March 2009 Ethanol Producer Magazine

INSIDE: SHOCKING MORE ETHANOL FROM A KERNEL OF CORN MARCH 2009

Sweetening Sugarcane Economics What Will it Take to Make US Sugarcane an Economically Feasible Feedstock?

WWW.ETHANOLPRODUCER.COM

INSIDE: DEVELOPING US SUGARCANE INTO A VIABLE FEEDSTOCK MARCH 2009

Shocking Technology High-Power Silicon Switches Could Be Just the Ticket For Extracting More Ethanol From a Kernel of Corn

WWW.ETHANOLPRODUCER.COM

INSIDE: SHOCKING MORE ETHANOL FROM A KERNEL OF CORN MARCH 2009

Distillers Grains on the Move Ethanol Industry Challenged to Find New Markets and Transportation Methods to Accommodate Increased Distillers Grains Production

WWW.ETHANOLPRODUCER.COM

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March 2009

ETHANOL PRODUCER MAGAZINE

March 2009

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ETHANOL PRODUCER MAGAZINE

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contents

vol. 15 no. 3

features 52 INNOVATION A Shocking Ethanol Enhancer Technology that uses high-power silicon switches to apply voltage to the cell walls of corn kernels could boost ethanol production. –By Anna Austin 62 FEEDSTOCK Sugarcane Economics While sugarcane isn’t widely used in the U.S. to make ethanol, mainly because there are so few areas where it can be grown, researchers are developing new varieties that thrive in drier, cooler climates, and a couple of projects utilizing the crop are in the works. –By Erin Voegele 70 TRANSPORTATION DDGS: Supplying Demand One of the biggest challenges for the ethanol industry is finding ways to expand the market for the growing supply of distillers dried grains with solubles and moving the product efficiently. –By Ryan C. Christiansen 82 RISK The Importance of Environmental Risk Protection Insurance professionals are urging ethanol producers to consider protecting themselves from potential environmental risks associated with the production and transport of the renewable fuel. –By Kris Bevill 90 ENZYMES Catalysts of Efficiency Genencor expands its mission to refine enzyme use and develop new enzyme cocktails to help ethanol plants operate more efficiently.

–By Susanne Retka Schill

98 INDUSTRY Tackling Indirect Land Use Should U.S. ethanol producers be held responsible for events that occur in other areas of the world? That’s just one of many questions surrounding incorporating indirect land-use change into public policy. –By Susanne Retka Schill

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106 DEBATE Pushing Back: Biofuels Industry Responds to Big Food Outrageous claims by Big Food have spurred the ethanol industry to take a different approach and be more proactive in responding to negative publicity.

–By Ron Kotrba

114 TECHNOLOGY Craving Corn and the Cob Ethanol producers and equipment manufacturers are working together to produce more energy from an acre of corn. EPM examines the different prototypes being developed to harvest corn and cobs. –By Ryan C. Christiansen ETHANOL PRODUCER MAGAZINE

March 2009

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Commercially viable?

© Novozymes A /S · Customer Communications · No. 2009-02010-01

Yes, sooner than you think.

We’re close. We’re very, very close.

But now that the right enzymes are ready, are you prepared for the really tough job?

Novozymes low-dose, high-yield cellulase and hemicellulase for cellulosic biofuel production, are ready to revolutionize the industry. These enzymes are the highest performing solutions on the market, and they are ready for your ethanol plant.

So now we need to make it happen. Let’s work together to make second-generation biofuels economical and sustainable. With your plant and our enzymes success is within reach.

Find out more about Novozymes’ cellulosic ethanol solutions at www.bioenergy.novozymes.com

Novozymes is the world leader in bioinnovation. Together with customers across a broad array of industries we create tomorrow’s industrial bio-solutions, improving our customers’ business and the use of our planet’s resources. Read more at www.novozymes.com.

contents contributions

departments 8 On the Web

122 CORN The 2009 Corn Market Outlook Ethanol producers are hoping for a less volatile corn market this year.

However, the global economic downturn requires smart buying decisions.

–By Darin Newsom

9 Advertisers Index 12 The Way I See It Setting a Unified Agenda for the Future

By Mike Bryan 16 Business & People 18 Commodities

122

20 View From the Hill Innovation in the Lead

By Bob Dinneen 21 RFA Update

124

124 RISK The Ethanol, Corn Relationship: A Silver Lining The ethanol and corn markets have swung wildly over the past three years. Now that corn has largely become pegged to the price of ethanol, some commodity risk has been eliminated in the industry.

–By Hunt Stookey

22 BIObytes 24 Industry News 38 Plant Construction List 46 Drive Leveling the Playing Field

By Toni Nuernberg 48 Legal Perspectives Plant Breeders’ Rights for New Feedstocks in Canada

By Michelle Ayoub and Jeremy Lawson 130 Events Calendar 132 Marketplace

126 COMPLIANCE Initial RFS Audits, Updated Rules Require Comprehensive Evaluations The U.S. EPA’s renewable fuels standard (RFS) established a range of provisions applicable to biodiesel producers and blenders. An RFS audit expert provides insight on the process and how it might change with RFS2.

–By Wade Watson

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Ethanol Producer Magazine: (USPS No. 023-974) March 2009, Vol. 15, Issue 3. Ethanol Producer Magazine is published monthly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices.

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

BPA Worldwide Membership Applied for October 2006

ETHANOL PRODUCER MAGAZINE

March 2009

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ON THE

web BLOG

PODCAST

TAKINGSTALK

DDGS: Supplying Demand

The success and popularity of the dry-mill ethanol production process means that in the near future, the ethanol industry might be producing more distiller grains with solubles (DDGS) than the domestic livestock feed market and the fledgling DDGS export market will bear.

DDGS is already considered by many to be an undervalued co-product of ethanol production. How will the ethanol industry expand the market and how will it move all of the DDGS from here to there?

By Ryan C. Christiansen

Tracking Industry Information As the ethanol industry enters perhaps its toughest economic calendar year ever, the potential for new plant construction appears low. However, that doesn’t mean potential producers are scrapping all of their plans. We’ll soon know for sure as the entire EPM staff begins making calls for the widely read, annual Proposed Ethanol Plant List, which will be the primary focus of the April issue.

To view this blog and others, visit www.ethanolproducer. com/takingstalk/archive.jsp.

The distillers grains market continues to grow with the ethanol industry. Staff Writer Ryan C. Christiansen looks at the impact of expansion in his March EPM feature, “DDGS: Supplying Demand.” What transportation issues will arise as distillers grains enters more markets in increasing volumes?

To listen to this podcast and others, visit www.ethanolproducer.com/podcast.

TOP 10 WEB EXCLUSIVES

Start-ups, Shutdowns and High Yields EthanolProducer.com’s most-read Web exclusive news stories for January

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Jobe responds to Kraft CEO statement

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Ohio plant for sale; bank buys Gateway

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Ethanol plants temporarily shut down, delay construction

National Biodiesel Board Chief Executive Officer Joe Jobe responds to a USAToday.com article that blamed biofuels for diverting 40 percent of the global food supply.

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USDA: 2008 corn yield is second-highest

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Tharaldson Ethanol starts up North Dakota plant

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Belgian ethanol plant begins production

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Ethanol projects receive Colorado grants

The For Sale sign remains on Greater Ohio Ethanol LLC while Gateway Ethanol’s Kansas plant is sold.

Husker Ag LLC, Pacific Ethanol Inc., Suncor Energy Inc. and VeraSun Energy Corp. announce plans regarding temporary shutdowns or the scaling back of construction activities.

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The USDA’s latest supply and demand report summarizes the 2008 corn crop as the second-highest yield on record.

North Dakota’s newest ethanol plant starts up as Tharaldson Ethanol LLC begins producing ethanol at its 120 MMgy plant.

Belgian-based BioWanze starts up its wheat- and sugar syrup-based 79 MMgy plant.

Four Colorado-based groups receive Advancing Colorado’s Renewable Energy grants for ethanol-related projects.

Pilot-scale Poet facility starts up smoothly Poet LLC’s highly anticipated cellulosic pilot-scale plant in Scotland, S.D., starts up, and the company unveils its 2009 plans.

Novella includes politics, sabotage in ethanol industry

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Verenium to build Florida cellulosic ethanol facility Verenium Corp. announces its intent to build its first commercial-scale cellulosic ethanol plant, which will be based in Florida.

A screenplay-turned-novella takes a fictional look at the history of ethanol politics in the U.S.

► For up-to-date Web exclusives, visit www.ethanolproducer.com.

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ETHANOL PRODUCER MAGAZINE

March 2009

AdIndex

68 & 69 2009 International BIOMASS Conference & Expo 112 2009 International Fuel Ethanol Workshop & Expo 44 4 56 45 42 80 60 & 129 88 47 138 54 26 57 2 92 85 95 35 84 74 81 89 97 110 76 65 104 77 111 3 72 13 55 32 58 103 105

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Cereal Process Technologies Check-All Valve Christianson & Associates PLLP Clifton Gunderson LLP Crown Iron Works Co. Inc. dbc SMARTsoftware Inc. Delta-T Corp.

Detroit Stoker Co. Duratech Industries International Inc. Eisenmann Corp. ethanol-jobs.com Encore Business Solutions ETS Labratories Fagen Inc. FCStone LLC Fermentis Flottweg Separation Technology Freez-it-Cleen Gamajet GATX Corp.

Genencor International Inc.

ETHANOL PRODUCER MAGAZINE

March 2009

79 28 50 & 51 14 & 15 121 59 30 41 10 75 66 93 78 96 116 86 61 33 64 73 6 49 140 101 102 100 120 27 139 43 & 87 108 40 29 117 109 34 113 67 119 94 118 31

Greenway Consulting LLC Husch Blackwell Sanders Hydro-Klean Inc. Inbicon Indeck Power Equipment Co. Intersystems ISCO Industries Kennedy & Coe LLC Lallemand Ethanol Technology Louis Dreyfus Marcus Construction Co. Martrex Inc. McC Inc. MOR Technology Nalco Co. Natwick Associates Appraisal Services New York Blower Co. Nexen Marketing USA Inc. Noble Americas Corp.

North American Safety Valve Novozymes PhibroChem Poet LLC Pro-Environmental Inc. R&R Contracting Inc. R.J. O’Brien & Associates Renewable Fuels Association Resonant BioSciences LLC Robert-James Sales Inc. Roskamp Champion/CPM Salco Products Inc. Sulzer Process Pumps Sustainable Development Technology Canada Swanson Flo-Systems Trico TCWind U.S. Energy Services Vaperma Inc. Vecoplan LLC Victory Energy Operations LLC Vogelbusch USA Inc. Wabash Power Equipment Co. WINBCO

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Toulouse Mercure Toulouse Atria

March 30–April 3, 2009 A Tradition of Industry Education For 28 years, The Alcohol School has been educating fuel ethanol and distilled beverage producers in the science of alcohol production.

The weeklong programme in Toulouse, France, is designed for lab, plant, and management personnel and is organized around a series of lectures and laboratory demonstrations presented by a faculty of academic, industry and Ethanol Technology Institute experts.

The programme will cover the process of ethanol and beverage alcohol production from milling and mash preparation through fermentation and distillation. Enzyme usage, yeast biology, bacterial contamination and control will also be discussed along with other issues currently affecting both industries.

For More Information Registration is limited, with preference given to fuel ethanol and distilled beverage producers.

Registration materials and additional information are available online at www.ethanoltech.com.

6120 W Douglas Ave | Milwaukee WI 53218 USA +1 414 393-0410 | Fax +1 414 358-8012

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

EDITORIAL

PUBLISHING & SALES

Jessica Sobolik Managing Editor jsobolik@bbiinternational.com

Mike Bryan Publisher & CEO mbryan@bbiinternational.com

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e-mail to jsobolik@bbiinternational.com.

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

SUBSCRIPTIONS Ethanol Producer Magazine is now free of charge

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ETHANOL PRODUCER MAGAZINE

March 2009

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The Way I See It Setting a Unified Agenda for the Future

O

ur industry’s success has been predicated on having a unified front. If we look back over the past 25 years and try to identify when we have had public policy problems, defeats or setbacks, it has almost always been when the ethanol industry is split on an issue.

Now more than ever, the importance of speaking with one voice in Washington, D.C., can’t be overstated. There is an opportunity for a new beginning, a chance to move the biofuels agenda forward in a way that we never thought possible. This administration has been incredibly outspoken in its support for biofuels and renewable energy in general.

We need to be sure that we clearly articulate the agenda for this industry and do so with one voice. As you can imagine, we won’t be alone in that endeavor.

Wind and solar power, and every other alternative energy source, will be lining up to stake their claim.

You can also bet that the entire array of fossil fuels will be knocking on the doors of Congress.

The challenges are significant, with oil prices once again comparatively low, the economy still in great peril and most of us reeling from a difficult 2008, but the rewards are unparalleled. We will need to present a clear path forward to the new administration.

Everyone in this business has had to create a strategic plan on how to cope with the changing environment of renewable energy. In business, we take input from a variety of sources, compile that information and then make a decision on a plan of action.

The same should be true of our industry. We need to bring together the brightest minds from all sides of the industry and collectively strategize a plan that has been formed by consensus, with input from all stakeholders.

Everyone has a stake in the success of the ethanol industry, whether they are a producer, an engineering company, a supplier or service provider.

These companies have invested hundreds of millions of dollars in the development of the ethanol industry and to say that only ethanol producers have a voice is dated thinking. We all have a vested interest.

As soon as feasible, I believe it’s absolutely necessary to bring together this diverse group, collect their thoughts, combined wisdom and creative ideas, and present those ideas with one voice to this administration as ethanol’s agenda for the future.

That’s the way I see it!

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

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ETHANOL PRODUCER MAGAZINE

March 2009

Graphic design s Marie RIO

Our fermentation experts offer custom made recommendations to adapt to your process, your needs & your economics.

From the selection of the yeast strain to the definition of its format up to onsite training of your staff, Fermentis offers your ethanol plant a global fermentation approach to maximize your efficiency & profitability.

For more information, visit www.fermentis.com or email fermentis@lesaffre.fr ETHANOL PRODUCER MAGAZINE

March 2009

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Introducing The New Ethanol .™

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ETHANOL PRODUCER MAGAZINE

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ETHANOL PRODUCER MAGAZINE

March 2009

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Business&People Ethanol Industry Briefs

Omaha, Neb.-based ethanol producer and marketer Green Plains Renewable Energy Inc. appointed Todd Becker chief executive officer, replacing Wayne Hoovestol.

Becker joined GPRE as president and chief operating officer following the completion of the company’s merger with Delaware-based VBV LLC in mid-October. Previously, he served as VBV’s chief executive officer, and executive vice president of global ethanol sales and trading. His primary duties as CEO entail managing the day-to-day operations of the company’s four operating ethanol plants and eight grain elevators, along with overseeing strategic planning, and merger and acquisition activities.

Provista Renewable Fuels Marketing LLC changed its name to CHS Renewable Fuels Marketing on Feb. 1 to reflect the company’s acquisition

by CHS Inc. in April. It also entered into an agreement with Canton, Ill.-based Riverland Biofuels LLC to exclusively market the 37 MMgy ethanol plant’s production.

Formerly Central Illinois Energy Co-op Inc., the faci lity halted construction

16

in 2007 when Central Illinois Energy filed for bankruptcy.

The plant was sold in 2008, prompting the name change.

Construction was completed Oct. 1, and the first batch of ethanol was produced Oct. 10.

CHS Renewable Fuels Marketing now markets 380 million gallons of ethanol nationwide.

In addition to the marketing, logistic and transaction services, CHS Inc. will provide Riverland Biofuels with grain origination and distillers grains marketing services.

Cleveland-based Arisdyne Systems Inc., an alternative fuel cavitation technology and equipment company, named Peter Reimers as the company’s president and chief executive officer. He previously served as managing director of technology strategy at Archer Daniels Midland Co. and earned a doctorate in global economics from Graz University of Technology in Austria.

Martin Dorociak and Parker Lyle also joined the company as engineers. Dorociak will work on hydrodynamic-controlled flow cavitation equipment design. Lyle will collaborate with the Ohio Agricultural Research and Development Center as part of the Third Frontier Advanced

Energy Program to enhance ethanol yields.

Arisdyne was also nominated as a finalist for the Northeast Ohio Technology Coalition Innovation Award, which honors the achievements of organizations in northeastern Ohio that have transformed their creative ideas into reality.

The Federal Railroad Administration announced that Cedar Rapids, Iowa-based Iowa Interstate Railroad Ltd., a subsidiary of Pittsburgh-based Railroad Development Corp., will receive a $31 million loan under the Railroad Rehabilitation and Improvement Financing program. The money will help fund the railroad’s purchase of 12 new 4,400-horsepower General Electric ES44AC Evolution Series locomotives, which have allowed the railroad to increase train lengths, tonnage and operating speeds in its service to newly constructed ethanol plants along its line. Iowa Interstate Railroad expects to move approximately 1 billion gallons of ethanol per year from ethanol plants along its line in the near future.

Kauai Island Utility Co-op in Lihue, Hawaii, has entered into an agreement with Pacific West Energy LLC in Kaumakani, Hawaii, to purchase electricity from Pacific West Energy’s proposed 20-megawatt, sugarcane-bagasse-fired power generation facility. The biomass-to-energy plant will complement a proposed 12 MMgy ethanol facility that will use sugarcane as its feedstock. The agreement will help the co-op reach a goal of producing more than 50 percent of its electricity from renewable resources within the next 15 years and also to meet Hawaii’s renewable portfolio standard, said Dennis Esaki, chairman of the co-op board.

California-based BlueFire Ethanol Inc. delayed the groundbreaking of its 3.2 MMgy cellulosic ethanol plant in Lancaster, Calif., because of permitting delays and the recent capital market decline, said Chief Executive Officer Arnold Klann in the company’s 2008 annual shareholder letter. “We remain

ETHANOL PRODUCER MAGAZINE • March 2009

Sponsored by

optimistic in being able to raise the additional capital necessary after the new federal administration is in place and the capital markets normalize,” he said.

The company’s 18 MMgy to 19 MMgy cellulosic ethanol facility near Palm Springs, Calif., is progressing in both permitting and design activities, he said.

BlueFire is also involved in a third project in South Korea, where it will provide Ubiex Inc. with a preliminary engineering design package and technical support for the development of a cellulosic ethanol plant.

Missouri-based Roeslein & Associates, a consulting, engineering and construction management firm specializing in modularization, created an engineering group dedicated solely to alternative energy projects, including ethanol, biomass, biodiesel and solar power.

The company and its subsidiary Integrated Manufacturing Technologies are working on two ethanol projects for the Abencs division of Abengoa Bioenergy SA, including modularization systems for the fermentation areas of an 88 MMgy ethanol facility in West Franklin, Ind., and an 88 MMgy ethanol plant in Madison, Ill. Lawyers and creditors representing bankrupt Greater Ohio Ethanol LLC narrowed

down the list of bidders for its idled 54 MMgy ethanol plant in Lima, Ohio, to Michigan-based NextGen Ethanol and Washington, D.C.-based Paladin Capital Group. Greater Ohio Ethanol planned to complete the sale Jan. 16.

Meanwhile, a U.S. bankruptcy judge in Kansas approved the sale of bankrupt Gateway Ethanol LLC, a 55 MMgy plant in Pratt, Kan., to Minneapolis-based investment bank Dougherty Funding for $60 million.

The Iowa Renewable Fuel Infrastructure Program awarded $1.5 million to 43 applicants at a meeting Dec. 16. Fifteen awards for statewide E85 dispensers went to Unity Biofuels in Olds and Mt. Pleasant; Linn Co-op Oil Co. in Marion; Multi-County Oil Co. in Williamsburg; Pioneer’s Rest Area in Dubuque; Dows Property Group in Dows; Kum & Go LC in Ankeny, Clear Lake, Johnston and Urbandale; Farm Service Co-op in Corning; Don’s Motor Mart in Lake Mills; Aspinwall Co-op in Manning; Mother Hubbard’s Cupboard in Davenport; and Agriland FS Inc. in Washington. Awards were also given for tank vehicles, biodiesel dispensers and terminals.

The Iowa Renewable Fuels Association announced

ETHANOL PRODUCER MAGAZINE • March 2009

its leadership slate for 2009.

Denny Mauser of Western Iowa Energy LLC is the first biodiesel producer to Ramsbottom serve as president, succeeding Lincolnway Energy LLC’s Bill Couser. Nile Ramsbottom of Renewable Energy Group Inc. was elected vice president , Mike Jerke of Quad County Corn Processors will serve as secretary and Walter Wendland of Golden Grain Energy LLC will act as treasurer. Bruce Rastetter of Hawkeye Renewables LLC and Jeremie Parr of Central Iowa Energy LLC will serve on the executive committee.

In mid-December, Aventine Renewable Energy Holdings Inc. was notified by the New York Stock Exchange that its minimum average closing price had dropped below $1 per share for 30 consecutive trading days, one of the requirements for continued listing on the exchange. Under NYSE rules, Aventine has six months from the time it was notified to bring its stock price

above the $1 threshold for 30 consecutive trading days. Aventine’s common stock will continue to be listed on the NYSE in the meantime, provided the company complies with the other continued listing requirements.

P r o - E nv i r o n m e n t a l Inc. named Kevin Nesbitt its southern regional manager. He told EPM he’s spent the past four years as an independent manufacturer’s representative, selling regenerative thermal oxidizers and other emissions control equipment. Before that, he spent 10 years selling volatile organic compound control equipment in a variety of industrial markets in the eastern two-thirds of the U.S. Nesbitt holds degrees from Texas A&M and the New Jersey Institute of Technology.

“I look forward to increasing Pro-Environmental’s market presence and working with my customers,” he said. EP

SHARE YOUR INDUSTRY BRIEFS To be included in Business & People, send information (including photos or illustrations if available) to: Industry Briefs, Ethanol Producer Magazine, 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@bbiinternational.com. Please include your name and telephone number in all correspondence.

17

COMMODITIES REPORT Natural Gas Report

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

Natural gas prices: A longer view Jan. 16—Natural gas prices have dropped dramatically over the past nine months. Prices are now less than $5/MMBtu, a level not experienced in more than four years except for a few days in September 2006. While we didn’t necessarily expect prices to trade below $5/ MMBtu, we have expected a generally soft market due to strong supply and weak demand. Our view of the market is now starting to change somewhat due to potential supply reductions.

Significantly lower natural gas prices combined with tight credit conditions have resulted in a dramatic decrease in natural gas drilling activity (see chart). Over the past four months, drilling activity has dropped 20 percent from 1,552 rigs to 1,239 actively drilling for new and replacement natural gas. The rig count is a leading indicator of supply availability since the level of natural gas production is directly related to drilling activity. The more wells drilled, the more natural gas production there will be in the future. Conversely, less drilling activity will eventually lead to lower production levels.

The level of future drilling activity will likely be an even stronger indicator of production levels than in the past since many newer natural gas wells are from shale formations which have an extremely high well decline rate in the first few years of production. For example, wells in Louisiana’s Haynesville Shale have an 80 percent first-year decline rate.

Other shale formations have 60 percent to 80 percent first-year decline rates. If drilling levels continue to drop and recently drilled shale wells

decline 50 percent to 80 percent in their first year of production, it won’t be long before we find ourselves supply short.

We are not sounding the alarm bell. Rather, we are raising an important risk factor that should be considered and monitored over the coming months. If drilling levels continue to drop there is a risk of supply shortages and increasing prices. If drilling levels continue to drop and prices remain low, deferred purchases may be a good value.

EP Casey Whelan, vice president of strategic initiatives, can be contacted at cwhelan@usenergyservices.com.

Corn Report

By Jason Sagebiel, FCStone

Demand drops as economy slows Jan. 19—More corn is available, according to the USDA. The agency found another 316 million bushels after reducing corn demand for feed, exports and ethanol. The USDA decreased January corn demand within the ethanol sector by 100 million bushels after reducing corn demand in the same sector by 300 million bushels in December. With a weaker global economy, exports are projected to be 686 million bushels less than one year ago. Feed demand is also projected to be down 638 million bushels compared to one year ago.

The result equates to total demand of 11.95 billion bushels compared to previous estimates of more than 12 billion bushels. The carry-out for corn has been calculated at more than 1.7 billion bushels.

