With biodiesel, doing good has to be good for business

By Lucy May

Cincinnati Business Courier - June 8, 2007

There's saving Mother Earth, and then there's doing it on a budget.

Cincinnati-based Peter Cremer North America is finding that in the battle to protect the environment and end America's dependence on foreign oil, the bottom line usually wins. And rising soybean oil prices are making soybean-based biodiesel more expensive than regular fossil-fuel diesel.

"A year ago, soybean oil was 22 or 23 cents a pound, and crude oil was $80 a barrel. Now crude is down to $65 a barrel, and soybean oil is up to almost 36 cents a pound," said Mack Findley, the company's business manager for Nexsol, its soybean-based biodiesel.

"It's a lot easier to be green when it's cheaper."

That's not to say the hot biodiesel industry is cooling. The United States had 86 commercial biodiesel production plants as of September 2006 and another 62 under construction, according to the National Biodiesel Board. Demand for biodiesel is expected to double in the United States, from 200 million gallons in 2006 to an estimated 400 million gallons this year.

And two Tri-State entrepreneurs are developing a new biodiesel plant in Pendleton County.

The trick will be meeting the country's demand in a way that makes financial sense

While biodiesel can be made from many raw materials - such as palm oil, poultry fat and yellow grease - soybean growers started researching and promoting the use of their product for the fuel a decade ago, said Jamie Mossbarger, communications director for the Ohio Soybean Council.

"Soy is the No. 1 feedstock right now for biodiesel," she said. "Using soy increases lubricity and increases the time between maintenance visits. And it can sustain itself in colder temperatures."

The Southwest Ohio Regional Transit Authority is sold on soy. SORTA started using biodiesel in 1993 and increased its consumption in 2005 after Hurricane Katrina made it difficult to get enough diesel to supply its 390 Metro buses, Chief Communications Officer Sallie Hilvers said.

In 2006, half of the fuel consumed by SORTA was biodiesel, she said. The agency has tried biodiesel made of waste cooking oil, but that didn't work in its buses' engines as well as the soybean-based Nexsol from Peter Cremer, one of the largest biodiesel producers in the United States.

And, so far, the price fluctuation hasn't hurt SORTA because the agency locked in a yearlong contract that has kept its biodiesel cost lower than the $2.28 per gallon that it's paying for regular diesel.

But rising soybean oil prices have made that competitive price impossible to maintain, Findley said. And as much as SORTA loves biodiesel, pricing is paramount.

"We use 3.6 million gallons of fuel a year," Hilvers said. "When you're filling gas tanks that big, you want to make sure you're getting the best buy for the taxpayer."

Biodiesel is produced through a chemical process that reacts alcohol with natural fats, oils or greases. The end products are biodiesel and glycerin, which is used in the production of soaps and cosmetics. (Peter Cremer markets crude and refined glycerin, too.)

Other firms tout alternative raw materials for biodiesel that are cheaper than soybean oil.

Orlando, Fla.-based Xenerga Inc. is looking for local investors to fund construction of a biodiesel plant here, said Dave Jarrett, chief communications officer.

Xenerga enters markets by finding partners with access to feedstock or waste cooking oil. The company then helps them build a production facility, trains them and links them with the companies that will buy the biodiesel to blend it with fossil-fuel diesel, Jarrett said. Xenerga then gets a royalty.

And Bluegrass Biodiesel LLC, the $2.3 million plant planned for the Pendleton County Industrial Development Authority's Commonwealth Commerce Center, expects to begin making fuel from hog and chicken grease later this year.

"People need to know a lot about fuel or potentially the feedstocks to be successful," he said. "I believe there's going to be a huge shaking-out process."