Legislature(2009 - 2010)BUTROVICH 205
01/26/2010 01:30 PM Senate ENERGY
| Audio | Topic |
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| Start | |
| Presentation by Denali Bio-diesel | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
JOINT MEETING
SENATE SPECIAL COMMITTEE ON ENERGY
SENATE RESOURCES STANDING COMMITTEE
January 26, 2010
1:33 p.m.
MEMBERS PRESENT
SENATE SPECIAL COMMITTEE ON ENERGY
Senator Lesil McGuire, Chair
Senator Albert Kookesh
Senator Bill Wielechowski
Senator Lyman Hoffman
SENATE RESOURCES STANDING COMMITTEE
Senator Lesil McGuire, Co-Chair
Senator Bill Wielechowski, Co-Chair
Senator Hollis French
Senator Thomas Wagoner
Senator Charlie Huggins
MEMBERS ABSENT
SENATE RESOURCES
Senator Bert Stedman
Senator Gary Stevens
COMMITTEE CALENDAR
Presentation: Denali Bio-Diesel
HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record.
WITNESS REGISTER
GREG MICK, CEO
Denali Bio-Diesel
Alaska State Capitol
Juneau, AK
POSITION STATEMENT: Presented an overview of Denali Bio-Diesel's
proposal to reduce or eliminate the Power Cost Equalization
Program.
SCOTT MCCORMICK, Vice-President
Denali Bio-Diesel
Alaska State Capitol
Juneau, AK
POSITION STATEMENT: Presented an overview of Denali Bio-Diesel's
proposal to reduce or eliminate the Power Cost Equalization
Program.
ACTION NARRATIVE
1:33:36 PM
CHAIR LESIL MCGUIRE called the joint meeting of the Senate
Special Committee on Energy and the Senate Resources Standing
Committee to order at 1:33 p.m. Present at the call to order
were Senators Wagoner, Kookesh, French, Hoffman, Wielchowski and
McGuire. Senator Huggins joined the meeting shortly thereafter.
^Presentation by Denali Bio-Diesel
1:34:31 PM
CHAIR MCGUIRE announced today's agenda to be a presentation by
Denali Bio-Diesel.
GREG MICK, CEO of Denali Bio-Diesel, said Denali Bio-Diesel is
owned by Disabled Veterans, is Alaska-based and is the only
licensed commercial biodiesel producer in the state. In 2009,
Governor Palin and her energy adviser, Joe Balash, asked Denali
them to consider a biodiesel refinery program that would reduce
or eliminate the Power Cost Equalization (PCE) program.
MR. MICK explained that biodiesel contains many of the same
traits as conventional diesel fuel and it is a direct
replacement for petroleum diesel. A manufacturing and refining
process converts high quality oils to biodiesel through
pretreatment known as acid esterification followed by
transesterification. Denali Bio-Diesel uses pure fish oil
derived by cutting and grinding fish waste and then separating
the oil out from the water and solids through centrifuging. The
oil is then run through the process of transesterification.
1:37:04 PM
MR. MICK pointed out that Dutch Harbor is blending fish oil with
petroleum diesel, creating a diesel blend as opposed to
biodiesel.
MR. MICK said the state funds up to $40 million in PCE subsidies
for high energy costs in rural areas; this has increased 25 to
30 percent yearly. Many rural areas with substantial fishing
operations could produce 100,000 to 600,000 gallons of fuel
annually from fish waste. Processors currently grind up and
discharge fish waste back into the ocean. This waste could be
invaluable biodiesel. Communities that produce excess fuel in
this way could also sell it as a commodity.
SCOTT MCCORMICK, Vice-President of Denali Bio-Diesel, said they
singled out 25 high potential areas for reducing PCE cost with
fish waste biodiesel production and consumption. Challenges
unique to small, remote fishing operations limit the potential
for a commercial biodiesel operation, he said. These challenges
include transportation, access to methanol and technical
services, ability to train and certify staff, ability to
maintain a laboratory and to have one or two people running
start up and shut down operations coinciding with the six month
fishing season. Converting fish waste into a product that allows
for the extraction of oil could also be a challenge because
while major fisheries already use a centrifuge and fish-grinding
process, many rural communities only use machetes and tables to
cut up fish. There would also be the issue of what to do with
the de-oiled fish waste.
