May 2011 Biodiesel Magazine

INSIDE: ENERGY FARMING PRACTICES MATURE, IMPROVE

BIODIESEL MAGAZINE May 2011

Feeding

a Need Safflower, Camelina, Pennycress, Meadowfoam, Castor and More Hold Promise for the Industry Page 24

Plus

Reasons to Invest in Biodiesel Page 30

And

The Importance of Community Outreach Page 36

US $24.95/year WWW.BIODIESELMAGAZINE.COM

CONTENTS

MAY 2011 VOLUME 8 ISSUE 5

24

36

30

FEEDSTOCK

INDUSTRY

COMMUNITY

Feeding a Need

Reasons to Invest

The Importance of Outreach

Efforts to expand feedstock availability

BY ERIN VOEGELE

Stakeholders tell us why biodiesel investment is still the right choice

STAFF REPORT

DEPARTMENTS 4 Editor’s Note Let’s Get Serious

BY RON KOTRBA

How biodiesel and community fit together

BY LUKE GEIVER

CONTRIBUTIONS 42 Pennycress Biodiesel: Good for America?

The answer is yes

BY KENNETH C. REED

6 Legal Perspectives

Structuring a Successful Co-location Project

BY DEAN R. EDSTROM 8 Talking Point

Energy Farming Methods Mature, Improve

BY RICHARD PALMER 10 Biodiesel Events 12 FrontEnd

Biodiesel News & Trends

18 Inside NBB 22 Business Briefs

Companies, Organizations & People in the News

44 Marketplace/Advertiser Index

Biodiesel Magazine: (USPS No. 023-975) May 2011, Vol. 8, Issue 5. 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.

MAY 2011

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EDITOR'S NOTE It seems like any time the U.S. president or the secretary of energy or agriculture give a speech on energy and mention advanced biofuels, everyone in this sector goes crazy over it.

Don’t get me wrong, it’s great to see advanced biofuels remain on the forefront of our national energy discussion, but what’s behind the lip service?

How seriously can the U.S. be taken about becoming energy independent when even the worst oil spill of our lifetime, the BP debacle in the Gulf, hasn’t changed a thing? What oil spill, right? The well was capped and that was that, the greatest environmental catastrophe that stared us in the face day after day just sort of disappeared, and along with it the momentum it offered advanced biofuels development. It didn’t even drive Congress to reinstate the biodiesel tax credit. That came, of course, much later in the year.

But if the U.S. is to be taken seriously about energy security and independence through the use of renewable fuels such as biodiesel, then two things need to happen immediately: the biomass-based diesel carve-out must increase from 1 billion gallons by 2012 to either 5 percent (B5) by 2015, or by doubling it immediately; and the loophole in RFS2 that allows imported biomass-based diesel to satisfy the federal directive, which is counterproductive to energy independence and security, must be closed.

One could make a strong argument that foreign feedstock should still be allowed to qualify, however, as long as proper source tracking is conducted for EPA to determine its sustainability. This would allow the U.S. to retain its biodiesel refining capacity—and jobs— while keeping the feedstock base sufficiently broad to meet any increased biomass-based diesel mandate.

Despite 2011 being the first time in history in which the dollar tax credit and RFS2 implementation coexist, some biodiesel plants are still idled, and many others are producing well under capacity. Some sources say those plants that are idle today are idle for a reason, and it may take as much money to build a new plant as it would to get some of those mothballed facilities up and running again. Check out more on this in our staff report on page 30, “Reasons to Invest.”

U.S. national policy should not be adding to that idled capacity by having too low a fuel standard or a policy that encourages foreign-refined fuel to qualify, putting us back in the very familiar boat of energy insecurity and dependence.

LET’S GET SERIOUS Ron Kotrba

Editor Biodiesel Magazine rkotrba@bbiinternational.com

FOR MORE INFORMATION AND PERSPECTIVE, VISIT KOTRBA’S BLOG AT BIODIESELMAGAZINE.COM/FAMEFORUM

Associate Editors Bryan Sims reports on Tokyo-based Itochu Corp.’s plans to use Benefuel’s solid catalysts in “Asian Invasion” on page 15 of the FrontEnd.

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Luke Geiver covers the community angle, and its value to biodiesel producers, in his feature article on page 36, “The Importance of Outreach.” ”

Erin Voegele talks to experts in her feature article, “Feeding a Need” on page 24, about efforts to expand the feedstock base so this industry can grow.

www.BiodieselMagazine.com E D I T O R I A L Ron Kotrba Editor rkotrba@bbiinternational.com Bryan Sims Associate Editor bsims@bbiinternational.com Erin Voegele Associate Editor evoegele@bbiinternational.com Luke Geiver Associate Editor lgeiver@bbiinternational.com Jan Tellmann Copy Editor jtellmann@bbiinternational.com P U B L I S H I N G Mike Bryan

&

S A L E S

Chairman mbryan@bbiinternational.com

Joe Bryan

CEO jbryan@bbiinternational.com

Tom Bryan

Vice President tbryan@bbiinternational.com

Matthew Spoor Howard Brockhouse

Vice President, Sales & Marketing mspoor@bbiinternational.com Executive Account Manager hbrockhouse@bbiinternational.com

Jeremy Hanson

Senior Account Manager jhanson@bbiinternational.com

Chip Shereck

Account Manager cshereck@bbiinternaional.com

Marty Steen

Account Manager msteen@bbiinternational.com

Bob Brown

Account Manager bbrown@bbiinternational.com

Andrea Anderson Dave Austin

Account Manager aanderson@bbiinternational.com Account Manager daustin@bbiinternational.com

Jessica Beaudry

Circulation Manager jbeaudry@bbiinternational.com

Jason Smith

Subscriber Acquisition Manager jsmith@bbiinternational.com

Marla DeFoe

Advertising Coordinator mdefoe@bbiinternational.com

John Nelson

Senior Marketing Manager jnelson@bbiinternational.com

Jaci Satterlund Elizabeth Burslie

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

Subscriptions Subscriptions to Biodiesel Magazine are free of charge to everyone with the exception of a shipping and handling charge of $49.95 for any country outside the United States, Canada and Mexico.

To subscribe, visit www.biodieselmagazine.com or you can send your mailing address and payment (checks made out to BBI International) to: Biodiesel Magazine Subscriptions, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You can also fax a subscription form to (701) 746-5367. Reprints and Back Issues Select back issues are available for $3.95 each, plus shipping. Article reprints are also available for a fee. For more information, contact us at (701) 746-8385 or service@bbiinternational.com. Advertising Biodiesel Magazine provides a specific topic delivered to a highly targeted audience. We are committed to editorial excellence and high-quality print production. To find out more about Biodiesel Magazine advertising opportunities, please contact us at 701-746-8385 or service@bbiinternational.com. Letters to the Editor We welcome letters to the editor. If you write us, please include your name, address and phone number. Letters may be edited for clarity and/or space. Send to Biodiesel Magazine Letters, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203 or e-mail to rkotrba@bbiinternational.com.

Please recycle this magazine and remove inserts or samples before recycling COPYRIGHT Š 2011 by BBI International

TM

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LEGAL PERSPECTIVE

Structuring a Successful Co-location Project

BY DEAN R. EDSTROM

Co-location is not a novel concept.

Since the dawn of human economic activity, we have recognized the convenience and efficiency of locating one economic activity in close proximity to a related activity. Today, the benefits of co-location can be measured quite clearly at the bottom line.

Examples of co-location are limitless: a smelter, refinery or other processing facility next to a mine, wellhead or hydroelectric facility; an ethanol or biodiesel plant on the site of a grain elevator or soy crush facility; chemical products operations a short pipe length away from a petroleum refinery. Any input to product relationship can suggest an opportunity for co-location.

While the concept is simple, establishing a successful co-location relationship can be quite complex. If the ownership of both the primary and secondary facilities is the same, the advantages of co-location can be realized readily. But, often the owners of co-located facilities are different, not only in their views of the economics of the relationship but also in their capabilities to establish and operate their respective facilities.

A simple co-location relationship might require only a contract for the supply of a feedstock or other input.

The most complex could be documented with a master or joint venture agreement that spells out the major terms of the relationship and is supplemented by agreements for feedstocks, energy, utilities, transport, off-take, site ownership or lease, management, other services, labor, equity and debt finance, and government subsidies. In any case, the agreements will need to address the endgame: what happens when the agreement expires or is terminated, if the benefits of co-location cease or if one party is sold, goes bankrupt or dissolves.

This can be critical where two or more parties colocate on a site owned by one party. The lease will need to deal with the term, renewals, rent or other payments, changes for market conditions, and ownership or disposition of plant and equipment upon termination. The rent could be $1 per year, market rate or variable depending on the success of the venture. The lessee would want both renewal rights at a predictable cost and termination rights with minimum liability. The site owner will have an interest in preserving the integrity of the property and assuming ownership of the fixed assets at termination.

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Where the co-located facility is essentially in the business of commodity processing, the supply and offtake arrangements will be critical. Pricing on both ends could make or break the venture. One answer might be a tolling arrangement, where the co-located facility is paid a processing fee that is not tied to the market price of either the inputs or production. Where the downstream producer has a market for a product that is not so sensitive to price, it may take more market risk with respect to inputs.

Joint arrangements for utilities and transportation can be a major cost reduction benefit of co-location.

Shared electric and natural gas sources and even a jointly owned power plant should be considered. Water source, recycling and disposal should be common. Road access and rail service should be shared. The agreements will need to identify which party will control these relationships and own the related real estate and fixed assets.

Co-location may also involve special management and labor sharing arrangements. Thus, management, employment and various operating services agreements may be used to reduce operating costs.

Financing sources, including equity and debt investors in either party to a co-location arrangement, will take a great interest in assuring the integrity and durability of whatever arrangement and agreements are made. Lenders particularly will look for assurances on the supply and off-take sides to support the viability of the facility or company being financed.

Risks and liabilities will need to be considered when co-locating facilities. An incident at one facility could damage the other. Indemnification and insurance will need to allocate risks and provide protection that is adequate in scope and amount.

Realizing the benefits of co-location will depend on sound planning and structuring. The parties will rely on engineering, operations, procurement, marketing, finance and legal resources to bring the project from conception to success. Outside advisors will bring expertise to the table to support each of these tasks.

Author: Dean R. Edstrom Partner Attorney, Lindquist & Vennum PLLP (612) 371-3955 dedstrom@lindquist.com

TALKING POINT

Energy Farming Methods Mature, Improve

BY RICHARD PALMER

As the demand for nonfood-based biofuel feedstocks is rapidly growing, so is the sophistication of the commercial agricultural methods used for these types of plants. Jatropha farming is still in its infancy as genetics, agronomics and horticulture sciences are beginning to drive new varieties, more knowledge around the plant’s nutritional requirements and more science-based processes for the care and custody of the plant. This is beginning to drive reliable and scalable results in jatropha farming. Early, less knowledgeable entrants are fading into the background and are being supplanted with a breed of experienced investors and operators keenly focused on building a solid foundation for industrial scale production.

So while Jatropha agriculture continues to be a new and exciting alternative energy source, and the world continues to watch its development closely, there are still many misnomers about where it should be grown, how to grow it and what resources the plant needs to achieve commercially productive yields. Unfortunately, “sound bites” still get circulated with very little credibility or scientific basis— such as recent unsupported statements about jatropha generating more greenhouse gases than it saves, or renewable energy projects that are based on deforestation.

The Center for Sustainable Energy Farming (www. cfsef.org) was created by Global Clean Energy Holdings Inc., one of the largest commercial jatropha farmers in the Americas, as a platform for multidisciplinary research into all aspects of energy farming. The center allows for collaborative research with other researchers and industry partners. The same collaborative research approach is common with other groups of perennial [tree] farmers, who have combined their efforts and resources to improve their product. The center’s mission is to perform cuttingedge plant science research in genetics, breeding and horticulture, and further develop technologies to allow for the economic commercialization and sustainability of energy farms globally. In essence, the ability for countries to access a home-grown energy solution that does not drain limited resources in the process. The center has a Master Research Agreement with Penn State University, funded by industry partners, and is developing other technical collaborations and financial partnerships.

