Whatever It Takes

His great-grandfather started Bunge. His brother founded Greenline Industries. Peter Brown, co-founder of the biodiesel process hardware vendor International Procurement Tools, is no stranger to the agricultural or biodiesel industries. He’s lived in Argentina, Belgium, the U.S. and French Canada, and he’s worked in almost every field imaginable, including journalism, public relations, nuclear development, hydroenergy and biodiesel. Biodiesel Magazine sits down with Brown to get his perspective on important and timely industry topics.

Q: How did you first get into biodiesel?

A: The more I looked at Europe and what they were doing with diesel, and how they were implementing biodiesel, the more sense it made to me that we should really be looking at this. New diesel engines are so far ahead of anything gas engines can offer at this point. We’re really missing an opportunity here. The mileage is 20 to 30 percent better, but it doesn’t seem to hit us. In Europe, 60 percent of the cars on the road are diesels. Here it’s 4 percent. I don’t know what the problem is. I had an old diesel Volkswagen, with the old technology, and I’d go to Europe and rent a diesel and, surprisingly, I really could not tell if it was a gas or diesel. Then it occurred to me that biodiesel is a fuel that is infinitely renewable and has all kinds of applications, and can be produced from almost anything. So that’s how I got interested in biodiesel. Then my brother was a pilot for Northwest Airlines and was selling biodiesel out of a very small plant he built in California. I volunteered to do public relations for him in 2006.

Q: You wrote an article a while back in which you stated that the days of small plants are over, big business is now king in biodiesel. My observation over the past two years is a little different. How would you address that same issue in the context of today’s climate and the industry’s recent history?

A: I’ve tempered my reaction since then. There are two definite business models in biodiesel now. The first is the initial soy-based facilities owned by the Bunges and Cargills, those will not go away because those are the ones the government is going to go to in order to meet its mandate. And then there is the local plant. They are taking advantage of a local situation for most of their feedstock, and have established a very solid niche with the community, they are involved ecologically. Take, for example, the Northeast and biodiesel-blended heating oil. Those are the plants that I think will do well in the near mandate, producing tons and tons of money. Their investments are very low, their goodwill is in place, and their financing is covered by the local bankers. The more these small plants work, the bigger they want to be. And that is something that originally happened in Europe before Germany killed the market. They started very small, maybe 2, 3 or 5 MMgy, and then grew. That’s why I think modular construction is so important.

Q: Your brother started Greenline Industries, which many thought was a very promising company. But after the 2009 National Biodiesel Conference in San Francisco, where Greenline held a press conference on some new technology offerings, the company went under. Why did it go out of business and what happened to all of its biodiesel customers who bought its various units?

A: My brother founded the company and I took care of public relations and marketing for Greenline. Then I was asked to do some international sales. They had the U.S. covered but, unfortunately, for Europe they had nothing. I had a bird’s eye view and a worm’s eye view of the company. You and I sat in that press conference at the 2009 National Biodiesel Conference and, to me, that was probably the highlight and the lowlight of the company. They lost focus at that point of what they were up to. They had gone through a very successful round of financing and picked up $20 million, and by then they did what every single dot.com in Silicon Valley did—they started spending the money on things that were not relevant to the business. They forgot that what they were was a hardware vendor. They picked up a contract with one of the people who developed the University of Kassel’s horizontal waterless biodiesel processors, which is in the public domain. That was one of the problems they had, they did not really own the technology that they were selling.

Q: What about its customers? What happens when a company goes under and they’ve got all these units out there that may be under warranty?

A: That’s a very fair question. They had one customer that had gotten some very advantageous contracts out of Nigeria on palm oil. They bought six trains that were never installed; they were brand new and sitting in a couple of warehouses on the East Coast. What we at IPT did is discuss this with the guys who bought these and we contacted the original engineering team of the Kassel product—the waterless horizontal—and they have agreed to install them and then provide all the warranties. They went over there and looked at them and said, “These things are wonderful, they’re brand new and have never been used.” So if anybody wants to install one of those, they can call me up and we will get everything ready to go, with warranties and all.

Q: What are some lessons learned from Greenline that you will make sure not to repeat in your new company?

A: This is going to sound self-serving but I’m a veteran of Silicon Valley, and the one thing I’m going to do is stay as lean as I have to. Most of it is done virtually: I’m contracting with a German company. I am not going to provide my own warranties because to buy that kind of expertise, why do it? You can get it, you can have it, and we can install it. The second thing, and this is vital, is never forget what you are doing. What you’re doing is selling hardware, and you have to do whatever is required to get that hardware into the client’s hands. I have discussed things with banks in Switzerland for some of my clients. I have gone to conferences and talked to people out of Eastern Europe about feedstock and crushing contracts. Whatever it takes, the client has to come first.

Q: Earlier you mentioned how Germany killed the market, can you explain what you mean?

