March 2008 Ethanol Producer Magazine

INSIDE: ETHANOL 2008 AUSTRALIA CONFERENCE PREVIEW MARCH 2008

Cellulosic Ethanol: The Feedstock Factor Partnership Forms to Commercialize Rice-Straw-to-Ethanol Process Termites May Hold Key to Unlocking Cellulosic Bonds How Much is a Ton of Biomass Worth?

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We measure success drop by drop.

Every gained efficiency. Every boost in yield. Each is a victory that ripples throughout our industry.

Strengthening. Building. Growing.

At ICM, the continuous improvement of ethanol production — and the industry as a whole — is our passion. And passion yields results: more than half of the ethanol production facilities currently under construction use our technology.

Yet for all our achievements, there remains but one true measurement of our success.

Your success.

icminc.com

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inside

MARCH 2008 . VOLUME 14 . ISSUE 3

features 64 CELLULOSE All Roads Lead to Rome and Rice

96 BUSINESS Managing Risk Through Marketing Methods

BBI International and Colusa Biomass Energy Corp. have partnered to

Marketing arrangements, whether in-house, through a third-party service or

commercialize a process that will turn rice straw and hulls into cellulosic

both, should be tailored to fit the unique needs of an ethanol plant.

ethanol. By Ron Kotrba

By Bryan Sims

72 MARKET Biomass: At What Cost?

104 PROFILE Honoring the GHGenius

How much does a ton of corn stover cost? Determining a fair value for

When Canadians need reliable information on renewable fuels, they turn to

biomass is a challenge that needs to be addressed as the cellulosic

Don O’Connor. To show their appreciation, the Canadian Renewable Fuels

ethanol industry develops. By Jerry W. Kram

Association presented him with the Green Fuel Industry award.

By Anduin Kirkbride McElroy

Page 80

Page 104

Page 114

80 TECHNOLOGY Termite-Tailored Cellulosic Ethanol

114 LEGAL Ethanol Start-Ups and the Bankruptcy Bogeyman

Researchers are studying termites to find out what role, if any, the

EPM provides insight into the situations that led to the financial tribulations of

bacteria in their guts play in degrading cellulose. By Jessica Ebert

two ethanol plants that are now facing angry creditors. By Sarah Smith

88 ENVIRONMENT Feedstock Face-Off

124 EVENT What’s Up Down Under

An ecologist and an agronomist present opposing views concerning

The Ethanol 2008 Australia Conference in Sydney will feature the latest

which is the best feedstock for the growing ethanol industry: corn or

information on Australia’s emerging biofuels industry, and developments in

mixed prairie grasses. By Susanne Retka Schill

other areas of the world. By Ian Thomson

ETHANOL PRODUCER MAGAZINE MARCH 2008

7

The future of fuel Transforming corn and other grains into biofuels is a major industry today. But what about tomorrow? The future of biofuels will also rely on the next generation of raw materials – biomass. At Novozymes we’re taking a fresh look at all types of biomass, and © Novozymes A /S · Customer Communications · No. 2007-35469-02

considering how we can turn it into something useful. And you know what? Corn cobs and wheat straw are just the beginning.

Who knows what other types of waste we can transform into fuel?

Novozymes is the world leader in bioinnovation.

Together with customers across a broad array of industries we create tomorrow’s industrial biosolutions, improving our customers’ business and the use of our planet’s resources. Read more at www.novozymes.com.

Novozymes North America, Inc. 77 Perry Chapel Church Road · Franklinton, NC 27525 Tel. +1 919-494-3000 · Fax +1 919-494-3485 biomass@novozymes.com · www.novozymes.com

inside

MARCH 2008 . VOLUME 14 . ISSUE 3

departments

contributors

11 Advertiser Index

130 PROCESS Agitation Challenges in Cellulosic Ethanol Production

14 The Way I See It

By Mike Bryan Addressing the 'Silver Bullet' Theory

16 Letter to the Editor 18 Business & People 22 Commodities 24 A View From the Hill

By Bob Dinneen Delivering on the Promise of Change

25 RFA Update

While researchers continue to improve enzyme cocktails for cellulosic ethanol production, the basic physical management and distribution of the feedstocks throughout the ethanol process still need to be fully considered. By Gregory T. Benz

134 FINANCE Managing Through Tough Times in Ethanol Production High input costs and moderate ethanol prices have pinched profits for some ethanol producers.

Plenty of options exist for managing cash flow in tightening market conditions.

By Todd Taylor and Ryan Murphy

138 WORLD Terrorist Group Extortion and Other Challenges for Transnational Corporations Like many industries, ethanol is moving onto the global stage. Companies working worldwide need to be aware of the possibility of extortion and how to handle it. By Dean C. Alexander

28 Industry News & BIObytes 38 Plant Construction List 50 Our Plant

By Jessica Ebert A First for Quebec

52 In the Field

By Susanne Retka Schill Not Your Grandma’s Sweet Potato

54 Up Front

By Anduin Kirkbride McElroy An Original

56 Flex Factor

By Ron Kotrba Cold Start 101

58 Business

By Bryan Sims FTC: Ethanol Industry is 'Unconcentrated'

60 Drive

By Scott Atherton American Le Mans Series Touts E85

62 Legal Perspectives

By Britney Schnathorst New SEC Rules May Make It Easier to Resell Securities

142 Events Calendar 144 EPM Marketplace

on the web EthanolProducer.com reader’s poll results ÍFor the week of Jan. 14 Will intermediate-level ethanol blends (E20, E30) become common throughout the United States in five years?

Yes—75.3 percent No—22.1 percent Unsure—2.6 percent

ÍFor the week of Jan. 7 Ethanol Producer Magazine: (USPS No. 023-974) March 2008, Vol. 14, 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.

How much ethanol production capacity will be on line by the end of 2008?

Less than 8 billion gallons per year—12 percent 8 billion to 10 billion gallons per year—72.3 percent 10 billion to 12 billion gallons per year—15.7 percent

BPA Worldwide Membership Applied for October 2006

ETHANOL PRODUCER MAGAZINE MARCH 2008

9

Ad Index 71 2008 International Fuel Ethanol Workshop & Expo

26 & 27 Hydro-Klean Inc. 2 ICM Inc.

82 Adams Building Contractors 69 Aeroglide Corp.

84 Indeck Power Equipment Co. 103 International Biomass '08

83 Agra Industries Corp.

Conference & Trade Show

15 American Railcar Industries Inc. 6 Anhydro Inc.

86 Interstates Cos. 133 Intersystems Inc.

20 Ansul Fire Solutions

79 ITT Industries Goulds Pumps

77 Aqua Power Inc. 44 Baird Holm LLP

31 Kennedy & Coe LLC 131 Larox Corp.

76 Barr-Rosin Inc. 59 & 87 BBI Project Development 116 Best Energies Inc.

63 Layne Christensen Co. 101 Legris Transair 132 Louis Dreyfus

45 BetaTec Hop Products Inc.

21 MAC Equipment

150 Biofuels Australasia

41 Management Recruiters of Atlanta

122 Biofuels Canada

46 Mapcon Technologies Inc.

128 Biomass Magazine

35 McC Inc.

75 Brown, Winick, Graves, Gross, Baskerville & Schoenebaum PLC

126 Nalco Co.

48 Buhler Inc.

127 Natwick Associates Appraisal Services

12 Burns & McDonnell

106 Nebraska Public Power District

40 Calbrandt

107 NESTec Inc. 17 New World Biomass Conference

95 Canadian Renewable Energy Workshop

136 Nexen Marketing USA Inc. 8 Novozymes

112 Chief Agri-Industrial

47 PhibroChem

34 Christianson & Associates PLLP 98 Clifton Gunderson LLP

137 Platts Conference & Events Division

78 Competitive Energy Insight Inc.

152 Poet LLC 92 R&R Contracting

37 Coverall Building Systems

30 RailWorks Track Systems Inc.

33 Davenport Dryer LLC 123 dbc SMARTsoftware Inc. 36 Delta-T Corp.

129 Renewable Fuels Association 151 Robert-James Sales Inc. 42 Ronning Engineering

118 Dresser-Rand

93 Roskamp Champion

110 Eisenmann Corp.

53 Electro Sensors

108 SafeRack LLC 43 Salco Products Inc.

94 Encore Business Solutions 49 Ethanex Energy 121 ethanol-jobs.com 57 Ethanol Technology

139 Seneca Waste Solutions 113 Siemens Energy & Automation 109 Smar International Co. 68 Strongform Nationwide Industrial Builders

111 Exothermics Inc. 3 Fagen Inc. 29 FBA Consulting

66 & 67 Sulzer Chemtech USA Inc. 117 TDC Dryers

135 FCStone LLC

90 Trico TCWind

100 Federal Equipment Co.

99 Vaperma Inc.

61 Fermentis

140 Victory Energy 32 Vogelbusch USA Inc.

85 Flowserve Corp.

91 Volkmann Railroad Builders Inc.

120 Gamajet Cleaning Systems Inc. 55 Genencor International Inc. 4 & 5 GS CleanTech Corp.

On page 19 of the Business & People section, it was incorrectly stated that U.S. Water Services was installing its patented high-efficiency reverse osmosis process at Big River Resources Galva LLC. The process is patented, but not by U.S. Water Services.

10 New York Blower Co.

70 Cereal Process Technologies 74 Check-All Valve

Correction from our January 2008 issue:

119 Walling Water Management 141 Wanzek Construction Inc.

102 Hurst Boiler & Welding Co. Inc.

ETHANOL PRODUCER MAGAZINE MARCH 2008

11

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E D I TO R I A L

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PUBLISHING & SALES

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

Jaci Satterlund Art Director jsatterlund@bbibiofuels.com

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

Tom Bryan Editorial Director tbryan@bbibiofuels.com

Sam Melquist Graphic Artist smelquist@bbibiofuels.com

Joe Bryan Vice President of Media jbryan@bbibiofuels.com

Jessica Sobolik Managing Editor jsobolik@bbibiofuels.com

Elizabeth Slavens Graphic Artist bslavens@bbibiofuels.com

Matthew Spoor Sales Director mspoor@bbibiofuels.com

Dave Nilles Contributions Editor dnilles@bbibiofuels.com

Jack Sitter Graphic Artist jsitter@bbibiofuels.com

Howard Brockhouse Senior Account Manager hbrockhouse@bbibiofuels.com

Rona Johnson Features Editor rjohnson@bbibiofuels.com

Clay Moore Account Manager cmoore@bbibiofuels.com

Ron Kotrba Senior Staff Writer rkotrba@bbibiofuels.com

Jeremy Hanson Account Manager jhanson@bbibiofuels.com

Anduin Kirkbride McElroy Staff Writer amcelroy@bbibiofuels.com

Chip Shereck Account Manager cshereck@bbibiofuels.com

Jerry W. Kram Staff Writer jkram@bbibiofuels.com

Tim Charles Account Manager tcharles@bbibiofuels.com

Susanne Retka Schill Staff Writer sretkaschill@bbibiofuels.com

Chad Ekanger Account Manager cekanger@bbibiofuels.com

Bryan Sims Staff Writer bsims@bbibiofuels.com

Marty Steen Account Manager msteen@bbibiofuels.com

Jessica Ebert Staff Writer jebert@bbibiofuels.com

Marla DeFoe Advertising Coordinator mdefoe@bbibiofuels.com

Sarah Smith Staff Writer ssmith@bbibiofuels.com

Jessica Beaudry Subscriptions Manager jbeaudry@bbibiofuels.com

Kris Bevill Staff Writer kbevill@bbibiofuels.com

Jason Smith Subscriber Aquisition Manager jsmith@bbibiofuels.com

Jan Tellmann Copy Editor jtellmann@bbibiofuels.com

Tim Greer Circulation Coordinator tgreer@bbibiofuels.com

Craig A. Johnson Plant List & Construction Editor cjohnson@bbibiofuels.com

Erika Wishart Administrative Assistant ewishart@bbibiofuels.com

Amber Armstrong Administrative Assistant aarmstrong@bbibiofuels.com

Christie Anderson Administrative Assistant canderson@bbibiofuels.com

HOW TO REACH US

LETTERS TO THE EDITOR We welcome letters to the editor. Send your letter to: Ethanol Producer Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to jsobolik@bbibiofuels.com.

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

SUBSCRIPTIONS To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203.

You can also fax a subscription form to (701) 746-5367.

Subscriptions to Ethanol Producer Magazine are available to all ethanol producers and future ethanol producers worldwide, free of charge.

Regular subscriptions are available for just $24.95 per year within the United States, $59.95 for Canada and Mexico, and $110 for any country outside North America.

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

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

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

COPYRIGHT © 2008 by BBI International

ETHANOL PRODUCER MAGAZINE MARCH 2008

13

The Way I See It

Addressing the 'Silver Bullet' Theory

A

ccording to a recent opinion column in the Denver Post, Greenpeace founder Dr. Patrick Moore, who was once critical of nuclear power, has changed his mind and now endorses its development. I personally don’t have an issue with that. Bravo to someone who can look anew at facts and have the courage to change their opinion. We desperately need all of the alternatives to oil that we can find, especially those that are safe, renewable and domestic.

What frustrates me is that the column, written by Post editorial board member David Harsanyi, trashes ethanol, and solar and wind power (not reflecting the position of Greenpeace).

He states that these alternative energy forms are “economically unfeasible and environmentally inconsequential.” So it appears that in his myopic vision of the future, it’s an all-or-nothing game. We either find an alternative energy form that single-handedly cures our oil dependence, or it isn’t worth pursuing.

The ethanol industry has never boasted that it can, by itself, cure our dependence on imported oil. To my knowledge, neither has the solar or wind power industries, and I’m quite sure the nuclear industry wouldn’t make that claim either. There is no single solution to oil dependence. Rather, it is a collection of strategies that will make up our energy future.

It’s difficult to understand the objections to ethanol; biodiesel; wind, solar and geothermal power; biogas; and other forms of renewable energy. The energy bill set a goal of 36 billion gallons of renewable fuels by 2022. Any clear-thinking person understands that the legislation will not cure our dependence on oil; it will only serve to reduce our dependence. We could have nuclear power plants dotting the countryside, and it wouldn’t cure our dependence on foreign oil. That, too, would only serve to reduce it.

It’s simply common sense that numerous alternative energy strategies working in unison will be the answer. There is no question that some alternatives are more environmentally sustainable than others, but all of the alternative fuels are cleaner and more sustainable than oil.

We jumped on the hydrogen train and soon realized that, while it may play a part in our energy future, it may not be the “cure-all” that we initially thought. While I personally support nuclear power, it would be a flawed strategy to abandon everything else in its pursuit.

There is no silver bullet—no one formula that will solve our reliance on oil. As much as we all might like to find one, it's just not there. It’s time we all understand that every alternative form of energy has its price, and in and of itself is not the total answer. No matter what anyone says, 36 billion gallons—while certainly not the finish line—is a pretty darn good start.

That’s the way I see it!

Mike Bryan Publisher & CEO mbryan@bbibiofuels.com

14

ETHANOL PRODUCER MAGAZINE MARCH 2008

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Letter to t h e

Editor

T

he issues of sustainability, and the environmental impacts of the corn and ethanol industries, bear discussion.

However, such discourse should include the perspectives of all stakeholders involved. We appreciated that a corn grower’s viewpoint was considered in EPM's article on the Ogallala Aquifer ("The Future of the Ogallala Aquifer," January 2008), but EPM’s article about the environmental impacts of growing more corn ("More Corn a Cause for Concern," January 2008) didn’t include any perspective from corn producers. If EPM had taken the time to visit with farmers about current stewardship and conservation practices, it might have learned the following: The amount of fertilizer applied per bushel of corn produced continues to decline. Over the past 15 years, farmers have seen a 17 percent reduction in the amount of nitrogen required to produce one bushel. Likewise, phosphorous requirements per bushel have declined 28 percent during this period.

The amount of pesticides applied to corn has also declined. Corn hybrids with insect resistance and herbicide-tolerant traits have dramatically curtailed the use of insecticides and herbicides. Between 1990 and 2005, growers reduced the application of herbicide active ingredient by 29 percent. In this same period, corn farmers reduced insecticide active ingredient use by 81 percent. Today, less than one-tenth of a pound of insecticide active ingredient is applied on the average corn acre.

Most corn is grown under conservation practices, contrary to the Environmental Working Group spokeswoman.

According to the most recent Conservation Tillage Information Council survey (2006), 55 percent of farmers are practicing conservation tillage and 77 percent are practicing crop residue management. Most farmers don't use conventional tillage with a moldboard plow, as the EWG suggests. Only 23.5 percent of farmers used conventional tillage in 2006, down from nearly 40 percent in 1990.

As a result of increased conservation tillage, erosion losses are declining. Conservation tillage reduces rainfall runoff by 60 percent and soil loss by 90 percent. Some estimates suggest total cropland erosion has declined 50 percent in the past 25 years.

Hay ground and pasture haven't been converted to cropland, as the article implies. The 19 percent increase in corn acres in 2007 came from existing cropland, not hay ground, pasture, wetlands, etc. Specifically, the additional corn acres came from ground previously planted to soybeans and cotton.

There is significant disagreement within the scientific community as to the causes of hypoxia in the Gulf of Mexico.

Most researchers admit that the science of hypoxia is severely lacking in breadth. To lay the issue at the feet of agriculture alone is disingenuous. Industrial emissions and discharge, unrestricted and poorly managed use of residential (lawn) fertilizers, and other sources likely play a more prominent role in hypoxia.

A number of new technologies and practices, such as the use of nitrogen inhibitors and variable application technologies, are making fertilizer use more efficient. Fertilizer prices are at record levels; why would a farmer want to apply any more fertilizer than is absolutely necessary?

The bottom line is this: Today’s farmers are better stewards of the land than any generation of farmers before them.

Farmers increasingly understand that satisfying the demands of a growing population must not come at the expense of ecological health, human safety or economic viability. U.S. producers will continue to seek improvements in efficiency, and embrace practices and products that lessen the environmental impacts of crop production.

Geoff Cooper Director, Ethanol & Business Development National Corn Growers Association

16

ETHANOL PRODUCER MAGAZINE MARCH 2008

BUSINESS&PEOPLE

Business& People Ethanol Industry Briefs Business

A “long-term humanitarian and social project” was launched in mid-December when Ireland-based Greenfield Project Management signed a framework agreement with Belarus to build a 550 millionliter-per-year (145 MMgy) ethanol plant.

The feedstock, mainly sugar beets and grains, will be grown on the site of the defunct Chernobyl Nuclear Power Station. This cultivation and production process will remove radioactive isotopes from the soil, using feedstocks that can’t be used in the food chain, said Greenfield chairwoman Ann McClain. Construction of the facility will begin after financing and an Environmental Impact Assessment are complete. EP

ICE delists former NYBOT ethanol futures contract The Intercontinental Exchange (ICE) has delisted the ethanol futures and options contract it originally inherited in its acquisition of the New York Board of Trade in mid-December. According to ICE spokeswoman Sarah Stashak, the move was warranted because the ethanol contract “had very low volume,” which didn’t make it useful to the industry for hedging strategies. The delisting follows in the footsteps of other exchanges that made similar moves. The Chicago Mercantile Exchange, following its merger with the Chicago Board of Trade, delisted its corn-based ethanol contract in September 2007. CME later delisted ethanol futures from its Globex electronic platform, leaving CME’s new CBOT acquisition as the only U.S.-based ethanol futures contract. EP

18

PHOTO: HAWKEYE ENERGY HOLDINGS

Belarus ethanol plant to benefit Chernobyl area

Hawkeye Energy Holdings’ latest partnership will allow ethanol from its ethanol plants, such as this one in Fairbank, Iowa, to reach consumers more easily through Iowa Northern Railway and Manly Terminal.

Manly Terminal, Northern Railway, Hawkeye partner Hawkeye Energy Holdings has partnered with Iowa Northern Railway and Manly Terminal LLC in order to more efficiently transport ethanol from its ethanol plants to consumers. Hawkeye currently has facilities operating in Iowa Falls and Fairbank, Iowa, which together produce 220 MMgy. Manly Terminal, a truck-to-rail facility, will store Hawkeye’s ethanol and provide additional transportation options from Hawkeye plants, while Iowa Northern Railway will connect Manly Terminal to the entire North American railroad network via its 165-mile short line. Hawkeye spokesman Nick Ryan said the contractual agreement will provide flexibility in transport from the plants to consumers and bolster logistical capabilities for his company. 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@bbibiofuels.com. Please include your name and telephone number in all correspondence.

Israeli firms invest in Colombian ethanol Merhav Ltd. has signed two agreements furthering the development of its sugarcaneto-ethanol project in Colombia. Merhav signed a memorandum of understanding for the acquisition of between 25 percent and 35 percent of the project by Colombia’s largest company Ecopetrol SA, one of the four principal petroleum companies in Latin America. Additionally, Ampal-American Israel Corp. agreed to supply Merhav with a $10 million loan for purchasing 11,000 hectares (27,000 acres) for sugarcane production and ethanol plant construction, while committing another $10 million future loan. The two companies also signed an option agreement to convert all or portions of the loan into a maximum of 35 percent equity. Yosef Maiman, chairman, president and chief executive officer of the Israelbased company, is the sole owner of Merhav.

EP

FUEL secures financing First United Ethanol LLC has secured $115 million in debt financing, including $15 million in working capital for its 100 MMgy ethanol facility under construction near Camilla, Ga. FUEL was represented by Baker & McKenzie LLP, which has worked to secure financing for several biofuels companies, including Imperium Renewables, a biodiesel company based in Washington. The New York branch of WestLB AG arranged the debt facilities, while Morgan Keegan & Co. acted as FUEL’s financial advisor. “Our partnership with Morgan Keegan & Co. and Baker & MacKenzie allowed us to successfully refinance this project, ensuring our competitive strength and completion in a timely manner,” said Anthony Flagg, chief executive officer of FUEL. EP

ETHANOL PRODUCER MAGAZINE MARCH 2008

BUSINESS&PEOPLE

Sponsored by

People

Business VeraSun names president

U.S. Water Services presents new RO platform U.S. Water Services has redesigned its reverse osmosis (RO) platform based on experience gained at approximately 40 ethanol plants, according to Mike Mowbray, the company’s marketing manager. The RO platform uses Grundfos vertical pumps with all stainless-steel-welded components. The platform is designed with a variable frequency drive, which efficiently controls the pressure and flow from the pump, potentially saving plants thousands of dollars in energy consumption each year. The stronger structure, and higher-quality materials and instrumentation minimize water usage while maximizing membrane performance, the company said. EP

Boiler technology receives patent The fluidized bed boiler system that has enabled current ethanol producer Corn Plus LLLP in Winnebago, Minn., to reduce its natural gas usage by half is now patented and available on the market. The biomass-fueled, steam production technology will be marketed, designed, installed and financed through a partnership of four companies: Interstate Power and Light Co., a subsidiary of Alliant Energy Corp.; Harris Cos., a mechanical contracting firm; AE&E-Von Roll Inc., a technology provider of steam-generating systems; and FCStone Carbon LLC. The first three companies patented the technology application, while FCStone Carbon will provide the marketing services and arrange financing options for ethanol producers interested in the technology. EP

One day before the Federal Trade Commission approved VeraSun Energy Corp.’s merger with U.S. BioEnergy, VeraSun Chief Financial Officer Danny Herron took the reins as president of the combined Herron company, which will retain the VeraSun name. Herron replaces Don Endres, who will remain the combined company’s chief executive officer, while U.S. BioEnergy President and CEO Gordon Ommen will serve as chairman. EP

SGS adds manager SGS North America Inc. recently appointed Howie Nelson as the company’s business development manager for alternative fuels. He will be managing a cross-divisional effort to provide services—construction verification, mechanical integrity inspections and systems, inbound grain grading and weighing, product testing, outsourced laboratory services, and International Standards Organization certifications—to the renewable fuels industry. EP

Hawkeye forms sales manager position Mark LaMond has accepted the newly formed position of national sales manager for Hawkeye Gold, a subsidiary of Hawkeye Energy Holdings. He will be responsible for leading the company’s ethanol sales activities. LaMond has 16 years of experience in sales management, most recently as vice president of sales for TributeDirect Inc. EP

ETHANOL PRODUCER MAGAZINE MARCH 2008

Stoel Rives appoints managing partner U.S. law firm Stoel Rives recently announced Robert Van Brocklin as the firm’s new managing partner. He will become chief executive officer and oversee the management of the firm’s 11 offices. Van Brocklin has been with the firm for more than 20 years. Before accepting his new position, he led the company’s Resources, Development and Environment practice group. EP

IRFA announces officers, directors Seven new directors will help to guide the Iowa Renewable Fuels Association in 2008 by serving one-year terms. They are: President Bill Couser of Lincolnway Energy; Vice President Denny Mauser of Western Iowa Energy; Secretary Nile Ramsbottom of REG Inc.; and Treasurer Mike Jerke of Quad County Corn Processors. Monte Shaw continues as IRFA executive director.

The IRFA also elected new officers, who include former IRFA President Walt Wendland of Golden Grain Energy and at-large member Bruce Rastetter of Hawkeye Renewables. EP

Layne joins Pacific Ethanol board Pacific Ethanol Inc. announced in late December the addition of Larry Layne to its board of directors. Previously, he was vice chairman of California-based Sanwa Bank until he retired. Layne has 37 years of experience from Sanwa Bank and Lloyd’s Bank California. His appointment follows the resignations of Robert Thomas and Dan Sanders in October. EP 19

we

like you Alternative thinking—focused on people, property, and the environment—can change the world. Your ethanol, bio-diesel, hydrogen, or low-sulfur diesel improves lives. Ansul’s revolutionary fire suppression systems protect them.

For the unique challenges you face, rely on like-minded thinkers who are uniquely qualified to suppress alternative fuels fires—Ansul.

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COMMODITIES REPORT Natural Gas Report

Does a recession mean lower natural gas prices?

Jan. 21—Over the past few months, several clients have asked if natural gas prices are likely to go down since it appears economic activity is slowing and we may actually be going into a recession.

It’s a reasonable question since energy demand is highly correlated with underlying economic activity, and demand changes impact prices.

To test the impact of economic activity on prices, we constructed a simple analysis correlating economic activity and natural gas prices over the past several years. The results are not overly sur-

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

prising. Economic growth and natural gas prices have been steadily increasing over the past nine years (see chart). However, natural gas price swings have been much more dramatic around the general upward price trend than the steady economic growth trends.

Natural gas price variability tends to reflect weather conditions such as hurricane activity, which can dramatically impact short term energy prices but not influence to any great extent economic growth.

It is clear that economic activity and natural gas prices are generally correlated. However, is the degree of correlation strong enough that one can say that prices will go down or not rise as fast if economic activity slows? The answer is truly an ambiguous maybe. Approximately 50 percent of natural gas price changes can be explained by changes in economic activity; however, the remaining 50 percent is due to other factors. The conclusion is that as economic activity slows—or drops—it will influence prices somewhat, but other factors will also have a significant influence.

Bottom line: with slowing economic activity, price increases will be mitigated somewhat, but other factors will still exert significant influence. EP Casey Whelan, vice president of strategic initiatives, can be contacted at cwhelan@usenergyservices.com.

Corn Report

Latest USDA report stirs market Jan. 22—The corn market buoyed as the January USDA wheat seedings and crop production report painted a bullish picture. The USDA dropped the U.S. corn yield by 1.9 bushels per acre to 151.1. Since 1984, when the yield falls from November to the release of the USDA's final report, the decrease averages 0.85 bushels. The past two years have seen a decrease of 1.3 bushels per acre. This indicates the presumed optimism by the market, traders, seed dealers and producers about the quality of the new genetics, only to be disappointed later.

The biggest effect on yield in 2007 was added corn acreage and that those acres were not as highly productive. Iowa and South Dakota yield was reduced by 4 bushels per acre compared to the prior year. North Dakota was reduced by 8 bushels per acre after seeing huge planted acres.

Keep in mind that this was the second-highest national yield since the 2004 average of 160.4 bushels per acre.

