March 2008 Ethanol Producer Magazine

INSIDE: ETHANOL 2008 AUSTRALIA CONFERENCE PREVIEW

US $3.95/US $24.95 year WWW.ETHANOLPRODUCER.COM

MARCH 2008

Cellulosic Ethanol: The Feedstock Factor

Partnership Forms to Commercialize Rice-Straw-to-Ethanol Process

Termites May Hold Key to Unlocking Cellulosic Bonds

How Much is a Ton of Biomass Worth?

EP

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than half of the ethanol production facilities

currently under construction use our technology.

Yet for all our achievements, there remains

but one true measurement of our success.

Your success.

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ETHANOL PRODUCER MAGAZINE MARCH 2008 7

features

insideMARCH 2008 . VOLUME 14 . ISSUE 3

96 BUSINESS Managing Risk Through Marketing Methods

Marketing arrangements, whether in-house, through a third-party service or

both, should be tailored to fit the unique needs of an ethanol plant.

By Bryan Sims

104 PROFILE Honoring the GHGenius

When Canadians need reliable information on renewable fuels, they turn to

Don O’Connor. To show their appreciation, the Canadian Renewable Fuels

Association presented him with the Green Fuel Industry award.

By Anduin Kirkbride McElroy

114 LEGAL Ethanol Start-Ups and the Bankruptcy Bogeyman

EPM provides insight into the situations that led to the financial tribulations of

two ethanol plants that are now facing angry creditors. By Sarah Smith

124 EVENT What’s Up Down Under

The Ethanol 2008 Australia Conference in Sydney will feature the latest

information on Australia’s emerging biofuels industry, and developments in

other areas of the world. By Ian Thomson

64 CELLULOSE All Roads Lead to Rome and Rice

BBI International and Colusa Biomass Energy Corp. have partnered to

commercialize a process that will turn rice straw and hulls into cellulosic

ethanol. By Ron Kotrba

72 MARKET Biomass: At What Cost?

How much does a ton of corn stover cost? Determining a fair value for

biomass is a challenge that needs to be addressed as the cellulosic

ethanol industry develops. By Jerry W. Kram

80 TECHNOLOGY Termite-Tailored Cellulosic Ethanol

Researchers are studying termites to find out what role, if any, the

bacteria in their guts play in degrading cellulose. By Jessica Ebert

88 ENVIRONMENT Feedstock Face-Off

An ecologist and an agronomist present opposing views concerning

which is the best feedstock for the growing ethanol industry: corn or

mixed prairie grasses. By Susanne Retka Schill

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© N

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Transforming corn and other grains into biofuels is a major industry

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departments contributors130 PROCESSAgitation Challenges in Cellulosic Ethanol ProductionWhile researchers continue to improve enzyme cocktails for cellulosic ethanol production, the basicphysical management and distribution of the feedstocks throughout the ethanol process still need tobe fully considered. By Gregory T. Benz

134 FINANCEManaging Through Tough Times in Ethanol ProductionHigh input costs and moderate ethanol prices have pinched profits for some ethanol producers.Plenty of options exist for managing cash flow in tightening market conditions.By Todd Taylor and Ryan Murphy

138 WORLDTerrorist Group Extortion and Other Challenges for Transnational CorporationsLike many industries, ethanol is moving onto the global stage. Companies working worldwide needto be aware of the possibility of extortion and how to handle it. By Dean C. Alexander

on the webEthanolProducer.com reader’s poll results

�For the week of Jan. 14Will intermediate-level ethanol blends (E20, E30) become common throughout the United States in five years?

Yes—75.3 percent

No—22.1 percent

Unsure—2.6 percent

�For the week of Jan. 7How much ethanol production capacity will be on line by the end of 2008?

Less than 8 billion gallons per year—12 percent

8 billion to 10 billion gallons per year—72.3 percent

10 billion to 12 billion gallons per year—15.7 percent

insideMARCH 2008 . VOLUME 14 . ISSUE 3

11 Advertiser Index

14 The Way I See ItBy Mike BryanAddressing the 'Silver Bullet' Theory

16 Letter to the Editor

18 Business & People

22 Commodities

24 A View From the HillBy Bob DinneenDelivering on the Promise of Change

25 RFA Update

28 Industry News & BIObytes

38 Plant Construction List

50 Our PlantBy Jessica EbertA First for Quebec

52 In the FieldBy Susanne Retka Schil lNot Your Grandma’s Sweet Potato

54 Up FrontBy Anduin Kirkbride McElroyAn Original

56 Flex FactorBy Ron KotrbaCold Start 101

58 BusinessBy Bryan SimsFTC: Ethanol Industry is 'Unconcentrated'

60 DriveBy Scott AthertonAmerican Le Mans Series Touts E85

62 Legal PerspectivesBy Britney Schnathorst New SEC Rules May Make It Easier to Resell Securities

142 Events Calendar

144 EPM Marketplace

Ethanol Producer Magazine: (USPS No. 023-974) March 2008,Vol. 14, Issue 3. Ethanol Producer Magazine is published month-ly. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks,ND 58203. Periodicals Postage Paid at Grand Forks, NorthDakota and additional mailing offices. POSTMASTER: Sendaddress changes to Ethanol Producer Magazine/Subscriptions,308 Second Ave. N., Suite 304, Grand Forks, North Dakota58203.

BPA Worldwide Membership Applied for October 2006

2008 International Fuel Ethanol Workshop & Expo

Adams Building Contractors

Aeroglide Corp.

Agra Industries Corp.

American Railcar Industries Inc.

Anhydro Inc.

Ansul Fire Solutions

Aqua Power Inc.

Baird Holm LLP

Barr-Rosin Inc.

BBI Project Development

Best Energies Inc.

BetaTec Hop Products Inc.

Biofuels Australasia

Biofuels Canada

Biomass Magazine

Brown, Winick, Graves, Gross, Baskerville & Schoenebaum PLC

Buhler Inc.

Burns & McDonnell

Calbrandt

Canadian Renewable Energy Workshop

Cereal Process Technologies

Check-All Valve

Chief Agri-Industrial

Christianson & Associates PLLP

Clifton Gunderson LLP

Competitive Energy Insight Inc.

Coverall Building Systems

Davenport Dryer LLC

dbc SMARTsoftware Inc.

Delta-T Corp.

Dresser-Rand

Eisenmann Corp.

Electro Sensors

Encore Business Solutions

Ethanex Energy

ethanol-jobs.com

Ethanol Technology

Exothermics Inc.

Fagen Inc.

FBA Consulting

FCStone LLC

Federal Equipment Co.

Fermentis

Flowserve Corp.

Gamajet Cleaning Systems Inc.

Genencor International Inc.

GS CleanTech Corp.

Hurst Boiler & Welding Co. Inc.

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Ad IndexHydro-Klean Inc.

ICM Inc.

Indeck Power Equipment Co.

International Biomass '08

Conference & Trade Show

Interstates Cos.

Intersystems Inc.

ITT Industries Goulds Pumps

Kennedy & Coe LLC

Larox Corp.

Layne Christensen Co.

Legris Transair

Louis Dreyfus

MAC Equipment

Management Recruiters of Atlanta

Mapcon Technologies Inc.

McC Inc.

Nalco Co.

Natwick Associates Appraisal Services

Nebraska Public Power District

NESTec Inc.

New World Biomass Conference

New York Blower Co.

Nexen Marketing USA Inc.

Novozymes

PhibroChem

Platts Conference & Events Division

Poet LLC

R&R Contracting

RailWorks Track Systems Inc.

Renewable Fuels Association

Robert-James Sales Inc.

Ronning Engineering

Roskamp Champion

SafeRack LLC

Salco Products Inc.

Seneca Waste Solutions

Siemens Energy & Automation

Smar International Co.

Strongform Nationwide Industrial Builders

Sulzer Chemtech USA Inc.

TDC Dryers

Trico TCWind

Vaperma Inc.

Victory Energy

Vogelbusch USA Inc.

Volkmann Railroad Builders Inc.

Walling Water Management

Wanzek Construction Inc.

26 & 27

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Correction from our January 2008 issue:On page 19 of the Business & People section, it was incorrectly stated that U.S. Water Services wasinstalling its patented high-efficiency reverse osmosis process at Big River Resources Galva LLC.The process is patented, but not by U.S. WaterServices.


EDITORIAL

Kathy Bryan [email protected]

Tom Bryan Editorial [email protected]

Jessica Sobolik Managing [email protected]

Dave Nilles Contributions [email protected]

Rona Johnson Features [email protected]

Ron Kotrba Senior Staff [email protected]

Anduin Kirkbride McElroy Staff [email protected]

Jerry W. Kram Staff [email protected]

Susanne Retka Schill Staff [email protected]

Bryan Sims Staff [email protected]

Jessica Ebert Staff [email protected]

Sarah Smith Staff [email protected]

Kris Bevill Staff [email protected]

Jan Tellmann Copy [email protected]

Craig A. Johnson Plant List & Construction [email protected]

Amber Armstrong Administrative [email protected]

ART

Jaci Satterlund Art [email protected]

Sam Melquist Graphic [email protected]

Elizabeth Slavens Graphic [email protected]

Jack Sitter Graphic [email protected]

PUBLISHING & SALES

Mike Bryan Publisher & [email protected]

Joe Bryan Vice President of [email protected]

Matthew Spoor Sales [email protected]

Howard Brockhouse Senior Account [email protected]

Clay Moore Account [email protected]

Jeremy Hanson Account [email protected]

Chip Shereck Account [email protected]

Tim Charles Account [email protected]

Chad Ekanger Account [email protected]

Marty Steen Account [email protected]

Marla DeFoe Advertising [email protected]

Jessica Beaudry Subscriptions [email protected]

Jason Smith Subscriber Aquisition [email protected]

Tim Greer Circulation [email protected]

Erika Wishart Administrative [email protected]

Christie Anderson Administrative [email protected]

HOW TO REACH US

LETTERS TO THE EDITORWe welcome letters to the editor. Send your letter to:

Ethanol Producer Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to [email protected].

Letters should include the writer’s full name, address

and telephone number, and may be edited for purposes of clarity and space.

SUBSCRIPTIONSTo 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.

Subscriptions to Ethanol Producer Magazine are available to all ethanol producers and future ethanol producers worldwide, free of charge.

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CUSTOMER SERVICE AND CHANGE OF ADDRESSFor service, please use our Web site at www.EthanolProducer.com. You can also call (866) 746-8385, or write to:

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COPYRIGHT © 2008 by BBI International

ETHANOL PRODUCER MAGAZINE MARCH 200814

ccording to a recent opinion column in the Denver Post, Greenpeace founder Dr.Patrick Moore, who was once critical of nuclear power, has changed his mind andnow endorses its development. I personally don’t have an issue with that. Bravo to

someone who can look anew at facts and have the courage to change their opinion. We desper-ately need all of the alternatives to oil that we can find, especially those that are safe, renewableand domestic.

What frustrates me is that the column, written by Post editorial board member DavidHarsanyi, trashes ethanol, and solar and wind power (not reflecting the position of Greenpeace).He states that these alternative energy forms are “economically unfeasible and environmentallyinconsequential.” So it appears that in his myopic vision of the future, it’s an all-or-nothinggame. We either find an alternative energy form that single-handedly cures our oil dependence, or it isn’t worth pursuing.

The ethanol industry has never boasted that it can, by itself, cure our dependence on imported oil. To my knowledge,neither has the solar or wind power industries, and I’m quite sure the nuclear industry wouldn’t make that claim either. Thereis no single solution to oil dependence. Rather, it is a collection of strategies that will make up our energy future.

It’s difficult to understand the objections to ethanol; biodiesel; wind, solar and geothermal power; biogas; and otherforms of renewable energy. The energy bill set a goal of 36 billion gallons of renewable fuels by 2022. Any clear-thinkingperson understands that the legislation will not cure our dependence on oil; it will only serve to reduce our dependence. Wecould have nuclear power plants dotting the countryside, and it wouldn’t cure our dependence on foreign oil. That, too,would only serve to reduce it.

It’s simply common sense that numerous alternative energy strategies working in unison will be the answer. There is noquestion that some alternatives are more environmentally sustainable than others, but all of the alternative fuels are cleanerand more sustainable than oil.

We jumped on the hydrogen train and soon realized that, while it may play a part in our energy future, it may not bethe “cure-all” that we initially thought. While I personally support nuclear power, it would be a flawed strategy to abandoneverything else in its pursuit.

There is no silver bullet—no one formula that will solve our reliance on oil. As much as we all might like to find one,it's just not there. It’s time we all understand that every alternative form of energy has its price, and in and of itself is notthe total answer. No matter what anyone says, 36 billion gallons—while certainly not the finish line—is a pretty darn goodstart.

That’s the way I see it!

The Way I See It

Addressing the 'Silver Bullet' Theory

Mike BryanPublisher & CEO

[email protected]

A

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Letterto the

Editor


he issues of sustainability, and the environmental impacts of the corn and ethanol industries, bear discussion.However, such discourse should include the perspectives of all stakeholders involved. We appreciated that a corngrower’s viewpoint was considered in EPM's article on the Ogallala Aquifer ("The Future of the Ogallala

Aquifer," January 2008), but EPM’s article about the environmental impacts of growing more corn ("More Corn a Causefor Concern," January 2008) didn’t include any perspective from corn producers. If EPM had taken the time to visit withfarmers about current stewardship and conservation practices, it might have learned the following:

�The amount of fertilizer applied per bushel of corn produced continues to decline. Over the past 15 years, farmershave seen a 17 percent reduction in the amount of nitrogen required to produce one bushel. Likewise, phosphorous require-ments per bushel have declined 28 percent during this period.

�The amount of pesticides applied to corn has also declined. Corn hybrids with insect resistance and herbicide-toler-ant traits have dramatically curtailed the use of insecticides and herbicides. Between 1990 and 2005, growers reduced theapplication of herbicide active ingredient by 29 percent. In this same period, corn farmers reduced insecticide active ingre-dient use by 81 percent. Today, less than one-tenth of a pound of insecticide active ingredient is applied on the average cornacre.

�Most corn is grown under conservation practices, contrary to the Environmental Working Group spokeswoman.According to the most recent Conservation Tillage Information Council survey (2006), 55 percent of farmers are practic-ing conservation tillage and 77 percent are practicing crop residue management. Most farmers don't use conventional tillagewith a moldboard plow, as the EWG suggests. Only 23.5 percent of farmers used conventional tillage in 2006, down fromnearly 40 percent in 1990.

�As a result of increased conservation tillage, erosion losses are declining. Conservation tillage reduces rainfall runoffby 60 percent and soil loss by 90 percent. Some estimates suggest total cropland erosion has declined 50 percent in the past25 years.

�Hay ground and pasture haven't been converted to cropland, as the article implies. The 19 percent increase in cornacres in 2007 came from existing cropland, not hay ground, pasture, wetlands, etc. Specifically, the additional corn acres camefrom ground previously planted to soybeans and cotton.

�There is significant disagreement within the scientific community as to the causes of hypoxia in the Gulf of Mexico.Most researchers admit that the science of hypoxia is severely lacking in breadth. To lay the issue at the feet of agriculturealone is disingenuous. Industrial emissions and discharge, unrestricted and poorly managed use of residential (lawn) fertiliz-ers, and other sources likely play a more prominent role in hypoxia.

�A number of new technologies and practices, such as the use of nitrogen inhibitors and variable application tech-nologies, are making fertilizer use more efficient. Fertilizer prices are at record levels; why would a farmer want to apply anymore fertilizer than is absolutely necessary?

The bottom line is this: Today’s farmers are better stewards of the land than any generation of farmers before them.Farmers increasingly understand that satisfying the demands of a growing population must not come at the expense of eco-logical health, human safety or economic viability. U.S. producers will continue to seek improvements in efficiency, andembrace practices and products that lessen the environmental impacts of crop production.

Geoff CooperDirector, Ethanol & Business Development

National Corn Growers Association

T


Israeli firms invest inColombian ethanol

Merhav Ltd. has signed two agreementsfurthering the development of its sugarcane-to-ethanol project in Colombia. Merhavsigned a memorandum of understanding forthe acquisition of between 25 percent and 35percent of the project by Colombia’s largestcompany Ecopetrol SA, one of the fourprincipal petroleum companies in LatinAmerica. Additionally, Ampal-AmericanIsrael Corp. agreed to supply Merhav with a$10 million loan for purchasing 11,000hectares (27,000 acres) for sugarcane pro-duction and ethanol plant construction,while committing another $10 million futureloan. The two companies also signed anoption agreement to convert all or portionsof the loan into a maximum of 35 percentequity. Yosef Maiman, chairman, presidentand chief executive officer of the Israel-based company, is the sole owner of Merhav.EP

Business

Business&PeopleEthanol Industry Briefs

BUSINESS&PEOPLE

ICE delists former NYBOTethanol futures contract

The Intercontinental Exchange(ICE) has delisted the ethanol futures andoptions contract it originally inherited inits acquisition of the New York Board ofTrade in mid-December. According toICE spokeswoman Sarah Stashak, themove was warranted because the ethanolcontract “had very low volume,” whichdidn’t make it useful to the industry forhedging strategies. The delisting followsin the footsteps of other exchanges thatmade similar moves. The ChicagoMercantile Exchange, following its merg-er with the Chicago Board of Trade,delisted its corn-based ethanol contract inSeptember 2007. CME later delistedethanol futures from its Globex electron-ic platform, leaving CME’s new CBOTacquisition as the only U.S.-based ethanolfutures contract. EP

To be included in Business & People, send information(including photos or illustrations if available) to: IndustryBriefs, Ethanol Producer Magazine, 308Second Ave. N., Suite 304, Grand Forks, ND 58203. Youmay also fax information to (701) 746-5367, or e-mail it to [email protected]. Please includeyour name and telephone number in all correspondence.

Share your Industry Briefs

FUEL secures financingFirst United Ethanol LLC has secured

$115 million in debt financing, including $15million in working capital for its 100 MMgyethanol facility under construction nearCamilla, Ga. FUEL was represented by Baker& McKenzie LLP, which has worked to securefinancing for several biofuels companies,including Imperium Renewables, a biodieselcompany based in Washington. The NewYork branch of WestLB AG arranged the debtfacilities, while Morgan Keegan & Co. acted asFUEL’s financial advisor. “Our partnershipwith Morgan Keegan & Co. and Baker &MacKenzie allowed us to successfully refi-nance this project, ensuring our competitivestrength and completion in a timely manner,”said Anthony Flagg, chief executive officer ofFUEL. EP

Manly Terminal, NorthernRailway, Hawkeye partner

Hawkeye Energy Holdings has part-nered with Iowa Northern Railway andManly Terminal LLC in order to more effi-ciently transport ethanol from its ethanolplants to consumers. Hawkeye currently hasfacilities operating in Iowa Falls andFairbank, Iowa, which together produce 220MMgy. Manly Terminal, a truck-to-rail facili-ty, will store Hawkeye’s ethanol and provideadditional transportation options fromHawkeye plants, while Iowa NorthernRailway will connect Manly Terminal to theentire North American railroad network viaits 165-mile short line. Hawkeye spokesmanNick Ryan said the contractual agreementwill provide flexibility in transport from theplants to consumers and bolster logisticalcapabilities for his company. EP

Belarus ethanol plant to benefit Chernobyl area

A “long-term humanitarian and socialproject” was launched in mid-Decemberwhen Ireland-based Greenfield ProjectManagement signed a framework agree-ment with Belarus to build a 550 million-liter-per-year (145 MMgy) ethanol plant.The feedstock, mainly sugar beets andgrains, will be grown on the site of thedefunct Chernobyl Nuclear PowerStation. This cultivation and productionprocess will remove radioactive isotopesfrom the soil, using feedstocks that can’tbe used in the food chain, said Greenfieldchairwoman Ann McClain. Constructionof the facility will begin after financingand an Environmental ImpactAssessment are complete. EP

Hawkeye Energy Holdings’ latest partnership willallow ethanol from its ethanol plants, such as this onein Fairbank, Iowa, to reach consumers more easilythrough Iowa Northern Railway and Manly Terminal.

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VeraSun names presidentOne day before the

Federal Trade Commissionapproved VeraSun EnergyCorp.’s merger with U.S.BioEnergy, VeraSun ChiefFinancial Officer DannyHerron took the reins aspresident of the combinedcompany, which will retainthe VeraSun name. Herron replaces DonEndres, who will remain the combined compa-ny’s chief executive officer, while U.S. BioEnergyPresident and CEO Gordon Ommen will serveas chairman. EP


BUSINESS&PEOPLE

Sponsored by

U.S. Water Services presents new RO platform

U.S. Water Services has redesigned itsreverse osmosis (RO) platform based onexperience gained at approximately 40ethanol plants, according to Mike Mowbray,the company’s marketing manager. The ROplatform uses Grundfos vertical pumps withall stainless-steel-welded components. Theplatform is designed with a variable frequen-cy drive, which efficiently controls the pres-sure and flow from the pump, potentiallysaving plants thousands of dollars in energyconsumption each year. The stronger struc-ture, and higher-quality materials and instru-mentation minimize water usage while max-imizing membrane performance, the com-pany said. EP

Business People

Stoel Rives appoints managing partner

U.S. law firm Stoel Rives recentlyannounced Robert Van Brocklin as thefirm’s new managing partner. He willbecome chief executive officer and over-see the management of the firm’s 11offices. Van Brocklin has been with thefirm for more than 20 years. Beforeaccepting his new position, he led thecompany’s Resources, Development andEnvironment practice group. EP

IRFA announces officers, directors

Seven new directors will help toguide the Iowa Renewable FuelsAssociation in 2008 by serving one-yearterms. They are: President Bill Couser ofLincolnway Energy; Vice PresidentDenny Mauser of Western Iowa Energy;Secretary Nile Ramsbottom of REGInc.; and Treasurer Mike Jerke of QuadCounty Corn Processors. Monte Shawcontinues as IRFA executive director.

The IRFA also elected new officers,who include former IRFA PresidentWalt Wendland of Golden Grain Energyand at-large member Bruce Rastetter ofHawkeye Renewables. EP

SGS adds managerSGS North America

Inc. recently appointedHowie Nelson as the com-pany’s business develop-ment manager for alterna-tive fuels. He will be man-aging a cross-divisionaleffort to provide servic-es—construction verifica-tion, mechanical integrity inspections and sys-tems, inbound grain grading and weighing, prod-uct testing, outsourced laboratory services, andInternational Standards Organization certifica-tions—to the renewable fuels industry. EP

Hawkeye forms sales manager position

Mark LaMond has accepted the newlyformed position of national sales manager forHawkeye Gold, a subsidiary of Hawkeye EnergyHoldings. He will be responsible for leading thecompany’s ethanol sales activities. LaMond has16 years of experience in sales management,most recently as vice president of sales forTributeDirect Inc. EP

Boiler technology receives patent

The fluidized bed boiler system that hasenabled current ethanol producer Corn PlusLLLP in Winnebago, Minn., to reduce its nat-ural gas usage by half is now patented andavailable on the market. The biomass-fueled,steam production technology will be market-ed, designed, installed and financed through apartnership of four companies: InterstatePower and Light Co., a subsidiary of AlliantEnergy Corp.; Harris Cos., a mechanical con-tracting firm; AE&E-Von Roll Inc., a tech-nology provider of steam-generating sys-tems; and FCStone Carbon LLC. The firstthree companies patented the technologyapplication, while FCStone Carbon will pro-vide the marketing services and arrangefinancing options for ethanol producersinterested in the technology. EP

Herron

Layne joins Pacific Ethanol board

Pacific Ethanol Inc. announced in lateDecember the addition of Larry Layne to itsboard of directors. Previously, he was vicechairman of California-based Sanwa Bankuntil he retired. Layne has 37 years of experi-ence from Sanwa Bank and Lloyd’s BankCalifornia. His appointment follows the resig-nations of Robert Thomas and Dan Sandersin October. EP

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COMMODITIES REPORT

Jan. 21—Over the past few months, several clients have askedif natural gas prices are likely to go down since it appears econom-ic activity is slowing and we may actually be going into a recession.It’s a reasonable question since energy demand is highly correlatedwith underlying economic activity, and demand changes impactprices.

To test the impact of economic activity on prices, we con-structed a simple analysis correlating economic activity and naturalgas prices over the past several years. The results are not overly sur-

prising. Economic growth and natural gas prices have been steadi-ly increasing over the past nine years (see chart). However, naturalgas price swings have been much more dramatic around the gener-al upward price trend than the steady economic growth trends.Natural gas price variability tends to reflect weather conditionssuch as hurricane activity, which can dramatically impact shortterm energy prices but not influence to any great extent economicgrowth.

It is clear that economic activity and natural gas prices are gen-erally correlated. However, is the degree of correlation strongenough that one can say that prices will go down or not rise as fastif economic activity slows? The answer is truly an ambiguousmaybe. Approximately 50 percent of natural gas price changes canbe explained by changes in economic activity; however, the remain-ing 50 percent is due to other factors. The conclusion is that aseconomic activity slows—or drops—it will influence prices some-what, but other factors will also have a significant influence.Bottom line: with slowing economic activity, price increases will bemitigated somewhat, but other factors will still exert significantinfluence. EP

Casey Whelan, vice president of strategic initiatives, can be contacted [email protected].

Does a recession mean lower natural gas prices?

Natural Gas Report By Casey Whelan, U.S. Energy Services Inc.

Latest USDA report stirs market

Corn Report By Jason Sagebiel, FCStone

Jan. 22—The corn market buoyed as the January USDA wheat seed-ings and crop production report painted a bullish picture. The USDAdropped the U.S. corn yield by 1.9 bushels per acre to 151.1. Since 1984,when the yield falls from November to the release of the USDA's finalreport, the decrease averages 0.85 bushels. The past two years have seen adecrease of 1.3 bushels per acre. This indicates the presumed optimism bythe market, traders, seed dealers and producers about the quality of thenew genetics, only to be disappointed later.

The biggest effect on yield in 2007 was added corn acreage and thatthose acres were not as highly productive. Iowa and South Dakota yieldwas reduced by 4 bushels per acre compared to the prior year. NorthDakota was reduced by 8 bushels per acre after seeing huge planted acres.Keep in mind that this was the second-highest national yield since the2004 average of 160.4 bushels per acre.

The other big component of the report was the additional 300 mil-lion bushels of corn expected to be utilized by the feed and residual sec-tor. This was determined by the September through November disappear-ance as indicated by the Dec. 1 stocks. The end result saw ending inven-tory shockingly reduced by 359 million bushels, equating to an 11 percentcarry-out-to-use ratio (2006 was 11.6 percent). This is what really helpedaid the market to reach its limit potential and allow corn to very easily tradeabove $5 per bushel.

Wheat seedings came in less than the market had expected. Total

wheat seedings were recorded at 46.6 million acres (up 4 percent); howev-er, the market expected wheat seedings to be 48.586 million acres. Whatdoes this mean? Many traders expected that with bigger wheat acres wewould see the potential for more double-crop soybeans. Therefore, theconclusion would be that fewer wheat acres would yield less potential forsoybean acres. Now the market encounters an even bigger battle for acresas we move into the much anticipated planting season. EP


COMMODITIES REPORT

DDGS Report By Sean Broderick, CHS Inc.

Ethanol Report By Spencer Kelly, OPIS

Jan. 18—Spot ethanol markets cooledoff from the highs reached in the early goingof 2008. Still, most market watchers foundethanol markets somewhat surprisinglybuoyant through the first month of 2008,given expectations of heavy supply.

Chicago spot ethanol held over $2.30per gallon for prompt material, while moretypical sales a week or so out were in theupper $2.20s per gallon. That was way downfrom prices that touched $2.50 per gallonshortly after New Year's Day, but aboutwhere spot prices ran just before Christmas.

One feature of ethanol markets in late2007 and into early 2008 was promptsqueezes that popped up in various markets.In late December it was Chicago with tightprompt supply boosting spots. In JanuaryNew York had its turn when prompt ethanolsellers tacked a dime onto prices in one day.

Houston was the latest center of atten-tion, especially after winter weather-related

barge delays. Dead-prompt ethanol bids inthe Gulf of Mexico jumped to highs of $3per gallon, but the market was highly illiquidas talk for later in the month ranged as wideas $2.50 to $2.80 per gallon by someaccounts.

Ethanol was underpinned by strongblending economics that continued to bearfruit in new markets. Even at $2.30 per gallonin Chicago, where gasoline traded at the sametime at around $2.16 per gallon, with the fed-eral blender credit ethanol offered a 37-cent-per-gallon price advantage. While weekly U.S.DOE data revealed strong discretionaryblending, new discretionary markets openedup in short order, including Marathon's addi-tion of E10 to Florida terminals in Tampaand Port Everglades. EP

For more information, contact OPIS Ethanol& Biodiesel Information Service at (888)301-2645.

