Nov/Dec 2013 Biodiesel Magazine

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CONTENTS

NOVEMBER/DECEMBER 2013 VOLUME 10 ISSUE 6

20

24

SAFETY

RISK

Safety is Not a 4-Letter Word

Eyes Wide Open

BY RON KOTRBA

BY RON KOTRBA

Find out what the rules are, develop best practices, and follow them

Due diligence is critical when buying distressed assets

CONTRIBUTION ADDITIVES

Cold Flow Treatment: FAME, HVO & Diesel Blends

28 Advertiser Index 8 2014 International Biomass Conference & Expo 36 2014 National Advanced Biofuels Conference & Expo 5 & 27 2014 National Biodiesel Conference & Expo\ 33 Biodiesel Industry Directory 35 Biodiesel Magazine 22 Crown Iron Works Company 10 Eastman Chemical Company 26 EcoEngineers 2 Evonik Corporation 30 French Oil Mill Machinery Company 29 Genscape, Inc. 32 Gorman-Rupp Pumps 11 GUMATECH 23 Hatfield Biodiesel 13 Iowa Central Fuel Testing Lab 9 Louis Dreyfus 18 31 19 12

MaxFlo Advanced Filtration Menlo Energy, LLC Methes Energies Superior Process Technologies, LLC

Effective additization of biodiesel, renewable and mineral diesel blends is essential to optimal fuel performance

BY WERNER A. REIMANN AND BETTINA A. SIGGELKOW

DEPARTMENTS 4 Editor’s Note

Draft Proposal Concerns Industry

BY RON KOTRBA 6 Legal Perspectives

Simple Steps Toward PSM Compliance

BY CHARLES B. PALMER 7 Talking Point

Safety From the School of Hard Knocks

BY LYLE ESTILL 9 Biodiesel Events 10 FrontEnd

Biodiesel News & Trends

14 Inside NBB 18 Business Briefs

Companies, Organizations & People in the News

34 Marketplace

Biodiesel Magazine: (USPS No. 023-975) November/December 2013, Vol. 10, Issue 6. Biodiesel Magazine is published bi-monthly by BBI International. Principal Office: 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. Periodicals Postage Paid at Grand Forks, North Dakota and additional mailing offices. POSTMASTER: Send address changes to Biodiesel Magazine/Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, North Dakota 58203.

NOVEMBER | DECEMBER 2013

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EDITOR'S NOTE

DRAFT PROPOSAL CONCERNS INDUSTRY

www.BiodieselMagazine.com

Ron Kotrba

E D I T O R I A L Tom Bryan President & Editor in Chief tbryan@bbiinternational.com

Editor Biodiesel Magazine rkotrba@bbiinternational.com

Tim Portz Vice President of Content & Executive Editor tportz@bbiinternational.com Ron Kotrba Editor rkotrba@bbiinternational.com Jan Tellmann Copy Editor jtellmann@bbiinternational.com P U B L I S H I N G Mike Bryan Joe Bryan

&

S A L E S

Chairman mbryan@bbiinternational.com CEO jbryan@bbiinternational.com

Matthew Spoor

Vice President, Operations mspoor@bbiinternational.com

John Nelson

Marketing Director jnelson@bbiinternational.com

Howard Brockhouse Chip Shereck Kelsi Brorby Brittany Ruhr Jessica Beaudry Marla DeFoe

Jaci Satterlund Elizabeth Burslie

Business Development Director hbrockhouse@bbiinternational.com Senior Account Manager cshereck@bbiinternational.com Account Manager kbrorby@bbiinternational Account Manager bruhr@bbiinternational.com Circulation Manager jbeaudry@bbiinternational.com Advertising Coordinator mdefoe@bbiinternational.com

A R T Art Director jsatterlund@bbiinternational.com Graphic Designer bburslie@bbiinternational.com

Subscriptions Subscriptions to Biodiesel Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico. To subscribe, visit www.biodieselmagazine. com or you can send your mailing address and payment (checks made out to BBI International) to: Biodiesel Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to 701-7465367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at 701-746-8385 or service@bbiinternational.com. Advertising Biodiesel Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Biodiesel Magazine advertising opportunities, please contact us at 701-7468385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number.

Letters may be edited for clarity and/or space. Send to Biodiesel Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or email to rkotrba@ bbiinternational.com.

holders. According to the document, the agency proposes stalling the biomass-based diesel renewable volume obligation (RVO) at 1.28 billion gallons for 2014 and 2015, while lowering the 2014 volumes for ethanol and cellulosic biofuel well below statutory requirements. For advanced biofuels, however, the agency proposes not only reducing the category’s 2014 statutory volume of 3.75 billion ethanol-equivalent gallons, but also pushing it far below this year’s achievable volume of 2.75 billion ethanol-equivalent gallons, to just 2.21 billion gallons.

The early draft proposal, which may be different than the proposal EPA will eventually publish, lists total renewable fuel at 15.21 billion gallons for next year, while the statutory requirement is 18.15 billion gallons. The proposal seeks a 2014 ethanol RVO at 13 billion gallons, down from next year’s requirement of 14.4 billion gallons. Cellulosic biofuel RVO is proposed at a mere 23 million ethanol-equivalent gallons.

The National Biodiesel Board projects U.S. biodiesel producers will manufacture up to 1.7 billion gallons this year, blowing past the 1.28 billion gallon 2013 RVO and equating to 2.55 billion ethanol-equivalent gallons under the advanced biofuel category. Anne Steckel, vice president of federal affairs for NBB, says the numbers in the draft proposal don’t reflect current actual market production for advanced biofuels. The agency says its proposal is based on biodiesel production, consumption, infrastructure, climate change, energy security, the agricultural sector, air quality, and others, but if so, a reasonable observer would expect an entirely different outcome given this year’s production and consumption rates, and biodiesel’s positive impacts on the environment, energy security and agriculture.

When the official proposal is published, it is clear that biodiesel stakeholders must make their voices heard in the comment period, providing solid argument to EPA that its proposal to stall the biodiesel RVO, and significantly lower the advanced RVO, is fundamentally flawed and detrimental to the existing commercial advanced biofuel industry of which biodiesel is the clear leader.

Please recycle this magazine and remove inserts or samples before recycling TM

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Near press time, we obtained an early draft of U.S. EPA’s renewable fuel standard (RFS) volume proposal for 2014, and its contents are both disturbing and baffling to biodiesel stake-

NOVEMBER | DECEMBER 2013

COPYRIGHT © 2013 by BBI International

LEGAL PERSPECTIVE

Simple Steps Toward PSM Compliance

BY CHARLES B. PALMER

Most biodiesel producers must comply with the federal Occupational Safety and Health Administration standard governing Process Safety Management (29 CFR 1910.119), a complex set of rules requiring massive documentation describing the process and safety information. The PSM standard is

a valuable outline for safe biodiesel manufacturing, but it also presents opportunities for a facility to be fined. For example, if the current owner did not design the facility or was not subject to the standard when the facility first opened, it may be missing many of the design-related documents, start-up safety documentation and diagrams required under the standard. The government can fine the owner for that.

Management and employee turnover also can pose significant challenges to later management compliance.

Even the most diligent biodiesel operators can be fined for lack of documentation. Therefore, biodiesel facility operators must develop a strategy for documenting PSM compliance, whether the current management is there at start-up or has inherited responsibility.

The first determination is whether a facility is now, or will soon be, subject to the PSM standard. Generally, the standard applies to a process that involves highly hazardous chemicals or a process that involves a flammable liquid or gas “on site in one location,” in a quantity of 10,000 pounds or more. For smaller biodiesel producers, the PSM standard might not apply.

Any commercial biodiesel facility will have flammable liquid on site, and probably more than 10,000 pounds (about 1,250 gallons). However, that quantity must be “on site in one location.” In June 2007, OSHA published an interpretation of this requirement. It concluded that when, through piping, tanks and other equipment that are interconnected, the process contains an aggregate of 10,000 pounds or the location of separate vessels is so close that an event of release involving one quantity of the material could cause release from a separate process, the volumes are combined. Therefore, a series of small processes in the same facility would not necessarily be combined to determine coverage, but OSHA often combines volumes to determine whether the 10,000-pound threshold is met, either because of interconnection or close proximity.

In the Meer case, the Occupational Safety and Health Review Commission held that simple storage in atmospheric tanks without benefit of refrigeration is not 6

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NOVEMBER | DECEMBER 2013

a covered process, even if the storage tank is interconnected to a covered process (OSHRC Docket No. 95-0341). In that case, the methanol and ethanol stored in tanks exceeded 10,000 pounds. The court concluded that an exception for storage in atmospheric tanks identified in the standard prevailed over OSHA’s position that flammable material in storage tanks interconnected to a process counts toward the 10,000-pound coverage threshold. While biodiesel producers shouldn’t ignore the PSM standard based solely upon the Meer decision, a smaller producer faced with an OSHA inspection may benefit from this decision.

Even if a small producer is exempt from PSM coverage now, efforts to comply are important. The producer may grow into coverage as production volume increases or as laws change. It’s more difficult to comply with PSM if PSM principles are not adopted and used as the facility is built, and employees are hired and trained, or if PSMrelated documentation is not created as changes are made.