Anyone with a background in plant science or agriculture knows that plants do not grow effectively without 8

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proper resources. Balancing resources to end up with a sustainable long-term solution without harming the environment is the challenge. The focus must remain on balancing the three major areas—genetics, agronomics and horticulture practices—so the plant will grow with optimal productivity.

The direct correlation between improvements in sustainable farming, corporate social responsibility and the resulting social improvements to the community is being proven on commercial jatropha farms in Mexico today. Innovations made on operating farms have resulted in time and cost efficiencies, which, in turn, provide funds that can be allocated to social improvements, health care and immunizations for the farm workers and their families, breakfast programs for students, skilled labor training and education. In order to enhance these benefits, improvements in productivity and sustainability are essential. The center’s goal is to triple jatropha yields within 10 years, increase the oil content from 33 to 45 percent, and increase the quality of the oils and other products produced—while minimizing inputs including pesticides and fertilizers.

We do not believe this is a genetic race to produce the “super variety,” but it is a race towards commercialization that will lend credibility, reliability and scalability to a plant variety that is working towards mass propagation. Even a super variety planted in inadequate soil and improperly cared for, will be unable to reach its potential and will create dissatisfied stakeholders. If the development focus is properly balanced, the species will go through a series of improvements to continually enhance the characteristics.

History has shown this trend with every plant that has been commercialized, including corn. If you look at other commercial crops as a proxy for the possibility for [yield] improvement, not to mention reduction in inputs or resistance to pests and diseases, you will see improvements of 300 to 700 percent over the past 75 years. Jatropha is expected to be the first plant commercialized utilizing modern genomics. The improvements with applied science will accelerate its rapid improvement.

Author: Richard Palmer CEO, Global Clean Energy Holdings (310) 641-4234 rpalmer@gceholdings.com

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.

(866) 746-8385 www.biomassconference.com

Steel City to Host Northeast Biomass Event

06/27

With an exclusive focus on biomass utilization in the Northeast, from Maryland to Maine, the Northeast Biomass Conference & Trade Show is a dynamic regional offshoot of Biorefining Magazine and Biomass Power & Thermal’s International Biomass Conference & Expo, the largest event of its kind in the world.

Taking place in Pittsburgh, Oct. 11-13, the event will connect the region’s current and future producers of biomass-derived electricity, industrial heat and power, and advanced biofuels and biobased chemicals, with waste generators, aggregators, growers, municipal leaders, utility executives, technology providers, equipment manufacturers, investors and policy makers.

The Northeast U.S. has vast forestry, agricultural and municipal biomass resources, and is home to hundreds of technologically progressive biomass power, biofuels and biomass thermal energy projects. This population-dense region is host to several world-class research institutions engaged in the development, scale-up and commercialization of next-generation bioenergy technologies. The sustainable utilization of forestry and wood processing residues―from manufacturing wood pellets in Maine and New York to converting pulp and paper mills to next-generation biorefineries in New Hampshire and Vermont―is only the beginning. With the first mandatory, market-based effort in the United States to reduce greenhouse gas emissions, the region’s utilities are expected to employ biomass cogeneration, gasification and advanced combustion projects in unprecedented numbers, while also supporting projects that generate electricity from on-farm methane, municipal biosolids and landfill gas. Likewise, countless research institutions are partnering with private industry in the region to develop next-generation biofuels such as cellulosic ethanol.

The Northeast Biomass Conference & Trade Show program will include more than 60 speakers, including technical presentations on topics ranging from anaerobic digestion and gasification to combined heat and power and large-scale biomass combustion, within the structured framework of general session panels and four customized tracks: Electricity Generation; Industrial Process Heat and Power; Biorefining; and Project Development and Finance.

The show is designed to help biomass industry stakeholders identify and evaluate solutions that fit their operations. It's time to improve operational efficiencies and tap into the revenue-generating potential of sustainable biomass resources in the Northeastern U.S. To attend, exhibit, speak or sponsor, visit http://ne.biomassconference. com today.

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International Biorefining Conference & Trade Show SEPTEMBER 14-16, 2011

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.

(866) 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.

(866) 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.

(866) 746-8385 www.biomassconference.com/southeast

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Biodiesel News & Trends

PHOTO: GREEN WAY UP

FrontEnd

EVERYTHING BUT: The team will trailer a biodiesel processor, a biodiesel-powered boat, general supplies, a photographer and a film crew on its journey from Australia to Norway.

The Ultimate Biodiesel Adventure Thirty countries, six months and four travelers―all connected by biodiesel This may go down as the greatest biodiesel-infused road trip ever. Four men will embark on a six-month tour that will span 30 countries, starting in Australia and ending in Norway. How they will get from point A to point B isn’t the intriguing part about the trip, but instead, how they will do it.

The goal is to make the entire trip without filling up at a single gas station. Although that may sound as grandiose as road trip themes often are, these guys have a plan—and more importantly, a biodiesel processor. During the trip, the crew, which consists of an engineer, a banker, a disc jockey and a welder, will use a biodiesel processor built in part by the engineer. The plan is to convert into B100 waste oil and grease they source along the way from such outlets as pub bistros, fish and chip shops, restaurants, abattoirs, canola fields and poultry farms. To make the water crossing, they’ve constructed a boat that will also run on biodiesel.

The team will carry general supplies, water and radio equipment and be accompanied by a photographer and a video crew.

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The time at sea will be roughly 20 days and the project has already garnered the support of the Australian and Indonesian governments. “Let’s get one thing clear,” the team wrote on its choice for fuel. “We’re not saying biodiesel is a magical potion that’ll make everything better. We see biodiesel as a step in the right direction, a fuel that can be easily integrated into existing infrastructure and burnt in standard engines. One truth,” they say, is “biodiesel is much better for our planet than mineral diesel.”

And the purpose of the undertaking? Because, the team says, “people generally believe that helping the environment requires time, money, effort and sacrifice; that it is a choice to be green; that it is boring.” Or, they mention fittingly, “that it is just for hippies.” The team says that while they hope to have fun on the trip and during the educational showcase events they plan to give during the time on the road, “we want to show that enjoying yourself can go hand in hand with living sustainability.”

—Luke Geiver

FRONTEND

Crunching the Numbers Monthly report outlines a decade of biodiesel history

A monthly biodiesel report published by the U.S. 2010 Production and Consumption Energy Information Administration in late February Production (in 1,000 barrels) Consumption (in 1,000 barrels) illustrates the bumpy ride the biodiesel industry has January 764 181 experienced since 2001.

February 797 679 The report lays out the production, trade and March 812 314 consumption numbers for the U.S. biodiesel industry April 735 591 over the first 11 months of 2010, as well as historical May 688 387 data for year-over-year comparisons.

June 554 397 According to the monthly overview, biodiesel July 670 641 imports have steadily dropped since peaking in 2008 August 543 429 at 7.5 million barrels (315 million gallons). In 2009, September 556 582 the U.S. imported only 1.8 million barrels. Imports October 497 415 dropped even more, to 546,000 barrels, in 2010.

November 376 323 U.S. exports of biodiesel were also reduced over SOURCE: U.S. ENERGY INFORMATION ADMINISTRATION the same period of time. In 2008, the U.S. exported as significantly as production, imports or exports. The U.S. consumed more than 16.1 million barrels of biodiesel. The respective export 7.52 million barrels of biodiesel in 2008. In 2009, consumption levels number for 2009 and the first 11 months of 2010 were 6.3 million actually increased slightly, to 7.54 million barrels. In 2010, the U.S. conbarrels and 2.5 million barrels. sumed 5.29 million barrels of the fuel.

The data clearly shows a slump in production numbers over The EIA has also released an early overview of its 2011 annual the past two years. In 2008, the monthly production numbers for energy report, which says the liquid fuels sector—including both petrobiodiesel varied between a high of 1.6 million barrels and a low of leum-based and biobased fuels—is expected to grow from 18.8 million 1.1 million barrels. In 2009, monthly production levels ranged from a barrels per day in 2009 to 22 million barrels per day in 2035. According high of 1.6 million barrels in December, to a low of 599,000 barrels in March. By 2010, production had slowed significantly, with monthly to the EIA, biofuels consumption is expected to account for the majorproduction ranging from a high of 812,000 barrels in March, to a low ity of that growth. Domestically produced biofuels are also expected to help curb the growth of oil imports in the future. —Erin Voegele of 367,000 in December.

Consumption levels over the past 3 years, however, didn’t drop

BASF Eyes South American Potential BASF has big plans for biodiesel production in South America.

“Based on the compulsory blending mandates, Argentina is expected to globally emerge as one of the largest biodiesel markets in the world,” says Anke Muenk, global communications spokesperson for the Inorganic division at BASF. “To solidify its regional presence, the company has made plans to build a 60,000 metric ton sodium methylate (readyto-go catalysts) plant in General Lagos, Argentina, a site Muenk says is centrally located near the main biodiesel production facilities. The German-based company believes roughly 20 percent of the annual global demand for biodiesel will come from South America by 2015.

“It is too early in the process to comment on the economic impact,” Muenk says, “but of course, the new plant will, for example, offer logistics advantages for our customers.” One of the biggest advantages, he points out, is a reliable local supply.

Given BASF’s perspective on the future of biodiesel in South America, it might appear that the company has nothing to worry about at its new site, but Muenk points out that isn’t the case. “BASF takes the principal of sustainable development seriously,” he says. “We know

EXPANDING BUSINESS: With one facility nearing construction in Brazil and another one in the works for Argentina, BASF sees a lot of sodium methylate demand in South America.

that our economic success also depends on the social acceptance of our activities. This applies especially in the communities and regions in which our sites are located.” BASF is also building a sodium methylate plant in Brazil that is nearing completion. —Luke Geiver MAY 2011

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PHOTO: BASF

Sustainability concerns, sodium methylate link BASF with Argentina, Brazil

FRONTEND

The View from the Top U.S. biodiesel production takes the lead

A report compiled by Hart Energy Consulting’s Global Biofuels Center Biodiesel Prodcution Capacity Rankings ranks the U.S. as the top biodiesel producing nation in the world, with 1.56 Capacity (in million gallons) billion gallons of capacity currently in operation. According to the report, United States 1,562 titled, “Global Biofuels Outlook to 2020,” Germany is ranked at No. 2, with Germany 1,334 1.3 billion gallons of capacity in operation. Spain, Indonesia and Brazil round Spain 1,327 out the top five biodiesel producing nations. Hart Energy Consulting reports 1,126 that Brazil’s production capacity is positioned to grow dramatically in 2011 and Indonesia 2012, and in fact, already features 70 percent as much production capacity as Brazil 1,099 the U.S. Malaysia 1,081 The report also states that the majority of the U.S.’ biodiesel capacity is China 1,032 not producing fuel. “It should be noted that only 10 percent of existing biodieArgentina 961 sel capacity in the U.S. is currently producing,” says Tammy Klein, Hart Energy France 773 Consulting’s assistant vice president. “The primary reason behind the 10 Thailand 732 percent utilization rate has been high feedstock prices and the federal biodiesel Italy 727 tax credit was not renewed until Dec. 17, 2010.”

According to the report, global supplies of biodiesel will need to double India 453 by 2020 in order to meet the requirements of government programs, such as Poland 398 the RFS2, that are being implemented around the world. Fewer facilities are ex- Netherlands 297 pected to be built over this timeframe, said Hart Energy Consulting. However, Singapore 261 production at existing facilities is expected to increase. The company also notes Austria 260 that it expects to see continued industry consolidation over the next decade, United Kingdom 256 with some facilities shut down for good.

