A Model of Success

When SoyMor Biodiesel came on line with its 30 MMgy biodiesel facility in Glenville, Minn., last year, it debuted as one of the biodiesel industry's first turnkey-plant designs of its size. The project was not without its challenges, but at the end of the day, REG delivered what it promised: a state-of-the-art biodiesel facility. What the builder learned from the experience was invaluable.
By Ron Kotrba and Tom Bryan | June 01, 2006
Nowadays, it's sometimes easy to overlook the intelligence, skill and labor that must coalesce to finance, design and build the countless engineering marvels that surround us. Observers of the U.S. biodiesel industry read reports of groups or companies with intentions to build massive new production facilities almost weekly (see Projects list on page 34), but it's much more rare to read about those projects coming to fruition. That's a stark reminder that biodiesel plants aren't actually biodiesel plants until they come on line. The planning, organization and teamwork, as well as the financial commitment, technological ability and production experience, that merge to make it all happen is simply remarkable.
"The SoyMor Biodiesel plant did not simply appear," says Mark Vermeer, REG project engineer. "It evolved over a period of years through the combined resources and cumulative passion of countless people." Having said that, the industry powerhouses responsible for completing the SoyMor plant-West Central, REG, Crown Iron Works, the Interstates Companies, Todd & Sargent, plus all of the SoyMor investors-don't shy away from pointing out the rough spots this forerunner of a project had to endure. In fact, they welcome it.
With success or failure on the line in Glenville, reputations were at stake. Leaders at the helm managed to work through-or around-the barriers, however, effectively reworking the challenges before them into a more evolved turnkey template for a dozen subsequent plants being stamped from the modified-original SoyMor die.

Early Stages of Development
In Ralston, Iowa, West Central has been successfully running its 12 MMgy flagship biodiesel plant for more than 3 years now, learning from successes and setbacks through detailing the dynamic progression of plant operations, which in many ways paralleled the industry's own charge at the time. After years of pioneering success in Ralston, West Central formally engaged Todd & Sargent-West Central's general contracting partner-to form the Renewable Energy Group (REG) a few years back. The new company has been strategically allied with process equipment specialists Crown Iron Works from the start, forging then what has become an ironclad triad in turnkey project development.
According to Vermeer, the SoyMor board and REG began meeting in September 2003, with the concept of large-scale production in mind at a time when biodiesel was just starting to emerge as a promising alternative fuel in the United States.

SoyMor had been established as a cooperative several years before the plant was built, says SoyMor director Richard Stadheim. The original co-op came together to produce value-added lecithin-an anti-oxidant derived from soybeans and used in skin-care products.

The lecithin plant was built. Troubles in producing a consistent product-and the group's immature market position-have since refocused the co-op's lecithin efforts on further R&D to eventually prove out a new production process. The intensifying lure of biodiesel compelled the co-op in 2003 to spin off its biodiesel branch to see if those practical little soybeans could bring in more value through biodiesel production.

Once the SoyMor board pulled together with REG, the first challenge was raising equity. Getting enough investment money from the co-op's soybean growers was difficult. Some growers were under the misconception that if they invested, they would have to supply a certain amount of product to the plant-as has historically been the case for corn farmers investing in ethanol plants. Unless there's a crushing facility on-site, which is rare due to the economics involved, the beans are crushed and the oil is extracted by the ADMs, Cargills, Bunges and CHSs of the world, from which a majority of biodiesel plants purchase varying grades of soy oil.

It was partly this misconception, plus the more restrictive nature of a co-op's ability to raise equity-not to mention many would-be investor-members sitting on the fence, waiting to see if a federal biodiesel exise tax credit would pass-that precipitated the formation of a multi-state limited liability corporation (LLC) under the SoyMor name. According to Stadheim, there are now slightly more than 500 investors in both the co-op and the LLC. Roughly 75 percent of those 500 investors are invested in the co-op, most of which are relatively small investors. Much of the big money came from accredited investors in the LLC.

Nearly enough equity had been raised when the federal biodiesel excise tax credit passed in 2004, after which investors were crawling out of the woodwork, Stadheim says. The books were closed not long after the legislation was signed into law, leaving many would-be investors in search of opportunities like the one no longer available with SoyMor. Lucky for these investors though, REG's soon-to-be major role in the biodiesel industry's build-out had just begun.

Project Challenges Tackled with Teamwork
As an REG project engineer, Vermeer stresses the importance of the design, but also the effective, efficient implementation of this continually evolving blueprint. "The design of this first-of-a-kind project involved incalculable hours of design and coordination meetings," Vermeer tells Biodiesel Magazine. "Not only did the plant need to produce the highest-quality biodiesel it had to be designed to the strictest standards of safety and environmental consciousness attainable through a HAZOPS design review process."
The challenge of permitting a 30 MMgy biodiesel plant in a state generally not known for going easy on industrial projects, was also a unique challenge. REG handled all state and local environmental and building permitting for the project, as well as the post-start-up and ongoing compliance and documentation. Interestingly, Vermeer says the entire permitting process required a significant amount of education. That is, because large-scale biodiesel production was new to Minnesota, REG personnel had to educate permitting officials about biodiesel and the biodiesel process. "All in all, state and local officials were excellent to work with," Vermeer says.

