Biodiesel Giant REG Buying Syntroleum

John Davis

REGSyntIowa-based Renewable Energy Group (REG) is planning on buying the assets of Oklahoma’s Syntroleum Corporation. REG announced it had agreed to acquire all of Syntroleum’s assets, including the company’s pioneering Fischer-Tropsch gas-to-liquids and renewable diesel fuel technologies and the company’s 50 percent share in Dynamic Fuels’ 75-million gallon renewable diesel production facility in Geismar, Louisiana. The deal is worth nearly 3.8 million shares of REG common stock (subject to reduction in the event that the aggregate market value of the REG common stock to be issued would exceed $49 million or if the cash transferred to REG is less than $3.2 million).

“Combining Syntroleum’s renewable and synthetic fuel technologies with REG’s expertise in biodiesel production, sales, marketing and logistics should be a positive outcome for investors in both companies,” said Renewable Energy Group, Inc. President and Chief Executive Officer Daniel J. Oh. “This will help us grow our advanced biofuel business, enhance our intellectual property portfolio, expand our geographic footprint and launch REG into new customer segments.”

“Today’s announcement marks the culmination of our comprehensive process to review Syntroleum’s strategic alternatives to enhance shareholder value,” said Syntroleum President and CEO, Gary Roth. “We are extremely pleased to have found a great partner in REG and to provide our stockholders with the opportunity to participate in a company with significant upside potential. We are confident that REG’s multi-feedstock business model and the combination of our strong management teams will drive increased value for Syntroleum’s stockholders and is the best path forward for Syntroleum.”

Syntroleum has been rumored to be on the sales block since this summer. With the buy, REG, already the Nation’s biggest biodiesel producer, expands its reach beyond its eight active biodiesel refineries in four states with a combined nameplate production capacity of 257 million gallons.

Biodiesel

Obama’s Proposed Biodiesel Cuts Could Cost Dems

John Davis

showsDemocrats looking to make gains on the Republican majority in the U.S. House and hold back any possible GOP takeover in the Senate in the 2014 elections could be hurt by the Obama Administration’s proposal to cut the amount of biodiesel in the Nation’s fuel supply. And that criticism is coming from one of the Democratic Party’s own. This opinion piece in Roll Call from former Mississippi Democratic congressman Ronnie Shows, says the proposal is likely to hurt fellow Democrats in some important states.

The biodiesel announcement was puzzling because the president has stated for years that advanced biofuels, such as biodiesel, are a critical component of this nation’s fuel supply. Throughout his presidency and even on the campaign trail, Obama has made his support of advanced biofuels a hallmark of his administration’s efforts to reduce our dependence on foreign sources of oil…

But despite the president’s recent support of biodiesel, as you read this, the EPA, which determines the number of gallons of biofuels federally required in the nation’s fuel supply, is soliciting comments on a proposal to reduce the amount of biodiesel sold every year in the United States by hundreds of millions of gallons.

Why the Obama administration is doing this to biodiesel is unclear, but I suspect the White House is planning to deny the Keystone XL pipeline — and offer Big Oil a consolation prize by cutting competition from renewable fuels, even advanced renewables such as biodiesel.

Shows goes on to say that the biodiesel proposal really hurts Democrats in key battleground states, such as North Carolina and Iowa. He concludes that the Administration’s lack of decisiveness on biodiesel could play into the hands of Republicans who accuse the White House of being “rudderless.”

Biodiesel, Government, politics, RFS

ICM Signs Canadian Ethanol Plant

Cindy Zimmerman

ICMlogo1Renewable energy technology company ICM of Colwich, Kansas has signed a Letter of Intent with IGPC Ethanol of Ontario, Canada to be the first Canadian adopter of ICM’s Generation 1.5™ technology.

Adoption of the technology will enable IGPC Ethanol to produce corn fiber cellulosic ethanol. “Through our previous collaboration with ICM, we believed it was important to continue down the path of obtaining their critical platform technologies that are necessary for making a sustained impact on agriculture and economic development within our region,” said IGPC Ethanol CEO Jim Grey.

