THE CHALLENGES OF BIOFUELS IN OHIO:

FROM THE PERSPECTIVE OF SMALL-SCALE PRODUCERS

A thesis presented to

the faculty of

the College of Arts and Sciences of Ohio University

In partial fulfillment

of the requirements for the degree

Masters of Science

John Carl Izaak McHenry

March 2008 2 This thesis titled

THE CHALLENGES OF BIOFUELS IN OHIO:

FROM THE PERSPECTIVE OF SMALL-SCALE PRODUCERS

by

JOHN CARL IZAAK MCHENRY

has been approved for

the Program of Environmental Studies

and the College of Arts and Sciences by

Michele Morrone

Associate Professor of Environmental Health

Benjamin M. Ogles

Dean, College of Arts and Sciences

3 Abstract

MCHENRY, JOHN CARL IZAAK, M.S., March 2008, Environmental Studies

THE CHALLENGES OF BIOFUELS IN OHIO: FROM THE PERSPECTIVE OF

SMALL-SCALE PRODUCERS (159 pp.)

Director of Thesis: Michele Morrone

The increased interest in renewable biofuels, such as biodiesel and ethanol, has come in the wake of higher domestic fuel costs after many years of low consumer prices.

With the increase in the price of petroleum-based fuels and growing concern over the reliance on foreign oil from unstable parts of the world there has been more interest to look for cheaper, more sustainable energy resources.

While domestically produced sustainable energy sources have the potential to spur growth for domestic farming communities, they have also been touted as being more environmentally friendly. There is also discussion about the potential for biofuels powering a large number of vehicles for the United States transportation sector while producing lower emissions and greenhouse gases. Some see this as a way to help reduce the effects of global warming but issues such as the availability of limited feedstock to produce the biofuels and bigger pictures such as food versus fuel are also a growing concern.

There are technical drawbacks to biofuels such as decrease in power, solvency issues, public perception, price competitiveness, feedstock availability, the waste stream produced and whether or not this waste can be dealt with in a sustainable manner. There are also issues related to the net energy gain from producing biofuels, which must also be addressed. 4 In terms of acres harvested, Ohio is one of the top ten agricultural states in the country and produces significant amounts of corn and soybeans, the main feedstock for biofuels. Many view biofuels as a way to stimulate the state economy while producing a more environmentally friendly domestic fuel. With new alternative fuels there are certain challenges in order to make these fuels more widely available. In this thesis I will explore the challenges of biofuels from the perspective of small-scale producers in Ohio that have a production rate of less than 5 million gallons per year.

Approved: ______

Michele Morrone

Associate Professor of Environmental Health 5 Dedication

This thesis is dedicated to the people who use their ingenuity and creativity to work

towards a future built on principles that support a sustainable community.

6 Acknowledgements

I would like to acknowledge the Environmental Studies Program for giving me

the opportunity to work in the program and broaden my perspectives in Environmental

Policy and Planning. I have greatly appreciated this challenge.

Thanks to Michele Morrone for her support and guidance throughout the thesis process as well as the support provided to me during my data collection. Thanks also to

Geoff Buckley and Ben Stuart for their additional input as well as to Gene Mapes for her guidance early on. I would also like to thank the anonymous interviewees who took the time to participate in my data collection and for their honest, and sometimes candid, responses.

Finally I would like to thank my family and friends for all of their support during this endeavor. Special thanks goes to John K. McHenry, Kelly Gaskill, Patsy Graves,

Brett Thompson and Julia Phillipson. Their support allowed me the freedom and flexibility to make the completion of this thesis possible.

