At the Washington Auto Show in January, Ford Motor Company unveiled a prototype Escape Hybrid E85, a sports utility vehicle that can run on regular gasoline, hybrid electric power and E85. The company is billing it as the first hybrid E85 vehicle of its kind. According to the RFA, and based on a 30-miles-per-gallon (mpg) average, the Hybrid E85 could get approximately 135 mpg of gasoline, drastically reducing gasoline use. "American consumers are letting their wallets and pocketbooks do the talking," Dinneen said. "They want more hybrids, and they want to reduce the use of oil in their cars and trucks. Ford's decision to combine hybrid technology in a flexible-fuel vehicle (FFV) is good for consumers, good for the economy, good for farmers and good for America."

RFA praises Ford's FFV hybrid technology

Iowa State University (ISU) was the recipient of the world's 73rd most powerful supercomputer this January, according to a Jan. 30 ISU news release. The refrigerator-sized IBM Blue Gene/L supercomputer, now stationed in ISU's Durham Center, will be used to help the university sequence the corn genome, the most complex genome-sequencing project to date.
 
 It is extremely difficult to assemble the 30 million to 60 million tiny segments of the genetic material that needs sequencing—a task the supercomputing research team in part is charged with fulfilling. The new IBM supercomputer can perform an amazing 5.7 trillion calculations per second. It has 2,048 processors and comes with 11 trillion bytes of data storage. With the delivery of its new supercomputer, ISU now ranks on an academic short list of U.S. universities possessing the 10 most powerful supercomputers on college campuses across the nation. 
 
 Four institutions in total are working on the project, the timeline for which is three years and carrying a $29.5 million price tag. Along with ISU, principle researcher Washington University (St. Louis, Mo.), the University of Arizona and Cold Spring Harbor Laboratory in Cold Spring Harbor, N.Y., are also involved. The ISU research team is being led by Arinivas Aluru, an ISU professor of electrical and computer engineering. Aluru's team members include ISU professors Robert Jernigan, Patrick Schnable and Arun Somani. 
 
 The research team was awarded $600,000 on behalf of The National Science Foundation to help purchase the supercomputer, a sum representing just less than half of the supercomputer's total cost of $1.25 million. The remaining cost was covered by ISU; specifically, funds were provided through allocations from ISU's President's Office, the Office of the Vice Provost for Research, Information Technology Services and the Plant Sciences Institute. 
 
 In related news, two ISU researchers are serving on the editorial board that's launching a new scientific quarterly publication called The Plant Genome, a peer-reviewed scientific journal put out by Crop Science Society of America, according to a Feb. 15 ISU release. The two ISU researchers on the editorial board of the new quarterly are Randy Shoemaker, an ISU professor of agronomy and a research geneticist for the USDA's Agricultural Research Service; and Kendall Lamkey, interim chair of the ISU Department of Agronomy and director of the Raymond F. Baker Center for Plant Breeding at ISU. Lamkey is also editor of Crop Science, the flagship publication of the Crop Science Society of America.

Srinivas Aluru stands with the 73rd fastest supercomputer in the world, the IBM Blue Gene/L model, containing 2,048 processors. To the left is the data storage and equipment to make it operational. (P

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Supercomputer sequencing corn genome

The Governors' Ethanol Coalition (GEC) met Feb. 28-March 1 in Washington, D.C. Twenty-four GEC representatives from 16 states and Thailand attended all or part of the two-day event, according to Carole Jordan, legislative and policy liaison for the Kansas Department of Agriculture. Governors in attendance included John Hoeven of North Dakota, Kathleen Sebelius of Kansas and Matt Blunt of Missouri.
 
 Bruce Benedict, a GEC representative from the Division of Markets for the Ohio Department of Agriculture, told EPM it was an excellent meeting. Attending GEC meetings helps members keep up-to-date on everything including legislative issues, regulations and scientific studies. The Renewable Fuels Association and National Ethanol Vehicle Coalition gave updates, and there were a variety of speakers. 
 
 Sebelius, the 2006 chairwoman of the group, and Hoeven, a past chairman, presented a GEC resolution to representatives from Ford, DaimlerChrysler and General Motors on the first day of the event, Jordan said. The resolution recognized the nation's automakers for increasing production of flexible fuel vehicles while calling for the manufacture of more E85-capable vehicles and models as soon as possible. "Reducing our dependency on imported petroleum will require a national will and a real commitment by every sector of our economy—by industry, as well as individuals," Hoeven said in a press release. "Today, governors from across the nation are urging automakers to meet that challenge for the good of our security and the good of our economy."
 
 Sen. Barack Obama, D-Ill., spoke at the meeting about the connection between renewable fuels and national security. In his speech, he said the bad news was that President George W. Bush's energy policy treats U.S. oil dependence as "more of a nuisance than a serious threat." 

 
 While the energy proposal calls for reducing oil imports by 4.5 million barrels per day by 2025, Obama said in his speech the United States can do better than that. He asserted that the country could reduce oil imports by more than 7.5 million barrels per day by 2025. This was possible, he said, through using more "homegrown" biofuels and the auto industry building more fuel-efficient cars. While Obama wasn't the only speaker at the event, the senator did generate a lot of interest. "I think he raised some good questions," Benedict said.
 
 The GEC has membership from 32 states and international representatives from Brazil, Canada, Mexico, Sweden and Thailand. The group promotes increased ethanol use with the goals of improving the environment and economy as well as decreasing imports. For more information, check out the GEC Web site at www.ethanol-gec.org.

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Sen. Barack Obama speaks at GEC meeting

A new study from the University of California-Berkeley has concluded that ethanol yields more energy than it takes to produce, and that ethanol decreases dangerous greenhouse gas emissions. Published in the journal Science on Jan. 27, the study found that the production and use of ethanol reduces greenhouse gases (GHG) by 15 percent compared to oil and gasoline use. The conclusion is consistent with findings by the U.S. DOE's Argonne National Laboratory, which estimates that the use of 10 percent ethanol blends reduce GHG by up to 19 percent. "While this report is not news to those who are familiar with the ethanol industry, it is significant in that it provides a comprehensive review of all the ethanol energy studies out there and concludes that ethanol is a net energy positive," Renewable Fuels Association (RFA) President and CEO Bob Dinneen said. The study also noted that new technology to convert cellulosic material, such as corn stover, switchgrass and wood chips, to ethanol holds even more potential.

Berkeley: Ethanol has positive energy balance

Quadra Energy Trading Inc., a wholly owned subsidiary of Nexen Marketing U.S.A., acquired a major supplier to the ethanol industry in early March. 
 
 Wittig Energy Resources LLC—a propane and natural gasoline provider serving the central United States from Texas to North Dakota—has grown with the ethanol industry, furnishing denaturant and ethanol to its diverse customer base for years. Wittig Energy's footing in the ethanol and natural gas liquids markets no doubt helped seal the deal for Quadra, which purchased Wittig Energy for an undisclosed price, confirmed Patrick Loftus, president of Quadra. "Wittig brings their strong customer base, and great knowledge of ethanol and denaturant to Quadra Energy Trading," he told EPM.
 
 According to Loftus, the arrangement was made official March 1, but negotiations had been going on for months. "Our discussions got serious about two-and-a-half months ago," Loftus said.
 
 Wittig Transport Inc.—Wittig Energy's army of trucks, railcars and barges—was not a part of the deal though. Commercial arrangements between Quadra Energy and Wittig Transport have been made, however. Quadra Energy is convinced that the timely and consistent deliveries of propane, natural gasoline and ethanol are keys to its success, and Quadra's management is confident Wittig Transport can carry out that mission statement. 
 
 "We're very excited," Loftus said. The new relationships with the experienced and knowledgeable Wittig Energy team—and the customers Wittig Energy has been servicing for years—is a lot to be excited about, he added.

Nexen's Quadra Energy acquires Wittig

U.S. BioEnergy, a Brookings, S.D.-based ethanol marketing and production firm, has made public its plans to acquire 100 percent ownership of Platte Valley Fuel Ethanol LLC near Central City, Neb. Platte Valley Fuel Ethanol is a privately owned ethanol plant that processes approximately 15 million bushels of corn a year into more than 40 MMgy of renewable fuel.
 
 "Bottom line—basically as it stands— there is an offer on the table, something has been presented, and it has to be decided upon," said Doug Anderson, president of Platte Valley Fuel Ethanol. The offer was made in the midst of a current expansion project underway at the Central City plant. "We are basically doubling the size of the plant, and the expected completion is January 2007," Anderson said. 
 
 Ron Fagen is the majority owner of Platte Valley Fuel Ethanol, and Fagen Inc. also has an interest in U.S. BioEnergy so this transaction may be seen as a consolidation maneuver. While the deal has not been finalized, "we fully anticipate that transaction to close by March 31," said Kristi Lee, media relations coordinator for U.S. BioEnergy. 
 

 The expansion project at Platte Valley Fuel Ethanol was not begun in anticipation of the offer from one of the major ethanol marketing and production firms in the nation. "The plan to expand was in place long before this offer was made," Anderson said. "U.S. Bio's philosophy is basically to become a large entity within the industry."
 
 Currently U.S. BioEnergy has two plants under construction—U.S. Bio Albert City, a 100 MMgy plant near Albert City, Iowa, scheduled to begin production in October; and U.S. Bio Woodbury, a 45 MMgy plant near Lake Odessa, Mich., scheduled to come on line in September. U.S. BioEnergy looks to acquire 100 percent ownership of Platte Valley Fuel Ethanol and also has negotiated a large share in Val-E Ethanol in Ord, Neb. This project has just started construction and is also a Fagen-designed plant. The current expansion projects underway for U.S. BioEnergy "will take us up to just over 250 million gallons by the end of 2006," Lee said.

Platte Valley Fuel Ethanol before the expansion project began

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US Bio to acquire 40 MMgy Nebraska facility

Thirteen days after being told they were laid off, 32 NREL researchers were told their jobs were awaiting them once again. 

 
 NREL, the U.S. DOE's primary national laboratory for renewable energy and energy efficiency research, was informed in November 2005 of a pending $28 million funding shortfall. The slashed funding was created by Congressionally directed earmarks, which reduced the budget available to the U.S. DOE for funding research at NREL.
 
 "When people were asked to scrub budgets, there was the possibility that all would be made whole again by 2007," NREL spokesman George Douglas said.
 
 Despite cost reduction attempts, including reducing contracts, delaying purchases and reducing conference attendance, the layoffs were announced Feb. 7. Of the 32, eight were research staff members and 24 worked in support positions. Douglas told EPM that two of those staff members worked specifically on ethanol-related research, including cellulosic projects.
 
 On Feb. 20, at the direction of U.S. Energy Secretary Samuel Bodman, $5 million was transferred to the Midwest Research Institute, NREL's operating contractor. NREL used the funds to immediately restore all of the jobs cut nearly two weeks earlier. Although not all of the affected employees are returning to NREL, Douglas said the ethanol-related researchers have come back.
 
 The additional funding was released to NREL one day before President George W. Bush became the first president in 28 years to tour the facility. While there, Bush touted his Advanced Energy Initiative, which he first announced in his Jan. 31 State of the Union address.
 
 The research programs that were affected by the layoffs include biomass, hydrogen and basic research. Douglas said returning employees were able to begin work Feb. 27.

32 NREL researchers to return to positions

A report published by the California Research Bureau (CRB), at the request of state Sen. Richard Alarcon, estimates that California could produce as much as 1.5 billion gallons of ethanol if green wastes are utilized as a feedstock. Dr. Rosa Moller, author of the report, said that Alarcon was interested in improving the work opportunities for the labor force in the Central Valley and the agricultural community. "The idea was to create an industry while at the same time, addressing issues very pertinent to the reality about energy sources and a potential oil crisis," Moller said. 
 
 Alarcon introduced a bill to divert green waste from landfills where it is currently used daily to cover municipal waste. "Often they use soil, but more and more they are using green waste, or composted wood and plant material, and this is an effort to divert the green matter from the landfill," Moller said. 
 
 The California Integrated Waste Management Board, another state agency, is also exploring ways to convert green waste into alternative energy sources such as ethanol instead of using it as a cover for landfills. "Sen. Alarcon requested this study as a way to manage the waste while exploring the possibility of renewable fuels in regard to the Energy Policy Act," Moller said. 
 

 California consumes nearly 1 billion gallons of ethanol in the form of reformulated gasoline but produces less than 1 percent of that amount, an imbalance state officials would like to correct by utilizing biomass. "The 1.5 billion figure is in regard to if we use all of the biomass that exists in the state, but of course there are alternative uses; it is possible to produce this amount if we use the biomass," Moller said.
 
 The "Brief on Biomass and Cellulosic Ethanol" prepared by Moller states that energy experts believe that California must begin to convert green wastes if the state is to have a legitimate and sustainable ethanol industry. California is not a large corn producing state, and importing corn for ethanol refinement is an uneconomical option. 
 
 More feasible is the conversion of biomass feedstocks from a variety of sources including animal manure, food processing operations, municipal wastes and forestry residues. The California Biomass Collaborative, an extension of the Department of Biological and Agricultural Engineering at the University of California-Davis, generated the 1.5 billion-gallon estimate. "We took state inventories on crop production, municipal waste recycling and degeneration, and forestry residues using a geographic information model from the California Department of Forestry and Fire Protection," said Professor Bryan Jenkins of the Biomass Collaborative. "Estimates were based on criteria such as tree diameters and residue factors."
 The Biomass Collaborative estimates "are built on the assumption of an average yield of 70 ethanol gallons per ton of biomass," Moller said. The production of this amount of ethanol from corn feedstocks would require 3 million acres.
 The brief from the research division of the California State Library, which drew much of its data from the California Biomass Collaborative, reports that currently "residual sugars, cheese whey and other sources already support ethanol production of approximately 8 million to 10 million gallons per year of fuel ethanol in the state, and development plans exist for much larger sugar and starch-crop based facilities."
 
 The paper is accessible through the California State Library's Web site <a href="http://www.library.ca.gov/html/statseg2a.cfm" target="_blank">www.library.ca.gov/html/statseg2a.cfm</a>.

CRB: California has 1.5 billion gpy potential

In mid-February, Lakota, Iowa-based Midwest Grain Processors LLC (MGP) announced the signing of a contingent purchase agreement with an Australian-based investment group calling itself Global Ethanol, according to MGP Board Chairman Dave Nelson. If approved and finalized, Global Ethanol will purchase 60 percent ownership of MGP, representing a controlling interest in the ethanol production company with the slogan, "Ethanol … and more." 
 
