INSIDE: CORN-OIL YIELD, DIVERSIFICATION MAY 2017
DDGS AT HAND Low Prices Attract Buyers, Expand Markets Page 26
DDGSâ€™ Surprising Environmental Benefits Page 32
Ethanol as an Intermediate Chemical Page 40
Ethanol Demand Prospects Page 48
we’re helping reduce greenhouse gas emissions
by 50 percent.
As farmers and ethanol producers, we’re working together to be good stewards of the land. We’re on track to lower greenhouse gas emissions up to 50 percent by 2022 (USDA). We’re doing our part each day to be kind to the earth, so during Earth Month tweet @GrowthEnergy to show us how you’re being caught #GreenHanded. Learn more about our ethanol’s impact on the environment at GrowthEnergy.org/environment.
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MAY 2017 VOLUME 23
Selling Points By Tom Bryan
VIEW FROM THE HILL
High Octane Fuel: An Opportunity for Ethanol By Emily Skor
Members Stress Importance of RVP Relief, RFS to Congress By Brian Jennings
Let’s Not Forget Carbon Just Yet By Ron Alverson
The Advantage of a Macro Business View By Donna Funk
ON THE COVER PHOTO COURTESY OF CHS
Ethanol Producer Magazine: (USPS No. 023-974) May 2017, Vol. 23, Issue 5. Ethanol Producer Magazine is published monthly by BBI International. Principal Oﬃce: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing oﬃces. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.
4 | Ethanol Producer Magazine | MAY 2017
Reduced methane emissions and better phosphorus utilization are possible when feeding distillers grains. By Ann Bailey
Ethanol’s Opportunity in the Chemical Market
Europe Needs More Than Words to Decarbonize Transport By Emmanuel Desplechin
CLEARING THE AIR
The cure for low prices is low prices. By Susanne Retka Schill
Untold Story of DDGS’ Positive Environmental Impact
RVP Parity is a Win, Win for Consumers By Bob Dinneen
Green polyethylene and ethyl acetate make inroads in green chemistry. By Luke Geiver
Intersecting Trends of Oil and Ethanol
Will low-octane gasoline from shale oil boost ethanol demand? By Patrick C. Miller
FEW Technical Sessions Planner
The panels and speakers at the 33rd International Fuel Ethanol Workshop are presented. By Tom Bryan and Tim Portz
64 CORN OIL
DCO Extraction Optimization Adapts to Changing Properties of Stillage Understanding the fundamental principles helps in tweaking multiple variables. By Jennifer Aurandt
Evaluating Alternative Diversification Options
Investment tools extend project analysis beyond simple return on investment metric. By Rob Sauer
Innovation Applied Proudly Serving Clients in the Ethanol Industry Rayeman Compression Dryer (RCD) • Ground-Breaking Patented Technology for DDGS • Lower Capex and Opex • Explosion/Fire Proof • Smaller Footprint/Lower VOCs • Preserves Highest Fat and/or Protein levels • Commands a Higher Price for your DDGS
Rayeman Bulk Densification Line • Bulk Densifies Materials up to 70% • Nearly Any Materials can be Processed • Opportunity to Diversify Revenue Streams • Improves and Expands Current Market Segments • Less than 2% Fines during Shipping and Handling • No Fillers or Binders • Highest Nutritional Value in Feed Supplements • May Add Vitamins and Minerals or Medication, if desired • Moisture Resistant
Rayeman Grain Cooling System • Preserves Highest Nutritional Value in the Grain • Eliminates Burning of Material • Creates Flowable Grain that Won’t Bridge • Extremely Controllable Temperatures • Can Directly Connect to Dryer • Can Be Implemented Directly off the Distillation Process • De-Clumps Dry Grain • Produces a Lighter Colored Grain • Levels of Moisture from 95% to 5% for Cooling
Rayeman Automated Tub Press System • Consumption Rate Controlled Solely through Density, Rather Than Limiters • 100% DDG or DDGS • No Fillers or Binders • 1-3 Pounds per head/per day Guaranteed • Possible to Dial in Other Feeding Rates • May Add Vitamins and Minerals or Medication, if desired • Specially Designed Tub ensures Billet Will Not Fall Out If the Tub is Kicked Over • Water/Rain resistant
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VOLUME 23 ISSUE 5
ADVERTISER INDEX EDITORIAL President & Editor in Chief Tom Bryan firstname.lastname@example.org Vice President of Content & Executive Editor Tim Portz email@example.com Managing Editor Susanne Retka Schill firstname.lastname@example.org News Editor Erin Voegele email@example.com Copy Editor Jan Tellmann firstname.lastname@example.org
ART Art Director Jaci Satterlund email@example.com Graphic Designer Raquel Boushee firstname.lastname@example.org
PUBLISHING Chairman Mike Bryan email@example.com CEO Joe Bryan firstname.lastname@example.org
SALES Vice President of Operations Matthew Spoor email@example.com Sales & Marketing Director John Nelson firstname.lastname@example.org Business Development Director Howard Brockhouse email@example.com Senior Account Manager/Bioenergy Team Leader Chip Shereck firstname.lastname@example.org Circulation Manager Jessica Tiller email@example.com Marketing & Advertising Manager Marla DeFoe firstname.lastname@example.org
EDITORIAL BOARD Ringneck Energy Walter Wendland Little Sioux Corn Processors Steve Roe Commonwealth Agri-Energy Mick Henderson Pinal Energy Keith Kor Aemetis Advanced Fuels Eric McAfee Poet Scott Teigen Western Plains Energy Derek Paine
2017 International Fuel Ethanol Workshop & Expo Agra Industries Apache Stainless Equipment Corporation BetaTec Hop Products Biofuels Financial Conference Buckman Cloud/Sellers Cleaning Systems CPM Roskamp Champion D3MAX LLC DuPont Industrial Biosciences Durr Systems, Inc. Edeniq, Inc. EISENMANN Corporation Fagen Inc. Fluid Quip Process Technologies, LLC Growth Energy Hengye Inc. Hydro-Klean LLC ICM, Inc. Indeck Power Equipment Co. InfoSight Corporation Interra Global Corporation J.C. Ramsdell Enviro Services, Inc. Lallemand Biofuels & Distilled Spirits McC Inc. Mist Chemical & Supply Company Mole Master Services Corporation Nalco Water NESTEC, Inc. Novozymes Phibro Ethanol Performance Group POET LLC Premium Plant Services, Inc. R.S. Stover Rayeman Elements, Inc. RPMG, Inc. Solenis LLC Southeastern Illinois College StoneAge Sukup Manufacturing Co. Syngenta: Enogen Thermal Refractory Valicor Separation Technologies Vertex Railcar Corporation Victory Energy Operations, LLC WestAgro Executive Brands Westmor Industries, LLC
73 70 44 15 75 61 31 51 38-39 76 3 53 20 36 17 2 45 63 9 43 57 35 59 24 42 56 50 30 18 37 71 47 11 52 5 66 13 34 19 46 25 58 60 21 28-29 62 67
Customer Service Please call 1-866-746-8385 or email us at email@example.com. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for anyone outside the United States. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or firstname.lastname@example.org. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or email@example.com. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to firstname.lastname@example.org. Please include your name, address and phone number. Letters may be edited for clarity and/ or space.
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6 | Ethanol Producer Magazine | MAY 2017
Selling Points This industry has gotten smart to the point where it can redirect DDGS exports to opportunistic buyers when China shuts its doors and prices fall. No longer do we simply sulk and wait. We build new markets and keep things Tom Bryan
President & Editor in Chief email@example.com
flowing. As EPM Managing Editor Susanne Retka Schill reports in “Pushing DDGS,” on page 26, the relative low price of distillers grains, painful as it is, has spurred a wave of buying from new and established customers around the world. And despite China’s virtual import freeze, the overall volume of DDGS shipping abroad this year is holding steady as countries such as Mexico, Turkey, Thailand and Japan pick up the slack. With the U.S. Grains Council’s help, buyers in Saudi Arabia, Pakistan and elsewhere are also taking largerthan-usual volumes of distillers grains while discounts are good. Historically, the price of ethanol’s principal coproduct has been tied to global demand and its value relative to other feed ingredients. Now, we’re learning that the environmental benefits of using DDGS might also factor into the product’s overall worth. As Ann Bailey reports in “Untold Story of DDGS’ Positive Environmental Impact,” on page 32, utilizing DDGS reduces methane emissions from cattle, minimizes phosphorus levels in manure and lessens the risk of unwanted nutrient runoff into waterways. It’s another great selling point for DDGS, but time will tell whether the product’s green traits will give it new value. We turn from essential coproducts to derivatives of the future in “Ethanol’s Opportunity in the Chemical Market,” on page 40. In this story, Luke Geiver reports on two companies, one in Nebraska, another in Brazil, aiming to use ethanol as a building block for intermediate chemicals. The American project—a technology bolted onto an Archer Daniels Midland Co. wet mill—will convert undenatured ethanol into ethyl acetate, while the South American company finds markets for its polyethylene made from sugarcane ethanol. On page 48, we look at the “Intersecting Trends of Oil and Ethanol,” asking if lowoctane crude oil from shale has created a greater need for ethanol’s octane. As Patrick Miller reports, however, the theory has yet to prove out because refiners have good methods of refining light, sweet crude, and they’re also exporting much of it. Ultimately, ethanol might benefit less from the prevalence of low-octane shale oil than the development of E15, new engines and new fuel economy rules. Finally, please check out our “FEW Technical Sessions Planner,” a 10-page overview of all 30 panels taking place at this year’s International Fuel Ethanol Workshop & Expo and National Advanced Biofuels Conference & Expo, taking place June 19-22, in Minneapolis.
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TWITTER.COM/ETHANOLMAGAZINE MAY 2017 | Ethanol Producer Magazine | 7
VIEW FROM THE HILL
RVP Parity a Win, Win for Consumers By Bob Dinneen
In 2016, the U.S. ethanol industry produced a record 15.25 billion gallons of clean, high-octane fuel and exported more than a billion gallons of the fuel to Brazil, China, Canada and other countries. I anticipate 2017 will be another record year for
production and use, but I remain focused on growing demand for our fuel. Growing demand means expanded market opportunities for higher ethanol blends and to that end, the Renewable Fuels Association’s top priority this year is securing RVP parity for all ethanol blends. How did we get here? In 1989, the U.S. EPA provided a Reid vapor pressure (RVP) waiver to 10 percent ethanol blends, concluding there would be no air quality consequence and retailers would otherwise be unable to secure blendstocks for ethanol blending year-round. In 2011, EPA approved the use of E15 in 2001 and newer vehicles, but the agency did not extend the same RVP waiver as it did to E10. As a result of this disparity, retailers in conventional gasoline areas (most of the country) have to secure specialty—and costly—gasoline blendstocks in order to continue selling E15 in the summer (June 1-Sept. 15). The RFA has repeatedly urged EPA to take immediate administrative actions to eliminate this nonsensical regulatory barrier that is impeding growth in the use of E15 and other higher ethanol blends. We have provided the agency with reams of data from the U.S. DOE and independent laboratories proving that extending the RVP tolerance currently provided only to E10 would have no detrimental impact on ozone or other air quality standards. In fact, because of the increased oxygen content of higher ethanol blends, there would actually be improved air quality. Inexplicably, the Obama administration’s EPA did not seem to understand the damage inflicted on retailers and consumers by denying RVP parity, however we have hope under this new administration. One of President Trump’s priorities is an overhaul of the regulatory code that has needlessly burdened American businesses, stymied growth and increased cost with little or no environmental or consumer benefit; EPA’s treatment of volatility
8 | Ethanol Producer Magazine | MAY 2017
for ethanol-blended gasoline is a perfect example. The failure to grant the RVP waiver has needlessly discouraged retailers from offering the fuel blend year-round and punished consumers who cannot take advantage of the lowest cost, highest octane source of fuel in the world. There are several ways for RVP parity to be achieved. RFA has worked for years on an administrative fix. To date, EPA has been reluctant to use its statutory authority to grant an RVP tolerance for E15. EPA could also lower the volatility of conventional fuels; but, while supportive, the agency has not shown much enthusiasm for getting that done either. RFA remains optimistic that, with a new sheriff in town and a fresh look at the existing statutory authority, we might soon be able to offer the lower-priced, higher-octane E15 to consumers year-round. Of course, a legislative fix is also possible and the RFA supports bills that have been introduced, as long as they don’t jeopardize the Renewable Fuels Standard. For example, our champions on Capitol Hill have introduced two bills that would address the issue. In early March, Sens. Deb. Fischer, R-Neb., Joe Donnelly, D-Ind., and Chuck Grassley, R-Iowa, introduced the Consumer and Fuel Retailer Choice Act (S. 517) that would extend RVP parity for ethanol blends above 10 percent. A companion bill, H.R. 1311, was also introduced in the House by Reps. Dave Loebsack, D-Iowa, and Adrian Smith, R-Neb. We will continue to pursue all avenues to make sure parity is addressed. I want consumers to have a choice at the pump, whether that’s in February or July or November. Let’s work on making sure that happens this year. Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835
EVENTS CALENDAR 2017 International Fuel Ethanol Workshop & Expo June 19-21, 2017 Minneapolis Convention Center Minneapolis, Minnesota From its inception, the mission of this event has remained constant: The FEW delivers timely presentations with a strong focus on commercial-scale ethanol production— from quality control and yield maximization to regulatory compliance and fiscal management. The FEW is the ethanol industry’s premier forum for unveiling new technologies and research findings. The program covers cellulosic ethanol while remaining committed to optimizing existing grain ethanol operations. 866-746-8385 | www.fuelethanolworkshop.com
2017 National Advanced Biofuels Conference & Expo June 19-21, 2017 Minneapolis Convention Center Minneapolis, Minnesota Colocated with the International Fuel Ethanol Workshop the National Advanced Biofuels Conference & Expo is tailored for industry professionals engaged in producing, developing and deploying advanced biofuels, including cellulosic ethanol, biobased platform chemicals, polymers and other renewable molecules that have the potential to meet or exceed the performance of petroleum-derived products. 866-746-8385 | www.advancedbiofuelsconference.com
Christianson PLLP's Biofuels Financial Conference September 27-28, 2017 Radisson Blu Minneapolis Downtown Minneapolis, Minnesota Produced by Christianson PLLP and organized by BBI International, this year’s Biofuels Financial Conference is focused on the best ways to explore new options in today’s changing ethanol and biodiesel industries. By understanding risks associated with various technology and marketing initiatives, and by exploring various options for making the best use of capital and resources, attendees will learn how to create a well-managed plan for growth and change—a plan which maximizes profitability while ensuring future stability and meeting the expectations of all stakeholders. 866-746-8385 | www.biofuelsfinancialconference.com
Please check our website for upcoming webinars
MAY 2017 | Ethanol Producer Magazine | 9
High Octane Fuel: An Opportunity for Ethanol By Emily Skor
In March, ASTM International published an important new high-octane fuel standard: ASTM D8076 â€“ 17, Standard Specification for 100 Research Octane Number Test Fuel for Automotive SparkIgnition Engines. A major victory for the ethanol industry, this
new specification intends to describe and align the fuel properties needed to enable high-compression ratio, turbocharged-boosted engines that will utilize fuels with up to 50 percent ethanol. Growth Energy, along with staff from several of our member plants and ethanol colleagues, engaged closely with ASTM to see this new specification published. It is very common for new standards and specifications to take up to five years to be fully developed and reach publication status because the ASTM process is rigorous and requires the review and approval of automotive and fuel experts from around the globe. However, Specification D8076-17 went from concept to completion in record time at ASTM due to the tremendous partnership and collaboration among the automotive, agriculture and ethanol industries, and the leadership on the standard by Robert McCormick from the National Renewable Energy Laboratory. One of Growth Energyâ€™s primary goals is to facilitate the expansion of higher ethanol blends in markets across the United States, and this new specification is a great sign of what is achievable in the future. The ethanol industry and the agriculture industry have been linked for years, but working in harmony with automakers is equally important to ensure that ethanol continues to expand. As agricultural technology and ethanol production efficiency advance and yield a greater supply of biofuels, we will need buy in from automakers to produce engines that are optimized for higher blends. Recently, President Trump committed to re-examining the corporate average fuel economy and greenhouse gas standards for
10 | Ethanol Producer Magazine | MAY 2017