The world outlook for corn demand has weakened. Total corn demand was projected at 783.22 million metric tons versus 789.87 million metric tons in December. However, this projection is still greater than last year’s 772.12 million metric tons and an increase by 55 million metric tons versus 2006-‘07. Ultimately, world corn and coarse grains demand is still increasing. The graph illustrates world corn production versus usage since 1982. It is interesting that world corn carry-out stayed below 19 percent since 2000. World coarse grains observed the same decline in stocks-to-use ratio as well. This can be determined in the graph because production from 2000 to 2004 was 18

less than usage. In addition, usage has continued to grow year-on-year since 1994. Corn prices should remain volatile until South American weather and U.S. acreage are determined. With the current U.S. corn carry-out the corn market may feel comfortable and can afford a little manipulation in the supply/demand tables. EP ETHANOL PRODUCER MAGAZINE • March 2009

COMMODITIES REPORT DDGS Report

By Sean Broderick, CHS Inc.

Myriad issues impacting price rally Jan. 16—As the beginning of February approached, distillers grains prices have rallied for some obvious and not-so-obvious reasons. First and foremost, plant margins on ethanol production are poor. Most plants have curtailed production to a bare minimum, and some have ceased running altogether. Whether it was because of hedging decisions made last summer, or the price drop in oil and ethanol and steady-to-better corn prices, the unknown future of many of the plants has placed future DDGS supply at risk. Couple this with a run up in prices for alternative products such as corn gluten feed, canola meal and fat prices, and you have a nearby demand market pushing for quick deliveries of DDGS. Cold weather in the Midwest and rain in the Pacific Northwest is affecting rail car shipments, keeping logistics management at a premium.

Barge freight prices have escalated because of ice-related issues, rallying

prices in the Gulf. With American imports down and bulk freight costs historically low, shipping companies have slashed prices on return trips of their containers back to Asia, creating opportunities for exporters to Southeast Asia. U.S. corn for export, which for a while was getting hammered by competing products from the Black Sea and South America, has begun to be more competitive again worldwide as exporters scramble for supply.

The demand side, on an animal profitability standpoint, is extremely poor. Dairymen are getting hit the worst, with milk prices being several dollars per hundredweight under break-even costs. Hogs and poultry, while not as bad, are still not profitable.

DDGS exports to Canada have declined to a fraction of 2008’s numbers.

Situations like these create demand and credit issues—one never truly knows the viability of their trading partners, or the potential exposures to which they might be subjected. EP

Regional Ethanol Prices ($/gallon as of Jan. 29)

REGION

SPOT

RACK

West Coast

1.705

1.7763

Midwest

1.575

1.6679

East Coast

1.69

1.8875 SOURCE: DTN

Regional Gasoline Prices ($/gallon as of Jan. 29)

REGION

SPOT

West Coast

1.527

Midwest

1.2789

1.633

East Coast

1.1439

1.2861

RACK 1.40

SOURCE: DTN

DDGS Prices ($/ton) LOCATION

JAN. 2008

DEC. 2008

JAN. 2008

Minnesota

135

125

165

California*

175

165

215

Chicago

120

105

165

Buffalo, N.Y.

135

120

165

Central Florida

157

145

201

*Central Valley

SOURCE: CHS Inc.

Corn Futures Prices DATE

(March corn, $/bushel)

HIGH

LOW

CLOSE

Jan. 16, 2008

3.93

3.65 1/4

3.91

Dec.16, 2008

3.99

3.70 1/4

3.94

Jan.16, 2007

5.05 1/2

4.96 1/4

5.02 1/4 SOURCE: FCStone

Cash Sorghum Prices ($/bushel) JAN. 16, 2008 DEC. 19, 2008 JAN. 17, 2007

Ethanol Report

By Rick Kment, DTN Biofuels Analyst

The New Year brings change Jan. 16—The first couple weeks of 2009 seem to indicate that previous trading patterns and relationships may be old hat and new patterns may be in store for the first several months of the year. Through most of 2008, RBOB gasoline and crude oil prices seemed to be joined at the hip in that each market followed the others pattern to a tee. However, starting in January, RBOB gasoline prices seem to have deviated from the normal crude oil pattern. This seems to be a combination of expected increased summer demand for gasoline as well as refiners and retailers trying to regain margins

that were lost through the second half of 2008. Gasoline prices may continue to trade on their own merit in the coming weeks and months.

Recently, ethanol prices have also deviated from normal trading patterns as corn prices have shown choppy patterns and the lack of market demand for ethanol has limited the ability to move in the same direction. This results in significantly reduced product margins for most producers. The financial challenges currently facing ethanol producers will leave overall supply levels of ethanol produced in question for much of 2009. EP

ETHANOL PRODUCER MAGAZINE • March 2009

Superior, Neb. Beatrice, Neb. Sublette, Kan. Salina, Kan. Triangle, Texas Gulf, Texas

3.04 2.96 3.07 3.18 2.98 3.91

2.86 2.71 2.95 3.06 2.83 3.67

4.82 4.79 4.56 4.85 4.58 5.47 SOURCE: Sorghum Synergies

Natural Gas Prices

($/MMBtu)

JAN. 2008

DEC. 2008

JAN. 2007

NYMEX

4.80

5.83

8.20

N. Ventura

5.65

5.89

8.30

Calif. Border

4.43

5.75

7.93

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production Output October 2008

647,000*

September 2008

640,000

October 2007

452,000

*all-time monthly high

(barrels/day)

SOURCE: U.S. Energy Information Administration

19

VIEW FROM THE HILL

Innovation in the Lead In December, an economist at North Dakota State University cautioned that if America is not diligent about pursuing next-generation renewable fuel technology that it could very well be passed by other nations in the race to bring such technologies to the marketplace.

What a tragedy that would be after 30 years of hard work by countless people dedicated to a renewable energy future for this nation. Fortunately, this industry is not going to let that happen.

If there is one word that defines American ethanol production today it’s innovation. From advancements in farming practices to improvements in efficiencies at ethanol biorefineries to the deployment of cellulosic feedstocks and other next-generation technologies, America’s farmers and ethanol producers are answering the call for cleaner, greener alternatives to costly imported oil.

Recently, a team of researchers from the University of Nebraska-Lincoln published a paper in the Journal of Industrial Ecology concluding that by using today’s farming and ethanol production technologies, ethanol use can reduce greenhouse gas emissions (GHG) between 48 percent and 59 percent compared to gasoline. As the study points out, “Recent improvements in crop production, biorefinery operation and coproduct utilization in U.S. cornethanol systems result in greater GHG emissions reduction, energy efficiency, and ethanol-to-petroleum output/input ratios compared to previous studies.”

The study also notes that between 10 and 19 gallons of ethanol are derived from each gallon of oil used, reducing America’s dependence on foreign oil.

Such improvements are only the beginning.

While today’s farmers and ethanol producers are constantly evolving to produce more while using less, new technologies are entering the market at a faster rate than ever. As a leading engineer

Dinneen

from the National Renewable Energy Laboratory in Golden, Colo., recently told USA Today, “The old joke was that cellulosic ethanol was always just five years down the road. Now, there’s steel going in the ground.”

Indeed, what has been perpetually just over the horizon is now directly in front of us. Dozens of ethanol producers, both starch- and cellulose-based, are developing, deploying and building technologies that will turn switchgrass, wood waste, corn cobs and garbage into the clean-burning renewable fuels that will power generations of Americans.

In Louisiana, sugarcane bagasse is the feedstock for a demonstration facility that will produce 1.5 MMgy of ethanol. In the middle of Georgia, steel and concrete are being put in the ground for a facility that will soon gasify wood industry waste into renewable ethanol. In Kansas, designs are being completed on a commercial-scale cellulosic ethanol biorefinery that will use a combination of grasses and corn stover to produce ethanol.

There isn’t an ethanol producer in the United States that doesn’t have aggressive plans and research programs in the works to commercialize the next generation of renewable fuel technology.

That professor from the Great Plains was right to warn America, and particularly its political leadership, that without a steadfast commitment all of the investments made in renewable fuel technology will be for naught.

Judging by comments from President Barack Obama and his Cabinet, the innovation that defines this industry has believers at both ends of Pennsylvania Ave. America has the talent, ability and ingenuity to answer the economic, energy and environmental challenges we face. American ethanol producers are ready to help lead the way.

Bob Dinneen President and CEO Renewable Fuels Association

20

ETHANOL PRODUCER MAGAZINE • March 2009

RFA UPDATE

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

Corn reports tout near-record production, increased carry-out A Jan. 12 USDA report indicated that U.S. farmers produced the second-largest corn crop and the secondhighest average yield per acre in history during the 2008 growing season. The yields and total production level are particularly noteworthy considering the unprecedented adverse weather conditions that plagued much of the Corn Belt during the early part of the growing season and a laterthan-usual harvest in the fall.

“January’s USDA report paints a very clear picture of the productivity potential of American farmers and dispels the misconception that ethanol is at the root of higher corn and food prices,” said Renewable Fuels Association President Bob Dinneen. “With an expected surplus of nearly 2 billion bushels at the end of this marketing year, it is clear that farmers can supply ample feedstock for food, feed, fiber and renewable fuel production.”

The USDA also released updated world corn supply and demand estimates on Jan. 12. It showed slightly reduced demand for corn use for ethanol. Because of corn reductions in all corn demand segments, USDA dramatically raised its projection of corn carry-out at the end of the 2008-’09 marketing year. At a projected 1.8 billion bushels, projected 2008-’09 carry-out would be at one of the highest levels in the past decade.

ETHANOL PRODUCER MAGAZINE • March 2009

RFA outlines ’09 challenges, opportunities The RFA’s mid-January teleconference, titled “Ethanol: Prospects and Policy in 2009,” provided participants with a 2009 outlook on the ethanol industry, including information on prospects, next-generation technologies, higher ethanol blends, and the impact of stimulus and energy legislation.

RFA Chairman Chris Standlee said three primary issues the industry faces in 2009 include: the need to get America’s economy moving again, the need to modernize current fuel regulations, and the need for the U.S. EPA to complete rulemaking for the federal renewable fuels standard that was established in the Energy Independence & Security Act of 2007.

Standlee said that requiring 50 percent of all new vehicles sold in the U.S. to be flexible-fuel capable by 2012 would help address some of the issues posed by outdated fuel regulations. He also said that preliminary data suggest that all vehicles and most engines could accommodate fuel containing 12 percent to 13 percent ethanol. “Such a subtle increase in the amount of gasoline blended into ethanol in the short term would help buy time and provide a market for the increasing volume of ethanol coming into the market over the next two to three years,” Standlee said.

A recording of the conference call is available at www. goodfuels.org.

21

BIObytes Ethanol News Briefs

PHOTO: POET LLC

Michigan passes key legislation

Poet Biorefining-Laddonia in Laddonia, Mo., is expanding from 52 MMgy to 57 MMgy.

Poet expands in Missouri Poet LLC is adding 5 MMgy of capacity to Poet Biorefining-Laddonia, its 52 MMgy ethanol plant in Laddonia, Mo. The $2 million project, expected to be complete in April, includes the installation of a sixth fermentor, according to General Manager Robin Venn. The additional capacity will

allow the plant to purchase another $3 million of corn per year. Poet operates one other Missouri ethanol plant—a 36 MMgy facility in Macon, Mo.—and 26 total U.S. ethanol plants with a combined production capacity of approximately 1.54 billion gallons.

IRS issues guidance on cellulosic biofuels tax credit Qualifying cellulosic biofuels produced and sold between Dec. 31, 2008, and Jan. 1, 2013, may be eligible for tax credits. The Internal Revenue Service recently issued Notice 2008-110, which provides guidance regarding the income and excise tax credits for biodiesel and cellulosic biofuels.

The Food, Conservation and Energy Act of 2008 created an income tax credit for producers of certain cellulosic biofuels. Under the legislation, cellulosic biofuels are defined as any liquid fuel, other than low-proof alcohol, that is produced from any lignocellulosic

22

or hemicellulosic matter available on a renewable basis. Cellulosic biofuels must also meet the registration requirements for fuels and fuel additives established by the U.S. EPA under section 211 of the Clean Air Act. To qualify for the credit, producers must register with the secretary of the treasury, and the notice issued by the IRS provides guidance on how to register as a cellulosic biofuels producer. A complete copy of the notice can be found at www.irs.gov/pub/irsdrop/n-08-110.pdf.

Michigan Gov. Jennifer Granholm signed 11 bills at the end of 2008 that aim to advance renewable fuels in the state.

Among the provisions, five renewable fuels renaissance zones were added to the existing 10 that receive tax exemptions. Five of the 15 total are specifically designated for cellulosic biofuels.

Another bill created a Renewable Fuels Fund to promote alternative fuels in Michigan, including an income tax checkoff provision for citizen contributions.

Michigan’s Renewable Fuels Commission was extended until 2012 and is charged with tracking renewable fuels in the state.

For more details on the public acts signed into law, visit www. michigan.gov.

Alberta joins other provinces with ethanol standards Canadian province Alberta announced Dec. 11 that it’s adopting a renewable fuels standard (RFS). The policy was announced as part of Alberta’s Provincial Energy Strategy, a long-term action plan to help the province achieve clean energy production, wise energy use and sustained economic prosperity. The RFS, scheduled to take effect in 2010, will require 5 percent ethanol per gallon of gasoline.

Four other Canadian provinces have enacted similar standards. British Columbia will require 5 percent renewable content in gasoline and diesel by

2010. Saskatchewan enacted a 7.5 percent ethanol requirement in gasoline in 2006, and Manitoba required 8.5 percent ethanol in gasoline starting in 2008.

Ontario also enacted a 5 percent ethanol mandate in gasoline in 2007 and is proposing to expand this requirement to 10 percent in 2009.

In addition, the Canadian government is in the process of implementing a federal RFS. The federal standard will require 5 percent ethanol to be included in gasoline by 2010.

For a map detailing individual Canadian and U.S. RFS policies, see pages 36-37.

ETHANOL PRODUCER MAGAZINE • March 2009

Magellan increases distribution capabilities Magellan Midstream Partners LP recently installed a stateof-the-art sequential ethanol blending system at its terminal in west Fort Worth, Texas, which now has 18,000 barrels of ethanol storage.

The company is also in the process of installing an additional ethanol blending system at its ter-

minal in Frost, Texas, which has 20,000 barrels of ethanol storage.

The company expected the system to be operational in late January. Company spokesman Bruce Heine said Magellan Midstream Partners can receive ethanol via truck and an automated offloading system.

Northeast projects cease development Pittsburgh-based Sunnyside Ethanol LLC has shelved plans to build an 80 MMgy ethanol plant in Aliquippa, Pa. The company had a property sales option to retrofit a tin mill building but allowed it to expire. Plans also called for an adjacent 24-megawatt coal-to-electricity generation facility to power the ethanol plant.

Meanwhile, “lack of working capital” forced Northern

Ethanol Inc. to consider selling assets from its three proposed 108 MMgy ethanol plants in Ontario and New York to potential third-party buyers, according to a 10-Q form filed with the U.S. Securities and Exchange Commission in December. Northern Ethanol needed $688 million in equity and/or debt financing to complete construction of all three plants, the filing said.

In December, the U.S. Energy Information Administration released a report that projects no growth in U.S. oil consumption through 2030, a first in more than 20 years due in part to the increased blending of renewable fuels. The report also found that by 2030, cellulosic ethanol blending in the U.S., including imported volumes, will only reach 12.6 billion gallons. The federal renewable fuels standard (RFS) mandates 16 billion gallons of cellulosic biofuel to be blended into U.S. supplies by 2022.

Following the release of the EIA report, newly formed ethanol advocacy group Growth Energy issued a statement of concern regarding mainstream media outlets across the country that may have focused more on the renewable fuels shortfall.

“To the unbiased observer, the real news has been overlooked here,” Growth Energy stated.

“As more biofuels are needed, specifically in the area of cellulosic ethanol as outlined in the RFS, the ingenuity of the American ethanol industry won’t let us down.”

PHOTO: CROPENERGIES AG

EIA projects oil, biofuels consumption

BioWanze started production at this 79 MMgy ethanol plant in Wanze, Belgium, in December.

Ethanol plants open in Europe, Australia BioWanze, a subsidiary of CropEnergies AG, has begun producing ethanol at its 79 MMgy plant in Wanze, Belgium, using wheat and sugar syrup feedstocks. Wheat bran from its milling process is used to feed a biomass boiler to produce electricity. The plant also produces wheat gluten and condensed distillers solubles.

Meanwhile, Lantmännen Agroetanol, a 56 MMgy grain-based ethanol plant in ETHANOL PRODUCER MAGAZINE • March 2009

Norrköping, Sweden, has restarted after a 41 MMgy expansion. The plant also produces pelletized protein feed.

Dalby Bio-Refinery Ltd., a 20 MMgy sorghum-based ethanol plant in Dalby, Australia, is now fully operational. The facility, Australia’s first, will produce 140,000 metric tons of distillers wet grains with solubles and 30,000 tons of syrup per year.

23

RIN values rise as ethanol production, blend margins fall The value of renewable identification number (RIN) credits is on the rise, as high as 13 cents per unit in mid-January.

According to Clayton McMartin, president of Clean Fuels Clearinghouse, operator of the RINSTAR renewable fuels registry, the reason for the spike is multifaceted but heavily influenced by poor ethanol-blend economics.

Another factor, however, is the yearend compliance report for obligated parties, due Feb. 28. “There are some parties coming late to the game and just now starting to understand what their obligations are under the regulations,” McMartin told EPM. “Consequently they are trying to find RINs, but there’s less ethanol being put into gasoline right now, so the RINs that are in the marketplace are catching a higher price.”

Out of 202 ethanol plants representing 12.4 billion gallons of annual production capacity, 27 of them are currently idle, according to EPM data. The idle production capacity totals nearly 1.7 billion gallons per

year, leaving 10.7 billion gallons per year in operating nameplate capacity. However, this number doesn’t include plants operating under nameplate capacity, also known as “hot idle” condition. The 2009 mandated volume of ethanol consumption under the federal renewable fuels standard (RFS) is 11.1 billion gallons. In addition, 1.29 billion gallons of annual construction capacity is expected to come on line in 2009.

RINs function as a way to enforce the RFS, but McMartin said people are confused by the system. A RIN is generated and assigned for every gallon of ethanol produced or imported into the U.S., but once a RIN is assigned to a gallon, it’s not required to move with that same gallon.

“The regulations provide for commercial flexibility,” he said. “Producers have the latitude to move a gallon of ethanol with zero RINs or up to 2.5 RINs, and anywhere in between, so why don’t producers set one price for ethanol without RINs and another price for ethanol with RINs?” The idea is to move more RINs to customers

willing to pay more for them, something McMartin said not many producers are doing today.

Some say ethanol is going through a consolidation period as bankrupt ethanol plants are put up for sale. “When you’re in a consolidation period, you’ve got hardware on the ground, and ultimately it will be utilized, but it most likely won’t be utilized by the same people on the title today,” McMartin said. “They’re going to recapitalize, and we’ve already seen some of that.”

VeraSun Energy Corp., which filed for bankruptcy in the fall, is putting seven of its 16 plants up for auction. Only four of its 16 facilities are operating today.

Ironically, the U.S. Energy Information Administration projected in December that U.S. oil consumption will plateau through 2030 partly because of biofuels’ displacement of fossil fuels, which is lowering gas prices and, in turn, making ethanol blending less economical.

—Ron Kotrba

PHOTO ABOVE

The map denotes ethanol plants currently producing (green), under construction (orange) and idle (blue).

24

ETHANOL PRODUCER MAGAZINE • March 2009

Grain suppliers learn to combat uncertainty with corn contracts Grain suppliers with corn contracts linked to bankrupt ethanol producer VeraSun Energy Corp. are taking proactive measures to protect themselves from ramifications associated with defaulted or rejected corn contracts.

At a court hearing in early December, U.S. Bankruptcy Judge Brendan Shannon gave VeraSun Energy Corp. approval to reject certain corn purchase contracts 10 business days before a contracted delivery date.

The decision was better than what VeraSun originally sought, but it put a serious crimp in its relationship with farmers and grain elevators, according to Mark Lakers, president of Ag and Food Associates, an Omaha, Neb.based middle market merger and acquisitions investment bank. “There’s a second wave that producers need to be cautious of,” Lakers said. “Some of the VeraSun defaults could significantly weaken [farmer] cooperatives.” VeraSun’s default on corn contracts forced farmers to sell their grain on the open market, where it was difficult to recoup the difference in value between the contract price and the market price.

‘There’s a second wave that producers need to be cautious of.’

In light of VeraSun’s default on forward corn contracts, the American Corn Growers Association called for federal policy reform to protect American farmers, consumers and investors against these instances. The association offered the following policy recommendations: That forward contracts held by buyers of farm commodities be treated no differently than delivered goods or services in a court of law That federal credit guarantees be given to struggling ethanol companies That transparency be increased on speculative positions in futures trading That minimum prices be set on ethanol through a price support mechanism and a strategic ethanol reserve That realistic price supports be enacted for grains and oilseeds

ETHANOL PRODUCER MAGAZINE • March 2009

That strategic grain reserves be enacted to ensure adequate feedstocks and allow for supply buffers.

Meanwhile, the Nebraska Department of Agriculture, through its Farm Mediation Program, hosted two workshops for Nebraska farmers to learn more about handling their obligations under forward contracts with ethanol producers. The meetings were held in Central City and Ord in early January, and in Albion in December.

An attorney was on hand to address sellers’ rights under grain contracts and to explain how those rights could be affected by bankruptcy.

According to Lakers, some states provide recourse for grain suppliers to circumvent potential issues in connection with contract defaults. “For example, Iowa has an indemnity fund whereby it covers financial losses to a point, but in states such as Nebraska and Minnesota, there is no such state fund, so grain suppliers are on their own.”

—Bryan Sims

25

SuGanit ferments xylose using brewer’s yeast SuGanit Systems Inc. in Reston, Va., was awarded a $999,900 grant from the Ohio Department of Development’s Third Frontier Advanced Energy Program to scale up its biomass pretreatment and fermentation processes that can ferment both glucose and xylose sugars using normal yeast. SuGanit Systems operates a research and development center at the University of Toledo’s Clean & Alternative Energy Incubator in Toledo, Ohio.

According to SuGanit President Praveen Paripati, the company licensed two technologies from the university and has been working with researchers at the College of Engineering to scale up the processes. “The first technology is a pretreatment process based on ionic liquid pretreatment,” he said. “It helps to soften or change the cellulose biomass structure to make it a lot more amenable for the enzymes to do their hydrolysis. The other technology ferments xylose sugars, Varanasi, right, and doctoral student Kripa Rao work with a high-performance liquid chromatography instrument used to check byproducts produced from renewable energy sources.

PHOTO: UNIVERSITY OF TOLEDO

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ETHANOL PRODUCER MAGAZINE • March 2009

which are five-carbon sugars, using normal yeast. The technology we have licensed [allows us to] get higher productivity.”

According to the university, its scientists developed the catalyst that allows unmodified, native yeast to ferment both sugars, which depending on the biomass could increase ethanol production by 30 percent or more. The research is being led by Sasidhar Varanasi, professor of chemical and environmental engineering.

According to Varanasi, baker’s or brewer’s yeast (Saccharomyces cerevisiae) can readily convert into ethanol the glucose that is recovered from the 40 percent to 50 percent cellulose portion of lignocellulose. However, the common yeast isn’t able to ferment xylose, which is obtained through the hydrolysis of the 25 percent to 35 percent hemicellulosic portion of lignocellulose. The common yeast can only ferment xylose if it has first been converted to xylulose, an isomer of xylose in which the atomic particles have been rearranged. The enzyme xylose isomerase can be used to con-

vert xylose to xylulose in a neutral-to-basic solution, but an acidic solution is necessary for fermenting xylulose to ethanol. To overcome this challenge, Varanasi and his team developed a method for converting xylose to xylulose using immobilized enzyme pellets, which contain multiple enzymes, suspended in a neutral-to-basic solution. The method sustains both neutral-to-basic and acidic microenvironments within a single vessel, allowing for the simultaneous conversion of xylose to xylulose and the fermentation of the xylulose to ethanol. Borax is used in the solution to assist with the conversion of xylose to xylulose.

Up to this point, SuGanit has been able to use the processes to convert one kilogram (2.2 pounds) of biomass per day into 0.25 kilograms (0.55 pounds) of ethanol per day using a batch process.

The funding will help SuGanit work toward processing 60 kilograms (132 pounds) of biomass to produce five gallons of ethanol per day using a continuous process.

The grant is contingent upon approval from the state Controlling Board. In 2008, SuGanit received a $500,000 grant from the U.S. DOE and a $250,000 grant from the Ohio Third Frontier Advanced Energy Program. The project began with a $100,000 Small Business Innovation Research grant from the U.S. Small Business Administration.