Belgium 234 Due to excessive biodiesel capacity present all around the world, Hart Greece 225 Energy Consulting says it expects to see most countries focus on their own internal markets. This includes the possibility that some countries, such as Australia 211 Brazil and Argentina, could increase national biodiesel blending limits in order South Korea 202 to absorb excess capacity that would otherwise be exported, thereby supportPortugal 156 ing local industry.

Columbia 155 The report addresses the biodiesel industries of five regions and 30 Philippines 126 countries, including the U.S., Australia, Canada, and New Zealand, as well as Czech Republic 121 a wide variety of countries in Europe, South America, and Southeast Asia. In Source: Hart Energy Consultants Global Biofuels Center addition, the report looks at other regions with production potential, including California, Sub-Saharan Africa and Central America. —Erin Voegele

Important Policy at the Local Level

In Washington state and South Dakota, policy makers are approving biofuel growth Federal policy may be in constant flux, but at the state level there are some pending policy measures that reveal a bright biodiesel path for years to come. In Washington, Sen. Janea Holmquist Newbry, R-Moses Lake, has sponsored SB 5478, aimed at helping a 2006 state push to develop feedstock, production capacity and infrastructure for biodiesel. The bill will mandate a 2 percent use of biodiesel in all on-road diesel blends, and there’s a kicker. The bill states that, “Beginning 60 days after the director determines that production of biodiesel fuel in this state from feedstock grown or produced in Washington has reached a level of at least 15 million gallons over the preceding 12 months, all diesel fuel sold or offered for sale in Washington”—and this is the good part—“must contain 14

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at least 5 percent biodiesel fuel or renewable diesel fuel by volume.”

In South Dakota, Gov. Dennis Daugaurd has signed a bill that could have a huge impact on the growth of biofuels in the state.

Under HB 1216, gas stations will now have the ability to offer various blends of both ethanol and biodiesel, regardless of what any franchisor says. According to the bill, “No franchise-related document entered into or renewed on or after July 1, 2008, may contain any provision allowing a franchisor to restrict the franchisee or any affiliate of the franchisee from” installing a renewable fuel pump or tank, converting existing pumps or fuel for renewable blend use or, among others, selling renewable fuel. —Luke Geiver

FRONTEND

Finding the Truth

Problems pop up with oilheat in the Northeast In mid-March a handful of oilheat dealers in New Hampshire began hearing reports from customers related to the coking of burners. The burners reportedly appeared to have an asphalt-like build up.

While some pointed to biodiesel as a potential cause, testing has since determined base fuel instability is likely the cause.

As often occurs when a new product such as Bioheat enters the market, the gut reaction of many people is to blame problems on the “new kid on the block,” says Paul Nazzaro, the National Biodiesel Board’s petroleum liaison. While biodiesel can cause issues related to filter plugging and frozen lines in winter, Roman Wolff, president of Enhanced Biofuels LLC, notes he’s never seen problems related to coking occur due to biodiesel.

The problems associated with coking led some oilheat dealers in the state to discover that biodiesel was blended with their fuel. Nazzaro was invited to a meeting with approximately 30 members of the New Hampshire oilheat industry to discuss the issue. “The meeting started because they were concerned that biodiesel was actually being blended, and they weren’t made aware of it by the wholesale community,” Nazzaro said. “They didn’t realize that no one has an obligation to them [to divulge] when, or if, they blend biodiesel.”

According to Ed Burke, chairman of the board of Dennis K. Burke Inc., it’s not uncommon for oilheat dealers to be unaware that biodiesel is blended into fuel by wholesalers. This is due in part to the fact that those not actively involved in, or following, the biodiesel industry might not be aware of ASTM specifications that consider fuel containing up to 5 percent biodiesel to be fungible. Wholesalers, Burke says, are not required to notify customers that the oilheat product they are supplying contains up to 5 percent biodiesel.

At his meeting with New Hampshire oilheat dealers, Nazzaro said his first objective was to arrest concerns that biodiesel is an undesirable

PLUGGED UP: Coking problems on oilheat burners in New Hampshire were initially blamed on biodiesel, but results show that bad base fuel was the culprit.

product being added to oilheat. “My goal was to convince them that biodiesel is actually a great alternative because it’s more critically scrutinized for quality parameters,” he said.

About four of the 30 oilheat dealers in attendance were experiencing similar problems related to coking. Following the meeting, Nazzaro arranged to have testing completed for two of the dealers. Samples were taken of both the affected fuel and the sedimentation that was building up on nozzles and hardware. Fuel sampled from a delivery truck clearly indicates fuel instability is likely the cause of burner coking.

Equipment problems and biodiesel have been ruled out as causes.

Although the problems were not associated with biodiesel usage, Nazzaro says that as the new kid on the block, the biodiesel and Bioheat industries have a responsibility to step up and address any potential problems. “The National Biodiesel Board and its stakeholders totally embrace the Bioheat movement, and are totally committed to looking at every single issue that will arise to ensure that Bioheat is not being unfairly judged by problems that have existed for decades,” he says.

—Erin Voegele

Asian Invasion

Tokyo, Japan-based international commodities trading firm Itochu Corp. is on a quest to produce biodiesel costeffectively and efficiently in Asia using a new biofunctional solid catalyst developed by Chicago-based Benefuel Inc. Consequently, Itochu invested a 4 percent stake in Benefuel to help achieve this objective.

While he couldn’t disclose the specific type of catalyst, Benefuel CEO Robert Tripp tells Biodiesel Magazine that the company’s patent-pending bifunctional solid catalyst is capable of converting virtually any fat, oil and fatty acids to biodiesel simultaneously with no effluent during downstream polishing and separating. With Itochu’s small

stake in Benefuel, Tripp expects Benefuel’s catalyst to make an impression in the Asian biodiesel industry.

“Our technology is applicable to the worldwide biodiesel market and Itochu is a very large commodities house,” Tripp says.

“We’re really looking forward to working with Itochu to grow our business in Asia as well as in other parts of the world and have their assistance where and when they can provide it.”

Demonstration experiments have been conducted using Benefuel’s bifunctional solid catalyst by Itochu jointly with Daiki Axis Co. Ltd., a leading biodiesel producer in Japan.

Itochu aims to develop operations using

PHOTO: BENEFUEL INC.

How Benefuel aims to produce biodiesel more efficiently, cheaper in Asia

TRY AND BUY: Itochu Corp. will not only use Benefuel catalyst to make biodiesel, but it also purchased a 4 percent stake in the company.

Benefuel’s bifunctional solid catalyst in Asian markets by 2012. —Bryan Sims

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FRONTEND

Use the Petroleum Industry Model?

High RIN prices and a tax credit aren’t enough to keep feedstock prices in check When the tax incentive was reinstated retroactively for 2010 and extended through 2011, the industry had a reason to feel cautiously optimistic. Only a month later, in February, biodiesel RIN prices hit an all-time high at $1.15 adding to that early 2011 optimism. Now, RIN prices are still high and the tax incentive is still here, so all signs should point to profitable times for the industry. Many producers know that isn’t the case, however, and they realized that the dollar tax incentive that seemed to save the day didn’t come without a catch— higher feedstock prices.

Jon Van Gerpen, professor and department head of biological and agricultural engineering at the University of Idaho, tells Biodiesel Magazine he has identified the various costs associated with the process today, and feedstock prices are once again dominating any margin created by the tax incentive.

Van Gerpen, who is currently teaching a class on bioenergy, said he has worked in his class to model the biodiesel production process. “It sure looks to me that with current feedstock prices that is where most of the money is going,” he says. Around this time last year, crude soybean oil was about 35 to 37 cents per pound according to figures by the Agricultural Marketing Service of the USDA. At the end of March, crude soybean oil was going for 52 to 54 cents a pound. And for nearly every other feedstock, the price rise is the same. A year ago, yellow grease was going for $25 to $37 per cwt and today, it has risen from $40 to $48 per cwt. The reason for the rise?

As Van Gerpen points out, the simple economics of supply and demand are taking effect. When the tax incentive came back and

producers were able to resume production under more favorable economics, the demand for feedstock rose once again. “You could argue about the role that speculators play in the process,” he says about the possibility of feedstock speculation driving up the price.

Adding that those speculators aren’t dumb, “they realize that when that tax credit came back,” he says, there would be a big demand for feedstock.

Fortunately, there is an answer to the dilemma, however broad it may seem. “I think it is an important point to be made,” he says, “that the biodiesel guys are not that different than the petroleum industry. If you look at the petroleum industry, you have people that do exploration and then petroleum recovery, and then people that do the refining.” A company like ExxonMobil, he explains, which does exploration and refining, isn’t refining because it boosts their profit.

“They do refining simply to allow them to market their petroleum product. The money is made on the petroleum recovery side.”

The same applies to biodiesel. “You have to have control of the exploration and the production of the feedstock, and then the refining is what gives you the opportunity to sell a product into the market.” Most importantly, there is a reason to “explore” for feedstock. The diesel market is “essentially unlimited,” and there is no risk of flooding the market. “The diesel market in this country is so huge compared to our ability to provide biodiesel that it is like we are trying to supply saltwater to the ocean.” —Luke Geiver

Upstream Acquisition

When a biodiesel technology provider captures a piece of the feedstock supply chain, its customers know it means business. That’s what Groveland, Fla.-based based Raptor Technology Group Inc. did when it acquired the assets and contracts of American Grease LLC, which collects and brokers more than 4 million gallons of waste vegetable oil annually.

According to Todd Jones, vice president of marketing and sales for Raptor, American Grease has the equipment to collect large quantities of waste vegetable oils and maintains contracts with customers in excess of $8 million in ongoing sales annually.

“American Grease was acquired because of the biofuel facilities that we build and it helps ensure that we can provide feedstock for the plants that we put together,” Jones tells Biodiesel Magazine. “It ties into the full package service that we can provide.”

Raptor President Tom Gleason says that the strategic acquisition will enable his company to provide biodiesel plants a consistent supply of feedstock to help sustain maximum production

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PHOTO: RAPTOR TECHNOLOGY GROUP INC.

How adding feedstock access is critical to a service package

AGRESSIVE LOGO: Like the dinosaur its name represents, Raptor has entered the biodiesel market with the same attitude.

levels. “Feedstock supply is an extremely important piece of the biodiesel production puzzle,” he says. —Bryan Sims

FRONTEND

Proposal of Fortune

Several proposed biodiesel plants continue making progress The $1 per gallon biodiesel blenders tax credit was extended until the end of the year—check. There’s a federally-mandated renewable fuels standard (RFS2)—check. And biodiesel prices seem to be price-competitive to that of diesel. For several biodiesel project developers, the time is right to capitalize on these favorable economics.

Near South Milford, Ind., Ultra Soy of America revived plans to build a 60 MMgy biodiesel plant. The project was initially proposed in 2007, but the downturn in the economy had kept it from finding investors needed to help fund the $165 million plant. The developers, however, are still trying to push the project forward and had been granted an operating permit by the Office of Air Quality, through the Indiana Department of Environmental Management, and more discussions are in queue to determine infrastructure and other issues, says to Keith Gillenwater, executive director of the LaGrange County Economic Development Corporation.

“We understand [Ultra Soy of America] has pursued this project the last few years,” Gillenwater says. “From a LaGrange County Economic Development Corporation standpoint, we’re certainly doing whatever we can to assist them to put them in the best position that they can be in to be successful with having special plant commission meetings, connecting them with more people and so forth.”

In the Pacific Northwest, Gen-X Energy Group Inc. is in the process of retrofitting an idle waste-to-ethanol plant to produce biodiesel and other biomass-based products in Moses Lake, Wash.

A Burbank, Wash.-based biodiesel plant owned and operated by Gen-X was destroyed by a nonbiodiesel-related fire in 2009. According to Ramon Benavides, Gen-X’s co-founder and vice president of business development, the company has been working on this new project since that time. The first units for biodiesel production, according to Benavides, will have an annual capacity of 1.8 million gallons each and will expand with demand in a modular roll-out to 6 MMgy. The biodiesel production unit is skid-mounted, noting the design has been awarded a provisional patent.