model year 2022-â€™25 automobiles. We have heard the requests from the auto industry engineers: They need a better fuel in the future to enable the next generation of spark-ignition technology and they want octane. Growth Energy and others in the agriculture and ethanol industries have been directly engaged to demonstrate that by using midlevel ethanol blends such as E30 to achieve a higher octane, automakers can maximize efficiency for the standards of today and potentially more stringent standards in the future. In fact, Growth Energy submitted a high-octane, E30 certification fuel in 2012 to U.S. EPA and the state of California for automakers to use to meet the initial set of standards that went into place in 2017. We believe this re-examination by the new administration provides another key opportunity for the industry to clearly demonstrate that ethanol is the best solution. We know that as an industry, we can produce enough ethanol to meet the challenge, and with the expansion of E15 and E85 through Prime the Pump and the USDA Biofuels Infrastructure Partnership program, we are also getting the necessary infrastructure in place to carry these fuels nationwide. Growth Energy is committed to demonstrating the value of higher ethanol blends to consumers. We know that higher blends deliver improved engine performance by burning cooler and providing additional octane while displacing toxic chemicals in gasoline, reducing harmful emissions and providing savings at the pump. We continue to work every day to convey these benefits to consumers and lawmakers, and are similarly engaging automakers to ensure that they fully understand why higher blends are a smart choice now and into the future. Author: Emily Skor CEO, Growth Energy 202-545-4000 firstname.lastname@example.org
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MAY 2017 | Ethanol Producer Magazine | 11
Members Stress Importance of RVP Relief, RFS to Congress By Brian Jennings
The American Coalition for Ethanol and over 70 of our grassroots members recently lobbied Congress and Trump administration officials during our ninth annual fly-in. The two-day event brought together
retailers, ethanol producers, investors, corn growers, and service and product providers to participate in over 120 meetings on Capitol Hill. This year’s fly-in was focused on encouraging cosponsorship of bipartisan legislation (S. 517, H.R. 1311) to extend Reid vapor pressure (RVP) relief to E15 to allow its use year-round. We also stressed the Renewable Fuel Standard works: it’s an America-first energy policy that supports a strong rural economy. People who have been on multiple ACE fly-ins reported there is more awareness about ethanol and the RFS on Capitol Hill than ever before. We were especially grateful so many corn farmers joined the event this year, underscoring how biofuel production has become a critical market for U.S. farmers and supports high-skill, high-wage jobs in rural communities. Farmers are motivated because of the economic insecurity that has spread across rural America since the U.S. EPA took implementation of the RFS off-track, reducing annual volume obligations below levels established by Congress. During this period, EPA sided with oil companies that claimed infrastructure constraints and the mythical E10 “blend wall” prevented higher ethanol blends, such as E15 and E30, from being used in the marketplace. As a result, leading biofuel groups were forced to sue the Obama administration, filing a petition for review last year. This litigation is ongoing with a court decision expected later this year. At the same time, EPA’s mismanagement of the RFS triggered an economic slump, farmers produced record-high corn crops in 2015 and 2016. According to USDA, surplus stocks of corn will swell to a 30year high of 2.4 billion bushels and corn prices will fall to a 10-year low in 2017. Liquidity ratios and working capital have deteriorated to their weakest levels since 2002 and the value of farm sector assets is expected to decline by $32 billion in 2017. Iowa farmland values dropped 6 percent in 2016, making it the third straight year land values fell. Net
12 | Ethanol Producer Magazine | MAY 2017
farm income has dropped from $124 billion in 2013 to an expected $62 billion in 2017, a decrease of nearly 50 percent, and taxpayer-funded payments to farmers for low crop prices have been on the rise. History has shown that increasing the demand for biofuels leads to higher market prices for crops and reduced government spending on farm program payments. To help make a convincing case for RVP regulatory relief, we asked retailers who sell E15 to join us for the fly-in. Representatives from Sheetz, Propel Fuels, Jetz, Cresco Fast Stop, Midway Service, and Good and Quick provided lawmakers with real-life examples of how they have overcome the so-called E10 blend wall and would sell even more E15 if it were allowed year-round in conventional gasoline areas. We were very encouraged by the growing support for RVP legislation, even with members of Congress from outside the Corn Belt. When you explain retailers aren’t allowed to sell E15 in the summer months, even though it has lower evaporative emissions than gasoline and E10, they see this as a problem that needs to be fixed, whether Congress takes that step or EPA decides it can do it on its own. Our members conveyed that growing the renewable fuels market is even more critical given the uncertainty created by efforts to renegotiate existing trade pacts. While we are hopeful these new negotiations will lead to better trade opportunities, the anxiety in the near term will impact the U.S. farm economy, which makes a strong biofuels market even more important. Most importantly, our fly-in attendees once again put a human face on the ethanol industry. In meetings with friends and foes, ACE members helped policymakers appreciate that to restore economic security in rural America, Congress needs to maintain the RFS, EPA needs to implement the program as enacted by Congress, and steps must be taken so that E15 and higher blends of ethanol have access to the market. Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 email@example.com
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Europe Needs More Than Words to Decarbonize Transport By Emmanuel Desplechin
When it comes to reducing greenhouse gas emissions from transport, the European Union is pretty good at talking the talk. But walking the walk? Not so much. Despite agreeing to ambitious climate and energy goals that require 18 to 19 percent emission reduction and 15 percent renewable energy in transport, it is now threatening to turn its back on one of its best options: conventional biofuels like renewable European ethanol. The European Parliament and member states are considering a proposal from the European Commission to phase out crop-based biofuels, capping their use at 3.8 percent of road transport energy in 2030. Even the Commission admits it has a long way to go to meet its goals for renewable energy use in transport. In a recent report, the Commission congratulated member states for efforts to boost renewables in most sectors, but lamented the slow progress in transport. The transport sector makes up 20 percent of EU emissions and is 95 percent reliant on oil. To many, it is a problem of the Commission’s own making, considering its record of biofuels policy U-turns that undermined implementation of renewables policy in member states. Europe needs a realistic mix of renewable energy, including sustainably produced European ethanol, if it wants to achieve its climate goals. The Commission rationalizes its decision to go in the other direction on two shaky pillars: that biofuels compete with food and there is no public support. The idea that the EU biofuels policy impacts global food supply or hunger is a myth. Most studies show EU biofuels policy contributed little to food and cereal price increases between 2007-’10, and not much since. The World Bank found food price increases are linked more to the crude oil market than biofuels. Indeed, biofuels production increased more than 70 percent since 2008 in Europe, while global food prices decreased 20 percent. In a 2015 report, the Commission confirmed EU biofuels policy has not led to negative impacts on food prices, nor will it by 2020. The truth is that global prices of cereals, the largest EU ethanol feedstock, declined nearly 40 percent in the past decade. The latest Commission report on renewable energy progress said the effect of ethanol consumption in Europe on food prices is “negligible.”
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Europeans appear to understand. They overwhelmingly support conventional crop-based biofuels and believe EU policy should encourage them, per the EU’s own statistics agency Eurobarometer and a recent independent survey. More than 69 percent of Europeans say conventional biofuels should be encouraged, while just 15 percent think they should not, the recent EuroPulse poll found. What is at stake? “We know what the outcome will be if this proposed policy is implemented: Europe will likely be more dependent on imported energy, and most likely not just on any energy, but on oil,” said Jan Koninckx, global business director biofuels, DuPont Industrial Biosciences, at a recent conference on decarbonizing EU transport. Or as Swedish Environment Minister Karolina Skog put it at the same event, EU policymakers need to make better use of existing technology to reduce emissions, even as the push toward advanced sources continues. “What we see in the short term is that biofuel is really important and we cannot neglect it.” Clearly there is a better alternative to turning our back on the promise of biofuels—one that leads to more success in achieving Europe’s climate and energy goals. Instead of phasing out conventional biofuels, the EU should prioritize sustainable ones that benefit the climate, air quality, engine performance and agriculture. The European ethanol industry is now making that case to policymakers. Rather than another innovation-killing policy U-turn, the EU can set higher goals, ensure policy continuity and maintain the 7 percent contribution of biofuels from arable crops to renewables. It can strengthen sustainability and traceability requirements for all biomass to ensure a level playing field. It should promote sustainable conventional biofuels beyond current and proposed caps, promote advanced biofuels and encourage higher biofuels blends. With the International Renewable Energy Agency recently calling for a tenfold increase in the use of biofuels to help climate change, now is not the time for the EU to turn back on its climate ambitions. Author: Emmanuel Desplechin Secretary General ePURE, the European Renewable Ethanol Association firstname.lastname@example.org
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CLEARING THE AIR
Let’s Not Forget Carbon Just Yet By Ron Alverson
“Reports of my death have been greatly exaggerated.” The famous quote attributed to Mark Twain
fits these days as it relates to the national interest in reducing carbon emissions. Without question, we are seeing a de-emphasis on lowering carbon at the federal level, but it does not mean the issue is going away or that low-carbon fuels have no value. While the pendulum appears to be swinging from one extreme to the other, it is likely to settle somewhere in the middle. Fuels that help automakers achieve efficiency standards are going to be important. California and the “left coast,” as well as numerous other states have or will be adopting low-carbon fuel standards. Countries importing our ethanol that require a low-carbon pedigree and the potential for a carbon tax all remain drivers to reduce our footprint. This is good news for ethanol, despite the myths, misinformation and prejudices that have dogged corn ethanol for years. Why does corn ethanol get such a bad rap? What is it that makes U.S. EPA and many environmentalists cover their eyes and ears when we provide solid, scientific data that turns those myths and misinformation upside down? For starters, the debits applied to corn ethanol for the use of fertilizer are based on numbers we left behind years ago. Similarly, dramatically higher corn yields and reductions in tillage over the past 30 years have reduced soil erosion and built soil carbon stocks in corn fields. These two revolutionary changes have made old carbon intensity calculations obsolete. Recently, Dr. Paul Fixen, the immediate past president of the American Society of Agronomy, penned a piece called “Progress in Agronomy: A Story Worth Telling.” Since the early 1980s, he writes, corn yields have increased by 70 percent, yet nitrogen fertilizer use per acre has only increased by 5 percent; cropland under conservation tillage increased from 18 to 42 percent; soil erosion declined by more than 40 percent; and more than a quarter million soil tests from multiple labs have confirmed that the long decline of soil organic carbon (SOC) has been reversed in the western Corn Belt due to those higher yields and reduced tillage. On average, SOC has increased 25 percent.
16 | Ethanol Producer Magazine | MAY 2017
So, what does all this good news about corn crop productivity, fertilizer use efficiency and soil health improvements have to do with the carbon intensity of corn-ethanol fuel? Big reductions! But only if the currently used models are updated to reflect these facts. The life-cycle greenhouse gas (GHG) emission models used to determine corn ethanol fuel’s carbon intensity do not consider a biofuel feedstock’s effect on SOC stocks. Small annual increases in SOC mean big reductions in corn carbon intensity that, when accounted for in GHG models, reduce corn ethanol fuel’s CI by 40 percent relative to the GREET 2016 model’s latest assessment. Currently, GHG emission models calculate that the manufacture and use of nitrogen (N) fertilizer to grow corn produces more than 40 percent of all GHG emissions during corn production, using decades-old emission factors. In the 1980s and 1990s, corn growers routinely applied about 1.25 pounds of N to produce a bushel of corn. Over the past five years, growers have used 0.9 pounds of N per bushel. This means big improvements: far less surplus nitrogen is left in soil and far less is lost to the environment. In 2015, the Gulf of Mexico task force report to Congress indicated total nitrogen fertilizer in Mississippi River water quality tests has been reduced by 30 percent over the past 35 years. We are working with the Urban Air Initiative and others to get EPA to update its models with these facts, which would show nitrogen fertilizer related emissions would be reduced by 40 percent. Big improvements in nitrogen fertilizer use efficiency and soil carbon stocks mean big reductions in corn ethanol carbon intensity. The wait is over, the low-carbon, high-octane, economical, plentiful and home-grown renewable fuel is here today. Author: Ron Alverson President, American Coalition for Ethanol email@example.com
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BUSINESS BRIEFS US Water Services cofounder retires Al Bly, cofounder and former CEO of U.S. Water Services Inc., has retired Bly from the water treatment industry after 31 years. In a letter to current U.S. Water CEO LaMarr Barnes, Bly thanked countless people and called his career “an incredible ride.” Bly cofounded U.S. Water in 1997 and played an instrumental role in its rapid growth over 20 years. His retirement comes two years after the company was acquired by Minnesota-based utility Allete in early 2015. Among the many customers and friends Bly thanked were Fagen Inc. founder and Chairman Ron Fagen and ICM Inc. founder and CEO Dave Vander Griend “for putting faith in us during the ethanol industry buildout that helped push us to another level.”
People, Partnerships & Projects
McPheeters picked for Nebraska Ethanol Board
Vander Griend gains seat in MOVES group
Scott McPheeters has been appointed by Nebraska McPheeters Gov. Pete Ricketts to be the Nebraska Ethanol Board’s business representative. McPheeters runs a family farm in southcentral Nebraska and is a founding member of KAAPA Ethanol LLC, the only farmerowned ethanol plant in Nebraska. McPheeters currently serves on the KAAPA board of managers and on the board for a sister company, KAAPA Grains. He is also a current member of the American Coalition for Ethanol’s board of directors. Nebraska Ethanol Board members are appointed by the governor to serve fouryear terms. The eight-person board includes seven voting members—representing farming, labor, petroleum and business interests—plus a nonvoting technical advisor.
Steve Vander Griend, the Urban Air Initiative’s technical director, has been added to the EPA’s Motor Vehicle VanderGriend Emission Simulator Review Work Group. His inclusion in the group gives the ethanol industry a voice on an assemblage that influences EPA emissions modeling. The MOVES Review Work Group was established by the Clean Air Act Advisory Committee, which provides recommendations to the EPA. Vander Griend, who attended his first group meeting in March, is the only participant with wide experience in how ethanol impacts emissions. “I asked a lot of questions and offered ideas that hadn’t been discussed,” he said, adding that UAI later presented suggestions for ways to improve the data being used to assess ethanol in the MOVES model.
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18 | Ethanol Producer Magazine | MAY 2017
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Bushmills joins Growth Energy Bushmills Ethanol Inc. has become the newest producer member of Growth Energy. The Atwater, Minnesota-based ethanol plant—a cooperative of 415 farmers—produces 65 million gallons of ethanol per year. “Growth Energy’s membership is comprised of men and women who are passionate about driving change in the ethanol industry, and committed to producing high-octane fuel that improves engine performance, reduces emissions, and saves consumers money at the pump,” said Growth Energy CEO Emily Skor. “We are thrilled to add Bushmills Ethanol to that team. I am especially proud to bring on a plant member from my home state of Minnesota, which is a national leader in ethanol policy and development, and ranks fourth among states in ethanol production.”