7

Table of Contents

Page

ABSTRACT ...... 3 DEDICATION ...... 5 ACKNOWLEDGEMENTS ...... 6 LIST OF TABLES ...... 9 LIST OF FIGURES ...... 10 CHAPTER 1: INTRODUCTION TO BIOFUELS ...... 11 BIOFUELS ...... 11 BIODIESEL ...... 12 BIODIESEL VERSUS DINO-DIESEL ...... 16 RUDOLF DIESEL ...... 20 ETHANOL ...... 21 E 85 ...... 23 ETHANOL INFRASTRUCTURE ...... 25 PURPOSE OF THIS STUDY ...... 27 CHAPTER 2: URGENCY BREEDS INNOVATION ...... 30 CREATION OF A CONSUMER SOCIETY AND THE NEED FOR OIL ...... 30 OIL AND TRANSPORTATION ...... 31 MIDDLE EAST OIL ...... 32 OPEC ...... 35 PEAK OIL ...... 36 STRAIGHT VEGETABLE OIL AND WASTE VEGETABLE OIL AS A BIOFUEL ...... 39 CHAPTER 3: BARRIERS OF BIOFUELS ...... 42 LAND IMPACT ISSUES IN BIOFUEL PRODUCTION ...... 42 FOOD VS. FUEL ...... 43 FORESTS VS. FUEL ...... 45 OHIO AGRICULTURE ...... 46 BIOFUEL COMPETITION ...... 48 PRICE AND AVAILABILITY OF BIOFUELS ...... 49 GREENHOUSE GASES ...... 51 NON-TECHNICAL BARRIERS ...... 54 RESISTANCE FOR BIOFUELS ...... 56 CHAPTER 4: METHODOLOGY ...... 58 SITE ...... 58 SAMPLE ...... 58 ACCESS AND SAMPLE SELECTION ...... 59 INTERVIEWS ...... 59 TRUSTWORTHINESS ...... 61 CONCERNS...... 62 LIMITATIONS ...... 64 DATA ANALYSIS ...... 64 CHAPTER 5: DATA COLLECTION AND RESEARCH ...... 66 8

SAMPLE QUESTIONS ...... 67 BACKGROUND OF PRODUCERS ...... 67 ON-ROAD BIODIESEL STANDARDS ...... 70 FEEDSTOCK ...... 72 PRIMARY CUSTOMERS ...... 74 CUSTOMERS MOTIVATIONS ...... 75 ADVANTAGES OF USING BIOFUELS ...... 76 DRAWBACKS OF BIOFUELS ...... 80 CHALLENGES OF BIOFUELS ...... 84 OHIO ETHANOL PLANTS ...... 88 LACK OF ALTERNATIVE FUEL INCENTIVES IN OHIO ...... 89 FUTURE OHIO INCENTIVES ...... 94 RENEWABLE FUEL STANDARD ...... 94 AMERICAN JOBS CREATION ACT ...... 95 OHIO’S NEIGHBOR ...... 102 OHIO GRASSROOTS INITIATIVES ...... 103 PROMISING TECHNOLOGIES ...... 104 CONCLUSION ...... 106 RECOMMENDATION FOR FURTHER RESEARCH ...... 109 REFERENCES ...... 111 APPENDICES ...... 116 APPENDIX A: INTERVIEW WITH PLANT A ON OCTOBER 13TH 2007 ...... 116 APPENDIX B: INTERVIEW WITH PLANT B ON OCTOBER 15TH 2007 ...... 127 APPENDIX C: INTERVIEW WITH PLANT C ON OCTOBER 18TH 2007 ...... 135 APPENDIX D: INTERVIEW WITH PLANT D ON OCTOBER 30TH 2007 ...... 143 APPENDIX E: INTERVIEW WITH PLANT E ON OCTOBER 15TH 2007 ...... 149 APPENDIX E: PAMPHLET FROM THE OHIO SOY COUNCIL ...... 159 9

List of Tables

Tables Page

Table 1. Possible U.S. Biodiesel Feedstocks ...... 16 Table 2. Hubberts Peak ...... 38 Table 3. General Characteristics of Biofuel Producers Interviewed ...... 68 Table 4. Potential Ohio Ethanol Producers ...... 88 Table 5. Challenges of Biofuels Checklist ...... 107

10

List of Figures

Figure Page

Figure 1. A Typical Biodiesel Pump...... 17 Figure 2. A Heated Vegetable Oil Tank ...... 40 Figure 3. The Corn Belt ...... 47 Figure 4. Arable Land in Ohio ...... 97 Figure 5. Ohio Corn and Soybean Acres Planted per Crop ...... 98 Figure 6. Ohio Soybean and Corn Production ...... 101 Figure 7. Ohio Soybean and Corn Price Per Bushel ...... 102

11

Chapter 1: Introduction to Biofuels

Biofuels

Biofuels is a term that refers to fuels produced primarily from biological or

agricultural feedstocks such as soybeans, corn, peanuts, mustard seed, and canola. The

fuels most commonly referred to as biofuels in the United States are biodiesel and

ethanol. These two are most commonly produced from soybean oil for biodiesel and

corn for ethanol. The production of biofuels in Ohio and the United States has risen

dramatically over the last three years. With the increase in the price of petroleum-based

fuels and a growing concern over the reliance on foreign oil from unstable parts of the

world there has been a renewed interest in domestically produced energy resources that

are sustainable while remaining competitive in price.

