Despite the qualitative and economic snafus riddling the biodiesel industry, small startups and new technologies continue to emerge. A biodiesel carve-out in the new Energy Bill's renewable fuels standard mandates a domestic methyl ester market, but without a blender's credit extension or the addition of meaningful incentives, low-cost production becomes more important than ever. Executives at Kreido Biofuels Inc. believe their technology and business strategy together possess the potential to make conventional biodiesel processing and financing obsolete. 

 
 Two chemical reactions that occur during biodiesel manufacturing are transesterification, and saponification. Transesterification, the desired reaction, is rapid whereas saponification, the secondary undesired reaction that produces soaps, is slow. "When you make biodiesel in a tank, there is a lot of time for both reactions to occur," says Ben Binninger, chief executive officer of Kreido Biofuels, a company whose investors aren't just banking on licensing royalties from its unprecedented reactor design. "In our reactors, because we get it in and out in seconds, we get the first reaction with only an insignificant amount of the second one. That's the magic of the technological innovation of our reactor. We get what we want without getting what we don't want and therein lies the advantage-higher utilization of raw materials, lower byproducts, which are wasteful and require energy, water washes, neutralizations, permits to get rid of water, and a run-up in the capital costs." 
 
 Lending institutions rarely finance debt packages to companies using unproven technologies, which is why investors in Kreido Biofuels are fully funding the design and construction of the premiere commercial-scale biodiesel refinery utilizing spinning tube-in-tube (STT) technology. "I am from the dark side," Binninger tells Biodiesel Magazine, referring to his years of experience working for major oil and chemical companies. "One thing I know is that you need a world-class plant equipped with in-line monitoring, fully integrated control systems, situated on a deep port with access to anywhere in the world. Our plant in Wilmington, N.C., will look more like a world-class chemical or oil company plant, than many of the biodiesel plants out there today." 
 
 STT Technology
 The principle behind Kreido Biofuels' technology is what is known in fluid dynamics as Couette flow, or the steady laminar flow of a viscous fluid between two surfaces with constant sheer. The two surfaces consist of a stator, a stationary cylinder, and a spinning rotor inside. Between the mirror-polished finishes of the stator and rotor is a very small and uniform gap, through which raw materials flow and where chemical reactions can rapidly take place. "It comes out of the mixing for chemicals in the electronics industry-semi-conductor manufacturing," says Larry Sullivan, Kreido Biofuels chief technology officer. "It's very similar to pharmaceutical mixing. To sterilize it, you cannot heat the drug because that would destroy its properties. So they actually force drugs through filters that would take any bacteria out. In electronics chemicals it's the same thing. You need to mix them but can't afford to put any thermal energy into it because it would cause a change of chemistry. That's the origin of spinning tube-in-tube." As beneficial as Couette flow dynamics were, its use in manufacturing processes was precluded by its tendency to induce what's called Taylor vortices, prohibiting the intimate mixing needed for applications in which industrial Couette flow would be employed. Sullivan explains how Kreido Biofuels' STT technology overcomes this barber-pole phenomenon of fluid dynamics. "The key in the patents cover the gap between the stator and rotor," he says. "The gap is about 0.8 millimeters. The gap is the key. It allows the oil, methanol and catalyst to move in there as a film. A simple way to put it is, when you reduce the vortices down to nothing, then that energy goes into the mixing of the two without forming the vortices." And the reaction takes place quickly. "But at the end of the day, doing things fast is not good enough," Binninger says. "Yes, we have a very fast reaction time, but what really counts are two things: doing it fast, and making biodiesel without making any soap, and hence, without water." 
 
 The U.S. EPA has been working with Kreido Biofuels' STT technology under an expanded cooperative research and development agreement, for the process intensification of STT technology. Michael Gonzalez, primary investigator for EPA's Green Chemistry and Engineering for Chemical Synthesis project at the National Risk Management Research Laboratory in Cincinnati, Ohio, has an entire lab dedicated to the use of STT reactors making ionic liquids and conducting nano-mixing for polymer, pharmaceutical and chemical companies. "In our broad experience in the areas of chemical reactions and pollution prevention, we have found that the unique mixing pattern of the STT system can dramatically improve reaction rates and product selectivity under process intensified conditions," Gonzalez says.	
 
 A Model Future
 Pilot work with STT technology was carried out at Foothills Bio-Energies, a biodiesel producer in western North Carolina. Across the Tar Heel State to the east is where Kreido Biofuels' commercial demonstration plant is being situated, in the deep-water port of Wilmington. "We have a lease with the port of Wilmington," Binninger says, adding that storage, tankage, docks and much of the permitting process are taken care of. He expected permitting to be final in January, after which construction would begin. Its plant design is modular based. Kreido Biofuels is headquartered in Camarillo, Calif., which is where its reactors are built as well. Certified Technical Services, a general industrial contractor, is building Kreido Biofuels' modular units near the Houston Ship Channel in Texas. "Each reactor produces about 13 MMgy," Binninger says. The plant in Wilmington is rated initially as a 33 MMgy plant even though Binninger says four 13 MMgy reactors are ready for installation on-site, which would allow production of up to 52 MMgy. "I expect we'll start at 33 MMgy and ramp it up as quick as we can," he says. The permits however allow for up to 100 MMgy. "The site is actually laid out for two plants-it's permitted for two, has the infrastructure for two, so we're going to build the structure, lab and tank farm to get ready for the second plant." The first 33 MMgy plant will cost between $22 million and $28 million, which includes about $4 million in costs to prepare the site for the addition of the second modular refinery. 
 
 The company anticipates installation of its modular units to begin soon, with operations underway late in 2008. Binninger believes any challenges he thought might arise in demonstration of the technology scale-up have all been accounted for. "We put in four reactors when we only needed three, and we got the highest grade centrifuge we could get to ensure good separation; we went to bubble-cap towers because, that way, we can turn the plant down from 100 percent to 25 percent productive capacity; and we put in an ion exchange resin even though we don't think we are going to need it," Ninninger says. "Our theory is that, we are lower in capital because we have so much less equipment than everyone else, so we could afford to be generous and put in these other toys and redundancies just to be sure that we don't have any surprises." Something Binninger wouldn't discuss is the sophisticated methanol column. "It's one of our tricks," he says. "Unlike most other plants, we will emit no methanol. Anybody who's got an open system, some methanol escapes because of the vapor. Secondly, some people leave methanol in the glycerin and the water, but we don't do that. Remember, we have no water discharge because we don't water wash. There's only one way methanol goes out the door from our plant, and that's as methyl esters."
 

 While Binninger says these technical provisions should help keep any operational surprises at bay, Sullivan speaks to other challenges in Kreido Biofuels' commercialization of STT technology. "There are two parts to that, one has been solved and one is still out there," he tells Biodiesel Magazine. "No one would be able to fund the plant, the debt portion, because it would not be a proven technology. Before I came on board, the company through its investors made the profound decision to raise the equity, not debt, and commit the money to building a commercial-scale plant. That, in the biodiesel environment of today, is next to impossible." Sullivan, a man who often gets his points across through effective analogies, says this plant in Wilmington, N.C., is to Kreido Biofuels what a model home is to builders selling property in a new housing development. "You've got to show them what you can do, how it all works," he says. 
 
 The remaining challenge to be addressed is how interested parties will respond to the showcase refinery. "A potential investor might say one of two things," Sullivan says. "I want a license and will pay a royalty for the use of the technology, or that I want you to duplicate that plant in Brazil or Oklahoma, and I would like you as a partner." A royalty assumes payment regardless of profitability, which sounds good but, if the licensee of the technology is not making money, the likelihood of payment to the licensor is slim. n 
 
 Ron Kotrba is a Biodiesel Magazine senior writer. Reach him at <a href="mailto:rkotrba@bbibiofuels.com">rkotrba@bbibiofuels.com</a> or (701) 738-4962.

A cross-sectional schematic of Kreido Biofuels' STT reactor

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Biodiesel Magazine talks with a California-based company about its unique reactor design and unconventional business plan that will lead to the construction of a model refinery on the East Coast.

Putting the Squeeze on Convention

Researchers in Illinois believe they have the answer to the continuing food versus fuel debate and high commodity prices that challenge the biodiesel industry: pennycress. Their excitement stems from the ability of the plant to be transformed from a weed into a biodiesel feedstock. "It's off season from corn and soybeans, has high seed yield and high oil," says Terry Isbell, lead researcher in the new crops and processing technology group at the National Center for Agricultural Utilization Research at Peoria, Ill. "This plant wants somebody to pay attention to it."
 
 Field pennycress may be a new crop in development, but it's an old weed. Thlaspi arvense is a winter annual weed known by farmers under several names-field pennycress, stinkweed, frenchweed-that grows widely across the Midwest. It isn't considered a big weed problem because it completes its life cycle in late spring and doesn't compete with newly planted corn or soybeans. Pennycress is a member of the mustard family. Its heart-shaped, flat seed packets carry the tiny oilseed that yields 36 percent oil when crushed. That kind of oil yield, plus seed yields in wild stands that approach 2,000 pounds per acre, make pennycress comparable with canola as an oilseed crop. Isbell almost didn't notice those traits, however, when he initially tested pennycress oil six years ago. He decided that the main product would be a monomer for biobased plastics that could be derived from the glucosinolate portion. 
 
 A colleague in the new crops group, Steve Vaughn, found promise in the glucosinolate portion as a potential soil fumigant. The glucosinolates in pennycress meal restrict its use as an animal feed, but also contain the chemical sinigrin, which in the presence of water disintegrates into allyisothiocyante-a bio-fumigant. A bio-fumigant could provide an eco-friendly alternative to methyl bromide, Vaughn says. Methyl bromide is a soil fumigant, which contributes to greenhouse gas emissions, that's used in high-value crops such as strawberries. Besides killing weed seeds in the soil prior to planting high-value crops, pennycress meal would have value as a fertilizer, Vaughn adds. Pennycress was set aside as an industrial oil source, however, because its range of fatty acids from the 16 carbon-chain length to 24 carbon-chain length are quite common in other vegetable oilseed crops. 
 
 Researchers revisited their pennycress research when the biodiesel industry started to take off. Initial screening of the pennycress oil showed that it meets all the parameters required for biodiesel, Isbell says. "The cloud point is better than soy-based biodiesel and it has a lot less saturates so it should be more oxidatively stable than soy," he says. Also, compared with other new crops in development at the center, field pennycress could make the leap to commercialization unusually fast. Biodiesel developer Sudhir Seth is watching their work closely and expects to be producing biodiesel from field pennycress oil within a few years at a biodiesel plant he's proposing in Mapleton, Ill., on the outskirts of Peoria. This is an ambitious goal for a new crop with just 30 acres being grown this winter. 

 
 The agronomic potential of pennycress is what excites the researchers most, especially in light of the food versus fuel debate. In the wild, pennycress seed is produced in the spring and lies dormant until daylight hours shorten in the fall when it germinates. Its leaves grow low to the ground, providing good winter cover and preventing soil erosion. When warm spring days arrive in late April and May, field pennycress bolts and flowers reaching heights of 30 inches or so. It can be harvested in early June just in time to plant a full-season soybean crop. Isbell says the plant appears to be a low-input crop and will likely require little fertilization. That will be determined as nutrient studies are on his list of research that still needs to be done. Researchers are also searching for herbicides that could be used to help establish optimal pennycress stands in the fall, although Isbell expects the crop's vigorous spring growth will make further herbicides unnecessary. It appears that pennycress is able to be harvested easily with existing equipment and doesn't suffer the shattering issues that often plague other new crops developed from wild plants, Isbell says. Pennycress tends to shatter in mid-summer, he says, well after the early June period when the plant is dried down sufficiently to combine, yielding seeds dry enough to store.
 
 This year's research is focused on establishing the best planting method and optimal plant population for field pennycress. Peoria area farmer Chip Unsicker is cooperating by providing a 10-acre field trial. This is the second year that he's been involved with the research efforts. "The first year we failed to get it to grow," he says. "We think we planted it too deep." This fall, the research plots on Unsicker's 10-acre field have nice stands of pennycress. The field was divided into smaller plots and different planting methods were used on each plot. Plant populations also varied from plot to plot. Two planting dates were used to determine the impact on yields when planted in early September compared with planting later in October. In addition to future studies on nutrient requirements, Isbell will experiment with planting pennycress into a young corn field this spring. "We want to minimize the number of times the farmer goes into the field," he explains. He wants to replicate the plant's wild system where the seeds are spread in early summer, lie dormant until the fall, germinate in corn stubble and grow throughout the winter. He is also trying to move the pennycress harvest date into May to make it easier to follow with a soybean crop.
 
 If they can determine how to reliably establish a good stand, Isbell thinks pennycress might be ready to commercialize in as soon as two years. But it may take longer to change farmers' perceptions of the potential oilseed crop, he adds. "This is a weed," he says. Farmers will be concerned that the plant will take over their fields. Isbell says that in summer annual crops like corn and soybeans, fall or spring tillage or ordinary herbicide programs should control volunteer pennycress. A volunteer weed problem could be created, however, in rotations with other winter annuals such as winter wheat.
 
 Biodiesel Plans
 Seth has 20 acres of field pennycress growing on a plot of land next to the Caterpillar Inc. headquarters on the outskirts of Peoria where he hopes to build a multi-feedstock 45 MMgy biodiesel plant. By December, BioFuels Manufacturers of Illinois LLC, the company which he heads as chief executive officer and president, finalized its capital campaign and was awaiting final financial closure. Construction won't begin though until the Illinois legislature appropriates funds for a $4.5 million state grant. The firm hopes to qualify for this grant, which is not available for plants under construction. Illinois offers a strong incentive for biodiesel, with a 6.25 percent sales tax exemption at the point of sale for biodiesel blends of 11 percent or higher, Seth says.
 
 Many other elements of the BMI project are in place: an off-take and distribution agreement was finalized with Growmark Inc.; the 35 acre plant site acquisition from Caterpillar Inc. is complete; Desmet Ballestra, North America Inc. has been selected as the core technology provider and URS Corp. as the engineering, procurement and construction management consultants. The target completion date will be early in 2009. Seth says the infrastructure will be in place to expand production to 60 MMgy within two years and eventually to 120 MMgy. 
 
 Once the researchers have the basic details worked out on pennycress production, Seth will organize demonstration plots and seminars in the area to educate farmers. "Over the next few years we think our entire requirement for oil could be met by pennycress," he 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) 738-4962.

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Pennycress, though a weed, may become a winter crop supplying oil for biodiesel without competing with corn or soybean acres.

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Pennycress can be combined with conventional equipment with minimal shattering.

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Pennycress is a weed that researchers think has the potential to quell the food versus fuel debate. If initial findings prove true, it could become a biodiesel feedstock that doesn't compete with corn and soybeans for acres.

Making Pennycress Pay Off

A catalyst is one of the basic components required to produce a gallon of biodiesel. It comes in many forms, but is the genesis of the reaction needed to form an end product.
 
 Now the biodiesel industry has a universal catalyst in the form of federal legislation. The biodiesel industry scored a holiday gift in late December when President George W. Bush signed the second major Energy Bill of his administration. The Energy Independence and Security Act of 2007, includes an expanded renewable fuels standard, which-for the first time-features a specific carve-out applicable to biodiesel. 
 

 The most common response from biodiesel insiders was excitement tempered by uncertainty. After all, the industry has been hit hard with increased feedstock costs, which aren't necessarily remedied by a government fuel usage requirement. "Just because this mandate is pending doesn't make life easy," says Will Babler, risk analyst for First Capitol Risk Management LLC.
 
 Bush's previous Energy Bill, the Energy Policy Act of 2005, required 7.5 billion gallons of renewable fuel use by 2012. Although the requirement included biodiesel, it has been largely filled by fuel ethanol. The new bill, which was widely supported, changes that. "We think it was a good day," says Iowa Renewable Fuels Association Executive Director Monte Shaw. "A carve-out for renewable diesel products like biodiesel is important for the long-term sustainability of the industry."
 
 The bill passed the House of Representatives by a 314-100 margin. Identical legislation was approved by the U.S. Senate on Dec. 13 by an 86-8 margin. Bush signed the bill Dec. 19, and it takes effect Jan. 1, 2009, with the exception of the 9 billion-gallon volume requirement for the existing RFS program, which takes effect this year. Much of that is still expected to come from corn-based ethanol production, which topped out near 7.5 billion gallons of annualized production at the end of 2007. Another 4.1 billion gallons of capacity was under construction at that time.
 
 Biomass-based diesel is one of several fuel categories defined in the bill (see Fuel Definitions on page 48). The carve-out begins at 500 million gallons in 2009 and tops out at 1 billion gallons in 2012. Following that, the U.S. EPA administrator, in coordination with the secretaries of energy and agriculture, shall determine the volume of fuel. "The applicable volume of biomass-based diesel shall not be less than the applicable volume … for calendar year 2012," the bill says, meaning that 1 billion gallons per year is a floor following that year.
 
 While the biodiesel industry responded favorably to the bill for the most part, it did provide some pause for concern. A provision that would have extended the biodiesel tax credit was eliminated from the final version of the bill. It also lacks closure to international trade concerns that have been voiced by domestic and international stakeholders such as the European Biodiesel Board. And, it creates a one-year gap-2008-before the mandate takes effect. 
 
 Other legislative vehicles appear ready to pick up those issues, however, and should allow the industry to focus on increasing production. "The biodiesel industry is ready, willing and able to step up and meet these requirements," says National Biodiesel Board Chief Executive Officer Joe Jobe.
 
 The Mandate's Market Effect
 The ultimate effect of a biodiesel requirement is unclear. Feedstock prices will continue to be a concern. "You can't mandate feedstock prices, but the futures market will provide incentives such that feedstock markets will respond," Babler says.
 
 It's a similar situation to the fuel ethanol industry in 2007. Ethanol demand spiked in 2006 and farmers responded by planting a record-breaking corn crop in 2007. Ethanol and corn prices moderated as a result. The USDA's spring planting projections, which are due in late March, should paint a clearer picture of where commodity prices will settle in 2008.

 
 The bill also contains a waiver should feedstock prices spike. If there is a significant renewable feedstock disruption or other market circumstances that would make the price of biomass-based diesel fuel increase significantly, a 60-day reduction could be enacted as long as the reduction does not exceed 15 percent of the applicable annual requirement for biomass-based diesel. 
 
 Babler says the mandate will either create more demand or ration users out of the demand side of the equation. That could include higher-cost biodiesel producers, the feed industry or export markets. "Those that don't have as durable a component of demand will get rationed out through price," Babler says. "Price will do its job."
 
 As was seen by the explosive build-out of the fuel ethanol industry following the 2005 Energy Bill, mandates can create interesting-and sometimes unexpected-market dynamics. "On the ethanol side, it assures that the capacity being built has a home," Babler says.
 
 On the biodiesel side, it provides a firm floor that ensures biodiesel will be produced essentially regardless of feedstock prices. "The most fundamental thing it will do is bring some confidence and stability into our industry," Jobe says. "We've got dramatic instability primarily due to unstable interplay with commodities and energy prices."
 
 However, providing a floor doesn't appear to be the problem with biodiesel right now; existing capacity already doesn't have a home. "The current RFS shows that certainty of demand doesn't mean certainty of profits," Shaw says.
 
 Understandably, the bill's economic impact on biodiesel production remains to be seen. Another facet of the bill is also unclear. The new bill credits renewable fuels based on their lifecycle greenhouse gas emissions. 
 
 The term "baseline lifecycle greenhouse gas emissions" means the average lifecycle greenhouse gas emission for gasoline and diesel sold and distributed as transportation fuel in 2005. Biomass-based diesel is defined as biodiesel that has lifecycle greenhouse gas emissions that are at least 50 percent less than the baseline lifecycle greenhouse gas emissions. The bill specifically states that renewable fuel derived from coprocessing biomass with a petroleum feedstock is eligible to be an advanced biofuel, but it cannot be a biomass-based diesel. 
 
 How fuels will be tracked is another critical issue. The current system, which uses renewable identification numbers, hasn't been the most user-friendly system. "We're trying to work with EPA to make that system more user-friendly than the existing system," Jobe says. "We're getting a significant amount of input on the onerousness of it."
 Clayton McMartin, president of Clean Fuels Clearinghouse, says the value of RINs will increase due to the updated RFS. "The big thing is that up until now, RINs have been seen as a necessary evil," McMartin says. "Starting today, there is a new value being established."

 
 Future Still Hazy
 While a catalyst drives biodiesel production, it also carries divisive characteristics, essentially splitting oil into glycerin and biodiesel. So too can a legislative act that imposes what fuel can be used. While the Energy Bill did provide the first RFS carve-out to support the biodiesel industry, several key provisions were axed during Congressional conference proceedings.
 
 In early December, the House passed a version of the Energy Independence and Security Act that included an extension of the biodiesel tax incentive through Dec. 31, 2010. It also included language that would have closed the so-called "splash-and-dash" loophole that allows foreign-produced biodiesel to be transshipped through the United States for the sole purpose of claiming the biodiesel tax incentive. One industry source tells Biodiesel Magazine they expect splash-and-dash to be the "biggest wild card going forward in 2008."
 The extension to the biodiesel tax credit didn't make it into the final version of the Energy Bill, but it was part of the Senate's Farm Bill at press time. Conference talks on the Farm Bill were expected to begin in January. "We were disappointed the biodiesel tax exemption didn't make it into the Energy Bill," says John Hoffmann, president of the American Soybean Association. "That's the reason the biodiesel industry has taken off in the past three years."
 
 Hoffmann, like others, says he expects language to extend the credit to appear in the Farm Bill discussions. "In light of $3 diesel fuel and $90 to $100 per barrel crude oil prices, the time is right for the RFS and the time is right for extending the biodiesel tax credit," he says.
 
 The biodiesel tax credit runs through 2008, providing support to blenders wishing to use the fuel. However, until the mandate takes effect in 2009, blenders will have little motivation to use biodiesel if it's priced higher than diesel. Therefore, Shaw says his constituents were disappointed the biomass-based diesel carve-out starts in 2009 and not in '08.
 
 While it appears options exist for the tax credit extension, another item looms large on the horizon for some in the industry. "To bridge the '08 gap before the RFS kicks in, a properly structured, fully-funded (Commodity Credit Corp.) bioenergy program is vital to producers," Shaw tells Biodiesel Magazine.
 
 Jobe lists the renewal of the bioenergy program as one of the industry's top-three priorities. He says it would provide additional incentives for producers faced with inordinately high feedstock prices.
 
 The form of a renewed bioenergy program is also unclear. Shaw says the program would be most effective if all gallons are eligible for funding, instead of the incremental new gallons that received funds under the program's previous version that expired in 2006. "Incentives for new capacity are not the problem," Shaw says. "Keeping existing capacity operating is what we need."

 
 Shaw says he would also like to see the program not offset other programs such as the small producer incentive. "The bioenergy program in 2008 could be the vital cog to keep the biodiesel machine rolling," he says.
 
 While many in the industry were pleased with the late December gift, additional work clearly needs to be done to create a successful biodiesel market. "[The bill] provides a guaranteed market and gives certainty to investors and the marketplace," says Sara Taylor, executive director of corporate affairs for Renewable Energy Group Inc. "This is an important catalyst to jump-start the industry domestically." 
 
 Dave Nilles is the Biodiesel Magazine contributions editor. Reach him at <a href="mailto:dnilles@bbibiofuels.com">dnilles@bbibiofuels.com</a> or (701) 373-0636. Staff writers Susanne Retka Schill and Anduin Kirkbride McElroy contributed to this feature.

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The biodiesel industry claimed several important victories in the latest Energy Bill. Fuel labeling, performance studies and an all-important specific carve-out are expected to enhance production and market confidence. However, critical issues remain as the dust settles.

A Billion-Gallon Boost

In competitive diving, splashes are a point deduction. For producers and distributors, splashing biodiesel is the most common way of making blended diesel fuel. If Archie Hendrix has his way, splashes at the biodiesel plant will be as frowned upon as a splash in a diving competition. Hendrix is vice president of sales for Honeywell Enraf, a maker of blending and measurement products.
 
 Accurate measurement of fuels is the basis of the biofuels economic model, according to Hendrix. Knowing what's entering and leaving the biodiesel plant is key to understanding the operating costs and revenues for a business. "The true custody transfer measurement-where it changes hands-is what we talk about in the industry as the cash register between one customer and another," he says.
 