1:40:34 PM
MR. MCCORMICK reported that the Environmental Protection Agency
(EPA) restricts the amount of fish waste that is dumped into the
water. Many fisheries then convert excess waste to fishmeal at a
loss. He said fish waste can be made into more valuable
commodities than fishmeal. He explained that a filtering process
removes small particulates and results in oil and de-oiled fish
solids. Refining the oil then results in two products, biodiesel
and glycerol. A number of commodities are made from glycerol,
such as soap. He reported that of 132 communities that Denali
Bio-Diesel looked at, 25 are likely to produce biodiesel and a
number of the others could use it as a cottage industry for
making products out of the glycerol.
1:42:00 PM
CHAIR MCGUIRE said that Mr. Mick's wife takes the glycerol from
Denali Bio-Diesel production and makes it into soap. Senator
McGuire has tried the soap and said it is fantastic.
SENATOR KOOKESH asked what Denali Bio-Diesel does with the
filtered solids and how much is produced in a typical day.
MR. MICK replied that 25 million pounds of waste in the Kenai
Peninsula would yield approximately 1 million gallons of
biodiesel fuel. The remaining 19 to 20 million pounds would then
be converted into a fish-based fertilizer product.
MR. MCCORMICK said the fertilizer product is called a liquid
hydrolysate. Removing oil and glycerol from fish waste initially
results in a dry product similar to a soil amendment. The dry
product can be put on another product, such as formic acid, to
stabilize it, prevent pathogens from forming and allow for
shipping and handling. Secondary processing converts the dry
fertilizer to a liquid called a liquid hydrolysate that sells
for about $5 to $7 a gallon. Twenty million pounds of waste
would result in $12 million of liquid hydrolysate.
SENATOR KOOKESH said he thought it was just waste.
MR. MCCORMICK replied that without a good understanding of how
to process the filtered solids, it has been considered waste.
Three locations in the world make fish waste into fuel. One is a
tilapia farm in Honduras, where biodiesel fuels all buses. A
Finnish company, VTT, is building a $40 million company in
Vietnam using large channel catfish waste. The third place is
the Denali Bio-Diesel plant in Chugiak, Alaska.
SENATOR KOOKESH clarified that he was asking about the filtered
solids.
MR. MCCORMICK said depending on how the fish are harvested, the
amount of removed solids is 85 to 90 percent of the fish waste
volume. One eighth of that can be made into a liquid
hydrolysate. If mixed with peat moss, the fish waste solids can
be used as top soil. California uses a mixture of peat moss and
fish solids as topsoil for desert areas and low-quality earth.
Plants absorb 100 percent of fish filtered solids when used as a
fertilizer as opposed to absorbing only 20 percent of chemical
fertilizers.
SENATOR FRENCH asked what a liquid hydrolysate is.
MR. MCCORMICK answered that the process of removing oil and
glycerol from fish waste results in a dry product. Another
chemical process turns the dry product into a liquid fish
fertilizer called a hydrolysate.
1:46:20 PM
SENATOR FRENCH would like to see a chart showing what is
currently happening across the state and the value of waste
products. He would also like to see a projection of what would
happen if the state adopted a process like this and its
potential economic value.
MR. MICK said most processing plants have a meal plant operating
at a loss because they are in excess of what can be ground and
dumped back into the water. Dealing with excess fish waste is
going to become a bigger problem because the EPA reported that
ground and discharged waste is not decomposing or being consumed
by aquatic life, but is building up on the ocean floor. Ground
and discharge practices will eventually not be allowed.
Processors will have to turn to a company to convert the fish
waste to biofuel, or the waste will go to landfills.
SENATOR FRENCH said, for example, it is costing a processor $2 a
pound to make fish meal that can be sold for $1 a pound.
MR. MCCORMICK responded in the affirmative, saying the cost is
about 10 to 25 cents a pound.
SENATOR WAGONER asked what nutritional value the filtered solids
have and if a secondary industry could be developed using
filtered solids to feed pigs, poultry or livestock.
MR. MCCORMICK replied that filtered solids have to be stabilized
to avoid the formation of pathogens in the decomposing fish.