Ethanol market cool, but blending heats up

Source: OPIS

Source: U.S. Energy Services Inc.

*Central Valley Source: CHS Inc.

Jan. 20—As the last half of Januarybegan, DDGS continued its rollercoasterride. After going up non-stop with theChicago Board of Trade in December, andtrading at greater than 100 percent the valueof corn, it began to abate in January. WhileDDGS is generally at its strongest, relativeto corn prices, in the December/Januarytime period, this year was marked bystrength due mainly to delayed plant startsand short covering.

Export demand for DDGS remainsextremely strong, ostensibly due to theweak dollar, but also due to decreasingocean transportation costs for all com-modities. Bulk rates from the U.S. Gulf ofMexico to Asia are down almost 30 percentfrom the November high. This has createdmore distillers grains demand and trading

volume in the Gulf and is expected to leadto a portion of bulk cargo being shipped toAsia. Demand from Canada remainsextremely strong, but could be tempered bydeclining feeding margins in the northernmarket. Asian container business continuesto be brisk and limited by container avail-ability. Cash soymeal prices have taken adramatic drop as crush economics favormaximum soybean processing, whichweighs on DDGS in diets that favor it as aprotein.

Going ahead, DDGS prices will beaffected mainly by CBOT prices, but willalso be impacted by the ability of sellers tokeep up with the increasing supply in asummer market that is normally marked bysubstantially lower feed demand. EP

Source: FCStone

Export market remains strong

REGION

West Coast

Midwest

East Coast

SPOT

238.979

232.201

239.59

RACK

248.393

244.399

246.826

RETAIL

320.458

300.073

307.071

October 2007

September 2007

October 2006

452,000*

434,000

333,000

REGION

West Coast

Midwest

East Coast

SPOT

242.861

233.778

239.972

BULK TRUCK (rack)

236

225.23

- - - -

SPLASH/TOP OFF (rack)

233.49

228.195

245.769

DATE

Jan. 18, 2008

Dec. 18, 2007

Jan. 18, 2007

CLOSE

4.94

4.32

4.12 1/4

LOW

4.80 1/2

4.31 1/4

4.05 1/4

HIGH

5.02 1/2

4.36

4.18

LOCATION

Minnesota

California*

Chicago, Ill.

Buffalo, N.Y.

Central Florida

JAN. 2008

165

215

165

165

201

DEC. 2007

145

205

155

157

185

JAN. 2007

120

164

125

138

151

Source: OPIS

NYMEX

N. Ventura

Calif. Border

JAN. 21, 2007

6.89

6.36

6.27

JAN. 21, 2008

7.89

9.92

8.03

DEC. 21, 2007

7.23

6.82

6.91

Regional Ethanol Prices (Monthly averages in cents per gallon)

Regional Gasoline Prices (Monthly averages in cents per gallon)

DDGS Prices ($/ton)

Corn Futures Prices (March corn, $/bushel)

Cash Sorghum Prices ($/bushel)

Source: Sorghum Synergies

Natural Gas Prices ($/MMBtu)

U.S. Ethanol Production Output (barrels/day)

*all-time monthly high Source: U.S. Energy Information Administration

Superior, Neb.

Beatrice, Neb.

Sublette, Kan.

Salina, Kan.

Triangle, Texas

Gulf, Texas

JAN. 17, 20084.82

4.79

4.56

4.85

4.58

5.47

DEC. 20, 20074.18

4.13

3.90

4.32

4.00

4.97

JAN. 31, 20073.77

3.77

3.79

3.95

3.87

4.54


As America gears up to elect its next president, Capitol Hill is abuzz with a new rai-

son d’etre: change. After the Iowa caucuses and the New Hampshire primary, it is clear

that Americans want just that. The status quo is no longer comfortable. Our addiction to

oil sits on top of the list of items Americans wish to see changed.

Just 36 hours into the new year, petroleum prices reached the historic price of $100

per barrel. As they have done every year, gas prices will continue to rise, and Americans

will continue to pay exorbitant prices at the pump.

Like the swallows returning to Capistrano, gas prices this spring will begin their

upward march as America’s petrochemical refining complex continues to age and be

strained, often beyond its capabilities. As is the case each year, a host of factors will be

blamed for rising prices, and you can be assured that ethanol will be one of them.

This year, however, such an argument will be difficult, if not impossible, to make. As the American Petroleum Institute

reported in January, gasoline demand remained flat in 2007 compared to 2006. Petroleum imports actually decreased.

So what does this all mean?

While the oil industry wouldn’t dare admit it, the reason for this change in America’s energy consumption habits is

due in no small part to the increasing availability and use of fuel ethanol. According to an analyst at investment firm Bear

Stearns Co. Inc., the more than 400,000 barrels of ethanol produced each day in 2007 replaces the gasoline output of

three average oil refineries. The dramatic increase of domestic ethanol production and use we will see in the coming

years will continue to help meet growing demand for motor fuel, displacing a greater volume of imported oil and reliev-

ing the pressure on America’s oil refinery infrastructure.

This change in how America is fueling its future has come about not because of the benevolent nature of America’s

petroleum industry, but because of the foresight and vision of leaders in the U.S. government. From President George

W. Bush to every rank-and-file member of Congress, they have understood the consequences of the energy status quo.

They realize that steps must be taken today that begin the difficult task of diversifying America’s energy portfolio.

For the first time, America has a roadmap to begin that process. The Energy Independence and Security Act of 2007

took those logical and necessary first steps to address the impacts of increasing foreign oil dependence and global cli-

mate change.

As the candidates for president are finding out, promising change and delivering it are two very different things.

However, Americans stand ready, as does the U.S. ethanol industry. Together, we can change the course of America’s

energy future.

Bob DinneenPresident and CEO

Renewable Fuels Association

VIEWFROMTHEHHIILLLL

Delivering on the Promise of Change


Dinneen

RFAUPDATE

RFA podcast now availableThe Renewable Fuels Association has launched a podcast, called “The Ethanol Report,” which covers issues impor-

tant to the ethanol industry. The report is produced twice per month and posted on RFA’s “The Ethanol Report” blog.

Readily available podcasts include such topics as the Renewable Fuels Now coalition and consumer survey, the

Informa study on the relationship between corn prices and the overall Consumer Price Index for food, the Energy Bill sign-

ing, and a look at what 2008 may hold for the ethanol industry.

“The Ethanol Report” is available by RSS feed subscription through any standard podcast subscription software or

service such as iTunes or Yahoo Music Jukebox. Subscription information is available at http://www.ethanolrfa.org

/the-ethanol-report-podcast.xml.

$100 oil underscores importance of investment in renewable fuelsOil prices soared to more than $100 per barrel during the first days of 2008, setting a new intraday trading high. With

oil being such an integral part of our economy—impacting everything from stock and food prices to diapers—this kind of

volatility is the exact problem Congress addressed by passing the Energy Independence and Security Act of 2007 and

investing heavily in new technologies like renewable fuels.

“Oil’s unprecedented rise to $100 a barrel underscores our economic and geopolitical vulnerability to depleting oil

reserves,” said RFA President Bob Dinneen. “While developing new oil reserves is proving more difficult and expensive, the

American ethanol industry is rapidly developing new cost-effective technologies that will greatly reduce our nation’s reliance

on imported oil from unstable regions often hostile to the United States.

“The energy paradigm in this country and around the world is beginning to change. Volatile oil prices and dwindling

supplies further emphasize the need to develop renewable alternatives. The American ethanol industry stands ready to help

lead the revolution away from fossil fuels and to a more stable, sustainable energy future.”

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Thank you from the National Ethanol ConferenceThe Renewable Fuels Association would like to extend its sincere thanks to all those who attended the National

Ethanol Conference in Orlando. It was a resounding success due in large part to those who participated.

The RFA would also like to thank those who work hard each year to make the NEC the premiere ethanol policy and

marketing event that it has become. Specifically, the RFA would like to recognize the staff at BBI International for everything

they do to ensure a seamless event.

We certainly hope to see all of you again next year in sunny San Antonio!

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BIObytesEthanol News Briefs

ADM teams with MGSC, ISGSfor carbon sequestration Archer Daniels Midland Co. has teamedwith the Midwest Geological SequestrationConsortium and the Illinois StateGeological Survey to capture and store car-bon dioxide from the company’s ethanolplant in Decatur, Ill. In this project, wellswill be drilled into the Mount SimonSandstone, a rock formation with greatpotential for sequestering large volumes ofcarbon dioxide, at a depth of more than6,500 feet. Carbon dioxide from theDecatur plant will be injected into thewells, and the safety and effectiveness ofthe storage will be monitored by MGSC.

Masada donates TVA biomassequipment to university Birmingham, Ala.-based Masada ResourceGroup LLC donated biomass pilot plantfacilities and equipment that it recently pur-chased from the Tennessee Valley Authority,the nation’s largest public power company, toAuburn University in Auburn, Ala. Theschool will serve as Masada’s exclusiveresearch and development platform, concur-rently utilizing and refining a unique propri-etary fractionation process from Ft. Lupton,Colo.-based PureVision Technology Inc. Theplatform seeks to enhance the conversion ofmunicipal solid waste into ethanol, accordingto Masada Chief Executive Officer DonaldWatkins.

Inventure Chemical completescellulosic feasibility studiesIn the fourth quarter of 2007, InventureChemical, a Seattle-based biofuels technolo-gy developer, completed 20 feasibility stud-ies to identify the highest-yielding and mostcost-effective second-generation feedstocksfor use in the company’s patent-pendingbiofuel conversion process. Fourteen of thestudies were completed for companiesgrowing algae, while the remaining studiesconsisted of analyses and market studies foragricultural waste streams. In the wake ofthese studies, Inventure is continuing toexpand its biodiesel and ethanol researchand development production facility.�continued on page 30

INDUSTRYNEWS


The July 2007 acquisition of Virginia-basedDelta-T Corp. has erupted in a lawsuit and chargesof material misrepresentation, fraud and miscon-duct.

Dutch energy giant Bateman Litwin NVasserts that Bibb Swain and son Rob Swain,founders of Delta-T, an ethanol process technolo-gy firm, forecasted profits of $8 million in 2007,but the company is actually projected to lose $73million. Bateman Litwin purchased Delta-T for $45million and nearly 12 million shares of BatemanLitwin stock.

Bateman Litwin filed suit Dec. 21 in U.S.District Court in Virginia after it “discovered thatthe financial and commercial situation of Delta-Twas materially different from the status representedby the Swains at and as of closing,” the complaintstated. Bateman Litwin is seeking a return of thestock and unspecified damages, including a $15 mil-lion write-down of the purchase price due to thetermination of Chief Executive Officer RobSwain, who was let go in October. Bibb Swain con-tinued at Delta-T as chief technology officer untillate January when he was also fired. Delta-T itselfisn’t a party to the suit and has declined to commenton the litigation.

“The Swains emphatically reject any sugges-tion of wrongdoing,” said their attorney AndrewMorris. “We will respond vigorously in our filings.They have a long history and excellent reputation inthe ethanol industry. They stand by their honorableconduct in the sale.”

The legal wrangling, major disputes with sup-pliers and language in the lengthy complaint alleg-ing underperformance of many Delta-T contractshas the potential to spill over into the industry.“Rumor has it that many of Delta-T's customersand vendors are starting to work around Delta-T sothat in the event Delta-T fails to perform, plans canstill proceed,” said one person currently collaborat-ing with the company. “There is talk about internalturmoil leading to reduced support and slowresponse time to customer requests, but my proj-ects are moving forward,” he said.

The causes of action allege that the Swainsforecasted 2007 profits upon the completion of

engineering procurement technology and variousengineering projects that didn’t materialize, and maylose $43 million.

Bateman Litwin settled one outstanding claimby a major electrical supplier that had threatened tohold several million dollars of equipment“hostage,” over numerous uncompensated changeorders, the complaint stated. The $18 million debtwas settled for an undisclosed sum, and the equip-ment was returned.

Another series of projects with The IndustrialCo., a Colorado-based heavy industrial contractor,is losing money instead of garnering a substantialprofit as forecasted by the Swains, according to thecomplaint. TIC Director of Corporate RelationsGary Bennett declined to comment on the status ofthe projects due to the pending litigation.

Bibb Swain launched Delta-T in 1984 andadapted his proprietary ideas for a new generationof molecular sieve technology to dehydrate alcohol.According to Delta-T’s Web site, the company hascompleted 120 projects on five continents. At presstime, Morris was planning to file his clients’response to the lawsuit Feb. 20.

“Delta-T is now operating profitably under anew dedicated and experienced managementteam,” Bateman Litwin said. The company hired anew CEO and 20 key personnel. It estimates thatup to $85 million may be needed to support Delta-T’s continued operations.

One strange aspect of the case is BatemanLitwin's own Web site announcing the lawsuit. OnDec. 24, three days after it filed the lawsuit, thecompany stated that Delta-T “was operating prof-itably since the date of acquisition.” Morrisresponded, “So they’re telling the world in this com-plaint that based on their accounting, they projectthese huge losses, but they’re telling their sharehold-ers that it was profitable from the date of acquisi-tion?”

Delta-T’s parent company files suit against company founders


INDUSTRYNEWS

One U.S. state implemented an E10 man-date at the start of 2008, while several others areimplementing or considering similar policies.

Missouri’s E10 mandate took effect Jan. 1with few problems. “We’ve been testing samplesout in the field, and everyone is complying,” saidRon Hayes, fuel quality manager in the MissouriDepartment of Agriculture Weights &Measures Division. He added that his depart-ment filed an emergency rule that relaxed volatil-ity standards and cleared up language on distilla-tion temperature standards that have been ineffect for some time.

In anticipation of the mandate, regionalpipeline company Teppco Partners LP put itsnew 50,000-barrel ethanol storage tank intoservice Jan. 1 at its terminal in Cape Girardeau,Mo. “This will make it more efficient for driv-ers,” said Public Relations Director Rich Rainey.Teppco’s terminal in Cape Girardeau is the com-pany’s first to have ethanol-blending capability.Teppco has six terminals with truck-loadingcapability along its Gulf Coast-Midwest pipelinesystem.

With the mandate in effect, Missouri Gov.Matt Blunt recently proposed to boost E85usage in the state through a $2 million tax incen-tive program designed to increase the number ofgas stations offering E85. The tax credits wouldhelp to offset the cost of modifying pumps—orinstalling new pumps or tanks—to dispenseE85, which can range from $3,000 to $40,000.Blunt also proposed a new state income taxdeduction equal to the lesser of $1,500 or 10percent of the purchase price for consumerswho purchase qualifying hybrid vehicles. A thirdproposed measure is an income tax credit of 25cents per gallon of E85 purchased in the firstyear, 20 cents per gallon in years two and three,and 15 cents per gallon in each subsequent year,with a maximum of $500 per taxpayer per year.

On the West Coast, counties in Oregonbegan implementing the state’s E10 mandate in

mid-January. Nine counties in northwestOregon were the first required to meet the man-date by Jan. 15. By the middle of September, allgas stations in the state will be required to offerE10. The Oregon Biofuel Mandate, passed inthe 2007 legislative session, requires E10 blendsonce in-state ethanol production reached 40MMgy. Pacific Ethanol-Columbia LLC, a 35MMgy ethanol plant in Boardman, Ore., is cur-rently operating. A second plant, Cascade GrainProducts LLC in Clatskanie, Ore., is slated tobring 108 MMgy on line this spring.

In the Southeast, Georgia scheduled a pub-lic hearing Feb. 12 to gather feedback for pro-posed changes to its fuel-blending standards,which may allow for more ethanol usage. Inanticipation of Georgia’s changes, Eco-EnergyInc. made arrangements with TrimacTransportation Inc. for ethanol storage and han-dling in Fairburn, Ga. Florida is also makingprogress with similar adjustments in languageand specifications, and in anticipation, KinderMorgan Inc. is increasing its ethanol storage andhandling facilities in that state.

—Susanne Retka Schill

E10 mandates in effect, under consideration

Once operational, Cascade Grain Products LLC willproduce 108 MMgy of ethanol in Clatskanie, Ore.,to help the state meet its E10 mandate. Start-up isslated for April.

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�continued from page 28

�continued on page 32


ICMB puts ethanol in Rose Bowl spotlightThe Illinois Corn Marketing Board is cele-brating a victory after a unique ad cam-paign that was implemented during theRose Bowl football game in Pasadena,Calif. The ICMB displayed 200 high-impact, single-message posters throughoutthe stadium featuring pro-ethanol state-ments accompanied by a Web site addressfor more information. Posters were placedin high-traffic areas, from hallways to uri-nal stalls. ICMB CommunicationsDirector Mark Lambert said the campaignwas extremely successful. More than93,000 people attended the game, andadditional post-game media exposure hasfurther boosted ICMB’s anticipatedimpact.

Direct Fuels automates storage terminalDirect Fuels, one of north Texas’ largestindependent regional fuel distributors, hasautomated its new ethanol terminal inEuless, Texas, using Data TransmissionNetwork’s Guardian3 terminal automationsystem. The system will deliver real-time

INDUSTRYNEWS

Denaturant pricing movementaffects blend volume

With the leeway in ASTM D 4806-07 thatallows ethanol denaturant to vary between 2 per-cent and 5 percent, producers gauge prices andadjust denaturant blend concentrations accord-ingly. Recent pricing in natural gas and ethanolmarkets have led to blending denaturant towardthe minimum volume allowable.

In mid-January, Data Transmission Networkethanol analyst Rick Kment said there have beena lot of pricing moves in the denaturant marketlately. With margins still narrow after modestethanol pricing recoveries, ethanol producers cansave “a couple of cents per gallon” by navigatingup or down denaturant blend concentrations intheir final product, depending on what benefitsthe bottom line. “At a time when margins are sothin, that could be the difference between makinga profit or not,” Kment said. For a 100 MMgyplant, a consistent savings of 2 cents per galloncould equate to $2 million over the course of ayear.

Ethanol is denatured with natural gasoline torender the product undrinkable. Natural gasolineis a liquid hydrocarbon mixture from casingheadgas, which is natural gas obtained from the top(casinghead) of an oil well, as opposed to liquid

natural gas from a natural gas well. The mixturelargely consists of pentanes, which are saturatedhydrocarbons with five carbon and 12 hydrogenatoms. “The denaturant market is a derivative ofthe natural gas market,” Kment told EPM. “It’shard to find spot prices for natural gasoline, but itusually follows the [liquefied petroleum gas]price.” Unlike ethanol prices, which trade on aper-gallon basis, natural gasoline is sold in million-therm units (a therm is 100,000 British thermalunits). In mid-January, the natural gasoline priceper one-million therms was slightly more than $8.“We’re at the high end of where we have beenrecently,” Kment said. “While in the second halfof 2005 it was significantly higher than what it istoday, in August 2007 the natural gasoline pricedipped down to $5.46.” Prices rose after that witha small dip in December 2007 but were back upto $8.17 at press time.

The ASTM maximum denaturant spec forethanol recently changed from 4.76 percent on avolume basis to 5 percent.

—Ron Kotrba


An accounting firm needs an educated understanding of the biofuels industry. At Kennedy and Coe, we have a wealth of knowledge and experience that helps us deliver substantial cost savings to a variety of biofuels producers. You’re not an average business. You need more than an average accounting firm. Give Jesse McCurry a call at 800-303-3241. We’ll crunch the numbers and maximize your profitability.

From Inception through Construction to Production. We’re Your Biofuels Industry Partner.

We can do the math.

The “e” mark and the “stylized e” are registered service marks of the Ethanol Promotion and Information Council. Used with permission.

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INDUSTRYNEWS

Tri-fuel engine research underwayFlexible-fuel vehicles (FFVs) may soon be

more flexible, thanks to research at LotusEngineering, a division of U.K.-based GroupLotus PLC. Researchers at the company’s head-quarters in Norwich, England, are converting aLotus Exige to run on gasoline, ethanol andmethanol, according to Tim Holland, directorof motor sports initiatives. He said the compa-ny’s U.S. office in Michigan is likely to follow suitthis year.

The conversion is on the heels of the com-pany’s similar work by both offices to convert aLotus Exige to an FFV. The standard Exige hasa supercharged 1.8-liter, 4-cylinder Toyotaengine that has been fitted to the sports carbody. “The addition of ethanol was [part of] ajoint research and development promotionalproject to show that an alternative fuel vehicledoesn’t have to be boring,” Holland said.

Holland said the initial conversion of theExige to an FFV wasn’t overly complicated; ittook approximately four weeks of mechanicalwork and software changes. “We had to changefuel lines to make them ethanol-compliant, andwe added sensors, which we got from another[original equipment manufacturer],” he said.“We did the calibration ourselves, so it was easyfor us to make the software changes required toswitch automatically, depending on the gaso-line/ethanol mix. We also had to add two fuelinjectors, and we added a heavy-duty clutch

because of the increased engine performanceand fuel flow requirements.” After the conver-sion and when fueled with E85, the car movedfrom a 220-horsepower engine to 265 horse-power. The demonstration vehicles are knownas 265E.

Lotus doesn’t have plans to bring either theE85 Exige or the tri-fuel Exige into productionat this time, but it has two reasons for develop-ing these systems, Holland said. First, Lotus isinterested in expanding the capabilities of itsown product. “We do it for our own researchbenefit, so we can understand alternative fuels'emissions and performance benefits,” he said.Secondly, because the engineering division ofLotus is largely a consulting company, the carsalso showcase the company’s work to potential

clients. Lotus Engineering offers full engineer-ing services capable of taking a project from ini-tial concept and product design through devel-opment, testing and prototype building. It canalso handle production and production support,and is thus employed by major car manufactur-ers.

Lotus is involved in other emerging vehicletechnologies and ethanol has its challenges, butHolland said there’s still life in the traditionalcombustion engine that can operate on alterna-tive fuels. That’s why the company is expandingits research to ethanol and other alternativefuels.

—Anduin Kirkbride McElroy

The 265E is a Lotus Exige that was converted to an FFV for research and demonstration purposes. Whenfueled with E85, the FFV gets 45 more horsepower than when fueled with gasoline.

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�continued on page 34


inventory updates for Direct Fuels andprovide activity reports to its customersfor their inventory and accounting needs.The system can automatically generateand e-mail reports to customers. The ter-minal will provide bulk storage of ethanolfor delivery to the Dallas-Ft. Worth area.

Xethanol extends NRELCRADA, sells projectsNew York-based Xethanol Corp. hasextended its Cooperative Research andDevelopment Agreement on cellulosicethanol feedstocks with the NationalRenewable Energy Laboratory. The origi-nal agreement began in January 2005 forresearch on the clean fractionation of cel-lulosic feedstocks into component partsto reduce fermentation time and decreaseenergy costs. Seperately, the companydecided to sell its cellulosic ethanol proj-ects in Augusta, Ga., and Spring Hope,N.C., which were to be colocated withcorn-based ethanol facilities. Instead,Xethanol bought Consus Ethanol LLC, acorn-based ethanol project in Pittsburgh.

INDUSTRYNEWS

Ethanol industry faces short-term challenges in 2008

With the Energy Independence & SecurityAct of 2007 signed into law, which increased therenewable fuels standard to 9 billion gallons in2008, industry organizations are preparing toface any challenges that may result from the newlegislation this year.

According to Brian Jennings, executive vicepresident of the American Coalition forEthanol, the organization’s main focus in 2008will be to aggressively advocate higher nation-wide blends of ethanol, an issue it has beenvehemently addressing for quite some timebefore the new energy bill was enacted. So far,E10 is the blend of choice in most states, butJennings said he would like to see that increasedto at least E20 or higher by the end of this year.Minnesota is the only state to publicly support anE20 blend.

“Our top priority is absolutely to do what-ever it takes to get these mid-level blends ofethanol approved,” Jennings said. “Whether itcan happen in 2008 or not is an open question,but at the very least, we’ve got to build momen-tum and support for mid-level blends.” OtherACE priorities include the installation of moreblender pumps in key parts of the country, andeducation and outreach to regulators, lawmakersand automakers.

In order to implement E10 or higher

ethanol blends, improve-ments in existing fuel infra-structure must be aggres-sively addressed, accordingto Al Mannato, fuels issuesmanager for the AmericanPetroleum Institute. Thoseimprovements could pro-vide terminals with moreefficient blending and stor-

age. “Our focus [in 2008] is going to be workingwith the terminal operators and owners to getthem ramped up with this [ethanol] blendingequipment and with the storage capacity,”Mannato said. “I think the logistics are going tobe critical as we move into this next phase …getting the infrastructure right, getting the termi-nals ready, and making sure that there areenough transport trucks and rail to support thegrowing demand for ethanol.”

Continued testing of E10 and higher blendsis needed as infrastructure improvements aremade, according to Mannato. “We think it’s crit-ically important that testing be done to demon-strate that an E10-plus blend would work in theconsumer vehicle fleet,” he said.

—Bryan Sims


Jennings

INDUSTRYNEWS

Kansas to test consumer reaction of E20, E30The Kansas Department of Agriculture

wants consumers and retailers to have morechoices when it comes to filling flexible-fuelvehicles (FFVs) with ethanol. The departmenthas initiated a pilot program allowing retailersto install blender pumps that offer E20, E30and E40, along with E85, which has beenavailable for FFVs for some time. Similarpumps are already being used in South Dakotaand Minnesota.

Kansas Secretary of Agriculture AdrianPolansky said the program is an opportunityto provide choices in the marketplace. “I thinkit will be beneficial to consumers and willallow us to market a larger quantity ofethanol,” he said, adding that the outcome ofthis project, which expires Jan. 1, 2009, willverify that current vehicle technology is ade-quate.

Only a few retailers have signed up forthe program so far. Colwich, Kan.-based ICMInc. was one of the first companies to showinterest in the project. Governmental AffairsDirector Greg Krissek said ICM is investigat-ing the possibility of installing at least oneblender pump in Colwich and might havesomething in place by the beginning ofMarch. ICM is working closely with theKansas Department of Agriculture’s Weights

and Measures Division to ensure that anypumps installed will accurately dispense thecorrect amount of ethanol from the start.Getting the proper percentage of ethanolfrom the pump to the consumer’s tank has

been an issue for retailers in other states.However, Tim Tyson, program manager ofthe Kansas Weights and Measures Division,said his office is prepared to work with retail-ers to make sure pumps are performing accu-rately from the start so that no additional costsor delays will be accrued.

Another concern of retailers is that con-sumers will unknowingly pump a higher blendof ethanol, such as E20 or E30, into theirnon-FFV. Polansky said pumps will featurebright orange labels stating that any blendhigher than E10 is for FFVs only.

South Dakota was the first state in thenation to allow retailers to install blenderpumps. Tammy Satrang, chief financial officerand credit manager of Four Seasons Co-op inBritton, S.D., said that while there were initialissues with the South Dakota Weights andMeasures Program, there have been no com-plaints from customers in the nearly two yearssince a blender pump was first installed. Infact, the co-op has plans to install anotherpump in Doland, S.D., within the next year.There are also blender pumps in Watertown,Redfield and Webster, S.D., and Ortonvilleand Belgrade, Minn.

—Kris Bevill

Blender pumps, similar to this one currently beingused in Britton, S.D., may soon be available toconsumers in Kansas.

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Ethanol taxes rise in MichiganThe Michigan E85 motor fuel tax breakended Jan. 1 after the state legislature failedto provide appropriations required bystatute to continue. For fuels containing atleast 70 percent ethanol, the tax increased7 cents per gallon (cpg) from 12 cpg to 19cpg. Terry Stanton with the state treasurytold EPM discussions are underwaybetween treasury officials and legislatorson how to reinstate the tax break.

Delek offers E10 blends in Texas, TennesseeIn December, Delek Refining Ltd.announced its intent to offer E10 at itsTyler, Texas, refinery starting Jan. 1. Itssubsidiary Mapco Express Inc. beganoffering E10 at approximately 180 of itsunbranded retail fuel and conveniencestores in Tennessee in December. Mapcowill continue to pursue opportunities forethanol blending at the remainder of itsretail fuel and convenience stores, thecompany said. EP

INDUSTRYNEWS

Ethanol report piques public’s interestA report on the current and future state of

ethanol production in Illinois has attracted a greatdeal of attention since being posted on theUniversity of Illinois FarmDOC Web site inNovember.

The report, “Corn-Based Ethanol in Illinoisand the U.S.,” was produced by the College ofAgricultural, Consumer and EnvironmentalSciences, and was downloaded more than 30,000times in the first month it was available. “I was sur-prised at the number of downloads, particularlygiven that we are talking about more than 160 pagesper download,” said Robert Hauser, chairman ofthe Department of Agricultural and ConsumerEconomics. Most of the report’s 14 authors aremembers of Hauser’s department.