 Many biodiesel processors still measure their sales by a weight-differentiation method. A truck is weighed on a scale, filled, weighed again and the difference between the weights is the amount of biodiesel that's been added. To make a blend such as B5, a proportional weight of biodiesel is splash blended with petroleum diesel. "At a loading facility, you would come in and get so much of the first product, let's say soy (biodiesel). Then you disconnect and pull the truck down a few feet and then connect up to the diesel and fill up the remainder of the compartment," Hendrix says.
 

 Ethanol and petroleum distributors have long used blending systems to manage their fuel sales and deliveries. Biodiesel producers, which are generally smaller and newer than those industries, are still learning the ropes. "The biodiesel industry is still in its infancy," Hendrix says. "Where we come into play is typically at the terminal. As they add biodiesel to diesel fuel at the terminal they are going with ratio blending rather than the splash. Back at the small mom and pop producers, if they are blending biodiesel to get the tax credit, I think that's where you are seeing splash blending."
 
 In Europe, Hendrix says, many biodiesel producers use high-accuracy tank level gauges to measure biodiesel transfers. This hasn't been widely adopted in the United States except for inventory control. "In this country we still want the dynamic measurement through a positive displace meter or some kind of turbine meter," he says.
 
 Another method of blending fuels is sequential blending, which is similar to splash blending, but more automated. "Normally, you set a volume into the electronic preset device that has been preprogrammed for a certain percentage," Hendrix explains. "When you depress the start button it will open an isolation valve allowing one of the products to go through. The custody transfer meter accurately measures that into the truck and once that percentage of the total batch is reached, it will shut off. It will close that isolation valve and open the isolation valve of the other product and deliver that in the system."
 
 Problems can arise, however, when the truck being filled isn't quite empty. Sometimes when trucks make deliveries to retail stations all of their product isn't dropped. "They leave 30 or 40 gallons of their product in the bottom of the compartment," Hendrix says. "So if they have a 3,000-gallon compartment for example and were doing a 10 percent blend, the first 300 gallons would be soy (biodiesel). Then the remainder would be diesel fuel. But because there was prior product in there you didn't have a full 3,000 gallon compartment. So you wind up having to shut down before that process is complete." In that situation, Hendrix says, you wind up with a truckload of off-spec product. "That's the disadvantage of splash and sequential blending," he says.
 
 More Control
 To avoid problems such as these, most producers should consider using ratio blending. In ratio blending, the producer controls both streams of the product so they leave the dispenser already mixed to the desired blend. Blending systems can be set for most of the common blends being marketed. Hendrix says there are three levels of blends in general use. Blends of 2 percent to 20 percent are done for retail sale and fleet fueling. Blends of 99 percent are done for tax credit allocation purposes. Some biodiesel producers blend between 20 percent and 90 percent as preblends based on customer needs. "We have the capabilities and the technical know how to blend basically any percentages," Hendrix says. "We just need to know that up front, and size the equipment so that it accurately covers the range customers need."
 
 If lower level blends, such as B2 are a company's sole product, large in-line blenders may not be necessary, Hendrix says. Honeywell Enraf has long built high-capacity injectors for blending additives and dyes to fuels. They are used in ethanol plants to add denaturant to pure ethanol. These injectors use a process called pulse blending to achieve the same goal as an in-line blender. "Standard injectors are used to put detergent into gasoline and lubricity agents into diesel," Hendrix says. "They are very small meters with little solenoids that pulse and put a squirt of so many [cubic centimeters], that's being paced by the custody transfer meter."
 
 The injector systems are precise but can handle only limited volumes. Smaller injectors are designed to add less than a half a percent of an additive to a fuel. High-capacity injectors can blend up to 5 percent of biodiesel to a fuel mixture. However, if a distributor intends to sell a wider range of blends, these systems will be undersized. "If you want to go from 2 percent to 20 percent, which is what is typically seen in the U.S., it is better to go with the full-fledged blender," he says.
 
 Honeywell Enraf's main product for biofuels producers is its vertical blending skid. These systems can be configured for two or five streams of different products. These blenders, which the company configures for both biodiesel and ethanol terminals, blend the fuel in the loading area just before it's loaded into trucks for transport.

 
 Weather is one of the primary issues that must be dealt with in handling biodiesel, particularly cold weather. Hendrix says the company modified its equipment to handle biodiesel in the cold when they started installing systems in Minnesota. "If you are familiar with soy oil, at low temperatures it becomes very, very viscous," he says. "With high viscosity it is very hard to blend that into diesel fuel and get a good homogeneous mix. For this project, they put insertion heaters into their large storage tanks. They were electrically tracing the pipeline going to the blender and insulating it. They asked us to redesign the blender so it could go through a 3-foot door and they physically put it into a small heated building."
 
 While making the modifications, Honeywell Enraf was able to create a blender that could serve six loading arms at one time. That meant the facility was able to move more trucks per blender and ship its product more efficiently. The blending equipment can also be scaled up to handle railcar loading.
 
 Ratio blending systems can incorporate tolerance alarms, so if there is a problem and the system gets out of proportion, it can be shut down and adjusted. That prevents off-spec batches, Hendrix says. The blending systems can also be configured to add biocides, cold flow additives, performance additives, dyes and markers, and other additives to biodiesel blends in an efficient manner. "We've done a lot of work with certain major oil companies that wanted to put invisible markers into their fuels to make darn sure the local service stations that carry their brand get gasoline or diesel from their terminals," Hendrix says.
 
 Automatic control systems make using the blending equipment fairly straightforward, Hendrix says. The blending controller is preset for various blends and volumes. Card readers can be added to the system so drivers and vehicles are identified. The system can also be configured so a specific quantity of fuel is delivered to a specified driver or vehicle. The blenders are also equipped with safety equipment to shut off the system in the case of overfills or electrical problems.
 
 Hendrix says the company has installed systems to deliver blended fuel for tiny distributors supplying a handful of local retailers, and major companies covering entire states. In either case, the system's terminal automation system (TAS) allows the distributor to monitor and control the operation of the system. "At the end of each load [the software] prints out a bill of lading of how much fuel was delivered," Hendrix says. "There are little TAS systems for mom and pop operations. When you get to the really large major oil companies, many times the TAS is still installed on a single computer, but its memory and capability is widespread. They can tie into a network across the entire country and monitor each terminal and each load. The capability is there depending on the extent and requirements of the customer." After installation, the maintenance on the systems is minimal, Hendrix says. "Most of the companies on a six-month basis are reproving the meters on the blenders, just to verify they are within the accepted tolerances," he says. "That is because if you are blending upstream from the rack meter, then the blender is not custody transferred."
 
 For distribution terminals to seriously consider adding biodiesel blending systems there has to be a reliable supply and demand. Hendrix says the largest concentration of the biodiesel systems his company has installed has been in Minnesota and Brazil. "Brazil has been extremely large for us this year because they mandated biodiesel into all their diesel fuel. We have done a few systems in Texas and some for some co-ops in Indiana. But it has not been big like the ethanol to this point." n 
 
 Jerry W. Kram is a Biodiesel Magazine staff writer. Reach him at jkram@bbiobiofuels.com <a href="mailto:jkram@bbiobiofuels.com">or (701) 738-4962.

Blending terminals will be built where there is a more dependable supply and demand for biodiesel. 

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Truck loading racks made by Honeywell Enraf are skid mounted and come in configurations that can handle small distributors to major petroleum suppliers.

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Biodiesel doesn't typically go straight from the processor to the fuel tank. It has to be distributed, blended and then redistributed to retailers before it's sold to consumers. Managing the transfers and tracking the blending is important to growing a viable biodiesel industry.

No Need to Splash

Ben Binninger has been named the new chief executive officer of Kreido Biofuels Corp. Formerly an employee of the oil and MTBE industries, he was involved with Kreido early on and even stepped in as interim chief executive. "[The Kreido board of directors] wanted someone with an operations background [to fill the CEO position]," he told Biodiesel Magazine. "After five months of looking for my replacement-a permanent CEO-the board concluded it really couldn't find anyone who knew the people and our unique technology like I do, and do everything a CEO should do."

Kreido names Binninger CEO

If there's one thing we all know about the new energy bill, it's that we don't know much. Most of the details are TBD-to be determined-and it will be months before the legislation is wholly defined. 
 
 A few months ago, I used this column to laud the introduction of a House bill that would have required U.S. petroleum companies to use 450 million gallons of "biobased diesel" in 2008, gradually increasing to 1.25 billion gallons in 2012. The Biodiesel Promotion and Quality Assurance Act of 2007 was the nearest thing to a biodiesel-specific renewable fuels standard the industry had ever seen, and for many of us, it was a first glimpse at the legislative absorption of biodiesel into a new category of advanced biofuels. 
 
 That particular bill didn't endure on its own. Many of its essential components did, however, settling out in the RFS of the Energy Independence and Security Act of 2007. The idea of a "biomass-based diesel" mandate survived, while the timelines and volumes changed. The energy bill's carve-out for biomass-based diesel begins at 500 million gallons in 2009, rather than 450 million gallons this year, and it tops out at 1 billion gallons in 2012, rather than 1.25 billion gallons. Several months of U.S. EPA interpretation and rule-
 making lie ahead; only broad certainties about the RFS can be assumed at the moment. One thing we can count on, according to our page 44 cover story, "A Billion-Gallon Boost," is that post-2012, the minimum annual usage requirement for biomass-based diesel use in the United States will be 1 billion gallons. 
 
 A usage mandate doesn't remedy high feedstock prices, though. In fact, the legislation includes a partial waiver from the requirement when feedstock costs soar. Commodity experts say the mandate, coupled with high feedstock prices, might "ration users out of the equation," benefiting the lowest-cost producers and exposing others. On the whole, it's simply not clear how significant a national minimum floor for biomass-based diesel will be to an average biodiesel plant's bottom line if feedstock costs don't settle.

 
 That's not the only thing about the bill that's open-ended. The legislation credits renewable fuels based on their lifecycle greenhouse gas (GHG) emissions. Biomass-based diesel is defined as biodiesel with lifecycle GHG emissions that are at least 50 percent less than baseline 2005 GHG emissions. How this will be determined, and precisely how the EPA will use renewable identification numbers, or RINs, to track these new values, is up in the air. From the sound of things, changes are imminent. 
 
 What wasn't in the energy bill? For starters, an extension of the penny-per-gallon blender's tax credit-the most potent legislative push for biodiesel in U.S. history, which expires at the end of this year-was excluded. The new RFS kicks in after the current tax credit sunsets, but producers could struggle during the buildup if the law isn't renewed. Finding a way to bridge that gap is crucial, and the passage of a new, fully funded Commodity Credit Corp. Bioenergy Program might be the answer. A new, broader CCC program might provide additional incentives for existing producers facing incredibly high feedstock prices. The pending farm bill might answer those questions, but that too is TBD.
 
 
 
 Tom Bryan
 Editorial Director
 <a href="mailto:tbryan@bbibiofuels.com">tbryan@bbibiofuels.com</a>
 
 Correction from our December 2007 issue:
 On page 21 of the Industry News section, Matt Johnston of the University of Wisconsin in Madison was incorrectly identified.

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The Energy Bill's Details, Impact: TBD

California-based biodiesel producers Greenline Industries LLC and Oilsource Holding LLC have partnered to develop a 60 MMgy biodiesel plant in Miami, which would be the largest in the Southeast. The $96 million project, slated to be complete by the first quarter of 2009, would have rail spur access for distribution within a 90-mile radius of three of Florida's main ports, according to Oilsource CEO Felipe Cano. The facility, called BioMix Energy, will use feedstocks such as palm, jatropha and coconut oil, among others. Construction will be conducted in three phases, reaching target capacity in the third phase, according to Cano.

Future biodiesel plant could be largest in Southeast

Earth Biofuels announced in December that a petition for involuntary bankruptcy against the company has been dismissed. The biodiesel producer and marketer granted security interests to its creditors and executed a restructuring plan approved by the U.S. Bankruptcy Court in Delaware. At one point, the company's board of directors included celebrities Willie Nelson, Morgan Freeman and Julia Roberts. It sells biodiesel under Nelson's brand name, "BioWillie." However, Nelson resigned from the board of directors in April and dumped $6 million of stock when the company suffered operational inefficiencies that resulted in growing debt. Earth Biofuels will overcome its financial problems, a company spokesman said.

Earth Biofuels emerges from involuntary bankruptcy

Earthrace, the biodiesel-powered speedboat with skipper Pete Bethune at the helm, will launch from port in Valencia, Spain, on March 1 in a second attempt to break the round-the-world speed record. At a maximum speed of 40 knots, Earthrace plans to circumnavigate the globe powered by 43,500 gallons of biodiesel supplied by its new Portugal-based fuel sponsor SGC Energia. For more information about Earthrace, visit www.earthrace.net.

Earthrace announces new launch date, sponsor

Allied Waste Services, a collection, recycling, transfer and disposal service provider in San Mateo County, Calif., is now running its 225 heavy-duty trucks on B20 supplied by Energy Alternative Solutions Inc., a biodiesel producer in Gonzales, Calif. Allied, which is now one of the largest users of B20 in the northern part of the state, said it experienced "excellent vehicle performance" with the renewable fuel blend. By using biodiesel, it replaces approximately 80,000 gallons of diesel fuel each month, equivalent to taking more than 315 cars off California roads annually. For more information on Allied's local waste collection and recycling programs, visit <a href="http://www.alliedwastesmc.com">www.alliedwastesmc.com</a>.

California fleet runs on biodiesel

William Schuermann has joined the American Soybean Association as an executive director of member and industry relations. He will manage all food, feed and fuel programming, as well as communications, industry relations, marketing and membership. Schuermann most recently served as group publisher for three of Meister Media Worldwide's specialty publications on fruit and vegetables. He also worked for publisher Doane LLC.

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Schuermann joins soybean association

UOP LLC, a Honeywell company, recently announced that Galp Energia, Portugal's largest refiner, will license UOP's technology to turn vegetable oils and grease into "green diesel." The process, dubbed Ecofining, was developed in partnership with Eni, a European oil company that has already installed a conversion unit at a facility in Livorno, Italy. The Galp Energia plant will be located in Sines, Portugal, and will process 6,500 barrels of vegetable oils per day. The fuel produced from this catalytic hydroprocessing technology features a cetane value of 80 compared with regular diesel, which ranges from 40 to 60 cetane.

Galp Energia to use UOP bioprocessor

Natural Fuel Ltd. brought the first of its three processing units on line at its facility in Singapore in mid-December. Each unit will produce 200,000 metric tons of biodiesel per year (61 MMgy). The two remaining units are slated to be complete in March and April. Lurgi AG designed the plant, which includes an independent 20,000-metric-ton-per-year (6 MMgy) glycerin refining unit. The Perth, Western Australia-based company has a 122,500-metric-ton-per-year (37 MMgy) plant in Darwin, Western Australia, and a project under assessment in Houston.

Natural Fuel starts production in Singapore

At press time, biodiesel documentary Fields of Fuel was scheduled to appear at the 2008 Sundance Film Festival in Park City, Utah, in January. It was one of 16 films selected from more than 3,000 submissions to compete in the Best Documentary Competition. The 90-minute film, directed by Josh Tickell, reviews the history of the oil industry, its political support and the alternatives available to slow the country's dependence on foreign oil. Filmmakers visit Carl's Corner Truck Stop in Texas, Tri-State Biodiesel in New York and an algae-to-biodiesel farm in Arizona. For more information on the film, visit <a href="http://www.fieldsoffuel.com">www.fieldsoffuel.com</a>.

Fields of Fuel debuts at Sundance

Coming out of the ASTM meeting in Phoenix in December, voting biodiesel advocates were cautiously optimistic but recognized there was still work to do in order to approve a series of new biodiesel and bio-related diesel specifications. 
 
 Stu Porter, a technical analyst for BBI Biofuels Canada and a voting ASTM member, told Biodiesel Magazine the good news: After a great deal of effort and discussion, the ballots proposing to allow 5 percent biodiesel into specifications for petroleum diesel (D 975) and heating oil (D 396), and a ballot for a stand-alone B6 to B20 biodiesel blend spec passed out of subcommittee and are moving on to the Main D2 ballot. This means biodiesel meeting its own spec, D 6751, is one step closer to acceptance and invisible integration into petroleum fuel supplies. At least D 975 and D 396 will allow up to 5 percent biodiesel. 
 
 While the news is promising, there is a pending stipulation that the passage in main committee hinges on. The three ballots-B5 in D 975, B5 in D 396 and the stand-alone spec for B6 to B20-are all linked to another important test method being balloted: the cold soak filtration test method. It is devised to prevent materials, such as unconverted monoglycerides and diglycerides, from falling out of solution causing filter plugging and damaging biodiesel's reputation as a transportation fuel. In December 2006, the B5 in the D 975 and D 396 ballots was voted down because of three persuasive negatives, Porter said. All three came from refiners concerned about biodiesel quality issues and wider fuel-supply contamination issues. "There is currently nothing in the specification protecting against those occurrences," another ASTM source said. "So it was determined that the negatives [against B5 in D 975 and D 396] would be withdrawn pending a successful addressing of that problem, and the change must be incorporated into D 6751 to deal with that issue." In order to appease those who voted the B5 and B6 to B20 specs down, the specs became linked to the cold soak filtration method in the Subcommittee 14 Task Group. 
 The cold soak measure tries to emulate conditions in which substandard biodiesel has been known to precipitate material out of solution. The fuel is chilled, filtered and measured for settled material. "The cold soak filtration method was the solution in Minnesota and was accepted by the suppliers to Minnesota prior to the reinstatement of the B2 mandate in February 2006," Porter said. 
 
 Subcommittee 14 failed to pass the cold soak method in December. "Several different parts of the method had been investigated as possible sources of imprecision in the test method," the ASTM source said. Precision testing done under slightly different conditions and the lack of members seeing eye-to-eye led to the method's omission this go-round. Which filter to use, which filter holder, cooling rates, how to rewarm the fuel after being chilled and other discrepancies also contributed to the imprecision, and therefore the method's inability to pass it. The next several months will involve significant work on honing the proposed method so that it-and the specs linked to it-can become part of ASTM fuel standards. 
 
 One balloted item did pass all committee levels and will be incorporated into the standard in early 2008. The Particulate Contamination of Biodiesel and Biodiesel Blends test method is basically a modified D 6217 spec, the particulate contamination test for diesel fuel. Since petroleum contaminants differ from those that may pollute biodiesel, methyl-ester-specific attributes were incorporated into a test method similar to D 6217. At press time, the new method hadn't been assigned a number.

ASTM begins to pass new biodiesel specs

If the road to hell is paved with good intentions, a blenders tax credit meant to stimulate the domestic biofuels industry has headed down a devilish path. The European Union recently announced that it will sue the United States for unfair trade practices to prevent U.S.-subsidized biodiesel from flooding its markets, fueling its cars and undercutting its status as world leader in biodiesel production.
 
 A loophole in the American Jobs Creation Act of 2004, unofficially called the "splash and dash" provision, authorized a tax credit intended to stimulate biodiesel growth by paying $1 for every gallon of biodiesel blended in the United States. However, the loophole inadvertently allowed foreign biodiesel producers to capitalize on the tax credit by importing biodiesel into the United States, adding a small amount of petroleum-based diesel and sailing to another foreign port with the tax credit in tow. Producers have honed in on Europe, where the miniscule 0.1 percent blend of petroleum in vegetable oil then capitalizes further on European subsidies. That's what rankles the Europeans. U.S. taxpayers are subsidizing the tax credits, estimated at $30 million last year and rising.

 
 The loophole has a sunset clause expiring at the end of 2008, but the European Biodiesel Board has no intention of waiting it out. EU biodiesel representatives unanimously agreed in November to lodge anti-dumping and anti-subsidy complaints with the European Commission. EBB Secretary General Raffaelo Garofalo said the complaint would be filed in February, following an intensive information-gathering process.
 
 One early version of the energy bill would have closed the loophole with language inserted into the Energy Advancement and Investment Act of 2007. The final bill, the Energy Independence and Security Act of 2007, which was signed into law Dec. 19, omitted the tax package. That disappointed not only the Europeans, but the National Biodiesel Board, too.
 
 "There is no policy justification for 'splash and dash,' and the NBB has consistently backed efforts to close this loophole," said Manning Feraci, NBB vice president of governmental affairs. "We anticipate that energy tax issues will again be considered next year, and when they are, the NBB will continue to work with the U.S. Congress and the Bush Administration to end 'splash and dash.'" 
 
 The NBB has called the policy "indefensible" since foreign producers are subverting U.S. profits and energy security benefits. 
 In March 2007, Garofalo called the subsidy a growing threat. European biodiesel producers even began shipping fuel to the United States, qualifying for the blenders credit and then returning to Europe.
 
 Once the EBB complaint has been filed, the European Commission has 45 days to examine its validity. If deemed acceptable, the commission will launch an investigation and could impose duties on U.S. biodiesel imports.

EU pursues legal action against U.S.-subsidized biodiesel

Royal Dutch Shell and Hawaii-based HR Biopetroleum Inc., a developer of large-scale microalgae production technology, recently announced the formation of a joint venture company that will develop an algae-to-biofuels project. The company, called Cellana, will build a pilot-scale facility in Hawaii to grow native, non-modified strains of Hawaiian algae or other varieties approved by the state's Department of Agriculture in open-air ponds using proprietary technology.
 
 HR Biopetroleum was founded in 2004 by a group of marine scientists who wanted to reenergize research on the cultivation of algae for biodiesel production. The research originally carried out in the 1980s and 1990s stagnated because of cost and contamination from strains of wild algae. HR Biopetroleum's technology overcomes these challenges by employing low-cost pond cultivation with photobioreactors that protect the cultivation of a monoculture of algae. In addition, frequent harvesting and cleaning of the ponds prevents contamination, and automated control systems maintain pH and nutrient levels.
 
 "HR Biopetroleum's proven technology provides a solid platform for commercial development and potential deployment worldwide," said HR Biopetroleum Chief Science Officer Mark Huntley. "Shell's expertise and commitment to next-generation biofuels complements our own strengths and makes this a truly collaborative partnership."
 
 The new demonstration facility will be built on Hawaii's Kona coast near existing commercial algae farms primarily serving the pharmaceutical and nutrition industries. In addition, scientists from the University of Hawaii, the University of Southern Mississippi and Dalhousie University in Nova Scotia will conduct research to screen for natural species of microalgae that produce the highest yields and the most vegetable oil.

 
 "Algae have great potential as a sustainable feedstock for production of diesel-type fuels with a very small [carbon dioxide] footprint," said Graeme Sweeney, executive vice president of future fuels and carbon dioxide at Shell. "This demonstration will be an important test of the technology and, critically, of commercial viability."

Work is underway on algae cultures at Natural Energy Laboratory Hawaii Authority in Kona.

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Shell, Hawaii company team to grow algae for biofuel

Tri-State Biodiesel, a New York City-based company that collects waste cooking oil as a feedstock for local biodiesel producers, recently agreed to supply biodiesel to a local online grocer's 150-truck fleet, which would be the largest privately owned fleet in the city to be fueled by biodiesel. 
 
 All of FreshDirect's trucks will be using B5 by the end of February. It began filling 30 of its trucks with B5 in early January and has been gradually phasing the fuel into the rest of the fleet. Tri-State, which purchases finished biodiesel from the same local producers it sends feedstock to, predicts that FreshDirect's fleet will use 10 to 15 gallons of biodiesel-blended fuel per truck per day, resulting in approximately 600,000 gallons of biodiesel-blended fuel per year. Tri-State's own trucks run on B20, Baker said, and the company may increase the blend ratio if manufacturer warranties allow it. 
 
 FreshDirect's switch to biodiesel will result in a 7.5 million-pound reduction of carbon dioxide released into New York City's atmosphere each year, according to Tri-State. 
 
 "Our trucks are a mass transit system for food in the communities we serve, and we are committed to making the fleet run as clean-burning and low-impact as possible," said Adrian Williams, FreshDirect's senior vice president of transportation. "Biodiesel does not require retrofitting our equipment and enables us to reduce emissions without complicated delays. Our conversion to biodiesel is but one example of our company's environmental stewardship and support of a sustainable future for New York."
 
 In 2006, Tri-State began collecting waste cooking oil from various New York City restaurants. Specially outfitted tanker trucks are sent to collect the oil, free of charge, from restaurants and deliver it to Tri-State's storage facility in Brooklyn. From there, tankers transport the waste oil to local biodiesel producers, who make the renewable fuel. Baker said Tri-State's trucks are currently collecting from approximately 1,500 various eateries in the Manhattan, Brooklyn and Queens areas. "We've been expanding rapidly, and we expect that we'll continue to do so," he said. "Our services have been extremely well-received by the restaurants and the food preparation community. Our phones are ringing every day with new clients looking to sign up with our service."
 
