INSIDE: THE NEED FOR A ‘PLAN B’ IN PROJECT FINANCING
BIODIESEL MAGAZINE March 2011
Straight Talk A Q&A with IPT’s Peter Brown on Issues Facing the Industry Today Page 36
Bouncing Back with the Buck Page 24
Cavitation Technology to Help Reduce Filter-Blocking Particles Page 30
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MARCH 2011 VOLUME 8 ISSUE 3
Whatever it Takes
Ready to Burst
Bouncing Back with the Buck
QUESTIONS BY RON KOTRBA
BY LUKE GEIVER
BY BRYAN SIMS
Straight talk with Peter Brown, co-founder of International Procurement Tools
Cavitation technology may help reduce filter-plugging tendencies in biodiesel
Producers discuss their thoughts on the tax credit and the political climate
DEPARTMENTS 4 Editorâ€™s Note Straight Talk
BY RON KOTRBA 6 Legal Perspectives
Using Private Placements for Initial Financing
BY TODD A. TAYLOR AND ZACHARY D. OLSON 8 Talking Point
Deliberately Profitable Biofuel
BY ROBERT M. BAILEY 9 Biodiesel Events 10 FrontEnd
Biodiesel News & Trends
16 Inside NBB 20 Business Briefs
Companies, Organizations & People in the News
36 Marketplace/Advertiser Index
Biodiesel Magazine: (USPS No. 023-975) March 2011, Vol. 8, Issue 3. Biodiesel Magazine is published monthly. 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.
EDITOR'S NOTE We live in a world of cautious, canned statements where people are hesitant to tell you what they really think about the issues. And then there’s Peter Brown.
STRAIGHT TALK Ron Kotrba
Editor Biodiesel Magazine firstname.lastname@example.org
In case you don’t know who he is, Brown is co-founder of International Procurement Tools, a company that says if you have a permitted site and a building with a concrete slab, it will build you a 60 MMgy pipe-to-pipe biodiesel processing unit for $6 million. That’s 10 cents per gallon of installed capacity. The systems are based on the horizontal waterless process developed at the University of Kassel in Europe, the same technology on which Greenline Industries, a biodiesel hardware vendor that went out of business two years ago, based its equipment. I had a long conversation with Brown, whose brother started Greenline Industries. While Brown was never officially employed by Greenline, he handled public relations for the company at arm’s length, along with international sales. In our conversation, which can be read in the Q-and-A on page 22, titled, “Whatever it Takes,” Brown discusses what happened to Greenline Industries, and how lessons learned from that spectacular failure will help keep his new company from making similar mistakes. “I had a bird’s eye view and a worm’s eye view of the company,” Brown told me. “You and I sat in that press conference at the 2009 National Biodiesel Conference and, to me, that was probably the highlight and the lowlight of the company. They lost focus at that point of what they were up to. They had gone through a very successful round of financing and picked up $20 million, and by then they did what every single dot.com in Silicon Valley did—they started spending the money on things that were not relevant to the business. They forgot that what they were was a hardware vendor.” Brown also offers a broader perspective on some serious, important issues facing the biodiesel industry today, such as how to increase U.S. domestic demand for biodiesel, what really happened to the German biodiesel industry and market, where he sees the most promise for biodiesel activity globally, and much more. I hope you find Brown’s straight talk as refreshing as I do.
FOR MORE INFORMATION AND PERSPECTIVE, VISIT KOTRBA’S BLOG AT BIODIESELMAGAZINE.COM/FAMEFORUM
Associate Editors Bryan Sims’ feature story, “Bouncing Back with the Buck,” is a continuation of our efforts to dissect how the return of the biodiesel tax credit will impact the industry and capture producers’ thoughts on what is next.
Luke Geiver wrote, “Ready to Burst,” a feature article that discusses how cavitation technology is being researched as a means of production that can help control filterplugging tendencies in some biodiesel.
Erin Voegele leads off our FrontEnd section this month with an article on R.C. Costello & Associates partnering with Certified Technical Services to offer convenient, skid-mounted biodiesel processing units.
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Using Private Placements for Initial Financing BY TODD A. TAYLOR AND ZACHARY D. OLSON
If you are involved in a new renewable energy company, you know it requires many resources, not the least of which is money. Prior to project financing, you have to
rely on selling stock or debt of the company to fund the company. Whether you rely on family and friends, angel investors, venture, or some other avenue to raise your initial capital, you need to be aware of the many potential issues when offering and selling securities and be armed with information to deal with any such issues. A security is more than just common stock. While the formal definition is lengthy and technical, a security is basically any investment of money or services into a company or project where investors are relying on someone else (typically the company, but can be a partnership or joint venture) to produce profits in which such investors will share. Therefore, even money from your mother, brother and friends for founders stock and one-page promissory notes is a security and subject to these regulations. All securities issued by a company, in whatever form, must be registered with the U.S. Securities and Exchange Commission unless either the securities transaction is, or the securities themselves are, exempt from registration. The federal securities laws and SEC rules provide several specific exemptions from registration. The most widely utilized exemption from registration is what is known as the private placement exemption, or Reg D exemption, which is the focus of the remainder of this article. In addition to the private placement exemption, there are several additional exemptions described in the federal securities laws and SEC rules that are not discussed in this article, but may be available in specific situations. The Reg D exemption is available to companies selling securities in private transactions to accredited investors. For an offering to qualify as private, a company may not use any form of general solicitation or advertisement to communicate the offer to potential investors. Companies may, however, hire licensed broker-dealers to assist in private transactions, which may help a company connect with potential investors. Using unlicensed broker-dealers, called finders, is very problematic and their involvement can often make an exemption unavailable. In our current social environment, which is becoming heavily influenced by social media—think Twitter, LinkedIn and Facebook— companies may be tempted to communicate offers to
purchase securities in this way. Unfortunately, the use of social media may be deemed to be general solicitation, and may violate private placement rules. At this time, there is little judicial guidance regarding the use of social media for securities offerings, but companies should avoid social media as an avenue for offering securities. Other things to avoid are mailings to or meetings with people with whom the business principals do not have an pre-existing business relationship. For example, a company that is developing a new biomass harvester cannot send letters to every implement dealer in the area asking for an investment. The types of investors that qualify as accredited investors most commonly include a corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; a director, executive officer or general partner of the company; a natural person whose individual net worth, or joint net worth with that person’s spouse, exceeds $1million (exclusive of primary residence) at the time of the purchase; a natural person with income in excess of $200,000 in each of the two most recent years (or $300,000 joint income with such person’s spouse); any trust with total assets in excess of $5 million not formed for the specific purpose of acquiring the securities; or an entity in which all the equity owners are accredited investors as defined above. In addition to the federal securities laws, companies issuing securities are required to comply with state securities laws, commonly called blue-sky laws. Securities issued pursuant to Reg D exemptions are considered covered securities and are not subject to registration in the states as long as the company complies with the notice provisions of any and all states in which securities are sold, not just the state in which the company conducts its operations. States’ notice requirements typically require a company to file a notice of sale with the state within a set amount of time after the first sale of securities in that state. The initial financing of a company can be very exciting, but can also be filled with pitfalls. It is important to be well advised regarding the potential risks when formulating a financing plan upfront, and to stick to that plan. Authors: Todd A. Taylor and Zachary D. Olson Attorneys, Fredrikson & Byron P.A. firstname.lastname@example.org email@example.com
CONFERENCE & EXPO
The biodiesel industry is poised to take on what could be its strongest year yet. But there will be challenges. The insight and education at the 2012 conference will be critical to keeping our industry on the right track and ensuring the long-term success of our strategic initiatives.
FEBRUARY 5-8, 2012 Gaylord Palms Hotel & Convention Center Orlando-Kissimmee, Florida
Hosted by the National Biodiesel Board www.biodieselconference.org
Deliberately Profitable Biofuel BY ROBERT M. BAILEY
The Sierra Club's David Brower once said, “There is no business to be done on a dead planet.” Some in the biofuel business may agree. The challenge in biofuels, however, is that they are also a business. And so we might add this corollary, “There is no business to be sustained without monitoring gross margins.” Gross margins can be established to reflect business metrics that act as a barometer of a business’ health and competitiveness when compared to the rest of the industry. Increasingly the biofuels industry is finding itself like any other. Despite a huge potential global demand for the fuel, if the processing costs of a business become too high and cannot be passed along to the ultimate buyer (exclusive of blending and tax credits), then that biofuel business is likely to be unsustainable. In preparing a biofuel business for funding, we explore management’s thinking and pinpoint the strengths and weaknesses of their business plan. The SWOT is a tool we include in every business review. Locating the strengths, weaknesses, opportunities and threats, provide valuable insights, but no measurable tools to run or improve the business. The biofuel industry is being impacted by the speed of communication and innovation at least as much as other global industries. Those increases are forcing changes in how it will manage information. Success there will mirror their financial successes. To address the speed of change up front, we recently revised our review process to include discussion about monitoring ongoing pricing and profitability. In essence, we are replicating the system advocated by John Mullins and Randy Komisar in their book, “Getting to Plan B: Breaking Through to a Better Business Model.” Komisar, a partner in the legendary venture capital firm Kleiner Perkins Caufield & Byers in Palo Alto, Calif., began noticing that most original business plans failed. The home run ideas that produced big, sustainable profits resulted from reworking a core innovation. The breakthrough of Plan B often identified a new niche or totally different application. Plan B usually proved to be the better investment. The gross margin model supports the success of Plan B. It represents the “best of ” in four elements of a pro-
cess of getting to Plan B. There are two types of models to explore. The analog is a broad industry approach to a market. Comparing say, the iPhone and the Droid benefits might be the analog for your new smartphone concept. The antilog represents those company approaches and new solutions that were risky—but worked. A good example here is Netflix, which is shattering the model for delivery of timely home video entertainment. Considering your analog and antilog models unearths new thinking and insights about your processes and customer behavior. Additionally though, it spurs the iterative steps of rethinking a product to distinctiveness. The assumptions about industry standards and customer habits give way to the leap of faith. This is the third element. It tests a new idea and leads to its refinement. Your revised approach works. It doesn’t. Or, it’s back to the drawing board. The process of refinement continues through to the creation of the fourth element, dashboards. Dashboards in themselves represent the process of developing useful metrics for increasing gross margins. Answers that surface on your dashboard might address the following questions. How low can we drive our costs? How high can we price our products? Are there other ways to manage the margins of each of our products? How can we adjust our gross margin model to give us a competitive advantage in ways that others in the industry lack? An industry comprised of many engineers can anticipate flexibility, adaptiveness, and precision. What is new here is the deliberate driving of process technologies into actual cost advantages. Furthermore, your company is distinguishable for its value-adding competence for regular, measurable innovation and quality improvement. It may be enough to simply live another day to supply the market with green fuels and byproducts. For those who want more, correlations to the gross margin represent quality and business sustainability. That may be what you need to identify your own Plan B. Author: Robert M. Bailey Biofuel Financing Advisor/Broker, Trusted Advisory (646) 472-5213 firstname.lastname@example.org
EVENTS CALENDAR International Biomass Conference & Expo MAY 2-5, 2011
America’s Center St. Louis, Missouri The largest, fastest growing biomass event was attended in 2010 by 1,700 industry professionals from 49 states and 25 nations representing nearly every geographical region and sector of the world’s biomass utilization industries―power, thermal energy, fuels and chemicals. Plan to join more than 2,500 attendees, 120 speakers and 400-plus exhibitors for the premier international biomass event of the year. (701)746-8385 www.biomassconference.com
International Biorefining Conference & Trade Show
Houston, We Have a Solution
SEPTEMBER 14-16, 2011
Mark your calendars and get ready, the No. 1 biorefining event in the world is coming. For three days, Sept. 14-16, the 2011 International Biorefining Conference & Trade Show to be held in Houston will bring together hundreds of industry professionals to discuss all things advanced. Produced by Biorefining Magazine, the unprecedented event will offer a comprehensive look into advanced biomass refining including technology scale-up, project finance, policy, feedstock use and more. Geared towards industrial, petroleum and agribusiness ventures, the program will highlight advanced biofuels development and distribution, biobased platform chemicals, polymers and other renewable molecules. The conference will be held at Hilton Americas. The topics to be covered will include finance (venture, private and institutional equity), petroleum and petrochemical refining, pulp and paper milling, biofuels and biobased products manufacturing and project development, agricultural processing and waste management, and will also be of interest to professionals from auto manufacturing, aviation, government/military, and research and academia. Starting with industry tours of the region’s most innovative bioprojects and facilities, the conference will address the biggest issues in the biorefining sector today. Included in the discussion will be petroleum industry perspectives on biorefining, converting existing industrial assets into next-generation biorefinieres; forging symbiotic relationships; aviation and military perspectives on biobased jet fuel, and among others, the global market outlook for biobased fuels and chemicals. For those startups seeking a foothold in the global industry, the conference will also cover venture capital and private equity viewpoints and overcoming the barriers to market entry. The 2011 International Biorefining Conference & Trade Show will usher in the next phase of the surging biorefinery industry. Plan to attend, and along with the teams from Biodiesel Magazine and Biorefining Magazine, hear about how the next generation of advanced biofuels and biobased chemicals is succeeding now.
