Report posted Sept. 28, 2010
 
 The energy resources division of Ohio's Department of Development has made available $8 million in American Recovery and Reinvestment funds to projects that will increase the availability of ethanol and biodiesel within the state. The Advancing Biofuels Beyond the Basics program is the fifth funding installment to be offered through the state's energy program. Other programs have targeted renewable energy, improving industrial efficiency and transforming waste to value.
 
 In order to meet Ohio's goal to improve the viability of its ethanol refining capacity, second-generation refining projects are encouraged to apply for grant approval. Eligible projects must be located within Ohio and include a cost share investment of a minimum of 25 percent of total costs. The project must be able to be completed within 12 months and must directly impact Ohio's economy. Once approved, funds can only be used to purchase and install eligible equipment that will increase second-generation ethanol refining capacity or biodiesel production.
 
 Interested applicants must complete a two-step process to become eligible for funding. First, a one-page project summary must be submitted to <a target="_blank" href="http://recovery.ohio.gov/opportunities " rel="external">recovery.ohio.gov/opportunities </a>by Oct. 22. Next, a complete application must be filed with the state's energy resources division by Nov. 1. According to a department spokeswoman, awards will range between $500,000 and $1 million and will be selected through a competitive process. The department anticipates awarding funding to between eight and 16 projects and expects to distribute grant money in early 2011.
 

 A bidders' conference is scheduled to be held in Columbus on Oct.6 to provide an opportunity for questions regarding application requirements. Attendees are required to register via email at recovery.stickel@em.ohio.gov. For more information regarding the application requirements, visit the department's <a target="_blank" href="http://www.development.ohio.gov/recovery/energy/FundingOpportunities.htm" rel="external">website</a>.

Ohio offers $8 million to biofuels projects

Posted Sept. 28, 2010
 
 Minneapolis, MN -- Mansfield Oil Company on Sept. 28 announced the addition of Denco II to C&N Companies existing portfolio of ethanol marketing partnerships.
 
 Denco II was recently purchased by local investors in the Morris area. The motivation for purchasing the plant and starting ethanol production stems from the desire of the investors to stimulate the local economy in Morris by creating local jobs and keeping investment dollars and revenue in the area. The plant will employ up to 30 employees and support grain prices for local corn producers.
 
 Energetix, LLC has partnered with the investment group to oversee the business and facility operations at DENCO II. "We are very excited to have an opportunity to partner with the investors in Morris and look forward to implementing management, energy efficiency, technology and operational improvements that will bring the plant long term success. C&N Companies is a key strategic partner that will allow us to accomplish our goals at Denco II," said Energetix Managing Partner Jason Jerke. "C&N is a perfect fit for the risk management strategy that we have implemented at Denco II. They bring the experience, market knowledge and transparency to ethanol marketing that allow us to manage our corn, DDGS and ethanol positions daily," he added.

 
 Mick Miller, Energetix President and former Denco Manager, will serve as the General Manager for Denco II. "I am very happy to be back in the Morris area to assist the DENCO II team in bringing long term success to the new owners. Denco II is looking forward to the opportunity to work with C&N on bringing unique marketing strategies to the new business," Miller said. "Energetix is glad to expand its relationship with C&N and bring additional value to Denco II," he added.
 
 C&N Companies' biofuels production and marketing includes production from 11 plants throughout the U.S.
 
 SOURCE: Mansfield Oil

Mansfield Oil signs marketing agreement

Construction began in late August on an American-style corn ethanol plant 50 miles outside Budapest on the Danube River at Dunafoldvar, Hungary. Pannonia Ethanol Zrt, an Ethanol Europe project, expects the 50 MMgy plant to be completed in mid-2012. A team from Minnesota-based Fagen Inc. is directing the project using local subcontractors to build a standard Fagen/ICM corn ethanol plant. The project also includes a natural gas-fired combined heat and power plant that will generate 1.5 MW power. Ethanol Europe's future plans include a biomass-fired steam/power plant, an ethanol loading facility on the Danube and possible doubling of capacity.

Hungary to get Fagen/ICM plant

Three universities received grants from the National Science Foundation this summer to further their research into cellulosic technologies. 
 
 Two North Dakota State University professors received $309,357 and will conduct their research in collaboration with a professor at Clarkson University, Potsdam, N.Y., who has been awarded $200,978. The objective of the group's research is to enhance the conversion of cellulosic biomass into fermentable glucose to convert into ethanol or other chemicals or fuels. 
 
 Researchers at North Carolina State University received a $500,000 grant aimed at finding an energy-efficient and environmentally friendly method for breaking down lignin feedstock. The aim is to develop the science for catalytically transforming lignin by using liquid CO2, creating an economically viable resource for the petrochemical industry.

North Carolina researchers are developing a new technology to convert lignin. PHOTO: NCSU

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BIObytes

Sept. 3—The trajectory of the rig count is the leading indicator on production and therefore, pricing for natural gas. As the composition of the rig count (horizontal/directional/vertical) continues to evolve, however, analysts struggle to derive accurate production levels from the overall number. It is further complicated because the gas produced from an individual horizontal well varies by basin and the technology employed. Drilling companies continue to find efficiencies that reduce drill times and increase the productivity of individual rigs. For instance, Petrohawk reported drilling times in the Haynesville having been reduced by 65 percent over the past two years due to advancements. While the market still watches the rig count, it has become increasingly reliant on pipeline flow data for production estimates. Analysts use the flow data to extrapolate current production levels into the future based on drilling expectations and lead times. The market is very sensitive to the weekly EIA inventory reports because they offer ‘real-time' corroboration or disputation of the longer term supply and demand expectations. At the end of August, the pipeline flow models were indicating unprecedented production growth.
 
 The highest level of production in at least 40 years is going to put significant downward pressure on prices until economics force cut backs. The theory is that sustained low prices will eventually steer those providing capital for shale development to seek higher returns elsewhere. However, in second-quarter analyst calls, the industry consistently hinted at cutbacks while forecasting production growth. The second quarter was largely profitable as hedges established last winter (such as summer 2010 gas sold at $5.85) have offered decent netbacks this year. In contrast, the industry is under-hedged versus norms for 2011 (35 percent) and poorly hedged for 2012. With the 2011 and 2012 strips below $5.35, the window to lock in profitable returns is closing. If prices remain low, a very gradual turn toward production cutbacks is setting up for late 2011 with the rig count falling aggressively by mid-year. It will take all of 2011 to work out of the growing oversupply, resulting in lower prices in 2011 than 2010. Beyond 2011, the availability of capital and (in)ability to hedge at economically attractive levels will drive production, and therefore pricing.

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Production growth suggests lower gas prices ahead

California-based seed developer Ceres Inc. has formed a Brazilian subsidiary to focus on expanding sweet sorghum as an ethanol feedstock. Ceres Sementes do Brasil Ltda. will be based in Sao Paulo and will be led temporarily by Ceres Chief Financial Officer Paul Kuc. 
 
 Sweet sorghum is already being grown in that area of Brazil, but on a very small scale and not as a biofuel feedstock, according to Ceres corporate communications manager Gary Koppenjan. Ceres is also conducting sweet sorghum crop trials in the U.S.

Ceres to seed sorghum in Brazil

Adding an in-house engineer to the payroll may seem like a hefty commitment, but facilities that have done so reap the benefits of the investment. In northeastern Iowa, Golden Grain Energy LLC and Homeland Energy Solutions LLC employ three engineers between the two ethanol plants. "It's really been key to Golden Grain and Homeland's success—having that expertise," says Walt Wendland, president and CEO of the two plants. "It certainly makes my job easier."
 
 The two companies have a lot of commonalities, Wendland says, including some shareholders and directors. Golden Grain and Homeland have a cooperative agreement for shared management, including the chief operating officer Chad Kuhlers, an electrical engineer. The other two engineers are Kevin Howes, a chemical engineer, and Don Mork, a mechanical engineer. Although Howes and Mork work principally at Homeland as plant manager and maintenance manager respectively, the three of them have consulted about projects at both plants. "When those three engineers put their heads together, there are a lot of things that can happen," Wendland says.
 

 Many ethanol plants don't have in-house engineers, Mork says, typically contracting out their engineering work instead. With two engineers on-site at Homeland, however, Mork and Howes can get the job done internally, often saving valuable time. Of course, that's not to say that it's only people with engineering degrees that are valuable resources, Mork adds. "You need to use a combination of looking at technical solutions as well as hands-on experience."
 
 Engineers can help an ethanol plant with cost-saving projects, such as energy reclaim/reduction, yield optimization and chemical usage reduction, says John Kwik, president of Dominion Energy LLC, an Ohio-based consulting firm for the renewable and corn wet milling industries. He's not just talking about hiring an engineer to work as a consultant as he does—he believes all ethanol plants should have an engineer or engineers on staff at critical times, particularly during periods of growth. 
 
 That may sound odd, but Kwik believes that if more ethanol plants had on-site engineers, it would actually create more work for consulting engineers like him. An ethanol plant without a plant engineer may be so busy keeping the plant running that there isn't time to troubleshoot or recognize the potential for improvements. "I believe there are a lot of two- to three-year payback projects out there," he tells EPM.
 
 As a general rule, he says, having a dedicated engineer on staff should save an average ethanol plant five times that person's salary. In other words, an engineer with a salary of $70,000 should be able to save that plant $350,000 a year. At a larger plant, that number may be as high as 10 times the engineer's salary. However, Kwik estimates that only about 20 percent of the ethanol industry has a dedicated process engineer on staff. Some plants do have management staff with engineering degrees, but other job duties mean they aren't focused on engineering matters.
 
 Neal Jakel, general manager of Illinois River Energy LLC, believes that a poor understanding of the technical processes of an ethanol plant has led to many project and plant failures over the years. Besides Jakel, a chemical engineer, the 100 MMgy ethanol plant in Rochelle, Ill., employs three other engineers, including a mechanical, electrical and chemical engineer. The plant also hires outside consulting engineers to take advantage of specialty skills as needed. "It is a fundamental limitation in many plants that do not have certain critical skill sets," he says. 
 
 Although Jakel isn't sure how many ethanol plants have engineers on staff, he wonders if it is on the rise. He points out that the listings for companies seeking engineers on www.ethanol-jobs.com seem to be up recently. As of late August, there were four ads for engineers, including two listings for multiple engineers in multiple plants. Three of the ads were asking for process or plant engineers and one was looking for an engineering manager. All four ads either preferred or required a degree in mechanical engineering, with chemical, electrical or civil engineering also mentioned as preferred or required degrees. 
 Lifeline Foods LLC, a 50 MMgy ethanol plant and corn milling facility, hired its first on-staff engineer this summer. The facility, located in St. Joseph, Mo., is experiencing growth, particularly on the food products side, says Rick Stoecklein, chief operating officer. "We found ourselves really at a resource deficit," he tells EPM. Although Lifeline can utilize the resources of its parent company, ICM Inc., having an engineer on staff will mean it will have the resources to complete a broader range of projects internally. Another consideration is that as the facility ages, more work will need to be done on infrastructure.
 
 Two engineers—one chemical and one mechanical—work at Chippewa Valley Ethanol Co. LLLP, a 45 MMgy plant in Benson, Minn. CVEC is in a bit of a unique position points out Andy Zurn, the company's engineering manager. The typical ethanol plant takes in corn, makes fuel grade ethanol utilizing natural gas and some electricity and ships it out. CVEC takes in field corn, organic corn, wheat and rye and ships out fuel, industrial grade alcohol, both regular and organic, and beverage alcohol, both regular and organic. On top of that, the company has a biomass gasifier to decrease its natural gas use. "You kind of have to have ethanol plant engineers on staff for doing the crazy things we do," he says.
 
 Zurn sees a benefit for all ethanol plants in hiring staff engineers. Innovation is common and fast moving in the ethanol industry—like no other industry he's ever seen. "The [ethanol plants] that don't have separate heads to think and consider and apply some of these technologies, boy I think maybe they're missing out," he says. Typically, an operations manager is so busy running the plant there is little extra time to evaluate new technologies. "The engineer is somebody who can evaluate and research new technology so when you integrate, it goes smoothly and you are highly successful," he says.
 

 That means digging deep into the details, to determine if a new technology is a good fit for a particular plant. An engineer needs to ask a lot of questions, such as whether the technology is reliable and operator friendly. Does it have a good payback, such as in reduced energy or production of more ethanol with less corn? What effect will it have on the rest of the ethanol plant processes? What other companies produce this technology and have they been at it longer, with a better reputation? Does the company provide technical support after the equipment has been installed, or does it disappear? "We do all that due diligence work," he explains. 
 
 Zurn agrees that an engineer can help save ethanol plants money, but says those savings can be hard to quantify. One obvious path to savings is when an engineer helps the plant write a grant for a new project. "I can tell you one thing for sure, your ethanol plant will be much slower to innovate and save money without an engineer," he says.
 
 The positive impact on the community is a plus, too. As has been said over and over, ethanol plants bring jobs to rural areas. And it's not just any job, either. "We have quite a few professionals on staff and it's ethanol that brought those jobs out here," he says with pride.
 
 Not all plants employing engineers are large or unusually diverse. Travis Brotherson is the plant engineer at Quad County Corn Processors, a 30 MMgy ethanol plant at Galva, Iowa. He first worked at the plant as a night operator and went back to school, earning a degree in aerospace engineering since he didn't think he'd be returning to the ethanol plant. When he finished his degree, he was talked into returning to the plant as its engineer and is glad he did. 
 
 Quad County, which started production in 2002, went without an on-staff engineer until Brotherson began in January 2009. His first dug into any and all data the plant had on file and went to work identifying and smoothing out process upsets. "Things were operating very well when I came in, but I think it helped us to understand things that had happened in the past to cause process upsets," he says. Another project on Brotherson's plate is to evaluate possible upgrades to the distillers grains line to increase the diversity of the products produced and tap into other feed markets.
 
 On-staff engineers aren't very common in his area of northwest Iowa, Brotherson says, making Quad County, a smaller and somewhat older plant, a bit unusual. That having been said, Brotherson believes it would make sense for more ethanol plants to hire engineering help. "Seeing as how I am an engineer at an ethanol plant, I'm probably a little bit slanted," he adds with a laugh. EP
 
 Holly Jessen is associate editor of Ethanol Producer Magazine. Reach her at (701) 738-4946 or <a href="mailto:hjessen@bbiinternational.com">hjessen@bbiinternational.com</a>.

Homeland Energy Solutions LLC in Lawler, Iowa, is an example of an ethanol plant that employs in-house engineering staff. Don Mork, left, is a mechanical engineer and the plant?s maintenance manager, and Kevin Howes, right, is a chemical engineer and

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Walt Wendland, president and CEO, Golden Grain and Homeland Energy

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Andy Zurn, engineering manager, Chippewa Valley Ethanol Co.

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Kevin Howes, plant manager for Homeland Energy Solutions LLC, looks on as Nathan Scheidel works in the control room. Homeland and its sister plant, Golden Grain Energy LLC, both employ on-staff engineers. PHOTO: MATTHEW PUTNEY 

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Chippewa Valley Ethanol Co. LLLP in Benson, Minn., has two on-staff engineers. PHOTO: CVEC

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The expertise of on-staff engineers pays off in troubleshooting, systems optimization and evaluation of new technology.

Engineers on the Ground

In the current era of rapid technological advancements, it's hard to believe that the majority of ethanol plants still rely on a basic microscope to evaluate yeast cells. And yet, there they sit in almost every ethanol plant—remnants of a time before computers, when a skilled eye was the only method of determining how yeasts were holding up throughout fermentation. While microscopes are an effective instrument to count and evaluate yeast cells, are they still the best option for monitoring what can arguably be one of the most important components of ethanol production? Perhaps not for long. A handful of companies believe yeast monitoring methods are due for improvement and have developed products that could give ethanol producers a boost in keeping an eye on the fungi.
 
 Yeast Activity Monitor

 Naperville, Ill.-based Nalco Co. began developing its Yeast Activity Monitor a few years ago, according to YAM researcher and developer Michael Bradley. Nalco researchers sent prototypes to ethanol producers and brewers, most of whom were using microscopes to evaluate yeast activity, for first-hand feedback on the device's functionality. The company released the final product in May and has already installed the equipment at 10 to 15 U.S. ethanol plants and several outside the U.S., according to Bradley. The greatest appeal of the product is its accuracy when compared to microscopic monitoring methods. "It's not a subjective measurement," he says. "To put it simply, if you did the measurement or if I did it, we're going to get the same answer because there's nothing about your personal bias that's going to come into play, unlike a cell count. That's definitely a nice characteristic."
 
 Each YAM system includes a touch screen computer that is connected to a digital balance and up to four probes. To use the equipment, a lab technician first weighs a sample from the plant's fermentation tank on the balance. The computer determines the amount of reagent required for the test and prompts the user to add the correct amount. Next, the technician inserts a probe into the sample and views the results on the touch screen monitor. Bradley says the entire measurement process takes approximately three minutes and is very user friendly. "One of the key things is that because you're doing it on a balance, it's very flexible," he says. "You can actually overshoot or undershoot the target [of reagent] that the computer gives you and it's perfectly fine because the computer will know how much you put in and will accommodate for that when it's calculating the result."
 
 Bradley says YAM is unique because it doesn't count yeast cells at all. Instead, it measures the metabolic activity of the yeast cells in the sample. "There's a reason for that," he explains. "We think that this idea of counting cells and using a viability stain to classify the cells that you count as being either dead or alive is a limiting type of approach. We know from biology that cells are not just alive or dead. There's a whole scale of ‘how alive are they?' And that's what you can't see with something binary like a viability stain. What we try to do is fill in that in-between space." 
 
 One of the benefits of looking through a microscope is that the user can evaluate overall health of the yeast cells, but Bradley says YAM can also detect stressed cells through a measured reduction in activity. "I would even argue that if your cells are stressed and you can't see it, and you don't know it, we would probably pick it up because we have a quantitative, non-subjective measurement that is a lot more in-depth than just ‘what does the cell look like?' It really tells you what the cell is doing on the inside of the cell, where it actually does all of the work."
 
 Cost of the YAM system varies depending on plant size, of course. Nalco estimates that a 100 MMgy plant would spend approximately $2,000 per month for reagents. Nalco provides the equipment to the plant at no cost, provided the plant purchases at least $1,300 of reagents per month. The equipment is a plug-and-play system, so total installation time is less than one hour and staff training can be completed in less than two hours, according to Bradley.
 
 Cellometer	
 Instrument developer Nexcelom Bioscience LLC gears most of its equipment toward the life sciences industry, mainly in the areas of cancer research and drug discovery. But President and CEO Peter Li says the company began receiving inquiries from people in the brewery/winery/biofuel industries regarding cell counting and yeast viability a few years ago and decided to explore developing something useful to those industries. Developers soon discovered that everyone's yeast samples were very different, with corn mash samples being the most complex. "People asked if we could do it and, in the beginning, we couldn't," Li says. As a result of continued interest from customers and hands-on research conducted with ethanol plant and brewery samples, Nexcelom invented a special application for the Cellometer, which Li says provides reliable, consistent data from samples containing high amounts of debris, which is a typical characteristic of corn mash samples.
 
 The Cellometer functions basically as a digitized microscope. It is an automated cell counting system that uses software to view sample images just as a person would. A technician places a fermentation sample into a disposable counting chamber and loads it into the Cellometer, where the instrument captures an image, analyzes the data and creates concentration and viability results. Depending on the complexity of the cell sample, a reagent may need to be added to help the software identify live and dead cells. The entire process is completed in less than a minute according to Li, compared to an average time of 10 to 15 minutes for a microscopic count.
 
 Li suggests the Cellometer would be a useful tool for producers who have microscopes but "are looking for a better solution." Because the software presents an image of the cell sample on a computer screen, the producer retains the ability to evaluate the cell sample with a trained eye, unlike other automated counters. "The user will always have the ability to interact and understand what the measurement results mean to them," he says. "It's different than if you use optical density, for instance, where you will never see the cells. In this case, you can see the cells, the uniformity of size, cells that have buds versus no buds, things like that."

 
 Nexcelom's equipment package varies widely in price depending on the determined complexity of a customer's samples. Instrumentation costs, including software and a computer, range from $5,000 to $27,000 for the most complex sample analysis requirements. The reagent cost is relatively low at less than $1 per sample.
 
 Another benefit of automated systems, according to both Li and Bradley, is their ability to record and store data. "If you're doing a measurement, I think it's important to get consistent data and have a good quality control record, and this will certainly do that," Li says. 
 
 "We thought data management was really lacking around the current practices of yeast handling," Bradley says. "There were people keeping notes on pieces of paper and sometimes those notes were getting transferred to a spreadsheet at the end of the month, but it was highly variable and you never knew what was going to happen. The biggest concern we had was that even if there was some attempt at data management, there was no attempt to actually proactively use that data during the process. We put a lot of focus on that while we were developing this product. We wanted it to be able to deliver the information real-time and to do it in a standard way."
 
 The Best of Both Worlds
 Chris Richards, global sales manager for Lallemand Ethanol Technology, says nine out of 10 plants his company works with still use a microscope to evaluate yeast activity. He sees advantages and disadvantages to both manual and automated methods and says the decision to use one method over another really depends on each particular plant's needs and staff. Microscopes are at a disadvantage in that it takes more time to complete a count and the accuracy of the count relies on the skill of the person looking through the scope. A skilled, experienced lab worker, however, may be able to detect certain anomalies when viewing cell samples that a machine could miss. And microscopes are very cheap. "The manual count is a bit of time and maybe 10 cents for the stain," he says. "If somebody has a well-trained team and they've got the time to do this, the manual cell counts are the most cost effective."
 
 Machines, on the other hand, offer reliable, consistent measurements and produce results faster than a microscope method. Any automatic device is more costly to acquire than a microscope, but with some creative thought, plant managers can further utilize the equipment when making process control decisions or trouble shooting when optimizing fermentation.
 
 "To be honest, the best solution is a blend of both worlds," Richards says. "As a plant manager, I would never want to lose that human interaction because it's always good to have someone looking at the yeast. If you don't look at yeast on a routine basis, when you do have a problem and you start looking at the yeast you don't know what you're looking at." One course of action could be to conduct both manual and automatic tests on key parameters and run automated tests for the remaining items. "That gives you somebody looking at the cells each fermenter and it also gives you a manual calibration check against the machine," he says.
 
 In late August, Illinois River Energy had just begun testing Nalco's YAM equipment at its 100 MMgy plant in Rochelle, Ill. Lab staff used a microscope to count yeast prior to testing YAM's automated equipment, and quality assurance lead Stephanie Brainard says they are interested in evaluating what an automated system might be able to provide in addition to a simple yeast count. "A yeast count is pretty cut and dry," she says. "It's either alive or dead or budding. This tells you the activity level of the yeast and is a pretty simple method." If comprehensive data can be gained that wouldn't otherwise be attained, Brainard believes the investment would be worth the price. "If it gives us a benefit and lets us see more of what's going on with our fermentation, I would say it's worth it," she says.
 

 Validation
 The National Corn-to-Ethanol Research Center trains plant employees for all aspects of ethanol production, including counting yeast cells. Sabrina Trupia, assistant director of biological research, says there's a definite learning curve when it comes to counting yeast and even when one becomes familiar with the process, there remains a large opportunity for error. "We currently in the lab have a very skilled staff, and they have spent many long hours perfecting their craft," she says. "In an ethanol plant, you maybe can't have people that are immediately that skilled at cell counting, so the counting method with a microscope is time-consuming and requires a lot of practice. We started looking at other ways and we know the brewing industry uses other ways of counting that are automated. Automated cell counters exist for bioscience. But basically, the problem in the ethanol industry is that we count cells in a medium that has its own chunks of other things. You have to recognize what's yeast and what are other things."
 
 The NCERC began a research project in August to validate automatic counting methods, beginning with Nexcelom's Cellometer. In late August, Trupia told EPM the validation process was still underway but that early results were "really good." NCERC lab staffers enjoyed using the machine and she found it was becoming increasingly difficult to enforce manual cell counting in addition to instrumentation evaluations, a signal that the equipment was easily accepted by the users.
 