 "Global Ethanol is a brand new company with a lot of equity behind them," Nelson told EPM. "They've delved in wind energy and ethanol in Australia, but they decided that they couldn't wait for the Australian ethanol market to get going, so they got involved here in the U.S." Nelson said Global Ethanol is made up of some fairly big ethanol players well known to the industry, but he couldn't specify names at this time. 

 
 According to Nelson, the first step in solidifying the purchase agreement has already been completed, in that MGP received an independent opinion stating that Global Ethanol's business proposition to MGP's current owners is fair. The opinion was given Feb. 22 by investment banking firm Duff & Phelps LLC. 
 
 "We're currently sending a letter to our membership so they don't have to hear everything from the media," Nelson said. MGP's current owners are MGP Cooperative, a farmer-owned co-op with nearly 1,300 farmer members in 11 Midwestern states; and Great Lakes Ethanol LLC in Riga, Mich., an ethanol plant under construction with more than 300 members, 98 percent of which are Michigan farmers. Together, MGP Cooperative and Great Lakes Ethanol own approximately 97 percent of MGP. 
 
 "In two weeks (around mid-March), we'll have a disclosure statement disclosing the deal," Nelson continued. "After that, we'll have two or three meetings in Iowa, Illinois and Michigan—where most of our current members live—and then we'll have a vote." A simple majority vote is needed from the company's current owners to approve the acquisition. The vote is expected toward the end of March.
 
 "If it's a favorable vote at the end of March, the deal would be complete by April 3," Nelson told EPM. "We'd be getting cash to our current owners by July 1." Nelson said he couldn't disclose how much Global Ethanol offered to pay for the controlling interest in MGP. 
 
 According to Nelson, talks between MGP and Global Ethanol initially began back in September. "We talked about philosophies and strategic plans," Nelson recalled. "Around the first of the year, talks had gotten more heated. They got to know who we are, and we got to know more about who they are. We started talking more about a deal. Then, around the first of February, they came to us with an offer, and we had to shut down trading of the co-op shares." 
 
 Aggressive expansion plans for MGP's facilities await the acquisition's approval. MGP's Lakota, Iowa, production facility just recently completed a major expansion project that doubled the plant's capacity to 100 Mmgy. Also, Great Lakes Ethanol plans to come on line with a nameplate production capacity of 57 MMgy in December. If the deal goes through, MGP plans to immediately double capacity at both sites. "We will start the air permitting process at Lakota and Riga, and get ready to expand," Nelson said. "If the acquisition is successful, we'll be breaking ground in Lakota this fall." MGP would expand production capacity in Lakota by building a second 100 MMgy plant right next to its current facility, according to Nelson. "And as soon as Riga gets operating, we'll start expanding that to 100 MMgy also," he said. 
 
 Global Ethanol has also expressed interest in purchasing Southwest Ethanol, which has been approved to build a 60 MMgy ethanol plant near McCook, Neb., but was lacking funds to break ground, according to Nelson. Again, provided the acquisition gets approved, MGP would like to break ground at the McCook site this summer.
 
 With these expansions virtually on the drawing boards already, and through inevitable future acquisitions, buyouts or mergers, Nelson stated that MGP is placing its ethanol production target at the 1 billion gallon mark by 2012.

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MGP's majority interest to be purchased

Chippewa Valley Ethanol Co. (CVEC), a 45 MMgy ethanol plan in Benson, Minn., has proven its innovative abilities once again.
 
 The company recently partnered with Frontline BioEnergy, a biomass gasification equipment provider in Ames, Iowa, to install a gasifier at the ethanol plant to make a "producer gas" that would replace natural gas. CVEC has taken an ownership position in Frontline and will work with Frontline, employees to design a gasifier that meets specific ethanol plant needs, according to Jason Jerke, CVEC process engineer. "Not only will we implement it here at CVEC, but we'll have firsthand input in the design and integration into other existing facilities," Jerke told EPM. "We see biomass utilization being an integral part of ethanol's future."
 
 CVEC will develop the gasifier design in three phases. In phase one, CVEC will build a pilot unit that will take in 35 to 70 tons of biomass per day. Initially, the plant will use modified distillers grains produced at the ethanol plant as a test feedstock. In the future, Jerke said CVEC wants to develop a "flexible fuel" gasifier that could use corn stover and wood chips as well. "We're ready to take the technology up to demonstration scale right now but not necessarily commercial scale. We'll work out any integration and design issues here on the pilot."
 

 In phase two, CVEC and Frontline will develop technologies to clean the producer gas. Conventional gasifiers convert biomass into a producer gas that can be used as fuel, but it typically contains ash and tar as well. "Our plan is to produce a cleaner producer gas—a true syngas—which should improve the efficiency of the conversion and allow us to distribute the fuel through ductwork to multiple burner sites."
 Phase three will be to implement a commercial-scale gasifier into plant operations. It would "replace essentially all natural gas here at CVEC," Jerke said. He wasn't able to give an exact timeline as to when each phase will be completed, but he estimated the entire project will be complete within the next three years, with sales of gasifiers at other sites beginning within two years.
 
 Not only will a gasifier spare CVEC from highly volatile and expensive natural gas prices, it will also allow CVEC to begin to develop a biomass infrastructure. This is necessary for producing cellulosic ethanol in the future, according to CVEC General Manager Bill Lee. "Relief from the high cost of natural gas is the immediate opportunity," Lee told EPM. "Whether it's converting cellulose to energy or to products, it seems obvious to us that gasification is going to be a key unit operation in the biorefinery of the future. Producing ethanol from cellulose is in the back of our mind, but we're not quite there yet. This project puts a couple pieces in play at our facility that would be needed for that."

CVEC to convert to biomass power

Platte Valley Fuel Ethanol LLC of Central City, Iowa, is expanding its ethanol production presence in the eastern region of the state. The 40 MMgy plant, using the design/build team of Fagen Inc. and ICM Inc., is in the beginning stages of doubling its capacity, according to Platte Valley Fuel Ethanol General Manager Doug Anderson. 
 
 Anderson told EPM the mobilization of equipment, materials and crew began on-site in January. Production is slated for January 2007. 
 Upon completion of the expansion project, Platte Valley Fuel Ethanol is expecting to actually produce nearly 96 MMgy. According to Anderson, Platte Valley Fuel Ethanol has been permitted to produce up to 100 MMgy.
 
 "We've been very successful here," Anderson said. "We've got a good staff. The plant runs well. We've got a good supply of grain. We just thought it would be a good idea to expand, and we're making a positive impact on the community." The estimated cost of the expansion project is $31 million, Anderson said.
 
 Wichita, Kan.-based United Bio Energy LLC, already contracted to market Platte Valley Fuel Ethanol's current volume of production, is also signed up to market the plant's additional volume. The added distillers grains will continue to be marketed by Performance Plus out of Palmer, Neb., Anderson said.
 
 "Bush wants to spearhead more reliance on renewables, and we're looking forward to that because it's the right thing to do," he said. 
 
 -Staff Report

Platte Valley expansion underway

Two days before the Washington Auto Show, Dinneen wrote a letter to the head of U.S. operations for both Honda and Toyota, urging them to reconsider their decisions not to market FFVs. In a recent Wall Street Journal article, both automakers downplayed the importance of renewable fuels like ethanol in the United States.
 
 Honda's vice president expressed concern that American consumers would be turned off by less fuel-efficient ethanol, even if the fuel becomes more readily available. Toyota's national manager of advanced technology in the United States said Toyota doesn't believe "corn-based ethanol is environmentally friendly" or a "sustainable solution."
 

 Dinneen encouraged both companies to reconsider their positions, and he used Ford Motor Company and General Motors as examples of how to successfully market FFVs to American drivers.	
 
 For copies of the letters, visit www.ethanolrfa.org/media/press/rfa/.

Dinneen urges automakers to join renewable fuels revolution

President Bush's State of the Union address had a profound impact on the debate in this country about the production and use of renewable fuels, not because he used the bully pulpit of the State of the Union but because of the message he sent.
 
 By boldly declaring that America was "addicted to oil" and singling out ethanol as a means to help lessen our addiction, the president changed the debate in Washington and the country from, "Should we use renewable fuels?" to "How much should we use?" and "How fast can we produce it?"
 
 This is an important shift and should be a call to arms to all those in the ethanol and renewable fuels industry. This is an opportunity for ethanol to go beyond just a blending component and become a true alternative to gasoline.
 
 The president laid forth an aggressive plan to reduce Middle East oil imports by 75 percent by 2025. According to information from the Energy Information Administration, Middle Eastern imports will be 2.3 million barrels a day at that time. If we assume the 75 percent reduction the president proposes, we will have to find a way to displace 1.8 million barrels of oil daily. Because refiners only get a little more than half a barrel of gasoline from each barrel of crude oil, our real target is about a million barrels per day.
 
 Today, the ethanol industry is producing about 275,000 barrels per day, with another 130,000 barrels per day of new capacity under construction. So, we're already almost halfway there! But we can do more. We can likely meet the goal the president established well before 2025.
 
 America can no longer afford to gluttonously consume oil. We have a domestic renewable fuels industry that is growing at a remarkable pace and is prepared to meet and exceed the challenges the president has put forth.
 So as the debate now turns to the size and the speed with which we can displace significant quantities of imported oil, the U.S. ethanol industry stands ready to help end America's addiction.
 
 
 Bob Dinneen

 President and CEO
 Renewable Fuels Association

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A View from the Hill

Citgo Petroleum Corp. is calling it an "unprecedented display of industry-wide cooperation"—and that's basically true—but the ethanol industry's acceptance of a new sulfate specification is not as much a show of acquiescence or compromise as a move to safeguard consumers while collaborative research continues. 
 
 A new specification applied to the ASTM International spec for ethanol (D 4806) would put the maximum level of sulfates in the renewable fuel at 4 parts per million (ppm). The proposed standard was approved in December by ASTM's Gasoline Subcommittee, and will go to its DO2 Subcommittee on Petroleum Products and Lubricants for final approval as early as June. 
 
 Citgo, which pushed for a strict 1 ppm sulfate spec last year, indicated in a Jan. 10 press release that it had worked with three other petroleum companies, two automakers and representatives of the ethanol industry to come to an agreement on the new spec. David Harvey, Citgo's manager of fuels quality, technology and technical services, said the sulfate limit is intended to help alleviate premature pump filter clogging at gasoline stations and prevent fuel injector problems in some automobiles.
 
 The Renewable Fuels Association (RFA) is standing behind the specifications, but Kelly Davis, Chippewa Valley Ethanol Co. quality manager and chair of the RFA Technical Committee, said the entire situation is "still fluid" and will play out over the next several months as more testing is completed. Davis said the ethanol industry agreed to move forward with the new spec "without knowing the root cause" of isolated incidents of fuel injector and fuel filter clogging. "Our work is certainly not done," Davis said. "It's a good start—and something that's in the best interest of consumers." 
 
 The good news: Davis said 96 percent of 84 U.S. ethanol plants that recently submitted ethanol samples met the 4 ppm sulfate spec. "That shows us the industry as a whole can meet this," she said. "This is where the path forward begins."
 
 -Staff Report

Industry accepts 4 ppm sulfate spec, calls for more testing

Is the demand for fuel-grade ethanol increases throughout the country, it is important for ethanol plants to operate at peak efficiency. 
 
 Much of the time, a plant's overall success is determined by the effectiveness of its maintenance organization and how well maintenance activity is integrated with the facility's production operation. No longer a cost to be minimized, maintenance must be viewed as a resource for optimization. Successful organizations can combine a full-featured, modern maintenance system, a few critical reports, and some Key Performance Indicators (KPIs) to convert the maintenance operation from a cost center to a true profit center. 
 
 Computerized maintenance management system
 Turning maintenance into a profit center is contingent on the use of a sound Computerized Maintenance Management System (CMMS), sometimes referred to as Enterprise Asset Management (EAM). These systems are significant improvements over spreadsheets, logbooks or "yellow legal pad" approaches to documenting maintenance activity. While certainly better than nothing at all, these long-standing methods lack the robustness required to truly modernize and optimize a plant's maintenance effort. A good CMMS can keep track of equipment history, preventive maintenance (PM) activity, spare parts inventory, maintenance labor and material cost, equipment failure and analysis, full reporting capability, and many other items. 
 
 What gets measured gets done

 A CMMS can keep track of a great deal of information; the challenge is in determining where to start and what to do with the information. Accurate reporting is based on good data. Good data comes from the entry of maintenance activity into the system. 
 
 Therefore, it becomes mandatory that all technician activity be recorded on valid work orders. At first this may seem like a daunting task, but many modern CMMSs contain features that make this process much easier than most people imagine. 
 
 For example, most systems allow for the creation of a "standing" or "blanket" work order. These are work orders that remain open and are simply updated as activity takes place. This eliminates the need to create a new work order whenever the need arises. More sophisticated systems allow the creation of "route"-type PMs. A route PM automatically distributes a technician's time in equal amounts over an unlimited number of tagged assets. This feature is useful in processing operations such as ethanol production, where daily monitoring activity is essential to good performance. Again, the advantage is in the elimination of creating multiple work orders for essentially the same type of activity. 
 
 Finally, many CMMSs allow for the creation of an "after-the-fact" work order. This allows for the immediate completion of the work with the recording functions taking place at a later, more convenient time. 
 
 The importance of tracking 100 percent of the maintenance activity cannot be overemphasized. Without full documentation, reporting and measurement, maintenance activity loses accuracy and value. Senior management must insist that full documentation takes place all of the time. One technique to ensure compliance is to compare payroll hours and hours charged to work orders. Most often, payroll is recorded in a separate system. For obvious reasons, payroll hours are nearly always precisely recorded by each technician. Therefore, comparing payroll to CMMS hours is a relatively easy method of monitoring compliance. 
 
 What should we look at?
 Once accurate reporting is achieved, a significant number of improvement possibilities emerge. Since the overriding goal of the maintenance organization is to increase profit and lower cost, any reporting and goal-setting activity should revolve around these two areas. Due to design and construction elements of modern ethanol plants, annual maintenance cost as a percentage of total cost is generally in the 2 percent to 3 percent range. This may not seem significant—and strictly speaking, it's not—when compared to other cost factors such as grain or energy. Nonetheless, maintenance cost remains an important consideration. 
 
 Maintenance has a much larger impact on profitability in the area of uptime. The current "cost not to run" a typical 40 MMgy facility exceeds $3,000 per hour. Every hour of downtime that can be eliminated or prevented translates directly to the bottom line. Information from the CMMS can be used to track two KPIs and generate a set of companion reports that can be used to improve both profitability and reduce cost.
 
 Overall equipment effectiveness

 It is currently in vogue to talk about a plant's ability for actual production to exceed nameplate capacity. Many new plants are capable of exceeding design specifications by 10 percent to 20 percent or more. When it comes to ethanol production, more is certainly better than less, but at what point does a high production rate result in additional equipment downtime? How do we tell? What is the best measurement of success? Who wins the race: the tortoise or the hare? One newer measurement that addresses these questions is called Overall Equipment Effectiveness (OEE), the first KPI. 
 
