Standing On Its Own 2 Feet
From the outside, it may seem as though the biodiesel industry had a tough year. An amalgamation of economic and political factors have impacted most biofuel sectors, perhaps the most obvious of hindrances being plummeting oil prices.
Diesel costs fell throughout 2015, recently reaching a six-year low, and are forecast to fall even further in 2016. The U.S. DOE’s Short-Term Energy Outlook issued in December projected the average price of diesel to settle at $2.71 for 2015, and $2.67 in 2016. A recent OPIS report cited B100 prices at $3.37, falling from an average of $3.55 per gallon in summer 2015.
To compound matters, the biodiesel tax credit expired Dec. 31, 2014, for the fourth time in six years. At press time, the U.S. House and Senate passed a two-year retroactive extension of the $1-per-gallon blender credit. Two weeks prior, a restructured version of the tax credit as a producer incentive was introduced in Congress. Producers were hopeful this would pass but at the last minute the incentive was reverted back to a blender credit, voted on, and passed. The credit is now retroactively in effect from Jan. 1, 2015, through Dec. 31, 2016.
And finally, the U.S. EPA’s renewable fuel standard (RFS) renewable volume obligation (RVO) numbers were woefully late, stirring up investor uncertainty and stymieing development. The highly anticipated numbers were released Nov. 30, 2015, and the volumes for biomass-based diesel were higher than the spring proposal—1.63 billion gallons for 2014, 1.73 billion gallons for 2015, 1.9 billion gallons for 2016, and 2 billion gallons for 2017. Good news overall, years late, nonetheless.
Despite these hurdles, a closer evaluation of the U.S. biodiesel industry and feedback from producers and developers tells a bit of a different story. Below is a cross section of developing projects to watch in 2016.
2 Biodico Projects
Roughly two decades ago, Russ Teall, founder and president of Biodico, launched a company that focused on modular, multifeedstock biodiesel plants called Biodiesel Industries. After prototypes, pilots and some work with the U.S. Department of Defense and U.S. DOE, the company built its first commercial plant in 2000, and subsequent plants in Australia, Colorado and Texas, all of which were sold off. “We designed, built, operated and then sold to our strategic joint partners once everything was up and operating correctly, in order to fund the next plant,” Teall says, adding that, considering the unique, proprietary technology of the plants the company builds, Biodico decided that its two latest projects, one recently completed and the other under development, will remain owned by the company.
The first project, Biodico Westside in California’s San Joaquin Valley, is a partnership between Biodico and Red Rock Ranch. The 20 MMgy plant was completed in the fall, with the first runs of biodiesel made in early December. “The next facility will be at the Naval Base Ventura County, a joint venture we started with the U.S. Navy in 2002,” Teall says. “It initially focused on biodiesel, but now focuses on all biofuels and bioenergy. We’ll be building a biodiesel facility there similar to the one up in west side, supported by renewable, combined-heat-and-power onsite resources.”
Similar to the design of Biodico Westside, the 10 MMgy Naval Base Ventura County plant—a partnership with the U.S. Navy, and supported by the California Energy Commission—will gasify dry biomass, mostly prunings from local orchards and vineyards, and also utilize anaerobic digestion for wet biomass such as crude glycerin, rotten fruits and vegetables, to produce heat and power consumed on-site, according to Teall. The location is already home to the Biodico Technology Test Site, which was built with a CEC grant and is the result of a five-year joint research and development project between Biodico and the Navy. One facet of the partnership is training Navy engineers to learn ASTM standards, Teall says, as well as what might go wrong in the process causing the fuel to fail to meet them.
And that is where the most unique part of Biodico’s process comes into play, according to Teall. “A lot of the testing that’s involved is time-consuming—running the gas chromatograph, it takes 45 minutes. The conclusion we’ve come to is that, to make on-spec biodiesel, there are two ways to do it. One is to test the batch when it’s done, and that might tell you that on Monday morning you made a mistake, but the other is to divide the process into a series of steps, and to test at the end of each portion of the process. By doing that, you’re not wasting time finding out at the end of the day that you did something wrong in the morning,” Teall says.
Biodico has implemented the latter option—real-time testing. “If you want to know, at end of the transesterification step, whether you have any residual glycerin, mono-, di- or triglycerides, you run a GC test and 45 minutes later it tells you,” Teall says. “We can tell exactly the state of the reaction at every single step—a series of sensors and protocols that give us that. We developed that with the U.S. Navy, and it’s incorporated into the new facility.” The next step is incorporating real-time sensing into automation.
Real-time testing differentiates the company as a biodiesel producer, Teall says, and renewable energy is a second distinguishing factor. “In 2004, we got a U.S. EPA award for using landfill gas to run our boilers, our first prototype biodiesel plant was run by small-scale solar … it’s a continuation of that focus on renewable energy to create renewable fuels.”
On challenges with launching two projects in today’s economic climate, Teall says there were not many surprises. “It was our fifth plant, and we have a focus on getting things done thoroughly and quickly. We obtained all of the necessary permits, networked with all of the agencies, and the fact that it was my area of practice helped quite a bit in understanding what the rules are and what the agencies are looking for, and being able to give it to them.”
