Patriotic Pursuit

Arkansas' newest biodiesel plant is about one-tenth the size of some of the massive facilities in the Upper Midwest, but that's of no consequence to Tommy Foltz and his investor partners, who are using Patriot BioFuels Inc. as a base from which to launch larger, more expansive operations.
By Gary DiGiuseppe | August 01, 2006
Throughout late 2005 and early 2006, Tommy Foltz was a regular presence at farm group meetings in eastern Arkansas. For months on end, Foltz spoke to growers about his soon-to-be biodiesel plant start-up, Patriot BioFuels Inc., which today is a tangible reality having already produced and sold more than 600,000 gallons of fuel through the end of July.

The Stuttgart, Ark., facility, located in the heart of Arkansas' Grand Prairie-a fertile rice- and soybean-growing region-melds new and old within a 31,000-square-foot building in an aging industrial district of town. The structure that houses the facility was built during the Great Depression by the Works Progress Administration, a federal relief agency established in 1935 by executive order to create jobs by spending money on a wide variety of programs, including highways and building construction, slum clearance, reforestation and rural rehabilitation.

Now, one area of that old building-located just feet from an operational rail line-is filled with state-of-the-art biodiesel production equipment; much of the structure remains unutilized. The plant came on line in late April with an annual production capacity of 3 MMgy. By today's standards, that means Patriot BioFuels is a relatively small producer, but Foltz, president of the company, and his partners have much larger plans for this booming young business. If all goes as planned, the Stuttgart facility will soon be expanded to approximately 13 MMgy. There's enough space in the building to go even larger-perhaps up to 25 MMgy-but the economies of scale for that particular market become less attractive beyond the 13 MMgy mark, Foltz estimates. That's why Patriot BioFuels will likely put its money into a second plant in a different location after the Stuttgart facility undergoes its 10 MMgy expansion. In fact, Foltz says the company is aggressively evaluating sites for a second plant nearer to key metropolitan diesel markets.

Right now, the company is selling as much biodiesel as it can produce-and doing it profitably-so Foltz and his partners are primarily focused on building a strong, sustainable company. "We're working on all the nuts-and-bolts types of things right now," he says. "We can have a 7,200-gallon tanker in and out of here in about 45 minutes. Being able to do this, by both truck and rail, will be critical to our opertions."

While feedstock supply is not a problem for Patriot BioFuels at the moment, growing the supply and diversity of raw materials for production in the region is something the company actively supports. Arkansas Agriculture Secretary Richard Bell says one project in the works is a collaborative effort that includes Patriot BioFuels and larger players like Riceland Foods, a giant farmer-owned cooperative and grain processor. The aim is to build contracts with farmers to grow canola, a fall-seeded crop with a higher oil content than soybeans. Arkansas has only two major vegetable oil processing facilities. Riceland Foods' soybean crushing facility in Stuttgart has an output of about 26 MMgy of virgin soybean oil. Not far away in Pine Bluff is the nation's largest cottonseed crushing plant, Planter's Cotton Oil Mill, which has a capacity of 11.5 MMgy of cottonseed oil. "It would be nice to bring canola into the region," Foltz says.

Currently, Patriot BioFuels is using soybean oil, cottonseed oil and first-use poultry oil as production feedstocks, making it a true multi-feedstock facility. Arkansas is the nation's second-largest chicken-producing state in the nation and home to Tyson Foods. Foltz says the poultry oil it gets from suppliers in the region is of a relatively high quality. That said, the company has no plans to use yellow grease or other second-use waste feedstocks that require intensive pretreatment.

Just a Different Kind of Diesel
Bell, a former Riceland Foods CEO, was among the dignitaries present for Patriot BioFuels' April 20 grand opening. The one-time career official at the USDA's Foreign Agricultural Service told the crowd, "I was a bit of a skeptic in terms of biofuels. My career was based on agricultural exports, and every time we looked at the arithmetic in earlier years, it didn't work out [for] biofuels. … But I tell people, when the price went to $60 a barrel for petroleum, it changed my mind."

