The history of BQ-9000 precedes Biodiesel Magazine, but the introduction, post-rollout development and upward industry acceptance of both have occurred on parallel timelines. That's simply coincidental, but the unique and mutually beneficial relationship shared by this publication and the National Biodiesel Accreditation Commission's quality assurance program is not. A growing number of U.S. and Canadian biodiesel producers and marketers feel precisely the same way: That is, they see the future of biodiesel-and BQ-9000, or some incarnation of it-is clearly part of the picture. We share that view, and this month Biodiesel Magazine is doing something it doesn't take lightly. Much like newspapers endorse political candidates, Biodiesel Magazine is forging a strengthened editorial commitment to BQ-9000. As the industry's leading trade publication, it's our obligation to support, report on, and perhaps even help develop and sustain activities that make our industry better, stronger and more mainstream. In other words, BQ-9000 is consistent with Biodiesel Magazine's mission and, subjective or not, we stand firmly behind it. 

 
 To be honest, this was an easy decision to arrive at. BQ-9000 is an excellent program with an unambiguous purpose. The National Biodiesel Accreditation Commission's Web site (www.bq-9000.org) describes the goals of the program as: 
 &bull; To promote the commercial success and public acceptance of biodiesel
 &bull; To help assure that biodiesel fuel is produced to and maintained at the industry standard, ASTM D 6751
 &bull; To avoid redundant testing throughout the production and distribution system
 &bull; To provide a mechanism to track biodiesel in the distribution system, identify biodiesel that meets industry standards, and provide a means to reduce the probability of product that does not meet D 6751 reaching the marketplace.
 
 Those objectives are tough to disagree with and essentially leave just two important questions up for discussion: Is the program affordable and achievable for industrial-scale producers? And does it achieve what it's supposed to? 
 
 B-9000 accreditation (for producers) and certification (for marketers, distributors and producers) is open to all companies actively producing, distributing or marketing (or planning to produce, distribute or market) biodiesel, either in its neat form (B100) or for use in blending with petroleum diesel or heating oil. By almost all measures, the program seems to be reasonable from both an economic and implementation viewpoint. From what we are hearing from producers and marketers already onboard with the program-and those in the process of getting onboard with it-BQ-9000 is living up to its design.
 
 We've been reporting on BQ-9000 since our inception, and this month's distribution issue contains a feature that highlights companies that are in the process of attaining BQ-9000 Certified Marketer status (see "BQ-9000: Gaining Momentum," on page 46). In next month's "Proposed Biodiesel Plant List: 2006," we're going to take things a step further. Biodiesel Magazine will include a question about BQ-9000 in its survey of over 150 would-be biodiesel plants across the United States and Canada. We are asking these "future producers" whether or not they plan to seek BQ-9000 accreditation and/or certification. My hunch is that many of our respondents will tell us they plan to "go BQ-9000" ASAP. 
 
 We'll keep you posted
 
 <hr style="width: 100%;height: 1%">
 Clarification from our March 2006 issue: 

 On page 26 of the Business Briefs section, the Business story about Consolidated Biofuels finding a financial advisor in January quotes President and CEO Christopher Sharon. Since January, Sharon is no longer president of the company. Jim Blair, formerly of SoyMor LLC in Glenville, Minn., is the new president and CEO.

Industry-wide acceptance of BQ-9000 is inevitable… if we have anything to say about it

Editor's note

On March 30, Washington Gov. Chris Gregoire signed a bill that requires at least 2 percent of diesel sales by volume to be comprised of biodiesel. Washington would be only the second state to do so, following Minnesota's lead. "We are establishing Washington as a leader of a dynamic, 21st century industry," said Gregoire, who requested the bill. The requirement goes into effect Nov. 30, 2008, or when in-state production can meet the 2 percent requirement, whichever comes first.

Washington adopts biodiesel requirement

The biodiesel company Biocarburantes Almaden, a joint venture of the Tecnica del Conociamiento Co. and the SEPI Group, is building a 24,000-ton-per-year soy-oil-based biodiesel plant near the Spanish municipality of Almaden. The company purchased three 8,000-ton-per-year CPU (compact production units) containerized production equipment from Austrian biodiesel technology vendor BioDiesel Technologies. The facility is expected to be operational by the end of the year.

BioDiesel Technologies sells biodiesel plant in Spain

Illinois-based HWRT Oil LCC is configuring tank storage and blending capability at its North Little Rock, Ark., terminal in order to distribute biodiesel, according to company representative Matt Schrimpf. Rack blending capability is expected to be operational later this spring. Schrimpf said biodiesel would be distributed from the terminal even before the tanks were complete. HWRT Oil currently distributes more than 1 million gallons of biodiesel per month through operations in Illinois, Indiana, Missouri and Arkansas.

HWRT Oil to blend biodiesel in North Little Rock

Planning to capitalize on the rapidly expanding markets for soybean oil and meal in southern and central China, the Noble Group has agreed to purchase a soybean crushing and refining plant from Siping Hongzui Grease Limited in the autonomous region of Quinzhou, Guangxi, a port city which handles large ocean vessel receiving and discharging. The soybean facility started operations in June 2005, and this purchase strategically links seaport transportation with dynamic and developing markets.

Noble Group to buy Chinese soybean processing plants

Cargill has announced plans to open a glycerin facility adjacent to its 37.5 MMgy biodiesel plant under construction in Iowa Falls, Iowa. The glycerin plant would open within a month after the biodiesel plant went on line, which was slated for early May. David Feider of Cargill Public Affairs said the Iowa Falls plant is the first biodiesel facility in the United States to combine soybean crushing with biodiesel and glycerin production at one site.

Cargill adds glycerin plant  to Iowa Falls biodiesel facility

Degussa Corporation's Building Blocks business unit has signed a long-term lease with a supplier to store biodiesel catalysts in Houston, Texas. A tank holding 25 percent solution sodium methylate was made available in early February, according to Degussa Communications Manager Richard Leister. A second tank for a 30 percent solution of sodium methylate will be available in April. The solutions-produced near Cologne, Germany-can be used in biodiesel production processes that don't use water.

Degussa leases tanks for biodiesel catalysts

Archer Daniels Midland Company (ADM) has announced plans to convert a soybean crushing facility in the Netherlands to a rapeseed crushing line, with the flexibility to switch between soybeans and rapeseed depending on demand, according to an ADM press release. Annually, the facility would have over 1 million metric tons crushing capacity. It will supply the company's biodiesel production operations and existing food oil customers. Depending on governmental approval, the project should be completed by January 2007.

ADM to add rapeseed crushing

Indiana legislators passed a bill requiring the state Environmental Quality Service Council to study the most effective way of implementing the federal renewable fuels standard (RFS), according to Jennifer Stevens, press secretary for state Rep. and bill author Steve Heim. The council is also to examine the feasibility of requiring vehicles sold in the state to be flexible fuel vehicles. Indiana Gov. Mitch Daniels signed the bill into law March 22

Indiana legislation puts RFS under the microscope

A microchannel steam reformer developed by InnovaTek Inc. has been used to produce hydrogen from B100, glycerol and raw soybean oil, all three of which were provided by Seattle Biofuels Inc. The InnovaGen fuel processor achieved a 100 percent conversion rate of B100 to hydrogen, but soy oil and glycerol conversion requires more water. "Biodiesel is easier to reform than glycerol," said Patricia Irving, President and CEO of InnovaTek.

InnovaTek makes hydrogen out of biodiesel

Perstorp Oxo, part of the international Perstorp Group, has started construction on a 44 MMgy biodiesel plant in Stenungsund, Sweden. The rapeseed oil refinery will come on line in early 2007. This is the first biodiesel venture for Perstorp, which is primarily a specialty chemicals company. The company will use Esterfip-H biodiesel technology developed by Axens, a French company. Lars Lind, vice president of new projects, said the plant will help meet the country's 5 percent renewable fuel mandate.

Perstorp Oxo to build biodiesel plant in Sweden

Louis Dreyfus Agricultural Industries LLC, a subsidiary of Louis Dreyfus Commodities, planned to break ground on an 80 MMgy biodiesel plant in Indiana at the end of April, according to Operations Manager Mike Mandl. At press time, a groundbreaking ceremony was set for April 20 with construction to begin soon after. "We hope to officially break ground by the end of this month, and we anticipate that the completion will come somewhere in the area of 18 to 24 months after actual groundbreaking," he said. 
 
 The plant, planned for Claypool, Ind., would be larger than any other biodiesel facilities now operating in the United States and one of the largest in the world. It's also the first biodiesel plant Louis Dreyfus has built in this country. "We're exited about opportunities in the growing biodiesel industry in North America," Mandl said. 
 
 The Claypool facility will include an integrated biodiesel plant and soybean processing plant. Nearly 50 million bushels of locally grown soybeans will be crushed there, creating more than 1 million tons of soybean meal, as well as biodiesel. "An integrated operation inherently has a lot of efficiencies," he said. "Being close to the feedstock, which this plant will be, is a very positive factor in the overall efficiency and the economics of the operation." The soybean and biodiesel facilities will be constructed simultaneously. When the project is completed, about 85 people will be employed there. 
 
 The Louis Dreyfus facility will be located just outside the city limits of Claypool on 275 acres of land, Mandl said. There is room for expansion on-site, with other possible projects in the discussion phases. One is the idea of building an ethanol plant next to the biodiesel and soy crushing facilities. "It's possible," he said. "It is something that could be considered in the future, but no decision has been made in that regard."
 
 The Indiana Economic Development Corp. provided several economic development incentives to Louis Dreyfus, said Weston Sedgwick, spokesman for the organization. All told, the company could receive up to $95,000 in training grants and nearly $5.3 million in tax credits based on anticipated employment and capital investment levels. A total of $137,500 was also awarded to the local community to help with infrastructure needs. "Indiana is kind of targeting this industry sector, which is becoming increasingly popular," Sedgwick said. "It's something that Indiana can take advantage of as a largely agricultural state."
 
 Louis Dreyfus is one of the worlds' largest and oldest merchandisers of grains and oilseeds. The company operates in more than 50 countries. 
 The company sees expanding its biodiesel and soy crushing facilities into the United States as a positive for Louis Dreyfus as a whole. "We believe there are operation and trading synergies, and strategies that can take place between North and South American operations," Mandl said.

Louis Dreyfus plans groundbreaking on largest U.S. biodiesel plant

Louis Dreyfus Agricultural Industries LLC, a subsidiary of Louis Dreyfus Commodities, planned to break ground on an 80 MMgy biodiesel plant in Indiana at the end of April, according to Operations Manager Mike Mandl. At press time, a groundbreaking ceremony was set for April 20 with construction to begin soon after. "We hope to officially break ground by the end of this month, and we anticipate that the completion will come somewhere in the area of 18 to 24 months after actual groundbreaking," he said.
 
 The plant, planned for Claypool, Ind., would be larger than any other biodiesel facilities now operating in the United States and one of the largest in the world. It's also the first biodiesel plant Louis Dreyfus has built in this country. "We're exited about opportunities in the growing biodiesel industry in North America," Mandl said. 
 
 The Claypool facility will include an integrated biodiesel plant and soybean processing plant. Nearly 50 million bushels of locally grown soybeans will be crushed there, creating more than 1 million tons of soybean meal, as well as biodiesel. "An integrated operation inherently has a lot of efficiencies," he said. "Being close to the feedstock, which this plant will be, is a very positive factor in the overall efficiency and the economics of the operation." 

 
 The soybean and biodiesel facilities will be constructed simultaneously. When the project is completed, about 85 people will be employed there. 
 
