It may not have been a record-breaking corn harvest, but it was close. The USDA estimates 13.654 billion bushels were produced in 2015, down from last year&rsquo;s record-breaking 14.216 billion bushels, and third largest ever. Of that, 5.2 billion bushels will be delivered to the nation&rsquo;s ethanol plants to become ethanol and distillers grains. The U.S. Grains Council survey of the 2015 corn crop found quality to be better than the four-year average on most attributes, mostly due to the favorable growing season. The lower protein concentration in 2015 compared to recent years was attributable to high yields, the USGC report suggests, and offset by higher starch concentration. Starch levels were above 2014 and earlier years. Oil content in the USGC survey was the same as last year, but higher than the four-year average. For a second time, Ethanol Producer Magazine&nbsp;surveyed a sampling of ethanol producers. Charles Hurburgh, University of Iowa grain quality specialist, helped craft the survey, suggesting additional questions to gain insight on grading practices. All respondents report testing every inbound load for test weight and moisture, and most (85 percent) grade every load for total damage and broken kernels and foreign material. Roughly a quarter of those reporting test every load for protein and oil content and one-third test starch concentration. Composite samples are widely used for other attributes. About half the plants test for protein and oil on the composite samples and 75 percent test for starch concentration. With mycotoxins being the most critical safety concern, as they get concentrated in the distillers grains, nearly 70 percent of the plants report testing for aflatoxin and 57 percent test for vomitoxin on composite samples. About 28 percent test for aflatoxin on every load, while 17 percent test for vomitoxin on every load. Mycotoxins aren&rsquo;t a concern this year among ethanol producers&mdash;no one responding to the survey reported more than scattered positives and most tests indicated undetectable toxins. Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922

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The 2015 survey provides snapshot of new crop quality for ethanol production. This story appears in the February issue of EPM. 

2015 Crop results: Good quality, plentiful corn

Ethanol margins returned to earth in 2015, after soaring sky-high for much of 2013 and 2014. The seasonality pattern that emerged after 2010 was put on pause during that prosperous period, but returned in 2015, resulting in slim to negative margins in the first few months before recovering as the summer driving season increased demand. The tighter margins didn&rsquo;t dampen ethanol production, however, with the industry setting new production records throughout the year, even topping out over 1 million barrels per day in the weekly production averages twice before the year ended. The production performance of 2015 is a testament to the industry&rsquo;s increasing efficiency, as miniscule new capacity was added during the year, but it also raises the worrisome question&mdash;with the industry running hard, is supply going to outpace demand? Ethanol Producer Magazine spoke to a banker and a broker for a perspective on the trends shown in the accompanying charts. &ldquo;Supply and demand has remained well balanced through the fall,&rdquo; says Dan Kowalski, director of industry research at CoBank, part of the national cooperative bank system servicing agribusiness. CoBank released a report in September that called 2015 a year of rebalancing in the ethanol industry. Kowalski updated the data through the end of the year for the charts shown here. Exports and low gasoline prices contributing to increased driving demand are the biggest factors behind that balance, he says.&nbsp; &ldquo;We continue to push higher on production but at the same time exports have remained very strong and ethanol is still priced above gasoline and has been since September.&rdquo;&nbsp; Speaking in late December, he adds, &ldquo;Clearly the market is signaling there is not the excess or burdensome amount of ethanol that one might expect at that production level.&rdquo; Ethanol production numbers and stocks reports are closely watched, says Will Babler, a broker and principal with Atten Babler Risk Management LLC. &ldquo;As far as the stocks go and how heavy they can get, I wouldn&rsquo;t give an absolute number,&rdquo; he says.&nbsp; &ldquo;If storage continues to build and the run rates stay up near the record pace, then the stocks situation will largely depend on exports.&rdquo; The start of the year usually sees tight margins, Babler says. &ldquo;We would expect it&rsquo;s going to be a tough margin environment until we move into the point where spring driving demand kicks in. You can have surprises where the export market will bail you out and keep the price up, which is a lot of what is happening now. There could be some wrinkles around RIN compliance and the amount of blending needed to meet these more aggressive EPA targets, and that&rsquo;s not entirely clear yet. But, it&rsquo;s hard to see a huge runaway market to the upside in the near term. Looking at the downside, if you&rsquo;re staring at $35 crude oil, or the possibility of something even lower, one shouldn&rsquo;t be surprised if, all of a sudden, the exports just stop.&rdquo; In many cases, imports are policy driven, and policies can change, he adds. &ldquo;That propensity of the export market to change its mind is probably increased when you&rsquo;re at 10-year low in oil price.&rdquo; On the other side of the margin equation, neither observer expects much movement in corn. Kowalski points out that USDA bumped up its projection for corn consumption by 25 million bushels in the report following the U.S. EPA&rsquo;s announcement of the 2016 renewable volume obligations (RVO) under the renewable fuel standard (RFS).&nbsp; &ldquo;It&rsquo;s not a big move. The broad consensus within the industry is that there&rsquo;s going to be a minimal impact, maybe in the area of a nickel or a dime on prices.&rdquo; Babler agrees that corn is not likely to be a constriction, although the basis has been strong as farmers have been tight fisted. &ldquo;But the corn is there and there&rsquo;s a good probability that there&rsquo;s going to be even more corn globally and in the U.S. as we move into the next crop cycles.&rdquo; Policy Influence The bigger question, Babler suggests, is how the market will balance out in a lower energy price environment. &ldquo;There&rsquo;s a lot of open questions the further out you go.&nbsp;&nbsp;&nbsp; It&rsquo;s hard to find stability in this market and the root of that is that there&rsquo;s so much policy influence.&rdquo; Policy changes in individual countries could impact exports, he says, and the domestic policy front isn't settled yet. Even though the EPA released its final rule on the RVO for 2016, there is still the possibility of a lawsuit or another attempt for Congressional action to alter the RFS, Babler points out. &ldquo;For corn ethanol it was a mandate that landed in the middle.&rdquo; Neither the ethanol nor the oil industries were exactly pleased, he says, nor is the policy impact entirely clear, with alternative viewpoints on RIN balances, the renewable identification numbers used for compliance, and speculation on the potential for biodiesel to be used to comply with the renewable mandate dominated by corn ethanol.&nbsp; Kowalski points out that D6 ethanol RIN value rose dramatically after the EPA&rsquo;s announcement, settling down around 70 cents at year end. For those in the industry who have worked to pass the RIN value on to the consumer, that could help drive E85 and E15 sales by reducing the cost of ethanol for blending. For others, the economics may work against ethanol blending. &ldquo;At this point, the incentive for the blender is to use RINs they may have accumulated, because ethanol is more expensive than gasoline,&rdquo; he says. &ldquo;It doesn&rsquo;t make sense to blend in extra ethanol into the gasoline pool. It makes more economic sense for them to use the RINs for any obligation that they&rsquo;re not covering with their 10 percent blend.&rdquo; The issue of the blend wall has not been solved, he adds. RINs prices could become stronger as obligated parties bid them up for compliance, additional higher blends could be used or noncompliance might become the strategy. &ldquo;And we&rsquo;re back at the same place next year fighting this battle, figuring out how this works,&rdquo; he says. While policy uncertainty was the 2015 story for biofuels, for commodities as a whole, it was the price collapse in oil. Indeed, across the board globally, all commodities have dropped, turning the focus of commodity analysts on super-cycles. Ethanol&rsquo;s growth curve coincides with the run-up in the current super-cycle which began in the early 2000s. There were fast growth rates in emerging markets and a debt-fueled boom time in developed countries, Babler points out.&nbsp; &ldquo;You had a huge run-up from 2000 all the way in to the financial crisis and then you started to see a lot of things shake out,&rdquo;&nbsp; Babler says. &ldquo;Some ag commodities hung on a little longer, due to drought and extreme weather, but now we&rsquo;re seeing all that slip.&rdquo; Investments made to increase capacity during the boom came online just as the economy slowed, thus the record inventories in many, many commodities, Babler says. The front side of the cycle, the boom, is much shorter than the downside, he adds, &ldquo;And you get a longer-than-expected negative cycle on the back side of it. When you consider everything going on, it seems like we&rsquo;re moving into that environment now.&rdquo;&nbsp;&nbsp; Kowalski says that at first glance, the commodity price woes are caused by the strong dollar, but not all commodity sectors have performed the same. The energy price index dropped the most dramatically, while ag crops, livestock and industrial metals saw a less dramatic decline. &ldquo;Macro forces are affecting commodities,&rdquo; he says, &ldquo;but they are having differing effects.&rdquo; Looking ahead to 2016, Kowalski says the dollar is likely to remain strong and alongside higher interest rates won&rsquo;t help commodities. 2016 Prospects As a broker, Babler views 2016 prospects in risk management terms. &ldquo;The most risk is in first half of the year,&rdquo; he says. &ldquo;The status quo would be margins stay very tight with some people struggling and some doing okay. That&rsquo;s the status quo until we get into driving season. But there&rsquo;s a mine field before we get there. Do exports hang in there? Does the low crude oil price finally catch up with the ethanol industry? Could margins run away to the positive side in the near term? I think there are a lot of headwinds to make that happen. It feels like it&rsquo;s going to be tough, scratching it out for the start of the year and more downside risk than upside opportunity. If you get further out, more things can change. We&rsquo;ve seen good gasoline demand all year. If we&rsquo;ve got low energy prices and we get into peak driving season, and we have an export market hanging in there, things could get better.&rdquo; Kowalski views 2016 with the eyes of a banker. &ldquo;The reality is that liquidity is fantastic in the industry. Ethanol producers have come through very strongly. They have managed their margins up to this point very well and the industry has really learned how to manage itself. So there might be some turbulent times ahead, but the liquidity really will enable most of the producers to handle those struggles, if they do come.&rdquo;&nbsp; Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine sretkaschill@bbiinternational.com 701-738-4922

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A major characteristic of combined global commodity prices is 30- to 40-year super-cycles that typically have short upswings and longer downswings. From peak-to-trough in the three cycles shown, the price declines ranged between 40 and 50 percent. 

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In 2015, DDG prices declined relative to corn and ethanol prices were dragged lower by crude oil, rebalancing margins at lower levels. Ample corn supplies should keep those prices relatively stable in 2016. 

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Ethanol stocks relative to 20-day supply for blenders are watched closely, charted here by the RFA. Ethanol inventories typically rise until the spring and decline as the driving season picks up. 

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A seasonal pattern in supply emerged in 2011, as supply caught up to demand. CoBank estimates ethanol production will rise 1 percent in 2016. 

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Margins for the Andersons in 2014 set the high end in most months while in 2015 they were on the low side of the nine-year average in most months. The information was presented in the company's third quarter call. 

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The ethanol/corn price ratio measures roughly three-fourths of plant cost and revenue in one ratio. Since 2008, break even margins correlated with an ethanol/corn price ratio of 0.38. 

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Off to a slow start, 2015 margins improved, thanks to exports and strong driving demand. What will 2016 bring? This article appears in the February issue of EPM. 

Ethanol margins return to seasonal swings

On Nov. 2, President Obama signed a bipartisan budget bill that permits OSHA to institute a catch-up adjustment. The increase is effective Aug. 1 and subsequent annual adjustments for which the bill provides are to be based upon the Consumer Price Index. The big question is, what will be the exact amount of the catch-up adjustments? Apparently, the CPI is approximately 80 percent higher than it was back in 1990, which is when OSHA penalties were last increased. However, this first increase in OSHA penalties could be much higher than 80 percent because the act sets the maximum adjustment at 150 percent of the current penalty structure. Thus, the potential penalty structure for maximum fines could be as follows:&nbsp; &bull; Other than serious:&nbsp; $12,600 to $17,500. The maximum is currently set at $7,000. &bull; Serious:&nbsp; $12,600 to $17,500. The maximum is currently set at $7,000. &bull; Repeat:&nbsp; $126,000 to $175,000. The maximum is currently set at $70,000. Willful:&nbsp; $126,000 to $175,000. The maximum is currently set at $70,000. This first increase is not the end of it. The budget bill also requires OSHA to annually increase the monetary penalties based upon the percentage increase in the CPI from the previous year. As a result, every Jan. 15, OSHA will set new penalty amounts. Thus, employers need to pay attention. OSHA&rsquo;s increased penalties are intended to increase employers&rsquo; attention to the safety regulations by putting some teeth back into the monetary penalties. Regardless of the penalty increases, employers need to be prepared for OSHA to show up at their door for an inspection. It has been easy for employers to accept OSHA citations when the dollar amounts are reduced. However, with the increase in the penalty structure, a repeat violation can be quite devastating to a company. An employer may be cited for a repeat violation if that employer has been cited previously for a substantially similar condition and the citation has become a final order. The new citation has to be issued within 3 years of the final order of the previous citation or 3 years from the final abatement date of the citation, whichever is later. Look over your safety manuals, make sure your employees are trained and be prepared for a work accident, an employee complaint to OSHA or even a programmed OSHA inspection. Know beforehand how you will handle an OSHA inspection. Also, don&rsquo;t be too quick to settle an OSHA case even now, before the new penalty structure goes into place, since a possible repeat violation will have much more punch to it after Aug. 1. If you aren&rsquo;t careful, an OSHA violation that you thought was a &ldquo;good deal&rdquo; can rear its ugly head again in the next three years and result in a single OSHA citation of up to $175,000. Author: Brenton D. Soderstrum Attorney, BrownWinick Law Firm 515-242-2474 soderstrum@brownwinick.com

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OSHA penalties are increasing for the first time since 1990 and employers need to be aware and more cautious than in the past, writes Brent Soderstrum. This column appears in the February issue of EPM. 

OSHA penalties going up, up, up

With the implementation of the Food Safety Modernization Act, many customers have questions about the proper regulatory position of all products used in their ethanol plants. The uncertainty is well-founded because of the far-reaching impact and complexity of this new regulation.&nbsp; It is important to note that the U.S. Food and Drug Administration spent several years prior to the implementation of FSMA to define procedures necessary for regulatory compliance for use of any processing additive or antimicrobial in ethanol production.&nbsp; These procedures remain consistent with and will be integrated into the new FSMA program.&nbsp; These guidelines, which remain consistent with FSMA, state that any additive, including antimicrobials, used in an ethanol plant must meet one of three criteria to be acceptable for use.&nbsp; These criteria are: 1. An AAFCO definition: The product has a definition in the feed ingredient manual approved by the American Association of Feed Control Officials.&nbsp;&nbsp; 2. Approved food additive:&nbsp; The product has an approved food additive petition that is listed in the Federal Registry.&nbsp; 3. Generally recognized as safe (GRAS):&nbsp; The product has been determined to be generally recognized as safe by panel of experts qualified by scientific training and experience to evaluate the safety of substances directly or indirectly added to food. If the product in use meets one or more of the above criteria, it is acceptable for use under FDA guidelines and it is compliant with FSMA simultaneously.&nbsp; Recently there has been further confusion in the industry as to the impact and potential overlap of the recently revised Veterinary Feed Directive guidance on the use of antimicrobials in the fermentation process.&nbsp; U.S. ethanol producers have the responsibility as animal feed suppliers to ensure that their suppliers and fermentation aids and ingredients fully comply with today&rsquo;s regulations under FSMA.&nbsp; In spite of the fact there are many regulations governing how antimicrobials and processing aids can be used, it is important to remember that each regulation is set in place for specific areas of governance defined by the intended use.&nbsp; Regulations are very clear on this point. The use of antimicrobials/antibiotics in ethanol processing does not require a Veterinary Feed Directive. Accordingly, recent news regarding the FDA changes to the VFD regulations (21 CFR 558.6) does not apply to the ethanol industry, nor do the VFD regulations apply to the feeding of distillers coproducts&nbsp; to livestock. VFDs are only applicable to the use of certain approved animal drugs. The FDA&rsquo;s consideration of the use of antimicrobials by the ethanol industry dates back more than two decades.&nbsp; In June of 1993, Alice O&rsquo;Connell of SmithKlineBeacham Animal Health (SKB), the company now known as Phibro Animal Health, made a submission for the use of virginiamycin in the fermentation of alcohol.&nbsp; Dr. George Graber of the FDA Center for Veterinary Medicine&rsquo;s Division of Animal Feeds replied Nov. 22, 1993, with their letter of no objection to the use of virginiamycin to SKB, thus paving the way for use of this important antibiotic to control infections.&nbsp; In more recent years, the FDA has further clarified the methods for any additive, including antimicrobials, to become acceptable for use in ethanol production. The FDA&rsquo;s guidance has been very clear that the intended use of the component or drug is the basis of the regulatory categorization.&nbsp; Antimicrobials used in the fermentation process to produce ethanol are not regulated as animal drugs but are food additives (as defined in FFDCA 201(s)) or components that are considered to be GRAS.&nbsp;&nbsp; Most processing aids, antimicrobials, yeasts and other fermentation components currently being sold to the U.S. ethanol industry are predominantly GRAS, but some are also approved food additives (or AAFCO defined ingredients).&nbsp; Antimicrobials used for ethanol fermentation are not intended to impact distillers grains in any way.&nbsp; They are simply the most effective, safe, and proven infection-management tools available to the industry to control bacteria in fermentation for over 30 years. In summary, Veterinary Feed Directives are for tracking the use of antibiotic treated feed&nbsp; (medicated feed) intended for the&nbsp; treatment of&nbsp; disease conditions, in accordance with the new animal drug regulations and have no bearing on products used in ethanol production. Ethanol coproducts are not medicated feeds and, therefore, not subject to the VFD requirements for use.&nbsp; All processing aids, including antimicrobials, used in ethanol fermentation must be either food additives or GRAS components intended for use in ethanol production, and are fully compliant with FSMA. Author: Richard Coulter, BVSc Senior vice president, scientific and regulatory affairs Phibro Animal Health Info requests: Steve.Rust@pahc.com 201-329-7300 Contributing author: Kristi Smedley, PhD, principal, Center for Regulatory Services Inc.&nbsp;

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FSMA is a far-reaching and complex new regulation that many have questions about, writes Richard Coulter. This column appears in the February issue of EPM. 

