2017 November Ethanol Producer Magazine by BBI International

NOVEMBER 2017

NEW MARKET

ON THE MAP Progress in Mexico and Whatâ&#x20AC;&#x2122;s Next Page 16

Fuel Marketer Roles Evolve Page 24

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E15 Infrastructure: 'The Bones Are Built' Page 30

The Future of Rail Transportation Page 36

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CONTENTS

NOVEMBER 2017 VOLUME 23

DEPARTMENTS 8

AD INDEX

EDITOR'S NOTE

DRIVE

FEATURES EXPORTS

How to Build a Market The steps to develop opportunity in Mexico By Lisa Gibson

If You Build It... By Tom Bryan

Washington State—An Opportunity for Higher Ethanol Blends By Emily Skor

EVENTS CALENDAR

GLOBAL SCENE

ISSUE 11

TERMINAL DEL CENTRO DE MEXICO

DISTRIBUTION

Minnesota Middleman Upper Midwest supplier evolves with the market By Tim Portz

Study: Biofuels Key in Reducing GHG Emissions By Jim Grey

GRASSROOTS VOICE

The Land of Sweetness By Ron Lamberty

BUSINESS BRIEFS

MARKETPLACE

TIM PORTZ, BBI INTERNATIONAL

INFRASTRUCTURE

Quick and Nimble

Midstream tweaks necessary, but doable for E15 inﬂux By Susanne Retka Schill

TIM PORTZ, BBI INTERNATIONAL

RAIL

Loop Track Comeback

Multi-track loops reemerge in expansion of on-site capabilities By Keith Loria PHOTO: ISTOCK

Ethanol Producer Magazine: (USPS No. 023-974) November 2017, Vol. 23, Issue 11. Ethanol Producer Magazine is published monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

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ADVERTISER INDEX EDITORIAL President & Editor in Chief Tom Bryan tbryan@bbiinternational.com Vice President of Content & Executive Editor Tim Portz tportz@bbiinternational.com Managing Editor Lisa Gibson lgibson@bbiinternational.com News Editor Erin Voegele evoegele@bbiinternational.com Copy Editor Jan Tellmann jtellmann@bbiinternational.com

2018 International Fuel Ethanol Workshop & Expo

2018 National Ethanol Conference

AB Biotek

BetaTec Hop Products

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D3MAX LLC

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

PUBLISHING & SALES CEO Joe Bryan jbryan@bbiinternational.com Vice President of Operations Matthew Spoor mspoor@bbiinternational.com Sales & Marketing Director John Nelson jnelson@bbiinternational.com Business Development Director Howard Brockhouse hbrockhouse@bbiinternational.com Senior Account Manager/Bioenergy Team Leader Chip Shereck cshereck@bbiinternational.com Circulation Manager Jessica Tiller jtiller@bbiinternational.com Marketing & Advertising Manager Marla DeFoe mdefoe@bbiinternational.com

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 Western Plains Energy Derek Peine Corn Plus Mike Jerke

Fagen Inc.

Fluid Quip Process Technologies, LLC

Growth Energy

Hydro-Klean LLC

ICM, Inc.

InfoSight Corp.

J.C. Ramsdell Enviro Services, Inc.

Leaf - Lesaffre Advanced Fermentations Mole Master Services Corporation

5 35

Nalco Water

On Sight Video Surveillance

Peinemann

POET LLC

R.S. Stover

Seneca Companies

Solenis LLC

StoneAge

Tramco, Inc.

WINBCO

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

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8 | Ethanol Producer Magazine | NOVEMBER 2017

EDITOR'S NOTE

If You Build It… Our industry’s immediate growth objective is to make E15 ubiquitous at the pump—like E10 already is—creating a strong market pull for next-generation ethanol. That plan, however, will not materialize quickly.

Tom Bryan

President & Editor in Chief tbryan@bbiinternational.com

After all, it took a quarter century for E10 to become a pervasive ethanol-gas blend, so it will almost certainly take a decade for E15 to do the same. As this long game plays out, American ethanol producers need exports—already a billion-plus-gallon market—to steady prices and production. Lately, however, our top export markets have been anything but stable. Brazil’s midyear decision to drop a 20 percent tariff on U.S. ethanol (anything beyond 158 million gallons) entering the country has stifled a good run. And that came after China levied an even heftier duty on our product. So, it appears that our current strategy is not so much to grow the export market but to maintain it with new buyers in new places. As we learn in our cover story, “How to Build a Market,” on page 16, Mexico represents our best and nearest opportunity to make that happen. In fact, we report that Mexican ethanol demand, alone, could be as high as 1.2 billion gallons now that E10 is allowed everywhere in the country except within the nation’s three largest cities. Aside from those metropolitan restrictions, and a serious lack of ethanol infrastructure in Mexico, it’s a market with huge potential. Mexico’s ethanol usage is where the U.S. was 15 or 20 years ago, so it’s fitting that E10 is being introduced south of the border while E15 is emerging here. In “Minnesota Middleman,” on page 24, we learn how one family-owned fuel distribution company in Minnesota is playing a role in E15’s supply chain. Waterford Oil Co. has found a profitable niche offering tailored biofuel blends to its retail and agricultural customers, making up batches of E15, E30 and various biodiesel blends virtually on demand. Over time, as E15 becomes common at the pump, scores of U.S. fuel terminals will need to be upgraded to receive and store greater quantities of ethanol. However, we find out in “Quick and Nimble,” on page 30, that the situation isn’t dire. Experts say threequarters of the nation’s terminals would be able to quickly adapt to an E15 marketplace. In other cases, rail-to-truck transloading could compensate while terminals upgrade. Finally, be sure to read “Loop Track Comeback,” on page 36, which offers insight on the uptick in the construction of on-site rail loops at ethanol plants. These multi-track rail loops—configured in a variety of ways—allow ethanol plants to switch back and forth between manifest shipments and unit trains, providing significant efficiency gains and improved market access.

FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US:

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DRIVE

Washington state—An Opportunity for Higher Ethanol Blends By Emily Skor

Our industry appropriately focuses on the big fights and the big opportunities. We know that we must have a strong Renewable Fuel Standard that continues to drive demand and innovation. We need Reid vapor pressure (RVP) relief for E15 to inject a massive shot of adrenaline into the already rapidly growing E15 market. We are working with the auto industry to embrace mid-level blends to meet rising fuel economy standards. And we must have a U.S. government that looks out for our global interests and works with us to break down trade barriers and protect our access to current and new markets. These keystone issues are critical to our continued prosperity and require significant time, energy and resources. In addition, there is a host of less visible yet extremely important initiatives and work streams that help build demand in other ways. These efforts warrant some conversation every now and then so we appreciate that there is value not just in opening up national markets—but state markets too. Growth Energy is constantly exploring every opportunity to advance the ethanol industry through state-level regulatory work. We’re looking to make certain that emerging fuel and cap-and-trade policies are designed to harness the climate benefits of ethanol. For example, we are engaged in a promising initiative in the state of Washington that may allow us to introduce E15 into that market to aid compliance with the state’s new greenhouse gas (GHG) regulations. Washington adopted the Clean Air Rule on Sept. 15, 2016, to cap and ultimately reduce GHG emissions. The CAR is administered by the Washington Department of Ecology, and the obligated parties under the rule fall into two categories: stationary sources (power plants and other manufacturing facilities) and fuel suppliers. Stationary sources are facilities that emit at least 10,000 metric tons of GHGs per year in the state, and fuel suppliers are defined as suppliers of liquid motor vehicle fuel that provide products equivalent to at least 10,000 metric tons of carbon dioxide equivalent (CO2e) per year. Growth Energy has been engaged with Washington State regulators at the Department of Ecology for over a year to ensure

10 | Ethanol Producer Magazine | NOVEMBER 2017

higher biofuel blends are part of the solution to the state’s climate goals. Chris Bliley, Growth Energy vice president of Regulatory Affairs, has coordinated the efforts of his regulatory team and legal counsel to work with Washington to see that the state turns to the widespread blending of E15 to receive significant credits toward its GHG reduction targets. A widespread move to E15 is a potential path to compliance for companies in Washington state that would allow them to comply with the program and immediately reduce their CO2e outputs. Washington boasts a 2.8 billion-gallon gasoline market, and 289 million gallons of ethanol were blended into its fuel supply in 2015. While Washington isn’t the largest market, a complete statewide move to E15 could mean as much as 140 million additional gallons of ethanol would be blended, which would be a boon for our industry and for the climate-conscious Pacific Northwest state. Growth Energy will continue its engagement with state regulators in Washington and maintain an open dialogue about the role biofuels can play in achieving climate reduction benchmarks. And, this important work in Washington accompanies a number of other ongoing state-level engagements that round out a comprehensive drive toward seeing more gallons of ethanol in the fuel supply and higher demand for our product. By thinking strategically and taking a seat at the table before the opposition, we will blaze a trail for growth that will pay dividends for decades to come. We are fighting a battle on many fronts—at the federal legislative level, in the court of public opinion at the consumer level, and deep in the state regulatory weeds. No matter the audience, our message always carries the same underlying principle—biofuels like ethanol are moving America forward today, and will continue to do so in the future. Author: Emily Skor CEO, Growth Energy 202.545.4000 eskor@growthenergy.org

EVENTS CALENDAR

2018 National Ethanol Conference February 12-14, 2018 JW Marriott San Antonio San Antonio, Texas The National Ethanol Conference is the most widely attended executive level conference for the ethanol industry. Since 1996, the RFA’s NEC has been recognized as the preeminent conference for delivering accurate, timely information on marketing, legislative and regulatory issues facing the ethanol industry. In 2017, 1,000 industry leaders and professionals attended the NEC, representing 38 states, the District of Columbia and more than 14 countries. Networking and business development have been the leading factors promoting attendance since the NEC’s inception. 202-315-2466 | www.nationalethanolconference.com

2018 International Fuel Ethanol Workshop & Expo June 11-13, 2018 CenturyLink Center Omaha Omaha, Nebraska 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

2018 National Advanced Biofuels Conference & Expo June 11-13, 2018 CenturyLink Center Omaha Omaha, Nebraska 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

Please check our website for upcoming webinars

www.ethanolproducer.com/pages/webinar NOVEMBER 2017 | Ethanol Producer Magazine | 11

GLOBAL SCENE

Study: Biofuels Key in Reducing GHG Emissions By Jim Grey

The current policy landscape in Canada is exciting to say the least. The federal government is crafting

a Clean Fuel Standard to reduce Canada’s greenhouse gas (GHG) emissions by 30 megatonnes of carbon dioxide equivalent per year, with the transportation sector being one of three key targets. Meanwhile, Quebec and Ontario are looking to implement new policies supporting the use of ethanol. Within this context of a concerted build-out of policy supporting renewable fuels, Renewable Industries Canada (RICanada) welcomed a new Conference Board of Canada report, Renewable Fuel Standards Within a Low-Carbon Fuel Strategy, released in September. According to the report, maintaining blend mandates is critical to the success of Canada’s climate change agenda as it relates to the reduction of transportation emissions in the near and longer term. The transportation sector is a top source of GHG emissions in Canada and is projected to grow with population and GDP growth. Maintaining volumetric requirements for renewable fuels such as ethanol and biodiesel will be an integral part of Canada’s transition to a low carbon future. The report says a “clean fuel standard that fails to maintain, or expand, current blend mandates for renewable fuels is not recommended.” Moreover, the report concludes that clean fuels targets envisioned as part of a broader CFS are almost certainly unattainable without mid- to high-level blending of renewables into the fuel stream. Mark Jaccard, Professor of Sustainable Energy Economics at Simon Fraser University, says, "Governments have yet to achieve the levels of carbon pricing needed to transition the transportation sector away from fossil fuels. Until such time, renewable fuel

12 | Ethanol Producer Magazine | NOVEMBER 2017

standards should not be weakened and may need to see their stringency increased, especially if flexible policies like the low carbon fuel standard are not quickly implemented and tightened." The report also reinforces that the environmental benefits of blending renewable fuels, such as ethanol and biodiesel, are clear and well-documented. For instance, ethanol’s national 5 percent mandated content in gasoline helps reduce GHG emissions by 4.2 megatonnes annually, equivalent to 1 million cars being removed from Canada’s roads each year. Beyond retaining the environmental benefits of the fuels, as the Conference Board notes, blend mandates also provide retail market access to low-carbon fuels for consumers, and a stable investment environment for the renewable fuels industry. At the end of the day, ethanol is the only low-carbon, renewable fuel alternative for gasoline available at commercial scale, meaning that retaining—and, ideally, increasing—blend mandates will help ensure the availability of low-carbon octane to the Canadian fuels market and realization of these benefits. Canada is urgently developing policy that will allow it to meet its commitments in the Paris Accord. As a part of this process, it is impossible to ignore both the historic contribution of renewable fuel standards that set a volume-based benchmark, and the forwardlooking analysis brought forward by groups such as the Conference Board of Canada that call for their use well into the future.