Foltz echoed Bell's sentiment. At more than $70-per-barrel oil, he said, "By the end of the work week, we'll have transferred about $1.6 billion to the OPEC nations-and I don't think most of those nations have our best interests at heart. … We believe what we're doing here matters. We believe that our employees are doing something that's heroic. We're not just making diesel fuel out of soybeans; we're making a more secure nation. We're cleaning the air that our children breathe. We're reducing greenhouse gases … and we're playing a positive role in the economy of the state of Arkansas and of the mid-South region."

Foltz says Patriot BioFuels' slogan is, "We're fueling America's future today," and he likens his company to a small, clean renewable petroleum producer. "We're really not in the business of making alternative fuels," he says. "What we do here is make diesel fuel. It's just that we don't make diesel fuel out of petroleum. We're making it out of soybean oil and a number of other feedstocks." Foltz got a laugh from the crowd at the grand opening when he said Patriot BioFuels was just like Exxon-except for the feedstock difference and the fact that the oil giant "posted the largest corporate profit 'in the history of the world' last year. … But other than that, we're just like Exxon."

Foltz is no stranger to the inner workings of Washington, D.C. During the Clinton Administration, he was deputy staff director of the U.S. DOE's Federal Fleet Conversion Task Force. Later, he was director of the National Clean Cities Program, and he eventually became a lobbyist on behalf of clean fuel alternatives. He now says the idea for Patriot BioFuels came to him while he was promoting a blenders' tax credit during the 2005 session of the Arkansas General Assembly. Back then, Foltz says, the closest biodiesel production facility to central Arkansas was 350 miles away. "It didn't seem like anyone was doing a whole lot to start a production facility in this area," he says. "So Cal McCastlain (now Patriot BioFuels' general counsel) and I started working on a business plan for a new facility."

The next to collaborators come on board were Mike Shook and Steve Danforth, who had participated in a Winrock International feasibility study for locating a biodiesel plant in Arkansas. In all, Patriot BioFuels has a dozen co-investors, ranging from the president of a leading regional seed company to the director of governmental affairs for the world's leading methanol producer. All but one of the investors are Arkansas natives. It took slightly less than a year-"from putting pen to paper to producing the first gallon of biodiesel"-to bring the company together, Foltz says, adding that the Stuttgart plant sold its first load of biodiesel on April 27. "We have Mike and Steve to thank for that," Foltz says. "They are two guys who really know what they're doing, and without them we wouldn't be in production today."

U.S. Sen. Blanche Lincoln, D-Ark., a long-time advocate of biodiesel, said during the grand opening that the plant was "a dream come true" for her. "I talked until I was blue in the face to everybody I could find in Washington, D.C., and elsewhere, about how important it was to give farmers a secondary market," she said.

Bell says Arkansas, with Patriot BioFuels and another new biodiesel plant in Batesville formerly owned by Eastman Chemical Co., has entered "a new dimension in demand for agricultural products." At the grand opening, he said, "I don't want to give up on the trade issues. I don't want to give up on the farm programs. I just want to add this one to it."

Biodiesel producers in Arkansas will benefit from a "technical correction" passed during a special session of the state's General Assembly. The action extends the 50-cents-per-gallon credit to blends of B2 and higher-not just B2.

No Wastewater, Plenty of Glycerin
The Stuttgart plant has environmentally unique features, according to Shook, who is Patriot BioFuels' COO. An engineer by training, Shook was also a long-time Riceland Foods employee before leaving in 2000 with Danforth to start a consulting/engineering firm, Agri-Process Innovations. Shook says the plant's process technology comes from California-based Greenline Industries. "It's fairly unique in that it doesn't use a water wash," he explains. "It uses a two-pass transesterification process, where it actually injects methanol and the catalyst twice-and removes it-and then goes through a long settling process and ion exchange resin, to purify the biodiesel in lieu of a water wash."

