By the time you are reading this column, European decision makers will have already completed six months of chewing on what could be described as the indirect land use change (ILUC) bill.&nbsp;
You might remember that its most astonishing part is the limitation of food/feed-based biofuels to 5 percent of the original 2020 10 percent target of renewable energy in transport. &nbsp;Food concerns were the main reason for this cap, not ILUC. The gap that would occur needs to be filled by advanced biofuels. Aware of the still small volumes of those available biofuels, volumes are artificially increased through a multiplier.&nbsp;
Both measures are perceived as controversial. Green and social non-governmental organizations (NGOs) think 5 percent is still 5 percent too much, industry fears that many investments were done in vain, and many EU member states also fear that targets can no longer be achieved partly because the multiplier instrument is seen as ill-defined. The European Parliament is still nine months away from expressing its position but views are pretty much scattered like above.&nbsp;
A majority of member states gave the proposal a frosty welcome. Some countries did not find a single syllable in the proposal they could support. Others found that the proposal was not addressing the ILUC problem at all. The virtual accounting of advanced biofuels puzzled most member states. Only two countries supported the proposal on the 5 percent cap and three states believe that 5 percent is still too much.&nbsp;
Not much basis for achieving quickly a common ground, one could think. Still, first deliberations between the member states already indicate a sort of direction where this may land.
As the capping element is the most controversial, the Irish Council Presidency recently put two options on the table to solve the 5 percent conundrum. One option implied a limit of 5 percent on biodiesel only and the other option a higher cap for all first-generation biofuel without specifying a ceiling (yet).
As many as 11 states favored the latter and five the first one.&nbsp;
This first poll is indicating division within the EU powerhouse but is also the most likely way forward. The only big state that has been very silent in this is Italy, but then again it has other fish to fry first.
For the European Commission, this first poll must be a cold shower. Normally, prior to launching a bill, the Commission takes careful account of the informally expressed views of the member states. But it seems that in this case, the Commission "forgot" to do its homework, most likely speculating that the member states would follow the mood of so-called public opinion, aka NGOs. &nbsp;Member states, however, are faced with the reality of an economic crisis and cannot think of any good reason to kill investments and opportunities for more investments in agriculture.
Maybe the Commission has also given in too quickly to the food concern. In its first, just published, Renewable Energy Progress Report, we can read that "Commission analysis has found that grain use for bioethanol production ... to have minor (1 to 2 percent) price effect on the global cereals market. It also appears that biofuel demand is more price-sensitive than the food market and so demand declines more in response to rising prices." It merely confirms what the ethanol sector has always said, there are only marginal price effects on food prices. The report goes on to state that "it is not yet clear if EU biofuels demand contributes any abuse of land use rights." Also, in this respect, facts do not concur with the NGO fiction.&nbsp;
It beggars belief that the Commission did not publish this report prior to its bill. It would have taken away much of the unnecessary emotion around the EU biofuel policy. The industry now needs to call upon legislators to keep this evidence clearly on board when amending the bill.
The bill is not terribly long but it is complex and politically very sensitive, which could well make this battle between the pros and cons take much more time than expected. If no agreement is reached between the legislators before April 2014, the bill is very much dead in the water. What happens then depends on how the newly elected Parliament and Commission will decide. But until then, the battle continues, hopefully resulting in favorable outcome for the industry. We seem to be going in the right direction even though we are still far away from the finish.
Author: Robert Vierhout Secretary-general, ePURE Vierhout@epure.org

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The Battle Continues

We recently concluded the American Coalition for Ethanol&rsquo;s Fifth Annual Biofuels Beltway March Fly-in to Washington, D.C. &nbsp;Over 50 grassroots leaders met with more than 120 congressional offices and top U.S. EPA officials in two days, showing and telling how the renewable fuel standard (RFS) is working and that E15 is a safe and new fuel choice that will save consumers a lot of money.
At the conclusion of every fly-in, I feel exhausted but energized. &nbsp;Exhausted because we wear out a lot of shoe leather doing Capitol Hill visits. &nbsp;Energized because I&rsquo;m reminded each year that our industry&rsquo;s most effective asset is our base of grassroots support.
People like Tim Van Der Wal, a banker and board director for Highwater Ethanol LLC, outside Lamberton, Minn., who told legislators he&rsquo;s a first-hand witness to how ethanol plants create new business and jobs in rural communities and expand the local tax base.
A dairyman named Mark Thomas from Ohio, who farms in addition to milking cows (and has won multiple IHRA Funny Car National Racing Championships on E85), poked holes in the myth some livestock groups are trying to spin about ethanol. &nbsp;Mark, a board member for the Ohio Corn Growers Association, was able to explain how, thanks to the RFS, there&rsquo;s actually more corn for all end users and better quality feed for dairymen like him from the distillers grains, as a result.
And Scott McPheeters, a farmer and board member for KAAPA Ethanol LLC, near Minden, Neb., who enlightened legislators on the food and fuel issue, based on his experience raising food-grade corn for Frito Lay Inc. and No. 2 yellow corn for ethanol plants and livestock producers.
ACE organizes a fly-in each year because we recognize that, contrary to popular belief, the facts alone aren&rsquo;t our best weapons in the fight to advance the priorities of the ethanol industry. &nbsp;At ACE we believe how we deliver the facts is equally important when it comes to protecting the RFS or promoting E15. &nbsp;We believe in humanizing ethanol and have confidence that grassroots advocates can deliver our facts in a more compelling way than traditional means.
Let me give you a larger-than-life example. &nbsp;Remember the &ldquo;God made a Farmer&rdquo; Super Bowl ad by Dodge, featuring Paul Harvey&rsquo;s voice and stirring still photos of farm and ranch life? &nbsp;The ad didn&rsquo;t tell us farmers and ranchers work hard. &nbsp;It didn&rsquo;t even come out and say &ldquo;buy a Dodge pickup.&rdquo; &nbsp;The ad instead tugged at our heartstrings and it worked.
That&rsquo;s instructive for us. &nbsp;Facts are on ethanol&rsquo;s side but facts alone do little to capture the hearts of people we need to reach. &nbsp;People don't care how much we know until they know how much we care. &nbsp;
People like Tim Van Der Wal, Mark Thomas, Scott McPheeters care, and care so much about the future success of ethanol that they took the time to participate in ACE&rsquo;s fly-in with several other grassroots leaders.
And despite all the bombast coming from the oil industry&rsquo;s attack campaigns and lobbyists in Washington, what we took away from our fly-in is that Congress isn&rsquo;t nearly as enthusiastic about repealing the RFS or stopping E15 as Big Oil would like the public to believe. &nbsp;Congress may not view the RFS as perfect but on balance they recognize it is working. &nbsp;We can&rsquo;t and shouldn&rsquo;t let down our guard based on this, but we should know that when real people get in front of Congress and show how much they care about our industry, it makes a positive difference.
Big Oil is spending millions of dollars to repeal the RFS and stop E15 this year. &nbsp;Groups like ACE are spending what we have to counteract these attacks and proactively promote our industry. &nbsp;But at ACE, we&rsquo;re also focused on punching &ldquo;above our weight&rdquo; by intelligently using other valuable resources such as our grassroots members. &nbsp;Real people who are authentic, who are part of a classic American success story, a story about hard work, innovation, solving problems and building and growing a better future right here at home.
Thanks to Tim, Mark, Scott, and many others, I&rsquo;m confident and optimistic about our prospects.
Author: Brian Jennings Executive Vice President American Coalition for Ethanol 605-334-3381 bjennings@ethanol.org

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Annual Fly-in Exhausting But Energizing

April 1&mdash;Sharp losses and gains have developed through the ethanol complex over the past couple of weeks. What started out as renewed support from falling ethanol inventory levels and expected strength in gasoline and ethanol demand through the summer quickly took a major hit at the end of March.&nbsp;
Through the first half of March, aggressive buyer support started to develop in the ethanol market. This surrounded the movement higher in gasoline price levels as expectations of strong spring and summer driving demand seemed to indicate renewed interest in all segments of the energy complex. Traders quickly jumped on the upward moving market, pushing ethanol prices 20 cents higher despite strong corn price levels. The strength in the ethanol market was also fueled by falling ethanol stocks as the higher cost of production has limited production levels. Stocks have moved back to levels not seen since December 2011.&nbsp;
But the latter half of March has been marred by uncertainty of gasoline demand as concerns of economic stability in Europe took over the headlines. The USDA quarterly stocks report was also released on the last trading day of March, indicating increased stock levels and quickly pushed corn futures down its daily limit. Ethanol futures quickly reverted from following the gasoline market, back to the normal coat tail relationship with corn. This shift accounted for a one-day, 13-cent-per-gallon loss in ethanol prices. Following a month of instability, the ethanol market remains extremely unstable.&nbsp;
&nbsp;

Ethanol prices on a volatile pattern

1. Gevo Inc. has expanded its executive team, adding Stephen P. Toon as its new executive vice president of operations and process development. In his new role at Gevo, Toon will report to Christopher Ryan, Gevo&rsquo;s president, chief operating officer and chief technology officer, and have overall responsibility for Gevo&rsquo;s Luverne, Minn., facility from startup through commercial operation. Prior to joining Gevo, Toon served as vice president of engineering and operations at OPX Biotechnologies and vice president of manufacturing and engineering at Verenium Corp. He spent 10 years as a senior scientist at Cargill and was previously a scientist and doctoral fellow at the National Renewable Energy Laboratory.&nbsp;
 2. Steve Hartig, vice president of bioenergy with DSM&rsquo;s Biobased Products and Services unit, has been named general manager of Poet-DSM Advanced Biofuels LLC. In this position, he is responsible for the roll-out and licensing of the joint venture&rsquo;s integrated technology packages. Hartig will report to the joint venture&rsquo;s board of directors. He joined DSM&rsquo;s Engineering Plastics division in 1990 as sales and marketing manager for the U.S. automotive industry. He has since headed several business units within DSM in the fields of coating resins, biomedical materials, and fiber optic coatings. He moved into the bio-energy field in 2012. DSM&rsquo;s Bioenergy Cluster currently has main activities in Elgin, Ill., S&atilde;o Paulo, Brazil, and Delft, Netherlands. Anton Robek, president of Bio-based Products and Services at DSM, will take on Hartig&rsquo;s responsibilities for the bioenergy cluster outside of the Poet-DSM joint venture.&nbsp;
 3. LanzaTech has appointed Abdul Rahim Hj Hashim to its board of directors. Hashim is the current president of the Malaysian Gas Association, former chief executive of Petronas Oil Refinery and a 36-year veteran of the oil and gas industry. His leadership experience in the oil and gas industry is expected to bring value to LanzaTech as it takes its technology further into the fuel production chain.&nbsp;
4. Rochelle, Ill.-based Illinois River Energy LLC has joined the U.S. Grains Council. IRE operates a dry mill corn ethanol biorefinery that produces ethanol, distillers dried grains with solubles (DDGS), and industrial corn oil. The plant processes more than 40 million bushels of corn per year, producing 120 MMgy of ethanol and more than 300,000 tons of DDGS.&nbsp;
5. Northern Michigan corn grower Ed Breitmeyer has been recognized by the U.S. Grains Council for five years of service to the group, which focuses on expanding export markets for U.S. grains. Breitmeyer was honored at USGC&rsquo;s 10th International Market Conference and 53rd annual membership meeting in Charleston, S.C., for his five years of service as a council delegate. He is an active member of the USGC&rsquo;s membership and communications advisory team and serves as chairman of the Michigan Corn Growers Association.&nbsp; 6. Fredrikson &amp; Byron PA has announced that shareholder Richard Weiner was named a Fellow of Stanford University Law School&rsquo;s Transatlantic Technology Law Forum. Weiner will research and author a whitepaper on best practices for implementing a transatlantic renewable energy policy, where he will compare the best of U.S. and European renewable fuel practices. His term runs through 2014. Weiner is an international biofuels lawyer and is chair of Fredrikson &amp; Bryon&rsquo;s International Group and chair of the firm&rsquo;s Biofuels Group.&nbsp; 7. VG Life Sciences has announced Martin B. Dickman joined its VGEnergy subsidiary as chief science advisor. Dickman will enhance the scientific rigor of the company&rsquo;s alternative energy core technology platform and expand development of a line of products that enhance the lipid and sugar production in emerging market sectors, such as algal biofuels, and in more mature, larger markets, such as corn and sugarcane. His expertise in comparative plant physiology and plant pathologies will enhance and add a new dimension to the company&rsquo;s ongoing research. Dickman has served as director of the Institute for Plant Genomics and Biotechnology at Texas A&amp;M University and has served on the editorial boards of several scientific journals.&nbsp;
8. Archer Daniels Midland Co. has promoted Gary Towne to the newly created role of president of ethanol and risk management in the company&rsquo;s corn business unit. Towne joined ADM in 1998 and previously served as general manager of global risk and ethanol before being named chairman of the management board of Alfred C. Toepfer International GmbH a grain merchandising company in which ADM holds an 80 percent ownership stake. Additional prior positions Towne held with ADM include vice president of corn processing and vice president of ADM Export Co.&nbsp;
9. The Canadian Renewable Fuels Association has announced a new committee and classification of membership to advance next generation biofuels in Canada. The new committee and its members represent leaders in biofuels with their cutting-edge technologies and first-of-kind projects. Inaugural members of the CRFA&rsquo;s Next Generation Biofuels Committee include Quebec-based Enerkem, Denmark-based Inbicon, and U.S.-based Mascoma.&nbsp;
10. Air Liquide Industrial U.S. LP has announced a new carbon dioxide liquefaction plant in the California Central Valley. The new 450-ton facility will capture carbon dioxide gases from the Calgren Renewable Fuels LLC ethanol plant. The carbon dioxide will be recovered, purified, and liquified by Air Liquide to meet beverage-grade specifications for the food, beverage and manufacturing industries in the region. The facility will serve Air Liquide customers in the Central Valley and Los Angeles Basin, and is slated to be operational by the end of the year.&nbsp;
11. The Iowa Renewable Fuels Association has announced two additional stations that began selling E15 Iowa in mid-March. The IRFA announced the Fast Stop in Cresco, Iowa, and Kountry Korner in Baxter, Iowa, are both supplying the fuel to 2001 and newer vehicles. The two stations joined Linn Co-op Oil in Marion and Fredericksburg Co-op in Fredericksburg in supplying the fuel blend.&nbsp; _____________________________________________________________________________________________ Share your industry briefs To be included in Business Briefs, send information (including photos and logos if available) to: Business Briefs, Ethanol Producer Magazine, 308 Second Ave. N., Suite 304, Grand Forks ND 58203. You may also fax information to 701-746-8385, or email it to evoegele@bbiinternational.com. Please include your name and telephone number in all correspondence. 
&nbsp;

Hartig is responsible for licensing Poet-DSM Advanced Biofuels LLCâ€™s integrated technology packages. 

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Weiner will compare the best of U.S. and European renewable fuels practices.

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Breitmeyer (center) was recognized for his service to the USGC. Presenting the award was Don Fast, USGC chairman (left), and Tom Sleight, USGC president and CEO.

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Business Briefs

Does your ethanol plant share an industrial rail yard with another business? Do you move railcars for each other or does your industrial rail yard connect with more than one mainline railroad? If the answer to any of these questions is &ldquo;yes,&rdquo; you should be aware that there are a number of risks to consider before combining rail operations. Even seemingly harmless tasks such as sharing a dual-purpose railcar mover or agreeing to push the neighbor's cars onto the neighbor's rail siding when the mainline railroad delivers a car, can turn your ethanol operation into a federally regulated railroad. These federal obligations can include, but are not limited to, federal approval for changes in ownership or changes in track layout, long and expensive environmental impact studies, having to purchase mainline-certified locomotives, and the necessity to hire or train locomotive engineers.&nbsp;
The Surface Transportation Board was created after the Interstate Commerce Commission was abolished by Congress in 1996. Although the STB's role in regulating railroads is much smaller than that of its predecessor, it exercises preemptive jurisdiction over all railroad operations other than safety. Once a track falls under STB jurisdiction, most material changes to the track or even the track&rsquo;s ownership must be approved by the STB.&nbsp;
If ethanol plants are careful, they can easily avoid triggering the limited jurisdiction of the STB, which extends to the mainline and shortline (i.e., common carrier) railroads but not to "construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks." For most ethanol plants, this is a crucial distinction because this means that their private spur tracks and industrial rail yards are generally not going to be subjected to STB jurisdiction. But what is a "spur, industrial, team, switching, or side track?" Although the statute does not specifically define these terms, the courts and the STB itself have issued rulings that provide guidance.&nbsp;
First, the STB looks to the actual use of the track, and not its label, to determine what it is. If the track in question is only used as a spur, side or an industrial track then it is more likely that the STB will determine that it has no jurisdiction. As an example of a use for a spur track that would fall under the STB's jurisdiction, let's assume that a given industry track is extended through the rail yard to transport train cars to another mainline. If cars for other shippers traverse that connection, then the track has a mixed use; one of the uses is functionally the same as that of a short line railroad. &nbsp;The STB will likely assert jurisdiction. Other facts that the STB look at include the length of the track involved and how many different shippers share the same exempt industry track. The longer the track and the more shippers who use that industry track, the higher the risk that the STB will assert jurisdiction.&nbsp;
Some tracks can also be regulated by the Federal Railroad Administration, which only oversees railroad safety. The FRA exercises jurisdiction over any railroad operating on the "general railroad system of transportation," which is defined as "the network of standard gage track over which goods may be transported throughout the nation." The FRA has, as a matter of policy, excluded from its regulations certain categories of rail operations, including railroads whose entire operations are confined to an industrial installation and where the only connection is by a switch for the receipt of shipment.&nbsp;
However, the FRA has taken the position in numerous cases that if one shipper switches a car for a different shipper on a shared industrial track that the shipper is subject to FRA jurisdiction. This can trigger onerous safety requirements, including the inability to use a dual-use railcar mover, having to purchase locomotives certified for mainline use and having to establish worker training, engineer certification, safety inspection programs and policies for the shipper. Avoid FRA jurisdiction by adopting a strong policy that each shipper must move its own cars or that the common carrier must handle the spotting and delivery of cars for shippers who do not have their own railcar mover.
Before you agree to a neighborly request to help out another industry move its cars in or through your yard, be certain that you are not going to trigger federal jurisdiction for both you and your neighbor.&nbsp;
Author: James L. Pray Attorney, BrownWinick Law Firm pray@brownwinick.com 515-242-2404

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Don't Share That Yard Track!

