One Stop Shop

The partners in Renewable Energy Group share a vision of a 1 billion-gallon-per-year biodiesel market in the United States. REG is charging toward that goal by creating a network of successful and innovative biodiesel production facilities capable of helping the industry meet its work.
By Dave Nilles | April 01, 2005
It's no secret that the U.S. biodiesel industry holds the potential for exponential growth. The transition to ultra-low sulfur diesel all but secures a more robust near-term market. In fact, establishing just a B2 blend nationwide would create a demand for more than 1 billion gallons of biodiesel annually. It's a far-reaching goal for a youthful industry that produced less than 30 million gallons of fuel in 2004. But it's a mark Iowa-based Renewable Energy Group (REG) believes is not only attainable, but well within sight.

REG was formed in 2002 by merging the strengths of West Central Soy, engineering and construction firm Todd & Sargent Inc., and an alliance with process equipment builder Crown Iron Works. West Central combines its technology and marketing expertise with the construction background of Todd & Sargent to develop commercial-scale biodiesel production facilities. "If you come to us and say 'We want to build a plant,' we can provide everything from construction to marketing," said Myron Danzer, REG sales production manager.

Danzer joined West Central 20 years ago and helped forge REG. West Central's early success with biodiesel was a major factor in the creation of REG. West Central Soy, the manufacturing division of West Central Co-op, opened its first batch process biodiesel plant in 1996.

The plant quickly began to produce more than 1 mmgy of biodiesel.

However, the co-op felt that it could produce biodiesel more efficiently, and in larger quantities. West Central continued to redesign the biodiesel process in its batch plant while studying other production techniques. Eventually the company settled on its own design and in 2002 unveiled its pioneering 12 mmgy plant in Ralston, Iowa.

While REG's technology-an energy efficient continuous flow process that recovers excess methanol and produces no process wastewater stream-is successful in its own right, it's what the company is doing with that technology that could push the biodiesel industry to the next level of large-scale production.

"Looking at the growth of biodiesel and the industry, there was a need in the marketplace for a reliable commercial-scale production system and technology," said Gary Haer, West Central soy products sales manager and National Biodiesel Board (NBB) executive committee member. "That vision drove [REG] into formation."

Forming a partnership
West Central's partnership with Todd & Sargent was a natural progression. The companies were involved with mutual projects long before REG. The Todd & Sargent team constructed West Central's Ralston plant. Todd & Sargent also completed a large soy processing facility for Harvest States in Fairmont, Minn. The company is currently constructing the grain handling, and distillers dried grains storage and handling facilities for the 100 mmgy VeraSun Energy ethanol project in Fort Dodge, Iowa. These abilities made the company a natural fit with West Central in REG.

"What we needed was a good solid construction company," REG President Nile Ramsbottom said. "I knew from my background that they were exactly that firm." Ramsbottom joined West Central in 2000 after serving as an officer of Purina Mills for 18 years.

Todd & Sargent has more than 60 years of engineering and construction experience, according to Todd & Sargent estimate coordinator Allan Tedrow. He is currently leading part of the team that is building REG's newest biodiesel facility in Albert Lea, Minn.

Providing the total package
Simply put, REG builds biodiesel plants and provides start-up services. However, the full scope of possibilities available to investor groups is much more.

REG builds the turnkey plant, trains the operating staff and provides start-up assistance. The plant can be start-up ready nine months after all construction and environmental permits have been approved. The process begins with site assessments and developing basic infrastructure including roads, the tank farm and layout of the site. Space requirements include one acre for process equipment and a control room, and 20 acres for tanks, process, rail, a support building and roadways.

REG then provides a unique training program. Plant operators undergo classroom and hands-on training at West Central's Ralston plant. Once the new plant is near completion, REG provides a core group of operators to aid in start-up and help make sure the plant runs smoothly before turning complete control over to the new operators. REG also provides operating and safety manuals for the plant.
From there, West Central can provide input procurement for feedstocks and marketing for the biodiesel and glycerin. The company can also provide plant management including a general manager and operations manager. "We can also provide all administration and human resource needs," Danzer said.

The biodiesel world is as ever changing as it is growing. Therefore, there will always be advancements in the production process, some of which are being initiated by REG's own research and development team. The benefit of that research for REG-aligned plants is they will have access to that new technology.

REG also provides lab set up and equipment, making sure the plant does all of the testing for the biodiesel and the training that goes with it. It's an important step in ensuring the biodiesel produced is of the highest quality.

