Most people in the U.S. have probably never heard of cyperus esculentus, but Victor Garlington, managing partner at BioEconomy Solutions, believes it is the next big thing in biomass-based diesel feedstock. The company has grand plans for this obscure crop, including a signed 10-year offtake contract for 120,000 metric tons (36 million gallons) of oil annually with an overseas buyer and, eventually, small-scale renewable diesel production. But to fulfill this, BioEconomy Solutions must educate farmers, get them onboard to grow the crop, build out crush capacity and install a hydrotreating unit.

Cyperus esculentus goes by many names—chufa sedge, nut grass, yellow nutsedge, tiger nutsedge, edible galingale, water grass and earth almond, to name the more popular ones. Unlike many crop-based feedstocks used for biodiesel or renewable diesel production, cyperus esculentus is not an oilseed. Rather, the crop is valued for its edible, oil-rich tubers, sometimes called tiger nuts.

“Ninety-nine percent of the population has never heard of it, especially in the venture capital realm,” Garlington says. “Farmers in the Southeast who farm and hunt turkeys and food nuts, or ‘foodies,’ are the only people I found with any working knowledge of what I’m talking about.” He says this is one of the reasons that makes investing in cyperus esculentus so great—it’s an opportunity to get in on the ground level, so to speak. “Soy and corn are established markets,” Garlington says. “This is something no one has looked at [in the U.S.] since the late 1800s or early 1900s as a commercial crop. In other places like Spain or countries in Africa, it’s a commodity used as food, or a replacement for milk.”

Garlington says BioEconomy Solutions is focusing on cyperus esculentus for a couple of key reasons. One, the tubers contain about 25 percent oil—a relatively high oil content compared to, for example, soybeans, which typically contain less than 20 percent oil. The second reason involves the type of oil. “The cold flow properties are excellent for the EU climate and does not require further additives, which increase final product cost,” he says. Furthermore, he says cyperus esculentus can be commercially planted, harvested and processed with existing implements and machinery. “No special equipment is needed,” Garlington says. “We are using readily available equipment in the marketplace currently.”

For years, Garlington has been the director of client services for 70centsagallon.com, a provider of small-scale biodiesel processing equipment. When asked why he started this new venture—BioEconomy Solutions—he says, “Since the early frontier days of biodiesel processing, it’s been all about the feedstock. Even in 2006, biodiesel was great until the price of feedstock went up. I said, ‘Wow, why not become a player in the oil business?’ Not petroleum oil, but the oil that grows on top of the ground vs. oil being pumped from underground. This took us down the rabbit hole of food vs. fuel. We were players in growing alternative mustards on the West Coast, camelina, but then the bottom fell out of the industry and interest went out. Two years ago, we saw the writing on the wall, especially in the EU. We had chance to travel to Turkey and England, and soon I realized everyone outside of the U.S. was far more [worse off] than we are, paying so much more than us for fuel. That drives action. On the West Coast, diesel was $5 a gallon. Again, that drives action. That’s what I feel is driving our business, proven by our long-term offtake agreement [with a buyer in the U.K.]. With the pain they’re going through in Europe today, and government mandates up from 5 to 7 to 10 percent blends, IMO 2020, the ban on palm oil—all these things are converging to make a boom for biofuels again. Maybe not so much here in America, but abroad. We’re thankful to have the $1 per gallon tax credit again here in the U.S., but there’s nowhere near the demand here compared to the EU. Most of the equipment that we at 70centsagallon.com have sold has been somewhere else—not here.”

In February, Carolina Opportunity Funds announced that its first IMPACT Carolina Fund investment—a qualified opportunity fund (QOF) designed to provide seed and early-stage financing to qualified opportunity zone businesses located in North and South Carolina—was being provided to BioEconomy Solutions for its planned cyperus esculentus crush facility and subsequent renewable diesel plant in Georgetown, South Carolina. An opportunity zone is a designation created by the Tax Cuts and Jobs Act of 2017 allowing for certain investments in lower income areas to have tax advantages. A QOF is an investment vehicle set up as either a partnership or corporation for investing in eligible property that is located in an opportunity zone and utilizes the investor’s gains from a prior investment for funding the QOF. The Opportunity Zone Initiative, included in the 2017 tax reform bill, was proposed by U.S. Sens. Tim Scott, R-South Carolina; Cory Booker, D-New Jersey; and Rep. Ron Kind, D-Wisconsin.

