Re-New-able York City

New York City, a cultural hub, is on the verge of a citywide bioheat mandate. Biodiesel Magazine talks with those working toward that end.
By Ron Kotrba | January 01, 2009
New York City is a place where dreams are made-unless those dreams involve manufacturing jobs, which lifelong New Yorker Gene Pullo, Metro Fuel Oil Corp.'s principle owner, says have all but left the area. In his own way, he's trying to help change that. Pullo's family-owned business, started by his grandmother in 1942, plans to build a 110-MMgy biodiesel refinery at Metro's terminal on Newtown Creek in Brooklyn, at the mouth of the East River. "We're getting great acceptance from the politicians and the local community because we're creating green-collar jobs," Pullo says. Once it's running, the mega-sized biodiesel plant will employ 30 full-time workers, and during construction will provide another 50 jobs. "We're helping the local economy," Pullo says. "This plant is inside the city of New York-in Brooklyn-and manufacturing jobs here are gone. They don't exist in this area any more."

Pullo anticipates the startup of the Metro Biofuels plant to "dovetail" with the passage of a citywide Bioheat mandate driven by New York City Councilman Jim Gennaro, who ran for a state senate seat in November in a close race that is under a recount. The legislation was previously proposed in council but it ran into several obstacles during the past year. "The legislation put forward by Gennaro is good legislation, but we commented on it and we do have some things that need to be addressed in it, in particular making sure the product is available on a regular basis," says John Maniscalco, executive vice president of the New York Oil Heating Association. He says approximately 480 million gallons of heating oil is consumed in New York City annually, so a B5 heating oil mandate would require 24 million gallons of B100 per year. The plan, however, is to begin the mandate at B5 and eventually ramp it up to B20, in which case 96 million gallons of B100 per year would be required to satisfy the mandate.

"We also need price sensitivity," Maniscalco says. "Everybody wants to be green until they find out it costs them a lot more green to be green, and then all of a sudden they change their shade, so to speak." The infrastructure also needs to be in place to blend that much biodiesel. "You can't just say, 'We're going to Bioheat within six months,'" Maniscalco cautions. "You've got to give my terminals enough time to make infrastructure changes, whether it's additional tankage or putting in an injection system."

For New Yorkers, it's less a question of if a Bioheat city mandate will be enacted and more a question of when. "Whenever it does come, we assume there will be two phases," Maniscalco says. "The first phase will be city-owned buildings, and the second phase would be all buildings citywide."

Long Time Coming
Michael Cooper, vice president of Ultra Green Energy Services LLC, says he learned how to sell biodiesel by not being able to sell biodiesel. "I made my first sales call for biodiesel into the New York metro region on Oct. 31, 2000," Cooper tells Biodiesel Magazine. "I made for first long-term contract for biodiesel in the metro region on Nov. 1, 2007-seven years and a day later." He says his company was the first to blend biodiesel in heating oil and sell it as Bioheat in 2001 in Maine. "Back then there was no excise credit and biodiesel was selling for $3 a gallon and heating oil was 75 cents a gallon," he says. "It was a massive uphill battle."

He tells a story about a client picking him up from New York's LaGuardia airport, asking Cooper straight away, "Which side is the penny on?" Meaning if they had to pay more for biodiesel than for heating oil, they wouldn't buy any of it; and if biodiesel was less than heating oil, they'd buy it all. "So I had to ask myself, "How do I supply Bioheat-biodiesel-into a mature market?'" Cooper says. "How do we solve the problem of getting the penny on the right side?"

After years of trying to solve this, Cooper says he's created a financial tool-a pricing mechanism-to finally get the penny on the right side for Bioheat. "We hedge our biodiesel, which allows us to purchase and resell our products on an index price," he says. "We can hold a product in a tank and it fluctuates with the price of the petroleum product we're pinning it against, whether that's heating oil, ULSD (ultra-low sulfur diesel), whatever."

The biodiesel UGES blends and distributes is made from recycled greases or animal fats. In early November, Cooper released his company's new branded Ultra Green Biodiesel. "Recently both of my markets-New York and United Kingdom-have incentivized biofuels that are sustainable socially, economically and environmentally," Cooper says, adding that his product, once considered disadvantaged compared with soy biodiesel, is slowly becoming the premium product. Now, after eight years of moving zero gallons of Bioheat into the New York City area, moving millions of gallons is "gorgeous," Cooper says.

