The Resilient Community Producers

Vertical integration, diversified operations, education and valued relationships are vital components to the success of community-based biodiesel producers. This is their story.
By Ron Kotrba | July 13, 2010

The biodiesel industry's diversity isn't recognized enough, says Emily Bockian Landsburg, CEO of BlackGold Biofuels and chair of the National Biodiesel Board's sustainability taskforce. "I think it's one of our greatest assets," she says. "We're a huge plant, we're a small plant. We're an urban model, we're a rural model. We use all different types of feedstocks. We are all different types of organizations and business models. You don't find that diversity elsewhere—it's a real positive character trait of the biodiesel industry."

If biodiesel producers could be put into three broad categories based on scale and operational limits, they would consist of the more centralized, large-scale producers; decentralized small- or community-scale producers; and the wildcard home brewers who enjoy the challenge of their hobby, and don't mind trading time for the reward of energy independence.

Kumar Plocher, president of the 500,000 gallon per year (gpy) Yokayo Biofuels Inc. located in the northern California town of Ukiah, tells Biodiesel Magazine about his home brewing days. He started home brewing biodiesel in 2001, after he and his wife moved from Berkley, Calif., to the northern part of the state where he needed transportation. Plocher bought a 1980s diesel Mercedes station wagon to run on biodiesel. "We were using a washing machine belt-driven motor with very few safeguards, duct tape in various places, a 55-gallon drum, using a drill with a paint-mixing attachment on it for mixing," Plocher reminisces. "And the second I learned more about safety I thought, 'Oh my God, we could have killed ourselves,'" he laughs. "It seems like the information on how to make biodiesel got out there before all the safety information did."

Many small commercial producers began with home brewing, which Plocher says is great for the do-it-yourself type, but he quickly realized back then that there was a growing market in the local community for already made, quality biodiesel. Yokayo was well-established as a biodiesel distribution company by 2005, when it opened the doors of its small-scale commercial production facility. In the beginning, it was all about producing biodiesel, he says.

"We weren't terribly concerned about energy efficiency, or getting value from waste streams like glycerin or methanol recovery-all of the things that are critically important over time," Plocher says. Another aspect of production that was important for Yokayo, and its customers, was increasing the sustainability of its fuel and operations.

"One thing that's changed over time is my definition of what it means to be a sustainable fuel provider," he says. "What I realized is that it's all based on local resources. Once we can effectively source all our resources locally, and deal with our wastes by getting value from them locally as well, it's at that point we become insulated from the petroleum market and the pressure all of that exerts on us." Uncontrollable forces drive commodity prices up and down, so one of the only ways small producers can exact any semblance of control over their margins is to become vertically integrated at the local level.


Vertical Integration

"If we didn't control our own feedstock, then we wouldn't have a business," says Nat Harris, production manager for Newport Biodiesel LLC in Newport, R.I. The plant is producing about 500,000 gpy, but Harris says by the end of the year production should be around 750,000 gpy. The model Newport Biodiesel follows is production targets are never outpaced by the volume of used cooking oil feedstock secured locally. "We did not want to build a plant scaled significantly greater than the amount of feedstock we can collect ourselves," Harris tells Biodiesel Magazine. "That's been our growth model since inception, and it's what's allowed us to stay in business." Rhode Island is the most densely populated state in the U.S., Harris says, so a 40-mile radius of the plant offers a plethora of waste feedstock collection opportunities; Newport Biodiesel has nearly 1,000 restaurants in its collection chain.

"It helps in getting the message out to the local community—we're collecting a local waste product for local biodiesel production for local consumption," Harris says. "Local restaurants really get that, the local message, and it helps us retain them when our competition is offering them money for their grease." Newport Biodiesel obtains most of its feedstock for free.

Harris says one of his company's main distributors, T.H. Malloy & Sons, had been distributing biodiesel for years before Newport Biodiesel came online. "They were looking for sustainably sourced fuel," says Harris, adding that they were buying biodiesel from the Midwest. "When we came online here in Rhode Island, they were thrilled." Ever since, local biodiesel demand has never been an issue.

Landsburg can relate to this idea of not producing more than your local feedstock resources allow. BlackGold based its business model on just that, looking at local waste streams that are burdensome to their owners and, not only minimizing that burden, but creating value from it. And the waste streams she is focused on are the nastiest out there, the sewer greases. BlackGold's pilot plant is in Philadelphia, but its first commercial plant, bought by the San Francisco public utilities commission, is being commissioned right now.