ICM’s Generation 1.5™ Technology introduces a cellulosic ethanol production capability by adding ICM’s Fiber Separation Technology™ (FST™) building block onto IGPC Ethanol’s current ICM Selective Milling Technology ™ (SMT™) platform. Once the FST™ and SMT™ platforms are in place, the Generation 1.5™ technology can be added. Development of ICM’s Generation 1.5™ technology was funded, in part, by a U.S. Department of Energy BioEnergy Technology Office contract that ICM was awarded through the American Recovery and Reinvestment Act of 2009.

advanced biofuels, Cellulosic, Ethanol, Ethanol News, technology

Legislation Would Extend Biofuels Tax Credits

Cindy Zimmerman

rep-petersLegislation introduced last week in the House would extend expiring tax incentives important to the development of next generation biofuels.

Rep. Scott Peters (D-CA) introduced the “Second Generation Biofuels Extension Act of 2013” (H.R. 3758) which would extend for one year the Second Generation Biofuel Producer Credit and the Special Allowance for Second Generation Biofuel Plant Property. Four fellow Democrats are co-sponsors of the bill, which is strongly supported by the biofuels industry.

Renewable Fuels Association (RFA) president and CEO Bob Dinneen commended Peters for taking a stand and fighting for the future of next generation biofuels. “Rep. Peters clearly understands the need to continue this successful program,” said Dinneen. “Investors need certainty and extending the tax credits for second generation biofuels will boost investment and innovation in cellulosic and advanced biofuels.”

This week RFA sent a letter to the leadership of the House Ways and Means committee and the Senate Finance Committee to request that key expiring biofuel tax incentives be extended. In addition to the two credits in the Peters bill, that would also include the Alternative Fuel Vehicle Refueling Property Credit.

advanced biofuels, Ethanol, Ethanol News, Government, RFA

Soybean Board Offers Winter Biodiesel Storage Tips

John Davis

USBlogoAs the latest winter storm bears down on a large part of the country, the United Soybean Board is offering some cold weather tips for biodiesel. This post on Southeast Farm Press says the cold can cause problems for both biodiesel and No. 2 diesel, so there are some things you need to do in the way of tank maintenance.

Many farmers like to use biodiesel blends of 20 percent or greater during the summer months. While not impossible to use higher blends in the winter, it does require a high degree of fuel management and a vigilant tank-maintenance program.

It is highly recommended the average diesel consumer reduce their biodiesel blend to 5 percent during the winter months.

High water concentration in fuel can lead to water-logged fuel filters. When the temperature of the filter gets below 32 degrees, the water freezes and blocks the flow of fuel through the filter.

Paraffin is a naturally occurring component of diesel fuel. When the temperature of fuel is at or below its cloud point, paraffin material can collect on the bottom of the tank. Wax anti-settling agent (WASA) additives can be used to keep paraffins from collecting at the bottom of the tank where they can cause filter plugging.

USB also recommends that you:

• Check tanks for any water
• Install a dispenser filter to keep keep contaminants from reaching the vehicle tanks
• Use a new dispenser filter, 30 micron or higher to handle the increased viscosity of the fuel
• Check hoses, fill/vapor caps and gaskets for leaks.
• Transition to a lower-percentage biodiesel blend in winter months.
• Use an appropriate additive package and/or use No. 1 diesel to ensure operability.
• Fill your tank after harvest season. Fuel tanks should always be kept as full as possible to reduce fuel degradation from exposure to oxygen.

If you’re still having trouble, you can also call the Diesel Helpline at 800-929-3437.

Biodiesel, Soybeans, USB

Biomass-based Diesel Supply Curves Examined

John Davis

irwinRapid growth in the renewable diesel market has some big implications for biodiesel, especially considering biomass-based diesel supply curves. In the latest of some really well-thought out analyses, University of Illinois Ag Marketing expert Scott Irwin gets into the issue of supply responsiveness from biodiesel to the broader category of biomass-based diesel. He starts out explaining the difference between biodiesel, renewable diesel and biomass-based diesel:

Biodiesel is a transportation fuel made from animal fats and vegetable oils by a process known as “transesterification.” Renewable diesel is also a transportation fuel made primarily from animal fats and vegetable oils, but by entirely different production processes compared to biodiesel. One process is known as “hydrodeoxygenation,” whereby heat, pressure, and a catalyst are used to remove oxygen from the biomass feedstock. Biomass-based diesel is generally defined as any form of biodiesel or renewable diesel.