Sustainable energy sources produced domestically have the potential to spur

growth for farming communities, specifically those in large agricultural states in the corn

belt such as Ohio. Issues such as the availability of feedstock to produce the biofuels,

public perception and bigger pictures such as land impact and food versus fuel are also a growing concern.

According to the U.S. Department of Agriculture (USDA), Ohio is one of the top-

ten agricultural states in the country in terms of acres harvested and produces significant

amounts of corn and soybeans, the main feedstock for biofuels in the United States

(National Agriculture, 2007). Many view biofuels as a way to stimulate the economy

while producing a more environmentally friendly domestic fuel. With new alternative

fuels there are certain challenges in order to make these fuels more widely available. 12

This qualitative research will focus on the challenges that the production of biofuels in

Ohio faces from the perspective of small-scale producers.

Biodiesel

Biodiesel is a renewable fuel source made primarily from vegetable oil such as virgin oils or used fryer oil from restaurants, but animal fats and even algae have been used in the biodiesel process. Biodiesel can be used as a petroleum diesel fuel substitute or additive, is relatively easy to make and is considered low-tech especially when compared to the process of refining fossil fuels. Because of its simplicity and similar combustion properties to petroleum diesel, many have been attracted to the production of biodiesel.

Biodiesel uses the same infrastructure as petroleum diesel and can be mixed in all forms with its diesel counterpart and is measured in what is known as the “B” factor. B1 represents 1% biodiesel 99% petroleum diesel; B50 represents 50% biodiesel 50% petroleum diesel and B99 99% biodiesel 1% petroleum diesel. The B essentially refers to the percentage of biodiesel to petroleum diesel and can come in all forms from B1 to

B100. Some popular blends are B5 (5% biodiesel 95% petroleum diesel) B20 (20% biodiesel 80% petroleum diesel) and B50. B100 refers to 100% biodiesel with no petroleum additives.

According to Greg Pahl, author of Biodiesel: Growing a New Energy Economy

(2005) the process of making biodiesel, known as transesterification, involves adding a chemical catalyst such as sodium methoxide (lye) and an alcohol, such as methanol, to straight vegetable oil (SVO) or waste vegetable oil (WVO). The transesterification 13 process separates the glycerin molecule from the methyl esters (what is essentially the biodiesel) and replaces it with an alcohol molecule. The mixture is stirred and heated until the vegetable oil molecules are split or separated. The methyl esters rise to the top and the glycerin and catalyst (which are the byproduct) settle to the bottom of the processing tank. The biodiesel is then removed from the top and can be “washed” by using a system of injecting water to remove any traces of alcohol, catalyst and glycerin.

The water is then removed after several days and the biodiesel is ready for market. Many small-scale “backyard home brewers” that produce biodiesel for personal vehicle consumption, skip the time consuming washing process but commercial producers usually have to perform this step in order to meet certain biodiesel industry standards.

One of the main advantages of using WVO over SVO is that it is very often found for free and restaurant owners are more than happy to get rid of a byproduct that they usually have to pay someone to haul off. This keeps the cost of making biodiesel down for the “home brewer” but companies making biodiesel on a much larger scale will more likely produce biodiesel from SVO because it is more readily available, is cleaner than

WVO and requires less processing and washing time. Smaller producers are more susceptible to use WVO to in the production of biodiesel because they are able to make the “local connections” needed to get their feedstock for free. Also, small-scale producers serve a smaller market niche and do not need access to millions of gallons of

SVO.

The byproduct in the production of biodiesel is glycerin, which is compostable, and can be used to make soap, cosmetics and animal feed. According to Lyle Estill and 14

Rachel Burton, authors of Our Place in the Biodiesel Waste Stream (2005), a Chinese

firm is already interested in purchasing glycerin from their processing plant in Piedmont,

North Carolina.

