One word: biofuels

Posted in OPINION by Joel Gillespie on Monday, January 30, 2012 at 7:59 am

Hey, remember when ethanol and biodiesel seemed like a good idea, and not just a way for scam artists to make a quick buck? Yeah, me too. In 2007, I heard the siren call of the burgeoning boom, and left a fairly stable job at a soybean processing plant in Council Bluffs, Iowa, to join a consulting engineering firm in Champaign. I thought I was getting into a rapidly-growing business at exactly the right time, but in reality, the wheels were already in the process of falling off.

The engineering firm had two biodiesel plant projects in the design phase, a recently-completed design of an ethanol plant in Canton, Illinois, along with several other ethanol and biodiesel projects on the horizon. With all that work happening in a rapidly-expanding industry, what could possibly go wrong?

If I'd been looking for them, there were already plenty of signs of trouble. The plant in Canton was experiencing serious financial problems during construction and was several months behind on its payments to the firm for which I was employed. They would soon declare bankruptcy.

The majority of the clients whom we were working with had purchased properties that used to contain operating chemical plants, but had been shut down for one reason or another. The clients planned to utilize the existing infrastructure of these "brownfield" sites to produce plant-derived fuels of one sort or another. I'll focus this article on one such project, in which a former cellophane plant in western Indiana was to be used to produce biodiesel. (Note to all you crazy capitalists out there: just because you are able to purchase a bunch of rusty old equipment for next to nothing, don't assume that any of it will actually be useful.)

OIL RUSH

For those of you who may not be familiar, biodiesel is a product similar in properties to diesel fuel. It's normally produced by reacting vegetable oil (or any other fat, like lard or waste cooking grease) with a mixture of caustic (usually sodium hydroxide) and methanol. This reaction produces 90% biodiesel and about 10% glycerin, a byproduct that's used in all sorts of products, including cosmetics. The glycerine needs to be separated from the biodiesel in order to make good quality fuel.

Glycerine used to have some value until the biodiesel boom, at which time the market was saturated with it, and its value plummeted. Therefore, the Holy Grail of biodiesel production is a process that produces less glycerine and has a higher yield of biodiesel relative to the amount of oil fed.

That set the stage for a male nurse and chemistry hobbyist named Frank (not his real name) to enter our story. Frank had been tinkering with different combinations of alcohols other than methanol (such as ethanol, propanol, and various combinations therein), and had had what appeared to be some astounding results: less than 2% glycerine was produced in experiments that he ran in the barn of a wealthy farmer near Rantoul.

Frank and the farmer were excited about the breakthrough; they incorporated soon after lining up a group of local businessmen (including the owner of the firm for which I was employed) to quickly ramp up the operation to plant scale (on the site of the old cellophane plant owned by one of the businessmen). Under normal circumstances, it would make a lot of sense to construct a pilot-scale proving ground for such a technological marvel, but they chose to push ahead with a full-sized plant. Since once of the principal investors in the plant owned an engineering firm, they hired the firm I worked for to scale up the process from barn-scale to plant-scale.

Simultaneously, the biodiesel consortium decides to also develop a modular biodiesel plant which would use the same breakthrough technology to produce biodiesel from whatever local feedstock were available, from a facility housed in a shipping container.

TURN FOR THE WORSE

It doesn't take a clairvoyant to see this plan going south, and it wasn't too long (early 2009) before the costs of both the fixed and modular plants got well out of hand before construction even began in earnest. At around the same time, the cost of soybean oil continued its rise, while the price of diesel fuel took a good-sized drop. It soon got to the point that even with a $1 per gallon federal subsidy for the producer, it would cost more to purchase the feedstock to produce a gallon of biodiesel than you could sell a gallon of biodiesel for. That's not good bidness.

As a result, our firm was asked to re-design the plant to accept less-expensive feedstocks like waste chicken fat and lard, or white and yellow grease, and also to refine the glycerine stream to pharmaceutical grade. Around this time, we made phone calls requesting information to every U.S. biodiesel plant that had been constructed, numbering around 50 in all. Only two of the facilities even had enough personnel still employed to answer the phone. The rest had apparently folded.

Meanwhile, since the investors who'd jumped into this to make a quick buck weren't seeing any return on their contributions, they decided to stop paying for engineering services. Combined with a couple of other bad debts on the books for the Canton ethanol plant and another shady biodiesel project at an old Monsanto chemical plant in Sauget, Illinois, my employer at the time was hemorrhaging cash. To stem the bleeding, there were significant layoffs, and everyone who was left got a 10% pay cut, followed by an additional 5% pay cut a couple months later.

But before everything bottomed out, a co-worker and I got a chance to participate in one last boondoggle. An equipment vendor had some available equipment for a glycerine refining system that had been defaulted upon by a separate biodiesel entity, and it was warehoused in both Laredo, Texas, and suburban Atlanta. Plant management decided that we should inspect the equipment, and it was decreed that the most cost-effective method to do so was by private jet. However, in order to keep costs under control, we would need to make the entire journey in less than 12 hours, so that the pilots wouldn't exceed their daily allotted travel time.

So, we took off from Champaign at 5 a.m., flew to Laredo, made a cursory inspection of the vessels stored outdoors, ate some Subway, flew to Atlanta, checked out the pumps and heat exchangers in a warehouse, and flew back to Champaign, arriving by 5 p.m. The next week, it was decided that the glycerine-refining equipment would not be purchased. But hey, at least I can say I've flown in a private jet.

ENDGAME

Eventually, Frank's revolutionary biodiesel-refining process was abandoned (using different alcohols just made the glycerine soluble in the biodiesel, instead of not producing glycerine, as had been assumed), as were the shipping container modules. They concentrated on just trying to get the plant up and running on the conventional method, hoping that the business end of things would eventually turn around. I quit around this time, heading back to the less-exciting, but relatively sensible, world of soybean processing.

I stayed in contact with some of my ex-coworkers, and last I'd heard the plant was still waiting for its first gallon of biodiesel to be produced, its owners' deep pockets still yet to be exhausted, despite years of throwing good money after bad. Heck, one of them even had enough cash left over at the end of this mess to purchase a professional sports team.