Helping ethanol producers control bacteria without the use of antibiotics is the daily goal of Eric Sumner, global market development manager at DuPont Industrial Biosciences. Sumner also &nbsp;serves as president of the Distillers Grains Technology Council, a voice for the continued advocacy and market development efforts for this vital feed coproduct.&nbsp;
 How long have you had an interest in science? I trace my interest in science back to growing up as a kid in rural Chatham, Pa. I practically lived outdoors and when I was unlucky enough to be closed up in the house I would crack open the set of World Book encyclopedias we had on the shelf. Over the years as a boy I read through every one of those, from A to Z. The knowledge I gained from those volumes taught me there was a much bigger world out there beyond our small town. Science and engineering were just one aspect of a world that was out there to be discovered.
 How much time do the lab managers and plant operators you work with spend keeping bacterial outbreaks at bay? Our customers devote a lot of time and effort toward getting the most out of their plants. Today&rsquo;s ethanol producer faces many challenges in trying to maintain profitability. Controlling bacteria and their potential negative effects are just one aspect of that overall goal. Fortunately, due to our innovative chlorine dioxide-based technology, our customers don&rsquo;t need to spend much time on controlling bacteria, freeing them up to address other needs they may have in their operation.
 If one common-sized fermentation vessel becomes stuck because of bacterial outbreak, what is the lost revenue potential? Individual, severe batch infections can be a real problem. If they are bad enough they can cost upwards of $50,000 or more in losses. In addition to lost ethanol production, other serious effects of an acute upset result in continued high bacteria levels, high lactic and acetic acid in backset, high sugars and related problems in downstream operations, as well as a huge distraction away from other plant improvement efforts. Ongoing variation in performance is a much bigger problem and one of its root causes is ongoing bacteria presence in feedstock or the plant itself. It&rsquo;s not uncommon for a typically sized plant, with fermentors sized around 800,000 gallons to produce about 13.7 percent ethanol on average from a batch fermentation. That&rsquo;s by weight. But if they are able to eliminate variation in performance caused by chronic background contamination, they could produce 13.9 percent or more on average per batch. For a typical 100 million gallon per year plant this equates to over 1.5 million gallons per year in additional production. That&rsquo;s almost $4 million per year.&nbsp; Can you walk me through the process of how considering a certain chemical approach to solving a problem goes from a concept to commercial deployment? DuPont is a science company. &nbsp;We work collaboratively to find sustainable, innovative, market-driven solutions to solve some of the world&rsquo;s biggest challenges, making lives better, safer, and healthier for people everywhere. We employ Six Sigma methodology to help us identify and develop solutions that will help the biofuels industry to be as productive as possible. DuPont FermaSure XL is a perfect example of this. We start with the customer. Voice of the customer, or VOC as we call it, helps us understand our customer&rsquo;s needs. From there we bring our resources to bear on the challenges the industry faces. We have resources based at regional technology centers around the world who work to develop solutions to these challenges. Once we have a concept, we work with customers to test and fine-tune the offering until it meets their needs. Then it&rsquo;s a matter of launching the product commercially in a way that makes the most sense. We have many such projects under way today and one soon to be launched.
 What is driving the push for antibiotic-free solutions to bacterial outbreaks?&nbsp; In my opinion, it is driven by an effort to minimize antibiotic use. We all recognize that antibiotic resistant bacterial strains are a threat to our health. Resistance is also a concern in ethanol production. &nbsp;We have numerous strains of antibiotic-resistant bacteria we have isolated in our laboratory. Most of these were brought to our attention by prospective customers who were not able to control them within their facility using virginiamycin or other antibiotics.
 Can you talk about the role that the Distillers Grains Technology Council plays within the industry? Our mission at the DGTC is to support the distilling industry in the area of DGS (distillers grains with soluables). This is focused in three main areas. The DGTC works to serve the industry by providing educational and technical support to member producers and downstream users of DGS. We also work to advocate the use of DGS. We do that by being the principle voice on nutrition, safety and regulatory issues affecting DGS usage. Finally, the DGTC works to add value by encouraging, supporting research and promoting new and existing markets for distiller grains.
 The contribution made to an ethanol plant&rsquo;s bottom line by coproducts continues to grow. Is the industry maximizing the full potential of the feedstock it receives? The industry&rsquo;s history is likely the best predictor of our future. So with that in mind, I would suggest we still should have significant opportunities ahead of us to extract additional value from the feedstocks currently in use.
 Where do you think the industry will continue to find revenue opportunities on the coproduct side of their business? Certainly opportunities for value extraction will continue to be identified and integrated into today&rsquo;s business model. A perfect example of this is today&rsquo;s movement toward corn oil extraction&mdash;it&rsquo;s becoming the norm versus the exception. This is just one example of how producers have developed more value from the basic feedstock. Before corn oil, DGS were an early value-added product for producers. In Brazil, we see producers separating yeast as a coproduct. Such opportunities will continue to be identified and leveraged until we approach maximum value extraction.
 What is the most exciting thing happening in the biofuels space right now, from a scientific perspective? To me, the single most exciting development is the commercialization of cellulosic ethanol. In 2014 and 2015, we will see the first two to three commercial cellulosic ethanol facilities begin production. These plants represent the culmination of decades of work by scientists and engineers. It is a very exciting time for our industry.
&nbsp;

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Eric Sumner's lifelong fascination with science spans from his youth to the cutting edge of ethanol plant bacterial control and the growing importance of coproducts for long-term industry viability.

Q&A: A Man of Science  Wears Many Hats

April 1&mdash; Throughout much of the nation, winter has lingered much longer than normal and, from my perspective, much longer than it should! Since natural gas demand is highly correlated with winter heating degree days, it should come as no surprise that the U.S. has experienced robust demand through the first quarter and into the second quarter of the year. Natural gas prices have responded. The current NYMEX price (March 29) &nbsp;for the May natural gas contract is $4.025 per MMBtu, which is 100 percent higher than the contract low price set last April ($1.97 per MMBtu) for last May's contract. &nbsp;Natural prices moved up throughout the summer and into the fall. The October NYMEX settlement price was $3.02 per MMBtu, 50 percent higher than last April's prices but 25 percent below current prices. &nbsp;In spite of dramatic increases in prompt prices over the past year, deferred prices have remained relatively steady. &nbsp;
The accompanying chart shows the January 2016 NYMEX natural gas contract price from late 2011 until the present. Last April the January 2016 contract price was $4.30 per MMBtu. By October, the January 2016 contract price increased by 12 percent to $4.80 per MMBtu. Interestingly, the January 2016 contract price has actually dropped since October by 4 percent from $4.80 per MMBtu to $4.60 per MMBtu. The January 2016 contract price from last April to March 29, only increased by 7 percent even though the prompt price increased by over 100 percent. &nbsp;The forward curve has certainly flattened.&nbsp;
&nbsp;

Natural gas demand shows flattening forward curve

April 1&mdash;Values imploded at February month-end as corn stocks were much greater than expected. New crop corn acres were in line with what the trading community anticipated, however, values collapsed on the devaluation of old crop acres. The USDA placed corn March 1 stocks at 5.40 billion bushels, 380 million bushels above expectations. This suggests that December corn stocks were skewed as the new crop corn last year was harvested earlier and, possibly, demand may not be as high as anticipated. That very well could be as distillers grains continues to remain at historically high prices relative to corn, and other feedstuffs continue to trade at higher-than-normal values. So the high price of corn has been able to price itself out of the feed market and the world market. Theoretically, one could assume carry-out would increase by about 300 million bushels but the USDA may not make it that simple. Nonetheless, this could assume a 900-plus million bushel carryout if no increases are made in ethanol or the export demand.
New crop corn acres were estimated at 97.282 million acres, up 127 million acres from a year ago. Acreage in Iowa was estimated to be unchanged from last year while Illinois is expected to reduce corn plantings by 600,000 acres and Minnesota and North Dakota increase acreage by 250,000 and 500,000 respectively. The Delta states and Texas &nbsp;are expected to plant about 1 million more acres than a year ago at the expense of cotton, although this could alter slightly.&nbsp;
&nbsp;

Market factors continue to push, pull in corn market

April 1&mdash;After the flurry of DDGS trading done at the end of February, March slowed down quite a bit. &nbsp;The available margins that caused all that trading went away pretty quickly, and with it, the DDGS that was being traded ahead. &nbsp;There are more windows of opportunities still showing up in the October forward time slots, but those have been pretty brief.
Prices were steady for most of the month and dropped in late March with the crop report, which dropped the corn down the limit. Percentages of corn values were dropping into the low 90s before the report, after hovering &nbsp;around 100 for the latter half of February and the first half of March. &nbsp;Demand for containers remained strong in the Chicago market but barge bids fell. &nbsp;Rising river levels have enabled normal barge movements to resume, which is a relief. But moving bulk DDGS to places like Asia is just not as competitive as moving it in containers. Domestically, demand has been pretty steady as well but feeding margins have been dissipating for the past couple months. &nbsp;In the southeastern and southwestern U.S., feed wheat is a lot cheaper and is eating into ration space.
Today the volatility that we expect for the summer began with the crop report, which showed corn stocks to be more than the market expected. &nbsp;Events like this will continue to provide those windows of opportunity to sell DDGS and create margins for plants. It will pay to be nimble.
&nbsp;

DDGS prices drop following crop report

During the past two years, the U.S. ethanol industry has widely implemented corn oil extraction technology. At this point, producers who haven&rsquo;t installed the technology are in the minority.&nbsp;
Corn oil revenue has been key in times of tough margins and, in some cases, has meant the difference between continuing operations versus idling the plant. A March 11 report from the U.S. Energy Information Administration noted that although production costs are slightly higher for facilities with corn oil extraction, the extra revenue more than makes up for it. &ldquo;Over the past few years, margins at plants with corn oil recovery have been 15 to 20 cents per gallon higher than at plants without it, meaning their margins have remained positive, while margins at plants without corn oil recovery were negative,&rdquo; the report said. In addition, several of the plants that don&rsquo;t produce corn oil, which the EIA referred to as less sophisticated or simple ethanol plants, have idled.&nbsp;
Data from the Christianson and Associates PLLP benchmarking program, which provides detailed statistics on around 60 participating ethanol plants, illustrates the increasing importance of coproduct revenue to ethanol plants. The company&rsquo;s third annual benchmarking report, which was released September 2012, showed that while coproduct revenue had remained relatively constant at an average of 15 to 16 percent of total revenue since 2008, that number has risen in the past few years thanks at least in part to the increasing contribution of corn oil. In 2011, coproducts contributed an average of 18 percent of total revenue and by the end of the first half of 2012, the most recent numbers available, it had gone up to 23 percent.&nbsp;
 Drilling Down to the Details Increasing amounts of corn oil are being used as a biodiesel feedstock, according to EIA numbers. In 2012, corn oil was the No. 4 &nbsp;most common biodiesel feedstock, at a total of 571 million pounds of corn oil. Notably, beginning in August and continuing through the end of the year, the monthly totals for corn oil rose above the monthly totals for canola oil, the No. 2 feedstock.
Renewable Energy Group Inc., which operates seven U.S. biodiesel plants, has been using corn oil as a biodiesel feedstock since 2007. The company tracks the number of ethanol plants extracting inedible corn oil and estimates about 70 percent have now installed the technology, says Dave Elsenbast, vice president of supply chain for REG. As biodiesel production has grown, so has demand for all of the commonly available feedstocks, including corn oil. &ldquo;[The biodiesel industry has] produced roughly a billion gallons in 2012 and we have the [required volume obligation] of 1.28 billion for 2013,&rdquo; he says.&nbsp;
REG&rsquo;s consumption of corn oil is up, Elsenbast says. The company is using a lot of corn oil at its 60 MMgy biodiesel plant in Seneca, Ill., a multifeedstock- capable facility with the capability to process high and low free fatty acid feedstocks. That includes corn oil, animal fats, waste restaurant grease and used cooking oil. A $20 million upgrade in progress at its 30 MMgy Albert Lea, Minn., plant, making the facility multifeedstock capable, is expected to be completed by mid-2013. REG sees value in corn oil and anticipates it will remain a competitively priced feedstock into the future. &ldquo;Our market is going to continue to grow,&rdquo; he says. &ldquo;The demand from the biodiesel industry is going to continue to send economic signals to the market for ethanol producers to have separation technology at all the plants and maximize the percent yield that they can pull out of the syrup.&rdquo;
Nutriquest has seen a fourfold increase in distillers grains with 9 percent or less oil content in the last two years, says Rob Musser, director of technical sales and marketing. The Mason City, Iowa-based company tracks corn oil levels through Illuminate, a database of distillers grains nutrient loading, marketed to the poultry, swine and dairy industries. Based on numbers from their database, since 2011, the ethanol industry has extracted an estimated 873 million pounds of corn oil. Assuming a value of $900 a ton, that adds up to $392 million in revenue from corn oil&mdash;a significant number. &nbsp;
The company doesn&rsquo;t specifically track how many ethanol plants extract corn oil but builds its estimates based on the corn oil content of the samples in its database. Distillers grains with corn oil content of less than 10 percent are considered to be from a plant with corn oil extraction technology. It&rsquo;s important to keep in mind that corn oil content can vary, however, depending on weather conditions and region, Musser clarifies. An ethanol plant that doesn&rsquo;t extract corn oil could produce distillers grains containing 9.8 or 9.7 percent corn oil.&nbsp;
With that cutoff point in mind, currently only 16 percent of the more than 130 ethanol plants tracked produced distillers grains containing more than 10 percent corn oil, and therefore aren&rsquo;t extracting corn oil. That&rsquo;s a big change from 2011, when 59 percent of the plants surveyed weren&rsquo;t extracting any corn oil. The number of plants that extract the most corn oil has changed dramatically from 2011, when only 2 percent of ethanol plants produced distillers grains containing less than 7 percent corn oil, to today, with 28 percent of plants producing distillers grains containing less than 7 percent corn oil. Still, not all ethanol plants are going for maximum separation levels. &ldquo;We still have a lot of plants that still have pretty high oil level even though they are extracting oil,&rdquo; he says.&nbsp;
 Ethanol Producers Green Plains Renewable Energy Inc. has corn oil extraction installed at all nine of its ethanol plants, with the total capacity to produce 145 million pounds of inedible corn oil annually. Although corn oil currently brings in about the same price in the animal feed additive and biodiesel markets, Green Plains is selling the majority of its corn oil to the biodiesel industry, says Todd Becker, president and CEO. Other possible markets for inedible corn oil listed in Green Plains documents filed with the U.S. Securities and Exchange Commission include rubber substitute, rust preventative, inks, textiles, soaps and insecticides.&nbsp;
Unlike the average ethanol production company, Green Plains has diversified revenue streams beyond its ethanol business, which includes ethanol and distillers grains production, Becker says. Corn oil, just one of several sources of the company&rsquo;s non-ethanol operating income, is separated out into its own business segment. The company considers corn oil an important business but just one of the many factors that helps get the company through times of depressed margins. Over a 20-year period, corn oil&rsquo;s impact on the bottom line will fluctuate depending on the overall price structure of the agricultural markets. Corn oil, which generally trades at a percentage of the price of soybean oil, generates more revenue for ethanol producers right now, with soybean oil at multidecade highs. &ldquo;You want to have it,&rdquo; he says. &ldquo;It absolutely adds a nice incremental income.&rdquo;
Green Plains doesn&rsquo;t aggressively go for maximum corn oil yield. The company carefully calculates how much corn oil to extract, depending on what markets its distillers grains are going into from the various plants. &ldquo;We make sure that we don&rsquo;t get any of our customers disappointed in the quality of our product,&rdquo; he says. &ldquo;We are very, very careful, where other companies will just extract all they can.&rdquo;&nbsp;
Still, with process improvements, the company has improved its corn oil yield numbers. On average, Green Plains yielded 0.61 pounds of corn oil per bushel of corn in the fourth quarter of 2012. That&rsquo;s up from 0.5 pounds per bushel in the same time period of 2011 and 0.4 pounds per bushel when the company first began extracting corn oil. Some individual Green Plains plants have higher corn oil yield depending on technology, region and distillers grains markets served, Becker says, adding that the highest yield is 0.9 pounds per bushel.&nbsp;
Like Green Plains, Illinois River Energy LLC in Rochelle, Ill., doesn&rsquo;t go all out on corn oil extraction, a technology it has had online since Dec. 1. The company&rsquo;s corn oil yield is about 0.48 pounds of oil per bushel of ground corn. Neal Jakel, general manager of IRE, said the company exports the majority of its distillers grains to the international market via containers and some of its key customers require a minimum of 8 percent fat content. &ldquo;We are shooting to hit a residual oil target in our DDGS versus maximizing our net oil recovery,&rdquo; he says, adding that plants that sell their distillers grains into local dairy or beef markets wouldn&rsquo;t have the same need to produce a higher-oil distillers grains product. &ldquo;The tradeoff for us is not worth it given the end markets we sell our DDGS into,&rdquo; he adds. &nbsp;
Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946&nbsp; hjessen@bbiinternational.com
&nbsp;

A sample of corn oil, left, is lined up with Renewable Energy Group Inc. biodiesel produced from corn oil. Variations in color are a result of different technologies. 