Setting up those definitions, Irwin explains how to estimate the supply curve for both biodiesel and total biomass-based diesel:
biodieselsupplycurves
The estimated supply curves in Figure 3 are basically the same up to about one billion gallons of annual production but then diverge sharply for volumes above one billion gallons. For example, the estimates imply that a price of $6.80 per gallon is required in order for biodiesel production to reach 2 billion gallons, while a price of only $5.06 per gallon is required for total biomass-based diesel to reach 2 billion gallons. If costs and revenues per unit are approximately the same for biodiesel and renewable diesel, then one would expect the two supply curves to exhibit more of a parallel relationship because biodiesel is the largest component of total biomass-based diesel. In that case, the total biomass-based diesel supply curve would simply represent the horizontal summation at a given price of the biodiesel supply curve and the supply curves for the other three components of the total. The estimation results seem to imply that there are greater economies of scale to renewable diesel production. While this could be the case, an alternative explanation is that new renewable diesel production capacity came on line in 2013 and this skewed the results given the short sample period used to estimate the supply curves (10 months). Unfortunately, we may have to wait for another year in which the tax credit is set to expire in order to expand the sample in a meaningful way.

Irwin concludes that information shows that both domestic and foreign renewable diesel grew rapidly in the past year, and biomass-based diesel production was responsive to market prices, a fact that hasn’t grabbed a lot of attention. He goes on to say that since Renewable Fuel Standard compliance can be met with biodiesel or renewable diesel, this supply curve for total biomass-based diesel plays a key role in setting the market price of RINs.

Biodiesel

Analyst Offers Sobering Ethanol Outlook

Cindy Zimmerman

asta-css-basseAgResource Company president Dan Basse looked at the year in review for grain markets and gave his outlook for the future at the American Seed Trade Association (ASTA) CSS 2013 and Seed Expo last week in Chicago. That included a pretty sobering outlook for corn and ethanol.

First off, Basse said he expects North America to be “energy self-sufficient by 2020” but that is largely due to fracking to reach new deposits of crude oil and natural gas rather than biofuels. “Ethanol, which was deemed to be the savior from Mideast oil, is no longer going to have that spot at the table,” he said, adding that the industry has “reached its zenith.”

Thanks to flat-lining ethanol demand, Basse believes the good times may have come to an end for corn. “A year ago we had corn prices above $7 with flirtations to eight,” he said. “We’re now looking at Chicago markets with corn prices near four. We think the best we can do at least for the next 6-9 months is maybe getting back to something like four and a half.” Basse points out that the United States only needs to produce a corn crop of 13 billion bushels to meet demand. “That’s the big concern for the US farmer down the road,” he said.

Asked about the EPA proposal to lower the 2014 volume obligations for ethanol under the RFS, Basse said he believes the plan has a 70% chance of being approved. “If we don’t raise blend rates and get Big Oil and get Detroit behind us, there’s really no growth in biofuels,” he said. “I want everybody in agriculture to understand that the political wills are not there as they were a few years ago and unfortunately now with shale gas and the new blessings of a different kind of energy, we’re just talking to ourselves in terms of the marketing for biofuels going forward.”

Listen to my interview for the condensed version and his 30 minute presentation for more details:
Interview with Dan Basse, AgResource ASTA CSS presentation by Dan Basse, AgResource

2013 ASTA CSS & Seed Expo Photo Album

Audio, biofuels, corn, Ethanol, Ethanol News

Marshall County Wind Farm Begins Construction

Joanna Schroeder

Laurel MorningMarshall Wind Energy LLC, a wholly-owned subsidiary of RPM Access LLC, has begun construction of its 74 MW wind farm in Marshall County near Beattie, Kansas. The company executed a high voltage transmission interconnection agreement with Westar Energy and Southwest Power Pool in mid-2011. Under the terms of this arrangement, the two companies are coordinating their efforts to pursue all design, engineering and construction activities related to the Westar 115kV Marshall County Wind Farm Switching Station and the Marshall Energy Rock Substation. Energization is scheduled for August 2014 with wind farm commercial operations expected by year end 2014.

A contract has also been signed with Mortenson Construction to provide balance-of-plant design and construction management activities. Marshall Wind has established a local business office in Beattie. An on-site construction management office and equipment have been mobilized to support construction of access roads to wind turbine locations along with substation site grading and foundation work activities that are now underway.

Renewable energy generated by the project will be purchased by multiple entities via long-term contracts. In September, Marshall Wind signed a 20-year power purchase agreement (PPA) for 20 MW with the Missouri Joint Municipal Electric Utility Commission (MJMEUC). The project will qualify for current renewable production tax credits (PTCs). Located within the Southwest Power Pool market region, Marshall Wind in 2014 is ideally positioned to offer for sale under long-term contract(s) the remaining available capacity.

