December 2008 Ethanol Producer Magazine

DECEMBER 2008

INSIDE: HOW WILL NEXT-GENERATION ETHANOL PLANTS BE FINANCED?

Corn Prices Expected to Remain Strong,Future Looks Promising for Midlevel Blends,

Automakers Prepare to Offer More FFVs,Debate Over Ethanol Tariff Heats Up

WWW.ETHANOLPRODUCER.COM

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ecember2008

ETHANOL PRODUCER MAGAZINE DECEMBER 20082

ETHANOL PRODUCER MAGAZINE DECEMBER 2008 3


ARI supplies the Ethanol industry with the latest in rail car design and technology. With overa century of engineering and manufacturing experience, ARI has the rail cars and servicesto get your product to market. Our standard Ethanol tank car has a capacity of 30,000gallons, and is designed to your individual loading and unloading specifications. ARI is a fullservice organization providing a wide array of customized services to support your growingindustry from engineering and repair to fleet management and consulting.

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Finding the right alternative energy source can be challenging. It takes more than a one-size-fits-all, Band-Aid approach. Burns & McDonnell — with more than

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Comprehensive ServicesProject Development • Environmental Studies and Permitting • Engineering and Construction

Front-End Planning • Engineering Design-Build (EPC) • Unit Operations

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Need refueling? Build it better with Burns & McDonnell.



insideDECEMBER 2008 . VOLUME 14 . ISSUE 12

features

58 PROCESS Improving the Process Without Breaking the Bank EPM examines the often overlooked fi eld of fermentation performance and the tools producers can use to improve the process and save money. By Ron Kotrba

68 CORN Fundamentals Remain Strong Corn prices may have taken a tumble in response to the fl agging stock market, but the supply/demand situation suggests the market will recover. By Susanne Retka Schill

78 CELLULOSE Building Blocks to Biofuels Success The federal government has developed a plan to fulfi ll the new renewable fuels standard. EPM takes a closer look at the National Biofuels Action Plan and the seven areas where the government will be taking steps to help the biofuels industry grow and evolve. By Jerry W. Kram

86 POLICY Carbon as a Commodity Ethanol producers who incorporate technology to reduce energy inputs may earn carbon credits once the United States enacts a mandatory carbon emissions reduction program, which many experts say is inevitable. By Kris Bevill

94 INDUSTRY The Future of Midlevel Blends The New Year is expected to ring in good news for midlevel ethanol blends, including UL certifi ed pumps and favorable tax legislation. Testing of midlevel blends and the E20 waiver request are still in the works. By Erin Voegele

102 VEHICLES The Road Ahead for FFVs Automakers are increasing their fl exible-fuel vehicle models in response to consumer demand. Now, it’s just a matter of making sure there are enough service stations across the country to serve FFV drivers. By Anna Austin

110 WORLD Raising Cane Where will the European Union get the ethanol it needs to meet its renewable fuels goals? Importing ethanol from Brazil seems to be the cheapest, but does that country’s sugarcane-based ethanol meet the EU’s tight sustainability criteria? By Ryan C. Christiansen

118 TRADE Politicos Seek to Harmonize Tariff, Tax Credit The tariff on imported ethanol is a topic of concern for the ethanol industry as some lawmakers have called for it to be eliminated or modifi ed. By Frank Zaworski

126 FINANCE Bankrolling the Next Generation Where will the money to build commercial-scale cellulosic ethanol plants come from? Financial analysts and companies in the process of building cellulosic ethanol plants agree that the fundraising process will be quite different than it was for corn-based ethanol plants. By Bryan Sims

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insideDECEMBER 2008 . VOLUME 14 . ISSUE 12

departments10 On the Web

11 Advertiser Index

14 The Way I See It By Mike Bryan The Real Tie Between Food, Fuel Prices

20 Business & People

24 Commodities

26 View from the Hill By Bob Dinneen Year of the Rat, or Perhaps the Scapegoat

27 RFA Update

30 Industry News & BIObytes

40 Plant Construction List

52 Finance By Donna Funk Pumping Up Profi ts With Retail Ventures

54 Legal Perspectives By Todd Guerrero California Courts Reconsider Ethanol-Related Greenhouse Gas Issues

170 Events Calendar

172 EPM Marketplace

Ethanol Producer Magazine: (USPS No. 023-974) December 2008, Vol. 14, Issue 12. Ethanol Producer Magazine is published monthly. Principal Offi ce: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offi ces. POSTMASTER: Send ad-dress changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

BPA Worldwide Membership Applied for October 2006

contributors134 CORN OILEthanol Producers Face Key Considerations When Assessing Corn Oil ExtractionExtracting corn oil at ethanol plants and using it as a feedstock at biodiesel plants benefi ts both industries. There are a number of ways it can be done and several different aspects to each. By Mark Warren

140 PROJECT DEVELOPMENTFeasibility Studies 101: What It Takes to Achieve Commercial GoalsProposed and existing ethanol facilities face capital-intensive projects. The fi rst step toward success is completing a feasibility study. By Ken Wenninger

146 FERMENTATIONFTIR Offers Push-Button Fermentation ControlFourier transform infrared technology is being tested in U.S. ethanol plants and gaining interest as a routine monitoring and control solution for fermentation.By Richard Mills

152 DISTRIBUTIONFamily Transport Business Expands in MidwestAs the third generation of the Kane family drives Kane Transport into the future, ethanol will continue to play an integral role in the fuel distributor’s success.

By Tom Stone

158 UTILIZATIONEmerging Waste/Coproducts Optimization Opportunities for Ethanol FacilitiesNew production technologies are providing new coproducts for the ethanol industry. In addition, new applications for existing coproducts are creating additional marketing opportunities. By Philip A. Marrone, Kenneth R. Liberty and David J. Turton

164 ECONOMYRenewable Energy, Energy Effi ciency Will Be Key to Economic RecoveryAs the world economy slides, a variety of experts are pushing renewable energy as a remedy. Some offi cials compare it to a “green energy gold rush.” By Bill Eby


Senior Staff Writer Ron Kotrba provides an in-depth look at the challenges to manufacturing and distributing cellulase and hemicellulose enzymes in his November EPM feature, “Second-Generation Enzyme Logistics.” Three major enzyme-makers discuss the advantages and disadvantages of producing en-zymes on-site.

What was Your Favorite Ethanol-Bashing Moment?Contributions Editor Dave Nilles discusses how the recent eco-nomic downturn has given the ethanol industry a temporary re-prieve in the faulty debate over food versus fuel.

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

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

TOP 10 WEB EXCLUSIVES

Biomass, Midlevel Blends and an Economic DownturnEthanolProducer.com’s most-read Web exclusive news stories for October

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

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Industry addresses N.Y. Times articleEthanol industry stakeholders quickly refute an Oct. 1 New York Times article that some ethanol supporters say inaccurately re-fl ects an article in Science Magazine.

ICM lays off more employeesDue to sluggish markets, Kansas-based design/builder and process technology provider ICM Inc. lays off 73 employees, marking its second staff reduction of 2008.

Iogen ships cellulosic ethanol to ShellCanadian cellulosic ethanol producer Iogen Corp. ships part of a 47,000-gallon order of cellulosic ethanol to Royal Dutch Shell PLC. The two companies have collaborated since 2002.

Biomass conference focuses on cellulosic ethanolThe Northern Plains Biomass Economy conference draws more than 100 people to Fargo, N.D., and discusses cellulosic ethanol incentives and how states can take advantage of them.

Pacifi c Ethanol starts up Stockton plantDespite recent fi nancial losses, Pacifi c Ethanol Inc. opens its fourth ethanol plant, this time in California.

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ABW: Creating markets for advanced biofuelsThe Advanced Biofuels Workshop & Trade Show provides a platform for constituents to discuss options for meeting the renewable fuels standard with advanced biofuels.

USDA, DOE plan promotes midlevel ethanol blendsThe USDA and DOE’s new National Biofuels Action Plan reiterates the agencies’ push for nationwide E10 while also promoting midlevel blends.

Volatile economics hurt ethanol producersA handful of bankruptcy fi lings, including those from producers in Ohio and Kansas, show that the ethanol industry isn’t immune to the current economic downturn.

Shell contracts with Jacobs to help with European biofuels programRoyal Dutch Shell PLC grants a three-year contract to Jacobs Engineering Group Inc. to develop and implement the installation of Shell ethanol and biodiesel blending facilities throughout Europe.

Shipworm enzyme could produce cellulosic ethanolScientists receives $4 million from the National Institutes of Health to determine if an enzyme found living in certain species of clams can be used to produce cellulosic ethanol.

webON THE

PODCAST BLOG TAKINGSTALK

Second-Generation Enzyme Logistics

AdIndex48

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67

42905332

136109

456

634

10477

153

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76, 84 & 150 72

105144 & 161

66 & 15746 & 10029 & 168

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2009 International Biomass Conference2009 Canadian Renewable Energy Workshop2009 InternationalFuel Ethanol Workshop & ExpoABENCSAdams Building ContractorsAfton Chemical Corp.Agra Industries Corp.Agri-SystemsAmerican Petroleum InstituteAmerican Railcar Industries Inc.American Stainless & SupplyAnhydro Inc.Antioch Intertnational Inc.Aqua Power Inc.Aquatech InternationalAustralian Department of Resources, Energy & TourismBarr-Rosin Inc.BBI International Community Initiative to Improve Energy Sustainability (CITIES)BBI Project DevelopmentBest Energies Inc.BetaTec Hop Products Inc.Bioenergy AustralasiaBiofuels CanadaBiofuels RecruitingBiomass MagazineBrock Grain SystemsBrown, Winick, Graves, Gross, Baskerville & SchoenebaumBuckman Laboratories Inc.Burns & McDonnellCalbrandtCaldwell TanksCentrisys Corp.Cereal Process Technologies LLCCheck-All Valve Mfg. Co.Christianson & Associates PLLPClifton Gunderson LLPCover-All Building SystemsCrown Iron Works Co.Crown Iron Works/Harburg FreudenbergerDavenport Dryer LLCdbc SMARTsoftware Inc.Delta-T Corp.Distillers Grains QuarterlyDuratech Industries International Inc.Eclipse Inc.Eisenmann Corp.ethanol-jobs.comEthanol Promotion & Information CouncilETS LabratoriesFaegre & Benson LLPFagen Inc.Farms Technology LLCFCStone LLCFederal Equipment Co.FermentisFlottweg Separation TechnologyGavilon

Genencor International Inc.GreenShift Corp.Hydro-Klean Inc.ICM Inc.Indeck Power Equipment Co.Interstates Cos.Intersystems Inc.Kennedy & Coe LLCLallemand Ethanol TechnologyLarox Corp.Louis DreyfusMaas Cos.Mapcon Technologies Inc.Martrex Inc.McC Inc.Metso AutomationMidland Scientifi c Inc.Midwest TowersMoyno Inc.Natural Resource Group Inc.National Ethanol ConferenceNatwick Associates Appraisal ServicesNestec Inc.New York Blower Co.Nexen Marketing USA Inc.North American Bioproducts Corp.North American Safety ValveNovozymesOrtman Ethanol Water ResourcesPaul Mueller Co.Peters MachinePhibroChemPioneer Hi-Bred International Inc.Poet LLCPro-Enviornmental Inc.Pursuit DynamicsR&R Contracting Inc.R.J. O’Brien & AssociatesRailWorks Track Systems Inc.Resonant BioSciences LLCRev Tech LCRenewable Fuels AssociationRobert-James Sales Inc.Robinson Industries Inc.Romer Labs Inc.Ronning EngineeringSafeRack LLCSalco Products Inc.Seneca Waste SolutionsSmar International Corp.Strongform Nationwide Industrial BuildersSturtevant Inc.Sulzer Chemtech USA Inc.SyngentaTDC DryersU.S. Water ServicesUnivar USA Inc.Vaperma Inc.Victory Energy Operations LLCVogelbusch USA Inc.Volkmann Railroad Builders Inc.WINBCO



EDITORIAL

Jessica Sobolik Managing [email protected]

Dave Nilles Contributions [email protected]

Rona Johnson Features [email protected]

Ron Kotrba Senior Staff [email protected]

Jerry W. Kram Staff [email protected]

Susanne Retka Schill Staff [email protected]

Kris Bevill Staff [email protected]

Erin Voegele Staff [email protected]

Anna Austin Staff [email protected]

Ryan C. Christiansen Staff [email protected]

Bryan Sims Staff Writer & Plant List [email protected]

Hope Deutscher Online [email protected]

Jan Tellmann Copy [email protected]

Megan Skauge E-Media [email protected]

ART

Jaci Satterlund Art [email protected]

Sam Melquist Graphic [email protected]

Elizabeth Slavens Graphic [email protected]

Jack Sitter Graphic [email protected]

PUBLISHING & SALES

Mike Bryan Publisher & [email protected]

Kathy Bryan Publisher & [email protected]

Joe Bryan Vice President of Media & [email protected]

Tom Bryan Vice President of [email protected]

Matthew Spoor Sales [email protected]

Howard Brockhouse Sales Manager, Media & [email protected]

Clay Moore Account [email protected]

Jeremy Hanson Account [email protected]

Chip Shereck Account [email protected]

Tim Charles Account [email protected]

Chad Ekanger Account [email protected]

Marty Steen Account [email protected]

Marla DeFoe Advertising [email protected]

Jessica Beaudry Subscriptions [email protected]

Jason Smith Subscriber Aquisition [email protected]

Christie Anderson Administrative Assistant, [email protected]

Nicole Zambo [email protected]

HOW TO REACH US

LETTERS TO THE EDITORWe welcome letters to the editor. Send your letter to:

Ethanol Producer Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to [email protected].

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

SUBSCRIPTIONSEthanol Producer Magazine is now free of charge to everyone with the exception of

a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico.To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment

(checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203.

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

CUSTOMER SERVICE AND CHANGE OF ADDRESSFor service, please use our Web site at www.EthanolProducer.com. You can also call (866) 746-8385, or write to:

Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203.

BACK ISSUES AND REPRINTSSelect back issues are available for $3.95 each, plus shipping. To place an order, contact Subscriptions at (701) 746-8385 or [email protected]. Article

reprints are also available for a fee. For more information, contact Christie Anderson at (701) 746-8385 or [email protected].

ADVERTISINGFor advertising rates and our editorial calendar, visit www.EthanolProducer.com or call (866) 746-8385.COPYRIGHT © 2008 by BBI International



The Way I See It

The Real Tie Between Food, Fuel Prices

An interesting phenomenon has occurred.

While U.S. ethanol production continues

to rise, the price of corn and other com-

modities followed oil’s downward trend in

the wake of Wall Street’s marked October setback. Mean-

while, food prices haven’t budged.

This is more proof that the allegation about corn-

based ethanol driving up the price of food has been noth-

ing more than a hoax of gigantic proportion promoted by

the Grocery Manufacturers Association.

It’s all been a farce, a marketing strategy of criminal

proportion that has allowed the greed of the GMA to

encourage grocers across the country to raise consumer

prices and blame fuel-grade ethanol. Farmers have always

been somewhat trapped between rising fuel/fertilizer costs

and the greedy grocers who spend millions on packaging,

marketing and transportation and then blame commodity

prices. This has been one of the few times in American

history that the farmers have actually been able to make a

decent return on their investment, and the GMA has por-

trayed them as villains

While grocery prices remain high, we have ships loaded

with grain for export backed up in harbors because many

of the importing countries don’t have the ability to pay.

We have always had more than

enough grain. This year’s corn

crop will be the second-largest

in history. Countries around

the world are anxious to pro-

duce corn and other crops,

but need to have high-enough

market prices to be able to ef-

fectively do so. They have the

land, labor and technology, but

the market price is too low.

The grocery industry was able to convince Congress

and others that higher commodity prices were starving

people and causing human catastrophes of epidemic pro-

portion. The true fact is that those high commodity prices

were the only global bright spot for agriculture. It’s an op-

portunity lost for countries around the world to improve

their self-suffi ciency by cultivating millions of acres of ar-

able land that now lies fallow because of low prices.

Perhaps a good slogan for the GMA would be, “Why

do you need farmers when you have all these grocery

stores?”

That’s the way I see it!

Mike BryanPublisher & CEO

[email protected]


®, TM, SM Trademarks and service marks of Pioneer Hi-Bred.All purchases are subject to the terms of labeling and purchase documents.© 2008 PHI INDSL010514P238AVC

Today Pioneer is driving new opportunities to help industry become

more profi table by delivering high-quality grain, proven expertise

and innovative services to meet growing demands from the biofuels,

livestock and food production industries.

Several key Pioneer® brand hybrids have been developed for

end-use markets: High Total Fermentable (HTF) hybrids provide more

ethanol per bushel. High Available Energy (HAE) hybrids contain

more digestible energy for pork and poultry producers. Food-grade

corn hybrids offer food processors higher milling quality corn.

Delivering high-output products is only one piece of the

equation. Pioneer also is developing new ways to profit from

our products by using innovative tools. Pioneer MarketPoint®

resource will help buyers identify and buy the grain best

suited for their business, and Pioneer QualiTrakSM system

assists processors and growers in evaluating and understanding

quality variations of incoming grain.

To learn more about these products and services and our

commitment to American agriculture, visit www.pioneer.com/enduse


GreenShift is the original inventor and industry pioneer of Corn Oil Extraction technology.With over 40,000 hours of operational run time on our systems and years of know howintegrating extraction technology into corn ethanol plants, GreenShift has established itstechnology leadership and proven its reliability.

Participating in GreenShift’s corn oil extraction program is guaranteed to bring you the highestreturn, on the shortest lead time, at the lowest risk, and for the least amount of capital deployed.

Take advantage of GreenShift’s turn-key Corn Oil Extraction and Biodiesel Productioncapabilities and chose between extracting oil for conversion at our new fully operational biodiesel

facility or extracting oil and producing biodiesel onsite at your facility.

Generate over $8 million in additional income for a 50 million gallon per year facilityand over $12 million for a 100 million gallon per year facility.

Capitalize by purchasing our Corn Oil Extraction System and Co-located Biodiesel Production toreceive the greatest return on investment while increasing your renewable fuel production.

Removing oil from your DDG can also be expected to enhance dryer operationwhile reducing drying costs, reduce emissions of greenhouse gases and to

enhance the marketability of your remaining DDG.


www.greenshift.com

Contact GreenShift for more information aboutthe future of Renewable Fuel production.

GreenShift Corporation1 Penn Plaza, Suite 1612 • New York, NY 10119phone: 1 888 ETHANOIL • email: [email protected]

Established Technology Leadership.Proven High Yields. Consistent Production. Fully Automated.


ETHANOL PRODUCER MAGAZINE DECEMBER 2008 19© 2008 Syngenta, Inc. The Syngenta logo is a registered trademark of a Syngenta Group Company.

Step ahead with us. We’re hiring. As a world leader in agriculture and plant science,

Syngenta is uniquely positioned to help the renewable-

fuels industry reach its full potential. If you’re interested

in joining a team dedicated to shaping the future of

our industry, we want to hear from you. Syngenta is

now hiring to fi ll numerous positions in its expanding

renewable-fuels program. Visit www.syngentacareers.com

for more information and to apply online today.

We’re on the right path.

BI008_Ethanol_Producer_vend.indd 1 8/13/08 2:05:45 PM

20 ETHANOL PRODUCER MAGAZINE DECEMBER 2008

BUSINESS&PEOPLE

Business&PeopleEthanol Industry Briefs

Business

Share YourIndustry Briefs

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

Manly Terminal launches online trading service

Iowa-based Manly Terminal LLC has launched an Internet-based ethanol and multi-products trading platform, allowing buyers and sellers of various commodities to easily and anonymously post trade offers any-time. The service is free of charge to regis-tered users looking to make transactions, and matches buyers and sellers each business day between 8 a.m. and 4 p.m. Though ethanol was the fi rst commodity to be introduced, the company plans to add more commodities in the future, according to Manly Terminal President Lee Kiewiet. “We are only letting registered people view or use the site so that we don’t have it work against them in any way,” he said. “This gives buyers just another outlet to purchase their product.” EP

Florida company to purchase Wanzek

Fargo, N.D.-based ethanol plant con-tractor Wanzek Construction Inc. is be-ing acquired by MasTec Inc. for $215 mil-lion—$200 million in cash and $15 million in assumed debt, according to the Florida-based company. The transaction is expected to be complete by the end of the year. In the mean-time, MasTec is reviewing various funding options, including what the company called “equity and equity-linked alternatives.” Mas-Tec’s purchase of Wanzek would include 500 pieces of heavy equipment, including several specialized cranes for erecting wind turbine towers. Wanzek employs 1,100 skilled work-ers and tradesmen. In the past, Wanzek has worked with Poet LLC, Glacial Lakes Energy LLC, Abengoa Bioenergy Corp. and Verasun Energy Corp. Wanzek is currently acting as general contractor for Tharaldson Ethanol LLC in Casselton, N.D. EP

Telvent acquires DTNTelvent GIT SA

has acquired DTN Holding Inc. for $445 million, a move that will increase the Spain-based in-formation systems provider’s presence in North America and provide DTN with a platform to expand globally. DTN will main-tain its employee and service base that pro-vides commodity information and specialized weather forecasts. In the energy sector, DTN tracks the buying and selling of various re-fi ned fuels, providing pricing information to the industry and handling credit authoriza-tions. Telvent will explore ways to add DTN’s weather forecasting to its automated control systems, and add the agricultural sector to its business. Telvent is a sister company of bio-fuel producer Abengoa Bioenergy Corp. EP

Syngenta receives award for beet development

Switzerland-based agribusiness compa-ny Syngenta AG has been recognized for its work in developing a sugar beet variety than can be grown in tropical conditions. Syngenta received the World Business and Develop-ment Award because its new beet variety can be grown for sugar and ethanol production with signifi cant advantages for farmers and the environment. The sugar beets require less water than sugarcane and grow faster, allow-ing farmers to grow a second crop every year. Syngenta spent 11 years developing the tropi-cal sugar beet variety, which it fi rst introduced in India in 2007. The company is conducting adaption trials in many countries. The award was presented by the United Nations Devel-opment Program, the International Chamber of Commerce and the International Business Leaders Forum. EP

Range Fuels receives innovation award

International growth consulting com-pany Frost & Sullivan awarded Broom-fi eld, Colo.-based Range Fuels Inc. with its 2008 North American Fuels Technol-ogy Innovation Green Excellence of the Year Award on Sept. 17 at the Green Ex-cellent Awards Banquet in San Francisco. The award is presented to companies that have demonstrated superior technological advancement in the green energy fi eld, and whose technologies are aligned with sus-tainable and environmentally conscious objectives. Range Fuels’ technology con-verts biomass into ethanol without the use of enzymes. The company broke ground on its fi rst commercial-scale cellulosic eth-anol facility in November 2007 near Sop-erton, Ga. The fi rst phase of construction, which will reach a 20 MMgy production capacity, is expected to be complete in 2009. EP


BUSINESS&PEOPLE

People

Sponsored by

Mascoma names GM exec to scientifi c board

Andreas Lippert, director of global en-ergy systems for Gen-eral Motors Corp., has been appointed to the scientifi c advisory board of Boston-based cellulosic ethanol de-veloper Mascoma Corp. The addition of Lippert to the board is part of the continu-ing cooperative agreement between the two companies to develop cellulosic ethanol for commercial use. EP

Janssens joins Greenfi eld Project Management

Ireland-based Greenfi eld Project Man-agement Ltd., an investment and project management company that specializes in biofuels, recently announced the hiring of Marc Janssens as director of marketing. He brings to Greenfi eld international experi-ence as an account executive for compa-nies such as McCann Erickson and United States Container Lines, and has led trade missions for the regional government of Flanders. At Greenfi eld, he will have a cen-tral role in marketing and sales activity for the company’s ethanol blends. EP

Algenol hires Schlicht, Denman

Florida-based Algenol Biofuels Inc. announced the appointment of two new employees Sept. 15. Greg Schlicht has been named senior vice president of business development and general counsel. He will work with Algenol’s partners to commer-cialize the company’s process and oversee select corporate legal matters for the com-pany. Previously, he worked for VeraSun Energy Corp. Dax Denman will serve as Algenol’s senior program manger. He will oversee the work being completed at Al-genol’s labs and facilities. Previously, he worked for Amgen Inc., a California-based therapeutics company. Algenol’s technolo-gy uses algae to produce ethanol. The com-pany’s fi rst commercial-scale facility will be located in Mexico and produce 1 billion gallons of ethanol annually. Construction is expected to begin in 2009. EP

Range Fuels hires vice president

Colorado-based Range Fuels Inc. has announced the hiring of Robert McDon-ald as vice president of applied engineer-ing. He will be responsible for the detailed engineering function that will implement the company’s biomass conversion process for its commercial-scale cellulosic ethanol plants. Most recently, he served as busi-ness leader of synthetic gas and biofuels at Stone & Webster, a subsidiary of The Shaw Group Inc. EP

NCGA names new president

Bob Dickey be-came president of the National Corn Grow-ers Association on Oct. 1. He owns and operates a farm in Ne-braska that grows corn and soybeans, and raises swine and cattle. He has been a member of the Nebraska Corn Checkoff Board for 11 years, also serving as chairman. He was chairman of the U.S. Grains Council and a state senator in the Nebraska legislature from 1999-2001. EP

US Ethanol adds to boardDongho Kim has been appointed to

the U.S. Ethanol LLC board of directors to complete the term of Bong-Sik Min, who recently resigned. Kim holds a doctorate degree in microbiology from the University of Texas at Austin. He has founded phar-maceutical companies in the United States and Korea. EP

Ceres names new CFOPaul Kuc has

been named the new chief fi nancial offi cer for Thousand Oaks, Calif.-based energy seed and crop com-pany Ceres Inc. In his new role, he will oversee Ceres’ capi-tal management and fi nancial systems. Previously, he worked at pharmaceutical company Eli Lilly, and held domestic and global fi nance positions at Monsanto Co. EP

Aventine appoints Butz to board

Theodore “Ted” Butz has taken a seat on the board of di-rectors for Aventine Renewable Energy Holdings Inc. He will be a member of the Aventine board’s audit, and nominating and corporate governance committees. He is also vice president and general manager of the specialty chemicals group at Philadelphia-based FMC Corp. EP

Lippert

Dickey

Butz

Kuc




COMMODITIES REPORT

Natural Gas Report

Corn Report

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

By Jason Sagebiel, FCStone

Oct. 17—Natural gas prices have dropped dramatically in the past several months. The market topped out on July 3 at $13.58/MMBtu and has generally dropped ever since. The prompt month natural gas price is now trading at $6.93/MMBtu. Is now the right time to buy since the market has dropped 49 percent in a little more than four months?

Not surprisingly, there is no clear-cut answer. On one hand, the forward 12-month NYMEX strip price ($7.61/MMBtu) is still 11 percent higher than the actual 2007 NYMEX monthly aver-age settlement price ($6.86/MMBtu). On the other hand, prices are much more attractive than at any other time during 2008. Dur-ing the fi rst quarter of 2008, prices couldn’t break through $7.50/MMBtu before the second and early third quarter rallies.

A useful tool we use to assess value is to look at where prices are relative to the long-term trend line. The chart shows the actual average annual price over the past fi ve years and a forecasted price for the current and next two years based on current market prices. We have “drawn” a long-term price trend line using all eight years of data.

There is clearly an upward trend in natural gas prices, albeit with a great degree of volatility around the trend line. If the trend

line is an accurate refl ection of the long-term value of natural gas, then 2009 provides relative value compared to the trend line. In addition, 2009 natural gas values are considerably lower than 2008 values. Now may be a good time to consider partial hedges for 2009. EP

Casey Whelan, vice president of strategic initiatives, can be contacted at [email protected].

Oct. 21—The corn market experienced a rapid downward move in a short period. Within seven days the market traded from $5.63 to $4.53. At press time, the market rested at approximately $4 per bushel and volatility had faded somewhat, but remained high. The sell-off in corn came with a sell-off in all commodities due to an entire fi nancial meltdown.

The October USDA corn supply and demand fi gures changed only slightly compared to the soybean supply and demand. The corn yield was 154 bushels per acre versus 152.3 last month. Carry-out increased from 1.018 billion to 1.154 billion bushels. Corn de-mand for ethanol was reduced by 100 million bushels as gasoline consumption is expected to slow.

Livestock feed demand increased by 150 million bushels while other industrial use was lowered by 10 million bushels. Feed de-mand was increased due to lower grain prices and reduced avail-ability of distillers grains. Worldwide corn inventories fell by 2.18 million metric tons from September to October. One component of that equation was an increase in world corn use for livestock feed. From a coarse grain perspective the world carry-out actually increased by 0.15 million metric tons.

With the 1.7-bushel increase in yield from the September to October report, one could estimate the yield from October to No-

vember should increase by approximately 1 bushel per acre. There-fore, corn yields would be 155 bushels per acre. This would increase production by 79 million bushels using today’s planted acreage fi g-ure.

However, with a slowdown in the U.S. ethanol industry, what does this mean to the demand side of the equation? EP

Is now the right time to buy?

Market faces downturn, volatility remains


COMMODITIES REPORT

DDGS Report

Ethanol Report

By Sean Broderick, CHS Inc.

By Sean Broderick, CHS Inc.

Dollar’s strength impacts overseas trade

Demand questions loom large

Oct. 20—Distillers grains, along with every other market, has had its share of volatility in the past couple of weeks. After hitting a high of $190 delivered to California in the second half of September, we are now see-ing $175 delivered with little to no premium for November and De-cember. As Halloween approached, distillers grains has appreciated from the low 60s to the high 80s as a per-centage of the price of corn, which is an impressive move in a year where the fall temperatures have been rela-tively mild.

The potential that ethanol plants may slow, or even shut down, pro-duction is keeping buyers concerned about supply, and the old-crop corn basis is keeping it in the rations.

At press time, the International Distillers Grains Conference and Trade Show was ongoing in India-napolis. Exports are going to con-tinue to be an important feature of the distillers grains market, and there have been some interesting things going on in this arena. First, the strength in the U.S. dollar is not only curtailing trade overseas, but is also directly infl uencing trade with Canada and Mexico. Last week, the dollar appreciated more than 10 percent against the Canadian dollar. That hasn’t helped trade to the north, especially when the Canadian wheat and barley harvest was much better than past years’ averages. EP

Oct. 17—The world changed with the meltdown on Wall Street fol-lowing the failures of a string of big investment houses. Just as suddenly, worry over a weakening global econ-omy helped slash crude oil prices as fears of faltering fuel demand took center stage at home and abroad.

In that environment, which gen-erated crude futures losses to less than half its summer peak and cut near-month RBOB prices more than 30 percent from mid-September to mid-October, ethanol markets generally put buyers in the driver’s seat. Chicago ethanol trading on either side of $1.70 per gallon for near-term deals by late October ran nearly 44 cents cheaper than it left September.