Regulatory issues for antimicrobials evolving

Forward ethanol margins can be projected using the futures market as a price discovery mechanism. The risk transfer function of these exchange-traded contracts, including futures and options, allow an ethanol plant to lock-in or protect forward margins. One aspect of the margin management process involves identifying a forward margin opportunity and then analyzing that opportunity from an objective context to determine whether it is worth protecting. Assuming it is, positions might be initiated as part of a margin management strategy to protect the plant&rsquo;s profitability. From there, prices will fluctuate over time, which brings us to the next step, managing positions. Effective margin management is a dynamic process that requires monitoring open positions over time as market conditions change, and takes advantage of making periodic adjustments to these positions with the hope of improving upon the margin opportunity. As a case study of this dynamic at work, let&rsquo;s explore a recent market period with a model ethanol plant actively managing positions around a margin opportunity for August, 2015. In early June, the plant is modeling its forward profitability around its projected costs and revenues and calculates an expected profit margin of 19 cents per gallon for August. Given that margins have recovered from around breakeven earlier in the spring, the plant finds this value attractive and wishes to take positions to protect its corn costs and ethanol revenue. They decide to initiate coverage by purchasing September corn futures contracts at the current price of $3.675 on June 5 while taking a flexible ethanol strategy using options. With August Platts trading at $1.51 per gallon, the ethanol plant decides to purchase a $1.50 put option for a premium of 6 cents and simultaneously sell a $1.70 call option for a premium of 2 cents. For a net cost of 4 cents, the resulting position provides the plant with a minimum ethanol price of $1.46 per gallon and a maximum ethanol price of $1.66 per gallon. Given the historically low prices for both corn and ethanol on June 5, the plant determines there would be more opportunity to participate in potential margin improvement through higher ethanol prices, thus the flexible strategy there. Holding all other costs and revenues fixed, with a projected margin on the open market of 19 cents per gallon, the combined positions would provide the ethanol plant with a minimum margin opportunity of 14 cents per gallon and a maximum potential margin of 34 cents per gallon, should August Platts be above $1.70 per gallon at expiration. Ten days later, on June 15, prices have subsequently declined and August Platts ethanol is now trading at $1.44 per gallon. As a result, the put option that the ethanol plant has purchased has gained in value while the call option that was sold has depreciated. The $1.70 call option is now worth a half cent, which means that it has lost 75 percent of its value in two weeks&rsquo; time, and the ethanol plant decides to buy it back in order to remove the maximum price sales obligation above the market. Following this adjustment, the plant effectively now has just a minimum ethanol price or floor of $1.455 with no cap or ceiling so that they can have unlimited participation to higher prices.&nbsp; Advancing a few weeks to July 2, the corn market has rallied sharply in response to adverse weather with excessive rainfall in the eastern Midwest causing concerns over yield ahead of pollination. September Corn futures are now trading at $4.30 per bushel, up over 60 cents from where the long position was initiated back on June 5. Much of the run-up has been in response to short-covering by commodity funds, and the price increase has been very sharp in a relatively short period of time. While wishing to maintain protection against further price increases, the ethanol plant also desires to secure the gain that has built up in its long futures position. Replacing the futures position with an option strategy may make sense in order to allow for the opportunity of participating in lower prices should the market retreat while still protecting the risk of higher prices. This may be particularly true as prices approach the previous high from the beginning of the year, as shown in Figure 1. They ultimately decide to reposition their hedge into an option strategy, buying a $4.30 call for a premium of 22 cents. Effectively, the ethanol plant now has a maximum September corn futures price of $3.895 which represents their right to purchase futures at $4.30 minus their net gain on the previous hedge (62.5 cents realized gain on closed futures position&mdash;22 cents cost of call option). Another way of thinking about this is that the plant spent 22 cents to protect 62 cents of gains, and under a worst case scenario will add that cost to their eventual corn purchase. The tradeoff, however, is they will benefit, should corn prices eventually decline by more than the 22 cent cost of the calls purchased, thus potentially lowering their corn price below the $3.675 level they started from.&nbsp; By the end of the month on July 28, the corn market has moved sharply lower as fund selling and reduced weather concerns have pressured prices. September corn futures are now trading at $3.75 per bushel, 55 cents lower from where the decision was made to adjust the long futures position into a call option. While the call option has now lost most of its value, the gain in the futures position was preserved by offsetting those contracts at the higher price level. As a result, the plant is significantly better off having effectively participated in a majority of the price decline. The decision is made to convert the hedge back into a long futures position to lock in the lower value the market is now trading at. Accounting for both the gain on the initial long futures position and the subsequent loss on the long call option, the ethanol plant has an effective net price on the new September corn futures contract of $3.33 per bushel. (see figures 2 and 3). Putting everything together, the ethanol plant comes into the August marketing period with a net realized margin of 26 cents per gallon. This is not only better than the open market margin at that point of 16 cents per gallon, assuming the plant had done nothing, but also better than the 19 cents per gallon margin they initially projected receiving back in early June, as detailed in Figure 3. While there were other adjustments that also could have been made during this particular period to improve the margin further, the main point is to highlight how active management of positions can significantly improve upon projected margin opportunities as market conditions change. Profit margin management is not simply a &ldquo;set it and forget it&rdquo; process but rather a dynamic one of capitalizing on opportunities as market conditions change.&nbsp; The examples reviewed in this case study explored two particular types of adjustments, buying back decayed options previously sold and protecting equity that has built up in a hedge position. The corn adjustment was an example of the latter in converting the initial futures purchase into a call option, while the ethanol adjustment involved the former buying back decayed options. While many might leave a short option in place with the expectation of it expiring worthless, there have been examples where the market can blow up (or down) to cause what were previously decayed options to suddenly become very valuable. The first quarter of 2014 is a case in point when logistical bottlenecks caused ethanol prices to soar heading into expiration. Short call options that impose a maximum price and limit participation in higher ethanol value would have been an unwelcome part of a hedge position during this period, particularly when they could have been bought back for little to no value (see figure 4). There is always a cost/benefit tradeoff between protecting the risk exposure of deteriorating margins on the one hand and retaining opportunity on the other to participate in stronger margins over time. In the case of the corn adjustment, spending 22 cents on the call option was the cost while the benefit would be participating in lower corn prices if the market were to drop by more than 22 cents. While some might not choose to adjust a long futures position under those circumstances, others might feel that after such a strong rally in a short period of time, there was a reasonable expectation that prices might retreat by that much to make the adjustment worthwhile. The ethanol adjustment is arguably an easier decision. By only spending a half cent per gallon to remove a limitation on participating in higher prices, the plant is not really affecting their bottom line that much from a cost standpoint while significantly improving their ability to benefit from margin improvement. Weighing the costs and benefits carefully is an important part of making any adjustment to a hedge position, but should always be considered as part of a dynamic margin management process in order to optimize profitability. Author: Chip Whalen Vice President, Education and Research Commodity &amp; Ingredient Hedging LLC 312-596-7755 ethanol@cihedging.com

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FIGURE 3: The final accounting of the margin strategy resulting in a realized margin that is significantly better than that projected on June 5, when, in this case study, the plant initiated hedges.    

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FIGURE 1: The price history for the September corn futures contract through July 2.  

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FIGURE 2: Three more weeks in the September Corn futures contract, showing adjustments in hedging strategy and along with that, an accounting of the final corn price.   

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Figure 4: Price history for the March 2014 ethanol contract illustrates the opportunity for an ethanol adjustment.   

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A case study examines strategies that leave openings for upside opportunities while mitigating risk. This contribution appears in the February issue of EPM. 

Well-managed hedge positions improve margins

When it comes to ethanol production volumes per acre of land, Joule's Helioculture technology leaves all other processes in the dust. &ldquo;We can do several factors higher productivity than any other biofuel system,&rdquo; says Tom Jensen, executive vice president and head of corporate development, speaking from the company&rsquo;s demo plant in Hobbs, New Mexico, where the company has reached peak yields of 4,000 to 5,000 gallons of ethanol per acre, per year. At lab scale, the number is closer to 16,000 gallons at peak, and Joule is still reaching for higher productivity numbers for an ideal outdoor location. &ldquo;We do believe we know how close the gap to what we label theoretical maximum, which is about 25,000 gallons per acre, per year.&rdquo; The company&rsquo;s technology utilizes engineered cyanobacteria to continuously convert waste CO2 to fuel, including ethanol and alkanes that are highly blendable for diesel and jet fuel products. Joule has developed a library of cyanobacteria, each one optimized for production of a desired end product. Joule&rsquo;s process can also produce biochemicals, although that hasn&rsquo;t been the company&rsquo;s focus. &ldquo;We believe the world needs a scalable low carbon solution for fuel,&rdquo; Jensen says. While some refer to cyanobacteria as simply algae, Joule uses the more technically correct term for the microorganisms. Cyanobacteria, a photosynthetic organism, is one of the oldest lifeforms on the planet and can be found growing in many different conditions, Jensen says. For example, although it&rsquo;s not in a recoverable form, there are two species of cyanobacteria found in the earth&rsquo;s oceans that naturally produce the equivalent of 15 million barrels of hydrocarbon equivalent daily. &ldquo;What we are doing is replicating nature,&rdquo; he says. &ldquo;We are industrializing photosynthesis, if you like.&rdquo; The Joule system circulates engineered microorganisms, brackish or sea water, nutrients and CO2 in large see-through plastic tubes. As the organisms are exposed to sunlight, the photosynthetic process occurs and ethanol secretes out the cells of the organism, which is then recovered. &ldquo;The efficiency of this process is quite extraordinary,&rdquo; Jensen says. &ldquo;It is really a close to 100 percent direct conversion of CO2 and sunlight to fuel.&rdquo; The technology is best suited for areas with strong sunlight, located in a wide band around the equator, and close to sources of CO2 and water. The company has identified more than 1,000 locations worldwide, which could support a commercial production unit of 1,000 acres or more, he says. There is more work that needs to be done, however, before it becomes a reality. For one thing, the alkane diesel production process, which is a more complicated biological pathway than ethanol production, requires further development. &ldquo;We have produced it,&rdquo; Jensen says. &ldquo;We know we can do it. But we are probably 12 to 18 months behind our ethanol program.&rdquo; The company expects the first commercial-scale Helioculture production unit to be up and running before the end of the decade. Eventually, Jensen says, the technology could replace a significant portion of current transportation fuels while reducing the environmental footprint by 80 to 90 percent and, eventually, nearly 100 percent. &ldquo;This is a way to decarbonize the transportation sector,&rdquo; he says. Cooperative Progress The company hit several major milestones in 2015, including the U.S. EPA registering it's trademarked Sunflow-E ethanol and closing on $40 million in private equity and venture debt financing, bringing the total raised to $200 million. At the end of the year Joule announced a partnership and a merger, both of which aim to move Joule along the pathway to commercial success. The most recent announcement was made in early December, after Joule and HeidelbergCement, a German company with locations around the world, including the U.S., agreed to explore how Joule&rsquo;s technology could be applied to mitigate carbon emissions in cement manufacturing. Almost exactly one month prior to that, Joule and Red Rock Biofuels, a developer of renewable jet and diesel fuel biorefineries, announced they intended to merge. The HeidelbergCement partnership could someday result in collocation of Joule&rsquo;s technology at one or more of the German company&rsquo;s cement manufacturing sites. Initially, however, Joule will set up a demo-scale system, to prove out the company&rsquo;s ability to produce fuel with CO2emissions produced by HeidelbergCement&rsquo;s manufacturing process, Jensen says. At the same time, Joule is continuing to evaluate other CO2 sources. The merger of Red Rock and Joule, on the other hand, offers the company a more near-term path to commercialization. Red Rock&rsquo;s process will use a commercially proven Fischer-Tropsch technology to produce 15 MMgy of renewable diesel and jet fuels from biomass residues sourced from forests and sawmills. Work to build the first biorefinery in Lakeview, Oregon, will begin this year and, is expected to wrap up within 18 months, Jensen says. Although the Oregon facility will not be located in an optimal location for collocation of Joule&rsquo;s Helioculture technology,&nbsp; the company will test the viability of integrating the two technologies. Red Rock&rsquo;s Fischer-Tropsch production process produces a pure source of CO2, which could be utilized in Joule&rsquo;s production process as a feedstock, recycling an already recycled CO2 stream to produce more biofuels, Jensen says. The merger is a diversification strategy and adds a pathway for producing additional low carbon to carbon neutral fuels. Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

ENDLESS POSSIBILITIES: Jouleâ€™s CO2-to-fuel conversion, shown here at lab scale, requires only sunlight, non-potable water and cyanobacteria to produce ethanol and other fuels. 

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SUNCATCHER: The company's demo-scale operation is located in Hobbs, New Mexico.

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For eight years, Joule has been working under the radar to develop and commercialize its CO2-to-fuel technology. This story appears in the February issue of EPM with the headline 'Industrializing photosynthesis.'

Biofuels company industrializes photosynthesis

Looking at the numbers, it doesn&rsquo;t take long to conclude that the U.S. is developing into an ethanol export powerhouse. &ldquo;As recently as 2006, the U.S. barely registered as an exporter at all, and between 2006 and 2014, our exports have risen by $2 billion,&rdquo; says Michael Dwyer, chief economist for the U.S. Grains Council. &ldquo;There has been a dramatic change in the competitiveness of American ethanol.&rdquo; By volume, U.S. market share of world exports was only a few percentage points in 2006.&nbsp; In 2015, the U.S. share of world exports is expected to remain at nearly 50 percent, about the same level as in 2014, and twice the amount exported by Brazil. The fact is, the U.S. is picking up market share from Brazilian ethanol producers, Dwyer says. In 2014, the U.S. exported $2.1 billion in ethanol, overtaking Brazil as the world&rsquo;s largest ethanol exporter. Brazil&rsquo;s ethanol industry faces multiple factors that make it difficult to complete, including a recession and high interest rates. In comparison, the U.S. ethanol industry is doing very well. &ldquo;The U.S. ethanol industry, while we have had better times, by and large, has never been healthier than it is today,&rdquo; he says. One factor in growing demand is the difference in price of U.S. and Brazilian ethanol, from the export position. &ldquo;We&rsquo;ve got them beat by about 30 cents a gallon,&rdquo; he says. And, USGC is optimistic that U.S. ethanol exports will continue to grow long term. That&rsquo;s based on projections through 2024 from the USDA on U.S. corn prices and Organization for Economic Co-operation and Development on world sugar prices. The price of corn is expected to hold fairly steady below $4 a bushel while sugar prices are forecast to stay just above corn prices. &ldquo;We think the advantage we have today is going to carry through pretty much the next decade,&rdquo; Dwyer says. There has been a significant shift, confirms Geoff Cooper, senior vice president of the Renewable Fuels Association. Five years ago the ethanol industry assumed the U.S. EPA would enforce the renewable fuel standard (RFS), set by Congress in 2007. But, unfortunately, that didn&rsquo;t happen. &ldquo;The ethanol export market emerged very rapidly, at a very crucial time for the industry and really provided a crucial outlet for some of the spare capacity and production that we have in the United States,&rdquo; he says. &ldquo;It has helped support robust demand, healthy pricing and healthy economics for the ethanol sector.&rdquo; By the time all the data is in for 2015, U.S. ethanol exports are expected to hit about 850 million gallons, second only to the record 1.193 billion gallons exported in 2011. It&rsquo;s also an increase from the 835.6 million gallons exported in 2014, Cooper says. That&rsquo;s particularly impressive, considering the changes in oil and ethanol prices. &ldquo;Having this conversation this time last year, there was a lot of concern within our industry about what lower oil prices might mean for ethanol export demand,&rdquo; Cooper says. &ldquo;The thought was that if ethanol was trading above gasoline blendstock we were going to see some erosion in ethanol market share. And here we are, a year later, expecting to see an increase in exports even though ethanol has been priced above gasoline for the last year.&rdquo; Ethanol doesn&rsquo;t only have value when it&rsquo;s an inexpensive source of energy. &ldquo;It&rsquo;s all about octane,&rdquo; Cooper says. &ldquo;What I have learned in the past year is that export markets are increasingly valuing U.S. ethanol for its octane content, just as domestic refiners here in the U.S. have for several years. I think what we have seen this year is a clear indication that ethanol&rsquo;s octane value is being recognized globally as well.&rdquo; Hot Markets Substantial opportunities for ethanol exports exist globally. In fact, according to figures from the RFA, if the top 15 gasoline markets outside the U.S. all used just 5 percent ethanol blends, that would add up to more than 6.5 billion gallons of ethanol a year. In an effort to tap into global ethanol export markets, two years ago USGC joined with RFA, Growth Energy and the USDA Foreign Agriculture Service to promote ethanol exports in other countries. Recent examples include visits to the U.S. by ethanol buyers from Mexico, the Philippines and Peru in October, August and June. USGC has long promoted distillers grains exports, and continues to do so, but the addition of ethanol exports acknowledges both products come from the same source. &ldquo;When we are exporting ethanol think of it as liquid corn, in terms of what it means for corn farmers,&rdquo; Dwyer says. Specifically, the trade team from Peru visited the International Fuel Ethanol Workshop &amp; Expo, followed by a tour of ethanol plants and trading companies in Iowa, Illinois and Texas. In December, USGC reported a U.S. exporter had confirmed the sale of 10 million gallons of ethanol, valued at more than $15 million, on its way to Peru. In 2010, Peru began requiring a 7.8 percent ethanol blend in gasoline and the country&rsquo;s own ethanol industry is still relatively new. The promotion program is at work in multiple countries, with a focus on Asian countries, such as the Philippines, Japan, Korea, India and China, as the best market prospects, Dwyer says. Ethanol usage in those counties is low but fuel consumption growth is the fastest in the world. In addition, air quality problems are widespread and worsening, especially in areas of Asia that are developing. The ethanol export promotion efforts have been successful, Cooper says, in terms of getting conversations going about U.S. ethanol. &ldquo;It takes time to build these markets and forge relationships,&rdquo; he says. &ldquo;It&rsquo;s not an easy thing to do but I think we have seen some success in breaking into these new markets.&rdquo; Besides RFA&rsquo;s involvement in promotion efforts with USGC, Growth Energy and USDA-FAS, the association also joined forces with the U.S. Commerce Department to set up business-to-business sales opportunities, such as trade trips to Brazil and the Philippines, which have been very successful. Cooper also mentioned Asian countries, specifically Thailand, Vietnam and Singapore, plus South American Countries such as Columbia and Peru, as hot, new markets. These are places where the U.S. is currently sending small amounts of ethanol but that have lot of potential for growth. For example, China emerged in 2015 as a player in the ethanol export story.&nbsp; The country was the top customer for U.S. ethanol in October, according to the latest available data in late December. In that month alone, 32.6 million gallons of ethanol were exported to China, which is almost double the total amount of ethanol shipped to the country in the past two years. &ldquo;That&rsquo;s a new development in 2015 that I think is a tremendous opportunity,&rdquo; Cooper says. &ldquo;China is the No. 2 gasoline market in the world, behind the United States, so there&rsquo;s lots of demand potential there.&rdquo; Between 2014 and 2011, China&rsquo;s ethanol industry produced between 555 million gallons and 696 million gallons of ethanol. Another opportunity for export growth is to Mexico and other markets still using MTBE despite known risks to air and water quality. &ldquo;We think there&rsquo;s a real opportunity to get in some of those markets,&rdquo; he says. While more education is needed on the environmental and health benefits of ethanol, good progress has been made in securing ethanol&rsquo;s future as Mexico&rsquo;s oxygenate of choice. Cooper also stressed the importance of Canada. &ldquo;It&rsquo;s our oldest and most consistent market,&rdquo; Cooper says. Through October, about one-third of ethanol exports ended up in Canada. In 2014, a total of 335.9 million gallons of U.S. ethanol was exported to the nation&rsquo;s neighbor to the north, which is 4 percent more than the previous year. The country produced 510 million gallons of the fuel that year. Brazil was the No. 2 market for U.S. ethanol in 2014 and is on track to be so this year as well. In 2014, Brazil produced 6.19 billion gallons of ethanol and imported 112.2 million gallons of U.S. ethanol, a 147 percent increase from the previous year. In the same year, the U.S. produced 14.3 billion gallons of ethanol domestically and imported 60.8 million gallons of Brazilian ethanol. It&rsquo;s also noteworthy that that&rsquo;s 83 percent reduction from Brazilian ethanol imports the previous year. &ldquo;We&rsquo;ve been trading ethanol with Brazil for much of the past five years but it&rsquo;s certainly more up and down and hit or miss in the Brazil market,&rdquo; he says.&nbsp; Then there&rsquo;s Europe. U.S. ethanol exports to Europe are the reason the industry crossed the 1 billion gallon mark in 2011. But a tariff on U.S. ethanol caused exports to Europe to erode dramatically, although small amounts are still making it there. &ldquo;Europe is a still a major frustration for us,&rdquo; Cooper says. &ldquo;They have a need for more ethanol they can produce. &hellip; We are just asking for the chance to get in there to compete with the Brazilian ethanol, for access to that marketplace.&rdquo;&nbsp; Author: Holly Jessen Managing Editor, Ethanol Producer Magazine 701-738-4946 hjessen@bbiinternational.com