A statewide penny per percentage point bioheat tax credit, up to 20 cents a gallon for B20, helps keep Bioheat competitively priced. Pullo says Metro price-points Bioheat at the net-back same price as its heating oil. "We've been successful at keeping our B20 at 20 cents above heating oil, so the net effect to the consumer is the same price as heating oil," he says. As a BQ9000 certified marketer, Metro moves more than 5 million gallons a year of biofuel, according to Pullo. He explains the importance of being BQ9000 certified. "If you're trying to introduce a new fuel in one of the toughest markets in the country where you're dealing with very savvy customers on the motor fuels side and heating oil side, you need to be assuring them in every possible way-not because I give you my word on it, but because I can prove that this product is the highest quality product out there," he says. As a future producer, Pullo says he intends to barge in virgin domestic feedstock for its 100 MMgy plant once it's operational. Metro has already engaged in talks with major crushers who have the ability to use barges.

Clearing the Air
In Los Angeles vehicle emissions are a major component of air pollution, but Cooper says it's a different situation on the East Coast. "Most of our pollution is from buildings, not from cars," he says. "Thirty-five percent of the pollution in this region is from cars, and the remainder is from No. 2 oil, No. 4 oil, and No. 6 oil. Now is the time to push this mandate forward."

Daniel Falcone, owner of Total Fuel Services Corp. and wholesale manager with UGES, says he is working closely with Gennaro on repackaging the citywide Bioheat mandate. Gennaro, who is also the chair of New York City's Committee on Environmental Protection, was unavailable for comment so Falcone filled Biodiesel Magazine in about the history of the mandate and ongoing work. "The only issue with the Bioheat bill was Gennaro also included No. 4 oil and No. 6 oil blends," Falcone says. Some buildings in the city burn the heavier No. 4 and No. 6 oils, which are significantly cheaper than No. 2 oil. Thus, a bill mandating Bioheat for those fuels would have negative price impacts. "Part of the bill sought to regulate sulfur content in heating oil, making it all ULSD," Falcone says. "There was protest because there is no availability of ultra-low sulfur heating oil on the market today-it is not practical." Falcone says he met with city council members two months ago on these issues and the appropriate language for the mandate is being crafted now. "We're right on the brink of passing this bill by January," he says.

While Falcone says ultra-low sulfur heating oil should be stricken from the mandate, Maniscalco says otherwise. "We need to carve out the mandate for ultra-low sulfur heating oil at this time too," he says. "For us, the ultimate jewel fuel of the future is a B20 blend with ultra-low sulfur heating oil."

As the city council and influential assisters work on crafting just the right language for the Bioheat mandate, Pullo says Metro won a 10 MMgy Bioheat bid with the city under a mayoral commitment to shift 30 percent of all city-owned buildings over to B5 heating oil. "That is being implemented in several agencies in the city," Pullo says.

Despite testimony from UGES and Metro executives about their ability to secure contracts for millions of gallons of Bioheat without a mandate on the books, Maniscalco isn't convinced that there is a market. "I can tell you this-there is no demand for Bioheat in the city of New York at this time," he says. "There is one company providing it to their entire customer base but that pales in comparison with the entire population. The reason is because they don't have to do it, it is going to be somewhat of an expense and, most importantly, my terminals aren't set up for it. I mean, can I buy biodiesel today? Yes, but when you're dealing with the city of New York and five boroughs moving to Bioheat, you can't run to just one terminal. And that's the infrastructure issue."

Cooper says UGES is the exclusive biodiesel supplier at the New Hyde Park terminal on New York's Long Island, which is owned and operated by Raymond Hart of Hart Petroleum. A rail spur leads from New Hyde Park to the Long Island Railroad, on which railcars full of biodiesel can be delivered directly to the terminal and blended on-site. The advantage of railing to and from Long Island is avoiding expensive, multiple bridge fees entering and leaving Long Island. "If you've got multiple axles and two bridges to cross, it could be a $75 charge one way to deliver by truck," he says. Also, Hart received a grant from New York State Energy Research and Development Authority to pay for upgrades to allow blending at the rack. So UGES has a 41,000-gallon tank plus the ability to store three 25,000-gallon railcars. "We are the only blending storage rack inside Long Island," he says. "The only other one is Metro, but they're in Brooklyn."

In the end though, Maniscalco says once the time comes and the legislative language is acceptable, the New York home heating oil industry will strongly embrace Bioheat.

Currently, heating oil prices are down approximately 50 percent compared with last winter. Unfortunately, the economic downturn has dampened the impact of lower heating costs.

Last year people couldn't afford $4-per-gallon fuel oil and this year, with the economy in shambles, people may not be able to afford $2-a-gallon heating oil, Maniscalco says. But the low heating oil prices do not make biodiesel less attractive. "The attractiveness of Bioheat is it's a renewable fuel," he says. "It brings us into the 21st century. And you can say that home heating oil is going to start eating its vegetables."

Ron Kotrba is a Biodiesel Magazine senior writer. Reach him at [email protected] or (701) 738-4942.
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