January Ethanol Producer Magazine

INSIDE: INDUSTRY CLEARS HURDLES, PREPARES FOR NEW ONES

ALSO Data-Driven Production

Page 36

Contamination Prevention

Page 38www.ethanolproducer.com

In-house Laboratories Integral to SuccessPage 30

Protecting Profitability

JANUARY 2013

4 | Ethanol Producer Magazine | JANUARY 2013

JANUARY issUe 2013 VOL. 19 issUe 1

contents

fEAturESDEPARTMENTS

6 Editor’s Note Labs Look to Vendors and Each Other for Answers By TOM BRyAN

7 Ad Index

10 the Way I See It Chin Up and Keep a Stiff Upper Lip By MIKE BRyAN

11 Events Calendar Upcoming Conferences & Trade Shows

12 View from the Hill The Year That Was and Will Be By BOB dINNEEN

14 Drive Expanding Market Access By TOM BUIS

16 Grassroots Voice New Year Challenges By BRIAN JENNINGS

18 Europe Calling Setting the Example By ROB VIERhOUT

20 Business Matters Co-location Plans Impact Air Permit By TOdd PAlMER ANd ANNA WIldEMAN

22 Business Briefs

24 Commodities report

26 Distilled

44 Marketplace

ON tHE COVErSharon Kipp, lab technician, takes a sample at Homeland Energy Solutions LLC. PHOTO: JOHN C. THOMAs, FisHeYe

Ethanol Producer Magazine: (UsPs No. 023-974) January 2013, Vol. 19, issue 1. Ethanol Producer Magazine is published monthly by BBi international. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Ethanol Producer Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

INSIDE: ASSESSING THE CHALLEGES OF THE YEAR AHEAD

ALSO A Day in the Lab

Page 36

Keeping Bacteria in Check

Page 38

www.ethanolproducer.com

In-house Laboratories Integral to SuccessPage 30

Protecting Profitability

JANUARY 2013

CORReCTiON Giancarlo Drennan’s name was misspelled in a story published in the December issue of EPM. We apologize for the error.

30 QUALiTY CONTROL Measurable SuccessIn-house laboratories can protect profits BY HOLLY JESSEN

30

36 Q&A Keeping Corn Plus in the Sweet SpotWalking in a lab manager’s shoesBY TIM PORTz

38 FeRMeNTATiON ferm Assurance Hygiene is key to preventing contamination BY SUSANNE RETKA SCHILL

36

38


editor’s note

Tom Bryan, PrESIDEnT & EDITor In [email protected]

LABS LOOK tO VENDOrSAND EACH OtHEr

fOr ANSWErS

FOR INDUSTRY NEWS: WWW.EtHANOLPrODuCEr.COM OR FOLLOW US: tWIttEr.COM/EtHANOLMAGAzINE

In the weeks leading up to the completion of this issue, our editors interviewed personnel at multiple U.S. ethanol plant labs, the national Corn-to-Ethanol research Center and several lab- and data-focused service companies to deliver on this month’s important lab innovation theme.

tim Portz, our executive editor, stepped inside the well-equipped laboratory at corn Plus lllP, in Winnebago, minn., where he met lab manager courtney trask, the subject of this month’s Q&a. in “Keeping corn Plus in the Sweet Spot,” on page 35, trask says monitoring and adjusting the performance of an ethanol plant has become a truly data-driven process. She tells us that vendors such as HPlc software reps often guide lab personnel through routine trouble-shooting and data analyses. And she verifies that the U.S. ethanol industry—if Corn Plus is typical—continues to make capital investments in new lab equip-ment, despite tight margins. in fact, trask says, her biggest challenge right now is not a lack of new technology, but getting comfortable with all of the new equipment and practices in her laboratory. “Our situation is difficult right now because we have implemented so many new things at the plant in the past few months,” she tells Portz.

trask will, of course, lean on her vendors for support and guidance as she continues to master new gadgets and roll out new procedures in her space. like-wise, service providers like Efficient Green Energy are also helping lab person-nel bridle new technology and harness better data. as Holly Jessen reports in her page-30 feature, “measurable Success,” the iowa-based company is enabling producers to capture and cleanse data, train personnel and benchmark their lab practices against competing facilities.

ncerc’s Sabrina trupia says successful ethanol plant labs are built around three intersecting components: “performance, understanding and communica-tion.” each component, especially the latter, must be methodical and unremit-ting. After all, even the best data integrity practices fall flat when internal com-munication breaks down.

external communication is important, too. this is a competitive industry, yet metered collaboration between ethanol plant labs is tolerated, and even encour-aged by some producers. In addition to Green Energy’s laboratory benchmarking program, companies like PhibroChem, through its Ethanol Performance Group, are engaging lab personnel in training programs that include analytical round robins between multiple facilities. it’s clear that, in today’s environment, data-driven performance strategies require lean producers to build support groups that include vendors, service providers and—now, more than ever—each other.

JANUARY 2013 | Ethanol Producer Magazine | 7

TM

EDItOrIALPRESIDENT & EDITOR IN CHIEF

tom Bryan [email protected]

VICE PRESIDENT OF CONTENT & EXECUTIVE EDITOR tim Portz [email protected]

CONTRIBUTIONS EDITOR Susanne retka Schill [email protected]

FEATURES EDITOR Holly Jessen [email protected]

NEWS EDITOR Erin Voegele [email protected]

COPY EDITOR Jan tellmann [email protected]

ArtART DIRECTOR

Jaci Satterlund [email protected]

GRAPHIC DESIGNERLindsey Noble [email protected]

PuBLISHINGCHAIRMAN

Mike Bryan [email protected]

CEO Joe Bryan [email protected]

SALES VICE PRESIDENT, SALES & MARKETING Matthew Spoor [email protected]

EXECUTIVE ACCOUNT MANAGER Howard Brockhouse [email protected]

ACCOUNT MANAGERSMarty Steen [email protected] Brown [email protected]

Andrea Anderson [email protected]

CIRCULATION MANAGER Jessica Beaudry [email protected]

ADVERTISING COORDINATOR Marla Defoe [email protected]

SENIOR MARKETING MANAGER John Nelson [email protected]

EDItOrIAL BOArDMike Jerke, Chippewa Valley Ethanol Co. LLLP

Jeremy Wilhelm, Cilion Inc.Mick Henderson, Commonwealth Agri-Energy LLC

Keith Kor, Pinal Energy LLCWalter Wendland, Golden Grain Energy LLC

Neal Jakel Illinois River Energy LLCBert farrish Lifeline Foods LLC

Eric Mosebey Lincolnland Agri-Energy LLCSteve roe Little Sioux Corn Processors LP

Customer Service Please call 1-866-746-8385 or email us at [email protected]. Subscriptions to Ethanol Producer Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and pay-ment (checks made out to BBI International) to: Ethanol Producer Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-746-5367. Back Issues, Reprints and Permissions Select back issues are available for $3.95 each, plus shipping.

Article reprints are also available for a fee. For more information, contact us at 866-746-8385 or [email protected]. Advertising Ethanol Producer Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Ethanol Producer Magazine advertising opportunities, please contact us at 866-746-8385 or [email protected]. Letters to the Editor We welcome letters to the editor. Send to Ethanol Producer Magazine Letters to the Editor, 308 2nd Ave. N., Suite 304, Grand Forks, ND 58203 or email to [email protected]. Please include your name, address and phone number. Letters may be edited for clarity and/or space.

COPYRIGHT © 2012 by BBI International

Please recycle this magazine and remove inserts or samples before recycling

11 2013 international Biomass Conference & expo

48 2013 international Fuel Ethanol Workshop & Expo

47 2013 National ethanol Conference

45 BBI Consulting Services

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the way i see it

Chin Up and Keep a Stiff Upper LipBy Mike Bryan

Author: Mike BryanChairman, BBi international

[email protected]

First, let me say happy New year! I do hope that the coming year for each of you is very rewarding, both on a personal level and a business level.

The coming year will, of course, bring lots of new challenges for the ethanol industry, but, as we have in the past, I suspect we will prevail. I’m not sure if 2012 was our toughest year ever, but it has to rank right up there in the top two or three. But with the U.S. EPA’s decision not to grant a waiver to the renewable fuels standard (RFs), it at least ended on a bit of a high note.

So, we press on, moving into the coming year with some trepidation, but at the same time, confident that we remain on the right side of the issue. There will no doubt be new challenges that will test our mettle, along with new opportunities to demonstrate the viability and importance of renewable energy.

Hopefully, Congress is a bit more coordinated and supportive in 2013 than it was in 2012 on the issue of ethanol and renewable fuels in general. Of

course, only time will tell whether the Obama administration will accomplish more with a still-divided Congress than in his first term or face the same recalcitrant challenges. As with all forms of energy, whether fossil or renewable, public policy is a crucial element in its success or failure. The elimination of the oil subsidies would be a good first step, to begin the process of leveling the playing field.

We speak of high corn prices like it’s a bad thing. One of the original premises of the ethanol industry was to provide a mechanism that would support commodity prices while providing a cleaner and safer environment. That certainly has been accomplished. Unfortunately, anyone who knows agriculture, knows that the current high corn price rarely makes its way to the average corn farmer—a good price on the farm, perhaps, but $7.50 a bushel, likely not. So these high corn prices that directly affect the profitability of the ethanol industry, generally are not finding their way to the growers. Who actually gets the $7.50 per bushel? I’ll leave that for another column.

