Canadian Plant, Global Plans

Armed with a cost-competitive process and an ambitious business plan, Ontario-based BIOX Corp. is poised to become a key innovator in the North American biodiesel industry.
By W.R. Stephens | December 01, 2004
Sitting in the boardroom of BIOX Corporation's head office in Oakville, Ontario, CEO Tim Haig sums up his winning formula: "I believe firmly there are three things you need to run a business. You need an idea, you need money, and you need management people who are just too [stubborn] to hear 'No.'"

Scott Lewis, business development manager, laughs and suggests "determined" might be the right word to describe BIOX's management style. It certainly took a lot of determination to bring Canada's largest-and Ontario's first commercial-scale biodiesel project into being.

The BIOX plant is now taking shape on an industrial site located in Hamilton, a city of 490,000, widely known as the heart of Ontario's steel industry. The facility will go on line in June and reach its 60-million-liter-per-year (16 mmgy) capacity by September. AMEC, an international engineering and project management services company, has been awarded a CAN$1.9 million contract to design the CAN$24 million facility.

For BIOX, the new plant not only marks the beginning of commercial operations but the first step in an ambitious plan to build similar plants across North America and Europe. "We see ourselves as biodiesel providers," Lewis affirms. "We want to be a technology that goes around the world and works in partnership with large oil and gas companies. We think that's the way this industry will proceed from being a niche industry to mainstream."

The science behind the plan
At the heart of this company's plan lies a proprietary process technology invented by David Boocock, former chair of the Department of Chemical Engineering and Applied Chemistry at the University of Toronto. Inert cosolvents convert both triglycerides and free fatty acids into standard-grade ASTM D6751/EN 14214 biodiesel fuel. The two-stage, single-phase process can accept feedstocks with up to 30 percent free fatty acid content without pretreatment and convert them to biodiesel on a 1:1 basis.

Where other conversion methods take hours, Boocock says, the BIOX process takes place in mere minutes. It also takes place under ordinary atmospheric pressure and at room temperature, eliminating the need for high-pressure vessels or special heating equipment. The ability to use a variety of feedstocks-agricultural seed oils, vegetable oils, animal fats, greases and used cooking oils-allows BIOX to shop the commodities market for bargains. This means both capital costs and operational costs for a BIOX plant should be comparatively low. In fact, BIOX expects to produce biodiesel at a price comparable to the price of petroleum diesel. In fact, the company sees major oil companies as its primary customers and plans to build additional plants near existing refineries once the technology is proven on a commercial scale.

Boocock says he came up with the original idea while working as a consultant for the Waste Water Technology Centre in Burlington, Ontario, which had a German process for converting waste sewage sludges to liquid fuel.

"They produced good oil which came from the lipids-the fat fraction-and bad oil, which came from the protein," Boocock recalls.
He returned to his lab with an interest in lipids as a source of liquid fuel.

"I started reading key papers on biodiesel, Boocock says. "One of them was on the kinetics of making biodiesel, and there was something odd about the speed of the reaction that takes place.

"I had a new grad student at that time and I said to the student, 'Go away and make me this prescribed mixture with this alcohol and vegetable oil.' The student was back in half an hour and said, 'They don't mix.' And I said, 'Well, that's the explanation for all the weird results in the literature. And so that set us off on this route for looking for the cosolvent, which would make the two mix."

A trip to a conference in Chicago put another piece of the puzzle in place. "Somebody said, 'We need to change not just vegetable oils, but waste fats and oils to biodiesel'," Boocock says. "And I realized you needed a two-step process to convert the fatty acids that were in these wastes."

A key step in the journey from lab bench to a commercial process came when the University of Toronto Innovations Foundation (UTIF) got involved. "They go out and look for investors and handle the patenting and do all the things that we scientists don't want to do," Boocock explains.

Cyril Gibbons of UTIF tells how the program works. "UTIF takes on a legal contract with inventors to act as their agent," Gibbons says. "We undertake all the risks. We pay for the patenting up front. We pay for the business plan, the marketing and all those other things. We take our compensation as a share of the revenue that is generated. If no revenue is generated, then we don't get paid."
When BIOX was formed in September 2000, UTIF became one of its partners. UTIF helped the new company find the original "angel investors" and the funding to build a 1 millionliter prototype plant.

That facility had two purposes. First, to see if Boocock's lab bench experiment could be scaled up to a commercial level and, second, to test every conceivable type of feedstock. That has since been dismantled. "We stopped running it at the end of 2003 only because we'd accomplished everything we needed to," Lewis says.
The new plant now taking shape on Pier 12 on land leased from the Hamilton Port Authority is a 60-times scale-up of that 2001 prototype.

