Not unlike many small-scale biodiesel production facilities, San Diego-based New Leaf Biofuel has struggled to survive the turbulent biodiesel market over the past decade. One major difference, however, is that this vertically integrated biodiesel company has Jennifer Case at the helm. Case, co-founder, co-owner and CEO of the 5 MMgy New Leaf Biofuel, is a Pepperdine University School of Law graduate and former attorney who never gives up. She is not afraid to roll up her sleeves, make tough decisions and get dirty.

As a Los Angeles-based litigator in the mid-2000s, Case’s former roommate told her of a business she was starting in San Diego to turn used cooking oil (UCO) into biodiesel. Case’s friend inquired whether the startup could secure Case as an attorney to help get the business off the ground. After a presentation to the law firm, the main partner pulled Case aside and told her the company didn’t need a lawyer, it needed a business plan. “They didn’t see the vision,” Case tells Biodiesel Magazine.

The deflated Case put in her notice to quit and moved to San Diego, invested in the new business and became a partner, all the while expecting to return to practicing law once the startup was established. She had already been dating Tyler Case, who lived in San Diego and would eventually become her husband. “I had no idea that what I was about to engage in would be such a huge undertaking,” Case says. After bringing in more partners, including Tyler, and raising more money, the list of creditors grew. “At that point we had five co-owners,” Case says.

New Leaf bought a skid-mounted system with a nameplate capacity of 500,000 gallons a year from a company based in Europe. The system was designed for rapeseed oil but when Case explained New Leaf wanted to use the system for processing UCO, the company added an acid esterification unit on the frontend. Case says to make this happen, New Leaf co-owners were raising more and more money from family members and friends cashing in their 401Ks, remortgaging their houses and maxing out credit cards. With additional help from a state grant and city loan, the European system was secured and work began to get it operational. “The system didn’t work like they said it would,” Case says. “Everything the sulfuric acid touched deteriorated.”

Then, in 2008, as if things couldn’t get any worse, the market crashed. “We spent 2009 rebuilding the system and fighting with [the provider],” Case says. “It was very stressful and difficult. It took years to get the system working right and a lot of reengineering.” After a long battle with the provider, a settlement was reached and ties were severed. It was now on New Leaf alone to make the system work. And this wasn’t easy. “The PLC code was written entirely in a foreign language, so anytime we wanted to adjust the code to add a tank or a pump, or add minutes to settling, it was all in a language none of us knew. So one of our guys had to learn this language basically just to rework the code. To this day, the code is still in this language.”

During this time, a second state grant application was submitted and approved to triple production from 500,000 gallons to 1.5 MMgy. “We were in massive trouble,” Case says. “We owed money to everyone. It was so stressful. I said, ‘This isn’t working. We don’t have any money.’ I thought I’d just go back to being a lawyer, but in the post-market crash, everyone said, ‘Unless you’re practicing bankruptcy law, no one is hiring lawyers.’” Her former roommate who conceived the idea to start the company had a baby and took a leave of absence. “That’s when I stepped in as CEO,” Case says.

“We still owed a lot of people a lot of money,” Case says. “People that took out 401K loans still hadn’t been paid back. It seemed like every time we started to feel like we might be turning a corner on making money in this industry, things would change.” Amid lapsed tax credits, delayed federal Renewable Fuel Standard regulations and a court-embattled state Low Carbon Fuel Standard, the tough times only got tougher.

“As the industry matured, we were just too small,” she says. In 2012, New Leaf wrote another state grant application and got it, this time to expand from 1.5 to 5 MMgy. “The cost difference between us and the next closest guy customers could buy gallons from was big,” she says. “We needed to lower our prices. We were in a constant state of needing to expand to lower our margins. It was really stressful for everyone.”

All the partners except Tyler wanted out. “The only people who were motivated to chase better margins were me and Tyler,” Case says. “After the 2012 grant, we put the company up for sale. We spent much of 2013 trying to sell it. Ultimately it didn’t happen. In 2014, we were in massive trouble again. It was bad. The tax credit had lapsed again, and this was the same year the U.S. EPA was backlogged on its RFS rules. So we had all this preexisting financial stress and these new stressors were layered on top if it.”

In 2014, New Leaf and Baker Commodities began negotiations. “By June, we still didn’t know if the sale was going to go through, and if we continued to run three shifts a day we’d run out of money by August and not be able to pay our employees anymore,” Case says. “But if we cut production down to one shift a day and only made biodiesel from the UCO we collected without buying any more, we could make our cash last ‘til January. By that time we would know if the tax credit would pass or not, and if that happened, we would get a few million dollars. So we just had to survive ‘til then.” The pending layoffs and dissolution of the former partnerships ate away at Case. “It was the worst time of my life,” she says.

In September 2014, the deal with Baker closed. Baker bought out all of New Leaf’s partners, which equaled 80 percent of the business. “Tyler and I stayed on to run the business,” she says. “Our partners got what they wanted, and Tyler and I got what we wanted, which was to build this business to be the best thing it could possibly be. Funny enough, the tax credit passed and we had a cash infusion. We would have survived anyway, but partnering with Baker was the best thing for us.”

Doug Smith, the vice president of R&D and quality control at Baker Commodities, has roots in biodiesel back to the early 1990s. He later joined Baker Commodities, a family-owned rendering company, and served as a board member at the National Biodiesel Board. “We wanted to be in the biodiesel business,” Smith says of Baker. “We found out New Leaf was considering selling its plant. Jennifer and I had several conversations, and one thing led to another and it just seemed like a good fit. They’re a grassroots business with hard-working, dedicated, good personalities. So after long negotiations, we decided Baker would acquire a controlling majority of the business at New Leaf. Since then, they’ve been wonderful to work with, and it’s been profitable with the way that Jennifer and Tyler run it.”