 For all the differences—cost, subjectivity, ease and speed of use—the choice between a microscope and an automated system really comes down to the lab staff's ability to evaluate cell samples and/or the desire for comprehensive data. Accuracy is key. If a plant employs experienced lab staff who are skilled at counting yeast through a microscope and expect to stay employed at the facility indefinitely, then an automated system may not be worth the price. But, if accuracy is an area that could be improved within the lab, the initial investment required to purchase an automated system may pay for itself many times over in the long run. "If you don't have an accurate idea, you might end up making a decision that is expensive, wrong or detrimental," Trupia says. "The yeast is what makes it all happen, so it would be nice to know what it's doing at any given time. It's expensive to add yeast because you didn't count correctly. Maybe you didn't need to, or maybe there's a problem in the nutrients that need to be added, and so on. It's like any other mistake—the bottom line is affected." EP
 
 Kris Bevill is an associate editor at Ethanol Producer Magazine. Reach her at <a href="mailto:kbevill@bbiinternational.com">kbevill@bbiinternational.com</a> or (701) 850-2553.

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Nalco Co.'s Yeast Activity Monitor measures the metabolic activity of yeast cells. PHOTO: NALCO CO

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Nexcelom Bioscience's Cellometer allows users to automatically count yeast and view images of the cell sample at the same time. PHOTO: NEXCELOM BIOSCIENCE

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Microscopes have long been the tool for counting yeast cells in fermentation tank samples. Automated yeast monitoring may soon change that.

Keeping an Eye On Yeast

As summer faded to a close, the ethanol industry continued to grow and develop. In late July and early August, several big-name companies made some feel-good announcements. Notably, Archer Daniels Midland Co., Green Plains Renewable Energy Inc. and The Andersons Inc. all reported increased income. Other news announced during this time included technology upgrades, the purchase of an idled plant and plans to build an ethanol plant in Germany. 
 
 ADM	
 ADM reported increased earnings in the fourth-quarter and for the fiscal year, which ended June 30. Compared to the previous year, the company saw an increase of $246 million in net earnings and an increase of $786 million in segmented operating profits. The fourth-quarter net earnings increased from $388 million to $446 million and segment operating profit increased from $591 million to $799 million during the [overkill/what other kind of period was there in 2009?] time period in 2009. The company's profit increased in the corn and oilseeds processing and agricultural services segments. Corn processing came out on top, with a $151 million increase in profit, specifically due to stronger bioproduct results, the company said. 
 
 GPRE

 GPRE, the fourth largest U.S. ethanol producer, also reported good financial news. For second-quarter 2010 the company had net income of $8.7 million, or 27 cents per diluted share. Those numbers were up considerably from $600,000, or 3 cents per diluted share, from the same period in 2009. 
 
 The company also announced plans for technology upgrades. On July 20, GPRE said it would move forward on a $4.5 million expansion to sequester CO2 using a BioProcess Algae Grower Harvester. Testing at the 65 MMgy GPRE ethanol plant in Shenandoah, Iowa, will scale up to see if the technology will prove out for industrial use, said Jim Stark, vice president of investor and media relations. A few days after the algae project announcement, the company said it plans to install corn oil extraction technology at all six of its plants at a total cost of $18 million, with the projects expected to be completed by the end of first-quarter 2011. 
 
 The Andersons Inc. 
 The company reported in early August that its grain and ethanol group set records. In the first six months of this year operating income was $40.3 million and $14.7 million in 2009. The group's operating income was $19.6 million in the second quarter, significantly higher than its result of $8.9 million one year earlier. The grain business did well due to increased space income, the company said, and the ethanol business benefited from a large portion of ethanol sales being contracted previously, when margins were high. 
 
 Aventine Renewable Energy Holdings Inc.
 In mid-August, Aventine completed the acquisition of the Riverland Biofuels ethanol plant in Canton, Ill., for a purchase price of $16.5 million. "This is an exciting opportunity to acquire a 38 million gallon facility at a favorable price," said Aventine CEO Tom Manuel in a press release. "When operational, we will leverage the proximity of the Canton facility to our Pekin, Ill., facility to gain marketing and operational synergies."
 
 The company has not specifically said when and how the plant would be made operational, however. The plant has had a rocky history, starting out as a farmer co-op that went bankrupt in 2007 and produced ethanol only intermittently as Riverland Biofuels between 2008 and March 2010. The plant shut down this spring after an Illinois Environmental Protection Agency investigation into alleged discharges into nearby lakes.
 
 Range Fuels Inc.
 Cellulosic ethanol producer Range Fuels is one step closer to producing cellulosic ethanol at its Soperton, Ga., plant. The company announced Aug. 17 that it had completed an initial phase of production by producing cellulosic methanol, which is expected to be followed by ethanol production in the third quarter. "The reason for starting up on methanol and then following with ethanol production is that the methanol catalyst is not as costly," David Aldous, Range Fuels' president and CEO told EPM.

 
 Construction to expand the plant to 60 MMgy of cellulosic biofuels is expected to begin next summer. The plant is permitted to produce a total of 100 MMgy of methanol and ethanol. 
 
 Süd-Chemie AG
 The Munich-based specialty chemical company announced in late July that it would build a cellulosic ethanol demonstration plant in Germany. The company plans to produce up to 2,000 tons of ethanol from agricultural waste such as cereal straw by the end of 2011. The $36 million project will be built near the new Bavarian BioCampus in Straubing. Süd-Chemie has been testing its trademarked process in a pilot plant since the beginning of 2009. "By launching construction of this demonstration plant for our so-called [trademarked] sunliquid technology, we continue to pursue our strategy of developing to market maturity sustainable manufacturing processes for climate-friendly biofuels and chemicals, based on leading expertise in the fields of catalysis, biocatalysis and process engineering," said Günter von Au, managing board chairman.

Range Fuels has begun producing methanol at its Soperton, Ga., facility, and expects to start ethanol production in the third quarter. PHOTO: RANGE FUELS 

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Plant updates: Increased earnings, acquisition, startup

In June, the California Energy Commission began accepting applications for acceptance into its Ethanol Producers Incentive Program (CEPIP), the first state incentives ever offered by California to ethanol producers. In August, the CEC said it had approved three producers and four facilities to participate in the program, but it's unlikely that all of the approved applicants will ever qualify to actually receive funds from the program.
 
 CEPIP is a unique incentive program, according to CEC spokesman Rob Schlichting. "There are other states that have incentive programs, but they pretty much just give money to producers to make ethanol in their state," he said. "Ours depends on the market and, depending on the crush spread, ethanol producers could get payments from the state or, if the market is really healthy, those same people would be required to return money to the state." In order to determine the ethanol crush spread, the CEC takes the near month Chicago Board of Trade corn price divided by 2.74, and subtracts that number from the Los Angeles Oil Price Information Service ethanol price. If the monthly average is less than 55 cents per gallon, eligible producers will receive an incentive equal to the difference between 55 cents and the average crush spread for the month times the number of gallons produced, up to 25 cents per gallon. The total amount of incentives allowed for each facility is capped at $3 million per year. During months that the crush spread is greater than $1 per gallon, participating producers will be required to pay back incentives at the amount the average crush spread is above $1 per gallon for each gallon of ethanol produced, up to 20 cents per gallon.
 
 In order to qualify to participate in the program, corn ethanol facilities must be located in California and have an operating capacity of at least 10 MMgy. "And here's the tough part: you have to be operating," Schlichting said. There are four companies with facilities in California that meet the first two requirements for program participation, but Schlichting said only one company—Calgren Renewable Fuels LLC—is currently producing ethanol. The company operates a 52 MMgy plant in Pixley and will be the only eligible facility able to receive payments when the program begins.
 
 Matt Schmitt, founder and developer of Calgren, said CEPIP fits well with California's mission to fund projects that promote renewable and lower carbon alternative fuels through AB 118, which has a budget of approximately $100 million annually for five years. He stressed that money received through the program is not a straight subsidy, and must be paid back to the state when ethanol margins are favorable. Still, every bit of support helps, he said, even when it's a little later than some might have hoped. "The state of California has not contributed a penny to the development of any ethanol plants in the state," he said. "A lot of plants around the country have received state and local funding. When you look at the amount of money California is allocating for these four plants, it's small compared to what we've seen in other states."
 
 California's lack of funding for ethanol to this point coincides with the technology options for ethanol production. The state has consistently favored other feedstocks and renewable fuels over corn-based ethanol and one of the requirements of CEPIP is that producers meet specific deadlines to either transition away from corn or implement technologies that will lower the facility's carbon footprint. Specifically, according to Schmitt, plants must either lower their carbon footprints by eight points from the state's Air Resources Board boiler plate rating of 80 gCO2e/MJ or replace 20 percent of corn feedstock with cellulose or waste sugar/starch-based material. At six months, producers must submit a plan to the CEC outlining their strategy to reduce the plant's footprint. Within 12 months, a timeline for those changes must be submitted, along with estimated costs of changes. At two years, permit applications must be filed for retrofits and, within four years of the start of participation in CEPIP, alterations must be complete.
 Schmitt said the CEPIP's timeline should be an achievable goal for Calgren. Prior to being accepted for CEPIP funding, the company had already taken action to lower the plant's carbon footprint and he expects several of those features will be applicable to the program. The plant produces corn oil, which lowers the carbon rating, and utilizes cogeneration to provide heat and electricity to the facility and eliminate any need for power from the grid. Schmitt said the company is also exploring the use of biogas to replace natural gas demand at the cogeneration plant, which would significantly lower the plant's carbon rating. Other feedstocks are also being considered, but not as aggressively.
 

 As for the other California ethanol plants that have gained acceptance into the program, none are currently operating and therefore will not be eligible to receive funds unless they resume operations. Pacific Ethanol Inc.'s 60 MMgy facility in Stockton and its 40 MMgy plant in Madera received approval to participate, as did AE Advanced Fuels Keyes/Cilion Inc. for its 55 MMgy plant in Keyes. The only other California ethanol producer with a facility large enough to meet the program's qualification requirements is AltraBiofuels Inc. It has a 31.5 MMgy facility in Goshen, but Schlichting said the company did not apply for the program. That plant is also not operating.
 
 One of the goals of CEPIP is to increase statewide production of biofuels, but with so many of California companies in financial distress, can the program be effective in its goal if only currently operating producers are allowed to participate? Schmitt thinks so. "If you're talking to investors or lenders to restart these plants, it makes an investment more attractive because you know you'll have some support down the road," he said. "These payments won't make or break anyone's operation. If you have a well-running plant, ultimately we all survive or don't survive on the ethanol-to-corn spread."

Of the five existing corn-based ethanol plants in California, only Calgren Renewable Fuels LLC is known to be operating and able to participate in the state's new funding opportunity.

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California incentivizes ethanol, just 1 producer to participate

In their hunt for captive ethanol supplies, petroleum refiners have been pursuing a steadily increasing role in the ethanol production industry. The latest refiner-turned-ethanol producer is Flint Hills Resources LP, a subsidiary of Koch Industries Inc., which agreed to acquire two Hawkeye Growth LLC facilities in August. Flint Hills said in a statement to EPM that it will continue to explore opportunities within new and emerging markets, including renewable fuels. The refining and chemical production company beat out dozens of interested parties in a "highly competitive" private auction for the 115 MMgy facilities located in Menlo and Shell Rock, Iowa, according to Scott Chabina, associate at Carl Marks Advisory Group LLC. Carl Marks represented the secured lenders in the Hawkeye sale and has been involved in numerous ethanol plant auctions and restructurings over the past few years, including several VeraSun Energy Corp. properties which were eventually acquired by refiner Valero Energy Corp.'s renewable fuels division. 
 
 Chabina said he believes there remains significant interest from refiners seeking to vertically integrate their operations and expects more of these types of players to step in to acquire ethanol plants in the future. "Refiners have already demonstrated a meaningful interest in the ethanol industry and I believe there remain a number of additional opportunities given their appetite," he said. "Refiners have been the consolidators since the VeraSun auction."
 
 Valero Renewable Fuels LLC was the first refiner to enter the ethanol industry when it purchased seven VeraSun plants through a bankruptcy auction. In the two years since the initial purchases, Valero acquired three more ethanol plants in locations scattered throughout the Midwest and now controls more than 1 billion gallons of the industry's annual capacity. Valero is also working on next-generation biofuels projects, including cellulosic ethanol and algae-based biofuels.
 
 The company continues to explore other ethanol acquisitions, according to Valero media relations director Bill Day, but is "very particular" as to which ethanol plants it purchases. "We haven't [recently] found any sites that meet the criteria we would require," he said. The VeraSun plants were all relatively new facilities with production capacities of at least 100 MMgy, excellent rail access, steady supplies of corn complete with existing supply contracts, and livestock producers nearby willing to purchase the plants' distillers grains, he said, adding that the other three Valero acquisitions had similar characteristics. 
 Murphy Oil Corp. was another refiner to snatch up a bankrupt VeraSun facility. The company purchased the 120 MMgy plant near Hankinson, N.D., from VeraSun creditors last October for $92 million and immediately began operations at the facility. Hankinson Renewable Energy LLC provides Murphy Oil with approximately one-quarter of its total retail ethanol requirements, according to company treasurer Mindy West. While the Hankinson plant serves an important role in the company's retail network, Murphy Oil still has to purchase three-quarters of its ethanol from outside sources so, according to West, there's definitely room for growth. "We obviously have room to do more when the right opportunity comes along," she said. "We've made no secret about the fact that we might expand in that business." Murphy Oil announced in August that it would be leaving the refining industry to focus on its upstream and retail businesses, of which West maintained that ethanol would continue to play a vital role for the company.
 
 In September, Murphy Oil had reportedly taken steps to purchase the former Panda Ethanol Inc. plant near Hereford, Texas. The 105 MMgy Panda Hereford Ethanol LP plant was never fully operational, reportedly due to faulty construction, and the company filed for bankruptcy in January 2009. In April, a federal bankruptcy court approved the sale of the plant to its lead creditor, Societe Generale, for $25 million in credit.
 
 Northeast U.S. refiner Sunoco Inc. recently restarted the former Northeast Biofuels LLC plant, which it purchased last year through a bankruptcy auction for a mere $8.5 million. Substantial retrofits were required to bring the plant, now known as Sunoco Fulton Ethanol Facility, up to grade and the company said it spent approximately $25 million to restart the plant. The 85 MMgy facility began producing ethanol in June. For now, all ethanol produced at the plant will be used to supply Sunoco's blending needs. The plant will supply up to 20 percent of Sunoco's demand for ethanol, which leaves plenty of room for more acquisitions. Sunoco has publicly stated that it will continue to consider additional investments in ethanol as well as advanced biofuels.

Refiners display increasing interest in ethanol

It's been years in the making, but Canada's first national renewable fuels standard (RFS) is finally in place. The mandate to require refiners to blend 5 percent renewable fuels into their gasoline supplies went into effect on Sept. 1 and was met with enthusiastic optimism from members of the nation's ethanol industry, according to Canadian Renewable Fuels Association President Gordon Quaiattini. "This has been a long time coming and there've been some dedicated folks in the ethanol market in Canada who have waited a long time to see this national mandate come into force," he said. "We're no longer an industry in its infancy. I think it's fair to say that we've achieved an adolescent stage and there's more to come."
 
 The initial RFS allows refiners to use fuels derived from any of the rule's defined fuel pathways to comply with the 5 percent blending mandate. Ethanol, biodiesel and petroleum-based biofuels all qualify as renewable fuels, so if an oil company is blending biodiesel into its supply, for example, that amount can be counted toward the company's overall requirements. Quaiattini said ethanol is expected to be the prominent renewable fuel used, however. "Given the viability of what's in the marketplace, we fully expect that the vast majority of the renewable fuel content will be ethanol," he added. 
 

 While biodiesel and other renewable fuels can be used to meet the RFS for the current time, the final rule contains an amendment for a 2 percent renewable diesel mandate to go into effect in 2011. When that happens, refiners will no longer be allowed to use biodiesel and other renewable diesel fuels to meet the 5 percent RFS.
 
 Canada's total gas pool is approximately 40 billion liters per year (11 billion gallons), so the 5 percent mandate will require 2 billion liters (528 million gallons) of renewable fuel to be blended into the nation's fuel. According to Quaiattini, the Canadian ethanol industry currently produces a total of 1.7 billion liters of fuel. This puts Canadian ethanol producers in the enviable position of needing to build out its supply to meet demand. In early September, Quaiattini said the industry was awaiting final decisions from Natural Resources Canada on its biofuels program, which is the source of incentives for new biofuels production capacity, and anticipated that ethanol projects would be chosen for financial support in order to bring the industry capacity up to 2 billion liters.
 
 A unique aspect of Canada's RFS, according to Quaiattini, is that it is an "open mandate." This allows refiners to blend more ethanol in some areas and still be compliant with the RFS as long as the company's average amount blended is at least 5 percent. While this will likely initially be illustrated in reports of over blending in some areas and very little blending in remote areas, Quaiattini expects it to quickly level out. "We will see ethanol in all regions of the country now because of the national mandate," he said. The decision to allow refiners some flexibility in where they blend renewable fuels into their supply was a nod to the geographic complexity of a nation that has a very large refining industry. "We recognize that, in the end, these are our customers," Quaiattini said. "So we've worked cooperatively with the oil industry and government to insure that as we bring renewable fuels into the Canadian market through a national mandate, it recognizes how the industry works here and ensures the best transition possible in terms of ensuring that as much ethanol can find its way into the marketplace."
 
 Of the provinces that already have blending requirements, Manitoba has the highest mandate and requires all gasoline to include 8.5 percent renewable fuels. Saskatchewan has a 7.5 RFS, while Ontario and British Columbia each have 5 percent mandates. Alberta will implement a 5 percent RFS beginning next year. The national mandate doesn't override these requirements.
 
 Looking ahead, the CRFA has already begun talks with industry members to discuss the industry's logical growth pattern and what needs to be done to continue to increase demand for their products. There is "no question" that cellulosic ethanol will play a role in future renewable fuels mandates, according to Quaiattini. But whatever steps are taken to include cellulosic biofuels in a Canadian RFS, they are likely to be as measured as the initial move was to establish a national mandate. "We are absolutely looking at not only having commercialization happen here but, different from the U.S. experience, we are quite keen to talk to the government about an appropriate regulatory mechanism that ensures there is a market for that fuel," he said. "We are looking at insuring that there is both a linkage between the government's existing next-generation biofuels fund and timing it to what would be an appropriate mandate to have that fuel actually used."

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Canada implements national RFS, allows open mandate for blenders

Minnesota increased the amount of E85 used in state vehicles by more than 86,000 gallons in the first two quarters of 2010 compared to the same time period last year, according to the American Lung Association of Minnesota. State agencies used 437,063 gallons of E85 to fuel the approximate 2,500 flex-fuel vehicles in their fleets during the first six months of the year. By comparison, approximately 2.2 million gallons of gasoline were used in state vehicles over the same time period, representing an 83.4 percent share of the fuel used in the state's fleets.

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Minnesota increases ethanol usage in state vehicles

After a nearly 60 percent growth in 2008, European ethanol production increased by 31 percent in 2009. Total EU production in 2009 was an estimated 3.7 billion liters up from 2.8 billion liters the previous year. 
 
 The biggest producer was France with an annual output in 2009 of 1 billion liters, an increase of 25 percent compared to 2008. The second largest producing country was Germany, which increased its production by 32 percent to 750 million liters. Spain was in third place with 465 million liters, a 46 percent increase from 2008. In six out of 18 producing member states the production declined while the rest either increased or kept production steady.

EU ethanol production expands again

Another record (or near record) corn crop will be binned this fall, with the USDA projecting a record 165.0 bushels per acre in its August report, 0.3 bushels above last year's record. That will total 255 million bushels more than the 2009 crop for a record 13.365 billion bushels. Domestic use and exports are keeping supplies tight, however, and pre-harvest jitters indicate the market is concerned about reports of smaller-than-expected yields as the early harvest begins. With smaller stocks of old crop corn, the supply  of corn for the 2010-'11 marketing year is expected to be only 11 million bushels larger than last year's supply. USDA forecasts consumption of U.S. corn during the 2010-'11 marketing year at a record 13.49 billion bushels, led by a 200 million bushel increase in corn used for ethanol production and a 75 million bushel increase in exports. Year-ending corn stocks for the 2010-'11  marketing year are projected at a four-year low of 1.312 billion bushels, which at 9.7 percent of projected consumption, would be the lowest ratio in seven years.

Corn crop likely to set another record

Isolux Corsan has signed a contract with the Colombian company Bioenergy for the construction of a $140 million industrial complex. The plant will produce ethanol from sugar cane with a processing capacity of 2.1 tons of cane per year, a 40 MW co-generation plant using bagasse, or sugar cane waste, and other facilities for handling vinasse, the residue left in a still after the distillation process. The industrial complex will be built in the Meta Department of Colombia, an area traditionally occupied by cattle ranches which is now converting to agricultural use, including sugar cane.

Columbian ethanol plant in the works

Isobutanol technology developer Gevo Inc. announced in August that it had reached an agreement to purchase the 22 MMgy Agri-Energy LLC corn ethanol plant near Luverne, Minn., and expected the sale to be final by the end of October. Upon completion of the sale, Gevo intends to immediately begin retrofitting the plant to produce isobutanol using its integrated fermentation technology. Agri-Energy founding member and co-op coordinator David Kolsrud said the move to produce isobutanol is in line with the company's devotion to advancing the technology and best practices of the ethanol industry. "We see biobutanol as the next logical step in the industry's development," he said. "We believe isobutanol can be sold into many markets and has product attributes that make it a compelling product for current ethanol producers." 

 
 One week after announcing the planned acquisition of Agri-Energy, Gevo filed an initial public offering with the U.S. Securities and Exchange Commission in an effort to raise $150 million to fund not only the Agri-Energy purchase, but future ethanol acquisitions as well. Gevo said it had no other planned ethanol plant acquisitions at the time of the filing, but was in discussions with several plant owners representing 1.8 billion gallons of ethanol capacity.
 
 Gevo is expected to pay $20.7 million for Agri-Energy, plus raise $3.7 million for working capital. Gevo will invest an additional $22 million to retrofit the facility for isobutanol production.

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Gevo goes public to fund ethanol plant purchases

Sept. 7—Ethanol futures prices soared higher following corn futures prices shooting up like a rocket ship at summer's end. The corn futures markets are caught between uncertain production levels following the extremely wet growing season in portions of the Corn Belt, and a tight world supply. The focus on Russia's tight wheat supply has driven additional speculation, moving corn futures from a low this year of $3.25 per bushel on June 29 to the December corn futures closing at $4.64 in early September. 
 
 The surge in corn prices carried through to the ethanol market as traders focused on corn more than any other market factor when establishing ethanol prices. The front month ethanol futures market moved from a yearly low of $1.467 per gallon on June 29 to $1.969 per gallon on Sept. 3; a 50 cent rally. This move also surpassed the RBOB gasoline futures price which slumped from summer highs at the end of August, falling 15 cents per gallon in the same period of time.
 
 With ethanol and RBOB gasoline prices moving opposite directions, there may additional strength in ethanol markets through the last four months of the year. Even though ethanol prices will likely find strong support following corn, RBOB gasoline futures seem to be oversold and primed for a rebound. This could help to spark widespread investment buying in both the energy and ethanol markets over the next several weeks and months.

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Ethanol price surge continues

>The executive committee of Renewable Products Marketing Group LLC announced that Doug Punke has accepted the position of CEO. Punke is charged with creating and executing RPMG's strategic growth plan, which includes adding to both its production and downstream customer base. RPMG is a U.S. ethanol and distillers grains marketer, currently marketing 900 million gallons per year of ethanol. A 27-year veteran of Cargill Inc., Punke's background includes commodity trading, grain processing and energy risk management. Most recently, he was vice president of Cargill's Energy Risk Management Solutions group.

 
 >BlueFire Renewables Inc., which until a name change in mid-August was known as BlueFire Ethanol Fuels Inc., has appointed Roger Petersen as a new board member. Petersen has more than 20 years of experience dealing with corporate mergers and acquisitions, development, finance, operations and engineering/construction. He served as president of PPL Global LLC, a company he helped create in 1995, and most recently served as president and CEO of Montana Horizons LLC, a company he founded to support utility mergers and acquisitions and energy development projects. BlueFire is currently in the process of developing two cellulosic ethanol facilities in Lancaster, Calif., and Fulton, Miss. 
 
