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Weekly UpdatesWHICH CAME FIRST: THE chicken or the egg? Or in the case of the biodiesel industry in Arkansas, what must occur first: the demand or a mandate?
While a spokesman says Gov. Mike Beebe is eager to see Arkansas become a major player in the biofuels industry, critics say the governor's lip service didn't convert to action when it mattered.
As a result, "The [biodiesel] industry is in huge trouble," said Mike Shook, a principal of AP Innovations Inc. of Stuttgart, a design and engineering company focusing on the biodiesel and oilseed-processing industries.
"It was the hope for reviving the Delta, but now I guess we'll just grow soybeans and send them to China," Shook said.
The biofuels industry simply hasn't blossomed as the governor had hoped--or as any of the producers had hoped when they built multimillion-dollar plants to produce biodiesel.
Beebe's early plan to convert 75 percent of state-owned diesel-powered vehicles to run on biodiesel fuel by 2009 never got off the ground.
"We'd still like to see it," said Matt DeCample, spokesman for the governor, "but the infrastructure is not there."
There's no distribution network, he said, that would make it feasible at this time.
And a proposed bill in the state Legislature earlier this year that would have boosted the industry by mandating that diesel fuel sold in the state contain 5 percent soybean-based biodiesel never got out of committee and was pulled for more study.
Why?
At least two people cite lack of support from the governor.
Wayne Lee, who heads both Lee Enterprises of Sherwood; a biodiesel consulting firm, and National Business Brokerage Inc., a firm specializing in the buying and selling of biodiesel plants, said the state wasn't yet serious about biodiesel.
While state officials advocate the growth of biodiesel plants, they haven't made the industry a priority, he said.
State Rep. Tiffany Rogers of Stuttgart, who introduced the biodiesel bill in the House, echoes that analysis.
She said that when she first brought up the idea, the governor was "on board," but by the time the Legislature met and the bill was actually introduced, the governor had made a turnaround.
DeCample said the governor had concerns about the measure--not about its goals, but about its feasibility.
Rogers pulled the bill, she said, and it remains in the Energy Committee, where she hopes to pursue it again in the 2011 session.
A study by the University of Arkansas at Little Rock found that Rogers' bill would create 1,500 jobs at an average annual salary of $37,000. It also would bring in $359 million each year and add $102 million to the gross state product, as well as add $25 million to yearly tax revenue, of which $11.4 million would be in state and local revenue.
While the governor's lack of support was one factor, Shook, in addition to Rogers and Lee, said the proposal also brought out opposition from the Arkansas Oil Marketers Association along with the Arkansas State Chamber of Commerce and the Arkansas Trucking Association.
"If the product is good enough, at a decent price, people will use it," said Ann Hines, executive director of the oil marketers group. There's no mandate in the state for ethanol, but nearly every pump in the state has an ethanol mix in it, she said.
Hines said the oil marketers were not against biodiesel. She said the group was an early supporter of the industry. "Lots of members carried it for a while," she said, "but the demand wasn't there." Customers didn't buy it and those distributors quit carrying it, she said.
The association opposed the proposed legislative mandate because it "forces all the eggs into one basket" and Hines thinks it is going to take all kinds of energy to meet the nation's needs in the future--electricity, hydrogen, propane, wind, natural gas, as well as gasoline, diesel and biodiesel.
The trucking association backed Beebe's plan to convert 75 percent of state-owned diesel-powered vehicles to run on biodiesel as a step to get the biodiesel industry going, but that never developed, association president Lane Kidd said.
He said the association did not back the proposed biodiesel blend mandate because the industry was not ready to meet the demand that such a standard would create.
Those opposed to a mandate state other reasons, such as consistency and quality problems in the blend and gelling in colder weather that clogged diesel filters. Kidd said he had heard from truckers who told him they would not buy fuel in Arkansas if biodiesel were mandated.
Hines said the gelling problem increased after the federal government mandated ultra-low sulfur diesel fuel.
No Market in State
Lee, Rogers and Shook firmly believe that despite the rich resources in Arkansas for biodiesel and biofuels, the industry will not grow unless there is a set standard, or mandate, as some other states have.