Foltz and his partners believe this process is more environmentally friendly since it doesn't produce wastewater. It's also able to bypass the difficult step of removing the fuel from the wash. Although the process adds time to the initial start-up, it's a continuous batch system. Once running, Shook says, "Our production output is a gallon coming in, a gallon going out." From start-up, the first biodiesel is ready in four to five days.

Shook says they're constantly working to solve what has become an industry-wide challenge for biodiesel manufacturers: what to do with the leftover glycerin from the transesterification process. He says the compound has a high energy value and could be used to fuel cement kilns or asphalt plants-"anything where there's a large burner and a boiler." In addition, the University of Arkansas is researching into using glycerin as an animal feed. "It looks like the energy value is at least that of corn, maybe higher," Shook says.

At the time of the plant's April 20 ribbon-cutting, Patriot BioFuels had 80,000 gallons of biodiesel in storage and was waiting for the final marketing approval from the U.S. EPA. That approval came five days later, and the first load-out took place within a week of getting the go-ahead from the agency. Now, Foltz says the facility has produced and sold more than 600,000 gallons of biodiesel and is on track to hit the 1 million gallon mark by mid-September.

Some weeks, Patriot BioFuels can barely keep up with demand. At a meeting in May for potential diesel users in Conway, Ark., just outside of Little Rock, Foltz reported Patriot BioFuels had already "sold out" for the week. "We can make about 61,000 gallons of biodiesel a week, and actually we sold 78,000 [gallons] this week, so we had some in storage that we sold," he told the audience.

Getting in the Stream
Patriot BioFuels' customers are diesel distributors, and Foltz says it has not been difficult to sell them on biodiesel. "There are a lot of diesel distributors out there whose customers are asking them for biodiesel," he says. "They've been a great ally for us." Patriot BioFuels got a boost in June when HWRT Oil of Alton, Ill., became the first oil company with a central Arkansas terminal to open an ethanol and biodiesel blending station for haulers. Company official Matt Schrimpf says HWRT Oil was the first fuel distributor in the nation to offer ethanol-blended gasoline-it started doing so in 1978-and the company began marketing biodiesel blends in 2000. He says Arkansas' blender tax credit, and the Patriot BioFuels and Eastman Chemical Co. plants, encouraged the company to open its blending station near Little Rock Airport. In addition, Foltz says Arkansas Terminalling and Trading (ATT) was also just weeks away from opening up a biodiesel blending operation just down the street from HWRT's blending station.

Arkansas has formed a Bioenergy Policy Task Force, and Foltz says he'd like to see the group work toward a number of important legislative goals. While he would like to see the state's blender credit remain in place, he would also like to see a producer payment, infrastructure development incentives, and research and development funding fall into place in Arkansas. Four states adjacent to Arkansas-Missouri, Oklahoma, Texas and Mississippi-already have producer credits in place. Foltz says it would help level the playing field, and without it, it is possible those states could deliver their fuel into Arkansas. "It really depends on where the best market is," he says, adding that so far, Patriot BioFuels has been able to sell its own biodiesel both in and out of state. "We've sold our fuel in Missouri, Illinois, Tennessee and Mississippi. … So, instead of biodiesel migrating into Arkansas, a lot of our biodiesel is migrating out of Arkansas."

There is frequent talk about new biodiesel plants coming on line in the South, including two reported to be under construction just across the Mississippi River in Memphis, Tenn. "We're trying to get a foot in the door in all the markets that we can, so that when and if those plants come up, we'll still be competitive in their areas," Foltz says, adding that his company has received an "overwhelmingly positive" response. "We're asked to go and make speeches and talk to people all the time, all over the state and in the Memphis area," he says. "We've had a great reception. … We're real pleased with it. People understand that supporting biofuels is a very patriotic thing to do. They are starting to see that green is the new red, white and blue."

Gary DiGiuseppe is an Arkansas-based freelance writer. He has authored several articles for Biodiesel Magazine, including the February feature "Tennessee Steps It Up."
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