The company was awarded approximately $720,000 in grant funding through the American Recovery and Reinvestment Act last year. Final U.S. DOE National Environmental Policy Act approval has also been issued, according to Benavides.

“That grant was awarded for the development of a multiphase advanced biorefinery project,” Benavides says. “The biodiesel unit is one component.”

In addition to biodiesel output, the plant will feature glycerin refining capacity and an advanced chemical production unit. According to Benavides, the plant will eventually have capacity for cellulosic fuels production, with potential for algae-based biodiesel production in the future.

Biodiesel capacity was expected to be commissioned in April, and reach full operational capacity by mid-May. The glycerin refining capacity was slated to be complete by summer, Benavides says.

—Bryan Sims

Making a Push

How a B5 mandate is gaining traction in the Golden Gate City San Francisco has seen its share of biodiesel-related initiatives over the years. In 2007, the city implemented a B20 mandate for its city fleet.

That same year, it launched a successful waste collection system and there’s talk of a production facility coming into town spearheaded by waste grease behemoth Darling International. Today, the city’s Biodiesel Access Task Force is proposing a citywide B5 mandate.

Comprised largely of local biodiesel advocates and executives, the task force last discussed the idea in December, but it has since sunset, according to task force member Ben Jordan. When it reconvenes, Jordan says the task force will reassemble under a new name and reintroduce the idea, which will likely be modeled after a similar program currently employed in Portland.

“We’re in the information-gathering phase right now,” he says.

“We’ve heard a lot of good things come from Portland that seems to be going well, such as increased biodiesel use from producers with no impact on operations. We want to make sure there’s a regionality aspect to the sourcing of the fuel and find out how Portland is successful in reporting requirements.”

Eric Smith, task force vice president and co-chairman, tells Biodiesel Magazine that, when the task force reconvenes, it plans to discuss several

WATCH AND LEARN: San Francisco’s biodiesel task force says the city is watching and learning from its neighbor to the north, Portland, before moving forward with its own citywide B5 mandate.

state and federal regulatory issues such as availability, fuel quality, education of industry stakeholders, with the topic of addressing underground storage requirements as being the top priority.

“Once we can get through that hurdle, the flood gates might open,” Smith says. —Bryan Sims MAY 2011

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Biodiesel Benefits Food, Feed, Energy Industries After a difficult 2010, biodiesel is poised for a great year. But a boost in production coupled with rising oil prices and sustained high food costs are sure to resurrect the now-familiar argument that biofuels are driving up food prices. The reality for biodiesel, the most biodiverse liquid fuel on the planet, is that the industry has numerous benefits for the food supply, and it can be proud of the impact it has on food security.

Spiking oil prices due in part to continued instability in the Middle East are taking a toll on businesses of all kinds. This includes food companies, whose production and distribution systems rely heavily on fossil fuels and are vulnerable to the ups and downs of global oil markets.

At the same time, when petroleum prices rise, renewable energy providers tend to benefit because alternative energy becomes more competitive with higher petroleum prices. This dynamic often leaves critics looking for a scapegoat, with biofuels a convenient target.

The facts about biodiesel show that the criticism is misguided, and that biodiesel production can be a leading solution to food and energy stability.

Biodiesel is produced from a wide variety of renewable feedstocks. About half the biodiesel produced in the U.S. is made from soybean oil. The remainder is made from a variety of sustainable oils including recycled cooking oil, animal fats and vegetable oils such as canola. In every case, these feedstocks are byproducts or coproducts of food production. By creating a market for underutilized or undervalued byproducts, biodiesel reduces waste and provides a beneficial revenue stream for farms and businesses that grow and produce food. This makes the food supply more stable and secure for America as well as the countries around the world that rely on efficient U.S. production of food, fiber and livestock feed.

Livestock producers benefit from biodiesel in more than one way. By creating a market for fats that are a waste product of the livestock and meat packing industries, biodiesel adds a beneficial revenue stream. Perhaps even more significant is the lower cost of livestock Don Scott, director feed as a result of a thriving U.S. biodiesel inof sustainability, NBB dustry. Crops like soybeans are grown primarily to supply protein meal as feed for livestock.

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In 2008, 360 million gallons of biodiesel from soybeans coproduced enough soybean meal for the equivalent of 110 billion rations of protein for the livestock sector.

ed by Centrec Consulting Group quantifies the reduction in protein meal prices as a direct result of using soybean oil to support the U.S. biodiesel industry. Without biodiesel in the marketplace, higher soybean meal prices could have cost the livestock industry an additional $4.8 billion from market years 2005 through 2009.i Soybeans are 80 percent protein meal by weight and approximately 20 percent oil. The quantity of soybeans produced correlates exclusively to the demand for protein meal. By increasing the utilization of the oil coproduct, biodiesel reduces the portion of production and crushing costs that must be borne by the protein meal. Therefore, consumers of soy protein meal benefit from lower costs.

Low-cost soy protein meal can also mean plentiful nutrition for people through programs like that of the World Soy Foundation, which provides nutritional rations to children in developing nations. In 2008, 360 million gallons of biodiesel from soybeans coproduced enough soybean meal for the equivalent of 110 billion rations of protein. In 2009, 247 million gallons of biodiesel from soybeans coproduced enough meal for the equivalent of 72 billion rations of protein.

The United Nations’ Food and Agriculture Organization recognizes that producing food and energy side-by-side offers the greatest potential for boosting food and energy security, while simultaneously reducing poverty. FAO recently released the study, “Making Integrated Food-Energy Systems Work for People and

inside

NBB Climate.” The study also concludes that integrating food and energy production can be an effective approach to mitigating climate change and emissions stemming from land use change. By combining food and energy production in synergistic ways, integrated food-energy systems reduce the likelihood that land will be converted from food production.

The FAO assistant director-general for natural resources was quoted saying, “Farming systems that combine food and energy crops present numerous benefits to poor rural communities.”

Among these benefits is increased investment in yield-improving technology, which further increases food security and reduces environmental impacts, including land use change and greenhouse gas emissions.

This will be a great year for biodiesel. The federal renewable fuel standard will be fully implemented, and biodiesel has a secured role in making the U.S. more energy independent and more energy secure. The efforts of the National Biodiesel Board to embrace sustainability and scientifically define biodiesel’s many environmental benefits are ensuring that consumers continue to find biodiesel an attractive alternative as America’s first advanced biofuel. Biodiesel has a bright future and has been proven to be a key step towards energy security, food security and reduced food costs. i

Centrec Consulting, February 2011, Soybean Oil and Meal Economics: How Livestock Producers Benefit from Biodiesel Production

Don Scott, Director of Sustainability, National Biodiesel Board

NBB members pack their bags for DC For the biodiesel industry, June not only brings the start of summer, it also means it is time to pack your bags for the nation’s capital. The National Biodiesel Board June membership meeting held annually in Washington, D.C., is the place where biodiesel producers and supporters meet to shape the future of the biodiesel industry.

On the agenda are important federal regulatory issues like the long-term status of the biodiesel tax incentive and implementation of the RFS2. With 2011 being the first full year of implementation of the revised renewable fuel standard, it will be very important to address its progress and prepare for increased volume requirements.

“This meeting provides an excellent opportunity for members of the biodiesel industry to shape the direction of their businesses on the national level,” said NBB Chairman Gary Haer.

“This is a critical year for our industry and our future. We need your voice and action in that effort. I encourage every member to consider taking advantage of this opportunity.”

NBB will again assist members in setting up Congressional visits while in Washington. These grassroots visits led by members of the industry continue to be paramount to achieving the board’s long-term vision and legislative priorities.

“Meeting face-to-face with elected officials in Washington is one of the most effective ways of communicating the status and needs of your business and the entire industry,” Haer added.

At the June NBB membership meeting, held annually in Washington, topics will include the long-term status of the biodiesel tax incentive and implementation of RFS2.

As always, members will get the The NBB membership inside track on what’s happening in all meeting takes place: areas of the industry, and learn about June 13-15, 2011 the progress of NBB in meeting inL’Enfant Plaza Hotel dustry objectives through technical, Washington, D.C. regulatory and marketing programs.

Watch for more information via email and the members only site for agendas and registration instructions.

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insideNBB

NBB delivers RFS2 education to the petroleum industry The renewable fuel standard is one of the most important federal policy drivers for the biodiesel industry in 2011. While it is important for the biodiesel industry to understand the program, it is just as important that the obligated parties on the petroleum side understand how RFS2 works, and how they can use biodiesel to comply.

That is why the National Biodiesel Board recently developed and delivered an educational series of webinars targeted specifically for the petroleum industry, outlining the biodiesel industry’s steps for producing and distributing quality biodiesel to meet the U.S. EPA’s 2011 volumetric requirements under RFS2.

“Our objective with the development and execution of these comprehensive training webinars specific to RFS2 was to ensure the petroleum supply chain that the biodiesel industry was, in fact, ready to produce and deliver the highest quality biodiesel fuel to meet the demands associated with the EPA RFS2 program,” said Paul Nazzaro, petroleum liaison to the NBB. “And we definitely accomplished that goal.”

A comprehensive overview of the biodiesel industry was given during the webinar sessions. Specific RFS2 topics included outlook for 2011 biodiesel supply and demand, management strategies utilized for RINs compliance, federal and state-specific legislative polices driving biodiesel demand, end-user markets pushing biodiesel sales and more.

The sessions were promoted to the petroleum industry through NBB contacts, NBB members’ client bases and NBB petroleum industry partners such as the Petroleum Marketers Association of America, Independent Liquid Terminals Association, Society of Independent Gasoline Marketers of America and the National Oilheat Research Alliance.

Each of the five regionally focused sessions averaged above 50 attendees and led to many follow-up requests for the NBB Petroleum Outreach team.

Biodiesel industry links up with video technology Sustainability is an important aspect of the biodiesel industry, and it is also an important principle by which the National Biodiesel Board conducts business. One of the ways the industry has made day-to-day business more sustainable is through increased use of technology.

The NBB has recently partnered with St. Louis-based Lifestream, a direct reseller of the registered trademarked LifeSize Video Conferencing equipment, to purchase and to offer LifeSize products to members. This network of technology within the industry, termed BioLink HD, is helping to improve communication capabilities while reducing travel time, expenses and the industry’s overall carbon footprint.

“NBB endorses this product because it works,” said NBB CEO Joe Jobe. “NBB is proud to be working with our partner LifeStream to deliver a video conferencing tool that will not only make communication more efficient but also assist in our sustainability mission. We can now participate in meetings and programs around the world without getting in a car or on a plane.”

The biodiesel industry is ever-changing and the NBB is continually looking for ways to help members better compete in the global market.

“We use LifeSize video conferencing equipment in both our headquarters and our Washington, D.C., office,” Jobe added. “Our goal is to build a communication network within our industry so we can all be more efficient with our resources and help reduce our carbon footprint by decreasing our travel. I encourage you to become part of the BioLinkHD network.”

LifeSize technology combines a high-definition video experience with a rich set of features to deliver a powerful, flexible and easy-to-use video communication solution. All LifeSize products 20

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NBB CEO Joe Jobe, left, says the organization supports LifeSize Video Conferencing because "it works."

Jobe says the goal of incorporating video conferencing is to build a communication network within the biodiesel industry to be more efficient with resources.

deliver quality high-definition video and audio providing for authentic user experiences.

For more information on the technology, pricing and the BioLink HD network, contact the NBB at info@allthingsbiodiesel. com, or visit the website at www.biolinkhd.com.

insideNBB

BQ-9000 program continues steady growth The BQ-9000 program continues to grow as biodiesel production volumes continue to increase.

With this increase comes a responsibility for fuel quality as it is the driving force for a continued demand for biodiesel in the marketplace. High-quality fuel continues to build consumer confidence in biodiesel, and consumers can rest assured knowing that biodiesel procured through BQ-9000 accredited organizations has undergone strict adherence to quality management practices.

