A visit from the Dogpatch!

Michele Swiggers and Robin Gold of San Francisco’s Dogpatch Biofuels came to visit the plant a few days ago.

These two started Dogpatch in San Francisco as a B100 filling station.

We get a lot of visitors to the plant nowadays, but I was particularly happy to see these two industry heroines. We spoke a bit about the consequences of the credit expiration, how are tanks have never been filled to capacity, the IRS, and their planned journey to the desert.

Dogpatch Biofuels is a dedicated biodiesel fueling stop, with an 8,000 gallon above ground tank and a retail pump. They also sell Eco-conscious beverages and snacks, as well as fuel additives.

If you have a chance to go out and support these two please do so. I know for my next visit to San Francisco a stop at their little corner of heaven will be a must.

Make it a better place,

Todd

Producers must re-register plants under RFS2

Buried in the middle of the RFS 2 regulations published in February by the EPA are the new requirements for producer program registration. The rules as posted are only the proposed modification to 40 CFR 80, pending publication of the final regulations in the Federal Register, a legal requirement for final adoption.

If you are not already aware, even if your facility was registered under the first version of RFS, it must re-register prior to July 1, 2010 to participate under the auspices of the new program.

The new producer registration requirements are detailed in a densely packed section of the 120 page document.

Occupying roughly four (4) pages, the requirements include a description of the type of fuels produced at the facility (or possibly produced with little modification to the production process),  feedstock used in the production process, the co-products produced with each fuel type,  and the submission by a state licensed, third party, chemical engineer the results of a careful review of your facility process and capacity expectation.

These requirements come at a time when producers are particularly sensitive to issues surrounding cash flow and operating costs, and expenses like a third-party engineering review may seem ill-timed.

RFS 2 participation is important to us here at Promethean. It is a personal initiative for me and I am focused on preparing us to meet the July start date.

There still exists a subset of mysteries whose answers are yet to be revealed by the EPA regarding what the EPA will specifically require as an ultimate demonstration of conformance.

I hope clarity is imminent.

Make it a better place,

Todd

Another bill fails, but we cannot afford to.

It’s the middle of February 2010.  The tax credit expired in January. The powers that lobby have been searching for a legislative mechanism to make it retroactively effective.

The media has begun to report that a now spend-shy Obama administration is entering year two with the agenda of looking less agressive when it comes to deficit-building.

Time also seems to be supporting a sort of congressional priority-awareness when it comes to jobs creation.

The most recent effort to reinstate the biodiesel tax credit was embedded in the Hiring Employees to Restore Employment Act, or the HIRE Act for short.  This piece of legislation when authored by Senators Baucus (D-Mont) and Grassley (R-Iowa) looked to be an excellent bipartisan shot at reinstating the biodiesel industry’s much desired credit. But last week it was announced that Senate Majority Leader Harry Reid (D-Nev) would move forward a version that removed the majority of tax credit inclusions, including the biodiesel tax credit. The reasons for this lack of support are currently the subject of intense speculation, but one possible reason put forward by Nicholas Zeman in his recent article for Biodiesel Magazine resonated with me.

Most biodiesel plants have been constructed to limit the number of employees required to operate them. A certain baseline is required to produce commercially and, after that, personnel requirements vary based on the level of plant atomation, oil collection and delivery receipt approach, testing requirements and equipment, continuous or batch operation, and access to capital. The latter means that no one can say if one job is generated per 1,000,000 gallons produced  or per $1,000,00 in revenue per year.  My personal experience indicates that neither is the case.

Mr. Zeman and his sources speculate that one possible reason is that the tax credit would do little to generate large numbers of new jobs at biodiesel plants, which have most likely been designed with efficiency and reduced need for labor. Of course, as I have said in prior posts in my opinion the credit does little to help the producer and serves primarily to support feedstock suppliers in the determination of a floor price for their product.

That said, it may serve to support farmers, and that may be an area Congress would be better served to consider, although farm jobs may not represent what is currently being considered as new jobs in the “green” energy sector.

It will take some time to introduce the credit extensions in another bill. It may be better if the credits are part of an entirely separate energy package.

What we all need to realize is that other countries are moving forward at lightning speed with their own biofuels programs. America has already given up its manufacturing dominance in many sectors. We cannot afford to let renewable energy be next.

We cannot afford to fail.

Make it a better place.

Todd

On biodiesel, feedstock, and production as a service.

This week the National Biodiesel Boards annual conference will be held in Texas.

With last week’s release of the EPA’s final rules related to RFS 2, a biodiesel mandate will be in place this year.  I suppose a good deal of time will be spent discussing the mandate, the future of renewable identification numbers (RINS), and the current situation with the lapsed excise tax credit.

But whether or not a new mandate is in place or the excise tax credit returns, the core industry problem remains; feedstock.

The life blood of any biodiesel production plant is feedstock. Whatever the feedstock, be it virgin vegetable oil, yellow or brown grease, or animal tallow, in general it must be tracked and prepared for its future conversion to methyl esters.

Feedstock represents the majority of the cost of operation, and its secure and consistent acquisition is a daily challenge. Preparing the oil in a way that facilitates its consistent conversion requires the development and maturation of a carefully coordinated system of processes and practices that allow incoming oil to be collected, cataloged, tested, categorized, filtered, de-watered, neutralized, at times blended, and stored prior to processing.

Promethean is fortunate to have a relatively large facility space, but early  decisions made about our approach to storage has meant that the focus here is on high throughput.

It is easy to build excessive capacity in the biofuels arena and it is more important to conserve cash at startup than to spend it on potential future capacity. The issue here is that we have recently been approached by groups or organizations that want us to stretch the limits of our capacity. Although I am a proponent of service delivery based on just in time manufacture, in this industry issues related to transportation are relatively common, and it is best to have a cushion for problems that may arise from timing or the myriad other things that can interfere with the scheduled drop off of feedstock or pick up of finished product.

I am not conservative. I am a risk taker. The proof of the latter is my participation in this industry.

Feedstock prices in California remain high, and may remain so over the next few months.

At Promethean we view the production of biodiesel first and foremost as a service. This view means that we must constantly explore ways to add value to our customers as well as reduce the costs related to production. Focusing on manufacturing as a service has other consequents as well, some yet to be discovered.

As it stands, an increased level of vertical integration is required in our collection approach and infrastructure, since it is obvious that without the ability to obtain some percentage of the feedstock required for production we cannot sustain-ably render our services in the long term.

Problems are opportunities, and the feedstock problem for a plant of our scale is easily solved with hard work, a commitment to service, and time.

Make it a better place!

Todd