Four of the report’s nine chapters examine theeconomics of ethanol. They highlight ethanol’sposition in the energy and agricultural sectors, theeconomics of dry-grind plants with a case study ofthe financial performance of an ethanol plant, andhow an ethanol plant affects local economies.Another chapter examines the use of distillers grainby livestock and poultry. Two chapters examine thescience and economics of alternative feedstockssuch as switchgrass and Miscanthus. The finalchapter looks at the role of policy and politics in theethanol industry. “The point of the report is not toadvocate for or discourage ethanol,” Hauser said.

“It was an attempt to be as objective as possible inanalyzing some background information andpotential future scenarios.”

The genesis of the report came when univer-sity Chancellor Richard Herman met with farmersat a large public event, according to Hauser. Manyof the questions Herman fielded were aboutethanol. “When he came back to campus, he asked,‘What do we know?’” Hauser said. “So within ayear, we were able to put together what are basical-ly nine white papers in some sort of reasonableorder, and we published it on the FarmDOC Website.”

With the role of ethanol growing in the agri-culture and energy sectors, the university will con-tinue to expand its expertise in ethanol issues. Whilea follow-up to the entire report isn’t planned, theindividual researchers will continue to investigateand publish economic and scientific research onethanol, Hauser said. “I can’t imagine there being ahigher-profile issue among farmers right now,” hesaid. “The prices we are seeing for our major cropsare being driven mostly by ethanol. That makesethanol just about the hottest topic around.”

The report can be downloaded at www.farmdoc.uiuc.edu/policy/research_reports/ethanol_report/index.html.

—Jerry W. Kram


INDUSTRYNEWS

Ethanol project developers alter coursesPlans for three more ethanol plants

have gone by the wayside amid rising con-struction costs, high feedstock prices and asputtering economy. Developers of a fourthproject are instead refocusing their efforts tobuy a bankrupt facility.

Western Illinois Ethanol Project LLCscrapped plans to build a 55 MMgy dry-grind facility near Griggsville, Ill., threemonths after awarding $37 million in build-ing contracts. WIEP is a subsidiary ofKnoxville-based Heartland Ethanol LLP.“We’re in a holding pattern right now,” saidHeartland Chief Executive Officer WalkerFilbert. “The financial markets are so topsy-turvy that we decided to postpone the clos-ing that we were going to have at the end ofOctober [2007] because the terms were justnot good. As much as we wanted to buildour dream house, we didn’t want to enterinto a mortgage that was going to come backand bite us later.”

Filbert said Heartland’s contractsremain viable, and the company has $30 mil-lion in assets and cash on hand. “We’re look-ing at $75 million in debt financing,” he said.“We’ve lined up about $40 million of tax-exempt financing that’s still available to us.”

Another venture has stopped planning

altogether. Kansas City-based AlternativeEnergy Sources Inc. let an option to pur-chase the Kankakee Industrial Park inKankakee, Ill., expire after six months.“We’re not planning to go forward in build-ing that plant,” said AES President MarkBeemer. “Obviously the financing ofethanol plants is much more difficult todaybecause of $5 corn. The bigger reason isthat our company is being acquired byanother entity, so because of the transactionwe can’t really say much.”

In Idaho, cost overruns approaching$13 million caused Renova Energy of IdahoLLC, a 21 MMgy plant under construction,to be put on hold in early 2008. In lateDecember, share trading for London-basedparent company Renova Energy PLC washalted on the London Stock Exchange as thecompany endeavored to clarify its financialfooting. Although trading resumed threeweeks later, Renova shares slumped 66 per-cent. Meanwhile, costs for the plant inHeyburn, Idaho, escalated to nearly $59 mil-lion.

The corn-based ethanol facility was slat-ed for a March start-up. The company wasalso building an adjacent waste-to-energyfacility that would use an anaerobic digester

to burn manure from a local feedlot andpower the ethanol process. Plans were to sellsurplus electricity to a local power grid,ensuring an external income stream for theplant. “[Renova is] working with theirbankers to arrange financing to get the proj-ect back on its feet,” said Graham Browne,president of ADI Systems Inc., the NewBrunswick company that built the anaerobicdigesters in Heyburn. “[The waste-to-energyfacility] was 98 percent complete. We weretwo weeks from finishing when we got thenotice to stop work, so we would obviouslylike to see it finished and to become a pro-ducing plant. Our contract came in underbudgeted costs.”

The actual plant construction incurredthe cost overruns, Browne said. He antici-pates a two-month shutdown while Renovaarranges financing. An outside firm exam-ined the construction expenses and will issuea report for financiers.

In Omaha, Prime BioSolutions tabled aproposed plant in Nebraska to concentrateon bidding for the bankrupt E3 BioFuelsfacility near Mead, Neb.

—Sarah Smith

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INDUSTRYEXPANSION COMPLETEPLANT EXPANSIONPROJECT COMPLETENEW PROJECT

Ethanol Plant Construction

Aberdeen Energy LLC

Location Mina, South Dakota Ethanol marketer undeclared

Design/builder Fagen Inc. Distillers grains marketer undeclared

Process technology ICM Inc. Carbon dioxide marketer N/A

Capacity 100 MMgy Broke ground November 2006

Feedstock corn Target start-up date 2008

Synopsis of progress

N/A

n the past four years, costs for all construction inputs have increased.

That’s no secret, but it is significant that nearly all inputs have outpaced

the 13 percent rate of inflation over the same time, a situation not

everyone predicted. For contractors, figuring the rising costs of mate-

rials into proposals can be problematic.

Since December 2003, the cost of all construction inputs has

increased by 23 percent, or about 5.5 percent per year, according to the

Bureau of Labor and Statistics. The only period of time that exceeds this sta-

tistic in terms of rapid cost increases was between 1977 and 1981 when

construction inputs rose by an average of 8.25 percent per year. However,

even during those years, with inflation numbers reaching into the 10 percent

range, the gains in construction inputs seemed moderate.

No inflationary issues are spurring today’s increases, but the cost of

energy may be one of the culprits. Everyone in the construction industry is

at the mercy of commodities providers. As prices for commodities rise, con-

tractors find themselves paying higher prices, or looking further away for

more affordable products. Since the cost of energy for shipping rises, the

savings can easily disappear.

At press time, light sweet crude oil for February delivery topped $90

per barrel. Although it’s not the only cost for commodities producers, it’s cer-

tainly a driving factor. According to BLS statistics, between December 2003

and December 2007, crude petroleum’s cost increased by 198 percent for

consumers. The only typical commodity to outpace petroleum over the

same period was copper ore. In January 2008, the average cost at the

pump for a gallon of No. 2 diesel was approaching $3.50.

Moving into spring with the soaring cost of building materials, not many

new projects are being announced. A few projects that started construction

in late 2006 and mid-2007 have been verified this month. Ethanol Grain

Processors LLC in Obion, Tenn., is on schedule to bring 100 MMgy of

ethanol on line in the fourth quarter of 2008. Hawkeye Renewables has two

110 MMgy plants currently under construction in Shell Rock and Menlo,

Iowa.

Three projects completed construction or expansion in January.

Heartland Grain Fuels LP in Aberdeen, S.D., finished its expansion from 8

to 48 MMgy of capacity. White Energy Hereford LLC announced the com-

pletion of the Lonestar State’s largest ethanol plant in Hereford, Texas. Poet

Biorefining-Leipsic opened its 60 MMgy plant in Leipsic, Ohio.

—Craig A. Johnson

Cost of Doing Business

Altra Indiana LLC

Location Cloverdale, Indiana Ethanol marketer undeclared

General contractor F.A. Wilhelm Construction Distillers grains marketer undeclared

Process technology Vogelbusch Carbon dioxide marketer undeclared

Capacity 88 MMgy Broke ground October 2006

Feedstock corn Target start-up date April 2008


N/A

Absolute Energy LLC

Location St. Ansgar, Iowa Ethanol marketer RPMG

Design/builder Fagen Inc. Distillers grains marketer CHS Inc.


Capacity 100 MMgy Broke ground July 2006

Feedstock corn Target start-up date February 2008


Piping and electrical work continues at the site.

Altra Coshocton Ethanol LLC

Location Coshocton, Ohio Ethanol marketer undeclared

General contractor The Industrial Co. Distillers grains marketer undeclared

Process technology Delta-T Corp. Carbon dioxide marketer undeclared




N/A

I


1. Our good faith attempts to contact project representatives go

unanswered for three straight months.

2. Through exhaustive means, we are unable to verify the contin-

ued advancement of a project.

3. The Renewable Fuels Association, as well as project represen-

tatives, are notified and given a reasonable amount of time to ver-

ify the project’s current status.

To provide updates to this list, contact Craig A. Johnson at (701) 746-

8385 or [email protected].

EPM will remove seemingly inactive projects from this list if:

Construction Represents 4.67 Billion Gallons Annually

Biofuel Energy Corp.

Location Fairmont, Minnesota Ethanol marketer Cargill Inc.

General contractor The Industrial Co. Distillers grains marketer Cargill Inc.

Process technology Delta-T Corp. Carbon dioxide marketer N/A

Capacity 110 MMgy Broke ground September 2006

Feedstock corn Target start-up date second quarter 2008


Electric, water and gas lines are complete. Piping and electrical work is complete in the process building. The

fermentation area is nearly complete mechanically. The distillers grains, ethanol load-out and grain handling

areas are 90 percent complete, along with cooling towers and dryers.

The Andersons Marathon Ethanol LLC

Location Greenville, Ohio Ethanol marketer The Andersons Inc.

Design/builder ICM Inc. Distillers grains marketer The Andersons Inc.

Process technology ICM Inc. Carbon dioxide marketer undeclared


Feedstock corn Target start-up date first quarter 2008


Construction continues. No further information was available at press time.


Altra Nebraska LLC

Location Carleton, Nebraska Ethanol marketer undeclared

General contractor undeclared Distillers grains marketer undeclared

Process technology Vogelbusch Carbon dioxide marketer undeclared

Capacity 113 MMgy Broke ground undeclared

Feedstock corn Target start-up date spring 2008


N/A

Bridgeport Ethanol LLC

Location Bridgeport, Nebraska Ethanol marketer undeclared

Design/builder ICM Inc. Distillers grains marketer undeclared



Feedstock corn Target start-up date October 2008


N/A

Biofuel Energy Corp.

Location Wood River, Nebraska Ethanol marketer Cargill Inc.

General contractor The Industrial Co. Distillers grains marketer Cargill Inc.


Capacity 110 MMgy Broke ground May 2006



Piping and electrical work in the process building is complete. Electric, water and gas lines are complete. The

distillers grains, ethanol load-out and grain handling areas are 90 percent complete, along with cooling tow-

ers and dryers.

Calgren Renewable Fuels LLC

Location Pixley, California Ethanol marketer Calgren Renewable Fuels

General contractor W.M. Lyles Co. Distillers grains marketer J.D. Heiskell & Co.

Process technology Lurgi Inc. Carbon dioxide marketer N/A

Capacity 52 MMgy Broke ground March 2007



N/A

Cardinal Ethanol LLC

Location Union City, Indiana Ethanol marketer Murex



Capacity 100 MMgy Broke ground February 2007

Feedstock corn Target start-up date summer 2008


In mid-January, the administration building was being enclosed. Fermentation tanks are nearly complete, and

structural steel in the process building continues to be placed. Steel for the energy center, dryers and thermal

oxidizers is also going up.

Cardinal Ethanol LLC

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Cascade Grain Products LLC

Location Clatskanie, Oregon Ethanol marketer Eco-Energy

General contractor JH Kelly Ethanol Distillers grains marketer Land O’Lakes


Capacity 108 MMgy Broke ground June 2006

Feedstock corn Target start-up date April 2008


All tanks are complete, and the grain storage bins were expected to be complete by the end of January. Most

of the construction work is now centered on piping and electrical work with the plant expected to be mechan-

ically complete by April 15.


Cilion Ethanol LLC

Location Keyes, California Ethanol marketer undeclared

General contractor Harris Construction Distillers grains marketer undeclared

Process technology Praj Industries Carbon dioxide marketer N/A




N/A

Center Ethanol Co. LLC

Location Sauget, Illinois Ethanol marketer Center Oil Co.

General contractor T.E. Ibberson/McCarthy Industrial Distillers grains marketer undeclared



Feedstock corn Target start-up date January 2008


N/A

Castle Rock Renewable Fuels LLC

Location Necedah, Wisconsin Ethanol marketer Murex






N/A

Didion Ethanol LLC

Location Courtland, Wisconsin Ethanol marketer undeclared

General contractor Agra Industries Distillers grains marketer undeclared



Feedstock corn Target start-up date March 2008


The company is training employees in preparation of a March 1 corn-grinding date. Most work is limited to

electrical and piping.

First United Ethanol LLC

Location Camilla, Georgia Ethanol marketer Eco-Energy

Design/builder Fagen Inc. Distillers grains marketer First United Ethanol


Capacity 100 MMgy Broke ground January 2007

Feedstock corn Target start-up date summer 2008


N/A

Ethanol Grain Processors LLC

Location Obion, Tennessee Ethanol marketer Aventine Renewable Energy



Capacity 100 MMgy Broke ground December 2006

Feedstock corn Target start-up date third quarter 2008


All tanks and cooling towers are complete. The distillers grains area is finished, and construction of the grain

silos is underway. Structural steel is being placed throughout the site. Overall construction is more than 60

percent complete.

Didion Ethanol LLC

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Heartland Grain Fuels LP

Location Aberdeen, South Dakota Ethanol marketer Aventine Renewable Energy

Design/builder ICM Inc. Distillers grains marketer Dakotaland Feeds


Capacity from 8 MMgy to 48 MMgy Start date September 2006

Feedstock corn Completion date January 2008


Expansion is complete, and the facility is producing. Congratulations Heartland Grain Fuels LP!

Expansion Complete

GreenField Ethanol

Location Johnstown, Ontario Ethanol marketer Commercial Alcohols

General contractor SNC-Lavalin Group Distillers grains marketer Commercial Alcohols


Capacity 200 MMly (53 MMgy) Broke ground October 2006

Feedstock corn Target start-up date fourth quarter 2008


Structural steel and mechanical installation in the energy and process areas continues. Some work contin-

ues on the field-erected tanks.

Greater Ohio Ethanol LLC

Location Lima, Ohio Ethanol marketer undeclared

General contractor Alberici Constructors Inc. Distillers grains marketer undeclared

Process technology Benchmark Products Inc. Carbon dioxide marketer N/A




N/A

Holt County Ethanol LLC

Location O'Neill, Nebraska Ethanol marketer undeclared

General contractor Adams Construction Distillers grains marketer undeclared

Process technology Vogelbusch Carbon dioxide marketer N/A


Feedstock corn Target completion date late 2008


N/A

Hawkeye Renewables

Location Menlo, Iowa Ethanol marketer Eco-Energy

Designer/builder Fagen Inc Distillers grains marketer undeclared





According to the company, progress is being made, and the project is on schedule.

Hawkeye Renewables

Location Shell Rock, Iowa Ethanol marketer Eco-Energy

Designer/builder Fagen Inc Distillers grains marketer undeclared





According to the company, progress is being made, and the project is on schedule.

GreenField Ethanol

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Innovation and Experience in Dehydration TechnologyDirect and Indirect Process Solutions

Low emissionsProcess optimizationHigh quality productionHigh energy efficiencyLow-temperature dryingExperienced project managementLow capital and operating costs

“With over 500 satisfied customers, Ronning is a proven leader inlarge-scale dehydration process solutions and system integration.”

[email protected]

9 1 3 - 2 3 9 - 8 1 1 8Tol l f ree : 866.RONNING


Kansas Ethanol LLC

Location Lyons, Kansas Ethanol marketer Poet Ethanol Products




Feedstock corn/milo Target start-up date April 2008


N/A

Levelland/Hockley County Ethanol LLC

Location Levelland, Texas Ethanol marketer Lansing Trade Group

Design/builder ICM Inc. Distillers grains marketer Lansing Trade Group

Process technology ICM Inc. Carbon dioxide marketer Chaparral Energy Inc.


Feedstock corn/milo Target start-up date February 2008


N/A

Marquis Energy LLC

Location Hennepin, Illinois Ethanol marketer Murex






N/A

Marysville Ethanol LLC

Location Marysville, Michigan Ethanol marketer undeclared



Capacity 50 MMgy Broke ground August 2006

Feedstock corn Target start-up date early 2008


N/A

Nesika Energy LLC

Location Scandia, Kansas Ethanol marketer Poet Ethanol Products

General contractor Free Country Design & Construction Distillers grains marketer Nesika Energy LLC





Vendors are training operators in preparation for start-up. Most construction work is focused on the finishing

touches, such as instrumentation, minor piping and electrical work.

Nexsun Ethanol LLC

Location Ulysses, Kansas Ethanol marketer undeclared




Feedstock corn/milo Target start-up date 2008


Roads are complete, and work on the fire loop and rail spur have begun. The company intended to begin

pouring concrete in April or May when winter weather conditions improve.

NEDAK Ethanol LLC

Location Atkinson, Nebraska Ethanol marketer Eco-Energy

General contractor Delta-T Corp. Distillers grains marketer Frahm and Deitloff





N/A

Indiana Bio-Energy LLC

Location Bluffton, Indiana Ethanol marketer Aventine Renewable Energy




Feedstock corn Target start-up date June 2008


Structural steel work is more than 80 percent complete. All equipment in the energy center has been placed,

and duct work is underway. Construction of two large fermentation tanks continues. In mid-January, work

began on the water treatment facility. The company expected to enclose the buildings by the end of the

month.

Otter Tail Ag Enterprises LLC

Location Fergus Falls, Minnesota Ethanol marketer RPMG

General contractor Harris Mechanical Distillers grains marketer CHS Inc.


Capacity 57.5 MMgy Broke ground October 2006



N/A

Northwest Renewable LLC

Location Longview, Washington Ethanol marketer U.S. Ethanol LLC

General contractor Makad Construction Corp. Distillers grains marketer Lansing Trade Group

Process technology Lurgi Inc. Carbon dioxide marketer undeclared




Foundation work continues. Crews are laying pilings despite wet, cold weather in the Pacific Northwest.

Northeast Biofuels LLC

Location Volney, New York Ethanol marketer Noble Americas Corp.

General contractor Lurgi Inc. Distillers grains marketer Perdue Farms

Process technology Lurgi Inc. Carbon dioxide marketer BOC Gases




N/A

Pacific Ethanol Magic Valley LLC

Location Burley, Idaho Ethanol marketer Kinergy Marketing

General contractor Parsons RCI Inc. Distillers grains marketer Pacific Ag Products LLC





Structural steel work is complete, and the process building is being enclosed.

Panda Hereford Ethanol LP

Location Hereford, Texas Ethanol marketer Aventine Renewable Energy

General contractor Lurgi Inc. Distillers grains marketer Panda Ethanol

Process technology Lurgi Inc. Carbon dioxide marketer undeclared




N/A

Pacific Ethanol Stockton LLC

Location Stockton, California Ethanol marketer Kinergy Marketing

General contractor W.M. Lyles Co. Distillers grains marketer Pacific Ag Products LLC


Capacity 50 MMgy Broke ground April 2007



Steel erection continues on bins and tanks.

Platinum Ethanol LLC

Location Arthur, Iowa Ethanol marketer Provista

Design/builder Fagen Inc. Distillers grains marketer UBE Ingredients



Feedstock corn Target start-up date August 2008


N/A

Patriot Renewable Fuels LLC

Location Annawan, Illinois Ethanol marketer Murex




Feedstock corn Target start-up date spring 2008


N/A


With our experience in renewable fuels,this team is anything but green.Baird Holm provides counsel to Midwest ethanol suppliers and producers at federal, state

and local levels. We’ve earned a reputation as a go-to law firm for securities, tax and other

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Poet Biorefining-Chancellor

Location Chancellor, South Dakota Ethanol marketer Poet Ethanol Products

Design/builder Poet Design & Construction Distillers grains marketer Poet Nutrition

Process technology Poet Design & Construction Carbon dioxide marketer N/A

Capacity from 50 MMgy to 100 MMgy Start date October 2006

Feedstock corn Target completion date third quarter 2008


Overall construction was 8 percent complete at the end of January.

Plant Expansion

Poet Biorefining-Fostoria

Location Fostoria, Ohio Ethanol marketer Poet Ethanol Products







Renova Energy of Idaho LLC

Location Heyburn, Idaho Ethanol marketer Renova Energy

General contractor Dilling Corp. Distillers grains marketer Renova Energy

Process technology Katzen International Carbon dioxide marketer Renova Energy




Renova Energy PLC has suspended construction on the Heyburn facility due to a “funding shortfall” caused

by “cost overruns.”

Poet Biorefining-Marion

Location Marion, Ohio Ethanol marketer Poet Ethanol Products



Capacity 65 MMgy Broke ground May 2007




Poet Biorefining-North Manchester

Location North Manchester, Indiana Ethanol marketer Poet Ethanol Products



Capacity 65 MMgy Broke ground third quarter 2007




Poet Biorefining-Leipsic

Location Leipsic, Ohio Ethanol marketer Poet Ethanol Products




Feedstock corn Start-up date January 2008


The plant began operations Jan. 10. Congratulations Poet Biorefining-Leipsic!

Project Complete Siouxland Energy & Livestock Co-op

Location Sioux Center, Iowa Ethanol marketer C&N Ethanol Marketing

Design/builder ICM Inc. Distillers grains marketer Farmers Co-op Society


Capacity from 25 MMgy to 55 MMgy Start date October 2006

Feedstock corn Target completion date 2008


N/A

Plant Expansion

Poet Biorefining-Alexandria

Location Alexandria, Indiana Ethanol marketer Poet Ethanol Products







IsoStabTM is composed of acidsthat appear naturally in hop plantsBenefits: � Controls lactic and acetic acid formation

� Optimizes plant efficiency� Active at a wide pH range, thermally stable

IsoStab™… a naturally derived acid to combat resistantbacteria during fermentation.

5185 MacArthur Blvd. NW, Ste. 300Washington, DC 20016-33441 • 202.777.4800 • Fax 202-777-4895 www.bthp.info

Southwest Iowa Renewable Energy LLC

Location Council Bluffs, Iowa Ethanol marketer Lansing Ethanol Group

Design/builder ICM Inc. Distillers grains marketer Bunge



Feedstock corn Target start-up date August 2008


The grain receiving silos and distillers grains silo are structurally complete with equipment being installed. The

distillers grains building is 95 percent complete. Three fermentation tanks are substantially complete. Structural

steel in the process area is going up, and all foundation and slab construction is complete. Work on the energy

center slab and foundation is complete with dryers to be installed as soon as they arrive on-site.

Standard Ethanol Cambridge LLC

Location Cambridge, Nebraska Ethanol marketer Noble Americas Corp.

General contractor The Industrial Co. Distillers grains marketer The Scoular Co.


Capacity 44 MMgy Broke ground April 2006



N/A

Superior Ethanol LLC

Location Superior, Iowa Ethanol marketer RPMG

General contractor Agra Industries Distillers grains marketer undeclared





N/A

Terra Grain Fuels Inc.

Location Belle Plaine, Saskatchewan Ethanol marketer undeclared

General contractor EllisDon/VCM Contractors & Engineers Distillers grains marketer undeclared


Capacity 150 MMly (40 MMgy) Broke ground September 2006

Feedstock wheat Target start-up date 2008


The plant is approximately 90 percent complete in hiring staff, and the company has begun personnel train-

ing. Delta-T and other vendors have begun commissioning training, as well. Bins are full of wheat as the plant

has been receiving grain since August.

U.S. Bio Janesville

Location Janesville, Minnesota Ethanol marketer Provista






According to the company Web site, construction continues. No further information was available at press

time.

U.S. Bio Dyersville

Location Dyersville, Iowa Ethanol marketer Provista







time.

U.S. Bio Hankinson

Location Hankinson, North Dakota Ethanol marketer Provista







time.

Tharaldson Ethanol LLC

Location Casselton, North Dakota Ethanol marketer undeclared

General contractor Wanzek/Valley Engineering Distillers grains marketer undeclared

Process technology Vogelbusch Carbon dioxide marketer N/A


Feedstock corn Target start-up date December 2008


N/A

“In my eyes, maintenance is equal to maximizing production.”

-Dwayne Braun(Plant Manager-Platte Valley Fuel Ethanol)

Platte Valley Fuel

Ethanol, LLC.

Mature Maintenance Management Software for the Growing Ethanol Industry

800.922.4336www.mapcon.com [email protected]

LDAR Inspections

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Asset Management

Inventory Management

Work Order Management

Project Management

For over 25 years, MAPCON has been

producing high-yield results in facilities like Platte

Valley (left) as well as many other ethanol plants.

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VeraSun Bloomingburg LLC

Location Bloomingburg, Ohio Ethanol marketer Cargill Inc.

Design/builder Fagen Inc. Distillers grains marketer Cargill Inc.






time.

VeraSun Hartley LLC

Location Hartley, Iowa Ethanol marketer VeraSun Energy

Design/builder Fagen Inc. Distillers grains marketer VeraSun Energy






time.

VeraSun Welcome LLC

Location Welcome, Minnesota Ethanol marketer VeraSun Energy

Design/builder Fagen Inc. Distillers grains marketer VeraSun Energy






time.

Verenium Biofuels Louisiana

Location Jennings, Louisiana Ethanol marketer undeclared

General contractor Cajun Constructors Inc. Distillers grains marketer N/A

Process technology Verenium Biofuels Carbon dioxide marketer N/A

Capacity 1.4 MMgy Broke ground February 2007

Feedstock sugarcane bagasse/energy cane Target start-up date first quarter 2008


N/A

White Energy Hereford LLC

Location Hereford, Texas Ethanol marketer Murex

Design/builder Fagen Inc. Distillers grains marketer Quality Distillers Grain



Feedstock corn/milo Start-up date January 2008


The company announced the plant’s start-up in mid-January. Congratulations White Energy Hereford LLC!

Project Complete

White Energy Plainview LLC

Location Plainview, Texas Ethanol marketer Murex

Design/builder Fagen Inc. Distillers grains marketer The Scoular Co.



Feedstock corn/milo Target start-up date first quarter 2008


Work continues at the site, but no further information was available at press time.

U.S. Bio Marion

Location Marion, South Dakota Ethanol marketer Archer Daniels Midland

Design/builder Fagen Inc. Distillers grains marketer Archer Daniels Midland



Feedstock corn Target start-up date January 2008



time.

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www.buhlergroup.com1-800-745-6777

Standards for tomorrow.

We see food, feed, and fuel.

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Varennes, Quebec, a suburb of

Montreal with a population of approxi-

mately 20,000, sits on the shore of the St.

Lawrence River in the southwestern part

of the province. Largely a farming com-

munity, Varennes is now home to a

GreenField Ethanol production facility,

the only ethanol plant in the province.

“Today marks a milestone for

GreenField Ethanol,” said company

President and CEO Robert Gallant at the

inauguration of the plant in late June

2007. “We are proud that Quebec’s first

ethanol plant carries the GreenField

name and that we are the pioneers of

renewable fuel in Quebec.”

After exhaustive investigaton of

sites throughout the province, the com-

pany’s decision to build the plant in

Varennes came down to two main driv-

ers. The first was location. “It’s literally

one bridge away from the Montreal

urban community,” the chief executive

officer explains. “The use of ethanol in

Quebec is primarily in urban areas.

Petro-Canada, which is the client for our

output, has a refinery in Montreal.”

Secondly, Varennes happens to sit in the

largest corn-growing region in the

province.

The Varennes plant was built by

Montreal-based SNC-Lavalin Group Inc.

with technology provided by ICM Inc.

The 120 MMly (32 MMgy) plant officially

started up in March 2007, about 18

months after GreenField Ethanol broke

ground. “With the Quebec winters, we

adopted a construction schedule that

took that into consideration, but the plant

started up on schedule and on budget,”

Gallant says. “We had excellent cooper-

ation and support from both the provin-

cial and federal governments. Our cus-

tomers were right there from the begin-

ning, and the farming community was so

enthusiastic about the project that they

took an equity position in it.”

Construction costs for the Varennes

plant totaled $109 million with $18 million

of that provided by the federal govern-

ment under its Ethanol Expansion

Program. Seventy percent of the total

cost was spent on goods and services

provided by workers and contractors

from Varennes and elsewhere in

Quebec. The number of jobs associated

with the construction of the plant peaked

at about 300 tradespeople, Gallant says.

Today, the plant employs about 45 peo-

ple. “The economic spin-off benefits for

the ethanol plant being in that region are

significant and well-appreciated,” he

says.