Biodiesel experts, including William Kemp, author of Biodiesel: Basics and

Beyond (2006), acknowledge the fact that biodiesel is not some kind of “magical”

product that will solve North America’s energy problems overnight. Nevertheless, he is a

firm believer that with more research and development, biofuels can potentially become a

part of a bigger “energy puzzle” which would also include wind, solar and geothermal

energy. Kemp also discusses the advantages of biofuels with their ability to be widely

used in the present infrastructure will little to no change. The infrastructure issue alone

has the potential to save billions of dollars and make a potential transition to biodiesel

easier.

Kemp (2006) also refers to the “waste stream problem” in the production of

biofuels as a major hurdle. Since biodiesel can be made using waste vegetable oil from

restaurants after a relatively easy refining process, Kemp specifically identifies the

production of biodiesel by these backyard home-brewers and the problem of

misinformation in dealing with biodiesel production waste as major problems. Kemp goes on to provide solutions for the waste stream, which includes proper education for small-biodiesel producers.

Plan B 2.0 by Lester Brown (2006), is a comprehensive book dealing with our global economy outgrowing the capacity of the earth to support itself. According to

Brown, the population of the earth is consuming finite resources at an alarming rate. 15

Brown goes on to discuss peak oil, the point at which the world’s oil production will not be able to meet demand. Many feel that peak oil is just around the corner, which gives us little time to plan for a replacement. Biofuels are a step in the right direction, but other issues, such as sustainability and food versus fuel, should be addressed before considering it a cure-all product.

Palm oil, which has to potential to yield over 600 gallons of oil per acre for biodiesel production, is far favored over soybeans, which produce approximately 50 gallons of oil per acre. But due to palm oils ability to grow only in tropical climates deforestation of tropical rainforest may also be a concern. One alternative that Brown

(2006) believes may be an option for transportation is the adoption of gas-electric hybrids with plug in capacity charged with wind turbines. The major point of this work is the absolute need to replace fossil fuels and move toward more sustainable energy sources.

From the Fryer to the Fuel Tank by Joshua Tickell (2003) is referred to as a

“complete” guide for using unrefined waste vegetable oils as an element of transportation fuel. Tickell does not provide much information dealing with refining glycerin, which is the main part of biodiesel waste, but does include more technical chapters discussing the conversion process of a “veggie car,” a diesel vehicle that has been converted to run on straight vegetable oil (SVO). In order to use vegetable oil as a vehicle fuel source, you can either convert the fuel to run in the vehicle (i.e. biodiesel) or convert the vehicle to run on the fuel, i.e. SVO or waste vegetable oil (WVO). Tickell gives a comprehensive account on how to accomplish this as well as the feedstock that can be used in biodiesel 16

production. Table 1 refers to the six common U.S. feedstocks that Tickell claims can be best used in the production of biodiesel.

Gallons of Feedstock Oil Per Acre Corn 18 Soy 50 Sunflower 100 Peanuts 50-100 Mustard 150 Rapeseed 100-200 (Canola)

Table 1. Possible U.S. Biodiesel Feedstocks

According to and article published by Sheehan, Bunahay, Benemann, & Roessler,

(1998), commercial production and use of biodiesel has the potential to be very

promising due to its relative resemblance, in terms of viscosity and combustability, to

petroleum diesel. Biodiesel performs as well as petroleum diesel and reduces emissions

of particulate matter, hydrocarbons, and SOx emissions. Biodiesel eliminates the black

soot smoke associated with diesel vehicles, is biodegradable and reduces emissions of air

toxins and carcinogens when compared to petroleum diesel. Many would also agree that

biodiesel even smells better than petroleum based fuels giving the fuel an extra advantage

in consumer markets.

Biodiesel versus Dino-diesel

Some major advantages of using biodiesel is that virtually any diesel engine can

burn biodiesel without engine modifications and the fuel can be distributed using the

existing petroleum infrastructure (Figure 1). Biodiesel also has higher lubricity 17

properties compared to petroleum diesel and may contribute to longer fuel injector and

engine life. However, because biodiesel acts as a solvent it may be necessary to change

fuel filters in order to eliminate clogging due to years of accumulated petroleum diesel

residue being broken up and moving through the fuel system. Biodiesel is, in effect,

cleaning out the years of residue that has built up after years of running petroleum diesel.