 >Evolution Markets Inc. has expanded its coverage of the U.S. renewable fuels trading markets and has added three employees. John Dall will serve as the director of the group's commodity brokerage operations and Tom Solon and Jonathan Auerbach will focus on facilitating structured physical trades of ethanol and biodiesel. Dall, a partner in the company, will lead the biofuels commodity brokerage desk. Solon will lead Evolution's efforts to build and expand market opportunities for structured transactions and physical biofuels markets. Auerbach's focus will be to develop and build the firm's physical biodiesel structured transaction business. 

 
 >Fourteen ethanol plants and two technology/manufacturing companies named in a patent infringement lawsuit will have their cases tried in the Southern District of Indiana after a U.S. Judicial Panel on Multidistrict Litigation ruled that the cases will be consolidated. GreenShift Corp. and its subsidiary, GS CleanTech Corp., are suing ethanol plants in Illinois, Indiana, Iowa, Minnesota, Wisconsin and North Dakota for allegedly infringing on its patented corn oil extraction technology. Also being sued are ICM Inc. and GEA Westfalia Separator Inc. GreenShift announced Aug. 17 that it has settled the lawsuit with one ethanol plant, Center Ethanol LLC of Sauget, Ill. The company entered into a license agreement for use of GreenShift's patented corn oil extraction process. 
 
 >Start-up company Xylogenics Inc. and Lallemand Ethanol Technology have signed an exclusive agreement to develop and commercialize yeasts for the first-generation ethanol industry. Xylogenics, with its knowledge in genetically enhanced ethanol-producing yeasts, will work in cooperation with Lallemand to engineer a new class of industrial ethanol yeast strains. The goal will be to increase fermentation yield and capacity and reduce fermentation costs. Lallemand, a U.S. business unit of the Canadian yeast and bacteria producer Lallemand Inc., will be responsible for process development, manufacturing and commercialization of the new yeast. Xylogenics will receive patent license fees and royalty payments, under the terms of the agreement. 
 
 >The Renewable Fuels Association welcomed Randy Klein as its new director of membership. Klein joined RFA from the Nebraska Corn Board where he served as director of market development. He will be based out of the RFA's Omaha office."We are pleased to have someone of Randy's experience and passion for ethanol as part of our team," said RFA President and CEO Bob Dinneen. "Randy will hit the ground running as the RFA's representative to the dozens of ethanol producers all across the nation." 

 
 >Pursuit Dynamics PLC has contracted to install and validate its Ethanol Reactor System at the 44 MMgy Mid America Bio Energy & Commodities LLC ethanol plant in Madrid, Neb. Installments at Marquis Energy LLV and Pacific Ethanol Inc's Boardman plant, which were announced this spring, are progressing well with deployment expected in October, according to the company. All three plants will run the ERS for up to 10 weeks to quantify the operational benefits in a commercial environment. Pursuit also announced Bill Schafer and Cary Veith will work jointly as general managers of the company's biofuels business. Schafer brings more than 30 years of energy industry experience including his most recent position as a founder and officer of Range Fuels Inc. Veith has more than 30 years experience in innovations, most recently having led the research and development department at Myriant Technologies LLC, a biotech developer and manufacturer of renewable biochemicals.
 
 >ADF Engineering Inc., headquartered in Miamisburg, Ohio, has hired Brian O'Toole as a process engineer. O'Toole is a recent graduate of the University of Dayton with a bachelor's degree in chemical engineering. With experience in research and process design, he will be focusing on energy conservation and process safety in the bioscience industry.
 

 >Dan Simon, co-founder and former executive vice president and chief operating officer of BioFuel Energy Corp., recently left the company to launch Elevant Advisors LLC, a consulting firm that targets the energy, technology, infrastructure development and manufacturing markets. Elevant specializes in capital raising activities, corporate strategy and development, buy and sell-side transactions, crisis management and operational management. Simon is president and CEO of the company.
 
 >Ethanol industry veteran Jeff Roskam, has been named founding CEO of the Kansas Alliance for Biorefining and Bioenergy. Formed last year through a $4.1 million grant from the Kansas Bioscience Authority's Centers of Innovation program, KABB will focus on resolving technical issues related to the production of biochemicals and biofuels, from harvesting feedstocks through the processing and marketing of organic chemicals. As Kansas' bioenergy center of innovation, KABB will also develop alternative fuels and chemicals and improve carbon capture. 
 
 Roskam's career in the ethanol industry spans two decades and includes positions at some of the most well-known companies, including what is now Poet LLC and the now defunct VeraSun Energy Corp. He also co-founded and served as CEO of CAP CO2 LLC, a CO2 enhanced oil recovery firm.
 
 >Poet LLC has appointed Mitch Krebs director of public policy for the company's public policy and corporate affairs group. Krebs formerly served as press secretary for S.D. Gov. Mike Rounds and as assistant vice president of media and community relations for Avera McKennan Hospital and University Health Center in Sioux Falls, S.D. In his position at Poet, Krebs will communicate with state legislators, industry groups and community leaders on initiatives that will increase the use of ethanol. 

 
 >U.S. Water Services has relocated its headquarters to St. Michael, Minn. The company's sales, marketing, engineering and equipment manufacturing staff moved into the new corporate facility in June. The facility also houses an expanded research and analytical laboratory as well as operations staff originally located in Cambridge, Minn.
 U.S. Water Services said the relocation was necessary in order to bring all of its operations, product development and support staff under one roof. The move also allows the engineering and equipment division opportunity for increased production capacity. 
 
 >The Merrick Consultancy, part of Merrick & Co., announced that Daniel Robinette has joined the group as a senior consultant, specializing in water, wastewater and energy. Robinette has more than 30 years of experience in these areas and has expertise in all aspects of water production and treatment, water properties and chemistry, according to the company. He is a member of the American Institute of Chemical Engineers and the National Association of Corrosion Engineers.
 
 The Merrick Consultancy serves the renewable, refining and utilities markets with management, technical and operations consulting services.

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Business and People

In a newly released internal IRS memorandum, the Internal Revenue Service denied a deduction for some (but not all) of the patronage dividends paid by an ethanol cooperative. This memorandum is notable for being the first time the IRS has opined on this issue in the ethanol industry.
 
 The memorandum released on Aug. 6 was written by the IRS in connection with an IRS audit of an ethanol cooperative. The cooperative in the audit is a non-exempt cooperative taxed under Subchapter T of the federal tax code. Accordingly, the cooperative is taxed as a corporation, but can claim a deduction for patronage dividends. 
 
 The cooperative and each of its members entered into a typical marketing agreement where members would be required to deliver a set number of bushels of corn each year to the cooperative. Because the committed bushels were insufficient to meet the production requirements of the ethanol plant, the cooperative purchased additional bushels from both members and nonmembers. On audit, the IRS denied deductions for dividends from earnings attributable to those additional bushels.
 
 IRS Position

 The IRS based its denial on two primary reasons. First, the IRS concluded that the cooperative's income from the additional bushels were not patronage sourced. This conclusion was based on the IRS interpreting "patronage source income" to require such income to result from transactions that the cooperative was obligated to enter into (among other requirements). The IRS noted that the cooperative was not obligated to buy corn other than pursuant to the marketing agreements. In other words, the IRS claimed that only the income attributable to corn purchased pursuant to the marketing agreements could be patronage sourced. (While the IRS' interpretation of the definition of patronage source income is debatable, the cooperative apparently conceded the point in the course of the audit). This IRS conclusion was fatal to the deductibility of these dividends, because federal statutes allow a cooperative to deduct only those distributions paid out of patronage-sourced income.
 
 Secondly, the IRS argued that the cooperative's distribution of earnings attributable to the additional bushels failed to meet the definition of a "patronage dividend." Federal statutes define a "patronage dividend" as a distribution which (among other requirements) is pursuant to an obligation of a cooperative to pay such amount. Moreover, this obligation to pay the distribution must be in existence prior to earning the amounts that is distributed. The IRS noted that while the cooperative's bylaws required that net income from patronage business be distributed at least annually, net income from nonpatronage business was distributable at the discretion of the board of directors. Although the relevance of this fact is debatable, the IRS held that this discretion was fatal to the deductibility of the distribution of earnings attributable to the additional bushels. 
 
 Interpreting the Memo
 It should be noted that this IRS memorandum is merely an internal communication released in redacted form under public disclosure laws, and not an official pronouncement of law. Nonetheless, the memorandum tells us how the IRS currently views the deductibility of patronage distribution. For an ethanol cooperative, this memorandum suggests the cooperative do the following to reduce the risk of problems in an IRS audit:
 >Corn Delivery Requirements: The IRS clearly stated that corn purchases by an ethanol cooperative other than pursuant to a marketing agreement cannot generate patronage source income, even if the corn is purchased from members. Thus, an ethanol cooperative should re-evaluate whether the corn delivery requirements are sufficient to satisfy the needs of the ethanol plant, and if not, consider raising the delivery requirements. 
 
 >Bylaws: The IRS clearly stated that if the bylaws give the board of directors discretion to declare dividends of patronage source income, then any such dividends may not be deductible. Thus, cooperatives should re-examine their bylaws to see whether an annual declaration of dividends is required (as compared to being merely permitted).
 
 Hamang Patel is a partner at Michael Best & Friedrich LLP. Reach him at (608) 283-2278 or <a href="mailto:hbpatel@michaelbest.com">hbpatel@michaelbest.com</a>. Craig Johnson is a member of the renewable energy, business and health care practice groups in the Madison office at Michael Best & Friedrich LLP. Reach him at (608) 257-3064 or <a href="mailto:cjjohnson@michaelbest.com">cjjohnson@michaelbest.com</a>.

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IRS Denies Patronage Dividend Deduction

As all EPM readers know there are several reasons governments promote biofuels. Depending on the location the argument may differ, but there is agreement everywhere that an important driver is a reduction in transport greenhouse gas (GHG) emissions. Within the EU, the environmental driver is certainly the most important, though it makes more sense to promote biofuels as an important and easy solution to reduce imports of crude oil. After all we are highly dependent on imports of fossil fuel at over 80 percent.
 

 For a number of years now many people around the world have been, and still are, looking into the environmental performance of biofuels. A lot of misinformation, often presented as scientific evidence, has been cited trying to convince legislators and society that producing biofuels costs more energy than petrol or diesel. Now we are in the midst of another fantasy: the debate on the carbon intensity of biofuels as a result of the so-called indirect land use changes. The next battle almost certainly will be on the use of water resources.
 
 In all these years of debate on the environmental performance of biofuels there has been relative silence around the question of how environmentally dangerous fossil fuels are. It is as if people simply accept that fossil fuels are bad for the environment and that not much can be done about it. Major oil spills as we have seen recently, or the fact that we rely more and more on non-conventional oil, do not lead to a perception that we need to make structural changes in our energy supply.
 
 As we all know, the environmental performance of biofuels is judged in terms of its GHG emission savings compared to the emissions of fossil fuels. In the relevant European laws, the default value of fossil fuel emissions has been set at 83.8 grams CO2 equivalent per megajule. It is not entirely clear, though, how this emission was calculated—very likely the result of a sort of black box operation, as there is no methodology mentioned in the law nor reference made to a source.
 
 Legislators realized that it was difficult to justify a very complex methodology for calculating emissions from biofuels whilst not having any methodology at all for fossil fuel. This omission was repaired in 2009 when an existing law on fuel specifications was amended to require fuel suppliers (both bio and fossil) to report life-cycle GHG emissions. By using actual average emissions from fossil fuels, a better comparator could then be established for biofuels.
 
 Within the European Commission the unit responsible for transport and ozone in the Climate Action department has worked over a year on a methodology for calculating fossil fuel emissions. Recently, this unit circulated a proposal to other commission departments. I was flabbergasted when I saw the document. It proposes biofuel producers inform national authorities what kind of feedstock they use, where it is coming from and what energy source is used for processing the raw material and, in case of sugar beet use, new GHG emission savings have to be set depending on the energy source—a straight blow to biofuel producers that already need to provide lots of information to certify the fuel they produce under a different law.
 
 It gets worse. For fossil fuel, the proposal provides two simple pathways with default (not actual) values for the emissions from crude to gasoline and crude to diesel, without specifying the crude source, which obviously will not result in higher emissions than that now in the law. The use of non-conventional oils is not factored in, as there are no emission data available. Overall, it is argued, actual values cannot be used as it is too difficult to obtain data. No wonder, if one knows that the oil industry was saying all the time that it is impossible to provide actual emission values and it would present an excessive administrative burden. Of course, the naïve civil servants have no reason to distrust the oil industry and would certainly not want to bring economic hardship upon them. Apparently the biofuel industry, in their view, is a mature and wealthy industry that would and could not object to more administrative burdens.
 
 The proposed implementation rules are being blocked by other commission services for the time being. Like us, they believe that this is the world upside down.
 
 Robert Vierhout is the secretary-general of eBIO, the European Bioethanol Fuel Association. Reach him at <a href="mailto:vierhout@ebio.org">vierhout@ebio.org</a>.

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The World Upside Down

If the polls are right, this November could see a tidal wave election that would swing control of Congress back to Republicans. Then again, these polls change almost daily. But what does remain the same in poll after poll is the concern most Americans have about the direction the country is going. Right or wrong, a majority of Americans are worried about their future, with much of this fretting caused by concerns over economic issues—always the top tier issue in polls.
 
 Other issues, however, also register on these polls. Concerns over national security, our oil addiction and the environment routinely show up as issues of importance to many voters. Not coincidentally, all are key issues that form the foundation for the continued efforts to expand America's renewable fuels industry.
 
 Let's break them down.
 
 Renewable fuels, and especially ethanol, are an enormous source of economic activity and opportunity in thousands of communities across the nation. American ethanol production alone is helping to support 400,000 jobs and providing billions of dollars of economic activity and new tax revenue. Many of the jobs directly associated with ethanol production are well-paying and provide employees with important benefits such as health insurance for their families and a sound retirement savings program.
 
 Simultaneously, using domestically produced renewable fuels reduces our trade deficits with oil-rich nations, far too many of which harbor hostile intentions toward the U.S. Using more than 10.5 billion gallons of ethanol last year alone reduced oil imports by 364 million barrels, enough savings to stop imports from Venezuela for 10 months. Displacing these oil barrels also helped improve our trade balance, saving more than $16 billion.
 
 Likewise, reducing the amount of money we spend on oil from hostile nations improves our national security. We spend $1 billion a day importing oil, with too high a percentage of that money going to nations that have interests contrary to ours. Too often, those dollars find their way to groups seeking to do Americans harm.
 

 On the environmental front, ethanol is unparalleled in its ability to reduce greenhouse gas emissions from vehicles. Compared to gasoline, ethanol reduces greenhouse gas emissions by nearly 60 percent. In 2009, these savings were the equivalent of removing 2.7 million cars from American roads. As new technologies are developed, these benefits will only grow.
 
 With ethanol the only widely available and viable alternative to gasoline, policy decisions on the future of the nation's renewable fuels are important. I am not one to advocate voting on a single issue, but as you weigh which candidates for federal, state and local office you will support, there are a couple of things to keep in mind:
 >Does this person share our industry's vision for America's energy future? 
 >Is the candidate willing to have open and honest discussions about American energy policy, including petroleum and other fossil fuels, in full context?
 >Does this candidate demonstrate the necessary fortitude to reject misinformation, fairly evaluate the facts, and make informed rather than politically expedient decisions?
 
 In Washington, people are fond of saying that elections have consequences. This is especially true against the current backdrop of Washington gridlock and voter anger. The votes that you cast have the potential to shape the future of American ethanol and energy policy for years to come. 
 
 As always, I trust the men and women who make up and support America's ethanol industry to make sound decisions and vote for candidates who reflect their views. That is what gives me confidence that issues from tax incentives to ethanol blending will be resolved in a manner that benefits the greatest number of people. 
 Happy voting!
 
 Bob Dinneen is president and CEO of the Renewable Fuels Association. Reach him at (202) 289-3835.

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Making Your Vote Count

News release posted Sept. 29, 2010
 
 Green Plains Renewable Energy Inc. announced Sept. 28 that it has entered into a definitive agreement to acquire Global Ethanol LLC. Global owns two operating ethanol plants which are located in Lakota, Iowa, and Riga, Mich., and have a combined annual production capacity of approximately 157 MMgy. The acquisition will increase Green Plains' capacity by 31 percent to approximately 657 MMgy. Once the transaction is closed, Green Plains will market and distribute more than one billion gallons of ethanol production on an annual basis.
 

 Green Plains estimates the total value of the transaction at approximately $169.2 million, including approximately $147.6 million for the ethanol production facilities and the balance in working capital. The definitive agreement provides that the proposed acquisition will be accomplished through a merger of a newly formed wholly-owned subsidiary of Green Plains with Global. Upon closing of the merger, the outstanding units of Global will be exchanged, in the aggregate, for 4,386,027 shares of restricted common stock of Green Plains, warrants to purchase 700,000 shares of restricted common stock of Green Plains and $20 million in cash. The total value of the transaction includes the assumption of approximately $98.7 million of outstanding debt. The warrants will not be transferable, except in certain limited circumstances, and will be exercisable for a period of three years from the closing date at a price of $14.00. The closing of the transaction, which is expected to occur during the fourth quarter of 2010, is subject to customary closing conditions and regulatory approvals.
 
 "This transaction demonstrates our ability to make acquisitions at attractive valuations utilizing a combination of our strong balance sheet and our stock, allowing us to meet the differing objectives of ethanol plant owners," stated Todd Becker, President and CEO of Green Plains Renewable Energy. "The addition of the Global plants enables us to lower our average cost of ethanol production assets and to achieve greater economies of scale in our marketing, risk management and back office operations. We believe this acquisition will be accretive to 2011 earnings. Consistent with our strategy to expand our operations throughout the ethanol value chain, we continue to seek out consolidation opportunities within each of our business segments," Becker concluded. 
 
 Green Plains Renewable Energy (Nasdaq: GPRE) is North America's fourth largest ethanol producer, operating a total of six ethanol plants in Indiana, Iowa, Nebraska and Tennessee with annual expected operating capacity totaling approximately 500 million gallons. Green Plains also markets and distributes ethanol for four third-party ethanol producers with annual expected operating capacity totaling approximately 360 million gallons. Green Plains owns 51 percent of Blendstar LLC, a biofuel terminal operator which operates nine blending or terminaling facilities with approximately 495 million gallons per year of total throughput capacity in seven states in the south central United States. Green Plains operates grain storage facilities and complementary agronomy and petroleum businesses in Iowa, southern Minnesota and western Tennessee.
 
 SOURCE: Green Plains Renewable Energy

GPRE to acquire Global Ethanol

Posted Oct. 13, 2010 
 
 Corn futures continue to rise and may just get to $6 a bushel. Corn prices rocketed up about 75 cents since close of business Oct. 7, following an Oct. 8 announcement from USDA that dramatically cut expected corn yields. 
 
 On the morning of the big announcement, corn was at $4.95, said Rob Esposito, the head of Latium Capital's ethanol and related products trading unit. By the end of the day Oct. 12, the price was $5.69 and still climbing. "I don't know if we'll see $6 a bushel corn but I would not be surprised," Esposito told EPM. 
 

 As is typical, ethanol prices tracked corn on Oct. 8 and Oct. 11. Generally, for every 3 cent price change in corn, ethanol prices move 1 cent, Esposito said. However, on Oct. 12 that rule of thumb didn't hold true and ethanol prices remained flat. "There has been some selling in ethanol so it hasn't kept up with corn," he said. "Ethanol is still a small enough market that if a couple of big sellers come in, it will keep the prices down, even with a corn rally." 
 
 The morning of Oct. 13 ethanol was at nearly a 6-cent premium to gasoline, down a bit from nearly a 9-cent premium Oct. 12, said Jerry Gidel of North America Risk Management Services Inc. November futures prices for reformulated gasoline was at $2.15 per gallon, compared to $2.21 for ethanol. 
 
 The high prices won't last forever, however, according to Esposito. "I think we'll stay at this level for the next month, and by the New Year we'll start seeing corn levels come off and, in turn, lower ethanol prices," Esposito said. 
 
 Although a record harvest had initially been predicted, the Oct. 8 USDA report lowered U.S. corn yields significantly. U.S. corn yield forecasts were cut to 155.8 bushels an acre, down from September's prediction of 162.5 bushels an acre. In the EU, coarse grain yields have been reduced by 15 percent to the smallest level in more than 10 years. In addition, world coarse grain stocks are expected to fall, with U.S. and EU stocks forecasted to drop nearly 50 percent, or 35 million tons. For U.S. corn stocks, that's a fall of 20 million tons, the lowest level in 14 years.

Lowered corn yields impact futures market

Posted Oct. 13, 2010
 
 The U.S. EPA issued what Assistant Administrator Gina McCarthy said is a step toward increasing U.S. renewable fuel use when it announced Oct. 13 that it has approved the use of E15 in vehicle models 2007 and newer. The agency denied the use of E15 in older vehicles as well as motorcycles, heavy-duty trucks and off-road vehicles and will issue a decision on model years 2001-'06 following the completion of U.S. DOE testing in November. The partial waiver approval came after nearly two years of extensive fuel testing following a petition for widespread E15 approval filed with the EPA by Growth Energy and a coalition of ethanol producers.
 
 Light-duty trucks and cars manufactured in years 2007 and newer represent approximately 20 percent of the total U.S. fleet and consume approximately one-third of the transportation fuel used in the U.S. There is "no question" the partial waiver has the potential to increase the use of renewable fuels, she said, but she admitted that the decision to make E15 available will be retailers', and there remain questions as to how eager retailers and fuel suppliers will be to add E15 to their fuel mix. "This decision was a step in the direction of allowing more renewable fuels into the market," she said. "It is by no means an assurance that that will happen quickly and that is by no means the EPA's job."
 
 According to McCarthy, the EPA was unable to approve E15 for model years 2001-'06 because it needs additional time to evaluate the DOE's fuel test results. No sufficient testing has been conducted on older model vehicles, she said, and therefore the EPA cannot approve the use of E15 in those vehicles. The EPA is required to entertain all waiver requests, however, and McCarthy stated that the partial approval "doesn't close the door to initial testing and waiver filing" for legacy vehicles.
 
 To coincide with the partial E15 approval, the EPA has proposed labeling requirements for E15 pumps which would clearly state that the fuel contains E15 and is to be used only in vehicles model years 2007 and newer. The EPA would also conduct quarterly surveys of retail stations to ensure that fuel tanks are properly labeled. McCarthy said the proposal also contains language to guide the EPA in management of blender pumps. Comments will be accepted for 60 days following the rule's publication in the Federal Register. For more information on the proposal, visit <a target="_blank" href="http://www.epa.gov/otaq/regs/fuels/additive/e15/index.htm" rel="external">www.epa.gov/otaq/regs/fuels/additive/e15/index.htm</a>.

EPA grants partial approval for E15 use

Posted Oct. 13, 2010

 
 A group consisting of industries historically opposed to corn ethanol production held a press conference Oct. 12 to reiterate its stance against ethanol subsidies, and corn ethanol in general. Representatives from food manufacturing groups, beef, pork and poultry producers and environmental activists took turns flinging accusations at the ethanol industry, blaming ethanol producers for everything from inflated grocery prices to global warming in an attempt to thwart rumored federal support to maintain ethanol subsidies.
 
 "Whether it's a blenders' tax credit or an ethanol producers' credit, it still will cost American tax payers billions of dollars each year," said J. Patrick Boyle, president and CEO of the American Meat Institute, adding that extending the Volumetric Ethanol Excise Tax Credit would prolong the "unfair support and protection" that ethanol has received for more than 30 years. 
 
 The history of financial support awarded to ethanol was mentioned several times during the press conference, but speakers made no mention of the long-term support that the petroleum industry has received. In fact, Steve Ellis, vice president of Taxpayers for Common Sense, a lobby group focused on eliminating subsidies, went so far as to say that the ethanol industry is addicted to subsidies and should "grow up and compete in the marketplace." His comments focused on Growth Energy's plan released earlier this year, which proposed to use blenders' credits monies for the build out of ethanol infrastructure. "Swapping out tax credits for infrastructure credits is like an alcoholic saying, ‘I'm going to give up booze' and simply switching to beer," Ellis said. 
 
