The U.S. fuel infrastructure involves an intricate web of highways and rail links, pipelines, truckers, jobbers, vessels, terminals and tank farms. This vast network often includes dozens of independent oil companies in every state that ruthlessly compete for market share at various levels of the supply chain.

Because renewable fuels compete with their petroleum counterparts as "substitutes," biodiesel producers and marketers cannot pass on their transportation costs-if it costs 20 cents-per-gallon to get a load of fuel from the plant to a terminal or an end user, they have to absorb that expense themselves.

Building out infrastructure for renewable fuels has to be done in a way that makes the industries able to compete, function and cooperate with existing modes of liquid fuel transport. Subsequently, biodiesel logistics coordinators-along with states, rail and freighters-have been creative in developing platforms in the industry.

Jerry Wilburn of Double Diamond Energy Inc., a 30 MMgy plant in Dimmit, Texas, told Biodiesel Magazine that retailers from the immediate vicinity come to his plant to pick up biodiesel. That paradigm, however, only works for some plants positioned near demand centers.

Like many of the major oil companies that sell biodiesel, BP and ExxonMobil for instance, most large biodiesel plants such as Double Diamond Energy have to move product out of state to reach areas of high demand. Corroborating Wilburn's statements, however, is the fact that in Texas, the city of Austin alone-with dozens of pumps-is a nice market for area producers. Love's Travel Stops, Signature Fuels and ExxonMobil are among the leading retailers of biodiesel in the state.

National Renewable Energy Laboratory's fairly new TransAtlas tool, which maps retail stations as well as biodiesel production plants, is available to help supply chain managers make the most economical decisions. The interactive map shows that North Carolina has the greatest cluster of biodiesel retail pumps. The U.S. DOE's Alternative Fuels Data Collection service reports that North Carolina leads the U.S. with 137 pumps. States ranked second and third are California and Washington with 51 and 47 pumps, respectively.


Local Model

Plant-to-pump paradigms aren't just about supply and demand and developing shrewd transportation management skills; they can actually be a part of a biodiesel company's core business model and even a part of its overall philosophy. Sometimes biodiesel has to be moved great distances but some production schemes take advantage of outlets in their immediate vicinity. One state that has made this possible is North Carolina. "The [Research] Triangle Area probably has about the greatest density of B100 users in the country," says Marc Dreyfors of Carolina Biodiesel in Durham. A state mandate requires government fleets to use biodiesel, which may have helped position North Carolina in its number one ranking in biodiesel pumps.
Indeed, fleets are some of the biggest customers of biodiesel salesmen and marketers. Large corporations and municipalities often have hundreds of diesel vehicles used in daily operations. The U.S. government is the biodiesel industry's biggest single customer, but more efforts are being made to generate private-sector retail demand.

Carolina Biodiesel delivers fuel via a 2,500-gallon tanker truck for a minimum charge of $45 "or seven cents-per-gallon, whichever is higher," Dreyfors says. In addition, there's no charge if the purchaser picks up the fuel from the terminal or if the tank is part of the Triangle Tank Trail delivery system, developed by Carolina Biodiesel and Piedmont Biofuels. "We can help you set up fuel tanks, deliver fuel to you and even help you work through the first stages of setting up a biofuels co-op," Carolina Biodiesel states. The company also sells and leases fuel tanks. Purchasers, retailers and others in the distribution chain can become a part of the Triangle Tank Trail by joining the Piedmont Biofuels Cooperative.

Carolina Biodiesel does a lot of business with Piedmont Biodiesel, which Dreyfors calls "the granddaddy" of biodiesel in the state. Piedmont engineered and constructed the first B100 fuel terminal in North Carolina. "We can fill top-loading tanker trucks, bottom-loading tractor trailers, 250 gallon totes, 55 gallon drums, and everything in between," the company says. "We can fill a shot glass with B100 if you would like."


Building Demand, Networks

Logistics continue to be a challenge directly related to profit margin. Furthermore, there's not enough demand in certain major production areas such as Iowa, for instance, so large plants must truck their goods long distances-sometimes across the country-to reach solid markets. The Northeast, though not heavily populated with on-highway pumps, buys a lot of heating oil and Bioheat.

