July 2015 Ethanol Producer Magazine

www.ethanolproducer.com

JULY 2015

INSIDE: ETHANOL COOKSTOVES FIGHT POLLUTION, DEFORESTATION

Page 28

BOOSTING SHELF LIFEPage 28

Antioxidant Addition Protects Distillers Grains, Corn Oil

Page 34Page 34

New Coproducts Wait in the Wings

Page 40Page 40

Consumer-Driven ChangesTo Food Chain Impact DGs

2015: THE YEAR OF

THANKS FOR BEING SOME OF THE FIRST RETAILERS TO OFFER E15.

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renewable fuels. They offer consumers a choice and savings at the pump, while investing in a homegrown industry

that supports farmers across the country.

Together we’re making progress toward the next generation of sustainable, renewable fuels.

Learn more at GrowthEnergy.org/E15

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4 | Ethanol Producer Magazine | JULY 2015

JULY 2015 VOLUME 21 ISSUE 7CONTENTS

DEPARTMENTS6 EDITOR'S NOTE Change Defines Ethanol’s Coproducts By Tom Bryan

7 AD INDEX

10 THE WAY I SEE IT Ignorance or Ignoring is Bliss By Mike Bryan

11 EVENTS CALENDAR

12 VIEW FROM THE HILL New Poll Shows RFS Support By Bob Dinneen

14 DRIVE Fueling Freedom By Tom Buis

16 GRASSROOTS VOICE ACE: Protecting RFS, Expanding Market Access By Brian Jennings

18 GLOBAL SCENE Opportunity Knocks, But Who Will Answer? By Andrea Kent

20 BUSINESS BRIEFS

22 COMMODITIES

24 DISTILLED

62 TALKING POINT DDGS Challenges, Old and New By Kurt A. Rosentrater

64 BUSINESS MATTERS Equity Redemption Plans Can Provide Liquidity, Tax Relief By Joe Leo

66 MARKETPLACEEthanol Producer Magazine: (USPS No. 023-974) July 2015, Vol. 21, Issue 7. 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.

QUALITY Creating a Quality Image Adding commercially available antioxidants to distillers grains and distillers corn oil improves shelf life By Holly Jessen

ANTIBIOTICS Wanted: Antibiotic-Free Chicken Ethanol producers evaluate their antimicrobial programs By Susanne Retka Schill

28DIVERSIFICATION Cracking the Kernel for Higher Value Products Will zein and phytate make it as the next coproduct success story? By Susanne Retka Schill

34

FEATURES

OUTREACH Stoves that Save Clean cooking stoves powered by ethanol improve life in Haiti By Janna Farley

48

CARBON DIOXIDE Energy-Related Carbon Dioxide Opportunities Can Enhance Ethanol Projects CO2 can replace water-based hydraulic fracturing in regions where water is scarce By Sam A. Rushing

CONTRIBUTIONS

56

40

SORGHUM Fueling the Sorghum-Ethanol Corproducts Engine An ethanol producer in Kansas is producing distillers grains, oil and other coproducts from grain sorghum By Lyndon Anderson

60

PHOTO BY UNIVERSITY OF MINNESOTAON THE COVER

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FOR INDUSTRY NEWS: WWW.ETHANOLPRODUCER.COM OR FOLLOW US: TWITTER.COM/ETHANOLMAGAZINE

EDITOR'S NOTE

Change Defines Ethanol’s Coproducts

Tom BryanPresident & Editor in [email protected]

The spec for fuel ethanol doesn’t change—the ASTM standard is the same all the time, no matter what—but its coproducts are modifi ed, tweaked and reinvented with striking regularity. The stern requirements of distillers grains customers has driven many coproduct decisions over the years. The allure of underserved markets has driven others. Now, two other factors are in play: regulation of food and consumer attitudes about food. This month’s issue touches on each of these pillars of coproduct change, starting with alterations born from customer care.

The stability of the ethanol’s two principal coproducts, distillers grains and distillers corn oil, is the subject of this month’s cover story. By stability, the experts mean the degree to which the products are susceptible to fouling during transport and storage. In “Creating a Quality Image,” on page 28, EPM Managing Editor Holly Jessen reports that the shelf life of distillers grains and DCO is especially important anywhere the coproducts are stored in hot or humid conditions. There has been little research done on coproduct stability, but a new study indicates that distillers grains and DCO, like other unsaturated oils, are prone to lipid degradation over time under steamy conditions. The good news, however, is that there are effective antioxidant additives on the market.

We turn from coproduct quality to coproduct invention on page 34, as EPM Senior Editor Susanne Retka Schill reports on a University of Minnesota research team’s effort to make phytate the industry’s next big coproduct. Bringing a new product to market is never easy, but this potential new coproduct has several appealing uses, and removing it from the production stream could enhance distillers grains. Low-phytate distillers grains equals low-phosphorous distillers grains, and that’s appealing to hog and poultry producers who must prevent phosphorous leaching on their properties. Moreover, lower phytate makes other nutrients in distillers grains more available and useful to animals. On a parallel front, Retka Schill also gives us an update on efforts to commercialize the production of zein, another novel but promising coproduct.

Finally, we wade into the complex subject of antibiotics in this issue. In “Wanted: Antibiotic Free Chicken,” on page 40, Retka Schill reports on how consumer-driven changes in the food and restaurant industries are inevitably affecting distillers grains producers. Several big food companies and restaurant chains including McDonalds, Chipoltle Mexican Grill, Perdue Farms and Tyson Inc. have recently declared their intentions to go antibiotic free. We report that an estimated 70 percent of U.S. ethanol plants still rely on antibiotics to ward off yield-robbing bacteria in the production process. Today’s producers are using antibiotics discerningly, and studies have shown that traces of antibiotics that sporadically show up in distillers grains are “magnitudes lower” than FDA limits. Despite the fact that antibiotics are effective and safe, however, some ethanol producers are committing to alternative antimicrobials to win over—or keep—their big customers. Oh, and those antibiotic-free DDGS premiums are reportedly starting to come. Time will tell if this is a niche opportunity or an unstoppable trend.

JULY 2015 | Ethanol Producer Magazine | 7

VOLUME 21 ISSUE 7

TM

EDITORIALPresident & Editor in Chief

Tom Bryan [email protected]

Vice President of Content & Executive EditorTim Portz [email protected]

Managing EditorHolly Jessen [email protected]

Senior EditorSusanne Retka Schill [email protected]

News EditorErin Voegele [email protected]

Copy Editor

Jan Tellmann [email protected]

ARTArt Director

Jaci Satterlund [email protected]

Graphic DesignerRaquel Boushee [email protected]

PUBLISHINGChairman

Mike Bryan [email protected]

CEOJoe Bryan [email protected]

SALES

Vice President of OperationsMatthew Spoor [email protected]

Sales & Marketing DirectorJohn Nelson [email protected]

Business Development DirectorHoward Brockhouse [email protected]

Senior Account Manager/Bioenergy Team LeaderChip Shereck [email protected]

Account ManagerJeff Hogan [email protected]

Account ManagerTami Pearson [email protected]

Circulation ManagerJessica Beaudry [email protected]

Traffic & Marketing CoordinatorMarla DeFoe [email protected]

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 andhandling charge of $49.95 for anyone outside the United States. To subscribe, visit www.EthanolProducer.com or you can send your mailing address and payment (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 © 2015 by BBI InternationalPlease recycle this magazine and remove inserts or samples before recycling

ADVERTISER INDEXACE American Coalition For Ethanol 17BetaTec Hop Products 15 Buckman 63Cereal Process Technologies 42CHS Renewable Fuels Marketing 59Direct Automation 51DuPont Industrial Biosciences 68EcoEngineers 58Fagen Inc. 55Fluid Quip Process Technologies, LLC 8Growth Energy 2Hengye USA 31Hydrite Chemical Co. 25Hydro-Klean LLC 27ICM, Inc. 11Interra Global Corporation 50Lallemand Biofuels & Distilled Spirits 33Leaf Technologies 24Louis Dreyfus 47Mist Chemical & Supply Company 20Mole Master Services Corporation 43Nalco, an Ecolab company 44NCAT, Inc. 46New Holland Agriculture 9North American Industrial Services 21Phibro Ethanol Performance Group 65POET-DSM Advanced Biofuels 67Premium Plant Services, Inc. 52Renewable Fuels Association 13RPMG, Inc 45Salco Products, Inc. 3Solenis LLC 5Swedish Exergy AB 53Thermal Refractory 38Tower Performance, Inc. 30Tranter 54Trinity Rail 19Valicor Separation Technologies 26Victory Energy Operations, LLC. 36-37WestAgro Executive Brands 32WINBCO 39

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S:8”S:10.375”

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Over the years, we have had a host of articles, books, press releases and talking heads highlight the shortcomings of biofuels, in particular ethanol. Almost all of these “experts” fail to account for the contributions of ethanol or, in many cases, simply ignore those contributions in order to make their point, sell their book, or get published in the newspaper.

They ignore the economic impact to the countries in which ethanol is produced and ignore the hundreds of millions, and in some countries billions, of dollars of economic growth that is created by a robust ethanol industry.

They ignore the true cost of fossil fuels, the damage to the environment, the billions of dollars in added healthcare cost as a result of fossil fuel use. In addition, most seem to gloss over the cost of military intervention to protect sources of oil, the pipelines, the oil spills and the utter environmental devastation that fossil fuels have caused in the world. Instead they focus on the small contribution that ethanol has on the price of food, as if fossil fuels had no impact on food cost worldwide.

They ignore the contributions made by the high quality distillers grains that feeds a myriad of livestock for human consumption. Distiller’s grains is shipped to countries rich and poor all around the world. Rather, they focus on the price of corn tacos in Mexico, or the cost of a loaf of bread in Uruguay, and blame ethanol.

They ignore the impact ethanol production has in keeping farmers in business so they can help feed a hungry world. The biofuels industry has helped to stabilize farm prices, has been a tremendous tool in keeping farmers on the farm. It has not only served to keep existing farmers in business, but has been instrumental in encouraging young people to stay on the farm. It’s not just the money, but often for the younger generation the

commitment that they have to not only help feed a hungry world, but to contribute to a cleaner environment in the process. It’s a pride thing and they wouldn’t understand.

They ignore the cost reduction to consumers at the pump. Ethanol has been a significant contributor to reducing gasoline prices and has saved consumers hundreds of millions of dollars. This is money that often would have gone to someone outside the country. One can only assume that by ignoring this, they would prefer that we pay more at the pump and make an oil baron a little richer. I’m not sure how that helps a subsistence farmer in the Baltics, but perhaps I just don’t get it.

They ignore the hundreds of thousands of jobs that are created and the impact on the economy that those jobs have. They ignore the contribution capabilities of those with good jobs have to contribute financial aid to a hungry world, or to make someone’s life a bit easier by helping build a home in the U.S. or a foreign country. People in poverty can’t do those things, people who are fortunate enough to have good jobs can and many do. Rather than focusing on the wealth created and the contributions made to the world because of that wealth, they focus on the price of wheat in Chile and make a feeble attempt to pin it on biofuels.

As I have said many times, ethanol is not a perfect fuel, it is a fuel that over time will transition us into an even better fuel, one that probably will be cleaner, cheaper and have fewer negatives. But until that happens, let’s stop ignoring the benefits of ethanol and embrace its attributes. I guess if you are looking for a story, writing a book or publishing a paper on the negatives of ethanol, ignoring can be as blissful as ignorance.

That’s the way I see it.

Ignorance or Ignoring is Bliss By Mike Bryan

Author: Mike BryanChairman, BBI International

[email protected]

THE WAY I SEE IT

ACE ConferenceAugust 19-21, 2015Omaha, NebraskaHilton OmahaACE’s annual conference is tailored to the interests and needs of the people of ethanol, the folks in the trenches. It’s a gathering of ACE’s commitment to connect ethanol producers with the farmers, researchers, retailers, and support businesses to continue what all of them started a long time ago. It’s also an excellent place to learn and share ideas. And, it has all the fun of a family reunion.605-334-3381 | www.ethanol.org/events/conference

National Advanced Biofuels Conference & ExpoOctober 26-28, 2015Hilton OmahaOmaha, NebraskaProduced by BBI International, this national event will feature the world of advanced biofuels and biobased chemicals—technology scale-up, project finance, policy, national markets and more—with a core focus on the industrial, petroleum and agribusiness alliances defining the national advanced biofuels industry.866-746-8385 | www.advancedbiofuelsconference.com

International Biomass Conference & ExpoApril 11-14, 2016Charlotte, North CarolinaOrganized by BBI International and produced by Biomass Magazine, this event brings current and future producers of bioenergy and biobased products together with waste generators, energy crop growers, municipal leaders, utility executives, technology providers, equipment manufacturers, project developers, investors and policy makers. It’s a true one-stop shop—the world’s premier educational and networking junction for all biomass industries. 866-746-8385 | www.biomassconference.com

2016 International Fuel Ethanol Workshop & ExpoJune 20-23, 2016Wisconsin Center Milwaukee, WisconsinNow in its 32nd year, the FEW provides the ethanol industry with cutting-edge content and unparalleled networking opportunities in a dynamic business-to-business environment. As the largest, longest running ethanol conference in the world, the FEW is renowned for its superb programming—powered by Ethanol Producer Magazine —that maintains a strong focus on commercial-scale ethanol production, new technology, and near-term research and development. The 2014 event drew more than 1,800 people from over 31 countries and from nearly every ethanol plant in the United States and Canada. 866-746-8385 | www.fuelethanolworkshop.com

EVENTS CALENDAR


Every Fourth of July, in the slowly darkening moments between dusk and the first pop of fireworks, I take advantage of the down time to read the Declaration of Independence to my family. The Fourth of July gives us all a moment to reflect on the freedom our forefathers envisioned and how those hopes transformed into the freedom Americans now have—through the Bill of Rights—to express their thoughts, views, and beliefs without the looming threat of repercussions.