Hilton Americas – Houston Houston, Texas The International Biorefining Conference & Trade Show brings together agricultural, forestry, waste, and petrochemical professionals to explore the valueadded opportunities awaiting them and their organizations within the quickly maturing biorefining industry. Speaker abstracts are now being accepted online. (701)746-8385 www.biorefiningconference.com
Northeast Biomass Conference & Trade Show OCTOBER 11-13, 2011
Westin Place Hotel Pittsburgh, Pennsylvania With an exclusive focus on biomass utilization in the Northeast―from Maryland to Maine―the Northeast Biomass Conference & Trade Show will connect current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels, with waste generators, aggregators, growers, municipal leaders, utilities, technology providers, equipment manufacturers, investors and policymakers. (701)746-8385 www.biomassconference.com/northeast
Southeast Biomass Conference & Trade Show NOVEMBER 1-3, 2011
Hyatt Regency Atlanta Atlanta, Georgia With an exclusive focus on biomass utilization in the Southeast―from the Virginias to the Gulf Coast―the Southeast Biomass Conference & Trade Show will include more than 60 speakers within four tracks: Electricity Generation; Industrial Heat and Power; Biorefining; and Biomass Project Development and Finance. (701)746-8385 www.biomassconference.com/southeast
Biodiesel News & Trends
PHOTO: R.C. COSTELLO & ASSOCIATES
UNIT TRAIN: R.C. Costello & Associates recently partnered with Certified Technical Services to build skid-mounted biodiesel processing units available to the industry.
Aligning for Greater Affordability Costello partners with CTS to design, construct skid-mounted units The U.S. is recovering from the financial downturn, but minimizing costs is still a primary concern for those considering new biodiesel projects. A strategic alliance formed between Californiabased R.C. Costello & Associates and Texas-based Certified Technical Services aims to make project development convenient and less costly for biodiesel producers. According to Rocky Costello, president of R.C. Costello & Associates, customers can save up to 15 percent on construction rates by purchasing a skid-mounted biodiesel facility. This is because shop rates are significantly lower than field-construction rates. Certified Technical Services’ location also means that project developers can expedite a project during winter months when weather conditions in northern states may cause costly construction delays. The companies have previously worked together designing and building numerous skid-mounted systems for biofuels, chemical and the oil and gas industries. The strategic alliance simply formalizes the relationship. Costello notes that there are several reasons his engineering company has chosen Certified Technical Services as its partner. “Their facility is a one-stop-shop in that they manufacturer vessels and skid mounted process plants,” he says. “They also have extensive knowledge in the proper layout of equipment and instru-
ments and controls. They have such a good background in the field, they’ve done so many skids, it’s our benefit to use them because we don’t have to go to multiple vendors to get a complete process plant.” Under the strategic alliance, R.C. Costello & Associates will complete the engineering for projects developed under the alliance, while Certified Technical Services will construct facility and handle design and construction of the skids. In addition to offering greater affordability, Costello notes that there are several other advantages of skid-mounted processors. When working to expand or modify an existing facility, skid-mounted systems allow for a reduced interruption to existing operations. Since initial testing can be done in the warehouse before the system is shipped, the time needed for onsite commissioning can also be reduced. In addition, skid-mounted systems offer important construction advantages when establishing a plant in a remote location. “The complementary strengths of the two firms will provide a simple and seamless experience for our customers,” Costello says. “When design and construction work together from the beginning of the project, fewer last-minute engineering changes occur and less contractor personnel are needed during on-site installation.” —Erin Voegele
Waste Not, Want Not
As the biodiesel industry ramps up production to help fulfill the 800-billion-gallon biomass-based diesel mandate under RFS2, efficient and cost-effective routes are underway for glycerol utilization, other than the traditional pharmaceutical and industrial routes currently being applied. Keerthi Venkataramanan, a graduate student at the University of Alabama-Huntsville’s biotechnology doctoral program, may have unlocked a novel glycerin application route for producers to tap into. In his research, Venkataramanan used a strain of bacteria commonly found in soil, called Clostridium pasteurianum, which feeds on glycerol as its sole carbon source whereby it can biologically produce a range of useful byproducts such as butanol, 1,3 propanediol and ethanol, in addition to trace amounts of acetic and butyric acid. Venkataramanan admits he’s not the first to study glycerol conversion processes like this. Since other firms, including DuPont, have developed a proven process that produces 1,3 propanediol from glycerol using a genetically engineered strain of E. coli, Venkataramanan decided to focus on butanol extraction instead. “In our bacteria strain on glycerol, we can produce about 30 to 40 percent butanol and another 25 to 30 percent into chemical intermediates,” Venkataramanan tells Biodiesel Magazine. “These studies are all batch fermentations so the yield varies comparatively between each batch. The maximum we’ve got is 40 percent and the average was around 22 percent; in other words, 22 grams of butanol per 100 grams of glycerol.” Unlike other commonly used bacteria strains, such as Citrobacter, that are highly pathogenic in nature, Clostridium bacteria is an anaerobe that is nonpathogenic, according to Venkataramanan, adding that he’s finding more productive strains that can be bioengineered. “The bacteria make butanol to a greater extent, but at the same time there are challenges,” he says, “because butanol is toxic to the cells and any of its cell growth at higher concentrations. We’re focusing on overcoming those challenges in terms of increasing butanol yield.” In addition to producing butanol and other biochemicals using the Clostridium bacteria, Venkataramanan adds that he’s also successfully extracted butanol from the methyl ester itself. “Blending butanol
PHOTO: PHIL GENTRY, UNIVERSITY OF ALABAMA-HUNTSVILLE
New glycerin use efforts are expected to keep pace with increased supply
UNIVERSITY UTILIZATION: Venkataramanan found a bacteria in soil, called Clostridium pasteuranum, which is being studied for its ability to convert glycerol into a range of biochemicals.
in biodiesel would actually increase the calorific—or fuel value—of biodiesel,” he says. “[A biodiesel producer] wouldn’t have to go outside the biodiesel plant to carry out the synthesis. You can integrate it into biodiesel plants so that you can blend butanol with biodiesel again.” Venkataramanan points out another advantage of using the Clostridium bacteria. “When you scale up an anaerobic process, it’s economically favorable comparable to aerobic processes by a margin of 40 percent,” he says. “Many biodiesel companies will be restarting or contemplating restarting and that means, eventually, there will be more glycerin out there. If there’s going to be more glycerol out there and they have problems of disposing of it, you need to come up with a viable solution like a biological conversion.” —Bryan Sims
The Good Gets Better
How an acclaimed federal algae consortium may become even more successful Although relatively young, the National Alliance for Advanced Biofuels and Bioproducts has already achieved a lot and proven that a long name can yield big results. In November, it released news that the program, formed to develop and evaluate new algal biofuels technology, had done its job and produced algae biodiesel through collaboration that brought catalyst providers to algae cultivators together. With 14 major universities, three national labs and several other private parties helping the NAABB to achieve its goals including Solix Biofuels, Targeted
Growth Inc. and UOP, it’s safe to say the program was doing just fine even before a major participant, the Donald Danforth Plant Science Center in St. Louis, received a $70 million grant from the Danforth Foundation. The grant, which incoming President James Carrington says will “add critical expertise and new technologies,” will also help “accelerate the transition of basic discoveries into commercial applications.” Five new investigators will be added to the center because of the grant, and the bioinformatics and biocomputing capabilities of the facility will grow. —Luke Geiver MARCH 2011
Primed for Growth
It started in 2007, when researchers began collecting an extensive library of jatropha genetic material in Central America, featuring thousands of genotypes that put SG Biofuels on the map as a bioenergy crop company. Now, the San Diego-based firm aims to extend its jatropha seed development and breeding expertise into Brazil with the launch of an R&D center to bring its JMax Jatropha Optimization Platform online through a newly created subsidiary, SG Biofuels Brasil Ltd. in Sao Paulo. Fernando Reinach was named senior advisor to help lead the initiative. SG Biofuels found Brazil to be an enticing location to establish relations with area farmers in the northeast region to grow jatropha on dry nonfood land, says Brian Brokowski, vice president. The jatropha will be an ideal and readily available feedstock for biodiesel producers in the region, he says. “Obviously, jatropha is very well-suited for biodiesel and there’s a strong market in Brazil for biodiesel,” Brokowski tells Biodiesel Magazine. “One of the advantages of jatropha is that there is a mandate in Brazil where biofuel producers have to secure 30 percent of their feedstock from community farms. Many growers are struggling to meet that requirement. Jatropha provides a solid option for growers to meet that mandate through community farming initiatives.” While its first priority is R&D, SG Biofuels intends to leverage its existing partnership with global oilseed crushing firm Bunge North America to aid in the downstream market of its jatropha to biodiesel producers. “We need to be looking at the complete value chain,” Brokowski says. “Not only the crop science and plantation development, but all the way through to downstream logistics and processing. Bunge will be working with us to establish a model for efficient processing in Brazil and other markets we’re working in.”