Smith says he believes the acquisition has breathed new life into the plant. But the benefits weren’t one-sided. Smith says the grease collection accounts that came with New Leaf’s acquisition helped the decision-making process, but it was not a critical factor. “The fact that they knew how to collect grease and were doing it showed us they had the ability to conduct business, so we weren’t getting into a company that was entirely green, or raw as you might say,” he says. “They already had an idea of how to run the business. The way we acquired New Leaf showed that Baker has intentions do something right for the environment and the public,” above and beyond its established role as a grease recycler. “Baker has a really good reputation as a rendering company, so with that added clout, this new life we helped infuse into New Leaf has sparked a lot more energy into the plant to go out and get more grants to produce more—it gave them the ability to say, ‘Hey, we are in good standing with a great company, and everything we do is above board, and we’re profitable.’”

Despite owning 80 percent of New Leaf, Smith says Baker is not interested in running the day-to-day operations of the company. He says Tyler and Jennifer live and breathe biodiesel as co-founders of New Leaf, and anyone that would want to come in and take that away from them just because they have a controlling interest in the company would be crazy. “New Leaf is their creation,” Smith says. “Just like parents giving birth to a child, they want to see that child grow up do the best that they can. I look at Jennifer and Tyler as being caretakers, parents and guardians of that division. They know what they’re doing, and I know they’re doing everything they can to further it along and make it better. They’re good, hard-working people and they treat their employees and the community well.”  

In early 2017, New Leaf won another state grant to help the company expand from 5 to 12 MMgy. “This is a consolidation period in the biodiesel industry,” Case says. “If we don’t continue to expand, we will get left behind.”

The original plan for expansion to 12 MMgy was to size everything down and move from batch to continuous flow on the same footprint-limited site where the plant has operated for more than a decade. “2017 was our most profitable year,” Case says, adding that the thought of tearing the plant down and retooling it with technology she didn’t know would work was scary. “Then, instead of that idea, we thought maybe we should build a skid-mounted system off-site to drop in through the roof when ready,” she says. “We could pull out our current system and the three additional reactors we installed over the years, and then we’d have a 5 MMgy system we could sell or install at another site.”

Case says the company was moving forward with this idea when she learned the neighboring business across the street was moving, and New Leaf had the opportunity to acquire the building. “It’s a big warehouse and we were excited about it,” she says. New Leaf bought the building and Case says it now made more sense to build out to 12 MMgy across the street. “When we made that decision, we had to redo all our plans, permits, contracts and work on a new layout,” she says. “We’ve redone these plans three times. We’re starting from square one. It’s a blank slate, which is good for design but it takes a lot more work with the city.”

Lucas Altic, vice president of operations for New Leaf, started with the company in 2015 as plant manager after working in the industry since 2005. He tells Biodiesel Magazine that even though New Leaf’s expansion details are currently in flux as the company finalizes its new plans, Phase 1 of the expansion is already complete. “We added 100,000 gallons of storage tanks on the existing site,” he says. “We already had 60,000 gallons of existing storage, so on top of that we added five biodiesel storage tanks and one technical-grade glycerin tank that we’re currently using for UCO storage. We have also added a terminal automation system that enables faster loadouts.” Altic says the company will add more new tanks for feedstock storage across the street.

One of Altic’s first tasks when he started at New Leaf was gaining BQ-9000 accreditation, the gold standard of quality in the biodiesel industry. “We were fully certified as a BQ-90000 producer by the end of 2015,” he says. “After that, we got into trading of fuel and brought partners to help do trading under the New Leaf brand.” The company then achieved BQ-9000 marketer status. While New Leaf’s roots were based in community-scale production, buying grease locally and selling to local jobbers, Altic says Case knew BQ-9000 was an absolute necessity. “As a small mom-and-pop biodiesel program, you do what you need to do, but not much beyond that,” he says. “New Leaf had to get into the mindset of a bigger company with a bigger mentality. Going to BQ-9000 made us really look at processes and think about procedures to focus on quality. New Leaf has always made good ASTM-quality fuel, but BQ-9000 certification helped take us to the next level to be taken seriously. It changed a lot of mindsets and opened up new business opportunities. It really changed our ability to sell fuel and, as a result, almost everything about the company.” Since achieving BQ-9000 producer and marketer status, New Leaf now primarily sells its biodiesel to large obligated parties and terminals.

Case says in the midst of redoing paperwork with the city for the expansion to 12 MMgy, the California Energy Commission announced another grant opportunity. Case says she is doing her best to secure this grant to further expand from 12 to 18 MMgy, despite not having built out to 12 MMgy yet. She says this may be the last type of grant funding the CEC will do for biodiesel as the legislators and regulators duke it out to determine what the clean energy future of California will look like. “Long story short, they favor electricity,” she says. “Their main goal is to get all LCFS credits from electricity and everyone else plays second fiddle.”

Ultimately, Case says never giving up and having the fortitude to make the really hard decisions, such as the layoff in 2014—coupled with the decision to partner with Baker—are what has allowed New Leaf to persevere. “If we hadn’t done one or both of those things, I don’t think we’d be here,” she says. “The layoff was not an easy decision. There were definitely disagreements with the partners. It was a tough call but I thank God I had the [courage] to do it.” She says the biodiesel industry is still a rollercoaster, but it’s a lot easier being on that ride with people who share the same vision. “This industry, and our business, is ever-changing,” she says. “It’s always one thing after another. I feel like we’re a never-ending startup.”

Altic agrees. “We still call ourselves a startup more than 10 years later,” he says. “We still have that scrappy, do-it-yourself attitude. It’s part of our identity.” 

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