 The Louis Dreyfus facility will be located just outside the city limits of Claypool on 275 acres of land, Mandl said. There is room for expansion on-site, with other possible projects in the discussion phases. One is the idea of building an ethanol plant next to the biodiesel and soy crushing facilities. "It's possible," he said. "It is something that could be considered in the future, but no decision has been made in that regard."
 
 The Indiana Economic Development Corp. provided several economic development incentives to Louis Dreyfus, said Weston Sedgwick, spokesman for the organization. All told, the company could receive up to $95,000 in training grants and nearly $5.3 million in tax credits based on anticipated employment and capital investment levels. A total of $137,500 was also awarded to the local community to help with infrastructure needs. "Indiana is kind of targeting this industry sector, which is becoming increasingly popular," Sedgwick said. "It's something that Indiana can take advantage of as a largely agricultural state."
 
 Louis Dreyfus is one of the worlds' largest and oldest merchandisers of grains and oilseeds. The company operates in more than 50 countries. The company sees expanding its biodiesel and soy crushing facilities into the United States as a positive for Louis Dreyfus as a whole. "We believe there are operation and trading synergies, and strategies that can take place between North and South American operations," Mandl said

Production begins at Oklahoma biodiesel plant

In the first week of April, Central Iowa Energy LLC started construction on its site in Newton, Iowa. The project was a collaboration between a group of progressive Iowa farmers, a consulting group, directors of another Iowa biodiesel plant currently under construction and a local economic development group, according to Tobin Bush, project coordinator for Central Iowa Energy.
 
 The consulting company, The Biodiesel Group, worked with the community and aided in site selection. It was seeking to build a plant identical to Western Iowa Energy in Wall Lake, Iowa, Bush said. In June 2005, Central Iowa Energy acquired a 32-acre site-previously owned by Jasper County Economic Development Corporation-that included rail access.
 
 The limited liability company raised $3 million in seed capital. The equity drive kicked off in January, eventually topping $20 million. The remainder of the $50 million project will be made up by debt financing, Bush said.
 
 At press time, Renewable Energy Group was on-site doing initial prep work. The company expects to begin production March 2007. The facility will use a continuous-flow process to produce biodiesel from multiple feedstocks, mainly soy oil and animal fats. Bush said West Central Cooperative will market the fuel-then, BQ-9000 accredited-throughout Iowa, but "it would be unrealistic to expect that all of it would be used in Iowa." In addition to biodiesel, about 9 percent of the facility's product will be glycerin, which will be sold into the existing glycerin market. Bush said there is also a small amount of feed fat that will go into poultry feed.

Central Iowa Energy breaks ground

In the first week of April, Central Iowa Energy LLC started construction on its site in Newton, Iowa. The project was a collaboration between a group of progressive Iowa farmers, a consulting group, directors of another Iowa biodiesel plant currently under construction and a local economic development group, according to Tobin Bush, project coordinator for Central Iowa Energy.
 
 The consulting company, The Biodiesel Group, worked with the community and aided in site selection. It was seeking to build a plant identical to Western Iowa Energy in Wall Lake, Iowa, Bush said. In June 2005, Central Iowa Energy acquired a 32-acre site-previously owned by Jasper County Economic Development Corporation-that included rail access.
 

 The limited liability company raised $3 million in seed capital. The equity drive kicked off in January, eventually topping $20 million. The remainder of the $50 million project will be made up by debt financing, Bush said.
 
 At press time, Renewable Energy Group was on-site doing initial prep work. The company expects to begin production March 2007. The facility will use a continuous-flow process to produce biodiesel from multiple feedstocks, mainly soy oil and animal fats. Bush said West Central Cooperative will market the fuel-then, BQ-9000 accredited-throughout Iowa, but "it would be unrealistic to expect that all of it would be used in Iowa." In addition to biodiesel, about 9 percent of the facility's product will be glycerin, which will be sold into the existing glycerin market. Bush said there is also a small amount of feed fat that will go into poultry feed.

Maryland Biodiesel starts construction

Construction has begun on a biodiesel plant next to Carl's Corner Truck Stop in Carl's Corner, Texas.
 
 Pacific Biodiesel Inc. of Hawaii and entertainer Willie Nelson have teamed up to build the plant, according to Kelly King, marketing and communications director for Pacific Biodiesel. Though construction had already begun in March, Nelson, a founding partner, and representatives from Pacific Biodiesel, the managing partner in the venture, were on hand for a groundbreaking ceremony April 2. 
 
 The facility, unofficially named Pacific Biodiesel Texas, will start out as a 2 MMgy plant with room for possible future expansion. The target completion date is July 4. 
 In the beginning, the primary feedstock will be locally grown cottonseed oil. The company will also use waste cooking oil, tallow and other virgin oils. "Our process is multi-feedstock, so we can adjust it to put other feedstocks in there," King said. 
 
 Carl's Corner, owned by Carl Cornelius, Nelson and others, will be the primary distributor of the biodiesel produced there. "We're actually going to be set up to pipe our finished products right in his tanks," King said. 
 
 That's good news for Cornelius, who said he sometimes runs out of biodiesel at the truck stop. "We're probably going to be rebuilding the whole truck stop … all new tanks, all new pumps, the whole thing," he said.

Construction begins at Texas biodiesel plant

Perhaps one of the most under-recognized biofuels states in the country is North Carolina. However, with the Tar Heel State's stout legislative mandates calling for an increased use of biodiesel in state-owned diesel fleets, and state-funded research grants for various renewable fuels projects, North Carolina's blossoming commitment to biofuels is exemplary. 
 
 Aiding in this trend is North Carolina's "Research Triangle"-anchored by Raleigh, Durham and Chapel Hill-where biodiesel emissions testing in on- and off-road diesel applications is underway. Anne Tazewell, North Carolina State University's (NCSU) Alternative Fuels Program Manager at the school's Solar Center-the name of which will soon be changed to the Center for Energy Innovation-said ongoing B20 emissions testing was originally requested by the North Carolina Department of Transportation (NCDOT). 
 According to Bruce Thompson, NCDOT manager of specifications and procurement, the department has been using biodiesel for some time. Thompson said the NCDOT's interest in B20 emissions testing was sparked by curiosity. The department wanted to know what biodiesel emissions profiles would be in real-world operating conditions as opposed to accepting the U.S. EPA's static data collected from engine dynamometer tests. With funding from the NCDOT's research and development arm, the NCDOT enlisted assistance from NCSU and Professor Chris Frey. 
 
 Phase One consisted of testing eight tandem and single-axle dump trucks using portable five-gas analyzers in actual-duty cycles to gauge the differences in outlet gases between B20 and low-sulfur diesel (LSD) fuel, Tazewell and Thompson told Biodiesel Magazine. Results of the tests confirmed the NCDOT's hunch that B20 positively impacts exhaust emissions from diesel tailpipes. Among the expected reductions in carbon monoxide, hydrocarbon and particulate matter, results showed an unexpected 10 percent decrease in nitric oxide (NO) compared to LSD. These NO reductions counter the EPA's engine dynamometer emissions results, which indicate that biodiesel blends increase NOx output. However, the emissions-testing tide nationwide seems to be moving away from engine dynamometer tests-as the NCSU-DOT study has done-to more accurately reflect real-world speed and load conditions of various diesel vehicles, not just long-haul trucks. 

 
 Thompson said the NCDOT is now in Phase Two of the project: the testing of B20 in off-road equipment. The tests will compare B20 with diesel fuel in equipment like front-end loaders in actual, rather than staged, duty cycles.
 
 "The future of biodiesel is very bright here in North Carolina," Thompson told Biodiesel Magazine. "We see more interest in building plants here, and farmers are getting more interested in soybeans." Thompson said as time goes on and petroleum prices rise, North Carolina and the NCDOT are looking toward biodiesel as that "something" needed to curb petroleum dependence and help clear those southern skies.

North Carolina, biodiesel: Partners in success

Two entrepreneurs recently completed another phase of their latest venture: Green Country Biodiesel Inc. in Chelsea, Okla. The capacity of the facility was expanded from 600,000 gallons per year to 2.5 MMgy; construction was completed in time for an April 1 production restart. 
 
 The company broke ground for the original facility in June 2005, began producing biodiesel in August and started construction of the expansion in December 2005.
 David Allen and Scott Williams are the brains behind the facility. Williams, who had previously owned several small companies, was contemplating starting a biodiesel plant on his own when he introduced Allen to biodiesel. Allen started making biodiesel for his own use; he became interested in partnering with Williams when he discovered the untapped market in Oklahoma. 
 
 The partners thoroughly researched other biodiesel plants and used their backgrounds in engineering, as well as pneumatic and hydraulic technologies, to design the plant. They also worked with a DuPont chemical engineer. The plant combines two processes into one hybrid, called continuous-flow batch. Allen described this process as having multiple reactions and innovative wash cycles.
 
 Allen and Williams also used their venture capital experience to fund the plant. They received the first USDA loan regarding rural development, which Allen said they used for capital expenses. Beyond that, they financed the project with their own capital. "For us small entrepreneurs, we're working with what we have," Allen said. 
 
 The company has plans to increase capacity as demand grows. Currently, the company does not see a lack of demand. "Everything we can make is already sold," Allen said. He postulated that Fuel Marketers Corporation would market the plant's biodiesel throughout Kansas, Oklahoma and Texas.
 
 Green Country Biodiesel is in discussions with state and local governments to put in the necessary rail, land and infrastructure to expand its facility to 30 MMgy in the future. "We're taking it one step at a time," Allen said.

Green Country Biodiesel finishes expansion

Two entrepreneurs recently completed another phase of their latest venture: Green Country Biodiesel Inc. in Chelsea, Okla. The capacity of the facility was expanded from 600,000 gallons per year to 2.5 MMgy; construction was completed in time for an April 1 production restart. 
 
 The company broke ground for the original facility in June 2005, began producing biodiesel in August and started construction of the expansion in December 2005.

 David Allen and Scott Williams are the brains behind the facility. Williams, who had previously owned several small companies, was contemplating starting a biodiesel plant on his own when he introduced Allen to biodiesel. Allen started making biodiesel for his own use; he became interested in partnering with Williams when he discovered the untapped market in Oklahoma. 
 
 The partners thoroughly researched other biodiesel plants and used their backgrounds in engineering, as well as pneumatic and hydraulic technologies, to design the plant. They also worked with a DuPont chemical engineer. The plant combines two processes into one hybrid, called continuous-flow batch. Allen described this process as having multiple reactions and innovative wash cycles.
 
 Allen and Williams also used their venture capital experience to fund the plant. They received the first USDA loan regarding rural development, which Allen said they used for capital expenses. Beyond that, they financed the project with their own capital. "For us small entrepreneurs, we're working with what we have," Allen said. 
 
 The company has plans to increase capacity as demand grows. Currently, the company does not see a lack of demand. "Everything we can make is already sold," Allen said. He postulated that Fuel Marketers Corporation would market the plant's biodiesel throughout Kansas, Oklahoma and Texas.
 
 Green Country Biodiesel is in discussions with state and local governments to put in the necessary rail, land and infrastructure to expand its facility to 30 MMgy in the future. "We're taking it one step at a time," Allen said.

Industry growth discussed at Biodiesel Finance and Investment Summit

The Biodiesel Finance and Investment Summit, which was held Feb. 26-27 in New York City, brought together leading project developers, investors, lenders, EPC contractors and others in the biodiesel finance and investment community to share their perspectives on the considerations involved in financing future biodiesel deals.
 
