Kentucky-based Owensboro Grain started out 101 years ago as a small grain merchant. The company has recently shown it still has the same entrepreneurial spirit as the current owners' ancestors. It opened a biodiesel plant in Owensboro, Ky., with the capacity to add 50 MMgy per year of fuel to the nation's energy supply.
 
 The company started out shipping corn on barges, according to John Wright, vice president of strategic planning and development, and a fourth-generation family operator of Owensboro Grain. He says his grandfather, recognizing early on that soybeans would play a significant role in the economy, evolved the company into soybean processing in the 1950s. 
 
 "In 1995, we evolved again by getting into vegetable oil refining, so opening a biodiesel plant is the next progression for us," Wright said. "I believe my great-grandfather and grandfather would be extremely proud. My grandpa was always a trendsetter, looking for the next wave."
 
 The biodiesel plant is located adjacent to the vegetable oil refinery and will use soybeans from Kentucky and across the region. "Our company produces 75 million gallons of soybean oil each year currently at our vegetable oil refinery, so we are somewhat unique in that we will have a secure supply of consistent-quality feedstock," Wright said.
 
 Wright's family may have never thought that someday dignitaries would visit their facility. Kentucky Gov. Ernie Fletcher, Sen. Jim Bunning, R-Ken., and other local officials joined in the grand opening celebration. The plant is the largest biodiesel production facility in the state. More information on Owensboro Grain is available at <a href="http://www.owensborograin.com" target="_blank">www.owensborograin.com</a>.
 

 FC Stone offers hedging webinar
 Commodity risk management firm FCStone and AllThingsBiodiesel.com have partnered to offer NBB members a Nov. 30 online workshop titled "Capital Requirements of Various Hedge Structures." FCStone is a member of the National Biodiesel Board (NBB).
 
 FCStone will offer insight into the dynamic commodity market. The presentation will offer information on current and forward market conditions, and the evolution of alternative feedstocks. More topics will be announced as the agenda develops. Workshop registration is available at the Members Only section of the NBB Web site.
 
 The Renewable Fuels Group at FCStone has become one of the largest independent risk management providers within the renewable fuels industry. The group performs risk management activities for renewable fuels plants within the United States and will account for more than 2.5 billion gallons of ethanol and biodiesel in production or under construction by the end of 2007. The group helps companies maximize operating profitability, expand merchandising efforts and mitigate multiple risks in volatile markets. FCStone's analyses take into account the inputs and outputs for renewable fuels. 
 
 <a href="http://allthingsbiodiesel.com" target="_blank">AllThingsBiodiesel.com</a> is the world's largest online biodiesel marketplace. It features a variety of services including online classifieds, a biodiesel store and directory.
 
 Register, save for 2008 conference
 The 2007 National Biodiesel Conference & Expo drew another record-breaking number of biodiesel industry leaders, so make sure to attend the 2008 event held Feb. 3-6 in Orlando, Fla.
 

 Significant early bird discounts will apply to registrations received on or before Nov. 16. Pre-registration ends Jan. 25, after which attendees must register on-site at a higher rate.
 
 The Gaylord Palms Resort and Convention Center is the ideal location for the 2008 Conference & Expo. Meeting facilities are a short distance from Walt Disney World and Orlando's myriad other attractions. The facility's on-site features include Falcon's Fire Golf Club, the prestigious Canyon Ranch SpaClub, La Petit Academy Kids Station (for children ages three to 14) and world-class restaurants.
 
 Call (407) 586-2000 to reserve a room. To ensure the discounted single/double room rate of $220, mention you are with the "National Biodiesel Conference & Expo 2008." Reservations must be made by Jan. 3 to secure discounted rates. A one-night room deposit is required. Rooms are based on availability, so make reservations soon.
 
 The 2008 conference will feature production, technical, fuel distribution, policy/regulations, markets and users tracks, including auto and engine manufacturer sessions. Among an array of social events, the event also features a golf tournament at Champions Gate Golf Course. Visit www.biodieselconference.org/2008 to register and for more information.
 
 NBB members eligible for Chrysler discount
 Preferred pricing on new Chrysler vehicles is another great benefit to being a member of the National Biodiesel Board (NBB).
 
 The Chrysler Affiliate Rewards Program allows eligible NBB members to purchase or lease select 2007-'08 Chrysler, Jeep or Dodge vehicles at the "preferred price" of 1 percent below factory invoice. The discount is in addition to consumer incentives that may be available at the time of sale.
 
 NBB members, and NBB member companies' U.S. employees, spouses, retirees and subsidiary employees are eligible to participate. U.S. Clean Cities Coordinators and designated NBB contractors are also eligible for the program, which allows for the purchase or lease of two vehicles per calendar year.

 
 Call the NBB hotline at (866) BIODIESEL to verify your eligibility and begin the enrollment process.
 
 Some of the vehicles available under the Affiliate Rewards Program include the 2007-'08 Diesel Jeep Grand Cherokee, Dodge Ram 2500 Diesel pick-up, Jeep Compass, Dodge Nitro and the Chrysler Sebring.
 
 The program offers NBB members a great discount opportunity and a chance to buy a new diesel vehicle from a strong supporter of biodiesel. Chrysler LLC supports the use of up to B5 biodiesel in its diesel vehicles and accepts the use of B20 blends in its Dodge Ram diesel pick-up for government, military and commercial fleet customers.
 
 Truckers have tools to find biodiesel
 The National Biodiesel Board (NBB) is coordinating incentives for biodiesel use while helping truckers more easily find the fuel. Businesses that want to use "green" shipping practices can now find truckers who use biodiesel through the U.S. EPA SmartWay Grow and Go program. The EPA and NBB announced they have teamed up to match shippers with truckers using biodiesel, as well as to educate the truck market about biodiesel. 
 
 The SmartWay Transport Partnership is a collaboration between the EPA and the freight industry. Its goal is to increase energy efficiency while significantly reducing greenhouse gases and air pollution. The SmartWay Grow & Go program will also help reduce U.S. dependence on petroleum. Program members include owner-operators, trucking fleets, suppliers, brokers and anyone who is interested in reducing fuel use and emissions through sustainable trucking practices. 
 
 In a separate announcement, ProMiles and the NBB said that truckers can now use their laptop computers to find truck-accessible biodiessel fueling sites along planned routes. The NBB, ProMiles, National Renewable Energy Laboratory and the Oil Price Information Service (OPIS) are developing a continuously updated and accurate list of truck-accessible biodiesel locations to be included in mapping software. The first set of locations is now incorporated into ProMiles XF, a commercial vehicle/truck routing and mileage software available for professional truckers. 
 
 ProMiles XF software is available on compact disc and features address-to-address truck routing. Truck-accessible fueling locations are clearly marked for pre-route planning or on-the-road searches, without the need for Internet access. Truck-accessible fueling locations that carry biodiesel can be found along with information including the blend, hours of operation and more. The first release of software includes a subset of truck-accessible biodiesel locations out of the nearly 600 that are identified on the NBB's trucking Web site, <a href="http://www.biotrucker.com" target="_blank">www.Biotrucker.com</a>. The NBB will continue to add more locations as OPIS identifications are assigned, ensuring accuracy.

 
 The NBB and partners made both announcements at the recent Great American Trucking Show in Dallas. The EPA and NBB co-sponsored the SmartWay "Get Green" Trucking Summit. More information on the EPA's SmartWay Grow & Go program is available at <a href="http://www.epa.gov/smartway/growandgo" target="_blank">www.epa.gov/smartway/growandgo</a>.
 
 Promising results shown in glycerin feed research
 The biodiesel industry continues to search for a market for its glycerin byproduct. The worldwide growth in biodiesel production has led to an increase in the supply of glycerin. Global availability has resulted in lower glycerin prices, and new doors have opened in the marketplace. Animal feed applications might be one opportunity for direct use of crude glycerin without the need for further refining. The University of Missouri is the latest to shed some light on glycerin in cattle feed.
 
 Led by Monty Kerley, the University of Missouri-Columbia conducts this research with the Missouri Soybean Association, Department of Transportation's Biobased Transportation Research Program and assistance from the NBB, has measured the daily rates of gain and feed efficiency on cattle eating feed blended with various levels of glycerin. Currently 110 days into the study, the rates of gain seem to be higher for cattle eating glycerin-blended feed. Feed efficiency is how much feed is consumed per pound of growth.
 
 "What we've found is that the advantages in the glycerin feeds are not necessarily that the energy is higher, but that the glycerin helps the diet (corn and supplement) to seal together better, which prevents the cattle from sorting through the diet," Kerley said. "Also, the cattle seem to eat the glycerin blends longer into the day than the control group. That practice may help prevent digestive problems like acidosis."
 
 Kerley presented the research plans at the February 2007 National Biodiesel Conference in San Antonio. His team reports promising-yet preliminary-results. The feeds included a control group (no glycerol) and 5 percent, 10 percent and 20 percent glycerin blends. The 5 percent and 10 percent blends of glycerin show higher rates of gain than the control group. However, the 20 percent blend has lower rates of gain than the diets with 5 percent and 10 percent glycerin.
 
 Previous research in this field has focused on the energy content of livestock feed. This study will also study effects on carcasses. 

 
 Growmark honors Jobe, NBB 
 The National Biodiesel Board (NBB) and its CEO, Joe Jobe, have been recognized by a leading agricultural cooperative and petroleum distributor for leadership and vision in the biofuels industry. Growmark Inc. recently presented the annual Friend of Growmark award at the company's annual meeting in Chicago. The company gives the award to individuals and organizations for their contributions to the well-being of cooperatives and agriculture.
 
 "Growmark is proud to partner with Jobe and the NBB, champions for the Growmark system's role as a marketer and fellow promoter," Growmark CEO Bill Davisson said. "We appreciate their commitment to the industry and value their friendship."
 
 Jobe has served with NBB for 10 years. Under his leadership, the young industry has enjoyed major successes including the passage of a federal tax incentive and other significant initiatives that have created a favorable climate for industry growth. Today there are 165 biodiesel plants in the United States, up from 86 this time last year.
 
 "Recognition like this is truly an honor, especially coming from a forward-thinking company like Growmark," Jobe said. "In 2002, Growmark became the first petroleum distributor to join NBB. Because biodiesel fits into our nation's petroleum infrastructure, the success of our industry is in many ways a result of companies like Growmark opening their arms to biodiesel, recognizing all the good it can do for our energy economy." 
 
 The NBB represents the biodiesel industry as the coordinating body for biodiesel research and development in the United States. Its members include biodiesel producers, feedstock producers and processors, soybean commodity boards, and fuel marketers and distributors.
 
 NBB welcomes new members
 Emergent Green Energy Inc.-Minneola, Kan.
 FCStone-West Des Moines, Iowa

 GEO Energy Inc.-Milton, N.Y.
 Greenlight Biofuels Holdings LLC-Charlottesville, Va.
 Kansas Biofuels-Wichita, Kan.
 Pohaku Inc.-Washington, Iowa
 SAOC Oil Inc.-Houston, Texas
 Solazyme Inc.-San Francisco, Calif.

Member profile: Owensboro Grain extends to biodiesel production

There's a battle underway in the commodity sector-soybean, corn and wheat markets are all signaling for more acres to be planted. What's unusual is that the wheat sector is the only one that should be sending strong signals because of a second year of poor worldwide wheat crops. In fact, wheat was setting new highs in early September, with Chicago December wheat contracts trading well over $8 a bushel. In the meantime, this year's all-time record corn crop should have depressed prices far more than it did; and last year's record soybean crop and healthy carryover forecast for this fall should have resulted in lower prices. Despite those market fundamentals, both soybean and corn markets-although not posting any records-remained strong the past several months. "Last year it was clear we needed more corn acres and the market signaled producers to do that," says Darrel Good, University of Illinois agricultural economist. Farmers responded by planting more corn and less soybeans, planting 64.1 million acres of soybeans in 2007, down from the 75.5 million acres that produced last year's record soybean crop. "Now we'll need more acres of everything, and how do you do that?" Good says.

 
 Three things are keeping markets strong, Good says. "Biofuels plays a big part and corn ethanol has been the major driver," he says. "World demand for livestock feed continues to be strong, particularly from China; and wheat has had two consecutive years of small crops worldwide."
 
 The market will be watching for two things as winter approaches-how much winter wheat is planted and what South American growers will do as planting progresses in October. The USDA is forecasting a modest increase in soybean acres in Brazil and Argentina but that won't offset the decline in U.S. production, Good says. "The chatter is that winter wheat seedings will be going up this fall with the high price of wheat," he adds. For the past 20 years, winter wheat acres have declined, mostly to the benefit of soybean acres. "All of that says soybean prices could remain extremely volatile but generally high priced over the next 12 months," Good concludes. That's good news from a producer's standpoint because they will be able to take advantage of higher prices. However, prices will be all over the board.
 
 Basis Widens
 Although soybean futures prices are strong that hasn't been reflected in local cash prices. "There's a huge basis difference between what the futures market says and what users are willing to pay," says Elaine Kub, market analyst for Omaha, Neb. - based DTN. DTN's national average for basis was showing $1.03 in late August, with a range of 40 to 50 cents in areas of Ohio and Indiana and a $1 or more basis farther west to a high of $2.21 per bushel in North Dakota. In September 2006, the national average basis was 60 cents. The basis narrows in the Chicago area reflecting lower transportation costs as producers can deliver grain on a contract, she explains. In other areas, the basis reflects both transportation costs and local demand. "The cash price of soybeans had to reflect the current surplus of soybeans that we have," Good explains. "The futures market has a lot of speculative froth in it. An interesting question will be as the surplus disappears, will cash prices catch up to the futures?" Good expects basis levels to return to normal this winter, but adds that speculative interest in the futures markets could push prices out of line again.
 
 Soybean prices have experienced a wider range than corn in trading, Kub says. Soybean futures ranging from $8 to $9 per bushel are not surprising. In 2004, soybean prices hit a record- high $10. July's high of $9.15 followed seasonal patterns of posting a summer high then trending down toward harvest, Kub says. "Looking into October and harvest, we predict the market won't retest those highs," she said at press time. However, the early September jump in wheat futures pulled the November soybean contract back above $9. Kub predicts that with the competition for acres, soybeans will likely stay above $7.
 
 Canola Market Follows
 A disappointing Canadian canola harvest will help keep oilseed prices up. Canadian canola producers had the potential to harvest a big crop, seeding 14.5 million acres last spring compared with 12.5 million acres the previous year. The spring weather started out nice but turned wet in early summer and then turned dry. John Duvenaud, publisher of the Wild Oats Grain Market Advisory based in Winnipeg, was predicting a 10.5 million ton canola crop early in the season, but by late August as Manitoba finished its canola harvest and Saskatchewan was beginning to combine canola he downgraded that to 9 million tons. The crop outlook sent canola to $8.30 per bushel at the elevator, compared with recent prices of $6 to $6.50 per bushel.
 
 Almost all the Canadian canola crop is used for human consumption, with less than 5 percent going for biodiesel, Duvenaud adds. Because Canada uses genetically modified canola it can't export to the European Union. However, the country of Dubai imports Canadian canola, crushes it and exports the oil to Europe where it's used to make biodiesel.
 

 Globalization and Biofuels
 Duvenaud points to globalization and biofuels as the big drivers behind the growing oilseed demand. "India, China and a lot of countries like that are growing at 8 [percent] to 10 percent a year," he points out. That has led to an increasing demand for oil crops as diets improve. "Biofuels have sopped up all the excess grain and oilseeds in the world," he adds. Even in Brazil, a country that has been expanding soybean acres, the return on corn has recently been above the return on soybeans. That will keep Brazilians from planting more soybean acres. 
 
 Palm oil is slower to respond to changing markets as new plantings take about five years to produce. The Malaysian palm market, however, did have an impact on the Chicago soybean market earlier this season, Kub says. "It was interesting to watch," she says. "On a given day we would see what happened in Malaysia overnight and soybeans would do the exact same thing." When the May-June rally in the Malaysian palm oil markets fell off, the Chicago soybean market went back to following its own fundamentals based on summer weather patterns. Another international influence on the Chicago market, she adds, is Brazil and Argentina producers who hedge their soybeans on the Chicago Board of Trade and look for high enough soybean prices to offset the weaker U.S. dollar.
 
 China's soybean crop prospects also impact the market. In its mid-August oil crops outlook, the USDA Economic Research Service reported that much of northeastern China, where the majority of the soybean crop is grown, was suffering through the worst drought in many years. Strong export demand has the USDA predicting soybean exports will reach a record high of 1.1 billion bushels for the 2006-'07 crop year. The August report predicted that the 2006-'07 average price for soybeans would be $6.40 per bushel and forecast the 2007-'08 price at a $7.25 to $8.25 per bushel. 
 
 USDA also reports a continued strengthening in values for soybean oil. The July average price for soybean oil in central Illinois was 34 cents per pound compared with 25.7 cents in June. The USDA reports continued strong exports, but domestic food use of soybean oil is trailing last year by nearly 2 percent with other vegetable oils expanding their share of the U.S. food market. 
 
 Biodiesel Use Up
 Biodiesel is absorbing some of the market share that was lost in the food market. This year, the USDA began reporting data collected by the U.S. Census Bureau on soybean oil used for biodiesel production plus the figure for total oils and fats used for biodiesel. In July, consumption for biodiesel was accelerating at a fairly rapid rate, Good says. In January 2007, the census bureau estimated 202 million pounds of all fats and oils were used for biodiesel, which is just under 8 percent of all fats and oils consumed. In July, that number was 392 million pounds representing 13 percent of total consumption of fats and oils. "That is a demand piece that is going to be important," he adds.
 
 Biodiesel producers are watching the soy market closely. "We're concerned about the strength in the soybean oil market," says Dave Elsenbast, who directs procurement for the Renewable Energy Group (REG) headquartered in Ralston, Iowa. "The economics get squeezed very tightly when the market is up this high." REG produces 162 MMgy from six biodiesel plants and has another 180 MMgy under construction. Elsenbast says the competitive market environment for biodiesel makes it hard to pass along the costs. "As I speak to people in the industry or read estimates on [soybean oil] costs for the next year, most put us in the 32 to 36 cent [per pound] board average." REG's response has been to focus on the things they can control such as producing a quality product and taking the correct steps in sales, marketing and risk management, he says. Two of REG's plants under construction are being built next to Bunge oil crushing facilities, which will help control expenses. And its plant in Ralston, Iowa, is next to the West Central Co-op crushing facility. "It helps lower transportation costs on feedstocks," Elsenbast says. "In many cases, transportation costs can be a penny a pound on soybean oil."
 
 Daryl Dahl, vice president of corporate hedging for Omaha, Neb.-based Ag Processing Inc. (AGP), doesn't expect the volatility in the soy market will end anytime soon because of the demand for corn. "It's the biggest jump in demand for corn we've ever seen," Dahl says, adding that with last year's soybean crop a record and the carryover one of the largest ever, soybeans should be trading much lower. "If it weren't for ethanol, soybean prices would not be trading where they are today," he says. AGP represents five regional and 194 local cooperatives. It operates nine soybean processing plants and markets its trademarked SoyGold biodiesel manufactured at its 30 MMgy plant in Sergeant Bluff, Iowa. A second 30 MMgy plant is expected to be on line this fall next to the AGP crushing facility at St. Joseph, Mo. The added speculative interest from the hedge funds in the commodity market has added to its overall volatility. "We probably are going to have a couple more years of this before things settle down," Dahl says.

 	
 Susanne Retka Schill is a Biodiesel Magazine staff writer. Reach her at <a href="mailto:sretkaschill@bbibiofuels.com">sretkaschill@bbibiofuels.com</a> or (701) 746-8385.

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Biofuels, globalization and weather have teamed up to create unusual market conditions for soybeans, corn and wheat. Biodiesel Magazine takes a look at the market and how it's impacting biodiesel producers.

Soybeans, Wheat and Corn Compete for Acres

If you type biodiesel into the search function on Amazon.com you will find more than 900 titles relating to the fuel in some way. The bulk of these are only tangentially related to the biodiesel industry, such as books on energy policy that mention biodiesel among other alternative fuels, reprints of news articles and even a few novels. But there is a substantial number of books published in the past few years that document the production, history and politics of biodiesel.
 
 <center><img src="/images/upload/20071016045945.jpg"></center>
 "Biodiesel America: How to Achieve Energy Security, Free America from Middle-east Oil Dependence and Make Money Growing Fuel"
 Josh Tickell has created an impressive work that should be required reading for anyone who wants to intelligently discuss biodiesel and its role in supplying the future energy needs of the United States. Starting with how oil formed and the birth pangs of the American oil industry, Tickell deftly leads the reader through the history of how this country first became dependent on oil to fuel its mushrooming economy and the inexorable need for imported oil to keep that growth going. He takes us to the logical conclusion that we must start preparing for the day the oil runs out.
 