 <a href="#" onclick="moreImagesSpecific(1886, 258);">See equation</a>
 
 OEE is a product of the Total Productive Maintenance movement that originated in Japan and has been subsequently adopted in other parts of the world. Normally, this measurement is applied to finite production units such as widgets. OEE is a measurement designed to standardize plant performance data in order to facilitate meaningful comparisons of plant performance over time. In the classic sense, it is the product of three measurements: availability, efficiency and rate of quality products 
 
 The idea is to move a plant as close to the ideal production level as possible by improving on all three of the individual measurement indices. For example, if a widget plant operated all year and had no downtime, availability would be 100 percent. If the plant had an official capacity of 40 million widgets per year but managed to produce 48 million widgets, efficiency would be 120 percent. Lastly, if no off-standard products were produced, the rate of quality products would be 100 percent. The OEE would be 1.00 (availability) X 1.20 (efficiency) X 1.00 (rate of quality product) = 120 percent. In reality, plants take planned shutdowns or incur unscheduled/unplanned downtime. It is also true that a plant may not be able to run at 120 percent efficiency on a consistent basis. Thus, the plant tracks OEE and improves on it by increasing uptime, running faster or reducing scrap. 
 
 This is all well and good for widget production, but how can this concept be applied to ethanol production? The concepts of uptime and efficiency are readily understandable, but ethanol plants don't have "scrap" in the same sense as a widget manufacturer. The key is to understand what OEE is truly telling us. In its most basic form, OEE tracks the quantity of ethanol produced verses the quantity which would have been produced if the plant ran 24 hours a day, seven days a week at nameplate capacity with no stoppages or slowdowns of any type over a given period of time. In an ethanol plant, off-standard product is usually manifested in a slower production rate or decreased yield. OEE ultimately becomes a product of availability multiplied by efficiency.
 
 Suppose a plant had planned/unplanned stoppages during the year totaling 288 hours and produced 45 MMgy of ethanol and had a nameplate capacity of 40 MMgy. What would its OEE look like?
 
 OEE becomes a more accurate measurement of plant performance because it takes both efficiency and utilization into account. Certainly, the ability for a plant to exceed nameplate capacity is beneficial. But to do so without regard for uptime can have a detrimental effect on plant success. Even though OEE is more of a total plant performance metric, it is usually tracked by the maintenance department since equipment downtime and the need for equipment repair or service has the most profound effect on availability. Improvement in availability is where maintenance efforts can positively affect the profitability of the plant. For the maintenance department, the preferred report out of the CMMS to track downtime is the "Top Failure Report."
 
 There is a great deal of day-to-day activities in an ethanol plant. It is easy for management to become preoccupied with the detail. Therefore, the Top Failure Report is used to focus analytical attention on the events that had the greatest impact on OEE. This report comes from the closed work-order file and is sorted by equipment number. The report is further sorted by the most significant incident(s) in terms of downtime per number. In this manner, maintenance personnel analyze each of the top five or 10 events, determine the root cause of each failure, and implement corrective actions to prevent recurrence. The top failures never go away but the plant has a systematic method of continuous improvement and, over time, the overall frequency and severity of negative events will be reduced.
 

 Cost control
 The second KPI is in the area of cost. It is possible to get downtime to a level that approaches zero, but few plants could afford the investment. So what is a useful measurement of maintenance cost, and how can the CMMS be used to control cost? 
 There are many ways of measuring cost, but one of the most constructive measures is to put maintenance cost in terms of units of production. In an ethanol production facility this would be:
 
 A measurement such as this is helpful because efforts can be directed at both sides of the equation. Maintenance can either lower cost in absolute terms or allow cost to remain constant and increase production through less downtime or better efficiency brought about by the installation of improved process equipment. To support this effort, a report can be generated out of the CMMS that is very similar to the Top Failure Report. In this case, the most useful report is the Top Equipment Cost Report. Once again, this report is sorted by equipment number starting with the most costly piece of equipment for the chosen time interval. The total cost of each entity should further be broken out by labor and material in order to give users a better understanding of which element requires the most attention. 
 
 As in the Top Failure Report, activity related to each of the top five or 10 most costly pieces of equipment is analyzed and effective measures are put in place to minimize future significant financial impact on the operation.
 
 Entire books have been written on the subject of maintenance and Key Performance Indicators. There are many, additional maintenance-related KPI's that are not mentioned in this article. This does not mean they are not useful in their own right. The trick is to sort through the available information and determine how it is best applied to a given industry, such as the rapidly expanding ethanol production industry. It is beneficial to start with the essentials: implement and use a full-featured CMMS and establish a routine to increase uptime and reduce cost that provides maximum results for the efforts applied. The good news is that maintenance can become a true profit center by combining key indicators, supporting reports, and focusing diligent efforts on continuous improvement and root cause failure analysis. 
 
 Neil Havran is a maintenance coordinator for ICM Inc. He can be reached at <a href="mailto:NeilH@IcmInc.com">NeilH@IcmInc.com</a>.

Badger State Ethanol LLC (left) and Little Sioux Corn Processors LP both use a full-featured CMMS developed by Mapcon Technologies Inc. and licensed by ICM Inc. for installation in new and existing et

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Maintenance as a Profit Center in a Fuel Ethanol Plant

Is demand for alternative energy sources soars, cost-effective transportation of ethanol and its byproducts is becoming increasingly important to producers. This need comes at a time when general demand for railcars is rising and lead times for newly built railcars—as well as railcar leasing costs—are increasing. This behooves ethanol producers to zero in on ways to improve their railcar utilization.
 
 The average railcar makes less than one round trip in any given month. Upping that figure even slightly to 1.25 or 1.5 trips per month can make a significant difference to the bottom line. Ethanol producers should consider several factors when looking for ways to improve fleet utilization: route optimization, faster turnaround times at destination or unloading, maximizing railcar utilization through unit trains, and/or pooling, and tracking and expediting railcars in transit. 
 

 Companies can choose to manage these factors internally or outsource them to a railcar management services provider. "Some companies develop and manage their own internal programs to ensure that their products move as quickly and efficiently from origination point to customer and back," said Steve Menzies, group president of TrinityRail Tank Car, Leasing and Services, a leading provider of railcars, leasing and management services. "But outsourcing can be more cost-effective and allows companies to focus on their core competencies rather than logistics issues." TrinityRail partners with ItelliTrans LLC, a leading provider of distribution chain management services, to offer railcar fleet management services designed to improve asset utilization and reduce inventory costs.
 
 Optimizing shipping routes has evolved into a sophisticated science, Menzies said, requiring a certain level of expertise and specifically designed analytical tools to determine the most cost-effective way to route railcars. Railcar route optimization software is available, but third-party fleet management services, which include route optimization and shipment expediting, can have a significant impact on an ethanol producer's shipping efficiencies.
 
 Turnaround times at destination and origination points also impact utilization. With organization and visibility of empty railcars in transit, producers can expedite turnaround times from the point of origin, ensuring that cars are filled as soon as they arrive and on their way to customers as quickly as possible. However, getting cars returned in a timely manner after unloading can be more challenging because the car is now in the hands of the customer and commands lower priority from railroads while en route. Some companies write provisions into contracts requiring that customers unload and return cars within specified periods of time. Working with customers and railroads to expedite turnaround of empty railcars is also a service that some railcar fleet management companies provide.
 
 Some smaller producers are using railcar pooling to expedite turnaround times. They view participating companies' railcars as one fleet and move empty cars to the closest loading points—regardless of which company owns them or whose products need to be loaded. The end result: Wasted travel time is eliminated and utilization improves. Pooling is yet another service that some railcar fleet management companies offer.
 
 Unit trains, entire trains that carry carloads of one product directly from a single origination point to a single destination point, have dramatically improved utilization for many companies. More than 100 unit trains have run since BNSF's trademarked Ethanol Express began in 2003. Generally, single cars or small groups of cars are moved less consistently than large groups, taking up to twice as much time to reach their destinations. Unit trains save time and money through increased fleet utilization, lower inventory carrying costs and logistics coordination and support. Now, small companies are enjoying the benefits of unit trains by pooling product and shipping from one point. 
 
 Staying on top of where cars are at any given point in time is also important. Railroads now provide tracking services using RFID tags, and shippers can view progress via the railroad's Internet site. Monitoring progress is essential. Some cars, particularly those not part of a unit train, still lose valuable time sitting in train yards. Sometimes a phone call is all that's required to get the car back on the tracks and headed in the right direction. Again, third-party rail fleet management companies also provide efficiency by improving shipment monitoring and expediting services.
 
 Railcar design can also impact the bottom line, particularly with respect to loading and unloading. TrinityRail, a leading manufacturer of railcars in North America and Europe, offers a wide range of standard and optional features for its 263,000-pound, gross rail load, non-coiled and non-insulated tank car, which has a shell capacity of 30,145 gallons. These features allow ethanol shippers to take advantage of quicker and easier unloading, more complete unloading, as well as easier and safer access to the car for operating personnel. For example, an extended operating handle for the bottom outlet valve allows the operator to open and close the valve without climbing under the car. In addition, the railcar's length has been reduced making it ideally suited for unit train service while reducing the railcar's light weight and allowing greater capacity for ethanol.
 
 Perhaps the most visible new product for the ethanol market that Trinity Rail offers is its 6351-cubic-foot covered hopper designed specifically for DDGS. In 2001, despite a railcar industry slump, Trinity Rail realized the potential for increased consumer interest in ethanol and queried producers about the ideal design of a hopper car intended to carry DDGS. The end result is the "6351," as it is commonly called. This is one of many examples of Trinity Rail's commitment to optimizing existing car designs, as well as developing new, clean-sheet-of-paper ideas. To that end, the company's New Product Development Group is continually looking for the next breakthrough in railcar design. 
 
 "The 6351 has been quite a success," said Ray Tasch, senior vice president of sales and business development for Trinity Rail. "Through the end of 2005, over 3,300 cars have been put into service and prospects remain bright as ethanol plant expansions require the need for additional rail equipment to move DDGS."

 
 For ethanol producers looking to capture and market carbon dioxide, Trinity Rail also offers a 286,000-pound, gross rail load, insulated pressure tank car with a shell capacity of 20,110 gallons.
 
 "In today's competitive transportation market, using the most efficient railcars and improving railcar utilization is sound business," Menzies says. "The end result for ethanol producers will be a stronger bottom line." EP
 
 For further details on TrinityRail's product portfolio, capabilities and service offerings, visit www.trinityrail.com. For more information about Trinity Rail Leasing and Management Services Group, visit www.gotilc.com.
 
 For questions regarding this article please contact Ray Tasch. Reach him at ray.tasch@trinityrail.com or (214) 589-8148.

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DDGS loading into a TrinityRail covered hopper

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New TrinityRail cars leased to Granite Falls Energy in Granite Falls, Minn.

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6351-cubic-foot covered hoppers loading at Granite Falls Energy

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Transportation Solutions for the Ethanol Industry

Consequent to President George W. Bush's buzz-inciting plug for ethanol produced from "stalks, wood chips" and "switchgrass," the Energy Policy Act of 2005 and its renewable fuels standard (RFS) just might become a global poster child for cellulose-to-ethanol legislation. The cellulosic provisions within the bill are trailblazing—the first of their kind put forward by any nation—and the stuff of truly gutsy, forward-thinking policymaking.
 
 Aside from a few pilot-scale projects, that's where America's cellulosic ethanol bragging rights stop, though, and if key provisions of the energy bill are not fully funded and administered soon, some industry experts say Europe or Asia could steal America's biomass thunder. Various companies across the globe are simultaneously developing process technologies to make cellulose-to-ethanol commercially viable. 
 
 Canada-based Iogen Corp., perhaps the world's cellulosic ethanol frontrunner, and Spanish-based Abengoa, the largest ethanol producer in Europe and one of the largest in the world, are leading the global cellulosic charge with pilot- and demonstration-scale plants. Iogen built and operates the world's first demonstration-scale facility that converts biomass to cellulosic ethanol using proprietary technology. The process used at the facility, located in Ottawa, Ontario, is the culmination of 25 years of research and development funded by Iogen, private industry partners like Shell Oil Co. and the Canadian government. The plant uses wheat, oat and barley straw as feedstocks to produce as much as 1 MMgy (4 MMly) of cellulosic ethanol. 
 
 Iogen recently announced a major joint study with Shell and German-based Volkswagen AG to determine the feasibility of building a cellulosic ethanol plant in Germany. "Volkswagen looked around to see who they should collaborate with on this study," says Jeff Passmore, Iogen's executive vice president. "The fact that they chose Iogen shows we're a world leader in the field."
 
 This joint venture has given Iogen a vote of confidence in its cellulosic technology and shows it is not only serious, but ready for commercialization. "Here is an automotive company that has said, ‘Look, we are going to have to figure out how to reduce our greenhouse gas emissions in the transport sector, and we think there should be an integration between fuels and vehicles to come up with the right solution,'" Passmore says, echoing a recent statement from Volkwagen CEO Bernd Pischetsrieder who has repeatedly declared the company's commitment to reducing the world's dependence on fossil fuels. The venture puts Germany back on the front burner and heightens Europe's interest in Iogen's cellulosic ethanol technology. The group hopes to have the feasibility study completed sometime this year, but no timetable has been released. 
 

 Iogen and Volkswagen believe the pressure to reduce emissions shouldn't be solely placed on the shoulders of automakers. "In some cases, there will be certain things you can do with a vehicle that will be more cost effective than cellulosic ethanol to reduce greenhouse emissions," Passmore says. "But cellulosic ethanol is the most cost-effective way to reduce carbon dioxide emissions today." 
 
 The investment of both Volkswagen and Abengoa in developing cellulosic ethanol stems from the European Union's objectives for reducing greenhouse gases to comply with the Kyoto Protocol. "The Kyoto Protocol is being taken very serious in Europe," says Javier Salgado, president and CEO of Abengoa. The Kyoto Protocol is an agreement under which industrialized countries will reduce their collective emissions of greenhouse gases by 5.2 percent compared to levels in 1990. A total of 156 countries have ratified the protocol, negotiated over eight years ago in Kyoto, Japan. "The reason why Europe is trying to get its emissions down is all Kyoto driven," Passmore says. "The problem is that emissions have come down in every sector of the economy in Europe except transport, where they are skyrocketing."
 