 "A major concern was the overall cost of feedstocks and how small changes in pricing of feedstocks can reduce profitability, " said Todd Guerrero, organizer of the event and attorney for Lindquist and Vennum LLP, a corporate law firm based in Minneapolis. "The overall consensus was that a niche market does not an industry make, and that biodiesel needs to be more ubiquitous as a fuel." 
 
 Guerrero said private equity players seem cautious to invest major funds in such a fledgling industry. "Main Street money and rural investment is going to be a viable part of the biodiesel industry for several years to come," Guerrero said. "There were some pretty high rollers, and they are not ready to throw big capital into biodiesel. That message was pretty clear." With ethanol companies like U.S. BioEnergy being backed by major investment capital and the atmosphere of global ethanol, biodiesel will not be on this level for some time to come, Guerrero said.
 
 "The most surprising thing is the level of interest in this industry given its small size, and over 200 people signed up from all sectors-equity, development, agriculture- in an industry that only produced 74 million gallons last year," said Chadbourne and Parke's Todd Alexander, who works out of the firm's Houston office and served as co-chair of the summit along with Guerrero. "This event was targeted at a more educated audience, who had more sophisticated questions to ask, who had a high level of interest in biodiesel and who had obviously spent some time learning about the industry." 
 
 Because the biodiesel tax credit was extended to 2008, annual biodiesel production is predicted to jump from 24 million gallons to over 1 billion gallons in just five years. If players could set firm deals now, they could be poised to see returns much higher than today's energy deals. At this point, the willingness of investors to take risks on biodiesel remains low, but interest from private equity is growing rapidly. "We are in a period of high returns for biodiesel producers, and when there is a time of high returns, the equity community gets very interested," Alexander said.

 
 Other topics discussed included relationship building between farmers, developers and investors; the criteria that investors use when evaluating biodiesel proposals or mergers; and the sources, terms and structures of debt financing.
 
 Most of all, the summit provided networking opportunities. "I met many potential clients [at the summit]," Alexander said. "I have already been retained by some of them."

Catalyst research discussed at Panama event

Illinois' largest biodiesel producer is now putting more product into that state's fuel supply. Joliet-based Stepan Co. finished its plant expansion in early March and is now producing 21 MMgy of biodiesel.
 
 The expansion of the once-10 MMgy multi-feedstock facility began in September 2005, said Jeff Nelson, Stepan's biodiesel business manager. Stepan oversaw its own biodiesel expansion.
 
 Although Stepan has been producing biodiesel for six years, the company has actually been producing methyl esters for decades. A global manufacturer of specialty and intermediate chemicals used in consumer products and industrial applications, Stepan is also a leading merchant producer of surfactants, which is the key ingredient in consumer and industrial cleaning compounds. "We were already making the chemistry," Nelson said. "It's not something that we have to invent."
 
 Stepan began producing methyl esters for biodiesel use as a way to make use of excess capacity. "Since then, we've expanded our capacity, building specifically for biodiesel," Nelson said.
 
 Located on the southwest outskirts of Chicago, Joliet offers Stepan the perfect location to reach the large urban markets of the metro area as well as the agricultural areas in the rest of the state.
 
 Stepan continues to have big plans for biodiesel in the near future. Nelson said the company already has completed engineering plans for another expansion. Stepan has also applied for BQ-9000 accreditation, the voluntary fuel quality assurance program governed by the National Biodiesel Accreditation Commission. "It's become important because of the quality issues in the industry," Nelson said. "It's become important for marketing biodiesel."
 
 Nelson predicts that refined glycerin sales will continue to be an issue for the biodiesel industry. The United States has historically been a net importer of glycerin, but that may change this year. "The market is getting to be a big problem," Nelson said.

Stepan Co.completes expansion

As the state of Washington begins down the road of implementing a new biodiesel requirement, the National Biodiesel Board (NBB) has extended a hand. Washington is now the second state, behind Minnesota, to adopt a biodiesel standard for diesel fuel. Gov. Christine Gregoire signed this renewable energy legislation March 30.
 

 The NBB provided regulatory and technical support to Washington during the legislative process, and our team will continue to stand ready as a technical resource while the state implements its new requirement. In doing so, the NBB will work with the state's Biofuel Advisory Committee, which will be formed to help assure a smooth transition. 
 
 The Washington law offers significant flexibility to the petroleum industry. Since it is volumetric, petroleum distributors can sell any blend, so long as biodiesel makes up 2 percent of total sales. It will ramp up to 5 percent of total diesel fuel sales after the director of agriculture determines there is crushing capacity and a supply of materials to satisfy a 3 percent requirement. There is also a provision that requires state vehicles and ferries to run on B20. 
 
 The requirement goes into effect Nov. 30, 2008, or when in-state production can meet the 2 percent requirement, whichever comes first. The law is expected to create demand for 20 million gallons of biodiesel annually in the first year. The U.S. Energy Information Administration reports that the state of Washington consumed 1 billion gallons of diesel in 2004.
 
 Having been closely involved with the successes and challenges in implementing the B2 requirement in Minnesota, the NBB is in a good position to tighten the learning curve for Washington. The Minnesota B2 requirement took effect last year, and the industry quickly learned that fuel quality is more critical than ever when a mandate is on the table. There is no room for error. 
 
 Based on the experience in Minnesota, NBB recommendations to the Washington Biofuel Advisory Committee will include quality control measures for production and distribution, and petroleum industry education. Simple steps, such as requiring a certificate of analysis on every batch of biodiesel, will help assure greater fuel quality. The NBB also recommends all biodiesel producers become accredited under the existing BQ-9000 program. This voluntary industry quality control program is already in place on a national scale.
 
 Washington has long been a leader when it comes to biodiesel. Commercial businesses such as The Essential Baking Company and Shilshole Marina, as well as governmental entities like Mount Rainier National Park and the city of Tacoma, all use biodiesel in their fleets. The state also has several biodiesel distributors, a biodiesel plant and dozens of pumps.
 
 As more plants are built and infrastructure is ramped up, the NBB looks forward to continually working with Washington's public and private stakeholders who are at the forefront of the biofuels movement. As an industry, we know we need to remain ever vigilant on biodiesel quality and education. In doing so, we will show the nation that Washington and Minnesota have indeed made the right decision for energy security, the environment and the economy.

B2, Act 2: Helping Washington transition to a biodiesel mandate

NBB In Sight

An automaker, a biodiesel producer and soybean farmers celebrated the sale of the 10,000th Jeep Liberty Common Rail Diesel (CRD), which comes pre-filled with 5 percent biodiesel (B5), in March. That's double the number of sales expected when Chrysler Group first launched the diesel model in early 2005.
 
 The company made the announcement in anticipation of the 10,000 milestone at the Peter Cremer North America biodiesel refinery in Cincinnati, Ohio. The refinery supplies biodiesel for the Toledo B5 factory fill of the Liberty. 
 
 "At DaimlerChrysler, biodiesel is part of our vision for an America that is less dependent on petroleum, protects and preserves the environment, and values a strong and sustainable economy," said Deb Morrissett, vice president of Regulatory Affairs for the Chrysler Group. During her remarks at the Peter Cremer facility, Morrissett noted that in addition to the 30 percent improvements in fuel economy with clean diesel technology, biodiesel further reduces the United States' reliance on petroleum. 

 
 Ohio Gov. Bob Taft, Ohio Department of Agriculture Director Fred L. Dailey, and representatives from the Ohio Soybean Council and DaimlerChrysler gathered at the biodiesel plant to celebrate the promise of biofuels.
 
 Peter Cremer North America's BQ-9000 Accredited Producer designation made the company a logical choice as a supplier when DaimlerChrysler announced its plans to factory-fill all of its Jeep Liberty CRDs. Earlier this year, the National Biodiesel Board (NBB) also welcomed DaimlerChrysler's decision to approve the use of B20 in its 2007 Dodge Ram pickup trucks for fleet customers. DaimlerChrysler is the first U.S. automaker to specifically approve of B20 in a warranty position statement.
 
 The NBB's close work with DaimlerChrysler and other original equipment manufacturers (OEMs) was foundational to Chrysler Group's decision to support biodiesel. The NBB's goal is for B20 to be approved in all major diesel engines and vehicles with the new 2007 and later model year engines, and significant progress toward that goal has been made. 
 
 Promoting increased use of biodiesel is a part of DaimlerChrysler's campaign to re-introduce diesel-powered passenger vehicles to U.S. consumers. Newer diesel vehicles offer fuel economy improvements of 30 percent and reduced greenhouse gas emissions, compared to gas-powered vehicles. At the same time, diesel vehicles provide the power and performance valued by American consumers.

Only in a Jeep: Liberty sales double expectations

As fuel quality takes center stage, companies with the BQ-9000 seal of approval will have an edge over their competitors. One-day seminars, held throughout North America, will help companies learn about the program. "Understanding and Implementing BQ-9000" seminars will provide the fundamentals for implementing BQ-9000, the voluntary quality management system for biodiesel producers and marketers. BQ-9000 couples the foundation of universally accepted quality management systems with the product specification ASTM D 6751. These seminars focus on understanding the details of the requirements, the steps to implement the requirements and the most efficient approaches to managing the registration project.
 Dates and places include:
 4 May 4-Kansas City, Mo.
 4 May 18-Dallas, Texas
 4 June 8-Philadelphia, Pa.	
 4 July 13-Vancouver, British Columbia
 4 August 10-Atlanta, Ga.
 
 Quality managers, operations managers, BQ-9000 program managers and other management personnel from biodiesel industry organizations are encouraged to attend.
 There will be one instructor at each location, and they all serve as independent auditors for the BQ-9000 program. They are Paul Henderson of Templin Quality Systems, Kent Bullard of Sustainable Options and Chris Garth of Carolina Management System Services.

 
 Contact Anne Klempke of the NBB at (800) 841-5849 or aklempke@biodiesel.org to register for a course. It is suggested to sign up at least one week in advance.
 Seminar content:
 Definition of quality
 BQ-9000 overview
 	-What is BQ-9000?
 	-What are the forces driving BQ-9000?
 	-How is the accreditation program administered?
 Review of BQ-9000-The theory behind BQ-9000
 	-Principal concepts of BQ-9000
 	-Explanation of BQ-9000's 10 elements

 System creation
 System installation
 	-System demonstration
 	-Documentation
 BQ-9000 requirements for documentation
 	-BQ-9000 documented procedures

BQ-9000 workshops offer training; outreach ramps up

The newly opened Washington, D.C., office of the National Biodiesel Board has been established. Scott Hughes will act as the director of Governmental Affairs, while Alan Weber of Marc-IV Consulting will also act as NBB economics advisor. The phone number is (202) 756-4592, and the fax number is (202) 756-4591.
 The new address is:
 	National Biodiesel Board
 	1101 Pennsylvania Avenue NW
 	6th Floor
 	Washington, DC 20004

Washington, D.C., office establishes address

The coordinating and auditing entity of BQ-9000, the National Biodiesel Accreditation Commission (NBAC), has started a new campaign to encourage consumers to buy fuel from accredited producers and certified marketers. The NBAC launched a new logo for accredited producers, and will soon begin an ad campaign to show consumers how they can have an added level of quality assurance. In Canada and the United States, fleet publications and other targeted media will soon tout the benefits of BQ-9000. Petroleum publications will also carry ads encouraging distributors to become certified marketers.

NBAC targets consumers to encourage BQ-9000

Like elsewhere in the country, biodiesel use is growing in the city of East Lansing, Mich. Members of the rock band Guster joined city officials on the Michigan State University (MSU) campus to celebrate the city's one-year anniversary of using B20. The city, MSU and the band highlighted how they all use biodiesel in their vehicles to minimize their impact on the environment.