The other big component of the report was the additional 300 million bushels of corn expected to be utilized by the feed and residual sector. This was determined by the September through November disappearance as indicated by the Dec. 1 stocks. The end result saw ending inventory shockingly reduced by 359 million bushels, equating to an 11 percent carry-out-to-use ratio (2006 was 11.6 percent). This is what really helped aid the market to reach its limit potential and allow corn to very easily trade above $5 per bushel.

Wheat seedings came in less than the market had expected. Total 22

By Jason Sagebiel, FCStone

wheat seedings were recorded at 46.6 million acres (up 4 percent); however, the market expected wheat seedings to be 48.586 million acres. What does this mean? Many traders expected that with bigger wheat acres we would see the potential for more double-crop soybeans. Therefore, the conclusion would be that fewer wheat acres would yield less potential for soybean acres. Now the market encounters an even bigger battle for acres as we move into the much anticipated planting season. EP ETHANOL PRODUCER MAGAZINE MARCH 2008

COMMODITIES REPORT DDGS Report

By Sean Broderick, CHS Inc.

Export market remains strong Jan. 20â&#x20AC;&#x201D;As the last half of January began, DDGS continued its rollercoaster ride. After going up non-stop with the Chicago Board of Trade in December, and trading at greater than 100 percent the value of corn, it began to abate in January. While DDGS is generally at its strongest, relative to corn prices, in the December/January time period, this year was marked by strength due mainly to delayed plant starts and short covering.

Export demand for DDGS remains extremely strong, ostensibly due to the weak dollar, but also due to decreasing ocean transportation costs for all commodities. Bulk rates from the U.S. Gulf of Mexico to Asia are down almost 30 percent from the November high. This has created more distillers grains demand and trading

Regional Ethanol Prices (Monthly averages in cents per gallon)

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

REGION

SPOT

West Coast

242.861

236

233.49

Midwest

233.778

225.23

228.195

East Coast

239.972

----

245.769 Source: OPIS

volume in the Gulf and is expected to lead to a portion of bulk cargo being shipped to Asia. Demand from Canada remains extremely strong, but could be tempered by declining feeding margins in the northern market. Asian container business continues to be brisk and limited by container availability. Cash soymeal prices have taken a dramatic drop as crush economics favor maximum soybean processing, which weighs on DDGS in diets that favor it as a protein.

Going ahead, DDGS prices will be affected mainly by CBOT prices, but will also be impacted by the ability of sellers to keep up with the increasing supply in a summer market that is normally marked by substantially lower feed demand. EP

Regional Gasoline Prices (Monthly averages in cents per gallon)

REGION

SPOT

RACK

RETAIL

West Coast

238.979

248.393

320.458

Midwest

232.201

244.399

300.073

East Coast

239.59

246.826

307.071 Source: OPIS

DDGS Prices ($/ton) JAN. 2008

DEC. 2007

JAN. 2007

Minnesota

165

145

120

California*

215

205

164

Chicago, Ill.

165

155

125

Buffalo, N.Y.

165

157

138

Central Florida

201

185

LOCATION

151

*Central Valley

Source: CHS Inc.

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

LOW

CLOSE

Jan. 18, 2008

5.02 1/2

4.80 1/2

4.94

Dec. 18, 2007

4.36

4.31 1/4

4.32

Jan. 18, 2007

4.18

4.05 1/4

4.12 1/4

DATE

Ethanol Report

By Spencer Kelly, OPIS

Source: FCStone

Ethanol market cool, but blending heats up Jan. 18â&#x20AC;&#x201D;Spot ethanol markets cooled off from the highs reached in the early going of 2008. Still, most market watchers found ethanol markets somewhat surprisingly buoyant through the first month of 2008, given expectations of heavy supply.

Chicago spot ethanol held over $2.30 per gallon for prompt material, while more typical sales a week or so out were in the upper $2.20s per gallon. That was way down from prices that touched $2.50 per gallon shortly after New Year's Day, but about where spot prices ran just before Christmas.

One feature of ethanol markets in late 2007 and into early 2008 was prompt squeezes that popped up in various markets.

In late December it was Chicago with tight prompt supply boosting spots. In January New York had its turn when prompt ethanol sellers tacked a dime onto prices in one day.

Houston was the latest center of attention, especially after winter weather-related

barge delays. Dead-prompt ethanol bids in the Gulf of Mexico jumped to highs of $3 per gallon, but the market was highly illiquid as talk for later in the month ranged as wide as $2.50 to $2.80 per gallon by some accounts.

Ethanol was underpinned by strong blending economics that continued to bear fruit in new markets. Even at $2.30 per gallon in Chicago, where gasoline traded at the same time at around $2.16 per gallon, with the federal blender credit ethanol offered a 37-centper-gallon price advantage. While weekly U.S. DOE data revealed strong discretionary blending, new discretionary markets opened up in short order, including Marathon's addition of E10 to Florida terminals in Tampa and Port Everglades. EP For more information, contact OPIS Ethanol & Biodiesel Information Service at (888) 301-2645.

ETHANOL PRODUCER MAGAZINE MARCH 2008

Cash Sorghum Prices ($/bushel) DEC. 20, 2007 JAN. 31, 2007

JAN. 17, 2008

3.77 3.77 3.79 3.95 3.87 4.54

4.18 4.13 3.90 4.32 4.00 4.97

4.82 4.79 4.56 4.85 4.58 5.47

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

Source: Sorghum Synergies

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

DEC. 21, 2007

JAN. 21, 2007

NYMEX

7.89

7.23

6.89

N. Ventura

9.92

6.82

6.36

Calif. Border

8.03

6.91

6.27 Source: U.S. Energy Services Inc.

U.S. Ethanol Production Output (barrels/day) October 2007

452,000*

September 2007

434,000

October 2006

333,000

*all-time monthly high

Source: U.S. Energy Information Administration

23

VIEW FROM

THE HILL

Delivering on the Promise of Change As America gears up to elect its next president, Capitol Hill is abuzz with a new raison d’etre: change. After the Iowa caucuses and the New Hampshire primary, it is clear that Americans want just that. The status quo is no longer comfortable. Our addiction to oil sits on top of the list of items Americans wish to see changed.

Just 36 hours into the new year, petroleum prices reached the historic price of $100 per barrel. As they have done every year, gas prices will continue to rise, and Americans will continue to pay exorbitant prices at the pump.

Like the swallows returning to Capistrano, gas prices this spring will begin their upward march as America’s petrochemical refining complex continues to age and be strained, often beyond its capabilities. As is the case each year, a host of factors will be

Dinneen

blamed for rising prices, and you can be assured that ethanol will be one of them.

This year, however, such an argument will be difficult, if not impossible, to make. As the American Petroleum Institute reported in January, gasoline demand remained flat in 2007 compared to 2006. Petroleum imports actually decreased.

So what does this all mean?

While the oil industry wouldn’t dare admit it, the reason for this change in America’s energy consumption habits is due in no small part to the increasing availability and use of fuel ethanol. According to an analyst at investment firm Bear Stearns Co. Inc., the more than 400,000 barrels of ethanol produced each day in 2007 replaces the gasoline output of three average oil refineries. The dramatic increase of domestic ethanol production and use we will see in the coming years will continue to help meet growing demand for motor fuel, displacing a greater volume of imported oil and relieving the pressure on America’s oil refinery infrastructure.

This change in how America is fueling its future has come about not because of the benevolent nature of America’s petroleum industry, but because of the foresight and vision of leaders in the U.S. government. From President George W. Bush to every rank-and-file member of Congress, they have understood the consequences of the energy status quo.

They realize that steps must be taken today that begin the difficult task of diversifying America’s energy portfolio.

For the first time, America has a roadmap to begin that process. The Energy Independence and Security Act of 2007 took those logical and necessary first steps to address the impacts of increasing foreign oil dependence and global climate change.

As the candidates for president are finding out, promising change and delivering it are two very different things.

However, Americans stand ready, as does the U.S. ethanol industry. Together, we can change the course of America’s energy future.

Bob Dinneen President and CEO Renewable Fuels Association

24

ETHANOL PRODUCER MAGAZINE MARCH 2008

RFA UPDATE

RFA podcast now available The Renewable Fuels Association has launched a podcast, called “The Ethanol Report,” which covers issues important to the ethanol industry. The report is produced twice per month and posted on RFA’s “The Ethanol Report” blog.

Readily available podcasts include such topics as the Renewable Fuels Now coalition and consumer survey, the Informa study on the relationship between corn prices and the overall Consumer Price Index for food, the Energy Bill signing, and a look at what 2008 may hold for the ethanol industry.

“The Ethanol Report” is available by RSS feed subscription through any standard podcast subscription software or service such as iTunes or Yahoo Music Jukebox. Subscription information is available at http://www.ethanolrfa.org /the-ethanol-report-podcast.xml.

$100 oil underscores importance of investment in renewable fuels

Thank you from the National Ethanol Conference The Renewable Fuels Association would like to extend its sincere thanks to all those who attended the National Ethanol Conference in Orlando. It was a resounding success due in large part to those who participated.

The RFA would also like to thank those who work hard each year to make the NEC the premiere ethanol policy and marketing event that it has become. Specifically, the RFA would like to recognize the staff at BBI International for everything they do to ensure a seamless event.

We certainly hope to see all of you again next year in sunny San Antonio!

ETHANOL PRODUCER MAGAZINE MARCH 2008

www.ethanolRFA.org

Oil prices soared to more than $100 per barrel during the first days of 2008, setting a new intraday trading high. With oil being such an integral part of our economy—impacting everything from stock and food prices to diapers—this kind of volatility is the exact problem Congress addressed by passing the Energy Independence and Security Act of 2007 and investing heavily in new technologies like renewable fuels.

“Oil’s unprecedented rise to $100 a barrel underscores our economic and geopolitical vulnerability to depleting oil reserves,” said RFA President Bob Dinneen. “While developing new oil reserves is proving more difficult and expensive, the American ethanol industry is rapidly developing new cost-effective technologies that will greatly reduce our nation’s reliance on imported oil from unstable regions often hostile to the United States.

“The energy paradigm in this country and around the world is beginning to change. Volatile oil prices and dwindling supplies further emphasize the need to develop renewable alternatives. The American ethanol industry stands ready to help lead the revolution away from fossil fuels and to a more stable, sustainable energy future.”

25

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BIObytes Ethanol News Briefs ADM teams with MGSC, ISGS for carbon sequestration Archer Daniels Midland Co. has teamed with the Midwest Geological Sequestration Consortium and the Illinois State Geological Survey to capture and store carbon dioxide from the company’s ethanol plant in Decatur, Ill. In this project, wells will be drilled into the Mount Simon Sandstone, a rock formation with great potential for sequestering large volumes of carbon dioxide, at a depth of more than 6,500 feet. Carbon dioxide from the Decatur plant will be injected into the wells, and the safety and effectiveness of the storage will be monitored by MGSC.

Masada donates TVA biomass equipment to university Birmingham, Ala.-based Masada Resource Group LLC donated biomass pilot plant facilities and equipment that it recently purchased from the Tennessee Valley Authority, the nation’s largest public power company, to Auburn University in Auburn, Ala. The school will serve as Masada’s exclusive research and development platform, concurrently utilizing and refining a unique proprietary fractionation process from Ft. Lupton, Colo.-based PureVision Technology Inc. The platform seeks to enhance the conversion of municipal solid waste into ethanol, according to Masada Chief Executive Officer Donald Watkins.

Inventure Chemical completes cellulosic feasibility studies In the fourth quarter of 2007, Inventure Chemical, a Seattle-based biofuels technology developer, completed 20 feasibility studies to identify the highest-yielding and most cost-effective second-generation feedstocks for use in the company’s patent-pending biofuel conversion process. Fourteen of the studies were completed for companies growing algae, while the remaining studies consisted of analyses and market studies for agricultural waste streams. In the wake of these studies, Inventure is continuing to expand its biodiesel and ethanol research and development production facility.

INDUSTRYNEWS

Delta-T’s parent company files suit against company founders The July 2007 acquisition of Virginia-based Delta-T Corp. has erupted in a lawsuit and charges of material misrepresentation, fraud and misconduct.

Dutch energy giant Bateman Litwin NV asserts that Bibb Swain and son Rob Swain, founders of Delta-T, an ethanol process technology firm, forecasted profits of $8 million in 2007, but the company is actually projected to lose $73 million. Bateman Litwin purchased Delta-T for $45 million and nearly 12 million shares of Bateman Litwin stock.

Bateman Litwin filed suit Dec. 21 in U.S. District Court in Virginia after it “discovered that the financial and commercial situation of Delta-T was materially different from the status represented by the Swains at and as of closing,” the complaint stated. Bateman Litwin is seeking a return of the stock and unspecified damages, including a $15 million write-down of the purchase price due to the termination of Chief Executive Officer Rob Swain, who was let go in October. Bibb Swain continued at Delta-T as chief technology officer until late January when he was also fired. Delta-T itself isn’t a party to the suit and has declined to comment on the litigation.

“The Swains emphatically reject any suggestion of wrongdoing,” said their attorney Andrew Morris. “We will respond vigorously in our filings.

They have a long history and excellent reputation in the ethanol industry. They stand by their honorable conduct in the sale.”

The legal wrangling, major disputes with suppliers and language in the lengthy complaint alleging underperformance of many Delta-T contracts has the potential to spill over into the industry.

“Rumor has it that many of Delta-T's customers and vendors are starting to work around Delta-T so that in the event Delta-T fails to perform, plans can still proceed,” said one person currently collaborating with the company. “There is talk about internal turmoil leading to reduced support and slow response time to customer requests, but my projects are moving forward,” he said.

The causes of action allege that the Swains forecasted 2007 profits upon the completion of

engineering procurement technology and various engineering projects that didn’t materialize, and may lose $43 million.

Bateman Litwin settled one outstanding claim by a major electrical supplier that had threatened to hold several million dollars of equipment “hostage,” over numerous uncompensated change orders, the complaint stated. The $18 million debt was settled for an undisclosed sum, and the equipment was returned.

Another series of projects with The Industrial Co., a Colorado-based heavy industrial contractor, is losing money instead of garnering a substantial profit as forecasted by the Swains, according to the complaint. TIC Director of Corporate Relations Gary Bennett declined to comment on the status of the projects due to the pending litigation.

Bibb Swain launched Delta-T in 1984 and adapted his proprietary ideas for a new generation of molecular sieve technology to dehydrate alcohol.

According to Delta-T’s Web site, the company has completed 120 projects on five continents. At press time, Morris was planning to file his clients’ response to the lawsuit Feb. 20.

“Delta-T is now operating profitably under a new dedicated and experienced management team,” Bateman Litwin said. The company hired a new CEO and 20 key personnel. It estimates that up to $85 million may be needed to support DeltaT’s continued operations.

One strange aspect of the case is Bateman Litwin's own Web site announcing the lawsuit. On Dec. 24, three days after it filed the lawsuit, the company stated that Delta-T “was operating profitably since the date of acquisition.” Morris responded, “So they’re telling the world in this complaint that based on their accounting, they project these huge losses, but they’re telling their shareholders that it was profitable from the date of acquisition?”

continued on page 30

28

ETHANOL PRODUCER MAGAZINE MARCH 2008

INDUSTRYNEWS

One U.S. state implemented an E10 mandate at the start of 2008, while several others are implementing or considering similar policies.

Missouri’s E10 mandate took effect Jan. 1 with few problems. “We’ve been testing samples out in the field, and everyone is complying,” said Ron Hayes, fuel quality manager in the Missouri Department of Agriculture Weights & Measures Division. He added that his department filed an emergency rule that relaxed volatility standards and cleared up language on distillation temperature standards that have been in effect for some time.

In anticipation of the mandate, regional pipeline company Teppco Partners LP put its new 50,000-barrel ethanol storage tank into service Jan. 1 at its terminal in Cape Girardeau, Mo. “This will make it more efficient for drivers,” said Public Relations Director Rich Rainey.

Teppco’s terminal in Cape Girardeau is the company’s first to have ethanol-blending capability.

Teppco has six terminals with truck-loading capability along its Gulf Coast-Midwest pipeline system.

With the mandate in effect, Missouri Gov. Matt Blunt recently proposed to boost E85 usage in the state through a $2 million tax incentive program designed to increase the number of gas stations offering E85. The tax credits would help to offset the cost of modifying pumps—or installing new pumps or tanks—to dispense E85, which can range from $3,000 to $40,000.

Blunt also proposed a new state income tax deduction equal to the lesser of $1,500 or 10 percent of the purchase price for consumers who purchase qualifying hybrid vehicles. A third proposed measure is an income tax credit of 25 cents per gallon of E85 purchased in the first year, 20 cents per gallon in years two and three, and 15 cents per gallon in each subsequent year, with a maximum of $500 per taxpayer per year.

On the West Coast, counties in Oregon began implementing the state’s E10 mandate in

PHOTO: CASCADE GRAIN PRODUCTS LLC

E10 mandates in effect, under consideration

Once operational, Cascade Grain Products LLC will produce 108 MMgy of ethanol in Clatskanie, Ore., to help the state meet its E10 mandate. Start-up is slated for April.

mid-January. Nine counties in northwest Oregon were the first required to meet the mandate by Jan. 15. By the middle of September, all gas stations in the state will be required to offer E10. The Oregon Biofuel Mandate, passed in the 2007 legislative session, requires E10 blends once in-state ethanol production reached 40 MMgy. Pacific Ethanol-Columbia LLC, a 35 MMgy ethanol plant in Boardman, Ore., is currently operating. A second plant, Cascade Grain Products LLC in Clatskanie, Ore., is slated to bring 108 MMgy on line this spring.

In the Southeast, Georgia scheduled a public hearing Feb. 12 to gather feedback for proposed changes to its fuel-blending standards, which may allow for more ethanol usage. In anticipation of Georgia’s changes, Eco-Energy Inc. made arrangements with Trimac Transportation Inc. for ethanol storage and handling in Fairburn, Ga. Florida is also making progress with similar adjustments in language and specifications, and in anticipation, Kinder Morgan Inc. is increasing its ethanol storage and handling facilities in that state.

ETHANOL PRODUCER MAGAZINE MARCH 2008

—Susanne Retka Schill

29

BIObytes Ethanol News Briefs continued from page 28

ICMB puts ethanol in Rose Bowl spotlight The Illinois Corn Marketing Board is celebrating a victory after a unique ad campaign that was implemented during the Rose Bowl football game in Pasadena, Calif. The ICMB displayed 200 highimpact, single-message posters throughout the stadium featuring pro-ethanol statements accompanied by a Web site address for more information. Posters were placed in high-traffic areas, from hallways to urinal stalls. ICMB Communications Director Mark Lambert said the campaign was extremely successful. More than 93,000 people attended the game, and additional post-game media exposure has further boosted ICMB’s anticipated impact.

Direct Fuels automates storage terminal Direct Fuels, one of north Texas’ largest independent regional fuel distributors, has automated its new ethanol terminal in Euless, Texas, using Data Transmission Network’s Guardian3 terminal automation system. The system will deliver real-time continued on page 32

INDUSTRYNEWS

Denaturant pricing movement affects blend volume With the leeway in ASTM D 4806-07 that allows ethanol denaturant to vary between 2 percent and 5 percent, producers gauge prices and adjust denaturant blend concentrations accordingly. Recent pricing in natural gas and ethanol markets have led to blending denaturant toward the minimum volume allowable.

In mid-January, Data Transmission Network ethanol analyst Rick Kment said there have been a lot of pricing moves in the denaturant market lately. With margins still narrow after modest ethanol pricing recoveries, ethanol producers can save “a couple of cents per gallon” by navigating up or down denaturant blend concentrations in their final product, depending on what benefits the bottom line. “At a time when margins are so thin, that could be the difference between making a profit or not,” Kment said. For a 100 MMgy plant, a consistent savings of 2 cents per gallon could equate to $2 million over the course of a year.

Ethanol is denatured with natural gasoline to render the product undrinkable. Natural gasoline is a liquid hydrocarbon mixture from casinghead gas, which is natural gas obtained from the top (casinghead) of an oil well, as opposed to liquid

natural gas from a natural gas well. The mixture largely consists of pentanes, which are saturated hydrocarbons with five carbon and 12 hydrogen atoms. “The denaturant market is a derivative of the natural gas market,” Kment told EPM. “It’s hard to find spot prices for natural gasoline, but it usually follows the [liquefied petroleum gas] price.” Unlike ethanol prices, which trade on a per-gallon basis, natural gasoline is sold in milliontherm units (a therm is 100,000 British thermal units). In mid-January, the natural gasoline price per one-million therms was slightly more than $8.

“We’re at the high end of where we have been recently,” Kment said. “While in the second half of 2005 it was significantly higher than what it is today, in August 2007 the natural gasoline price dipped down to $5.46.” Prices rose after that with a small dip in December 2007 but were back up to $8.17 at press time.

The ASTM maximum denaturant spec for ethanol recently changed from 4.76 percent on a volume basis to 5 percent.

—Ron Kotrba

INDUSTRYNEWS

Flexible-fuel vehicles (FFVs) may soon be more flexible, thanks to research at Lotus Engineering, a division of U.K.-based Group Lotus PLC. Researchers at the company’s headquarters in Norwich, England, are converting a Lotus Exige to run on gasoline, ethanol and methanol, according to Tim Holland, director of motor sports initiatives. He said the company’s U.S. office in Michigan is likely to follow suit this year.

The conversion is on the heels of the company’s similar work by both offices to convert a Lotus Exige to an FFV. The standard Exige has a supercharged 1.8-liter, 4-cylinder Toyota engine that has been fitted to the sports car body. “The addition of ethanol was [part of] a joint research and development promotional project to show that an alternative fuel vehicle doesn’t have to be boring,” Holland said.

Holland said the initial conversion of the Exige to an FFV wasn’t overly complicated; it took approximately four weeks of mechanical work and software changes. “We had to change fuel lines to make them ethanol-compliant, and we added sensors, which we got from another [original equipment manufacturer],” he said.

“We did the calibration ourselves, so it was easy for us to make the software changes required to switch automatically, depending on the gasoline/ethanol mix. We also had to add two fuel injectors, and we added a heavy-duty clutch

PHOTO: TIM HOLLAND, LOTUS ENGINEERING INC.

Tri-fuel engine research underway

The 265E is a Lotus Exige that was converted to an FFV for research and demonstration purposes. When fueled with E85, the FFV gets 45 more horsepower than when fueled with gasoline.

because of the increased engine performance and fuel flow requirements.” After the conversion and when fueled with E85, the car moved from a 220-horsepower engine to 265 horsepower. The demonstration vehicles are known as 265E. Lotus doesn’t have plans to bring either the E85 Exige or the tri-fuel Exige into production at this time, but it has two reasons for developing these systems, Holland said. First, Lotus is interested in expanding the capabilities of its own product. “We do it for our own research benefit, so we can understand alternative fuels' emissions and performance benefits,” he said.

Secondly, because the engineering division of Lotus is largely a consulting company, the cars also showcase the company’s work to potential

clients. Lotus Engineering offers full engineering services capable of taking a project from initial concept and product design through development, testing and prototype building. It can also handle production and production support, and is thus employed by major car manufacturers.

Lotus is involved in other emerging vehicle technologies and ethanol has its challenges, but Holland said there’s still life in the traditional combustion engine that can operate on alternative fuels. That’s why the company is expanding its research to ethanol and other alternative fuels.

—Anduin Kirkbride McElroy

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ETHANOL PRODUCER MAGAZINE MARCH 2008

31

BIObytes

INDUSTRYNEWS

Ethanol News Briefs continued from page 30

inventory updates for Direct Fuels and provide activity reports to its customers for their inventory and accounting needs.

The system can automatically generate and e-mail reports to customers. The terminal will provide bulk storage of ethanol for delivery to the Dallas-Ft. Worth area.

Xethanol extends NREL CRADA, sells projects New York-based Xethanol Corp. has extended its Cooperative Research and Development Agreement on cellulosic ethanol feedstocks with the National Renewable Energy Laboratory. The original agreement began in January 2005 for research on the clean fractionation of cellulosic feedstocks into component parts to reduce fermentation time and decrease energy costs. Seperately, the company decided to sell its cellulosic ethanol projects in Augusta, Ga., and Spring Hope, N.C., which were to be colocated with corn-based ethanol facilities. Instead, Xethanol bought Consus Ethanol LLC, a corn-based ethanol project in Pittsburgh. continued on page 34

32

Ethanol industry faces short-term challenges in 2008 With the Energy Independence & Security Act of 2007 signed into law, which increased the renewable fuels standard to 9 billion gallons in 2008, industry organizations are preparing to face any challenges that may result from the new legislation this year.

According to Brian Jennings, executive vice president of the American Coalition for Ethanol, the organization’s main focus in 2008 will be to aggressively advocate higher nationwide blends of ethanol, an issue it has been vehemently addressing for quite some time before the new energy bill was enacted. So far, E10 is the blend of choice in most states, but Jennings said he would like to see that increased to at least E20 or higher by the end of this year.

Minnesota is the only state to publicly support an E20 blend.

“Our top priority is absolutely to do whatever it takes to get these mid-level blends of ethanol approved,” Jennings said. “Whether it can happen in 2008 or not is an open question, but at the very least, we’ve got to build momentum and support for mid-level blends.” Other ACE priorities include the installation of more blender pumps in key parts of the country, and education and outreach to regulators, lawmakers and automakers.

In order to implement E10 or higher

ethanol blends, improvements in existing fuel infrastructure must be aggressively addressed, according to Al Mannato, fuels issues manager for the American Petroleum Institute. Those improvements could provide terminals with more Jennings efficient blending and storage. “Our focus [in 2008] is going to be working with the terminal operators and owners to get them ramped up with this [ethanol] blending equipment and with the storage capacity,” Mannato said. “I think the logistics are going to be critical as we move into this next phase … getting the infrastructure right, getting the terminals ready, and making sure that there are enough transport trucks and rail to support the growing demand for ethanol.”

Continued testing of E10 and higher blends is needed as infrastructure improvements are made, according to Mannato. “We think it’s critically important that testing be done to demonstrate that an E10-plus blend would work in the consumer vehicle fleet,” he said.

—Bryan Sims

ETHANOL PRODUCER MAGAZINE MARCH 2008

INDUSTRYNEWS

The Kansas Department of Agriculture wants consumers and retailers to have more choices when it comes to filling flexible-fuel vehicles (FFVs) with ethanol. The department has initiated a pilot program allowing retailers to install blender pumps that offer E20, E30 and E40, along with E85, which has been available for FFVs for some time. Similar pumps are already being used in South Dakota and Minnesota.

Kansas Secretary of Agriculture Adrian Polansky said the program is an opportunity to provide choices in the marketplace. “I think it will be beneficial to consumers and will allow us to market a larger quantity of ethanol,” he said, adding that the outcome of this project, which expires Jan. 1, 2009, will verify that current vehicle technology is adequate.

Only a few retailers have signed up for the program so far. Colwich, Kan.-based ICM Inc. was one of the first companies to show interest in the project. Governmental Affairs Director Greg Krissek said ICM is investigating the possibility of installing at least one blender pump in Colwich and might have something in place by the beginning of March. ICM is working closely with the Kansas Department of Agriculture’s Weights

PHOTO: TAMMY SATRANG, FOUR SEASONS CO-OP.

Kansas to test consumer reaction of E20, E30

Blender pumps, similar to this one currently being used in Britton, S.D., may soon be available to consumers in Kansas.

and Measures Division to ensure that any pumps installed will accurately dispense the correct amount of ethanol from the start.

Getting the proper percentage of ethanol from the pump to the consumer’s tank has

been an issue for retailers in other states.

However, Tim Tyson, program manager of the Kansas Weights and Measures Division, said his office is prepared to work with retailers to make sure pumps are performing accurately from the start so that no additional costs or delays will be accrued.

Another concern of retailers is that consumers will unknowingly pump a higher blend of ethanol, such as E20 or E30, into their non-FFV. Polansky said pumps will feature bright orange labels stating that any blend higher than E10 is for FFVs only.