So as we move into 2013 with corn prices close to an all-time high and oil prices at their lowest level in some time, it looks as though we are still in for a few months of tough sledding. Plants that have a high debt load are generally the first to fail or temporarily shut down, those with lower debt and cash reserves can ride out the market fluctuations.

But isn’t that true for most industries? When times are tough, low debt and cash on hand rule the day. Often, it’s a matter of timing more than bad financial planning. Timing in terms of when the plant was built, how quickly the debt could be paid down, whether the plant was under-capitalized and if there were unanticipated shifts in markets.

so, as they say in merry old England, “chin up and keep a stiff upper lip.” 2013 will be interesting ride.

That’s the way I see it.


eVents caLendar

National Ethanol ConferenceFebruary 5 -7, 2013Wynn Las VegasLas Vegas, NevadaSince 1996, the Renewable Fuel Association’s National Ethanol Conference has been recognized as the preeminent conference for delivering accurate, timely information on marketing, legislative and regulatory issues facing the ethanol industry. With numerous networking opportunities, more business meetings are conducted and contacts made at this conference than any other ethanol conference.866-497-1232 | www..nationalethanolconference.com

International Biomass Conference & ExpoApril 8 -10, 2013Minneapolis Convention CenterMinneapolis, MinnesotaBuilding on InnovationOrganized by BBI International and coproduced by Biomass Magazine, the international Biomass Conference & Expo program will include 30-plus panels and more than 100 speakers, including 90 technical presentations on topics ranging from anaerobic digestion and gasification to pyrolysis and combined heat and power. This dynamic event unites industry professionals from all sectors of the world’s interconnected biomass utilization industries—biobased power, thermal energy, fuels and chemicals. 866-746-8385 | www.biomassconference.com

International fuel Ethanol Workshop & ExpoJune 10 -13, 2013America’s CenterSt. Louis, MissouriWhere Producers Meet Now in its 29th year, the FEW provides the global ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. The FEW is the largest, longest-running ethanol conference in the world—and the only event powered by Ethanol Producer Magazine. Visit our website to reserve premium booth space now.866-746-8385 | www.fuelethanolworkshop.com

Algae Biomass SummitSeptember 30 - October 3, 2013Hilton OrlandoOrlando, FloridaThis dynamic event unites professionals from all sectors of the world’s algae utilization industry including, but not limited to, financing, algal ecology, genetic systems, carbon partitioning, engineering and analysis, biofuels, animal feeds, fertilizers, bioplastics, supplements and foods. Organized by the Algae Biomass Organization and coproduced by BBI International, this event brings current and future producers of biobased products and energy together with algae crop growers, municipal leaders, technology providers, equipment manufacturers, project developers, investors and policy makers. The event is the world’s premier educational and networking junction for the algae industry.866-746-8385 | www.algaebiomasssummit.org

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Eagle Innovations


View from the hiLL

The Year That Was and Will BeBy Bob Dinneen

OUT IN

RFS Waiver Battle RFS Legislative Battle

E15 Test Programs E15 at the Pump

RFA Chairman Woodside RFA Chairman McKinstray

RiN Fraud RIN Depletion

13.2 BGY RFS Ethanol Demand 13.8 BGY RFS Ethanol Demand

E15 Registration RFA Misfueling Mitigation Plan (MMP)

API RFS “Revisions” API RFS “Repeal”

Cellulose Demonstration Commercial-scale Cellulose Production

EU Countervailing Duty Case eU Food Crop Biofuel Limitation

Energy Cmte Chairman Bingaman Energy Cmte Chairman Wyden

Four-Gallon Minimum Purchase E10 Dedicated Hose

Margo Oge Chris Grundler

Carbon Accounting Debate Carbon Tax Talk

UNICA’s Marcos Jank UNICA’s Elizabeth Farina

Mad Cows Angry Birds

E15 Auto Concerns 2013 E15 Auto Warranty Coverage

APi RFs Lawsuits More APi RFs Lawsuits

South Dakota’s Suboctane Gas Higher-Octane Fuel Nationwide

Big Oil Funding Campaigns RFA PAC

Food-Before-Fuel Campaign Fuels America Campaign

What a year 2012 has been. We’ve completed the hard work necessary to introduce E15 as a new fuel and now the rollout has begun. E15 is now for sale in Iowa, Kansas and Nebraska. We’ve also endured a historic drought that caused economic pain and emotional discomfort for farmers in the Midwest, livestock and poultry producers nationwide, and a 15 percent reduction in ethanol production resulting in a handful of plants shuttering until financial conditions improve. As if that weren’t enough, the fierce battle to protect the renewable fuel standard (RFs) is already underway. Fortunately, the facts proved once and for all that the RFS is working and flexible, thus no waivers were granted by the U.s. ePA this year.

2013 may have a rocky start for the industry, but there is also good news on the horizon, especially as we watch cellulosic companies move from the promising talk of the future to meaningful production of ethanol at market scale.

As important as these innovations are and as serious as the challenges facing us are, it is always good to take time and reflect on the year that was and will be, with a certain amount of levity, of course.

As is tradition, I give you 2013’s In and Out list:

Author: Bob DinneenPresident and CeO,

Renewable Fuels Association202-289-3835

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driVe

Expanding Market AccessBy Tom Buis

happy New year to all of you in the ethanol industry, who, in my opinion, are part of one of the greatest success stories in the history of America! While this past year has been one of the most challenging we have ever faced, and we certainly understand we will face more challenges in the new year, we have won every hurdle that Big Oil and Big Food have thrown at us, and we will continue that success this year. We won numerous legal battles against Big Oil and Big Food in 2012—we won the battle over the waiver of the renewable fuel standard (RFs) and we stopped them on the legislative front from dismantling the RFs.

in 2013, we will see some of the greatest challenges and opportunities in history for our industry—and we are prepared for both. Big Oil and Big Food will again make an all-out assault on the RFs, we will continue to face unfair trade practices from Brazil, barriers to open trade to the European Union, a bizarre regulatory scheme in California, and every conceivable hurdle to get more market access for E15 and higher blends. And we will succeed.

Our biggest challenge and opportunity in the New Year is market access. One of the reasons Growth Energy was formed was to anticipate and respond to what our industry needs to succeed. We recognized that one of the biggest obstacles for our industry was the impending blend wall. In March 2009, we filed the waiver to increase the ethanol blend up to 15 percent, recognizing that fuel consumption in America was declining and that our industry had the capacity to produce more than enough to meet the 10 percent regulatory cap. While our opponents have erected every regulatory and legal hurdle imaginary to prevent higher blends, we expect to overcome these hurdles this year.

Our big focus will be working with retailers to get E15 and flex-fuel pumps into more retail establishments nationwide. We will continue to work with pump manufacturers to offer minimal cost retrofit kits for retailers. And, we will pursue regulatory changes to address the Reid vapor pressure problem, the minimum purchase requirement obstacle and all the other regulatory hurdles impeding the adoption of higher blends.

This year we will have a new Congress and an Obama administration supportive of renewable fuels, creating an opportunity to further promote our industry. We cannot take things for granted, however, we need every one of you to engage with your members of Congress to ensure our industry’s future.

Everyone recognizes what a tough year 2012 was. Our industry is a winner, and winners succeed, and we will succeed

because we have the facts on our side. Whether it’s food versus fuel, environmental benefits or savings to consumers, we are a great benefit to all Americans. But we cannot sit back and hope for success, we must stand up and fight for our industry. At Growth Energy, we will be leading the fight for our industry and urge you to do the same.

American ethanol is a win for America. We have reduced our dependence on foreign oil. We are now 10 percent of America’s fuel supply. We have created more than 400,000 jobs in the U.S.—jobs that cannot be outsourced overseas. We generate more than $50 billion in gross domestic product. We have improved our nation’s air quality and our environment, revitalized our rural economy, and saved consumers money at the pump. Because of you, our industry is one of the greatest American success stories. Let’s continue to spread the message.

On behalf of everyone at Growth Energy, we wish you a Happy New Year!

Author: Tom BuisCEO, Growth Energy

[email protected]

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Grassroots Voice

New Year ChallengesBy Brian Jennings

The new year rings in a number of daunting challenges for U.S. ethanol producers. Gasoline use continues to fall off and the blend wall remains at a standstill, so producers are selling into a market that is on the decline and artificially limits ethanol use. Otherwise, uneconomical imports from Brazil are flooding the U.S. due to biased trade policy and bizarre indirect land use change scoring by the U.S. EPA, adding to ethanol’s supply/demand imbalance. Corn supplies are tight and margins are even tighter. If that weren’t enough, the battle over the renewable fuel standard (RFs) continues.

Against this backdrop, producer-members of the American Coalition for ethanol recently met to help determine the action plan that our grassroots advocacy needs to pursue in 2013. Among the many priorities identified by these members, a few rise to the top.

Market access is clearly our industry’s top priority. ACE provides unmatched expertise in helping petroleum marketers understand the benefits of ethanol blends and blender pumps, so we will focus on expanding ethanol use by continuing to collaborate with petroleum marketers and automakers this year. E15 is the most important opportunity to expand ethanol use in the short-term. ACE will prioritize educating retailers about the benefits and

availability of E15 and launch some new and creative ways to overcome the hurdles standing in the way of more E15 use. We are also working with automakers to identify the higher ethanol blends that will provide the valuable octane needed for future engine technologies.