PHOTO: SG BIOFUELS
How increased jatropha oil availability is coming to Brazil
PLANTING POTENTIAL: SG Biofuels plans to launch R&D facilities similar to its operations previously established in Central America.
In addition to Bunge, SG Biofuels has worked with Life Technologies Corp. on a genome sequencing project to identify different jatropha gene characteristics, and has also created cultivar of jatropha that SG Biofuels claims it can provide 100 percent greater yields when used in Guatemalan growing conditions. “[Brazil] is an area that, just based on soil conditions, isn’t optimal for food production,” Brokowski says. “There’s a significant need for alternative crops and energy crops, and we really think jatropha could be a viable crop in that region.” —Bryan Sims
The Hand That Feeds With funding provided by the Michigan Pre-Seed Capital Fund and Automation Alley, Detroit-based biodiesel technology developer NextCAT Inc. is closer to bringing its novel process technology to market. According to President Charles Salley, the funds will be used for pilot-scale testing of the technology with plans to build a demo unit in an existing retrofitted facility later this year. Developed by the National Biofuels Energy Lab at Wayne State University, NextCAT’s technology involves the use of a heterogeneous solid metal oxide catalyst capable of performing esterification and transesterification steps in a single pass without consuming the catalyst in the reaction. “It’ll handle high free fatty acid feedstocks and triglycerides in a single step without forming the soaps and other waste byproducts that are incident in current first-gen technology,” Salley says. NextCAT has partnered with a catalyst manufacturing firm to 12
PHOTO: NEXTCAT INC.
Capital funds aid commercialization efforts in Michigan
BRIGHT MINDS: NextCAT Inc. founders, from left, Simon Ng and Charles and Steven Salley, are excited to build a demo plant later this year.
aid in its scale-up initiatives, but the company hopes to lock up similar partnerships with biodiesel equipment suppliers that can integrate its process technology into existing biodiesel assets, Salley says. “Since many of these facilities have been designed for refined vegetable oil, we think there’s a major opportunity to upgrade them to handle higher FFA feedstocks.” —Bryan Sims
Springing Towards Applied Skills California-based Springboard Biodiesel LLC has reached a new benchmark. More than 50 universities and school systems in the U.S. have now installed its BioPro biodiesel processing equipment. The latest system has been installed at Arkansas State University, where it will be used for both educational and research purposes. The BioPro processor is housed in a research lab located on ASU’s farm. According to Kevin Humphrey, the university’s director of agricultural education and a researcher focused on biofuels and biobased products, there are several reasons he chose to install a BioPro system in his lab. He says he needed something that was automated, featured durable components, and was self-contained. Since students will be interacting with the system, safety was also a key concern. Humphrey notes that the system’s control of hazardous ingredients was particularly attractive. Special attention has been paid to the safety parameters of the BioPro system, says Springboard CEO Mark Roberts. “The units are made out of stainless steel,” Roberts says. “They are designed with safety in mind, so all the motors are explosion proof. It’s a fully automated system. The way it’s constructed you don’t have to interact with caustic chemicals after you’ve loaded the machine. It’s well ventilated.” ASU’s system will be used to process a wide range of feedstocks into biodiesel. Some feedstocks, such as soybeans, camelina and canola, can be sourced directly from the university’s farm. “I have storage capacity now that can auger the feedstocks into my lab, and then clean and crush them to produce oil—which is pure clean oil,” Humphrey says. “At the same time, I am working on a system to pick up used oil [in a similar fashion].” Used cooking oil to feed the processor will be sourced from local restaurants. It is also possible that crop-based feedstocks could be purchased from local farmers. Humphrey’s lab also includes an engine testing cell. Some of the biodiesel produced at the lab will be used for testing purchases in small
GOT SKILLS: An Arkansas State University student gains applied skills in ASU Director of Agricultural Education Kevin Humphrey’s lab.
diesel engines. We also plan to use the fuel in some of our on-farm equipment, Humphrey says. In addition, there are plans to approach ASU’s facility management team in hopes of running the fuel in some on-campus vehicles. The BioPro system will also be used as an educational tool for students. One benefit of the system Humphrey is building in his lab is that students will be able see a complete biorefining system in action—from cultivating feedstocks, to processing the resulting oils into a finished product. The biodiesel production equipment will also help Humphrey meet his goal of supplying more skill-based knowledge to students. “A couple of the other professors and I are trying to get a whole lot more applied skills to our students,” he says. “It’s good to have theory—you need to have theory—but the marriage of theory and applied [skills] is really important to us. We’re really trying to build up our [renewable energy technology] program in the College of Agriculture and Technology, and provide these types of applied skill opportunities to our students.” —Erin Voegele
Going Once, Going Twice, Sold! A bankrupt biodiesel plant in Europe goes up for auction Estonia-based Biodiesel Paldiski AS is slated to be auctioned off Feb. 16. Bidding will open at €7 million ($9.5 million). The plant was originally offered for sale in September, with the opening bid set at €24 million. Biodiesel Paldiski was founded in 2004. The 100,000 ton (30 MMgy) plant began operations in 2007and was idled in early 2009. According to information posted to the auctioneer’s website, the company’s consolidated assets will be sold jointly. This includes a ground lease term of 30 years, which was established by Biodiesel Paldiski with the Port of Tallinn. The biodiesel plant is located within the port. The property also includes production equipment leased from SEB Bank. The purchase price does not reflect the EU's Value Added Tax.
The auction listing also states it is possible for the buyer to acquire additional assets that were excluded from the bankruptcy estate. This includes a 3,000 square-meter tank owned by AS APL Production, and heat production equipment owned by Fortum Termest AS. Parties participating in the auction are required to pay a deposit equivalent to 10 percent of the starting price. This equates to approximately €700,000. The deposit of the winning bidder will be applied to the final purchase price, while the deposits of other participants will be returned within one business day of the tender date. —Erin Voegele
PHOTO: ARKANSAS STATE UNIVERSITY
A new biodiesel processor is installed at Arkansas State University
A Hopeful Developer
Algae.Tec doesn’t believe in VC―but the company does believe in its own story Roger Stroud is optimistic that people will like the story of Algae.Tec. The CEO of the Australian-based algae-to-energy process developer that has created what they call the McConchie-Stroud system is so confident in his story that he decided to avoid any help from venture capitalist funding, or “vulture capitalists,” as he calls them. “Some people ask us why we didn’t go SYSTEM PROVIDER: see a venture capitalist,” Stroud says. “We thought Roger Stroud, CEO, a better way to go would be to share it with a lot helped develop the Algae.Tec approach of shareholders rather than one group that just to growing algae, had a lot of money.” Stroud and his team did which involves use just that, in part, because the investment world of a honeycomb at the time of the decision “had been thrown on structure to increase surface area. its ear.” Algae.Tec is now one of only a handful of cleantech companies to list on the Australian Stock Exchange. In the U.S.or U.K. markets, the stock would be considered a penny stock, but with 600 shareholders already, Stroud says Algae.Tec is the acorn and “the oak tree has yet to grow, but overtime we hope to have several thousand stock holders.” The early funding will be used to further develop the McConchieStroud system at a demonstration facility just outside of Sidney. “We want to be the masters of our own destiny,” Stroud says, and to do so they will have to prove that the internal testing the team ran on its system, and the years spent researching how to turn algae into energy, will translate at the demo plant. The system, created by Stroud and colleague Bill McConchie, a former Dow Chemical Co. employee and Texas A&M alum, utilizes what Stroud calls a “honeycomb” effect. In large, modified 40-foot
FULLY CONTAINED: The 40-foot modified shipping containers are a critical element of the McChonchie-Stroud system. SOURCE: ALGAE.TEC
shipping containers, the system uses a synthetic material shaped in a honeycomb pattern within the container that Stroud says creates a more sufficient surface area to grow algae. The containers also allow for algae growth deep within containers and, according to the firm, uses one-tenth of the land when the open-pond method for growing is used. The energy source to grow the algae is solar, and every day the containers are rotated to maximize the amount of sun energy in any one day, Stroud explains. The company has an MOU with a group based in Hong Kong, says Stroud, and the construction for the demonstration facility should begin by the end of this year. “Any shareholder coming in now is coming in at the early stage of the total development, and,” he adds, “as they say, the early bird gets the worm.” —Luke Geiver
PHOTO: MADISON SNARIC, HERITAGE HIGH SCHOOL
Youth of the Industry High schools see biodiesel as an important sector of education
From Heritage High School in Washington to Galway High School in New York, a growing number of secondary schools across the country have incorporated biodiesel curriculums within their education programs, and many more are considering them. Students and faculty members recognize biodiesel as being a viable alternative fuel and state officials are listening. On Jan. 14, Sen. Maria Cantwell toured Heritage High School’s biodiesel lab in Vancouver, Wash., in an effort to encourage student interest in science, technology, engineering and math education. According to principal Anne Sosky, the school’s biodiesel lab is a culmination of two years of work by its students and faculty who participated in designing the processors, which are capable of producing batches of biodiesel from used cooking oil supplied by area restaurants. “[The processors] couldn’t be something that you push a button 14
LESSONS LEARNED: U.S. Sen. Maria Cantwell talks with Heritage High School junior Jason Aurand about a sample of biodiesel during her Jan. 14 visit to the school.
because it’s not a learning experience,” Sosky says. “The whole idea that got kids hooked were that they built the biodiesel processor. We said we wanted it to be a processor that kids think about and work on so they have ownership in the learning experience.” —Bryan Sims
PHOTO: DYNAMIC FUELS LLC
LOOK AT THIS: Dynamic Fuels may be the first renewable diesel producer in Louisiana, but with a $241 million U.S. DOE loan guarantee, the Darling/Valero venture will be another new biorefinery to watch out for.