 Although FreshDirect is the largest fleet that Tri-State supplies biodiesel to, it isn't the first. Tri-State has been supplying biodiesel to smaller local companies for some time, including Whole Foods Market, a natural and organic food store chain. Baker estimated that on any given day there are 50 trucks on New York streets using Tri-State's biodiesel, and that number will increase once FreshDirect's entire fleet begins using biodiesel. 
 
 The rising cost of soybean oil has caused to some hesitation on behalf of fleet managers to start fueling their trucks with biodiesel. However, Baker said his company works hard to keep prices competitive and that the use of Tri-State Biodiesel's fuel in FreshDirect's fleet is a great step toward positive exposure for biodiesel.

FreshDirect, a New York City food delivery service, has signed a contract to fill its entire 150 truck fleet

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New York City biodiesel supplier signs contract

Canadian biodiesel producer Biox Corp. announced that it has closed on CAN$14 million in debt financing with Wellington Financial LP, a specialty financing firm based in Toronto. 
 
 Wellington Financial President and Chief Executive Officer Mark McQueen said Biox, which has investors such as Canadian mutual fund provider VentureLink LP, will use the capital at its 60 MMly (16 MMgy) plant in Hamilton, Ontario. "We are excited to be partnering with Biox by providing it with the true growth capital that will enable it to bring production levels at its existing facility up to full capacity and help pave the way to the next step of significant expansion," McQueen said.
 

 Biox, which uses multiple feedstocks, is the largest biodiesel producer in Canada. According to the company, its proprietary process technology can produce biodiesel from feedstocks with high concentrations of free fatty acid without pretreatment.. The process allows the company to utilize less desirable-and less expensive-feedstocks, such as tallow and yellow grease, instead of virgin oilseeds. Its continuous flow design is modular, according to the company, and it is looking to expand into areas where economics are favorable with one or more feedstocks.
 
 "With the ongoing support of our shareholders and partners, including Wellington Financial and VentureLink, Biox is well-positioned to continue to execute on its expansion plans within Canada and internationally," said Biox CEO Tim Haig.

Biox Corp.'s 60 MMly (16 MMgy) facility in Hamilton, Ontario

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Biox closes on $14 million financing package

U.S. law firm Stoel Rives recently announced Robert Van Brocklin as the firm's newest managing partner. He will become chief executive officer and oversee the management of the firm's 11 offices. Van Brocklin has been with the firm for more than 20 years. Before accepting his new position, he led the company's Resources, Development and Environment practice group.

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Stoel Rives appoints managing partner

First-year results are in for the Two-Million-Mile Haul, a two-year B20 study in commercial long-haul trucks being operated by Decker Truck Line Inc. "We are pleased with the results to date," said Don Heck, coordinator of the biotechnology and biofuels programs at Iowa Central Community College in Fort Dodge, Iowa. He is collecting and analyzing the data in the study, which is tracking 20 matched trucks running matched routes in the Decker fleet, half running on B20 blends and half using regular diesel.
 
 "Preliminary results are that B20 performs similarly to 100 percent diesel," Heck said. "We found a slight decrease in overall fuel efficiency for the B20 group, but it was not statistically significant. In fact, the difference was several times smaller than the driver-to-driver variability in fuel efficiency within each group." More than 1.5 million miles were logged by the end of the first year, from Oct. 1, 2006, to Oct. 1, 2007.
 
 Winter driving resulted in relatively few problems regarding cold-flow issues. Fuel for both groups was treated with a commercial fuel additive, and a 40 percent blend of No. 1 diesel was used by both groups for a brief time during a severe cold snap in February. No drivers experienced fuel gelling problems. However, early in the study, filter-plugging problems occurred in the trucks using the B20 blend. After changes were made in blending in early February, the rate of filter plugging for the B20 group dropped significantly. "We are continuing to investigate the causes of filter plugging that occurred last winter," Heck said. The residue that plugged one of the filters was analyzed and didn't match any compounds found in the soy-based B100 or resulting B20 blend. "We have been testing various blends of B20 with No. 1 diesel and cold flow additives in the laboratory, and will use this information for the 2007-2008 winter driving season," Heck said. "Although the filter residue was not positively identified, we do not believe it is the result of poor fuel quality."
 
 In addition, engine oil tests showed no difference between the B20 and diesel groups. At the conclusion of the study, engines from both groups will be inspected for a closer analysis of engine wear.
 
 The two-year study is sponsored by the Iowa Soybean Association, Iowa Central Community College, Decker Truck Line Inc., Caterpillar Inc., the National Biodiesel Board, Renewable Energy Group Inc. and the USDA. The study is believed to be the first comprehensive, publicly documented demonstration of B20 in over-the-road trucks.

B20 performance matches diesel in Iowa

More heat and pressure may be the solution to converting recalcitrant feedstocks into biodiesel. Researchers at the University of Arkansas successfully used supercritical methanol to convert feedstocks with high levels of free fatty acids (FFAs) into biodiesel. At high temperatures and pressures, many substances become supercritical fluids that exhibit properties of both a liquid and a gas. Supercritical fluids are used in many organic chemistry reactions as both solvents and reactants. 
 
 R. E. "Buddy" Babcock, professor of chemical engineering, and graduate student Brent Schulte heated methanol until it became a supercritical fluid and reacted it with low-grade chicken fat and tall oil, a byproduct of the pulp and paper industry. The methanol reacted with the fats to create biodiesel in a one-step process that didn't require any catalyst. Babcock and Schulte found that FFAs were preferentially converted into biodiesel in the reaction. In traditional biodiesel production, FFAs form soaps in the presence of caustic catalysts. The soaps have to be removed from the biodiesel in a washing step.
 
 The researchers found the process to be highly efficient. With chicken fat, the biodiesel yield was more than 94 percent, and with tall oil, the yields were in excess of 89 percent. The reaction proceeded most efficiently at a temperature of 325 degrees Celsius (617 degrees Fahrenheit).
 
 Babcock said the process would be ideal for converting feedstocks such as feed-grade chicken fat, which can have as much as 6 percent FFAs. Results using tall oil were mixed. Crude tall oil contains rosins and resin acids that don't combine with methanol to form biodiesel under the conditions that the researchers tested. Tall oil fatty acids (TOFA), which can be extracted from tall oil, worked well in the experiments. However, TOFA doesn't have much of a price advantage over other biodiesel feedstocks, according to Babcock. He said future research will look at ways to make the process work better with crude tall oil.

Supercritical method converts low-value feedstocks

Neste Oil Corp., a Finland-based oil refiner-and biodiesel producer, marketer and distributor-intends to invest approximately $810 million in the construction of an 800,000-metric-ton renewable diesel production facility in Singapore. Once operational, the plant would be the largest renewable diesel facility in the world. 

 
 The plant will be built in the Tuas industrial zone in the southwest part of the island. Integrated into the area's existing industrial infrastructure, it will make use of local utilities, and port and storage services. Construction is expected to commence in the first half of 2008 with completion slated for late 2010. 
 
 The new plant will use the company's proprietary NExBTL technology, a commercial-scale, new-generation renewable diesel production process that can use any vegetable oil or animal fat as its input, according to the company.
 
 The facility's primary feedstock would be palm oil, according to company spokesman Osmo Kammonen. The company will only use palm oil certified by the Roundtable on Sustainable Palm Oil as soon as sufficient quantities are available. Palm oil complying with the RSPO certification system, which was approved in November, will probably be available from the early part of 2008 onward, Kammonen said. 
 
 Because of its NExBTL renewable diesel process, Neste Oil recently received a Cleantech Finland award, an honor coordinated by Sitra, the Finnish Innovation Fund. The awards were presented by Finnish Minister of the Environment Kimmo Tiilikainen on Nov. 7 at the closing seminar of Sitra's Environmental Program. Winners of the Cleantech Finland award move on to take part in a European-wide competition. Winners will be announced in Brussels in June during Europe's Green Week.

Neste Oil eyes Singapore for world's largest renewable diesel plant

As the newly elected chairman of the National Biodiesel Board, I am humbled by the enormous potential and daunting challenges facing the biodiesel industry. 2007 was a year of explosive growth and dramatic progress, but also a year of instability in the global energy and commodity markets, which distressed the economics of the industry. 2008 promises to include continued challenges requiring hard-fought successes in public policy, trade, technical, outreach and fuel quality.
 
 The NBB members elected a strong and capable governing board, a team of seasoned leaders with good representation of all stakeholders. I was honored to be elected as chairman during this critical time. My intention is to harness the power of our large and diverse membership. Our differences should build us up and not tear us down. To that end, I will remain open to all viewpoints, concerns and desires of our board members, and ask only in return that we never work against each other. 
 
 My first step in this effort was to call upon Gary Haer as the vice chairman to take a strong role in the leadership of this body. Gary has offered his full partnership, starting with overseeing the formation of the board's 2009 Program Plan. This plan is developed each year through an intensive prioritization process and sets the course for the NBB in fiscal year 2009. 
 
 This is a year that promises to bring more dramatic changes, challenges and opportunities to our industry. A unified organization with engaged members has never been so critical. 
 
 I commend Chairman Ed Hegland for his bold plan to energize our industry through cooperation and leadership. 2008 marks my 10th year serving NBB. I have seen tremendous changes in both the industry and our still-growing trade group. I have observed a model of cooperation among farmer leaders, biodiesel producers and allies, which has led to unprecedented success. 
 

 This cooperation came full circle with the passage of the Energy Bill, which included NBB's preferred provisions in an expanded renewable fuels standard. This extraordinary NBB public policy victory will bring some much-needed stability to our industry. 
 
 Our world-class federal affairs team has not achieved such political wins on its own. These victories are the direct result of efforts by NBB members. Our fuel producer dues enable our association to fund these efforts. Many active members provided additional resources beyond their dues, including lobbying activities, outreach to their delegations and fundraising. We also recognize our most important public policy ally, the American Soybean Association, for standing with us on every one of our policy issues.
 
 As a leadership team, Ed and I will work diligently with the rest of the governing board to reach out to members for strong, effective and unified action during 2008. We have tremendous challenges that we must face. We commit to you that we will do everything we can to serve your interests, and we ask for your support in working together to move this industry forward 
 
 Energy Bill passes Congress, signed into law by President Bush
 At the end of 2007, President George W. Bush signed H.R. 6, the Energy Independence and Security Act of 2007, into law. The measure passed both the House and Senate by significant bipartisan margins. In addition to implementing new measures designed to improve energy efficiency and increase Corporate Average Fuel Economy standards, the measure provides for a significant increase in the renewable fuels standard. The expansion of the RFS as provided for in H.R. 6 will significantly increase the use of biofuels in the United States.
 
 "The U.S. biodiesel industry praises President Bush, Speaker [Nancy] Pelosi, Majority Leader [Harry] Reid and the bipartisan supporters of biofuels in Congress who worked tirelessly to enact an expanded renewable fuels standard," says Joe Jobe, National Biodiesel Board CEO. "This is good public policy that meets the needs of consumers and addresses America's pressing energy security concerns by increasing the use of clean-burning, domestically produced biofuels like biodiesel to reduce our dependence on foreign oil. The nearly five-fold expansion of the RFS in this legislation is truly a landmark achievement."
 
 Under previous law, the RFS was set to expand to 7.5 billion gallons by 2012. The Energy Independence and Security Act expands the minimum amount of biofuels that will be used in the United States to 36 billion gallons by 2022. Within the expanded RFS, the measure contains specific provisions that will, for the first time, implement a renewable requirement for diesel fuel. The enactment of a renewable requirement in the diesel pool that includes biodiesel has been a top priority for the U.S. biodiesel industry. The NBB views the enactment of H.R. 6 as a historic achievement that will lessen America's dependence on foreign oil and help create a viable, growing domestic market for biodiesel.
 "Of particular note, increasing the minimum renewable requirement in the diesel pool from 500 million gallons in 2009 to 1 billion gallons in 2012 will create a stable, viable domestic market for biodiesel," Jobe says. "In addition, the fuel labeling requirements in the bill will promote consumer confidence in renewable fuels and help ensure that only quality fuels are entered into commerce."
 
 To get a renewable component in diesel fuel, the Energy Independence and Security Act specifically requires the use of biomass-based diesel fuel, which is a diesel replacement fuel that reduces greenhouse gas emissions by 40 percent to 50 percent. Biodiesel qualifies as a biomass-based diesel fuel. However, under the statute, coprocessed renewable diesel specifically does not meet the definition of biomass-based diesel fuel. The usage requirement for biomass-based diesel begins at 500 million gallons in 2009 and expands to 1 billion gallons in 2012. Beyond 2012, a minimum of 1 billion gallons must be used, and the amount can be set higher by the administrator of the U.S. EPA, in consultation with the secretaries of the USDA and the U.S. DOE. 
 

 Biomass-based diesel is one schedule within a larger advanced biofuel schedule provided under H.R. 6. Within the advanced biofuel schedule, there is also a specific use mandate for cellulosic biofuels and undifferentiated advanced biofuels. In addition, the total amounts of advanced biofuels, when added to the use requirements for conventional biofuels, make up the total RFS provided for in H.R. 6. In addition to qualifying as a biomass-based diesel fuel, biodiesel can also qualify as a conventional biofuel or an undifferentiated advanced biofuel. The following chart illustrates the RFS schedule provided for in the Energy Independence and Security Act and shows the categories under which biodiesel qualifies: 		
 
 As this chart demonstrates, H.R. 6 commits the United States to a long-term energy policy that envisions renewable fuels like biodiesel playing a significant role in meeting America's future energy needs. "U.S. biodiesel producers are eager and capable of meeting the aggressive renewable goals in this bill, and our industry looks forward to doing its part to help America meet its energy security needs," Jobe says.
 
 San Francisco meets citywide biodiesel use
 A pledge made in 2006 by San Francisco Mayor Gavin Newsom came to fruition by the promised deadline. At press time, San Francisco was on track to have all its diesel vehicles running on B20 by Dec. 31, 2007. To help achieve that goal, an innovative program was recently launched to help collect feedstock to make the city's biodiesel. 
 
 In an effort to reduce greenhouse gas emissions, combat climate change and curb the growing number of clogged sewers plaguing city residents and businesses, the mayor launched an effort to collect fats, oil and grease free of charge from city restaurants and turn them into biofuel for city-owned vehicles. SFGreasecycle is the nation's first citywide program to turn fats, oil and grease into fuel for municipal fleets. It is expected to save residents and businesses money, unclog city sewers and reduce greenhouse gas emissions. 
 
 SFGreasecycle was developed by the San Francisco Public Utilities Commission as a sustainable alternative to combat sewer blockages caused in part by excess cooking oils and fats discharged down drains from restaurants and homes. Each year, the SFPUC estimates that 50 percent of sewer emergency calls are related to backups caused by grease blockages costing their ratepayers $3.5 million per year in repairs.
 
 San Francisco, a national leader in initiatives to reduce greenhouse gas emissions, has a city fleet of more than 1,600 diesel vehicles to accept the new biofuel source. Eventually biodiesel for the city fleet will all come from biodiesel generated from San Francisco's restaurant waste oil stream. Tellurian Biodiesel, a National Biodiesel Board member, supplies the fuel to San Francisco Petroleum, which distributes to the city.
 
 Recycled fats, oil and grease from San Francisco restaurants is estimated to generate 1.5 million gallons of biofuel each year. San Francisco is now the largest city to use B20 fleet-wide. The program even included holiday waste cooking oil drop-offs. Visit www.sfgreasecycle.org for more information. 
 
 Member profile: Tellurian Biodiesel

 Tellurian Biodiesel is a California-based biodiesel sales, distribution and production company with offices in Los Angeles and San Francisco. The National Biodiesel Board member markets a significant portion of the biodiesel consumed in California and the southwest United States. Customers include terminal operators, petroleum distributors, municipal, transit and public fleets as well as commercial fleet and logistics transport operators.
 
 Tellurian has successfully managed the biodiesel fleet transition process for the cities of San Francisco, Santa Monica, Beverly Hills and Inglewood and has worked with companies such as Warner Brothers, Clif Bar, American Apparel and Google. 
 
 Tellurian provides fuel to San Francisco Petroleum, the distributor that has the contract with San Francisco. Tellurian CEO Eric Bowen helped establish San Francisco's B20 program for the city fleet. He also serves as chairman and wrote the legislation that created the city's Biodiesel Task Force.
 
 Another high-level fleet that Tellurian is assisting with fuel and education is Clif Bar in southern California. Clif Bar, an energy bar manufacturer, is using biodiesel blends in its entire southern California fleet. 
 
 With funding from the South Coast Air Quality Management District, Tellurian is managing a biodiesel NOx reduction demonstration project in partnership with the National Renewable Energy Laboratory, California Energy Commission and Air Resources Board.
 
 Tellurian Biodiesel is currently developing biodiesel production facilities in California and throughout the United States. Tellurian officials say its goal is sustainability, and to strive to use local and domestically available feedstocks for regional biodiesel production and consumption whenever possible in order to maximize carbon reduction and energy conservation.
 
 Fred Wellons of Tellurian is an immediate past governing board member of NBB.

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Bowen, left, and Tellurian's Joe Gershen at an Olympian B20 pump in San Francisco.

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NBB In Sight

Los Angeles-based biodiesel producer and distributor Allegro Biodiesel Corp. has invested $1 million and acquired a minority stake in privately held Community Power Corp., a developer of modular bioenergy technology and products in Littleton, Colo. The deal, which follows an extended $500,000 bridge loan to CPC, gives Allegro access to CPC's biomass gasification technologies that generate power and heat. CPC's technologies would also produce biobased synthetic fuels that replace fossil fuels such as natural gas, propane and diesel, according to Allegro Chief Executive Officer Bruce Comer.

Allegro Biodiesel invests in CPC

From mid-November through December, Los Angeles-based Biogold Fuels Corp. made several business deals that advanced its plans to process municipal solid waste into a type of biodiesel. It licensed a proprietary separation process technology from Gemini Environmental. It began negotiations for a joint venture with an unnamed United Kingdom company to build waste-to-biodiesel plants in Europe. It also appointed Walter Wendland of Golden Grain Energy LLC, an 80 MMgy ethanol plant in Mason City, Iowa, to its board of directors.

Biogold furthers biodiesel plans

At press time, Petrotec AG aimed to restart biodiesel production in January at its 27 MMgy facility in Südlohn-Oeding, Germany. Production had been halted due to unfavorable market conditions. The company is also opening a 23 MMgy biodiesel plant in Emden, Germany. The announcement came after the company released its third quarter 2007 financial results, which indicated that sales increased 12.8 percent to 16 million euro ($23.5 million) in that quarter. The volume of used cooking oil feedstock collected by Petrotec increased 15 percent during that same time frame.

Biodiesel producer Petrotec increased its sales nearly 13 percent in the third quarter of 2007.

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Petrotec restarts production, releases financial report

Life in all its many forms-from the microscopic to the massive-shares several basic requirements for persistence such as enough resources to grow and develop and favorable environmental conditions for this to proceed optimally. The availability of these seemingly prosaic needs is oftentimes at the whims of the weather. Too much rain and essential soil nutrients get washed away from the roots of plants that depend on it. Too little rain and these same soils become dry deathtraps devoid of the liquid that sustains the living. 

 
 The growth and development of a soybean plant is governed by nothing different. Given ample nutrients and water and a propitious temperature for growth, soybean seeds will yield a satisfying bounty. Take these away or alter them in any way and what once was expected to be a generous haul now becomes mediocre at best. "Obviously weather affects yield. It has an effect on the diseases and the insects present, it affects traits like size of seed and protein and oil content," says Walter Fehr, a soybean breeder at Iowa State University. "For each of these, the extent to which the environment exerts an effect differs a lot." 
 
 Physiology Facts
 Growth, development and yield of soybeans are influenced by a variety's genetic potential interacting with environmental elements and farming practices, according to a soybean growth and management guide published by the North Dakota State University Extension Service. Farmers who understand how soybeans grow and develop can optimize seed yield by minimizing environmental stresses and establishing field practices that maximize the potential of their chosen variety. 	
 
 From seed to full-grown and mature plant, the development of soybeans can be broken down into two main phases: a vegetative phase characterized by the first leaves of the plant emerging from the soil and culminating in a stem that stands about a foot tall with several nodes or branching points ending in a profusion of leaves; and a reproductive phase defined by the blooming flower, maturation of the bean pod and development of seeds. "The soybean plant is very flexible in terms of how many seeds are formed. The plant will basically cannibalize the leaves and the stem just to make sure those seeds keep growing as long as they can," explains Mark Westgate, a soybean physiologist at Iowa State University. "But the first thing that drought stress or high-temperature stress does is decrease the number of seeds that are successful." 
 
 The second adjustment that the plant makes is in the size of the seed. Since seed size is proportionate with the amount of oil and protein that can be harvested-i.e. the bigger the seed the bigger the volume of oil and protein carried by the seed-and growers focus on bringing in as much oil per acre as possible, conditions that favor the development of lots of big beans are desirable, Westgate says. It turns out that a lack of water plays a primary environmental role in this outcome. "Under drought conditions, the plant runs out of reserves and stops growing," he explains. More specifically, an inadequate supply of water signals the seed to stop expanding. "Soybean seed is kind of interesting in that it continues to accumulate dry matter and continues to do biochemistry as long as it can expand," he adds. Since most of this expansion deals with getting more water in the seed, when that process stops, the seed stops growing.
 
 This phenomenon was documented in the 2007 growing season. According to a November report compiled by Seth Naeve and James Orf, professors in the Department of Agronomy and Plant Genetics at the University of Minnesota, despite a midseason drought in parts of Iowa, Minnesota, Wisconsin, Michigan and several East Coast states, rain in the latter part of the growing season allowed the remaining seeds to fully expand and enlarge. The southern range of the U.S. soybean production area, however, suffered from a season-long drought resulting in smaller seeds from these states. "Overall, the midseason drought affected soybean yields more than any other weather phenomena," the authors wrote. 
 Although dry conditions affect seed size, drought doesn't significantly affect the basic biochemistry of oil formation. "We know this because the rate of growth of the seed doesn't slow down. It keeps chugging along until eventually it hits a brick wall-it's too dry and the seed can't expand anymore," Westgate explains. 
 
 Temperature, on the other hand, does affect the biochemistry of oil production as well as seed size. Higher temperatures speed the activity of enzymes thereby making development proceed more rapidly. When the vegetative and reproductive stages of growth occur more quickly, the overall development of the plant finishes sooner, resulting in a smaller seed. 
 
 In addition, temperature affects the concentration of various fatty acids in the oil mix. Higher temperatures favor the synthesis of palmitic and oleic acids while an increase in the concentration of linolenic and linoleic-unsaturated fatty acids-coincides with lower temperatures, according to Jim Board, an agronomist at Louisiana State University. The difference has to do with the proteins involved in the synthesis of each. "The makeup of all things is controlled by enzymes and these are differentially controlled by temperature," Board explains. "So for the genotypes we have today, the kinds of conditions that favor increasing protein and oil content are the same kind of conditions that favor prolonged seed filling," Westgate says. "Anything that shortens the filling period is going to decrease the total amount of protein and oil without having a big impact on concentration."

 In terms of biodiesel production, varieties of soybean with higher oleic acid content have been shown to reduce nitrogen oxide pollutants. Similarly varieties with a lower concentration of fatty acids such as palmitic and stearic have been shown to improve the cold-weather performance of biodiesel. 
 
 However, breeding soybean varieties with more oil and protein has proved challenging. This is partly because the energy cost of making oil is high, Board explains. "It takes a great deal more energy to make a gram of oil than to make seed." Westgate's approach to understanding how this happens and how the pathways that lead to oil and protein formation could potentially be manipulated to increase concentrations, involves following the fate of carbon atoms through the metabolic pathways that produce all the various amino acids (the building blocks of protein) and all the various fatty acids (the building blocks of oil). Since plants use sugar to form these building blocks, Westgate's team labels the 12 carbon atoms of sucrose with a nonradioactive isotope, feeds this sugar to soybeans and traces the carbons as they're routed through various biochemical pathways using mass spectrometry. "This is a powerful technique because it allows us to see the activities of certain pathways and to look at interactions between compartments in a cell," Westgate says. "We're trying to link a basic understanding of biochemistry with genetic approaches to understand how the environment makes the seed shift how much carbon goes into these end products." 
 
