Interview with Dana Persson, CEO/General Manager of Central MN Ethanol Co-op.

Q. What do you view as the most important things you can do as a general manager to ensure the continued success of Central MN Ethanol Co-op (CMEC) facility?

A. A challenge for the ethanol industry, like many other industries, is managing our margins. As a plant, we have little control over the price that we receive for the products we produce (ethanol, DDGS and corn oil) as the prices are dictated by the markets.  The same is true for what we pay for our major inputs (corn and natural gas).  As a team we work to properly manage the commodity risk that is inherent in the business and ensure that we are operating the plant at its optimal performance and peak efficiency.  We have made significant improvements in operational efficiencies in  the last couple of years  and we will continue to do so into the future.

Q. How long have you personally worked in the ethanol industry and what was your path to your current position?

A. I started my career in the Grain and Farm Supply business managing locally owned cooperatives.  In the middle 1990's I helped develop  a "greenfield" fully integrated poultry operation selling egg products to companies in the food manufacturing and food service industry. We sold the company in 2009.  I have been with CMEC and I have worked in the ethanol industry for the last two years.

Q. Please share the impact that you feel CMEC has on the local economy and surrounding communities?

A. We feel that employing local people is an important part of keeping a community vibrant. CMEC currently has 29 full time employees and 2 part time employees. CMEC supports many other local businesses in the area by purchasing goods and services from these companies. In addition, CMEC also provides benefits to the local agricultural industry as we provide a consistently competitive market for corn. CMEC's presence has improved our local corn basis and saves agricultural producers the expense of transporting their product greater distances.

Having been in the grain business for over 30 years, I have witnessed the effects of a weak agricultural economy firsthand and its direct impact on families, communities and the country at large.  It was not that many years ago that farmers consistently sold their grain for a price that was well below what it cost the farmer to produce it.  The result of this deficit was larger payments through government farm programs. More recently because of improved corn prices, government payments to farmers have decreased.

In my experience, rural areas have exported a lot of "brain power" from our local communities as our kids lost hope in careers in agriculture and sought their fortunes from non-ag industries. We hope that the impact of ethanol on the agricultural community provides the opportunity for young people to return to rural communities for jobs and possibly the opportunity to return to the family farm.

Q. What would you like consumers to know about your plant and the products produced by the plant?

A. In my opinion, one of the best kept secrets about the ethanol industry is the positive impact we have on the livestock industry. In addition to ethanol, one of the co-products from our ethanol production process is Dried Distillers Grains (DDGs) which are sold to livestock producers for feed. We sell this very high quality feed (protein content of 27-30% and fat content of 6-9%) at a discount to raw corn values. This allows livestock producers to displace higher cost ingredients and thereby reduce their overall feed costs substantially.

Q. Where are the biggest opportunities for ethanol in the next 10 years in your opinion?

A. Ethanol is extremely important since it is as an economical source of octane in fuels and an oxygenate replacement for MTBE. MTBE is fossil fuel derived and was banned because of its adverse health effects and pervasiveness in the environment. Future engines will require higher levels of octane to achieve better performance and economy required to meet new federal standards and ethanol can satisfy the requirements of those new engines.

Interview with Tom Hanson, Vice President of Operations (left), and Dean Reder, Chief Financial Officer (right).

Q. Please tell us a bit about the history of Guardian Energy since opening in 2009 and how it operates today?

Reder: The Janesville, MN, ICM/Fagen 100 million gallons per year facility was one of the final designed and constructed facilities by US BioEnergy before their merger with Verasun. It was nearly complete when Verasun’s bankruptcy liquidation occurred. The facility was purchased in September 2009 by six farmer-owned ethanol companies that had worked together to form and develop Renewable Products Marketing Group (“RPMG”) based in Shakopee Minnesota. The plant quickly filled positions and started operations in November 2009.

The Company enjoys leadership from its ownership group that have been pioneers and leaders for the ethanol industry:

KAAPA Ethanol, LLC - Minden, NE

Heartland Corn Products - Winthrop, MN

Al-Corn Clean Fuel Cooperative - Claremont, MN

Chippewa Valley Ethanol Company - Benson, MN

Golden Grain Energy, LLC - Mason City, IA

Q. Where specifically has Guardian Energy made the most significant improvements in production efficiencies since the facility opened?

