1. Kalundborg, Denmark www.inbicon.com

2. Crop Residues: Potential, Problems and Solutions EPAC Biofuel Summit Larry Johnson; Inbicon A/S June 7, 2011

3. Current Status: Potential: Why Harvest Crop Biomass? – Policies and economics Problems: Obstacles and Deterrents – History, logistics, cost and weather Solutions: Innovation and Incentives – Farmers and equipment manufacturers – Favorable economics and policies Presentation Objectives

4. Tons of Available Stover

5. 2007 U.S. average yield (USDA-NASS 2008) Perlack et al. 2005 Slide by INL Crop/Format Grain Yield a (bu/acre) Grain Test Weight b (lb/bu) Moisture Content of Test Weight (%) Residue-to-Grain Ratio Residue Yield (DM ton/acre) Corn151.156.015.51.03.6 Sorghum74.256.014.01.01.8 Wheat: Winter42.26013.51.71.9 Wheat: Spring37.06013.51.31.2 Barley63.14814.51.51.9 Oats60.932142.11.7 Soybeans41.460111.51.7 Rice71.9100121.54.7

6. Market Opportunities & Drivers BioFuels Production

7. Research Projects Deere. ADM, Monsanto (DAM) 3 year trials Document stover analysis and nutrient removal Document minimal soil loss to erosion Identified equipment and storage issues POET trials and commercialization Energized many equipment companies 56,000 tons commercially delivered in 2010-2011 Utilized BCAP program AGCO. $5 million U.S. DoE biomass grant Biomass feedstock supply demonstration

8. 1.Potential energy value of cellulose is huge 2.Domestic biomass energy vs. imported oil 3.Cellulosic ethanol benefits local economy 4.Stover removal provides agronomic benefits 5.Reduction of GHG emissions Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt. Why Will We harvest Crop Residues?

9. 13 billion bu. Corn = 360 million tons of stover Availability = 1/3 sustainably removed – 120MM tons Combustion Potential = 7159 Btus/lb. – (3 year DAM study) Ethanol Potential = 5.7 bgy (C6) + 5.3 bgpy (C5) – 11 billion gallons ethanol plus 23 million tons lignin Potential Stover Value = $20 to $40 billion – Most is currently unused and undervalued Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt.

10. 55,617,000 sm. grain acres = 116 million tons of straw Availability = 1/3 sustainably removed = 39 million tons Oats: 1,315,000 A @ 1.7 t/a = 2,236,000 tons Barley: 2,546,000 A @ 1.9 t/a = 4,837,000 tons Sp Wheat: 13,590,000 A @ 1.2 t/a =16,308,000 tons W. Wheat: 32,085,000 A @ 1.9 t/a = 69,961,000 tons D. Wheat: 2,588,000 A @ 1.2 t/a = 3,105,000 tons Rice: 3,493,000 A @ 4.7 t/a = 16,417,000 tons Ethanol Potential = 1.9 bgy (C6) + 1.7 bgy (C5) – 3.6 billion gallons ethanol plus 7.6 million tons lignin Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt.

11. Domestic, renewable energy is policy goal Energy security is a priority Economic hedge on oil prices Equipment company investment Value to agriculture and rural America Carbon Sequestration Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt.

12. 20mgy plant will need 500,000 tons of residue > $200 million in local investment $30 million in new feedstock value 40 new ethanol plant employees Procurement co. full & part time employees Potential BCAP dollars to local economy Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt.

13. Facilitates residue management Complimentary to “stacked” corn hybrids Allows soil to warm up and dry out earlier Enables reduced tillage and no-till No-till increases soil carbon & organic matter Does not tie up nitrogen Will increase yield the following year Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt.

14. London 01 February 2008 Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt. Photo by Jim Streater, Rochester New Holland

15. Stover removal prevents degradation emissions Stover combustion replaces fossil fuels Stover removal reduces tillage trips Stover removal enables No Till planting No Till enhances soil carbon and organic matter * No Till reduced NOX by 57% compared to chisel plow and 40% over moldboard plow (GHG = 310x CO2) *Purdue University, Tony Vyn 12/2010 Resource Value Policy Drivers Jobs & Economy Agronomy Carbon Mgmnt.