Shortline asRailroad asjoins MBA Minnesota railroad operator, Twin Cities & Western Railroad Co., has joined the Minnesota Bio-Fuels Association as a vendor member. The Glencoe-based rail company and its affiliates, Minnesota Prairie Line and Sisseton Milbank Railroad Co., operate approximately 350 miles of railroad track in west-central Minnesota and eastern South Dakota. The company's shipments are primarily comprised of agricultural products as well as ethanol. “We appreciate that the Minnesota Bio-Fuels Association is dedicated to supporting and representing the renewable fuels industry in Minnesota, and we are pleased to join the association in support of our ethanol shipping customers and the communities we serve,” said Mark Wegner, president of TC&W.
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Nebraska Corn Z Board thanks White Robert White, the Renewable Fuels Association’s vice president of industry White relations, has been awarded the Nebraska Corn Board’s 2017 Ethanol Industry Appreciation Award for his efforts to grow ethanol markets and expand demand for higher blends. Notably, White is the first non-Nebraskan recipient of the Ethanol Industry Appreciation Award, which has been handed out annually since 2007. White works with fuel retailers and other stakeholders to grow the use of renewable fuels, particularly the adoption of E15. “I have the unique privilege of interacting with farmers daily, and enjoy the relationships that have developed over the years working together to expand the market for corn and ethanol,” he said. “Thank you again for this treasured award.”
NCERC names new research director The National Corn-toEthanol Research Center at Southern Illinois University Zhang Edwardsville has named Yan Zhang director of research. Zhang will provide scientific and technical services for client- and grant-funded research projects at NCERCâ€™s pilot plant and laboratories. â€œYanâ€™s background in analytical chemistry, built upon more than two decades of experience working in the environmental, biofuels and pharmaceutical industries, provides her an indispensable foundation to understand and quantify the myriad biochemical conversions that occur during the production of biofuels,â€? NCERC Executive Director John Caupert said. Yan was previously employed at NCERC from 2003 through 2012, spending the past five years as an analytical chemist for a biopharmaceutical company in St. Louis.
Yeast maker opens new tech branch
DSM opens new biotech R&D hub
AB Mauri has launched a new division, dubbed AB Biotek, specializing in fermentation science and yeast innovation. The new branch will develop specialty yeast solutions for biofuels, beverage alcohol, and animal and human nutrition. â€œAB Mauri has a long history of providing leading-edge products to industrial customers outside of the bakery markets in other parts of the world,â€? said Greg Strauss of AB Biotek North America. â€œNow, with AB Biotek, we have a dedicated team focused on delivering high-quality products and solutions, coupled with superior technical collaboration. The company has extensive yeast production capabilities worldwide, and its North American hub in St. Louis has a lab that provides yeast and fermentation diagnostics.
Royal DSM has opened a new biotechnology facility on its sprawling Delft, Netherlands, campus. The Biotechnology Center will accelerate DSM's biotech R&D work in food and nutrition, feed, fuel, pharma and biobased materials. The project is part of a $100 million-plus investment by DSM to build up its R&D capabilities. The center houses over 400 experts under one roof and builds on DSMâ€™s 150-year history of fermentation and biotech innovation. Science performed there will support DSMâ€™s food specialties, biofuels and biobased products lines. The Delft campus is home to the companyâ€™s Bioprocess Pilot Facility and its Biobased Products and Services group, the branch of DSM engaged in a joint venture with Poet to commercialize cellulosic ethanol.
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For more details, call the Eisenmann Environmental Team at 815-477-5335 . www.eisenmann.us.com | Ethanol Producer Magazine | MAY 2017 20DGYHUWBB[B=ROOB572BSULQWLQGG
Butamax buys Kansas plant Butamax Advanced Biofuels has acquired Nesika Energy LLC, a 10 MMgy corn ethanol plant in Scandia, Kansas. The joint venture between BP and DuPont will immediately begin the detailed engineering work to add bioisobutanol capacity to the small facility. Nesika officials reported that the plant will retain its name while continuing to produce ethanol before and after the retrofit. The plan is to use the facility as a commercial demonstration plant to prove out Butamax’s technology before licensing it broadly. Dev Sanyal, BP’s chief executive of alternative energy, said, “We invest in renewables where we believe we can build commercially viable businesses at scale, and this project … is another important step in that direction.”
Calgren to add biodiesel production A southern California ethanol plant will soon add on-site biodiesel production. Calgren Renewable Fuels, in Pixley, already features an anaerobic digester that powers the 57 MMgy plant. Now, the integrated biorefinery plans to diversify even further by adding a unique biodiesel technology to its renewable energy repertoire. The project is supported by a $3.6 million grant from the California Energy Commission’s Alternative and Renewable Fuel and Vehicle Technology Program. Another $5 million from Calgren will be required to finance the construction of the biodiesel plant, which will be engineered and built by Jatrodiesel Inc. The plant will be similar to one already installed at CHS Annawan (Illinois).
Veteran s employments high in ethanol A new U.S. DOE study shows that America’s ethanol industry employs a much larger share of military veterans, relative to its total workforce, than any other segment of the energy industry. Nearly one in five ethanol industry employees is a veteran—18.9 percent— compared to a national average of 7 percent across all sectors of the workforce, according to the DOE. Per 100 workers, the ethanol industry employs twice as many veterans as the oil and gas sector and nearly four times as many veterans as the coal and nuclear power generation sectors. Other renewable energy sectors, including advanced biofuels, wind and solar, also employ a relatively large share of military veterans.
Prices & Market Analyses
Natural Gas Report
Summer comes into focus as natural gas inventories find bottom April 3—With so many moving parts in the U.S. natural gas market, the price direction and environment can often simply boil down to underground storage inventory levels. 2016 saw two records established in that regard: the end-of-winter bottom of 2,468 Bcf was the highest ever, as was the end-of-summer peak of 4,047 Bcf. What often gets lost in that story is that the 1,579 Bcf that was added in between represented the second slowest injection season ever. Sliding domestic production combined with rising exports and record usage from the power generation sector to cap off the availability of excess supply available for injection. This dynamic helped fuel an impressive price recovery throughout the year. Last year’s market is in the rearview, but it does help color expectations for the coming injection season. As of March 24, storage inventories were 2,049 Bcf, most likely the 2016 seasonal bottom. That is a very healthy end-of-winter level—fourth highest on record, and far north of the more bullish pre-winter projections. However, the deficit to year-ago levels cannot be ignored. There are real questions going into the summer about the market’s ability to refill inventories back near recent peaks.
by Andy Huenefeld
Rising exports—both via pipeline to Mexico and from the nation’s growing LNG export capacity—will provide the most prominent headwind for storage injections. Compared to last year, we can reasonably expect to be exporting additional volumes averaging 1.5 to 2.0 Bcf per day. That essentially represents natural gas supply that was in excess of demand in 2016 and stored. Increased exports put the pressure squarely on domestic production and the power generation sector to loosen up the market throughout the season. Higher prices in 2017 should play a part in continuing to spur activity in the production space and limit the fuel switching that led to such high levels of consumption from power generators last summer. If the market isn’t comfortable with the pace of injection once cooling demand kicks in, upside risk could be realized by the natural gas market. Rising production and relatively light demand from power generators would assuage bullish concerns, but they still carry more questions than answers.
Corn stocks up 10%, planting intentions down 4% April 3—During March, the corn market stayed relatively quiet, working its way lower after a Feb. 28 spike. The move higher was fueled by rumors surrounding potential changes to the Renewable Fuel Standard that were not realized. The market continued to unwind longs and prices eroded with new shorts entering the market. During the month, May corn traded a high of 383 to a low of 354 1/4. The March USDA report did not offer any revelations. The U.S. corn balance table remained unchanged with a carryout of 2.320 billion bushels. Global corn carryout increased from 217.56 mmt to 220.68 mmt due to production increases in Brazil, Argentina and South Africa. Argentina and Brazil corn exports are expected to be 25.0 mmt and 31.0 mmt, respectively, compared to 21.7 mmt and 14.2 mmt a year ago. China’s corn carry-in remained unchanged compared to previous projections at 102.31 mmt vs. 110.77 mmt a year ago. Corn stocks as of March 1 totaled 8.62 billion bushels, up 10 percent from a year ago, just slightly higher than the trade estimate. This stocks number would indicate corn disappearance during December to February was 3.77 billion bushels compared to 3.41 billion during the same timeperiod a year ago. Therefore, one would expect to observe a greater ending stocks number in the April report.
by Jason Sagebiel
Per the March intentions report, corn planted area for all purposes in 2017 is estimated at 90.0 million acres, down 4 percent or 4.0 million acres versus a year ago and below the average trade estimate of 90.969 million acres. The biggest decline in corn acres versus a year ago was Iowa. See the accompanying illustration. Comments in this column are market commentary and are not to be construed as market advice.
22 | Ethanol Producer Magazine | MAY 2017
Regional Ethanol Prices ($/gallon) Front Month Futures (AC) $1.577
1.550 SOURCE: DTN
DDGS value boosts US inclusion rates, exports to smaller markets April 4—As April begins, DDGS prices emerge from the winter at one of its lowest values versus corn that has been seen in many years. The lack of business from Vietnam and China has made a huge impact on exports, and although other countries have been buyers in place of these two, the lack of enthusiastic demand they previously created is leading to muted prices. Here in the U.S., values are low enough that most feeders are saving a significant amount of money by feeding DDGS, so they have it at a maximum inclusion rates in diets. Southeast poultry feeders are using DDGS in near record amounts, providing an outlet for a lot of plants that suffered from corn that was higher in vomitoxin in their local areas. The Mississippi River opened much earlier this year than normal, shifting
by Sean Broderick
product flow from the container yards in Chicago to the Gulf bulk markets. With Asian demand lower than normal (for example, the U.S. Census Bureau reports Vietnam took 245,00 tons in November and zero tons in February), Mexico and Turkey accelerated their import tonnages, as did places like the UK, Portugal, Spain and Ireland. Clearly, in countries that don’t have outright bans or prohibitive tariffs, the value of DDGS is without peer. April is the month that a lot of plants take spring maintenance shutdowns, which will affect supply. Export demand should continue through the spring as freight keeps delivered prices competitive. Hopefully, weakness of the dollar and governmental policies keep exports strong.
Regional Gasoline Prices ($/gallon)
Front Month Futures Price (RBOB) $1.679 Region
1.490 SOURCE: DTN
DDGS Prices ($/ton) LOCATION
155 SOURCE: CHS INC.
Corn Futures Prices (MayFutures) Date
Mar 31, 2017
Febr 28, 2017
Mar 31, 2016
125.54 SOURCE: FCSTONE
Cash Sorghum ($/bushel) by Rick Kment
Ethanol markets on seasonal upswing anticipate summer driving April 3—After hitting a six-month low the second week of March, April ethanol contracts gained buyer support over the rest of the month as seasonal buying moved into the market. Traders have moved into both ethanol and RBOB gasoline markets over the past several weeks as commercial buying increases ahead of the spring and summer driving season. The current price of gasoline is also likely to spark increased sales and driving activity over the next several months. Ethanol futures have posted a 10-cent rally since hitting support levels. This has
continued to spark additional follow-through buyer activity in not only ethanol markets, but all energy markets through the end of March and early April. This is expected to continue as overall inventory of ethanol and gasoline will likely be drawn down through the next couple of months. Prices are expected to remain moderate during the summer of 2017, but firm buyer support is expected during the spring months in ethanol markets, allowing for strong demand as plant capacity remains steady based on expected relatively stable corn market prices.
Mar 27, 2017
Mar 2, 2017
Mar 18, 2016
SOURCE: SORGHUM SYNERGIES
Natural Gas Prices ($/MMBtu) LOCATION
Mar 30, 2017
Mar 6, 2017
Mar 31, 2016
SOURCE: KINECT ENERGY GROUP
U.S. Ethanol Production (1,000 barrels) Per Day
SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION
MAY 2017 | Ethanol Producer Magazine | 23
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ÂŠ2017 Lallemand Biofuels & Distilled Spirits. All rights reserved.
Ironically, the latest breakthrough in the field of energy, is a field. While most innovation begins with the seed of an idea, the greatest advance in the making of ethanol starts with a seed. The first corn seed technology specifically developed to increase the efficiency of ethanol production, Enogen® corn can reduce costs by up to 10% and helps generate more ethanol per bushel than any corn feedstock ever grown. Recently named AgriMarketing’s Product of the Year, Enogen is definitely making waves in the field of energy.
© 2016 Syngenta. Enogen ®, the Alliance Frame, the Purpose Icon, and the Syngenta logo are trademarks of a Syngenta Group Company. Syngenta Customer Center: 1-866-SYNGENT(A) (796-4368). www.FarmAssist.com MW 1ENG6003_8.5 x 10.875 1/16
Prices may be low, but the cure is kicking in and markets are expanding worldwide. By Susanne Retka Schill
With record ethanol production comes record distillers grains supplies. Combine those big supplies with
big declines in exports to two major international buyers, and you have a formula for low prices. Indeed, in mid-March, DTN was reporting average DDGS prices in the lower $90 per-ton range. But, the old adage is kicking in: The cure for low prices is low prices. And, attractive low prices they are. At the end of March, the U.S. Grains Council’s Market Perspectives reported DDGS prices at the Gulf were 41 percent of soybean meal, which equates to a $1.55 per protein-unit cost advantage for DDGS on the export market. So, despite a big decline in sales to two major importers—China, due to its antidumping tariff and Vietnam, due to fumigation issues—by the end of January, total U.S. DDGS exports were down just 2 percent in the marketing year starting in September. And, by the end of February, they were up 3 percent. Essentially, 5 million metric tons (mmt)—
a big chunk of the total 11 mmt to 12 mmt market—are finding new homes. Eight of 10 countries at the top of the DDGS destination list are increasing their imports and, even more encouraging to exporters, more countries are taking advantage of the low prices and trying larger volumes of the feed. Looking at the numbers for the current marketing year through February, China dropped from No. 1 export destination to No. 2, down 69 percent compared to the same period a year ago. Mexico has moved to the No. 1 spot, with its total at the end of January matching last year’s and a month later 10 percent over last year’s pace. Big increases in DDGS purchases are seen from Turkey, up 153 percent, Thailand, up 87 percent, and Japan, up 82 percent. Other countries in the top 10 have more moderate increases, including Indonesia, South Korea and Vietnam. Canada, often among the top three destinations in past years, is down 4 percent from last year, coming in at eighth place among exporters. In January, EU destinations were down 3 percent, but the PHOTO: CHS
26 | Ethanol Producer Magazine | MAY 2017
GROWING SUPPLIES: This chart from a University of Illinois FarmDoc Daily report shows the growth in overall supply and export demand.
power of price kicked in and by February, it was showing a 36 percent increase from the pace at the same time a year ago.