South Dakota was the first state in the nation to allow retailers to install blender pumps. Tammy Satrang, chief financial officer and credit manager of Four Seasons Co-op in Britton, S.D., said that while there were initial issues with the South Dakota Weights and Measures Program, there have been no complaints from customers in the nearly two years since a blender pump was first installed. In fact, the co-op has plans to install another pump in Doland, S.D., within the next year.

There are also blender pumps in Watertown, Redfield and Webster, S.D., and Ortonville and Belgrade, Minn.

—Kris Bevill

BIObytes

INDUSTRYNEWS

Ethanol News Briefs continued from page 32

Ethanol taxes rise in Michigan The Michigan E85 motor fuel tax break ended Jan. 1 after the state legislature failed to provide appropriations required by statute to continue. For fuels containing at least 70 percent ethanol, the tax increased 7 cents per gallon (cpg) from 12 cpg to 19 cpg. Terry Stanton with the state treasury told EPM discussions are underway between treasury officials and legislators on how to reinstate the tax break.

Delek offers E10 blends in Texas, Tennessee In December, Delek Refining Ltd. announced its intent to offer E10 at its Tyler, Texas, refinery starting Jan. 1. Its subsidiary Mapco Express Inc. began offering E10 at approximately 180 of its unbranded retail fuel and convenience stores in Tennessee in December. Mapco will continue to pursue opportunities for ethanol blending at the remainder of its retail fuel and convenience stores, the company said. EP

34

Ethanol report piques public’s interest A report on the current and future state of ethanol production in Illinois has attracted a great deal of attention since being posted on the University of Illinois FarmDOC Web site in November.

The report, “Corn-Based Ethanol in Illinois and the U.S.,” was produced by the College of Agricultural, Consumer and Environmental Sciences, and was downloaded more than 30,000 times in the first month it was available. “I was surprised at the number of downloads, particularly given that we are talking about more than 160 pages per download,” said Robert Hauser, chairman of the Department of Agricultural and Consumer Economics. Most of the report’s 14 authors are members of Hauser’s department.

Four of the report’s nine chapters examine the economics of ethanol. They highlight ethanol’s position in the energy and agricultural sectors, the economics of dry-grind plants with a case study of the financial performance of an ethanol plant, and how an ethanol plant affects local economies.

Another chapter examines the use of distillers grain by livestock and poultry. Two chapters examine the science and economics of alternative feedstocks such as switchgrass and Miscanthus. The final chapter looks at the role of policy and politics in the ethanol industry. “The point of the report is not to advocate for or discourage ethanol,” Hauser said.

“It was an attempt to be as objective as possible in analyzing some background information and potential future scenarios.”

The genesis of the report came when university Chancellor Richard Herman met with farmers at a large public event, according to Hauser. Many of the questions Herman fielded were about ethanol. “When he came back to campus, he asked, ‘What do we know?’” Hauser said. “So within a year, we were able to put together what are basically nine white papers in some sort of reasonable order, and we published it on the FarmDOC Web site.”

With the role of ethanol growing in the agriculture and energy sectors, the university will continue to expand its expertise in ethanol issues. While a follow-up to the entire report isn’t planned, the individual researchers will continue to investigate and publish economic and scientific research on ethanol, Hauser said. “I can’t imagine there being a higher-profile issue among farmers right now,” he said. “The prices we are seeing for our major crops are being driven mostly by ethanol. That makes ethanol just about the hottest topic around.”

The report can be downloaded at www .farmdoc.uiuc.edu/policy/research_reports/ ethanol_report/index.html.

—Jerry W. Kram

ETHANOL PRODUCER MAGAZINE MARCH 2008

INDUSTRYNEWS

Ethanol project developers alter courses Plans for three more ethanol plants have gone by the wayside amid rising construction costs, high feedstock prices and a sputtering economy. Developers of a fourth project are instead refocusing their efforts to buy a bankrupt facility.

Western Illinois Ethanol Project LLC scrapped plans to build a 55 MMgy drygrind facility near Griggsville, Ill., three months after awarding $37 million in building contracts. WIEP is a subsidiary of Knoxville-based Heartland Ethanol LLP. “We’re in a holding pattern right now,” said Heartland Chief Executive Officer Walker Filbert. “The financial markets are so topsyturvy that we decided to postpone the closing that we were going to have at the end of October [2007] because the terms were just not good. As much as we wanted to build our dream house, we didn’t want to enter into a mortgage that was going to come back and bite us later.”

Filbert said Heartland’s contracts remain viable, and the company has $30 million in assets and cash on hand. “We’re looking at $75 million in debt financing,” he said.

“We’ve lined up about $40 million of taxexempt financing that’s still available to us.”

Another venture has stopped planning

altogether. Kansas City-based Alternative Energy Sources Inc. let an option to purchase the Kankakee Industrial Park in Kankakee, Ill., expire after six months.

“We’re not planning to go forward in building that plant,” said AES President Mark Beemer. “Obviously the financing of ethanol plants is much more difficult today because of $5 corn. The bigger reason is that our company is being acquired by another entity, so because of the transaction we can’t really say much.”

In Idaho, cost overruns approaching $13 million caused Renova Energy of Idaho LLC, a 21 MMgy plant under construction, to be put on hold in early 2008. In late December, share trading for London-based parent company Renova Energy PLC was halted on the London Stock Exchange as the company endeavored to clarify its financial footing. Although trading resumed three weeks later, Renova shares slumped 66 percent. Meanwhile, costs for the plant in Heyburn, Idaho, escalated to nearly $59 million.

The corn-based ethanol facility was slated for a March start-up. The company was also building an adjacent waste-to-energy facility that would use an anaerobic digester

ETHANOL PRODUCER MAGAZINE MARCH 2008

to burn manure from a local feedlot and power the ethanol process. Plans were to sell surplus electricity to a local power grid, ensuring an external income stream for the plant. “[Renova is] working with their bankers to arrange financing to get the project back on its feet,” said Graham Browne, president of ADI Systems Inc., the New Brunswick company that built the anaerobic digesters in Heyburn. “[The waste-to-energy facility] was 98 percent complete. We were two weeks from finishing when we got the notice to stop work, so we would obviously like to see it finished and to become a producing plant. Our contract came in under budgeted costs.”

The actual plant construction incurred the cost overruns, Browne said. He anticipates a two-month shutdown while Renova arranges financing. An outside firm examined the construction expenses and will issue a report for financiers.

In Omaha, Prime BioSolutions tabled a proposed plant in Nebraska to concentrate on bidding for the bankrupt E3 BioFuels facility near Mead, Neb. —Sarah Smith

35

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Ethanol Plant Construction Cost of Doing Business n the past four years, costs for all construction inputs have increased.

That’s no secret, but it is significant that nearly all inputs have outpaced the 13 percent rate of inflation over the same time, a situation not everyone predicted. For contractors, figuring the rising costs of materials into proposals can be problematic.

Since December 2003, the cost of all construction inputs has increased by 23 percent, or about 5.5 percent per year, according to the Bureau of Labor and Statistics. The only period of time that exceeds this statistic in terms of rapid cost increases was between 1977 and 1981 when construction inputs rose by an average of 8.25 percent per year. However, even during those years, with inflation numbers reaching into the 10 percent range, the gains in construction inputs seemed moderate.

No inflationary issues are spurring today’s increases, but the cost of energy may be one of the culprits. Everyone in the construction industry is at the mercy of commodities providers. As prices for commodities rise, contractors find themselves paying higher prices, or looking further away for more affordable products. Since the cost of energy for shipping rises, the savings can easily disappear.

At press time, light sweet crude oil for February delivery topped $90 per barrel. Although it’s not the only cost for commodities producers, it’s certainly a driving factor. According to BLS statistics, between December 2003 and December 2007, crude petroleum’s cost increased by 198 percent for consumers. The only typical commodity to outpace petroleum over the same period was copper ore. In January 2008, the average cost at the pump for a gallon of No. 2 diesel was approaching $3.50.

Moving into spring with the soaring cost of building materials, not many new projects are being announced. A few projects that started construction

I

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

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

in late 2006 and mid-2007 have been verified this month. Ethanol Grain Processors LLC in Obion, Tenn., is on schedule to bring 100 MMgy of ethanol on line in the fourth quarter of 2008. Hawkeye Renewables has two 110 MMgy plants currently under construction in Shell Rock and Menlo, Iowa.

Three projects completed construction or expansion in January.

Heartland Grain Fuels LP in Aberdeen, S.D., finished its expansion from 8 to 48 MMgy of capacity. White Energy Hereford LLC announced the completion of the Lonestar State’s largest ethanol plant in Hereford, Texas. Poet Biorefining-Leipsic opened its 60 MMgy plant in Leipsic, Ohio.

—Craig A. Johnson

EPM will remove seemingly inactive projects from this list if: 1. Our good faith attempts to contact project representatives go unanswered for three straight months.

2. Through exhaustive means, we are unable to verify the continued advancement of a project.

3. The Renewable Fuels Association, as well as project representatives, are notified and given a reasonable amount of time to verify the project’s current status.

To provide updates to this list, contact Craig A. Johnson at (701) 7468385 or cjohnson@bbibiofuels.com.

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

undeclared undeclared N/A November 2006 2008

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

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

RPMG CHS Inc. N/A July 2006 February 2008

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

Absolute Energy LLC Location Design/builder Process technology Capacity Feedstock Synopsis of progress Piping and electrical work

38

St. Ansgar, Iowa Fagen Inc. ICM Inc. 100 MMgy corn continues at the site.

Coshocton, Ohio The Industrial Co. Delta-T Corp.

60 MMgy corn

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

undeclared undeclared undeclared July 2006 2008

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

undeclared undeclared undeclared October 2006 April 2008

Altra Indiana LLC Cloverdale, Indiana F.A. Wilhelm Construction Vogelbusch 88 MMgy corn

ETHANOL PRODUCER MAGAZINE MARCH 2008

Construction Represents 4.67 Billion Gallons Annually

Altra Nebraska LLC Location General contractor Process technology Capacity Feedstock

Carleton, Nebraska undeclared Vogelbusch 113 MMgy corn

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

undeclared undeclared undeclared undeclared spring 2008

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

Calgren Renewable Fuels

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

Synopsis of progress N/A

The Andersons Marathon Ethanol LLC Location Design/builder Process technology Capacity Feedstock

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

Greenville, Ohio ICM Inc. ICM Inc. 110 MMgy corn

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

Cardinal Ethanol LLC The Andersons Inc. The Andersons Inc. undeclared September 2006 first quarter 2008

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

Location Design/builder Process technology Capacity Feedstock

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

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

Murex CHS Inc. N/A February 2007 summer 2008

Synopsis of progress In mid-January, the administration building was being enclosed. Fermentation tanks are nearly complete, and structural steel in the process building continues to be placed. Steel for the energy center, dryers and thermal oxidizers is also going up.

Biofuel Energy Corp.

Location General contractor Process technology Capacity Feedstock

Fairmont, Minnesota The Industrial Co.

Delta-T Corp.

110 MMgy corn

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

Cargill Inc. Cargill Inc. N/A September 2006 second quarter 2008

PHOTO: HEATHER CRAIG, CARDINAL ETHANOL LLC

Synopsis of progress Electric, water and gas lines are complete. Piping and electrical work is complete in the process building. The fermentation area is nearly complete mechanically. The distillers grains, ethanol load-out and grain handling areas are 90 percent complete, along with cooling towers and dryers.

Biofuel Energy Corp.

Location General contractor Process technology Capacity Feedstock

Wood River, Nebraska The Industrial Co. Delta-T Corp.

110 MMgy corn

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

Cargill Inc. Cargill Inc. N/A May 2006 second quarter 2008

Synopsis of progress Piping and electrical work in the process building is complete. Electric, water and gas lines are complete. The distillers grains, ethanol load-out and grain handling areas are 90 percent complete, along with cooling towers and dryers.

Cardinal Ethanol LLC

Cascade Grain Products LLC

Bridgeport Ethanol LLC Location Design/builder Process technology Capacity Feedstock

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

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

Synopsis of progress N/A

ETHANOL PRODUCER MAGAZINE MARCH 2008

undeclared undeclared undeclared September 2007 October 2008

Location General contractor Process technology Capacity Feedstock

Clatskanie, Oregon JH Kelly Ethanol Delta-T Corp.

108 MMgy corn

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

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

Synopsis of progress All tanks are complete, and the grain storage bins were expected to be complete by the end of January. Most of the construction work is now centered on piping and electrical work with the plant expected to be mechanically complete by April 15.

39

Castle Rock Renewable Fuels LLC Location Design/builder Process technology Capacity Feedstock

Necedah, Wisconsin Fagen Inc. ICM Inc. 50 MMgy corn

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

Ethanol Grain Processors LLC Murex CHS Inc. undeclared September 2006 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

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

Synopsis of progress All tanks and cooling towers are complete. The distillers grains area is finished, and construction of the grain silos is underway. Structural steel is being placed throughout the site. Overall construction is more than 60 percent complete.

Center Ethanol Co. LLC Location General contractor Process technology Capacity Feedstock

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

First United Ethanol LLC

Sauget, Illinois

Ethanol marketer T.E. Ibberson/McCarthy Industrial Distillers grains marketer Delta-T Corp.

Carbon dioxide marketer 50 MMgy Broke ground corn Target start-up date

Center Oil Co. undeclared undeclared October 2006 January 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

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

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

Eco-Energy First United Ethanol undeclared January 2007 summer 2008

Synopsis of progress N/A

Cilion Ethanol LLC Location General contractor Process technology Capacity Feedstock

Keyes, California Harris Construction Praj Industries 55 MMgy corn

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

undeclared undeclared N/A July 2006 second quarter 2008

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

undeclared undeclared N/A October 2006 March 2008

Synopsis of progress N/A

Courtland, Wisconsin Agra Industries Delta-T Corp.

50 MMgy corn

Synopsis of progress The company is training employees in preparation of a March 1 corn-grinding date. Most work is limited to electrical and piping.

40

PHOTO: DIDION ETHANOL LLC

Didion Ethanol LLC Location General contractor Process technology Capacity Feedstock

Didion Ethanol LLC

ETHANOL PRODUCER MAGAZINE MARCH 2008

Greater Ohio Ethanol LLC Location General contractor Process technology Capacity Feedstock

Lima, Ohio Alberici Constructors Inc. Benchmark Products Inc. 54 MMgy corn

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

undeclared undeclared N/A September 2005 2008

Location Designer/builder Process technology Capacity Feedstock

Synopsis of progress N/A

Menlo, Iowa Fagen Inc ICM Inc. 110 MMgy corn

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

Synopsis of progress According to the company, progress is being made, and the project is on schedule.

GreenField Ethanol Location General contractor Process technology Capacity Feedstock

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

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

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

Location Designer/builder Process technology Capacity Feedstock

Commercial Alcohols Commercial Alcohols

undeclared October 2006 fourth quarter 2008

Synopsis of progress Structural steel and mechanical installation in the energy and process areas continues. Some work continues on the field-erected tanks.

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

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

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

Synopsis of progress According to the company, progress is being made, and the project is on schedule.

Expansion Complete

Heartland Grain Fuels LP

Location Design/builder Process technology Capacity Feedstock

Aberdeen, South Dakota ICM Inc. ICM Inc. from 8 MMgy to 48 MMgy corn

Ethanol marketer Aventine Renewable Energy Distillers grains marketer Dakotaland Feeds Carbon dioxide marketer N/A Start date September 2006 Completion date January 2008

PHOTO: GREENFIELD ETHANOL

Synopsis of progress Expansion is complete, and the facility is producing. Congratulations Heartland Grain Fuels LP!

Holt County Ethanol LLC Location General contractor Process technology Capacity Feedstock

O'Neill, Nebraska Adams Construction Vogelbusch 100 MMgy corn

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

undeclared undeclared N/A July 2007 late 2008

Synopsis of progress N/A

GreenField Ethanol

ETHANOL PRODUCER MAGAZINE MARCH 2008

41

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

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

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

Synopsis of progress Structural steel work is more than 80 percent complete. All equipment in the energy center has been placed, and duct work is underway. Construction of two large fermentation tanks continues. In mid-January, work began on the water treatment facility. The company expected to enclose the buildings by the end of the month.

Location Design/builder Process technology Capacity Feedstock

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

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

undeclared undeclared N/A August 2006 early 2008

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

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

Ethanol marketer

Poet Ethanol Products Nesika Energy LLC N/A December 2006 February 2008

Synopsis of progress N/A

Kansas Ethanol LLC Location Design/builder Process technology Capacity Feedstock

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

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

Poet Ethanol Products

undeclared N/A January 2007 April 2008

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

Atkinson, Nebraska Delta-T Corp.

Delta-T Corp.

44 MMgy corn

Synopsis of progress N/A

Levelland/Hockley County Ethanol LLC Location Design/builder Process technology Capacity Feedstock

Levelland, Texas ICM Inc. ICM Inc. 40 MMgy corn/milo

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

Nesika Energy LLC Lansing Trade Group Lansing Trade Group Chaparral Energy Inc.

January 2007 February 2008

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

ICM Inc. 10 MMgy corn

Carbon dioxide marketer Broke ground Target start-up date

Synopsis of progress Vendors are training operators in preparation for start-up. Most construction work is focused on the finishing touches, such as instrumentation, minor piping and electrical work.

Marquis Energy LLC Location Design/builder Process technology Capacity Feedstock

Scandia, Kansas

Free Country Design & Construction Distillers grains marketer

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

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

Murex CHS Inc. N/A September 2006 March 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

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

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

undeclared undeclared undeclared August 2007 2008

Synopsis of progress Roads are complete, and work on the fire loop and rail spur have begun. The company intended to begin pouring concrete in April or May when winter weather conditions improve.

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www.ronningengineering.com dryerinfo@ronningengineering.com

913-239-8118 To l l f r e e : 8 6 6 . R O N N I N G 42

ETHANOL PRODUCER MAGAZINE MARCH 2008

Northeast Biofuels LLC Location General contractor Process technology Capacity Feedstock

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

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

Noble Americas Corp.

Perdue Farms BOC Gases July 2006 2008

Synopsis of progress N/A

Location General contractor Process technology Capacity Feedstock

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

50 MMgy corn

Kinergy Marketing Pacific Ag Products LLC

undeclared April 2007 third quarter 2008

Synopsis of progress Steel erection continues on bins and tanks.

Northwest Renewable LLC Location General contractor Process technology Capacity Feedstock

Longview, Washington Makad Construction Corp.

Lurgi Inc. 55 MMgy corn

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

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

Synopsis of progress Foundation work continues. Crews are laying pilings despite wet, cold weather in the Pacific Northwest.

Location General contractor Process technology Capacity Feedstock

Fergus Falls, Minnesota Harris Mechanical Delta-T Corp.

57.5 MMgy corn

Hereford, Texas Lurgi Inc. Lurgi Inc. 115 MMgy corn

Ethanol marketer Aventine Renewable Energy Distillers grains marketer Panda Ethanol Carbon dioxide marketer undeclared Broke ground August 2006 Target start-up date first quarter 2008

Synopsis of progress N/A

Otter Tail Ag Enterprises LLC Location General contractor Process technology Capacity Feedstock

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

RPMG CHS Inc. N/A October 2006 March 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

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

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

Murex undeclared undeclared February 2007 spring 2008

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

Provista UBE Ingredients N/A November 2006 August 2008

Synopsis of progress N/A

Pacific Ethanol Magic Valley LLC Location General contractor Process technology Capacity Feedstock

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

Burley, Idaho Parsons RCI Inc. Delta-T Corp.

50 MMgy corn

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

Synopsis of progress Structural steel work is complete, and the process building is being enclosed.

Platinum Ethanol LLC Kinergy Marketing Pacific Ag Products LLC

undeclared February 2007 second quarter 2008

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

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

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

Poet Biorefining-Marion

Alexandria, Indiana Poet Design & Construction Poet Design & Construction 65 MMgy corn

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

Poet Ethanol Products

Poet Nutrition N/A February 2007 second quarter 2008

Synopsis of progress Overall construction was 78 percent complete at the end of January.

Plant Expansion

Location Design/builder Process technology Capacity Feedstock

Location Design/builder Process technology Capacity Feedstock

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

Poet Biorefining-Chancellor

Poet Biorefining-North Manchester

Chancellor, South Dakota Poet Design & Construction Poet Design & Construction from 50 MMgy to 100 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Target completion date

Poet Ethanol Products

Poet Nutrition N/A October 2006 third quarter 2008

Location Design/builder Process technology Capacity Feedstock

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

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

Renova Energy of Idaho LLC

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

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

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

Synopsis of progress Overall construction was 32 percent complete at the end of January.

Location Design/builder Process technology Capacity Feedstock

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

Synopsis of progress Overall construction was 32 percent complete at the end of January.

Poet Biorefining-Fostoria

Project Complete

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

Synopsis of progress Overall construction was 34 percent complete at the end of January.

Synopsis of progress Overall construction was 8 percent complete at the end of January.

Location Design/builder 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

Heyburn, Idaho Dilling Corp.

Katzen International 20 MMgy corn

Plant Expansion

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

Renova Energy Renova Energy Renova Energy February 2007 first quarter 2008

Synopsis of progress Renova Energy PLC has suspended construction on the Heyburn facility due to a “funding shortfall” caused by “cost overruns.”

Poet Biorefining-Leipsic Leipsic, Ohio Poet Design & Construction Poet Design & Construction 60 MMgy corn

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

Poet Ethanol Products Poet Nutrition N/A December 2006 January 2008

Synopsis of progress The plant began operations Jan. 10. Congratulations Poet Biorefining-Leipsic!

Siouxland Energy & Livestock Co-op

Location Design/builder Process technology Capacity Feedstock

Sioux Center, Iowa ICM Inc. ICM Inc. from 25 MMgy to 55 MMgy corn

Ethanol marketer Distillers grains marketer Carbon dioxide marketer Start date Target completion date

C&N Ethanol Marketing Farmers Co-op Society

N/A October 2006 2008

Synopsis of progress N/A

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ETHANOL PRODUCER MAGAZINE MARCH 2008

Southwest Iowa Renewable Energy LLC Location Design/builder Process technology Capacity Feedstock

Council Bluffs, Iowa ICM Inc. ICM Inc. 110 MMgy corn

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

Tharaldson Ethanol LLC Lansing Ethanol Group

Bunge undeclared November 2006 August 2008

Synopsis of progress The grain receiving silos and distillers grains silo are structurally complete with equipment being installed. The distillers grains building is 95 percent complete. Three fermentation tanks are substantially complete. Structural steel in the process area is going up, and all foundation and slab construction is complete. Work on the energy center slab and foundation is complete with dryers to be installed as soon as they arrive on-site.

Location General contractor Process technology Capacity Feedstock

Cambridge, Nebraska The Industrial Co. Delta-T Corp.

44 MMgy corn

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

The Scoular Co. N/A April 2006 2008

Location Design/builder Process technology Capacity Feedstock

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

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

Provista UBE Ingredients N/A November 2006 second quarter 2008

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

Superior Ethanol LLC Superior, Iowa Agra Industries Delta-T Corp.

50 MMgy corn

U.S. Bio Hankinson Ethanol marketer Distillers grains marketer Carbon dioxide marketer Broke ground Target start-up date

RPMG undeclared N/A July 2006 March 2008

Synopsis of progress N/A

Location Design/builder Process technology Capacity Feedstock

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

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

Provista UBE Ingredients N/A August 2006 second quarter 2008

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

Terra Grain Fuels Inc. Location General contractor Process technology Capacity Feedstock

undeclared undeclared N/A June 2007 December 2008

U.S. Bio Dyersville Noble Americas Corp.

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

Synopsis of progress N/A

Standard Ethanol Cambridge LLC Location General contractor Process technology Capacity Feedstock

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

U.S. Bio Janesville

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

Delta-T Corp.

150 MMly (40 MMgy) wheat

Carbon dioxide marketer Broke ground Target start-up date

undeclared undeclared undeclared September 2006 2008

Synopsis of progress The plant is approximately 90 percent complete in hiring staff, and the company has begun personnel training. Delta-T and other vendors have begun commissioning training, as well. Bins are full of wheat as the plant has been receiving grain since August.

Location Design/builder Process technology Capacity Feedstock

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

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

Provista UBE Ingredients N/A January 2007 third quarter 2008

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

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U.S. Bio Marion Location Design/builder Process technology Capacity Feedstock

Verenium Biofuels Louisiana

Marion, South Dakota Fagen Inc. ICM Inc. 110 MMgy corn

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

Archer Daniels Midland Archer Daniels Midland

N/A October 2006 January 2008

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

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

Jennings, Louisiana Cajun Constructors Inc. Verenium Biofuels 1.4 MMgy

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

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

White Energy Hereford LLC

Location Design/builder Process technology Capacity Feedstock

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

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

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

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

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

Murex Quality Distillers Grain N/A July 2006 January 2008

Synopsis of progress The company announced the plant’s start-up in mid-January. Congratulations White Energy Hereford LLC!

VeraSun Hartley LLC Location Design/builder Process technology Capacity Feedstock

undeclared N/A N/A February 2007 first quarter 2008

Synopsis of progress N/A

Project Complete

VeraSun Bloomingburg LLC Location Design/builder Process technology Capacity Feedstock

Location General contractor Process technology Capacity Feedstock

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

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

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

Location Design/builder Process technology Capacity Feedstock

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

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

Murex The Scoular Co. undeclared October 2006 first quarter 2008

Synopsis of progress Work continues at the site, but no further information was available at press time.

VeraSun Welcome LLC Location Design/builder Process technology Capacity Feedstock

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

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

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

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

MAPCON MAPCON “In my eyes, maintenance is equal to maximizing production.”

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E t h a n o l, L L C .

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ETHANOL PRODUCER MAGAZINE MARCH 2008

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LACTROL antimicrobial is the de facto standard for ethanol processing efficiency and for regulatory compliance of your distiller’s grains. Call your PhibroChem Ethanol Sales Specialist at 800-223-0434 and ask about LACTROL antimicrobial.

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:OU R P L A N T 50

A First for Quebec

V

arennes, Quebec, a suburb of Montreal with a population of approximately 20,000, sits on the shore of the St. Lawrence River in the southwestern part of the province. Largely a farming community, Varennes is now home to a GreenField Ethanol production facility, the only ethanol plant in the province.

“Today marks a milestone for GreenField Ethanol,” said company President and CEO Robert Gallant at the inauguration of the plant in late June 2007. “We are proud that Quebec’s first ethanol plant carries the GreenField name and that we are the pioneers of renewable fuel in Quebec.”

After exhaustive investigaton of sites throughout the province, the company’s decision to build the plant in Varennes came down to two main drivers. The first was location. “It’s literally one bridge away from the Montreal urban community,” the chief executive officer explains. “The use of ethanol in Quebec is primarily in urban areas.

Petro-Canada, which is the client for our output, has a refinery in Montreal.”

Secondly, Varennes happens to sit in the largest corn-growing region in the province.

The Varennes plant was built by Montreal-based SNC-Lavalin Group Inc. with technology provided by ICM Inc. The 120 MMly (32 MMgy) plant officially started up in March 2007, about 18 months after GreenField Ethanol broke ground. “With the Quebec winters, we adopted a construction schedule that took that into consideration, but the plant started up on schedule and on budget,” Gallant says. “We had excellent cooperation and support from both the provin-

cial and federal governments. Our customers were right there from the beginning, and the farming community was so enthusiastic about the project that they took an equity position in it.”

Construction costs for the Varennes plant totaled $109 million with $18 million of that provided by the federal government under its Ethanol Expansion Program. Seventy percent of the total cost was spent on goods and services provided by workers and contractors from Varennes and elsewhere in Quebec. The number of jobs associated with the construction of the plant peaked at about 300 tradespeople, Gallant says.

Today, the plant employs about 45 people. “The economic spin-off benefits for the ethanol plant being in that region are significant and well-appreciated,” he says.

The facility is currently running at full capacity fueled by 12 million bushels of Quebec corn, the majority of which is purchased from Pro-Ethanol, an organization of about 500 Quebec corn farmers who have personally invested in the Varennes plant. The ethanol is sold directly to Petro-Canada, a Canadian oil and gas company that has purchased all of the fuel that will be made at the facility for the next 10 years.