One simple approach to compliance is to create a binder divided into the following categories: 1) Piping and Instrumentation Diagrams, 2) Employee Involvement (training and in PSM program management), 3) Process Hazard Analysis, 4) Mechanical Integrity Evaluations, 5) Operating Procedures, 6) Prestart-up Safety Reviews (for new and restarting facilities), 7) Employee Training, 8) Contractor Procedures, 9) Management of Change (for parts replacement or process additions involving team decisions), and 10) Emergency Plans and Accident, or Close-call Investigation (procedures and documentation).

Place all documentation that fits into each category into the binder, and then look at PSM standard requirements to determine what’s missing. Getting documentation organized is the first step to a legally sound PSM program.

Once documentation is organized, assemble a PSM team. Also, establish a change management team. The PSM team’s job is to get the entire program into compliance. The change management team’s job is to make sure no changes are made until they have evaluated the changes and then recommended those changes to the PSM team. It’s impossible to create a legally compliant PSM program without delegating compliance tasks.

Therefore, regular meetings of the participants are a must so the efforts can be coordinated in a consistent manner and documented.

Author: Charles B. Palmer Attorney, Michael Best & Friedrich 262-956-6518 cbpalmer@michaelbest.com

TALKING POINT

Safety From the School of Hard Knocks

BY LYLE ESTILL

At Piedmont Biofuels we came by our culture of safety the hard way. We’ve been making biodiesel since 2002 and we have lots of “thrills, chills and excitement” to show for it.

When we were brewing up fuel in the backyard, we put our first “safety policy” in place. That was, drinks were limited to one part of the shop, and not allowed near the methanol or isopropyl. That was fortunate for Leif and me. When our 55-gallon reactor blew up, we were having coffee around the corner. Janice said it shook her windows a half-mile away.

When we went to work on our commercial plant (1 MMgy) in 2005, we became a massive construction zone—lots of welding, rigging and dangerous work to be done. Matt sliced his hand with a carpet knife and experienced some serious blood loss. Sparks from an oxy-fuel cutting rig penetrated a hydraulic line on the crane we were using. That was our our first fire. Dean put that one out with a nearby fire extinguisher. We had another fire on our box truck when one of our interns decided to drive across the state with the parking brake on. With no extinguisher on board, we lost that vehicle. Our third fire occurred when Chris was rebuilding a fouled boiler. Without proper lockout/tagout procedures in place, the boiler room was re-energized while we were at lunch together. David put that one out with a fire extinguisher.

The real danger began when the plant started operating—and we remained under construction. It seemed like we were constantly modifying, expanding or correcting our homemade plant, and we were doing it in the context of production. Our first serious accident occurred when Ponytail and Rick were blown off the top of a three-story feedstock tank they were welding on. Unbeknownst to them, one of our production guys had used some methanol-laden bottoms to strip a load of high-FFA feedstock in that tank. With one guy in the burn unit and another in ICU, a sense of terror and dread settled over our project.

They both survived, and have remained friends of our project, but that accident sent us squarely into “OSHA mode.”

We started documenting like crazy. We started standard operating procedures (SOPs) everywhere while we watched our worker’s compensation payments travel sky-

ward. It didn’t help when Joe fell into a one-story concrete pit next to our reactor room and was seriously injured.

One thing his accident inspired was “day lighting.” We started putting in Plexiglas sheets and doors with windows wherever possible so we had no spaces that were pitch black without lights on. And we moved on brightly painted rails. And on conformance. We started behaving the way a chemical plant should behave. Although we are no longer OSHA-obligated, we still act as if we are—maintaining a safety committee, with quarterly walk-throughs and documentation of problem areas we identify at the plant. Safety became a regular item at our Monday morning staff meeting, as did plant cleanliness, since the two are inextricably mixed. We document minor injuries in order to learn from them. That might come from Paul handling toxic cashew oil sent to our lab for characterization, causing an extreme dermatitis reaction that would make anyone beg for poison ivy. Or from a bad lift that injured Spencer’s back. Also on the log is the time I was swatted from the building while cutting a 12,000-gallon poly tank that was filled with deadly embodied energy.

Our most famous fire occurred in the spring of 2013, when our SOP for filter-aid handling was not followed.

A tray of biodiesel-ensconced filter media spontaneously combusted in the dead of the night. It turned our washdry facility into a four-story oven. We lost our filter press and a bunch of other stuff that we probably should have purged years ago. The fire gave us an opportunity to rewire our 30-year-old building—and to simplify operations there—but it was a significant financial setback and a truly expensive lesson to learn. Again.

Nowadays our plant is spinning like a top. Every drop of fuel is spoken for before it is even made, and we have a tight-knit crew. I would say Piedmont Biofuels might be the poster child for learning things the hard way. But we have survived the journey. We are resilient. And we are safely and happily making and distributing our BQ-9000 fuel to the motoring public.

NOVEMBER | DECEMBER 2013

Author: Lyle Estill President, Piedmont Biofuels 919-321-8260 lyle@biofuels.coop

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FrontEnd

Biodiesel News & Trends

Minnesota green lights jump to 10 percent biodiesel After some delay, beginning next July every gallon of diesel sold in Minnesota will contain 10 percent biodiesel. In the Sept. 30 edition of the Minnesota State Register, the state agriculture department announced four conditions required by the statute had finally been met to move from 5 to 10 percent biodiesel. Since the standard kicks off July 1, the higher blend will be required July through October next year, and April through October in subsequent years. In the off months, the standard blend for No. 2 will roll back to B5. The waiver on blending biodiesel with No. 1 from Oct. 1 through March 31 is still in effect, however, and is not set to expire until May 1, 2015.

In 2005, Minnesota implemented the nation’s first B2 biodiesel mandate. In 2009, the requirement jumped to B5. The move to B10 was slated for 2012, but two caveats to the increase under the third statutory condition involving adequate blending infrastructure and regulatory protocol were not met. A Nov. 3, 2011, letter from state commissioners explains the delay specifically involved inadequate regulatory protocol and blending infrastructure. “The length of the interval between [Weights & Measures] inspections might allow for an opportunity for undetected violations of

the content mandate,” the letter stated. “Also, Weights & Measures does not have the authority to audit or inspect at farms or fleet facilities to determine if Minnesota bulk facilities are delivering mandatecompliant fuel.” Regarding blending infrastructure, the letter stated the southwestern portion of Minnesota historically has experienced issues with access to mandatecompliant fuel.

This July, the state biodiesel task force met to evaluate the four conditions, including regulatory protocol and blending infrastructure. Kevin Hennessy, biofuels manager with the state agriculture department, was at the meeting.

He says with Harms Oil’s new biodiesel blending facility across the southwestern state line in Sioux Falls, S.D., which opened last fall, and Western Petroleum supplying biodiesel blends through the NuStar terminal in Sioux Falls, blending infrastructure deficiencies for southwest Minnesota have been deemed by the task force to be alleviated. On regulatory protocol, Minnesota passed H F 634, which changes the delivery ticket requirements

so the biodiesel component needs to be reported. According to Hennessy, these are metered tickets in addition to the bill of lading, which already had the biodiesel content. Previously, the biodiesel percentage was only required on the metering ticket if it was above 5 percent.

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FRONTEND

Tri-State Biodiesel’s triple play: fashion, tribute, heating In September, New York City’s Lincoln Center, one of the most well-known arts and cultural institutions in the world, was fashion central as the Mercedes-Benz Fashion Week, New York City's single largest media event, kicked into high gear. Designers from across the globe rolled out their spring 2014 lines sported by supermodels strutting down runways whose lights were powered by B20.

Dehran Duckworth, a managing partner at Tri-State Biodiesel, said this was the first year Tri-State Biodiesel won the contract to supply the Aggreko plc generators and temperature control equipment for the virtual “tent city” with its 20 percent biodiesel fuel.

“It was an uphill push getting them to agree to run on B20,” Duckworth tells Biodiesel Magazine. Bidding against other suppliers, Duckworth said Tri-State Biodiesel was able to hit the right price point since New York State only taxes the petroleum portion of a B20 blend.

Also in September, the Twin Towers Tribute Lights shined brightly, as they have each year since the terrorist attack violently took the World Trade Center Twin Towers down on Sept. 11, 2001. The lights, said to be the strongest shafts of light ever projected from Earth into the night sky, are a visual memorial to those who were lost on that fateful date, and are turned on at sunset each Sept.

11 and off at dawn Sept. 12. In 2009, Tri-State Biodiesel began supplying the generators that run the tribute lights with a 50 percent blend of biodiesel. This year, however, the generator supplier, Cat Entertainment Services, agreed to run the lights on B99.9 supplied by Tri-State Biodiesel.

This year also marks the fourth year for Tri-State Biodiesel’s Bioheat program that seeks to convert B20 Bioheat users in the New York City area to B99. For B20—and No. 2—users who want to make the switch,

Tri-State Biodiesel offers free servicing, which includes changing filters and adjusting the air mixture; since there’s a lack of carbon and hence a lack of color in the B99 flame, the infrared eye can have difficulty with detection.

Tri-State Biodiesel works with its customers to optimize their systems for use with B99 home heating oil. The company also includes equipment guarantees for the pumps and seals. “In our fourth year, we’ve not had to change one single pump,” Duckworth says. “We’ve got a 99 percent customer satisfaction rate.”