Ethanol blending economics faltered some, but remained well in

positive territory. Ethanol production continued expanding to record highs, and there was growing concern that gasoline demand—down by double-digits on a year-on-year basis by some marketer estimates—could weigh on ethanol blending growth. Anecdotal signs included ethanol backing up at some terminals as blending slowed and some credit issues that stunted trading.

The U.S. DOE cut its projected growth for biofuel blending next year, assuming a softer economy. Also, weekly DOE data had conventional gasoline blended with ethanol down 7.6 percent week-to-week, at 3.151 million barrels per day. While still 45 percent more than one year ago, it was the lowest level since late August. EP

Regional Ethanol Prices (Monthly averages in cents per gallon)

Regional Gasoline Prices (Monthly averages in cents per gallon)

DDGS ($/ton)

Corn Futures Prices (December corn, $/bushel)

Natural Gas ($/MMBtu)

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

Cash Sorghum Prices ($/bushel)

REGION

West Coast

Midwest

East Coast

REGION

West Coast

Midwest

East Coast

LOCATIONMinnesota

California*

Chicago

Buffalo, N.Y.

Central Florida*Central Valley

DATESept. 19, 2008

Aug. 19, 2008

Sept. 19, 2007

NYMEX

N. Ventura

Calif. Border

July 2008

June 2008

July 2007

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

SPOT

280.724

197.803

206.901

SPOT

252.902

249.335

229.796

OCT. 2008130

172

125

150

150

HIGH4.27 3/4

5.64 1/2

3.68 1/2

OCT. 20086.83

6.21

4.90

614,000*

585,000

421,000

OCT. 17, 20083.083.033.193.233.151.03

BULK TRUCK (rack)

217.67

210.69

- - - -

RACK

269.804

258.743

253.815

SEPT. 2008140

188

120

147

176

LOW4.06 1/2

5.35 1/2

3.59

SEPT. 20087.50

6.19

5.70

SEPT. 19, 20084.474.424.544.584.575.44

RETAIL

247.574

237.902

242.280

RETAIL

356.094

339.963

350.605

OCT. 200895

140

105

114

126

CLOSE4.11

5.58 1/2

3.64 1/4

OCT. 20077.37

6.89

7.03

OCT. 25, 20073.663.543.323.713.334.21

SOURCE: OPIS

SOURCE: OPIS

SOURCE: CHS Inc.

SOURCE: FCStone

SOURCE: Sorghum Synergies

SOURCE: U.S. Energy Services Inc.

SOURCE: U.S. energy Information Administration*all-time monthly high


VIEWFROMTHE HILL

Year of the Rat, or Perhaps the ScapegoatChinese culture names each new year after an ani-

mal believed to best represent what that year will hold. This past year (ending Jan. 25, 2009, according to the Chinese zodiac calendar) was the Year of the Rat. The rat is a revered animal, thought to be courageous, clev-er and bright. It is also believed that enterprises begun in a rat year may not yield immediate returns, but those who are patient will see success.

This is a fi tting description of the year endured by America’s ethanol industry. Despite new beginnings—implementing a new renewable fuels standard, building increased ethanol infrastructure, moving to higher etha-nol blends, developing new ethanol technologies—it will take time to yield returns. Patience is a virtue familiar to this industry.

I offer that 2008 could very easily be characterized by another mythical animal: the scapegoat. America’s ethanol producers have been blamed for everything from the rising price of food to global warming to the price of gummy bears in Germany.

Headline after headline and CNBC interview after CNBC interview proclaimed that ethanol was all hype. They said it was little more than snake oil, delivering none of the benefi ts promised while making milk more expensive and starving children in Africa. Overheated rhetoric, dubious science, scurrilous accusations and even one claim that ethanol was a “crime against hu-manity” came to defi ne the attacks from anti-ethanol voices.

Under such a relentless, well-funded and coordi-nated attack, lesser industries might have given way to the pressure. This industry did not.

Redoubling our efforts and steeling our resolve, America’s ethanol industry fought back against its de-tractors, pointing out their inaccuracies, exposing their tactics and calling them out when their hypocrisy be-came too much to bear. This industry went on the of-fensive to defend itself from these baseless attacks that were designed for the sole purpose of deceiving the public and turning Americans against farmers and ethanol producers.

American ethanol pro-ducers were not the only ones engaged in this fi ght. Our friends in Canada, Eu-rope, Brazil and even India have joined with us in de-fending the global future of this industry.

We would be remiss if we did not recognize the brave souls on Capitol Hill and in Washington, D.C., who stood steadfastly with this industry during the worst of the storm. Sen. Chuck Grassley, Rep. Col-lin Peterson, Sens. John Thune and Tim Johnson, Rep. Stephanie Herseth San-dlin, USDA Secretary Ed Schafer and President George W. Bush all remained committed to America’s renew-able fuels industry. Absent their unwavering support, this industry would be in far more dire straights.

To be clear, the fi ght isn’t over. Corn prices are down, but they won’t stay there forever. Concerns about water use, carbon emissions, food prices, eco-diversity and global warming will be areas of focus in the next Congress and administration. With the federal budget constraints that will likely be in place, tax incentives, tar-iffs and other public policies will come under increased scrutiny and attack.

As the Chinese believe and is true of this indus-try, the progress we achieved in the Year of the Rat will yield results, but will take some time. Whether you be-lieve 2008 was the Year of the Rat or the Scapegoat, one thing remains certain: The success and future of America’s ethanol industry is directly associated with our ability to forcefully and coherently speak with the same voice.

Happy Holidays from all of us at the RFA!

Dinneen

Bob DinneenPresident and CEO

Renewable Fuels Association


RFAUpdate

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RFA elects new offi cersThe Renewable Fuels Association announced the election of offi cers and board of directors for the

fi scal year 2009. Offi cers include:Chairman Chris Standlee of Abengoa BioenergyVice Chairman Tom Branhan of Glacial Lakes EnergyTreasurer Nate Kimpel of New Energy Corp.Secretary Chuck Woodside of KAAPA Ethanol LLCPresident Bob Dinneen of the RFA

“The RFA is proud of the dedication and commitment of its members to assuring a vital American ethanol industry,” Dinneen said. “The opportunity this industry has to lead America into a new era of greater energy, environment and economic security is exciting.”

A list of the RFA’s board of directors is available at www.ethanolrfa.org.

Redding, White join RFA staffTwo ethanol industry veterans recently joined the RFA’s staff. Jim Redding has become the RFA’s vice

president for industry relations. He joins the RFA after more than 20 years at Aventine Renewable Energy Inc. He will serve as the chief point of contact for RFA member companies and others in the industry.

Also joining the RFA as director of market development is Robert White. He brings years of experience as a liaison between the ethanol industry and its customers. Most recently, White served as the deputy director of the Ethanol Promotion and Information Council.

“Jim and Robert bring an unmatched level of expertise and experience to the RFA and will greatly expand the scope of issues the RFA addresses on behalf of America’s ethanol industry,” RFA Chairman Chris Standlee said.

Food prices aren’t following drop in grain pricesAnti-ethanol interests from the livestock, poultry and food processing industries were quick to blame

U.S. ethanol producers for rising grain and food prices in the fi rst half of 2008. In fact, the premise was the basis for Texas Gov. Rick Perry’s failed renewable fuels standard waiver request.

However, as grain prices have fallen drastically from record highs, food prices haven’t fallen accord-ingly. A new report, “Will the Plunge in Grain Prices Mean Lower Food Prices at the Supermarket,” dis-cusses the relationship.

“Without question, the plunge in commodity prices in the past several months was the dominant fac-tor driving grain and oilseed prices higher,” the report concludes. “Ethanol production has continued to expand dramatically while the price of corn and other agricultural commodities has plummeted in the past four months. Still, food prices have continued to rise, undermining the assertion by ethanol critics that food prices and ethanol production are somehow strongly linked.”

The full report is available at www.ethanolrfa.org.


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BIObytesEthanol News Briefs

Nebraska university updates energy effi ciency statsThe Nebraska Center for Energy Sciences Research, located on the campus of the University of Nebraska-Lincoln, has com-pleted a new study that found the energy balance of corn-based ethanol is two to three times more favorable than previous estimates. The study, which has been sub-mitted to the Journal of Industrial Ecology for publication, also estimated that 13 gallons of ethanol are produced for every gallon of petroleum used in the production cycle of corn-based ethanol.

Wal-Mart funds researchThe Arkansas Biosciences Institute at Arkansas State University has received $369,000 from the Wal-Mart Foundation to complement a $1.48 million U.S. DOE grant to support research for growing corn hybrids that have cellulase enzymes within the germs of the kernels. ASU has been collaborating with Texas A&M University and the Applied Biotechnology Institute in San Luis Obispo, Calif., to develop this project. The researchers said they expect to have corn hybrids that are ready for market within three years.

Abengoa receives grantfor proposed plant Abengoa Bioenergy Corp. has received a $4 million grant from the Illinois Renew-able Fuels Development Program for a proposed $200 million, 88 MMgy ethanol plant in Madison, Ill. The new facility will be built by Abengoa on a 79-acre site. It will use 32 million bushels of “traditional cereal grains” per year as feedstocks and is expected to be operational by the end of 2009.

DuPont Danisco breaks ground in Tennessee The University of Tennessee Foundation’s Genera Energy LLC and partner DuPont Danisco Cellulosic Ethanol LLC broke ground Oct. 14 on a pilot-scale cellulosic

continued on page 32

INDUSTRYNEWS

Credit crunchThe recent global credit crunch and fi nan-

cial meltdown has been especially diffi cult for ethanol companies and other inventory-inten-sive businesses that need operating capital to stay running. “Biofuels is in a particularly bad place right now,” said Kevin Book, senior alter-native energy and fuels analyst for Friedman, Billings, Ramsey & Co. Inc., an institutional brokerage, research and investment banking fi rm. “It’s an expensive way of making a prod-uct that’s becoming increasingly less desirable to its main market—transportation fuels.”

Commodity prices are suffering, as well. “Recently, we’ve seen corn prices come down substantially, but the real problem is that gas demand has come down equally substantial-ly—on a year-to-date basis between 6 [percent] and 8 percent,” Book said.

VeraSun Energy Corp. was hit especially hard this year by volatile markets and a risk management strategy that locked in high-priced corn futures when it looked like corn prices would remain high earlier this year. Ac-cording to an 8-K fi ling with the U.S. Securities and Exchange Commission, that misstep could cost VeraSun $100 million in the third quarter of 2008. Asset manager Invesco Ltd. recently purchased nearly 16 million shares of VeraSun Energy, approximately 10 percent of the com-pany. “Large public, fi rst-generation producers look very attractive at the current share prices,” Book said.

Rick Eastman, chief executive offi cer of Pursuit Dynamics Inc., said what he and many in the industry may also be thinking: Consoli-dation is coming. “There are obvious indica-tions with the pure-play public [companies] that some consolidation may very likely hap-pen,” he said. “Is the ethanol industry going to go away? No, I don’t think so.”

The fi nancial crisis is hurting all industry players, so companies looking to acquire addi-tional assets must still come up with adequate leverage to do so. “Any transaction now is be-ing deterred or inhibited by the transaction costs and the credit crunch,” Book said.

In early October, Aventine shares sank to an all-time low of $1.93, followed by Pacifi c Ethanol Inc.’s 20-cent-per-share loss, drop-ping its stock to $1.08 per share, and VeraSun’s 12.4 percent dip to $1.84 per share. Shares of agribusiness giant Archer Daniels Midland Co. fell 87 cents, nearly 5 percent of its value, to $17.65. In contrast for example, when the ethanol industry was in its prime in 2006 and VeraSun started publicly trading, its stock was selling for just over $28 per share.

What about second-generation projects? Experts believe there’s a natural investor class willing to take the risk—either corporate stra-tegic investors or venture investors such as Vinod Khosla. “My expectation is that early-stage projects will not change much,” Khosla told Reuters. “Oftentimes in a recession, we see these projects go up as big companies cut back their most advanced research projects to pre-serve capital, but those that are let go start new projects outside the company, so it’s a healthy environment for early-stage projects.”

—Ron Kotrba


INDUSTRYNEWS

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DOE addresses midlevel blendsA preliminary midlevel

blend report released by the U.S. DOE in early October summa-rized how E15 and E20 blends affect emissions and perfor-mance in both vehicles and small non-road engines.

The vast majority of etha-nol used in the United States is blended as E10, with less than 1 percent of ethanol consumed as E85 in 2007, the report said. Given projected growth in etha-nol production and the new federal renewable fuels standard (RFS) in the Energy Indepen-dence & Security Act of 2007, some analysts believe the E10 market will be saturated in the next few years, possibly as soon as 2010. With only 7 percent of U.S. vehicles being replaced each year, a sig-nifi cant number of non-fl exible-fuel vehicles will remain on the road, restricting growth of E85 consumption. Given this reality, the pur-pose of the DOE test program was to assess the viability of using intermediate blends to help meet the RFS.

The DOE test program included techni-cal expertise from the DOE’s National Re-newable Energy Laboratory and Oak Ridge National Laboratory. The initial group of 11 vehicles was selected primarily to span the evo-lution in emission-control-system technology, but focused on 2003 and 2007 models. Five additional vehicles were included because they were likely to be sensitive to increased ethanol content. Results from 13 of the non-fl ex-fuel vehicles were included in this fi rst report.

When comparing E15 and E20 with tra-ditional gasoline, the DOE found:

Tailpipe emissions were similar.Under normal operations, catalyst

temperatures in the 13 cars were largely un-changed.

When tested under full-throttle condi-tions, approximately half of the cars exhibited

slightly increased catalyst temperatures with E15 and E20.

Based on informal observations dur-ing testing, drivability was unchanged.

In addition, 28 small non-road engines were tested, including lawn equipment and generators. When comparing E15 and E20 with traditional gasoline, the DOE found:

As ethanol content increased, regulat-ed emissions generally stayed within allowed limits, and engine and exhaust temperatures increased.

Commercial engines, as well as larger non-handheld residential engines, exhibited no particular sensitivity to ethanol from a du-rability perspective.

The effect of E15 and E20 on the durability of smaller, less-expensive handheld residential engines was not clear.

The fi rst report gave the fi ndings from the fi rst stages of a much larger overall test program. The second report of the series is expected in January.

—Susanne Retka Schill

SOURCES: RENEWABLE FUELS ASSOCIATION AND U.S. ENERGY INFORMATION ADMINISTRATION

Impact of Change in Biofuels Blends

ethanol plant at the Niles Ferry Industrial Park near Vonore, Tenn. The new facility, which is expected to be complete in late 2009, will have a production capacity of 250,000 gallons per year, using switchgrass, corn stover and other crop residues as feedstocks. The Tennessee Biofuels Initia-tive has researched switchgrass and begun contracting with farmers to raise the dedi-cated biomass crop for this facility.

Report tallies UK biofuel usageThe United Kingdom’s Renewable Fuels Agency released its fi rst quarterly report Oct. 7, which found that biofuels account-ed for 2.61 percent of the country’s road fuel during the quarter, exceeding the Eu-ropean Union’s 2.5 percent goal. Ethanol accounted for 16 percent of the renewable fuel, while biodiesel accounted for 84 per-cent. The most widely used ethanol feed-stock was Brazilian sugarcane, which ac-counted for 75 percent of all ethanol sold during the quarter.

Shell receives cellulosicethanol from IogenIogen Energy Corp. delivered more than 100,000 liters (26,000 gallons) of cellulosic


continued from page 30


INDUSTRYNEWS

Conference goers call for midlevel ethanol blends

For advanced biofuels to enter the marketplace, the conventional ethanol industry must continue its aggressive pursuit of striv-ing past an E10 “blend wall” and establish a mar-ket for higher blends. This was an overarching topic presented to attendees of the 2008 Advanced Biofuels Workshop & Trade Show in Minne-apolis on Sept. 28-30.

The renewable fuels standard (RFS) in the Energy Independence & Security Act of 2007 requires the United States to consume 36 bil-lion gallons of biofuel by 2022 and caps the re-quired consumption of corn-based ethanol at 15 billion gallons. For 2009, the RFS mandates 10.5 billion gallons of conventional biofuel and 600 million gallons of “advanced biofuel.” This new category consists of 500 million gal-lons of biomass-based diesel and 100 million gallons of undifferentiated advanced biofuel.

Ralph Groschen, senior marketing special-ist for the Minnesota Department of Agricul-ture, discussed the importance of expanding

E85 and midlevel blend infrastructure nation-wide. Blender pumps at gasoline retail stations could help in this regard. “Certainly, E85 has its challenges,” he said. “Blender pumps are a possible way of achieving a blend somewhere between E10 and E85 in combination with [fl exible-fuel vehicles]. If there becomes a sig-nifi cant legal market for conventional vehicles, midlevel blends will require some sort of (U.S.) EPA waiver.”

Brian Jennings, executive vice president of the American Coalition for Ethanol, agreed with Groschen in regard to mid- to high-level ethanol blends. “We need the transition of midlevel blends,” he said, adding that the Unit-ed States “cannot simply rely on the quantum leap from E10 to E85 to get the job done.”

He added, “I would make the case that if we don’t fi nd this pathway and we don’t have a market for advanced biofuel, it will chill in-vestment, stymie growth, and slow or delay for years the commercialization of advanced bio-fuel. This is not the corn-based ethanol indus-try’s problem; this is everyone’s problem.”

—Bryan Sims

Jennings


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

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

KAC.10442_EPM_Cir_7.5x3.375_4C 1 7/24/08 11:05:51 AM

INDUSTRYNEWS

More opportunities for E85 driversDrivers of the nearly 7 mil-

lion fl exible-fuel vehicles (FFVs) in the United States can enjoy increased access to ethanol as recent projects have resulted in openings of E85 stations in vari-ous locations nationwide, even an entire interstate corridor east of the Mississippi River.

In late September, a Mid-Atlantic Petroleum Properties station in Germantown, Md., celebrated its grand opening by offering VeraSun Energy Corp.’s trademarked VE85 brand of E85 for $1.85 per gallon for the fi rst 185 minutes of sales. The sta-tion is Mid-Atlantic’s seventh location to begin selling VE85. Rick Eggebrecht, vice president of market development at Vera-Sun, said the company was pleased to be part of the partnership to expand VE85 in Maryland, and the Washington D.C., area. “Expanding the availability of ethanol, in particular higher blends of ethanol, to American drivers throughout the country is critical,” he said.

San Diego-based Pearson Fuels was responsible for the opening of E85 fu-eling stations in Carlsbad, Concord and

Hayward, Calif., in early October. The fuel supplier planned to break ground on ad-ditional E85 stations in Beaumont, Perris, San Jose, Carmichael and Sacramento, Ca-lif., later in the month. The company has a unique plan that includes partnering with gas station owners to install E85 pumps at virtually no cost to the station owner, so long as they agree to fuel supply contracts with Pearson Fuels. In return, Pearson Fuels acquires all appropriate permits for the station and foots the bill for the pump installation, the sum of which can reach

up to $200,000, according to the company.

An E85 corridor has been completed along Interstate 65. The interstate runs 884 miles from Mobile, Ala., to Gary, Ind. Major cities along the way in-clude Nashville, Tenn.; Louis-ville, Ky.; and Indianapolis. The corridor was a two-year project funded in part by a $1.3 million U.S. DOE grant. Other partners in the project included the Etha-nol Promotion and Information Council, General Motors Corp. and several state organizations. According to EPIC, just three

years ago there were no E85 stations along the corridor. Now, motorists are never more than a quarter of a tank away from an E85 retailer. “This could not have been accomplished without the cooperation of the federal government, automakers and our industry partners,” EPIC Executive Director Toni Nuernberg said. “We look forward to the continued expansion of America’s fl ex fuel.”

—Kris Bevill

E85 is even more available to consumers across the United States through recent station openings and the completion of an E85 interstate corridor.



ethanol to Royal Dutch Shell PLC, its com-mercial business partner, in late September. The fuel was the fi rst part of Shell’s initial order of cellulosic ethanol from Iogen, which totaled 180,000 liters (47,550 gal-lons). Iogen said Shell purchased the fuel “for upcoming fuel applications.” Shell fi rst gained an equity stake in Iogen in 2002, and in July 2008, Shell increased its shareholding in Iogen from slightly more than 26 percent to 50 percent.

Industry addresses Science articleAn October Science magazine article ad-dressing cellulosic ethanol sustainability is-sues drew quick responses from concerned ethanol industry members, mainly because a New York Times news article said the Sci-ence authors “sounded a note of caution” about cellulosic ethanol production. Poet LLC stated the Times article “chose to focus on the potential environmental problems” of biofuel production, even though the Science article seemed fairly well-balanced. The Science article will be addressed in more detail in the January issue of EPM.



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INDUSTRYNEWS

IDGC: Improving DDGS exportsMore than 140 foreign buyers, nutritionists

and feed ingredient importers were among the 500 attendees at the 2008 International Distill-ers Grains Conference and Trade Show in India-napolis on Oct. 19-21. The event was designed to allow international buyers to network with U.S. distillers grains suppliers. Presentations were translated into seven languages, and interpreters were on hand during the International Meet and Greet Reception prior to the grand opening of the trade show.

Although Mexico is expected to continue being the largest importer of U.S. distillers dried grains with solubles (DDGS), many other inter-national markets are expected to increase im-ports of DDGS, as well. Presenters represent-ing Canada, Central America, South America and Asia each described the specifi c needs and market conditions in their regions. In addition, most sighted the value of the U.S. dollar as one variable that will help to determine how much U.S. DDGS is imported into their respective re-gions. Educating foreign buyers on the benefi ts of DDGS, addressing safety concerns and work-ing to ensure product consistency were all cited as ways to increase the use of U.S. DDGS in for-eign markets.

“Distillers grains is the best value in the marketplace today,” said Steve Markham, a mer-chandiser at CHS Inc. “It’s the best value per unit of energy, and it’s the best value per unit of

protein.” Product quality and consistency were cited by many as the primary concern of DDGS purchasers. According to Ken Hobbie, U.S. Grains Council president, it’s imperative that U.S. DDGS suppliers inform customers of the nu-tritional details of their products. As production and consumption of distillers grains increase, it will become necessary to combine DDGS from a variety of ethanol plants to fi ll large orders. “The better the whole industry makes their prod-ucts, the higher the price they can all receive in the bulk export market,” Hobbie said.

More details regarding the IDGC will be printed in the fi rst quarter 2009 issue of Distillers Grains Quarterly.

—Erin Voegele

More than 500 people attended the 2008 International Distillers Grains Conference and Trade Show in Indianapolis in October.

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INDUSTRYNEWS

DDGS export options available in Russia, ChinaU.S. activities related to the ex-

port of distillers dried grains with solubles (DDGS) are continuing to raise awareness and create access to markets, most recently in Russia and China.

The U.S. Grains Council is planning to conduct DDGS feed trials with the Moscow and St. Pe-tersburg, Russia, poultry industry as early as next spring, provided the Russian government certifi es the commodity for import. The USGC hopes that DDGS can be exported to Russia as early as January, accord-ing to Craig Coon, a researcher at the Center of Excellence for Poul-try Science at the University of Ar-kansas in Fayetteville, Ark. Coon was in Rus-sia the week of Sept. 14.

Russian poultry farmers primarily use sunfl ower meal and wheat for feed, but very little corn, Coon said. Two feeding trials are planned—for layers in St. Petersburg and broilers in Moscow. The market in St. Pe-tersburg alone would use 17,000 metric tons of DDGS annually, based on a 20 percent DDGS diet, Coon said.

With modern operations similar in size and scope to those in the United States, the

Chinese swine industry is also interested in DDGS, according to Bob Thaler, a swine nutrition expert at South Dakota State Uni-versity. He was recently in China to evaluate the USGC Swine Technical and Managerial Training program there.

Chinese producers plan to expand their industry from approximately 650 million pigs per year to at least 730 million, Thaler said, and producers told him that the country is unable grow all of the grain needed for the expansion. Therefore, China will have to im-

port a substantial amount of feed. “U.S. feed grains look to be the No. 1 choice in an import situation,” he said. As the industry grows, Chinese farmers will especially start looking at DDGS, he said.

To help bring DDGS overseas, North Star Container International, a full-service, non-vessel-operating common carrier and subsidiary of Minneapolis-based North Star Rail Intermodal LLC, has opened an offi ce in Chicago to provide mar-keting and overseas transportation services for grain products. North Star’s rail operation offers ethanol producers an intermodal truck and train service, which allows them to

utilize the international container shipping system by loading DDGS into containers at North Star rail terminals from either hopper trucks or railcars, or by loading directly into containers at the ethanol plant. The company has negotiated contracts with several major shipping lines serving the Asian, European and Latin American markets.

—Ryan C. Christiansen

Thaler, left, stands with Ying Qian, co-owner of Henan Muyuan Farms, a swine operation in Henan Province, China. The farm, the country’s second-largest swine operation, is looking into distillers grains usage.

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Siouxland sellscarbon creditsU.S. Energy Services recently helped Jackson, Neb.-based Siouxland Ethanol LLC to sell carbon credits garnered from the ethanol plant’s use of landfi ll gas for power. Siouxland had ICM Inc. redesign its thermal oxidizer to allow lower-energy landfi ll gas to be mixed with natural gas after Fagen Inc. completed construction of the production facility in December 2007, when landfi ll gas began fl owing to the plant. U.S. Energy Services will help to manage Siouxland’s future energy use, as well. EP


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

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INDUSTRYNEWS

Mascoma furthers cellulosic ethanol plans

Boston-based Mascoma Corp. continues its mission to produce cellulosic ethanol on a commercial scale with recent advancements in the lab and the fi nalization of a site for its fi rst commercial-scale plant in Michigan.

Researchers at Mascoma and Dartmouth College’s Thayer School of Engineering in Hanover, N.H., have genetically engineered a thermophilic bacterium that can be used in a fermentation process to secrete ethanol as its only detectable organic product. The scientists found that the microorganism, which can grow at very high temperatures, may have the poten-tial to signifi cantly lower the cost of cellulosic ethanol production because it doesn’t need en-zymes or yeast to produce ethanol. The Dart-mouth/Mascoma study was published online in early September in the journal Proceedings of the National Academy of Science.

In early October, Mascoma received $26 million in funding from the U.S. DOE for the construction of its commercial-scale facility. These funds are in addition to $23.5 million from the state of Michigan. The company fi rst announced its intent to build the plant in July 2007.

The company recently announced that af-ter an extensive review process of various sites, Kinross township, Mich., was chosen because of support provided by the state of Michigan,

and the extensive availability of wood and agri-cultural waste as feedstocks in the Upper Pen-insula.

Mascoma has partnered with Marquette, Mich.-based timber, mining and project man-agement company JM Longyear to form a new company called Frontier Renewable Resources, which will own the plant. Additionally, Mas-coma will collaborate with Michigan State Uni-versity and Michigan Technological University to adjust the company’s technology to available feedstock supply chain options. Mascoma has also partnered with Associate British Foods PLC to develop advanced conversion methods. General Motors Corp. and Marathon Oil Corp., investors in Mascoma, are also providing proj-ect support.

The 40 MMgy plant will use mixed hard-wood chips and other nonfood biomass mate-rials as feedstocks. A Mascoma spokeswoman said the company has targeted a construction start date of 2010, with a construction timeline of 18 to 24 months.

—Anna Austin

Siouxland Ethanol LLC has begun selling car-bon credits at its production plant in Jackson, Neb.

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INDUSTRYNEWS

Wisconsin ethanol producers receive boost from state

Wisconsin, the ninth largest ethanol producer in the United States, has contin-ued to invest in the future of alternative energy production within its borders by re-cently funding new technology for ethanol production and upgrading its transporta-tion infrastructure that would help move ethanol to market.

Gov. Jim Doyle authorized the Wiscon-sin Energy Independence Fund to award up to $500,000 to fi ve to 10 communities to help them create voluntary plans to derive 25 percent of their transportation and elec-trical energy from renewable sources in the next 25 years. Communities can obtain an application at http://power.wisconsin.gov before the Dec. 15 deadline. The grants will allow communities to hire an energy inde-pendence coordinator to create a baseline of information on the consumption of electrical energy, liquid fuels and potential feedstocks, or renewable sources of power, for future use.

The WEIF also allocated $600,000 for ethanol research in September. C5-6 Technologies Inc. in Middleton, Wis., will receive $350,000 to develop new enzymes to increase ethanol yields at corn-based eth-

anol plants. The company will isolate and commercialize thermostable enzymes that will recover more starch from ground corn than current enzymes. Also, Great Lakes Ag Energy LLC in Madison, Wis., was awarded $250,000 to perfect a pretreatment process for producing cellulosic ethanol.

Several other grants from the WEIF were announced in September, as well. Grand Meadow Energies LLC in Stratford, Wis., received a $265,000 state grant to opti-mize ethanol production from whey wastes, using the ethanol plant’s byproducts to raise algae to produce biodiesel. American Sci-ence and Technology received a $150,000 grant to research the development of bio-fuels and industrial chemicals from wood-chips, wood waste and switchgrass. Best Energies Inc. in Madison, Wis., received a total of $1 million, half in grants and half in loans, to develop and implement technol-ogy that will allow its facility to use corn oil from ethanol plants as a feedstock for biodiesel production.

The state will also spend more than $16 million to upgrade its rail lines, in part to handle increased transportation of ethanol. Specialty Ingredients LLC in Watertown,

Wis., received a $737,700 award to build a rail track and facility to more effi ciently transport ethanol and other products. The funds will allow the company to construct a double-spur track with a load-out facil-ity to serve other local companies shipping ethanol and other products. The project will reduce the number of trucks on state high-ways, and create savings in shipping costs for items including bentonite, ethanol, corn meal, distillers dried grains, sugar, salt and cement. In addition, River Valley Energy LLC in Beaver Dam, Wis., received a $3 million loan to construct rail yard facilities, and grain-based ethanol loading and receiv-ing facilities at a new ethanol production facility being developed at Prairie du Chien, Wis. “Freight rail plays a critical role in Wis-consin’s transportation system, moving 150 million tons of commodities every year, and driving economic growth and strengthening our agricultural economy,” Doyle said. “The grants and loans will develop our freight rail capabilities, and allow great companies like Specialty Ingredients to retain jobs and grow right here in Wisconsin.”

—Jerry W. Kram


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New Project Project Complete Project Expansion Expansion Complete

urrent ethanol producers have seen how the rise and fall of corn prices, especially brought on by late spring fl ood-ing in the Midwest, can affect their operations and ulti-mately their bottom lines. In July, corn prices skyrocketed to all-time highs, hovering at or above $8 per bushel. Un-

fortunately, some ethanol producers are still locked in at those high prices. Following this brief spike, corn prices then hit some of the lowest levels of the year, selling at or under $4 per bushel on the Chicago Board of Trade, down nearly 50 percent from midsum-mer.