 In an unprecedented move, several ethanol lobby groups joined together to release a statement responding to the coalition's attacks even before the coalition made its remarks. Growth Energy, the Renewable Fuels Association, the National Corn Growers Association and the American Coalition for Ethanol joined together to point out that the anti-ethanol groups are continuing to blame ethanol for things such as high grocery costs and indirect land use change, which have largely been disproven by scientific studies. "Constantly pining for fictional fuels or seeking to keep America hooked on the oil standard runs contrary to the desire most Americans have to become energy independent," the ethanol groups stated. "Instead of facts or new approaches, these groups are recycling tired rhetoric that does nothing to solve America's energy problems."
 
 The anti-ethanol group's conference call occurred just days after the USDA decreased its expectations for this year's corn harvest as well as course grain reserves, causing speculators to drive corn futures prices to more than $5.50 per bushel. The American Meat Institute addressed rising corn prices and said it will inevitably lead to higher food costs. "The result will likely be higher prices for beef, pork and poultry as producers pass on higher feed costs." The ethanol groups stated that distillers grains will be able to displace more than 1 billion bushels of corn in domestic livestock rations this year for the first time, which should offset some of the livestock producers' feed costs. Growth Energy, the RFA and others also stated that less than half of the U.S. corn crop has been harvested, so an uptick in corn production numbers is still possible.

Anti-ethanol groups continue to fight tax credit

Posted Sept. 29, 2010 

 
 Jim Borchart, owner of Borchart Steel Inc., is now the owner of the Alchem ethanol plant in Grafton, N.D. His $525,000 bid at auction Sept. 29 plus a 10 percent buyer's premium puts the final purchase price at $577,500. 
 
 It's still unclear what Borchart will do with the 10.5 MMgy plant, which has been sitting idle for years. He intends to winterize it and make a final decision this March or April, he said. One possible option is that he will sell off the equipment, piece by piece. Or, he'll modernize and streamline the plant and then restart it. "It doesn't have a good flow pattern right now," he said. 
 
 Still, even if the New Germany, Minn., resident goes with option No. 2, it's not a slam dunk that the Alchem plant will once again produce ethanol. He expressed some interest in cellulosic ethanol from energy beets and beet tops. However, the most "realistic" option may be other products, he said, such as biochemicals, pharmaceuticals or agricultural products, such as fertilizer. 
 
 Although Scott Steffes, president of Steffes Auctioneers Inc., was concerned nobody would turn up for the auction at all, there were seven registered bidders and more than 30 people in attendance. "I'm glad we got it sold and surprised at the realistic price," he said. 
 
 Harold Newman, former owner of the plant, was there. He was quiet during the bidding and left quickly. Also at the auction was Grafton resident Lee Anderson, who started work at the plant in November 1985 and in recent years stayed on as plant security. That involved checking on the plant at a variety of times of day, he told EPM. Sometimes people would stop by the plant to discuss the latest rumors about whether the plant would sell and he'd talk to them and answer their questions. "Some days I was here eight hours, some days four hours," he said. 
 
 The plant started out as a potato flake plant and began producing 3.5 MMgy of fuel ethanol in 1983. The capacity was up to 10.5 MMgy in 2007, but the plant was only producing 8.5 MMgy. By October 2007 it had shut down due to the high cost of corn and low price of ethanol. 
 
 Millions of dollars in plant upgrades were made after the shutdown, including an automation system for the coal-fired boilers and a steam generating system. It has a thermal oxidizer system that has never been operated, a methonator system, a CO2 scrubber and other items. 
 
 The plant was sold with no minimum bid and "as is and where is," Steffes reminded attendees before the auction started. "The only thing you are being guaranteed is free and clear title," he said.

Alchem sells for under $600,000 at auction

Posted Oct. 4, 2010

 
 The extension of the Volumetric Ethanol Excise Tax Credit came up at the annual gathering of the Renewable Fuels Association, held Sept. 30. Heather Zichal, U.S. President Barack Obama's deputy assistant for energy and climate change policy, spoke to the group about the administration's commitment to clean energy, and specifically, ethanol. "As you know, we support the extension of the ethanol tax credit and recognize how important the industry," she said. 
 
 As Obama has said before, Zichal pointed out that the U.S. has a choice when it comes to energy policy—action or inaction. It's a choice between the old ways or the new and between leading the global race or falling behind other countries. She also pointed out that about 95 percent of the fuel powering cars, trucks, planes and trains comes from oil. More than half of that oil comes from overseas, accounting for more than one-third of the carbon emissions in the U.S. "With statistics like that, there's no question that biofuels will continue to be a critical component of our energy policy - and along the way, it's going to reduce our dependence on foreign oil, create jobs, protect the environment, and invigorate rural economies," she said. 
 
 She also brought up the subject of tax credit reform. Although Zichal didn't mention the group by name, Growth Energy proposed its potentially game changing Fueling Freedom Plan this summer. It calls for some tax credit funds to be diverted to help pay for infrastructure such as blender pumps and pipelines. 
 
 Zichal said the White House does want to work with the ethanol industry and Congress with looking at options for reform. "We want to make sure that it's guided by a recognition that the existing program does work—we're certainly not looking to upend a program that works, as occasionally happens in Washington," she said. "We want to make sure that we are all on the same page as we move forward and have these discussions." 
 
 The ethanol industry has been playing the waiting game in recent weeks, with very little news about VEETC, commonly referred to as the blender's credit. The RFA recently told EPM the organization is continuing to work with lawmakers in an effort to get the extension passed before it expires at the end of the year. "We remain hopeful that an extension of VEETC will occur in the lame duck session of Congress in November," said Matt Hartwig, communications director. "We are also realistic that it's an uphill battle." 
 
 As it has said since summer, Growth Energy does support a multi-year extension of VEETC. The group feels strongly that its plan is the best way to go, but if that isn't implemented it doesn't want to see the tax credit lapse. "Because the VEETC plays such a crucial role in our energy independence, Growth Energy believes that the tax credit will pass in some form by the end of the year," Stephanie Dreyer, Growth Energy public affairs associate, told EPM. 
 
 The point, Dryer said, is that the ethanol industry needs the same kind of access to the market as Big Oil enjoys. "That is why we have proposed our Fueling Freedom Plan which will eliminate the barriers to the transportation fuels market by building out ethanol dispensing infrastructure in the form of 200,000 blender pumps, a federal loan guarantee for construction of ethanol pipelines and production of flex fuel vehicles," she said.

Zichal: White House supports VEETC extension

Posted Oct. 4, 2010
 

 On Sept. 31, the U.S. EPA and the U.S. Department of Justice settled disputes with two of Poet LLC's South Dakota facilities as well as Dakota Ethanol LLC over claims that the plants had violated portions of the Clean Air Act. The 79 MMgy Poet plant at Big Stone City, the 53 MMgy Poet plant at Groton, and the 48 MMgy Dakota Ethanol plant near Wentworth were charged with violations associated with emissions and testing requirements for volatile organic compounds (VOCs). In consent decrees signed in a South Dakota district court, the facilities agreed to pay the penalties associated with the claims, but did not admit to the allegations.
 
 According to Albion Carlson, an environmental scientist with the technical enforcement program for Region 8 of the EPA, some of the violations stemmed from operator oversight. All three facilities were fined for failing to maintain internal floating roofs that are supposed to be placed directly on the surface of ethanol in storage tanks. At the Poet and Dakota Ethanol facilities, the floating roofs were allowed to rest on A-legs as the tanks were being drained, which could potentially allow for vapors to escape into the atmosphere. "It was just an operating requirement that wasn't followed," he said. Carlson said it's vital to keep a lid on the liquid due to ethanol's quick evaporation rates. "When these roofs are sitting directly on top of the liquid like they're supposed to, it inhibits the volatilization of VOCs," he explained. 
 
 In addition to the floating roof violations, Poet's Big Stone facility was charged with exceeding certain VOC emissions limits, conducting invalid testing to demonstrate VOC compliance and failing to install required monitoring devices. As part of the settlement agreement, Poet Plant Management has agreed to pay $150,000 within 30 days, to remedy erroneous operations and adopt EPA-approved methods for measuring VOC emissions.
 
 Poet said the alleged floating roof violations at its plants occured in 2004 and the alleged stack test violation at Big Stone occurred in 2007. The issues have since been resolved. "The plants in question are operating within permitted levels, and we have passed subsequent air emission tests," said Matt Merritt, Poet media relations specialist. "The EPA has also adopted a more precise method, which Poet supports, for measuring these mass VOC emissions, and we are working closely with the South Dakota Department of Environment and Natural Resources to amend our permits to accommodate the new method. At Poet, we work hard to ensure we are good stewards of the land, and we are proud of our environmental record."
 
 Dakota Ethanol also exceeded VOC emissions limits, conducted inappropriate compliance testing and failed to conduct required VOC stack testing in a timely manner, according to the EPA. Dakota Ethanol will pay $75,000 and will also adhere to EPA-measurement methods and correct any deficiencies at the plant.
 
 Carlson said violations such as those allegedly committed at the three South Dakota facilities were at one time typical violations for the industry. That began to change when the EPA implemented its ethanol plant enforcement initiative in 2002. "This is one of the reasons that the ethanol initiative was first formed," he said. "There was concern that VOCs weren't being measured properly." The EPA began investigating the "suspected pattern of noncompliance" related to prevention of significant deterioration and new source review permit requirements, and has since reached settlements with some of the country's largest ethanol producers. Archer Daniels Midland Co. has been the largest settlement to date. In 2003, it agreed to spend approximately $340 million to overhaul environmental compliance measures at 52 of its grain processing plants in 16 states, according to the EPA.
 
 The testing that has been agreed to by Poet and Dakota Ethanol is no more stringent than what ethanol plants across the country are subject to, according to Carlson. The facilities will be expected to measure emissions from fermentation tanks, distillation systems, dryers and cooling systems in accordance with Clean Air Act requirements. Poet must implement these measures at all five of its South Dakota plants. "In the past in South Dakota, methods were used that didn't accurately measure the amounts of VOCs emitted," Carlson said, indicating that state regulators were perhaps lax in their enforcement of the regulations. Requiring these plants to measure VOCs using EPA-approved methods will merely bring them up to speed with the rest of the industry, he said.

S.D. producers receive fines for CAA violations

Posted Oct. 4, 2010 
 
 After multiple delays, the U.S. EPA is expected in mid-October to unveil its decision to approve 15 percent ethanol in gasoline. The full decision for older vehicles won't come until later, however. "Based on comments made by administration officials, we anticipate an announcement on cars 2007 and newer will be made within the next two weeks and an announcement for cars 2001 to 2006 will be made by the end of the year," said Stephanie Dreyer, Growth Energy public affairs associate. 

 
 Growth Energy first submitted the Green Jobs Waiver in March 2009, requesting that the blend limit be lifted from E10 to E15. The decision has been delayed multiple times since then. 
 
 On Sept. 13, Lisa Jackson, EPA administrator, spoke to Growth Energy on a variety of subjects, including E15. The EPA's decision is "directly linked" to the U.S. DOE test program on the impacts of E15 on vehicles. 
 
 Growth Energy learned that, in all, the DOE has spent $43 million on E15 testing, Dreyer said. "We were also told that the DOE is working ‘around the clock' to get these tests completed so we anticipate that the deadlines we have been provided with will be met," she said. 
 
 The first phase of testing is on 19 vehicle models, years 2007 and newer, Jackson said. The testing of vehicle models built between 2001 and 2006 is expected to be completed at the end of November. "In conjunction with the waiver decisions EPA will also move forward on a rule to provide for proper fuel labeling to reduce the potential misfueling," she said. "As with all of our actions we intend to take these deliberately and actions based on all of the information necessary to make a sound decision that will serve the public interest." 
 
 The Renewable Fuels Association is continuing to call the two-phased decision a "deeply flawed approach." The concern is that if E15 is approved only for newer cars it will cause confusion in the marketplace. 
 
 In July, RFA joined the National Corn Growers Association and the American Coalition for Ethanol in sending a letter to the EPA, encouraging the agency to formally approve the use of E12 for all vehicles immediately, while waiting on the final E15 decision. The groups have repeatedly pointed out that fuels with oxygen content equivalent to E12 were previously approved. 
 
 Mike Irmen, director of ethanol services for The Andersons Inc., recently told EPM the company agrees that E12 should be approved immediately, while waiting on the E15 approval. "The product is substantially similar and will integrate seamlessly into the existing motor fuel distributions system," he said. "It has been tested far more stringently than any other fuel change in history. It would allow for increased ethanol demand immediately, but only if it is economical. Blenders would only use more if it either increased their margin or made their product less expensive to consumers at the pump." 
 
 E15 also came up at the annual gathering of RFA, held Sept. 30. Heather Zichal, U.S. President Barack Obama's deputy assistant for energy and climate change policy, assured attendees that a decision was expected soon. "If approved, we think this would be a very positive step for the industry and will help in our efforts to reach our biofuels goals," she said.

Industry still waiting on E15 decision

Posted Oct. 13, 2010

 
 Initial reactions varied following the U.S. EPA's Oct. 13 <a target="_blank" href="http://www.ethanolproducer.com/article.jsp?article_id=7041" rel="external">announcement </a>that it will allow E15 only in vehicle models 2007 and newer. Ethanol industry members cautiously eyed the approval as an indication that there will be continued support for their product, but opinions were split on its immediate impact on the market. 
 
 The Renewable Fuels Association has lobbied heavily all year for an E12 waiver for all vehicles rather than a partial E15 waiver and RFA President Bob Dinneen expressed his disappointment over the denial of E12 use. "I find it hard to believe that there is not a level between E10 and E15 at which EPA could approve for use in all vehicles," he said. "An interim step to anything above E10 for all vehicles would have a more immediate impact on the market than today's announcement." The RFA is concerned that partial approval of E15 will create consumer confusion and will do little to increase the ethanol blend wall. Additionally, the RFA stated that two years of federal government testing of E15 has produced no evidence that E15 use would adversely affect older engines. "EPA is providing no scientific justification for its decision to bifurcate the market," he said. "It's almost as though they pulled the number out of a hat. As test after test has demonstrated, E15 is safe and effective in all light duty vehicles."
 
 Growth Energy, which filed the initial E15 waiver petition, said the EPA's partial approval was an "important first step," but stressed that more must be done to push back the blend wall. "Some may view it as a glass half empty, but Growth Energy views it as a glass half full," said CEO Tom Buis. "Every long journey begins with a first step and, today, that step was made." The group said it will continue to urge the EPA to approve E15 for vehicles 2001-2006 and to begin testing for legacy vehicles as well.
 
 "The arguments being made right now against E15 are the same as those made about E10 back in the late 1980s, when I entered the ethanol industry," said Poet LLC CEO Jeff Broin. "Seventy billion gallons later, we have proven those arguments false, just as research on E15 is proving critics wrong today." Poet is set to begin construction on its first commercial-scale cellulosic ethanol production facility as soon as financing is finalized, but during a press conference to discuss the EPA's decision, Broin hinted that Poet may not continue with its project if widespread E15 is not approved, stating that it would not make economic sense to produce a product for which there is no market.
 
 The American Coalition for Ethanol took a neutral stance, stating that the partial waiver is neither a major victory for ethanol nor an unworkable compromise. "ACE views it as a very small step and we will work to try and make the best of it," Brian Jennings, ACE executive vice president, said. "While we are pleased EPA finally made a decision, restricting the use of E15 to 2007 model year and newer vehicles is inadequate and will not sufficiently move the demand needle for ethanol." Jennings contented that the less than stellar result of the long waiver process should prove that the best way to provide ethanol fuel choices is to increase flex fuel vehicle and blender pump availability. "We will also continue to push for the approval of ethanol blends beyond 10 percent in all vehicles, as is supported by volumes of testing and years of real-world experience, and encourage EPA to act more appropriately in the near future to allow all vehicles to use E15," he said.
 
 Small engine manufacturers have historically been opposed to increased ethanol fuel blends and they continue to oppose E15 use. However, Kris Kiser, executive vice president of the Outdoor Power Equipment Institute, which represents most of the U.S. small engine manufacturers, wants to make clear that his organization is not against ethanol. Rather, it merely wants to protect its members from litigation related to misfueling issues. "We're often portrayed as anti-ethanol, but that's not it all," he said. "My guys can make a machine that runs on anything. The challenge becomes, what are we going to be designing to in the future? What's the number? Is it [E]25, is it 20, is it 30?" Kiser said his group has been meeting with members from Growth Energy, the RFA and ACE to discuss problems that could arise from partial higher-blend approval as well as potential courses of action that would provide some predictability for engine manufacturers, such as a planned nationwide increase to E30 during a certain year. Kiser said this type of approach may be more appropriate for producers and manufacturers as well as consumers. "We think this gradual implementation gives the consumer a real challenge in the marketplace," he added.
 
 The National Corn Growers Association said it was disappointed with the scope of the EPA's decision, but pleased that a decision was finally made. "We believe this bifurcation of the approval process, and the labels that are expected to be placed on higher-blend fuel pumps, can lead to general consumer confusion and therefore act counter to the original intent," Bart Schott, NCGA president, stated. "We strongly urge the EPA and the Department of Energy to expedite their remaining testing and cut through bureaucracy to quickly approve the E15 blend for all vehicles. Consumers deserve clarity."
 

 Agriculture Secretary Tom Vilsack, who is scheduled to make another biofuels-related announcement Oct. 21, said the EPA approval will assist in creating jobs in rural America and will allow existing ethanol capacity to enter the market. "Today's action by Administrator [Lisa] Jackson and the EPA provides assurance to farmers, ranchers and the renewable fuels industry that the government backs the use of home-grown energy in our cars and trucks," he said. "At the same time, more work is needed and we hope EPA and the Department of Energy complete an evaluation of 2001-2006 models soon."

Reactions vary following E15 announcement

Posted Sept. 29, 2010

 
 Pacific Ethanol Inc. is maneuvering to restart its 60 MMgy corn ethanol plant in Stockton, Calif., sometime this quarter. The company announced on Sept. 28 that it will purchase a 20 percent ownership in New PE Holdco LLC, the current owner of Pacific Ethanol's four facilities, for $23.3 million and expects the transaction to close no later than Oct. 22. The purchase will give Pacific Ethanol controlling ownership of New PE Holdco and allow it to regain controlling interest in its ethanol plants. 
 
 When the transaction is complete, Pacific Ethanol will once again control a 60 MMgy facility in Burley, Idaho, a 40 MMgy plant in Boardman, Ore., the 60 MMgy Stockton facility and a 40 MMgy plant in Madera, Calif. The plants in Idaho and Oregon are currently operating, according to Pacific Ethanol, but the California facilities have been idle for some time. Neil Koehler, Pacific Ethanol's president and CEO said the company is focused on an immediate plan to restart the Stockton plant in order to meet growing demand for ethanol and, specifically, California-produced ethanol. Paul Koehler, the company's vice president of corporate development, said the Madera plant will be reopened "in an ordered manner and as market conditions continue to permit."
 
 As part of its strategy to fund the reacquisition of its plants, Pacific Ethanol has agreed to sell its 42 percent share in the 48 MMgy Front Range Energy LLC plant to the facility's majority owner for $18.5 million. The transaction is scheduled to close by Oct. 11.
 
 "These transactions represent a significant step forward for Pacific Ethanol Inc. as we complete our restructuring and improve our balance sheet," said Neil Koehler. "We are reinvesting in the ownership of core assets at a time when plant valuations offer considerable upside potential, as evidenced by the price we received from the sale of our interest in Front Range. With our improved financial position, additional working capital, the integration of marketing asset management, and plant ownership, together with efficient operations, we are well positioned for profitable growth."
 
 Separately, Pacific Ethanol recently signed a memorandum of understanding with Canadian cellulosic ethanol producer and technology developer Lignol Energy Corp. to explore integrating Lignol's technology at Pacific Ethanol's plants. Paul Koehler said the company looks forward to working with Lignol and developing the potential for second-generation ethanol integration at the facilities, however, testing has not yet commenced.

Pacific Ethanol sets goal to reopen facility

Posted Sept. 29, 2010
 
 When Trillium FiberFuels Inc. first started investigating cellulosic ethanol, it was assumed that it could select a technology, fire it up and start cranking out ethanol. Then company founders realized—there really is no off-the-shelf technology for cellulosic ethanol production. Not yet anyway. "That was a little silly in retrospect," said Chris Beatty, president and one of four founding members of the company. 
 
 Today, the Oregon-based company is working with an unidentified out-of-state pulp and paper mill in an attempt to crack the xylose utilization question. The companies hammered out an agreement in which the pulp and paper mill provides a waste product, hemicellulose, to the Corvallis, Ore., Trillium lab. Currently, researchers are conducting tests on 10 liters at a time, with plans to ramp up to 200 liters before Christmas and 4,000 liters early next year. "We're all hovering around it like mother hens, because this is a big deal for us," Beatty said. 
 

 There has been a great deal of effort—with some success—at genetically engineering yeast to utilize xylose, Beatty said. Trillium, however, is looking for a more robust yeast solution. "What we're trying to do is use conventional yeast that is still tough and basically change the food so they can use it," he said. 
 
 The company started with an industrial enzyme that's used to make high fructose corn syrup. The enzyme, which is not genetically modified, converts xylose, a native sugar, to xylulose. That small transformation happens without adding or taking away anything, but simply rearranging, Beatty said. Taking that known science, which has been in use for 20 years, the company is working on perfecting its simultaneous isomerization, or SIS. The company's patent-pending process is about converting sugar to a usable food for yeast and fermenting it at the same time, he said. 
 
 Trillium is halfway through a U.S. DOE grant period and is using $750,000 it was awarded in 2009 to conduct its research. Working with the pulp and paper mill is a perfect extension of that research. At some point, if all goes well, the idea is to co-locate a pilot plant at the pulp and paper mill. "They are very interested in that," he said. 
 
 Unlike building a greenfield cellulosic ethanol plant, co-locating with another facility is an attractive way to prove a technology and gather data with a much smaller capital expenditure, Beatty said. Mounting a module on the side of an existing factory is a much smaller hurtle because it takes advantage of existing infrastructure, such as utilities, water, steam and power. "That really helps with overall project cost," he said. 
 
 Trillium hopes to someday license its technology to others interested in producing cellulosic ethanol. The group hasn't lost interest in actually producing it themselves, however. The original idea came about because the region of Oregon that Trillium is located produces a lot of grass straw, which they feel would be an ideal ethanol feedstock. Linn County, which is adjacent the county Trillium is located in, is the grass seed capital of the world. "We see our feedstock every day," Beatty said. 
 
 Legislation in 2009 phased out the burning of grass straw, which means there's excess straw that could be converted into cellulosic ethanol. Another positive is that collection infrastructure already exists because the straw is currently baled and sold into foreign markets, among other uses.

Trillium working with pulp and paper mill

Posted Sept. 30, 2010 
 
 Gateway ethanol plant in Pratt, Kan., has attracted the attention of a potential buyer that has expressed interest in restarting the plant. The identity of the buyer is not being released. "Until it's a done deal, their preference is to keep this confidential," said Kirk Martin, managing partner of Ascendant Partners, a business and financial advisory firm that is working with the owners to find buyers for the plant.
 
 An auction was planned for Sept. 24, however, the seller had reserved the right to accept offers before the auction. Several offers were received and now Ascendant Partners is in exclusive negotiations with the buyer that was selected. The next step is for the potential buyer to complete its due diligence, which includes examining the contract, permits, current condition of the plant and more, Martin told EPM. The process is likely to take several months. "We would hope to be completed with the entire process by year end," he said. 

 
 Gateway Ethanol started up in fall 2007 and filed for bankruptcy one year later. The new owners are a bank group made up of the original lenders and other banks that aren't interested in operating the plant themselves. The group took possession of the plant and its related assets on June 30, which for legal purposes is now called Gateway Plant. Gateway Ethanol, on the other hand, is still working to resolve the bankruptcy issue.
 
 The plant has been idle for more than two years but has been maintained, Martin said. In addition, the facility's permits, county taxes and water payments have been kept up to date.