—Ryan C. Christiansen

ISU to study biomass gasification for ethanol, process heat Iowa State Universityâ&#x20AC;&#x2122;s research on gasification technologies for the ethanol industry got a boost this winter in the form of a $2.37 million grant from the Iowa Power Fund. The research aims to create systems that produce process heat from clean biomass-derived synthesis gas. Ethanol plants could use these sytems to replace natural gas usage. Another dimension of the research aims to improve the process of making ethanol from the syngas produced by biomass gasification.

Song-Charng Kong and Robert Brown, professors in mechanical engineering at ISU, are leading the project with Frontline BioEnergy LLC and Hawkeye Renewables LLC as partners. â&#x20AC;&#x153;This is a commercially driven project,â&#x20AC;? Brown said. It seeks to refine gasification technologies in order for ethanol plants to reduce energy costs and improve their carbon footprints.

A rule of thumb is that replacing natural gas with syngas for process heat in Weihua Deng, researcher at ISUâ&#x20AC;&#x2122;s Center for Sustainable Environmental Technologies, monitors a fixed-bed catalytic reactor system that converts biomass-derived syngas into ethanol.

PHOTO: IOWA STATE UNIVERSITY

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ethanol plants will reduce greenhouse gas emissions (GHG) by 90 percent, he said.

Although wood chips are easier to use in biomass gasification, the targeted biomass feedstock in this project is corn stover, whose nitrogen content presents a challenge, Brown said. The nitrogen in the feedstock itself, along with nitrogen from the air in some processes, increases nitrogen oxide emissions (NOx)—gases with a far greater GHG impact than carbon dioxide. Distillers grains would be another candidate for gasification, although its protein content creates other issues. One goal of the ISU project is to demonstrate a low NOx burner developed by Kong to reduce those GHG emissions.

NOx burners were originally developed for coal and natural gas, and aren’t yet widely available for the mixture of gases found in syngas.

The project will use a pilot-scale fluidized-bed gasification unit, developed by Frontline and ISU, at the Iowa Energy Center’s Biomass Energy Conversion facility in Nevada, Iowa. It will also demonstrate a Frontline process to clean tar out of the syngas produced from gasifying biomass. While the tar burns well, Brown explained, it can precipitate out when syngas cools as it’s piped from the gasifier.

Another dimension of the project will test catalysts that convert syngas into ethanol. These are being developed by ISU chemistry professor Victor Lin. The advantage to using gasification, a thermochemical process, is the potential to convert all the biomass components into ethanol. Companies working on the other broad category of cellulosic ethanol technology, biochemical conversions,

are targeting the cellulose and hemicellulose content of biomass by using pretreatments, enzymes and microbial fermentation. This approach, however, leaves more than one-fourth of the biomass bound in lignin. Gasifying biomass converts it all with a theoretical maximum ethanol yield of 187 gallons per ton, significantly higher than the other cellulosic ethanol technologies.

While the theoretical yield is promising, the actual conversions being reported by companies working on the thermochemical gasification process are closer to 120 gallons per ton, Brown said. That compares with the theoretical maximum yield of 110 gallons per ton for corn-based ethanol, which the industry is approaching, he added. “Remember, the cost is around $150 per ton for corn, whereas biomass is expected to cost between $50 and $100 per ton,” he said.

The ultimate goal of the collaboration partners is to develop cost-effective technologies that can be adapted in the existing cornbased ethanol industry within a reasonable payback time. Frontline BioEnergy, located in Ames, Iowa, has installed a gasification unit at Chippewa Valley Ethanol Co. LLLP in Benson, Minn., which is using wood chips to displace 90 percent of its natural gas. In production since April, the gasifier burns approximately 380 tons of wood waste per day. Long-term plans include the use of grasses, corn cobs and other ag residues.

—Susanne Retka Schill

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ETHANOL PRODUCER MAGAZINE • March 2009

29

Enerkem syngas-toethanol plant starts up Quebec-based Enerkem Inc. began the start-up phase at its commercial-scale synthesis-gas-to-ethanol/methanol plant in Westbury, Quebec, in January after a 14-month construction period.

The company has operated a pilot plant in Sherbrooke, Quebec, since 2003. Enerkem President and Chief Executive Officer Vincent Chornet told EPM that he expects the commercial-scale facility to become fully operational within a few months after the alcohol modules are bolted to the syngas island.

Enerkem received financial support for the construction of the plant from Sustainable Development Technology Canada, and the Quebec Natural Resources and Wildlife Ministry.

The companyâ&#x20AC;&#x2122;s sequential gas-conditioning and catalysis technology allows for the processing of certain types of demolition wood, such as decommissioned power poles and creosote-treated wood that most companies canâ&#x20AC;&#x2122;t process due to air permit limiEnerkem has begun start-up operations at its commercial-scale syngas-to-ethanol plant in Westbury, Quebec.

PHOTO: ENERKEM INC.

‘Forestry biomass is like butter for us, although the plant is designed to be flexible.’ tations. Appropriately, the 1.3 MMgy facility is collocated with a saw mill and will utilize waste wood materials to produce 365 liters (95 gallons) of ethanol per ton. It’s operated by a team of 13 people.

Besides treated wood waste, the plant will also be capable of processing other sorted municipal solid waste. “Forestry biomass is like butter for us, although the plant is designed to be flexible,” Chornet said.

After the wood chips or other wastes are dried, sorted and shredded, they are stored in a container connected to the gasifier by a front-end feeding system. Slurries or liquids may also be fed into the gasifier through injectors. The carbonaceous materials are converted into a syngas, consisting mostly of carbon monoxide and hydrogen, through a chemical gasification process.

The gasification process uses air as a partial oxidation agent or oxygen-enriched air, which includes steam at a specific partial pressure. The gasifier operates at low severities, temperatures of approximately 700 degrees Celsius (1,292 degrees Fahrenheit) and below 10 units of atmospheric pressure. During the gasification

ETHANOL PRODUCER MAGAZINE • March 2009

process, part of the creosote is broken down, forming a portion of the syngas.

Other traces of impurities are captured as residues in the form of a neutralized ash, or through a wastewater treatment system for effective disposal through the syngas cleaning system. At this stage, the gas is cleaned and conditioned for use with existing catalysts, which is accomplished through a sequential conditioning system that includes the cyclonic removal of inerts, secondary carbon and tar conversion, heat recovery units, and the reinjection of tar and fines into the reactor. The gas that is produced at the end of the cleaning process is ready for conversion into liquid fuel and end products.

The ethanol produced at Enerkem’s facility will be sold within Canada to refineries. Chornet said the company is currently in talks with refineries in the greater Montreal area.

Notably, Enerkem has partnered with top Canadian ethanol producer GreenField Ethanol and the city of Edmonton, Alberta, to construct another cellulosic ethanol/methanol plant, which will use municipal solid waste as a feedstock. Chornet said the Alberta project is on schedule and should be entering the construction phase in 2009.

—Anna Austin

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Ethanol projects receive Colorado ag grants The Colorado Agricultural Value Added Development Board, part of the Colorado Department of Agriculture, awarded $200,000 in Advancing Colorado’s Renewable Energy grants to organizations for ethanol-related projects.

Colorado State University’s Golden Plains Area Extension Service was awarded a $50,000 grant to evaluate how energy crops should be rotated on northeastern Colorado dryland farms.

“What we’re trying to do is take the potential renewable energy crops—whether they’re biodiesel, ethanol or cellulosic sources—and see how they fit into a cropping sequence,” said Alan Helm, area extension agent for CSU. “Which crops follow which best? Which crops don’t follow?” He said dryland corn, grain sorghum, forage sorghums and winter wheat will be rotated with canola, camelina, sunflowers and other crops at the Central Great Plains Research Station to de-

Alternative dryland crop rotation plots at the Central Great Plains Research Station in Akron, Colo.

PHOTO: DAVID NIELSEN, USDA

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ETHANOL PRODUCER MAGAZINE • March 2009

termine how well the crops grow in sequence. “Every crop will be planted into every residue,” he said. The grant covers the first two years of the project, but additional grants will be sought to extend the project.

KL Energy Corp. in Rapid City, S.D., was awarded a $25,000 grant to study the feasibility of colocating a 5 MMgy cellulosic ethanol plant with Confluence Energy, a wood pellet production facility in Kremmling, Colo., which came on line in April.

The facility manufactures pellets from beetle-killed Ponderosa pine.

Pending the feasibility study and financing, the ethanol plant would come on line by the spring of 2010, according to Aaron Broten, project manager for KL Energy. He said the ethanol plant will also use beetle-killed timber as a feedstock. KL Energy’s cellulosic ethanol production process uses a thermomechanical pretreatment followed by enzymatic hydrolysis to prepare woody biomass for fermentation. Because the process doesn’t use a harsh acid pretreatment, Broten said the result is a clean lignin byproduct, which will be mixed with additional unprocessed beetle-killed timber wood chips for pelletizing. The resulting wood pellets will have 20 percent to 30 percent more British thermal units per pound than wood pellets without the added lignin.

Feedlot Biofuel LLC in Wichita, Kan., was awarded a $20,180 grant to assess the feasibility of establishing ethanol plants

at feedlots in east-central and southeastern Colorado. According to Bowe Wingerd, manager of Feedlot Biofuel, the company has designed an ethanol plant that is optimized to produce distillers wet grains with solubles that caters to the nutritional needs of cattle. “It’s a unique design that produces higher-quality distillers grains while using less energy and Wingerd capital,” he said. Wingerd, who has 18 years of experience in process engineering, said that instead of building a large ethanol plant near corn acreage and then shipping distillers dried grains with soluble elsewhere, Feedlot Biofuel plans to build smaller ethanol plants adjacent to feedlots. He said an ethanol plant located near a typical corn- and sorghum-based feedlot might produce 10 MMgy or 20 MMgy of ethanol.

The Colorado Corn Growers Association, based in Greeley, Colo., was awarded a $100,000 grant to assist the development of E85 infrastructure in rural Colorado. According to Katrina Davis, spokeswoman for the CCGA, the grant will help three to five retailers pay for installing E85 pumps in 2009.

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Sugarcane plays role in development of green polyethylene, Sugarcorn Brazil is the world’s top sugarcane-based ethanol producer. According to the Renewable Fuels Association, the country produced more than 5 billion gallons in 2007. A new project being undertaken by Braskem, a Brazilian thermoplastic resin producer, will seek to convert a portion of that ethanol into green polyethylene.

Braskem’s board of directors recently approved the Green Polyethylene Project, which will produce ethylene and polyethylene from sugarcane-based ethanol. An investment of 500 million reals ($211 million) has been allotted for the project, located at the Southern Petrochemical Complex in the state of Rio Grande do Sul. According to Braskem spokesman Nelson Lataif, the process of producing polyethylene from sugarcane is simple in concept. “Sugar in the form of sucrose is extracted from the sugarcane and fermented to produce ethanol,” he said. “This is dehydrogenated to ethylene, which is subsequently polymerized to polyethylene. The challenge is achieving the level of purity required.”

Braskem plans to manufacture polyethylene from sugarcane-based ethanol.

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The facility will have the capacity to produce 200,000 tons of ethylene and polyethylene on an annual basis. The project won’t be integrated with an ethanol plant. “Braskem will purchase [ethanol] as a commodity,” Lataif said. The process will utilize approximately 400,000 tons of ethanol each year, producing one ton of ethylene from every 1.8 tons of ethanol.

According to information released by Braskem, the design of the project is complete. The detailing phase and construction are expected to begin in 2009, and operational start-up is scheduled for 2011. Braskem has also reserved the project’s critical equipment, such as the feed gas and refrigeration compressors. To finance the operation, the company plans to pay 30 percent with its own funds and is seeking financing for the remaining 70 percent.

The company has identified demand for 600,000 tons of green polyethylene and estimates the chemical will command a price premium of 15 percent to 30 percent over the price of polyethylene made from nonrenewable materials. The project could be the first of additional larger-scale projects being analyzed by the company.

While sugarcane-based ethanol production is highly efficient and widespread in Brazil, its potential is limited in the U.S. This is largely due to economic factors and the fact that most agricultural land in the U.S. isn’t ideal for sugarcane growth. Still, at least one U.S. company is working to overcome some of these barriers.

Seattle-based Targeted Growth Inc. is developing a new crop

referred to as Sugarcorn, a hybrid cross between sugarcane and corn.

The plant contains genes from Midwestern corn, tropical maize and sugarcane, resuilting in a corn variety that doesn’t flower to produce grain but instead produces sugar in its stalks.

The company has been developing the crop for approximately three years. Researchers are currently working to increase sugar yields, increase the plant’s hardiness and develop ways to prevent the plant from being pollinated by nearby crops of traditional corn. The ultimate goal is to develop a sugar crop in the U.S. that will be competitive with sugarcane for ethanol production.

Unlike sugarcane, Sugarcorn doesn’t require more water than tradition corn. It also requires less nitrogen fertilizer. One major difference between corn and Sugarcorn is the way Sugarcorn must be harvested—with a biomass harvester, similar to the way sugarcane is harvested. The stalks would be gathered and crushed to extract the sugary juice. This juice could then be fermented into ethanol. In addition, the remaining biomass material could be processed through a cellulosic technology.

During the 2008 growing season, Targeted Growth tested the growth of Sugarcorn in Illinois and Indiana. During the 2009 growing season, the company will test the crop in plots across a larger region of the U.S., from Indiana to Nebraska and Minnesota to Florida.

—Erin Voegele

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ETHANOL PRODUCER MAGAZINE • March 2009

Renewable Fuels Standards The U.S. and Canada have enacted separate federal renewable fuels standards, yet individual states and provinces have additional standards in place or on the books.

Columbia: By 2010, all gasoline sold must 1 British contain 5 percent ethanol.

By 2010, 5 percent ethanol must be 2 Alberta: blended with all gasoline sold.

Since October 2006, all gaso3 Saskatchewan: line sold has been required to contain 7.5 percent ethanol.

Since April, all gasoline sold has been 4 Manitoba: required to contain at least 8.5 percent ethanol.

Since 2008, at least 85 percent of Ha10 Hawaii: waiiâ&#x20AC;&#x2122;s gasoline has been required to contain 10 percent ethanol by volume.

Montana: Total non-premium gasoline sales, exSince 2007, an annual average of 5 per11 cept 91-octane, must contain 10 percent ethanol 5 Ontario: cent ethanol has been blended into gasoline sold in Ontario. An increase to 10 percent in 2009 has been proposed.

By 2012, all gasoline sold must contain 6 Quebec: 5 percent ethanol.

Since Dec. 1, all gasoline sold in 7 Washington: Washington has been required to contain 2 percent ethanol.

Since Sept. 16, total gasoline sales have 8 Oregon: been required to contain 10 percent ethanol.

three months after in-state ethanol production reaches 40 MMgy. There are no ethanol plants under construction or operating in the state at this time.

Minnesota: With an E10 mandate already in ef12 fect, total motor gasoline sales must contain 20 percent ethanol by volume by 2013.

Twenty-five percent of motor fuel sold in 13 Iowa: the state must come from renewable sources (E10, E85 and biodiesel blends) by 2020.

Missouri: Since 2008, total non-premium gasoCalifornia: Gasoline produced at state refineries 14 line sales have been required to contain 10 per9 must contain 10 percent ethanol by Dec. 31. cent ethanol.

Total motor gasoline sales must con15 Louisiana: tain 2 percent ethanol by 2015, or six months after in-state ethanol production reaches 50 MMgy. There is one 1.4 MMgy cellulosic ethanol plant operating in the state, and a 25 MMgy facility is under construction.

Beginning Dec. 31, 2010, all gasoline 16 Florida: sold or offered for sale within the state is required to contain 9 percent to 10 percent ethanol by volume. â&#x20AC;&#x201D;Compiled by Anna Austin

ETHANOL PRODUCER MAGAZINE â&#x20AC;˘ March 2009

37

Representing 1.75 Billion Gallons Annually

Ethanol Plant Construction New Project

Project Complete

Project Expansion

Expansion Complete

Will plant construction pick up in 2009?

T

his month’s plant construction list contains 21 plants with

Ga. The facility is being built in two phases: 10 MMgy, followed by

a combined production capacity of 1.75 billion gallons. In

100 MMgy.

comparison, 63 plants were under construction at this time

Other plants may stick with grain-based feedstocks, but per-

last year with a combined capacity of 4.67 billion gallons.

haps not corn. Appomattox Bio Energy, owned by Osage Bio En-

To give the bigger picture, 2008 began with 67 plants under

ergy LLC, plans to use barley to produce ethanol in Hopewell, Va.

construction with a combined capacity of 4.79 billion gallons. That

According to Osage Bio Energy Chief Operating Officer Joel Stone,

total began declining in April, and the year ended with 31 plants un-

surveying crews were conducting soil testing in January before

der construction with a combined capacity of 2.84 billion gallons.

concrete work began. “We’re detailing the design on all of our foun-

2009 began with 31 plants under construction with a total ca-

dations,” he said. “Construction crews and their trailers are all on-

pacity of 2.7 billion gallons, and that number continues to decrease.

site.” Osage Bio Energy is a sister company to Roanoke, Va.-based

What will the rest of the year bring? With a bearish credit market for

Osage Inc., an independent ethanol distributor in the Southeast.

grain-based ethanol, more plants may begin making the transition to cellulose.

The April issue of EPM will include the annual Proposed Ethanol Plant List. From this, some production patterns may emerge,

Some on this list have already committed to making this transi-

along with a more defined direction for 2009 and beyond.

tion. Range Fuels Inc. is using a U.S. DOE grant awarded in mid2007 to build a wood-based cellulosic ethanol plant in Soperton,

—Bryan Sims

Abengoa Bioenergy of Indiana Posey County, Ind. Abener Energía SA Vogelbusch USA Inc. 88 MMgy corn Abengoa Bioenergy Trading Abengoa Bioenergy Trading undeclared March 2008 fourth quarter 2009

PHOTO: ABENGOA BIOENERGY OF INDIANA

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress Infrastructure elements, such as rail and roads, are 47.5 percent complete, while building construction is 21 percent complete.

Abengoa Bioenergy of Indiana To provide updates to this list, contact Bryan Sims at (701) 738-4950 or bsims@bbiinternational.com.

38

ETHANOL PRODUCER MAGAZINE • March 2009

Abengoa Bioenergy of Illinois

Archer Daniels Midland Co.

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Madison, Ill. Abener EnergĂ­a SA Vogelbusch USA Inc. 88 MMgy corn Abengoa Bioenergy Trading Abengoa Bioenergy Trading undeclared March 2008 fourth quarter 2009

Columbus, Neb. undeclared undeclared 275 MMgy corn Archer Daniels Midland Co. undeclared undeclared July 2007 third quarter 2009

Synopsis of progress Infrastructure elements, such as rail and roads, are 47.8 percent, while building construction is 23.3 percent complete.

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

Appomattox Bio Energy

Aventine Renewable Energy-Mt. Vernon LLC

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Hopewell, Va. Agra Industries Inc. Katzen International Inc. 65 MMgy barley Osage Bio Energy LLC N/A N/A October 2008 second quarter 2010

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Mt. Vernon, Ind. Kiewit Energy Co. Delta-T Corp.

113 MMgy corn Aventine Renewable Energy Inc. Aventine/Consolidated Grain and Barge

undeclared September 2007 fourth quarter 2009

Synopsis of progress Construction crews have arrived on-site. Soil tests are underway and will be followed by concrete work.

Synopsis of progress Construction has been temporarily suspended. No further information was available at press time.

Archer Daniels Midland Co.

Big River Resources-Galva LLC

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Cedar Rapids, Iowa undeclared undeclared 275 MMgy corn Archer Daniels Midland Co. undeclared undeclared June 2007 first quarter 2010

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

ETHANOL PRODUCER MAGAZINE â&#x20AC;˘ March 2009

Location Design/builder Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Galva, Ill. Fagen Inc. ICM Inc. 100 MMgy corn CHS Renewable Fuels Marketing Hawkeye Gold LLC N/A September 2007 May 2009

Synopsis of progress Administration building is complete, and most tanks are erected. Energy center is nearly complete. Rail yard is approximately 90 percent complete.

39

Highwater Ethanol LLC

Bionol Clearfield LLC Location Design/builder Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Clearfield, Pa. Fagen Inc. ICM Inc. 110 MMgy corn Bionol Clearfield LLC Land Oâ&#x20AC;&#x2122;Lakes N/A February 2008 January 2010

40

Renewable Products Marketing Group

CHS Inc. N/A November 2007 May 2009

Homeland Energy Solutions LLC

Clean Burn Fuels LLC

Synopsis of progress N/A

Lamberton, Minn.

Fagen Inc. ICM Inc. 55 MMgy corn

Synopsis of progress Winter weather is slowing some work. Natural gas lines are functioning, and some areas of the site are receiving permanent power. Work on the electrical substation is being finalized. Process building is enclosed. Most of the piping is installed. Crews are anticipating the arrival of the thermal oxidizer.

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Location Design/builder Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Raeford, N.C. Biofuels Design/Clean Burn Fuels LLC

Katzen International Inc. 60 MMgy corn undeclared Harris Crane Inc. Airgas Inc. May 2008 July 2009

Location Design/builder Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Lawler, Iowa Fagen Inc. ICM Inc. 100 MMgy corn Green Plains Renewable Energy Inc.

CHS Inc. N/A May 2007 April 2009

Synopsis of progress Overall construction is approximately 85 percent complete, including the energy center and rail line.

ETHANOL PRODUCER MAGAZINE â&#x20AC;˘ March 2009

Kawartha Ethanol Inc. Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Louisiana Green Fuels LLC Havelock, Ontario Profab International Ltd. Delta-T Corp.

80 MMly (21 MMgy) corn undeclared Thompson’s Ltd. undeclared October 2007 May 2009

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress All buildings and tanks are erected. The installation of equipment and automated control components is underway.

Lacassine, La. Casey Industrial Inc Louisiana Green Fuels LLC/Praj Industries Ltd.

25 MMgy sugarcane/sweet sorghum undeclared N/A undeclared April 2008 fourth quarter 2009

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

PHOTO: HOMELAND ENERGY SOLUTIONS LLC

Nexsun Ethanol LLC Location Design/builder Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Ulysses, Kan. ICM Inc. ICM Inc. 48 MMgy corn undeclared undeclared undeclared September 2007 first quarter 2009

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

Homeland Energy Solutions LLC

IN AN EVER-CHANGING BIOFUELS INDUSTRY, IT’S EASY TO FEEL LIKE YOU’RE GETTING NOWHERE.

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ETHANOL PRODUCER MAGAZINE • March 2009 KAC.10442_EPM_Cir_7.5x3.375_4C 1

41 7/24/08 11:05:51 AM

Northwest Bio-Energy Ltd. Unity, Saskatchewan Northwest Terminal Ltd. Katzen International Inc. 25 MMly (6.6 MMgy) wheat undeclared undeclared undeclared September 2007 March 2009

PHOTO: NORTHWEST BIO-ENERGY LTD.

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

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

Northwest Bio-Energy Ltd.

One Earth Energy LLC

Northwest Renewable LLC Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Longview, Wash.

Makad Construction Corp.

Lurgi Inc. 55 MMgy corn U.S. Ethanol LLC Lansing Trade Group undeclared November 2006 second quarter 2009

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

Gibson City, Ill. Fagen Inc. ICM Inc. 100 MMgy corn Eco-Energy Inc. Ag Motion Inc. N/A October 2007 April 2009

Synopsis of progress Start-up has been delayed one month due to weather constraints.

Process center offices are furnished. Installation of water pretreatment instrumentation continues. Electrical work is ongoing.

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ETHANOL PRODUCER MAGAZINE • March 2009

Panda Hereford Ethanol LP Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Poet Biorefining-Laddonia Hereford, Texas Panda Ethanol Inc. Thermo-Kinetics/Lurgi Inc. 105 MMgy corn Aventine Renewable Energy Inc. Panda Ethanol Inc. undeclared September 2006 first quarter 2009

Location Design/builder Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Target completion date

Project Expansion Laddonia, Mo. Poet Design & Construction Poet Design & Construction from 52 MMgy to 57 MMgy corn Poet Ethanol Products Poet Nutrition undeclared December 2008 April 2009

Synopsis of progress Panda Ethanol Inc. filed for Chapter 11 bankruptcy in January and intends to sell this project to potential buyers, according to a filing with the U.S. Securities and Exchange Commission.

