Wisconsin Legislative CouncilWisconsin Legislative Council

September 16, 2008September 16, 2008

Presented by Hoon GePresented by Hoon Ge

Summary of TopicsSummary of Topics

• Adequacy of Current Fuel Distribution Adequacy of Current Fuel Distribution System of Ethanol and BiodieselSystem of Ethanol and Biodiesel

• Prospects for Biofuel Pipelines from Prospects for Biofuel Pipelines from Midwest to Population CentersMidwest to Population Centers

• Infrastructure StudiesInfrastructure Studies• Concerns of Biodiesel UsersConcerns of Biodiesel Users• Minnesota Ethanol and Biodiesel Minnesota Ethanol and Biodiesel

Mandate ExperienceMandate Experience

Energy Independence & Security Act of 2007

Biodiesel RequirementBiodiesel Requirement– 500 million gallons used by 2009500 million gallons used by 2009– 1 billion gallons used by 20121 billion gallons used by 2012

Ethanol Requirement (corn-based)Ethanol Requirement (corn-based)– 15 billion gallons by 201515 billion gallons by 2015– 36 billion gallons by 202236 billion gallons by 2022

Current U.S. Biofuel ProductionCurrent U.S. Biofuel Production

Biodiesel is already meeting 2009 goal at Biodiesel is already meeting 2009 goal at 550 million gallons 550 million gallons

Ethanol is estimated at 13.5 billion gallonsEthanol is estimated at 13.5 billion gallons

Midwest Biodiesel Production Midwest Biodiesel Production FacilitiesFacilities

Over 40 throughout MidwestOver 40 throughout Midwest

Midwest Ethanol Midwest Ethanol Production FacilitiesProduction Facilities

Ethanol Pipeline Feasibility StudyEthanol Pipeline Feasibility Study

Sec. 243 in the 2007 Energy ActSec. 243 in the 2007 Energy ActStudying the feasibility of the construction of an Studying the feasibility of the construction of an

dedicated ethanol pipelinededicated ethanol pipeline

Study:Study:

Existing potential barriers to the construction of pipeline Existing potential barriers to the construction of pipeline (technical, financing, regulatory)(technical, financing, regulatory)

Market RiskMarket Risk

Financial Incentives that may be necessaryFinancial Incentives that may be necessary

Technical factors that may compromise safe Technical factors that may compromise safe transportation of ethanoltransportation of ethanol

Transportation of Renewable FuelsTransportation of Renewable Fuels

Sec. 245 in the 2007 Energy ActSec. 245 in the 2007 Energy ActStudying the Adequacy of Transporting Bio-fuelsStudying the Adequacy of Transporting Bio-fuels

Study Includes:Study Includes:

Infrastructure/equipment CapabilitiesInfrastructure/equipment Capabilities

Cost of Transportation (and Fuel increases due to it)Cost of Transportation (and Fuel increases due to it)

Distribution IssuesDistribution Issues

Transportation Competition (and federal regulations)Transportation Competition (and federal regulations)

Addressing Transportation Service ProblemsAddressing Transportation Service Problems

Total Cost of all Programs to regulate transportationTotal Cost of all Programs to regulate transportation

Bio-fuels Infrastructure StudyBio-fuels Infrastructure Study Sec. 9002 in the 2008 Farm BillSec. 9002 in the 2008 Farm Bill

Federal Procurement of Bio-based ProductsFederal Procurement of Bio-based Products

Study:Study:

Into the use of bio-based products by Procuring Into the use of bio-based products by Procuring AgenciesAgencies

Effects of bio-based products on functionality of Effects of bio-based products on functionality of AgenciesAgencies

Bottom Line:Bottom Line: Preference for Contracts that implicate Preference for Contracts that implicate more Bio-based products (as long as products don’t more Bio-based products (as long as products don’t affect Operability of the Agency)affect Operability of the Agency)

Biodiesel Pipeline?Biodiesel Pipeline?75,000 barrels of B5 moved on the 75,000 barrels of B5 moved on the Colonial Pipeline from Houston to New Colonial Pipeline from Houston to New JerseyJersey

DOE supported the testDOE supported the test

Test was completed and successfulTest was completed and successfulOnly issue is trail-back of biodiesel into Jet-fuel… Only issue is trail-back of biodiesel into Jet-fuel…

must be less than 10 ppmmust be less than 10 ppm

Other test scheduledOther test scheduled

Ethanol Pipeline?Ethanol Pipeline?

Magellan Midstream Partners/Buckeye Partners - Magellan Midstream Partners/Buckeye Partners - proposed pipeline would run 1,700 miles for a cost of $3 proposed pipeline would run 1,700 miles for a cost of $3 billion and take several years to build. The pipeline billion and take several years to build. The pipeline would have the capacity to take 10 million gallons of would have the capacity to take 10 million gallons of ethanol per day produced in IA, IL, MN and SD and ethanol per day produced in IA, IL, MN and SD and deliver it to Pittsburgh, Philadelphia and New York. deliver it to Pittsburgh, Philadelphia and New York. Colonial Pipeline Company - using geographic Colonial Pipeline Company - using geographic information systems to build business models for ethanol information systems to build business models for ethanol pipelines. Using the business models, the company can pipelines. Using the business models, the company can compare production capacities of ethanol plants, compare production capacities of ethanol plants, proximity to existing pipelines, population centers for proximity to existing pipelines, population centers for distribution, geographical concerns and other modes of distribution, geographical concerns and other modes of transportation. transportation.