A trade team of Mexican ethanol buyers pose outside Kansas Ethanol LLC, during an October trip to Missouri, Kansas and Texas to learn about U.S. ethanol production and strategies for purchasing the fuel. 

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A team of ethanol buyers listens to Tom Buis, co-chairman of Growth Energy, during a visit from the Philippines in August. 

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Kelly Davis, director of regulatory affairs for the Renewable Fuels Association, sits in a vehicle advertising ethanol as â€œclean energy for your engineâ€� during a May trip to explore market possibilities in Mexico. 

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Global trade for U.S. ethanol has been trending up in the past decade, becoming an important part of the industry's growth strategy. This article appears in the February issue of EPM.  

Export markets for “liquid corn” 

Wayne Fueling Systems has announced an agreement to acquire Simmons Sirvey, a provider of real-time fuel management services and traditional statistical inventory reconciliation in the retail fueling industry. Through the agreement, Wayne will acquire all of Simmons&rsquo; products and technology solutions including the ClearView software that provides real-time fuel monitoring and analytics for fueling station owners. Wayne Fueling Systems also recently announced an agreement with Vianet Group plc, a provider of real-time monitoring systems, data management services, and actionable data for the leisure and vending sectors, to acquire their fuel management subsidiary. U.K.-based Vianet Fuel Solutions Ltd. includes two main product lines as part of the Wayne acquisition, including fuel management solutions (FMS) and construction and forecourt services. FMS is comprised of real-time, wet-stock management, asset management and compliance monitoring services. CFS aligns with Wayne&rsquo;s current U.K. services business and provides additional services,&nbsp; including forecourt construction, electrical compliance services and tank lining. &nbsp; Jeff Broin, founder of Poet LLC, resumed his role as the company&rsquo;s CEO in November after serving as executive chairman for the previous 3.5 years. Jeff Lautt, who served as CEO in Broin&rsquo;s absence, will continue to manage the day-to-day operations of Poet as president and chief operating officer.&nbsp; &nbsp; The Iowa Renewable Fuels Association has announced its board of directors, officers and executive committee for 2016. Each producer member has a seat on the board and votes on officers. New officers will serve a one-year term during the 2016 calendar year. Tom Brooks of Western Dubuque Biodiesel will serve as president, while Eamonn Byrne of Plymouth Energy has been elected vice president. Rick Schwarck of Absolute Energy will serve as treasurer, while Steve Bleyl of Green Plains Inc. will serve as secretary and Monte Shaw will continue as executive director. The executive committee includes Brian Cahill of Southwest Iowa Renewable Energy, Derek Winkel of Renewable Energy Group, Craig Willis of Archer Daniels Midland Co., and Bill Howell of Poet-Coon Rapids.&nbsp; &nbsp; Syngenta has signed an agreement with Midwest Renewable Energy LLC to begin using Enogen corn technology at its Sutherland, Nebraska, ethanol plant beginning with the 2016 planting season. Syngenta is contracting Enogen with growers to support 18 ethanol plants in seven states, representing approximately 1.3 billion gallons of ethanol capacity.&nbsp; &nbsp; The USDA has announced a conditional commitment for a $70 million loan guarantee to an affiliate Ensyn Corp. to support the construction of a 20 MMgy cellulosic biorefinery in Georgia. The facility will employ Ensyn&rsquo;s Rapid Thermal Processing technology to produce a renewable fuel oil product. The loan guarantee was awarded under the USDA&rsquo;s Biorefinery Assistance Program.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Laurel Biocomposite LLC has earned the USDA Certified Biobased Product Label for its Bio-Res PLA with 97 percent biobased content; Bio-Res PE with 62 percent biobased content and Bio-Res powder with 100 percent biobased content.&nbsp; The company first introduced the biomaterial in 2011 as a cost-effective, green replacement with improved performance properties for traditional petroleum-based resins in a variety of plastics manufacturing processes. &nbsp;&nbsp; The Iowa Corn Promotion Board recently announced the U.S. Patent and Trademark Office has published its patent application for a production method using corn in the industrial manufacturing of monoethylene glycol (MEG), which can be used to manufacture polyethylene terephthalate (PET) plastic. MEG can also be used as antifreeze, coolants, aircraft deicers and industrial solvents.&nbsp; &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; LanzaTech has signed a joint development agreement with nylon producer Invista to collaborate on projects to develop one- and two-step technologies to convert industrial waste gas carbon monoxide into butadiene. Initial commercialization is expected this year.&nbsp;&nbsp; U.S. Water, an Allete Co., has announced the acquisition of A and W Technologies, a Georgia-based company that provides specialty chemicals and engineering service for water treatment in data centers, light industrial, institutional and food industries. A $9 million purchase agreement was signed by both parties in November. The Alliance for Sustainable Energy recently announced the appointment of Martin Keller as director of the National Renewable Energy Laboratory and president of the alliance, which manages the laboratory for the U.S. Department of Energy. Keller officially joined NREL on Nov. 30. He was previously employed by Oak Ridge National Laboratory, where he served as the associate laboratory director for energy and environmental sciences, which includes ORNL&rsquo;s programs in biosciences, environmental sciences, buildings technologies, transportation, climate change, manufacturing, and electrical and electronics systems. In 2006, Keller was recruited to ORNL from an industrial enzyme discovery and development company to lead the Office of Science-supported BioEnergy Science Center, in which NREL is a partner. Redfield Energy and ICM Inc. unveiled the installation of ICM&rsquo;s Fiber Separation Technology at Redfield&rsquo;s ethanol plant in Redfield, South Dakota, in November. FST is a value-added platform technology that helps increase ethanol yield and oil recovery for customers. FST also removes fiber from a standard ethanol process, which allows increased throughput and efficiency for each gallon of ethanol produced, and creates options for diversified coproducts with high-protein feeds and fiber. Deinove has produced second-generation ethanol in a 300-liter fermenter. The trials were conducted at VTT1. Fermentation of glucose and xylose sugars by and optimized deinol strain of Deinococcus bacteria resulted in the production of ethanol at 7.3 percent volume/volume. This performance is consistent with the results obtained by the Deinove team in its laboratories in 20-liter fermenters. &nbsp; Cherry Murray was confirmed by the U.S. Senate in December as director of the U.S. Department of Energy&rsquo;s Office of Science. Murray will oversee research in the areas of advanced scientific computing, basic energy sciences, biological and environmental sciences, fusion energy sciences, high-energy physics, and nuclear physics. She will have responsibility not only for supporting scientific research, but also for the development, construction, and operation of unique, open-access scientific user facilities. The Office of Science manages 10 of the department&rsquo;s 17 national laboratories. Murray previously served as the Benjamin Peirce professor of technology and public policy and professor of physics at Harvard University. &nbsp; Fluid Quip Process Technologies LLC has developed a fiber bypass system that removes solids before ethanol fermentation. The company installed the system at two U.S. ethanol plants last year, and was scheduled to install additional systems in U.S. and Brazilian plants in December. The Renewable Fuels Association has unveiled a redesigned version of its fuel market website E85prices.com. The revamped crowdsourcing site offers a highly optimized user experience by integrating mobile device compatibility so that users can access E85prices.com no matter where they are.

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Business Briefs

At the recently concluded Paris Climate Summit, or COP21, leaders of 195 countries reached a landmark agreement on combating climate change, which will come into effect in 2020. It aims to ensure that the global temperature rise this century does not exceed 2 degrees Celsius above pre-industrial levels by shifting to a low carbon global economy and encouraging the development of clean technologies as the basis for future development. As part of the agreement, the signatories will be required to prepare, communicate and maintain plans outlining their efforts to reduce greenhouse gas (GHG) emissions. Countries are also required to submit updated climate plans every five years allowing them to gradually increase the ambitiousness of their goals. Given the daunting scale of the challenge that countries face in transitioning off carbon intensive technologies, now is the time for world leaders to acknowledge the enormous potential of biofuels as the only commercially viable technology available to significantly offset emissions in the transport sector over the short and medium term by including supportive policies in their plans. According to a report by the International Energy Agency, sustainable biofuels could provide 27 percent of the world&rsquo;s total transport fuel by 2050 and avoid around 2.1 billion metric tons of CO2 emissions per year, with biofuels eventually providing 20 percent of total emission reductions in the transport sector. &ldquo;Greenhouse gas emissions, which are causing climate change, can be controlled,&rdquo; Michel Jarraud, director-general of the World Meteorological Organization, recently explained. &ldquo;We have the knowledge and the tools to act. We have a choice. Future generations will not.&rdquo; That biofuels represent a key tool in global efforts to combat climate change is self-evident. What is needed is the political will to enhance biofuel friendly policies in developed nations in order to lead by example in maximizing the advantages of biofuel technologies that are demonstrated to be effective, affordable and immediately available. On Dec. 6 in Paris, our organization released a report prepared by (S&amp;T)2 Consultants Inc., which uses figures from F.O. Licht examining the impact of biofuels on global emissions. The report found that the total GHG emission reductions from global biofuels production forecast for 2014 is 169 million metric tons CO2 equivalent. These findings are consistent with recent trends, which show global ethanol production and use has, year after year, steadily reduced GHG emissions. To put the scale of these reductions into perspective, the projections for 2014 now represent a total greater than the GHG emissions in 28 Annex 1 countries, which includes industrialized nations such as the U.S. and France. Given the ambitious goal of the agreement reached at COP21, estimated to represent CO2 emission reductions of 80 percent by 2050, countries will need to embrace biofuels like ethanol in order to achieve their targets. With the momentum coming out of COP21, now is the time for governments around to world to demonstrate leadership, introduce stronger global biofuel policies, and prioritize the commercialization of advanced biofuels to take full advantage of low carbon biofuels like ethanol in the fight against climate change. Thirty-seven countries have already recognized the unique value of biofuels like ethanol as a low carbon alternative to fossil fuels and included biofuel friendly policies as part of the Intended Nationally Determined Contributions plans they submitted at COP21. Given the size of the challenge being confronted, supporting biofuels is a no-brainer. Author: Bliss Baker Global Renewable Fuels Association 647-309-0058 info@globalrfa.org

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Given the challenge that countries face in transitioning off carbon intensive technologies, now is the time for world leaders to acknowledge the enormous potential of biofuels, writes Bliss Baker. This column appears in the February issue of EPM. 

World leaders must recognize biofuels potential 

Scott Parsley recently retired after 30 years at East River Electric, and 27 years on the American Coalition for Ethanol board of directors. Scott was one of the first board members and the first ACE president who wasn&rsquo;t Merle Anderson. Scott is also my Aunt Sue&rsquo;s brother, and I met him more than 40 years ago, when my family spent the day with a bunch of the Parsleys at Lake Campbell one Fourth of July. I remember being in the middle of the lake, in a boat with Scott, my Dad, a dead motor and a storm rolling in. Scott and Dad were trying to get the engine restarted, and they were checking the electrical system with Dad turning the key while Scott held wires in the engine compartment to feel whether a charge was getting to the spark plugs. That&rsquo;s right, Scott verified power was delivered by getting repeatedly shocked. Kind of like testing an outlet by sticking a fork in it. Memorable. Some people would be shocked (sorry, couldn&rsquo;t resist) to learn the problem turned out to be fuel related, several years before ethanol arrived in the fuel supply. And since I went there, I won&rsquo;t resist drawing a cheesy parallel to Scott being comfortable with power in his hands, or willing to be a hands-on board member, even when it&rsquo;s painful. All that is true. We appreciate Scott&rsquo;s service to ACE, and wish him well in his retirement. For this column, Scott came to mind for a different reason. One of the first times I proposed a promotional campaign, Scott said he liked the idea, asked about the target market, and then asked the question he would ask in several future ACE meetings, &ldquo;Do you know if they&rsquo;ll like it?&rdquo; I started to answer, and realized I didn&rsquo;t know. It was my opinion. I hadn&rsquo;t asked anyone that wasn&rsquo;t one of us.
Scott&rsquo;s question came from his participation in the creation of the Touchstone Energy brand for rural electric cooperatives, a name and look his group didn&rsquo;t think of, and didn&rsquo;t care for when the advertising agency suggested it. The agency told them the dairy industry didn&rsquo;t like their ideas at first, either, but were convinced by extensive research that said people who actually buy milk, liked this ridiculous, new, &ldquo;milk moustache&rdquo; campaign. The Touchstone Energy research was apparently similar and resulted in similar (albeit lesser known) success.| There&rsquo;s plenty of consumer research on motorists&rsquo; fuel buying habits, and focus group research done by ACE and other ethanol supporters falls in line with historical fuel buying studies. First, most people hardly ever think of fuel. When they have to, 70 percent of people say price drives their decision, 20 percent location and 8 percent brand. Those numbers drift a percent or two each year, but they&rsquo;ve been consistent for decades. When you really press people, they&rsquo;ll eventually say fuel quality is important, too. Big Oil&rsquo;s retail marketing approach suggests their numbers are the same. They rarely advertise fuel, unless it&rsquo;s premium. Premium barely sells, but suggests brand quality. They spend money to brand locations they don&rsquo;t own, in exchange for long-term contracts that dictate more expensive branded fuel offerings, and limit availability of less expensive, higher-octane ethanol blends. And with competitors doing the same, that pesky price issue is minimized. Until someone in a market starts to sell those less-expensive, higher octane ethanol blends. E10 went nationwide well ahead of the renewable fuel standard, without brand campaigns or big promotions. The lower price&mdash;made even lower with a tax credit&mdash;simply had to be explained to marketers. They ran with it from there. Today, lower-priced E15 and flex fuels include renewable identification numbers (RINs), and marketers need to understand how RINs work for them. We have to teach math, know fueling equipment and lots of rules and regulations. That&rsquo;s not flashy or exciting like an ad campaign or special event, but research suggests there&rsquo;s a 70 percent chance it&rsquo;ll work. Author: Ron Lamberty Senior Vice President American Coalition for Ethanol 605-334-3381 rlamberty@ethanol.org

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A recently retired ACE board member helped the organization focus in on the wants and needs of the target market, writes Ron Lamberty. This column appears in the February issue of EPM. 

Know your target market 

At the United Nations Conference on Climate Change in Paris, 195 countries reached a historic agreement that will, for the first time, enable us to improve air quality and boost the transition toward resilient, low-carbon societies and economies. The important, ambitious goals contained in the agreement can be met with the help of biofuels. Cleaner-burning, higher-performing fuels have the potential to resolve many of the pressing environmental and public health issues faced by our friends across the globe, and we are ready to be part of the solution.&nbsp; The landmark agreement commits nearly every country to lowering greenhouse gas (GHG) emissions. According to Argonne National Laboratory, ethanol reduces greenhouse gas emissions by an average of 34 percent compared to gasoline. Ethanol producers are also developing new and innovative ways to produce sustainable biofuels from farm waste and woody biomass, ushering in the next generation of renewable fuels that promise even greater reductions in GHG emissions. Argonne National Laboratory estimates that cellulosic and other advanced biofuels can reduce GHG emissions by 100 percent or more compared to gasoline. In addition to helping the world take on the challenge of climate change, ethanol and distillers grains exports also represent about 10 percent of the industry&rsquo;s sales. In order to actively explore additional market opportunities and pursue solutions to trade barriers, Growth Energy has partnered with the U.S. Grains Council and the Renewable Fuels Association to create an Ethanol Export Steering Committee consisting of members of each organization and senior USDA Foreign Agricultural Service officials. The steering committee focuses on providing educational information related to ethanol to our overseas representatives and customers, including USGC and FAS staff, initiating market assessment missions and engaging with current customers to expand foreign demand through a combination of overseas trade activities and bringing foreign ethanol industry teams to the U.S. Teams from the three organizations have participated in exploratory market development missions to China, South Korea, Japan, Mexico, Peru, Panama, the Philippines, Singapore and India to ascertain the potential to expand the export market for U.S. ethanol. Additional missions are in the planning stage for 2016. These efforts have been a resounding success. In 2014, the industry had a record volume of distillers grains sales overseas and the second-highest amount of ethanol exports in history. Through October 2015, U.S. exports of ethanol totaled 695 million gallons, up about 4 percent compared to the same period in 2014, with a value of $1.5 billion. U.S. distillers grains exports totaled 10.6 million metric tons for the first 10 months of the year with an export value of $2.5 billion. We are working hard to ensure that these numbers continue to grow by expanding the market development efforts launched in 2015 through additional market analysis and development missions. With rapidly growing energy demands and a new climate agreement, our nation and others should invest in biofuels that are cleaner, cheaper and offer a more reliable supply than fossil fuels. Imagine all of the good we can do for the environment and for our future by increasing the blend of ethanol in our fuel supply. &nbsp; Author: Tom Buis Co-chairman, Growth Energy 202-545-4000 tbuis@growthenergy.org

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The important, ambitious goals contained in the agreement reached at the climate change conference can be met with the help of biofuels, writes Tom Buis. This column appears in the February issue of EPM. 