Developing the market for E15 in the short-term and higher ethanol and octane opportunities in the long-run depend upon the market access created by the RFS. That’s why another priority for ACE in 2013 will be to win the RFs battle to secure a place in the market for higher ethanol blends.

It would be nice if free market principles cleared the path to more ethanol use. Let’s recall, however, what a truly free market does: it rewards low-cost alternatives, it promotes innovation, and a free market fosters competition. Despite the fact that ethanol is the low-cost alternative and ethanol producers are innovating and becoming more efficient, left to their own devices, oil companies—our customers—wouldn’t use as much ethanol as called for under the RFs because they control the market.

An old saying about Capitol Hill applies to our industry’s relationship with oil companies: there’s no such thing as a permanent victory or permanent defeat, just permanent battles. Yes, oil companies are our customers. But make no mistake, in D.C., they are our fierce competitors. Winning the EPA decision over whether the RFS should be waived was anticlimactic because we knew the facts and law were on our side. But the battle continues as Big Oil and other opponents simply turn the page in their game plan to now seek repeal of the RFS in Congress. Given all the tax benefits and artificial market advantages enjoyed by

oil companies, the RFs is the only tool we have to try and level the playing field.

As the first group to advocate for an RFS, ACE will be aggressive in drawing attention to its success. Our opponents will claim to Congress the RFS is broken and in need of “repair” (i.e. repeal). Our job will be to explain that the RFS is working and delivering important benefits to America.

ACE will also continue to be active in mobilizing strong grassroots support for ethanol, taking steps to activate members to stand up and promote the benefits of ethanol in their communities, states and with federal policymakers. Several years ago we initiated the first ethanol industry fly-in to the nation’s capital; this grassroots event will be held again March 13 and 14. The facts are on our side, but if our opponents are louder and more visible in the halls of Congress, the alternative reality they are trying to create about ethanol becomes fact. We are also supporting the Fuels America campaign designed to go on offense and reframe the public conversation about ethanol, an effort that is long overdue.

Our forward-looking action plan to expand market access alongside automakers, retailers and policymakers will only succeed with your support and involvement. That’s why it is critical to remain engaged. Join us in D.C. for the ACE fly-in. Take action in your communities. Be part of our grassroots team and take an active role in ACE’s mission of making American ethanol the consumer fuel of choice.

Author: Brian JenningsExecutive Vice President,

American Coalition for ethanol605-334-3381

[email protected]

Learn how getting the right product on the right acre can mean increased profi ts for you.www.pioneer.com/biofuels www.dppgraindesk.com


europe caLLinG

Setting the ExampleBy Robert Vierhout

The decision by the U.S. EPA to deny a waiver on the renewable fuel standard (RFS) was the right decision. With this statement I will probably only echo what many colleagues in or related to the ethanol sector have said already. Clearly, the decision is good news for the American ethanol sector, but it should also be important for those who design policy and adopt laws at the other side of the pond in europe.

The EPA decision gave at least two clear messages to those who favored the waiver and to the rest of the world: First of all, the food/fuel issue was greatly exaggerated, and secondly, the RFS has an in-built flexibility that makes a waiver on the mandate unnecessary. The EPA officials were able to distinguish fact from fiction when they made their assessment on the impact of ethanol production on commodity prices, the food and the feed market.

Hopefully, European regulators will take note of what has happened. If they are intellectually honest, they should acknowledge that if the U.S. biofuel policy has no real negative impact on the food/feed market, then surely the European policy cannot have any impact at all. Compared to the U.S. volumes, the European volumes are simply too small to have any significant impact. Even the estimated volumes for 2020 are small,

comparable in size with today’s ethanol production in the U.s. Unfortunately, eU regulators seem to be under the spell of Big Food and the self-righteousness NGOs no one seems to question.

I have always wondered why there is this anxiety in the eU around food.

Europe has become the biggest food importer in the world since it reformed the European Common Agricultural Policy. This reform was partly the result of international trade agreements. Land the size of Germany (35 million hectares, or 86 million acres) is needed outside europe to feed europeans. The result is that europe has taken arable land out of production year-on-year and we have created a huge protein deficit. It is not that we couldn’t produce these proteins ourselves, but we cannot do it competitively with soymeal. As the EU common agricultural policy no longer allows production support for farmers, we have no other option but to import protein, importing 35 million metric tons of soymeal annually to feed animals.

We reduced arable land use in Europe for another reason. in 2006, under pressure of a World Trade Organization ruling, Europe reduced its sugar production by 6 million tons, equal to 700,000 hectares. A total of 83 sugar refineries had to be closed. Europe was restricted in its sugar exports and mainly Brazil is benefiting from this situation. This 700,000 hectares can be used for growing wheat or corn for ethanol production. it would not impact on land outside the eU, nor commodities for food use.

According to the Food and Agriculture Organization of the United Nations, the EU

is taking 500,000 hectares of arable land out of production each year. Yet, it seems that this is not enough; another 7 million hectares should be taken out of production to boost green farming. At least that is what the european Commission proposed as part of another reform of Europe’s agricultural policy.

All in all, Europe seems to have too much land. in any case, there certainly seems to be enough land to produce biofuels and at the same time reduce the protein deficit via distillers grains.

These land facts, plus the ePA decision, should have an impact on European politicians who are gifted with common sense thinking. The EPA has set a clear example and the eU should follow.

In any case, Europe’s plan to limit conventional biofuel, and even prevent its production beyond 2020, will not change America’s view on its biofuel policy. America’s ethanol is needed to reduce America’s addiction to oil and to become less dependent on the Middle East—considerations Europe doesn’t yet care about.

Author: Robert VierhoutSecretary-general, ePURE

[email protected]


business matters

Co-location Plans Impact Air PermitBy Todd Palmer and Anna Wildeman

Given the state of the economy and the high price of corn, many ethanol producers are exploring cost-reduction strategies, including partnering and co-locating with innovative noncorn feedstock producers and grain storage facilities. These strategies may create excellent opportunities for consolidation and new growth, however, they may also have significant permitting implications pursuant to the federal Clean Air Act and state-implemented air permit programs.

For stationary sources that emit pollutants above certain thresholds, including most ethanol production facilities, the CAA requires permits be issued prior to construction and operation. such permits are typically issued to an individual facility owner or operator and dictate very specific operational, pollution control and recordkeeping requirements. In the CAA, if certain factual criteria are met, two different stationary sources may be considered a single stationary source and regulated as such, requiring each to account for the others’ emissions, construction projects, modifications and compliance determinations.

The test for determining if two facilities should be considered a single stationary source is well-defined in federal and state-delegated statutes and rules. For two facilities to be considered a single stationary source, they must: 1) be on contiguous or adjacent property, 2) belong to a single major industrial grouping, and 3) be under common control by the same entity. (CAA

40 C.F.R. § 52.21(b)(6). In other words, two facilities must satisfy all three criteria before an agency can regulate them as a single stationary source.

The first criteria is not always a straightforward analysis. If two facilities are physically located on contiguous or adjacent properties, then this criteria is satisfied. U.S. EPA guidance has broadened this concept, however, such that two facilities that are physically separated by several miles can nonetheless be considered a single source, if the two are functionally related. Courts have added uncertainty by challenging EPA on this broadened interpretation. Therefore, a source may want to consult with an attorney if two projects are to be separated by less than 20 miles.

The second criteria, belonging to a single major industrial grouping, may appear straightforward, but as with most elements of the CAA, this analysis is complicated by EPA guidance. The Standard Industrial Classification code system classifies facilities to determine applicable federal and state regulatory programs. There are 10 divisions of SIC codes, each representing an industry sector, and within each division are multiple subsets called “Major Groups.” (See www.osha.gov/pls/imis/sic_manual.html for more information on the siC code system.) A plain reading of the second criteria indicates that if two facilities operate under the same siC code, the second criteria is satisfied; and if under different siC codes, it is not. ePA has issued guidance, however, suggesting that the regulator can completely disregard the SIC codes, even if different, and require an

additional “support facility” analysis based on various criteria developed by EPA. Importantly, the “support facility” analysis and criteria have never been promulgated as a rule by EPA; rather, the concept is discussed in a preamble that has never been promulgated as a rule.

The third criteria, common control, requires a more fact-intensive evaluation. To determine if two facilities would be considered under common control, ePA generally relies upon the Securities and Exchange Commission definition, which is “the possession, direct or indirect, of the power to direct or cause the direction of management and polices of a person, whether through the ownership or voting shares, by contract, or otherwise.” This criteria has been the subject of numerous administrative interpretations and judicial decisions, resulting in significant case precedent and EPA guidance. Because this criteria is highly fact-specific, facilities must carefully consider available guidance and should consult with an attorney prior to determining whether two facilities satisfy this criteria.

in summary, ethanol producers considering new partnerships and co-locations must be aware of potential air permitting implications, and resulting operational and management complications that can arise.