After Carolina Opportunity Funds announced its support for BioEconomy Solutions, Sen. Scott gave the company and Carolina Opportunity Funds a shout-out on Twitter by tweeting: “#OpportunityZones doing work in Georgetown – hundreds of jobs on the way!” Hannah Kirby, managing partner of Carolina Opportunity Funds, says, “BioEconomy Solutions’ decision to locate an advanced [renewable diesel] processing plant within an economically disadvantaged opportunity zone represents the spirit of the Opportunity Zone Initiative. The vast majority of opportunity zones within the Carolinas are in rural communities and the BioEconomy Solutions project will provide measurable economic growth to the region. Not only do investments in qualified opportunity zones provide tax incentives, but companies like BioEconomy Solutions are on the cusp of a new wave of agribusiness technologies that will drive the future growth of the industry.”

The amount Carolina Opportunity Funds is investing in BioEconomy Solutions is confidential, Garlington says. But it is still raising additional funds with a total goal of $20 million. In return, Carolina Opportunity Funds receives a management fee “not unlike a hedge fund,” Garlington says. With the investment, Garlington says BioEconomy Solutions will establish grow contracts with area farmers and complete the oil processing plant.

BioEconomy Solutions’ business plan is laid out in two phases. The first phase is educating farmers and establishing grow contracts, building a large-scale crush facility and supplying oil. “Our goal for Phase 1,” Garlington says, “is to supply our offtake agreement by the fourth quarter [of this year]. In 2021, the plan is to increase our oilseed processing capabilities along with educating farmers on our oilseed crop.” While Garlington will not say how many farmers BioEconomy Solutions has contracted now to grow cyperus esculentus, he says the plan is to grow the crop on 27,000 acres in the Carolinas down to Florida. “When it’s cold in North Carolina, they’re harvesting tomatoes in Florida,” he says. “But the processing plant, where the bulk of the employment is, will be in Georgetown, South Carolina.”

Thus far, the company has been crushing tiger nutsedge through toll contracting via mechanical cold-pressing. To fulfill the large offtake contract of 36 million gallons a year, however, with a buyer whose name Garlington will not disclose, construction and completion of a large-scale crush facility must ensue. He says the company anticipates starting construction of the crush plant in the second quarter of this year, adding that it can be completed in as little as 90 days. Garlington says the plant will use Komet Vegetable Oil Expellers manufactured by IBG Monforts. He says while the company is making smaller deliveries of chufa oil in ISO tanks today, he expects to be producing 3 million gallons a month by the end of the year, with high-volume bulk shipment deliveries across the Northern Atlantic Ocean by second quarter 2021. 

The second phase of BioEconomy Solutions’ business plan is to construct and operate a 5 MMgy renewable diesel production facility in Georgetown, South Carolina, near the cyperus esculentus crush facility. Garlington says the company is currently in negotiations with technology providers, but no decisions on renewable diesel process technology have been made yet. “We want to add a 5 million-gallon hydrotreating renewable diesel production facility to focus on the marine, rail, and over-the-road diesel markets,” he says. “We’ve been talking to folks in the marine industry, ship owners in Canada and Europe. With IMO 2020, the need for [low-sulfur marine fuel] is tremendous, and they don’t know how to fill that gap. Once we get a good baseline proof of concept, and offtakes with those operators, we can expand. We’ve got plenty of land in Georgetown, not to mention there’s people there from other industries—the pulp and paper and steel industries—to employ.” 

Garlington emphasizes that movement on the renewable diesel production facility won’t occur until 2022. “What’s going on in the next 12 to 18 months,” he says, “is we’re talking with people in Georgetown, training farmers and employees. One of the things that’s so important to us is jobs, jobs, jobs. If you look at that region, it’s had lots of ups and downs with the local paper and steel mills. There are two military bases, and my partner and I are prior military, so we intend to employ veterans and those who worked in the declining paper and steel industries. We’re creating jobs in renewable energy.”

Operation of the crush facility alone, along with movement of whole tiger nutsedge in and shipment of oil and meal out, will create 200 jobs. “We’re not hiring farmers directly, so those 200 jobs are just the people that have to process the oil, move the feedstock, treat it, prepare it for shipment, and get it from point A to point B,” he says. “Three million gallons a month—that’s a sea of oil, not to mention the meal created. We’ll be employing a lot of people to make this happen. We’re taking advantage of [the infrastructure that] soy and corn created, for another input.”

Jobs, jobs, jobs. “That’s what it’s all about,” Garlington says. “It’s been fantastic working with Carolina Opportunity Funds. It’s gotten us noticed by the Republican legislature running the state. It’s been wonderful. What I really want to get across is that we are creating 200 full-time jobs in renewable energy through this project, the right way.”

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