NOVEMBER | DECEMBER 2013

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FRONTEND

Charges finally filed in e-Biofuels fraud case After a long investigation, the U.S. federal government charged Indiana-based e-Biofuels and several executives and suppliers with 88 counts of conspiracy, wire fraud, false tax claims, false statements under the Clean Air Act, obstruction of justice, money laundering and securities fraud, for involvement in an alleged illegal biodiesel scheme that bilked victims, including investors, customers and the government, out of more than $100 million.

The U.S. Securities and Exchange Commission alleges that when Imperial Petroleum purchased Middletown, Ind.-based e-Biofuels LLC as a subsidiary in 2010, e-Biofuels’ owners falsely represented that they were producing biodiesel from soybean oil and chicken fat. E-Biofuels received significant government incentives based on its biodiesel production representations. The government alleges e-Biofuels used middlemen to buy finished biodiesel and portrayed those purchases in fake invoices as feedstock, and later sold the purchased biodiesel for double the price.

The government alleges that brothers Craig, Chad and Chris Ducey, and Brian Carmichael, operated e-Biofuels and conspired with Joseph Furando and Evelyn Katirina Pattison (aka Katirina Tracy), executives with New Jersey-based Caravan Trading Co. and Cima Green, to purchase RIN-stripped B99 from third parties, pretend that e-Biofuels produced the fuel and fraudulently resell it to customers as B100 with RINs and an available tax credit.

The government says when Imperial’s CEO Jeffrey Wilson learned that e-Biofuels was not really producing fuel he allowed it to continue, taking no corrective action. Imperial’s annual revenue increased from $1 million to more than $100 million and its stock price soared as it told investors it was in the business of environmentally friendly biodiesel production. Imperial’s stock price plummeted to less than 10 cents per share after the scheme fell apart, resulting in a loss of around $60 million. The SEC alleges that from

November 2009 to January 2012, e-Biofuels created more than 52 million fraudulent renewable energy credits and $35 million in false tax credits.

Ben Evans, director of public affairs and federal communications for the National Biodiesel Board, says, “This investigation has been underway for at least two years, and we commend the EPA and other federal authorities for moving it closer to resolution.”

The SEC’s complaint filed in federal court charges Imperial Petroleum and Wilson as well as Craig and Chad Ducey and Carmichael. The complaint also charges Caravan Trading, Cima Green and Cima Energy Group and their operators Furando and Pattison (Tracy) for acting as middlemen. They allegedly provided false and misleading documents to deceive government regulators and attract investors to Imperial.

In an email sent to Biodiesel Magazine after charges were filed, Furando says the raid on Cima Green in spring 2012 “was a snipe hunt initiated by the executives at e-Biofuels to divert attention from their alleged illegal activities. Documents were taken, and we cooperated fully.” He further states, “I am taken aback by the total lack of any investigator interest in what Weaver [and Tidwell’s] or the EPA's culpability is in this situation. Attestations were all completed and e-Biofuels was approved to run as a biodiesel plant. Who dropped the ball?”

“RIN fraud, while isolated, has been incredibly damaging to the biodiesel industry and others in the fuels marketplace,” Evans says.

“We have worked diligently with the EPA and the petroleum sector to address it head-on, and we believe the new regulations that are now being finalized by the EPA, as well as increased vigilance in the industry, will prevent it moving forward.”

If found guilty, the individuals charged by indictment face up to 20 years in federal prison on some counts, as well as significant fines.

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FRONTEND

FUELING IMPROVEMENT: Test engine data suggests metathesis alters biodiesel's boiling point and improves oil dilution in late post-injection.

Metathesis processing improves biodiesel oil dilution issues For several years now, concerns have existed with using higher-level biodiesel blends in new diesel vehicles that employ late postinjection for particulate filter regeneration, mainly because of engine oil dilution issues resulting from biodiesel’s higher boiling point.

Unlike the petroleum portion of a blended fuel that seeps into the crankcase and then evaporates back out, biodiesel’s higher boiling temperature allows it to accumulate in the engine oil and stay there, causing concerns of premature engine wear if oil change intervals are not adjusted.

A project carried out at the Johann Heinrich von Thünen-Institut in cooperation with the Karlsruhe Institute of Technology, the Institute for Internal Combustion Engines of the Technical University of Braunschweig, the Steinbeis-Transfer Center for Biofuels and Environmental Measuring, Coburg, and the Technology Center Automotive of the University of Applied Sciences in Coburg, aimed to adjust the boiling behavior of biodiesel to that of petro diesel fuel.

The change of biodiesel molecules through metathesis, as a design tool, was extremely effective for the adaptation of the

boiling behavior of a fuel. Metathesis is a special chemical reaction known from the oleochemistry industry, but it hasn’t really been applied to tailoring biofuels.

Starting from rapeseed oil methyl ester, composed largely of oleic, linoleic and linolenic acid, the catalyst-assisted metathesis reaction with 1-hexene as further reagent led to a variation of the chain lengths, which significantly influenced the boiling line of the produced fuel.

Investigations were done of the fuel’s properties, such as mixing with other fuels and engine oil, as well as the material compatibility with selected polymers.

Subsequent engine tests comprised both analyses of the burning behavior of the fuels as well as determination of the exhaust gas emissions. In addition to the regulated emissions, ammonia, polycyclic aromatic hydrocarbons, carbonyls, mutagenicity and particle size distribution were also examined.

The investigation results indicate that metathesis fuels appear well-suited for use in modern diesel engines that use late-post injection.

Evonik Industries opens new catalyst plant in Argentina On Oct. 21, Essen, Germany-based Evonik Industries started up a new plant for manufacturing biodiesel production catalysts in Argentina. With an annual capacity of more than 60,000 metric tons, the new production plant will supply ready-to-use alkoxides for use as catalysts in biodiesel production from renewable

raw materials. The new catalyst production center will serve primarily the Argentine and Brazilian markets. Evonik located the plant on the same site as Terminal 6 S.A., which operates a large biodiesel facility.

In 2009, Evonik opened a similar plant in Alabama to serve North American biodiesel markets.

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NATIONAL

BOARD

2013: A Year For Record Growth 2013 started with a bang as Congress voted on New Year’s Day to pass one of the industry’s top objectives—an extension of the biodiesel tax incentive that had expired a year earlier. The extension was retroactive, covering 2012 and 2013 production. This came just months after our success on the 2013 volume increase under the renewable fuel standard (RFS). Passage of the incentive meant the policy tools were in place for an incredibly successful year, and as expected, the industry shattered previous production records.

The year was one of the most challenging, yet successful years on record for the industry. We saw intense and sustained attacks to the RFS through political, public relations, and legal challenges.

The year started off at harvest time having suffered through one of the worst droughts in decades. Liquidity had not fully returned to the RIN market due to previous year’s RIN fraud cases, and the biodiesel tax incentive had been lapsed for nine months. The industry, however, was able to overcome these significant challenges and achieve nearly complete success on all of our major priorities, setting the stage for continued industry growth.

The RFS was originally designed and later expanded to increase domestic energy production, reduce greenhouse gases and develop commercial production of advanced biofuels. Many on Capitol Hill have referred to biodiesel as one of the success stories of the RFS and it is because we as an industry have surpassed RFS volume requirements in each year of the program. We are producing significant volumes of advanced biofuels in commercial facilities from coast to coast that are making real contributions to our domestic energy supply. As the program encounters increasingly aggressive attacks, we have worked hard to demonstrate that biodiesel is an advanced biofuel that’s working today to achieve our nation’s renewable fuels goals of diversifying fuel supplies, strengthening energy security, boosting the economy and reducing emissions.

During the 2013 National Biodiesel Conference & Expo in Las Vegas, the industry celebrated its 20th anniversary. This celebration offered the opportunity to both reflect on how far we have come and also to look ahead to our future. In 20 years, we have come from zero commercial volumes and selling biodiesel by the 5-gallon bucket, to a third straight year of more than 1 billion commercial gallons. With two decades in the rearview mirror, industry leaders announced a lofty, yet attainable 10-year vision during the conference for biodiesel to be 10 percent of the diesel market by 2022.

This goal is benchmarked to the on-road diesel volume, but is expected to be met in various markets, applications and blend levels.

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This goal sends a strong message to the marketplace that biodiesel is here to stay as part of the diversification of America’s transportation energy supply.

Another driving force for increased biodiesel demand is the climate benefits of biodiesel as states such as California and New York pass and implement low carbon fuel Gary Haer, standards (LCFS) and other similar climate Chairman, National Biodiesel Board policies. Successful industry efforts in New York State and Rhode Island led to passage of statewide Bioheat mandates this year. The New York state policy requires B2 blended in all heating oil beginning in 2015, and the Rhode Island policy starts at B2 next year and increases to B5 in 2017. On the West Coast, the California LCFS keeps moving forward. The LCFS survived two major legal challenges this year and biodiesel volumes used for compliance are expected to double for a second consecutive year. As more states take it upon themselves to mitigate the effects of greenhouse gases, biodiesel is sure to play an increasing role.