 Succeeding chapters document the fascinating history of the diesel engine from Otto Diesel's tumultuous life and mysterious death to modern diesel-electric hybrid cars; a survey of the pros and cons of alternative fuels from coal-to-liquid (Fischer-Tropsch) to hydrogen to ethanol to compressed air and beyond; a primer on farm policy and its impacts on biodiesel feedstocks; a survey of the most important biodiesel feedstocks; and finally, the history, business, politics economics and future of the biodiesel industry. The book ends with a heartfelt plea for all Americans to become involved in increasing the nation's energy security by conserving energy and promoting alternatives. Tickell lists 52 ways to help achieve these goals ranging from the political (call your local radio or TV talk shows to boost alternative energy) to the personal (turn down your thermostat in the winter) to the automotive (consider buying a diesel vehicle and use biodiesel).
 

 An attractive feature of the book is its strong documentation. The references and endnotes take up 43 pages. A 15-page glossary is helpful for anyone new to the industry and confused by technical jargon. An extensive index is a welcome addition for anyone who needs to find a particular tidbit of information quickly.
 
 Tickell approaches his topic with obvious passion but with an even hand. While promoting the industry, he also points out biodiesel's limitations as an alternative fuel. There are simply not enough feedstocks available to produce enough biodiesel to replace more than a small fraction of fossil fuels, Tickell says. But hand in hand with other technologies such as wind and solar power, other alternative fuels such as ethanol and hydrogen, and conservation, biodiesel has an important role to play in America's energy future.
 
 Joe Jobe, CEO of the National Biodiesel Board, summarized the book in the forward this way. "This book will help you understand how to increase your energy security, the energy security of your family, and of your community. It will also teach you how to protect yourself and your loved ones from the negative health effects of diesel exhaust. But most of all, this book offers you a way to begin benefiting from the upcoming changes in America's energy infrastructure. Not 25 years from now. Not even a decade from now. But right now."
 
 <center><img src="/images/upload/20071016050008.jpg"></center>
 "Biodiesel, Basics and Beyond: A Comprehensive Guide to Production and Use for the Home and Farm"
 While the intended audience for William Kemp's book is people interested in homebrewing biodiesel, its encyclopedic nature will make it valuable for anyone wanting to understand the complexity of manufacturing and using biodiesel. As vice president of engineering for Powerbase Automation Systems Inc. in Ontario, Kemp understands the reasons behind all the steps commercial biodiesel manufacturers take to produce a quality product. Part of his reasoning for writing the book was because when he decided to home-brew biodiesel, the only book on the subject he could find was "riddled with errors." "Visits to home-based biodiesel producers were no better, revealing to me the disregard for issues of safety, fuel quality, waste disposal and environmental sustainability that should have been obvious to people who were professing their concern for the environment as their reason for making the fuel in the first place," he continues in the preface of the book. "Most people were unaware that there was any problem at all."
 
 The book devotes many pages to what Kemp says are the common myths propagated by home-brew biodiesel advocates. These include myths such as the glycerin produced by the process is nontoxic (in practice, it contains toxic levels of methanol), methanol can be removed from glycerin by leaving it in the sun (Kemp tested it. Didn't work.), that biodiesel wash water could be disposed of in the sewer system (don't try telling that to the U.S. EPA or your local sewer district) among others. He especially takes aim at the claim that making biodiesel is simple, easy and safe. He writes that the purpose of his book is give people the proper tools to make quality biodiesel safely and start a small-scale biodiesel revolution. "However, I would prefer to see this happen before someone dies trying to save a few dollars with the assumption that biodiesel can be produced in their kitchen," he says. To show that it was possible to be a safe, quality small-scale biodiesel producer, Kemp engineered his own biodiesel production unit, complete with safety station, quality control lab and chemical storage areas. 
 
 Safety, fuel quality and waste disposal are Kemp's major concerns. He profiles six small-scale biodiesel producers, but notes that none of their systems can produce fuel that meets ASTM standards or address the waste stream the process produces. Kemp devotes a lengthy chapter to quality standards and provides a lesson on diesel engine technology to show why those standards are important. He describes several ASTM biodiesel testing methods and how homebrewers can perform them. He also details what can happen to engines and filters when producers try to run non-spec biodiesel in their vehicles. 
 
 Kemp also talks about trying to minimize his waste stream by finding a use for glycerin. Eventually he settles on using the glycerin for dust suppression but not before an amusing attempt to make soap from waste vegetable oil. "The semi-refined glycerin has the smell of dirty socks and french fries all rolled into one," he wrote. "… no amount of soap dye would color the dark brown mass and it took approximately three or four times the amount of essential oils to mask the smell, greatly increasing the cost."
 

 The book is comprehensive in its attempt to show every aspect of biodiesel production. It weighs in at nearly 600 pages and is lavishly illustrated with black and white photographs of the good, bad and ugly of home biodiesel production. Kemp concludes the book with a resource list to help home-brew producers find parts, supplies and services.
 
 <center><img src="/images/upload/20071016050042.jpg"></center>
 "Biodiesel Power: The Passion, the People, and the Politics of the Next Renewable Fuel"
 Lyle Estill is nothing if not passionate, opinionated and entertaining. "Biodiesel Power" is the story of Piedmont Biodiesel, a cooperative located in North Carolina. On one level, it is a tale of how a man, his family and some friends went from making biodiesel in a blender to a thriving cooperative with nearly 500 members producing 4,000 gallons of biodiesel a day. On another level it is the story of a vision of a different biodiesel industry, an industry of small producers making B100 to serve their communities while preserving the environment.
 
 Estill is a blogger-a person who maintains a journal on the Internet called a 'blog.' In the book, he uses entries from his journal, The Energy Blog (www.biofuels.coop/blog), to document how his thoughts and feelings about the cooperative, biodiesel and the industry have evolved over the years. Some of the entries are reflective, some provocative and most are amusing. They give the sense of "you are there" immediacy that makes many parts of the book more compelling. Estill's straightforward writing style is well-suited to his direct, head-on approach to the industry.
 
 Estill is no fan of what he calls the "renewables establishment," which tends to include the National Biodiesel Board. He documents his interactions with the NBB and other representatives of the establishment and while he does respect some of the work they do, he is saddened that they don't share his vision of a distributed biodiesel industry. "Every little town on this continent should have a million-gallon plant and every little town should strive to meet its own fueling needs," he writes. "If we are ever going to be free of a top-down, government supported energy infrastructure that externalizes its true costs and operates in a monopolistic fashion, we need thousands of Piedmont Biofuels Industrials dotting the landscape of our economy." It should be noted that Estill uses BBI International, publisher of Biodiesel Magazine, as a specific example of the renewables establishment.
 
 In the end, Estill doesn't want biodiesel to be a product or an industry. He sees it as a movement, something with the power to change the way people live. Despite his mixed feelings about the renewables establishment, he would like to see the NBB and backyard home-brewers working towards the same ends. "I'd like to think that everyone in biodiesel is working hard at petroleum replacement, and that's a good thing for our communities. It's good for our air quality. It's good for our farmers. It's good for our economy and it should be very good for world peace."
 
 <center><img src="/images/upload/20071016050055.jpg"></center>
 "Biodiesel: Growing a New Energy Economy"
 Greg Pahl's book covers much the same ground as the other books listed here. He writes about the history of the diesel engine, the biodiesel production process and the pros and cons of various feedstocks. What sets his books apart from the rest is his survey of the state of the art of biodiesel, at least how it stood in 2005. The middle of the book features a country-by-country survey of biodiesel production in Europe-which Pahl considers the global leader in biodiesel. That is followed by a summary of the state of biodiesel in the United States with profiles of most of the large companies in the industry at that time.

 
 Unfortunately, in a fast-changing industry, books such as this do not age well. While some issues that were hot topics in 2005 are still controversial, others have faded while new issues have arisen. For one thing, biodiesel production tripled in 2006, radically redefining what is considered a major player in the industry. Biodiesel is still a valuable book, but one that will soon cry out for a new, updated edition.
 
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 "2007 Cyber Guide to Biodiesel"
 This sounded like a good idea. Collect the tens of thousands of documents and Web pages concerning biodiesel published by the federal government and put them in PDF format on a single CD-ROM for easy access. However, the execution of this idea leaves a lot to be desired.
 
 One problem is just the vast quantity of data presented. The disc includes everything from scientific reports to handouts intended for school children. To find anything useful on the CD-ROM would take an excellent, intelligent search engine. However, the publishers chose to use Adobe Reader's built in indexing software, which was sluggish and not very useful.
 
 Then there is the matter of content. There doesn't seem to have been much thought put in to organizing the content in any useful way. Every Web page that mentions biodiesel-more than 16,000 pages worth-are crammed into a single document. A search on several industry-related terms, such as methanol recovery, did not convince me that even if someone were patient enough to wait for the searches to be completed they would be rewarded with documents that would be useful to a biodiesel producer.
 
 The "Cyber Guide to Biodiesel" might be useful to a high school student doing a report on biodiesel, but only if he or she didn't have an Internet connection. For everyone else, Google or another Internet search engine will likely give more relevant results faster.
 
 Jerry W. Kram is a Biodiesel Magazine staff writer. He can be reached at <a href="mailto:jkram@bbibiofuels.com">jkram@bbibiofuels.com</a> or (701) 746-8385.

Biodiesel is a topic of interest to many people, as evidenced by the number of books and articles that have been written in the past few years. Biodiesel Magazine looks at a handful of materials published recently on the subject.

Biodiesel by the Book

A provision meant to encourage the production and use of biodiesel included a loophole that is causing trade friction with Europe and consternation in the United States. However, Congress may be moving toward closing the loophole once and for all.

 
 It's called "splash and dash." In 2004, Congress passed a provision providing a tax credit for biodiesel that is blended with regular diesel fuel. This provision was to expire in 2006, but was extended to 2008 as part of the Energy Policy Act of 2005. The federal excise tax credit amounted to a 1 cent per percent of biodiesel blended with petroleum diesel. B2 would receive a 2-cent credit while B99 would get a 99-cent credit. This credit is applied to biodiesel blends exported to other countries as well as to the fuel consumed in the United States.
 
 European Union (EU) countries started to notice biodiesel being imported as a B99.9 blend. That is, about 1,000 gallons of petroleum diesel were added to every million gallons of biodiesel. That small "splash" of petroleum diesel, if added to a tanker of biodiesel from, for example, Malaysia, in a U.S. port, would qualify the entire shipment for the U.S. tax credit. After getting the credit, the tanker could continue to Europe-the "dash"-and receive European fuel tax credits. In effect, the fuel would be subsidized once by U.S. taxpayers and again by the Europeans.
 
 The European Biodiesel Board (EBB) made an official complaint in March to Peter Mandelson, commissioner of trade for the European Commission asking that action be taken against B99 import. The complaint stated that B99 imports had reached 30,000 metric tons a month in January 2007. "In most EU countries, EBB member companies are experiencing dumping competition from B99 blends which are offered in the market as pure biodiesel with a substantial discount in some cases going from 100 to 150 euros per [metric ton]," the complaint reads. "The competition is price setting and is progressively disrupting the margins of EU biodiesel producers, putting out of business many EU biodiesel producers who are already confronting important market difficulties because of the late implementation of EU biofuels legislations in many EU countries and subsequent industrial overcapacities."
 
 One company, World Energy Alternatives LLC, is reported to have been shipping more than 1 million gallons of biodiesel per month to Europe since February.
 
 A report by the U.S. Department of Agriculture's Foreign Agricultural Service (FAS) cited information from the German Biofuels Industry Association claiming that in Germany, B99 blends from the United States were being offered for sale at €53.25 per 100 liters ($2.78 a gallon) while the German cost of production for biodiesel was €64 per 100 liters ($3.34 a gallon).
 
 As a result, the EBB forecast that growth in the European biodiesel industry would stagnate in the coming years after seeing annual growth of between 30 percent and 65 percent for the past five years. There are 185 biodiesel plants operating in the European Union and 58 plants are under construction. In 2007, capacity for biodiesel production in Europe is expected to reach 10.2 million metric tons.
 
 The FAS report cited the case of Campa AG, one of the top 10 biodiesel producers in Germany. The company stopped producing biodiesel in its existing 45 MMgy plant in Oschsenfurt. Campa also put plans for construction of a 60 MMgy plant in Straubling on hold, and will only build an oil extraction facility on the site. "Campa managers cite the competition of imported B99 as the major driver behind this decision," the report states. "At a market price for rapeseed oil at 600 euros per metric ton, it is more profitable to export the rapeseed oil to the U.S. and import biodiesel, which benefits from the U.S. blenders credit, than producing biodiesel from rapeseed oil in their own plant."
 	
 Closing the Loophole

 It seems likely that the splash and dash loophole will be at least partially closed by Congress in the near future. The Energy Bill now before Congress would close the loophole by requiring that biodiesel be produced and consumed in the United States in order to qualify for the tax credit. The bill was passed by the House of Representatives in August and is under consideration by the Senate.
 
 Section 888; subsection 5 (A) of the version of the Energy Bill adopted by the House of Representatives reads: "No biodiesel credit shall be determined under this section with respect to any biodiesel unless such biodiesel is produced in the United States for consumption in the United States or is entered into the United States for consumption in the United States."
 
 Succeeding sections strip the credit for biodiesel blends not meant for consumption in the United States and for biodiesel specifically destined for export. There is an exception prohibition on exports for small "agri-biodiesel" producers as determined by the secretary of agriculture. The exemption is limited to biodiesel produced in the United States.
 
 The National Biodiesel Board (NBB) supports these provisions in the Energy Bill, says Manning Feraci, the board's director of governmental affairs. "When it comes to splash and dash we want to shut it down," he says. "You can't justify it from an energy policy perspective. You can't justify it from a tax policy perspective. It's not a practice that the NBB supports or endorses. We want to work with Congress to stop that practice. It clearly wasn't the intent [of the original legislation]. Being able to export to markets is a different matter."
 
 As Congress headed into its August recess, the Energy Bill was being considered by the Senate. The primary mark up of the bill is taking place in the Energy Committee. However, the tax provisions of the bill are being considered in the Finance Committee. According to Feraci, the Finance Committee's version of the tax portion of the bill failed to get the necessary votes needed so work on the bill will continue when Congress reconvenes. "They are kind of in a holding pattern on the tax title of the bill, which is where [splash and dash] is being dealt with," he says. "What happens-and this is Senate procedure, which is always a very fun topic-is that while the bill was on the floor the Senate marked up and passed out of committee an energy tax bill. That bill was offered as an amendment. Under Senate rules an amendment has to get 60 votes for cloture, basically to stop debate and come to a final vote on the tax title. When they offered the amendment, it came up short."
 
 While Feraci thinks some sort of energy legislation will pass the Senate, he isn't sure what it will look like or how it will get there. "What the Senate is going to do with [the Energy Bill] I don't think has been decided yet," he says. "They could take up the House bill and strike out the enacting clause and try and do a tax amendment to it or they could just send it to the conference committee without a tax title and basically just adopt the Finance Committees version of the tax title. I wish I could tell you exactly how it was going to transpire. I just don't think that decision has been made yet."
 
 The most far-reaching aspect of the legislation could be a provision in the House bill that would make the revocation of the excise tax credits retroactive to the implementation of the 2004 legislation. That is, all the companies who received the tax credit for biodiesel bound for export will have to pay back the credits they received. The version produced by the Senate Finance Committee would only end the credit for future exports.
 
 The NBB, along with other renewable energy organizations, is pressing the Senate to adopt the energy tax provisions because along with splash and dash prohibition, the title would also include provisions such as an extension of the biodiesel tax credit beyond 2008. "This bill as a whole is very important," Feraci says. "We think the chances of it getting done in a timely manner are better if the Senate is able to adopt this amendment. It's kind of up in the air now in terms of how or when or if that is going to happen."
 
 Jerry W. Kram is a Biodiesel Magazine staff writer. He can be reached at <a href="mailto:jkram@bbibiofuels.com">jkram@bbibiofuels.com</a> or (701) 746-8385.

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Concerns have been raised about a questionable loophole that may be allowing U.S. subsidies to be applied to biodiesel exports that were neither produced nor consumed in the United States. Legislation working its way through Congress would eliminate this loophole.

The End of 'Splash and Dash'?

The tragic events of Sept. 11, 2001, have gone down in U.S. history as a time when Americans felt the most vulnerable. The tragedy caused the country to reevaluate its homeland security, reaffirm its values and to test its unified mettle in retaliation against the foreign enemies who comitted the deplorable act of terrorism. For Ned Nazzaro, the events that occurred on that day were a horrific display of international hatred toward our country and another reason for Americans to curb their reliance on foreign oil, he says. "I live a couple blocks from the Pentagon and saw the plane fly over, so I like the idea of anything to cut our dependence on foreign oil," he tells Biodiesel Magazine.

 
 In 2005, Nazzaro and his wife Jean co-created a small company called Big White Tiger (BWT), an environmental consulting firm that sells ethanol and biodiesel products and services provided by biofuels additive companies such as FPPF Chemical Company Inc., Lucas Oil Products Inc. and Soyclean. The business is small but Nazzaro believes his Arlington, Va.-based company has taken a giant step toward decreasing the United States' dependence on foreign oil and heightening environmental awareness. The decision to start small was pivotal to Nazzaro's long-term business goals, he says. "A year ago, we almost built a biodiesel plant," says Nazzaro, who is the director of operations for BWT. "Thank God we didn't. That's what has kept us in business. We're a slow, steady, growing company and we truly believe in [biodiesel]." When BWT considered building its large-scale biodiesel plant the price of soybean oil was in the $20 range. When it increased to about $30, Nazzaro didn't think he could compete with the economics of scale that other large biodiesel producers faced.
 
 Nazzaro put his environmental and altruistic philosophies into action in June when BWT completed a small-scale biodiesel project transaction with the new Pocahontas State Correctional Center in Pocahontas, Va. The facility agreed to install an on-site 160-gallon mega ester biodiesel reactor unit to convert cooking oils and grease supplied by the prison's cafeteria into biodiesel. The biodiesel is blended with diesel fuel to fill the fuel tanks of the prison's truck fleet and farm equipment such as lawn tractors and backhoes used for landscaping tasks. BWT consulted and negotiated the purchase of the $4,000 unit, which was supplied by Huntsville, Texas-based Evolution Biodiesel LLC, a small-scale biodiesel unit manufacturer.
 
 The biodiesel unit has an initial capacity of 40 gallons and is equipped with two 40-gallon expansion tanks so the prison can increase its capacity at any time. The prison opted to produce biodiesel because it's an environmentally friendly fuel and to save money on cooking oil and grease disposal, says Gary Shrader, building and grounds superintendent for the Pocahontas Correctional Center. The prison also installed the unit to provide a model for other correctional facilities to follow. "We wanted to be on the cutting edge," he says. "Here at Pocahontas State, we not only want to be a shining example to the Virginia DOC (Department of Corrections), but we also want to lead nationwide." Shrader, who has worked for the Virginia DOC for four years, had never seen a biodiesel project of this nature in a correctional facility. Employing small biodiesel operations like Nazzaro has with the Pocahontas State Correctional Center could be a growing trend, and a way for novice producers to have a stake in the U.S. biodiesel industry.
 
 Small Start, Big Contribution
 Nazzaro chose to start small because of volatile soy prices. All too often, large-scale biodiesel producers strike out with high expectations only to fall short of their goals because of poor preparation and risk management, or just being priced out of the market by high soy prices, he says. Nazzaro intends to continue working with other small-scale biodiesel unit manufacturers like Evolution Biodiesel on future projects. "It just makes sense," he says. "I know [biodiesel] has a long way to go in terms of development. … We're working with a lot of good people and we're finding out quickly there are a lot of good people in this industry. It's working out wonderfully. We want to grow slow and steady. That's our nature."
 
 Supplying small-scale biodiesel units for projects like the Pocahontas State Correctional Center isn't new to Evolution Biodiesel, says John Davis, marketing and sales manager. The company has been around for about two years assisting customers who have projects similar to Nazzaro's model. "We really see ourselves opening the door for folks who want to just kind of get their toe wet," Davis says. "Right now, there's a lot of information out there, but there are not a lot of folks that are really ingrained into using it. If you're making [biodiesel], people step back because they want to know more and see how it's made. It's a neat opportunity to kind of get people started."
 
 In addition to supplying mega ester reactor units for producers who have a ready supply of feedstocks such as cafeteria grease and oils, Evolution Biodiesel also works with soybean crushing unit manufacturers like Insta-Pro International in Des Moines, Iowa. In those cases, the company purchases the crushing unit and packages it with the biodiesel reactors and sells them to farmers. The units provide an investment opportunity for farmers looking to incorporate biodiesel into their operations, according to Davis. "We feel that these are the folks who need it the absolute most, and they're the people who can do it too," he says. "We're really trying to evolve what we're doing and work with the heart of America."
 
 To make its process more effective, the Pocahontas prison may collect discarded kitchen grease and oils from other prisons in the area, depending on how the current unit performs. According to Shrader, the prison has about five feedstock candidates in mind. "If we do approach the capacity limit on the biodiesel reactor then there could be a possibility for expansion," Shrader says. "That would just depend on the other institutes and how much waste they produce." 
 	

