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FindingOpportunitiesforCarbonDioxideRevenuesBy Sam Rushing

A few years ago. a primary source of refined camon

dioxide (C02) was as a byproduct produced during

the manufacture of anhydrous ammonia. In fact.

only a handful of primary sources of raw C02 were refined

and liquefied from ethanol for the merchant CO2 industry.

While a majority of anhydrous ammonia is traditionally ded-

icated to the agriculture sector, many plants are closed or

going through restructuring and bankruptcy largely due to

ramped-up production from mega-sized facilities in LatinAmerica. the Caribbean. China and Russia. These countries

and regions have cheaper labor and extremely cheap natural

gas feedstocks.

The result of the drastic reduction of domestic anhy-

drous ammonia manufacturing has been a shift in the loca-

tions of C02 facilities. forcing the relocation of merchant

C02 production in the United States.Another factor affecting the domestic market is that it's

not economically feasible to produce unsubsidized merchant

C02 from flue gas derived from power plants. CO2 volume in

the raw flue gas is often 3 percent to 15 percent versus up to

99 percent in ethanol and ammonia plant coproducts.

Table 1 represents the primary sources of today's raw

C02 feedstock. Just a few years ago the percentage of C02

derived from anhydrous ammonia plants was up to 40 per-cent of the total C02 from all forms of manufacturing

processes. At the same time. the percentage of C02 derivedfrom ethanol production was in the teens.

Some ethanol-sourced C02 has replaced ammonia-

sourced C02. particularly in regions of the Midwest. In fact.

many Midwest areas are flooded with C02 from ethanol proj-

ects. creating a regional oversupply. Moreover, C02 is usually

transported via truck. limiting the distribution radius to about

200 miles from the source. The balance is often shipped via

rail. However. it's becoming more difficult to negotiate bene-

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ficial rail rates for many commodities in part due to over-

loaded rail capacities from ethanol feedstocks. product and

coproducts.

Coproduct revenues are essential to the long-term suc-

cess of any ethanol project. Developing the C02 aspect of a

project "later on" is a dire mistake since making C02 ventures

work on a first-served basis is essential. especially with so

many new projects on the drawing board.

C02 Source TargetsThe North American C02 merchant market is estimated

to be about 10 million short tons per year and growing at an

average annual rate of 3 percent. Existing ethanol projects

largely fulfill the raw feedstock requirements of the Com

Belt and select regions of the greater Midwest. However. it's

possible to develop specific. over-the-fence. captive or

sequestration C02 targets even in the well-supplied Com

Belt. Examples include enhanced oil recovery. chemical feed-stock usage and enhanced coal-bed methane projects. Such

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projects are found adjacent toviable oilfields, or cbemical manu-

facturing and coal production proj-

ects, and require distribution infra-structure. The food processing

industry is also a possible market.

Markets having large concentrated

poultry projects use cryogenic

freezing that utilizes fluids sucb as

C02 to replace mecbanical refriger-ation.

Selling C02 to gas companiesvia direct, over-the-fence raw mar-

keting, a joint venture, or possible

equity position for refinement and

liquefaction, would supply the mer-cbant markets sucb as food proces-sors. This is the wholesale version

of supply to the mercbant markets.For under-supplied regions

that import C02, ethanol projectscan benefit the local CO2 industry.

Those regions include markets inthe West, Southwest, Middle

South, Middle Atlantic, Florida and

New England. Some Canadian

markets, including the Pacific andAtlantic regions, as well as specific

areas of populated provinces, are

better targets for the wholesale ver-sion of C02 sales.

A proper evaluation should be

conducted to devise sucb captive

marketing to the oil or chemical

sector. The same goes for selecting

the best gas company to purchaseand refine C02 on a wholesalelevel.

The possibility also exists for

refining and liquefying C02 for saleto the direct consumer market,

something some ethanol firmshave achieved. Of course, this

form of marketing involves the

greatest amount of risk. However,it also holds the greatest profit

potential.

An EnvironmentalPerspective

Since the United States isn't

party to the Kyoto Protocol or

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..

