For biodiesel enthusiasts, the gas is always greener

For biodiesel enthusiasts, the gas is always greener
Loyal customers and investors help drive biofuel producer’s expansion

By Tim Christie
The Register-Guard
Published: Friday, June 22, 2008

Kevin Clark/The Register-Guard

Tyson Keever, managing partner of SeQuential Biofuels, is dwarfed by storage silos at the new SeQuential-Pacific Biodiesel plant in Salem. The new plant has 200,000 gallons of storage capacity compared with10,000 gallons at the old plant. The plant is capable of making 5 million gallons per year.

Harold Beatty of Pleasant Hill recently pulled his Dodge Ram quad cab pickup into the SeQuential Biofuels filling station in Eugene and reluctantly asked the attendant to fill 'er up.

A few short minutes later, the tank of Beatty’s truck was full of $4.99-per-gallon, 99-percent-pure biodiesel, and Beatty was $155 poorer.

Beatty said he runs biodiesel in his truck, rather than straight petroleum diesel, to try to do his part to help the environment and the economy. But he’s paying dearly for his principles.

While motorists are gnashing their teeth over skyrocketing gasoline prices, the price of biodiesel — the greener cousin of petroleum diesel — has gone up even more because of the materials used. And that is testing the resolve of individual motorists like Beatty as well as commercial and government fleet managers who buy biodiesel in an effort to lighten their carbon footprint.

And that means SeQuential Biofuels — the Portland fuel company born in a Eugene garage — is feeling the pinch, even as it embarks on a major expansion of its production facilities and launches a new company to make sure it can collect enough used cooking oil to feed the new plant.

A headline over a recent blog post on SeQuential’s Web site put the company’s predicament in blunt terms: “High prices are bad for business.”

“On the financial side of things we have lost volume and customers,” blogged SeQuential staffer Sasha Friedman. “Some people are driving less and others have gone back to petroleum fuels. … The lost volume means SeQuential is struggling.”

But the tough times haven’t deterred the company from following its ambitious path to create a new community-based fuel system that turns the traditional petroleum business model on its head. Historically, oil is transported from distant fields by truck, ship or pipe to giant centralized refineries, where it gets processed into fuel and shipped out again to far-flung markets.

“Our company is about building a local fuel economy: Using local feedstock, producing local, selling local,” said Ian Hill, SeQuential co-founder and managing partner. “We have no choice but to create a more decentralized fuel economy.”

Hill started home-brewing biodiesel in a Eugene garage with Tomas Endicott in 2000, and the two partners formed SeQuential Biofuels two years later. In 2004, the company entered into a joint venture with Hawaii-based Pacific Biodiesel Co. to build the state’s first commercial biodiesel production facility in Salem. In 2006, the company opened its first filling station on McVay Highway in Eugene, the first all-biofuel station in the Northwest.

SeQuential had planned to build a second filling station in Eugene this year. Those plans have been put on hold for now, although the company is looking at potential sites for a station in Portland, Hill said.

Partly because it uses used cooking oil as its main feedstock, rather than more costly soy oil, SeQuential has been able to keep biodiesel prices at its flagship Eugene station cheaper than what the fuel is selling for elsewhere.

The SeQuential station in Eugene is selling B99 biodiesel for $4.99 per gallon, B20 for $4.95 per gallon and B5 for $4.89 per gallon. (The “B” numbers indicate the mix of biodiesel to petroleum diesel; B20, for example, is 20 percent biodiesel, 80 percent petroleum diesel.) Biodiesel prices in the Seattle area have been reported as high as $6 per gallon, and in Portland as high as $5.25 per gallon.

The average price of pure petroleum diesel in the Eugene-Springfield area last week, meanwhile, was $4.86 per gallon, according to AAA.

Those high biodiesel prices have forced some loyal customers, who buy it for environmental reasons, to scale back.

Rexius Landscape Services in Eugene has been using biodiesel for several years in its 15 landscape trucks, 30 delivery trucks and eight Volkswagen Jetta wagons. But last month, the company switched from the more expensive B20 to B5 biodiesel, said Jack Hoeck, the company’s vice president of environmental services.

“We’re still using biodiesel” even with the higher prices, he said. “We don’t necessarily like it, but what do you do? We have a certain amount of trucking we have to do in our business.”

Rexius is committed to biodiesel for environmental reasons — it burns cleaner than regular diesel — even if it means paying a premium, he said. But that calculus may change if prices keep going up.

“At some point you’re making decisions financially,” he said. “Are our customers willing to pay more for our products because we’re doing this? You can only raise prices so much before you’re losing business.”

On the production side, SeQuential and Pacific Biodiesel are preparing to open a new biodiesel production plant in Salem. The new SeQuential-Pacific Biodiesel facility will produce up to 5 million gallons of biodiesel a year, and will replace a 1million-gallon facility next door, which will be dismantled and sold.

Investors in the enterprise include country music legend Willie Nelson, who runs biodiesel in his tour bus; Ron Tyree of Tyree Oil Co. in Eugene; Cameron Healy, founder of Kettle Foods, a Salem snack-food maker that supplies SeQuential with used cooking oil; and John and Susan Miller, sustainable developers in Salem.

The new plant, which will employ 14 full-time workers, will be more efficient and more environmentally friendly than the old plant. Wastewater production, for example, will be reduced to zero, Hill said.

While a fivefold increase in production capacity is a big jump for SeQuential, the new plant is small compared to a facility built by a competitor, Imperium Renewables. The Seattle company last year opened a plant in Grays Harbor, Wash., capable of producing 100 million gallons a year, one of the nation’s largest biodiesel refineries.

“We’re growing our processing to fit the market,” Hill said. The new plant in Salem will ramp up production “as quick as we can source the feedstock,” said Tyson Keever, plant manager and a SeQuential managing partner.

Once the plant is producing 5 million gallons a year, that will trigger the state’s renewable fuel standards for diesel, requiring that all diesel sold in Oregon include at least 2 percent biodiesel, Keever said.

To make sure it has enough source material to feed the new facility, SeQuential-Pacific is about to acquire a waste-oil collection company and launch a new subsidiary called Encore Oils that will collect waste oil from restaurants in Oregon and Washington. Keever said Oregon and Washington restaurants get rid of 15 million to 20 million gallons of used cooking oil each year.

Most commercially produced biodiesel is made from virgin oil from seed crops, mostly soy oil. But about 90 percent of SeQuential’s feedstock is used cooking oil, while the balance comes from virgin seed oil grown in the Northwest.

Hill said used cooking oil has the lightest carbon footprint of any biodiesel feedstock.

The new oil-collection company will give SeQuential more control over its main feedstock and provide some protection against big jumps in price, Hill said. Until just a few years ago, restaurants paid haulers to take away their used cooking oil. Now it’s a commodity that’s so valuable that restaurants in some areas are having to padlock their barrels to protect against theft.

Hill said the company also is trying to foster alternative sources of seed oil crops that can be grown in the Northwest, such as camelina, a crop that’s cheap to grow, has a shortgrowing cycle and doesn’t require irrigation.

Some wineries have begun using camelina as a cover crop between vine rows. Hill is hopeful more growers will plant camelina if the U.S. Department of Agriculture approves the use of the meal — the material left after the oil is crushed out of the seeds — as livestock feed.

Hill said SeQuential will continue on its path of sustainable growth, backed by “visionary investors” who have a long-term outlook, and a loyal base of customers such as Beatty who go out of their way to buy fuel at the Eugene filling station.

“We won’t shoot the moon,” Hill said. “We’ll grow organically.”