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As more ethanol producers install corn oil extraction technology, the average oil content in Nutriquestâ€™s database of distillers grains samples has steadily decreased.

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Revenue from corn oil has become an important part of the bottom line at the majority of U.S. ethanol plants. 

Corn Oil Makes The Grade

St. Louis introduced the world to the first cast-iron dome, the first skyscraper and launched the historic Lewis and Clark expedition. With a rich history of innovation and discovery, it is little wonder that the 29th Annual International Fuel Ethanol Workshop &amp; Expo will make its home in St. Louis.
More than 2,000 industry professionals are expected to attend the FEW, which will be headquartered at the America&rsquo;s Center in downtown St. Louis June 10-13. Nearly one-fourth of the attendees will be ethanol producers, who, last year, represented 87 percent of U.S. production capacity. All seven Canadian provinces were represented along with 41 U.S. states and 33 countries. &nbsp;
&ldquo;As the international ethanol industry&rsquo;s leading production-oriented event, the FEW truly lives up to its mantra, &lsquo;Where Producers Meet,&rsquo;&rdquo; says Tom Bryan, president of BBI International and editor-in-chief of Ethanol Producer Magazine. &ldquo;Plant employees, managers and board members attend the FEW because it&rsquo;s built around their needs. The agenda is rich with content aimed at helping them run their facilities more efficiently and more profitably, and the expo is full of industry service providers and equipment manufacturers eager to talk to plant personnel about new technology and solutions.&rdquo;
Learning Opportunities During the general session, attendees will hear from pioneers in cellulosic ethanol development, learning whether this is the year that commercial-scale production finally arrives. Producers will catch up on progress in construction and commissioning from cellulosic industry leaders in the U.S. and beyond. &nbsp;
After the general session, attendees can fan out to the expo floor where exhibitors from across the industry represent every facet of ethanol production and services, including equipment manufacturers, suppliers and technology service providers, and economic development; finance and lending professionals. Breakout panels will feature four tracks: production; leadership and financial management; coproducts, and cellulosic and advanced ethanol. &nbsp;
The most popular track in recent years, the cellulosic and advanced ethanol panel sessions, will include more project updates from the industry&rsquo;s first commercial-scale facilities, as well as those looking at ways to scale up cellulosic output at existing starch-based facilities. Steve Rust, vice president of sales and marketing for California-based Edeniq Inc., says attendees will learn how current ethanol plants can migrate to second-generation technologies and provide cellulosic gallons in existing facilities to meet the renewable fuels standard. Others speaking on the &ldquo;Parallel Production&rdquo; panel will give updates on the approaches being developed by ICM Inc., Katzen International Inc. and the National Corn-to-Ethanol Research Center. Other topics in the track include cost-effective saccharification pathways, leveraging new products and process pathways and algae integration.&nbsp;
Tailored to industry professionals focused on production efficiency and process optimization, the production and operations track attracts a full house each year at the FEW. In one of six panel presentations in that track, Robert Wilson, ICM Inc. product manager, will describe new software from ICM to replace paper records with a comprehensive database with the goal of improving plant performance. &ldquo;We are in the information age, but getting that information into a format to make it useful has been a challenge,&rdquo; he says. Others on the panel on capturing and utilizing real-time data will present the work being done by Ashland Water Technologies, Rockwell Automation Inc. and Carbo Analytics LLC. Other topics within the production and operations track include fermentation optimization techniques, managing bacterial contamination, water-use strategies, yeast population efficiency and environmental and regulatory compliance.
Addressing leadership and financial management, Mark Warren, a partner from Colorado-based Ascendant Partners Inc. will participate in the panel titled &ldquo;Plant Valuation in an Era of Tight Margins and Industry Consolidation.&rdquo; Given the tight margin environment and all the activity taking place in terms of consolidation and policy, he says, &ldquo;it&rsquo;s paramount to understand what that means to the outlook of your business, specifically the financial implications. My session will be valuable because I will speak of ways to be more proactive in a challenging market environment so that your company is best prepared for long- term success, whether that means continuing to operate or defining an exit strategy.&rdquo; Other panels in the track will cover facility profitability, reducing risk, understanding available corn inventories, assessing plant performance, and workforce stability.
The fourth track is customized for attendees responsible for producing and marketing distillers grains as well as plant executives exploring product diversification strategies such as fractionation and corn oil extraction. Rachel Overheul, engineering manager from Kansas-based WB Services LLC and a new speaker at the FEW, will be speaking on the &ldquo;Revenue Remix&rdquo; panel discussing how to make coproducts more valuable to ethanol producers. She will showcase a plant that uses corn oil to produce drop-in biodiesel with a process similar to a crude oil refinery. Other subjects in the track include methods to increase corn oil yield, diversification&rsquo;s effect on financial viability, the potential for lowering a facility&rsquo;s carbon score, how to enhance distillers grains, and new milling strategies.
Wilson, Warren and Rust, all past attendees of the FEW, say the event is a great opportunity for ethanol producers. &ldquo;The FEW is the main event for the ethanol industry, as it showcases new ideas and products to keep plant users abreast of new developments to improve their business performance,&rdquo; Wilson says. If a speaker has a concept that addresses a need, the attendee and speaker can begin to work together on solutions, he adds. According to Rust, the event provides the chance for producers to see the innovative contributions that are making plants more cost-effective.
Tour Highlights The FEW goes beyond the expo and workshops to include networking opportunities during golfing and a newly-expanded-to-two-day offering of industry tours. The golf outing at the Gateway National Golf Links requires preregistration. On the first day of the conference attendees will have the chance to see the state-of-the-art Bunge-SCF Grain Elevator on the Mississippi River in Fairmont City, Ill. The terminal can handle approximately 300 truck deliveries per day and boasts 1 million bushels of grain storage capacity. That afternoon, the tour buses will cross the river to Monsanto&rsquo;s campus at Chesterfield, Mo., where participants will learn about the breadth of the company&rsquo;s work from seed genetics to the entomology of a corn field. &nbsp;
Tour participants on the final day of the FEW will be joining in a celebration of 10 years of research at the National Corn-to-Ethanol Research Center on the Southern Illinois University campus in Edwardsville, Ill. Over its decade in existence, nearly 50 different technologies now found in the ethanol industry have passed through the facility. NCERC is lining up a special program with speakers from the National Corn Growers Association, the American Coalition for Ethanol, Renewable Fuels Association and others. Additionally, the tour will feature the center&rsquo;s analytical and fermentation labs, the pilot-scale ethanol plant on site and will include a look at two feedstock programs and a mini-exposition showcasing the latest equipment in corn production.&nbsp;
Industry Awards&nbsp; Each year, BBI International and&nbsp;Ethanol Producer Magazine&nbsp;recognize two individuals for their contributions to the ethanol industry. This year's honorees will be announced in the general session at FEW. The Award of Excellence recognizes an individual who has made significant contributions to the fuel ethanol industry through research, technical advisory or development activities. Gerald Shurson, a distillers dried grains researcher from the University of Minnesota, was last year&rsquo;s recipient. The FEW High Octane award acknowledges outstanding efforts to both promote and advance the ethanol industry over the years. The 2012 winner was Larry Johnson, owner of Minnesota-based LLJ Consulting and Business Development. Nominations are being accepted through May 6.&nbsp;
Author: Chris Hanson&nbsp; Staff Writer, BBI International&nbsp; chanson@bbiinternational.com&nbsp; 701-738-4970

State-of-the-art Bunge-SCF Grain Elevator on the Mississippi River in Fairmont City, Ill., will host a tour for FEW participants. 

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More than 2,000 people will gather in St. Louis for the 29th Annual International Fuel Ethanol Workshop & Expo. 

FEW:  'Where  Producers  Meet'

The sleepy world of ethanol renewable identification numbers (RINs) was turned on its head this spring. Prices that had been 2 or 3 cents per RIN rocketed to more than $1 for a few days in March before it slowly settled into the 60-to-70-cent range as the month progressed. Between Jan. 2 and March 22, the average daily price for D6 RINs was 37 cents, according to Informa Economics Inc.
Ethanol opponents ran with the story of high RIN prices to create yet another argument in a campaign to kill the renewable fuels standard (RFS). The ethanol industry rallied to defend the RFS and the RINs compliance system. As the discussion picks up steam, Ethanol Producer Magazine is stepping back to take a look at how RINs work and examine some of the many questions raised in the controversy over the dramatic price increase.
 RINs Primer The system is built upon U.S. EPA regulations to administer the RFS. There are four main players who all register with the EPA: the ethanol producer, the blender, the broker and the obligated party. Speculators may also register to trade in RINs. The EPA provides an online reporting program&ndash;&ndash;the Moderated Transaction System (EMTS)&ndash;&ndash;that generates and tracks RINs as the transactions occur. But beyond the EMTS, a system has evolved in the five years since the Energy Independence and Security Act was passed in 2007 and EPA published its rules in 2010. &nbsp;
The ethanol producer's role in RIN generation is basic: produce the physical gallons and fill in the required information to generate the RINs in the automated EMTS system. That information becomes part of the shipping documentation as the product moves into the marketplace. In practice, many ethanol producers don&rsquo;t actually handle RINs at all, but hand off the task to their ethanol marketers and the independent firms providing RINs tracking services.&nbsp;
RINs follow the physical gallons through the distribution system until the ethanol is blended into gasoline, at which &nbsp;point the RINs are separated and used by the blender, if it is an obligated party, to meet its renewable volume obligation (RVO). If that blender has excess RINs, they can be banked and, up to 20 percent carried into the next year. Or, excess RINs can be sold. Blenders are not necessarily obligated parties, however, and many separate RINs and offer to sell them privately or in one of the trading platforms offered by brokerage firms. &nbsp;
Obligated parties in this system are domestic refiners, importers and downstream parties who make finished gasoline or blendstocks. Still proposed as of late March, the EPA&rsquo;s 2013 RVO for D6 RINs for conventional renewable fuels was 9.63 percent of the gasoline handled by obligated parties. Corn ethanol makes up the vast majority of this classification. Other fuels can generate D6 RINs, but are generally used to meet the mandates for renewable diesel or advanced biofuels.&nbsp;
Obligated parties that need to demonstrate compliance with their RVO can buy and blend physical gallons of ethanol or buy separated RINs. The RINs market is unregulated and private, although all parties involved in buying and transferring RINs are registered with the EPA. A number of brokers provide trading services and their associated market-analysis services report bids and offers on a daily basis. &nbsp;
Underlying the basic description, though, is a trading system lacking the transparency and rules that are in place for other commodities. In corn trading, for example, the Chicago Board of Trade handles the corn futures trading that is the benchmark for cash bids posted by thousands of corn buyers on boards and websites on a daily basis. There are CBOT limits to daily price moves and the volume traded each day is reported as are the ongoing and closing prices. Commercial traders using the market for hedging and speculators providing needed liquidity all have rules to follow. A large number of analysts follow trends in the volumes of data that is publicly available and the active participation, or lack of, from commercial and noncommercial traders is the fodder of daily market reports. The RINs market has mimiced that structure, but without many of the rules and little transparency. That will soon change, however, as the CME Group announced in early April that it will offer three RINs contracts on the NYMEX starting in late May.
 Market Dynamics Blue Ocean Brokerage LLC is one of many offering RINs trading services, built upon its platform of physical ethanol and swaps trading services. &ldquo;What&rsquo;s been created is a marketplace, a fragmented market,&rdquo; says David Steiner, senior broker and analyst. &ldquo;Our role is price discovery.&rdquo; When asked how many brokers operate in the space, he explains it is hard to tell. &ldquo;There are a decent amount of brokers out there, but the ones doing a fair amount of business are just a handful, but it is hard to gauge.&rdquo; In addition, information on the number of obligated parties is available through the EMTS, but is difficult to sort out. &nbsp;
On the market analysis side, Brian Milne is editor and manager of a team of specialists producing oil market news and analysis for Schneider Electric, owner of the DTN line of services. &ldquo;It&rsquo;s not like trades on an exchange where you can look at the end of the day and see the volume,&rdquo; he says. &ldquo;We do know there is volume. We see a million RINs on offer. Whether that&rsquo;s being bought, we can&rsquo;t tell.&rdquo; An expected shortage of RINs is driving the market, he explains. &ldquo;We understand that a lot of obligated parties have already carried over 20 percent of their RINs from last year to help meet this year&rsquo;s obligations, but the renewable fuels obligation goes up again next year,&rdquo; Milne says. &ldquo;And we&rsquo;re not expecting to see a ramp up in gasoline demand. The concern is not only about meeting this year&rsquo;s obligation, but 2014.&rdquo; &nbsp;
Valero Energy Corp.&rsquo;s position in the system as both an ethanol producer and an obligated party as a refiner provides another example of the system&rsquo;s complexity. In the world of ethanol, Valero&rsquo;s total ethanol capacity of 1.2 MMgy puts it in third place among U.S. ethanol producers. But Bill Day, executive director of media relations, points out its ethanol production is a fraction of the volume handled in its refineries. The total ethanol capacity matches just one medium-size refinery, and the company has 16 refineries, making it the largest independent refiner. &ldquo;The ethanol Valero makes in its plants doesn&rsquo;t necessarily get blended into the gasoline Valero makes at its refineries,&rdquo; he explains. Like other ethanol producers, the RINs generated in Valero plants accompany the shipments into the market. Valero does little actual blending and thus buys the needed RINs to meets its RVO on refinery production of gasoline.
When asked whether many RINs were trading at these high prices, Day replies, &ldquo;It&rsquo;s not a terribly tiny volume of trade, because we buy a lot of RINs.&rdquo; &nbsp;While Day declined to comment on the numbers, an investor presentation on Valero&rsquo;s website shows a throughput capacity of 3 million barrels per day at its 16 refineries. With an RVO of 9.63 percent, that would require several hundred thousand RINs daily. &nbsp;
It is difficult to analyze the RINs market, Day concurs. &ldquo;It&rsquo;s hard to tell because the RINs market is so opaque, there&rsquo;s no transparency to it. It&rsquo;s not a regulated market like gasoline or crude oil or other commodities that trade on the New York exchange or CBOT. It&rsquo;s mostly private transactions.&rdquo; While it&rsquo;s difficult to know the volumes of trade, he adds, &ldquo;It seems obvious that some are banking RINs because of the idea that the country is getting close to or at the blend wall.&rdquo; &nbsp;
Ethanol Response As RINs prices rose rapidly, the American Petroleum Institute, the American Fuel &amp; Petrochemical Manufacturers association and individual oil industry executives warned that gasoline prices would need to rise to cover the increased cost of RINS. Estimates of 10 cents per gallon were reported in the media, indicating some expected the entire cost to be passed through to the consumer. RINs became one more part of their argument to modify or end the RFS. &nbsp; &nbsp;&nbsp;
The ethanol industry organizations, the Renewable Fuels Association, Growth Energy, the American Coalition for Ethanol and the recently formed coalition, Fuels America, as well as individual producers, kicked into high gear to explain the complex issues and provide documentation to support the ethanol industry&rsquo;s point of view. In multiple news conferences, statements, blogs and reports, the industry laid out its basic position:
&bull; The oil industry, in dragging its feet on implementing higher blends such as E15 or E85, has brought the blend wall situation on itself.&nbsp;
&bull; It is entirely possible to blend more ethanol. There is no shortage of ethanol nor of ethanol capacity to produce more ethanol, and thus, more RINs. And, with ethanol trading 50 to 60 cents per gallon less than gasoline, more should be blended to save consumers money.
&bull; There are 2.5 billion unassigned RINs going into 2013, more than enough to cover any deficits for the compliance reports due in February 2014. &nbsp;
&bull; The oil industry originally helped design and openly supported the open market RINs mechanism for the flexibility that RINs credits would provide in showing compliance.&nbsp;
&bull; High gasoline prices are being driven by the record profits of the oil companies, with profits of more than $1 per gallon.&nbsp;
 Independent Analyses In late March, two separate analyses came out that conclude increases in RINs prices are having little impact on gas prices. University of Illinois economists Scott Irwin and Darrel Good conclude the impact on RINs on gasoline prices was but a few cents in the first quarter. &ldquo;RINs prices started moving higher in January and peaked near 90 cents in early March and then declined modestly,&rdquo; they write in a FarmDocDaily analysis. &ldquo;The timing of the increase in CBOB (conventional blendstock for oxygenate blending) gasoline prices predates the increase in RINs prices by several weeks, which casts doubt on RINs prices as a significant driver of gasoline blendstock prices. In addition, CBOB prices were lower in late March than in October, further suggesting that factors other than RINs prices dominated CBOB prices.&rdquo;&nbsp;
&ldquo;It is difficult to make a precise estimate of the impact of high RINs prices on gasoline prices, in large part because of the diversity of obligated parties within the motor fuel supply chain,&rdquo; they continue. &ldquo;Some of the obligated parties are fully integrated through the motor fuel supply chain (refining/blending/retailing). At the other extreme, some obligated parties participate only at one end of the supply chain. These would include firms who only import or refine and those who only blend.&rdquo;&nbsp;
The two economists conclude the current controversy reveals a major weakness in the system. &ldquo;Importantly, the E10 blend wall and current high prices of D6 RINs may be revealing a significant flaw in the way EPA designates obligated parties for RFS2. In 2010, EPA considered, but rejected, the alternative of moving all RVOs downstream of refineries and importers to those who supply finished gasoline at the retail level. This change would have resulted in a more homogeneous group of obligated parties and better aligned an obligated party's RVO with access to RINs. Such a realignment may have precluded some of the current diverse impacts of high RINs prices on obligated parties and minimized the cost of RFS2 compliance.&rdquo;
Informa Economics was commissioned by the RFA to do a third-party assessment of the impact of RINs prices on gasoline prices, which it concludes was 2 cents at most and more likely a fraction of a cent. Gas prices went up following distinct seasonal patterns, not RINs prices. &ldquo;The increase in gasoline prices and crack spreads during the first quarter of 2013 has been generally consistent with increases experienced in 2011 and 2012, despite the fact that conventional ethanol RIN prices averaged 3 cents during the first quarter of 2011 and 2 cents during the first quarter of 2012,&rdquo; the report says. Another factor is that in the first quarter of 2013, ethanol prices averaged 44 cents per gallon below wholesale gasoline, which translated into a net benefit to consumers of 2 to 4 cents, considering both the ethanol price advantage and the direct cost of RINs prices.&nbsp;
Informa Economics also took a look at factors affecting ethanol prices. As the weekly average price of D6 RINs in late March increased by 76 cents from the first of the year, the Chicago spot price of ethanol increased by a comparatively modest 19 cents per gallon. Corn prices, on the other hand, increased by 30 cents per bushel. Thus, the report says, &ldquo;11 cents per gallon of the ethanol price move can be &lsquo;explained&rsquo; by the increase in production costs.&rdquo;&nbsp;
More analyses will no doubt be coming in the weeks and months ahead as the industry works to fully understand the complex RINs trading system and shed light on its opaque workings. More seriously, the RINs controversy is becoming one more test of the nation's commitment to renewable fuels. Ethanol industry veterans have described the current challenges to the RFS as the toughest yet. There is no doubt that the ethanol industry is rising to meet the challenge. &nbsp;
Quality assurance for RINs
Amidst the controversy over RINs prices, ethanol producers are also contemplating proposed rules from the U.S. EPA to create a voluntary quality assurance program (QAP). Created as a response to RINs fraud in biodiesel, the new system would provide options to reduce the liability for obligated parties who are ultimately held responsible for demonstrating compliance with valid RINs, and replacing any RINs found to be invalid. In the biodiesel case, the U.S. EPA estimated three companies generated over 140 million biomass-based diesel RINs that did not represent qualifying biofuel.&nbsp;
The ethanol industry could rightly argue that this shouldn&rsquo;t apply to it since there have been no fraud allegations, says Shashi Menon, managing partner in Iowa-based EcoEngineers, a RINs management service. &ldquo;Also, ethanol plants are bigger and much more sophisticated.&rdquo; But the run-up in RINs prices increases the risk for the obligated parties, he adds. &nbsp;&ldquo;Maybe there won&rsquo;t be a demand for QAP for ethanol&mdash;unless your buyer tells you that you need it.&rdquo;
The proposed voluntary QAP system has two tracks. Option A is more stringent, but relieves the obligated buyers of liability to replace invalid RINs. Menon describes the QAP system his company provides to several biodiesel producers and a few ethanol clients. &ldquo;We take production data each night, in an automatic data dump. We generate the RINs for them&mdash;it automatically interacts with the EMTS.&rdquo; The system includes ongoing monitoring of plant production data to verify the physical gallons produced match the RINs generated. While it may seem like overkill, he admits, the EPA&rsquo;s proposed rules for QAP would require this sort of ongoing monitoring for Option A.&nbsp;
Option B is less stringent and requires four site audits, explains Menon. &ldquo;It requires a professional engineer to sign off on the mass balances for the quarter.&rdquo; This would be in addition to the annual attestations now required where a certified public accountant audits a plant&rsquo;s records to confirm product transfer documents and RINs generation are properly done.
Menon often hears from ethanol producers that their RINs are handled by their marketers, but he cautions that it is the producer who is held liable by the EPA. &ldquo;I&rsquo;ve talked to many ethanol plants that don&rsquo;t have a staff person assigned to do any interface with the EPA because their marketer does it all for them.&rdquo; They are vulnerable, he suggests, because should their marketing arrangements change, they may not have ready access to their RIN accounts and risk falling into noncompliance. &ldquo;They&rsquo;re still 100 percent responsible,&rdquo; he cautions.&nbsp;
Looking ahead, Menon expects that as corn ethanol producers begin to add cellulosic or advanced biofuel capabilities, RINs verification will become necessary. He also expects that California officials will soon follow EPA in asking for audits for the California low carbon fuel standard. &ldquo;For those who say, &lsquo;We don&rsquo;t touch a RIN, we just give it away,&rsquo; that may be true for a while for many,&rdquo; Menon says. &nbsp;&ldquo;But if you want to be competitive in the marketplace, you have to understand RINs and you have to be able to take care of them.&rdquo;&nbsp;
&nbsp;
&nbsp;Author: Susanne Retka Schill Senior Editor, BBI International publications 701-738-4922 sretkaschill@bbiinternational.com