Authors: Todd PalmerPartner, Michael Best & Friedrich

[email protected]

Anna WildemanAssociate, Michael Best & Friedrich

[email protected]


People, Partnerships & Deals

BuSINESS BRIEFS

RSB Services Foundation, the implementing entity of the roundtable on Sustainable biofuels, which has developed a Global Sustainabil-ity Standard and cer-tification System for biofuel production, has added John Slade as regional director for business develop-ment in north america. Slade has nearly 20 years of experience in the biofuels industry in north america and asia. He has spent most of his career in the enzyme business. Prior to joining the rSb, Slade served as a strategic consultant for DSm nV, and spent 17 years at novozymes. He has also held positions at cargill inc. and currently holds two biotechnology application patents.

Archer Daniels Midland Co. has named Gary Towne as vice president of ADM Corn Process-ing. towne previous-ly served as chairman of the management board of Alfred C. Toepfer Interna-tional G.m.b.H., a global grain merchan-

dising company that is 80 percent owned by aDm. He also previously served as aDm’s manager of Global Risk and Ethanol. In ad-dition, aDm has named Domingo Lastra as chairman of the management board of ACTI. He previously served as president of aDm South america and as aDm’s vice president of Business Growth.

Highwater Ethanol LLC has added Luke Schneider as its chief financial of-ficer. Prior to joining Highwater Ethanol, Schneider served as chief financial officer for Heron lake bioenergy llc., where he also held a variety of other positions, includ-ing senior accountant and staff accountant. the appointment became effective Dec. 3, and coincided with the resignation of brian Kletscher from the position of interim chief financial officer. Kletscher will continue as the company’s ceo.

Platts, a division of the McGraw-Hill companies inc., has completed its acqui-sition of Kingsman SA, a privately held, Switzerland-based provider of price infor-mation and analytics for the global sugar and biofuels markets. the acquisition will expand Platts’ capabilities in biofuels, pro-vide an entry into the agriculture markets and add skills in fundamental market analy-sis. Kingsman offers a range of daily, weekly and monthly reports covering ethanol, biod-iesel and sugar. as a unit of Platts’ new ag-ricultural group, Kingsman will continue to offer its existing product portfolio under the Kingsman brand led by its founder, Jona-than Kingsman.

industrial enzyme producer No-vozymes and cellulosic biofuel company Beta Renewables, part of Gruppo Mossi & Ghisolfi, have announced an agreement to jointly market, demonstrate and guaran-tee cellulosic biofuel solutions. as part of the agreement, novozymes will acquire a 10 percent share in beta renewables, pay-ing approximately $115 million for the eq-uity, marketing fees, other intellectual prop-erty rights and milestone payments. the two companies will offer customers looking to produce biofuels from agricultural residues, energy crops and other cellulosic feedstocks a combination of novozymes cellic en-zymes and beta renewables’ Proesa engi-neering and production technology.

Slade has worked as a scientist and held sales positions in North America, Asia, india and Australia.

Towne joined ADM in 1997 and most recently led the ACTi organization.


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Evogene Ltd., a developer of im-proved plant traits for the food, feed and biofuel industries, has announced the launch of its Phenomix platform, which utilizes advanced proprietary technologies for the collection, storage and integrated analysis of vast amounts of phenotypic data di-rectly from the field. Through the use of Phenomix, evogene researchers can evalu-ate crop behavior in environments closely resembling growth conditions existing in commercial agriculture. the two key data types utilized by evogene’s infrastructure for improving plant traits are phenotypic and phenotypic. Phenomix provides a direct field-to-computer research communication channel that constantly streams physiologi-cal, structural and environmental data inputs from the field. The platform was success-fully validated in an 18 acre field trial of vari-ous wheat varieties.

Atlas Commodity Markets has an-nounced the promotion of Bob Shults to president of Atlas Commodity Holdings. Shults is a cofounder of the firm, and has been responsible for daily operations and development of its business since July 2006. in his new role, Shults will ensure strategic focus on new opportunities and manage the changing regulatory environment. Prior to founding atlas, Shults served as managing direct of commercial services and a member of the executive management committee for aPX inc. He also served on the board of directors of the environmental markets as-sociation. He has more than two decades of experience in the energy sector in trading, origination, risk management, technology, operations, accounting, regulatory, strategy, project management, and project develop-ment.

Green Plains Renewable Energy Inc. has entered into an asset purchase agree-ment to sell 12 grain elevators located in northwestern iowa and western tennessee to the Andersons Inc. the sale involves approximately 32.6 million bushels, or 83 percent, of its agribusiness storage capacity and all of its agronomy and retail petroleum operations. the estimated sales price for the facilities and certain related working capital is $133.1 million, including the assumption at closing of term debt of approximately $28.3 million.

RC Fuels has announced the addition of Rex Roehl as its business development director. in his new position, roehl will fur-ther develop the company’s growing port-folio of national and regional accounts for its rich yeast product portfolio. Prior to joining rc Fuels, roehl served in business development and asset management roles at indeck energy Services. He has also served on the boards of several ethanol plants for indeck, including big river resources and Highwater ethanol. rc Fuels’ rich yeast is a proprietary product designed as a drop-in replacement for conventional yeast for fer-mentation that reduces the need for prepro-cess enzymes, reducing production costs for a typical plant.

the U.S. Grains Council has an-nounced the official approval of the Synge-nta corn variety mir 162 agrisure Vipterra in the EU, opening the door for exports of U.S. distillers dried grains with solubles. The decision came after years of industry leader-ship and efforts, especially those partners of the USGC in the EU, including COCERAL, FeFac and the irish Feed millers associa-tion.


Nov. 26—Two notable developments emerge, looking back at the year just closed. First, natural gas prices hit a 13-year low in the spring of 2012 with nymeX prices un-der $2 per mmbtu. the price collapse was driven by a combination of record-high natural gas production volumes and anemic demand due to soft weather-related demand over the winter and continued lagging in-dustrial demand. as the accompanying chart shows, the industry exited winter with storage inventory levels drastically higher than five-year average levels, fueling concerns that ex-isting production would have to be curtailed by late summer if storage facilities filled and there was no place for natural gas production to go. this potential outcome is shown by the broken black line that assumed inventory builds would follow historic patterns. this

fear pushed prices down close to variable operating cost levels in anticipation of stranded supply.

the second develop-ment is tied to the first. With low natural gas prices, demand was stimu-lated. both industrial us-ers and electric generators that had burned coal as a primary fuel source for years found that natural gas was now cheaper. as industrials and electric utilities switched to natural gas, demand picked up significantly. the chart shows that post-spring storage in-ventories built at a much slower rate than the five-year average fill rate due to higher de-

Natural Gas Report

Corn Report

2012 saw record low prices, increased demand By CASEy WHELAN

Corn market vulnerable to South American developments By JASON SAGEBIEL

COMMODItIES REPORT

Nov. 26—The corn market is trying to balance this year’s short supply with po-tentially big plantings next spring. corn de-mand could be impacted by higher prices as the rationing began in earnest early this past summer. For example, corn exports sales this marketing year have been 470 million bushels compared to 860 million bushels last year at this time, with the USDA projecting export demand at 1.150 billion (bln) bushels. as a result, will the current corn carry-out of 647 million bushels increase as the marketing year continues? Overall the USDA has ethanol corn consumption at 4.50 bln bushels. etha-nol production in this corn marketing year can justify the current rate. livestock feed-ing leaves corn demand at 4.15 bln bushels. therefore, with total demand at 11.167 bln bushels, and a supply of 11.814 bln bushels, the U.S. corn carry is projected today at 647 million bushels.

now with world carry-out sitting just under 119 million metric tons compared to 132 mmt last year, one must understand the potential impact of argentina and bra-zil weather. any production concerns will leave this market vulnerable to sharp and violent price swings. the tight world soybean situ-ation can easily im-pact corn direction during the Southern Hemisphere grow-ing season.

in addition to the concerns above, U.S. producers have been slow to move corn into the pipe-line after harvest.

Traders will be keeping an eye on the U.S. and global economy while evaluating the potential wheat crop in the hard red winter wheat areas.

US Corn Exports (million bushel)

1000

1200

1400

1600

1800

2000

2200

2400

2600

83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

Source: USDA

mand. a supply crisis was avoided and natu-ral gas prices rose during most of the sum-mer season. interestingly, natural gas prices are now roughly double the level experienced last spring.


DDGS Report

Ethanol Report

DDGS supplies adequate on weak demand By SEAN BrODErICK

Ethanol supplies move in wide ranges By rICK KMENt

COMMODItIES REPORT

DDGS Prices ($/ton)

LOCAtION JAN 2013 DEC 2012 JAN 2012

Minnesota 240 260 195

Chicago 258 278 227

Buffalo, N.Y. 250 285 232

Central Calif. 312 324 260

Central Fla. 280 308 223sOURCe: CHs inc.