On a positive note, this drastic downswing in corn prices may be a benefi t for plants now coming on line, equaling healthy profi t margins during the fi rst few months of operation. Plus, these etha-nol plants can hedge against futures contracts heading into winter. At press time, corn futures for December rose 15.5 cents, or 3.8 percent, to $4.18 per bushel, according to CBOT.

In this issue’s list, three plants completed construction: Bridge-port Ethanol LLC, a 50 MMgy plant in Bridgeport, Neb.; Southwest Georgia Ethanol LLC, a 100 MMgy facility in Camilla, Ga.; and Poet Biorefi ning-Marion, a 68 MMgy plant in Marion, Ohio.

Southwest Georgia Ethanol, the southeasternmost U.S. oper-ating plant, began grinding its fi rst batch of corn Oct. 10. It began

receiving corn Sept. 12, followed by a 90-car unit train that brought more than 300,000 bushels of corn on-site Sept. 21. “Our board, management team and employees have put in a tremendous amount of hours assembling all the pieces of this jigsaw puzzle,” said Murray Campbell, chief executive offi cer of First United Etha-nol LLC, which owns the plant. “Projects this size don’t happen overnight. It takes a commitment from stockholders and supporters to see them through.”

Range Fuels Inc. and Appomattox Bio Energy are two of the newest additions to this list, and both will use a feedstock other than corn. Range Fuels is constructing a cellulosic ethanol plant near Soperton, Ga., where it will employ a proprietary thermochem-ical process technology to break down woody biomass. The plant will initially produce 10 MMgy but plans to build out to a maximum nameplate capacity of 100 MMgy after its scheduled start-up date in late 2009. Appomattox Bio Energy, an operating subsidiary of Osage Bio Energy, is building a 65 MMgy ethanol plant in Hopewell, Va., that will use barley as its feedstock. The project broke ground Oct. 3, and contractors have arrived on-site, according to Chief Op-erating Offi cer Joel Stone.

—Bryan Sims

Lower Corn Prices Should Translate Into Sustainable Operations

To provide updates to this list, contact Bryan Sims at (701) 738-4950 or [email protected].

C

Ethanol Plant Construction

Location General contractor Process technologyCapacityFeedstockEthanol marketerDistillers grains marketerCarbon dioxide marketerBroke groundTarget start-up date

Cedar Rapids, Iowaundeclaredundeclared275 MMgycornArcher Daniels Midland Co.undeclaredundeclaredJune 2007fi rst quarter 2010

Appomattox Bio Energy Archer Daniels Midland Co.

Synopsis of progressPreliminary dirt work is underway.

Synopsis of progressN/A

Representing 2.8 Billion Gallons Annually


Hopewell, Va.Agra Industries Inc.Katzen International Inc. 65 MMgybarleyOsage Inc.N/AN/AOctober 2008second quarter 2010



Columbus, Neb.undeclared undeclared275 MMgycornArcher Daniels Midland Co.undeclaredundeclaredJuly 2007third quarter 2009


Mt. Vernon, Ind.Kiewit Energy Co.Delta-T Corp.113 MMgycornAventine Renewable Energy Inc.Aventine/Consolidated Grain and BargeundeclaredSeptember 2007fi rst quarter 2009

Location Design/builder Process technologyCapacityFeedstockEthanol marketerDistillers grains marketerCarbon dioxide marketerBroke groundTarget start-up date

Clearfi eld, Pa.Fagen Inc. ICM Inc. 110 MMgycornBionol Clearfi eldLand O’LakesN/AFebruary 2008January 2010

Location Design/builder Process technologyCapacityFeedstockEthanol marketerDistillers grains marketerCarbon dioxide marketerBroke groundStart-up date

Bridgeport, Neb.ICM Inc.ICM Inc. 50 MMgycornPoet Ethanol ProductsColorado Agri ProductsundeclaredSeptember 2007October 2008


Union City, Ind.Fagen Inc. ICM Inc.100 MMgycornMurexCHS Inc.N/AFebruary 2007October 2008

Archer Daniels Midland Co.

Aventine Renewable Energy-Aurora West LLC

Aventine Renewable Energy-Mt. Vernon LLC

Bionol Clearfi eld LLC

Bridgeport Ethanol LLC

Cardinal Ethanol LLC

Synopsis of progressAccording to a fi ling through the U.S. Securities and Exchange Com-mission on Oct. 6, the company has pushed back its target start-up date from March 2009 to June 2009. No further information was avail-able at press time.


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

Synopsis of progressOuter scope of project is approximately 95 percent complete. Foun-dations for fermentors have been poured. Work on grains area is un-derway, along with excavation and foundation work for drum dryers in the energy center. Design for water treatment plant is initialized. Fire suppression system is being installed.

Synopsis of progressAt press time, the company was running water tests throughout the plant, and boilers were operational. Corn was in silos in preparation for an Oct. 23 start-up date. Congratulations Bridgeport Ethanol LLC!

Synopsis of progressPlant staff training is complete. At press time, corn procurement was underway in preparation for start-up.

Project Complete


Aurora, Neb.Kiewit Energy Co.Delta-T Corp.113 MMgycornAventine Renewable Energy Inc.Aventine Renewable Energy Inc.undeclaredSeptember 2007June 2009



Keyes, Calif.Harris Construction Praj Industries Ltd.55 MMgycornEco-Energy Inc.Western MillingN/AJuly 2006November 2008


Goodland, Kan.JMC Engineering LLC/Agri-SystemsJMC Engineering LLC/Agri-Systems20 MMgycornundeclaredundeclaredN/AJune 2006fi rst quarter 2009

Cilion Inc. E Caruso LLC

Synopsis of progressAt press time, the company was testing various equipment compo-nents. Complete plant staff is hired.



Raeford, N.C.Biofuels Design/Clean Burn Fuels LLCKatzen International Inc.60 MMgycornundeclaredHarris Crane Inc.AirgasMay 2008July 2009


Obion, Tenn.Fagen Inc. ICM Inc. 100 MMgycornAventine Renewable Energy Inc.undeclaredN/ADecember 20062008

Clean Burn Fuels LLC Ethanol Grain Processors LLC

Synopsis of progressConstruction of fermentation tanks continues. Chiller building, cooling tower and grain-receiving building are complete. Work on distillation towers is underway. Dryers are on-site.




Johnstown, OntarioSNC-Lavalin GroupICM Inc. 200 MMly (53 MMgy)cornGreenField EthanolCommercial AlcoholsundeclaredOctober 2006December 2008


Shell Rock, IowaFagen Inc. ICM Inc. 110 MMgycornHawkeye Gold LLCundeclaredN/AJuly 2007fi rst quarter 2009

GreenField Ethanol Hawkeye Renewables

Synopsis of progressConstruction is approximately 90 percent complete. Tests on various process systems and electrical components are being conducted. All buildings are erected.



Menlo, IowaFagen Inc. ICM Inc. 110 MMgycornHawkeye Gold LLCundeclaredN/AJuly 2007fourth quarter 2008


Lamberton, Minn.Fagen Inc. ICM Inc. 55 MMgycornRenewable Products Marketing GroupCHS Inc.N/ANovember 2007May 2009

Hawkeye Renewables Highwater Ethanol LLC


Synopsis of progressCorn storage silos are complete. Rail construction continues. Energy center and process building are being enclosed. Tank farm and cool-ing tower are complete. Distillation tower is nearly complete. Con-struction continues on administration building. Natural gas lines are being installed. Work on electrical substation is underway. Installation of fi re suppression system is ongoing.


Location General contractor Process technologyCapacityFeedstockEthanol marketerDistillers grains marketerCarbon dioxide marketerBroke ground Target start-up date

O’Neill, Neb.Adams ConstructionVogelbusch USA Inc.100 MMgycornundeclaredundeclaredN/AJuly 2007late 2008


Havelock, OntarioProfab International Ltd.Delta-T Corp.80 MMly (21 MMgy)cornundeclaredThompson’s Ltd.undeclaredOctober 2007February 2009

Holt County Ethanol LLC Kawartha Ethanol Inc.


Synopsis of progressFermentation tanks and distiller’s grains area are complete.


Lawler, IowaFagen Inc. ICM Inc. 100 MMgycornGreen Plains Renewable Energy Inc.CHS Inc.N/AMay 2007March 2009


Lacassine, La.Praj Industries Ltd. Louisiana Green Fuels LLC25 MMgysugarcane/sweet sorghumundeclaredN/AundeclaredApril 2008mid-2009

Homeland Energy Solutions LLC Louisiana Green Fuels LLC

Synopsis of progressThis project is ahead of schedule. Rail track is laid, and work on con-necting to the main rail line is ongoing.


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Atkinson, Neb.Delta-T Corp.Delta-T Corp.44 MMgycornEco-Energy Inc.Frahm and DeitloffN/AJune 2006November 2008


Gibson City, Ill.Fagen Inc. ICM Inc. 100 MMgycornEco-Energy Inc.Ag Motion Inc.N/AOctober 2007March 2009

NEDAK Ethanol LLC One Earth Energy LLC

Synopsis of progressTesting is underway in preparation for start-up.

Synopsis of progressConcrete base for truck scales is being poured. Process building is being enclosed. Thermal oxidizer stack is erected. Rail yard, cooling tower foundation and water tanks are complete. Fermentation tanks are installed. Electrical and instrumentation work is ongoing in the dis-tillation and fermentation areas. Work on substation is in progress.


Longview, Wash.Makad Construction Corp.Lurgi Inc.55 MMgycornU.S. Ethanol LLCLansing Trade GroupundeclaredNovember 2006second quarter 2009


Hereford, TexasPanda Ethanol Inc.Thermo-Kinetics/Lurgi Inc.105 MMgycornAventine Renewable Energy Inc.Panda Ethanol Inc.undeclaredSeptember 2006fi rst quarter 2009

Northwest Renewable LLC Panda Hereford Ethanol LP





Merill, IowaDelta-T Corp.Delta-T Corp.50 MMgycornC&N Cos.Plymouth Energy LLCundeclaredMay 2007November 2008


Soperton, Ga.undeclaredundeclared10 MMgywoody biomassundeclaredN/AN/ANovember 2006fourth quarter 2009

Plymouth Energy LLC Range Fuels Inc.

Synopsis of progressCommissioning activities and mechanical testing procedures are un-derway. Boilers in energy center are fi red up. Air compressors are complete. Fire suppression systems are next to be tested.

Synopsis of progressThe site has been excavated for the 100 MMgy maximum nameplate capacity eventually intended for this plant. Road and basic infrastruc-ture work is in progress. Foundation for warehouse pad is poured, and steel is being erected.


Marion, OhioPoet Design & ConstructionPoet Design & Construction68 MMgycornPoet Ethanol ProductsPoet NutritionN/AMay 2007October 2008


Tucumcari, N.M.APS/United Stainless Process Technology

United Stainless Process Technology

10 MMgycorn/miloundeclaredundeclaredN/AOctober 2007early 2009

Poet Biorefi ning-Marion Route 66 Ethanol LLC

Synopsis of progressA grand opening ceremony was held Oct. 24. Congratulations Poet Biorefi ning-Marion!


Project Complete



Camilla, Ga.Fagen Inc. ICM Inc. 100 MMgycornEco-Energy Inc.Palmetto Grain Brokerage LLCAirgas Inc.January 2007October 2008


Casselton, N.D.Wanzek Construction Inc./Valley Engineering

Vogelbusch USA Inc. 120 MMgycornGreen Plains Renewable Energy Inc.Verde Bioproducts Inc.N/AMay 2007December 2008

Southwest Georgia Ethanol LLC(formerly First United Ethanol LLC) Tharaldson Ethanol LLC

Synopsis of progressThis plant began grinding its fi rst batch of corn Oct. 10. Congratula-tions Southwest Georgia Ethanol LLC!

Synopsis of progressElectrical work is nearly complete. Grain-receiving functions have passed testing.


Council Bluffs, IowaICM Inc.ICM Inc. 110 MMgycornLansing Ethanol Group BungeN/ANovember 2006December 2008


Janesville, Minn.Fagen Inc. ICM Inc. 110 MMgycornVeraSun Energy Corp.VeraSun Energy Corp.undeclaredJanuary 2007fourth quarter 2008

Southwest Iowa Renewable Energy LLC VeraSun Janesville LLC

Synopsis of progressCorn is arriving on-site. Final work on energy center is in progress. Work on steam lines to power plant is underway.


Project Complete



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:FINAN

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Pumping Up Profi ts With Retail VenturesBy Donna Funk

thanol plant managers should consider the fol-lowing: What if my plant could make a few extra million dollars per year?

Would I like to take advantage of tax credits and incentive programs that, as a producer, may not be available to my business?

These questions can be an-swered positively if a plant enters a joint venture with a retail gas station to provide ethanol-blended fuel. With ever-tightening margins it is critical to gain the maximum val-ue for a plant’s product. The spread in pricing between what plants cur-rently receive for ethanol versus what consumers pay for gasoline at the pump is not going away. Entry into the retail market is one way to bring some of those dollars back to the plant. Establishing a joint ven-ture with a local fuel retailer who has installed, or is interested in installing, blender pumps could be just the ticket to increasing profi ts.

For example, if a 40 MMgy plant sells ethanol for $2 per gal-lon and the consumer pays $4 per gallon at the pump, a $2 per gallon profi t isn’t shared with the ethanol plant. An investment in that retail location would add dollars to the bottom line of every gallon of fuel sold.

The Internal Revenue Service offers a blender tax credit that is otherwise not available to ethanol production facilities. By partnering with a fuel retailer, a plant can share in the blender credit, depending on how the joint venture is structured. This tax credit can be helpful to both new and operating plants by ultimately reducing federal income tax paid by the facility. Other incen-tive programs are available at the federal and state levels that can offset some of the cost associated with installing blender pumps.

ICM Inc. recently teamed up with a local fuel retailer to offer reg-ular unleaded fuel as well as E10, E20, E30 and E85 at its pumps. The blender relationship was the brain-child of ICM Chief Executive Offi cer Dave Vander Griend, who wanted to provide a way for local consum-ers to use a higher blend of fuel in their car and ultimately increase the overall usage of ethanol.

ICM’s partnership with a fuel retailer means it and the station, TJ Convenience, will return the blender tax credit to the consumer.

The station p u r c h a s e s ethanol from a plant just over 60 miles away, which also keeps money in the area econo-my.

The 2009 blender’s credit of 46-cents-per-gallon means E10 is 4.6 cents cheaper at the pump than regular unleaded fuel. Thanks to the credit, TJ Convenience can blend the fuel itself, putting more money in its bank while consumers actually realize savings.

Many ethanol plants are con-sidering additional profi t strategies. In most cases, it’s not a matter of if a blender relationship might benefi t the plant but rather when the rela-tionship might occur.

Donna Funk manages the biofuels division of Kennedy and Coe LLC. Reach her at [email protected] or (800) 303-3241.

EFunk



:LEGAL PER

SPECTIVES

California Courts Reconsider Ethanol-Related Greenhouse Gas Issues

By Todd Guerrero

n March, Time magazine pub-lished an article in which its au-thor concluded that with respect to global warming, biofuels aren’t part of the solution but instead

part of the problem. Time based its conclusions in part on a study by Tim Searchinger, published in Febru-ary in Science. The study, titled “Use of Croplands for Biofuels Increases Greenhouse Gases Through Emis-sions from Land-Use Change,” found that corn-based ethanol, instead of producing up to 20 percent carbon di-oxide savings, instead nearly doubles greenhouse gas emissions over 30 years and increases greenhouse gas emissions for 167 years.

The theory in the study was that converting unused forest or grass-lands to grow biofuel feedstock re-leases more previously stored green-house gas emissions than is saved on a life-cycle basis by replacing gaso-line with biofuels. Reaction from biofu-els supporters and experts was swift, including at least one point-by-point refutation and reference to other stud-ies that raise serious questions about the assumptions used by Searchinger, et al.

EPM readers are of course fa-miliar with this policy and scientifi c debate. But now it appears that the courts will soon be weighing in on the question of whether biofuels, and specifi cally ethanol, effect climate change.

In late September, oil refi ning giant Tesoro Corp. fi led an action in Superior Court in Sacramento, Calif., seeking to invalidate and stay enforce-ment of the California Air Resources Board’s recent adoption of regulations that require refi ners to increase the amount of ethanol in California gaso-line.

At issue in the litigation is CARB’s adoption of amendments to the Cali-fornia Reformulated Gasoline Regula-tions. The new CaRFGs will require refi ners to increase the amount of ethanol in California gasoline from the current level of 5.7 percent to 10 per-cent by Dec. 31, 2009.

In its petition, Tesoro makes es-sentially two claims. First, the compa-ny argues that in adopting any chang-es to CaRFG regulations, CARB must fi rst assume that any new amend-ments “maintain or improve upon emissions and air quality benefi ts” achieved by previous CaRFG regula-tions. In adopting the new regulations, Tesoro argues that CARB failed to follow this standard because the ad-ditional ethanol blending required by the new amendments will result in ad-ditional ethanol production, presum-ably causing increased greenhouse gas emissions. As evidence that in-creased ethanol production will lead to negative greenhouse gas impacts, Tesoro cites as authority the same Searchinger study reported in the March 2008 Time article.

Tesoro further alleges that CARB also failed to evaluate the cost that the amendments will visit upon refi n-ers and California consumers. Under

separate provi-sions of Cali-fornia law, be-fore CARB can adopt or amend any standard relating to mo-tor-vehicle fuel specifications, CARB must de-termine the cost-effectiveness of the new standard. Previously, CARB had estimated it would cost $200 million to $400 million in capital improvements to make the refi nery modifi cations required to bring gasoline into compli-ance with the new regulations. Citing a report from the California Energy Commission, Tesoro alleges that the estimated cost to consumers and busi-nesses of the CaRFG amendments will be 4.2 to 5.6 cents per gallon, or $716 million to $1.1 billion per year.

A response from CARB is ex-pected in the fi rst quarter of 2009.

Todd J. Guerrero is an attorney prac-ticing with the Agribusiness and Ener-gy group at Lindquist & Vennum PLLP. Reach him at [email protected] or (612) 371-3211.

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for ethanol producers to do just that.

By Ron Kotrba

Lactobacillus bacteria under a microscope. Conventional methods to detect contamination only identify the metabolic byproduct of contamination─lactic acids─not the presence of the organisms themselves. The proactive ability to detect the organisms can help avert bacteria contamination at an ethanol plant.PHOTO: ETS LABORATORIES




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Patented

The big ethanol process-design fi rms have done good work to help optimize plant operations in various ways, and they con-

tinue to make strides in increasing yields while decreasing ethanol refi neries’ envi-ronmental footprint. Various fractionation packages are becoming more readily avail-able, which allow producers more coprod-ucts and choices, but fractionation requires some serious capital investment—and in the middle of what could end up being the worst fi nancial crisis in history, it may be diffi cult to convince a plant or their fi nan-cial institution that this is the way to go.

“Many of the points in the production process that relate to engineering have been optimized,” says Gordon Burns, president of ETS Laboratories. “And the industry continues to develop new technology to im-prove the process.” He tells EPM how Rich-ard DeScenzo, a microbiologist with ETS, uses a black box at his booth during trade shows to represent the mystery of fermen-tation, which isn’t a new metaphor. Broin Companies, now Poet LLC, used a similar

prop at the 2006 International Fuel Ethanol Workshop & Expo, and then opened it to symbolize that they understood this impor-tant but mystifying step in ethanol produc-tion. Prior to that, EPM wrote a feature in January 2006 called “Unlocking the Black Box.” No, it’s not a new metaphor, but it is representative of some ethanol people’s un-derstanding of fermentation. “At the trade shows, you hear people saying this all the time, ‘We have great engineers and we’ve optimized our process, but we don’t really have a handle on optimizing our fermen-tations,’” Burns says. “We hear that again and again. Fermentation performance is

an overlooked fi eld for many in the etha-nol industry. There are a lot of engineers and very good ones, and there are a lot of fi nanciers, very good ones no doubt, and there are some microbiologists, but not in proportion to the importance microbiology plays in this whole process.”

DeScenzo tells EPM he’s been to six or seven ethanol-related conferences in the past year and only one of those shows, the FEW organized by BBI International, had a session on fermentation. “The focus was mostly on things like fractionation or maxi-mizing distillation, and they’re doing stel-lar work in those fi elds, but you don’t hear

PROCESS

A 1 MMgy side stream of ethanol from a 25 MMgy plant for ethyl lactate production via reactive distillation, could produce the same revenue in the specialized chemicals market as the remaining 24 MMgy of ethanol sold into the fuel markets.

much about fermentation—and what you do hear on fermentation primarily focuses on antimicrobials.”

Use a Surgical Laser, Not a Shotgun

Since 1977, ETS has provided labo-ratory services to the fermentation indus-try—mostly wine, beer and spirits. “We’re not a startup,” Burns says. Some of the company’s beverage clients also have fuel ethanol production interests. The spoil-age organisms that affect production of alcoholic beverages are the same ones that contaminate fuel ethanol plants. These mi-crobes compete with Saccharomyces cerevisiae for vital nutrients, while their populations multiply exponentially, creating levels of acetic and lactic acids that can inhibit Sac-charomyces growth.

ETS developed a microbiological tool kit called Scorpions, which detects the pres-ence of the acid-producing bacteria and yeast in the mash instead of testing for their byproducts, or the acids themselves, like most conventional methods. “What

we’re detecting is the organism—that’s the key difference—and what they’re detect-ing is the metabolic byproduct that has to build up in concentration to where they can actually detect it,” DeScenzo explains.

In other words, the Scorpions detection kit can actually identify the presence of these contaminate organisms long before they have produced enough lactic or acetic acid to be detected using conventional methods

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PROCESS

ETS Laboratories uses a genetics-based approach to detecting the presence of spoilage organisms, and offers a turnkey solution for ethanol producers—including selection of laboratory equipment, in addition to setup and training.

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of analysis. “What we’re offering is an extraordinary technique that fi nds the beginning of the sickness if you will, and allows the plant to take proactive measures to prevent the illness, instead of fi nding out once they have an extreme problem,” Burns says.

DeScenzo says, “In order to have enough lactic or acetic acid to be detectable you’re looking at a population of 100,000 to a million cells per milliliter, but we can detect down to the 10-cell-per-milliliter range.” Scorpions allows for the detection of bacteria in the incoming feedstock prior to milling and slurrying. “They can check feedstock as it’s coming in and while they’re building their yeast starters,” DeScenzo says. With a four or fi ve hour turnaround time, results can be in hand and intervention methods can be in play before any undesired microbe populations get out of control.

A growing population of contaminate organisms gone unde-tected can cause batch fermentation time to increase nearly two-fold, and in the case of continuous fl ow fermentation—not very common in dry-grind ethanol production because of the problem-atic issues with contamination—can reduce the alcohol content in the resulting beer. Either situation means money lost for the plant.

ETS offers two different service packages for ethanol produc-ers. The fi rst is more of a conventional forensics method using their novel microbiological approach, where plants can ship samples to ETS for a 24-hour turnaround time for results. The cost is $80 per sample to detect unwanted bacteria, and another $80 to detect con-taminate yeast, like Brettanomyces. If both tests are requested, the cost is $140. There is another test available to detect Saccharomyces

to make sure the population is growing as expected. The second service ETS can provide, and the proactive approach the company recommends for optimum effectiveness against contamination, is what Burns calls the turnkey solution.

ETS’s turnkey solution involves setting up the laboratory at an ethanol plant with the necessary analytical equipment and proprie-tary reagents to detect the presence of contaminate organisms early in the process. So, rather than a forensics approach to identify what went wrong, plant operators can detect contamination early on and intervene to prevent loss of yield. ETS doesn’t sell the required lab equipment but, if the ethanol plant doesn’t already have the necessary equipment, ETS will help the plant lab personnel select what is needed. To be fully automated, a robotic device is used to extract the DNA from the contaminate microbes in the mash, and an instrument called a real-time thermocycler is used to amplify the DNA. “We sell a kit that contains the molecular probes needed for doing the detection, the Scorpions reagents that are very specifi c, and the technical support and training,” Burns says. “If you started with nothing, the cost is about $120,000.” Then, the in-house cost for each assay is about $30 versus the $80 per assay ETS would normally charge.

A big advantage of knowing precisely which organisms are present is the ability to tailor the treatment to those organisms. De-Scenzo calls this ability to tailor treatment a “data-driven decision.” Not all bacteria can be effectively treated with the same antibiotics. Dousing a plant with antibiotics using conventional testing meth-

PROCESS


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ods detecting the presence of acids—especially when different mi-crobes can produce the same acid—is akin to a doctor offering a single solution to different patients all exhibiting fevers. “It’s a shotgun approach instead of understanding what the problem is, and designing a solution,” Burns says. “It’s a very ‘un-engineer-like’ process to go after the problem with a shotgun rather than a surgi-cal laser.”

“We want people to think of this as a preemptive screening tool,” DeScenzo says. If you can prevent these contaminate popu-lations from getting to the point where it’s impacting your fermen-tation effi ciency, then you’re saving money.”

More Effective CookingThe October EPM featured a story on Pursuit Dynamics

Inc.’s ethanol reactor tower (ERT) titled “In Dynamic Pursuit of Effi ciency.” Then it was too early for any real data from the fi rst full-scale trial of the equipment at Pacifi c Ethanol Inc.’s 40 MMgy Columbia plant in Boardman, Ore. The ERT is a pretreatment de-vice that is positioned on the side of the liquefaction tank through which slurry enters prior to liquefaction. Using highly atomized steam that impacts the slurry to cause more cell disruption and ac-tivate more starch than a jet-cooker at lower temperatures, thereby decreasing liquefaction time, reducing alpha amylase requirements by 50 percent, speeding up fermentation and ultimately producing higher ethanol yields.

Ongoing trials at Pacifi c Ethanol’s Columbia plant taught Pur-

suit Dynamics something about its equipment the company hadn’t encountered before: The potential for buildup of “super beerstone.” “We identifi ed we were producing a deposit that was magnesium phytate,” says Richard Eastman, president of Pursuit Dynamics. “For lack of a more technical term we call it super beerstone.” The design and low-temperature operations of the PDX array—the in-dividual reactors in the ERT—offered the perfect temperature and mechanical activity not only for the deposit to form, Eastman says, but for it to drop out. “Then it would coat the inside of the PDX array, reducing the tunnel bore size and eventually impacting the fl ow rate,” Eastman explains.

What the company discovered through its full-scale trial at a 40 MMgy plant is that it needed the ability to clean in place (CIP), which meant adding one more array to its ERT. “While it takes two banks or two PDX arrays to run the 500-gallon-a-minute fl ow rate at Boardman, we added a third array and all the necessary controls,” Eastman says. This gives the plant the ability to automatically valve one bank out and perform a CIP with a commercial cleaning solu-tion. “So you’re running a CIP cycle on each bank daily for one or two hours, and that eliminates the opportunity for buildup to take place,” he says.

Part of Pursuit Dynamics’ marketing strategy involves what Eastman calls creating “the greatest ease of entry possible,” and he says the reoccurring income model helps with that. “No one’s in love with the recurring revenue model, but all we’re asking for is a very small part of a large number,” Eastman tells EPM. The

PROCESS



company has already signed a four-plant commercial letter of in-tent with Babcock & Brown, and involves the Denco LLC plant in Morris, Minn., the Castle Rock Renewable Fuels LLC facility in

Necedah, Wis., Marquis Energy LLC in Hennepin, Ill., and Iro-quois Bio-Energy Co. LLC in Rensselaer, Ind.

“The one common voice we’re hearing says, ‘We are more than interested in looking at technologies that would deliver us a 10 per-cent yield benefi t,’” Eastman says. “Everyone’s situation is differ-ent, but 10 percent is 10 percent. And that could be the 10 percent that keeps your head above water.”

The company states it still expects to see a 50 percent reduc-tion in alpha amylase use as a result of employing its ERT, which alone could amount to a savings of a half-a-million dollars a year.

Atypical Product Diversifi cationEfforts to perform back-end oil extraction or the more capital-

intense front-end fractionation to diversify and enhance coproduct streams continue to move forward, but a project between the Nation-al Corn Growers Association and Michigan State University looked outside the box of conventional coproduct diversifi cation. The project involved the production of ethyl lactate through the combi-nation of lactic acid and ethanol downstream of fermentation in a relatively simple process called reactive distillation. “The intention of this project was to try and provide some diversity for products from starch-based feeds, so producers could have more products to sell,” says Carl Lira, MSU professor of chemical engineering and thermo-dynamics.

An ethanol plant could either outfi t a small fermentation tank to produce lactic acid in a controlled manner on-site, or it could pur-

PROCESS

Full-scale trials of Pursuit Dynamics’ ERT, shown above, taught the company it needed to install an additional reactor bank at the 40 MMgy Pacifi c Ethanol plant to allow for clean in place (CIP) on one bank at a time while not interrupting operations. CIP eliminates buildup of “super beerstone.”

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chase lactic acid for reaction with the ethanol it already makes. Today ethyl lactate is predominantly produced in a complicated process by the petrochemical companies, and used in specialized market appli-cations such as micro-circuit fabrication in the electronics industry, mainly because it’s a clean solvent.

Richard Glass, NCGA vice president of research and develop-ment, says a 1 MMgy side stream of ethanol from a 25 MMgy plant for ethyl lactate production via reactive distillation, could produce the same revenue in the specialized chemicals market as the remaining 24 MMgy of ethanol sold into the fuel markets. The researchers were also able to demonstrate the ability to produce ethyl lactate at a profi t while selling it at half the market value petrochemical companies typ-ically charge. Lira says the production costs were closely tied to the selling price of lactic acid, so if an ethanol plant where fermentation is already a critical function could ferment some of its simple sugars into lactic acid using Lactobacillus, for example, thereby lowering the cost of obtaining the organic acid, then even better economics could be gained. “We were able to obtain a 30 percent return on investment and sell it for half the price of current market value,” Lira says.

NCGA holds the license for this technology and is eager to dis-cuss it with ethanol plants looking to diversify its coproduct stream in a manner unlike what’s commonly investigated today. Glass says his dream is the integrated biorefi nery where limitations arise only by one’s own imagination and the ability to build the system. “You can make a lot of different value-added chemicals—glycols, epoxydes, ethers—everything but the oink,” Glass says. EP

Ron Kotrba is an Ethanol Producer Magazine senior writer. He can be reached at [email protected] or (701) 738-4942.

PROCESS

Lira works in his lab on bench-scale reactive distillation of ethyl lactate, an ester compound used in the electronics industry that could be produced at a dry-grind ethanol plant to diversify its coproduct stream.