Author: Jim Grey Chair, Renewable Industries Canada CEO, IGPC Ethanol Inc. 519.765.2575 jgrey@igpc.ca

GRASSROOTS VOICE

The Land of Sweetness By Ron Lamberty

A few months after the initial E15 waiver was granted, I was speaking at the Nebraska Ethanol Board’s “Emerging Issues Forum” in Omaha about remaining steps to getting E15 into the marketplace when an audience member asked me to predict when we would see widespread E15 in stations. I was certain it wouldn’t happen quickly, but didn’t want to be the wet blanket. I repeated points from my presentation about roadblocks, but when it was apparent the crowd knew I was tapdancing to avoid answering the question, I said, “The ethanol industry isn’t suddenly going to be the land of sweetness and light because EPA approved E15. Petroleum marketers aren’t going to call and beg us for E15. There’s a lot of work to do.” Somehow, a news story about the conference reduced my answer to “it’s not going to be the land of sweetness,” which sounds stupid, and I’m almost sure I didn’t say it. Colleagues and friends enjoyed taunting me about that phrase, and some still occasionally ask me about the faroff and mystical land called “sweetness.” What I meant to say was: “I do not believe our adversaries will beckon us to come, along with our E15, and abide with them forever in the land of sweetness and light.” And even if some reporter was so taken with my eloquence that he or she somehow wrote down a dumb thing I don’t think I said, most of the conference attendees had been around ethanol long enough to remember getting E10 into the last U.S. unblended markets, and knew E15 faced a similar uphill climb. Recent developments are encouraging, and E15 wholesale availability is improving along with retail. With many of the nation’s most respected convenience store retail chains now offering E15, and with one of the nation’s largest pipeline companies offering preblended E15 at its terminals in one state, petroleum retailers who have ignored or resisted E15 are asking questions. E15 is a real product now, not a theory or gimmick, and it gets “realer” as stations unveil new ethanol

blend fueling infrastructure, courtesy of the U.S. Department of Agriculture’s Biofuels Infrastructure Program. Station owners who scoffed at USDA-BIP and the idea of adding E15 and flex fuels, are realizing they will have to scramble to catch up with their more forwardlooking competitors. They’ve got to catch up, because in addition to shiny new equipment and improvements in E15 availability, “the math” of higher ethanol blends is more attractive than it has been in some time. Crude oil and gasoline prices have risen faster than ethanol prices, and as retailers learn about RIN values and no longer fear them, RINs are being used to gain market share—at improved margins. Retailers losing those gallons and profits now have decisions to make. Heck, get Reid vapor pressure reform done and it’s off to the races. Right? Necessary and helpful, yes. But one-third of stations in the country (stations in RFG areas) can offer E15 year-round right now, and most don’t. Why not? Branded petroleum supply contracts don’t allow it, and it costs a lot to get out of those contracts. Oil companies point out they only own 2 percent of stations, and say retailers don’t want E15. They’re less forthcoming about controlling the E15-less fuel slate at 60 percent of stations utilizing 10-year contracts with confiscatory buyout clauses. But even the contract headlock isn’t hopeless. Retailers didn’t add E15 because pipeline terminals had it. Pipeline terminals have E15 because retailers are selling it. When unbranded E15 takes volume away from oil companies, oil company fuel slates will have to add E15. That’s when it’s going to be the land of sweetness. Author: Ron Lamberty Senior Vice President American Coalition for Ethanol 605.334.3381 rlamberty@ethanol.org

NOVEMBER 2017 | Ethanol Producer Magazine | 13

BUSINESS BRIEFS

People, Partnerships & Projects

Pacific Ethanol joins Advanced Biofuels Business Council

Edeniq president joins BIO IES board

Pacific Ethanol Inc. has joined the Advanced Biofuels Business Council. Pacific Ethanol owns and operates nine ethanol production facilitiesâ&#x20AC;&#x201D;four in California, Oregon and Idaho, and five in Illinois and Nebraska. The plants have a combined production capacity of 605 MMgy. â&#x20AC;&#x153;Through the commercial production of cellulosic ethanol at our Stockton facility, we have taken an important step forward in our strategy to increase production yields at our plants and our mission to be the leading producer and marketer of low-carbon renewable fuels,â&#x20AC;? says Neil Koehler, Pacific Ethanolâ&#x20AC;&#x2122;s president and CEO. â&#x20AC;&#x153;We are very pleased to be working with Pacific Ethanol,â&#x20AC;? says Brooke Coleman, executive director of the ABBC. â&#x20AC;&#x153;The cellulosic biofuels industry is breaking through at commercial scale, and it is critical for the industry to work together when it comes to how we engage on policy and regulatory matters. Pacific Ethanol is the perfect example of the natural bridge between first- and second-generation biofuels, and the renewable fuel industryâ&#x20AC;&#x2122;s ongoing commitment to producing the cleanest and most sustainable motor fuels in the world. We look forward to working with Pacific Ethanol on strategies that will put the industry in a position to succeed in 2017 and beyond.â&#x20AC;?

Edeniq Inc. President and CEO Brian Thome has been elected to the Biotechnology Thome Innovation Organization Industrial and Environmental Section governing board. Thome joins other industry leaders to help set the organizationâ&#x20AC;&#x2122;s policy and guide other priorities that will help facilitate growth of the biofuel and renewable chemical industries. â&#x20AC;&#x153;I am thrilled to join BIOâ&#x20AC;&#x2122;s IES governing board,â&#x20AC;? Thome says. â&#x20AC;&#x153;BIO is a leading trade association that plays an essential role in advancing policies that help facilitate the investment, development and use of biofuels and renewable chemicals in the United States. I look forward to playing a leadership role in these efforts that are so important to the industry, and to helping to grow U.S. energy independence and security on the whole. Especially at this time of increasing advanced and cellulosic biofuel commercialization, it is crucial that the industry work together in a unified way to ensure continued growth of the entire value chain of biofuels and renewable chemicals.â&#x20AC;?

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BUSINESS BRIEFS¦

Nelson Appointed to Nebraska Ethanol Board Taylor Nelson, who farms near Jackson, Nebraska, joins the Nebraska Ethanol Board as the corn representative. He Nelson was appointed by Gov. Pete Ricketts on Sept. 8. Nelson earned his agriculture economics degree from the University of Nebraska-Lincoln. He returned to the family farm in 2012, and produces corn and soybeans in Dixon and Dakota counties with his father, Doug Nelson, and uncle, Jim Nelson. Along with his wife and parents, Nelson also operates the Jackson Express convenience store. Nelson joins current board members: Mike Thede, chairman, Palmer; Jan tenBensel, vice chairman, Cambridge; Mark Ondracek, secretary, Omaha; Randy Gard, Grand Island; Tim Else, Belvidere; Scott McPheeters, Gothenburg; and University of Nebraska-Lincoln Chemical Engineering Professor Hunter Flodman, who serves as the board’s technical advisor. Members of the Nebraska Ethanol Board are appointed by the governor to serve four-year terms.

