This 5-year old firm that makes biodiesel from used cooking oil plans to go public this summer.
by Dan Emerson
Back in the early 90s, Russ Teall – then a Florida Keys-based publisher of nautical charts and president of the National Boat Owners – read about a new technology that would alter his career path. The article in a marine industry publication described a solo sailor’s voyage around the world in an inflatable boat powered by diesel fuel refined from used cooking oil. An “800” number included in the article led Teall to the newly formed Biodiesel Trade Association, which hired the former attorney to conduct a market survey. “It was totally accidental, but the more I learned about biodiesel, the more I liked it. I saw obvious things that needed to be done to get it off the ground – dealing with legislative and regulatory issues. Also, we needed to bring the price down to make it economically viable as a competitive fuel.”
Today, Teall’s five-year old company, Las Vegas-based Biodiesel Industries (BI) is the world’s largest producer of diesel fuel made from used cooking oil. The nontoxic, biodegradable fuel substantially reduces emissions, particularly black sooty exhaust, and makes vehicle exhaust smell like french fries. Biodiesel also offers enhanced lubricity and cetane (similar to octane rating for gasoline), plus similar horsepower and torque when compared to petroleum diesel.
Fastest Growing Diesel Alternative
Biodiesel may be the fastest growing type of “alternative” fuel. According to the National Biodiesel Board, about 15 million gallons were used in 2002. More than 250 vehicle fleets use B20, a mixture of 20% biodiesel with 80% petrodiesel, commercially nationwide. Lower level biodiesel blends, such as B2 or B5, are used in countless pieces of equipment from tractors to over the road semi-trucks, and hundreds of fuel distributors now carry biodiesel blends nationally.
Since March, 2001, BI has been supplying one million gallons of biodiesel a year to Las Vegas and Clark County, Nevada government agencies and the local school system for use in their diesel vehicles. A total of about 2800 vehicles are using biodiesel fuel exclusively. The company recently expanded production capacity at its Las Vegas plant to three million gallons a year. To attract public attention to the fuel, in May 2001 the Nevada Energy office opened the first biodiesel refueling station in the U.S., using BI’s product. Interest in Northern Nevada began with the demonstration of the Bio Bug, a VW Beetle in the Nevada State Motor Pool which runs on biodiesel.
Dan Hyde, fleet and transportation services manager for the city of Las Vegas, says the city is using about 200,000 gallons of biodiesel annually to fuel the 325 diesel vehicles in its fleet of 1200 cars and trucks. It costs the city about the same as conventional diesel fuel.
The city’s pilot testing in 2001 also indicated no loss of miles-per-gallon, or diminished engine power using biodiesel. “The only problem with using biodiesel was in the beginning stages,” comments Hyde, “It’s so clean that when you start using it, it dislodges debris in the engines; so we had to replace filters daily for about two weeks. But since then, we have had no problems. Overall, it’s exceeded our expectations.”
“Cleaning Up” Las Vegas
Until recently, the U.S. Environmental Protection Agency (EPA) classified the Las Vegas metro area as a non-attainment area for several pollutants, including airborne particulates. In January, the EPA announced the area is in compliance. “Biodiesel has had a great deal to with that,” says Hyde, who is also executive director of the Clean Cities Coalition. “It virtually eliminates visual soot.”
According to a recent EPA report, biodiesel use can reduce emissions of particulate matter by 47% compared to petroleum diesel in unmodified diesel engines. The report also verified a 67% reduction in unburned hydrocarbons and a 48% reduction in carbon monoxide with pure biodiesel.
John Haycock is a petroleum distributor who believes in biodiesel. His company, Las Vegas-based Haycock Petroleum, is BI’s biodiesel distributor for Nevada and the rest of the southwestern U.S., selling it in tank-wagon quantities for blending with conventional fuel. For end-users, it’s not necessarily cheaper than petroleum, “but is has the potential to be at some point in the future if plans work out well,” Haycock says. “There are critical mass issues. Another advantage of biodiesel is that its price doesn’t fluctuate as much as conventional diesel.”
California Foothold & Joint Ventures
BI is also establishing a foothold in Southern California; in February, the company opened a biodiesel plant at the U.S. navy base in Ventura, CA., under a CREDA (cooperative R&D agreement). The objective is to “militarize” the BI modular plant prototype so they may be deployed at U.S. military installations around the world, Teall reports. BI has permits pending to build plants in San Jose and Reno, and another BI-developed plant is scheduled to begin operating in Sudbury, Ontario, Canada, later this year.
In late December, BI delivered a three-million gallon a year plant for an Australian joint venture being developed 120 miles north of Sydney. Australia is considered a very promising market, since the government does not tax biodiesel fuel. Australia may exceed the U.S. production total in the next year or two, “unless the U.S. changes its tax policy,” Teall says.
A proposal to establish a biodiesel tax credit to support the industry has been introduced in Congress. But Teall isn’t holding his breath: “Our business plan does not depend on any tax credits or subsidies. If it happens, that’s great. But we don’t rely on that; what the government gives it can also take away.”
Once they are underway, the BI-built plants in North America and Australia will have a total capacity of 20 million gallons a year. BI has a patent pending on the company’s biodiesel production technology, which involves modular production units – “being able to make small (three million gallons per year capacity), inexpensive production units so the capital costs are not that high,” Teall explains. Designed for relatively quick deployment to take advantage of new market opportunities, the units can be replaced with larger fixed base plants if market conditions merit. BI’s prefabricated modular units are designed to fit into a standard, 8 foot-by-8-foot-by-40 foot ISO (International Standards Organization) container, facilitating shipment anywhere in the world.
Shifting From Central Refineries to Small, Community Units
The modular plants are much less costly than traditional diesel plants, which cost $20-30 million to build and equip, about $1 per gallon of annual production capacity, according to Teall. Before he developed the modular model, “I saw other companies that were involved in biodiesel trying to pattern themselves after oil companies and build large plants and transporting fuel all over the country. Why bring in feedstocks from all over the country, process it and ship fuel back?” BI’s business model involves collecting the oil 10-15 miles from each plant.
The move away from large, central refineries to small, community-based units is analogous to the new “distributed generation” model of electrical power systems, Teall contends. “There is more political support for doing that, since it helps local economic development. With the modular production units, we can employ locally, we can use a recycled resource and keep the energy in the local co
mmunity.”
About 90% of the output from the company’s Las Vegas plant stays in the area. Another 10-15% goes to other areas where the company is trying to develop new markets, such as Reno, San Jose, and Ventura, CA. As of early 2003, BI was selling biodiesel fuel for $1.35 a gallon, delivered within a 15-mile radius. When production and transportation costs are factored in, the company makes a profit of 25-30%.
The company, which as about 2500 private shareholders, plans to launch its initial public offering this summer.
“I think there is room for 200-300 plants in the U.S. alone,” Teall says. One major advantage that may further that objective is that not only does biodiesel burn more cleanly than petroleum, the manufacturing process itself is very clean. “It’s a no-impact product.” BI’s plants can also produce biodiesel from virgin soybean oil, although the economics are not as attractive as “used oil.” One of the primary reasons he chose Las Vegas as the company’s home base was the city’s large number of hotels and restaurants, which produce an abundance of spent cooking oil.
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Russell Teall, President: rteall@aol.com
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FROM In Business, a SustainableBusiness.com Content Partner
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