Therefore, it is recommended to change the fuel filters after 500-1000 miles after initially

using a biodiesel blend.

Figure 1. A Typical Biodiesel Pump These pumps use the same infrastructure as petroleum diesel and can be mixed in all forms from B1 (1% biodiesel 99% petroleum diesel) to B50 (50% biodiesel 50% petroleum diesel) all the way to B99 (99% biodiesel 1% petroleum diesel.) The B refers to the percentage of Biodiesel to Petroleum diesel. B100 refers to 100% Biodiesel.

While the filter issues may scare many who are not familiar with using biodiesel, this should be viewed as a precautionary measure in much the same way that consumers view regular oil changes as a necessary precautionary measure. Another concern is that 18 biodiesel will break down natural rubber hoses in some older vehicles. These tend to wear out naturally and may have already been replaced with newer viton hose, which is not reactive to biodiesel. According to Tickell, author of From the Fryer to the Fuel

Tank (2003), the hose issue should not be a concern in vehicles made from approximately

1992 on because by this time all vehicle producers had already switched to viton hoses.

Many people remain skeptical about running biodiesel in their vehicles. Some bad press has come out about biodiesel regarding the filter and hose issues mentioned above.

There is also concern that some vehicles running on high blends such as B70 or higher seem to be underpowered. These may be valid concerns but the consumer should be aware that there is literature regarding the benefits of using biodiesel in even small blends such as B5 (5% biodiesel 95% petroleum diesel). Many people report little to no noticeable power loss when running high blends of biodiesel and a smoother running engine without the normal clanking associated with diesel engines. The majority of the

United States population has little to no experience using biofuels and for the last century has basically been exclusively using petroleum based fuels in their automobiles. The education of the public about the advantages of biofuels is a hurdle that many in the biofuel world are working to address.

Another concern about biodiesel is its higher gel temperature when compared to petroleum diesel. Gel point refers to the temperature in which a fuel starts to coagulate.

Petroleum diesel has a gel point around 2 degrees F as compared to B100, which has a gel point around 32 degrees F. This can be problematic when running biodiesel in colder climates such as Minnesota, a state that has taken strong initiative to promote biodiesel 19

usage (Biodiesel Leaders, 2006). One way to lower the gel point of biodiesel is to use petroleum diesel as an additive during the winter and colder months. Another way is to add kerosene or some brand of non-gelling diesel fuel product. Some people have even been experimenting with the use of 12-volt fuel line and filter heaters to keep biodiesel from gelling.

An article that appeared in USA Today titled Cold snap raises issues when biodiesel gels up by Sharon Silke Carty (2006) illustrates how public perception can affect the popularity of biofuels. Because of gelling problems Minnesota temporarily lifted the September 2005 mandate requiring the states fleet to run on at least 2% biodiesel. John Hausladen, president of the Minnesota Trucking Association, is not a fan of the mandate because some truckers have reported problems with biodiesel such as trucks having trouble starting, stalling and losing power climbing hills in cold weather.

There are also concerns that the mandate is treating the Minnesota Trucking Association like guinea pigs in order to see if biodiesel is a viable fuel. Mike Bute, a diesel technician at Riverland Community College in Albert Lea, Minnesota says the problem is not just biodiesel and that the problem would exist even with petroleum diesel. "Every year, when it gets subzero, there are diesel-powered vehicles that gel up and stall, this year, because of the mandate, the biodiesel have been taking the blame for that. It really hasn't been more than usual.” The notoriety and popularity biodiesel has gained partially due to tax cuts given to biodiesel producers in the state. He then mentions the Clean School Bus

USA program, an EPA program that encourages school districts to make changes that 20 will cut emissions from buses, including switching to biodiesel. Through 2005, the EPA program has given $7.5 million in grants (Carty, 2006).

Many involved in the biodiesel movement acknowledge that biodiesel may not be the “silver bullet” to help wean the country off of petroleum oil (Motavalli, 2006).