Industry poised to be part of climate change solution 

If you are a regular reader of the Renewable Fuels Association&rsquo;s monthly export, import summaries, then you know that ethanol exports are once again on the rise, on track to surpass 850 million gallons this year, the second-highest total ever. Given the U.S. EPA&rsquo;s decision in November to inexplicitly curtail renewable fuel use in the United States and limiting ethanol to the so-called blend wall, exports of ethanol are going to continue to be a critical market and the key to profitability in the industry.&nbsp; As a result, the RFA membership has made growing export market opportunities one of our top priorities. RFA publishes the &ldquo;Ethanol Export &amp; Import Statistical Summary,&rdquo; which provides an in-depth review of international ethanol trade over the past decade. It reflects the growth in ethanol exports over that time, and lists the more than 50 countries importing U.S. ethanol today. Canada, of course, remains the largest market for U.S. ethanol, receiving 29 percent of all ethanol exports last year.&nbsp; Brazil, the Philippines, South Korea and India also remain top five export destinations. But this year, China emerged as a growing market for U.S. ethanol, becoming the sixth largest market for exports. A troubling threat to the Canadian market was averted in December, when the U.S. Congress included a repeal of Country of Origin Labeling requirements in the Omnibus spending bill after the World Trade Organization found COOL violated international trade law and awarded Canada and Mexico up to a $1 billion each in potential countervailing duties that could have included fuel ethanol. RFA continues to fight the unjustified 9 percent duty imposed on U.S. ethanol by the European Union, and when it is ultimately repealed, that important market should once again provide significant opportunities.&nbsp; If the on again, off again distillers grains trade with China has taught us anything, it is that overdependence on one international market is fraught with peril, and the industry must work to develop new export markets in every corner of the globe. Toward that end, the RFA helped form the Ethanol Export Partnership with the U.S. Grains Council and Growth Energy to combine resources and maximize the effort&rsquo;s effectiveness. Working through the USDA, the partnership has already conducted trade missions to Mexico, Japan, India, China and the Philippines. More are planned this year. The RFA has also worked closely with the U.S. Department of Commerce to expand international trade opportunities. RFA has sponsored business-to-business trade missions to Brazil and the Philippines, and the National Ethanol Conference was selected to host an International Buyer Program in February, bringing pre-screened foreign buyers from Brazil, Mexico, India, China and the Philippines to the NEC for networking with U.S. producers and marketers. International trade specialists from the commerce department will be at the International Trade Center on-site at the NEC to provide export counseling, matchmaking services, market analysis and more.&nbsp; It is perhaps unfortunate that the U.S. ethanol industry is forced to build export markets because our own EPA fails to appreciate the value of maximizing, rather than artificially limiting, the amount of ethanol that can be blended domestically. But through these efforts, and the commitment to growing international markets by producers, the U.S. is poised to realize its full potential in any case.
Author: Bob Dinneen President and CEO, Renewable Fuels Association 202-289-3835

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RFA membership has made growing export market opportunities one of our top priorities, writes Bob Dinneen. This column appears in the February issue of EPM. 

Seizing export opportunities

All eyes are turning to Iowa as the State Caucus looms on Feb. 1. Of course, those of us in the ethanol industry hang on every word candidates speak when it comes to ethanol and renewable energy, in general. I wonder, however, if it really makes a great deal of difference. In theory, it&rsquo;s great to have a president who supports renewable energy, but in practice, Congress is the body that actually determines the success or failure of our industry. I&rsquo;m reminded of this when I hear presidential candidates make wild claims about what they are going to do if they are elected to the Oval Office. In fact, there is little they can do (outside of veto power) without Congressional approval, as it relates to renewable energy. I&rsquo;m not a Washington insider, so what I&rsquo;m saying here may not be the view of those who are insiders. But, from someone who has seen a few presidents come and go (more than I would like to admit), I do wonder how important their comments about renewable energy are, when they are vying for the top job. Aside from only a handful of candidates over the years, just about all of them, when they are in Iowa, say they support ethanol. Following through on that commitment is another story. Not to do so would be like a vegetarian seeking the position of CEO for the National Cattlemen&rsquo;s Association. If you really wanted the job, you would probably, albeit reluctantly, wolf down a T-bone over dinner with the board and comment that there is nothing like a good steak. Of course, once you have the top job, there are all sorts of reasons you can revert back to being a vegetarian but, boy, deep down I really do support the meat industry. I think you get my point. Over the years I&rsquo;ve become pretty cynical about what politicians promise when on the campaign trail. The political realities of Washington soon come to roost once the election is over. That list includes campaign donations, the compromises required in order to get things though Congress and pressures from a vast array of lobby groups, all with very convincing stories. I don&rsquo;t pay a lot of attention to what is said on the campaign trail about ethanol, because I don&rsquo;t think it makes a lot of difference. What makes a difference is what&rsquo;s in their heart. Unfortunately it&rsquo;s difficult to know that unless they have some voting or other public track record of either support or opposition. Looking at a number of candidates, what they say about ethanol in Iowa and what their track record is, are two different things. Some have no track record at all on ethanol and it becomes almost impossible to know if they are simply saying what Iowans and others want to hear. Maybe we should listen to them when they are campaigning in the coal country of Kentucky or in the oil producing states of Oklahoma or Texas. Renewable energy would likely not be on their list of topics. So I&rsquo;ll let the political insiders make the call on which candidate is best suited from a renewable energy perspective. For me, I&rsquo;m not sure it makes a gnat&rsquo;s worth of difference. That&rsquo;s the way I see it. Author: Mike Bryan Chairman, BBI International mbryan@bbiinternational.com

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How important are comments about ethanol made by presidential candidates, muses Mike Bryan, when nearly all claim they support it when in Iowa? This column appears in the February issue of EPM. 

Promises made in Iowa        

The marked rise of U.S. ethanol exports, particularly over the past five years, continues to be one of the industry&rsquo;s top stories, and also one of the brightest. The roughly 850 million gallons of ethanol our nation is expected to export in 2015, while just 6 percent of total domestic production, is a big difference maker in the marketplace. In addition to having a stabilizing effect on the price of ethanol, today&rsquo;s total export volume represents, for example, the amount of ethanol produced by all the ethanol plants in Ohio and Missouri combined. Without those foreign markets, who knows?&nbsp;&nbsp; As explained in our story, <a href="http://www.ethanolproducer.com/articles/12942/export-markets-for-undefinedliquid-cornundefined" target="_blank">&ldquo;Markets for Liquid Corn,&rdquo;</a> U.S. ethanol exports, as a dollar figure, have risen from essentially nothing a decade ago to $2 billion today. In fact, EPM Managing Editor Holly Jessen reports that the United States&rsquo; market share of world ethanol exports now stands at 50 percent, twice that of historical frontrunner, Brazil. America&rsquo;s ascent to ethanol exports dominance can be attributed to several factors including readiness, capacity and incidental market dynamics. First, the global demand for octane is rising while the price of U.S. ethanol&mdash;and corn&mdash;is relatively low. Corn, in fact, is expected to stay cheaper than sugar, Brazil&rsquo;s main feedstock, for years to come. That bodes well for the growth of U.S. exports in the near term. Secondly, the rise of U.S. ethanol exports absolutely must be attributed to the sheer diligence and swift action of the industry itself. As Jessen reports, the U.S. ethanol industry, with lots of help from the U.S. Grains Council and federal agencies like the USDA and U.S. Commerce Department, has been originating and building worldwide markets for its product out of a real sense of necessity. The industry needed, and very much still needs, outlets for its spare capacity in order to stabilize prices and keep the lights on at every operable plant in America. Exports, particularly at today&rsquo;s levels, provide exactly that channel. Fortuitously, or maybe by design, the market growth we&rsquo;re seeing is occurring with geographic diversity. While ethanol exports remain strong in proven destinations like Canada and Brazil, budding customer bases in South America, Southeast Asia and China&mdash;the No. 2 gasoline market in the world&mdash;are being cultivated in earnest. Particularly impressive, and perhaps a little confounding, is that U.S. ethanol exports are on the rise despite the fact that ethanol has been trading above the price of gasoline for about a year. That&rsquo;s probably a reflection of budding global demand for octane, but also the intrepid work of America&rsquo;s globetrotting ethanol ambassadors.
Author: Tom Bryan President &amp; Editor in Chief tbryan@bbiinternational.com

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The February issue of EPM is now online, including a story about growing export markets. Tom Bryan writes that today's total ethanol exports adds up to the amount of ethanol produced by all the ethanol plants in Ohio and Missouri combined. 

Ethanol's outlet opportunities 

When West Pharmaceutical Services&rsquo; plant in Kingston, North Carolina, exploded in 2003, resulting in six deaths, dozens of injuries, and complete destruction of the facility, it was ultimately concluded that the accident was preventable. Not simply in that the design of the suspended ceiling and operation of the facility didn&rsquo;t take into account the hazards of combustible dust, but that some employees knew about the dust, but were unaware of the risk. According to the U.S. Chemical Safety Board report, while dust removal and good housekeeping were priorities at the facility, dust accumulated above the ceiling over time, going unrecognized as a serious hazard&mdash;even though maintenance workers were aware of the dust, they lacked an effective understanding of the danger. Dust explosions resulting in injuries, fatalities and facility destruction are not uncommon at grain elevators, woodworking facilities, fossil fuel power generation plants, various food industry sectors involving materials such as sugar, flour, tobacco and more, as well biomass facilities that utilize pulverized or ground wood material to make energy or wood pellets. Owners, operators and all employees of plants at risk for combustible dust incidents should be educated on the risks. A great teaching tool to use for that purpose is the explosion pentagon, says Tim Cullina, P.E., senior consulting engineer at Fauske and Associates, a process safety engineering company. For a dust explosion to occur, five conditions must be met: a fuel source (combustible dust), an oxidizer (oxygen in air), an ignition source such as a spark, dispersion of the dust and confinement of the dust cloud. Cullina, who teaches a class on the basics of combustible dust, says that it&rsquo;s also important to understand that removing of the dust and confinement of the dust cloud. doesn&rsquo;t safeguard a facility against an event&mdash;it may still be susceptible to deflagration. &ldquo;You&rsquo;re not going to explode, but if you take away the confinement and still have a dust cloud, oxygen and ignition, it can be just as damaging. Deflagration only needs four of those items&mdash;I refer to it as the deflagration diamond. Apart from employee education, understanding the role of various regulatory agencies&mdash;OSHA, fire marshals, building departments and the National Fire Protection Association have in enforcing codes and safety requirements is crucial, according to Cullina. Sorting Out Authority NFPA, which is made up of volunteers who sit on technical committees to provide expertise for the development of codes and standards designed to minimize the risk and of fires and explosions, OSHA, insurance companies and the local permitting authorities may all recommend or require different things, Cullina points out. &ldquo;What is really going to protect your people and your facility? In each case, it's about education, and how much each authority having jurisdiction (AHJ) understands about combustible dust and risk assessment.&rdquo; Going back 15 years, many of the AHJs were not aware of combustible dust hazards, according to Cullina. For example, in one jurisdiction, it was against code to install an indoor bucket elevator. &ldquo;The builder requested a variance from this requirement, and the building department granted it without conditions,&rdquo; Cullina says. &ldquo;The permitting authority was unaware of the risks of using a bucket elevator indoors to transfer combustible particulate. If this had been an agricultural facility, an OSHA standard would have mandated additional ignition control requirements, but in this case, that OSHA standard did not apply. The local insurance broker issued a policy without inspection. Even if there was an inspection, there is no guarantee that the insurance inspector would have been aware of the risk from combustible dust. The NFPA standards for combustible dust have been in place for many years. But the owner, the permitting authority, and the insurance company were not aware of these standards.&rdquo; NFPA is not an enforcement or an inspection agency, Cullina points out&mdash;it has no power, nor does it police or enforce compliance with the contents of NFPA documents. &ldquo;That job is left to the local jurisdictions that adopt the NFPA documents as code,&rdquo; he explains. &ldquo;Most commonly, fire protection requirements are enforced through fire marshal inspections.&nbsp; They&rsquo;ll have a list of things they&rsquo;re looking for to make sure that at a minimum, you&rsquo;ve addressed them, and they may or may not include some of the specifics of NFPA. But usually, they&rsquo;re more generic, like certain plumbing requirements, which are common and understood. The combustible dust standards haven&rsquo;t been, but they are more so now because a lot more attention has been brought to bear on it.&rdquo; In some cases, the local authority might be aware of combustible dust issues and have made the requirements, and other cases they haven&rsquo;t trained themselves to look for it.&nbsp; &ldquo;The fire marshal is the only entity in the process with authority to bring things to a screeching halt. If they see something wrong, they can shut you down,&rdquo; Cullina says. &ldquo;OSHA doesn&rsquo;t have that authority.&rdquo;&nbsp; Local jurisdictions may or may not make certain NFPA standards laws&mdash;for example, NFPA 664, which applies to woody biomass. &ldquo;They may or may not make you put in the explosion vent, or a suppression system,&rdquo; Cullina points out. &ldquo;They may or may not be sensitive to checking whether you&rsquo;re completely grounded so that you won&rsquo;t create a static spark. From OSHA&rsquo;s point of view, the very existence of this standard lets us know this is a problem and that you should know about it if you&rsquo;re in this business. Even if they don&rsquo;t have a standard specifically for your individual piece of equipment or operation, you do have the general duty clause which says you&rsquo;ll provide a safe workplace.&rdquo; Therefore, OSHA can use NFPA standards as evidence of knowledge that the industry has a standard, and remedies for hazards. &ldquo;It&rsquo;s an onion&mdash;there are these different layers, we have to talk about all these different aspects to get a broad picture [of requirements].&rdquo; The key component to all of these codes, designs and specification is to have someone in the design, engineering and operations with clear evidence of capability and relevant experience with combustible dust to ensure that the systems not only comply with the NFPA codes and standards, but also to provide on-going support for any modification to existing operations, according to Justin Price, project engineer at Evergreen Engineering. Risk at New, Existing Facilities &ldquo;Some typical examples of fires and failure can be seen across the wood products industry, all are symptomatic and provide us with great lessons we can learn to protect the lives of our employees,&rdquo; Price says. &ldquo;We see many fires started from material building up on motors and bearing or other mechanical components. Once the wood builds up on these components, it acts like an insulator and retains the heat. The heat then is cause for the event. This can happen quickly, and is many times in places that are difficult to reach and therefore often overlooked in the housekeeping task.&rdquo; &nbsp;Other times, it is simply poor design, in that the bearing is inaccessible. &ldquo;Alternatively, pressure relief systems are not in place,&rdquo; Price says. &ldquo;Even to the extent that process interlocks are not applied.&rdquo; &nbsp;When we are designing a new facility, the key to compliance and best method of mitigating risk is hiring the right engineering/designer who has the experience. &ldquo;For existing operations, we find it very helpful to begin with a standard combustible dust checklist that is available through OSHA,&rdquo; Price says. &ldquo;From that checklist, you can determine the biggest risk factors to consider as you move to the next step, which is to perform the combustible dust assessment.&nbsp; The combustible dust assessment will identify the hazards and mitigation that should be installed for each.&rdquo; An ideal design eliminates the ignition sources, operates well-above or well-below the flammable limits, or provides an inert atmosphere, according to Price. In these designs, there is no effect or mitigation of the dispersion, confinement or fuel on the dust explosion pentagon. &ldquo;This means that the fuel and dust will be present in the system, and a performance-based design option will need to be incorporated into the overall mitigation plans,&rdquo; Price says. &ldquo;There are no ideal designs, so one must take care to protect the failure with the detection devices, extinguishing or suppression systems.&rdquo; Price says typical design flaws his firm sees include poor design in bin venting, detection and suppression systems in the pneumatic systems, and for the material handling, poor designs in the chutes and transitions of the conveyors. Another area of concern is that although many portions of biomass and pellet plants&rsquo; raw material will fall outside the moisture content requirements of NFPA (greater than 25 percent) for deflagration protection, the designs do not consider what happens when the material collects in corners, pockets and other areas of the equipment and dries, Price points out. &ldquo;When the material dries and a bearing failure occurs, fires are very common.&rdquo; Fires and failure are not unusual across the wood products industry in general, and while unfortunate, there is a silver lining&mdash;they provide the rest of the industry with great lessons and takeaways to protect the lives of employees.&nbsp; In Price&rsquo;s opinion, the key to risk mitigation at biomass and pellet mill operations is to draw on the years of experience in the engineered wood products, sawmills and composite panel products operations, as they experience many of the same issues. &ldquo;This isn&rsquo;t to say the wood product industry has it figured out, but more so to say that they have some great processes in place for the hazard identification and equipment to help with the mitigation techniques,&rdquo; he says. Cullina points out that just because a facility might be meeting its AHJ requirements, it doesn&rsquo;t mean the facility is safe.&nbsp; &ldquo;There&rsquo;s a spectrum when you talk about &ldquo;right&rdquo; or &ldquo;wrong,&rdquo; and that&rsquo;s where you introduce the concept of risk assessment and risk management,&rdquo; Cullina says. &ldquo;The right and wrong is whether you did what the code says, and that&rsquo;s much easier to enforce. You may be aware of the requirements, but are you aware of ducts or other types of transport systems inside your plant and what&rsquo;s going on inside them?&rdquo; For existing facilities, undergoing a combustible dust audit, or risk assessment, can determine whether the facility is up to code, identify safety issues, ensure employees are aware of and trained to deal with and avoid hazardous scenarios, as well as determine an appropriate risk mitigation plan. Walk Through an Audit A combustible dust audit begins with a site visit to the facility by Fauske&rsquo;s or Evergreen&rsquo;s audit team to review and evaluate several elements of the facility that affect the wood dust mitigation and control program. Prior to the visit, Evergreen will request background information from the facility to assess current mitigation and control plans as well as other relevant safety programs.&nbsp; The general process and procedures of the audit include document reviews, facility inspections and employee interviews that are intended to provide a representative assessment of employee knowledge of the facility&rsquo;s wood dust control program and the hazards associated with combustible wood dust. &ldquo;The audit will encompass all aspects of the facility&rsquo;s wood dust control program. Safety committee meeting minutes will be reviewed, along with crew safety meeting minutes to evaluate whether hazards are being addressed and acted upon,&rdquo; Price says. Maintenance records, management bulletins, and safety notices will be reviewed to ensure good communication is happening between the committees, management, and employees. During the on-site audit review, the audit team will complete various general and focused inspections to help assess the facility&rsquo;s activities and conditions to determine the effectiveness of the program&rsquo;s achievement. &ldquo;Should there be specific observations of hazardous systems during the audit, we will focus their inspection on these particular systems,&rdquo; Price says. At the conclusion of the audit, a closing meeting will be held with client&rsquo;s project team to provide an overview of the audit findings. &ldquo;Any critical dust conditions identified will be brought to their attention. If high-risk conditions are found, they will be brought to the senior management team immediately,&rdquo; Price says. Within a month of the closing audit meeting, the audit team will provide a final written report, including a series of recommendations to help the facility improve the level of compliance going forward. Boiling It Down Proactive risk mitigation, and knowing your facility, its fuel and unique risks&mdash;and training all employees to share in that knowledge&mdash;could prevent disaster, Cullina emphasizes. &ldquo;Dust collectors are a really common component in biomass facilities. Do you know how much risk you have of that dust being ignited in that dust collector? Is there a chance your dust collector could explode? When you have a baghouse, you&rsquo;ve got four of the five explosion pentagon elements already. All you need is the ignition source, and you&rsquo;ve met all of the requirements to create that explosion. It would be a very good idea to ensure that your baghouse is appropriately grounded so that you&rsquo;re not going to create static spark that might in turn ignite the dust.&rdquo; There is no excuse for not knowing that a facility has combustible dust, according to Cullina, and there are many lists available that identify combustible dusts. &ldquo;But to make it even simpler, if your powder or dust is organic, then it is combustible,&rdquo; he says, adding that it is every facility&rsquo;s responsibility to understand the particular dust it has, especially when creating a protection system against it. &ldquo;This is really important when making calculations, to decide, for example, how big the vent has to be,&rdquo; he says. &ldquo;You should be using data from the dust that&rsquo;s used in the plant at that point. Take a sample and have it analyzed so that you know the combustible dust characteristics and can appropriately design the relief valve and the explosion vent. A lot of people don&rsquo;t have the individual data to do that. You&rsquo;ve got to test your own dust, you need to know what your risk is, and that&rsquo;s part of your risk assessment, to make effective risk management decisions.&rdquo; Cullina points back to West Pharmaceutical Services, noting that the facility was very clean and well-kept, meeting codes and regulation. &ldquo;But, unknown to them, their process was creating very small, fine particles of dust. The maintenance guys, they knew the dust was up there, but it didn&rsquo;t mean anything to them&mdash;they hadn&rsquo;t been trained on it. People think only operators need to know [about risks], but all employees need to understand this risk&mdash;if dust is accumulating somewhere, it needs to be cleaned up.&rdquo; -------------------------------------------------------------------------------------------- NFPA Codes Relevant to Biomass Industry &bull; NFPA 68: Guide for Venting of Deflagrations &bull; NFPA 69: Explosion Prevention Systems &bull; NFPA 77: Static Electricity &bull; NFPA 91: Exhaust Systems for Air Conveying of Materials &bull; NFPA 650: Pneumatic Conveying Systems for Handling Combustible Materials &bull; NFPA 652: Standard on the Fundamentals of Combustible Dust &bull; NFPA 654: Standard for the Prevention of Fire and Dust Explosions from the&nbsp; Manufacturing, Processing, and Handling of Combustible Dust &bull; NFPA 664: Standard for the Prevention of Fire and Explosion in Wood Processing and Woodworking Facilities SOURCE: Evergreen Engineering
--------------------------------------------------------------------------------------------
 Author: Anna Simet Managing Editor, Biomass Magazine asimet@bbiinternational.com 701-738-4961