“Petro-Canada is proud to be the exclusive purchaser of all ethanol production from GreenField Ethanol’s new Quebec facility in Varennes,” said Mel Broten, Petro-Canada’s general manager of integration and planning, at the June inauguration. “This partnership enables us to provide consumers with gasoline that is blended with up to 10 percent ethanol, which is produced right here in Quebec.”

ETHANOL PRODUCER MAGAZINE MARCH 2008

LOCATION DESIGNER/BUILDER PROCESS TECHNOLOGY CAPACITY FEEDSTOCK ETHANOL MARKETER COPRODUCT MARKETER CARBON DIOXIDE MARKETER BROKE GROUND START-UP DATE

GreenField Ethanol will also market distillers dried grains and some distillers wet grains to the local farming community.

In addition, carbon dioxide will be sold to Praxair Inc., an international provider of industrial gases. According to Gallant, Praxair has built a gas compression and refrigeration plant “literally across the street from our plant.”

Gallant calls the Varennes plant a one-stop shop for everything ethanol.

“Everything is used,” he says. “We try to do that for all our facilities.” Thought of in this way, the facility appears more like a biorefinery than just an ethanol plant. “It has that potential,” Gallant says. “Both the

Varennes, Quebec SNC-Lavalin Group Inc. ICM Inc. 120 MMly (32 MMgy) corn GreenField Ethanol GreenField Ethanol GreenField Ethanol fall 2005 March 2007

provincial and federal governments have been working with us on additional potential associated with cellulosic ethanol.

Varennes could provide an excellent seed location for that kind of work.” The plant currently occupies about 25 acres of a 75acre site, so plant expansion possibilities exist.

In the meantime, GreenField Ethanol is in the midst of developing a 200 MMly (53 MMgy) plant just over the Quebec border in Johnstown, Ontario. It is currently building a 145 MMly (38 MMgy) plant in Hensall, Ontario, as well. The former is slated for start-up in late 2008, while the Hensall plant is expected to start up in mid-2009. The company has two additional plants operating in Ontario, one in Chatham and one in Tiverton. “With these other two plants, I think the docket is full,” Gallant jokes.

—Jessica Ebert

:OU R P L A N T

GREENFIELD ETHANOL

PHOTO: GREENFIELD ETHANOL

ETHANOL PRODUCER MAGAZINE MARCH 2008

51

:INTHEFIELD

Not Your Grandma’s Sweet Potato

C

raig Yencho likes to tell farmers that the new industrial sweet potatoes he’s working on aren’t your grandma’s sweet potato. For one, they are being bred for high starch and high solids, which means they don’t taste the same as the familiar sweet potato. Nor do they look the same; the industrial sweet potatoes have white flesh, and either white or purple skins. Finally, they wouldn’t be grown for food, but rather for ethanol.

Yencho recently visited southwest China, where sweet potatoes are joining cassava and sweet sorghum as ethanol feedstocks. Yencho reports there are two ethanol plants there using those feedstocks and one under construction that will use those feedstocks, as well. He says the biggest difference between China’s agricultural system and the U.S. ag system is that China has a multitude of farmers with small farms under a quarter-acre in size, where hand labor is the norm. In the United States, sweet potatoes require hand transplanting and hand harvesting, which boosts production costs between $1,500 and $1,700 per acre, compared with $175 to $225 per acre for corn in North Carolina. Thus, even though sweet potatoes can outyield corn in biomass per acre and equal corn’s ethanol yield per acre, they aren’t considered an ethanol feedstock because of the high production costs.

Yencho leads research at North Carolina State University that aims to create an industrial sweet potato for the emerging ethanol industry in the South.

The harvesting limitation should be relatively easy to overcome, using modified potato diggers, Yencho says. The primary reason for hand digging is to protect the easily skinned sweet potato in order to maximize its visual appeal for supermarket customers. An industrial market wouldn’t worry about cosmetic appearance and could tolerate machine digging. Overcoming the transplanting obstacle will take more time. Unlike Irish potatoes, which are planted mechanically using cut seed tubers, the sweet potato isn’t a tuber, but a swollen part of the plant’s root, Yencho explains. He says the trait to sprout from cut sweet potatoes is heritable, and new varieties should be forthcoming that can be mechanically planted. “After two years of study, I think the planting modifications are solvable,” he says.

Additionally, he is working to boost yields between 30,000 and 60,000 pounds per acre, which will yield an estimated 400 to 600 gallons of ethanol per acre. Because uniform size, shape and nice appearance aren’t as important, the industrial sweet potato could be grown on more marginal land than the table varieties, Yencho adds. Other advantages to an industrial sweet potato crop in the South would be the plant’s drought tolerance and low nitrogen requirement.

In parallel work, molecular biologist Byron Sosinski, Yencho’s colleague, is experimenting with genetic modifications that would make industrial sweet potatoes self-processing.

Sosinski is using genes identified in bacteria found in extreme deep-sea environments that create enzymes capable of breaking down starch at high temperatures. The theory is that the genes would be inserted into sweet potatoes to be expressed only in the sweet potato itself and not other plant tissue. The enzymes would lie dormant in the sweet potato until it was taken from storage, ground into slurry and heated. Under the higher temperatures, the enzymes would become active and turn the starch into fermentable sugars.

“We have proof of this concept in tobacco cell cultures,” Yencho reports. “The next step is to place the genes in sweet potatoes, which we’ve done in Jewel.”

Jewel is a prime tabletop sweet potato variety that is amenable to genetic manipulation. Moving the genetic trait into the new industrial varieties is the next challenge for the researchers.

Definitely, these potatoes won’t be your grandma’s sweet potato.

—Susanne

Retka Schill

PHOTO: NORTH CAROLINA STATE UNIVERSITY

52

ETHANOL PRODUCER MAGAZINE MARCH 2008

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:UP FRONT

An Original

R

oger Hill has seen a lot of change in the ethanol industry since he became one of the original farmscale ethanol producers in the 1970s and ’80s. In the past 30 years, he has built and helped operate ethanol plants in Illinois, North Dakota, Iowa, Nebraska, Missouri and Australia. He has seen most of these plants change ownership at least once—one even changed location—and most have been rebuilt several times. This straight-talker with military, racing and banking experience is highly soughtafter by companies who want an original.

Q: How did you first enter the ethanol industry?

A: It was during the Arab oil crisis when they embargoed 10 percent of their oil.

There was a movement in the late 1970s; people in the United States were talking about making alcohol. I was an agriculture banker in northern Illinois. I got very interested, and in 1979, I built my first ethanol plant. I operated it until the payment-in-kind program came into play in 1983. Then all the small producers were virtually out of business.

Q: How were you prepared for your work in the ethanol industry?

A: I was a hot-rodder in my younger days. I spent time on the drag strip.

When I was in the military, my specialties were in large engines and hydraulics. It helps to understand how pumps and process equipment work.

I tell people that I know a lot more ways that don’t work than do work. A lot was trial and error over the years.

You just keep trying until you get it right.

Q: What’s a major change you’ve observed?

A: It’s been interesting to see how the distillers grain market has evolved.

Farmers were reluctant to take the mash and feed it. I had to get farmers to feed it to their dairy cows. The universities were saying it was good stuff, but you have to convince farmers of it. Moving the coproducts is an essential part of this business. Most of our feed at Golden Triangle goes wet to feedlots and dairies.

Q: What has been the most challenging for you?

A: Getting cooperation with oil companies that really don’t want to cooperate. They don’t care if they sell alcohol or not. They do it because it was mandated. I was told years ago that every gallon of alcohol we sell is a gallon of gasoline they’re not selling. [In Rockford, Ill.], signs went up in Mobil and Shell stations that said, “We don’t put ethanol in gasoline.” That did away with ethanol sales. Prices dropped to 65 cents in Rockford. That plant got moved to Morris, Minn., and it’s operating as DENCO today. Oil companies aren’t changing. They had many years to get infrastructure ready, but they chose not to do it.

They still come up with excuses, but the tankage excuse is lame. People think oil companies are our friends, but they really aren’t.

Q: In this era of consolidation and corporations, is it tough to be a co-op?

A: The farmers that own this co-op want to have another source of sale for their corn. They started the plant to value-enhance their corn, which they did. The way they look at it, it’s a hedge on the market. During the past few years, the corn market wasn’t what it is today. Now, going forward, we’re looking at a tougher time of it, but they’re getting a lot more for their corn. It’s almost a perfect hedge, as far as owning an ethanol plant. It’s a good business for them. One way or another, they’re going to make more off of their crop. If the price of corn drops, hopefully ethanol will be profitable. There have been many companies interested in purchasing Golden Triangle, but the members of the co-op haven’t been interested in selling the plant because it is achieving what they hoped it would.

—Anduin Kirkbride McElroy

Name Roger Hill Title General Manager Plant Golden Triangle Energy LLC in Craig, Mo. Hometown Nebraska City, Neb.

54

ETHANOL PRODUCER MAGAZINE MARCH 2008

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:FLEXFACTOR 56

Cold Start 101

W

hen the Brazilian government set out in the 1980s to substitute ethanol for gasoline as its national passenger transportation fuel, General Motors Corp. was acutely aware of the low-volatility and cold-start concerns associated with running an engine on pure alcohol.

According to Henrique Pereira with GM Powertrain, this is why the Big Three automaker equipped its Brazilian vehicles with two fuel tanks—one for ethanol or ethanol blends, and the other solely for gasoline to assist with cold starts. While the words “cold” and “Brazil” aren’t often found in the same sentence, temperatures below 64 degrees Fahrenheit may cause trouble for an engine starting on alcohol. Ethanol in pure form and in higher blends with gasoline doesn’t evaporate well at lower temperatures and won’t produce a combustible mix at start-up.

However, low concentrations of ethanol in gas, especially at 6 percent, cause inordinately high volatility compared with straight gasoline or ethanol blended in concentrations greater than 20 percent (see chart). Even though this is still a concern regarding emissions (evaporative and permeation), high-volatility E10 burned in older carbureted engines had a propensity to cause vapor lock, which has been much less of a concern in the past 20 years with the advent and proliferation of fuel-injection systems.

Like many fuels, the percentage of ethanol in E85 is adjusted throughout the seasons. During colder months, the ethanol content in E85 drops to nearly 70 percent to compensate for ethanol’s lower volatility, and it increases during the warmer months of the year when cold starts aren’t a concern. Brazilian vehicles weren’t flexible-fuel vehicles (FFVs) at first but were designed for ethanol-based fuels, which is why compression ratios were increased to optimize thermal efficiency in ethanol combustion. Over time, improvements were made, and in 2006, Honda announced it was introducing an FFV able to run on E20 or pure ethanol.

Much like GM’s early Brazilian ethanol cars, a Honda press release states, “[A]

SOURCE: SAE PAPER 852116

cold-start system utilizing a secondary fuel tank ensures reliable starts even at low ambient temperatures,” which indicates that after two decades, automakers still rely on an auxiliary fuel tank to overcome low-volatility issues with alcohol fuels.

In the 1990s, changing emissions regulations in Brazil and improved combustion technologies led GM to incorporate electronic controls to assist cold-start performance with a greater sense of sophistication. According to GM, the first FFV engines used a light-reactive sensor to measure the composition of fuel relative to alcohol content. In the past few years, GM has switched to what’s called a virtual sensor, which functions on readings from the oxygen sensors in the exhaust stream, fuel-level sensor and vehicle-speed sensors. Using these readings, the engine control module adjusts the length of time that fuel injectors stay open depending on the concentration of ethanol. In other words, the more ethanol (and lower energy density), the longer the injectors stay open.

In April 2007, GM issued a large voluntary service campaign for 2006 and 2007 FFVs, which were prone to poor cold-start performances due to improper programming in the engine control module. Ford Motor Co. had a similar issue with its Taurus FFVs (see January 2007 EPM Flex Factor). Similar to how carbureted engines were sometimes equipped with a manual choke to create a fuel-rich air-fuel ratio, the engine needs more fuel and less air at start-up to help combat poor cold-starting with ethanol (without an additional fuel tank for gasoline only).

Change2E85, a company that makes aftermarket E85 conversion kits called FFI Platinum, recently announced that its systems will now come equipped with what it calls “Cold Start Technology.”

According to the company, “Ethanol has a vaporization temperature approximately 56 degrees Fahrenheit. When the outside temperature drops below 56, the FFI Platinum’s cold-start feature will turn on but only during the initial starting cycle. It will add extra fuel during the starting cycle to help increase the vaporization potential. The FFI Platinum will resume normal operations after 30 to 40 seconds of engine run time.”

—Ron Kotrba

ETHANOL PRODUCER MAGAZINE MARCH 2008

:BUSINESS 58

FTC: Ethanol Industry is ‘Unconcentrated’

I

n 2007, despite lower ethanol prices and project financing challenges, the ethanol production industry experienced historic growth. With the flood of new plants coming on line, the U.S. ethanol industry kept its status of “unconcentrated,” according to a report conducted by the Federal Trade Commission in late November.

The report, as prescribed by the Energy Policy Act of 2005, has reached similar conclusions in all three years that it has been issued.

The intent of the report was to simply gauge the ethanol industry’s competitiveness using the HerfindahlHirschman Index, a calculation method the FTC uses to measure individual market shares to “determine whether there is sufficient competition among industry participants to avoid price-setting and other anti-competitive behavior,” the report stated.

Calculations were based on figures compiled by the U.S. Energy Information Administration and the Renewable Fuels Association from July 2006 to July 2007. As outlined by the FTC and the U.S. Department of Justice, HHI values below 1,000 are deemed unconcentrated and competitive, while a score between 1,000 and 1,800 is considered moderately concentrated. An index score above 1,800 is considered a pure monopoly. Based on actual production volumes (instead of production capacity), the FTC gives the U.S. ethanol industry a score of 465, down from 736 in 2006.

“This [study] provides the underpinnings for continued growth of the industry,” says Todd Alexander, principal at Chadbourne & Parke LLP. “The pace at which the industry is growing has certainly slowed down based on what I’ve seen, and the ability to raise private equity for these projects has definitely diminished. Last year at this time, the spreads in the market were masking some of the flaws in projects’ business plans.”

The FTC noted that the decline in concentration was attributed to the recent increase in new ethanol production and proposed ethanol projects starting construction. In September 2007, 103 companies were producing ethanol in the United States, a 13-

SOURCE: RENEWABLE FUELS ASSOCIATION/NATIONAL ASSOCIATION FOR RETAIL MARKETING

company increase from 2006 and a 28-company increase from 2005, according to the report. The largest ethanol producer’s share of capacity has continued to fall each year as new firms enter the market. The report also indicated that the largest producer accounted for approximately 16 percent of domestic ethanol capacity, down from 21 percent in 2006 and 26 percent in 2005.

If this period of rapid growth creates an oversupply, followed by lack of profit and trends toward consolidation, the report could serve as a viable benchmark for the industry in the longterm as the market matures. “This report is important for people to take a step back and realize that [the ethanol industry] is not in fact controlled by one or two companies,” says Cory Garcia, senior research analyst at Raymond James & Associates. “The industry is really fragmented, which is good for the entire market because it shows that the industry isn’t monopolized by one or two larger players.”

Looking ahead into 2008, analysts say consolidation activity should occur and become a significant element in the FTC’s 2008 report.

Evidence of this trend became obvious when two of the largest ethanol

producers—VeraSun Energy Corp. and U.S. BioEnergy Inc.—announced a monumental merger agreement one day after the 2007 FTC report was released. “To our knowledge, we haven’t seen too much consolidation outside of the U.S. BioEnergy/ VeraSun deal,” Garcia says. “So, there are no real mechanisms for the market to get further concentrated. I would guess that the concentration percentage would be going lower like it has.”

According to Alexander, on the other hand, the ethanol industry’s inherent and turbulent commodity cycle could increase concentration before the 2008 report. “I do expect the industry to become more concentrated,” he says. “The industry is a commodity business. In general, commodity businesses move toward a situation where there are several large players who can capitalize on the economics of scale to lower their marginal cost of production, and I expect that the ethanol industry will be no different.”

—Bryan Sims

ETHANOL PRODUCER MAGAZINE MARCH 2008

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:DRIVE 60

American Le Mans Series Touts E85

By Scott Atherton comes in all shapes and sizes in the United States. The competition for the sports entertainment dollar is fierce.

The long-term health and relevancy of s the 2008 American Le the sport has grown by leaps and Mans Series kicks off its season with bounds with our commitment to the Mobil 1 Twelve Hours of Sebring, renewable fuels. We play a critical role I’m reminded of a quote by the late in demonstrating to consumers the Jerry Garcia of the Grateful Dead in environmental, economic and perdescribing the legendary band’s formance attributes of ethanol.

These are not fuel blends appeal. “You do not merely want to be considered just the best of the best,” designed specifically for the American he said. “You want to be considered Le Mans Series. I have often spoken of providing a direct link from the racethe only ones who do what you do.”

This quote also sums up our track to the filling station. In the 2007 partnership with the Ethanol season, the American Le Mans Series Promotion and Information Council, chose E10 as its “official ethanolthe consumer marketing arm of the enriched fuel” of the series. However, this fuel is not exclusive to the race ethanol industry. This track. E10 is a blend of 90 perinfluential organizacent gasoline and 10 percent tion has been at the ethanol and is widely available forefront of the drive at many gas stations across to increase conthe country. More than 6 million sumer awareness of flexible-fuel vehicles are on the ethanol. In racing road and E85 is available at terms, they are in the more than 1,400 refueling sta“pole position” of this tions, from coast-to-coast, with critical effort. more stations opening every It is through this day. relationship that I am Atherton In our 10th season, the proud to announce American Le Mans Series that the American Le Mans Series now offers E85 as an offi- demonstrates that cars can perform at cial fuel for the 2008 season. This is top speeds in demanding environthe first time that a motorsports league ments, utilizing a renewable fuel that's has sanctioned “America’s Flex-Fuel,” readily available. The series showcasa high-performance, environmentally es premier brands such as Porsche, friendly, renewable fuel. This year, Acura, Audi, Corvette, Ferrari and several automotive manufacturers will Aston Martin to name but a few. The run on E85, including seven-time GT1 message is clear: choosing ethanolclass champion Corvette Racing.

As racing legend Bobby Rahal said in a speech to the National Press Club in 2007, “Racing is simply not just entertainment anymore.” Auto racing

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enriched fuel at the pump is a commitment to performance, environmental responsibility and energy independence.

There was little debate in our decision to offer E85 in our series. E85 is the cleanest-burning fuel available.

With an octane rating of 100, E85 is the highest-performing fuel on the road. It has the highest oxygen content of any available fuel, allowing it to burn cleaner than conventional gasoline. The use of E85 results in a nearly 40 percent reduction in greenhouse gas emissions. Cellulosic E85 has the capability to provide even greater reductions. While others speak of clean fuel technologies that are years away from development, E85 is available now to meet clean air challenges and provide momentum in the quest for energy security in the United States.

For more than 30 years the American consumer has endured one energy crisis after another. There have been no magic remedies or solutions.

Now we have the opportunity to begin the process of taking control of our energy destiny. We are proud to be a part of this effort.

Scott Atherton is the president and chief executive officer of the American Le Mans Series. For more information on the series, visit www.americanlemans.com.

ETHANOL PRODUCER MAGAZINE MARCH 2008

:LEGALPERSPECTIVES 62

New SEC Rules May Make It Easier to Resell Securities

By Britney Schnathorst f you have purchased securities in a private equity offering, you likely hold “restricted securities.”

For many of you, this means you are currently prohibited from selling your securities to someone else. This is because securities laws restrict resales of securities that were originally issued in offerings not registered with the Securities and Exchange Commission. To resell your securities, you must register the resale with the SEC or the resale must qualify for an exemption from registration. Rule 144 is a safe harbor you might use to comply with this requirement.

The SEC has amended Rule 144 to eliminate some of the conditions for using the safe harbor. This may make it easier for you to resell securities that you purchased in a private offering. The effective date is Feb. 15, 2008, and the new rules apply to securities bought before or after that date. This article provides a brief overview of the new rules.

Before getting too excited about the SEC’s generosity, you should determine whether you are an affiliate of the company whose securities you own. Stricter requirements for using the safe harbor apply to affiliates. These rules apply even if affiliates bought their securities in a public offering. Affiliates generally include officers and directors of the issuer, as well as persons who own a 10 percent or greater interest.

I

ates must meet additional requirements. These include the availability To use Rule 144, you must first of public information, limitations on own the securities for the required the amount of securities an affiliate may sell, a manner of holding period. The sale requirement, and holding period typically a notice filing requirebegins on the date you ment if securities sold bought securities in an in reliance upon Rule offering or from an 144 during any threeaffiliate of the issuer. month period exceed There are rules for cal5,000 shares or culating holding peri$50,000. Under the ods for some specific new rules, the mantransactions, such as ner of sale requirethose involving promment does not apply issory notes, estates to debt securities. and gifts, as well as Affiliates of small new rules for reorganiSchnathorst private issuers may zations. have difficulty satisfyThe SEC has reduced the holding period to one ing the public information and manyear for securities of non-reporting ner of sale requirements. As a result, issuers and six months for securities they may need to register public of issuers that have been subject to resales or use an alternative exempSEC reporting requirements for at tion. Even though the new rules probleast 90 days before the sale. For ably won’t help such affiliates sell resales of securities of reporting com- their own securities, directors and panies, there also must be adequate managers of small private companies current public information about the may still appreciate the prospect of issuer. This additional requirement increased flexibility to approve transapplies for six months after the six fer requests and keep their stockmonth holding period is met. After the holders and members happy. one-year holding period, resales by nonaffiliates of reporting and nonre- Other Rules Still Apply Remember there are other porting companies are not subject to sources of restrictions that may any other requirements. impact transfers of your securities, such as tax rules and the issuer’s Affiliates Subject to governing documents. However, the Stricter Rules Affiliates have the same holding changes to Rule 144 may help you period restrictions as nonaffiliates. satisfy the securities law requireHowever, for the most part, the new ments for selling your restricted securules did not change the require- rities. ments that apply to affiliates. Once they satisfy the holding period, affiliBritney L. Schnathorst is an associate with BrownWinick, a Des Moines, Iowa-based law firm serving the renewable fuels industry. Reach her at bls@brownwinick.com or (515) 242-2487.

Sale of Restricted Securities

by Nonaffiliates

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

ETHANOL PRODUCER MAGAZINE MARCH 2008

CELLULOSE

All Roads Lead to Executives with Colusa Biomass Energy Corp., a company securing its niche in rice waste, were searching diligently for an engineering company to take their project to the next level: commercial production. No matter the paths they traversed, CBEC executives say all roads led to BBI International.

By Ron Kotrba

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ETHANOL PRODUCER MAGAZINE MARCH 2008

CELLULOSE

ROME AND RICE

ETHANOL PRODUCER MAGAZINE MARCH 2008

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CELLULOSE

eedstock choices by companies establishing themselves in the race to commercialize ethanol from cellulose are largely determined by geographical availability. Corn stover, wheat straw, woody biomass, and dedicated energy crops are frequently discussed, but a company based in California’s Sacramento Valley, Colusa Biomass Energy Corp., doesn’t have to look far to discover its niche feedstock. “North of Sacramento it’s pretty much all rice fields,” says Mark Yancey, vice president of BBI International’s project development division. BBI, which publishes EPM, recently agreed to provide process design and

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engineering services for CBEC’s project: Building a full-scale biorefinery producing ethanol and sodium silicate from rice residues. It’s something CBEC execs have been working toward for years.

Disappointing pilot work done with rice straw in the 1990s using the general patented process on which CBEC’s more refined conversion design is based, coupled with low oil prices and a discouraging economic environment, slowed the company down but didn’t stop it.

Despite past obstacles, CBEC gained a preliminary engineering thumbs-up from Harris Group last year and began the hunt for experts in cellulose to scale up their process in a full-size plant.

‘By the end of the year we should be ready to negotiate an EPC contract for the design and construction of the plant.’

“It was a case of mutual interest and respect,” says CBEC President and Chief Executive Officer Tom Bowers, referring to what led to the two companies’ new working relationship. “We’ve been looking hard since last March for the right group to take us to the next level domestically and internationally, and I guess it was one of those cases where all roads lead to Rome—every time we followed a solid lead on somebody who had talent or someone we respected, well, they ended up being with BBI most of the time.”

Originally intending to Yancey focus its initial commercial plant in California where a rice-collection infrastructure exists, the company is now equally interested in an Arkansas site where rice hulls lie awaiting—pending a deal-closer. Straw, hulls

CELLULOSE

or both projects concurrently, Yancey says BBI has a timeline in place to move either site forward by completing specified tasks in 2008.

“We have all of 2008 to demonstrate the technology and generate the data we need to do the process design,” Yancey says. “Then we have all of 2009 to do detailed design work and build the plant.” The plan isn’t linear so several different tasks will be going on at once, but Yancey says BBI’s practical approach and project development experience will make this project go. “When we first talked, we sat down with them and said we still feel there are some technology gaps [for converting most biomass feedstocks to ethanol],” Yancey explains.

“We told them our approach would circumvent those gaps and eliminate the missing technology.” The technology gaps Yancey refers to stem from CBEC’s

PHOTO: COLUSA BIOMASS ENERGY CORP.

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Rice straw is high in silica and undesirable as forage for livestock.

CELLULOSE

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Since state environmental regulations no longer allow producers to burn their rice residues openly in the field, California rice farmers welcome new and cheaper ways to dispose of the straw. desire to double-pretreat its feedstock before fermentation. The “pre-pretreatment” would liberate hemicellulose so its five-carbon sugars could carry on to fermentation. But, Yancey says, “pretreatment is still very expensive and an issue for any tech provider trying to use the fermentation route. Dilute acid requires expensive alloys or glass-lined or acid brick-lined equipment, and these primary pretreatments are generally done at a higher temperature, running up operational costs.”

Furthermore, there are no commercially demonstrated organisms capable of proficiently fermenting five-carbon sugars, so even if the uncertainty and expense of pretreatment were endured Yancey says, exactly how those sugars would be fermented is still questionable. If it becomes feasible to isolate and ferment the five-carbon sugars from rice waste in the future, then a move in that direction could be made.

Until then, BBI suggested moving forward with a base pretreatment that dissolves the silica.

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BBI’s forward approach hooked Bowers from the start. “What you get from BBI is a sense of well-roundedness, and that their feet are on the ground,” he says. “After our first meeting with BBI, I told my guys as we walked onto the airplane, ‘This is it. As far as I’m concerned let’s not look anyplace else so let’s make the best deal we can with them.’”

The responsibilities BBI will

undertake first include conducting a detailed study to define acceptable ranges of the key process variables. At press time in late December, the study had already begun. The financials of the first plant will be driven by established targets for these key process variables. For instance, the initial study may not reveal that the C6 yield will be 85 percent and, from that, “X” amount of ethanol will be refined. “What it will tell us is that we will need at least 70 percent, for example, and if we can’t reach that established target then we know we can’t do this,” Yancey says. Essentially, the purpose of BBI’s initial study is to determine what is needed to make the project competitive, and is expected to be complete by the end of February. By then, BBI plans to have already begun developing what Yancey calls a technology demonstration plan. “That’s where we’ll generate the data needed to design the plant,” he says. Bench- and pilotscale work managed by BBI will continue throughout most of 2008. As data streams in, BBI will take the aggressive initiative to concurrently develop the “Schedule A” basic engineering package to transfer knowledge from the pilot work to commercial process design.

“By the end of the year we should be

Colusa Extra To read more about Colusa Biomass Energy Corp.’s process and plans see “The Rumpelstiltskin of Rice Straw” in the August 2007 issue of EPM.

ETHANOL PRODUCER MAGAZINE MARCH 2008

Capture The Power

PHOTO: COLUSA BIOMASS ENERGY CORP.

CELLULOSE

CBEC would need rice straw from 35,000 acres to produce 12.5 MMgy of ethanol.

ready to negotiate an EPC contract for the design and construction of the plant,” Yancey says, cautioning he couldn’t reveal which contractors are already under consideration. The Colorado-based company estimates its new client will need a $2.5 million budget for the work described.