The facility is currently running at full

capacity fueled by 12 million bushels of

Quebec corn, the majority of which is

purchased from Pro-Ethanol, an organi-

zation of about 500 Quebec corn farmers

who have personally invested in the

Varennes plant. The ethanol is sold

directly to Petro-Canada, a Canadian oil

and gas company that has purchased all

of the fuel that will be made at the facility

for the next 10 years.

“Petro-Canada is proud to be the

exclusive purchaser of all ethanol pro-

duction from GreenField Ethanol’s new

Quebec facility in Varennes,” said Mel

Broten, Petro-Canada’s general manag-

er of integration and planning, at the

June inauguration. “This partnership

enables us to provide consumers with

gasoline that is blended with up to 10

percent ethanol, which is produced right

here in Quebec.”

A First for Quebec

:OU

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LA

NT


:OU

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GreenField Ethanol will also market

distillers dried grains and some distillers

wet grains to the local farming community.

In addition, carbon dioxide will be sold to

Praxair Inc., an international provider of

industrial gases. According to Gallant,

Praxair has built a gas compression and

refrigeration plant “literally across the

street from our plant.”

Gallant calls the Varennes plant a

one-stop shop for everything ethanol.

“Everything is used,” he says. “We try to

do that for all our facilities.” Thought of in

this way, the facility appears more like a

biorefinery than just an ethanol plant. “It

has that potential,” Gallant says. “Both the

provincial and federal governments have

been working with us on additional poten-

tial associated with cellulosic ethanol.

Varennes could provide an excellent seed

location for that kind of work.” The plant

currently occupies about 25 acres of a 75-

acre site, so plant expansion possibilities

exist.

In the meantime, GreenField

Ethanol is in the midst of developing a 200

MMly (53 MMgy) plant just over the

Quebec border in Johnstown, Ontario. It is

currently building a 145 MMly (38 MMgy)

plant in Hensall, Ontario, as well. The for-

mer is slated for start-up in late 2008, while

the Hensall plant is expected to start up in

mid-2009. The company has two addition-

al plants operating in Ontario, one in

Chatham and one in Tiverton. “With these

other two plants, I think the docket is full,”

Gallant jokes.

—Jessica Ebert

GREENFIELD ETHANOL

LOCATION Varennes, Quebec

DESIGNER/BUILDER SNC-Lavalin Group Inc.

PROCESS TECHNOLOGY ICM Inc.

CAPACITY 120 MMly (32 MMgy)

FEEDSTOCK corn

ETHANOL MARKETER GreenField Ethanol

COPRODUCT MARKETER GreenField Ethanol

CARBON DIOXIDE MARKETER GreenField Ethanol

BROKE GROUND fall 2005

START-UP DATE March 2007


PHOTO: GREENFIELD ETHANOL

:INT

HE

FIE

LD

Craig Yencho likes to tell

farmers that the new industrial sweet

potatoes he’s working on aren’t your

grandma’s sweet potato. For one, they

are being bred for high starch and high

solids, which means they don’t taste the

same as the familiar sweet potato. Nor

do they look the same; the industrial

sweet potatoes have white flesh, and

either white or purple skins. Finally, they

wouldn’t be grown for food, but rather

for ethanol.

Yencho recently visited southwest

China, where sweet potatoes are join-

ing cassava and sweet sorghum as

ethanol feedstocks. Yencho reports

there are two ethanol plants there using

those feedstocks and one under con-

struction that will use those feedstocks,

as well. He says the biggest difference

between China’s agricultural system

and the U.S. ag system is that China

has a multitude of farmers with small

farms under a quarter-acre in size,

where hand labor is the norm. In the

United States, sweet potatoes require

hand transplanting and hand harvest-

ing, which boosts production costs

between $1,500 and $1,700 per acre,

compared with $175 to $225 per acre

for corn in North Carolina. Thus, even

though sweet potatoes can outyield

corn in biomass per acre and equal

corn’s ethanol yield per acre, they aren’t

considered an ethanol feedstock

because of the high production costs.

Yencho leads research at North

Carolina State University that aims to

create an industrial sweet potato for the

emerging ethanol industry in the South.

The harvesting limitation should be rela-

tively easy to overcome, using modified

potato diggers, Yencho says. The pri-

mary reason for hand digging is to pro-

tect the easily skinned sweet potato in

order to maximize its visual appeal for

supermarket customers. An industrial

market wouldn’t worry about cosmetic

appearance and could tolerate machine

digging. Overcoming the transplanting

obstacle will take more time. Unlike Irish

potatoes, which are planted mechani-

cally using cut seed tubers, the sweet

potato isn’t a tuber, but a swollen part of

the plant’s root, Yencho explains. He

says the trait to sprout from cut sweet

potatoes is heritable, and new varieties

should be forthcoming that can be

mechanically planted. “After two years

of study, I think the planting modifica-

tions are solvable,” he says.

Additionally, he is working to boost

yields between 30,000 and 60,000

pounds per acre, which will yield an esti-

mated 400 to 600 gallons of ethanol per

acre. Because uniform size, shape and

nice appearance aren’t as important,

the industrial sweet potato could be

grown on more marginal land than the

table varieties, Yencho adds. Other

advantages to an industrial sweet pota-

to crop in the South would be the plant’s

drought tolerance and low nitrogen

requirement.

In parallel work, molecular biolo-

gist Byron Sosinski, Yencho’s col-

league, is experimenting with genetic

modifications that would make industri-

al sweet potatoes self-processing.

Sosinski is using genes identified in

bacteria found in extreme deep-sea

environments that create enzymes

capable of breaking down starch at high

temperatures. The theory is that the

genes would be inserted into sweet

potatoes to be expressed only in the

sweet potato itself and not other plant

tissue. The enzymes would lie dormant

in the sweet potato until it was taken

from storage, ground into slurry and

heated. Under the higher temperatures,

the enzymes would become active and

turn the starch into fermentable sugars.

“We have proof of this concept in tobac-

co cell cultures,” Yencho reports. “The

next step is to place the genes in sweet

potatoes, which we’ve done in Jewel.”

Jewel is a prime tabletop sweet potato

variety that is amenable to genetic

manipulation. Moving the genetic trait

into the new industrial varieties is the

next challenge for the researchers.

Definitely, these potatoes won’t be your

grandma’s sweet potato.

—Susanne Retka Schill

Not Your Grandma’s Sweet Potato


PHOTO: NORTH CAROLINA STATE UNIVERSITY

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:UP

FR

ON

T

Roger Hill has seen a lot of

change in the ethanol industry since

he became one of the original farm-

scale ethanol producers in the 1970s

and ’80s. In the past 30 years, he has

built and helped operate ethanol

plants in Illinois, North Dakota, Iowa,

Nebraska, Missouri and Australia. He

has seen most of these plants change

ownership at least once—one even

changed location—and most have

been rebuilt several times. This

straight-talker with military, racing and

banking experience is highly sought-

after by companies who want an orig-

inal.

Q: How did you first enter theethanol industry?A: It was during the Arab oil crisis when

they embargoed 10 percent of their oil.

There was a movement in the late

1970s; people in the United States

were talking about making alcohol. I

was an agriculture banker in northern

Illinois. I got very interested, and in

1979, I built my first ethanol plant. I

operated it until the payment-in-kind

program came into play in 1983. Then

all the small producers were virtually

out of business.

Q: How were you prepared foryour work in the ethanol indus-try?A: I was a hot-rodder in my younger

days. I spent time on the drag strip.

When I was in the military, my special-

ties were in large engines and

hydraulics. It helps to understand how

pumps and process equipment work.

I tell people that I know a lot more

ways that don’t work than do work. A

lot was trial and error over the years.

You just keep trying until you get it

right.

Q: What’s a major changeyou’ve observed?A: It’s been interesting to see how the

distillers grain market has evolved.

Farmers were reluctant to take the

mash and feed it. I had to get farmers

to feed it to their dairy cows. The uni-

versities were saying it was good

stuff, but you have to convince farm-

ers of it. Moving the coproducts is an

essential part of this business. Most of

our feed at Golden Triangle goes wet

to feedlots and dairies.

Q: What has been the mostchallenging for you?A: Getting cooperation with oil com-

panies that really don’t want to coop-

erate. They don’t care if they sell alco-

hol or not. They do it because it was

mandated. I was told years ago that

every gallon of alcohol we sell is a gal-

lon of gasoline they’re not selling. [In

Rockford, Ill.], signs went up in Mobil

and Shell stations that said, “We don’t

put ethanol in gasoline.” That did

away with ethanol sales. Prices

dropped to 65 cents in Rockford. That

plant got moved to Morris, Minn., and

it’s operating as DENCO today. Oil

companies aren’t changing. They had

many years to get infrastructure

ready, but they chose not to do it.

They still come up with excuses, but

the tankage excuse is lame. People

think oil companies are our friends,

but they really aren’t.

Q: In this era of consolidationand corporations, is it tough tobe a co-op? A: The farmers that own this co-op

want to have another source of sale

for their corn. They started the plant to

value-enhance their corn, which they

did. The way they look at it, it’s a

hedge on the market. During the past

few years, the corn market wasn’t

what it is today. Now, going forward,

we’re looking at a tougher time of it,

but they’re getting a lot more for their

corn. It’s almost a perfect hedge, as

far as owning an ethanol plant. It’s a

good business for them. One way or

another, they’re going to make more

off of their crop. If the price of corn

drops, hopefully ethanol will be prof-

itable. There have been many com-

panies interested in purchasing

Golden Triangle, but the members of

the co-op haven’t been interested in

selling the plant because it is achiev-

ing what they hoped it would.

—Anduin Kirkbride McElroy

An Original

Name

Roger Hill

Title General Manager

PlantGolden Triangle Energy LLC in Craig, Mo.

HometownNebraska City, Neb.

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www.genencor.com

:FLE

XFA

CT

OR

When the Brazilian gov-

ernment set out in the 1980s to substitute

ethanol for gasoline as its national pas-

senger transportation fuel, General

Motors Corp. was acutely aware of the

low-volatility and cold-start concerns

associated with running an engine on

pure alcohol.

According to Henrique Pereira with

GM Powertrain, this is why the Big Three

automaker equipped its Brazilian vehicles

with two fuel tanks—one for ethanol or

ethanol blends, and the other solely for

gasoline to assist with cold starts. While

the words “cold” and “Brazil” aren’t often

found in the same sentence, tempera-

tures below 64 degrees Fahrenheit may

cause trouble for an engine starting on

alcohol. Ethanol in pure form and in high-

er blends with gasoline doesn’t evaporate

well at lower temperatures and won’t pro-

duce a combustible mix at start-up.

However, low concentrations of ethanol

in gas, especially at 6 percent, cause

inordinately high volatility compared with

straight gasoline or ethanol blended in

concentrations greater than 20 percent

(see chart). Even though this is still a con-

cern regarding emissions (evaporative

and permeation), high-volatility E10

burned in older carbureted engines had a

propensity to cause vapor lock, which

has been much less of a concern in the

past 20 years with the advent and prolif-

eration of fuel-injection systems.

Like many fuels, the percentage of

ethanol in E85 is adjusted throughout the

seasons. During colder months, the

ethanol content in E85 drops to nearly 70

percent to compensate for ethanol’s

lower volatility, and it increases during the

warmer months of the year when cold

starts aren’t a concern. Brazilian vehicles

weren’t flexible-fuel vehicles (FFVs) at

first but were designed for ethanol-based

fuels, which is why compression ratios

were increased to optimize thermal effi-

ciency in ethanol combustion. Over time,

improvements were made, and in 2006,

Honda announced it was introducing an

FFV able to run on E20 or pure ethanol.

Much like GM’s early Brazilian ethanol

cars, a Honda press release states, “[A]

cold-start system utilizing a secondary

fuel tank ensures reliable starts even at

low ambient temperatures,” which indi-

cates that after two decades, automakers

still rely on an auxiliary fuel tank to over-

come low-volatility issues with alcohol

fuels.

In the 1990s, changing emissions

regulations in Brazil and improved com-

bustion technologies led GM to incorpo-

rate electronic controls to assist cold-start

performance with a greater sense of

sophistication. According to GM, the first

FFV engines used a light-reactive sensor

to measure the composition of fuel rela-

tive to alcohol content. In the past few

years, GM has switched to what’s called

a virtual sensor, which functions on read-

ings from the oxygen sensors in the

exhaust stream, fuel-level sensor and

vehicle-speed sensors. Using these

readings, the engine control module

adjusts the length of time that fuel injec-

tors stay open depending on the concen-

tration of ethanol. In other words, the

more ethanol (and lower energy density),

the longer the injectors stay open.

In April 2007, GM issued a large vol-

untary service campaign for 2006 and

2007 FFVs, which were prone to poor

cold-start performances due to improper

programming in the engine control mod-

ule. Ford Motor Co. had a similar issue

with its Taurus FFVs (see January 2007

EPM Flex Factor). Similar to how carbu-

reted engines were sometimes equipped

with a manual choke to create a fuel-rich

air-fuel ratio, the engine needs more fuel

and less air at start-up to help combat

poor cold-starting with ethanol (without

an additional fuel tank for gasoline only).

Change2E85, a company that

makes aftermarket E85 conversion kits

called FFI Platinum, recently announced

that its systems will now come equipped

with what it calls “Cold Start Technology.”

According to the company, “Ethanol has

a vaporization temperature approximate-

ly 56 degrees Fahrenheit. When the out-

side temperature drops below 56, the FFI

Platinum’s cold-start feature will turn on

but only during the initial starting cycle. It

will add extra fuel during the starting cycle

to help increase the vaporization poten-

tial. The FFI Platinum will resume normal

operations after 30 to 40 seconds of

engine run time.”

—Ron Kotrba

Cold Start 101


SOURCE: SAE PAPER 852116


:BU

SIN

ES

S

In 2007, despite lower ethanol

prices and project financing chal-

lenges, the ethanol production indus-

try experienced historic growth. With

the flood of new plants coming on line,

the U.S. ethanol industry kept its sta-

tus of “unconcentrated,” according to

a report conducted by the Federal

Trade Commission in late November.

The report, as prescribed by the

Energy Policy Act of 2005, has

reached similar conclusions in all

three years that it has been issued.

The intent of the report was to

simply gauge the ethanol industry’s

competitiveness using the Herfindahl-

Hirschman Index, a calculation

method the FTC uses to measure indi-

vidual market shares to “determine

whether there is sufficient competition

among industry participants to avoid

price-setting and other anti-competi-

tive behavior,” the report stated.

Calculations were based on fig-

ures compiled by the U.S. Energy

Information Administration and the

Renewable Fuels Association from

July 2006 to July 2007. As outlined by

the FTC and the U.S. Department of

Justice, HHI values below 1,000 are

deemed unconcentrated and competi-

tive, while a score between 1,000 and

1,800 is considered moderately con-

centrated. An index score above 1,800

is considered a pure monopoly. Based

on actual production volumes (instead

of production capacity), the FTC gives

the U.S. ethanol industry a score of

465, down from 736 in 2006.

“This [study] provides the under-

pinnings for continued growth of the

industry,” says Todd Alexander, princi-

pal at Chadbourne & Parke LLP. “The

pace at which the industry is growing

has certainly slowed down based on

what I’ve seen, and the ability to raise

private equity for these projects has

definitely diminished. Last year at this

time, the spreads in the market were

masking some of the flaws in projects’

business plans.”

The FTC noted that the decline in

concentration was attributed to the

recent increase in new ethanol pro-

duction and proposed ethanol projects

starting construction. In September

2007, 103 companies were producing

ethanol in the United States, a 13-

company increase from 2006 and a

28-company increase from 2005,

according to the report. The largest

ethanol producer’s share of capacity

has continued to fall each year as new

firms enter the market. The report also

indicated that the largest producer

accounted for approximately 16 per-

cent of domestic ethanol capacity,

down from 21 percent in 2006 and 26

percent in 2005.

If this period of rapid growth cre-

ates an oversupply, followed by lack of

profit and trends toward consolidation,

the report could serve as a viable

benchmark for the industry in the long-

term as the market matures. “This

report is important for people to take a

step back and realize that [the ethanol

industry] is not in fact controlled by

one or two companies,” says Cory

Garcia, senior research analyst at

Raymond James & Associates. “The

industry is really fragmented, which is

good for the entire market because it

shows that the industry isn’t monopo-

lized by one or two larger players.”

Looking ahead into 2008, ana-

lysts say consolidation activity should

occur and become a significant ele-

ment in the FTC’s 2008 report.

Evidence of this trend became obvi-

ous when two of the largest ethanol

producers—VeraSun Energy Corp.

and U.S. BioEnergy Inc.—announced

a monumental merger agreement one

day after the 2007 FTC report was

released. “To our knowledge, we

haven’t seen too much consolidation

outside of the U.S. BioEnergy/

VeraSun deal,” Garcia says. “So,

there are no real mechanisms for the

market to get further concentrated. I

would guess that the concentration

percentage would be going lower like

it has.”

According to Alexander, on the

other hand, the ethanol industry’s

inherent and turbulent commodity

cycle could increase concentration

before the 2008 report. “I do expect

the industry to become more concen-

trated,” he says. “The industry is a

commodity business. In general, com-

modity businesses move toward a sit-

uation where there are several large

players who can capitalize on the eco-

nomics of scale to lower their margin-

al cost of production, and I expect that

the ethanol industry will be no differ-

ent.”

—Bryan Sims

FTC: Ethanol Industry is ‘Unconcentrated’

SOURCE: RENEWABLE FUELS ASSOCIATION/NATIONAL ASSOCIATION FOR RETAIL MARKETING

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:DR

IVE

As the 2008 American Le

Mans Series kicks off its season with

the Mobil 1 Twelve Hours of Sebring,

I’m reminded of a quote by the late

Jerry Garcia of the Grateful Dead in

describing the legendary band’s

appeal. “You do not merely want to be

considered just the best of the best,”

he said. “You want to be considered

the only ones who do what you do.”

This quote also sums up our

partnership with the Ethanol

Promotion and Information Council,

the consumer marketing arm of the

ethanol industry. This

influential organiza-

tion has been at the

forefront of the drive

to increase con-

sumer awareness of

ethanol. In racing

terms, they are in the

“pole position” of this

critical effort.

It is through this

relationship that I am

proud to announce

that the American Le

Mans Series now offers E85 as an offi-

cial fuel for the 2008 season. This is

the first time that a motorsports league

has sanctioned “America’s Flex-Fuel,”

a high-performance, environmentally

friendly, renewable fuel. This year,

several automotive manufacturers will

run on E85, including seven-time GT1

class champion Corvette Racing.

As racing legend Bobby Rahal

said in a speech to the National Press

Club in 2007, “Racing is simply not just

entertainment anymore.” Auto racing

comes in all shapes and sizes in the

United States. The competition for the

sports entertainment dollar is fierce.

The long-term health and relevancy of

the sport has grown by leaps and

bounds with our commitment to

renewable fuels. We play a critical role

in demonstrating to consumers the

environmental, economic and per-

formance attributes of ethanol.

These are not fuel blends

designed specifically for the American

Le Mans Series. I have often spoken

of providing a direct link from the race-

track to the filling station. In the 2007

season, the American Le Mans Series

chose E10 as its “official ethanol-

enriched fuel” of the series. However,

this fuel is not exclusive to the race

track. E10 is a blend of 90 per-

cent gasoline and 10 percent

ethanol and is widely available

at many gas stations across

the country. More than 6 million

flexible-fuel vehicles are on the

road and E85 is available at

more than 1,400 refueling sta-

tions, from coast-to-coast, with

more stations opening every

day.

In our 10th season, the

American Le Mans Series

demonstrates that cars can perform at

top speeds in demanding environ-

ments, utilizing a renewable fuel that's

readily available. The series showcas-

es premier brands such as Porsche,

Acura, Audi, Corvette, Ferrari and

Aston Martin to name but a few. The

message is clear: choosing ethanol-

enriched fuel at the pump is a commit-

ment to performance, environmental

responsibility and energy independ-

ence.

There was little debate in our

decision to offer E85 in our series. E85

is the cleanest-burning fuel available.

With an octane rating of 100, E85 is

the highest-performing fuel on the

road. It has the highest oxygen con-

tent of any available fuel, allowing it to

burn cleaner than conventional gaso-

line. The use of E85 results in a near-

ly 40 percent reduction in greenhouse

gas emissions. Cellulosic E85 has the

capability to provide even greater

reductions. While others speak of

clean fuel technologies that are years

away from development, E85 is avail-

able now to meet clean air challenges

and provide momentum in the quest

for energy security in the United

States.

For more than 30 years the

American consumer has endured one

energy crisis after another. There have

been no magic remedies or solutions.

Now we have the opportunity to begin

the process of taking control of our

energy destiny. We are proud to be a

part of this effort.

Scott Atherton is the president and

chief executive officer of the

American Le Mans Series. For more

information on the series, visit

www.americanlemans.com.

American Le Mans Series Touts E85By Scott Atherton

Atherton


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f you have purchased securities

in a private equity offering, you

likely hold “restricted securities.”

For many of you, this means

you are currently prohibited

from selling your securities to some-

one else. This is because securities

laws restrict resales of securities that

were originally issued in offerings not

registered with the Securities and

Exchange Commission. To resell

your securities, you must register the

resale with the SEC or the resale

must qualify for an exemption from

registration. Rule 144 is a safe harbor

you might use to comply with this

requirement.

The SEC has amended Rule

144 to eliminate some of the condi-

tions for using the safe harbor. This

may make it easier for you to resell

securities that you purchased in a pri-

vate offering. The effective date is

Feb. 15, 2008, and the new rules

apply to securities bought before or

after that date. This article provides a

brief overview of the new rules.

Before getting too excited about

the SEC’s generosity, you should

determine whether you are an affili-

ate of the company whose securities

you own. Stricter requirements for

using the safe harbor apply to affili-

ates. These rules apply even if affili-

ates bought their securities in a pub-

lic offering. Affiliates generally include

officers and directors of the issuer, as

well as persons who own a 10 per-

cent or greater interest.

Sale of Restricted Securities by Nonaffiliates

To use Rule 144, you must first

own the securities for the required

holding period. The

holding period typically

begins on the date you

bought securities in an

offering or from an

affiliate of the issuer.

There are rules for cal-

culating holding peri-

ods for some specific

transactions, such as

those involving prom-

issory notes, estates

and gifts, as well as

new rules for reorgani-

zations.

The SEC has

reduced the holding period to one

year for securities of non-reporting

issuers and six months for securities

of issuers that have been subject to

SEC reporting requirements for at

least 90 days before the sale. For

resales of securities of reporting com-

panies, there also must be adequate

current public information about the

issuer. This additional requirement

applies for six months after the six

month holding period is met. After the

one-year holding period, resales by

nonaffiliates of reporting and nonre-

porting companies are not subject to

any other requirements.

Affiliates Subject to Stricter Rules

Affiliates have the same holding

period restrictions as nonaffiliates.

However, for the most part, the new

rules did not change the require-

ments that apply to affiliates. Once

they satisfy the holding period, affili-

ates must meet additional require-

ments. These include the availability

of public information, limitations on

the amount of securities an affiliate

may sell, a manner of

sale requirement, and

a notice filing require-

ment if securities sold

in reliance upon Rule

144 during any three-

month period exceed

5,000 shares or

$50,000. Under the

new rules, the man-

ner of sale require-

ment does not apply

to debt securities.

Affiliates of small

private issuers may

have difficulty satisfy-

ing the public information and man-

ner of sale requirements. As a result,

they may need to register public

resales or use an alternative exemp-

tion. Even though the new rules prob-

ably won’t help such affiliates sell

their own securities, directors and

managers of small private companies

may still appreciate the prospect of

increased flexibility to approve trans-

fer requests and keep their stock-

holders and members happy.

Other Rules Still ApplyRemember there are other

sources of restrictions that may

impact transfers of your securities,

such as tax rules and the issuer’s

governing documents. However, the

changes to Rule 144 may help you

satisfy the securities law require-

ments for selling your restricted secu-

rities.

Britney L. Schnathorst is an associ-

ate with BrownWinick, a Des Moines,

Iowa-based law firm serving the

renewable fuels industry. Reach her

at [email protected] or (515)

242-2487.

New SEC Rules May Make ItEasier to Resell Securities

By Britney Schnathorst

This article is only a general summary for information purposes and does not constitute legal advice. Consult a qualified and experienced legal advisor for your specific situation or particular questions.

I

Schnathorst


CELLULOSE

Executives with Colusa Biomass Energy Corp., a company securing itsniche in rice waste, were searching diligently for an engineering companyto take their project to the next level: commercial production. No matter thepaths they traversed, CBEC executives say all roads led to BBIInternational.

By Ron Kotrba

All Roads Lead to


CELLULOSE

ROMEAND

RICE

CELLULOSE

eedstock choices by compa-nies establishing themselves inthe race to commercializeethanol from cellulose are

largely determined by geographical avail-ability. Corn stover, wheat straw, woodybiomass, and dedicated energy crops arefrequently discussed, but a companybased in California’s Sacramento Valley,Colusa Biomass Energy Corp., doesn’thave to look far to discover its nichefeedstock. “North of Sacramento it’spretty much all rice fields,” says MarkYancey, vice president of BBIInternational’s project development divi-sion. BBI, which publishes EPM, recent-ly agreed to provide process design and

engineering services for CBEC’s project:Building a full-scale biorefinery produc-ing ethanol and sodium silicate from riceresidues. It’s something CBEC execshave been working toward for years.

Disappointing pilot work done withrice straw in the 1990s using the generalpatented process on which CBEC’s morerefined conversion design is based, cou-pled with low oil prices and a discourag-ing economic environment, slowed thecompany down but didn’t stop it.Despite past obstacles, CBEC gained apreliminary engineering thumbs-up fromHarris Group last year and began thehunt for experts in cellulose to scale uptheir process in a full-size plant.

“It was a case of mutual interestand respect,” says CBEC President andChief Executive Officer Tom Bowers,referring to what led to the two compa-nies’ new working relationship. “We’vebeen looking hard since last March forthe right group to take us to the nextlevel domestically and internationally,and I guess it was one of those caseswhere all roads lead toRome—every time wefollowed a solid lead onsomebody who had tal-ent or someone werespected, well, theyended up being withBBI most of the time.”Originally intending tofocus its initial commer-cial plant in California where a rice-col-lection infrastructure exists, the compa-ny is now equally interested in anArkansas site where rice hulls lie await-ing—pending a deal-closer. Straw, hulls

F

Yancey

‘By the end of the year we should beready to negotiate an EPC contract forthe design and construction of the plant.’

CELLULOSE

or both projects concurrently, Yanceysays BBI has a timeline in place to moveeither site forward by completing speci-fied tasks in 2008.

Be Practical and Forward“We have all of 2008 to demon-

strate the technology and generate thedata we need to do the process design,”Yancey says. “Then we have all of 2009to do detailed design work and build theplant.” The plan isn’t linear so severaldifferent tasks will be going on at once,but Yancey says BBI’s practical approachand project development experience willmake this project go. “When we firsttalked, we sat down with them and saidwe still feel there are some technologygaps [for converting most biomass feed-stocks to ethanol],” Yancey explains.“We told them our approach would cir-cumvent those gaps and eliminate themissing technology.” The technologygaps Yancey refers to stem from CBEC’s

Rice straw is high in silica and undesirable as forage for livestock.

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desire to double-pretreat its feedstockbefore fermentation. The “pre-pretreat-ment” would liberate hemicellulose soits five-carbon sugars could carry on tofermentation. But, Yancey says, “pre-treatment is still very expensive and anissue for any tech provider trying to usethe fermentation route. Dilute acidrequires expensive alloys or glass-linedor acid brick-lined equipment, andthese primary pretreatments are gener-ally done at a higher temperature, run-ning up operational costs.”Furthermore, there are no commercial-ly demonstrated organisms capable ofproficiently fermenting five-carbonsugars, so even if the uncertainty andexpense of pretreatment were enduredYancey says, exactly how those sugarswould be fermented is still question-able. If it becomes feasible to isolateand ferment the five-carbon sugarsfrom rice waste in the future, then amove in that direction could be made.Until then, BBI suggested moving for-ward with a base pretreatment that dis-solves the silica.

A Series of Concurrent Events

BBI’s forward approach hookedBowers from the start. “What you getfrom BBI is a sense of well-rounded-ness, and that their feet are on theground,” he says. “After our first meet-ing with BBI, I told my guys as wewalked onto the airplane, ‘This is it. Asfar as I’m concerned let’s not look any-place else so let’s make the best deal wecan with them.’”