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DETONATED BY DUST: On Feb. 7, 2008, a massive explosion and fire occurred at the Imperial Sugar refinery northwest of Savannah, Georgia, causing 14 deaths and injuring 38 others, including 14 with serious and life-threatening burns. The explosion was

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A perfect storm of conditions can result in an explosion or fire at a biomass-using facility, events that are often preventable. 

Dusting Up on Risk & Regulation

During the year-end budget negotiations, which have become an annual Congressional ritual Congress presented the biomass industry with what could be an opportunity for tax parity. For the past few years, the end of the year has marked a scramble by all involved in renewable energy to persuade Congress to preserve or extend, for the next year, the production tax credit (PTC) and investment tax credit (ITC). At times, this tax package involves issuing a retroactive credit to cover the current or previous year during the times when the credits were not renewed the previous year. For the biomass industry, these credits have been useful at times, but they are difficult for potential facilities to use. A one-year or two-year extension is plenty of time to develop a wind farm, but not nearly enough time to plan and site a new biomass facility, source its fuel and obtain proper permits. Add to that the value of the credit&mdash;half of what wind projects receive&mdash;and the tax extender ritual has become a tradition that our industry doesn&rsquo;t benefit much from, but also can&rsquo;t afford to be cut out of. This year, tradition went out the window. After a decade of awarding billions of dollars to the wind and solar industries, sparking considerable growth for each, Congress set an end date for these industries to qualify for the PTC and ITC. After a five-year extension under the current terms, the credits will reduce incrementally over the next few years, before ending completely. This is not terribly surprising since, by most metrics, these industries are healthy and expanding independent of the tax credits, and the Clean Power Plan will only create more opportunities for growth. What was surprising and encouraging to biomass this time around was that the tax credits that our industry qualifies for were left intact, with no phase-out on the horizon.&nbsp; In past years, our credits were extended definitively for only two years&mdash;one year retroactive, plus the entirety of the current year. While two years&mdash;with one of them being retroactive&mdash;is not a long enough time period for most biomass developers to conceive and construct a project, this is a significant win for our industry for a couple of reasons. First, the fact that our credit was not phased out means that Congress recognizes the lopsidedness of the PTC in favor of wind and chooses to continue its support of biomass. Second, a continued biomass credit in the face of a reduced and eventually nonexistent wind credit does go some distance toward creating a more even playing field among renewables, something we&rsquo;ve sought for a long time and which could help encourage expanded use of biomass as states look for compliance options under the Clean Power Plan. Most significant is that by extending tax credits for biomass, Congress is implicitly acknowledging the additional benefits that biomass provides beyond power generation. Biomass creates a much-needed market for forestry residues, and adds or enhances thousands of jobs in rural America. It&rsquo;s also a critical element in forest health and maintenance, and in the disposal of agricultural byproducts. Rather than shutting the door on tax credits for biomass, Congress has left us an opening. The lack of a phase-out for biomass could very well present an opportunity for a tax credit for the industry that better addresses our needs, provides support for existing facilities and spurs growth where it is feasible. This year will be a very condensed and busy year for Congress, with a presidential election as a major focus, but exploring a tax benefit for the biomass industry will be a major focus for Biomass Power Association. &nbsp; Author: Bob Cleaves President, Biomass Power Association bob@biomasspowerassociation.com www.biomasspowerassociation.com

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This year will be a very condensed and busy year for Congress, with a presidential election as a major focus, but exploring a tax benefit for the biomass industry will be a major focus for Biomass Power Association.

Congressional Recognition for Biomass 

Renew Biomass, New Energy Farms partner in miscanthus project Renew Biomass and New Energy Farms recently announced a long-term partnership agreement under which New Energy Farms will provide Renew Biomass with high-quality miscanthus&nbsp; planting material. The supply agreement commenced in January 2016 for the upcoming planting season. Renew Biomass will plant a rate of 10,000 rhizomes per acre in central and southwest Missouri.&nbsp;&nbsp; FuelCell Energy expands Connecticut manufacturing facility FuelCell Energy has announced the commencement of a previously disclosed North American manufacturing facility expansion, and closing on an assistance agreement with the Connecticut Department of Economic and Community Development. A groundbreaking ceremony was held in November. The expansion project will increase the size of the facility by approximately 102,000 square feet to approximately 167,000 square feet. The expansion is being undertaken in two phases with the first stage increasing the size of the manufacturing facility and the second stage increasing annual manufacturing capacity from the current 100 MW to at least 200 MW.&nbsp;&nbsp; Statkraft announces wood chip shipment to Danish customer Statkraft has successfully shipped over 3,000 tons of wood chip cargo to a leading Danish customer. The consignment is the first wood chip cargo to be shipped from Statkraft&rsquo;s new biomass trading hub, which opened in August at the site of the former S&ouml;dra Cell paper mill, located south of Oslo, Norway, at Tofte, directly on the Oslofjord. New NREL director appointed The Alliance for Sustainable Energy recently announced the appointment of Martin Keller as director of the National Renewable Energy Laboratory and president of the Alliance, which manages the laboratory for the U.S. Department of Energy. Keller officially joined NREL on Nov. 30. He was previously employed by Oak Ridge National Laboratory, where he served as the associate laboratory director for energy and environmental sciences, which includes ORNL&rsquo;s programs in biosciences, environmental sciences, buildings technologies, transportation, climate change, manufacturing, and electrical and electronics systems. In 2006, Keller was recruited to ORNL from an industrial enzyme discovery and development company to lead the Office of Science-supported BioEnergy Science Center, in which NREL is a partner. Veolia announces power contracts&nbsp; Veolia has won two contracts to operate biomass power plants in Japan. The two facilities, located in Hirakawa and Hanamaki cities in the Tohoku region, will produce 100 GWh of electricity per year. Wood used to fire the boilers comes from neighboring forestry industries. Veolia will manage the overall operations, including 40 employees who will work permanently at the two facilities. Operations at the Hirakawa plant were scheduled to begin in November 2015, with the Hanamaki facility expected to be operational in December 2016. Building Energy to develop bioenergy plant in Serbia Building Energy and the city of Krusevac, Serbia, have announced the construction of a biomass power plant. The facility is the first one in the country to combine electric and thermal energy. It will have an installed capacity of 4.8 MWe and 20 MWt and will generate 38.4 GWh of electric power and 86 GWh of thermal power per year. The plant will be fueled by wood chips coming from the cleaning of Serbian forests. The sale of thermal energy, resulting from a 10-year agreement between Building Energy and the Krusevac thermal power plant, will largely satisfy the thermal needs of the city, which has about 110,000 inhabitants. The sale of electric power will be regulated by a contract with the national utility operator EPS, according to the Serbian feed-in-tariff rules. BTEC elects board of directors The Biomass Thermal Energy Council recently announced the re-election of four members of the board. At the Nov. 17 Annual Membership Meeting in Washington, D.C., all four directors up for election were re-elected, including Dan Wilson of Wilson Engineering Services; Christine Donovan, senior advisor for the Biomass Energy Resource Center and director of Business Strategy and Innovation at Vermont Energy Investment Corp.; Andrew Haden, founder and president of Wisewood Inc., and John Ackerly, president of the Alliance for Green Heat. Opcon to deliver automatic biomass-handling system to UK Opcon Group has received an order from Babcock &amp; Wilcox V&oslash;lund A/S, Denmark,&nbsp; for the delivery of a state-of-the-art biomass handling system to the Templeborough Biomass Power Plant in Sheffield, U.K. The order includes the design, manufacturing, delivery and commissioning of a dual automatic fuel handling system with reception and transport lines to the boiler, complete with cranes. The entire fuel feeding system, including wood storage and conveyor systems, will be designed for multi-fuel waste wood, designed for efficiency, minimum maintenance and high availability as well as low emission of dust and noise. Commissioning and take-over is scheduled for next year. Genera Energy adds business development team member Genera Energy Inc. has hired Chad Covert to join its growing business development team as a business development associate. Prior to joining Genera, Covert managed U.S. ocean import processing for an international freight forwarder. His knowledge and experience will help Genera continue to meet the needs of existing clients, as well as help identify new business opportunities in this rapidly expanding industry. Round for a Reason announces patent for combustion chamber South Dakota-based Round for a Reason LLC has received a patent, U.S. Patent No. 9,182,116, for a new combustion chamber concept, known an Efficient Solid Fuel Burning Appliance. The ESFBA is a vertical cylinder combustion chamber that burns solid biomass fuels. When compared to similarly shaped appliances, the ESFBA features a stronger cylinder shape, increased internal pressure, more efficient heat distribution and a smaller footprint. The combustion chamber allows for many feedstocks and applications, including forced air furnaces, boilers, free-standing stoves, and indoor or outdoor placement. Wilson Sonsini Goodrich &amp; Rosati names new partner Wilson Sonsini Goodrich &amp; Rosati has elected attorney Nicole Gambino as a new partner. Based in San Francisco, Gambino specializes in renewable energy and project finance and, in particular, related tax matters. She represents both equity investors and developers in the financing of wind, solar, geothermal, and biomass facilities, utilizing a variety of structures. Gambino also represents investors in new market tax credit transactions. The promotion was to become&nbsp; effective on Feb. 1. Cool Planet adds board members Cool Planet has added Ed Anderson to its board of directors and Jim Bone to its technical advisory board. Anderson brings strong leadership from his experience in founding and growing North Bridge Partners, a Boston-based venture capital firm, while Bone brings four decades of agriculture business and technical expertise.

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Threaded throughout this issue, in which Biomass Magazine once again turns it editorial gaze to dust management and plant safety, is a continued call for greater education, regardless of an employee&rsquo;s position within a facility. This point is driven home in Managing Editor Anna Simet&rsquo;s page-10 feature, &ldquo;Dusting Up on Risk and Regulation.&rdquo; Her piece opens and closes in the West Pharmaceutical Services plant in Kingston, North Carolina, the site of a massive explosion in 2003 that killed six and injured dozens more. The plant produced a very particular kind of dust that was accumulating in a suspended ceiling. Maintenance employees at the plant were aware of the dust build-up, but not aware of the danger it posed. The results were tragic. With that in mind, please share this issue broadly with your teams, regardless of their areas of responsibility. This issue is loaded with technical information. Our team talked with engineers, technology developers, university researchers and plant personnel, and the result is a comprehensive overview of the dangers this industry confronts on a daily basis. A special thank you to Mark Wilson, CEO of New England Wood Pellet, for talking with Senior Editor Ron Kotrba about the lessons the plant learned after being cited by OHSA. Understandably, plants aren&rsquo;t always forthcoming about lessons learned in this way, and Wilson&rsquo;s candor really brings Kotrba&rsquo;s feature to life. He tells Kotrba, &ldquo;We thought we were in good shape. We thought we knew a lot, but we didn&rsquo;t know much at all.&rdquo; He goes on to say that his team knew components of the various codes and guidelines for safety, but lacked a system-wide understanding of best practices. Both Kotrba&rsquo;s and Simet&rsquo;s stories make it clear that the body of knowledge surrounding dust, its inherent risks and best practices in dust control is robust and simply needs to be more widely shared within plants and across the industry. Differing from the aforementioned stories is Associate Editor Katie Fletcher's page-16 feature, which concludes that the knowledge base surrounding safety issues posed by stored wood pellets is still being accumulated. Researchers and industry are working to gain a solid understanding of the risks, their causes, and prevention techniques. Her story looks at two studies that yielded different results, and consequently, prompted different reactions from the industry. Our reader surveys tell us that a majority of our readers pass along their issue of Biomass Magazine to a colleague. In the spirit of sharing vital safety information, our team asks that this month&rsquo;s issue makes its way onto every desk in your operation.
Author: Tim Portz Vice President of Content&nbsp; &amp; Executive Editor tportz@bbiinternational.com

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Threaded throughout this issue, in which Biomass Magazine once again turns it editorial gaze to dust management and plant safety, is a continued call for greater education, regardless of an employee's position within a facility.