 Soybean School 
 To spread the word about soybean seed physiology, Westgate is one of the teachers in an annual winter soybean management school held on the ISU campus. The two-day colloquium covers anything related to soybean production. "We cover everything from seed physiology to crop physiology to diseases, different insects, growth and development, soybean rust, soybean fertility, weed management, and then agronomic decisions to maximize yield and grain quality," explains Palle Pedersen, an extension agronomist at ISU and organizer of the event, which will be held at the end of this month. Attendees range from growers to crop consultants, county extension agents, marketing people and seed company agronomists. "The major goal is to get people up to a level where they understand soybean production and they understand the variables that influence yield and grain quality. In addition, we want them to gain an understanding of our research projects and why we're doing them," he says. 
 
 Westgate has a similar goal for the seed physiology session he teaches. "I want people to take home a few key messages about how plants face the environment and how they respond to it so they're a little bit more aware of what the consequences of their decisions about management might be." 
 
 Jessica Ebert is a Biodiesel Magazine staff writer. Reach her at <a href="mailto:jebert@bbibiofuels.com ">jebert@bbibiofuels.com </a>or (701) 738-4962.

For the past several years, Pedersen, far right, has organized the soybean production colloquium at Iowa State University's crop school.

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On the surface it seems simple: too little water or too high temperatures during the growing season equals disappointing soybean yields. A closer look, however, reveals a host of entwined physiological changes in the soybean seed that result in this deflating outcome. Soybean physiologists spoke with Biodiesel Magazine about how they're trying to understand these changes in an attempt to improve yields.

Probing Soybean Physiology

Getting product to the customer is a crucial aspect of any business, but biodiesel has special challenges that must be considered. The three primary ways to transport biodiesel are truck, rail and barge. Additionally, ships are used to transport large amounts of biodiesel between continents, and pipelines are being explored as a more efficient means of transporting fuel across land to major markets. Tests of biodiesel blends continue to be run in various pipelines, but it is still far from being a mainstream method of transporting methyl esters. Until pipeline transportation is an option, the biodiesel industry will continue to rely on the rail and barge system to transport its product long distances. 

 
 Short distance transportation is, and will continue to be, dominated by trucks. While the basics sound simple, transportation experts tell Biodiesel Magazine that many factors must be evaluated when considering how to send each shipment. "There are several factors that go into determining which mode of transportation is most efficient," says Adam Sander, transportation manager for biodiesel producer and marketer Renewable Energy Group Inc. "This includes the origin of the facility, destination, if the receiver is serviced by rail and the volume the customer can handle. Trucks hold 6,600 to 7,200 gallons, a railcar holds 23,000 to 26,000 gallons and barges hold 400,000 gallons. So you figure each railcar on average holds four truckloads. Each barge represents a volume of 15 railcars or 60 trucks." 
 
 Narrow down the options with simple steps, says Mike Szady, vice president of supply at World Energy. First, both the shipping and the receiving ends must have the proper infrastructure in order to have a choice. "If one side can only offload trucks, then you don't have a choice," he says. "If both sides can handle both trucks and railcars, then you have a choice. Get quotes for that movement: go to a truck company and ask them to quote you to ship from one point to the next. Then get a rail quote, and compare the two. 
 
 In general, if it's more than 300 miles, you can bet that railcars will be cheaper. Probably in the same vein, if it's less than 50 miles, it's going to be trucks that are cheaper."
 
 Costs can vary widely, depending on distance, volume and method. "We price on cents per gallon," says Bill Neese, director of transportation and logistics for REG. "You can move a railcar 2 ½ times the distance that you can move a truck for the same per gallon price. The cost to move a truck 300 miles is the same cost per gallon to move a railcar 2 ½ to three times as far. For that same cost per gallon, you can move a barge from the Midwest to the Gulf."
 
 Of course, these cost rationales assume full volumes. "If you go to railcar because the truck is too expensive, but you only have 10,000 gallons, is the volume of scale right to go from a truck to a railcar?" Szady asks. hypothetically. "Can I make other sales in that area to go to a railcar?"
 
 Distribution makes up between 5 percent and 10 percent of the end product's cost, Szady says. Feedstock costs are about 80 percent to 85 percent and manufacturing costs make up the remaining 15 percent. "[The cost of distribution] could be next to nothing, but it won't be much more than 10 percent of the final cost of B100," he says.
 
 Cost is certainly not the only factor when choosing a distribution method. The timing is also an important consideration. Trucks are obviously the most flexible method, and offer faster pick-up and delivery scheduling. Trains, meanwhile, require an average of six weeks to make a roundtrip. 
 
 The majority of biodiesel in the United States is shipped via rail, followed by truck and then finally barge, Szady says. While rail access isn't necessary to sell product, he says it offers an advantage to reach markets beyond the approximately 300-mile radius in which truck distribution is efficient. He explains that the typical 30 MMgy plant will have a 150-railcar-fleet. Each car will be insulated and coiled and can carry about 23,000 gallons. Ten percent of these cars will be used to carry glycerin. If feedstock delivery is also required, the fleet size should be doubled, Szady says. 
 

 REG manages transportation logistics for seven producing plants and three plants under construction, all of which have (or will have) rail access. In one year, it has doubled the amount of fuel for which it oversees distribution. About 70 percent of REG's transportation is on rail, 15 percent is on truck that REG schedules, and the remaining 15 percent is hauled out on truck from the production plant by the customers, Neese says. "As we see our railcar volumes grow, railcar management has become very vital to our operations," Sander says, referring to a long daily checklist required to monitor where railcars are, manage turn time and keep product moving. 
 
 Because trains are so integral to the transportation plan of the company, those at REG say it's important to ensure that rail access is one of the top priorities for a plant in development. "As soon as a customer [of REG's marketing division] indicates a desire to build a plant, we get involved," Neese says. "We establish rail carriers, rail service, truckers-even as far as the terminals to make sure that production from this plant will have a place to go to the terminal and distribution."
 
 It is also important to order railcars early. Until recently, there was a 12- to 18-month lead time from when the order was placed with the leasing company until the time a biodiesel facility received its railcars. "Now there are cars already built and available," Neese says. "This is due to the decrease in production [of biodiesel]. Orders were placed based on anticipated production 12 to 18 months ago, assuming that all plants would be built." Though railcars are now more readily available, gaining access on rail lines is still a challenge, as rail infrastructure is near capacity, Neese says. "As we bring additional business to the rail in the form of biofuels, there is limited room for them to expand," he says. "We're probably bringing production and volume on faster than they can increase capacity to handle it. You can't just build it and expect that they'll come with the train. You have to talk to them at the very onset to make sure the line you're considering has the ability to handle the increased capacity."
 
 Unit-Train Economics
 As efficient and economical as rail is, it could be even more so when cars are moved as part of a unit train. A unit train typically consists of approximately 100 cars shipped from a single origin or gathering location to the same destination. The ethanol industry currently utilizes the unit trains to get large amounts of fuel from the Midwest to markets in California more cheaply and efficiently. In 2003, Burlington Northern Santa Fe Railway Co. developed the industry's first ethanol unit-train service, Ethanol Express. The program is designed to save producers time and money through increased fleet utilization, lower inventory carrying costs and logistics coordination. BNSF moves more than 223 million gallons of ethanol per year on its Ethanol Express. 
 
 At this point, Szady and Neese agree that moving biodiesel on unit trains doesn't make sense. The majority of biodiesel on rail is added to other units, up to eight cars at one time, Szady explains. Although he agrees that ultimately it will be good for the industry to be able to ship on unit trains, he says his company hasn't looked at it seriously because the market size isn't there. "Most of the larger biodiesel plants have a capacity of 30 MMgy, which is about 2.5 million gallons per month," Neese says. "A unit train of 100 cars holds 2.5 million gallons. Biodiesel plants aren't scaled the same as ethanol plants. To further complicate it, you don't have distribution on the other end that can accept that large of volume." 
 
 What if there was a central gathering place, such as a transload facility that had the tank capacity for unit trains? "We've looked into that, however you're doing an extra handling process there," Neese says. "All of our plants are set up to rail direct. Again, with unit trains, you're requiring someone to have the capability to have that large of volume in the receiving end. Currently, we don't have that large size. We're hoping in the near future we'll see it. It could be a refinery or a terminal with access to pipeline." 
 
 As the market for biodiesel within the United States has struggled over the past year, many producers have shifted to export markets. This has dramatically increased the amount of biodiesel that is shipped via rail to the ports, Sander says. Szady agrees that rail, rather than barge, has been the primary method to get fuel to export. "The main way to get it to export from the center of the country is by rail to water-based tankage on the coast," he says. "The reason you do that over barge is supply chain. Compare taking railcars to Houston with trucking it to the Mississippi River to a barge and then end up at the tank. Export parcels are very large-2,500, 5,000 or 10,000 metric tons are going at once. That's larger than any single barge. It's easier to take the tankage by rail. Some do go by barge because it's cheaper, but the barge market is tight. The majority [of transportation] is railing it by tank and shipping. There are few biodiesel plants on the Mississippi River that have the ability to load onto a barge."
 
 Generally, barges are used just for feedstocks, but they are also an option to move fuel within the Mississippi River system. "In general, moving something down the Mississippi to New Orleans or Houston will be cheaper to move it by barge than rail," Szady says. In addition to limited barge access, scale and seasonal challenges make barge the least used transportation mode.

 
 Transportation Challenges
 Neese, who previously handled distribution in agricultural products, says biodiesel has unique properties that make it a more challenging product to transport-regardless of the method used. "The nature of the product is that it's temperature sensitive, especially in cold weather months, whereas with grain products you don't deal with those factors." 
 
 Another major challenge within all modes of transportation is maintaining product quality. "Because REG is a BQ- 9000 certified producer, we're responsible to maintain quality throughout distribution," Sander says. "That includes making sure we have all appropriate equipment and handling to maintain quality." Szady agrees that quality control goes far beyond the plant. "Every time you transfer your product, there's a risk that your quality can get compromised," he says. "Every time you take product from your tank and offload it, there's a chance something can happen to the product because you're doing something with it." Sampling and analyzing the product each step of the way and maintaining the right paperwork is how quality is maintained.
 
 Finally, as the above transportation experts have described, the most efficient methods of transportation mean nothing if the customer cannot handle the equipment or volume. This is where it's important that customers have biodiesel-compatible tankage. Szady says terminals and terminal operators are investing in additional tankage in general, but he says they usually aren't biodiesel specific unless it's for a specific customer. Long-term leases can help encourage a terminal to invest in such infrastructure. Tankage allows a producer or marketer to accumulate inventory, which can open it up to more marketing and distribution options. 
 
 Anduin Kirkbride McElroy is a Biodiesel Magazine staff writer. Reach her at <a href="mailto:amcelroy@bbibiofuels.com">amcelroy@bbibiofuels.com</a> or (701) 738-4962.

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Distribution of fuel makes up less than 10 percent of the cost of biodiesel, but there's a lot of flux within that 10 percent. Trucks, trains and barges each offer options to control costs and reach markets.

Moving Biodiesel

Country music, Graceland, American war history and wholesome southern hospitality are just a few of the things that come to mind when people think of Tennessee. Today, the Volunteer State is in the midst of making its name synonymous with biofuels.
 

 Rich in farmland that produces a variety of crops, a transportation industry and a desire to augment its rural and urban economic development efforts, Tennessee is an ideal location for establishing a biofuels industry. The state government has realized this potential and has responded by providing solid legislative support. Although evolving from an agricultural-based state to a bioeconomy takes time, political support is a good first step for any advancement in this arena.
 
 In February 2006, Tennessee Gov. Phil Bredesen signed Executive Order 33 to stimulate the biofuels movement across the state. His first act was to form the Interagency Alternative Fuels Working Group (IAFWG) to develop a comprehensive state renewable fuels strategy. The working group consists of representatives of six major state agencies, including the commissioners of the Department of Agriculture, Department of Economic and Community Development, Department of Environment and Conservation, Department of General Services, Department of Health and the Department of Transportation. The IAFWG was tasked to take immediate steps to establish interim state standards for biodiesel to provide an adequate level of quality assurance for biofuels blending and distribution. "We're creating a whole new industry in the state," says Andrea Arnold, spokeswomen for the Tennessee Department of Economic and Community Development. "It's not only a brand new industry it's a higher skilled tech-based industry, which is something that many states, particularly those in the South, are trying to switch to, and Tennessee is in the middle of that transition."
 
 In 2006, Bredesen included $4 million in his budget to fund the state's alternative fuels initiatives, which was approved by the General Assembly. The funding laid the groundwork to increase the visibility and availability of biofuels at retail stations, to produce more biofuels, to assist local governments in making biofuels available to their fleets, and to establish education and outreach resources for Tennesseans to learn more about the benefits of biofuels.
 
 The state is expected to kick in an additional $5 million in 2008 as an auxiliary fund to boost projects that have been put on hold or that have not yet applied for the first portion of the funding. The state funding in support of biofuels has brought out the entrepreneurial spirit of residents, according to Jon Overly, executive director of the East Tennessee Clean Fuels Coalition, one of three nonprofit organizations tasked to facilitate and endorse the use, production and distribution of biofuels in the state. "I've got more funding than I have time to work on," Overly says. "What a terrific predicament to be in. We are certainly going in the right direction for establishing a sustainable biodiesel future."
 
 With continued support from the state and acceptance of biofuels from its residents, Tennessee is heavily involved with several biodiesel projects that are working in tandem to meet the governor's goals.
 
 Producer to End-User Progress
 As a means to encourage instate biodiesel production, Tennessee implemented a statewide producer subsidy where, as of Sept. 1, 2007, any indigenous biodiesel producer that sells biodiesel to an instate fuel supplier/distributor receives a 20-cent per gallon credit. The incentive is a six-year program passed by the General Assembly during the last session. The subsidy is a tremendous boost for local biodiesel producers who are dealing with soy oil prices that have nearly doubled in two years, according to Diane Mulloy, president and chief executive officer of Milagro Biofuels LLC, a 5 MMgy biodiesel facility in Memphis, Tenn., that has been producing since 2006. "If it wasn't for the subsidy, we probably would've all given up by now," she says, noting that prior to the subsidy several proposed projects shut down due to unfavorable market conditions. "Soy oil prices are just so high right now; it's difficult to break even." 
 
 With incentives promoting increased production, the state's commitment to biodiesel has opened new "Green Islands" or biocorridors along Tennessee's interstates. The Green Island program is being deployed across the state as part of a joint effort by the governor's office and the departments of Environment and Conservation, Transportation, Economic and Community Development, General Services and Agriculture. The goal of the $1.5 million project is to create 70 new alternative fuel retail outlets with E85 and B20 pumps that are no more than 100 miles apart. The BP stations in Riverside and Somerville are among the retailers that started offering B20 in July 2007. "The Green Islands are certainly a great way of promoting the benefits of biofuels to the general public," says Andrew Couch, executive director of the West Tennessee Clean Cities Coalition.
 
 The availability of biodiesel has also been welcomed by Tennessee's fleets and municipalities, according to Overly. About 100 organizations in east Tennessee are currently using biodiesel in their fleets. "Thanks to that funding you're going to see more and more B20 stations pop up," Overly says. "When biodiesel costs the same as diesel about 100 plus fleets in East Tennessee use biodiesel."

 
 Innovative Efforts
 Bredesen dedicated about $880,000 of the $4 million provided by the state to Alternative Fuel Innovation Grants, which went to 14 local governments and public universities to increase the alternative fuel use in their fleets and measure positive impacts to state air quality, particularly in areas that are not currently attaining federal air quality standards.
 Among the recipients, the University of Memphis received $99,998 to build a biodiesel production unit. The unit would be designed, built and operated by students and faculty, and produce enough biodiesel to replace conventional diesel in campus vehicles. The unit would also be utilized as a testing resource for commercial biodiesel producers facing challenges related to feedstock variability, product quality and operational efficiency.
 
 <center><img src="/images/upload/20080117125735.jpg" alt="" /></center>
 
 In addition, Cleveland State Community College in Bradley County recently received $84,000 to develop an Alternative Fuels Learning Lab in the newly proposed Cleveland/Bradley Energy Business Incubator that will house the college's Biodiesel Education Program. The college will develop a variety of programs and classes in alternative fuels production for students and small businesses. Funding will also be used to help purchase necessary equipment to convert food waste products to biodiesel that will fuel campus vehicles. "I see the biofuels arena as just kind of a small part of this much bigger picture of trying to meet the claim that agriculture can participate fully in the petroleum products industry," Couch says. "For every petroleum-based product there is a biobased substitute or replacement. That's a huge claim and I think we're in an area of the country where we can really figure that out."
 
 Education is Key
 For Tennessee to successfully meet the challenges set by Bredesen's biodiesel initiatives, educating consumers is paramount, according to Arnold. "Educating the consumers about biodiesel and biofuels in general is a critical component to accomplish these goals," Arnold says. "We're ready for that public education component so that will be a key next step in this plan for long-term sustainability. I think 2008 is the right time to start talking to Tennesseans about what we've done and how it affects them and what they can do."
 
 Because biodiesel is relatively new to Tennessee residents, state agencies and governmental bodies banded together to establish an education and outreach campaign entitled "BioTenn," to provide information and resources to consumers about biodiesel. The program is also available on the Internet. Additionally, as part of the Southeast Alternative Fuels Task Force, people from across the state can participate in calls to discuss alternative fuels actions and needs. Once a month, the task force participates in a call involving the entire multi-state network (about six states) then each state can hold its own call during the next month. "I think in general we have good efforts moving forward to try and make a difference here in the Southeast," Overly says. "I think we have to start dreaming a little bigger if we're going to realize the full potential of the governor's goal."
 
 Near-Term Challenges

 Amid the proactive approaches the state has undertaken and the ambitious goals set forth, short-term hurdles remain that are being addressed. One of the areas of concern lies in the research and development areas regarding improvements in biodiesel production operations, Couch says. "One of the biggest challenges we have here is that we don't have any soybean crushing facilities," he says. "We import all of our soy oil for biodiesel production in Tennessee. Right now, with soybean prices the way they are it's prohibitive to keep producing." In light of its short-term acceptance, it's the long-term that Tennesseans are concerned about, according Couch. "We've seen tremendous growth in biodiesel in the state," he tells Biodiesel Magazine. "Most of the technical questions are already addressed and people feel okay about [biodiesel]. It's mostly just the future that people are questioning now. They're just worried if it's going to stick around."
 
 Although Tennessee is confronted with immediate challenges, the new Energy Bill with its 36 billion gallon renewable fuels standard should make it easier for biodiesel advocates such as the clean cities coalitions to reassure Tennesseans that the federal government is encouraging more involvement. "This was an auxiliary benefit that gives us the opportunity to be in the national spotlight and to share best practices and to get on peoples' radar to discuss with other states and private entities doing this as well," Arnold says. "The potential is just limitless." 
 		
 Bryan Sims is a Biodiesel Magazine staff writer. Reach him at <a href="mailto:bsims@bbibiofuels.com">bsims@bbibiofuels.com</a> or (701) 738-4962.

Bredesen and Wilson County farmer Jack Pratt

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Milagro Biofuels, a 5 MMgy soy-based biodiesel plant in Memphis that has been in operation since 2006

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Tennessee Gov. Phil Bredesen's bold leadership has unlocked the state's potential to become a biodiesel producer and user.

A Southern Transformation

Excessive feedstock costs have been a thorn in the side of the biodiesel industry for more than a year. Small producers in particular have been at the mercy of oilseed crushers who have passed along higher oilseed costs. Biodiesel manufacturers could have more control over their processes if they could extract their own vegetable oil and perhaps even diversify their feedstocks. Mechanical crushers have lower capitol costs, but leave about one-third of the oil in the oilseed cake. The alternative, solvent extraction, removes almost all of the oil from the meal. However, economies of scale have prevented all but the largest biodiesel plants from doing their own solvent extraction.
 
 Murrieta, Calif.-based SRS Engineering Corp. says it's changing that dynamic. SRS says its solvent extraction system can economically cash flow for biodiesel plants as small as 15 MMgy to 20 MMgy. "We are finding out that for biodiesel plants to become profitable it is necessary for them to look at securing feedstocks directly from farmers," says George Hawranik, SRS's senior engineer. "What they have to do then is come up with a method to extract the oils."
 
 SRS provides complete engineering, design and production services for multiple industries, including the biodiesel industry. According to Hawranik, the company has been in business 25 years and has worked in the biodiesel industry the past four years. Its primary business is distillation columns for glycerin strippers and methanol recovery, pretreatment systems and plant development.
 
 SRS is building two facilities that will utilize its solvent extraction system. One, near Birmingham, Ala., will have the capacity to produce 20 MMgy of biodiesel with a 12 MMgy solvent extraction plant. The other plant, to be located north of Fresno, Calif., will be a 60 MMgy biodiesel plant with a 24 MMgy solvent extraction plant. The company is in discussions to start construction on another five to six plants in the coming year. Hawranik says the SRS system can also be retrofitted onto existing plants and incorporated into new construction.

 
 Along with the lower oil yield, mechanical extraction has other drawbacks, Hawranik says. The hydraulic presses that squeeze the oil from the oilseeds require large electric motors to power them, which in turn leads to higher operating costs. "A mechanical system can take as much as five to ten times more electricity in some cases than a solvent extraction system," he says. "To make money in the biodiesel business, energy is a big, big factor." Mechanical systems also require more material storage and handling, more maintenance, and additional workers to operate them. 
 
 Offsetting these advantages are the higher capital costs of a solvent-based system. Hawranik says most solvent systems cost double that of mechanical systems. With its design and manufacturing capabilities, SRS can build a solvent extraction system at a price competitive with a mechanical extraction system. "We can produce this equipment and install it far more cheaply than everybody else out there," he says. "We are slightly more expensive than mechanical crushers and way lower than other solvent extraction systems." He estimates that other solvent extraction systems cost about $1.50 per gallon of capacity while mechanical systems were closer to 50 cents per gallon. SRS's costs were closer to the average for mechanical systems than to other solvent extraction systems, Hawranik says. A solvent extraction system also requires additional land for siting. A 12 MMgy system will require an additional eight to 10 acres. 
 
 SRS has several advantages that allow it to create a system that is less expensive than its competitors. The company has a large engineering office plus a manufacturing facility in India where SRS can design and produce its own equipment. "We control our own costs," Hawranik says. "A lot of companies out there are buying combinations of equipment from around the world. Their equipment is from different manufacturers so everyone is getting a cut of the pie. In our case, the pie is basically in our court, so to speak." The company also controls the intellectual property over its designs so it doesn't have to license technology from other companies.
 
 Because of the high capital cost of solvent extraction systems, it has been the conventional wisdom that only large plants producing more than 100 MMgy could make such a system cash flow. The lower cost of the SRS system makes it practical for plants as small as 15 MMgy. "If you go to some of the big companies out there, a 60 MMgy plant will cost $100 million or more to install a system just to process the feedstock," Harwanik says. "Ours is more affordable for a 20 MMgy plant."
 
 How the System Works
 In the SRS system, oilseeds are cleaned, cracked and cooked with steam, before being flaked and dried. Oil is extracted from the flaked seed with hexane to create an oil-hexane mixture called miscella. The hexane is recovered for reuse from the miscella in an evaporator. The oilseed cake is steamed to remove the residual hexane, toasted and dried. It is screened and any lumps are crushed to a uniform size, and then mixed and packaged for livestock feed.
 
 The crude vegetable oil at this point contains gums, waxes and other impurities that make it unsuitable for biodiesel production. The oil is degummed by adding phosphoric or citric acid and sending it through a separator. The degummed oil is sent through a bleaching system and is then filtered. Finally, the bleached oil goes through a deacidification column to remove free fatty acids (FFAs). The FFA-free oil and FFA distillates can then be made into biodiesel. "A lot of solvent extraction systems do caustic washing," Hawranik says. "That actually removes the FFA from the soy oil. Soy oil can be anywhere from 2 percent to 4 percent FFAs. Our system actually converts the FFAs to usable oil. Other systems basically water wash their oil, which lessens the quality right off the bat." 
 
 The company tested its oil pretreatment system on other potential feedstocks such as chicken fat and turned feedstocks with as much as 15 percent FFAs into 100 percent usable oil, Hawranik says. "I would recommend that every plant being built today have a pretreatment system," he says. "It will pay for itself very quickly. The only pretreatment system I would recommend is one that converts FFAs to oils. You are throwing your money away if you are paying for 4 percent FFAs and you have to dispose of it. It doesn't make economical sense when you can convert it to usable oil and get money for it. If you take 4 percent of 60 million gallons that is millions of gallons of usable oil, or something you have to dispose of. It isn't a very complicated choice."
 