The responsibilities BBI will

undertake first include conducting adetailed study to define acceptableranges of the key process variables. Atpress time in late December, the studyhad already begun. The financials ofthe first plant will be driven by estab-lished targets for these key process vari-ables. For instance, the initial study maynot reveal that the C6 yield will be 85percent and, from that, “X” amount ofethanol will be refined. “What it will tellus is that we will need at least 70 per-cent, for example, and if we can’t reachthat established target then we know wecan’t do this,” Yancey says. Essentially,the purpose of BBI’s initial study is todetermine what is needed to make theproject competitive, and is expected tobe complete by the end of February. Bythen, BBI plans to have already begundeveloping what Yancey calls a technol-ogy demonstration plan. “That’s wherewe’ll generate the data needed to designthe plant,” he says. Bench- and pilot-scale work managed by BBI will contin-ue throughout most of 2008. As datastreams in, BBI will take the aggressiveinitiative to concurrently develop the“Schedule A” basic engineering packageto transfer knowledge from the pilotwork to commercial process design.“By the end of the year we should be

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Colusa ExtraTo read more about Colusa BiomassEnergy Corp.’s process and plans see“The Rumpelstiltskin of Rice Straw” inthe August 2007 issue of EPM.

Since state environmental regulations nolonger allow producers to burn their riceresidues openly in the field, California ricefarmers welcome new and cheaper ways todispose of the straw.


CELLULOSE

ready to negotiate an EPC contract forthe design and construction of theplant,” Yancey says, cautioning hecouldn’t reveal which contractors arealready under consideration. TheColorado-based company estimates itsnew client will need a $2.5 millionbudget for the work described.

Finally, BBI will do what Yancey’sdivision was named after: project devel-opment. “Just like we develop projectsfor dry-mill plants, we’ll do for Colusa,”Yancey says. “I doubt we’ll hold smallmeetings in communities asking peopleto invest”—how conventional equitydrives go typically for private projectsintegrating proven designs—“butinstead we’ll be looking for $5 millionto $20 million investments. At thispoint, we recommend raising 100 per-cent equity to build this first plant,which would greatly simplify things andlower the cost.” BBI estimates the first12.5 MMgy facility will cost approxi-mately $50 million. BBI began design-ing its first cellulosic ethanol plant in

early 2007, and the Colusa project is itssecond major project in the growingfield. “Cellulose process design will be abig part of BBI’s future,” Yancey says.CBEC is a publicly-traded company; itsOTC stock symbol is CLME.PK.

Two States, One MissionCalifornia rice farmers produce

nearly 20 percent of all the rice grownin the United States, and they relish thethought of turning their troublesomecrop waste into money. They currentlypay between $25 and $45 an acre tohave the residues baled and removedfrom their fields, markets for which arenot easy to find. Livestock producersdon’t want it because rice straw is highin silica, reaching 13 percent on a dry-matter basis. “Silica is one of nature’sgreat abrasives,” Bowers says. As for-age, rice straw may cause excessive wearon bovine molars, but chances are thecows won’t eat it anyway because it isn’tpalatable. Bowers says rice waste is evendestructive to farm equipment, wearing

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CBEC would need rice straw from 35,000 acres to produce 12.5 MMgy of ethanol.

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burning straw in Arkansas, so there isno real incentive to collect it andtherefore the infrastructure is lessdeveloped there than in California.But Arkansas is home to several largerice mills where hulls accumulate rap-idly, so collocating near a mill is a wisechoice and virtually eliminates the gru-eling task of honing an efficientmethod of aggregation, storage anddelivery. According to Nannen, ongo-ing discussions with Riceland Foodsand Producers Co-op for feedstockarrangements are encouraging.Riceland Foods gasifies a portion ofits hulls for some of the energyrequired in milling operations, and hasfor many years. “I don’t know howefficient that technology is anymore,”Nannen says. Bowers adds, “They usethe hulls to generate the heat for theirparboiling operations. That workedreally well 15 to 18 years ago but notnecessarily so well now because of theadvances in combustion techniqueswith other materials that have comealong, so it was a leading situationyears ago but it’s not the same today—and there might be a better use forthose hulls from an income point ofview for the rice mills, and it could cer-tainly be the basis for transportationfuels.” Rice hulls contain 20 percentsilica whereas the straw contains 12percent. “If the economics allow uson the front end, I could see us build-ing both these plants with completiondates within six months of eachother,” Bowers tells EPM.

Two states, two companies andone mission: Being the first projectdevelopment team to build the firstcommercial ethanol and specialty-chemicals plant using difficult butglobally abundant rice waste. EP

Ron Kotrba is an Ethanol ProducerMagazine senior writer. Reach him [email protected] or (701) 738-4962.

out implements 40 percent faster thanwheat. And simply leaving the straw onthe ground for soil nutrition still requireschopping it up and re-flooding the fieldswith water. “All that costs money,” saysRick Nannen, CBEC vice president. Sincestate environmental regulations no longerallow producers to burn their rice residuesopenly in the field, California rice farmerswelcome new and cheaper ways to dis-pose of the straw. CBEC would requirerice straw from 35,000 acres for the annu-

al production of 12.5 million gallons ofethanol, and 33 million pounds of sodi-um silicate—a high-value specialtycoproduct.

While CBEC was initially focused onthe California rice-straw “market,” theyhave since expanded their options for afirst commercial project site. But true toform, all roads for this unique companylead to rice. “The other option isArkansas, where rice mills have a problemdisposing of hulls. There is no ban against

CELLULOSE

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A wood storage pile at Public Service Co. of New Hampshire’s SchillerStation, a 50 megawatt wood-fired power plant in Portsmouth, NH.

PHOTO: INNOVATIVE NATURAL RESOURCE SOLUTIONS LLC

MARKET

Processors believe biofuels will prosper because cellulosicfeedstocks will be cheap and readily available. Feedstockowners think they will get rich selling biomass to the ethanolindustry. Obviously, they both can’t be right. Finding amutually beneficial balance between buyer and seller is achallenge as the cellulosic ethanol industry finds its feet.

By Jerry W. Kram


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he cellulosic energy industry is challenged by twomutually inconsistent myths, says Eric Kingsley, vicepresident of Innovative Natural Resource SolutionsLLC. Speaking about wood resources in the

Northeast, Kingsley says the first myth is that wood is free—thatis, some biomass developers think there are vast quantities ofwood waste just sitting there for the taking at little or no cost. Onthe other side is the myth of the “oil sheik” landowner whobelieves that because energy prices are so high, developers can andshould be able to pay just about any price for their now-valuablefeedstock.

As the cellulosic ethanol industry develops, both of thesemyths are going to collide with reality. Kingsley points out that allcellulosic feedstocks will have inherent costs—raising, harvesting,transporting, and storing biomass all cost money. And while ener-gy is valuable, the laws of physics dictate how much energy can beextracted from a ton of biomass and all the processors’ expensesfor pretreatment, extraction, saccharification and fermentation alsohave to be paid in addition to the feedstock cost.

So as the cellulosic ethanol industry takes its first baby steps,the question looms: how will a fair price for biomass be deter-mined that will provide a sustainable income to producers and giveprocessors a reliable, cost-competitive supply?

T


Atruck unloads at Public Service Co. of New Hampshire’s Schiller Station, a 50megawatt wood-fired power plant in Portsmouth, N.H.

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Open Market?Three primary models of feedstock supply relationships could

develop, according to Ira Altman, an assistant professor in thedepartment of agribusiness economics at Southern IllinoisUniversity, Carbondale. One is a spot market model where buyersand sellers negotiate every sale. Another is the contract modelwhere buyers and sellers enter into a long-term relationship. Thefinal model is a vertically integrated system, where the processorowns or otherwise controls its supply of feedstocks.

Altman surveyed the biopower industry which generates elec-tricity from biomass as a possible analog for the cellulosic industry.He found that three-quarters of biopower facilities were verticallyintegrated in regards to feedstocks. “If cellulosic ethanol is going tobe anything like biopower it will be vertically integrated,” he says.“That means either biomass growers are going to integrate forwardinto cellulosic ethanol production or cellulosic ethanol producersare going to integrate backwards into biomass production.” Thisdoesn’t necessarily reflect the future of the cellulosic ethanol indus-try because most of the biopower facilities he surveyed were off-shoots of the timber, or pulp and paper industries, which wereusing their own plant waste as a fuel. The feedstocks that are likelyto feed cellulosic ethanol plants are much more diverse.

Altman also looked at the farmers and ranchers in Missouri asbiomass producers and consumers in the form of hay and straw.

While many livestock producers grow their own hay, there is some-what of a spot market for grass and alfalfa hay in most states.However, Altman found that most of these markets were verysmall and typically operate on an informal “handshake” basis fortransactions, making it an ill-suited model for the cellulosic ethanolproducers requiring hundreds of thousands of tons of biomass peryear. “I haven’t necessarily studied this from an academic perspec-tive, but I know from growing up on a farm a lot of this is ad hoc,”he says. “Producers advertise in a magazine or they go by word ofmouth. So there is a lot of what I call informal contracting. ”

Early in the development of the cellulosic industry, contract-ing is much more likely to be the dominant form of feedstockacquisition, says Anna Rath, vice president for business develop-ment at Ceres Inc., a developer of energy crops. One reason is thesecurity that long-term contracts provide for the producer andprocessor of energy crops. A cellulosic ethanol company isn’t like-ly to get funding for a $300 million facility if it can’t show banks andinvestors that it will have a reliable source of feedstocks. In turn,farmers aren’t going to invest time and money for land and equip-ment if they don’t have a market for their biomass. “It’s pushingpeople toward, in a lot of cases, long-term contracts,” Rath says. “Itmakes sure everyone has peace of mind. The biorefinery knows it’sgoing to get its feedstock and the grower knows that he has thatoutlet for sales.”

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What’s it Worth?What determines the value of bio-

mass? Many things, says Alan Doering,head of coproducts research for theAgricultural Utilization Research Institutein Waseca, Minn. Producers need to thinkcarefully about what it costs them to pro-duce a ton of biomass, whether it is acoproduct such as corn stover or dedicat-ed energy crops such as switchgrass. Someof the costs include equipment costs forbaling, land for storage and transporta-tion. Farmers even need to keep in mindthat removing biomass from their landwill deplete nutrients in the soil such aspotassium and phosphorus, which willneed to be replaced with fertilizers. Thereis also the opportunity cost for the farmerto consider, that is, he or she needs to takeinto account the income the same landcould have produced if planted to corn oranother crop.

Rath adds that there are some bio-mass industries with established marketsand pricing, such as wood chips. “In thoseareas where there are existing prices, offers(from cellulosic ethanol producers) will becompared with those prices,” he says.

For the processor, the calculation is

similar. Given the income expected fromthe final product, ethanol, and deductingthe fixed and operating costs of convert-ing the biomass to ethanol, what’s left isthe value of the feedstock and the proces-sor’s profit. “How the market comes intobeing will be a combination of greater vis-ibility coming into the pricing of biomassthrough studies that are being done bygovernment agencies and universities,”Rath says. “I also think we will see a pri-vate price-setting mechanism between thebiorefineries and local grower groups.”

Productivity and quality will have ahuge impact on biomass prices, Rath says.Biomass is bulky and difficult to transport.In some cases, transportation costs can beas high as $25 per ton. That cost can eatinto the margins of both the producer andthe processor. Crop residues such as cornstover generally yield about 3 tons peracre. That could force a cellulosic ethanolproducer to seek feedstocks in a 50-mileradius. If dedicated energy crops achievetheir maximal yields of 25 tons per acre ormore, that radius can be reduced by 90percent. “This turns out to be a goodthing for everyone,” Rath says. “Thebiorefineries understand that they are

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76

Because biomass is bulky and hard to transport, that cost can eat into the margins of both the producerand the processor.

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dependent on the growers around thembecause they need the lowest transportcosts and best feedstocks. The growersunderstand, especially when they plant aperennial energy crop, that they willneed an outlet for that crop—the localbiorefinery.”

Quality concerns will have animpact on the processor side of the

equation, Rath says.Generally, the morehomogenous and lessrecalcitrant a biomassfeedstock, the lowerthe plant’s operatingcosts are going to be.Those savings willmean better profitsfor the processor andcould flow back to

the feedstock producer. “If you havesomething that gives you 80 gallons perton in your process instead of 70 gallonsper ton, that is something you can affordto pay more for,” Rath says. “One of thebig differences between energy cropsand other feedstocks is that energy cropsallow us to optimize composition for thedifferent processes.”

What’s the cost?So, with all these factors taken into

account, what should the price of a tonof biomass be? The answer is itdepends. By all indications, the biomassmarket is going to be localized and idio-syncratic. Transportation costs will limitprocessors to buying feedstocks withina 50-mile radius of their plant. It willlikely be unusual for a feedstock pro-ducer to have more than one potentialcustomer, so there will be little directcompetition between processors.

It is also unlikely that there will bethe sort of national price reporting forbiomass as is seen in agricultural com-modities such as corn and wheat. Therehave been several attempts at creatingbiomass exchanges on the Internetwhich would act both as a clearinghouse

Doering


between the two. “We think you will seecompanies working together with grow-er co-ops or local grower associations tofigure out a price that will make sense forthe growers as well as the biorefinery,”Rath says. “So we see the biorefinery get-ting together with the local grower groupto do field trials with Ceres to figure outwhat the economics are going to looklike.”

Altman believes the contract modelis the most likely form of market at leastin the early days of the cellulosic ethanolindustry. “I think from a producer per-spective if you are switching to switch-grass or miscanthus or hybrid poplar,you would be more interested in a long-term relationship with a cellulosicethanol processor,” he says. “I think theywould be less likely to be interested inspot markets because if you are growingone crop for a specific buyer you want tomake sure you have the market lockedin.”

Rath says some of the early con-tracts are pegging the price of biomassto the final product: ethanol. That givesthe growers some upside if there is anincrease in the price of ethanol. Suchcontracts are being negotiated aroundthe country and Rath is confident thatthe relationship between growers andprocessors will be worked out. “I thinkthere are number of things in the EnergyBill and the Farm Bill that are going tomake this come to fruition faster than alot of people expect,” she says. “I thinkthere are especially a lot of things in theFarm Bill that will help with these mar-ket mechanisms. There will be incentivesin place to ensure that both the growersand biorefineries get prices they can livewith in these days when everyone is stillfiguring this out.” EP

Jerry W. Kram is an Ethanol ProducerMagazine staff writer. He can be reachedat [email protected] or (701) 738-4962.

and a potential price discovery mechanism.Two of these exchanges are the MinnesotaBiomass Exchange (www.mnbiomassex-change.org) and the North AmericanBiomass exchange (www.nabiomassex-change.com). However, the industry isn’tdeveloped enough for these exchanges tohandle significant volumes of biomass yet.“What I have found is that there is really nomarket right now,” says ShashankNadgauda, president of Renova

Engineering, which started the NorthAmerican Biomass Exchange. “Everybodysells biomass on a handshake. There is nomarket mechanism at all. That is whatprompted us to start an exchange to putsome kind of legitimacy or structure in themarketplace.”

Ceres is working with groups of bio-mass producers and biomass processors towork out mutually beneficial contracts tohelp develop long-term relationships

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TECHNOLOGY


TECHNOLOGY

The diverse ecosystems that mark the landscape of Costa Rica, ranging from lowland rainforests to cloud forests, lakes and rivers, are a hot spot for life. For scientists, this treasure trove

of biodiversity represents yet to be discovered insights into medicine, species diversity and forsome, the commercialization and development of enzymes for cellulosic ethanol production.

By Jessica Ebert


TERMITE-TAILORED Cellulosic Ethanol


TECHNOLOGY

mong the hundreds ofthousands of speciesincluding various orchids,toucans and tropical fish

that flourish in the sultry climate ofCosta Rica, one group of insects holdsthe attention of scientists and technol-ogy developers with a stake in the bio-fuels industry. Wood-boring termitesabound in the lush foliage of thisCentral American country. But it’s notthe termites themselves that people arebetting on—it’s the microbes within

the guts of these seg-mented cellulose-feasters that may holda key to toppling thebarriers to commer-cial-scale cellulosicethanol production.“Being a generalmicrobial ecologist, it’sjust a rule of thumb

that if there’s some job going on youcan put your money on it that bacteriaare doing that job,” says PhilHugenholtz, head of the MicrobialEcology Program at the U.S. DOEJoint Genome Institute. The JGI basedin Walnut Creek, Calif., was created to

unite the expertise and resources ingenome mapping, DNA sequencing,technology development and informa-tion sciences pioneered at the DOEgenome centers at Lawrence BerkeleyNational Laboratory, LawrenceLivermore National Laboratory andLos Alamos National Laboratory. Forsome time, the role of bacteria inmetabolizing the wood ingested by ter-mites was highly unclear. However, in arecent issue of the journal Nature,Hugenholtz along with otherresearchers from universities, privateindustry and the DOE report that thebacteria seem to be doing a great dealof the work. “These bacteria are

absolutely loaded with hydrolyticenzymes principally for cellulose andxylan [the main component of hemi-cellulose] decomposition,” he says.“This is good news.”

Community SequencingAll termites serve as vehicles for

various microbial passengers. Thesemicroscopic organisms are more thanjust hitching a ride, however; the rela-tionships forged between these twodiverse groups of organisms are neces-sary and beneficial. Termites providemicrobes with a protected, nutritiousplace to live and in return, themicrobes make enzymes able to crack

Hugenholtz

A One way to find out if these termite-gut bacteria do play a role is to isolate them,grow them in the laboratory, sequence theirgenetic information and see if there are anygenes that code for hydrolytic enzymes.


TECHNOLOGY

the intricate cage of cellulose, hemicel-lulose and lignin that form the cellwalls of plant material. Breaking thisarmor releases sugars that can be fer-mented into a host of products includ-ing ethanol. In the termite gut,

microbes convertthese sugars into othercompounds that drivethe metabolism of thetermite. This mutuallybeneficial associationhas been well-docu-mented in a group ofinsects dubbed the“lower” termites.

These insects carry unicellularmicrobes called flagellates in their guts.Flagellates have long been known toproduce cellulases and hemicellulases,hydrolytic enzymes that disassemblewoody materials.

“Higher” termites, on the otherhand, don’t harbor flagellates. Instead,these insects are packed with bacteria.Although higher termites are the mostabundant and diverse of all the ter-mites, very little is known about how oreven if the bacteria residing in theirintestinal tracts play any role in degrad-

ing cellulose. “Most of the researchdone on termite microbiology in thepast 20 years or so dealt with lower ter-mites,” explains Falk Warnecke ofJGI’s Microbial Ecology Program.

One way to find out if these ter-mite-gut bacteria do play a role is toisolate them, grow them in the labora-tory, sequence their genetic informa-tion and see if there are any genes thatcode for hydrolytic enzymes. “Only afraction of the organisms in the naturalworld can be studied like this,”Hugenholtz says. That fraction doesn’tinclude the bacterial species associatedwith the termite gut. “When you havethese organisms that grow on platesand you sequence them and character-ize their enzymes you only see askewed picture of all the enzymes thatare out there in nature,” he explains. Toget around this, Jared Leadbetter, anenvironmental microbiologist at theCalifornia Institute of Technology pro-posed to sequence the entire communi-ty of termite-gut microbes. Thismethod is termed metagenomics andallows researchers to study all DNAfrom a particular environment ratherthan the genetic contribution of a sin-

gle cell or organism.Leadbetter initiated the project by

applying to the CommunitySequencing Program at JGI. The CSPis a DOE-funded program designed toallow genomic sequencing of systems

Warnecke

Nasutitermes corniger termite species

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84 ETHANOL PRODUCER MAGAZINE MARCH 2008

TECHNOLOGY

of relevance to the agency’s missions including those asso-ciated with global carbon cycling, alternative energy produc-tion and bioremediation. Leadbetter’s proposal involvedexamining the microbial members of the hindgut pouch—the largest part of the termite gut—of higher termites thatbelong to the genus Nasutitermes. “This was a fairly riskyproject when we proposed it,” Leadbetter says. “In theseabundant tropical termites, there was no compelling evi-dence that microbes play direct roles in cellulose degrada-tion.” Once the proposal was accepted, the fun began.

Termite-Gut BacteriaEarly on in the project, several other groups joined the

Leadbetter team including microbial ecologists at JGI,researchers at Verenium Corp. and INBio, the NationalBiodiversity Institute of Costa Rica. The first step was tofind termites. “Termites are very small so one termite is notenough for doing the genome sequencing,” Warnecke says.The termite hindgut consists of a viscous fluid with a tooth-paste-like consistency. Although it’s the largest intestinalcompartment, the volume of the hindgut liquid from a sin-gle termite would only form a pinhead-sized dot if placedon a piece of wax paper. “We needed a couple of hundredtermites,” Warnecke explains.

To that end the team headed to Central America.“Verenium has agreements with the Costa Rican govern-ment and has established a lab there so they had the infra-structure and permits for sampling termites,” Warnecke

Nasutitermes corniger termite species

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says. “Besides, everyone knows that Costa Rica is a hot spotof biodiversity so there are many termite species.”

On the team’s first trip to the country they found a neston the trunk of a tree that housed hundreds of termitesbelonging to a species of Nasutitermes. The nest was aboutthe size of a football and the walls were paper thin like awasp nest. “We knew that all the individuals in this nestwould be coming from the same queen,” Warnecke says. “Sowe were sure we weren’t comparing apples and pears.”

The scientists pooled the hindgut contents from a cou-

ple of hundred termites,extracted the DNA from thecommunity as a whole andsequenced a large number ofgenetic fragments. By compar-ing these sequences with otherDNA fragments of knownsequence and functionality, theteam could determine the typesof bacteria present as well as thegenes these bacteria carried.Overall, about 300 differentbacterial species were identifiedalong with more than 500 genes

linked to cellulose and hemicellulose degradation. “Theseenzymes are consistent with the diet of this termite species,”Hugenholtz explains. Nasutitermes species are foragers. Theyclimb out of the nest, scurry across the ground and feed ondead wood from several different species with a range ofplant cell wall compositions. “That’s why they’re loaded withthis enzyme artillery to break down these different plant cellwall types,” he adds.

While the DNA analysis was going on, Verenium wasisolating proteins directly from the hindgut fluid, sequencing

‘Our task now is to discover the metabolic pathways generated by these structures to figure out how nature digests plant materials.We can then synthesize the novel enzymes discovered through this project to acceleratethe delivery of the next generation of cellulosicbiofuels.’

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TECHNOLOGY

those molecules and testing them for activity. “From thatyou could tell definitely that the genes weren’t just there theywere being expressed and producing the enzymes,”

Hugenholtz says. “This was confirmed for quite a few cellu-lases and xylanases and other enzymes involved in theprocess.”

Raymond Orbach, DOE’s under secretary for sciencehas described the termite and its bacterial cargo as a remark-able machine. “Termites can digest a frightening amount ofwood in a very short time, as anyone who has had termitesin their house is painfully aware,” he says. “Instead of usingharsh chemicals or excess heat to do so, termites employ anarray of specialized microbes in their hindguts to breakdown the cell walls of plant material and catalyze the diges-tion process. Industrial-scale DNA sequencing by DOE JGIwas key to identifying the genetic structures that comprisethe tools that termites use. Our task now is to discover themetabolic pathways generated by these structures to figureout how nature digests plant materials. We can then synthe-size the novel enzymes discovered through this project toaccelerate the delivery of the next generation of cellulosicbiofuels.”

That is what Verenium continues to work on. The chal-lenge lies in finding the mixture of enzymes that work opti-mally for specific feedstocks and certain pretreatments. “Weare currently testing our cocktails of enzymes on a variety offeedstocks and a variety of pretreatments to determine howwell they perform,” says Kevin Gray, director of biofuels atVerenium. EP

Jessica Ebert is an Ethanol Producer Magazine staff writer. Reachher at [email protected] or (701) 738-4962.

A scientist in a Verenium laboratory examines a culture of microorganisms.

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ENVIRONMENT

Face-off ETHANOL PRODUCER MAGAZINE MARCH 200888

Feedstock

ENVIRONMENT

Which system should be targeted to produce biofuelsfeedstocks in the future—high-input, low-diversitycrops such as corn, or low-input, high-diversity systems such as mixed prairie grasses? An ecologistand an agronomist weigh in on the debate.

By Susanne Retka Schill



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ENVIRONMENT

ifferent visions of the future for ethanol havesparked a debate from opposite poles of anecological continuum. On one side are theadvocates for producing the maximum yield per

acre from corn using intensified high-input, low-diversitysystems. On the other end are those who envision cellulosicethanol feedstocks giving economic value to low-input, high-diversity systems such as mixed prairie grasses. KenCassman, director of the Nebraska Center for EnergyScience Research, and Oklahoma State University EcologistMike Palmer represented their contrary views during adebate this winter at the American Society of Agronomyannual meeting in New Orleans.

First on Palmer’s list in critiquing corn is the concernthat more land will be converted to plant dedicated biofuelscrops. Sodbusting is likely to create more greenhouse gas

emissions and global warming potential thanusing the fossil fuels it’s intended to dis-place, he says. “Land conversion is not ahypothetical issue,” he says. “A recordamount of virgin soils are being turned inthe Great Plains, largely due to biofuelsfeedstock production.” The concern is notjust from the loss of virgin soil, but also theincreased soil respiration from tilling grass-lands which releases carbon and nitrous

oxide, he adds. A second concern Palmer raises is the poten-tial for the dead zone in the Gulf of Mexico to grow as morecorn acres are produced in the upper Midwest leading to anincrease in the amount of nitrogen leaching into theMississippi River. “It’s an awful lot of nitrogen,” Palmer

says. “$750 million worth of nitrogen goes down theMississippi annually. That’s more than all the nitrogen beingused in sub Sahara Africa.” While perennial feedstocks suchas switchgrass offer some advantages, Palmer warns that amonoculture of grasses will still be energy-demanding, high-input systems.

D

Palmer

Flowers in a mixed prairie grass system attract pollinators like bees, which inturn benefit the entire ecosystem.

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In contrast to intense monocultures, Palmer proposesthe creation of highly diverse, mixed-grass systems that offerthe following distinct advantages:

�Growing more than one species allows availableresources to be used more efficiently

�Incorporating nitrogen fixers is relatively easy andmany will emerge spontaneously

�Adding of ecosystem services such as flowers thatpromote pollinators

�Lowering inputs �Using more plant species stabilizes production �Eliminating the use of biocides �Producing a trivial amount of greenhouse gas emis-

sions and sequestering carbonWhile critics of the mixed grass systems often argue

that mixtures of grasses will end up as a monoculture any-

way, as one species begins to dominate a particular planting,Palmer says ecologists call that the insurance hypothesis.“The more species you start out with, the more likely you’llfind a winner,” he says. “The key point here is that what wins


Maintaining productive, diverse grasslands requires regular biomass removal,whether from mowing, grazing or fire.

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‘The key point here is that whatwins one year is not necessarilythe winner the next year or 10years from now. Having a diverseset of species improves the likelihood of sustained production.The basic thinking behind lowinput, high diversity is to letnature do the heavy lifting.’


ENVIRONMENT

one year is not necessarily the winnerthe next year or 10 years from now.Having a diverse set of speciesimproves the likelihood of sustainedproduction. The basic thinking behindlow input, high diversity is to letnature do the heavy lifting.”

Mowed HaylandsAs an ecologist, Palmer points out

that grasslands have developedthrough biomass removal whetherthat’s accomplished by fire, animalgrazing or mowing. He cited an area inEstonia, a small country in northernEurope, which has been mowed formore than three centuries. “This areahas the record highest diversity ofplants per square meter, much higherthan the tropical rain forest,” he says.Similarly, a hay meadow in the WhiteCarpathian Mountains of Moravia incentral Europe has been mowed con-tinuously for more than 500 years. Thehay is used to feed the horses in met-ropolitan areas. “This area has 40species of orchids alone,” he says,which is indicative of the ecologicalbenefits of mowing grasslands.Ecologists are concerned about grass-lands being abandoned when they areno longer needed for hay, he says. InOklahoma, eastern red cedar is invad-ing abandoned grasslands near citiesand creating new ecological problems

by depleting water resources andbecoming fire hazards as well as asource of allergens.

In evaluating the two systems—conventional intense cropping systemsversus mixed grass systems—Palmerargues that in addition to yield, otherfactors including nitrogen use efficien-cy, water use efficiency, energy effi-ciency, carbon sequestration and otherecosystem benefits should be consid-ered. “Let us use our diverse grass-lands as a source of biofuels to pro-tect them, for a sustainable economyand environment,” he says.

Maximize Energy Yield In debating the two points of

view, Cassman empha-sizes the need to max-imize the energy yieldper acre in order tomeet the planet’s ever-expanding energyneeds. He doesn’t dis-count the desirabilityof diversity, however,“I’m often amazedthat we try for the perfect and throwout the good,” he says. “It may be pos-sible to produce a biofuel with incred-ibly low carbon intensity that isincredibly green with tremendouspotential to mitigate greenhousegasses on a per gallon basis, but have

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Cassman

‘We need to do research that strives to dotwo things that are dramatically opposed.One is to get the highest possible yield ofthe feedstock per unit area. Second, weneed to achieve that with minimal environmental impact.’