 
 Guster was in East Lansing for a performance at MSU as part of the Campus Consciousness Tour, which raises awareness in college towns about sustainable practices like using biodiesel. Their tour bus is fueled with B20. 
 
 "Today we are excited to bring our Campus Consciousness Tour to a city that is already living what we are promoting in our environmental education tour," said Adam Gardner, guitarist/singer for Guster. "The city of East Lansing, Michigan State University and our band are all reducing the amount of 'earth-eating' we are doing by using a blend of B20 biodiesel in our buses and fleets."
 
 MSU started using biodiesel blends campus-wide in all its diesel vehicles last fall. The city's Department of Public Works uses biodiesel in 39 of its vehicles and equipment. 
 "We're excited to be using this alternative fuel that will reduce emissions and make our city a cleaner place to live," said East Lansing Mayor Sam Singh.
 The event was sponsored by the National Biodiesel Board and Michigan Soybean Promotion Committee.

Popular band highlights biodiesel use in Michigan college town

Three more terminals have announced that they are making pre-blended biodiesel available to distributors. The National Biodiesel Board (NBB) estimates that about 25 petroleum terminals have invested in equipment to make biodiesel a significant part of their businesses. 
 
 "This announcement is part of a growing trend," said Joe Jobe, chief executive officer of the NBB. "The further integration of biodiesel into existing petroleum infrastructure illustrates the acceptance of biodiesel within the petroleum industry. The NBB has been working to facilitate this progress, which will ultimately benefit consumers in the form of increased availability and possibly lower prices." 
 
 Biodiesel availability at the terminal level streamlines the distribution process. Three terminals that have added pre-blended biodiesel within the last month are:
 -Sprague Energy celebrated the opening of the company's first biofuel facility at its Albany, N.Y. terminal. Gov. George Pataki attended. The availability means more home heating and diesel retailers throughout New York will be able to supply blended biodiesel to their customers. 
 -RKA Petroleum Cos. became the first terminal facility in Michigan to offer pre-blended biodiesel. A Michigan-based petroleum company, RKA is now offering electronically blended biodiesel at the rack at its terminal facility in Romulus, Mich.
 -Distribution Drive, a wholly owned subsidiary of Earth Biofuels, Inc. and Motiva Enterprises, an oil company headquartered in Houston, Texas, announced that the Motiva Enterprises terminal in Dallas will now offer biodiesel at any blend level.

Petroleum terminals integrate pre-blended biodiesel

Case New Holland (CNH) Global N.V. announced April 3 that its leading agricultural and construction equipment brands fully support the use of B5 blends in all engines it manufactures. In addition, use of B20 is within consideration.
 
 The statement covers Case IH and New Holland agricultural equipment, and Case and New Holland construction equipment brands.

 
 CNH said B5 blends must meet the requirements of U.S. standard ASTM D 6751 on the base biodiesel stock, or European standard EN14214. When using B20, certain handling and maintenance requirements come into play, and customers are advised to speak with their dealers on specific issues.
 
 "The National Biodiesel Board (NBB) has been working with CNH on biodiesel support, and we see its announcement as an encouraging step for increased biodiesel usage in CNH equipment," said Darryl Brinkmann, chairman of the NBB and a soybean grower from Carlyle, Ill. "Farmers are important customers to companies like CNH, and we believe that farm equipment manufacturers should be leaders in promoting biodiesel use. The NBB is committed to working with CNH to achieve full support for B20, and we are pleased that they are heading in that direction."
 
 CNH officials said they are committed to working with partners to push toward higher-level biodiesel that will be a compatible fuel source in future low-emissions-compliant engines. CNH has initiated aggressive field tests to evaluate the performance with 100 percent biodiesel. 
 
 More information about CNH and its Case and New Holland products can be found online at <a target="_blank" href="http://www.cnh.com">www.cnh.com</a>.

CNH announces full support of B5, considers B20

The United Soybean Board and soybean checkoff presented John Deere Co. with an Outstanding Achievement Award at the Commodity Classic's American Soybean Association Awards Banquet on March 6. John Deere's B2 biodiesel factory-fill program puts B2 in John Deere's diesel-powered, self-propelled machines made in the United States. The program used more than 1 million gallons of biodiesel in its first year.

USB presents John Deere with award for factory fill

Qualisoy, a soybean industry collaboration that markets soybeans for healthier, more functional products, named members of its 2006 board of directors and executive committee in late February.
 
 At the board's meeting in Minneapolis, Chairman Jim Sutter welcomed new board members Todd Allen, David Schmidt and Philip Bradshaw of the United Soybean Board, John Jansen of Bunge Oils and Rob York of ACH Foods. Jim Bowman of Monsanto took the place previously held by colleague Kerry Preete, who assumed a new role within the company.
 
 Then, the board of directors named its 2006 executive committee, consisting of Sutter of Cargill; Bowman; Ike Boudreaux and John Becherer of the United Soybean Board; and Dennis Byron of Pioneer Hi-Bred International Inc.

Qualisoy appoints 2006 positions

Qualisoy, a soybean industry collaboration that markets soybeans for healthier, more functional products, named members of its 2006 board of directors and executive committee in late February.
 
 At the board's meeting in Minneapolis, Chairman Jim Sutter welcomed new board members Todd Allen, David Schmidt and Philip Bradshaw of the United Soybean Board, John Jansen of Bunge Oils and Rob York of ACH Foods. Jim Bowman of Monsanto took the place previously held by colleague Kerry Preete, who assumed a new role within the company. Then, the board of directors named its 2006 executive committee, consisting of Sutter of Cargill; Bowman; Ike Boudreaux and John Becherer of the United Soybean Board; and Dennis Byron of Pioneer Hi-Bred International Inc.

UBS, a Swiss investment bank, and Diapason Commodities Management, a Swiss commodities operator, together launched the first biofuels index for trading in commodities used in production of ethanol and biodiesel, according to Tatjana Domke, spokeswoman for UBS.
 

 The UBS Diapason Global Biofuel Index is published in U.S. dollars, euros, Swiss francs and Japanese yen. The index is made up of futures contracts on 10 physical commodities, including corn, two types of sugar, wheat, barley, rice and lumber in the ethanol group and rapeseed, canola and soybean oil in the biodiesel group. At press time, biodiesel had a 16.99 percent weight on the index.

First biofuels index launches March 7

The Manitoba Biodiesel Board, formed in March, was recently allocated $1.5 million from the federal government to distribute through the newly developed Manitoba Biodiesel Production Program. The program was formed to aid full-scale commercial biodiesel facilities that produce at least 2 MMly (0.5 MMgy). Plants can apply for this funding; applications sent to the board must include a comprehensive business plan and will be reviewed on an ongoing basis. The board can grant up to $250,000 per project, which can cover construction, production and salary costs for financing, building or expanding a plant.

Manitoba Biodiesel Board established

As the manufacturer of diesel-to-natural-gas conversion technology adding a biofuels division to its operations, Hybrid Fuel Systems has changed its name to U.S. Energy Initiatives Corporation. The biofuels division's main objective will be to produce biodiesel with zero emissions that is completely made in America. U.S. Energy Initiatives, based in Atlanta, Ga., plans on combining the sales of its conversion technology with biodiesel, integrating several components in order to offer end-users an economical option with powerful environmental benefits, according to U.S. Initiatives CEO Mark Clancy.

Hybrid Fuel Systems changes name, adds biofuels division

The University of New Hampshire (UNH) will soon use a MPB Bioenergy processor to convert waste vegetable oil used in its dining facilities into biodiesel. This product will be used as fuel on campus to heat greenhouses and other facilities, and to power stationary diesel equipment. According to MBP President Jim Proulx, the UNH installation will be the first of many for the company that will enable universities and cities to convert waste into renewable fuel. Interns from the university's Office of Sustainability will collect waste oils at five dining facilities on campus and track the amounts to be recycled.

MPB Bioenergy signs UNH biodiesel production contract

According to founder John Plaza, Seattle Biofuels in Washington has changed its name to Imperium Renewables. Plaza said the change was necessary to expand the company's reach both geographically and product-wise. The company, which oversees biodiesel producer Seattle Biodiesel, will first look at producing biodiesel in other regions domestically and abroad before branching out into other renewable products, such as hydrogen from biodiesel (see BIObytes).

Seattle Biofuels changes name

In late February, GreenFuel Technologies Corporation announced the formation of a new position-vice president-international development-and a person to fill that position. Paul Rodzianko, GreenFuel's former board chairman, took the role, which was formed in response to increasing international interest in the company's unique carbon management process. His new duties will include developing mutually beneficial licensing relationships with a select group of partner organizations capable of executing multiple large-scale installations.

GreenFuel creates new vice president position

The biodiesel industry lost one of its pioneers March 1 with the death of Virginia Biodiesel Refinery Managing Partner Doug Faulkner. The message was posted on Virginia Biodiesel Refinery's Web site, <a target="_blank" href="http://www.virginiabiodiesel.com">www.virginiabiodiesel.com</a>. Faulkner's passing came on the second anniversary of the plant opening.
 
 Faulkner was instrumental in getting biodiesel into the national vernacular when his facility hosted President George W. Bush last May, marking the first time a U.S. president had visited a biodiesel plant.

Virginia Biodiesel Refinery's Faulkner passes away

Handling, delivering and blending biodiesel has, in years past, been expensive and uniquely challenging, from both a logistical and procedural standpoint. For example, the terminal infrastructure required to bring the biofuel and its petroleum counterpart together for blending has not always existed when and where consumer demand has. The situation is vastly improved today, though, as the U.S. biodiesel industry plows forward with a historic expansion now marked by the construction of at least 27 facilities in addition to 46 existing plants, a handful of which are expanding. What is often overlooked by observers of industry growth is the comparably emergent biodiesel distribution infrastructure-something the ethanol industry calls its "virtual pipeline"-that is rising in sync with capacity and demand. 
 No, the modern biodiesel industry isn't beyond every supply chain challenge it faced five or 10 years ago, but progress has been steady. New developments have made winter handling of biodiesel blends easier, for example, and the biofuel is now less susceptible to contamination and degradation during storage. Biodiesel is now transported by both road and rail, of course, and more production plants and fuel terminals have installed automated systems that allow wholesale customers to fill their own tanks. 
 That's a sort of "30,000-foot view," but what's happening on the ground, behind the scenes? How does biodiesel-and ultimately biodiesel blends-travel from point A to point B? The answer is both intricate and varied, but the industry professionals engaged with the biofuel's supply chain can provide valuable insight.
 
 A Smoother Process
 The U.S. Department of Transportation's interstate weight requirements place limits by weight and call for fuel-carrying tankers to be measured with precision. Union County Biodiesel LLC, a 5 MMgy plant in Morganfield, Ky., is among a growing number of producers now equipped with metered pumps that conveniently fill tankers to capacity with speed and accuracy. Plant Manager Andy Sprague describes the process as a worry-free component of plant operations, so much so that he tells Biodiesel Magazine load-out is now a "minor" operational focal point. 
 
 Sprague says a load of biodiesel takes up less volume, pound-for-pound, than petroleum diesel. A super tanker, for example, can legally haul 80,000 pounds of fuel. Biodiesel weighs about 8.5 percent more than petroleum diesel, so trucks rolling away from plants like the one in Morganfield are carrying approximately 6,800 gallons less fuel than what is standard by petroleum industry standards. 
 
