroglide Corporation 919-851-2000

Distillation Equipment SRS Engineering Corporation 800-497-5841 www.srsengineering.com Gordon Technologies 570-279-8086

www.aeroglide.com

FEECO International, Inc. 920-468-1000

www.feeco.com

Emission Monitoring Systems www.gtsieve.com

MonitorTech Corp. 866-682-6771

www.monitortechgrp.com

Dryers—Flash Barr-Rosin,Inc. 630-659-3980

Emissions Testing & Reduction www.barr-rosin.com

Lantec Products, Inc. 617-265-2171

Dryers—Other Davenport Dryer, LLC 309-786-1500 www.davenportdryer.com

GEA NIRO Inc 410-997-8700

Barr-Rosin,Inc 630-659-3980

Dryers—Rotary Drum Barr-Rosin,Inc. 630-659-3980

www.niroinc.com

ICM, Inc. 316-796-0900

www.icminc.com

Ronning Engineering Company, Inc. 913-239-8118 www.ronningengineering.com

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

EPM MARKETPLACE

EPM MARKETPLACE www.winbco.com

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains top editorial content but also a useful

Filters www.barr-rosin.com

Custom Metalcraft Inc. 417-862-0707 www.custom-metalcraft.com

HRS Process Technology, Inc. 623-915-4328 www.hrs-americas.com

WINBCO Tank Company 641-683-1855 www.barr-rosin.com

Heat Exchangers

Your Solution. Advertise Today.

Fermentors Dryers—Ring

www.sukup.com

Your Ad HERE

Evaporators www.aeroglide.com

Sukup Manufacturing Co. 641-892-4222

www.lantecp.com

Dryers—Fluid Bed Aeroglide Corporation 919-851-2000

Grain Handling & Storage

directory in each publication. Whether a

Eaton Filtration 800-656-3344 ext 581 BruceClaw@eaton.com

first-time advertiser wanting to raise

Larox 301-543-1200

frequent display advertiser looking for

www.larox.com/cpi

awareness of your business or a added exposure, EPM Marketplace is

Filtration Equipment Fluid Engineering 814-453-5014

ETHANOL PRODUCER MAGAZINE JUNE 2008

the perfect solution. www.fluideng.com 247


EPM MARKETPLACE Laboratory-Testing Services

Mixers

Midwest Laboratories 402-334-7770

KINEMATICA, INC. 631-750-6653

www.midwestlabs.com

Eurofins GeneScan, Inc. 504-297-4330 www.gmotesting.com Trilogy Analytical Laboratory 636-239-1521 www.trilogylab.com SGS North America, Inc. 281-478-8234 www.sgs.com/alternativefuels

Loading Equipment

www.kinematica-inc.com

Moisture Analyzers Sartorius Mechatronies-Omnimark 800-835-3211 www.sartorius-omnimark.com

Molecular Sieve Desiccant Gordon Technologies 570-279-8086

www.gtsieve.com

Molecular Sieves

SafeRack 866-761-7225

www.saferack.com

Lubrication Systems

Vaperma, Inc. 418-839-6989 Gordon Technologies 570-279-8086

www.vaperma.com

www.gtsieve.com

Motors Trico TCWind, Incorporated 320-693-6200 www.tricotcwind.com

CMC Letco Industries 417-831-1528

Summit Industrial Products has lubricants and greases for conveyors, dryers, cooling tower pumps, gearboxes, blowers, compressors, motor bearings and CO2 recovery. www.cmc-letco.com

Packing & Tray Installation Gordon Technologies 570-279-8086

Pipe

Call today for a distributor in your area.

Incinerators

Robert-James Sales, Inc. 800-666-0088

800.749.5823

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

ISCO Industries 800-345-4726

Jouleâ&#x20AC;&#x2122; Industrial Contractors bbosher@jouleinc.com www.jouleinc.com

Instrument Associates 708-597-9880 www.instrumentassociates.com

Maintenance Software

Process Sensors Corp. 508-473-9901 www.processsensors.com

Mapcon Technologies, Inc. 800-922-4336 www.mapcon.com

Jet Cookers

Mills-Hammer

ProSonix Corporation 800-849-1130, x. 801

CPM/Roskamp Champion 800-366-2563 www.cpmroskamp.com

Pipe-Fittings Robert-James Sales, Inc. 800-666-0088

www.rjsales.com

St. Louis Pipe & Supply 800-737-7473 www.stlpipesupply.com

Pipe-Flanges

www.pro-sonix.com

CBT Wear Parts, Inc. 888-228-3625

Laboratory-Equipment Astoria-Pacific International 800-536-3111 www.astoria-pacific.com