MN Ethanol MandateMN Ethanol Mandate

Phase SeparationPhase Separation

Remedy was to remove all the free water Remedy was to remove all the free water from fuel tanksfrom fuel tanks

MN Biodiesel ExperienceMN Biodiesel Experience

Complaint filed by Flint Hills Pipeline of off Complaint filed by Flint Hills Pipeline of off quality product: Oct 27, 2005quality product: Oct 27, 2005– Dept of Commerce Wt/Measures finds Dept of Commerce Wt/Measures finds

biodiesel out of spec for flash pointbiodiesel out of spec for flash point– Dept rules that blending out of spec biodiesel Dept rules that blending out of spec biodiesel

is illegal by statuteis illegal by statute– NBB is notified to determine the purpose of NBB is notified to determine the purpose of

flashpoint testing and lab error analysis: flash flashpoint testing and lab error analysis: flash point for diesel is 50 – 75 C, Biodiesel is 130 point for diesel is 50 – 75 C, Biodiesel is 130 C.C.

MN ExperienceMN Experience

Mandate suspended for 10 daysMandate suspended for 10 days

Out of spec flashpoint product found at 5 Out of spec flashpoint product found at 5 terminal locations in the stateterminal locations in the state

Dept of Commerce began sampling at Dept of Commerce began sampling at terminals and Mn producersterminals and Mn producers

November 8, mandate reinstatedNovember 8, mandate reinstated

Cooperation of stakeholders allowed Cooperation of stakeholders allowed blending to beginblending to begin

MN ExperienceMN Experience

Root causeRoot cause– Flash point test is variableFlash point test is variable– Some biodiesel from producers may have been below ASTM Some biodiesel from producers may have been below ASTM

specspec– Downstream tests of cross-contamination from ethanol or diesel Downstream tests of cross-contamination from ethanol or diesel

was not conductedwas not conducted– Plants must meet 130C to ship, terminals 100C to blendPlants must meet 130C to ship, terminals 100C to blend– Some biodiesel was retrieved by producers and brought back to Some biodiesel was retrieved by producers and brought back to

specspec– Specification has since been changed in ASTMSpecification has since been changed in ASTM

130 C flash or 100 C flash with GC proof of methanol content130 C flash or 100 C flash with GC proof of methanol content

MN ExperienceMN Experience

Terminals began to institute procedures Terminals began to institute procedures for approval of suppliersfor approval of suppliers

Nov 2005, task force began to investigate Nov 2005, task force began to investigate cold weather plugging complaints, cold weather plugging complaints, discussion of possible filter plugging from discussion of possible filter plugging from in-spec productin-spec product

Feb 2006, filter plugging issues found out Feb 2006, filter plugging issues found out of spec biodieselof spec biodiesel

MN ExperienceMN Experience

Plants shipping out of spec product Plants shipping out of spec product retrieved all product impactedretrieved all product impacted

Dept of Commerce inspected all in-state Dept of Commerce inspected all in-state producers for complianceproducers for compliance

Suggestion of BQ-9000 and additional “Mn Suggestion of BQ-9000 and additional “Mn cold soak test” implemented to catch cold soak test” implemented to catch suspect product at terminalssuspect product at terminals

What was happening?What was happening?

Terminals were receiving product without proof Terminals were receiving product without proof of analysis, retains to determine offender not of analysis, retains to determine offender not always presentalways presentSome production facilities were still filling tanks Some production facilities were still filling tanks while trying to certify the productwhile trying to certify the productProduct tanks on average met standards, but Product tanks on average met standards, but individual loads were suspectindividual loads were suspectSediment above cloud point was identified as Sediment above cloud point was identified as potential issuepotential issue– Either high mono-glycerides or sterolsEither high mono-glycerides or sterols– ASTM std does not indicate mono-glyceride limit, only ASTM std does not indicate mono-glyceride limit, only

free and total limitsfree and total limits

Concerns of Biodiesel UsersConcerns of Biodiesel Users

Microbial Growth – Microbial Growth – Exposure to air and waterExposure to air and water

Icing of Filter – Icing of Filter – Excess water in tankExcess water in tank

Oxidation – Oxidation – Hot fuel return to fuel tankHot fuel return to fuel tank

Monoglyceride Build Up – Monoglyceride Build Up – Off specification of Off specification of Total & Free GlycerinTotal & Free Glycerin

Paraffin Wax – Paraffin Wax – Temperature at or below cloud Temperature at or below cloud pointpoint

Breakdown of Filter Plugging SourcesBreakdown of Filter Plugging SourcesFrom April 2007 to March 2008 - Filter Plugging Problems From April 2007 to March 2008 - Filter Plugging Problems

Addressed by the National Biodiesel HotlineAddressed by the National Biodiesel Hotline

Microbial OnlyMicrobial Only 21%21%High Water and MicrobialHigh Water and Microbial 18%18%High Water OnlyHigh Water Only 15%15%Biodiesel ContaminantsBiodiesel Contaminants 10%10%No problem FoundNo problem Found 10%10%Improper blendingImproper blending 8% 8%OtherOther 8% 8%

Oxidation, Oil ContaminantsOxidation, Oil ContaminantsBiodiesel Didn’t Meet SpecificationBiodiesel Didn’t Meet Specification 5% 5%Outside Temperature Was Below Cloud PointOutside Temperature Was Below Cloud Point 5% 5%ULSD Paraffin’sULSD Paraffin’s 3% 3%