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The weekly price chart from October through March shows that ethanol prices (with RINS attached) and RINs prices moved in a concurrent manner, say University of Illinois economists Scott Irwin and Darrel Good in their analysis. 

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Lack of transparency makes market analysis difficult.

Ethanol Rins Market Explodes

Tight margins for ethanol producers throughout last year led most in the industry to carefully examine all possible opportunities for generating coproduct revenue to supplement income derived strictly from ethanol sales. Specifically, decisions surrounding the extraction of corn oil have been high on everyone&rsquo;s agenda this year, according to analysts with the Biofuels Benchmarking Program at Minnesota accounting and consulting firm Christianson &amp; Associates PLLP.
More than 60 ethanol plants in the United States and Canada participated in the benchmarking program last year, and among these plants, more than 23 percent of total revenues are derived from coproducts like distillers grains and corn oil. Over half of the participating plants include corn oil extraction as an important component of their coproduct revenue stream.&nbsp;
Innovations in extraction technology have led to large increases in average corn oil yield over the past year. Corn oil yields have risen steadily as plants improve their technologies and processes for extraction. Average yields have increased more than 50 percent since the beginning of 2011 and now average well over half a pound per bushel. The leading top 25 percent of plants can expect even higher yields, averaging upwards of 0.8 pounds per bushel in the most recent quarter for which data is available, Q4 of 2012.&nbsp;
Netback on corn oil has fluctuated, rising early in 2011, then falling slightly for several quarters before stabilizing. The most recent calendar year has seen corn oil netback averages remaining in the range of $700 to $750 per ton. Leaders in this category averaged nearly $800 per ton for the most recent calendar quarter.&nbsp;
Regional Differences The profitability of corn oil extraction does appear to be tied to the unique economic environment in which each plant exists. For instance, plants with a robust market for livestock feed may find it most profitable to focus on producing feed with the specific oil content most desirable (and therefore most highly compensated) in their particular market. Other plants may have strong relationships with biodiesel producers or other markets for their corn oil, and in these cases, obviously, plant management teams will want to focus their efforts on maximizing corn oil production.&nbsp;
How, then, does any individual plant decide how much to focus on corn oil production, given these differences in marketability? In addition to performing economic analysis using information specific to each plant&rsquo;s own market, some general observations may be made by looking at coproduct profitability data from several different angles. One of the most common ways to do this is by grouping plants into geographic regions (east of the Mississippi River for the Eastern region, west of Highway 83 from North Dakota to Texas for the Western region, and the Central region represented by everything in between).&nbsp;
Looking at coproduct revenue contributions with an eye to a plant&rsquo;s geographic region shows a difference, on average, to the significance of corn oil, and this difference has remained present over time, including the most recent calendar year. Last year, corn oil sales net dollars averaged nearly twice as high in the East (per gallon of ethanol sold) as they did in the West. Western-region plants&rsquo; corn oil net sales dollars averaged just over 4 cents per gallon of ethanol sold, while Eastern plants averaged over 8 cents. When reviewing the relative contribution of corn oil to profitability, as a percentage of all coproduct sales, the difference by region remains pronounced, with the Eastern region averaging over 12 percent of coproduct sales from corn oil alone versus Western plants averaging just over 6 percent.
The cause of this disparity obviously varies from plant to plant, but in general, many plants in the Western region are located closer to markets for their livestock feed coproducts, whereas Eastern plants may have closer relationships to biodiesel refiners or other purchasers for their corn oil.
Although a regional gap remains, it is closing with Western plants gaining traction in the corn oil market. Thus, assuming that the most profitable plants in all regions are looking to diversify their coproduct revenue streams as much as possible and maximize the value of both distillers grains and corn oil, the question arises: will a plant generate more total revenue by extracting corn oil? Or will the value of livestock feed go down too far to make corn oil extraction worthwhile? The latter question arises frequently and benchmarking data indicates the answer is no.
To explore this concern, it is useful to examine total coproduct sales in two groups: plants that produce corn oil and plants that do not. We see from this comparison that plants that produce and sell corn oil historically earn more from coproduct sales than those that do not, although the additional revenue has flattened slightly over the past several quarters. The average difference in coproduct revenue over the past four quarters, between plants that produce corn oil versus plants that do not, is about 3 cents per gallon of ethanol sold. For a plant producing 60 MMgy, this translates to about $1.8 million in additional revenue&mdash;a significant amount given today&rsquo;s extremely tight margins.
Cost vs Return How about overall profitability? Increased corn oil yields (and hence higher profits from this source) do correlate to slightly increased costs, but the data indicates that the financial benefits of the higher yields outweigh the slight cost differences.
In order to examine this assertion more closely, the benchmarking analytical team reviewed data only from corn oil-producing plants, and then split those plants into several groups based on their corn oil yields each quarter. The intended purpose of such a grouping was to see whether the additional costs necessary to optimize corn oil yield were worthwhile investments. In other words, if a plant can expect corn oil extraction to generate 3 or 4 cents of additional revenue for every gallon of ethanol sold, do their production costs increase so much as to wash away the profit in this revenue?
As mentioned, the top 25 percent of corn oil producers by yield average more than 0.8 pounds of corn oil extracted per bushel of feedstock ground. By contrast, laggards, the bottom 25 percent, in corn oil yield produce an average of only about 0.3 pounds per bushel. For such a large difference of more than half a pound of corn oil extracted per bushel, it&rsquo;s reasonable to assume there may be a correlated increase in certain expenses, notably chemical and ingredient costs to effectively break down the corn components and extract the oil. Thus, when we review the data in this manner, it&rsquo;s not surprising to see that, indeed, corn oil-yield leaders pay more on average for chemicals and ingredients.&nbsp;
The difference between leader averages and laggard averages in chemical and ingredient cost, however, is well under a penny per ethanol production gallon&mdash;a difference that is more than made up for by that large increase in corn oil yield. Breaking down the data even further, a look at the cost category that specifically contains corn oil additive shows that even in this tiny cost category, the difference between a typical leader in corn oil yield and a laggard is negligible. The average plant spends about 0.75 cent per production gallon in this &ldquo;other chemical&rdquo; category, which includes only highly specialized-use chemicals like corn oil additive. By contrast, a corn oil yield leader spends just a few tenths of a cent more.
As the field of ethanol production keeps pace with the ever-changing marketplace, considerations such as finding the appropriate coproduct mix to optimize and diversify revenue for each plant will become increasingly important. Each plant obviously has its own unique considerations, but with several years of industry data available for analysis at this point, it seems clear that corn oil-extraction technologies have earned a closer look for any producer.
 Author: Paula Emberland Benchmarking Business Analyst Christianson &amp; Associates PLLP pemberland@christiansoncpa.com 320-441-5544
&nbsp;
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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Average yields increase 50 percent, netbacks top $700 per ton.

Corn Oil Adds Significant Profitability to Ethanol

As I sit here in a hotel room, I am reminded of a recent story about the evolution of the bedbug. Disconcerting, right? Bedbugs apparently have evolved to include a thicker, waxlike exoskeleton that repels pesticides, a faster metabolism that creates more of their natural chemical defenses, and a dominant mutation to block pyrethroids. I&rsquo;m not entirely sure what a pyrethroid is, but I wish the little buggers couldn&rsquo;t block them.
Throughout our lifetimes things evolve. The relationship I have with my wife has evolved after several years of marriage. My children, thank goodness, have evolved in their knowledge. And more relevant to you at this moment, the ethanol industry has evolved. Now, it is no secret that markets mature, but evolution requires adaptation to the environment.&nbsp;
The environment of ethanol production margins today mandates increased revenue from coproducts in order to stay afloat. Without dried distillers grains and corn oil extraction, most ethanol plants would be at the bottom of the lake after this year. But a one-time change, such as the installation of a centrifuge, doesn&rsquo;t constitute evolution. To truly evolve, one must adapt to the environment and produce something of value to current conditions.&nbsp;
Today, more than 300 MMgy of distillers corn oil is being extracted, but unfortunately, it is only adding value at around 38 cents per pound, well below where it could be with a bit of evolution. Demanding more than 50 cents per pound for corn oil is not that farfetched, and I predict we will see it, not only in our lifetime, but in our immediate future. Now that the value to ethanol plants of extracting corn oil from dried distillers grains has been thoroughly confirmed, it is time to turn our attention to increasing the value of this oil and removing barriers that hold down its price. What is holding us back from seeing those values are the constituents we have become accustomed to&ndash;&ndash;the waxes, color, odor and the consistency of the oil.&nbsp;
 FFAs, Waxes, Yield&nbsp; Today only two major markets exist for distillers corn oil&mdash;feed and fuel production. Feed markets are always going to demand the lowest-cost feed formulations. That inherently puts corn oil into a battle against other fat sources that today have a more stable market. And while biodiesel production is a good outlet for corn oil today, the current free fatty acid (FFA) levels limit further expansion into the biodiesel industry. &nbsp;
I envision a day in the near future where corn oil will evolve into markets such as oleo chemical, export and even food. If you think I am crazy, just think back to the evolution of the bedbug. Things evolve to stay alive, and today&rsquo;s ethanol industry demands to place its coproducts into the most valuable markets. &nbsp;
So how do I propose we get corn oil into those opportunities? We need to fundamentally change to increase corn oil value. We need to dramatically lower free fatty acids from today&rsquo;s standard of more than 15 percent to less than 1 percent. We need to lessen or remove the wax from corn oil. And, we need to produce significantly greater volumes.&nbsp;
First, the FFA and wax issue: &nbsp;We know that FFAs are a limiting factor to biodiesel producers&rsquo; usage of corn oil, oftentimes limiting the total production capacity of a plant. A lower-FFA corn oil would increase demand for biodiesel. But even beyond fuel, a lower-FFA material with a profile more like that of edible corn oil would open the doors to oleo chemical and even, potentially, food-grade opportunities. These markets could push distillers corn oil prices well above 50 cents per pound, returning significantly higher profits for ethanol producers. &nbsp;With this type of value created, increasing demand will push the need for increased distillers corn oil production.&nbsp;
Even in today&rsquo;s environment, there is a strong need to increase the volume of corn oil. The U.S. EPA projects 680 million gallons of corn oil will be needed to meet biodiesel volumes for the renewable fuels standard. It is estimated that 300 MMgy of distillers corn oil will be extracted from ethanol facilities this year, well below the demand for corn oil for biodiesel production. The biodiesel industry shouldn&rsquo;t need to look towards alternative fats and oils to fill the gap.&nbsp;
With close to 80 percent of ethanol plants now using some form of corn oil extraction, the need now turns toward extracting even more oil through mechanical, physical or chemical means. Surfactants are already a popular choice.&nbsp;
The chemical, biological and mechanical technologies for additional extraction of corn oil have become very easy to monetize. But some of the best ways to increase corn oil volume in a plant is to focus on the plant operators. Just increasing operator training or additional automation can ensure consistent corn oil extraction and increase overall volumes being generated, even doubling them. If an ethanol plant had just two additional days of corn oil production per quarter at 38 cents per pound, the plant would net about $100,000 more revenue annually. These numbers also illustrate how extremely important it is to keep extraction equipment in good working condition. &nbsp;How many days of downtime did you have last year?&nbsp;
It is in these areas&mdash;removal of FFAs, removal of wax and increased volumes&mdash;that I predict ethanol producers will find their evolution. As general manager of FEC Solutions, I am excited to be bringing a technology called Corn Oil ONE into the marketplace that can achieve these objectives. I am excited about the future of coproducts value from ethanol production, and I hope you share in that excitement. More importantly, I am excited to hit my bed tonight in my hotel room. But first, I am going to check the mattress for bedbugs.
Author: Joe Riley&nbsp; General Manager, FEC Solutions 515-868-0030 jpriley@fecsolutions.com
&nbsp;
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

Joe Riley, general manager at FEC Solutions, makes a case for improving extraction rates, free fatty acid and wax profiles to open market opportunities for the ethanol industryâ€™s corn oil.

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Ethanol producers need to improve the quality, rate of extraction. 

