Adding Fuel to the Fire
Cover Story
By Stephanie Sims   
Tuesday, 31 July 2007
smc Global warming concerns are driving interest in biodiesel fuel as an alternative to petroleum diesel fuel. REG is marketing it heavily to reach even more consumers.
Global warming concerns are driving interest in biodiesel fuel as an alternative to petroleum diesel fuel. REG is marketing it heavily to reach even more consumers.
A 1998 biodiesel lifecycle study, jointly sponsored by the U.S. departments of energy and agriculture, found that biodiesel fuel reduces net CO2 emissions by 78 percent compared to petroleum diesel. Because global warming is a hot-button topic today, biodiesel fuel is being looked at more seriously by consumers.

Biodiesel fuel is made of esters from vegetable oil, soybean oil, canola oil, sunflower oil and animal fats. According to the National Biodiesel Board, biodiesel is the only alternative fuel to fully meet the health effects testing requirements of the Clean Air Act. Using biodiesel in a conventional diesel engine results in a substantial reduction of unburned hydrocarbons, carbon monoxide and particulate matter in comparison to emissions from diesel fuel, the board maintains, and also has lubricating properties which reduce engine wear and extends engine life.

An estimated 200 million gallons of biodiesel was sold in 2006, and Renewable Energy Group (REG) sold approximately 40 percent of it. Founded in 1996 and incorporated in August 2006, REG, headquartered in Ralston, Iowa, is one of several companies serving hundreds of clients that use biodiesel blends in a variety of industries. President and COO Nile Ramsbottom says a challenge for all biodiesel companies is to make sure the product’s quality is maintained. “Biodiesel is a wonderful fuel, but it has to be marketed correctly and [be] of high quality,” Ramsbottom says.

“My concern is this is a relatively new industry, and I want all participants to make high-quality fuel,” he says. “Some companies think if they build a plant, that’s all they need to be concerned about and people will flock to the plant for products. I want all participants in this industry to make high-quality fuel, and I encourage them to make high-quality fuel. Three years from now, I might not be that benevolent to competitors, but today, as we’re building this business, we need to make sure everyone has a high-quality product to offer.”

The petroleum industry’s quality standard is set at American Society of Testing and Materials (ASTM) 6751 and to make sure it is met, Ramsbottom says REG double-tests the biodiesel. “We test it every two hours while it is being made, and we test it again before we ship it out,” he says. “Nothing leaves the facility without it meeting the standard. To build volume in this industry, we have to make sure everyone has a good experience with biodiesel fuel. We’re still breaking into this territory, and to replace diesel fuel, we all must be bona fide companies. With biodiesel, we can build a great industry.”

Marketing Biodiesel
REG says it leads the industry in biodiesel sales and is the only full-service company that offers plant construction, production, management and marketing services to other companies. The company actively markets biodiesel to users in the military, maritime, mining, on-highway fleet, agriculture and home-heating market sectors. The agriculture and truck industries comprise 65 percent of REG’s customer base.

A network of partnerships allows it to distribute biodiesel to any location in the United States in a timely manner. This system also helps it market the cost-effectiveness of its products and promote itself as a “one-stop entity in the biodiesel business,” Ramsbottom says. “REG has a nationwide transportation network that helps REG distribute its high-grade fuel to any strategic location throughout the U.S., and a national sales network to market the fuel,” the company says. “The distribution network and the ability to produce high volumes of fuel help REG move large amounts to nearly any location on schedule.”

“We are the largest marketer of biodiesel in the U.S.,” Ramsbottom says, “and we’ve made a lot of arrangements with consumers that includes a number of terminals to distribute the product and get it out to other states where customers want it, when they want it.”

Raising Confidence
Ramsbottom says its marketing plan is geared toward raising confidence in the product. “For example, a truck fleet may decide to use biodiesel, but want to be assured of its quality,” he says. “We don’t want to take on a customer until they are assured we have a supply of high-quality biodiesel.”

He says he looks forward to meeting growing demand. “The coordination of bringing on more supply and building plants that can be ready to produce fuel at the right time is a bit of a challenge, but it’s a positive thing, and one challenge we look forward to,” he says. REG has seven plants in its network; three are producing, four are under construction.

Key Challenges
Ramsbottom says REG is the only platform biodiesel company. It has the technology and construction divisions to build and construct plants, as well as a purchasing team to purchase raw materials and manage risk. In addition, REG manages plants for third parties and markets all finished biodiesel product.