 The oil produced by the SRS system could be considered even better for biodiesel production than commercial vegetable oils because the FFAs and water are removed. "The biggest challenge in building these systems is to prepare it to minimize the amount of rework and cost to condition the biodiesel," Hawranik says. "Our engineering concept basically started with the first drop of oil right through to the first drop of biodiesel. We look at every feature in between to minimize soap content, to minimize the use of methanol and methylates, and Magnesol or ion exchange. People are finding out there that they are getting a lot more methanol than they suspected in the biodiesel. They are using a considerable amount of Magnesol, which is very costly, to bring it up to spec. So we have specifically designed equipment to treat the oil before it gets to the Magnesol." This dedication to quality on the front end makes a difference to the bottom line, Hawranik says. "It makes our plants more efficient," he says. "These are challenges that we have worked on for the past four years." 
 
 Hawranik believes it's time for this technology to be widely adopted. When the biodiesel industry was just starting, the people getting into it found that solvent extraction was expensive, which is why the industry became largely dependent on the crushing industry for feedstock. Now that vegetable oil costs are becoming prohibitive, producers are looking for alternatives. "People are researching it," he says. "We know of a couple of mechanical extraction systems going in. We are just joining the game now. We are working with an Indian manufacturer to combine our system and their system to make the whole thing less expensive."
 
 As feedstock sources become more diverse, the SRS system will allow biodiesel producers more flexibility to use the most economical feedstock available, whether imported or domestic. "I think a lot of the feedstock will be coming from counties like Mexico, where there is undeveloped land that can grow jatropha oil," Hawranik says. "We have a party with several thousand hectares available that wants to start doing pilot testing on growing jatropha. We are also working with the University of Tijuana which is helping us put in a plant in the Mexicali area." 
 
 Jerry W. Kram is a Biodiesel Magazine staff writer. Reach him at <a href="mailto:jkram@bbibiofuels.com">jkram@bbibiofuels.com</a> or (701) 738-4962.

Oilseed cake produced by the SRS system has almost all of the oil extracted and can be sold for animal feed.

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SRS's system incorporates everything necessary for biodiesel feedstock

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The conventional wisdom has always been that combining oil crushing and biodiesel production is too expensive for all but the largest producers. That thinking has put biodiesel producers at the mercy of a volatile and capricious oil market. A California engineering firm says it's found a way for biodiesel makers to take control of their feedstocks.

Do-it-Yourself Oil Extraction

The National Renewable Energy Laboratory is situated near the base of a rise on the west side of Golden, Colo., with a view of the Denver skyline. In its labs, scientists and engineers grapple with the challenge of turning promising concepts into commercial energy sources to increase America's energy independence while easing our impact on the environment. 
 
 NREL is operated by the U.S. DOE. The lab has been working on biomass for nearly 30 years along with wind, solar, geothermal and other alternative energy resources. The DOE reorganized its alternative energy programs in 2001 to coordinate research on the different alternative energy sources. NREL became the lead lab in the National Biomass Initiative, which coordinates the biomass work of five national energy labs.
 

 A tremendous amount of research is conducted at NREL and the other national labs. That research wouldn't be worth much if the labs didn't have a strong relationship with the private sector. John Ashworth is acting director of the National Biomass Initiative and head of partnership and business development for the biomass program at NREL. He is responsible for bringing businesses and entrepreneurs together with researchers and engineers with the expertise to make their ideas a reality. 
 
 Partnering
 There are many ways to form a business partnership with NREL. "We get associated with companies three different ways," Ashworth says. "A company comes to us with an idea for a process or an idea for a piece of equipment and asks if we can help them by testing the equipment or replicating the process or giving them technical advice."
 
 Sometimes NREL is the customer, looking for some obscure bit of expertise for a project or client. "No. 2, which isn't as common, is that we have a research need," Ashworth says. "We need to find a way to do something better than anyone can do it today. We may go out and look for someone who can help us with that by buying their equipment or having them build something that nobody has ever built before. A lot of the pieces in the pilot plant are custom, nobody had ever built them before."
 
 Finally, some companies approach NREL to do joint projects. This has been a growing source of work for the lab as the DOE has put more emphasis on funding corporate research projects. "The last one, which has been the big driver over the past six years, is that the DOE has decided that one way to get private companies involved in commercializing technology is to put out matching money. So starting in about 1999, NREL has had big solicitations, where they put $20 million to $30 million or recently $200 million on the table and tell companies to put together a team that can do the work. In a lot of cases, people come to us and ask, 'Would you partner with us if we win [the bid]?'"
 
 As this Biodiesel Magazine staff writer was visiting the lab, one of these partnered projects was coming to fruition. Although Ashworth couldn't share details because of confidentiality agreements, he did say that the lab's pilot plant, the Alternative Fuels User Facility, was being fitted for some equipment developed by NREL and DuPont. "We've been working with DuPont for 3½ years," he says. "We're doing the proof-of-concept pilot plant run for their process using our facilities and our people. It's an $8.5 million cooperative research program and this is the payoff. This is the proof that all the stuff we have done over the past 3½ years actually works at scale."
 
 There are not many places in the United States where companies can do pilot-scale research, short of building their own facilities. That's what makes the AFUF so attractive to corporations looking to create a new process without wiping out their own bottom lines. Ashworth says the lab has successfully worked with most of the major companies in the ethanol business including Poet LLC, Archer Daniels Midland Co. and Abengoa Bioenergy. 
 
 Contract Talks
 The lab has designed several different levels of contractual agreements to work with companies and meet the requirements of different kinds of projects. "I will give the DOE some credit, they have tried to streamline the process," Ashworth says. Years ago, people told the DOE that the process was cumbersome. "It was particularly cumbersome if you wanted to do something that was very simple," he says. "What we have tried to do is create an instrument that allows people to make use of our people and facilities very quickly."

 
 The simplest agreements are with companies that want a particular analysis or research question answered. This is handled under an analytical services agreement. "It just says you have something you want us to analyze or just look at," Ashworth says. "In the biomass case, it could be a feedstock that you want us to tell you what's inside. It's a one-page piece of paper that says 'We'll do this, you pay us X, and we'll give you the data and everyone goes home.' There is no intellectual property, no discovery, just the information." An agreement of this type can be negotiated in a week or less.
 
 More in-depth analysis is handled through a technical services agreement. These analytical projects can last up to a year. For example, the lab tested a feedstock for fermentation every three months to see how the feedstock changed with the seasons, or in storage, Ashworth says.
 
 The more typical relationship between a company and NREL is negotiated in a cooperative research and development agreement or CRADA. "[In a CRADA] that's where we are actually doing research-there is intellectual property being created," Ashworth says. "There is a lot of concern about who will wind up owning that at the end of the day. So there are terms and conditions totally open to negotiation on who owns what. At the end of the day you work that all out and it will say something like, 'If your scientists discover it, you own it. If our scientists discover it, we own it and will license it to you for commercial purposes.'"
 
 These contracts are important because as a government agency the lab is required to make its discoveries available to the public. "We are bound by government rules, and one of those rules is that if the lab's equipment is used, the government retains a research license to whatever it has invented," Ashworth says. "It doesn't mean the government will commercialize it, but if it is something important that pushes the technology forward the government wants to be able to work on it."
 
 The complexity of CRADAs requires a longer time period for negotiations. Ashworth says it can take from one to eight months, depending on the intricacy of the agreement. "It depends on how much intellectual property is being brought to the table," he says. "For example, in our work with DuPont, we had a lot of background intellectual property they wanted to use. So that means you had to figure out who licenses what and what are they going to pay. They also brought their own intellectual property because they have a tremendous research program. You have the terms and conditions and then you have to have the lawyers look at the terms and conditions." Once those terms are set, a CRADA can be approved locally so work can begin quickly, Ashworth says. "In general, if we can agree on all the background stuff, it can get going pretty quickly," he says. "Basically we just need to know what the work is going to be, who's going to pay what, and what are the milestones and deliverables. The local field office approves it and we move ahead."
 
 At one time, the lab was involved in a number of what it calls work for others agreements where the company paid 100 percent of all the costs involved in the research project and retained all the intellectual property rights. These are generally limited to replicating or scaling up research that has already been completed by the business involved. "We don't do a lot of those any more," Ashworth says. "We found that when we got into these agreements, by and large there were always discoveries. People were always coming up with better processes and it just causes big issues down the line. We will still do them, but we are pretty insistent that you know what you are doing. You can't just have an idea, but you have to have a dialed in process and you just want us to prove it on a larger scale."
 
 Technology developed by NREL is licensed to the industry. However, research done under a CRADA generally isn't published for five years to allow NREL's partners the chance to commercialize it first. Ashworth's favorite example of a widespread NREL-developed technology doesn't come from biofuels or biomass research, but from the lab's work in wind power. Most of the windmills sold today use an advanced blade design developed at NREL. The lab also licenses microorganisms that it has discovered and developed such as Zymomonas. The income produced from those licenses goes back to the lab. However, Ashworth says the main purpose of the license is to make sure the technology is being used. If the technology isn't being used, the license is revoked. "We've had that happen," he says. "A company licensed something to prevent a competitor from getting it. After about 18 months we took it back." The number of agreements in place at any one time varies, Ashworth says. With more money going into cellulosic technologies NREL's biomass program has been busy. At any one time, the company can be working on three or four CRADAs, and a half-a-dozen analytical service agreements. Then there are a number of technical service agreements which take only a week or two to complete.
 
 As the biomass industry expands, NREL is looking to expand its facilities. "We will double the size of our pilot facility, AFUF, in the next two years," Ashworth says. "Part of the reason we're doing that is so we can run more industrial collaborations in parallel. Right now we have many pieces of equipment that are used quite heavily, and you can only use something 24 hours a day." NREL is also enlarging its thermochemical biomass conversion facility. 
 

 Working Together
 The nuts and bolts of molding a working relationship depend on the type and scale of the project. Once an agreement is in place between NREL and a business, it is up to process engineers like Andy Aden to implement them. "Most of the research I do is on process design and economic analysis," he says. "I take the research in the laboratories and see what economics and designs are on the commercial scale-see what the biggest areas of improvement are going to be and things of that nature. I try to make sure things are cost effective for industry to implement."
 
 The scale of the work Aden does depends in large part on how far the company has advanced in its own research. "Basically we work with that partner to figure out how much data they already have," Aden says. "If we are going to the pilot scale, that means they already have some amount of bench-scale research." NREL can also help develop bench-scale experiments if the company's research isn't that far along. The lab can help ensure that the companies have all the information they need to move ahead with their process. "For example, if we are doing pretreatment research we're geared to doing dilute acid pretreatment, but there are a lot of other chemistries you can use," Aden explains. "So we would get to the point where we feel there is sufficient background data before we feel justified in going to the larger scale. Then we would have to see if the existing equipment we have would satisfy their needs or if we'd have to purchase some equipment to fill their needs. That's one of the reasons we are expanding this facility over the next couple years, to anticipate the needs we have heard from industry."
 
 While testing a new piece of equipment such as a new pretreatment digester would require some repiping of the pilot plant, Aden says more time would be taken to develop standard operating and safety procedures. The pilot plant was designed to make swapping equipment in and out as easy as possible. "We try to do as much plug-and-play systems as possible," he says. "Theoretically, if someone wanted to do a butanol fermentation instead of an ethanol fermentation we use this existing equipment, just different organisms," Aden says.
 
 NREL is one of the few facilities in the country that can work with bioenergy processes ranging from a few grams in a laboratory flask to up to a ton a day in the pilot facility, according to Jim McMillan, principal chemical engineer for the National Bioenergy Center. "One of our strengths is that we have this whole spectrum of scales so some company doesn't have to over-invest because they have only a certain scale of equipment for a limited amount of time," McMillan says.
 
 NREL's other strength is that few other institutions can match the level of experience it has working with biomass. This level of experience makes NREL a source for training and teaching future researchers and industry leaders about biomass. "The industry is nascent right now," McMillan says. "You are starting to see companies with internal research programs and some funding in academic areas. So you will have some students who have done work with this material, but the talent pool is still one of the bottlenecks for the industry. That's one of our roles, bringing on a lot of teachers, a lot of summer interns and in some CRADAs we will train people in the companies. That's sometimes an important part of the project."
 
 As the technologies for cellulosic ethanol are ramped up to commercial scale the excitement is intense. "Look out for the next five years," Aden says. "With industry's help there are going to be significant strides made. I can't wait to see exactly what's going to take place. The common phrase used to be 'it's always five years out,' well steel's going in the ground right now. It's going be interesting to see how successful biomass is and who's successful because there is a variety of players out there now and it's anybody's ballgame." 
 
 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) 738-4962.

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Aden examines some feedstock to be used for an upcoming run of the NREL's pilot ethanol facility. NREL has tested many potential cellulosic feedstocks, including corn stover, poplar and switchgrass.

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The AFUF at the NREL is devoted to researching new fuels made by biological fermentation. Another lab is devoted to thermochemical biomass conversion.

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Figuring out how to make fuel and chemicals from biomass is only the first step, making those processes economically viable is the ultimate goal. Researchers at the National Renewable Energy Laboratory in Colorado work with large and small businesses to turn their discoveries into commercial successes.

From Concept to Commercialization

While the biodiesel industry's focus on environmental regulatory matters understandably has been drawn toward critical path issues relating to fuel standards, it is essential that biodiesel manufacturing, terminal and transportation companies not lose sight of the complex and burdensome environmental regulatory compliance requirements that apply to their facilities, much as they do to other fuel refiners and handlers. 

 
 Federal, state and, in some circumstances, local laws and regulations provide for complex and costly permitting and controls on the emission of pollutants to the air and releases of pollutants through wastewater and stormwater discharges. They also provide for control over the generation, classification, handling and disposal of wastes. Further, they also provide management practices, planning and reporting relating to many types of hazardous materials, and permitting, registration, control, testing, monitoring, inspection, planning, prevention, training, reporting and recordkeeping requirements relating to all of the above. 
 
 Major Liabilities, Business Consequences 
 By themselves, the 30-plus volumes and tens of thousands of pages of highly technical regulations promulgated by the U.S. EPA would provide a daunting task for any industrial operator, without even considering the additional environmental requirements imposed by other federal agencies such as the Army Corps of Engineers, the Fish & Wildlife Service, the Occupational Safety and Health Administration, and the Department of Transportation. Also to be considered are the thousands of pages of new and revised environmental rules of all of the federal agencies that appear in the Federal Register each year, and the many divergent statutes, rules and revisions adopted or implemented by state legislators, environmental regulators and local bodies that possess equally important authority. 
 
 These environmental requirements are backed by federal, state and local inspection and enforcement powers that provide for penalties often running up to $32,500 for each day of each violation, cleanup obligations that can quickly reach into the millions of dollars and more, and criminal penalties, including both fines and imprisonment that can apply to many types of violations at the discretion of sometimes headline-minded prosecutors. 
 
 Facilities that fail to comply with environmental laws also can suffer restrictions on operations and difficulty in permitting new or revised projects or operations, increased inspection frequency by governmental authorities, negative media attention, greater opposition from community and environmental groups, and other burdens that would merit a strong preventative effort even if a company wasn't focused on pursuing a green business where such factors are arguably even more important.
 
 Ongoing Compliance Requires Extraordinary Efforts 
 Given the complexity and consequences of these regulatory requirements, sound management of biodiesel facilities requires careful attention to compliance assurance efforts. Facility owners and operators that wish to avoid the severe liability and other consequences associated with environmental violations should carefully consider pursuing a strong program of environmental management starting with the employment of highly qualified internal and external environmental technical and legal experts to help design, administer and troubleshoot their compliance efforts. Maintaining compliance over time has other requirements.
 
 Periodic "checkup" audits are essential. In addition to the ongoing efforts of qualified environmental personnel, the most essential component of a strong compliance effort may be periodic audits of a facility's environmental compliance status. It is important to realize that in the world of environmental compliance, there is no "finish line." Obligations are hourly, daily, weekly, monthly, quarterly and annual. Even under the best of circumstances, the applicable laws change, key people leave and regulated equipment breaks down. 

 
 Without frequent checkups, including periodic, comprehensive independent compliance assessments with the assistance of fresh, expert eyes, industrial facilities are doomed to overlook certain duties and fall out of compliance. It seems self-evident that periodic reviews of a facility's compliance with applicable environmental laws, regulations and permits would be helpful in identifying any gaps in compliance with performance. What may not be self-evident is that in the absence of such periodic audits, even where companies make a strong effort to comply, some of these complicated compliance obligations will always slip through the cracks.
 
 As a note of caution, however, such auditing efforts should not be undertaken lightly. Companies should launch an audit only after consulting legal professionals experienced in environmental auditing to discuss the potential liability risks of uncovering and creating evidence of legal violations, the potential privileges that can be used to prevent adverse use of audit documents and information, appropriate strategies for correcting and documenting the correction of identified concerns, and the best ways of obtaining protection against certain liabilities through the careful application of federal and state programs that offer opportunities for leniency or immunity.
 
 Maintaining compliance also requires systematic management approaches. Traditionally, most companies managed environmental compliance in a fairly informal manner by engaging the assistance of managers who were tasked with administering a facility's compliance efforts. While expert environmental managers are invaluable resources, contemporary trends have moved industrial facilities sharply toward more formal and systematic approaches to environmental management. 
 
 In the traditional model, the loss of an environmental manager to retirement, health problems or greener pastures would cripple a facility's compliance effort. To address this concern, and to better apply business management principles to the environmental discipline, leading-edge companies today more commonly approach these issues using a formal "environmental management system," or EMS, that begins with a strong board of directors or chief executive officer-level policy statement on environmental protection and compliance goals and follows through with strong measures in furtherance of continuous environmental improvement. The common elements of the dominant EMS model in use today include:
 
 › Dissemination of a strong environmental protection and compliance policy statement from top company management
 
 › Formal, documented annual or other periodic identification of a facility's critical interactions with the environment-regulated and otherwise
 
 › Development of written, measurable objectives, targets and performance criteria respecting each of those environmental aspects including objectives relating to legal 
 compliance
 

 › Preparation and maintenance of written plans, programs and procedures for achieving those objectives and targets including, among other things, calendars and other 
 programs to better ensure the timely completion of ongoing environmental regulatory responsibilities
 
 › Specific, written assignment of environmental roles and responsibilities to different job descriptions and categories of personnel throughout the organization
 
 › Documented training of all employees with environmental responsibilities on environmental procedures, requirements and objectives to ensure competency and understanding
 
 › Periodic internal and independent auditing to confirm the effectiveness of environmental management, compliance and training efforts
 
 › Systems for tracking and ensuring the documented, adequate correction and prevention of any gaps in environmental compliance or performance
 
 › Programs of document control to help ensure not only that the facility is doing the right thing but that the facility can readily demonstrate that fact, and
 
 › Regular management review and updating of the management system to ensure that it is serving its purpose effectively, with feedback from this review effort leading to 
 completion of these EMS elements anew with updated policies, aspects reviews, objectives, procedures, responsibilities, training and audits undertaken in pursuit of a cycle of 

 continuous environmental improvement.
 
 Companies considering the adoption of a more formal EMS have the obvious potential to benefit from increased systematic attention to environmental efforts relative to companies that approach environmental management in a more informal or ad hoc fashion. A variety of potential policy and other incentives can also be available to companies that pursue formal, approved EMSs. Even companies that do not implement a full, formal EMS, however, can benefit from evaluating their current environmental management efforts relative to the EMS elements presented above, each of which may in their own right have significant merit when adapted for use at particular companies and facilities.
 
 On the other hand, EMS efforts implicate numerous potential legal and liability concerns, from the legal issues associated with auditing to the establishment of written policies, procedures and statements of responsibility that might be used by adversaries as evidence to help establish corporate or individual tort liability or even criminal responsibility. Companies seeking to qualify for the legal and policy benefits of EMS-and to minimize the numerous potential legal and liability pitfalls that can be associated with the development and implementation of EMS elements-would do well to consult with an environmental attorney who is experienced with these systems and their ramifications as they pursue more systematic environmental management efforts.
 
 It's Not Easy Being Green
 Companies participating in the biodiesel industry should take pride in their efforts to make and distribute renewable fuels and to pursue the betterment of our environment. However, participating in a "green" industry by itself provides no assurance that a company or facility has satisfied the complex, costly and cumbersome regulatory requirements that apply to industrial facilities. Environmental compliance assurance requires a vigorous environmental management effort with the assistance of qualified technical and legal experts who can assist in the design and implementation of your environmental program. Periodic, comprehensive auditing of environmental compliance status and strong systems for environmental management are potentially costly and can be both difficult and risky to implement but, done right, these measures are essential for maintaining and demonstrating ongoing compliance with the complex environmental laws and regulations that govern your company. 
 
 Timothy A. Wilkins heads the environmental practice of the international law firm Bracewell & Giuliani LLP. Reach him at <a href="mailto:timothy.wilkins@bgllp.com">timothy.wilkins@bgllp.com</a>. The information provided is for general educational purposes. It is not meant to offer, and is not a substitute for obtaining, specific legal advice. This article represents the personal comments of the author and does not constitute a legal position or opinion of Bracewell & Giuliani LLP.

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Biodiesel facilities mustn't negatively impact their natural surroundings.

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The ethanol industry has been scrutinized for its environmental footprint. Biodiesel producers are now facing the same pressures.

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Environmental Auditing and Management Approaches for Compliance

Some say the world is getting flatter, and the U.S. biodiesel industry is very much an active part in it. Much like the world's major oil and energy companies, biodiesel exports continue to increase and business continues to become more globalized.

 
 The U.S. biodiesel industry has been moving much of its product to European consumers, opening worldwide avenues of trade. The domestically produced renewable fuel is creating a new global business option for U.S. companies. However, with new ventures come new obstacles.
 
 A sinister threat to global business that is critically underappreciated but worth highlighting is extortion, a tactic used by terror groups to obtain money through threats or actual violence against corporate personnel and other assets. This form of terrorism continues to have far-reaching implications for business, particularly transnational companies. 
 
 Companies are increasingly facing the reality and risks of doing business in an unstable world. Any company in energy, agriculture, mining or manufacturing will likely come up against the threat of terror and subsequent extortion payments. 
 
 To give an idea of just how big this problem is for transnational companies, consider Nigeria. For several years, the eighth-largest oil exporter has suffered bombings against oil rigs and compounds as well as kidnappings and other extortive acts by the Nigerian terror group MEND (the Movement for the Emancipation of the Niger Delta). In September 2007, Mexico, another top oil exporter, experienced bomb blasts perpetrated by the terror group EPR (the Popular Revolutionary Army) against state-owned Pemex oil and natural gas pipelines. Recent cases of terror extortion tactics include the ETA (Euskadi Ta Askatasuna) in Spain, Abu Sayef in the Philippines, Hizballah in South America's tri-border area and narco-terror groups in Colombia.
 
 Terror group extortion, such as revolutionary payments or protection-money, is an ongoing issue for transnational companies. Giving in and paying off the terrorists may initially afford a transnational company peace and quiet. Yet ultimately, employing such defensive measures, which are akin to bribery payments, can result in far-reaching negative operational, financial and legal consequences.
 
 In Focus: Chiquita and Colombian Terror Groups
 Recently, Chiquita Brands International Inc. revealed to the U.S. Department of Justice that it had been illegally paying extortion fees to known terrorist groups for several years. 
 Chiquita stated that its management felt it had no choice but to ensure the safety of the company's employees. 
 
 Chiquita voluntarily alerted the Justice Department in April 2003 that it paid $1.7 million between 1997 and 2004 to AUC (United Self-Defense Forces of Colombia), a terror group responsible for some of the worst massacres in Colombia's civil conflict and for a sizable percentage of the country's cocaine exports. Additionally, Chiquita made payments to the terror groups ELN (National Liberation Army) and FARC (Revolutionary Armed Forces of Colombia), as control of the company's banana-growing area shifted. 

 
 Ultimately, Chiquita agreed to a $25 million criminal fine, the requirement to implement and maintain an effective compliance and ethics program, and five years probation. Also, Chiquita executives narrowly avoided U.S. criminal charges.
 
 In the face of extortion, Chiquita had to decide between several unappealing options: 1) pay terrorists the extortion, 2) refuse to pay them and possibly suffer attacks on employees and facilities, 3) stop operations temporarily or 4) sell operations, most likely at a loss. While making payments may seem like the lesser of many evils, a transnational company's decision to make protection payments undermines its status at home and with host countries. Even worse, extortion payments encourage similar conduct by terrorists against businesses worldwide. 
 
 Additional Ramifications
 Aside from the obvious disadvantage of dealing with terrorists, terror group extortion payment pressures can have negative operational effects such as declining production, often with poorer quality deliverables, higher costs of production due to heightened labor, security and transportation costs, lower efficiencies, underutilization of assets, production stoppages and threats to business continuity, adjustments to and pressures on supply chains, and corporate governance complexities. 
 