Corn Oil Industry Needs to Evolve

Many ethanol producers look for additional revenue streams beyond the core ethanol and distillers grains to extract corn oil and capture CO2. Opportunities exist to expand that even further, integrating available synergies from the underutilized carbon dioxide resource as well as other waste streams.
The potential for CO2 to serve as an additional revenue stream is well-known. Unlike CO2 from coal-fired power plants, carbon dioxide produced in the ethanol process is regarded as pure, with a CO2 concentration of up to 99 percent. &nbsp;After some minor processing to remove the small amounts of impurities, the pure CO2 stream can be sold to the merchant markets for use in beverage production and certain medical uses, as well as dry ice. Ethanol-based CO2 now makes up nearly one-third of the North American supply of CO2.
A typical ethanol plant producing 50 MMgy will also produce roughly 150,000 metric tons of CO2 per year. As large as this number is, the price of raw gas sold does not add enough revenue to offset the losses ethanol plants are suffering in today&rsquo;s tight margin environment. Ethanol producers typically sell the raw CO2 to refining companies that then sell the refined CO2 to the merchant markets. In addition to the beverage, medical and dry ice markets, CO2 is also used in heavy industrial processes such as enhanced oil recovery and fracturing, which are both techniques for the recovery of oil from older oil wells.
The value of the refined CO2 from the merchant and industrial markets does not accrue to the ethanol producer but, rather, to the refined CO2 supplier. Ethanol producers cannot justify the large capital expense required to refine and market the refined CO2, and are thus not deriving the full value of their production.
Tapping Process Streams The CO2, as well as the stillage, can also be utilized in the production of high-value coproducts for needed revenue generation. Stillage has little economic value and is thus recycled to the maximum extent possible or simply disposed of. An entirely new use for such process streams can deliver returns to producers and, we would argue, is required to offset losses in today&rsquo;s tight margin environment for ethanol producers. Our company, Solutions4CO2 Inc., is proposing a solution to utilize both stillage and undervalued CO2 in its trademarked Integrated Biogas Refinery to produce new coproducts, algae biomass and oil, for sale in high-value nutraceutical and pharmaceutical markets.&nbsp;
The IBR takes organic waste such as stillage and produces biogas through anaerobic digestion (AD). North America, with about 200 installed AD facilities, lags behinds Europe where 8,000 AD units have been installed over the past 10 years. With tough regulations regarding waste-handling stimulating AD development and long-term subsidized power purchase agreements incenting renewable power, that number is expected to grow to more than 25,000 by 2020. Lacking those incentives, the North American utilization of AD requires improving the payback periods and addressing air and water permitting issues. Meeting tight air quality regulations surrounding hydrogen sulfide (H2S) emissions is a particular challenge. The presence of corrosive H2S in the AD biogas also adds to the maintenance cost of the gensets used to process the biogas stream into power.&nbsp;
Solutions4CO2 &nbsp;has developed &nbsp;a trademarked Biogas Purifier and Infusion System to address those issues. AD biogas, containing roughly 60 percent methane, 39 percent CO2 and small amounts of hydrogen sulfide (H2S), is processed in the BPIS using a patented microporous, hollow-fiber technology to separate the CO2 and H2S and infuse them into water. The BPIS removes more than 85 percent of the CO2 and 95 percent of H2S from the biogas stream and delivers a 90 percent purified methane stream to a genset for more efficient power production. The BPIS can also capture and infuse the CO2 directly from the ethanol process stream if an AD is not desired.
The CO2/H2S, or CO2-only infused water is then used to cultivate microalgae in an algae cultivation system&mdash;the source of extractable high-value oils containing nutraceutical and pharmaceutical coproducts such as omega-3 and astaxanthin.
The IBR is a closed loop system that utilizes all of the outputs of the AD system as inputs to the coproduct platform. Power, CO2, H2S, clean methane, water and digestate from the AD are utilized as inputs to the coproduct platform.&nbsp;
Accruing Additional Value&nbsp; Ethanol plants require large capital outlays up to $200 million for 100 MMgy of capacity. The current losses can be more than offset with a relatively low, additional capital outlay for an IBR. For a marginal investment, the ethanol plant can install the IBR and process the stillage and CO2 byproducts on site and earn the value added from the utilization of the waste streams in the production of high value added coproducts. Instead of merely selling the CO2 to the markets described above, the utilization of the waste streams on-site and ownership of the IBR allows the plant to accrue the value creation and strengthen its overall financial profile.&nbsp;
The operation has now been transformed from an ethanol plant producing ethanol with a CO2 byproduct to an Integrated Biogas Refinery producing high-value algae-based products utilizing CO2 and power from the stillage from corn, with the ethanol being the byproduct. This Integrated Biogas Refinery model allows for ethanol production to continue sustainably and profitably, while also reducing CO2 emissions and making valuable use of all the products in the value chain including the production of high-value nutraceutical and pharmaceutical coproducts. The low capital and operating expenditure of the IBR and high-margin value of the coproducts results in payback periods under three years.&nbsp;
Solutions such as the IBR are an example of how the model of integrating various technologies that have a common denominator, such as CO2, can transform struggling industries into sustainable industries by looking at the total product of a process and utilizing each product for its most value-added use. The key is enabling the producers of these byproducts to earn their full value instead of simply selling them as commodities.
In addition to the ethanol industry, a number of other sectors are suited to IBR deployment utilizing AD biogas from dairy waste or commercial/municipal organic waste. Solutions4CO2 currently has its commercial demonstration facility in New Brunswick, Canada, which is producing microalgae using infused CO2 from AD biogas on a dairy farm.
&nbsp; Author: Dil Vashi&nbsp; Manager, Corporate Development, S4CO2&nbsp; 416-859-0909&nbsp; dil.vashi@s4co2.com
The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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An integrated biorefinery would use CO2 from an ethanol plant to produce high-value algae coproducts.

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Stillage, CO2 become valuable inputs in synergistic design

Tap, Enhance, Process Stream  to Create Value-added Products

Nearly all companies claim they make decisions based on their customers&rsquo; needs, but I wonder how many really do. The failure rate of startups and small businesses indicates that most of them listen poorly or not at all. Each year, thousands of inattentive companies go belly up, offering products and services too few of us want or need. &nbsp;
Our industry is different. Ethanol producers listen to their customers, especially when it comes to coproduct specifications, because each of their customers has unique requirements. For the same reason, industry vendors listen and respond to the needs of the individual ethanol plants they call on. DuPont&rsquo;s Eric Sumner, the subject of this month&rsquo;s page-32 Q&amp;A, says each of DuPont&rsquo;s industrial bioscience products is born from VOC, or voice of the customer.&nbsp;
The concept of VOC recurs this month inside of two data-rich updates on the incredible upsurge of corn oil extraction in the North American ethanol industry. Today, about 70 percent of U.S. ethanol plants extract oil, in varying percentages. Rapid innovation in oil extraction technology has led to large increases in average corn oil yield over the past two years. In fact, average yield has increased more than 50 percent since the beginning of 2011 and is now well over a half-pound of oil per bushel. The most determined corn oil producing ethanol plants are getting eight-tenths of a pound per bushel at $700 to $750 per ton. But again, it&rsquo;s all about listening to customers. As EPM Managing Editor Holly Jessen reports in her page-34 feature, &ldquo;Corn Oil Makes the Grade,&rdquo; most producers extracting corn oil aren&rsquo;t simply maxing out, but rather setting their oil recovery targets at levels tailored to the fat content needs of their distillers grains customers. So, while one producer may go for maximum oil extraction, another may intentionally strive for a much lower number with VOC in mind. &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp; &nbsp;
According to Paula Emberland, author of our page-54 summary of Christianson &amp; Associates&rsquo; recent benchmarking excerpt on corn oil production and revenue trends, about 23 percent of total plant revenues are now derived from distillers grains and corn oil. That number is remarkable given the fact that the industry average just four or five years ago was 16 percent. In fact, in 2011 it was still just 18 percent. Yes, distillers grains prices have risen, but corn oil sales have been the real difference-maker.&nbsp;
The details in both stories are telling. The bottom line, however, is that plants that produce corn oil simply earn more from coproduct sales than plants that don&rsquo;t. And the most ambitious corn oil producers&mdash;those with unique opportunities to pursue eight-tenths of a pound per bushel&mdash;have done well by it. Simply said, U.S. ethanol plants that extract corn oil&mdash;especially with VOC in mind&mdash;have maintained positive margins over the past few years.
&nbsp;
Tom Bryan, President &amp; Editor In Chief tbryan@bbiinternational.com
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Making Customer-Driven Corn Oil Decisions

With all of the opposition surrounding biofuels, we just keep slogging on through the mud like old work horses. Thousands of people still show up at conferences, with unbridled enthusiasm. Groups continue to get dollars to conduct more cutting-edge research into advanced biofuels. Almost every day, new developments in the production of biofuels are announced, making biofuel production better, faster and cheaper.
In short, despite the exaggerations, misrepresentations and, in some cases, outright lies, biofuels continue to gain headway in the market. It&rsquo;s an idea at its golden moment in time and despite drought and floods, there is little anyone can do to stop it.
There are those who would question my optimism, given that we seem to have stalled out a bit given the headwinds we are currently facing. I would say to them, be patient, time is on the side of renewable energy.&nbsp;
There have been many times over the past 30 years that I thought this may be it, it&rsquo;s over for biofuels. Then, through the efforts of those representing us in Washington and in the various states, a few things change and we begin moving forward once again. I am convinced beyond question that we will continue to make headway despite the adversity.&nbsp;
There are times in life when you just know you are on the right side of the issue. Now is one of those times. I&rsquo;m not being an optimistic old fool, I&rsquo;m just going by history. As it has time and time again, no matter what befalls this industry, somehow, The Beat Goes On!
That&rsquo;s the way I see it.&nbsp;
Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com
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The Beat Goes On

Margaret Thatcher once said, &ldquo;You may have to fight a battle more than once to win a war.&rdquo; That is certainly the case when it comes to the renewable fuel standard (RFS). When the first RFS was passed in 2005 the American Petroleum Institute supported the bill because it provided a pathway to end the use of methyl tert-butyl ether. When the program became such an unmitigated success that Congress expanded the RFS to 36 billion gallons in 2007, the API was vehemently opposed. Now, API is attempting to relitigate the RFS and have it overturned. &nbsp;So we&rsquo;ll have to fight that battle again to win the war for America&rsquo;s energy security. Win it we will.
The official beginning of this year's Battle for the RFS occurred last month when the House Energy and Commerce Committee released the first in a series of white papers to investigate various elements of the RFS, the first on the blend wall. The committee asked a series of questions, most of which reflected a bias against the RFS, suggesting the blend wall was indicative of a &ldquo;problem&rdquo; with the law that needed to be fixed. But it&rsquo;s not a problem with the law. It&rsquo;s the result of oil companies refusing to comply with it!
When Congress passed the 36 billion gallon RFS, it clearly understood that volume of fuel would compel the market to move beyond 10 percent blends. The expectation was that E85 would become a viable competitor of gasoline. Indeed, the auto companies responded to the market signal provided by the RFS by dramatically increasing their production of flexible fuel vehicles. Ethanol companies also responded to the market signal of the RFS, expanding production, investing in new cellulosic technologies and initiating the effort to seek approval for E15. &nbsp;
The only stakeholder to ignore the market signal of the RFS was the oil industry. From the beginning, oil companies refused to make the modest infrastructure investments necessary to provide market access for E85 and they have steadfastly opposed every effort to commercialize E15. A recent analysis by the RFA&rsquo;s Geoff Cooper concluded the cost of RFS compliance for 2013 would amount to just 6 cents per gallon of capital investment to accommodate the additional ethanol needed beyond E10.
Oil companies say they&rsquo;re not to blame, that it&rsquo;s the gasoline marketers who own the downstream blending facilities where the investments have to be made. &nbsp;While that&rsquo;s true to some extent, it is also true that they have used every tool available to them, including the terms of franchise agreements, to keep marketers from offering consumers choice at the pump.&nbsp;Oil companies are now appealing to Congress to repeal the RFS because the &ldquo;blend wall,&rdquo; which they created, supposedly makes it impossible to meet the increasing volume obligations. Phooey. Congress shouldn&rsquo;t reward their bad behavior and should consider the consequences of changing the rules in the middle of the game. Businesses rely upon consistent and reliable policy. Investments have been made in response to the RFS. Changing that policy now simply because one stakeholder has ignored the law would chase investors in biofuels away, reversing the progress we have made toward a diverse energy portfolio and leaving America ever more dependent on oil. That&rsquo;s why we&rsquo;ll continue the fight, and that&rsquo;s why we&rsquo;ll win it again.
<img src="http://www.ethanolproducer.com/app/webroot/email-images/RFA-cartoon-oil.jpg" border="0" alt="" width="400" />
Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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Scaling the Wall … Again

As we all know, the ethanol industry recognized it was time to end federal subsidies and collectively asked the federal government to end the subsidies for grain-based, first generation ethanol. The Volumetric Ethanol Excise Tax Credit was no longer needed. The ethanol industry had matured, it was standing on its own and demand was up. The goal of the leaders in the ethanol industry has always been to increase America&rsquo;s energy independence with homegrown, renewable fuel.
Ethanol is the lowest-cost, most-competitive liquid fuel available in the marketplace today. It is generally understood that when we move towards new energy sources, there often is some level of incentives to help that technology grow and become cost competitive, giving the industry time to mature and compete on its own. First-generation ethanol has done that. The industry has matured and is operating freely without any federal subsidies.&nbsp;
Yet, 100 years later, Big Oil refuses to give up its excessive tax subsidies.
The petroleum industry continues to enjoy immense tax breaks and subsidies that have been in place for nearly a century. In fact, one such oil subsidy just reached a milestone of 100 years on the books. This begs the question&mdash;why do we still highly subsidize one of the most profitable industries ever, with federal taxpayer dollars? The oil industry is mature, making record profits, and yet continues to gorge at the trough of the public treasury.
While Big Oil has a near stranglehold on the liquid fuels market, ethanol is starting to break through oil's near-monopoly, and in doing so ethanol&rsquo;s success has threated the bottom line of many oil companies. American consumers see that ethanol revitalizes rural communities and spurs economic growth by creating new jobs that cannot be outsourced throughout America&rsquo;s heartland. They also enjoy cost savings and a choice at the pump. American consumers are lining up to get more and pay less&mdash;with higher blends of ethanol. Not only is it less expensive, it has a higher octane rating and is a better-performing fuel.
Just the other month, the International Monetary Fund released a study which concluded that, &ldquo;broad reform of the world&rsquo;s energy subsidies could lead to long-term economic growth.&rdquo; The study further noted that, &ldquo;while aimed at protecting consumers, subsidies aggravate fiscal imbalances, crowd-out priority public spending, and depress private investment, including in the energy sector. &hellip; Subsidies also distort resource allocation by encouraging excessive energy consumption, artificially promoting capital-intensive industries, reducing incentives for investment in renewable energy, and accelerating the depletion of natural resources.&rdquo;
First-generation ethanol has already voluntarily given up its tax incentives, now it is time for Big Oil to do the same.
Time and again, oil companies fight renewable fuels and while they may pay lip service to supporting renewables, they erect every legal, regulatory and public affairs hurdle to prevent biofuels from succeeding. It&rsquo;s time they get out of the way of advancements in renewable fuels and also give up the excessive subsidies they enjoy.
Let&rsquo;s take a look at what Big Oil gets and gives back. They enjoy record subsidies; in fact, the mature oil industry may be the most subsidized in U.S. history. It is truly unfortunate that we continue to transfer hundreds of billions of American dollars overseas to politically hostile and unstable regions, when we should be investing that money right here, at home&mdash;developing sustainable and renewable fuel sources for the future.
In return for all the subsidies the taxpayers hand out, we get oil spills, excessive price spikes and record costs each year for gasoline, even as Big Oil touts the so-called domestic energy boom. If we are producing so much at home, why do prices at the pump continue to rise?
The bottom line is that Big Oil continues to take in, while it puts corporate profits ahead of the public&rsquo;s interest and safety. They are simply complacent in the ongoing activities that are harmful to their own consumers. They will continue to extract oil from tar sands, regardless of the environmental impact, and if I were a betting man, I would say the BP spill in the gulf, is not the last one we will see from Big Oil.
We need to stop the insanity of subsidizing the most profitable companies that pollute our environment and cost us billions. It is time to move forward with renewable fuels, like higher blends of ethanol, such as E15.
Author: Tom Buis CEO, Growth Energy 202-545-4000 tbuis@growthenergy.org

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Ending the Century of Subsidies

The production cycle for this issue of Biomass Magazine fell smack dab in the middle of the International Biomass Conference &amp; Expo, which our team just wrapped up. More than 1,200 of you joined us in Minneapolis, and I&rsquo;m not alone when I suggest that this year&rsquo;s event was the strongest in the conference&rsquo;s six-year history.&nbsp; Our efforts to establish the International Biomass Conference &amp; Expo as the preeminent annual venue for the varied sectors that together form the biomass industry we are so happy to serve are truly succeeding.
 In keeping with tradition, we opened the conference with a moderated conversation featuring the leaders of the various biomass industry associations.&nbsp; This year, we asked association leaders to share with our audience news about facilities under active construction and expansion. We were delighted to hear of robust activity in all biomass industry sectors. Each of the association leaders pointed to policy certainty as a critical component and the number one catalyst for the continued and accelerated expansion of their segment. Interestingly, foreign energy policy is emerging as one of the largest catalysts for domestic biomass energy activity. Seth Ginther, executive director of the U.S. Industrial Pellet Association, briefed our audience on the tremendous market signal being sent to the American Southeast by the architects of the U.K. Renewable Obligation Certificate scheme.
 The appetite for U.S.-produced American wood pellets is music to the industry&rsquo;s ears, but the Europeans want and are demanding a fiber supply that can meet both performance and sustainability criteria. This issue of Biomass Magazine examines each of these in turn.&nbsp; Chris Hanson&rsquo;s feature, &ldquo;The Weight of Biomass Analysis,&rdquo; lays out the most common tests performed on wood pellets, the manner in which the tests are performed and the reason buyers demand that these metrics be met. Anna Simet&rsquo;s feature,&nbsp; &ldquo;Certification Uncertainty,&rdquo; outlines the challenge the industry faces in bringing enough forest acres under active certification to satisfy the appetites of foreign pellet buyers.&nbsp; While institutional landowners can afford the investment of getting their acres certified, it isn&rsquo;t feasible for many smaller private landowners. Simet&rsquo;s feature suggests that the forestry industry and certification segment are already working on this problem so that the sustainability requirements of foreign buyers don&rsquo;t create a supply bottleneck stateside.
 Clearly, the underlying point of certification requirements is to prove the overall sustainability of the supply chain. As our industry ramps up to satisfy growing demand for biomass inputs and biomass-derived energy, our customers and the public at large will have to be assured we are doing so sustainably. The job that now falls to our industry is to work with our customers, our partners and the scientific community to stake out an objective and measurable definition of what sustainability is, while developing and deploying a&nbsp; cost-effective means of guaranteeing our supply and production chains operate inside of those parameters.