What happened to Germany is probably symptomatic of what happened to biodiesel everywhere. Biodiesel producers were given incentives, and Germany very quickly became Europe’s No. 1 biodiesel producer. Then, overnight, they took the incentives away at the same time the American market was doing the old splash-and-dash stuff. And that just destroyed them. The German producers could not sell biodiesel at a profit anymore, and Germans are very pragmatic so they said, “If we can’t sell it at a profit any more, then we’ll just shut it down.” Now, I understand that this is changing, and Germany is going back to the incentives again—but look at the damage it’s done.

Q: And the same argument can be made regarding the U.S. biodiesel industry—many producers have told us that they can deal without the credit if that’s what they know the future is going to be, but having the incentive, then not having it, then getting it back for a short-term period, they just can’t adapt to those inconsistencies. What do you think?

A: I am in 100 percent agreement with that statement. Furthermore, I think the banks and the financing institutions have also destroyed this industry. They were throwing money at companies that didn’t deserve to have the money, but they had fantastic PowerPoint presentations. When Vinod Khosla becomes an expert on energy—he’s a very nice guy, but basically he’s almost clueless.

Q: On a global level where do you see the most promise, the most biodiesel project activity, and why do you think that is?

A: I’ll tell you where I see the most promise for an American company to do business. They should go to Canada. They have incentives. They are committed to it. They also have a mandate but almost no production capacity, nothing very big. So most of their biodiesel, just like with California, is going to have to come from outside. That’s why I’m working on two projects in Canada right now, one in Alberta and one in Quebec. Another thing is you have to keep an eye on the politics. And I’m not talking about the dollar, I’m talking about statewide. Iowa has a lot of biodiesel because they are friendly toward biodiesel. California is almost producing zilch even though Schwarzenegger was a big green guy. There is such a dichotomy between the demand and the response that I don’t know if we’re going to be able to pull out of it in the next six, eight or 12 months.

Q: Globally, do you think there’s more biodiesel demand than supply or is it the other way around?

A: If you move away from the rather peculiar American mindset about diesel, I think certainly every gallon of biodiesel out there has a buyer. I also believe every buyer knows why he is buying it, as opposed to people who buy gasoline and other products. The first is the ecology, I feel good about this. Two, biodiesel is price competitive with the petroleum he’s buying, meaning that if you put 5 percent biodiesel in your petroleum product, you’re going to have a product that’s more valuable than those pennies that you added. And the third thing is that biodiesel hasn’t quite found its niche yet. People look at it to power engines, but there’s a huge market that’s slowly appearing in specialized lubricants, engine cleaners. It’s a wonderful product.

Q: You mentioned the U.S. lack of interest in diesel vehicles. I agree, but we have a 60-plus billion gallon a year diesel fuel market. How are we going to tap into that huge trucking, construction and heating oil market, to get them to believe in biodiesel and support it, use it, even without mandates?

A: Let’s start with mandates. There’s a reason to put biodiesel in your truck, for example. If you put it in, you extend your engine life by 25 percent because of the lubricity and cleaning powers of the fuel itself. I have spoken to a number of truckers and trucking organizations, and they are 100 percent behind doing it—if they can get the warranties from the engine manufacturers. They’re a little nervous about putting their new $60,000 V-12 diesel engine at the risk of an attorney who’s going to say, “Um, that’s not covered by warranty.” So I can understand their point of view. And some companies warranty higher blends of biodiesel in the EU but not in the states, and I don’t understand it. In America there seems to be—and I’m going way out on a limb here—a conspiracy. Some companies don’t want 5, 10 or 15 percent of their sales taken away by people selling biodiesel.

Q: In the U.S. and abroad, what are some key issues needed to be overcome to increase demand for, and production of, biodiesel?

A: We need to be better educated. When we read some of these statements being made that biodiesel increases the price of food in Mexico by 20 percent, somebody should be on top of that so fast it would make your head spin. The World Trade Organization recently came out with a study that says biofuels only use 1.75 percent of the land mass dedicated to producing vegetable oils, so I don’t see how we’re the big, swinging baseball bat in that market. On the contrary, I think the food people will have to watch out. And also, we, the biodiesel people, have access to so many new forms of feedstock that we’re not even able to consider because we’re trying to hold the soy organization’s hand. Look at camelina or pennycress, the stuff’s fantastic.

Q: Your new company, IPT, says it can build a 60 MMgy biodiesel facility pipe-to-pipe for $6 million, that’s 10 cents per gallon of installed capacity. How is that possible, what does it include—and more importantly, what doesn’t it include?

A: This is what I say upfront: I will install 100,000 ton per year capacity on a client’s permitted and serviced site, which means that it does not include any of the storage, any of the rail or that stuff, but rather, if you give me a building with a slab, I will put the processors there. That is one-third the price of our nearest competitor at this point. The reason I can do that is quite simple. I do not have any engineers—I have an engineering company that I work with. They have other projects but they don’t rely on me. Secondly, I am having the plant fabricated by a company in India that has built more than 200 hexane extraction plants around the world, so if you’re screwing around with hexane, you have quality control because that stuff is nasty. They understand it.