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Fundamentals Remain Strong

Market gyrations can temporarily obscure the fundamentals. Although corn prices dipped in response to the fl agging stock market, demand for corn should continue to pressure supplies. Ethanol producers also need to track crude oil prices as they have an increasingly important impact on prices. EPM talks to

Iowa State University economists who have been plotting the numbers.

By Susanne Retka Schill



The fi nancial troubles on Wall Street affected the grain markets much like the weather does. Just as the June fl oods affected the market

psychology and sent corn markets sky high last summer, the credit crisis put the commodity markets into a dive. Predicting such gyrations is impossible, but analysis shows the fundamental drivers of the corn market still indicate strong demand keeping pressure on supplies in the next few years. However, the corn market is in-creasingly infl uenced by crude oil’s relationship with ethanol demand.

Bob Wisner, an Iowa State University agricultural economist specializing in biofuels,

expects the use of corn in the ethanol industry to grow and to keep the pressure on corn prices. He has charted expected growth in the ethanol in-dustry against the USDA supply and demand esti-mates using the Renew-

able Fuels Association’s numbers indicating 1.984 billion gallons of ethanol capacity are under construction in late 2008. Several of those plants are scheduled to come on line in the last half of the current corn marketing year. Another major component of the expansion in the 2008-’09 corn marketing year will come from new ethanol plants that were operational for only part of the previous year. “I would ex-

pect that expansion in ethanol will give impor-tant support for corn prices and be an impor-tant factor encouraging the corn market to pull some acreage in from other crops.”

Wisner has plugged those demand fi gures into a spreadsheet built on the USDA’s supply and demand reports and includes scenarios for low, medium and high yields. (See chart on page 71). The chart shows the numbers for the 2008-’09 crop using the crop estimates from the October USDA World Agricultural Supply and Demand report. The 2007-’08 fi gures are for the marketing year that closed in September (for the crop harvested in 2007), and show the October USDA projections for total usage.

Wisner says the low, medium and high scenarios show varying yields based on yield trends, plus or minus two or three bushels on either side. The line for historical probability indicates how often the national average corn yields were above or below the trend line since USDA began tracking the national average corn yield. “One good year like 1994 or 2004 would take a lot of pressure off the corn sup-ply,” he comments. “And conversely if we had a year with a drought like in the 1980s or the 1993 fl ood year, it would tighten the supplies dramatically.”

Crude Oil ImpactThe other big factor for corn ethanol use

is the price of crude oil, Wisner adds. “We saw that last winter when the bidding war for acres

of corn, soybeans and wheat was fueled by a surge in crude oil prices,” he says. Prices of $71 a barrel at the end of June 2007 rose 41 per-cent to $100 per barrel in February. “That was an important driving force in the commodity market,” he recalls. At the same time, the En-ergy Bill was passed with increased mandates for corn ethanol and cellulosic ethanol, adding even more bullishness to the market.

Crude oil prices have a huge impact. Wis-ner’s chart in August, based on the prices at that time, projected a range of corn prices for the current marketing year of $5.10 to $5.90 per bushel. Adjustments to the USDA projec-tions for corn supply from the October report, and the weakening of the crude oil market in early October, dropped the corn price range to $4.10 to $4.50.

Recalling last year’s bidding war for acres among corn, soybeans and wheat, Wisner says, “those prices looked very high at the time, but looking back after what we saw in early June and July they now look low to a lot of peo-ple.” There is still a need for the market to bal-ance the acreage between soybeans and corn, but how intense the competition between the crops will be depends on several factors. The October supply and demand report showed sharply higher soybean supplies than expected, which would dampen the bidding. However, several other factors will be watched closely, Wisner says. “Crude oil prices will be very important. South American weather and fi nal

Wisner

CORN


Continued on page 75

CORN


Updated: 10/13/2008

Year: (production/marketing) 1 2004-05 2005-06 2006-07 2007-08 Low Med. High Low Med. 4 High Low Med. 4 High Yield (bu. per acre) 160.4 147.9 149.1 151.1 152.0 154.0 155.5 148.0 157.5 162.0 150.0 159.0 164.0Long-term Historical Yield Probability: 18% 65% 17% 18% 65% 17%

Supplies: Planted acres (million) 80.9 81.8 78.3 93.6 86.9 86.9 86.9 91.0 91.0 91.0 94.0 94.0 94.0 Harvested acres (million) 73.6 75.1 70.6 86.5 79.0 79.2 79.3 83.4 84.0 84.0 86.4 87.0 87.0 Production (mil. bu.) 11,807 11,114 10,535 13,073 12,008 12,200 12,331 12,343 13,230 13,608 12,960 13,833 14,268 Beginning Carryover (mil. bu.) 958 2,114 1,967 1,304 1,624 1,624 1,624 1,149 1,149 1,149 1,099 1,099 1,099 Total Supply (incl. imports) 12,776 13,237 12,514 14,395 13,647 13,839 13,970 13,509 14,394 14,772 14,076 14,947 15,382

Total Usage: (mil. bu.) Feed & residual 6,158 6,155 5,598 5,999 5,425 5,450 5,475 5,150 5,500 5,475 5,200 5,500 5,550 Ethanol 1,323 1,603 2,117 3,000 3,920 3,950 3,975 4,400 4,450 4,475 4,775 4,850 4,875 Food, ind. & seed 1,363 1,378 1,371 1,338 1,335 1,340 1,350 1,340 1,345 1,350 1,340 1,345 1,350 Exports 1,818 2,134 2,125 2,435 1,925 1,950 1,925 1,875 2,000 2,050 1,850 2,000 2,050 Total Usage 10,662 11,270 11,210 12,771 12,605 12,690 12,725 12,765 13,295 13,350 13,165 13,695 13,825

Ethanol Usage: 2

Ethanol usage (bu. corn) 1,323 1,603 2,117 3,000 3,920 3,950 3,975 4,400 4,450 4,475 4,775 4,850 4,875 DDGS production (Mil. bu. corn equiv.)3 227 282 371 524 683 689 693 766 775 779 831 844 848 Ethanol usage (bu. per acre) 18 21 30 35 50 50 50 53 53 53 55 56 56 DDGS production (bu. per acre equiv.) 3 4 5 6 9 9 9 9 9 9 10 10 10 Ethanol usage (% corn production) 11.2% 14.4% 20.1% 22.9% 32.6% 32.4% 32.2% 35.6% 33.6% 32.9% 36.8% 35.1% 34.2% DDGS production ( corn equiv.% of crop) 1.9% 2.5% 3.5% 4.0% 5.7% 5.6% 5.6% 6.2% 5.9% 5.7% 6.4% 6.1% 5.9% Mil. bu. increase in ethanol vs. prev. year 280 514 883 920 950 975 450 500 525 325 400 425

Ending Carryover: (mil. bu.) 2,114 1,967 1,304 1,624 1,042 1,149 1,245 744 1,099 1,422 911 1,252 1,557 Carryover as percent of supply 16.5% 14.9% 10.4% 11.3% 7.6% 8.3% 8.9% 5.5% 7.6% 9.6% 6.5% 8.4% 10.1% Carryover, weeks of total use 10.3 9.1 6.0 6.6 4.3 4.7 5.1 3.0 4.3 5.5 3.6 4.8 5.9

Prices: U.S. weighted avg. farm price $2.06 $2.00 $3.04 $4.25 $4.50 $4.25 $4.10 $5.60 $4.35 $4.20 $5.40 $4.25 $4.15 Iowa weighted avg. farm price $1.96 $1.95 $2.99 $4.20 $4.45 $4.20 $4.05 $5.55 $4.30 $4.15 $5.35 $4.20 $4.10 Counter-Cyclical Pmt. $0.30 $0.35 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 Harvest price (central Iowa) $1.60 $1.40 $2.80 $3.30 $4.00 $3.75 $3.60 $5.20 $4.00 $3.75 $5.00 $4.60 $4.30 Dec. Futures Price (harvest avg.) $1.98 $2.00 $3.15 $3.80 $4.60 $4.30 $4.20 $5.90 $4.60 $4.35 $5.70 $5.30 $4.90

Other:

Feed use % chg. Low-yield years vs. 2007-08 -9.6% -14.1% -13.3%Mil. bu. domestic corn feeding replaced by increased DDGS 2 25 43 75 119 122 4 4 53 7 4 34 11 4

Mil. bu. corn exports replaced by increased DDGS 6 11 15 34 38 38 39 21 22 23 40 22 22Mil. bu. change in corn feeding vs. prev. year 363 -3 -557 401 -574 -549 -524 -300 50 25 -300 0 50% decline in corn feeding vs. prev. year: -9.6% -9.1% -8.7% -5.5% 0.9% 0.5% -4.6% 0.9% 1.8%Net change in domestic corn feeding (mil. bu.) vs. prev. yr., incl. DDGS 388 40 -482 519 -452 -544 -520 -247 57 29 -266 11 54

Ethanol Usage Projections & Corn Balance Sheet (mil. bu.) (Med. 2008 crop production based on USDA October Crop Report)

Historic Projected 2010-2011Projected 2009-2010Projected 2008-20091 Marketing year starts at Sept. 1 of the production year and ends Aug. 31 of the following year. 2 DDGS substitution for corn feed-ing is based on 17 pounds of DDGS per bushel of corn. Assumed total DDGS consumption: 42.5% fed to dairy, 32.5% to beef, 5% hogs, 5% poultry and 15% exported in 2007-’08 with gradually increasing future exports and a slightly decreasing percentage fed domestically.3 Includes corn equivalent of DDGS exports4 Medium yield approximately equals 1990-2007 trend yield. 1995-2007 yield trend is modestly higher, with two low years and one very high year tilting the trend line upward. Actual yield has been below the 1995-2007 trend all but one year (2004) since 2002. Actual yield has been below the 1990-2007 trend all except two years since 2004. Key Balance Sheet Assumptions: 1. No changes in Conservation Re-serve Program2. Crude oil price stays in $75 to $95 per barrel range3. U.S. ethanol mandates, blend-ing credit and import tariff are un-changed and enforced 4. U.S. and world economies have gradual slowing of growth through 20105. U.S. dollar stabilizes relative to foreign currencies near Oct. 7, 2008 levels6. U.S. biodiesel mandate is imple-mented for 2009 and 2010

SOURCE: ROBERT WISNER

CORN


Agricultural economist Don Hofstrand, co-director of the Ag Marketing Resource Center at Iowa State University, has plotted ethanol and corn prices along with ethanol production

costs and farmer costs to develop the accompanying chart. With all prices con-verted to the dollar amount per bushel of corn in the chart, it gives a picture of the size and recipient of ethanol profi ts for the last three crop marketing years.

The chart shows that the initial ben-efi ciaries of the corn ethanol expansion were ethanol producers, Hofstrand says. They received large profi ts indicated by the spread between the corn price line and the ethanol price line (the maximum

or breakeven price ethanol producers can pay for corn). How-ever, these profi ts attracted new fi rms to the industry and ethanol production capacity expanded. As a result of the ex-pansion, ethanol producers bid up the price of corn and profi ts shifted from ethanol producers to corn producers when the price of corn began to rise. However, the ultimate benefi ciary of these profi ts over the long-run are not the corn producers, but the landowners, as the price of cash rent begins to rise as indicated in the bottom blue sections. “My premise is the blue area—Land Owner Return (rent)—will continue to expand be-cause farm operators will bid these profi ts into higher land prices and rental rates, just as the ethanol producers bid their profi ts into higher corn prices.” However, a portion of these profi ts will be bid into higher input prices for necessities such as fertilizer and seed.

This is all based on ethanol prices staying high. If etha-nol prices drop substantially, profi ts will be greatly diminished. Although a long period of lower profi ts will eventually result in lower land values and rents, the initial profi t squeeze will be shared by the ethanol producer, corn producer and production input suppliers.

Chart ExplanationAll values in Hofstrand’s chart are expressed in dollars

per bushel of corn. For example, rather than expressing the price of ethanol per gallon, it is shown as the price of ethanol per bushel of corn.

Ethanol production costs are the tan-colored zone be-tween the ethanol price and ethanol breakeven corn purchase price. Hofstrand has created a hypothetical ethanol plant that is used to track monthly ethanol profi ts. In addition to fi xed and operating costs, he plugs in actual prices every month from the USDA and Energy Information Administration for ethanol, dis-tillers grains and natural gas. The income from distiller grains sales is deducted from the production costs to compute the breakeven price the ethanol plant can pay for corn.

Similarly, farmer costs and breakeven corn selling prices are based on two hypothetical 1,000-acre-farms in north cen-tral Iowa using Iowa State University Extension Service crop budgets. One farmer owns all the land debt free and the other rents all the land. The two lines show the breakeven price each farmer needs for corn. The green section is the cost of production such as fertilizer, seed, labor and machinery. The difference between the two lines (the blue section) is the cash rental rate the tenant farmer must pay for the land.

Where Are the Profi ts Going?

Hofstrand

CORN

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CORN

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acreage actually planted there will help to determine how many soybean acres we need in the U.S. to meet growing world demand,” he says. “What we’ve seen so far is that the increased acreage in South American soy-beans will be quite modest. We won’t be able to sharply reduce our soybean acres here to meet growing world demand.”

If Ethanol Use Hadn’t Expanded

Wisner also has used his Ethanol Usage Projec-tions and Corn Balance Sheet to run a “what if ” scenario. Where would corn prices be if the ethanol industry hadn’t expanded to use 2.7 billion bushels more corn than it had in 2004? Taking into account the lower ethanol demand in his hypothetical scenario,

0

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Continued from page 70

SOURCE: ROBERT WISNER

CORN


Wisner adjusted several things in the model such as boosting average corn yield 2 bushels higher because there would be less marginal acres planted and less continuous corn plant-ed. Total acreage was dropped and usage for exports and livestock feeding adjusted higher. Plugging all that into the corn usage chart, he predicts the $2 per bushel corn prices seen in 2004 through 2006 would be even lower, at $1.60 per bushel U.S. average farm price in 2008-’09. “Our conclusion is without the ex-pansion, U.S. agriculture would be struggling with large excess capacity, large carryover stocks, high program costs and low prices and much less volatility in prices, of course,” Wisner says.

In October, all eyes were on the fi nan-cial markets, raising the question of what im-pact Wall Street’s crisis will have on the corn and ethanol industries. “I’ve been wrestling with that question,” Wisner says. “There’s a linkage, and with the extreme moves we’ve seen in the fi nancial markets, I believe that linkage is going to be stronger than it has been in the past. The No. 1 connection is

that if you slow the world economy, you slow the growth in the demand for crude oil and that tends to put downward pressure on crude oil prices. That also causes liquida-tion by index fund investors in crude oil and other commodities. That affects crude oil prices and very directly affects ethanol. The potential impact on agriculture is larger than in the past because in agriculture we’re now producing for two markets, one for food and one for energy. The energy market is more sensitive to what happens in fi nancial markets—more sensitive than the food mar-kets.” At press time, Wisner says he believes there is some overreaction and panic that is depressing that market but over time that will subside. “There will be some moves by the U.S. government and some foreign govern-ments to bring less volatility in those markets and, as that occurs, the commodity markets will begin to stabilize and focus more on lon-ger term fundamentals—the need for corn land for ethanol, the need for soybean acres for growing food demand especially in China and other Asian markets, and the need for

vegetable oil for biofuels,” Wisner says. “I’m expecting by January or February these mar-kets will show more stability than they have in the past couple of months.”

Iowa State University ag economists have launched a monthly newsletter at www.agmrc.org/agmrc/renewables. They are compiling data from USDA, the Energy In-formation Agency and other sources, along with analyses done by colleagues in Iowa and neighboring states. An ethanol profi t-ability spreadsheet is included showing the impact of corn and natural gas prices and other variables on a model ethanol plant. The spreadsheet allows ethanol producers to plug in specifi c values for overhead costs and debt service and see how the numbers play out. EP

Susanne Retka Schill is an Ethanol Pro-ducer Magazine staff writer. Reach her at [email protected] or (701) 738-4922.

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Building Blocks to Biofuels Success

Federal support for ethanol has been crucial for the growth of the ethanol industry as it expanded from a regional specialty fuel to an energy source

of national importance. As the transition begins from fi rst-generation to second-generation fuels, the government has created a plan to continue to help the industry develop new feedstocks and technologies to fulfi ll the

new renewable fuels standard.

By Jerry W. Kram



Ethanol production is in transition. The capacity of plants currently producing corn-based ethanol and those under construction is rapidly

approaching the limit set by the federal renewable fuels standard. As the fi rst generation of ethanol production reaches its limit, it will be up to new ethanol technologies based on cellulosic feed-stocks to reach the goal of 36 billion gallons of ethanol production by 2022, as required by the Energy Independence & Security Act of 2007. Currently, second-generation technologies are in their infancy. A few plants have come on line, but they are pilot-scale plants with limited capacity. More pilot-scale plants are expected to come on line in 2009. But in order to reach the lofty goals set by the EISA, a signifi cant investment in both research and implementation will be needed.

Much of the fi nancing, of course, will come from the private sector. But the federal govern-ment will continue to have an important role in boosting the industry. The bulk of the support will come from programs administered by the U.S. DOE and USDA. These agencies have been at the forefront of promoting renewable fuels even when the price of oil was $10 per barrel—

dark days for the ethanol industry. Although en-ergy prices have increased to the point where all biofuels seem to be a smart bet, federal support for new generation fuel sources through grants, loans and loan guarantees remains a vital part of developing this infant industry.

The level of support has been signifi cant. In addition to the EISA, the 2008 Farm Bill included $1 billion in mandatory funding for renewable energy and energy effi ciency projects, including $210 million in loan guarantees for cellulosic etha-nol plants. Under the auspices of the Advanced Energy Initiative launched by the Bush Admin-istration in 2006, the DOE has committed to in-vesting more than $1 billion in partnership with industry and the research community to develop and deploy advance biofuels technologies by 2012. That funding includes up to $240 million for demonstration-scale projects, $400 million for bioenergy centers and up to $272 million for commercial-scale biorefi neries.

Administering these programs is the Bio-mass Research and Development Board, which Congress created in 2000. The board coordinates biofuels and other biobased products research, development, procurement and implementation

among and within government agencies. Its goal is to maximize the benefi ts of federal grants and assistance and bring coherence to government planning. The board is co-chaired by senior offi -cials of the DOE and USDA and has members drawn from several other agencies.

With an ambitious goal of more than tri-pling biofuels production in just 14 years based largely on cellulosic ethanol production, the board developed a clear vision of where the country’s biofuels strategy was headed. In September, the board released the National Biofuels Action Plan. “Federal leadership can provide the vision for re-search, industry and citizens to understand how the nation will become less dependent on foreign oil and create strong rural economies,” says U.S. Secretary of Agriculture Ed Schafer. “This Na-tional Biofuels Action Plan supports the drive for biofuels growth to supply energy that is clean and affordable, and always renewable.”

Indentifying Priorities The plan identifi es seven areas where the

government will be taking steps to help the biofu-els industry grow and evolve. Five of the priority areas are based on supply chain considerations,

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which include feedstock production, feedstock lo-gistics, conversion, distribution and end use. The other two priorities are ensuring the sustainability of the biofuels industry and protecting the envi-ronment and the health and safety of workers and the public.

Each of the priority areas has an action plan outlining the board’s short- and long-term steps toward achieving that goal. The fi rst of those goals is sustainability. In terms of biofuels, the EISA de-fi nes sustainable biofuels as those that will signifi -cantly reduce greenhouse gas emissions, not have adverse impacts on the environment and do not compete with food production. It also stipulates that the EPA must report to Congress every three years on the environmental impacts of biofuels systems. To ensure the sustainable production of biofuels, the board is requiring that a set of science-based sustainability standards be identi-fi ed by the end of 2008. An interagency working group headed by USDA, DOE and the U.S. EPA will coordinate the application of these standards in the government and with industry. Two series of workshops are planned for both policy-makers inside the government and with outside stake-holders to evaluate the strengths and weaknesses

of the guidelines and their application.Feedstock production and logistics are the

next action areas addressed. The board considers crop residue and timber waste as “second-genera-tion” feedstocks while energy crops including pe-

rennial grasses and fast-growing trees are dubbed “third generation.” The short-term goals of the action plan are to create a long-term integrated feedstock research plan that will include an exami-nation of the environmental impacts and fi nan-

0

1

2

3

4

5

6

2001 2007 2009 2012

Cost

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Value $6

Value $2.25Value $1.86

Value $1.33

Status Status Target Target

SOURCE: DOE EERE OFFICE OF THE BIOMASS PROGRAM, MULTI-YEAR PROGRAM PLAN

CELLULOSE

Biochemical Conversion Cost of Cellulose to Ethanol

cial viability of feedstock production. The board will also look at what regulatory hurdles need to be overcome to encourage farmers and foresters to begin producing third-generation feedstocks. The plan states that logistics—moving feedstocks from farm to plant—can constitute as much as 20

percent of the cost of cellulosic ethanol. Given the diversity of feedstocks and geographic variability, the action plan states that partnerships between agencies and private enterprises will be necessary to overcome the challenges of harvesting, storing, preprocessing and transporting feedstocks. The

board is in the process of developing milestones in its implementation of logistics system demon-stration projects.

The fourth goal of the plan, conversion tech-nology, has been an area where there has been a great deal of success even before the adoption of the action plan. Since 2001, the cost of biochemi-cally converting cellulose to ethanol has dropped by nearly two-thirds, from $6 to about $2, accord-ing to the DOE. However, for cellulosic ethanol to compete economically, this progress has to continue. The immediate steps the board fore-sees to achieve this goal are continued research on enzymes and feedstocks to make them better suited to ethanol production, identifying better conversion technologies, developing marketable coproducts, optimizing technologies to use mul-tiple feedstocks, and looking for processes and in-novations in other industries that could be applied to cellulosic ethanol production.

Moving Biofuels Effi cientlyThe U.S. Department of Transportation will

take the lead in developing recommendations to address bottlenecks and barriers to the effi cient distribution of biofuels. Steps in this process will

CELLULOSE

Biomass Research and Development BoardStatement on Intermediate Level Blends

The interagency Biomass Research and Development Board, on behalf of its re-spective agencies, is committed to the president’s goal of reducing petroleum-based gasoline usage in the United States by 20 percent in the next 10 years (20-in-’10 initiative). Our national fuel infrastructure must accommodate the current and future growth of domestic biofuels production and delivery. As we develop the technology for the next generation of biofuels, it is essential that we enable both full utilization of increased biofuels production and nationwide retail access, while minimizing disrup-tions, cost and infrastructure challenges, and potential environmental, health and safety impacts. In addition to the present and projected growth of E10 and E85 sales, federal fuel registration and national market access for intermediate ethanol blends of gasoline (defi ned as blends between 10 percent and 85 percent ethanol, e.g., E12, E15, E20) that meet applicable statutory and regulatory requirements represent a critical pathway to meet the 20-in-’10 goal. The board will continue to monitor and closely assess issues regarding the development, availability, and potential impacts of intermediate ethanol blends of gasoline.


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include examining the use of pipelines to trans-port biofuels, identifying and eliminating bottle-necks to transporting biofuels by barge, train or truck, and using Geographic Information System tools to give potential biofuels producers informa-tion on infrastructure, demand, feedstock avail-ability, water and other resources.

As ethanol makes up more of the U.S. fuel supply, end users will need to be educated on the benefi ts of using more ethanol and have access to vehicles that can safely use higher level gasoline-ethanol blends. The DOE and EPA will begin a testing program to look at the impact of midlevel blends such as E15 and E20 on existing vehicles and small motors used in lawn mowers and off-road vehicles. If the testing shows no ill effects, the board would support the approval of those blends. The board is also planning to work with state and local agencies to continue the penetra-tion of E10 blends in the market by resolving ob-stacles created by local regulations.

The fi nal action area is protecting the envi-ronment and the safety and health of workers and the public. With ethanol’s 30-year history as a fuel, its risks are relatively well-understood. However, as new biofuels come into production, the risks

associated with using those fuels will have to be evaluated. The board will review existing safety and environmental information available on bio-fuels and use that information to conduct out-reach to the public, industry and others involved in the biofuels economy.

The path to reaching the country’s biofu-els goal has obstacles which must be overcome quickly. The goal of the National Biofuels Action Plan is having cellulosic ethanol production using second-generation feedstocks being cost compet-itive by 2012. Feedstock production needs to be evaluated to ensure sustainable practices are used and adequate supplies are available. Harvesting, collection and preprocessing technologies have to be perfected. Research is needed to drive the cost of converting cellulose to ethanol still lower. Distribution bottlenecks will have to be resolved. In addition to all that, the plan states that by 2012 the market for E10 will be saturated. To absorb additional production, higher level blends of fuel will be necessary.

The fi nal step in reaching the plan’s goals will depend on the private sector. After the initial re-search and development phase of the plan, it will be up to industry to build the hundreds

of plants needed to fulfi ll the 2022 RFS requirements. These new plants will need skilled technicians, builders and managers. Creating the human capital to keep up with growth of biofuels capacity will be the fi nal key to a vigorous and viable biofuels indus-try. “This plan is a strategic blueprint that shows us the way to meet the president’s goal of meaningful biofuels production by the year 2022,” says Secretary of Energy Samuel Bodman. “It also shows how to do it in cost-effective, environmentally re-sponsible ways that utilize a science-based approach to ensure the next generation of biofuels that are made primarily from feed-stocks outside the food supply that are pro-duced sustainably.” EP

Jerry W. Kram is an Ethanol Producer Maga-zine staff writer. He can be reached at [email protected] or (701) 738-4920.

CELLULOSE

Carbon as a Commodity

Chances are the United States will bring into play a mandatory carbon emissions reduction program sooner rather than later. In the second of a two-part series, EPM explores the domestic carbon trading market and

what the future could hold for ethanol producers.

By Kris Bevill



As a noncomplier of the Kyoto Protocol, the United States is one of the last westernized na-tions in the world to employ

some type of carbon emissions reduction program. The European Union’s manda-tory carbon emissions reduction program is the largest in the world. Japan is in the initial stages of employing a nationwide carbon cap program. Australia and New Zealand are planning government-regulated cap-and-trade carbon reduction programs. Canada is similar to the United States in its adoption of voluntary programs, however, some provinc-es have decided to follow other international examples and pass mandatory reduction and trade programs. The most notable of these programs is in Alberta, where oil companies have been actively drilling the tar sands and are major customers of that mandatory car-bon market. It is important to note the various international emissions reductions programs because greenhouse gas emissions affect the world no matter where the emissions occur and many believe that, ultimately, an inter-national program will be needed to properly address the situation. Those countries already implementing emissions reduction programs will no doubt set the standard for others to follow.

Change is on the horizon for carbon emitters in the United States and ethanol pro-ducers need to be aware of their potential role to shape the nation’s carbon market. Ethanol producers, as they currently stand, are emitters of carbon dioxide. If no changes are made to the way ethanol is produced, most producers will fi nd themselves competing with other industrial companies to buy carbon credits should some type of cap-and-trade-program become law. However, with a few energy-sav-ing steps, the ethanol industry can “green” its image and become an example of a fuel production industry that earns credits rather than uses them.

“I don’t know if the ethanol industry is prepared for what might happen,” says Jim Murphy, president of Carbon Green LLC. His company specializes in working with

POLICY

Murphy

biofuels companies to reduce their “carbon profi le” in order to become carbon genera-tors and then monetizes the credits on the U.S. voluntary market, namely the Chicago Climate Exchange. Murphy has been working in the carbon world exclusively for a few years now, and he admits that it is not easily under-stood. But one thing is certain, he says. Once ethanol producers begin to focus on carbon they automatically begin to focus on energy, and “ethanol plants need to focus on energy.” Murphy believes many ethanol producers may not realize that they will be forced to reduce their emissions under a federal greenhouse gas emissions reduction program and it may come as an unwelcome surprise unless they begin to take steps now to reduce their energy use.

Pressure for PolicySo what is in store for carbon as a regu-

lated commodity in the United States? No one really knows. The number of proposed legislative measures that have been intro-duced regarding the reduction of greenhouse gas emissions is in the hundreds and no one seems to think that the government will agree on a program by the end of 2009.

At press time, the most recent document to be posed to Congress was a discussion draft on climate change legislation presented to members of the U.S. House of Represen-tatives Committee on Energy and Commerce by committee Chairman John Dingell, D-Mich., and energy subcommittee Congress Chairman Rick Boucher, D-Va. In a memo-randum to committee members, Dingell and

Boucher state, “Politically, scientifi cally, legally, and morally, the question has been settled: regulation of greenhouse gases in the United States is coming.” But even they say that it is unclear exactly what form of regulatory pro-gram will be adopted.

The draft proposed by Dingell and Boucher calls for a cap-and-trade-program which will gradually reduce greenhouse gas emissions until reaching a goal of 80 percent below 2005 levels by 2050. Major company types to be regulated under this proposal are power plants, producers and importers of pe-troleum, other fossil fuels and bulk gases and other “large industrial facilities,” which may very well include ethanol producers. Those producers not covered in the “large” category would then fall into the small source category, which includes all sources emitting less than 25,000 tons of carbon dioxide per year. The draft proposes those sources be held to indus-try-specifi c emissions standards, as should be determined by the U.S. EPA.

The proposal given to energy committee members is a discussion draft, not a bill pro-posal. Boucher and Dingell say their draft is the result of nearly two years of committee work on climate change and that it should result in the passage of climate change legislation by the next Congress. However at the same time, their executive summary of the draft states, “Reaching a consensus on a national approach to addressing climate change will be diffi cult under the best of circumstances.”

Certainly the views of the next president will play a role in shaping the policy. Elections

POLICY


What is it Worth?The fi nancial difference between carbon prices in mandatory mar-kets and voluntary markets speaks volumes. At press time in mid-Oc-tober, carbon credits, each credit equal to one metric short ton, were down just slightly on the European Climate Exchange board. Decem-ber futures were selling for about $30 per ton. By contrast, credits on the voluntary U.S. market were sell-ing for approximately $2 per ton.

had not been held by press time, but Sens. Ba-rack Obama, D-Ill., and John McCain, R-Ariz., have both stated their support for a nationwide, mandatory cap-and-trade carbon emissions reduction program. In response to a question posed to the candidates by ScienceDebate2008.com regarding their positions on a cap and trade system, Obama said he planned to reduce emis-sions to 80 percent below 1990 levels by 2050. McCain’s plan would reduce emissions to 60 per-cent below 1990 levels by 2050. Obama said his

plan is in line with reduction levels scientists have deemed as necessary. McCain said his approach would be easier on American businesses, spe-cifi cally coal-fi red plants, allowing them time to adapt to policy changes. Both candidates’ plans call for a more stringent baseline than the draft proposed by Boucher and Dingell, which serves as an indicator of all the specifi cs that need to be debated before a program can be put in place. There’s much work to be done, but it is expected that no matter who takes offi ce in January, a cap-

and-trade-program will be addressed within his fi rst year of offi ce.