 No Regrets
 Nazzaro and the Pocahontas Correctional Center are satisfied with the biodiesel mega ester reactor. The unit met both parties' goals of serving as a cost-savings plan for the prison and providing health and environmental benefits for the prison staff and inmates. 
 
 Nazzaro has received a great deal of support from the state of Virginia, which is a firm advocate of sustainable renewable fuels and encourages small-scale producers to pursue innovative "green" projects. Virginia is also working on a Renewable Energy Portfolio Standard mandating that 17 percent of the state's energy come from renewable sources such as biomass, wind, solar and other sources by 2020, and the state encourages the use of energy efficiency programs.
 
 Nazzaro's self-sustaining, simplified approach has proven to be a viable niche. As for long-term goals, he intends to expand his small-scale biodiesel endeavors to other prisons, in addition to universities and restaurants. He is working to facilitate two more projects-one at a university and one in another prison, both of which he couldn't disclose at press time. "I guess we're more like facilitators than anything else," Nazzaro says. "Our intent is to develop relationships that allow us to trade products wherever and whenever it's needed. It's less expensive fuel, it's less expensive to pay to get rid of the grease and it's also good for the environment." n
 	
 Bryan Sims is a Biodiesel Magazine staff writer. Reach him at bsims@bbibiofuels.com or (701) 746-8385.

Nazzaro, director of operations for Big White Tiger, is a firm believer in starting small when it comes to succeeding in the biodiesel industry.

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Evolution Biodiesel's 80-gallon biodiesel processor'the Mega Ester II' is the newest product the company offers for producers looking to begin small-scale projects.

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Ned Nazzaro believes that starting small-scale biodiesel operations is the best way to deal with the volatile soy market. The entrepreneur and cofounder of Big White Tiger built his business around biofuels because of their environmental benefits and positive impact on the country's dependence on foreign oil.

Small Scale, Big Impact

The breadth of biodiesel production technologies has exploded along with the expansive growth of the industry in the past several years. The biodiesel process continues to evolve as producers and researchers determine ways to refine production techniques.
 
 Occasionally, drastic design changes provide a new way of thinking about the transesterification process. As the process evolves there are opportunities for inventive technology. Researchers in Connecticut have found and developed an innovative process they hope will move from the table top to the field.
 
 In 1954, microwave ovens were introduced into homes, and their popularity has continued to grow. Simply put, when something is put into a microwave oven, it heats faster than when using conventional methods. Although microwave technology is widely used in homes, it has many other uses outside of the home. In fact, in industrial applications, microwaves are used for product drying, moisture and fat analysis of food products, solvent extraction applications and to irradiate coal to remove sulfur and other pollutants.

 
 In the mid-1980s, home microwave ovens began being used for the production of chemicals in an organic chemistry laboratory setting. However, the home models weren't reliable or rugged enough to withstand the rigors of laboratory use. More importantly, they were unsafe for use with chemicals due to the possible build up of flammable vapors. These issues were addressed in the late 1990s with the introduction of microwave equipment specifically designed for use in laboratories.
 
 Conventional thermal heating relies on conduction currents within the sample to provide an overall rise in temperature. Meanwhile, microwaves transfer energy directly into the sample. This thermal energy then drives the reaction to completion. By definition, this is a relatively slow process. Microwave irradiation is a form of energy that resides fairly low in the electromagnetic spectrum. It is slightly higher in frequency than radio waves, but much lower than X-rays, ultraviolet light and other chemical bond-breaking forms of energy. As a result, bonds are neither formed nor broken by microwave irradiation-it simply acts as an energy source, rapidly transferring energy to the sample.
 
 Energy transferred directly into the sample, as accomplished by microwave irradiation, is powerful enough to accomplish chemical reactions in seconds or minutes, instead of the hours or days it would take using conventional thermal heating. For this reason, microwave irradiation has been accepted across a variety of scientific fields.
 
 Realizing that microwave heating can speed up chemical reactions and improve the quality of the products formed, a research group at the University of Connecticut began using it for the production of biodiesel in 2006. The researchers demonstrated that, in a batch reactor, biodiesel could be made by heating oil, methanol and lye to 50 degrees Celsius (120 degrees Fahrenheit) in a microwave apparatus and maintaining this temperature for one minute.
 
 Methanol is the most commonly used alcohol in the transesterification of vegetable oil to biodiesel. However, if replaced by ethanol it would be possible to obtain both starting materials from renewable resources. Ethanol is most commonly made from corn, but can also be produced from other feedstocks such as grain sorghum, wheat, barley or potatoes. The University of Connecticut researchers tested ethanol in the microwave apparatus. They found it was possible to convert vegetable oil to biodiesel with a quantitative conversion obtained after one minute at 50 degrees Celsius.
 
 Although the initially developed process was fast, the test microwave units could only hold a maximum of three quarts per batch, limiting production to a small scale. However, continued efforts between the university and CEM Corp., a microwave apparatus manufacturer, have led to a continuous-flow approach for the preparation of biodiesel using microwave heating. The apparatus resulting from this collaboration can produce approximately two gallons of biodiesel per minute.
 
 Energy consumption studies show that the continuous-flow preparation of biodiesel using microwave heating proves to be more energy efficient than the conventional (nonmicrowave) synthesis of biodiesel in large tank reactors. However, caution should be stressed when considering these results. There has been a report of the use of a domestic microwave for the reaction between methanol and seed oils in a batch process. However, production is limited due to the scale and the inherent reproducibility and safety issues affiliated with using a home microwave apparatus for making chemicals.
 
 Three patent applications have been filed on the use of microwave heating in biofuels manufacture (WO 03/014272 A2, 2003; US 2005/0274065 A1, 2005; US 2006/0162245 A1, 2006). All three use a specially designed large microwave apparatus rather than readily available commercial scientific models.
 

 The Microwave Accelerated Reaction System (MARS) used by the University of Connecticut and manufactured by CEM Corp. is a modular unit with a small footprint. One module could produce more than 800,000 gallons of biodiesel per year. Linking several units in parallel holds the potential for even greater production levels and a high-throughput design. This also offers redundancy. If the units are used in parallel and one fails, production can still continue at a slightly lower output. If a large tank reactor fails, production stops until repairs have been made. Also, because the microwave units are portable, it would be possible to take the microwave unit to the feedstock source rather than transport feedstock to a larger processing facility. For example, a cooperative of farms could own a unit and move it from site to site on an as-needed basis. One can also imagine the possibilities for fast-food restaurants. Since waste and virgin oils are common feedstocks, restaurants could convert fryer oil into biodiesel on site for use as a heating oil.
 
 Microwave irradiation is revolutionizing many different industrial applications, and biodiesel production is merely the latest field to see the impact of this technology. Implementing multiple microwave units could have a major impact on land, energy and time savings compared with a single large reactor tank process. While microwave energy is still a relatively young technology in the biodiesel arena, it is a technology whose time has come.
 
 T. Michael Barnard is a development chemist with CEM Corp. Reach him at <a href="mailto:mike.barnard@cem.com">mike.barnard@cem.com</a> or (704) 821-7015. Nicholas E. Leadbeater is a professor at the University of Connecticut. Reach him at <a href="mailto:nicholas.leadbeater@uconn.edu">nicholas.leadbeater@uconn.edu</a> or (860) 617-3518. This research was published in Energy and Fuels: 2006, Vol. 20, Issue 5 p. 2,281- 2,283–Batch; 2007, Vol. 21, Issue 3, p. 1,777-1,781–Continuous-Flow
 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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Barnard, left, and Leadbeater watch as waste vegetable oil and methoxide are pumped into the MARS microwave unit and biodiesel flows out.

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MARS with an inlet line to introduce waste vegetable oil and methoxide into the microwave and an outlet line for biodiesel to flow out.

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Researchers remove a biodiesel test batch from the MARS system.

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MARS with a four-liter reaction vessel for the continuous flow preparation of biodiesel.

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Microwave Technology and Continuous-Flow Production

Concerns over energy availability and climate change continue to drive biodiesel fuel demand. To meet that demand, the worldwide diversity of biodiesel feedstocks is increasing. The benefits of such diversity include increased raw material availability, flexibility as commodity prices shift, and the ability to take advantage of indigenous or policy-preferred raw materials.

 
 Offsetting those benefits are concerns over the varying performance characteristics of the resulting biodiesel fuel. Cold flow performance-how the biodiesel or biodiesel blend behaves in cold conditions-is a significant concern, especially as the winter season takes hold of the northern hemisphere. Cold flow additives play a role in improving biodiesel low temperature performance and can enable the use of diverse feedstocks.
 
 Biodiesel can be made from a wide variety of oilseeds and animal fats. Common feedstocks are soybean in the United States, Canada and Brazil, rapeseed or canola in Europe and Canada, and palm and coconut oils in the Far East. Jatropha seed oil is being promoted in India. Use of recycled cooking oils and animal fat trimmings as raw materials to make B100 is growing rapidly due to environmental benefits and their potentially lower cost.
 
 Saturated, monounsaturated and polyunsaturated fats can be used to manufacture biodiesel. The chemical makeup of the various oils affects the operability and handling of the biodiesel (Figure 1).
 
 <center><img src="/images/upload/20071017093906.jpg"></center>
 Figure 1. Biodiesel with high levels of saturates have poorer cold-weather operability but better oxidative or storage stability. Base biodiesel fuels containing higher amounts of polyunsaturates have better low-temperature operability but reduced oxidative stability. Biodiesel made from oils high in monounstaturates can provide good oxidative stability and reasonable cold-temperature performance.
 
 Also at issue are the cold flow performance requirements in certain geographic areas and the biodiesel blend levels in those markets. During winter months in colder climates, diesel fuel's cold flow properties are an operability issue, even without adding the complications of the various biodiesel feedstock characteristics. Marketers and fuel users manage diesel fuel flow in the winter with several techniques, including kerosene blending and the use of cold flow additives. Five factors can impact biodiesel cold temperature operability and handling. The first is the type of feedstock used in production (rapeseed, soy, tallow, palm, canola or other oils). The second is the processing technique and resulting B100 purity. Third is the biodiesel blend level used in diesel fuel. The fourth factor is the cold flow properties of the diesel fuel. Finally, the usage and type of cold flow additive impacts cold weather operability and handling.
 
 Handling, Blending and Operability
 There are two cold-temperature performance concerns: handling and operability. Handling refers to the ability to store, blend and pump B100 or the resulting biodiesel blend. Operability refers to the usage of the blended fuel in a vehicle or equipment.
 

 Biodiesel handling concerns typically fall in the realm of the B100 producer or blender. To enhance winter handling, heat is used to enable pumping. Additives can also be used to lower the pour point, either alone or in combination with heat. In B100, pour point additives can be effectively tailored to the fuel's feedstock.
 
 The method to achieve homogenous biodiesel blends essentially includes combining heat (with B100 at least 10 degrees Fahrenheit warmer than its cloud point) and agitation. Cold flow additives also must be added and thoroughly mixed at temperatures well above the cloud point of the components.
 
 Operability concerns typically fall in the realm of the biodiesel blender, marketer and user. The goal is for the equipment using the biodiesel blend to start and run without problems in the particular climate. Requirements change depending on the latitude and time of year.
 
 The blender/marketer defines the required performance, looks at the feedstock and diesel sources, determines the blend level and if kerosene will be used, and takes into account the geographical area where the fuel will be used. Operability additives are typically added when the biodiesel is blended and are most effective when included with adequate agitation and at temperatures well above the cloud point.
 
 Controlling the Crystals
 Diesel and biodiesel low temperature properties are determined by their chemical makeup, which affects crystal growth. All diesel fuel and biodiesel contains wax molecules, which are dissolved in the fuel at higher temperatures. As the fuel temperature drops, the wax molecules begin to crystallize. Cold flow additives work by controlling the crystals. They interact with the growing wax crystals to keep them small and able to flow.
 
 Four industry-recognized terms are used to describe various levels of operability. The cloud point (CP) measures the onset of crystallization. It's the temperature at which crystals grow large enough to scatter light. The cold filter plug point (CFPP) is the lowest temperature at which wax plugs a filter through which chilled fuel is pumped. The low temperature flow test (LTFT) is similar to the CFPP, but with a slower cooling rate and different filter. The slower a fuel cools, the larger the resulting crystals. Larger crystals cause filter plugging. LTFT temperatures are typically above the CFPP. Finally, the pour point (PP) is the handling temperature at which the fuel will no longer flow. As the fuel further chills, it will ultimately reach the PP.
 
 The CFPP and PP of various biodiesel feedstocks are shown in Figure 2.
 
 <center><img src="/images/upload/20071017094031.jpg"></center>

 Figure 2. Biodiesel with a higher saturated fatty ester content exhibits wax crystal formation and begins to gel at significantly higher temperatures than those containing higher amounts of unsaturated fatty esters. Therefore, biodiesel fuels made from rapeseed have better low temperature properties than those made from soybeans. Biodiesel made from palm and coconut oils has incrementally worse cold weather operability.
 
 It is clear that all biodiesel fuels are not created equal when it comes to cold weather operability. As with diesel fuels, biodiesel and biodiesel blends can gel as the ambient temperatures drop. The higher the percentage of biodiesel in the blend, the poorer the low temperature properties. Biodiesel blends of B5 or less typically exhibit cold weather performance similar to the base diesel fuel.
 
 Enhancing Operability with Additives
 Traditionally, kerosene or No. 1 diesel fuel has been used to lower the CFPP of diesel fuels. This approach also is effective with biodiesel-blended fuels, but ultra-low-sulfur kerosene has been scarce. The good news is that additives are available that will improve the cold-weather performance of biodiesel and its blends. Their use can be more cost effective than blending with kerosene. Engine power losses associated with kerosene blending also are avoided when additives are used.
 
 In the United States, cold temperature operability guidelines for diesel fuel can be found in ASTM D 975. While these guidelines are a starting point for biodiesel blends, there is no specific cold flow specification for B100 or biodiesel blends. ASTM D 6751, the standard for B100 biodiesel blendstock, requires only that cloud point be reported.
 
 As with traditional cold flow additives for diesel fuel, additives must be matched to the biodiesel composition and blend level. Additive formulators have developed broad spectrum additives that can improve the operability of biodiesel blends in the range of B5. At blend levels greater than B5, or with highly saturated B100 blendstocks, care should be taken in the additive selection and treat rate. The treat rates for biodiesel cold flow improvers are typically higher than treat rates required for traditional cold flow improvers used in diesel fuels to reach equivalent performance (Figure 3).
 
 <center><img src="/images/upload/20071017094139.jpg"></center>
 Figure 3. As the biodiesel blend level increases from B0 to B20, the CFPP temperature increases, and higher levels of cold flow additive are required to reach target performance. In this case, B10 required twice the additive level to reach the target CFPP temperature.
 

 Exercise caution when choosing an additive for biodiesel blends. Some additive chemistries can have negative effects when blended into biodiesel blends where the diesel portion was previously treated with a traditional diesel cold flow additive. Perform testing to avoid this scenario.
 
 Because of their various characteristics, different additive packages are designed for specific oil sources as well as for the time at which they will be blended (at the producer or blender level). Using the correct additive package will enhance the cold weather handling and operability of a vehicle or equipment.
 
 Tom Weyenberg is the global business manager of diesel fuel additives for The Lubrizol Corp. Reach him at <a href="mailto:trwe@lubrizol.com">trwe@lubrizol.com</a> or (440) 347-1301.
 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

Improving Biodiesel Handling and Operability in Cold Weather

As the biofuels industry adjusts to increased competition, a tighter credit market and escalating input costs, the fine details of the design/build contract are becoming more important than ever. Arguably, the most critical part of a biofuels construction project is the design/build contract (DBC). Owners must be aware that even the seemingly insignificant terms of the DBC can have significant practical, financial and legal consequences. As the Greek philosopher Plato once said, "The beginning is the most important part of the work."
 
 Carefully negotiating the terms, including what may be considered purely business or technical terms (the "boilerplate"), is an investment that may save an owner significant time and resources during and after construction.
 

 The biofuels industry has transitioned from a once cautious use of DBCs to a saturation of DBC forms from the American Institute of Architects, the Design/Build Institute of America, Associated General Contractors of America and other reputable sources. Each organization has forms that are excellent starting points, but according to their own sources, they should be used as guides and not blindly accepted. Also, the increasing number of developers in the biofuels construction industry has produced a new generation of "hybrid" construction documents which take elements from different DBC contracts. The forms are essentially a "cafeteria-style" approach to contract formation as they deviate, sometimes substantially, from standard industry documents. While this deviation is not an unpardonable sin, making certain that all the parties are in agreement with all of the terms of the DBC can be like learning to ride a bike for the first time-without the training wheels.
 
 Each biodiesel project has unique requirements which must be considered at the DBC negotiation stage in order to address the owner's goals. The industry is accustomed to a "design/build bid contract" or "design/build lump sum contract" with fairly standard terms. Yet, one can skim no further than the definitions section of hybrid DBCs and discover awkward shifts of duties and responsibilities from the contractor to the owner. While this departs from most independent owner's expectations, many owners are shocked to discover that their executed DBC reflects this "agreement."
 
 The most common, yet avoidable, areas of dispute involve poorly defined, inconsistent or insufficiently defined terms in the DBC. If the parties aren't careful, terms of a DBC can be ambiguous, used incorrectly or assume that each party understands a definition. For example, if you ask 10 people to define "best efforts," which is a common contract term, you will likely get 10 different answers-even from lawyers. Take into consideration instances when the terms are as technical as a performance guarantee where opinions vary between experts.
 
 In addition to a reputable legal counsel negotiating these points, an experienced owner's representative can also spot issues for the owner. The owner's representative can also provide accountability to ensure that the negotiated criteria and other technical aspects are drafted and executed properly.
 
 Other factors of consideration are a matter of common sense. Contracts should avoid dense industry jargon. Implement the "bus stop" approach to contract drafting. If the average person at the bus stop can't make sense of your agreement, then they won't be able to understand it when they're sitting in the jury box and in charge of resolving your contract dispute.
 
 For specific industry terms relating to design criteria, change orders, payments, timing, "substantial completion," retainage, warranties and dispute avoidance, solid advice from a party who understands how these matters will be resolved if there is a dispute will help build a better contract. For example, change orders often cause difficulties if they aren't detailed and don't discuss timing, cost increases and responsibilities. Since change orders are often an exception to the lump-sum requirement of a DBC, owners must overlook the potential for additional costs, time and completion obligations in the balance of the DBC. Court decisions throughout the United States demonstrate that changes not contemplated at the time of contract, even if not documented properly, can be properly awarded against an owner. Just think what would happen when "substantial completion" is not understood among parties, since it does not always mean the ability to produce fuel.
 
 Handling Disputes
 Even with the most careful planning and drafting, problems will occur once construction has commenced. As an owner representing shareholders, investors and lenders, there is a tendency to react quickly to keep a project on task. However, reacting too quickly can create ancillary problems that hinder resolving a business issue. The following offers a couple of practical considerations in light of a DBC.
 
 First, carefully review the facts with the relevant DBC provisions and construction binder to confirm the facts and factors of the situation. Second, confirm who bears responsibility for the problem pursuant to the DBC. Third, convene with the owner's representative and an attorney to review the situation in detail, identifying all of the issues and potential outcomes in order to prepare a response. Be careful to consider all facts and possibilities, including potentially harmful information, since it is easier to deal with negative facts early in the process. Fourth, consider the costs of the alternatives, including the time and frustration that are a part of disputes and, for larger issues, litigation.

 
 If a problem or dispute arises during the construction process, most modern DBCs follow a defined process that may include alternative dispute resolution (ADR), mediation and arbitration. Careful consideration of the DBC requirements may prevent a problem from growing to an act of default which gives further remedy to either party. By following the proper notice provisions, including the timing requirements, you are adhering to the requirements of the DBC and creating a paper record of events required by insurance or used if litigation occurs. A problem doesn't have to stop the construction process. However, any indication that the problem is not going to be resolved in a reasonable manner may have broader implications for the project.
 
 Failed negotiations usually lead to a form of ADR. Most modern DBCs contemplate non-binding mediation, followed by either binding arbitration or litigation. Mediation is non-binding and less formal than either arbitration or litigation. A well-drafted DBC will state that the goal of mediation is to get the parties to reach a mutually acceptable agreement to resolve a dispute. The mediator is usually an impartial industry expert, attorney or retired judge who has no formal power to force a settlement, but instead may help each party identify strengths and weaknesses with their case and offer creative methods to reach an agreement.
 
 Arbitration is typically binding and the award can't be appealed in the courts. The arbitration process is less formal than litigation, but implements the use of many of the same evidentiary concepts and procedures. An advantage is that there is no jury and formal procedural calendar, which expedites the resolution process. In the event the DBC does not contain an arbitration clause, or the parties cannot resolve their issues amicably, litigation is a likely next step. The scope of this article neither allows the space or the need to articulate the costs of litigation nor the impact on a construction project. However, a well-negotiated DBC, good legal counsel and proper documentation will be key factors in litigation preparation.
 