Synopsis of progress Site and concrete work is complete. Tank construction is underway.

Plymouth Energy LLC

Range Fuels Inc.

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Merill, Iowa Delta-T Corp.

Delta-T Corp.

50 MMgy corn C&N Cos. Plymouth Energy LLC undeclared May 2007 2009

Location General contractor Process technology Capacity Feedstock Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

Soperton, Ga. undeclared undeclared 10 MMgy woody biomass undeclared N/A N/A November 2007 first quarter 2010

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

Synopsis of progress N/A

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ETHANOL PRODUCER MAGAZINE • March 2009

ETHANOL PRODUCER MAGAZINE • March 2009

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DRIVE Nuernberg

Leveling the Playing Field ardon the sports metaphor, but changing the rules mid-game does not contribute to a level playing field. You may have heard the phrase during an election recount or perhaps the selection of a national champion in college football. Unfortunately, it now applies to our industry’s efforts to comply with government regulations as it relates to indirect land use.

Case in point: The Energy Independence and Security Act of 2007 provides not only a foundation for the ethanol industry but also the promise of long-term stability. But despite this legislation, challenges remain. Under the provisions, new ethanol projects will have to meet standards for reducing greenhouse gas emissions or else the fuel the plants produce won’t qualify for meeting the nation’s annual biofuels targets.

The industry has worked diligently since its inception to reduce its environmental footprint, and as of 2009, ethanol has less than half the greenhouse gas emissions of gasoline on a life cycle basis. Greenhouse gas emissions are universally measured through a process called life cycle analysis, whereby emissions can be tested and verified. The EISA legislation penalizes each new ethanol plant that cannot meet a life cycle analysis of at least 20 percent less greenhouse gas emissions than petroleum gasoline.

According to the Greenhouse gases, Regulated Emissions and Energy use in Transportation (GREET) model developed by Michael Wang of the U.S. DOE’s Argonne National Laboratory, starch-based ethanol produced at corn dry mill plants utilizing natural gas as an energy source have a net life cycle analysis of between 18 percent and 29 percent less greenhouse gas emissions than a typical gasoline refinery.

However, some are proposing that ethanol’s greenhouse gas emissions be expanded to include emissions that are not directly caused by the production of ethanol. This is the equivalent of a catcher calling for a fastball and the pitcher uncorking a wildly thrown curveball. This is more than just a case of miscommunication.

This is based on the theory of indirect land change and it unfairly penalizes domestic grain-based ethanol, based on suspect linkages to land clearing and agricultural practices in some developing countries.

This theory is considered debatable by many in the scientific community due to its many intellectual and ethical weaknesses.

There are a number of flaws with this type of measurement. Indirect land use change theory is based entirely on economic models

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that were developed for other uses and depend on vast uncertainties.

Models can be helpful for predicting the future, but they always lack the precision necessary for life cycle analysis. Indirect land use change theory also makes domestic industries responsible for the environmental performance of foreign competitors. This holds ethanol to a different standard than all of the other fuels with which it has to compete.

Bruce Dale of Michigan State University, along with several other renowned professors, testified before the U.S. EPA research committee in October 2008 and urged them to delay the decision. They stated that the science about land use issues is not developed enough to make an educated decision. He and other professors submitted a formal letter to the EPA in October.

Unfortunately, global climate change and the impact of possible sources of carbon emissions are complicated and multi-factorial issues that will require continued and thorough research that and be founded in verifiable science and uniform standards—in short, a level playing field.

In the words of the late historian Lewis Mumford, “More and more, our life has been governed by specialists who know too little of what lies outside their province to be able to know enough about what takes place within it.” We need to deliver the message to Washington, D.C., and state legislatures that it would be detrimental to our country’s efforts toward energy security to create legislation based on the small amount of knowledge our scientific community currently has on the effects of indirect land use.

Toni Nuernberg is the executive director-Midwest for Growth Energy.

Reach her at tnuernberg@growthenergy.org or (402) 932-0567.

ETHANOL PRODUCER MAGAZINE • March 2009

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Plant Breeders’ Rights for New Feedstocks hile patents remain the principal form of intellectual property for protecting technological advancements in Canada, plant breeders’ rights can provide an alternative or complementary protection for new plant varieties. Species engineering has begun on heralded, under-researched plant feedstocks such as switchgrass, camelina and jatropha.

Protecting the fruits of such research and development labor could be achieved in Canada through a combined strategy of patenting and plant breeders’ rights.

W

Criteria for Patents Versus Plant Breeders’ Rights A valid patent will be granted for an invention that is novel, useful and non-obvious. If the invention was disclosed by the applicant more than one year before filing a patent application, then it is considered unpatentable in Canada for lack of novelty.

To qualify for a plant breeders’ rights certificate, a plant variety must be new, distinct, uniform and stable. A “new” variety must not have been sold in Canada before the filing of the plant breeders’ rights application, and must not have been sold abroad for more than four years or for more than six years in the case of woody plants and their rootstocks. A “distinct” variety possesses measurably different characteristics from commonly known varieties. For example, a variety could be “distinct” because its seed oil content is higher than any known variety of the same species.

Furthermore, a “uniform” variety exhibits predictable variation in its characteristics, and a “stable” variety has characteristics that remain unchanged over successive generations.

Subject Matter of Patents Versus Plant Breeders’ Rights The Canadian Intellectual Property Office currently takes the position that multicellular organisms are not patentable subject matter. It may be possible to patent new and inventive methods of genetic engineering or individual cells of multicellular organ-

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isms, but any claims to a plant itself will be rejected by CIPO. The Plant Breeders’ Rights Act allows the exclusive right to a plant variety that is asexually or sexually reproducible. However, plant breeders’ rights cannot be obtained for fungi, algae or bacteria.

Duration, Scope of Patents Versus Plant Breeders’ Rights While the term of a patent is 20 years from the date of filing a patent application, the duration of plant breeders’ rights is 18 years from the plant breeders’ rights certificate issue date.

The scope of a patent is defined by its claims and often allows broad coverage of an invention, such as a plant cell containing a new chimeric gene that is applicable to several plant species. Each plant breeders’ rights certificate, however, covers a particular variety belonging to a particular plant species. The plant breeders’ rights certificate holder may exclude others from selling the protected variety, producing it for sale or making repeated use of the protected variety as a step to commercially produce another variety.

Plant Protection in the U.S. In the U.S., breeders’ rights can be obtained for sexually reproduced (by seed) or tuber-propagated plants. It is also possible to obtain a so-called “plant patent” for an asexually reproduced plant. The U.S. also allows regular utility patents for plants.

Given the need for improved plant feedstocks in the energy industry and the particularities of the Canadian intellectual property system, neither patents nor plant breeders’ rights should be overlooked as valuable means of protection.

Micheline Ayoub is a patent associate in the fields of biotechnology and plant varieties protection at ROBIC, a Quebec, Canadabased intellectual property and business law firm. Reach her at ayoub@robic.com. Jeremy Lawson is a patent agent in the fields of chemical and process engineering at ROBIC. Reach him at lawson@robic.com.

ETHANOL PRODUCER MAGAZINE • March 2009

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INNOVATION

Squeezing more ethanol from a bushel of corn is one way for an ethanol producer to stay on top of his game. California-based OptiSwitch Technology has developed a process that could increase ethanol production by 5 percent or more, using high-power silicon switches to apply voltage to the cell walls of the corn kernel.

By Anna Austin

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INNOVATION

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PHOTO: OPTISWITCH TECHNOLOGY

H

ow does a company that makes high-performance semiconductor switches make an ethanol plant more efficient? OptiSwitch Technology Corp. developed a reliable, solidstate switch (a component that can break an electrical circuit) for critical military applications with the help of some internal funding and a $10 million contract from the U.S. Department of Defense. OptiSwitch’s specialty is producing high-power, short-duration electrical systems, or “pulsed power,” which use high voltages—10,000 to more than 100,000 volts—and high currents—10,000 to more than 100,000 amperes—for durations of hundreds of microseconds or less.

On the surface, the company’s connection to biofuels isn’t obvious, but its budding technology has the potential to fit comfortably into the industry.

This hermetically sealed, high-voltage switch about the size of a coaster is capable of industrial-scale processing and is the heart of OptiSwitch’s electroporation system.

Interest in Ethanol OptiSwitch became interested in ethanol about two years ago, according to David Giorgi, chief technology

officer and president of OptiSwitch.

The technology the company has developed is based on electroporation, or electropermeabilization, a process that

ETHANOL PRODUCER MAGAZINE

March 2009

INNOVATION

is more familiar to those in the medical industry or cancer patients who have received chemotherapy treatments than to ethanol producers.

During electroporation, high electrical pulses are briefly applied to the cell plasma membrane, or cell wall,

PHOTO: OPTISWITCH TECHNOLOGY

OptiSwitch ran corn mash, which would normally be processed at an ethanol plant, through its system and found that a significantly high amount of fermentable sugars were released, when measured and compared with control samples.

The fabrication of the high-voltage silicon wafers requires the same kind of cleanliness found in semiconductor labs that produce consumer electronics.

which permeate or poke holes in the cell. In the medical field, this is done to introduce effective amounts of medicine into a cell or specific area.

The holes serve a different purpose in ethanol production. Rather than introducing a substance into the cell, the holes poked into corn kernels allow

PHOTO: OPTISWITCH TECHNOLOGY

INNOVATION

Pictured is an artist’s rendering of an electroporation system for a 25 MMgy ethanol plant.

A 100 MMgy plant would require four of these systems.

starch to effectively come out of the cell and to gain more accessibility to enzymes.

The company’s ethanol research process involved a visit to an institute in Karlsruhe, Germany, which was using electroporation to increase the sugar yields in sugar beets, Giorgi says. “The problem they had is that they were using a switch called a spark gap, which consists of two electrodes that you over-volt and develop a spark between to close the switch,” he explains. “The process of forming the spark causes erosion of the electrodes, which limits the life and reliability of the system. They weren’t able to get the system to operate for the duration of the sugar beet harvest—or three months.”

After seeing that process, OptiSwitch decided to use a semiconductor instead of a spark gap, Giorgi says. “These are everywhere—in your cell phone or camcorder—and they are very reliable,” he says. “The problem with these types of switch-

56

Taking into account maintenance, equipment, cost and electricity, the estimated pay-back period would be 12 to 18 months—and would increase ethanol output by 3 percent to 5 percent a year.

es is that they are low power, and we needed high power.” To remedy the situation, the company took silicon semiconductor switches and engineered them for high-power, highcurrent applications.

During the company’s experiments, which were conducted and evaluated at the National Corn-toEthanol Research Center on the

ETHANOL PRODUCER MAGAZINE

March 2009

Capture The Power

PHOTO: OPTISWITCH TECHNOLOGY

INNOVATION

This silicon wafer, which is 88 milliliters in diameter, is capable of pulse switching hundreds of thousands of amperes (a typical home has an electrical feed of 100 to 200 amperes of current).

Southern Illinois University campus in Edwardsville, OptiSwitch ran corn mash, which would normally be processed at an ethanol plant, through its system and found that a significantly high amount of fermentable sugars were released, when measured and compared with control samples.

“On another project in which some of our team members were involved, a commercial-scale pulsed electric field unit—very similar to the electroporation unit—was built and used in the food industry to replace heat pasteurization,” says Tajchai Navapanich, director of operations at OptiSwitch. “Pulsed electric fields are effective in killing bacteria.

We are currently involved with one of the largest ethanol producers in the nation to determine the effectiveness and scalability of a system which could increase ethanol yield and at the same time eliminate the use of antibiotics.”

Despite all the research that’s been conducted on this technology, no one was able to scale the elec-

ETHANOL PRODUCER MAGAZINE

troporation to work in something as large as an ethanol plant without constant repairs and maintenance to the machinery, Navapanich says. “[But] that’s exactly what we’ve done,” he says. “Existing solid-state switches, although highly reliable, are not capable of extremely highpower applications.”

Installation Logistics The high-power silicon switches can handle 100,000 amperes and volts to perform the electroporation process on a large scale, Navapanich says. Installing the technology in an ethanol plant would not be difficult, he adds.

As in every case where the technology seems too good to be true, the question of economic viability must be asked. Would it put out more energy than it uses? “We have calculated that it will only cost a few pennies more per gallon to generate 5 [percent] to 10 percent more ethanol,” Navapanich says. “At this point, we haven’t built a full-scale

March 2009

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PHOTO: OPTISWITCH TECHNOLOGY

INNOVATION

This artist’s rendering shows the electroporation cell retrofitted in line with the existing 8-inch pipe in an ethanol plant.

system but, based on the parameters from lab trials, the modular unit would be able to process roughly 25 MMgy. If you had a 100 MMgy plant, you would need four units.”

The units would have the footprint of a compact car and could easily be retrofitted into any existing ethanol plant. “With that kind of footprint and some pipe rerouting, it could be done in a week,” Navapanich says.

Taking into account maintenance, equipment, cost and electricity, the estimated pay-back period would be 12 to 18 months—and would increase ethanol output by 3 percent to 5 percent a year, he says.

OptiSwitch is currently finalizing a research scaleup agreement with one of the largest ethanol producers in the U.S., a project which could be completed before the summer of 2009.

Cellulosic Ethanol and Biodiesel OptiSwitch is also looking into the use of electroporation as a pretreatment method for cellulosic ethanol feedstocks. “The advantage is that the process doesn’t involve the use of steam explosion or acid hydrolysis, which produces inhibitor compounds that render a portion of the cellulose-derived sugars unusable for fermentation into ethanol,” he says.

This is an important development as ethanol producers are leaning towards using cellulosic feedstocks in the future to lower their carbon footprints.

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INNOVATION

“We are looking at applying our technology as a pretreatment process to eliminate steam expulsions or acid hydrolysis. That’s something we’re looking into doing, hopefully later this year.”

Another area that looks promising using the same principle is algae-based biodiesel production, Navapanich tells EPM. “Two hurdles that must be cleared are algae dewatering and lipids extraction,” he says. “The current solvent extraction method uses hexane to extract lipids. This process, however, is expensive, costing upwards of $1 or more per gallon of algal oil.”

OptiSwitch recently presented the results of its experiments at the Algae Biomass Summit in Seattle, Wash. “This work was a collaborative research effort between OptiSwitch and an Arizona State University team,” Navapanich says. “It showed that electroporated samples required one-third the amount of solvents for lipid extraction and was achieved in one-third the time.”

Navapanich says OptiSwitch is beginning collaborative research with Washington State University on the dewatering of algae using direct-current and sacrificial metal electrodes in a process called electroflocculation (EF), or electrocoagulation (EC). “Test results performed at WSU have shown that greater than 99.9 percent of the algae was removed from test samples in about 20 minutes, and research indicates that removing algae from solution using EF/EC could cost as little as fractions of a penny per gallon of treated water, again significantly bringing down the cost of using algae as a biofuels feedstock,” he says.

Soon, OptiSwitch will venture into a joint collaborative research effort with a large algae company

ETHANOL PRODUCER MAGAZINE

to optimize and scale-up the technology.

“We anticipate that we can bring down the cost of dewatering and lipid extraction to around 30 cents per gallon of algal oil within two years or less,” Navapanich says.

OptiSwitch’s technology is yet another example of an older, commonly used process revamped, further developed and uniquely applied to a completely different process.

March 2009

Seemingly well on its way to a smooth transition from military applications into the ethanol and biodiesel industries, OptiSwitch may have the potential to make significant impact on the advancement of renewable fuel technologies. EP Anna Austin is an Ethanol Producer Magazine staff writer. Reach her at aaustin@ bbiinternational.com or (701) 738-4968.

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Sugarcane Economics Although the sugarcane-based ethanol industry is booming in Brazil, only a handful of companies are developing processing plants in the U.S., where market conditions in most parts of the country canâ&#x20AC;&#x2122;t support them. A few projects are poised to thrive in unique pockets of the country, but the cropâ&#x20AC;&#x2122;s real potential will rely upon the commercialization of cellulosic technologies.

By Erin Voegele

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FEEDSTOCK

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ETHANOL PRODUCER MAGAZINE

March 2009

PHOTO: USDA-ARS SUGARCANE RESEARCH LABORATORY

S

ugarcane has been grown in the ergy it consumes the energy balance of U.S. for centuries even though sugarcane is approximately eight to one, land most suitable for its cul- Legendre says. tivation is scarce. Commercial Even with all of these advantages, production of the tropical grass is lim- sugarcane ethanol projects have strugited to select areas of Florida, Louisi- gled to gain a foothold in the U.S. beana, Texas and Hawaii. Edward Rich- cause the economics simply don’t make ard, a research leader with the USDA sense in most areas. Using current techAgricultural Research Service’s Sugar- nology, Legendre says it takes about 14 cane Research Unit in Houma, La., says pounds of sugar to produce 1 gallon U.S. sugarcane production is limited to of ethanol. The price of U.S.-produced about 1 million acres nationwide. It’s no raw sugar currently hovers at about wonder the U.S. ethanol industry relies 20 cents per pound, and has remained on corn since farmers planted more stable for nearly two decades. With the than 85 million acres last year. current economics, ethanol producers Even though sugarcane produc- in most areas simply wouldn’t be able tion levels are relatively minor, a great to afford it. deal of research and development is dedicated to developing new varieties of the crop that are more suitable for cultivation in the U.S. Ben Legendre, a professor and department head of the Audubon Sugar Institute at Louisiana State University’s Agricultural Center, says the Sugarcane is forced to flower to facilitate crossing for the varietal program at the USDA-ARS Sugarcane Research major emphasis development Laboratory. of this research is to increase sugar yields and reduce crop input costs. This includes extensive breeding programs Pockets of Potential to develop sugarcane varieties that are There are, however, specific pockresistant to diseases, insects and weeds, ets of the U.S. where sugarcane ethanol and better adapted to colder tempera- production could be feasible. Pacific tures.

West Energy LLC is currently moving Sugarcane efficiently turns sun- ahead with sugarcane ethanol produclight and chemical inputs into energy tion on the island of Kauai in Hawaii. and requires a minimal amount of fer- According to William Maloney, the tilizer, compared with other ethanol company’s president and chief execufeedstocks. “Your total input costs are tive officer, Hawaii’s unique economy less [with sugarcane] than with corn or holds opportunities that will allow this some of the other crops that are used project to thrive. for ethanol production,” Richard says.

Pacific West Energy’s ethanol proThe energy balance is also greater. duction project involves converting an While corn generally produces about existing sugar mill on Kauai. To make 1.5 units of energy for each unit of en- the facility competitive, it will be ca-

PHOTO: USDA-ARS SUGARCANE RESEARCH LABORATORY

FEEDSTOCK

Researchers Tom Tew, left, and Robert Cobill inspect sugarcane and energy cane varieties.

pable of producing sugar and/or ethanol. This should provide the company with a safety net if the price of ethanol dramatically drops or the price of sugar sharply increases. Other elements of the project include doubling the land currently dedicated to sugarcane production, and modernizing harvesting methods.

The key to sugarcane ethanol economics today is to take advantage of the byproduct value of electrical generation, Maloney says. In addition to producing ethanol, Pacific West Energy’s proposed plant will also burn bagasse to produce electricity through a combined heat-and-power system. “Not only will we provide all of our own energy for our process, but we will also export a significant amount of energy to the utility,” Maloney says.

A variety of factors make Hawaii’s island economy uniquely suited

ETHANOL PRODUCER MAGAZINE

to sugarcane ethanol production, according to Maloney. The state already has an established sugarcane industry and land suitable to grow the crop.

Hawaiian sugarcane producers also receive lower payments for their sugarcane when compared with farmers in the continental U.S. because they have to ship their raw sugar to California to be refined. This means that an ethanol producer in Hawaii will be better able to afford the price paid to a farmer for their sugarcane production. “If you are a sugar producer in Hawaii, the point when it makes sense for you to switch to ethanol is at a lower price point than it would be for a producer in Louisiana or Florida,” Maloney says.

Hawaii also has some of the highest national prices for electricity and liquid fuels and is a captive home market in which to sell the fuel. In addition, it has some of the highest ethanol prices

March 2009

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While the economics of U.S. sugarcane production are limited to specific pockets of the country, the larger potential for its development is dependent on the commercialization of cellulosic ethanol production.

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in the U.S., allowing Pacific West Energy to sell the fuel at a higher price than it could in other areas of the country. The company will also receive the highest value for the excess electrical production that it provides to the grid because of the island’s high electricity prices. “I’ve always looked at it as the perfect storm—or perfect influence—of positive factors,” Maloney says.

Additional benefits include a 30-cent-per-gallon state production incentive, which will help offset building costs. Maloney has been pursuing the project since 2005.

Pacific West Energy’s plant is currently permitted at 12 MMgy of capacity, although Maloney expects that will be increased to 15 MMgy. Depending on the lending environment, he estimates the plant could be on line by 2010.

The Imperial Valley of California is home to another sugarcane ethanol project, which is being pursued by California Ethanol & Power LLC and is currently in the development stage. According to David Rubenstein, the company’s chief operating officer, the project is in the permitting stage and is expanding the amount of sugarcane being cultivated. “We had just over 100 acres last year,” he says. “This year we have more than 500 acres planted and growing.”

CE&P expects to break ground by late 2009 and be operational by 2011. The proposed plant would have the capacity to produce 60 MMgy of ethanol and about 50 megawatts of electricity by burning bagasse in a combined heat-andpower system. A portion of that electricity will be used to power the plant and the remaining power will be sold back to the grid.

The plant will require approximately 40,000 acres of sugarcane.

“We think the valley could ulti-

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March 2009

FEEDSTOCK

mately support five plants Legendre says his organization total,” Rubenstein says. could develop a pilot plant to test The development of adthe technology by 2010. ditional plants is scheduled At the same time, USDA to begin as soon as the first ARS’s Sugarcane Research Unit plant is operational. is developing a sugarcane-based Rubenstein says his dedicated biomass feedstock company is working closecalled energy cane. The fiber conRichard ly with five groups of tent of energy cane is much highfarmers to develop the sugarcane er than sugarcane, which has a fiber conplots to support ethanol production tent of about 12 percent. “Every year we in the valley. The project will bring plant about 80,000 to 100,000 new varieta sustainable, profitable crop to the ies of seedlings to evaluate,” Richard says.

Imperial Valley, he says. “This will “About 10 percent of [these varieties] are be a consistent crop that will prodedicated energy canes that we know are duce consistent streams of revenue not going to be suitable sugarcane varietfor the farmers,” Rubenstein adds. ies, but they could be suitable as energy The project will also create numercane varieties.” ous job opportunities in the region.

One benefit of an energy cane over sugarcane is that the crop can be grown under drier conditions. As part of the reWaiting for search, domestic sugar varieties are curCellulosic Technology rently being crossed with wild material While the economics of sug-

from areas in India and China, where the plants grow naturally in colder temperatures. Richard says energy cane production trials have been started in some areas of the country, but it will likely be 2010 before the results of those trials are available.

One major hurdle must be cleared, however, before these cellulsoic ethanol projects can move forward. The technology has to be commercially viable. “We keep hearing that cellulsoic technologies will be profitable in the next five years,” Richard says. “But, we’ve been hearing that for a long time.” EP Erin Voegele is an Ethanol Producer Magazine staff writer. Reach her at evoegele@ bbiinternational.com or (701) 373-8040.

arcane ethanol production seem to be limited to specific pockets of the U.S., the larger potential for sugarcane ethanol development is dependent on the commercialization of cellulosic technologies that will be able to utilize waste sugarcane bagasse.

The Audubon Sugar Institute is one of many entities developing a cellulosic technology. “We have developed a process where we can produce 70 to 80 gallons of ethanol per ton of bone-dry fiber,” Legendre says.

Sugarcane processing facilities in the U.S. generally burn a portion of the waste bagasse recovered during raw sugar production as a source of heat and power. However, this process utilizes only a portion of the bagasse, leaving 20 percent to 30 percent as waste. Legendre says processing facilities could potentially use this excess bagasse to produce ethanol. “Right now it would be a win-win situation where we would produce sugar and ethanol,” he says.

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TRANSPORTATION

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ETHANOL PRODUCER MAGAZINE

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TRANSPORTATION

DDGS: Supplying Demand The success of the dry-mill ethanol production process means that in the near future, the ethanol industry could produce more distillers grains than the domestic livestock feed market and the fledgling export market will bear. Distillers dried grains with solubles is already considered by many to be an undervalued co-product of ethanol production. How will the ethanol industry expand the market and how will they move it all from here to there?