NBB continues to work tirelessly to address the technical needs of those within the supply chain and end users, as biodiesel volumes in the marketplace continue to grow. Our ongoing efforts with OEMs proved successful again this year as General Motors announced the launch of the diesel Chevy Cruze. The launch of an American-made diesel passenger car was significant by itself, but on top of that, it was approved for use with B20. It is very fitting that the first American advanced diesel passenger car is approved for America’s first advanced biofuel.

While the industry continues to grow and expand, NBB as an organization also expanded in 2013. This year, NBB members approved the addition of a Renewable Hydrocarbon Diesel category to its membership. This means that NBB now represents the entire biomass-based diesel category of the RFS. NBB also streamlined its governing board structure, dropping the mandatory seats for various membership categories. This will hopefully simplify the election process and be more inclusive and inviting for good new leaders to run for the board.

NBB also continued to successfully raise funds to execute projects on behalf of the biodiesel industry this year. Membership dues remain a modest portion of the organization’s revenue stream as those dues dollars are leveraged with federal grant and

inside

NBB soybean checkoff dollars to advance the industry and complement our member-funded federal and state policy efforts. This blueprint continues to work in providing value to our membership.

Over the past three years, I have been extremely honored to serve as your chairman. As I pass the torch on to the next chairman, I remain committed to NBB and to this industry. I am sincerely grateful for the dedication of the governing board, the fine work of NBB staff, and the contributions of NBB members. I can tell you that your trade association is completely committed to serving you. We have an incredibly diverse membership, but yet have

managed to stay united as a single industry group. It is my fervent belief that this diversity coupled with industry unity has been the formula for the incredible success that we’ve had. Even as we wrap up this enormously successful and record-breaking year, we will no doubt face intense challenges and uncertainty moving forward. But the industry is the strongest it has ever been, and we have demonstrated to ourselves and to others that we can handle whatever is thrown at us. And so we fight on.

Gary Haer, Chairman, National Biodiesel Board

Industry battling million-dollar anti-RFS campaign Most readers of Biodiesel Magazine have by now seen that the oil industry and other renewable fuel standard (RFS) opponents are pulling out all the stops trying to discredit the program. The National Biodiesel Board has aggressively responded, publishing op-eds and letters in more than 20 publications including USA Today, the Wall Street Journal, the Pittsburgh Tribune Review, the Houston Chronicle, National Journal, the Baltimore Sun and the Philadelphia Inquirer.

When the Philadelphia Inquirer published a column in September parroting the oil industry’s talking points suggesting that the RFS is a broken policy, NBB worked quickly to get a response published by CEO Joe Jobe. “The Energy Information Administration says the United States is already producing more oil than it has in the past two decades, yet pump prices remain near record highs. .... Only through diversification of, and competition in, our transportation-fuel markets can we lower prices.

The renewable fuel standard is working and has helped biodiesel grow from a niche fuel annually into a commercial-scale industry with plants nationwide.”

Many NBB members have published their own letters or op-eds as well, and all biodiesel stakeholders are encouraged to do the same.

We have the facts on our side: We’re the first EPA-designated advanced biofuel to reach 1 billion gallons of annual production. We’ve sur-

passed RFS volume requirements in each year of the program while supporting thousands of jobs nationwide. We’re reducing greenhouse gas emissions by more than 50 percent compared with petroleum. And we’re helping consumers by diversifying the fuel supply and displacing imported diesel fuel.

As RFS critics spend millions of dollars on public relations suggesting the RFS is not working, it is critical that the biodiesel industry step up and spread the word about its benefits. For help, please don’t hesitate to call NBB’s offices, and don’t forget to check out NBB’s Fueling Action website at www.biodiesel.org/policy/fueling-action-center for the latest on how you can help support strong biofuels policy for growing the biodiesel industry.

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insideNBB

Breaking records doesn’t happen by accident Two decades ago it was a word leaders feared to utter.

There was no way; it was too big, too much. Yet 20 years after the biodiesel industry was born, they did it. America’s advanced biofuel broke the B-word. Now it’s not just said, it’s shattered.

But records don’t break themselves. They are broken by determination, hard work, persistence and consistency—exactly what the National Biodiesel Board delivers its members year after year to support their priorities.

With support from the soybean checkoff and federal grants, NBB leverages member dues payments. So for every dues dollar invested in policy issues, there is additional funding at work to support key programs like engine testing, communications and sustainability research.

Fiscal year 2013 was one of the most challenging, yet successful years on record for the industry and it set the pace toward our new long-term goal—10 percent of diesel fuel volumes by 2022. The industry overcame significant challenges to achieve nearly complete success on all major industry priorities.

To start the year, the U.S. EPA announced the precedentsetting level for the 2013 biomass-based diesel volume obligation at 1.28 billion gallons. Also, despite historical gridlock in Congress, the biodiesel tax credit was included in the year-end fiscal cliff deal for 2013. Through relentless efforts with the EPA, the petroleum sector and other groups, NBB helped facilitate the successful development of a private sector RIN integrity solution as well as an EPA Quality Assurance Plan proposed rulemaking.

These programs have helped restore liquidity to the RIN markets and opened doors to continued volume growth.

Along with the policy successes in Washington, other industry milestones abound. The third year of the Advanced Biofuel Initiative captured 67 million impressions across the country, driving awareness up among target audience members. Significant landmarks in California ensure biodiesel remains competitive in the state’s low carbon market. Chevy unveiled the Cruze as the first American diesel passenger car approved for B20, which triggered additional manufacturers to make moves to stronger biodiesel positions. At the close of the year, nearly 90 percent of the biodiesel manufactured by NBB members now comes from BQ-9000 accredited producers. Internally, NBB expanded its membership to include renewable hydrocarbon diesel producers.

As a result, the group now represents the entire biomass-based diesel category of the RFS. NBB also restructured the staff team to bring on new expert resources in Washington, D.C., and on the technical front.

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There are a tremendous number of challenges and uncertainties that the industry will face in the upcoming year, but the first 20 years have set a strong foundation. As 2014 heads out of the gate, with a continued collaborative effort the industry is strong and biodiesel is well-positioned to continue breaking records.

insideNBB

Have it your way: Your trade association priorities are made to order The National Biodiesel Board is your association; that means you can have it your way. NBB members run the show. Members define long-term objectives and programs—they have it their way.

This is the time of year staff asks NBB members to complete an online survey. It’s short and how members answer actually makes a difference. The survey provides input to identify priorities for the draft NBB Program Plan. The plan is coming together now and will define where staff spends time and money October 2014 to September 2015.

The survey is part of an extensive planning process to capture member input and share association priorities. NBB staff and contractors are constantly interacting with biodiesel companies, regulators, users, engine and vehicle companies and distributors to better understand the needs and priorities of the industry. Input is gathered on the technical program through participation in the Biodiesel Technical Workshop. Also, the November membership meeting pro-

vides another opportunity to add input to the planning process. During this meeting, the standing committees (regulatory, trade, technical and marketing) convene and discuss issues facing the industry in the coming years.

In addition to committee meetings, direct member input and a survey, the program plan development also includes a webinar presentation and member review, held after the first of the year. This extensive input process allows NBB to prepare a clear direction to ensure the trade association continues to meet the needs of members.

Stronger than ever: 2014 National Biodiesel Conference almost here There’s still time to register for the 2014 National Biodiesel Conference & Expo, Jan. 20-23 in sunny San Diego—but hurry! Standard registration will end soon, and so will the discount.

This year’s theme is “Strong.”

“With strong policy, strong markets and strong technical and environmental positions, the industry is again poised to see record production,” said National Biodiesel Board CEO Joe Jobe. “NBB celebrates the strong, united front of its membership and the successes of its efforts to continue to grow the U.S. biodiesel market.”

As always, the conference sessions offer education and updates that will help any biodiesel business thrive, while enhancing understanding of issues relevant to the biodiesel industry. The National Biodiesel Conference & Expo continues to be a place to do business, network Among the usual insightful session staples are with industry leaders, and learn from the experts. some new ones, including: diesel business gets done, there is more networking time built into • Ask the EPA. the schedule. Also, unconventional session formats will add variety • Frack Attack: Biodiesel in a New Energy World. to the rich educational content, such as “Ask the Expert” and “Con• California State Policy Update.

• The Final Frontier? Technical Research to Open New Markets. versessions.” A vehicle showcase and Ride-and-Drive will show off the ever-expanding array of B20-approved vehicles.

• Behind-the-Scenes with the Directors of GasHole.

Register now at www.biodieselconference.com, where you can • Transparent Transactions: Creating Balance Among Buyers also view session titles, descriptions and tentative times. and Sellers.

The conference takes place at the San Diego Convention Center The 2014 event has several changes in store, including an earlier and San Diego Marriott Marquis & Marina. time frame than its traditional first week of February. Living up to the conference’s reputation as “the” event of the year where bio-

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BusinessBriefs

LT Industries has released Near Infrared (NIR) analyzers designed to meet biodiesel production and quality testing needs worldwide. The company says its newly updated Parafuel Biodiesel Analyzer provides comprehensive analysis in biodiesel research, development and production. The analyzers are available for either process or bench-top applications. “Our new biodiesel analyzer is a significant update on our previous analyzer’s design,” says Brian Thomson with LT Industries. “It can do measurements that our previous version could not.” The Parafuel Biodiesel Analyzers can measure ASTM D6751 and EN 14214 properties including flash point, viscos-

Companies, Organizations & People in the News

ity, cetane number, moisture, acid number, glycerin, and distillation temperature. They can also measure concentrations of species such as methanol or esters, and monitor transesterification reactions. The new product has improved sensitivity over previous analyzers, which has expanded the measurements that LT-NIR can perform. The new measurements this version can perform are free and total glycerin, including mono-, di- and triglycerides, and water content.

