Better publicity, increased relations with farmers and an emergence of extrusion plants are all needed to advance the burgeoning biodiesel industry, at least in the Delta.
A cross-section of representatives from legislators' offices, oil companies, and Farm Bureau and soybean producers from several states met recently to discuss new developments at the first USDA sanctioned biodiesel plant in Mississippi.
Jimmy Chiles, chief operating officer of the refinery Biodiesel of Mississippi Inc., Nettleton, Miss., told the audience that biodiesel — derived from plant oil and particularly soybean oil — is currently profitable for producers and suppliers, as well as less expensive than petroleum for truckers, farmers and other users.
Its economic advantage is due in large part to the federal government, which offers a $1 tax credit reimbursement for every gallon of biodiesel burned, as a well as an additional blending credit that pays 20 cents a gallon up to a 20 percent biodiesel blend (or $4 for 100 gallons of B20 mix).
“Due to the blender's credit offered by IRS and the $1 gallon that also comes back from IRS biodiesel is competitive with petroleum,” he said. “Obviously, the more biodiesel you put into a blend, the more you have on the bottom line.”
Chiles is preparing to open his own refinery, Central Mississippi Biodiesel, on 14 acres north of New Albany, Miss. It should be operational by early September.
A third facility, an expansion of the refinery in Nettleton and capable of producing 38,000 gallons every day, is under construction in Aberdeen, Miss.
Under the bio-energy program, part of the 2002 farm act legislation, $150 billion (currently $100 billion) — has been earmarked toward subsidizing bio-energy plants.
However, that program could expire by September 2006, placing potential investors in the industry in an unfavorable position.
William Tacker, owner of the refinery in Nettleton, which produces 60,000 gallons of biodiesel daily, said most experts and officials seeking to boost alternative fuel sources are focusing on ethanol plants.
But, he said, for the cost of every ethanol plant built, five biodiesel refineries (at a cost of about $3 million each) can be constructed.
“Financially, you can build a refinery and pay for it in one month,” he said. “But money management is the problem.
“If you go to the bank to borrow money on a government program that could go out next year, the banker is not too happy.”
Tacker said arranging proper logistics for biodiesel refineries and securing a burdensome, myriad of operational and environmental permits have proven difficult.
Due primarily to the high cost of crude oil and environmental friendly advantages of burning biodiesel, demand remains high.
According to the National Biodiesel Board, the domestic industry will produce 30 million gallons of biodiesel this year, although it has a capacity of 150 million. The USDA projects demand will grow to 124 million — but with the soaring costs of crude and diesel, demand could go higher and rise quickly.
Tacker said biodiesel production at the Nettleton location can only satisfy one-third of demand levels. Customers include fuel distributors, local trucking companies and telephone service businesses.
One client stands apart. A power company, McMinnville Electrical System, located in McMinnville, Tenn., has used a federal grant to begin incremental trials on a diesel generator which eventually could run completely on biodiesel.
Rodney Boyd, a supervisor at MES, said the 2-megawatt diesel generator is expected to have a 95 percent reduction in nitrogen oxides and close to a 100 percent reduction in sulfur emissions.
“We're going to have a clean-burning and pollution-free engine producing power from soybeans grown in Mississippi and Tennessee rather than sending our money overseas (for oil),” Boyd said.
The refinery purchases its soybean oil from large agribusiness corporations, such as Bunge. For the industry to prosper and for soybean growers to capitalize on the distribution advantages, Tacker said, local extrusion plants (or crushing plants) are needed.
“An extrusion plant, the industry will tell, will cost you $2 million and they guarantee you that you can pay for it in three years,” he said.
He said convincing farmers to make the financial risk and to earmark their crops to a crushing plant from traditional financial commitments is not easy.
“If people would get behind the biodiesel industry, there could be a lot of bio refineries, and farmers could get better prices,” Tacker said.
“Farmers are not going to make a lot more off soybeans because of refineries. The only way that farmers can make more money is if they start putting in extrusion plants. That is what farmers have to do. I think you could get a group of 20 or 30 farmers together (to invest).”
Parks Wells, executive director of Tennessee Soybeans, who attended the meeting, said interest in biodiesel in that state has recently “exploded.”
The Nettleton refinery, he said, is the closest one to Tennessee, but he noted there has been a lot of investment interest in new refineries in recent weeks, especially near Memphis, a major transportation hub.
“In general, the price of soy oil has dragged the price of soybeans, so an increased demand for soy oil for biodiesel would help,” Wells said.
He noted that during the 1980s, several crushing plants operated in the Mid-South, but economics — in part a dramatic decline in Mid-South soybean acreage — forced them to close.
Tacker said the meeting's overall goal was to clarify any misinformation about biodiesel and expound on generic information already widespread.
“What we hope to do is stimulate someone or some group to ask us for more information about biodiesel,” he said.
He said he wished there was as much interest in biodiesel regionally and nationally as there is concerning ethanol. “This industry is ready to go. We need people to form co-ops and we needs extrusion plants. We don't want this industry to fail.”