ENVIRONMENT

such a low yield per gallon per acrethat you would have to expand bothbiofuel feedstock production and agri-culture in general. The net environ-mental impact from that expansioncould be negative.” Furthermore, say-ing a mixed prairie grass feedstock sys-tem for marginal lands would be inde-pendent of the food versus fuelsdebate is misleading, Cassman says.“Even marginal land in areas withgood rainfall has the potential to pro-duce food and other agricultural prod-ucts, including livestock,” he says.

Cassman is critical of the atten-tion given to Minnesota ecologistDavid Tillman’s proposal that mixedprairie grass systems would be a good,sustainable biofuel feedstock.Tillman’s study was based on a singlefield experiment on one degradedcropland site, he says. “To make

regional or global extrapolationrequires testing on a much wider rangeof soil and climatic conditions, andmore rigorous modeling,” Cassmansays. Palmer agrees that Tillman’sstudy and comments were essentiallysolid speculation. “It is a launchingpad for the real experiments that needto come,” he adds.

The attention given to a futuristicvision of mixed prairie grass systemssiphons away support for criticallyneeded research on the existing feed-stocks, Cassman says. “We need to doresearch that strives to do two thingsthat are dramatically opposed,” hesays. “One is to get the highest possi-ble yield of the feedstock per unitarea. Second, we need to achieve thatwith minimal environmental impact.”The goal would be to achieve the max-imum genetic potential in corn yields

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The focus of Nebraska’s ecological intensification research is to increase corn yields and address environmental goals.


with the right policies in place,ethanol plants could pay farmersmore or less to the degree that theirproduction systems were contribut-ing to reducing the carbon intensityof biofuels.

Cassman also calls for the biofu-els industry to support the allocationof more resources for corn research.“It seems we’re putting all our eggsin one basket [supporting cellulosicethanol projects],” he says. “Therewill not be a second-generation bio-fuels system if corn ethanol falls flat.Society will walk away from biofuels.They’ll say ‘You told us [cornethanol] would be good for the envi-ronment and it would be cost effec-tive, and now look what happened.And now you want us to continue tofund development of the secondgeneration for the same reasons?Why should we trust you and yourscientific judgment?’ ” EP

Susanne Retka Schill is an EthanolProducer Magazine staff writer. Reachher at [email protected] or(701) 738-4962.

by eliminating every source of stress.He sees the need to develop new tools,such as weather modeling for farmersto fine tune their crop managementduring the growing season. Other ele-ments of an intensified corn produc-tion system include discovering theoptimal plant population, row spacing,and planting date for each growingregion. In 10 years of research on theecological intensification of corn andsoybeans in Nebraska, they’ve increased

yields by 35 percent while at the sametime increasing nitrogen efficiency by30 percent to 50 percent, Cassman says.“It’s only just begun, we have to do bet-ter than that,” he says.

There is promise in the marriage ofthe biofuels industry with environmen-tal goals that are becoming more widelyaccepted in U.S. society, and, whichCassman says seem to be happeningquickly. “The biofuels industry needs tojump on it,” he says. He suggests that

ENVIRONMENT

‘It seems we’re putting all our eggsin one basket [supporting cellulosicethanol projects].There will not be asecond-generationbiofuels system ifcorn ethanol fallsflat.’

BUSINESS


Developing effective marketing arrangementsfor ethanol and distillers grains requires just asmuch due diligence as producing the products.

By Bryan Sims

96

Managing RiskThrough MARKETING

METHODS

BUSINESS



BUSINESS

thanol producers will tell you that production isone thing; selling the product to the consumer inthe most efficient and cost-effective manner isanother. The factors considered when selecting

the most effective ethanol marketing arrangement are crucialfor achieving success. In the project development processthis component can determine a company’s viability in alender’s eyes for financing or the firm’s ability to be profitablewhen in operation.

There are several different third-party marketing pack-ages each with advantages and disadvantages specific to aparticular plant’s operations. For example, some marketersprovide an all-in-one service where they conduct grain origi-nation, dried distillers grain marketing, ethanol marketing andrisk management activities such as hedging strategies. Someethanol facilities use a combination, conducting some func-tions in-house and allowing a third-party service provider toconduct the rest of its marketing ventures. For example, anethanol company might source its own corn, but hire a third-party service provider or providers to market its ethanol anddistillers grains, and conduct risk management services.Determining which marketing options are best tailored to thespecific functions of a particular facility depends on theunique needs of each operation.

Some ethanol plants simply don’t have the capital tofinance a third-party marketing service. Others may not havethe expertise to do it themselves. Those are just some of thefactors that weigh into the decision of whether the trade-offsjustify the action, according to Neill McKinstray, vice presi-dent and general manager of The Andersons EthanolDivision. “There are as many nuances and potential differ-

E

The Andersons Albion Ethanol LLC facility is a 55 MMgy corn-based ethanolplant in Albion, Mich. The company conducts all ethanol, DDG, carbon dioxideand risk management activities in-house.

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ences in the nature of a particular mar-keting agreement as there are differenttypes of plants,” he tells EPM. Thediversified Maumee, Ohio-based com-pany conducts all of its marketing activ-ities in-house for its plants in Albion,Mich., and Clymers, Ind., and soon forits 110 MMgy Greenville, Ohio, facilitycurrently under construction. The com-pany also offers marketing services forother ethanol firms as a third-partyentity. “Every ethanol firm that runsthat plant has its own set of uniquecapabilities whether it’s human, finan-cial or operational,” McKinstray adds.

There’s no denying that developingan ethanol project is a challenging task.For many would-be producers, theprocess of finding the right marketingarrangement(s) can be just as arduouswhen “selling” the project to a lender,according to Troy Prescott, president ofCardinal Ethanol LLC, a 100 MMgycorn-based plant that’s under construc-tion in Union City, Ind. CardinalEthanol intends to market its ethanolthrough Murex, while CommoditySpecialist Co. will market its distillersdried grains (DDG) when it begins pro-duction this fall. “We interviewed prob-ably nine different ethanol marketersand maybe four DDG marketers,”

Prescott tells EPM. “Ithink it’s one of thosethings that as marginsget tighter, obviously[weighing those mar-keting arrangements]becomes a biggerconcern in today’smarket, especiallywith banks tightening

up. We kind of [started] before thatmad rush, so I think our plant was scru-tinized real well.”

With more production and volumeanticipated to come on line this year,

coupled with an increase in consolida-tion, current producers provide insighton the disadvantages and advantages ofdifferent marketing packages that couldbe beneficial in the long term for thoselooking to get in the game.

Third-Party Pros and ConsAccording to current ethanol pro-

ducers, securing a third-party all-in-oneservice provider can have its advantagesbecause it can “seal the deal” when pre-sented to a lender, according to OmerSagheer, vice president of marketingand public policy for White EnergyLLC. The Dallas-based ethanolproducer current-ly owns and oper-ates a 50 MMgymilo and wheatstarch ethanolfacility in Russell,Kan., just com-pleted a 100MMgy ethanol plant in Hererford,Texas and has a 100 MMgy corn/miloplant under construction in Plainview,Texas. “The advantage is that it furthervalidates the project to the bank rightaway on the financial side,” Sagheersays.

Although an all-encompassingservice provider is beneficial to closingthe project in the short-term, determin-ing which marketing function it special-izes in is crucial for long-term decisionmaking, he says. For example, the all-in-one service provider may excel in riskmanagement activities, but is poor inethanol marketing. Another factor toconsider is that an all-in-one serviceprovider may not have as close a rela-tionship with the local railroads as a sin-gle grain origination company that hasexisting customers within its area.According to Sagheer, conducting thor-

Prescott

Sagheer


BUSINESS

ough preliminary research on third par-ties that provide all-in-one services isthe key to financial and operational suc-cess. “In the long run you need to findout which function they’re an expert inand which side the marketing entity ismore concentrated in,” Sagheer says.“Everything is wrapped up into oneentity and therefore the boundaries canget a little fuzzy at that point.”

A sound path for establishing theright marketing agreement would be torefer to an ethanol contractor orbuilder’s preferred vendor list, accord-ing to Prescott. Esteemed ethanol con-tractors or builders such as GraniteFalls, Minn.-based Fagen Inc. offeredthis service for Cardinal Ethanol. It’s aservice that Prescott gladly accepted forthis project. “We went to Fagen rightfrom the start and said, ‘We don’t wantto reinvent the wheel,’” Prescott says.“When you go to the bank and they seethat you use someone that isn’t on thelist I’m sure they would double-check

and wonder why you’re doing some-thing different from most in the indus-try.”

As far as marketing ethanol goes,current producers agree that contractingwith third-party service providers is rec-ommended for would-be producerslooking to establish themselves in theindustry. “It’s advantageous to have athird-party service provider to marketyour ethanol for you to start off with,”Sagheer says. “You need to build therelationships over time. As you hit asubstantial volume and as you gobeyond that single plant entity and asyou get into the larger scale, it makessense to try to bring some of thatethanol marketing in-house, especiallyas you diversify your business and try tocapture a little more of the supplychain.”

Solo StrategyOne ethanol company that

achieved substantial production volume

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Hawkeye Renewable’s 95 MMgy ethanol plant inIowa Falls, Iowa, has rail access to bring in corn andship out distillers grains. Its marketing subsidiary,Hawkeye Gold, will conduct all of the ethanol marketing activities in-house, breaking a four-yearmarketing agreement it had with Eco-Energy since2004.

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and the expertise to merit an in-housemarketing strategy is Hawkeye EnergyHoldings LLC. In January, the Ames,Iowa-based ethanol producerannounced that it would market its ownethanol by way of “direct commercialrepresentation” through its HawkeyeGold subsidiary. The move means thatHawkeye Energy will directly manage itsentire ethanol marketing activities all theway to its customers, according toHawkeye Chief Commercial OfficerMarty Lyons, who was hired fromArcher Daniels Midland Co. last year tohead the company’s new marketingcampaign. Newly-hired Hawkeye SalesManager Marc LaMond, who followedLyons from ADM to Hawkeye, will pro-vide additional expertise to the venture.“We’re reaching out and calling all thebig users of ethanol across the countryand trying to develop a Hawkeye rela-tionship with those customers directly,”Lyons says. “We’re handling all of thedownstream activities for our company

now. In this business, you really need todevelop relationships with end-users.We have taken control from our plants’range all the way to our customers’delivery point. ”

The transition enabled HawkeyeEnergy to end its marketing agreementwith Eco-Energy, which it had since2004 when the company was running at50 MMgy, a scale that couldn’t supportthe type of marketing arrangement itannounced in early January, Lyons says.Today, Hawkeye Energy and its affiliates

have 450 MMgy of ethanol capacity inIowa. Hawkeye Renewables’ Iowa Fallsand Fairbank facilities produce a com-bined 220 MMgy and Hawkeye Gold’sMenlo and Shell Rock plants, which areunder construction and should be oper-ational late this year, will add another230 MMgy of production capacity.

According to Eco-Energy ChiefLegal Officer Jaime Dachelet, the ami-cable move by Hawkeye didn’t come asa surprise. Eco-Energy is also expand-ing with close to 1 billion gallons

101

No matter which marketing method is used, ‘getting thebest value, managing the logistics, executing, having thecontracts, having the systems to track the positionreports and then being able to assemble all that informa-tion in a manner that allows one to proactively managetheir risk, is what it’s all about.’


according to Will Babler, principal forFirst Capitol Risk Management LLC.Headquartered in Galena, Ill., thefirm specializes in providing com-modity price risk consulting andhedging solutions for commercialcommodity producers, processors,marketers and end-users in a variety ofagriculture andrenewable energymarkets. “You’realways facing anincredible amountof commodity riskin the ethanol busi-ness,” Babler says.“On top of that, you have theethanol-specific risk where policycontinues to change rapidly, capacityexpansion continues to change, com-petitors for imports change and themargins are subject to that volatility.At the end of the day, that’s probablythe biggest lever in any plants’ prof-itability; knowing how to deal with theprice risk and managing what the mar-ket is throwing at them on any givenday.”

With an expanded renewablefuels standard in the new Energy Billushered into law late last year, theindustry could see increased consoli-dation activity, which could enhanceexisting and future marketing rela-tionships. No matter which marketingmethod is used, “getting the bestvalue, managing the logistics, execut-ing, having the contracts, having thesystems to track the position reportsand then being able to assemble allthat information in a manner thatallows one to proactively manage theirrisk, is what it’s all about,” McKinstraysays. EP

Bryan Sims is an Ethanol ProducerMagazine staff writer. Reach him [email protected] or (701) 738-4962

through marketingagreements with pro-ducers who are alreadyin production or underconstruction. “We haveabsolutely parted ongood terms and we willcontinue to be one ofHawkeye’s largest cus-

tomers,” Dachelet says. “We haveworked very well together over the years

and we plan to continue that healthy,trusting relationship into this next phaseof Hawkeye’s growth.”

Risky BusinessEthanol developers agree that

addressing the risk management aspectof a marketing package is one of themost important components in the deci-sion-making process to find that prover-bial “eye in the storm” so to speak,

BUSINESS

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PROFILE


PHOTO: BRIGITTE BOUVIER

O’Connor, left, accepts the Green Fuel Industry award from JeffPassmore, executive vice president of Ottawa-based Iogen Corp.

PROFILE

Don O’Connor has the breadth and width of knowledge that is secondto none in Canada. His analysis of biofuel plants’ greenhouse gasemissions has been especially important to the global industry.

By Anduin Kirkbride McElroy


HONORING theGHGenius


PROFILE

n occasion, individualsare recognized for a life-time of achievement andcontribution to an indus-

try. The Canadian Renewable FuelsAssociation awards the Green FuelIndustry Award at the CanadianRenewable Fuels Summit, held inDecember. “Every year the associationlooks to recognize someone in theethanol and biodiesel world who hasdedicated service to the cause and hasworked to advance the industry in anumber of different forums,” saysGordon Quaiattini, president of theCRFA. “We look every year at candi-dates who were early champions, earlysupporters, working to make a differ-ence, and should be recognized for thecontribution they have made to advancethe industry in Canada.”

At the 2007 summit in QuebecCity, Quebec, the CRFA recognizedDon O’Connor, president of (S&T)2

Consultants Inc. and a mechanical engi-neer who got his start in renewable fuelswhile working for an oil company. “Donis a very serious, very thoughtful advo-cate for the industry,” Quaiattini says.“I’ve only been in my current positionfor a few months, but he has been ahuge asset to me as far as his knowledgeof where the industry is going inCanada and the world. We rely onhim—as do the government andethanol projects—to get advice on feed-stock, infrastructure, regulatory issues,legislative language, attracting invest-ment and industry growth. His breadthand width of knowledge are second tonone in Canada. We’d be hard-pressedto find someone else like him.”Quaiattini also expresses admiration forO’Connor’s commitment to the indus-try. “It’s not easy to grow a new indus-try,” he says. “In Canada, we’re not nearwhere the United States is in size andscope. Yet he’s been at it a long time.

Commitment and perseverance isindicative of his character that he’sgiven to the industry for a lot of years.”

O

O’Connor accepts the Green Fuel Industry awardat the fourth annual Canadian Renewable FuelsSummit held in December in Quebec City.

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PROFILE

O’Connor got involved withrenewable fuels when he began workingat Mohawk Oil Co. in 1981, whenethanol was first produced and added togasoline in Canada. He was part of thegroup that commercialized the use ofwheat in Canada as an ethanol feed-stock. While it’s difficult for him to saywhat his greatest contribution has beento the industry, he notes to EPM theperseverance through the 1980s and1990s when biofuels weren’t economi-cally attractive as especially challenging.

His experience has made him anexpert to call on in many instances.Through his consulting firm, he pro-vides advice on fuels, transportationissues and greenhouse gas emissions toa number of provincial governments,several Canadian federal governmentdepartments and international agenciesand governments. He has also consultedfor a number of companies developingnew technologies for alternative-fueledvehicles, and new transportation fuelprocesses and facilities.

In addition, O’Connor has servedon or chaired many government adviso-ry panels on transportation fuels andbioenergy, industry associations, andcommunity foundations. He served onthe CRFA board for several years andworked closely with the Canadian gov-ernment to develop its ethanol policy.

O’Connor’s consulting firm alsoanalyzes greenhouse gas emissions forboth the private and government sec-tors. He studies greenhouse gas emis-sions and energy balance—both formu-lated from life cycle analyses. Over thepast eight years, O’Connor and his firmdeveloped the GHGenius Model forNatural Resources Canada. The modelsand analyses he has created help toshape policy and give the private sectorsolid data to make decisions. As theworld shifts to a carbon conscious econ-omy, his work may prove to be evenmore valuable.


‘Most of the big, easy-to-get-at sources of crude oilhave already been found, so the energy required tomake crude oil tends to increase as time goes on.Whereas with ethanol production, as plants get moreefficient and they get better enzymes, the energyrequired to make ethanol goes down over time.’


PROFILE

Analyzing EthanolSome people in the ethanol indus-

try hear “energy balance” and immedi-ately feel defensive. Life cycle analy-ses—conflicting, unfavorable or other-wise—have sometimes been a thorn inthe side of the ethanol industry.Opponents have tried to fight ethanolsubsidies using negative energy balancestudies, or have tried to disprove claimsof improved emissions. But not allstudies are unfavorable, especially forethanol production that actually doeshave favorable profiles. Therein lies theissue: Many studies have been pub-lished that address either the energybalance or the emissions profile ofethanol, and the results tend to varyacross the board (see Figure 1). Howcan the fuel be seriously evaluated ifscientists are in such disagreement?

Life cycle analyses are importanttools that aid in the decision makingprocess for governments, lenders,investors and project developers. “Weneed policy makers who have an under-standing of what some of the issuesare,” O’Connor says. “Of course, that’snot an easy thing to do, so we need tomake sure that we can explain the com-

plexities of some of these issues in away that people, who aren’t experts,can understand. In general, in Canada,we’ve made a lot of progress over thepast few years getting people to under-stand what the issues are and how com-plex they are, and there tends to be agreater acceptance that maybe thisethanol can have a positive impact.”

O’Connor says it’s always appro-priate to analyze both emissions andenergy balance—especially when set-ting policy. “Society doesn’t make deci-sions just based on energy or just basedon greenhouse gas emissions,”O’Connor says. “You have to takeother factors into account such asimpact on local air quality, economics,social issues and resource issues, anddo a multidimensional analysis toensure that this is the right thing to do.All of those things need to be takeninto consideration when you’re devel-oping policy.”

The multidimensional analysis isjust one step. The findings must be putinto perspective. He points to theUnited States’ fossil fuel consumptionas an example. To reduce crude oilimports, the United States must look atall alternatives, including coal to liquids

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Figure 1


PROFILE

and shale oil extraction. “You need tobe looking at the energy balance andgreenhouse gas emissions from all ofthose alternatives and put all of thatdata through all of your filters: energy,greenhouse gas emissions, economicsand regional pollution. When you dothat, you find that ethanol or biodieselisn’t necessarily that bad, even if youonly get 50 percent more energy outthan goes into the system. That’s not anawful lot different than some of the oilsands operations that we have inCanada, and it’s probably better thanmaking crude oil from oil shale (seeFigure 2).”

What is the best way to analyzefuel? Probably by some other analysis,O’Connor says. “There is no such thingas a perfect study, which is part of thewhole problem,” he says. “Decisionmakers are looking for the one perfectanswer. When you do these studies andwhere you do these studies has a hugeimpact on what the results are.” He saysthe same fuel in the United Stateswould likely have a different green-house gas calculation than in Canada orEurope because of the differences inthe industrial infrastructure. “When youdo a greenhouse gas emissions analysis

or an energy balance, the answer is veryspecific to that particular point in timeand that particular location,” O’Connorsays (see Figures 3 and 4).

Why the DifferencesWhen, where and how a study is

done greatly influences the results andexplains why many ethanol studies havesuch diverse results. The timing mattersbecause efficiencies change. “Most ofthe big, easy-to-get-at sources of crudeoil have already been found, so theenergy required to make crude oil tendsto increase as time goes on,” he says.“Whereas with ethanol production, asplants get more efficient and they getbetter enzymes, the energy required tomake ethanol goes down over time.”

Differing definitions, as in the caseof energy balance studies, can beanother reason for confusion. Two ofthe most common measures are theenergy produced divided by the totalenergy consumed, and the energy pro-duced divided by the fossil energy con-sumed. O’Connor says there are issueswith both measures, and confusion aris-es when some people compare the firstfor one type of fuel with the second foranother type of fuel. To get the true E

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PROFILE

picture, the analysis should look at theenergy displaced as well as the totalenergy and the fossil energy consumed.

Yet another reason for differencesamong studies is the system bound-aries—what is included and what is notconsidered. The primary factors includ-ed within an energy balance study arefuel dispensing, fuel distribution andstorage, fuel production, feedstocktransmission, feedstock recovery, agri-culture and chemical manufacture andcoproduct credits. In an analysis ofgreenhouse gas emissions, additionalfactors must be considered: fertilizerapplication, soil carbon changes andaboveground biomass changes.

Sometimes researchers include

inputs that that are fairly inconsequen-tial. “It’s questionable if you need toinclude the energy that went into build-ing the infrastructure—the plant, trac-tors and trucks,” O’Connor says. “Theplant numbers turn out to be quitesmall. A number of studies amortizeenergy requirements over the life of theplant; the numbers end up being 1 per-cent or 2 percent of the life cycle emis-sions associated with that particularfuel. That’s pretty common actually foroil refineries as well as for ethanol andbiodiesel plants. The materials goinginto tractors and trucks turns out to bea relatively small number in the overallscheme as well.”

Another relatively small number is

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Figure 4


the human input, such as how muchenergy the farmer consumed in ameal. “I don’t think that’s a particular-ly appropriate boundary because Ibelieve that person would be livingand doing something else, even if hewasn’t making biofuels. All of thatenergy should be showing up in bothyour references to man the systemthat you’re looking at. Therefore theycancel out and you don’t have toworry about it. If you do want toinclude it, the challenge is to findgood data. A few studies I’ve seenwhere they’ve tried to include thathave taken very coarse data and essen-tially double counted things and justhaven’t done a good job of it. I’mpretty sure that it turns out to be a rel-atively insignificant part of the overallequation.”

Sometimes, the diverse results aredeliberate. “The issues are complex,but there are people out there who aredeliberately trying to muddy thewater,” O’Connor says. “When some-body keeps quoting studies that havethe basis of much of their data in the1970s, it’s not relevant to what’s hap-pening today. We have two authorsout there who have a tendency to usebad data to try to make their point.It’s just not right. They take the ener-gy efficiency of nitrogen fertilizerplants that are processing coal inChina and apply that to the NorthAmerican context. Or they take anenergy balance from an ethanol plantthat was built in the 1980s, and wentbankrupt in the 1980s, as the modelof what energy requirements are foran ethanol plant. Guess what: therewas a reason that plant went bank-rupt. As long as there are people outthere who continue to do that sort ofthing, it’s going to be very difficult toget consensus.”

The press can also encumberconsensus because it is more interest-ed in a sound bite or a headline thanin understanding the complex issues

that go into the studies, O’Connor says.Additionally, he says the press has a ten-dency to give more weight than isdeserved to the alternate views.

O’Connor says credible studies willhave clearly stated their assumptions interms of inputs, the region and the timeperiod the analysis applies to. His work tofacilitate thorough and credible studies isjust one of his many contributions.Providing information that allows indus-try leaders and policy makers to make

confident, informed decisions is worthyof a lifetime achievement award. EP

Anduin Kirkbride McElroy is an EthanolProducer Magazine staff writer. Reachher at (701) 738-4962 or [email protected].

PROFILE

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LEGAL

Two new ethanol plants received a lump of coal intheir Christmas stockings—a Chapter 11 bankruptcyfiling. One plant isn’t even completed. Now both facethe unenviable task of clawing their way out of a holeto become successful enterprises. And both leavecorn farmers and other investors wondering howsuch lofty aspirations went awry.

By Sarah Smith


BankruptcyBogeyman

and theEthanol Start-Ups


LEGAL

n mid-December 2007, Central Illinois Energy, acooperative formed by 260 farmers and localinvestors who spent $130 million to build an ethanolplant near Canton, Ill., threw in the towel when they

learned they’d lost their money—about one month shy of dis-tilling their corn. Plant construction had mushroomed fromits $40 million initial proposal in 2001, in part due to projectadditions, engineering delays and financing hurdles.

The unfinished plant faces $37 million in constructionliens, a debt load of $87 million and a loss of all but two ofits directors. It surrendered its grain license when the financialproblems became insurmountable. The Central IllinoisAgriculture Coalition, which spearheaded the fund drive,owns 71 percent of the defunct plant.

One week earlier, an innovative plant near Mead, Neb.,filed Chapter 11 bankruptcy papers after mechanical failuresundermined early output and profit projections and sent com-pany finances spiraling downward. E3 BioFuels LLC, an $80million plant called Genesis, had only been operational forfive months. It employed a prototype technology. The plantwas powered by biogas generated from cattle manure, compli-ments of a 28,000-head feedlot nearby. Distillers wet grains, abyproduct of the ethanol plant, fed the cattle in a “closed-loop” system.

E3 lists $10 million in assets and $73 million in liabilitiesin bankruptcy papers. Major bondholders CIT Group andOppenheimer have an estimated $40 million outstanding;Wells Fargo Bank in Omaha is owed $57 million. More than$3.25 million has been filed in construction liens. In addition,E3 lost six directors in 2007.

Like the town of Canton, Mead felt the financial pain ofthe bankruptcy filing. Mead’s 600 residents are among thecreditors because their town board provided $5 million in taxincrement financing for the project. Mead-area farmers whobypassed traditional grain markets to sell to the ethanol plantfor a higher price are also listed as unpaid creditors.

Anatomy of a Meltdown: What Went Wrong in Illinois

Each plant failure features plenty of culprits and evenmore finger-pointing. CIE and E3 both cited an inability topay their debts as they came due as a reason for filing forbankruptcy. Neither blamed volatile market conditions. Debt,and the near-death experience—came to both plants in theearly stages of development and evolved over a period of sev-eral years before the filings.

ICIE, a cooperative formed by 260 farmers and local investors, will go on theauction block this month.

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In Canton, CIE’s main contractorLurgi PSI is the object of much of theblame for $50 million in cost overruns.Lurgi blames CIE management, plantsize and engineering design changes dur-ing construction. The plant was designedto be powered by a waste coal generator.

Lurgi, a Memphis contractor, hasdesigned, engineered and constructed

more than $2 billion in projects in the corn wet milling, grainand starch industries. When asked about the cost overruns,project manager David Cooper said, “Ma’am this company isnot going to comment on any of that.”

CIE began with ICM-designed dry-mill technology inwhich the entire corn kernel is ground into flour. Bankruptcyattorney Barry Barash says at an early stage in the construc-tion, the ICM technology morphed into Lurgi’s own untestedmethod of distilling, necessitating the escalating costs. “Thecontractor wasn’t solely to blame,” Barash says. “The amountof water that was available from the city of Canton is not suf-ficient to produce 37 million gallons of ethanol, which is thenameplate capacity of the plant.”

Ironically CIE’s small size may have been a factor in itsdemise. Its 37 MMgy is small by today’s standards. Because ofmarket factors most plants are currently going on line withthree times that capacity.

To date, CIE investors have been unable to raise the esti-mated $25 million to $30 million remaining to complete con-struction. The plant will go on the auction block in March2008. Barash says the pending sale has attracted a lot of atten-

tion—in part stimulated by the Energy Independence andSecurity Act of 2007, which mandated a six-fold increase inethanol production.

The Meltdown in Mead: Clash of Two Energy Titans

In Nebraska, a boiler explosion in one of two boilers pre-vented plant personnel from attaining sustainable boiler oper-ations to allow full capacity of the ethanol unit. Its anaerobicdigester (the manure-to-methane conversion unit), was notthe source of the problems even though early blame focusedon the technology. The plant was never able to reach fullcapacity and losses mounted.

Plant officials estimated it was operating at 50 percent ofits 25 MMgy capacity following the February 2007 explosion.E3 was intentionally designed small to capitalize on the feed-lot’s supply of manure. Again, the economy of scale may beto blame. Like CIE, the plant may be too small to competewith the mega-plants under construction or already in opera-tion.

E3’s start-up failures have been blamed on the pressure tobring the plant on line. Insiders who declined to be named sayoperators omitted some steps during the start-up that causeda “puff ”—an explosion that blew a boiler door off. Formerplant spokesman R.J. Wilson says contractors may be namedas defendants in recovering the operating losses. Bankruptcyfilings indicate the wet cake conveyor at the feedlot wasn’toperating properly and there was a freeze loss in November2006 that contributed to its financial condition.