Adding to the challenge of designing and building this groundbreaking project, Vermeer says it also had a fast-track completion schedule, pushing the envelope on a greenfield biodiesel project of this magnitude. REG got the job done in an impressive nine months.

Several factors encouraged SoyMor's developers to expedite the development and construction of the plant. For one, legislation had passed in Minnesota mandating a B2 blend, set for implementation in 2005 or when in-state capacity surpassed 8 MMgy. There was competition from Minnesota Soybean Processors' project being built at the same time, and both wanted to be the plant to trigger the state's progressive renewable fuel standard. Another factor involved the Commodity Credit Corporation's (CCC) bioenergy payments-making sure the plant was up and running before the dwindling funding disappeared altogether.

Vermeer gives a few clues to his organization's success in getting SoyMor built so quickly. "Orchestration of a project of this size and complexity takes more than just luck," he tells Biodiesel Magazine. REG employed software called the Primavera Project Planner to accomplish the hearty, critical task of scheduling. Regular meetings also helped keep the SoyMor project on schedule. "The importance of quality project scheduling cannot be overstated," Vermeer points out. "[It] served as a communication tool touching the entire project team. Each team member assisted in identifying project scope and individual responsibilities, which were then broken down into measurable tasks." He says from there a baseline schedule was built, which was updated weekly. "By updating weekly, the team was assured of the most current information available from which to make decisions, prioritize tasks and manage team deliverables, as well as the material procurement process."

Material costs had risen sharply while the project was underway, so re-evaluating the financial costs of these necessary materials was one more challenge added to the growing pile. Stadheim says some of the added or unexpected costs were split between SoyMor and REG. "REG treated us very fair," he remembers.

Ground was broken in Glenville in October 2004, which presented another challenge intertwined with the need to get the plant running in record time. "We built a good share of this project through a Minnesota winter," Vermeer says, inflecting the almost monumental task of enduring bone-chilling temperatures experienced there.

The mission of painstakingly developing a turnkey biodiesel plant of 30 MMgy isn't accomplished with the straightforwardness of designing a cookie-cutter ethanol plant. According to the numbers on Ethanol Producer Magazine's U.S. & Canada Fuel Ethanol Plant Map: Spring 2006, 94 percent of feedstock for ethanol production in North America (including the small-grains-only plants of Canada) is corn, one single feedstock produced in relatively high abundance in the United States

Sure, even corn has its limits, but there are much less fats and oils available for biodiesel production from traditional sources than corn for fuel ethanol. Steve Howell, technical director for the National Biodiesel Board (NBB), says with a 30 billion-gallon-per-year on-road diesel fuel market in the United States, there's only about 5 billion gallons of available fats and oils. The competition for what most would call "choice" feedstocks, like soy or canola oil, will only increase, giving way to the need for a refinery to remain flexible to a variety of potential feedstocks as the market demands and tight supplies drive prices upward. "So with these complexities [of potentially having to switch feedstocks], we don't know that we'll ever get to that 'perfect' design that a dry-mill ethanol plant seems to have-due to the need to remain feedstock flexible," Vermeer explains.

With challenges surmounting, Vermeer tells Biodiesel Magazine about what he says was the biggest hurdle to jump: incorrigible public interest. "One of the biggest challenges to this project was managing the public's expectations-and I say 'public' meaning our investors, the media and politicians," he says. "People may have underestimated the complexity of the project. When they don't understand the complexities involved, they begin to ask things like, 'So when is this black box going to start spewing out biodiesel?'" Ironically, SoyMor's project developers adhered to a grueling schedule in order to be the team that captured the spotlight for kicking off the nation's first biodiesel standard, yet they were challenged by the public's heightened interest in SoyMor doing just that.
Vermeer says managing the board's expectations was another swell to quell. "It caused some anxiety and pressure," he says as he takes a deep breath. "But at the end of the day, I think everyone realizes the SoyMor story is one of success."

From Project to Producer
SoyMor Biodiesel came alive in August 2005, triggering the Minnesota B2 mandate that went into effect two months later. The plant is quite a spectacle of polished steel and clean, solid construction. Although Vermeer says Crown Iron Works and West Central codeveloped the technology together, he emphasizes that the Minneapolis-based Crown Iron Works supplied the process engineering documents and biodiesel processing equipment within the plant.

No plant simply starts up with the push of a button, and certainly not the first plant of its kind. After Todd & Sargent "handed the keys" to West Central's biodiesel production expert Myron Danzer, he and his crew took over. This was only after spending many hours with SoyMor's new employees, carrying out production and safety training in an operating plant, as well as classroom settings. Danzer was also instrumental in implementing BQ-9000, at both his plant in Ralston, Iowa, and at SoyMor. Danzer also worked closely with Minnesota officials to help them implement the state's B2 mandate. "He worked tirelessly and put many long hours to help correct misinformation surrounding the introduction of biodiesel in Minnesota this past winter," Vermeer says.