Hanson: Guardian Energy has converted the process to a zero liquid (water) discharge.  One of the first production facilities to do so.  Occasionally, the plant will utilize excess run-off rain water in its production to further reduce well water usage.  The use of  strong conservation and environmentally focused processes, and the facility’s  state of the art water treatment  system, have enabled the plant to generate each gallon of ethanol with less than 2 gallons of water.

Q. What do you view as the three most important things you can do to ensure the continued success of Guardian Energy?

Reder: We must stay focused on:
1.    Maximizing efforts on the things we can control and hire good people to manage the areas that are out of our control
2.    Continuously improving yield & efficiency while not cutting corners on safety
3.    Enhancing shareholder value
These focal points align and interconnect in many areas. 
We don’t control or exercise significant influence over the corn or ethanol markets.  We can strive to develop good relationships with local farmers and elevators to make us the preferred place for them to sell their corn.  We have state of the art grain receiving equipment to minimize “waiting times” and added 1 million bushels of grain storage to reduce the days that “we’re full”. 

The empowered maintenance team and diligent preventative maintenance programs have enabled us to become a reliable source of ethanol for RPMG to market our products to customers that have come to rely on us as a source for them in tightening ethanol supply markets.  Beyond the normal planned shutdown days (5-10) for cleaning and inspection the facility has had relatively few unplanned shut-downs.  By doing these things we believe we receive fairly priced corn and receive the best price available on our ethanol.

Emphasizing yield improvement and energy usage reductions with a strong group of laboratory and production managers will continue to separate the leaders from the followers.  We may not see ethanol demand exceed production capacity in the next few years resulting in thin margins. When margins are thin the only way to make a profit is maximize yield and energy efficiencies.

Realizing that our ownership group and their group of farmer-owners took a risk to purchase and operate our facility, we understand that we need to operate in a manner that will maximize returns to those owners in the current, near term and long term. Shareholder value over the long term should be maximized by making good economic decisions and treating farmers, employees, vendors, railroads, policy makers and advocates fairly and with the respect expected in rural communities. Earning and maintaining that respect will result in  continued success at Guardian Energy.

Q. Consumers have been hearing about E15. How do you feel E15 impacts Minnesota and the fuel consumers in the state?

Reder: We believe E-15 will reduce the price at the pump for fuel consumers without impacting gas mileage.  Over the last few years the price of ethanol has been considerably less than gas and has provided an octane boost when blended with gasoline. By blending an additional 5% of less expensive, high quality fuel, retail competition should pass on some of that savings to the end users. Burning more ethanol and less petroleum should improve air quality especially in the Twin Cities and surrounding communities. As E-15 gains market share, the increased demand will be met by Minnesota ethanol producers. That spurred activity should maintain the value that local farmers receive for their corn which historically has been reinvested in local economies.

Q. What would you like consumers to know about your plant, your employees, and the products produced by the plant?

Hanson: Guardian Energy employees are very proud to be a positive influence for their community bringing value to rural Minnesota. We take pride in processing corn from local farmers to provide  a clean renewable fuel, corn oil used as an animal feed additive and biodiesel feedstock and a value added feed for livestock and poultry called Dried Distillers Grains.
The Guardian team is very involved in the community and  and the team understands the importance of the benefits they provide for their neighbors since the materials and services needed for the ethanol facility are sourced from their neighbors.
Guardian Energy is focused on continually improving and utilizing new methods and new technologies that result in more efficient and more environmental friendly ways to produce a renewable liquid fuel.

Q. Where are the biggest opportunities for ethanol in the next 10 years in your opinion?

Reder: We believe there is an opportunity for growth of higher ethanol fuel blends within the United States in the next 10 years. Once the oil industry supported 10% blend wall is penetrated (torn down), E-15 will become common place.  As US fuel economy standards increase, there is additional opportunity for higher octane fuels (E-20 or E-30) to run higher compression engines that auto manufacturers are indicating will be required to meet those standards.

We believe that new markets will develop for using the recently available in bulk scale commodities that are produced in the ethanol production process (distiller grains and corn oil).  Often referred to as co-products, the distiller grains are primarily sold to beef and dairy cattle, swine and poultry markets as feed and the corn oil is used in poultry diets as well as a feed stock for bio-diesel production.  We believe that additional “green products” will be developed from further refining these valuable co-products.