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Meeting Exploding Biomass Demand Sustainably

CanBio appoints executive director The Canadian Bioenergy Association&rsquo;s (CanBio) board of directors has appointed Fernando Preto as executive director. Preto most recently served as lead scientist of biomass and renewables at Natural Resources Canada&rsquo;s CanmetEnergy, an energy science and technology organization. In his position at CanmetEnergy, Preto was instrumental in advancing bioenergy developments in Canada and bringing together industry, government and academic stakeholders from the agriculture, forestry and energy sectors. He served as a taskforce member for the Forest Products Association of Canada&rsquo;s biopathways initiative. Preto is a chemical engineer by training, and has the technical expertise, project experience and collaborative leadership skills needed to promote the Canadian bioenergy and bioeconomy sectors. Sewall adds vice president Consulting organization Sewall has hired Lee Freeman as vice president of global business development. Freeman has 35 years of experience in forestry and natural renewable resources. In his new position, Freeman will lead Sewall&rsquo;s business development and consultative sales in biomass, carbon and other renewable energy markets, complementing the organization&rsquo;s existing staff expertise in engineering, geospatial, forestry and natural resources consulting. Prior to joining Sewall, Freeman was employed by Thomson Reuters Lanworth, where he led business development in forestry, energy and carbon markets. He advanced Lanworth&rsquo;s global business through partnerships and integrated geospatial solutions for real-time agro-forestry monitoring, inventory and analysis. Freeman has also held leadership roles in supply chain management, supervising the sourcing of forest products, biomass and recycled fiber for pulp and paper manufacturing firms. Fredrikson &amp; Bryron shareholder earns fellowship Fredrikson &amp; Byron PA shareholder Richard Weiner was named a fellow of Stanford University Law School&rsquo;s Transatlantic Technology Law Forum. He will research and author a white paper on best practices for implementing a trans-Atlantic renewable energy policy that will include a comparison of the best U.S. and European renewable fuel practices. Weiner is an international biofuels lawyer at Fredrikson and Byron, where he chairs the firm&rsquo;s international group and biofuels group. He assists clients with biofuel projects in the U.S. and overseas. Weiner&rsquo;s term runs through 2014. VG Energy adds chief science advisor VG Life Sciences has announced Martin B. Dickman has joined its subsidiary VGEnergy as chief science advisor. In his new position, Dickman will enhance the scientific rigor of the company&rsquo;s alternative energy core technology platform and expand the development of products that enhance the lipid and sugar production in emerging market sectors, such as algae biofuels. Dickman&rsquo;s expertise in comparative plant physiology and plant pathologies is expected to add a new dimension to VGEnergy&rsquo;s ongoing research. He has held positions at several universities, most recently as director of the Institute for Plant Genomics and Biotechnology at Texas A&amp;M University. Associated British Ports signs contract with Drax Associated British Ports signed a 15-year contract with Drax Power Ltd., an operating subsidiary of Drax Group plc. ABP will make investments of up to &pound;100 million ($153 million) to handle wood pellet shipments at its Humber Ports of Immingham, Hull and Goole to support Drax Power&rsquo;s conversion to a pellet-fueled power plant. The Drax Power Station at Selby is the U.K.&rsquo;s largest single producer of electricity, meeting approximately 7 percent of the country&rsquo;s energy needs. Drax plans to convert three existing coal-fired generating units to burn wood pellets. &nbsp;

Fernando Preto, executive director of the Canadian Bioenergy Association

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Held in Minneapolis on April 8-10, the International Biomass Conference &amp; Expo welcomed over 1,200 industry stakeholders&mdash;technology, equipment, and service providers, academia, project developers, investors, foresters and more&mdash;to discuss the industry&rsquo;s most pressing issues.
 The event kicked off early the first morning with tours of Koda Energy LLC and the Elk River Resource Recovery Project. Following an afternoon finance and project development forum, the ribbon to the expo hall and welcome reception was cut by Tim Portz, Biomass Magazine executive editor. Day two of the event began with industry awards. Charlie Niebling, general manager of New England Wood Pellet, received the 2013 Excellence in Bioenergy Award, and Dominion Virginia Power was awarded the Ground Breaker of the Year Award for converting three coal-fired power plants to biomass.
 The ensuing general session&rsquo;s industry director roundtable focused on the legislative landscape and market growth and opportunities. Each speaker discussed near- and long-term challenges and goals of their respective biomass sector, which included biomass power, thermal, advanced biofuels, algae and wood pellets.
 Following the general session were two days of concurrent breakout and question and answer sessions dedicated to specific sectors of the industry: power and thermal, pellets and densification, advanced biofuels and biochemicals, and biogas.
 The conference wrapped up with an evening of socializing and networking at the Nicollet Island Pavilion, where attendees enjoyed stunning views of downtown Minneapolis and the bluegrass musings of the High 48s. Completion of a final industry tour the following morning&mdash;District Energy St. Paul, Environmental Wood Supply and Target Field&mdash;officially marked the end of the sixth annual International Biomass Conference &amp; Expo. Planning is already underway for next year&rsquo;s event, which will be held in Orlando, Fla., on March 24-26.

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The Abengoa booth was warmly staffed by Jessica Woods, left, Catrina Straubinger and Philip Schwarz. 


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Ruth Prideaux accepts the Groundbreaker of the Year Award on behalf of Dominion Virginia Power; Charlie Niebling of New England Wood Pellet wins the Excellence in Bioenergy Award.

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Jeff Manternach, IR1 Group LLC CEO, presents on an advanced biofuel & biobased chemical panel. Other panelists include Brian Davis, BioPetrol Ltd.  North American coordinator, left; Andrew Held, Virent Inc. senior director of feedstock development; K

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Last year's Excellence in Bioenergy Award winner William Strauss of FutureMetrics Inc. asks a question during a breakout session. 

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Enjoying evening entertainment at Nicollet Island Pavilion. Marco Lemes, SMUD, left; Ruud van den Brink, ECN; Valentino Tiangco, SMUD; Jim Patel, Carbona; Timo Bungert, Andritz. 

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Attendees enjoy dinner and a live band at the closing International Biomass Conference & Expo event.

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Seth Ginther, U.S. Industrial Wood Pellet Association executive director, explains the impact of overseas policies on the U.S. wood pellet export industry.

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2013-2014 Pellet Mill Magazine Editorial Board (L to R): Ryan Davis, Zilkha Biomass Energy;Jonathan E. Kahn, Geneva Wood Fuels;Tom Plaugher, Appalachian Wood Pellets; Tom Bryan, BBI International; Jennifer Hedrick, Pellet Fuels Institute; Tim Portz, 

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Metso's William Partanen, left, and John Feick, right, visit with with an expo attendee.


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On the busy expo floor, All Power Labs' Brian Normally, right, discusses the company's exhibit with an attendee.


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Fagen Inc.'s Ed McRae shares information about the company's newly completed biomass power plant in Nacogdoches, Texas. 

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CPMâ€™s Scott Anderson, left, BBI Internationalâ€™s Tim Portz and Buhlerâ€™s Greg Alles cut the  ribbon to officially open the 2013 International Biomass Conference & Expo.   



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Alejandro Zamorano, Bloomberg bioenergy analyst, discusses investment drivers in next-generation bioenergy. 


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Policy and industry collaboration were two topics highlighted at the 2013 International Biomass Conference & Expo.

Building on Innovation

The U.S. Energy Information Administration released biomass power data for all 12 months of last year in the March issue of its Monthly Energy Review. Net electricity generation for wood biomass increased to 37.54 terrawatt hours (TWh) last year, an increase over the 37.45 TWh production level for 2011.
 Power production from waste biomass also increased last year, reaching 20.03 TWh. The U.S. EIA defines waste biomass as including municipal solid waste from biogenic sources, landfill gas, sludge waste, agricultural byproducts, and other biomass. Only 19.22 TWh of electricity from waste biomass was reported in 2011.
 The EIA estimates that 367 trillion Btu of wood was consumed to generate power in the U.S. during 2012, an increase over the 348 trillion Btu reported the year prior. Only 276 trillion Btu of waste biomass was consumed to generate electricity in 2012, however, a slight drop compared to the 279 trillion Btu of waste biomass reported for 2011.

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Biomass power production increased in 2012

The Blue Lake Rancheria Tribe of Humboldt County, Calif., has purchased a 175 kW ClearGen distributed generation fuel cell system from Ballard Power Systems. The system will be integrated with a biomass gasification system and a syngas purification unit, resulting in an integrated biomass-to-fuel cell power solution that has the potential to double the efficiency of the biomass power production.
 The system will use a pyrolysis gasification technology to convert waste woody biomass into syngas, which will be purified into a high-quality hydrogen stream. The hydrogen will fuel the ClearGen fuel cell system. Once operational, the plant will provide base-load power to the tribe&rsquo;s commercial enterprises. Waste heat will heat a swimming pool at an adjacent hotel.
 Schatz Energy Research Center, which is affiliated with Humboldt State University&rsquo;s Environmental Resources Engineering program, will provide support for the project. A proposed funding award from the California Energy Commission&rsquo;s Community Scale Renewable Energy Development, Deployment and Integration Program is helping fund the project.

Biomass fuel cell project planned for California

In early April, I attended the International Biomass Conference &amp; Expo in Minneapolis. This was a huge gathering of every possible aspect of the biomass industry. Wood-to-energy, equipment and machinery, torrefaction, thermal, combined heat and power, biofuels and algae were all represented at the conference, among even more topics.
 The term &ldquo;biomass&rdquo; is an umbrella term that refers to an incredibly diverse selection of industries and markets. Yet, there is a good reason that all of these sectors were present in Minneapolis. In addition to the networking opportunities, we all need to be aware of the policy challenges facing our respective pieces of the biomass industry.
 Through collective efforts, we can make sure that the industry continues to grow in the coming years, and protect it from challenges that come from Washington, state and local governments. One example of an area where we are making progress on the federal level is in the area of energy tax reform. While comprehensive tax reform that gives serious, long-term support to renewable energy resources is far from guaranteed, there have been a couple recent reasons for optimism.
 First, President Obama included in his fiscal year 2014 proposed budget a line item that would permanently extend production tax credits (PTC) to renewable energy sources. This would be very encouraging for the biomass industry if it came to pass, as it would help new facilities secure the considerable investments they need for construction. It would also allow us to divert our resources to other important issues, rather than advocating for a PTC renewal every couple of years.
 Second, the House Ways and Means Committee invited testimony from the Biomass Power Association on energy tax reform. In March, I testified in front of the Committee, and last month provided written testimony on what we as an industry need to see happen. I recommended four things:
 &bull; Make renewable electricity tax incentives permanent.
 &bull; Make the tax rate standard across the board for all technologies.
 &bull; Recognize the value of existing biomass facilities.
 &bull; Promote refurbishment of older facilities, and acknowledge the value of cofiring with fossil fuels is possible.
 Obviously, this wish list won&rsquo;t solve everything for the biomass industry. It&rsquo;s not even guaranteed that any of this will become law. It&rsquo;s a good start, however, that both the president and Congress are looking seriously at energy tax law and ways that it can be improved.
 As I noted above, the biomass industry is made up of a lot of smaller, more specialized sectors. We all have common interests though, and it is my firm belief that we can accomplish more by comparing notes and acting together on policy and other issues we face. The International Biomass Conference &amp; Expo was a great example of that, and I look forward to seeing you all at future events.
 Author: Bob Cleaves President and CEO, Biomass Power Association <a href="http://www.biomasspowerassociation.com">www.biomasspowerassociation.com </a> <a href="mailto:bob@biomasspowerassociation.com">bob@biomasspowerassociation.com</a>

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Biomass Takes on Minneapolis

Sustainably sourcing biomass fuel isn&rsquo;t something that&rsquo;s taken lightly in the U.K., and the country is proving it by developing the first nationwide mandatory biomass sustainability standards. As its Renewables Obligation continues to ramp up, the amount of biomass that power utilities will require may significantly increase, and the U.K. is determined to ensure that feedstocks are sourced responsibly.
 The RO, a policy mechanism similar to a state renewable portfolio standard in the U.S., requires licensed electricity suppliers in the U.K. to source an increasing amount of electricity from renewable sources. Biomass, particularly imported wood pellets, are an attractive replacement for facilities using coal, and imports from North America are increasing at a rapid rate.
 Currently, the country sets general restrictions for biomass materials sourced from land with high biodiversity value or high carbon stock, including primary forest, peatland and wetlands. But this approach has proven untenable over the past two years, according to Suz-Anne Kinney of Forest2Market, as there has been some disagreement over definitions, and because current forest certification schemes alone are not sufficient to meet the criteria.
 The U.K. Department of Energy and Climate Change proposed new sustainability criteria last September and a comment period wrapped up at the end of November, but the official standards are yet to be released. As proposed, a biomass power facility would have to demonstrate that 70 percent of the wood used to manufacture the pellets it procures has chain-of-custody (COC) certification, from the forest of origin to the final user. &ldquo;In order to demonstrate compliance, a supplier must provide independent COC certification of the timber or timber products by one of the major certification schemes,&rdquo; explains Kinney. &ldquo;In the U.S., especially in the South where the majority of industrial pellet mills are or will be located, widespread certification of this type is not common. As mills purchase wood from dozens of different dealers, brokers or loggers who buy the timber from hundreds of landowners, the scope of any project to increase certification will require significant resources.&rdquo;
 So the big question is: will part of the criteria include this requirement of third-party verification of raw material? While it may sound suitable on the exterior, such a requirement may pose significant challenges to U.S. biomass exporters, and some believe sets unachievable&nbsp; expectations.
 Certification and Ownership 
 &ldquo;The problem is that there is a very low percentage of timberland that is actually certified, so it would be very difficult to procure 70 percent of material from certified forests,&rdquo; explains Seth Walker, RISI bioenergy economist. &ldquo;In the U.S., less than 25 percent is certified, and in the South, it&rsquo;s 22 percent. Actively managed and harvested timber, less than a quarter of it is certified.&rdquo;
 According to Robert Simpson, senior vice president of Sustainable Forests &amp; Forest Product Certification at GreenWood Global Consulting, sourcing 70 percent of pellet feedstock from certified sources &ldquo;will be impossible, unless you have a very large supplying force nearby,&rdquo; he says. &ldquo;If you&rsquo;re depending on many ma and pop forest owners, it&rsquo;ll be very difficult.&rdquo;
 And that&rsquo;s largely the case for biomass sourcing in the Southeast, where about 67 percent of commercial-value forests are privately owned. The forest industry owns another small portion, Simpson says, and the federal government an equal portion. &ldquo;Interestingly, out of the 134 million acres of procurable&nbsp; and useable forestland in the Southeast, only 3 percent have long-term management plans,&rdquo; says Simpson.&nbsp; Furthermore, only 13 percent have formal management advice.
That&rsquo;s very minimal compared to Europe, according to Simpson, where 77 percent have some type of professional forest management advice. That leads buyers in the European Union to wonder why forest owners in the U.S. aren&rsquo;t certified, when the forests of Europe are regulated and strictly managed. In the U.K, about two-thirds of land is privately owned&mdash;very close to the portion that is privately-owned in the U.S.&mdash;but both countries differ from the norm, as it is estimated that of the 3.9 billion hectares of the world&rsquo;s forests, 86 percent are publicly owned.
 If the U.K. policy comes through as proposed&mdash;requiring forest certification&mdash;or if an end user demands a high percentage of certified material anyway, it just won&rsquo;t be found, says Simpson. &ldquo;It&rsquo;s not there, especially for the larger facilities.&rdquo; He recommends smaller family forestland owners contemplating certification to look into group certification, which goes fairly quickly and is less expensive, as it allows multiple forest owners to become certified as a group and share financial costs.
 Essentially, the motivation behind the standards stems from the carbon accounting question. &ldquo;If you cut down trees and don&rsquo;t replant, the carbon story is very different [than if trees are replanted],&rdquo; says Walker. &ldquo;There are really two reasons why the U.K. likes certification and sees it as ideal, but at the same time, they know the forests in North America are managed pretty well, and there aren&rsquo;t any major issues with deforestation or bad practices.&rdquo;
 That&rsquo;s evidenced by the increasing/stable forest area cover in most U.S. regions. &ldquo;We have growth exceeding removals, so it&rsquo;s a pretty good story, but it&rsquo;s tough to put that [sustainable] stamp on it,&rdquo; Walker says. One of the main reasons for that is there is a great history of family-owned forests, especially in the Northeast and the Southeast; in the Pacific Northwest there is more federal, state and consolidated land.&nbsp; &ldquo;So, the Smith family in Virginia has 50 acres of forest and a forester comes in every 10 years and maybe cuts 12 of the 50 acres, in 20 years a thinning, then in 40 years do a clear cut and then replant,&rdquo; explains Walker. &ldquo;Someone like that isn&rsquo;t going to have any incentive to go through all of the red tape to get that land certified. The biggest indicator of whether land will be certified sustainable, in the U.S., is whether it is owned by a large land owner or financial landowner.&rdquo;&nbsp;
 Looking Ahead 
 If forest certification isn&rsquo;t required, what might be the alternative? &ldquo;Right now, each of the utilities have to audit their own supply chain, so there might just be some due-diligence requirements, as far as the forest stock around the areas they&rsquo;re procuring fiber from for wood pellets,&rdquo; suggests Walker. There could also be group certification [requirements] where an entire state would become certified to meet necessary standards. &ldquo;That hasn&rsquo;t happened on a big scale yet, but it has happened on smaller scales,&rdquo; says Walker. For example, FSC worked with a large group of Wisconsin landowners for certification and brought 31,000 new participants into the certification program, more than 2 million acres of privately owned land. &ldquo;The Nature Conservancy and the SFI (Sustainability Forestry Initiative) are working together to find gaps in the certification program and see if they can fix them,&rdquo; Walker adds, one of which is the small landowner problem.&nbsp;
 The National Wildlife Federation is one of those groups working to recruit smaller forest owners to get certified under FSC, and suggests one way to alleviate the cost to smaller landowners is by sharing the cost with the buyer. &ldquo;We know that in the Southeast and other regions of the country, not all forest owners can afford to get certified, and so we believe that pellet manufacturers and other bioenergy facilities could help cover the cost of assuring regulators and the public at large that their bioenergy sources are truly sustainable,&rdquo; says F.G. Beauregard, NWF Southeast Sustainable Bioenergy manager.
 So whether forest certification will ultimately be required is unclear, but in the meantime, what can pellet exporters be doing to prepare for what might potentially be enforced? The first thing is getting chain of custody under these certification schemes, according to Walker. COC verifies company systems for tracking and handling materials used in FSC-certified forest products within the company's operations. Another major preparation measure is securing a supply contract with a large landowner, particularly a financial landowner. &ldquo;Despite the majority of the actively managed timberland being owned by smaller landowners, there still are very large tracks owned by financial landowners, and those are mostly certified,&rdquo; says Walker. &ldquo;So, it is possible to get most or all of your timber from a certified source, if you&rsquo;re located in the right place and can set up the right agreement.&rdquo;&nbsp;
 So, are the standards likely to remain as proposed? &ldquo;My hunch is no, because there has been so much invested&hellip;it would really almost halt the industry, a strict standard like that,&rdquo; says Walker. &ldquo;Again, part of the issue is the whole carbon balance, carbon is actually the main issue; they [utilities] have to show a net reduction of carbon over coal. They&rsquo;re concerned about sustainability on one hand, not wanting to promote any sort of bad forestry practices, but they also want that stamp that says whichever forest the wood came from is managed and has a plan to be replanted.&rdquo; Author: Anna Simet Managing Editor, Biomass Magazine 701-751-2756 <a href="mailto:asimet@bbiinternational.com">asimet@bbiinternational.com</a>