Pass Me Along

Emphasis toward greenhouse gas reduction and massive availability of agriculture and forest residue has led to an increased interest in converting biomass into second-generation cellulosic biofuel or power. The U.S. alone could produce over 1 billion tons of biomass for bioenergy. The U.S. EPA has a set a target of 16 billion gallons per year of cellulosic biofuel by 2022. A few commercial-scale cellulosic biofuel plants have been commissioned, and a few are under development. However, the industry is running significantly behind targets, and further reduction in cellulosic biofuel production cost is necessary. Advancements in fermentation and enzymatic hydrolysis have reduced cellulosic biofuel conversion cost (biomass at factory gate to biofuel) by severalfold. Currently, conversion cost is less than 30 percent of the production cost of cellulosic biofuel, while more than 60 percent of the cost is associated with biomass supply. This involves harvesting, biomass collection, transportation, and management of biomass supply buffers. Despite biomass supply cost having a significant impact, there have been limited advancements in past 10 years. To bring significant reductions in cellulosic biofuel production costs, increased focus toward biomass supply chain is needed. While biomass from agriculture or forest residue could be free, the characteristics of this biomass&mdash;low energy density and the inability to store the biomass long-term&mdash;lead to 60 percent of cellulosic biofuel production cost. Biomass transportation, collection and handling are major components of the cost. Removal of agriculture residue sometimes leads to increased fertilizer use, adding to nutrition replacement cost of biomass. Farmers expect an economic incentive to either remove agriculture reside, or convert acreage into perennial crops. Additionally, recent studies have found that biomass supply based on agriculture waste has 20 to 30 percent year-to-year regional supply variations. Economically importing biomass over long distance is not possible. Therefore, if supply variations are left unmitigated, they lead to massive biomass supply shocks to the biorefinery. This exposes both the biorefinery and farmer to significant financial risk. To put this in perspective, a 30 million-gallon biorefinery will require about a half million tons of biomass. With average biomass cost ranging from $60 to $100, a 10 percent higher biomass cost, due to lack of optimization, would lead to $5 million per year of additional costs, or increased production cost of cellulosic biofuel by 15 to 20 cents per gallon. To reduce biomass supply chain costs and mitigate supply risk, a holistic understanding of supply chain and trade-offs is required. Supply Chain Risks and Trade-Offs While mismanagement of each variable could lead to massive impacts on biorefinery operations, it is important to understand the impact of each variable on risks and trade-offs.&nbsp; Below, the impact of different variables on (a) exposure due to supply shocks, as well as the (b) proportion of biomass cost is qualitatively discussed. While biomass supply shocks are one-off events, their impact on business financials could be massive. In Figure 1, based on (a) and (b), the size of the bubble defines the importance of the variable to biomass supply chain management. Market structure selection and contracting strategy: Market structure and contracting strategy defines the strategy to source biomass. The U.S. does not have a spot market for biomass, however, as the industry matures, regional spot markets are possible. Recent studies by Golecha and Gan, published in international journal Renewable and Sustainability Energy Reviews, have found that due to large variations in biomass supply and current limitations with long-distance biomass transport, fixed-price, quantity-inflexible-type, long-term biomass supply contracts under a derisked market structure are optimal. Spot market pricing structure would expose biorefineries to massive price variations. Study has found that setting up optimal contracting structures can reduce biomass cost by $5 to $10 per ton, and significantly reduce risks for both the biorefinery and biomass supplier. Biomass transport cost: Due to the low energy density of biomass, transport cost is 15 to 30 percent of biomass cost. Change in availability of biomass impacts the area of supply, and as a result, transport distance of biomass. While the study by Golecha et al found that resultant variations in transport cost are less than the variations in biomass supply itself, optimal selection of biorefinery and evaluating trade-offs between biomass transport cost and incentives offered to biomass suppliers to improve their participation is important. Alternative feedstock supply: Studies by Golecha and Gan have found that diversification and portfolio are important ways to mitigate biomass supply risks. Availability of alternative feedstock allows a biorefinery to diversify biomass such as corn stover, switchgrass, and wheat stover, instead of relying on a single source of biomass. Using a portfolio approach, biorefineries can significantly mitigate supply risks. Studies show that diversifying feedstock portfolio by combining multiple feedstocks could reduce biomass supply risk by as much as 40 percent. Unavailability of alternative feedstock could be a significant risk, and biorefineries should consider this in making investment decisions. Incentives offered for biomass: Availability of biomass, i.e., farmer participation and incentives offered, are found to have a relationship. Increased participation of farmers can reduce transport cost by reducing the supply area. Incentives are linked with the market structure. Under a fixed-price, long-term market structure, incentives do not impact supply shocks, however, under a free market structure, biomass incentives could vary vastly, exposing both biorefineries and farmers to massive variations. Recent studies by Golecha and Gan provide strategies to identify optimal incentive structure. It is found that a $2- to $3-per-ton deviation from the optimal incentive could result in a $5 to $10 per ton increase in overall biomass cost. Biomass collection and handling, storage: Variations in biomass collection and handling, and storage costs are considered to be small. However, they are 40 to 60 percent of biomass costs. In the event of biomass supply shocks, storage can play an important role in trying to mitigate risk. Trade-Offs exist Limitations with long-distance transport and long-term storage of biomass, combined with large variations in annual biomass supply, are major complexities in development of biomass supply chains. While these challenges cannot be completely eliminated, strategies are needed to mitigate their impact for sustainable development of bioenergy industry. In developing biomass supply strategies, managers need to consider trade-offs between biomass price (incentives offered to suppliers), biomass transport cost, alternative feedstock availability, variation in primary feedstock availability, and biorefinery loss in the event of a supply deficit. Optimizing these variables independently, without considering the intricate relationship, will lead to higher biomass cost and expose both biorefineries and biomass suppliers to supply and price risks. Managers also need to consider the trade-off between biomass cost and biomass supply variation (risk). Recent studies by Golecha et al have found that the operating framework that leads to the lowest biomass cost is not necessarily the point of lowest supply variability. Therefore, in developing a biomass supply strategy, managers should make composite decisions considering the impact of choices on biomass cost, the company&rsquo;s risk tolerance, and impact of supply risk. Evaluating trade-offs between biomass cost over risk is a nice way to derive an ideal operating framework. Biomass supply chains are a critical aspect in the development of cellulosic biofuel business, and in most cases, are the primary decision driver for investments and location selection. Therefore, it is important that biomass supply strategy be developed composite with the company&rsquo;s strategy. Author: Rajdeep Golecha Bioenergy and energy expert 517-755-7880 rajdeep.golecha@gmail.com

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Feedstock sourcing is a critical aspect in the development of cellulosic biofuel businesses.

Biomass Supply Chain Trade-Offs: Basis for Successful Bioenergy Businesses

A Christmas miracle! Those are probably the best words I can use to describe the end of 2015. Don&rsquo;t get me wrong, last year was an extremely difficult year for the advanced biofuels industry. Policy uncertainty continued to plague the sector, outdated regulations created unnecessary barriers to entry, and record-low commodity prices contributed to lack luster investment. However, just when it all looked lost, a miracle happened: Our government started working.
First, the U.S. EPA finalized the renewable volume obligations (RVO) for 2014, 2015 and 2016.&nbsp; Granted, it was a little late, but better late than never. The program is now back on track, and we hope EPA will keep it that way. Unfortunately, EPA might not have ultimate control of that as Big Oil and Big Corn take their fight to the courts&mdash;stakeholders are expected to file their lawsuits on or around Feb 12. The Oil vs. Corn battle may once again paralyze the program and hinder the growth of the advanced biofuel industry. Second, we have both retroactive and forward-facing tax credits. For the first time in years, Congress injected some certainty into the market by extending expired tax provision for 2015 and 2016. The Advanced Biofuels Association was proud to help secure this tax extenders package, which included the extension of the current blenders credit. This provision will continue to protect all of the small producers, users of biodiesel and renewable diesel and their distributors.&nbsp; Working with a large coalition of stakeholders, we protected the extension of the blenders credit to help small producers grow and deliver cleaner fuels to American consumers. This tax victory, as EPA is well aware, also enables the advanced biofuels sector to continue to achieve the 2016 RVO targets and seek higher levels in the future. Finally, EPA announced its final regulatory agenda for 2016. In it, for the first time, is a new proposed regulation to help resolve some of the regulatory barriers to entry for the industry. This regulation, the Renewables Enhancement and Growth Support Rule, is slated to be introduced in April and proposes various changes to the renewable fuel standard program (RFS). Although we&rsquo;ll need to wait to see what this rule ultimately will be, we&rsquo;re hopeful it can provide a much-needed intermediate feedstock fix and remove other barriers to the production and use of renewable fuels. Given the ups and downs of 2015, the advanced biofuels industry ended with hope on the horizon for much needed stability in 2016. The ABFA looks forward to continue working with the administration to expedite pathways and improve the overall RFS program. Furthermore, ABFA looks forward to continue working with Congress to reform and strengthen the RFS program. While Congress is only in town for 111 days this year&mdash;it is an election year, after all&mdash;the lifting of the oil embargo last year may move RFS reform toward the front of the agenda. Finally, with a looming fight between corn and oil and potential legislative challenges ahead, our industry must remain vigilant to avoid becoming collateral damage due to others&rsquo; agendas, and to capitalize on the certainty provided by having secured tax credits and RVO targets for the year ahead. Cheers to a glass half full. Author: Michael McAdams President, Advanced Biofuels Association www.advancedbiofuelsassociation.com Michael.mcadams@hklaw.com

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Given the ups and downs of 2015, the advanced biofuels industry ended with hope on the horizon for much needed stability in 2016.

Fortune Smiles on Industry, Better Late Than Never

Stored biogas shouldn&rsquo;t be treated as a static inventory only to be used during temporary upset conditions. Successful management begins with proper sizing of the gas holder, and continues with controlling process options to maintain an appropriate inventory in the gas holder. This article is written from the perspective of maintaining a near-atmospheric pressure biogas inventory while operating an anaerobic digester to produce methane-rich biogas to fuel combined-heat-and-power (CHP) generator systems or to fuel boilers. Many of the principles discussed can be applied to other biogas systems as well. Gas Holder Basics The purposes of a gas holder are to provide biogas storage to offset temporary imbalances between gas production and gas use, and to establish a biogas reserve. Since they have flexible walls, gas holders operate within a range of volumes, rather than a fixed volume. When gas is being produced in a biodigester faster than it is being consumed, excess can accumulate in the gas holder. When gas is being consumed faster than it is being produced, stored gas can be drawn out of the holder to supplement production and satisfy the biogas consumer. In this manner, the gas holder becomes a buffer for short-term process imbalances. Walls of a typical gas holder are flexible in the sense that they can distort so that the containment volume will match the volume of biogas inside, with little change in internal pressure. Gas holder membranes collapse when emptying and inflate when filling, similar to a balloon, except the membranes do not stretch and internal pressure does not vary significantly. These design principles are important. Remote, bladder-style holders consist entirely of membrane material, all of which flexes with changing inventory. This style can either be protected by a rigid shell or be installed without a shell. Integral gas holders consist of flexible membranes sealed to a rigid open-top vessel. Only the membrane is allowed to deform in these designs; the rigid vessel can be used to contain digestate. These two configurations are common;other styles exist. To fulfill their purpose, remote gas holders are connected to the pipeline between the vapor space of the biodigester and the biogas consumers. Typically, a simple pipeline tee is used to permit biogas to flow to or from the gas holder to best balance supply and demand cycles of the biogas system. Sizing Considerations The volume of a gas holder has practical limits related to gas supply-and-demand variations, as well as economics. The minimum volume contained in a gas holder needs to address a situation when biogas production drops drastically. At such times, the operator will need to initiate process control measures either manually or automatically. These measures can include reducing consumption of selected gas users, stopping gas users, diverting to backup fuel sources, or other options. Then, the minimum gas holder is whatever volume is required to give the operator enough time to execute deliberate, controlled process changes in response to the situation. Typically, this reserve volume will be equivalent to one or several hours of biogas consumption. Generous time allowances translate to larger volumes, larger space requirements, and larger capital costs, so economics will influence this sizing factor. Well planned system controls should alleviate the operator from needing excessive reserve volumes. If the minimum volume selected is too small, the operator will be faced with frequent process upsets that might otherwise have been avoided. Maximum gas holder volume relates to imbalances in gas production compared to gas consumption. As long as the feed stream and digester conditions do not change, biodigesters produce a relatively constant flow of biogas. Daily rates may vary several percent, but the average rate can be relatively constant on an annual basis. In some systems, gas usage is fairly constant on a daily basis. Rarely, though, does gas generation exactly match gas use. Some imbalance can be buffered by modulating fuel systems at the user. Much of the imbalance is allowed to be absorbed at the gas holder. As stated earlier, the gas holder will inflate when supply exceeds demand and deflate when supply lags demand. All of this variation needs to occur above the minimum volume required for a controlled shutdown. For instance, if a selected digester system requires an emergency backup volume of 2,000 cubic feet, and the annual supply/demand imbalance can reach up to 400 cubic feet, then the operating range of the gas holder should be 2,000 to 2,400 cubic feet. Allowing a safety factor to prevent frequent gas holder overpressure situations, the total gas holder volume for this system might be specified to be 2,800 to 3,000 cubic feet. Biodigesters utilizing a boiler (biogas-fired heater for heat transfer fluid) for process heating can exhibit some of the more extreme gas holder volume swings. Process heating can include using heat transfer fluid from the boiler to heat the digester, reception tank, digester feed streams, building spaces, hot water supplies and other systems. Additional Considerations If process heating is supplied exclusively from a CHP unit, cyclic daily heat demand often needs to be accounted for in the design of heat transfer systems, rather than planning to modulate consumption at the CHP unit. CHP units can vary heat output, but this results in varying output of electrical power. Frequent radical changes in CHP power output are usually undesirable. Gas consumption can change along with annual seasonal changes. For instance, digesters in cold climates require more heat during winter months. If a boiler is the primary heat source, it will require more biogas fuel in winter. With more fuel directed to the boiler, other biogas users will need to be operated at lower capacity or shut down. If a CHP system is the primary heat source, the system will need to maximize heat output. If there are other types of systems consuming biogas and reserve capacity in the CHP system, the other operations may need to be scaled back or shut down to increase output from the CHP units. If the CHP system is the sole biogas consumer, heat that would otherwise be used elsewhere in warmer months will need to be redirected to keep the digester warm. These changes need to be managed to prevent the gas holder inventory from emptying or overfilling. Note that fuel-to-heat conversion is in the range of 80 percent in boilers and 35 to 40 percent for CHP units. Therefore, increasing boiler fuel supplies by a given volumetric flow yields about twice the heat output increase than an equal increase to CHP units. These relationships are important to consider when sizing the gas holder. A flare can be used to help manage biogas supplies when the gas holder is nearly full and biogas production exceeds consumption. In these cases, biogas can automatically be burned in an approved flare. This prevents release of methane into the atmosphere. If biogas is allowed to overfill the gas holder, the excess gas vents to the atmosphere through a pressure relief vent equipped with a flame or detonation arrestor. This is done for safety purposes. An owner should minimize the volume of excess biogas that is allowed to vent from a gas holder for both economic and environmental reasons. A biogas discharge limit may be stipulated in air emission permit documents. If the gas holder inventory drops to near zero and there is a risk of rupturing a membrane or tank, a vacuum relief vent may need to be installed on the gas holder. Such a provision would permit air to enter the gas holder and create a potentially hazardous atmosphere inside the holder and other parts of the biodigester system, so the installation should be done with appropriate fire protection measures. Design of a remote gas holder needs to account for condensate dropping out of the biogas during storage. The relative humidity of biogas leaving the digester is saturated with water vapor at 100 percent relative humidity. Unless the gas is dried, the relative humidity remains at 100 percent until it is used. In almost all cases, the temperature of biogas is lower in transfer piping and gas holder than in the digester. Absolute humidity of saturated biogas is lower at cooler temperature than at elevated temperatures. The net effect is that moisture condenses and flows as a liquid to the nearest low point in the gas system. The gas holder should not be the low point in the biogas system. Instead, piping connected to the gas holder is typically connected at the bottom of the gas holder and is sloped to permit condensate to drain to a system condensate collection point. When digester feed streams or conditions are altered, biogas output can increase or decrease enough to warrant process changes. Modeling and Controls Biogas holder size and gas management options can be predicted by simulating operations using a mathematical model of the facility. To do this, one can input operational characteristics into a model developed for the specific process cycles unique to the plant. Important characteristics include, but are not limited to: biogas production and methane content; summer and winter heating requirements; boiler burner size and turndown limits; CHP heat recovery characteristics; fuel consumption and turndown limits of CHP generators; and schedule of operating cycles. This does not require proprietary software; common spreadsheet software is adequate. Once all of the data is entered, charts can be used to represent how biogas inventory is affected by process changes. Information gleaned from this type of modeling may lead to digester process design changes. It is important to keep track of the volume contained in a gas holder. Clearly, corrective measures need to be taken when level instruments indicate that inventory approaches high or low limits. Additionally, level indicators can display gradual upward or downward volume trends. Some of these types of changes can be predicted by modeling prior to startup. Author: Bruce R. Smith Project Manager, Sidock Group 231-722-4900&nbsp;&nbsp; bsmith@sidockgroup.com&nbsp;&nbsp;

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The volume of a facility's stored biogas varies constantly and requires managing.