Finally, BBI will do what Yancey’s division was named after: project development. “Just like we develop projects for dry-mill plants, we’ll do for Colusa,” Yancey says. “I doubt we’ll hold small meetings in communities asking people to invest”—how conventional equity drives go typically for private projects integrating proven designs—“but instead we’ll be looking for $5 million to $20 million investments. At this point, we recommend raising 100 percent equity to build this first plant, which would greatly simplify things and lower the cost.” BBI estimates the first 12.5 MMgy facility will cost approximately $50 million. BBI began designing its first cellulosic ethanol plant in

early 2007, and the Colusa project is its second major project in the growing field. “Cellulose process design will be a big part of BBI’s future,” Yancey says.

CBEC is a publicly-traded company; its OTC stock symbol is CLME.PK.

Two States, One Mission California rice farmers produce nearly 20 percent of all the rice grown in the United States, and they relish the thought of turning their troublesome crop waste into money. They currently pay between $25 and $45 an acre to have the residues baled and removed from their fields, markets for which are not easy to find. Livestock producers don’t want it because rice straw is high in silica, reaching 13 percent on a drymatter basis. “Silica is one of nature’s great abrasives,” Bowers says. As forage, rice straw may cause excessive wear on bovine molars, but chances are the cows won’t eat it anyway because it isn’t palatable. Bowers says rice waste is even destructive to farm equipment, wearing

ETHANOL PRODUCER MAGAZINE MARCH 2008

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CELLULOSE

out implements 40 percent faster than wheat. And simply leaving the straw on the ground for soil nutrition still requires chopping it up and re-flooding the fields with water. “All that costs money,” says Rick Nannen, CBEC vice president. Since state environmental regulations no longer allow producers to burn their rice residues openly in the field, California rice farmers welcome new and cheaper ways to dispose of the straw. CBEC would require rice straw from 35,000 acres for the annu-

al production of 12.5 million gallons of ethanol, and 33 million pounds of sodium silicate—a high-value specialty coproduct.

While CBEC was initially focused on the California rice-straw “market,” they have since expanded their options for a first commercial project site. But true to form, all roads for this unique company lead to rice. “The other option is Arkansas, where rice mills have a problem disposing of hulls. There is no ban against

burning straw in Arkansas, so there is no real incentive to collect it and therefore the infrastructure is less developed there than in California.

But Arkansas is home to several large rice mills where hulls accumulate rapidly, so collocating near a mill is a wise choice and virtually eliminates the grueling task of honing an efficient method of aggregation, storage and delivery. According to Nannen, ongoing discussions with Riceland Foods and Producers Co-op for feedstock arrangements are encouraging.

Riceland Foods gasifies a portion of its hulls for some of the energy required in milling operations, and has for many years. “I don’t know how efficient that technology is anymore,” Nannen says. Bowers adds, “They use the hulls to generate the heat for their parboiling operations. That worked really well 15 to 18 years ago but not necessarily so well now because of the advances in combustion techniques with other materials that have come along, so it was a leading situation years ago but it’s not the same today— and there might be a better use for those hulls from an income point of view for the rice mills, and it could certainly be the basis for transportation fuels.” Rice hulls contain 20 percent silica whereas the straw contains 12 percent. “If the economics allow us on the front end, I could see us building both these plants with completion dates within six months of each other,” Bowers tells EPM. Two states, two companies and one mission: Being the first project development team to build the first commercial ethanol and specialtychemicals plant using difficult but globally abundant rice waste. EP Ron Kotrba is an Ethanol Producer Magazine senior writer. Reach him at rkotrba@bbibiofuels.com or (701) 7384962.

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ETHANOL PRODUCER MAGAZINE MARCH 2008

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A wood storage pile at Public Service Co. of New Hampshire’s Schiller Station, a 50 megawatt wood-fired power plant in Portsmouth, NH. PHOTO: INNOVATIVE NATURAL RESOURCE SOLUTIONS LLC

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Biomass: AT WHAT COST? Processors believe biofuels will prosper because cellulosic feedstocks will be cheap and readily available. Feedstock owners think they will get rich selling biomass to the ethanol industry. Obviously, they both canâ&#x20AC;&#x2122;t be right. Finding a mutually beneficial balance between buyer and seller is a challenge as the cellulosic ethanol industry finds its feet.

By Jerry W. Kram

ETHANOL PRODUCER MAGAZINE MARCH 2008

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PHOTO: INNOVATIVE NATURAL RESOURCE SOLUTIONS LLC

T

he cellulosic energy industry is challenged by two mutually inconsistent myths, says Eric Kingsley, vice president of Innovative Natural Resource Solutions LLC. Speaking about wood resources in the Northeast, Kingsley says the first myth is that wood is free—that is, some biomass developers think there are vast quantities of wood waste just sitting there for the taking at little or no cost. On the other side is the myth of the “oil sheik” landowner who believes that because energy prices are so high, developers can and should be able to pay just about any price for their now-valuable feedstock.

As the cellulosic ethanol industry develops, both of these myths are going to collide with reality. Kingsley points out that all cellulosic feedstocks will have inherent costs—raising, harvesting, transporting, and storing biomass all cost money. And while energy is valuable, the laws of physics dictate how much energy can be extracted from a ton of biomass and all the processors’ expenses for pretreatment, extraction, saccharification and fermentation also have to be paid in addition to the feedstock cost.

So as the cellulosic ethanol industry takes its first baby steps, the question looms: how will a fair price for biomass be determined that will provide a sustainable income to producers and give processors a reliable, cost-competitive supply?

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Open Market?

Three primary models of feedstock supply relationships could develop, according to Ira Altman, an assistant professor in the department of agribusiness economics at Southern Illinois University, Carbondale. One is a spot market model where buyers and sellers negotiate every sale. Another is the contract model where buyers and sellers enter into a long-term relationship. The final model is a vertically integrated system, where the processor owns or otherwise controls its supply of feedstocks.

Altman surveyed the biopower industry which generates electricity from biomass as a possible analog for the cellulosic industry.

He found that three-quarters of biopower facilities were vertically integrated in regards to feedstocks. “If cellulosic ethanol is going to be anything like biopower it will be vertically integrated,” he says.

“That means either biomass growers are going to integrate forward into cellulosic ethanol production or cellulosic ethanol producers are going to integrate backwards into biomass production.” This doesn’t necessarily reflect the future of the cellulosic ethanol industry because most of the biopower facilities he surveyed were offshoots of the timber, or pulp and paper industries, which were using their own plant waste as a fuel. The feedstocks that are likely to feed cellulosic ethanol plants are much more diverse.

Altman also looked at the farmers and ranchers in Missouri as biomass producers and consumers in the form of hay and straw.

While many livestock producers grow their own hay, there is somewhat of a spot market for grass and alfalfa hay in most states.

However, Altman found that most of these markets were very small and typically operate on an informal “handshake” basis for transactions, making it an ill-suited model for the cellulosic ethanol producers requiring hundreds of thousands of tons of biomass per year. “I haven’t necessarily studied this from an academic perspective, but I know from growing up on a farm a lot of this is ad hoc,” he says. “Producers advertise in a magazine or they go by word of mouth. So there is a lot of what I call informal contracting. ” Early in the development of the cellulosic industry, contracting is much more likely to be the dominant form of feedstock acquisition, says Anna Rath, vice president for business development at Ceres Inc., a developer of energy crops. One reason is the security that long-term contracts provide for the producer and processor of energy crops. A cellulosic ethanol company isn’t likely to get funding for a $300 million facility if it can’t show banks and investors that it will have a reliable source of feedstocks. In turn, farmers aren’t going to invest time and money for land and equipment if they don’t have a market for their biomass. “It’s pushing people toward, in a lot of cases, long-term contracts,” Rath says. “It makes sure everyone has peace of mind. The biorefinery knows it’s going to get its feedstock and the grower knows that he has that outlet for sales.”

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Because biomass is bulky and hard to transport, that cost can eat into the margins of both the producer and the processor.

What’s it Worth?

What determines the value of biomass? Many things, says Alan Doering, head of coproducts research for the Agricultural Utilization Research Institute in Waseca, Minn. Producers need to think carefully about what it costs them to produce a ton of biomass, whether it is a coproduct such as corn stover or dedicated energy crops such as switchgrass. Some of the costs include equipment costs for baling, land for storage and transportation. Farmers even need to keep in mind that removing biomass from their land will deplete nutrients in the soil such as potassium and phosphorus, which will need to be replaced with fertilizers. There is also the opportunity cost for the farmer to consider, that is, he or she needs to take into account the income the same land could have produced if planted to corn or another crop.

Rath adds that there are some biomass industries with established markets and pricing, such as wood chips. “In those areas where there are existing prices, offers (from cellulosic ethanol producers) will be compared with those prices,” he says.

For the processor, the calculation is

similar. Given the income expected from the final product, ethanol, and deducting the fixed and operating costs of converting the biomass to ethanol, what’s left is the value of the feedstock and the processor’s profit. “How the market comes into being will be a combination of greater visibility coming into the pricing of biomass through studies that are being done by government agencies and universities,” Rath says. “I also think we will see a private price-setting mechanism between the biorefineries and local grower groups.”

Productivity and quality will have a huge impact on biomass prices, Rath says.

Biomass is bulky and difficult to transport.

In some cases, transportation costs can be as high as $25 per ton. That cost can eat into the margins of both the producer and the processor. Crop residues such as corn stover generally yield about 3 tons per acre. That could force a cellulosic ethanol producer to seek feedstocks in a 50-mile radius. If dedicated energy crops achieve their maximal yields of 25 tons per acre or more, that radius can be reduced by 90 percent. “This turns out to be a good thing for everyone,” Rath says. “The biorefineries understand that they are

ETHANOL PRODUCER MAGAZINE MARCH 2008

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dependent on the growers around them because they need the lowest transport costs and best feedstocks. The growers understand, especially when they plant a perennial energy crop, that they will need an outlet for that crop—the local biorefinery.”

Quality concerns will have an impact on the processor side of the equation, Rath says.

Generally, the more homogenous and less recalcitrant a biomass feedstock, the lower the plant’s operating costs are going to be.

Those savings will mean better profits Doering for the processor and could flow back to the feedstock producer. “If you have something that gives you 80 gallons per ton in your process instead of 70 gallons per ton, that is something you can afford to pay more for,” Rath says. “One of the big differences between energy crops and other feedstocks is that energy crops allow us to optimize composition for the different processes.”

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What’s the cost?

So, with all these factors taken into account, what should the price of a ton of biomass be? The answer is it depends. By all indications, the biomass market is going to be localized and idiosyncratic. Transportation costs will limit processors to buying feedstocks within a 50-mile radius of their plant. It will likely be unusual for a feedstock producer to have more than one potential customer, so there will be little direct competition between processors.

It is also unlikely that there will be the sort of national price reporting for biomass as is seen in agricultural commodities such as corn and wheat. There have been several attempts at creating biomass exchanges on the Internet which would act both as a clearinghouse

ETHANOL PRODUCER MAGAZINE MARCH 2008

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and a potential price discovery mechanism.

Two of these exchanges are the Minnesota Biomass Exchange (www.mnbiomassexchange.org) and the North American Biomass exchange (www.nabiomassexchange.com). However, the industry isn’t developed enough for these exchanges to handle significant volumes of biomass yet.

“What I have found is that there is really no market right now,” says Shashank Nadgauda, president of Renova

Engineering, which started the North American Biomass Exchange. “Everybody sells biomass on a handshake. There is no market mechanism at all. That is what prompted us to start an exchange to put some kind of legitimacy or structure in the marketplace.”

Ceres is working with groups of biomass producers and biomass processors to work out mutually beneficial contracts to help develop long-term relationships

between the two. “We think you will see companies working together with grower co-ops or local grower associations to figure out a price that will make sense for the growers as well as the biorefinery,” Rath says. “So we see the biorefinery getting together with the local grower group to do field trials with Ceres to figure out what the economics are going to look like.”

Altman believes the contract model is the most likely form of market at least in the early days of the cellulosic ethanol industry. “I think from a producer perspective if you are switching to switchgrass or miscanthus or hybrid poplar, you would be more interested in a longterm relationship with a cellulosic ethanol processor,” he says. “I think they would be less likely to be interested in spot markets because if you are growing one crop for a specific buyer you want to make sure you have the market locked in.”

Rath says some of the early contracts are pegging the price of biomass to the final product: ethanol. That gives the growers some upside if there is an increase in the price of ethanol. Such contracts are being negotiated around the country and Rath is confident that the relationship between growers and processors will be worked out. “I think there are number of things in the Energy Bill and the Farm Bill that are going to make this come to fruition faster than a lot of people expect,” she says. “I think there are especially a lot of things in the Farm Bill that will help with these market mechanisms. There will be incentives in place to ensure that both the growers and biorefineries get prices they can live with in these days when everyone is still figuring this out.” EP Jerry W. Kram is an Ethanol Producer Magazine staff writer. He can be reached at jkram@bbibiofuels.com or (701) 7384962.

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ETHANOL PRODUCER MAGAZINE MARCH 2008

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TECHNOLOGY

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TERMITE-TAILORED

Cellulosic Ethanol

The diverse ecosystems that mark the landscape of Costa Rica, ranging from lowland rain forests to cloud forests, lakes and rivers, are a hot spot for life. For scientists, this treasure trove of biodiversity represents yet to be discovered insights into medicine, species diversity and for some, the commercialization and development of enzymes for cellulosic ethanol production.

By Jessica Ebert

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A

mong the hundreds of thousands of species including various orchids, toucans and tropical fish that flourish in the sultry climate of Costa Rica, one group of insects holds the attention of scientists and technology developers with a stake in the biofuels industry. Wood-boring termites abound in the lush foliage of this Central American country. But it’s not the termites themselves that people are betting on—it’s the microbes within the guts of these segmented cellulosefeasters that may hold a key to toppling the barriers to commercial-scale cellulosic ethanol production.

“Being a general microbial ecologist, it’s Hugenholtz just a rule of thumb that if there’s some job going on you can put your money on it that bacteria are doing that job,” says Phil Hugenholtz, head of the Microbial Ecology Program at the U.S. DOE Joint Genome Institute. The JGI based in Walnut Creek, Calif., was created to

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One way to find out if these termite-gut bacteria do play a role is to isolate them, grow them in the laboratory, sequence their genetic information and see if there are any genes that code for hydrolytic enzymes.

unite the expertise and resources in genome mapping, DNA sequencing, technology development and information sciences pioneered at the DOE genome centers at Lawrence Berkeley National Laboratory, Lawrence Livermore National Laboratory and Los Alamos National Laboratory. For some time, the role of bacteria in metabolizing the wood ingested by termites was highly unclear. However, in a recent issue of the journal Nature, Hugenholtz along with other researchers from universities, private industry and the DOE report that the bacteria seem to be doing a great deal of the work. “These bacteria are

absolutely loaded with hydrolytic enzymes principally for cellulose and xylan [the main component of hemicellulose] decomposition,” he says.

“This is good news.”

Community Sequencing All termites serve as vehicles for various microbial passengers. These microscopic organisms are more than just hitching a ride, however; the relationships forged between these two diverse groups of organisms are necessary and beneficial. Termites provide microbes with a protected, nutritious place to live and in return, the microbes make enzymes able to crack

ETHANOL PRODUCER MAGAZINE MARCH 2008

the intricate cage of cellulose, hemicellulose and lignin that form the cell walls of plant material. Breaking this armor releases sugars that can be fermented into a host of products including ethanol. In the termite gut, microbes convert these sugars into other compounds that drive the metabolism of the termite. This mutually beneficial association has been well-documented in a group of insects dubbed the Warnecke “lower” termites.

These insects carry unicellular microbes called flagellates in their guts.

Flagellates have long been known to produce cellulases and hemicellulases, hydrolytic enzymes that disassemble woody materials.

“Higher” termites, on the other hand, don’t harbor flagellates. Instead, these insects are packed with bacteria.

Although higher termites are the most abundant and diverse of all the termites, very little is known about how or even if the bacteria residing in their intestinal tracts play any role in degrad-

ing cellulose. “Most of the research done on termite microbiology in the past 20 years or so dealt with lower termites,” explains Falk Warnecke of JGI’s Microbial Ecology Program.

One way to find out if these termite-gut bacteria do play a role is to isolate them, grow them in the laboratory, sequence their genetic information and see if there are any genes that code for hydrolytic enzymes. “Only a fraction of the organisms in the natural world can be studied like this,” Hugenholtz says. That fraction doesn’t include the bacterial species associated with the termite gut. “When you have these organisms that grow on plates and you sequence them and characterize their enzymes you only see a skewed picture of all the enzymes that are out there in nature,” he explains. To get around this, Jared Leadbetter, an environmental microbiologist at the California Institute of Technology proposed to sequence the entire community of termite-gut microbes. This method is termed metagenomics and allows researchers to study all DNA from a particular environment rather than the genetic contribution of a sin-

ETHANOL PRODUCER MAGAZINE MARCH 2008

PHOTO: DAVID GILBERT, DOE JOINT GENOME INSTITUTE

TECHNOLOGY

Nasutitermes corniger termite species

gle cell or organism.

Leadbetter initiated the project by applying to the Community Sequencing Program at JGI. The CSP is a DOE-funded program designed to allow genomic sequencing of systems

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PHOTO: RUDOLF H. SCHEFFRAHN, PROFESSOR OF ENTOMOLOGY, UNIVERSITY OF FLORIDA.

of relevance to the agency’s missions including those associated with global carbon cycling, alternative energy production and bioremediation. Leadbetter’s proposal involved examining the microbial members of the hindgut pouch— the largest part of the termite gut—of higher termites that belong to the genus Nasutitermes. “This was a fairly risky project when we proposed it,” Leadbetter says. “In these abundant tropical termites, there was no compelling evidence that microbes play direct roles in cellulose degradation.” Once the proposal was accepted, the fun began.

Termite-Gut Bacteria Early on in the project, several other groups joined the Leadbetter team including microbial ecologists at JGI, researchers at Verenium Corp. and INBio, the National Biodiversity Institute of Costa Rica. The first step was to find termites. “Termites are very small so one termite is not enough for doing the genome sequencing,” Warnecke says.

The termite hindgut consists of a viscous fluid with a toothpaste-like consistency. Although it’s the largest intestinal compartment, the volume of the hindgut liquid from a single termite would only form a pinhead-sized dot if placed on a piece of wax paper. “We needed a couple of hundred termites,” Warnecke explains.

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Nasutitermes corniger termite species

To that end the team headed to Central America.

“Verenium has agreements with the Costa Rican government and has established a lab there so they had the infrastructure and permits for sampling termites,” Warnecke

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ple of hundred termites, extracted the DNA from the community as a whole and sequenced a large number of genetic fragments. By comparing these sequences with other DNA fragments of known sequence and functionality, the team could determine the types of bacteria present as well as the genes these bacteria carried.

Overall, about 300 different bacterial species were identified along with more than 500 genes linked to cellulose and hemicellulose degradation. “These enzymes are consistent with the diet of this termite species,” Hugenholtz explains. Nasutitermes species are foragers. They climb out of the nest, scurry across the ground and feed on dead wood from several different species with a range of plant cell wall compositions. “That’s why they’re loaded with this enzyme artillery to break down these different plant cell wall types,” he adds.

While the DNA analysis was going on, Verenium was isolating proteins directly from the hindgut fluid, sequencing

‘Our task now is to discover the metabolic pathways generated by these structures to figure out how nature digests plant materials.

We can then synthesize the novel enzymes discovered through this project to accelerate the delivery of the next generation of cellulosic biofuels.’

says. “Besides, everyone knows that Costa Rica is a hot spot of biodiversity so there are many termite species.”

On the team’s first trip to the country they found a nest on the trunk of a tree that housed hundreds of termites belonging to a species of Nasutitermes. The nest was about the size of a football and the walls were paper thin like a wasp nest. “We knew that all the individuals in this nest would be coming from the same queen,” Warnecke says. “So we were sure we weren’t comparing apples and pears.”

The scientists pooled the hindgut contents from a cou-

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PHOTO: VERENIUM CORP.

TECHNOLOGY

A scientist in a Verenium laboratory examines a culture of microorganisms.

those molecules and testing them for activity. “From that you could tell definitely that the genes weren’t just there they were being expressed and producing the enzymes,”

II

Hugenholtz says. “This was confirmed for quite a few cellulases and xylanases and other enzymes involved in the process.”

Raymond Orbach, DOE’s under secretary for science has described the termite and its bacterial cargo as a remarkable machine. “Termites can digest a frightening amount of wood in a very short time, as anyone who has had termites in their house is painfully aware,” he says. “Instead of using harsh chemicals or excess heat to do so, termites employ an array of specialized microbes in their hindguts to break down the cell walls of plant material and catalyze the digestion process. Industrial-scale DNA sequencing by DOE JGI was key to identifying the genetic structures that comprise the tools that termites use. Our task now is to discover the metabolic pathways generated by these structures to figure out how nature digests plant materials. We can then synthesize the novel enzymes discovered through this project to accelerate the delivery of the next generation of cellulosic biofuels.”

That is what Verenium continues to work on. The challenge lies in finding the mixture of enzymes that work optimally for specific feedstocks and certain pretreatments. “We are currently testing our cocktails of enzymes on a variety of feedstocks and a variety of pretreatments to determine how well they perform,” says Kevin Gray, director of biofuels at Verenium. EP Jessica Ebert is an Ethanol Producer Magazine staff writer. Reach her at jebert@bbibiofuels.com or (701) 738-4962.

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Feedstock

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Which system should be targeted to produce biofuels feedstocks in the futureâ&#x20AC;&#x201D;high-input, low-diversity crops such as corn, or low-input, high-diversity systems such as mixed prairie grasses? An ecologist and an agronomist weigh in on the debate.

By Susanne Retka Schill

ETHANOL PRODUCER MAGAZINE MARCH 2008

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PHOTO: MIKE PALMER, OSU

D

ifferent visions of the future for ethanol have sparked a debate from opposite poles of an ecological continuum. On one side are the advocates for producing the maximum yield per acre from corn using intensified high-input, low-diversity systems. On the other end are those who envision cellulosic ethanol feedstocks giving economic value to low-input, highdiversity systems such as mixed prairie grasses. Ken Cassman, director of the Nebraska Center for Energy Science Research, and Oklahoma State University Ecologist Mike Palmer represented their contrary views during a debate this winter at the American Society of Agronomy annual meeting in New Orleans.

First on Palmer’s list in critiquing corn is the concern that more land will be converted to plant dedicated biofuels crops. Sodbusting is likely to create more greenhouse gas emissions and global warming potential than using the fossil fuels it’s intended to displace, he says. “Land conversion is not a hypothetical issue,” he says. “A record amount of virgin soils are being turned in the Great Plains, largely due to biofuels feedstock production.” The concern is not just from the loss of virgin soil, but also the Palmer increased soil respiration from tilling grasslands which releases carbon and nitrous oxide, he adds. A second concern Palmer raises is the potential for the dead zone in the Gulf of Mexico to grow as more corn acres are produced in the upper Midwest leading to an increase in the amount of nitrogen leaching into the Mississippi River. “It’s an awful lot of nitrogen,” Palmer

Flowers in a mixed prairie grass system attract pollinators like bees, which in turn benefit the entire ecosystem.

says. “$750 million worth of nitrogen goes down the Mississippi annually. That’s more than all the nitrogen being used in sub Sahara Africa.” While perennial feedstocks such as switchgrass offer some advantages, Palmer warns that a monoculture of grasses will still be energy-demanding, highinput systems.

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In contrast to intense monocultures, Palmer proposes the creation of highly diverse, mixed-grass systems that offer the following distinct advantages: Growing more than one species allows available resources to be used more efficiently Incorporating nitrogen fixers is relatively easy and many will emerge spontaneously Adding of ecosystem services such as flowers that promote pollinators Lowering inputs Using more plant species stabilizes production Eliminating the use of biocides Producing a trivial amount of greenhouse gas emissions and sequestering carbon While critics of the mixed grass systems often argue that mixtures of grasses will end up as a monoculture any-

ETHANOL PRODUCER MAGAZINE MARCH 2008

PHOTO: MIKE PALMER, OSU

‘The key point here is that what wins one year is not necessarily the winner the next year or 10 years from now. Having a diverse set of species improves the likelihood of sustained production.

The basic thinking behind low input, high diversity is to let nature do the heavy lifting.’

Maintaining productive, diverse grasslands requires regular biomass removal, whether from mowing, grazing or fire.

way, as one species begins to dominate a particular planting, Palmer says ecologists call that the insurance hypothesis.

“The more species you start out with, the more likely you’ll find a winner,” he says. “The key point here is that what wins

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‘We need to do research that strives to do two things that are dramatically opposed.

One is to get the highest possible yield of the feedstock per unit area. Second, we need to achieve that with minimal environmental impact.’

one year is not necessarily the winner the next year or 10 years from now.

Having a diverse set of species improves the likelihood of sustained production. The basic thinking behind low input, high diversity is to let nature do the heavy lifting.”

Mowed Haylands As an ecologist, Palmer points out that grasslands have developed through biomass removal whether that’s accomplished by fire, animal grazing or mowing. He cited an area in Estonia, a small country in northern Europe, which has been mowed for more than three centuries. “This area has the record highest diversity of plants per square meter, much higher than the tropical rain forest,” he says.

Similarly, a hay meadow in the White Carpathian Mountains of Moravia in central Europe has been mowed continuously for more than 500 years. The hay is used to feed the horses in metropolitan areas. “This area has 40 species of orchids alone,” he says, which is indicative of the ecological benefits of mowing grasslands.

Ecologists are concerned about grasslands being abandoned when they are no longer needed for hay, he says. In Oklahoma, eastern red cedar is invading abandoned grasslands near cities and creating new ecological problems

by depleting water resources and becoming fire hazards as well as a source of allergens.

In evaluating the two systems— conventional intense cropping systems versus mixed grass systems—Palmer argues that in addition to yield, other factors including nitrogen use efficiency, water use efficiency, energy efficiency, carbon sequestration and other ecosystem benefits should be considered. “Let us use our diverse grasslands as a source of biofuels to protect them, for a sustainable economy and environment,” he says.

Maximize Energy Yield In debating the two points of view, Cassman emphasizes the need to maximize the energy yield per acre in order to meet the planet’s everexpanding energy needs. He doesn’t discount the desirability Cassman of diversity, however, “I’m often amazed that we try for the perfect and throw out the good,” he says. “It may be possible to produce a biofuel with incredibly low carbon intensity that is incredibly green with tremendous potential to mitigate greenhouse gasses on a per gallon basis, but have

ETHANOL PRODUCER MAGAZINE MARCH 2008

ENVIRONMENT

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The focus of Nebraska’s ecological intensification research is to increase corn yields and address environmental goals.

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such a low yield per gallon per acre that you would have to expand both biofuel feedstock production and agriculture in general. The net environmental impact from that expansion could be negative.” Furthermore, saying a mixed prairie grass feedstock system for marginal lands would be independent of the food versus fuels debate is misleading, Cassman says.

“Even marginal land in areas with good rainfall has the potential to produce food and other agricultural products, including livestock,” he says.

Cassman is critical of the attention given to Minnesota ecologist David Tillman’s proposal that mixed prairie grass systems would be a good, sustainable biofuel feedstock.

Tillman’s study was based on a single field experiment on one degraded cropland site, he says. “To make

regional or global extrapolation requires testing on a much wider range of soil and climatic conditions, and more rigorous modeling,” Cassman says. Palmer agrees that Tillman’s study and comments were essentially solid speculation. “It is a launching pad for the real experiments that need to come,” he adds.

The attention given to a futuristic vision of mixed prairie grass systems siphons away support for critically needed research on the existing feedstocks, Cassman says. “We need to do research that strives to do two things that are dramatically opposed,” he says. “One is to get the highest possible yield of the feedstock per unit area. Second, we need to achieve that with minimal environmental impact.”

The goal would be to achieve the maximum genetic potential in corn yields

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by eliminating every source of stress.