Kurt Shultz, USGC director of global strategies, says the U.S. Grains Council has gone to its directors and consultants in the dif-
ferent markets around the world and encouraged them to push distillers grains into new markets or ramp up existing markets. “What we’ve seen is markets stepping up and increasing their purchases,” he says. “You can’t isolate it to one single market, but it’s really created an opportunity for us to move product, and into markets that we haven’t been able to get into in the past. For example, Saudi Arabia. We’ve been trying to push distillers grains in Saudi for years. Part of it is they have a subsidy program that favors barley, and doesn’t necessarily favor distillers grains. But the most it ever imported was maybe two or three years ago when they brought in about 4,000 tons. Just in February, they bought 18,000 tons of distillers grains, with another 20,000 ton purchase in the works. That’s not a huge purchase, but for them it is.” Sean Broderick, senior merchandiser with CHS, and chair of the USGC’s A-Team advisory committee, remembers a similar situation a few years ago. Chinese imports of U.S. DDGS ground to a halt over concerns about unapproved corn traits. “They were importing a whole bunch, they stopped, the market went down, and we were on the lower end of the price spectrum,” he recalls. “We did a huge ex-
pansion in the number of customer countries.” At the time, discussions about destinations receiving meaningful tonnages focused on the top five, he recalls. “Now with the prices doing it again, we’re poised to make inroads in places like Oman and Pakistan or even India, which is looking at distillers grains a lot harder lately.”
Building Sustainable Markets
A new market needs to reach a critical size to become sustainable, Shultz says. “If you have DDGS coming in small quantities—less than 50,000 tons a year, it really is challenging for nutritionists and purchasing managers.” Once it grows above that level, supplies become more consistent, storage gets dedicated to the new product and feedmills begin using the feed ingredient with less hesitation. “So now is an opportunity for a lot of countries to start increasing their purchases, take advantage of the pricing and become more familiar with DDGS,” he says. The multiplication of buyers creates a healthier market, he adds. “We’re not dominated by one market that can turn us on or off. I know it’s not been easy for the ethanol indus-
SOURCE: USGC, TOP U.S. EXPORT CUSTOMERS, MEXICO DETAIL
try and DDG exporters with these low prices, but I think what’s going to come out of this is they are going to have more customers and more diversified buyers.” Distillers exports are poised to push beyond the 11 mmt to 12 mmt levels seen in recent years, Shultz says, particularly if the headwinds from the Vietnamese
and Chinese markets subside. He outlined the prospects in several countries: Mexico has risen to No. 1 this year. DDGS imports rose by 310,000 metric tons (mt) from 2014-’15 to 2015-’16 and are up nearly 10 percent from last year’s pace. A nearby market provides advantages in the multiple
EXPORTS supply channels, via rail, truck or vessels, and the country’s livestock industry has been growing in recent years, Shultz says. “There’s still plenty of opportunity with DDGS for growth in Mexico.” The other close-by customer, Canada, has room for growth. Exports to Canada have been below the 2011-’12 peak of 646,000 tons, coming in 100,000 tons below that last year. That may not change, Shultz adds, as this marketing year’s shipments through February were 4 percent lower than last year at the same time.
Saudi Arabia’s increase is important because it’s a big dairy country. Government policies are changing with the realization the desert kingdom may want to conserve the groundwater resources that have been used to grow alfalfa, wheat and barley. That change is opening the door for the importation of more feed ingredients for the 6 million-ton, compound-feed market, Shultz says. If DDGS could capture a 10 percent share, it would amount to 600,000 tons, which in 2016 would have landed Saudi in seventh place as a DDGS customer.
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2016 TOP U.S. DDGS CUSTOMERS
China Mexico Vietnam South Korea Turkey Thailand Canada Indonesia Japan Ireland Taiwan Others TOTAL
3,371.6 1,901.0 1,006.0 844.6 695.5 587.0 547.8 335.9 295.5 269.9 217.1 1,653.4
29% 16% 9% 7% 6% 5% 5% 3% 3% 2% 2% 14%
Source: USDA FAS GATS Sept. 2015 to Aug. 2016
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“What’s interesting,” Shultz continues, “is you see a lot of countries pop in very quickly. For example, Pakistan, which has imported very small volumes in the past, has already imported 60,000 tons. Bangladesh, Myanmar— DDGS is getting around the globe.” Building new markets is a multifaceted challenge. Adding a new feed product requires storage capacity and proper handling logistics need to be in place. The USGC organizes seminars for potential customers to outline DDGS’ nutritional profile and its best use in a ration.
EXPORTS Each country is different, Shultz points out. Tunisia, with its 10 million people, essentially has three feed companies and Saudi Arabia, just 10. Working with a smaller number of large feed buyers can be easier than where there are hundreds of smaller companies. “When you use distillers, if you’re not bringing in a certain tonnage, it’s not worth the risk, because you don’t see the price advantage until you get to a certain volume,” Shultz says. The USGC offers extensive educational support to new customers. “I’ve gone to importers who brought in their first shipment of DDG into a market—maybe 5,000 tons—and I’ve told them we will provide them with whatever nutritional support they need to use that product as fast as possible.” The last thing they want to see happen is for that new customer to leave the first shipment sit in a warehouse for weeks or months, due to buyer uncertainty. To avoid that, USGC support often includes seminars for feed companies’ customers. Educational seminars also have been a big part of making the transition to lower-oil DDGS in the export market, teaching users about needed nutritional adjustments. When the ethanol industry first began spinning the oil out, there was a big spread between those plants extracting the oil and those that hadn’t yet adopted the technology, Broderick says. Today, the market has primarily adjusted. “The industry is surprisingly consistent in how much residual oil is in the product. Generally, it’s between 6.5 to 8, and probably closer to 6.5 percent,” Broderick says. Some ethanol producers take out more, coming in closer to 4 percent fat, he says, and those DDGS are traded differently. The majority trades at a 35 pro/ fat standard—a combined value where protein content is between 28 and 29 percent of the total and fat is between 6 to 7 percent. “It seems like the plants have aligned themselves and the customers have aligned themselves on what they want. And, we’re better as shippers, knowing what we’re getting and what we’re shipping, and who wants which product.”
Logistics play a big role in market development. Asian markets for DDGS have grown partly because so many containers used to ship goods to the U.S. are available at reasonable rates to ship DDGS back across the Pacific Ocean. “It’s cheaper to ship a container loaded in Chicago to Shanghai on a per-ton
basis than it is for me to load that DDGS in Chicago in a railcar to the West Coast,” Broderick says. “It’s probably $25 a ton cheaper, so it’s 30 percent cheaper to send it over to Asia than the West Coast.” Price and logistics impact domestic markets, too. Broderick explains that due to freight costs, DDGS generally stay in traditional areas. “When prices go down, we push into other regions, like the Southeast.” With that region’s numerous poultry and hog operations, the expansion in the domestic DDGS market may soon mirror exports. “Anecdotally, we hear
people in the Midwest who feed hogs save $15 to $20 a ton on finished feed by putting in a decent amount of distillers. It’s financially lucrative for them to put in distillers grains, and they’re looking to put in more.” Author: Susanne Retka Schill Managing Editor, Ethanol Producer Magazine firstname.lastname@example.org 701-738-4922
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Untold Stor y of DDGS’ Positive
ENVIRONMENTAL I M PA C T Benefits include methane reduction in cows, better phosphorus utilization reducing loss to the environment, improved sustainability. By Ann Bailey
The benefits in feeding distillers grains are well known—it’s an economical, nutritious, palatable addition to livestock and poultry rations. Less well known are its environmen-
tal benefits that range from reducing methane emissions from cattle to minimizing phosphorus content in manure and the risk from runoff into waterways. These littleknown benefits are something that University of Minnesota professor and animal nutritionist Gerald (Jerry) Shurson believes the ethanol industry should tout. “We’re entering an era where we have to think about the environmental impact of feed ingredients,” Shurson says. One of the biggest challenges today is to sustainably produce enough nutritious, safe and affordable food for a growing population, while at the same time preserving natural resources and minimizing negative impacts on the
environment. Food demand is projected to increase 70 percent between 2010 and 2050 and the growing middle class is expected to have 1.8 times more consumer buying power, allowing more people to be able to buy more milk, meat and eggs, he says. Meeting the goal of feeding the world sustainably will be multidimensional, requiring innovations in production techniques and systems that increase the efficiency and amount of food produced, while preserving finite natural resources, protecting ecosystems and biodiversity, and mitigating the effects of global climate change, Shurson says. Estimates indicate about 14 percent of human-produced greenhouse gas (GHG) emissions globally come from the livestock sector, Shurson says. While 14 percent is not a huge contribution to the total, nonetheless, it is significant and there are opportunities for the livestock industry to play a significant part in reducing greenhouse
MAY 2017 | Ethanol Producer Magazine | 33
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gases. Growing consumer concern about the effect the global livestock industry has on the environment and climate change is prompting integrated livestock and poultry producers and food production companies to begin emphasizing supply chain management to reduce their carbon footprints, Shurson says. â€œIn other words, in addition to nutrition and economic value, they are also sourcing ingredients that have less negative impact on the environment.â€? Feed ingredients are beginning to be classified by renewable and nonrenewable resource use, acidification and eutrophication potential, and contribution to GHG emissions, he says. DDGS can play an important role. In 2015, the ethanol industry produced roughly 37 million metric tons of DDGS for export and domestic use. Historically, most of the corn coproduct was fed to dairy and beef cattle, but because ethanol and DDGS production has greatly increased during the past 15 years, the need to build the market has increased, both domestically and overseas. Inclusion rates for dairy and beef cattle have also risen and demand from other livestock sectors, such as swine, poultry and aquaculture, both domestically and overseas, has increased.
Methane, Phosphorus Benefits
One side effect of increasing the inclusion rate of DDGS in the diet of dairy cows is it increases the amount of corn oil consumed. Several studies have shown that
34 | Ethanol Producer Magazine | MAY 2017
raising dietary fat content reduces methane production, Shurson notes. Thatâ€™s important because methane is a significant contributor to greenhouse gas emissions. â€œThe reduction in methane production in cattle is a positive environmental story that makes DDGS even more attractive, beyond its economic and performance benefits.â€? On top of reducing methane emission in cows, feeding distillers grains brings an important environmental benefit to poultry and swine operations. â€œOne of the unique advantages of using DDGS in swine and poultry diets is that it contains a greater concentration of digestible phosphorus than all other grains and grain coproducts, which can dramatically reduce the amount of phosphorus excretion in manure,â€? Shurson says. â€œWhatever is not digested and absorbed by the animal comes out in the manure, so there is a dramatic reduction in phosphorus excretion in manure when adding DDGS to these diets.â€? The reduced phosphorus content in manure from pigs and poultry fed DDGS means that when manure is applied to soil, there is less phosphorus runoff into rivers, lakes and streams, Shurson says. â€œBecause we take corn and put it through a fermentation process with yeast in an ethanol plant, that process converts much of the indigestible phosphorus into a digestible form which is important to pigs and poultry.â€? Less risk of runoff into waterways Shurson says, minimizes the risk of eutro-
ENVIRONMENTAL IMPACT phication, which can lead to algae blooms and fish kill, if it’s severe enough. Another environmental advantage of the high digestibility of phosphorus in DDGS is that animal nutritionists can reduce inorganic phosphorus supplementation, Shurson says. “Some experts have predicted that within the next 20 years, our natural phosphate reserves around the world will be close to being depleted, so there’s a big amount of interest, and even organizations, focused on phosphorus conservation.” Distillers dried grains plays a big role because it is not only high in phosphorus content, but the phosphorus is more digestible, reducing the pressure on inorganic reserves, he says. “That’s a good thing from a long-term environmental perspective.” Besides having positive environmental benefits, reducing the amount of inorganic phosphates in the animals’ diets is cost effective, Shurson adds. “Inorganic phosphate sources are relatively expensive and phosphorus is the third most expensive nutritional component in animal feeds. Using more DDGS to replace inorganic phosphate supplements reduces diet cost when diets are formulated on a digestible phosphorus basis.” On top of reducing the amount of methane in cattle and phosphorus in pigs, DDGS also have potential to mitigate the smell in commercial swine operations. Some studies have shown that the amount of hydrogen sulfide emitted from stored manure is reduced in pigs that are fed 30 percent DDGS diets compared with cornsoybean meal diets, Shurson says, which reduces odor in manure storage pits. Odor reduction is a significant advantage because as urban areas move closer to large confinement operations, complaints about the smell emitted from the manure storage pits increase, Shurson says.
Telling the Story
Historically, the focus of nutritionists and livestock producers has been on minimizing costs while optimizing animal performance. That will continue, Shurson says, but there are already signs that environmental concerns will add another level to purchasing decision. “What I’m suggesting is, we’re entering an era where
we have to think about the environmental impact of feed ingredients, because global agriculture is projected to represent more than 50 percent of total agricultural economic value in the next 10 years,” he says. The growing middle class in China and other Asian countries, together with an increasing global population, will result in the production of more food animals than ever before, Shurson notes. Furthermore, driven by consumer desire, food companies and major livestock and poultry integrators are beginning to make claims that the food they produce is, among other things, environmentally friendly, he says. The business models of companies such as Walmart, Smithfield Foods and Pepsico are putting more emphasis on limiting environmental impacts in response to those concerns. Because DDGS are a significant global feed ingredient, Shurson believes the ethanol industry has an important story to tell. “A lot of companies are talking about, and struggling with, how they can move toward a bioeconomy. The role of ethanol and its major coproduct, DDGS, contribute to a positive environmental story. I’ve begun introducing these positive environmental impact stories in many of my presentations at feed conferences in the U.S. and overseas.”
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Measuring the Impact
Feeding food-producing animals diets that reduce the negative effect on the environment is important because it is something that can have an appreciable, measurable effect, says Jennifer Schmitt, program director and lead scientist at the NorthStar Initiative for Sustainable Enterprise, a program at the Institute on the Environment at the University of Minnesota. During the next year, Schmitt will be working on a project with Shurson and Pedro Urriola, University of Minnesota animal science research assistant professor, that will look at how four hog diets affect the life-cycle (cradle to grave) environmental impact of hog production. One of the diets will contain DDGS, another food waste, a third, phytase enzymes and a fourth, synthetic amino acids. Hogs were chosen for the project because their digestive systems can handle a wider variety of feeds than animals such as dairy and beef cattle.
