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Carbon Dioxide – Regions of Greatest Strategic Value, Production and Purity Requirements; Ethanol Industry Sourcing for the Merchant CO2 Trade, plus Second Generation Ethanol Developments

July 18, 2008

CO2 moleculesFrom Biofuels Digest correspondent Sam A. Rushing

The North American CO2 market is at least an estimated 10 million short tons per year in consumption, of which the US alone is about 80% of this volume, the balance consumed in Canada. Some 70% of this is in the food and beverage markets and the balance in the industrial sector; none of which is including enhanced oil recovery (EOR). Initiatives for application in many other sectors and industries are underway, some environmentally friendly v. other agents; and this will further the industrial sector as time progresses.

This article reviews the most valuable strategically located opportunities for new developments of CO2 for the merchant sector; plus a review of production issues and purity requirements for various segments of industry. The ethanol industry is undergoing rapid change globally, and more specific to the U.S. the ethanol industry sourcing CO2 as well as the longer term second generation ethanol developments will be reviewed. I am defining the first generation ethanol as using feedstock from corn and wheat, primarily.

The second generation ethanol projects would be the so-called cellulose projects, using a variety of enzymes, syngas processes; or hybrid methods for proposed viable fuel grade ethanol.  These days we notice rather strong views on the ethanol front concerning a wide range of issues; and this is discussed as well.

Regional CO2 Opportunities with the Greatest Potential Need

To start, numerous ethanol projects have been slated for the US Northeast, which historically has been difficult to supply with CO2 due to a lack of feedstock from traditional sources (usually refinery (reformer), ammonia, and certain chemical plants TiO2, and Ethylene oxide).

No such projects have been readily available or affordable for the merchant sector for years hence this region has been an import market, from places such as Ohio, Virginia, and New Brunswick. Up to half a dozen ethanol and potential CO2 projects were discussed in the New York market, however as of today, Linde’s plant will be the first tangible ethanol venture for the merchant sector. The project started by BOC Gases now Linde, is located in Fulton, NY will come to fruition in the near term, a 600 TPD facility, sourced from ethanol by-product. This was at the site of an old Miller’s Brewery, now the Northeast Biofuels, LLC facility.

Other potential New York ethanol sourced CO2 projects may come to fruition in the relative near term as well; and of a relatively recent event, Western New York Energy has been a source for CO2 from this corn based 50 million GPY ethanol plant. Next from a regional highly desirable perspective, the Middle Atlantic could well afford strong sourcing from ethanol off-gas, particularly with greater scale, as the 100MM gallon per year range. Numerous efforts have been attempted to fulfill gaps such as this. The Florida market is entirely a CO2 import zone as well, and attempts to develop ethanol projects have not been successful to date. So, as we travel across the U.S.; we go through the Midwest and Southeast; both regions are generally well supplied, and today are not good targets for sourcing opportunities. The low prices offered in the Midwest for merchant CO2 have profit margins which are difficult to reconcile.

In terms of the Southeast, I mentioned this is generally well supplied; however, the Arkansas market has no true strategically located CO2, which is a poultry processing region, with well over 1,000 tons per day in usage. I have personally been contacted by developers in Arkansas with ethanol plans, which never emerged. Some of this greater Arkansas, Mississippi and Alabama regional market has traditionally been supplied by the lower cost Jackson Dome natural sourcing, as underground wells.

Since oil and gas have hit record highs, and since the reserves are primarily owned and their application driven by an oil company, as the merchant contracts expire with most of the CO2 companies, the CO2 will be directed to oilfields for long term enhanced oil recovery (EOR) projects; however one or two exceptions to this EOR directive for CO2 will remain due to a ‘grandfather arrangement’. The expiration of the supply arrangement to the gas companies will take place over the next 10 years. The disappearance of most of these reserves might then lead to a further regional need for new sources from ethanol. The Texas market lost sourcing from anhydrous ammonia, and some of this gap will be filled with new sourcing in the Gulf Coast region from a reformer source; however, additional CO2 sourcing may be an opportunity for the general Texas market.

As we travel to the US Rockies region, there may be plans for new merchant CO2 from ethanol at this time in Colorado; however the balance of the US Rockies should be well supplied as is. Next, traveling to the US Intermountain region, there may be opportunities within this region as well. The same may exist for the west coast; from the U.S. Northwest to the tip of California.

When addressing these more promising regions for strategic CO2 opportunities for the merchant markets, I see ethanol as the most likely source to fill the gaps. If other sources of traditional by-product of a clean and concentrated nature were available in these regions, then sourcing would have probably already been developed. Furthermore, I do not see many alternate chemical process projects likely to emerge readily in most of these areas, short of ethanol as a source for CO2. With respect to these regions, most of the losses of prior more strategically located CO2 sourcing has been from the production of anhydrous ammonia; stemming from cheap imports and high natural gas prices.

CO2 production and Quality Requirements

The cost of CO2 production has risen primarily due to the increased cost of the hardware, as driven by steel price increases (which can readily be noticed by the large storage vessels, for example), plus the increases in power rates. The two major factors in the cost of merchant CO2 production are amortization and power, running close to $10/ton per factor. The cost of labor, overhead, chemical replacement, maintenance, etc, is further added to this equation.