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The United Kingdom's biomass sustainability criteria may impact U.S. biomass exporters, particularly policy requiring forest certification.

Certification Uncertainty 

New Hampshire-based New England Wood Pellet has become the first manufacturer to qualify for the Pellet Fuel Institute&rsquo;s pellet fuel standards program. NEWP can now begin to display the PFI Quality Mark on its bags, indicating the company is producing pellets compliant with the fuel grade listed on its packaging. This allows the pellets to be properly matched to appliances that burn them.
 PFI has been working on the program since 2005 with the goal of creating an industry-wide uniform certification to improve product quality. The program has been incorporated into the U.S. EPA&rsquo;s New Source Performance Standards for Residential Wood Heaters.
 Additional companies are undergoing certification and similar announcements are expected to be made later this year. According to PFI, 29 companies representing 48 pellet mills have pledged their intent to enroll in the program in the past year.

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NEWP qualifies for PFI's  pellet fuel standards program

Confluence Energy of Kremmling, Colo., has acquired certain assets of Walden, Colo.-based Rocky Mountain Pellet. The acquisition will nearly double the current 100,000 ton production capacity of Confluence Energy.
 Both facilities began operations in 2008 and have sourced beetle-killed wood as feedstock. Confluence Energy has a 10-year feedstock materials contract with the U.S. Forest Service, which was announced in December.
 The acquisition includes one building, 90 acres of land, and all the fixed and mobile assets. With the completion of the transaction, Confluence Energy gains facilities housing four pellet presses with an annual capacity of 120,000 tons. Minor modifications are being made to the facility. It is expected to be fully operational by midyear.

Confluence Energy acquires additional capacity

The three grades of pellet classifications issued by the Virginia-based Pellet Fuels Institute&ndash;&ndash;premium, standard and utility&ndash;&ndash;serve to ensure residential and commercial consumers they are getting consistent products. Furthermore, using advanced laboratory testing and quality control of the product could bring more stability and credibility to the biomass industry. &ldquo;There is a long history of people being able to put whatever they want on the bag, and you&rsquo;ll see premium as pretty much the predominant grade classification,&rdquo; says Chris Wiberg, biomass lab manager for Timber Products Inspection Inc. Some producers have even placed super premium and ultrapremium as quality identifiers on their bags, he says, and historically, there has not been a process to verify their claims.
 The Pellet Fuel Institute has had standards and listed characteristics of the fuel for many years, but they were never fully enforced, Wiberg says. It is very common for producers to not comply with the grade requirements, and others do not even know they are supposed to test their product. &ldquo;I had a producer in 2006 &hellip;he came up to me after my presentation and said, &lsquo;so what you&rsquo;re telling me is I should test my product?&rsquo;&rdquo; Wiberg recalls. When the producer brought in the bag label, it was stamped as a premium grade. &ldquo;The bag supplier was just so used to what goes on the bag, and wood is wood is wood,&rdquo; he says.
 Why Test?
 The main purpose for biomass testing is to assure the product quality is consistent among producers, Wiberg says. Failing to test biomass could hold potential repercussions for consumers, as well as producers. When producers fail to follow a quality program, he adds, they are doing the industry a disservice because it raises concern about the use of inappropriate materials, and consumers might not have the experience the industry would like them to have. One example he cites is a producer suspected of manufacturing pellets containing blue tarpaulin fragments.&nbsp;
 Biomass testing also aims at building confidence in the industry. When a producer is putting questionable material in a premium pellet, it could result in lower confidence in the system on the part of regulatory bodies. The PFI program is intended to be referenced with the U.S. EPA&rsquo;s new source performance standard for residential wood heaters, Wiberg says. By following standards built in conjunction with the biomass industry and the EPA, product quality and market confidence can become more established, leading to better consumer experiences, resulting in more product recommendations and consumer support for the pellet industry.
 Testing Procedures
 To claim a premium grade, the PFI tests biomass materials for bulk density, diameter, pellet durability and other properties, using procedures mostly taken or adapted from ASTM International, formerly the American Society for Testing and Materials. For instance, PFI adapted a protected ASTM test for bulk density of wood pellets by utilizing a minimum, 12-pound sample in a 0.25-cubic-foot container that is tapped 25 times from a distance of 1 inch.
 The percentage of fines is determined using a 2.5-pound sample weighed with an analytical balance and recorded to the nearest 0.1 gram. A receiving pan is weighed and recorded and a one-eighth-inch screen is attached. The pellet sample is moved to the screen and tilted 10 times to each side to sift the entire sample. Last, the screen is removed and the weight of the base pan with the fines is recorded. To figure the percentage, the recorded weight of the base pan is subtracted from the combined weight of the base pan with the fines, then divided by the initial sample weight and multiplied by 100.
 The National Renewable Energy Lab tests biomass ash content through the use of a muffle furnace. First, specialized bowls, called crucibles, are placed in a muffle furnace for a minimum of four hours at 550 to 600 degrees Celsius. The crucibles are then removed from the furnace, cooled, weighed and placed back in the muffle furnace to determine a constant weight. Next, 0.5 to 2 grams of the test sample is placed in the crucible and placed over an ashing burner until smoke appears. The smoke is ignited and burned until no more smoke or flames appear. The crucible is placed back in the muffle furnace for 18 to 30 hours, protected from drafts to avoid sample loss. The crucible is then placed in a vacuum-sealed enclosure, called a desiccator, cooled for a specific amount of time and weighed with the ash to the nearest milligram to determine the remaining ash.
 The gross calorific value of a prepared sample of solid forms of refuse-derived fuel is determined by a bomb calorimeter according to ASTM International. In this process, described by the German-based IKA Group, which manufactures bomb calorimeters, 1 gram of a solid is weighed and placed in a stainless steel container filled with roughly 435 pounds per square inch (PSI) of oxygen. The sample is then ignited using cotton thread connected to an ignition wire inside the decomposition vessel and burned. During the test, the core temperature can reach 1,800 degrees Fahrenheit and pressures of 2,900 PSI for a couple milliseconds. The generated heat is then transferred into an inner vessel filled with water where it can be measured.
 The pellet durability index (PDI) recommended by PFI was outlined by Kansas State University. In the PDI test, a 500-gram sample is run through a pellet durability tester&mdash;a 1-foot-tall box with a 9-inch baffle that rotates to agitate the pellets. Before being placed in the tester, fines are removed with a one-eighth-inch wire sieve. The sample is tumbled through the durability tester at roughly 50 rotations per minute for a total of 500 rotations. The tumbled sample is rescreened on the one-eighth-inch sieve and the weight is recorded. The PDI is calculated by dividing the whole pellet sample weight by the initial sample weight, and multiplied by 100.
 Upon completion of the tests, PFI then classifies the biomass based on the results. To qualify for premium grade for residential and commercial use, pellets need to have a bulk density of 40 to 60 pounds per cubic foot, a diameter of 0.23 to 0.28 inches, length of 1.5 inches with less than 1 percent variation, a PDI greater than or equal to 96.5, fines of 0.5 percent or less, an ash content of 1 percent or less, moisture content of 8 percent or less and chloride content of 300 parts per million or less.
 In order to enforce the standards, PFI requires random samples be pulled and tested and says producers must continually test their products. On-site testing may be done, but only if testing will also be completed by an accredited laboratory, at least twice a year. PFI&rsquo;s quality mark can be used only for products that have met the standards. PFI asks that if producers have other, untested product lines, they not imply the quality mark is all encompassing. This lowers the risk of subpar products reaching the customer and establishes credibility for the product.
 Domestic vs. Export 
 The criteria for pellets for residential and commercial use are the same. While commercial boilers require the same quality standards as residential units, the industrial uses for biomass are much more varied than residential, Wiberg says. Industrial fuel quality specifications are often negotiated between a biomass supplier and a buyer, reflecting the specific requirements for the power plant or other industrial use and incorporating logistics concerns.&nbsp;
 Work is being done in Europe to create new standards based on contract agreements currently in use among industrial users, power plants and pellet producers, according to Wiberg. The establishment of European standards could demand further quality studies of biomass on the industrial level. Timber Product Inspection is currently the only lab in the U.S. to achieve ISO 17025 accreditation by the International Organization for Standardization for the European test method, Wiberg adds. He hopes PFI might adapt ISO testing methods to help create a more international standard. Author: Chris Hanson Staff Writer, Biomass Magazine 701-738-4970
<a href="mailto:chanson@bbiinternational.com">chanson@bbiinternational.com</a>

Chris Wiberg, biomass lab manager for Timber Products Inspection Inc., says the main purpose for biomass testing is to assure the product quality is consistent among producers.

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PAINSTAKINGLY PRECISE: Stephen Sundeen, chemistry laboratory manager at Twin Ports Testing, performs a bomb calorimetry test.

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TESTS AT TPI: Timber Products Inspection performs in-the-lab tests for fines percentage, ash content, calorific value, durability and many other properties.

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Biomass quality testing involves a series of meticulous procedures that assure industry confidence.

The Weight of  Biomass Analysis 

Pellet stoves had only an 11 percent share of the stove market in 1999. Today, nearly one in three stoves sold are designed to burn pellets.
 According to the Hearth, Patio &amp; Barbeque Association, manufacturers shipped 48,277 pellet stoves to sell in the U.S. during 2012. While 2012 sales were slow, pellet stoves sales for the past five years averaged nearly 90,000 per year.
 Despite their lower emissions profiles, pellet stoves in the U.S. have rarely been recognized in rebate and incentive programs as distinct from wood stoves. Distinct incentives, however, could expedite growth in the pellet appliance market. A recent rebate program in Maryland resulted in residents choosing pellet stoves twice as often as wood stoves.
 &ldquo;This is an example of a new and effective renewable energy technology getting off the ground without significant government assistance,&rdquo; said John Ackerly, president of the Alliance for Green Heat. &ldquo;While this proves pellet technology can succeed in the market on its own, if it was treated like solar and geothermal in the federal tax code, many more consumers would have a very affordable way to reduce fossil fuels.&rdquo;

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Pellet stoves gain market share 

The village of Telkwa, British Columbia, was awarded $680,230 from the Canadian government through Infrastructure Canada&rsquo;s Gas Tax Fund transfer to install a biomass heating system in its municipal building. The funding will also support a sustainable subdivision plan.
 The biomass heating system will burn wood waste from the forest lands surrounding the community. In addition to providing heat to the village&rsquo;s municipal building, the system will also heat an adjacent business, a school and four residences.
 Once complete, the project is expected to reduce carbon dioxide emission by approximately 10 metric tons per year and improve efficiency.
 &ldquo;Telkwa&rsquo;s project will lead to cleaner air and reduce the cost of operating their municipal building for years to come,&rdquo; said Union of British Columbia Municipalities President Mary Sjostrom.&nbsp; &ldquo;I am very pleased to see the Gas Tax Fund supporting this district energy system.&rdquo;

Canadian village wins grant for biomass district heating system

In mid-April, the Biomass Thermal Energy Council shared its perspective on federal energy tax policy in the context of comprehensive tax reform with the U.S. House Ways and Means Energy Tax Reform Working Group. BTEC is urging the working group to evaluate reform efforts that provide a level playing field for competing energy technologies, specifically for high-efficiency biomass thermal combustion technology.
 Our nation&rsquo;s tax code has long played a key role in shaping and influencing national energy policy. In the renewable energy arena, the current code features numerous incentives for most renewable energy technologies in residential, commercial and industrial installations (Sections 25D and 48, respectively, for investment tax credits, and Section 45 for production tax credits). The Joint Committee on Taxation has listed approximately 80 separate energy-related tax provisions in existing law. Unfortunately, none of these incentives extends to high-efficiency biomass thermal energy, despite the fact that biomass thermal energy fulfills all the same public policy objectives as other renewable energy sources, and despite the fact that the code recognizes other thermal technologies such as solar and geothermal. The end result is an uneven energy landscape that promotes certain technologies over others, both limiting consumers&rsquo; energy choices and their ability to utilize local fuels from landowners and farmers.
 BTEC proposes parity in tax incentives for high-efficiency biomass thermal combustion technology to include:
 &bull; Eligibility for the 30 percent residential renewable energy tax credit under Section 25D of the Internal Revenue Code.
 &bull; Eligibility for the 30 percent business energy investment tax credit under Section 48 for commercial and industrial installations.
 &bull; Accelerated depreciation of capital investments similar to what also exists for other renewable technologies, including biomass electric generation.
 Inclusion of biomass thermal in Sections 25D and Section 48 will provide the highest possible return for the country in terms of reductions in fossil fuel imports and jobs created. Per dollar of federal support, biomass heating displaces ten times more fossil fuel than solar installations or ethanol and is proven to create a greater number of ongoing jobs. Biomass has accounted for 40 percent of the renewable energy jobs in Germany, more than wind, solar or liquid fuels.
 In regions such as the Northeast and north-central states that rely heavily on imported fossil energy for&nbsp; home and business heating, biomass has the potential to greatly reduce our consumption of&nbsp; higher-priced heating oil and propane. In particular, the Northeast is extremely vulnerable to heating oil price shocks and supply disruptions. In that region, biomass can sustainably offset as much as 25 percent of oil used to heat homes and businesses.
 BTEC recommends that the Energy Tax Reform Working Group first focus on how the tax code addresses the major end uses of energy. Widely unknown, America&rsquo;s energy consumption can be divided into thirds: roughly one-third transportation, one-third electricity, and one-third heat (or thermal). Energy policy to promote renewable energy has focused almost entirely on transportation fuels such as ethanol and biodiesel, and electricity from hydro, wind, solar, geothermal and biomass.
These fuels and technologies have received support from the federal government in the form of production and investment tax credits, accelerated depreciation, research and development funding, direct project grants, and renewable energy credits (e.g. state-level renewable electricity programs).
 Although the tax code does address thermal energy in 25D and 48, it primarily promotes generating electricity from biomass and thermal energy from geo and solar systems. Biomass thermal, a proven pathway for reliable, base-load heating and cooling has been omitted from this larger concept of thermal energy.
 The Energy Tax Working Group should also look to weigh how it determines what technologies are explicitly supported against a technology-neutral approach. Super clean, highly efficient combustion technology is rapidly entering the domestic U.S. marketplace, mostly developed in Europe in response to long-standing industry incentives to encourage technology development. Efficient fuel distribution systems are in place to expand the adoption of central heating systems in home and business heating, industrial process heat, district heating of whole communities, and combined heat and power. This proven technology has been widely deployed in Europe in homes, schools, municipal buildings, factories and any other large institutional, commercial or industrial setting.
 The bottom line is that biomass thermal fulfills all the same public policy objectives that are by necessity the basis and justification for renewable energy tax incentives. Author: Joseph Seymour Executive Director, Biomass Thermal Energy Council 202-596-3974 ext. 302 <a href="mailto:jseymour@ttcorp.com">jseymour@ttcorp.com</a>