 When problems and disputes arise during the construction process, the parties may carve out issues that are not material to the completion of the project, allowing the construction process to continue. It is possible for parties to resolve matters pertaining to costs and expenses relative to the DBC without impacting other aspects of the project. However, if the issue is material to the design, construction, operation or safety of a project, there will likely be no carve-out available. Since problems always arise, the contractor should have contemplated some degree of potential problems into their estimate of construction completion and cost.
 
 For post-completion project issues, the DBC is still the source for resolving any issue. Once final completion is reached pursuant to the DBC, post-completion issues shift from construction performance to warranties. The warranty provision is critical to resolving problems as the final payment subject to final completion has been met, bills have been paid and the contractor and subcontractors are working on their next project. Moreover, if the issue arises after the release of any retainage on the project, any commitment to address an issue will likely be an out-of-pocket cost for the party who has to make a correction. Warranty issues may be subject to ADR. Also, the critical element will be giving proper notice to the contractor upon discovery of the issue.
 
 Do not rule out the importance of the bond and insurance policy for the project. Each policy contains language, often unread, that requires notice to be delivered to the carrier of any claim, defect, damage or otherwise. Failure to tender a claim in a timely manner may violate the terms of the policy or negate any proper claim made by the contractor or the owner.
 
 Words fail to describe a project that has crumbled due to poor contract negotiation. The old adage that an ounce of prevention is worth a pound of cure is never more real than when considering how critical the DBC negotiation process can be. Since the goal of every project is to pump fuel, do not overlook the essential steps of properly preparing the DBC, or if its already in place, getting the counsel you need in the event a problem arises.
 
 Todd Taylor and Kermit Nash are officers with Fredrikson & Byron P.A. Taylor focuses his practice in corporate securities and renewable energy law. Reach him at <a href="mailto:ttaylor@fredlaw.com">ttaylor@fredlaw.com</a> or (612) 492-7355. Nash focuses his practice in business transactions, energy law, mergers and acquisitions, and real estate law. Reach him at <a href="mailto:knash@fredlaw.com">knash@fredlaw.com</a> or (612) 492-7356.

 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

A New Era in Design/Build Contracts

The energy balance of biodiesel and ethanol is a subject that seems to create endless confusion. Analysis is usually reduced to a single number, or ratio, and the energy balance debate typically hinges on whether that ratio is lesser than or greater than one. This article will shed some light on the energy balance ratio and its relationship to the "renewability" of biodiesel.
 
 Why is the energy balance ratio so important in the first place? A major reason is the concern over how renewable a specific biofuel is. Since biofuels are derived from biological materials, the fuel can be replaced in a relatively short period of time. In the case of biodiesel, oil can be obtained from a new crop of oilseeds and or animal fats are available year-round. A renewable fuel serves at least two purposes; it reduces a country's dependence on imported oil and conserves limited natural petroleum supplies for alternative energy uses.
 
 The energy balance debate revolves around whether a biofuel that requires some fossil fuel energy to produce can be defined as a renewable fuel. True, it is derived from a plant grown in a field, but doing so may use a considerable amount of nonrenewable petroleum-based fuel for things like field cultivation, fuel processing and transportation. The renewable qualities of biodiesel can range from completely renewable, if no fossil energy input is required, to nonrenewable, if the fossil energy input required for production is as much or more than the energy content of the biofuel. It's beneficial to know the renewable qualities of a biofuel for two reasons. First, it determines to what degree the fuel is renewable. Second, it allows for the comparison of the renewable nature of the different processes used to produce the fuel.
 
 The extent to which a fuel is renewable is frequently expressed by an energy ratio. Instead of accounting for only the nonrenewable energy input, ratios are calculated to compare the total energy that went into producing a gallon of biofuel with the energy content in that gallon of fuel. For biodiesel, the energy ratio doesn't differ much from the renewable ratio. The total energy input is close to the nonrenewable energy input.
 
 <center><img src="/images/upload/20071017094925.jpg"></center>
 Figure 1. Total input energy E used for farming, transportation and processing is factored to all coproducts. Meal, biodiesel and glycerin have energy equivalent Em, Eb, and Eg respectively.
 

 Figure 1 depicts the energy inputs and outputs for biodiesel. Note that not all of the energy used in farming and soybean crushing goes to produce biodiesel because soybean meal and glycerin are also produced. Therefore, biodiesel should be held accountable for only a fraction of the total energy input when assessing its energy balance.
 
 The fraction of the input energy associated with the meal is designated f1. The biodiesel fraction is f2 and the glycerin fraction is f3. The fractions represent the overall split of input energy going into a coproduct. How the fractions are assigned may vary.
 
 The input energy which is assigned to the meal as shown in Figure 1 is E&bull;f1. Biodiesel is responsible for E&bull;f2 and glycerin is E&bull;f3. The sum of the energy splits is equal to the energy input. One of the most straightforward ways to determine the energy split is to partition the input energy in proportion to the mass fraction of each individual end product. Even though this method is simple and consistent, it does not account for the economic value of the output stream. Therefore, another way of assigning fractions is based on the economic value of each end product. 
 
 Em, Eb, and Eg are the energy equivalents of the meal, biodiesel and glycerin, respectively. Another method used for coproduct energy allocation is based on the replacement energy of each coproduct. The method estimates an energy credit for each coproduct based on the energy required to produce a substitute coproduct. The replacement method is often difficult to apply because many coproducts don't have exact substitutes.
 
 To calculate the energy ratio, the calorific value of biodiesel is compared to the energy fraction for which the fuel is reponsible. E&bull;f1 is not equal to Em. In fact, Em is expected to exceed E&bull;f1 because of the solar energy collected during photosynthesis.
 
 How the energy ratio is defined makes a large difference in the final value of the energy ratio. According to the Sheehan et al. (1998), also known as the National Renewable Energy Laboratory (NREL) study, the energy ratio should be defined as:
 
 <center><img src="/images/upload/20071017095006.jpg"></center>
 
 Pimentel and Patzek (2005) defined the energy ratio differently. They subtracted the energy contained in the meal (Em) from the total input energy and divided the biodiesel energy content by this amount to get the energy ratio as:
 
 <center><img src="/images/upload/20071017095012.jpg"></center>

 
 The disadvantage of using the meal energy equivalent instead of E&bull;f1 is that the energy ratio could be problematic. As pointed out above, Em can approach or even exceed E. In that case, the energy ratio approaches infinity or may even be a negative number making the energy ratio meaningless.
 
 In Ahmed (1994), the energy ratio was defined as:	 
 
 <center><img src="/images/upload/20071017095016.jpg"></center>
 
 Ahmed's definition of the energy ratio is logical if the coproducts are also used for fuel, as is the case for ethanol production from sugarcane. The total energy output in this model would be the energy content of biodiesel and its coproducts. Since soybean meal is generally not burned for energy production, this definition carries less meaning in evaluating the renewable characteristics of the fuel.
 
 Hill et al. (2006) defined the energy ratio as:
 
 <center><img src="/images/upload/20071017095022.jpg"></center>
 
 This definition of the energy ratio is a hybrid between Pimentel and Ahmed's definition. 
 
 Each energy ratio defined above provides a unique numerical value for the energy ratio even for the same input data set. Consider the following numerical example: The total energy input to E to produce all products from an acre is about 1,900 million calories and f2 equals 0.25. Energy in biodiesel produced from acre of land (Eb) is nearly 1,500 million calories. The value of Em is roughly 400 million calories per acre, according to Pimentel's paper. Eg is estimated as 100 million calories per acre. With these assumptions, the following energy ratios were obtained.
 

 › NREL definition: 3.2:1
 › Pimentel's definition: 1:1
 › Ahmed's definition: 1.5:1
 › Hill's definition: 1.1:1
 
 The variation in the results clearly shows that the reported number should be interpreted carefully as they do not mean the same thing. Which definition to use depends on what question is being answered. If the renewable nature of the fuel is being addressed, the NREL definition of energy ratio is more appropriate since it doesn't treat coproducts as a fuel. Further processing of coproducts, which may alter their calorific value, doesn't affect biodiesel renewability.
 
 What happens with this definition if some of the crude glycerin or meal is burned to offset the fossil energy input? Does its renewable nature increase? If part of E could be replaced by meal or glycerin, the energy ratio becomes higher. In that sense, biodiesel becomes even more of a renewable fuel. This is one of the reasons sugarcane-based ethanol has a higher energy balance than corn-based ethanol. Sugarcane bagasse is burned to reduce the need for outside fossil fuel energy inputs. 
 
 When comparing two bioenergy sources-one using a byproduct as an energy source and another not-we get very different energy balance ratios. Comparing the energy ratio of those fuels is like comparing apples to oranges.
 
 What would happen if some of the biodiesel share of energy E&bull;f2, which equals 475 million calories in the above example, is replaced by biodiesel itself? If 400 million calories were replaced by biodiesel then,
 
 <center><img src="/images/upload/20071017095026.jpg"></center>
 
 If we use more renewable energy in the production process, the renewability ratio could be more than 10. More importantly, the biodiesel industry needs to establish a standard definition of energy balance so the rest of us aren't left to guess at what it refers to.
 

 Dev S. Shrestha is an assistant professor of bioenergy at the University of Idaho. Reach him at <a href="mailto:devs@uidaho.edu">devs@uidaho.edu</a> or (208) 885-7545. Jon Van Gerpen is a professor and head of the University of Idaho's Biological and Agricultural Engineering Department. Reach him at <a href="mailto:jonvg@uidaho.edu">jonvg@uidaho.edu</a> or (208) 885-7891.
 
 References
 Ahmed, I., J. Decker and D. Morris. 1994. How much energy does it take to make a gallon of soydiesel? Report for the National Soydiesel Development Board. Jefferson City, Mo. 
 Hill, J., E. Nelson, D. Tilman, S. Polasky and D. Tiffany. 2006. Environmental, economic and energetic costs and benefits of biodiesel and ethanol biofuels. Proceedings of the National Academy of Sciences.103(30): 11206-11210.
 Pimentel, D. and T. W. Patzek. 2005. Ethanol production using corn, switchgrass, and wood; biodiesel production using soybean and sunflower. Natural Resources Research. 14(1): 65-76.
 Sheehan, J., V. Camobreco, J. Duffield, M. Graboski, and H. Shapouri. 1998. Life cycle inventory of biodiesel and petroleum diesel for use in an urban bus. NREL/SR-580-24089 Golden, CO: National Renewable Energy Laboratory. U.S. Department of Energy.
 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

The Biodiesel Energy Balance

Despite the biodiesel industry's grassroots start and stakeholder diversity, biodiesel producers aren't immune to the permitting process. While every state has a slightly different approach to the process, most plants are required to fulfill permits before, during and after construction. Not only do permits keep producers safe, they assure the environmentally friendly attributes the industry touts are upheld.

 
 The permitting process isn't "cut and dried." It's a varied and evolving process that begins at the state and local level. States submit their implementation plan to the U.S. EPA, which must approve each state's plan. Then it's up to the biodiesel producer and permitting officials to effectively communicate the nature of the process, what the potential and actual emissions are, and subsequent requirements for the facility. This step usually begins with air quality issues.
 
 Air quality construction permits are typically required for the construction or modification of biodiesel plants unless the state has established a facility-wide de minimis threshold. De minimis levels are a minimal level of emissions, in tons per year, for any of the six criteria pollutants or any one of more than 200 hazardous air pollutants (HAPs). The six criteria pollutants are particulate matter, sulfur dioxide, nitrogen dioxide, volatile organic compounds (VOCs), carbon monoxide and lead.
 
 The main air pollutant associated with biodiesel production is methanol. A criteria pollutant because of its VOC content, methanol is also a HAP. It, can be emitted from storage tanks, pumps, piping components, reactor vessels and distillation processes. Other criteria pollutants may be emitted from boilers, haul roads and cooling towers.
 
 If the facility's potential to emit is less than de minimis levels, a construction permit is not required. The potential to emit is based on 8,760 hours per year of production at design rate.
 
 Project developers can submit a request for a construction permit determination to the state's regulatory authority to decide if a construction permit is required. The request also allows the state to provide feedback on other requirements which may apply to the project's construction. This allows a developer to proactively incorporate requirements during the construction phase rather than learning about them later.
 
 Federal Title V permits are required for major source emitters, which are facilities that have the potential to emit more than 100 tons of any single criteria pollutant (excluding lead), produce 10 tons of any single HAP or 25 tons of any combination of HAPs per year. However, state permits are required for facilities that have the potential to emit air pollutants in quantities greater than de minimis levels but less than major source emitters.
 
 Due mainly to their relatively low emissions and simple production process, most biodiesel plants will not be considered a major source emitter of air pollution. However, if the plant has a support relationship with another facility, such as an oilseed crusher or livestock processing plant, the two facilities will be considered one installation, thus potentially creating a major source of air pollution.
 
 Insignificant activities do not need to be included or considered in the permit. Each state has established a list of insignificant activities based on a project's type of production process, size of equipment or potential to emit. For a biodiesel plant, insignificant activities may include a storage tank for biodiesel, soy oil, animal fats or diesel fuel.
 

 As with any process using chemicals, biodiesel production has a variety of emission points that must be considered during the permitting process. Examples include storage tanks, vacuum distillation/flash evaporator, loadout operations, haul roads, boilers, equipment leaks, cooling towers and batch reactor vessel.
 
 Applying NSPS
 Certain pieces of equipment, including those listed above, are covered under air emissions standards, referred to as new source performance standards (NSPS). NSPS is not a permit, but a standard that a producer must follow. They require qualitative and/or quantitative performance testing once the equipment is operational. The NSPS standard and type of equipment found in the biodiesel plant are broken into five subparts:
 
 › Subpart Dc covers small industrial/commercial/institutional steam generating units and applies to boilers with a heating capacity greater than 10 MMBtu. Monitoring, recordkeeping and reporting requirements depend upon the fuel used to fire the boiler.
 › Subpart Kb is the standard of performance for volatile organic liquid storage vessels, including those containing petroleum. It applies to volatile organic liquid storage tanks larger than 19,800 gallons. Typically, only tank dimensions and capacity records need to be kept for conventional biodiesel production. 
 › Subpart VV is the standard of performance for equipment leaks of VOC in the synthetic organic chemicals manufacturing industry (SOCMI) and requires biodiesel plants to implement a leak detection and repair program. Process equipment (e.g., pumps, valves and non-welded connections) handling methanol must be monitored for fugitive emissions on a monthly basis. Testing is performed with a flame ionization detector and/or a photo ionization detector.
 › Subpart NNN is the standard of performance for VOC emissions from SOCMI distillation operations and applies to distillation and recovery systems that vent to the atmosphere. In conventional biodiesel production, a total resource effectiveness (TRE) index value is calculated for methanol recovery systems by two methods. The lower of the two TRE values is used to determine monitoring, recordkeeping and reporting requirements.
 › Subpart RRR is the standards of performance for VOC emissions from SOCMI reactor processes and applies to biodiesel plants only if the reactors are vented to the atmosphere.
 
 Wastewater Considerations
 While air emissions are a major source of focus for permitting, water must also receive due consideration. Biodiesel plants that plan on utilizing water washing and/or discharge a wastewater stream to the environment need to obtain a National Pollutant Discharge Elimination System (NPDES) permit. This type of permit requires an on-site wastewater treatment facility to lower pollutant loads to acceptable levels. It also specifies the limits on the types and amounts of pollutants that can be discharged to a stream or applied to land. Biodiesel plants produce wastewater from cooling water, process wastewater (wash water) reverse osmosis reject water, boiler blowdown, biodiesel wash and IS regeneration water.
 
 Biodiesel plants that feature water washing and discharge that water to publicly owned treatment works need to obtain a pretreatment permit. Plant wastewater streams may contribute significant hydraulic or pollutant loads to public wastewater treatment facilities. A wastewater pretreatment process may be needed to lower biochemical oxygen demand, oil and grease, chemical oxygen demand and total suspended solids loads.

 
 Plants that opt to dispose of domestic waste either to the surface (lagoon) or below grade (absorption field) are required to permit their septic system.
 
 Construction projects with a land disturbance greater than one acre are also required to obtain an NPDES general permit for "construction activities." Contractors must develop and implement a storm water pollution prevention plan (SWPPP) and use best management practices (BMP) to prevent and mitigate soil erosion and the potential off-site effects of water pollutants carried in storm water run-off.
 
 Continued Operation
 Finally, biodiesel producers must obtain operating permits, which are mainly used to ensure compliance once the facility is functional. Producers must obtain a building permit from the state fire marshal to construct, install or modify storage tanks and process buildings. Most Midwest states have adopted the National Fire Protection Association's "Flammable and Combustible Liquids Code" as state law regarding the storage, handling or use of flammable or combustible liquids. Other NFPA codes have been adopted by reference for fire, electrical and building safety.
 
 Due to the applicability of NSPS, all biodiesel plants, regardless of whether they are a de minimis source of air pollutants, are required to obtain an operating permit once installation or modification is complete. Operating permits are legally enforceable documents that enable authorities to enforce air pollution rules more effectively by recording all permit conditions in one document and requiring reporting to track emissions and compliance. Conditions of a construction permit will carry over to the operating permit.
 
 Biodiesel plants are required to obtain an NPDES general permit for "industrial activities." Like contractors, producers must develop and implement a SWPPP and use BMP to prevent and mitigate the potential off-site effects of water pollutants carried in storm water run-off. Site drainage may flow into a storm water retention pond as a means to mitigate potential off site pollution. An annual storm water compliance evaluation must be conducted to ensure safeguards are effective. Sampling, monitoring and reporting of storm water run off may be required as a condition of the permit.
 
 Construction and operating permits are required by the U.S. EPA or the agency that regulates these permits in your state. Enforcement action may come from EPA or a state environmental agency working directly with EPA. While biodiesel plant permitting may seem like a lengthy, tedious process, it's a required step in becoming a member of the biodiesel industry.
 
 Jenny Boeckman is the manager of communications with Regulatory Consultants Inc. (RCI). She has guided clients through regulatory questions and concerns for more than 10 years. Reach Boeckman at <a href="mailto:jenny.boeckman@rci-safety.com">jenny.boeckman@rci-safety.com</a> or (800) 888-9596 ext. 213.

 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

A Permitting Primer

Whether planning to build a new biodiesel plant or operating an existing facility, having a solid capital strategy plan is instrumental in determining future success. However, those planning or developing a new plant must realize that times have changed. The debt and equity capital markets have tightened significantly due to several factors, including higher and more volatile vegetable oil prices, intensified competition (especially from integrated commercial oilseed operators) emerging technological threats (e.g., renewable diesel fuel), the high cost of construction and rapid industry growth.
 
 Biodiesel prices have remained stable over the last six months (Figure 1). However, rising feedstock prices have negatively impacted investor returns.
 
 <center><img src="/images/upload/20071017101322.jpg">
 Figure 1</center>
 
 Those planning to develop a new biodiesel plant are finding it difficult to obtain capital to fund development. Most U.S. banks have cut back on lending to the biodiesel industry, and those transactions that do get funded are built around some sustainable competitive advantages that position the project for success. Average projects lacking these characteristics will struggle to get financing in today's market. Institutional equity from major private equity funds and interest from Wall Street are also getting tougher to find. They too are looking to invest in projects that stand out in a crowd-for all the right reasons. Examples of ways a proposed project can differentiate itself include:
 
 › Feedstock control through its own crushing assets and strong grower alignment, long-term supply contracts or other captive supply arrangements
 › Feedstock flexibility 

 › dvantaged location 
 › Transportation flexibility
 › Sustainable cost advantage
 › Existing asset leverage (e.g., brownfield sites)
 › Superior margin management with offtake and origination contracts with credible partners
 › Credible project development and management team
 › Capacity to expand scale and scope of operations to reduce unit costs and/or diversify risk.
 › Sustainable incentive structure beyond the federal tax incentive.
 
 If a project has a competitive advantage, bank financing is typically structured as a construction loan and a seven-year term loan secured by all of the fixed assets and a pledge of the equity. A separate working capital line is often provided by the same lending syndicate and secured by the accounts receivable and inventories. While the loan is seven years in length, lenders are looking to be paid off in four years or less through a sweep mechanism. Each year, depending upon the company's debt service coverage ratios, the lender will "sweep" the company's excess cash flow to prepay the loan.
 
 Pricing for bank financing ranges from London Interbank Offered Rate (LIBOR) plus 350 basis points to LIBOR plus 450 basis points with two or more points up front. The amount of leverage that most banks are willing to tolerate for projects is in the 50 percent to 55 percent debt-to-total capital range with equity investors funding the remaining project costs with equity of 45 percent to 50 percent. Equity dollars are required to be the first into the project.
 
