Domestic Fuel

Since it was the biggest gathering of the year for corn and soybean growers, it’s only natural that Commodity Classic was also a good place to talk about the state of the ethanol and biodiesel industries, especially when you consider the two grains are still the biggest feedstocks for the biofuels.

In this edition, we listen in on the conversation about ethanol and biodiesel at Commodity Classic with Secretary of Agriculture Tom Vilsack; Brian Jennings, the Executive Director of the American Coalition for Ethanol; Robert White with the Renewable Fuels Association; National Corn Growers Association president Darrin Ihnen; and American Soybean Association president Rob Joslin.

They talk about the E15 blend wall, the state of biofuels infrastructure, and the prospect of getting the federal $1-a-gallon biodiesel tax incentive passed through Congress.

It’s an interesting conversation, and you can hear it below.

You can also subscribe to the DomesticFuel Cast here.

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Each day, cellulosic gets closer to becoming commercially viable in the marketplace. Two weeks ago, a major hurdle was overcome with the announcement that Novozymes’ enzyme Cellic® CTec2, used for cellulosic ethanol production with feedstocks such as corn stover and corn cobs, is now 50 cents per gallon. I had the opportunity to learn more about this breakthrough when I sat down with Thomas Videbaek, Executive President of Novozymes BioBusiness, at Commodity Classic.

Videbaek explained that Cellic is the first commercial product for cellulosic ethanol. With Cellic, you’ll be able to produce cellulosic ethanol using an enzyme cost of about 50 cents per gallon. “With this, we think that the enzyme part of producing cellulosic ethanol has been cracked,” said Videbaek. “Now we need to get out and starting producing it and we’re really, really excited about that.”

Novozymes is a partner with POET’s Project Liberty which will produce ethanol from corn cobs. I asked Videbaek for an update and he believes that with the enzyme breakthrough they will be able to produce cellulosic ethanol for around $2.35 per gallon. However, the expectation is that once Project Liberty is up and running, the cost will be reduced to around $1.90 per gallon. This will be monumental in that it will break the $2.00 per gallon barrier challenge of producing cellulosic ethanol.

This was a massive project for Novozymes who has been working on it for more than five years. “It’s the biggest project we’ve ever carried out,” said Videbaek. There were more than 150 people working on it in the past year alone.

In addition to corn stover and cobs as a feedstock, they are also working with wheat in Europe and have an operational pilot plant in Denmark. In addition, they are working with Brazilian ethanol producers to develop an enzyme to break down the bagasse.

You can learn more about Cellic by listening to my full interview with Thomas below.

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“Some people believe that corn ethanol is an old technology. We believe just the opposite,” said John Caupert, the Director for the National Corn-to-Ethanol Research Center (NCERC) during an interview with me at Commodity Classic. “We feel the corn ethanol industry is still in its infancy and through technological advancements, there’s much more to learn and prove in corn ethanol production.”

In the last two-to-three years, Caupert noted that there has been a major emphasis on technological improvements such as corn fractionation, and aneorbic digestion, things that would incorporate capital upgrades or capital investments in the ethanol plant. In terms of corn ethanol production, a lot of focus has been dedicated to advancements in fermentation ingredients such as enzymes and various strains of yeast.

The NCERC has also played a role in the debate over indirect land use. Caupert explained that they have done a lot of research that focuses on the value of how co-products improve the greenhouse gas footprint of fuel ethanol production.

“I think more often than not, we forget about the fact a corn ethanol plant in addition to producing fuel ethanol, also produces this high value livestock feed called distillers grains,” said Caupert.

They will continue to look at this data and make recommendation about how the co-products should add value to corn ethanol in the indirect land use arena.

Listen below to hear my entire interview with John.

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Ethanol issues were in the spotlight when National Corn Growers Association president Darrin Ihnen of South Dakota took the stage at the Commodity Classic general session on Friday.

Ihnen talked about the importance of using higher blends of ethanol in the fuel supply. “The EPA is studying the issue and everything they’ve indicated to this date looks very promising,” said Ihnen. “They said it will probably be late summer now and we are very hopeful it will come then.” He says that is a top priority for corn growers and “this is a game changer” that will give them an opportunity to use more corn.

Ihnen also talked about the climate change issue and other important issues during an interview with session moderator Mark Mayfield which is available in the player below.