Proving its worth
One of the goals of the prototype plant was to demonstrate the commercial potential of the process to investors, but money was needed to build the prototype itself. Some of it came from the Canadian government's Industrial Research Assistance Program (IRAP), a National Research Council program dedicated to developing new technologies.

Public money is also helping to build the new BIOX plant. Sustainable Development Technology Canada (SDTC), an arm's length not-for-profit foundation created by the federal government of Canada, is contributing CAN$5 million to the project. Operating in the specialized niche between research and commercialization, SDTC can contribute up to a third of the cost of a project. SDTC funds commercially viable projects that promise to reduce greenhouse gas emissions.

To qualify for the SDTC program, a company must not only prove that its new technology works, but that it has sound marketing plans in place for introducing the technology into the marketplace. It is an extensive due diligence process.

Lewis feels his company's project was a good fit for the SDTC mandate. "Biodiesel goes into existing infrastructure and it's going to touch, effectively, everybody's life," he says. "If you buy a liter of milk at the store, it was delivered on a diesel truck. Nobody gets away from diesel engines."

SDTC contributed 28 percent of the total cost of the BIOX project, leaving 72 percent of the project cost unanswered for.
But with the SDTC support in hand, BIOX was able to offer private investors reduced risk exposure. It still proved a substantial hurdle for a young start-up company. "The venture capital market can be very difficult and a bit off-putting when it becomes less about business [and more] about the ownership of the business. . . ." Lewis explains.

According to Lewis, Venture capitalists often seek control of a company because of the money they've put into it, but they aren't necessarily able to provide management skills. "Somebody, has got to show up everyday," he points out.

Haig adds, "We're very fortunate in having found some investors that get that. They're more angel financiers than venture capitalists, by a considerable margin. We have some very committed shareholders now, but it took us a long time to get there."

A talented and tenacious team
In addition to overseeing everyday operations, management has to be able to raise capital. BIOX has raised more than CAN$35 million dollars, a feat largely credited to Tim Haig. A graduate of the Royal Military College (RMC) and an ex-army officer, Haig was a latecomer to the business community.

"I came out of the military," he recalls. "I didn't know what equity was. I was 27 years old. I needed to catch up to my peers."
An MBA program offered him what he calls "a bit of a kick start."

"I'd been involved in renewable energy projects, including work on wind farms, both in the UK and in Canada," He explains. "I was working at the time over here for an environmental technologies company. And I bumped into this technology at the University of Toronto, frankly, at the same time as I bumped into the first set of shareholders."

But Haig makes no secret of what he considers to be the key to his company's success. "I don't want to belittle a very expensive MBA, but I don't think you can learn tenacity," he says. "I think that's something you've got-and I think the group around here shows that we've got it."
He continues, "I just cannot imagine how many technologies have not come to fruition because people heard 'no' 20, 30 times and listened to it. We come out of a meeting and we've heard 'No,' we go: 'That's a BIOX no. They really mean, yes, they just haven't gotten there yet.' That's what this has all been about-great engineering and not hearing no."

Looking after the technical end of the business is Chief Operating Officer Kevin Norton, whom Boocock admiringly calls, "a wizard." Norton, an RMC graduate like Haig, served in the Canadian Navy for 13 years. He became involved with wastewater treatment for the nation's Department of Defence and later for a private company where he met Haig.

To illustrate the BIOX process, Norton spreads a site plan out on the table, placing sample bottles at various points on the diagram. Two larger ones contain the primary feedstocks, one soybean oil, the other waste fat. Bottles placed on the opposite end of what will be the 10,000 square foot production unit represent the finished products.

A large bottle filled with dark brown liquid holds biodiesel. He quickly places two smaller bottles filled with clear liquid beside it. One contains technical-grade glycerin, a coproduct of the process. The second holds a sample of the water-white biodiesel currently emerging from a BIOX test facility in Boston. An additional step has been added to the process to clarify the fuel, but one Norton feels could be the key to the widespread acceptance of BIOX biodiesel. "The product you have at the end is so much more marketable," he explains.

Armed with its cost-competitive process and an ambitious business plan, BIOX is poised to bring great changes to the North American biofuels industry and to Europe's, perhaps, as well. Many of the company's commercial plans depend now on the willingness of the governments involved to support the biodiesel industry with environmental regulation and tax breaks. But even a negative answer isn't likely to stop BIOX.

W.R. Stephens is a freelance writer who lives in London, Ontario, Canada. He can be reached by e-mail at [email protected].
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