Louisiana’s Bright Renewable Diesel Future Already home to one facility, the state has DOE support for another If there were ever a state-by-state competition for renewable diesel, Louisiana would be winning. Already home to the highlytouted, first-of-its-kind renewable diesel facility in Geismar known as Dynamic Fuels, the state will someday feature another facility as well. The U.S. DOE has offered a conditional commitment in a $241 million loan guarantee to Diamond Green Diesel LLC, the joint venture project between Valero Energy Corp. and Darling International Inc. that will combine Valero’s expertise in designing, constructing and running a refinery, with Darling’s ability to provide what so many projects lack—a consistent feedstock supply. On the project, energy secretary Steven Chu says that “strong biofuels projects like Diamond Green Diesel” can strengthen an economy and grow jobs. Chu wasn’t kidding. The project is
expected to create more than 700 jobs during construction and employ at least 60 when operational. USDA Secretary Tom Vilsack says the loan guarantee demonstrates the dedication by the current administration to support advanced biofuels, and Lisa P. Jackson, U.S. EPA administrator, says the announcement showed that “we can protect our health, preserve our environment and improve our economy at the same time.” U.S. Sen. Mary Landrieu, D-La., says the project will not only help Louisiana, but also the nation. UOP will be providing its patented Ecofining process, which hydrogenates triglycerides or free fatty acid feedstocks. The resulting paraffins are then isomerized to create the renewable diesel product, one that Louisiana will soon be very familiar with. —Luke Geiver
Framework in Place for a Bright Future I recently visited with a biodiesel producer about the state of their business and our industry’s future. There is, after all, no better way to keep your finger on the pulse of what is happening in the marketplace. As the conversation progressed, this member noted that 2010 was akin to a rollercoaster ride for both him and the industry. I, like most associated with our industry, wholeheartedly agree with this apt description. Turning the calendar from 2010 to 2011 provides a good opportunity to not only take stock of where we have been, but more importantly, to look forward at where we are going. Without question, 2010 was a turbulent year. That said, there is good reason to be optimistic about 2011 and beyond. Those who are successful over time—be they companies, trade associations, entrepreneurs, or sports franchises—have one thing in common. Their long-term viability is the result of a larger vision that establishes a framework for future success. Such is the case with the leadership of the U.S. biodiesel industry. In the 1990s, the industry recognized that the consumers must have confidence in the quality of our fuel. As a result, the National Biodiesel Board formulated and implemented an aggressive effort to secure U.S. EPA health effects data; worked at ASTM to put in place a biodiesel fuel specification upon which the marketplace could depend; and has worked constructively with engine manufacturers and auto makers to warranty the use of biodiesel. The results speak for themselves. Biodiesel is the best tested, most reliable advanced biofuel available in the commercial marketplace today. Our industry’s leadership also saw the importance of favorable federal policy. History has clearly demonstrated that the success or failure of various areas of the energy sector, particularly nascent industries, is directly affected by the legislative, regulatory, and legal framework at the federal level. By any objective measure, there are significant economic, energy security and environmen16
tal benefits associated with displacing petroleum diesel fuel with biodiesel. At the beginning of the last decade, however, the policy framework simply was not in place for the nation to accrue the benefits associated with exManning Feraci panded production and use of biodiesel. To help make biodiesel price competitive in the marketplace, the NBB and its allies moved forward with a plan to advocate for and ultimately enact a tax incentive that would help offset the inherent price advantage petroleum diesel fuel enjoys in the marketplace. The result of this effort was enactment of the biodiesel tax incentive in 2004. The big picture goal of the biodiesel tax incentive was to encourage expanded production and use of biodiesel, and by that measure, the tax credit has been an overwhelming success. When the credit was enacted in 2004, the U.S. industry produced a mere 25 million gallons of biodiesel. In the five years that the credit was seamlessly in place, we built the production capacity to become America’s first commercial-scale advanced biofuel and produced more than 2 billion gallons of fuel. Even with the tax incentive in place, it was readily apparent that to get significant penetration in the U.S. diesel fuel marketplace, the renewable fuel standard—an existing program that provided for a minimum renewable content in the nation’s transportation fuel—had to be structured to accommodate biodiesel. Again, the biodiesel industry’s leaders took decisive steps to address the long-term interests of U.S. biodiesel stakeholders. An internal task force carefully analyzed available feedstock and market dynamics, and based on this work, proposed the inclusion of an aggressive yet attainable biodiesel volume requirement as part of the renewable fuel standard. This volume schedule became the basis of the NBB’s lobbying
1993 NBB is established as the trade association for the biodiesel industry 1999 The U.S. biodiesel industry produces 500,000 gallons 2001 December―ASTM approves full standard for biodiesel (D-6751) through NBB technical efforts 2004 The U.S. biodiesel industry produces 25 million gallons 2004 Oct. 22―Biodiesel tax incentive first enacted as part of H.R. 4520, the American Jobs Creation Act of 2004 (P.L. 108357) 2005 Biodiesel tax incentive extended through Dec. 31, 2008, as part of H.R. 6, the Energy Policy Act of 2005 (P.L. 109-058) 2007 Dec. 19―H.R. 6, the Energy Independence and Security Act of 2007 (P.L. 110-140) is signed into law. Legislation expands Renewable Fuel Standard (RFS2) to provide for renewable component in U.S. diesel fuel 2008 H.R. 1424, the Emergency Economic Stabilization Act of 2008, (P.L. 110-343) extends the biodiesel tax incentive through Dec. 31, 2009 2008 The U.S. biodiesel industry produces 700 million gallons 2009 May 26―EPA publishes proposed RFS2 rulemaking in the Federal Register
NBB 2009 June-September―NBB grassroots efforts orchestrate more than 8,000 comments to the EPA on the RFS2 proposed rule 2009 Sept. 25―NBB submits formal comments to EPA on the RFS2 proposed rule 2009 Dec. 31―Biodiesel tax incentive lapses 2010 March 26―Final RFS2 rule published in Federal Register: NBB technical, legal, and grassroots efforts yield workable RFS2 program that qualifies biodiesel as an advanced biofuel 2010 Nov. 23―EPA administrator signs rule requiring the use of 800 million gallons of biodiesel under the RFS2 program in 2011 2010 Dec. 17―H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, (P.L. 111-312) is signed in to law. The bill retroactively extends the biodiesel tax incentive through Dec. 31, 2011 2010 Dec. 21―D.C. Circuit court unanimously rejects litigation lodged by petroleum industry against the RFS2 program 2011 U.S. biodiesel is the only commercial-scale advanced biofuel in America, as defined by the EPA
efforts in Washington and, as a result of these advocacy efforts, the 2007 energy bill expanded the renewable fuel standard (RFS2) and for the first time provided a renewable component in U.S. diesel fuel—a renewable demand that the U.S. biodiesel industry is ideally situated to meet. Our industry again rose to meet a great challenge during the RFS2 rulemaking process. The EPA, the federal agency charged with implementing the RFS2 program, initially proposed an unworkable rule that would have disqualified domestic vegetable oils from qualifying as biomass-based diesel. The NBB marshaled technical resources to demonstrate shortcomings in the EPA’s life-cycle analysis; legal assets to justify a program structure that was optimal for the U.S. biodiesel industry; lobbying efforts to keep elected officials engaged; and perhaps most importantly, grassroots initiatives that yielded thousands of favorable comments to the EPA. The result was a final rule that works for the U.S. biodiesel industry and fulfills the vision of a RFS2 program that displaces petroleum diesel fuel with biodiesel. The 800 million gallon 2011 biomass-based diesel volume obligation published by the EPA in November and the unanimous decision by the D.C. Circuit to reject litigation lodged by the petroleum industry to stymie RFS2 implementation further reinforces the reality of this important and worthwhile program. Without question, the lapse of the biodiesel tax incentive at the end of 2009 had a detrimental impact on the U.S. biodiesel industry. The absence of the incentive combined with marketplace uncertainty had a predictable impact. U.S. biodiesel production dropped significantly, plants mothballed or, in worst case scenarios, went out of business altogether, and thousands of workers lost their jobs. The chattering class wondered if this was the end of the U.S. biodiesel industry. To borrow from an old adage, I am pleased to state that reports of the U.S. biodiesel industry’s demise have been greatly exaggerated. Last year was without question a tough year, but we have
weathered the storm, and the policy framework is in place for a robust 2011. The federal tax incentive has been reinstated through 2011, and, as it has previously, will help make biodiesel price competitive with petroleum diesel in the marketplace. Going forward, the NBB—consistent with the sentiment of its membership—will work to achieve the certainty and reliability that comes from a long-term extension of a biodiesel tax incentive that is restructured as a production excise tax credit. This will focus the credit’s benefit on the domestic industry and help the entrepreneurs who are the heart and soul of this dynamic industry make the long-term business decisions that will yield future growth and prosperity. In 2011, the U.S. biodiesel industry has both the production capacity and available feedstock to meet and exceed the 800 million gallon RFS2 biomass-based diesel requirement. Beyond 2012, the RFS2 program gives the EPA administrator the ability to responsibly grow the biomass-based diesel program beyond the 1 billion gallon requirement provided by law. Already, an NBB task force is analyzing the data that will be crucial to demonstrating our ability to produce increasing amounts of advanced biofuel going into the future, and as we have in the past, the NBB will bring a host of assets to bear to make the RFS2 program work in an optimal way for the U.S. biodiesel industry. By any objective measure, the U.S. biodiesel industry has come a long way. Through good times and bad, the long-term perseverance and vision of the industry’s leadership has benefited not only biodiesel stakeholders, but the nation as a whole. As a result, we are poised to accomplish great things in 2011 and beyond. Without question, our best days lie ahead.
Manning Feraci, vice president of federal affairs, National Biodiesel Board
Highest biodiesel honors awarded at national conference The National Biodiesel Board recognized six biodiesel champions at the annual Eye on Biodiesel awards presentation at the National Biodiesel Conference & Expo held recently in Phoenix. “The biodiesel industry is blessed with many champions and true believers,” said Joe Jobe, CEO of the NBB. “Each of these winners has helped carry the biodiesel torch, fostering understanding, mentoring others and encouraging broader use of a cleaner burning, sustainable fuel.” The NBB's 2011 Eye on Biodiesel award categories and winners: Inspiration: Deer Valley Unified School District. This Arizona school district began its biodiesel program in 1999, long before the fuel was a known quantity. Now the district uses biodiesel blends from B5 to B50 in all 236 school buses. Transportation Director Nick Portonova says he routinely takes calls from across the nation, helping answer questions that other fleets have. Portonova added the biggest benefit of using biodiesel is the healthier choice they are making for their students. Industry Partnership: Nebraska Soybean Board. The board has been a leader among state soybean organizations in its support of biodiesel. Staff and farmer leaders participated in Bioheat tours in Boston and New York and hosted an oilheat industry delegation. They introduced new state soybean organizations to the biodiesel industry and continue to support the industry through major investments in biodiesel projects. Influence: City of New York, New York City Department of Sanitation, and New York City Department of Parks and Recreation. N.Y. Mayor Michael Bloomberg signed landmark air quality legislation that includes a provision requiring all heating oil sold within the city to contain at least 2 percent biodiesel by Oct. 1, 2012. By moving to environmentally friendly Bioheat, the City will annually replace approximately 20 million gallons of petroleum-based heating fuel. The sanitation department uses biodiesel blends of B5 to B20 in its 4,000 diesel vehicles, which include many large trucks and snow plows. Parks and recreation has operated its diverse fleet of vehicles as well as more than 130 buildings on B20 to B100 blends since 2006. Because of these two departments’ commitment to cleaner fuels, New York City is the nation’s largest municipal user of biodiesel. Impact: Ford Motor Co. As a leader in the automotive industry, Ford has again stepped to the forefront with its support and promotion of biodiesel. The full line of 2011 Ford Super Duty diesel trucks is approved for B20 blends and features a large silver B20 emblem on the side. This continued support leads to greater consumer confidence in biodiesel.
The “Eye on Biodiesel Awards” honor champions in the biodiesel industry.
Deer Valley Unified School District has used biodiesel in its fleet since 1999.
Initiative: NBB Grassroots Team Captains. The NBB grassroots initiative empowers biodiesel industry leaders and supporters to influence public discussion. The successful program centers on the team captains who carry out targeted objectives in their states. Since November 2009, the team captains have rallied contacts in key states to support the push to extend the biodiesel tax incentive. In that time, their volunteer efforts led to more than 125 earned media placements, successful sight visits, and thousands of calls and letters to elected leaders. Innovation: Disneyland Resort. The resort is a national landmark, where efforts to reduce emissions through biodiesel use displace 200,000 gallons a year of petroleum diesel. The innovative solution saved its iconic steam trains and is a shining example of biodiesel use.
