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Biodiesel producer takes control of distribution, diversifies

Diversification of operations and controlling distribution has helped keep one biodiesel producer's doors open amid tough market conditions
By Ron Kotrba | July 15, 2015

It’s not an easy market for biodiesel makers right now. Low fuel prices, rising feedstock costs and wavering government tax incentives—not to mention the second year without an RFS final rule—mean biodiesel companies must be smart and creative to survive.

Diversification and taking control of distribution are two ways Midlands Biofuels of South Carolina is keeping its doors open.

My friend in the industry, Midlands Biofuels owner “Bio” Joe Renwick, recently shared with me some great news that is ultimately helping his business increase margins and keep operations going.

For years, Midlands sold its biodiesel to an oil company with 32 stations in the region. With low fuel prices over the past year, actually making money this way was difficult, if not impossible, “Bio” Joe says. “When you’re selling B5, and you only get paid on the bio, you’re not making much if any money these days.” But the relationship was comfortable since Midlands Biofuels had the used cooking oil accounts with those 32 stations.

Then one day “Bio” Joe found out that his distributor pulled those accounts from under him and sold them to another collection company. This made him rethink the relationship.  

Midlands’ plant is located next door to a Shell fuel station from which “Bio” Joe rents the space. He and the owner have never done business together (outside of the tenant-landlord relationship for the past eight years), “which is ridiculous,” “Bio” Joe says, adding that the reason for this is “Shell isn’t allowed to buy our biodiesel.”

The landlord had a 1994 1,800-gallon, gas-powered tanker truck for sale with only 62,000 miles on its 454 cubic-inch engine and “Bio” Joe saw gold through the truck’s rusted, ugly façade. He explained his situation with his current buyer-distributor and struck a deal with his landlord—not only to buy the fuel truck for just under $1,000, but also for a new petroleum diesel purchase arrangement.

“Now I’m buying my petroleum diesel from the landlord and making more per gallon,” “Bio” Joe says. “When you own the truck, you control the numbers.” He says he’s purchasing diesel from his landlord at cost (roughly $1.86 a gallon) plus 8 cents delivery charge on 30-day terms. After the 42-cent tax and 8-cent delivery charge, “Bio” Joe can sell the fuel for $2.65 making around 30 cents a gallon on just the petro. He now sells on- and off-road fuel direct to small businesses and farmers, blending in biodiesel at their requested level and adjusting the price accordingly.

He says Midlands Biofuels just signed up Richland County library to fuel them with B50 in its book delivery trucks.

Midlands Biofuels is still making biodiesel every day, but not as much as it could. “We have the ability to make three batches a day, but right now we’re only making one,” “Bio” Joe says. Midlands fuels its own fleet with bio, and sells its blended product direct to customers. The company also still sells blends to the city of Columbia and University of South Carolina, but on a bid process rather than through contract. “We usually win the bid,” he says. The difference is that now, the company makes a good margin on the diesel portion of the blend, in addition to whatever the market will allow it to fetch for the bio portion.

On top of now controlling its own distribution, Midlands continues to process used cooking oil for other biodiesel plants in the region. “We’re surviving by growing these relationships,” “Bio” Joe says. Raw oil can have 2 to 20 percent MIU, he says, so what Midlands does is charge a per-pound fee to cleanse the oil and reduce moisture content to 0.5 percent, and filters it down to 10 microns. “We also stabilize the oil to prevent FFA rise during processing,” he says. Midlands is also hauling, processing and discharging wastewater from other plants. “Nobody does that,” he says. “We’ve had to shift gears from solely being a biodiesel manufacturer to also having a focus on used cooking oil and wastewater purification.” Ultimately, however, “Bio” Joe says he’s still mission-driven about biodiesel. It’s just that, like a lot of companies, his plant has had to change with the times to keep that passion—and his operations—alive.