 Abengoa currently has two pilot-scale cellulose-to-ethanol plants under construction. "We need to change the way we produce ethanol," Salgado says. Each plant is testing different technologies for extracting the lignocellulose from wheat straw. Abengoa's first plant is located in Salamanca, Spain, and will produce over 1 MMgy of cellulosic ethanol. "The ultimate objective of this plant is to develop cellulosic ethanol technologies that are economically competitive with gasoline," says Gerson Santos-Leon, research and development general for Abengoa. The plant will be integrated with a starch plant and use Toronto-based SunOpta's steam explosion process for cellulosic extraction. The company's second pilot cellulosic plant is located in York, Nebraska. The plant, also collocated with a grain-based ethanol facility, will test a fractionation process for breaking down biomass into ethanol. Both of Abengoa's plants are scheduled to start production by the end of the year.
 
 How far out is the commercialization of cellulosic ethanol? If you would have asked that question to anyone 10 years ago, the answer—almost invariably—would have been "five years." That same question today gets the same response, "cellulosic ethanol will be viable in five years." 
 
 This time, however, they might be right. 
 
 As motivation in developing cellulosic technologies grows—and as the U.S. energy bill's provisions are rolled out—Iogen and Abengoa see the commercialization of cellulosic ethanol developing in this decade. Passmore believes the support for cellulosic ethanol is being provided by three factors. First, it provides a new source of income for farmers. "This is a great opportunity for farmers to sell their residue and put more money in their pockets," he tells EPM. Second, the alternative fuel has been proven to reduce greenhouse gas emissions. Third, cellulosic ethanol provides greater energy security for nations currently relying on foreign sources of oil. "Depending on what country you're in, these factors will vary in importance," Passmore says. "The U.S. will be interested in energy security, Canada will be interested in adding value to crops [and meeting the Kyoto Protocol], while Europe will see all three with equal importance." 
 
 Leading candidate countries where cellulosic ethanol will most likely develop first are Canada, Germany and the United States. Though versatile, the site selection for these plants still must follow some criteria to be economically feasible. Companies will have to look at feedstocks, government policy, infrastructure issues and ethanol markets before selecting a plant site.
 
 When Abengoa and Iogen selected sites for their respective pilot- and demonstration-scale plants, feedstock considerations were of critical priority. The type, availability, cost and ease of collection are just some of the factors a developer must consider. In the United States, corn stover is perhaps the front-runner among near-term potential cellulosic feedstocks. "Corn stover is readily available and can have a low cost under the right conditions," Bob Perlack of Oak Ridge National Laboratory says. "But there are some issues in collecting it from the field." In Canada and Germany, wheat straw is rather bountiful and will most likely be the first feedstock developed into cellulosic ethanol. There are substantial quantities of wheat straw available in the Canadian providences of Manitoba, Saskatchewan and Alberta. If one-third of the annual crop was used to make cellulosic ethanol, it could replace 10 percent of the nation's gasoline usage. "We (Iogen) have been looking at Germany for a number of years, and we know there is a lot of wheat straw there, so feedstock isn't an issue there," Passmore says about the feasibility study going on with Volkswagen. Abengoa's pilot plant in Spain will also be using wheat straw, although the company has noted that today's equipment doesn't collect the biomass efficiently. "Some people are talking about "single-pass" technology where grain and biomass will be collected at the same time," Santos-Leon says. "I think that technology will be available within 10 years." 
 
 Another feedstock that will be closely looked at around the world will be switchgrass, a so-called dedicated energy crop. "Switchgrass has high yields per acre, up to 10 tons per acre," Perlack says. "Compared to corn yields of two tons per acre, switchgrass looks to be a good feedstock for cellulosic ethanol." The only disadvantage switchgrass has is the fact that it would take two growing seasons before it could be harvested. After the initial growing time, switchgrass can be harvested annually up to 10 years before replanting, Perlack adds. 

 
 The third viable crop for cellulose-to-ethanol production will be woody crops. Some cellulosic plant will utilize waste residues from sawmills, paper and pulp mills, and forestry waste. Planting fast-growing poplar and willow trees that can be harvested every six to 10 years may also prove to be economical, Perlack says. "The only downfall for woody feedstocks is that the technology is a little behind the rest of cellulosic technology," Perlack says. 
 
 The aggressive cellulosic provisions in the RFS have shown other countries that governmental support is going to be vital in creating any kind of cellulosic program. "Companies are going to need extensive support from state and federal governments," Salgado says. Both Abengoa and Iogen see the United States RFS being used as a model to develop legislation in other countries. "Germany recognizes, as the Americans do, that there is an issue about the commercialization of new technology without support from the government," Passmore says. "Using loan guarantees as an economic instrument to commercialize cellulosic ethanol is the key provision in the RFS that other countries will have to follow." 
 
 Salgado adds, "We estimate that $4 billion to $5 billion dollars are going to be invested in cellulosic plants in the next few years. That's why loan guarantees and other financial incentives will be important to establish." 
 
 In Europe, there is talk about getting a bill passed that would require 20 percent of gasoline and diesel be comprised of renewable fuel by 2020. "There are going to be huge advances in legislation the next few years in Europe," Salgado says. 
 
 Iogen and Abengoa are among the most well known companies with big stakes in cellulosic ethanol, but there are other international entities that are continuing to research and develop new technologies. A group of researchers at Kyoto University, for example, are working on extracting cellulose from wood through fluid technologies. Likewise, professor Claus Felby at the Danish Royal Veterinary and Agriculture University in Denmark has discovered a new and simple method of mixing biomass with enzymes that requires less water than existing methods. The professor is currently testing the new process in a test plant and has applied for a patent for the energy- and cost-saving process. Industry experts say these and other developments taking place worldwide should send a clear message to companies in the United States: Cellulosic ethanol is an emerging global phenomenon. 
 
 Kory Wallen is an Ethanol Producer Magazine staff writer. Reach him at <a href="mailto:kwallen@bbibiofuels.com ">kwallen@bbibiofuels.com </a>or (701) 746-8385.

Left to right: Rob Routs, executive director downsteam for Royal Dutch Shell; Brian Foody, president and CEO of Iogen Corp.; and Dr. Bernd Pischetsrieder, chairman of the Board of Management of Volksw

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Cellulosic ethanol is gaining momentum worldwide as more and more governments and international companies begin to see the renewable fuel as the next inevitable step toward reducing fossil fuel consumption. This new technology has a bright future, but when—and where—will it develop first?

Cellulose Goes Global

Switchyard layovers, late deliveries and slow turnaround times: These are the usual suspects of rail system congestion and precisely the kind of transportation setbacks that sporadically beleaguer the U.S. ethanol industry. 
 

 America's crowded rail system is the target of frequent ethanol industry criticism and, of late, the subject of Internet market reports, one of which recently identified "snarled rail service" as the culprit of supply-threatening delays and higher ethanol prices. When rail deliveries get "snarled," it can quickly add up to what Art Wiselogel of BBI International calls a "logistics nightmare." He tells EPM, "If something gets delayed by an hour, the whole thing gets backed up." 
 
 Byron Stewart is all too familiar with that type of dilemma. As director of ingredient trading and transportation for United Bio Energy (UBE), one of the nation's largest ethanol and distillers grains marketers, Stewart has a good handle on the challenges of running a business that depends on rail. He says rail logistics, especially going out West have been extremely tight lately. "Going to California on Union Pacific, specifically [has been problematic]," Stewart tells EPM. "Weather problems in December increased transit times four to 10 days each way." These delays were specifically reported in editions of the OPIS Daily Ethanol & Biodiesel Report around the turn of the new year through mid-January. A representative from Union Pacific chose not to comment on these repeated reports of congestion. 
 
 UBE, which markets about 350 million gallons of ethanol annually and expects to double that capacity by the end of the year, would like to see to see a 50 percent improvement in railcar "turn" (i.e., the time it takes to get a railcar to its market destination, unload it and get it back to its point of origination). It's not only ethanol; in addition to railing approximately 8 percent of the nation's ethanol down the lines, UBE rails 1.5 million tons of distillers grains annually, too. 
 
 "What we would typically like to see is for our cars to move one turn a month, but we're seeing one turn every six weeks now," Stewart says. "Transit times are up, and there's an increased number of cars on the tracks."
 
 Notably, the U.S. rail system is defined not just by more traffic, but more traffic controlled by few companies. A half century of industry consolidation has left the nation's rail lines in the hands of a small number of Class 1 providers. Fewer big players, some say, equals less competition—and that's rarely good for service. 
 
 According to Daniel Sabin, president of Iowa Northern Railway Co., 60 years ago there were approximately 200 Class 1 carriers in the United States. Now there are only eight. Sabin is among those who say the lack of Class 1 competition is a legitimate concern. If a single line is a company's only option for rail, for example, it will be in a less-than-ideal position to negotiate rates—or much of anything at all. "There needs to be an increase in competition," says a source who agrees with Sabin but asked to remain anonymous. "And there are more short lines showing up."
 
 Short line, Class 1 solutions 

 There's a common "misconception" out there that short line railroads raise the cost of transporting products. "Short lines do add something to the cost structure," EPM's unnamed source says. "But the overall economics must be weighed out." 
 
 Sabin understands the issue as good as anyone, and he says the idea that utilizing short line railroads add to transportation costs is a myth. "The real case is exactly the opposite," he says. "On top of that, the level of service and attention to detail is an enormous added value for our customers."
 
 In a state like Iowa, where Sabin says most ethanol plants are serviced directly by Union Pacific, his short line rail company, Iowa Northern, is giving options to those plants experiencing delays in the Hawkeye State and destinations beyond. "If you run an Iowa ethanol plant built on Union Pacific rail, you are limited in your destination points," Sabin says. "What customers of Iowa Northern enjoy is that we have multiple connections. We treat everyone equally. If there's a better market for your ethanol in New Jersey, for example, then we give the choice of five different routes to Chicago." In fact, virtually all eastbound freight must go through Chicago, and Iowa Northern offers several paths to get there. 
 
 Iowa Northern has several different ways to help expedite freight delivery. "Say, for example, you have a 100 MMgy ethanol plant [in Iowa]," Sabin poses. "You produce about 10 to 15 tank cars full of ethanol per day. When Union Pacific picks those cars up—either then or two weeks later—those cars are brought to the switching yard, where they are held until enough cars are accumulated for the duration of the haul." 
 
 On the other hand, Iowa Northern will consolidate traffic on its own lines, not in a switching yard. "We would consolidate on our lines until we get a 75-car unit train to Union Pacific. Of course, we would give them notice, so Union Pacific could be ready to receive those cars," Sabin says. 
 
 The point of all this, of course, is to cut costs, and Sabin argues that it does. He says the short line railcar consolidation option results in lower rental expenses for ethanol tanker cars. When cars are being rented for a given amount each month, time is money. Less congestion on the lines, in the terminals or switching yards means the faster these cars can be shipped out, received, emptied and shipped back down the line. In other words, if two hauls can be made in the time it typically takes to make one, then that capital expense for the car rental just went down relative to the company's overall income during that month's time. It would also reduce crew costs in knowing how many crew members are needed when, rather than bulking up the crew in anticipation of possible freight car handoffs. 
 
 Here's another idea: To help maintain fluidity on its rail lines as the ethanol industry continues to grow, Iowa Northern wants to develop a staging yard for railcar accumulation. Iowa Northern would ask each ethanol plant on the line to contribute to its construction. In turn, the contributing plants would not only reap the benefits of its operation, but they would also get reimbursed from Iowa Northern on a per car basis through its use. "For example, it could cost $4 million for a plant to build its own [staging yard], or they could contribute $2 million into a pool that they'd get paid back [on]," Sabin tells EPM. "This is unique because, by consolidating traffic in one yard, we'll be able to accumulate volume quicker." 
 
 Iowa Northern isn't afraid to spend its own money to enhance its rail infrastructure. "We just recently put down $20 million in track improvements, and we plan to put another $59 million down in the next couple of years," Sabin says. "In our five-year plan, we plan to spend more money per mile on tracking than any of the Class 1s out there." 
 
 Perhaps Sabin has the right idea. It takes discipline for a rail company to invest steadily in its infrastructure—essentially amounting to a rail company's bread and butter. 

 
 Burlington Northern Santa Fe Railroad Co. (BNSF) has stayed out of recent media reports on rail congestion circulating around the industry—and it's not by sheer luck. "We are proud to have maintained our fluidity," says Suann Lundsberg, manager of media relations for BNSF. "We invest in our network—the right amounts at the right times. You can't just keep throwing capital at it."
 
 Surely capital helps, but it must be strategically placed when, where and how it's needed. "You know, when you put it all together, it's all about anticipation and action," says Bob Kelly, BNSF director of Bulk Foods. Accurate analysis on behalf of the railroad companies to precisely forecast exactly what parts of the infrastructure will need certain improvements, expansions or upgrades is critical, and it's something that BNSF prides itself in doing. "We've got a whole team of analysts that just do this type of projection forecasting," Lundsberg says. 
 
 One might suggest that BNSF maintains fluidity because its lines don't see as much traffic as other Class 1 providers—but they'd be mistaken. "In 2004, we did 10 percent more volume than in 2003," Lundberg tells EPM. "And in 2005, we did 5.1 percent more volume than in 2004. We've had growth in every division of the company." 
 
 In 2005, BNSF made $2.1 billion worth of investment in shared track improvements. In 2006, BNSF will spend $2.4 billion more in capital expenditures for rail infrastructure improvements. 
 
 "We now have access to 85 percent of the ethanol production in the U.S.," says Angela Caddell, BNSF manager of Ethanol and Sweeteners. "Our network extends from Chicago to New Orleans and everything west." 
 
 BNSF has also moved to covered hopper cars, allowing more product to be transported in each car, Kelly says. Iowa Northern, too, has interesting ideas for its hopper cars. 
 
 According to Sabin, Iowa Northern is trying to incentivize its customers to use its DDGS cars for inbound corn, after which the plant could load its DDGS right onto the empty car. "There would be a freight rate reduction on the inbound corn," Sabin says. "But the cars can only be filled up to about 80 percent," mainly due to the difference in car sizes for corn and distillers grains. However, Sabin says this opportunity would open the door to advantageous alliances for corn origination, continuing to help set low costs for feedstock procurement. 
 
 Evaluating options

 Although ethanol supply shortages stemming from late rail deliveries look to be a double-edged sword—meaning that ethanol prices rise when supplies are tight—that might be one way to boost profits that producers and marketers want to steer clear of. "On the other side (of higher ethanol prices), that could mean if the oil companies can't get consistent supplies domestically, they might start looking into barging some ethanol in from Brazil, or somewhere like that," Wiselogel forewarns. 
 