Filtered solids can be used as feed within a day or two or
stored at a cold temperature. If large quantities need to be
shipped, then filtered solids are not usable as a feedstock but
only as a soil amendment, fish fertilizer or fishmeal.
MR. MICK said the word "feedstock" creates confusion; it is an
industry standard term…
SENATOR WAGONER interrupted and said he knows what feedstock is.
He said he was referring to feed for livestock and noted that
dried feed can be fed to poultry, cattle or pigs. He asked if
the filtered solids could be stored and used as feed.
MR. MICK said many places do that with the fishmeal that is
created at a loss. Fishmeal is dried, further ground, stored and
sold.
MR. MCCORMICK said that fishmeal does not require vitamin or
mineral additives; specific additives are required for fishmeal
that will be used to feed stock.
1:51:33 PM
SENATOR HUGGINS asked if the solids have an odor.
MR. MICK said the fish waste right from the fish plants does
smell like dead fish. Once the waste is ground, dried and the
oil has been removed, the smell is eliminated. The biodiesel has
no smell.
CHAIR MCGUIRE asked if they had any of biodiesel here with them.
MR. MICK replied no.
CHAIR MCGUIRE said she has a mason jar of the biodiesel in her
Anchorage office and it is odorless.
MR. MICK said the biodiesel is odorless and non-toxic.
MR. MCCORMICK said rural communities would need some new
equipment, such as a machine similar to a high speed garbage
disposal, to process the amount of fish waste that would make it
viable for a rural community to generate its own fuel. Such a
machine processes up to a ton an hour into a slurry that is then
heated and pressed to remove the oil. Home equipment could make
small quantities of soap; industrial equipment could make larger
quantities. A tank system, costing about $100,000 to $250,000,
would process the de-oiled, dried solid fish waste into a soil
amendment in a passive fashion.
1:55:12 PM
MR. MCCORMICK reported that 25 rural communities could produce
about 4 million gallons of biodiesel annually. Depending on the
region, diesel fuel costs between $4.00 and $10.00 per gallon.
Therefore, the rural communities could create between $16 and
$40 million worth of biodiesel.
SENATOR HOFFMAN asked if biodiesel is a substitute for diesel
and if gasoline can also be made.
MR. MICK said biodiesel is a substitute for diesel, not
gasoline. Biodiesel can run in diesel engines and generators and
be used for home heating. Anything that burns diesel fuel can
burn biodiesel with 100 percent compatibility.
SENATOR HOFFMAN asked if the BTU of a gallon of biodiesel is
equivalent to a gallon of diesel.
MR. MICK replied that a gallon of diesel has approximately
140,000 BTU's and a gallon of biodiesel produces approximately
134,000 BTU's. He said that biodiesel, when run in any internal
combustion engine, has far better lubrication properties than
number 1 and two diesels and ultra low sulfur diesel. Biodiesel
lubrication is superior and causes less wear on the engine.
SENATOR HOFFMAN asked if biodiesel can be used as substitute for
low sulfur diesel.
MR. MICK replied absolutely.
MR. MCCORMICK explained that beginning in 2010, federal law
allows oil companies to deliver low quality high sulfur fuel to
remote regions. The oil companies had claimed it was too
expensive to supply two different kinds of fuels. Mr. McCormick
said this would add more pollution to the environment.
SENATOR HOFFMAN asked if there is a rule exemption for low
sulfur diesel in rural Alaska this year.
MR. MCCORMICK replied yes, beginning this year.
1:58:14 PM
SENATOR WAGONER commented that the performance of his boat
engine goes down if he is using low sulfur diesel, but that
biodiesel would perform as good as number 1 or number 2 diesels.
He asked where he can get some of Denali Bio-Diesel's product to
try in his boat.
MR. MCCORMICK replied that Senator Wagoner could get some in
Chugiak.
SENATOR WAGONER asked the price per gallon.
MR. MICK replied that he generally keeps the price of the
biodiesel about 25 percent less than pump diesel. Methanol,
which is derived from petroleum, is the one chemical needed to
make biodiesel; therefore, if the price of oil sky rockets, the
price of methanol goes up too. Right now diesel in Anchorage
sells at $3.50 a gallon, the biodiesel sells between $2.75 and
$3 per gallon.
SENATOR MCGUIRE asked if Mr. Mick also brings tanks to people's
homes.