In early April, Morning Consult—on behalf of the Renewable Fuels Association—asked more than 2,000 Americans to share their views on a wide variety of topics and issues. They answered questions ranging from how well they believed the president is governing the country to their views on America’s key energy policy, the renewable fuel standard (RFS). Once the poll numbers were tallied, one thing was clear: The RFS has the support of the American people.

The poll shows that of the 2,047 individuals asked, 62 percent of Americans came out in support of the RFS, while only 18 percent opposed the popular policy. These numbers just go to show that despite all of the false rhetoric and fear tactics thrown at the American public from the petroleum industry, support for the RFS remains high.

As you may know, there is currently an RFS that requires a certain amount of the fuel produced each year tocome from ethanol, biodiesel and other renewablesources that aren’t fossil fuels. Do you support or oppose this requirement?Support = 62 percent Oppose = 18 percent Don’t know/no opinion = 20 percent

Respondents were also asked a variety of other biofuels and energy related questions. The results found that 65 percent of Americans support tax incentives for clean, renewable cellulosic ethanol while on the flip side of the coin only 34 percent supported tax incentives that would continue to help Big Oil boost its profits.

The government has considered giving tax incentives to helpfund the expansion of a new fuel known as cellulosic ethanol,which is a biofuel produced from wood, grasses and other non-edible parts of plants. Do you support or oppose the government giving such tax incentives?Support = 65 percent Oppose = 18 percent Don’t know/no opinion = 17 percent

As you may know, oil companies receive $4 billion to $5 billionin government tax incentives to help pay for thingslike equipment depreciation, oil depletion allowances andforeign investment tax credits for taxes they pay in foreigncountries. Do you support or oppose these tax incentives?Support = 34 percent Oppose = 51 percent Don’t know/no opinion = 15 percent

Last, but certainly not least, individuals were asked about their support of alternative fuel vehicle programs which would require auto manufacturers to produce vehicles such as those that run on flex-fuel. Nearly 70 percent came out in support of these types of programs.

Do you support or oppose the federal governmentrequiring automobile manufacturers to build cars thatwill run on fuel sources other than oil, such as electricity,natural gas and biofuels?Support = 69 percent Oppose = 20 percent Don’t know/no opinion = 11 percent

As the Fourth of July rapidly approaches and communities get ready for parades and fireworks, it’s time for Washington to think outside the beltway and take a good, hard look at the people it represents. Washington should take into account the American people’s strong and steady support for biofuels before doing anything to harm or undercut the RFS.

Author: Bob DinneenPresident and CEO,

Renewable Fuels Association202-289-3835

New Poll Shows Clear RFS Support By Bob Dinneen

VIEW FROM THE HILL


Major players in the fuel retail world, like Kum & Go, Mapco, Minnoco, Murphy USA, Protec, Zarco USA, Petro Serve USA and Cenex, are not only fueling cars; they’re fueling freedom. By offering E15 at their stations, they’re bringing consumers the freedom of choice, giving farmers the freedom to earn a good living doing the job they love and providing our nation with freedom from the instability of foreign oil. As we celebrate all of the many freedoms that we are fortunate enough to enjoy in this great nation over the Fourth of July, let’s not forget to thank those retail leaders as well.

E15 has entered the market and continues to grow across the country. If our industry embraces a can-do attitude, it will only be a matter of time before E15 is available in every state. As they say, your attitude determines your altitude. There have been and always will be naysayers, but we cannot allow them to drown out the voices of yes. If Lincoln had listened to the naysayers, we wouldn’t have had a transcontinental railroad. If Eisenhower had listened to the naysayers, we wouldn’t have the interstate highway system. If Kennedy had listened to them, we wouldn’t have put a man on the moon. None of these achievements would have been possible without a can-do attitude.

As an industry, we’ve risen to challenges and will rise to new challenges, all because of our positive thinking. The naysayers out there who are making noise and spreading misinformation to protect their dwindling market share will not hold us back. When critics ask if we can protect the RFS, the answer is yes. Can we get E15 into the marketplace and provide consumers with a much needed choice and savings at the pump? Yes. Can we improve our environment? Yes. Can we strengthen our nation’s rural communities, economy and energy independence? Yes. Yes, we will.

The renewable fuel standard is our nation’s most successful energy policy in the past 40 years. Since its introduction in 2005,

the RFS has helped us cut our dependence on foreign oil nearly in half—from 60 percent to 33 percent—cracking the monopolistic stranglehold that the oil industry has on our transportation system and supporting nearly 400,000 jobs here in America. It also allows the United States to lead the world in biofuel innovation, driving the research and development of next-generation biofuels that will break our dangerous addiction to fossil fuels.

What’s more is that all of this significant progress has been made while providing consumers with a choice and much needed savings at the pump. High-performance, low-cost ethanol fuel blends like E15 are well on their way to becoming a standard offering at retail locations across the country. The demand for E15 is strong, and we believe that when consumers are given the choice, they will choose the less-expensive fuel that is better for their engines and our environment.

Nationwide, moving to E15 would create another 136,000 American jobs that can’t be outsourced, reduce the demand for foreign oil by 7 billion gallons and eliminate up to 8 million metric tons of greenhouse gas emissions per year—the equivalent of taking 1.68 million vehicles off the road—all while saving consumers even more money at the pump. We know that E15 is the right move at the right time for America, and if every member of our industry embraces that can-do attitude, it won’t be long before consumers across the country will be able to fuel up with freedom.

Author: Tom Buis

CEO, Growth Energy202-545-4000

[email protected]

DRIVE

Fueling Freedom By Tom Buis


ACE: Protecting RFS,Expanding Market Access By Brian Jennings

As we celebrate our independence this month, here’s a rundown of what the American Coalition for Ethanol has been working on and a preview of what’s to come for the remainder of the year. On the policy front, ACE has united with other groups to get the renewable fuel standard back on track. The U.S. EPA has finally proposed the direction it intends to take with the RFS going forward. The agency is under a court order to finalize the blending levels for 2014 and 2015 by Nov. 30, and they have promised to meet the same deadline for determining the 2016 blending target. Our priority is to ensure oil companies are held legally responsible for making cleaner and less-expensive fuel choices, such as E15 and E85, available to consumers. We are all committed to preventing EPA from using the so-called blend wall as an excuse to reset the RFS.

While EPA has been in the RFS spotlight, we have not neglected Capitol Hill. Three out of every five members of Congress were not in office when RFS2 was enacted, so we need to educate them about the benefits of ethanol.

In March, 70 ACE members and supporters helped us meet with more than 160 congressional offices representing 43 states during our 2015 fly-in. People from all walks of life took part in our fly-in alongside ethanol producers and corn growers. Our grassroots advocates met face-to-face with policymakers and talked about the RFS, E15 and flex fuels, but most importantly their own personal stories about why ethanol needs to remain a national priority. We also joined with the Fuels America campaign during the fly-in to help convince nearly 40 U.S. senators to sign a letter to EPA Administrator Gina McCarthy, urging her to seize the opportunity to get the RFS right by reversing course from the 2014 proposed rule and craft targets for 2015 and 2016 that reflect Congress’ intended goals.

Expanding market access for E15 and flex fuels is ACE’s top priority this year, and for that reason we launched a new retailer-focused campaign called Flex Forward. It is based upon the real-

life experiences of retailers who were able to break free of oil company restrictions, get over the “blend wall,” and make money by offering E15 and flex fuels to their customers. Our campaign includes print and digital advertisements with the most popular and trusted magazines, newsletters, and websites for retailers. Monthly readership of these publications surpasses 300,000 people and one of the websites boasts over 30,000 unique visitors each month. ACE has also unveiled a new retailer website, www.flexfuelforward.com, which includes videos of retailers who have made the switch to E15 and flex fuels in addition to all the technical information retailers need to offer their customers more choices at the pump.

Our Power by People campaign has highlighted many ACE members in print and digital ads to promote the RFS or ethanol industry, in general. Two ads that have been particularly effective feature Delayne Johnson, CEO of Quad County Corn Processors, and Marietta Lakness, a rancher and investor in Glacial Lakes Energy. Delayne’s ad brings to light the ingenuity that enabled Quad County to become the first facility in the nation to produce one million gallons of cellulosic biofuel. Marietta’s ad emphasized the importance of the RFS during President Obama’s recent visit to her home town.

Finally, I encourage you to join ACE in Omaha, Aug. 19 to 21, for our annual conference. We will meet retailers who are making the switch to E15, learn about a new campaign designed to promote the health benefits of ethanol to consumers, and discover why corn ethanol producers are innovating to produce advanced and cellulosic biofuels. Conference topics will also highlight the new tank car regulations coming down the pike, efforts to promote ethanol and DDGs exports, and a series of breakout sessions designed for plant board directors and staff.

Author: Brian JenningsExecutive Vice President

American Coalition for Ethanol605-334-3381

[email protected]

GRASSROOTS VOICE


Opportunity Knocks, But Who Will Answer?By Andrea Kent

Climate change is one of the defining challenges of the 21st century. And it's especially tough because it isn't just a scientific concern or activist cause or industrial issue. Climate change is a global problem that brings to light serious environmental and economic challenges.

CRFA recently conducted a national survey of 1,750 Canadians. The gross majority (79 percent) of people polled believe that climate change is happening and is caused by human activity. And more than half (61 percent) of respondents said they want more government action to fight climate change.

With Canada’s next federal election later this year, environmental policy is poised to become a sword or a shield for politicians.

As it stands, Canada does not have a sterling reputation on the environment. A recent report prepared by Environment Canada suggested Canada has little hope of meeting its international commitment to reduce greenhouse gas emissions by 17 percent from 2005 levels by 2020. As I write this, Canada’s post-2020 targets, and those of many provinces have not been released. The only thing that is known going into the fall federal election is that climate change will continue to be a political issue or an opportunity.

Enter, renewable fuels. Despite the criticism on Canada’s progress on greenhouse gas reductions, using biofuel in our fuel mix removes 4.2 megatons of carbon from Canada’s environment annually. This is the equivalent to removing 1 million cars from our roads every year. It’s hard to imagine reaching any reduction targets without renewable fuels, let alone the ambitious standards being called for internationally and by some here at home. Biofuels are an easy fix for any government looking for efficient, low-cost pathways to reducing greenhouse gas emissions. Investing in renewable fuel infrastructure and making higher-level ethanol blends available to consumers at the pump is the best way to achieve even greater emissions reductions from the transportation sector.

Those on the campaign trail should also know that Canada is home to well-established federal and provincial biofuels policies.

This spans the federal mandates announced in 2007 to the more recent Greener Diesel Mandate in Ontario. Of those surveyed about one-third (35 percent) were aware of Canada’s ethanol mandate. However, when told about the impact of the mandate, 31 percent said their impression of the government’s record on climate change improved. By comparison, only a fraction (6 percent) said their impression was negative. And there’s more:

• 85 percent of Canadians have a favorable impression of Canada’s renewable fuels industry.• Support for the Government of Canada doing more to promote renewable fuels was high across the country (88 percent).• Almost all Canadians (91 percent) have heard of ethanol before the survey, and most Canadians (64 percent) support the federal ethanol mandate.• Eight in 10 Canadians believe that renewable fuels are innovative, sustainable, clean, and efficient products that they need, which help create great jobs that are good for their province. • The majority (61 percent) of Canadians want the federal government to do more to deal with climate change.It all goes to show what our industry, and our champions in

public office, have known from the beginning: Supporting renewable fuels has many upsides, and few downsides. The upcoming federal election presents an opportunity for politicians and voters alike. Opportunity is knocking, let’s hope we are all ready to answer.

Author: Andrea KentPresident

Canadian Renewable Fuels Association613-594-5528

[email protected]

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Michael Best & Friedrich LLP has an-nounced Eric J. Cal-listo, former chairperson of the Public Service Commission of Wis-consin, has joined the firm’s Madison, Wis-consin, office as a part-

ner on the firm’s Energy and Environmental teams. Callisto has extensive experience with state, regional, and national energy and util-ity issues, and will assist clients in these areas as well as with environmental law matters.

Husky Corp. has announced its fuel nozzle valves for dispensing ethanol blended gasolines, diesel, and biodiesel fuels meet en-hanced Underwriters Laboratories safety stan-dards that took effect April 30. The stringent new standards ensure fuel nozzle valves can safely dispense enhanced ethanol and biodiesel blended fuels. Husky nozzle products recently listed under UL 2586 include the Husky X family of fuel nozzles, Husky VIII family of fuel nozzles, Husky 1A/1HS/IGS, and Husky V34.