One of the issues that will need to be ad-dressed is: Who will regulate compliance of a fed-eral program? The EPA is an obvious choice be-cause it regulates the Clean Air Act and has been active in many of the greenhouse gas emissions programs and proposals thus far. However, the number of employees needed to conduct com-pliance check-ups may be more than the agency can offer. The Boucher/Dingell draft proposes that oversight responsibilities, including the pre-vention of fraud and manipulation, be handled by the Federal Energy Regulatory Commission, with the EPA playing a smaller regulatory role. It is one suggestion of many to be hashed out over the next Congressional session.

Also up for debate is whether a monetary value should be assigned to carbon. At a House energy subcommittee hearing earlier this year several private industry executives testifi ed that assigning a dollar value to carbon would expedite investments by companies into energy-saving processes.

Producer ParticipationThere are many options available to ethanol

producers interested in reducing their energy use. In January 2008, the EPA suggested that produc-ers look at combined-heat-and-power-systems to create negative carbon emissions. Other choices include the integration of biomass gasifi cation , such as the system Chippewa Valley Ethanol Co.

Cap-and-trade legislation to reduce the amount of greenhouse gas emissions in the United States is expected to be on the agenda in 2009. The country currently is one of the few remaining westernized nations that doesn’t employ some type of mandatory emissions program—and experts say ethanol producers need to begin reducing carbon dioxide emissions now in order to benefi t later.

POLICY


able. Kor believes that the United States will adopt a market similar to Europe’s and that the next president will re-enact the United States’ participation with the Kyoto Protocol, which will then require the government to enact some type of program.

Producers should realize that it will take some type of investment on their part to become carbon credit generators. Lee says that a few years ago many believed that traditional ethanol pro-duction would be low in carbon emissions and would therefore qualify for credits. That’s simply not true. Producers need to reduce their energy

intake and greenhouse gas emissions to become credit generators. Installing some type of energy-generating system that reduces the need for natu-ral gas is a sure way to not only reduce operating costs, but also add possible revenue by becoming a carbon credit generator. And there is no time like the present to get started. EP

Kris Bevill is an Ethanol Producer Maga-zine staff writer. Reach her at [email protected] or (701) 373-8044.

LLLP chose for its 46 MMgy Benson, Minn., facility. Frontline BioEnergy LLC produces gasifi ers and is the other half of the CVEC project. Frontline general manager Norman Reese says his company can provide gasifi ers for a variety of uses and that their products will aid producers in compliance with what-ever type of emissions reduction program is fi nally decided on. He’s seen a lot of interest already from ethanol producers, although their No. 1 priority so far has been to reduce energy costs, he says. That’s fi ne, because when input costs are reduced, carbon credits can be a welcome secondary benefi t to hav-ing the system in place.

“A lot of people have been watch-ing this,” says Bill Lee, general manager of CVEC’s plant. A number of curious produc-ers have visited the plant to see the system that will soon generate not only energy but carbon credits for CVEC. For now, Lee says produc-ers are keeping an eye on both the carbon market and natural gas prices, but he predicts that more producers will soon begin altering their plants to save energy and join the carbon market. It might take a few years before the country gets a cap-and-trade-system up and running, he says, but as a credit generator he’s willing to wait and will be ready to reap the benefi ts.

The use of landfi ll gas may be a viable al-ternative for biorefi neries located within close enough proximity to a municipal landfi ll. Poet LLC reached an agreement earlier this year with the city of Sioux Falls, S.D., for the transfer of methane produced at the landfi ll to the company’s Chancellor, S.D., facility to be used as an energy source. They are just one example of this type of partnership.

Other producers might use Corn Plus LLLP as an example of how to reduce en-ergy inputs and produce carbon credits. The company decided several years ago to install a fl uidized bed boiler that could utilize leftover corn syrup as an energy source. At press time, Corn Plus was the only ethanol producer thus far to sell carbon credits on the Chicago Climate Exchange. They didn’t sell for much compared with Europe’s prices, but Keith Kor, Corn Plus general manager, says he and other company shareholders are betting that carbon credits will only become more valu-

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The Future of Midlevel Blends

2009 could be a big year for midlevel ethanol blends. UL certifi ed E85 fuel dispensers and blender pumps should be available by the fi rst half of the

year. In addition, Congress is expected to address tax legislation that limits fuel retailers’ ability to claim credits for blender pumps distributing E85.

Testing of midlevel blends will continue, and an E20 fuel waiver request could be submitted to the U.S. EPA before the end of the year.

By Erin Voegele



The nation’s fi rst ethanol blender pump was installed in Britton, S.D., in March 2006. Less than three years later, the American Coalition for

Ethanol lists more than 80 retail stations that have installed the pumps. That list continues to grow.

More station owners are expressing interest in installing the fuel dispensers, driven in part by the rising demand for midlevel ethanol blends. The trend, which began in the Midwest, is begin-ning to gain traction in other areas of the coun-try.

However, there are some important elements that must be addressed before widespread use of midlevel ethanol blends can be achieved. Most importantly, a midlevel blend must be approved by the U.S EPA for use in standard nonfl exible fuel engines. This approval would signifi cantly in-crease the market for ethanol-blended fuels. The lack of Underwriters Laboratory Inc. approved fuel dispensers is another issue that must be over-come before some retailers will consider installing E85 dispensers and blender pumps.

UL Certifi cationUL certifi cation is one issue that should

be resolved in 2009. Gilbarco Veeder-Root and

Dresser Wayne have each submitted blender pumps for E85 UL certifi cation. According to Scott Negley, Dresser Wayne’s director of product management for North America, the equipment his company manufactures has already passed UL’s required testing procedures for E85.

However, UL is requiring that a full fuel dis-pensing system be certifi ed, which also includes the hose, nozzle, and other hardware elements that are attached, which Dresser Wayne doesn’t manufacture. “Until you get a full set of compo-nents certifi ed, we are not allowed to put a label—a certifi cation mark—on our dispenser because the system lacks certifi cation,” Negley says. Many of those items have been submitted by their re-spective manufacturers and are going through the testing process. According to Negley, hoses will likely be the last element to gain approval.

Gilbarco is expecting its dispenser to be ap-proved by UL during the fourth quarter of 2008. In the meantime, the company is marketing the model it submitted to UL. According to Rich-ard Browne, Gilbarco’s vice president of North American marketing, many fi re marshals have ap-proved the model for installation even though it currently lacks UL certifi cation. “Our fl exible-fuel unit has special material coating and elastomers

that will stand up to the aggressive/corrosive na-ture of high alcohol fuels,” Browne says. “Every component in the dispenser that comes in contact with the fuel has been upgraded.”

According to Browne and Negley, both companies are experiencing heightened interest in the fuel dispensers. Dresser Wayne has also designed a new piece of equipment that will be compliant with some state-specifi c regulations that have been enacted. “We are developing a blender [pump] that will allow blends from two hoses on one side of the dispenser,” Negley says. Conventional fuels such as unleaded and E10 will be dispensed from one hose. Higher blends of ethanol, from E20 to E85, will be dispensed from the other. Negley says the new equipment is ex-pected to be available in January 2009.

As UL-approved equipment becomes avail-able, it is likely that each state will deal with previ-ously installed E85 dispensers and blender pumps differently. Mark Buccelli, director of the Minne-sota Weights and Measures Division, says the state is not going to require fuel dispensers already in operation to be replaced with a UL-approved dis-penser. David Pfahler, director of South Dakota Weights and Measures, says the issue has not yet been addressed in South Dakota.

INDUSTRY

UL-certifi ed dispensers are expected to spur growth in the availability of E85 and midlevel blends. “I know of a number of large compa-nies that have expressed interest in installing E85 fueling systems,” says Phillip Lampert, executive

director of the National Ethanol Vehicle Coali-tion. “Given the risk management associated with not having a UL-approved dispenser, they have refrained from doing so.”

Robert White, deputy director of the Etha-

nol Promotion and Infor-mation Council, says that before UL certifi cation was pulled for E85 dis-pensers, a lot of big box retailers were consider-ing installing E85 pumps. “When UL pulled their certifi cation, that removed some of the comfort level that those big box re-tailers had with the product and the dispensing of the product,” White says. When a UL certifi ed pump becomes available, he expects those who have been sitting on the sidelines to jump back onboard. “On the E85 side, that could mean a lot of new stations almost as quickly as they can pro-duce dispensers,” he says.

Ron Lamberty, vice president of market de-velopment for ACE, agrees that the pending UL certifi cation has caused some stagnation in retail installations. “If marketers are looking at putting in E85 right now, most of them fi gure the smart thing is to wait out the UL-approval process,” he says. Since there is no history of reports or com-plaints of equipment failure, ACE would like to see a phase-in period established for UL-certifi ed equipment.

Engine dynamometers are used to examine engines and fuels.

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“When the major pump manufacturers sub-mitted pumps to the UL for testing, they submit-ted blender pumps,” Lamberty says. “I think that’s

a good sign. I think they recognize that this is the wave of the future.” Although not all retailers in-stalling the UL approved E85 fuel dispensers will offer midlevel ethanol blends right now, having the equipment installed should ease the transition into midlevel blends in the event one is approved by the U.S. EPA for use in standard nonfl exible fuel engines.

Blending Tax CreditsLamberty and Lampert also agree that the

industry must address income tax legislation en-acted under the Energy Policy Act of 2005 that prevents retailers installing ethanol blender pumps from claiming a 30 percent tax credit that is avail-able to those who install dedicated E85 fuel dis-pensers.

“We are leading the effort to ensure that blender pumps receive the benefi ts of the federal income tax credit,” Lampert says. “The way that credit has been interpreted by the Internal Rev-enue Service marginalizes the value of the credit for blender pumps.” For blender pumps to really make a positive impact on the industry, the federal income tax credit needs to apply to them, he says.

Lamberty says Gilbarco has been working on getting legislation passed that would increase the credit to 50 percent of the installation cost and apply it to blender pumps. “Frankly, right now, if all we did was get the 30 percent to apply to any pump that sells E85, I think there is the potential for much faster growth,” Lamberty says. He adds that by including blender pumps, the govern-

ment may also end up covering less of the total expenditure because it is often cheaper to install a blender pump than to break ground installing a new tank, hose and pipe for a dedicated E85 pump. Lampert says he expects the issue to be considered during the next congressional session in January 2009.

Midlevel Testing GroundsIn October, DOE’s National Renewable

Energy Laboratory and Oak Ridge National Lab-oratory released a preliminary report on midlevel blends testing. The results included data from testing E15 and E20 on 13 vehicles and 28 small nonroad engines. The report showed that most regulated emissions were within the normal test variations.

The report provided results available to date from the fi rst stages of a large overall test pro-gram, which was initiated by the DOE in 2007 to evaluate the potential impacts of intermediate ethanol blends on a variety of engine types. The broad test program is intended to evaluate the ef-fects of E15 and E20 on tailpipe and evaporative emissions, catalyst and engine durability, vehicle drivability, engine operability, and vehicle and en-gine materials.

“The DOE along with NREL and ORNL have approximately 20-plus projects either under-way or in the planning stages, all related to differ-ent aspects of intermediate blends,” says Steve Przesmitzki, NREL’s senior project leader. “This [report] is just a fi rst look. Things look promising,

Ethanol blender pumps allow consumers to select the ethanol content of their fuel.

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says. “So, we’ve bitten off a pretty big chunk here. Thank goodness there are other people who want to see some progress in this area.” Under current regulation, the EPA must respond to a fuel waiver application within 180 days of receipt. To ensure the application is considered in time for the 2010 deadline, it must be submitted in 2009 or early 2010.

“EPA expects the industry to fi le the applica-tion,” Groschen says. “We hope to be a part of that application to show support, but they’re likely the ones that are going to be fi ling it.” Groschen says he hopes to see a waiver request submitted

to the EPA, but that will likely depend on the sta-tus of the midlevel blends testing. He also expects the application process to be impacted by world events. “There are times when, if the political will is there nationally, things happen,” he says. EP

Erin Voegele is an Ethanol Producer Mag-azine staff writer. Reach her at [email protected] or (701) 373-8040.

but it is a fi rst look. It is not conclusive evidence that E20 or E30 will work.”

Przesmitzki estimates that testing will continue until 2010 or 2011. He expects a report on vehicle drivability to be released in 2009, as well as a fi rst look at materials com-patibility testing results. A project testing more than 30 different fuels on more than 20 differ-ent vehicles is also planned. “From what I’ve been told, it’s one of the biggest vehicle tailpipe emissions projects for research that EPA has ever undertaken, and they are doing it jointly with the DOE,” he says.

Waiver Request According to Ralph Groschen, Minne-

sota Department of Agriculture’s senior mar-ket specialist, there are fi ve different areas of data EPA requires along with a waiver request. These data sets include drivability, materials compatibility, emissions, durability and health effects. The research projects being undertaken by the DOE should help provide this data.

“We are feeling very good that federal government and other agencies that deal with these testing and things are sinking a lot of time

and effort into this,” Groschen says. “Those are the kinds of data and materials that we need to answer the broad range of ques-tions.”

In 2005, Minne-sota passed a law that replaces the state’s cur-

rent E10 mandate with E20 by 2013. Under the law, the mandate will take effect unless 20 percent of the state’s vehicle fuel already con-sists of ethanol by 2010. Groschen says the implementation also depends on EPA certi-fi cation of a fuel containing 20 percent etha-nol. “The particular time when it’s determined whether or not the law will be implemented is Aug. 31, 2010,” Groschen says. If EPA has not approved a waiver for E20 by this time, the law expires.

“The implementation of our law depends on national certifi cation of E20,” Groschen

INDUSTRYINDUSTRY


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www.biofuelsrecruiting.com

The Road Ahead for FFVs

Automakers are expected to produce nearly 50 2009 fl exible-fuel vehicle models, doubling their offerings from 2008. EPM examines the future of the fl exible-fuel vehicle infrastructure and what each of these companies has to

offer consumers who want to use ethanol blends.

By Anna Austin




Flexible-fuel vehicles (FFVs) have made a lot of headway in the past 10 years. Since 1998, the number of FFVs on

America’s roads has increased from about 171,000 to more than 6 million.

When gas prices rocketed to new heights and consumers started to see the wisdom of reducing the country’s dependence on foreign oil, FFVs sud-denly became more attractive. Automak-ers are gearing up to meet the demand as consumers scramble to exchange their vehicles for more fuel-effi cient, environ-mentally friendly automobiles. Although miles achieved per gallon for E85 may be slightly above vehicles fueled with regular-unleaded gasoline, the price of ethanol blends has been considerably cheaper.

In March 2006, Chrysler LLC, Gen-eral Motors Corp. and Ford Motor Co. pledged to con-vert 50 percent of each company’s fl eet to FFVs by 2012, which is good news for consumers and the environment. Ac-cording to the National Ethanol Vehicle Coalition, there are approximately 6 mil-lion E85 compatible vehicles on Ameri-can roads today. The problem with this to date, however, is that there are less than 1,800 gas stations nationwide that offer E85 out of a total of 161,000. According to the Renewable Fuels Association, the majority of states host 25 or less E85 fu-eling stations, and fi ve Northeast states, and Alaska and Hawaii, don’t have any. Minnesota, Wisconsin and Iowa lead the nation with more than 100 stations each.

Phil Lampert, executive director of the NEVC, says much progress needs to be made to keep up with the vehicle manufacturers. “Obviously, we aren’t close to the amount of E85 stations we must have to make this move forward,” he says. “We need to continue to work on that infrastructure—there is no value to increase fl ex-fuel vehicle production un-less this happens.”

VEHICLES

Lampert

The NEVC is a nonprofi t member-ship organization that serves as the na-tion’s primary advocacy group promot-ing the use of 85 percent ethanol as an alternative transportation fuel. NEVC is composed of a wide range of organiza-tions, including state and local interest groups, state and local elected offi cials, ethanol producers, vehicle manufacturers, agricultural interests, ethanol suppliers and others.

Lampert says vehicle manufactur-ers have stepped up to the plate in 2009, investing many resources toward the de-sign, support and distribution of FFVs. “We can’t say enough positive things about them,” he adds, emphasizing that although incentives are clearly in sight, vehicle manufacturers have no obliga-tions. “They are not required to build them, they don’t receive any money from the government—but they have found there is a demand,” Lampert says. “With the very high requirement levels in the re-newable fuels standard, everyone realizes we have to have millions of FFVs pro-duced every year, rather than hundreds of thousands.”

General Motors: Leader of the Pack

General Motors leads the pack with a total of 18 different FFVs being offered in the United States in 2009, three more than in 2008. Models include:

Buick: *Lucerne; Cadillac: *Escalade, *Escalade ESV and *Escalade EXT; Chevro-let: Avalanche, Express, *HHR, *HHR Panel, Impala, *Silverado, Suburban and *Tahoe; GMC: Savana, Sierra, Yukon, Yukon XL-Hummer: *H2 and *H2 SUT. (* indicates FFV option new in 2009)

GM cars and trucks account for 3 million of the 6 million FFVs on U.S. roadways and the company produced more than 1 million FFV models in North America and Brazil last year.

Addressing the release of GM’s 2009 lineup, Beth Lowery, GM vice president of environment, energy and safety policy, says GM is on target to make 50 percent of its vehicles fl exible-fuel capable by 2012, providing the infrastructure is in place. “We continue to believe that bio-fuels, specifi cally E85, is the most signifi -cant thing we can do in the near-term to

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offset future energy demands,” she says. In May 2008, GM and Mascoma Corp.

announced a strategic relationship to de-velop cellulosic ethanol focused on Masco-ma’s single-step biochemical conversion of nongrain biomass into low-carbon alterna-

tive fuels to help address increasing energy demand. GM’s involvement with Mascoma will include projects to evaluate materi-als and other fuels for specifi c engine ap-plications and collaborating on Mascoma’s efforts to expand its commercialization

projects globally, including promotion of increased biofuels distribution.

Chrysler’s Big 10 Chrysler offers 10 FFV models in the

United States in 2009—the same number

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and models the company offered in 2008—an impressively broad range. The company has been making FFVs since 1998, longer than any of the other fi ve automakers. From a minivan to a convertible, chances are a consumer will fi nd an FFV that best suits them. “As the price of fuel has risen, many consumers are looking for smaller en-gines in an FFV,” Lampert says. “The 2.7 liter Avenger and Sebring address that de-mand.”

Models include: Chrysler: Aspen, Sebring (convertible and sedan) and Town and Country; Dodge: Avenger, Dakota, Du-rango, Grand Caravan and Ram 1500; Jeep: Commander and Grand Cherokee.

This is the seventh consecutive year of E85 capability for the Chrysler Sebring sedan, the company’s veteran FFV. The Dodge Ram 1500 will enter its sixth con-secutive year.

Ford’s Lineup Offering more than double the number

of FFVs than it did in 2008, Ford has made great progress towards its 50 percent E85 conversion goal in one year.

Ford models include: Ford: Crown Victoria, F-150, *E-Series Commercial Van, Wagon and Cutaway, *Expedition/Expedi-tion EL; Mercury: Grand Marquis; Lincoln: *Town Car and *Navigator.

“Our big story for the coming year is

the all-new F-150, which has an FFV op-tion,” says Ford spokesman Mark Schirmer. “The 2009 F-150 goes on sale this month (October) and is another big step forward in our leadership story.” The new F-150 is categorized as a “superior fuel economy”

edition that the automaker says delivers 15 miles per gallon (mpg) in the city and 21 mpg on the highway. A considerable im-provement compared with last year’s 5.4-li-ter V8 F-150, which achieved 13 mpg in the city and 17 mpg on the highway. This is the

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fourth consecutive year in which Ford is offering the F-150 with a FFV option.

Schirmer adds that there are no sig-nifi cant changes from carry-over models from 2007.

The Rest of the Pack: Mercedes Benz, Nissan and Toyota

Mercedes Benz is offering one FFV in the United States in 2009—the Merde-ces Benz C300 Luxury & Sport, its sec-ond year of possessing the FFV option. Nissan Motor Co. Ltd. will continue its Titan for the fi fth consecutive year and Armada for the third.

Toyota becomes the new kid on the block, introducing its fi rst-ever FFVs in the United States—5.7-liter Sequoia and Tundra.

Now that the automakers are on track, the number of E85 stations avail-able nationwide needs to increase greatly. Because they require little or no addi-tional expense to the consumer and carry the same warranties as regular-unleaded gasoline-powered vehicles, it is clear that FFVs will play a signifi cant role in the fu-ture of the automobile industry. EP

Anna Austin is an Ethanol Producer Mag-azine staff writer. Reach her at [email protected] or (701) 738-4968.

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Raising CaneEurope has an appetite for sustainable ethanol.

Brazil is hungry to supply the demand.

By Ryan C. Christiansen

PHOTO: ESKINDER DEBEBE, UNITED NATIONS



With the goal of reducing greenhouse gas emissions, the European Union con-tinues to direct its member

states to adopt measures that will increase the percentage of ethanol used in trans-portation fuel in those countries. The EU has also said the ethanol must be produced with little impact to the environment or people’s well-being. Purchasing ethanol from Brazilian producers appears to be the least expensive way to increase ethanol consumption in Europe. However, there is skepticism about whether Brazilian-made sugarcane ethanol is being produced in a way that is sustainable.

European TargetsMore than six years ago, the EU and its

member states ratifi ed the Kyoto Protocol to the United Nations Framework Conven-tion on Climate Change, which means the EU commits its member states to reduc-ing their collective greenhouse gas (GHG) emissions at least 8 percent by 2012.

During a plenary session to be held in December the 785-member European Parliament is expected to approve a co-decision with the EU’s Council of Minis-ters to move forward with a directive from the European Commission (the executive branch of the EU) that by 2020, at least 10 percent of the energy used in road trans-portation in the member states should come from renewable fuels and that at least 40 percent of the renewable fuels should be from more sustainable sources, such as second-generation biofuels made from waste or algae, for example. The di-rective is expected to set an interim target of 5 percent by 2015 and to stipulate that the 10 percent by 2020 target be reviewed again in 2014.

Under the directive, member states would be required to adopt national action plans and targets to help the EU meet its objectives. The directive might also include language that says the European Commis-sion will impose direct penalties on mem-ber states that fall short of targets.

Sustainability RequirementsThe EU directive will also tighten the

sustainability criteria for ethanol. If the fuel is to count toward the target, it must save at least 45 percent of GHG emissions compared with petroleum gasoline. After 2015, GHG savings must be at least 60 percent.

GHG savings are not the only criteria for making ethanol sustainable. According to the European Biofuels Technology Plat-form, which is funded in part by the Eu-ropean Commission, ethanol production must not negatively affect the land where the feedstock is grown, including animal life and water resources for the land, as well as the land’s ability to sequester car-bon dioxide. Ethanol must not be pro-duced in a way that negatively affects the price and availability of food. The quality of life of those who live on or work the land must also not be impaired. GHG use and savings must be accounted for along the entire supply chain from the fi eld to the fuel pump.

WORLD


The EU’s sustainability goals are sub-jective ones. How does the EU plan to move beyond subjectivity toward objective sustainability goals?

To objectively confi rm that a specifi c quantity of ethanol has been produced in a way that meets sustainability criteria, the ethanol must be certifi ed by an arbiter. The EU and its member states will need to adopt a certifi cation system.

According to Norbert Schmitz, a managing director for the Meo Consulting Team in Köln, Germany, there currently are no certifi cation systems that can han-dle sustainability criteria and GHG calcu-lations for the various feedstocks that are used to produce ethanol and the regions where it is produced. However, Schmitz and his consultancy—under the direction of the German federal government—are leading the way in helping the EU to estab-lish a framework for certifying the sustain-ability of ethanol.

The consultancy’s International Sus-tainability & Carbon Certifi cation project is based on a model that was developed

by Meo in 2006-’07 with organizations from Europe, the Americas and Southeast Asia and with support from the Agency for Renewable Resources in the German

Federal Ministry of Food, Agriculture and Consumer Protection. The two-year pi-lot project, which started in February, is developing a global certifi cation process

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Ethanol Production (MMgy) - 2006

that might become the model for the en-tire EU. “The overall intention is to set up a global system with participation from many countries outside Germany and Eu-rope,” Schmitz says. “We concluded that, instead of preparing further studies, a real fi eld test would be required to move things forward.”

Meo has enlisted more than 80 organi-zations, including Brazilian, European, and U.S. ethanol suppliers and major oil com-panies to test various chain-of-custody models. Schmitz says he was not at liberty to name the participants involved.

One of the chain-of-custody models the ISCC project is testing is a “book-and-claim” system that certifi es the sustainabil-ity of a quantity of ethanol for a producer.

The producer can then use the certifi cate to sell an equivalent amount of ethanol. The buyer then receives the certifi cate and the ethanol and can claim sustainability. However, the certifi cates and the actual product are not coupled, Schmitz says. The system only guarantees that a specifi c amount of sustainable ethanol is produced and paid for. Schmitz says the book-and-claim system is well-suited for certifying ethanol because it is a bulk commodity and the traceability of specifi c quantities of the product is almost impossible.

GHG emissions for the ISCC project are determined based on calculations pro-vided by the European Commission.

Brazil: Europe’s Ethanol Supplier

According to the European Bio-ethanol Fuel Association (eBIO), the EU produced 468 MMgy of ethanol in 2007, mostly from wheat and raw alcohol, but consumed an estimated 687 MMgy. The EU’s top ethanol consumers are Germany, Sweden, France, Spain, Poland and the U.K. The demand in 2007 was satisfi ed with imports; 98 percent of the imported ethanol came from Brazil.

According to the Renewable Fuels Agency, an executive nondepartmental public body funded by the Department for Transport in the U.K., 79 percent of ethanol used in the U.K. from mid-April to mid-May was imported sugarcane ethanol from Brazil.

EU member states imported 32 per-cent of the ethanol they consumed in 2007, despite having an installed produc-tion capacity suffi cient to handle demand. Capacity in the EU is currently 1 billion gallons per year, mostly in France, Germa-

WORLD

To meet the total demand, Brazil will need to have 246 ethanol plants in production, 114 of which are already producing or are under construction, and 23 of which are being planned and fi nanced; this means that 109 more plants will be needed.

ny, and Spain, with 1 billion gallons under construction, according to eBIO. Accord-ing to ethanol producer Verbio Vereinigte BioEnergie AG in Leipzig, Germany, even though grain prices were lower in Septem-ber than the previous year, the company still could not compete with the price of imported ethanol. Therefore, the company temporarily shut down its ethanol plant in Zörbig, Germany.

Brazil plans to be the world’s price-competitive ethanol provider. A United Nations Environment Program report en-titled “Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World” published Sept. 24 said Brazil currently ac-counts for about half of all global etha-nol exports and the country is planning to increase sugarcane production by 55 per-cent over the next six years. According to a report published in September by Brazil’s state-owned Energy Research Co. (Em-presa de Pesquisa Energética), demand for ethanol in Brazil, where more than 75 per-cent of vehicles are fl exible fuel will grow by 150 percent over the next 10 years from

6.7 billion gallons per year to 16.9 billion gallons. Meanwhile, the country expects exports will double in the next 10 years from 1.1 billion gallons per year to 2.2 bil-lion gallons. To meet the total demand, Brazil will need to have 246 ethanol plants in production, 114 of which are already producing or under construction, and 23 of which are being planned and fi nanced; this means that 109 more plants will be needed.

Brazilian Ethanol and Sustainability

Because much of the agricultural land where sugarcane is grown in Brazil is con-verted grasslands or forests, concerns have been raised that much of the sugarcane ethanol that Brazil currently produces could not be certifi ed for use in the EU. The Bra-zilian Sugarcane Industry Association dis-misses such concerns, however, and says that most sugarcane that is grown for producing ethanol is harvested in south-central Brazil, more than 1,500 miles from the Amazon and primarily in degraded pastureland.

However, the EU also says that an eth-anol producer’s supply chain must not im-pinge upon the human rights of the workers involved. At a minimum, the standards set by the U.N.’s International Labor Organiza-tion must be followed in the production of ethanol in order for the ethanol to be certi-fi ed sustainable, Schmitz says.

According to the U.N., many Brazil-ian sugarcane plantation workers receive poor pay—a little more than $1 per ton for sugarcane cutters—and fi nd themselves in debt to their employers due to exorbitant charges for transportation, accommodation and food. Work conditions are also deplor-able and sometimes dangerous, the U.N. says. Workers experience crowding, poor hygiene, and poor nutrition and company security guards are sometimes violent with workers.

Meanwhile, Brazil’s Ministry of Labor and Employment (MTE) works to combat abuses through labor inspections and the labor courts. More than half of the 5,800 slaves rescued by Brazilian authorities in 2007 were found on sugarcane planta-

WORLD


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tions, according to the U.S. Department of State’s 2008 Traffi cking in Persons Report. For example, in July 2007 MTE inspectors freed 1,108 forced laborers from a sugar-cane farm producing cane for ethanol in Ulianopolis, Para, Brazil, according to the State Department’s 2007 Country Report on Human Rights Practices for Brazil.

Investments from multinational agri-businesses have helped to consolidate Brazilian sugar and ethanol production. For example, Cargill owns the country’s

biggest ethanol refi nery, along with an as-sociated 36,000 hectares (89,000 acres) of plantation, according to the U.N. In 2006, Cargill acquired a 63 percent stake in Cen-tral Energética Vale do Sapucaí Ltda., an ethanol mill located in Patrocínio Paulista, in the state of São Paulo, according to in-formation on Cargill’s Web site.

It is not known if Cargill is commu-nicating with plantation owners about la-bor practices. A request for a statement from Cargill was not returned. However,

Sekab, one of Europe’s leading ethanol suppliers based in Örnsköldsvik, Sweden, has worked with its Brazilian ethanol pro-ducers to develop sustainability criteria. In late summer, Sekab began receiving what it says is “verifi ed sustainable ethanol” confi rmed by an independent auditor. The company’s criteria have zero tolerance for child labor or forced labor and also the conversion of rainforest land into agricul-tural land. The company aims for its pro-ducers to have a fully mechanized harvest by 2014, which the company admits will replace 80 to 90 jobs for each harvesting machine, but plans to address the issue through job training and the expansion of production. The company said it has sustainability agreements with Brazilian ethanol producers LDC Bioenergia, Co-san, Guarani, Novoamerica and Alcoeste. Sekab is also planning and preparing for large-scale production of ethanol in Tan-zania and Mozambique and is working with those governments on sustainability criteria. EP

Ryan C. Christiansen is an Ethanol Pro-ducer Magazine staff writer. Reach him at [email protected] or (701) 373-8042.