Q: Take me through what IPT’s processing units offer?

A: They’re called waterless horizontal processors. You could put any type of feedstock at one end so long as it meets the minimum requirements. It goes through a double esterification process. We’re using Amberlite, formerly of Rohm and Haas, now Dow, to clean filter the finished product. Our glycerin is around 80 to 85 percent pure but if you use really dirty feedstock like waste vegetable oil, then it’s down to 60 percent. The methanol can be recovered as much as we can—I think there’s maybe 0.2 percent left as it goes into the final filters. My partner calls it the Model-T of biodiesel processors because it’s so simple that you can run almost anything through it. You can stack these processors one on top of the other after the plant decides they can market their fuel and expand. That’s why I like it. If one of your lines goes down because of contamination, you can continue to produce on the other lines. That’s fairly crucial. You can also run different feedstocks through the lines or you can mix feedstocks. When you’re doing stuff like this, you don’t need complications. You need simplicity. And that’s what we’ve done with the IPT concept.

Q: A few years ago plants had a hard time getting rid of their glycerin, and not many had purification units. Have you seen a technology shift since then?

A: If you don’t control every single step of your process, then you’re missing huge opportunities. That starts from buying your own feedstock, running them through your own crusher and so forth. We were looking at things like glycerin-powered generators, but now that is no longer a valid solution because glycerin is much too valuable a commodity. The problem is glycerin purifiers used to be big distillation columns. They were energy hogs. The new ones I’m working on right now are using some very advanced membrane technology and they’re very chintzy on energy, just running pumps.

Q: Are there any activities going on in the biodiesel industry, whether in the states or internationally, that you think do more harm than good for the global community of biodiesel producers?

A: This misinformation campaign right now aimed at biodiesel—not biofuels but specifically biodiesel—is something that should be addressed. That is one. Two, I think that if you don’t approve biodiesel in the beginning, then it will never get accepted. Any diesel engine in the world should be covered to run on biodiesel blends. The [original equipment manufacturers and oil companies] really have to be forced to work with it because they are so conservative that it’s not even funny. Also, if biodiesel producers were just a little bit smarter about how they run their businesses, the industry could be self-sustaining. I don’t think you can put a biodiesel plant in the hands of people who’ve got no concept of how to do it, and then expect them to be happy with the result.

Q: The EU is still complaining that the U.S. is dumping subsidized biodiesel into its market and circumventing the established tariffs. What do you think of this, what’s behind it?

A: I think the Europeans have a point, but here’s something to consider. We in America should be buying all that biodiesel and not shipping it out. And that should be possible if you tell people in America, “You buy something with a diesel engine in it and tell them, ‛3 percent, guys. You put it in or you don't drive it.’” And that’s what’s going to happen in Canada now that they’ve instituted their incentive. There should be huge fines for those who don’t put biodiesel into their system. And they’re looking at the American market saying, “Well, we can buy that stuff down there until we get our own production up.”

Q: Prediction time: Will a long-term biodiesel tax incentive get through Congress this year?
 
A: Yes. I’ve heard it should be a blenders credit, I’ve heard it should be a production credit, and there’s another one I don’t think a lot of people have heard about, which came out of a think tank in D.C., it’s along the lines of, if you’re using a homegrown feedstock, then you get so much. If you then put it into the American system and it stays here, then you get so much. So it’ll be incentivized along the full line, and that’s not a bad system either. We’re looking at creating jobs here, not just biodiesel.

Q: Will the EPA increase the biomass-based diesel mandate under RFS2 this year?

A: I think they will. We, as in the [international community], should be insisting that we take an active role in the propagation of biofuels, which are nonpolluting compared to what we’re shipping in from the world’s war zones.

Q: Throughout the past year or two, there have been many who want to give up on biodiesel, the industry producing it. What are some final comments that you’d like to say to these naysayers who say biodiesel is a thing of the past?

A: I would say that in certain areas they are probably right, but I would also tell them that the best years for biodiesel are going to be coming up in the U.S. I think a lot of the plants that were shuttered were shut down for very good reasons, most of them related to business. And I would also tell them to keep an eye out on things like algae and jatropha. If it could be produced here, and can be used in U.S. equipment, how much better is that than spending billions of dollars supporting the petroleum industry, which is more polluting and more expensive? The biodiesel industry is subsidized—but the petroleum industry is really super-subsidized. And that’s all part of the education process that we as biodiesel producers and those in the market have completely missed.

Questions by: Ron Kotrba
Editor, Biodiesel Magazine
(701) 738-4942
rkotrba@bbiinternational.com