NCAT Inc. has announced the launch of a new website that focuses on a long-standing opportunity for the ethanol industry—lever-aging plant data from an operational cost to a financial asset. Rapidly evolving technology and new ways of viewing and using data are

merging to create this new asset. According to NCAT, realizing this opportunity requires a coherent strategy, effective use of the latest in-formation technologies, and the right partner.

asdfLee Enterprises Consulting has an-nounced the addition to its team of five new engineers and two additional team members who hold doctorates. The company has also divided into four internal teams to handle biodiesel, ethanol, emerging technologies, and solar/wind. The company has promoted Ger-ald Kutney to lead the emerging technologies team and Bob Parkins to lead its solar/wind team. The new team members are as follows: Elizabeth Hood will work in industrial en-zymes, foreign gene expression, plant cell wall structure and protein targeting. Kapil Kokare will work in biomass upgrading, biobutanol, biorenewables, lignin (hydrothermal upgrad-ing) and catalytic valorization of biomass, methane-to-methanol conversion, butanol biosynthesis, conversion of ethanol to higher hydrocarbons/higher value products, and

selective deconstruction of biomass. Doug Proctor will focus on overhead and under-ground transmission projects. Dave Collier will work on the group’s solar energy team, with an emphasis on low-voltage solar design and construction. Charles Cuhna and Ed-mund Peterson will work on solar and wind projects. Mark Carey will work on solar and wastewater projects, specializing in civil engi-neering, energy efficiency and management consulting services for the water industry.

Propel Fuels has announced it will move its headquarters in California from Redwood City to Sacramento. As California’s low car-bon economy grows over the next decade, Sacramento will be home to the people and policies shaping its future.

Solenis LLC celebrated the grand open-ing of its new world headquarters on April 27. Located in Wilmington, Delaware, the head-quarters will accommodate approximately 120 employees supporting a variety of corpo-rate functions for the specialty chemicals com-pany, which was previously known as Ashland Water Technologies. Space for additional ex-pansion has been allocated. The opening of the world headquarters follows the opening of the company’s European headquarters in Schaffhausen, Switzerland, last year.

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Hydro-Klean announced that it has ac-quired Infratech. This acquisition allows Hydro-Klean to offer additional special-ized trenchless rehabilitation services to municipal clients throughout the Midwest.

asdThe National Corn Growers Association has announced a restructure that aims to bring greater focus on building corn demand. As part of this restructure, NCGA has promoted Fred Stemme to vice president of marketing and operations. Paul Bertels will continue to serve as the organization’s vice president of production and sustainability while Rodger Mansfield has stepped down after 19 years of service. In April, the NCGA also launched a search for vice president of market develop-ment. The professional chosen to fill that po-sition will be responsible for managing mar-keting initiatives to build demand for ethanol, livestock feed, biobased products and food uses of corn.

SJC Bioenergia, a joint venture between Cargill and Group USJ, has purchased Fluid Quip Process Technologies’ systems to inte-grate corn ethanol production at its sugar-cane ethanol facility located in Quirinopolis, Brazil. SJC Bioenergia will utilize FQPT’s SGT mill-ing, BOS front-end corn oil, Fiber Separation, and MSC Protein Recovery technologies.

Maizall, the international maize alliance, has announced the election of Sergio Bor-tolozzo as its new president. A farmer from Brazil, Bortolozzo succeeds U.S. Grains Council Past Chairman Julius Schaaf, who had served as president since Maizall was formed in 2013. Maizall is a strategic partner-ship formed by the USGC, the National Corn Growers Association, Abramhilo and Maizar, the major corn producer organizations of the United States, Brazil and Argentina.

CSX has announced the winners of its 21st annual Chemical Safety Excellence Award, which recognizes customers for their commit-ment to the safe transport of hazardous mate-rials by rail. The 70 companies recognized in-clude Archer Daniels Midland Co., Buckeye Partners LP, Eco-Energy, Green Plains Inc., Louis Dreyfus Commodities, Poet Ethanol Products, Southwest Iowa Renewable En-ergy, and Valero Renewable Fuels Co. LLC.

asdAnitox has appointed Eric Sumner to its biofu-els division, strengthening technical support for its new antibiotic-free ethanol processing aid OptimOH, a new technology capable of controlling bacteria in ethanol plants, protecting

fermentation and improving yields without the need to modify pH, enzymes or other parameters. Sumner has more than 10 years of experience in the biofuels market. Prior to joining Anitox, he was employed at DuPont, where he held a number of managerial roles.

asdArcher Daniels Mid-land Co. has announced Chris Cuddy, president of ADM’s corn process-ing business unit, has been named a senior vice president of the company. Cuddy previously served as president of sweeten-

ers and starches in ADM’s corn processing business unit. In that role, he was responsible for all commercial activities of the company’s North American sweetener, starch, fiber and acidulant businesses. He joined ADM in 1998.

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May 18— Many markets are influenced by seasonal changes and the natural gas market is no exception. While summer consumption is far less dramatic than the winter, the increasing prevalence of natural gas as a fuel for power generation makes peak summer heat and the associated air-conditioning demand an increasingly influential (second) seasonal driver of natural gas prices. Following this seasonal pattern, there has been a notable run in natural gas prices over the first few weeks of May with prices rising from $2.50 per MMBtu for the June contract to close to $3 per MMBtu.

Before anything else, natural gas is a weather sensitive commodity. Its primary use is space heating in the residential and commercial sector and to a lesser extent the industrial sector in the winter. Over the past decade, natural gas-fired power generation has been gaining additional market share at the expense of coal, mainly as a result of more stringent regulatory environment but also because of fuel economics.

The chart gives a mechanism for quantifying and demonstrating the seasonal pressures in the gas market by summing the differences between the population-weighted average temperature and a 65 degree Fahrenheit normal for each day in a weekly period. Obviously, summer deviations from normal are far less extreme than winter cold, but as the

domestic gas market is getting a hint of warmer-than-normal tempera-tures heading into the start of June, natural gas prices have rallied in response to the implications for stronger seasonal demand.

Natural Gas Report

Corn Report

May 18—The market had the opportunity to get an updated look at the old and new crop scenarios in the May USDA supply and demand report. Old crop supplies have been plentiful and carryout was increased slightly to 1.831 billion bushels. New crop planted acreage is projected to be 89.2 million acres and harvested 81.7 million acres. New crop yield was calculated at 166.8 bushels per acre compared to 171 bushels a year ago and 158.1 bushels in 2013-’14.

With plantings running ahead of last year’s pace at this time, one can understand how the USDA yield was aggressive at 166.8 bushels per acre. With a carryin of 1.851 billion bushels and calculated production at 13.630 billion bushels, total supply was at 15.506 billion, allowing for some imports. Carryout is calculated at 1.746 billion bushels. This would leave the market comfortable two years in a row with ample supplies and carryover. Ultimately this places pressure on the corn values.

Factors affecting prices during the growing season will be obvious weather issues that will arise. Moreover, the market will follow any im-pacts of outside influences such as weather in other global production areas and issues that could be short term affect livestock feed demand.

Another factor that can impact demand will be the action of the U.S. dollar.

Summer air-conditioning season becomes second price driver by Ben Straus

Ample corn supply, carryover creates price pressure by Jason Sagebiel

COMMODITIES Prices & Market Analyses

Comments in this column are market commentary and are not to be construed as market advice.


DDGS Report

Ethanol Report

May 18—This is the time of year when what happened from January through May seems to have very little im-pact on overall direction of the market. Traders are squarely focused on the road ahead. During the next couple of months, traders and market watchers not only study the direction of the market, but also exam-ine the amount of activity and how much time will be spent driving for holiday and summer activities. Even though increased driving has been a factor through most of the spring and winter, drivers out logging miles through the summer months make up the lion's share of seasonal demand support.

Both ethanol and gasoline inventory levels are holding above year ago levels, in some cases significantly above average. But expectations of strong demand over the next several weeks have kept buyers active in the market, looking for further in-ventory pullbacks. Although prices are not expected to see outrageous jumps through the spring and summer, the steady support developing during late spring could main-tain active consumer demand; as more time is spent on the road, more gasoline and ethanol are consumed.

May 18— Going into Memorial Day, DDGS pricing was still being overly influ-enced by Chinese demand. There were a lot of tons booked earlier in the year for the first and second quarters, and a me-dium amount for the third quarter. The re-sulting demand pushed prices above what made sense for U.S. domestic feeders. Since the middle of March, demand has slowed, and the resulting price decline has created prices that have begun to work back into U.S. rations.

At the same time DDGS is getting cheaper, the market is also now being faced with the effects of the H5N1 bird flu, which is decimating the poultry industry, mostly in the Midwest. To date, it has re-sulted in the deaths of more than 34 mil-lion birds, which in the central part of the U.S., would have been potential consumers

of the lower-priced DDGS, as well as the corn and soymeal that normally competes with distillers grains in feed rations. This catastrophe has kept a lid on any big up-ward price moves in the U.S. market in the near future.

But the Chinese market is still going to be the biggest influence in the weeks ahead. DDGS are still well priced versus China’s domestic corn that is being offered for sale, hence the reason for demand. But another good crop year would strain whatever stor-age capacity the Chinese have left, and current supplies will more than likely need to be priced to move. For a U.S. DDGS market that is being overly influenced by Chinese demand, that will determine prices as much, or more, than the condition of the U.S. crop.

Regional Ethanol Prices ($/gallon)Front Month Futures (AC) $1.678Region Spot RackWest Coast 1.840 1.850Midwest 1.690 1.797East Coast 1.730 1.842

SOURCE: DTN

Regional Gasoline Prices ($/gallon)Front Month Futures Price (RBOB) $2.057Region Spot RackWest Coast 2.606 2.747Midwest 2.215 2.438East Coast 1.888 2.641

SOURCE: DTN

DDGS Prices ($/ton)LOCATION Jul 2015 Jun 2015 Jul 2014Minnesota 160 170 210Chicago 185 192 233Buffalo, N.Y. 175 185 255Central Calif. 214 234 270Central Fla. 204 206 261

SOURCE: CHS Inc.

Corn Futures Prices (July Futures, $/bushel)Date High Low CloseMay 18, 2015 3.71 1/4 3.64 3.68April 20, 2015 3.88 1/2 3.82 1/4 3.84 3/4May 20, 2014 4.81 1/4 4.73 4.73 1/2

SOURCE: FCStone

Cash Sorghum ($/bushel)Location May 15,

2015April 24,

2015May 15,

2014Superior, Neb. 4.41 4.40 4.48Beatrice, Neb. 3.91 4.15 4.39Sublette, Kan. 3.66 4.24 4.59Salina, Kan. 4.36 4.74 4.59Triangle, Texas 3.91 3.79 4.76Gulf, Texas 5.57 5.60 5.57

SOURCE: Sorghum Synergies

Natural Gas Prices ($/MMBtu)LOCATION May 19,

2015Mar 31,

2015May 20,

2014NYMEX 2.95 2.64 4.47NNG Ventura 2.98 2.45 4.37Calif. Citygate 3.07 2.58 4.84

SOURCE: U.S. Energy Services Inc.

U.S. Ethanol Production (1,000 barrels)Per Day Month End Stocks

Feb. 2015 957 26,788 20,979Jan. 2015 960 29,755 20,543Feb. 2014 907 25,401 20,979

SOURCE: U.S. Energy Information Administration

Price decline brings DDGS back into US rations

by Sean Broderick

All eyes on the road ahead by Rick Kment


DISTILLED Ethanol News & Trends

In May, the U.S. Department of Transportation released a final rule un-veiling a new enhanced tank car stan-dard and risk-based retrofitting schedule for older tank cars carrying crude oil and ethanol. While certain tank cars in crude oil service must be retrofitted as soon as 2017, the initial retrofit requirements for tank cars carrying ethanol don’t begin until 2023.

The rule, developed by the Pipeline and Hazardous Materials Safety Admin-istration and Federal Railroad Admin-istration, in coordination with Canada, focuses on safety improvements that are designed to prevent accidents, mitigate consequences in the event of an acci-dent, and support emergency response.

DOT issues tank car rule, retrofit schedule

The European Parliament recently voted to approve a cap on first-generation biofuels, provid-ing a degree of closure to the long-debated mea-sure.

The law caps first-generation biofuels from crops grown on agricultural land at 7 percent of energy consumption in transportation by 2020. It also requires fuel suppliers to report the estimated level of greenhouse gas (GHG) emissions caused by indirect land use change (ILUC), requires the commission to report and publish data on ILUC-related emissions, and obligates the commission to report back to the parliament and ministerial council on the scope for including ILUC emission figures in the existing sustainability criteria.

EPURE, the European ethanol industry as-sociation, welcomed closure of the ILUC file in order to restore regulatory and market certainty, but called the absence of binding targets for ad-vanced biofuels and ethanol a missed opportunity.