Natural Gas Prices ($/MMBtu)

LOCAtION NOV 26, 2012 NOV 1, 2012 DEC 1, 2011

NYMeX 3.74 3.47 3.36

NNG Ventura 3.65 3.83 3.53

CA Citygate 3.68 3.81 3.81

SOURCE: U.S. Energy Services Inc.

regional Ethanol Prices ($/gallon) Front Month Futures (AC) $2.392

rEGION SPOt rACK

West Coast $2.535 $2.750

Midwest $2.385 $2.700

east Coast $2.485 $2.891SOURCE: DTN

regional Gasoline Prices ($/gallon) Front Month Futures Price (RBOB) $2.744

rEGION SPOt rACK

West Coast $2.848 $2.968

Midwest $2.770 $2.812

east Coast $2.810 $3.216SOURCE: DTN

Corn futures Prices (Mar. Futures, $/bushel)

DAtE HIGH LOW CLOSE

NOV 26, 2012 7.57 7.46 7.51 1/4

OCT 26, 2012 7.46 1/2 7.39 7.39 3/4

NOV 26, 2011 6.00 3/4 5.88 1/4 5.90sOURCe: FCstone

Cash Sorghum Prices ($/bushel)

LOCAtION NOV 21, 2012

OCt 19, 2012

NOV 28, 2011

superior, Neb. 7.14 7.27 5.77

Beatrice, Neb. 7.04 7.21 5.62

sublette, Kan. 7.22 7.31 5.67

salina, Kan. 7.21 7.39 5.99

Triangle, Texas 7.48 7.19 5.56

Gulf, Texas 7.36 7.24 6.70

SOURCE: Sorghum Synergies

u.S. Ethanol Production (1,000 barrels)

PEr DAy MONtH END StOCKS

seP 2012 817 24,511 20,044

AUG 2012 845 26,194 19,369

seP 2011 886 26,588 18,465SOURCE: U.S. Energy Information Administration

Nov. 26—The impact of Hurricane Sandy and winter storms in the north-east created some wild and unexpected reactions in the ethanol market. the chal-lenge of returning to normal for many in new york and surrounding states caused a swift and strong decrease in ethanol inventory levels through the first half of november. this also started a yo-yo effect through the market, creating ad-ditional build-up in overall supplies just before the thanksgiving holiday, with to-tal ethanol stocks 8.5 percent higher than last year. this could add challenges in the ethanol market through the first half of 2013 when demand for gasoline and etha-nol starts out extremely sluggish across the country. The inability to significantly reduce inventory levels on a consistent

basis, even with total ethanol production trailing 2011 levels, may create additional long-term pressure on the industry and keep overall plant margins extremely thin, if positive at all.

the corn market softened after harvest and it appears nearby prices will remain comfortable in a narrow-to-mod-erate range between $7.20 and $7.50 per bushel. this will likely keep ethanol plant margins either in the red or extremely nar-row for the foreseeable future, and may continue to limit overall production levels. Unless a significant shift is seen before the end of the year, the industry is expected to carry large inventory levels and steady production into 2013. this may create the same concern over an “ethanol glut” that cast a shadow over the first half of 2012.

Nov. 26—Just before Thanksgiving, DDGS prices had dropped from the pre-vious month. export demand, particularly from the container market in chicago, was down significantly, mostly due to DDGS prices being well above the price of de-livered corn. as the weather gets colder and more cattle go into the feedlot, we normally start to see domestic demand start to pick up this time of year, which we are starting to see now. Feeding margins are mildly positive, a contrast to ethanol margins, which are negative to break-even. With most plants running at full produc-tion, it does not appear as though DDGS supply will be compressed.

looking ahead, several factors will af-

fect DDGS prices, corn supply being fore-most. Water levels on the mississippi that are near historic lows are likely to impact Gulf exports. Asian demand, especially from china, needs to pick up from what it is now. We are keeping our eye on their new mandate requiring U.S. ethanol plants to be registered, which has been an ardu-ous process. South american shipment is-sues will need to improve, or we will be shipping more out of the U.S. Gulf, even if it is higher-priced, because we actually are able to do it efficiently.

overall, though, the market has, and will continue to be, dictated by the overall demand for export containers.

DIStILLED Ethanol News & Trends

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a new report pub-lished by the international energy agency predicts drastic changes in the world energy market. the report, titled “World energy out-look 2012,” indicates that global energy demand will increase by more than one-third by 2035, with china, india and the middle east accounting for 60 percent of the increase. The report also noted that the U.S. is on track to become the world’s largest oil produc-er in the world, becoming a net exporter by 2030.

regarding renewable energy, the iea says that consumption of biofuels and biomass is expected to increase four-fold, with increasing volumes be-ing traded internationally. the report also notes that

global bioenergy resources are more than sufficient to meet the world’s projected biofuel and biomass supply without competing with food production.

energy-related co2 emissions are also expect-ed to increase, from 31.2 gigatonnes in 2011 to 37 gigatonnes in 2035. in response to the report, the Global Renewable Fuels Alliance pointed out that ethanol production alone can reduce greenhouse gas emission by 100 million tons globally.

the global energy map is changing

$250

$200

$150

$100

$50

2011 2015 2020 2025 2030 2035

Global Renewable Energy Subsidies

Electricity 2012-2035 Existing capacity

*Data sourced from International Energy Agency

$1200 billion

$2600 billion

$960 billion

Biofuels 2011-2035

Billion New enzyme offers increased yields

novozymes has launched avantec, a new enzyme for corn-ethanol production. the enzyme enables ethanol producers to increase yields by as much as 2.5 percent.

according to Peder Holk, no-vozymes executive vice president, his company has been working on the in-novation for a significant period of time. With the use of avanec, a typical 100 MMgy ethanol plant in the U.S. could re-duce its corn input from 900,000 tons to 877,500 tons while maintaining its etha-nol production level.

the enzyme was tested during trials at ethanol plants, where yields increased from 0 to 4 percent, with an average in-crease of 2.5 percent. Holk specifies that the amount of residual starch that a plant can convert to ethanol with avantec de-pends on the exact configuration of the plant and other factors.

distiLLed

researchers propose new carbon accounting method

in a recent research paper, Jesper Kløverpris of novozymes a/S and Steffen mueller from the University of Illinois at chicago call for the use of a new method to calculate land use change co2 emis-sions. the new method is referred to as baseline ac-counting.

according to the researchers, indirect land use change (ILUC) models that aim to forecast the global warming impact of bio-fuel production generally incorporate time accounting in a simplistic way to allocate total carbon emitted from affected land to the vol-ume of fuel that is produced. Kløverpris and mueller, alternatively, argue that the accuracy of accounting for time in this type of model is severely limited by the use of the annualiza-

tion approach, which requires arbitrary pro-jections of future biofuel production. the researchers note that the land use emissions estimated using this method fail to incorpo-rate actual land use dynamics.

the approach developed by Kløverpris and Mueller provides ILUC researchers with the ability to isolate the climate impact of biofuel-related land use changes from other land use changes.

Estimated IlUC factors30 years annualization

(g CO2e/MJ)Baseline time accounting

(g CO2e/MJ)Searchinger et al. (2008)Developing world 78 24Developed world 26 6Total 104 30hertel et al. (2010) Developing world 3 1Developed world 24 10Total 27 11

Ontario demonstration plant begins operations

Woodland biofuels inc. began commissioning of its Sarnia, ontario, cellulosic demonstration facil-ity in october. located at the bio industrial innova-tion center, the facility is capable of handling 7.2 metric tons of wood waste per day, which equates to approximately 2,400 metric tons per year.

Woodland biofuels’ thermochemical process is based on its catalyzed Pressure reduction tech-nology. Biomass enters a standard gasifier, where it is processed into syngas. the syngas is then passed through a series of catalyzed chemical reactions to convert it into ethanol.

by late march, the company expects to have gathered enough data to support the development of a commercial-scale facility. Woodland biofuels is initially targeting wood waste as a feedstock, and is looking in Ontario and the southeastern U.S. for the future site of its first commercial facility. “The for-est industry in north america has seen better days,” said Greg Nuttall, CEO of Woodland Biofuels. “there are hundreds of potential sites.”

distiLLed

an interdisciplinary team of 11 scien-tists from seven european countries and the U.S. recently published a paper reviewing food versus fuel and indirect land use change discussions in the international community.

in the study, the authors say they are ap-plying a critical view of the idea of cultivating feedstocks on surplus lands only, because en-vironmental and socio-economic constraints that might restrict the availability and poten-tial of surplus land are often not considered. they also note that there is a lack of a clear definition for surplus land, and uncertainties exist with regard to land availability assess-ments and bioenergy crop yields.

the paper reviews discussions of classes of land considered to be surplus, nature con-servation, indirect land use, water footprint, greenhouse gas emissions and loss of soil

carbon, as well as socio-economic factors. according to the authors, “if the constraints and their implications are assessed properly and accounted for, options for sustainable bioenergy production can be identified and developed.”

Scientists call for sustainable approach to bioenergy

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Abandoned Marginal

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*Chart sourced from “Bioenergy from ‘surplus’ land: environmental and socio-economic implications.”

edeniq inc. has begun engineering and con-struction on a bagasse-to-sugars demonstration-scale facility in brazil. the project is being com-pleted in partnership with Usina Vale, a Brazilian sugar and ethanol producer. the new facility will be located with Usina Vale’s operations in the state of São Paulo.

the demonstration plant will produce cellu-losic sugars from bagasse feedstock. the extracted sugars will be converted into ethanol to demonstrate how sugarcane mills can increase ethanol produc-tion economically with edeniq’s cellulosic technol-ogy. once complete, the demonstration facility will be capable of talking in 20 tons of bagasse per day.

the companies successfully completed a feasi-bility study to evaluate the economics of integrating edeniq’s technology at the ethanol plant. Follow-ing the study, a collaboration agreement was signed, which applies to the joint funding of the demon-stration facility. edeniq also owns and operates a 2 ton per day pilot plant in Visalia, calif.