MR. MICK said he can do that upon request.
SENATOR WIELECHOWSKI asked how much fish waste there is and the
amount of diesel that can be created with it here in Alaska.
MR. MCCORMICK said the 25 high potential villages could make
about 4 million gallons of biodiesel per year. Alaska has enough
commercial fish waste discarded every year to produce between 85
and 90 million gallons of diesel. The state consumes about 58
million gallons of diesel, all of which is imported. In the
United States, just 50 percent of commercial fishery waste
equates to 10 percent of national diesel needs per year.
2:01:05 PM
SENATOR HOFFMAN inquired as to why the US and the world is not
implementing this technology more widely if the biodiesel can be
used as a low sulfur substitute and is cheaper.
MR. MICK said biodiesel is being widely implemented throughout
the United States. Last year, 750,000 gallons of biodiesel were
produced and consumed in the US. In Europe, 2.6 billion gallons
of biodiesel were produced and consumed. Seven states have
mandates requiring all pump diesel to be B20 within the next two
years. Mr. Mick explained that the "B" stands for biodiesel and
the number is the percentage of biodiesel that is blended with
diesel. By 2012 at least seven states are mandating biodiesel
blend for all consumers.
SENATOR HOFFMAN asked for Mr. Mick and Mr. McCormick's response
to those who say this is unproven technology.
MR. MCCORMICK said that when he heard that response from one
individual, he asked the under-secretary at the Department of
Energy to send some information to that person. He said that
Denali Bio-Diesel's product has been graded by the American
Society of Testing and Materials (ASTM, which is the standard by
which any fuel product is measured. He said a lack of awareness
and some misconceptions about biodiesel exist but a variety of
information is available. He reported that a catfish farm in
Alabama buried the equivalent of 20 million gallons of fuel
because they didn't know what to do with it. Biodiesel people
often do not know about fishing communities or fish farms and
fisherman do not know about biodiesel.
MR. MCCORMICK said that as with any product that is not main
stream, it is misunderstood. Some places have mixed biodiesel
with diesel and called it biodiesel. When the mixed fuel did not
work, biodiesel got a bad reputation.
SENATOR HUGGINS asked about the logistics involved for offshore
processors, including transloading the fish waste. He asked if
it was true that the EPA is going to eliminate the processors'
ability to dump fish refuse.
2:05:29 PM
MR. MICK said that it was his understanding that the EPA intends
to severely limit or restrict the processors' ability to grind
and discharge.
SENATOR HUGGINS asked about the logic and logistics of bringing
offshore processing waste on shore for biodiesel processing.
MR. MCCORMICK felt part of the solution would be to design a
refinery that can fit in a 20'x8'x8' shipping container. He said
most processors have a support vessel and it would be easy to
put this refinery on a ship and process waste at sea. The
offshore processors would still have to deal with the de-oiled
waste, but it has substantially lower pathogenic material
growth.
MR. MCCORMICK noted it may be a decade before the EPA would
restrict the grind and discharge ability of offshore processors.
SENATOR FRENCH asked what the catch is, what the cost is or what
the main impediment to implementing this idea might be.
MR. MCCORMICK reported that over a couple of years, the
infrastructure would probably cost $6 million for two plants;
one plant would be about $3.5 million. Incrementally, each plant
would cost about $2.5 million. If the plant made 100,000 to
600,000 gallons of biodiesel, the payback would be less than 1.5
years.
MR. MCCORMICK explained that Denali Bio-Diesel was asked, as
domain experts, to do a study and propose a solution; they
presented this proposal as a potential solution for reducing the
PCE cost and helping rural communities. A number of firms could
implement this proposed development. Mr. McCormick said that he
and Mr. Mick are not financial experts and feel the legislators
and others would need to decide how to manage and run this
project.
2:08:31 PM
SENATOR FRENCH asked where Denali Bio-Diesel's proposal is
written down.
MR. MCCORMICK explained that as he understood this committee's
role and expertise not to include working out the funding, he
removed four pages from the document before the committee; he
had them to distribute separately. His intention was that this
be solely an informational meeting.
SENATOR WAGONER corrected Mr. McCormick's earlier statement that
diesel is imported into Alaska and stated that diesel is made in
North Pole and in Kenai. He said most low sulfur diesel used in
Alaska is made here.