 While commercial and agricultural banks tighten their lending standards, nonbank capital, such as that from finance companies and alternative lenders, is flowing into the renewable energy sector to finance the debt portion of projects. In addition, new funds are being formed to invest in the sector. Foreign debt and equity capital are also entering the U.S. renewable energy market. However, these new groups are just as selective and only finance plants with high return potential driven by unique and sustainable characteristics.
 
 For those operating plants, it's important to define a clear strategic vision and direction for the company. How is it going to survive and thrive in the increasingly competitive and complex environment? The capital strategy is a key component to realizing this vision. It must evolve and be updated in conjunction with the lifecycle of the business. The various scenarios that biodiesel plant directors and owners should consider include:
 

 › Vertical integration to reduce feedstock and/or marketing risk
 › Horizontal diversification into other business areas (such as ethanol processing) to reduce risk 
 › Innovative and sustainable feedstock strategies
 › Acquire or merge with other companies 
 › Improve efficiencies through energy and operational optimization 
 › Refinance debt to improve long-term cash flow
 › Recapitalize the company to provide liquidity to existing shareholders and reduce risk
 › Sell part or all of the company.
 
 An exit strategy is an important part of overall capital strategy planning. As the industry matures and shifts from construction to growth, liquidity and operation of existing plants, one will have the opportunity to be an acquirer or be purchased, in full or in part. Protecting and enhancing shareholder value should be an ongoing goal when considering partial and whole restructure or exit strategies.
 
 Company valuation is driven by existing and projected earnings, and qualitative components that drive success such as management, location, feedstock and transportation flexibility, contracts and relationships. The prevailing marketing conditions also determine the multiples of earnings being paid. While current market conditions are indeed tough, a well-managed and well-positioned company always has better long-term options.
 
 The evolution of the renewable energy sector continues to move rapidly. Companies need to be positioned, both strategically and operationally, to succeed over time. Understanding the capital markets and having a capital strategy plan are key to a well thought-out plan for the future. Looking at short- and long-term options, including an exit strategy, will position the company to maximize equity value and provide optimal returns for all shareholders.
 
 Susan Wyka is a partner at Ascendant Partners Inc., an independent consulting and investment banking organization dedicated to helping agribusiness, food and renewable energy companies succeed from concept to capital. She has more than 25 years of experience in corporate finance including investment banking, private equity fund management, corporate loans and mezzanine investing. Reach Wyka at (303) 221-4700 or <a href="mailto:swyka@ascendantfp.com">swyka@ascendantfp.com</a>.

 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

Capital Strategies to Position a Biodiesel Business

Despite sharing its eastern border with Iowa, the nation's leading biodiesel producer, Nebraska has been slow to develop its own biodiesel industry. The state has plenty of feedstock sources. Soybeans are a predominant crop, especially in the state's eastern third, and one in every five steaks purchased in the United States originates from Nebraska, creating what should be a large supply of animal fats.
 
 However, it wasn't until May 29, 2007, when Nebraska Gov. Dave Heineman approved Legislative Bill (LB) 343, that a tax incentive program to encourage and advance the growth of the biodiesel industry in Nebraska was finally established.
 
 Unlike the state's burgeoning ethanol industry, Nebraska had no specific legislation providing incentives for biodiesel production prior to the passage of LB 343. While such production might qualify for incentives under the more general economic development packages offered under the Nebraska Advantage Act, many felt Nebraska was at a disadvantage in encouraging producers to enter the biodiesel market because of the lack of specific legislation for the biodiesel industry.
 
 A number of surrounding states already have widely varying legislation to encourage biodiesel production. Iowa has been one of the most active with incentives, including an income tax credit of 3 cents per gallon to certain point-of-sale retailers for each gallon of diesel sold that contains more than 2 percent biodiesel. Iowa also requires state agencies to ensure all bulk diesel purchased by the agencies be at least 5 percent biodiesel. This will reach 20 percent by 2010. Finally, Iowa offers tax credits for cooperatives that produce "value-added agricultural products," including biodiesel.
 
 In Missouri, qualified biodiesel producers are eligible to receive 30 cents per gallon for the first 15 million gallons of production. An additional 10 cents per gallon can be granted for up to an additional 15 million gallons. Kansas' Qualified Biodiesel Producer Incentive Fund provides up to 30 cents per gallon for each gallon of biodiesel sold by a producer.
 
 By 2006, 263 biodiesel-specific bills had been introduced nationwide to boost the biodiesel industry. Of these, 51 bills passed in 36 states. As a result of neighboring states' biodiesel incentives, Nebraska's biodiesel industry wasn't competitive.
 

 The Economic Impacts
 The economic impact of the U.S. biodiesel industry has become apparent. According to a study cited by the National Biodiesel Board (NBB), it's estimated that the biodiesel industry will add $24 billion to the U.S. economy between 2005 and 2015, assuming biodiesel growth reaches 650 MMgy of production by 2015. This impact would come in the form of construction spending, increased spending on raw materials to produce biodiesel and increased wages. The economic impact is already being noticed in states such as Iowa, which is home to 14 active plants, with a combined production capacity of 257 MMgy. Missouri boasts five production facilities rated at 46 MMgy of capacity. According to the report, Nebraska was then home to three plants with 12.5 MMgy of capacity.
 
 Not only is current production at an all-time high, but growth in the biodiesel industry continues. Annual biodiesel production capacity is expected to reach 1 billion gallons nationwide in 2008. This would represent a tenfold increase in production capacity since 2005.
 
 According to Sen. Chris Langemeier's state of intent when introducing the bill, LB 343's aim is to capitalize on this growth and "to increase economic development [in Nebraska] by encouraging biodiesel facilities to be constructed in Nebraska." The likely impact biodiesel production will have in Nebraska is substantial, based on an economic analysis performed by the NBB. It is predicted that the biofuel industry will have several results.
 
 Construction investment is expected to rise due to the construction of new biodiesel plants and expansion of existing facilities. Farm prices will benefit due to increased demand for feedstocks for biodiesel production. Soybean producers, whose soybeans now reportedly only account for approximately 16 percent to 18 percent of the feedstocks used to produce biodiesel in Nebraska, could see demand increase significantly. In addition, producers of other feedstocks, including sunflowers, canola and animal fats, could benefit from additional demand.
 
 A permanent increase in biodiesel production will result in added employment, transportation demands and business services. The environmental impact will include the positive use of cleaner-burning biodiesel over traditional diesel. In addition, some facilities recycle cooking oils to produce biodiesel.
 
 Finally, additional tax revenues will be created in the form of increased income and employment tax revenues, as well as the potential for greater property tax revenues.
 
 The Bill's Details
 The biodiesel credit established in LB 343 applies to taxpayers who invest in biodiesel facilities in Nebraska. An amount equal to 30 percent of the investment in a biodiesel facility is allowable as a non-refundable income tax credit, up to a maximum credit of $250,000.

 
 The tax credit applies to investments made after Jan. 1, 2008, and prior to Jan. 1, 2015, by Nebraska taxpayers, which includes pass-through entities. The credit must be taken over at least four taxable years. However, the credit is limited to 10 percent of the total allowable credit in the first two taxable years the facility produces B100, and no more than 50 percent of the allowable credit in the third year of production. The credit is limited to no more than 50 percent of the taxpayer's annual tax liability in any one year, with $250,000 as the aggregate maximum credit.
 
 To qualify for the credit, the investment in the facility must be at risk and must remain invested for at least three years. The facility must produce B100 at a rate of at least 70 percent of the facility's rated capacity for certain defined time periods. LB 343 defines B100 as "pure biodiesel containing mono-alkyl esters of long chain fatty acids derived from vegetable oils or animal fats . . . and meeting the American Society for Testing and Materials standard, ASTM D 6751."
 
 As indicated, LB 343 is intended to encourage in-state biodiesel development and its requirements further that purpose. A qualified biodiesel facility must do all of its processing in Nebraska and have a majority of its ownership interests held by Nebraska residents. Whenever possible, the biodiesel facility must employ workers who are Nebraska residents. Furthermore, a qualified facility must expend the entire investment for the plant, equipment, research and development, marketing and sales activity, or working capital.
 
 Nebraska's legislators hope that LB 343 will provide incentives for biodiesel producers to set up shop in Nebraska. While Nebraska's approach is not overly aggressive, it is hoped that the state's ready supply of a variety of feedstocks, access to key transportation facilities and the growing market for biodiesel, along with the benefits provided by LB 343, will provide ample incentive for biodiesel producers to choose Nebraska.
 
 Michael L. Sullivan is a member of the business, tax and estate planning section of Baird Holm LLP. He regularly represents clients with issues involving taxation, corporate law, tax-exempt organizations and trademarks relating to the renewable fuels industry. For more information on LB 343, reach Sullivan at (402) 344-0500.
 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

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Nebraska Tax Credit Could Level Field

Oil and water don't mix, efficiency and profits often do. While the oil and water adage is well known to biodiesel producers-it means feedstock is contaminated with water-it also offers an opportunity. Biodiesel plant personnel are always looking for new tools and equipment that help a facility operate more efficiently. Oily water is a major hurdle to efficient processing operation.
 

 Water has several purposes in the biodiesel production process, including equipment cooling and the "wash" process. Therefore, water often picks up oil or grease from equipment and feedstocks. Regardless of whether the facility reuses the water or sends it to a municipal treatment plant, the oil must be removed. Many producers aren't properly equipped to do so efficiently.
 
 Oil skimmer technology presents a possible low-cost solution. Oil skimmers are used in a wide variety of industries, including biodiesel and steel production, food processing and wastewater treatment. 
 
 The equipment continuously removes oil from the surface of the water using a simple process. Essentially, the equipment circulates a continuous loop of tubing across two pulleys (see photo on page 135). One pulley grasps the tube and feeds it onto the surface of the oily water. As it skims across the water's surface the tube attracts the oil as it breaks the water's surface tension. The tube "skims" the oil off the water before returning to the second pulley, which feeds the tube across two scrapers that pull the oil from the tube's surface. The oil is deposited into a container for removal and the freshly cleaned tube travels across the first pulley and back onto the water. The skimming action provides the equipment its name and its many benefits.
 
 The Benefits of an Oil Skimmer
 Oil skimmers are primarily designed to remove oil from water. While this is the technology's objective, the reasons to use it are varied. The removed waste oil can be valuable to other industries that develop products with it. For example, facilities that create vegetable oils or animal fats can easily recapture the waste products and provide them to other industries to make biodiesel, soap and animal feed. Waste petroleum oil can also be recycled, cleaned and receive additives that could create reusable oil.
 
 Biodiesel producers can also save money through water usage. Some facilities recirculate water after its treated. Others send it to a municipal water treatment facility. Either way, the removal of oil prior to treatment reduces costs and improves treatment efficiency, which can result in a reduced surcharge if water is sent to a treatment facility.
 
 An oil skimmer can also help reduce a facility's costs of having an outside contractor haul away waste oil. Since the skimmer separates oil and water, the facility isn't charged for the extra weight usually hauled away in the form of water. In fact, since the oil is typically water-free, it can oftentimes be used in the biodiesel production process.
 
 Oil skimmers also help prevent foul odors. An oily layer prevents oxygen from reaching the water, allowing anaerobic bacteria to grow and cause odors.

 
 Skimming can prevent safety hazards. For example, it can prevent clogs in lines and sprays by removing coolant's tramp oil. Tramp oil removal maximizes the effect and life of the coolant and tool. Also, oil build up can create a fire or spill hazard.
 
 Finally, unlike time-consuming and costly manual skimming, an automatic oil skimmer continuously removes oil while unattended. It shouldn't require constant adjustments or supervision in order to operate continuously. This is especially essential for a plant that is faced with minimal staffing, such as small-scale biodiesel or feedstock pretreatment facilities.
 
 Every oil skimmer is designed to accomplish the same thing-remove oil from water. However, not every oil skimmer achieves the same results. Certain features allow a skimmer to operate at its maximum functional level. First, a skimmer's removal capacity should match the amount of oil that is generated. For example, a small oil skimmer should not be used to remove oil from a large oil spill.
 
 The skimmer should be able to skim under conditions where floating debris is present. It should also adjust to liquid level fluctuations and be constructed of a material that is compatible with its application.
 
 Additional products and accessories are available to improve the performance of an oil skimmer. These products are typically designed to accommodate a facility's unique removal needs.
 
 A decanter returns any water removed by the skimming process to the skim tank. There are several situations in which a decanter should be used. If the skimmed oil is frothy, as is common in machine tool coolant, the decanter gives the solution a chance to separate from the removed oil and returned to the solution reservoir. This reduces solution loss.
 
 When the oil doesn't enter the skimming area for long periods of time, the oil skimmer continually operates to protect against excessive discharge. When oil isn't present, the decanter prevents an accumulation of water in the storage tank.
 
 A decanter can be used when oily waste disposal and/or oil reclamation costs need to be controlled. The decanter minimizes the quantity of water or solution accumulation in waste storage containers, thereby controlling costs.
 

 A pre-fabricated mounting system eliminates expensive bridgework needed to install the skimmer. It also provides safe and easy access to the skimmer.
 
 Used in conjunction with a skimmer, vapor hoods are used when oil must be removed from areas, such as tanks and sumps, where volatile organic compounds are present. They're also used to protect the skimmer from harsh weather conditions.
 
 Oil skimmers are often used in cold weather. In order for the removed oil to be warm and fluid for processing, the oil skimmer needs to be equipped with a heating device such as a heat rod.
 
 Waste oil doesn't need to be a burden to plant personnel. An oil skimmer ensures that the oil is easily removed with minimal effort. The right oil skimmer allows a facility to effectively manage oil, and save time and money.
 
 Jim Petrucci has extensive experience in the oil skimmers industry, having been with Oil Skimmers Inc. for 30 years. Reach him at <a href="mailto:info@oilskim.com">info@oilskim.com</a> or (440) 237-4600. More information is available at <a href="http://www.oilskim.com" target="_blank">www.oilskim.com</a>. The oil skimmer technology was on display at the 2007 National Biodiesel Conference in San Antonio. 
 
 The claims and statements made in this article belong exclusively to the author(s) and do not necessarily reflect the views of Biodiesel Magazine or its advertisers. All questions pertaining to this article should be directed to the author(s).

The decanter allows for further separation of waste oils and water.

826-1294329833.jpg

The Model 6V oil recovery system removes animal, vegetable and petroleum-based oils, fats, greases and oily wastes that float on water.

828-1294329834.jpg

An oil skimmer deposits waste oil in a barrel for removal.

829-1294329835.jpg

The decanter's manifold allows the lighter oil to flow out of the oil well, leaving the heavier water.

830-1294329836.jpg

This oil skimmer pulls excess waste oil from a water tank located on the floor below.

831-1294329839.jpg

The vapor hood prevents harmful materials from escaping the skimmer.

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A New Way to Skim and Save

A major component of biodiesel project development is raising equity and debt capital. Equity is raised through corporate stock, limited-liability company units, and cooperative or partnership interests. Debt is typically represented by promissory notes, debentures or other instruments, which can be converted into equity or issued with warrants representing future rights to purchase equity. With few exceptions, these equity and debt instruments are "securities," subject to federal and state regulation.

 
 Securities laws require that a company intending to offer and sell securities must either register with the U.S. Securities and Exchange Commission (SEC) and authorities in the states where the securities will be offered, or qualify for an exemption. Choosing the type of registration and exemptions to be used will determine the number, location and status of investors to whom the securities can be offered and sold, as well as how the offering is made. The choice can affect whether the company's offering succeeds and raises the capital necessary to construct a plant and begin operations.
 
 Private placement
 The least expensive, least time-consuming alternative to raising capital is through an offering conducted under a "private placement" exemption. A private placement is an offering to a limited number of suitable investors that does not involve public advertising. It does not have to be registered with the SEC or, in most cases, by state authorities. The offering is normally made via a private-placement memorandum that provides a required level of disclosure. Private placements are typically used to raise initial or "seed" capital, because limitations on the number of investors and conduct of the offering often make a private placement unsuitable for raising the equity required to construct a biodiesel plant. To provide protection against liability, issuers frequently restrict their private-placement offerings to "accredited investors," which include individuals with more than $1 million in net worth or more than $200,000 in annual income. 
 
 Intrastate offering
 This exemption is available if the offering is conducted entirely within the state where the business is located and all of the investors are residents of that state. Although it is normally necessary to register an intrastate offering in the state where the offering is made, it is less expensive and less time-consuming than registering with the SEC. The offering is a public offering within the state, made via a prospectus that meets state disclosure requirements. Intrastate offerings can use advertising within the state where the offering is made, but offers and sales cannot be made to persons outside that state.
 
 Registered offering
 Although it can be time-consuming and costly, full SEC registration allows the offering to be made to an unlimited number of investors in states where the offering is registered or exempt from registration. A registered offering provides flexibility in the company's ability to reach investors through mailings, media advertisements and publicly announced meetings. The company works with attorneys and accountants to prepare a registration statement, including a prospectus that describes the business, the terms of shares or units to be sold to investors, the company's management structure and the risks of investing in the project. The statement is then filed with the SEC and state securities authorities for their review and comment. When comments have been addressed and resolved and the registration process is complete, the statement is declared "effective" by the SEC and state authorities. Subscriptions for investments in the company can then be accepted.
 
 Whether the offering is registered or exempt, companies need to disclose information about the project to prospective investors and comply with federal and state securities laws. Inadequate disclosure can result in liability for the issuer, its directors or managers and officers, promoters and others in control positions in a company. It's important to consult counsel early to identify the best approach for raising capital, preparing documentation, and guiding your company through the disclosure and offering process. 

 
 Dean R. Edstrom is a partner in the Agribusiness & Energy Group at Lindquist & Vennum PLLP, a leading provider of legal assistance on renewable energy projects across the country. For more information visit <a href="http://www.lindquist.com" target="_blank">www.lindquist.com or call (612) 371-3955.
 
 This article is only a general summary for informational purposes and does not constitute legal advice. Consult a qualified and experienced legal advisor for your specific situation or particular questions.

Biodiesel Project Development and the Securities Laws

Over the past two years, Carbon Green LLC and Environmental Credit Corp. (ECC) have been working to develop protocols that would enable biodiesel producers to qualify for carbon credits. Currently, the protocols are being developed for submission to the Chicago Climate Exchange (CCX), the only legally binding, rules-based exchange for greenhouse gas (GHG) emissions trading in the United States. This could be an invaluable opportunity for biodiesel producers, not only as an income generator, but also to reinforce that biofuels are alternatives to "business as usual."
 
 Although the biofuel production protocols are still in development, we have been successful in bringing carbon credits to a biofuel producer for switching its fuel source. Corn Plus, one of Minnesota's largest ethanol producers, is our first client to join CCX. The refinery uses a fluidized bed biomass reactor that produces steam to fuel its operations. The technology reduced the plant's natural gas usage by more than 50 percent and decreased the plant's GHG emissions to a point well below the level required by its CCX membership commitment, qualifying Corn Plus for carbon credits. Although biodiesel refineries have different carbon profiles than ethanol plants, similar methods for reducing GHG emissions are an option.
 
 Carbon Credits Defined
 Carbon credits are actively traded in Europe and the United States and result from monetizing the economic value of defined environmental benefits, most commonly a reduction in GHG emissions. Emission reductions are defined by a rigorous set of scientific rules to ensure that a reduction actually occurs. To make carbon credits tradable, CCX has created a unit of measure known as the Carbon Financial Instrument (CFI). One CFI represents 100 metric tons of carbon dioxide emissions reduction, or its equivalent in other GHGs. All GHGs are given a carbon dioxide equivalent rating using carbon dioxide as the standard.
 

 The CCX uses a cap-and-trade system whereby its members commit to reduce their GHG emissions. Membership is voluntary, but exchange members are legally bound to meet their commitment. If the member company cannot meet its reduction commitment, it must purchase carbon credits, most often from offset projects. As the CCX Web site states, CCX issues offset credits to "owners or aggregators of eligible projects on the basis of sequestration, destruction or displacement of GHG emissions." 
 
 How Aggregators Can Help
 As offset aggregators, Carbon Green and ECC not only develop new ways for our clients to earn carbon credits, but also manage offset projects by providing services to implement and measure emission reductions. We are developing protocols substantiating that biofuel producers should be awarded credits for their activities that displace GHG emissions. While there are still challenges facing the protocols' approval due to a rapidly changing political environment, we believe that the science is sound and validates our efforts. With current projects including agricultural and landfill methane destruction, soil and forest carbon sequestration and renewable energy production, ECC is one of the leading aggregators in the United States. They have an established reputation as a reliable and successful offset aggregator to CCX.
 
 Carbon Green joined with ECC to assess and develop offset protocols specifically for biofuels. By focusing on biodiesel, ethanol and biomass, Carbon Green has developed strong relationships with leaders in these industries, as well as with biotechnology experts. These relationships will facilitate our goal of increasing efficiency and profitability for our biofuel clients.
 