However, biodiesel does carry the capacity to supplement at least a part of our petroleum fuel consumption. Biodiesel has about the same viscosity as petroleum diesel and can be blended with any amount of petroleum diesel. The initial investment in the conversion of the infrastructure for biodiesel is relatively small compared to other alternative energy resources such as hydrogen fuel cells. Existing diesel fuel pumps across the U.S. would not need to be altered in anyway to be able to pump biodiesel due to its blending ability with petroleum diesel and similar viscosity components.

Rudolf Diesel

The German engineer Rudolf Diesel invented the first compression ignition engine in the 1890s. In 1900 at the World’s Fair in Paris, France, Diesel ran his engine on peanut oil. Diesel’s vision was that farmers could grow their own crop that could, in turn, be used as fuel because in 1900, there was not as wide availability of fuels or fueling stations. According to Tickell (2003) in 1912 Diesel stated that, "The use of vegetable oils for engine fuels may seem insignificant today, but such oils may become, in the course of time, as important as petroleum and the coal-tar products of the present time." Diesel did not live to see his vision become a reality because he disappeared under mysterious circumstances in 1913 while taking a trip to Britian. Rudolf Diesel’s body was found floating in the English Channel before he completed his trip. Some items were 21

taken from the body to determine its identification, but it was never recovered. There is

some speculation that Diesel was murdered by the German government which feared that

Diesel was going to provide his engine technology to the British government. At the

time, the Germans were developing the now infamous U-Boats driven by the diesel

engine. Diesel also accumulated massive debts due to failed investments so some believe

he committed suicide. Whatever the cause his death still remains a mystery today

(Tickell, 2003).

Although the cumbersome internal combustion engine invented by Rudolf Diesel

was powered by peanut oil it did not technically run on biodiesel because the oil did not

go through the transesterification process in order to make the fuel less viscous. The

technology was further developed and the modern diesel engine used today still bears the

inventor’s name. As more petroleum oil reserves continued to be discovered in the

United States cheaper crude made gasoline the primary fuel of choice to drive the 20th century’s transportation sector and industry.

Ethanol

Another alternative fuel being considered by many in the auto industry and in the

political realm is ethanol. Ethanol is also gaining popularity recently because of a

renewed sense of what has been known as the United States “oil addiction.” Ethanol is a

renewable fuel made from plants such as sugar cane or, as in the United States, corn.

Some low ethanol blends can be used in gas engines without modifications but higher

blends such as E85 (85% ethanol 15% gasoline) can only be used in vehicles equipped

with special fuels sensors. As with biodiesel, ethanol can be produced in small-scale 22

setups, involves relatively non-technical production in comparison to petroleum and can

be used as a fuel additive or in higher percentages to help supplement domestic fuel

supply.

Ethanol, also known as ethyl alcohol and grain alcohol, is a flammable, colorless

chemical compound commonly found in alcoholic beverages that can be used as fuel in

gasoline powered engines. Ethanol is produced by the fermentation process of starches

into sugars by yeast and can be made from many sources including sugarcane, corn,

barley, potatoes and switchgrass. According to Tickell, author of Biodiesel America:

How to Achieve Energy Security, Free America from Middle-East Oil Dependence and

Make Money Growing Fuel (2006) Ethanol burns cleaner than petroleum based gasoline and produces water and carbon dioxide as a byproduct.

Ethanol served as lamp fuel in the United States prior to the Civil War. The early

Ford Model T automobiles had an optional ethanol carburetor and got approximately 25 miles a gallon. But ethanol could not compete with the low cost and availability of petroleum and ethanol suffered the same fate as peanut oil in Rudolf Diesel’s engine, fading from the consumer scene in the 1920s. But the recent increase in petroleum oil prices has generated renewed interest in alternative fuels. The main feedstock for the production of ethanol in the United States is corn. According to Brent Yacobucci, author of Fuel Ethanol: Background and Public Policy Issues (2006), another new crop being developed for ethanol production is switchgrass, which may show greater yields. The dominant ethanol feedstock in warmer regions such as South America is sugarcane. 23

Brazil has taken major initiative to supplement its domestic fuel consumption with

ethanol produced from sugar cane grown in the country. All fuel sold in Brazil contains

at least 20% ethanol and at gas stations ethanol mixed with gasoline is known by many as

gasohol (Yacobucci, 2006). Ethanol creates less pollution than petroleum gasoline but

also has a lower energy content than gasoline. Because of its lower energy content than

gasoline there has been some concern about mileage in vehicles running on ethanol.