Europe caps crop-based biofuels

SOURCE: U.S. DEPARTMENT OF TRANSPORTATION

Retrofit schedule by tank car and service typeUnited StatesNonjacketed DOT-111 (PG I)

1/1/2018

Jacketed DOT-111 (PG I ) 3/1/2018

Nonjacketed CPC-1232 (PG I)

4/1/2020

Nonjacketed DOT-111 (PG II)

5/1/2023

Jacketed DOT-111 (PG II) 5/1/2023

Nonjacketed CPC-1232 (PG II) 7/1/2023

Jacketed CPC-1232 (PG I, PG II, all remaing tank cars carrying PG III materials in a HHFT

5/1/2025

CanadaNonjacketed DOT-111 (crude oil) 1/1/2017

Jacketed DOT-111 (crude oil) 3/1/2018

Nonjacketed CPC-1232 (crude oil) 4/1/2020

Nonjacketed DOT-111 (ethanol) 5/1/2023

Jacketed DOT-111 (ethanol) 5/1/2023

Nonjacketed CPC-1232 (ethanol) 7/1/2023

Jacketed CPC-1232 (crude oil, ethanol, all remaining tank cars carrying PG III materi-als in a HHFT

5/1/2025

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DISTILLED

Pacific Ethanol Inc. is completing up-grades at its 40 MMgy ethanol plant in Madera, California. The company recently announced corn oil production at the plant has com-menced. In addition, an industrial-scale mem-brane system is scheduled to be installed at the facility.

In May, Pacific Ethanol announced com-mercial production of corn oil had begun at the Madera plant utilizing Valicor’s proprietary VFRAC corn oil recovery system.

The membrane system is scheduled to be installed by Whitefox. According to an agreement announced in May, Whitefox was expected to deliver a stand-alone, container-based membrane system to the facility later that month. Commissioning and startup of the system was scheduled for June. According to Whitefox, the membrane unit will be used to as-sess the impact of treating certain side streams in the ethanol production process and optimize the design of a membrane solution to remove bottlenecks and improve ethanol production efficiency.

Pacific Ethanol upgrades Madera plant

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The U.S. Energy Information Administra-tion has released its Annual Energy Outlook 2015, which presents updated projections for U.S. energy markets through 2040 based on six different cases that reflect updated scenarios for crude oil prices.

Regarding ethanol, the reference case pre-dicts that a modest penetration of E85 and a small increase in renewable liquids blended into diesel fuel will result in a slight increase in con-sumption of renewable liquid fuels for trans-portation. This increase is expected to occur despite a projected overall decrease in motor gasoline consumption.

In the reference case, ethanol consumed in motor gasoline and E85 is expected to increase from 1.12 quadrillion Btu in 2013 to 1.27 qua-drillion Btu in 2040. Motor gasoline consump-tion, however, is expected to decrease from 16.36 quadrillion Btu in 2013 to 12.96 quadril-lion Btu in 2040. Of that volume of motor gasoline consumption, the EIA’s reference case predicts the share of E85 will increase from 0.02 quadrillion Btu in 2013 to 0.28 quadrillion Btu in 2040, a 10 percent annual growth rate.

EIA outlook predicts increased E85 consumption

Projected E85 consumption (quadrillion Btu per year) 2020 2030 2040

Reference case 0.03 0.2 0.28Low economic growth 0.03 0.26 0.29High economic growth 0.03 0.19 0.3Low oil price 0.02 0.14 0.16High oil price 0.19 0.52 0.76High oil and gas resource 0.03 0.17 0.28

SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION

A recent poll conducted by Morn-ing Consult on behalf of the Renew-able Fuels Association determined that the majority of Americans support the renewable fuels standard (RFS). According to the poll, 62 percent of Americans support the RFS while only 18 oppose the program.

The poll also determined 65 per-cent of voters support federal tax in-centives to assist funding of cellulosic ethanol, with 51 percent opposing tax incentives for oil companies to pay for such things as equipment depreciation, oil depletion allowances, and foreign investment tax credits for taxes they pay in foreign countries. In addition, 69 percent of respondents said they

support requiring automobile manu-facturers to build cars that run on fuel sources other than oil, such as biofuels, natural gas and electricity.

DISTILLED

Poll shows public support for RFS

Kum & Go to offer E85 at 65 stores

Kum & Go recently announced it will begin of-fering E15 as a fuel option. Over the next two years, the company plans to make E15 available at more than 65 stores across Iowa, Nebraska, Arkansas, Colorado, Missouri, Oklahoma, and South Dakota. The first station, located in Windsor Heights, Iowa, opened in late April.

The company was among the first to begin of-fering E10 blends in the 1970s and began offering E85 in 1997. Kum & Go currently offers E85 at more than 160 locations across 11 states, and also carries biodiesel blends at many stores.

“We have a strong tradition in our company to implement sustainability within our business and at our locations. From our 100 LEED-certified stores, to our selection of alternative fuels, E15 was a natu-ral addition to our fuel offering,” said Jim Pirolli, vice president of fuels at Kum & Go. “Having E15 in our portfolio allows Kum & Go to offer our customers a quality product at a great value.”

SOURCE: RENEWABLE FUELS ASSOCIATION

Morning Consult poll results

Support the RFS

Women 58%Men 65%Voters with a bachelors degree 70%Government employees 69%Democrats 65%Independents 61%Republicans 57%Total registered voters 62%


Renmatix acquiresformer Mascoma facility

DISTILLED

Renmatix Inc. has acquired the existing as-sets of a 56,000-square-foot manufacturing fa-cility in Rome, New York, previously owned by Mascoma Corp. According to Renmatix, the new feedstock processing facility (FPF) is dedicated to the first step in the conversion of biomass to cel-lulosic sugars using proprietary Plantrose process conditions. The FPF officially opened in April, becoming the third U.S. location for Renmatix.

With the FPF now in place, Renmatix said the acquisition creates a secure supply for the company and its development partners at the In-tegrated Platrose Complex in Kennesaw, Georgia, where the second step in production of Plantro sugars is performed.

The acquisition is the latest in a series of strategic moves for Renmatix since mid-2014, including a series D investment from Total, the acquisition of Sweden-based REAC’s intellectual property portfolio, and an expansion of the IPC facility.

Nearly 20 million cellulosic RINs generated in Q1

The U.S. EPA recently published re-newable identification number (RIN) data for the first quarter of this year, reporting approximately 4.75 billion RINs were gener-ated during the quarter.

A net total of 19.73 million D3 cel-lulosic biofuel RINs were generated during the first three months of 2015, including 286,237 for ethanol, with 9.28 million gener-ated for renewable compressed natural gas and 10.25 million for renewable liquefied natural gas. All 19.81 million D3 RINs gen-

erated during the first three months of 2015 were generated domestically. No D7 renew-able diesel RINs have been generated so far in 2015.

In addition, 14.58 million D5 advanced biofuel RINs, including 6.05 million ethanol RINs, and 3.57 billion D6 renewable fuel RINs, including 3.47 billion ethanol RINs were generated during the quarter, along with 472.28 million D4 biomass-based die-sel RINs.

Q1 RIN generation (net, in millions)Ethanol Total

Cellulosic biofuel (D4) 0.29 19.73Advanced biofuel (D5) 6.05 14.58Renewable fuel (D6) 3,466.77 3,567.91

SOURCE: U.S. EPA


QUALITY

PHOTO: UNIVERSITY OF MINNESOTA


New research suggests that ethanol producers can improve the long-term storage stability of distillers grains and distillers corn oil. By Holly Jessen

QUALITY

In 15 years of traveling to foreign countries with the U.S. Grains Council to promote distillers grains and now distillers corn oil (DCO), Jerry Shurson says one of the most frequently asked questions is, how stable is distill-ers grains? Shurson, a professor in the University of Minnesota depart-ment of animal science, says it comes up in particular in Southeast Asia, where customers want to know if the oil in distillers grains and DCO will go rancid in transport or storage. “All I could tell them, up until recently, is, nobody has ever conducted a study to ask that question and fi nd how bad or how good it could be,” he says, adding that the only small pieces of data he had were from fi eld trials conducted in Mexico and Taiwan.

Shelf life of distillers grains and DCO is especially important anywhere the coproducts are stored in hot or humid conditions, which includes export markets like Southeast Asia as well as southern U.S. After a coproduct leaves an ethanol plant, depending on where it is going, two or even three months can pass before the end-user receives it. That includes time in transport but also just sitting at port or at a feed mill, Shurson says. An added factor is that exported coproducts are sometimes transported in containers, which are essentially sealed steel boxes that can get very hot. “These customers were asking very reasonable and legitimate questions, in my opinion,” he says. “So we were fi nally able to cobble together enough funding to do a fairly simple initial experiment.”

The results confi rmed what researchers suspected. Peroxidation, or lipid degradation, does occur in distillers grains and DCO. “Peroxidation is an impact of time, temperature, oxygen, minerals and other factors,” says

Creating a Quality Image

Brian Kerr, animal scientist for the USDA-Agricultural Research Service’s National Laboratory for Agriculture and the En-vironment, adding that it’s not unique to ethanol coproducts. Other unsaturated oils with double bonds, such as soybean oil or canola oil, also degrade over time.

Specifically, the study looked at the ef-fects of exposing distillers grains and DCO to temperatures of 38 degrees Celsius at 94 percent relative humidity for a period of four weeks. As researchers suspected would be the case, peroxidation was greater for distillers grains samples with 13 percent oil than samples with 5 percent distillers grains. For DCO, peroxidation was great-er on the DCO samples with 1.8 percent moisture, insolubles and unsaponifiables (MIU) than the samples with 1.3 percent MIU. The exciting part, Shurson says, is that applying two commercially available antioxidants did reduce damage to the sam-ples of distillers grains and DCO. “It didn’t

totally eliminate it, but it cut it by half,” he says, “which I think is pretty significant.”

Exposing More Questions The study of peroxidation in distill-

ers grains and DCO is the latest in a long string of related studies conducted by Shurson and Kerr, with the help of others. It started about six years ago, with research into 4-hydroxynonenal, or 4HNE, a com-pound found in French fries, which has been associated with Parkinson’s disease, Alzheimer’s and various forms of cancer. In other words, “a lot of nasty, adverse health effects,” Shurson says. As increasing amounts of restaurant grease is funneled into the livestock industry as a feed ingre-dient, Shurson and Kerr realized research was needed on what effect this has on ani-mal health and performance.

In theory, peroxidized oils, which yield aldehydes and other undesirable com-pounds, have a negative effect on digest-

MINOR TO MAJOR: MIU content of 1.8 percent, compared to 1.3 percent, makes a big difference in how susceptible DCO is to peroxidation, according to a study that subjected distillers grains to heat and humidity to measure lipid degradation. PHOTO: BOB MODERSOHN

‘Even though producers won’t necessarily get paid more for doing something to improve product quality, over time it does end up paying returns by having established a reputation for better quality products compared to lower quality products.’


ibility, Kerr says. While there have been some studies done on this topic, some are decades old, and additional study is needed as the type of lipids used in animal feed has changed over time. “We really haven’t wor-ried much about it in the past, because it’s been minor,” he says, “but with more and different sources of lipids, such as distillers corn oil, more yellow grease, and also with competition for oil, such as the biodiesel industry using distillers corn oil, there’s a lot of different lipids out there that may become available to livestock.”

With every study completed, research-ers learn more and expose more questions, Shurson says, adding that a comprehensive literature review turned up several studies showing that feeding peroxidized oils to pigs and poultry reduces food consump-tion, feed conversion and growth rate. “The real question is, is there a magical threshold where this happens and below that we don’t have to worry about it?” he

asks, adding that he believes dietary thresh-olds for maximum lipid peroxidation do need to be established. “I think we’ve got a pretty strong body of evidence that indi-cates it’s not a good thing.”

Kerr agrees there are a lot of ques-tions that need to be answered through additional study. Specific to the ethanol industry, one question is whether the natu-rally occurring vitamin E, an antioxidant, provides any protection from peroxida-tion. Another one is whether the heat ap-plied to distillers grains during the drying process has an impact on lipid peroxida-tion.

Coproduct Evolution When Shurson shares the results of

this study, he’s commonly asked if any eth-anol producers currently add antioxidants to distillers grains or DCO. “Unless I am missing something, my answer is no,” he said, adding that producers are willing to

DRAMATIC EFFECT: Adding antioxidants commercially available from Novus International Inc. and Kemin Industries reduced peroxidation in distillers grains and DCO by 50 percent. PHOTO: UNIVERSITY OF MINNESOTA

do it if customers specifi cally ask for it but that would likely come with an additional cost.

In that same vein, ethanol production facilities could implement changes to their individual production processes in order to produce DCO with lower MIU levels, and therefore, longer-term shelf stability. Free fatty acids, or FFAs, are another possible indicator of DCO quality. Many different parts of the production process could be tweaked to improve the quality of the DCO and distillers grains produced, including en-zymes used in the process, surfactants used for corn oil extraction, process temperature and more.

Shurson hopes the results of the study will raise awareness among ethanol produc-ers and prompt them to think about how to produce a higher quality product from a lipid standpoint. However, he suspects pro-ducers will wonder why they should spend money to tweak their production processes or add antioxidants if it won’t result in get-ting paid more for the coproducts. “My re-sponse to that is, it’s work that needs to be done to maintain or sustain your market,” he says. “Because if people start getting

concerned about lipid degradation in corn coproducts, it may hurt your demand.”