MR. MCCORMICK apologized and said that was the information given
to him.
SENATOR WAGONER asked if the biodiesel processing plants would
be permanently in place or just when fish are being harvested
and waste is being generated. He asked if the waste could sit
and then a plant could be brought to process it.
MR. MICK replied that these would be permanent locations because
fish degrades quickly without immediate processing or correct
storage.
2:11:14 PM
SENATOR WIELECHOWSKI said he envisioned this taking off through
the Emerging Technology Fund in the Omnibus bill. He said Alaska
could become a pioneer and that the opportunity to provide
diesel fuel, at a low cost, with payback in a year or so,
certainly needed to be looked into.
MR. MICK agreed with Senator Wielechowski and said fish waste
biodiesel would enable rural communities to create their own low
cost fuel source. Alaska can be a technological leader and a
center for excellence for the production of fish waste
biodiesel. Only two other places in the world do this, a small
Honduras company and a Finnish company in Vietnam. By setting up
small scale refineries in rural communities, Alaska would also
be a center of excellence for economic development.
2:13:12 PM
CHAIR MCGUIRE said the Blended Tax Credit of 2004 gave a $1 per
gallon subsidy for fish diesel which expired in 2008. She asked
if there any new subsidies on the horizon.
Mr. MCCORMICK understood that the Department of Energy (DOE) is
waiting to see if there is going to be a stimulus package and if
Stimulus Two would include subsidies. Denali Bio-Diesel worked
with the DOE, Congressman Peters and Senator Stabenow on some of
the language used in their last $3 billion energy bill to allow
subsidies to be a consideration on a state by state basis.
Congress has not decided whether there is going to be a federal
mandate yet and will not know until August when they get through
many of the committee meetings.
CHAIR MCGUIRE said she understood low sulfur diesel to be much
more expensive and yet mandates for it are on the horizon. She
understood that the Department of Transportation is easing their
fleet into low sulfur diesel and it is expensive. She reminded
the committee that in the late 1970's, the US started to require
that gasoline be refined down and the environment harming
elements be removed. The government did not require this of
diesel at that time, but now the push exists. She said she sees
the US going toward low sulfur diesel. She suggested Mr.
McCormick and Mr. Mick look at the cost comparison between low
sulfur diesel and the biodiesel itself because that will be a
most relevant comparison.
CHAIR MCGUIRE said that the meeting was meant to expose
committee members to the many ways that the state would recoup
its investment in this biodiesel plan, including job training,
energy production and independence in villages. Denali Bio-
Diesel's proposal fits with the concept of Emerging Energy
Technology, formerly SB 150, now within the energy plan, and
could make Alaska a world leader.
2:16:50 PM
MR. MCCORMICK showed a photo of a typical commercial biodiesel
refinery that processes large quantities.
CHAIR MCGUIRE asked Mr. McCormick to list costs when possible.
MR. MCCORMICK said this type of large, commercial biodiesel
refinery usually costs between $8 and $15 million, depending on
how many gallons it produces. Other designs made in Germany and
Belgium cost about $2.2 to $2.4 million and produces between
100,000 gallons and 600,000 gallons. To use this equipment
however, fish rendering equipment is also needed, as well as
some extra handling and some external tanks. Both types of
refineries fit in 20'x8'x8' shipping containers. They could be
barged or flown to the desired location.
CHAIR MCGUIRE said the ability to ship these refineries is
important.
MR. MICK said the refineries are built into a shipping container
and can go on barges or a C-130. They can be transported easily
to the communities.
MR. MCCORMICK said he asked for some information from the
company in Whitehorse that has the contract to build housing in
the pipeline area. That housing fits into a container, can be
removed, unfolded and built into a facility that would be big
enough to house the refinery equipment and sometimes host other
community activities in a loft space. He said the refinery is
self-sufficient, not requiring water and using its own fuel to
run itself after an initial start up.
2:19:16 PM
MR. MCCORMICK referred to a summary chart illustrating the goals
of the proposed solution: to consume locally generated waste as
a feedstock, to produce biodiesel for local consumption, to
produce no unusable waste or pollution and to train and employ
residents of rural communities. The daily maintenance for the
refinery system is no more complex than doing maintenance on a
snow mobile.
