Demand for biodiesel solicits investors' millions, shuns others

Just this month, a biodiesel company continued its canvassing for investors in Springfield, an Ozarks farmer concerned about dwindling raw materials sidelined plans for a small biodiesel plant in Aurora, and Springfield officials orchestrated a meeting to discuss alternative fuel production and consumption.

“The biodiesel market – in and of itself – is huge,” said Rob Wood, the chief operating officer of Crane-based renewable energy firm American Green Holdings Inc. who attended the June 1 meeting at Drury University. “The demand far outstrips the supply.”

City officials, led by Councilman Dan Chiles, are planning a conference later this year to continue discussions about biodiesel – fuel made from vegetable oil, primarily soybeans right now, or animal fat – and other renewable energy forms.

Further research that biodiesel can be made from a number of oil-based feedstocks, including canola seeds and castor beans, is aiding a biodiesel business boom.

As of Jan. 31, more than 100 U.S. companies were manufacturing and actively marketing biodiesel with a combined annual production capacity of 864 million gallons, according to the National Biodiesel Board in Jefferson City.

Missouri is only home to a handful of biodiesel plants, but several are on the drawing board. Heartland Biodiesel LLC plans to build a $23 million plant near Rock Port, north of St. Joseph near the Missouri-Nebraska border. Company representatives have recruited investments from the Springfield area, though they would not disclose the sum or by whom.

Closer to home, Billings dairy farmer Mike Kendrick had hoped to build a smaller biodiesel plant in Aurora’s industrial park under the banner of his company, BioForce Fuels. But he said large agricultural companies that can afford the rising price of soybean oil have edged him out of the emerging biodiesel market.

“I don’t know if there’s going to be any room for a guy that just wants to buy oil and make (biodiesel) fuel,” he said.

Grass-roots equity drives

Companies that sell securities in Missouri are required to register with the Missouri secretary of state or obtain an exemption, but the office doesn’t categorize the companies by the nature of their business.

In 2006, however, at least 17 companies clearly affiliated with alternative fuels registered with the state or sought an exemption, said spokeswoman Carrie Bebermeyer.

Heartland Biodiesel’s organizers have crisscrossed Missouri to raise seed money for their plant, which will be capable of producing 30 million gallons of biodiesel annually. Company officials have made their pitch in St. Louis, Kansas City, Columbia, Jefferson City and Joplin among other cities.

As of June 5, the company was about $1.8 million shy of its fund-raising goal, said Stan Griffin, chairman of the company’s board of managers. That was before back-to-back investment seminars June 7-8 in Springfield and Rolla. Average turnout for the seminars is between 50 and 100, Griffin said.

In letters mailed out in late May, Heartland invited about 7,500 area people to attend the seminars. Individuals were selected based on their personal income, Griffin said.

“The demand for biodiesel continues to emerge at a rapid pace in the United States because of rising oil prices, the desire to reduce our country’s dependence on foreign oil and the adoption of both federal and state incentives which promote its use,” the letter reads. “Missouri entrepreneurs have the momentum in place to capitalize on this demand.”

Heartland’s biggest investor is Ralston, Iowa-based Renewable Energy Group Inc., which has pledged $3 million to the plant – the company’s largest investment in a majority farmer-owned biodiesel plant. Farmer-investors own 77 percent of Heartland, Griffin said. “Ours is pretty much a grass-roots thing,” he added.

Heartland’s equity drive began in August and will conclude at the end of June, with plant construction expected to begin later this summer. The plant will be built about five miles west of Rock Port in Atchison County, one of Missouri’s top counties for soybean production. The county is also part of the Corn Belt, which is fueling the country’s exploding ethanol industry.

“Biodiesel is where ethanol was five years ago,” Griffin said. “The time to have gotten into ethanol to make the money was four or five years ago.”

The plant site was selected for its Burlington Northern Santa Fe rail access and its proximity to Interstate 29, continuous soybean crush facilities and hog slaughterhouses in St. Joseph and in Omaha, Neb., he said.

Heartland will own the plant, which will be designed, built and managed by REG.

Small-plant struggles

As Heartland forges ahead, farmer Kendrick is leaning toward nixing his plan to build a small biodiesel plant. Kendrick bought three acres in Aurora for the plant and spent some $20,000 on feasibility studies and environmental assessments related to the project.

Kendrick said he had a loan commitment from Mid-Missouri Bank, but that the financing fell through when the U.S. Department of Agriculture office in Columbia refused to guarantee the loan. Kendrick thinks the dwindling feedstock supply gave the department “cold feet,” but USDA program specialist Matt Moore said Kendrick never completed the application process.

“We never had enough information to say, ‘Yes, we’ll do this or no, we won’t,’” Moore said.

With soybean oil at 35 cents a pound – up more than 10 cents from last fall – Kendrick admits he can’t compete with larger companies like Archer Daniels Midland and Cargill. Ironically, he said, Congress has prioritized aid for smaller biodiesel producers in recent energy bills.

“If you can’t get soybean oil at a fair price, it’s not going to work,” Kendrick said. “I think some of the big companies are kind of putting the squelch on the little guy, because they’re in control of all the soybean oil, and they’ve really run the price up on it.”

Kendrick had hoped to build a plant capable of producing 5 million gallons of biodiesel annually. He said the plant could have supplied the Springfield market as more service stations made biodiesel available to consumers.

City Utilities of Springfield likes the idea of a local biodiesel supply terminal for its bus fleet, said Steve Fraley, the utility’s director of environmental compliance.

Fraley said biodiesel for CU buses, which have been running on a blend of less than 10 percent biodiesel for three years, is delivered by the drum from Jefferson City. The biodiesel is then blended with diesel fuel at a terminal in Brookline, he said.

Beyond CU’s public transit system, there’s not much demand for biodiesel in Springfield. Still, Fraley remains hopeful that other city-based fleets will turn to biodiesel in the near future.

“We look for the day when we increase our utilization,” he said.[[In-content Ad]]