 Union County Biodiesel's load-out is exclusive to trucks, and the plant usually fills two per day. The facility works with multiple distributors, and each one not only markets (i.e., buys and sells) the plant's biodiesel, but carries the expense of transporting the fuel, too. "Every gallon is picked up at our gate," Sprague says, explaining that while the biodiesel produced at some U.S. plants is shipped to far-off destinations, almost all of the fuel made at Union County Biodiesel is consumed in the northwest part of the state, a region that borders Indiana and Illinois. "Most of our distributors are within a 60-mile radius [of the plant], and we don't know if they take the product another 60 miles, but we feel most of our biodiesel is consumed within a 125-mile radius," Sprague says. 
 
 Demand for biodiesel is on the rise nationwide, and although more than 300 MMgy of additional capacity is under development, supplies are relatively tight. For now, that means most biodiesel producers don't have to look far to find markets for their product. "We're in that good place," Sprague says. "[Oil prices are] high and biodiesel demand is high, which typically yields a strong market. … Farmers, [in particular], want to consume their own product. It has been my experience that when demand is high, consumers who want the product are willing to come and get it."

 
 Injection Blending Becomes Routine
 At the consumer level, most U.S. biodiesel is purchased in low-level blends with petroleum diesel-B2 and B5, for instance-which means blending processes are a major component of distribution. Don Irmen, a North Dakota-based marketing manager for the 12 MMgy West Central plant in Ralston, Iowa, tells Biodiesel Magazine injection blending is the way to go whenever possible. "Splash blending works well if it's done properly, but biodiesel weighs more than regular diesel. If it is not done correctly, [problems can arise]."
 
 West Central, which is not only a producer but also a distributor of biodiesel, has made it a priority to establish biodiesel hubs near petroleum terminals. That allows tanker trucks to fill up with biodiesel and petroleum diesel for blending at the same spot. 
 Even when biodiesel travels by rail from the Midwest to markets on the East and West Coasts, West Central still uses trucks to get the fuel to the tank farm where railcars are loaded, Irmen says. "What we rail out mostly goes to the East and West coast," he explains. "We ship about 60 percent of our biodiesel to customers, and the other 40 percent is picked up. Customers who own terminals will blend the product themselves." Irmen is referring to companies like Countrymark Co-op, an Indiana-based petroleum company that specializes in meeting the needs of agricultural and on-road diesel customers in the region. Countrymark, which offers a complete line of fuels for transportation and stationary applications, is arguably one of the petroleum industry's strongest supporters of biodiesel and now blends about 75 percent of the diesel it sells with the renewable fuel, primarily at low levels. 
 Dennis Reynolds, terminal manager for Countrymark, says the company's Jolietville, Ind., terminal was the first metered biodiesel facility in the country, as well as the first to have a fully automated loading system and heated storage tanks. "A tanker driver pulls up to the loading racks, selects a product (a specific blend), hooks up the hoses and the machines do the rest of the work," Reynolds says. "We are pretty much out of splash-blending operations."
 Farmers in Indiana, Ohio and parts of Michigan make up the lion's share of Countrymark's customers and Reynolds says the soy-based biodiesel the company uses is a great way to create market differentiation and further integrate with the agricultural community. Countrymark's members hold contracts to transport biodiesel blends from the company's terminal to retail outlets across the region. 
 
 Knowledge is Key
 More and more terminals across the nation are following Countrymark's lead, putting high-speed biodiesel blending infrastructure in place. "The advantage of this is that distributors can go to one location to get various biodiesel blends," says Countrymark Sales Manager Steve Thomas, reiterating that Countrymark's terminals are state-of-the-art, equipped with fully automated loading racks, metered pumps and storage tanks and pipelines that are heated and insulated. 
 
 Biodiesel blends have sometimes been associated with certain cold weather storage and handling challenges, and despite a growing demand for the biofuel, Sprague says those issues have weighed heavily on the industry. "[Union County Biodiesel] has kind of been on hold while the weather warms up," he says. "We kind of limped along through the winter."
 
 The cloud point of biodiesel and biodiesel blends is an important factor to consider in transporting the fuel. Biodiesel must not be allowed to drop below its cloud point when en route to its destination. The National Biodiesel Board (NBB) recommends that the fuel be transported "hot" for truck and rail shipping, or blended with winter diesel, kerosene or another low-cloud-point fuel. 

 
 When handling biodiesel, there are other storage factors to consider other than cloud point and cold-flow properties. For instance, in terms of long-term storability, it's been said that pure biodiesel can degrade unit rubber, and can also be susceptible to degradation and contamination. Cummins Diesel has performed several tests on biodiesel in relation to how the fuel is stored and its performance in engines. Howard Fang, lead scientist of the fuel and lube division at Cummins, says biodiesel can degrade substantially over time if proper precautions are ignored. Subsequently, when the degraded biodiesel and/or biodiesel blends are burned in an engine it can corrode engine parts and leave deposits that plug pumps and other mechanisms. These problems, Fang says, might be related to oxidation. "If the fuel is not oxidatively stable, it might have a tendency to form a deposit, and it might have a tendency to corrode the metal parts."
 
 In performing its tests, Cummins placed biodiesel in storage tanks and examined the fuel every two weeks. "[Over time], you could clearly see that the biodiesel degraded substantially," Fang says. "In the beginning, methyl ester derived from the vegetable oil has a substantial amount of vitamin E-a wonderful antioxidant-but after [the vitamin] is used up, the biodiesel becomes vulnerable and the oxygen can easily attack the fuel. … Natural inhibitors play a major role." 
 
 Also, Fang says additive technology should be utilized by biodiesel producers and distributors. In addition, the NBB recommends that B100 be shipped in a way that does not lead to contamination. The association says trucks and/or railcars should be washed out before being loaded-and the only residual that is acceptable in a tanker is petroleum diesel.
 
 Demand Growing, 
 Some Buying In Bulk
 Rising Phoenix Biofuels in Phoenix, Ore., might be described as a biodiesel retailer, wholesaler and redistributor that truly views biodiesel challenges as opportunities. "We have heated tanks … so we can pump all winter long," says Abraham Harris, the company's manager. Rising Phoenix Biofuels has customers that buy in bulk and at the pump where B99.9 is sold. "We allow the 'fuel people' to blend ... and our price is more closely related to regular diesel than being a dollar more per gallon," Harris says. "There are a lot of people who buy 55-gallon drums and totes-we have a lot of farmers who buy bulk-but most of our traffic is at the pump.'' 
 
 Rising Phoenix Biofuels' biodiesel often originates in the Midwest, Harris says. "It comes by rail car to a fuel yard and we broker truck and trailer transport from the fuel yard to our tanks," he says. "When it is produced locally, it gets here by truck." 
 
 The fact that a company like Rising Phoenix Biofuels is unable to purchase all of its biodiesel regionally perhaps speaks volumes about the rising demand for the fuel-and not just in the heart of America's farm country. And if Harris' ambition is any indication of the direction of the industry, biodiesel blends may soon be available at highway stops nationwide. "There will soon be signs [on Interstate 5] in Oregon for Rising Phoenix Biofuels, so everyone knows where they can get biodiesel," he says. n 
 

 Nicholas Zeman is a Biodiesel Magazine staff writer. Reach him at <a href="mailto:nzeman@bbibiofuels.com">nzeman@bbibiofuels.com </a>or (701) 746-8385.

Incorporating biofuels into an infrastructure dominated by petroleum is the next practical step in reaching greater energy independence for the United States. As the biodiesel industry expands, so too does the supply chain matrix that supports it. The journey biodiesel takes from the facilities where it is produced to the pumps where it is dispensed is an integral, yet low-key, segment of the industry.

From the plant to the pump

About two years after the first biodiesel producer was accredited, BQ-9000, North America's only real biodiesel quality assurance program, is slowly but surely starting to catch on in the industry. While there are only five accredited producers signed up for the program and no certified marketers at the moment, 14 companies are currently in the application or audit process in either or both categories. 
 
 While those numbers are encouraging, it may be premature to deem the program triumphant at this point, according to Leland Tong, chairman of the National Biodiesel Accreditation Commission (NBAC). "It's like anything," he tells Biodiesel Magazine. You need some critical mass and … you reach a tipping point, so to speak. We're not quite there yet, but I think we can be there in the next year or two."
 
 With more companies signing on for both categories-including several industry leaders-it's bound to attract interest. "We are starting to get these folks that are saying, 'OK, this is the right thing to do,'" Tong says. "'Maybe it does take a little bit of time up front, but it's where our industry needs to be.'"
 
 Danny Norton, quality manager for Peter Cremer North America, and an NBAC commissioner for the past three years, has no doubts that the program is catching on in the industry. Peter Cremer, which became the first BQ-9000 accredited producer in 2004, is now among other companies working toward being listed in both categories. Norton foresees that a lot more marketers will seek certification in the next few years. "It's critical," he tells Biodiesel Magazine. "It's critical to what we do." 
 
 Program roots 
 BQ-9000 is a combination of documentation and reporting requirements similar to International Organization for Standardization paperwork and testing protocols that meet ASTM D 6751, the biodiesel industry standard. It's voluntary and open to all biodiesel producers, distributors and marketers across the United States and Canada, Tong says. 
 After a couple years of development, the BQ-9000 program was released Nov. 22, 2002. It wasn't exactly embraced immediately. "The initial acceptance of the program was slow, quite frankly," Tong says. "I think there were a lot of folks in the industry-we were relatively small at that point-who didn't feel like there was any need." 
 
 While it's fairly easy to make biodiesel, it's more difficult to make biodiesel that meets ASTM standards. "The prevailing attitude is that you can mix methanol and oil and a catalyst together in a big tank, and stir it all up and separate out the components and you've got ASTM biodiesel," Tong says. 
 

 In contrast, refiners will not accept any fuel that has not been tested and shown to meet specifications. "So, [would any producer] think that the biodiesel industry can get by with making product that hasn't been tested to meet the applicable specifications?" Tong asked. "That attitude has to change, otherwise we'll be seen as nothing more than a nuisance and a small-time industry to the petroleum guys."
 
 As much as he believes in the BQ-9000 program, Tong isn't saying it's the only avenue to success for biodiesel producers and marketers. However, standards to protect the integrity of the product are essential. "I'm not saying they've got to be BQ-9000. I'm saying that their philosophy towards quality has to be on the same level as a refinery or an oleo chemical company," he says. "And anything less than that is quite frankly unacceptable."
 
 In the end, it all boils down to testing. No biodiesel should ever leave production facilities without undergoing testing at some point in the process, Tong says. And in certain locations, albeit few, that's exactly what's happening. "It's maybe not a widespread industry thing, but … the fact is that we are getting fuel into the marketplace that does not meet specifications," he says. 
 
 The second half of that equation falls on the shoulders of marketers and distributors. "It doesn't do producers any good to produce a good product to have it messed up further down stream," Tong says, explaining that when there's a problem with biodiesel, it doesn't just affect the companies involved, it gives the whole industry a black eye. Norton agrees, saying, "It would be bad for Peter Cremer if someone else was out there selling biodiesel that didn't meet the BQ-9000 standard. So it's important obviously that Peter Cremer become accredited, but we certainly enjoy seeing other companies becoming accredited as well. We can't have biodiesel obtaining a bad name out in the marketplace."
 
 Shifting Emphasis 
 So far, the NBAC has been concentrating its efforts on educating producers about the benefits of BQ-9000, Tong says. That's about to change in 2006-'07, however. In the next few years, the NBAC plans to target marketers, fuel procurement officers and fleet users by attending conferences, taking out advertisements and passing out promotional materials.
 