Last summer, DOE's office of Energy Efficiency and Renewable Energy released a report on the creation of the I-65 Biofuels Corridor. From the Great Lakes to the Gulf Coast, the interstate features five B20 pumps strategically located so travelers can drive the 886-mile stretch using renewable fuel blends the entire way. Some locations were given grants to install biofuel pumps through the DOE's Clean Cities program, which convinced other stations planning construction or expansion projects to include biofuels in their renovation plans. "This saved them a third of the cost," EERE says.

Growmark, Countrymark and other distributors operate biodiesel handling facilities and terminals in states served by I-65, such as Indiana, where methyl esters are widely offered by such companies as Thorntons Convenience Stores and Gas City Ltd.
Some aspects of distribution certainly involve diversifying the customer base. Retail customers pay a premium but do not use the fuel in high volumes, and fleets contribute more to volume but are not willing to a pay a premium-but Dreyfors says between the two is where Carolina Biodiesel can break even. "And breaking even is a beautiful thing," he says. "It's nearly impossible to make money-you either have to increase your volumes or increase your margins."

Also, waterways and pipelines have proven to be modalities of superior efficiency. Kinder Morgan spent some effort publicizing its shipment of biodiesel through a section of its pipeline network, but pipeline testing and transport can take years before any serious volumes are moved. And most biodiesel plants don't move enough volume to put barges to work. So the two cheapest modes of fuel transport-pipelines and fuel barges-are conspicuously absent from biodiesel distribution schemes. "Ethanol and biodiesel aren't really fuels, they're fuel additives," says Michael Cooper of Chicago-based Ultra Green Energy Services. "Gasoline and diesel fuel aren't delivered by rail car, it's mostly barge and pipeline transport."

Highways are often built by the federal government, states often build and repair their own roads, and towns and cities manage and maintain commercial and residential streets. This model exemplifies a tiered distribution and transport system. Similarly, the dominating paradigm of biodiesel distribution often operates in the following way. A producer sends biodiesel either by rail or truck to a fuel terminal where the fuel is stored. It is either then preblended to percentages selected by the terminal managers, or blended at the rack, often to customer specifications. UGES says it has the largest network of fuel terminals in the state of New York, which services a relatively exciting region for biodiesel sales, but UGES often buys biodiesel from producers in the Midwest. Fuel oil dealers and other retailers pick up a blended product from B20 to B99 at these "racks."

"Spoke-and-wheel" logistics models, used in several industries including commercial air traffic, are used in the biodiesel industries as well. Biodiesel production does remain relatively centralized in areas such as Texas, the upper Midwest and the "Great Lakes" states of Michigan, Indiana, Ohio and Illinois. Minnesota, Wisconsin and Iowa combine with the states already listed to form the majority of the production stronghold. In addition, Washington and California show significant clusters of biodiesel production.

Access to barge and pipeline remains an advantage for petroleum companies when it comes to competing with alternative fuels in the marketplace. Meanwhile, producers will continue to be creative when it comes to building local demand, brokering freight deals and managing risk. "The biggest hang-up for the biodiesel industry is the price volatility of commodities," Dreyfors says. "I don't see a cap-and-trade system being put in place and I don't see the price of energy going up anytime soon. Policies will dictate the playing field."

Prices are so competitive, and sales are squabbled over ferociously. Hoping to avoid bidding deals or fighting for sales, some distributors are even uncomfortable talking about specifics involving their customer lists. "It can be pretty ruthless," Cooper says. "People are getting circumvented all the time." UGES, however, publishes its customer list online and Cooper says that he refers business to his own customers-ultimately that means they're buying more fuel from him.

Each opportunity has to be maximized, each transport transaction managed meticulously. "Rail is the challenging part of what we do," Cooper says. "Sometimes you have to call the railroad to come pick up your cars. Otherwise, they'll sit at the terminal for a week."

Nicholas Zeman is an associate editor for Biodiesel Magazine. Reach him at (701) 738-4972 or nzeman@bbiinternational.com.