 Of course, rail line congestion caused by weather or terminal delays—whether that's at intermodal terminals or not—is likely to worsen as more and more ethanol plants come on line in the next five years. That's not taking into consideration projected growth in other industries requiring even more freight rail cars on the tracks. One option for new ethanol plants, or plants in existence looking to reevaluate their transportation arrangements, is to hire a rail consulting company like Antioch International Inc. "We are a civil engineering firm," says Blane Pound, director of Antioch's business development team. "We go in and work on the rail infrastructure for an ethanol plant, which will allow for receiving and loading, and moving those railcars out. We also coordinate between the plant owner and the railroad carrier." 
 
 Another option, if it's viable, is simply to truck ethanol and distillers grains to nearby markets when available. The point at which trucking ethanol is no longer an economical option is often found between 500 and 600 miles from the plant. 
 
 Ultimately though, an entirely new infrastructure may be the best option. An integrated pipeline/rail system is entirely feasible in the near future, especially as U.S. production numbers increase. "In certain parts of the country like in Minnesota, for example, there's an ethanol plant almost every 30 miles or so. A pipeline running down that type of corridor is definitely a possibility," Wiselogel tells EPM. There's chatter that the Big Oil companies are making a push to get a pipeline system for ethanol going. In this design, ethanol plants could transport their denatured fuel virtually trouble-free to a common pickup point, after which a large Class 1 carrier could efficiently load unit trains full of ethanol for those long hauls down the line. 
 
 Ron Kotrba is an Ethanol Producer Magazine staff writer. Reach him at <a href="mailto:rkotrba@bbibiofuels.com">rkotrba@bbibiofuels.com</a> or (701) 746-8385.

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The United States has more than 200 years of experience in rail, so efficiency and optimization should come naturally—and for many it does. But with a rail system that is growingly congested, it's often impossible to give customers what they want when they want it. Fortunately, some Class 1 and short line railroad companies are investing with the ethanol industry in mind.

Getting A Move On

February 1—The market made a new three-month high on the first day of trading in 2006 at $2.21 and then promptly started a break the next day that took prices down to $2.03 ½ by the end of the third week. The buildup to the high at $2.21 came from the anticipation of index fund buying. The break came from the "lack of" index fund buying in early January. Also contributing to the break in prices was the increase in carryout in the USDA's January report. The last seven trading sessions of the month were marked by a new round of fund buying. The funds pushed prices to $2.22, a new monthly high on Jan. 30 before closing the month out at $2.18 ¾. 
 
 The USDA increased the final production figure by 80 million bushels in January. At the same time, the carryout increased 7 million bushels versus previous estimates. However, this year's carryout is now 312 million bushels larger than a year ago. This led to a carryout-to-use ratio of 22.4 percent compared to a 19.8 percent carryout-to-use ratio a year ago. Just two years ago, the carryout-to-use ratio was 9.3 percent. Ethanol corn demand is expected to use 1.575 billion bushels or 11.9 percent of the total corn supply. This compares to 1.323 billion bushels or 10.4 percent of the total corn supply a year ago. Feed demand went up from 5.875 billion bushels to 6.0 billion bushels, a 125 million bushel increase, while export estimates dropped 50 million bushels to 1.8 billion bushels. World carryout projections increased from 118.74 million metric tons to 128.27 million metric tons. Beginning world stocks and world production increased with Chinese production up 4 million metric tons.
 
 Prices should be volatile this summer amidst any weather concerns and the question of what index funds will do in the marketplace. Nearby futures should be range-bound; however, a wide trade range may be expected as the funds enter and exit the market.

2006 prices start out promising, quickly subside

I have written The Way I See It for a number of years, sometimes ranting about an issue that gets under my skin and sometimes just trying to spread the word about ethanol. An associate said to me the other day, "Gee … I wonder how other people in the industry see it?" As soon as I recovered from the insinuation that there may be someone out there who sees things differently than I, I realized it may actually be a good idea to find out.

 
 In light of this epiphany, I've asked our editorial team to accept letters to the editor, or in my case, letters to the publisher. Write to us and express your thoughts and concerns. Tell us how you feel about the opinions I express in this column, for example, or give us your two cents on how we cover important industry issues. Your comments may be focused on any segment of the industry: production, policy, use—all things ethanol. We truly want to know "How You See It" once in a while. Simply e-mail your comments (300 words or less please) to Editorial Director Tom Bryan at tbryan@bbibiofuels.com. We can't print letters from anonymous sources, so please include your name and contact information within your correspondence. Ethanol Producer Magazine will launch a "Letters to the Editor" page—either in the magazine or online—as soon as we've heard from a good bunch of you. 
 
 On another matter, much will be written in the months ahead about President Bush's cellulosic ethanol comments in his State of the Union address. There is one thing and only one thing that is needed to bring the production of ethanol from cellulosic materials to fruition … a national will. We seem to have billions of dollars to do whatever is required for national security, yet we hesitate to spend a hundredth of that to develop the technology for cellulosic ethanol. 
 
 The attainable objective of developing a domestic renewable fuels strategy from abundant cellulosic materials has enormous potential to bring peace and prosperity to the world. Can we do it? Of course we can! We've been able to do it for years. Is it currently competitive with ethanol from corn? No! But it will be someday soon, and we can't afford to wait until the roof caves in before we fix it. 
 
 The United States faces a serious situation with Iran. It involves a threat that goes beyond any nuclear issue and touches the security of every American … oil! If we embargo Iran and they turn off the oil spigot to the United States, we are going to think $3-per-gallon gasoline is a real bargain. The answer has been right in front of our faces for years. The president knows it. Congress has come to grips with it. It is domestically produced ethanol and biodiesel. It's not rocket science … it's just plain common sense. 
 
 I don't know about the rest of you, but I for one am fed up with the renewable energy naysayers. They offer no alternative, only criticism; no fresh concepts, only old outdated data; and no hope, only pessimism and the promise of an oil-dependent future. Is that the best we can do? I sure don't think so, Congress doesn't think so, and it seems to me that more and more people around the world don't think so either. It's time for a new direction and new energy future, and it's time for those who only seem to offer criticism to step aside and let the future through.

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The Way I See It

The Iowa Renewable Fuels Association announced its second round of Renewable Fuels Infrastructure Grants from the Iowa Values Fund. The program helps gasoline retailers offset the infrastructure cost of making E85 available to the public. 218 Fuel Express in Floyd, Iowa, received $20,000 to install new E85 fueling equipment, while Star Energy in Fort Dodge got $7,500 to upgrade an existing pump to E85. In February, EPM reported seven gasoline stations were given grants in the first round of funding.

IRFA gives second round of grants

According to Oil and Petroleum Information System (OPIS), Jamaica plans to launch a pilot program May 1 that mandates government vehicles to use E10. If the pilot program is successful, the government plans to phase out MTBE by the end of 2008. Jamaica's state-owned oil company Petrojam recently reopened a 40 MMgy ethanol plant in Kingston with the goal of exporting the renewable fuel to the United States. However, if MTBE is banned, the company will likely be producing ethanol for domestic use.

Jamaica may ban MTBE

U.S. ethanol sales will double, hitting $15 billion by 2012, according to engineer Andrew Eldib, a New Jersey-based consultant who's offering a new independent report that projects striking industry growth spurred largely by policy. The report predicts an increase in E85 sales and a transition from corn to cellulose feedstocks. "[The Energy Policy Act of 2005] will change the complexion of the industry," Eldib said. To obtain the complete study, contact Eldib at eldib@eldib.com.

$15 billion ethanol market forecasted

California, a state well known for its stringent emissions regulations and specialty fuels, is about to get a lesson in E85. California only has one publicly accessible E85 pump now, but the state transportation department (CalTrans), Pacific Ethanol Inc., General Motors Corp. and Chevron Venture Technologies will soon change that through an E85 demonstration project to take place in the Golden State. 
 The goals of the project are not only for the parties involved to gain a better understanding of the fuel and its infrastructure requirements, but also to gauge public awareness of—and receptivity to—the domestically grown fuel. Through this partnership, two or three E85 demonstration facilities in northern and central California will be established to "prove out" various aspects called into consideration when looking at demonstrating the blending, transporting, storing, using and marketing of a new fuel in what could potentially be one of its largest markets in the world.
 
 Chevron is blending and distributing the E85, as well as providing the necessary dispensing and storage equipment, said Dewey McLemore, Chevron's project manager for the E85 project. "Because this is a demonstration program and not a commercial venture, the fueling stations will be set up at two to three CalTrans transportation equipment yards," he said. "The actual locations [in central and/or northern California] are yet to be determined … ." With centrally located Pacific Ethanol as one of the demonstration partners, nearby CalTrans divisions suitable for housing demonstration-scale E85 storage and dispensing facilities are good candidates for where these E85 refueling centers might show up. 
 
 Pacific Ethanol will be supplying Chevron its ethanol to blend with commercial gasoline, according to McLemore. Pacific Ethanol's production facility is currently under construction in Madera, Calif., and is expected to be operational by this fall. 
 
 According to General Motors spokesman Dave Barthmouss, General Motors will make available between 50 and 100 E85-capable vehicles—Chevrolet Impalas and Chevrolet Silverado pickup trucks—to CalTrans through a competitive bid process. "We have a long history with the state of California and the state's transportation department with our fuel cell partnership and the hydrogen highway," Barthmouss told EPM. "It was just natural for us to want to work with California on this E85 project." 

 Both Chevron and General Motors consider ethanol and E85 as important parts of their overall "blueprint"—a term Barthmouss used—for energy diversification. 
 
 "Chevron is committed to exploring various energy resources and making best use of all forms of energy," McLemore told EPM. "[Chevron] engages in [these types of] programs to demonstrate and validate safe, practical technologies in real-world settings." 
 
 General Motors is also eager to explore the possibilities of ethanol. "Ethanol's not the silver bullet, but General Motors sees it as an extremely important element needed to cut down on fossil fuel use, imported oil and emissions," Barthmouss said. "Ultimately, we're looking at all kinds of technologies in combination with hybrids and hydrogen technologies."
 
 -Staff Report

Representatives from GM, Chevron, Pacific Ethanol and the California government announced a collaborative E85 project at the L.A. Auto Show.

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California E85 demo attracts big players

The American River Transportation Company (ARTCO), a wholly owned subsidiary of Archer Daniels Midland Co. (ADM), has acquired Garvey Marine Inc., in order to improve barge shipments of grain and possibly ethanol on the Illinois River.

 
 Garvey Marine owned 17 harbor boats, a construction division and six harbors, all located in Lemont, Channahon, Morris, Seneca, Ottawa and Pekin, Ill. The construction division in Pekin offers construction services primarily on the Illinois River. "The operations of ARTCO and Garvey are complementary, and the acquisition will create synergies to better serve customers located along the Illinois River system," Royce Wilken, ARTCO president, said in a prepared release. The purchase of the marine company will help ARTCO and ADM gain a stronger hold on existing waterway systems, including two existing ADM grain elevators in Morris. 
 
 Garvey Marine has grown since Bob White, CEO of Garvey International, took over in 1983 through numerous acquisitions over several years. The company had become the largest independent provider on the Illinois River. With the acquisition of Garvey Marine, ARTCO will operate 12 harbor services along the Midwest waterway that will provide services such as moving barges back and forth around different docks for storage, and for loading and unloading services. It will also own and operate over 2,100 barges, 30 tow boats and 29 line boats. "Barge operation is not going to go away," said Karla Miller, vice president of public relations for ADM. "So it made perfect sense, and it will add depth to our service." The addition of Garvey Marine will also help create better ways to take care of ADM customers located along the waterfront, Miller added. 
 -Staff Report

ADM acquires new river harbors

The Canadian province Prince Edward Island is making strides to become a leader in renewable energy use. More than a year ago, the legislative assembly passed the Renewable Energy Act, but the provincial government just approved three out of four sections in the act in January. The act requires utility companies to provide no less than 15 percent of their electricity from renewable resources. Minimum purchase price, designated areas and net-metering sysystems regulations were also approved, while a more aggressive 2015 renewables target was held over for rework.

Prince Edward Island passes renewable energy law

On Jan. 18, Nebraska Gov. Dave Heineman among many others attended a groundbreaking ceremony for ASA Albion, a 100 MMgy ethanol plant being developed by ASAlliances Holdings LLC in Albion, Neb.
 
 Site work is currently underway. Fagen Inc. will start building the plant, using ICM Inc. design, in late February or early March, according to ASAlliances Holdings President David Black. If all goes as planned, the facility will start producing corn-based ethanol by late summer 2007. "The whole project development took about two years," Black told EPM. "The financing and structuring agreements, contracts, and legal process took about 10 months."
 
 The plant will be built adjacent to a Cargill AgHorizons grain elevator, therefore Cargill will procure the plant's corn feedstock. It will also act as ASA Albion's ethanol and distillers grains marketer. The plant will produce just over 300,000 tons of distillers wet and dry grains, which will be distributed along with the ethanol to the local area and possibly the West Coast by truck and rail. The company has no plans to capture its carbon dioxide, according to Black.
 
 United Bio Energy in Wichita, Kan., will act as the plant's operator.
 
 ASAlliances' decision to enter the ethanol industry was influenced by company partner Steve Durham, who had invested in ethanol projects in the past. "His vision of the industry was different than what it currently was," Black said. "He felt the need for a larger institutional approach with strategic service providers. He attracted myself and others to explore a structure that would ultimately be more efficient and more attractive to the capital market."
 
 Black said ASAlliances Holdings, formerly Demeter Enterprises, developed a new entity, ASAlliances Biofuels LLC, to oversee the company's ethanol operations. ASAlliances broke ground Jan. 19 on a similar ethanol project in Linden, Ind. (see Industry News, page 14). 
 -Staff Report

ASAlliances breaks ground in Nebraska

According to a recent U.S. Department of Justice press release, Pekin, Ill.-based MGP Ingredients of Illinois Inc. (MGPI) is required to reduce its emissions and pay civil fines totaling $171,800—with the state and federal governments each getting half. MGPI will install pollution control equipment to reduce more than 1,700 tons of air pollutants per year like VOCs and carbon monoxide, after violating the Clean Air Act and failing to install the necessary emission-reducing equipment.

DOJ demands fines, less emissions from MGPI

The U.S. Senate recently passed S.1932, the Deficit Reduction Act of 2005, according to the Environment and Energy Study Institute (EESI). If the U.S. House of Representatives follows suit and President George W. Bush signs the bill into law, that could mean the reduction of millions of dollars in funding for renewable energy programs—specifically Sections 6401 and 9006 in the U.S. Farm Bill, which, respectively, are the Value-added Grant Program and the Renewable Energy and Energy Program

Cut possible in federal renewable fuels spending

Per capita, if China and India consumed natural resources and discharged pollution equivalent to that of the United States, sustaining those two economies alone would require two planet Earths. This is just one of the many thought-provoking findings released by the Washington, D.C.-based Worldwatch Institute in the independent research organization's annual world report, State of the World 2006: China and India Hold World in Balance, which became available Jan. 11.
 