In August, Nevada-based biodiesel producer Bently Biofuels Co. expanded its used cooking oil collection program by purchasing the assets of Got Grease?, a Bay Area waste oil and grease trap pumping company. Got Grease? collected used cooking oil throughout the San Francisco peninsula, East Bay, and Marin areas up to Sacramento. The used cooking oil was then sold to biofuels producers. As one of Got Grease?’s largest customers, Bently Biofuels says it was a natural fit to expand its used cooking oil collection services by purchasing the business assets. The expan-

sion means the addition of approximately 12 jobs in the Bay Area. Christopher Bently, the CEO of Bently Biofuels, says, “By adding our own grease collection service, we increase our efficiency in delivering our alternative to toxicbased fossil fuels. I am very proud to present a more complete and capable Bently Biofuels in the interest of preserving our environment.”

Portuguese biodiesel technology provider Incbio announced it has signed a contract with Biokast Energy S.A. to supply an 8,000 ton (2.4 MMgy) ultrasonic biodiesel plant for installation in Tunis, Tunisia, a small country in North Africa. The plant will employ used cooking oil collected from restaurants in Tunis as feedstock. Incbio and Biokast Energy expect the plant to be complete January. “After a long time spent in the project-planning stage to ensure the client gets the business model right, we have signed the agreement and construction

BUSINESSBRIEFS has commenced, which will see Biokast becoming one of the few biodiesel producers in Tunisia,” says José Marques, CEO of Incbio.

Biokast Energy was established earlier this year with the purpose of collecting and processing UCO into biodiesel. The first project will be set up in an industrial site in Tunis, and will serve the area, with further projects planned for the near future in other cities throughout Tunisia.

Miamisburg, Ohio-based biodiesel technology provider Jatrodiesel Inc. made a strong showing in the 2013 Inc. 5000 list of America’s fastest growing companies, ranking 768 overall and 32 out of the top 100 energy companies. “RFS2 Mosali (the federal renewable fuel standard) coupled with advanced technologies that we offer, plus the breadth of experience we have in the field with more than 15 biodiesel plants all over the world, is helping us grow the company,” Jatrodiesel President and CEO Raj

Mosali tells Biodiesel Magazine. “We couldn’t be more thankful to a proactive biodiesel board, our customers, vendors and lastly our valued and hardworking employees.” Mosali says he hopes Jatrodiesel’s patented marquee technology that eliminates use of acid and catalyst, a process that operates at supercritical pressure and temperatures, is going to catapult the company further into a leading position in the market. “We built a commercial version using this technology and it is performing above and beyond our expectations,” Mosali says. “We are excited about it, and we are actively looking for partners who own or have access to feedstock.”

R.C. Costello & Associates Inc. and Zeton Inc. have recently signed a memorandum of understanding. Costello has extensive frontend engineering, process modeling and design experience, and Zeton has specific know-how in the scale-up of process technology, specializing in designing and building modular pilot and demonstration plants. Together, Costello and Zeton will provide a customized “end-toend” solution from feasibility studies, process

simulation, front end engineering through detailed design, procurement, fabrication and factory testing. Costello has been involved with scale-up of chemical processes, oil and gas, polymers, biofuels and pharmaceutical processes from bench scale, to pilot plant and full-scale operating facilities. Costello in the past has gone out to various construction firms for manufacturing of their modular plants. Now in partnership with Zeton, they have a one-stop shop. Zeton is a recognized world leader in the design and fabrication of lab-scale systems, pilot plants, demonstration plants and small commercial plants using modular fabrication. Process modules are engineered and fabricated at Zeton’s two state-of-the-art, integrated designbuild facilities in Burlington, Ontario, Canada, and Enschede, Netherlands.

PHOTO: R.C. COSTELLO & ASSOCIATES INC.

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SAFETY

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SAFETY

Safety is Not a 4-Letter Word Fire safety is everybody’s business, and the fires easiest to extinguish are the ones prevented

BY RON KOTRBA

Simply put, a culture of safety must permeate commercial biodiesel production. Too often personnel, communities and property have been at risk of catastrophe because preventive safety regulations for facilities that handle flammable materials were not followed or had never been introduced. But the knife cuts both ways and, in some cases, governing bodies, particularly those enforcing the rules, lack inspection budgets, protocol or clear direction on whose responsibility it is to ensure these facilities are operating safely. Biodiesel producers have a confusing mix of regulations and jurisdictions they must follow and report to that includes OSHA, U.S. EPA and National Fire Protection Association codes; fire marshals and state regulations that may be more stringent, but not less than, federal regulations; and local ordinances, zoning and building codes that may be more restrictive than state requirements.

Overlooked sometimes in the confusion is outreach to those who are most important at the time an incident occurs—the local fire departments and first responders.

This confusion isn’t isolated to the U.S. either. Last year in St. Boniface (Winnipeg), Canada, a major fire at Speedway International, a biodiesel facility situated in an industrial zone close to residential housing, rocked the city. It caused surrounding residents to evacuate the area, $15 million in damage, and locals to scratch their heads wondering who is responsible for their safety. A year later, a local committee approved a report stating the city must develop a plan to regulate industrial sites in the future, and requested another report be conducted on how inspections and enforcement of industrial sites are presently done.

St. Boniface city councilor Dan Vandal spoke on AM 680 CJOB radio. “I’ve got mixed feelings on the report,” Vandal says, “and parts of it are alarming.” The fact that railcars with hazardous materials are not subject to monitoring is “very alarming, because that’s a railroad part of town,” he says. “I’m disappointed that one year after, it’s not any clearer who is responsible for monitoring and inspecting industrial sites that have environmental licenses.” He says fire departments in the city have time to inspect other things, “but an industrial site with an environmental license is a priority,” he says. “I would like the fire departments and the province—because they are awarding these licenses—to put priority on doing inspections

and follow up with industrial sites that have environmental licenses. I don’t know why it took a year to come back with a report. We’ve lost many months where we could have started the process.” Vandal did not respond to requests for an interview.

Alabama State Fire Marshal Ed Paulk has been in the news for his refusal, after two fires, to let a biodiesel plant in Jackson County reopen until it meets code. “People don’t seem to understand the wisdom of understanding what the code requires,” Paulk tells Biodiesel Magazine. He says the biodiesel plant was a retrofit in an old foundry. “There was no rhyme or reason, no engineering in determining what the requirements were, no engineering to determine what the life safety requirements were, and we can’t make a buck ‘til we produce product—that’s the thinking that everybody has,” Paulk says. “That’s what causes our bad record, and that’s what causes things to go wrong.”

If any business in Alabama wants to open a facility that is 2,500 square feet or larger, or if it is an assembly or educational occupancy of any size, it has to be designed by a design professional. Retrofitting a foundry for biodiesel production is a change in occupancy, or subclassification within an occupancy, and kicks in the requirement that an architect or engineer must determine if the structure is compliant with the requirements.

“If you change your occupancy type, from when the building was originally built, then you have to meet the codes as they are today,” he says. “You need to get this piece to this puzzle in place early, and our law requires that.” The state fire marshal can’t levy fines for violations, but it can shut a business down.

Like many states, Alabama adopted the National Fire Prevention Association and international building codes. “That’s what we design to, and that’s what the minimum standards are,” Paulk says. Under these codes, something that may seem obvious is, if you’re in an environment like a biodiesel plant where flammable vapors may be present, electrical wiring must be installed in an explosion-proof configuration, he says. But there are also static discharges and other sources to cause ignition. Methanol vapors are heavier than air so they’ll travel to the lowest point and remain until something moves them along or ignites them. “So design of our process to eliminate available vapors escaping into the atmosphere, that’s one method of reducing the fuel that you’re putting out there,” Paulk says. “And that’s all it is—a fuel—and its one job in life is sitting around and waiting for something to make it go ‘bang.’”

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SAFETY Larry Sullivan, owner of consulting firm Larry D. Sullivan and Co. Inc., says he’s always encouraged people in chemical design to look at fitness for purpose. “If you’re dealing with methanol, then it requires a very high fitness for purpose,” Sullivan says. “That means you’re going to have to pay more for the quality of the material and equipment.”

Another clear source of fire at biodiesel plants is spontaneous combustion, whether it’s ensconced filtration media or other material.

Spontaneous combustion is a decomposition process of organic material, an exothermic re-

action. “Once this process starts, as heat builds up, it will dissipate and continue to build until it combusts,” Paulk says. “If it feels warm, you’ve got to do something then to mitigate the hazard.”

In Orange, Texas, last spring, several people were killed, many first responders, in the infamous fertilizer plant explosion. “While fighting the fire, they had one of these ‘uh-oh’ moments, when all of a sudden things really went wrong,” Paulk says. “If, in fact, the people there had kept in close coordination with the local fire department, and understood the

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types of things they were storing—especially the quantity of things they were storing— chances are someone might have foreseen this hazard and prevented the catastrophic event.” Sullivan says a lot of biodiesel plants have emerged in recent years, “but they don’t have an outreach to the community,” he says, but to have hospitals, fire departments and EMS be prepared, they must.