Q. What do you see as the biggest threats to the ethanol industry in Minnesota in the short term (next year) and in the long term?

Reder: The potential reversal of federal legislation originally designed to improve energy independence, clean the air and produce domestic jobs would threaten our industry. Ethanol is a less expensive, cleaner burning, higher octane fuel than petroleum based fuel. However, without certain protections, the oil industry has the resources to halt any further market penetration by renewable fuels and or exercising influence to regain 100% of the liquid fuel market in the United States.   Failure of any state to adopt or promote federal renewable programs, like the EPA’s 2011 approval of the use of E-15 blends, adds another threat level to producers in those regions.

By Tim Rudnicki, Esq.

Every runner has a set of tactics (or survival skills) they use to propel themselves across the
finish line. For me, when I’m running a marathon, one of my tactics is to keep looking forward.
The aim is to get far away from the starting line by putting my energy and focus on moving
toward and crossing the finish line up ahead. Many of us think the U.S. EPA should do the same
with respect to the Renewable Fuel Standard - Keep Looking Forward!

We are half way into the biofuel marathon and the U.S. EPA has proposed that we slow down
and then go backwards. What do I mean by this? Just as we are making progress in moving
toward the use of more biofuels (E85 for Flex Fuel Vehicles and E15 for all 2001 and newer
vehicles) the EPA has proposed a substantial reduction in the amount of biofuel to be used by
consumers in 2014.

The Renewable Fuel Standard (RFS), however, is a law that is intended to be a paced and ramped
up implementation of biofuel usage through the year 2022. Specifically, for 2014, Congress
directed that at least 18.15 billion gallons of biofuels (14.4 billion gallons from renewable fuel
such as ethanol) be used in the United States. That is a very clear mile post that has been known
by the petroleum industry, biofuel producers and the EPA for at least seven years!

The petroleum industry likes to say they can’t comply with the law because the amount of
gasoline being consumed is going down. Basic math and, according to the Energy Information
Administration, the total actual and projected fuel consumption in the United States tells us
otherwise. Just because the petroleum industry is comfortable with the E10 status quo, this is no
time for the EPA to look backwards, retreat and accept defeat. In fact, under the law, the Agency
has a clear duty to keep looking forward and to push even harder to reach the 2014 biofuel mile
post as well as the next one.

How can one conclude the EPA has a duty to “push” for the use of more biofuels? The law
explicitly requires the EPA to “ensure that transportation fuel sold or introduced into commerce
in the United States (except in noncontiguous States or territories), on an annual average basis,
contains at least the applicable volume of renewable fuel, advanced biofuel, cellulosic biofuel,
and biomass-based diesel, determined in accordance with” the Energy Independence and Security
Act of 2007. In other words, it is not an option for the EPA to capitulate to the petroleum
industry by reducing the amount of biofuel to be used in 2014. Instead, the EPA should accept
the renewable volume requirements in law and take proactive steps to ensure consumers have
greater access to more biofuels as intended by Congress.

Minnesota biofuel producers are doing their part to comply with the RFS, so to should the
petroleum industry and the EPA. Biofuel producers in Minnesota have made, and continue to
make, significant investments in their operations to meet the RFS requirements. This translates
into more clean, renewable biofuels that can and should be made available to consumers through
the petroleum infrastructure.

Any retreat the EPA makes from the gallon volume requirements of the black letter law will have
adverse environmental and economic impacts. Biofuels have lower carbon footprints compared
to petroleum gasoline. If the EPA proposal to reduce the amount of biofuels for 2014 moves
forward, more gasoline will be used instead of biofuels. The unintended consequence will be a
boost in greenhouse gas emissions. This situation is especially troubling as more highly carbon
intensive tar sands from the boreal forest in Alberta are used for fuel in the United States.
Biofuels also save consumers money at the pump. The Center for Agricultural and Rural
Development found biofuels, in the Midwest, held down the price of gasoline by approximately
$1.69 per gallon. If the EPA fails to comply with the law and slows down the pace of biofuel
usage, environmental and consumer benefits will be lost.