And that's something the petroleum industry will not support. "It isn't in their best interest to support it," Shook said.
The four biodiesel plants in Arkansas have found there is no market for their product in the state. What they produce, they must ship out of state. Distributors in Arkansas won't carry it, Shook said.
The four plants are:
* Arkansas SoyEnergy Group LLC of DeWitt, with a capacity of 8 million gallons per year.
* FutureFuel Corp. of Batesville, 59 MGY.
* Pinnacle Biofuels Inc. of Crossett, 10 MGY.
* Delta American Fuel LLC of Helena/West Helena, 40 MGY.
Another plant, Diamond Valley Ventures, formerly Ag Bio-Energy, is under construction at Rowher. The Patriot BioFuels plant at Stuttgart was destroyed by a tornado last year and will not be rebuilt.
Despite the tough times for the industry, several producers see a brighter future.
Troy Hornbeck, one of the brothers who run the various Hornbeck enterprises that include Arkansas SoyEnergy, said the plant was ready to ramp up to full capacity of 8 million gallons per year as demand grows.
Hornbeck said its key customers were distributors, farm co-ops and farmers in Arkansas. The company has 25 employees involved in crushing and refining at the plant.
"Everyone knows it's a tough market," Hornbeck said, "but we see signs of progress.
"We are confident that demand will grow as people become aware of the quality of our biodiesel, and as they understand the many benefits of biodiesel to the Arkansas economy, jobs and environment.
"Biodiesel is in use all across the country, and tens of thousands of trucks, buses, tractors and other vehicles are operating on this renewable fuel today. Arkansas County has used a biodiesel blend in county vehicles for several years with no problems," Hornbeck said.
"It's not a product problem; it's a perception problem," he said.
State mandate or not, there is a federal biodiesel mandate coming as part of the renewable fuels standards set by Congress in 2007, but the Environmental Protection Agency has not implemented it and is still taking comments on it through September, meaning nothing will take place before the end of the year, according to Arkansas Agriculture Secretary Richard Bell and Bernie Crowley with Delta American Fuel.
Crowley said the EPA's interpretation of greenhouse emissions had caused the delay.
New Endeavors
Jenny Ahlen, the renewable energy programs coordinator with the Arkansas Energy Office, a part of the Arkansas Economic Development Commission, said biofuels remained a targeted industry in the state.
She said the office was still studying various biomass and advanced biofuels but the AEDC at this point had no new initiatives that would boost the industry.
Jerome Bio-Refinery LLC, a $236 million biofuels complex, is under development in Drew County. It plans to use algae grown in converted catfish ponds to produce biofuels.
The potential is there for algae-based fuel. Late last month, J.B. Hunt Transport Services Inc. and SunEco Energy of Chino, Calif., signed an agreement that could lead to J.B. Hunt becoming a significant buyer of biodiesel made from natural algae oil.
The two companies conducted a series of successful tests using biodiesel made by SunEco Energy from 100 percent natural algae oil produced at the company's pilot plant in Chino. The tests, using a 20 percent and 50 percent blend of algae oil with petroleum diesel, measured an 82 percent reduction in particulate emissions with no loss of power.
A planned $80 million biorefinery at Stuttgart by Colusa Biomass Inc. that would use rice hulls and rice straw to make ethanol and commercial silica was expected to be operational by late this year, but financial problems have delayed it, according to Bell. It was expected to produce about 12.5 million gallons of ethanol and hire more than 200 people.
Other biofuels operations are being planned by E-Fuels Inc. at Helena and Arkansas Farmers Biofuels LLC and NextGen Biofuels, both at Pine Bluff. Still others have been on the drawing board but lack of financing has prevented any progress.
Biodiesel Tax Legislation
The Biodiesel Tax Incentive Reform & Extension Act has been introduced by Sens. Maria Cantwell, D-Wash., and Charles Grassley, R-Iowa The act seeks to provide stability and reliability in the marketplace by extending the biodiesel tax incentive for five years. In addition, the legislation would change the biodiesel tax incentive from a blenders excise tax credit to a production excise tax credit.
By John Henry
jhenry@abpg.com
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