POET plans to add rail spur as production expands

Source: By Charles Dunlap, The Mexico Ledger • Posted: Wednesday, February 12, 2020

POET Biorefining plants in Macon and Laddonia increased ethanol yields in 2019 leading to plans to expand products and services at both plants.

POET Biorefining wants to put more of its ethanol on the rails with the addition of a new spur line at its Laddonia facility, General Manager Steve Murphy said.

POET’s expenses are partially matched by a Freight Enhancement Grant through the Missouri Department of Transportation to construct a small secondary railroad branch, known as a spur, to decrease the amount of the flammable fuel that is shipped on the highways. Bids were opened Feb. 5 and winners are to be announced. The spur will be built along the south side of the Laddonia plant, parallel to existing lines, to handle the increased volume of gallons being sent out of state, such as California.

“As we increase production, those additional gallons are going to have to go on rail,” Murphy said.

Changing markets

The reason more ethanol is being sent to California is because there is a market for lower carbon fuels there, when compared to Missouri, he said. The Missouri Renewable Fuels Association is pushing for changes to the state’s code of regulations with regard to ethanol. Murphy is the president of the association.

“Unless E15 happens in Missouri, the market is already saturated at E10. So we’re going to need to ship further. The rail spur is the best way to get those gallons to market,” Murphy said.

The association wants state rules regarding ethanol sales to match federal rules, which now allows the sale of E15 year round. E15, also known as Unleaded 88, is a fuel mixture of 15% ethanol and 85% gasoline. Most gas stations in Missouri already sell fuel that includes a 10% mix of ethanol.

State rules currently restrict the sale of fuel mixes more than 10% ethanol except from June 1 to Sept. 15, but there is a proposed amendment to the rules to match federal regulations.

E15 puts out less carbon than its E10 counterpart, according to a letter from POET Director of State Policy Michael Walz to the Missouri Department of Agriculture. Reporting from the Environmental and Energy Study Instituteconfirmed E15 produces less carbon dioxide, while ethanol-based fuels also produce 34% less in greenhouse gases than gasoline alone.

The Laddonia plant increased production by 3 million gallons in 2019, requiring a purchase increase of 1 million bushels of corn from farmers within a 30-mile radius of the plant. Production rates from 2018 were not available for comparison.

“As E15 grows, we hope to be able to supply it,” Murphy said, adding the first shipments of E15 to California happened in 2019. “We get a premium for some of the ethanol we send to California.”

The lower-carbon ethanol to California includes both fiber and starch from the corn kernel. Ethanol typically is made with just starch. Using corn fiber is considered greener than just starch, Murphy said.

So, POET is sending the fiber/starch ethanol to California because there is a market for the lower-carbon fuel and byproducts of the ethanol production process, such as a wet livestock feed.

“California rules allow us to sell these lower-carbon gallons at a price premium compared to other states,” Murphy said.

Along with the ethanol, the Laddonia plant produces a wet and dry livestock feed, liquid carbon dioxide, corn oil and electricity on site. The plant’s efficiency and reduced CO2 output allows POET to sell ethanol to California.

The Laddonia plant is not the only POET facility seeing upgrades. The Macon plant will hire four new staff members for its dry ice production facility. One of the byproducts of ethanol production is CO2. The Macon plant will now take a portion of its liquid CO2 and turn it into dry ice pellets.

Two different animals

While Ethanol production is increasing at POET, there still are issues relating to small refinery exemptions. Oil refineries producing 75,000 barrels or less are considered small refineries. Exemptions allow them to not produce an ethanol-gasoline mix.

Ethanol production and the exemptions are two different issues, however, Murphy said. Ethanol producers won a recent case in the 10th U.S. Circuit finding the Environmental Protection Agency “overstepped its authority in granting the waivers” for three refineries.

″[Ethanol production and SREs] both impact ethanol demand and we are working on both issues to increase consumer choice at the pump for lower cost, [higher] octane blends of ethanol over 10%,” Murphy wrote in an email.

The exemptions did impact the ethanol industry, though, he wrote. Production rates were not really affected, but prices were. The spring flooding and tariffs also had an impact. The ability to sell the lower-carbon fuel to California kept the doors to POET open.

“Some plants closed in 2019 and some slowed production because low ethanol prices and high local corn prices. However, the POET plants in Missouri continue to run at full and increasing rates.” Murphy said.