New BQ-9000 program elements take effect The backbone of any successful industry is quality, and the BQ-9000 Program is integral in building and maintaining consumer confidence in biodiesel. BQ-9000 is a voluntary program in the U.S. and Canada, in which producers, marketers and laboratories adhere to a comprehensive quality manual built upon the foundation of ASTM D6751. OEMs and bid proposals are increasingly requiring BQ-9000-accredited companies for supply of biodiesel. This demand has caused the BQ-9000 program to grow more than 15 percent in 2010, and 2011 has already seen a huge increase in applications. The National Biodiesel Accreditation Commission consists of a diverse group of producers, farmers, marketers, engine manufacturers, fleet managers, renderers and technical experts who design and implement the BQ-9000 program elements. Last August the commission began to revise the Program Requirements of the BQ-9000 Quality Management System. The main objective was to enhance the clarity of the program requirements to ensure clear interpretation of each element, making it easier for BQ-9000-designated companies to comply. After several meetings and discussions, the revised program elements were sent out for a comprehensive peer review. This review included stakeholders from all areas of the industry in-
cluding biodiesel consumers. The NBAC studied each reviewer’s comment individually to see if changes or adjustments needed to be made to the proposed revisions. The revised program elements became effective Feb. 1. The manuals for Producer, Marketer, and Laboratory now include a Part B, which contains all of the pertinent policies used by the NBAC. This includes explanation of the audit certification process, certification suspension and revocation, reconsideration and appeal processes, provisional status, status of idle facilities and change of ownership, BQF-1 Form, and Recertification form. These revisions have made it much more convenient for accredited and prospective organizations and is another step in the continued goal of improving biodiesel fuel quality. For more information or to inquire about becoming a BQ9000 Accredited Organization, contact Kyle Anderson at the National Biodiesel Board office.
NBB members finalize program plan, set direction for the industry Part of the role of National Biodiesel Board members is to define the long-term objectives and programs for their trade association. The No. 1 priority of the February membership meeting was to finalize the FY2012 program plan. The final vote on the program plan was an important step in setting the direction of the industry. As a member organization, the entire process of developing the program plan is carried out by the membership. Through technical, marketing and regulatory meetings, the process identifies opportunities, as well as issues facing the industry. There are many ways NBB members can provide input to the program plan including committee meetings, direct member input, an online survey, and a formal webinar meeting. This wide variety of mediums allows for maximum member input, and includes many levels of participation.
Gathering member input allows NBB to prepare a clear direction to ensure the trade association continues to meet members’ needs. “In order for the industry to meet the challenges ahead, we must have a comprehensive plan,” said NBB Vice Chair Ed Ulch. “The NBB Program Plan encompasses technical, marketing, legislative and regulatory priorities and is the key mechanism to make sure the NBB is serving its members in the best way possible.” The planning process captures member input and is a way to share association priorities with members. 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.
NBB welcomes new members Fransham, Robert—Houston, Texas MARCH 2011
The Culinary Institute of America has found a sustainable use for the school’s waste vegetable oil (WVO). At the Greystone campus located within Napa Valley, the CIA is making high-quality biodiesel from the WVO to fuel campus shuttles. The WVO is taken from fryers in the teaching kitchen and from a restaurant on campus, and converted using a BioPro biodiesel processor from Springboard Biodiesel LLC, according to Greg Phipps, facilities director on campus. The biodiesel is used in two shuttle vans and other all-terrain vehicles used to move equipment around the campus. The switch saves $64 per fill-up. The winter mix will be 50 percent biodiesel while the summer mix will be 70 percent. Phipps adds that starting the process was not easy and required homework, but they learned a lot by taking an online biodiesel production class from Utah Biodiesel Supply Co., and also received help from Springboard.
Port of Stockton officials in California have reviewed the environmental impacts of a proposed expansion to Community Fuels’ existing 10 MMgy plant in Stockton and, according to CEO Lisa Mortenson, the results were positive. The environmental assessment went through a rigorous vetting process through 20
BIODIESEL BELIEVER: Community Fuels CEO Lisa Mortenson says her plant is expanding its infrastructure and hopes to hit full production capacity this year.
Companies, Organizations & People in the News
the California Environmental Quality Act. “It was a lengthy evaluation that looks at all the impacts of the [expansion] project, including traffic impacts, emissions, impacts on land, soil and other areas,” Mortenson tells Biodiesel Magazine. “Thankfully, everything came back positively and it appears that we should have a Notice of Determination indicating there are no significant impacts of the project.” Mortenson says Community Fuels intends to install 500,000 gallons of additional finished product storage, in addition to enhanced truck and rail loading capabilities. The expansion project would also allow Community Fuels to handle more volumes of biodiesel produced outside of the state and distribute it in the California market, in addition to the fuel it produces at the Stockton plant.
California-based Springboard Biodiesel LLC recently announced that more than 50 U.S. universities and school systems now own and operate its BioPro biodiesel processing equipment. Arkansas State University is the latest educational institution to purchase the fully automated system. Springboard manufactures, markets and sells the BioPro and SpringPro lines of small-scale biodiesel processing equipment. “The BioPro is a self-contained, all-in-one, small-scale production unit that will take vegetable oil and turn it into ASTM-grade biodiesel,” says CEO Mark Roberts. The SpringPro line is a dry-wash system that can be incorporated into the BioPro biodiesel processor. “It allows you to produce biodiesel without the use of water,” Roberts said. “Instead, it uses resins to basically polish the raw biodiesel. Those entities that buy SpringPro are interested in either speeding up their production
capacity—because if you connect it to the BioPro, you can make biodiesel quicker— or are focused on having a waterless biodiesel production system.” Springboard is also working to develop a larger-scale production system, and Roberts says a prototype is only two to three months out.
Raptor Technology Group Inc. recently announced that a company it’s in the process of acquiring, Raptor Fabrication and Equipment Inc., has started up its newest biodiesel plant for Greenwave Biodiesel of Fort Lauderdale, Fla. The company says it produced its first batch of ASTM-certified biodiesel and will now begin commercial production of biodiesel. The Greenwave facility, according to the company, utilizes Raptor's flagship midsized, multifeedstock production system and is capable of producing 3.6 MMgy. System production can be remotely monitored by Raptor to insure maximum efficiency and up-time. Raptor Technology Group has signed a Plan of Merger Agreement with Raptor Fabrication and Equipment.
Houston-based Endicott Biofuels LLC has signed an agreement with KMTEX Ltd. to construct a 30 MMgy multifeedstock biodiesel production plant in Port Arthur, Texas. The proposed facility was expected to break ground in late January. It will employ Endicott’s proprietary technology to convert variety of waste fats, oils and greases into its trademarked G2 Clear biodiesel. KMTEX will host Endicott as well as provide certain construction and operational services, according to Endicott principle Christopher Frantz, adding that the company plans “to get it up and running shortly after construction is complete to help the U.S. EPA meet its RFS2 mandates.” Endicott’s proprietary process is based on esterification technology developed by Davy Process Technology Ltd.,
BUSINESSBRIEFS Sponsored by a subsidiary of Johnson Matthey Co., a leading technology provider for the chemical, oleochemical and petrochemical industries.
ment in the plant. Mann estimates that it will take approximately 60 to 90 days for the facility’s next owner to complete the needed work and begin operations.
A Florida-based biodiesel technoloThe competitive singgy developer formed in 2006 has released ing phenomenon Ameria new product that can lower methanol can Idol is back for an requirements by up to 5 percent. Florida 11th season and the show Biodiesel Inc., a company that works will commence with a nawith both consumer and commercial tionwide bus tour fueled by biodiesel operators, has been developing biodiesel. The month-long, the Cyclonic Mixer over the past year. 16-city national tour will AMERICAN FUEL: “The Mixer is a device that is made to start in San Diego and end Ryan Seacrest shear the catalyst and the feedstock, givin Boston. Allan Schaeffer, is host of Fox's American Idol, ing a more complete mixing, which is executive director of the which recently able to reduce the amount of methanol Diesel Technology Forum, started its 11th season with a bus used,” says Bill Gehrs, president, addpraised the decision by the tour fueled by ing that it can save the plant operator Fox television show as “an biodiesel. between 2 and 5 percent in methanol excellent choice toward becosts. Described by Gehrs as a “passive” ing environmentally friendly device, the mixer has been used in other while still having the power consumer and commercial systems, and the and fuel-efficiency” to complete the tour. Florida Biodiesel version can be scaled to work in a 60 gallon system all the way up to a Adamstown, Md.-based Chesapeake 2.3 MMgy facility. “It has no moving parts,” Green Fuels LLC has retained Pasadena, Gehrs says. “The high shear mixer is encased Md.-based Equity Partners Inc. to sell its in a pipe when the feedstock and the catalyst idle biodiesel plant. CGF has been trying to are moved through the multi-veined system sell the facility, which is located in Clayton, in the mixer.” Del., for approximately six months. Due in part to the reinstatement of the biodieEnervation Advisors LLC has partsel tax credit, Equity Partners Managing Partner Ken Mann estimates the plant will nered with the former owner of an idle sell in about 60 days. Fagen Inc. built the biodiesel plant to bring it back online. The Desmet Ballestra-designed facility in 2006, Keokuk, Iowa-based 5 MMgy plant was says Mann. The bank handling the original originally owned by John Rothgeb and opowner’s financing foreclosed on the plant erated under the name Tri-City Energy. and sold it to CGF in 2008. The current According to Paul Tantillo, Enervation’s owners began retrofitting the plant in 2009 director of operations and managing memto make it multifeedstock capable. Work had ber, the facility has been idle for nearly three also begun on pump repairs and other main- years. Enervation is working to retrofit and tenance needs. The facility needs some ad- staff the plant, which features a glycerin ditional work, Mann says, noting that CGF refining system that can process 4 MMgy. chose not to spend money on the plant in The glycerin capacity will be brought on2010 due to the expiration of the biodiesel line first, and is set to begin producing by tax credit. The decision to sell the plant has March. Work on the system is being combeen made because the plant’s current inves- pleted now, Tantillo says, noting that little tors do not have tolerance for further invest- was required to bring the refining system MARCH 2011
back online. The front end of the biodiesel plant is being upgraded to accept a wider range of feedstocks. Once the retrofit is complete, Tantillo says the plant will be able to process feedstocks containing up to 15 percent free fatty acids. Tantillo estimates the biodiesel capacity of the plant will be brought online in approximately 60 days.
Pacific Biodiesel Inc., Hawaii’s only commercial biodiesel producer, announced new appointments to the management team to keep pace with the its planned growth in coming years. Kimberly Vanderlaan has been hired as chief financial officer. Vanderlaan is a certified public accountant and was most recently a partner with the CPA firm of Levin & Hu LLP. She has more than 20 years’ experience in public accounting and private industry. Vanderlaan will work closely with Mike Bradley, corporate controller at the company’s Kahului headquarters. Pacific Biodiesel also promoted Beth Mathias to director of marketing. Mathias joined the firm as a marketing associate in August and quickly advanced her position.