 We think the future is bright for biofuels in the United States and look forward to helping producers add value through the emerging carbon markets.
 
 Jim Murphy is president of Carbon Green LLC. Reach him at <a href="mailto:jmurphy@carbongreenllc.com">jmurphy@carbongreenllc.com</a> or (312) 432-6570. For more information, visit <a href="http://www.carbongreenllc.com" target="_blank">www.carbongreenllc.com</a>.

Carbon credits offer opportunity for biodiesel producers

Two summer fires and a fatal explosion set back production for three biodiesel producers, although all three are continuing with expansion plans.
 
 A tank exploded and killed a contract welder in a tragic accident Aug. 21 at the Farmers and Truckers Biodiesel LLC plant in Augusta, Ga. Plant co-owner Chuck Pardue said the tank had been purged, and two leak detection systems found no combustible gases before work began to weld a flow meter on a pipe going into a 550-gallon mixing tank. So far, it's being called a freak accident of unknown origin, he said, adding, "One possible theory is that the welder, who had been welding on the tank for several hours, may have superheated the air inside of the tank to cause the tank to explode." The 5 MMgy plant will reopen as soon as the reactor and mixing tank are replaced. The impact of the explosion was limited, Pardue said, "due to the safety devices, leak detection equipment, placement of the chemical storage tank, and the cutoff valves that were installed." Construction on a second 5 MMgy plant in Warrensville, S.C., is scheduled to begin in 2008.
 
 The cause of a fire at Foothills Bio-Energies LLC in Lenoir, N.C., is also a mystery, according to co-owner Randy Dellinger. The Aug. 25 fire started in the containment area around the feedstock tank farm, destroying the tanks. The plant was unoccupied on the Saturday when the fire started and had been shut down for two days prior to the fire for cleanup and a tour, Dillinger said. The ignition source hadn't been determined at press time, but the area didn't contain electrical service or pumps, he said, adding that the flashpoint of the company's poultry fat and soybean oil feedstock is quite high. With the fire contained outside, the 5 MMgy biodiesel plant had relatively minor damages inside. After a review of the plant process and materials handling found no deficiencies, the biodiesel plant started limited production 10 days later using temporary feedstock tanks. "We are in the process of rebuilding the piping," Dellinger said. Foothills Bio-Energies, which started production in September 2006, was in the process of ramping up its production to 3 MMgy by the end of 2007 with the goal of reaching its 5 MMgy capacity by mid-2008.
 
 A July 25 fire at Better Biodiesel Inc. in Spanish Fork, Utah, was caused by a mechanical malfunction in a transfer line within the reactor section, with damage isolated within the reactor container, according to the company. At the time, the 3 MMgy plant was using animal fat as a feedstock to optimize the company's process design. "Fortunately, we were far enough along with the plant optimization to be able to establish initial effectiveness and the baseline for improved design of the new plant," said company Chairman and CEO Ron Crafts. Plans were already in place to begin work on a 10 MMgy expansion this fall. The company hired an independent engineering firm to evaluate the required repairs to the damaged processor and to help finalize the design of the new plant. Better Biodiesel has developed a waterless technology using low-grade feedstocks without the need for preprocessing or post-polishing. It intends to build out the Spanish Fork plant to 100 MMgy.

 
 It has been just over a year since fires were reported in the biodiesel industry. In 2006, two biodiesel plants had fires: Blue Sky Biodiesel, a 1 MMgy facility that had just completed construction in Plymouth, Idaho; and American Biofuels, a plant operating in Bakersfield, Calif. In Bakersfield, a methanol spill was pinpointed as the cause of the fire. In Plymouth, a welder was working on a storage tank when the tank exploded. Both facilities planned to rebuild after the fires.

Biodiesel plants bounce back after fires, explosions

The perceived rivalry between biodiesel and renewable diesel will intensify this fall if, as expected, event organizers pit these related renewable fuels against each other in various conference agendas. That's likely to happen-justifiably so, perhaps-at one or more U.S. conferences taking place in October and November.
 
 The dialogue will start Oct. 15 in Washington, D.C., where the International Fuel Quality Center (IFQC) will host a one-day briefing titled, "Can Biodiesel and Renewable Diesel Co-Exist?" If nothing else, the IFQC's guileless event label will get people talking-and probably fill seats, too. The centerpiece of this event is a roundtable discussion featuring a representative of the National Biodiesel Board, an executive from Neste Oil and an analyst from Hart Energy. Later, attendees may choose to stick around for the World Refining Fuels Conference, which will feature speakers from Tyson Foods Inc., Archer Daniels Midland Co. and the U.S. EPA, each presumably weighing in on the relationship between biodiesel and renewable diesel.
 
 The chatter will resume later in the month when conference-goers hit Las Vegas for the Oil Price and Information Service National Supply Summit on Oct. 29-30. While getting the scoop on North America's increasingly delicate transportation fuels supply and demand situation, attendees of this event will also hear from executives representing Tyson Foods, ConocoPhillips and BP. These experts will provide commentary on how marrying refining and renewable fuels provides a potentially lucrative opportunity to create "green" fuel with attractive refining economics.
 
 The faceoff will continue at the Soya & Oilseed Summit on Nov. 11-13 in Chicago, where an executive from the Energy Management Institute will discuss the current relationship between the biofuels and petroleum industries-and what traditional oil companies are looking for in biofuels partnerships.
 
 Finally, Platts will host an event titled, "Renewable Diesel: Clean Fuels for a Growing North American Market" on Nov. 15-16 in Houston, Texas, where the previously mentioned players are expected to weigh in. Along with ConocoPhillips, Tyson Foods and BP, other renewable diesel stakeholders such as Syntroleum Corp. and UOP LLC and will be represented at this event.

 
 The biodiesel industry will no doubt stay attuned to this dialogue as 2008 approaches and the NBB sets the stage for the National Biodiesel Conference & Expo in Orlando, Fla., on Feb 3-6. Meanwhile, we'll do our best to keep you in the loop.
 
 Tom Bryan
 Editorial Director
 <a href="mailto:tbryan@bbibiofuels.com">tbryan@bbibiofuels.com</a>

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Renewable diesel permeates fall conference circuit

Editor's Note

America's biodiesel industry has experienced impressive growth over the last few years. In 2004, the industry produced 25 million gallons of fuel. By 2006, production increased to 250 million gallons. Although the 2007 numbers are not final, it is safe to assume that our production will exceed 300 million gallons. The National Biodiesel Board (NBB) is proud of this accomplishment and proud to serve those whose hard work and efforts yielded these results.

 
 Despite the past success, the NBB is very aware of the challenges facing our industry. High feedstock costs and the need to expand domestic demand for our fuel are making it hard for some producers to make ends meet. The NBB's broad membership-producers, marketers and feedstock suppliers-share a commitment to biodiesel's potential and have a vested interest in the success of the industry.
 
 For a viable U.S. biodiesel industry to thrive, federal policy must provide a framework that is conducive to growth. In Washington, D.C., the NBB's advocacy team is pushing an agenda that will provide this framework. The agenda is based broadly on three policy proposals-the three legs of our legislative stool-that will provide a solid policy foundation upon which our industry will grow and prosper.
 
 The stool's first leg is the extension of the $1-per-gallon biodiesel tax incentive. Congress enacted the incentive in 2004, and it was extended in subsequent energy legislation. As the industry's growth since 2004 demonstrates, the credit is achieving its desired public policy objective by helping make biodiesel price competitive with petroleum diesel fuel, ensuring the growth of a domestic biodiesel industry that will displace 242 billion barrels of crude oil between 2006 and 2015. 
 
 However, the credit is set to expire at the end of 2008. If the credit lapses, it would be nearly impossible for the industry to survive under current market conditions. That is why extending the biodiesel tax incentive is a top priority for the NBB. The U.S. House of Representatives recently approved legislation extending the credit through 2010, and the Senate's tax writing committee has approved an energy tax package that also extends the credit. Though more work remains, these are positive developments, and the NBB will keep working with our champions in Congress to get an extension signed into law.
 
 The second leg of the stool is an initiative to create a renewable requirement as part of the nation's 60 billion-gallon pool of diesel fuel. For the long-term health of the industry, we must have a strong, reliable domestic market for our fuel. There is bipartisan consensus that expanding the production and use of environmentally friendly, domestically produced renewable fuels are integral parts of a national strategy to reduce our reliance on foreign oil. A renewable standard in the diesel pool is consistent with this effort, and the biodiesel industry is well-positioned to play a constructive role in helping achieve this common sense goal.
 
 Sens. Richard Durbin, D-Ill., and Chuck Grassley, R-Iowa, have introduced legislation in the U.S. Senate that would establish a 1 billion gallon biodiesel fuel standard by 2012. Companion legislation will be introduced in the House in the near future. The U.S. EPA is also in the process of crafting the regulatory rule to implement President George W. Bush administration's 20-in-10 initiative, which proposes to reduce America's consumption of oil by creating a 35 billion-gallon renewable and alternative fuel standard. The NBB's Washington, D.C., team will remain fully engaged in these efforts.
 
 The third leg of our legislative effort is a strong Commodity Credit Corp. (CCC) Bioenergy Program that provides support to biodiesel producers on a per-gallon basis. By design, the CCC Bioenergy Program helps producers offset the cost of feedstock, a policy objective that is timely and relevant given dramatic increases in feedstock prices. 
 
 The U.S. House passed H.R. 2419, its version of the Farm Bill, on July 27. It contained $1.4 billion in mandatory funding for the CCC Bioenergy Program between 2008 and 2012. The U.S. Senate is expected to consider its version of the bill in the near future. As the process moves forward, the NBB will continue working with Congress to structure the program in a manner that helps producers offset rising input costs.
 

 NBB's membership is varied and dynamic, as it represents all sectors of the industry. The three legs of the stool-the pillars of our legislative agenda in Washington-are common sense items that are consistent with sound federal energy policy and will help all sectors of the American biodiesel industry thrive.
 
 At this point, it is unclear how events in the legislative process will unfold. What is clear is that the NBB's Washington, D.C., team will keep pushing an agenda consistent with the needs of our diverse membership.
 
 Manning Feraci
 NBB Vice President of Federal Affairs

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The three-legged stool: Promoting the industry's needs

NBB In Sight

It's about time someone put this light-duty, diesel, present/future list together (<a href="http://biodieselmagazine.com/article.jsp?article_id=1751" target="_blank">"Current and Future Passenger Vehicles"</a>). However, you didn't mention that Ford, DaimlerChrysler and General Motors (GM) plan to bring new, highly developed diesels to the half-ton pickup truck market. Considering all three of these companies rank in the top five of all U.S. light-duty passenger vehicle sales, this is a significant event and can net huge reductions in petroleum consumption and carbon dioxide output. Pickup diesels in the past have always been in the 8,501 gross vehicle weight rating (GVWR) or higher, and we haven't had diesels for half-tons (6,001-8,500 GVWR), which really limits pickup buyer choices. The only exception was the 6.2 V-8 diesel built by GM for the half-ton Chevys/GMCs in the late 1980s.
 
 Also, Hyundai has already announced that it will equip the Veracruz SUV with a 3.0-liter V-6, Hyundai-built diesel for the United States as soon as the U.S. EPA can approve it. Hyundai representatives have said the company's vision is to equip its entire U.S. lineup with a clean diesel option.
 
 Lastly, GM announced that the United States would get a diesel Cadillac CTS and a Saturn Aura diesel in 2010. The engine is a 200-plus horsepower, 2.9 V-6 that will get highway fuel economy in the mid-30s.
 
 Gregory Faulkner
 Rickman, Tenn.

 
 
 I read your informative article about current and future passenger diesels in the United States in the August issue of Biodiesel Magazine. I thought you would have mentioned Mahindra & Mahindra's entry into the U.S. diesel market (<a href="http://www.thetruthaboutcars.com/?p=3842" target="_blank">www.thetruthaboutcars.com/?p=3842</a>) or this interesting bit at <a href="http://www.autobloggreen.com/2007/05/31/mahindra-hopes-to-offer-diesel-small-trucks-suvs-and-sedans-in/" target="_blank">www.autobloggreen.com/2007/05/31/mahindra-hopes-to-offer-diesel-small-trucks-suvs-and-sedans-in</a>. I haven't heard anything much about this development since it was announced in May, but it seems interesting. 
 
 Ed Rahe
 Advertising Sales
 Equipment Dealer Magazine

Letters to the Editor

Plans for energy cooperative CHS Inc. to enter the renewable diesel industry have been put on hold until support from Congress becomes official. CHS has had exploratory conversations regarding potential renewable diesel production at its Laurel, Mont., petroleum refinery, but no commitments have been made until the company has "a little more certainty about government support," according to CHS spokeswoman Lani Jordan. Congress is currently considering removal of the $1-per-gallon biodiesel blender's tax credit that renewable diesel producers are eligible for under current legislative language. CHS, based in Inver Grove Heights, Minn., is already heavily involved in ethanol through a biofuels marketing joint venture with Provista and as part-owner of U.S. BioEnergy Corp.

CHS awaits government backing for biodiesel projects

Development company Perihelion Global Inc. recently announced the purchase of a biodiesel plant in the western United States. The company plans to move the plant to the site of its 60 MMgy biodiesel facility currently under construction in Opp, Ala., because many of the company's potential fuel buyers, including Crew Distributing Inc., are located in the Southeast. "There is a favorable environment right now for precisely this kind of activity, and we hope to acquire and place some of these facilities back on line in regions that can be productive to potential suppliers and distributors," said Perihelion CEO John H. Beebe.

Perihelion to relocate biodiesel plant

On Sept. 1, Canadian National Railway (CN) opened its new biofuels handling facility in Auburn, Maine. According to Corrine Kostyshyn, CN marketing manager, the new handling center is in "stage one," meaning only direct rail-to-truck service is offered through seven rail sidings with up to 100-railcar capacity. The loading stations can handle 450 gallons per minute. "Steaming" is available to keep biodiesel from chilling too much during the intermodal exchange in frigid Maine. Kostyshyn said CN will consider moving to stage two-building a storage tank farm-when the market dictates the need for such a move.

CN adds biodiesel handling in Maine

VeraSun Energy Corp. announced it wouldn't pursue biodiesel production in the current economic climate. The company will continue to develop technology to extract corn oil from distillers dried grains, which it would then sell as feedstock to biodiesel producers. VeraSun has begun construction of an oil extraction facility at its ethanol plant in Aurora, S.D. Completion is slated for the fourth quarter of 2008. The company plans to build oil extraction facilities at its ethanol plants in Fort Dodge and Charles City, Iowa, as soon as the permitting processes are complete.

VeraSun drops biodiesel plans

An unsolicited bid to acquire Ag Processing Inc. (AGP), a soybean processor and producer of 30 MMgy of biodiesel in Sergeant Bluff, Iowa, was rejected by the company's board of directors in August. Ag Processors Alliance LLC (APA), which was formed for the sole purpose of acquiring AGP, submitted a letter of intent to acquire AGP for cash up to $850 million. APA said the reason for the bid was to provide AGP members with liquidity that the current cooperative structure, owned by local Midwestern and regional cooperatives, doesn't provide. Though the bid was rejected, APA said the offer would remain open for future consideration.

AGP rejects purchase bid

Eastman Chemical Co. began fueling its entire locomotive fleet with B20, the company announced in early August. Its five locomotives, which handle an average of 12,000 railcars each month at the company's Kingsport, Tenn., facility, had used B10 since July without trouble. The locomotives, owned by Genesee & Wyoming Inc., will use over 200,000 gallons of B20 per year, according to Betty Payne of Eastman's corporate communications. This increase, combined with the B10 to B30 usage in Eastman's approximately 350 heavy-duty vehicles and equipment, will push the company's total annual consumption of B20 over 600,000 gallons.

Eastman increases biodiesel blends

Saying that he wanted to "extend the lead" of Minnesota as a top renewable fuels state, Gov. Tim Pawlenty is promoting a schedule to take the state's current biodiesel fuel mandate from 2 percent to 20 percent within the next eight years. Under the provisions of Pawlenty's plan announced in August, Minnesota would move to a 5 percent biodiesel blend by 2008, 10 percent by 2011, 15 percent by 2013 and ultimately 20 percent by 2015.

Pawlenty calls for B20 mandate

Approximately 6,000 people attended the grand opening of Louis Dreyfus' new biodiesel plant in Claypool, Ind. The 80 MMgy facility drew considerable attention as the largest soy-based biodiesel plant in the world. News crews from as far away as France were on hand to document the event, and the state's governor was there, too. The facility started production in August and will be fully operational by mid-October.
 

 Two other large-scale biodiesel producers started operations in August, as well. Archer Daniels Midland Co.'s (ADM) 85 MMgy facility-the largest canola-based biodiesel plant in the country, if not the world-is producing at full capacity in Velva, N.D. The largest overall biodiesel plant, Imperium Renewables, started biodiesel production at its 100 MMgy facility in Aberdeen, Wash.
 
 These plants that started up within weeks of each other signal a milestone for the biodiesel industry. This is major volume-more than 17 percent of the biodiesel industry's current capacity.
 
 To portray the sheer size of these facilities, consider the fact that Louis Dreyfus will be capable of processing nearly 50 million bushels of soybeans and producing more than 1 million tons of soybean meal annually. Those are more soybeans than Indiana can provide independently. "We will buy Indiana soybeans whenever we can, but we will have to source some feedstock from outside to meet our processing needs," said Mike Mandl of Louis Dreyfus.
 
 ADM's facility may require more than 100 percent of North Dakota's canola supply. The state is the leading canola grower in the United States, producing more than 95 percent of the nation's crop. Will ADM be able to coax that much feedstock away from other markets? "That plant is going to require about 700,000 tons of seed, so some will have to come from somewhere else," said Eric Mack, a Velva canola grower and board member of the Northern Canola Growers Association. "In the past, we've produced over 900,000 tons, so there might be more acres going into the future. There are other crush operations around besides ADM, so there will be more canola oil for different things."
 
 Imperium is capable of storing up to 17 million gallons of biodiesel and feedstock at any one time, but is not limited to a single feedstock. The site includes eight main tanks, which can hold 2 million gallons each, and two reserves that can hold 500,000 gallons.
 
 Will all that capacity ever be utilized? As large plants continue to open nationwide, reports indicate the biodiesel industry is operating below capacity. One reason for this is the increase in soy oil prices. However, because Louis Dreyfus is an oil broker and ADM has several crush operations nationwide, including one in Velva, perhaps feedstock procurement will be less of a challenge.

Louis Dreyfus Agricultural Industries LLC started production at its 80 MMgy facility in August. It was slated to reach full capacity in mid-October.

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Recent plant start-ups raise feedstock questions

PetroSun Inc. is moving forward with its algae-to-biodiesel production plans. The company held an invitation-only demonstration of its algae-to-biodiesel system in Auburn and Opelika, Ala., in early August, and more demonstration meetings are planned.
 
 "The purpose of these meetings is to demonstrate to potential customers that algal oil is a commercially viable alternative feedstock for the biodiesel industry," said PetroSun CEO Gordon LeBlanc Jr. "The company intends to hold a series of these programs during August and September with biodiesel refiners and firms that are researching the use of algal oil as a potential feedstock for jet fuel production."
 
 PetroSun has announced plans to build algae farms and oil extraction plants in Alabama, Louisiana, California, Mexico and Australia. The company plans to extract oil from algae for sale to existing biodiesel refiners. The company's three-year plan calls for a production capacity of 2.56 billion gallons per year. Potential revenue at that level of production is more than $4 billion, according to the company. Current biodiesel production capacity in the United States is approximately 2.5 billion gallons per year.
 
 The company has established a preliminary wholesale market price for algae oil based on crude oil market prices. For example, at $72 per barrel of crude oil, the market price for the company's algal oil will be $1.71 per gallon, compared with a market price of $2.81 per gallon for soybean oil.
 
 PetroSun has completed an agreement with Grupo Santa Maria to provide consulting for its initial production facilities in Mexico. PetroSun established a biofuels subsidiary in Mexico in August. The two companies will focus their initial efforts in the state of Sonora, identifying sites for algae farms and extraction plants near the cities of Hermosillo, Guaymas and Puerto Peñasco.
 
 The company is also entering the South American biofuels market, establishing PetroSun Brazil in early September. PetroSun Brazil will enter into joint venture agreements to develop algae cultivation farms and extraction plants in that country, the company announced. Brazil has enacted legislation to require a 2 percent biodiesel-blended product effective Jan. 1, 2008. The requirement will increase to 5 percent in 2013.

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PetroSun announces algae-to-biodiesel advances

Hawaiian Electric Co. (HECO) and the Natural Resources Defense Council (NRDC) have finalized a policy that will ensure that HECO's two electric companies in the state-Maui Electric and Hawaii Electric Light Co.-will only purchase biodiesel fuel produced from locally grown sustainable feedstocks and palm oil. These feedstocks would comply with international standards established by the Roundtable on Sustainable Palm Oil (RSPO), an international organization made up of more than 200 members who represent all factors of the palm oil industry.
 