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‘The role of ethanol and its major coproduct, DDGS, contribute to a positive environmental story. I’ve begun introducing these positive environmental impact stories in many of my presentations at feed conferences in the U.S. and overseas.’ - Shurson
“If we can show ways to improve the environmental impacts with pork, we can reduce the overall environmental burden of meat animals,” Schmitt says. “Meat consumption has large environmental impacts in the world, so if we want to address greenhouse gas emissions, water use, water quality, land use, etc., we must either decrease meat consumption in the world or have more sustainable meat production.” It is
unlikely total world meat consumption will decrease because the middle class is expected to grow and they will be eating more, not less, meat, Schmitt says. That means that finding a more sustainable way to produce meat is important. Manure management is the No. 1 environmental “hot spot” or the largest contributor, to the greenhouse gases associated with hog production. Second is production of corn feed products, followed
by in-home consumption, which includes food waste, she says. “If we can hit those big hot spots and make improvements, we can have environmental gains.” Author: Ann Bailey Freelance Journalist firstname.lastname@example.org
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ETHANOLâ€™S OPPORTUNITY in the Chemical Market
A Nebraska-focused tech startup and a Latin American chemical supplier highlight two options for using ethanol as the building block for intermediate chemicals. By Luke Geiver
40 | Ethanol Producer Magazine | MAY 2017
PRODUCING THE GREEN STORY: Braskem produced approximately 200,000 tons of its trademarked Green Polyethylene product in 2015 using sugarcane-based ethanol. Today, the product is the one of only a few of the biobased products the global chemical producer and supplier sells. PHOTO: BRASKEM
MAY 2017 | Ethanol Producer Magazine | 41
CHEMICALS The future of ethanol for in- locale—offers a glimpse into the possibilifor ethanol-based chemical production termediate chemical production ties opportunities, market needs and the quancan be seen next door to a wet tifiable value that green chemicals can fetch mill in Columbus, Nebraska, from buyers. and thousands of miles south Upgrading to a Green Era in Sao Paolo, Brazil. Greenyug is a small team that formed Greenyug LLC, a startup technology development company headquartered in Santa Barbara, California, intends to break ground in Nebraska this summer alongside an Archer Daniels Midland Co. facility. The bolt-on facility—already tested in India—is designed to convert nondenatured ethanol into ethyl acetate, a product used in coatings, paint and cleaning products. Formed in 2008, the company—whose name borrows from English and Sanskrit to spell green era—believes it is entering a massive and economically lucrative market by utilizing ethanol as the main building block for many widely used chemicals. Braskem, the largest petrochemical company in Latin America, has been converting sugarcane-based ethanol into polyethylene at its facilities in Brazil for several years. While not the only companies developing green chemicals, Greenyug the startup, and Braskem the global player, show the range of approaches and viable pathways for ethanol to fuel processes other than engine combustion. Each entity—despite company size, global reach or operational
42 | Ethanol Producer Magazine | MAY 2017
in 2008 to commercialize its technology platform designed to perform process intensification and liquid phase catalysis to produce hydrogen as a byproduct and ethyl acetate as a revenue generating stream. The system—tested in both California and India from 2011-’13—offers a small footprint compared to others used to create similar chemicals at petrochemical refineries, says Luca Zullo, vice president of commercialization, “Imagine the size of the separation section of a standard ethanol plant.” Prior to his Greenyug efforts, Zullo worked in the petrochemical industry. The Greenyug process involves feeding a stream of ethanol into a reactive distillation column, dehydrating the ethanol over a catalyst in the liquid phase and then removing the produced ethyl acetate as a bottoms product and hydrogen as a top product. “Our profitability is based on the spread between ethanol and the products, not unlike the petrochemical industry that focuses on the spread between naphtha and chemicals,” Zullo says. The Greenyug team targets products with selling prices at
THE PREMIUM TOUCH: Although Braskem’s Green PE product is sold at a premium to other fossil-based versions, the Braskem team is still seeing a rising demand and interest level for its renewable, ethanol-based chemical. PHOTO: BRASKEM
the $1,000-per-ton starting point. Ethanol is typically in the $500-per-ton range, Zullo says. “This spread provides a very good return, if one has good mass yield conversion and moderate capital costs,” he says, adding that the Greenyug technology approach has performed well in both areas. “Approximately 5 percent of the oil barrel goes
CHEMICALS Main Uses of Ethyl Acetate: US Demand by End-Use Sector
Ethyl Acetate Plant Comparison Capital and operating costs for 50 kta (In $ million)
Paints and Coatings Other (food, packaging, solvents) Adhesives
Ethyl Acetate Revenue Coproducts
Former US BioTech
into chemicals generating 40 percent of its value. We can do the same for the ethanol industry using a foundation of proven petrochemical technologies,” Zullo says. The Freedonia Group, a Clevelandbased industry research firm, puts products such as ethyl acetate on a growth path that could create a 2 billion-pound market by 2020. Between now and then, the market for such products should grow by 3.7 percent, the research group said in a recent study on renewable solvents and chemicals. Zullo projects the current global market for his product at roughly $20 billion. No matter what the market size or demand may be for ethanol-based ethyl acetate, Greenyug has pitched its technology to investors and operational collaborators as one independent of a green premium. “No-
where in our assumption do we predicate a premium because of a green product,” he says. “Make no mistake, our products are green and often the only 100 percent renewable-based product available. However, from the beginning, we have intended to compete purely on a market basis.” In some cases, the green factor may be the tie breaker in a decision between a Greenyug produced product or an alternative produced using fossil-based naphtha. This summer will mark the groundbreaking for Greenyug’s first plant next to an ADM wet mill facility. The engineering, procurement and construction contract is being finalized and most of the large equipment needed has been ordered, and product testing on large quantities is already completed. With ADM, Zullo says his team
found a great partner that put in considerable effort in due diligence and analysis on the Greenyug process. To finance the plant, Greenyug utilized St. Louis-based Stern Brothers. The company will issue bonds for its project with USDA backing under its business and industry loan guarantee program. Ethanol streamed from the ADM facility does not have to be tweaked before it enters Greenyug’s Prairie Catalytic LLC facility—the subsidiary the company formed to operate the Nebraska plant. “From an ethanol plant’s perspective, this is a very simple proposition. When the plant is ready to go, one just diverts some ethanol from the load-out to our plant,” Zullo says. There is no need to retrofit anything on the plant and there is nothing to change with the
MAY 2017 | Ethanol Producer Magazine | 43
‘Approximately 5 percent of the oil barrel goes into chemicals generating 40 percent of its value. We can do the same for the ethanol industry using a foundation of proven petrochemical technologies.’ - Luca Zullo, Greenyug
DDGs. In some cases, the bolt-on process could allow the plant to increase grind rate, Zullo says. The amount of ethanol needed for the Greenyug process is not enough to change or disrupt ethanol plant fuel market focus, he says, but it is enough to add considerable value to the fraction of ethanol that is used for the chemical production process. Thanks to an offtake agreement signed in March, Zullo doesn’t have to pitch the market value and demand for ethyl acetate to investors or potential collaborators anymore. HELM AG, a German-based petrochemical producer and supplier that operates globally, signed a marketing agreement with Greenyug for its Nebraska-produced biobased chemicals made from ethanol. Axel Viering, executive director of the derivatives business unit at HELM, says the agreement will strengthen its presence and expand its ethyl acetate distribution network. Currently, the company supplies much of its ethyl acetate products to markets outside of the U.S. “As a major global distributor of chemicals, HELM looks forward to a long-term relationship with Greenyug,” Viering says. The significance of the offtake agreement with HELM is related to the product procurement model typical of the chemical industry, Zullo says. Distribution channels are varied and complex with some custom44 | Ethanol Producer Magazine | MAY 2017
ers taking large delivery of product by rail and others seeking small volumes by other packaging methods. Most chemical buyers do not buy only one product and, instead, prefer to purchase an entire portfolio. A company selling one product may have difficulty gaining acceptance from a client, if that means the client would have to compromise a relationship with the sellers of other products, Zullo explains. “Because of that, we immediately understood that we needed to build a relationship with an existing chemical distributor to save us the need to build an independent sales channel.” For Greenyug, the significance of the offtake deal is simple. Working with the third largest chemical distributor in the world, Greenyug’s small team can now focus on its future: using ethanol as an intermediate building block to produce a product that sells for $1,300 to $3,000 per ton from its first plant and eventually expanding its operations to other facilities.
Selling the Green Premium
As the largest petrochemical refiner in Latin America, Brazilian-based Braskem is uniquely positioned to produce an ethanolbased chemical. Because of the country’s support and massive volumes of sugarcanebased ethanol, Braskem is shipping a 100 percent green plastic product across the world—and even into space. Its green poly-
ETHANOL IN SPACE: At the International Space Station, Braskem’s trademarked Green PE product was used to 3-D print a wrench and other products. PHOTO: BRASKEM
ethylene is used in packaging, plastic bags and a 3-D printer designed and used with Braskem’s ethanol-based green polyethylene on the International Space Station. Research on its trademarked green polyethylene began in 2007. By 2010, production operations started at a 200,000 ton-per-year sugarcane ethanol facility in Triunfo, Brazil, using dehydration and a catalysis-based process to produce the biobased chemical. In 2011, the product was certified as 99 percent renewable and today it is marketed across the globe. “We have a sustainability platform that is comprised of three pillars,” says Cinthia Vargas, director of communications for Braskem. “One of them is to make our processes as green as we possibly can. Right now, [Green PE] is our one product that offers a different raw material for our clients and that helps us build a larger narrative on sustainability.” Joe Jankowski, commercial manager in charge of selling the green polyethylene (PE) product, says sales today are robust and growing. “Our clients are looking more at their own footprint and the companies they buy product from,” he says. The product can be used as a drop-in replacement for fossil-based ethylenes. And, as a sign of the market’s size, Jankowski says there is a major need for the product no matter what feedstock is used to pro-
duce it. Braskem has a fossil-based polyethylene production facility in Mexico, and another constructed in Texas that is soon to be inaugurated. Although Jankowski is uncertain if ethanol will be used in greater quantities to produce ethylene in the future, he believes sentiment from his clients will persuade Braskem to utilize more ethanol. The current Green PE is sold at a premium to its fossil-equivalents offered by Braskem, a variable of the product that, unlike Zullo, doesn’t bother Jankowski or the Braskem team. Braskem’s Green PE story is becoming more powerful among major clients around the world, Jankowski says, evidenced by rising sales and client sentiment. “I do love the fact that [Green PE] is a positive story. It is cutting-edge from our company’s offering,” he says of his ability to sell the product to production facilities and plastic-focused end-users. “And, it is indicative of how we want to be positioned in the future.” Author: Luke Geiver BBI International Staff Editor email@example.com 701-738-4944
MAY 2017 | Ethanol Producer Magazine | 45
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STILL NEVER SATISFIED
Intersecting Trends of Oil and Ethanol
Oil industry consultants discuss the impact of shale oil production growth and other trends on the ethanol industry. By Patrick C. Miller
Is the growth in shale oil production a potential boost for ethanol? The theory goes that because the light crude produced from fracked shale produces lower-octane gasoline, greater oil production from shale will translate into an increased demand for ethanol as an octane booster. However, the idea that a flood of sweet, light crude entering the market would result in an increased demand for ethanol has been around for more than two years and, thus far, remains a theory. “Those crudes from what they call light, tight oils from shale formations do contain a very poor octane gasoline material,” says Dave Hirshfeld, co-founder and president of MathPro Inc. in Washington, D.C. “That had the effect of forcing refiners to install processes to upgrade the octane of those fractions or to sell the lightest part of it into the natural gas liquids market at a pretty stiff discount just to get rid of it.” Hirshfeld specializes in analyzing refining economics, technologies and related areas. MathPro’s range of clients is diverse and includes oil companies, ethanol companies, state and federal agencies, government labs, automobile manufacturers and trade associations in both renewable and fossil energy.
48 | Ethanol Producer Magazine | MAY 2017
MAY 2017 | Ethanol Producer Magazine | 49
As Hirshfeld explains, U.S. refiners took an economic hit from the increased production of sweet, light crude from shale, but quickly adapted, as did the market. “They can accommodate these things at a cost—they can overcome these challenges,” he says. “Since the end of 2015, when the ban on crude oil exports was lifted and the price of crude had begun to decline, those
50 | Ethanol Producer Magazine | MAY 2017
two factors together reduced the amount of light tight oil that’s been going into U.S. refineries.” According to the U.S. Energy Information Administration, after the U.S. crude export ban ended, the U.S. in 2016 exported oil to 26 different countries, compared to 10 countries in 2015. In 2015, 92 percent of U.S. crude exports went to Canada, which
was exempt from the restrictions. After restrictions were lifted, Canada remained the top export destination but received only 58 percent of U.S. crude exports in 2016. The EIA also notes that in 2016, U.S. crude oil exports averaged 520,000 barrels per day, 55,000 barrels (12 percent) above the 2015 level, despite a decline in domestic crude production brought on by lower oil prices. More can be made by selling shale oil in the export market than by selling the crude to Gulf Coast refineries, he says, “Because a number of overseas markets don’t have the demand for gasoline that we have in the U.S.,” he says, referring to the low-octane gasoline refined from shale oil. “So that hurdle is pretty much behind the refining industry.” Hirshfeld notes that to outsiders, the refinery industry and the importing and exporting of oil and refined products can be confusing. From an economic standpoint, he relates, the international markets for crude and refined products have great flexibility in placing those products where they best belong. Some international refiners, for instance, prefer light sweet crudes more than U.S. refiners. “They have great capacity for doing that—which they’ll deny—but they do,” Hirshfeld says. “We’re still importing oil, but we’re importing half of what we did before. We’re still importing gasoline, but we’re exporting more. We’re still importing some into PADD 1, but we’re exporting twice as much out of PADD 3.” The petroleum administration district PADD 1 includes the East Coast states from Maine to Florida. PADD 3 covers the Gulf Coast from New Mexico to Alabama. “It’s a complicated market that defies human understanding, but it does require some engagement and experience,” he adds. “People want to snap their fingers and say ‘We can replace all that.’ The increase in domestic crude has been a huge, huge boon to the producers, to the refiners and the public, but not necessarily in all the obvious ways.”
The increased investment in U.S. shale oil will be of some benefit to the ethanol industry, though not a huge driving force. â€˜A bigger tailwind for ethanol would be a potential future requirement for high-octane gasoline to meet the higher fuel efficiency engines that might be required.â€™ - Auers
Benefits for Ethanol
John Auers, executive vice president of Turner Mason & Co.â€”a Dallas-based firm that provides engineering and management consulting services for the petroleum and petrochemical industriesâ€”believes the increased investment in U.S. shale oil will be of some benefit to the ethanol industry. â€œItâ€™s not a huge driving force, but it provides a little bit of tailwind,â€? says Auers, who leads the firmâ€™s activities in forecasting and outlook publications. â€œA bigger tailwind for ethanol would be a potential future requirement for high-octane gasoline to meet the higher fuel efficiency engines that might be required.â€? Both Auers and Hirshfeld agree that the ethanol industryâ€™s future will likely be affected more by what policymakers in Washington, D.C., decide than by trends in crude production or refinery output, although they also believe market forces will play a role. â€œThe Trump administration looks like it might rescind the approval of the 2022â€™25 stringent CAFE standards that would drive the high-octane fuel requirements,â€? Auers notes. â€œThe administration is going to do its own review about what should be done for the â€™22-â€™25 model years. Thatâ€™s potentially the biggest driving force for the need for higher octane gasoline and would provide an opening for ethanol.â€? Until the administrationâ€”through the U.S. EPA and Department of Transportationâ€”decides within the next year or so, Auers says automakers, the ethanol industry and the oil industry are in a state of limbo. â€œThe Trump administration might go
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MAY 2017 | Ethanol Producer Magazine | 51
LOW-OCTANE SHALE OIL: U.S. crude from shale formations is light, sweet and low in octane for gasoline. Requiring additional processing at U.S. refineries, the lifting of the export ban has diverted those supplies overseas, dampening a potential boost for ethanol.