MARKETING SUCCESS: Beth Mathias, who joined Pacific Biodiesel in August as a marketing associate, was recently promoted to be the firm's marketing director.
FINANCES FIRST: Kimberly Vanderlaan was recently hired by Pacific Biodiesel as its chief financial officer.
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Peter Brown, co-founder of International Procurement Tools, talks with Biodiesel Magazine about everything from the failure of his brother's company, Greenline Industries, to predictions on what's in store for the industry in coming years. PHOTO: SCOTT ANDERSON
Whatever It Takes A candid conversation with Peter Brown, co-founder of International Procurement Tools QUESTIONS BY RON KOTRBA
His great-grandfather started Bunge. His brother founded Greenline Industries. Peter Brown, co-founder of the biodiesel process hardware vendor International Procurement Tools, is no stranger to the agricultural or biodiesel industries. He’s lived in Argentina, Belgium, the U.S. and French Canada, and he’s worked in almost every field imaginable, including journalism, public relations, nuclear development, hydroenergy and biodiesel. Biodiesel Magazine sits down with Brown to get his perspective on important and timely industry topics. Q: How did you first get into biodiesel? A: The more I looked at Europe and what they were doing with diesel, and how they were implementing biodiesel, the more sense it made to me that we should really be looking at this. New diesel engines are so far ahead of anything gas engines can offer at this point. We’re really missing an opportunity here. The mileage is 20 to 30 percent better, but it doesn’t seem to hit us. In Europe, 60 percent of the cars on the road are diesels. Here it’s 4 percent. I don’t know what the problem is. I had an old diesel Volkswagen, with the old technology, and I’d go to Europe and rent a diesel and, surprisingly, I really could not tell if it was a gas or diesel. Then it occurred to me that biodiesel is a fuel that is infinitely renewable and has all kinds of applications, and can be produced from almost anything. So that’s how I got interested in biodiesel. Then my brother was a pilot for Northwest Airlines and was selling biodiesel out of a very small plant he built in California. I volunteered to do public relations for him in 2006. Q: You wrote an article a while back in which you stated that the days of small plants are over, big business is now king in biodiesel. My observation over the past two years is a little different. How would you address that same issue in the context of today’s climate and the industry’s recent history? A: I’ve tempered my reaction since then. There are two definite business models in biodiesel now. The first is the initial soy-based facilities owned by the Bunges and Cargills, those will not go away because those are the
INTERVIEW ones the government is going to go to in order to meet its mandate. And then there is the local plant. They are taking advantage of a local situation for most of their feedstock, and have established a very solid niche with the community, they are involved ecologically. Take, for example, the Northeast and biodiesel-blended heating oil. Those are the plants that I think will do well in the near mandate, producing tons and tons of money. Their investments are very low, their goodwill is in place, and their financing is covered by the local bankers. The more these small plants work, the bigger they want to be. And that is something that originally happened in Europe before Germany killed the market. They started very small, maybe 2, 3 or 5 MMgy, and then grew. That’s why I think modular construction is so important. Q: Your brother started Greenline Industries, which many thought was a very promising company. But after the 2009 National Biodiesel Conference in San Francisco, where Greenline held a press conference on some new technology offerings, the company went under. Why did it go out of business and what happened to all of its biodiesel customers who bought its various units? A: My brother founded the company and I took care of public relations and marketing for Greenline. Then I was asked to do some
international sales. They had the U.S. covered but, unfortunately, for Europe they had nothing. I had a bird’s eye view and a worm’s eye view of the company. You and I sat in that press conference at the 2009 National Biodiesel Conference and, to me, that was probably the highlight and the lowlight of the company. They lost focus at that point of what they were up to. They had gone through a very successful round of financing and picked up $20 million, and by then they did what every single dot.com in Silicon Valley did—they started spending the money on things that were not relevant to the business. They forgot that what they were was a hardware vendor. They picked up a contract with one of the people who developed the University of Kassel’s horizontal waterless biodiesel processors, which is in the public domain. That was one of the problems they had, they did not really own the technology that they were selling. Q: What about its customers? What happens when a company goes under and they’ve got all these units out there that may be under warranty? A: That’s a very fair question. They had one customer that had gotten some very advantageous contracts out of Nigeria on palm oil. They bought six trains that were never installed; they were brand new and sitting in a couple of warehouses on the East Coast. What
we at IPT did is discuss this with the guys who bought these and we contacted the original engineering team of the Kassel product—the waterless horizontal—and they have agreed to install them and then provide all the warranties. They went over there and looked at them and said, “These things are wonderful, they’re brand new and have never been used.” So if anybody wants to install one of those, they can call me up and we will get everything ready to go, with warranties and all. Q: What are some lessons learned from Greenline that you will make sure not to repeat in your new company? A: This is going to sound self-serving but I’m a veteran of Silicon Valley, and the one thing I’m going to do is stay as lean as I have to. Most of it is done virtually: I’m contracting with a German company. I am not going to provide my own warranties because to buy that kind of expertise, why do it? You can get it, you can have it, and we can install it. The second thing, and this is vital, is never forget what you are doing. What you’re doing is selling hardware, and you have to do whatever is required to get that hardware into the client’s hands. I have discussed things with banks in Switzerland for some of my clients. I have gone to conferences and talked to people out of Eastern Europe about feedstock and crushing contracts. Whatever it takes, the client has to come first.
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INTERVIEW Q: Earlier you mentioned how Germany killed the market, can you explain what you mean? What happened to Germany is probably symptomatic of what happened to biodiesel everywhere. Biodiesel producers were given incentives, and Germany very quickly became Europe’s No. 1 biodiesel producer. Then, overnight, they took the incentives away at the same time the American market was doing the old splash-and-dash stuff. And that just destroyed them. The German producers could not sell biodiesel at a profit anymore, and Germans are very pragmatic so they said, “If we can’t sell it at a profit any more, then we’ll just shut it down.” Now, I understand that this is changing, and Germany is going back to the incentives again—but look at the damage it’s done. Q: And the same argument can be made regarding the U.S. biodiesel industry— many producers have told us that they can deal without the credit if that’s what they know the future is going to be, but having the incentive, then not having it, then getting it back for a short-term period, they just can’t adapt to those inconsistencies. What do you think? A: I am in 100 percent agreement with that statement. Furthermore, I think the banks and the financing institutions have also destroyed this industry. They were throwing money at companies that didn’t deserve to have the money, but they had fantastic PowerPoint presentations. When Vinod Khosla becomes an expert on energy—he’s a very nice guy, but basically he’s almost clueless. Q: On a global level where do you see the most promise, the most biodiesel project activity, and why do you think that is? A: I’ll tell you where I see the most promise for an American company to do business. They should go to Canada. They have incentives. They are committed to it. They also have a mandate but almost no production capacity, nothing very big. So most of their biodiesel, just like with California, is going to have to come from outside. That’s why I’m working
on two projects in Canada right now, one in Alberta and one in Quebec. Another thing is you have to keep an eye on the politics. And I’m not talking about the dollar, I’m talking about statewide. Iowa has a lot of biodiesel because they are friendly toward biodiesel. California is almost producing zilch even though Schwarzenegger was a big green guy. There is such a dichotomy between the demand and the response that I don’t know if we’re going to be able to pull out of it in the next six, eight or 12 months.
about putting their new $60,000 V-12 diesel engine at the risk of an attorney who’s going to say, “Um, that’s not covered by warranty.” So I can understand their point of view. And some companies warranty higher blends of biodiesel in the EU but not in the states, and I don’t understand it. In America there seems to be—and I’m going way out on a limb here— a conspiracy. Some companies don’t want 5, 10 or 15 percent of their sales taken away by people selling biodiesel.
Q: Globally, do you think there’s more biodiesel demand than supply or is it the other way around?
Q: In the U.S. and abroad, what are some key issues needed to be overcome to increase demand for, and production of, biodiesel?
A: If you move away from the rather peculiar American mindset about diesel, I think certainly every gallon of biodiesel out there has a buyer. I also believe every buyer knows why he is buying it, as opposed to people who buy gasoline and other products. The first is the ecology, I feel good about this. Two, biodiesel is price competitive with the petroleum he’s buying, meaning that if you put 5 percent biodiesel in your petroleum product, you’re going to have a product that’s more valuable than those pennies that you added. And the third thing is that biodiesel hasn’t quite found its niche yet. People look at it to power engines, but there’s a huge market that’s slowly appearing in specialized lubricants, engine cleaners. It’s a wonderful product.
A: We need to be better educated. When we read some of these statements being made that biodiesel increases the price of food in Mexico by 20 percent, somebody should be on top of that so fast it would make your head spin. The World Trade Organization recently came out with a study that says biofuels only use 1.75 percent of the land mass dedicated to producing vegetable oils, so I don’t see how we’re the big, swinging baseball bat in that market. On the contrary, I think the food people will have to watch out. And also, we, the biodiesel people, have access to so many new forms of feedstock that we’re not even able to consider because we’re trying to hold the soy organization’s hand. Look at camelina or pennycress, the stuff ’s fantastic.
Q: You mentioned the U.S. lack of interest in diesel vehicles. I agree, but we have a 60-plus billion gallon a year diesel fuel market. How are we going to tap into that huge trucking, construction and heating oil market, to get them to believe in biodiesel and support it, use it, even without mandates?
Q: Your new company, IPT, says it can build a 60 MMgy biodiesel facility pipeto-pipe for $6 million, that’s 10 cents per gallon of installed capacity. How is that possible, what does it include—and more importantly, what doesn’t it include?