 According to NRDC Energy Program Codirector Ralph Cavanagh, conforming to the criteria set by the RSPO was a critical centerpiece behind the HECO/NRDC agreement. The new feedstock procurement policy with HECO is significant because more than 80 percent of the Honolulu-based utility company's electricity is derived through petroleum usage. The transition from petroleum to biodiesel use for electricity production would make HECO the largest user of biodiesel in the United States, Cavanagh said. "The effort here was to see if [HECO] could come up with criteria for procurement that would provide reasonable assurance of an environmental gain and still be commercially possible," he said. "We very much hope this will be a model for biofuels purchases by other utilities and indeed by all sectors."
 
 Under the terms of the HECO/NRDC public process, the policy clarifies that in addition to procuring imported palm oil for conversion to biodiesel, HECO will also require that its suppliers and others in the supply chain be independently audited to ensure compliance with RSPO standards.
 

 HECO, in partnership with Blue Earth Biofuels LLC, intends to build a 40 MMgy biodiesel production plant in Maui to supply the renewable fuel to Maui Electric Co., which uses diesel for about 85 percent of its electricity production. The project is slated for full operation by mid-2009. In addition, HECO has committed to using 100 percent biofuels at its new 110-megawatt electricity generator at Campbell Industrial Park in Oahu, which is slated to be completed in July 2009.
 
 "Our commitment is to use biofuels, and what we really want to do is create a firm local market, which would really be the first step toward developing a thriving local agricultural energy industry," HECO spokesman Darren Pai said.
 
 Initially, HECO will buy imported palm oil until the feedstock becomes locally available, according to Pai. Hawaii has about 140,000 acres that were cleared for agricultural use that are now fallow due to the decline of pineapple and sugar production. In addition to planting palm oil there, other feedstocks being considered include jatropha, coconut and kukui nuts, Pai said.

Palm oil, made from these seeds, is an acceptable feedstock for biodiesel used by HECO, the company said.

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HECO, NRDC finalize biodiesel feedstock procurement policy

At press time, a Chapter 7 bankruptcy case against Earth Biofuels was scheduled but postponed, according to the U.S. Bankruptcy Court District of Delaware.
 
 The September court date stemmed from an involuntary Chapter 7 bankruptcy petition filed July 11 by Castlerigg Master Investments Ltd., Radcliffe SPC Ltd., Portside Growth and Opportunity Fund, Cornell Capital Partners LP, and Evolution Master Fund Ltd., according to a U.S. Securities and Exchange Commission 8-K form. The five companies hold $33 million of Earth Biofuels' senior convertible notes, which were issued in July 2006.
 
 The company reported a net loss of $34.6 million in its second quarter fiscal year 2007 earnings statement, released in August. In its 10QSB form, Earth Biofuels said, "We have had net losses from operations each year since inception, and there can be no assurance that we will be profitable in the future. Our financial results depend upon many factors that impact our results of operations including sales prices of natural gas, soy oil and corn … biodiesel and ethanol … the level and success of production."
 
 After Biodiesel Magazine printed a story in its August 2007 issue regarding a biomass partnership between Earth Biofuels and Revolution Biorefining, the latter company's founder Robert Bickel said the partnership was no longer intact. Earth Biofuels was also working with Liquafaction Corp. to build a 12 MMgy ethanol plant in Moses Lake, Wash., but the two companies signed a mutual release agreement in August, according to Liquafaction Corp. Earth Biofuels acknowledged its attempt to "seek strategic alternatives, including the pursuit of additional financing for strategic acquisitions or a merger with other businesses." However, the company admitted its current financial situation raises "substantial doubt about our ability to continue as [an operating company]."

Earth Biofuels faces bankruptcy

The Texas legislature rescinded funding for the state's biofuels incentive program, effective Aug. 31. The incentive program, administered by the Texas Department of Agriculture (TDA), provided quarterly payments to eligible biodiesel producers for the first 18 MMgy produced by each plant during the first 10 years of operation.
 
 Under the program, eligible producers paid the state 3.2 cents per gallon of biodiesel produced. In return, they received 20 cents per gallon. Funding for the incentive payments was previously financed through the state's appropriations bill. The TDA asked for $85 million to fund the program for another two years, but the state legislature decided not to include financing for the program in this session's appropriations bill. Although some producers say the legislature bowed to the erroneous food-versus-fuel issue, Brian Black, a spokesman for the TDA, said the decision was based on the expense of the program. "It seems like it just came down to dollars and cents," Black said. "Other programs took priority."
 
 The program was initially instated to spur the development of biofuels projects in the state to make Texas more competitive with other states that are actively pursuing renewable fuels. Since May 2006, the TDA has made quarterly payments to biodiesel producers totaling about $9.4 million. At this time, Texas is the second-largest biodiesel-producing state in the country. However, that rank may be threatened by the funding cut.

 
 Texas-based ethanol producer White Energy Holding Company LLC, which is developing corn-oil-extraction technology and is in the process of acquiring biodiesel production technology, was considering biodiesel projects in its home state. "We'll reconsider, not about getting into biodiesel but actually where we'll put the facilities," said Kevin Kuykendall, CEO and president of the company. "It doesn't make a lot of sense for us to put more capital into a state that's not willing to support and back what it already committed to."
 
 He continued, "The legislature and the governor not supporting the funding, and then coming back and saying they didn't want to choose between food and fuel-they clearly made a choice."

White Energy's ethanol production facility in Hereford, Texas, is currently under construction, but the company's biodiesel projects may be put on hold or moved outside the state.

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Texas pulls biofuels funding

Austria-based BioDiesel Technologies GmbH (BDT) announced it has delivered its first biodiesel processing unit to Brazil. The biodiesel equipment manufacturer and project developer has 17 projects operating in 10 countries worldwide.
 
 The receiving plant, Compahnhia Productora de Biodiesel de Tocantins, is the first commercial-scale biodiesel plant in Brazil that will use jatropha as a feedstock, according to BDT. It is also BDT's first commercial-scale project to use jatropha oil. The plant has feedstock agreements in place with local cooperatives and small farmers in the state of Tocantins who have planted 48,000 hectares (118,611 acres) of jatropha. The plant can also use animal fat from the state's 6 million head of cattle.
 
 In a press release, BDT said it would deliver one processing unit in September and four additional units by the end of the year. Ultimately, the plant will have the capacity to produce 40,000 metric tons per year (11 MMgy). Additionally, Compahnhia Productora de Biodiesel de Tocantins is researching the feasibility of two additional sites within the region, which would add 80,000 metric tons (22 MMgy) of annual production capacity.
 
 In an attempt to promote agricultural production that is both environmentally and socially sustainable, the government has implemented tax incentives for biodiesel producers that source their feedstocks from local communities. Because the plant's feedstock agreements align with this model, Compahnhia Productora de Biodiesel de Tocantins expects to take advantage of these incentives.

Farmers in Tocantins, Brazil, have planted over 118,600 acres of jatropha for biodiesel production.

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First jatropha-based plant in Brazil to open this fall

Michigan State University (MSU) and Ford Motor Co. have been awarded nearly $2.4 million from the U.S. DOE to research engine technologies and biofuels properties concurrently to fully optimize diesel combustion performance when coupled together. "The grant really builds on 25 years of experience in engine research at Michigan State University," said MSU professor of mechanical engineering Harold Schock, who is also director of the university's Automotive Research Experiment Station. "We're trying to ascertain biofuels that have particular properties to be exploited to provide very efficient modes of combustion. The synthesis of fuel will determine the nature of the hydrocarbons we're dealing with."
 
 According to Kris Berglund, MSU professor of chemical engineering and forestry, the syntheses of biofuels being examined aren't conventional renewable substitutes for diesel fuel. Rather, they will come from a variety of starch or lignocellulosic feedstocks pretreated and fermented using clostridium organisms to produce butanol and higher-alcohol butanol derivatives. MSU is conducting concurrent work in Sweden to develop better separation processes in butanol production. Much of the larger-scale fuels development aspects of this project will be conducted in Webberville, Mich., at Michigan Brewing Co., where MSU has a biorefinery training facility. 
 
 The goal of this work is to better understand the relationships among fuels like butanol and the optimum fuel-air ratios prior to combustion, and "managing the way the fuel evaporates and the subsequent turbulent mixing that takes place," Schock said. Technologies such as homogeneous charge compression ignition (HCCI) will be investigated to manage hydroxyl radicals promoting leaner and more efficient combustion. Alternative means to start the combustion process using a turbulent jet igniter are also under examination.
 
 In addition to providing direction, Ford will help to determine if the proposed advanced combustion systems are mass-producible. "Ford will also have input in the potential mechanisms for controlling emissions for any concept that we might investigate," Schock told Biodiesel Magazine.

Michigan State, Ford partner for fuels, engine development

China Clean Energy Inc., a leading producer of biodiesel and specialty products headquartered in Fujian, China, saw its biodiesel sales rise 68 percent for its second quarter ending June 30 to 2,745 tons (approximately 825,000 gallons). Other notable highlights in its quarterly report include a record $5.3 million in total revenue, up 61 percent from the same time last year, while net income rose to $793,110, a 60 percent increase compared with the company's second quarter in fiscal year 2006.

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China Clean Energy sees strong second quarter

Renewable Energy Group Inc. (REG), which earned BQ-9000 certified marketer status from the National Biodiesel Accreditation Committee in late August, was ranked No. 200 in Inc. Magazine's list of the fastest-growing companies in the United States. REG, which has annual revenue of $178 million, was also ranked the seventh-fastest growing energy company on the list. "This is really exciting because we're the first biodiesel company ever listed there," said Alicia Clancy, REG spokeswoman.

REG earns certification, accolade

Bigfork, Mont.-based Great Plains Oil & Exploration, or Great Plains-The Camelina Company, said it is currently producing and crushing the nonnative, fringe oilseed crop camelina in Montana. Its work has attracted INEOS Enterprises, a petroleum company with annual sales near $36 billion that has decided to partner with Great Plains. INEOS said Great Plains' feedstock platform was perfect for its planned expansion into the biodiesel sector.

Camelina company, petroleum manufacturer partner

Nova Biosource Fuels Inc. has acquired Clinton County Bio Energy LLC, a 10 MMgy biodiesel plant in Clinton, Iowa, which Nova designed and built. The company plans to install its pretreatment process to the facility to enable the use of lower-quality fats. A 20 MMgy expansion project is also being developed. In other company news, Nova announced that its subsidiary Nova Biofuels Trade Group has contracted ConAgra Trade Group to market Nova's 50 percent share of biodiesel production from Scott Petroleum Corp., a 20 MMgy plant in Greenville, Miss.

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Nova Biosource acquires plant, signs contract

Clovis Biodiesel LLC, a 15 MMgy biodiesel plant under construction in Clovis, N.M., contracted with Boonton, N.J.-based ChemPro Group LLC for a modular purification and recovery system. The system is scheduled to be delivered by ChemPro later this year, according to company President Steve Lavorerio. ChemPro designs and builds process systems for solvent recovery, distillation, evaporation, and extraction for the chemical and hydrocarbon process industries. Clovis Biodiesel is ChemPro's first biodiesel customer. Clovis Biodiesel is owned by ARES Blue Sun Development LLC.

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ChemPro Group provides system to Clovis Biodiesel

Independence Renewable Energy Corp. (IREC) has named Arick Rynearson the vice president and general manager of biodiesel operations at its facility in Perdue Hill, Ala. Rynearson has 14 years experience in business development and marketing, and recently earned a Master of Business Administration degree at Seattle (Wash.) University. He also earned a graduate certificate in sustainable business development from the Bainbridge Graduate Institute. Rynearson will be headquartered in the Mobile, Ala., area and maintain a significant presence at the company's biodiesel operations.

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IREC names general manager

In April, Tyson Foods and ConocoPhillips announced plans to produce and distribute what has become known as "renewable diesel." The impetus for this move was ostensibly to market a product that burns cleaner and has many more positives than regular diesel. While this may be true, some in the biodiesel industry feel the real impetus was the $1-per-gallon tax credit that blenders can receive for mixing as little as 1 percent biodiesel into the product.
 
 This is only one of many concerns that biodiesel producers, especially future producers, have as fall approaches. While some people blame fossil fuels for climate change, biodiesel producers find themselves in the uncomfortable position of reiterating that biodiesel is no "silver bullet." What so many seem to forget is that renewable fuels aren't a panacea, but a step in the right direction. Plants like Biofuels of Tennessee LLC in Decaturville, Tenn., may be small when compared with some producers, but the 10 MMgy facility, which completed a 10 MMgy expansion project in August, is still making a large impact in the local area.
 
 On the other side of the capacity spectrum, the largest soy-based plant in the world-Louis Dreyfus Agricultural Industries LLC-started production at its 80 MMgy facility in Claypool, Ind. As many as 10,000 people attended the company's grand opening Aug. 21, including Indiana Gov. Mitch Daniels. Also in August, Archer Daniels Midland Co. started production at the country's largest canola-based biodiesel plant, an 85 MMgy facility in Velva, N.D.
 
 Four other plants started production since last month's plant construction list. Beatrice Biodiesel LLC in Beatrice, Neb., started testing its 50 MMgy soy-based facility in September. Alterra Bioenergy of Middle Georgia in Gordon, Ga., started commissioning at its 15 MMgy facility in late August. Mason Biodiesel in Westerly, R.I., finished construction of its 1.2 MMgy facility in July, followed by production in August. Last but not least, Prairie Pride Inc. in Nevada, Mo., started testing its 30 MMgy facility in September.
 
 Critics are always available to point out the shortcomings in any form of progress. However, it is difficult to see how an additional 272 MMgy of fuel from renewable resources is a negative. When these facilities make good on their promise to produce cleaner fuel, the industry as a whole will benefit.

Biodiesel Plant Construction

It's hard for most people to imagine a gram of material made up of tiny spheres no larger than the period at the end of this sentence that when stretched out two-dimensionally would cover the surface of a football field. Perhaps harder to imagine is a solid bead that size serving as a pivotal instrument in biodiesel production. Biodiesel producers around the globe, however, have vivid imaginations when it comes to more efficient production methods and are clamoring for more information about the technology. "People representing over 30 percent of the worldwide biodiesel capacity have contacted us about the technology," says Larry Lenhart, CEO of Catilin Inc., the startup created to commercialize the technology. "It's reassuring and highlights the need for new biodiesel technologies."
 
 The nano-sized spheres, invented by Victor Lin, a chemistry professor at Iowa State University in Ames and a scientist for the U.S. DOE Ames Laboratory, weren't originally designed for biodiesel production. "Our expertise is in catalysis and material synthesis," Lin explains. "We initially wanted to explore this class of materials because we were interested in their structure."

 
 It turns out this structure, a honeycomb of channels that run through the sphere, serves as a foundation for the development of tiny porous materials useful for a range of catalysis and biotechnological applications. Biodiesel production happens to be one of these applications, and the implementation of these tiny tools has been proven in the lab to alleviate several sticky points in the process. 
 
 Homogeneous Versus Heterogeneous
 In simple terms, the production of biodiesel involves a chemical reaction between a vegetable oil or animal fat and methanol that creates a mixture of methyl esters and glycerol. The latter is a byproduct that can be turned into value-added chemicals while the former is purified to make biodiesel. In order to reduce the energy needed for the reaction to proceed, a basic catalyst is added. Today, that chemical of choice is sodium methoxide, a potentially explosive but inexpensive option.
 
 Sodium methoxide, as well as other commonly used catalysts for biodiesel production are known as homogeneous catalysts because they dissolve in the reaction solution. The rub is that these chemicals become trapped in glycerin, and sometimes in the biodiesel itself, and must be removed. To do this, acid is added to neutralize the base and water is used to wash it from the products. Besides adding a layer of cost to biodiesel production, adding water shortens the lifetime of the biodiesel, Lin explains.
 
 The new honeycomb spheres, however, are heterogeneous catalysts that don't break down in solution. "Our catalyst is a solid," Lin says. "We don't have anything leaching into the solution so when the reaction is finished we simply do a filtration to recover the spheres." In a bench-top reaction, the nano-particles are simply added to an oil and methanol mix forming a milky suspension. The reaction is run to completion and the entire mixture filtered to capture the catalytic spheres, which can be recycled and used again and again.
 
 In addition, these new catalysts allow for the processing of numerous feedstocks, a feature expected to improve the economy of biodiesel production. At this time, sodium methoxide tends to be most effective in reactions involving soybean oil because this feedstock contains few of the impurities called free fatty acids (FFAs) that react with the catalyst to form soaps or salts. But the cost of this feedstock is on the rise and producers are looking to cheaper, albeit not as clean, options including animal fats such as beef tallow and chicken fat. When these cheaper feedstocks are used, however, they must first be pretreated in an acid-catalyzed reaction that converts the FFAs into esters. "It's like a catch-22," Lin says. "You want to use a cheaper feedstock but in order to use the cheaper feedstock you have to add another reaction and use another catalyst. All this defeats the purpose of switching the feedstock. Our catalyst will have the ability to contain both acidic and basic functionalities."
 
 Bifunctionality
 This kind of bifunctionality is abundant in nature, Lin says. Enzymes, for example, contain both acidic and basic residues. These residues are spatially separated yet work together to catalyze reactions. But how do you make a solid sphere act like an enzyme? "Our initial thinking was that if we could load the surface of these spheres with catalytically active functionalities we could enhance the kinetics and throughput of a reaction," Lin explains.
 

 And that's just what they did. Leo Manzer, a retiree who directed DuPont's corporate catalysis center, visualizes the nano-catalysts as a bundle of straws. "You can vary the diameter of the straw very precisely to modify the surfaces in a very controlled fashion so that the acidic reactions take place on the outside of the straw and the triglycerides go down through the channel," he explains. "Basic catalysts decorate the inside of the straw and cause transesterification to take place. The methyl esters then exit the bottom of the straw," says Manzer, who developed catalysts for DuPont for 32 years before founding his own consulting company, Catalytic Insights LLC. "This is a pretty slick technology," he says. "It's a nice example of designing a catalyst to do a specific job."
 
 That's what representatives of Mohr Davidow Ventures (MDV), a California-based investment firm concluded when they attended one of Lin's presentations. "We saw Dr. Lin making a presentation and thought about the applicability of this technology in the biodiesel market given the growth of the industry," explains Lenhart, who also serves as an executive-in-residence at MDV. "We saw this as a great opportunity to get in on the ground floor of a game-changing technology."
 
 To that end, MDV started working with Lin to create a business around the technology. MDV invested $3 million into the business dubbed Catilin Inc. ("cat" for catalysis and "lin" for Lin) and pulled it out of Iowa State University, although the college still owns a portion of the business and continues to be a contributor of the technology, Lenhart says.
 
 Catilin has been operating since the end of May and at this time the company has three objectives: "First and foremost we want to make sure this technology that we've proven in the lab works at a biodiesel pilot plant," he says. "We want to make sure we can produce our catalyst at a production level that makes sense and we want to make sure that the technology not only works economically but that it also works to produce the appropriate standards of biodiesel, the right ASTM levels."
 
 To meet these objectives, the company is currently refurbishing a pilot plant at the Iowa Energy Center's Biomass Energy Conversion (BECON) facility. BECON, which is near Iowa State University, serves as a bioenergy plant for scaling-up promising laboratory research in biofuels. "We're breaking down and changing out some of the equipment because our process doesn't need as much equipment as the existing biodiesel plant needed," Lenhart explains. He expects that Catilin will be producing biodiesel and collecting results by the end of the year. "When you take something from bench to pilot-plant scale you get nervous if you're introducing a lot of new variables to the process like heat and pressure," he says. "We're really not introducing a lot of new things. Our process is not high heat, it's not high temperature, we're not mixing four or five things together so it's not as risky as you might find at another scale-up facility." The biggest challenge the company may face in scale-up is optimizing the rate of biodiesel produced with the heterogeneous catalyst. The advantage of a homogenous catalyst is that it tends to be reactive because it is in phase with the reactants. With the new heterogeneous catalyst, however, the reactants have to come into contact with the spheres and move through the pores. This could potentially slow down the reaction. That's where the BECON facility will come in handy. The pilot plant will house a 100-gallon reactor and could produce up to 1 MMgy, Lin explains. The modular nature of BECON makes it ideal for Catilin's scale-up because the company will be able to showcase the various options for incorporating the nano-catalyst technology into new and existing facilities. "BECON provides a unique flexibility that allows us to go in and play around with different ideas," Lin says. One of these is engineering a filtration system for the recycling of the beads. Another is designing a catalyst column where reactants would flow in and products out. "Right now we're working hard to figure out what is the best and most economical design," Lin says. "We want to be able to show people, this is how it works and these are the options so that they can decide what will work best for their operation."
 
 The potential of the technology is great: a more economical biodiesel production process, a recyclable catalyst, and a cleaner biodiesel and glycerol byproduct. And the timing for these new catalysts might be right. "Some of the problems that didn't exist 20 or 30 years ago will now be a grand challenge," Lin says. "I think people are now starting to realize the importance of this kind of research."
 