He sees the need to develop new tools, such as weather modeling for farmers to fine tune their crop management during the growing season. Other elements of an intensified corn production system include discovering the optimal plant population, row spacing, and planting date for each growing region. In 10 years of research on the ecological intensification of corn and soybeans in Nebraska, they’ve increased

yields by 35 percent while at the same time increasing nitrogen efficiency by 30 percent to 50 percent, Cassman says.

“It’s only just begun, we have to do better than that,” he says.

There is promise in the marriage of the biofuels industry with environmental goals that are becoming more widely accepted in U.S. society, and, which Cassman says seem to be happening quickly. “The biofuels industry needs to jump on it,” he says. He suggests that

‘It seems we’re putting all our eggs in one basket [supporting cellulosic ethanol projects].

There will not be a second-generation biofuels system if corn ethanol falls flat.’

with the right policies in place, ethanol plants could pay farmers more or less to the degree that their production systems were contributing to reducing the carbon intensity of biofuels.

Cassman also calls for the biofuels industry to support the allocation of more resources for corn research.

“It seems we’re putting all our eggs in one basket [supporting cellulosic ethanol projects],” he says. “There will not be a second-generation biofuels system if corn ethanol falls flat.

Society will walk away from biofuels.

They’ll say ‘You told us [corn ethanol] would be good for the environment and it would be cost effective, and now look what happened.

And now you want us to continue to fund development of the second generation for the same reasons?

Why should we trust you and your scientific judgment?’ ” EP Susanne Retka Schill is an Ethanol Producer Magazine staff writer. Reach her at sretkaschill@bbibiofuels.com or (701) 738-4962.

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Risk

Managing Through MARKETING METHODS Developing effective marketing arrangements for ethanol and distillers grains requires just as much due diligence as producing the products.

By Bryan Sims

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PHOTO: THE ANDERSONS INC.

thanol producers will tell you that production is one thing; selling the product to the consumer in the most efficient and cost-effective manner is another. The factors considered when selecting the most effective ethanol marketing arrangement are crucial for achieving success. In the project development process this component can determine a company’s viability in a lender’s eyes for financing or the firm’s ability to be profitable when in operation.

There are several different third-party marketing packages each with advantages and disadvantages specific to a particular plant’s operations. For example, some marketers provide an all-in-one service where they conduct grain origination, dried distillers grain marketing, ethanol marketing and risk management activities such as hedging strategies. Some ethanol facilities use a combination, conducting some functions in-house and allowing a third-party service provider to conduct the rest of its marketing ventures. For example, an ethanol company might source its own corn, but hire a thirdparty service provider or providers to market its ethanol and distillers grains, and conduct risk management services.

Determining which marketing options are best tailored to the specific functions of a particular facility depends on the unique needs of each operation.

Some ethanol plants simply don’t have the capital to finance a third-party marketing service. Others may not have the expertise to do it themselves. Those are just some of the factors that weigh into the decision of whether the trade-offs justify the action, according to Neill McKinstray, vice president and general manager of The Andersons Ethanol Division. “There are as many nuances and potential differ-

The Andersons Albion Ethanol LLC facility is a 55 MMgy corn-based ethanol plant in Albion, Mich. The company conducts all ethanol, DDG, carbon dioxide and risk management activities in-house.

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ences in the nature of a particular marketing agreement as there are different types of plants,” he tells EPM. The diversified Maumee, Ohio-based company conducts all of its marketing activities in-house for its plants in Albion, Mich., and Clymers, Ind., and soon for its 110 MMgy Greenville, Ohio, facility currently under construction. The company also offers marketing services for other ethanol firms as a third-party entity. “Every ethanol firm that runs that plant has its own set of unique capabilities whether it’s human, financial or operational,” McKinstray adds.

There’s no denying that developing an ethanol project is a challenging task.

For many would-be producers, the process of finding the right marketing arrangement(s) can be just as arduous when “selling” the project to a lender, according to Troy Prescott, president of Cardinal Ethanol LLC, a 100 MMgy corn-based plant that’s under construction in Union City, Ind. Cardinal Ethanol intends to market its ethanol through Murex, while Commodity Specialist Co. will market its distillers dried grains (DDG) when it begins production this fall. “We interviewed probably nine different ethanol marketers and maybe four DDG marketers,” Prescott tells EPM. “I think it’s one of those things that as margins get tighter, obviously [weighing those marketing arrangements] becomes a bigger concern in today’s market, especially Prescott with banks tightening up. We kind of [started] before that mad rush, so I think our plant was scrutinized real well.”

With more production and volume anticipated to come on line this year,

coupled with an increase in consolidation, current producers provide insight on the disadvantages and advantages of different marketing packages that could be beneficial in the long term for those looking to get in the game.

Third-Party Pros and Cons According to current ethanol producers, securing a third-party all-in-one service provider can have its advantages because it can “seal the deal” when presented to a lender, according to Omer Sagheer, vice president of marketing and public policy for White Energy LLC. The Dallasbased ethanol producer currently owns and operates a 50 MMgy milo and wheat starch ethanol facility in Russell, Kan., just comSagheer pleted a 100 MMgy ethanol plant in Hererford, Texas and has a 100 MMgy corn/milo plant under construction in Plainview, Texas. “The advantage is that it further validates the project to the bank right away on the financial side,” Sagheer says.

Although an all-encompassing service provider is beneficial to closing the project in the short-term, determining which marketing function it specializes in is crucial for long-term decision making, he says. For example, the all-inone service provider may excel in risk management activities, but is poor in ethanol marketing. Another factor to consider is that an all-in-one service provider may not have as close a relationship with the local railroads as a single grain origination company that has existing customers within its area.

According to Sagheer, conducting thor-

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Hawkeye Renewable’s 95 MMgy ethanol plant in Iowa Falls, Iowa, has rail access to bring in corn and ship out distillers grains. Its marketing subsidiary, Hawkeye Gold, will conduct all of the ethanol marketing activities in-house, breaking a four-year marketing agreement it had with Eco-Energy since 2004.

ough preliminary research on third parties that provide all-in-one services is the key to financial and operational success. “In the long run you need to find out which function they’re an expert in and which side the marketing entity is more concentrated in,” Sagheer says.

“Everything is wrapped up into one entity and therefore the boundaries can get a little fuzzy at that point.”

A sound path for establishing the right marketing agreement would be to refer to an ethanol contractor or builder’s preferred vendor list, according to Prescott. Esteemed ethanol contractors or builders such as Granite Falls, Minn.-based Fagen Inc. offered this service for Cardinal Ethanol. It’s a service that Prescott gladly accepted for this project. “We went to Fagen right from the start and said, ‘We don’t want to reinvent the wheel,’” Prescott says.

“When you go to the bank and they see that you use someone that isn’t on the list I’m sure they would double-check

and wonder why you’re doing something different from most in the industry.”

As far as marketing ethanol goes, current producers agree that contracting with third-party service providers is recommended for would-be producers looking to establish themselves in the industry. “It’s advantageous to have a third-party service provider to market your ethanol for you to start off with,” Sagheer says. “You need to build the relationships over time. As you hit a substantial volume and as you go beyond that single plant entity and as you get into the larger scale, it makes sense to try to bring some of that ethanol marketing in-house, especially as you diversify your business and try to capture a little more of the supply chain.”

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and the expertise to merit an in-house marketing strategy is Hawkeye Energy Holdings LLC. In January, the Ames, Iowa-based ethanol producer announced that it would market its own ethanol by way of “direct commercial representation” through its Hawkeye Gold subsidiary. The move means that Hawkeye Energy will directly manage its entire ethanol marketing activities all the way to its customers, according to Hawkeye Chief Commercial Officer Marty Lyons, who was hired from Archer Daniels Midland Co. last year to head the company’s new marketing campaign. Newly-hired Hawkeye Sales Manager Marc LaMond, who followed Lyons from ADM to Hawkeye, will provide additional expertise to the venture.

“We’re reaching out and calling all the big users of ethanol across the country and trying to develop a Hawkeye relationship with those customers directly,” Lyons says. “We’re handling all of the downstream activities for our company

No matter which marketing method is used, ‘getting the best value, managing the logistics, executing, having the contracts, having the systems to track the position reports and then being able to assemble all that information in a manner that allows one to proactively manage their risk, is what it’s all about.’

now. In this business, you really need to develop relationships with end-users.

We have taken control from our plants’ range all the way to our customers’ delivery point. ” The transition enabled Hawkeye Energy to end its marketing agreement with Eco-Energy, which it had since 2004 when the company was running at 50 MMgy, a scale that couldn’t support the type of marketing arrangement it announced in early January, Lyons says.

Today, Hawkeye Energy and its affiliates

have 450 MMgy of ethanol capacity in Iowa. Hawkeye Renewables’ Iowa Falls and Fairbank facilities produce a combined 220 MMgy and Hawkeye Gold’s Menlo and Shell Rock plants, which are under construction and should be operational late this year, will add another 230 MMgy of production capacity.

According to Eco-Energy Chief Legal Officer Jaime Dachelet, the amicable move by Hawkeye didn’t come as a surprise. Eco-Energy is also expanding with close to 1 billion gallons

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BUSINESS

through marketing agreements with producers who are already in production or under construction. “We have absolutely parted on good terms and we will continue to be one of Dachelet Hawkeye’s largest customers,” Dachelet says. “We have worked very well together over the years

and we plan to continue that healthy, trusting relationship into this next phase of Hawkeye’s growth.”

Risky Business Ethanol developers agree that addressing the risk management aspect of a marketing package is one of the most important components in the decision-making process to find that proverbial “eye in the storm” so to speak,

according to Will Babler, principal for First Capitol Risk Management LLC. Headquartered in Galena, Ill., the firm specializes in providing commodity price risk consulting and hedging solutions for commercial commodity producers, processors, marketers and endusers in a variety of agriculture and renewable energy markets. “You’re always facing an incredible amount of commodity risk in the ethanol busiBabler ness,” Babler says.

“On top of that, you have the ethanol-specific risk where policy continues to change rapidly, capacity expansion continues to change, competitors for imports change and the margins are subject to that volatility.

At the end of the day, that’s probably the biggest lever in any plants’ profitability; knowing how to deal with the price risk and managing what the market is throwing at them on any given day.”

With an expanded renewable fuels standard in the new Energy Bill ushered into law late last year, the industry could see increased consolidation activity, which could enhance existing and future marketing relationships. No matter which marketing method is used, “getting the best value, managing the logistics, executing, having the contracts, having the systems to track the position reports and then being able to assemble all that information in a manner that allows one to proactively manage their risk, is what it’s all about,” McKinstray says. EP Bryan Sims is an Ethanol Producer Magazine staff writer. Reach him at bsims@bbibiofuels.com or (701) 7384962

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ETHANOL PRODUCER MAGAZINE MARCH 2008

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PROFILE

PHOTO: BRIGITTE BOUVIER

O’Connor, left, accepts the Green Fuel Industry award from Jeff Passmore, executive vice president of Ottawa-based Iogen Corp.

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ETHANOL PRODUCER MAGAZINE MARCH 2008

PROFILE

HONORING

theGHGenius Don O’Connor has the breadth and width of knowledge that is second to none in Canada. His analysis of biofuel plants’ greenhouse gas emissions has been especially important to the global industry.

By Anduin Kirkbride McElroy

ETHANOL PRODUCER MAGAZINE MARCH 2008

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n occasion, individuals are recognized for a lifetime of achievement and contribution to an industry. The Canadian Renewable Fuels Association awards the Green Fuel Industry Award at the Canadian Renewable Fuels Summit, held in December. “Every year the association looks to recognize someone in the ethanol and biodiesel world who has dedicated service to the cause and has worked to advance the industry in a number of different forums,” says Gordon Quaiattini, president of the CRFA. “We look every year at candidates who were early champions, early supporters, working to make a difference, and should be recognized for the contribution they have made to advance the industry in Canada.”

At the 2007 summit in Quebec City, Quebec, the CRFA recognized Don O’Connor, president of (S&T)2

O

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Consultants Inc. and a mechanical engineer who got his start in renewable fuels while working for an oil company. “Don is a very serious, very thoughtful advocate for the industry,” Quaiattini says.

“I’ve only been in my current position for a few months, but he has been a huge asset to me as far as his knowledge of where the industry is going in Canada and the world. We rely on him—as do the government and ethanol projects—to get advice on feedstock, infrastructure, regulatory issues, legislative language, attracting investment and industry growth. His breadth and width of knowledge are second to none in Canada. We’d be hard-pressed to find someone else like him.”

Quaiattini also expresses admiration for O’Connor’s commitment to the industry. “It’s not easy to grow a new industry,” he says. “In Canada, we’re not near where the United States is in size and scope. Yet he’s been at it a long time.

PHOTO: BRIGITTE BOUVIER

PROFILE

O’Connor accepts the Green Fuel Industry award at the fourth annual Canadian Renewable Fuels Summit held in December in Quebec City.

Commitment and perseverance is indicative of his character that he’s given to the industry for a lot of years.”

ETHANOL PRODUCER MAGAZINE MARCH 2008

PROFILE

‘Most of the big, easy-to-get-at sources of crude oil have already been found, so the energy required to make crude oil tends to increase as time goes on.

Whereas with ethanol production, as plants get more efficient and they get better enzymes, the energy required to make ethanol goes down over time.’

O’Connor got involved with renewable fuels when he began working at Mohawk Oil Co. in 1981, when ethanol was first produced and added to gasoline in Canada. He was part of the group that commercialized the use of wheat in Canada as an ethanol feedstock. While it’s difficult for him to say what his greatest contribution has been to the industry, he notes to EPM the perseverance through the 1980s and 1990s when biofuels weren’t economically attractive as especially challenging.

His experience has made him an expert to call on in many instances.

Through his consulting firm, he provides advice on fuels, transportation issues and greenhouse gas emissions to a number of provincial governments, several Canadian federal government departments and international agencies and governments. He has also consulted for a number of companies developing new technologies for alternative-fueled vehicles, and new transportation fuel processes and facilities.

In addition, O’Connor has served on or chaired many government advisory panels on transportation fuels and bioenergy, industry associations, and community foundations. He served on the CRFA board for several years and worked closely with the Canadian government to develop its ethanol policy.

O’Connor’s consulting firm also analyzes greenhouse gas emissions for both the private and government sectors. He studies greenhouse gas emissions and energy balance—both formulated from life cycle analyses. Over the past eight years, O’Connor and his firm developed the GHGenius Model for Natural Resources Canada. The models and analyses he has created help to shape policy and give the private sector solid data to make decisions. As the world shifts to a carbon conscious economy, his work may prove to be even more valuable.

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Some people in the ethanol industry hear “energy balance” and immediately feel defensive. Life cycle analyses—conflicting, unfavorable or otherwise—have sometimes been a thorn in the side of the ethanol industry.

Opponents have tried to fight ethanol subsidies using negative energy balance studies, or have tried to disprove claims of improved emissions. But not all studies are unfavorable, especially for ethanol production that actually does have favorable profiles. Therein lies the issue: Many studies have been published that address either the energy balance or the emissions profile of ethanol, and the results tend to vary across the board (see Figure 1). How can the fuel be seriously evaluated if scientists are in such disagreement?

Life cycle analyses are important tools that aid in the decision making process for governments, lenders, investors and project developers. “We need policy makers who have an understanding of what some of the issues are,” O’Connor says. “Of course, that’s not an easy thing to do, so we need to make sure that we can explain the com-

plexities of some of these issues in a way that people, who aren’t experts, can understand. In general, in Canada, we’ve made a lot of progress over the past few years getting people to understand what the issues are and how complex they are, and there tends to be a greater acceptance that maybe this ethanol can have a positive impact.”

O’Connor says it’s always appropriate to analyze both emissions and energy balance—especially when setting policy. “Society doesn’t make decisions just based on energy or just based on greenhouse gas emissions,” O’Connor says. “You have to take other factors into account such as impact on local air quality, economics, social issues and resource issues, and do a multidimensional analysis to ensure that this is the right thing to do.

All of those things need to be taken into consideration when you’re developing policy.”

The multidimensional analysis is just one step. The findings must be put into perspective. He points to the United States’ fossil fuel consumption as an example. To reduce crude oil imports, the United States must look at all alternatives, including coal to liquids

ETHANOL PRODUCER MAGAZINE MARCH 2008

or an energy balance, the answer is very specific to that particular point in time and that particular location,” O’Connor says (see Figures 3 and 4).

Why the Differences When, where and how a study is done greatly influences the results and explains why many ethanol studies have such diverse results. The timing matters because efficiencies change. “Most of the big, easy-to-get-at sources of crude oil have already been found, so the energy required to make crude oil tends to increase as time goes on,” he says.

“Whereas with ethanol production, as plants get more efficient and they get better enzymes, the energy required to make ethanol goes down over time.”

Differing definitions, as in the case of energy balance studies, can be another reason for confusion. Two of the most common measures are the energy produced divided by the total energy consumed, and the energy produced divided by the fossil energy consumed. O’Connor says there are issues with both measures, and confusion arises when some people compare the first for one type of fuel with the second for another type of fuel. To get the true

ETHANOL PRODUCER MAGAZINE MARCH 2008

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and shale oil extraction. “You need to be looking at the energy balance and greenhouse gas emissions from all of those alternatives and put all of that data through all of your filters: energy, greenhouse gas emissions, economics and regional pollution. When you do that, you find that ethanol or biodiesel isn’t necessarily that bad, even if you only get 50 percent more energy out than goes into the system. That’s not an awful lot different than some of the oil sands operations that we have in Canada, and it’s probably better than making crude oil from oil shale (see Figure 2).”

What is the best way to analyze fuel? Probably by some other analysis, O’Connor says. “There is no such thing as a perfect study, which is part of the whole problem,” he says. “Decision makers are looking for the one perfect answer. When you do these studies and where you do these studies has a huge impact on what the results are.” He says the same fuel in the United States would likely have a different greenhouse gas calculation than in Canada or Europe because of the differences in the industrial infrastructure. “When you do a greenhouse gas emissions analysis

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picture, the analysis should look at the energy displaced as well as the total energy and the fossil energy consumed.

Yet another reason for differences among studies is the system boundaries—what is included and what is not considered. The primary factors included within an energy balance study are fuel dispensing, fuel distribution and storage, fuel production, feedstock transmission, feedstock recovery, agriculture and chemical manufacture and coproduct credits. In an analysis of greenhouse gas emissions, additional factors must be considered: fertilizer application, soil carbon changes and aboveground biomass changes.

Sometimes researchers include

inputs that that are fairly inconsequential. “It’s questionable if you need to include the energy that went into building the infrastructure—the plant, tractors and trucks,” O’Connor says. “The plant numbers turn out to be quite small. A number of studies amortize energy requirements over the life of the plant; the numbers end up being 1 percent or 2 percent of the life cycle emissions associated with that particular fuel. That’s pretty common actually for oil refineries as well as for ethanol and biodiesel plants. The materials going into tractors and trucks turns out to be a relatively small number in the overall scheme as well.”

Another relatively small number is

ETHANOL PRODUCER MAGAZINE MARCH 2008

PROFILE

the human input, such as how much energy the farmer consumed in a meal. “I don’t think that’s a particularly appropriate boundary because I believe that person would be living and doing something else, even if he wasn’t making biofuels. All of that energy should be showing up in both your references to man the system that you’re looking at. Therefore they cancel out and you don’t have to worry about it. If you do want to include it, the challenge is to find good data. A few studies I’ve seen where they’ve tried to include that have taken very coarse data and essentially double counted things and just haven’t done a good job of it. I’m pretty sure that it turns out to be a relatively insignificant part of the overall equation.”

Sometimes, the diverse results are deliberate. “The issues are complex, but there are people out there who are deliberately trying to muddy the water,” O’Connor says. “When somebody keeps quoting studies that have the basis of much of their data in the 1970s, it’s not relevant to what’s happening today. We have two authors out there who have a tendency to use bad data to try to make their point.

It’s just not right. They take the energy efficiency of nitrogen fertilizer plants that are processing coal in China and apply that to the North American context. Or they take an energy balance from an ethanol plant that was built in the 1980s, and went bankrupt in the 1980s, as the model of what energy requirements are for an ethanol plant. Guess what: there was a reason that plant went bankrupt. As long as there are people out there who continue to do that sort of thing, it’s going to be very difficult to get consensus.”

The press can also encumber consensus because it is more interested in a sound bite or a headline than in understanding the complex issues

that go into the studies, O’Connor says.

Additionally, he says the press has a tendency to give more weight than is deserved to the alternate views.

O’Connor says credible studies will have clearly stated their assumptions in terms of inputs, the region and the time period the analysis applies to. His work to facilitate thorough and credible studies is just one of his many contributions.

Providing information that allows industry leaders and policy makers to make

E

confident, informed decisions is worthy of a lifetime achievement award. EP Anduin Kirkbride McElroy is an Ethanol Producer Magazine staff writer. Reach her at (701) 738-4962 or amcelroy @bbibiofuels.com.

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ETHANOL PRODUCER MAGAZINE MARCH 2008

LEGAL

Ethanol Start-Ups and the

Bankruptcy Bogeyman

Two new ethanol plants received a lump of coal in their Christmas stockings—a Chapter 11 bankruptcy filing. One plant isn’t even completed. Now both face the unenviable task of clawing their way out of a hole to become successful enterprises. And both leave corn farmers and other investors wondering how such lofty aspirations went awry.

By Sarah Smith

ETHANOL PRODUCER MAGAZINE MARCH 2008

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LEGAL

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PHOTO: CENTRAL ILLINOIS ENERGY CO-OP

I

n mid-December 2007, Central Illinois Energy, a cooperative formed by 260 farmers and local investors who spent $130 million to build an ethanol plant near Canton, Ill., threw in the towel when they learned they’d lost their money—about one month shy of distilling their corn. Plant construction had mushroomed from its $40 million initial proposal in 2001, in part due to project additions, engineering delays and financing hurdles.

The unfinished plant faces $37 million in construction liens, a debt load of $87 million and a loss of all but two of its directors. It surrendered its grain license when the financial problems became insurmountable. The Central Illinois Agriculture Coalition, which spearheaded the fund drive, owns 71 percent of the defunct plant.

One week earlier, an innovative plant near Mead, Neb., filed Chapter 11 bankruptcy papers after mechanical failures undermined early output and profit projections and sent company finances spiraling downward. E3 BioFuels LLC, an $80 million plant called Genesis, had only been operational for five months. It employed a prototype technology. The plant was powered by biogas generated from cattle manure, compliments of a 28,000-head feedlot nearby. Distillers wet grains, a byproduct of the ethanol plant, fed the cattle in a “closedloop” system.

E3 lists $10 million in assets and $73 million in liabilities in bankruptcy papers. Major bondholders CIT Group and Oppenheimer have an estimated $40 million outstanding; Wells Fargo Bank in Omaha is owed $57 million. More than $3.25 million has been filed in construction liens. In addition, E3 lost six directors in 2007.

CIE, a cooperative formed by 260 farmers and local investors, will go on the auction block this month.

Like the town of Canton, Mead felt the financial pain of the bankruptcy filing. Mead’s 600 residents are among the creditors because their town board provided $5 million in tax increment financing for the project. Mead-area farmers who bypassed traditional grain markets to sell to the ethanol plant for a higher price are also listed as unpaid creditors.

Anatomy of a Meltdown: What Went Wrong in Illinois Each plant failure features plenty of culprits and even more finger-pointing. CIE and E3 both cited an inability to pay their debts as they came due as a reason for filing for bankruptcy. Neither blamed volatile market conditions. Debt, and the near-death experience—came to both plants in the early stages of development and evolved over a period of several years before the filings.

ETHANOL PRODUCER MAGAZINE MARCH 2008

LEGAL

In Canton, CIE’s main contractor Lurgi PSI is the object of much of the blame for $50 million in cost overruns.

Lurgi blames CIE management, plant size and engineering design changes during construction. The plant was designed to be powered by a waste coal generator.

Lurgi, a Memphis contractor, has Barash designed, engineered and constructed more than $2 billion in projects in the corn wet milling, grain and starch industries. When asked about the cost overruns, project manager David Cooper said, “Ma’am this company is not going to comment on any of that.”

CIE began with ICM-designed dry-mill technology in which the entire corn kernel is ground into flour. Bankruptcy attorney Barry Barash says at an early stage in the construction, the ICM technology morphed into Lurgi’s own untested method of distilling, necessitating the escalating costs. “The contractor wasn’t solely to blame,” Barash says. “The amount of water that was available from the city of Canton is not sufficient to produce 37 million gallons of ethanol, which is the nameplate capacity of the plant.”

Ironically CIE’s small size may have been a factor in its demise. Its 37 MMgy is small by today’s standards. Because of market factors most plants are currently going on line with three times that capacity.

To date, CIE investors have been unable to raise the estimated $25 million to $30 million remaining to complete construction. The plant will go on the auction block in March 2008. Barash says the pending sale has attracted a lot of atten-

tion—in part stimulated by the Energy Independence and Security Act of 2007, which mandated a six-fold increase in ethanol production.

The Meltdown in Mead: Clash of Two Energy Titans In Nebraska, a boiler explosion in one of two boilers prevented plant personnel from attaining sustainable boiler operations to allow full capacity of the ethanol unit. Its anaerobic digester (the manure-to-methane conversion unit), was not the source of the problems even though early blame focused on the technology. The plant was never able to reach full capacity and losses mounted.

Plant officials estimated it was operating at 50 percent of its 25 MMgy capacity following the February 2007 explosion.

E3 was intentionally designed small to capitalize on the feedlot’s supply of manure. Again, the economy of scale may be to blame. Like CIE, the plant may be too small to compete with the mega-plants under construction or already in operation.

E3’s start-up failures have been blamed on the pressure to bring the plant on line. Insiders who declined to be named say operators omitted some steps during the start-up that caused a “puff ”—an explosion that blew a boiler door off. Former plant spokesman R.J. Wilson says contractors may be named as defendants in recovering the operating losses. Bankruptcy filings indicate the wet cake conveyor at the feedlot wasn’t operating properly and there was a freeze loss in November 2006 that contributed to its financial condition.

E3’s difficulties began three years earlier and involved

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personalities, not mechanical failures.

The closed-loop system was patented in 2002 by ethanol pioneer David Hallberg. Founding president of the Renewable Fuels Association, he went on to form his own ethanol tech venture, PRIME BioSolutions LLC. In the interim, Hallberg was chief executive officer of E3.

In 1999, Kansas City businessman Dennis Langley, an oil and gas pioneer, sold Kansas Pipeline Co., to form Earth, Energy and Environment LLC, E3’s parent company. In 2005, Langley invested in Hallberg’s patent. Ground was broken on the E3 plant in late fall of that year. By June 2006, the partners’ styles clashed. They severed their business relationship, agreeing in a bitter parting to share the patent through a holding company. Hallberg’s PRIME BioSolutions became a minority owner in another holding company involving E3 while Langley retained 80 percent ownership. Hallberg resigned as CEO. He has observed the bankruptcy proceedings from the sidelines.

Hallberg characterizes the explosion as “an operational snafu. It was an unfortunate development but it’s certainly very manageable. It had nothing to do with the method technology, the feedlot or the digesters.” He’s reluctant to elaborate further due to the litigation, but admitted he has spoken to financial backers about salvaging the plant because he has significant investments in the closed-loop technology.

“Out of the ashes of disaster come opportunities and kernels of opportunity,” he says. He declines to discuss his former partner but acknowledged he would only involve himself in E3’s resurrection if Langley wasn’t involved.

The partners were viewed as the “Odd Couple” of ethanol. Where Hallberg was precise and methodical, Langley was flamboyant, launching an international press campaign and a “YouTube” video on the self-sustain-

PHOTO: E3 BIOFUELS LLC

LEGAL

E3 Biofuels filed Chapter 11 bankruptcy papers in December because of mechanical failures and unfavorable profit projections.

ing technology when E3 began operations. The opening day fanfare included an appearance by Nebraska Gov. Dave Heineman. Langley’s expansion plans announced at that time included building 15 similar plants around the globe in a five-year span.