Commodity Classic Photo Album

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Ethanol related issues top the list of concerns for members of the National Corn Growers Association (NCGA) preparing for their annual policy meeting ti be held this week in Anaheim as part of the 2010 Commodity Classic.

NCGA president Darrin Ihnen, a corn grower from South Dakota, says among those concerns are the use of indirect land use change in making regulations for low carbon fuels and increasing the allowable blend level for ethanol in gasoline to 15 percent. “The other thing that is looming is tax policy when it comes to the ethanol industry – VEET (volumetric ethanol excise tax credit) and the import tariff,” Ihnen said on a visit last week to the Missouri Corn Growers Association annual meeting. “Those will definitely bring a lot of discussion in our resolution sessions and our policy decision making.”

Corn growers are also concerned about the threat posed to animal agriculture in individual states by activist groups, which affects them on two levels. “Number one, the livestock industry is our largest user of corn,” Ihnen says. “The second thing is that we supply a lot of corn to the ethanol industry, which produces DDGs, which comes back to the livestock industry.”

Ihnen sees the animal activist threat as a unifying issue for the agriculture industry, which is sometimes divided when it comes to ethanol. “We can’t be separated when it comes to agriculture,” he said. “We need to work together.”

Listen to or download my interview with Darrin Ihnen here.

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The debate rages on regarding ethanol’s greenhouse gas emission reductions (GHGs) as compared to conventional gasoline. Today, Growth Energy came out against two Cornell University professors’ recent paper that criticizes the Environmental Protection Agency’s calculations that grain ethanol boasts a lower GHG than gas.

Harry de Gorter and David R. Just, professors of Applied Economics and Management, will have their findings published in the inaugural March issue of the peer-reviewed journal, Applied Economics Perspectives and Policy, Vol. 32, Issue 1, Oxford University Press. The article, “The Social Costs and Benefits of Biofuels: The Intersection of Environmental, Energy, and Agricultural Policy,” criticizes both corn-based ethanol’s GHG reductions as well as ethanol subsidies and mandates.

Tom Buis, Growth Energy’s CEO stated, “What it appears these two professors at Cornell would have us do is maintain the status quo – keep our addiction to oil, no matter what the cost to our economy in lost jobs and money we send overseas, no matter what the cost to our environment, no matter what the cost to our national security.”

“The Cornell paper is pretzel logic at its worst. The truth is that when we fuel up with domestic ethanol in the U.S., we need less gasoline refined from carbon-heavy oil. And the science on this is clear: a peer-reviewed study published by Yale University found that grain ethanol is 59 percent cleaner than gasoline – with cellulosic ethanol 86 percent cleaner than gasoline,” continued Buis.

Buis concluded, “Academic studies, government agencies and independent papers have concluded that innovation and new technology in the ethanol industry is bringing us ever closer to a high-tech domestic fuel that can contribute significantly to cleaning our skies, while creating jobs and strengthening our national security.”

GreenShift Corporation has simultaneously announced that it has filed for its third patent on its corn-oil extraction technologies while at the same time, commencing legal action against Big River Resources Galva, Big River Resources West Burlington and Cardinal Ethanol for infringing on GreenShift’s U.S. patent covering its corn oil extraction technology.

GreenShift's Corn Oil Extraction Technology

The complaint against Big River alleges that they infringed upon GreenShift’s U.S. Patent No. 7,601,858, titled “Method of Processing Ethanol Byproducts and Related Subsystems” (the “858 Patent”). The patent covers processes for recovering corn oil by evaporating and mechanically processing thin stillage, a precursor to the distillers grain co-product of corn ethanol production (“DGS”). Greenshift is claiming that Big River has caused a loss of income and irreparable harm.

Kevin Kreisler, chairman and CEO of GreenShift said in a company statement regarding the lawsuits, “There was no market for corn oil extraction from dry mill ethanol plants before we invented our now-patented technology in 2004. We estimate that more than about 20 percent of the ethanol industry has begun to use our technology without a license. While we are eager to earn the business of each last producer, we expect to have the opportunity to do so by helping each to realize additional value.”

Kreisler continued, “We innovated corn oil extraction technology, created the corn oil extraction market, and subsidized disruptive value creation for the U.S. corn ethanol industry; we have earned our patents and we deserve the full measure of the first mover competitive advantage. This, and any other, continued infringement is causing GreenShift irreparable and immediate harm and it must stop.”