 There are also significant financial implications from giving in to terror extortion, such as higher costs for labor, security, capital, inputs and insurance, reduced profitability, loss of goodwill and declining stock price, financial penalties, and/or liabilities arising from host and home country litigation initiated by the government, private sector or even employees.
 
 Reducing the Terror Risk 
 There are steps that transnational companies can undertake to reduce the risks of terror extortion. Prior to following such a path, the transnational company must analyze whether the benefits outweigh the risk of doing business in the host country. If the company decides to proceed, it can reduce risks by exploring whether land grants or subsidized loans are available from the host country or a development agency (e.g., the World Bank or a regional development bank). The transnational company can also invest in political risk insurance covering war and civil disturbance/terrorism, expropriation, breach of contract, and inconvertibility of currency offered by commercial, government (e.g., the U.S. government's Overseas Private Investment Corp.) and non-governmental organization (e.g., the World Bank's Multilateral Investment Guarantee Agency).
 
 In cases of terror extortion, the kidnapping of transnational company personnel is a very real threat. Kidnapping and ransom insurance, along with other insurance products (e.g., property and casualty, business interruption, life, disability and health insurance), should be seriously considered. It is also critical to apply disparate security products, services and methodologies-ranging from risk and vulnerability assessments to business and risk intelligence data reports-that can aid in lessening the likelihood, frequency and severity of terrorism in general, and terror extortion in particular.
 Other preventative measures transnational companies can pursue include developing alliances and gathering support from host country government, business, civic and labor entities, along with home country representatives (e.g., a U.S. embassy) and non-governmental institutions (e.g., the World Bank). Likewise, engendering support for bilateral economic and political relations (e.g., trade and investment agreements) between host and home countries will aid transnational company efforts abroad. 

 
 This discussion demonstrates that while terror group extortion can have substantial pernicious operational, financial and legal effects on transnational companies, a variety of alternatives and instruments are available to lessen such threats. In doing so, companies can help enhance global trade, investment and business while contributing to the reduction of terrorism internationally by eliminating a considerable source of terror funding. n
 
 
 Professor Dean C. Alexander, a member of the advisory council of Marsh's Center for Risk Insights and author of "Business Confronts Terrorism," is the director of the Homeland Security Research Program at Western Illinois University. Reach him at <a href="mailto:dc-alexander@wiu.edu">dc-alexander@wiu.edu</a> or (309) 298-2120.

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Terrorist Group Extortion and Other Challenges for Transnational Corporations

Note: This article originally appeared in the November 2007 issue of <a href="http://www.laboratoryequipment.com/default.html">Laboratory Equipment</a>, a publication of Advantage Business Media.
 
 In the past decade, biodiesel has emerged as a leading alternative fuel source because it is easily derived from common feedstocks and can be used in unmodified diesel engines. The relative ease of biodiesel production can mask the importance of maintaining high quality diesel fuel standards. To support the growth of the biodiesel industry, the United States' American Society for Testing and Materials and the European Deutsches Institut fur Normung recently outlined physical and chemical tests and specified the minimum quality standard for biodiesel fuel used in modern diesel engines. These are outlined in "Biodiesel Analytical Methods," published by the National Renewable Energy Laboratory in 2004. 
 
 Arguably the most critical test for biodiesel is the measure of glycerin content. Glycerin is the major byproduct of the biodiesel production process, called transesterification, where oils and fats are reacted with an alcohol to produce fatty acid methyl esters. High glycerin content can lead to a number of fuel problems, such as clogged fuel filters and fuel pressure drops, and its presence must be minimized. 

 
 <center><img src="/images/upload/20080117021153.jpg" alt="" />
 Figure 1. Lifetime comparison of the DB-5ht and ZB-5HT Inferno. The lifetime and bleed profile comparisons were performed on new, unused DB-5ht and the ZB-5HT gas chromatography columns. Careful measures were taken to ensure that all conditions were similar for both columns.</center>
 
 ASTM D 6584-00, "Test Method for Determination of Free and Total Glycerin in B100 Biodiesel Methyl Esters by Gas Chromatography," outlines testing methods measuring the total amount of glycerin in biodiesel. Although gas chromatography is the standard analysis technique for this method, it has several inherent challenges. The tests run at very high temperatures and standard fused silica columns are not engineered to withstand temperatures above 380 degrees Celsius (716 degrees Fahrenheit). In fact, at temperatures above 380 degrees Celsius, the polyimide coating of most fused silica columns starts to degrade, eventually becoming brittle and inflexible.
 
 The alternative, metal columns, present other challenges. While metal columns can withstand higher oven temperatures, they are inflexible, difficult to use and require special tubing cutters. In addition, they often develop leaks due to the expansion and contraction that occurs during oven heating cycles and are highly active to acids and bases. Thus, using metal columns might compromise the accuracy of the biodiesel analysis.
 
 Phenomenex Inc. has recently developed unique fused silica columns designed specifically for high-temperature analysis. These columns, called the Zebron ZB-1HT and ZB-5HT Inferno, are specially processed to be thermally stable up to 430 degrees Celsius (806 degrees Fahrenheit). As a result, their stationary phases and a polyimide coating are more rugged and can withstand higher temperatures than other conventional columns. This article compares the lifetime and stability of the Zebron Inferno column with the leading fused-silica columns and presents analysis results on the Zebron column, using ASTM methods.
 
 Lifetime Comparison
 For the high-temperature lifetime comparison, three columns were compared: Agilent's (J&W) DB-5ht, Varian's VF-5HT and Phenomenex's Zebron ZB-5HT. The columns were held at 400 degrees Celsius (752 degrees Fahrenheit) for two hours. After lowering the oven temperature to 120 degrees Celsius (248 degrees Fahrenheit), 1 liter (0.26 gallons) of pentadecane was injected and its retention time was measured. This process was repeated 50 times, totaling 100 hours at 400 degrees Celsius (752 degrees Fahrenheit) for each column tested.
 
 <center><img src="/images/upload/20080117021403.jpg" alt="" />

 Figure 2. Bleed comparison of the DB-5ht and ZB-5HT Inferno. The shaded area depicts the bleed criteria for mass spectrometry certified columns on a mass spectrometry detector. Mass spectrometry bleed certification values are typically read at 320 degrees Celsius (608 degrees Fahrenheit). The ZB-5HT demonstrated lower bleed than the DB-5ht. It meets mass spectrometry certification limits, even at 360 degrees Celsius (680 degrees Fahrenheit).</center>
 
 <img src="/images/upload/20080117021518.jpg" alt="" />
 <center>Figure 3. The standards and biodiesel sample were both run under the same conditions using a 15 meter (49 feet) by 0.32 millimeter (0.13 inch) by 0.10 micron Zebron ZB-5HT Inferno column (7EM-G015-02) with a 2 meter (3.3 feet) by 0.53 millimeter (0.02 inch) high-temperature guard column. One liter (0.26 gallons) of the reaction mixture was injected onto a cool-on-column injector connected to a HP 6890 Gas Chromatograph (provided by Agilent Technologies, Palo Alto, Calif.) and detected by flame ionization. The gas chromatography oven is as follows: 50 degrees Celsius (122 degrees Fahrenheit) for 1 minute to 180 degrees Celsius (356 degrees Fahrenheit) at 15 degrees Celsius (59 degrees Fahrenheit) per minute to 230 degrees Celsius (446 degrees Fahrenheit) at 7 degrees Celsius (44.6 degrees Fahrenheit) per minute to 380 degrees Celsius (716 degrees Fahrenheit) at 30 degrees Celsius (86 degrees Fahrenheit per minute for 10 minutes. Samples: 1) Glycerol, 2) Butanetriol (ISTD1), 3) Esters, 4) Monoglycerides, 5) 1-Monooleoyl-rac-glycerol, 6) Tricarpin (ISTD2), 7) Diglycerides, 8) 1,3-Diolein, 9) Triglycerides and 10) Triolein.</center>
 
 Bleed Profile
 Bleed (pA) was measured using a flame ionization detector as the gas chromatography oven program increased from 120 degrees Celsius (248 degrees Fahrenheit) to 400 degrees Celsius (752 degrees Fahrenheit). The gas chromatography oven was held at 120 degrees Celsius (248 degrees Fahrenheit) for three minutes then increased to 320 degrees Celsius (608 degrees Fahrenheit) at 30 degrees Celsius (86 degrees Fahrenheit) per minute. A null injection was made at 250 degrees Celsius (482 degrees Fahrenheit). 
 
 Biodiesel Analysis
 Calibration standards, sample preparation and gas chromatography analysis were performed per ASTM method D 6584 (reference ASTM method). In brief, the samples were derivatized with N-Methyl-N-trimethylsilyltrifluoroacetamide (MSTFA). 
 
 Results and Discussions

 A good indicator of a column's stability is its consistency in retention time for hydrocarbons, such as pentadecane. The pentadecane retention time comparison revealed that the Zebron ZB-5HT has higher thermal stability than the DB-5ht and VF-5HT. After 40 hours at 400 degrees Celsius (752 degrees Fahrenheit), the VF-5HT column broke (data not shown). Pentadecane has the same retention time on the DB-5ht after 40 hours at 400 degrees Celsius (752 degrees Fahrenheit) as on the Zebron ZB-5HT after 80 hours at that temperature. This suggests that the ZB-5HT is two times more stable and has twice the column lifetime as the DB-5ht.
 
 Bleed can also be an indicator of the stability and lifetime of a gas chromatography column. In the bleed comparison test, the DB-5ht showed significantly higher bleed than ZB-5HT at 380 degrees Celsius (716 degrees Fahrenheit) (Figure 2). This difference is amplified at 400 degrees Celsius (752 degrees Fahrenheit).
 
 After these initial comparative tests, we conducted the ASTM D 6584's free and total glycerin analysis on the Zebron ZB-5HT column. The calibration curve for each reference components had a correlation coefficient greater than 0.99 (data not shown). 
 
 Good peak shape is also indicative of a column's suitability for a designated method. ASTM D 6584 specifies that Butanetriol and Tricarpin be used as internal standards because they have similar properties as many components in a biodiesel sample. Because we observed good peak shape in the biodiesel gas chromatography run, it indicates that the Zebron ZB-5HT is well suited for the analysis and exhibits very low activity for the analytes (Figure 3).
 
 Conclusions
 To ensure the quality of the biodiesel product, the U.S. ASTM D 6584 specifies a high temperature analysis of free and total glycerin in biodiesel products. However at temperatures above 380 degrees Celsius (716 degrees Fahrenheit), most fused silica columns become brittle and spontaneously break. Our studies suggest that Phenomenex's Zebron ZB-5HT is well suited for high temperature analyses.
 Having a rugged and durable high-temperature gas chromatography column will help manufacturers develop methods that will produce high-quality, alternative fuel products. In addition, a column with a longer lifetime will help lower the cost per sample of the analysis, thus driving down the cost of production. 
 
 Ngoc Nguyen is the gas chromatography and solid phase extraction marketing brand manager for Phenomenex Inc. Reach her at <a href="mailto:ngocn@Phenomenex.com">ngocn@Phenomenex.com</a> or (310) 212-0555. Kory Kelly is a research specialist and Sky Countryman is the product manager for gas chromatography with Phenomenex Inc.

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Reliable Analysis of Glycerin in Biodiesel

Many American biodiesel companies source their products and equipment from overseas suppliers. Some of them even sell biodiesel plants or equipment to customers in foreign countries. What many of these companies fail to realize is that a dispute between them and their foreign customer or supplier can have serious legal and financial consequences for their company.

 
 Disputes between a U.S. biodiesel company and its foreign customer or supplier can take many forms: disagreements over construction, operation, maintenance, quality, performance standards and payment for the plant or equipment. However, the options for resolving disputes that the U.S. company and its foreign customer or supplier cannot settle on their own are much more limited. One option is to commence a lawsuit in the United States against the foreign customer or supplier. This option has several inherent problems. First, the U.S. company must show that the foreign customer or supplier has enough contacts with the state in which the lawsuit is filed in order to be hauled into court there. Simply having a contract to supply equipment to a company in that state or engaging a company in that state to build a biodiesel plant overseas may not be enough of a connection with that state to convince a court that it has the authority to force the foreign customer or supplier to participate in a lawsuit there.
 
 Even if the U.S. biodiesel company can force the foreign customer or supplier to defend itself in a U.S. court, it will be even harder for the U.S. company to enforce any judgment that the U.S. court may render against the foreign customer or supplier. Unless the foreign customer or supplier has assets in the United States that the U.S. company can attempt to seize, the U.S. court judgment may be a hollow victory for the U.S. biodiesel company. There simply is no easy legal mechanism for the U.S. company to enforce the judgment in the court system of the country where the foreign customer or supplier is located. Many foreign courts will not honor the U.S. court judgment and will require the U.S. company to re-commence its lawsuit against the foreign customer or supplier in the foreign court.
 
 Another option for the U.S. biodiesel company is to file a lawsuit in the court system in the country where the foreign customer or supplier is located. This option has its own set of problems. First, commencing a lawsuit in a foreign court can be costly and time-consuming. It may require the U.S. company to send employees to the foreign country for extended periods of time. It may require the U.S. company to deal with a set of laws and regulations that it may not understand in an unfamiliar court system in a foreign language. The U.S. company may have to worry about "home court" advantage: the possibility that the foreign court or the foreign laws will inherently favor the foreign customer or supplier.
 
 When disputes arise, some U.S. biodiesel companies and their foreign customers or suppliers ultimately agree that their disputes should be heard by a court in a neutral country. This often is the worst of both worlds. The court may refuse to hear the case because one or both of the parties lacks sufficient contacts with the jurisdiction. Either or both of the parties may lack a sufficient understanding of the country's court system or laws and regulations. Any judgment rendered by the court may be difficult to enforce if the losing party has little or no assets that can be seized by the prevailing party in the country where the court is located.
 
 For all of these reasons, many U.S. biodiesel companies and their foreign customers and suppliers often opt to have their disputes settled in arbitration. The advantages to settling disputes in arbitration are many. First, arbitration is often less expensive and time-consuming than litigation. Second, the parties to the arbitration can often determine what laws and rules should apply in the arbitration proceeding. Third, the parties may actually select the arbitrators who will hear the case. Most importantly, the award rendered by the arbitrators will be enforceable through court systems in many countries around the world. This is due in large part to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, an international treaty that provides a mechanism to have foreign arbitration awards honored by courts throughout the world. Many countries have signed this treaty and will honor an arbitration award rendered in accordance with the treaty.
 
 Generally speaking, arbitration will offer the U.S. biodiesel company and its foreign customer or supplier more options than litigation. There is a variety of internationally recognized arbitration systems from which the parties may choose, such as the International Chamber of Commerce Arbitration Rules and the United Nations Commission on International Trade Law Arbitration Rules, which allows the parties to determine the procedural rules to be followed during the course of the arbitration. These rules establish the guidelines for the arbitration proceeding itself, for example, the type of evidence that may be presented during the arbitration, how long the arbitrators may take to come to a decision, and even whether the losing party should pay the costs and expenses incurred by the prevailing party in the arbitration.
 
 The U.S. biodiesel company and its foreign customer or supplier should discuss the strategy that they will use to resolve their differences in the event that they are unable to resolve them by themselves. The strategy that they choose should be set out in detail in their contract. A well-drafted arbitration clause in the contract will often provide a framework for the efficient settlement of such disputes. It will usually provide the parties with a system that is more fair and flexible than they might find in various courts around the world. n
 
 Richard Weiner is an international biodiesel lawyer in the energy law department of Fredrikson & Byron P.A., a leading law firm assisting energy clients. Reach him at <a href="mailto:rweiner@fredlaw.com">rweiner@fredlaw.com</a> or (612) 492-7009.

Resolving Disputes with Foreign Biodiesel Customers and Suppliers

Web exclusive posted Jan. 17, 2008, at 1:31 p.m. CST

 
 Safeway Inc. announced today that it will fuel its entire truck fleet with B20. As one of the largest food and drug retailers, it has a fleet of more than 1,000 trucks. 
 
 The move is part of the company's Greenhouse Gas Reduction Initiative. "Safeway is proud to lead by example to help protect the environment," said Chairman, President and CEO Steve Burd. "Using biodiesel to power our transportation fleet will prevent millions of pounds of carbon emissions from being released into the environment. Our biodiesel program is just one of many initiatives underway that will make a positive impact on the environment."
 
 Safeway has worked for many years to reduce its carbon emissions using solar power, alternative fuels and construction strategies in conjunction with education. In 2006, Safeway joined the Chicago Climate Exchange, the world's first voluntary, legally binding greenhouse gas emissions reduction, registry and trading program. In addition, the company is participating in the U.S. EPA's SmartWay Transportation Partnership.
 
 Joe Jobe, CEO of the National Biodiesel Board, lauded Safeway's decision. "We commend Safeway for showing leadership in true corporate sustainability," Jobe said. "The company is also reducing its dependence on foreign oil and helping to stimulate a domestic energy economy. We encourage other large retailers to follow this example."

Safeway to use B20 in fleet

With nearly 76 million acres planted in 2006, soybeans are second only to corn as America's most widely grown crop. That's because the nitrogen-fixing legume, which originated in Asia, is incredibly versatile. Edible uses run the gamut from cooking oil and veggie burgers to sashimi and soy sauce. Industrial uses range from cosmetics and printing inks to lubricants and biodiesel.
 
 Yet, for all its versatility, soy sits atop a narrow genetic base that, some researchers contend, could leave it vulnerable to exotic new diseases or insect pests like Aphis glycines, the Asian aphid, which was first detected in Wisconsin in 2000.
 
 Researchers at the Agricultural Research Service's Soybean Genomics and Improvement Laboratory in Beltsville, Md., are looking for efficient ways to uncork this so-called genetic bottleneck in today's soybean crop, and they're using valuable genetic resources preserved at another ARS facility in Urbana, Ill.
 
 Widening the Base 
 Two events in soybean's history are thought to have caused the genetic bottleneck: use of only a few introduced precursor beans, called "landraces," to form the genetic base of the American soybean crop in the mid-20th century, and a focus on selectively breeding soybeans for pest resistance, seed-quality traits and productivity above all else.
 Implicit in discussion of the narrow genetic base of a crop species is the suggestion that a wider base would protect the crop from genetic vulnerability. One way to widen the genetic base of U.S. soybeans is to use many more landraces in hopes that they would contain genes to ward off future new diseases or insect pests.

 
 That approach may not be the most efficient, according to a team of scientists led by SGIL's David L. Hyten and Perry B. Cregan. Writing in the November 2006 Proceedings of the National Academy of Sciences, the team contends that, "Given the low frequency of useful variants for a given trait, it is likely that randomly adding 100 new Asian landraces to the elite germplasm pool will only slightly increase useful diversity beyond that already present in the North American elite cultivars."
 
 A better approach, they propose, is to anticipate an exotic pest's or pathogen's arrival by going to the region where it is problematic and seeking out protective genes in tolerant varieties. "Those genes could be incorporated into elite U.S. cultivars with wide adaption, in anticipation of an outbreak in the United States," Hyten says.
 
 This is where the USDA Soybean Germplasm Collection at Urbana comes in. The collection includes more than 17,000 landraces from Asia and other locations as well as the wild soybean, Glycine soja, which is the progenitor of the modern soybean, Glycine max. The team's research confirms the value of these critical genetic resources but also shows the importance of being highly selective in their use.
 
 Scoping Out the Genetic Scene 
 The scientists came to their conclusions based on their determination of the DNA sequences of 102 genes from four major groups of affected soybeans: the wild soybean native to Asia, the landraces derived from them by the first Asian farmers, the small number of Asian landraces introduced to America in the 20th century, and the cultivars that resulted from the intensive plant breeding that followed.
 
 "We analyzed the genetic bottleneck resulting from the domestication of soy, which began around 5,000 years ago in Asia," says Hyten, a geneticist at the Beltsville lab, where Cregan is research leader. Their collaborators on the published paper were Randall L. Nelson of the ARS Soybean/Maize Germplasm, Pathology and Genetics Research Unit, Urbana, Ill.; Randy C. Shoemaker with ARS's Corn Insects and Crop Genetics Research Unit, Ames, Iowa; Qijian Song and José Costa, University of Maryland-College Park; James E. Specht of the University of Nebraska-Lincoln; and visiting scientists Youlin Zhu from China and Ik-Young Choi from Korea.
 
 The soybeans whose sequences they analyzed included 26 accessions, or samples, of G. soja, 52 Asian landraces, 17 landrace founders used to establish today's $18 billion-plus soy crop starting in 1947, and 25 elite cultivars used in U.S. soybean production.
 
 Not That Different 

 After examining variations in the DNA sequences and in alternate gene forms called "alleles," the researchers concluded that the difference in genetic diversity between today's beans and their landrace founders was statistically insignificant. The U.S. beans lacked many of the alleles found in the wild soybeans, which suggests that a significant genetic bottleneck occurred when Asia's first farmers began domesticating the legume thousands of years ago.
 
 Nonetheless, a "surprising result of the analysis was that genetic bottlenecks associated with the introduction of soybean to North America, followed by intensive selection via plant breeding, had only reduced overall genetic variation by 25 percent, which was much less than first anticipated," Hyten says. 
 
 However, some rare alleles were lost. Discovering alleles that could improve today's cultivars will require extensive mining of the germplasm collection.
 Numerous published reports document searches for new genes offering pest resistance in soybeans. In almost all cases, such protective genes occur in less than 1 percent of USDA's Asian landrace collection. "So, randomly crossing them with elite bean varieties probably isn't the best approach to take if one wants to protect the crop from a future pest that has not yet appeared on U.S. farms," Hyten says.
 
 The beauty of the USDA collection is that it may hold accessions from the pest's area of origin that harbor a gene or genes for resistance not found in the U.S. crop. That's why Hyten's group recommends continued maintenance and characterization of the collection's accessions. They are a starting point in times of need.
 
 Hand-in-hand with that is keeping a diligent watch on pest problems as they occur in other parts of the world. That way, if nothing is available in the USDA collection, the researchers know where else to search for new sources of resistance. The team also recommends stocking up on wild soybeans as allelic sources that can be mined for their genetic diversity.
 
 This research is a part of Plant Genetic Resources, Genomics and Genetic Improvement. More information is available at <a href="http://www.nps.ars.usda.gov">www.nps.ars.usda.gov</a>. 
 
 Jan Suszkiw is a member of the ARS' information staff. Reach her at <a href="mailto:jan.suszkiw@ars.usda.gov">jan.suszkiw@ars.usda.gov</a> or (301) 504-1630. This article was published in the November/December 2007 issue of Agricultural Research.

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Hyten harvests leaf tissue from one of many plant progenies derived from the cross of the soybean cultivar Williams 82 with a wild soybean. The leaf tissue will be stored at minus 80 degrees Celsius 

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Developing pods on one of more than 500 soybean progeny derived from the cross between the soybean cultivar Williams 82 and a wild soybean. 

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Uncorking Genetic Bottlenecks in Soy

Millions of dollars in operating capital are being wasted as the biodiesel industry struggles to comply with the renewable fuel standard. A survey conducted during an Oct. 30 web conference attended by 234 industry stakeholders indicates that as many as 61 percent of renewable fuel suppliers are out of compliance.

 
 Each of these facts are directly attributable to the requirements set forth in the RFS regulations requiring new documentation for product transfers throughout the renewable fuel supply chain. Many players have attempted to satisfy these requirements by modifying their existing production account systems, resulting in a short-term solution with long-term consequences. 
 
 Although the threat of $32,500-per-day fines for Clean Air Act violations is significant, even greater daily costs have come to bear upon the entire industry by those mixing business systems with regulatory compliance systems. Millions of dollars in extra operating capital are required for those who have adopted this ill-advised operating practice, which comes at a time when a newly released RFS places even more emphasis on business efficiencies.
 
 The root of the problem stems from the U.S. EPA requiring the use of a product transfer document to signify transfer of title to both renewable fuel and any associated renewable identification numbers. RINs are the serial numbers assigned to each gallon of fuel under the RFS program and tracked throughout their life in the supply chain. The product transfer document serves to record the transfer of title from one party to the next and must be kept on record for five years. The document is analogous to a warranty deed received when purchasing a house or other piece of real estate.
 
 Regulations Result in More Paperwork
 Prior to Sept. 1, 2007-the effective date of the RFS-the industry had no product transfer document. In practice, the closest legal document satisfying this purpose would have been a written contract between buyer and seller stating all terms and conditions, including title transfers. Of course, this type of contract served more as a static document, where numerous individual sales could be executed over weeks, months or even years.
 