Some area residents, who did not want to be named, suggested a preoccupation with politics, instead of plant production, as the source of E3’s demise. Langley, a political activist, was hosting fundraisers while E3 was starting to struggle. In the fall of 2007, he hosted a soiree for the Association of State Democratic Chairs at his home in Shawnee, Kan. ASDC publicized the event with an Internet slide show of the mansion, its waterfalls and rock grotto. Kansas Gov. Kathleen Sebelius attended, along with other dignitaries.

Some offered testimonials as to the lucrative aspect of Langley’s support.

Campaign financing records indicate Langley has contributed more than $350,000 to various state and federal Democratic Party candidates since

ETHANOL PRODUCER MAGAZINE MARCH 2008

LEGAL

ny is working hard to make this bankruptcy a success and the views of discontented creditors should be weighed accordingly.”

Langley’s holding company and E3’s parent company are listed as creditors for $6.5 million. At a court hearing on Jan. 7, Hallberg says there were “a lot of angry creditors.” One creditors committee is questioning numerous expenditures. Langley is scheduled to be deposed some time this spring.

PHOTO: E3 BIOFUELS LLC

The Way Back

In 2005, Langley, pictured, a Kansas City businessman, and David Hallberg formed a partnership to build E3 Biofuels based on Hallberg’s patent for a closed-loop ethanol production system. The partnership was dissolved in 2006.

2000. His wife, Lynette Shaw, has contributed more than $90,000 in that time. E3 hired the Gephardt Group, a lobbying firm run by former House Minority Leader Richard Gephardt, DMo., to ensure political clout.

Gordon Ganz, owner of Alvo Grain in Ashland Neb., has never met Langley, but E3 owes the company nearly $100,000 for grain sold in good faith. “My official comment should be ‘no comment,’” he says, noting that plant officials asked the farmer creditors not to discuss the bankruptcy.

“But I think ethanol plants should be bonded.”

“It is common for creditors in bankruptcy cases to express discontent,” says Jeffrey Deines, Langley’s attorney. Langley declined to comment for this story. “Creditors are certainly entitled to full and prompt payment of their debts and various aspects of the bankruptcy process sometimes are not consistent with this desire. The compa-

Representatives of both plants feel they’ve been thrown a life preserver in the form of the Energy Bill. The Illinois Department of Agriculture seized CIE’s $6 million worth of grain in late December. That asset, sold to high bidder Cargill, was liquidated to pay off creditors. Depending on the grain’s quality, the sale may make many farmer-suppliers whole. Central Illinois Grain Co. is a member of the Illinois Grain Insurance Fund, which will help cover any insufficiencies that the sale doesn’t.

Chicago financial advisor Alex Moglia was brought in to restructure the company’s operations. He abruptly departed after three weeks, citing a conflict of interest within his firm, Moglia Advisors. He says he stabilized the plant and positioned it “for new investors to step in.”

Farmer investors, several of whom declined to comment, will not recover their investments, however. Although there were attempts to set aside money for the unsecured creditors, “the equity has been wiped out,” Moglia says.

Canton, too, had angry creditors at its January meeting. But Elaine Stone, president of the Fulton County Farm Bureau, said the sentiments were mostly based on heartsickness.

Barash sympathizes with the farm co-op that spearheaded the plant fund drive. He stops short of calling the

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farmers naïve, but says, “I don’t think farmers should sign any of these contracts that require subordinated loans and long-term deliveries over a period of years, of corn at a discount, at a deferred payment.” Barash suggests—too late— that a fixed-cost contract might have protected the investors by containing exorbitant costs and protecting them against renegotiations with the contractors during construction that weren’t in their best interests. All the contractors, including Lurgi, will be paid because they filed mechanics’ liens, which have priority in bankruptcy shakeouts.

CIE’s senior secured creditors, or a consortium of them, likely will be the successful bidders in March, Barash predicts. International financier Credit Swisse has extended nearly $6 million in operating costs to keep the plant afloat until its sale. Whitebox Advisors LLC, a Minneapolis arbitrage and hedge fund firm, has purchased 70 percent of CIE’s debt, Barash says. Neither entity returned calls seeking comment. Barash estimated CIE’s value at $25 million because most ethanol developers are looking to cellulosic feedstocks rather than corn.

Wisconsin ethanol developer Rich Ryan expressed interest in CIE, but may not be in a position to negotiate the senior debt. Ryan was initially involved in building a plant near Sparta, Wis., but sold his interest. That plant has been mired in litigation over site selection.

Meanwhile in Nebraska, there is a grassroots groundswell to license and bond ethanol plants, much like grain elevators as Ganz suggests. That way, sellers such as Alvo would be covered in the event of insolvency instead of waiting for a bankruptcy referee to sort out the mess.

Twice since 2002 the Nebraska Legislature has toyed with the notion of licensing ethanol plants but both bills died in committee.

Deines says Langley is “fully cooperating with the bondholders to resolve certain mechanical and construction issues and allow for a successful restart of the plant.”

Hallberg, although troubled by the events that caused E3’s ill health, still champions the technology that gave it life.

“This was a very regrettable development,” he says. “For the industry in general and the community, we all want to get it rectified for the employees. The future of this industry is very exciting and one of the new dimensions is an emphasis on producing biofuels with no fossil fuels, with as small a carbon footprint as possible, sustainably, and with as little water as possible. That is exactly what this technology was designed to do.”

And in the wake of the Energy Bill, there are more ethanol plants on the horizon. EP Sarah Smith is an Ethanol Producer Magazine staff writer.

Reach her at ssmith@bbibiofuels.com or (701) 663-5002.

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What’s Up

Down Under

By Ian Thomson

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s Australia quickens its steps towards a biofuels future, industry leaders expect 2008 will be a watershed year for ethanol production Down Under. They point to events such as the start of work on the long-awaited ethanol plant at Dalby in Western Queensland—the first purposebuilt, grain-to-fuel ethanol facility in the nation—and the climate change issue as significant indicators of the successful future of biofuels.

Progress at the $A130 million ($112 million) Dalby plant will be closely monitored by many people, including three farmers in the same Western Queensland region who are forging ahead with plans to construct a plant of their own—known as Western Downs. At least another 10 plants are proposed in other states and the Northern Territory.

Political commentators will tell you that a lack of action on climate change was one of the reasons the Coalition Government led by Prime Minister John Howard was thrown out of office last December. Millions of Australians have embraced the issue, realizing the need to seriously consider an ever-increasing use of renewable transport fuel to drastically reduce carbon dioxide emissions from motor vehicles.

Bill Elliott, director of Brisbane-based BBI Biofuels Australia, says the only way for ethanol production across the country

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‘Australia, which is obviously a long, long way from the enormous progress made by the Americans in the biofuels industry, can take the lead from Washington and speed up the ethanol process.’

PHOTO: GERARD HYNES

A

Australian of the Year Tim Flannery addresses dinner guests at the Ethanol 2007 Conference in Melbourne.

is up. “The state of New South Wales has mandated the use of ethanol-blended fuel, Queensland has set a policy of blended ethanol by 2010 and the other states are becoming increasingly aware of the need to reduce greenhouse gases linked to global warming,” he says.

Regional Economies Invigorated “I remain confident that the new Federal Labor Government led by (Prime Minister) Kevin Rudd will join its state counterparts and turn its attention to an ethanol mandate so things can really get moving in this country,” Elliott says. He also points to the other significant benefits related to the expansion of biofuels production. “Ethanol production across the country delivers far more than just the vital need for cleaner and safer alternatives to fossil fuels,” he says. “The ethanol industry is reinvigorating rural economies. As more plants go on the drawing board, the massive investment in infrastructure provides new jobs in the construction, farm and automotive sectors. Many of those jobs will go to young people in the areas where ethanol plants will be built—stopping those people from having to seek work in the big cities.”

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PHOTO: GERARD HYNES

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Dinner guests at the 2007 Melbourne conference

With the NSW mandate and Queensland setting a policy of 5 percent blended ethanol two years from now, it’s obvious that more ethanol plants on drawing boards across the nation will need to quickly move from development to the construction stage. A minimum of six plants able to produce 200 million litres (50 million gallons) of fuel ethanol per year will need to be built by 2011 to meet the needs of NSW and Queensland alone.

Conference Tackles the Issues The signing into law of the U.S. Energy Bill late last year is also being seen as a major boost for the fledgling Australian biofuels industry. Elliott says the legislation requiring a five-fold increase in the use of transport fuels—most of which will be ethanol—is an historic turning point for the renewable fuels industry.

“The Americans have raised the bar enormously as they strive for longterm energy security,” he says. “Australia, which is Elliott obviously a long, long way from the enormous progress made by the Americans in the biofuels industry, can take the lead from Washington and speed up the

ethanol process.”

The events at home and abroad in recent months have set the scene for what promises to be a fascinating industry talk fest April 8-10 in Sydney. The BBI International Ethanol 2008 Australia Conference in the plush and expansive Sydney Convention and Exhibition Centre will thrash out the issues and concerns confronting industry leaders on the march toward a transport future based on renewable fuels. Delegates and speakers will make their way to Sydney from the United States, Asia and from across Australia to the third and biggest annual conference of its type.

Food Versus Fuel on the Menu One hot issue on the agenda is the socalled food-versus-fuel debate. Those opposed to ethanol production say that when it comes to ethanol plant feedstocks, we must choose between fuelling our cars and feeding the people. Others say we can do both. The debate has raged in the United States and now it’s Australia’s turn to take a long, hard look at the facts as they’re presented by several experts in the field.

BBI Conference Coordinator Louise Jordan says the 2008 event will face the food-versus-fuel issue head-on. “We are

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planning a debate of our own on stage at the conference,” Jordan says. “We have approached a number of speakers to be involved in the discussion, with the highly-respected Todd Sneller from the Nebraska Ethanol Board already signalling his acceptance.”

Jordan says she expects the 2008 conference to be the biggest yet, with more than 500 attenJordan dees and 50 industry booths at the trade show to be held in conjunction with the event. “The conference will provide the latest developments in biofuels production across the globe, and outline just what’s happening in the emerging Australian ethanol revolution,” she says. “Australia has come a long way in biofuels development and there is still a long way to go. A well-planned conference with excellent speakers generates discussion on the best ways to speed up the push for nondependence on fossil fuels.”

Oil Titan Comes to the Party Oil giant Caltex Australia will have a presence at the conference, with an address by the company’s National Fuels Marketing Manager Michael Ridley-Smith.

The involvement by major oil companies in Australian biofuels production and distribution has taken leaps and bounds in recent times, a move unexpected by many in the renewable fuels industry.

The latest edition of the Caltex industry magazine, The Star,

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contains six pages on biofuels. It quotes Ridley-Smith as saying Caltex was well ahead of most competitors in the number of sites at which ethanol blends are available. “Some areas of Australia are better suited for biofuels expansion than others,” he says in the magazine. “With its sugar plantations, Queensland is a logical place for further growth, so are grain growing areas and Caltex has committed to taking at least 30 million litres (7.5 million gallons) a year from the grain-to-ethanol plant at Dalby in Queensland.”

Apart from an oil company’s perspective, other topics to be covered at the Ethanol 2008 Conference in Sydney include: Ethanol automotive technology Future production technologies Basics of ethanol production Plant construction and management Establishing feasibility Financial structure The ethanol market Elliott says the conference represents a major step in the development of the Australian biofuels industry. “It will provide highlyvalued and accurate information for those already established and others keen to jump on the renewable fuels bandwagon,” he says. EP Ian Thomson is managing editor of Biofuels Australasia. He can be reached at ithomson@bbibiofuels.com or 07 3360 7018 and 0409 827-387.

ETHANOL PRODUCER MAGAZINE MARCH 2008

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PROCESS

Agitation Challenges in Cellulosic Ethanol Production

By Gregory T. Benz

K

PHOTO: NATIONAL RENEWABLE ENERGY LABORATORY

ey fluid agitation problems face the emerging cellulosic ethanol industry. Of particular importance is the conflict between the need to use high solids fibrous slurries, which require expensive solids mixing equipment, versus the desire to use inexpensive fluid agitation equipment, which cannot handle high-solids fibrous slurries. Despite the challenges, possible solutions and areas where further research would be beneficial are available.

One of the challenges facing the industry is the variety of different feedstocks, each having different rheological properties that affect mixing difficulty. Examples of feedstock include corn stover, switchgrass and recycled newspaper. Some facilities must be designed to handle multiple feedstocks. The key parameter for mixing is how much water can be absorbed inside the fibrous cells before there is any â&#x20AC;&#x153;freeâ&#x20AC;? water available, marking the transition from a damp solid to a liquid

Switchgrass, corn stover and newspaper waste are potential cellulosic ethanol feedstocks with diverse agitation requirements.

slurry. When the slurry behaves as a damp solid, it must be mixed with expensive solids-mixing equipment, which is not available with large volumetric capacity. When the slurry behaves as a liquid, it can be handled with fluid-mixing equipment, which is much less expensive and readily available for very large tank volumes.

Another challenge is that many different processes are still being developed, and each has its own requirements. However, the wide variety of processes can be simplified in order to focus on their common elements and identify agitation issues. In general, all cellulosic ethanol processes have four major process steps: pretreatment, hydrolysis, fermentation and ethanol concentration. Sometimes some of these steps occur concurrently. For example, fermentation may begin in the hydrolysis step. Though there can be many differences in each of these steps from one process to another, the mixing challenges are qualitatively the same.

Pretreatment Pretreatment involves making the individual cellulosic fibers more accessible to the agents of hydrolysis. Pretreatment may involve combinations of mechanical steps such as chopping the fibers, thermal processing, and chemical processing, such as treatment with acids, alkalis and/or enzymes. Generally, liquid agitation is not possible, due to low free moisture. A solids processor or a modified rotary dryer which tumbles the damp solids without the addition of heat might be useful in this step.

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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Hydrolysis For an economically viable process, the solids content feeding the hydrolysis step should be as high as possible, typically 20 percent to 30 percent or more. Any excess water not only dilutes the enzymes added for hydrolysis, reducing the reaction rate, but also dilutes the sugars produced. This slows fermentation, lowers ethanol concentrations and adds energy cost for concentrating the ethanol.

Water in fibrous slurries can be found both inside and outside the cells. However, only the water outside the cells, which we will call â&#x20AC;&#x153;freeâ&#x20AC;? water, contributes to product fluidity. The practical significance of this is that cellulosic slurries above approximately 12 percent to 15 percent dry solids content are not liquids, but damp solids, having little or no free water. They cannot be handled by turbine agitators.

Instead, they must be mixed by expensive, low volumetric capacity solids mixers. Turbine agitators are much less expensive and have no real size limitations, but generally are not practical above approximately 8 percent to 10 percent solids because the required torque of a turbine agitator is roughly proportional to percent solids cubed.

Therefore, from a turbine viewpoint, the solids should be more dilute.

How can we keep the feedstock at high percent solids and yet use inexpensive turbines? In other words, can we somehow use the water inside the cells to fluidize the slurry? The answer lies in what is happening in the hydrolysis reactor.

In this reactor, with time and reaction progress, the cellulosic structure is broken down, and the cellulose is hydrolyzed into various

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In a continuous flow scheme with a backmixed reactor, the bulk contents of the tank have the same composition and fluid properties as the effluent.

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soluble sugars. This means the end product of a hydrolysis reactor is basically low viscosity liquid, not fibrous slurry. The key to using a turbine, therefore, is to avoid exposing it directly to the high-solids, fibrous feedstock from the pretreatment step, allowing it to run in a mixture of feedstock and the hydrolyzate reaction product. The strategies are slightly different for batch and continuous reactors.

Batch Reactor A pure batch reactor would involve filling the tank with the pretreated feed, say at 30 percent solids, adding the necessary reagents and letting the reaction proceed. Such a reactor would then have to be able to mix the 30 percent fibrous material. This is not practical for large scales of operation, as it would require a solids mixer. A better way is to operate as fed batch, starting out with a small heel of water. The pretreated feed plus enzymes would be added until the tank was full, allowing hydrolysis to occur, breaking down the cellular structure and releasing internal water so as to increase the “free” water content.

Filling would be done at a rate so as to keep the tank contents fluid enough to be agitated by a turbine, then the tank would continue to be agitated until hydrolysis was essentially complete. The research needed for such a system would likely employ empirical kinetics studies, plus agitation studies to determine what the maximum effective percent solids after partial hydrolysis might be, and the minimum agitation at various solids concentrations. This would be highly dependent on the pretreatment process used as well as the kind of feedstock.

Continuous Flow Reactor In a continuous flow scheme with a backmixed reactor, the bulk contents of the tank have the same composition and fluid properties as the effluent. Thus, it is necessary to assure that the retention time in the first stage of a continuous flow system is sufficient to liquefy the feed. The minimum mixing torque/volume to create full motion is roughly proportional to the cube of the percent solids. However, mixing clumpy, high solids material into a lower percent solids bulk liquid will require substantially more torque than that required to maintain full liquid motion. Thus, a better scheme than using a single large tank or equal-sized tanks in series is to start with a small first stage, which will have an equivalent discharge consistency as high as possible for a turbine (likely 8 percent to 12 percent). This scheme avoids the need to create high agitation intensity in a large tank size. The small first

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have anecdotally reported similar results. A The fledgling cellulosic mechanistic study needs to be done to explain ethanol industry has the reason(s) for such strong influence and the major agitation challenges implications for proper scale-up. in the hydrolysis reactor Ethanol Concentration area, due to the need to Agitators in the ethanol concentration handle high solids feed. area of the plant are needed to keep solids

stage is followed by one or more tanks in series, with the final tank discharging an almost fiber-free material. It minimizes agitator cost and power. Research needed for this scheme includes at least an empirical study of kinetics plus agitation studies as a function of percent solids. Feedstock will heavily influence this approach.

Although for the purposes of this article fermentation is treated as a separate step, many processes under consideration actually begin the fermentation in the hydrolysis reactor.

Aside from pure economics, such processes may be used to deal with the fact that some sugars impede the very hydrolysis reactions that make them, but this does not affect the minimum mixing requirements.

from settling. This function is well understood by agitation consultants familiar with the industry, and no additional research is needed.

The fledgling cellulosic ethanol industry has major agitation challenges in the hydrolysis

reactor area, due to the need to handle high solids feed. Research into agitation issues is essential for viable process operation as well as minimizing agitation capital and energy costs.

Less critical, but worthy of study to allow process optimization, is the influence of agitation on fermentation. If the industry gets this right, productivity could be greatly enhanced.

EP

Gregory T. Benz is president of Clarksville, Ohiobased Benz Technology International Inc. Reach him at benztech@mindspring.com or (937) 289-4504.

Fermentation Ethanol fermentation has been used for thousands of years. Even fuel ethanol has been in production around the world for at least 50 years on a large commercial scale. Yet the influence of agitation has not been well studied. Most ethanol processes based on sucrose and yeast just use agitators to keep the tank bottom reasonably clean, and no additional research is needed to design for that function. However, work done by Professor Enrique Galindo of the Institute of Biotechnology at National University of Mexico showed that even for simple yeast/sugar ethanol fermentations, the process results were directly affected by agitation.

Specifically, he showed that rate of production, yield and maximum percent ethanol all increased up to an agitator-specific power input of 1.6 watts per kilogram (8 horsepower per 1,000 gallons), which is much higher than anything used on a commercial scale. Others

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Managing Through Tough Times in Ethanol Production

By Todd Taylor and Ryan Murphy

I

t’s no secret: high corn and energy prices coupled with low ethanol prices are squeezing ethanol plant’s margins and making it hard to not only make a profit and pay dividends, but also to buy corn and chemicals, pay wages and make debt payments. Even with the Energy Independence and Security Act signed Dec. 19, 2007, by President George W. Bush, the ethanol industry faces challenges. Newer plants with significant debt loads face these problems more than older plants that paid off debt before the current market tightening. For management at these plants, having a plan to deal with dwindling cash flows and reserves is critical to avoid shutting down and surviving until better times.

A plant’s ebbing cash flow will impact its relationships with creditors such as vendors, banks and employees. It can also test the equity owners, as the financial strains will impose greater burdens on them and may expose divergent goals. This is particularly true where owners wear other hats such as that of a supplier. The specific nature and scope of the financial difficulty will determine which creditor or creditors will be the focus of the plant’s operational renewal. The process of realigning reasonable expectations, however, remains fundamentally the same.

Declining cash flows may prevent the plant from meeting all of its contractual obligations in a timely fashion. To work through these issues, the plant must convince creditors that a realignment of these obligations is in everyone’s best interests. The primary line of reasoning is that a termination of the creditor’s relationship with the plant or commencement of a collection action will result in a far smaller return. As a result, it is in the best interest of all those involved, including the creditor, to receive payment

according to a more relaxed timetable or in an amount less than originally expected.

The most critical factor determining whether a plant can weather the current economic climate is early recognition of the challenges and putMurphy Taylor ting a comprehensive plan in place. The plant’s resources may be needlessly wasted attempting to impose last-minute solutions. The plant may obtain short-term concessions from creditors. This may provide the plant immediate relief. However, it will typically fail to address the fundamental issues driving the dwindling revenues.

It may even exacerbate such problems by causing the plant to incur additional obligations such as interest and attorneys’ fees. The current environment calls for resolutions that are broader in scope, more farsighted and permit the plant to continue operations rather than shut down. Such resolutions may include the implementation of a uniform plan to extend contractual commitments to conserve operating capital with a wider array of the plant’s creditors.

One critical class of creditors is vendors. Those who supply the goods and services essential to the plant’s continued operations often are the first to feel the impact. In a time of financial distress, payments to these suppliers may be untimely and infrequent. This is a product of necessity as it is a way to informally fund operations. If the financial problem is quickly

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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FINANCE resolved, such vendor financing may be sufficient. The current and near-term economic conditions, namely high-priced inputs and oversupply caused by infrastructure problems, counsel that such a resolution will be rare or only temporary.

If delaying payment of obligations to vendors fails to trigger the operational renewal, banks are often the next class of creditors to be addressed. The deteriorating condition may trigger a default under the loan documents such as a missed payment or very often a breach of financial covenants. Indeed, banks draft the default provisions broadly to enable quick action on their own financial interests. Diligent banks will learn of the operational concerns before a payment default occurs through financial reporting required under the loan documents. The recent publicity surrounding the difficult issues facing the ethanol industry will condition banks to have their antennas tuned for such distress.

Once aware of potential problems, banks usually proceed with a two-pronged approach.

First, they will conduct a review of the plantâ&#x20AC;&#x2122;s assets securing the loan. The analysis will assume that the assets will be sold at an orderly liquidation value, significantly less than fair market value. The bank uses this picture of the asset values to establish the available approaches to ensure payment of the loan or otherwise maximize its recovery. Second, the bank will demand that the plant provide it with a plan and supporting financial information, such as projections, to resolve the operational issues. Provided an arrangement can be reached with the bank, it will permit the plant to continue to operate under close monitoring. If the bank perceives that the continued operations will further deteriorate its financial position, the bank will likely act quickly to attempt to enforce its rights, particularly against the assets.

Employees are the final category of creditors affected by declining cash flow. They are one of the plantâ&#x20AC;&#x2122;s critical assets. With continued technological advancement, each employee has added importance. The value of a business will suffer if employees lose confidence. To ensure their continued confidence, management must keep them reasonably informed of the difficul-

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ties and the renewal plan. It is also absolutely critical that the wages and other benefits of the employees be paid on a timely basis. Rest assured, the critical nature of these payments will be acknowledged by almost all creditors, including banks.

The negotiations with vendors, banks, employees and other necessary parties culminate with a “workout plan,” which captures the renegotiated agreements with the plant’s creditors. This plan may be a formal or informal arrangement and may consist of a number of individual agreements. The important aspect of the plan is that it addresses the interests of all the applicable parties, including those of the plant.

A successful plan is one that allows the plant to return to financial stability and meets the creditors’ readjusted expectations.

If a workout plan cannot be finalized, creditors, in particular banks and vendors, will pursue available rights and remedies in an attempt to maximize their return or force their desired resolution upon the plant. The rights and remedies of banks and vendors differ in mate-

Despite the plant’s efforts, creditors may persist in pursuing their claims in the face of continued negotiations.

rial ways; accordingly, so does the plant’s response.

A bank’s primary remedy is to seize and sell personal property such as plant equipment or real estate. While always cognizant of any substantive defenses, the most pragmatic defenses are those rights provided by the process. To foreclose on personal property or real estate, the bank must meet established procedures for notice, obtaining possession and sale. This process is time-consuming and expensive. In addition, these remedies fail to maximize the return on the assets to be sold. Only with the cooperation of the plant can the bank realize the full value of the plant’s assets. Thus, even after the bank begins to exercise its rights and remedies, sufficient time exists to discuss reasonable arrangements or pursue alternatives such as replacement financing or a sale.

While less expansive, vendors also possess significant rights.

Vendors always have the right to stop supplying goods or services. This can make a financial renewal difficult as replacement agreements will need to be arranged, and often the plant’s alternative vendors are limited due to location, logistics and other restrictions. Suppliers of goods can also demand the return of recently shipped goods, a process called reclamation. A number of substantive defenses exist to reclamation claims; however, vendors further increase their leverage by pursing the claims.

Despite the plant’s efforts, creditors may persist in pursuing their claims in the face of continued negotiations. The plant, however, is not

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FINANCE

without additional options. One is the commencement of a bankruptcy case. Generally speaking, there are two types of chapters available for business debtors: 1) a chapter 11 reorganization and 2) a chapter 7 liquidation. The commencement of a bankruptcy case stays the action of all creditors against the plant or its assets, including attempts by the bank to seize assets, vendors seeking to reclaim goods, and collection actions. More fundamentally, it implements a specific process with the intent of maximizing the value of the plant’s business and assets for the benefit of its creditors and owners.

A chapter 11 filing allows the plant to continue to operate with the owners still in control, preserving business value. The filing provides the debtor with additional rights such as the ability to impose a payment arrangement on banks and terminate uneconomical contracts or leases. These rights come with certain obligations, including the requirement to obtain court approval for financing and use of property outside of the ordinary course of business, such as a sale. The chapter 11 process typically concludes with either a plan of reorganization or a sale. A “plan of reorganization” is substantially similar to a workout plan, albeit more formal and detailed. With increasing frequency, the chapter 11 process has been employed to facilitate a sale. A sale in bankruptcy can occur free and clear of all liabilities including liens, making it attractive to prospective purchasers. This heightened interest allows the plant to maximize the value of assets for the benefit of creditors and owners.

In contrast to a chapter 11 reorganization case, chapter 7 liquidation halts business operations. Upon the filing of the chapter 7 case, a “trustee,” typically a local attorney, is appointed and controls the plant’s assets. The trustee is charged with disposing of those assets and then making a pro-rata payment of those funds after expenses to creditors.

A chapter 7 case often fails to capture the full value of the plant and its assets. As a result, it is best utilized to formally conclude the affairs of a company, as most state laws do not permit a company whose liabilities exceeds its assets to dissolve.

At the end of the day, no one in the ethanol industry has a great deal of interest in closing plants. Banks and vendors lose money in foreclosures and bankruptcies. Investors lose their equity investment, and employees lose jobs. However, management and boards need to be realistic about dealing with difficult economic conditions and their own financial situation. Failing to address real problems because of a hope for better times is a recipe for failure. Plants that have a plan and follow it are far more likely to survive and thrive. EP Todd Taylor is an officer in Fredrikson & Byron’s corporate, renewable energy, securities and emerging business groups. Reach him at ttaylor@fredlaw.com or (612) 492-7355. Ryan Murphy is a senior associate in Fredrikson & Byron’s bankruptcy and reorganization, and litigation groups. Reach him at rmurphy@fredlaw.com or (612) 492-7310.

Ethanol in Europe Infrastructure Investment and Blend Economics How Can European Infrastructure Support Ethanol?

Existing players in ethanol markets are wellaccustomed to working with price-fluctuations, but how will regulatory change and demand uncertainty affect European trade, investments and use of ethanol?

Join regulators, academics and market players to debate the way forward in ethanol infrastructure, blend economics and demand in Europe.

Topics Will Include: ■ How will regulatory developments affect the industry going forward?