By Ryan C. Christiansen

ETHANOL PRODUCER MAGAZINE

March 2009

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TRANSPORTATION

T

he shelf life for distillers wet grains with solubles, with 65 percent to 70 percent moisture content, is less than one week, thus limiting its market area to within 61 miles of a dry mill-ethanol plant, on average. By contrast, the market for distillers dried grains with solubles (DDGS) is global. Plants typically sell two-thirds of distillers grains dried, but the drying process can consume about 30 percent of the plant’s operating budget.

For DDGS to remain a valued commodity, demand must keep pace with production. Can demand keep up?

Production Projections Conservative estimates by the Food and Agricultural Policy Research Institute at Iowa State University in Ames say the U.S. ethanol industry is projected to produce 43 million metric tons of DDGS during the 2013-’14 market year, based on projected ethanol production of 16.8 billion gallons. This rise in DDGS production from 15 million tons in 2006-’07 means there might be a lot more potential

‘The DDGS market will have to grow to absorb as much product over a five-year period as the soybean meal market has absorbed over several decades.’

supply than demand—unless the industry is able to grow the market, according to Dermot Hayes, co-director of FAPRI. “To put this quantity in perspective,” Hayes says, “the amount of DDGS that will need to be marketed in 2013-’14 will be approximately equal to the amount of soybean meal produced in 2006-’07. This means the DDGS market will have to grow to absorb as much product over a

PHOTO: CHS INC.

TRANSPORTATION

A dry-mill ethanol plant can produce about 2.79 gallons of ethanol and 17.5 pounds of DDGS from one bushel of corn.

five-year period as the soybean meal market has absorbed over several decades.”

Hayes’ observation appears in a new electronic book titled “Using Distillers Grains in the U.S. and International Livestock and Poultry Industries” published by the Midwest Agribusiness Trade Research and Information Center at ISU. Hayes is co-editor of the publication.

The rapid rise in production of DDGS is not only due to a rapidly expanding ethanol industry, but to the success and popularity of the dry-mill ethanol production process during which distillers grains—wet and dry—are produced, as opposed to wet milling, which produces corn gluten feed and meal.

There were 59 dry-mill plants producing 2.6 billion gallons of ethanol in 2004; by 2010, it is expected there will be 189 drymill plants producing 12.4 billion gallons of ethanol, according to Frank Dooley, an agronomist at Purdue University in West Lafayette, Ind., and Bobby Martens, a logistician at ISU. Corn ethanol expansion in the U.S. will likely be predominantly dry-mill facilities, which means DDGS production is expected to rise in direct

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Container Shipping Historically, an oversupply of empty containers in the U.S. has made shipping DDGS and other grains by container competitive with bulk shipping rates, according to John Fox, an agronomist at Kansas State University in Manhattan. Fox’s observation appears in a new electronic book titled “Using Distillers Grains in the U.S. and International Livestock and Poultry Industries” published by the Midwest Agribusiness Trade Research and Information Center at ISU. “[In 2007], bulk shipping rates had risen really high,” says Bruce Abbe, executive director for the Midwest Shippers’ Association, a state-funded cooperative in Eden Prairie, Minn., that promotes and facilitates direct sales of Midwest agricultural commodities from producers to end users, both domestic and international. “Container shipping rates were not as high because, traditionally, all of the intermodal container-based systems—the ocean carriers—made their money importing here, basically sending flat-screen TVs and high-value products from Asian markets to the West Coast. They would load them onto container-hauling trains and send them inland to the major ports. Going back, they needed a back-haul and so container rates were quite low.

Some of the enterprising shippers started sending grain in containers overseas, because it was cheaper for them to do that.”

Those were good times. But then, “about a year ago, containers became very scarce,” says Ryan LeGrand, export marketing manager for Hawkeye Gold LLC, a subsidiary of Hawkeye Energy Holdings LLC. Hawkeye Gold markets DDGS for Hawkeye plants throughout Iowa. “There have been times when there weren’t enough containers and people were having a hard time making shipments,” says Sean Broderick, senior merchandiser for CHS Inc. in Inver Grove Heights, Minn., which has DDGS marketing agreements at 28 ethanol facilities. “That created issues all

proportion to ethanol, says John Fox, an agronomist at Kansas State University in Manhattan. Dooley, Martens, and Fox were contributors to the MATRIC publication.

On average, a dry mill plant can produce 2.79 gallons of denatured ethanol and 17.5 pounds of DDGS from one bushel of corn. In round figures, dry mill plants can produce 40 million tons of DDGS from 5 billion bushels of corn.

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From 2004 to 2007, the Corn Belt produced 88 percent of the nation’s corn, 97 percent of the nation’s ethanol and 40 percent of beef and dairy, Dooley and Martens say. Fox says

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TRANSPORTATION

the way up the chain: the plants weren’t getting product out of their buildings like they thought they were going to.”

“A lot of customers found they liked getting [grain] in containers,” Abbe says. “They liked the transportability of it, and so demand for containers went up. All-of-a-sudden, the demand for containers was so high that we didn’t’ have enough and there was a crisis, really. The value of the dollar was low and there was high demand for feed and exports and we didn’t have enough. It was a real scramble.”

But then the global recession hit. “With the drop in the per-ton cost of the vessel shipping, [the cost of shipping by container] is a lot closer to parity than it ever was,” Broderick says.

“And now the situation seems to be a little bit better,” LeGrand says. “Containers are starting to free up and so the availability is a little bit better right now. It’s going to go in cycles.”

But even if container availability is up, there is not always a ship available to move a container. “The ocean steam ship lines [sic], their markets have declined so much, that they are kind of parking ships for a while until the demand comes up,” Abbe says, “and so you’ve got ship space to deal with.”

For ethanol producers and all shippers located in the Midwest, the supply of containers might continue to be a finicky issue. “There is reluctance on the part of the ocean carriers that own the containers to send them inland,” Abbe says. “With the intermodal system, it is all geared to try to work things both ways. They are always trying to find products to go back the other way. We have been able to, over the years, dove-tail in on that and do quite nicely by having lower rates. But if the economy is down and we’re not importing as many products, the containers aren’t going to move back here into the Midwest where the ethanol plants and the DDGS are located.”

this proximity of supply to demand enabled domestic livestock feeders to absorb more than 85 percent of the distillers grains produced. Dairy and beef cattle each used 42 percent of domestic consumption; swine consumed 11 percent and poultry consumed 5 percent.

Less than half of livestock operations use distillers grains, citing the lack of availability, Fox says, but more than half of those who don’t are considering using it. Based on a USDA National Agricultural Statistics Service 2006 survey of livestock producer intentions, and on recommended DDGS feed inclusion rates, the potential market for DDGS in the U.S. is 39 million tons, near to the 2013-’14 market year production pro-

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jection of 43 million metric tons, Fox says.

However, it’s not likely livestock producers will fully adopt DDGS. Full adoption assumes DDGS will be priced low enough, notes Nicholas Paulson, an agronomist at the University of Illinois at Urbana-Champaign in Urbana, Ill. Paulson also contributed to the MATRIC publication.

With the capacity to store only two weeks of DDGS on average, producers depend upon reliable transportation. Many farmers can be reached by truck, but only larger livestock operations can utilize truck-

load quantities. One 48,000-pound truckload can feed 200 dairy cows, 400 beef cattle, or 1,600 hogs for a month at recommended rates. On average, the market for trucking is 250 miles from the plant, Dooley and Martens say. Producers shipped DDGS by truck 47 percent of the time in 2007, or 322,000 truckloads, which are expected to increase to 574,000 in 2010.

Rail is used to ship DDGS longer distances, expanding the domestic market.

Unit trainloads with 100-ton jumbo hoppers filled with DDGS can typically reach

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The export share to small markets in Central and South America, the Caribbean, Southeast Asia, and Africa increased to nearly 25 percent in 2007.

the coast from the Corn Belt in as little as 12 days, but few feedlots are able to receive and store 10,000 tons of DDGS at one time, Dooley and Martens say.

The Export Market Only 15 percent DDGS are exported. The number of states with dry-mill plants is expected to double from 13 in 2004 to 26 in 2010, making DDGS production more geographically disperse.

However, ethanol production remains concentrated in the Corn Belt with eight states in 2007 producing a DDGS surplus, Dooley and Martens say. By 2010, 14 states are expected to be producing surpluses totaling 25 million tons, 10 million of which are expected to be absorbed domestically. During the 2007-’08 marketing year, DDGS exports were 3.9 million tons, according to the U.S. Grains Council. DDGS exports for 2008-’09 are projected at 5.4 million tons, Fox says.

Historically, DDGS prices have tracked corn, Paulson says, but DDGS should be valued slightly higher, although still lower than soybean meal. “Ethanol producers need to consider the benefits of developing export markets to enhance demand for the DDGS they produce,” Paulson says. Expanding global demand for meat, higher feed grain prices and relatively low tariff rates for DDGS will help, Fox says. But there are strong competitors.

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“One of the main challenges that I’ve seen with getting [DDGS] overseas is stiff competition from wheat [and] soybean meal around the world,” says Ryan LeGrand, export marketing manager for Hawkeye Gold LLC, a subsidiary of Hawkeye Energy Holdings LLC. Hawkeye Gold markets DDGS for Hawkeye plants throughout Iowa. LeGrand says DDGS is a harder sell in the current market against Black Sea wheat and Indian soybean meal. On the other hand, when wheat growers recently had a bad year, “we were seeing demand [for DDGS] coming out of the woodwork from all over the world,” he says.

Historically, the EU has been an important export market for DDGS. The EU imported 53 percent of U.S. DDGS exports in 2005, Fox says. However, EU restrictions on imports of genetically modified crops have hurt. “The European Union has, for all practical purposes, been eliminated as an export market,” Fox says.

Canada and Mexico remain strong markets, Fox says, with Canada’s potential at 3.8 million tons and Mexico at 3.1 million. Fox says because Japan, Taiwan and South Korea rely heavily on imported feed, exports to those countries have increased. They potentially could import 5.4 million tons.

Recently, smaller international markets have developed that each year account for a larger share of exports, Paulson says. The export share to small markets in Central and South America, the Caribbean, Southeast Asia, and Africa increased to nearly 25 percent in 2007. Even conservative estimates say potential demand in small international markets might be more than 16 million tons, Paulson says.

All together, potential domestic and international demand could absorb the anticipated increase in DDGS production, Fox says, but the USGC needs to continue to educate foreign buyers about DDGS.

ETHANOL PRODUCER MAGAZINE

“The [USGC] has done a lot of good work in developing markets overseas,” says Bruce Abbe, executive director for the Midwest Shippers’ Association, a state-funded cooperative in Eden Prairie, Minn., that promotes and facilitates direct sales of Midwest agricultural commodities from producers to end users, both domestic and international.

“This past year, we saw significant demand,” he says. “There is interest from China, in particular.”

To expand export markets, the ethanol industry needs to address product variability

March 2009

issues, Fox says. One way to do that is to sell DDGS as a branded product.

“We sell the Hawkeye Gold brand as a consistent product across our entire network of plants,” LeGrand says, “and we try to promote value and quality above others on that basis. It takes some time to get a brand established. We’re going down that path and it is working well.”

But branding and the promise of consistency is not enough for all international buyers. “In particular, the Asian customers seem to like to go and see things first-

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‘The good thing about containers is that they came on at the time when we were really expanding the industry, and a number of export customers could try [DDGS] in pretty small increments without the commitment to infrastructure that you might have if you’re buying in bulk.’

hand: the plant, the production and all of that type of thing,” says Sean Broderick, senior merchandiser for CHS Inc., an Inver Grove Heights, Minn., company with DDGS marketing agreements at 28 ethanol facilities. “[Asian customers] have made a lot of visits over here,” Broderick says. “They have seen a lot of different plants and I think they are just more comfortable trading with you if they have seen the product.”

Fox says the industry must also address product flowability issues. Dooley and Martens say DDGS that has moisture content higher than 10 percent can solidify during shipment, forcing load operators to hammer the sides and bottoms of hoppers to induce flow. This has led railroads to require DDGS to be shipped in hopper cars owned or leased by the shipper. (There was a 25,000-unit increase in demand for jumbo hoppers between 2005 and 2007, Dooley and Martens say.) “They did that because the cars were being beaten up,” says Broderick, who has been marketing DDGS since 1991. “There were a lot of plants that were just sort of load-

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ing it haphazardly. They weren’t letting it cool [and] loaded it right out of the spout.”

“Over the years, it has gotten a lot better,” says Paul Lundequam, transportation manager for the Arcadia Cooperative Association in Arcadia, Wis. The co-op has a transloading facility for moving DDGS and other grains from hopper cars to containers that have been used to import supplies for Ashley Furniture Industries Inc. in Arcadia.

“Five years ago, if the truck didn’t come straight from the distillers plant within six hours, it was a good hour to an hour-anda-half to unload the truck, just beating on the trailer,” Lundequam says. “But now, most times [we] don’t ever hit the trailer anymore with a hammer until it’s just to clean out the last little bit.” “[Change] in the industry has been two-fold,” Broderick says.

“One is the knowledge that the plants have themselves about the best ways to load. The other side of it is the acceptance of the customers and the unloaders that DDGS is not shelled corn—it takes a little bit of extra creativeness, or effort, to unload the product.”

Shipping DDGS to international markets includes using a combination of rail, containers and barge. Dooley and Martens say transportation has become the third-highest expense for ethanol producers after feedstock and energy costs.

Both Canada and Mexico are well-served by rail, and the absence of tariffs under the North American Free Trade Agreement only makes exports by rail more likely, Fox says. The anticipated rise in exports means by 2010, shipments are expected to nearly triple to 251,000 carloads.

To get DDGS to ports, a combination of rail and barge might be used. Because much of DDGS is produced in states along the Mississippi River, barge transportation might be competitive with rail, Dooley and Martens say. However, ethanol plants in the north can utilize 1,500-ton barges only four or five times per year before the river closes for winter.

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PHOTO: PAUL LUNDEQUAM, ARCADIA COOPERATIVE ASSOCIATION

TRANSPORTATION

A containerload of DDGS is being loaded onto a train at the Arcadia Cooperative Association in Arcadia, Wis. The co-op has a transloading facility for moving DDGS and other grains from hopper cars to containers that have been used to import supplies for Ashley Furniture Industries Inc. in Arcadia.

Smaller than truckloads by 25 percent, 20-foot shipping containers hold only 18 tons of DDGS, but they are increasingly being used to ship to Asia from inland ports near Chicago, Kansas City, Memphis and Columbus, Dooley and Martens say. “A lot of the transportation systems are shifting to that method,” Abbe says.

“The new major ports in China are all intermodal container-based ports.”

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March 2009

Shipping by container eliminates the transloading of DDGS multiple times. “A container can be shipped all the way to the end destination [where] people can unload it,” Abbe says. “It’s much, much more tailor-made for DDGS.” DDGS marketers began using containers at just the right time, Broderick says. “The good thing about containers is that they came on at the time when we were really expanding the industry, and a number of export customers could try [DDGS] in pretty small increments without the commitment to infrastructure that you might have if you’re buying in bulk,” he says.

Shipping by container has also assisted marketers with selling DDGS as a branded product. After containers are sealed at the source, “they can be sent all the way to the end market and [they don’t] even have to be opened [along the way],” Abbe says. “It is ideal for identity preservation.”

But containers create more overhead for the ethanol producer.

“The downside is that you have documentation on each one of those containers that you have to look after,” Broderick says.

Will the ethanol industry produce more DDGS than the domestic livestock feed market and the fledgling DDGS export market will bear?

“I’ve been hearing that since 1991 when having three trucks a day was a lot of product,” Broderick says. “In the end, the market takes care of things. Price kind of solves everything in the end.” EP Ryan C. Christiansen is an Ethanol Producer Magazine staff writer.

Reach him at rchristiansen@bbiinternational.com or (701) 3738042.

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RISK

The Importance of

Environmental R i sk Pr ot e c t ion Ethanol is an environmentally friendly fuel, especially compared with petroleum-based fuels, but that doesnâ&#x20AC;&#x2122;t mean there are no environmental risks involved in the production process. For a variety of reasons, environmental insurance should be considered when determining how best to protect a companyâ&#x20AC;&#x2122;s investment.

By Kris Bevill

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RISK

R

isk is inherent in any business and the ethanol industry is no exception. Producers constantly deal with volatile corn prices and ethanol prices, skewed public perception and governmental whims.

This industry, perhaps better than many others understands the concept of risk protection. After working so hard to get a foothold in the nation’s fuel supply, producers take the idea of guarding what they have built seriously. Surprisingly, few have considered protecting themselves from risks posed to the environment during the production and transportation of their fuel.

Many global insurers offer environmental policies. Some of the major companies include American International Group Inc., Zurich Financial Services Group and Liberty International Underwriters. In addition, Aon Corp., a large insurance/risk management company, has an environmental services group that specializes in providing environmental insurance to ethanol and other chemical companies.

“The ones who know about it, like it,” says Ken Ayers, managing director of the environmental services group. Few ethanol producers, however, are informed about environmental coverage and the industry overall is not educated as to the benefits this type of insurance can offer, he says.

The handful of new projects being developed are more likely to be aware of environmental insurance than those plants already operating because banks are beginning to require environmental protection policies, and it’s being recommended by some legal councils.

Environmental insurance developed in the late 1970s to fill the gap created when insurance underwriters began excluding pollution events from their liability policies. “The market as we know it today has been around since the late 1980s,” Ayers says, adding that even after nearly two decades many ethanol producers still don’t know about this type of coverage.

That may be due partly the lack of new ethanol projects currently under development.

Kenn Anderson, a director within Aon’s environmental services group, deals directly with customers and says that insurance sales in general were down

in 2008, including environmental policies.

He attributes lackluster sales to economic issues, adding that fewer environmental policies are being sold to ethanol companies Anderson because fewer plants are being built and fewer new companies are being formed. The handful of new projects being developed are more likely to be aware of environmental insurance than those plants already operating because banks are beginning to require environmental protection policies, and it’s being recommended by some legal councils. Insurance companies are adapting to the changing ethanol industry and are focusing on selling policies to pre-existing plants and companies that are in the process of making new acquisitions, Anderson says. It might be a tough sell when producers are watching every penny, but insurance professionals like Anderson and Ayers believe the benefits make it worth their while.

Coverage Considerations So why should ethanol producers purchase environmental insurance? Neil Davis, president of Houston-based Petro-Chem Insurance Group Inc., says a Continued on page 86

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Environmental Protection Policy Specifics Environmental insurance policies are similar to other liability policies as they offer a wide range of coverage. Following are some of the most common types: Fixed Site: Known as Pollution Legal Liability (PLL) or Environmental Impairment Liability (EIL), the policy pays for third-party claims of bodily injury, property damage and clean-up costs that arise from pollution conditions at or as a result of actions taken at an insured site. Policies are frequently written for multiple years. One major potential benefit to this type of insurance is that in the case of a lawsuit, defense costs are included within the policy limits.

Clean-Up Cost Cap: This policy, also called Remediation Stop-Loss, pays for excess costs associated with a clean-up project. The policy can be combined with PLL or EIL coverage and serves as projectspecific coverage. It expires at the end of the project.

Contractors/Consultants: There are many variations of policies that serve to cover contractor liability. It is best to speak with an insurance representative to determine which particular policy is best suited to the companies’ needs.

Project Efficacy: This type of policy insures against issues related to the capabilities of a plant’s technology. For start-up facilities, it could be an important investment as the policy will pay to tweak the system if needed. A good candidate for a project efficacy policy is someone who is in a position to ask “Will the technology work like we planned?”

Carbon Credits/Offsets: This policy protects against several risks in a new portion of a relatively new industry. Project owners, carbon credit buyers and traders are best served by this policy. The policy protects credit buyers from the possibility that a facility will become insolvent or bankrupt before delivering credits. It also protects against government takeover of a project and if the government seizes or blocks delivery of purchased credits. Finally, if a buyer doesn’t receive purchased credits and is forced to purchase replacements on the spot market, this policy reimburses some of that cost. It’s important to note that the policy covers only up to 80 percent of the credits to be delivered.

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March 2009

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RISK Continued from page 84

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look back at methyl tertiary butyl ether (MTBE) manufacturers offers a perfect example of how environmental insurance can pay for itself. “Environmental hazards caught up with the industry, resulting in very large lawsuits,” he says.

“Those who had environmental insurance were able to deal with the problems. Those who didn’t …”

Davis is not directly comparing MTBE production with ethanol production, but traditional ethanol plants emit some pollutants and anything is possible. Protection against lawsuits is the No. 1 reason to retain an environmental policy, Ayers says. “If you’re brought into litigation over an environmental release, meaning that you’ve released something into the air or the soil or the water and people take you to court over it, it will pay the legal defense for that. That’s really one of the big advantages,” he says.

As with any type of insurance coverage, there are many policy variations, and it’s important to work with an insurance representative to determine which best suits the company’s needs and risks. Aside from litigation protection, environmental policies offer protection against emissions violations, clean-up costs, third-party bodily injury, start-up technology flaws and costs incurred through carbon credit discrepancies. Unless they’re building on a greenfield site, developers of new projects should be aware that a prior company could have done some environmental damage that could surface during construction, Ayers says. There are environmental policies to protect against those expenses. A growing number of existing plants are looking into carbon credit generation as a form of future revenue. Ayers anticipates that there will be environmental policies that pay for a company to buy credits if the company isn’t able to generate them as promised. That could be big in the next couple of years and is something producers should consider now.

“A good policy needs to protect you from a couple of different things,”

Signing up for environmental insurance doesn’t mean you are a dirty, polluting company. It simply serves as a safeguard should something environmentally detrimental occur as a result of an activity that stems from your facility.

Anderson says. Pre-existing conditions are the No. 1 issue for new plants. An ethanol company also needs to be insured for the waste stream that it generates, he says. Transportation is another major part of ethanol production and companies need to protect against possible spills or other environmental hazards that could happen while their product is being moved, he adds. Aon has a number of clients with large rail contracts, and because anything that happens during rail transport of the product is the ethanol producer’s responsibility, having an environmental policy is an important piece of insurance for them, Anderson says.

Money Well Spent The good news for producers trying to make ends meet during challenging economic times is that environmental insurance policies are not expensive.

Davis’s advice: Buy now and lock in a policy for many years. “It doesn’t cost anything to look into it,” he adds. Ayers stresses that many of the environmental risks are the same for operating plants as they are for new facilities. He suggests the company owners and decision makers evaluate their facilities and look at their risk appetite. Is there is a real possibility your plant may emit or dump something that it shouldn’t? If the possibility is there, an environmental policy could make a big difference, he says. If

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March 2009

RISK

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Banks are starting to require environmental protection policies for new projects, and it’s being recommended by some legal councils.

you plan to rely on carbon credits as a revenue source, the chance that you wind up in a situation where you can’t deliver credits as promised could put the company in a bind. Environmental insurance could prove to be a wise investment in that instance. Premiums haven’t increased since the 1990s and Ayers doesn’t foresee any changes in policy pricing anytime soon. However, the soft market means low prices and easily obtained premiums for producers, so buying now wouldn’t require a large investment, he adds.

It’s also possible that some producers are shying away from environmental protection because they are afraid it might damage their image. When producers have already had to struggle with misconceptions that the production process is environmentally unsound, they could be hesitant to admit that they need to protect against environmental issues. That is a poor excuse, according to those who deal with environmental policies. The fact is, signing up for envi-

ronmental insurance doesn’t mean you are a dirty, polluting company. It simply serves as a safeguard should something environmentally detrimental occur as a result of an activity that stems from your facility. Environmental insurance has been around for 25 years and although its customers have primarily been chemical and petroleum companies, ethanol producers are on the list of potential clients. When questioned about the possible image projected by ethanol producers acquiring environmental insurance Anderson gives it to them straight. “Our answer is, look, you do create pollution,” he says. “Purchasing a policy doesn’t admit anything, it protects you.” EP

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ENZYMES

Catalysts of Efficiency Genencor shares an inside view of the ethanol process, with a focus on optimizing enzyme use.