As feed prices go up and down, there are times when nutritionists and livestock producers put more emphasis on shop-ping for higher-quality feed ingredients, he points out. “Even though producers won’t necessarily get paid more for doing some-thing to improve product quality, over time it does end up paying returns by having established a reputation for better-quality products compared to lower-quality prod-ucts.”

The ethanol industry has come a long way from the days when producers were trying to get rid of the ethanol process by-product. Although the main focus is still ethanol yield, he says, in the past fi ve years, the ethanol industry has become much more focused on the revenue it can gain from coproducts like distillers grains and DCO. More producers are diversifying their coproduct portfolio, fi rst with corn oil ex-traction, and, in the future, with other co-products, leading the industry closer to the true biorefi nery model.

And, Shurson says, it’s true there are ethanol production companies, ethanol

plant boards and individual managers who do pay more attention to the quality side of coproduct production. It’s a sign of progress, he says, that more ethanol pro-ducers are aligning themselves with animal feed companies, to add to their knowledge base on how to better serve their custom-ers. And yet, Shurson would like to see an even greater emphasis on coproduct quality. “My challenge to the industry is, let’s move a little bit further in that direction, and let’s start looking at ways that individual plants can improve on minimizing some of these less desirable characteristics of the prod-ucts they are producing,” he says. “They may not see immediate returns in terms of cents per pound or dollars per ton but, long term, they will be creating a quality image that hopefully will help sustain and grow the coproduct market.”

Author: Holly JessenManaging Editor, Ethanol Producer Magazine

[email protected]

QUALITY

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DIVERSIFICATION


Researchers hope phytate replicates the corn oil extraction success story, but the history of zein shows it can be a slow and difficult road to success. By Susanne Retka Schill

DIVERSIFICATION

Cracking The Kernel For Higher Value Products

Diversification of coproducts is increasingly important to the ethanol industry, as the widespread adoption of corn oil extraction has demonstrated so well. Penetrating markets with a new coproduct is no easy task, though. Zein, for instance, has shown promise for decades, but has gained little traction. Now, a team from the University of Minnesota is working on a new coproduct—phytate. In addition to providing a new coproduct with multiple uses, the remaining distillers grains could be considered enhanced with distinct market advantages.

Plants hold on to phosphorus in their seeds in the form of phytate, explains Doug Tiffany, a University of Minnesota extension economist. “It’s useful. If you think about the grain, it’s the source of phosphorus for germination.” However, it’s not always so useful in feed, he continues. “There’s little problem for cattle to utilize the phosphorus, but the poor digestibility of phytate is an issue with mono-gastrics. That’s what leads to overfeeding and more of it ends up in manure.” For Southeast poultry producers or North Carolina pork producers, phosphorus leach-ing out of the soils is a growing environmental issue.

2015_ETHANOL AD_ HALF-PAGE SPREAD.indd 1 5/12/2015 10:18:00 AM

DIVERSIFICATION

There would be other benefits for low-phosphorus distillers besides reducing an environmental concern, Tiffany says. “Lower phytate levels make other nutrients more available and useful to the animal, such as the protein and the vitamins.” The new DDGS would be attractive in feed rations for monogastrics like poultry and swine, as well as for fish, a new and potentially big market for distillers.

A team from the Department of Bioproducts and Biosystems Engineering, led by Professor Bo Hu, has developed a process to extract various forms of phytate from distillers grains. U of M nu-tritionists Jerry Shurson and Pedro Urriola and economists Tiffany and Won Lee are working on other aspects of the project. With a year of research completed, the team hopes to launch a two-year pilot study, working with cooperating ethanol plants. “It’s nice to have cooperators in the industry offer us guidance on how to make something like this fit into a plant,” Tiffany says. “That integration is key, you don’t want to upset the process.” The goal is to design a bolt-on process that will divert a portion of the whole stillage stream for chemical extraction of phytate. In addition to working out the integration with the ethanol process, the pilot facility will aid in predicting costs and efficiencies and provide more material for further testing.

“A big challenge is to understand the marketing side,” Tiffany continues. The U.S. currently imports phytic acid, a commercial form of phytate, from China and Japan, where it is extracted from the byproducts of rice milling. “They have a lot of experience and they have some high-purity production of phytic acid that goes for

pharmaceuticals and different food products,” he explains. Phytic acid is used as a preservative and antioxidant by the food, phar-maceutical and cosmetic industries. One industrial market is as an anticorrosive treatment for metal surfaces. The researchers are now learning more about the different markets, the range of formula-tions and quality specifications.

Tiffany knows well the challenge of creating a viable new co-product. He was involved in the research team headed by Pavel Krasutsky at the Natural Resources Research Institute at the Uni-versity of Minnesota-Duluth, who began researching alternative products from distillers grains in 2004, zein among them. Phytate has been known for some time as well, Tiffany says. “People pick these things up and set them aside and, after a while somebody will start some research and maybe see a new technique and the whole proposition will be much closer.”

Zein Debute The corn protein extract zein falls into the category of an idea

that has been set aside and revisited several times. Discovered in 1821, the first patented process for extraction of zein from corn gluten used ethanol as a solvent. It became commercially available in 1938 and reached a peak production of 7 million kilograms (15 million pounds) per year in 1956, according to a 2009 paper found on the webpage of University of Illinois professor emeritus, Munir Cheryan. “Today there is one known manufacturer of zein in the U.S. and one in Japan. The cost of purified zein is $20 to $70 per kg, depending on the grade and purity. However, this price makes

2015_ETHANOL AD_ HALF-PAGE SPREAD.indd 1 5/12/2015 10:18:00 AM

zein an uneconomical material for large industrial uses such as bio-degradable plastics, since petroleum-based polymer resins sell for much lower prices (35 to 70 cents per kg),” the paper says.

Cheryan’s team at the University of Illinois Urbana-Cham-paign developed and patented a zein extraction method which they dubbed COPE, for corn oil and protein extraction. Using mem-

brane technology allowed selective low-energy, low-cost separation of zein and for the recycling of the ethanol solvent “without the substantial evaporation costs that now limit other zein extraction process,” Cheryan’s description reads. Zein has multiple uses. The protein has been the subject in more than 3,400 patents since 1976 and has the potential to become many things such as biodegradable

PHYTATE TEAM: Bo Hu, professor of Bioproducts and Biosystems Engineering, center front, leads the phytate research. In front of him is Yan Mei Zhang, post-doctoral fellow, and in the back, from left, is Doug Tiffany, assistant extension professor, Ara Rajendran, post-doctoral fellow, and Cris Reis, post-doctoral fellow. PHOTO: UNIVERSITY OF MINNESOTA, DAVID L. HANSEN


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In 2006, Prairie Gold Inc. was formed to license the University of Illinois technology. Philip Shane, who worked at the Illinois Corn Marketing Board and the Illinois Corn Growers Association which funded the research, became its president. Prairie Gold, however,

is not the first to attempt to reclaim the zein market. In 2009, Poet LLC announced it had commercialized a patent-pending process to produce zein, which it dubbed Inviz. While some zein has been produced by Poet, full-scale production has yet to take off.

Shane, now director of zein operations and sales for the JV, declined an interview for this article due to Prairie Gold being in the quiet phase of an equity fundraising drive.

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DIVERSIFICATION

‘People pick these things up and set them aside and, after a while somebody will start some research and maybe see a new technique and the whole proposition will be much closer.’

Prairie Gold’s project got off to a good start, with a USDA grant to help with development and collaboration with Katzen In-ternational Inc. to work on integrating the COPE technology in a pilot plant. By the fall of 2009, the pilot facility was under construc-tion in Rochelle, Illinois, next to Illinois River Energy (now under new ownership and renamed CHS Rochelle).

The timing was unfortunate, but unlike many projects that ex-pired in the Great Recession, Prairie Gold rose again. In October 2013, the company announced a joint venture with Big River Re-sources LLC. Big River Prairie Gold LLC began construction a year later on a zein production facility near Galva, Illinois, on the site of one of Big River’s 110 MMgy ethanol plants.

Nearing completion, the 15,000 square foot facility will pro-duce a high-quality, food- and pharmaceutical-grade zein protein. The first-of-its-kind plant will process about 600,000 bushels of corn per year, extracting zein at the front end of the plant after the corn is ground, and recycling the ethanol solvent into the plant while returning the starch component to the ethanol process. In early May, the plant was on track to come online this summer and begin its shakedown and start-up period.

Author: Susanne Retka Schill Senior Editor, Ethanol Producer Magazine

[email protected]


ANTIBIOTICS


Consumer-driven changes peck their way up the food chain to distillers grains producers. By Susanne Retka Schill

ANTIBIOTICS

In late April, Tyson Inc. joined the ranks of food companies and restaurant chains declaring their inten-tions to go antibiotic free. The list includes big poultry producers like Perdue Farms and Pilgrim’s Pride Corp. and restaurant chains such as McDonalds, Chick-fil-A and Chipotle Mexican Grill. The move to minimize or elimi-nate nontherapeutic use of antibiotics in meat production is a response to the increasing concerns about drug resistant bacteria affecting people. Drug resistance in tuberculosis cases and antibiotic-resistant staph bacte-ria (MRSA) are two that receive a lot of attention these days.

It is far from a new issue, however. The U.S. Food and Drug Ad-ministration first proposed restricting the use of antibiotics in feed in the mid-1980s, when producers were increasingly using them as growth enhancers and preventative aids in confinement feed operations. Indus-try successfully stayed the FDA’s hand in the U.S., even while European countries moved to ban nontherapeutic antibiotic use in animals, the first being Sweden in 1986. In the past two years, FDA has developed a vol-untary approach to “achieve the common goal of more judicious use of medically important antimicrobials in animal agriculture.” The feed in-dustry is getting on board, agreeing to move toward reserving certain an-tibiotics for use under a veterinarian’s supervision to treat animal illnesses.

The impact on the ethanol industry could be significant. The indus-try has long used low doses of antibiotics in propagation and fermenta-tion tanks to keep yield-reducing bacteria counts at low levels. A full-blown bacterial infection is a serious issue that can halt production. The miles of pipes, hundreds of valves and dozens of tanks in an ethanol plant provide multiple places for bacteria to hide and proliferate. As a result, sanitation procedures have become much more sophisticated, with clean in place (CIP) systems now commonly used and close monitoring of infection indicators standard operating procedure. Nonetheless, some

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estimates say 70 percent or more of U.S. ethanol producers still routinely rely upon antibiotics.

The likelihood of problematic antibi-otic residues getting into the final distillers grains product is low, according to research conducted at the University of Minnesota. A team led by Jerry Shurson, professor of swine nutrition and a known expert on dis-tillers grains, studied the question in 2011, publishing a paper, “Presence and biologi-cal activity of antibiotics used in fuel etha-nol and corn coproduct production,” in the Journal of Animal Science. Over a year’s time, the team gathered 159 samples of wet and dry distillers grains from livestock feeders getting product from multiple etha-nol plants. “Not all samples had antibiotic residues, and those that did were very low—many magnitudes lower that what FDA al-lows,” Shurson recalls. The research went one step further, examining the premise that the high temperatures and pH condi-tions in the ethanol process after fermenta-tion deactivate any residual antibiotics. To test that, the samples were exposed to two sentinel bacteria, a strain of E coli and one of listeria. Bacteria grew on all cultures but one—and that was a sample where no anti-biotic residues had been detected. Based on that research, Shurson’s assessment is that the risk of residual antibiotics in distillers grains is low, given the relatively low inci-dences of low concentrations found in the samples that are not very biologically active. There is a further dilution affect, he adds, when the distillers grains are incorporated into rations at rates of between 5 and 30 percent.

Despite those findings, the antibiotic question is not likely to go away, Shurson adds. And, it has a global reach. Last No-vember in Bangkok, at a distillers grains seminar hosted by the U.S. Grains Council, the question of antibiotic residues in distill-ers was raised. Many poultry producers in Thailand export to the European Union, which has strict standards on antibiotic resi-dues. Not one to give a pat response when asked about a scientific question, Shurson found the presentation on his laptop and

ANTIBIOTICS


ANTIBIOTICS

walked the Thai audience through the uni-versity study, explaining not only the find-ings but issues surrounding the method-ology. It is challenging to measure minute amounts of antibiotics, he explains. There are questions surrounding the best analyti-cal methods and a lack of standardization that makes comparisons difficult. “Many people think that because I sent my sample to the laboratory, the results are the gospel truth,” he adds, explaining there can be is-sues with false negatives and positives.

While the science is indicating the risk for antibiotics in distillers grains is low, Shurson told his listeners in Bangkok that the science is backed by experience. There are two sensitive markets in the U.S—dairy and laying hens—where the milk and egg products are closely monitored and toler-ances for antibiotic residues are quite strict.

“If there were a problem with residues, they wouldn’t use distillers,” Shurson says, “and that’s not the case.”

