[Sustainable-biodiesel] State's biodiesel industry lagging

[Rachel Burton]

By S. Heather Duncan - hduncan at macon.com

Georgia's fledgling biodiesel industry is struggling in the face of  
the skyrocketing price of oils used to make the fuel, mostly soybean  
oil and chicken fat.

Middle Georgia has positioned itself as a hub for cleaner-burning  
fuels, and six new production plants have been announced in the  
region during the past two years. But some of these companies are now  
pinched by record prices, and they say Georgia isn't doing enough to  
support the industry.

Biodiesel producers nationwide that use soybean oil have been hit  
particularly hard, said Amber Thurlo Pearson with the National  
Biodiesel Board. Three-fourths of biodiesel produced in the U.S.  
comes from soybeans, she said.

"Unfortunately for some (producers), they're having a hard time  
running the plant, especially if they were just opening," she said.

Macon-based Alterra Bioenergy is in this position. It was building  
two plants at once, in Gordon and Plains. A year after being  
announced, the Plains refinery still hasn't gone into production, and  
the company is trying to restructure its business plan.

"(Biodiesel producers) are shutting down and going bankrupt every  
day," said Lisa Ryan, vice president of Alterra and chairman of the  
producer's committee of the National Biodiesel Board. She said her  
company isn't in such dire straits yet, but it has been forced to  
restrict its production to conserve funding.

Pearson said many plants closed or stopped producing last year, but  
in recent months some are restarting. Many of them will compare notes  
on their approach to the tough market at the National Biodiesel Expo  
starting Sunday in Orlando.

Dan Young, a partner in Dublin-based Middle Georgia Biofuels who also  
acts as a consultant for potential biodiesel ventures, said he has  
seen some companies rush into the new industry too fast, only to be  
floored by the competition for feedstocks.

"The industry is literally changing on a weekly basis," he said. "You  
have plants that started a year or year and a half ago coming online  
with soybean oil, and now 20-million-gallon ... even 80-million- 
gallon-a-year plants aren't running because they can't afford to make  
biodiesel for the domestic market."

Pearson said the demand for scarce feedstocks is only going to  
increase, because the federal energy bill passed last month requires  
that 1 billion gallons of biodiesel be sold in the U.S. by 2012.

Several Georgia biodiesel refineries rely on chicken fat, which is  
less expensive than soybean oil. Middle Georgia Biofuels expected to  
make much more fuel from soybean oil when it opened in 2005, Young  
said. Instead, it has made almost all its biodiesel from chicken fat.

Rome-based U.S. Biofuels, the oldest biodiesel producer in the state,  
also switched from a soybean-oil mix to only poultry fat, said  
company President Greg Hopkins.

But even chicken fat has climbed in price and become more scarce as  
biodiesel demand increases. Chicken fat is also bought by the pet  
food industry, and the poultry industry puts the fat back into  
chicken feed for an energy boost, Young said.

Young recalled that in 2005, chicken fat sold for about 18 cents a  
pound. Now it's running between 31 cents and 34 cents.

That has put a pinch on Middle Georgia Biofuels and caused short  
supply blips for U.S. Biofuels, their leaders said.

U.S. Biofuels has grown despite these pressures, partly because it  
started with a small production capacity and added slowly, Hopkins  
said. The company's first refinery produced 3 million gallons of  
biodiesel a year. It later moved into a larger plant where it can  
produce 12 million gallons a year.

"There were times we expected it to be even bigger, and times we  
wondered if we'd even make it to the next day," Hopkins said.

BOON TO GEORGIA

FARMERS?

State agricultural experts say high soybean prices are luring many  
Georgia farmers back to the crop this year.

"I'm getting a lot of calls about soybean varieties and production  
methods," said Ronnie Barentine, extension agent for Pulaski County.  
He said county farmers planted only about 1,500 acres in soybeans  
during recent years, but that might double this year.

"Some people are saying soybeans could go to $15 to $20 a bushel," he  
said - three or four times the price a few years ago.

Laurens County is one of the largest soybean producers in Middle  
Georgia, with 10,00 to 11,000 acres in 2007, said extension agent  
Raymond Joyce.

"These prices have created some optimism, which has been good after  
so many drought years," he said.

Last year, Georgia farmers harvested 275,000 acres of soybeans, and  
that number is expected to climb, said Nathan Smith, an agricultural  
economist for the University of Georgia at Tifton.