White Energy names new president, CEO Biofuels, feed and food ingredient producer White Energy has appointed Greg Thompson as president and CEO. Thompson, 44, is one of the founders of Verdesian Life Sciences, a North Carolina-based agricultural technology company specializing in nutrient use efficiency technologies. As president and Thompson chief operating officer, he led the acquisition and integration of six companies to expand Verdesian’s global market presence. “Greg is a proven leader with the experience and passion to take White Energy to the next level,” says James Continenza, chairman of White Energy. “He is a strategic thinker with a strong track record of successfully implementing business strategies and process improvements to grow businesses. We are excited to welcome him to the White Energy team.” “The growth of America’s biofuels industry presents tremendous opportunities for White Energy,” Thompson says. “Given the quality of our employees and the strength of our production capabilities, we are well-positioned to play a significant role in the future of this industry. I’m looking forward to helping White Energy take full advantage of new and existing market opportunities.” Thompson spent the first 10 years of his career with BASF. He later assumed leadership roles with a number of successful startup companies where he worked closely with private equity investment firms to grow revenues and build value. He is a 1995 graduate of Pennsylvania State University and has completed executive leadership courses at Harvard University, Columbia University and other leading academic institutions.

NOVEMBER 2017 | Ethanol Producer Magazine | 15

EXPORTS

TRANSLOAD TRAINING: Workers oversee fuel transloading in Mexico. The country announced in June it will allow E10 blends, but an infrastructure needs to be built before it represents a viable market for the U.S. PHOTO: TERMINAL DEL CENTRO DE MEXICO

16 | Ethanol Producer Magazine | NOVEMBER 2017

EXPORTS

How to Build a

M A R KET Mexico’s allowance of E10 blends creates an opportunity for the U.S., and work to develop that market is ongoing. By Lisa Gibson

When the news broke in June, Kristy Moore made an unscheduled trip to Mexico to get back to work on the next steps in building a market. Mexico’s Regulatory Commission

on Energy (CRE) had announced it would allow up to 10 percent ethanol in gasoline across most of the country, and Moore, president of KMoore Consulting LLC and working closely with the U.S. Grains Council, had been active for more than a year to encourage the change. “They’ve taken our advice, understand the benefits to them and they have a fungible fuel specification so that they can directly import gasoline from the United States,” Moore says. Since the June announcement, Moore and her counterparts across the U.S. ethanol and gasoline industries have been teaming up with Mexican officials and agencies to forge ahead with the next steps in developing a new market. That market represents a 1.2 billion-gallon opportunity for the U.S., says Ryan LeGrand, a Mexico-based director for the USGC. The market, technically, is open today and Moore and LeGrand say some companies in Mexican border states likely already are sending trucks across the border, purchasing blended gasoline and bringing it back. But farther south, the infrastructure is lacking and desperately needs to be built out before a healthy ethanol market is established. Retailers need information about selling and blending ethanol, and widespread myths about ethanol need to be debunked. E10 is still banned from the country’s three largest metro areas— Mexico City, Guadalajara and Monterrey—while the government conducts a closed study into ethanol’s impacts on its most polluted cities. Even with all that’s been accomplished, there’s plenty more work to do.

NOVEMBER 2017 | Ethanol Producer Magazine | 17

EXPORTS

So, how does a new market get developed and where are we in the process? Moore outlines four steps: update fuel specifications; build the infrastructure; educate retailers; and make the product financially attractive. They don’t necessarily happen in a cut-and-dry order, and most are happening simultaneously. Right now.

Fuel Specifications

The push to educate and debunk ethanol myths in Mexico began in 2016, according to Moore. The country already was reevaluating its current policies and fuel market, prompted by a desire for more competition—the industry was dominated by government-owned gasoline supplier Pemex, which controlled the fuel price. Ethanol was prohibited nationwide, based on a negative reputation perpetuated by the MTBE industry, so some organizations teamed up to present the facts. They included the USGC, Growth Energy, the Renewable Fuels Association and the American Coalition for Ethanol, among others, as well as agencies

18 | Ethanol Producer Magazine | NOVEMBER 2017

such as the Mexican Association for Sustainable Mobility & Generation. “We’ve spent a year telling them about what ethanol does and doesn’t do,” Moore says. In August of 2016, the CRE published proposed national fuel specifications, which included ethanol blending, but only up to 5.8 percent by volume, and maintained the ethanol prohibition in the three main cities, based on questions about how ethanol would affect their air pollution. “In our minds, we thought we had failed in our education,” Moore says. USGC, the Mexican Association for Sustainable Mobility & Generation and their partners submitted extensive comments about the fuel blend volume and the fact that ethanol is needed most in Mexico’s three most volatile ozone areas. In December, the CRE initiated monthly work group meetings to discuss issues with the national fuel specification. “It was an amazing process,” Moore says, adding all her counterparts working on the fuel industry in the U.S.—Tesoro, Chevron, BP, Valero and more—would make the trip to Mexico

for the monthly meetings, all working to help ensure Mexico’s fuel specifications would be beneficial to their product. In April, the Mexican Association for Sustainable Mobility & Generation submitted an official proposal to the CRE to increase the volume to 10 percent and remove the prohibition in the three major cities. “Mexico has been increasingly relying on the U.S. fuel producers to fulfill the market’s needs,” says Stephan Wittig, president of the Mexican Association for Sustainable Mobility & Generation. “This year, over 60 percent of liquid transportation fuels have been imported from the U.S. Allowing E10 gives not only access to cleaner fuels because of ethanol, but also because of having access to the same lower sulfur fuels being sold in the U.S.” Then, in June 2017, the CRE released its emergency ruling allowing E10, but keeping the ban in Mexico City, Guadalajara and Monterrey, pending a closed government study of ethanol’s emissions, to take place at the Mexico Petroleum Institute. Moore says

METRO POLLUTION: The skyline of Mexico City is seen through smog. The Mexico governmentâ&#x20AC;&#x2122;s energy arm has maintained its ban on E10 in Mexico City, Guadalajara and Monterrey as it conducts a study on air pollution impacts. PHOTO: STEPHAN WITTIG, MEXICAN ASSOCIATION FOR SUSTAINABLE MOBILITY & GENERATION

sheâ&#x20AC;&#x2122;s cautiously optimistic about the study, but adds the elevation, number of vehicles on the roads and fuel composition are all wild cards in the analysis. LeGrand says he hopes results will be released by the end of the year. He says the myth that ethanol contributes to ozone is the biggest fear and obstacle to overcome in Mexico. â&#x20AC;&#x153;We need to dispel the myth and allow blending in those three major cities.â&#x20AC;? Moore points out that the swift E10 allowance was in large part attributable to support from the Mexico Department of Energy

(SENER). â&#x20AC;&#x153;This would not have come to fruition in such a short time frame had SENER not understood the benefits of ethanol and intervened to support its introduction.â&#x20AC;? So with the results and ruling for the three cities on the way, E10 is allowed in the rest of the country but is hindered by inadequate infrastructure. Pemex has no plans to produce ethanol, Moore says, and owns all the countryâ&#x20AC;&#x2122;s fuel rail terminals, meaning an almost entirely new infrastructure must be built from scratch. â&#x20AC;&#x153;Today, Pemex is the only game in town. Theyâ&#x20AC;&#x2122;re the only ones who own ter-

minals, tanks and any pipelines and ports. So thereâ&#x20AC;&#x2122;s no infrastructure down there.â&#x20AC;?