WORLD


A transport truck delivers sugar cane from the fi elds to the Moema Mill sugarcane company in Orindiúva, Brazil.

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Politicos Seek to Harmonize

Tariff, Tax Credit If the noise coming out of the Capitol in Washington, D.C., in late

2008 is any indication, the tariff on imported ethanol appears to be in danger, or at least subject to signifi cant modifi cation.

By Frank Zaworski



At a time when the U.S. etha-nol industry can least afford it, some political leaders want to either harmonize the tariff

with the 45-cent blender tax credit, or elimi-nate the tariff entirely.

Sen. John McCain, R-Ariz., stated in his proposed “Lexington” energy plan that he believes alcohol-based fuels hold great promise, as both an alternative to gasoline and as a means of expanding consumers’ choices. McCain said during his recent presi-dential election campaign that he would like to abolish the tariff on imported ethanol to make the renewable fuel more accessible and affordable to blenders.

Sen. Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resourc-es Committee, “favors lifting the tariff and would likely vote that way if such a measure is ever introduced in Congress and brought up for a vote,” says Bingaman spokesperson Bill Wicker of Bingaman’s Senate Energy Committee offi ce.

“We need to level the playing fi eld and eliminate mandates, subsidies, tariffs and price supports that focus exclusively on corn-based ethanol, and prevent the devel-opment of market-based solutions which would provide us with better options for our fuel needs,” McCain said.

While Sen. Barack Obama, D-Ill., has not specifi cally addressed the tariff on etha-

nol, he has repeatedly voiced his support for renewable fuels. He told the National Corn Growers Association in September that he supports efforts to reduce the nation’s de-pendence on foreign oil by developing re-newable energy, including biofuels, solar and wind energy. “Farmers are on the cutting edge of America’s path to energy indepen-dence,” he said. “We are already replacing millions of barrels of imported oil thanks to our successful biofuels program, and I recently established a goal to have 60 billion gallons of our fuel come from biofuels by 2022.

He continued, “I am a proud supporter of the renewable fuels standard and tax in-centives for biofuels. I’ll invest $150 billion over the next 10 years in our green energy sector, enhancing farmer profi tability, inject-ing capital into rural economies, and creating up to 5 million new jobs in the process—

jobs that pay well and can’t be outsourced.”Meanwhile, Bingaman has signed on

as a co-sponsor of a bill submitted in June by Sens. Diane Feinstein, D-Calif., and Judd Gregg, R-N.H., that would reduce the tar-iff on imported ethanol to 45 cents. “The need for inexpensive and cleaner-burning fuels continues to grow,” Feinstein said in introducing her bill. “And yet, U.S. refi ners are forced to pay a 54-cent tariff on etha-nol imported from Brazil and other foreign sources. This bill would essentially level the playing fi eld and ensure that U.S. refi ners are able to purchase cheaper and more climate-friendly ethanol, no matter where it comes from.”

Feinstein said the harmonization of the tariff with the ethanol subsidy would ensure that foreign ethanol neither benefi ts from the ethanol subsidy nor is penalized by a 9-cent barrier to trade.

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‘For ACE to support harmonization of the tax credit, we need an ironclad commitment from Congress that they will extend the tax credit (volumetric ethanol excise tax credit) beyond 2010.’

U.S. Ethanol Industry RespondsAs expected, ethanol proponents op-

pose Feinstein’s bill. “She proclaims we need more biofuels from Brazil but she turns her back on biofuels from the United States time and time again,” says Brian Jennings, executive vice president of the American Coalition for Ethanol. “ACE believes the tariff works exactly how it was intended. It is not a barrier. When the situation allows, we can import ethanol when it makes the most economic sense.

“For ACE to support harmonization of the tax credit, we need an ironclad com-mitment from Congress that they will ex-tend the tax credit (volumetric ethanol ex-cise tax credit) beyond 2010,” Jennings says. “We won’t entertain harmonizing the credit and the tariff to 45 cents without such a commitment.

“If the value of the tariff is dropped, it would send an absolutely chilling signal to companies, lenders, scientists and everyone else that our nation is not as committed to energy security as we say we are.”

Nathan Schock, director of public rela-tions for Poet LLC in Sioux Falls, S.D., tells EPM that, “Eliminating the tariff would not result in one more gallon of ethanol being used in the United States because ethanol is currently in an oversupply situation. With an E10 base blend, ethanol is effectively capped at 10 percent of our fuel supply and

with the plants we have in operation and under construction, we are already there.

“The American ethanol industry is in a constant state of technological advance-ment,” Schock says. “By allowing foreign ethanol to fl ood the market, it would slow technology investment and likely delay the development of cellulosic ethanol produc-tion because there would be no market for the product.”

In Washington, the Renewable Fu-els Association voiced a similar sentiment. “Calling for a repeal of the tariff is a so-lution in search of a problem, to para-phrase Senator Chuck Grassley,” says Matt Hartwig, RFA communications director. “The tariff exists to prevent taxpayers from subsidizing foreign ethanol production. It is not a protectionist measure, nor is it a barrier to our markets for foreign ethanol.

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Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec1993 1 2 2 1 1 2 01994 2 1 1 2 2 2

1995 1 0 2 1 1 2 2 1 0 0 2 11996 1 1 2 1 1 0 0 2 2 0 0 21997 0 0 2 0 0 1 0 0 0 1 0 01998 0 0 1 0 0 0 0 0 0 0 0 01999 0 0 0 0 0 0 0 0 0 0 0 0

2000 0 0 0 0 0 0 0 0 0 0 0 02001 1 3 1 0 2 0 1 2 1 0 0 12002 2 1 1 0 0 0 0 0 0 0 4 02003 2 0 0 2 0 0 0 0 0 0 3 02004 4 5 5 6 18 11 22 13 17 12 0 3

2005 13 0 7 3 7 3 6 2 22 23 192006 4 22 29 30 22 52 85 100 76 66 46 392007 35 36 23 24 21 31 49 51 20 32 13 72008 16 17 12 48 28 52

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

U.S. Oxygenates, Fuel Ethanol Imports (thousand barrels per day)

Last year, some 400 million gallons of ethanol was imported directly from Bra-zil. Hartwig says the RFA has supported parity between the tax credit and the sec-ondary tariff. “Removing the tariff would send a chilling signal to an already cold investment market that we are not seri-ous about developing a robust domestic ethanol industry complete with the emer-gence of cellulosic and other next-gen-eration technologies,” Hartwig says. “It would mean American taxpayers would be subsidizing ethanol and job creation in foreign countries. Removing the tariff would be a mistake.”

Schock adds, “The U.S. would be far better off following the Brazilian model of encouraging domestic, renewable fuel production. Brazil protected their indus-try and increased the base blend so that ethanol could grow to be a signifi cant part of their energy supply. Today, they are energy exporters and the U.S. contin-ues to spend hundreds of billions of dol-lars on foreign oil.”

A study early in 2008 at Iowa State University in Ames indicated that elimi-nating the tariff on foreign ethanol would likely result in a decrease of U.S. ethanol production of about 7 percent as cheaper imports move in and grab market share.

According to the USDA, costs for ethanol produced from sugar in Brazil are about 81 cents per gallon. Domestic U.S. ethanol production costs were well over $2 per gallon in 2008.

Any reduction in demand for domes-tically produced ethanol would likely have a signifi cantly negative impact on corn-based ethanol producers who struggled in 2008 with out-of-whack input costs.

Importer AdvantageOne company that could stand to

gain from an adjustment to the ethanol tariff is Minneapolis-based Cargill Inc. According to its Web site, Cargill is one of the main exporters of Brazilian sug-ar. Cargill ships this commodity world-wide through its joint ventures Terminal de Exportação de Açúcar do Guarujá (TEAG) and the Terminal de Açucar En-sacado (T-33), both in the state of São

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Paulo. Cargill also exports alcohol through the Terminal Expor-tador de Álcool de Santos (TEAS), which is also in the state of São Paulo, in which the company has an equity stake.

In 2006, Cargill announced the acquisition of a 63 percent stake in Central Energética Vale do Sapucaí Ltda. (Cevasa), an ethanol mill located in Patrocínio Paulista, in the state of São Paulo. In that same year, Cargill also acquired a 43.8 percent stake in Usina Itapagipe Açúcar e Álcool Ltda., a sugar and etha-nol mill in the state of Minas Gerais.

Cargill has taken the position that free markets are the best way to meet global renewable energy challenges. “Biofuels should be freely traded worldwide,” Gregory Page, Cargill presi-dent and chief executive offi cer, told the USDA’s 2007 Out-look Conference. ”Open trading arrangements for biofuels will provide fl exibility to our domestic biofuels markets and greater cooperation and integration with our biofuels trade partners around the globe. Global trade in biofuels should comply with international trade rules and agreements by ensuring equity for all countries as well as industry and trade participants.

“Brazil is an increasingly important global player in etha-nol production and ethanol exports, producing nearly half of all traded ethanol today. We currently charge a 54-cent duty on Brazilian imports. But then, we allow the purchaser of that im-ported ethanol to be eligible for a 51-cent credit when the im-ported ethanol is blended into our U.S. fuel supply.

“Rather than view global biofuels trade as a threat, we should view overseas sources as an opportunity to develop a diverse and global biofuels market that can take advantage of multiple points of origin. U.S. production of biofuels can help increase our energy security—but other kinds of renewable en-ergy will increase our fl exibility and improve our ability to help feed the world’s hungry, while improving the global and U.S. energy picture.”

The status of the ethanol tariff will likely be determined after a new administration takes offi ce in January. Until then, the U.S. ethanol industry will be keeping its fi ngers crossed. EP

Frank Zaworski is an Ethanol Producer Magazine freelance writer. Reach him at [email protected].

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The status of the ethanol tariff will likely be determined after a new administration takes office in January. Until then, the U.S. ethanol industry will be keeping its fingers crossed.

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Bankrolling the Next Generation

The food-versus-fuel debate, high corn prices and the country’s economic crisis have taken a toll on the corn-based ethanol industry. Despite its diffi culties, the development of cellulosic

ethanol wouldn’t be where it is without its predecessor. Now it’s just a matter of getting the necessary fi nancing to

commercialize the industry.

By Bryan Sims



Corn-based ethanol has been under intense scrutiny this past year. It’s been blamed for numerous ills from high food

prices to increased pollution in the Gulf of Mexico. If that weren’t enough, the industry has also been saddled with high feedstock costs and is not immune to the crisis in the banking industry and the volatility on Wall Street.

Currently, developers looking to build new plants or even recapitalize to expand or retrofi t existing plants are hard-pressed to fi nd lines of credit and/or debt to fi nance projects in the current economic climate. Limited availability of working capital has forced some plants to shut down operations until market conditions improve.

Even for proponents, corn-based ethanol was never the silver bullet that would wean America from its dependence on import-ed oil. Today, the renewable fuel serves as a meaningful bridge to develop and eventually commer-cialize cellulosic ethanol.

Thanks to the support of the federal government, private investors and the many people involved in research and development, the stage is set for cellulosic ethanol’s commercial-scale debut. The re-newable fuels standard (RFS) in the Energy Independence & Security Act of 2007, calls for the use of 16 billion gallons of cellulosic ethanol by 2022, with the near-term target being 100 million gallons by 2010. Addition-ally, the RFS caps corn-based ethanol at 15 billion gallons. At press time, there were 182 operating plants with a combined capacity of 11.21 billion gallons. There were also 26 plants under construction with a combined capacity of 2.49 billion gallons.

Although it’s a work in progress, many cellulosic developers are actively engaged in pilot and demonstration phases to prove that their process technologies can economically operate commercially. So what will it take for developers to obtain the fi nancing necessary to propel their unique projects onto the com-mercial stage? Many in the industry are taking a wait-and-see approach to who will provide the fi nancial blueprint for others to follow. Those people will no doubt be watching the

companies that are already constructing fa-cilities such as Range Fuels Inc. and BlueFire Ethanol Fuels Inc.

“There is no one vehicle to get these plants built to commercial scale,” says Mitch Mandich, chief executive offi cer for Range Fuels. The Broomfi eld, Colo.-based compa-ny is currently building a 100 MMgy cellulosic ethanol plant near Soperton, Ga., that will use woody biomass as its feedstock. The plant, scheduled to be in operation by late 2009, will initially produce 10 MMgy in its fi rst phase. Production will be ramped up to maximum capacity shortly after its test phase.

“It’s going to come down to the size of those fi rst plants in an effort to match the corn-based ethanol industry,” Mandich adds.

“In my opinion, the industry will have to scale those plants along a continuum of size based upon capital needs and requirements. It’s unlikely that anyone in the cel-lulosic ethanol space will be able to raise commercial-level funding to build a 100 MMgy plant right out of the chute.”

Like the fi nancial boost corn-based ethanol received four to fi ve years ago by eager farmer-owned co-ops where equity was the primary source behind much of its growth, the same exuberance may be seen by venture capitalists as the fi rst commercial ventures come on line.

“The next few years will be a very im-portant time for the industry to demonstrate that it can stand on its own,” says Paul Ho, principal at Hudson Clean Energy Partners. Ho joined HCEP in September and oversees transactions in the biofuels and biomass sec-tors. “Nobody doubts that the technologies will work,” he says. “The million-dollar-ques-tion is whether it can scale up economically to accommodate commercial production op-erations. Until then, people are still going to view it with a skeptical eye, but as soon as the fi rst company cracks the mold I think there will be a lot of interest in this space.”

The current credit environment is tight, but several large fi rms, backed by both gov-ernment funds and private-equity investors, are going ahead with plans to test their tech-nology.

Mandich

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Capital ConcernsCellulosic ethanol plant developers

agree there is still substantial capital—wheth-er it involves varying forms of debt and/or equity—fl owing into the cellulosic industry in an effort to accelerate projects to com-mercial scale. “The capital markets perform when the structure is right and when there is a demand market for the end product,” says Arnold Klann, president and chief executive offi cer of BlueFire Ethanol. The company has broken ground on a 17 MMgy cellulosic ethanol facility near Palm Springs, Calif., and a 3.2 MMgy facility near Lancaster, Calif. Both would use wood wastes, waste plant material and other refuse-derived biomass. “It’s one of those situations where everyone is waiting to see if the equity markets are going to re-turn to some kind of normalcy,” Klann says. “You do have some equity funds today that have billions of dollars with no place to put their money at the moment.”

Another source of capital has been pro-vided by the U.S. DOE in the form of feder-ally funded loan guarantees. In March 2007, the U.S. DOE awarded several grants to cel-lulosic ethanol companies for technology en-hancements and to reassess viable economics applicable to commercialization deployment

strategies. Range Fuels and BlueFire Ethanol are two of six companies that have received federal grant money toward their respective projects.

According to John May, managing director for St. Louis, Mo.-based Stern Brothers Co., the DOE federal loan guar-antee program should be seen as a “lynchpin” for cellulosic ethanol de-velopers looking to gain fi nancial footing and to scale up their projects. “I think [the DOE grant program] is an indispensible tool for the industry as it moves toward cellulosic ethanol,” he says.

BlueFire Ethanol was awarded $40 mil-lion and was the fi rst company to draw down on the grant money. Range Fuels received $76 million to construct its Soperton facil-ity. The company also received an additional $100 million of equity from a Series B round and $6 million from the state of Georgia. The company is also backed by venture capital, including Vinod Khosla’s investment fi rm Khosla Ventures.

“With the DOE guaranteeing a portion

Klann, chief executive offi cer of BlueFire Ethanol, displays the different feedstocks the company will use to make cellulosic ethanol through the company’s Arkenol process.

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of that loan, it should allow us to bring ad-ditional investment banks to participate un-der that loan guarantee program,” Mandich says. “However, it will be based upon the risk of the technology, its ability to reach com-mercial scale and its ability to meet the right ‘pro forma’ that will give investors a solid re-turn.”

Federal grant funds, or the federal loan guarantee program, typically cover about 80 percent of a company’s debt that would not otherwise be supplied by traditional “merchant-type” lenders. The remaining 20 percent would come in the form of venture capital, private and/or public equity entities.

“I think you’re probably two years away yet before the fi nancial markets are actually mature enough to fi nance these projects,” Klann says.

Historically, lenders committed a 50/50 or even 60/40 debt-to-equity ratio to corn-based ethanol plants. This new combina-tion of federal grant money, equity and/or venture capital could create a paradigm shift within the lending community, which experi-enced nominal risk in the corn-based ethanol industry due to its commercially proven tech-nology. If and when these commercial cellu-

losic ethanol plants are operational, obtaining working capital to sustain operations will be another challenge, according to May. “I think the lending paradigm changes somewhat just because you’re applying project fi nance rules around risk mitigation to a different set of facts,” he says. “In the end, the same con-cerns about managing feedstock cost, reli-ability, managing technology risk and where ethanol prices will be going remains.”

Improving Technological Appeal

Like the beginning of the corn-based ethanol industry, cellulosic ethanol is striving to establish a proven track record. Much of the debate over how cellulosic ethanol proj-ects will get fi nanced to commercial scale depends on what technologies lenders and investors perceive as the most feasible.

“You have a lot of technology confu-sion in the marketplace right now because the government has sponsored enzymatic hydrolysis for years and years, so everyone believes that’s the way to go,” Klann says. “That’s added a lot of confusion and a lot of resistance. The banks are waiting to see which technology is better because they’ve

FINANCE


Pictured is a schematic detailing BlueFire Ethanol’s conversion process using Arkenol’s concentrated acid hydrolysis process technology. SOURCE: BLUEFIRE ETHANOL FUELS INC.

heard all kinds of hype and have seen no performance on a com-mercial scale.”

BlueFire Ethanol holds the exclusive rights for a process tech-nology developed by Arkenol Fuels LLC. Arkenol’s patented process utilizes a concentrated acid hydrolysis pathway, which is amenable to handling the wide range of feedstocks BlueFire Ethanol intends to use, according to Klann. BlueFire Ethanol determined that it could produce approximately 70 gallons of ethanol per dry ton of bio-mass.

As for Range Fuels, it will deploy a patented thermochemical process to convert woody biomass into ethanol at its Soperton facility. The company has also partnered with Ceres Inc. to research, develop and commercialize energy crop feedstocks for ethanol production. The two companies began working together during the 2008 spring planting season and plan to continue the collaboration for several years.

“The banks that are going to come forward with the fund-ing and take the risk are still very concerned about developmen-tal technology and how much money they will put into play in a debt market,” Mandich says. “The initial foray into a commercial plant will most likely need to be on a smaller scale as opposed to the mid-range or higher end because you won’t be able to get the fi nancing.” EP

Bryan Sims is an Ethanol Producer Magazine staff writer. Reach him at [email protected] or (701) 738-4950.

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Pictured is a 3-D preliminary design of BlueFire’s proposed 17 MMgy ethanol facility near Palm Springs, Calif.

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CORN OIL

Ethanol Producers Face Key Considerations When Assessing Corn Oil ExtractionBy Mark Warren

he past year has been a volatile time in the renewable fuels in-dustry. The increased demand

for all commodities, including agricultural commodities such as corn and soybeans, has driven up prices affecting the profi t-ability of renewable energy plants. As a result, business models not accounting for this relatively recent market pressure are struggling to keep pace in this rapidly changing environment.

Both start-up and mature companies must leverage their unique capabilities, re-duce operating costs and diversify revenue streams in order to position themselves for market success. More often than not, this requires a customized approach for each business and an in-depth understanding of its business and relevant markets.

One option that could potentially in-crease shareholder profi tability for ethanol plants is the extraction of industrial-grade crude corn oil from the ethanol process for use as an alternative feedstock for biodiesel plants. This solution has caught the eye of

many given that ethanol plants can further enhance and diversify their revenues with this relatively low capital-intensive “add-on” asset while biodiesel plants can secure a less-expensive feedstock compared with the bulk of food-grade crude vegetable oils.

On the surface, this outcome looks to be a “win-win” for both the buyer and seller of the industrial-grade crude corn oil. The payback on the ethanol asset is often within a few years, and shareholders quickly see an uptick in enhanced returns to the plant.

At the same time, biodiesel plants have a new source of feedstock that isn’t solely dependent on the vegetable oil market and is priced at a discount to those traditional oils.

Even with all the positive attributes associated with this relationship, ethanol and biodiesel plants need to be thoughtful of business, fi nancial, technical, marketing and ownership structure risks associated with the endeavor. Generally speaking,

two business models are evolving related to the selling of industrial-grade crude corn oil. One, for lack of a better term, is the “vertically inte-grated” model, while the other is the typical market-based supply model. Each model has its own strengths, weaknesses and de-pendencies.

Thus, an inves-tor should not only get comfortable with these attributes, but also, and more impor-tantly, consider ways in which to mitigate the underlying risks associated with each approach.

Vertical IntegrationIn the vertically integrated model, sev-

eral ethanol producers form a new entity with the sole intent of producing biodiesel. Often, the biodiesel plant is built to scale based on the volume of industrial-grade

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

Warren

T


crude corn oil that the participants can supply. Listed below are some of the at-tractive attributes of this business model:

1. The ethanol plants have aligned interests with the biodiesel plant. With this model, those ethanol producers usually contribute equity into the biodiesel plant. Thus, those participating have “skin in the game.” Make no mistake, the etha-nol producers are interested in capturing a nice return for their industrial-grade crude corn oil but won’t sacrifi ce the viability of the biodiesel plant to do so.

2. Often, the pricing for the in-dustrial-grade crude corn oil is indexed off either biodiesel prices (product), animal fat prices (substitute) and/or other petroleum markets (indexed product) to ensure that the biodiesel plant secures a strong operat-ing margin or crack spread between whole-sale biodiesel prices and industrial-grade crude corn oil. Thus, as prices fl uctuate, the biodiesel plant can remain competitive while generating a strong return for inves-tors.

3. The biodiesel plant will usually collocate next to an ethanol plant that is an investor and supplier of the crude corn oil.

A collocated approach allows the biodie-sel plant to reduce its capital costs for in-frastructure (rail, storage, utilities, water/wastewater), as well as capture other syn-ergies from the ethanol plant (waste heat, staff, existing contracts for infrastruc-ture).

4. Transportation costs of the feedstock are generally less expensive than the competition due to the close proxim-ity of the ethanol plants to the biodiesel plant. Usually the investors will locate the biodiesel plant in an area most centrally located among all of the ethanol partici-pants.

Although there is a lot of value in this vertically integrated model, there are sev-eral key considerations that should be fully considered in order to make an informed investment decision. Listed below are just a few of the many questions that should be explored before proceeding with the venture:

Strategic issues: 1) What im-pact will this strategy have on the distillers grains prices and marketing options for the ethanol plant? 2) What impact might it have on future options such as corn frac-tionation or others? 3) Are the involved participants aligned in terms of return ex-pectations, culture and value fi t? and 4) How will the board address key stra-tegic decisions (buy, sell, merge), and what impact does that have on each ethanol plant?

Business structure: 1) How will the board be structured (equity con-tribution, business line expertise, etc.)? 2) What are the issues regarding the transfer of ethanol ownership if the ethanol plant is sold? 3) What impact will that have on the biodiesel plant’s ownership structure and control? and 4) What steps can be taken at inception of the biodiesel plant to mitigate long-term business structure issues?

Contracts and risk manage-ment: 1) What are the risks of default and implications to the ethanol plant and biodie-sel plant? 2) What is the contingency plan in case default occurs? and 3) What measures can be documented to minimize exposure?

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Pricing: 1) How will the price of industrial-grade crude corn oil be es-tablished (including length of contract, methodology, and timing and requirements for delivery)? 2) How will quality control of the product be measured? (What are the standards of the product? How are discounts established?) and 3) What is the contingency plan for policy issues? (Pos-sible expiration of the biodiesel tax credit, and state incentives and grants?)

Technology and performance standards: 1) Will all the ethanol plants be utilizing the same corn oil extraction tech-nology? If not, what are the performance risks (composition of the crude corn oil and yield conversion)? 2) Will there be any issues with pretreating and processing dif-ferent compositions of industrial-grade crude corn oil at the biodiesel plant? and 3) What are the performance guarantees associated with the extraction technology? (What impact does that have on the biod-iesel plant’s performance or shareholder returns?)

Counterparty risk assess-ment: 1) What is the fi nancial stability of other participating ethanol plants? 2) What is the debt exposure at ethanol plants? 3) What are the implications for securing funding based upon existing loan cov-enants and liens? and 4) What is the ability to secure funding for extraction technol-ogy?

As can be seen, a number of items need to be diligently explored. Only a hand-ful of the key considerations have been discussed that ethanol and biodiesel board members should consider when exploring this business model. We recommend work-ing closely with legal counsel, equity par-ticipants, banks, technology providers and the project developer/consultant to ensure there is alignment around these critical business issues.

The Supply ModelFor biodiesel plants interested in

sourcing industrial-grade crude corn oil, often the best way to secure the volume is to work directly with an ethanol plant.

There are several procurement ap-proaches that a biodiesel plant can take

CORN OIL


when looking to lock in the crude corn oil.One approach would be to estab-

lish a long-term offtake contract with the supplier for a certain amount of volume. The buyer and seller would need to work through many of the contracting issues previously mentioned in order to develop a healthy and sustainable business relation-ship.

Another option would be for a biod-iesel plant to purchase the extraction asset for the ethanol plant. With this type of ar-rangement, the ethanol plant wouldn’t have to source the capital for the extraction asset but would likely be required to sell the in-dustrial-grade crude corn oil at a discount to the biodiesel plant. Both parties would need to actively work with their banking relationships to ensure that all parties are comfortable with the risks and structure of the business relationship.

Lastly, a biodiesel plant could source industrial-grade crude corn oil on the spot market. This is likely not a strong approach given the lack of product available on the open market, minimal amount of price transparency/discovery in the market and the technical requirements that a biodie-sel plant must plan for when utilizing this product. Ultimately, hinging one’s hopes on fi nding industrial-grade crude corn oil in the spot market is highly risky and not recommended.

The primary reason for the pricing discount for the industrial-grade crude corn oil is its composition. Compared with other vegetable and rendered oils, it has a high free-fatty-acid (FFA) composition (12 percent to 17 percent), as well as waxes and other chemicals that make it unsuitable for human consumption and a challenge to pretreat. With the high FFA content, many producers utilizing this oil resort to acid es-terifi cation as the most economical way to convert FFAs into triglycerides versus strip-ping out the FFAs and selling them for a steep discount to the purchase price of the oil. This level of pretreatment will require a retrofi t for existing assets, but the payback can be quick if all works smoothly.

One should be cautious when select-ing a technology provider for this add-on or fi rst-time install and should utilize a

proven technology. Proper performance guarantees and liquidated damages will need to be clearly defi ned and agreed upon by the plant’s banker and shareholders alike.

Utilizing industrial-grade crude corn oil defi nitely has a number of advantages for a biodiesel producer. This competitively priced oil provides feedstock diversity and, in many cases, a vertically integrated busi-ness model.

Likewise, extracting corn oil has po-tential advantages for the ethanol producer. Several operating plants are, or are in the

process of, installing equipment to extract corn oil.

With all its promise, investors should proactively address the existing and poten-tial risks to protect their shareholders’ re-turns, as well as ensure alignment between the board, management, buyer and seller regardless of what business model is uti-lized. EP

Mark Warren is a partner with Ascen-dant Partners Inc. Reach him at [email protected] or (303) 221-4700.

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PROJECT DEVELOPMENT

Feasibility Studies 101: What It Takes to Achieve Commercial GoalsBy Ken Wenninger

Before undertaking a major capital project, a host of questions must be answered regarding the tech-

nical and fi nancial viability of the project. The questions are the same regardless of the type of project being contemplated. How much will it cost? How long will it take to complete? How quickly will proj-ect owners and investors recover the in-vestment? What is the return on invest-ment? Which of the assumptions about the project are critical to its success?

The necessity of systematically ad-dressing these topics leads many to uti-lize an engineering tool called a feasibility

study early in the project’s development. Essentially, a feasibility study provides an opportunity to clarify a business plan by enumerating and analyzing the risks and returns of a capital project.

The results of the feasibility study show how a business would operate un-der the given set of assumptions that led one to consider the project. The primary audience for the study includes potential investors, fi nanciers, developers, upper management or anyone who will partici-pate in deciding whether to proceed with the project. It is typical for a feasibility study conducted by a third party to be

required before any major investors or banks will make a funding decision.

Feasibility studies are frequently completed by an outside engineering fi rm in order to obtain an independent review of a company’s business plan. A fi rm with experience in process development and banking requirements should be selected. This often will be the fi rst time that a new company interacts with a consulting engi-neering fi rm, and it is important to select one that can provide guidance in handling projects from research and development through construction and start-up. With-out such experience, an engineering fi rm


By estimating the capital cost of a project and calculating operating expenses such as raw material consumption and labor, a feasibility study helps identify all the costs

and revenues associated with the process.

cannot accurately assess the risks and rewards of undertaking a major capital project.

If the project involves proprietary information, it is wise to ensure that the engineering fi rm hired to conduct a feasibility study has strong intellec-tual property protection procedures. Consider entering into a non-disclosure agreement with any fi rm, even though there is no detailed technology transfer involved.

Issues AddressedAt the root, a feasibility study ad-

dresses a specifi c set of technical, eco-nomic, legal and schedule topics. Pri-marily, it seeks to provide a thorough understanding of what it will take to ex-ecute a project prior to investing signifi -cant amounts of capital. On the techni-cal side, a feasibility study answers the inevitable engineering questions raised once a company decides to scale up a process:

What equipment is needed to operate the process at larger scales?

Is that equipment widely avail-able, or is it highly customized?

Which utilities will the owners or investors need to provide, and are they available where the project will be built?

Are the required raw materi-als and labor available at the anticipated construction site?

How long will it take to get the process and ancillary equipment in-stalled and operating?

What will the factory look like in the end?

What size property is needed to build this facility?

What permits need to be ob-tained, and which will take the longest to obtain?

What transportation networks are available, and which ones are need-ed?

A feasibility study will also help predict what will happen with a group’s money. Know what the return on in-vestment will be, what the fi rst fi ve to 10 years’ worth of cash fl ow will look

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like, and how long the payback period will be. This includes an analysis of tax rates and possible tax incentives for the project.

By estimating the capital cost of a project and calculating operating expenses such as raw material consumption and labor, a feasibility study helps identify all the costs and revenues associ-ated with the process. Market assessment, internal rate of return, revenue and operating costs are all estimated to provide as full a picture as possible of the project’s viability.