Teall says he doesn’t worry so much about today’s low diesel prices. “The single largest factor in biodiesel production is feedstocks and their cost, and that has to be addressed right up front,” he says. “We need to zero out all of the subsidies and incentives, because if your business is not stable without subsidies and incentives, then you’re exposing your investment to a lot of risk—people tend to forget that.”
Lakeview Biodiesel LLC
When Lakeview Energy was considering purchasing a shuttered 10 MMgy biodiesel plant in Moberly, Missouri, it recognized it might appear outside of its interests, as the company has investments in agribusiness, wind energy and two ethanol plants located in Merrill, Iowa, and Coshocton, Ohio. But the prospect of diversifying its biofuel portfolio with biodiesel, the attractive characteristics of the Moberly site and its proximity to the company’s ethanol plants equated to an opportunity that was just too appealing to pass up, according to CEO Jim Galvin. The plant retrofit is moving full steam ahead, he says, and plans are to bring it online in Q2 2016. “I just recently visited the site, and right now, there is probably more equipment outside than inside,” he says.
At Moberly, the company will deploy a multifeedstock-capable transesterification process, using various fats, oils and greases, potentially including distillers corn oil from the company’s ethanol plants. “The geography of this plant was one of the big things for us,” Galvin says. “We’re almost equal distance between Kansas City and St. Louis, where there are good local markets for our product. A project we’re working on right now is access to rail—we’re working with the local Missouri railroads to see what our options are there, to enable us to serve other local markets.”
Raw material availability was a key factor in the decision to purchase the plant and move forward with the retrofit, Galvin says. “There’s a good supply chain there. And one of the things we looked at was the potential for our [existing] plants—Plymouth or Three Rivers—to be able to supply corn oil, and whether it would be cost-effective for us. That’s advantageous to this particular location.”
Another aspect Lakeview evaluated was what kind of local support the project would have. “It was a very important first step,” Galvin says. “With any kind of stressed asset purchase, there can always be issues, so this was something we looked at before we made the investment. We’ve gotten very good support from the local economic development and city councils, and we’re recruiting staff at the moment and are in the interviewing process, and have taken on a number of people already.”
Galvin says diesel prices were considered but had little impact on the decision to purchase the Moberly plant, as the company makes long-term investments. “If we made decisions based on the short term, we’d never get anything done—the market moves so quickly,” he says. “Fundamentally, we looked at this and believe there’s a bit of a consolidation play to take place in the biodiesel industry. Our plan is that if this goes successfully, we’ll look at a number of other acquisitions in the biodiesel sector. We’re not looking at this as a sole, stand-alone project.”
When Irving, Texas-based Benefuel Inc. brought to market its novel, patented Ensel technology, a catalytic process capable of refining renewable, high free fatty acid (FFA) feedstocks into a variety of products, it snagged the interest of Flint Hills Resources LLC, a leading refining, chemicals, biofuels and ingredients company. Considering the interests and experience of both companies, the partnership made perfect sense. “Flint Hills Resources is a leader in the transportation fuels industry, and has a long history of blending biofuels,” says Jeremy Bezdek, vice president of biofuels and ingredients at Flint Hills Resources.
In fact, the company has been blending ethanol into gasoline since the 1990s. “We are continually looking for ways to innovate and optimize our transportation fuels business and further create value for our customers and society,” Bezdek says. “That’s why, in 2010, our company purchased its first two ethanol plants in Iowa. Since then, we have added an additional five ethanol plants to our biofuels fleet making Flint Hills Resources the fifth largest producer of ethanol in the U.S.”
In 2011, FHR purchased the Beatrice, Nebraska, biodiesel plant out of bankruptcy. The same year, it made an equity investment in Benefuel, a company that Bezdek says has developed a technology that could dramatically improve the cost-effectiveness of biodiesel production. “We believe the Benefuel technology has the potential to expand the range of low-cost feedstocks used in biodiesel production,” he says. “The Ensel technology process combines esterification of FFAs and transesterification of triglycerides into a single process step, which is a long-standing technology goal of the biodiesel and oleochemical industries.”
Resulting from FHR’s investment in Benefuel is the Beatrice plant, a joint venture titled Duonix Beatrice, which will represent the first commercial use of the Ensel technology. “Flint Hills Resources has been hired by Duonix to be the operator and employer,” Bezdek explains.
Duonix Beatrice will be feedstock-flexible, able to run on distillers corn oil, used cooking oil and animal tallow, and, of course, soybean oil. “Feedstock flexibility will allow the plant to purchase lower-cost feedstocks,” he says, adding that the types purchased will depend on the market.
Progress continues at the Duonix Beatrice plant, with a start-up planned in early Q1 2016, Bezdek says. “In preparation for the planned start-up, we have begun plant commissioning including conducting safety checks on plant equipment. These checks include tests on piping integrity, and safety systems designed to maintain balance in industrial systems.”
On project challenges, Bezdek says Beatrice marks the first time FHR has built a plant from nearly the ground up. “That means we couldn’t draw on past experience as a guide,” he says. “It began with a clean slate.”