Infrastructure and Education

â&#x20AC;&#x153;Our next effort in Mexico is to build the infrastructure,â&#x20AC;? Moore says. â&#x20AC;&#x153;There are dozens of infrastructure projects being built.â&#x20AC;? Jorge Wade, director of Terminal de Centro del Mexico, says several terminals are under construction all over Mexico and will be ready within the next couple of years. TCM is working with Watco to design, build

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NOVEMBER 2017 | Ethanol Producer Magazine | 19

DOMESTIC PRODUCTION: Mexico needs its own ethanol industry in order to be a viable market for the U.S. Pictured is a plant in Tuxtepec, Oaxaca, producing 23 MMgy of beverage-grade alcohol from sugar cane. PHOTO: STEPHAN WITTIG, MEXICAN ASSOCIATION FOR SUSTAINABLE MOBILITY & GENERATION

and operate a terminal in San Luis Potosí, in central Mexico. The terminal will be able to receive unit trains and store up to 1.2 million barrels of fuel, he says. “TCM is now ready to transload product from rail car to trucks directly and will be ready to store by quarter two 2018,” Wade says. “Our offer is flexible and can receive finished products or also have the possibility to blend on site, depending on customers’ needs.” Wade says the terminal-building industry is excited about the new market and infrastructure, siting rail track builders, pipelines, storage, automation, software and security

sectors. The buildout process is a long one and LeGrand expects the first terminals to be online later next year. Moore says, beyond physical infrastructure construction, work also is being done to educate on the ease of converting existing terminals to accommodate ethanol handling. Educational workshops already are being conducted with retailers to outline the benefits and guidelines for E10 handling. “This will allow a seamless transition towards the use of E10 fuels,” Wittig says. Moore says the first retailer conversion workshop she held netted 110 attendees, despite the fact that the invita-

tion only went out to 50. “It was wonderful,” she says. “Retailers are excited about having more supply options and being able to differentiate themselves and build their own businesses.” But setting up access for U.S. ethanol producers and fuel suppliers isn’t the only goal. For the market to take off, the country needs its own domestic production, too. “Mexico represents a very interesting potential market for us,” LeGrand says. “It’s a 1.2 billion-gallon potential market. But I also believe that people need to know that for ethanol to be widely accepted in Mexico, and for us to continue to

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EXPORTS see policies that push additional ethanol consumption in Mexico, we have to see growth in Mexican ethanol production as well. The government is trying to set up a new industry down here and we’re trying to support that as well. So the Grains Council is down here to not only promote imports of U.S. ethanol, but to also help the Mexican industry in any way that we can. For this to work, we need to see a win-win situation on both sides.” Moore agrees and adds that the U.S. ethanol industry is the best and most efficient in the world, perfectly positioned to help Mexico set up its own. “Our ethanol fermentation and production process is the most advanced in the world,” she says. “We get the highest yield for the lowest energy and the most efficient use of grain. And we can teach them how to do that in Mexico.”

Benefits at Home

Ethanol’s benefits to Mexico will be numerous, Wittig says. The secure ethanol source from the U.S., just a train ride away, is a no-brainer for refiners that will jumpstart the

ethanol blending program while the Mexican industry starts to grow, he says. But there’s much more. “In general, the use of ethanol will bring to Mexico the same air quality benefits that have been proven in over 60 countries around the world that have implemented biofuel programs,” Wittig says. “Ozone, toxics and particulate matter level reductions are among the first observed results in highly polluted cities that implement ethanol blending. Moving close towards the country’s goal on GHG emissions reductions committed to in the COP21 in Paris is a big step, also.” And the use of competitively priced ethanol will allow Mexican consumers to save between 20 and 40 centavos (4 and 6 cents) per gallon, Wittig says. “Private sector is involved,” Wade says. “The reform is allowing private sector to participate in the energy industry. This generates new investments, efficiencies, jobs and competition.” It also gives the country’s capacity a boost from the oneto three-day supply it’s been used to, up to 15 days, he says.

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“A safer water supply for the country is also an effect of allowing ethanol blended fuels, since other toxic components will be replaced,” Wittig says. The legislative groundwork is laid, the infrastructure buildout and education campaign are in action, and the financial attraction is clear. The market is setting up to be the winwin LeGrand says is ideal for both parties. “I can see a situation in the future where we have a very large export market for U.S. ethanol, and Mexico, at the same time, is able to have success in growing their industry here at home and create jobs, which obviously has further implications.” Author: Lisa Gibson Managing Editor, Ethanol Producer Magazine 701.738.4920 lgibson@bbiinternational.com

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DISTRIBUTION

BETTER BLENDS: A Waterford Oil Co. fuel truck makes a delivery to a Minnoco location in Shakopee, Minnesota. Brands like Minnoco are driving customer awareness of higher blends of ethanol and Waterford Oil can provide those blended fuels to stations without blending capabilities. PHOTO: TIM PORTZ, BBI INTERNATIONAL

24 | Ethanol Producer Magazine | NOVEMBER 2017

DISTRIBUTION

M I N N E S O TA

MIDDLEMAN Waterford Oil has grown into a vital piece of the Upper Midwestâ&#x20AC;&#x2122;s renewable fuel infrastructure. By Tim Portz

NOVEMBER 2017 | Ethanol Producer Magazine | 25

DISTRIBUTION To Brian Lynch, the fuel marketing and distribution game has changed because customers have changed. To help

make his point, he recalls a time when his grandfather had a favorite brand of motor oil for his vehicles, and wouldn’t have dreamed of using anything else. “That just didn’t happen and then all of that changed and it was very painful for some people,” he says. Lynch, vice president for Waterford Oil Co., a family-owned fuel distribution company in Northfield, Minnesota, refers to customers’ preferences when he explains how and why Waterford does what it does in the liquid fuel marketplace. Lynch says, historically, oil refiners established marketplace brands and built retail outlets around them. Customers loyally sought out branded filling stations. Connecting these stations and the refineries that produced the motor fuels were fuel marketers, sometimes called “jobbers.” They were

a vital piece of fuel distribution infrastructure, trucking fuel from pipeline terminals to storage tanks, and making a small margin on the sale. This model defined the fuel marketplace for decades, but is undergoing a change. Waterford Oil finds itself squarely in the middle of it. First, long gone are the days of fullservice, fuel-only filling stations. They’ve been replaced by convenience stores offering fuel, but also attracting customers inside, where they can purchase food and drinks. The offerings inside generate far higher profit margins than the fuel sold outside. While brand names, such as BP, ConocoPhillips and Mobil, still exist, an entirely different class of convenience store with no brand connection to any refinery whatsoever has sprung up. Retailers such as Kum and Go, Kwik Trip, Casey’s, Sheetz and Minnesota brand Minnoco have entered the space and are quickly gobbling up market share. Additionally, retailers like Hy-Vee, Walmart and Costco are coming in, betting that in-