Laboratory-Supplies

248

www.isco-pipe.com

Maintenance Services

Shimadzu Scientific Instruments 800-477-1227 www.ssi.shimadzu.com

Midland Scientific, Inc. 800-642-5263

www.rjsales.com

American Stainless & Supply 800-845-5511 www.americanstainless.com

P.O. Box 131359 Tyler, TX 75713 www.klsummit.com

Instrumentation

www.gtsieve.com

Prater-Sterling 630-679-3254

Agri-Systems 406-245-6231

www.rjsales.com

Pressure Vessels www.cbtwearparts.com

www.prater-sterling.com

Millwright www.midlandsci.com

Robert-James Sales, Inc. 800-666-0088

WINBCO Tank Company 641-683-1855

www.winbco.com

Custom Metalcraft Inc. 417-862-0707 www.custom-metalcraft.com Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

www.agrisystems.net

ETHANOL PRODUCER MAGAZINE JUNE 2008


EPM MARKETPLACE QA Test Products

Steel Suppliers

Phenomenex 310-212-0555x3328

www.phenomenex.com

Chapel Steel 800-320-6042

davidj@chapelsteel.com

Outokumpu Stainless 847-517-4050

www.outokumpu.com

Storage-DDGS Laidig Systems, Inc. 574-256-0204

www.laidig.com

Structural Fabrication Cherokee Steel Fabricators, Inc. 903-759-3844 www.cherokeesteelfabricators.com

Tanks

Process Control Harris Group Inc. 206-494-9422

WINBCO Tank Company 641-683-1855

www.winbco.com

Agra Industries, Inc. 715-536-9584

www.agraind.com

Custom Metalcraft Inc. 417-862-0707 www.custom-metalcraft.com

www.harrisgroup.com

Pumps

Federal Equipment Company 800-652-2466 www.fedequip.com Brown-Minneapolis Tank 281-252-9809

www.bmt-tank.com

Paragon Trailer Sales 800-471-8769 www.paragontrailer.com Greenberry Industrial 541-757-8458 www.greenberryinc.com

RTO Media Lantec Products, Inc. 617-265-2171

www.lantecp.com

CMC Letco Industries 417-831-1528

Safety SimplexGrinnell 800-746-7539

www.simplexgrinnell.com

www.electro-sensors.com

Separation Equipment Fluid Engineering 814-453-5014

Thermal Energy

www.fluideng.com

Your Solution. Advertise Today.

EPM MARKETPLACE

Reach your customers

Separators Westfalia Separator,Inc. 201-784-4322

Thermal Oxidizers

Your Ad HERE

Puritan Magnetics, Inc. 248-628-3808 www.puritanmagnetics.com

Yamada America, Inc. 800-990-7867 www.yamadapump.com

www.cmc-letco.com

American Waste Removal 505-417-9933 www.americanwasteremoval.com

Sensors Electro Sensors 800-328-6170

Gortech Global Fabrication 570-279-8086 www.gortechglobal.com

www.wsus.com

Your Solution. Advertise Today.

EPM MARKETPLACE ETHANOL PRODUCER MAGAZINE JUNE 2008

249


EPM MARKETPLACE Siemens Water Technologies 800-525-0658 www.siemens.com/water

Used Equipment

Aquatech International Corporation 724-746-5300 www.aquatech.com Gordon Technologies 570-279-8086

PROVEN RELIABILITY

www.gtsieve.com

Ethanol Production

for VOC, CO & PM ABATEMENT

Existing Producers

EISENMANN Corporation Crystal Lake, Illinois

Future Producers

815.455.4100 es.info@eisenmann.com

Syntec Biofuel, Inc. 604-648-2092

Louis Dreyfus Commodities 402-844-2680 LDCommodities.com

www.syntecbiofuel.com

Finance Accounting Christianson & Associates PLLP 320-235-5937 www.christiansoncpa.com Kennedy and Coe, LLC 800-303-3241

www.kcoe.com

Appraisals ICM, Inc. 316-796-0900 Pro-Environmental, Inc. 909-989-3010

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

www.pro-env.com

Turbines-Gas Kawasaki Gas Turbines 281-970-3255x18 www.kawasakigasturbines.com

VOC Scrubbers Lantec Products, Inc. 617-265-2171

www.lantecp.com

Valve Actuators Rotork Controls,Inc. 585-247-2304

www.rotork.com

Valves

EPM MARKETPLACE With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains top editorial content but also a useful directory in each publication. Whether a first-time advertiser wanting to raise awareness of your business or a frequent display advertiser looking for added exposure, EPM Marketplace is the perfect solution.