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ETHANOL PRODUCER MAGAZINE MARCH 2008

137

WORLD

Terrorist Group Extortion and Other Challenges for Transnational Corporations

By Dean C. Alexander

S

ome say the world is getting flatter, and the U.S. ethanol industry is very much an active part in it. Much like the world’s major oil and energy companies, ethanol industry-related exports— distillers grains, technology and expertise, primarily—continue to increase and business continues to become more globalized.

The U.S. ethanol industry has been moving much of its coproduct to worldwide consumers, opening new avenues of trade. The domestically produced renewable fuel is creating a new global business option for U.S. companies. However, with new ventures come new obstacles.

A sinister threat to global business that is critically underappreciated but worth highlighting is extortion, a tactic used by terror groups to obtain money through threats or actual violence against corporate personnel and other assets. This form of terrorism continues to have farreaching implications for business, particularly transnational companies.

Companies are increasingly facing the reality and risks of doing business in an unstable world. Any company in energy, agriculture, mining or manufacturing will likely come up against the threat of terror and subsequent extortion payments.

To give an idea of just how big this problem is for transnational companies, consider Nigeria. For several years, the eighth-largest oil exporter has suffered bombings against oil rigs and compounds as well as kidnappings and other extortive acts by the Nigerian terror group MEND (the Movement for the Emancipation of the Niger Delta). In September 2007, Mexico, another top oil exporter, experienced bomb

blasts perpetrated by the terror group EPR (the Popular Revolutionary Army) against state-owned Pemex oil and natural gas pipelines. Recent cases of terror extortion tactics include the ETA (Euskadi Ta Askatasuna) in Spain, Abu Sayef in the Philippines, Hizballah in South America’s tri-border area and narco-terror groups in Colombia.

Terror group extortion, such as revolutionary payments or protection-money, is an ongoing issue for transnational companies. Giving in and paying off the terrorists may initially afford a transnational company peace and quiet. Yet ultimately, employing such defensive measures, which are akin to bribery payments, can result in far-reaching negative operational, financial and legal consequences.

In Focus: Chiquita and Colombian Terror Groups Recently, Chiquita Brands International Inc. revealed to the U.S. Department of Justice that it had been illegally paying extortion fees to known terrorist groups for several years. Chiquita stated that its management felt it had no choice but to ensure the safety of the company’s employees.

Chiquita voluntarily alerted the Justice Department in April 2003 that it paid $1.7 million between 1997 and 2004 to AUC (United SelfDefense Forces of Colombia), a terror group responsible for some of the worst massacres in Colombia's civil conflict and for a sizable percentage of the country's cocaine exports. Additionally, Chiquita made payments to the terror groups ELN (National Liberation Army) and FARC (Revolutionary Armed Forces of Colombia), as control of the

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

All questions pertaining to this article should be directed to the author(s).

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ETHANOL PRODUCER MAGAZINE MARCH 2008

WORLD

U.S. criminal charges.

In the face of extortion, Chiquita had to decide between several unappealing options: 1) pay terrorists the extortion, 2) refuse to pay them and possibly suffer attacks on employees and facilities, 3) stop operations temporarily or 4) sell operations, most likely at a loss. While making payments may seem like the lesser of many evils, a transnational company’s decision to make protection payments undermines its status at home and with host countries. Even worse, extortion payments encourage similar conduct by terrorists against businesses worldwide.

Additional Ramifications

company's banana-growing area shifted.

Ultimately, Chiquita agreed to a $25 million criminal fine, the requirement to imple-

ment and maintain an effective compliance and ethics program, and five years probation.

Also, Chiquita executives narrowly avoided

Aside from the obvious disadvantage of dealing with terrorists, terror group extortion payment pressures can have negative operational effects such as declining production, often with poorer quality deliverables, higher costs of production due to heightened labor, security and transportation costs, lower efficiencies, underutilization of assets, production stoppages and threats to business continuity, adjustments to and pressures on supply

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WORLD chains, and corporate governance complexities.

There are also significant financial implications from giving in to terror extortion, such as higher costs for labor, security, capital, inputs and insurance, reduced profitability, loss of goodwill and declining stock price, financial penalties, and/or liabilities arising from host and home country litigation initiated by the government, private sector or even employees.

Reducing the Terror Risk There are steps that transnational companies can undertake to reduce the risks of terror extortion. Prior to following such a path, the transnational company must analyze whether the benefits outweigh the risk of doing business in the host country. If the company decides to proceed, it can reduce risks by exploring whether land grants or subsidized loans are available from the host country or a development agency (e.g., the World Bank or a regional development bank). The transnational company can also invest in political risk insurance covering war and civil disturbance/terrorism, expropriation, breach of contract, and inconvertibility of currency offered by commercial, government (e.g., the U.S. governmentâ&#x20AC;&#x2122;s Overseas Private Investment Corp.) and nongovernmental organization (e.g., the World Bankâ&#x20AC;&#x2122;s Multilateral Investment Guarantee Agency).

In cases of terror extortion, the kidnapping of transnational company personnel is a very real threat. Kidnapping and ransom insurance, along with other insurance products (e.g., property and casualty, business interruption, life, disability and health insurance), should be serious-

140

ETHANOL PRODUCER MAGAZINE MARCH 2008

WORLD ly considered. It is also critical to apply disparate security products, services and methodologies—ranging from risk and vulnerability assessments to business and risk intelligence data reports—that can aid in lessening the likelihood, frequency and severity of terrorism in general, and terror extortion in particular.

Other preventative measures transnational companies can pursue include developing alliances and gathering support from host country government, business, civic and labor entities, along with home country representatives (e.g., a U.S. embassy) and non-governmental institutions (e.g., the World Bank). Likewise, engendering support for bilateral economic and political relations (e.g., trade and investment agreements) between host and home countries will aid transnational company efforts abroad.

This discussion demonstrates that while terror group extortion can have substantial pernicious operational, financial and legal effects on transnational companies, a variety of alternatives and instruments are available to lessen such threats. In doing so, companies can help enhance global trade, investment and business while contributing to the reduction of terrorism internationally by eliminating a considerable source of terror funding. EP Professor Dean C. Alexander, a member of the advisory council of Marsh’s Center for Risk Insights and author of “Business Confronts Terrorism," is the director of the Homeland Security Research Program at Western Illinois University. Reach him at dc-alexander@wiu.edu or (309) 298-2120.

Washington International Renewable Energy Conference March 4-6, 2008 Washington Convention Center Washington, D.C. This event will present the latest developments in renewable energy. Speakers will discuss the status of key renewable energy technologies, plus systems costs, economics, markets, manufacturing and financing. Biofuels and biomass technologies will also be discussed. A trade show will be colocated with the conference.

(202) 393-0001 www.wirec2008.org

Ecological Dimensions of Biofuels

World Biofuels Markets Congress

March 10, 2008

March 12-14, 2008

Ronald Reagan Building and International Trade Center Washington, D.C.

Brussels Expo Brussels, Belgium

This conference will explore the ecological dimensions of biofuels production, and will identify management strategies and research opportunities to ensure their sustainability. Agenda topics include sustainable development, environmental and ecological dimensions, conservation and biodiversity, agriculture and grasslands, rangelands, forests, and secondary feedstocks. A poster session social is also planned.

The sessions at this event will focus on ethanol on a local and global scale. More detailed topics of discussion include feedstocks, trading and pricing, quality and distribution, fleets, pipelines and shipping, and transport manufacturers and users. Precongress conferences will address finance and investment, next-generation biofuels, sustainability and certification, and policy and regulation. +44 20 7801 6333 www.worldbiofuelsmarkets.com

(202) 833-8773 http://esa.org/biofuels

EVENTS

CALENDAR

International Biomass Conference & Trade Show

Alternative Fuels & Vehicles National Conference + Expo

2008 Energy Conference

April 15-17, 2008

M a y 11 - 1 4 , 2 0 0 8

Minneapolis Convention Center Minneapolis, Minnesota

Las Vegas Rio All-Suite Hotel Las Vegas, Nevada

Radisson Hotel and Conference Center Plymouth, Minnesota

This event, which stemmed from the Energy & Environmental Research Centerâ&#x20AC;&#x2122;s biomass conference last year in Grand Forks, N.D., aims to advance the near-term, commercial-scale manufacturing of biomass-based power, fuels and chemicals. Topics include biopower, bioproducts, biochemicals, biofuels, intermediate products and coproducts, which will be presented through general sessions, technical workshops and an industry trade show.

This 14th annual event focuses on alternative fuels, alternative fuel vehicles, advanced transportation technologies, vehicle emissions and policy. The preliminary agenda includes discussions that will educate vehicle fleet operators and endusers on the options available in alternative fuels.

The expo features auto manufacturers, technology developers, fuel suppliers and many others. There will also be a ride-and-drive event.

(719) 539-0300 www.biomassconference.com

142

(702) 254-4180 www.afvi.org/NationalConference2008

May 15-16, 2008

More than 200 key business decision-makers are expected to attend this annual event hosted by U.S. Energy Services Inc. Current energy issues, future trends and industry concerns that may affect future business will be addressed. Presentations and panel discussions given by industry experts will tackle critical topics and challenges surrounding energy management, including green energy management strategies.

(763) 543-4600 www.usenergyservices.com

ETHANOL PRODUCER MAGAZINE MARCH 2008

Canadian Renewable Energy Workshop March 16-18, 2008 IPSCO Place Regina, Saskatchewan This inaugural event will facilitate the continued development of Canada’s ethanol and biodiesel industry. Agenda topics will discuss the past, present and future of the biofuels industry; plant maintenance; operational challenges; financing; feedstocks; coproducts; technologies; governmental incentives; and enzymes.

(519) 576-4500 www.crew2008.com

4th Annual Ethanol & Biodiesel Supply Summit

Ethanol 2008 Australia

March 16-18, 2008

Sydney Convention & Exhibition Center Sydney, Australia

The Renaissance Hotel Washington, D.C. Join top renewable fuels, automotive and refined product experts, who will forecast challenging economic issues surrounding ethanol and biodiesel pricing, storage and transportation. Program highlights include a focus on ethanol demand, production and imports; renewable fuels markets from the refiner’s point of view; a review of the renewable fuels standard; cellulosic ethanol; food versus fuel; storage and transportation infrastructure; and E85 and flexible-fuel vehicles. There will also be a presummit workshop.

A p r i l 8 - 11 , 2 0 0 8

This third annual event will continue to build Australia’s ethanol industry by discussing development opportunities. The agenda includes preconference seminars (Ethanol 101 and Lenders & Investors), an international update on ethanol, the food-versus-fuel debate, new technologies and an oil company perspective. Registration is now open.

Australia: +61 7 3360 7000 U.S.: (719) 539-0300 www.ethanol2008.com

(866) 620-5940 www.opisnet.com/biosupply

Renewable Energy Finance & Investment Summit

Corn Utilization & Technology Conference

24th Annual International Fuel Ethanol Workshop & Expo

May 19-21, 2008

June 2-4, 2008

June 16-19, 2008

FireSky Resort & Spa Scottsdale, Arizona

Kansas City Marriott Downtown Kansas City, Missouri

Opryland Hotel & Convention Center Nashville, Tennessee

This third annual event, themed “Exploring Key Deals & Developments in the Renewable Fuel & Renewable Power Markets,” will discuss state-ofthe-art finance structures, deal mechanics, tax incentives, investment trends, more efficient technologies, regulatory changes and creative financing solutions. Three tracks address renewable power, biofuels, and carbon and greenhouse gas emissions. A separate workshop will detail renewable energy project finance fundamentals.

The theme for this sixth annual event reflects the continued growing importance of corn as a keystone to a carbohydrate-based economy. Topics will include wet milling, dry-grind technologies, value-added products from corn, and new uses for distillers dried grains that will be of value to ethanol producers and livestock interests. Registration is now open. A more detailed agenda will be available as the event approaches.

This conference will follow the record-breaking 2007 event, in which more than 500 exhibitors participated and more than 5,300 people attended.

The preliminary agenda includes an Ethanol 101 pre-conference seminar, general sessions, concurrent technical workshops and various networking opportunities. Attendees will also have the chance to tour Commonwealth Agri-Energy LLC, a 33 MMgy corn-based ethanol facility in Hopkinsville, Ky. More information will be available as this event approaches.

(704) 889-1287 www.frallc.com

ETHANOL PRODUCER MAGAZINE MARCH 2008

(636) 733-9004 www.corntechconf.org

(719) 539-0300 www.fuelethanolworkshop.com

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EPM MARKETPLACE Ag Products & Services

Emergency Spill Response

Plate-Frame

Hybrid Corn

Hydro-Klean, Inc. 515-283-0500

Hydro-Klean, Inc. 515-283-0500

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

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

www.lactrol.com

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

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

Fans

Railcars

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

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

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

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

Heat Exchanger

Tank Cleaning Services www.hydro-klean.com

Hydro-Klean, Inc. 515-283-0500

www.hydro-klean.com

www.hydro-klean.com

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

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

Hydro-Blasting

Construction

Hydro-Klean, Inc. 515-283-0500

www.lactrol.com

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

Filter Media

Hydro-Klean, Inc. 515-283-0500

PhibroChem Ltd. 800-223-0434

www.hydro-klean.com

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

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

Chemicals PhibroChem Ltd. 800-223-0434

www.hydro-klean.com

Fabrication www.hydro-klean.com

Macomber Welding & Fabricating, Inc. 616-698-0819 macwelding@triton.net VAL-FAB Inc. 877-482-5322

www.valfab.com

CIP Univar USA Inc. 402-733-3266

Grain Storage www.univarusa.com

Coverall Building Systems 800-268-3768

www.coverall.net

Yeast Ferm Solutions 859-402-8707

Insulation www.ferm-solutions.com

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

Cleaning

www.mavo.com

Plant Construction Agra Industries, Inc. 715-536-9584

Dryer Systems Hydro-Klean, Inc. 515-283-0500

Mavo Systems 763-788-7713

Agri-Systems 406-245-6231

www.agraind.com

www.agrisystems.net

www.hydro-klean.com

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

Reach your customers

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

Your Solution. Advertise Today. www.hydro-klean.com

EPM MARKETPLACE

Seneca Waste Solutions 800-369-5500 www.senecacompanies.com 144

ETHANOL PRODUCER MAGAZINE MARCH 2008

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

Railroad Tracks

Feasibility Studies Harris Group Inc. 206-494-9422

www.harrisgroup.com

Groundwater Services Leggette, Brashears & Graham, Inc. 651-490-1405 www.lbgweb.com

Personnel Recruiting

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SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago

Build Your Career at Mortenson Contact Us Today!

1-877-MORTENSON (toll free) energyjobs@mortenson.com www.mortenson.com

HIRING ALL POSITIONS NATIONWIDE

Reimer Welding Inc. 218-773-0886

www.reimerwelding.com

Reach your customers

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

www.rrcontracting.net

Railworks 913-888-4091

www.railworks.com

Your Solution. Advertise Today.

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

Tanks

EPM MARKETPLACE With all contact information placed in one convenient location, Ethanol Producer Magazine not only contains

Caldwell Tanks 502-964-3361

www.caldwelltanks.com

Eagle Tanks, Inc. 888-678-0698 WINBCO Tank Company 641-683-1855

www.eagletanks.com

Plant Optimization www.winbco.com

top editorial content but also a useful directory in each publication. Whether a

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ICM, Inc. 316-796-0900

www.icminc.com

Environmental ICM, Inc. 316-796-0900

ETHANOL PRODUCER MAGAZINE MARCH 2008

www.icminc.com

Harris Group Inc. 206-494-9422

www.harrisgroup.com

145

EPM MARKETPLACE Terratec Biofuels of Solutia 800-742-1476 www.TerratecBiofuels.com

Project Development Ethanol Productions 813-968-6867 Harris Group Inc. 206-494-9422

jim.plautz@verizon.net

www.harrisgroup.com

Public Relations Lanser Public Affairs, LLC 262-797-7876 www.lanserpublicaffairs.com

Education

Process Design

Iowa Lakes Community College 800-242-5108 www.iowalakes.edu

Agri-Systems 406-245-6231

www.agrisystems.net

Employment

ChemSim 781-248-5057

www.chemsim.com

Recruiting Hobbs & Towne 610-783-4600x108

Process Engineering Associates, LLC 865-220-8722 www.processengr.com www.hobbstowne.com

SearchPath of Chicago 815-261-4403 www.searchpath.com/chicago

Vogelbusch USA, Inc. 713-461-7374

www.vogelbusch.com

Equipment & Services Engineering

Air Pollution/Odor Control

Civil Antioch International, Inc. 402-289-2217 www.antioch-intl.com

ICM, Inc. 316-796-0900

www.icminc.com

Control Systems Bachelor Controls 785-284-3482

www.bachelorcontrols.com

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Agra Industries, Inc. 715-536-9584 Agri-Systems 406-245-6231 Delta-T Corporation 757-941-0188

Blowers & Fans www.agrisystems.net

www.deltatcorp.com

Ethanol Productions 813-968-6867

jim.plautz@verizon.net

GS CleanTech Corp.

678-566-3588

www.gs-cleantech.com

ICM, Inc. 316-796-0900 146

www.agraind.com

New York Blower Company 800-208-7918

www.nyb.com

Robinson Industries, Inc. 724-452-6121 www.robinsonfans.com

Boiler System Factory Sales and Engineering, Inc. 985-867-9150 www.fsela.com

www.icminc.com

ETHANOL PRODUCER MAGAZINE MARCH 2008

EPM MARKETPLACE Catwalks

Dryers—Rotary Drum

Lean Technologies LLC 701-352-9620 www.leantechnologiesllc.com

Aeroglide Corporation 919-851-2000

Fractionation—Corn www.aeroglide.com

Buhler Inc. 763-847-9900

www.buhlergroup.com/us

Sturtevant Inc. 781-829-6501

Centrifuge Repair Nosnhoj Services Inc. 317-887-6436

www.sturtevantinc.com

Gas Detectors

www.nosnhojinc.com

UE Systems, Inc. 914-592-1220

Computer Software

www.uesystems.com

Encore Business Solutions 204-989-4330 www.encorebusiness.com

Gaskets

Integrated Business Solutions 888-697-3060 www.ibsolutions-llc.com

Allegheny Coupling Company 814-723-8150 www.alleghenycoupling.com

John Deere Agri Services 770-238-5100 www.johndeereagriservices.com

Grain Handling & Storage McC, Inc. 763-477-4774 www.mccormickconstruction.com

dbc SMARTsoftware, Inc. 770-427-7633 www.dbcsmartsoftware.com

Sukup Manufacturing Co. 641-892-4222

Control Systems Automation Alliance 205-271-9743 www.automationalliance.net FeedForward, Inc. 770-426-4422

www.feedforward.com

Revere Control Systems 800-536-2525 www.reverecontrol.com

Instrumentation

ICM, Inc. 316-796-0900

www.icminc.com

Emission Monitoring Systems MonitorTech Corp.

866-682-6771

www.monitortechgrp.com

Continuous Emissions Monitoring Systems Easiest installation, operation and maintenance Meet or exceeds EPA requirements NOx, O2, CO, SO2 and others Turnkey systems for under $100,000.00 P.O. Box 9271, Columbus, Oh 43209 866-682-6771 sales@monitortechcorp.us

Emissions Testing & Reduction

Grisley Components, Inc. 303-756-6474

Lantec Products, Inc. 617-265-2171

www.grisley.com

Blower Engineering 800-388-1339 www.blowerengineering.com

Aeroglide Corporation 919-851-2000

www.aeroglide.com

Dryers—Other

Shimadzu Scientific Instruments 800-477-1227 www.ssi.shimadzu.com

ProSonix Corporation 800-849-1130, x. 801

www.pro-sonix.com

Laboratory-Supplies Midland Scientific, Inc. 800-642-5263

www.midlandsci.com

Laboratory—Testing Services Eurofins GeneScan, Inc. 504-297-4330 www.gmotesting.com Midwest Laboratories 402-334-7770

www.midwestlabs.com

SGS North America, Inc. 281-478-8234 www.sgs.com/alternativefuels www.winbco.com Trilogy Analytical Laboratory 636-239-1521 www.trilogylab.com

Filters Larox 301-543-1200

Dryers—Fluid Bed

www.lantecp.com

Fermentors WINBCO Tank Company 641-683-1855

Conveyors—Pneumatic

Instrument Associates 708-597-9880 www.instrumentassociates.com

Jet Cookers

Control Systems—Distributed

Conveyors—Enclosed

www.sukup.com

www.larox.com/cpi

Loading Equipment

Filtration Equipment

SafeRack 866-761-7225

www.saferack.com

Fluid Engineering 814-453-5014

SafeRack 866-761-7225

www.saferack.com

www.fluideng.com

Davenport Dryer, LLC 309-786-1500 www.davenportdryer.com

ETHANOL PRODUCER MAGAZINE MARCH 2008

147

EPM MARKETPLACE Maintenance Software

Outokumpu Stainless 847-517-4050

Pumps

Mapcon Technologies, Inc. 800-922-4336 www.mapcon.com

Storageâ&#x20AC;&#x201D;DDGS Laidig Systems, Inc. 574-256-0204

Mills-Hammer CBT Wear Parts, Inc. 888-228-3625 Prater-Sterling 630-679-3254

www.outokumpu.com

www.cbtwearparts.com

www.laidig.com

Tanks Agra Industries, Inc. 715-536-9584

www.prater-sterling.com

www.agraind.com

CPM/Roskamp Champion 800-366-2563 www.cpmroskamp.com

Brown-Minneapolis Tank 281-252-9809

Millwright

Federal Equipment Company 800-652-2466 www.fedequip.com

Agri-Systems 406-245-6231

Paragon Trailer Sales 800-471-8769 www.paragontrailer.com

www.agrisystems.net

Molecular Sieves Vaperma, Inc. 418-839-6989

www.bmt-tank.com

WINBCO Tank Company 641-683-1855

www.winbco.com

www.vaperma.com

Thermal Oxidizers Motors Trico TCWind, Incorporated 320-693-6200 www.tricotcwind.com

Pipe American Stainless & Supply 800-845-5511 www.americanstainless.com Robert-James Sales, Inc. 800-666-0088

Yamada America, Inc. 800-990-7867 www.yamadapump.com www.rjsales.com

RTO Media

Pipe-Fittings Robert-James Sales, Inc. 800-666-0088

Lantec Products, Inc. 617-265-2171

St. Louis Pipe & Supply 800-737-7473 www.stlpipesupply.com

Pipe-Flanges Robert-James Sales, Inc. 800-666-0088

SimplexGrinnell 800-746-7539

EISENMANN Corporation Crystal Lake, Illinois 815.455.4100 es.info@eisenmann.com

www.simplexgrinnell.com

Electro Sensors 800-328-6170

www.electro-sensors.com

Separation Equipment www.winbco.com

Process Control Harris Group Inc. 206-494-9422

Safety

for VOC, CO & PM ABATEMENT

Sensors www.rjsales.com

Pressure Vessels WINBCO Tank Company 641-683-1855

www.lantecp.com

www.rjsales.com

PROVEN RELIABILITY

Fluid Engineering 814-453-5014

www.fluideng.com

Puritan Magnetics, Inc. 248-628-3808 www.puritanmagnetics.com www.harrisgroup.com

Your Ad HERE Your Solution. Advertise Today.

Steel Suppliers Chapel Steel 800-320-6042

ICM, Inc. 316-796-0900 Pro-Environmental, Inc. 909-989-3010

www.icminc.com

www.pro-env.com

davidj@chapelsteel.com

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ETHANOL PRODUCER MAGAZINE MARCH 2008

EPM MARKETPLACE Used Equipment

Faegre & Benson, LLP 612-766-6930

Finance

www.faegre.com

Accounting Christianson & Associates PLLP 320-235-5937 www.christiansoncpa.com Kennedy and Coe, LLC 800-303-3241

www.kcoe.com

Appraisals

Distillers Grains ConAgra Trade Group 402-595-4125 www.conagratradegroup.com Hawkeye Gold, LLC 515-663-6429

Federal Appraisal & Consulting, LLC. 908-823-0607 www.federalappraisal.com Natwick Associates Appraisal Services 800-279-4757 www.natwick.com

Due Diligence Harris Group Inc. 206-494-9422

Marketing

www.hawkgold.com

Fuel Ethanol ConAgra Trade Group 402-595-4125 www.conagratradegroup.com Noble Americas Corporation 626-585-1705 www.thisisnoble.com

www.harrisgroup.com

Provista Renewable Fuels Marketing 651-355-8519 www.provistafuels.com

Equity Procurement Greenman Funding 888-802-7678 greenman.funding@verizon.net

ERI Solutions, Inc. 316-927-4294

VOC Scrubbers www.lantecp.com

Valves Central States Group 800-318-2747 www.centralstatesgroup.com Check-All Valve Mfg. Co. 515-224-2301 Metso Automation 508-852-0215

Agri-Energy Funding Solutions 402-895-5067 www.agri-energyfs.com

Rail Ameritrack RailRoad Contractors, Inc. 765-659-2111 www.ameritrackrailroad.com

Rail Consulting

Greenman Funding 888-802-7678 greenman.funding@verizon.net

Risk Management www.rjobrien.com

www.metsoethanol.com

R.J. O’Brien 800-621-0757

www.rjobrien.com

www.biothane.com

www.landstar.com

Blacklands Railroad 903-439-0738 www.blacklandsrailroad.com

R.J. O’Brien 800-621-0757

Water Treatment Fluid Engineering 814-453-5014

erisolutions.com

www.checkall.com

Wastewater Treatment Services Biothane Corporation 856-541-3500x501

chubb.com

Lender Representatives

Lantec Products, Inc. 617-265-2171

Heavy Highway Transport Landstar Carrier Group 920-487-3877

Insurance Chubb Insurance 312-454-4250

Transportation

Software—Accounting

Railcar Moving

Encore Business Solutions 204-989-4330 www.encorebusiness.com

Heyl & Patterson Inc. 412-788-9810

www.heylpatterson.com

Legal Services www.fluideng.com

Siemens Water Technologies 800-525-0658 www.siemens.com/water

Your Ad HERE

Attorneys

Your Ad HERE

BrownWinick Law Firm 515-242-2400 www.biofuellawyers.com Dorsey & Whitney LLP 612-343-8275

Your Solution. Advertise Today.

EPM MARKETPLACE www.dorsey.com

Your Solution. Advertise Today.

EPM MARKETPLACE ETHANOL PRODUCER MAGAZINE MARCH 2008

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EPM MARKETPLACE

RAILCAR MOVING

The CUB™ is an electromechanical machine designed to move single railcars or groups of cars.

Some advantages of the CUB™ are: •Safety of Personnel •One Person Operation •Little Maintenance Requirements •Low Investment/Operating Costs

Ask about our complete line of Railcar Moving Devices

www.heylpatterson.com P

412-788-9810

F

412-788-9822

E

info@heylpatterson.com

Railcar Parts Salco Products, Inc. 630-783-2570

www.salcoproducts.com

Utilities Natural Gas

Contact Mark Rundle at marundle@integrysenergy.com or (608) 222-5170.

124 W. Broadway, Suite 300 Madison, Wisconsin 53716 www.integrysenergy.com

Utility Integrys Energy Services 608-235-2547 www.integrysenergy.com

Your Ad HERE Your Solution. Advertise Today.

EPM MARKETPLACE

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ETHANOL PRODUCER MAGAZINE MARCH 2008

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22

EXPANDING? UPGRADING? Keep Your Plant Running with our In-Stock Stainless PVF Robert-James Sales—the leading distributor of in-stock stainless pipe, fittings, valves and flanges—got your new plant up and running when it was built. Now look to us to service all your continuing MRO requirements.

Over 80% of all orders are shipped the same day from our nine regional warehouses. We also ship the larger size products up to 54” in diameter demanded by the biofuel processing industry today.

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Buffalo, NY Cleveland, OH Cincinnati, OH Chicago, IL Indianapolis, IN Minneapolis, MN South Plainfield, NJ Raleigh, NC Tavernier, FL

800-666-0088 800-777-0820 800-777-2260 800-777-2008 800-777-0510 800-777-1355 800-777-1858 866-493-8834 305-852-1694

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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