The Biodiesel Boom...and Bust

Back in the summer of 2006...

Imperium Renewables, a 2-year-old Seattle company backed by billionaire Paul Allen, plans to control 40 percent of the growing U.S. market for diesel fuel made from vegetable oil by 2009.

Imperium said last month that it will build a plant in Grays Harbor that will be the largest biodiesel refinery in the U.S. The plant, set to open a year from now, will make 100 million gallons a year. Three more of that size are planned by the end of 2008, Imperium Chief Executive Martin Tobias said Monday.

The U.S. last year produced about 75 million gallons of biodiesel, which is made mostly from soybeans, according to the National Biodiesel Board, a trade group in Jefferson City, Mo. Output will reach 1 billion gallons a year by 2009, Tobias said.

The $78 million plant, which opened in August, is "feedstock agnostic," giving Imperium considerable flexibility when it comes to finding the best deals on renewable oils.  But, the Northwest doesn't have the canola production to fill much of the plant's capacity, and the price of soybeans has spiked in recent years.  Thus right now, most (if not all) of the feedstock is Canadian canola oil and Malaysian palm oil.  We're reducing our dependency upon foreign oil by increasing our dependency upon edible foreign oils...which are also getting more expensive. 

Biodiesel producers are helped by a range of government subsidies and incentives, plus an increasing number of mandates driving the use of biodiesel.  Tobias used to say that biodiesel production would be profitable so long as the price of a barrel of oil remained above $50 dollars.  But now at almost twice that price...

Two weeks after its chief executive officer quit, biodiesel producer Imperium Renewables said Thursday that it would officially postpone an initial public offering because of "unfavorable market conditions" and that cutbacks or layoffs are possible.

...

Imperium filed for the IPO--which was expected to raise $345 million--in May. The company said it would use about $220 million from the stock sale to open 100-million-gallon refineries in Hawaii, Argentina and Philadelphia.

It is unclear whether the company will now continue with those plans.

Spokesman John Williams said cutbacks or layoffs at the 107-employee company could occur because of the cancellation of the IPO, but he could not comment on the fate of the planned refineries, stating only that it was "logical to assume that building three more plants requires more capital."

Switching articles...

Hawaiian Electric spokesman Peter Rosegg said yesterday (Thursday) that the utility "is committed to biofueling the new generating unit on Oahu, and this news doesn't impact those plans."

Imperium's contract with Hawaiian Electric calls for the supply of 5 million to 12 million gallons of biodiesel annually, beginning in mid-2009.

Imperium could lose other customers if delays occur in construction of its planned plants. The company noted in its IPO filing that it has an exclusive agreement to supply biodiesel to Constellation Energy and its affiliates on the East Coast. If Imperium can't supply 100 million gallons by December 2008, it could lose the contract.

With the IPO called off, the company is seeking more capital in the private markets. In the near term, Williams said Imperium will operate from the cash flow generated at its Grays Harbor plant. Imperium also had $25.8 million in cash and short-term investments on the books as of June.

I'm sure with the credit crunch that it's become harder to secure cheap financing.  Plus, the weak dollar is drawing overseas buyers of soybean oil, one of a number of factors helping to drive up the cost of the commodity.  Switching links:

In late 2007, the cost of soybeans rose high enough to begin affecting the biodiesel market in much the same way rising corn costs first began affecting the ethanol industry, with companies such as Indiana’s North Prairie Productions halting construction on proposed biodiesel plants, citing rising commodity costs as the primary reason.

...

Although analysts and investors agree 2008 and possibly 2009 could be rocky years for commodities, biofuels and the economy in general, Newsom says given the natural cycle of the economy, the dollar is likely to rebound after a recession, driving commodity prices down. In the meantime, government will continue to subsidize both conventional farmers and biofuel producers.

In the meantime??

Comments

[John Eyler]

"We're reducing our dependency upon foreign oil by increasing our dependency upon edible foreign oils...which are also getting more expensive."

That's priceless as quotes go.....

[Ten Bears]

Pound for pound, biodiesel, from production to consumption, puts more carbon into the atmosphere than refined petroleum diesel. Just another "feel good" hoax, and waste of taxpayer subsidies to those who shouldn't receive them.

[(Bio)Diesel Dan]

Well Ten Bears , I don't know where that interesting statement came from (Rush Limbaugh?) but there are NO facts to support that and plenty to prove otherwise. Ethanol has an energy return that is barely creepeing over 1 for 1 (currently 1.1 to 1). Biodiesel, however has an energy return of 3.25 to 1, that is 3.25 calories for every 1 used to produce it - including farm and transport. This is according to data from the NBB, USDA and the USDOT. Keep in mind that most of our petro is from a long distance and that takes considerable energy to bring it here. Have you ever been to an oil refinery? I have and used to install turbine generators for GE and believe me it takes a lot of energy to run a refinery - most use 20 to 50 megawatts depending on the throughput.

I am making biodiesel commercially now and we hope to be soon at a 5 to 1 energy return. We are and will use waste oil collected from our region and will supplement with regionally grown canola and jatropha as needed. Then the technology is on the way for algae based oils that have 40 times the yield.

Biodiesel compared to petrodiesel produces 78% less CO2 and 50% less CO. there are no UHCs or particulates (PMs)and the only pollutant not reduced is Oxides of Nitrogen (NOx). The lubricity is far better (ULSD has almost zero as so much Sulphur (S) is removed). The mileage is the same, power (cetane) slightly higher and it just smells better. After conservation it is one of the best solutions for environmental and national security challenges

We take no subsidies now (may later if we begin to blend)and the huge oil companies are receiving huge subsidies, ------that is not OK!

By the way, Imperium Renewables plant at 100 mmgy was sized way too big to be practical and being so huge may make a huge flop and then get real or die. Small is beautiful.

So don't believe all the Limbaughs of the world on biodiesel (or anything else) and check out facts, not propoganda.

(Bio)Diesel Dan