Chris Barron, executive director of the State Firemen’s and Fire Marshals’ Association of Texas, also a volunteer fire chief, says as a local fire chief he’d like to know from biodiesel producers what they are producing, what daily production is and what materials routinely go in and out of the plant. “And then of course what kind of fire suppressants they have and their emergency response team,” Barron tells Biodiesel Magazine. “Those things might help us respond to possible disasters or medical calls.”

Iowa, home to 12 biodiesel and an astounding 41 ethanol plants, only has one inspector in the fire marshal’s office handling flammable liquids plants: Jeffrey Miller, deputy state fire marshal. He says projects are required to submit a plan review before construction—engineered drawings of the plant, what they have for fire protection and ensuring everything per the code—but existing plants are not subject to inspection unless a complaint is lodged.

“Our adopted codes are the NFPA, which basically covers the major requirements for the facilities,” Miller says. “One of those requirements is that the facility should have an emergency action plan. We encourage the facility to communicate this with the local jurisdiction that would be responding to them.”

But, he says, since most of these facilities are in rural areas, many of the fire departments are volunteer. “Most of our volunteer fire departments aren’t even equipped well enough if something catastrophic happened at one of these facilities,” he says. “Most of the small departments aren’t going to have adequate enough foam on hand. Through NFPA, which we’ve adopted through the state, it requires that the facility themselves should provide, or have, the equipment to suppress a fire. Basically, we put it all on the plant owner to be able to provide enough fire suppression or fire protection for the facility.”

SAFETY Years ago, U.S. Congress mandated OSHA and EPA to develop regulatory requirements that would, when companies implemented it, help prevent catastrophic releases of hazardous chemicals: the Process Safety Management program. Biodiesel producers with more than 10,000 pounds (only 1,250 gallons)—virtually all commercial facilities—must implement a PSM program.

“Within that program, there’s one element referring to Process Hazard Analysis,” says Robert Voncannon, senior consultant with Bureau Veritas. “OSHA requires companies that fall within their defined scope to do a process hazard analysis and a HazOp (hazard and operability analysis) is one methodology recognized as acceptable.” Voncannon adds that if a plant meets OSHA’s PSM threshold, it’s likely also subject to EPA’s Risk Management Plan, adding more regulatory red tape.

“If you’re subject to that rule, then you have to submit that to EPA,” he says. Sullivan says HazOp analyses for biodiesel plants “should really be a high-order type simply because you’re dealing with methanol.”

HazOp analysis is a highly structured methodology involving examination of a process or system for possible deviations from the design, construction, modification, or operation intent, Vancannon explains. “To start a HazOp study, you take information about the process, the P&IDs (piping and instrumentation diagrams), break that whole process down into manageable pieces called nodes,” he says. “Once you identify each node, you subject each to questions that are formulated around guidewords.” There is a specific set of guidewords that the methodology requires following (No or Not, More and Less, As Well As, Part Of, Reverse, and Other Than). Then each parameter of every node is subject to the guidewords. The methodology itself is used to identify hazards or operational problems.

“It doesn’t correct anything in itself,” he says.

“If you wanted to build in safety stops in your process, it would give you information on the severity of a possible deviation.” Once consequences to those deviations are identified, a qualitative risk ranking is conducted, leading to development of a risk matrix. “With that information, you can determine what else needs to be done, what other safeguards need to be put into the system,” he says. “Once you iden-

tify the recommended actions, then you assign responsibility in your organization to ensure that those actions are taken or the recommendation addressed.”

In the end, it appears that, as Miller says, safety of personnel and the community is up to the plant. “I wish we could outreach more on whether they’re communicating with the local volunteer fire departments,” he says. “And a lot of [departments] do get involved because they know that, eventually, they will get called to the facility. I don’t know how well they’re working with the locals, but we haven’t received too

many complaints that they are or aren’t.” Paulk says his No. 1 recommendation is simply follow the rules. “If you want to go into business, find out what the rules are,” he says. “Contact your local building and fire authorities, find out what the requirements are, and follow those rules. And above all else, just obey common sense.” After all, once those big, red trucks turn on their lights and sirens and roll out of the station, nobody’s a winner.

NOVEMBER | DECEMBER 2013

Author: Ron Kotrba Editor, Biodiesel Magazine 218-745-8347 rkotrba@bbiinternational.com

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RISK

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RISK

Eyes Wide Open Hope is not enough. Buying distressed biodiesel assets requires important considerations.

BY RON KOTRBA

Sticky, gummed-up valves, busted not so much of a crap shoot and mitigate risk. If it’s a shutpipes, tanks still partially filled with tered plant, a lot of times they’re shuttered for a reason.” residues that were never drained at shutdown—these are things you don’t Primary Assessments “When you think about what drives value from an want to see when buying a shuttered biodiesel plant. But these are obvious red flags, un- investor’s perspective, you want to assess the means of like other problems that may be lurking in the crevices of a deal that seems too good to be true. If a biodiesel plant has remained idle in 2013, perhaps something is fundamentally wrong with the asset, such as location, or permitting, or outdated, even unsupported, process technology requiring millions of dollars.

Plenty of considerations, important business decisions that require experienced legal, engineering and financial counsel, must be given to buying any biodiesel facility, particularly those where an operational history is nonexistent. These include shuttered facilities and partially completed projects. As a seller, without certain elements in the deal, such as a properly shut down plant, an extensive operating history and data on yield conversions, run rates and even productive capacity, you can expect significant discounts on your asset because the buyer must do rigorous due diligence, a major part of which is risk mitigation.

“Your skill set on the engineering side, your knowledge base, what you bring to the table is fundamental,” says Paul Tantillo, managing partner at Enervation Advisors, which facilitated the purchase of several distressed biodiesel plants now operating under the name W2 Energy. “Going into a shuttered plant, first, you have to make sure the plant was shut down properly,” Tantillo says. “That could kill you. You could end up spending $300,000 to $400,000 in busted pipes, gummed-up works, if they didn’t clean out the tanks of all residual material. Then you have modernization—do you have esterification, the frontend system, capable of variable free fatty acid handling and capability?

You have to come in with the knowledge and capacity to do the OSHA requirements and put the safety systems in. Most of them aren’t leaving the recipe book behind— most times you’re buying from a bank. You don’t always have the previous ownership around. You have to make it

that asset to produce a cash flow in the future and the risk factors that could impact its ability to generate that cash flow,” says Kirk Martin, managing partner at Ascendant Partners. “Then you want to assess what kind of capital costs you would expect in the acquisition, the startup and improvements that might be necessary. Then you have the two factors you need to evaluate the investment opportunity—that being the ability to generate cash against the cost of producing that cash.” Ascendant Partners facilitated the sale of the large Beatrice, Neb., plant that was built around Axens’ dry process technology. The plant was completed but never fully operated. The process technology provider disappeared, and couldn’t support technology maintenance. Flint Hills Resources and Benefuel bought the 50-plus MMgy plant for $5 million. It cost $70-plus million to build.

First, Martin says, you need to understand whether the facility is positioned to be competitive. “Does it have competitive access to feedstock markets, is it located to reasonable access to the downstream markets, does it have the kind of transportation infrastructure that you need to efficiently move products to market?” he says. “If the plant’s not located in a competitive spot, the rest doesn’t really matter.” Erik Endler, senior partner at 321 Capital Partners, says a plant’s proximity to competitors is also important.

“Whether it’s rail, highway or water, everyone wants to have as big a plant as possible given the amount of engineering costs involved, and it doesn’t cost much to make them bigger,” Endler says. “But to make it bigger, you have to be able to move the feedstock coming in and the biodiesel going out. Realistically, if a plant says they can do 8 to 10 MMgy and they’re not on rail or water, it’s going to be tough to do that volume unless they have massive storage capacity and run tanker trucks 24/7,” he says.

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RISK about whether you want to do any additional ger challenge to assess the risk that the plant research.” can run, and it becomes a lot more theoretical in determining what kind of conversions, yields, and so forth,” Martin says, “because Discount vs Lack of Information Once market position and competiveness you don’t have an operating history to give have been examined, a much more difficult you that confidence. In those cases, what we question, and a much more risky proposition want to do is bring in additional technical exthan acquiring an operating plant where real pertise, engineering and construction compaoperating data and margins, conversion and nies that could come in and actually assess the yield data are available, is assessing whether the condition of the equipment.”

Detailed inspections must be done to plant can run as intended. “If you have a plant that’s been sitting idle, you’ve got a much big- assess the operability condition so the buyer doesn’t find out later that another $5 million is needed in capital improvements that weren’t anticipated. For an idled plant, there’s a much greater emphasis on the operating condition of the asset. “Has it been sitting for a series of winters?” Martin asks. “Can we turn the valves? Are the tanks still in good shape?”

Lack of an operating history at a partially complete facility or one that was completed but never ran, dings the value materially, EcoEngineers Endler says. “Three-fourths of the cost of Design Verification Compliance building a biodiesel plant is not in the actual equipment, it’s in the engineering costs, so when you have a plant that has problems, or Join the industry leader and implement if the engineering wasn’t right, you basically have to reengineer the whole plant,” he adds. a RIN QAP at your plant!