creasingly busy customers will combine their grocery and fuel purchases into one efficient stop. Second, customer awareness of and demand for a renewable fuel product is on the rise. While ethanol can be found in nearly every gallon of oxygenated gasoline sold in the U.S., demand for fuel with more than 10 percent ethanol is growing. Waterford Oil has found a home at the convergence of these marketplace trends and, as a result, is achieving impressive growth. Lynch’s parents bought Waterford Oil in 1983. At the time, the company was a small, local distributor. By the time Lynch joined the company after graduating college in 2000, ethanol was a reality in the fuel marketplace and Waterford's attention to this and other marketplace trends was fueling impressive growth. The company's revenues have increased by a factor of 20.

Small Footprint, Big Impact

Considering the sales volume that Waterford Oil achieves on a yearly basis,

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VITAL INFRASTRUCTURE: Two 18,000-gallon tanks at Waterford Oilâ&#x20AC;&#x2122;s Northfield, Minnesota, headquarters allow the company to blend fuels with higher concentrations of ethanol for retailers that do not have blender pumps. PHOTO: TIM PORTZ, BBI INTERNATIONAL

A. B.. B B.

NOVEMBER 2017 | Ethanol Producer Magazine | 27

ONE TRUCK, MULTIPLE FUELS: A full-size fuel trailer can carry roughly 8,000 gallons of fuel. Most trailers are divided into four compartments to transport multiple products at once. PHOTO: TIM PORTZ, BBI INTERNATIONAL

the company’s Northfield headquarters location is somewhat of a surprise. Two 18,000-gallon tanks and the frequent coming and going of fuel trucks are the only indications that the site is a vital cog in the fuel distribution wheel for the region. “People will often say that if you are going to be a fuel distributor, you’ve got to have a bulk plant,” Lynch says. “We don’t believe in that. We use our pipeline inventory as our bulk plant and this facility really functions as a transfer station.” Lynch says Waterford Oil is a “just-intime” fuel distributor. While it does procure

hydrocarbon fuels from conventional refiners, it maintains a light storage footprint by pulling inventory, as needed, directly from the Magellan pipeline that serves the Upper Midwest. Waterford does lease some storage at a handful of the fuel terminals that are connected to the pipeline, but prefers to keep the fuel moving, typically taking it from the terminal and delivering it to customers on the same day. But Waterford handles ethanol and biodiesel differently. Most notably, they are not moved from producer to markets via pipeline. They move by rail or truck,

through Waterford’s widely distributed roster of truck drivers. “We’ve got drivers located near here and all the way south to the Iowa border,” Lynch says. “It works out well because most of our trucks begin their day in the heart of ethanol production country.” Lynch is quick to underscore the importance of the company’s storage and blending capabilities in the effort to grow the availability of higher blends of ethanol such as E15 or E30. Many retailers have the underground storage capacity to support these fuels, without the blender pumps to mix them as they’re purchased. “With our assets here in Northfield, we’re capable of mixing up any fuel blend our customers might want,” Lynch says. Waterford Oil serves as a bridge to market availability of these fuels until the blending infrastructure at retail locations catches up. Recently, Lynch notes, the state of Minnesota passed a B20 mandate and many in the diesel and biodiesel marketplace are wondering how the fuel distribution infrastructure will accommodate the new mandate. “There is still a pretty significant infrastructure gap for blending in the state and what we do with regard to fuel blending is only becoming more important,” he says. Without the blending capabilities of companies like Waterford, the policy victories

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28 | Ethanol Producer Magazine | NOVEMBER 2017

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DISTRIBUTION won by the industry would struggle to gain footing and momentum in the marketplace. “I think, ultimately, the responsibility of achieving mandates like a B20 mandate and whatever might follow will ultimately fall to the distributor,” Lynch says.

Looking Ahead

Lynch expects the demand for renewable products to continue to grow and is positioning Waterford Oil to be able to help meet it. “I think that E15 and E30 are going to have a pretty big role in the market,” he says. Lynch sees two primary catalysts behind the demand drive. First, octane value in ethanol is getting more traction in the marketplace. “I tell all of my customers that E30 is likely going to be a pretty good substitute for any high-octane needs their customers might have, especially in newer vehicles,” he says. “It really is the perfect substitute for that high-octane need, particularly in the summer months when there is an octane squeeze and that premium product is more difficult to find. E30 fills that octane need quite well.” Next, he points to the efforts to increase consumer awareness of renewables, specifically higher blends of ethanol and biodiesel, and is confident they are beginning to bear fruit. “Kwik Trip is offering

E15 at pretty much every store. Minnoco and Hy-Vee here locally and other retailers like Sheetz out east are all working to make their customers aware that it is available,” he says. Lynch sees the demand in the company’s other sectors, too. Waterford does robust business with farmers and farm operations, and Lynch says he sees a strong demand for ethanol and biodiesel in that market. “Our agricultural customers often select fuel blends with higher rates of ethanol and biodiesel than you can buy normally, but they can purchase whatever they’d like because we can mix it up for them right here. E30. B30. It doesn’t matter, we’re happy to make it up for them,” he says. During harvest, Waterford’s agricultural business is brisk and a few of his customers take semiloads of fuel. Just half of Waterford’s business is tied to convenience store customers. The other half is spread across a number of different categories including marine, aviation, agricultural and heating industries. “We’re not just a conventional reseller anymore,” Lynch says. “We’ve evolved into a true supplier and trader. We’re taking on every role that makes sense for us and we feel we can do well at.” Finally, Lynch sees Waterford Oil growing stride for stride with the renewable fuel

industry, particularly in Minnesota. “Minnesota was one of the first states to have a mandate, and it was a great place for the industry to take hold,” he says. “We’re right in the middle of the Corn Belt. It gets hot here. It gets cold here. This is the perfect place to prove the viability of these fuels, but for usage to grow like the renewables guys want it to, they’ll need distributors. That’s the role we’d like to play.” Still, Lynch is reluctant to cast himself as an industry advocate or catalyst for change. His customer focus is what has helped him dramatically grow the business and he’s committed to that approach. “I’m not here to reinvent the wheel,” he says. “My responsibility is to stay attuned to what my customer wants, and then give it to them.” Author: Tim Portz Executive Editor, Ethanol Producer Magazine 701.738.4969 tportz@bbiinternational.com

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INFRASTRUCTURE

QUICK &

NIMBLE

If an incremental buildup to E15 materializes, rail-to-truck transloading could compensate while terminals upgrade. By Susanne Retka Schill

OFFLOADING EFFICIENCY: Eco-Energyâ&#x20AC;&#x2122;s unit-train terminal near Philadelphia offloads all cars simultaneously. Twenty to 25 cars are parked on spurs and hooked up to the manifold running between fingers. Experts say the ethanol industry's midstream infrastructure could ramp up to E15, using truck transloading to make up ground at terminals not equipped for incremental volume increases. PHOTO: ECO-ENERGY

30 | Ethanol Producer Magazine | NOVEMBER 2017

INFRASTRUCTURE

NOVEMBER 2017 | Ethanol Producer Magazine | 31

INFRASTRUCTURE

The ethanol industry is working hard to build ethanol demand, focusing on retail infrastructure for E15 and flex fuels, which raises the question, is the rest of the system ready?

