The Port of Pandora

As the U.S. biodiesel industry works hard to meet the growing demand for its domestic product, EarthFirst Americas has begun importing palm oil-based biodiesel through the Port of Tampa, Fla. By 2007, the company plans to boost its imports to 100 MMgy-a number representing an astonishing one-half the U.S. biodiesel industry's projected output for that same year.
By Ron Kotrba | January 01, 2006
It's quite imaginable that many Americans would be at odds with even the idea of importing large quantities-or any amount, for that matter-of biodiesel, a fuel that's often touted as a viable, growing part of an emerging U.S. domestic energy strategy.

However, private and public demands for biodiesel are sky high right now and, like it or not, some believe that U.S. producers, while vigorously laboring to build more plants and increase productivity for this industry on the verge of an upsurge, simply cannot supply enough biodiesel to meet the current U.S. markets' seemingly insatiable demands.
Enter EarthFirst Technologies Inc. and its wholly owned subsidiary, EarthFirst Americas Inc.-companies adding new dynamics to the biodiesel production and supply mix.

Exporting technology
EarthFirst Technologies is a technology development company based in Tampa, Fla. "We're specifically focused on developing those technologies formed around environmentally friendly fuels," said Elio Muller, spokesman for EarthFirst Technologies. The company's new biodiesel process technology is based on catalytically activated vacuum distillation (CAVD). "The process is similar to pyrolysis under a vacuum," Muller told Biodiesel Magazine. "We don't call our process 'pyrolysis' anymore though. It's been greatly refined."

EarthFirst now operates a plant in Mobile, Ala., using CAVD technology to turn spent tires into an industrial No. 6 fuel oil, often referred to as bunker oil, Muller said. The fuel is often used in power generators and steam boilers.

"So we asked ourselves what would happen if we used a raw high-oil feedstock in CAVD," Muller said. "Soon afterward, one of our Ph.D.s took our question seriously, and we began running lab tests in Mobile and other locations using this technology with whole soybeans and corn. The tests results were positive for making biofuels, so we started talking to the palm producers in Ecuador [that] we've been working with for the last four years."

EarthFirst's dual-pronged production begins
In a joint venture with La Fabril, a large Ecuadorian palm oil distribution company, EarthFirst began retrofitting an idle margarine plant near the palm oil extraction center in Manta, Ecuador, in May. "We improved the tank farm, reactors and storage areas," Muller told Biodiesel Magazine. While the company has been honing its CAVD technology for biodiesel production, it has also simultaneously started down a better-known process path-the transesterification of palm oil in the old Manta margarine plant.

By June 2005, EarthFirst's Manta plant began transesterifying enough palm oil to produce 1 million gallons of biodiesel per month. By April 2006, EarthFirst expects to be producing up to 3 million gallons per month. By November 2006, it plans to increase production even further, surpassing 3 million gallons per month.

As far as EarthFirst's CAVD technology is concerned, at press time in mid-December, the company was packaging and shipping its first pilot-scale system to Ecuador. "The first CAVD plant is being packaged as we speak, arriving in Ecuador by the end of the month," Muller said.

EarthFirst hopes to be fully underway with CAVD trials using whole palm fruit feedstock by the end of January. "Although the CAVD plant is scaled to size for industrial production, it's not going to be a 'full-scale plant,'" Muller explained. The CAVD plant to be located in sight of the oil extraction center in Manta will use several tons of palm fruit that will bypass oil extraction altogether.

Tests using CAVD with soybeans and corn in its Mobile plant showed EarthFirst that the process produces a usable fuel after the first step-a fuel similar to low-grade diesel that can be used for power generation, but not yet ASTM D6751 biodiesel. "It's mother's milk to a turbine," Muller said. Taking the 'turbine's milk' to ASTM biodiesel requires further refining-EarthFirst says it knows how to get there using soybeans or corn, but Muller wouldn't say what steps it would take to further refine its palm oil-based, CAVD-derived fuel to ASTM biodiesel specs.

EarthFirst is capitalizing on two separate tracks of biodiesel production: One, harnessing current transesterification technology, and the other refining a technology to reduce production costs. Muller said once CAVD technology reduces its biodiesel production costs by one-third, the company would no longer depend on the U.S. excise tax credit currently being claimed by EarthFirst.

"This is so exciting," Muller told Biodiesel Magazine. "We're exporting manufacturing equipment developed here in the U.S. We're developing technologies, and we're also developing markets."

The controversy
The markets Muller alluded to have caused quite a controversy stateside, considering they are going to be supplied by imported biodiesel.

The uproar appears to be multifaceted. On one hand, folks are upset over the possibility of imported biodiesel flooding the U.S. marketplace and displacing domestically sourced biodiesel. At the same time, importing biodiesel strips away the whole notion of building a domestic network of transportation fuels to help alleviate U.S. dependence on foreign oil, whether fossil- or vegetable-based. Furthermore, EarthFirst receives the $1 per-gallon U.S. biodiesel excise tax credit on all its imports currently being blended by EarthFirst across Florida and the Southeast. According to the language in the tax credit-a part of the U.S. energy bill passed by Congress and signed by President George W. Bush last summer-EarthFirst is legally entitled to receive the incentive, but at least one national trade association voiced its discontent in what ostensibly turned out to be a press release positional debate.

American Soybean Association (ASA) First Vice President Rick Ostlie, who will become ASA president in July, spoke to Biodiesel Magazine and explained his organization's position.

