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Blue Means GO

Blue Sun Biodiesel is taking biodiesel to the people with its new state-of-the-art blending terminal and network of retail pumps. With production plans in place, this small Colorado company is poised to handle growing consumer demand in the American West.
By Nathan Ward | December 01, 2004
A brisk autumn wind blew across the dusty rail yard in Alamosa, Colo., as big farm pickups pulled up to the new Blue Sun Biodiesel blending terminal and future processing plant. An industrial grand opening was taking place next to the rail lines, and it wasn't your typical crunchy environmental crowd, but salt-of-the-Earth farmers wrapped in Carhart coats and windbreakers, coming out to celebrate the grand opening of what's been called the most advanced high-volume biodiesel facility in the country.

Located in the heart of the San Luis Valley, the nearly-finished blending terminal represents the rise and evolution of biodiesel in America. As the farmers and their families toured the facility, some of them must have felt pretty good, knowing that they were part-owners in a privately-held company whose stock value has increased significantly in the last year. They have invested in a company that is poised to become a major player in the biodiesel industry and believes that its innovative marketing, agricultural development and future co-located plant and terminal will vault the company to the head of the field. This hard-charging company wants "Blue Sun B20" to become household words in the American West.

Give consumers want they want
Blue Sun Biodiesel opened its doors in 2001 and the company now employs eight people at its headquarters in Fort Collins, Colo. In addition to the small staff, the company relies on a dedicated support network of 3,000 people in the region-real biodiesel believers-everyone from contractors to soccer moms to city administrators.

Like its diverse support group, a lot of the action in Blue Sun goes on behind the scenes, but one of its most visible efforts is a network of 16 retail pumps throughout Colorado and one in Santa Fe, N.M. Each of these pumps displays the flaming Blue Sun logo and serves up B20 on demand to anyone who wants to burn it in their vehicle. Many more communities are working to bring biodiesel to their area and the number of retail pumps in the Mountain West-Wyoming, Colorado, Nevada, Utah and New Mexico-could double by the end of 2005, according to Blue Sun and other biofuels advocates.

"We've had a really good experience with Blue Sun B20 at one of our stations and volume has increased 40 percent compared to our past sales of regular No. 2 diesel," said Glen Babcock of Heartland Town and Country in Fort Morgan, Colo. "People go out of their way to buy biodiesel, and they're appreciative that we're selling a product that is renewable." Demand for B20 at Heartland Town and Country's two other stations has stayed on par with previous diesel sales, despite biodiesel's higher price tag.

This success story is one of many that define Blue Sun's unique business philosophy in the biodiesel industry. Blue Sun developed its business plan by first learning what the consumer was looking for-a high quality, consistent and convenient alternative fuel. Then it worked backward, starting from the consumer and working its way back to the supply source, taking care to monitor every step along the way. This differs from companies in other industries that start at the supply end and focus on ways to get the consumer to choose their product.

Blue Sun believes that focusing on what the consumer wants has allowed the company to create a business that can control quality at every single level of development and production. Jeff Probst, president and CEO of Blue Sun, explained, "We are an integrated oil company that monitors every step of the process, from seed to fuel tank, in order to create a high-quality consistent fuel."

In its quest to make Blue Sun B20 the standard that other biodiesel blends might eventually be compared with, Probst said, the company is focused primarily on two areas: agricultural development and marketing. In the agricultural development field, Blue Sun continually searches for appropriate crops that grow well in local conditions with a minimal amount of water and chemicals. Probst and his team focus primarily on canola and mustard, both of which can be grown in the high altitude and dry conditions of the Western Plains, and yield a high percentage of oil when crushed.

The company's research doesn't stop there. Blue Sun goes the extra mile to anticipate what crops it will use once the agricultural potential of an area has been reached. Right now the company is looking 10 to 20 years down the road to see if algae will be the next plant to put the responsible fire in fuel.

A popular cause
On the marketing side, the high-profile retail pump network is a success, and Probst has backed the pumps up with events involving local celebrities like Denver Mayor John Hickenlooper, also owner of the successful Wynkoop Brewing Company. He presided over ceremonies where Blue Sun opened a large retail biodiesel station in Denver. At the same time, Hickenlooper announced Denver's decision to run 60 public works vehicles exclusively on biodiesel. Both events received great press attention. With keen marketing and a central location in the heart of Colorado's progressive university communities, Blue Sun is well positioned to meet its goals.

Blue Sun's agricultural and marketing goals merge in the Alamosa facility, which, Probst said, will be the most advanced combined biodiesel processing plant and blending terminal in the country. The blending terminal is nearly finished and will go into operation in January. If all goes according to schedule, the processing plant will be finished in May.