 As more consumers start to get familiar with the benefits of BQ-9000, Tong believes those companies will start to demand their suppliers become certified marketers. In fact, he's already gotten several calls about how BQ-9000 certification can be included in purchase contracts. And, in St. Louis, the Missouri Department of Transportation declared a preference for working with a BQ-9000 program, even though a marketer has yet to complete that process. 
 
 It's also garnering attention from vehicle manufactures. A B20 Fleet Evaluation Team organized by that industry to study if there are technical issues with using B20 gave the program a nod. One of the group's top recommendations was that B20 used by fleets come from BQ-9000 accredited producers and certified marketers. And that, in turn, should prod more marketers in the direction of the program. "When end-users start asking for-and see-the value in the BQ-9000 program, that's what really piques the interest of the marketer," Tong says. "It's pretty tough to push down a program on a marketer. It's a lot easier if the consumer is demanding it and pulling it through."
 As a BQ-9000 accredited producer, Peter Cremer has an advantage over other companies, Norton says. One example of that is the fact that DaimlerChrysler exclusively uses a B5 blend of the company's biodiesel in new diesel-powered Jeep Liberty CRD sport utility vehicles. Benefits like those are exactly why Minnesota Soybean Processors is working on becoming both an accredited producer of biodiesel and a certified marketer of the product says Steve Still, plant manger. First, the program just makes sense from a quality control standpoint. Next, he simply sees it as part of an industry trend. "If I look long-term to the biodiesel future … I foresee our customers asking for that kind of a commitment from us to ensure that we have a quality project," Still tells Biodiesel Magazine. 
 

 Others feel the same way. Gary McDonald, manager of administration for the Arkansas operations of Eastman Chemical Co., says customers look to the fact that the company is BQ-9000 accredited as an important part of doing business with them. "As a relatively new industry, quality is a key component of [widespread acceptance]," he says. "And I think the BQ-9000 [program] is an excellent tool to make sure that quality is in place."
 
 The Cost Factor 
 Stephen Chase, president/owner of Alliance Energy Services Inc., says his company may not be a certified marketer now, but he isn't against the idea. "I'm a great believer in quality and quality processes," he says. 
 
 With the end of the busy heating oil season, Chase plans to take a serious look at the program. West Central, the company Alliance Energy Services gets its biodiesel from, has spoken to him about getting on board with BQ-9000. "They want to make sure the product that they deliver is a quality product all the way down the chain," he says. 
 Alliance Energy Services already has several testing and quality assurance measures in place, so taking the step to become certified isn't a big deal. However, he does consider it a hefty investment. "I think if they do something about the cost there would be a lot more people doing it," he says. 
 
 The BQ-9000 program costs producers and marketers the same amount to get accredited or certified, Tong says. Initially, it costs $2,500 for auditing fees and $750 for an application fee. In two years, recertification costs $1,750. 
 
 Although the fees do generate revenue, the majority goes to the company doing the audit. It may seem like a lot of money, Tong says, but it simply costs quite a bit of money to hire an auditor. Then there's the opportunity for added value. "If it gives you an opportunity to better market yourself, you probably can recoup those [BQ-9000] costs, quite easily," he says. 
 
 Plus, the potential cost of not having the proper testing procedures and standards in place is much more taxing. Really, marketers should look at BQ-9000 as a risk-mitigation program, Tong says. Weighing the cost of the program with the cost of pumping biodiesel out of a customer's tank or having to fix damaged vehicles, it just makes sense for marketers to be certified. 
 
 Other Challenges

 Implementing BQ-9000 protocols can be difficult for marketing and distribution companies, admits Mark Tarrien, quality control manager for World Energy and an NBAC commissioner. World Energy has been working on becoming a certified marketer since the program was first released. 
 
 The main difficulty for marketers is that the product can change hands many times before it reaches the end-user. The larger the company, the more difficult it is to implement BQ-9000. "Because on the certified marketer side, it is pretty strenuous as far as sampling and testing," Tarrien says. "For companies that have a very large supply chain, that becomes increasingly difficult."
 
 Most of the company's quality management practices already follow BQ-9000 procedures rather closely. However, once it's certified, those practices will be implemented further down the line. 
 
 The program is definitely the wave of the future for the industry. Tarrien predicts biodiesel customers will simply demand certification or accreditation within a year or two. "BQ-9000 might not be an added value for you or your product, but it will be essential for what you have to be to be in the market," he tells Biodiesel Magazine. "So if you are not BQ-9000 certified or accredited, you are not going to have the opportunities as far as contracts."
 
 Gus Kellogg, founder of Greenleaf Biofuels, says his company has only considered becoming a certified marketer on a cursory level. Since most of the biodiesel his company distributes comes from World Energy, he wonders how far down the supply chain companies will see value in becoming certified. In other words, once World Energy is officially a certified marketer, can Greenleaf simply tell customers it has obtained its supply from a BQ-9000 company? 
 
 No matter the answer to that question, Kellogg sees value in the program. "Even though there are some issues with it, I'm glad to see that there is a quality assurance program in place," he says.
 
 For more information about BQ-9000, check out www.bq-9000.org, e-mail <a href="mailto:info@bq-9000.org">info@bq-9000.org</a>or call (573) 635-3893. 
 
 Holly Jessen is an Biodiesel Magazine staff writer. Reach her at <a href="mailto:hjessen@bbibiofuels.com">hjessen@bbibiofuels.com</a> or (701) 746-8385.

By no means has every American biodiesel producer and distributor jumped on board with BQ-9000, but interest is steadily increasing with each passing month. Does the program have what it takes to shape the future of the industry?

BQ-9000: Gaining Momentum

Just a few decades back, as much as 20 percent of American households relied on heating-oil-fed boilers for warmth during frigid seasons of the year. That started to change-and kept changing-when natural gas entered the scene in the mid-1960s. In effect, heating oil was systematically edged out of many northern U.S. markets, so much so that fewer than 10 percent of U.S. households now use heating oil as a primary feedstock for heat. 

 
 From its inception, natural gas was billed as a clean, inexpensive way to heat homes-and it is-while heating oil got a bad rap for being a "dirty" fuel, and one susceptible to price volatility. In essence, the fuels were, and are, as different in form and reputation as in the way they are sold and distributed. There is typically only one provider of natural gas per market, which contrasts sharply with the much more decentralized heating oil market, characterized by several small companies competing for each individual customer within a given region. That's been an Achilles heal for heating oil. The very nature of the heating oil industry-small and independent-made it susceptible to fragmentation. So when natural gas encroached on territories once dominated by America's mainstay heating fuel, distributors were slow to organize and react. The pipelines moved in and the heating oil tanks moved out. 
 
 After years of market decline, something had to be done. The National Oilheat Research Alliance (NORA), a national check-off program, was formed in 2000, not just to preserve what was left of America's heating oil market, but to try make it grow. The timing was just right. Biodiesel had arrived on the scene and more and more people were touting it as a viable blend with petroleum diesel fuel. Paul Nazzaro, president of Advanced Fuel Solutions Inc., a petroleum industry consulting firm, quickly identified the potential symbiotic relationship for biodiesel and heating oil by pairing an "industry that needed help with an industry that was eager to help," he says.
 
 That was half a decade ago. Since then, blends of the renewable fuel with traditional heating oil-now commonly referred to as "bioheat"-have gained considerable acceptance in the Northeast and Northwest, where heating oil is still common. Nazzaro explains that biodiesel gives heating oil an opportunity to change its reputation, to become a cleaner, environmentally friendly, American-made fuel. That is, with biodiesel in its coffers, heating oil can claim several marketing advantages over natural gas. But it's not a one-way street-this is a terrific symbiotic relationship, a thing of mutual benefit. While biodiesel gives heating oil a hip new image, heating oil gives biodiesel a ready-made market that augments its use as a transportation fuel and steadies demand for the alternative fuel in the winter.
 
 Coming off the 2005-'06 heating season, all indications are that bioheat is continuing to make headway with petroleum companies, biodiesel producers, wholesalers, distributors and customers alike. The strength of the supply chain-and what appears to be a rising consumer pull for the product-perhaps means bioheat is becoming more than just a niche biofuels market. However, the fate of biodiesel-blended heating oil lies in the success and continued use of heating oil itself. 
 
 Is the Market Going to Be There? 
 Even at just 10 percent of the U.S. market, heating oil is used by more than 9.5 million households per year, according to Don Farrell, publisher of Oilheating Journal. NORA represents heating oil companies in 23 states and regions in the United States. An additional market is represented by the Canadian Oil Heat Association (COHA), which serves five provinces. NORA states represent over 92 percent of total heating oil sales, or about 7 billion gallons per year. 
 Industry experts have mixed opinions about the market for heating oil. Consumption of heating oil did increase in the 2004-'05 season, according to NORA, which reported in January 2005, "Nationally, residential heating oil sales increased by 550 million gallons or 8.6 percent to 6.9 billion gallons, the highest level since 1994. A sharply colder winter in the Northeast drove increased use."
 
 The 2005-'06 winter was quite mild and consumption of all heating fuels were down from the previous year. But experts say winter temperatures, while still indicative of use, are no longer the only factor influencing heating oil demand. 
 
 Gary Hess, service and installation manager of heating oil retailer Worley & Obetz Inc., says there is no doubt the heating oil industry is shrinking, but not from customers switching to natural gas. Instead, he points to an increased efficiency of customer equipment as the cause of decreased consumption.

 
 Efficiency is a good thing, and no one's grumbling about that. Plus, even though the market for heating oil doesn't appear to be growing at the moment, it represents a major market opportunity for the biodiesel industry. In fact, just 1 percent of the 7 billion gallon heating oil market represents a 70 MMgy market for biodiesel. If B5 bioheat was mandated nationwide, it would require at least 350 MMgy. This might be considered a small number when 1 percent of on-road diesel fuel demand is also 350 MMgy. However, Nazzaro points out that U.S. production and consumption of biodiesel in transportation fuels (mostly in low blends) totaled just 75 MMgy in 2005. The question is, however, can bioheat capture 1 percent, 2 percent or 5 percent of the heating oil industry? Nazzaro says it's a "slam dunk." 
 
 Nazzaro is adamant about his claim because the market for bioheat is a geographic one. In other words, while heating oil is used throughout the country, it is primarily concentrated on the East Coast. The 14 states within New England and the Mid-Atlantic comprise 73 percent of the U.S. heating oil market. "The heating oil market in the Northeast is at least two-to-one that of diesel fuel (for transportation)," says Joel Glatz, who in addition to being vice president of Frontier Energy, is also vice president of Biofuel Brokers LLC. "In Maine we use 150 MMgy of diesel fuel and 400 MMgy for heat. It's obvious that the larger market is in heating oil."
 
 World Energy Alternatives LLC is a producer, distributor and marketer of biodiesel. President and CEO Gene Gebolys says that biodiesel for bioheat blending is still a relatively small percentage of the company's total sales. When asked about future sales, he projects, "As a large part of our sales, I wouldn't expect it to get over 10 percent to 15 percent." However, Gebolys qualifies his statement by telling Biodiesel Magazine, "It could get much bigger. … The bioheat industry has huge potential."
 
 Logistical Challenges
 The geographic market-combined with competitive, individual retailers-present both opportunities and challenges. Until recently, if a heating oil retailer wanted to sell bioheat, it would employ a "splash blending" method, in which it would mix biodiesel from one terminal in the delivery truck with heating oil from another terminal. This method can add time and expense as well as compromise quality. Beyond that, splash blending effectively makes bioheat a boutique fuel and does not establish continuity within the industry.
 Nazzaro explains that this "prehistoric method" is not conducive to nurturing bioheat into a viable product. It is crucial for large wholesalers to provide pre-blended fuel, as that is where most retailers acquire fuel. "They need to put those assets in place to get growth," he says. "Commercial infrastructure will make or break the bioheat market. If it's not available-even if [the retailers are] embracing it, they won't buy it."
 