"When we supported the tax incentive, our intention was to reduce reliance on foreign energy. Not to allow U.S. subsidies for imported energy," Ostlie said.
The ASA has publicly stated its positions-namely regarding domestic, trade and tax credit issues-related to EarthFirst's actions discussed above. However, the ASA is concerned about one more thing, and that's the quality issue. According to Ostlie, the cloud point for palm oil-based biodiesel is 55 degrees Fahrenheit. If shipments of palm biodiesel untreated for cold temperatures are distributed in northern reaches where 55 degrees is considered a nice, warm day, performance issues could occur. Those issues could lead to bad biodiesel press and, perhaps, ultimately inhibit the renewable fuel's growing acceptance. "Obviously, this is a real problem-a real concern," Ostlie told Biodiesel Magazine.

The idea of a U.S. biodiesel shortage-the void from which EarthFirst said it's filling-is absurd to Ostlie. "There's no shortage," he said. "Part of the idea of the incentive was to build more plants [and] increase more soy [biodiesel] production. We want to get this industry established. We don't see a shortage."

The National Biodiesel Board (NBB) has been relatively quiet on the issue of EarthFirst importing biodiesel. NBB CEO Joe Jobe offered Biodiesel Magazine no comment on the issue, instead referring to the NBB's official statement on the matter:

"It is the position of the National Biodiesel Board that the list of 11 feedstocks available for the agri-biodiesel incentive was definitive. Imported palm oil should be eligible for the biodiesel incentive, but not for the higher agri-biodiesel incentive. The IRS (Internal Revenue Service) determined that palm oil does qualify for the agri-biodiesel incentive for purposes of the interim rule. However, the final rule [has] not been issued."

The statement recognizes that the NBB believes imported palm oil should be eligible for the 50-cents-per-gallon tax credit. Incidentally, EarthFirst is a full-voting member of the NBB.

As far as trade goes, the U.S. exports half of its soybeans every year, according to Ostlie. "The ASA is in favor of free trade," Ostlie said. "We have a few different options with how we would like to see this fixed, and we want the solution to be WTO- (World Trade Organization) compliant. We're meeting with Washington officials to look at certain issues."

In its Nov. 14 press release, ASA president Bob Metz stated, "ASA also calls on Congress to support enactment of a tariff on imported biodiesel equal to the $1 per-gallon tax incentive for agri-biodiesel."

The Port of Pandora
So which side is prowling around Pandora's box with a key? The ASA has a valid series of arguments, questioning what it believes could be the beginning of a very slippery slope. "If we wait a year to fix this, that's too long," Ostlie said. "This needs to be addressed now."

EarthFirst sees it differently. "To take those types of protectionist stances flies in the face of U.S. foreign policy for the last several years," Muller told Biodiesel Magazine. "Our government has been telling the world to free their markets, lift their sanctions. [To ban our imports], you'd have to change the entire commercial policy of the U.S. to succeed, and that would be like opening Pandora's box."

EarthFirst's biodiesel importing has just begun. The first shipment arrived in November. The load was an introductory shipment of 267,000 gallons of palm oil-based biodiesel. By early January, the company will have received its second load of 1 million gallons. The company plans to receive and blend 100 MMgy by 2007. "Tampa's a good place to incubate our strategy and marketing program," Muller said. "We hope to see the program expand from Tampa logically to Jacksonville (Fla.), then to Mobile (Ala.), New Orleans, Houston, San Diego and Los Angeles terminals. We'll keep our marketing to the south, because of the cloud factor."

Imported biodiesel isn't just coming from EarthFirst and Ecuador though. Rothsay Biodiesel, a Canadian plant being commissioned near Montreal in Ville Sainte Catherine, Quebec, is currently operating at 25 percent capacity. Rothsay officials plan on exporting half the plant's full capacity of approximately 9 MMgy to U.S. markets, said Ron Wardrop, director of marketing and business development with Rothsay Biodiesel. That's 4.5 MMgy of imported biodiesel-agri-biodiesel made from virgin animal fats, for which the blender will be eligible for the full tax credit from the U.S. government-from one plant north of the border. "We have U.S. material coming into Canada now, [and] as much as we don't like it, we understand that import and export is a part of our business, and we have to compete in a worldwide market to be successful," Wardrop told Biodiesel Magazine.

From a U.S. biodiesel producer's point of view, Richard Vandevusse of Gladstone, Mich.-based Ag Solutions Inc.-another U.S. plant just starting production-offered his thoughts. "I'm mixed over it," he said. "As long as demand exceeds supply, we'll be importing oil or importing biodiesel. Not to mention, the petroleum industry receives government subsidies too." Of more interest to Vandevusse is the high cloud point, which he said could have significant ramifications on quality control and public perception of biodiesel. "Even if they market [palm biodiesel] in the South, a truck driver can fill up down there and not have to fill up again until Ohio, where the temperature could be much colder," he said.

"But what can be done to prevent this whole scenario?" Vandevusse asked.

The consensus seems to be that the U.S. government and its lobbyists have challenges to work through in addressing this looming trade issue, while at the same time reconciling their efforts not with WTO regulations alone, but also with the U.S. biodiesel industry, public acceptance and established precedence in U.S. foreign trade. n

Ron Kotrba is a Biodiesel Magazine staff writer. Reach him at [email protected] or (701) 746-8385.
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