Potential buyer eyeing Gateway Ethanol

Posted Sept. 30 
 
 More than 1,000 corn producers have reason to celebrate. The money they received from now-bankrupt VeraSun Energy Corp. for corn is now safe. 
 
 "Please be advised that we have received sufficient information to determine that the VeraSun estate will not pursue a claim for relief against corn producers and the demands are hereby withdrawn," said Randy Schaefer, a lawyer with SilvermanAcampora LLP, in an email on Sept 30. Schaefer added that a list of corn producers "against whom we are withdrawing our demands" would be forthcoming. 
 
 SilvermanAcampora and Kelley Drye & Warren LLP are two New York law firms that sent out letters, asking corn producers to repay money they received from VeraSun. The letters offered producers until Sept. 30 to repay 80 percent of payments received in the 90 days before it filed for Chapter 11 bankruptcy in 2008.
 
 Cedar Rapids, Iowa, lawyer Joe Peiffer said he was feeling "giddy" when he told EPM he finally had some good news to report. "It appears that they will not be pursuing any corn suppliers," he said. 
 
 A group of 50 or more attorneys banded together to work on the problem, sharing resources, Peiffer said. They sent letters to the VeraSun estate attorneys, laying out two solid defenses against the argument that corn farmers received preferential treatment. A preference payment is when a creditor is paid before other creditors, allowing them to recover more money than if the bankruptcy estate had distributed the money after the bankruptcy.

 
 Corn producers did not receive preferential treatment because producers were paid in the ordinary course of business, he said, typically delivering corn and getting paid the next week. In addition, a 2005 amendment to the bankruptcy code provides an exception to preferential treatment for those that used forward contracts. It's not clear at this point which argument worked. "It could be either of them," Peiffer said. "Frankly, I don't care. We got where we needed to get."
 
 The VeraSun estate is reserving the right try to collect back payments from other groups, such as elevators or service providers.

VeraSun estate lets corn farmers off the hook

News release posted Oct. 1, 2010
 
 Washington - The Renewable Fuels Association announced Sept. 30 that Chuck Woodside, General Manager of farmer-owned KAAPA Ethanol in Minden, Neb., will be the new RFA Chairman. KAAPA Ethanol is a 60 million gallon per year farmer-owned ethanol facility. Woodside is succeeding Chris Standlee, executive vice President of Abengoa Bioenergy, who served for three one-year terms. The election was held as part of the RFA's Annual Membership Meeting held in Washington, D.C. this week. 
 
 "The RFA remains the most effective voice for American ethanol producers, and I am honored the producer members of the board have selected me to lead the association," said Woodside. "The ethanol industry is facing unprecedented challenges and on the precipice of unparalleled opportunity. As Chairman, I will seek to work with my fellow RFA members and those ethanol producers unaffiliated with the RFA to produce sound policy and market expansions that allow this industry to thrive."
 
 Woodside underscored numerous activities that will be the focus of the RFA in the year to come, including: efforts to extend current tax incentives for ethanol use, expanding ethanol markets through higher ethanol blend such as E15 and above, modifying fuel regulations to allow greater ethanol blending, challenging regulation of biogenic emissions by EPA, addressing incomplete science with respect to low carbon fuel regulations, developing next generation ethanol technologies, and expanding the market for distillers grains and other ethanol co-products.
 
 "This is an exciting time for American ethanol production," Woodside said. "If acted upon correctly, all of the challenges and opportunities before the industry will usher in a golden era of American ethanol production and help turn the corner toward true energy security in this country. The RFA and its members stand ready, as they always have, to help this industry build bridges and move ever forward."
 
 The RFA is also pleased to announce Neill McKinstray, vice president and general manager, Ethanol Division of The Andersons Inc., as vice chairman, taking the position left vacant by Woodside's election. The Andersons manage three ethanol facilities in Albion, Mich.; Clymers, Ind.; and Greenville, Ohio.
 

 "From infrastructure needs to concerns over crucial public policies, the RFA has led the ethanol industry into battle and found common ground with our opponents in order to get things done," said McKinstray. "I am honored my colleagues have given me an opportunity to help lead this organization and this industry in what is an unprecedented time of excitement and challenge."
 
 Also taking positions of leadership within the RFA are:
 
 Treasurer: Randall J. Doyal, CEO of Al-Corn Clean Fuel in Claremont, Minn.
 Secretary: Walter Wendland, CEO of Golden Grain Energy in Mason City, Iowa. 
 President: Bob Dinneen
 
 A complete list of RFA membership can be found <a target="_blank" href="http://www.ethanolrfa.org/exchange/entry/rfa-announces-board-of-directors-and-new-officers/?utm_medium=email&utm_source=Emailmarketingsoftware&utm_content=502529342&utm_campaign=RFAElectsNewOfficers&utm_term=here" rel="external">here</a>.
 
 SOURCE: RFA

RFA elects new leadership for 2011

Posted Oct. 1, 2010
 
 Brazilian Braskem A.S. inaugurated the first commercial-scale plant in late September to produce ethylene from ethanol in Triunfo, in the Brazilian southern state of Rio Grande. With a production capacity of 200,000 tons of green polyethylene per year, the landmark project is equipped with technology developed by the petro-chemical company requiring investments worth $278 million. 

 
 "Braskem's green plastics are made from CO2 sequestered from the atmosphere through sugarcane photosynthesis. It is also the most competitive of all plastics made from renewable sources. And this has been widely acknowledged by the market, which recorded demand three times greater than the plant's capacity," says the company's CEO Bernardo Gradin.
 
 Ethylene specification took place 12 hours after the plant's start up, on Sept. 3, and green polyethylene production began a week later. The polymerization process, which converts ethylene into resin, is carried out in Braskem's existing plants in the Triunfo Complex. The final product has the same properties and characteristics as conventional polyethylene, enabling clients to process it without the need for any adjustments in their machinery.
 
 Over the past year, Braskem has established several partnerships to supply green polyethylene to domestic and international clients who have adopted sustainable development as a pillar of their market strategy including Tetra Pak, Toyota Tsusho, Shiseido, Natura, Acinplas, Johnson & Johnson, Procter & Gamble and Petropack. The most common applications of plastics from renewable sources are personal care and cleaning products, food packaging, toys and home appliances.
 
 The green polyethylene project is built upon the highly developed Brazilian sugar cane ethanol industry. The new plant will consume around 462 million liters (120 million gallons) of ethanol per year, which will initially come from the states of São Paulo, Minas Gerais and Paraná. The company is the largest industrial consumer of ethanol in Brazil, absorbing around 700 million liters per year for the production of green polyethylene and the fuel additive ETBE. 
 
 Braskem contracts with Brazilian ethanol producers will include a code of conduct establishing sustainability criteria. "The code of conduct has been welcomed by our suppliers because they realize that a commitment to production chain sustainability is in the interests of every link in the chain, as well as meeting the demands of society as a whole," said Hardi Schuck, in announcing the company's sustainability initiative. Schuck is responsible for raw materials and supplies at Braskem's Basic Petrochemicals Unit. 
 
 The five-page Code of Conduct for Ethanol Suppliers specifies best practices regarding life cycle analysis, biodiversity, good environmental practices, burning, labor rights and human rights. While the best practices are laid out in general terms, the document doesn't go into detail on how proof of compliance will be established beyond saying it is the responsibility of the supplier to orient its supply chain in full compliance and Baskrem can ask for documentation, establish criteria and procedures to monitor compliance including the possibility of third party verification.
 
 While most ethylene today is petroleum based, the Baskrem process returns to the roots of ethylene production which historically was from ethanol. The first published literature about the catalytic dehydration of ethanol to ethylene dates back to 1797, according to a Baskrem research scientist. Generating ethylene from ethanol is essentially a dehydration process, using a catalyst and heat. Ethylene is a chemical intermediate used to produce many different products including polyethylene—the most widely used plastic— polyethylene terephthalate (PET), polyvinyl chloride (PVC) and polystyrene. Baskrem also has a research project underway to develop a green polypropylene process in partnership with Novozymes which will supply its fermentation technology combined with Braskem's expertise in chemical technology and thermoplastics. 
 

 Braskem is a Brazilian-based petrochemical company which has been expanding its involvement in biobased polymers in recent years. It describes itself as the largest petrochemical company in the Americas and the world's third largest producer of polypropylene. In early 2010, Braskem announced the acquisition of the polypropylene business of American Sunoco Chemicals, creating Braskem America and expanding to 29 industrial units: 26 in Brazil and three in the United States.

Braskem starts up ethanol-to-ethylene plant

Posted Oct. 1, 2010
 
 A recent analysis of global biofuels in the next decade predicts a shortage in ethanol supply beginning in 2015 due to increased demand for biofuels to meet regulatory requirements. Hart Energy Consulting's study of global biofuels concluded that worldwide demand for biofuels will increase by more than 100 percent over current demand levels by 2020. As a result, by 2020 global ethanol supply may be short by 5 billion gallons.
 
 "We view this as good news for the industry," said Tammy Klein, global study leader and assistant vice president of Hart Energy Consulting. "We are projecting increasing demand for the product in the market and high utilization rates. However, we don't expect a rush of new facilities or additional build-out in the industry. Rather, we think it's more likely the producers will debottleneck, possibly expand facilities and run over nameplate capacity. We expect facilities will improve efficiency and this is meaningful for future potential low carbon fuel standard (LCFS) and renewable fuel standard (RFS) compliance. This is the challenge for producers - to make their process more ‘sustainable' and ‘GHG [greenhouse gas] friendly' - and we think they will rise to that challenge."
 
 Brazil is expected to have the greatest ethanol demand increase. The U.S. ranked second in ethanol demand growth, followed by China, Japan, the U.K. and Germany. Brazilian sugarcane-based ethanol is expected to come into high demand by countries seeking to fill their low-carbon biofuels requirements. "Obligated parties in the U.S. will find themselves competing for these volumes as never before," Frederick Potter, Hart Energy Publishing executive vice president, said. "We expect this to lead to continued price appreciation for sugarcane ethanol over the 2011-2020 period." Klein said she expects only one billion gallons of U.S. cellulosic ethanol to be produced in the next decade, although she recognizes the situation could change rapidly as technological breakthroughs occur.
 
 Brazilian producers have been slow to complete the necessary RFS registration process required to import their product to the U.S., but Klein said that will change. "Brazilian sugarcane ethanol in our view will be a key avenue toward compliance with the LCFS," she said. "We project the U.S. market may need up to 2 billion gallons of sugarcane ethanol [by 2020]. Demand for sugarcane ethanol is also expected to grow significantly in the EU27, Japan, China - there will be competition for the product." China's demand for ethanol is expected to double in the next 10 years, reaching 2 billion gallons by 2020.
 
 It was assumed the U.S. will implement E12/E15 blend requirements within the decade. So while gasoline demand is expected to continue to decrease in the U.S., blending percentages will not. Klein said she estimates an 88 percent marketing blending rate of E15 by 2020. 
 
 Thirty-five countries in four regions were included in the study. Predictions were based on analysis using current capacity, production and utilization rates as well as Hart Energy Consulting's calculations of policy changes expected in the coming decade.

Report: Ethanol demand to outpace production

Posted Oct. 5, 2010 

 
 In a letter written Sept. 29, the U.S. DOE reiterated its support of renewable fuels and highlighted opportunities for state, local and tribal grantees under the American Recovery and Reinvestment Act of 2009. "With over 7 million flex-fuel vehicles already on the road and millions more being produced every year, the market for renewable fuels will continue to grow," said the letter, which was signed by Kathleen Hogan, deputy assistant secretary for energy efficiency. "Therefore, there is a need to increase the number of compatible fueling dispensers in order to meet our nation's energy goals, particularly in renewable fuel producing regions of the nation in the near term."
 
 The letter was sent to state Energy Program and Energy Efficiency & Conservation Block Grant grantees. It encouraged those groups to consider allocating or increasing the amount of funding for renewable fuels infrastructure investments. The DOE has a program overview document to help identify partners and will work with USDA field offices and other stakeholders to provide needed technical assistance. "Obligations and DOE payments to grantees remain a key measure to evaluate Recovery Act performance; however, if funds have not been obligated by grantees and are available, targeted investments to improve renewable fuel infrastructure are a valuable use of Recovery Act funds for meeting the strategic energy goals of the nation," the letter said. 
 
 The DOE's efforts did not go unnoticed. Growth Energy commended the DOE's efforts to address infrastructure needs. "If we are truly going to realize our nation's energy independence goals, we need to ensure that our entire vehicle fleet and fuel infrastructure are ready to use expanded U.S. ethanol production," CEO Tom Buis said. "Each additional flex fuel vehicle and blender pump gives consumers the option of filling up with clean, renewable ethanol to create a more secure energy future for this country."
 
 The Renewable Fuels Association called the DOE's letter "very positive news." Modernizing the U.S. fuel infrastructure is critical, said Matt Hartwig, communications director. "Some of that has already been accomplished through the investments in biofuel technology, such as the ethanol tax incentive. And we should continue those policies," he said. "At the same time, we should be investing in blender pumps and other infrastructure that moves America away from a strict reliance on oil. While full details and the total amount of money that may be available are still forthcoming, this initiative is the exact thing of which we need more." 
 
 More information can be found at <a target="_blank" href="http://www1.eere.energy.gov/wip/rfiip.html " rel="external">this DOE link</a>. In addition, the DOE plans to host a webinar on this topic soon.

DOE: Increase funding for infrastructure

Posted Oct. 5, 2010
 
 The U.S. DOE's National Renewable Energy Laboratory has unveiled two new bioenergy and mapping tools that could aid biofuels project developers in targeting desirable locations. The BioEnergy Atlas combines data gathered from NREL's BioPower and BioFuels Atlas and allows users to layer related data onto a single map. The result is a comprehensive overview of available feedstocks, existing biofuels plants, power plants, fueling stations and energy use statistics.

 
 NREL said it expects government and state agencies, researchers, petroleum industry officials, investment firms, technology providers and project developers to utilize the atlas. In addition to available resources, the atlas also pinpoints areas that are lacking infrastructure, which it said should aid policymakers in identifying areas in need of expansion. 
 
 Feedstocks tracked on the Biofuels Atlas include sugar beets, sugarcane, bagasse, barley straw, corn cobs, corn stover, rice straw, wheat straw, forest residues, primary mill residues, and urban wood and secondary mill residues. Other layers include methane sites, U.S. EPA bioenergy and brownfield sites, biopower and biofuels plant locations, power plant locations and alternative fuel stations. A project developer could, for example, select a desired feedstock(s) and compare the availability of that feedstock with the number of biofuels plants in a specific area. The atlas provides an overview of the entire U.S., but users can also select any state to view more specific information. For example, according to the BioEnergy Atlas Iowa has 16.1 million metric tons of corn stover available per year, enough to produce 1.4 billion gallons of ethanol. Using information provided by the Renewable Fuels Association, NREL determined that there are currently 41 ethanol plants in Iowa, with a combined capacity of 2.9 billion gallons annually. Delaware, which currently has no ethanol plants, is shown to have the potential to produce more than 29 million gallons per year of ethanol from feedstocks including wood residues, corn stover, barley straw and wheat straw.
 
 The USDA, DOE and EPA provided data for the atlas, which will be updated as those agencies acquire new information. Funding for the atlas was provided by the U.S. EPA's Skyways Collaborative and DOE's Biomass Program. The atlas can be accessed at <a target="_blank" href="http://maps.nrel.gov/bioenergyatlas" rel="external">maps.nrel.gov/bioenergyatlas</a>.

NREL launches interactive bioenergy map

Posted Oct. 6, 2010
 
 Future cellulosic ethanol producer BlueFire Renewables Inc. has made another step towards realizing its first commercial-scale facility. On Oct. 5, it announced that it has selected Wanzek Construction Inc., a subsidiary of MasTec Inc., to provide engineering, procurement and construction (EPC) services for BlueFire's 19 MMgy wood waste-to-ethanol plant in Fulton, Miss. 
 	
 Wanzek will complete the engineering and construction of the facility in 22 months, at a fixed price of $296 million. Setting a fixed-price contract was crucial to BlueFire's U.S. DOE loan guarantee process, according to BlueFire CEO Arnold Klann. Achieving that goal sets a precedent for the cellulosic industry. "To my knowledge, no one in this industry has achieved this type of contract for a cellulosic biofuels project," he said. "It's a very unique contract."
 
 Under the terms of the contract, if Wanzek fails to meet the price or agreed-upon schedule, it will be responsible for the damages. If BlueFire alters the construction plans, Wanzek receives some security through a change-order mechanism built into the contract. Klann said this type of low-risk construction agreement is exactly the type of contract that DOE wants to see and that BlueFire should now be able to finalize its loan guarantee with either the DOE or USDA. A start-date for construction is dependent upon financing approval from either agency, but BlueFire's goal is to break ground by early January, according to Klann. Itawamba County, where the site is located, will begin preliminary grading and infrastructure installment at the beginning of November, he said.
 

 Wanzek won the competitive bid for the BlueFire project partially because it was the lowest bidder, but also because BlueFire leaders felt it had the best approach for its first-of-its-kind plant. "We needed someone that had the capabilities of conceptualizing how to scale up from a smaller pre-commercialization plant to a much larger plant," Klann said. "They clearly rose to the top with their pricing and the way they wanted to execute the project. I frankly was amazed they were able to achieve this [fixed-price]."
 
 Jose Mas, CEO of MasTec Inc., said his company looks forward to a long-term relationship with BlueFire. "We are glad to be a part of the initial roll-out and we look forward to working with BlueFire on a number of other opportunities," he said. 
 
 BlueFire also recently <a target="_blank" href="http://www.ethanolproducer.com/article.jsp?article_id=7010" rel="external">signed </a>long-term feedstock procurement contracts and offtake agreements for the Fulton facility.

BlueFire signs EPC contract for Fulton plant

Posted Oct. 7, 2010
 
 General Electric Co. announced Oct. 7 that it has been contracted by Petrobras to convert the second of two units at a power plant near Rio de Janiero to burn ethanol. The Juiz de Fora power plant is an 87 megawatt, simple-cycle, natural gas plant that serves approximately 300,000 homes. Two of GE's 43.5 megawatt, LM6000 model gas-fired turbines are used to power the plant, and soon both will be capable of burning ethanol as well. The plant is believed to be the first power plant in the world to be powered by ethanol.
 
 The combustor on the first unit was converted to become ethanol-capable one year ago and endured 1,000 hours of testing using 100 percent hydrous ethanol. John Ingham, GE's aeroproducts manager for Latin America, said various tests were conducted, mostly to determine what effects ethanol may have on the wear and tear of the machine when operating at baseload capacity. "The results were very satisfactory and very equivalent to that of any other liquid fuel," he said.
 
 The LM6000 model turbine, as well as several other turbine models produced by GE, is known as an aeroderivative and is a modification of aviation turbine designs. "This particular model is derived from the turbine that is used on wide-body jets like the 747," Ingham said. "It's originally designed to work with liquid fuels. The aeroderivatives version of it is normally operated with gas. The model that was installed at this power plant was a gas-only turbine and we've converted it to be dual fuel." Ingham said the turbine can now burn any liquid fuel, including gasoline, diesel, biodiesel or kerosene, but it has only been tested using ethanol. The unit can be switched from fuel to fuel during operation, with no downtime required.
 
 A massive amount of ethanol is required to fuel the 43.5 megawatt turbine. Ingham said one turbine burns 18,000 liters (approximately 4,700 gallons) per hour. If operated continuously, the two turbines at the Petrobras plant would require about 6.7 million gallons of ethanol every 30 days. Petrobras is heavily invested in many ethanol production projects, but Ingham said most of the ethanol used for testing at the power plant came from ethanol mills not owned by Petrobras because they were located in closer proximity to the power plant. The strategic move for Petrobras to convert to dual-fuel turbines was more of a hedge against future fossil fuel issues than to create a use for Brazilian ethanol, he said. "They are investing in having alternative fuel sources for their power plants in case of any problem in the supply of natural gas," he said. "They will also have a secondary fuel to be able to use and continue generating power."

 
 The renewable aspect of ethanol is also a motivator to convert turbines at power plants, Ingham said. After five-months of testing sugarcane ethanol at the Petrobras plant, the companies found that nitrous oxide (NOx) emissions and water requirements had been greatly reduced, while efficiency and power levels remained the same. "We were quite surprised about the low levels of water and NOx emissions," he said. "We expected them to be lower, but they were even lower than what we hoped for."
 
 GE has not tested corn-based ethanol in its turbines, but Ingham doesn't foresee any problems with using that as a fuel. "Our main rule is that the fuel does have to follow GE's liquid fuel specs, as does any fuel," he said. "We're not making special exceptions for ethanol." The company currently has no plans to expand its technology to the continental U.S., but it is exploring possibilities in Hawaii. "In the U.S., you have some difficulties because of the local price of ethanol and also the tariff to import ethanol into the U.S.," he said. "One of the problems with ethanol becomes the logistics—18,000 liters an hour is a lot of ethanol. If you were to double that and go for 100 megawatts, you'd have to have a substantial logistics system to do that." Hawaii poses an intriguing opportunity because it already imports fossil fuels to burn at its power plants. "The appeal of having a renewable fuel source that could be used for generating power is pretty interesting and it actually makes economic sense to use ethanol instead of diesel or kerosene," he said, adding that GE is also exploring dual-fuel turbine unit possibilities in Japan and Southeast Asia.
 
 The cost of an ethanol compatible dual-fuel turbine is comparable to other gasoline-diesel turbines, Ingham said. Upgrading a gas-only turbine to become dual-fuel compatible, such as what is being done at the Petrobras plant, requires an additional cost to install liquid fuel systems to the gas turbine. Ingham said a converted turbine costs between 5 and 10 percent more than a gas-only turbine.
 
 The first turbine at the Petrobras plant has been burning natural gas since testing was completed in May, but it could be switched back to ethanol at any time, Ingham said. "Since the test, the unit has resumed normal operations without being stopped for maintenance or taken out for repairs or anything like that," he said, adding that prior to testing, the unit already had undergone 10,000 hours of run time. Conversions to the second turbine are estimated to be complete in January, exactly one year after the start-up of the first unit.

GE powers turbines with ethanol in Brazil

Posted Oct. 7, 2010
 
 A Fairmont, Minn., ethanol plant has agreed to pay a $285,000 penalty after alleged violations of the company's environmental permits issued by the Minnesota Pollution Control Agency. 
 
 MPCA said Oct. 1 that the company violated the conditions of its air quality and water quality permits on numerous occasions. Mark Zoeller, vice president of general counsel for BioFuel Energy, which owns the plant, clarified that the company was paying the penalty as part of a settlement. "The company neither admits nor denies the allegations," he told EPM. 
 
 The first and most significant water quality alleged violation is that the company built and operated a different wastewater system than what was permitted.. "The system did not perform adequately to ensure that pollutants discharged from the facility met the permit's effluent limits," said a press release. "The facility discharged wastewater to Center Creek which violated its permitted limits for toxicity, a measure of potential harm to aquatic organisms." 
 

 What the MPCA does not say, Zoeller pointed out, is that the plant's new water treatment system is discharging cleaner water today than it was with the old system under the old permit. The problem was that the new water treatment system didn't conform to what was permitted.. 
 
 The MPCA said the facility's water quality permit granted variances from several water quality standards but required the company to investigate water treatment technologies that would allow it to meet the standards without variances. MPCA alleges that Buffalo Lake Energy failed to adequately do that. Other violations related to the water quality permit include things like record keeping, failure to report spills and unauthorized discharges, late submittals of monitoring data to the MPCA, improper storage of byproduct, failure to properly operate the wastewater treatment system and failure to monitor in accordance with the permit-required schedule. 
 
 What was permitted was also the issue on the air emissions permit side. The company applied for its air permit in 2006 and then, in 2008, applied twice for amended permits, according to the MPCA. First, the company asked for an amendment for design changes made during construction. The second amendment was to up the emissions limits. The MPCA issued the first amended permit in July 2008 and required performance testing. The second amendment was issued in April 2009. Buffalo Lake Energy was not in compliance with emissions limits until the second amended permit went into effect in April 2009. 
 
 In other words, Zoeller said, if the company had the air permit it has now, the violations never would have happened. 
 