Central States Group 800-318-2747 www.centralstatesgroup.com

Federal Appraisal & Consulting, LLC. 908-823-0607 www.federalappraisal.com

Metso Automation 508-852-0215

Due Diligence

www.metsoethanol.com

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

www.checkall.com

www.biothane.com

Greenman Funding 888-802-7678 greenman.funding@verizon.net Jordan, Knauff & Company 312-254-5900 www.jordanknauff.com

Water Treatment Fluid Engineering 814-453-5014

www.fluideng.com

Insurance Chubb Insurance 312-454-4250

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www.harrisgroup.com

Equity Procurement

Wastewater Treatment Services Biothane Corporation 856-541-3500x501

Harris Group Inc. 206-494-9422

chubb.com

ETHANOL PRODUCER MAGAZINE JUNE 2008


EPM MARKETPLACE Armor Companies, Inc. 612-501-5654 acline@armorcompanies.com ERI Solutions, Inc. 316-927-4294

erisolutions.com

Lender Representatives

Transportation

Utilities

Heavy Highway Transport

Natural Gas

Landstar Carrier Group 920-487-3877

www.landstar.com

Rail

Greenman Funding 888-802-7678 greenman.funding@verizon.net

Risk Management

Blacklands Railroad 903-439-0738 www.blacklandsrailroad.com Ameritrack RailRoad Contractors, Inc. 765-659-2111 www.ameritrackrailroad.com

R.J. O’Brien 800-621-0757

www.rjobrien.com

Contact Mark Rundle at marundle@integrysenergy.com or (608) 222-5170.

Rail Consulting R.J. O’Brien 800-621-0757

www.rjobrien.com

Software-Accounting Encore Business Solutions 204-989-4330 www.encorebusiness.com

Antioch International, Inc. 402-289-2217 www.antioch-intl.com TKDA 651-292-4602

www.tkda.com

Rail Ties Services-Attorneys Dorsey & Whitney LLP 612-343-8275

Thompson Industries, Inc. 317-859-8725 www.thompsonindustries.net www.dorsey.com

Railcar Moving BrownWinick Law Firm 515-242-2400 www.biofuellawyers.com Stoel Rives LLP 612-373-8800 Faegre & Benson, LLP 612-766-6930

www.stoel.com/biofuels

Utility Integrys Energy Services 608-235-2547 www.integrysenergy.com

Shuttlewagon 816-767-0300

www.shuttlewagon.com

Heyl & Patterson Inc. 412-788-9810

www.heylpatterson.com

RAILCAR MOVING

www.faegre.com

124 W. Broadway, Suite 300 Madison, Wisconsin 53716 www.integrysenergy.com

Your Ad HERE Your Solution. Advertise Today.

EPM MARKETPLACE

Marketing

Reach your customers

Distillers Grains CHS, Inc. 651-355-6271

Your Solution. Advertise Today.

www.chsinc.com The CUB™ is an electromechanical machine designed to move single railcars or groups of cars. Some advantages of the CUB™ are:

ConAgra Trade Group 402-595-4125 www.conagratradegroup.com Hawkeye Gold, LLC 515-663-6429

•Safety of Personnel •One Person Operation •Little Maintenance Requirements •Low Investment/Operating Costs

www.hawkgold.com

Fuel Ethanol

Ask about our complete line of Railcar Moving Devices

Noble Americas Corporation 626-585-1705 www.thisisnoble.com

www.heylpatterson.com

C&N Ethanol Marketing Corp. 952-854-6675 www.candncompanies.com ConAgra Trade Group 402-595-4125 www.conagratradegroup.com Provista Renewable Fuels Marketing 651-355-8519 www.provistafuels.com

P

412-788-9810

F

412-788-9822

E

info@heylpatterson.com

Railcar Parts Salco Products, Inc. 630-783-2570

ETHANOL PRODUCER MAGAZINE JUNE 2008

www.salcoproducts.com

EPM MARKETPLACE

EPM MARKETPLACE With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains top editorial content but also a useful directory in each publication. Whether a first-time advertiser wanting to raise awareness of your business or a frequent display advertiser looking for added exposure, EPM Marketplace is the perfect solution.

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June 2008 Ethanol Producer Magazine