16. Issues and Challenges Weather Impacts Logistics & Variables Product Specs. Agronomic Factors Equipment Innovation Storage Issues Producer Contracts Business Financing

17. DAM study: 3 year ave. 19.2 “harvest days” – Harvest Day = 3 rd day without rain. Soil conditions and product moisture Square bales do not shed rainwater Bales may be road-sided to “cure” Storage depends on % moisture and wrap Weather Impacts Logistics & Variables Product Specs. Agronomic Factors

18. Roadsided bales

19. Management and organizational skills People, equipment, fuel, maintenance Individual producer contract management Recording volumes and quality for each field Coordinate transportation and storage sites 500,000 tons = 26,042 tons/day baled Requires ~ 50 balers @ $110,000 each Weather Impacts Logistics & Variables Product Specs. Agronomic Factors

20. Farmers will focus on grain harvest Short harvest “window” after grain harvest Coordinate with fertilizer application & tillage Most local labor is already utilized Trucks and equipment are being utilized Procurement and harvest will be done by a third party with possible subcontracts to qualified farmers. Weather Impacts Logistics & Variables Product Specs. Agronomic Factors

21. Power from nature’s leftovers Ethanol made from waste Monsanto predicts ag waste will grow as traditional crop yields increase Switchgrass, blade sorghum, miscanthus crops development DONG Energy brings know-how to biomass

22. Inbicon Biomass Refinery: Biomass handling and preparation

23. Determine delivered value at the plant Moisture, cob/stalk ratio, ash, shrink, molds Develop ASTM standardized test methods Guide to harvest methods and timing – Equipment will target specific parts of corn plant Eventually stover will have commodity status Weather Impacts Logistics & Variables Product Specs. Agronomic Factors

24. Soil structure and organic matter (OM) Continuous corn and yield impacts Additional commercial fertilizer required Soil Compaction and seedbed preparation Soil Erosion and no-till opportunities Field slope and contours Double crop, cover crop and harvest delays Weather Impacts Logistics & Variables Product Specs. Agronomic Factors

25. NutrientIowa Prior work DAM Project 3 year average DAM projected for 3 tons/A Iowa 3 year average price Nutrient value removed (DAM data) N20.916.349#$0.50/lb.$24.50 P4.95.416#$0.62/lb$ 9.92 K26.918.455#$0.50/lb$27.50 NutrientRemoved/ton low value Removed /ton high value ‘09 ISU Cost/lb ‘10 ISU Cost/lb ‘11 ISU Cost/lb Three year cost range of nutrient replacement N 1 13.6 3 37$0.68$0.33$0.51$4.48 to $25.16 P 3 3.5 2 5.9$0.90$0.38$0.59$1.33 to $5.31 K 1 19.7 3 33$0.72$0.43$0.47$8.47 to $23.76 Variation in value/ton of removed nutrients$14.28 to $54.23 1-Nielson 1995 2-Lang 2002 3-NRDC 2005 Weather Impacts Logistics & Variables Product Specs. Agronomic Factors

26. Issues and Challenges Equipment Innovation Storage Issues Producer Contracts Business Financing Weather Impacts Logistics & Variables Product Specs. Agronomic Factors

27. Single pass: baler tied to combine – Clean product, low volume, mostly cobs Two passes: windrow created by combine – Clean product but potential drying problems Multiple passes – Chopping, raking, baling is traditional method – Expensive, soil compaction, high dirt content Equipment Innovation Storage Issues Producer Contracts Business Financing

28. Equipment Mfgrs. are investing in R&D Unique feedstock specifications will require unique equipment Product specs. will drive equipment design Prototypes and mass production take time Equipment production requires product orders Industry needs to formulate equipment orders Equipment Innovation Storage Issues Producer Contracts Business Financing

29. Equipment Innovation Storage Issues Producer Contracts Business Financing

30. Equipment Innovation Storage Issues Producer Contracts Business Financing

31. Equipment Innovation Storage Issues Producer Contracts Business Financing

32. Equipment Innovation Storage Issues Producer Contracts Business Financing

33. Variable with variety, season and weather Bale wraps and stack wraps (anaerobic) Regional storage sites (200 total acres) Tarps or buildings needed to cover bales On farm storage - incentives and rules Monitoring and managing storage Equipment Innovation Storage Issues Producer Contracts Business Financing

34. Equipment Innovation Storage Issues Producer Contracts Business Financing

35. Equipment Innovation Storage Issues Producer Contracts Business Financing

36. Guaranteed product delivery and penalties Down payment will be required Designated volume removed from each field Define harvest practices and conditions Define harvest timeline window Product specifications and price factors Storage, delivery and payment schedule Equipment Innovation Storage Issues Producer Contracts Business Financing

37. Equipment capital: $15-25 million – Dependent on harvest methods Inventory 500K tons @$50/ton = $25 million – $12.5 million to farmer/producers 3ton/acre x $25/ton = $75/acre - $25/A for fertilizer – $12.5 million for harvest/storage/freight $60/delivered ton provides a $10/ton profit Equipment Innovation Storage Issues Producer Contracts Business Financing

38. We have learned to handle 13 billion bushels of corn. We can do the same with biomass.

39. Conclusions 1)Crop Residue harvest will become routine 2)Biomass is an underutilized energy resource 3)We are still learning how best to collect and store large volumes of Crop residue. 4)With incentives, efficient solutions will come from farmers and equipment manufacturers 5)The greatest risk of failure is due to current uncertainty about U.S. energy policy.

40. Kalundborg, Denmark www.inbicon.com