 In addition to the fine, Buffalo Lake Energy has agreed to a schedule of corrective actions, including plans on how it will comply with the environmental permits and prevent future violations, the MPCA said. The <a target="_blank" href="www.pca.state.mn.us/newscenter/enforcement.html" rel="external">MPCA website contains a comprehensive list of enforcement actions</a>.

Buffalo Lake Energy to pay $285,000 fine

Posted Oct. 8, 2010
 
 Eyes will be on the corn market to see how it reacts to the latest USDA supply and demand report lowering its estimates to project corn yield and production as the third highest on record, instead of the record expected earlier this summer. The trade was expecting the reduction.
 
 Corn production is forecast 496 million bushels lower as a 258,000-acre increase in harvested area is more than offset by a 6.7 bushel-per-acre reduction in yield. 

 
 Higher 2010-'11 corn beginning stocks raise prospects for 2010-'11 feed and residual disappearance, especially during the September-December quarter. Ending stocks for 2009-'10 are raised 322 million bushels based on the Sept. 1 stocks estimate. Larger-than-expected carryout of old-crop corn combined with an unusually early start to this year's harvesting suggest heavy new-crop corn use before the Sept. 1 beginning of the 2010-'11 marketing year. 
 
 Individual state harvest progress reports suggest that 600-700 million bushels of corn were harvested across the South, Southern Plains, and southern Corn Belt before Sept. 1. This is about double the level of the preceding two years and similar to what happened between the 2006-'07 and 2007-'08 marketing years. New-crop corn usage before Sept. 2007 lowered feed and residual disappearance during the June-August quarter of 2006-'07 and boosted feed and residual disappearance during the September-December quarter of 2007-'08. 
 
 Despite the increase in 2010-'11 beginning stocks, lower forecast production and higher projected domestic disappearance leave ending stocks down sharply from last month. Feed and residual use for 2010-'11 is projected 150 million bushels higher reflecting the expected impact of new-crop corn usage before Sept. 1 on indicated disappearance during the current marketing year. 
 
 Exports are lowered 100 million bushels with tighter available supplies, higher prices, and increased competition from Argentina. U.S. ending stocks for 2010-'11 are projected 214 million bushels lower at 902 million. The season-average farm price is projected at $4.60 to $5.40 per bushel, up 60 cents on both ends of the range. 
 
 A number of changes are made this month to 2009-'10 corn usage with the biggest a 358-million bushel reduction in feed and residual use as indicated by the Sept. 1 stocks and small upward revisions to exports and food, seed, and industrial (FSI) use based on the latest available data. Sorghum FSI use and exports for 2009-'10 are also lowered slightly this month. 
 
 Global coarse grain supplies for 2010-'11 are nearly unchanged with lower U.S. supplies offset by increased foreign coarse grain production. World corn production is lowered 6.4 million tons with the lower U.S. production and a 0.5-million-ton reduction for Russia only partly offset by increases for Argentina, Serbia, EU-27, and several Sub-Saharan Africa countries. Production for Argentina is raised 4.0 million tons on higher expected area as rising corn prices and favorable early season soil moisture support a rapid pace of early corn planting. 
 
 Global coarse grain exports for 2010-'11 are increased this month mostly reflecting higher expected corn exports from Argentina, which are raised 3.5 million tons, along with small increases for Paraguay, Mexico and Zambia. Corn imports are increased for Turkey, Colombia, Indonesia and South Korea supporting higher expected corn feeding in these countries. Global corn ending stocks for 2010-'11 are projected 3.2 million tons lower this month despite increases for Argentina, EU-27, Zambia, and Iran. The reduction in U.S. corn ending stocks outweighs these increases.
 
 Soybean production and yields were also ratcheted down in the USDA monthly report, though not as much as corn. Soybean production is forecast at 3.408 billion bushels, down 75 million based on both lower harvested area and yield. Harvested area is reduced 1.2 million acres to 76.8 million. The soybean yield is projected at 44.4 bushels per acre, down 0.3 bushels. Prices for soybeans and products are all raised this month, supported by strong prices for corn. The U.S. season-average soybean price range for 2010-'11 is projected at $10 to $11.50 per bushel, up 85 cents on both ends of the range.

USDA lowers corn yield, production to third highest

Posted Oct. 8, 2010

 
 Oct. 15 marks the fifth biennial National Alternative Fuels Vehicle Day Odyssey, a nationwide event created in 2002 by the National Alternative Fuels Training Consortium to increase public awareness of domestic alternative fuels. More than 125 events in 40 states and Canada are planned at fueling stations and other locations to promote alternative fuels and educate consumers on the benefits of driving alternative fuels vehicles. Organizers expect to reach up to 75 million people through event attendance and media coverage.
 
 NAFTC executive director Al Ebron said the Odyssey events have continuously expanded since the inaugural events were held in 2002. That year, an estimated 17,000 attendees participated in various events throughout the country. The most recent Odyssey in 2008 attracted more than 200,000 attendees to more than 90 events across the country. This year will include more events and potentially millions of consumers, though Ebron admits that of course not all of the people reached by these events will make changes to their fuel consumption. "Even if you reach that many people but only some of them hear the message, that's still millions of people that are learning about these cleaner technologies and new technologies that can reduce our dependence on petroleum and help clean our air."
 
 The 2010 Odyssey is being partially funded by a grant from the U.S. DOE, made available through the American Recovery and Reinvestment Act, and the Clean Cities Learning Program. National sponsors include Toyota, Honda, power management company Eaton Corp., and electric car manufacturer Think. All types of alternative fuels and vehicles will be represented at various events, including electric, natural gas, hydrogen, biodiesel and E85. Event agendas are unique to each site, but each event must comply with the Odyssey's overall goal to promote alternative fuel technologies. 
 
 Many events will include reduced prices at filling stations for alternative fuels such as E85. Propel Inc., for example, will offer $1 off per gallon on both E85 and biodiesel at five of its San Francisco Bay area fueling stations as part of its push to increase consumer awareness. "The quickest and most efficient way to decrease our dependence on petroleum is to get consumers and businesses who already own flex fuel and diesel cars to fuel up with domestically produced renewable fuels," CEO Matt Horton said. "This event gives Bay Area drivers a chance to try renewable fuels at prices we haven't seen in a decade."
 
 Propel currently offers E85 at 13 of its 20 fueling stations in various locations throughout California. Chris LaPlante, Propel's director of marketing, said the company is planning a build out that will increase its number of E85/biodiesel stations to 75 within the next year. The company plans to install a total of 200 combined E85/biodiesel fueling stations in California and other West Coast locations within the next two years. 
 
 LaPlante said Propel's decision to expand was based on its experienced year-over-year increase in demand for alternative fuels as more consumers become aware of the benefits of using them. "Consumers in California have largely not had a choice to use renewables," he said. "California is a bit behind other states in offering these fuels, but we're finding that when you offer the customers are showing up in big ways. We're also getting support by state vehicles—they're encouraged to use the fuel—as well as the federal vehicles that are mandated to use alternative fuel. The postal service is one of our best customers."
 
 Ebron said that while it's hard to quantify results from Odyssey, he's received first-hand testimonials that attendance at Odyssey events has translated into fleet managers making the switch to renewable fuels and, in some cases, legislation being drafted to encourage greater use of renewables. "We've seen results," he said. "Odyssey will touch hundreds of organizations across the country. It really has had a major impact from the consumer to the fleet manager to the government official." 
 
 Odyssey's audience has also been expanded this year to include secondary schools. "Today's secondary school students may become tomorrow's engineers, technicians and consumers of alternative fuel vehicles," Ebron said. "It is important secondary school students learn about the benefits and challenges of alternative fuel and advanced electric drive vehicles."
 

 A kick-off event for this year's Odyssey will be held Oct. 14 at Union Square in New York City. To view a list of other event locations, visit the Odyssey <a target="_blank" href="http://www.nationalafvdayodyssey.org/locations.html" rel="external">website</a>.

Alternative fuel vehicle day to reach millions

Posted Oct. 8, 2010
 
 Motiva Enterprises LLC, a refining, distribution and retail joint venture between Shell Oil Co. and Saudi Refining Inc., has expanded its Doraville, Ga., terminal to allow for delivery of Norfolk Southern Corp. unit trains transporting Midwest ethanol. Motiva said the expansion will enable an 80-car unit train to be off-loaded and returned to the supplier intact and will better serve ethanol producers supplying the Southeast market.
 
 "Motiva is committed to enhancing its position in ethanol logistics throughout the eastern and southern U.S. by installing reliable ethanol blending capabilities at all of our proprietary terminals and at ethanol rail hub facilities where practical," said Dan Grinstead, general manager of supply at Motiva. 
 
 The Doraville terminals have the capability to store a combined 560,000 barrels of refined products, according to Motiva. Improved ethanol off-loading capabilities will potentially affect millions of gallons of ethanol delivered to by Norfolk Southern to the Atlanta metropolitan area, the company said.
 
 "This is a major step in making the Motiva Doraville terminal the low-cost solution for ethanol distribution in the Atlanta metropolitan area," John Kraemer, Norfolk Southern group vice president, said. "Norfolk Southern is proud to partner with Motiva in this important supply chain improvement for the industry."
 
 Motiva's operations have the capability to refine 740,000 barrels of fuel per day and markets transportation fuel to approximately 8,100 Shell gasoline stations in the eastern and southern U.S. The company currently operates ethanol hubs at terminals in New Jersey, Rhode Island, Louisiana and Florida and is considering adding rail capabilities to its ethanol hubs under development at Port Everglades, Fla., and Charlotte, N.C.

Atlanta terminal expands ethanol capabilities

Posted Oct. 11, 2010 

 
 CHICAGO - U.S. farmers will continue to produce an abundance of food and feed for both the domestic and international markets. This was an often repeated message at the Export Exchange, a conference focused on connecting international buyers of U.S. distillers dried grains with solubles (DDGS) and coarse grains. "This year the U.S. exported 54 million tons of corn, sorghum and barley, valued at about $8.6 billion," said Daniel Keefe, manager of international DDGS operations for the U.S. Grains Council. "And, about 9 million tons of corn products mostly from ethanol production valued at over $1.5 billion."
 
 The conference, held Oct. 6 through Oct. 8 in Chicago, attracted nearly 500 attendees, including 170 buyers from 33 foreign countries. The U.S. Grains Council and the Renewable Fuels Association teamed up to host the conference. 
 
 The message remained the same Oct. 8, despite the newly revised numbers forecasting a dramatic decrease in world global coarse grain supplies. In the U.S., corn yield forecasts were cut to 155.8 bushels an acre, down significantly from September's prediction of 162.5 bushels an acre. In the EU, coarse grain yields have been reduced by 15 percent to the smallest level in more than 10 years. 
 
 Thomas Dorr, president and CEO of U.S. Grains Council, said the short-term effect will be on price. "Yes, we're going to have some challenges and yes, we're going to have some sleepless nights over the next couple weeks," he told EPM. 
 
 In the long term, however, U.S. farmers will do what they have always done—respond to marketplace signals and produce an adequate supply of corn. Dorr also pointed out that the newly forecast numbers are still above what was produced in a recent record year. In 2008, the U.S. had a corn yield of 12.1 billion bushels with an average yield of 153.9 bushels per acre. The forecast for 2010 is 12.7 billion bushels with an average yield of 155.8 bushels per acre. 
 
 Erick Erickson, special assistant for planting evaluation and projects for the U.S. Grains Council, also pointed to corn producers' past performance as well as an "explosion" in yield technology. This isn't the first time concerns have cropped up about U.S. producers' ability to produce enough feed and food at home and abroad and those concerns were proved baseless. One example was in 2006 when the ethanol industry was expanding. "Some analysts believed that the U.S. would become a net importer of corn to feed ethanol production," he said. 
 
 Ethanol is the second largest market for U.S. corn, said Bob Dinneen, president and CEO of RFA. What people don't think about, however, is that one-third of that corn comes back out of the ethanol plant as feed in the form of DDGS, plus some corn gluten feed and corn gluten meal. In fact, the amount of DDGS produced in the U.S. in 2009 was equal to the amount of feed fed to cattle at U.S. feedlots last year. 
 
 Ankush Bhandari, director of economic research for Gavilon LLC, told attendees that this year, for the first time, DDGS imports are on track to actually exceed exports of soybean meal. "This is a tremendous sustainable feed source that is doing some remarkable things not only domestically but internationally," he said. 
 

 Another topic of concern was regulatory hurdles facing the ethanol industry. Geoff Cooper, vice president of research for RFA, pointed to the Volumetric Ethanol Excise Tax Credit as one of the "watershed policies" that has helped the industry grow. It's a crucial time, as the industry waits, not knowing if the tax incentive will be extended before it expires at the end of the year. "The next six months may be the most critical in the history of the industry," he said. 
 
 Jim Allwood, senior vice president and director of energy services for Informa Economics Inc., said he's been hearing more "apprehension that VEETC will be extended in a timely fashion." Current U.S. policies just aren't encouraging growth in biofuels. "Policy-wise, biofuels, in my opinion, is at a crossroads," he said. 
 
 RFA can only "hope desperately" to get VEETC extended during the lame duck session, Dinneen said. The next critical policy issue is E15, Dinneen said. Again Dinneen spoke out against approving E15 only for newer model vehicles, pointing to Brazil as an example of a country that has been using higher levels in its vehicles for years. Approving E15 only for newer vehicles will cause confusion in the marketplace and delay acceptance of the new fuel. "EPA needs to make these fuels available to all vehicles, period," he said. 
 
 Theoretically, if E15 is only approved for model year 2007 and newer, the maximum impact it will have on the ethanol industry is a market for an additional 1.5 billion gallons of ethanol, he added. If E12 is approved for all vehicles, that's only 1.8 billion gallons. If however, E15 is approved for all vehicles, it means a maximum impact of 6.5 billion gallons. 
 
 On the DDGS side, with E10 the maximum yearly production is 33.1 million metric tons yearly, Dinneen said. If E15 is approved only for model year 2007 and newer vehicles, however, it only provides a maximum of 37.2 million metric tons. E12 would add up to 38 million metric tons while E15 for all vehicles would mean 51 million metric tons.

Export Exchange conference zeros in on supply

Posted Oct. 11, 2010
 
 BBI International announced today that it has officially changed the name of Biomass Magazine—the world's leading biomass industry trade publication—to Biomass Power & Thermal, a move that characterizes the magazine's heightened focus on biobased electricity and heat. 
 
 BBI International announced last month that it would split its flagship biomass publication into two distinct titles, one focused on power and heat, the other focused on fuels and chemicals. The new magazine, Biorefining, was launched in September, and today's unveiling of Biomass Power & Thermal—the new name, logo and website—completes the second phase of the transition. 

 
 "By dividing Biomass Magazine into two separate publications we are serving our readers and advertisers in both sectors more effectively," said Joe Bryan, CEO of BBI International. "Extensive market research, industry consultation and long-term planning went into this decision. Splitting a successful, growing magazine into two separate titles is not an easy thing to do, but it's the right thing to do for our readers. They'll be better served by two publications with niche editorial scopes." 
 
 Biomass Power & Thermal will retain Biomass Magazine's familiar Web address—www.biomassmagazine.com—while the website itself has been completely rebuilt. The publication's online visitors will continue to find news, commentary, features and technical contributions within a cleaner, easier-to-use website. The site's homepage more prominently features up-to-the-minute breaking news on biobased power and thermal energy while continuing to house the world's most extensive collection of biomass related articles. The site also has improved navigation and search functionality while allowing readers to share and comment on every article, column and blog. 
 
 In keeping with the contemporary styling and functionality of the new website, the print publication also received a subtle makeover. Readers will appreciate the fresh new look of the October issue of Biomass Power & Thermal. As a testament to the industries the magazine serves, its new design is both efficient and practical. Inside each issue of Biomass Power & Thermal, readers will continue to find articles and columns from the editors they trust and the industry voices they rely on—including monthly columns from the Biomass Power Association and the Biomass Thermal Energy Council. 
 
 Visit the new website at <a target="_blank" href="http://www.biomassmagazine.com" rel="external">www.biomassmagazine.com</a>. The October issue of Biomass Power & Thermal is now available online.

Biomass Magazine unveils new name, website

All too often, the ethanol industry forgets to trumpet the positive messages about ethanol and, instead, gets sidetracked by the negativity, said Lars Herseth, president of the American Coalition for Ethanol. "I think we generally take the bait." Telling ethanol's positive story was an important theme at ACE's 23rd Annual Ethanol Conference &amp; Trade Show. The event, held in Kansas City in early August, brought together ethanol supporters to talk about the ethanol message, the Volumetric Ethanol Excise Tax Credit, the blend wall and more. Ron Lamberty, ACE's vice president and director of market development, also talked up the importance of a positive message. "Ethanol is getting clobbered in the battle of public opinion," he said. He made the analogy of a daughter bringing a new boyfriend home and saying he doesn't gamble much, he's not an alcoholic and he's never killed anyone.' The parents' impression of the new boyfriend might not be very good, he said. And yet, that's the way that some have tackled introducing ethanol. In recent months, Lamberty said, a lot of money was spent trying to convince people what ethanol will not do, such as not closing beaches due to ethanol spills. Instead, he said, the industry should be focusing on what ethanol can do. After all, that type of message isn't really giving oil much of a black eye--people use petroleum every day to drive to work and go on vacations. "Gasoline might be the black sheep of the family but to most people, he's still family," he said. People need to know that ethanol can power their cars to and from work and on vacations. That it can reduce emissions, help keep fuel prices low and create or retain jobs. "Let's get back to talking about the benefits of ethanol," he said. "We don't need to spend the time convincing people oil is bad, it does that itself." At another point in the conference, Brian Jennings, ACE's executive vice president, singled out the Volumetric Ethanol Excise Tax Credit and the blend wall as the two most important policy challenges facing the industry. Although the renewable fuels standard signals the industry to produce more ethanol, there's a 30-year-old limit in the Clean Air Act that restricts ethanol blending to E10. The EPA has been considering the E15 waiver for a year and a half now and, in June, delayed the decision for the second time. Now there are rumors that E15 will be approved only for model years 2007 and newer, although the ethanol industry has maintained that the blend is safe for all vehicles, regardless the year. ACE has calculated if the EPA goes through with the model year limit it would open up E15 to only two out of every 10 cars on the road. "It sounds like a solution that only a government bureaucrat could come up with," he said. Wally Tyner, professor of agricultural economics at Purdue University, told conference attendees that the blend wall isn't in the future, it's now. In addition, he had some words of caution for the future of cellulosic ethanol. The renewable fuels standard includes 15 billion gallons of traditional ethanol and 4 billion gallons of "other advanced" biofuels, which includes sugar cane ethanol that could potentially come from Brazil or Central America, he said. If the blend wall were increased from E10, or 12.5 billion gallons, to E15, or 19 million gallons, it could all be met with corn and sugar cane ethanol. "If we stay at E10, you can forget cellulosic ethanol," he said. "Even if we go to E15 there's no room at the inn for cellulosic ethanol." VEETC, another big topic at the ACE conference, is certainly a topic of debate, Jennings told the crowd. The industry can debate about how many jobs would be lost and how many plants would close if it is allowed to expire at the end of the year. "The fact of the matter is that both those things would happen," he said, adding that the price at the gas pumps would go up for the consumer. Keynote speaker Anne Korin, co-author of "Turning Oil into Salt" is a slight woman with passionate ideas about fuel choice and the danger of relying on what she called an oil cartel. "We are at the mercy of countries that hate us," she said. She made a strong case for supporting an open fuel standard. "We need to be able to choose," she said, "just like they do in Brazil." If passed, the law would require mandated amounts of flex-fuel vehicles (FFVs) warranted to operate on gasoline, ethanol, methanol or biodiesel. Vehicles can run on ethanol or methanol with only a slight tweak, she said. Korin rallied hard for the ethanol industry to band together with other alternative fuels, not just for ethanol FFVs, adding that in 20 years or so, FFVs could also be hybrid vehicles, providing further consumer choice. "What we can tackle, and tackle very effectively is the gas part of the equation," she said. Laws mandating FFVs have not gone anywhere, Korin asserted, because legislators coming from states outside the Corn Belt have no reason to support ethanol FFVs. If, however, methanol were added to the mix, FFVs would suddenly become much more attractive to legislators from coal and natural gas states, since both are produced right here in the U.S. While most methanol is made from natural gas, China makes a large amount of it from coal. If the producers and supporters of corn, natural gas and coal were to join together to ask lawmakers to mandate FFVs, that would be a nearly unbeatable coalition, she said. "It's very, very hard to argue against that political clout," she said. Marc Rauch, executive vice president and co-publisher of The Auto Channel, a Web-based automotive information site, spoke about ethanol as a "single bullet solution." Some say there is no one solution for replacing petroleum, no one alternative fuel that is better than the others. "We disagree," he said. "We think that there is one solution that can be used immediatel--ethanol." Big Oil uses a strategy of divide and conquer to keep ethanol from succeeding. Big Oil buys politicians, buys votes and buys media spokespeople, he said, using misconceptions and outright lies. Some of the lies he listed are that ethanol requires high subsidies to succeed, damages engines, provides low power and is less energy dense and that FFVs are insignificant. "The lies are so pervasive, so well spread that many people in the alternative energy space and the ethanol camp believe some or all of them," he added.

Ron Lamberty, left, ACE's vice president and director of market development, and Dan Gilligan, president of the Petroleum Marketers Association of America, spoke during a panel titled E15 and Beyond. At top right is Wally Tyner, a professor of agricu

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ACE speakers: Craft a positive message

Ethanol manufacturers that want to achieve a sustainable manufacturing advantage and effectively compete in the fuel market will appreciate the help of an innovative information technology (IT) known as a manufacturing execution system (MES), also called a manufacturing operations management (MOM) system. This IT solution allows plant managers to make decisions quickly as market conditions change because it delivers real-time and accurate information about various systems in an ethanol plant. An MES helps a plant reach its optimal performance, resulting in improved revenues and profits.
 
 In the pulp and paper industry—another commodity industry that has faced challenges similar to the ethanol industry's— MES was embraced with major success by many mills. In fact the mills that deployed an MES prospered in a very tough environment while those that did not implement an MES were challenged to survive and in some cases had to close. The ethanol industry today is facing what the pulp and paper market has faced for the past 15 years. Following this roadmap for success, an MES would be the next step in invigorating plants and operations in the ethanol industry.
 
 Some ethanol manufacturers might not be familiar with the term manufacturing execution system, a generally accepted term for a software system that integrates business and plant operations data. An MES provides real time and historical data that generates reports and key performance indicators for plant managers and operational staff to effectively manage their plant(s) and improve quality, efficiency and productivity."
 
 An MES is an information and control system that manages and monitors work-in-process, data on production infrastructure, control monitors and employee activities. The end result is a real-time view or a digital map that displays the entire manufacturing enterprise, activities and processes—providing vital information at a glance.
 
 In the past, an MES operated as a self-contained system. Today's MES systems are increasingly being integrated with enterprise resource planning software as well as a myriad of other applications such as maintenance, lab reporting and, most strikingly, financial reporting systems—a key feature of the STI Corp. MES. With a fully integrated system everyone in the plant has access to the same real time information to help maintain seamless operations. With the ability to access any piece of information, from daily corn usage to monthly income statements, plants will be better equipped to enhance their operations and, most importantly, continue producing ethanol profitably.
 
 An MES is designed to address productivity gains, reduce energy consumption, reduce raw material costs (or increase yield with the same amount of feed stock) and increase product traceability as well as many other benefits. In addition, real-time information on key functions such as laboratory data, batch fermentation analysis, process/product traceability and material balance controls, adds to the return on investment.
 

 U.S. ethanol plants participating in a 2009 survey by Christianson and Associates produce an average of 2.73 gallons of ethanol per bushel of corn. For an ethanol plant that produces 70 million gallons per year (an average U.S. plant) an MES can realize a very attractive return on investment. Assuming a 2.6 percent yield increase of approximately 1.79 million gallons at a 70 MMgy facility—a yield increase to 2.8 gallons per bushel of corn—and an average market price of $1.55 per gallon, that extra yield with the same amount of feed stock used results in about $2.7 million in increased revenues. This estimate does not include increased bottom line profits through decreased energy costs and other gains in efficiencies. Current corn and ethanol rack prices will determine the expected ROI. A typical MES investment for a plant producing 70 MMgy is around $600,000 to $700,000 for software and implementation. This indicates a very attractive return on investment which can be achieved in approximately six months or less. 
 