Edeniq develops cellulosic demonstration

distiLLed

more than 200 attendees from 30 countries attended the 2012 export exchange in minneapolis. Geoff Cooper, vice president of research and analysis at the renew-able Fuels association, was one of several speakers to address distill-ers grains at the event. For some, it’s all too easy to lose sight of the significant contributions made by ethanol’s corn coproducts used as feed ingredients, cooper said.

“the american ethanol indus-try produced nearly 39 million tons of nutrient-dense animal feed in the 2011-’12 marketing year, meaning the ethanol industry has surpassed the U.S. soybean crushing industry in terms of feed production,” cooper said. Due to this year’s drought, corn production decreased. less distillers grains will also be produced.

Ron Gray, secretary and treasurer of the U.S. Grains Council called distillers grains a “major suc-cess story,” noting that 25 percent of U.S. produc-tion has been exported in recent years.

Exports Exchange calls DDGS a major success

a customizable calculator developed by University of Illinois agricultural economist madhu Khanna is designed to help farmers ac-curately estimate the costs and benefits associated with switching from the cultivation of traditional crops to the cultivation of biomass energy crops. after selecting a baseline crop, the users provide specific information about expenses, yields and inputs to generate specific results.

“it’s an information dissemination tool,” Khanna said. “the calculator allows farmers to put in their own parameters. they can customize the costs based on what their current farming op-eration looks like, what their current returns are on the land that they are thinking about convert-ing, and learn what it would cost to grown an en-ergy crop on it instead. they can decide at what price it might be feasible for them to produce an energy crop. What is the minimum price they would need in order to make it worthwhile?”

tool helps determine the cost of feedstock cultivation

ddGS Price Table: Nov. 16, 2012 ($/MT)(Quantity, availability, payment and delivery terms vary)

delivery Point (Quality min. 35% Pro-fat combined) dec. Jan. Feb.Barge CIF New Orleans 325 323 324FOB Vessel Gulf 333 333 333Rail delivered PNW 339 341 342Rail delivered California 331 334 334Mid-Bridge Laredo, Texas 317 321 32140 ft. containers to south Korea (Busan) 351 351 35740 ft. containers to Taiwan (Kaohsiung) 349 348 35440 ft. containers to Philippines (Manila) 365 366 37240 ft. containers to Indonesia (Jakarta) 362 362 36840 ft. containers to Malaysia (Port Kelang) 362 362 36840 ft. containers to Vietnam (HCMC) 363 363 37040 ft. containers to Japan (Yokohama) 356 356 36640 ft. containers to Thailand (LCMB) 360 361 36740 ft. containers to Shanghai, China 348 349 354KC & Elwood, Ill., railyard (delivered ramp) 290 397 299*Data sourced from U.S. Grains Council


QuaLity controL


QuaLity controL

An in-house ethanol plant laboratory staffed with qualified, well-trained personnel is an indispensable edge in tough times.By HOLLy JESSEN

Measurable

Quest for data Lindsay Kuhn, lab manager at Homeland Energy Solutions LLC, works in the 140 MMgy ethanol plant’s laboratory.

PHOTO: JOHN C. THOMAs, FisHeYe

Success

From a square-footage point of view, a typical ethanol plant laboratory barely registers in the overall scheme of things. it’s a clear case of looks being deceiving, however, because its impact on the bottom line is anything but trivial.

Kevin Howes, plant manager of Homeland energy Solutions llc, views the in-house laboratory at the lawler, iowa, ethanol plant as a crucial piece in the com-pany’s success. “We view the lab as the third leg of the operational stool, the other two being maintenance and production,” he says. “all three are a necessity to have a functional operation. … if one is missing or broken you will fall.”

improving ethanol plant yield begins with data gathered in the lab, putting the lab manager and lab technician, who work full time at Homeland, in the front lines of protecting profitability. “At today’s corn prices, if you could improve your etha-nol yield by 0.01 gallon of ethanol per bushel of corn ground, a 100 mmgy ethanol plant could positively impact their bottom line by $1 million,” he says. “everything


QuaLity controL

from a simple slurry pH measurement, to fer-mentation [high-performance liquid chroma-tography] HPlc readings, through moisture measurement in the final denatured ethanol can impact this number.”

the way to get there is through data in-tegrity or placing the utmost importance on quality control. “the lab must generate timely, accurate information in order for the right decisions to be made to maximize the plants profitability,” Howes says. Making sure lab in-struments are calibrated correctly to give prop-er readings can have a big impact but is often overlooked, he added.

Data integrity is crucial at a research fa-cility like ncerc but it’s no less important at production plants, says Sabrina trupia, as-sistant director of biological research at the national corn-to-ethanol research center. She makes the argument that the ethanol plant lab’s ability to positively influence profitability is linked to whether it is staffed with qualified and well-trained employees. that’s going to be the company’s first line of defense in keeping yield at optimal levels, trupia says. For example, a lab that utilizes the right tests and recognizes a stuck fermentor early on won’t have to add additional antibiotics, yeast or enzymes, which can be costly. not catching it on time could result in lower quality distillers grains as well as a loss of efficiency. “In this day and age, where

it is a really knife edge where a plant makes it or breaks it, it’s even worse,” she says. Howes agrees, adding that, “in today’s environment of very tight crush margins, there is no room for error.”

Susan Scherlinger, the lab coordinator at Show me ethanol llc, a 55 mmgy plant in carrol-ton, mo., also talked about the lab’s role in holding the line on input costs and yield. additionally, the lab provides checks and balances to ensure the company doesn’t send out off-spec product to its customers, she says.

Having a quality control program in place is essential, says Wayne Mattsfield, manager of analytical and microbio-logical services for the Ethanol Performance Group, part of Phibro-chem. He spoke about the topic in october at the fifth annual Fuel Ethanol Laboratory Con-ference, put on by Midland Scientific Inc. He

recommends the use of data quality objectives, a process in use by industries and government organizations. it helps labs determine what’s needed in data quality and the number of data samples, based on internal measurements of

Sharon Kipp, lab technician, takes a sample at Homeland Energy Solutions LLC.

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precision and accuracy. in some cases, the data might not need to be so precise, while other situations require careful accuracy. “if you don’t have a [quality control] program, there’s really no way to determine that—how good the data happens to be—and therefore, you may not be able to monitor processes well,” he said.

Beefing It Up ethanol producers searching for ways to

improve their lab operations have a variety of options. ncerc, which is located 20 miles from downtown St. louis, offers training for ethanol plant lab employees. Wherever training is completed, it is best accomplished in three stages, trupia says. initially, it’s about exposure to lab procedures, followed by active demon-stration and, finally, hands-on training. She has identified three intersecting components for successful lab staff: performance, understand-ing and communication.

Performance refers to their ability to put out reliable analysis and data with fewer sam-ples needing to be re-run and less time spent on each test, Trupia says. “If they are qualified, they know how to do it, they know how to do it well, they make fewer mistakes and they know that the data is reliable,” she says.

Understanding the process is another significant factor in ethanol plant lab success. to illustrate this, trupia recounts working with interns at ncerc. yes, they might be able to complete tasks in the laboratory after someone else sets everything up for them. but without understanding how the instrument works, what the data is used for and even the ethanol production process, they are at a disadvantage. “they can’t just push buttons,” she said, add-ing without understanding the process, a lab worker is unable to recognize or troubleshoot any problems that develop.

Finally, lab staff must be able to commu-nicate what’s discovered in the lab to opera-tions. that means passing on the appropriate information, including more than just data val-ues, she said. a past ncerc intern completed a master’s thesis on improving communication between the lab and the ethanol plant and concluded that in order to respond quickly to changes in plant conditions, communication must be constant.

Scherlinger agrees that training is very important. She has been working at Show me ethanol since the plant started up in 2008, and was promoted from within because she had previous lab experience. the company is very good about sending her to conferences and training sessions and makes it clear that lab is a vital part of its daily operations. “they come to you with a lot of questions,” she says.

Iowa-based Efficient Green Energy also aims to help the ethanol industry improve lab operations. the startup company was launched in June, at the 2012 international Fuel etha-nol Workshop & expo, on the premise that lab data is vital to improving yield. “We've seen a lot of variation in industry practice and firmly believe the companies who focus on the insight lab data provides are the ones who continue to succeed in our current operating environment,” says brian Steenhard, president of the company.

the company sees a gap in the ethanol in-dustry’s ability to harness lab data to make op-erational decisions. a crucial factor is the lab’s ability to capture accurate data. in fact, one of the first things done, when beginning work with a new ethanol plant, is to go through the facility’s records as far back as they exist, scrub-bing it for errors. this helps identify meaning-ful relationships. “Without accurate data, it’s hard to make good, sound operational deci-sions,” he says, “so our first step in the process is just to make sure that the data is cleaned up and as accurate as possible.”

Efficient Green Energy also provides training for lab staff. all lab staff, whether they are new employees or seasoned lab workers, can benefit from additional training, Steenhard says, adding that there’s a varied amount of ex-pertise at work in ethanol plant labs. that can range from employing lab managers or tech-nicians to simply utilizing operational staff, or


‘We've seen a lot of variation in industry practice and firmly believe the companies who focus on the insight lab data provides are the ones who continue to succeed in our current operating environment.’— Brian Steenhard, president of Efficient Green Energy

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some combination of all three. the company’s training program focuses on helping employ-ees understand the theory behind various lab tests and the path to optimal yield improve-ment, not just how to complete the tests.

