Biodiesel's Mass. Distributor

In just six years, Chelsea, Mass.-based World Energy Alternatives has built the largest biodiesel distribution network in the United States, operating a delivery infrastructure with national reach.
By Dave Nilles | October 01, 2004
Gene Gebolys was an economic development official with the Massachusetts governor's office in 1994 when biodiesel entered his life, planting in him a seed of interest that would eventually transform his career. A successful businessman named Jim Ricci was interested in purchasing a Massachusetts oleochemical plant owned by Proctor and Gamble. Ricci, seeking guidance from the governor's office in brokering the deal, intended to turn the facility into the nation's first large-scale biodiesel plant.

"That's when I first heard the word biodiesel," said Gebolys, who helped make the deal happen and, two years later, joined Ricci's company, Twin Rivers Technologies (TRT).

Gebolys was enamored with biodiesel. At a time when most Americans had no idea that the renewable fuel even existed-much less what it was good for-Gebolys joined industry pioneers already fighting hard to get the fledgling industry off the ground. Of course, getting the petroleum industry, engine manufacturers and consumers to accept biodiesel was-and still is-a hard-fought battle. As late as 1999, three years after Gebolys joined the industry, annual U.S. consumption of biodiesel was just 500,000 gallons. That number has grown greatly due in large part to the marketing and production efforts of a company Gebolys would eventually create.

Shortly after joining TRT in 1996, Gebolys realized that the route the company was taking to produce biodiesel was, in his view, simply not going to work. TRT was, and continues to be, a full-line oleochemical producer and supply company that produces fatty acids, glycerin and methyl esters. But their biodiesel division was slow to get going. According to Gebolys, the scale of the newly purchased plant was out of sync with the size of the biodiesel industry at that time. He could see that biodiesel wasn't fitting in at TRT. So in 1998 Gebolys spun off the biodiesel division into a stand-alone company. He became founder and CEO of World Energy Alternatives LLC.

His initial strategy was simple: World Energy would make its mark by marketing energy, not necessarily creating it.

"By then it was clear to me," he said. "For the company to be successful, it needed to focus on selling and distributing renewable Btus at a premium. We started selling niche energy rather than focusing on how to produce it."

The birth of a biodiesel leader

Looking back on his split with TRT, Gebolys now feels that TRT and World Energy followed appropriate paths by pursuing their respective strengths. For World Energy, biodiesel was it.

Based in Chelsea, Mass., World Energy has built the largest biodiesel distribution network in the United States, operating a delivery infrastructure with national reach. They are a licensed fuel seller in 35 states, a total even major oil companies seldom reach. Customers include the U.S. Postal Service, the U.S. military, large commercial operations and numerous government agencies.

World Energy has capitalized on its ability to aggregate customers. For example, Gebolys explained, for someone to start up a large-scale biodiesel facility in Oklahoma, they would only have a couple of customers. They would need to reach a more broad market further away from their area to be profitable. He said small-scale plants could meet the demands of local customers but tend to be inefficient. World Energy gathers customers from large areas and provides a market for large-scale producers. "The upside is that we don't have to buy in from fuel distributors in every market," Gebolys said. "Where a willing and able distributor has yet to surface, we can go in and sell to customers directly."

World Energy also handles credit-trading capabilities for EPAct customers. World Energy facilitates the sale of those credits and often replaces them with credits through biodiesel. "From our beginning, we have been absolutely committed to working with environmental groups and health groups," Gebolys said.

From spin-off company to partnership building
Several U.S. industries, including alcohol, tobacco and fuel, are intensely regulated and taxed. Fuel taxes provide a large source of revenue to the U.S. government. Due to regulations, it becomes a significant task to keep up with the licensing procedures required when distributing fuel in even one or two states. So how does World Energy maintain licenses in 35 states? "If you're going to be a broad aggregator of the market you better prepare to be licensed all over the country," Gebolys said. "It's a monumental undertaking to keep track of all of that.

We became licensed so our manufacturing partners don't have to deal with it."

World Energy typically has four or five manufacturing sources per year, with contracts being both long- and short-term.
Petroleum industry relationships are, of course, equally important to World Energy. One company with World Energy for the long run is Gulf Oil LP. Gulf Oil has been providing financial backing and a platform for growth to the company since its start in 1998, making World Energy the first alternative energy company backed by a major petroleum company. "Gulf is known to be a very forward-looking company," Gebolys said. "That makes them an ideal partner for us."

With Gulf Oil's backing, sales have continued to improve, growing by over 50 percent every year of existence. World Energy sells at least 50 percent of the biodiesel gallons consumed in the United States annually.

World Energy's success is rooted in customer ties. "We've always been about-and focused on-the customer, from the get-go," Gebolys said. "In the mid- to late 90s, while people were focused on plants, we were jumping on airplanes and talking to customers and prospects."
Gebolys said his approach is simple: The most efficient way to provide consumers with consistent supplies of biodiesel is to provide high-quality fuel through a distribution system that fits-as seamlessly as possible-into the petroleum industry's existing infrastructure.
World Energy now has 50 distribution "nodes," or central distribution points, across the United States. Gebolys said only in very rare exceptions can customers not get fuel within 24 hour's notice.