E3’s difficulties began three years earlier and involved

Barash


LEGAL

personalities, not mechanical failures.The closed-loop system was patentedin 2002 by ethanol pioneer DavidHallberg. Founding president of theRenewable Fuels Association, he wenton to form his own ethanol tech ven-ture, PRIME BioSolutions LLC. In theinterim, Hallberg was chief executiveofficer of E3.

In 1999, Kansas City businessmanDennis Langley, an oil and gas pioneer,sold Kansas Pipeline Co., to formEarth, Energy and Environment LLC,E3’s parent company. In 2005, Langleyinvested in Hallberg’s patent. Groundwas broken on the E3 plant in late fallof that year. By June 2006, the part-ners’ styles clashed. They severed theirbusiness relationship, agreeing in a bit-ter parting to share the patent througha holding company. Hallberg’s PRIMEBioSolutions became a minority ownerin another holding company involvingE3 while Langley retained 80 percentownership. Hallberg resigned as CEO.He has observed the bankruptcy pro-ceedings from the sidelines.

Hallberg characterizes the explo-sion as “an operational snafu. It was anunfortunate development but it’s cer-tainly very manageable. It had nothingto do with the method technology, thefeedlot or the digesters.” He’s reluctantto elaborate further due to the litiga-tion, but admitted he has spoken tofinancial backers about salvaging theplant because he has significant invest-ments in the closed-loop technology.“Out of the ashes of disaster comeopportunities and kernels of opportu-nity,” he says. He declines to discuss hisformer partner but acknowledged hewould only involve himself in E3’s res-urrection if Langley wasn’t involved.

The partners were viewed as the“Odd Couple” of ethanol. WhereHallberg was precise and methodical,Langley was flamboyant, launching aninternational press campaign and a“YouTube” video on the self-sustain-

ing technology when E3 began opera-tions. The opening day fanfare includ-ed an appearance by Nebraska Gov.Dave Heineman. Langley’s expansionplans announced at that time includedbuilding 15 similar plants around theglobe in a five-year span.

Some area residents, who did notwant to be named, suggested a preoc-cupation with politics, instead of plantproduction, as the source of E3’sdemise. Langley, a political activist, washosting fundraisers while E3 was start-ing to struggle. In the fall of 2007, hehosted a soiree for the Association ofState Democratic Chairs at his home inShawnee, Kan. ASDC publicized theevent with an Internet slide show ofthe mansion, its waterfalls and rockgrotto. Kansas Gov. Kathleen Sebeliusattended, along with other dignitaries.Some offered testimonials as to thelucrative aspect of Langley’s support.

Campaign financing records indi-cate Langley has contributed more than$350,000 to various state and federalDemocratic Party candidates since

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E3 Biofuels filed Chapter 11 bankruptcy papers inDecember because of mechanical failures andunfavorable profit projections.

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2000. His wife, Lynette Shaw, has con-tributed more than $90,000 in thattime. E3 hired the Gephardt Group, alobbying firm run by former HouseMinority Leader Richard Gephardt, D-Mo., to ensure political clout.

Gordon Ganz, owner of AlvoGrain in Ashland Neb., has never metLangley, but E3 owes the companynearly $100,000 for grain sold in goodfaith. “My official comment should be‘no comment,’” he says, noting thatplant officials asked the farmer credi-tors not to discuss the bankruptcy.“But I think ethanol plants should bebonded.”

“It is common for creditors inbankruptcy cases to express discon-tent,” says Jeffrey Deines, Langley’sattorney. Langley declined to commentfor this story. “Creditors are certainlyentitled to full and prompt payment oftheir debts and various aspects of thebankruptcy process sometimes are notconsistent with this desire. The compa-

ny is working hard to make this bank-ruptcy a success and the views of dis-contented creditors should be weighedaccordingly.”

Langley’s holding company andE3’s parent company are listed as cred-itors for $6.5 million. At a court hear-ing on Jan. 7, Hallberg says there were“a lot of angry creditors.” One credi-tors committee is questioning numer-ous expenditures. Langley is scheduledto be deposed some time this spring.

The Way BackRepresentatives of both plants

feel they’ve been thrown a life preserv-er in the form of the Energy Bill. TheIllinois Department of Agricultureseized CIE’s $6 million worth of grainin late December. That asset, sold tohigh bidder Cargill, was liquidated topay off creditors. Depending on thegrain’s quality, the sale may make manyfarmer-suppliers whole. Central IllinoisGrain Co. is a member of the IllinoisGrain Insurance Fund, which will helpcover any insufficiencies that the saledoesn’t.

Chicago financial advisor AlexMoglia was brought in to restructurethe company’s operations. He abruptlydeparted after three weeks, citing aconflict of interest within his firm,Moglia Advisors. He says he stabilizedthe plant and positioned it “for newinvestors to step in.”

Farmer investors, several of whomdeclined to comment, will not recovertheir investments, however. Althoughthere were attempts to set aside moneyfor the unsecured creditors, “the equityhas been wiped out,” Moglia says.

Canton, too, had angry creditors atits January meeting. But Elaine Stone,president of the Fulton County FarmBureau, said the sentiments were most-ly based on heartsickness.

Barash sympathizes with the farmco-op that spearheaded the plant funddrive. He stops short of calling the

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In 2005, Langley, pictured, a Kansas City businessman, and David Hallberg formed a partnership to build E3 Biofuels based onHallberg’s patent for a closed-loop ethanol production system. The partnership was dissolved in 2006.

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farmers naïve, but says, “I don’t think farmers should signany of these contracts that require subordinated loans andlong-term deliveries over a period of years, of corn at a dis-count, at a deferred payment.” Barash suggests—too late—that a fixed-cost contract might have protected theinvestors by containing exorbitant costs and protectingthem against renegotiations with the contractors duringconstruction that weren’t in their best interests. All the con-tractors, including Lurgi, will be paid because they filedmechanics’ liens, which have priority in bankruptcy shake-outs.

CIE’s senior secured creditors, or a consortium ofthem, likely will be the successful bidders in March, Barashpredicts. International financier Credit Swisse has extendednearly $6 million in operating costs to keep the plant afloatuntil its sale. Whitebox Advisors LLC, a Minneapolis arbi-trage and hedge fund firm, has purchased 70 percent ofCIE’s debt, Barash says. Neither entity returned calls seek-ing comment. Barash estimated CIE’s value at $25 millionbecause most ethanol developers are looking to cellulosicfeedstocks rather than corn.

Wisconsin ethanol developer Rich Ryan expressedinterest in CIE, but may not be in a position to negotiatethe senior debt. Ryan was initially involved in building aplant near Sparta, Wis., but sold his interest. That plant hasbeen mired in litigation over site selection.

Meanwhile in Nebraska, there is a grassrootsgroundswell to license and bond ethanol plants, much likegrain elevators as Ganz suggests. That way, sellers such asAlvo would be covered in the event of insolvency insteadof waiting for a bankruptcy referee to sort out the mess.Twice since 2002 the Nebraska Legislature has toyed withthe notion of licensing ethanol plants but both bills died incommittee.

Deines says Langley is “fully cooperating with thebondholders to resolve certain mechanical and construc-tion issues and allow for a successful restart of the plant.”Hallberg, although troubled by the events that caused E3’sill health, still champions the technology that gave it life.“This was a very regrettable development,” he says. “Forthe industry in general and the community, we all want toget it rectified for the employees. The future of this indus-try is very exciting and one of the new dimensions is anemphasis on producing biofuels with no fossil fuels, with assmall a carbon footprint as possible, sustainably, and withas little water as possible. That is exactly what this technol-ogy was designed to do.”

And in the wake of the Energy Bill, there are moreethanol plants on the horizon. EP

Sarah Smith is an Ethanol Producer Magazine staff writer.Reach her at [email protected] or (701) 663-5002.

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EVENT

By Ian Thomson

What’s UpDown Under


EVENT



EVENT

s Australia quickens its stepstowards a biofuels future,industry leaders expect 2008will be a watershed year for

ethanol production Down Under. Theypoint to events such as the start of work onthe long-awaited ethanol plant at Dalby inWestern Queensland—the first purpose-built, grain-to-fuel ethanol facility in thenation—and the climate change issue assignificant indicators of the successfulfuture of biofuels.

Progress at the $A130 million ($112million) Dalby plant will be closely moni-tored by many people, including threefarmers in the same Western Queenslandregion who are forging ahead with plans toconstruct a plant of their own—known asWestern Downs. At least another 10plants are proposed in other states and theNorthern Territory.

Political commentators will tell youthat a lack of action on climate change wasone of the reasons the CoalitionGovernment led by Prime Minister JohnHoward was thrown out of office lastDecember. Millions of Australians haveembraced the issue, realizing the need toseriously consider an ever-increasing use ofrenewable transport fuel to drasticallyreduce carbon dioxide emissions frommotor vehicles.

Bill Elliott, director of Brisbane-basedBBI Biofuels Australia, says the only wayfor ethanol production across the country

is up. “The state of New South Wales hasmandated the use of ethanol-blended fuel,Queensland has set a policy of blendedethanol by 2010 and the other states arebecoming increasingly aware of the need toreduce greenhouse gases linked to globalwarming,” he says.

Regional EconomiesInvigorated

“I remain confident that the newFederal Labor Government led by (PrimeMinister) Kevin Rudd will join its statecounterparts and turn its attention to anethanol mandate so things can really getmoving in this country,” Elliott says. Healso points to the other significant benefitsrelated to the expansion of biofuels pro-duction. “Ethanol production across thecountry delivers far more than just the vitalneed for cleaner and safer alternatives tofossil fuels,” he says. “The ethanol industryis reinvigorating rural economies. As moreplants go on the drawing board, the mas-sive investment in infrastructure providesnew jobs in the construction, farm andautomotive sectors. Many of those jobs willgo to young people in the areas whereethanol plants will be built—stoppingthose people from having to seek work inthe big cities.”

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Australian of the Year Tim Flannery addresses dinner guests at the Ethanol 2007 Conference inMelbourne.

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obviously a long, long

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Americans in the

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EVENT

With the NSW mandate andQueensland setting a policy of 5 percentblended ethanol two years from now, it’sobvious that more ethanol plants on draw-ing boards across the nation will need toquickly move from development to theconstruction stage. A minimum of sixplants able to produce 200 million litres (50million gallons) of fuel ethanol per year willneed to be built by 2011 to meet the needsof NSW and Queensland alone.

Conference Tackles the Issues

The signing into law of the U.S. EnergyBill late last year is also being seen as a majorboost for the fledgling Australian biofuelsindustry. Elliott says the legislation requiringa five-fold increase in the use of transport

fuels—most of whichwill be ethanol—is an his-toric turning point for therenewable fuels industry.“The Americans haveraised the bar enormouslyas they strive for long-term energy security,” hesays. “Australia, which isobviously a long, long way

from the enormous progress made by theAmericans in the biofuels industry, can takethe lead from Washington and speed up the

ethanol process.”The events at home and abroad in

recent months have set the scene for whatpromises to be a fascinating industry talkfest April 8-10 in Sydney. The BBIInternational Ethanol 2008 AustraliaConference in the plush and expansiveSydney Convention and Exhibition Centrewill thrash out the issues and concerns con-fronting industry leaders on the marchtoward a transport future based on renew-able fuels. Delegates and speakers will maketheir way to Sydney from the United States,Asia and from across Australia to the thirdand biggest annual conference of its type.

Food Versus Fuel on the Menu

One hot issue on the agenda is the so-called food-versus-fuel debate. Thoseopposed to ethanol production say thatwhen it comes to ethanol plant feedstocks,we must choose between fuelling our carsand feeding the people. Others say we cando both. The debate has raged in theUnited States and now it’s Australia’s turnto take a long, hard look at the facts asthey’re presented by several experts in thefield.

BBI Conference Coordinator LouiseJordan says the 2008 event will face thefood-versus-fuel issue head-on. “We are

Elliott

Dinner guests at the 2007 Melbourne conference

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planning a debate of our own on stage at the con-ference,” Jordan says. “We have approached anumber of speakers to be involved in the discus-sion, with the highly-respected Todd Sneller fromthe Nebraska Ethanol Board already signalling hisacceptance.”

Jordan says she expects the 2008 conferenceto be the biggest yet, with more than 500 atten-dees and 50 industry booths at the trade show to

be held in conjunction with the event. “The conference will providethe latest developments in biofuels production across the globe, andoutline just what’s happening in the emerging Australian ethanol rev-olution,” she says. “Australia has come a long way in biofuels devel-opment and there is still a long way to go. A well-planned conferencewith excellent speakers generates discussion on the best ways tospeed up the push for nondependence on fossil fuels.”

Oil Titan Comes to the PartyOil giant Caltex Australia will have a presence at the conference,

with an address by the company’s National Fuels MarketingManager Michael Ridley-Smith.

The involvement by major oil companies in Australian biofuelsproduction and distribution has taken leaps and bounds in recenttimes, a move unexpected by many in the renewable fuels industry.

The latest edition of the Caltex industry magazine, The Star,

contains six pages on biofuels. It quotes Ridley-Smith as sayingCaltex was well ahead of most competitors in the number of sitesat which ethanol blends are available. “Some areas of Australia arebetter suited for biofuels expansion than others,” he says in the mag-azine. “With its sugar plantations, Queensland is a logical place forfurther growth, so are grain growing areas and Caltex has commit-ted to taking at least 30 million litres (7.5 million gallons) a year fromthe grain-to-ethanol plant at Dalby in Queensland.”

Apart from an oil company’s perspective, other topics to becovered at the Ethanol 2008 Conference in Sydney include:

�Ethanol automotive technology�Future production technologies�Basics of ethanol production�Plant construction and management�Establishing feasibility�Financial structure�The ethanol marketElliott says the conference represents a major step in the devel-

opment of the Australian biofuels industry. “It will provide highly-valued and accurate information for those already established andothers keen to jump on the renewable fuels bandwagon,” he says. EP

Ian Thomson is managing editor of Biofuels Australasia. He canbe reached at [email protected] or 07 3360 7018 and0409 827-387.

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The claims and statements made in this article belong exclusively to the author(s) anddo 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).

ey fluid agitation problems face the emerging cellulosicethanol industry. Of particular importance is the conflictbetween the need to use high solids fibrous slurries, which

require expensive solids mixing equipment, versus the desire to useinexpensive fluid agitation equipment, which cannot handle high-solidsfibrous slurries. Despite the challenges, possible solutions and areaswhere further research would be beneficial are available.

One of the challenges facing the industry is the variety of differ-ent feedstocks, each having different rheological properties that affectmixing difficulty. Examples of feedstock include corn stover, switch-grass and recycled newspaper. Some facilities must be designed to han-dle multiple feedstocks. The key parameter for mixing is how muchwater can be absorbed inside the fibrous cells before there is any “free”water available, marking the transition from a damp solid to a liquid

slurry. When the slurry behaves as a damp solid, it must be mixed withexpensive solids-mixing equipment, which is not available with largevolumetric capacity. When the slurry behaves as a liquid, it can be han-dled with fluid-mixing equipment, which is much less expensive andreadily available for very large tank volumes.

Another challenge is that many different processes are still beingdeveloped, and each has its own requirements. However, the wide vari-ety of processes can be simplified in order to focus on their commonelements and identify agitation issues. In general, all cellulosic ethanolprocesses have four major process steps: pretreatment, hydrolysis, fer-mentation and ethanol concentration. Sometimes some of these stepsoccur concurrently. For example, fermentation may begin in the hydrol-ysis step. Though there can be many differences in each of these stepsfrom one process to another, the mixing challenges are qualitatively thesame.

PretreatmentPretreatment involves making the individual cellulosic fibers more

accessible to the agents of hydrolysis. Pretreatment may involve com-binations of mechanical steps such as chopping the fibers, thermal pro-cessing, and chemical processing, such as treatment with acids, alkalisand/or enzymes. Generally, liquid agitation is not possible, due to lowfree moisture. A solids processor or a modified rotary dryer which tum-bles the damp solids without the addition of heat might be useful inthis step.

PROCESS

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Agitation Challenges in Cellulosic EthanolProductionBy Gregory T. Benz


HydrolysisFor an economically viable process, the solids content feeding the

hydrolysis step should be as high as possible, typically 20 percent to 30percent or more. Any excess water not only dilutes the enzymes addedfor hydrolysis, reducing the reaction rate, but also dilutes the sugarsproduced. This slows fermentation, lowers ethanol concentrationsand adds energy cost for concentrating the ethanol.

Water in fibrous slurries can be found both inside and outside thecells. However, only the water outside the cells, which we will call“free” water, contributes to product fluidity. The practical significanceof this is that cellulosic slurries above approximately 12 percent to 15percent dry solids content are not liquids, but damp solids, having lit-tle or no free water. They cannot be handled by turbine agitators.Instead, they must be mixed by expensive, low volumetric capacitysolids mixers. Turbine agitators are much less expensive and have noreal size limitations, but generally are not practical above approximate-ly 8 percent to 10 percent solids because the required torque of a tur-bine agitator is roughly proportional to percent solids cubed.Therefore, from a turbine viewpoint, the solids should be more dilute.How can we keep the feedstock at high percent solids and yet useinexpensive turbines? In other words, can we somehow use the waterinside the cells to fluidize the slurry? The answer lies in what is hap-pening in the hydrolysis reactor.

In this reactor, with time and reaction progress, the cellulosicstructure is broken down, and the cellulose is hydrolyzed into various

PROCESS


Fueling the Future

soluble sugars. This means the end product of a hydrolysis reactor isbasically low viscosity liquid, not fibrous slurry. The key to using a tur-bine, therefore, is to avoid exposing it directly to the high-solids,fibrous feedstock from the pretreatment step, allowing it to run in amixture of feedstock and the hydrolyzate reaction product. The strate-gies are slightly different for batch and continuous reactors.

Batch ReactorA pure batch reactor would involve filling the tank with the pre-

treated feed, say at 30 percent solids, adding the necessary reagents andletting the reaction proceed. Such a reactor would then have to be ableto mix the 30 percent fibrous material. This is not practical for largescales of operation, as it would require a solids mixer. A better way isto operate as fed batch, starting out with a small heel of water. Thepretreated feed plus enzymes would be added until the tank was full,allowing hydrolysis to occur, breaking down the cellular structure andreleasing internal water so as to increase the “free” water content.Filling would be done at a rate so as to keep the tank contents fluidenough to be agitated by a turbine, then the tank would continue tobe agitated until hydrolysis was essentially complete. The researchneeded for such a system would likely employ empirical kinetics stud-ies, plus agitation studies to determine what the maximum effectivepercent solids after partial hydrolysis might be, and the minimum agi-tation at various solids concentrations. This would be highly depend-ent on the pretreatment process used as well as the kind of feedstock.

Continuous Flow ReactorIn a continuous flow scheme with a backmixed reactor, the bulk

contents of the tank have the same composition and fluid propertiesas the effluent. Thus, it is necessary to assure that the retention time inthe first stage of a continuous flow system is sufficient to liquefy thefeed. The minimum mixing torque/volume to create full motion isroughly proportional to the cube of the percent solids. However, mix-ing clumpy, high solids material into a lower percent solids bulk liquidwill require substantially more torque than that required to maintainfull liquid motion. Thus, a better scheme than using a single large tankor equal-sized tanks in series is to start with a small first stage, whichwill have an equivalent discharge consistency as high as possible for aturbine (likely 8 percent to 12 percent). This scheme avoids the needto create high agitation intensity in a large tank size. The small first

PROCESS

In a continuous flow scheme with abackmixed reactor, the bulk contents of the tank have the same compositionand fluid properties as the effluent.


PROCESS

stage is followed by one or more tanks inseries, with the final tank discharging an almostfiber-free material. It minimizes agitator costand power. Research needed for this schemeincludes at least an empirical study of kineticsplus agitation studies as a function of percentsolids. Feedstock will heavily influence thisapproach.

Although for the purposes of this articlefermentation is treated as a separate step, manyprocesses under consideration actually beginthe fermentation in the hydrolysis reactor.Aside from pure economics, such processesmay be used to deal with the fact that somesugars impede the very hydrolysis reactionsthat make them, but this does not affect theminimum mixing requirements.

FermentationEthanol fermentation has been used for

thousands of years. Even fuel ethanol hasbeen in production around the world for atleast 50 years on a large commercial scale. Yetthe influence of agitation has not been wellstudied. Most ethanol processes based onsucrose and yeast just use agitators to keep thetank bottom reasonably clean, and no addi-tional research is needed to design for thatfunction. However, work done by ProfessorEnrique Galindo of the Institute ofBiotechnology at National University ofMexico showed that even for simpleyeast/sugar ethanol fermentations, the processresults were directly affected by agitation.Specifically, he showed that rate of production,yield and maximum percent ethanol allincreased up to an agitator-specific powerinput of 1.6 watts per kilogram (8 horsepowerper 1,000 gallons), which is much higher thananything used on a commercial scale. Others

have anecdotally reported similar results. Amechanistic study needs to be done to explainthe reason(s) for such strong influence and theimplications for proper scale-up.

Ethanol ConcentrationAgitators in the ethanol concentration

area of the plant are needed to keep solidsfrom settling. This function is well understoodby agitation consultants familiar with the indus-try, and no additional research is needed.

The fledgling cellulosic ethanol industryhas major agitation challenges in the hydrolysis

reactor area, due to the need to handle highsolids feed. Research into agitation issues isessential for viable process operation as well asminimizing agitation capital and energy costs.Less critical, but worthy of study to allowprocess optimization, is the influence of agita-tion on fermentation. If the industry gets thisright, productivity could be greatly enhanced.EP

Gregory T. Benz is president of Clarksville, Ohio-based Benz Technology International Inc.Reach him at [email protected] or(937) 289-4504.

The fledgling cellulosicethanol industry hasmajor agitation challengesin the hydrolysis reactorarea, due to the need tohandle high solids feed.


FINANCE


t’s no secret: high corn and energy prices coupled with low ethanolprices are squeezing ethanol plant’s margins and making it hard tonot only make a profit and pay dividends, but also to buy corn and

chemicals, pay wages and make debt payments. Even with the EnergyIndependence and Security Act signed Dec. 19, 2007, by President GeorgeW. Bush, the ethanol industry faces challenges. Newer plants with signifi-cant debt loads face these problems more than older plants that paid offdebt before the current market tightening. For management at these plants,having a plan to deal with dwindling cash flows and reserves is critical toavoid shutting down and surviving until better times.

A plant’s ebbing cash flow will impact its relationships with creditorssuch as vendors, banks and employees. It can also test the equity owners,as the financial strains will impose greater burdens on them and mayexpose divergent goals. This is particularly true where owners wear otherhats such as that of a supplier. The specific nature and scope of the finan-cial difficulty will determine which creditor or creditors will be the focus ofthe plant’s operational renewal. The process of realigning reasonableexpectations, however, remains fundamentally the same.

Declining cash flows may prevent the plant from meeting all of itscontractual obligations in a timely fashion. To work through these issues,the plant must convince creditors that a realignment of these obligations isin everyone’s best interests. The primary line of reasoning is that a termi-nation of the creditor’s relationship with the plant or commencement of acollection action will result in a far smaller return. As a result, it is in the bestinterest of all those involved, including the creditor, to receive payment

according to a more relaxedtimetable or in an amount lessthan originally expected.

The most critical factordetermining whether a plantcan weather the current eco-nomic climate is early recogni-tion of the challenges and put-ting a comprehensive plan inplace. The plant’s resources may be needlessly wasted attempting to imposelast-minute solutions. The plant may obtain short-term concessions fromcreditors. This may provide the plant immediate relief. However, it will typ-ically fail to address the fundamental issues driving the dwindling revenues.It may even exacerbate such problems by causing the plant to incur addi-tional obligations such as interest and attorneys’ fees. The current environ-ment calls for resolutions that are broader in scope, more farsighted andpermit the plant to continue operations rather than shut down. Such reso-lutions may include the implementation of a uniform plan to extend con-tractual commitments to conserve operating capital with a wider array ofthe plant’s creditors.

One critical class of creditors is vendors. Those who supply the goodsand services essential to the plant’s continued operations often are the firstto feel the impact. In a time of financial distress, payments to these suppli-ers may be untimely and infrequent. This is a product of necessity as it is away to informally fund operations. If the financial problem is quickly

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resolved, such vendor financing may be suffi-cient. The current and near-term economicconditions, namely high-priced inputs and over-supply caused by infrastructure problems, coun-sel that such a resolution will be rare or onlytemporary.

If delaying payment of obligations to ven-dors fails to trigger the operational renewal,banks are often the next class of creditors to beaddressed. The deteriorating condition may trig-ger a default under the loan documents such asa missed payment or very often a breach offinancial covenants. Indeed, banks draft thedefault provisions broadly to enable quickaction on their own financial interests. Diligentbanks will learn of the operational concernsbefore a payment default occurs through finan-cial reporting required under the loan docu-ments. The recent publicity surrounding the dif-ficult issues facing the ethanol industry will con-dition banks to have their antennas tuned forsuch distress.

Once aware of potential problems, banksusually proceed with a two-pronged approach.First, they will conduct a review of the plant’sassets securing the loan. The analysis willassume that the assets will be sold at an orderlyliquidation value, significantly less than fair mar-ket value. The bank uses this picture of the assetvalues to establish the available approaches toensure payment of the loan or otherwise maxi-mize its recovery. Second, the bank will demandthat the plant provide it with a plan and support-ing financial information, such as projections, toresolve the operational issues. Provided anarrangement can be reached with the bank, itwill permit the plant to continue to operateunder close monitoring. If the bank perceivesthat the continued operations will further dete-riorate its financial position, the bank will likelyact quickly to attempt to enforce its rights, par-ticularly against the assets.

Employees are the final category of credi-tors affected by declining cash flow. They areone of the plant’s critical assets. With continuedtechnological advancement, each employee hasadded importance. The value of a business willsuffer if employees lose confidence. To ensuretheir continued confidence, management mustkeep them reasonably informed of the difficul-

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ties and the renewal plan. It is also absolutely critical that the wages andother benefits of the employees be paid on a timely basis. Rest assured,the critical nature of these payments will be acknowledged by almostall creditors, including banks.

The negotiations with vendors, banks, employees and other nec-essary parties culminate with a “workout plan,” which captures therenegotiated agreements with the plant’s creditors. This plan may be aformal or informal arrangement and may consist of a number of indi-vidual agreements. The important aspect of the plan is that it address-es the interests of all the applicable parties, including those of the plant.A successful plan is one that allows the plant to return to financial sta-bility and meets the creditors’ readjusted expectations.

If a workout plan cannot be finalized, creditors, in particularbanks and vendors, will pursue available rights and remedies in anattempt to maximize their return or force their desired resolution uponthe plant. The rights and remedies of banks and vendors differ in mate-

rial ways; accordingly, so does the plant’s response.A bank’s primary remedy is to seize and sell personal property

such as plant equipment or real estate. While always cognizant of anysubstantive defenses, the most pragmatic defenses are those rights pro-vided by the process. To foreclose on personal property or real estate,the bank must meet established procedures for notice, obtaining pos-session and sale. This process is time-consuming and expensive. Inaddition, these remedies fail to maximize the return on the assets to besold. Only with the cooperation of the plant can the bank realize thefull value of the plant’s assets. Thus, even after the bank begins to exer-cise its rights and remedies, sufficient time exists to discuss reasonablearrangements or pursue alternatives such as replacement financing or asale.

While less expansive, vendors also possess significant rights.Vendors always have the right to stop supplying goods or services. Thiscan make a financial renewal difficult as replacement agreements willneed to be arranged, and often the plant’s alternative vendors are limit-ed due to location, logistics and other restrictions. Suppliers of goodscan also demand the return of recently shipped goods, a process calledreclamation. A number of substantive defenses exist to reclamationclaims; however, vendors further increase their leverage by pursing theclaims.

Despite the plant’s efforts, creditors may persist in pursuing theirclaims in the face of continued negotiations. The plant, however, is not

Despite the plant’s efforts, creditorsmay persist in pursuing their claimsin the face of continued negotiations.


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without additional options. One is the commencement of a bankrupt-cy case. Generally speaking, there are two types of chapters available forbusiness debtors: 1) a chapter 11 reorganization and 2) a chapter 7 liq-uidation. The commencement of a bankruptcy case stays the action ofall creditors against the plant or its assets, including attempts by thebank to seize assets, vendors seeking to reclaim goods, and collectionactions. More fundamentally, it implements a specific process with theintent of maximizing the value of the plant’s business and assets for thebenefit of its creditors and owners.