The CO2 storage bullet is on the rig~ side of the phoro of Quad County Com Processors in Galva,Iowa. The CO2 plant is the low-Iying building.

other laws that urilize collection or

sequestration of CO2 from fermenta-tion. there is no immediate mandate

to do so. However. all indications are

that sequestration or consumption of

C02 from high emitting sources. such

as power projects and la.:ge fermenta-

tion projects. will inevitably takeplace. The question is when and howwill this occur.

Trading carbon credits isn't appli-

cable to the ethanol industry todayand isn't a true solution to a net

reduction of C02 emissions. One of

the only domestic formats which rep-resents C02 trading is the Chicago

Climate Exchange (CCX). which

doesn't yet deal with industrial chem-

ical or ethanol projects. However. theCCX has used a C02 trade value of

about $4 per ton. a mechanism that

may be established broadly some day.

Let's say a state. such asCalifornia. wishes to reduce C02emissions. If such a case mandates a

net reduction of emissions from an

ethanol plant. a project would utilize

true sequestration or find specificC02 markets. In the case of markets.

a chemical manufacturer or oilfield

project could receive the product andthen be considered a means of reduc-

ing C02 via combining or consuming

it in a product or project. C02 in the

service of enhanced oil recovery proj-

ects may not be considered truesequestration since some of the C02

is brought back to the surface during

oil recovery.

With respect to serving the mer-chant C02 markets. some of the C02

sold via a gas company or directly to

a consumer is only displaced, not

sequestered As a result. the questionof an exclusive answer for C02 reduc-

tion remains extensive. extremely

challenging and somewhat unknown.

Recovering C02 from new or existing

ethanol projects. as the industrygrows and political and environmen-

tal sectors close in on requirements toreduce emissions. will become

increasingly important.

An understanding of C02 mar-

kets. possible sequestration targetsand the costs associated with trans-

porting C02 should be in the hip

pocket of the ethanol developer.

ETHANOL PRODUCER MAGAZINE AUGUST 2007

Further data will be required beyondthe immediate knowledge of themost profitable and beneficial meansof C02 marketing from the ethanolproject.

ConclusionsThe United States holds per-

haps 40 percent of the approximatetotal of 20 million metric tons of

global merchant C02. The balance

of North America is approximately

another 2 million tons per year in

consumption. Western Europe andJapan are the other significant mer-

chant markets, while developing

economies are largely solely bever-

age carbonation markets. Developed

economies are highly diversified in

terms of the broad application of

C02, including agricultural, solvent

technologies, cryogenic freezing,

food preservation, metallurgical

applications, oil and gas applications,plus many usages in the chemicaland water treatment industries.

The dynamics for C02 usage

continues to change, as would the

source types found in some regions,such as that described with the fertil-

izer ammonia production sector nowreplaced in part by C02 off the fer-mentation sector.

C02 continues to be a relatively

routine and simple process for

purification when derived from dry-

grind, continuous fermentation

ethanol operations. It is essential to

understand the costs and require-

ments for production of C02 inorder to factor it into a clear under-

standing of the value of C02 when

sold over the fence to the gas refin-

er, or when selling direcdy to the

markets at large.

There remain many targetopportunities for C02 in numerous

regions of North America and inter-

nationally. However, to understand

the impact, competition, costs,

requirements and essential market

values, a proper evaluation of these

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elements is necessary to yield the great-

est dollar value to the ethanol project.

Even $1 or $2 per ton variation over

many years represents a great deal of

money.

There will continue to be a growingpush to control and reduce C02 emis-

sions from all emitters, whether a singlefamily car, an ethanol project, or the

mega-sized coal-fired power plant. In the

long term, C02 recovery, sequestration,

or another form of C02 management

will direcdy affect the growing ethanolindustry.

More information is available atwww.carbondioxideconsultants.com.

Sam Rushing is president of AdvancedCryogenics Ltd" a carbon dioxide con-sulting firm based in Tavernier, Fla.Reach him at rushing@terranova.net or(305) 852-2597.

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