With respect to quality, the benchmark is the ISBT (International Society of Beverage Technologists) standard, also references to the Compressed Gas Association standards is a further consideration for beverage grade quality. Ultimately, the major beverage producers must certify each plant prior to allowing said CO2 liquid as certified for use in their plants, thus the process of certification is essential if the beverage market is to be served; which has traditionally been about 30% of most developed world markets.

Traditional (First Generation) Ethanol Projects in America

During recent years, hundreds of proposed ethanol projects have been proposed, with a fair number to emerge as true working facilities. Some of the impasse has been permitting problems, ‘not in my back yard’ issues, and of course financing such projects. Even before the mortgage meltdown and capital crisis which we now are living with, these projects were difficult to fund often requiring $40million to $100million for ethanol projects with capacities from 40 million to over 100 million GPY in capacity. Ethanol producers are being squeezed from more than one end today, that being with commodities including the essential corn and wheat for feedstock at record high prices here and the demand for affordable ethanol at a peak globally.

With respect to addressing our nation’s energy demands, and future requirements, plus the ever smaller prospect for significant oil reserves to be discovered, ethanol is a viable means to help bridge this gap, not just to replace MTBE as an oxygenate. Even with logistical difficulties surrounding ethanol entering the gasoline additive or replacement markets, and high grain prices, the industry will continue to expand. Some of this will result in certain ethanol project and company consolidations; however as mandates move forward for MTBE replacement continues, and initiatives move ahead to bridge the gap between the consumer need for energy and the dwindling energy supply alternatives, ethanol is here to stay and grow in production and consumption. Corn, wheat, and grains which alternately can, and have been consumed in food products are at an all time high in terms of demand and commodity pricing; plus this demand is further driven by ethanol plant demands; thus prices escalate and crop growth demands continue to grow.

The scale of ethanol plant capacity has steadily grown over the last few years, and is now found to be at least 50 to 100 million gallons per year in capacity today. New projects with less capacity than this would have much more challenging economics.

Second Generation (Cellulose) Ethanol Projects in America

There has been a significant amount of attention placed in the prospect of producing CO2 from a wide variety of organic matter including MSW, old tires, cellulose based grass, wood and corn stalks, for example. Today, some cellulostic projects are DOE sponsored, on a pilot or demo basis to start. There are vast opinions as to methods for improving upon energy consumed, enzyme utilization, and other technical challenges which must be used to achieve viable ethanol from such materials. This challenge must bring the cost of second generation ethanol closer to that of corn based product, or even below this threshold.

With respect to actual plans for cellulostic ethanol, one firm as an example, Range Fuels, headquartered in Colorado, broke ground in November, 2007, near Soperton, GA. This is said to be the first such plant in the United States to produce ‘commercial quantities’ of ethanol from biomass. Their process is said to be a proprietary two step, thermo chemical process, using heat, high pressures and steam for conversion of biomass into syngas. This syngas then uses a proprietary catalyst for conversion into a fuel grade ethanol. Wood chips appear to be the primary feedstock for this project. Range Fuels was unavailable to comment on this subject.

Other projects which I have been a consultant to, and which are proprietary in name and nature, I cannot mention by company name. These cellulostic projects include enzymatic in nature, or acid based in some cases. Usually DOE grants are partly funding these pilot or demo projects, which are small in scale, usually less than 5MM GPY in size.

Last Words

Ethanol and biofuels in general are here to stay, and will continue to grow.  One good source of planned new ethanol ventures is the Ethanol Producer Magazine, which in their April edition is showing some 118 domestic projects as possible targets at this time.

When speaking of commodities, The USDA reports a decline in planned corn for 2008 v. 2007; and the decrease in corn for 2008, will perhaps result in higher food prices than we see today. Some of the corn crops will be converted to soybeans. Even though the ethanol industry is heavily subsidized, and has contributed to the rise in corn prices, a decrease in corn production could yield higher prices at the fuel pump.

We have strong arguments against deforestation and clearing of land for planting all forms of grain and biofuel feedstock agents, however, as a form of energy and as a partial means to an end for bridging the gap between dwindling oil supplies and an ever growing hunger for fuels continue; ethanol will grow. CO2 from these projects, that being byproduct from fermentation has been the usual subject with respect to utilization in the merchant markets. Many world markets could use CO2 from these projects; however, with the second generation ethanol projects, when the word ‘waste’ is attached to a feedstock, it may be an absolute ‘turn off’ with respect to the food and beverage industries; particularly when this feedstock is MSW.

On the other hand, in the United States there are orders for new plants beyond Linde’s Fulton, NY plant; which include CO2 plants from ethanol for Medina, NY, Camilla, GA, and Riga, MI to name a few; more will take place in the U.S. as the projects find financing and develop in full.

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About the author

Sam A. Rushing is a chemist with 30 years in the CO2 trade, 12 years with the former Amerigas, and 18 years as a consultant, operating Advanced Cryogenics, Ltd., a full range CO2 consulting practice. For expertise in the CO2 and ethanol industries contact 305 852 2597, rushing@terranova.net ; www.carbondioxideconsultants.com

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