Managing Biogas Storage and Retrieval

Last year witnessed significant achievements toward the transition to a lower-carbon economy. A historic agreement among over 180 countries to collectively reduce greenhouse gas emissions was reached in Paris in December. Also there, 20 countries announced the Mission Innovation initiative, which is aimed at doubling clean energy research and development in the next five years. Some clean energy technologies have become cost-competitive with incumbent technologies, and costs are projected to continue declining into the future. On the biogas front, 2015 was a good year, especially when compared to activity in previous years. Due to recently implemented initiatives and trends, I have high hopes that 2016 will be even better. In the summer of 2014, the USDA released the Biogas Opportunities Roadmap. The release of this roadmap marked the first time that federal agencies made a public commitment to coordinate biogas activities and outline objectives aimed at increasing the deployment of biogas systems across the U.S. At the end of 2015, the USDA published a progress report on roadmap objectives. According to the progress report, the USDA, U.S. DOE and U.S. EPA have all identified or implemented policy achievements to increase resource access for biogas projects. The progress report also identified technology achievements, a variety of private sector efforts, and identification of barriers to address in the future.&nbsp;&nbsp; Federal agency collaboration and coordination is critical because there is far more work to do to truly bring the biogas resource to scale. According to the 2014 Biogas Opportunities Roadmap, there are more than 2,000 U.S. sites that produce biogas, but there are at least an additional 11,000 sites that could support biogas systems. Although 2015 was a relatively good year for biogas, clearly there is more that we can and should be doing to fully take advantage of the resource potential. Biogas generation saw explosive growth in 2015 under the federal renewable fuel standard (RFS). In July 2014, the EPA revised program rules to allow biogas generation from wastewater treatment facilities, landfills and agricultural producers to qualify as cellulosic fuel when raw biogas is cleaned and upgraded for use as a transportation fuel. From January to November, over 112 million gallons of cellulosic fuel were reported to the EPA, and 98 percent of the gallons were from renewable compressed and liquefied natural gas. The transportation fuel market offers an attractive biogas utilization pathway for producers. Under the RFS, program producers can sell biogas-based fuel credits for a premium&mdash;north of $1 per gallon. Eligible biogas producers are also able to stack RFS renewable fuel credits with compliance credits under the California Low Carbon Fuel Standard program. From the first quarter of 2011 through the third quarter of 2015, biogas credits used for compliance under the LCFS program have increased to nearly 10 percent of all LCFS credits. In 2016, I expect that we will continue to see growth in the use of biogas as a transportation fuel. As a renewable, low-carbon option, biogas will complement state and local strategies aimed at transitioning heavy-duty vehicle fleets to natural gas or electrification. The biogas industry has made steady progress in the past several years. The industry reached a turning point in 2015, and I am willing to bet that 2016 will be an even better year for biogas projects across the country. Author: Amanda Bilek Government Affairs Manager, Great Plains Institute abilek@gpisd.net 612-278-7118

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 On the biogas front, 2015 was a good year, especially when compared to activity in previous years

Betting on Biogas Growth in 2016 

Under the right substandard conditions at a wood pellet mill, the creation of a spark is like throwing a match into a dynamite factory. &ldquo;Wood is about like gunpowder, and it&rsquo;s as explosive in the right scenario,&rdquo; says Justin Price, principal at Evergreen Engineering Inc. The risks are the same at small and large mills alike. The difference is that smaller plants typically don&rsquo;t have the dust hazard analysis (DHA) expertise found in larger, more sophisticated facilities, Price says, and therefore they don&rsquo;t realize the risks and dangers facing them. &ldquo;The bigger facilities have a larger staff and greater expertise,&rdquo; he says. &ldquo;It&rsquo;s an educational issue.&rdquo; Smaller-scale pellet mills could be at greater risk for dust-related safety incidents because they may have less knowledge of the codes and risks, less capital to invest in fire detection and explosion suppression and prevention technologies, less operating capital to rotate staff for proper cleaning and maintenance, and insufficient training. &ldquo;Housekeeping should be a primary concern to these folks,&rdquo; says David Grandaw, vice president of sales at IEP Technologies. These plants should at least prioritize keeping residual dust to a minimum, he says. Price says preventive maintenance programs around cleaning are more vigorous in larger mills. &ldquo;Smaller facilities generally have fewer hands on deck to do this, and it&rsquo;s a harder challenge to justify hiring two guys to sweep the floor and clean the building,&rdquo; he says, whereas a larger plant with larger volumes can rotate those responsibilities out to take care of some housekeeping. &ldquo;The other thing is process expectations,&rdquo; Price continues. &ldquo;Smaller plants realize fires are common. They will happen. It&rsquo;s a cost of doing business. They have fire protection systems in place to fight fires, but larger facilities implement measures to prevent fires. If I&rsquo;m walking through a smaller operation, I look up when I see a charred bin and they say, &lsquo;Yeah, we had another fire there,&rsquo; or &lsquo;Yeah, fire happens routinely.&rsquo; That&rsquo;s just part of operating to them. In reality, that&rsquo;s not necessarily true. It&rsquo;s an educational standpoint some operations just don&rsquo;t have.&rdquo; Price says this is becoming less the issue as the pellet industry matures. Experts say keeping residual dust to a minimum is extremely important because of how the dynamics of an explosion work. Explosions send shock waves at the speed of sound, faster than the flame behind it, which can rattle dust built up on conveyors, pulleys and rafters into suspension. Then, the lagging fireball catches up and finds the dust cloud, turning the room into a secondary explosion. &ldquo;That&rsquo;s what blows up the building and kills people,&rdquo; Grandaw says.&nbsp; When improperly maintained or installed outside a sound management-of-change program, some devices intended to mitigate dust-related risks, such as dust collectors, can constitute a big safety threat. Dust collectors are often a first line of equipment defense to keep residual dust down at a pellet mill. &ldquo;Dust collectors in general are probably one of the most dangerous vessels for an explosion in a facility,&rdquo; Grandaw says. Dust collectors contain the finest dust in the plant captured from vents, separated from the air and collected in a filter medium or bag periodically cleaned pneumatically or mechanically, which reintroduces fine dust to the air. &ldquo;Having the finest dust means having the most aggressive explosion characteristics,&rdquo; Grandaw says. Furthermore, the finest dust requires less ignition energy to light, so it ignites easier. Finally, dust collectors are often connected to multiple vessels within the facility, especially in smaller operations that rely on one or two central collectors as they lack capital for multiple units. When an explosion occurs, the flame propagation travels upstream to the main duct and out to various parts of the facility from where the dust was extracted, exposing multiple areas to danger, Grandaw says. Repeat Offenders
In 2012, the U.S. Department of Labor&rsquo;s Occupational Safety and Health Administration cited New England Wood Pellet LLC for serious repeat violations of workplace safety standards at its wood pellet plant in Jaffrey, New Hampshire, proposing fines of $147,000 for fire and explosion hazards in the aftermath of an Oct. 20, 2011, fire at the facility. According to OSHA, the fire started in the pellet mill and was transported through several conveying systems to a pellet cooler and then to a dust collector, and caused several other flash fires. Shortly thereafter, explosions occurred in the dust collector and an exhaust muffler. The explosions sent fireballs outside of the building and likely ignited materials in two silos. The 2012 OSHA inspection found numerous fire and explosion hazards stemming from the absence of protective devices in the transport system, dust collection duct and conveyor systems that would prevent sparks, embers and fires from spreading throughout the system, as well as a lack of effective explosion protection due to the construction or location of dust collection ducts. The hazards were exacerbated by a buildup of combustible wood dust on surfaces throughout the plant and from the use of unsafe equipment to vacuum combustible dust. In 2013, OSHA cited the company again, this time for violations following inspections of its New York mills in Schuyler and Deposit. The violations found at the Schuyler plant included failing to isolate the conveying systems to prevent fire and rapid combustion from spreading both upstream and downstream in critical process equipment. In addition, the process equipment, such as indoor cyclones, pellet coolers and silos, lacked containment, explosion venting and suppression to mitigate the hazards of rapid and explosive combustion. At the Deposit plant, the violations include inadequate ventilation, lack of isolation devices and lack of spark detection and extinguishing systems in the wood pellet processing system. &ldquo;We thought we were in good shape,&rdquo; says Mark Wilson, CEO of New England Wood Pellet. &ldquo;We thought we knew a lot, but we didn&rsquo;t know much at all. None of us had any background on National Fire Protection Association codes. We knew parts.&rdquo; Unfortunately, this mentality exemplified through incidents and OSHA citations is not uncommon in the pellet industry. In 2013, a combustible wood dust explosion and fire occurred at Inferno Wood Pellet Inc. in East Providence, Rhode Island, injuring a worker and partially demolishing the building. The ignition of wood dust in the plant&rsquo;s production room migrated to a retention bin, resulting in an explosion that spread through the building. OSHA found that the retention bin lacked spark detection, explosion suppression, fire and explosion isolation and explosion venting devices; conveyor systems carrying combustible wood products lacked spark detection, fire suppression or fire isolation devices; dust collection systems and dust segregation barriers were not maintained to minimize fire sources; and an opening in the fire wall between the plant&rsquo;s production and chip rooms allowed a fireball to enter the chip room and spread the fire. OSHA cited Inferno for 11 serious violations of workplace safety standards and proposed $43,400 in fines. The mill has since been shut down. Solutions
After dust collectors, other areas where Grandaw says pellet mills should consider implementing explosion protection systems are cyclones (a different type of air-material separator), hammer mills or other particle-size reducers, which are active ignition sources, and equipment associated with hammer mills that are exposed to the threats. In addition, pellet coolers, storage vessels such as bins, hoppers and silos, bucket elevators, which have ignition potential between bearings, belt rubs and static discharge, not to mention drag conveyors&mdash;&ldquo;a beautiful conduit,&rdquo; Grandaw says&mdash;and rotary dryers should all be evaluated. &ldquo;You take a small operation vs. a big company,&rdquo; Grandaw says, &ldquo;and they&rsquo;re looking at all these vessels but can&rsquo;t afford to protect them all. That&rsquo;s why it&rsquo;s so important to do a process hazard analysis (PHA), to determine where the risks are and what can be done to minimize the risks. And then they have to make choices.&rdquo;&nbsp; A thorough analysis may determine that, in certain parts of the process, the risk of fire or explosion in a particular vessel is less than another near an active ignition source. Also, a mill may choose to protect equipment that, if lost to a fire, would cause the entire operation to cease. Another obvious consideration is protecting equipment that would endanger life without protection. Companies operating on a budget must prioritize what to protect in terms of ignition potential and risk to human health and business continuity, Grandaw says. Mitigating the presence of dust through suppressors, like Dust Solutions Inc.&rsquo;s Dry Fog system, can reduce dust suspension and aid housekeeping. The technology creates droplets smaller than 10 microns that agglomerate to dust at points of transfer, such as truck tippers, hopper loaders and conveyor transfers, says Richard Posner, president of Dust Solutions. &ldquo;At conveyance transfer points, there are two areas of dust generation,&rdquo; Posner says. &ldquo;That&rsquo;s discharging from one conveyor to another, and the biggest is when wood impacts the belt below and plumes out.&rdquo; Dry Fog nozzles are positioned at the discharge area to knock dust down and at the impact point to help drop the dust into the pile. The system adds less than 0.1 percent moisture by volume, Posner says. Spark detection and suppression systems are another line of defense. Though IEP Technologies does not offer these systems in the U.S., Grandaw says it does overseas. &ldquo;Spark detection systems are looking for burning embers or hot spots traveling through the duct,&rdquo; he says. Based on air-flow rates and the system&rsquo;s response time, X amount of feet downstream a water nozzle activates to suppress the ember. &ldquo;It&rsquo;s a very effective explosion prevention means for pneumatic conveyance,&rdquo; Grandaw says. &ldquo;It only takes care of one type of ignition source, an ember that&rsquo;s conveyed. It does not protect against static discharge or frictional heating.&rdquo; Explosion protection comes in passive and active systems. A passive system provides protection based on pressure waves through an explosion rupture panel or an isolation valve in ductwork, Grandaw says. &ldquo;It&rsquo;s the least expensive, so if passive can be used, that&rsquo;s going to be the No. 1 choice,&rdquo; he tells Biomass Magazine. Explosion vent panels must be placed to direct fireballs to a safe area outside the plant. If that&rsquo;s not possible, a flameless explosion vent is an option, albeit perhaps more expensive. Grandaw says these are vent panels with a metal mesh housing that act as a heat sink. An isolation valve, on the other hand, can passively protect against an explosion that occurs in a vented dust collector from traveling upstream. &ldquo;The pressure wave that precedes the flame closes the valve,&rdquo; he says. In conveyance, active protection must be used, Grandaw says. These use high-speed detection, usually pressure-activated or infrared (IR) sensors. In milliseconds, interfacing through the control panel, high-rate extinguishers discharge to smother the fireball and suppress explosion while creating a dry-chemical barrier, usually sodium bicarbonate, in the dust to stop flame propagation from one vessel to another. &ldquo;Active systems are both suppression and isolation agents,&rdquo; Grandaw says. &ldquo;They excel at putting out the fire and isolation.&rdquo; Some pressure sensors are calibrated to a fixed setting and once that level is hit, the system is tripped. Others look for a rate of pressure increase. Price says the No. 1 move for a pellet mill on a tight budget looking to mitigate risks, especially a new facility scaled at 50,000 tons or less, is getting a DHA. &ldquo;The second part is there are some basic minimums you need to address, such as knowing that when you&rsquo;re conveying material down an air system pneumatically, look for capital improvements through spark detection and deluging,&rdquo; he says. &ldquo;Third string is to look at rotating machinery systems. Address anything you can&rsquo;t do in housecleaning, such as deluge and suppression. If you roll all those together, you end up with a really good system. The fourth tier is housecleaning, misters and other equipment to knock down dust, fans&mdash;low capital items&mdash;things that will help in housecleaning. A $2,000 fan is going to save you time and expense in keeping dust from the rafters and ceiling. If you do a DHA properly, lower-cost capital expenses can prevent you from having issues with dust accumulation.&rdquo; For cost-conscious facilities, knowledge of codes and best practices can come through a variety of resources, Price says. &ldquo;Look to traditional wood processing industries and see what they&rsquo;re doing,&rdquo; Price says. &ldquo;There&rsquo;ll be some great learning there that&rsquo;ll save you tremendous amounts of time and energy.&rdquo; Canada-based FPInnovations and WorkSafe BC have invaluable assessments and best practices of sawmills. FM Global also has best practices to glean information from. Also, the American Industrial Hygiene Association&rsquo;s annual event is worth attending. All of these are great resources, Price says, adding that the biggest educational component has been through OSHA&rsquo;s combustible dust initiative. &ldquo;The larger facilities have engineers and designers, expertise in code compliance,&rdquo; he says. &ldquo;The small guys tend to not afford hiring code-specific people, so they put it together the best they can with the local jurisdiction&mdash;it&rsquo;s more compliance-based.&rdquo; OSHA&rsquo;s role as a regulatory body in mitigating risk may seem heavy-handed, but Wilson says New England Wood Pellet&rsquo;s experiences with the agency vastly improved safety at its mills. &ldquo;We have a great relationship with OSHA,&rdquo; Wilson says. &ldquo;They recommend experts to bring in and we ultimately made a number of changes to our equipment, putting in certain fire and explosion mitigation systems.&rdquo; After its 2011 fire and numerous citations, the company invested more than $2 million in safety equipment and implemented a combustible dust and housekeeping safety program formalized with training. &ldquo;We were cleaning with Shop-Vacs,&rdquo; Wilson says. &ldquo;That&rsquo;s not allowed, so we purchased Class 1 vacuum systems, expensive ones that you can use in hazardous environments. We formalized a management-of-change program, so we are not allowed to change equipment and processes until we conduct reviews on what could happen. And we also implemented a formal preventative maintenance program.&rdquo; New England Wood Pellet also had to put in processes and equipment to minimize fire risks and spreading or creation of sparks, including bonding and grounding in all equipment and lightning. It also implemented a dust leak program that reviews all equipment once a quarter minimally.
 The company&rsquo;s hammer mills and dryers are indoors, which Wilson says adds another layer of protection. &ldquo;We also implemented top-of-the-line Firefly spark detection and suppression systems on our pellet mills, coolers, baghouses, dryers, cyclones and hammer mills,&rdquo; he says. &ldquo;We also had to do a lot of work in our bucket systems. We had to have the correct air locks in place, and put in explosion vents on our silos, cyclones, and baghouses, and a properly designed explosion protection system on our hammer mills, baghouses, certain conveyors, and on our dryers and cyclones. We did a lot of work. And we spent a lot of time reading NFPA codes over and over and over again. We overdid it. For instance, we did not have to put in an explosion suppression system on our dryer, but we wanted to do the right thing. The only thing incumbent upon us now is following through on our housekeeping, preventative maintenance and management of change. If we do all those, OSHA tells us we can&rsquo;t do any more to protect our workers.&rdquo; Author: Ron Kotrba Senior Editor, Biomass Magazine 218-745-8347 rkotrba@bbiinternational.com

THREAT CONTAINED: After a 2011 fire at New England Wood Pellet LLCâ€™s manufacturing plant in Jaffrey, New Hampshire, and multiple repeat citations on safety violations from OSHA, the company invested $2 million in fire and explosion safety equipment

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Cost-effective techniques to mitigate dust-related risks are available to less sophisticated wood pellet mills, where a lack of capital, education, code knowledge, and proper cleaning and maintenance protocols may exist.

Defusing the Tinderbox

Planned shutdowns, turnarounds and outages (STOs) are often scheduled for preventative maintenance and new equipment installation that must be performed to keep a plant running and in regulatory compliance.&nbsp; To minimize production downtime, this work must be completed within a very tight time frame.&nbsp; As such, STOs are often feats of engineering, planning and coordination&mdash;work that begins many months, even years, before the event. At the top of the list during any planned shutdown is safety.&nbsp; To prevent injury or loss of life, reduce liability, and keep insurance rates in check, safety departments must provide required safety training, products and services that will ensure that all on-site personnel and company assets are protected throughout the scope of the operation. Managing all that encompasses safety for an STO, however, is often a feat of its own. During an STO, a typical facility can see its ranks swell from 50 to perhaps 200 to 300 additional workers who the safety department must properly equip, train, and provide rescue and standby emergency services.&nbsp; This often requires managing multiple vendors of safety products and services, as well as dealing directly with workers who are not familiar with the facility or its processes and are performing challenging, even high-risk, tasks. In a move designed to eliminate a point of complexity and coordination in an already complicated process, some facility safety departments are outsourcing to a single combined-safety-service provider that can deliver the entire gamut of safety-related products and services.&nbsp; The benefit of this one-stop-shop approach for a planned shutdown is the single point of coordination, reduction in facility personnel required to manage the safety effort, access to extensive safety expertise and technical knowledge, potential cost savings on basic and more advanced personal protective equipment (PPE) and ability to respond quickly to unexpected situations or emergencies Despite the focus on speedy return-to-service, those who have participated in planned shutdowns will attest that the primary emphasis is not how fast the work is completed, but rather ensuring the safety of all involved. This is not mere lip service, but the prime directive, even if that means going over budget or delaying the project. &ldquo;Safety is number one,&rdquo; says Kevin Nadolski, safety director at Duke &amp; Duke Services, a company provides installation and maintenance of conveyor systems, bulk handling equipment, presses, cranes, robotics and other automated machinery, often during STOs. &ldquo;Well before any of the work starts, the project managers are holding safety meetings and orienting employees on safety.&nbsp; This occurs both before and during the project, with managers reviewing daily reports about how many personnel are working, what they are doing, and if any are hurt they want to know exactly what happened.&rdquo; As safety director, Nadolski has utilized a number of PPE providers and safety service companies over the course of his career. He admits that the concept of a single combined-safety-service provider is a novel concept in an industry where suppliers generally keep to well defined market segments with minimal overlap. Large PPE providers, for example, offer catalogues with thousands of products, but rarely offer safety services, and vice versa. Nadolski first began outsourcing to a company that was later acquired by DXP Safety Services while working at a prior job, and has continued to use the company throughout the five years he has been employed as safety director at Duke &amp; Duke.&nbsp; The company operates as a single provider of combined safety for plant turnarounds. In 2015, Nadolski estimates he has already used DXP a dozen times for on-site safety supervision, emergency response, confined space attendants, and supplied air trailers.&nbsp; He also utilizes DXP to train employees that most complete annual confined space training. The benefits of a one-stop-shop approach to safety begins well before the STO. As part of the preplanning, a safety advisor from a combined service provider meets with facility safety and maintenance personnel to learn about their existing procedures and processes. For shorter projects, this can be 2 to 4 weeks beforehand, or for a more complex project 12 to 18 months in advance. The safety advisor then evaluates and monitors safety hazards, and control strategies to ensure compliance with the facility&rsquo;s safety rules, policies, programs, criteria and procedures as well as all governmental regulations.&nbsp; Another benefit to this approach is the ability to react to unexpected situations or emergencies. Although a tremendous amount of planning goes into a planned shutdown, there are inevitably situations, requirements for specialized equipment, unexpected air quality issues, and even injuries that can leave safety personnel scrambling. With the breadth and scope of its expertise, a combined safety services company can tap into its resources quickly to resolve the situation. Author: Chris McKinnon DXP Safety Services 713-996-4700 &nbsp;Chris.mckinnon@dxpe.com

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In a move designed to eliminate a point of complexity and coordination in an already complicated process, some facility safety departments are outsourcing to a single combined-safety-service provider.