By Susanne Retka Schill

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ENZYMES

W

hen times were “Every single ethanol plant they tweak enzyme flush in the ethais different,” Nedwin says, “the protocols to improve nol industry, way they turn the valves, the efficiency, says Hans Genencor techtiming they use between the dif- Foerster, Genencor’s nical staff noted that ethanol ferent steps, the volumes they director of marketplant managers were concentratadd—this all can be tweaked.” ing for fuel in the ing their efforts on maximizing Even plants built by the same Americas. “They have throughput. Now in response to engineering firm can vary, as the a very good idea of Nedwin Foerster the economic downturn, they are design evolves. “Many ethanol what they’re trying to seeing more emphasis on maximizing yields. plants don’t have a lot of technical analy- achieve and the limitations of what enHelping those ethanol plants achieve pro- sis to know what’s happening at different zymes can accomplish,” he says. Often, duction goals is what Genencor, a division stages—how much glucose do they pro- ethanol plants are looking for specific of Danisco, sees as its role as an enzyme duce in this step, how many side reactions ways to eliminate bottlenecks, or figurprovider. do they get, what percent conversion, ing out how to handle special conditions.

“Our technical sales staff can really get etc.,” Nedwin adds. Genencor’s technical For example, every year enzyme providin there and help ethanol plants get more sales team can help by collecting samples ers hear from plant operators who want efficient in how they operate,” says Glenn Nedwin, executive vice president of technical enzymes with Genencor. Enzymes Genencor has developed enzyme cocktails for the comprise a relatively small part of the cost of ethanol production. Corn makes up 65 emerging cellulosic industry, one is marketed as percent of the cost, natural gas about 15 Accellerase, and the other is Stargen, an enzyme blend percent, and enzymes are part of the refor simultaneous saccharification and fermentation with maining 20 percent, costing between 3 to 5 cents per gallon. Although seemingly small, the cook stage eliminated in the corn ethanol process. improvements to ethanol plant efficiency can add up. Enzyme use refinements can improve efficiency by as little as 1 percent that can be analyzed by the company’s to optimize the process so they can use to upwards of 5 percent, in some cases. applications team in its laboratories, and end-of-season bad corn, although using Given the large volumes produced by to- by seeing the plant in operation through bad corn is never recommended, Foerster day’s ethanol plants, a 2 percent increase in the eyes of an enzyme specialist. Genen- says. ethanol yield for a 50 MMgy plant amounts cor’s technical sales team and experienced The enzyme specialists are also called to 1 million gallons more ethanol. plant operators learn from each other as when a plant wants to adjust its operat-

ENZYMES

ing goal. Until recently, the emphasis has been on increasing throughput, which is achieved by increasing the level of solids which in turn requires adjusting the enzyme dosing, Foerster says. The more corn that can be processed per hour, the more ethanol can be produced per hour— within limits. “We have found through experience that there is some level of solids at which a plant operates most efficiently,” he says. “We can push beyond that for a gain in throughput, but we’ll get less yield.” With current economic constraints, however, ethanol plants are now looking to maximize ethanol yields. The Genencor technical sales team works with plant operators to achieve a plant’s goals.

“It’s very much an individual plant prescription,” Foerster says.

This summer, Genencor will boost its capacity to help ethanol plants solve process issues and train new plant employees when it completes its Center of Excellence, which is being built near Genencor’s manufacturing facility in Cedar Rapids, Iowa. The center includes a pilot plant, additional analytical capabilities and space for group training. “We’ll have a space that will allow us to collaborate with customers on specific projects in our lab,” Foerster explains. “In most ethanol plants, the laboratory is a very busy place, and tends to be a very constrained space.”

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In the ethanol production process milled grain is slurried with water and a thermostable alpha amylase enzyme. The slurry is cooked to 221 to 302 degrees Fahrenheit to gelatinize and liquefy the starch in the liquefaction process. The resulting mash is cooled and a secondary enzyme, glucoamylase, is added to convert the liquefied starch to fermentable sugars (glucose) in the saccharification stage.

Yeast is then added to the mash to ferment the sugars to ethanol and carbon dioxide. In addition to alpha amylase and glucoamylase, protease can be added to improve the fermentation process, and phytase, a newer enzyme, can be added in the liquefaction stage to enhance the performance of thermostable alpha amylase, or in the yeast fermentation process SOURCE: GENENCOR

The Center of Excellence will also house a second applications team, in addition to the one at the Beloit, Wis., manufacturing

March 2009

site. Scientists in the applications team back up the technical sales team, analyzing samples gathered at ethanol plants,

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PHOTO: GENENCOR

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Genencor’s Center of Excellence is being built in Cedar Rapids, Iowa, next to its enzyme manufacturing facility. When completed, it will add analytical capability and a pilot plant to help the company provide services for its customers.

and creating a link between the team working directly with ethanol plants and the research and development division that’s working on new enzymes.

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Enzyme Enhancements Genencor continues to develop new enzymes so it can respond to customers’ needs. “Ethanol plants are al-

ways looking to reduce manufacturing costs,” says Jay Shetty, research fellow in Genencor’s applications/technical services division. “To increase efficiency and reduce manufacturing costs you need some additional enzymes.”

The company has developed a protease enzyme, marketed as Fermgen, which matches the pH environment of the fermentor and increases alcohol yield.

It improves fermentation efficiency by breaking down a protein in corn to generate free amino nitrogen a yeast nutrient that boosts yeast action. Protease also releases bound starch molecules, which without the enzyme treatment remain unfermentable and pass through into the distillers grains.

While proteases are gaining acceptance in the industry, a second auxiliary enzyme, phytase, is newer and less widely used, Foerster says. Phytase is added during liquefaction to improve the function of the alpha amylase and glucoamylase and increase ethanol yields. Phytase also improves the feed characteristics of the distillers grains.

Genencor’s animal nutrition division also includes phytase with other ingredients in an additive to improve distillers grains performance in swine. Genencor’s research and development team is working on other enzymes to improve

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the feed coproduct from the ethanol process, Foerster adds, tapping into the company’s capacity to do feeding trials on poultry and swine.

Genencor has developed enzyme cocktails for the emerging cellulosic industry, one is marketed as Accellerase, and the other is Stargen, an enzyme blend for simultaneous saccharification and fermentation with the cook stage eliminated in the corn ethanol process. The required retrofits have somewhat dampened adoption of the cold cook enzymes in the U.S., Foerster says, but it’s a different story internationally.

“We’ve had great success with Stargen on noncorn substrates outside of the U.S. where energy prices tend to be higher.” In addition to reducing energy costs by eliminating the cook stage, Stargen helps to avoid the high viscosity issues associated with small grains.

Genencor recently extended its cooperative research agreement with scientists at USDA’s Eastern Region Research Center to develop enzymes for processing winter barley into ethanol. Enzymes have been developed to address the high-beta glucan content and increase ethanol yields from barley. The barley enzymes are expected to help develop the ethanol industry in the South, where winter barley wouldn’t compete with summer food crops. The ethanol yields per acre from barley would be comparable with corn produced in the South.

Unlike corn ethanol, which has two main enzymes plus a handful of auxiliary enzymes, the cellulosic process will require at least six cellulase enzymes that are designed to match the pretreatment and fermentation processes. Genencor received a U.S. EPA grant in 2000, when the cost of enzymes was considered a major hurdle to clear in developing a cost effective cellulosic ethanol process.

ETHANOL PRODUCER MAGAZINE

“We brought the cost of enzymes down 30-fold,” Nedwin says. With current enzymes priced between 30 to 50 cents per gallon of ethanol, pretreatment is now the most costly step. “The enzyme price needs to go lower,” he adds, with an ultimate goal of about 10 cents per gallon of ethanol produced. While that work continues, Genencor has released its Accellerase line of enzymes which cellulosic ethanol developers are using to test pretreatment and fermentation technologies. The company anticipates continued developments in the Accellerase line of its merchant enzyme business, while it embarks on its own cellulosic ethanol process venture in collaboration with DuPont. DuPont Danisco Cellulosic Ethanol LLC broke ground last fall on a pilot plant in Lenore, Tenn., in a joint venture with Genera Energy LLC, a company formed by the University of Tennessee’s Research Foundation. DDCE

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is working to optimize Genencor’s Accellerase line of enzymes, matching them to the biomass pretreatment and planned fermentation process. DDCE has licensed the dilute ammonia pretreatment process developed at Michigan State University and the bacterial fermentation process using Zymomonus mobilis developed by the National Renewable Energy Laboratory.

With construction proceeding quickly, the project is gearing up to move from the bench scale to pilot scale and planning for commercialization, says Jack Huttner, vice president of commercial and public affairs for DDCE. EP Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her at sretkaschill@bbiinternational.com or (701) 738-4922.

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TACKLING INDIRECT LAND USE

If a tree falls in the Amazon should American biofuels be held responsible?

By Susanne Retka Schill

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F

or years, ethanol producers have endured the criticism about ethanol’s energy balance—whether more energy is produced than is used to produce the renewable fuel.

Just as that discussion began to settle in ethanol’s favor, the food-versus-fuel debate erupted. The collapse of commodity markets and lack of a corresponding drop in food prices have taken the steam out of that debate. In late 2008, just when it seemed like the industry might get a much-deserved reprieve from negative publicity, a far more complex challenge arose from an attempt to evaluate indirect land-use impacts of biofuels.

The indirect land-use concept goes far beyond estimating greenhouse gas (GHG) emissions through a life-cycle analysis (LCA) of the supply chain. A supply-chain LCA includes such things as the carbon emissions involved in raising the crop and transporting it to market, the energy used in the biofuel conversion process and transporting the fuel to the end user. Some want to take that analysis further and include estimated GHG emissions from indirect land-use change. For example, an increase in demand for corn in Iowa to make ethanol leads to higher corn prices, which results in more acres of corn planted and a reduction in soybean acres. The ripple effect concludes

with new land being converted to take advantage of the increased prices and to meet increased global demand. Some argue that the GHG impacts of that conversion, whether it happens in the United States or in an equatorial rainforest on the other side of the globe, should be assessed to that Iowa ethanol.

U.S. ethanol producers might be tempted to shrug off the debate as another wearisome public relations problem or perhaps as an interesting, but not that relevant, academic debate. Unfortunately, this winter two important regulatory agencies have indicated they will incorporate the impacts of indirect land-use change into their standards. When Congress wrote the renewable fuels standard (RFS) section of the Energy Independence & Security Act of 2007 new GHG reduction targets were set for different categories of biofuels.

The statute includes “significant indirect emissions such as significant emissions from land use changes” in its definition of life-cycle greenhouse gas emissions.

The U.S. EPA is charged with using that definition as it writes the rules for implementing the new RFS. Furthermore, the California Air Resources Board has included a measurement of indirect landuse impact in its low-carbon plan.

For the biofuels industry, indirect land-use is no longer a debate being waged

in academic journals and on the editorial pages of major newspapers, but in precedent-setting public policy. The scientific community, nonprofits and industry representatives have been marshalling their facts and sending volleys of letters to the agencies involved and writing journal articles and white papers critiquing the indirect land-use assessments models that are being developed. The criticisms center on the inadequacies of the models to quantify indirect land use and underlying assumptions.

Faulty Models The Renewable Fuels Association dug into the details of the data used in the models in a paper it released in November titled “Understanding Land Use Change and U.S. Ethanol Expansion.” The report discusses historical agricultural land use and crop utilization trends, the role of increased productivity, the contributions of ethanol feed coproducts, and global agricultural land-use projections. Bob Dinneen, RFA president and chief executive officer, drew on the report to defend U.S. ethanol. “The impressive productivity advancements of American farmers have largely mitigated the need for additional arable acres to be brought into production here in the U.S.,” he said. “Land exists around the globe, should it be needed,

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that can be responsibly and sustainably brought into agricultural production. …

A team of researchers from Stanford University estimates that an area of abandoned agricultural land half the size of the continental U.S. could be brought into production with minimal impact on the environment.”

RFA also probed the details of the model California is proposing to use. In a letter to CARB, the RFA questioned the capacity of the Global Trade Analysis Project model to reliably predict landuse change impacts. The RFA said the model underestimates the productivity of marginal lands in the U.S. that could be converted to crops, as well as the gain in average grain yields over time, and the model does not account for an incremental expansion of ethanol production. “Because the model is ‘shocked’ with 13.25 billion gallons of new ethanol production instantaneously, and yield values do not take into account the improvement in yields between 2000 and 2015, the model is converting too much land to crops as a result,” the letter stated. In addition, the RFA said the model underestimates the credit provided by distillers grains and appears to omit Conservation Reserve Program land and idled cropland from its land inventory.

The American Coalition for Ethanol

weighed in with its own white percent reduction in GHG paper “Lifecycle Analysis of emissions when compared with Greenhouse Gas Emissions Asgasoline. Cellulosic ethanol is sociated with Starch-Based Ethrequired to meet a 60 percent anol.” The ACE paper addressed reduction target. ACE sugother problems with the model gested that the GHG emissions methodology, particularly that from increased ethanol prothere was not enough groundduction be compared with the Kruse based verification of land-use GHG contributions from new estimates based on satellite data in de- crude oil sources. The lead author of the veloping countries. It can be difficult to ACE report, John Kruse, director of agdistinguish deforested areas from fallow ricultural services for IHS Global Insight agricultural areas and pastures, the report Inc., says while they weren’t able to find said. It also pointed out that while both data on deep-sea oil drilling, the GHG EPA and CARB are proposing to assign emissions associated with tar sands proindirect GHG emissions to corn ethanol, duction is well documented. Depending there appears to be no such inclusion of on the source of energy used in the proindirect GHG emissions for petroleum. cess, the mining of tar sands can increase For example, the report cited a study by GHG emissions over 300 percent comthe Congressional Research Service that pared with conventional crude oil. estimated the indirect military costs assoThere are other problems with the ciated with securing petroleum from for- models, according to Kruse, including the eign regions, which in 1992 was estimated use of data from a period of stable, low at $56 billion to $73 billion. However, commodity prices, with predictable supthere were no estimates of the GHG ply/demand relationships. The experiemissions associated with that military ence of the past couple of years has been support. quite different. According to the modThe ACE report also argued that the els, the impact of last year’s high prices single GHG value assigned to petroleum should have resulted in a reduction in exis inadequate. GHG reduction targets are ports, Kruse says. “In 2007, we’d have to expressed relative to the GHG emissions say that didn’t happen,” he says. “We had standards for fossil-based fuels. Thus, record exports for corn, soybean exports the RFS requirement for ethanol is a 20 were respectable and wheat exports were

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near record.” Calculating indirect impacts is a reach, Kruse adds. “There is not the scientific data, nor the accuracy in measurements nor robustness in economic models.”

Flaws in the Premise There are two parts to the critique of the indirect land-use effect, says Bruce Dale, professor of chemical engineering and developer of cellulosic ethanol technology at Michigan State University. One is the technical—the science and the data

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used to make the assessment—and the other is philosophical. On the technical side, Dale says a group of about 30 scientists and other interested parties from around the world debated the issue while developing principles and criteria for the Roundtable for Sustainable Biofuels, for which Dale chairs the technical committee on GHG emissions. “After arguing among ourselves for six months we came to the conclusion you can’t reliably measure indirect impacts.”

Dale’s concerns go beyond the tech-

nical issues, however, to the philosophical. “Is it a good idea to make the U.S. responsible for indirect effects around the world?” he asks. The conDale cept goes beyond supply-chain analysis to market effects, he says. “No one person is responsible for the market,” Dale adds. The logic would hold U.S. biofuels producers responsible not only for their own GHG emissions, but for the GHG emissions of their competitors. Bruce supports the efforts to encourage sustainability goals, but he cautions, “We make progress by holding people responsible for their own actions. In holding people responsible for actions of people elsewhere in the world, you can stifle innovation.”

Furthermore, the argument doesn’t hold up, Dale says. If it is indeed right to hold the U.S. responsible for indirect effects around the world, “we shouldn’t be doing anything that would increase land use elsewhere and we need to get CRP lands back in production,” he says. The CRP, which holds wide support from the agricultural and environmental communities, was started decades ago to set aside crop land with the dual goals of enhancing the environment and reducing price-depressing crop surpluses.

Another underlying assumption to the indirect land-use argument is that agricultural markets drive land-use change. Critics wonder how much is attributable to biofuels demand. Dale points out that in many developing countries, the building of roads stimulates land conversion to grow crops that can now be transported to markets.

Not to mention that the conversion of rain forests began long before biofuels expansion by the logging industry to supply lumber to the construction industry, Kruse adds.

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In each country where rainforest conversion has raised international concerns, there is a complex set of factors involved. Kruse uses Indonesia as an example, where internal government policies have long encouraged oil palm expansion as a means of raising the country out of poverty. Culturally, palm oil is seen as a source of wealth and a hedge against inflation. “It’s not biofuels that have driven that expansion,” Kruse says. “It’s not as clean cut as to say we’re going to assign the indirect land-use impacts to American biofuels and we’ll fix that problem in Indonesia. Indonesia is going to fix that policy in Indonesia.”

The arguments critical of the science and philosophy behind measuring indirect land-use change presented here highlight only a few of the many being brought forth by organizations and individuals who caution policymakers not to put policy ahead of the science in the laudable goal of addressing climate change.

The arguments from those supporting the concept are equally complex, but are summarized in a letter to the EPA from a coalition of environmental nonprofit groups. “Consideration of all of the science in an open and transparent comment process will be key to ensuring that the regulations accomplish the emissions reductions Congress intended when they directed that indirect emissions from land use changes be included,” the letter said.

The group, consisting of the Environmental Defense Fund, the National Wildlife Federation, the Natural Resources Defense Council, Friends of the Earth, the Union of Concerned Scientists and the Environmental Working Group, argued that indirect land-use change is the “ripple effect” resulting from converting land from food production to fuel production.

“There is no doubt that greenhouse gas emissions caused by land use change are substantial, and that those

associated with renewable fuel production can easily make the difference between reducing or increasing GHG emissions relative to gasoline,” the letter stated. Rather than stunt the advanced biofuels industry by including indirect land-use changes to the policy, the group asserted that the inclusion of such changes will help determine which second-generation feedstocks will have the least impact. “Properly done, accounting for indirect land-use will improve the ability of investors and developers to distinguish promising approaches

from dead ends and drive investments and innovation towards these feedstocks and technologies,” the group stated.

It remains to be seen which of the two sides will prevail, and as the world’s economy worsens one wonders whether the issue might be put on the back burner. EP Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her at sretkaschill@bbiinternational.com or (701) 738-4922.

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DEBATE

PUSHING BACK: Biofuels Industry Responds to Big Food Big Foodâ&#x20AC;&#x2122;s sustained assault on biofuels has spurred the industry to take a new, more assertive stance.

By Ron Kotrba

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T

he clock on the left side of the Growth Energy Web site says it all. As the seconds, minutes and hours tick by, accumulating in a devilish sort of fashion, the headline above the ticker reads, “When Will Big Food Lower Prices?” The Grocery Manufacturers Association, the voice of the food industry, all year had blamed soaring food prices on ethanol, biodiesel and the government policies promoting them. The question, when will big food lower prices, is a logical one. Months have passed since commodity prices, along with the economy, tumbled from the near-record highs set in 2008. Energy prices have also decreased, with gas consistently below $2 a gallon. Yet despite a return to “normal” commodity prices and the precipitous descent in fuel costs, grocery prices remain unduly high. The clock, a symbol for the message, represents a new era in biofuels. The tables have turned. Many in the biofuels industry say they believe time for aggressive action has arrived.

Growth Energy was formed toward the end of 2008, and Toni Nuernberg, the organization’s executive director, Midwest, tells EPM why. “I think it’s just that a lot of ethanol plants and members now of Growth Energy believe we needed a fresh approach to things,” she says. “The anti-ethanol campaigns that had gone

on all last summer, a lot of the ers pointed to then-rising costs research going on right now, for agricultural commodities which is very negative, those such as corn, wheat and vegthings need to be addressed and etable oil. Further, Big Food dethey need to be addressed very ceptively attempted to single out quickly when they hit the press. expanded grain ethanol producWe’re trying to be proactive and tion as the main driver of escasee what these issues are, and lating grain and food prices.”

Nuernberg watch the horizon and know “Big food and livestock prowhat the issues are, and address them very cessors, led by the Grocery Manufacturers proactively—and probably a bit more. I Association, have spent many months and don’t like to use the term aggressive, but countless dollars trying to convince Amerwe’re going to address these things in a icans that ethanol is the reason their food different manner than the way the [Re- bills are higher,” says RFA vice president newable Fuels Association] has done of research, Geoff Cooper, who authored things in the past.” the study. “Despite their elaborate ruse,

‘Adjusted for inflation, corn and wheat have dropped by 50 percent since spring, and soybean prices are lower than at almost any other time since the Great Depression even as biofuels production expands.’

In late November, RFA released a three-page report titled, “Why Aren’t Food Companies Reducing Prices?” In the report, the organization stated, “In attempting to defend the rapid food price hikes that began in early 2007, food mak-

they cannot hide the facts. Prices for virtually all inputs in food production have fallen dramatically while U.S. ethanol production has risen. Yet, despite the drop in price for corn, wheat, soybeans, oil, natural gas and other inputs, the retail price

DEBATE

of food continues to rise. At a time when Americans are counting every penny, the last thing they want is food companies trying desperately to shift the blame while raking in higher profits.”

And while the RFA points out the overt “deception” on behalf of GMA and the food industry over the past five months in shifting the blame, National Biodiesel Board Chief Executive Officer Joe Jobe, in late December caught Kraft Foods Chief Executive Officer Irene Rosenfeld in a misstatement of epic proportions. In a Q&A with USA Today, Rosenfeld said 40 percent of the food supply is being diverted for use as fuel.

Jobe responded in an editorial comment on USAToday.com that Rosenfeld’s comments were “fear-mongering” at its worst.

“While Kraft’s income soars to new heights, the company’s attempt to spread misinformation to defend the doubling of its profits has reached a record low,” Jobe’s posting states. “Almost half of all grains, meats, dairy, vegetables and fruit in the world are being converted to fuel?

This is fear-mongering at its worst. The United Nations Food and Agriculture Organization found that of the 10.4 billion acres of available farmland, only 3.7 billion acres are used. Of that, less than 1 percent is used for biofuels such as ethanol and biodiesel. Food companies have

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blamed biofuels all year for higher prices.

Rosenfeld’s statement shows how far companies will go to distract Americans as Kraft raked in $1.4 billion in earnings last quarter. Adjusted for inflation, corn and wheat have dropped by 50 percent since spring, and soybean prices are lower than at almost any other time since the

companies—press releases that speak to boosted earnings as a result of the spike in food prices. Kellogg’s second quarter 2008 net earnings were $312 million, 4 percent higher than 2007’s second quarter earnings of $301 million. A Kellogg’s press release states, “These results were driven by innovation, recent price in-

Ten percent of the consumer dollar goes toward food, and of that, 20 percent goes to the farmer, so, essentially, 2 percent of the American consumer dollar goes to the farmer.

Great Depression even as biofuels production expands. This year, oil companies made more than ever in profits. The difference is, when oil prices dropped, so did the price at the pump. Too bad Big Food isn’t living up to Big Oil’s standards.”

Food Company Profits, Agenda In his online comments, Jobe mentioned Kraft’s record profits this year. An organization called FoodPriceTruth.org pulled press releases from various food

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creases and effective brand building and were achieved after absorbing significant cost inflation. ... Our business momentum, recent price increases and focus on productivity give us confidence we will meet our goals.”

In third quarter 2008, Sara Lee earned $242 million, a $150 million increase (61.2 percent) more than it earned in the same quarter the previous year. Price increases were also listed by Sara Lee as one reason why the company had such a good third quarter. Dean Foods’ second quarter 2008 net income was nearly $49 mil-

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FoodPriceTruth.org created this graph to show that rising commodity prices didn’t seem to adversely impact the earnings of the major food companies.

SOURCE: FOODPRICETRUTH.ORG

lion compared with second quarter 2007 net income of $28.2 million.

The list goes on. For more information on food company profits, visit FoodPriceTruth.org.

The GMA, and the Food Before Fuel campaign, ignored repeated requests from EPM to take part in this article. EPM is not the only one the GMA is ignoring. “We here at Growth Energy posed the question very, very vocally, and very publicly, to the GMA and to Big Food asking, with commodity prices dropping, and with fuel prices down, why have we not seen the price of food go down?” Nuernberg says. “All we’re seeing is these food companies with record profits. We’ve asked that question, if ethanol’s the only thing to blame for the rising food prices, then why have food prices not come down? And we’ve not had a response from the GMA yet.”

In March 2007, the GMA put out a request for proposal to hire a public relations firm to hammer home the message of Big Food’s then-burgeoning smear campaign against ethanol.