Dennis Bayrock, research director for PhibroChem Ethanol Performance Group, reinforces the case that little antibiotic resi-due is found in distillers grains. More than 300 samples were tested by Phibro without any detection of virginiamycin residues above limits, Bayrock says, and other studies

have reaffirmed levels of virginiamycin in samples below the detection limit. Virginia-mycin is the most widely used, although not the only, antibiotic in the ethanol industry.

A focus on minute antibiotic residues could be misplaced, Bayrock suggests. For one, while antibiotics and other chemicals can be detected in extremely low amounts, he says, a zero tolerance approach is not practical. “A subtler point that most people

GREEN LEAP: Ethanol producers are evaluating long-known hops-based programs or newer antimicrobial chemistries. PHOTO: BETATEC HOP PRODUCTS


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don’t realize is that the clinical bacteria that do or do not show resistance in human medicine are just not isolated to any signifi-cant levels in an industrial ethanol plant,” he says. While some studies have isolated E coli in stored grain and soil at facilities the bacteria are likely destroyed as processing begins, as they are not found in plant mi-crobiological audits, he adds. Furthermore, there is no virginiamycin-related human drug approved for any serious and unique human disease.

The industry’s approach has matured, he says. The team with Phibro Ethanol Per-formance Group helps ethanol producers fine tune the process to minimize upsets. “Putting good practices and CIP practices and auditing at a plant comes first,” he ex-plains. Procedures are audited and yeast health and microbiology are monitored. “The philosophy I train our field staff in is to look at process first, help the plant, and then use our products with what con-tamination is remaining. In the old school way of thinking, they’d say: ‘if 2 parts per million [of antibiotics] worked, let’s throw some more in; if it worked over here it should work over there.’ We have moved away from this trial-and-error thinking. We make sure everything is working correctly, and then use our products when necessary.”

Bayrock is adamant that antibiotics are necessary. “You need to have both an ef-fective CIP cleaning program in place to take care of the bulk of the contaminants present and organics. You also need to have an effective antibiotic regimen. There are areas of the plant you can’t CIP. For exam-ple, in the fermenter when you are actually fermenting. You can’t put caustic or harsh chemicals in there. Likewise, there are areas where antibiotics are ineffective. You can’t use antibiotics for CIP. A proper and opti-mal combination of both CIP and antibiot-ics is the best approach for maximizing the performance of the plant.”

Ready AlternativesTyson’s announcement that it was

moving away from antibiotic use in chicken

PROCESSING AID: Antimicrobials can be introduced at several points in the process. Shown is the equipment used to add Anitox's thermostable OptimOH into the slurry line at a 110 MMgy plant that participated in the company's commercial-scale trials.PHOTO: ANITOX CORP.

ANTIBIOTICS


rations, though, has had a quick impact on the ethanol industry. Three weeks after the announcement, BetaTec Hop Products per-sonnel had received several calls from etha-nol producers wanting to learn more about the BetaTec program, says John Forte, vice president. “We’ve worked with a couple just recently who have said, ‘I’ve signed a com-mitment that I won’t use antibiotics. I need to make a change.’”

BetaTec’s products are derived from hops plants, a natural solution for antimi-crobial action, yeast nutrition and flavoring that predates the antibiotic era by centuries. Forte’s company, for instance, goes back 250 years in Europe. Going green and using a nonchemical approach is a conscientious decision that isn’t made overnight, and can’t be switched on and off, Forte says. “First a plant has to rationalize it, because a green program, let’s face it, costs more money. And that expense, rightfully so, has to be justified at the shareholder level. When somebody like a Tyson says we’ll only buy certified product, then there’s a price justifi-cation and reason beyond it’s the right thing to do.” Antibiotic-free distillers grains has been offered within the ethanol industry for a few years, but it hadn’t caught on partly because there was no offsetting premium. Forte says that’s changing, “There’s definite-ly a premium that’s starting to be captured.”

“There’s a cost to the plant to switch from antibiotics to us or a different pro-gram,” he continues. BetaTec approaches it as a value-added proposition and a part-nership with a plant. “You can work with a plant to clean it up, get it off antibiotics and nurture the yeast in a green way where you do get higher yields to justify the price.”

FERM ATTENTION: Antimicrobials keep bacteria growth in check, but at the same time must aid and not impede yeast health. Here a BetaTec hops formulation is being added to the mix tank for yeast propagation.PHOTO: BETATEC HOP PRODUCTS


New FDA regulations in the pipeline on two fronts will impact distillers grains producers and all companies providing process-ing aids. On the human side of FDA, the entire GRAS system is being challenged in court. It is expected that any changes to hu-man food GRAS determinations will impact the animal food side of the regulatory agency. Coming first, though, are new regulations implementing the Food Safety Modernization Act, with the final rule due out at the end of August. All feed ingredient suppliers will need to evalu-ate their ingredients and processes to identify any potential sig-nificant hazards. Ethanol producers will need to formally adopt good manufacturing practices (GMP) and standard operating procedures (SOP) for distillers grains. Shurson says FSMA represents a fundamental shift. “The traditional mindset in our U.S. food system has been to sample, test and monitor for the presence of bad stuff,” he explains. “It could be antibiotics, E coli or heavy metals.” FSMA is turning that around to rely less upon testing the final product and more toward preventative measures built into GMPs and SOPs that

are verified by outside parties. “In other words, write down what you do and, in compliance with regulations, do what you say and have a third-party auditor come in and say, ‘Yep, here’s what they said they’d do and they are doing it—we can certify their process.’”

In the traditional approach, Shurson explains, by the time test results come back, the product may have gotten into

the food chain, requiring costly recalls. If the use of antibiotics and other antimicrobials and process additives follow approved protocols that are verified by outside auditors, he adds, “there should be no reason to test.” Many don’t want to go through those layers of control, he admits, but there are benefits to oper-ational controls. “It’s not only a proactive way of avoiding issues, but at the end of the day, it improves efficiency and profitably because things are being done the way they are supposed to be and things aren’t getting ignored.”

Regulatory Shift Ahead

Shurson


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Other companies are introducing new chemical-based anti-microbials. Two, Solenis LLC and Anitox Corp., rolled out new product offerings at the International Fuel Ethanol Workshop in Minneapolis that they’ve been testing at cooperating ethanol plants for the past couple of years.

Known in the ethanol industry for its water treatment and oil extraction aids, Solenis (formerly Ashland Water Technolo-gies) is introducing a new line of fermentation aids designed to be yeast friendly while degrading or killing competing bacteria. The goal has been to provide options that work in conventional fermentations as well as in the elevated pH required for cellulosic and isobutanol processes, explains Allen Ziegler, global biorefin-ing marketing director. One of the three formulations is for use in yeast propagation and fermentation processes currently using minimal or no antibiotics. The second formulation has stronger antimicrobial action and the third combines the chemistry in the first two with chlorine dioxide to address upstream scaling issues, if needed. Ziegler, who also leads antimicrobial technology de-velopment, explains Solenis begins its development process for new chemistries by being sure the product will qualify as generally recognized as safe (GRAS). “We look long term,” he adds. “We want to be sure we won’t have regulatory issues in the future but still meet the requirements of the industry.”

Anitox Corp. introduced itself, as well as its new antimicrobial OptimOH, to the ethanol industry at FEW. The Georgia-head-quartered company has offered pathogen-control and processing aids for the poultry, livestock, pet food and grain milling industries for almost 40 years. For the past couple of years, it has worked globally with several ethanol producers as well as the National Corn-to-Ethanol Research Center to bring its chemically based antimicrobial to the ethanol process. The company describes Op-timOH as a thermostable, antibiotic-free, broad-spectrum, broad pH processing aid for ethanol production that leaves no residues in the distillers grains. “What we’re seeing in the field is that clients can remove antibiotics and maintain a consistent yield improve-ment,” says Eric Summers, who recently joined Anitox as techni-cal business development manager biofuels.

Even if their customers aren’t supplying companies like Ty-son or Chipotle, ethanol producers will be looking closely at the products and programs of companies featured here, along with others offering process aids such as DuPont, Lallemand and Ferm Solutions. Regulatory changes coming in the Food Safety Mod-ernization Act are expected to require all plants to better under-stand potential hazards and upgrade their procedures in handling all inputs—chemicals, antibiotics and even incoming corn.

Author: Susanne Retka SchillSenior Editor, Ethanol Producer Magazine

[email protected]

ANTIBIOTICS

Poet partners to fi ght pollution and deforestation in Haiti with ethanol cook stoves. By Janna Farley

Stoves SAVE�ha�

SOMETHING TO SMILE ABOUT: Appliance brand Dometic is supplying the cookstoves that eventually will be made in Haiti; and local partner Novogaz is organizing distribution.PHOTO: PROJECT GAIA

TIME SAVER: Replacing wood-burning stoves with clean, ethanol-fueled cookstoves means Haitians won’t have to spend hours cooking every day. PHOTO: PROJECT GAIA

OUTREACH


Decades ago, Haiti was a popular stop for luxury cruise liners. The country’s tropical weather, miles of beautiful Caribbean coasts and a rich history (not to mention the rum) en-ticed tourists to explore the island.

Fast forward to today. Deforestation and pollution have distressed the country’s environment and beauty. The chronic ef-fects of disease, economic instability and social unrest, coupled with the infrastruc-ture devastation from the 2010 earthquake, have positioned Haiti among the poorest countries in the world. The extreme pover-ty makes life on the island hard, particularly when it comes to meeting one of life’s basic needs: food. Not only do Haitians have to worry about where their next meal is com-ing from. They also have to worry about how to cook it.

“Cooking is something that most of us here in the United States do all the time

without even thinking twice about it,” says Brady Luceno, assistant director for Proj-ect Gaia, a Gettysburg, Pennsylvania-based nonprofi t organization dedicated to pro-moting and implementing projects based around clean cookstoves powered by alco-hol fuels.

Haitians, however, like many people in developing countries, cook over open fi res, using solid fuels such as charcoal, wood and other biomass substrates. But wood and charcoal are expensive and often hard to get. “People are suffering because they can’t afford to cook their daily meals,” Luceno says. Not to mention that burning these solid fuels is bad for the environment—and the residual smoke and carcinogens are bad for people’s health. “It’s gotten to the point where we’ve reached a crisis,” Luceno says. “Something has to change.”

The solution could be found in a very familiar substance—ethanol. And if all goes as planned, it not only will help fi ght

pollution and deforestation in Haiti, but also stimulate and revive the Haitian econo-my. That’s where Poet LLC, one of the na-tion’s largest producers of ethanol, comes in. Through a new partnership with Project Gaia, Poet hopes to help replace wood-burning stoves in Haiti with clean, ethanol-fueled cook stoves.

For decades, ethanol has been used in the United States primarily as an automo-tive fuel. But as good as it is for cars, etha-nol is an even better home cooking fuel, says Shon Van Hulzen, director of quality control for Poet plant management in Sioux Falls, South Dakota. “The characteristics of ethanol as a fuel and its combustion chem-istry make it an ideal home cooking fuel,” he says. “Ethanol is safe to handle from both a toxicity and fl ammability standpoint, and the emissions from burning ethanol are virtually nonexistent, with the primary combustion byproducts being simply car-bon dioxide and water vapor.”

HELPING HAND: The cost to use an ethanol-fueled cookstove is signifi cantly less than using wood or charcoal. In addition to the economic benefi ts, the cookstoves also eliminate the household air pollution caused by burning wood and charcoal indoors, resulting in healthier, happier families. PHOTO: PROJECT GAIA


To jump-start the project, Poet do-nated 12,000 gallons of ethanol, shipping two loads from its production site in Jew-ell, Iowa, to Port-au-Prince, Haiti. The fi rst rollout of stoves and fuel began earlier this year. A couple hundred stoves have been distributed so far.

Haitians are excited about the possi-bilities these cookstoves hold, Luceno says, and are thrilled with the speed of cooking. “One of the fi rst users said she would have had to wake up at 5 a.m. to light her char-coal stove to make coffee in the morning. Now, she only needs 10 minutes.”

But more than saving time, Haitians will be saving money. “We found that in Haiti, people were spending 56 cents to cook one meal because of the fuel cost,” Luceno says. “It’s our hope that with etha-nol, they’ll be able to cook more meals with the same amount of money.”

Abounding Benefi tsThe benefi ts don’t stop there. Im-

proved cooking conditions will also help improve Haitians’ health. Household air

pollution—essentially kitchen smoke re-sulting from burning wood and charcoal indoors—“is the silent killer in the kitch-en,” Luceno says. The United Nations es-timates that the average lifespan in Haiti is shortened by 6.6 years due to illnesses caused by household air pollution.

The use of ethanol as a cooking fuel also stands to help the environment. The nation has experienced extreme defores-tation over the years, and now less than 2 percent of Haiti’s forest cover remains. Alternative cooking fuels, like ethanol, will help put an end to that, Luceno says.

But ethanol’s potential as a cooking fuel in Haiti goes far beyond the fam-ily meal. And that’s what makes the proj-ect so exciting, Luceno says. “The stoves themselves are not the solution,” she says. “They merely provide the spark.” Ethanol could be just what Haitians need to stimu-late their economy. The country of Haiti is testimony to the fact that you cannot give people out of poverty. Despite the best intentions of hundreds of nonprofi t orga-nizations and millions of donated dollars,

A HAND UP: Poet and Project Gaia hope to improve the standard of living and drive positive socioeconomic change with the project in Haiti. PHOTO: PROJECT GAIA


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the country of Haiti has made very little progress toward sustaining its own people. “Economic opportunity is what they need, not another handout,” Van Hulzen says.