“That’s hugely costly and makes it an untenEcoEngineers is the industry leader for process and quality standards. Our comprehensive able situation for a lot of people because you program monitors biofuel production in accordance with EPA requirements without can build a plant cheaper that doesn’t have disrupting daily production cycles with intrusive equipment or procedures. We send a clear these problems.” message to RIN markets that your operations meet RFS2 RIN quality standards.

“Just because it’s a bargain doesn’t mean it’s cheap,” Tantillo says. To get an incomplete That means: project or one that’s never run to operational • 2,000,000+ RINS transacted daily on our RIN management platform; • 330,000,000 gallons of biodiesel annual production capacity under management; status, almost always costs more than one • 250,000,000 gallons of ethanol annual production capacity under management; thinks, Martin says. “The discount is signifi• 30 biofuel plants and growing; cant. There’s always unknown factors, it al• Volume-based pricing at a fraction of a penny per RIN! ways costs more than you think it’ll cost, and Features: frankly, even with that kind of risk adjustment • Batch level review and reports available to downstream parties; that they’ll do on the valuation, I’ve seen more • Daily RIN price index; times than not they’re still underestimating • Access to RIN insurance to further indemnify downstream RIN holders; what it’ll take to get that plant operational,” he • Quarterly reports, engineers reviews, registration, annual attests; says. “Ideally, if you’re a seller, and you have • Available for advanced biofuel and foreign production. the option, complete the plant, prove the The results: plant’s operations, and you’ll be talking about • Producers have more access to RIN markets and fair market pricing; an order of magnitude difference in the valu• Blenders can trust the RINs they are separating; • Obligated Parties can trust the RINs they are buying. ation by being able to sell a plant with proven operations versus a plant that’s not operating, Contact: or even worse, not been completed.” If a buyJim Baker, Sales and Marketing Director | Phone: 515-309-1279 (o) / 515-556-1936 (c) er thinks it’ll take $5 million to $10 million to Email: jbaker@ecoengineers.us | Website: www.ecoengineers.us complete, be conservative and risk adjust that to $15 million or $20 million to be safe.

Determining a plant’s actual production capacity is another task. “Sellers will tell you my plant can do this many gallons per year,” he says. “The fact is, most of those plants have never produced, and likely cannot produce, at that capacity.”

The biodiesel business is all about margins, and it’s a long play. “We have to look at gross margins, crush margins, and product margins to understand what you think the potential for profit could be,” Martin says. “If they’re not competitive, you better think hard

CHOOSE THE INDUSTRY LEADER FOR YOUR RIN QUALITY ASSURANCE

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RISK Other Considerations A very detailed assessment of the environmental, legal and regulatory history must also be commissioned to make sure past incidents aren’t going to prevent a buyer from operating the facility. “Are there any permitting issues? Are there outside drivers that resulted in this plant coming into this inoperable condition, was that due to regulatory or environmental violations, or were there some legal issues that might need to be resolved?”

Martin asks. “You need to assess that there’s no extraneous factors that could prevent you from bringing it back into an operating condition.” If there were any correctable violations or stigma tied to the plant, such as unpaid growers, or a RIN fraud investigation, the new owner will find it valuable to employ an aggressive communications and outreach program with the community and regulatory bodies to establish credibility upfront. “Maybe you risk overcommunicating to some extent, but that’s better than undercommunicating,” Martin says.

Another consideration is the differences between buying at auction and buying through a facilitated sales process. “If there are pieces of equipment you need in that plant to help your operation, it always makes sense to make an offer,” Endler says. “You may end up paying more from an auction house than you would directly through the buyer because of the way the auction world works. They buy something from us for X and they hope to make 2X with all the buying premiums and other add-ons.”

In a facilitated sales process, there is a much greater opportunity to complete a comprehensive and detailed due diligence; there’s more time and typically there’s more availability to meet with management and staff to review data, take tours and procure necessary information. “It’s a much more disciplined and organized process that really facilitates making sure that prospective buyers have the opportunity to fully assess the risk and opportunities of the plant,” Martin says. “In a court-ordered auction, the time frame is comparatively short for your due diligence. That means people showing up on auction day have less information available to make that decision and, as a result, they tend to modify their valuation accordingly. They risk-adjust

their valuation not necessarily based on known factors, but based on the unknown factors.”

He says closings at auctions happen quickly, there are very limited representations and warranties, and there are few options for recourse should something be discovered in the future.

Ultimately, purchasing a distressed biodiesel asset is a big decision that contains a significant amount of opportunity, but also a significant amount of risk. “You can’t shortcut the process,” Martin says. “You get excited about a deal, you think it’s a good price and you want to make it happen, but these deals

can take on a life of their own before you’ve done the comprehensive due diligence needed.

Make sure you know what you're getting into, and don’t simply hope it’ll work, but define and tie down at a detailed level the risk factors that could affect your ability to be successful. And go into the acquisition with your eyes open.”

NOVEMBER | DECEMBER 2013

Author: Ron Kotrba Editor, Biodiesel Magazine 218-745-8347 rkotrba@bbiinternational.com

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ADDITIVES

PHOTOS: CLARIANT

CONTRIBUTION

MAKING A DIFFERENCE: Saturated FAME crystal growth can be controlled by flow improvers to hinder crystals from forming large, interlocking species (left) by producing very small crystal entities that can be readily dispersed (right).

Cold Flow Treatment: FAME, HVO & Diesel Blends Effective additization of various biodiesel, hydrogenated vegetable oil and mineral diesel blends is critical to optimal fuel performance

BY WERNER A. REIMANN AND BETTINA A. SIGGELKOW

The recent two decades have been a period of constant change for diesel fuel specifications. The main driving forces have been initiatives to reduce vehicle emissions and, later, efforts to find access to renewable and sustainable resources with the aim of minimizing diesel fuel’s CO2 footprint while at the same time becoming independent of fossil feedstocks. Europe has been at the forefront of this revolutionary trend and is still at the leading edge of these developments.

Quota politics began in Europe in 2003 when the biofuel directive was issued by the European Parliament and Council. The biofuel directive required a minimum biofuel quota of 2 percent beginning in 2005 and envisaged a stepwise increase to 5.75 percent by 2010.

However, revised regulations became more ambitious and in line with the current EU

directives, leading to today’s biodiesel quota, which is now at 7 percent with the declared target of reaching 10 percent by 2020.

The quotas did stipulate blends of mineral diesel and biodiesel, so at first the majority of biodiesel was sold as B100. Only later, when tax relaxations were alleviated, did selling standard B100 became unprofitable and refiners started using biodiesel as a blending component.

The major part of the biodiesel quota in Europe is still covered by first-generation fatty acid methyl ester (FAME) biodiesel, but recent fiscal legislation has made it possible for more second-generation biodiesel (HVO) to be brought into the market. Recent reconsiderations by the European council suggest capping the quota of edible vegetable oils processes to 6 percent with the gap in 2020 targets to be made up by alternative feedstock with no land use change/indirect land use change issues.

Europe embraces a wide range of climatic zones where single or combined use of FAME and HVO as a blending component is practiced. Cold flow treatment of the various kinds of biodiesel and blends with mineral diesel is of key importance for this industry.

Cold Flow Treatment of B100 First-generation biodiesel is referred to as FAME. It’s obtained from fats, oils or greases by transesterification with methanol leading to glycerol as a side product.

In Europe, the most common feedstocks are rapeseed, soybean and palm oils, with used cooking oils becoming more popular and profitable in recent years. Vegetable oils contain certain amounts of saturated fatty acids that are mainly found in the chain length of C14, C16 and C18. Depending on the species of plant origin, the content of

The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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saturated fatty acids in the oil or fat can make up more than 50 percent.

The saturated fatty methyl esters are responsible for the cold flow and engine operability problems in the cold. Saturated fatty methyl esters, which are very similar to the linear paraffin in mineral diesel, will start to crystallize and drop out of solution upon cooling. This crystallization creates field problems similar to vehicle operability experienced in the past. During the crystallizing process, the saturated FAME molecules in the biodiesel are forming macrocrystalline structures that can block filter screens. Often this is found in internal combustion engines and can sometimes permeate through the whole of the fuel, causing it to form a solid gel.

This can create a serious problem in the distribution chain, because when B100 is transported to refineries or terminals to be used as a blending component, it often forms sediments or solidifies.

Saturated FAME crystal growth can be effectively controlled by the use of biodiesel flow improvers that hinder the crystals to form large interlocking species and produce very small crystal entities that can be readily dispersed.

Basic cold-flow properties of biodiesel are measured in the same way for mineral diesel. The cloud point (CP) is the temperature where the biodiesel gets turbid; the cold filter plugging point (CFPP) indicates the engine operability limit and the pour point (PP) reflects the solidification temperature.

Today very efficient cold flow additive technology is available. This technology allows a lower CFPP and PP for a broad range of firstgeneration B100. The CFPP response of a flow improver designed for B100 in a 70/30 percent RME/SME mixture, which is now frequently produced in biodiesel blends, is shown in Figure 1.