 According to research gathered and conducted by Worldwatch Institute, many stabilizing aspects of the world's future hinges on the choices made by India and China during this critical time of growth and development in Asia. The effects of decisions that these two countries will make while on their independent paths to technological advancement and skyrocketing industrial capacities do indeed have global consequences. Among key items on Worldwatch Institute's radar are the growing transportation sectors in China and India, the resources commanded to supply the necessary fuels for these projected markets, and the real concern over the resultant emissions from increased internal combustion mobility of goods, services and people. However, Worldwatch Institute holds firm to its belief that the use and proliferation of biofuels and biofuels technologies will help these population powerhouses down the path of more sustainable growth.
 According to Worldwatch Institute's 2006 global report, ethanol and biodiesel use combined provided only 2 percent of the world's transportation fuels in 2004. The global production of ethanol more than doubled since 2000, while biodiesel production in that same time has nearly tripled. Conversely, oil production since 2000 only increased by 7 percent. 
 
 Worldwatch Institute also reported that the world's biggest biofuels producers—Brazil, the United States, the European Union and China—all plan to at least double biofuels production outputs within the next 15 years, which appears to be a conservative projection. On top of that, Worldwatch Institute found that the world could theoretically harvest enough biomass to satisfy the entire global demand of transportation fuels by 2050. 
 
 Ultimately, Worldwatch Institute's global report called for broad cooperation between China, India, the European Union and the United States to maximize resource efficiencies, and develop new agriculture and energy systems while continuing to pursue participation in the decisions made by China and India. "The rise of China and India is the wake-up call that should prompt people in the United States and around the world to take seriously the need for strong commitments to build sustainable economies," the book concluded. "Viewing this colossal shift in global geopolitics as an opportunity rather than a challenge holds the greatest prospect for ensuring a stable and peaceful 21st century.

Worldwatch releases State of the World 2006

California-based MEMS USA Inc. has announced that Hearst, Ontario, will be the site of Hearst Ethanol One, a biomass-to-fuel ethanol conversion facility. The plant will be majority-owned by MEMS USA and C. Villeneuve Construction, both of which will design, engineer, build and operate the biomass plant. The US$150 million facility will produce 227 million liters (59 MMgy) annually. The plant will utilize wood waste and forest waste as its primary feedstocks.

MEMS USA plans another biomass-to-ethanol facitlity

The Agricultural Research Service (ARS) and Iowa State University have developed a Web site dedicated to the genetics and genomics of corn. The Maize Genetics and Genomics Database, also know as the MaizeGDB, offers information on the traits, genetic sequences and other related features of corn, including those aspects having to do with breeding and crop improvement. It also provides contact information for more than 2,400 cooperative researchers, along with Web-based tools for ordering items such as corn stocks and cloned sequences. The MaizeGDB Web site can be accessed at www.maizegdb.org

ARS offers new maize web site

Chippewa Valley Ethanol Co. (CVEC), a 45 MMgy ethanol plan in Benson, Minn., has proven its innovative abilities once again.

 
 The company recently partnered with Frontline BioEnergy, a biomass gasification equipment provider in Ames, Iowa, to install a gasifier at the ethanol plant to make a "producer gas" that would replace natural gas. CVEC has taken an ownership position in Frontline and will work with Frontline, employees to design a gasifier that meets specific ethanol plant needs, according to Jason Jerke, CVEC process engineer. "Not only will we implement it here at CVEC, but we'll have firsthand input in the design and integration into other existing facilities," Jerke told EPM. "We see biomass utilization being an integral part of ethanol's future."
 
 CVEC will develop the gasifier design in three phases. In phase one, CVEC will build a pilot unit that will take in 35 to 70 tons of biomass per day. Initially, the plant will use modified distillers grains produced at the ethanol plant as a test feedstock. In the future, Jerke said CVEC wants to develop a "flexible fuel" gasifier that could use corn stover and wood chips as well. "We're ready to take the technology up to demonstration scale right now but not necessarily commercial scale. We'll work out any integration and design issues here on the pilot."
 
 In phase two, CVEC and Frontline will develop technologies to clean the producer gas. Conventional gasifiers convert biomass into a producer gas that can be used as fuel, but it typically contains ash and tar as well. "Our plan is to produce a cleaner producer gas—a true syngas—which should improve the efficiency of the conversion and allow us to distribute the fuel through ductwork to multiple burner sites."
 Phase three will be to implement a commercial-scale gasifier into plant operations. It would "replace essentially all natural gas here at CVEC," Jerke said. He wasn't able to give an exact timeline as to when each phase will be completed, but he estimated the entire project will be complete within the next three years, with sales of gasifiers at other sites beginning within two years.
 
 Not only will a gasifier spare CVEC from highly volatile and expensive natural gas prices, it will also allow CVEC to begin to develop a biomass infrastructure. This is necessary for producing cellulosic ethanol in the future, according to CVEC General Manager Bill Lee. "Relief from the high cost of natural gas is the immediate opportunity," Lee told EPM. "Whether it's converting cellulose to energy or to products, it seems obvious to us that gasification is going to be a key unit operation in the biorefinery of the future. Producing ethanol from cellulose is in the back of our mind, but we're not quite there yet. This project puts a couple pieces in play at our facility that would be needed for that."

The Aviation Grade Ethanol (AGE85) group recently flew a Mooney aircraft from South Dakota to Texas, in order to test an ethanol-based fuel and determine power ratings. AGE85 reported the engine produced 5 percent more power running on E85. The group used a Laboe, a large torque meter bolted between the crankshaft and the propeller, to measure the amount of power the propeller was producing.

AGE85 group finds ethanol provides more power

Petrobras, a Brazilian international energy company, has signed three share purchase agreements for the acquisitions of Shell's fuel businesses in three South American countries. The purchase of these retail and commercial fuel businesses will cost Petrobras approximately US$140 million. All acquisitions in these countries are subject to relevant government approvals. 
 
 Petrobras will take control of 38 service stations in Bogotá, Colombia, along with a blending plant and a product terminal in Santa Marta, Colombia. In Paraguay, the company will take over the operations of 134 service stations—52 with convenience stores—throughout the country. A total of 89 service stations will be turned over to Petrobras in Uruguay. 
 
 Petrobras also announced that its subsidiary, Petrobras International Braspetro BV, will be incorporating Brazil-Japan Ethanol Co. Ltd. in Japan. Brazil-Japan Ethanol's main purpose will be to import and distribute Brazilian-produced ethanol. The company will also be in charge of identifying technical and commercial solutions for inserting ethanol into the Japanese market. Petrobras hopes that Brazil-Japan Ethanol will help the company break into the complex Japanese fuel market and provide additional options for consumers. The incorporation of Brazil-Japan Ethanol was enacted from Petrobras Strategic Plan 2005-2015, in which the company plans to expand its current international business. 
 
 With the help of companies like Petrobras, the Brazilian government has predicted that it will achieve its long-sought goal of oil self-sufficiency this year and become a net exporter of oil, according to its Web site. The milestone was reached through years of pushing to find oil within Brazil's borders and government efforts to keep oil consumption low by encouraging the use of alternatives such as ethanol. The government has promoted the use of ethanol since the global oil shortages of the 1970s, with the public's embrace of the alternative fuel rising and falling with oil prices.

Petrobras expands international ventures

The first ethanol plant to be built in Arizona celebrated its groundbreaking Jan. 30 in Maricopa, 20 miles southeast of Phoenix. Various state and local officials, Pinal Energy LLC board members, and members of the Maricopa community attended the event.
 
 The $60 million plant will be constructed by The Industrial Company (TIC) with process technology supplied by Delta-T Corp. The plant will be owned and operated by Arizona Grain Inc., and constructed adjacent to the company's existing grain facility. "It really is a natural fit for us with a major grain facility and a big feedlot next door," said John Skelley, president of Arizona Grain. "This is an exciting asset in that it will involve not only processing corn into feed, but also the creation of two new products for this facility: energy and carbon dioxide."

 
 Dirt work is underway with a target start-up date set for February 2007. "We hope to finish sooner," Skelley said. "We hope to take advantage of the Arizona weather to speed up construction." 
 
 Pinal Energy will produce 55 MMgy of ethanol from an estimated 18 million bushels of corn, shipped from the Midwest. "We are big corn users here in Arizona, so we bring in a lot of corn," Skelley said. "Instead of buying corn by the truckloads, we buy it by the train loads." 
 Pinal Energy is working to finalize an ethanol marketer and is looking at plans to blend its own E85 at the plant in the future. There isn't a large demand for E85 in Arizona, but Skelley said he hopes Pinal Energy will change that. 
 
 The idea for the plant started getting tossed around about five years ago when Skelley and other board members saw three good revenue streams that could come out of the plant. "We have a lot of bottle companies that have a need for carbon dioxide, the state has a fuel additive mandate in the winter months, and there is a large feedlot we can take advantage of," Skelley said. The plant will be producing mostly distillers wet grains that will service the neighboring feedlot by conveyor belts. "That will be a huge cost-saver, not having to dry or ship all of our distillers grains," Skelley said. Any distillers dried grains will be marketed by Arizona Grain's sister company, Eagle Milling. All carbon dioxide will be captured and marketed by Reliant Holdings; the plant will also have capabilities to create dry ice on site.

Pinal Energy celebrates groundbreaking

Front Range Energy, a 40 MMgy ethanol plant under construction in Windsor, Colo., is anticipating an April start-up, and it needs a staff of employees to get things going. Plant Owner Dan Sanders told EPM the company will likely look out-of-state for a plant manager and production supervisor to obtain the most experienced people. However, other management positions, operations and other job duties will most likely be handled by northern Colorado applicants who Front Range Energy is willing to train. A total of 35 people, averaging about $37,000 in annual pay, will be needed to run the plant. Maintenance positions pay $18 to $20 per hour, while production jobs pay $13 to $15 per hour. Interested parties should contact General Manager Terry Kulesa at (970) 674-2910

Now hiring: Front Range Energy looks for employees

A&B Process Systems is expanding one of its plants in Stratford, Wis., to meet the needs of its customers in the growing ethanol industry. A 21,000-square-foot addition to one of four facilities the company operates will be used to fabricate equipment. With more space, A&B's fabrication process will become more efficient, company officials said. The new addition is slated to be completed by May. Companywide, A&B is adding approximately 60 new positions to fill openings for welder/fabricators in its Stratford facilities, as well as welder/fitters for its traveling installation crew.

A&B expands to meet ethanol industry growth

The Ethanol Promotion and Information Council (EPIC) has agreed to provide sponsorship, and oversee promotions and public relations for Wyoming Ethanol Racing during the 2006 race season. Wyoming Ethanol Racing has been using E85 for the past 10 years in its racecars. "We're excited about the partnership," said Dan Schwartzkopf, a 17-year race veteran and founder of Wyoming Ethanol Racing. "EPIC is a natural fit as our title team sponsor since we use E85." The race team will have five drag-race cars under EPIC's sponsorship that will be seen at eight major events this year.

EPIC becomes title sponsor for Wyoming Ethanol Racing

Colusa Biomass Energy Corp., a California-based company with patented process technology to convert waste rice hulls and straw into ethanol, announced Jan. 18 that it has signed a consulting agreement with yet2.com of Massachusetts to globally market Colusa's technology. "We are pleased to establish a strategic alliance with yet2.com," Colusa Biomass CEO Tom Bowers stated in a recent company press release. "Yet2.com has a proven track record of helping companies identify licensing opportunities, helping them facilitate their business plans and ultimately providing enhanced shareholder value."

Colusa Biomass signs consulting agreement

BBI International's Project Development division welcomed Frank Baumgardt to its Lakewood, Colo., office in early January. Baumgardt, a native of Germany, is a project manager who will help the company to develop ethanol projects. Previously, Baumgardt was a senior project engineer with Navarro Research, supporting the Biomass Program at the U.S. DOE office in Golden, Colo.

Baumgardt joins BBI project development

Mark Jutila has joined Phibrochem, a supplier of specialty chemicals and fermentation processing aids, as a technical sales representative for its Ethanol Performance Solutions Group. Jutila will be in charge of sales and service of Phibrochem's fermentation processing aids including its Lactrol and Neotrol brands. In the past, he worked for Tyson Foods, Nalco Chemicals and Recyclights.

Jutila joins Phibrochem

North American Bioproducts Corporation (NABC) has announced the addition of Kevin Kauers as lab manager at the company's Norcross, Ga., office. Kauers will be in charge of overseeing the day-to-day operations of NABC's quality control and research operations. He will also be involved with NABC's Bacteria Isolate Program and provide technical field support to sales teams across the country. Before joining NABC, Kauers was a lab supervisor with Glacial Lakes Energy.

NABC appoints new lab manager

Omaha, Neb.-based InterSystems Inc., provider of bulk material handling equipment for various commodities, brought Brend King aboard Jan. 3 as sales manager of Bulk Material Handling. King has more than 18 years experience in equipment sales and project management.

InterSystems hires King

Kansas Gov. Kathleen Sebelius and Nebraska Gov. Dave Heineman became chairwoman and vice chairman, respectively, of the Governor's Ethanol Coalition (GEC) on Jan. 1. One of the GEC's first actions of the year was to issue a letter asking the USDA and the U.S. DOE to participate in a study that would examine the best way to achieve expansion of the nation's biofuels industry. 
 The GEC held its January meeting via conference call and plans to meet in-person in Washington D.C., on Feb. 28-March 1

Sebelius, Heineman take reins of GEC

With the resignation of former board member Chad Elliot, Aventine Renewable Energy Holdings Inc. recently appointed Michael Hoffman to its board of directors Jan. 13 as a Class II member. Hoffman is currently a managing director of Metalmark Capital LLC. Hoffman previously served Aventine as a director from May 2003 through December 2005.

Aventine appoints Hoffman to board

National Corn Growers Association CEO Rick Tolman was reelected to a two-year term as chairman of the Midwest Area Rivers Coalition in January. The coalition has been working for the past 12 years to update the lock and dam systems on the Illinois and Mississippi rivers.

Tolman reelected to Midwest Area Rivers Coalition

In early December, the stockholders of St. Paul, Minn.-based CHS Inc. reelected seven agricultural producers to the company's board of directors. Curt Eischens and Jerry Hasnedl, both of Minnesota; Bruce Anderson of North Dakota; Robert Grabarski of Wisconsin; Richard Owen of Montana; Glen Keppy  of Iowa; and David Bielenberg of Oregon will all serve three-year terms on the company's 17-member board.