BQ-9000 is a voluntary fuel quality assurance program in the U.S. and Canada that is overseen by the National Biodiesel Accreditation Commission. The program is a unique combination of the ASTM standard for biodiesel, ASTM D6751, and a quality systems program that includes storage, sampling, testing, blending, shipping, distribution and fuel management practices that ensure quality for consumers. These quality controls above and beyond the ASTM standard ensure that only the highest quality product reaches the marketplace.

The program is open to anyone in the biodiesel industry that falls in one of the three categories: BQ-9000 Producer, BQ-9000 Marketer or BQ-9000 Laboratory.

The BQ-9000 program recently welcomed three new producer members and two new marketer members to its ranks. This year’s new BQ9000 Producer members include Sequential Pacific Biodiesel of Salem, Ore., and REG Seneca of Seneca, Ill., both of which became certified in January; and RBF Port Neches of Port Neches, Texas, which became certified in March. The new BQ-9000 Marketer members include Trafigura AG of Houston, which became certified in January, and Castle Oil of Harrison, N.Y., which became certified in March.

These new additions to the BQ-9000 program show the continued commitment to fuel quality in the biodiesel industry.

For more information or to inquire about becoming a BQ-9000 Accredited Organization, contact Kyle Anderson at the National Biodiesel Board office.

NBB applauds Oregon’s move to B5 The National Biodiesel Board applauded the state of Oregon on its progressive upgrade from a B2 requirement to B5. In April, the NBB helped garner news coverage of the state’s biodiesel program—now the second state to require B5.

“Policymakers in Oregon should be congratulated for displaying national leadership on clean energy issues,” said Shelby Neal, NBB regulatory affairs director. “As a result of the biodiesel policy, Oregon's citizens will enjoy cleaner air, green jobs and a higher level of energy independence.”

Neal noted that Minnesota was the first state to pass a B2 biodiesel requirement, which has since increased to B5. The state’s required volume of biodiesel is scheduled to rise to B10 by 2012, and B20 by 2015. The NBB is committed to supporting state policy that supports biodiesel. The state regulatory team’s staff has visited 17 states in the last six months as a part of this effort.

Washington and Pennsylvania both have a B2 requirement in effect. Connecticut, Louisiana, Massachusetts and New Mexico have all passed similar legislations that haven’t yet taken effect.

Oregon's B5 requirement was scheduled to be triggered when the in-state production capacity reached 15 million gallons annually, which the biodiesel plants recently accomplished.

The new statewide requirement took effect April 1. It will generate about 25 million gallons of biodiesel demand annually.

“Increasing the use of domestically produced, low-carbon fuels like biodiesel is a win-win for Oregon,” said Rick Wallace, a senior policy analyst at the Oregon Department of Energy, and the Clean Cities Coordinator of the Columbia-Willamette Clean Cities Coalition. “We’re supporting the local economy while reducing pollution, rather than relying entirely on fossil fuels to power our state.”

NBB welcomes new members Tunku Syed Razman Environmental Foundation—Seremban, Malaysia Aufbau Renewable Energy Inc.—Blue Point, N.Y. Irving Oil Terminals Inc.—Portsmouth, N.H. MAY 2011

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BusinessBriefs Ft. Collins, Colo.-based integrated algal technology developer Solix Biofuels Inc. has secured $16 million from inside investors as part of a Series B finance round. Bohemian Ventures, The Southern Ute Alternative Energy Fund and I2BF Global Ventures all participated in the round. In conjunction with the financing, Solix changed its name to Solix BioSystems to better reflect its role as a leading provider of algal production systems. According to Joanna Money, vice president of business development for Solix, the new funding will help drive the commercialization of the company’s trademarked algae growth system—or AGS—which utilizes Solix’s proprietary, high-productivity photobioreactors.

EQM Technologies & Energy Inc. went looking for working capital, and according to Robert Galvin, CFO of EQM, found it. After performing a reverse merger to acquire Beacon Energy Holdings in January, the newly named EQM Technology & Energy Inc. needed funding to restart a 12 MMgy biodiesel facility in Cleburne, Texas, formerly owned and operated by Beacon Energy Holdings.

The board of directors for EQM authorized the sale of $3 million for convertible notes, and Galvin says he has secured $2.5 million. “When we acquired this business, we needed to raise some working capital to effectively start the plant,” Galvin tells 22

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Companies, Organizations & People in the News

Biodiesel Magazine. The convertible notes mean that those notes “are convertible into shares of the company’s common stock. If the stock trades above the conversion price,” Galvin says, “I’m expecting that the holders of these notes will want to convert their notes to stock.” If, however, the stock doesn’t trade above the conversion price, he adds, “I’m sure they’ll want to hold onto their notes. If that were to happen, these notes mature in three years, at which time they will be paid their principle with interest.”

PetroAlgae has formed a partnership to upgrade the Melbourne, Fla.-based company’s algae oil technology, and the upgrade comes from known, traditional methods: catalysts. Through a new agreement with Haldor Topsoe A/S and its U.S. subsidiary Haldor Topsoe Inc., PetroAlgae will now use catalysts provided from the subsidiary's Houston headquarters to enhance the oils produced through its algae refining process that includes coking and pyrolysis. The agreement will also allow PetroAlgae to test the algae biomass produced from its system in refinery cokers and “validate the commercial viability” of the process, says John Scott, chairman of PetroAlgae.

A new biodiesel production technology developed at the University of Connecticut will soon be offered commercially. The innovative system features a continuous flow reactor that separates biodiesel from glycerin in one step. The patented technology has been under development for approximately three years.

Richard Parnas, UConn professor of chemical engineering, identified an opportunity to combine the reaction step with glycerin separation. “Sometimes separations can cost more than the reactions,” Parnas says. “As we were developing our continuous reactor, we rec-

MAY 2011

ognized an opportunity to combine the glycerol separation with the actual reaction to produce the biodiesel.” Vegetable oil and methanol are run through a mixer before they enter the reactor. The biodiesel systems will be built on skids, and can be shipped anywhere in the world. The company plans to initially focus on community-scale production systems ranging in nameplate capacity between 250,000 and 5 MMgy.

Ultra Green Energy Services Inc. expanded operations at the New Hyde Park Fuel Terminal in New Hyde Park, N.Y., by increasing railcar storage capacity by 30 percent. The terminal, owned and operated by Hart Petroleum, is the lone operating rail-to-rack terminal dedicated to biofuels on Long Island. According to Michael Cooper, director of sales and trading for UGES, the impetus for the rail expansion came as a result from record demand for Bioheat from customers during the most recent winter months. As a result, Cooper said UGES worked with the New York and Atlantic Railway to add more track for the addition of seven railcars that will help meet the demand. “A railcar comes in every seven minutes at 70 miles per hour there,” Cooper tells Biodiesel Magazine. He said UGES plans on adding 10 more railcars to the New Hyde Park terminal. The New Hyde Park terminal is capable of storing B100 in a separate 40,000-gallon tank equipped with computerized in-line blending systems that ensure concise biodiesel and/or Bioheat blend levels, from B2 to B99, based on customer needs, accord-

BUSINESSBRIEFS Sponsored by ing to Danny Falcone, wholesale manager for UGES. “The demand is coming now,” Falcone says.

Isuzu Commercial Truck of America recently released a new commercial van called the Reach, and among other attributes the van will be B20 compatible.

During the National Truck Equipment Association’s 2011 Work Truck show in Indianapolis, Isuzu unveiled the new line of B20 vans, telling the large crowd that each van will reduce emissions by 11 tons per year. “We believe the Reach will truly revolutionize the commercial van market,” says John Marshall, senior vice president of sales and marketing for Utilimaster, a company that helped design and build the new commercial van. The van is powered by a 3.0-liter turbocharged diesel engine that has been rated to last 310,000 miles.

In comparison to traditional commercial vans, independent testing concluded that the Reach is 35 percent more fuel efficient, according to Isuzu, and 81 percent of Isuzu-built diesel vehicles sold in the U.S. since 1986 are still in service today. The new Reach diesel-powered vans are set for production by mid-summer.

Ohio State University has teamed up with a biodiesel producer from Ohio on research based in glycerin technology that converts crude glycerin into polyurethane foam. The process was created by Yebo Li, a biosystems engineer for OSU’s Ohio Agricultural Research and Development Center located in Wooster, Ohio.

Li has developed a process that converts crude glycerin created via biodiesel production into biopolyol, which is then used as the main component for the foam. The material can be used in a wide range of products including automotive seats and bumpers, appliance applications such as thermal insulation systems from refrigerators, insulation boards, packaging materials, or the construction industry. “We have already tested our biopolyol products in automobile headrests,” Li tells Biodiesel Magazine. The product is 5 to 10 percent cheaper that petroleum or natural oilbased foams. The current market for polyurethane is roughly $13 billion in the U.S., and creates a demand for 2.8 million tons of product.

Germany’s Federal Office for Economy and Export Control (BAFA) released figures recently on the nation’s total biodiesel sales in 2010. BAFA reports that approximately 2.6 million metric tons (780.5 million gallons) of biodiesel was sold into the German fuel market last year.

A majority of that, about 2.3 million tons, was sold for blending into the 32.1 million ton German diesel fuel market, which comes to slightly more than 7 percent.

The German oilseed council UFOP commented on the numbers, stating, “Biodiesel will remain an alternative fuel of great importance in the future … the consumption of diesel will continue to rise due to the constantly higher quantities of goods transported by road.” The council then says, “Besides, so-called second-generation fuels replacing diesel will not be available for a foreseeable time, UFOP is con-

vinced. So UFOP confirms the necessity that biodiesel should be conceded a future both as pure fuel and as admixture in motor fuel. There is no other way of meeting the climate targets in the transport sector.”

While Germany consumed more than 780 million gallons of biodiesel last year, the U.S. only produced 315 million gallons of biodiesel in 2010, according to preliminary data released by the U.S. Census Bureau.

Nevada-based Green Fuels America Inc., a wholly-owned subsidiary of U.K.based Green Fuels Ltd., will begin manufacturing feedstock-flexible FuelMatic biodiesel processors this spring. The community-scale production facilities are capable of processing approximately 5,000 gallons of biodiesel per day, equating to an annual production capacity of nearly 1.6 million gallons. Greg Springer, vice president and general manager of Green Fuels America, says Green Fuels Ltd. has been manufacturing its FuelMatic line of biodiesel processors for about five years. “There are about 21 of them in the world right now, and seven in backlog,” Springer says, noting that Green Fuels’ manufacturing capacity in England is peaked out. Green Fuels America will now begin manufacturing the productions systems for markets in the western hemisphere. “Out of our office, we are handling markets spanning from Alaska to Argentina,” Springer says.

SHARE YOUR BUSINESS BRIEFS To be included in Business Briefs, send information (including photos, illustrations or logos, if available) to: Business Briefs, Biodiesel Magazine, 308 Second Ave. N., Suite 304, Grand Forks, ND 58203. You may also fax information to (701) 746-5367, or e-mail it to rkotrba@ bbiinternational.com. Please include your name and telephone number in each correspondence.

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FEEDSTOCK

REGIONAL ADAPTATION: Safflower is already cultivated as a specialty crop in California. Research is underway to investigate its use as biodiesel feedstock in areas of the Southwest region of the country.

PHOTO: USDA AGRICULTURAL RESEARCH SERVICE, JACK DYKINGA

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FEEDSTOCK

Feeding a Need Ample biodiesel feedstock is available to meet the short-term goals of RFS2, but researchers all around the country diligently work to build out the feedstock base

BY ERIN VOEGELE

Every few years it seems that a new “wonder crop” is poised for commercialization as the latest, greatest biodiesel feedstock. Whether it’s algae, camelina, jatropha or field pennycress, each crop is positioned as the solution to providing nearly unlimited quantities of feedstock more efficiently and economically than ever before. Inevitably, reality intervenes, demonstrating that while a particular feedstock may show great potential, it’s far from providing a nationwide, single solution to the biodiesel industry’s feedstock needs.