Due to the higher amounts of saturated fatty acid methyl ester deriving from soy methyl ester, the response for cold flow additives is significantly lowered. Because of this, many flow improvers at high dos-

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ADDITIVES

age rates will fail to show sufficient reduction in CFPP. With Dodiflow 5603 and Dodiflow 5822, it is still possible to reach the German CFPP winter specification of minus 20 degrees Celsius.

In contrast, PP response of FAME blends typically gives better results and allows handling at much lower temperatures. This is important for refiners who are using this blend component in refinery tank farms and terminals. However, FAME response to cold flow additives is very dependent on the content of saturated fatty acid methyl esters. For CFPP (shown in Figure 2), the results indicate that Dodiflow 5603 does allow a CFPP reduction of 6 C in FAME mixtures with up to around 15 percent saturated FAME. When the content of total saturates is increased, the CFPP delta goes down and reaches a value of greater than 20 percent. With the additive technology currently used, the FAME virtually gets untreatable at economically reasonable dosage rates.

In Figure 3, biodiesel flow improver PP response is shown for RME/SME blends.

Large PP deltas achieved start off at low saturates concentrations and decrease as the SME content is increased. The biodiesel CFPP and PP performance is optimized with Dodiflow 5603 because this technology allows the handling of FAME blends with up to 60 percent SME content down to temperatures of minus 18 C. This is especially important regarding handling issues faced by refineries and terminals.

Figure 2

Biodiesel-Mineral Blends With the introduction of biodiesel quotas, the use of FAME as a diesel blending component is mandatory in Europe. As acknowledged above, FAME has a significant impact on diesel fuel properties such as oxidation stability, lubricity and cetane number.

Through the carbon-carbon double bonds unsaturated compounds, the fuel stability is often negatively influenced and has to be compensated by appropriate antioxidants and stabilizers. On the other hand, cetane number and lubricity are positively influenced, which makes additives to bring sulfur-free B0 onspec obsolete.

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Regarding the cold flow additive response, FAME impact can be negative or positive depending on the type and amount of biodiesel used for making the blend. FAME with a low content in saturates, such as RME, typically show higher percentages than what is needed to fulfill the quotas and is indifferent to cold flow additive response.

PME, an example of a highly saturated FAME, gives a totally different picture.

At low concentrations, nucleating effects dominate the results in a CFPP boost effect, whereas higher blending rates lead to a significant increase in CFPP values (Figure 4).

Often times, the FAME used in the diesel blends is already flow-additized to facilitate handling and pumping at the blending facility. Dodiflow 5603 is successfully used to reduce the PP of this FAME. Compared to conventional diesel, cold flow treatment dosage rates present as rather high. Dodiflow 5603 alleviates these issues, because it is compatible with all conventional cold flow improvers and does not exhibit negative effects when treating the FAME/diesel blend to CFPP specification. Often this Dodiflow-treated FAME helps to lower overall cold flow improver treatment.

Figure 3

Second-Generation Biodiesel The original concept of “second-generation biodiesel” and its major advantage in terms of sustainability implied the use of a nonalimental feedstock such as biomass from wood and organic waste. The main process postulated involved pyrolysis, creation of synthesis gas and finally liquefaction by Fischer-Tropsch synthesis.

The resulting fuels therefore were called biomass to liquid.

Technically, the advantages for use as a fuel compared to first-generation FAME lie in the absence of functional groups and double bonds. These fuels, which are derived from biomass, resemble GTL-fuels derived from natural gas and are regarded as premium in terms of engine compatibility, fuel stability and cetane number.

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Figure 4

HVO-Mineral Blends

Alternative fuels of bio-origin (which are hydrocarbon-based) start with vegetable oils and are used as feedstock for first-generation biodiesel. Instead of a transesterification, the

HVO consists of linear paraffins in a low C-number range with an extremely narrow distribution. The material is wax-like with a solidification point of approximately 30 C. When used as a blending component, this kind of HVO has a devastating effect on the cold flow properties of winterized mineral diesel even at low concentrations.

A German case study showed that the addition of 3 percent HVO to a FAME B7 to reach the 10 percent quota target was enough to seriously damage the CFPP performance of the cold flow additives (Figure 5).

Hydro-dewaxed HVO (HDX-HVO) is a much more suitable biofuel. In addition to hydrogenation, the vegetable oil is subject to iso-dewaxing where part of the linear paraffins is transformed or transmuted into iso-paraffins. The materials obtained of these processes are liquids. By controlling the degree of isomerization, CP and PP can be adjusted in a wide range accord-

triglycerides are directly processed in hydrodesulfurization units (HDS) as neat oil or via cohydrogenation. The resulting fuels are called hydrogenated vegetable oils (HVO).

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positively influence CFPP response of customized cold flow additives.

Figure 5

Summary First- and second-generation biodiesels are playing an increasingly important role as blending components in refinery blending operations that must fulfill strict biodiesel quotas. In colder climate areas, appropriate cold flow properties of the resulting blends and the influence of the biodiesel components also have to be considered. With biodiesel flow improvers out of the Dodiflow range, very effective cold flow additives are available. This allows refineries to treat biodiesel blends with a high content of saturated FAME for the desired low CFPP values.

It also efficiently reduces pour points, which facilitates easier handling in cold climates.

ing to the requirements of the application.

Nearly all properties of the HVO, including density, oxidation stability and cetane, are maintained.

In terms of CFPP, DWX-HVO fuels such as NExBTL are not critical and can be blended in a wide concentration range into mineral oils. Low CP DWX-HVO can

NOVEMBER | DECEMBER 2013

Authors: Werner A. Reimann, Bettina A. Siggelkow Senior Expert-Fuels Additives Global Marketing Manager Clariant OMS 281-465-9100 +49693055203 Refinery.services@clariant.com

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WHERE BIODIESEL BUSINESS TAKES PLACE Biodiesel Magazine Reaches Thousands Around the Globe

1

Jump in on a growing market: The U.S. biodiesel industry is poised for its most profitable, successful year yet in 2013 with expected record-breaking production volumes thanks in part to the increased federal biomass-based diesel requirement of 1.28 billion gallons (28 percent higher than 2012), the $1 per gallon tax credit and rebounding D4 RIN prices.

2

Favorable blend economics indicate that obligated parties under the renewable fuel standard (RFS2) will find it economically advantageous to blend U.S. biodiesel over Brazilian sugarcane to meet their advanced biofuel obligations (2.75 billion ethanol-equivalent gallons), over and above the biomass-based diesel volume requirements, suggesting the possibility of domestic biodiesel production significantly exceeding 1.28 billion gallons. *farmdoc daily.

3

Sustainable 10-year growth plan: IHS Global Insight conducted a modeling report for the National Biodiesel Board to help guide EPA with its yearly biodiesel RVO under RFS2 and, in the modeling report, the group determined that there will be enough feedstock available to reach 3.3 billion gallons of U.S. biodiesel production by 2022.

Biodiesel Magazine is Truly Global

4

The National Biodiesel Board unveiled a new industry target in February 2013, named 10x22, an aggressive but achievable goal that calls for biodiesel to make up 10 percent of the U.S. diesel fuel supply by 2022.

Did you know Biodiesel Magazine is recognized as the world’s largest and longest-running biodiesel magazine? It is the only trade journal exclusively dedicated to important biodiesel industry news, policy and events.

5

Engine makers support biodiesel, why not you? All major OEMs producing diesel vehicles for the U.S. market support at least B5 and lower blends and 79 percent of U.S. manufacturers now support B20 or higher biodiesel blends in at least some of their equipment. Source: NBB OEM support document, Sept. 2012.

6

No blend wall here: While the ethanol industry struggles with hitting its blend wall, biodiesel penetration in the 2012 U.S. diesel fuel supply was only 1.9 percent. Given that all major OEMs support B5, achieving a 5 percent biodiesel penetration rate would mean nearly 3 billion gallons of biodiesel production (almost three times greater than 2012 production volumes). Moreover, nearly all the biodiesel used in the U.S. today is consumed by heavy-duty applications, a growing number of which support B20. To reach 20 percent penetration, the U.S. would need to produce 11.5 billion gallons of biodiesel, 10 times more than produced last year.

7

Global ethanol and biodiesel consumption combined will reach 135 billion gallons by 2018.

Source: Global Industry Analysts Inc.

8

Biodiesel quality continues to improve: The latest NREL quality survey results announced February 2013 at the National Biodiesel Conference show a record 95 percent of the biodiesel on the market today is within ASTM D6751 specifications.

9

68 percent of U.S. and Canadian biodiesel productive capacity is BQ-9000-certified, meaning strict quality controls are in place—of the approximately 3 billion gallons of productive capacity in the U.S. and Canada, 1.84 billion gallons is BQ-9000-certified versus 1.24 billion gallons that is not. Source: 2013 Biodiesel Plant Map and the BQ-9000 site of certified producers.

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11 Assurance in the market: Obligated parties, third-party quality assurance plan (QAP) providers, the biodiesel industry and government have worked together to restructure the RIN program to provide more security against potential fraud. A proposed QAP rule was issued in January and a final rule is expected midyear. The proposal offers obligated parties an affirmative defense against civil liabilities from buying, trading or retiring bad RINs, and includes one option that also relieves obligated parties from paying for the replacement of any invalid RINs. Source: EPA, Congressional hearings, American Petroleum Institute, Biodiesel Magazine, etc.

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