Another small-scale biodiesel producer, Bently Biofuels in Minden, Nev., says vertical integration has been critical to their success. Bently Biofuels is one of a number of companies owned by Don Bently. A third of the biodiesel plant's supply goes to its sister company's ranching operations. "That gives us a baseline demand," says Carlo Luri, general manager for Bently Biofuels. "Owner Don Bently believes in minimizing petroleum use and reducing our carbon footprint, so he's not going to stop using biodiesel because the tax credit goes away."

This strong, passionate belief in biodiesel, alongside savvy localized business models, has sustained the small-scale producer during this dark period without the federal tax credit; and while a number of large, "corporate" biodiesel plants sit idle in this uncertain policy environment, many community-scale biodiesel plants are operating at full capacity-even if their production capacities are small by comparison.

"Vertical integration becomes pretty important in the economic model," Luri says. "If you're buying from and selling to the commodities markets, then your fate is out of your hands. The spread might be good or it might be bad, but you have no control over what the spread is." He says one fatal flaw seen over and over in the biodiesel industry is well-intentioned investors fund the building of a massive plant, yet there isn't enough available feedstock within a reasonable distance from the plant to operate anywhere near capacity. "So now your model includes transporting feedstock long distances, which, as energy costs go up—and they will—the cost of transportation goes way up," he says. Conversely, if the local demand is significantly outpaced by a large plant's capacity, then the fuel itself must be shipped long distances to reach end markets.

Vertical integration meets company diversification at Bently Biofuels' own retail station and convenience store, where it sells B99 directly to consumers. The station also sells B5, B20 and ethanol blends of 10 and 85 percent.


Diversification

Like many small-scale biodiesel producers, Piedmont Biofuels, a worker- and member-owned cooperative in Pittsboro, N.C., knows the importance of diversification. "We do make biodiesel, but fortunately that's not all we do or we'd be boarded up right now," says Lyle Estill, president.

Piedmont operates a 1 MMgy production facility. It also has a design-build group that makes skid-mounted reactors, the latest project of which is with enzyme-maker Novozymes to develop an enzymatic biodiesel production process. The enzymatic pilot plant will open in July. "We also make a cavitational reactor that we ship," Estill says. "And in the pump and tank shop we've got a degumming skid, a local farmer hired us to build a little skid unit to knock the gums out of his soybean oil. We also manufacture small-scale methanol recovery units, that sort of stuff."

The co-op also has a research and analytics group. "They do some outside testing for others in the industry," Estill says. "And we also do contract research," for professors, for instance, who have theories they want tested at the practical level. In addition, Piedmont supports local and regional educational workshops. "We have a mobile rig, so we'll pull into town and hold biodiesel workshops," he says. The rig has an oilseed press and biodiesel production unit, so the co-op starts its workshops by dumping whole oilseed in, and by the end of the session, they get ASTM quality biodiesel.

Finally, Piedmont does consulting. "Any given day you might find someone visiting us from afar, talking to our lab guys about analytics or asking about regulations or how to get a license or permit for their plant," Estill tells Biodiesel Magazine. "Or they might be sitting on the couch or in the kitchen rapping about pumps with our staff. So we're a fairly diversified operation where making biodiesel is only one of the things that we do."

Estill says ideally feedstock is gained, and the biodiesel is produced and consumed, locally. "We would like to see the next 100 million gallons of biodiesel production come not from one behemoth plant in the harbor, but from a hundred community-scaled plants like ours," he says. "We're trying to get free from a top-down oppressive energy infrastructure like the one we know from petroleum."


Relationships

"When you know your clients—your feedstock providers, your customers—it's a personal transaction, not purely a commodity-based transaction," Landsburg says. "This allows for a level of flexibility and loyalty. These types of relationships exist for small-scale producers that would be harder to find in larger-scale operations. I think that offers a lot of resilience against down markets."

Two common misconceptions out there about small producers are that they're not as safe as their larger counterparts, and they cannot ensure fuel quality. But the average community-based producer is selling fuel to family, friends and neighbors—on top of using the fuel themselves—so fuel quality and community safety are paramount for maintaining the integrity of these vital relationships.

"I say I won't sell you bad fuel because that same fuel is going in my vehicle," Luri says, adding that Bently Biofuels' tanker trucks delivering biodiesel are powered by B99. "Our customers appreciate that the fuel we deliver is brought in a tanker truck running on B99, not some truck running on petroleum diesel."

Harris says, "If there's a problem with our fuel, it's going to affect our friends, our families, us. It's different than shipping fuel off to some end user who we'll never hear from again. I'm the production manager, and that personally drives me to ensure fuel quality."

Ron Kotrba is editor of Biodiesel Magazine. Reach him at (701) 738-4942 or rkotrba@bbiinternational.com.

 
 
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