REG’s commercial-scale plants produce 30 million to 60 million gallons of biodiesel per year. Of its seven plants, three are in production in Ralston and Wall Lake, Iowa, and Albert Lea, Minn., and four are under construction in Newton, Farley, Washington and Algona, Iowa. The company produces around the clock, and all its plants meet biodiesel quality (BQ) 9000 production standards.

“The biodiesel production process starts with facilities,” REG notes, adding its key construction expertise includes:
• Process design, engineering and hazard management procedures
• Implementation of technology
• Safety management
• Structural, mechanical, electrical and control-system engineering
• Heat tracing of piping and vessels

“We’re convinced we have the best technology that exists today,” he says. REG constantly updates its plants’ technologies, he adds. “Before we built our first plant, we looked at technology all over the world.

“We discovered what we had thought about doing for our plants was just as good as the technology that existed anywhere. We put our technology in place and that’s when we started selling it to others. It’s proven to be excellent. For example, we lowered our products’ cost to lower than we thought we could, and exceeded our quality standard because of our plant technology.

“We introduce new tweaks to biodiesel products to make things different and a little better,” he continues. “We are constantly doing experiments and research on new methods on how things might change. We normally don’t do any major changes, though, just enhancements.” Ramsbottom notes REG owns several patents and has others pending.

Training the Work Force
The company has extensive training programs for all employees, not only those who operate REG’s plants. Employees train at the company’s campus at its headquarters, and when the company begins building a plant, new employees learn while on the job. “While building the plant, we’re also showing them how to operate one,” he says. “It’s a dual training program.” REG can simulate the production processes so employees can practice before they operate and manage the real thing.

“We have video screens that basically simulate the operating room of a plant,” Ramsbottom explains. “All our plants are built with high-tech operations with computers, so we can simulate the same operating processes in a training class.”

Expensive Soybeans
“With our announcement of our incorporation in August 2006, one of our business partners is Bunge North America, one of the largest oil processors in the world,” Ramsbottom says. “We announced we’d build plants in conjunction with the oil supply. “We started in the Midwest, but will be going to other regions because of a combination of raw material supplies and fuel demands. As we get toward larger and larger cities, there will be a larger demand.” The increasing prices of raw materials is the biggest challenge for REG currently. The company produces SoyPOWER biodiesel, biodiesel fuel made from soybean oil, and the increased price of soy has forced REG to make fuel from other esters.

“Although there are record supplies of soybean oil today, the price has gone up fairly dramatically,” Ramsbottom says. “One reason why is because of competition. Whether farmers plant corn acres or soybean acres is because of the ethanol demand, which lessens the supply of soy. Therefore, the soybean oil price is higher because the market is anticipating less soybeans being planted this year.”

REG tries to mitigate market risks as much as it can. “We look for feedstock materials other than soy,” he says. “At the moment, that’s the biggest opportunity we have [to keep producing biodiesel]. We can use any triglycerides, like animal fat, canola oil, corn oil and peanut oil.

“Animal fat, as a feedstock, has different characteristics, such as more acid than soybean oil,” Ramsbottom continues. “But multifeed stock is capable of making the same quality biodiesel. It’s all about making high-quality biodiesel.” This doesn’t mean the company won’t sell as much SoyPOWER brand biodiesel, however. “What we do is blend animal fat with soy,” Ramsbottom says. “There is some soy in everything we produce and we can still sell it as the SoyPOWER brand.”

The Future of Biodiesel
REG plans to continue to expand and find more uses for biodiesel. “Today, we sell it to customers who use it in [several industries],” he says. “In the Northeast where natural gas is limited, the home heating industry is a growing industry. The cruise ship industry and over-the-road trucking industry, the largest in the U.S., are areas we’re in but want to expand in, as well.”

In addition, some grocery retailers may soon purchase products from REG. Safeway Inc., a national food and drug retailer., recently started offering the clean-burning B20 blend of 20 percent biodiesel and 80 percent petroleum diesel at a retail location in Seattle.

In addition, Safeway is selling REG’s SoyPOWER brand biodiesel. Tacoma, Wash.-based SC Fuels, which is the largest biodiesel storage and distribution company in the state, will be the sole distributor, and Safeway is considering offering B20 at other fuel centers. “With the addition of biofuels at its West Seattle location, Safeway is taking a bold step toward helping our city, state and country become less dependent on fossil fuels alone,” Tacoma Mayor Greg Nickels said in a statement.

“Safeway is leading by example and setting a standard for environmental partnership.” With the use of biodiesel spreading, Ramsbottom is positive about the future. “We’ll be building plants constantly, working on quality enhancements and getting more customers,” Ramsbottom says.
 
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