CHS reelects seven directors

In early January, Glacial Lakes Energy LLC announced the addition of Todd Richter as a controller at the ethanol plant in Watertown, S.D. Richter most recently worked as a controller at Great Western Bank in Watertown. 
 Richter replaced Michael Nealon, who was promoted to director of finance for Glacial Lakes Energy, Redfield Energy and Granite Falls Energy. Nealon had acted as controller since May 2002.

Richter joins Glacial Lakes Energy; Nealon promoted

February 1—After many of major natural gas producers reported their fourth quarter earnings results, it has become obvious that finding more natural gas supply—especially in North America—is becoming more difficult. In 2005, Exxon Mobil reported 9.25 Bcf per day of average worldwide natural gas production, down 6 percent from 2004. In the United States, the company's full-year production fell 10 percent, while Canadian volumes dropped 5 percent from 2004. This may be one reason why most industry analysts are forecasting continued strong natural gas prices in 2006 even though natural gas storage levels remain historically high. 

 
 What about demand? According to the U.S. Energy Information Administration (EIA), this year's demand for natural gas in the United States is predicted to grow 1 percent. Most forecasted growth will be derived from the power generation sector. According to Energy and Environmental Analysis Inc., U.S. gas-fired power consumption, which averaged about 13 Bcf per day in 2005, should increase 6 percent to 13.8 Bcf per day in 2006, and 15 percent to 15 Bcf per day in 2007. 
 
 So, how do we increase natural gas production in the United States? Import liquefied natural gas (LNG). In 2004, the United States imported 600,000 Bcf of LNG. Imported LNG should increase to 4.1 Tcf by 2025 according to the EIA. Although more LNG will be entering the United States, it is not happening at a fast rate because some hurdles remain. First, regional resistance to building LNG facilities is high. Second, securing LNG supply in the world marketplace is more difficult as prices for LNG are higher in other countries. Finally, the LNG market will act more similar to purchasing crude oil largely because LNG will be delivered from foreign countries.

Is natural gas production increasing or decreasing?

Ockham's Razor is a principle almost every Philosophy 101 student learns. It dates back to the 14th century, the origination of which is attributed to William of Ockham, an English logician and friar. A common explanation of Ockham's Razor is, well, that the simplest answer is most likely the correct answer. This idea has been indispensable in the development and advancement of modern science, and it has found a home in the rigors of the Scientific Method—mainly as the great expeditor of hypotheses. When multiple theories are presented in hopes to provide answers to scientific questions, Ockham's Razor dictates that the hypothesis with the least number of unproven assumptions is most likely the correct choice. It's not foolproof, but it has served science well as a guide throughout the last 600 years, to one degree or another.

 
 Simple plans emerge
 Perhaps Ockham's age-old supposition can offer some assistance in accurately predicting certain aspects of what the future U.S.-based cellulosic ethanol industry will likely resemble. It's no secret that different technologies exist out there at varying levels of effectiveness for the conversion of biomass to ethanol—in addition to other higher-value coproducts. Those technologies may not be optimized, but they do exist. Several gray areas remain though, but when it comes to predicting how—and at what point—a cellulosic ethanol industry will take hold in the United States, one might want to keep Ockham's Razor in mind. 
 
 Some of the most notable companies involved in partnership agreements to bring cellulose technologies from the lab to the next step of proving yield, capacity and overall process effectiveness of the different production techniques include Abengoa Bioenergy R&D, DuPont and Broin Companies. Each of these companies is actively involved in a Cooperative Research and Development Agreement (CRADA), a formal agreement between U.S. DOE national laboratories like NREL, various production facilities and integral partners. "Broin, Abengoa and DuPont all responded to a 2002 [DOE] solicitation," says John Ashworth, partnership development team leader at NREL's National Bioenergy Center. The purpose of this solicitation was twofold, Ashworth explains. One objective was to provide incentives for the industry to further develop cellulose-to-ethanol conversion technologies through pilot-scale operations. The solicitation also sought answers to questions about how to integrate cellulosic materials into existing dry-grind or new ethanol plants, Ashworth tells EPM.
 
 Abengoa Bioenergy R&D
 According to Gerson Santos-Leon, director of Abengoa Bioenergy R&D, Abengoa's current program to develop cellulose technologies has two steps. "Step one is the optimization of the dry mill technology, and that we are doing in York, Neb.," Santos-Leon tells EPM. "About two years ago, we built the starch pilot plant there, and we've been … optimizing the production of ethanol from cereals." Corn, wheat, barley and sorghum are all being tested at Abengoa's York pilot plant. "We're also in the process of building a second pilot plant (in York) to develop the biomass fractionation system, the second step in our partnership with the DOE," Santos-Leon says. Abengoa anticipates the biomass fractionation plant in York to be operational next fall using corn stover as the initial feedstock. "Our goal is to develop and demonstrate an integrated biorefining process, which would include the fermentation of both pentose and glucose sugars."
 
 Abengoa has an even bigger project in Europe. "In Spain—in partnership with Ebro Puleva and the European Union 5th Framework Programme—we are demonstrating our enzymatic hydrolysis technology," he says, referring to Abengoa's first biomass commercial demonstration. "What we want to do in [the city of] Salamanca is demonstrate the pretreatment process and the enzymatic hydrolysis of cellulose on a commercial scale using wheat straw. This plant is co-located with the starch plant in Salamanca, sharing utilities and support systems."
 
 Abengoa anticipates the Salamanca starch plant with which the demonstration plant is being co-located to begin operations by mid-year at the latest, while it says the 2 MMgy wheat-straw-to-ethanol plant next door should be up and running by late this year or early next year. According to Santos-Leon, the demo facility in Spain will not ferment the pentose (C5) sugars. Only glucose (C6) from the cellulose hydrolysis will be fermented into alcohol. The pentose-laden residue will be mixed with animal feed for further studies. 
 

 Abengoa's partners include NREL, Genencor, Novozymes, SunOpta and Ray Katzen, the distinguished professional engineer (see EPM's February 2006 profile on Katzen, "The Project of a Lifetime") who is retained by Abengoa for consultation.
 
 Broin's practical approach
 Broin Companies is another major player involved in researching and developing a better cellulose-to-ethanol conversion process. Although Broin's CRADA involves integrating cellulosic conversion with existing processes, the specific process with which Broin hopes to merge its cellulose technologies currently under development is Broin's trademarked corn fractionation process known as BFrac. 
 
 "BFrac is not a cellulose-to-ethanol process," says Rob Broin, Broin Companies chief technology officer. "What we're working on in our CRADA is converting the BFrac fiber fraction into ethanol." The fiber feeding Broin's cellulose conversion R&D is being directly supplied by corn fiber gained from the company's proprietary BFrac corn fractionation process. Like Abengoa and most other companies in pursuit of optimizing this technology, Broin Companies' efforts have been somewhat splintered due to the non-existence of a good organism to ferment both C5 and C6 sugars. "Another thing we see that needs more work is the pretreatment process," Broin tells EPM. "There is a lot of work going on in that area, but I think a lot of work still needs to be done to find an optimum pretreatment process and to make sure that the ethanologen—or the micro-organism—that gets developed works in conjunction with the pretreatment process." Broin is referring to the inhibitors produced by some of the cellulose pretreatments under development today. Enzymatic hydrolysis can follow pretreatment of the biomass, but Broin says some of the pretreatments out there produce too many inhibitors, and there isn't an organism available that can withstand those at any relative alcohol concentration. "There's a real Catch-22," Broin says. "We can pretreat the corn fiber, but we can't get a good fermentation of the resulting hydrolysate. It's a dilemma that's fairly well-known." 
 
 Regardless of any industry-wide R&D shortcomings in "finding" this multi-tasking yet elusive ethanologen, what's attractive about Broin's approach is that the company already has experience integrating its other technologies at several of its facilities. Broin's Project X (BPX), the company's own raw starch hydrolysis, has been successfully implemented on a commercial scale at 10 Broin ethanol plants. BFrac technology has also been integrated at two Broin plants. Moreover, BPX and BFrac compliment each other. With Broin's experience in technological integration, the company could very well have an edge in the cellulosic ethanol industry before it even exists. 
 
 DuPont's different direction
 DuPont's CRADA, a four-year, $38 million DuPont-led consortium—$19 million of which is being supplied by the DOE in matching funds—has a different direction than the other R&D efforts named. DuPont calls this project an integrated biorefinery. "DuPont has a process for converting sugars to polymers (1,3 propanediol), trademarked as Sorona, which is a premium fiber," Ashworth tells EPM. "They originally started making this from petroleum, but the company makes it from purified sugars today." 

 
 According to Ashworth, DuPont's project has two parts: one part DuPont is conducting on its own, and the other is with NREL. The former project processes corn kernels so its organism can make 1,3 propanediol. The other aspect of the project uses whole stalks and the corn itself—and through processing, the grain goes one way and the biomass goes the other, Ashworth says. "There are two products to make this cellulosic ethanol plant work," he says. "Polymers, where the value is, and ethanol, which is sort of the flywheel to drive the plant." DuPont is also looking at the high-energy lignin to power the plant. 
 
 DuPont's partners include NREL, Diversa Corp., John Deere and Michigan State University. 
 
 Synergies too great to ignore
 According to Murray Burke, vice president and general manager of SunOpta Inc.—the Brampton, Ontario-based company providing its steam explosion pretreatment technology—it's important to look at the oil and chemical industries' approaches at process evolution over the years as a guide to how this industry's processes might evolve. A major oil or chemicals company would develop new processes or process techniques in a lab, followed by selecting one of their refinery sites to "‘clip on' the smallest possible process model to prove the process technical data and process economic outcome," Burke tells EPM. "This would form the basis for the next grow-out size of the process." 
 
 Essentially, there are too many advantages in either co-locating or integrating cellulose processes into existing starch-based facilities to ignore—and, remembering Ockham's Razor, it does appear to be the simplest way to building a cellulosic ethanol industry. 
 "[A clip-on cellulose plant could] utilize the synergies of an existing site," Burke says. Just some of the advantages include sharing operators, maintenance responsibilities, utilities, infrastructure and management. A cellulose process line or "clip-on" could leverage muscle from virtually every corner of an existing facility. 
 
 "Our hybrid technology concept integrates cellulosic and starch technologies," Santos tells EPM. "When you talk about that, you talk about sharing a lot of systems. If you look at the dry mill system, and you look at the cellulosic process, the primary differences between these processes are the pretreatments. … Our objective is to integrate some of the key unit operations like hydrolysis, fermentation and distillation, and share the utilities and support systems. … We'll have two different pretreatments at the front end but when you get to the backend, it will be the same. We will have glucose from starch and glucose from biomass, so what you'll see is bigger fermentation tanks. Then, for the C5 (pentose sugars), we will use a recombinant organism to ferment the pentose. That would be a separate fermentation." 
 
 Burke says one of the most feasible and seemingly imminent approaches to integrating cellulose and dry (or wet) milling operations is exactly what Broin is investigating through its CRADA—using "waste" streams like the corn fiber gained from fractionation of corn kernels to not only produce ethanol from the starch but also from the lignocellulosic materials in the kernels. "With the new dry mill corn fiber separation in the front end coming into play, there will be large quantities of cellulose, starch and hemicellulose streams becoming available," Burke predicts. "With [distillers grains] prices facing downward pressure, the use of these corn fiber streams as feedstocks will become more and more attractive. They typically have 20 percent starch, 20 percent cellulose and 25 to 30 percent hemicellulose. These streams will be priced below [distillers grains]. Hence, this is likely the number one synergy to be seen."
 
 Burke notes other benefits to integration, like raw material diversification to allow for flexibility of supplies in case of drought or to avoid the woes of having only a single supplier of input goods. 

 
 Tackling challenges
 It's safe to say that all of the companies involved in this pursuit differ in isolating what challenges remain. However, if any doubts existed before Jan. 31 as to whether or not the development of technically viable and economically competitive cellulosic process technologies is a priority on the U.S. government's "to-do" list, surely those doubts were cast aside after President Bush's State of the Union address, during which he prioritized the commercial demonstration of cellulosic ethanol within a six-year timetable. 
 
 Nevertheless, the issue of developing a simultaneous, multi-functioning ethanologen to convert C5 and C6 sugars is key to optimizing not only the efficiency of integrating cellulose- and starch-based processes, but also the economics. "That is an important part that's missing," Broin says. "It's really holding back the future of the cellulosic ethanol industry." 
 
 According to Ashworth, NREL has an organism that can ferment both pentose and glucose sugars, and it's being used with DuPont's project. "Diversa has a specialty mix of enzymes to react with our pretreatment," Ashworth reveals. "We're using the organism NREL developed a while ago, and the result will be ethanol." Although Ashworth states that NREL has the sought-after organism, more work is needed. The key is finding a similar organism, or enhancing this particular one, to ferment both sugars "at high speed," he says.
 Similarly, optimizing the pretreatment of lignocellulosic materials is also crucial. "Industry experts are now acknowledging that the pretreatment stage is the critical step to the entire process outcome for the lignocellulosics-to-ethanol process," Burke says. "The SunOpta Stake Technology pretreatment system is applicable to virtually all published pretreatment processes. It is the only system in the world that has a multitude of proven industrial applications and sites." 
 
 Although financing these cellulosic ventures will also present its own group of hurdles, there won't be nearly as many obstacles to financing an integrated plant, as there would be for a standalone plant. 
 
 And what catalyst will spark the proliferation of these process-integrated ethanol plants? Well, experts differ on that too. Some say it's going to be when cellulosic processes are economically competitive with current starch-to-ethanol production. Santos-Leon thinks otherwise. "The issue is not to have a technology that is more competitive with starch," he tells EPM. "The whole objective is to have a technology that will complement the starch technology to expand the ethanol market in the transportation sector." 
 
 Javier Salgado, CEO of the Abengoa Bioenergy Business Group, believes the integration of starch and cellulosic technologies into hybrid plants is the most viable option to overcome the financial barrier and get the cellulosic ethanol industry off the ground. "Our hybrid plant concept lowers the technology risk and the capital requirements—essential for an economically viable project—to secure financing in the marketplace," Salgado says. "Our approach, along with the president's Energy Initiative, will launch the cellulosic industry to meet our growing energy needs." 
 
 Ron Kotrba is an Ethanol Producer Magazine staff writer. Reach him at <a href="mailto:rkotrba@bbibiofuels.com ">rkotrba@bbibiofuels.com </a>or (701) 746-8385.

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Pretreatment-flashed steam condensation system

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A handful of larger companies are working diligently toward uprooting cellulose conversion technologies from the labs and transplanting them to pilot-scale facilities. Integrating and further refining cellulose process technologies within existing ethanol plants is likely to be the irresistible medium that's already incubating the future of celllulosic ethanol.