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52 | Ethanol Producer Magazine | MAY 2017
for something in between,” he says. “They could reduce the standards. If that happens and we don’t have a requirement for highoctane gasoline, that’s a negative for ethanol. The more stringent the fuel efficiency standards, the more you require high-compression engines that need higher octane fuel. That provides an opening for ethanol.” In addition, there are questions about the Renewable Fuel Standard—a longtime target of the oil industry. However, Auers points out that Trump was friendly toward the ethanol industry when he campaigned in Iowa. In addition, his vice president, Mike Pence of Indiana, is also pro-ethanol. “I tend to think that not much is going to happen on the Renewable Fuel Standard,” Auers says. “The 15 billion gallons of ethanol, that’s going to be there. There’s enough political push from the ag industry to keep that in place. I can’t imagine that RFS will be removed. It might become more flexible.” Hirshfeld notes, “In the refinery industry, there are lots of things that will affect the future demand for ethanol, but those things are not going to happen inside refineries—except in response to other drivers.” He listed the most important factors impacting future ethanol demand. The first
is the demand for finished gasoline, which is likely to change based on the price of oil. Whatever the CAFE standards become, Hirshfeld says they will influence the vehicle miles traveled by consumers and the mix of cars they buy. “People will obviously be spending less per mile for gasoline and the question is: Will they just drive more?” he asks. “There’s considerable evidence that when gasoline prices go down, the demand does indeed go up.” Hirshfeld notes that EIA’s forecast for gasoline consumption is much different in a high-price scenario than a low-price scenario. “In one case in 2040, the demand with a low oil price is around 8 million barrels a day. With a high oil price, it’s 5 million barrels a day,” he relates. Gasoline demand directly affects ethanol. “Every gallon of gasoline is going to have 10 percent ethanol in it—more gasoline, more ethanol.” Hirshfeld says there will likely be action on the RFS by 2022. “Corn ethanol is capped at 15 billion gallons, which for the moment works out to about 10 percent of gasoline,” he says. “At some point, Congress is going to have to do something about that. They might repeal the act. They might expand the mandate. Whatever they do, it’s going to have a big effect on the ethanol industry.” Changes in the distribution system between the refineries and gasoline retail outlets are another factor to watch, because they could result in greater use of E15, Hirshfeld says. “Very little is being used and the reason is that the distribution system is not set up to handle E10 and E15 BOBs simultaneously,” he explains. “Since E15 has more ethanol than E10 and ethanol has very high octane, the refiner wants the E15 BOB to have lower octane than the E10 BOB. Otherwise, the refiner’s giving away octane at the point of sale. That’s one reason why E15 sales have not been what the ethanol industry had hoped they would be.”
Auers and Hirshfeld agree that international demand for ethanol could grow, but predicting how much is problematic.
“There could be changes for the better or for the worse in ethanol exports, which right now are running unusually high because of Brazil,” Hirshfeld says. “They’ve been diverting sugarcane to make sugar instead of making ethanol. The marketplace down there still needs ethanol. They’ve been importing somewhat more than they usually do from the U.S. That could change one way or the other.” Auers points out that some countries that use lead as an octane booster are moving away from it and there’s a trend toward higher compression engines, which would also increase the demand for ethanol overseas. “At this point, it’s not defined how much of a driving force there is for premium demand internationally, but I think directionally it should grow some,” he says. Hirshfeld allows that even if more stringent CAFE standards are eventually implemented, technical challenges remain. “Some of the octane requirements go beyond what the refiners can realistically deliver with hydrocarbons,” he says. “What midlevel ethanol blends would be authorized by EPA? E20, E25 or E30? One government lab is even looking at E40. These can get you significantly higher octane. If those fuels came into use, they would do great things for ethanol demand.” The auto industry, the ethanol industry, EPA and the EIA are all working on potential solutions to these issues, Hirshfeld notes. “All of those factors are somehow going to coalesce in the next five, 10 or 20 years, and they will shape the demand for ethanol,” he says. “But almost none of those factors are going to happen inside the refinery gate—except as refiners need to respond. What they do will be in response to what happens; it won’t be the driver.” Author: Patrick C. Miller BBI International Staff Writer email@example.com 701-738-4923
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54 Ethanol Producer Producer Magazine Magazine || MAY MAY 2017 2017 54 || Ethanol
With 30 panels—five at a time—at the world’s largest ethanol conference, attendees must pick their spots. Here’s a guide. By Tim Portz and Tom Bryan
With a cache of new ethanol technologies rising against the backdrop of growing markets and brisk regulatory maneuvering, the industry prepares for the 33rd International Fuel Ethanol Workshop & Expo, June 19-22, in Minneapolis. The largest, longest-running ethanol event in the world is again colocated with the National Advanced Biofuels Conference & Expo, bringing not just one, but all advanced
biofuels under one tent for a big summer roundup. The paired events will share an exciting general session June 20—keynoted by Renewable Fuels Association President and CEO Bob Dinneen—before breaking into the equivalent of five tracks featuring 30 panels and 120 speakers at the Minneapolis Convention Center. As always, the FEW will be teeming with ethanol producers. More than a quarter of the show’s 2,000 attendees will be plant employees, executives or directors, making it the top educational and networking forum for plant personnel. True to form, the show will
focus on solutions that improve ethanol production from grain and cellulosic feedstocks. This year’s technical tracks include: (Track 1) Production and Operations; (Track 2) Leadership and Financial Management; (Track 3) Coproducts and Product Diversification; and (Track 4) Infrastructure and Market Development; as well as the National Advanced Biofuels Conference, which includes two panels on cellulosic ethanol from corn fiber. Here’s a look at each of the 30 breakout sessions unfolding at this year’s FEW and National Advanced Biofuels Conference.
MAY 2017 2017 || Ethanol Ethanol Producer Producer Magazine Magazine || 55 MAY
TRACK 1: PRODUCTION AND OPERATIONS 1:30 pm | Tuesday, June 20 How to Get the Most out of the Lab Equipment that is Guiding Your Plantâ€™s Operational Decisions Ethanol plants rely upon the analysis of fermentation samples in their labs to guide production decisions, monitor yeast health and identify fusel compounds that may place a drag on fermentation. The challenge for producers is to ensure that their lab equipment is maintained, optimized and calibrated in such a way that it delivers maximum visibility of the compounds lab managers are most interested in measuring. This panel will examine the opportunity for lab teams to better align their instruments with their unique process nuances and production goals. Speakers: Mike Smith, Novozymes; Jim Mott, Shimadzu Scientific; Caleb Ogden, Lallemand Biofuels & Distilled Spirits; Nathan Anderson, Novozymes.
3:30 pm | Tuesday, June 20 Harnessing the Industryâ€™s Best Science on Yeast Health and the Factors that Impact It to Maximize Yield Ethanol plant yield is tightly correlated to the level of yeast health a plant can not only attain, but also maintain. When yeast cannot access the nutrients they need to thrive and propagate, or are inhibited by bacterial contaminations, fermentation can slow or grind to an altogether profit-sapping halt. This panel will dive into the means available to producers to simultaneously maximize the nutrients available for their yeast populations, supplement those nutrients when necessary and protect yeast populations from bacterial contamination. Speakers: Jenny Forbes, Phibro Ethanol Performance Group; Dale Earls, Novozymes; Dennis Bayrock, Phibro Ethanol Performance Group. 3:30 pm | Tuesday, June 20 Utilizing Strategic Data Capture and Analysis to Improve Production Predictability, Optimize Yield and Grow Plant Profits As the industry approaches the theoretical yield limits for ethanol production, incremental gains are becoming harder and harder to find. Increasing throughput now will require producers to capture, analyze and react to the massive amounts of production data available to them. The presentations that make up this panel promise to offer value to both producers looking to launch a robust data program and those who need to sense check one they have already deployed. Speakers: Rachel Burton, Novozymes; Ben Fuchs, DuPont Industrial Biosci-
ences; Zac Bauer, Emerson Process Management; Brett Baker, ICM Inc. 8:30 am | Wednesday, June 21 Ethanolâ€™s Better Mousetrap: Developing New Yeast Strains as a Means to Increase Plant Yields Because the value of even the smallest of gains delivered by new strains may ultimately be multiplied across billions of gallons of production, a strong effort persists to develop yeasts that yield more ethanol, require fewer nutrients and produce less low-value byproducts. Attendees who make a point of staying abreast of the latest in engineered yeasts will appreciate this annual update from the worldâ€™s leading developers of industrial yeasts and their thinking on the strain characteristics most beneficial for ethanol production. Speakers: Pauline Teunissen, DuPont Industrial Biosciences; Matt Richards, Lallemand Biofuels & Distilled Spirits; Kerry Hollands, DuPont Industrial Biosciences. 8:30 am | Wednesday, June 21 How to Move Your Operation Toward a Proactive Approach to Asset Management and Plant Maintenance In this era of record production, no producer can afford to have production slowed or even idled because of an unplanned outage. This, coupled with the fact that a sizeable number of plants are over a decade old, means that asset management and maintenance programs require the attention of plant management teams and boards. There is a way to proactively manage and complete required cleaning, maintenance and nondestructive testing and still at-
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56 | Ethanol Producer Magazine | MAY 2017
EVENT tain production goals but it requires the kind of strategic planning outlined by the presenters in this panel. Speakers: Erica Montefusco; Green Plains Inc.; Dave Schneider, Novaspect; Bob Garstki, Lechler Inc.; Jay Beckel ERI Solutions Inc. 10:30 am | Wednesday, June 21 The Liquefaction Waypoint: Analytical and Process Options Available to Producers Hoping to Avoid Common Yield Limiters During this Critical Production Step Producers know that effectively cooking their corn flour slurry and making starches more available for enzymes to saccharify them is crucial to achieving their yield goals. This same process step continues to invite process tweaks and enhancements all aimed at greater access to simple sugars for yeast populations during fermentation. This panel will look at both novel thermal and enzymatic process enhancements available to producers who have identified an opportunity for increased yield in their liquefaction/saccharification step. Speakers: Loren Chen, East Tide Science & Technology; Martijn Scheffers, DuPont Industrial Biosciences; Matt Hawkins, Lallemand Biofuels & Distilled Spirits.
10:30 am | Wednesday, June 21 How Data can be Used by Ethanol Producers to Increase Yield, Optimize Required Maintenance, Manage Regulatory Burdens and Identify Top Operators Producers are well-aware of the yield gains available to them using data capture and predictive control approaches. That said, finding the sweet spot where the delivered yield returns and production efficiencies are proportional to the investment to get them is complicated. Producers reluctant to gather and use data more extensively because they fear giving up control of plant operation to some nameless program will appreciate this panelâ€™s focus on process control software as an enhancement to, and not a replacement for, skilled and intuitive human operators. Speakers: Andrea Foglesong, RTP Environmental Associates Inc.; Ed Thomas, Honeywell Process Solutions; Hank Brittain, OPX Control; Anne Chronic, Phibro Ethanol Performance Group. 1:30 pm | Wednesday, June 21 Cost-Effective Strategies Available to Reduce the Risk of Bacterial Contamination at Your Plant Ethanol plants are forever walking the tightrope of creating an operating condition where some micro-organisms survive and thrive while others are kept entirely at bay. Management teams do have multiple options at their disposal including antibiotic and nonantibiotic measures. This panel will feature presentations from purveyors of both, but will also offer a more holistic view of microbial control includ-
ing the implementation of a culture of plant hygiene that seeks to cost-effectively control bacterial outbreaks, regardless of the treatment pathway a plant intends to deploy. Speakers: Dennis Bayrock, Phibro Ethanol Performance Group; Allen Ziegler, Archangel LLC; Tera Stoughtenger, Lallemand Biofuels & Distilled Spirits; Stacey Campbell, BetaTec Hop Products. 1:30 pm | Wednesday, June 21 Engineering and Technological Approaches Available to Plant Teams Looking to Debottleneck Their Facility and Make the Most of the Production Asset They Already Have Most ethanol plants have been operating for a decade or longer and have been working to debottleneck production since the plant was commissioned. As a result, wringing additional yield out of mature plants is becoming more and more difficult. Nevertheless, plant teams that manage to boost throughput with minimal capital expenditures are rewarded with the lowest-cost production increases they could hope to find. This panel will investigate the potential that both engineering audits and new technologies have to get the very last drop of product out of existing plants. Speakers: Neal Jakel, Fluid Quip Process Technologies LLC; George Baskin, Burns & Mc Donnell; Trond Heggenhougen, Whitefox Technologies Ltd.; Mayumi Kiyono, Mitsubishi Chemical Holdings America Inc.
MAY 2017 | Ethanol Producer Magazine | 57
EVENT 3:30 pm | Wednesday, June 21 The Startling New Science on How Biofilms Can Negatively Impact Your Plant and How to Get Them Under Control Ethanol producers have been working to control biofilm formation within their facilities and limit their negative impact on yield since the industry began. With the advent of the Food Safety and Modernization Act, the number of arrows in a management team’s biofilm control quiver has been reduced. Presentations in this panel will outline the best path forward for biofilm control within the context of FSMA regulations, as well as the efficiency gains available to those producers looking to aggressively attack this ongoing production bottleneck. Speakers: Andrew Ledlie, Solenis LLC; Kim Lukanich, U.S. Water; Greg Hoffpauir, GE Water & Process Technologies; Wayne Mattsfield, Phibro Ethanol Performance Group.
TRACK 2: LEADERSHIP AND FINANCIAL MANAGEMENT
1:30 pm | Tuesday, June 20 Training Strategies that Ask and Receive More from Ethanol Plant Employees A well-trained workforce is an ethanol plant’s top asset, but some producers still struggle to produce cultures that reward learning and demand uniformity. Find out how to tap into progressive training systems that yield plantwide benefits, from lab to load out. Speakers on this panel will explain procedural development—grafting personnel with a deep knowledge of how and why things are done—how training and reliability strategies can be linked, and why sharing select financial information with employees can boost plant profitability. Speakers: Wade Rummel, Lallemand Biofuels & Distilled Spirits; Jason Shannon, GP Strategies Corp.; Ron Faciane, K-Coe Isom. 3:30 pm |Tuesday, June 20 Spending Money to Make Money: Finding Capital and Gauging the Payback on New Technologies Today’s uncertain regulatory landscape shrouds the usual bullet list of items ethanol producers consider when evaluating ROI on new technologies. Big capital expenditure decisions have always been—and still are—based on cash flows, lending, permitting and payback. But, for some, perceived regulatory impermanence now clouds the numbers. On this panel, speakers will explain how to build a great capital projects team, evaluate the short- and long-term impacts of plant upgrades within the confines of regulatory permitting, and move projects forward on time and on budget. Speakers: Matt Haakenstad, U.S. Energy Services Inc.; Justin Mentele, K-Coe Isom;
Adam Anderson, ICM Inc.; Ron Pagel, Power Engineers. 8:30 am | Wednesday, June 21 How Successful Ethanol Plant Boards Predict and Adjust for the Future Ethanol plant board members are often asked the impossible: to predict the future. Reacting in real time is no longer ample. Directors have to anticipate almost everything: regulations, tax reform, markets and trade. Making accurate predictions requires organizational intelligence. Acting on predictions requires agility. In this session, you’ll learn how to leverage new ways of thinking about management, positioning your business for success as you adopt better strategies to buy, produce, sell, hire and lead. Panelists will discuss the merits of proactive management, great leadership, and improved financial reporting. Speakers: Donna Funk, KCoe Isom; Scott McDermott, Ascendant Partners Inc.; Connie Lindstrom, Christianson & Associates PLLP. 10:30 am | Wednesday, June 21 Preparing for New and Indefinite Policy, Regulatory and Tax Code Modifications As the Trump administration makes good on its pledge to reverse certain Obama-era environmental regulations, the ethanol industry is scrambling to keep up and influence outcomes where it can. This panel will serve as a summary of new and changing federal regulations that affect ethanol plants. Speakers will explain updates to the RFS—the REGS rule, in particular—and the potential impacts of proposed tax code changes. Attendees will also be briefed on the EPA’s tightened sulfur limits, which will
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EVENT require producers to maintain tighter control of sulfur in their fuel. Speakers: Jessica Karras-Bailey, RTP Environmental Associates Inc.; Donna Funk, K-Coe Isom; Monty McCoy, U.S. Water; Ernie Pollitzer, Clean Energy Consultants. 1:30 pm | Wednesday, June 21 Protecting Ethanol Plants From Incidents Before and After They Occur While ethanol plants are safe workplaces, no industrial facility is immune to the risk of incidents, including employee injury, property damage, fire and accidental environmental release. This session will include a detailed review of a decade of data on ethanol plant incidents, providing context for the associated risks of mishaps. Speakers will also discuss tank fire mitigation solutions, how ethanol plants can build money-saving relationships with their insurance providers, and effective plans for managing media relations, if and when spills, accidents and emergencies happen. Speakers: Nathan VanderGriend, ERI Solutions Inc.; Erica Montefusco, Green Plains Inc.; Henry Persson, SP Fire Technology; Daniel Deboer, ERI Solutions Inc. 3:30 pm | Wednesday, June 21 Expanding Your Risk Management Playlist with New and Alternative Tracks Beyond managing margins on inputs and outputs, today’s ethanol producers must incorporate all manner of potential regulatory exposures into their book of risk stratagem. On this panel, speakers will explain how and why specific risk measures are taken, while others are avoided, to stay profitable and secure new financial opportunities when they arise. Panelists will also discuss interrelated policy, trade and
commodity dynamics that could impact future crush margins, as well as ancillary risk management activities like safeguarding ethanol plants and equipping them with solar as a green energy hedge. Speakers: Chip Whalen, Commodity & Ingredient Hedging LLC; Will Babler, Atten Babler Risk Management LLC; Jay Beckel, ERI Solutions; Nicholas Franco, U.S. Energy Services Inc.