A report last year from the National Renewable Energy Laboratory questioned whether current terminal capacity can handle higher blends such as E30, but ethanol marketers note that a move toward E15 is more of an incremental increase. Between 70 and 80 percent of the midstream infrastructure supplying ethanol to blending terminals could handle E15 almost immediately, says Josh Bailey, CEO of EcoEnergy. The biggest constraints would be short-term tank reconfigurations at many of the smaller blending terminals. “It’s like a big puzzle,” Bailey explains. “You’re replacing 5 percent of gasoline with 5 percent of ethanol, but the overall finished fuel demand is not changing.” But issues could arise in some areas, he says. “We believe there are certain areas that could transition to E15 tomorrow and be able to handle it

32 | Ethanol Producer Magazine | NOVEMBER 2017

“While some terminals will need additional investment with incremental volume, that build-out can move quickly—the bones are built.” - STEVE BLEYL, EXECUTIVE VICE PRESIDENT OF ETHANOL MARKETING, GREEN PLAINS INC.

efficiently and there are others that need some time, attention and investment.” Steve Bleyl, executive vice president of ethanol marketing at Green Plains Inc.,

agrees and notes that E10 is now available across the country. “We have large-scale, high-volume terminals in place today, most of which are able to handle incremental

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TO THE TRUCKS: Green Plains Inc.'s subsidiary Blendstar operates a unit-train facility in Birmingham, Alabama. With three truck-loading lanes, it’s throughput capacity is 8 million gallons per month. PHOTO: GREEN PLAINS INC.

volume. While some terminals will need additional investment with incremental volume, that build-out can move quickly—the bones are built.” He adds that the rail-to-truck transloading business model is very nimble, and will quickly fill in any holes.

Building Capacity

Midstream ethanol infrastructure has evolved along different trajectories in different regions, Bailey says. Much of the investment in the past decade focused on the Gulf and East coasts, primarily because the majority of the terminals could not receive ethanol by rail. Served by pipeline for conventional fuels, rail access was ripped out to make room for commercial buildings and housing as populations grew in places such as Dallas, Houston, New York Harbor and Atlanta. Rail-to-truck facilities popped up on the outskirts to transload product into the terminals. On the West Coast—Tacoma, Seattle, San Diego and Phoenix—big investments weren’t neces-

sary because terminals still could receive ethanol by rail. “They didn’t have to invest a lot to be in business,” Bailey says. “I think in order to handle an incremental 50 percent demand growth, some of those areas will require more investment.” It is difficult to know just how many rail-to-truck transloading facilities there are across the country, Bleyl says. “It can be hard to identify as they are often used exclusively for a specific supplier or end user. They are also nimble sites and come online and offline as needed to service demand.” He predicts these facilities will continue to be a great business model in some markets—generally lower-volume or specific customer-served locations. “In larger markets, that model has shifted to state-of-the-art terminals,” he says. Bleyl highlights three benefits to the 24-hour unit-train offloading facilities: “The high-speed and volume offloading reduces turn times on equipment; rail service providers can organize and coordinate power more efficiently; and ample invento-

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INFRASTRUCTURE

CONTINUOUS CAPABILITY: Blendstar’s unit-train facility in Birmingham, Alabama, can offload a train in 24 hours. PHOTO: GREEN PLAINS INC.

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34 | Ethanol Producer Magazine | NOVEMBER 2017

ries ease supply concerns with customers.” The savings for shippers can be substantial. While transloading a train with 80 cars is going to cost 3 cents per gallon, the same as going through a state-of-the-art terminal, Bailey says, the advantage comes from reduced turn times for rail cars. “To transload a train with 80 cars is going to take three to five days to pump the ethanol into trucks,” he explains. Combining the transit time for a unit train with 24-hour unloading can shorten the turnaround time from a range of 25 to 45 days to 13 to 15 days. The savings from fewer rail cars needed is substantial. “Where terminals create value and generate return for investors like Eco is we attract more volume and shippers because they ultimately are saving money on other costs in the supply chain,” he says. Being able to unload a unit train with 2.3 million to 2.8 million gallons of ethanol in 24 hours requires adequate storage, which is attractive to the demand side of the equation, Bailey says. “People value the fact there’s inventory on hand at these terminals, rather than being fully reliant on the railroad and rail cars.” He recalls the recent winter when a polar vortex brought cold temperatures that, combined with large grain crops and increased volumes of oil shipments by rail, wreaked havoc on rail shipments. “There were numerous locations across the U.S. that had strong logistical difficulties because they solely relied upon rail and didn’t have their own storage,” Bailey says.

Rail-Ready

The companies investing in midstream ethanol infrastructure for biofuels, such as Eco-Energy and Green Plains Partners, are relatively few. “The major buyers and blenders—the Exxons and Marathons of the world—really don’t have capital allocated to biofuels infrastructure,” Bailey says. Down-

INFRASTRUCTURE

stream pipeline companies and terminal operators typically don’t make investments without three- to five-year commitments, which is not common in biofuels, he adds. “What’s left is primarily marketers like Eco and some third-party terminal operators.” Eco-Energy has eight unit-train terminals, coming in second for throughput capacity in the nation, handling a little more than 1 billion gallons of ethanol annually, according to Bailey. Kinder Morgan Inc. ranks first with six terminals receiving unit trains, per its ethanol business unit webpage. One of those is a transloading facility in Lomita, California, while the others have 24-hour unit-train offloading capabilities. KMI handles ethanol in terminals in Baltimore; Dallas/Ft. Worth; Linden, New Jersey; Richmond, California; and its Deer Park Terminal in Pasadena, Texas. KMI also has partnerships with other firms, such as Archer Daniels Midland Co. and Bailey Feed Mill in Selma, North Carolina, which held a ribbon-cutting ceremony in late September. The new facility at the feed mill will offload a 96-car unit train in 24 hours, delivering the ethanol to KMI’s nearby Selma terminal via a 2.6-mile pipeline. Green Plains’ subsidiary Blendstar, has seven fuel terminals taking in rail, one of which can handle 96-car car unit trains in Birmingham, Alabama. In late 2015, Green Plains announced a joint venture with Delek Holdings Inc. to build a unit-train terminal in Maumelle, Arkansas. Another project for Arkansas was announced in 2016—an expansion of JP Energy’s terminal at North Little Rock to accommodate unit train deliveries, along with an interconnection agreement for a pipeline with an affiliate of Magellan Midstream Partners. There also have been notable investments in export infrastructure, with considerable expansion in the Texas Gulf. Green Plains invested in a joint venture at the Jefferson rail terminal and Valero has a new terminal in Galveston, plus Kinder Morgan’s Deer Park Terminal is situated on the