And part of working from a clean slate meant putting together a new—and right—team, which will include about 50 people when the facility is operational. “We are happy with the results,” Bezdek says. “We have a talented team of individuals, some drawn from within Flint Hills Resources, some from Benefuel, and some drawn from elsewhere, with extensive experience. They have worked hard to get the plant up and running.”
Another hurdle faced in the beginning was thoroughly testing and validating the Ensel technology. To do so, a pilot plant was constructed near FHR’s Euless, Texas, fuel terminal. “After multiple rounds of testing, we felt confident the technology would be sustainable at a commercial-scale operation,” Bezdek says. “Our next challenge will be scaling up production and, with luck, proving our assumptions were correct.”
And finally, earlier in the year, Beatrice and surrounding areas were hit with 25-year flooding, which washed away some of the railroad tracks leading to the plant, leaving equipment stranded at another location. “Waiting for delivery put pressure on our timeline and resulted in some construction delays,” Bezdek says.
On the recent release of the RFS RVO numbers, Bezdek says they have no bearing on the company’s decision to operate its plants. “We don’t consider it a significant factor in the viability of this project, or our biofuels and ingredients business,” he says.
Colocated with CHS’s 125 MMgy ethanol plant in Annawan, Illinois, is a 5 MMgy supercritical biodiesel plant designed and built by process technology firm Jatrodiesel Inc. In an early November interview, Jatrodiesel President Raj Mosali told Biodiesel Magazine that the final stages of tying the automation into the process were underway. The innovative facility is able to capitalize on the existing ethanol plant’s infrastructure, steam, and distillers corn oil byproduct for biodiesel feedstock.
Jatrodiesel describes its Super technology as a single-stage process that eliminates esterification and transesterification, puts no limit on FFA levels in feedstock, and cuts the cost of traditional biodiesel refining by 25 to 28 percent, in part by eliminating the need for conventional catalysts.
During the process, feedstock is mixed with methanol and is introduced into the Super column, which operates in a supercritical environment. High temperatures and pressures are maintained, and complete conversion takes place in minutes with minimal or no loss in yield, according to Jatrodiesel. The feedstock’s water content also has no effect on the process. The mixture coming from the Super column is then sent through a separation process to isolate biodiesel from glycerin, and the excess methanol is recovered. The biodiesel is then either water- or dry-washed to remove excess glycerin. “This changes the whole landscape,” Mosali says. “The simplicity is remarkable—we’re talking three or four steps in the Super process vs. 10 steps in traditional biodiesel processing. We have built 18 traditional biodiesel plants, and we know the complexity in the process due to variable feedstocks and FFA and, also, the complexity in operations due to various processes involved. The Super process addresses those issues and solves them.”
There were three main challenges in commercializing the Super process, according to Mosali. The first was scale-up of a technology that has never before been commercialized. “There’s no supercritical process used in a chemical plant at this volume, so all the pumps, valves, reactors, automation—it was all new ground for us,” he says. The next hurdle was making the process truly continuous vs. batch. Most supercritical operations in other industries are batch, Mosali explains. “How to pressurize and relieve in continuous fashion was important,” he says. The final and perhaps most significant challenge was overcoming the high equipment costs for a supercritical process. “If our capex was two to three times the cost of a traditional biodiesel plant, then simplicity and lower operational costs of the process wouldn’t matter,” Mosali says.
In addition to the above projects, numerous others are under development, including Renewable Energy Group Inc.’s four plants in Emporia, Kansas; Clovis, New Mexico; Atlanta, Georgia; and New Orleans, Louisiana. Biodiesel Magazine was unable to obtain project updates from REG, and information on the projects wasn’t provided during its Q3 2015 financial earnings call. However, CEO Daniel Oh said the company is making a “meaningful upgrade” at its Danville, Illinois, biorefinery. “We’re investing over $30 million for a variety of enhancements that will enable us to produce high-quality biodiesel more efficiently,” he said during the call. “We’re adding distillation equipment that will result in a more pure final product, as well as expanding feedstock pretreatment capacity, storage and other logistical enhancements. Those upgrades are on track and we expect upgrade work at Danville to be completed around the middle of 2016.”
Additional proposed projects include Viridis Fuels’ 10 MMgy Oakland, California, facility, which received a CEC grant and is in early stages of development, as well as a new glycerin refinery at Louis Dreyfus Commodities 90 MMgy plant in Claypool, Indiana, scheduled to come online by the end of 2015. In addition, New Heaven Chemicals is nearing completion of an 18,000-ton sodium methylate plant in Manly, Iowa, to serve the growing, regional market, says Prasad Devineni, NHC managing director, with a second, larger catalyst plant under development in Houston.
While the past year hasn’t been the best of times, it certainly hasn’t been the worst, and many projects have been moving forward, tax credit or not, low diesel prices or high, confident in biodiesel’s role in the domestic fuel market. The biodiesel industry continues to develop and evolve, demonstrating the ability to stand on its own two feet.
Author: Anna Simet
Associate Editor, Biodiesel Magazine