In other words, there is no silver bullet. Rather, research demonstrates that a wide range of regionally adapted feedstocks will characterize the future of the biodiesel industry. We have to look at region-based systems and figure out which crops can produce the greatest amount of feedstock for the lowest input and cost, says Jeffrey Steiner, national program leader for biomass production systems at the USDA’s Agricultural Research Service.

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FEEDSTOCK There are many promising crops on the horizon, but they need to be properly vetted scientifically. “Good scientific research is needed to show which oilseed crops grow best across different soil conditions and climates, and how they fit into existing production systems,” Steiner says. For example, there is evidence that camelina may be more heat tolerant than some of the other alternative oilseed crops, which might make it suited for cultivation in warmer climate regions.

While a vast number of public and private researchers are working to identify and develop new oilseed crops, Alan Weber, a senior advisor to the National Biodiesel Board, says it’s important to note that existing crops can more than meet feedstock needs in the near-term. “I always like to remind people that when we look at the next few years, don’t underestimate yield technology in terms of its short-term impact,” he says. “Also, don’t underestimate the synergies that exist with the biodiesel industry and the dry grind ethanol industry in terms of the ability to remove corn oil from distillers.” Steiner adds that it might also be possible to increase the quantity of vegetable oil entering the marketplace through the development of higher oil content soybeans and peanuts.

Regional Solutions Those crops cannot be grown in all regions, however. In order for the biodiesel industry to realize a more significant presence in areas where traditional feedstocks, such as soybeans, cannot be

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grown, regionally adapted oilseed crops will be necessary. Even in traditional soybean-producing regions, new oilseed crops can offer farmers important benefits in terms of winter cropping options and rotations. “Our perspective is that there will be a range of feedstocks that will be best suited for different parts of the country,” Steiner says.

For example, soybeans cannot be effectively grown in California. Stephen Kaffka, director of the California Biomass Collaborative at the University of California, Davis, is heading up a research project in the state that focuses on the development of alternative oilseed crops.

The study, funded by the California Energy Commission and the California Department of Food and Agriculture, is evaluating the production of a wide variety of alternative oilseeds, from mustards, canola and camelina, to meadowfoam. “We think there might be an opportunity to grow these oilseeds, which for us are winter annuals, in a number of locations that are nontraditional,” Kaffka says. Plot work is currently ongoing, with larger trials expected to begin next year. According to Kaffka, the study entails crop variety trials, fertilizer rates and water use evaluations, as well as other agronomic research.

Rather than picking winners and losers, Kaffka says state agencies are interested in determining what consequences might result from growing these crops in terms of sustainability. The commission is also interested in learning how best to evaluate carbon intensity.

PHOTO: USDA AGRIGULTURAL RESEARCH SERVICE, BRIAN PRECHTEL

FEEDSTOCK

CALIFORNIA DREAMIN’: Meadowfoam is an oilseed crop that is being investigated as a feedstock for biodiesel production in California and parts of the Southwest.

to Weber, researchers in this region are working to identify oilseed crops that could effectively be grown in high-salt content soils. Castor and winter safflower have shown promise in these regions, he says. The ability to leverage several hundred thousand underutilized acres in that region would not only benefit the rural economy, but also help support a local biodiesel industry.

A great deal of recent research in the Midwest has focused on another alternative, field pennycress. A primary benefit of the crop

PHOTO: USDA AGRICULTURAL RESEARCH SERVICE, HANNA CASTLE

According to Kaffka, another oilseed plant that can be used in California is safflower, a thistle-like annual. The crop is already being grown by famers to serve specialty food oil and lubricant markets. It also fits nicely into certain cropping systems, Kaffka says.

While safflower may prove to be part of the feedstock solution in California, the crop isn’t adaptable to many other U.S. regions.

There may, however, be potential for winter safflower production in western Texas, and areas of New Mexico. According

NEW USES: USDA ARS soil scientist Gary Banuelos stands in a field of canola. Interest is growing in the use of the crop as a feedstock for biodiesel production.

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PHOTO: USDA AGRICULTURAL RESEARCH SERVICE, BRIAN PRECHTEL

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SALTY SOLUTION: Castor beans may offer a solution to developing a local biodiesel industry in areas of Texas and New Mexico that feature salty soils.

is that it can be grown as a winter annual, potentially providing farmers with a “bonus” crop that also serves as a cover crop to help avoid soil erosion.

One area of focus for researchers working to commercialize field pennycress is optimizing the harvest date, Weber says. Comparable winter crops, such as winter wheat and winter canola, are harvested in late June. If field pennycress can be optimized for harvest in May, it would allow farmers to plant a subsequent crop, such as soybeans, without yield drag, Weber says.

Another issue with field pennycress is that high glucosinolate levels may limit its meal from being used as a source of feed. Agronomic research could help negate this problem. Weber notes that some researchers are also investigating the possibility of employing the resulting meal in bioenergy applications.

Jatropha seems to be showing less promise as an oilseed crop in the U.S. than elsewhere. “There are several breeding goals that would have to be achieved in order for jatropha to become a serious contender as a U.S. grown biodiesel feedstock,” Weber says.

FEEDSTOCK This includes the fact that the tree is not frost tolerant. In addition, its undetermined potential for producing blooms and ripe fruit makes designing mechanical harvesting equipment difficult.

Beyond Agronomics While agronomic work is an important first step in the development of any new crop, for new oilseeds to reach commercialization, several other factors need to be addressed.

“With any of these crops, whether camelina, pennycress or others, there is definitely an education curve for producers to be able to understand how it fits into their rotation,” Weber says. Risk management concerns must also be addressed.

“In this day and age, there is a fairly hefty outflow of working capital required to be able to put a crop in,” Weber says. “From a risk management standpoint, producers want to be able to have options such as crop insurance and hedging opportunities in terms of futures markets. Those are all issues that must be addressed when you are working to develop these specialty crops.”

Steiner agrees, noting that a great deal NATIONAL LEADER: Jeffrey of work also needs to be done to ensure that Steiner, national various pesticides and herbicides are registered program leader for for use with a particular crop. Regarding insurbiomass production systems at the ance, Steiner says that even though a particular USDA’s Agricultural crop, such as canola, might be eligible for crop Research Service, insurance in several regions of the U.S., it may stresses there is no silver bullet when it not be covered in other areas of the country. comes to biodiesel “That is an issue,” he says. feedstock.

The USDA’s Risk Management Agency ultimately determines which crops are insurable on a county-by-county basis, says Nic Prothero, owner of Minnesota-based Wild Rice Seed & Insurance LLC. It’s a tough process to get a completely new crop cleared for coverage, he says. This is, in part, because coverage levels are largely based on crop history, yields and price. The process of obtaining local coverage for a new crop, however, should become easier as the RMA approves initial coverage areas. For a farmer wanting coverage for a new crop that is already insured in an adjacent county, that process does get easier, Prothero notes.

Grower experience also plays an important role in a farmer’s decision to plant a new crop. “If a grower has not grown an oilseed crop before, there is a learning curve that they have to go off of,” Steiner says. “There is a risk associated with that. One of the nice things about oilseed crops is that the infrastructure is similar,” OILSEED RESEARCHER: Steven Kaffka, director of the California Biomass Collaborative at the University of California, Davis, leads a research project to evaluate the potential for oilseed production in his state.

including the harvesting equipment, transportation and processing of the seeds. This means that a farmer with experience growing one type of oilseed crop may be more willing to try his hand at a new one.

Beyond risk management, the potential for profit clearly plays a role in the farming community’s decision to grow new crops. If there were demand for oilseed crops at a price that is attractive to growers, they would grow the crops, Kaffka says, noting that California farmers have a strong history of swiftly shifting production when a promising opportunity arises.

When it comes to feedstock production for biodiesel, Kaffka says the inherent issue is that growers want to receive the highest price possible for their crops, while biofuel producers want to pay the lowest possible price for feedstock. “These requirements work against each other,” he says. “There may be a sweet spot that we can find. If we can’t, then it won’t be done,” unless there are other benefits associated with a given crop that will benefit farmers.

“It’s not a simple thing because all these crops have multiple costs and benefits in cropping systems,” Kaffka says. In other words, the costs and benefits of a crop cannot be solely determined by directly comparing costs and profits. Secondary benefits, or costs of introducing a new oilseed crop into an existing cropping system, might shift the balance either way. “There might be some reasons you would grow a less profitable crop, because it helps you control weeds or it has rotational benefits,” Kaffka adds. “People have tended to grow wheat [in California] even when they didn’t make much money because it was one of the few winter options.

So, something like canola could be another winter option,” especially, he notes, when wheat prices are depressed.

The biodiesel industry itself will also play an important role in spurring grower interest in new crops. You need to have a market outlet for the oilseeds, Steiner says. Unless there is an existing market ready to utilize the oils produced by these new crops, growers won’t be interested in cultivating them.

While some in the biodiesel industry may see alternative biofuels production technologies as competitors in the fuel and feedstock markets, Steiner notes those industries are actually likely to help expedite development of alternative oilseed crops. “I would anticipate that there is going to be more demand for oilseeds, not only going to biodiesel but also into the technology that can covert those agricultural oils into products such as jet fuel,” he says. “One of the really cool things is [biojet fuels and non-ester renewable diesels] are all new market opportunities being created, which helps to send market signals all the way up the supply chain to the agricultural producers.”

Author: Erin Voegele Associate Editor, Biodiesel Magazine (701) 540-6986 evoegele@bbiinternational.com

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Reasons to Invest Why biodiesel investment is the right choice STAFF REPORT

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INDUSTRY Oil prices are rising, and the world is anything but secure when it comes to political unrest, says Sandra Robnett, president and CEO of Syntek Resource Corp. “Especially in the Middle East, where a significant portion of U.S. energy comes from. We, in the United States, and, frankly, the rest of the free world, need to take a very serious look at how we energize and globalize, and really move forward. We need to put our money where our mouths are, and recognize we’d like to have alternative energy. We’d like to have biodiesel.” While Americans hold firm the idea of energy independence and security, Robnett says investors in the U.S. market seem less willing to take the risks associated with a long-term investment in new, alternative energy technologies. “They see an advantage to putting their money in the stock market, where it is more liquid,” she says.

As those investors Robnett alludes to wait and gauge the rebounding biodiesel markets, the world’s finite supply of precious crude grows smaller, scientists tell us the climate is getting warmer, and toxic city smog becomes a little thicker. And Arab sheiks, along with other modern-day oil barons who hold much of the developed world hostage, grow wealthier, more powerful. “The oil price spikes just point out the underlying problem,” says Wayne Lee, head of Arkansas-based biodiesel consulting firm Lee Enterprises Inc. “This is a national security issue, and an environmental issue, to be sure. But in the very short term, it is most importantly an economic issue. Can you imagine what the national deficit would do if we just replaced 25 percent of the oil we import with domestically produced biofuels? Not only would we breathe a bit easier when oil spikes or problems occurred in the Middle East, but our economy would turn around very rapidly. We have a renewable fuel standard. We have a public that is

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Biodiesel represents jobs, energy independence, community involvement, diversity, innovation, environmental stewardship and social responsibility. Ultimately, biodiesel is about doing the right thing, leaving an important legacy― and teaching an important lesson―to the children of our children’s kids. And if that’s not enough, there is money to be made too, given a sound business model and smart planning.

finally demanding that elected officials do something. Is it a good time to be in biodiesel? It is a great time.”

Joe Furando, senior vice president of sales and marketing for Cima Green Energy, says, “Unlike in the 1970s when biofuels were unavailable, we should look at countries like Spain and its recent biodiesel mandate increases, to lead and champion biodiesel to drive energy independence and hedge against the volatility of the current energy market.” Spain recently upped its allowable biodiesel concentration from 5.7 to 7 percent to help curb the economic impact borne by rapidly increasing oil prices.