As more Haitians start using the cook-stoves, there will be a bigger market for ethanol in the country. Ethanol imported from the United States will help meet that demand for the home-cooking fuel. But eventually, Haitians could produce their own. “Ethanol offers perhaps the great-est opportunity to revitalize the agricul-ture sector and offer families a clean and

affordable alternative to charcoal,” Luceno says. “Haiti was once a leading alcohol-producing nation but currently produces only a fraction of its potential. Those sugar cane mills and alcohol distilleries represent a ready infrastructure for a clean energy future. If ethanol were produced there, it could be cost-competitive with charcoal, kerosene and liquid petroleum gas.” This kind of socioeconomic development is the most effective way to teach a man to fish, or, more aptly, to “give a man a market,” Van Hulzen says.

“This creates a viable market for clean burning ethanol in Haiti and, in addition, a viable agriculture market Haitians can take advantage of in the future,” says Jeff Broin, founder and executive chairman of Poet. “If agriculture can regain a foothold by producing sugarcane, corn and other crops for cooking fuel, we can do even more than improve health and defores-tation issues in Haiti. We can literally see people pull themselves out of poverty.”

It won’t happen overnight. “Devel-oping an economy takes time. It takes a

‘It’s a wonderful project that a lot of us here are rallying around. We used Haiti initially as a test site to see if we could get a product flowing, to get a market developed. Now we’re looking at other geographies.’


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long-term vision and an unwavering com-mitment to make it happen,” Van Hulzen says. “But it’s worth the investment as it is arguably the only method of creating a sus-tainable country.”

Haiti is just the beginning. The poten-tial for ethanol to be used as a home-cook-ing fuel extends to many other countries around the world. “It’s a wonderful project that a lot of us here are rallying around,” Van Hulzen says. “We used Haiti initially as a test site to see if we could get a product fl owing, to get a market developed. Now we’re looking at other geographies.”

African countries, such as Kenya, are on the list, Van Hulzen says. Project Gaia estimates that if every home in Africa, de-veloping Asia, Latin America and the Mid-dle East that is currently using traditional solid fuels would switch to ethanol fuel for cooking, the resulting demand would be more than 27 billion gallons of ethanol an-nually. “That’s almost exactly double the en-tire United States market today,” Van Hul-zen says. “It’s a huge market.”

It’s projects like these that illustrate, as the people of Poet believe, that ethanol is more than just an automotive fuel. “It’s something that literally changes lives,” Bro-in says, “whether that’s a farmer who has a new market for grain, a city with air quality issues that needs a cleaner-burning fuel or, in this case, a woman in Haiti who wants to cook dinner for her family without foul-ing the air she and her husband and children breathe.”

Related Projects It isn’t the fi rst time Poet has worked to

improve lives in Africa. A project dubbed Mission Greenfi eld

is improving the lives of farmers in rural

‘One of the first users said she would have had to wake up at 5 a.m. to light her charcoal stove to make coffee in the morning. Now, she only needs 10 minutes.’

OUTREACH

PRECIOUS CARGO: Justin Easterday, commodities supervisor for Poet Biorefi ning, Jewell, Iowa, loads the fi rst ethanol shipment to Haiti as part of Poet’s eff ort to provide the country with clean, ethanol-fueled cookstoves. PHOTO: GREG LATZA


Kenya. When Broin took part in a church mission trip to Kenya, he was struck by how bad the local corn crop appeared. A drought factored into the problem. But Broin also determined that traditional farming practices were starving the crop of nutrients and moisture.

Land in Africa is traditionally hoed by hand. Because there’s no freeze-thaw cycle there, there’s a hard pan below the topsoil that’s probably been there for hundreds of years. So the roots would simply spread out when they hit the hardpan, and in periods of dry weather, it could cause a poor to no yield. Broin and a charitable foundation set up by Poet found a local partner, FIPS (Farm Input Promotions) Africa to help teach African farmers new farming, tillage and fertilization techniques.

In addition, Poet also supports Mission Greenhouse, a multiyear project to grow a school for disadvantaged girls in Kenya.

Author: Janna FarleySouth Dakota-based freelance writer

[email protected]

LIFESAVER: A Haitian woman prepares food. The United Nations estimates that the average lifespan in Haiti is shortened by 6.6 years due to illnesses caused by household air pollution. Switching to an ethanol cooking fuel would reduce that pollution. PHOTO: PROJECT GAIA


Growing industrial gas applications will diversify markets beyond carbonation.By Sam A. Rushing

CARBON DIOXIDE

For decades, carbon dioxide has been recovered from concentrated sources like fermentation and sold to a handful of merchant markets, primarily beverage carbonation, food and meat processing. There are several industrial applications of note as well. As we have all noticed in the press, there is increased pressure being placed

on hydraulic fracturing projects, due to water contamination and absolute water shortages. Opportunities exist for ethanol plants to provide their CO2 product for both dry frac demands to replace the water-based hydraulic fracturing applications and large, ongoing sums of CO2 for supply to enhanced oil recovery projects.

With the dire need to reduce or slow ongoing carbon emissions and atmospheric carbon content, which many claim to be reaching

Energy-Related Carbon Dioxide Opportunities Can Enhance Ethanol Projects

CONTRIBUTION: The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).


CARBON DIOXIDE

400 parts per million these days, a dent in turning the tide can be achieved via novel techniques for replacing water and fluids in concrete curing, and the generation of power and geothermal energy using CO2 as a working fluid. Other opportunities for CO2 are growing in the industrial sector. Novel chemistry is creating opportunities in polymer processing, renewable methanol and the production of formic acid, all using CO2 as a feedstock. In the advanced biofuels industry, algal biofuels fixation is an excellent means of utilizing carbon dioxide in renewable energy. Other energy twists include using the commodity in wind energy projects as a cushion gas, enhancing the recovery of natural gas in coal bed seams and in situ uranium leaching.

Dry Frac DeliversMany CO2 marketing firms are expanding dry frac technology,

as opposed to the currently more common hydraulic fracking technique. In regions where water is scarce, unavailable, or where recycling and spillage is a problem, CO2 is the logical choice and solution. In dry frac, CO2 replaces water, tapping into the energized nature of CO2 as it rapidly expands from a liquid to a vapor. The technology can deliver the well much better than water and is sometimes applied along with foam, sand and other materials to save water and eliminate the need for clean-up, recycling and the risk of spills from hydraulic fracturing techniques.

Before hydraulic fracturing took hold, dry frac provided abundant CO2 demand. Today, many CO2 refiners and marketers are returning to this service, as pressure on the hydraulic fracturing industry grows. Many of those firms buy raw gas across the fence from ethanol producers, supplying one grade of CO2 commodity to a variety of markets, including frac, beverage and food.

Ethanol for EORIt is hoped that enhanced oil recovery (EOR) will be one

of the best options for both sequestration of CO2 emissions as well as making money from otherwise depleted oil wells. Of the

approximate 140 CO2-based EOR projects found in the United States, there is one project of particular interest to the ethanol industry.

The U.S. DOE-funded CO2 demonstration project started in 2002 at the regional Russell County, Kansas, Hall - Gurney oil field, aimed at both carbon sequestration and enhanced oil recovery. This oil field, on a 10-acre patch of land some seven miles from a 48 MMgy ethanol plant near Russell, Kansas, has produced more than 150 million barrels of oil since the original discovery in 1931. However, oil production dropped significantly into the 2000 era, when the EOR process began reviving oil production.

The integrated White Energy (sometimes referred to as the Energy Partners) ethanol plant at Russell receives its process heat from a nearby cogeneration plant. A colocated CO2 facility captures the gas and delivers it via pipeline to the central Kansas oilfield.

When launching an EOR project, smaller quantities of CO2 are usually trucked or railed in as an initial test. This project planned a truckload per day of CO2 for six months, followed by alternating injections of CO2 and water for about four years. This EOR project pumps liquid CO2 about 3,000 feet underground to reach the cracks and crevices among rocks, clay and other geologic formations. CO2 acts as a solvent and reduces the swelling of clay, dissolves carbonate compounds, and much more. The oil is swept to nearby wells for recovery. Some estimates indicated an additional 20,000 barrels of oil could be recovered over the four-year period, in order to be successful. From this data, a greater expanse of EOR projects will be evaluated for CO2. If industrial (anthropogenic) sources of CO2 are not adequate, some of this demand could be serviced by natural, geologic sources from regional New Mexico Bravo Dome and Colorado natural sources

Given the highly agricultural nature of the region, raw CO2 sources from both ethanol and ammonia are fairly abundant, albeit, CO2 is already recovered for the merchant markets from some of the plants. Ethanol sources could well supply at least part of this EOR demand in various regions of the United States, including the West, Southwest, Central and Middle Atlantic regions. The consideration of EOR as a mechanism for both sequestration and additional oil production, linked with CO2 byproduct from ethanol represents many benefits, from increased oil production, to creating a form of carbon sequestration, to the development of business opportunities and more jobs.

Cost ComparisonSupplying CO2 for such energy-related projects is a function

of source type, location and infrastructure costs of the oil wells. Supply of CO2 to the Russell, Kansas, project is integrated with nearby cogenerated process heat from the power plant for ethanol fermentation, aided by DOE funding. The cost of recovering CO2 is a function of the raw gas composition. In the case of large anthropogenic sources, such as power production, the flue gas is weak in CO2 concentration when compared to ethanol sources

‘With the proper ingredients surrounding sources, destinations, logistics and infrastructure, coupled with geological and well characteristics, there will be opportunities for CO2 to supply EOR projects in the future.’

that are often 98 percent CO2 by volume in a water-saturated sample. Power plant flue gas holds 12 to 20 percent by volume at best, meaning the CO2 would have to be concentrated upstream of liquefying and purifying, making it a very expensive form of EOR product. Ethanol projects often average 430 to 800 tons per day of raw CO2; indeed, some larger CO2 ethanol projects do exist and are flourishing. Some EOR projects could be candidates for 1,000 to 2,000 or even 5,000 tons per day. While that could be recovered from the large amounts of flue gas emitted from coal-fired power plants, these sources are expensive to construct. Not only does the gas need to be concentrated prior to liquefaction, most require an expensive MEA (monoethanolamine) recovery plant.

Given this, industrial sources such as ethanol are already concentrated, and are often located within a reasonable distance of a wide variety of markets, and in some cases, prospective EOR ventures. The ultimate goal is locating the most economical source of raw CO2 gas for liquefaction and possible purification. Then, there is the hurdle surrounding the costs and existence (or new construction) of a pipeline plus, of course, oil well infrastructure asset costs. It is believed the demand for EOR-based CO2 long term will outstrip supply capabilities. I have often evaluated CO2 opportunities for all markets including captive and sequestration options such as EOR, particularly with a sequestration- and energy-producing slant. Findings have represented potential EOR markets throughout the continent; therefore, this is an avenue to explore for the ethanol project owner near oil producing regions. With the proper ingredients surrounding sources, destinations, logistics and infrastructure, coupled with geological and well characteristics, there will be opportunities for CO2 to supply EOR projects in the future, particularly when value-added elements are included in the equation.

Author: Sam A. RushingPresident, Advanced Cryogenics Ltd.

[email protected]

CARBON DIOXIDE

JOB #: 53528 Print Scale: NoneCLIENT CODE: CHST03 Version: NoneCLIENT: CHS

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Producers work to expand markets for sorghum distillers and oil. By Kelli Fulkerson

SORGHUM

While exports are undeniably the hottest market for grain sorghum right now with China set to buy over 70 percent of the 2014-’15 U.S. crop, sorghum's advantages as an ethanol feedstock remain evident and vital to end-users. Grain sorghum ethanol producers have recognized the benefits inherent to sorghum and are working to exploit the feedstock’s numerous advantages, including coproducts.

An innovator in this is Kansas Ethanol LLC, located in Lyons, Kansas. In addition to about 60 million gallons of ethanol annually, Kansas Ethanol produces wet and dried distillers grains, oil, and protein

and forage supplements. Taking advantage of value-added coproducts does add cost, but extracting value from every component of grain pays big dividends, says CEO Mike Chisam. “We see the economic importance of utilizing the added value that every kernel of grain provides.” Kansas Ethanol typically grinds a blend of one-third corn and two-thirds grain sorghum.

Chisam and his team began working with ICM Inc. to implement the company’s Advanced Oil Separation system, which utilizes a proprietary process to maximize the recovery of nonfood grade oil from centrifugally separated syrup.

“Grain sorghum fit into the oil extraction process very easily,” Chisam says. “ICM made a few alterations in the evaporation and oil

Fueling the Sorghum Ethanol Coproducts Engine

CONTRIBUTION: The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Ethanol Producer Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

QUALITY RED: Sorghum and corn are essentially interchangeable in the ethanol process as starch and handling characteristics are similar. Sorghum distillers are red, however, which can be problematic for buyers accustomed to judging corn distillers quality by the golden color.PHOTO: NATIONAL SORGHUM PRODUCERS


extraction process to ensure the oil remained a liquid rather than solidify because sorghum contains more wax than corn, necessitating slightly different procedures."

