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Waste-fat Fuel: The Next Big Thing or Flash in the Pan?
 Greased by federal subsidies, used oil from fast-food fryers could be the next hot thing in recycling waste into fuel.
By Mike Meyers
Star Tribune - April 11, 2007
Fast-food grease soon may move from fattening thighs to fattening wallets. In the process, promoters promise to fuel the wheels of commerce on America's highways.
But first, they must prove that their vision is more than empty calories.
By the end of 2008, a group of Florida entrepreneurs hopes to have one or more plants up and running in Minnesota, turning waste grease from deep fryers into biodiesel fuel.
Xenerga, based in Orlando, started up its first U.S. plant in its hometown this month and claims to have investors lined up to build 14 more across the country.
"People could be skeptical, but it's a good opportunity," said Jason Sayers, Xenerga chief executive.
Good, indeed, if Xenerga delivers on its promises. The company's promoters say that for an investment of about $2 million, investors will get a turnkey operation -- supplying the waste grease, the plant to process 5 million gallons of biodiesel annually and customers to buy it. The equipment itself is imported from Germany.
Bottom line: the "potential" to make profits of up to $2.5 million a year per plant, by Xenerga's calculation.
Xenerga represents a second act in the recycling business for Sayers, co-founder of Orlando-based FiltaFry, a firm that has sold more than 500 franchises around the world to clean restaurant fryers and sell waste oil to animal feed producers.
In Minnesota, most biodiesel is made in factories owned by soybean growers and comes from virgin soybean oil. Most of the fuel they produce ends up in commercial trucks.
About 60 million gallons of biodiesel were produced last year in Minnesota. That's about 5 percent of the 1.1 billion gallons of diesel fuel consumed in 2004, according to the latest figures available for the state.
Nevertheless, Minnesota biodiesel employed a total of 5,668 people, counting jobs at every stage of production, from field to factory, and yielded $928 million in benefits for soybean growers and others in the supply chain, by the estimate of the Minnesota Department of Agriculture. Soy diesel consumes about 13 percent of Minnesota's annual soybean crop, the agency estimated.
A 2002 Minnesota law mandated that all diesel fuels sold in the state contain at least 2 percent biodiesel.
Subsidies from U.S. taxpayers have fanned interest in biodiesel. The federal government offers tax benefits, at $1 a gallon, for biodiesel made from seed oil and 50 cents a gallon in benefits to waste-oil-to-fuel operations.
Xenerga tells potential investors that those subsidies, set to last another decade, will generate much of the profits to be shared by owners of the micro-plants and the Orlando company, which will collect royalties on sales.
"There's good money to be made in it," Sayers said. "The problem is to make good quality biodiesel all the time."
A chemical process separates fats and oils into two marketable products: biodiesel sold to fuel-blending companies and glycerin, used in making soaps and other products.
Xenerga supplies the equipment and know-how to do the job while investors supply about $2 million and a half acre of industrial land.
Depending on local laws, gaining permits can take weeks or months.
Not everyone is sure that Xenerga is offering a sure thing, however.
"It's quite an uphill battle to make biodiesel out of waste grease. I can't make it work financially," said Chuck Neece, director of research and development and the biodiesel department at Farmers Union Industries in Redwood Falls, Minn.
That farmers' cooperative last year produced 3 million gallons of biodiesel from oils of soybeans, linseed, sunflowers and other plants, as well as fat from Minnesota poultry operations.
The fact that the federal subsidy for biodiesel made from virgin oils is double the payment for biodiesel made from waste oil is a big setback to the profit from recycling oil from fryers, Neece said.
"We've never been sure whether we can make waste [oil] work economically," he said.
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