Will the EPA and White House listen to your voice? Thanks to many of you, thousands of
messages in support of biofuels and the RFS were sent to the Minnesota Congressional
Delegation, U.S. EPA and the White House. If the EPA heard you, the Agency will continue to
keep looking forward and implement the RFS as signed into law. With the EPA implementation
of the RFS as written, the economic, consumer and environmental benefits will move us, as a
Nation, closer to the next renewable fuel mile post. This will put us, as a Nation, well on the
path toward winning the biofuel marathon and a better environmental quality.

As always, I look forward to your This email address is being protected from spambots. You need JavaScript enabled to view it..

By Tim Rudnicki, Esq

The details might be complicated, but the overarching blueprint is straightforward: continue to grow the biofuels industry AND build out the biobased feedstock industry.

On the continuum of an industry's development, the biofuel industry in Minnesota is very young. Relative to other Minnesota industries, such as agriculture and mining, the biofuels industry is just getting started. Nevertheless, the latest economic analysis of the Minnesota-based biofuels industry finds it supports 48,506 jobs with wages close to $3 billion and has a total annual economic impact of approximately $11.7 billion. And today's Minnesota-based biofuels industry still has room to grow.

More than two years ago the United States Environmental Protection Agency approved the use of E15 (that's a blend of 15% ethanol and 85% petroleum gasoline) for use in vehicles from model year 2001 to the present. If we focused on the current law and if all the owners of those vehicles had access to and chose to use E15 (when it's available, they do indeed use it), Minnesota would nearly triple the amount of biofuel used within the State. That outcome would have spin off benefits for the biofuels industry, Minnesota consumers and the environment. 

Who is the Minnesota biofuels industry? It's the men and women that live and work throughout Minnesota. Some of the more than 48,000 jobs supported by the industry include those who live and work in the metro area of Minneapolis and St. Paul as well as in Minnesota’s rural communities where the production plants are located. All these men and women provide a broad range of products and services. The products provided for the biofuels industry include, for example, renewable ingredients, enzymes, all the processing tanks and related production equipment. Similarly, the scope of services is broad. It covers, for instance, finance, transportation, communications and engineering to name a few.

In practical terms, Minnesota made biofuels support thousands of Minnesotans, keep energy dollars at home on Main Street and add to the vitality of rural communities.

How do consumers benefit from increased use of biofuels? The short answer is this: an ample supply of less expensive, renewable biofuels decreases the demand for more expensive finite petroleum. Biofuels helped Minnesota consumers save nearly $2 billion dollars in 2012 because biofuels, such as ethanol, held down the price of petroleum gasoline. Today, biofuels continue to hold down the price of petroleum gasoline. By keeping the bioeconomy blueprint focused on building up the existing biofuel industry, more renewable fuel will be available to continue holding down the price of gasoline. That’s good for people who live and work here in Minnesota.

What are the environmental benefits associated with expanding the use of existing biofuels in Minnesota? Briefly, studies by Argonne National Laboratory and other reputable science based organizations find ethanol made from corn starch has a lifecycle greenhouse gas emission (GHG) footprint that is up to 57% lower than petroleum. Even when counting the energy used to plant, cultivate, harvest, process and use biofuels, the GHG emissions for biofuels is significantly lower compared to petroleum. Right here, right now, nearly 85% of the vehicles on the highway today can be using a lower GHG fuel with existing vehicle technology. Regular engines in 2001 and newer vehicles can use E15, a 5% higher blend of ethanol compared to regular unleaded gasoline at most retail fuel stations. Let’s not forget that green plants are the best solar collectors, and its that renewable plant material that is used to make biofuels.

Where do biobased feedstocks, that displace petroleum, fit on the bioeconomy blueprint?  Next to, not in place of, biofuels.  The bioeconomy blueprint is not about picking one over the other, but instead building synergy between one and the other. A truly growth oriented and sustainable bioeconomy will focus on expanding the use of both biofuels and biobased feedstocks which can be used in paints, adhesives, inks and resins to name a few uses.

This basic blueprint is offered in the hope we can build upon the discussion now taking place in Minnesota. Let’s work together to find ways to expand the success in the biofuels industry and to build upon that success in ways that can further grow the biobased feed stock industry. If we do this the correct way, Minnesota will be a leader on this front. Most importantly, we can further improve the environment and quality of life for Minnesotans.

As always, direct any questions or comments to me This email address is being protected from spambots. You need JavaScript enabled to view it.