“I think the most important thing driving investment in biodiesel is the continuing belief that energy prices are going to remain volatile, which really drives the need for energy security,” says Daniel Oh, Renewable Energy Group’s president and chief operating officer. “Supporting that, of course, is the low carbon fuel standard and RFS2.”

Do the Right Thing Despite recent favorable court rulings, a federal mandate, various state directives and incentive packages, and the (shortterm) return of the dollar tax credit, some, however, still wonder

INDUSTRY why the biodiesel industry is worth investing in today, especially after all it has been through.

Why invest in biodiesel? Well, for someone looking to get rich quick, biodiesel would not be the answer. But for those looking to invest in the future, and their local community, biodiesel represents jobs, energy independence, community involvement, diversity, innovation, environmental stewardship and social responsibility. Ultimately, biodiesel is about doing the right thing, leaving an important legacy—and teaching an important lesson—to the children of our children’s kids. And if that’s not enough, there is money to be made too, given a sound business model and smart planning.

“Those who educated themselves about high-tech investing in the ’90s, and carefully weighted their grasp of the industry, its supply chains, and each business’ product and marketing strengths, gave themselves the advantage of knowledge,” says Robert Bailey, a capital broker with Trusted Advisory. “There is no reason to doubt that a nascent industry like biodiesel investment will undergo the same sort of expansion, competition, merger and acquisition cycles that all other industries do. Those willing to do the necessary brain work should do very well financially.”

Idle with Reason Oh says a lot of the biodiesel capacity that is idled right now—an unprecedented time when both the tax credit and an implemented, court-upheld RFS2 coexist—will likely stay that way. “As we’re moving ahead, the industry is following typical value-added commodity pathways, and logistics positioning with respect to feedstock and customers is extremely important,” he says. “Not everything that was built in the past had that in mind.

13 Reasons to Invest in Biodiesel 1. Rising oil prices and political tumult strengthen biodiesel’s already strong appeal through its offering of energy security and independence.

2. Federal and international mandates create long-term policy and markets, and will only increase in time.

3. Biodiesel is a globally produced, globally traded fuel.

4. Biodiesel is the only advanced biofuel with significant commercial capacity.

5. In the U.S., a growing number of state mandates and incentives help drive biodiesel’s financial and market stability.

6. Low carbon fuel standards, under development in California and the Northeast, will create more opportunity for biodiesel, especially product derived from waste.

7. Capital costs are relatively low compared to other advanced biofuel production facilities.

8. In the U.S., the 7 billion gallon oilheat industry is moving more towards biodiesel blends, creating a big, free methyl ester market.

9. Hard work has made biodiesel a drop-in fuel, and every serious vehicle OEM and pipeline and terminal operator has invested in biodiesel, in one way or another.

10. A feedstock-flexible fuel, biodiesel can be made from any fat, oil or grease, and the already broad range of available feedstock is widening.

11. Investment in biodiesel is an investment in local communities.

12. Biodiesel creates green-collar jobs.

13. Investment in biodiesel is an investment in the children of your children’s kids’ future.

Experience the Eide Bailly Difference We’ve been here since the start-up of the biofuels industry, working with management and governing boards on both the challenges and the opportunities.

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INDUSTRY In addition to the existing state policies that provide good reasons to invest in biodiesel on geographical bases, there are the future policies to consider, mainly low carbon fuel standards in the two most-populated, fuel-using regions of the world’s greatest fuel-consuming nation, California and the Northeastern U.S.

Some of the idle capacity out there right now would require as much investment to bring online as building a new plant would.”

REG’s Keith Olson, executive director of corporate finance and investment banking, says distressed assets lack the strategic characteristics necessary to be financially successful in the biodiesel industry of today—and tomorrow. “From a location standpoint, technology or otherwise, those plants will have a tough time,” he says. “It really boils down to the strategic advantages.”

In 2010, REG acquired the bankrupt assets of Nova Biosource in Illinois.

“Since then, we’ve brought it back to be a very productive facility,” Oh says, adding that he’s more optimistic today than he has been for the past three years. “I think the paradigm has changed,” Oh tells Biodiesel Magazine. “I think you’ll find integrated companies like REG, and maybe some small individual companies on the regional side, but what is really driving business is customer adoption and volumes that customers and obligated parties now want to buy and use.”

Due Diligence One company making biodiesel headlines recently, a company that knows about investing in biodiesel, is Enervation Advisors LLC. It’s an Axis Group Company that just recently purchased a couple of distressed biodiesel production facilities, both in Iowa, and also has bids out on others, including a biodiesel refinery in Michigan. Paul Tantillo, director of operations and managing member of Enervation Advisors, says one reason his company anticipates success in its biodiesel invest-

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ments is that its strategy of purchasing distressed assets allows the company to enter the biodiesel space free of the massive debt, which was an encumbrance to many companies that entered the sector in 2007 and 2008. “Without that debt component to consider, you change the matrix and change the business model,” Tantillo says.

“You don’t have those massive payments to make and you can then make money with a tighter margin.”

Enervation Advisors is also working in a very deliberate manner to identify the best projects to invest in. “The difference between us and some of the other opportunist funds,” Tantillo says, “is that we’re staying in this space. We’ve brought along engineers who are going to change the front ends to process multiple feedstocks.

We’re also looking at technology changes at these plants, and have focused on working with outstanding professionals in the biodiesel industry who have a keen understanding of the technological landscape of the industry and what Enervation has to do to bring a more effective solution to the table.”

Before entering the biodiesel space, the Enervation team spent nearly a year and a half, and $250,000, on due diligence activities. “We moved very slowly into this space, with a lot of due diligence and a lot of research,” Tantillo says.

Tax Credit, RFS2 Regarding the tax credit and its return, REG's Oh says whether it continues as a blender credit or is revised and extended as a production credit, it’s important for the industry’s success. “The blenders credit today supports the economics for every aspect of the value chain,” Oh says,

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FINANCIER: Robert Bailey, a capital broker with Trusted Advisory, says biodiesel is certainly not the first industry to go through expansion and contraction.

CONSULTANT: Wayne Lee, CEO of Lee Enterprises Inc., says oil price spikes are just a symptom of the underlying problem.

PREZ: Daniel Oh, president of REG Inc., says the past two years have caused a paradigm shift in biodiesel.

DIRECTOR: Keith Olson, director of corporate financing for REG, says many distressed biodiesel assets lack strategic characteristics.

including the development of infrastructure. “We’re very supportive of it. We think it should be there, and it’s important when you think about continuing incentives to get to a critical mass, ADVISOR: Alan Weber, senior advisor where biodiesel is just to the NBB, says state an everyday normal policies have always part of the fuel sys- been important to biodiesel growth. tem.” Oh and REG are in favor of the credit but Tantillo says he feels otherwise. “While the extension of the biodiesel tax credit is helpful to some, Enervation’s goal is to be economically sustainable without subsidy,” he says.

CEO of Benefuel Inc. Robert Tripp runs a biodiesel technology company in Chicago that makes solid catalysts to convert low-grade fats and oils into biodiesel.

He says what’s more important than the return of the credit is implementation of

INDUSTRY RFS2, creating a domestic market for the fuel. “Having a billion gallons of production (the mandate is based on blending, not production) on the books is probably more substantial than the credit itself,” Tripp says.

The National Biodiesel Board’s senior advisor Alan Weber says RFS2 represents a long-term policy framework for the biodiesel industry. One way the mandate will help foster growth in the industry, Olson points out, is through the impact it will have on infrastructure development.

He says, “The biodiesel industry has had a couple of flat years, but it is now rebounding, in part due to some of the rationalization that has happened in the industry.

We do have improved economics in light of near-term rising oil prices and regulatory support. RFS2 creates infrastructure development, and that is going to be critical.” He adds that he’s seeing investment opportunities both in the U.S. and internationally. “The rationale for future investments,” he says, “would be opportunities that either pop up on a geographical basis, or ones that fit into our footprint here in the United States—or from a strategic standpoint in terms of participating in a vertically integrated business model.” Olson also says that as infrastructure comes online, it would give rise to investment opportunity on a geographical basis.

State Policies Not only is the federal mandate, specifically the biomass-based diesel and advanced biofuel carve-outs nestled under RFS2, an important market and investment driver for the industry, but state policy will continue to play a big role in keeping industry alive and growing it at a responsible rate. Minnesota, Pennsylvania, Massachusetts, Illinois, Washington and Oregon all have biodiesel mandates (or in Illinois’ case, an incentive that in effect acts as a B11 mandate) on the books. “From a policy perspective, state policies have always been both beneficial and important,” says Weber. In addition to the existing state policies that provide good reasons to

market driver and source of demand for biodiesel.” Biodiesel from waste, he says, achieves the largest carbon reduction of any fuels scored to date by the state’s air resources board. “All my analysis,” he says, “tells me that biodiesel—today and for the foreseeable future—will be the lowest cost of compliance.”

invest in biodiesel on geographical bases, there are the future policies to consider, mainly low carbon fuel standards in the two most-populated, fuel-using regions of the world’s greatest fuel-consuming nation, California and the Northeastern U.S. Eric Bowen, chairman of the California Biodiesel Alliance and recently appointed member for the low carbon fuel standard advisory panel in California, says, “I really believe the low carbon fuel standard has enormous potential to be a very large

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COMMUNITY

WALKING THE WALK: Piedmont Biofuels has set the standard for community involvement.

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Importance of Outreach

The

Producers know the value of their product— with a little effort so could everyone else

BY LUKE GEIVER

Buster Halterman and his team from Buster Biofuels, a biodiesel startup just outside San Diego, truly believe the future is now for the California city’s use of biodiesel. Unfortunately, Halterman, who is founder and CEO of Buster Biofuels, admits that it sure doesn’t feel that way. For the past few years, Halterman has spent more time trying to navigate through permitting paperwork related to tree planting requirements and the number of necessary parking spots at his small production facility, than doing the one thing he started Buster Biofuels for in the first place: producing biodiesel. The brief history of Halterman’s biodiesel endeavors may seem unfortunate― and to the large producers out there, somewhat meaningless―but the truth is, the San Diego producer’s experience provides a definitive reminder that there’s more to biodiesel than feedstock, processing and glycerin coproducts, regardless of installed capacity.

To be a producer today means putting in effort, the kind that includes reaching out to communities and providing the knowledge and education that will help end-users everywhere understand that biodiesel is a proven and positive alternative fuel—one that doesn’t require a NASA-inspired engine.

Educated Decisions “If I’m building a business, I need to do everything to promote it.

If you don’t do that, you are at the mercy of what somebody else might think in communications,” says Greg Paulk, president of Biodiesel of Las Vegas, a production facility that’s been under expansion for years, and plans to resume production in the fall.

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DRESSED TO IMPRESS: Congress staffers were told two completely different stories, one from Buster Biofuels and the other from Sapphire Energy.

Halterman shares the same sentiments as Paulk on the need to constantly inform and clear up misperceptions about biodiesel.

“Here we are in San Diego, the hub for algae research, but at the same time, you can’t even get biodiesel at but one gas station in all of San Diego County,” he says. “And, when you talk to people about biodiesel, they think you have to do some expensive conversion on the diesel engine.” Throughout his time working with city and state officials, Halterman says he had to hold meetings with several fire marshals about biodiesel, while exerting a significant amount of time and energy clarifying for other policymakers various aspects of the fuel.

For producers and those familiar with biodiesel, the idea that certain segments of the population are still uninformed and unacquainted with the fuel is not news. Some of the nation’s fuels programs are still devoting time and effort towards biodiesel education, and it’s not just the biodiesel producers trying to promote their product, or the National Biodiesel Board fighting for its members. “We’ve actually been performing biodiesel outreach and education since early 2000,” says Chelsea Jenkins, executive director for Virginia Clean Cities. While the early reasoning for the outreach efforts related more to concerns over home brewers using dangerous chemicals in producing biodiesel, Jenkins says that VCC’s educational topics

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A FACE IN THE SKY: Buster Biofuels was chosen as part of a campaign based on sustainability for energy drink maker Sambazon.

the House and Senate staffers—we got to tell them our story.” The whole idea, he says, “was just to educate these staffers and give them some real-world experience “with which they can apprise the senators, in the hope of influ-

encing future policy steered in the direction of businesses like ours.”