On the data management side, Efficient Green Energy can offer ethanol production plants Ferm Up, its trademarked web-based data collection software. the company has also started a benchmarking program, specifi-cally for ethanol plant labs. the ethanol indus-try is still evolving and it’s valuable to have the opportunity to talk to others in the industry about things such as chemical trials and recipe variations. “the industry needs those types of relationships, so that we can continue to promote ethanol as a viable alternative to gas-oline,” he says.

Mattsfield recommends that compa-nies take advantage of training opportunities through local technical colleges or universities as well as attending relevant conferences and seminars. like other companies, Phibro offers training at the plant or in the company’s St. Paul, minn., location. He emphasizes the posi-tives of participating in proficiency sample programs, which can help an ethanol plant lab identify areas for improvement. one example is a round robin, in which a sample is split up among several different participants. each lab analyzes the sample and the data is pooled for statistical examination, which reveals to each participant how close they came to the statis-tical mean. Phibro recently started a HPlc round robin among ethanol producers. “it’s just another way for laboratories to check to see how they fare against another laboratory statistically,” he says.

overall, he’s impressed with the ethanol plant lab staff he has met. “they are always eager to expand their knowledge and improve their processes,” he says. the bottom line is that every lab should have an ongoing aim for advancement. “there is a place for improve-ment in any laboratory, whether it be a well-established laboratory in industry or govern-mental laboratory,” he said.

Author: Holly JessenFeatures editor, Ethanol Producer Magazine

701-738-4946 [email protected]

Source: IcMCopyright© 2012 DuPont. All rights reserved. Dupont™, Genencor®, and the Leaf Globe are trademarks or registrered trademarks of E. I. du Pont de Nemours and company or its affiliates.

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Q & a

Keeping Corn Plus in the Sweet SpotCourtney Trask talks about the vital role her vendors play in maximizing plant yield and how she and her team manage a dizzying amount of daily operational data. INtErVIEW By tIM POrtz

Calculating the current ethanol yield at Corn Plus LLLP is Courtney Trask’s first duty when she reports to work at the 49 MMgy facility in Winnebago, Minn., each morning. as lab manager, trask moni-tors pH and glucose levels, temperature and yeast health plantwide, all with an eye toward achieving maximum ethanol production. in her perpetual quest to optimize corn Plus for ethanol, DDGS and corn-oil production while keeping bacterial infection at bay, the South Dakota State University graduate enlists the help of vendors, co-workers and peers she has met at industry events.

When and where did your interest in science begin?

Growing up on a cattle ranch in Western South Dakota gave me exposure to science at a young age. When we would treat our cattle or calves i was always a little curious about how the treatment actually worked. i knew as soon as i entered high school that i wanted to attend col-lege to earn my doctorate degree in pharmacy. as my college career began, my plans didn’t quite work out so i decided to go with the next science-based degree that i had a strong inter-est in, which led me to receive my (bachelor of science) in microbiology. i had no idea that my interest in microbiology would lead me to the places that it has in my career.

What were your first days as a lab manager like?

The learning curve was definitely steep. there is a lot to learn, and it can sometimes be overwhelming. I relied—and still do—heavily on my fellow employees, as well as vendors, to

help decrease that overwhelm-ing feeling. i attended several industry events right away and had the opportunity to cre-ate relationships with other lab managers in the industry. these relationships have also helped me become more fa-miliar with the field and have al-lowed me to make more informed decisions.

Talk a little about the counsel your vendors provide and how you utilize it as you go about your day.

the ethanol process is monitored using a combination of high performance liquid chro-matography (HPlc), pH, brix, temperature, and yeast counts. our fermentation process is also monitored every six hours, which means that each of the variables is different for each time during fermentation. our vendors have been extremely helpful in sorting out which in-formation is the most important to keep an eye on as well as what the numbers should look like at each hour. they have also been able to quickly analyze our data when our plant is struggling. our HPlc rep has also been a huge help with assisting me in understanding our HPlc software to ensure we are getting accu-rate numbers. i also use my vendors when our plant is experiencing something that i haven’t seen before; their knowledge is vast because they work with so many plants.


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In the sea of numbers you are constantly measuring and analyzing, what is the one number you look at first each morning?

ethanol is what we were built to do, so that is definitely the number that I look at first. if these numbers are lower than i like to see, i begin looking at the multiple variables that can cause a fermenter to not finish with the desired amount of ethanol. The first variable that I turn to is glucose. this number is important in judg-ing how well the fermenter performed because yeast utilizes the glucose to produce ethanol. this means that if the glucose number is high, the yeast could have utilized more of the glu-cose to produce more ethanol. When this is the case, then i start looking into the multiple fac-tors that could cause yeast stress. it is indeed a very data-driven process, and it’s an important part of my job to use the available data to make decisions about the performance of the plant.

How much variance do you experience in the data you measure each day? Do your yields fluctuate quite a bit?

Our yield does fluctuate more than I would like to see. there are just so many variables that are involved, that it can sometimes be difficult to determine where the problem may be com-ing from. it isn’t uncommon to make several changes before you find the root cause of the problem. i do believe that as the plant becomes even more data-driven and as i become more comfortable with analyzing the data that the plant will begin to run more smoothly, and it will be easier to narrow down the source of the problem.

Do you see patterns emerging in the variations you see in the lab? Are there certain points in the process that end up on a short list of usual suspects?

Patterns do tend to show up in the lab data. We like to say in this industry that “trends are your friends.” they often help to determine the source of the problem. There are definitely things that end up on a short list of usual sus-pects. These things are often verified by the trends that we see in the data.

What can you tell me about the samples pulled from the plant each day?

We have nine fermenters here at corn Plus. currently seven of those fermenters are online, and being tested every six hours. this means there are roughly 15 to 20 fermenta-tion samples per shift, which means there can be close to 40 fermentation samples every 24 hours. this is only our fermentation samples. there are also multiple samples that the lab as well as the operators take every few hours or at least once daily to ensure that the plant is run-ning smoothly.

Can you explain what happens in a bacterial infection at an ethanol plant?

bacterial infections are most often caused by some type of dead leg in the process which is an area that cannot be properly cleaned. the corn mash can sit in this area, which just so happens to be the perfect pH, temp, and food source for bacteria growth to flourish. This can also be caused by improper cleaning, weak clean-

ing solution, or a multitude of other variables. From a microbiologist standpoint, i learned this piece of advice from a vendor just recently. if you have a pocket or dead leg of bacteria with a total cell count of 108, it only takes 1 gallon of that high bacterial contaminated mash into 1,000 gallons of clean mash to turn the clean mash into a 105 environment. in this industry, anything 105 or higher is considered an infec-tion, so 1 gallon of infected mash can create a high risk environment early in fermentation.

It seems there is a sweet spot you are working to achieve and maintain from a production standpoint. Is this difficult to hold, or are you simply making minor adjustments to hold that position once it’s established?

There is definitely a sweet spot that we would like to run and i feel that we will get to a point where we can make only minor adjust-ments to keep within the sweet spot parameters. Our situation is difficult right now because we have implemented so many new things at the plant in the past few months. i strongly believe that the more and more comfortable we get with the new equipment the easier it will be to maintain the sweet spot for good production. i also understand that stuff happens and there will more than likely always be a threat for a situation to occur. the best we can do is be-come knowledgeable about the decisions that we make, and above all make decisions based on data.


fermentation

Polluted Sample A florescence microscope illuminates a sample of round yeast cells contaminated with rod-shaped bacteria.

SOURCE: JOSEPH KALKWART, LALLEMAND


fermentation

Keeping bacteria in check for quality fermentations requires close attention to hygiene.By SuSANNE rEtKA SCHILL

an old-time plant manager once said he could tell there was trouble brewing by the smell when he arrived at the plant in the morning. a sudden contamination event causing that distinctly sour smell is often a relatively straightforward problem to solve. “in a transient contami-nation, you might see something suddenly happen from one fermentation to the next, something suddenly dropped or changed and it’s raising alarm bells in the process control system,” explains Graeme Walker, scientific director of the Etha-nol Institute and professor of zymology at the University of Abertay in Scotland. “that might point to some contaminated material coming in, or something that an operator has done by mistake, perhaps leaving some cleaning solution in the fermentor.”

FermAssurAnce


the bigger challenge to the quality con-trol team at an ethanol plant is spotting a chronic contamination well before it becomes an issue. the root problem can be ingrained in the process, Walker suggests, most likely re-sidual contaminants that have been there quite a while, resistant to normal cleaning routines. “that’s the chronic situation that can be more difficult to identify and do something about,” he explains. “a chronic contamination gradu-ally builds, showing up in small incremental changes in the process. the chronic contami-nations would be a buildup of biofilms of contaminant bacteria in pipework, for exam-ple. These are difficult to remove because they are in the nooks and crannies where automatic cleaning systems won’t remove them.”