A: Let’s start with mandates. There’s a reason to put biodiesel in your truck, for example. If you put it in, you extend your engine life by 25 percent because of the lubricity and cleaning powers of the fuel itself. I have spoken to a number of truckers and trucking organizations, and they are 100 percent behind doing it—if they can get the warranties from the engine manufacturers. They’re a little nervous MARCH 2011
A: This is what I say upfront: I will install 100,000 ton per year capacity on a client’s permitted and serviced site, which means that it does not include any of the storage, any of the rail or that stuff, but rather, if you give me a building with a slab, I will put the processors there. That is one-third the price of our nearest competitor at this point. The reason I can do that is quite simple. I do not have any engineers—I have an engineering company that I work with. They have other projects but they z
INTERVIEW don’t rely on me. Secondly, I am having the plant fabricated by a company in India that has built more than 200 hexane extraction plants around the world, so if you’re screwing around with hexane, you have quality control because that stuff is nasty. They understand it. Q: Take me through what IPT’s processing units offer? A: They’re called waterless horizontal processors. You could put any type of feedstock at one end so long as it meets the minimum re-
quirements. It goes through a double esterification process. We’re using Amberlite, formerly of Rohm and Haas, now Dow, to clean filter the finished product. Our glycerin is around 80 to 85 percent pure but if you use really dirty feedstock like waste vegetable oil, then it’s down to 60 percent. The methanol can be recovered as much as we can—I think there’s maybe 0.2 percent left as it goes into the final filters. My partner calls it the Model-T of biodiesel processors because it’s so simple that you can run almost anything through it. You can stack these processors one on top of the other
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after the plant decides they can market their fuel and expand. That’s why I like it. If one of your lines goes down because of contamination, you can continue to produce on the other lines. That’s fairly crucial. You can also run different feedstocks through the lines or you can mix feedstocks. When you’re doing stuff like this, you don’t need complications. You need simplicity. And that’s what we’ve done with the IPT concept. Q: A few years ago plants had a hard time getting rid of their glycerin, and not many had purification units. Have you seen a technology shift since then? A: If you don’t control every single step of your process, then you’re missing huge opportunities. That starts from buying your own feedstock, running them through your own crusher and so forth. We were looking at things like glycerin-powered generators, but now that is no longer a valid solution because glycerin is much too valuable a commodity. The problem is glycerin purifiers used to be big distillation columns. They were energy hogs. The new ones I’m working on right now are using some very advanced membrane technology and they’re very chintzy on energy, just running pumps. Q: Are there any activities going on in the biodiesel industry, whether in the states or internationally, that you think do more harm than good for the global community of biodiesel producers? A: This misinformation campaign right now aimed at biodiesel—not biofuels but specifically biodiesel—is something that should be addressed. That is one. Two, I think that if you don’t approve biodiesel in the beginning, then it will never get accepted. Any diesel engine in the world should be covered to run on biodiesel blends. The [original equipment manufacturers and oil companies] really have to be forced to work with it because they are so conservative that it’s not even funny. Also, if biodiesel producers were just a little bit smarter about how they run their businesses, the industry could be self-sustaining. I don’t think you can put a biodiesel plant in the hands of
INTERVIEW people who’ve got no concept of how to do have been many who want to give up on it, and then expect them to be happy with the biodiesel, the industry producing it. What are some final comments that you’d like to result. say to these naysayers who say biodiesel is Q: The EU is still complaining that the a thing of the past? U.S. is dumping subsidized biodiesel into its market and circumventing the estab- A: I would say that in certain areas they are lished tariffs. What do you think of this, probably right, but I would also tell them that the best years for biodiesel are going to be comwhat’s behind it? ing up in the U.S. I think a lot of the plants that A: I think the Europeans have a point, but were shuttered were shut down for very good here’s something to consider. We in America reasons, most of them related to business. And should be buying all that biodiesel and not I would also tell them to keep an eye out on shipping it out. And that should be possible if you tell people in America, “You buy something with a diesel engine in it and tell them, ‛3 percent, guys. You put it in or you don't drive it.’” And that’s what’s going to happen in Canada now that they’ve instituted their incentive. There should be huge fines for those who don’t put biodiesel into their system. And they’re looking at the American market saying, “Well, we can buy that stuff down there until we get our own production up.”
things like algae and jatropha. If it could be produced here, and can be used in U.S. equipment, how much better is that than spending billions of dollars supporting the petroleum industry, which is more polluting and more expensive? The biodiesel industry is subsidized—but the petroleum industry is really super-subsidized. And that’s all part of the education process that we as biodiesel producers and those in the market have completely missed. Questions by: Ron Kotrba Editor, Biodiesel Magazine (701) 738-4942 email@example.com
Q: Prediction time: Will a long-term biodiesel tax incentive get through Congress this year? A: Yes. I’ve heard it should be a blenders credit, I’ve heard it should be a production credit, and there’s another one I don’t think a lot of people have heard about, which came out of a think tank in D.C., it’s along the lines of, if you’re using a homegrown feedstock, then you get so much. If you then put it into the American system and it stays here, then you get so much. So it’ll be incentivized along the full line, and that’s not a bad system either. We’re looking at creating jobs here, not just biodiesel. Q: Will the EPA increase the biomassbased diesel mandate under RFS2 this year? A: I think they will. We, as in the [international community], should be insisting that we take an active role in the propagation of biofuels, which are nonpolluting compared to what we’re shipping in from the world’s war zones. Q: Throughout the past year or two, there MARCH 2011
SHOCKING TECHNOLOGY: Cavitation-based reactors may offer an answer for tougher biodiesel standards. PHOTO: ADVANCED BIOFUEL SOLUTIONS
Ready to Burst A two-grade system would force the industry to respond. Luckily, cavitation technology is here. BY LUKE GEIVER
Tom McGurk wasn’t always in the business of bubbles.
several grades of fuel though. “I think there is a consensus, however, that we need to move to these two-grades of biodiesel,” he says. The proposal’s sticking points, McCormick says, included different levels of total monoglycerides for biodiesel in different ranges of cloud point. “As you went to biodiesel that had a higher cloud point, it required a lower level of total monoglycerides,” he says. When you look at the precision of the cloud point measurement, and then the precision of the total amount of monoglycerides, it was hard to make a case that these requirements (a lower monoglycerides spec) really meant anything. Along with the confusion over what exactly the cloud point measurements showed, McCormick says the ballot also faltered due to a lack of an official ASTM test for monoglyceride levels, and because “everybody agreed that what we needed to limit was the concentration of saturated monoglycerides, not total monoglycerides.” As McCormick suggested, any confusion created from the first attempt to create a two-grade system will someday find clarity. When that time comes, and monoglyceride levels act as the line between grade one and two, what can the industry do to meet the new standards? Distillation, for one thing. It is the “sledgehammer,” as McCormick says. “It’s going to work” but, he adds, it’s also expensive to build and use. “Distilled biodiesel, if properly stabilized is at an extremely high quality,” he says. “But, for many producers, I’m not sure that is going to make economic sense.”
The current CEO and president of Advanced Biofuel Solutions, McGurk currently heads a team responsible for creating a controlled cavitation reactor that harnesses the power of bubbles, the same reactor that just might solve a complex issue related to biodiesel production: monoglycerides. “We had a chemical company for years,” McGurk says, “and then we got into biodiesel.” Compared to making industrial chemicals, “producing biodiesel was very difficult because the feedstock varied from load to load.” A former chemical engineer, McGurk now spends his time in Rome, Ga., the home of the ShockWave Power Biodiesel Reactor, which he explains could transform the industry through its ability to deal with monoglycerides. But to fully understand why Georgia, of all places, and why McGurk’s technology based on cavitation (and other similar reactors) may be important to the industry now more than ever, consider ASTM’s main committee ballot that proposed a two-grade system for biodiesel. The ballot, which has since been voted down, originally presented a two-grade system that would include a grade of biodiesel suitable for cold climates, a grade that would ultimately be determined by monoglyceride levels present in the fuel. “There are probably many reasons why it failed,” Robert McCormick, principal engineer of fuels performance at the National Renewable Energy Laboratory in Golden, Colo., tells Biodiesel Magazine. Proposed in June, the ballot met its end in a main committee-level vote in December. “I think after people had six more months to think about it and really understand where they are going with it, the proposal wasn’t really ready," he says. It's not over yet for a system that would mimic the petro diesel system that features MARCH 2011
Controlled Cavitation McGurk says cavitation is a physical phenomenon that creates low-pressure bubbles within the fluid that cannot self-sustain z
QUALITY and eventually implode. When they burst, a shock wave sends cavitation bubbles out into the fluid. If those shock waves are left unchecked, the heat and mixing power of the bursting bubbles can create a lot of equipment damage. “Conventionally, engineers are taught to avoid cavitation,” he says. McGurk found a pathway that allows him to harness that energy, to control it, a technology that drives a reaction in a matter of seconds versus the minutes or hours typically seen in a continuous stir tank reactor. As an example of just how damaging some methods of cavitation can be, McGurk sites a retrofit project his team worked on in a chemical plant considering switching to biodiesel production. The plant was using a stir tank reactor set-up with cavitation. The system required the sparging of air into the tanks and when combined with the cavitation, the bubbles were so powerful they “ate through the walls at several points” and caused the two-story reactor tanks to lift off the floor. The ShockWave Power Biodiesel Reactor employs the “controlled” approach and uses a spinning rotor with depressions in it. As the device spins, cavitation bubbles are formed in the depressions, and as the fluid flows over the depressions the bubbles burst, sending out a massive wave of energy and heat that drives futher reaction of the materials. The amount of energy created by the bubbles breaks down the material into smaller pieces, creating more surface area for the reactants to take place, a situation McGurk says also helps to reduce side or reverse reactions. Already used in eight different biodiesel plants, including one of the largest production facilities in the country, the ShockWave
Power Biodiesel Reactor is an option for producers who, McGurk says, don’t want—or can’t afford—distillation. Some producers have sent McGurk samples of biodiesel that showed only a .19 monoglyceride content with a total glycerin content of .055, he says. “You are looking at a fifth of the total glycerin and that is with waste cooking oil, and many plants aren’t able to handle that in their transesterification process.” The idea of cavitation as a means to solve high mono levels in biodiesel produced from beef tallow or waste vegetable oil isn’t a new one though. Companies like Ultrasonic Power Corp. out of Freeport, Ill., employ a sound wave, or ultrasonic-based cavitation approach to biodiesel production. While cavitation approaches vary, the ultrasonic unit at Freeport, like the mechanical version, can reduce the one- to four-hour process to less than 30 seconds, while effectively dispersing nanoparticles and deconglomerating coalesced materials in the fluid. Mike Kass from Oak Ridge National Laboratory even recently investigated using ultrasonic acoustic energy (similar to that of Ultrasonic Power Corp.’s version) to remove precipitate formation in biodiesel. The rationale, Kass says, was that the application of ultrasound would concentrate heating at the precipitate-liquid interfacial region. “The advantage of this approach is that you can focus the heating on the precipitate itself rather than heating the bulk solution.” To test the theory that ultrasonic cavitation does, in fact, reduce precipitates, Kass and his team, which includes Sam Lewis and Maggie Connatser, performed a modified version of the ASTM D7501
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QUALITY Cold Soak Filtration Test. The team used a sample of SoyGold 1000 biodiesel that was first tested and filtered, then spiked with precipitate precursors and remeasured for filtration time. The team then chilled the biodiesel overnight and let the sample return to room temperature. “We ran the filtration test on the spiked sample and the filtration time increased as you would expect with the formation of precipitates,” Kass says. The team sonicated the spiked sample and the filtration time decreased to the original time of the spiked sample. The team also evaluated a sample that was heated conventionally, and the bulk heating was not found to reduce precipitates. So how does this technology solve the issues of producers for whom the two-grade system could eventually be a reality? Kass says while it is not necessary to induce cavitation to reduce or eliminate precipitates, “you do need an ultrasonic field.” The bottom line, he says, is that many of the issues dogging the biodiesel industry “may be mitigated with the use of ultrasonication.” As McGurk’s sentiments show, that is a real benefit to the industry. “If you can replace or augment your reactors with a system that can provide many of the same quality characteristics of distilled products at a fraction of the cost in a much simpler installation,” he says, “then it will allow companies that may decide to stop producing or reduce their production targets to rethink their goals.”