Simplifying Safety During Shutdowns

Serious and fatal accidents in a range of scenarios in Europe have sounded the alarm when it comes to pellet carbon monoxide (CO) offgassing and its potential hazards. As a result of these instances, pellet offgassing has become an issue of contention in the U.S., where the pellet heating industry is still in its infancy and research has brought forth varying conclusions regarding offgassing and its dangers. In May 2002, during the discharge of pellets from British Columbia onboard MV Weaver Arrow in the Port of Rotterdam, one stevedore died and several other workers were injured. Another fatal case occurred in November 2006 onboard the MS Saga Spray in the Port of Helsingborg, Sweden, while the vessel was, again, discharging wood pellets from British Columbia. One seaman was killed, a stevedore was seriously injured and several rescue workers were slightly injured after entering an unventilated stairway next to a cargo hold. Other incidents caused by the release of CO from wood pellets have occurred beyond ship&rsquo;s cargo holds, including three deaths in Europe since 2010, caused by entry into wood pellet storage facilities on domestic sites. The most recent occurred in 2011, when a 28-year-old pregnant woman died in Switzerland after entering a pellet storeroom that supplied 60 households. CO, coined the &ldquo;silent killer,&rdquo; is an odorless, colorless, tasteless and highly toxic gas. CO becomes hazardous at elevated concentrations and exposure times, and because of this, various organizations have set exposure guidelines. For example, the Occupational Safety and Health Administration&rsquo;s guideline is any enclosed space shall be maintained at no more than 50 parts per million (ppm) as an eight-hour average area level. The National Institute for Occupational Safety and Health guidelines are more stringent, at a maximum of 35 ppm CO concentration per eight hours of exposure time. The World Health Organization&rsquo;s guideline is 9 ppm per eight hours of exposure and 25 ppm for one hour. In response to the fatalities in Europe, the U.K. Health and Safety Executive issued a warning to raise awareness of certain issues involved in using wood pellets as fuel. The North American pellet industry is learning from its European counterparts, and conducting its own research in response to these incidents. Well-versed on the issue, Europe maintains considerable research and dedicates more funding toward establishing standards and guidelines for bulk pellet storage. Meanwhile, the U.S. recognizes the concern and is working on establishing common industry understanding. One example of this is Biomass Thermal Energy Council&rsquo;s document of best practices regarding quality and safety assurance for the storage of loose bulk wood pellets for small- and medium-scale central heating systems. The New York State Energy Research and Development Authority is pushing research dollars into studying pellet offgassing. One study conducted by Clarkson University in Potsdam, New York, observed the presence of CO in wood pellet storage facilities and in the laboratory due to offgassing, and investigated methods to improve air quality in pellet storage areas. CO monitors were positioned in or near pellet bins, and CO concentrations were found to be as high as 44 ppm in a residential basement, which exceeds NIOSH exposure guidelines of 35 ppm in occupational settings and 9 ppm in residential and commercial buildings. On the other hand, a study released by the University of New Hampshire in August found that indoor storage of pellets in homes does not pose a risk of generating CO levels above recommended thresholds. Both studies unveiled varying emission measurements, but also differed in where CO monitors were placed and the variables studied. Adam Sherman, manager of the Vermont-based Biomass Energy Resource Center, says this research takes a shallow dive, but because of this, everything else is conjecture as to whether pellet offgassing is a problem. Although the reason behind these studies creates an ominous outlook for indoor pellet storage, research conducted thus far demonstrates that pellet offgassing is a simple problem that should not invoke panic. Similar Studies, Different Results While the research conducted at Clarkson University offered elevated levels of CO, the study didn&rsquo;t measure any values close to lethal levels experienced in the European incidents. &ldquo;It&rsquo;s not a hazard we need to panic over, but it&rsquo;s certainly a hazard we need to take seriously and work on resolving,&rdquo; says Philip Hopke, director of the Center for Air Resources Engineering and Science at Clarkson University. The concern is that as biomass boilers become more widely used, a broad array of homes with varying levels of natural ventilation will install pellet heating systems with inside-the-structure storage bins. According to the study, in energy efficient (low air exchange rates) homes, this situation could produce unacceptable CO concentrations. The results raise a safety question regarding how pellet storage bins are designed and sited. The study found that active and natural ventilation clearly reduces the average concentrations, although higher values were still observed. Also, pellet aging clearly reduced the amount of observed CO. In the study, there was a clear, positive relationship between the offgassing of CO and CO2 and temperature where higher temperatures produce higher offgassing production. Thus, bin temperatures need to be considered when designing or choosing pellet storage bins. Another variable studied by Clarkson University considered hardwood pellets versus softwood. The study suggested northeastern U.S. hardwood pellets have less CO offgassing, but caution should be taken because hardwood pellets had the tendency to absorb more moisture than softwood pellets. Moisture can be concerning, the study suggests, because it found that dried wood pellets were less active in CO offgassing, and pellets stored under high relative humidity had a faster and higher CO emission rate. Pellets should be stored under low-humidity, low-temperature conditions. Hopke and others at Clarkson are furthering their research. One project he mentions began last summer and aims to understand the CO formation mechanism and to determine whether there are ways that, before leaving the factory, a pellet can be processed to potentially lower CO offgassing. The university is doing a series of basic mechanistic studies to understand what kind of controls they should have and what it is that&rsquo;s oxidizing, an issue that&rsquo;s puzzled over, according to Hopke. NYSERDA has taken action due to the absence of widespread industry knowledge concerning indoor bulk pellet storage. &ldquo;Currently, in consultation with the New York State Department of Health, NYSERDA is using caution by not subsidizing in-building bins until we get a better handle on just what&rsquo;s going on, and whether that would really represent a significant health hazard to the occupants of the building,&rdquo; Hopke says. Indoor pellet storage is considered a confined space, so there has to be a permit program established where the employer only gives permits to trained personnel to work in those spaces. This is an OSHA regulation. Clarkson&rsquo;s faculty has provided confined space training to ensure that maintenance workers understand how they can work safely, as well as know the employer program requirements to limit access and provide continuing training to keep the workers safe. &ldquo;We just want to find ways to do it efficiently, effectively and safely so we don&rsquo;t wind up with incidents like they saw in Europe, because that would seriously hurt the pellet industry very quickly,&rdquo; Hopke says. According to results from the University of New Hampshire study, indoor pellet storage does not pose a risk of generating CO levels above recommended thresholds. Over a period of seven months, the CO concentration in the air of 25 residences in New Hampshire and Massachusetts were monitored. The fact that homes built in different eras possess a range of air tightness and dampness tendencies was taken into consideration, so construction varied from residences built in 1774 to 2013. Out of the 25, 16 of the homes use wood pellet boilers with indoor pellet storage containers at a capacity of at least 3 tons, four of the homes use outdoor pellet storage, four use other heating fuels and the remainder are at a university laboratory site. The study was designed to obtain preliminary survey data of residential CO concentrations at the level of ppm of ambient indoor air in the immediate vicinity of wood pellet storage and heating systems compared to that of the homes using fossil fuel systems. Using a threshold of 9 ppm for its average, hourly CO measurements, data was acquired every five minutes to determine concentrations that might adversely affect indoor air quality. There are various factors not controlled for in the study, but of the data obtained, no evidence suggests there is an reasonable risk when having pellet storage inside, a conclusion that differs from Clarkson University&rsquo;s study. Backing New Hampshire&rsquo;s findings, Sherman says some installations throughout the northeastern U.S. are voluntarily putting CO monitoring equipment in boiler rooms next to pellet storage, and finding no evidence of emissions above an acceptable threshold. &ldquo;I think that what the researchers are trying to understand is what happened with those early accidents and whether those cases are applicable to the most common situations where you&rsquo;ve got&mdash;especially residential, but also commercial and industrial&mdash;pellet storage and for a lot of that, the answer is no,&rdquo; says Ben Bell-Walker, technical affairs manager with BTEC. Bell-Walker says this is mainly because pellet offgassing is a volume issue. &ldquo;If you&rsquo;re talking about a residential, small commercial or even a larger commercial system, you&rsquo;re really not talking about concentrations of pellets that are going to give you that amount of carbon monoxide.&rdquo; Industry Work Dilution is the solution to pollution, Sherman references as the remedy to pellet offgassing. &ldquo;CO only becomes a threat to human health if concentrated in an enclosed space, so if you vent it outside, it becomes a nonissue&mdash;simple solutions for simple problems,&rdquo; he says. On Sept. 24, BTEC released its 1.0 version of quality and safety assurance best management practice for the storage of loose bulk wood pellets for small- and medium-scale central heating systems. &ldquo;This whole document is what we consider industry best practices, so the reason this was prepared is to provide manufacturers, deliverers, pellet suppliers a way to make sure they&rsquo;re checking all of the boxes in terms of any kind of possible dangers,&rdquo; Bell-Walker says. &ldquo;Especially with residential pellet delivery, you get a whole variety of ways people have configured their space for storage. This is just a way for the company to do some due diligence.&rdquo; The guidelines address a the size of ventilation ports and the configuration of venting, not just for potential CO offgassing, but for minimizing dust and fines. Other areas addressed include storage volume recommendations, delivery preconditions, and explosion management. Bin-specific requirements are a big part of the best practices BTEC put together. Sherman says the question to ask when considering indoor pellet storage is what sort of monitoring and what sort of ventilation systems can be easily and cost-effectively installed, keeping in mind that if there is CO offgassing while the fuel is stored indoors, it can be passively vented, making it a nonissue. There are also active ventilation options such as fans that can be implemented. Other Research and Future Studies A number of studies have evaluated components of pellet storage at the University of British Columbia. One study assessed the rate and peak concentrations of offgas emissions in stored wood pellets such as sensitivities to temperature, relative humidity and headspace volume. The study found that increased headspace volume ratio increases peak offgas emissions because of the availability of oxygen associated with pellet decomposition. A report providing similar data on offgassing and self-heating was prepared in 2011 by the Wood Pellet Association of Canada, in collaboration with UBC Department of Chemical and Biological Engineering with funding from Ethanol BC. The research focused on self-heating as a chemical process and kinetic modeling of offgassing to establish a prediction model for industry use. The research played a significant role in the new ISO quality classification and testing standards for solid biofuels.&nbsp; In March of 2013, the European Pellet Council held its first International Workshop on Pellet Safety in F&uuml;gen, Austria, where participants offered feedback on existing pellet storage guidance, opportunities to improve research and communication to industry stakeholders. Sherman says he&rsquo;d like to see research delve deeper into finding what variables are driving CO offgassing, rather than focusing on whether it is or isn&rsquo;t an issue. &ldquo;I think what would be interesting, in terms of future studies, is really looking into the critical variables,&rdquo; he says. Sherman adds that when it comes to pellet offgassing, it&rsquo;s particularly important to understand more about three variables,&nbsp; including the age of pellets, the volume of pellets, and their physical and chemical properties. Whether there is truly an issue, Sherman says, the industry must be proactive, establishing best practices and promulgating them. &ldquo;This isn&rsquo;t a problem unique to pellets that should warn undue concern if there are simple solutions for simple problems.&rdquo; Author: Katie Fletcher Associate Editor, Biomass Magazine 701-738-4920 kfletcher@bbiinternational.com

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Wood pellet-derived carbon monoxide has been a cause of concern for indoor storage scenarios, but research suggests it's an easy fix. 

Pellet Offgassing: Simple Problem, Simple Solution?

When the U.S. EPA first regulated wood stoves in the late 1980s, the industry was more of a partner in developing the standards. When the EPA began updating those standards around 2010, many in the industry expected to be treated as partners again. After all, the depth of industry&rsquo;s expertise and experience far exceeded that of the small, underfunded team of EPA employees. The key EPA employee, Gil Wood, was a veteran of the 1988 regulations. All the key industry players were on a first-name basis with him, and had developed with him a certain level of trust. In the summer of 2012, the EPA appeared to be putting final touches on regulations that the industry supported and had worked hard on.&nbsp; All that changed in November 2012, when the EPA released a new draft containing far stricter emission standards. The industry was stunned, and felt betrayed. What had gone wrong? Had it become too self-assured? That month, we were part of the meeting at which the EPA unveiled the stricter regulations. It was plain to us that the EPA had misjudged the demand by states and air quality agencies for stricter regulations. Now, it was up to Wood to be the main messenger of the far stricter draft rules. One thing that had changed was a dramatic resurgence in wood stove use that began during the great recession of 2008-&lsquo;09. States and air quality agencies were still digesting the pollution impacts as the EPA developed its first draft of regulations.&nbsp; Another trend was that both wood and pellet stoves were becoming cleaner, and it was clear that a sizable portion of new stoves could meet the stricter standards that the EPA was proposing. From the start, this regulatory battle had little to do with the potential of wood and pellets as a significant renewable energy source. Rather, the EPA was treating wood and pellet stoves and boilers simply as a source of pollution that needed to be regulated. Years ago, the wood and pellet contingent merged with the patio industry and were now just as committed to gas stoves and fireplaces. Wood and pellet stoves and boilers were almost an orphaned type of renewable technology, with no clear advocates in the private sector or government. Things began to change, as many of the states that demanded stricter emissions regulations also began incentivizing modern, cleaner wood and pellet boilers from Europe. Several northeastern states began a push to promote the cleanest appliances, which the EPA and DOE had not done. Around the same time, the Biomass Thermal Energy Council broke away from the Pellet Fuels Institute to champion policies that would help wood and pellet heating be viewed as a modern renewable energy technology. BTEC emerged as the leading voice in Washington for biomass as a renewable heating fuel. My organization, the Alliance For Green Heat, focuses on wood and pellets as a residential renewable fuel that has the potential to be very clean and efficient. The final regulations released by the EPA in 2015 were not as tough as the ones it floated in 2012, but they were far tougher than what industry thought they were getting. We believe these tougher standards are key for stoves and boilers to be more accepted as mainstream renewable energy appliances.&nbsp; Solar, wind and other technologies are growing quickly, and biomass technology needs to show that it is clean enough to play a larger role in the renewable energy mix. Most in the stove and boiler industry acknowledge that the 1988 regulations saved the industry, because states were developing their own patchwork of regulations and the wood smoke problem was severe. For better or worse, regulations provide a necessary floor for this industry (and many others) and help to create a level playing field that helps the sector become cleaner and more efficient. Jan. 1 was a historic day for residential wood heating in America, as it marked the day that unregulated stoves and boilers went off the market. Finally, we have entered an era where all new equipment is required to meet at least basic emission regulations. Three very conservative states&mdash;Missouri, Michigan and Virginia&mdash;oppose even basic emission regulations for stoves and boilers, but virtually the entire stove industry accepts the need for some regulations.&nbsp; Even the EPA itself is changing. It is now beginning to issue voluntary hangtags, which are akin to a green label for woodstoves. Influenced by states and groups like ours that want to deploy more of the cleanest and most efficient appliances, the EPA is slowly beginning to treat the sector not just as an emitter of particulates, but also as a way to reduce fossil fuels.&nbsp; It&rsquo;s a small but important step and part of the legacy that Gil Wood left when he retired last spring. Author: John Ackerly President, Alliance For Green Heat jackerly@forgreenheat.com www.forgreenheat.com

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Influenced by states and groups that want to deploy more of the cleanest and most efficient appliances, the EPA is slowly beginning to treat the wood stove sector not just as an emitter of particulates, but also as a way to reduce fossil fuels.

February 2016

Business Briefs

Business Briefs

Business Briefs

Columns

OSHA penalties going up, up, up

Regulatory issues for antimicrobials evolving

World leaders must recognize biofuels potential

Know your target market

Industry poised to be part of climate change solution

Seizing export opportunities

Promises made in Iowa

Ethanol's outlet opportunities

Congressional Recognition for Biomass

Pass Me Along

Fortune Smiles on Industry, Better Late Than Never

Betting on Biogas Growth in 2016

Simplifying Safety During Shutdowns

Wood Stoves and Washington Lobbyists

Featured

2015 Crop results: Good quality, plentiful corn

Ethanol margins return to seasonal swings

Biofuels company industrializes photosynthesis

Export markets for “liquid corn”

Dusting Up on Risk & Regulation

Defusing the Tinderbox

Pellet Offgassing: Simple Problem, Simple Solution?

Contributions

Well-managed hedge positions improve margins

Biomass Supply Chain Trade-Offs: Basis for Successful Bioenergy Businesses

Managing Biogas Storage and Retrieval

February 2016.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

OSHA penalties going up, up, up

Regulatory issues for antimicrobials evolving

World leaders must recognize biofuels potential

Know your target market

Industry poised to be part of climate change solution

Seizing export opportunities

Promises made in Iowa

Ethanol's outlet opportunities

Congressional Recognition for Biomass

Pass Me Along

Fortune Smiles on Industry, Better Late Than Never

Betting on Biogas Growth in 2016

Simplifying Safety During Shutdowns

Wood Stoves and Washington Lobbyists

Featured

2015 Crop results: Good quality, plentiful corn

Ethanol margins return to seasonal swings

Biofuels company industrializes photosynthesis

Export markets for “liquid corn”

Dusting Up on Risk & Regulation

Defusing the Tinderbox

Pellet Offgassing: Simple Problem, Simple Solution?

Contributions

Well-managed hedge positions improve margins

Biomass Supply Chain Trade-Offs: Basis for Successful Bioenergy Businesses

Managing Biogas Storage and Retrieval

February 2016