Houston shipping channel for export capability as well. From production to marketing infrastructure, the ethanol industry has made significant investments, Bleyl says. “Over the past three to five years, we have seen the industry make big steps to invest in itself by pushing efficiency in all levels of the supply chain, from production to distribution.” Combining export and domestic facilities,

there are between 25 and 30 sites capable of handling unit volumes, he estimates. “The industry has noted that we need additional capacity to increase our exports, and we need more efficient terminals owned by the industry.” Author: Susanne Retka Schill Freelance Journalist retkaschill@yahoo.com

NOVEMBER 2017 | Ethanol Producer Magazine | 35

RAIL

Loop Track

COMEBACK On-site rail loops at ethanol plants have regained some of their former popularity in the past year, increasing eﬃciency and market access. By Keith Loria

Glacial Lakes Energy LLC in Watertown, South Dakota, added a four-track rail loop earlier this year, allowing the switch from manifest shipments to unit trains. The loop can accommodate four full unit trains and, in part-

nership with a new double loadout station and additional storage, the upgrades are enabling massive efficiency gains at the 60 MMgy plant. “This now allows us to ship all of our ethanol and DDGS by unit train, gaining more lucrative access to export markets and other markets only accepting products supplied by unit train deliveries,” says Pat Hogan, Glacial Lakes Energy’s director of operations. “Before we did the rail, we had a small ladder track system, a single loadout and we shipped all of our ethanol rail cars as manifest shipments, which means they went out in blocks of five, 10, 20 cars at a time.” With the new rail improvements, Glacial Lakes Energy has seen better shipment times and returns. “It gives us better access to unit des-

36 | Ethanol Producer Magazine | NOVEMBER 2017

RAIL

LAYING THE LOOP: Glacial Lakes Energy in Watertown, South Dakota, installed a rail loop earlier this year that can accommodate four unit trains. The expansion enabled a switch from manifest to unit trains. PHOTO: GLACIAL LAKES ENERGY LLC

NOVEMBER 2017 | Ethanol Producer Magazine | 37

RAIL

TANKERS ON THE TRACKS: Glacial Lakes Energy in Watertown, South Dakota, began using its new rail loop in February. It can accommodate four unit trains simultaneously, increasing loading efficiency.

FROM THE SKY: Glacial Lakes Energy’s rail loop makes a massive footprint near the 60 MMgy ethanol plant.

PHOTO: GLACIAL LAKES ENERGY LLC

tinations and better market access,” Hogan says. “We were aware of a couple of plants that had transitioned to rail loops and the buzz in the industry is that this is the future of rail transportation.”

Loading Efficiency

Richard Carney, senior vice presidentNorth America track for New York-based RailWorks Corp., a track and transit systems construction and maintenance service provider, notes rail loops increase efficiency in unit train storage and the unloading and loading processes. “Essentially, you are loading and unloading the cars on the same track,” he says. “About five years ago, rail loops at ethanol facilities were a really hot market, but it tapered off. Now, it’s something that has been reinvigorated in the last 12 months.” Brett Porter, general director for ethanol products at BNSF Railway in Fort Worth, Texas, says loop tracks are a more effective solution than manifest shipments for receiving and departing trains from a railroad’s mainlines. At ethanol plants, a rail loop eliminates the need to couple and recouple cars while loading, which is safer for

38 | Ethanol Producer Magazine | NOVEMBER 2017

the employees and more efficient for operation. “Loop tracks can be a good alternative when you need a 7,000-foot strip of land for a track to receive and depart unit trains of 96-plus railcars,” Porter says. “If you are expanding track at a plant that has road crossings or other barriers like hills and water nearby, a loop track in an adjacent field may be the best alternative for track expansion.” Porter says recent BNSF ethanol customers have opted for a rail loop to avoid such obstacles, or because the land available suits the expansion. “The loop method was created for model efficiency,” says Reed Reimer, vice president of business development for R&R Contracting. Loops allow the railroad to leave its locomotive connected to the entire unit train, loading while pulling the train in one direction, he says. R&R Contracting recently worked on a loop expansion project in South Dakota and is currently installing loops at an ethanol plant in Beaumont, Texas. “The best method to ship is pipeline but there’s only one endpoint and they can’t reroute or change delivery,” Reimer says. “Trucking is

not a viable solution because of the budget. Rail just makes the most sense.”

Implementing Rail Loops

When designing and constructing rail loops, it’s important to make a loop track big enough to handle the entire train in a single pass without breaking the train up, Carney says. It’s crucial for efficiency. Porter notes that ethanol plants are essentially two or three separate rail car loading operations—ethanol, distillers grains and inbound corn. They each need to operate separately for best efficiency, and to plan a track layout, a company needs to understand the loading pattern for ethanol and distillers grains. “This needs to be taken into account when the arrival/departure track is designed,” he says. “The track will need to be designed in a manner that provides room for the plant to continue loading rail cars while trains arrive and depart. If it is a location that also receives inbound grain, it adds additional complexity to the project.” RailWorks recently constructed a 15,000-foot, double-loop track for KAAPA Ethanol Ravenna LLC in Ravenna, Nebras-

RAIL

LOADING CAPABILITIES : Glacial Lakes Energy in Watertown, South Dakota, increased its loadout capacity by replacing its single loadout station with a double station.

STORAGE CAPACITY: Along with rail and loadout upgrades, Glacial Lakes Energy invested in additional storage capacity this year. PHOTO: GLACIAL LAKES ENERGY LLC

PHOTO: GLACIAL LAKES ENERGY LLC

ka. The track has nine turnouts, which accommodate two unit trains simultaneously to ensure continuous shipment and production.

More Markets

The consensus among experts and plant operation managers is that unit trains help ethanol plants move their products efficiently, open new markets and provide competitive access to existing markets. “Most destination markets with population densities and export capability have converted into unit trains, and supply chains—including transportation and terminal and storage facilities—are adapting accordingly,” Porter says. “Currently, 70 percent of the ethanol moving on BNSF moves on unit trains, and we expect this percentage to continue to grow as export markets expand and as more destination markets convert to unit trains.” Author: Keith Loria Freelance Journalist freelancekeith@gmail.com

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