“Food prices are rising twice as fast

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as inflation,” according to the GMA’s request for proposal. “Although there are several factors, a mandate in the 2007 Energy Bill requiring gasoline refiners to blend 15 billion gallons of corn ethanol in the nation’s gasoline supply by 2015 is the primary reason. ... GMA has concluded that rising food prices, global shortages of basic commodities, and new studies on the environmental impacts of corn ethanol create a window to change perceptions about the benefits of biofuels and the mandate and, ultimately, to build a groundswell in support of freezing or reversing some provisions of the 2007 Energy Bill and for the elimination/reform of ethanol subsidies and import restrictions ...”

Additional Perspectives Don Hofstrand, co-director of the Agricultural Marketing Resource Center at Iowa State University in Ames, tells EPM that grain prices have “a pretty small impact” on food prices. He says 10 percent of the consumer dollar goes toward food, and of that, 20 percent goes to the farmer,

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DEBATE

so, essentially, 2 percent of the American consumer dollar goes to the farmer.

He thinks the foodversus-fuel debate will continue to “be an issue so long as Hofstrand the media still pay attention to it.” He says everyone looks at this issue as a zero-sum gain.

“In other words, if we use some commodities for biofuels, then we’re going to cut back in the amount of food we have. But what these higher prices are actually doing is giving incentive for the first time in a long time for farmers to increase production, and that’s never taken into account in this equation.

People really underestimate the ability of the ag sector to expand production due to higher prices for sure, but to expand production to serve both masters.”

Another aspect of this issue never mentioned in mainstream media is how much food is wasted in our society. Hofstrand says 25 percent to 30 percent of food bought by consumers is thrown out as waste. “We wouldn’t need to grow nearly as much if we didn’t waste so much of it,” he says.

“That would free up more grains to be used for biofuels. If we had that waste factor down to 10 percent, we wouldn’t have the problems we have now of shortages and so forth. But food has been so cheap that, instead of saving it, we end up wasting it.”

Congress held hearings on rising food prices in the spring of 2008 and Liz Friedlander, communications director with the National Farmers Union, says in light of precipitously falling commodity prices, the NFU has asked Congress to take another look at the causes of high food prices. She tells EPM the small business committee has responded to the request and put the issue on its agenda for this session. “We hope they hold hearings again,” Friedlander says. “Conditions

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have definitely changed since the last time they held these hearings—and so we see this as a vehicle to set the record straight on the true causes of food price increases.” She tells of how media can play an influential role in the food and fuel debate. “I think it was the day before they held the joint economic committee hearings, there was a story on the front page of The Washington Post about how a bagel shop in Bethesda, Md., was going to raise their prices because of ethanol,” she says. “We did the math and there’s like 8 cents worth of wheat in that bagel and they raised their price 25 cents, blaming it all on ethanol. That sort of thing gets on the front page of the paper, and we’re trying to squash it.” How many of those Congressmen may have read The Washington Post that morning?

To be fair, we have seen ethanol companies such as VeraSun Energy Corp. lock in high corn prices right before the commodities markets began taking a downturn. Maybe some food companies found themselves in the same position. Also, there is often a lag-time and the domino effect in commodity prices and its effect on food prices. After all, if corn and soybean meal prices are high, this could cause livestock producers to produce less beef, pork and poultry, which could drive up the price of meat long after commodity prices dipped back down. “There is a lag time,” Hofstrand says. “Commodity prices can go up very fast, or down very fast, but that does not automatically translate into higher or lower food prices.” EP Ron Kotrba is an Ethanol Producer Magazine senior writer. Reach him at rkotrba@bbiinternational.com or (701) 738-4942.

March 2009

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Craving Corn and the Cob The ethanol industryâ&#x20AC;&#x2122;s declaration of energy independence for the U.S. is leading producers to generate more energy from an acre of corn.

By Ryan C. Christiansen

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I

t might not look like a revolution: men and women in Carhartt jackets and feed caps standing in a corn field watching a combine harvest grain. Adjusting the car radio, yawning or blinking, the casual passerby might miss the rebellion. The American farmer, however, might pause—and smile. He sees that the harvest is for more than just grain. Cobs, too, are being collected and hauled away from the field. Under the banner of energy independence, ethanol producers—along with agricultural equipment manufacturers of equipment of every color—are working together to generate more fuel from the field.

Cob Harvest Demand To spur the commercial production of cellulosic ethanol, the 2008 Farm Bill includes a $1.01 per gallon tax credit through 2012.

Sioux Falls, S.D.-based ethanol producer Poet LLC has selected corn cobs as its cellulosic ethanol feedstock. According to Doug Berven, director of corporate affairs for Poet, cobs are an excellent feedstock because they are consistent in quality, they can be collected during the main corn grain harvest, they have good bulk density, and farmers are more willing to collect cobs than the re-

ETHANOL PRODUCER MAGAZINE

March 2009

maining corn stover, mainly because the stalks, leaves and husks provide valuable nutrients when left to decay in the soil. Berven says cobs are a logical feedstock for producing cellulosic ethanol, and 5 billion gallons of ethanol could potentially be produced each year from cobs alone.

With $80 million from the U.S. DOE, Poet is perfecting cobto-ethanol conversion at the Poet Research Center in Scotland, S.D., and is converting a 50 MMgy corn-grain-to-ethanol plant in Emmetsburg, Iowa, into an integrated corn-grain-to-ethanol and cob-to-ethanol biorefinery to produce 125 MMgy of ethanol—25 MMgy from cobs and also from corn fiber derived through grain fractionation. The process will allow Poet to produce 27 percent more ethanol from an acre of corn. Construction in Emmetsburg is expected to begin this year and Poet plans to produce cellulosic ethanol commercially by 2011. The plant will require 275,000 acres of cobs annually.

Another ethanol producer wants to use corncobs to help fuel its corn grain ethanol production process. Chippewa Valley Ethanol Co. LLLP of Benson, Minn., will convert cobs in a gasifier to synthesis gas to replace 75 percent or more of the natural gas needs

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at its 45 MMgy plant. According to Gene Fynboh, the harvest coordinator and a board member for the Chippewa Valley Agrafuels Co-op, cobs are desirable for gasification because a ton of cobs produces a similar amount of British thermal units as a ton of coal, with little ash.

CVEC isn’t the only company on the southern edge of the Central Lakes area of Minnesota looking at cobs for energy. The University of Minnesota-Morris wants cobs for its gasifier and Willmar Municipal Utilities in the city of Willmar, Minn., plans to test burn cobs with coal at its 16 megawatt (MW) coal-fired power plant this winter. According to Bruce Gomm, general manager for the utility, because Minnesota has mandated all utilities produce 25 percent of their energy through renewable resources by 2025, the goal is to burn 20 percent to 30 percent cobs. “Our research indicates there is quite a large quantity of cobs available [in the area] … plenty to meet everybody’s needs,” Gomm says. Jon Folkedahl, a consultant for the utility, says 150,000 acres of corn were planted in Minnesota’s Kandiyohi County last year. “The farmer will feel more comfortable investing in cob harvesting equipment if he knows that there is more than one market avail-

able in the area,” Folkedahl says. “Cobs are the hottest thing going in terms of renewable fuels.”

Cob Harvest Evangelism To evangelize the economic benefits of harvesting cobs with grain, Poet and CVEC have demonstrated the prototypes that agricultural equipment manufacturers have developed for harvesting, transporting and storing cobs. Poet held a demonstration on 4,000 acres near Hurley, S.D., in October 2007, and in November 2008 displayed equipment for approximately 750 farmers near Emmetsburg. “What’s exciting is that so many equipment companies, and all of the major equipment companies, are working on this,” says Jim Sturdevant, director of Poet’s Project Liberty cob-to-ethanol initiative. Poet tested harvesting 10,000 acres of cobs in Texas, Iowa and South Dakota in 2008.

CVEC held three cob harvesting demonstrations in October near Donnelly, Priam and Holloway, Minn., with the goal of harvesting 5,000 acres of cobs from more than a dozen farmers. The company received applications offering more than 25,000 acres for the harvest, Fynboh says.

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TECHNOLOGY

Numerous growers volunteered for the Willmar utility’s 450-ton cob harvest, but in the end, logistics, timing and equipment availability prompted them to work with a single grower, Folkedahl says.

Sturdevant says interest among farmers is growing. “This is an opportunity for farmers to get an additional revenue stream without requiring them to change their planting practices,” he says.

The companies have yet to determine how much to pay for cobs. Poet has suggested that the cobs are worth between $30 and $60 per ton. The most recent Farm Bill includes the Biomass Crop Assistance Program, which allows for farmers to be reimbursed up to $45 per ton for the collection, harvest, storage and transportation of feedstock to a cellulosic ethanol biorefinery.

Cob Harvest Equipment Corn grain is typically harvested using a combine that strips the ears from the stalks and then separates the grain from the ears, depositing cobs and the rest of the stover back onto the field.

Agricultural equipment manufacturers have come up with multiple ways for harvesting cobs during the same field pass, which prevents farmers from having to pick up cobs from the ground, and keeps dirt from being collected with the cobs.

The manufacturers know the first criteria farmers have for cob harvesting is that the equipment should not slow down the grain harvest, because the window for harvesting corn can be small due to weather constraints.

Manufacturers have employed three basic harvesting techniques: using a modified combine to harvest a mixture of cobs and grain together (dubbed corn-cob mix or CCM), using a modified combine to harvest and also separate cobs and grain, or using a cob “caddy” towed behind the combine to harvest cobs from stover ejected by the grain combine.

Corn-Cob Mix Harvest The CCM harvest technique uses a modified combine to harvest a mixture

ETHANOL PRODUCER MAGAZINE

of whole or broken cobs and clean grain into the same bin. The cobs and grain are then separated using a second machine on the side of the field. The farmer doesn’t have to change harvesting practices while operating the combine, but would have to consider using a modified grain cart that can better handle the emptying of the CCM. Additional equipment is required to separate the cobs from grain after harvest.

The manufacturers involved in this technique include CNH America LLC with its Case IH combines, Claas of America Inc. with its Lexion combines, and Deere & Co. with its John Deere combines.

“It’s relatively minor modifications,” says Sam Acker, director of marketing for Case IH harvesting equipment. “In a couple of hours of changing some parts out, a guy can go from just harvesting the grain to harvesting a corn-cob mix.”

“Within the next couple of years— once we get a good handle on what type of solutions our customers are looking for—we will have a kit available to convert a combine over to do the corn-cob mix,” says Barry Nelson, manager of media and channel relations for Deere.

A conversion kit is already available for the Claas Lexion combine, according to Bob Armstrong, product marketing manager for Claas. He says the modification is a variation on what is available for harvesting earlage.

To catch and transport the CCM from the combine, Armstrong says Claas has a Xerion multipurpose tractor with a fifth wheel and a 53-foot aluminum trailer that can be transferred to a semi tractor for high-speed road transport to a feedstock purchaser.

Unverferth Manufacturing Co. Inc. has developed the dual-auger Brent Avalanche 1194CCM grain cart, which has been designed specifically for emptying the CCM. “Being dense and slippery, [corn grain] flows very well but, once you get the less-dense corncobs and some of the fodder from the corn plant itself in there, its flow ability is reduced, and so we have made modifications to the inside of

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the cart,” says Jerry Ecklund, advertising manager for Unverferth.

To separate cobs from the grain, Wildcat Manufacturing has a modification for its 626 Cougar trommel screen system, according to Shannon Wezensky, design engineer for Wildcat.

On-Combine Cob Separation The on-combine cob separation technique uses a modified combine to harvest cobs and grain into separate bins. The manufacturer involved in this technique is primarily Ceres Agriculture Consultants.

The Ceres Ag Residue Recovery System sorts stover at the back of the combine and then collects cobs in a hopper on top of the combine.

Tow-Behind Cob Harvest The tow-behind cob harvest technique uses a cob caddy hitched to the back of the combine. The machine catches the stover from the combine to collect the cobs. A hitch must be installed on the combine, meaning the combine will work harder to pull the weight of the equipment and the cobs. “That’s obviously a

concern,” Ackers says. “The combines up to this point—I don’t care which [manufacturer]—their chassis haven’t been designed for pulling a big, heavy cart behind them. What [Case IH] is looking at with our own (tow-behind) design, as well, is what do we need to do with the rear axle and rear frame of the combine to ensure that it’s all going to hold together when we do this.”

Because cobs are less dense than grain, the cob caddy needs to be emptied more often than the grain cart. The manufacturers involved in this technique include CNH America LLC, Vermeer Corp., and Redekop Manufacturing.

To support collecting grain from the combine and cobs from the caddies during a single harvest pass, Dethmers Manufacturing Co. (Demco) has developed the dual-cart 2-SKU Cob Cart, according to Ken Streff, vice president of sales and marketing for Demco. Streff says the front cart collects grain. The rear cart is connected using a swing hitch so that it can be positioned beside the cob caddy for cob collection.

ETHANOL PRODUCER MAGAZINE

March 2009

TECHNOLOGY

Most cob harvesting equipment is not yet available for purchase and most manufacturers haven’t determined pricing, which makes it difficult for farmers to weigh the cost of harvesting cobs against the value of their cobs—which is also still an unknown.

No matter. Machinery Link, an agricultural equipment leasing company based in Kansas City, Mo., plans to have cob harvesting equipment available for lease as soon as possible, according to Landon Morris, vice president of marketing for Machinery Link. Morris urges farmers to consider leasing. “We lease combines because they are a very expensive and highly specialized asset,” he says. “Whichever of the cob units become commercial, they will fall into the same asset class. They are new pieces of equipment that have never existed before, and so we don’t know what the residual value of those pieces of equipment will be or what their useful life will be. This is an ideal model for leasing or short-term rentals as opposed to asking a producer to bear the burden of purchasing an asset for cob collection.”

Morris says the farmers he has talked to are excited to begin harvesting cobs.

“I think they are all hopeful,” he says.

“Farmers are generally optimistic. Otherwise, they wouldn’t be farmers, right?”

Cob Harvest Logistics Researchers at the U of M-Morris have looked at cob storage and transportation issues and have determined that cobs can be stored in the field temporarily, as long as the piles are removed before spring. This provides growers and feedstock purchasers with a practical, inexpensive storage option. So far, both Poet and CVEC have asked farmers to pile cobs at the edges of their fields and have shouldered the cost of transporting cobs to their facilities. Meanwhile, researchers continue to examine whether broken or whole-cob pieces store better and which is better for transportation.

ETHANOL PRODUCER MAGAZINE

PHOTO: RYAN C. CHRISTIANSEN, BBI INTERNATIONAL

Obtaining Harvesting Equipment

The Vermeer Corp. CCX770 Cob Harvester empties cobs into a truck.

A Commercial Harvest The first, small-scale commercial harvest of cobs for Poet and CVEC will be in the fall of 2009. “We will work with farmers and buy cobs, probably through a contract approach,” Sturdevant says.

“We’ll just keep this evolution going so that in 2009, a number of farmers are actually harvesting cobs and then in 2010, there will be more machinery available for lease or purchase and there will be more farmers involved. We will just let it grow from there.”

CVEC currently purchases corn from approximately 112,000 acres of land supplied by members of its associated cooperative. “We expect that those same 112,000 acres could provide 75 percent of the energy needs for operating the plant if we use all of the corncobs,” Fynboh says. “It’s not an insurmountable task. Twenty-five years ago, you couldn’t imagine the pile of corn that we’re producing now.” EP Ryan C. Christiansen is an Ethanol Producer Magazine staff writer. Reach him at rchristiansen@bbiinternational .com or (701) 373-8042.

March 2009

CORN. BY DARIN NEWSOM Contribution

The 2009 Corn Market Outlook The ethanol industry faced steep challenges in 2008 as corn prices touched record highs.

2009 is providing a fresh start and the possibility of a return to normalcy.

M

any ethanol producers are hoping that this year holds a less volatile corn market than 2008. Last year’s road was bumpy as corn prices hit all-time highs causing a flurry of problems for some industry producers and possible ulcers for others. However, if ethanol producers paid close attention to the markets in 2008, they are likely much wiser and poised to make smarter corn buying decisions in 2009.

Using 2008 as a yard stick for market volatility, several factors need to be considered to better understand the corn markets this year. First, the current demand structure for the corn market will determine whether it is still a demand-driven market.

In addition, we need to review the basic corn market fundamentals, its viability as an investment opportunity for noncommercial (speculative) interests, and its seasonal trends. Last, we need to examine how ethanol producers should react to the inevitable market swings.

Driving Demand Since the fall of 2006, corn prices have rallied on the idea that a demand-driven market has been established. A demanddriven market (as opposed to a supply-driven market) is a situation where new demand is pulling on either stable or growing supplies. This results in a higher expected price range over time rather than a short-lived spike in prices. That being the case,

the demand-driven market created by the burgeoning ethanol industry has justified the higher prices we have seen over the past three years. However, it wasn’t just commercial demand that drove the market into a higher price range. Noncommercial traders were interested in taking part in the rally as well and proved to be the key reason for the unprecedented volatility.

Where markets may normally see a scare that causes a price spike once or twice per year (an idea we will come back to later), in this case the frenzy went largely unchecked for months on end.

So the question heading into 2009 is whether corn remains a demand-driven market as in the past few years, or has this been lost and the market is set for a

return to “normalcy.” Looking first at the current domestic demand, the answer would seem to be the demand-driven market may be taking its last breaths.

According to the January USDA supply and Newsom demand report, 2007‘08 feed demand was pegged at approximately 5.9 billion bushels. In 2008-‘09, this demand is estimated to drop to approximately 5.3 billion bushels due to fewer cattle being placed in feed yards for much of the latter half of 2008 as a result of the higher prices of feed.

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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One needs to also look at U.S. corn exports. In the 2007‘08 marketing year, the U.S. exported approximately 2.4 billion bushels of corn. For 2008-’09, USDA is projecting a decrease to 1.75 billion bushels, a number that could continue to fall as the marketing year progresses given the slow pace of demand as 2008 ended. If realized, this would be the lowest export demand number since the 1.59 billion bushels seen during the 2002-‘03 marketing year.

However, it needs to be remembered that corn is a global market and the reduction in U.S. exports does not mean that global demand has declined. On the contrary, the January world supply and demand report pegged global demand at 783.22 million tonnes, an increase of 11.1 million tonnes from the previous marketing year.

This reduction in U.S. exports, despite a growth in world demand, can be attributed to a number of factors. The easiest factor to target would be the global economy. Some say that if prices are higher and the U.S. dollar gains some ground, foreign countries have a harder time purchasing grain from the U.S. Others will say it doesn’t matter because regardless of price, people still need to eat.

Both theories have their merits and, although the U.S. is still the largest exporter in the world, other countries such as Brazil, Argentina, South Africa and China are also players that might be able to sell corn cheaper than the U.S. This leaves us with the demand created by the U.S. ethanol industry. The global economic downturn has slowed demand for petroleum products

worldwide, leading to a historic selloff in the crude oil and gasoline markets. Domestically, the drop in gasoline demand has also reduced demand for ethanol, therefore lowering the ethanol industry’s demand for corn from lofty estimates earlier in the 2008-‘09 marketing year.

This is key to the discussion of ethanol demand for corn going forward. While it appears that demand is decreasing, in actuality, demand for corn is still projected to increase from the 2007-‘08 number of 3 billion bushels to 3.6 billion bushels in 2008-‘09. The 3.6 billion bushels is a continued reduction from the 4 billion bushels projected in the fall of 2008. Some analysts are predicting further reductions as the ethanol industry continues to consolidate in 2009, with demand for corn possibly falling as low as 3.2 billion bushels.

If the other demand categories remain unchanged from January estimates, total U.S. demand would then fall to only 11.5 billion bushels, a sharp reduction from the 2007-‘08 figure of 12.7 billion bushels.

Believe it or not, we are still in a demand-driven market. With world demand still growing, any hiccups in world supplies could spark increased buying interest in corn. However, continued growth in world ending stocks—pegged at 136 million tonnes in the January world supply and demand report—create a world stocks-to-use number (ending stocks divided by total demand) of approximately 17.4 percent, a figure that is higher than what was seen in the 2006‘07 and 2007-‘08 marketing years (14.9 percent and 16.4 percent, respectively) but still well below the 25.5 percent average of

ETHANOL PRODUCER MAGAZINE

March 2009

the past 20 years. This indicates that although some might think prices will remain lower because of a dip in demand, the big picture illustrates that a demand market still exists and will justify the higher prices we could see in 2009. The current market deems the appropriate price range for corn at a low near $3 per bushel and a high near $6.

Seasonality, Market Reactions Corn prices were near the low end of this price range in late December, the month the market typically sees some push from export demand. Since that is not necessarily the case in 2009, this would indicate that the market was still waiting for commercial demand to emerge to push market prices higher.

Seasonal trends generally help the market rally from January through early planting season and sometimes into early June.

Much of this increase is attributed to pre-planting speculation and farmers beginning to shut their bin doors as they begin to focus on spring planting. This makes it harder for merchandisers to secure grain deliveries.

Then May through June, factors related to the new crop begin to take hold on the market as speculation on planting progress begins. Based on a seasonal index, corn prices from the first week in January increase 25 percent by mid-June. That means if the season index holds true in 2009, ethanol producers should begin preparing for the possibility of $5 corn during the spring.

After spring planting, the market will react to factors related to the newly planted crop. A weather scare could push corn prices back to the $6 mark. Each

year, traders get one weather-related scare that is then built into the market. Last year, the flooding in Iowa was the center of a media fire storm that escalated new-crop prices to near $8 per bushel (the December 2008 futures contract). In reality, only a small amount of acreage was affected and market prices quickly readjusted.

This is typical of a supplydriven market where prices react violently to weather-related news, but one must look at the larger picture. The commercial side of the market must quickly weigh out if the supply scare is real or headline-driven before making buying or selling decisions. Where speculative traders live for this type of market due to the large possible return and quick in and out, commercial traders have to factor in actual needs that could be affected.

2009 will remain a volatile year due to a demand-driven market. However, with the global economic downturn, noncommercial influence in commodities could be less than in years past. The market will most assuredly see sharp rallies as well as strong selloffs. Traders, both commercial and noncommercial, must plan for it. In doing so, the lessons from the past two or three years will certainly come into play as both sides evaluate the corn market. Ethanol producers cannot afford to be too cautious, because cautious can kill in the corn market.

Be smarter in buying decisions through the summer for the best production value. EP Darin Newsom is a senior analyst for DTN. Reach him at darinnewsom@dtn.com or (800) 328-2278.

123

RISK. BY HUNT STOOKEY Contribution

The Ethanol, Corn Relationship: A Silver Lining The ethanol industry was hit hard in 2008 with a steep rise in corn prices.

However, the episode should provide a risk management advantage in 2009.

I

tâ&#x20AC;&#x2122;s been a wild, unexpected ride for ethanol producers over the past two years.

While the ethanol business may be less profitable now than it was in 2006, it is also a lot less risky. The reason: the price of corn has been pegged to the price of ethanol, eliminating a big source of commodity risk in the business.

In the period up until approximately the end of 2006, corn and ethanol prices moved independently, requiring active risk management based on a producerâ&#x20AC;&#x2122;s expectation of future price moves for the two com-

modities. However, the rules changed mid-game when a fundamental shift in the dynamics of the corn market linked the price of corn to the price of ethanol. Sometime around the beginning of 2007, corn and ethanol stopped moving independently and became highly correlated.

Consequently, risk managers no longer have to worry about the price of corn going up while the price of ethanol goes down. Their primary goal should be simply to match corn purchases with ethanol sales.

The Price of Corn Pegged to Ethanol How did corn become so highly correlated with ethanol?

How did crush spreads fall from a peak of more than $3 per gallon during the methyl tertiary butyl ether phase-out in 2006 to a range of 20 to 40 cents in the summer of 2008?

Starting around the beginning of 2007, crush margins for ethanol producers compressed rapidly, and the price of corn started to track the price of ethanol. In June 2008, corn was $7.50 per bushel and ethanol $3 per gallon. By the middle of Oc-

tober corn was $3.73 per bushel and ethanol was $1.65 per gallon. At the same time, corn and ethanol became highly correlated.

There is a fundamental economic explanation for this relationship: the ethanol industry is the marginal consumer in a short corn market.

Historically, global stocks functioned as a shock absorber for year-to-year fluctuations in production. However, sustained global demand growth has depleted those stocks, and in 2006 the surplus in the global corn market was fully absorbed.

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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March 2009

Conversely, when corn production increases over time so that there are again surpluses, the ethanol industry will enjoy brief periods of extraordinary profitability. However, someone will eventually add capacity to soak up the surplus, putting ethanol back on the margin.