A chapter 11 filing allows the plant to continue to operate with theowners still in control, preserving business value. The filing providesthe debtor with additional rights such as the ability to impose a paymentarrangement on banks and terminate uneconomical contracts or leas-es. These rights come with certain obligations, including the require-ment to obtain court approval for financing and use of property out-side of the ordinary course of business, such as a sale. The chapter 11process typically concludes with either a plan of reorganization or asale. A “plan of reorganization” is substantially similar to a workoutplan, albeit more formal and detailed. With increasing frequency, thechapter 11 process has been employed to facilitate a sale. A sale in bank-ruptcy can occur free and clear of all liabilities including liens, makingit attractive to prospective purchasers. This heightened interest allowsthe plant to maximize the value of assets for the benefit of creditorsand owners.

In contrast to a chapter 11 reorganization case, chapter 7 liquida-tion halts business operations. Upon the filing of the chapter 7 case, a“trustee,” typically a local attorney, is appointed and controls the plant’sassets. The trustee is charged with disposing of those assets and thenmaking a pro-rata payment of those funds after expenses to creditors.A chapter 7 case often fails to capture the full value of the plant and itsassets. As a result, it is best utilized to formally conclude the affairs of acompany, as most state laws do not permit a company whose liabilitiesexceeds its assets to dissolve.

At the end of the day, no one in the ethanol industry has a greatdeal of interest in closing plants. Banks and vendors lose money inforeclosures and bankruptcies. Investors lose their equity investment,and employees lose jobs. However, management and boards need tobe realistic about dealing with difficult economic conditions and theirown financial situation. Failing to address real problems because of ahope for better times is a recipe for failure. Plants that have a plan andfollow it are far more likely to survive and thrive. EP

Todd Taylor is an officer in Fredrikson & Byron’s corporate, renewableenergy, securities and emerging business groups. Reach him at [email protected] or (612) 492-7355. Ryan Murphy is a senior asso-ciate in Fredrikson & Byron’s bankruptcy and reorganization, and litiga-tion groups. Reach him at [email protected] or (612) 492-7310.



ome say the world is getting flatter, and the U.S. ethanol indus-try is very much an active part in it. Much like the world’s majoroil and energy companies, ethanol industry-related exports—

distillers grains, technology and expertise, primarily—continue toincrease and business continues to become more globalized.

The U.S. ethanol industry has been moving much of its coprod-uct to worldwide consumers, opening new avenues of trade. Thedomestically produced renewable fuel is creating a new global businessoption for U.S. companies. However, with new ventures come newobstacles.

A sinister threat to global business that is critically underappreciat-ed but worth highlighting is extortion, a tactic used by terror groups toobtain money through threats or actual violence against corporate per-sonnel and other assets. This form of terrorism continues to have far-reaching implications for business, particularly transnational companies.

Companies are increasingly facing the reality and risks of doingbusiness in an unstable world. Any company in energy, agriculture, min-ing or manufacturing will likely come up against the threat of terror andsubsequent extortion payments.

To give an idea of just how big this problem is for transnationalcompanies, consider Nigeria. For several years, the eighth-largest oilexporter has suffered bombings against oil rigs and compounds as wellas kidnappings and other extortive acts by the Nigerian terror groupMEND (the Movement for the Emancipation of the Niger Delta). InSeptember 2007, Mexico, another top oil exporter, experienced bomb

blasts perpetrated by the terror group EPR (the Popular RevolutionaryArmy) against state-owned Pemex oil and natural gas pipelines. Recentcases of terror extortion tactics include the ETA (Euskadi TaAskatasuna) in Spain, Abu Sayef in the Philippines, Hizballah in SouthAmerica’s tri-border area and narco-terror groups in Colombia.

Terror group extortion, such as revolutionary payments or protec-tion-money, is an ongoing issue for transnational companies. Giving inand paying off the terrorists may initially afford a transnational compa-ny peace and quiet. Yet ultimately, employing such defensive measures,which are akin to bribery payments, can result in far-reaching negativeoperational, financial and legal consequences.

In Focus: Chiquita and Colombian Terror GroupsRecently, Chiquita Brands International Inc. revealed to the U.S.

Department of Justice that it had been illegally paying extortion fees toknown terrorist groups for several years. Chiquita stated that its man-agement felt it had no choice but to ensure the safety of the company’semployees.

Chiquita voluntarily alerted the Justice Department in April 2003that it paid $1.7 million between 1997 and 2004 to AUC (United Self-Defense Forces of Colombia), a terror group responsible for some ofthe worst massacres in Colombia's civil conflict and for a sizable per-centage of the country's cocaine exports. Additionally, Chiquita madepayments to the terror groups ELN (National Liberation Army) andFARC (Revolutionary Armed Forces of Colombia), as control of the

WORLD

S

Terrorist Group Extortion and OtherChallenges forTransnationalCorporations By Dean C. Alexander


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WORLD

company's banana-growing area shifted.Ultimately, Chiquita agreed to a $25 mil-

lion criminal fine, the requirement to imple-

ment and maintain an effective complianceand ethics program, and five years probation.Also, Chiquita executives narrowly avoided

U.S. criminal charges.In the face of extortion, Chiquita had to

decide between several unappealing options:1) pay terrorists the extortion, 2) refuse to paythem and possibly suffer attacks on employeesand facilities, 3) stop operations temporarily or4) sell operations, most likely at a loss. Whilemaking payments may seem like the lesser ofmany evils, a transnational company’s decisionto make protection payments undermines itsstatus at home and with host countries. Evenworse, extortion payments encourage similarconduct by terrorists against businesses world-wide.

Additional RamificationsAside from the obvious disadvantage of

dealing with terrorists, terror group extortionpayment pressures can have negative opera-tional effects such as declining production,often with poorer quality deliverables, highercosts of production due to heightened labor,security and transportation costs, lower effi-ciencies, underutilization of assets, productionstoppages and threats to business continuity,adjustments to and pressures on supply


WORLD

chains, and corporate governance complexities.There are also significant financial implications from giving in to

terror extortion, such as higher costs for labor, security, capital, inputsand insurance, reduced profitability, loss of goodwill and declining stockprice, financial penalties, and/or liabilities arising from host and homecountry litigation initiated by the government, private sector or evenemployees.

Reducing the Terror Risk There are steps that transnational companies can undertake to

reduce the risks of terror extortion. Prior to following such a path, thetransnational company must analyze whether the benefits outweigh therisk of doing business in the host country. If the company decides toproceed, it can reduce risks by exploring whether land grants or subsi-dized loans are available from the host country or a development agency(e.g., the World Bank or a regional development bank). The transnation-al company can also invest in political risk insurance covering war andcivil disturbance/terrorism, expropriation, breach of contract, andinconvertibility of currency offered by commercial, government (e.g.,the U.S. government’s Overseas Private Investment Corp.) and non-governmental organization (e.g., the World Bank’s MultilateralInvestment Guarantee Agency).

In cases of terror extortion, the kidnapping of transnational com-pany personnel is a very real threat. Kidnapping and ransom insurance,along with other insurance products (e.g., property and casualty, busi-ness interruption, life, disability and health insurance), should be serious-

WORLD

ly considered. It is also critical to apply disparate security products, serv-ices and methodologies—ranging from risk and vulnerability assess-ments to business and risk intelligence data reports—that can aid in less-ening the likelihood, frequency and severity of terrorism in general, andterror extortion in particular.

Other preventative measures transnational companies can pursueinclude developing alliances and gathering support from host countrygovernment, business, civic and labor entities, along with home countryrepresentatives (e.g., a U.S. embassy) and non-governmental institutions(e.g., the World Bank). Likewise, engendering support for bilateral eco-nomic and political relations (e.g., trade and investment agreements)between host and home countries will aid transnational company effortsabroad.

This discussion demonstrates that while terror group extortion canhave substantial pernicious operational, financial and legal effects ontransnational companies, a variety of alternatives and instruments areavailable to lessen such threats. In doing so, companies can help enhanceglobal trade, investment and business while contributing to the reductionof terrorism internationally by eliminating a considerable source of ter-ror funding. EP

Professor Dean C. Alexander, a member of the advisory council ofMarsh’s Center for Risk Insights and author of “Business ConfrontsTerrorism," is the director of the Homeland Security Research Programat Western Illinois University. Reach him at [email protected] or(309) 298-2120.

EVENTS CALENDAR

Washington InternationalRenewable Energy Conference

March 4-6, 2008Washington Convention Center

Washington, D.C.

This event will present the latest developments in

renewable energy. Speakers will discuss the status

of key renewable energy technologies, plus sys-

tems costs, economics, markets, manufacturing

and financing. Biofuels and biomass technologies

will also be discussed. A trade show will be colocat-

ed with the conference.

(202) 393-0001

www.wirec2008.org

Ecological Dimensions of Biofuels

March 10, 2008Ronald Reagan Building and

International Trade Center

Washington, D.C.

This conference will explore the ecological dimen-

sions of biofuels production, and will identify man-

agement strategies and research opportunities to

ensure their sustainability. Agenda topics include

sustainable development, environmental and eco-

logical dimensions, conservation and biodiversity,

agriculture and grasslands, rangelands, forests,

and secondary feedstocks. A poster session social

is also planned.

(202) 833-8773

http://esa.org/biofuels

World Biofuels Markets Congress

March 12-14, 2008Brussels Expo

Brussels, Belgium

The sessions at this event will focus on ethanol on

a local and global scale. More detailed topics of

discussion include feedstocks, trading and pricing,

quality and distribution, fleets, pipelines and ship-

ping, and transport manufacturers and users. Pre-

congress conferences will address finance and

investment, next-generation biofuels, sustainability

and certification, and policy and regulation.

+44 20 7801 6333

www.worldbiofuelsmarkets.com

International BiomassConference & Trade Show

Apr i l 15-17, 2008Minneapolis Convention Center

Minneapolis, Minnesota

This event, which stemmed from the Energy &

Environmental Research Center’s biomass confer-

ence last year in Grand Forks, N.D., aims to

advance the near-term, commercial-scale manu-

facturing of biomass-based power, fuels and

chemicals. Topics include biopower, bioproducts,

biochemicals, biofuels, intermediate products and

coproducts, which will be presented through gen-

eral sessions, technical workshops and an industry

trade show.

(719) 539-0300

www.biomassconference.com

Alternative Fuels & VehiclesNational Conference + Expo

May 11-14, 2008Las Vegas Rio All-Suite Hotel

Las Vegas, Nevada

This 14th annual event focuses on alternative

fuels, alternative fuel vehicles, advanced trans-

portation technologies, vehicle emissions and poli-

cy. The preliminary agenda includes discussions

that will educate vehicle fleet operators and end-

users on the options available in alternative fuels.

The expo features auto manufacturers, technology

developers, fuel suppliers and many others. There

will also be a ride-and-drive event.

(702) 254-4180

www.afvi.org/NationalConference2008

2008 Energy Conference May 15-16, 2008

Radisson Hotel and Conference Center

Plymouth, Minnesota

More than 200 key business decision-makers are

expected to attend this annual event hosted by

U.S. Energy Services Inc. Current energy issues,

future trends and industry concerns that may affect

future business will be addressed. Presentations

and panel discussions given by industry experts

will tackle critical topics and challenges surround-

ing energy management, including green energy

management strategies.

(763) 543-4600

www.usenergyservices.com


Canadian Renewable Energy WorkshopMarch 16-18, 2008

IPSCO Place

Regina, Saskatchewan

This inaugural event will facilitate the continued

development of Canada’s ethanol and biodiesel

industry. Agenda topics will discuss the past, present

and future of the biofuels industry; plant mainte-

nance; operational challenges; financing; feed-

stocks; coproducts; technologies; governmental

incentives; and enzymes.

(519) 576-4500

www.crew2008.com

4th Annual Ethanol & Biodiesel Supply Summit

March 16-18, 2008The Renaissance Hotel

Washington, D.C.

Join top renewable fuels, automotive and refined

product experts, who will forecast challenging eco-

nomic issues surrounding ethanol and biodiesel

pricing, storage and transportation. Program high-

lights include a focus on ethanol demand, produc-

tion and imports; renewable fuels markets from the

refiner’s point of view; a review of the renewable

fuels standard; cellulosic ethanol; food versus fuel;

storage and transportation infrastructure; and E85

and flexible-fuel vehicles. There will also be a pre-

summit workshop.

(866) 620-5940

www.opisnet.com/biosupply

Ethanol 2008 AustraliaApr i l 8-11, 2008

Sydney Convention & Exhibition Center

Sydney, Australia

This third annual event will continue to build

Australia’s ethanol industry by discussing develop-

ment opportunities. The agenda includes preconfer-

ence seminars (Ethanol 101 and Lenders &

Investors), an international update on ethanol, the

food-versus-fuel debate, new technologies and an

oil company perspective. Registration is now open.

Australia: +61 7 3360 7000

U.S.: (719) 539-0300

www.ethanol2008.com

Renewable Energy Finance &Investment SummitMay 19-21, 2008

FireSky Resort & Spa

Scottsdale, Arizona

This third annual event, themed “Exploring Key

Deals & Developments in the Renewable Fuel &

Renewable Power Markets,” will discuss state-of-

the-art finance structures, deal mechanics, tax

incentives, investment trends, more efficient tech-

nologies, regulatory changes and creative financ-

ing solutions. Three tracks address renewable

power, biofuels, and carbon and greenhouse gas

emissions. A separate workshop will detail renew-

able energy project finance fundamentals.

(704) 889-1287

www.frallc.com

Corn Utilization & Technology Conference

June 2-4, 2008Kansas City Marriott Downtown

Kansas City, Missouri

The theme for this sixth annual event reflects the

continued growing importance of corn as a key-

stone to a carbohydrate-based economy. Topics

will include wet milling, dry-grind technologies,

value-added products from corn, and new uses for

distillers dried grains that will be of value to ethanol

producers and livestock interests. Registration is

now open. A more detailed agenda will be avail-

able as the event approaches.

(636) 733-9004

www.corntechconf.org

24th Annual International FuelEthanol Workshop & Expo

June 16-19, 2008Opryland Hotel & Convention Center

Nashville, Tennessee

This conference will follow the record-breaking

2007 event, in which more than 500 exhibitors par-

ticipated and more than 5,300 people attended.

The preliminary agenda includes an Ethanol 101

pre-conference seminar, general sessions, concur-

rent technical workshops and various networking

opportunities. Attendees will also have the chance

to tour Commonwealth Agri-Energy LLC, a 33

MMgy corn-based ethanol facility in Hopkinsville,

Ky. More information will be available as this event

approaches.

(719) 539-0300

www.fuelethanolworkshop.com



EPM MARKETPLACE

Ag Products & Services

Hybrid Corn

Pioneer Hi-Bred International, Inc.

800-247-6803 www.pioneer.com

Associations/Organizations

Trade

Ethanol Promotion & Information Council (EPIC)

402-932-0567 www.drivingethanol.org

Chemicals

PhibroChem Ltd.

800-223-0434 www.lactrol.com

Anti-Microbial

North American Bioproducts Corporation

866-342-7026 www.na-bio.com

PhibroChem Ltd.

800-223-0434 www.lactrol.com

CIP

Univar USA Inc.

402-733-3266 www.univarusa.com

Yeast

Ferm Solutions

859-402-8707 www.ferm-solutions.com

North American Bioproducts Corporation

866-342-7026 www.na-bio.com

Cleaning

Dryer Systems

Hydro-Klean, Inc.

515-283-0500 www.hydro-klean.com


800-369-5500 www.senecacompanies.com

Ductwork

Hydro-Klean, Inc.




Emergency Spill Response

Hydro-Klean, Inc.




Fans

Hydro-Klean, Inc.




Filter Media



Heat Exchanger

Hydro-Klean, Inc.




Hydro-Blasting

Hydro-Klean, Inc.


Plate-Frame

Hydro-Klean, Inc.




Railcars



Smoke Stack

Hydro-Klean, Inc.




Tank Cleaning Services

Hydro-Klean, Inc.




Construction

Fabrication

Macomber Welding & Fabricating, Inc.

616-698-0819 [email protected]

VAL-FAB Inc.

877-482-5322 www.valfab.com

Grain Storage

Coverall Building Systems

800-268-3768 www.coverall.net

Insulation

Mavo Systems

763-788-7713 www.mavo.com

Plant Construction

Agra Industries, Inc.

715-536-9584 www.agraind.com

Agri-Systems

406-245-6231 www.agrisystems.net

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Reimer Welding Inc.

218-773-0886 www.reimerwelding.com

Railroad Tracks

R & R Contracting, Inc.

800-872-5975 www.rrcontracting.net

Railworks

913-888-4091 www.railworks.com

Volkmann Railroad Builders, Inc.

262-252-3377 www.volkmannrr.com

Tanks

Caldwell Tanks

502-964-3361 www.caldwelltanks.com

Eagle Tanks, Inc.

888-678-0698 www.eagletanks.com

WINBCO Tank Company

641-683-1855 www.winbco.com

Consulting

Business Plans

ICM, Inc.

316-796-0900 www.icminc.com

Environmental

ICM, Inc.


Seneca Companies


Feasibility Studies

Harris Group Inc.

206-494-9422 www.harrisgroup.com

Groundwater Services

Leggette, Brashears & Graham, Inc.

651-490-1405 www.lbgweb.com

Personnel Recruiting

SearchPath of Chicago

815-261-4403 www.searchpath.com/chicago

Plant Optimization

Harris Group Inc.


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EPM MARKETPLACE

Terratec Biofuels of Solutia

800-742-1476 www.TerratecBiofuels.com

Project Development

Ethanol Productions


Harris Group Inc.


Public Relations

Lanser Public Affairs, LLC

262-797-7876 www.lanserpublicaffairs.com

Quality Assurance

Eurofins Scientific, Inc.

551-580-9140 www.eurofinsus.com

Education

Iowa Lakes Community College

800-242-5108 www.iowalakes.edu

Employment

Recruiting

Hobbs & Towne

610-783-4600x108 www.hobbstowne.com

SearchPath of Chicago

815-261-4403 www.searchpath.com/chicago

Engineering

Civil

Antioch International, Inc.

402-289-2217 www.antioch-intl.com

Control Systems

Bachelor Controls

785-284-3482 www.bachelorcontrols.com

Design/Build



Agri-Systems


Delta-T Corporation

757-941-0188 www.deltatcorp.com

Ethanol Productions


GS CleanTech Corp.

678-566-3588 www.gs-cleantech.com

ICM, Inc.


Process Design

Agri-Systems


ChemSim

781-248-5057 www.chemsim.com

Process Engineering Associates, LLC

865-220-8722 www.processengr.com

Vogelbusch USA, Inc.

713-461-7374 www.vogelbusch.com

Equipment & Services

Air Pollution/Odor Control

ICM, Inc.


Blowers & Fans

New York Blower Company

800-208-7918 www.nyb.com

Robinson Industries, Inc.

724-452-6121 www.robinsonfans.com

Boiler System

Factory Sales and Engineering, Inc.

985-867-9150 www.fsela.com

Grading, sampling, mycotoxins, proximates, residues, GMOs.QA / QC Consulting: HACCP, GMPs, SOPs, NIR calibrationCo-products: Quality assurance testing; Lot certification; Export assistance

[email protected]

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EPM MARKETPLACE

Catwalks

Lean Technologies LLC

701-352-9620 www.leantechnologiesllc.com

Centrifuge Repair

Nosnhoj Services Inc.

317-887-6436 www.nosnhojinc.com

Computer Software


204-989-4330 www.encorebusiness.com

Integrated Business Solutions

888-697-3060 www.ibsolutions-llc.com

John Deere Agri Services

770-238-5100 www.johndeereagriservices.com

dbc SMARTsoftware, Inc.

770-427-7633 www.dbcsmartsoftware.com

Control Systems

Automation Alliance

205-271-9743 www.automationalliance.net

FeedForward, Inc.

770-426-4422 www.feedforward.com

Revere Control Systems

800-536-2525 www.reverecontrol.com

Control Systems—Distributed

Conveyors—Enclosed

Grisley Components, Inc.

303-756-6474 www.grisley.com

Conveyors—Pneumatic

Blower Engineering

800-388-1339 www.blowerengineering.com

Dryers—Fluid Bed

Aeroglide Corporation

919-851-2000 www.aeroglide.com

Dryers—Other

Davenport Dryer, LLC

309-786-1500 www.davenportdryer.com

Dryers—Rotary Drum

Aeroglide Corporation

919-851-2000 www.aeroglide.com

ICM, Inc.


Emission Monitoring Systems

MonitorTech Corp.

866-682-6771 www.monitortechgrp.com

Emissions Testing & Reduction

Lantec Products, Inc.

617-265-2171 www.lantecp.com

Fermentors

WINBCO Tank Company


Filters

Larox

301-543-1200 www.larox.com/cpi

Filtration Equipment

Fluid Engineering

814-453-5014 www.fluideng.com

Fractionation—Corn

Buhler Inc.

763-847-9900 www.buhlergroup.com/us

Sturtevant Inc.

781-829-6501 www.sturtevantinc.com

Gas Detectors

UE Systems, Inc.

914-592-1220 www.uesystems.com

Gaskets

Allegheny Coupling Company

814-723-8150 www.alleghenycoupling.com

Grain Handling & Storage

McC, Inc.

763-477-4774 www.mccormickconstruction.com

Sukup Manufacturing Co.

641-892-4222 www.sukup.com

Instrumentation

Instrument Associates

708-597-9880 www.instrumentassociates.com

Shimadzu Scientific Instruments

800-477-1227 www.ssi.shimadzu.com

Jet Cookers

ProSonix Corporation

800-849-1130, x. 801 www.pro-sonix.com

Laboratory-Supplies

Midland Scientific, Inc.

800-642-5263 www.midlandsci.com

Laboratory—Testing Services

Eurofins GeneScan, Inc.

504-297-4330 www.gmotesting.com

Midwest Laboratories

402-334-7770 www.midwestlabs.com

SGS North America, Inc.

281-478-8234 www.sgs.com/alternativefuels

Trilogy Analytical Laboratory

636-239-1521 www.trilogylab.com

Loading Equipment

SafeRack

866-761-7225 www.saferack.com

SafeRack

866-761-7225 www.saferack.com

Continuous Emissions Monitoring SystemsEasiest installation, operation and maintenance

Meet or exceeds EPA requirementsNOx, O2, CO, SO2 and others

Turnkey systems for under $100,000.00P.O. Box 9271, Columbus, Oh 43209



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Maintenance Software

Mapcon Technologies, Inc.

800-922-4336 www.mapcon.com

Mills-Hammer

CBT Wear Parts, Inc.

888-228-3625 www.cbtwearparts.com

Prater-Sterling

630-679-3254 www.prater-sterling.com

CPM/Roskamp Champion

800-366-2563 www.cpmroskamp.com

Millwright

Agri-Systems


Molecular Sieves

Vaperma, Inc.

418-839-6989 www.vaperma.com

Motors

Trico TCWind, Incorporated

320-693-6200 www.tricotcwind.com

Pipe

American Stainless & Supply

800-845-5511 www.americanstainless.com

Robert-James Sales, Inc.

800-666-0088 www.rjsales.com

Pipe-Fittings



St. Louis Pipe & Supply

800-737-7473 www.stlpipesupply.com

Pipe-Flanges



Pressure Vessels

WINBCO Tank Company


Process Control

Harris Group Inc.


Pumps

Yamada America, Inc.

800-990-7867 www.yamadapump.com

RTO Media



Safety

SimplexGrinnell

800-746-7539 www.simplexgrinnell.com

Sensors

Electro Sensors

800-328-6170 www.electro-sensors.com

Separation Equipment

Fluid Engineering


Puritan Magnetics, Inc.

248-628-3808 www.puritanmagnetics.com

Steel Suppliers

Chapel Steel


Outokumpu Stainless

847-517-4050 www.outokumpu.com

Storage—DDGS

Laidig Systems, Inc.

574-256-0204 www.laidig.com

Tanks



Brown-Minneapolis Tank

281-252-9809 www.bmt-tank.com

Federal Equipment Company

800-652-2466 www.fedequip.com

Paragon Trailer Sales

800-471-8769 www.paragontrailer.com

WINBCO Tank Company


Thermal Oxidizers

ICM, Inc.


Pro-Environmental, Inc.

909-989-3010 www.pro-env.com


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PROVENRELIABILITYfor VOC, CO & PM

ABATEMENT

EISENMANN CorporationCrystal Lake, Illinois


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Used Equipment

VOC Scrubbers



Valves

Central States Group

800-318-2747 www.centralstatesgroup.com

Check-All Valve Mfg. Co.

515-224-2301 www.checkall.com

Metso Automation

508-852-0215 www.metsoethanol.com

Wastewater Treatment Services

Biothane Corporation

856-541-3500x501 www.biothane.com

Water Treatment

Fluid Engineering


Siemens Water Technologies

800-525-0658 www.siemens.com/water

Finance

Accounting

Christianson & Associates PLLP

320-235-5937 www.christiansoncpa.com

Kennedy and Coe, LLC

800-303-3241 www.kcoe.com

Appraisals

Federal Appraisal & Consulting, LLC.

908-823-0607 www.federalappraisal.com

Natwick Associates Appraisal Services

800-279-4757 www.natwick.com

Due Diligence

Harris Group Inc.


Equity Procurement

Greenman Funding


Insurance

Chubb Insurance

312-454-4250 chubb.com

ERI Solutions, Inc.

316-927-4294 erisolutions.com

Lender Representatives

Agri-Energy Funding Solutions

402-895-5067 www.agri-energyfs.com

Greenman Funding


Risk Management

R.J. O’Brien

800-621-0757 www.rjobrien.com

R.J. O’Brien

800-621-0757 www.rjobrien.com

Software—Accounting


204-989-4330 www.encorebusiness.com

Legal Services

Attorneys

BrownWinick Law Firm

515-242-2400 www.biofuellawyers.com

Dorsey & Whitney LLP

612-343-8275 www.dorsey.com

Faegre & Benson, LLP

612-766-6930 www.faegre.com

Marketing

Distillers Grains

ConAgra Trade Group

402-595-4125 www.conagratradegroup.com

Hawkeye Gold, LLC

515-663-6429 www.hawkgold.com

Fuel Ethanol

ConAgra Trade Group

402-595-4125 www.conagratradegroup.com

Noble Americas Corporation

626-585-1705 www.thisisnoble.com

Provista Renewable Fuels Marketing

651-355-8519 www.provistafuels.com

Transportation

Heavy Highway Transport

Landstar Carrier Group

920-487-3877 www.landstar.com

Rail

Ameritrack RailRoad Contractors, Inc.

765-659-2111 www.ameritrackrailroad.com

Blacklands Railroad

903-439-0738 www.blacklandsrailroad.com

Rail Consulting

Railcar Moving

Heyl & Patterson Inc.

412-788-9810 www.heylpatterson.com


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Railcar Parts

Salco Products, Inc.

630-783-2570 www.salcoproducts.com

Utilities

Natural Gas

Utility

Integrys Energy Services

608-235-2547 www.integrysenergy.com

RAILCAR MOVING

P 412-788-9810 F 412-788-9822 E [email protected]

The CUB™ is an electromechanicalmachine designed to move single

railcars or groups of cars. Some advantages of the CUB™ are:

•Safety of Personnel•One Person Operation•Little Maintenance Requirements•Low Investment/Operating Costs

Ask about our complete line of Railcar Moving Devices

www.heylpatterson.com

124 W. Broadway, Suite 300Madison, Wisconsin 53716www.integrysenergy.com

Contact Mark Rundle [email protected]

or (608) 222-5170.


EPM MARKETPLACE

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EXPANDING?UPGRADING?

Keep Your Plant Runningwith our In-Stock Stainless PVF

Robert-James Sales—the leading distributor of in-stock stainless pipe, fittings, valves and flanges—got yournew plant up and running when it was built. Now look to us to service all your continuing MRO requirements.Over 80% of all orders are shipped the same day from our nine regional warehouses. We also ship the largersize products up to 54” in diameter demanded by the biofuel processing industry today.

Buffalo, NY 800-666-0088Cleveland, OH 800-777-0820Cincinnati, OH 800-777-2260Chicago, IL 800-777-2008Indianapolis, IN 800-777-0510Minneapolis, MN 800-777-1355South Plainfield, NJ 800-777-1858Raleigh, NC 866-493-8834Tavernier, FL 305-852-1694www.rjsales.com

Free Product CDContact the Robert-James Sales locationnearest you and ask for a freecopy of our comprehensive,up-to-date CD. It outlines our stainless product lineincluding reference charts,graphs and tables to help you calculate what your processing plant needs.

Stocking

a full r

ange of

2205 Duplex in 1/2" to 24"

poetenergy.com See for yourself. Visit www.wecanmakehistory.com and let’s begin.

Documents

March 2008 Ethanol Producer Magazine