 Additionally, to improve manufacturing efficiencies and production results, plant management will have information tools and processes that generate important data about plant operations that may not be available to them without an MES. Examples include communicating production data in a standard company-wide reporting system; capturing key performance indicators (KPI) for quality control; identifying and scheduling maintenance needs; extending production runs by minimizing start-up time and maximizing uptime; and supplying process monitoring tools for research and development. An MES system can also help a plant react and respond quickly to changing markets and customer needs through the improved ability to optimize batch results through traceability.
 
 Resolving Pain Points 
 An MES system should provide detailed information on the following critical processes that in many cases present "pain points" that need to be resolved.
 
 Process traceability is necessary for production staff to be able to diagnose issues and optimize processes. The system must allow for full traceability of all operational activity, producing records of real time operational performance. An MES can even anticipate the effect of process changes by extrapolating from prior performance at the plant.
 
 The fast access accorded by an MES provides a valid and precise picture of production. If an operational parameter is out of specification, an MES will quickly identify the production segments associated with this problem and provide the operators with instant access to the associated key performance indicators. Then, operators can begin to take corrective actions to remedy the root cause of the problem and minimize the negative cost effects of a process deviation. 
 
 An MES collects information such as flows and downtime directly from the programmable logic controller (PLC) and/or from other systems and sources. The PLC or control layer will supply the MES with an event—for example the duration of a distillation downtime—that could cause a production delay if not dealt with promptly. The equipment failure can be logged and a root cause analysis can be performed to prevent reoccurrences.
 
 MES also provides real-time downtime tracking, identifying possible causes with automated data collection where possible. It records operational parameters associated with production performance that can be tracked by various parameters such as throughput, operator, shift, etc. The MES publishes efficiency information and reports to the entire plant.
 
 MES also creates root-cause screens that include Pareto charts and reports to identify and reduce downtime, waste and performance issues. It develops screens to display the summary of production of all shifts and fermentation batches for use by foremen and operators.

 
 An MES will manage by-products as well as end products and manage all manual and lab data entry such as specifications management, control specifications and customer specifications (with automated certificates of authenticity). Recipe management of raw materials and process conditions, alarms capability; quality alarms, set point change alarms and conditional adjustments can also be managed with an MES system. It also has statistical quality control capability, document management for the lab allowing technicians to consult online work instructions, quality tracking of manual entries and control systems data, by both time and by events. Simple and complex calculations can also be executed.
 
 Market feedback indicates the three most important attributes of an MES are the ability to integrate with financial reporting systems, report data on a real time basis and measure overall equipment effectiveness. EP 
 
 Charles A. Horth is founder and CEO of STI Corp. Reach him at <a href="mailto:chorth@sticorp.com">chorth@sticorp.com</a> or (819) 373-3332.

A graphical display shows in a glance at the dials whether the key performance indicators are on target or not. SOURCE: STICORP

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 The main menu of an MES system shows the array of reports generated on different areas of a plant and management subjects. SOURCE: STICORP

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An innovative IT solution can dramatically improve the operating environment and the bottom line at ethanol plants.

Achieving a Sustainable Manufacturing Advantage

Sept. 7—The corn market has been in a bullish mode on concerns over lower-than-anticipated yields from early harvested corn. Adding more inspiration is the fact that Russia had wheat production issues and has yet to receive beneficial rains as wheat-sowing season approaches. The end result is lower world coarse grains carry-out and lower U.S. corn production. As of the August USDA report, the carry-out-to-use ratio for corn was calculated at 9.7 percent compared to 10.7 percent and 13.9 percent in 2009-'10 and 2008-'09, respectively. With lower production and no demand shift, this could shrink, bringing even more volatility into the corn market. As prices move higher, demand could be affected and at some point cap the upside. The trading community will be watching demand—exports, livestock and dairy prices and, of course, ethanol values. Another market fundamental is the length the managed money funds and index funds hold today, which has surpassed the record length established in mid-2008. In addition, this length is a greater percentage of open interest than it was in '08. Therefore, we have a market that is truly concerned about production decline. Any liquidation by the funds, however, could have some rapid downside pressure.
 
 The accompanying chart illustrates U.S. corn ending stocks (left axis) in million bushels and the carry-out-to-use ratio (right axis illustrating the low carry-out and low carry-to-use ratio that the corn market experienced in 2006-'07 when the rally really began. The August carry-out-to-use ratio is lower than it was during this time frame.

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Bullish market jittery on carry-out-to-use ratios

Sept. 7—Post Labor Day, domestic feed demand is normally still suffering from summer heat effects. This year, however, we are seeing good domestic demand from most animal sectors, no doubt sparked by bottom lines being more black than red. With elevation in the Gulf tight, barge demand is filling done deals. Gulf vessel loaders are seeing increasing demand-based loading fees, making DDGS ship-loading costs prohibitive. Asian demand is moving into the container market, which is reaching the highest prices of the season, and competing for containers with supplementary grains.
 
 Chinese DDGS demand is expected to take a breather. With a poor China corn crop, importation and its resulting strain on infrastructure, is going to supersede some DDGS bulk business. It is expected to pick up again late October. Europe, feeling the effects of Russia's wheat crop failure, has been in the market not only for replacement wheat, but also DDGS, out of obvious places like the Gulf, and non-traditional origins such as Superior, Wis.
 
 Going forward, exports will be affected by an increase in shipping ratesContainer rates are expected to increase Oct. 1 by $300-400 per container. Rail rates will take an annual new crop increase, and physical rail cars themselves are tight and expensive. Many plants will be taking fall maintenance, but with ethanol margins as strong as they are, off-line times should be abbreviated. Domestically, DDGS use from the hog sector should pick up after declining last year due to vomitoxin.

3340-1292440012.jpg

Shipping rates rise on increased demand

With concerns about the distillers grains market reaching saturation, tight margins, and the possibility of increasing energy costs, a new technology is being tested at the plant level to produce enhanced and new coproducts. Fluid-Quip Inc. is a Springfield, Ohio-based equipment manufacturing firm that has been engineering and manufacturing wet-mill separation equipment for more than 20 years. The company recently developed a a new filtration centrifuge and system to recover coproducts from whole stillage at dry grind plants, called the Maximized Stillage Co-products system. "This patent-pending process is focused on recovering protein from whole stillage," says Michael Franko, technical projects manager at Fluid-Quip Inc. 
 
 Whole stillage is sent to a filtration centrifuge, where the distillers grains are washed to remove the proteins, solubles and oil away from the fiber material. The fiber is sent through dryers just as traditional distillers grains would be, while the corn oil and protein are sent through a second centrifuge. There, the oil and solubles are washed away from the protein, creating a cleaner stream for evaporation which allows for improved corn oil recovery, as well as a high-protein coproduct that Fluid-Quip has named StillPro. Franko says the result is a win-win for ethanol producers. "You get the protein without affecting ethanol yield," he adds.
 
 Coproducts

 The fiber coproduct created in Fluid-Quip's process has a few distinct differences compared to traditional distillers dried grains (DDG). "We've basically taken the DDGs, lowered the protein and lowered the oil slightly," Franko says. "So, they take a slight discount on it, but the nice part is that the plant is able to sell it through their traditional DDGS channels." Frankos says some of the producers he has introduced the system to have been more excited about the fiber product's potential for co-generation use or cellulosic ethanol conversion than marketing it as a feed product. Corn oil produced through the MSC system can be marketed for biodiesel production, which is a typical use for that coproduct.
 
 The protein product, which Franko compares to soybean meal or corn gluten meal, has diverse application possibilities. "We have a mix that's part protein and part yeast, so it's a unique type of protein, which is why the amino acid profile is somewhat unique," he explains. The content of the product makes it a good possibility for feeding poultry, swine and possibly fish and can demand a higher selling price, similar to meal produced at wet mills. "The plant we're working with is doing a great job of developing those markets and conducting feed studies," Franko says. "They've conducted some initial poultry market studies [and] they're moving into some other areas working with major nutritionists, because we want to make sure that everyone's very comfortable with the products."
 
 Field Test
 The 52 MMgy ethanol plant conducting tests on MSC system's coproducts, which declined to be named for this article, began operating Fluid-Quip's system a year ago. It recently commissioned a second filtration centrifuge, which increased yield and allowed for greater throughput. A third centrifuge will be installed this fall, which will allow for full operation of protein production, according to Franko. He says a 50 MMgy plant could temporarily get by with only two centrifuges, but a third is strongly recommended and is automatically included in the base equipment package. Franko recommends four centrifuges for a 100 MMgy plant.
 
 Capital equipment costs for a 50 MMgy base package, which includes three centrifuges and a dryer, is less than $7 million, says Franko. Installation and construction costs will vary depending on the situation. The module is designed to be a stand-alone building, which can be constructed next to an energy center at a typical ethanol plant. Construction and commissioning of the system can be completed within one year and, depending on construction and installation costs, producers can expect to achieve a return on their investment in only two years. "The dependency there is on installation and engineering—how the plant is set up and where we can do the tie-ins," Franko adds. Fluid-Quip estimates that a 52,000 bushel-per-day dry mill can generate $10 million in annual revenue through products created in its MSC system while discounting DDGs.
 
 No Interruptions
 One of the complaints producers have with front-end fractionation is the length of installation time and disruption of ethanol production. Franko says Fluid-Quip's system does away with both of those concerns. "The idea is that we do not interfere with the production of ethanol on the front-end at all," he says. "That's their main business, that's what they do best, so we don't want to disturb that. We want to take the whole stillage from the distiller bottoms after they're done and improve their fractionation on the back-end side of things. The nicest part is, for tying into the plant operation, our engineers have designed it so that tying in and plant interruption really should be minimal. We are able to tie-in with scheduled shutdowns so that there are no interruptions other than possibly one day to start up the process."
 
 Because the system is relatively easy to start up, it's also easy to shut down. "If, for some reason, we want to shut down, we want to go back to making DDGS, you can take it offline very quickly," Franko says. The plant that is currently using the MSC system has tested shutting down the equipment and was able to do so in a one hour.
 
 The MSC system requires no additional natural gas usage and demands only slightly more electricity use, which Franko says has not been a drawback for any of the plants where he's introduced the equipment. No additional water is required to operate the system because wash water used in the centrifuges can be taken from various sources within the plant. The system has also shown potential benefits in the maintenance requirements for a plant's evaporation system. "Many plants are running their DDG dryers and evaporators to the limit," Franko says. The plant currently operating the system discovered during a scheduled shut down for cleaning that the evaporation system required minimal cleaning. Franko attributes that to the system's process of removing protein from the evaporation stream.

 
 Overall, Franko believes that forward thinking members of the ethanol industry realize a back-end fractionation system offers them an opportunity to increase bottom line revenues at a fraction of the cost of front-end systems. "What I hear from plants is the significant difference in capital costs," he says. "Trying to get money for capital projects right now is not easy, as everyone knows, so a smaller capital cost is a big attraction. The people that are looking forward in the industry are seeing [the hedging opportunity] as the real value in a system like this. Not only do you want a diverse group of byproducts so that you're in multiple markets, you're not living and dying by the corn and ethanol prices." EP
 
 Kris Bevill is an associate editor at Ethanol Producer Magazine. Reach her at <a href="mailto:kbevill@bbiinternational.com ">kbevill@bbiinternational.com </a>or (701) 850-2553.

Fluid-Quip Inc.'s Maximized Stillage Co-products system uses whole stillage to produce three separate coproducts from ethanol. PHOTO: FLUID-QUIP INC.

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Fluid-Quip Inc. manufactures a filtration centrifuge that can be used to recover coproducts at ethanol plants.

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Coproducts produced using Fluid Quip Inc.'s process include corn oil and a high-protein feed called StillPro. PHOTO: FLUID-QUIP INC.

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A new technology targeting whole stillage produces enchanced coproducts and new possibilities.

Boosting the Back End's Bottom Line

Posted Sept. 29, 2010
 
 Owners of the former Greater Ohio Ethanol LLC plant in Lima, Ohio, were recently approved for a 40 percent, five-year tax credit in exchange for a commitment to operate the 54 MMgy plant continuously for eight years and to create 22 full-time jobs that will pay an average wage of $27.67 per hour. The currently idle plant began operations in July 2008 but reportedly experienced numerous mechanical and operational difficulties and filed for bankruptcy in 2008. The facility stopped producing ethanol by the end of 2008. In March 2009, the plant was purchased for $5.75 million by PEA Lima, a wholly owned subsidiary of Paladin Ethanol Acquisition LLC, which is an investment group focused on acquiring "deeply discounted" ethanol plants, according to its website.
 
 According to information released by the Ohio Department of Development, PEA Lima will invest approximately $34 million to retrofit the facility, purchase machinery and equipment and pay for other necessary site preparations and land investment. It is unclear when retrofits will begin at the facility. According to the development department, PEA Lima said it will not be able to begin the construction portion of the project and begin ethanol production until it secures a commitment for the balance of its funding requirements. PEA did not immediately return calls for comment. The tax break is scheduled to begin in January and will expire in December 2015.
 
 In its project summary for the Lima plant, the Ohio development department said that the tax credit was a major factor in PEA Lima's decision to operate in Ohio. Michigan and Indiana were named as competing states for PEA's project.

Ohio plant receives tax break to restart

The world is watching America's renewable energy policy. Living now in Australia and being involved in the biofuels industry here and having had the opportunity to travel to many countries over the last 25 years, one thing is clear to me. Countries may set their own renewable energy policy, but what America does helps to set the tone for renewable energy on a global scale.
 
 The current debate over raising the allowable content level of ethanol to 15 percent is being watched everywhere. "If cars in America can run on 15 percent ethanol why can't our cars?" That same question has been asked by Americans about the Brazilian ethanol/auto industry for years. "If Brazilian cars can run on 20 percent ethanol without modification, why can't American cars?"
 
 In truth, there is no reason. Neither the U.S. EPA, nor the auto or oil industries have been able to come up with one truly credible reason why ethanol cannot be blended at 15 percent with gasoline. We all know it's the politics of a strong oil lobby, pure and simple. The world is watching America.

 
 I recently traveled to Thailand on a business development trade mission. We met with Prime Minister Vejjajiva for over an hour discussing trade, renewable energy and business development. One thing became clear¯while Thailand sets its direction on renewable energy policy, there is an underlying influence that comes from watching what America is doing. The same is true for Australia and many other countries around the world.
 
 What we do in the United States has an indirect, sometimes even direct influence on public policy globally. When we speak with a loud and clear voice to Congress, it inspires others to do the same. When President Obama makes it known that he supports biofuels, it has an impact. When farmers across America unite and bring a strong message to Washington on renewable energy, and farm policy, it creates an attitude of "if they can do it…we can do it" in other parts of the world.
 
 America has taken a lot of hits in the past few years, with wars, questionable international policies and the global economic crisis. One of the things we are still admired for however, is our dedication to a strong renewable energy industry. We are looked at as a world leader in adopting energy policies that help our environment and programs that support our farmers and rural communities. 
 
 We need to set a biofuels standard that is second to none. Believe it or not…the world is watching. 
 
 That's the way I see it.

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Setting the Global Direction

Posted Sept. 23, 2010

 
 Cellulosic ethanol company Fiberight LLC and U.K.-based TMO Renewables Ltd. have entered into an exclusive agreement that includes plans to design and build 15 commercial-scale cellulosic ethanol production facilities across the U.S. within the next five years. Fiberight's 5 MMgy Blairstown, Iowa, facility will serve as the initial collaborative effort. Sites in the Mid-Atlantic and Florida areas have been identified for the next five plants, which Fiberight CEO Craig Stuart-Paul said will range in capacity from 10 to 15 MMgy. 
 
 The facilities will utilize a combination of TMO's process technology and Fiberight's fractionation and digestion technology, which will allow the facilities to convert municipal solid waste (MSW) to ethanol at a more efficient, cost-effective pace, according to Stuart-Paul. "Integrating TMO's process with our own will give Fiberight the edge compared with other ethanol producing technologies, allowing us to be more efficient with waste than our competitors," he said. "Together, the companies are on track to become one of the largest producers of cellulosic ethanol in the U.S. during 2011, helping to divert millions of tons of waste away from landfills every year." 
 
 Work has already begun to install specialized vessels and additional MSW processing equipment at Fiberight's Blairstown plant. Earlier this month, Fiberight received a $2.9 million grant from the Iowa Power Fund Board which will be used to assist in financing the build out. Don Tormey, spokesman for the Iowa Office of Energy Independence, which oversees the power fund, said the Blairstown plant was selected for funding because it meets the program's goals to accelerate research and development and improve the economic competitiveness of alternative energy sources. To date, the only other cellulosic project to receive funding from the Iowa Power Fund Board is Poet LLC, according to Tormey.
 
 Meanwhile, TMO is continuing to test MSW pulps produced at Fiberight's Virginia-based pilot plant at its own demonstration plant in the U.K. Stuart-Paul said that while the TMO process will improve production efficiency, there will be few significant changes to the overall production process. Non-recycled MSW acquired by Fiberight will be processed using its digestion and fractionation technology before being fed directly into TMO's biomass-to-ethanol process. Stuart-Paul said Novozymes A/S will continue to supply enzymes for Fiberight's conversion process.
 
 According to TMO, the 20-year contract between the two companies has the potential to be worth more than $25 million annually. TMO will receive an initial one-off design fee plus recurring annual revenues from each facility. Fiberight will receive revenues from ethanol produced at the facilities as well as tipping fees for the MSW feedstock acquired for each plant. Stuart-Paul said locally sourced MSW will be used at each facility, so plants will be located in areas with large amounts of available feedstock. Feedstock agreements have not yet been acquired for any of the proposed sites. Stuart-Paul said that, unlike some other companies, Fiberight is focused on proving the technology process before cementing feedstock agreements. "We think that's putting the cart before the horse," he added.

Fiberight, TMO to build 15 plants in 5 years

We've all heard the saying, "You can't judge a book by its cover," and I can't deny that sorghum has an unusual cover. After the organization of the Sorghum Checkoff, we are seeing sorghum become a more valuable feedstock to the ethanol industry, proving that despite its unusual cover, sorghum is a valuable option for many industries.

 
 Those of us at the Sorghum Checkoff believe we've made great progress in the past year raising awareness of the potential of sorghum as a feedstock in the ethanol process. The Sorghum Checkoff is on a mission to increase the inclusion rate of grain sorghum to produce ethanol by 50 percent. We've crisscrossed the country, speaking at conferences and trade shows, visiting with sorghum growers and ethanol producers, seeking input and addressing questions and concerns. Managers have learned that using sorghum in ethanol and feed made significant improvements to profit and product quality. In fact, some managers may be leaving money on the table by judging sorghum just by its color.
 
 We've also talked with feedlot managers, dairy managers and nutritionists about sorghum distiller's grains. If you've seen this product, well, it's a little different in appearance. In my experience, some livestock producers have the misperception that the red distiller's grains from grain sorghum ethanol production are not as nutritious as the typical distillers dried grains (DDGS) from yellow corn. As they say, you can't judge a book by its cover. 
 
 Distiller's grains from corn and sorghum are a valuable feed for livestock, poultry and swine. When they first came on the market, there was some initial reluctance from feedlots. However, facts overcame fear and now there is a rapidly growing global market for DDGS. China is on pace to become the largest buyer of U.S. DDGS this year, buying some 1.5 million tons.
 
 Sorghum DDGS tends to be lower in fat and higher in protein than corn DDGS. There is no need to make comparisons. Similar to the role of sorghum in the ethanol process, it is another option for those producers in the sorghum belt.
 
 Grain sorghum is unique among all the crops being evaluated as a feedstock source for renewable fuel production in that it can fit into all the proposed conversion schemes currently under review. Not only is the crop drought tolerant and uses less inputs than many other crops, it is highly adaptable to whatever process becomes the dominant commercial vehicle from which biofuels are produced.
 
 The same can be said of the sorghum coproduct in the ethanol process—the DDGS may appear a bit different, but it has proven to be another viable option for a nutritional feed. So I guess the old saying proves true, you can't judge a book by its cover and you can't judge sorghum DDGS by its color either.
 
 Bill Greving is the chairman of the United Sorghum Checkoff Program. Reach him at <a href="mailto:wand@ruraltel.net">wand@ruraltel.net</a>.

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Overcoming Color Bias

Last month marked a dubious milestone in our nation's history: the 50th anniversary of the founding of OPEC, the Organization of the Petroleum Exporting Countries. That is 50 years of a foreign cartel controlling our economy through the coordinated manipulation of the production of Middle East oil.

 
 The United States has been held over a barrel of oil for far too long, sending more than $300 billion annually to the economies of foreign countries to feed our addiction. As explained by Gen. Wesley Clark, former NATO Supreme Commander and our co-chairman here at Growth Energy, that means every man, woman and child in the U.S. sends a $1,000-a-year tribute to foreign governments. 
 
 It may get worse. The International Energy Agency forecasts that as output by non-OPEC nations fall in the next five to 10 years, the global economy will only grow more reliant on OPEC, and more vulnerable to cartel-driven spike shocks.
 
 Increasing the production of domestic, renewable fuels such as ethanol can reduce the power OPEC exerts over our economy. Every gallon of clean-burning ethanol that we produce in this country decreases the demand for foreign oil and keeps U.S. money in the U.S. economy, where it can create U.S. jobs. 
 
 In 2009 alone, U.S. production and use of ethanol eliminated the need to import at least 364 million barrels of oil—keeping $21.3 billion in the U.S. economy—and reduced CO2 equivalent greenhouse gas emissions by approximately 16.5 million tons in the U.S., or the equivalent of removing more than 2.7 million cars from America's roadways. An increase from E10 to E15, as Growth Energy seeks with its Green Jobs Waiver, would create 136,000 new American jobs.
 
 Ethanol's contributions to our nation are undeniable, but the industry's potential is constrained because we are arbitrarily denied access to all but 10 percent of the market.
 
 Federal regulations mandate that 90 percent of our transportation fuel come from gasoline refined from oil. But we can eliminate these market barriers. As outlined in Growth Energy's Fueling Freedom Plan, we can create an open market where we can compete—fair and square—against oil, and against OPEC. It is time we loosen OPEC's grip over the transportation fuel market and strengthen our nation's economy and national security.
 
 Fueling Freedom seeks to create permanent access to the fuel market. The benefits of those market reforms and open market benefits would long outlast any public financing of Fueling Freedom. 
 Ethanol is more than a fuel, it's a solution. A strong ethanol industry will create American jobs, stimulate economic growth and make our country truly energy independent.
 
 Since 1960, America's dependence on oil from OPEC has put our country's security and economic strength at risk. If we really want America to become energy independent, we need to increase the use and consumption of domestic ethanol.

 
 Otherwise, we will be celebrating another 50 years for OPEC.
 
 Tom Buis is CEO of Growth Energy. He can be reached at <a href="mailto:tbuis@growthenergy.org ">tbuis@growthenergy.org </a>or (202) 545-4000.

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50 Years of OPEC

The nitty-gritty details of keeping an ethanol plant running smoothly and the fermentation process healthy are always important. In this issue, Associate Editor Kris Bevill takes a look at new methods being developed to make monitoring yeast activity faster and more accurate. For our cover story, Associate Editor Holly Jessen takes a look at another trend in ethanol plant management—hiring in-house engineers to help optimize processes and investigate potential upgrades. Ideally, an engineer working with experienced plant personnel should anticipate problems before they become costly breakdowns. Every step made to fine tune the operations within control can insure a plant's smooth operations, providing a solid base in the face of the uncontrollable.
 
 Policy is one of those areas outside the control of a plant's management team. There's the potential that Washington gridlock will put the ethanol tax credit into the same limbo as the biodiesel credit, in spite of the hard work being done on ethanol's behalf by many individuals and organizations. One plant manager I visited with recently said he would look for opportunities to hedge a profit of even a nickel rather than risk what may happen after Dec. 31.
 