Incubation Through Integration

Take a close look. It's in there. 

 
 The U.S. renewable fuel standard (RFS) defines cellulosic ethanol as ethanol derived from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis. It's a blanket definition that includes "dedicated energy crops," trees, wood and crop residues, grasses, fibers and just about every other non-petroleum waste imaginable. And here's the beauty of it. The RFS provides—if not in appropriations, in law—the economic apparatuses to start producing fuel from these underutilized domestic resources now, in this decade. 
 
 The truth of the matter, however, is that until President George W. Bush dropped the "switchgrass" bombshell in his Jan. 31 State of the Union address, hardly anyone in America was talking about cellulose-to-ethanol, and the mainstream ethanol industry seemed to have more immediate concerns. For most, cellulose was simply a distant hope. 
 
 Here's why. The cellulosic ethanol provisions of the RFS have been largely overshadowed by the corn-to-ethanol industry's fast and furious industry expansion en route to the 7.5 billion-gallon floor required by the RFS in 2012. Industry experts say there's also been an underlying lack of faith, not in the promise of cellulosic ethanol, but in the existing technologies to produce it. As the old saying goes, "Be not the first by whom the new are tried, nor yet the last to lay the old aside."
 
 Don't expect American producers to lay grain-based ethanol aside in this decade or the next, but it's fair to say that companies engaged in cellulosic ethanol are already in good company. Almost every major ethanol producer in America is taking a close look at cellulose—or even participating in R&D—and many say it's simply a matter of time before the industry is eating up more than just grain. 
 
 Worldwide, the stars are aligned for biomass utilization. The walls that once stood in the way of cellulosic ethanol are crumbling—and the ethanol industry is watching and waiting. "There are three reasons why cellulosic ethanol wasn't economical before," says Brian Duff, project manager for BBI International Project Development. "The cost of oil, the cost of enzymes and the high cost of building a plant." 
 Now, that's all changing. The era of cheap oil is over, the cost of enzymes needed to make cellulosic ethanol, once prohibitively high, has fallen exponentially, and companies like Canada's Iogen Corp. are itching to get into the big league with their process technologies. 
 That's where the RFS might help. But pulling apart the energy bill and clarifying how certain RFS provisions will be enacted will be a long and tedious process. "The Energy Policy Act of 2005 is the most aggressive pro-cellulose policy language of any government in the world," says Jeff Passmore, executive vice president of Iogen Corp. "The issue now is, how will we implement the Energy Policy Act and get what was authorized actually done?"
 
 How the implementation of these provisions may come to be is unclear, but the importance they may play in the years ahead is starting to come into focus. A handful of RFS provisions are designed to promote the development and use of cellulosic ethanol in the United States. To grasp the full potential of the bill, Passmore says it's important to think about the provisions collectively. "You have to look at the cellulose provisions in the energy bill as a complete package," he says, qualifying his advice by saying that three specific provisions stand out among several. According to Passmore, here's what probably will count the most to would-be producers: 
 
 <li>A provision that allows oil companies to treat one gallon of cellulosic ethanol as 2.5 gallons of grain ethanol in fulfilling their obligation to meet the renewable fuels requirement of the RFS.</li>

 <li>A provision that requires at least 250 MMgy of the 7.5 billion gallons of ethanol produced under the RFS to come from cellulosic ethanol post-2012. </li>
 <li>A provision that provides federal loan guarantees on up to $250 million of debt for qualified cellulose-to-ethanol plant developers. </li>
 
 As the industry moves towards the 7.5 billion-gallon RFS target, the energy bill allows a 2.5:1 per gallon trading bias for cellulosic ethanol. In other words, for every gallon of cellulosic ethanol a refiner blends, it would receive a credit as if 2.5 gallons of grain-based ethanol were used. The existing VEETC legislation that allows blenders to receive a 51-cent tax credit for every gallon of ethanol blended will not be magnified by 2.5 with this cellulose provision. "This is exclusively a trading scheme," Passmore explains. 
 
 "The bottom line is that this will help us reach the 7.5 billion gallons quicker," Duff says. "It allows oil companies to blend less cellulosic ethanol and still be compliant with the [2.78] percent of their gasoline sales that is now required to be comprised of ethanol." Giving cellulosic ethanol 2.5 times the credit as grain ethanol certainly holds value while the nation races toward the 7.5 billion target. However, the provision would likely hold little value after that goal is met, unless the RFS is extended. Industry experts say oil refiners likely see this provision as a "cost saver" because, for example, they might only have to retrofit one refinery, rather than two, to incorporate ethanol blending. The blending ratio provision will expire in 2013 as a new cellulosic ethanol mandate begins.
 
 No less than 250 million gallons of the 7.5 billion gallons of ethanol produced under the RFS post-2012 must come from cellulosic ethanol. If the government expects to see 250 MMgy of cellulosic ethanol, that could easily be done with four 60 MMgy plants, Passmore says. While the industry today could raise capital and build four grain-based plants of that size in 18 months, building a single cellulosic ethanol plant that large—let alone four—is easier said than done. With only Iogen's demonstration-scale cellulose-to-ethanol plant producing a small amount of wheat-straw-based ethanol today, estimating the cost of constructing a commercial-scale plant requires guesswork. Most experts say the cost would be three to four times greater than the capital needed for a grain-based plant of equal capacity Operating costs would be less, however. 
 
 The loan guarantee program outlined in the legislation has particular appeal to future producers. The program provides the project owner/developer with a loan guarantee, backed by the federal government, up to a maximum of $250 million. "The reason that this provision is important is because it is very difficult to commercialize new technology," Passmore says. "All new technology has a problem raising debt." Hence, conventional lenders would be able to lend debt to qualifying cellulosic ethanol projects if that debt was backed by a strong credit rating, such as the government. 
 
 "To put it simply, the provision states that to make it easier for potential producers to get capital, the government has said, ‘If you qualify, you will get a government guarantee on that debt,'" Passmore explains. 
 
 So now qualifying has become the operative word. But what qualifies a producer to receive a loan guarantee? To make sure the companies coming forward to receive these loan guarantees are credible and pushing viable projects, the federal government has set certain criteria in the RFS that will have to be met. "It's sensible that the government has done that," Passmore says. "You have to make sure you are making a prudent decision on behalf of the taxpayers." The loan program was developed as an 80/20 debt-to-equity split with a maximum of $250 million in government-backed loan guarantees on debt. With cellulosic ethanol plants coming with an estimated price tag in the $350 million range, companies would be looking to raise $80 million to $100 million from the private sector (i.e., 20 percent equity) before the government could consider issuing them loan guarantees. "The equity has to be at the table," Passmore says. "A company can't come in and get a loan guarantee if it doesn't already have the equity raised." Secondly, a company must have a demonstration plant producing cellulosic ethanol and have a proposed plant with a minimum nameplate production capacity of 30 MMgy to qualify. 
 

 The future direction of cellulosic ethanol has yet to be written. The U.S. Congress has set the guidelines—now it's up to the industry to deliver on them. "Congress is hoping that the loan guarantee program will be significant in stimulating the development of cellulose ethanol in the U.S. between now and 2012," Passmore says. "The loan guarantee program should help get plants financed … and financing everyone's largest hurdle today." 
 
 There are no guarantees that these cellulosic provisions will spark an industry dominated by cellulosic ethanol. "All Congress can do now is watch and see if any companies will come forward and respond with qualifying projects," Passmore says. 
 
 If they don't, one of two things can be said. Either the industry simply isn't ready to move towards cellulosic ethanol, or Congress didn't go far enough to "incentivize" such a leap. "It would be premature to make conclusions about cellulosic provisions today," Passmore says. "We will have to see what they are and how the administration and various departments are going to implement them." 
 
 Interestingly, Duff says high oil prices provide more of an incentive for cellulosic ethanol production than the energy bill does. "The provisions in the RFS are simply an added bonus for prospective producers," he says, explaining that the cost a crude oil is the real determining factor of biomass utilization. 
 
 If and when a cellulose-to-ethanol industry does take off in America, experts say it will probably start small and conservatively. They say the industry should expect to see smaller cellulosic plants as a result of construction costs and availability of technologies. For example, a plant producing cellulosic ethanol from enzymatic hydrolysis uses a thermo-chemical process that uses acids to separate the cellulose from various lignocellulosic materials. This process would require acid-resistant metals, such as Carpenter 20, whereas conventional corn-to-ethanol plants can use stainless or conventional steel. That's the type of building-cost deterrent that would have to be overcome. 
 Eventually, after the process is proven and accepted, plants would likely increase in size. "You could get into bigger plants running on corn stover that could be upwards of 60, 80 or 100 million gallons per year," Passmore predicts. 
 
 Other provisions in the RFS for cellulosic ethanol include a number of grants earmarked for R&D. Over $700 million would go into the U.S. DOE's Bioenergy Program. The U.S. EPA would receive $550 million for research on advanced biofuels technologies. 
 
 In the end, what the energy bill accomplishes is altering the business landscape to a point where companies are forced to at least take a very serious look at the United States as a market for cellulosic ethanol commercialization. "It's Iogen's intention to continue to work with the U.S. government to try and get a plant commercialized," Passmore says. Now with multiple provisions in motion, and new technologies and other key factors making cellulosic ethanol more economical, Passmore and Duff see the industry taking off. "If oil prices stay above $45 a barrel, it makes a lot of technologies economical, and cellulosic ethanol is one of them," Duff says. 
 

 Kory Wallen is an Ethanol Producer Magazine staff writer. Reach him at <a href="mailto:kwallen@bbibiofuels.com">kwallen@bbibiofuels.com</a> or (701) 746-8385.<ul>

Tucked within the 1,700 pages of the Energy Policy Act of 2005 are a number of provisions intended to help jumpstart the commercialization of cellulosic ethanol in the United States. Considering the long-term outlook for oil prices, some experts believe biomass will soon fill petroleum's proverbial shoes. Can legislation get cellulose-to-ethanol on its feet?

The Energy Bill's Sleeper Cellulose Provisions

February 2—As of the beginning of February, DDGS has been getting over an extremely strong January market, which was tight due to a run-up in the Chicago Board of Trade, poor plant run-times and logistical issues. Now prices have abated as those issues have been alleviated, due in part by lower animal fat prices. When natural gas was high-priced, East Coast processors were burning fat used to feed monogastrics in lieu of buying energy. Now that natural gas prices have decreased more than 25 percent, producers are now back to feeding fat in their operations, which is decreasing demand for higher energy products like DDGS. Also, many of the plants that greatly reduce dryer use with high natural gas prices have started to sell dry product again. 
 
 Buyers all seem to feel that prices should go lower, but most of the distillers grains production for February and March has been sold, much of it during the highs of January. Export container demand remains extremely strong, and fill-in barge business has greatly benefited those plants that have a barge-oriented marketing program. Future plant netbacks for barges will be affected by recent Burlington Northern rail increases on grain rates to the Pacific Northwest, giving traders incentive to ship on the Mississippi River, and increasing prices for barge freight. 
 
 As new buyers, both domestically and worldwide, incorporate DDGS into their animals' diets, continued research and education will be important. With the United States commitment to producing more ethanol-based fuels, ration space for DDGS will be vital.

Producers start drying again as energy prices dip

Ethanol prices began moving to the beat of their own drum early in 2006, with strong demand in coastal markets pumping up prices amid thinning availability. That also put upward pressure on seasonal term contract deals, market sources said.
 
 In Chicago, spot barge deals trading around $2.25 in mid-January could not be touched for less than assessments in the $2.40s per gallon by the end of the month, with most prompt offers hovering at $2.50 per gallon or higher. Over the same period, plant FOB prices were up 10 to 25 cents, with some selling bulk truck volumes at more than $2.40 per gallon. Though some smaller plants were still offering in the $2.10-to $2.15-per-gallon range, they were also firming offers even as bulk slowed. 
 
 At the rack, the anomaly of cheaper rack prices persisted, though postings for top-off sales also generally moved up. In Iowa, average ethanol rack prices gained 18 percent in January, with those in Illinois up 14 percent and Nebraska gaining 20 percent.
 Much of the pressure on ethanol came from early preparation from refiners abandoning MTBE in gasoline, particularly in the East. More product was being devoted to the East, while New York spots surrounded $2.70 per gallon. 

 
 Volatile NYMEX unleaded front-month values actually closed out the month nearly 2.5 cents lower than they began. Gasoline pump prices turned higher at the end of the month, averaging over $2.32 per gallon nationally, but remained much softer in the Midwest, slipping to less than $2.22 per gallon on average.

Ethanol prices climb as coastal pressures mount

When the most powerful man in America says cellulosic ethanol is going to be commercialized within six years, the industry he's talking to listens up. Now, as the nation's energy department unveils a 30-year outlook on oil that makes biomass utilization a long-term energy option with teeth, EPM offers industry reactions to the speech that made a nation start thinking about cellulose.

March 2006

Business Briefs

ARS offers new maize web site

Now hiring: Front Range Energy looks for employees

A&B expands to meet ethanol industry growth

EPIC becomes title sponsor for Wyoming Ethanol Racing

Colusa Biomass signs consulting agreement

Baumgardt joins BBI project development

Jutila joins Phibrochem

NABC appoints new lab manager

InterSystems hires King

Sebelius, Heineman take reins of GEC

Aventine appoints Hoffman to board

Tolman reelected to Midwest Area Rivers Coalition

CHS reelects seven directors

Richter joins Glacial Lakes Energy; Nealon promoted

Columns

A View from the Hill

The Way I See It

Featured

Cellulose Goes Global

Getting A Move On

Incubation Through Integration

The Energy Bill's Sleeper Cellulose Provisions

Did the President Just Say Switchgrass?

Contributions

Maintenance as a Profit Center in a Fuel Ethanol Plant

Transportation Solutions for the Ethanol Industry

March 2006.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

ARS offers new maize web site

Now hiring: Front Range Energy looks for employees

A&B expands to meet ethanol industry growth

EPIC becomes title sponsor for Wyoming Ethanol Racing

Colusa Biomass signs consulting agreement

Baumgardt joins BBI project development

Jutila joins Phibrochem

NABC appoints new lab manager

InterSystems hires King

Sebelius, Heineman take reins of GEC

Aventine appoints Hoffman to board

Tolman reelected to Midwest Area Rivers Coalition

CHS reelects seven directors

Richter joins Glacial Lakes Energy; Nealon promoted

Columns

A View from the Hill

The Way I See It

Featured

Cellulose Goes Global

Getting A Move On

Incubation Through Integration

The Energy Bill's Sleeper Cellulose Provisions

Did the President Just Say Switchgrass?

Contributions

Maintenance as a Profit Center in a Fuel Ethanol Plant

Transportation Solutions for the Ethanol Industry

March 2006