Quality plants producing quality biodiesel
In today's fuel market, quality and availability are the foremost concerns for biodiesel consumers, according to Ramsbottom. "It's all about making standards for biodiesel that are upheld and made even more stringent for the future than today," he said.

That is why West Central's Ralston plant is currently undergoing BQ-9000 accreditation. Danzer, a member of the National Biodiesel Accreditation Commission, believes the plant will soon become the second producer to become accredited.

For REG projects, those standards come as part of the REG package. "All of the REG plants are going to be BQ-9000 certified plants," Haer said. "They will meet that level of quality measurement in production, storage and handling so [the fuel] gets to the distributor without compromising quality."

Haer provides an additional step in ensuring biodiesel remains on spec once it leaves an REG facility and reaches the distributor. He often sits down with a distributor to discuss biodiesel-handling issues. There is an education process on how to store and handle biodiesel during blending, Haer said.

SoyMor plant ready to trip mandate
REG's first plant, the 30 mmgy soy-based SoyMor facility near Albert Lea, Minn., is on pace to begin production this summer, in time to supply the 8 mmgy of in-state production capacity needed to trigger the Minnesota B2 mandate. The mandate calls for 2 percent biodiesel in nearly all diesel fuel sold within Minnesota.

In effect, the SoyMor facility represents a full circle of ideas for REG. "Back in 1998, Roger Peterson was the SoyMor president and a member of the National Biodiesel Board," Danzer said. "He came and talked with West Central and encouraged us to keep pursuing biodiesel. West Central followed Roger's recommendation. We started to convert the process to meet ASTM standards. Little did I know that he would come back in four or five years to ask us to build a plant."

As vice chair of the NBB, Peterson purchased biodiesel from West Central because they provided a consistent and quality product. He now refers to REG as a "one stop shop" for biodiesel construction because they are the most "experienced with a full-sized biodiesel plant."
REG is acting as general contractor for SoyMor. Tedrow said the process is based upon West Central and Crown Iron Works' transesterification biodiesel technology. Interstates Electric is providing electrical and control system work, and Peoria, Ill.-based M&W Contractors is doing process piping. Miller Mechanical of Des Moines, Iowa, is the provider of instrumentation for the plant.

Danzer said REG is proud of its role in triggering the Minnesota B2 mandate. He points out that at the time SoyMor was considering building the plant, the 2 percent mandate was in effect, but there was no blender's tax credit, which was eventually included as part of the JOBS bill last fall.

"[SoyMor] took a leap of faith like West Central did when we built a 12 million-gallon plant in 2001," Danzer said.

At a 2 percent blend, Minnesota creates a 16 mmgy market for biodiesel, according to Haer. Danzer feels the distribution infrastructure is in place. Magellan Mainstream Partners has tank distribution capabilities set up in Alexandria, Minn., and has plans to expand to other cities in the region. It's the first proving ground for proper blending of biodiesel at a terminal, Danzer said.

Looking to the future
In addition to SoyMor, REG has five biodiesel projects in varying stages of development, according to Ramsbottom. Western Iowa Energy LLC in Wall Lake, Iowa, is moving quickly. The group has completed a successful equity drive for the 30 mmgy plant capable of using vegetable oil and animal fats as feedstock. Danzer said that project could start construction this spring and be near completion later this year.

Ramsbottom expects REG to build 20 plants in the next five years. He believes the industry itself is preparing for a major expansion. The low sulfur diesel fuel standards taking effect in 2007 will create a large market for biodiesel as a lubricity additive, Ramsbottom said. He said depending on feedstock availability and demand, there could be a 1 billion gallon market for biodiesel in the United States. A B2 market in the United States' 55 billion-gallon-per-year diesel fuel market would create a demand of approximately 1.1 billion gallons of biodiesel annually.

Such production will naturally require an expanded distribution network. That is something REG will provide its future partners as part of its complete biodiesel package. "That distribution network is growing," Haer said. "In the future, it is going to evolve. We're actively putting together future distribution for biodiesel. That will provide nice market access to producers currently and into the future."

Ramsbottom said the U.S. distribution network is still in its infancy. The goal for West Central this year is to market 40 million gallons of biodiesel nationwide.

The biodiesel industry could easily provide the United States with a B2 market, Peterson said. "We need at least 10 to 12 plants in the next two years," he said. "REG is in the best position to provide that kind of growth." n

Dave Nilles is a Biodiesel Magazine staff writer. Reach him by e-mail at [email protected] or by phone at (701)-746-8385.
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