The verdict is still out on the success of the D.C. trip, but recent political activity in Las Vegas shows that outreach efforts aimed

PHOTO: PIEDMONT BIOFUELS

have changed, but it still sees the need to put forth the effort. “We want to make sure that the misinformation that is out there is countered by facts,” she says.

Programs like Clean Cities are a major help, Paulk says, but that doesn’t mean producers are helpless in the face of misinformation and the lack of understanding, especially at the policy level. “There needs to be more success stories with biodiesel,” he explains, “and that is what we hope to get out through our efforts.” By efforts, he means a crosscountry trip to Washington, D.C., to meet with congressional staffers. Sponsored by a San Diego-based group called Connect, Halterman, along with Jason Biddle, co-founder of Buster Biofuels, provided an overview of the company’s brief history, telling the staffers the challenges the Buster Biofuels team have faced along the way. Joining the biodiesel team was Tim Zenk, Sapphire Energy's vice president of corporate affairs, who also spoke to the staffers, educating them of the policy-driven landscape (including all of the peaks and valleys) that both companies have had to travel.

“I thought the response was good,” Halterman says of the trip. “We got to talk with

PHOTO: SAMBAZON

COMMUNITY

BRING IN THE CROWDS: One way Piedmont educates the public and private sector on its industry and community efforts is through educational workshops.

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COMMUNITY While communicating with policy makers is an important part of outreach for producers, Halterman and Paulk say their companies also work hard in other areas they say are equally important. For instance, the Biodiesel of Las Vegas website features a video series produced by four local high school students from previous outreach efforts.

‘Workshopping’ for a Profit Bill Shoemaker and Matt Steiman, both with the biodiesel project at Dickinson College, Carlisle, Pa., have developed

PHOTO: PIEDMONT BIOFUELS

at policy makers can pay off. Sen. Mike Schneider, D-Las Vegas, recently introduced a bill to increase the levels of biodiesel used in the state to a B10 level. Why? Because Schneider believes the bill would directly benefit Biodiesel of Las Vegas. “One way to get biodiesel to the public at an affordable price, to get more out there at economies of scale and make us more competitive with petroleum diesel,” Paulk says, is by educational efforts like those by the Nevada producers directed at several state legislators, including Schneider.

A NOT SO QUIET PLACE: If the public doesn't know about the value of biodiesel, why would they demand it?

their outreach in areas other than shaping the political landscape.

Steiman left a small Pennsylvania college in 2007 for another small college in the same state, to start a biodiesel program. Together, they run a program that allows five to 10 students per year to learn about and produce biodiesel. “Our program is a student-driven program,” says Shoemaker. “A fuel gets made because the students make it.” For the program to be maintained, he adds, student interest has to be maintained. Both Steiman and Shoemaker believe in the importance of outreach. Their philosophy is that to develop a sustainability-minded workforce of tomorrow, there must first be participants. The program holds workshops every spring for the environmental studies students at the college, at which the students are allowed to make small batches of fuel. “From a community perspective,” Shoemaker adds, “we’ll do lunchtime talks trying to get our name out there and draw attention to the program,” all in the hopes of recruiting more students. “We are just 40

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COMMUNITY trying to get the message out to as many people as possible.”

For programs like the one at Dickinson College, the message centers around a statement and goal of sustainability, and building a program based on those goals.

For others, the idea of “getting the message out” to those who don’t represent a county, city or state, may be more about financial growth, both internally and externally.

Piedmont Biofuels, the well-known community-scale producer that has found equilibrium between small and industrialscale production, offers the perfect example. In March, Piedmont held a workshop explaining its innovative enzymatic process developed in part with Novozymes.

“We thought the best way for the industry to learn about the new process and work with the new catalyst would be to offer a workshop,” says Rachel Burton, Piedmont's research director. The educational efforts, she says, “are in our communityscale model.”

Pittsboro, N.C.-based Piedmont has been holding workshops for many years, Burton says, both as a way to educate others on the Piedmont processes, and to provide other community-scale producers with information that will help in forming their own models. “We say, here is all the resources. Your community may be completely different than ours, your model may look different,” she says, “so we just try and provide comprehensive information about the biodiesel industry and let people make their own decisions.”

Like Burton, Halterman also notes the importance of spending time educating, promoting or marketing to a nonpolicyrelated audience—if that is even possible.

Buster Biofuels, for instance, recently took part in a sustainability campaign funded by a local energy drink maker, Sambazon.

“What we did with Sambazon was more marketing directly,” Halterman says.

“But I think that campaign was done specifically by those guys to increase public awareness about companies that are doing meaningful things, and about companies that are trying to make a difference in their

own little ways.” This sounds like a good use of resources, considering biodiesel fits well with the idea of sustainability.

There’s no doubt that producers both large and small have a positive product to sell. But with the amount of pervasive misleading sources of information combined with a segment of the population that still doesn’t know the true story of biodiesel, and all of the jobs and environmental, economic and communal benefits that come with it, there is a place in the current biodiesel landscape for educating fire marshals,

high school students and Senate staffers.

And if efforts aren't made to tell the right story, Paulk’s sentiment about being at the mercy of other people’s communication efforts will continue to apply. As Halterman explains, “I think in any way, shape or form, all companies need to put a little more effort into outreach.”

Author: Luke Geiver Associate Editor, Biodiesel Magazine (701) 738-4944 lgeiver@bbiinternational.com

get more.

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PENNYCRESS CONTRIBUTION

Pennycress Biodiesel: Good for America?

Interest in the oily, grow-anywhere weed drives development

BY KENNETH C. REED

President Eisenhower once said, “I have only one yardstick by which I test every problem, and that yardstick is: Is it good for America?” Civil unrest in the Middle East, natural disasters, nuclear explosions in Japan, and our nation's insatiable appetite for foreign crude oil, all pose a threat to America’s national energy and security position. America must reduce dependence upon foreign oil, increase energy security, enhance national security, protect and preserve our natural resources for future generations. One way to do this is to produce clean, liquid alternative fuels from domestic agricultural resources. Field pennycress (Thlaspi arvense L.) presents one viable alternative.

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I was introduced to pennycress by Lance Stokes and James Padilla Jr. of The Power Alternative, a biodiesel production facility located near Detroit. TPA is currently evaluating pennycress as an energy crop. Field pennycress is a nonedible, winter annual weed, widely distributed throughout every state in America except Hawaii. A native of Eurasia, pennycress was brought to America in 1701 and has adapted to a wide variety of climates.i It is a member of the Brassicaceae family and is also known as Frenchweed, stinkweed or fanweed. Pennycress is a close relative of canola (rapeseed), camelina and other mustard plants.

It grows naturally in highway medians, on roadsides, in railroad beds, in open grasslands and on marginal, fallow lands, thus completely circumventing the food versus fuel debate. It

MAY 2011

requires minimal water and no fertilizer or pesticides to grow. Because pennycress is a winter plant harvested in early spring, it could easily share the same crop fields with soybeans or Kenneth C. Reed, CEO and founder of corn.

Pennycress typically Natural Alternative Fuels grows between four and 24 inches in height with circular seed pods. This plant can live up to 30 years and produce as much as 15,000 seeds per plant with seed oil content between 20 and 36 percent. Terry Isbell, an Agricultural Research Service research scientist in Peoria, Ill., said pennycress can

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

PENNYRESS

PHOTO: USDA-ARS

structure. Planted in the offseason from soybeans and corn, pennycress presents a good cycle rotation alternative crop for farmers looking to supplement their income.

Further, field pennycress provides a high-quality biodiesel product that can be blended with petroleum-based diesel as a displacement fuel. It can also be blended with biodiesel from other feedstock as a strategy to enhance the composition and physical properties of lower quality biodiesel.

Biodiesel from pennycress meets or exceeds generally accepted fuel standards imposed by ASTM D6751iii in the United States and the Committee for Standardization EN 14214 in Europe.iv The development of pennycress as an alternative fuel will enable America to import less foreign oil. The U.S. imported 51 percent of its petroleum products in PENNYCRESS POTENTIAL: Bryan Moser, a researcher with 2009.v Approximately 17 USDA's Agricultural Research Service, works in the lab to better percent of this amount came understand the potential of field pennycress. from countries in the Middle East, some of which are hosproduce 1,500 to 2,000 pounds of seed per tile toward America. The U.S. has paid hunacre, and yield an estimated 75 to 100 gallons dreds of millions of dollars per year to these of biodiesel per acre. Production of biodie- countries for decades for their crude oil. Some sel from pennycress oil was first evaluated by of this money has undoubtedly helped supthe National Center for Agricultural Research port principles and actions that are contrary to Service in 2009.ii Since then, other farmers, the interests of America and its allies. biodiesel producers such as the TPA group Field pennycress biodiesel is good for and universities have teamed up to evaluate the America because it will help overcome some benefits of pennycress as a biodiesel feedstock. restraints that have challenged the growth of Based upon the findings to date, field penny- the industry. The high cost of soybean and cress has earned respect as an acceptable feed- vegetable oils has been a significant barrier to stock for biodiesel production. The question the advancement of the biodiesel industry.vi remains, however: Is this good for America?

Presently, feedstock acquisition accounts for as Pennycress offers a low-cost, high oil con- much as 80 percent of the production costs of tent, low agricultural, nonresource competitive biodiesel. Availability of feedstock also presand nonedible alternative feedstock, compat- ents challenges depending upon geography ible with existing farm equipment and infra- and climate. Pennycress grows anywhere and

everywhere, with minimal agricultural inputs.

Moreover, pennycress biodiesel is better-suited than soy oil-based biodiesel for cold weather climates.

Finally, pennycress offers several additional value-added benefits. Studies by the USDA Agricultural Research Service have found that field pennycress seedmeal offers excellent potential as a fertilizer and biofumigant for highvalue horticultural crops for both conventional and organic growers.vii Further studies have shown that pennycress is a viable alternative for cleaning contaminated soil and water through a technique known as phytoremediation. Phytoremediation is a general term for several ways that plants are used to remediate sites by removing heavy metals and other pollutants from soil and water. This direct use of pennycress presents a tremendous opportunity for municipalities to clean up contaminated lands and restore vacant properties to the tax rolls at a huge cost savings over traditional mechanical cleanup methods. Is pennycress, and biodiesel from pennycress, good for America?

You decide. i Vaughn, S.F.; Isbell, T. A.; Weisleder, D.; Berhw, M. A. J. Chem. Ecol. 2005, 31, 167-177. ii Moser, B. R.; Knothe, G; Vaughn, S.F. and Isbell, T. A., [http://pubs.acs.org. published (Web) July 2, 2009, American Chemical Society. iii American Society for Testing and Materials. Standard specification for biodiesel fuel blend stock (B100) for middle distillate fuels, ASTM D6751-08. In ASTM Book of Standards; American Society for Testing and Materials: West Conshohocken, PA. 2008. iv European Committee for Standardization (CEN), Automotive fuels-Fatty acid methyl esters (FAME) for diesel engines-Requirement methods, EN 14214:2003; European Committee for Standardization (CEN): Brussels, Belgium, 2003. v U.S. Energy Information Administration; http://www. eia.doe.gov/energy_in_brief/foreign_oildependence.cfm.

Accessed 3/19/11. vi Retka-Schill, S. Biodiesel Magazine 2008, 5, 64-70. vii Vaughn, S. F., Isbell, T. A., Weisleder, D., Berhow, M. A. 2005. Biofumigant compounds released by fieldpennycress (Thlaspi arvense) seedmeal. Journal of Chemical Ecology. 31: 167-177.

MAY 2011

Author: Kenneth C. Reed Founder, CEO, Natural Alternative Fuels (248) 460-3233 kcreedtriumph@yahoo.com

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