Permitting and patent/licensing issues dominate the legal focus at the early stage of a project. Identifying the permits re-quired for the project and building a timeline for acquiring those permits is crucial for the development of a project timeline. Pat-ents and/or technology licensing will impact costs and revenue streams and should be included in return on investment calcu-lations. Additional questions to consider at this phase include

PROJECT DEVELOPMENT

Feasibility Study Results

At the conclusion of a feasibility study, several key

items will help guide further project decisions:

Rough capital cost estimate, estimated

return on investment and internal rate

of return

Projected project timeline

Key process equipment pricing and

delivery lead times

Utility consumption estimate

Identifi cation of next steps to transition

to detailed engineering

It is wise to spend considerable time ensuring an appropriate engineering fi rm is selected to conduct the feasibility study.

possible markets for byproducts, disposal costs for waste streams, carbon credits for a “green” process, utility costs and evaluation of alternative technologies that might increase effi ciency. These top-ics will not be exhaustively researched in this phase of a project, but they will be identifi ed for future study based on their relevance to the overall project success.

None of the questions raised earlier will be fully answered at the end of a fea-sibility study, but the key decisions that need to be made early in the next phase of engineering will be identifi ed.

The Limits of a Feasibility Study

While a feasibility study covers a broad range of topics, it does not delve into great detail on any one of those top-ics. It will not provide a detailed equip-ment list nor a full heat and mass balance for a process. Nor will it provide enough information to obtain detailed bids on de-sign and construction. Assuming the fea-sibility study fi nds that a project is viable and fi nancing is secured, the next steps include front-end loading (preliminary engineering, site selection and permit-ting), followed by detailed engineering, equipment procurement, construction and start-up. Because all of those steps are contingent on the completion of a thorough feasibility study that carefully analyzes the risks and rewards of a proj-ect, it is wise to spend considerable time ensuring an appropriate engineering fi rm is selected to conduct the feasibility study. Upon completion of the study, a good engineering fi rm should also be able to help with subsequent steps as well. EP

Ken Wenninger is the corporate director of marketing for Harris Group Inc. Reach him at [email protected] or (800) 488-7410.

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FTIR Offers Push-Button Fermentation ControlBy Richard Mills

hile clouds of misinformed accusations swirl around the emerging ethanol industry,

in the eye of the storm, producers are quietly getting on with the essential job of making sustainable fuel. What’s more, they’re improving the process all the time.

Advances in effi ciency are being made across the board. The ability to pre-dict yield and segregate corn at intake is just one example. Further into the process, fermentation is another area under devel-opment. While arguably the most critical part of making fuel ethanol, it is also the most vulnerable as infection with unwant-ed microbial activity can literally eat away at millions of dollars of production.

Although current methods based on high-performance liquid chromatography (HPLC) analysis provide a wealth of in-formation, time-to-result, cost-per-sample and the need for trained laboratory person-nel remain barriers to gaining the level of information needed for effective fermen-

tation control. Room exists for something faster, cheaper and easier, especially for those that don’t happen to have a premier laboratory on site.

Near infrared (NIR), so well known for applications such as testing grain, has been investigated by many. However, questions remain about its ability to detect infection indicators typically only present at low levels. The fi eld of infrared analysis technology is not fi nished there. Another related technology has just the right cre-dentials to fi ll the gap: Fourier transform infrared (FTIR).

FTIR is worth remembering for its proven benefi ts, including speed, low cost and simplicity. Results for several param-eters are delivered in no more than two minutes. Unlimited analyses can be con-ducted at no extra cost, and anyone can perform the test. FTIR also appears to be particularly well-suited to picking up in-fection indicator parameters.

A prototype application of the tech-nology has been tested at ethanol plants

in the United States and the concept is attracting signifi cant interest as a push-button solution for routine monitoring and control.

Unlimited TestingFor Brian Wrenn, research director at

the National Corn-to-Ethanol Research Center in Edwardsville, Ill., the speed of the new monitoring option is especially interesting. He describes that with con-ventional testing there can be an eight- to 10-hour gap between tests and the actual test takes approximately an hour to deliv-er results: around 20 minutes for the test, plus the additional time for pulling the sample and setting up. “A lot can happen within an hour and it can be maddening to wait,” Wrenn says.

Antibiotics provide a solution, but operators want to avoid using more than absolutely necessary, both with respect to cost and the possibility of residues con-taminating distillers grains. Rapid testing can improve monitoring and allow a more


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proactive approach to fermentation con-trol where the use of antibiotics is mini-mized.

The ability to test as much as need-ed at no extra cost is another aspect of the FTIR option, says Mitchell Feldman,

laboratory manager at Abengoa Bioen-ergy of Nebraska LLC, an 88 MMgy in Ravenna, Neb. Since February, the plant has been testing a prototype FTIR unit called the BioFoss developed by Foss. “With HPLC, the fi lters are at least a dol-

FERMENTATION

FTIR measures all the regular parameters involved in fermentation control, plus it provides the sensitivity required to pick up parameters often discernable in low concentrations, such as acetic and lactic acid.

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will run 100 or more tests depending on what needs to be measured. Although only occasionally required, the need to replace columns for HPLC systems also contributes to costs. “When you run as many samples as we do, it all adds up,” Feldman says.

FTIR analysis technology is available in an easy-to-use form and the test model used at Abengoa Bioenergy of Nebraska is a compact, simple-to-use instrument that is no more complicated than a vend-ing machine. “Anyone can use it,” Feld-man says.

The usability associated with FTIR analysis is also noted by NCERC Director John Caupert. “Training is a huge issue in the industry,” Caupert says. “Someone like me can use it and I am not a chemist or an engineer.

Caupert has testifi ed to the U.S. House of Representatives on the need for improved training in what he sees as one of the few growth areas for the present U.S. economy.

Milk, Wine, Fuel EthanolFTIR technology may be new to the

ethanol industry, but it’s common to oth-er industries where the need to monitor fermentation is by no means unique.

Winemakers can get just as many gray hairs as ethanol producers waiting for the outcome of fermentation. But in contrast, many have given themselves an edge in the form of analytical technology that can deliver results for key measure-ments whenever needed, effectively pro-viding an early warning system for poten-tial problems.

In simple terms, the FTIR method works by shining infrared light through the sample. This picks up the vibrational activity of chemical functional groups. The information is then decoded us-

lar per sample and the vials are at least 10 cents, so you are saving $1.10 with every sample you run,” Feldman says.

On a typical day, the laboratory at the 88 MMgy plant runs between 50 and 60 samples. However, if issues arise, they

Measurements are simple to perform for anyone working in the plant.

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FERMENTATION

ing a well known mathematical function (the Fourier transform). The technique has been in use for decades to test milk and was fi rst used in 1999 in the wine industry.

FTIR measures all the regular param-eters involved in fermentation control, sugars (maltose and glucose) and ethanol. FTIR technology provides the sensitiv-ity required to pick up parameters often discernable in low concentrations, such as acetic and lactic acids. In this way it offers a more powerful alternative to the better known NIR analysis method.

A common term in connection with FTIR is the “signature” left by a chemi-cal component that can be picked up at specifi c areas of the infrared light wave-length. Corn mash provides many differ-ent signatures and the FTIR technology is ideal for sniffi ng out acetic and lactic acid among the mass of data. At the same time, studies indicate that it is also better at measuring the more prominent com-ponents. “NIR seems to work, but with FTIR it is more specifi c,” Wrenn says.

Feldman shares the interest in the ability to track infection indicators. “In measuring lactic and acetic acids the tech-nology really shines in giving reproducible results,” he says. “They are very low level, so they are hard to measure with NIR, but we found that the FTIR instrument actu-ally does a very good job of measuring these low level parameters.”

Same Procedure, More Information

Infection control is especially im-portant at facilities such as the Abengoa Bioenergy Nebraska plant where a con-tinuous fermentation process involving eight tanks is used. “A small infection in early fermentation translates into a big problem by the time you get to the end of fermentation,” Feldman says.

He explains how, if they see a prob-lem coming, they will take more samples to check that everything is heading in the right direction. At approximately 1 mil-lion gallons per tank, a big investment is involved given that 1 million gallons of corn mash is not cheap in today’s market. Millions of dollars in grain are in the pro-cess.

“We don’t lose a whole tank, but you do lose yield,” explains Feldman with ref-

erence to the fact that an infection either consumes sugar or alcohol. Bacteria in the tank convert sugar and ethanol to some-thing else: either lactic or acetic acid.

FTIR analysis simply makes getting the required control data quicker and more cost effective. “It would be the same with HPLC, but the biggest benefi t with FTIR is the time and the cost, which are both excellent,” Feldman says.

At press time, the BioFoss unit is still being tested at Abengoa Bioenergy of Ne-braska, where it is showing great promise. It has also been tested at the NCERC and

at four producing U.S. fuel ethanol plants with positive results.

While the fi eld tests add the fi nishing touches to the new fermentation moni-toring solution, the potential of FTIR is already clear. As an accessible and rapid method, FTIR can help to reduce the use of antibiotics, ensure maximum yield and avoid nasty surprises during fermentation. Above all, it makes testing by anyone in the plant routine. “Why not do tests every hour?” Wrenn says. EP Richard Mills is with Foss. Reach him at [email protected].

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DISTRIBUTION

Family Transport Business Expands in MidwestBy Tom Stone

It’s not much of a stretch to say that the lifeblood coursing through the Kane family tree is motor fu-

els. Since its founding by Joseph Kane and his wife, Lucille, in 1949 in Sauk Centre, Minn., about two hours west of Minneapolis-St. Paul, Kane Trans-port has been a family-owned and -op-erated business. The third generation of Kanes now works to ensure that it remains one of the top carriers in the Upper Midwest.

Not only is the Kane Transport story one of a close family working to-gether for the greater good, but it is an example of something that was thought to be nearly extinct in American busi-ness—the family-owned business that not only survives, but thrives—as cor-porate mergers and hostile takeovers have thinned the herd of businesses that used to have “& Son” tacked onto the end of their name.

“Kane Transport is very much so a family affair and we all get along togeth-

er,” says Pete Kane, Joe’s grandson and the company’s current vice president of Twin Cities operations. “We’re going on the third generation and we’re continu-ing to improve the business, which the odds say we shouldn’t be able to do.”

This commitment to the family name and company has deep roots in Kane Transport, providing the foun-dation for a company that could have called it quits long ago.

From Modest BeginningsJoe and Lucille Kane, with the help

of Joe’s brother Louie, founded Kane Brothers in 1949 as a one-truck opera-tion that delivered gasoline and fuel oil to customers in parts of Minnesota and North Dakota. When Joe passed away in 1968, the company had recently added a second truck and the business was still growing, so Lucille decided to keep at it. To lend a hand, Joe and Lucille’s four sons—David, Mike, Tom and Bob—joined their mother in run-

ning the business. In those days, the four sons handled all of the deliveries and a third truck was added to the fl eet in 1972. Since then the company’s sig-nifi cant growth has met considerable challenges.

Tragedy struck in the 1980s when David, a fi refi ghter by trade, was killed while fi ghting a fi re. Mike then left the business in 1997 before Tom passed away of a heart attack in 1999, leav-ing Bob to run the business by himself from 1999 to 2006. At that time, he asked his three children—Pete, Angela and Patrick—to join the company, and they all agreed to buy equal shares with Bob still retaining majority control. A cousin, Paul Kane, is also involved as the company’s general manager.

During this time, the company emerged as one of the largest petroleum carriers in Minnesota with a fl eet of ap-proximately 180 tractor trucks and more than 250 transport trailers that pick up their supply from a network of 11


company-operated terminals spread throughout Minnesota, Wisconsin, Iowa and Illinois. Besides gasoline, die-sel and biofuels, Kane Transport also delivers asphalt, propane and anhy-drous ammonia to a customer base that covers Minnesota, Wisconsin, Iowa, Il-linois, North Dakota and South Dako-ta. In an average year, Kane Transport trucks and trailers deliver 70,000 loads.

With an average load measuring ap-proximately 7,500 gallons of product, approximately 525 million gallons of fuel are delivered by Kane trucks in a calendar year.

Kane Transport is able to deliver this type of volume and cover its wide-spread distribution area by employing a truck fl eet that isn’t dedicated solely to one type of product. “Our compa-ny tractors kind of go where we need them to go,” Pete Kane says. “One day they’ll be hauling fuel, the next day ethanol, the next day asphalt. We like the versatility that we have to use the trucks to haul different products at different times.”

Green and GrowingWhile gasoline and diesel have

been the backbone of Kane Trans-port’s distribution business, the com-pany got in on the ground fl oor of the ethanol-distribution segment of the industry, thanks, in part, to Minneso-ta’s early acceptance of biofuels as an alternative to petroleum products. In fact, as of April 2007, Minnesota had 307 (26.9 percent) of the nation’s 1,143 E85 retail fueling stations, a number that was more than twice that of the state with the second-most E85 refuel-ing sites, Illinois’ 149.

“We’ve been transporting ethanol for 20 years,” Pete Kane says. “It’s been

in the Upper Midwest, Minnesota spe-cifi cally, for a long time. It’s just started to have more channels of distribution and with the pressure to fi nd alterna-tives to foreign oil, it’s gained speed. In the past 10 years, we’ve seen signifi cant growth in the area of alternative fuels transportation.”

Growth in Minnesota was boosted by a 1997 state mandate that required all gasoline to contain 10 percent etha-nol. A mandate requiring 20 percent ethanol in all regular gasoline will go into effect in 2012. In 2005, the state also passed a mandate requiring all diesel fuel contain 2 percent biodiesel. This increased emphasis on biofuels has resulted in upwards of 15 percent of Kane Transport’s deliveries consist-ing of biofuels, which can range from loads of E10 to E85 and B2 to B100.

Add that to the traditional gaso-line and diesel, and the fringe products such as asphalt and propane, and the success of Kane Transport depends on the nimbleness of its fl eet, as well as the ability to keep it running consis-tently as it criss-crosses its seven-state delivery territory.

Another ConnectionTo keep its large and varied fl eet

on the road and out of the shop, Kane Transport forged relationships with reliable equipment suppliers. When it

DISTRIBUTION


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DISTRIBUTION

came to selecting the brand of transport pumps that would be used on their trailers, Bob Kane turned to longtime family friend Jim Determan.

The Kane and Determan families grew up together in the Sauk Centre area and, while the Kanes got into petro-leum distribution, the Determans got into the supply of fuel-handling products, with Jim Determan founding the Determan Brownie Inc. distributorship in the 1960s. So when Bob Kane needed the right transport pump for his growing stable of delivery trailers, he knew where to turn. Determan directed him to sliding vane pumps.

Since the mid-1980s, TX Series sliding vane pumps from Blackmer have been standard equipment on nearly all of Kane Transport’s 200-plus transport trailers. On the 25 or so trailers that have been specifi cally marked for the deliv-ery of biofuels, TXSD3E Series (3-inch) pumps have been standardized.

A truck fl eet as large as Kane Transport’s must follow a strict maintenance and replacement schedule. In general, Kane replaces its tractors after eight years of service with about 12 needing to be replaced each year.

The company has found, however, that while the trac-tors and trailers need to be replaced according to this sched-ule, not all of the replacement tractors and trailers need new transport pumps placed on them.

“We’ve had [situations] where we’ve removed trailers from our fl eet, took off the old Blackmer pump, used a re-build kit and put them back in service,” Pete Kane says. “Af-

A Kane Transport driver is next to the three-inch sliding vane pumps standard on the company’s biofuels delivery trailers.

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DISTRIBUTION

ter 15 years, we’ll throw a rebuild kit on the pump, slap it on another trailer and let it go for life. We abuse these pumps and they take a beating and they keep on going. Like my Dad said, ‘If the pump was run by a robot, you’d never have to touch it.’”

Kane Transport’s diverse customer base and product of-fering also means that it has some unique delivery challenges. While traditional gasoline and diesel deliveries have relied on gravity drops instead of transport pumps, the growth of the ethanol side of the business has required the need for sliding vane pumps.

While every customer might be different, for the past 25 years Kane Transport has ensured that its products and deliveries come with the highest standard of quality, keeping the company at the forefront of the petroleum industry in the Upper Midwest. EP

Tom Stone is the director of marketing for Blackmer. Reach him at [email protected] or (616) 248-9252.

Pete, left, and Bob Kane

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UTILIZATION

Emerging Waste/Coproducts Optimization Opportunities for Ethanol FacilitiesBy Philip A. Marrone, Kenneth R. Liberty and David J. Turton

n the past two issues of EPM, we presented several options for im-proving ethanol plant operation

from process- and energy-related per-spectives. This article, the third in a three-part series, focuses on waste and coprod-uct-related changes that can be made to improve the ethanol production process relative to the current standard processes (i.e., dry grind and wet mill).

Ethanol production has a unique ad-vantage in the biofuels arena in that the waste products are not really “waste,” but rather valuable end products that require only a small amount of further processing. In most cases, the end products become animal feed (e.g., distillers dried grains with solubles [DDGS]). However, there are oth-er valuable fractions that can be extracted with the right technology. Once separated and removed, the fractions would increase the overall revenue at an ethanol produc-tion facility. Some of these fractions (e.g., oil, fi ber, protein) are already removed up-front in the wet mill process, but other op-portunities are missed. In addition to new

coproducts, there are also new applications for existing products to consider.

Most of the changes associated with waste/coproduct optimization options presented here have to do with identifying new markets or uses for existing coprod-ucts, production of new coproducts, or new applications for coproducts that cur-rently have little or no value (i.e., wastes). The goal of all of these options is to in-crease the number and value of marketable coproducts that may be extracted from the fuel ethanol production process relative to that typically generated by the standard process in the United States today. This will increase revenue and expand plant diversity to better weather market fl uctuations. All of the options presented here are available or under development, but not yet in wide-spread use or considered standard. A more detailed discussion of these and additional options can be found in the full-length ver-sion of this three-part series, available on-line at www.ethanolproducer.com/articles/EmergingOptimizationOpportunities.

Generation of New Products/Coproducts

Aside from DDGS and carbon di-oxide, other marketable products can be derived from an ethanol production fa-cility. The production of butanol via fer-mentation is similar to ethanol production, although an ethanol plant’s fermentation tanks and distillation columns would need to be retrofi tted to support butanol produc-tion. Butanol, as a fuel, has several advan-tages over ethanol. Unlike ethanol, butanol can be a direct replacement for gasoline in an unmodifi ed internal combustion engine with only a 10 percent or less loss in energy density. Butanol can also be blended with gasoline, much like ethanol, but does not have the same concerns as ethanol in re-gard to issues such as corrosivity or water retention. For these reasons, there is grow-ing interest in biobutanol. Companies such as BP and DuPont are venturing into this market in preparation for expanding the concept of biofuels and reducing reliance on foreign oil.

Another type of new product that is


I


seeing increased attention is the synthe-sis of polymers or their monomer units from corn starch. The starch is typically separated by fractionation and then sac-charifi ed to dextrose as the starting mate-rial for polymer production. Examples of starch-derived compounds with produc-tion processes that have been developed and commercialized include polylactide and polyhydroxyalkanoate polymers and 1,3 propanediol monomer. These bio-derived substances (to distinguish from petroleum-derived versions) can be used in plastic fi bers, fabrics, fi lms and resins. Because of the ability of corn to rival pe-troleum as a viable yet renewable building block for many polymeric and organic spe-cies, the market for this coproduct may be signifi cant. This particular option requires signifi cant investment of resources, how-ever, which may not be feasible for every ethanol facility.

Recovery and purifi cation of proteins represents another area of new product interest. In particular, zein is a valuable protein derived from corn that is useful as an edible, water resistant, fi lm-forming polymer. Currently, there is no cost-effec-tive way to recover and purify zein protein. However, efforts are under way to develop

a viable extraction procedure, which if successful, could open up a number of new markets.

Corn fi ber gum, an alkaline extract of corn fi ber, is a potential coproduct that can be generated from a variation of the wet mill process referred to as the sequential extraction process (SEP). In SEP, ethanol, instead of water and sulfur dioxide, is used to extract protein and oil components from corn, which can be re-covered as coproducts along with the corn fi ber gum. Corn fi ber gum has value as a substitute for gum arabic, which is a key ingredient in many soft drinks, candy and pharmaceuticals. There are few domestic sources of gum arabic, which adds to the value of the corn fi ber gum. However, the process is about double the cost of a con-ventional wet mill process.

The substances described above are just a few of the most promising exam-ples of work being done on new product/coproduct development in the fuel etha-nol production process. Clearly, the more useful products that can be extracted from the non-ethanol producing components, the more value is generated for the plant, not only in new sales, but also in waste re-duction.

Alternate Uses for Existing Coproducts

If ethanol capacity and the produc-tion of traditional coproducts increases while the demand for these coproducts remains constant, normal market forces will drive down coproduct prices. Conse-quently, there is incentive to explore new uses and markets that may exist for these coproducts.

Many farmers are looking at DDGS as a feed for livestock other than beef cattle, such as swine and poultry. As is, DDGS may not be quite as competitive since there may be more inexpensive feeds on the market (depending on current prices). Fractionation, however, increases the protein content in the DDGS, mak-ing it more attractive as a feed for other livestock. Research is also being conducted to modify the composition of DDGS to make it more acceptable to other forms of livestock, such as horses.

There is also interest in utilizing DDGS for non-feed applications. Among

UTILIZATION

the alternative applications cited for DDGS are use as a de-icing agent, cat litter and lightweight “ag-fi ber” shipping containers. There is also a potential use as nutraceuticals and subsequent in-corporation in human food. One example of this is beta-glucans, which are polysaccharides found in DDGS (particularly from bar-ley or other cereal grain feeds) that can be used as a source of soluble fi ber and have been shown to have a number of benefi cial human health effects, such as reducing cholesterol levels, reducing cancer risks and improving the immune system. Technology is available to separate corn oil downstream in the dry grind pro-cess from condensed distillers solubles. The oil, which is extracted via centrifuge during evaporation of the thin stillage, can then be utilized as feed for production of biodiesel (see below). Finally, stillage in any form can be used as fuel or lawn fertilizer.

Industrial applications for carbon dioxide generated during fermentation include use as a source of carbonation in the bever-age industry, use in water treatment and chemical processes, and use as a refrigerant. Other proposed applications include use as a purge gas for extracting residual oil deposits from an existing oil fi eld and as a feed for biomass growth, such as algae. The latter has the added benefi t of sequestering carbon and avoiding the release of a greenhouse gas.

Coproduction of BiodieselCorn oil extracted from the kernel or DDGS can be used for

producing biodiesel. Biodiesel, which consists of fatty acid methyl esters, is made by combining the oil with methanol in the presence of a base catalyst. Ethanol can also be used instead of methanol to generate an acceptable diesel fuel replacement (although tech-nically, fatty acid ethyl esters cannot be called biodiesel) and may be a particularly viable option for colocated plants.

Several companies are developing a strategy for coproducing biodiesel alongside their ethanol production. This has a signifi -cant advantage over traditional ethanol production facilities. The

feedstock for biodiesel is already in the plant, meaning there is no transportation cost for the feedstock input. In the traditional dry grind process, the oil normally exits with the DDGS as a low-value product, but separating the oil via fractionation and making biodiesel creates a high-value product. In addition, the DDGS can still be sold as a higher value coproduct as well, since the protein concentration increases. Most importantly, coproduction of etha-nol with biodiesel allows an ethanol plant to diversify, giving added fl exibility to deal with market fl uctuations. The biodiesel produced can either be sold through the existing distribution network, or used as a fuel on site for diesel generators, boilers and heaters.

Biorefi neriesA biorefi nery is analogous to today’s petroleum refi nery; it

is a broad term used to defi ne a facility that integrates biomass conversion processes and equipment to produce fuels, power and value-added chemicals. An example of a biorefi nery is a facility that produces ethanol and burns the waste product to generate power, produces biodiesel, develops protein-enriched meal for farm animals, creates synthetic oils, extracts monomers for plas-tics, and/or performs reactions to make dyes for inks.

Transforming an ethanol production facility to a biorefi nery requires that a second process or facility be established in con-junction with the ethanol plant to produce at least one additional high-value product. Traditional dry grind corn ethanol plants usu-ally produce DDGS as their main coproduct. Such a facility might consider other opportunities such as performing a fractionation step prior to fermentation so that only the starch undergoes fer-mentation while other fractions (oil, proteins, carbohydrates, etc.) can go toward other fuel products, plastics or dyes. Likewise, at the fi nishing end, extractive techniques can be employed to remove valuable proteins, oils can be captured for use as a fuel, cellulose can be recycled for producing additional ethanol, or the insoluble matter (e.g., lignins) can be burned to generate heat or electricity.

UTILIZATION

The main advantage of a biorefi nery is the inherent fl exibil-ity to react to market fl uctuations and demands. For example, if the demand for ethanol decreases (lowering prices), the second high-value product (biodiesel, plastic monomers, etc.) will likely not be affected and revenues in that process remain steady. The downside is the signifi cant investment and capital cost involved with the biorefi nery transformation, although it may be possible to take advantage of funding opportunities available through the federal government to partially offset the cost. To date, the federal government has supplemented many biorefi ning endeavors with millions of dollars in grants; a practice that will likely continue in the foreseeable future.

Summary of Waste/Coproduct Optimization Options

In this article, we have presented several opportunities for alternate uses of wastes/coproducts from a corn-to-ethanol pro-duction facility. The investment required to incorporate these op-tions into an existing plant range from relatively low (e.g., recycle of solid waste) to high (e.g., biodiesel production), but none are high enough to be impracticable. From an overall perspective, the point of all of these options is to extract as much usable product out of the same amount of feedstock, while at the same time, de-veloping a diverse and stable product “portfolio.” However, while reusing waste can reduce costs and new products can generate new revenues, there is also revenue lost from the loss of former

products no longer generated. Thus, it is critical in all cases to perform a cost evaluation to examine the benefi ts of incorporat-ing any new process variations compared to the loss of traditional products and/or markets, given the unique constraints associated with each production facility.

It should be clear that not every option is appropriate for every plant. Those options that increase overall plant fl exibility (e.g., having the ability to utilize coproducts as either sellable com-modities or fuel) will likely confer the most effi ciency and savings. Some options are more mature or will have greater impact on the industry than others. Almost every option has the hurdle of some initial capital expense to implement, which in some cases is sig-nifi cant. The greatest benefi t, however, will come to those plants that are willing to continually invest in new technology to achieve long-term cost benefi ts. Signifi cant advancements in technology over the past 30 years have led to considerable gains in plant ef-fi ciency and profi tability, and this trend is expected to continue. Those plants that do not continuously look to optimize and im-prove performance run the risk of achieving short-term profi ts today at the expense of future viability. EP

Philip A. Marrone is a chemical engineer, Kenneth R. Liberty is a biochemical engineer and David J. Turton is a civil engineer with Science Applications International Corporation. Reach Marrone at [email protected] or (617) 618-4686. Reach Turton at [email protected] or (443) 402-9209.

UTILIZATION

© 2008 Danisco US Inc.Genencor® is a registered trademark and MAXALIQ™ is a trademark of Danisco US Inc. or its affiliates in the United States and/or other countries.


ECONOMY

Renewable Energy, Energy Efficiency Will Be Key to Economic RecoveryBy Bill Eby

As world leaders and their fi nan-cial chiefs scramble to fi nd ways to shore up credit markets and

rebuild confi dence in the global econo-my, many analysts and government lead-ers say that now is the best opportunity to implement renewable energy and energy effi ciency initiatives that can drive and maintain economic recovery.

Recent and numerous calls for the next Congress and administration to forge a comprehensive national energy policy take on a new urgency in troubled economic times, and underscore a long-standing recommendation from the Na-tional 25x’25 Alliance for a renewable en-

ergy and energy effi cient future that will boost the economy, as well as enhance national security and improve the envi-ronment.

“Through the creation of a 25x’25 energy future, we can stimulate the econ-omy and put hundreds of thousands of Americans back to work,” says Read Smith, co-chairman of the National 25x’25 Steering Committee. “Let’s not bury our heads in the sand during these very challenging times. We have solutions that we can bring to the economic recov-ery table.”

A national study undertaken by the University of Tennessee Department of

Agricultural Economics shows that if America’s farms, ranches and forestlands can meet 25 percent of the nation’s ener-gy needs with renewable resources— bio-fuels, biomass, wind energy, solar power, geothermal energy and hydropower—an estimated $700 billion in new, annual eco-nomic activity would be generated, and 4 million to 5 million new jobs would be created.

The Tennessee study, commissioned by 25x’25, is said by its authors to be one scenario among many in meeting the 25x’25 vision. While the analysis includes forest waste from hazard-reduction pro-grams and mill residue, there are numer-


‘The green economic recovery program addresses the immediate need to boost our struggling economy and accelerate the adoption of a

comprehensive clean energy agenda.’

ous resources that are not taken into account—woody biomass from man-aged forests, agricultural wastes (other than corn and wheat) and urban wood waste—suggesting the economic ben-efi ts of a 25x’25 future could be even greater. Further, while the analysis in-cludes the production of dedicated en-ergy crops, some varieties of feedstocks currently under research in laboratories and universities, including energy cane, Miscanthus and hybrid willow, may not have been fully evaluated in the analy-sis, indicating even greater economic returns.

Another strong indicator of renew-able energy development’s potential to strengthen the economy comes from the U.S. DOE, which looked at just wind energy and concluded that it is ca-pable of becoming a major contributor to America’s electricity supply and econ-omy over the next three decades. The DOE says that achieving a 20 percent wind contribution to the U.S. electricity supply would increase annual revenues to local communities to more than $1.5

billion by 2030 and support roughly 500,000 jobs in the United States.

Developing Recommendations

When presented with those kinds of economic incentives, says 25x’25 Project Coordinator Ernie Shea, the al-liance’s steering committee developed a set of recommendations for a national energy policy that will not only reduce the nation’s dependence on foreign oil and address climate change challenges, but will reinvigorate the economy and create new jobs. “The 25x’25 recom-mendations will lead to a comprehen-sive, long-term energy plan that will accelerate the production of all forms of renewable energy and create new re-newable energy markets,” Shea says.

Among the 25x’25 recommenda-tions that directly address the current economic issues are the establishment of a mechanism to create a market for carbon, a change in the way utilities are regulated to give them a real incentive to aggressively pursue cost-effective ener-

ECONOMY


gy effi ciency, the expansion and extension of federal loans and loan guarantees for renewable energy production, the creation of incentives to accelerate the produc-tion and deployment of fl exible-fuel and plug-in hybrid electric vehicles, and the modernization of the nation’s power grid. The alliance also calls for an increase in federal research, development and deploy-ment funding to accelerate the commer-cial implementation of renewable energy technologies.

Meanwhile, the Center for American Progress, a Washington, D.C., think tank and 25x’25 endorsing partner, says the United States can create 2 million jobs over two years by investing in a rapid “green” economic recovery program. In a recently issued report, the group says a $100 billion public/private investment package would create nearly four times more jobs, includ-ing a vast majority paying at least $16 per hour, than spending the same amount of money within the oil industry. It would also reduce the unemployment rate from the 5.7 percent recorded in July to 4.4 per-cent over two years.