A Serious Need With the working group still reformulating the definition of that highly-contested winter grade of biodiesel, McCormick provides his idea on what to expect. What he suspects is the working group will
come forward with a more modest proposal, something that for the winter grade is more restrictive than what is in place for all grades. More than likely, he says, the new ballot will “directionally” correct the problem, but there will still be several people who don’t feel it goes far enough. But he notes, as time goes by, “We will be able to collect more data” and “improve the test methods for monoglyceride levels.” That might not necessarily eliminate all biodiesel that is going to have these unexpected low-temperature operability problems, McCormick says, but it would limit a lot of them. There is a possibility, he also says, that if a new ballot goes out in April, and earns approval in June, before winter there could be a two-grade system in place. While that is still unlikely, “that is the fastest a change could be made.” McGurk says they’ve already seen customers who were waiting for the tax credit to come back before pulling the trigger on retrofit purchases. The dollar being back for this year doesn’t mean the biodiesel industry is free of all impediments. A two-grade system may still be on the way and, with it, new quality issues that several producers will have to face. And, although it might already be well understood, as McGurk says, “The ability to use lower quality feedstocks and still achieve an extremely high level of quality could make the difference in success or failure in many biodiesel plants.” Author: Luke Geiver Associate Editor, Biodiesel Magazine (701) 738-4944 firstname.lastname@example.org
Bouncing Back With the
The biodiesel tax credit is back for another year. What will 2011 bring for the industry? BY BRYAN SIMS
When the U.S. Senate failed to extend the $1 per gallon U.S. biodiesel blender tax credit at the end of 2009, it also failed to factor in the impact it would have on the industry in 2010. Left in its wake was an industry of producers running their plants at reduced rates, furloughed personnel, stockpiles of fuel inventories, and production facilities shutting down operations left and right. To put it lightly, 2010 was a year the biodiesel industry would like to forget. Despite the plight suffered, however, the industry scored two big victories in late December that put it in a stronger position heading into this year. First, President Barack Obama signed an $850 billion tax package that included an extension of the U.S. biodiesel blender tax credit through 2011, which also made the credit retroactive for blended biodiesel sold in 2010. Shortly after the tax credit was reinstated, the industry received more good news when the U.S. District Appeals Court for the District of Columbia rejected a petition filed by the National Petrochemical Refiners Association and the American Petroleum Institute in March on the U.S. EPA’s combined RFS2 volume requirements for 2009-‘10. While many were ecstatic to see the tax credit back for another year, the majority of industry reaction was mixed. Some expressed short-term relief with ambitions of potentially restarting operations, upgrading processing equipment or even expanding staff. “We continued to blend fuel through 2010 so we were actually very happy that they extended the tax credit retroactively, because we had a lot of blended fuel we were able to cash in on,” says Donna Belcher, spokeswoman at Rio Valley Biofuels LLC, a 1 MMgy plant in Anthony, N.M. Conversely, some believe the extension is simply too short a timeframe to build any long-term investment beyond this year, according to Ben Wooten, president and owner of Keystone Biofuels Inc., a 20 MMgy facility in Shiremanstown, Penn. “The inconsistency of that federal policy hurt us [in 2010] and it continues to hurt us,” Wooten says. “With the inconsistency of that public policy, it’s not really helping us long-term by attracting confidence from investors or from the banking industry, especially for the banking industry to secure the necessary capital that we need to do what we do here in the country.” MARCH 2011
INDUSTRY Todd Hill, managing principle and founder of Promethean Biofuels Cooperative Corp., a 1.5 MMgy facility in Temecula, Calif., believes the reinstatement of the tax credit may be more burdensome for the industry than beneficial. “We feel that the real economic struggle is just beginning,” Hill tells Biodiesel Magazine. “If feedstock prices remain constrained and we as an industry forget how many plants stood idle even when the tax credit was in place, speculation may hurt the industry more than help it.” While 2010 was a year that financially strapped a majority of biodiesel operations, the unfavorable economic climate brought with it the value of the renewable identification number (RIN) credit price. Not only did producers find RIN credits to be an effective market mechanism for generating incremental value for their product and offset cost for customers, but they also became financially savvy in the process, having to understand the entire supply chain dynamic in order to survive in 2010.
RIN Around the Market Prior to the reinstatement of the tax credit, RIN prices traded at all-time highs, hitting 96 cents per RIN at one point, effectively providing a snapshot of what a biodiesel market would look like absent the tax credit. Since each gallon of biodiesel produced generates 1.5 RINs, that translated into $1.44 per gallon, which more than offset the lost value of the expired tax credit. Many trace the spike in RIN prices back to the RFS2 standard that went effective in July, which requires 1.35 billion gallons of advanced biofuel to be consumed this year. Of that number, 800 million gallons must be biomass-based diesel. Obligated parties, the petroleum refiners, are required to retire a specified amount of biodiesel RINs, proving that the fuel has been used. They can do this either by blending it themselves or by paying nonobligated parties who use biodiesel on their behalf. Although RINs are characterized by volatility against other commodity prices, such as feedstock prices, RIN prices aren't expected to bottom out in 2011, according to Sam Gray, a renewable fuels trader with Ft. Worth, Texas-based VICNRG LLC, a leading marketer of biodiesel blends, glycerin and refined petroleum products. Gray notes that RINs stood at a low of about 45 cents per RIN shortly after the credit was extended, but then jumped to 75 cents not long after. “High-priced feedstock is going to put pressure on RIN prices,” Gray says. “Without feedstock taking a U-turn, it’s not anticipated that this pressure is going to ease, which means you can’t really count on a RIN price increase that’s independent of feedstock prices.” Prior to when the tax credit was reinstated, prices for yellow grease and tallows hovered around 33 to 34 cents per pound. Shortly after the tax credit extension, yellow grease prices increased about 10 cents per pound, according to Gray. “It appears that feedstock prices have taken a large percentage of the dollar, exerting even more pressure on the 2011 biodiesel RIN value based on the higher prices for feedstock,” Gray says. “Since the announcement that the credit was coming back, commodities in general, especially the lower-priced commodities like yellow grease and tallow, have rallied to about 70 cents per gallon.” Gray continues, “It’s going to be a very interesting year to see how this debate goes with
Renewable Fuels Group West Des Moines, Iowa email@example.com 800.422.3087, ext. 7419
INDUSTRY the tax credit, but the evidence is indisputable, that feedstock prices have eaten about 70 percent of that dollar so far. Many that are against extending the credit after 2011 will have that evidence to point to and say that the market purely functions with the RINs. Only that should be how we keep score in the RFS2 rather than just having both the tax credit and the 1.5-RIN for biodiesel.” Like other producers, relying solely on the RIN market was one of the factors that forced Seattle-based General Biodiesel Inc. to become much more financially savvy and gain a better understanding of the entire supply chain dynamics, according to president Cameron Hewes. “For us, the key comes down to being vertically integrated into the feedstock business,” Hewes says. “We’ve always had that approach. That was helpful to us in 2010 given where the tax credit came out. That just underscored for us the importance of that strategy going forward.” Likewise, Chris Glynos, president and general manager of Bio-Pur Inc., a 1 MMgy facility in Bethlehem, Conn., credits the RIN market for not only helping it maintain operations, but also for securing its waste cooking oil feedstock. “Unless you become your own customer, your own producer and own supplier, it’s hard to be at the whims of the market,” Glynos says.
We’ve had some plants get back up for as little as $50,000. A lot of the [plants] lost their key maintenance staff, so they just need training and parts, and they’re ready to go.” Given that the credit is only extended until the end of the year, many wonder if it’s worth it for plants that have been mothballed in the past year to try and come back online. According to Raj Mosali, CEO of Miamisburg, Ohio-based biodiesel producer and technology provider Jatrodiesel Inc., the company is not only getting orders from potential
clients to upgrade existing biodiesel assets, but it’s also getting requests from would-be biodiesel companies looking to Jatrodiesel’s novel technology that is capable of converting inedible oil crops like pennycress or camelina into biodiesel. “We did a lot of assessments in October last year,” Masoli says. “It kind of surprised us to see that.” Author: Bryan Sims Associate Editor, Biodiesel Magazine (701) 738-4974 firstname.lastname@example.org
DON’T GET LEFT OUT IN THE COLD
Building a New Wave The extension of the tax credit is expected to draw additional upgrade and retrofit activity from engineering firms and technology providers. According to Mike Shook, coowner of Stuttgart, Ark.-based Agri Process Innovations, existing and previously idled plants already sought API’s services to restart their plants or increase their output capacity. API can conduct affordable assessments for clients that are considering restarting a plant. Depending on the size of the facility, Shook says, cost estimates for an assessment typically range between $15,000 and $25,000. “From there, we provide a detailed report describing what we recommend along with an estimate for a budget to do it,” Shook says. “Then, the customer can take that and get the financing to do it. Depending on the specific upgrades they need, the total capital cost can be between $50,000 and $1 million.
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Biodiesel Analytical Solutions 800-483-8107 www.biodieselanalytical.com
Turner BioDiesel 715-288-6480
Red River Valley Clean Cities 651-227-8014 www.CleanAirChoice.org
SearchPath of Chicago 815-261-4403,x100 www.searchpathofchicago.com
Twin Cities Clean Cities Coalition 651-223-9568 www.CleanAirChoice.org
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Bases Evonik Degussa Corporation 732-651-0001 www.degussa-biodiesel.com
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Wilks Enterprise, Inc. 831-338-7459
Ductwork Hydro-Klean, Inc. 515-283-0500
Emergency Spill Response Hydro-Klean, Inc. 515-283-0500
French Oil Mill Machinery Company 937-773-3420 www.frenchoil.com/biodieselmag.shtml
Hydro-Blasting Hydro-Klean, Inc. 515-283-0500
Railcars Hydro-Klean, Inc. 515-283-0500
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Tank Cleaning Services Hydro-Klean, Inc. 515-283-0500
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Guttman Group 800-245-5955
Tanks JVNW Inc. 503-263-2858
Used Equipment www.raptorfe.com UPM Machine 713-440-8200
Filtration Media Met-Chem, Inc. 216-881-7900
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Fabrication Raptor Technology Group 321-274-9675
Biodiesel (FAME) in diesel
Cennatek Bioanalytical Services 519-479-0489 www.cennetek.ca
French Oil Mill Machinery Company 937-773-3420 www.frenchoil.com/biodieselmag.shtml
Suma Energy LLC 516-816-3705
BIODIESEL MARKETPLACE Blender/Distributor American Biofuel Solutions,LLC 305-246-3835 www.305biofuel.com
Market Data Research 13 503-863-9913
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Miscellaneous Maas Companies 507-285-1444
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Ag Solutions LLC
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Crown Iron Works Company
GreeNebraska Renewable Diesel Refineries 402-640-8925 www.greenebraska.com
National Biodiesel Board
Oil-Dri Corporation of America
Sustainable Development Technology Canada
Wilks Enterprise, Inc.
Turnkey Systems Green Fuels America, Inc. 866-996-6130 www.greenfuelsamerica.com
JatroDiesel Inc. 937-847-8050
Mcgyan Biodiesel, LLC 763-421-3729
Engine Testing Roush Industries 734-779-7736
Railcar Gate Openers The Arnold Company 800-245-7505 www.arnoldcompany.com
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March 2011 BDM