 March 30 marked a huge step for the bioheat industry, as Sprague Energy opened a biofuel terminal in Albany, N.Y. It is the first terminal in the Northeast to offer ratio blending of biodiesel, and arguably the only terminal that will also provide blends for heating purposes. "We provide the most sought after blends of bioheat and biodiesel, which are B2, B5 and B20," says Tim Keaveney, manager of premium fuels and biodiesel marketing for Sprague. "Sprague is endorsing both NBB and NORA recommendations to introduce bioheat in B2 to B5 blends."
 
 Sprague is one of the largest heating oil wholesale companies in the area; it sells 20 percent of all heating oil in New England. "It was a landmark day because it was the first time anyone of our magnitude introduced biodiesel at a terminal," Keaveny says.
 
 Bioheat is still in its infancy stages, and faces more challenges than infrastructure. Of course, there are the logistical challenges of getting biodiesel to the center of bioheat applications from the center of production. Additionally, because heating oil gets used in one season of the year, large volumes must be accumulated and stored, Gebolys says. However, "because so many people are buying heating oil that has a fixed price guarantee, that means a lot of the heating oil procurement is done in futures contracts," he explains. "That provides real opportunities for biodiesel to make a contribution."

 
 Gebolys also describes a financial drawback to producing and trading biodiesel for bioheat: "Heating oil trades at a discount to onroad diesel fuel. Generally you want to sell to most expensive distillate markets, not least expensive." A solution identified by Biofuel Brokers is to index biodiesel in a package similar to that found in petroleum markets, Glatz says. "We're offing a contract to heating oil and diesel distributors that are similar to what they're familiar with."
 
 Getting Hotter
 Despite the challenges, most of those involved with the heating oil industry identify a market with all the potential. "There are more pressures toward the success of bioheat than there are toward the obstacles," Gebolys says. Industry organizations, such as the NBB and NORA, are working together to promote bioheat. This last season saw NORA in an aggressive campaign to market heating oil as a clean fuel. "If we're going to get homeowners excited, NORA is where it is," says Farrell.
 
 To market to consumers, Glatz believes the opportunity for the heating oil marketer is great because heating oil is a commodity. "If you're in the retail heating oil business, you're in the same market and sell the same product," he says. "So how do you differentiate from 10 other companies in the market? With bioheat, you have a totally different product-cleaner, renewable, domestic ... red, white and blue." n 
 
 Anduin Kirkbride McElroy is a Biodiesel Magazine staff writer. Reach her at 
 <a href="mailto:amcelroy@bbibiofuels.com">amcelroy@bbibiofuels.com </a>or (701) 746-8385.

Bioheat-biodiesel blended at various levels with residential heating oil-has been gaining considerable support and market growth over the past three years, especially in the Northeast where heating oil is still predominantly used to heat homes and buildings. After this past heating season and projecting into the next, some claim that bioheat is more than just a niche market. Rather, it represents "an explosive time for the industry," a time for which bioheat is getting fired up.

Another Good Winter for Bioheat

Businesses routinely enter into confidentiality agreements. These agreements are used for a number or purposes, primarily to protect information exchanged between businesses as they consider a possible relationship. Perhaps because these agreements are so common and their provisions seemingly so easy to understand, businesses often fail to review them carefully. Often, however, careful review discloses risks that are not obvious at first glance.
 
 Risks to the disclosing party
 Primarily, a business disclosing confidential information is primarily concerned that the information is properly protected. Unfortunately, the terms of confidentiality agreements can often hinder that protection in unexpected ways. 
 

 Often, the confidentiality agreement will not cover all of the information the business considers confidential, at least not without additional work on the part of the disclosing business. Many forms of confidentiality agreements, for instance, require that information be marked or otherwise identified as confidential by the disclosing party, but not all businesses have procedures in place to ensure that the marking or identification actually occurs. Information disclosures that do not meet the requirements of the confidentiality agreement will not be protected by the agreement. Once confidential information is disclosed without the proper protection, the business can no longer claim that information as a trade secret or otherwise proprietary. 
 
 Confidentiality agreements also often limit the time period in which information has to be treated as confidential. Once that time period has expired, there is no longer any restriction on use or disclosure of confidential information received under the agreement. This artificial limit can severely reduce the value of any confidential information disclosed under the agreement. 
 
 Another problem arises when the confidentiality agreement does not limit the use of confidential information disclosed under the agreement. Generally, the party receiving information should be limited to using that information only for the purpose for which it was disclosed. Without such a restriction, the receiving party could use that information for any purpose, including the development of competitive products.
 
 Risks to the receiving party
 The receipt of confidential information under a confidentiality agreement can also adversely affect a business. For example, when a business receives information that overlaps information already in the possession or knowledge of the business, use of that knowledge might appear to be a breach of the confidentiality agreement. Proving prior knowledge can be difficult, and disclosing parties can be very aggressive when they believe their confidence has been betrayed.
 
 Measures can be taken to reduce the likelihood of these problems occurring, and to increase the likelihood of a successful resolution if these problems do occur. One approach is to limit the number of individuals who are exposed to confidential information received from other businesses. In fact, some businesses establish special teams to conduct confidential business and product evaluations. Such teams are often used to isolate research and development personnel from potentially conflicting product ideas from outside the business.
 
 Confidentiality agreements in context
 The disclosure and receipt of information under a confidentiality agreement can create other risks to a business. These risks can be properly evaluated only in the context of the confidential information to be disclosed and received, the purpose for the disclosure of that information, the circumstances under which that information will be disclosed, and the terms of the applicable confidentiality agreement. Carefully considering the risks involved in a confidential information exchange can give a business the opportunity to reduce or eliminate many of those risks, whether by changing the terms of the confidentiality agreement, or by establishing procedures for disclosing and receiving information under the agreement.
 
 Mark Hanson and Todd Guerrero are members of the Agribusiness and Energy Practice Group of Lindquist & Vennum PLLP, a leading provider of legal assistance on renewable energy projects throughout the country. Tim Keller, a partner with the firm specializing in technology transfer and intellectual property matters, contributed this article. They can be reached at (612) 371-3211.

Hidden issues in confidentiality agreements

Legal Perspective

Following Congressional passage of the Energy Policy Act of 2005, which included a much-coveted extension of the biodiesel tax incentive through 2008, soybean farmers and the U.S. biodiesel industry face more challenges than ever. However, together we're poised to tackle a myriad of issues, such as biodiesel imports, implementing-and extending-the biodiesel excise tax incentive and the federal renewable fuels standard (RFS), Farm Bill Energy Title programs like the Commodity Credit Corporation's (CCC) Bioenergy Program, and appropriations projects like the Biodiesel Education Grant Program. 

 
 All of these items have made biodiesel a hot issue on Capitol Hill, setting the tone for the second session of the 109th Congress. To sort through these issues and develop consensus on 2006 policy priorities, a group of soy biodiesel stakeholders met in Washington, D.C., on Feb. 16. Here's a look at just some of the legislative priorities identified at that gathering. 
 
 Extending the biodiesel tax incentive
 Extension of the biodiesel tax incentive by at least two years beyond its scheduled expiration at the end of 2008 is a top priority. On March 14, Sens. Chuck Grassley, R-Iowa, and Max Baucus, D-Mont., introduced the Alternative Energy Extender Act (S. 2401). This legislation extends renewable tax incentives-including the biodiesel tax incentive in the Volumetric Ethanol Excise Tax Credit (VEETC). Specifically, the bill includes: 
 -A "biodiesel and alternative fuel excise tax credit" that extends the biodiesel excise and income tax credit for biodiesel, biodiesel mixtures and renewable diesel through 2010
 -A "refueling property credit" that extends a 30 percent tax credit (enacted in the Energy Policy Act of 2005) on the cost of installing clean-fuel vehicle refueling property, such as biodiesel blends of B20 or greater. It would also expire at the end of 2010 
 -A revision and extension of the "small agri-biodiesel producer credit" would make the 10-cents-per-gallon credit, now only applicable to 15 MMgy of production or less, available to as much as 60 MMgy of production. It would also expire at the end of 2010. 
 These incentives would harmonize other important tax credits through 2010, which will help deliver subsequent extensions beyond that date.
 
 CCC Bioenergy Program funding
 Funding for the CCC Bioenergy Program has fallen from the authorized level of $150 million to $100 million in fiscal year 2005 and $60 million in fiscal year 2006. Farmers and stakeholders will continue working with the USDA to ensure biodiesel receives no less than the $25 million allocated in fiscal year 2005 and 2006. Further, the 2002 Farm Bill eliminates funding authority for the CCC Bioenergy Program in fiscal year 2007. Key players must work with the USDA and members of Congress to ensure CCC funds continue to be provided for biodiesel production in fiscal year 2007.
 
 Biodiesel and feedstock imports 

 There are concerns that increasing the biodiesel tariff to offset the value of the tax incentive or restricting agri-biodiesel feedstocks to the list included in the JOBS bill could violate U.S. World Trade Organization (WTO) obligations. The American Soybean Association is exploring these concerns and examining other ways to address imported biodiesel and feedstocks. These approaches include tightening industry standards for biodiesel, exploring other tax code provisions and restructuring CCC support for domestic biodiesel production as described earlier. 
 
 Finding an appropriate RFS value for biodiesel 
 The U.S. EPA is working on a ruling that will establish an appropriate value for biodiesel under the RFS credit-trading program. The biodiesel industry is urging for biodiesel to be given at least a 1.5 to 1 value based on its Btu content. The industry is working with renewable fuel stakeholders to reach an agreement on a mutually acceptable approach that could be adopted by the EPA.
 
 Looking forward
 In addition to these priorities, the biodiesel industry will look toward the 2007 Farm Bill by analyzing the potential pros, cons and likely impacts of establishing a program to provide payments or other incentives to producers of "energy crops." The European Union already has a similar program in place, considered "Green Box" for WTO purposes. Some key legislators have expressed interest in this approach. 
 
 Furthermore, the 2007 Farm Bill should have a robust Energy Title. The one in the 2002 Farm Bill included several programs that benefit biodiesel, such as the Biodiesel Education Grant Program. It has been a major success in helping educate consumers and major constituent groups (i.e., original equipment manufacturers, truckers) about the benefits of biodiesel. This program needs to be reauthorized as part of a strong Energy Title. With farmer and industry support built on success, the biodiesel industry is well on its way to healthy growth.
 
 Mark Palmer is a Washington, D.C., representative of the American Soybean Association. Reach him by e-mail at <a href="mailto:mpalmer@gordley.com">mpalmer@gordley.com</a>.

Biodiesel policy fueling a buzz on Capitol Hill

Talking Point

So many people think that by building a plant, they're in the fuel industry," says Mack Findley, biodiesel sales manager for Peter Cremer North America LP. "They're not. We're in the manufacturing industry."
 
 That statement sums up a crucial axiom in the biodiesel industry. Just because one can produce quality biodiesel doesn't mean it's going to get sold. There is often a wide gulf between the producer and the potential consumer.
 
 Enter TransMontaigne. With a growing infrastructure and an emphasis on quality, the Colorado-based company is bridging that gulf through its trademarked biodiesel supply chain platform, Navitus. While the program has taken time and effort to build, it's beginning to pay off. For TransMontaigne, it couldn't have come at a better time, coinciding with the explosive growth of the biodiesel industry.
 