The project is anticipated to create more than 150 jobs during the construction phase and approximately four permanent positions. The wind farm will also benefit the community by strengthening the local economy and providing a steady flow of revenue to Marshall County.

Alternative energy, Electricity, Wind

Tips from Patriot’s Dave Gerhart on Improving Efficiency

Joanna Schroeder

When you want to learn about ethanol, you go to an industry veteran and I did just that when I spoke with Patriot Renewable Fuels Plant Manager Dave Gerhart who began his career in the early 80s at is what is now known as Nebraska-based Chief Ethanol Fuels. At the time, they were the largest dry mill ethanol plant in the United States. Back then corn was less than $2 a bushel so the ethanol plant was something the local community supported to help the local farmer.

Patriot Plant Manager Dave GerhartFrom there, Gerhart changed gears slightly and joined the ICM team where he worked with them on their first 5 design and build ethanol plants. This was in the early 2000s before the major industry boom. Next he began the plant manager at Kaapa Ethanol and today he has brought his 30 years of experience to Patriot to help them grow.

One of Gerhart’s areas of expertise is his ability to identify things in the plant that can be modified to help improve efficiency – a key factor in increasing profitability. I asked him for those that are newbies to the industry, some areas plant managers can’t look at to increase efficiency.

“One you would look at your energy balance and see where you could actually put variable frequency drives rather than an automatic control valve. So that would reduce electricity,” explained Gerhart. “If you can reduce water usage, this helps you out in the energy balance as well. There is different trains of thoughts on fermentation and what you can do there. Sometimes people take the path of least resistance and in doing so they short circuit the energy efficiency they can actually get out of there plant.”

I asked Gerhart what he would really like consumers to know about biofuels. “Hopefully they all realize that ethanol is probably the cleanest thing they can put into your gas tank,” said Gerhart. “Gasoline is not. Alcohol is very safe. It’s homegrown. It’s renewable. It’s not something that we have to go foreign to get.”

I also asked him why consumers needed to care about the Renewable Fuel Standard (RFs). They need to care because ethanol has such an impact on middle America,” said Gerhart. “We’ve done so much to build up the farm incomes and the trucking industry and the fuel distribution. So every plant no matter where it’s at has an economic impact, at a minimum of 70 miles around it.”

Gerhart added, “This needs to stay.”

Listen to my interview with Dave Gerhart here: Tips from Patriot's Dave Gerhart on Improving Efficiency

Check out the Patriot Renewable Fuels photo album.

Audio, biofuels, corn, Ethanol, Patriot Renewable Fuels, RFS

Abundant Corn Harvest Increases Ethanol Production

Joanna Schroeder

According to a recent Today in Energy published by the U.S. Energy Information Administration (EIA), expectations of a record corn harvest in 2013 have helped lower corn prices and improve ethanol production margins. This has also increased ethanol production and supply.

It was just last year that the 2012 corn harvest faced some of the most severe and far-reaching drought since the 1950s. Final productions for the year were 10.8 billion bushel. This fall however, brought a 30 percent increase over 2012, even those much of the U.S. still experienced drought. Many key growing areas, despite the dry weather, had ample rains at just the right time.

Ave Monthly Corn Prices and Margins for EthanolAs the EIA explains the ethanol margin is the difference between the market price of ethanol and its cost of production adjusted by the value of co-products. It is also a measure of the profitability of producing ethanol. Between October 2012 and January 2013, the ethanol margin for producers was close to zero. The recent reduction in corn prices had a major impact on the profitability of ethanol production, because purchased corn is by far the largest cost incurred by ethanol producers. On average, one bushel of corn can be used to produce 2.8 gallons of ethanol.

Between January and November 2013, corn prices fell from about $7.50 per bushel to below $4.50 per bushel. A $3 reduction in the price of a bushel of corn translates into a roughly $1.08 reduction in the cost of ethanol production. While ethanol prices have also declined, ethanol producer margins have risen above $0.50 per gallon in recent months.

As a result, reports EIA, improved margins have incentivized greater levels of ethanol production, with output recovering to pre-drought levels. At the same time, lower prices have made ethanol more economically attractive for refinery blending, and output of ethanol-blended gasoline has risen. Net use of ethanol by refiners and blenders reached an all-time high of 884,000 barrels per day in August 2013.

biofuels, corn, Ethanol