Biofilms are ubiquitous in industrial plants, he adds. “most living micro-organisms in nature exist in biofilms attached to surfaces. certainly in the human body, bacteria stick to tissues in the body in the form of biofilms,” he says. “and, keeping the medical analogy going, bacterial biofilms are notoriously diffi-cult to treat with antibiotics and anti-infective drugs in a hospital environment. it’s a similar scenario in an industrial environment. if you

get a buildup of biofilms, you may occasion-ally kill just the upper surface of the biofilm cells but the ones that are deep-seated can be more resistant to antimicrobial agents.”

bacteria are a problem for ethanol pro-ducers because every molecule of acetic or lactic acid produced by a bacterium means there’s one less molecule of ethanol produced by yeast. bacteria grow very quickly in the right environment, doubling every 15 minutes to an hour, Walker says. thus, theoretically, a single cell can multiply to more than a million (1 x 106) cells in five hours and to 2.8 x 1014 cells in 12 hours. the single most important tool in an ethanol plant’s arsenal to limit that exponential growth is a microscope. “even fairly rudimentary microbiological monitor-ing is helpful,” Walker says. “by that i mean you don’t have to have a PhD in microbiol-ogy working in your plant, but with relatively simple training you could get people to pro-vide useful information.” Gram stains, slide cultures and direct microscopy can be used to detect bacteria in samples and, by using cer-tain dyes, can provide additional information on viability, morphology and identity of bac-terial contaminants. there are also a number

fermentation

looking Good An example of clean yeast is shown with a fluorescence microscope, equipment that offers ethanol plant laboratories some advantages. A single sample can be run in minutes and an entire ethanol plant’s worth of samples can be run in “just a couple of hours,” according to Joseph Kalkwart, technical sales representative with Lallemand Biofuels and Distilled Spirits. When special dyes are used, dead or living bacteria can be distinguished.SOURCE: JOSEPH KALKWART, LALLEMAND


of rapid tests, such as bioluminescence meth-ods where swabs can be used to take samples from tank walls and quickly show contamina-tion using the accompanying luminometer.

cleanliness is crucial to avoid contami-nated fermentations, Walker stresses. “that means you’ve removed the vast majority of unwanted organisms.” but with ethanol plants providing the ideal environment for micro-or-ganisms—ethanol-producing yeast being the good and bacteria the bad—monitoring the levels of residual bacteria becomes the goal. “things to look out for include the consis-tency of alcohol production and yields from week-to-week and month-to-month,” he says. “if things are beginning to show a downward trend that might point the finger at the levels of hygienic cleanliness in the plant, and the fermentation vessel particularly.”

Spotting Incremental Changein addition to watching for downward

trends, ethanol producers need to know their baseline numbers, stresses chris richards, global sales manager for lallemand biofuels and Distilled Spirits. He’s part of the lalle-mand team troubleshooting fermentation is-sues and doing hygiene audits at ethanol plants. “you have to know what your plant normally does when it is running well,” he says, “so you can tell the difference when it is not.” there can be quite a variation from plant to plant in those baseline numbers. a plant’s quality con-trol team can monitor ethanol yield trends as one baseline indicator. if yields begin to drift lower, it’s time to look for issues in plant sys-tems that can include issues with grind, with enzyme dosing or distillation inefficiencies. For fermentation quality assurance, increasing organic acid levels are a prime indicator of in-creasing bacterial contamination.

While the contamination may first be spotted in the fermentor—where any bacteria in the mash have many hours to multiply—the

fermentation

Contaminating dead legsEthanol plant quality control teams need to periodically inspect for dead legs and other places where bacteria can escape cleaning solutions. A rule of thumb is that the length of any pipe extension used for sampling or a tank connection should be limited to the diameter of the main pipe where the cleaning solution flows through, says Chris Richards of Lallemand Biofuels and Distilled Spirits, who conducts ethanol plant hygiene audits, among other duties. The turbulence during cleaning will effectively clean the connected pipe only that far.

hidden Places Removing lines no longer in use reduces potential for contamination.

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source may be elusive. “you can have a con-tamination from a fill line or heat exchanger that only shows in the fermentor because the mash only remains in the heat exchanger for a few seconds or minutes,” richards explains.

multiple samples need to be gathered from as many places as possible and analyzed, using one of several methods, such as titra-tions, high-performance liquid chromatog-raphy (HPLC) or fluorescence microscopes. the samples need to be re-analyzed after sev-eral hours to determine if bacteria are grow-ing. an increase in the organic acids, or other indicators being tested, indicates a possible source of contamination.

Sometimes the sources of chronic con-taminations are structural. many plants were engineered for mechanics and cost effective-ness and not necessarily optimized for hy-giene, richards points out. Furthermore, when changes to a plant are proposed, the economic and process impacts are well studied, while the hygienic implications can sometimes be over-looked. He recommends that a plant’s quality control team systematically select areas of the plant to review in detail, looking at each line connection and valve. “look at the product running through the branch or line and assess the risk to the process by looking at the type of product, frequency of cleaning and normal temperatures,” he says. look for and eliminate dead legs—lines that are no longer in use, or perhaps used only occasionally—and make sure that there is no potential for bacterial contamination to move into the process. an ongoing project for every plant should be to optimize the pipework, he adds. Key things to look for include verifying internal weld sur-faces are polished, making sure valves aren’t positioned too far from the T and finding any pipe runs with low points that are not drained. each tank and all heat exchangers need scru-tiny as well, using the same sort of logic as applied to pipework, richards advises.

While plants can’t change design easily, a good set of standard operating procedures can be designed to optimize hygiene. “Find key performance indicators that can be used to monitor effectiveness,” he says. clean in place (ciP) procedures need to be reviewed to make sure the fluids are at the proper tem-peratures, the correct cleaners are used, the

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lurking Problems A blanked line on a fermentation outlet is an example of a dead leg where contaminants can hide.

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cleaning head is matched to the ciP cycle time and that the head is rotating properly. it can be easy to install a new cleaning head and not re-member to make the appropriate adjustments, he adds. a rotating head with off timing can result in a significant portion of a tank not be-ing properly cleaned.

Decisions to slow throughput could be problematic as well. A simplified example would be to slow the flow in the plant by 50 percent. “What are the implications of this from a hygienic point of view?” he asks. if the turbulence in the pipes and heat exchanges is reduced, particles are less likely to stay in sus-pension, he suggests, and deposits are more likely to form. cleaning protocols may need to be adjusted to insure those deposits are flushed out.

What’s an Acceptable Loss? So, if bacteria are ubiquitous and plant

design sometimes works against thorough hy-giene, how clean is clean enough? “We have to be realistic, alcohol plants are not pharmaceu-tical, they are not going to be sterile,” Walker says. “it’s a case of keeping an eye on the pro-cess and monitoring potential contaminating microorganisms. it’s going to be impossible to completely, 100 percent, remove them. as long as plant managers are able to live with what might be there, and it is not deleteriously affecting the yields and the process to a huge extent, that’s probably going to be okay.”

mike ingledew, professor emeritus at the University of Saskatchewan who preceded Walker as the scientific director of The Al-cohol School, suggests that even low, 1 to 4 percent losses in well-operated plants adds up to serious money. running his calculations a year ago, with 209 plants in the U.S. producing 14.76 billion gallons, Ingledew figured a 1 to 4 percent loss amounted to between 147 mmgy to 588 mmgy for the industry as a whole. With ethanol at $2.20 per gallon, that would add up to an average loss per plant ranging between $1.5 million to $6.2 million per year, all at low infection levels.

the move towards decreased antibiotic use has increased the chance for infections, ingledew adds. “in my view, unless some-one finds new antimicrobials that act at low concentrations to kill or prevent growth of

contaminant microbes, the industry's only re-course might become cleaning and sanitation of all vessels and ancillary equipment prior to addition of almost sterile mash and the add-ing of culture yeasts with very few contaminat-ing microbes,” ingledew says. “this cleaning and sanitation technology is already used in the dairy and brewing industries, but is more expensive and would reduce profits signifi-cantly.” Dairies and breweries use things like caustic cleaning solutions, descalants, sodium

hypochlorite, iodophors and hydrogen perox-ide to sanitize. “it will take such measures to eliminate the use of antibiotics, yet remove in-herent contamination at decent cost,” he adds. “Serious microbial audits in the plant will be-come commonplace.”

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fermentation


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Jim Borchart612-363-0279 | www.borchartsteel.com

BORCHART STEEL INC

FOR SALE

www.bbiinterna�onal.com866-746-8385 | service@bbiinterna�onal.com

Consulting Services

Projects don’t have room for error. Through careful analysis and due diligence, the informa�on and answers BBI Consul�ng Services will provide, can allow you to move your project forward without errors. As experts, we have the experience, the support team and the knowledge to make sure it’s done right.

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Introducing effi ciency on a whole new level. New EnogenTM trait technology. It drastically reduces slurry viscosity, which signifi cantly increases solids loading. And that dramatically improves throughput by 10% while reducing water and energy cost 8%-10%1. Learn more about how Enogen can change your world at 877-4ENOGEN. www.enogen.net

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NEC EARLY-BIRD AND HOTEL DEADLINES NEARING! $100 Discount on Registration and Hotel Room Block Expire January 19, 2013

Visit NationalEthanolConference.com for more information

FEBRUARY 5-7, 2013 WYNN LAS VEGAS | LAS VEGAS, NEVADA

Documents

January Ethanol Producer Magazine