 "We believed it was the birth of a new segment of the supply chain, and that segment has critical needs for it to integrate with the refined product slate," says Rick Eaton, TransMontaigne's executive vice president of supply chain services. "Providing that integration, for a company like TransMontaigne, was a very logical choice."
 

 Eaton says the company entered the biodiesel market because it presented an opportunity to be proactive and join an industry still in its infancy-or perhaps its youth. The company also felt biodiesel was compatible with its core competencies. The challenge is integrating that into the refined petroleum market. "You're really integrating the feedstock supply chain, biodiesel supply chain and a refined products supply chain," he says.
 
 It's certainly easier said than done. "Initially, the real challenges were the concentration of biodiesel production capacity," Eaton says, explaining that the lack of infrastructure to get biodiesel out of its traditional agricultural stronghold and into larger fuel markets presented a daunting task.
 
 "One of the things the biodiesel industry is facing in its development is the infrastructure piece of the business," says Gary Haer, soy products sales manager for West Central. "[Companies like TransMontaigne provide] the critical link between biodiesel production and the diesel consumer." 
 
 From Refinery Gate to Point of Consumption 
 Operating physical assets primarily east of the Mississippi River, TransMontaigne has prime access to the East Coast and Gulf Coast petroleum refinery infrastructure. Coupled with supply chain services spread nationwide, the company is a perfect gateway for biodiesel expansion.
 
 Boiled down, TransMontaigne is a refined petroleum products marketing, distribution and supply chain management company. It manages the acquisition, distribution, transportation, price risk and administration of numerous refined petroleum products throughout the supply chain. TransMontaigne also owns, operates, builds and manages specific pipeline and terminal assets.
 
 With all its petroleum industry experience, TransMontaigne was in a prime position to enter the biodiesel industry, or more appropriately, to oversee the biodiesel industry's entrance into the petroleum supply chain.
 
 We were on a big learning curve," Eaton says. "That was part of the design. We wanted to get in and learn the functional requirements of the supply chain regarding the economics around the procurement market and distribution, blending, heating, handling and coproducts." 	
 
 They've also needed to gain knowledge on the physical handling aspects of biodiesel, such as those concerning splash blending and line blending. The education should pay off with the introduction of ultra-low-sulfur diesel (ULSD). "Remember, all these changes in the supply chain, if it impacts distillates, it impacts biodiesel," Eaton says. "It is somewhat of a domino effect. The complexity of the refined product supply chain and its impact on tankage, storage and distribution has made the integration of biodiesel a more difficult task."

 
 Quality Throughout the Supply Chain 
 BQ-9000 is a program well-suited to TransMontaigne's supply chain activities. The company holds high standards for any biodiesel entering its control. That's why it tends to work with BQ-9000 accredited biodiesel producers, such as West Central and Peter Cremer.
 
 Findley and Haer see the relationship as mutually beneficial. "They see biodiesel as providing added value to their customer base, by bringing in a renewable, cleaner-burning fuel and making it available to their customers," Haer says. "It's a very exciting relationship we have with them."
 
 Haer tells Biodiesel Magazine that West Central has been working with TransMontaigne for approximately 18 months. "It's a matter of taking production of biodiesel and tapping it into a developed infrastructure," he says. "That's not just the tanks, but a whole platform that provides value to that diesel fuel customer. That has been the real exciting part; our capability of taking production and having access to that." Eaton says the initial work with Peter Cremer and West Central allowed TransMontaigne to obtain quality product that allowed for consistent supply and benchmarking.
 
 The next step is TransMontaigne's BQ-9000 Certified Marketer application, which is currently being reviewed by the National Biodiesel Accreditation Commission. It opens the door for the first vertically integrated BQ-9000 program. 	
 
 "What it means for the supply chain in general, is sort of a vertically complete supply chain where the integrity of production can be documented through the supply chain," Eaton says. "It will accurately reflect what was contracted."
 
 Eaton continues, "The BQ-9000 program is really a catalyst for biodiesel and its seamless integration. It's providing transparency to the quality of the supply chain for the consumer."
 
 Mapping the Industry:

 From Feedstock to Fuel Tank 
 TransMontaigne is not only interested in vertical integration from biodiesel production to consumer, but going a step above that. The company is also interested in integrating into the feedstock end of the equation. "As time goes on-maybe not so much today-a good core competency in feedstocks will play well longer-term," Eaton says. "We want a strong management capability with feedstocks so that we can manage the economic impact of feedstocks with producers."
 
 For example, consumers may demand imported palm-oil-based biodiesel instead of railing in soy-based biodiesel from the Midwest. There is as much variation with production as with product quality when looking at specific feedstocks. It's something TransMontaigne is trying to stay on top of. 
 
 Eaton expects market segmentation based on feedstock sources to occur, to the point where it may be difficult to consider biodiesel a commodity. "We may see economic segmentation associated with feedstock product attributable to production and distribution channels," Eaton says. "That's why you have to be competent on the feedstock side."
 Eaton believes the BQ-9000 documentation will help ensure that biodiesel produced from specific feedstocks will end up where it's supposed to. And while the biodiesel production supply chain can be chaotic at times, the supply chain biodiesel needs to integrate into is just as complex. "Obviously, consistent availability and consistent quality are going to be very key ingredients in that," Eaton says. 
 
 TransMontaigne conducted testing and underwent changes to manage the distribution of everything from pricing and inventory, to building and distribution components at the bulk and retail environment. Through this process, the company determined market development issues, how different demand profiles reacted and the nuances of profiling demand. 
 Technology constraints were also addressed, as were logistical distribution and physical assets. Once all of these components were combined, the Navitus program was born. 	
 TransMontaigne worked on all these components so that whether it was dealing with a 10-gallon transaction or a barge load, the supply chain process was addressed "In a way, we were really trying to get an education in order to develop the process that would be in place as the industry ramped up and as the different quality of products emerged," Eaton says.
 
 Finding a Path into Florida
 An example of the payoff occurred when TransMontaigne turned on the south Florida valve for biodiesel by integrating biodiesel blends into one of its terminals in the Sunshine State. The company integrated B100 supplied by Peter Cremer into its 2,200-acre Port Everglades Coastal Fuels terminal in February 2005. The terminal has rack-blending capabilities, allowing TransMontaigne to offer blends ranging from B1 to B100.
 

 "We were sort of at the forefront of that port facility," Eaton says. "We were able to test the physical assets, but also find out what the marketplace requirements and expectations for biodiesel were."
 
 Water Taxi Inc. was one of the first users of that biodiesel. President Bob Beckhoff, whose company transports 365,000 people annually on the waterways surrounding Fort Lauderdale, says he encountered no problems using biodiesel. 
 
 "I think Florida will be a very good market," Eaton says. "Part of the premise of going down there is, we're optimistic about the potential in the marine industry." 
 However, Eaton warns, long-term success in the state and elsewhere will depend on a more diversified supply of biodiesel. Supply has been feast or famine in the state, which is limiting the amount of growth, he explains. 
 
 In Sync with Sysco 
 As the nation's largest foodservice company and owner of the country's largest private truck fleet, Sysco Corp. can't afford to take a chance on an unreliable fuel. That is why it requires BQ-9000 accredited biodiesel, which TransMontaigne has been more than happy to supply. Eaton says his company has been working with Sysco to develop a biodiesel usage program. TransMontaigne is already managing Sysco's fuel supply chain throughout the country. "We're mapping the incorporation of biodiesel into its supply chain in Florida and Minnesota," Eaton says. 
 
 According to Terry Taylor, Sysco's senior director of national purchasing, Sysco has been using B5 at four locations in approximately 400 vehicles. Taylor tells Biodiesel Magazine the company had no problems in Minnesota this past winter, where it has been using B5 for nine months. 
 
 Taylor says Sysco began using biodiesel for lubricity reasons in anticipation of ULSD, and to reduce the amount of imported fuel into the United States. 	
 
 TransMontaigne helped test biodiesel and evaluate the long-term operability of the fuel in Sysco's fuel chain. Taylor said several of his company's other locations would like to move to biodiesel. It's just a matter of finding a consistent quality supply.
 

 "We manage their distillate supply chain from product origination to distribution into their facilities on a nationwide basis-whether bulk tank facility, mobile refueling or retail-we provide the management of that process," Eaton says. "We manage their inventories and distribution requirements. It really is an accumulation of functionality, so they can focus on their core business."
 
 TransMontaigne continues to partner with companies to get biodiesel into the marketplace. In late February New Jersey-based Able Energy Inc. signed an agreement with TransMontaigne, allowing Able to optimize its fuel supply chain, accelerating distribution of biodiesel and bioheat. 	
 
 Able Energy and its five subsidiaries serve 30,000 customers in four East Coast states with home heating oil, diesel fuel and kerosene. 
 
 Eaton considers Able Energy a snapshot of the business TransMontaigne works with. "We were involved with them on the distillates side of the supply chain, so it was very easy to incorporate biodiesel into that," Eaton says. "They were interested in learning from their customer base." 
 
 A Merger in the Works 
 In late March, TransMontaigne announced it had entered into a merger agreement with Oklahoma-based SemGroup LP, a midstream service company providing diversified services for end-users and consumers of North America's crude oil, natural gas, natural gas liquids, refined products and asphalt. The deal was still being developed at press time. Upon completion of the merger, TransMontaigne will become a privately held company. SemGroup already ranks No. 9 on Forbes magazine's list of America's largest private companies. 
 Eaton says SemGroup's broad energy footprint will be an asset to TransMontaigne. "Overall, it brings us a strong energy footprint, broad energy structure and commitment, which will help facility supply chain growth," Eaton says.
 
 Dave Nilles is a Biodiesel Magazine staff writer. Reach him at dnilles@bbibiofuels.com or (701) 373-0636.

Change is the constant denominator in the fuel distribution business. From the introduction of ultra-low-sulfur diesel to demand growth and from industry consolidation to product proliferation-it's a lot for any one company to rein in. That's why biodiesel producers and consumers alike are searching for seamless integration through companies such as TransMontaigne.

May 2006

Business Briefs

USB presents John Deere with award for factory fill

Qualisoy appoints 2006 positions

Qualisoy appoints 2006 positions

First biofuels index launches March 7

Manitoba Biodiesel Board established

Hybrid Fuel Systems changes name, adds biofuels division

MPB Bioenergy signs UNH biodiesel production contract

Seattle Biofuels changes name

GreenFuel creates new vice president position

Virginia Biodiesel Refinery's Faulkner passes away

Columns

Editor's note

NBB In Sight

Legal Perspective

Talking Point

Featured

From the plant to the pump

BQ-9000: Gaining Momentum

Another Good Winter for Bioheat

Assets, Experience, Expertise: From Origin to Consumption

May 2006.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

USB presents John Deere with award for factory fill

Qualisoy appoints 2006 positions

Qualisoy appoints 2006 positions

First biofuels index launches March 7

Manitoba Biodiesel Board established

Hybrid Fuel Systems changes name, adds biofuels division

MPB Bioenergy signs UNH biodiesel production contract

Seattle Biofuels changes name

GreenFuel creates new vice president position

Virginia Biodiesel Refinery's Faulkner passes away

Columns

Editor's note

NBB In Sight

Legal Perspective

Talking Point

Featured

From the plant to the pump

BQ-9000: Gaining Momentum

Another Good Winter for Bioheat

Assets, Experience, Expertise: From Origin to Consumption

May 2006