 "This is a really attractive technology that we're bringing to the table at the right time," Lenhart adds. "We're getting a good sense of the economic and environmental value of biodiesel but as a country we're trying to figure out how much to invest in biodiesel infrastructure. We help produce biodiesel on a more economic basis with less waste, requiring fewer government subsidies. That's a very attractive technology for people who might be interested in renewable fuels, which happens to be everybody."
 
 Jessica Ebert is a Biodiesel Magazine staff writer. She can be reached at <a href="mailto:jebert@bbibiofuels.com">jebert@bbibiofuels.com</a> or (701) 746-8385.

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Lin's team of chemists at Iowa State University has designed a solid, recyclable catalyst that improves the quality of biodiesel and the economics of producing the fuel.

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A new company is gearing up to galvanize the biodiesel industry with microscopic catalysts that could lower the cost of biodiesel production by up to 25 cents a gallon.

Nano-Style Biodiesel Production

Developed as a mechanism to bring major renewable fuels players on the same page, the International Biofuels Forum (IBF) formally organized this spring with the seemingly daunting task of harmonizing the world's biofuels quality standards. The purpose is to jump-start the global commoditization of ethanol and biodiesel with minimal technical interference. Experts agree that European biodiesel specifications and quality standards have been tailored around specific feedstocks common in Europe-mostly rapeseed. Despite this Eurocentric flaw continental standards stand second to none. This is partly why those involved in shaping and improving ASTM standards have been working hard to close the technical gaps between D 6751 and EN 14214.

 
 Experts are hesitant to predict exactly how this new set of international standards will look-whether ASTM will retain regional autonomy or if EN will prevail across the world or maybe a fused montage of elements borrowed from EN and ASTM will emerge with a distinctly international designation. "I wouldn't even begin to make a prediction," says Steve Westbrook, principal scientist with Southwest Research Institute and chair of the ASTM subcommittee E. Westbrook is also an IBF committee member. "It's going to come down to the few things that are not common to both specs, and really are probably based on feedstock differences for the most part," he says. "Whether it comes down to picking one or the other and making it an ISO spec or what, I just don't know." Westbrook and others say most countries already rely on either EN or ASTM quality standards in some form or another. Therefore the task is to weave together in an official and standardized manner what is essentially already being done to ensure original engine manufacturers (OEMs) and fuel purchasers that the product they're buying from Brazil or India resides within the same set of technical specifications as fuels purchased domestically.
 
 In a presentation made to the 11th Annual Green Chemistry and Engineering Conference in late June, Steve Howell, the National Biodiesel Board's (NBB) technical director, indicated that foregoing the encompassing ASTM protocol simply isn't an option in the United States. Howell said ASTM fuel standards have become intimately entwined within federal and various state laws, tax regulations, product listings, safety regulations, EPA regulations, insurance listings, etc., so much so that a revision of those laws and regulations to "specify a new, non-ASTM standard would be very expensive, time consuming and difficult." Howell said it is therefore important that current and improved ASTM standards continue as the recognized standards to meet U.S. needs. Of the IBF and its goals, "Right now there's somewhat of a loose structure," Westbrook says. "I think we're trying to get the foundation laid."
 
 Closing the Gaps
 While Howell indicates that replacing ASTM standards with an international variety would be too costly to justify, the fact is ASTM D 6751 resembles EN 14214 more and more. One such recently closed gap is the inclusion of a trace metals spec in D 6751. A combined limit of 5 parts per million (ppm) of sodium and potassium-residual catalyst materials in the fuel-and a combined 5 ppm spec on calcium and magnesium mesh with EN 14538. Sources say this spec, much like many other addendums, inclusions or improvements to quality standards, is often spear-headed by the OEMs in rightful attempts to protect their assets-engine warranties.
 
 Another measure taken to bring U.S. and European standards closer together is the adoption of EN 14112, a three-hour oxidative stability test commonly referred to as the "Rancimat test." Europeans have long relied on a six-hour Rancimat test to determine the stability of its often rapeseed-based biodiesel. The caveat with the three-hour test is that it's supposed to begin at the point of blending rather than at the point of production. While some experts agree three hours is not a long enough duration for this accelerated test, the Europeans have no concrete data to back up the need for a six-hour test. Sources involved in the effort to improve the shelf life of biodiesel tell Biodiesel Magazine that, when the three-hour oxidative stability test passed and became a part of D 6751, industry leaders were willing to vote it in because the need for some sort of mechanism to test the shelf life of U.S. biodiesel was widely recognized as the biodiesel industry's struggle with quality control became more apparent. The idea was to pass a three-hour test for starters and improve on it in the future. A subtler difference between ASTM and EN, which sources say will be tougher to reconcile, is the means of carbon residue testing-ASTM's test is done on B100 whereas in EN 14214 a test is run on a 10 percent distillation residue. 
 
 A final difference between American and European standards is the need for a method within D 6751 to test for particulate contamination. There is presently a particulate contamination specification in EN 14214 using method EN 12662 with a limit of 24 milligrams per kilogram. This is under consideration but not yet on the ballot for inclusion in ASTM D 6751. An additional measure being balloted in D 6751 addresses solids forming in the fuel above the cloud point-symptoms of which caused problems in Minnesota nearly two years ago and continue to plague the industry. This problem lit a fire under petroleum refiners and OEMs and essentially shaped the direction of biodiesel-related ASTM actions over the past year; and will continue to play a role in the future. 
 
 EPA Oversight
 To recap events that led to the current volume of biodiesel-related standards activities within ASTM, last year at this time biodiesel industry analysts were still reeling from the disconcerting results of the National Renewable Energy Laboratory's B100 quality survey. Just as those disturbing results were settling in, winter was closing in again. Industry advocates feared the proliferation of gelling instances at temperatures above cloud point. Also, about one year ago, biodiesel industry members brought a measure to the balloting stage that they had been advocating for some time. The measure was to allow for up to 5 percent biodiesel in the petroleum diesel fuel spec, ASTM D 975, similar to Europe's EN 590 specification. If passed, this would allow without notice a blend of up to B5 in petroleum diesel fuel-a major victory for the industry. Unfortunately, fresh in the minds of refiners were the undesirable biodiesel quality results wherein half the collected samples failed to meet ASTM specs. The most common problem identified was too much bound glycerin manifesting in the formations of solids above the cloud point. Since refiners rely heavily on cloud point, this presented reasonable justification for negative votes blocking the passage of the measure; four out of five of which came from refiners.
 

 As a result, the U.S. EPA-also an ASTM member-has become more involved than ever before in the ongoing evolution of biodiesel fuel quality standards, and is tightening its leash on the biodiesel industry to make sure all biodiesel produced meets ASTM D 6751. Some sources characterize the EPA's move as a "hostile takeover." Others say OEMs are rightfully using the EPA as an agent of enforcement. "I guess there's a concern that if a governmental body makes regulations that it will be difficult to change it if it comes time to change it," Westbrook says. An EPA source who wishes to remain anonymous admits that the agency's involvement in the regulatory and enforcement processes of biodiesel certainly would impede the industry's ability to adjust specs in an expeditious manner. Westbrook and others take EPA's charge seriously, but aren't stalled in discouragement-balloting and approving the necessary, technically sound specs as quickly as possible, which is the No. 1 mission for the industry. 
 
 To carry out this mission an Operability Task Force on biodiesel was formed in ASTM after the failed attempt to approve B5 in ASTM D 975. The task force consists of 30 people from a wide cross-section of petroleum refiners, biodiesel producers and fuel experts. The intent of the task force is to more visibly and concretely address biodiesel quality concerns; specifically the issue of precipitates forming above cloud point. 
 
 A man some call the "shepherd" due to his successful efforts to herd member support and corral precision data, BBI Biofuels Canada technical analyst and voting ASTM member Stu Porter, has been working hard to ballot a final version of a particulate contamination test method. It's the Cold Soak Filtration Test, which was developed by Magellan Midstream Partners LP's Rod Lawrence and Porter while assisting the National Biodiesel Board, where the fuel is chilled and goes through a timed filtration process. Porter says after the terrible winter experience in Minnesota with filter pluggings two years ago, this particular method was used to test all biodiesel coming into the state. Minnesota biodiesel has been given a "clean bill of health" ever since, Porter says. He tells Biodiesel Magazine that the Operability Task Force is cautiously optimistic regarding the measure's upcoming vote. He is also balloting an ASTM particulate contamination method. The method successfully went through the balloting process once before, but because of a lack of precision data-test data accompanying the ballot item to justify its passing-one member voted negative. "And rightfully so," Porter says. "It originally went through more quickly than I expected and I didn't have my round robin or precision ready, so someone correctly voted negative." At press time in early September, Porter says the precision data will be ready and the test method for particulate contamination, which doesn't even have a number yet, will go to ballot. Porter will also be balloting the Cold Soak Filtration method. This is the same method that will be balloted in the annex of D 6751 and was to be voted on electronically on the ASTM Web site at the end of September.
 
 Since time is of the essence and ASTM meets only twice a year (June and December), Westbrook says a cover letter will accompany the upcoming ballot informing voters that, if they wish to vote negative, the possibility of electronic adjudication is in play and, therefore, ample and persuasive reasoning should be provided as to why their negative vote carries weight. This is being done to expedite the entire process before winter and the EPA closes in on the process.
 
 The question then is what's to come of the previously failed attempt to incorporate B5 in D 975? "Because we're balloting the cold soak due to the prior negatives on B5, the intent is to [vote on it] at the same time at main committee and the negatives are being addressed," Porter says, adding that they adjudicated the B6 to B20 spec at the last subcommittee meeting so that too will be addressed in the next session. "There will be three ballots at subcommittee E, all related to biodiesel standards," Porter says. "I'm really amazed that we got the negatives for the B6 to B20 spec adjudicated." It is hoped that the Cold Soak Filtration Test method in the annex of D 6751 and the B5 vote at Main D2 Committee will pass. "I think the fear of the unknown made people a lot more cooperative than they would otherwise be," says Porter, referring to the EPA's pending regulatory oversight.
 
 Ron Kotrba is a Biodiesel Magazine senior staff writer. Reach him at <a href="mailto:rkotrba@bbibiofuels.com">rkotrba@bbibiofuels.com</a> or (701) 746-8385.

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As the synchronization of biodiesel standards moves forward across the world-most notably between the ASTM D 6751 and EN 14214 protocols-a concerted effort is underway in the United States to improve D 6751 while keeping the U.S. EPA and its slow moving regulatory body at arm's length.

Quasi-Harmony and the EPA Wild Card

Web exclusive posted Oct. 19, 2007, at 9:28 a.m. CDT

 
 <a href="http://www.heco.com" target="_blank">Hawaiian Electric Co.</a> announced Thursday that it has filed an application with the Hawaii Public Utilities Commission for approval of a biodiesel supply contract for a new electrical generation station. According to a Hawaiian Electric news release, <a href="http://www.imperiumrenewables.com" target="_blank">Imperium Services LLC</a>, an affiliate of Imperium Renewables, would be the provider of the biodiesel, anticipated to be between 5 MMgy and 12 MMgy.
 
 According to Hawaiian Electric, construction on the 110 megawatt generating station is expected to begin in early 2008 with service beginning by mid-2009. Imperium currently operates a 100 MMgy biodiesel facility in Grays Harbor, Wash., but has no production in Hawaii. The company is in the process of developing a biodiesel facility at Kalaeloa Harbor, Hawaii.
 
 On the Web:
 <a href="http://www.imperiumrenewables.com" target="_blank">www.imperiumrenewables.com</a>
 <a href="http://www.heco.com" target="_blank">www.heco.com</a>

Imperium to provide biodiesel for planned electricity generation

Web exclusive posted Oct. 23, 2007, at 3:12 p.m. CDT
 

 <a href="http://www.greenflightinternational.com" target="_blank">Green Flight International</a> and <a href="http://www.biodieselsolutions.com" target="_blank">Biodiesel Solutions</a> teamed up for an aviation first in early October with the completion of an experimental test flight in an L-29 aircraft powered by B100. The plane, made in the former Czechoslovakia, was piloted by Carol Sugars and Douglas Rodante from Reno-Stead Airport in Reno, Nev., on a test flight that experimented with mixtures of jet fuel and biodiesel. As the flight progressed, the blend of biodiesel increased until the jet was burning B100.
 
 "As we gradually increased the amount of biodiesel in the fuel blend, the data confirmed that the aircraft continued to perform well, giving me the confidence to transition to 100 percent biodiesel," said Sugars, who acted as chief pilot on the flight. According to a Green Flight International news release, the aircraft reached an altitude of 17,000 with no significant difference in performance compared to jet fuel.
 
 "This test program between Green Flight International and Biodiesel Solutions was a unique and exciting opportunity to show what can be done in renewable fuels," said Biodiesel Solutions President Rudi Wiedemann. "The very idea of using 100 percent biodiesel to fly a jet aircraft makes a compelling statement about the possibilities for the future of renewable energy and a healthier planet."
 
 Global Flight International was founded in 2006 by Rodante to serve as a platform for future development in the use of renewable fuels in aviation and other sectors. Global Flight International said it expects to announce another record-breaking event in the near future.
 
 On the Web:
 <a href="http://www.greenflightinternational.com" target="_blank">www.greenflightinternational.com</a>
 <a href="http://www.biodieselsolutions.com" target="_blank">www.biodieselsolutions.com</a>

Sugars, left, and Rodante wave from the cockpit of the L-29 Delfin they used on a flight burning B100.

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Biodiesel jet makes first flight

News release posted Oct. 25, 2007, at 8:41 a.m. CDT

 
 In its first week, the Green Fuels Exchange (GFEX) has seen unprecedented success for a marketplace of its kind. With over 400 unique visitors in its first week coming from 43 states and 10 foreign countries, this diverse collection of users includes organizations ranging from Archer Daniels Midland to United Technologies and the City of Phoenix to the US Department of Agriculture. Through this wide and varied use, contractual activity began before noon on its opening day for all but two GFEX products.
 
 For the first time, the value of products such as switchgrass, at $21.84 per ton; cow manure, at $1.65/ton; or cornhusks, at $0.27 per pound, is accessible to the public in a transparent manner. "Even though our fist week saw visitors in the hundreds, not thousands or millions, we are already seeing the kind of valuable activity we were hoping for," says Chris Draper, director of concept development. "Right now, since we have more people looking for products to buy than those looking to sell, we are seeing the product values dominated by the lower entry prices requested by the buyers. Once more sellers enter the market, we are expecting these values to migrate upwards."
 
 Despite the current buyer-heavy usage, the regional variability expected is already being observed. "The GFEX is unique in that it allows for regional variation in product values," says Alison Ryan, director of operations for the GFEX in Des Moines. "We are already seeing this marketplace flexibility exhibited in the biodiesel request contracts. For example, a biodiesel contract in New England is going for $3.15/gal while a similar request in Iowa is only fetching $3.01; these variations were expected given the regional variation in traditional diesel fuels."
 
 Right now, both Ryan and Draper admit that it will take time for users to understand that the GFEX is open to everyone. "We have heard of examples like an individual in Georgia who has a significant quantity of oil that he would like to make available on the GFEX, but does not realize that there are buyers in his area if he makes the product available," says Ryan. "The GFEX is not exclusive to any one region."
 
 "We need to help people understand that there is no risk associated with posting materials for sale on the GFEX, apart from someone buying it, and that takes time," comments Draper. "It has been a very good first week, exceeding many of our expectations. Hopefully next week will allow us to keep building, allowing us to all to take a few more steps towards finding that value of green."

Green Fuels Exchange opens

Web exclusive posted Oct. 25, 2007, at 2:12 p.m. CDT
 
 Eight biodiesel manufacturers in the Netherlands are leading the push for the European Union (EU) member to climb to the top of the list of biodiesel producers in the union. The Netherlands Biodiesel Industry Association (VNBI) says its goal is to become one of the EU's top producers within two years.
 
 According to a VNBI press release, the group hopes to produce a combined 1.5 million tons (410 MMgy) of biodiesel annually and replace at least 10 percent of petroleum diesel as early as 2009.
 

 By forming the VNBI, member companies hope to generate political support for biodiesel and forge an alliance with government, oil companies and environmental groups to find a balance between petroleum and biodiesel.

Dutch biodiesel producers join forces

News release posted Oct. 26, 2007, at 10:23 a.m. CDT
 
 The first trial of buses in the United Kingdom running on B100 was launched today. In a pilot project, Argent Energy, the UK's first large scale biodiesel producer, is working with Stagecoach, one of the UK's biggest bus and coach operators, to supply the biodiesel made by recycling and processing tallow (animal fat) and used cooking oil – both byproducts of the food industry.
 
 The environmentally-friendly fuel will be used to power eight buses serving the Kilmarnock area in Scotland in a trial which is expected to run for around six months. Passengers will be able to help fuel the buses by exchanging their used cooking oil for discounted bus travel under a unique environmental incentive scheme.
 
 Running under the slogan "Do your part, be Bio smart!" the single-deck Bio-buses have been fitted with bespoke dual fuel tanks and Argent Energy is providing bulk fuel storage at Stagecoach's Kilmarnock depot for the duration of the trial.
 
 Brian Souter, Stagecoach Group Chief Executive, said: "This innovative project is a great opportunity for our customers to play their part in saving the planet by recycling household products that would otherwise go to waste. I'm sure the idea of cheaper travel in exchange for the used contents of your chip pan will capture people's imagination.
 
 "Biodiesel is an excellent renewable fuel which has a number of environmental benefits, and we are delighted to carry out the first UK trial of this technology on a commercial bus service. We are looking forward to assessing these vehicles and the potential of this technology for our bus operations in the UK."
 
 Jim Walker, Operations Director at Argent Energy, said: "We are delighted to work with Stagecoach on this ground-breaking trial. I am pleased that Stagecoach has recognised the importance of using biodiesel made from the by-products of other industries and from the left-overs from our everyday lives.
 
 "Because we recycle these products as our raw materials, Argent Energy biodiesel is exceptionally environmentally friendly. So not only will Argent guarantee a quality product for these eight buses, their carbon footprint will be significantly reduced, benefiting the community as a whole."

 
 While the use of 5 percent biodiesel blended with 95 percent diesel is common and requires no modifications to either vehicles or supply logistics, the use of 100 percent biodiesel is different. B100 needs to be kept at a constant temperature and that requires dedicated fuel storage tanks and modifications to vehicle fuel tanks.

UK's first biodiesel buses launched

Web exclusive posted Oct. 29, 2007, at 10:18 a.m. CDT
 
 Central Carolina Community College in Pittsboro, N.C., announced this week that it has received two BioNetwork Fund grants and that the college will expand its biofuels education efforts, including a biofuels associate degree starting in fall 2008.
 
 According to a CCCC news release, the college received a $44,180 Phase II Biofuels Curriculum Development Grant to fund the creation of courses and workshops related to biofuels production and utilization. The courses will be offered at CCCC's Small Business Center in Chatham County, N.C.
 
 A $96,737 Biofuels Equipment Funding Grant will be used to purchase equipment and supplies to expand fuel testing capabilities in the biofuels analytics laboratory at CCCC's Chatham campus.

CCCC receives two BioNetwork grants

Web exclusive posted Oct. 31, 2007, at 1:50 p.m. CDT
 
 This afternoon President Bush announced his intention to nominate former North Dakota Gov. Ed Schafer as the next U.S. Secretary of Agriculture. According to a White House news release, the president will submit Schafer's name to the Senate for confirmation.
 
 Schafer served as governor of North Dakota from 1992 to 2000 and declined to run for a third term. He will be nominated to replace Mike Johanns, who resigned in September so that he could focus on a bid for an open Senate seat in Nebraska.

October 2007

Business Briefs

China Clean Energy sees strong second quarter

REG earns certification, accolade

Camelina company, petroleum manufacturer partner

Nova Biosource acquires plant, signs contract

ChemPro Group provides system to Clovis Biodiesel

IREC names general manager

Columns

Editor's Note

NBB In Sight

Letters to the Editor

Biodiesel Plant Construction

Featured

Soybeans, Wheat and Corn Compete for Acres

Biodiesel by the Book

The End of 'Splash and Dash'?

Small Scale, Big Impact

Nano-Style Biodiesel Production

Quasi-Harmony and the EPA Wild Card

October 2007.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

China Clean Energy sees strong second quarter

REG earns certification, accolade

Camelina company, petroleum manufacturer partner

Nova Biosource acquires plant, signs contract

ChemPro Group provides system to Clovis Biodiesel

IREC names general manager

Columns

Editor's Note

NBB In Sight

Letters to the Editor

Biodiesel Plant Construction

Featured

Soybeans, Wheat and Corn Compete for Acres

Biodiesel by the Book

The End of 'Splash and Dash'?

Small Scale, Big Impact

Nano-Style Biodiesel Production

Quasi-Harmony and the EPA Wild Card

October 2007