The ordered engineering beauty of SoyMor Biodiesel is no doubt attributable to its designers and builders, but its sheer cleanliness is a testament to the day-to-day management of the refinery.

Through West Central, REG offered SoyMor a comprehensive Management and Operations Service Agreement (MOSA), which covers four major categories and essentially represents an all-inclusive package-including the bells and whistles.

The first of four parts to the package is management. This includes the general manager and a production manager, both of which require individuals with impressive credentials. "Really, with the exception of the general manager and the plant manager, all of the employees are leased through West Central," or about 30 people per plant, Vermeer says.
West Central also arranges procurement agreements under the MOSA for feedstock and chemicals-part two of the agreement. "Almost all the oil is trucked in," says Stadheim. SoyMor accepts varying grades of soy oils from several different facilities within a 200-mile radius of the plant, with which West Central has secured agreements to keep supply flowing into SoyMor. The plant has a pretreatment facility on one side, with the transesterification process going on across the fortified divide, between which the control room is positioned in sight of both operations. Depending on availability and prices, SoyMor receives oils ranging from crude to "refined, bleached, deoderized" product. The layout of the plant accommodates this flexibility.

Parts three and four of the MOSA include marketing arrangements and administration/risk management, respectively.
The plant is collocated near EXOL's 40 MMgy ethanol plant, which means that SoyMor has a shared rail access, from which on occasion small quantities of oils may come in from a farther distance when the price is right.

Connecting the ethanol plant and SoyMor is an impressive network of support bridges and insulated piping spanning nearly 1,000 feet, transferring excess steam from EXOL's ethanol production process to SoyMor, the 30 MMgy biodiesel plant's only source of thermal energy. "There's no question the shared steam infrastructure was difficult and expensive," Vermeer says. Its construction has a three-year return on investment, he tells Biodiesel Magazine.

There's some lighthearted ribbing between the SoyMor board and the project's developers whether production actually started in July or August. Technically, production started in July, the joke goes, but officially August seems to be a reasonable verdict, as July's production was far less than nameplate capacity.

After SoyMor and its large-scale competitor, Minnesota Soybean Processors, were producing strong for a couple of months, and as the state's B2 mandate was in full-force, fuel filters across Minnesota began plugging in December. The mandate was lifted once earlier for biodiesel that tested out of spec with ASTM D 6751 regarding flashpoint, which presumably had nothing to do with the onset of filter pluggings, which point to a much more serious condition. The obvious scapegoat was biodiesel. "From the petroleum companies' perspective, enter the adversarial [biodiesel] forced on them," Vermeer says.

Samples were tested from all the plants supplying biodiesel to Minnesota-including plants in neighboring states. According to the NBB's Howell, the out-of-state implicated facilities were all tested, and the results were within the ASTM D 6751 specification.

The SoyMor group doesn't deny having tested out-of-spec for flashpoint, but that has since been corrected. Other biodiesel that was coming up out-of-spec for excess glycerin count (unconverted monoglycerides and diglycerides) and a variety of other problems weren't coming out of SoyMor, say the plant owners-and the test results. With whatever combination of factors that inopportunely came together last winter in mind, it's not even certain that biodiesel was, in fact, the problem.

"Minnesota has problems with its diesel every winter," Vermeer tells Biodiesel Magazine. "We just don't hear about it normally. This winter, thanks to the hurricanes and the fuel shortages they caused, well, you've heard the phrase, 'Hitting the bottom of the barrel.' Minnesota was getting diesel fuel from the bottom of Gulf Coast storage tanks last winter. Then the cold snap came in December, which no one expected. So take biodiesel out of the picture and, yeah, Minnesota had some problems already."

Nearing press time, SoyMor management was awaiting its BQ-9000 certification. As the national spotlight beamed upon Minnesota and its diesel fuel troubles last winter, biodiesel quality is more important than ever. Some people believe accredited biodiesel through BQ-9000 or, perhaps, a similar program not yet developed, may be required if it's going to be blended in the nation's increasingly sensitive diesel fuel, while others don't. Nearly everyone agrees that biodiesel originating from BQ-9000 accredited producers and/or certified marketers will be the only biodiesel trusted in U.S. diesel supplies. SoyMor's soon-expected BQ-9000 certification will add one more razor to the plant's already-sharp competitive edge. Following the education and evolution of the SoyMor plant, it's expected that REG's subsequent plants, which are either ready to produce, under construction or in the works will possess that same advantage.

Ron Kotrba is a Biodiesel Magazine staff writer. Reach him at [email protected] Tom Bryan is editorial director of Biodiesel Magazine. Reach him at [email protected]
.com. Contact them both at (701) 746-8385.
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