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Recommendations for  Pro-Growth Tax Reform 

Managing forests sustainably is a noble idea and can result in a number of very positive social, economic and environmental outcomes. The sustainable forest management (SFM) paradigm as it is being currently developed and implemented by policy networks in Europe and North America, however, may not be the best guide for action everywhere.
 Originating in the 1990s, the SFM concept was part of the greater effort to develop a sustainable economic development framework intended to guide policymaking efforts through the global environmental challenges of the 21st century. The Ministerial Conference on the Protection of Forests in Europe developed the following definition for SFM: &ldquo;The stewardship and use of forests and forest lands in a way, and at a rate, that maintains their biodiversity, productivity, regeneration capacity, vitality and their potential to fulfill, now and in the future, relevant ecological, economic and social functions, at local, national, and global levels, and that does not cause damage to other ecosystems.&rdquo;&nbsp; Other definitions are available, with the central premise in all emphasizing three key areas of sustainability to be harmonized: the environment, society and the economy.&nbsp;
 Based on these principles, a series of criteria and indicators of sustainability have been developed by a number of expert third-party organizations that exert supervisory control over forest product commodity markets. For a fee, organizations such as the Forest Stewardship Council and the Sustainable Forest Initiative, among others, audit forest operation plans for adherence to the criteria of a particular certification brand. For the most part, these groups have been successful in using public pressure&mdash;by appealing to &ldquo;green&rdquo; or socially and ethically responsible consumer habits&mdash;to compel forest products manufacturers to adopt a certification system. To date, sustainability certification has focused on traditional products such as dimension lumber, pulp and paper. More recently, the focus has shifted to woody bioenergy products.&nbsp;
 Restoration Through Bioenergy
 The emerging bioenergy sector provides one of the few remaining economic opportunities for restoring resilience to hundreds of millions of hectares of forest in western North America, but the application of SFM criteria may stand in the way. Current landscape issues cannot be addressed with an SFM model based on the nondeclining, even flow of biomass.&nbsp;
 The current Western forest structure is the result of past management strategies. Beginning in the mid- to late-1800s, public forest administrations attempted to prevent and exclude all fire in ecosystems that had evolved for thousands of years under the influence of this crucial disturbance. The result has been a dramatic increase in forest density, mortality and, in some cases, a wholesale shift in species composition and landscape structure and function.&nbsp;
 These ecological transformations could conceivably be tolerated by contemporary societies, and even welcomed from a business perspective, if there were no detrimental consequences. Society, the environment and the economy are experiencing quite the opposite, however. Scientists tell us wildfires are currently behaving with an intensity and severity unprecedented in the past 1,000 years. In the past decade in the U.S., wildfires have burned an average of 2.5 million hectares per year (6 million acres) with annual suppression costs running into the billions of dollars. With a population of barely 4 million people, British Columbia alone experienced wildfire suppression costs exceeding $2 billion in the first decade of this century. Environmental economists suggest the true cost of wildfires can be two to 32 times greater than suppression cost when all factors are considered, including human lives and health, property loss and damage, damage to watersheds and domestic water quality. Climate change researchers also suggest that fire seasons are getting longer on average, which is likely to increase the annual burned area in western North America.&nbsp;
 Restoring resilience to fire-suppressed ecosystems is contingent on removing the inherent structural threat&mdash;the unnatural accumulation of woodsy fuels that is driving current trends in fire intensity and severity. Decades of fire exclusion have resulted in forests choked with high volumes of low-value wood.
 From an economic perspective, these dense stands of ponderosa pine, Douglas-fir, juniper and other conifer species contain small quantities of more valuable round wood that can be milled into dimension lumber. Ecologically speaking though, many of the larger-diameter, more economically valuable trees need to be left standing due to their fire-tolerance. Thus, the traditional forest products industry has little economic incentive to utilize these resources.
 There is a vast potential in western North America to mobilize the emerging bioenergy sector and the new market opportunities as an outlet for these large volumes of low-value material threatening western forests and communities. The bioenergy industry can profitably exploit these resources, manufacturing degraded forest materials into wood pellets, biocoal or renewable diesel. The economics of bioenergy utilization can be difficult, however, because volumes are often low, harvest costs are high, transportation to receiving industries can be costly due to distance and fuel prices, and the prices paid for the raw material (chips) or finished bioenergy product are relatively low.&nbsp;
 The best available business models combine the harvest of higher-value products, such as sawtimber, with the removal of biomass. Two of the largest contributors to project feasibility are the sale price of biomass products and market availability. Current SFM certification schemes, however, do not provide the needed flexibility for those business models to access the global bioenergy markets. Trade-offs may need to be made among the three utilities that are to be maximized simultaneously: the environmental, social and economic.&nbsp;&nbsp;
 Paradoxes in Sustainability
 In Western forests, the extremely large volumes of biomass need to be removed quickly, if we are to truly reduce the risks and hazards of wildfire in the short- and medium-term. In the long-term, this would result in resilient and sustainable forest ecosystems with significantly lower tree density. Paradoxically, this positive environmental outcome would not result in sustainable employment (social effects) or business activity (economic effects).&nbsp;
 The initial thrust to treat large areas of the landscape would require large-scale employment in biomass harvest and manufacture but, eventually, those job and business opportunities would be dramatically reduced. The initial landscape intervention phase could take up to a decade or more, but unfortunately, after this initial aggressive forest treatment stage, the employment and business activities associated with low-hazard maintenance would be greatly diminished. This situation thus resembles the &ldquo;boom and bust&rdquo; economic model embraced by extractive mining activity.&nbsp; A similar business model may be necessary to solve the ecological dilemma in Western forests, though it may contradict some of the principles of sustainable forest management and may require reformulation.
 For the current SFM paradigm approach to work in this situation, we would be required to treat the landscape gradually. A slow implementation would harmonize employment outcomes (the social component) with the harvest of the annual increment of volume growth (the economic component) in order to achieve the desired environmental outcome. This model works well in productive ecosystems that experience small-scale disturbances, but not in the low-productivity Western ecosystems where disturbances are tending towards large-scale fire and pest events and where climate change modeling suggests that forest productivity will continue to decline dramatically.&nbsp;
 Treating only the annual increment of volume growth, in an effort to provide sustainable employment and business profitability, would only lead to a continuation of the current, ecologically detrimental vicious circle of forest health decline and mega fires. In the end, the resulting landscape would be incapable of fulfilling the essential environment, social and economic functions.&nbsp; Authors: Robert W. Gray Fire Ecologist R.W. Gray Consulting Ltd. <a href="mailto:bobgray@shaw.ca">bobgray@shaw.ca</a> Francisco Seijo Adjunct Professor of Political Science Middlebury College <a href="mailto:fseijoo@middlebury.edu">fseijoo@middlebury.edu</a>

While providing some opportunities, forest sustainability framework may hinder bioenergy development.

Forest Sustainability:  Bioenergy Breaks and Barriers

The U.K.&rsquo;s National Non-Food Crops Centre has announced the country is now home to more than 100 anaerobic digestion (AD) systems that are not affiliated with the water treatment industry. The quantity of these AD plants has more than doubled in the U.K. since September 2011.
 The NNFCC estimated that the U.K.&rsquo;s nonwater industry AD plants currently process up to 5.2 million metric tons of food and farm waste annually with an electric production capacity of 88 MW. According to the center, more than a dozen additional AD plants are currently under construction.
 Nearly half the AD plants currently operating are community digesters, while approximately 40 percent process agricultural feedstocks, such as slurry, manure, crops or residues. The remaining digesters are found on industrial sites and take in waste materials, including food process waste and brewery effluent.

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UK biogas development expands rapidly

A project in Indiana is upgrading biogas into transportation-quality fuel. Anaergia Inc. designed, built and now operates the facility, located at Fair Oaks Farms.
 An anaerobic digestions system processes manure collected from approximately 11,000 dairy cows. The resulting biogas, comprised of approximately 60 percent methane, is cleaned, compressed and upgraded. The upgrading process generates biogas that contains more than 98 percent methane. The purified biogas is compressed to up to 4,000 psig for use in compressed natural gas (CNG) capable vehicles. The system can produce a volume of fuel equivalent to nearly 10,000 gallons of diesel fuel per day.
 The transportation-grade biogas is used to fuel a fleet of 42 milk trucks operated by Fair Oaks Farms and AMP Americas. Excess upgraded biogas will be injected into the natural gas grid.

Biogas upgrading facility begins operations

The National Renewable Energy Laboratory has released an updated version of its Cost of Renewable Energy Spreadsheet Tool for anaerobic digestion (AD) projects. The CREST model is an economic cash flow model that is designed to help stakeholders assess market economics, design cost-based incentives, such as fee-in tariffs, and evaluate the impact of government support structures.
 The tool allows users to estimate the year-one cost of energy for a particular project, as well as the levelized cost of energy. In addition to allowing users to experiment with setting cost-based incentives, the spreadsheet allows project stakeholders to investigate the impacts that different economic drivers have on the cost of energy. The model also helps users understand how different project characteristics, such as project size, feedsock quality, location, or ownership, impact project economics.

NREL updates CREST model for AD systems

Burlington, Ontario-based Anaergia Inc. recently announced that the Victor Valley Wastewater Reclamation Authority in California has voted to enter into a 20-year power purchase agreement with the company to purchase electricity from a proposed biogas project.
 According to information released by Anaergia, it will design, build and own the biogas energy system, with VVWRA contributing no capital costs to the project. The company also noted that the project will utilize biogas currently being flared.
 &nbsp;&ldquo;We&rsquo;re very fortunate to have the ability to turn that waste into energy and reduce the costs to our ratepayers long into the future,&rdquo; said VVWRA Commissioner and Apple Valley Town Councilman Scott Nassif. &ldquo;It&rsquo;s an exciting project for the agency.&rdquo;
 Anaergia noted in a statement that the project will provide a benchmark for the industry by proving that energy independence can be obtained without capital investment under a power purchase agreement. &ldquo;A lot of eyes will be watching VVWRA once this project becomes active, and we can&rsquo;t wait to show them how successful this technology will be,&rdquo; said Logan Olds, VVWRA&rsquo;s general manager.

Anaergiaâ€™s proposed biogas project at the Victor Valley Wastewater Reclamation Authority is expected to save VVWRA ratepayers millions of dollars over the life of the project.

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Anaergia to develop biogas project in Calif. 

Bloomberg New Energy Finance recently published a report outlining the results of its Bioenergy Leadership Forum, an invitation-only executive think tank of 50 bioenergy sector thought leaders. According to the report, these leaders noted that the future of next-generation biofuels is closely tied to biochemical production. They said biochemicals are not a means to getting to transportation fuel production, however, as higher margins associated with biochemicals are not likely to help the transition to fuels. Rather, they said it would be easier to prove biofuel processes first, before moving into the chemical markets. The report also specifies that the future of the industry is likely in large, integrated biorefineries that produce fuels and chemicals simultaneously.
 Panel participants also agreed that biochemicals will not require subsidies to compete with their fossil-based counterparts. Diversification, however, will be a crucial component of risk management.

Investment in biochemical companies (2004 - H1 2012)


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BNEF report outlines Bioenergy Leadership Forum 

KLM Royal Dutch Airlines, in partnership with the Schiphol Group, Delta Air Lines and the Port Authority of New York and New Jersey, has kicked off a 25-week pilot program that will fuel a weekly trans-Atlantic flight between Schiphol Amsterdam Airport in the Netherlands and JFK International Airport in New York with a blend of biobased jet fuel.
 Biofuel used in the testing program is being sourced from SkyNRG, a company founded by KLM in 2009 in cooperation with the North Sea Group and Spring Associates. The company recently earned certification from the RSB Foundation for its entire supply chain for renewable jet fuel, including separation, blending and logistics. According to the RSB, SkyNRG is currently the only fuel operator in the world that can deliver certified renewable jet fuel to wing at any airport in the world.

International biofuel test program takes flight

Congress is back, and so are the same old shenanigans.&nbsp; Yes, it&rsquo;s April, and it&rsquo;s time for some to blame the renewable fuel standard (RFS) for the price of gasoline, and everything wrong with the world. Maybe not the entire world, but it sure seems like it if you believe some of the rhetoric I&rsquo;ve been hearing lately.&nbsp;
 But here&rsquo;s what&rsquo;s different this time: for the first occasion in a decade, the price of gasoline is actually falling in the spring, rather than rising.&nbsp;
 Now don&rsquo;t let the facts get in the way of a good public relations campaign, which may be why the anti-RFS forces have ramped up their attacks. They&rsquo;ve managed to get Congressman Bob Goodlatte, R-Va., to introduce legislation to repeal the RFS, legislation that the Advanced Biofuels Association and its members will adamantly oppose. Nevertheless, as I write this column, the American Petroleum Institute and the American Fuel and Petrochemical Manufactures Association are flying in CEOs of oil and refining companies to call for repeal of the RFS. Few think they can ultimately repeal the RFS, but they may succeed in getting Congress to open it up for review. And if that happens, there&rsquo;s no telling what Congress will do.&nbsp;
 Last week, the House Energy and Commerce Committee&mdash;being spurred by rising ethanol RIN prices and refining industry complaints that it had "hit the blend wall"&mdash;asked various interested organizations to comment on the committee&rsquo;s white paper, which included 11 questions. Most of the questions focused on the current concerns over the percentage of ethanol blends such as E-15, and the &ldquo;blend wall&rdquo; (the blend wall is the current blending limit of 10 percent ethanol into the gasoline pool). This year, the U.S. Energy Information Agency predicts the gasoline pool to decrease to approximately 133.4 billion gallons, while the RFS calls for the use of up to 13.8 billion gallons of corn ethanol.&nbsp;&nbsp;
 In the Senate, Chairman Ron Wyden, D-Ore., of the Senate Committee on Energy and Natural Resources, sent a three-page memo asking for the U.S. EPA to give a full brief on the causes of the rise in the ethanol RIN market and its potential impact on gasoline prices. Additionally, he is asking detailed questions about the market participants, and how the trades are structured and taking place.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
 So what do we expect in the coming months? The House Energy and Commerce Committee will broaden its analysis and ask for input on a minimum of three more white papers, and then hold hearings.&nbsp;&nbsp; Meanwhile, the Senate Energy Committee may hold a gasoline price hearing &ldquo;at some point," but no dates have been scheduled.&nbsp;&nbsp;
 There are two other issues worth noting. First, EPA has a number of rules it is required to complete in the next few months. These include establishing the mandated numbers for each of the pools under the RFS, as well as another set of rules regulating the RIN pool and creating a quality assurance program for the gallons under the RFS. EPA will tackle other rules, like heating oil definition changes, commingling, pathway approval for technologies, and feedstocks.&nbsp;
 Also, the current budget debate has driven new interest in the tax code, and the House Ways and Means Committee is asking for comments on the current biofuels tax provisions. ABFA and most of the major trade organizations have submitted comments, although it is too early to know whether there will be new tax provisions. In fact, some argue that Congress should &ldquo;go big&rdquo; and propose an entirely new framework for renewable energy.&nbsp; This would be far more difficult, but stranger things have happened in my career.&nbsp;
 With so much going on, it&rsquo;s important to stay engaged and follow events closely, as there are multiple pieces in flux that could positively or negatively affect the advanced biofuels industry. Your input matters, so please submit your own comments to the white papers and during the rulemaking comment periods.&nbsp;&nbsp; As always, ABFA will be engaged. Author: Michael McAdams President, Advanced Biofuels Association 202-469-5140 <a href="mailto:Michael.McAdams@hklaw.com">Michael.McAdams@hklaw.com</a>

May 2013

Business Briefs

Business Briefs

Business Briefs

Columns

The Battle Continues

Annual Fly-in Exhausting But Energizing

Don't Share That Yard Track!

Making Customer-Driven Corn Oil Decisions

The Beat Goes On

Scaling the Wall … Again

Ending the Century of Subsidies

Meeting Exploding Biomass Demand Sustainably

Biomass Takes on Minneapolis

Recommendations for Pro-Growth Tax Reform

RFS under Attack Once Again

Featured

Q&A: A Man of Science Wears Many Hats

Corn Oil Makes The Grade

FEW: 'Where Producers Meet'

Ethanol Rins Market Explodes

Building on Innovation

Certification Uncertainty

The Weight of Biomass Analysis

Contributions

Corn Oil Adds Significant Profitability to Ethanol

Corn Oil Industry Needs to Evolve

Tap, Enhance, Process Stream to Create Value-added Products

Forest Sustainability: Bioenergy Breaks and Barriers

May 2013.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

Business Briefs

Business Briefs

Columns

The Battle Continues

Annual Fly-in Exhausting But Energizing

Don't Share That Yard Track!

Making Customer-Driven Corn Oil Decisions

The Beat Goes On

Scaling the Wall … Again

Ending the Century of Subsidies

Meeting Exploding Biomass Demand Sustainably

Biomass Takes on Minneapolis

Recommendations for Pro-Growth Tax Reform

RFS under Attack Once Again

Featured

Q&A: A Man of Science Wears Many Hats

Corn Oil Makes The Grade

FEW: 'Where Producers Meet'

Ethanol Rins Market Explodes

Building on Innovation

Certification Uncertainty

The Weight of Biomass Analysis

Contributions

Corn Oil Adds Significant Profitability to Ethanol

Corn Oil Industry Needs to Evolve

Tap, Enhance, Process Stream to Create Value-added Products

Forest Sustainability: Bioenergy Breaks and Barriers

May 2013