 Market risk is better understood than policy uncertainty and risk management teams have several tools available to hedge. Those teams may be understandably a bit nervous this fall. While ethanol prices are up, so are corn prices and the speculators are back. Ironically, once again grain market advances are being led by wheat crop failures elsewhere in the world. What is not needed now is an event like the Iowa floods of a couple summers ago or the runaway oil prices that together created a perfect storm and turned what should have been a short-lived weather market into a wild ride for all. Having yet another record-busting corn crop in the field, record soybean yields and abundant U.S. wheat supplies have kept a countervailing downward pressure on the U.S. market. The stage is set, however, for returned volatility should the unexpected happen.

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The Controllable and Uncontrollable

What is needed to assure the growth and stability of the ethanol industry is to make E100 (98/2, ethanol/iso-propanol) a primary motor fuel in the U.S. To do that, the E100 Ethanol Group believes a government mandate on engines, not the fuel, is necessary. We suggest ethanol producers use their influence in Congress to achieve the following amendments to proposed bills:
 4At least 50 percent of new vehicle inventory in the U.S. be E100 capable by the end of 2016 with a minimum of 30 miles per gallon (mpg) mileage in highway use for small and mid-size vehicles and 24 mpg highway for larger vehicles when running in E100 mode.
 
 >No retail franchise agreement may prohibit a gasoline retailer from purchasing E100 from any source. 

 
 >No retail franchise agreement may prohibit a gasoline retailer from selling E100 under a branded canopy.
 
 These steps would eliminate the main problems with E85—poor mileage and higher cost per mile—that are a disincentive for consumers to buy it. AVL Powertrain, HP2g, Saab, Nissan, Sturman Industries, Ricardo and others have demonstrated competitive engine technology that can get good mileage with ethanol, yet still run on gasoline, even though performance on gasoline may be sacrificed. That is precisely what ethanol producers need—an engine that provides an incentive for drivers to purchase E100 instead of gasoline, a reversal of what we have today with E85 engines. 
 
 An engine mandate is necessary. Historically, the automotive industry does not make changes without a mandate. E85 (CAFE regulations), seat belts, air bags, high mount brake lights and unleaded gasoline were all mandated.
 
 Ethanol producers would be able to sell E100 directly to a retail distribution system bypassing the oil companies pricing mechanisms and take the "blender credit" of 45 cents per gal for themselves on every gallon of E100 sold.
 
 The E100 Ethanol Group believes it is madness to continue using 140 billion gallons per year of gasoline to power our light-duty cars and trucks. The ethanol industry could lower this to 70 billion gallons per year in short order if the above were adopted.
 
 Bill Farrah, CEO, and Don Siekes, executive director
 E100 Ethanol Group 
 Reach them at <a href="mailto:donsiefkes@aol.com">donsiefkes@aol.com</a>

Push for E100 Engines

Posted Sept. 24, 2010

 
 The Global Renewable Fuels Alliance is challenging the Food and Agriculture Organization of the United Nations to reveal the true impact that crude oil prices have on food pricing and recognize that our heavy reliance on crude imports is one of the leading causes of food inflation and price spikes. The Food and Agricultural Organization of the UN is holding an extraordinary meeting of the Intergovernmental Group on Grains and Rice in response to recent surge in wheat prices and rising concerns of wheat shortages as a result of drought in the Russian Federation.
 
 "The FAO has recognized a variety of drivers behind food price spikes, such as drought, energy prices and trade restrictions; however, the impact of crude oil prices on food inflation cuts across all national boundaries and has a disproportionate impact on food prices," said GRFA spokesperson, Bliss Baker. "As long as we are dependant on crude oil for our primary source of energy, we will continue see food prices climb as crude oil prices climb." 
 
 This crude oil / food price connection is even more acute in developing countries where 37 of the 44 poorest countries on earth are net energy importers, the organization explained. The rising long-term outlook for energy prices puts true food security for many of these countries in jeopardy. According to the FAO, "increased demand for biofuels will help revitalize the worldwide agricultural sector without putting our secure food supply in jeopardy." Next generation biofuels production hold even greater promise and will create new markets for farmers in developing countries and help bring unproductive land into production."
 
 "We are all very concerned about food price spikes and we certainly support the World Bank's recent analysis highlighting the crippling impact of oil prices and drought on food prices," Baker said. "There is no doubt that biofuels are part of the solution. They reduce our reliance on crude oil and therefore limit the impact of crude oil prices on food inflation."
 
 The <a target="_blank" href="http://www.globalrfa.org/" rel="external">Global Renewable Fuels Alliance</a> is an international federation representing more than 65 per cent of the world's renewable fuels production from 30 countries. Through the development of new technology and best practices, its members are committed to producing renewable fuels with the smallest possible ecological footprint. The GRFA promotes the expanded use of ethanol and biodiesel throughout the world; advocating for sound public policy and responsible research to help meet the world's energy, environmental and economic challenges.
 
 SOURCE: GRFA

Global RFA: UN should reveal oil impact on food

News release posted Sept. 24, 2010

 
 Englewood, Colo.—September 23, 2010— Gevo Inc., a privately held renewable chemicals and advanced biofuels company, announced today the closing of its acquisition of Agri-Energy's ethanol production facility in Luverne, Minn. This plant is expected to provide 18 million gallons per year (MGPY) of production capacity for chemicals and fuels customers.
 
 Engineering for the mechanical retrofitting of the plant has begun and isobutanol production is expected to begin early in 2012. During most of the retrofit process, it is expected that the facility will continue to produce and sell ethanol.
 
 Gevo has developed a proprietary process designed to fit into current ethanol production facilities. The process also enables the production of isobutanol from numerous renewable feedstocks including corn, wheat, sorghum, barley, sugar cane and cellulosic feedstocks when biomass conversion becomes commercially available. Gevo's integrated fermentation technology (GIFT™) platform consists of two components: a yeast biocatalyst and a separations technology unit that bolts into existing ethanol plants.
 
 SOURCE: GEVO INC.

Gevo acquires Agri-Energy

Posted Sept. 27, 2010
 
 BlueFire Renewables Inc. has cemented two significant contracts in the past week that should guarantee the company's U.S. DOE loan guarantee approval for a planned 19 MMgy cellulosic ethanol facility in Fulton, Miss. On Sept. 20, the company announced a 15-year offtake agreement with Tenaska Biofuels LLC for the purchase and sale of all ethanol produced at the Fulton plant. On Sept. 27, BlueFire said it also secured a 15-year feedstock supply contract with Mobile, Ala.-based Cooper Marine & Timberlands, a Cooper/T. Smith company that specializes in all areas of forest products.
 
 "It's really coming down to the homestretch for us in terms of getting the project in Mississippi buttoned up," said BlueFire CEO Arnold Klann. "There's no reason for this project not to get financed, save for the governmental loans not getting through due to bureaucratic hold-ups. We have met and greatly exceeded every criteria that we know of that has been set by the DOE loan guarantee program."
 
 BlueFire filed an application to acquire a $250 million federal loan guarantee in February, but Klann said BlueFire has reduced the request to $215 million. In July, the project advanced to Phase II of the program. According to Klann, it has been difficult to meet the DOE's loan guarantee requirements, which include secured matching feedstock and offtake agreements, because of cellulosic ethanol's uniqueness within the industry. Long-term contracts aren't typical for ethanol because it is a commodity, he said. Corn ethanol producers can at least hedge risks on feedstock and the end product, but that option is more difficult for cellulosic producers. "In the case of cellulosic, you really have nothing to hedge your output production against because you don't have a feedstock contract by a credit-worthy company because, in most cases, you have farmers trying to harvest the feedstock coming in. In our case, we were able to work out a deal with Cooper Marine, so we were able to create in essence what is normally done—a feedstock contract with price points in it that effectively matches what we're selling to Tenaska with a spread in between for our conversion efficiency."

 
 No earlier than December 2012, Cooper Marine will begin delivering 770 dry tons per day of locally sourced wood waste, including wood chips, forest waste, construction waste and storm debris, to the Fulton ethanol plant. In addition to ethanol, the facility will generate 8.5 megawatts of power, which will provide all the facility with all of its energy needs. Most of the feedstock will be acquired from within a 40-mile radius of the Fulton plant, according to Klann, and will cost BlueFire $25 per ton.
 
 When production commences at the Fulton facility, Tenaska Biofuels will acquire all of the fuel produced based on a pricing contract that includes rack ethanol prices for the area to which the fuel is being delivered, minus transportation costs. The contract also includes a kicker for renewable identification numbers (RINs) credits, Klann said. The offtake agreement was arranged quite rapidly, in less than eight weeks. Klann said he believes Tenaska plans to expand its alternative fuels business to include more ethanol marketing and vertical integration.
 
 Now that feedstock and offtake agreements are settled, Klann is optimistic that financing will be finalized by the end of the year, although the loan guarantee process is difficult to predict. BlueFire has invested $19 million into the $293 million project so far and has obtained an $88 million federal grant, of which approximately $81 million remains to be used for plant construction. Klann told EPM earlier this year that the project could not move forward without some type of federal loan guarantee, but he is now confident that the project will advance regardless. Offtake agreements and feedstock contracts give strength to the project and could make it possible to finance in the commercial marketplace, when it otherwise would not be possible. "There's an opportunity that we may be able to do that given certain conditions on guaranteeing the technology yield," he said. "There's opportunities out there."
 
 Klann said site work is scheduled to begin by early November, prior to the close of financing.

BlueFire CEO: We're in the homestretch

Posted Sept. 28, 2010 
 
 Now's the time to register for a webinar titled "Ethanol 2011: New Fuels, New Rules." The event is being held Oct. 20 by the Blend Your Own Ethanol Campaign, a joint effort of the American Coalition for Ethanol and the Renewable Fuels Association. "This webinar is available for anyone interested in learning more about ethanol blender pumps," said Robert White, director of market development for RFA, "but we believe it is critical that petroleum marketers and station owners participate."
 
 Ethanol producers may want to listen in, too, said Ron Lamberty, vice president and director of market development for ACE. It's an opportunity for an ethanol plant board member or employee to learn more about blender pumps and pass that information on to a gas station located nearby—or at least direct them where to get the information. 
 
 The webinar will include information on ethanol blending, from mid-level blends to E85. E15 updates will be provided, along with information about how blender pumps can work for retailers that want to provide customers with a variety of fuel choices. There will also be information about a federal tax credit for installing E85 infrastructure that expires at the end of the year. "Instead of combing the Internet for all of this information, the BYO Ethanol Campaign has gathered it all for individuals in one spot and they can get it all in under an hour," White said. 
 
 The webinar is set for 1 p.m. CDT. To register for the free event see <a target="_blank" href="http://www.byoethanol.com/" rel="external">www.BYOethanol.com</a>. 

 
 In addition to the webinar, ACE and RFA also put out its fall <a target="_blank" href="http://www.byoethanol.com/images/stories/mr.byo_fall_2010_magazine.final.9.23.10 " rel="external">"Blending Fuels: A Petroleum Marketer's Guide to Blender Pumps, E85 & Mid-level Ethanol Blends."</a> The full 9-page magazine can be found at the BYO website.

‘Blend Your Own' webinar set for Oct. 20

Gills Onions, one of the largest fresh onion producer/ processors in the world, was disposing of 1.5 million pounds of onion waste every week by spreading it as compost across 15,000 acres it farms in Oxnard, Calif. It was an arduous, time-consuming process that cost the company approximately $400,000 annually. Gills had also long-faced two even potentially costlier concerns: high electricity costs (12 to 13 cents per kilowatt hour plus a 15 percent rate hike for 2010) and electricity blackouts. After experiencing a series of blackouts that had jeopardized the extensive refrigeration required to process and protect its fresh-cut onions, the 27-year-old family owned company began to aggressively pursue a long-held desire to convert its onion waste into energy. Determining how to efficiently convert onion waste into methane gas through anaerobic digestion presented a challenge, according to Bill Deaton, president of Deaton &amp; Associates LLC, the Kayenta, Utah, chemical engineering and energy consulting firm retained by Gills to study the concept and develop a plan.&nbsp; &ldquo;It works well at breweries where beer waste is used to run boilers and on dairy farms where manure is converted into fuel. But until Gills decided to try it, no one had used microorganisms to generate digester gas from onion waste before,&rdquo; Deaton says. &nbsp;After testing by Ruihong Zhang at the University of California, Davis confirmed that the sugar content in onion waste was ideal food for methane-producing microbes, Deaton assembled a team of engineers and contractors to develop an efficient waste-to-energy system they named the Advanced Energy Recovery System. In late winter 2009, following a multiyear research and design process, a new energy recovery system went fully on line at Gills, converting the company&rsquo;s onion waste to methane gas that feeds two 300-kilowatt fuel cells. Today this system is offsetting 100 percent of the company&rsquo;s baseload power costs and its expensive waste hauling and disposal operation is no longer necessary. Biogas Production During its fresh cut operations, Gills removes the top, tail and skin, which is roughly 35 to 40 percent of the onion. This waste, generated at a rate of approximately 300,000 pounds daily, now goes through grinding and pressing equipment where 30,000 gallons of onion juice (approximately 75 percent of the total waste) is separated from the solids. The juice is diluted and fed to the energy recovery system&rsquo;s fully automated anaerobic digestion process. Microorganisms in the digester convert the juice&rsquo;s sugar content into methane and carbon dioxide. The remaining leftover solids are sold as high-value cattle feed. In the first step, the onion juice flows to the anaerobic reactor&rsquo;s equalization tank that ensures the influent is pumped to the anaerobic digester at a constant, continuous flow. The equalized water is pumped to a rapid mix tank, where the influent is mixed with a dilution stream and conditioned for efficient anaerobic digestion by adjusting temperature, pH and nutrients (including phosphoric acid and nitrogen). A heating recirculation loop maintains the necessary temperature. From the rapid mix tank, the stream is pumped through a static mixer, which injects ferric chloride and micronutrients into the stream prior to entering the digester. &ldquo;The temperature of the feed flow is between 35 and 40 degrees Celsius (95 to 104 degrees Fahrenheit),&rdquo; Deaton says. &ldquo;To obtain this mesophilic condition, we brought waste heat from other processes in the plant to heat the digester feed.&rdquo; The system&rsquo;s upflow anaerobic sludge blanket (UASB) reactor has a working capacity of 550 cubic meters and a hydraulic retention time of just 29 hours. During this period, anaerobic bacteria within the digester convert the biodegradable onion waste material into methane, carbon dioxide and new biomass. Feed flow from the rapid mix tank splits and enters the bottom of the digester through two feed headers. A proprietary feed distribution-piping system is used in the distribution of the digester feed across the bottom of the digester. The distribution system is specifically designed to create good initial flow distribution of the conditioned onion juice through the sludge bed. The feed flows upwards through the digester. At the top of the reactor, effluent flows over weirs that spill equally into a continuous trough system and combine into a settler drop box. Once collected in the drop box, it exits the digester and flows to a standpipe. An anaerobic effluent composite sampler located in the recycle piping upstream of the rapid mix tank automatically collects samples of the effluent to determine digester performance. Biogas exits the digesters through a gas nozzle at the top of each digester vessel. Excess biomass is periodically removed from the digester and pumped to a tanker truck. Vent gases from the equalization tank, rapid mix tank, digester and standpipe are collected via a vent air blower and purified in a biofilter. One initial challenge the team faced was foaming generated in the sludge bed due to the high protein content of the onion waste. &ldquo;But by making several modifications and changing some of the gas piping, we eliminated the foaming issue,&rdquo; Deaton says. Digester Selection The team selected Biothane to build the specialized reactor to produce the methane. Biothane, a Veolia Water Solutions &amp; Technologies company, is a leading biotechnology company that focuses on highly efficient, cost-effective biological methods to treat wastewater while creating energy and reducing pollution. &ldquo;We liked the idea of the UASB reactor having a sludge bed system rather than a fixed bed,&rdquo; Deaton says. &ldquo;Initially we had considered using a fixed-bed reactor because of the high surface area for the bacteria to form. But after further consideration, we decided we didn&rsquo;t want to deal with the blockage, cleaning, or any of the other issues that can arise with fixed-bed reactors when treating a waste material containing pulp, like diluted onion juice,&rdquo; says Deaton. Biothane&rsquo;s UASB reactor forms a blanket of granular sludge that suspends in the tank.&nbsp; &ldquo;By suspending the bacteria, you can mix the feed with it and get good contact, and you don&rsquo;t have to deal with the problems of the fixed media in the bed. Ultimately, the simplicity of the UASB played a big part in our decision to select it,&rdquo; Deaton says. &ldquo;Plus, there was a lot of engineering we did outside of the reactor&mdash;we transferred waste heat from other processes in the plant with the onion juice, then diluted the onion juice and added micronutrients when necessary.&rdquo;&nbsp; Before the methane could be safely fed into the system&rsquo;s fuel cells, the team had to first overcome a serious obstacle. The methane produced by the feed flow has high sulfur content&mdash;part of what makes onions smell and makes people&rsquo;s eyes water. &ldquo;You can&rsquo;t send high-sulfur gas to these fuel cells because they have very stringent gas quality specifications for displacing natural gas as a fuel source,&rdquo; Deaton says. A grant to fund research by the Gas Technology Institute helped solve the issue. Consequently, the reactor was modified to allow for the collection and conditioning of the biogas. &ldquo;With this modification, the biogas flows from the digester into a conditioning process that purifies, dehumidifies and compresses the gas, making it acceptable for use in these high-efficiency fuel cells,&rdquo; Deaton says. &ldquo;As a result, the system produces about a 70 percent methane gas, which is very high quality for biogas.&rdquo; Fuel Cells=Clean Energy Because Gills wanted an energy recovery system that produces clean heat and electricity, it ruled out engines, combustors or boilers, choosing fuel cells instead. Although relatively new to commercial industry, fuel cells are increasingly being adopted because they generate a highly clean form of energy, run quietly, and produce power and heat at high efficiency. The new energy recovery system at Gills uses two 300-kilowatt fuel cells manufactured by Fuel Cell Energy. The methane produced by the anaerobic digester feeds the fuel cells, which re-form the methane to hydrogen and carbon. The hydrogen and carbon recombines with air in the fuel cells to generate electricity in a classic oxidation/reduction reaction. The end-products are electricity, water and carbon dioxide. The two fuel cells generate enough combined electricity to power the equivalent of 460 homes. &ldquo;A standard power plant runs at about 30 percent efficiency,&rdquo; Deaton says. &ldquo;These fuel cells are currently running at 47 percent efficiency. And, because this is an industrial site, Gills can take advantage of all the heat being generated, too&mdash;using it to heat water, evaporate water, and refrigerate or chill plant water. So, the system is actually running at about 80 percent efficiency and negligible emissions.&rdquo; The emissions avoided by using fuel cells, plus the emissions avoided by not trucking away and land applying the onion waste, yields an approximate 15,000 ton-per-year reduction in the company&rsquo;s carbon emissions. Since the fuel cells are designed to supply base-load power and do not ramp up and down quickly, Gills Onions is able to offset 100 percent of its base-load power costs. Therefore, the company is able to bring the power up and hold it steady 24/7. &ldquo;In a large fresh-cut produce plant like Gills, there are high, around-the-clock refrigeration demands. You don&rsquo;t ever want to lose the cold chain in maintaining fresh onions. This constant demand is now satisfied with the AERS process on-site,&rdquo; Deaton says. Quick Payback, Flexibility Gained The entire project cost $9.5 million. Deaton says the savings of $400,000 a year from eliminating waste hauling, $700,000 a year in deferred electricity costs, plus $2.7 million in incentives for the project from Southern California Gas Co. (as part of the state&rsquo;s Self-Generation Incentive Program) and tax credits should enable Gills to receive a five-year payback. &ldquo;Meanwhile, we&rsquo;re working on another process to take the remaining 25 percent of the waste left after the grinding and pressing process and reduce that by half. This should add another 20 to 50 percent to energy production. When you&rsquo;re offsetting Edison Power at about 12 to 13 cents per kilowatt hour, the payback comes fairly quickly,&rdquo; he says. As the system&rsquo;s project manager, Deaton says he is pleased with what has been accomplished, but he also says the work is not yet finished. Future plans include further reducing the carbon footprint through energy storage, water re-use, and extracting quercetin from the onion waste for use as an anti-oxidant supplement for humans. Authors: Denise Johnston Vice President Marketing and Sales, Biothane LLC <a href="mailto:denise.johnston@veoliawater.com">denise.johnston@veoliawater.com</a> Kristina Gerber Project Manager, Biothane LLC <a href="mailto:kristina.gerber@veoliawater.com">kristina.gerber@veoliawater.com</a> -------- The claims and statements made in this article belong exclusively to the author(s) and do not necessarilyreflect the views of Biomass Power &amp; Thermal or its advertisers. All questions pertaining to this article should be directed to the author(s).

Waste Reduction: At Gills Onions, employees remove the top, tail, and skinâ€”roughly 35 to 40 percentâ€”of the onion, generating some 1.5 million pounds of waste per week. Prior to installing an anaerobic digestion system, Gills had been disposing of

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Energy Juice: The onion juice is diluted and fed to the energy recovery systemâ€™s fully automated biothane UASB reactor.

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Livestock Feed: After the juice has been extracted, the remaining onion solids are further dewatered in a cake press and sold as cattle feed.

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Reactionary: The new energy recovery system at Gills uses two 300-kilowatt fuel cells. The methane produced by the Biothane anaerobic digester feeds the fuel cells, which reform the methane to hydrogen and carbon. The hydrogen and carbon recombines w

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Separation: Onion waste now goes through grinding and pressing equipment where 30,000 gallons of onion juice (approximately 75 percent of the total waste) is separated from the solids. The juice is diluted and fed to the energy recovery systemâ€™s fu

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Gills Onions' new energy recovery system converts about 300,000 pounds per day of onion waste to methane gas that feeds two 300-kilowatt fuel cells. The system is efficiently offsetting all of the company's baseload power costs while reducing carbon 

October 2010

Business Briefs

Business and People

Business Briefs: People, Products & Partnerships

Business Briefs

Columns

IRS Denies Patronage Dividend Deduction

The World Upside Down

Making Your Vote Count

Setting the Global Direction

Overcoming Color Bias

50 Years of OPEC

The Controllable and Uncontrollable

Push for E100 Engines

Zeroing in on Power and Thermal

ENERGY REVIEW: Reducing Water Usage in Biopower Production

LEGAL PERSPECTIVES: New Possibilities in the Hunt for Biomass Project Financing

POWER PLATFORM: Biomass Industry Pushes Back Against Potentially Harmful Laws

Meet You in Atlanta

RFS2 Compliance for Obligated Parties

Featured

Engineers on the Ground

Keeping an Eye On Yeast

Boosting the Back End's Bottom Line

Supply Supply Supply

Zero Tolerance for Waste

Cogeneration Sensation

Infrastructure to Market

Balancing Act

Waste Oil's New World

Contributions

Achieving a Sustainable Manufacturing Advantage

Onion Processor Uses AD, Fuel Cells To Convert Waste Into Energy

Energy Master Plans Streamline Operational Efficiency, Reduce Costs

October 2010.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

Business and People

Business Briefs: People, Products & Partnerships

Business Briefs

Columns

IRS Denies Patronage Dividend Deduction

The World Upside Down

Making Your Vote Count

Setting the Global Direction

Overcoming Color Bias

50 Years of OPEC

The Controllable and Uncontrollable

Push for E100 Engines

Zeroing in on Power and Thermal

ENERGY REVIEW: Reducing Water Usage in Biopower Production

LEGAL PERSPECTIVES: New Possibilities in the Hunt for Biomass Project Financing

POWER PLATFORM: Biomass Industry Pushes Back Against Potentially Harmful Laws

Meet You in Atlanta

RFS2 Compliance for Obligated Parties

Featured

Engineers on the Ground

Keeping an Eye On Yeast

Boosting the Back End's Bottom Line

Supply Supply Supply

Zero Tolerance for Waste

Cogeneration Sensation

Infrastructure to Market

Balancing Act

Waste Oil's New World

Contributions

Achieving a Sustainable Manufacturing Advantage

Onion Processor Uses AD, Fuel Cells To Convert Waste Into Energy

Energy Master Plans Streamline Operational Efficiency, Reduce Costs

October 2010