Smith did not attribute rising prices to the biodiesel industry,  
pointing instead to growing demand for vegetable oils. China and  
India are using more, he said, and the soybean supply dropped last  
year as many farmers switched acreage to corn for ethanol.

But Pearson and other industry watchers say biodiesel is partly  
behind the high prices.

And Smith said, "Basically it's a bidding game now between soybean  
oil and corn," both food crops used to produce alternative fuels.

SOLUTIONS FOR PRODUCERS

Ryan, with Alterra, expressed frustration that Georgia lags behind  
surrounding states in legislation to promote biodiesel use.

She said Gov. Sonny Perdue has offered only "lip service" to the  
industry. "He has done nothing to help us in this crunch time," she  
said.

However, Ryan expressed some hope after attending a meeting Thursday  
at which Rep. Charlice Byrd, R-Woodstock, said she planned to  
introduce legislation to help the biofuels industry.

Byrd did introduce a bill Friday, which has not yet been assigned a  
bill number, calling for the creation of a Georgia Innovation Center.  
The center and its appointed director would supervise a state-backed  
venture capital fund for startup companies exploiting biotechnology.

"When I attended the Bio International Convention 2007 in Boston, the  
(Massachusetts) governor committed $1 billion" to life sciences  
research, Byrd said. "Unless Georgia starts taking some steps, we're  
in danger of falling off the radar."

Byrd said she also plans to introduce a bill giving tax credits to  
life science industries.

The Carolinas and Tennessee are regional leaders in offering  
biodiesel incentives and tax breaks for producing the fuel and  
installing distribution or retail facilities. Florida and Virginia  
also offer more than Georgia.

Perdue signed a law last year setting up a Georgia sales tax  
exemption for materials used to build new biodiesel plants and  
infrastructure.

"Gov. Perdue believes the best way to support the biodiesel industry  
in Georgia is to create the most business-friendly environment  
possible," said Perdue spokesman Marshall Guest. "That includes  
cutting red tape and allowing these businesses to get up and running  
as quickly as possible."

But biodiesel experts say other measures are needed. Nationally,  
Pearson said it's crucial that a tax credit for biodiesel blenders be  
extended. It's set to expire at the end of 2008.

Hopkins said he'd like to see a federal requirement that all diesel  
fuel contain some biodiesel.

Short of that, he and Ryan said the state should enact a similar  
mandate requiring 2 percent biodiesel. Ryan said subsidies or  
incentives to biodiesel producers, distributors, retailers or users  
would also help. "It's going to take legislators coming together to  
say: 'This is what's good for our state. We need to make it work,' "  
Ryan said.

Sen. Ross Tolleson, R-Perry, said he plans to meet with officials  
from the Georgia Environmental Facilities Authority soon to  
brainstorm ways to help the biodiesel industry flourish. They will  
look at ways to get biodiesel to the consumer and possibilities such  
as tax credits and biodiesel blend mandates, he said.

"I would hope we could get some legislation this session," said  
Tolleson, who chairs the Senate Natural Resources and the Environment  
Committee.

Meanwhile, the industry is exploring immediate alternatives. These  
might include marketing biodiesel as an additive or shipping it  
overseas, Young said.

Hopkins said Europe requires greater biodiesel use than the United  
States, and biodiesel can better compete with high diesel prices  
there. All his company's biodiesel is sold in Europe, mostly the  
United Kingdom.

Alternately, cheaper European oil crops could be imported to U.S.  
biodiesel refineries as feedstocks.

"One positive thing about all this is that research and development  
has gone into overdrive to seek an alternative from soy," said Dennis  
Burnett, alternative fuels manager for Perry-based distributor Davis  
Oil Co.

Guest said Perdue backed a successful 2006 bill to pay for research.  
Georgia universities are working on jatropha and camelina, feedstocks  
that produce nearly five times as many gallons per acre compared to  
soybeans, he said. And because they aren't a food source, they're  
less vulnerable to market forces.

Several biodiesel experts said the most promising alternative might  
be algae, which promises to produce more oil at a lower cost. Plus,  
the meal left after processing could be used in making ethanol,  
Hopkins said.

Staff writer Mike Billips

contributed to this report.

To contact writer S. Heather Duncan, call 744-4225.