In the past, Blue Sun purchased B100 from a variety of producers, mixed in its own additives at the blender's facility and sold the B20 under the Blue Sun name. When its first plant is complete and operational, Blue Sun will continue to purchase B100 from select producers, but the company will blend all of its fuel independently in an innovative computer-controlled blending facility. This higher degree of control will lead to a higher quality biodiesel fuel, which in turn will lead to greater consumer confidence, Probst said. "We want people to know that regardless of where they buy Blue Sun B20, it will be exactly the same product each time," he said.

When the new plant opens, Blue Sun will start producing its own B100 from canola crops grown by the farmers in the San Luis Valley. "We can do it all here," explained Dan Mortensen of Alta Fuels, one of Blue Sun's distributors. "Grow it. Crush it. Process it. Blend it. Ship it." This is important because it allows Blue Sun to monitor the entire process, from field to firing.

This biodiesel hub has both truck and rail capacity and can operate at much faster speeds than Blue Sun was able to achieve before. The truck terminal has three lanes and a capacity of 120 mmgy. Where it used to take half a day to blend the fuel and fill a truck, now it takes just 20 minutes. The rail terminal has a capacity of 100 mmgy and can fill a railcar to the brim in one hour.

On the production side, the future Blue Sun plant will be able to produce 3 mmgy of B100, resulting in 15 mmgy of B20. Since the capacity of the truck and rail terminal far outdistances the future production capacity, Blue Sun will continue to purchase B100 from select suppliers and blend it on-site. As demand grows, the company has room to increase processing capacity at its future Alamosa plant.

The promise of local crops
Local farmers are also hoping demand increases, as they are an integral part of Blue Sun's efforts. In 2002, Blue Sun started a farm program to bring local growers into the company to produce the seed crops locally and not import them from other parts of the country. At a series of public meetings around Colorado, the company initially found farmers hesitant about committing their personal resources to an unknown industry. In order to get farmers on the same side of the table, Blue Sun started a value-added farmer co-op that allows farmers to become equity owners in the company.

To buy in, each farmer must invest at least $5,000 (which goes toward equity shares) and plant up to 200 acres with seed that Blue Sun provides. In return, they sell the crop to Blue Sun after the harvest and enjoy a number of benefits that protects their investment even if they have a bad year. To undecided farmers, this arrangement presents a much higher degree of security by giving them three benefits to participate in the program: profit-sharing, equity appreciation and a revenue producing crop that fits in well with their traditional crops. There are currently two farmer cooperatives working with Blue Sun: the Progressive Producers Non-Stock Cooperative in Nebraska and the Blue Sun Producers Cooperative in Colorado and Kansas.

For farmers that got in early, the stock is expected to split in the near future, essentially doubling in value in a very short time, according to Blue Sun. One of the advantages of building a plant in Alamosa is that it lies in the heart of Colorado farm country with many of the growers living within a 30-mile radius.

Expanding its reach
Surrounded by crops or not, the heart of farm country isn't necessarily the place with the most fuel demand, so distribution will be an increasingly important factor as Blue Sun continues to expand its market share. To start with, Blue Sun will continue to use five regional distributors that it has worked with for the last three years to give the company access to northern New Mexico, Colorado, Utah, Wyoming, Montana, Nebraska and Kansas. As demand increases, Blue Sun will expand its range by approaching new distributors about becoming authorized Blue Sun dealers.

In January, Blue Sun will start shipping fuel out by rail. Its Alamosa rail connection could make a real difference in the company's near future because it's an artery that connects the plant directly to the Midwest and the heavily-populated West Coast.

Right now it seems that Blue Sun is enjoying a period of exponential growth and has ambitions to set an industry standard with its B20 blend. Its future production plant should meet the region's near-term needs and the company plans to increase its share of the country's biodiesel market, radiating from the mountain states outward.

However, beyond the nuts and bolts of creating the biodiesel and getting it where it needs to go, one of the most significant achievements of Blue Sun is that it has brought biodiesel to the people of the Mountain West and simply created a buzz. The public is becoming aware of biodiesel and using it on a daily basis. Farmers are realizing that there is money to be made by focusing on crops that lead to alternative fuels. In small Colorado towns like Carbondale, Salida and Commerce City, more and more people are stepping back and saying, "Hey, let's give biodiesel a try." For many people, a movement has begun.

Nathan Ward is a writer and photographer living in Salida, Colo. He can be reached at www.nathanward.com.
 

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