TRACK 3: COPRODUCTS AND PRODUCT DIVERSIFICATION 1:30 pm | Tuesday, June 20 Each to Their Own: The Argument for Isolating Individual Components of a Corn Kernel to Increase Ethanol and Coproduct Yield As the ethanol industry continues to mature, increasing attention is being paid to maximizing the revenue potential of inbound corn. Ethanol plants have moved well-beyond simply producing ethanol and a distillers feed coproduct and the drive to increase the overall value of the ethanol product suite continues. This panel will look at the impact component separation technologies have on plant yield and feed co-
product quality all while keeping an eye on the requirements for their operation laid out in the Food Safety Modernization Act. Speakers: Michael Reiger, Cereal Process Technologies; Jeremy Javers, ICM Inc.; George Bolton, Harvesting Technology LLC; Jesse Spooner, ICM Inc. 8:30 am | Wednesday, June 21 The Continuing Innovation in Corn Oil Extraction and Conversion and How to Make the Most of It at Your Plant While the practice of corn-oil extraction has become common across the ethanol industry, each plant’s extraction efficiency remains unique. This panel will begin with an analysis of the factors that impact corn oil extraction rates before moving on to an investigation of the technologies and process approaches available to move producers beyond their current rate of capture. The discussion will conclude with a close look at a bolt-on technology available for producers looking to put these increased corn oil streams to work while also diversifying their final product mix. Speakers: Speakers: Min Wang, Croda Inc.; Jennifer Aurandt, Valicor Inc.; Virginia Klausmeier, Sylvatex Inc. 1:30 pm | Wednesday, June 21 Beyond Distillers I: A Look at the Innovative Ways Ethanol's Number One Coproduct is Being Reimagined to Deliver More Overall Value Producers not satisfied with the market conditions or price trends for distillers grains will appreciate this panel’s focus on production approaches that promise to open markets that so far have eluded the industry. In particular, presentations will draw a dotted line between
MAY 2017 | Ethanol Producer Magazine | 59
EVENT the protein that already exists in plant coproduct streams and the sizeable aquaculture market. In another presentation, a field study examining the possibility of using distillers coproduct streams as an alternative source of phosphorous fertilizer will be presented. Speakers: Maura Warner, KnipBio; Jasper Teboh, North Dakota State University; Peter Williams, Fluid Quip Process Technologies LLC; Bryan Tracy, White Dog Labs. 3:30 pm | Wednesday, June 21 Pathways Available to Producers Looking to Get Their Coproduct Program Out of the Commodity Trap and Into Value-Add Ethanol producers manufacture over 40 million tons of distillers grains per year. The associated revenues from this product often propel plant balance sheets into the black. Still, DDGS has become a globally traded commodity that has faced recent downward price pressure. For that reason, the science of producing distillers grains rich in the compounds that contribute significantly to animal health is advancing rapidly. This panel will explore the pathways available to producers today, as well as those still under development, that hold exciting promise. Speakers: Ryan Mass, ICM Inc.; Douglas
60 | Ethanol Producer Magazine | MAY 2017
Tiffany, University of Minnesota; Scott Kohl, White Energy; Charles Hurburgh, Iowa State University.
TRACK 4: INFRASTRUCTURE & MARKETS 1:30 pm | Tuesday, June 20 Home Cooking: Why the Fuel Market in Your Own Backyard Deserves Your Attention and Effort Whether through direct selling or working with local retailers, producers are showing an increasing appetite to interact more directly with local fuel buyers. This how-to panel will walk attendees through the process with a focus on business planning, regulatory challenges and the
different business models currently being pursued by other producers. Using a recently released Renewable Fuels Association guidebook as its principal source, this panel is a must for plant management teams considering a move into local markets. Speakers: Robert White, Renewable Fuels Association; additional speakers TBA. 3:30 pm | Tuesday, June 20 Game Changers: Disrupting the Establishment as a Means to Move Higher Blends of Ethanol This panel promises to turn the conventional thinking about expanding the market opportunity for ethanol on its head. Panelists will ask if it is time to abandon the thinking that the industry growth from here forward will advance slowly and incrementally, or if a different approach might once again usher in a new era of rapid market expansion. The discussion will focus on how the industry can leverage ethanolâ€™s clean, high-octane values with consumers and auto manufacturers to create the kind of demand that will help the industry grow to the size and scope prescribed in the RFS. Speakers: Trevor Klein, Future Fuels Strategies; Adam Gustafson, Boyden Gray & Associates; Alec Hohnadell, Formula Drift Circuit Racer.
10:30 am | Wednesday, June 21 The Impact of Foreign Markets on U.S. Ethanol Production and the Efforts to Find and Grow New Ones Export markets currently consume less than 10 percent of annual production, but many industry stakeholders see these markets as the best opportunity for near-term growth. Establishing an interest for ethanol in these new destinations requires a thorough understanding of the energy and public health goals of each potential marketplace. This panel will examine where ethanol has already won market share, where the industry is most actively working to win new opportunities and which value propositions are finding the most traction with foreign buyers. Speakers: Jim Miller, Growth Energy; Mike Dwyer, U.S. Grains Council; Fahran Robb, USDA; Sophie Byron, Platts.
3:30 pm | Wednesday, June 21 Strategies to Ensure Domestic and Foreign Fuel Specification Requirements Donâ€™t Limit Marketplace Access for Ethanol The struggle to introduce and grow demand for E15 serves as a perfect case study for the drag that fuel specifications and ill-conceived regulation can place on market growth. In the absence of an RVP waiver, E15 remains a seasonal fuel that has retailers hesitant to introduce it to their customers. Similar and even more vexing challenges face the industry as it seeks to open and expand new export markets. International fuel specifications matter and producers are wise to understand the subtle differences in specifications and testing while folding them into their QA protocols. Speakers: Shon Van Hulzen, Poet; Kristy Moore, KMoore Consulting; Chris Bliley, Growth Energy.
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EVENT piece of the puzzle is already in place. What remains are cost-effective approaches to isolate this fiber, saccharify its bound up carbohydrates and ferment them into ethanol. This panel will kick off a two-session exploration of the cellulosic feedstock everyone is talking about. Speakers: Michael Franko, Fluid Quip Process Technologies LLC; James Ramm, EcoEngineers; Marina Chow, DuPont Industrial Biosciences.
TRACK 5: NATIONAL ADVANCED BIOFUELS CONFERENCE & EXPO 1:30 pm | Tuesday, June 20 The Future is Fiber I: The Argument for Converting Material Our Plants Already Handle into the Cellulosic Gallons the RFS is Calling For It is hard to argue against corn fiber being the most logical feedstock for a practicable, near-term cellulosic ethanol production buildout. This material is already handled at significant scale and delivered to ethanol plant gates on a daily basis. The feedstock supply chain
3:30 pm | Tuesday, June 20 The Future is Fiber II: Why Corn Fiber is the Best Platform Upon Which to Build the Industry’s Next Great Era In this second session on corn fiber, the discussion will move on to conversion approaches for this feedstock that couldn’t be more compositionally different than corn starch. The sugars in corn fiber are tightly bound up and the developers of fiber conversion technologies will present their approaches to making these sugars more available to the waiting yeast colonies downstream. The race to crack the fiber code is on and this session will give producers a front row seat to the home stretch. Speakers: Marina Chow, DuPont Industrial Biosciences; Mark Yancey, D3MAX LLC; Kurt Creamer, Novozymes North America.
8:30 am | Wednesday, June 21 The Compelling Argument for Carbon Reduction or Capture Strategies at Ethanol or Biodiesel Plants Markets that reward low-carbon fuels are already here and forecast to grow worldwide as countries work to drive down the carbon intensity of their economies. Conventional biofuels already offer a lower carbon profile when compared to their fossil fuel equivalents, but technologies do exist to substantially increase those reductions. This panel will look closely at carbon capture or reduction approaches available now and under development, while also asking whether existing marketplace premiums are able to justify their cost. Speakers: Brendan Jordan, Great Plains Institute; Sai Gollakota, U.S. DOE; Daniel Sanchez, Carnegie Institution for Science; Troy Shoen, Renewable Energy Group. 10:30 am | Wednesday, June 21 Examining the Advanced Biofuels Market Through the Lens of RIN Production and RIN Markets The production of advanced biofuels RINs and the marketplace for those RINs is a crucial piece of the economics of any advanced
Your plant is unique. Your treatment options should be too. WestAgro releases DeLasan CMT TM a patent pending process treatment for corn mash used for fermentationat at fuel and beverage ethanol plants. DeLasan CMT is a leading technology that is best suited for control of organic acids in your fermentation process. The unigue product formulation, low cost, high concentration of actives, and patent pending application make DeLasan CMT unique among other fermentation treatments. Additional benefits of our DeLasan CMT program can include: • Cost reduction in your organic acid control program • Does not contribute inorganic salts • Breaks down easily into food ingredients • Improves your ethanol production • No pre-mixing required • Recognized as safe for grains • Meets the new FSMA requirements • Eliminates your need for anti-biotics
Contact your West Agro representative for more
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biofuel production venture. Presenters in this panel will explore the relationship between RIN prices, volumetric production requirements and RIN waivers, and what it means for producers considering an advanced biofuel investment. This panel is a must for any producer looking to bring clarity to their return-on-investment calculations for efficient production or advanced biofuel investments. Speakers: Larry Schafer, Playmaker Strategies LLC; Ashley Player, Weaver and Tidwell LLP; Lily Wachter, Edeniq Inc. 1:30 pm | Wednesday, June 21 Innovations in Biodiesel Processing, Quality Testing and Products In the cutting-edge world of biomassbased diesel technology and processing, new industrial techniques are continuously developing to keep up with demand for lower-cost biodiesel production, tighter quality specs, and broader options in biofuels and chemicals. This panel will feature several experts in the field who will cover the spectrum of this growing industryâ€™s most recent developments, including a new approach to phase separation, testing as related to improving consistency of fuel quality and performance, novel products development, and an emerging renewable diesel process. Speakers:
Kurt Holecek, Energia Tech; Richard Heiden, R.W. Heiden Associates LLC; Atul Deshmane, Whole Energy Fuels Corp.; Bernadette Burkus, Axens. 3:30 pm | Wednesday, June 21 Imagining Your Plantâ€™s Future in Advanced Biofuels Production and the Technologies Available Now to Get You There Established biofuel production facilities with a history of success and healthy cash flows offer a compelling opportunity for the developers of bolt-on technologies. Similarly, bolt-on technologies offer existing facilities a capitallight pathway to new markets that may provide a healthier margin than the markets they are selling into now. Representatives of emerging, bolt-on technologies working to prove the economic viability of their processes will present their business cases to producers ready to make advanced biofuels production a piece of their operating strategy. Speakers: Mark Fashian, Biodiesel Analytical Solutions; Neal Jakel, Fluid Quip Process Technologies LLC; Jayant Godbole, Praj Industries Ltd.; James Kacmar, Edeniq.
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DCO EXTRACTION OPTIMIZATION ADAPTS TO CHANGING PROPERTIES OF STILLAGE
Understanding of the variables impacting corn oil extraction is needed as the ethanol industry adopts new process technologies. By Jennifer Aurandt
Centrifugal separation of corn oil from stillage is the accepted method for distillers corn oil (DCO) recovery throughout the ethanol industry. While plant
operating parameters influence a plant’s oil yield and performance, the efficiency is
fundamentally governed by a simple Nobel Prize-winning formula: Stokes’ Law. Understanding how normal process variables in the plant impact the factors of this equation ensures oil extraction efficiency. Applied to DCO separation, Stoke’s Law outlines the variables that can be modified to increase separation:
• Increase the droplet size of the oil. Nonshear retention time allows oil droplets to coalesce, form larger droplets and rise. • Increase the settling force or g-force. The two primary centrifuge technologies vary in g-force from 3,000 for a decanter centrifuge to 8,000 for a high-speed disc stack centrifuge. Most machines are run-
CONTRIBUTION: The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).
64 | Ethanol Producer Magazine | MAY 2017
ning at their design maximum and cannot be increased. • Change the density of the liquid. The density in the suspended particles of the stillage can be modified through mechanical, enzymatic or chemical forces. • Decrease the dynamic viscosity. Variables affecting viscosity—dissolved solids including residual sugars, suspended solids, total solids or temperature—can be manipulated to increase separation efficiency. This factor is the easiest to manipulate within the ethanol process.