Grain sorghum oil extraction—like corn oil extraction—is quickly becoming a key component for financial health during times of tight margins. However, this can vary from plant to plant dependent upon the amount of oil that is being extracted. Chisam says oil extraction has had a positive contribution to Kansas Ethanol's net income. “We could earn more on every gallon, but we choose to hold back during extraction to ensure our feed tag will read 4 to 5 percent fat for the livestock feeders we work with,” he adds.

Grain sorghum oil is primarily used as a feedstuff in the swine, poultry, beef cattle and dairy cattle industries. The swine and dairy industries in particular have found extra value in grain sorghum ethanol coproducts, as protein content and even the contents of lesser-known micronutrients like iodine can become important. Research also suggests that sorghum can help keep the glycemic index of dairy cows in check and can boost meat quality scores in swine.

Like corn oil, another outlet for sorghum oil is the biodiesel market. Currently the National Sorghum Producers and several industry partners, including Kansas Ethanol, are working with the U.S. EPA to develop a pathway for sorghum-based biodiesel to generate renewable identification numbers (RINs).

Another effort led by the Sorghum Checkoff is working with USDA on a research project devoted to sustainable sorghum biofuels and coproducts. A major focus of this work is adding value to sorghum ethanol plants by relying on the unique properties of grain sorghum.

Value-added DDGS Ethanol plants in 2014 produced approximately 39 million metric

tons of feed, according to the Renewable Fuels Association, making the renewable fuels sector one of the largest animal feed processing segments in the U.S. With such a large market of so many participants producing the same products, Kansas Ethanol has worked to differentiate its products by working with Rayeman Elements Inc. to develop DDGS cubes and tubs for cattle producers. “We knew our WDGS and DDGS were being utilized in feedlots and dairy operations, respectively, but also wanted to develop products for the cow-calf producers,” Chisam says. Rayeman Elements and Kansas Ethanol developed the 100 percent DDGS range cube and supplemental tub products and Furst-McNess has been helping with marketing the products.

The cubes, trademarked Bova Cubes, are a convenient, quality feed for cows, stockers or calves that can be fed on the ground without high waste or wind loss. The tubs, trademarked Bova Tubs, are 200-pound lick tubs offering expected intake of 1 to 3 pounds per head per day. Both products feed at a 30 percent crude protein and 8 percent crude fat rate. "I'm feeding my heifers Bova Cubes during fall grazing," says Furst-McNess customer J.P. Conrad, manager of Lazy 9 Ranch. "The fat content is outstanding. It really boosts the heifers along their way."

“Our customers have been impressed with the cube and tub products,” Chisam says. “The sorghum DDGS do offer a little higher protein content, making the product development even easier on our end.”

Sorghum Background Sorghum has been a regionally important feedstock to the ethanol

industry since the late 1970s with approximately one-third of the U.S.

crop typically used to produce fuel. Naturally drought-tolerant sorghum can be used to produce starch, sugar and cellulose-based ethanol. Grain sorghum is an excellent option for ethanol production because it produces the same amount of ethanol per bushel as corn and can be grown using one-third less water.

Sorghum and corn are virtually interchangeable in ethanol production, as there are few differences in yield or handling through the process. The advantage for sorghum is seen when ethanol producers are mindful of coproduct challenges and opportunities when formulating a feedstock procurement strategy centered on sorghum. Sorghum DDGS tend to be higher in protein and slightly lower in fat than corn DDGS, while starch content remains basically the same.

The most common states in which sorghum is used to produce ethanol are California, Kansas, Missouri, Nebraska, South Dakota and Texas. Producers in several other states also use sorghum when market conditions are favorable. Two states lead the way as pioneers of sorghum-based ethanol: Kansas with a total capacity of 510 MMgy and Texas with 390 MMgy.

As more learn about sorghum’s advantages in low-water demand for growers and added value in distillers grains and oil, there is potential for sorghum-based ethanol production to grow. “Even though we don’t have as much sorghum running through our plant today as we normally do, we have many alternative markets we are exploring when supply increases,” says Matt Durler, vice president of marketing for Conestoga Energy Partners, in Liberal, Kansas.

Author: Kelli FulkersonCommunications Director, National Sorghum Producers

[email protected]

SORGHUM

VALUE-ADDED DISTILLERS: Mike Chisam, CEO, and his team at Kansas Ethanol worked with Rayeman Elements to successfully pelletize sorghum distillers to make supplementing range-fed cattle easier.PHOTO: NATIONAL SORGHUM PRODUCERS


Several years back someone asked me if everything that could be done with distillers grains was done. It is amazing how innovation continues to percolate through the industry and distillers coproducts continue to evolve, as do the industries that produce as well as consume them. At the recent Distillers Grains Technology Council’s 19th Distillers Grains Symposium in Kansas City, the latest and greatest issues to impact distillers grains production and use, and thus the fuel ethanol and beverage alcohol industries, were discussed. Of course, the main concerns that affect the partnership between alcohol plants and livestock producers include DDGS price and availability.

To fully explore the issues, the symposium consisted of several tracks. These included: 1) economic issues, including supply and demand, sales and marketing, both domestic and export; 2) livestock nutrition; 3) new processes and new coproducts; 4) effects of manufacturing processes on coproduct properties and quality; 5) leveraging and integrating systems to obtain greater value for DDGS; and 6) regulatory issues, including the Food Safety and Modernization Act and implementing hazard analysis and critical control point (HACCP) programs at ethanol plants.

In terms of markets and economics, quality and consistency is still critical for the industry. Beef and dairy cattle still consume the lion’s share of distillers coproducts, and the new USDA coproducts survey has been a very useful tool so far. Surprisingly, almost one-third of ethanol coproducts in the U.S. are marketed as wet feeds. More important to coproduct values, however, is the international export market. In recent years, China has become the primary importer of DDGS. Due to this demand, the sales price of DDGS was actually higher than that of corn in recent years. In fact, when the Chinese government decided to restrict DDGS imports last summer, the price of DDGS collapsed here in the U.S. The silver lining to that situation, though, was that U.S. livestock producers decided to start using more in their rations again, as the price of DDGS was substantially discounted compared to the price of corn, at least on a short-term basis. This year, Chinese imports are again on the rise. It will be very interesting to see how the export market ultimately affects coproduct prices here in the U.S. during the coming year.

As always, the livestock nutrition portion of the program addressed current knowledge in terms of feeding recommendations, challenges and opportunities for the beef, dairy, swine and poultry

industries. As coproducts have evolved in recent years to a lower oil (and thus energy) level with the rapid implementation of corn-oil extraction systems throughout the industry, livestock nutritionists and researchers have endeavored to understand how best to use these new coproducts vis-a-vis traditional distillers grains. From the presenters this year, it is clear that the livestock industry has progressed significantly, and lower-oil coproducts are becoming well-understood via many ongoing feeding trials. Not only do distillers grains offer price advantages compared to other ingredients, but they also offer nutritional and digestibility benefits as well. And we are seeing greater inclusion levels than ever in not just ruminant diets, but also swine and poultry diets.

During the discussion of new processes and new coproducts, several speakers provided insights on their approaches to process innovation and next-generation coproducts that are being commercialized. In fact, several fractionated coproducts are hitting the market. These are primarily high-protein feed ingredients, and arise from upstream separations, not fractionation from the DDGS (see my column in the March issue on utilizing the fiber fraction). How much more will livestock producers be willing to pay for these new ingredients? Feeding trials will be necessary to help establish these new values. For certain, protein content of these new products is much higher than traditional DDGS. And, not only can protein be economically concentrated, but corn fiber can be as well. This fiber is a material that can be broken down by enzymes and then fermented into cellulosic ethanol at the ethanol plant (which then qualifies as an advanced biofuel). Indeed, as these systems become commercialized and implemented throughout the industry, we will need a better understanding of how best to use these in the livestock industry.

Not only does fractionation allow ethanol plants to obtain truer nutrient values for DDGS, but so does integration of ethanol plants with livestock feeding operations. One of the talks reviewed the economic advantages that can occur by this type of synergism. And, as the industry evolves into Generation 1.5 and Generation 2.0 ethanol production, these types of integrations could show even more economic benefits.

At the end of this summer, the U.S. Food and Drug Administration is slated to release the final rules for FSMA and guidance on current good manufacturing practices. Our speakers discussed the issues that your companies should be worrying about and preparing for. Although the new regulations aren’t requiring an

DDGS Challenges,Old and New

TALKING POINT

By Kurt A. Rosentrater


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Buckman takes a wider view.

HACCP plan, the components in such a plan provide one way to help meet some of the FSMA requirements. Yes, FSMA will change the way that many companies do business, but implementing steps to comply should be well underway at most plants.

All in all, our 19th annual symposium covered many facets of coproducts, from grain kernels all the way through the animals consuming the coproducts, and everything in between. Hopefully we offered something for everyone. There were several major takeaway messages from our speakers. First, coproducts are continuing to change in both physical and nutrient properties. The true value of the nonfermentable materials in ethanol plants are becoming apparent not only to the ethanol plants, but also to the livestock producers as well as affiliated industries. Yes, starch is used to produce alcohol, but ethanol plants are also feed-manufacturing plants, and all of the other nutrients have considerable value. Additionally, as our industry becomes more globalized due to exports (of both the DDGS and ethanol), the market values we are used to seeing may be subject to unanticipated shifts.

To answer the question that I led the article with: Yes, we still have much work to do to improve the value and utilization of ethanol coproducts. Our industry recognizes these challenges (both old and new) and continues to grow and evolve.

Next year we will be holding our 20th annual symposium in St. Louis. We hope to see you there!

Author: Kurt A. RosentraterExecutive Director, Distillers Grains Technology Council

Iowa State University515-294-4019

[email protected]

GOLDEN COPRODUCT: A barge (shown in the background) is loaded with distillers grains at a CHS Inc. facility in Winona, Minnesota.PHOTO: DAVID LUNDQUIST, CHS INC.


Due to recent reductions in profitability in the ethanol industry, now may be a perfect time for ethanol production companies to implement equity redemption plans. Equity redemption plans can provide important liquidity for investors and at the same time provide important tax relief for certain companies and an enhanced return for those that continue as owners. While equity redemption plans are typically considered when margins are favorable and companies are flush with cash, those are frequently the most difficult times to find willing sellers. However, when margins are less favorable, sellers may be more willing to consider a sale of their investment. In addition, due to less favorable commodities prices, many owners may welcome the ability to convert their ethanol plant investment into cash.

Ethanol production companies that have little or no debt can leverage the strength of their balance sheet in order to implement these equity redemption plans. For large-scale redemption programs, it may make sense to seek debt financing specifically tailored to this use. Further, for smaller redemption programs, ethanol production companies may be able to utilize existing lines of credit to implement a redemption program. Due to lower corn prices, many ethanol production companies are carrying large lines of credit that are not being used that could be tapped for equity redemptions.

Many ethanol production companies were capitalized through local equity drives spearheaded by local grain producers. These producers understood that ethanol would provide a market for their corn in addition to the other benefits provided by ethanol. Further, a significant number of these ethanol production companies were organized as limited liability companies to capture favorable tax treatment and have now fully depreciated their assets. Without generous accelerated depreciation deductions, these limited liability companies are allocating a significant amount of taxable income to their owners. On the heels of the record profits generated last year, owners are feeling the tax impact. At the same time, the age of the investors in these ethanol production companies continues to increase. Many of the investors who financed the ethanol production

companies in the heart of their careers are now a decade older and considering retirement. Older owners are in many cases looking for a way to liquidate their investment but are finding a limited number of buyers in the market. While these two industry trends may seem unrelated, it is possible to marry the two in a way that presents a win-win for all involved through an equity redemption plan.

There is an important tax benefit to limited liability companies which may be able to treat a portion of the price paid to redeem the company’s equity as a new asset that would allow additional depreciation for the company. For companies that have fully depreciated their assets, this can provide important tax relief to their owners, especially for larger-scale redemption plans.

In addition, some ethanol production companies that are SEC reporting companies could use redemption plans to terminate their Securities and Exchange Commission registrations. If this is your goal, companies would focus their redemption efforts on redeeming all of the ownership interests of a large number of small investors in order to meet applicable SEC thresholds for deregistration.

Structuring an equity redemption plan involves a number of legal and accounting considerations to be implemented successfully. Limited liability companies need to consider whether the equity redemption plan they implement will meet IRS rules related to publicly traded partnerships. For larger redemption plans, there may be SEC issues related to tender offers and insider trading regulations to consider. While these rules may limit your flexibility in implementing an equity redemption plan, with careful planning almost any program can be successfully pursued. If you think repurchasing equity may be something that could benefit your company, now may be the perfect time to start.

Author: Joe LeoAttorney, BrownWinick Law Firm

[email protected]

Equity Redemption Plans CanProvide Liquidity, Tax Relief

BUSINESS MATTERS

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July 2015 Ethanol Producer Magazine

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Transcript of July 2015 Ethanol Producer Magazine