Drink the Best and Sell the Rest!

Some facilities that were originally designed and operated as fuel-grade ethanol plants are diversifying to produce higher-grade alcohol. There are permitting and compliance hurdles that may be encountered when making these changes to a biorefinery.
By Jessica Buckley | August 16, 2022

It’s no secret that 2020 was an especially difficult year for the biofuel industry. Between less people traveling and market conditions, many plants were forced to slow or temporarily halt production due to reduced demand. Some facilities were able to divert product for alternative uses, particularly as an ingredient in hand sanitizer as the result of FDA’s temporary policy changes. Given the current political climate and push for more electric vehicles, some facilities are beginning to explore alternative markets on a more permanent basis. Facilities that were originally designed and operated as fuel-grade ethanol manufacturing plants are diversifying to produce higher-grade alcohol. However, there are permitting and compliance hurdles that may be encountered when changing the intended final use of manufactured products. With the global industrial alcohol market expected to grow to over $241 billion by 2027, it is logical for facilities to diversify to secure a more sustainable future.  

Fuel and Industrial-Grade Ethyl Alcohol
Ethyl alcohol can be found in a wide range of products. It is important to understand the various alcohol grades to distinguish adjustments to the process and the compliance considerations. Fuel-grade alcohol is denatured with natural gasoline and is often considered the lowest grade due to high impurity levels, which are often disregarded since they’re easily combusted in engines. Industrial grade alcohol typically has most of the impurities removed and is required to meet United States Pharmacopoeia (USP) standards. Industrial-grade alcohol can be 190 or 200-proof and is specifically denatured. For example, SDA 40B, a variety of industrial-grade alcohol, is specifically denatured with tert-Butyl alcohol. Approximately 60% of U.S. industrial demand goes to solvent applications in toiletries and cosmetics, detergents and household cleaners, coatings and inks, processing solvents, or as a chemical intermediate.

Pharmaceutical-Grade Ethyl Alcohol
Further reducing impurity levels can qualify the ethyl alcohol as “Pharmaceutical Grade,” which has applications as a topical disinfectant (i.e. hand sanitizer). Pharma-grade alcohol can also be used for blood fractionation/plasma, chemical intermediates, tableting, powders and antibiotics. Additional recordkeeping and testing will be required at this level and will also require registration with FDA. The primary impurities of concern and acceptance criteria is represented as follows: methanol (200 mL/L), acetaldehyde and acetals (10 mL/L), benzene (2 mL/L), sum of all other impurities (300 mL/L).  

Food-Grade Alcohol
Food grade is distinguished from the other grades since it must be safe for human consumption. It has a higher purity level due to lack of additives, adds a heavy metal specification limit, and is conventionally 200-proof. It requires specific FDA registrations and a specific hazard assessment and Food Safety Plan through FDA’s Food Safety Modernization Act (FSMA). Food-grade alcohol has a wide variety of markets, including hemp and cannabis extraction, flavor extracts (vanilla, citrus, root, etc.), craft vinegar, as well as personal hygiene products and nontoxic fuel for RV and boat stoves.  

Beverage-Grade Alcohol
Beverage grade alcohol is considered “pure alcohol” or Grain Neutral Spirits (GNS), and is the highest grade of purity, typically 192-proof. Since taste and smell profile is considered, it must pass a stringent organoleptic assessment, which can often pose challenges for fuel-grade facilities. Production of beverage alcohol requires a specific DSP permit through the Alcohol and Tobacco Tax and Trade Bureau (TTB) and requires a separate FSMA plan. The state permitting authority may also require additional authorizations and may affect tax on products.  

Permitting and Compliance Considerations
Although some diversification of final alcohol products will require minimal modifications to the manufacturing process, they will likely affect various environmental permits and compliance programs. For example, the facility may need to upgrade the distillation process, or may require add-on technology. Depending on the facility, the plant may require a separate line, separate loading and separate storage tanks. Not only will this likely affect the facility air permit, but it could also require an update to the aboveground storage tank (AST) permit, Tier II filings, risk management plans and water permits. Examples of scenarios requiring a modification to the facility air permit include a change in the method of operations or the incorporation of alternative operating scenarios, new storage tanks, additional steam required to support production, new or modified loading rack, or even additional LDAR components. Some of these changes may even change the permit from a minor source/Title V to a major source/PSD permit or major source NESHAP, which would require a new permit authorization. These changes would likely result in adjusted or new recordkeeping and reporting requirements, stack testing, etc. Additionally, depending on the state, air dispersion modeling and additional environmental impact assessments may be required.

Producing higher grades of alcohol will likely affect RINs and other Low Carbon Fuel Standard (LCFS) programs since the facility could not credit 100% fuel production. This may require calculating steam/energy and feedstock usage separately for each process line. Also, if there’s additional storage, the facility must assess if the tank farm can handle the new tanks for secondary containment, and an update to the Industrial Storm Water Pollution Prevention Plan is likely required. Construction Storm Water authorization could also be required depending on facility activities.

Additionally, as stated previously, the facility may need FSMA registrations and certifications as well as follow new and/or updated compliance programs. A full registration process is required for industrial-grade and higher-grade alcohols. Since the temporary waiver granted by FDA in 2020 expired as of December 31, 2021, manufacturers that plan to continue producing alcohol for hand sanitizer can do so provided they comply with the FDA’s Current Good Manufacturing Practices (CGMP) and other applicable requirements. Further, food-grade and beverage-grade alcohol plants will require registration as a food facility, which requires additional handling considerations such as security, sanitation, additional FSMA assessments and verification activities, product testing, premarket submissions and labeling requirements.

Further, short and long-term business plans may need to be assessed to determine which TTB permit is required. If only producing fuel-grade alcohol, the facility requires an Alcohol Fuel Plant (AFP) permit. For higher grade alcohols, there are several DSP permits for which the facility may require authorization. A DSP Beverage facility may be authorized to produce, bottle, rectify, process or store beverage spirits, (i.e. vodka, whiskey, gin, etc.). A DSP Industrial facility may be established to manufacture articles, or produce, bottle or package, denature or warehouse spirits for industrial use (not beverage use); Distilled Spirits Vinegar Plants fall into this category. A DSP Industrial/Beverage facility may conduct beverage (non-industrial) and industrial operations from the same premises.

Finally, an Experimental DSP may be established for specific and limited periods of time solely for experimentation to develop industrial spirits or sources of materials or processes used to produce spirits. In addition, there are other registration considerations for beverage-grade alcohol. There are certain applications that wholesalers must file to export alcohol, particularly to export it without payment of tax.  Importers and wholesalers must follow similar procedures.

With all the nuances listed here it is easy to be overwhelmed. Environmental consultants and marketers can provide a valuable resource for information and assist with streamlining the approval process. With some minor changes to the process and some additional paperwork, it may be feasible to “drink the best and sell the rest!”

Author: Jessica Buckley,
Project Manager
RTP Environmental Associates Inc.
[email protected]