Corn oil extraction started around 2005 with a simple observation regarding the corn oil present at the top of whole and thin stillage tanks. The oil presented a potential problem because it could build up in the tank or, worse yet, find its way into the evaporators and cause an imbalance in steam usage. At the time, new coproducts were being sought for the animal feed market, indicating a market for corn oil, if plants could isolate it. A number of players in the marketplace, such as ICM, GreenShift and Valicor, developed technologies to separate DCO from stillage. Two technologies emerged, both based upon the same separation principal of centrifugation: the decanter centrifuge and the high-speed disc stack centrifuge. Centrifugation g seconds is based upon three principles: residence time, g-force and surface area. In decanter centrifuge technology, the stillage is exposed to lower g-force for a longer residence time and lower surface area. High-speed disc stack centrifuges are much smaller and accomplish equivalent results by increasing the g-force and the surface area of the machine. The maximum yield in the early years was 0.4 to 0.5 pounds per bushel, which paid for the extraction technology in less than six months. The DCO feed market expanded through trial and error into biodiesel and poultry feeding. Biodiesel facilities modified their process used for soy oil to include
acid esterification to convert the high level of free fatty acids in DCO to methyl esters. Biodiesel producers also worked to reduce gums, waxes and color in DCObased biodiesel to make a final Increase separation by modifying variables: product compaIncrease the droplet size of the oil. (d2) rable to soy-based Increase the settling force or g-force. (rω2) biodiesel. Besides the generally lowChange the density of the liquid. (ρω-ρo ) er price, the new Decrease the dynamic viscosity. ( ) DCO feedstock scored lower on carbon intensity in life-cycle modeling, earning it financially at- to 190 Fahrenheit, resulting in increased tractive carbon credits. The two financial in- oil yields between 0.6 and 0.8 pounds per centives allowed for investments in the pro- bushel. ICM plant designs and others cess modifications needed to accommodate opted for increased residence time in the the different qualities of DCO. The poultry centrifuge to optimize corn oil extraction, market expanded as feed producers started adding separation equipment in the middle to appreciate the red color in corn oil and of the evaporator train for plants running the benefits of the lutein and zeaxanthin higher syrup solids. For plant design with content that enhance the yellow color of lower syrup solids, moving the extraction broiler products and egg yolks, while pro- unit to syrup has been a successful option to decrease the flow rate and increase resividing a high-energy fat source. As the market adapted and extraction dence time. Employing hold technology technology became commonplace, the de- also increases quiescence time, which allows mand for enhanced corn oil extraction effi- for coalescence of oil droplets and more efciency increased and chemical additives were ficient separation. introduced. Emulsifiers such as Polysorbate80 and others were added to stillage to increase the rate of oil droplet coalescence New Technology and to liberate oil contained on the surfaces Challenges New technologies seeking process of other particles and compounds. Ethanol plants and technology providers also began gains through mechanical and chemical modifying the placement of centrifuges and means influence the properties of stillage in solids loading. DeltaT plant designs, for ex- the backend of the plant, affecting particle ample, did not have the option of moving size and the solubility of protein and fiber, to the middle of the evaporation systems as well as introducing biochemical changes to lower solids loading. Vacuum distillation to the structure of the suspended particles. Particle size affects separation by inand increased suspended solids in the stillage, however, made them a prime candidate creasing the quantity of particles driven to for improved extraction through holding the thin stillage through the decanters. The material at elevated temperatures of 180 hydrophobic nature of DCO tends to bind
MAY 2017 | Ethanol Producer Magazine | 65
ADAPTING TO CHANGE: Extraction technology provider Valicor has worked with clients to test modifications to enhance oil yield, such as adjusting recovery locations. PHOTO: VALICOR
66 | Ethanol Producer Magazine | MAY 2017
oil to the surface area of particles and thus the DCO gets pulled into the thin stillage and is available for extraction. However, an increase in small particles also increases the viscosity of the stillage at similar solids content, and is the opposite of what is needed for efficient oil extraction, according to Stokesâ€™ Law. Some new technologies also increase dissolved solids high in short chains of protein and fiber in the thin stillage. The polar regions of these compounds bind to the polar region of fatty acids, and more specifically phospholipids, to create a strong emulsion. The ionic forces and hydrogen bonding in tightly bound oil emulsions require additional energy for separation when compared to the energy needed to separate free oil. When cleaving or breaking down the chemical structure of fiber or protein, the three-dimensional structure is opened up to allow bound oil to be freed from the complex protein and fiber structures. This oil is then more easily separated because it can coalesce with free oil droplets. The suspended solids matrix after oil extraction is more open as well and behaves very differently during evaporation than a noncleaved solids matrix. The rheology (flow property) changes, based upon the binding of free water and the reaction chemistry that occurs with more free reactive groups. As new process technologies increase the amount of oil driven to the thin stillage in plants, the centrifuge technology on the back end must accommodate the changes in rheology. Valicor is correlating process changes to the behavior of stillage viscosity through a benchmarking program with a network of ethanol plants. Oil extraction efficiency data is collected and collated by plant design and operation parameters and then statistically analyzed to understand the effects of process changes on the chemistry and physics of oil separation. Through understanding the relationship between stillage chemistry and the impacts on rheology, we have modified our centrifugation technology to efficiently
extract more corn oil. For example, as the particle size decreased in stillage, the separation space between the light and heavy phase decreased and the centrifuge was modified to provide more surface area for separation with a shorter path length. In addition, selective removal of particles before the centrifuge, which has been part of Valicor technology since its first installation, has been optimized to account for changes in stillage to remove nonoil-laden particles from the process. There also is an increased chance for fouling and clogging within the system due to dissolved solids and small particles. Therefore, the particle removal and washing process has also changed to accommodate the change in solid type and size. The behavior of the particles in the evaporator has changed due to all these process changes, resulting in significant viscosity changes, which can be mitigated through adaptive technologies. It has become evident through the years that as the ethanol industry has matured, each plant has adopted different strategies for enhancing ethanol production and corn oil yield. Through continued statistical analysis of process parameters and stillage characteristics from over 40 ethanol plants with varying plant designs, Valicor has identified key process parameters and developed analytical tools to understand factors affecting corn oil extraction efficiency. It is important to understand the efficiency of extraction throughout unit operations and not just the pounds-per-bushel ranking compared to other plants to reveal the most accurate insight into oil yield optimization. In-depth analysis of process parameters at each plant will ensure optimal corn oil extraction efficiencyâ€”the better metric for corn oil extraction.
CLOSE UP: Microscopic analysis of the coalescence of oil droplets is helpful in evaluating the impact of process changes on stillage properties. PHOTO: VALICOR
Author: Jennifer Aurandt, PhD R&D Program Manager, Valicor email@example.com 734-253-2908
MAY 2017 | Ethanol Producer Magazine | 67
EVALUATING ALTERNATIVE DIVERSIFICATION OPTIONS Ethanol plants need to go beyond calculating return on investment to consider risks and net present value when considering diversification strategies. By Rob Sauer
It still makes me laugh, since I first heard it in that large auditorium for Econ 101 at the U (that’s Iowa State University): excess profits. In business, there is no such thing, right? Maybe that’s true within the pages of the economics textbook, but in practice, we know better (see Bill Gates or Mark Zuckerberg).
How do you attain excess profits? You invest in a good thing: your time, talents and finances. While surveying the current ethanol landscape, there are numerous avenues available to pitch a road to riches. Let’s get started on a plan for evaluating those investment options.
There is a documented "co-integrating" relationship between ethanol and corn prices,
outlined in a paper from University of Illinois economists Mallory, Irwin and Hays titled “How market efficiency and theory of storage link corn and ethanol markets.” The paper shows the relationship between ethanol and corn prices tends to revert to levels implied by an equilibrium long-run level of ethanol production profitability. If the ethanol price is too high relative to corn prices, then either the ethanol price must fall or the corn price must rise. In any one episode, it can be difficult to
CONTRIBUTION: The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).
68 | Ethanol Producer Magazine | MAY 2017
DIVERSIFICATION identify which price will bear the brunt of the adjustment, but history shows that such an adjustment is the norm. This is not the recipe for excess profits, particularly in well-established commodity markets where brutal price adjustments are tales of legend. But, it is relevant for the myriad investment options that can increase ethanol production at your plant. Although a smart financial manager will say it makes sense to increase output while keeping fixed costs contained, do not ignore the marketplace. If we have learned anything as an industry, it is that 100 plants all oversupplying demand leads to zeroâ€”or even negativeâ€”profits for all.
Diversification and Price Correlations
Diversification refers to the expansion into another product line or market. "Don't put all your eggs in one basket" is the aphorism. Dropping the basket will break all the eggs. Placing each egg in a different basket is more diversified. There is more risk of losing one egg, but less risk of losing all of them. By diversifying, one loses the chance of having invested solely in the single asset that comes out best, but one also avoids having invested solely in the asset that comes out worst. That is the role of diversification: It narrows or lessens the extreme ranges of possible outcomes. Price correlations can be used to evaluate the level of diversification of various products. A correlation coefficient of 1 indicates products highly correlated to act similarly, while a correlation coefficient of minus 1 indicates the products act in mirrored opposition to each other. In the real world, it is difficult to find reliable negative correlations. Generally, one does well to get close to 0, which means that the prices act independently of each other. The accompanying graphs illustrate this relationship of corn oil and soybean meal prices when examined relative to the prices of ethanol. The illustrated correlations of 0.14 and 0.15 create price activity drastically apart from the behavior of baseline ethanol. Today, most companiesâ€™ ethanol sales represent anywhere from 75 to 85 percent of total revenue. That is a very high concentration. In 2007, corn oil was introduced in the industry. This diversified coproduct with a correlation of 0.14 was a homerun for every plant that installed it. This has helped to lessen reliance on ethanol alone, but still amounts to only about 2 percent of revenue. Having been in several ethanol company board rooms, I have seen for myself the hard-
ship that a single product production environment creates when margins squeeze or even go negative. A single word describes it best: powerless. Wet corn milling plants are great examples of diversification for the dry grind ethanol industry. These plants can produce many different products through a very flexible production system. The blend of products produced can be changed daily based on the product returns for each product for that time frame. There are many engineered processes coming to the market to provide this kind of flexibility to the dry grind platform. In addition, there are signs that this can be achieved at dry grind plants for a fraction of the investment capital deployed at wet mills. The first plants to invest in corn oil were certainly gaining excess profits until the rest of the industry caught up. Is there another corn oil type product out there? If it comes along will you be an early adopter? Or will you cautiously wait until it is 100 percent proven?
Helpful Investment Tools
There are investment tools available to help navigate these various product and investment options. Many plants analyze payback to determine the financial merits of a project. This method has advantages in terms of simplicity, but does not provide a full picture for projects over longer time frames with longer paybacks. More sophisticated projects require analysis beyond simple investment payback calculations. Net present value models are terrific tools to evaluate large multiyear investment projects. These larger projects can require significant investment but can also provide large cash flows in the future. Net present value models are also ideal tools to benchmark and evaluate projects against one another. Potential projects also need to be evaluated for operational and market risks. When assessing risk, the required return can be adjusted up or down, depending on the perceived level of risk within the project. Higher risk equals a MAY 2017 | Ethanol Producer Magazine | 69
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higher required return. This can help in evaluating two separate projects with vastly different risk profiles. We executed our own case study to compare two viable investment alternatives that could be available to most any ethanol plant: • Investment in an add-on biodiesel refinery presenting a second fuel product. • Investment in processing technology resulting in an enhanced, high-protein feed coproduct. For each project, we assessed risks, determined capital funds, and estimated the cash generated from the investment once installed. The summary results are displayed in the accompanying table. The high-protein product was perceived to be twice as risky as the biodiesel project due to both internal operational and external market challenges. The required return was then doubled from 9 percent for the biodiesel project to 18 percent for the high-protein distillers grains. Despite this higher hurdle, the returns expected for the high-protein DDG led to a higher net present value when compared to the biodiesel product. In addition, the high-protein DDG is a more diversified product with a correlation coefficient of 0.15 versus 0.28 for biodiesel. Note that soybean meal—a similar high-protein feed—was used as a proxy for high-protein DDG, for which there is not an established market. Correlation is rarely an exact science. When creating new products, or introducing new products to new markets, one may need to use proxies of existing products with similar characteristics to complete the correlation. Efficient capital deployment can create and drive value, creating coveted excess profits. Adding products to an operation with low correlations to the existing product mix can reduce earnings volatility, smooth out earnings, and improve overall performance. Using a framework of robust net present value modeling and product correlation analyses, different potential capital projects can be compared side-by-side to evaluate the best of use of cash. These capital decision tools are available and, with today’s available technology, are easy to use. This may be the recipe to gain power within the board room, but it must be planned out before the crisis occurs. We are off to find the next breakthrough product that can help reduce our reliance on ethanol and, in turn, the Renewable Fuel Standard. Could it, in fact, be high-protein DDG? Time will tell. Meanwhile, keep searching for those elusive excess profits. Author: Rob Sauer Partner, CFO Systems LLC firstname.lastname@example.org (402)639-4358
70 | Ethanol Producer Magazine | MAY 2017
MAY 2017 | Ethanol Producer Magazine | 71
The Advantage of a Macro Business View
By Donna Funk
The ethanol business is, well, busy. With so much focus on internal operations, it’s easy to get hyper-focused and neglect the general business and economic trends that impact operations. Employment issues, taxes, environmental concerns and political factors form an interconnected web of critical information that serves as advance notice of issues to address. Some areas to watch as we move further into 2017: Employment Concerns: A recent survey by Ethanol Producer Magazine found more than 90 percent of ethanol employees are “satisfied” with their jobs. But don’t assume this level of satisfaction will remain static, especially as millennials roll into the workforce. Keep close tabs on issues like health insurance, wage requirements and safety practices. Healthcare: If you’re not on top of market shifts or options available to you, you may miss opportunities to provide better or more affordable care to your employees. Make regular reviews of plans and insurers and watch legislation. The U.S. House of Representatives released its first bill to repeal and replace the Affordable Care Act in early March that hinted at potentially big future changes for employers. To stay in the loop on ACA repeal and replace, visit www.healthaffairs. org/blog. Overtime Rules: The new overtime rule that was set to go into effect Dec. 1 was held up by an injunction granted by the U.S. District Court of the Eastern District of Texas, but it could still become law. It’s also becoming trendy for states and municipalities to invoke overtime laws, so pay close attention to regulations at those levels. And don’t assume an employee is exempt from overtime without checking www. dol.gov/elaws/whd/flsa/. Minimum Wage: Employers must pay the higher of the federal, state or local minimum wage in the areas where they operate. While the federal minimum wage is up in the air, the trend toward higher wages at the state and local levels bears watching. Even an inadvertent wage and hour violation can be costly. Safety Concerns: In “Corporate Culture: The Key to Safety Performance,” consultant Judith Erickson shows that a positive employee environment is the most important contributor to safety performance. With OSHA civil penalties increasing by 80 percent last year, infractions will be even costlier, not to mention injury, loss of life, lost productivity and remediation. These are important reasons
72 | Ethanol Producer Magazine | MAY 2017
to examine your safety program. The OSHA document for ethanol producers is at http://tinyurl.com/OSHAethanol Taxes: Preparing for potential outcomes from tax reform efforts is critical to your business’ agility. Changes in this area are swift and constant, but there are items to monitor now: • A proposed border adjustment tax could make imported fuel, feedstock and equipment more expensive. • President Trump wants to cut corporate tax rates from a top rate of 35 percent to a rate of 15 percent for all entities, but the House GOP plan is less friendly. Ethanol producers could have decisions to make about whether to change entity structure. • The Trump and House GOP plans offer manufacturers full expensing of capital expenditures. • The Trump plan would set the top capital gains rate at 20 percent, while the House GOP plan would cap it at 16.5 percent. • Elimination of personal exemptions and repeal of the Alternative Minimum Tax also have implications for investors and employees. Other Regulations: Ethanol producers have made tremendous strides in clean air and water conservation, and the Trump Administration promises fewer regulations. Still, there is widespread consumer sentiment that energy production must mitigate its impact on air and water. President Trump criticized Food and Drug Administration food safety regulations. But it is unclear whether that means revision or repeal of the Food Safety Modernization Act. Ethanol producers are already required to comply with certain rules, and there could be more on the way. The name of this column is “Business Matters”—and that’s a great concept to remember as we unravel the future in the ethanol industry. ALL business matters, and how our industry interconnects with government, other businesses and economic factors is crucial to capitalizing on opportunities. We need to keep all these wider business factors in mind if we want to effectively advocate for change and continue to grow.
Author: Donna Funk Principal, K-Coe Isom email@example.com 800-303-3241
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