The report, “Green Recovery: A Pro-gram to Create Good Jobs and Start Build-ing a Low-Carbon Economy,” which was prepared by the Political Economy Re-search Institute at the University of Mas-sachusetts-Amherst under commission by the Center for American Progress, also shows that the proposed green economic recovery package would boost construc-tion and manufacturing employment. The report says the green recovery program, at the least, can restore some 800,000 con-struction jobs lost over the past two years due to the housing bubble collapse.

John Podesta, president and chief ex-ecutive offi cer of the Center for American Progress, says falling home prices, foreclo-sures, bank failures, a weaker dollar, steep prices for gas, food and steel, and layoffs in the banking, construction and manufac-turing sectors are all indicators of serious economic strain. “What’s more, evidence suggests the current downturn will con-tinue for at least another year,” he says. “At the same time, we face a growing cli-mate crisis that will require us to rapidly

invest in new energy infrastructure, clean-er sources of power, and more effi cient use of electricity and fuels in order to cut global warming pollution.”

Podesta says the time is now “for a new vision for the economic revitalization of the nation and a restoration of Ameri-can leadership in the world” and “at the heart of this opportunity is clean energy, remaking the vast energy systems that power the nation and the world.” He says the economic opportunities provided by a fundamental change in the way energy is produced and consumed are vast.

The $100 billion package envisioned by the center would include $50 billion for tax credits, $46 billion in direct government spending and $4 billion for federal loan guarantees. By comparison, U.S. crude oil imports during the fi rst eight months of 2008 totaled $251 billion, according to the U.S. Bureau of Economic Analysis.

“The green economic recovery pro-gram addresses the immediate need to boost our struggling economy and accel-erate the adoption of a comprehensive clean energy agenda,” says Podesta, noting that combining tax credits and loan guar-antees for private businesses along with direct public investment spending would retrofi t buildings to increase energy effi -ciency, expand mass transit and freight rail, construct “smart” electrical grid transmis-sion systems, and boost wind energy, solar power and advanced biofuels.

The report shows the vast majority of the 2 million new jobs would be in the same areas of employment that people already work in today, in every region and state of the country. For example, the report notes, constructing wind farms creates jobs for sheet metal workers, machinists and truck drivers, among many others. Increasing the energy effi ciency of buildings through retrofi tting requires roofers, insulators and building inspectors. Expanding mass tran-sit systems employs civil engineers, electri-cians and dispatchers.

Investment Strategies for a Cleaner Environment

On another front, The Apollo Alli-ance, a coalition of business, labor, envi-

ECONOMY


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ECONOMY

ronmental and community leaders, and a 25x’25 endorsing partner, has released its own economic investment strategy the authors say will build a clean energy economy while cutting energy bills for families and businesses. Alliance offi cials say the plan will generate and invest $500 billion over the next 10 years and create more than 5 million “high-quality, green-collar” jobs.

“The New Apollo Program: Clean Energy, Good Jobs,” which the alliance says is a collaboration among several la-bor unions, environmental groups, busi-nesses, industry associations and socially responsible non-profi t organizations, is a strategy designed to be carried out through initiatives such as establishing a national energy effi ciency commitment to reduce energy use in new and existing buildings by at least 30 percent by 2025, improve effi ciency by 20 percent in exist-ing power plants and industries by 2025, restore America’s manufacturing leader-ship to meet the demands of the clean energy future, establish a National Ener-gy Innovation Fund to invest in the most promising new clean energy technologies emerging from our nation’s laboratories, and train America’s workers for the new clean energy economy.

The nation’s mayors have joined re-newable energy advocates in their calls for a “green” overhaul of the nation’s econ-omy. In a study from the U.S. Conference of Mayors Climate Protection Center, the U.S. economy currently generates more than 750,000 green jobs—a number that the report projects will grow fi ve-fold to more than 4.2 million jobs over the next three decades. The report establishes a “Green Jobs Index” and is the fi rst calcu-lation of its kind to measure how many direct and indirect jobs are in the new and emerging U.S. green economy.

“This report proves that being green is not optional, it is necessary for a healthy and robust economy,” said con-ference President Manny Diaz, the mayor of Miami. “Creating green jobs is an in-vestment we must continue to make.”

Prepared by Global Insight Inc., the report found that more than 400,000 of

current green jobs identifi ed in the study are in the engineering, legal, research and consulting fi elds, highlighting the impor-tant role supportive or “indirect” jobs play in moving the economy toward energy in-dependence. Renewable power generation maintains 127,000 jobs, while agriculture and forestry provides 57,500 jobs.

Under assumed scenarios and with government commitment and investments, the report projects green jobs could con-tribute 10 percent of all new jobs through 2038, representing the fastest-growing job segment in the U.S. economy. By 2038, the report forecasts that renewable electricity production will create 1.23 million jobs, alternative transportation fuels will give rise to 1.5 million jobs, engineering, legal, research and consulting will account for more than 1.4 million positions, and com-mercial and residential retrofi ts will gener-ate 81,000 jobs.

While recent news accounts focus on the diffi culties faced by national econo-mies around the world, some encourage-ment is offered by news from the United Nations Environmental Program that an estimated $148 billion was invested in new wind, solar, biofuels and other alternative energy development around the world last year, a spike of nearly 60 percent increase more than the $92.6 billion spent on such projects in 2006. U.N. offi cials say the up-surge in investment, which they describe as a “green energy gold rush,” has been gaining speed the past few years because of rising concerns over climate change and energy prices. In 2005, some $58.5 bil-lion in new money was invested. EP

Bill Eby provides communication and media support for 25x’25. Reach him at [email protected] or (512) 940-8990.



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EVENTSCALENDAR

Canadian Renewable Fuels Summit

December 1-3, 2008Hilton Hotel Lac Leamy

Hull, Quebec

Themed “Growing Beyond Oil,” the Canadian Renewable Fuels Association’s fi fth annual event will continue discussion of the challenges and opportunities facing the Canadian and global biofuels markets. Agenda topics will include an international outlook, including Argentina, Bra-zil and North America; Canada’s political situ-ation following its federal election in October; low-carbon fuel standards and carbon markets; second-generation ethanol; risk management and hedging; the U.S. renewable fuels standard; and eco-branding.

(519) 576-4500www.canadianrenewablefuelssummit.com

Waste to Energy: International Exhibition

& Conference for Energy from Waste and BiomassDecember 10-11, 2008

Bremen Exhibition & Conference CentreBremen, Germany

This fourth annual event will focus on waste as a resource for the production of biogas, biofuels and more. Agenda topics will include material fl ow management, separation and sorting, residues, shredding and grinding, and power and biogas plants. A breakout session will address biofuels, ethanol in particular.

+49-421-3505-347www.wte-expo.com

National Ethanol ConferenceFebruary 23-25, 2009

San Antonio Convention CenterSan Antonio, Texas

This event, themed “Growing Innovation,” will cover the ethanol industry’s impact on the U.S. economy, the environment, food prices and the international market. A record of nearly 2,500 people attended in 2008. An agenda will be avail-able as the event approaches.

(202) 289-3835www.ethanolrfa.org

African BiofuelsMarch 30-April 2, 2009

Vodaworld Event CenterJohannesburg, South Africa

This fourth annual conference will focus on vari-ous biofuels, including ethanol, and the technol-ogy and movement toward second-generation biofuels. The event will showcase more than 40 speakers, panel and open fl oor discussions, mini workshops, and 16 case studies. A more detailed agenda will be available as the event approach-es.

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

Alternative Fuels & Vehicles National Conference + Expo

April 19-22, 2009Walt Disney World Swan and Dolphin Resort

Orlando, Florida

This 14th annual event will represent all fuels, ve-hicles and technologies that provide an alterna-tive to petroleum, including ethanol. Information will be disseminated via preconference sessions, a general session and concurrent breakout ses-sions. There will also be a ride-and-drive event, industry tours and niche market workshops. More information will be available as the event approaches.

(702) 254-4180www.afv2009.com

International Biomass Conference & Trade Show

April 28-30, 2009 Oregon Convention Center

Portland, Oregon

This event, sponsored by BBI International Inc., will address the latest technologies and business considerations for bioenergy projects, including biofuels. Breakout session topics will include cel-lulosic ethanol; feedstocks such as ag residues, wood waste and municipal solid waste; project fi nance; and permitting and project implementa-tion. Attendees will also be able to tour the Cor-nelius Summit Foods ethanol plant.

(719) 539-0300www.biomassconference.com


Renewable Energy Technology Conference

& ExhibitionFebruary 25-27, 2009

Las Vegas Convention CenterLas Vegas, Nevada

This event will include a business conference, a trade show and several side events. The busi-ness conference will address the status and out-look of renewable energy. One breakout session in particular will focus on biomass and biofuels. It will address sustainability, feedstocks, fi nancing, ethanol production technology, a global market outlook, engines and fueling stations, and next-generation facilities.

(805) 290-1338www.retech2009.com

Canadian Renewable Energy WorkshopMarch 9-11, 2009

Regina, Saskatchewan

This second annual conference facilitates the continued development of Canada’s renewable energy industry. More information will be avail-able as the event approaches.

(719) 539-0300www.crew2009.com

World Biofuels MarketMarch 16-18, 2009

Brussels Expo CentreBrussels, Belgium

This is one of the largest biofuels events in Eu-rope, and a key meeting place for industry ex-perts looking to share best practices and attract new clients. Agenda topics will include conven-tional and cellulosic ethanol; international etha-nol markets such as Asia, Brazil and Africa; infra-structure; and use.

+44 20 7099 0600www.worldbiofuelsmarkets.com

International Fuel Ethanol Workshop & ExpoJune 15-18, 2009

Denver Convention CenterDenver, Colorado

This will mark the 25th anniversary of the world’s largest ethanol conference, which was recently recognized by Trade Show Week magazine as one of the Fastest 50 events in the United States for the second consecutive year. More details will be available as the event approaches.

(719) 539-0300www.2009few.com

Ethanol Conference & Trade Show

August 11- 13, 2009Milwaukee, Wisconsin

The American Coalition for Ethanol’s 22nd annual conference will highlight public policy, technology and education in regard to the ethanol industry, among many other topics. A more detailed agen-da will be available as the event approaches.

(605) 334-3381www.ethanol.org

The 2008 Ethanol Conference & Trade Show was held in Omaha, Neb., in August.

PHO

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EPM MARKETPLACE

Ag Products & ServicesGrain Origination Services

Agnetic, LLC317-696-2824 blog.agnetic.com

Hybrid Corn

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

Associations/OrganizationsTrade

API Credit Exchange202-682-8192 www.api.org/ace

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

ChemicalsPhibroChem 800-223-0434 www.lactrol.com

Anti-Microbial

Ferm Solutions859-402-8707 www.ferm-solutions.com

Lallemand Ethanol Technology800-583-6484 www.ethanoltech.com

North American Bioproducts Corporation866-342-7026 www.na-bio.com

PhibroChem 800-223-0434 www.lactrol.com

CIP

Univar USA Inc.402-733-3266 www.univarusa.com

Desiccant

Gordon Technologies570-279-8086 www.gtsieve.com

Water Treatment

Fremont Industries Inc.952-445-4121 www.fremontind.com

Yeast

Fermentis-Division of SI Lesaffre800-558-7279 www.fermentis.com

Lallemand Ethanol Technology800-583-6484 www.ethanoltech.com

North American Bioproducts Corporation866-342-7026 www.na-bio.com

CleaningDryer Systems

Hydro-Klean, Inc.515-283-0500 www.hydro-klean.com

Inland Waters313-841-5800 www.inlandwaters.com

Seneca Waste Solutions800-369-5500 www.senecacompanies.com

Ductwork




Emergency Spill Response




Fans




Filter Media



Heat Exchanger




Summit Industrial Products800-749-5823 www.klsummit.com

Hydro-Blasting



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Plate-Frame



Railcars




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Tank Cleaning Equipment

Spraying Systems Co.630-665-5000 www.spray.com

Tank Cleaning Services



Professional Environmental Cleaning Services402-212-0949 www.professionalECS.com


ConstructionBuildings-Modular

Fabrication

Macomber Welding & Fabricating, Inc.616-698-0819 www.macomberwelding.com

VAL-FAB Inc.877-482-5322 www.valfab.com

W. Soule & Company1-877-976-8531 www.wsoule.com

Grain Storage

Coverall Building Systems800-268-3768 www.coverall.net

Insulation

Mavo Systems763-788-7713 www.mavo.com

Mayes Coatings, Inc.866-93MAYES www.mayescoatings.com

Miller Insulation Co, Inc.701-258-4323 www.millerinsulation.com

Mechanical

EPM MARKETPLACEWith all contact information placed in one convenient location, Ethanol Pro-ducer Magazine not only contains top editorial content but also a useful di-rectory in each publication. Whether a fi rst-time advertiser wanting to raise awareness of your business or a frequent display advertiser looking for added exposure, EPM Marketplace is the perfect solution.

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Mid-States Mechanical Services, Inc.800-950-0279 www.mid-statesmechanical.com

W. Soule & Company1-877-976-8531 www.wsoule.com

Plant Construction

Agra Industries, Inc.715-536-9584 www.agraind.com

Agri-Systems406-245-6231 www.agrisystems.net

CYC Construction402-333-1652 www.cycconstruction.com

Reimer Welding Inc.218-773-0886 www.reimerwelding.com

Wanzek Construction,Inc.701-282-6171 wanzek.com

Railroad Tracks

R & R Contracting, Inc.800-872-5975 www.rrcontracting.net

Railworks913-888-4091 www.railworks.com

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

Tanks

DCI, Inc.320-252-8200 www.dciinc.com

Eagle Tanks, Inc.888-678-0698 www.eagletanks.com

WINBCO Tank Company641-683-1855 www.winbco.com

ConsultingBusiness Plans

ICM, Inc.316-796-0900 www.icminc.com

Environmental

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

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With all contact information placed in

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ducer Magazine not only contains top

editorial content but also a useful di-

rectory in each publication. Whether

a fi rst-time advertiser wanting to raise

awareness of your business or a

frequent display advertiser looking for

added exposure, EPM Marketplace is

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EPM MARKETPLACE



Seneca Companies800-369-5500 www.senecacompanies.com

TKDA651-292-4602 www.tkda.com

Feasibility Studies

Harris Group Inc.206-494-9422 www.harrisgroup.com

Groundwater Services

Leggette, Brashears & Graham, Inc.651-490-1405 www.lbgweb.com

Personnel Recruiting

SearchPath of Chicago815-261-4403 www.searchpath.com/chicago

Plant Optimization

Granatus Consulting, Inc.218-773-0005 www.granatusinc.com


Terratec Biofuels of Solutia800-742-1476 www.TerratecBiofuels.com

Project Development

Ethanol Productions813-968-6867 [email protected]


Public Relations

Lanser Public Affairs, LLC262-797-7876 www.lanserpublicaffairs.com

Quality Assurance

Eurofi ns Scientifi c, Inc.551-580-9140 www.eurofi nsus.com

Regulatory

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

Risk Management

National Fuel Marketing303-996-6781 www.NationalFuelMarketing.com

EducationIowa BioDevelopment641-969-4167 www.iabiodevelopment.com

Iowa Biofuels Training International641-969-4167 www.biofuelstraining.org

Iowa Lakes Community College800-242-5108 www.iowalakes.edu

EmploymentRecruiting

Hobbs & Towne610-783-4600x108 www.hobbstowne.com

SearchPath of Chicago815-261-4403 www.searchpath.com/chicago

The Richmond Group USA - BioEnergy Search Division804-285-2071 www.trgbioenergy.com

EngineeringCivil

Antioch International, Inc.402-289-2217 www.antioch-intl.com


Control Systems

Bachelor Controls785-284-3482 www.bachelorcontrols.com

Control System Integrators, Inc.319-377-6538 x19 www.csystemi.com

Grading, sampling, mycotoxins, proximates, residues, GMOs.QA / QC Consulting: HACCP, GMPs, SOPs, NIR calibrationCo-products: Quality assurance testing; Lot certification; Export assistance

[email protected]

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Design/Build



Delta-T Corporation757-941-0188 www.deltatcorp.com

ECE Design312-235-6960 www.ecedesign.com

Ethanol Productions813-968-6867 [email protected]

GS CleanTech Corp.678-566-3588 www.gs-cleantech.com


Wanzek Construction, Inc.701-282-6171 wanzek.com

Process Design


ChemSim781-248-5057 www.chemsim.com

Process Engineering Associates, LLC865-220-8722 www.processengr.com

Vogelbusch USA, Inc.713-461-7374 www.vogelbusch.com

Equipment & ServicesAgitation Equipment

ProQuip, Inc.330-468-1850 www.proquipinc.com

Air Pollution/Odor Control

Ceco Abatement Systems, Inc.630-493-0624 www.cecoenviro.com/Abatement


Analytical Instruments

Anton Paar+1-804-550-1051 www.anton-paar.com

Perten Instruments, Inc.801-936-8165 www.perten.com

Blowers & Fans

FlaktWoods716-845-0900 www.fl aktwoods.com

Robinson Industries, Inc.724-452-6121 www.robinsonfans.com

Boiler Systems

Factory Sales and Engineering, Inc.985-867-9150 www.fsela.com

Rentech Boiler Systems, Inc.325-794-5701 www.rentechboilers.com

Catwalks

Lean Technologies LLC701-352-9620 www.leantechnologiesllc.com

Centrifuge Repair

Nosnhoj Services Inc.317-887-6436 www.nosnhojinc.com

Centrifuges

Westfalia Separator,Inc.201-784-4322 www.wsus.com

Combustion Equipment

Eclipse.Inc.815-637-7213 www.eclipsenet.com

John Zink Company LLC800-421-9242 www.johnzink.com

Computer Software

dbc SMARTsoftware, Inc.770-427-7633 www.dbcsmartsoftware.com

Encore Business Solutions204-989-4330 www.encorebusiness.com

John Deere Agri Services770-238-5100 www.johndeereagriservices.com

Summit Software, Inc.800-433-5724 x 181 www.summit-soft.com

Control Systems

Automation Alliance205-271-9743 www.automationalliance.net

FeedForward, Inc.770-426-4422 www.feedforward.com

Kahler Automation Corp.507-235-6648 www.kahlerautomation.com

SoftPLC Corporation512-264-8390 www.softplc.com

Control Systems──Distributed

Control System Integrators, Inc.319-377-6538 x19 www.csystemi.com

Conveyors─Enclosed

Grisley Components, Inc.303-756-6474 www.grisley.com

Conveyors─Pneumatic

Blower Engineering800-388-1339 www.blowerengineering.com

Gusmer Enterprises, Inc.847-277-9785 www.gusmerenterprises.com



EPM MARKETPLACE

Cooling Towers

Delta Cooling Towers, Inc.800-BUY-DELTA www.deltacooling.com

Decanters

Distillation Equipment

SRS Engineering Corporation800-497-5841 www.srsengineering.com

Dryers─Flash

Barr-Rosin,Inc.630-659-3980 www.barr-rosin.com

Dryers─Fluid Bed

Aeroglide Corporation919-851-2000 www.aeroglide.com

Littleford Day, Inc.859-525-7600 www.littleford.com

Dryers─Other

Davenport Dryer, LLC309-786-1500 www.davenportdryer.com

Dryers─Ring

Barr-Rosin,Inc630-659-3980 www.barr-rosin.com

Dryers─Rotary Drum

Aeroglide Corporation919-851-2000 www.aeroglide.com

Barr-Rosin,Inc.630-659-3980 www.barr-rosin.com

FEECO International, Inc.920-468-1000 www.feeco.com


Ronning Engineering Company, Inc.913-239-8118 www.ronningengineering.com

Emission Monitoring Systems

MonitorTech Corp.866-682-6771 www.monitortechgrp.com

Emissions Testing & Reduction

Lantec Products, Inc.617-265-2171 www.lantecp.com

Evaporators

GEA NIRO Inc410-997-8700 www.niroinc.com

HRS Process Technology, Inc.623-915-4328 www.hrs-americas.com

Fermentation Monitoring

ETS Laboratories707-963-4806 www.etslabs.com

Fermentors


Filters

Eaton Filtration800-656-3344 ext 581 [email protected]

Larox301-543-1200 www.larox.com/cpi

Filtration Equipment

BWF America800-733-2043 www.bwf-america.com

Fluid Engineering814-453-5014 www.fl uideng.com

W.S. Tyler1-800-321-6188 www.wstyler.com

Fractionation─Corn

Buhler Inc.763-847-9900 www.buhlergroup.com/us

Cereal Process Technologies217-779-2595 www.cerealprocess.com

FWS Technologies204-487-2500 www.fwsgroup.com

Sturtevant Inc.781-829-6501 www.sturtevantinc.com

Gas Detectors

UE Systems, Inc.914-592-1220 www.uesystems.com

Gaskets

Allegheny Coupling Company814-723-8150 www.alleghenycoupling.com

Grain Handling & Storage

Sukup Manufacturing Co.641-892-4222 www.sukup.com

Heat Exchangers

Custom Metalcraft Inc.417-862-0707 www.custom-metalcraft.com

Continuous Emissions Monitoring SystemsEasiest installation, operation and maintenance

Meet or exceeds EPA requirementsNOx, O2, CO, SO2 and others

Turnkey systems for under $100,000.00P.O. Box 9271, Columbus, Oh 43209

866-682-6771 [email protected]



EPM MARKETPLACE


EPM MARKETPLACE

Munters - Des Champs Products540-291-1111 www.deschamps.com

Instrumentation

Endress+Hauser 317-535-2174 www.us.endress.com

Instrument Associates708-597-9880 www.instrumentassociates.com

Process Sensors Corp.508-473-9901 www.processsensors.com


Shimadzu Scientifi c Instruments800-477-1227 www.ssi.shimadzu.com

WIKA Instrument Corporation888-945-2872, x5127 www.wika.com

Insulator

Industrial Construction & Engineering636-970-1650 www.ic-e.cc

Jet Cookers

ProSonix Corporation800-849-1130, x. 801 www.pro-sonix.com

Laboratory─Equipment

Astoria-Pacifi c International800-536-3111 www.astoria-pacifi c.com


Laboratory─Outsourcing

SGS North America Inc. 281-479-7170 www.sgs.com/alternativefuels

Laboratory─Supplies

Midland Scientifi c, Inc.800-642-5263 www.midlandsci.com

Laboratory─Testing Services

Eurofi ns GeneScan, Inc.504-297-4330 www.gmotesting.com

Midwest Laboratories402-334-7770 www.midwestlabs.com

Romer Labs, Inc.636-583-8600 www.romerlabs.com

SGS North America, Inc.281-478-8234www.sgs.com/alternativefuels

Trilogy Analytical Laboratory636-239-1521 www.trilogylab.com

Loading Equipment

Hemco Industries, Inc.877-347-7106 www.hemcocpm.com

SafeRack866-761-7225 www.saferack.com

Maintenance Services

Joule’ Industrial [email protected] www.jouleinc.com

Maintenance Software

Mapcon Technologies, Inc.800-922-4336 www.mapcon.com

Mills─Hammer

CBT Wear Parts, Inc.888-228-3625 www.cbtwearparts.com

CPM/Roskamp Champion800-366-2563 www.cpmroskamp.com

Prater-Sterling630-679-3254 www.prater-sterling.com

Millwright


Mixers

KINEMATICA, INC.631-750-6653 www.kinematica-inc.com

Moisture Analyzers


Sartorius Mechatronies-Omnimark800-835-3211 www.sartorius-omnimark.com

Molecular Sieves

Gordon Technologies570-279-8086 www.gtsieve.com

Vaperma, Inc.418-839-6989 www.vaperma.com

Zeochem, LLC502-634-7600 www.zeochem.com

Motors

Trico TCWind, Incorporated320-693-6200 www.tricotcwind.com

Pipe

American Stainless & Supply800-845-5511 www.americanstainless.com

ISCO Industries800-345-4726 www.isco-pipe.com

Robert-James Sales, Inc.800-666-0088 www.rjsales.com

Pipe─Fittings


St. Louis Pipe & Supply800-737-7473 www.stlpipesupply.com

Pipe─Flanges


Pressure & Temperature

WIKA Instrument Corporation888-945-2872, x5127 www.wika.com

Pressure Vessels


Process Control



EPM MARKETPLACE

Pumps

ITT Industries Goulds Pumps315-568-2811 www.gouldspumps.com

Watson-Marlow Bredel Pumps800-282-8823 www.watson-marlow.com

Yamada America, Inc.800-990-7867 www.yamadapump.com

QA Test Products


Phenomenex310-212-0555x3328 www.phenomenex.com

RTO Media


Resource Recovery

Eco-Tec, Inc.905-427-0077 www.eco-tec.com

Safety

SimplexGrinnell800-746-7539 www.simplexgrinnell.com

Seals

Aesseal Inc.865-531-0192 www.aesseal.com

Utex Industries, Inc.432-333-4151/800-873-0946 www.utexind.com

Sensors

Electro Sensors800-328-6170 www.electro-sensors.com

Separation Equipment


Puritan Magnetics, Inc.248-628-3808 www.puritanmagnetics.com

Separators

Westfalia Separator,Inc.201-784-4322 www.wsus.com

Steel Suppliers

Chapel Steel800-320-6042 [email protected]

Outokumpu Stainless847-517-4050 www.outokumpu.com

Sandmeyer Steel Company215-464-7100 www.sandmeyersteel.com

Storage─DDGS

Laidig Systems, Inc.574-256-0204 www.laidig.com

Structural Fabrication

Cherokee Steel Fabricators, Inc.903-759-3844 www.cherokeesteelfabricators.com

Tanks


Brown-Minneapolis Tank281-252-9809 www.bmt-tank.com

CMC Letco Industries417-831-1528 www.cmc-letco.com

Federal Equipment Company800-652-2466 www.fedequip.com

Greenberry Industrial541-757-8458 www.greenberryinc.com

Paragon Trailer Sales800-471-8769 www.paragontrailer.com


Thermal Energy

American Waste Removal505-417-9933 www.americanwasteremoval.com

Thermal Oxidizers


Pro-Environmental, Inc.909-989-3010 www.pro-env.com

Turbines─Gas

Kawasaki Gas Turbines281-970-3255x18 www.kawasakigasturbines.com

[email protected]

PROVENRELIABILITYfor VOC, CO & PM

ABATEMENT

EISENMANN CorporationCrystal Lake, Illinois




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Used Equipment

VOC Scrubbers


Valve Actuators

Rotork Controls,Inc.585-247-2304 www.rotork.com

Valves

Central States Group800-318-2747 www.centralstatesgroup.com

Check-All Valve Mfg. Co.515-224-2301 www.checkall.com

Metso Automation508-852-0215 www.metsoethanol.com

North American Safety Valve800-800-8882 www.nasvi.com

Wastewater Treatment Services

Biothane Corporation856-541-3500x501 www.biothane.com

Water Treatment

Aquatech International Corporation724-746-5300 www.aquatech.com


Siemens Water Technologies800-525-0658 www.siemens.com/water

Ethanol ProductionExisting Producers

Louis Dreyfus Commodities402-844-2680 LDCommodities.com

Future Producers

Syntec Biofuel, Inc.604-648-2092 www.syntecbiofuel.com

FinanceAccounting

Christianson & Associates PLLP320-235-5937 www.christiansoncpa.com

Kennedy and Coe, LLC800-303-3241 www.kcoe.com

Appraisals

Natwick Associates Appraisal Services800-279-4757 www.natwick.com

Due Diligence


Equity Procurement

Greenman Funding888-802-7678 [email protected]

Jordan, Knauff & Company312-254-5900 www.jordanknauff.com

Insurance

Armor Companies, Inc.612-501-5654 [email protected]

ERI Solutions, Inc.316-927-4294 erisolutions.com

Lender Representatives

Greenman Funding888-802-7678 [email protected]

Mergers & Acquisitions

Thomas Group Capital404-504-6050 www.thomassec.com

Risk Management

First Capitol Risk Management800-884-8290 www.fi rstcapitolrm.com

R.J. O’Brien800-621-0757 www.rjobrien.com

Software-Accounting

Encore Business Solutions204-989-4330 www.encorebusiness.com

Summit Software, Inc.800-433-5724 x 181 www.summit-soft.com

GovernmentState

Legal ServicesAttorneys

BrownWinick Law Firm515-242-2400 www.biofuellawyers.com

Dorsey & Whitney LLP612-343-8275 www.dorsey.com

Faegre & Benson, LLP612-766-6930 www.faegre.com


EPM MARKETPLACE

Stoel Rives LLP612-373-8800 www.stoel.com/biofuels

MarketingDistillers Grains

CHS, Inc.651-355-6271 www.chsinc.com

Gavilon402-595-5678 www.gavilon.com

Hawkeye Gold, LLC515-663-6429 www.hawkgold.com

Fuel Ethanol

Atlas Renewable Energy, LLC800-884-8290 www.atlasenergyllc.com

C&N Ethanol Marketing Corp.952-854-6675 www.candncompanies.com

Gavilon402-595-5678 www.gavilon.com

Noble Americas Corporation626-585-1705 www.thisisnoble.com

Provista Renewable Fuels Marketing651-355-8519 www.provistafuels.com

TransportationHeavy Highway Transport

Landstar Carrier Group920-487-3877 www.landstar.com

Rail

Ameritrack RailRoad Contractors, Inc.765-659-2111 www.ameritrackrailroad.com

Blacklands Railroad903-439-0738 www.blacklandsrailroad.com

Rail Consulting

Antioch International, Inc.402-289-2217 www.antioch-intl.com


Rail Ties

Thompson Industries, Inc.317-859-8725 www.thompsonindustries.net

Railcar Moving

Heyl & Patterson Inc.412-788-9810 www.heylpatterson.com

Shuttlewagon816-767-0300 www.shuttlewagon.com

Railcar Parts

Salco Products, Inc.630-783-2570 www.salcoproducts.com

UtilitiesUtility

Integrys Energy Services608-235-2547 www.integrysenergy.com

RAILCAR MOVING

P 412-788-9810 F 412-788-9822 E [email protected]

The CUB™ is an electromechanicalmachine designed to move single

railcars or groups of cars. Some advantages of the CUB™ are:

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EPM MARKETPLACE



For additional informationplease contact us at (701) 746-8385 or at

[email protected].

EXPANDING?UPGRADING?

Keep Your Plant Runningwith our In-Stock Stainless PVF

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Stocking

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December 2008 Ethanol Producer Magazine

Documents

e n g i n e e r i n

c o n s t r u c t i

r c h i t e c t u r

n d c o n s u

t i n g s o

ethanol producer magazine

c e t h e w h o

n d s e r v