However, ICM has come to the defense of Cardinal Ethanol, as the suit is against ICM equipment. ICM built the ethanol plant that went online in November of 2008.

“ICM will defend its customers as a companion matter to ICM’s own litigation against GS CleanTech and its affiliate, GreenShift Corporation, which we filed in Kansas in October 2009,” said Chris Mitchell, ICM’s vice president of marketing. “ICM believes that GS CleanTech’s alleged patent claims will be proved to be invalid. In the Kansas litigation, we have asserted that GS CleanTech/GreenShift misrepresented the liability of ICM’s customers for operating the ICM system, and that various actions of GS CleanTech/GreenShift constitute unfair competition and wrongful interference with ICM’s existing and prospective business and contractual relationships. Our customers continue to operate their oil recovery systems acquired from ICM, and we continue to see strong interest from prospective customers for further orders for ICM’s equipment.”

And patents they seek.
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The futures hold a new climate of opportunity for corn, ethanol and livestock producers.

CME Group this week announced the launch of Distillers’ Dried Grain agricultural commodity futures contracts, scheduled to begin trading April 26. Information about the new contract was released during the Renewable Fuels Association’s National Ethanol Conference in Orlando where CME Group was a sponsor.

Distillers’ Dried Grains, a byproduct of corn-produced ethanol, is used for animal feed, including livestock and dairy cows. The electronically traded and physically delivered futures contracts can be used by livestock and ethanol producers, commercial corn interests and others to lock in the price of feed or to hedge their ethanol refining margin in combination with corn, natural gas and ethanol futures.

The contracts will be listed with the Chicago Board of Trade and more information is available on the CME Group commodities website.

The U.S. Grains Council is holding its 7th Annual International Marketing Conference and 50th Annual Membership Meeting in Mexico. One of the main purposes of this meeting is for the organization to create a new working plan for the development of U.S. grain exports and a bright spot for corn growers has been the growth in the export of DDGS.

I’m attending the meeting and had a chance to visit with National Corn Growers Association CEO, Rick Tolman, seen here addressing one of the conference meetings. NCGA is a founding member of the U.S. Grains Council.

Rick, who worked for USGC for many years, says that NCGA considers the Grains Council their international trade partner. The two organizations have a very strong working relationship. He says one of the things he’s really happy to hear discussed here at this meeting is how well exports of DDGS have been due to the efforts of the Grains Council. That’s good news for corn growers for whom the production of ethanol is so important right now. He says that the Grains Council is looking at other value added products they can promote for export too.

Since Rick is here instead of attending the National Ethanol Conference which gets underway today I asked him what’s going on in the ethanol industry from a corn growers perspective. He says there is a whole list of challenges and opportunities for ethanol. He says that with the final rule making on the RFS-2 it has improved the regulations but also created some challenges. It has given more optimism for growth of the business he says but the EPA is still giving a big penalty to ethanol for indirect land use change. He says it’s “tying an anvil around the ankle of the industry and trying to move forward and compete.” NCGA will continue to work with EPA to remove the unfair part of the new rules.

By the way, Cindy is attending the National Ethanol Conference so you’ll be seeing her coverage here on Domestic Fuel once the meeting gets going. The opening general session will be tomorrow morning.

You can listen to my interview with Rick here:

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The second ethanol blender pump has opened in Missouri. The Temp Stop is located at 100 SE Todd George Road in Lee’s Summit, Missouri. The station will offer E20, E30, E85 and regular gasoline.

“With the addition of these blender pumps, consumers can seize the opportunity to utilize a homegrown, renewable fuel,” said Bradley Schad, Missouri Corn associate director of ethanol blends. “Not only does ethanol burn cleaner than gasoline, it helps reduce our dependence on foreign oil and keeps U.S. dollars here at home.”

According to the Missouri Corn Growers Association, the Temp Stop blender pumps are part of a pilot program with Missouri Corn and the Missouri Department of Agriculture Division of Weights and Measures.

“We’re proud to be part of this movement to promote a cleaner environment,” says Terry Green, CEO of Temp Stop in Lee’s Summit. “Together with our fuel supplier, CarterEnergy, we’re making E20, E30 and E85 available to our customers and offering them more choices than ever before when it comes to refueling their vehicles. These blended fuels give them a way to join the ‘green’ movement, too.”

Missouri Corn is currently working with additional retailers to establish more ethanol blending pump facilities in the state.