 Faced with the impending deadline, two schools of thought formed. One developed new documents called the product transfer document and associated RIN certificate. The other modified existing invoicing systems in an attempt to satisfy the new requirements.
 
 The product transfer document and RIN certificate approach, like that used by those on the renewable fuel registry, allows for documents to be generated independent of any corporate financial function. This approach avoids costly delays in payment for product.
 
 On the other hand, the use of invoices almost always results in delays, which can be attributed to the inherent nature of the process itself. Invoices always have some time delay after shipping and make a company dependent on its supplier to send RINs before they can complete their own invoicing. These delays are further compounded whenever product is traded multiple times before finally reaching its end user.
 

 Inherent Costs of Delayed Paperwork
 To illustrate the impact of these delays, consider a railcar of product that is produced at a biodiesel manufacturing facility. The title is transferred to a marketing company that sells it to a trader that turns around the same day and trades it to yet another marketer before it is ultimately shipped to a petroleum refiner, which is the end user. This series constitutes four transfers of title to the product and the associated RINs. If each party attempts to handle the product transfer document requirements with its existing invoicing processes, and considering a minimal two-day lag time for each of the invoicing steps, the RINs will lag the product by at least eight days. The example is a real-life case seen every day throughout the industry. 
 
 Let's look at the dollars and cents. Let's assume the railcar holds 28,500 gallons of biodiesel at $2 per gallon, or $57,000 in working capital. Also assume a cost of capital at 10 percent, 250 working days per year and a two-day lag costing each company just over $45. Applying that to everyone in the supply chain in the example means more than $180 was wasted as a result of inefficient compliance management systems. 
 
 Conservatively, the time delays resulting from the invoicing methodology cost $1.50 per 1,000 gallons transferred. This does not count any additional cost for increased personnel or computing systems. With renewable fuel production levels at approximately 7 billion gallons per year, and assuming an average of three title transfers during the life of each gallon, the biofuels industry is tying up $31.5 million annually by handling the product transfer documentation through modifications to invoicing systems. Again, this is a conservative estimate, as experience has shown many companies experience as many as four- or five-day delays in their invoicing, as well as the need to increase staff levels.
 Many companies simply can not afford to wait for their RINs before invoicing. However, the regulations clearly state that RINs must be transmitted on the same day as the product transfer document-the invoice in this instance. To not abide by this requirement places these companies out of compliance with the RFS and subject to hefty fines. It's possible that two-thirds of the industry is still out of compliance with the basic product transfer document requirements of the regulation. This is supported by polling conducted during a late October webinar that showed that only 39 percent of participants receive RINs on the same day they receive their invoices.
 
 A New Approach Offers a Better Way
 The regulations do not force companies to transmit RIN information on invoices. The regulations only state what information must be transmitted and that it must be done on the same day as title to the product is transferred. Title-to-product transfers occur well before any invoices are prepared. Early on in the program, and at the request of many throughout the industry, EPA loosened up on its interpretation to allow for invoices to serve the product transfer document requirements. However, EPA still maintains that RINs be transmitted no later than the same day as the invoice, so transferring RINs seven to 10 days after the invoice is clearly not permissible.
 
 Another proven approach to handling the product documentation requirements of the rule is to prepare a separate product transfer document and accompanying RIN certificate. This is the approach utilized by participants on the renewable fuel registry. Regulatory compliance documents are generated independent of any corporate invoicing processes. The registry approach to product transfer documents minimizes costly delays in payment for product and saves the industry millions of dollars in working capital.
 
 Counterparties are notified immediately of RIN transfers, allowing members to operate their accounts receivable and compliance programs independently and in parallel. This approach allows for minimal disruption to commercial operations while avoiding regulatory violations. With registry participants now accounting for more than 1 billion gallons per year of biofuel transfers, millions of dollars are being saved across the industry with a simple change in operational procedures.
 

 Dangerous Precedence Forming 
 Some within the industry are now developing payment policies that require RINs be transmitted on the invoice before payment is made. The regulations do not mention the word "invoice" at all and certainly do not require that RIN information be transmitted on invoices. However the law requires that RINs be transferred on the same day title to the product is transferred so it is reasonable for a customer to expect RINs no later than their supplier's invoice. In the case of the product transfer document/RIN certificate approach, however, RINs can show up well in advance of any invoice. Denying payment in this scenario would have no regulatory support.
 
 Formal recognition of this issue will almost definitely come as a result of attestation engagements as required by the RFS regulation. The first of these independent outside audits is not due until May 2008, with many already qualifying to delay until May 2009. Proactive companies will certainly not want to wait until an outside auditor brings this to EPA's attention before taking action. Fines for such willful violations are tallied on a daily basis, so the sooner a company acts to correct this issue the better. Companies finding themselves in this situation should seriously consider taking proactive measures by notifying EPA's Office of Transportation Air Quality Enforcement Division and implementing corrective solutions as soon as possible. 
 
 Clayton McMartin is the president of the Clean Fuels Clearinghouse, a company formed in 2001 for the sole purpose of cost effective implementation of clean fuel regulations. Reach him at (575) 377-3369 or <a href="http://www.rinregister.com">www.rinregister.com</a>.

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The Hidden Costs of the Renewable Fuel Standard

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Taking the Pulse of the Biodiesel Industry

In its listing requirements, the New York Stock Exchange requires boards, along with nominating, governance, compensation and audit committees, to conduct annual evaluations. According to Ram Charan's 2005 book "Boards That Deliver: Advancing Corporate Governance from Compliance to Competitive Advantage," progressive boards have known all along that self-evaluation is a vital process, one that ensures continuous improvement and renewal.
 
 Even if a company is not subject to the Sarbanes-Oxley Act of 2002's requirement of conducting an annual board evaluation like NYSE companies, shareholders, co-op members and stakeholders are asking questions and evaluating the company as though it has the same requirements. A company's members, investors, shareholders, community and employees are expecting-and even presuming-the board of directors is using an objective approach to hold themselves and the company to the "best business practices" that have been a positive result of the Sarbanes-Oxley legislation.

 
 It's unfortunate that something that can raise the board to a higher level of performance is called an "evaluation," which may create anxiety and avoidance. Many boards see past the nomenclature and realize the positive results for board development that a well-designed and executed board evaluation process can provide.
 
 A well-designed board evaluation focuses on key functions of the board and provides a "gap" analysis that draws weak areas to the forefront. It looks at the disbursement of responses and identifies their "tone." Board evaluation is most meaningful as a productive activity when it focuses on board development rather than compliance. This takes knowledge not only of board function, roles and responsibilities, but also how the information links to market changes, and current business and industry trends. A vibrant board evaluation moves the board to a higher level of performance on business issues while enhancing group dynamics. 
 
 Overall, a board evaluation can transform a group of strong individuals into a collective body of focused board members who enhance their value to the chief executive officer, senior management team and all stakeholders. A skillful board evaluation that causes directors to say "I'm glad we did that" typically includes several important items. It provides clear board objectives and receives reports and feedback from a knowledgeable third party. The evaluation should also facilitate follow-up discussion with the board to identify board development actions. 
 
 A board evaluation should also integrate its results into strategic leadership and planning. Eventually, the evaluation should provide insights that lead to greater team effectiveness.
 At times, every board finds itself showing up for a meeting and going through the motions. Knowing the vital signs that a board needs to complete an evaluation can help it move to a productive oversight role. Realizing it's time to conduct an evaluation can emanate from a number of signals. 
 Questions to review when considering a board evaluation include:
 
 › Is the board engaging in a full-fledged debate over key issues?
 
 › Is there confusion over the board's role of oversight versus micromanaging?
 
 › Is there a common vision that the board agrees on and is moving toward?
 

 › Are the fiscal responsibilities of the board members clear?
 
 › Is the board recruitment based on the strategic plan?
 
 Matching a board's objectives, dynamics of tenure and stage of business are just a few elements that should be considered by a board as it thinks about evaluation. Boards need to be thoughtful and deliberative when considering the type of evaluation to use. Evaluations progress from simple compliance orientation to a comprehensive approach involving written responses and discussion with individual directors in a safe environment.
 
 Our practice with boards has taught us to be mindful of the important stages they go through while becoming more effective working together and with the senior management team, and while providing important strategic guidance for the business that is received and acted upon.
 
 In the early stages of a business, the entrepreneurial venture begins to build systems, establish relationships with the community, and hear from management about return on investment, and staffing and key employee issues. The board is entering into an understanding of its role with management, representing and understanding the organization, and establishing the initial boardroom dynamics.
 
 At this stage the board evaluation involves establishing a baseline of questions that focuses on fundamental board oversight, management/board relations, key industry compliance areas, regulatory agencies and ensuring transparent financial reporting standards. The board evaluation can be handled in a quick and simple manner, yet provide meaningful information for the board to grow to the next level of oversight and performance.
 
 Many ethanol and biodiesel companies are new, having spent approximately five years in the industry. As the industry matures, the next five to eight years will require talented management and critical board decisions as to how the company fits within the overall biofuels industry. It's at this stage that critical decisions to sell, merge or continue as an independent operator come into the boardroom. The board needs to adapt new attitudes and behaviors to successfully navigate the transitions during this period.
 
 If the board decides to remain independent, it needs to choose a board evaluation tool that will allow a "deeper dive." This more comprehensive approach, combined with a consultant who has governance expertise and understands the state of industry's business cycle, can provide deeper insight and needed shifts in board performance required at this business juncture. Integrated with strategic planning, the board evaluation can be a tool that assists the board in developing action plans. Transformations often come fast and require a board to be positioned to handle decisions to keep the current business viable while adding new direction to ensure its future position in the industry. Anticipation, implication and asking deep and thoughtful questions to understand the big strategic picture are vital actions of the board and should be tested in the board evaluation process during this stage.
 
 Enlightened boards are engaging in board evaluations even if not required as part of their development goals. Overcoming the resistance to a board evaluation can enhance the strategic planning process. It creates a strategic intelligence that is an essential part of the board's oversight role at any stage of company growth. A philosophy of continuous improvement from board leadership sends an excellent message to stakeholders and the community about the character of the company. The board evaluation is a great tool to create and sustain positive change.

 
 Tracy E. Houston, M.A., is a senior consultant in governance with Summit Point Consulting. Reach her at <a href="mailto:tracy.houston@summitpointconsulting.com">tracy.houston@summitpointconsulting.com</a> or (303) 721-3219. Cindy Knutson is the vice president of organizational effectiveness for Summit Point Consulting. Reach her at <a href="mailto:cindy.knutson@summitpointconsulting.com">cindy.knutson@summitpointconsulting.com</a> or (303) 721-3277.

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Annual evaluations can help boards become more productive and alleviate stress-causing situations.

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Recalibrating the Board of Directors

Web exclusive posted Jan. 23, 2008, at 9:34 a.m. CST 
 
 Former North Dakota Gov. Ed Schafer goes to Capitol Hill on Thursday to undergo confirmation hearings to become U.S. secretary of agriculture. Confirmation is expected for the post Schafer will occupy for less than one year.
 
 He will be accompanied by North Dakota Sen. Byron Dorgan, a Democrat Schafer unsuccessfully challenged in 1990 when Dorgan was a U.S. congressman. In 2004, he declined to run against Dorgan a second time for the Senate seat Dorgan then occupied, despite political pressure from national Republican groups.
 
 Schafer served as North Dakota's 30th governor from 1992-2000. Although the state doesn't have term limits, Schafer didn't seek a third tem.

 
 Dorgan isn't on the Senate Agriculture Committee. His office said the senator predicted a floor vote on the nomination sometime next week. Schafer will also be accompanied by North Dakota's other Democratic Sen. Kent Conrad, an Ag Committee member and Schafer's former brother-in-law.
 
 Since 2006 Schafer has been chief executive officer of Extend America, a wireless communications company. He has also served as an advisor for the North Dakota chapter of Americans for Prosperity, a nationwide limited-government/pro-growth organization.
 
 Schafer will be charged with implementing a farm bill mired in committee wrangling and facing opposition from President George W. Bush, who nominated Schafer in October 2007. Financing the bill is the biggest hurdle facing Congress.

Ag secretary confirmation hearing starts Jan. 24

Web exclusive posted Jan. 24, 2008, at 7:32 a.m. CST 
 
 On Jan. 22, the Florida Department of Agriculture announced 12 recipients of $25 million in grants as part of the "Farm to Fuel" program. The program is part of the 25x'25 initiative spearheaded by Agricultural Commissioner Charles Bronson. It is designed to spur the state's agricultural industry to produce 25 percent of Florida's energy needs by 2025. "We believe that awards such as these are critical in triggering the development of a renewable energy industry in Florida," Bronson said.
 
 Grant recipients included Gulf Coast Energy of Walton LLC, which was awarded $7 million for the construction and operation of biodiesel and ethanol plants in Mossy Head, Fla. Gulf Coast Energy plans to begin construction of the $62 million project in the next few months and expects to begin producing biodiesel by the end of the year. The company plans to produce ethanol in early 2009.
 
 Agri-Source Fuels was awarded $4 million to be used toward the construction of a $21 million biodiesel plant in Pensecola. Company spokeswoman Peggy Matthews said the grant will be used specifically for equipment and will benefit the project greatly. Awarded funds were matched by company President Rick Higdon, the sole financial provider for Agri-Source. Site work has begun on the 18 Mmgy plant, which is expected to be operational by the end of the year.
 
 Other recipients included the University of Florida, the Florida Institute of Technology, Applied Research Associates Inc. of Panama City and Neptune Industries Inc. All were awarded research and development grants, ranging from $150,000 to $500,000.

 
 Deputy Agricultural Commissioner Jay Levenstein said the department is pleased with the results of the grant disbursement this year. He said Florida, like many states, is experiencing budget shortfalls, but he hopes it will be able to continue the program next year as long as funding is available.
 
 Companies that received grant money are required to match the contribution with their own money or otherwise raised funds. Entities chosen for the grants are contributing more than $150 million of their own resources to these projects. "We're not looking to build our own state-funded ethanol plants or biodiesel plants, or completely fund other projects," Levenstein said. "We like to be in a position where we can help out, but they've also got to be able to come to the table with some of their own assets. I know from talking to some of these companies that funding like this really puts them over the top of the hill as far as being able to complete their project."
 
 There were 76 grant submissions received by the agriculture department. Proposals were evaluated on set criteria, including the use of Florida-grown crops or biomass to produce energy, the company's potential to expand agribusiness in Florida, preliminary market research, and the efficiency of their use of energy and other material resources.

Florida ag department announces grant recipients

Web exclusive posted Jan. 25, 2008, at 7:18 a.m. CST 
 
 The National Algae Association, which recently opened its headquarters in Houston, is providing a new forum for researchers, producers and investors to advance the discussion and production of algae as a renewable energy source.
 
 The association, which is in the formation stages, was founded by Barry Cohen of Biofuel Capital Partners, a private equity fund for biodiesel and other biofuels-related technology and production companies. Cohen said biodiesel producers, who are facing problems as a result of high soybean and vegetable oil feedstock costs, are looking to alternative feedstocks, such as algae. "We've got biodiesel producers that are contacting us every single day because they know they've got a problem, so by putting this together, we're bringing the researchers together. We're bringing the algae production companies together so that we can share information and exchange ideas. From that, we are pushing the commercialization of algae."
 
 Algae can grow in ponds or tubes, and are considered a low-cost, high-yield feedstock. Up until now, researchers were researching algae production, but there was no motivation to commercialize it, Cohen said.
 
 Since the association was created, Cohen said his phone has been ringing and his mailbox has been full. "People are asking me, 'Where can I buy algae feedstock from?' but there are currently limited quantities of algae feedstock available," he said. "This is sort of a new round of lower-cost, nonedible feedstock. Algae is not edible. We're talking about something that can be grown and turned into algae oil, and we have companies that have been contacting us about setting up production plants in Texas and other areas of the country."
 

 The association is currently organizing a board of directors and plans to sponsor a national conference in May. A Web site should be operational in a few weeks. Inquiries can be sent to bcohen@nationalalgaeassociation.com.

Algae association forms to advance biodiesel production

Web exclusive posted Jan. 25, 2008, at 9:44 a.m. CST 
 
 San Francisco-based biotech company Solazyme unveiled its car fueled with algae-based biodiesel at the Sundance Film Festival this week. Company founders Jonathan Wolfson and Harrison Dillon arrived at the festival driving a 2006 Mercedes 320 fueled by the company's Soladiesel. Their arrival coincided with the premiere of biodiesel documentary "Fields of Fuel," in which Solazyme is one of the biofuel companies featured. "We were excited to let the movie be the first to premiere a standard, showroom-floor Mercedes running on Soladiesel," Wolfson said. "It's the first algae-biodiesel that's ever been road tested anywhere. Many years and many millions of dollars have gone into this project, and we're really excited to introduce it."
 
 According to Wolfson, Solazyme is currently producing thousands of gallons of algal oil. Wolfson said the company grows algae in standard industrial fermentation equipment rather than outside in open ponds. It can use a wide variety of feedstocks, from corn to wood chips. "The only thing that separates us from thousands of gallons to millions of gallons right now is capital equipment, which we're working on with respect to facilities and demonstration facilities," Wolfson said. "We're working on bringing down production costs, and we believe we'll be at production economics within two to three years."
 
 Solazyme also announced this week a biodiesel feedstock development and testing agreement with Chevron Technology Ventures. "We're working with the folks that control the infrastructure, from refinery to pipeline to gas station to car," Wolfson said. "We feel that's a very important feature of actually getting our technology out there."
 
 Wolfson said Soladiesel meets the requirements of ASTM biodiesel standard D 6751 and the European standard equivalent. The car is "road testing fantastic," according to Wolfson, and hasn't had any problems with very cold mountain temperatures. "More testing still needs to be done, but everything is running just great."

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Solazyme introduces algae-based biodiesel car at Sundance

Canola's vibrant yellow flowers have become a trademarked sight on the Canadian prairies. The now familiar oilseed, which has already reinvigorated prairie agriculture, has the potential to deliver a new golden opportunity-biodiesel-for growers, processors, retailers and consumers. The very properties that make canola oil the healthiest choice of all the vegetable oils also make it the perfect candidate for biodiesel. "This is an example of the tremendous versatility of this crop and, in particular, the value of canola oil," says JoAnne 
 Buth, president of the Canola Council of Canada. As such, there are many clear advantages to using canola as a biodiesel production feedstock. 
 
 Canola currently contributes more than $13 billion (US$12.9 billion) in economic activity to the Canadian economy. Whether it is used as an ingredient for food or renewable fuel, there is something to be said about why this crop, grown on more than 14 million acres of Canadian farm land, is the perfect candidate for biodiesel production. 
 
 High Efficiency 

 Canola seed has more than 43 percent oil content, higher than many other oilseeds including soybeans, which contain approximately 18 percent oil. This makes canola an extremely efficient North American feedstock for biodiesel production. The Canadian crop averaged 43 percent to 44 percent oil content over the past three years and is likely to make even further oil content gains. The new quality standards set for variety registration in western Canada will see oil content in new varieties increase 1.2 percent over the next five years. This change will ensure canola continues to deliver more oil per unit seed, improving processing efficiency. 
 
 "The value for canola is in the oil component," explains Dave Hickling, vice president of utilization for the Canola Council. "It only makes sense for the industry to continue to focus on this strength, especially in light of increasing global demand for vegetable oils. It was not hard to get agreement from the industry that increasing oil content would benefit everyone in the value chain." 
 
 Better Biodiesel 
 Besides its high oil content, canola delivers several other important advantages to biodiesel makers and users. At 7 percent saturated fat, canola has the lowest saturated fat level of all major vegetable oils. The low saturated fat content of canola oil means improved cold weather performance of the biodiesel. The truth is, even petroleum diesel will crystallize or gel at extremely cold temperatures. Pure canola biodiesel has a cloud point-the temperature at which small solid crystals form in the fuel-of 3 degrees Celsius (37 degrees Fahrenheit). 
 
 While low saturated fat levels improve cold weather performance, pure canola biodiesel also contains 10 percent oxygen by weight. It is this oxygen that leads to a reduction in emissions of hydrocarbons, toxic compounds, carbon monoxide and particulate matter. These benefits also apply to biodiesel blends burned in diesel engines. This means canola biodiesel is a cleaner-burning fuel than pure petroleum diesel. 
 
 Interestingly, the high-stability canola profiles that have been so successful in creating trans-fat-free solutions for the food industry offer all the advantages of conventional oil profile canola plus one-improved oxidative stability. The further reduction in polyunsaturated fatty acids of high stability canola oil has reduced iodine values and improved oxidative stability. Many other potential characteristics, such as high oil content, reduced saturated fat or decreased polyunsaturated fatty acids, have benefits for both fuel and food uses. 
 
 What makes canola good for food also makes it good for biodiesel. "Higher oil content, higher yield and the healthy fatty acid profile are ideal for both uses," Hickling says. 
 
 Projected Canadian canola production
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 Canadian farmers are expected to grow more than 14 million metric tons of canola by 2015.
 
 The Earth-Friendly Fuel 
 Canola biodiesel produces only about 12 percent of the carbon dioxide of petroleum diesel fuel. This difference becomes even more pronounced when adding in some of the common canola production practices. The Intergovernmental Panel on Climate Change has calculated that biodiesel produces about 0.4 kilograms of carbon dioxide per liter (3.3 pounds per gallon) and 0.6 kilograms of nitrogen oxides per liter (5 pounds per gallon) of fuel compared to petroleum diesel which produces 4 kilograms of carbon dioxide per liter (33 pounds per gallon) of fuel. 
 
 In "From Grain to Oil," part of a study titled A Review of Environmental Assessments of Biodiesel Displacing Fossil, Diesel, University of British Columbia researcher Hadi Dowlatabadi calculated greenhouse gas emissions specifically for canola biodiesel and related production practices in Canada. In conventional tillage systems, he observed similar levels of carbon dioxide emissions but much lower levels of NOx emissions as calculated by the IPCC. When Dowlatabadi added "zero-till" practices, the amount of carbon returned to the soil while producing the crop actually exceeded the amount of carbon dioxide produced by the biodiesel. Clearly, canola biodiesel offers a tremendous opportunity to reduce greenhouse gas emissions relative to petroleum diesel products. 
 
 According to IPCC calculations and University of British Columbia observations, the differences between the NOx emissions are related to differences in growing conditions in Canada relative to hotter and more humid growing conditions. Canadian growing conditions limit the production of NOx. 
 
 A 2006 study by the U.S.-based National Renewable Energy Laboratory showed that there were no statistically significant differences in NOx emissions between pure petroleum diesel and biodiesel blends of up to B20. 
 
 In addition to reducing greenhouse gas emissions, canola biodiesel biodegrades five times faster than petroleum diesel. Each year, Canada records an average of 3,500 spills of diesel with an average of 9 tonnes (9.9 tons) per spill. Pure biodiesel biodegrades in one to two weeks, but even biodiesel blends biodegrade faster than petroleum diesel itself.
 
 Food and Fuel 

 The increased emphasis on producing crop feedstocks for biofuels has led to speculation about shortages in food supplies and increased costs for consumers. Neither scenario is likely in Canada. Canola producers already grow 1 million to 2 million tonnes (1.1 million to 2.2 million tons) more canola seed than is currently used domestically or for export. While some "carryout" of canola stocks is necessary to ensure supply all year long, too much inventory can drive commodity prices down. 
 
 The current biofuels mandate from the Canadian federal government calls for 2 percent of diesel fuel to come from renewable sources by 2012. If only canola was used to meet this mandate, which is unlikely, 1.6 million tonnes (1.8 million tons) of canola would be needed. Canola carryout for 2006-'07 was projected to be just less than 2 million tonnes (2.2 million tons). 
 
 Producing oil from canola, whether it is for food or fuel, creates canola meal, an excellent animal feed. An increase in the supply of canola meal will mean more food production in the form of dairy, poultry and pork. Significant increases in canola oil use could make canola meal prices drop, making it a more attractive feed product for the livestock and dairy industries. Western Canadian farmers have shown they can grow enough canola to meet biodiesel demand and more. Statistics Canada predicted record plantings of canola this season based on its early spring seeding intentions survey. 
 
 Higher-yielding canola varieties are helping to increase grower profits. The long-term average yield for canola has been 26.6 bushels per acre (0.6 metric tons per acre or 1.5 metric tons per hectare) but the average yield for the past three years has been 30 bushels per acre. This yield increase has been due to the adoption of hybrids, better agronomic management and improved genetics. 
 