The company also has a small but growing global presence-they've exported small amounts of biodiesel to Southeast Asia, Canada, Mexico and Europe-but the company's main focus remains in the domestic market.

A Florida asset boosts production
World Energy greatly increased its biodiesel production capability this summer with the reopening and upgrading of an 18-mmgy plant in Lakeland, Fla. According to the company, the plant is the largest multi-feedstock biodiesel production facility in the United States. Purada Processing LLC, a World Energy wholly-owned subsidiary, manages the facility and sells the plant's refined glycerin. "It really gives us all facets of the biodiesel business," Gebolys said. "It makes us knowledgeable in all aspects of the industry."

Although World Energy continues to obtain most of its biodiesel through contract manufacturing, the Lakeland plant guarantees that World Energy can provide reliable supply. "With the diversification, if other sites go down, World Energy customers will never know it," Gebolys said.
Gebolys said the industry has, at times, experienced inconsistency of supply. That has made it difficult for some distributors and customers to fully embrace the industry. World Energy is facing that head on. The Florida facility has proven capabilities with both virgin and recycled oils.

The possibility of expanding production
"The future looks like the past, except in a much larger scale," Gebolys said of his company. World Energy grew by creating lines of distribution from the customer backwards. In other words, they started by bringing in a few customers and building up the company's assets and capabilities where railcars and distributors were needed.

"Keeping it simple," Gebolys said. "Our philosophy is to focus on the customer and deliver value to them."
World Energy continues to grow with new offices in Minnesota and Ohio. They now have six locations for 43 employees. Gebolys said they are working on the first non-United States office that could be announced by the end of the year.

Meanwhile in the United States, World Energy is looking to increase its own biodiesel capacity. They are in a joint venture to build a new start-up facility in Delaware. World Energy is contracted to own all of the output of Mid-Atlantic Biodiesel LLC. "I'm a real believer in the people behind the project," Gebolys said.

Martin Ross, president of Mid-Atlantic, said he first contacted World Energy three years ago when looking at supply and demand estimates within the biodiesel industry. "It was part of market research," Ross said. "Gene is a great guy, and we hit it off immediately. It developed into a partnership."

World Energy helps take the risk out of selling the product once the plant is running. This helped Ross gather financing for the project. "We're five years ahead of where we thought we would be," Ross said.

World Energy's alliance with Gulf Oil helped solidify Ross' beliefs. "Even with ethanol, we have to have a partnership and alliance with the current fuel infrastructure," explains Ross. "We can't have an island with a plant and not get into the fuel industry supply lines."
The Mid-Atlantic plant is the first project World Energy has been involved in that is a pure start-up. Gebolys feels the plant is located in a very strong market. "We bring a market to the project," Gebolys said. "We are able to bring a whole existing list of customers to the mix. We're able to cut out a lot of risk in any new venture."

The 5-mmgy plant held a ceremonial groundbreaking in September and could begin production by fall 2005.

A boost from the tax credit
The U.S. biodiesel industry, World Energy included, is expected to receive a boost from the passage of the American JOBS Creation Act (see page 16). However, Gebolys cautions against getting carried away with the good news.

"This is a great step in the right direction and it will certainly help, however, it is a two-year credit as it sits today," Gebolys said. "New capital investment still faces a speculative environment. You still have to sell the value of biodiesel rather than the price of biodiesel." Gebolys added that this is what World Energy has done since its inception-sell the value of biodiesel.

Gebolys was pleased with the biodiesel tax incentive but doesn't anticipate that it alone will revolutionize the industry. "On Jan. 2, I don't expect there to be a wild demand for biodiesel," he said. "The development of biodiesel is a marathon, not a sprint. The technology and the industry are still very volatile, very young. We would do well by taking the long view."

World Energy's place in the biodiesel future

Gebolys credits much of World Energy's success with the biodiesel pioneers that came before him. Ricci, for example, helped introduce Gebolys to biodiesel.

"Jim was the first guy to bring vision, scale and commercial viability to biodiesel," Gebolys said. "He was always convinced it would be big in the U.S."

Gebolys also credits Bill Ayres and Doug Pickering and those that came after them at Ag Environmental Products LLC. "These were people seeing things that didn't even exist," Gebolys said. "I'm probably a member of the second generation. It started with just a handful of visionaries."

Those visionaries would likely be proud to see World Energy's accomplishment of being named a Clean Cities National Stakeholder award winner in 2004. "It's indicative of how far biodiesel has come," Gebolys said.
Biodiesel will emerge in the next decade or so as an important component of the energy portfolio of this country, according to Gebolys.

He feels the biggest challenge is that the economics of biodiesel is beyond one's control. A stakeholder is squeezed between multiple commodities such as diesel, soybean oil and other feedstocks that do not trend in any discernable way with each other.

"This country has an addiction to fossil fuel," Gebolys said. "For a host of social reasons, that simply cannot continue indefinitely. Society is almost certainly going to continue to invest in figuring out reasonable, thoughtful alternatives to its continued dependence on foreign oil. I believe biodiesel is that alternative."

Dave Nilles is a Biodiesel Magazine staff writer. He can be reached at dnilles@bbibiofuels.com.
 
 
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