Global corn stocks versus demand 50% 45%

Stocks as percent of demand

40% 35% 30% 25% 20% 15%

Implications for Risk Management

10%

2006/2007

2004/2005

2002/2003

2000/2001

1998/1999

1996/1997

1994/1995

1992/1993

1990/1991

1988/1989

1986/1987

1984/1985

1982/1983

1980/1981

1978/1979

1976/1977

1974/1975

1972/1973

1970/1971

1968/1969

1966/1967

1964/1965

1962/1963

0%

1960/1961

5%

Sustained strong demand over the past two decades has run global stocks to minimum levels, eliminating the buffer and requiring demand rationing to offset production shortfalls.

SOURCE: USDA, HIGHQUEST PARTNERS ANALYSIS

World stocks were drawn down to less than 15 percent of annual consumptionâ&#x20AC;&#x201D;a historically low level not seen since the early 1970s.

When there is a limited supply of corn, demand has to adjust to match that supply: the balance sheet has to balance.

In the short term, demand for corn for food and livestock feed (domestic and export) is highly inelastic. If the price of corn rises, there is nothing a hog producer can do but pay the higher price or permanently exit the business. By comparison, an ethanol producer can easily idle his or her facility. So if there is not enough corn to satisfy all of the potential demand in the market, the ethanol industry has to idle some capacity to ration demand.

In a market economy, the price of corn (the price everyone pays) gets bid up until enough ethanol capacity is idled to clear the market (i.e., to balance the balance sheet). If the price of ethanol rises (or falls), the price of corn will likewise rise (or fall) to maintain the supply. At the end of the day, a bushel of corn

is worth 2.8 gallons of ethanol (less the net conversion costs for the break-even producer), whatever the price of ethanol may be.

This pricing dynamic is unfamiliar to the agricultural commodities markets, but well documented in other industries.

In wholesale electric power, for example, the price of peak hour electricity is driven by the price of natural gas because it is nearly always a gas-fired generating unit operating on the margin.

In commodity chemicals, it is widely understood that the market price will reflect the conversion economics of the high-cost producer, assuming the industry is operating at less than full capacity.

Moreover, as long as the ethanol industry is the marginal consumer, then the price of corn will be pegged to the price of ethanol. If there is a crop event and the supply of corn drops by 20 percent, then the price of corn would rise slightly relative to ethanol, narrowing spreads in order to push some, but not all, remaining capacity out of the market.

ETHANOL PRODUCER MAGAZINE

March 2009

With the price of corn pegged to the price of ethanol, crush spreads will stay within a fairly narrow range dictated by the conversion economics of ethanol production, fluctuating with the price of natural gas and as marginal producers idle or restart capacity in response to changes in the corn supply.

This relationship nearly eliminates commodity risk from the industry. Ethanol producers no longer have to worry about hedging a market scenario with widening corn spreads and narrowing ethanol spreads because it wonâ&#x20AC;&#x2122;t happen. Rather, a hedging strategy for corn that does not match ethanol sales contracts/hedges will represent a speculative bet on the direction of both ethanol and corn prices.

As such, it will introduce risk to the business.

Most producers did not recognize the change in the fundamentals of the business and continued to hedge corn with disastrous consequences throughout much of 2008. Some of the largest and presumably most sophisticated players in the industry reportedly bought corn in June, right before the collapse, and were caught with $7 per bushel corn in a $2 per gallon ethanol market.

While tragic, this should not be surprising. The rules changed

This pricing dynamic is unfamiliar to the agricultural commodities markets, but well documented in other industries. mid-game and the change went largely unnoticed. Certainly, risk managers saw that the prices of corn and ethanol had suddenly become highly correlated, but for the most part they treated that anomaly as a temporary coincidence or perhaps as a result of open interest from commodity index funds. Because they did not recognize that the rules had changed, they continued to hedge corn and ethanol as independent commodities when in fact corn had become almost entirely dependent on ethanol.

Summary Somewhere around the beginning of 2007, the fundamentals of the corn market changed.

As the global surplus supply was absorbed, ethanol became the marginal consumer in a short corn market, and the value of a bushel of corn became pegged to the price of the 2.8 gallons of ethanol that could be produced from itâ&#x20AC;&#x201D;whatever the price of ethanol. While this has compressed margins from their earlier levels, it has also largely eliminated the commodity risk in the ethanol business. EP Hunt Stookey is a managing director and leads the strategy consulting group at HighQuest Partners LLC. Reach him at hstookey@highquestpartners. com or (978) 887-8800.

125

COMPLIANCE. BY WADE WATSON Contribution

Initial RFS Audits, Updated Rules Require Comprehensive Evaluations Tracking the Renewable Identification Numbers required by the renewable fuels standard is a daunting task.

The first full year of the system provided experience that will pay off in the future.

W

hen the U.S. EPAâ&#x20AC;&#x2122;s Renewable Fuels Standard program went into effect on Sept. 1, 2007, it established a range of provisions applicable to regulated parties. Those provisions include annual attest engagements (audits) that must be performed by a certified internal auditor, an independent certified public accountant or a CPA firm.

The first reporting period covered by those requirements was Sept. 1 to Dec. 31, 2007, with attest engagement reports due by May 31, 2008. Auditors

examined companiesâ&#x20AC;&#x2122; annual compliance demonstration reports, quarterly renewable identification number (RIN) generation reports, quarterly RIN transaction reports, quarterly gallon-RIN activity reports, and the underlying documentation, including product transfer documents required for each change in renewable fuel ownership.

EPA provisions mandated detailed examinations and audit reports that went beyond identifying exceptions. While particular circumstances varied among obligated parties (a gasoline refiner or importer), export-

ers of renewable fuel and nonobligated parties (renewable fuel producers and importers, and any other party taking ownership of RINs), initial audits for the 2007 reporting period identified the following general concerns which must be addressed as companies face updated audit procedures.

Complete, Accurate RINs The EPA established the RIN system to track renewable fuel batches from the producer through various downstream entities. Each RIN represents

a batch of renewable fuel, and each batch of renewable fuel generated requires a RIN. A RIN consists of a 38-digit code that includes the year the fuel was generated, the equivaWatson lence value for the specific type of renewable fuel, a company registration number and a facility registration number. Each RIN also includes an

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).

126

ETHANOL PRODUCER MAGAZINE

March 2009

unassigned or assigned designation. Generally, an assigned RIN must accompany any renewable fuel batch transferred to a new owner.

Once the renewable fuel batch is purchased by an obligated party or blender of gasoline with renewable fuel, the RIN can either be retained by the purchaser or sold separately as an unassigned RIN. With that system, the EPA created a market where obligated parties could purchase RINs to meet annual renewable volume obligation requirements.

Quarterly RIN transaction reports contain the RIN traded as part of the transaction. Common difficulties uncovered during audit examinations included RINs that did not have all 38 digits or typographical errors related to entry of some of the characters in the RIN sequence.

Companies need to ensure that RINs are correctly entered.

The Need for RFS Compliance-Specific Software In addition to difficulties encountered in recording complete and accurate RINs, companies faced challenges in correctly documenting all of the activities associated with generating, buying, selling or retiring renewable fuel batches, and producing the necessary quarterly and annual reports for RFS program compliance.

Using a spreadsheet or another general business application for necessary documentation requires devising macros for cross checking, as well as conducting regular manual reviews. Without such controls,

companies faced considerable risk for reporting errors.

To promote greater accuracy and efficiency, some larger companies have developed custom compliance-related applications. For smaller companies lacking such in-house information technology capabilities, a variety of applications specifically designed for RFS compliance purposes are on the market.

Balancing Reports, Accurate Reporting When the EPA established the audit requirements for the RFS program, it defined methods for auditors to use in reconciling or verifying the accuracy of various reports. For example, the total buys, sells and retirements listed in the quarterly RIN transaction reports should correspond to the total buys, sells and retirements listed in the quarterly gallon-RIN activity report. Inventory analysis is used to verify gasoline production volumes reported in the annual compliance report. Renewable fuel production documentation is used to determine the accuracy of RIN generation reports.

Unfortunately, audit examinations revealed instances where various report totals that should have balanced did not balance.

To promote greater efficiency and remain in compliance, companies need to deploy the EPA’s prescribed methodology and regularly contemporaneously check whether report totals balance properly.

Renewable fuel producers and importers generate RINs. Uncertainty regarding the proper method to account for

ETHANOL PRODUCER MAGAZINE

March 2009

EPA Provides Online Information The U.S. EPA’s Web site is the central location for information on RINs and attest engagements. Its RFS Reporting Forms page contains reporting forms and instructions for the RFS program. Any party that generates or owns RINS in a calendar quarter must report to EPA for that quarter.

Report information includes: RFS Activity Reports, which are required quarterly for all parties RFS RIN Transaction Reports, which are required quarterly for all parties RFS Obligated Party Annual Compliance Report, which is required annually for obligated parties and exporters of renewable fuel (blended and unblended) RFS RIN Generation Reports, which are required for RIN generators.

Reports due quarterly are due within two months of the end of the calendar quarter. Reports due annually are due by the end of February following the compliance year.

Reports must be submitted via EPA’s Central Data Exchange. More information on the exchange is available at http://www.epa.gov/otaq/regs/fuels/cdxinfo.htm.

For more RFS reporting information, visit http:// www.epa.gov/otaq/regs/fuels/rfsforms.htm.

127

COMPLIANCE such generations in the gallonRIN activity reports, however, prompted some companies to report those activities as purchases in transaction reports.

The RINs generated must be manually added to the end-ofquarter RINs for balancing.

The EPA allows parties to use RINs generated in a previous year for current year compliance, up to a 20 percent threshold. A company cannot, however, use RINs generated in a future year.

In other words, RINs generated in 2008 were not valid to meet 2007 compliance.

Planning for Future Audits In February 2008, Congress approved increasing the annual renewable fuel amount that is required to be blended into gasoline for the 2008 compliance year to 9 billion gallons, or 7.76 percent of the nation’s gasoline production. That standard is used to calculate the renewable volume obligation that obligated parties must meet every year. A company’s renewable volume obligation for 2008 is determined by multiplying annual gasoline production volume by 7.76 percent.

The EPA also released technical amendments in October 2008. The amendments address various grammatical or typographical errors, or provide minor clarifications to assist regulated entities in complying with the existing RFS program requirements and include revisions to the audit procedures.

Audit procedures for the 2008 compliance year address: Annual Compliance Demonstration Reports The annual compliance demonstration report is used to verify that an obligated party has

128

met its renewable volume obligation. For meeting that obligation, RINs are considered expired or invalid two years after they were generated.

Documentation for all renewable fuel used in gasoline at the refinery or import facility must be obtained and reviewed by the auditor, with the volume being reported as a finding. This procedure is meant to address situations where renewable fuel is used in the production of gasoline and should be excluded from the volume of gasoline produced for purposes of calculating the company’s renewable volume obligation. Inventory analysis is then used to verify the total gasoline production volume reported to EPA. Auditors are also responsible for recalculating the renewable volume obligation.

One of the updated rules directs auditors to calculate the total number of RINs used for compliance based on year of generation, rather than calculating and reporting on all RINs used for compliance. The auditor must compare that data with information reported to the EPA. For further examination, the auditor must select a representative sample of RINs used for compliance and review supporting product transfer documents and other documentation.

RIN Generation Reports The RIN generation report is unique to a renewable fuel producer or importer, and must be filed quarterly. Auditors cannot rely upon examining samples and need to review production data for each renewable fuel batch, and verify that the proper number of RINs were generated and assigned to fuel batches.

The auditor must determine

whether actual volumes of denaturant and applicable values, the designated renewable fuel type and other listed details conform to information provided to the EPA. Related product transfer documents require scrutiny on a representative sample of renewable fuel batches produced or imported during the year, with auditors verifying the accuracy of the information contained in the product transfer document.

RIN Transaction Reports Each transaction in a listing of RIN transaction reports is essentially a report in itself, providing considerable documentation for that event. Under revised EPA rules, a sample is required for each type of transaction—purchases, sales and retirements—included in the listing of transaction reports.

Retirements are of particular concern to obligated parties, since they retire RINs for use in meeting their annual renewable volume obligation. RINs listed as retired due to use need to include the unassigned RIN (k=2) designation.

The auditor must test each transaction sampling to verify its accuracy. That entails obtaining and reviewing contracts, invoices, product transfer documents or other relevant documentation. Findings must conform to what was reported to the EPA, and any exceptions must be reported.

Gallon-RIN Activity Reports Auditors must review documentation used to generate information for the quarterly gallon-RIN activity reports, and compare information contained in that report to the transaction samples examined as part

of the transaction report audit procedures. Sampling information from the transaction report should correspond with activity report data. Quarterly beginning and ending totals and sums for RIN purchases, sales and retirements should also correspond to transaction report information. The auditor is required to report any discrepancies.

Product Transfer Documents Under RFS provisions, a product transfer document needs to accompany each change in renewable fuel ownership. Each product transfer document requires the RINs assigned to the volume transferred, as well as the name, address and EPA registration number for the transferor and transferee, volumes of renewable fuel being transferred and transfer date. The auditor must verify that this information is included on all product transfer documents reviewed related to audit procedures performed, with exceptions being reported.

Summary The initial work related to RFS filings and audits illustrated the importance of devising and sustaining processes for effectively capturing necessary information, and then regularly reviewing that data for accuracy.

RFS compliance is an ongoing requirement, and addressing those provisions in the most efficient manner possible is a crucial concern for all affected parties. EP Wade Watson is a certified public accountant, certified fraud examiner and an audit partner for Weaver and Tidwell LLP. Reach him at wlwatson@ weaverandtidwell.com.

ETHANOL PRODUCER MAGAZINE

March 2009

www.biofuelsrecruiting.com

EVENTS CALENDAR Fundamentals of Fuel Ethanol Production March 2-April 3, 2009 Kansas State University Manhattan, Kan. This five-week online course is offered by Kansas State University and the Grain Elevator & Processing Society. Itâ&#x20AC;&#x2122;s designed to help professionals who are new to the fuel-ethanol industry or who just want to learn more about the fundamentals of production. Lectures will focus on grain-based feedstocks, feedstock size reduction, fundamentals of starch chemistry and more.

(952) 928-4640 www.geaps.com/dist-learn

Canadian Renewable Energy Workshop March 10-12, 2009 Regina Inn Hotel and Conference Center Regina, Saskatchewan This second conference facilitates the continued development of Canadaâ&#x20AC;&#x2122;s renewable energy industry. Agenda topics will include provincial renewable energy summaries and outlooks, waste potential, new ethanol and biodiesel technologies and feedstocks, financing, and production process efficiencies.

(888) 501-0224 www.crew2009.com

African Biofuels March 30-April 2, 2009 Vodaworld Event Center Johannesburg, South Africa This fourth annual conference will focus on various biofuels, including ethanol, and the movement toward second-generation biofuels.

Through speakers, panel and open floor discussions, mini workshops, and 16 case studies, the agenda will offer information about ethanol production, efficiency, risk management, technology, funding and economics, and legislation.

The status of the ethanol industry in Africa and around the world will also be discussed via international case studies focusing on Sweden, Brazil, China and India.

Brussels Expo Centre Brussels, Belgium This is one of the largest biofuels events in Europe and a key meeting place for industry experts looking to share best practices and attract new clients.

Agenda topics will include conventional and cellulosic ethanol; international ethanol markets such as Asia, Brazil and Africa; infrastructure; and use. +44 20 7099 0600 www.worldbiofuelsmarkets.com

Snowbird Resort Snowbird, Utah The goal of this meeting will be to share a broad perspective defining the critical needs for biofuels, and to highlight cutting-edge research and development efforts that are defining the next generation of biofuel product and process advances. This event will bring together a broad spectrum of core experts to help enable and advance biofuel research efforts globally.

(800) 253-0685 www.keystonesymposia.org

(011) 771-7000 www.africanbiofuels.co.za

Mar

World Biofuels Markets March 16-18, 2009

The Future of Biofuels April 4-8, 2009

Apr

The Alcohol School March 30-April 3, 2009 Mercure Toulouse Atria Toulouse, France This week-long course will educate fuel-ethanol and distilled beverage producers in the science of alcohol production. The program will cover the ethanol production process from milling and mash preparation through fermentation and distillation. Enzyme usage, yeast biology, and 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

Alternative Fuels & Vehicles National Conference + Expo April 19-22, 2009 Walt Disney World Swan and Dolphin Resort Orlando, Fla. This 14th annual event will represent all fuels, vehicles and technologies that provide an alternative to petroleum, including ethanol. Preconference sessions will address biofuels blends, government funding and incentives, and how to convert vehicles to run on alternative fuels. Breakout sessions will focus on local and state policies, and U.S. EPA regulations. There will also be a rideand-drive event, industry tours, and niche market workshops focusing on government fleets, school buses, airports, transit and goods movement.

(702) 254-4180 www.afv2009.com

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ETHANOL PRODUCER MAGAZINE

March 2009

Waste-to-Fuels Conference & Trade Show May 17-19, 2009

Advanced Biofuels Development Summit April 20-21, 2009 Marriott at Metro Center Washington, D.C. This event will bring together leaders of scientific innovations in advanced biofuels development. Topics will include business models and strategies, emerging feedstocks and process technologies, public policy, financing, alliances and public-private partnerships, and international biofuels development. An agenda will be available as the event approaches.

Hyatt Regency Mission Bay San Diego This second event will inform the public and private sectors of the economic and environmental benefits of converting waste materials to alternative fuels such as ethanol. Agenda topics will address the conversion of biomass, municipal solid waste and agricultural waste to fuel. Attendees will also have a chance to preview the newest advances in alternative fuel production products and services.

More information will be available as the event approaches.

(800) 441-7949 www.waste-to-fuels.org

(781) 972-1346 www.biofuels-summit.com

May

Jun

July

International Biomass Conference & Expo April 28-30, 2009

International Fuel Ethanol Workshop & Expo June 15-18, 2009

Oregon Convention Center Portland, Ore. This event, sponsored by BBI International Inc., will address the latest technologies and business considerations for bioenergy projects, including biofuels. Breakout session topics will include cellulosic ethanol; feedstocks such as ag residues, wood waste and municipal solid waste; project finance; and permitting and project implementation. Attendees will also be able to tour the Summit Foods Inc. ethanol plant in Cornelius, Ore.

Denver Convention Center Denver This will mark the 25th anniversary of the worldâ&#x20AC;&#x2122;s largest ethanol conference, which was recently recognized by Trade Show Week magazine as one of the fastest-growing events in the United States for the second consecutive year. The workshop will address conventional ethanol, next-generation ethanol and biomass. More details will be available as the event approaches.

(701) 746-8385 www.biomassconference.com

ETHANOL PRODUCER MAGAZINE

March 2009

Aug

Ethanol Conference & Trade Show Aug. 11-13, 2009 Milwaukee The American Coalition for Ethanolâ&#x20AC;&#x2122;s 22nd annual conference will highlight public policy, technology and education relative to the ethanol industry, among many other topics. A more detailed agenda will be available as the event approaches.

(605) 334-3381 www.ethanol.org

(701) 746-8385 www.2009few.com

131

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134

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KINEMATICA, INC. 631-750-6653

Trilogy Analytical Laboratory 636-239-1521 www.trilogylab.com

Filtration Equipment Fluid Engineering 814-453-5014

Midwest Laboratories, Inc. 402-829-9877 www.midwestlabs.com Romer Labs, Inc. 636-583-8600

Mixers

Paint & Protective Coatings

Laboratory-Supplies

Laboratory-Testing Services

ETS Laboratories 707-963-4806

www.agraind.com

Motors

Laboratory-Outsourcing

CHATA Biosystems

Fermentation Monitoring

www.mapcon.com

Moisture Analyzers

Perten Instruments, Inc. 801-936-8165

Ronning Engineering Company, Inc. 913-239-8118 www.ronningengineering.com

MonitorTech Corp.

866-682-6771

Agra Industries, Inc. 715-536-9584

Instrumentation Endress+Hauser, 317-535-2174

Dryers-Ring

www.agraind.com

www.fwsgroup.com

ETHANOL PRODUCER MAGAZINE

SafeRack 866-761-7225

www.hemcocpm.com www.saferack.com

Maintenance Services Jouleâ&#x20AC;&#x2122; Industrial Contractors bbosher@jouleinc.com www.jouleinc.com

March 2009

Pipe-Fittings Robert-James Sales, Inc. 800-666-0088

www.rjsales.com 135

EPM MARKETPLACE Valves

Pipe-Flanges Robert-James Sales, Inc. 800-666-0088

North American Safety Valve 800-800-8882

www.rjsales.com

Pressure & Temperature

Wastewater Treatment Services

WIKA Instrument Corporation 888-945-2872, x5127

Biothane Corporation 856-541-3500x501

www.wika.com

Hydro-Klean, Inc. 515-283-0500

Pressure Vessels WINBCO Tank Company 641-683-1855

www.hydro-klean.com

Aquatech International Corporation 724-746-5300 www.aquatech.com

ITT Industries Goulds Pumps 315-568-2811 www.gouldspumps.com

Fluid Engineering 814-453-5014

Watson-Marlow Bredel Pumps 800-282-8823 www.watson-marlow.com

QA Test Products

Paragon Trailer Sales 800-471-8769 www.perten.com

Existing Producers www.paragontrailer.com

WINBCO Tank Company 641-683-1855

www.winbco.com

Thermal Energy www.eco-tec.com

www.fluideng.com

Ethanol Production

Resource Recovery Eco-Tec, Inc. 905-427-0077

www.biothane.com

Water Treatment

www.winbco.com

Pumps

Perten Instruments, Inc. 801-936-8165

www.nasvi.com

American Waste Removal 505-417-9933 www.americanwasteremoval.com

Seals Used Equipment

Louis Dreyfus Commodities 402-844-2680 LDCommodities.com POET LLC 605-965-2200

www.poetenergy.com

Finance Accounting

Aesseal Inc. 865-531-0192

www.aesseal.com

Christianson & Associates PLLP 320-235-5937 www.christiansoncpa.com

Utex Industries, Inc. 432-333-4151/800-873-0946

www.utexind.com

Eide Bailly LLC 605-977-2703 Kennedy and Coe, LLC 800-303-3241

Separation Equipment Fluid Engineering 814-453-5014

www.fluideng.com

www.laidig.com

www.kentgroupinc.com

Risk Management First Capitol Risk Management 800-884-8290 www.firstcapitolrm.com

Structural Fabrication Agra Industries, Inc. 715-536-9584

www.kcoe.com

Mergers & Acquisitions Kent Group, Inc. 715-358-7528

Storage-DDGS Laidig Systems, Inc. 574-256-0204

www.eidebailly.com

www.agraind.com

R.J. Oâ&#x20AC;&#x2122;Brien 800-621-0757

www.rjobrien.com

Cherokee Steel Fabricators, Inc. 903-759-3844 www.cherokeesteelfabricators.com

Software-Accounting

Tanks

Encore Business Solutions 204-989-4330 www.encorebusiness.com

Agra Industries, Inc. 715-536-9584 CMC Letco Industries 417-831-1528

www.agraind.com

Attorneys www.cmc-letco.com

Federal Equipment Company 800-652-2466 www.fedequip.com 136

Legal Services Faegre & Benson, LLP 612-766-6930

www.faegre.com

ETHANOL PRODUCER MAGAZINE

March 2009

EPM MARKETPLACE

Atlas Renewable Energy, LLC 800-884-8290 www.atlasenergyllc.com

Transportation Marine Evolution Markets, Inc. 914-323-0259

www.evomarkets.com

Rail Ties Thompson Industries, Inc. 317-859-8725 www.thompsonindustries.net

Railcar Moving Shuttlewagon, Inc. 816-767-0300

www.shuttlewagon.com

Utilities Utility Integrys Energy Services 608-235-2547 www.integrysenergy.com

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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ETHANOL PRODUCER MAGAZINE

March 2009

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Stoel Rives LLP 612-373-8800

137

Robert-James Sales is your #1 source

for stainless PIPE, FITTINGS and FLANGES up to 36" in Sch 5, 10 and 40. We also carry 2205 duplex through 24".

www.rjsales.com Buffalo, NY Cleveland, OH Cincinnati, OH Chicago, IL Cranbury, NJ

800-666-0088 800-777-0820 800-777-2260 800-777-2008 800-777-1858

Indianapolis, IN Minneapolis, MN Raleigh, NC Tavernier, FL

800-777-0510 800-777-1355 866-493-8834 305-852-1694

Free Product CD Contact the Robert-James Sales location nearest you and ask for a free copy of our comprehensive, up-to-date CD. It outlines our stainless product line including reference charts, graphs and tables to help you calculate what your processing plant needs.

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