SENATOR WAGONER what happens if some of the biodiesel is spilled
on water.
MR. MICK replied that one tablespoon of salt is more toxic to
the water than 10,000 gallons of biodiesel.
MR. MCCORMICK said these refineries would diversify the industry
and increase the skills of the rural communities. The design can
be scaled up or down to produce 100,000 to 600,000 gallons of
output. This biodiesel system would help the state decrease or
eliminate the energy subsidies. The villages would have to
provide a plant site but would gain an environmentally friendly
fuel, would employ people with new skill sets and would reduce
reliance on imported fuel.
2:21:23 PM
MR. MCCORMICK said he does not view this as a bio-fuel program
but an economic development initiative. A village with a high
level operation of 600,000 gallons would employ four to eight
people. A training and certification center, which the
University of Alaska Fairbanks has been helping to identify and
create, would probably employ 6 to 10 university personnel, most
of whom would be students involved as a part of a course
program. Another 8 to 10 jobs would staff a chemical and spares
warehouse, an office and field positions. There would also be
collateral employment growth in transportation, chemical and
other industries that participate.
MR. MCCORMICK said that Argonne National Laboratory analyzed the
amount of energy used to recover a fuel from its source through
usage. They found that B100 fuel, fuel that is 100 percent
biodiesel, is the cleanest known fuel. This was illustrated in a
DOE table, "A Comparison of Alternative Fuels." The EPA looked
at the exhaust emissions from the product that Denali Bio-Diesel
produced and compared to petroleum, there is 101 percent less
pollution. It is more than 100 percent because the fish are
collected whether the waste is made into biodiesel or not, so no
extra energy is used to harvest the feedstock. Every other fuel
requires collection and processing of feedstock specifically for
the purpose of making fuel.
MR. MICK referred to a chart of fish waste derived biodiesel
pollution and said the carbon dioxide (CO2) reduction is 96.8
percent. The nitrogen oxide (N20) is up slightly at 15.7
percent. The green house gases (GHG) are down 95.3%. The de-
oiled fish waste is up 338.2 percent but that is then turned
into fertilizer. Carbon Monoxide (CO) is down 85.3 percent.
Particulate Matter, <10 micrometers, is down 162.3 percent and
particulate matter, <2.5 micrometers, is down 86.3 percent.
2:24:22 PM
SENATOR WAGONER referred to a previous chart of relative
greenhouse gas emissions and said he did not understand the gas
emissions of liquid petroleum gas (LPG) and compressed natural
gas (CNG) being almost as high as gasoline. He said LPG and CNG
are much lower in emissions than diesel.
MR. MCCORMICK replied that the DOE calculates total green house
gas emissions by counting how much pollution is given off to
harvest the original fuel source, to transport it, to store it
and to use it
SENATOR WAGONER said that it is funny math.
SENATOR FRENCH asked if it is a life-cycle approach to green
house gas, from cradle to grave.
MR. MCCORMICK said the GREET model for well to wheel analysis
was created by Argon National Laboratory for the DOE.
SENATOR FRENCH asked if these green house gas emissions were DOE
numbers.
MR. MCCORMICK responded yes, they were DOE numbers.
2:26:05 PM
SENATOR Wagoner asked if Denali Bio-Diesel is undertaking a fish
waste biodiesel refinery on the Kenai Peninsula.
MR. MICK confirmed that Denali Bio-Diesel is currently
undertaking this project.
SENATOR WAGONER said he doesn't think the offshore processors
are going to have to bring their waste on shore.
MR. MICK said EPA individuals willing to speak off the record
and offshore processing managers themselves told him that they
foresee a day when grinding and discharging will not be allowed.
Material that is ground and discharged is not decomposing at the
depth it is deposited into the ocean. It was originally thought
that other sea life would consume ground and discharged
material, but that has not been the case.
SENATOR WAGONER said it was true that other sea life doesn't
consume what is ground. Sea life would consume fish waste if it
was not ground. Any processor or fisherman understands that.
2:28:47 PM
MR. MCCORMICK thanked Chair McGuire for the opportunity to
present.
2:29:05 PM
CHAIR MCGUIRE thanked the presenters and having no further
business before the committee, the meeting was adjourned.
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