 The trend seems likely to continue. The Canola Council is predicting that yields could improve by as much as 35 percent by 2015. 
 
 Growing into the Future 
 The trend toward higher acres and higher yields for canola is a key factor in the Canola Council's new strategic initiative "Canola … growing great 2015." The strategy outlines key goals for both the supply and demand sides of the industry. "These goals are a result of careful analysis on mega trends affecting all vegetable oils and specific markets where canola has a strategic fit," Buth says. "Demand will be the key driver for the next several years but Canadian producers have the capacity to meet those demands." 
 
 The council's 2015 strategy document predicts that biodiesel demand will account for 2 million tonnes (2.2 million tons) of canola domestically and another 500,000 tonnes (550,000 tons) going to biodiesel production in export markets. The Canola Council is predicting that Canadian production of canola will exceed 15 million tonnes (16.5 million tons) by 2015. "If not sooner," Buth says. "There is a very real possibility that global demand for canola will rise even faster and farmers will respond to those market signals." 
 Increased adoption of hybrids, higher-yielding genetics, new traits and improved production practices will create more value through higher yields and better stress tolerance. Higher yields coupled with more acres and increased oil content will ensure a steady supply of canola for food and fuel for the future. 
 

 Biofuels represent a significant new opportunity for Canada. Canola is a key feedstock for producing biodiesel, and the Canadian canola industry is well prepared to invest in this opportunity.
 
 Chris Anderson is the vice president of crop production of the Canola Council of Canada. Reach him at (204) 982-2100.

Canadians typically grow more than 14 million acres of canola each year.

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Canadian producers feel canola could fulfill both food and fuel needs.

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Canola contributes more than $13 billion (US$12.9 billion) in economic activity to the Canadian economy.

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Count on Canola for Your Biodiesel

From a casual discussion with a county development agent in 2004 to full production in August 2006, much can be learned from Charles Whittington's practical approach to starting and running a successful biodiesel production facility. 
 
 Whittington, known to his friends as Shorty, is a local entrepreneur and owner of Grammer Industries Inc., a common-carrier trucking company specializing in the transportation of fertilizers in the Midwest. As a board member and chairman of the Indiana Motor Truck Association, chairman of the Agricultural Transporters Conference and vice chairman of the American Trucking Association, he was well positioned to understand both the need and the potential of an alternative fuel such as biodiesel. 
 
 Once Whittington became inspired to start a biodiesel operation, all that was needed was to learn as much as possible, as fast as possible. 
 
 The Quest Began
 The small team that Whittington assembled to build a biodiesel company was long on smarts but short on biodiesel industry experience. John Whittington, Charles' son, had a degree in agricultural business management and had been working in the family business for many years. Charles also hired Ron Howe, a contract historian and researcher, who brought a pragmatic approach to gathering the facts needed to make sound decisions on building and running a biodiesel facility. 
 
 They had the site, an empty lumber warehouse in Morristown, Ind.-30 miles east of Indianapolis-and now they needed to find the equipment. 
 
 One of the first orders of business was to join the National Biodiesel Board and to attend the National Biodiesel Conference & Expo in early 2005. It was there that the team first started talking to design/build firms to build a plant for what was to become Integrity BioFuels. It was in these early meetings and business trips Charles' team began to see building lead times of more than 18 months due the increasing popularity of biodiesel. Understandably, they wanted to move faster. 

 
 Shortening the Build Cycle
 In order to find a faster building approach, Whittington's team switched their search to component manufacturers in hopes it would decrease the construction lead time. This approach had the added benefit of allowing them to see the biodiesel being manufactured by the actual components that they intended to purchase. 
 
 "In one of our trips visiting component manufacturers, we shipped a full trailer of the soy oil beforehand to see the biodiesel actually manufactured at their facility," says Howe, Integrity BioFuels' quality management representative. "While we learned a lot on that trip, the key learning came when we had to wait two weeks for the test results of their test runs that took 15 minutes to make. It didn't take us long to see that that was terribly inefficient. If we wanted our plant built and calibrated on time and then keep it calibrated going forward, we had to find an easier and faster testing method." 
 
 Finding Fast Quality Control
 While researching the Internet to better define the quality control requirements of the new facility, Howe discovered a trademarked quality and process control approach called the QTA System developed by the Cognis Corp. The QTA System overcame the need to build a testing lab, hire chemists or wait for extended periods for testing results. At the plant end of the QTA System is a mid infrared instrument-a standard piece of equipment used for years in food and agrochemical control industries-that measures the various quality traits of a single drop of biodiesel. These digitized traits are then sent via the Internet to a central database at Cognis. The data are instantly analyzed by a complex set of chemist-developed calculations that convert the traits into standard quality control measures that can be understood by plant operators. 
 
 "The entire quality control process-from taking the sample to reading the results-could be conducted by most plant personnel regardless of their background," Howe says. "Plus, each analysis takes less than two minutes to complete, enabling us to dramatically increase our testing frequency." 
 
 Increasing the Learning Curve
 While Integrity BioFuels' plant was being designed and built, the start-up team decided to get hands-on experience by also buying a residential biodiesel brewing kit to "practice" making biodiesel. Together with the fast quality feedback loop offered by the QTA System, they started producing small quantities of biodiesel that met and exceeded industry standard quality measures. 
 

 This fast-feedback-loop process was repeated during plant start-up-creating small batches, getting quality results in two minutes, recalibrating the plant, creating another small batch-and allowed Integrity BioFuels to move through plant commissioning and get up and running at a much faster pace. 
 
 Today, many of Integrity BioFuels' employees participate in the quality and process control process. "The easy-to-use QTA System allows at least two people on every shift to get involved and test the quality of our biodiesel," Howe says. "If you can use a dropper you can analyze a sample." 
 
 Howe adds, "Additionally, I can now test our biodiesel much more frequently-more than 700 times a month-to monitor the quality of our production on a more continuous basis to ensure the highest quality products for our customers." 
 
 Integrity BioFuels Vice President John Whittington confirmed it this way: "The QTA System has proven to be an extremely valuable tool for our plant start up and operation," he says. "It is the quickest, most cost-efficient method we have found to ensure that every load that leaves our plant falls within specifications. Samples are taken while the truck is loading and results for that specific load leave in the hand of the driver along with the bill of lading." 
 
 
 Barbara Stefl holds master's degrees in chemical engineering and business administration. She is the global business director, QTA at the Cognis Corp. Reach Stefl at <a href="mailto:barbara.stefl@cognis.com">barbara.stefl@cognis.com</a>. For more information on Integrity BioFuels, visit <a href="http://www.integritybiofuels.com">www.integritybiofuels.com</a>. For more information on the QTA System, visit <a href="http://www.qta.com">www.qta.com</a>.

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Integrity BioFuels' manufacturing equipment in a converted warehouse.

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A drop of biodiesel is placed for analysis on the near infrared instrument.

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Quality Testing at Light Speed

Have you ever encountered an unhappy employee-whether it's the retail clerk at a local florist or the sales manager at a multi-million dollar corporation? If the answer is yes, then you've probably also been left with a negative impression of that company. 

 
 Unhappy employees are definitely not good for business. They tend to deliver poor service and poor results, and are unlikely to feel committed to company objectives or motivated to go the extra mile. They also create missed opportunities, which can undermine the success of your organization. Companies have several options that can result in increasing employee satisfaction.
 
 As biodiesel margins continue to be tight, happy, productive employees can boost company revenue. Also, in an already tight job market in the renewable fuels industries, it's important to retain and nurture productive employees.
 
 Every business, large or small, has a great deal to gain from investing in employee satisfaction. When you make employees feel happier with their work, the odds of an employee badmouthing your policies-or worse, your products-to customers, potential buyers, vendors or competitors will be significantly reduced. Even more important, a satisfied staff will be much more motivated to put in the extra effort required to make the company more productive and profitable. Happy employees become loyal employees, which can dramatically reduce attrition rates and lower the associated hiring and training costs.
 
 While you can invest in a wide variety of formal (and often expensive) initiatives to boost job satisfaction, the most powerful tool is one that costs nothing at all-good management. Encourage the management team to view every employee as a valuable individual worthy of respect for his or her time, talent and opinions. Strive to understand each individual's unique needs and motivational triggers. 
 
 "Hold on," you might be saying to yourself. "Is management supposed to cater to each employee's every whim?" Not exactly, but there are some broad motivational practices that can be implemented to help make the majority of the team feel respected and valued. Here are some favorites:
 
 Hire People that Fit
 To have happy employees, you have to hire people who fit not just the job, but the company and its culture. Don't underestimate the importance of looking for more than just aptitude in an applicant. In his article, "Hire, Inspire, Admire, Retire," John Reh, founder of www.peoplearecapital.com, says, "Hire talent, not just trainable skills. Skills can be taught to a talented employee. A skilled employee cannot just be given talent." When a worker possesses the right talent for a position, he or she is more likely to succeed and thus find contentment in the position.
 

 "Make your company a place people want to come to and work for," Reh says. "Company culture can be a powerful recruiting tool. Make sure yours reflects the goals the company wants to achieve."
 
 Train Well
 Training and the opportunity to learn new skills is a highly sought-after benefit, particularly among engineers, scientists and other knowledge workers. By providing formal training and informal shared learning experiences, you create an environment that will keep your most talented people excited about their careers. Be sure the personnel budget includes a line item for training, and just as importantly, ensure that the budget gets spent. 
 
 Beyond formal training, look for opportunities for mentoring, cross training, on-the-job learning experiences and even simple brainstorming. The more you create a culture where learning and knowledge sharing is valued, the more people will feel energized and satisfied with their work. As an additional benefit, unmotivated people will very likely be replaced by those who are interested in developing their skills, which makes your business more competitive over the long-term. 
 
 
 Keep an Open Door, Invite People In
 From an employee's point of view, approachability is a key trait in a good manager. If your workers feel they can come to you to "vent" and offer suggestions, they'll feel that their ideas and opinions are understood and valued. Being appreciated is a key to job satisfaction.
 Also, when you're facing important decisions or challenges, invite your employees to participate in developing solutions. By soliciting input on key decisions, you demonstrate to your people that you value their ideas and respect their knowledge. 
 
 Be Clear, Be Fair
 Make sure you clearly convey your performance expectations. Let each employee know, ideally in writing, what is expected in terms of work ethic and job performance. Let them know the specific tasks they are responsible for performing, the results they are responsible for delivering and how their work will be evaluated. 

 At the same time, make sure your expectations are consistent and equitable. If one person or department perceives that they are consistently getting "the short end of the stick," you'll breed discontent, a cancer that can decimate your culture. 
 
 Survey the Staff and Yourself
 Job satisfaction can be an elusive target; it is certainly something that changes over time. The key to building a great culture is to maintain open, honest two-way communication. As a manager, you have to be proactive about getting the conversations started by regularly asking for feedback.
 
 However, before you survey the troops, start by asking yourself a few questions about how you think your people are feeling. For example:
 › Do the employees seem to enjoy working for our organization or in this department?
 
 How good do they feel about their role in the company?
 
 › If asked by a friend, what might they say it's like to work for this company and for me as a manager?
 
 Then, ask the employees similar questions in anonymous surveys to find out what people are really thinking. Be sure to encourage people to include their candid comments and suggestions. As tempting as it may be, avoid trying to figure out who wrote what. The point of keeping the survey anonymous is to get honest feedback and be alerted to problems before they occur. If employees feel they'll be punished for being honest, they won't speak up, and that will only create further discontent.
 
 Acknowledge Achievement

 Recognition can go a long way in making people feel proud of their accomplishments and appreciated for their abilities and performance. The key is to provide sincere, timely praise for accomplishments that merit recognition. Too often, praise is either never given out or given for every little task so that the recognition loses its value.
 
 Supervise from a Distance
 It takes a confident leader to delegate responsibility. However, when it comes to job satisfaction, effective delegation is essential. According to the online article "Ways to Keep Your Employees Happy" by the Council of Better Business Bureaus, "Empower workers to do the job you hired them to do. A work environment in which employees are constantly monitored, micro-managed and bossed around can be stifling."
 Not all employees prefer to be left on their own. Ironically, some personalities feel more in control if they're provided with structure and closer supervision than others. It's up to you to distinguish which employees will thrive on independence and which will need a little more handholding.
 
 Reward Equitably
 Money isn't everything, but there's no question that compensation is tied to job satisfaction. At a minimum, compensation has to be equitable-both within your organization and as compared to the industry as a whole. As a starting point, benchmark your salary and wage rates to make sure that they are at or above industry averages. Review your health benefits, time off policies and other compensation to ensure they stack up to the competition. As part of your employee surveying process, ask people if they believe that their pay plans, bonuses and other financial incentives are fairly managed.
 
 Keep a Smile on Your Face
 We spend more than half our waking hours on the job. No one wants to spend that time in an environment where everyone's stressed and miserable. To boost morale, find small ways to make each day enjoyable. It can be as simple as adding a little humor to your office communications (maybe an occasional joke or cartoon in a memo), or incorporating games and music into meetings from time to time. Remember, if you want happy employees, you must lead by example. 
 
 
 Patrick B. Ropella is president and chief executive officer of Ropella & Associates. Reach him at (850) 983-4777 or visit <a href="http://www.ropella.com">www.ropella.com</a>.

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Human Capital Management: Satisfied Employees are Productive Employees

Congress's failure to address immigration issues during the 2007 legislative session placed the burden of immigration enforcement squarely on the shoulders of employers, making enforcement of immigration laws the employer's problem.

 
 Since 1986, every employer has been required to obtain an I-9 form from new employees, verifying each employee's identity and eligibility to work in the United States. If employees provided the correct documentation, employers could rely on those documents. If an employee's identity later proved to be incorrect, the employer had no liability.
 
 Occasionally, an employer would receive a letter from the Social Security Administration stating that an employee's name and Social Security number did not match the government's records. Sometimes it was an employer's or employee's error (e.g., the numbers were transposed on the employer's tax form or the employee had memorized and reported the number incorrectly), and sometimes it was an administrative glitch (an employee's name had changed, but the records didn't reflect it). Occasionally, the information provided by the employee was fraudulent. Until recently there was no definite mandate for employers to do anything if they received a "no-match letter" from the Social Security 
 Administration.
 
 Last fall, the situation changed. The Department of Labor issued new rules that would have required employers to promptly take certain actions on receipt of no-match letters, including ascertaining whether the mismatch was the result of an error. If the information could not be corrected by the employee, the new rules would have compelled employers to require their employees to appropriately document their identity with information other than the disputed Social Security number. Employers who were unable to confirm employees' eligibility to work but allowed employees to continue working would have risked liability for violating the law by knowingly employing unauthorized persons.
 
 Just as the new rules were set to become effective, a California court, in AFL-CIO, et al. versus Chertoff, et al., issued an injunction preventing them from going into effect. The order enjoins the government from implementing the new rules. Until this case is resolved, employers are not required to follow the new rules. 
 
 Why wouldn't employers implement the new rules anyway? Without being legally obligated to force employees to correct the information in question, employers can be liable for discriminating against workers if they are terminated because of a Social Security mismatch. Also, employers would violate the existing law by specifying which documents workers can or cannot use to establish identity. Until the "safe harbor" provisions of the new rules are effectively in place, employers are not encouraged to implement the practices.
 
 Until the new rules are enacted, here are the suggested best practices for an employer to follow. First, if you know an individual is not eligible to work in the U.S., do not employ him or her. Mere suspicion does not require that you terminate an employee, but an employee's admission that he or she is "illegal" requires termination.
 
 Second, if you receive a no-match letter or if you discover a discrepancy in an employee's identification, inform the employee and ask him or her to correct it within a reasonable period of time. You should not terminate the employee simply because of the discrepancy.
 
 Third, treat all employees the same way. You cannot require different information or use a different procedure because of an employee's national origin or "foreign- sounding" surname.

 
 Fourth, review your practices for completing I-9 forms for new employees, and audit existing I-9 forms for compliance. New forms, which have been required for use since Dec. 26, 2007, are available at www.uscis.gov/files/form/i-9.pdf. 
 
 Finally, stay informed about law changes affecting employers in the immigration area. 
 
 Following these best practices allows employers to walk the narrow line between being in or out of compliance with immigration laws until Congress and the courts make definitive decisions.
 
 Nancy Brostrom Vollertsen counsels employers on issues of employment law and related matters. Reach her at <a href="mailto:nvollertsen@lindquist.com">nvollertsen@lindquist.com</a> or (612) 371-3540.

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Avoiding Liability for Immigration Compliance

Global warming, geopolitical instability, peak oil concerns and the instability of crude oil prices have greatly increased the sense of urgency with which governments now pursue renewable energy alternatives to fossil fuels.
 
 To successfully harvest renewable energy, we must adopt public policy that first plants the seed of viable new technologies and, more importantly, nurtures their growth to full potential. As we look at supporting promising "new-generation" technologies such as cellulosic ethanol and the like, we must remain vigilant that we not-through neglect-undercut the solutions we already have at hand.
 
 The 2002 Farm Bill stands as a prime example of what can be accomplished in planting seeds from which a renewable energy industry will grow. Prior to 2002, the domestic biodiesel industry was virtually non-existent. In an effort to spark the development of a renewable biofuels industry, Congress introduced producer incentives in the 2002 Farm Bill. Among them was a $1-per-gallon tax credit for biodiesel produced in the United States. The result was an astonishing growth in production as entrepreneurs and investors engaged to grow the industry to an estimated capacity of 250 million gallons with more than twice that in development by the end of 2006.
 

 As with any new industry, such exponential expansion-albeit critical to its ultimate success-is not accomplished without substantial "growing pains." The commodity markets upon which the industry relies for its feedstocks have responded with extreme volatility. Efforts to identify and develop more sustainable feedstocks (e.g., algae, jatropha, etc.) show great promise but require time and the application of resources to become available. In addition, lender requirements to finance capital investment in a new industry are understandably restrictive, particularly in a period of economic downturn and the disruption of financial markets such as we experienced in 2007. Finally, distribution infrastructure needs to be developed to make the product readily available to consumers.
 
 These "growing pains" are not unlike those that will be experienced by any new renewable energy industry. Yet, Congress and other lawmakers now seem inclined to direct undivided attention to the "next best thing" in an "either/or" choice between biodiesel as a proven technology versus the promise of "next-generation" biofuels such as cellulosic ethanol. A sensible renewable energy policy instead requires that we choose both.
 
 Having invested in the seed to create the biodiesel industry, Congress must now sustain the critical support needed to strengthen its foundation. Such support will include:
 
 › Sustained, and perhaps additional, producer incentives to offset the cost of production during these initial market adjustments and the increased volatility of feedstock commodity 
 pricing
 
 › Funding of research and development to identify and establish additional sustainable feedstocks
 
 › Grants and loan guarantees to underwrite debt financing for the capital required to sustain growth of the industry
 
 › Market incentives to establish biodiesel within present fuel distribution infrastructure as an alternative fuel source made available to consumers
 
 While efforts to support "next-generation" biofuels such as cellulosic ethanol are appropriate, it must be remembered that these too will require substantial cultivation. It remains important, therefore, to make certain we offer each viable alternative sufficient support to allow its industry to grow and achieve its maximum yield. Only then can we be assured that the public's investment in renewable energy is most effectively targeted to support the ultimate objective, which is the harvesting of renewable energy toward a more sustainable future for us all.

 
 Jeff Pieterick is president of the Wisconsin Biodiesel Association and cofounder of North Prairie Productions LLC. Reach him at <a href="mailto:jpieterick@wibiodiesel.org">jpieterick@wibiodiesel.org</a> or (877) 299-2435.

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Congress Can Alleviate Growing Pains

Web exclusive posted Jan. 22, 2008, at 11:21 a.m. CST 
 
 BioEnergy of Colorado's two Denver plants have ceased operations in the wake of the East Coast bankruptcy of an affiliated company.
 
 Earlier this month, BioEnergy of America filed for Chapter 11 protection in New Jersey after funding for an 80 MMgy plant fell through a year ago. The plants are all owned principally by Tom Davanzo, who began the Colorado soy-based plants in 2006.
 
 Davanzo expects the New Jersey plant, which was only 30 percent complete, to be mothballed. "For someone to come in and want to finish off our particular design that they're not familiar with, or to reconfigure the plant to a design that they are familiar with, is really a big undertaking," he said. "We've talked to a lot of people, but it's an awful big project, what with the prices of raw materials today."
 
 BioEnergy of America lists $1 million to $10 million in assets in its bankruptcy petition, ands $10 million to $50 million in liabilities.
 

 The Colorado plants face a similar uncertain fate as the New Jersey plant. Davanzo, an advocate of niche operations located near transportation and feedstock sources, departed from that philosophy in seeking funding for the New Jersey refinery. The two Colorado plants produce a combined 18 MMgy of biodiesel. "We changed the whole corporate structure from small plants with entrepreneurs to a more sophisticated corporate structure," he said. Colorado had several executives under contract, and expenses for those operations "sucked all the capital out of the company" after funding fell through in New Jersey.
 
 "There weren't very positive margins to the business" that would have enabled the Colorado operations to pay off the mounting debts, Davanzo continued. "I'm afraid that the Chapter 11 of the New Jersey operation will probably suck the whole company down the tubes."
 
 Davanzo said he's not sure what will happen to the Colorado plants because a bankruptcy judge will determine their fate. "My team is still very optimistic," he said. "It's a strong industry. You've just got to be a little more creative. I need to see this project through to wherever it ends up."

Bankruptcy hits two Colorado biodiesel plants

Web exclusive posted Jan. 21, 2008, at 11:20 a.m. CST 
 
 Three weeks after an Ohio biodiesel plant exploded, injuring four, the American Ag Fuels plant is still undergoing repairs.
 
 The Jan. 3 explosion rocked the plant's Quonset-style loading and unloading facility, and damaged a non-load bearing wall of the adjacent processing building, said Defiance, Ohio, acting Fire Chief Pete Schlosser.
 
 Schlosser said a vapor buildup occurred from unknown sources, and the flammable gases were triggered when plant employees hit the switch to open an overhead garage door. Three plant employees were transported to a nearby hospital, along with a police officer who responded and was overcome by gas fumes.
 
 "We're looking to measure it in weeks, not months, in terms of repair," said American Ag Fuels CEO Steve Lankenau.
 
 Defiance fire and police evacuated a two-block area surrounding the soybean processing plant. Schlosser said the fire department has concluded its investigation, but insurance investigators remain on the scene while repairs are underway. "There was no explosion-proof equipment in that building, but it wasn't required," Schlosser said.

 
 Two of the workers and the officer were treated and released. One worker was hospitalized for burns but was released after three days, Schlosser said. Another worker was hospitalized for cuts and pressure wounds from the impact of the blast. Lankenau said those two men continue to recover.
 
 American Ag Fuels processes 1.5 MMgy of multi-feedstock biodiesel and has been in operation since June 2005. A newer facility, with different processing technology, was slated to open this winter, bringing total plant capacity to 7 MMgy. Lankenau said that opening has been delayed pending the investigation even though that unit wasn't damaged. "We were days or weeks from coming on line," he said of the new facility.
 
 Schlosser said the plant will resume operations once repairs are completed and building inspectors have certified the facility for occupancy. 
 
 Lankenau said the loading facility was totally destroyed, but no damage estimates are available to date. "We fully intend to return to general operations as soon as we can," he said.

February 2008

Business Briefs

Kreido names Binninger CEO

Schuermann joins soybean association

Stoel Rives appoints managing partner

Allegro Biodiesel invests in CPC

Biogold furthers biodiesel plans

Petrotec restarts production, releases financial report

Columns

The Energy Bill's Details, Impact: TBD

Featured

Putting the Squeeze on Convention

Making Pennycress Pay Off

A Billion-Gallon Boost

No Need to Splash

Probing Soybean Physiology

Moving Biodiesel

A Southern Transformation

Do-it-Yourself Oil Extraction

From Concept to Commercialization

February 2008.css-7jxktu{position:absolute;bottom:0px;left:0px;right:0px;height:3px;border-radius:3px;background-color:var(--chakra-colors-brandBlack);}

Business Briefs

Kreido names Binninger CEO

Schuermann joins soybean association

Stoel Rives appoints managing partner

Allegro Biodiesel invests in CPC

Biogold furthers biodiesel plans

Petrotec restarts production, releases financial report

Columns

The Energy Bill's Details, Impact: TBD

Featured

Putting the Squeeze on Convention

Making Pennycress Pay Off

A Billion-Gallon Boost

No Need to Splash

Probing Soybean Physiology

Moving Biodiesel

A Southern Transformation

Do-it-Yourself Oil Extraction

From Concept to Commercialization

February 2008