According to a U.S. Department of Energy a gallon of ethanol equals about 66 percent of

the energy content of a gallon of gasoline. A gallon of E85 equals about 71 percent of

the energy content of a gallon of gasoline which leads to around a 15 percent decrease in

fuel mileage when running high levels of ethanol in flex fuel vehicles (U.S. Department

of Energy, 2007).

Yacobucci also feels that some supporters of ethanol argue that its use can lead to lower emissions of toxic ozone-depleting pollutants, and greenhouse gases, especially

when higher-level blends are used. It is further argued that ethanol, as with biodiesel, can

supplement the country’s use of petroleum gasoline, thus promoting energy security.

One argument against ethanol is that the energy and chemical inputs needed to turn corn

into ethanol actually increase emissions and energy consumption therefore an energy

efficient fuel is not being produced.

E 85

In higher forms, such as E85, ethanol can be used as an alternative to gasoline in

vehicles specifically designed to use it. These are the flex fuel vehicles that have been gaining widespread attention recently. However, this use represents only approximately 24 one percent of the ethanol consumption in the United States. To promote the development of E85 and other alternative fuels, Congress has enacted various legislative requirements and incentives. The Energy Policy Act of 1992 requires the federal government and state governments, along with businesses in the alternative fuel industry, to purchase alternative-fueled vehicles in order to start integrating them into their fleet.

In addition, under the Clean Air Act Amendments of 1990, municipal fleets can use alternative fuel vehicles as one way to mitigate air quality problems. Both E85 and E15

(15% ethanol) are currently considered alternative fuels by the Department of Energy.

The small amount of gasoline added to the alcohol helps prevent corrosion of engine parts and aids ignition in cold weather (Yacobucci 2006).

The market for fuel ethanol is heavily dependent on federal tax and on the implementation of government regulations. Ethanol production is encouraged by a federal tax credit of 51 cents per gallon. This incentive allows ethanol, which like biodiesel has historically been more expensive than petroleum fuels, to compete with gasoline and other alternative fuels. In addition to the above tax credit some smaller ethanol producers qualify for an additional production credit. It has been argued that the fuel ethanol industry could scarcely survive without these incentives but more recently the move toward renewable fuels has gained some momentum (Yacobucci, 2006).

In addition to the above tax incentives, the Energy Policy Act of 2005 established a renewable fuels standard (RFS). This standard requires the use of 4.0 billion gallons of renewable fuels in 2006, increasing each year to 7.5 billion gallons in 2012. Most of this requirement will likely be met with ethanol and biodiesel. In the United States, 25

approximately 3.4 billion gallons of ethanol was consumed in 2004. The RFS will likely

lead to a doubling of the United States ethanol market by 2012. Some analysts believe that this program could have serious effects on gasoline suppliers, leading to somewhat higher fuel prices. (Yacobucci, 2006)

Ethanol Infrastructure

Yacobucci (2006) argues that with the increase in the use of ethanol, the

development of an infrastructure to support ethanol vehicles needs to be developed.

Ethanol has a much lower flash point than other alternative fuels such as biodiesel,

meaning it will combust at a much lower temperature. Therefore the transportation of

ethanol is as dangerous as transporting gasoline but cannot use existing gasoline pipelines

due to the fuel’s corrosive properties. The majority of ethanol is produced in the

Midwest cornbelt, with roughly 80% of the national production occurring in five states:

Illinois, Iowa, Nebraska, Minnesota and Indiana. Because it is generally less expensive to produce ethanol close to the feedstock, it is not surprising that the top five corn producing states in the United States are also the top five ethanol producers. This geographic concentration is an obstacle to promote ethanol use on the east and west coasts. Most ethanol use is in the metropolitan centers of the Midwest near where it is

produced. When ethanol is used in other regions shipping tends to increase the price

since gasoline blended with ethanol cannot travel through conventional petroleum

pipelines, but must be transported by truck, rail, or barge.

Major obstacles for ethanol’s expansion in the United States are price and

infrastructure. Since a major part of the total production cost is the cost of feedstock and 26 transportation, reducing costs associated with these factors could lead to lower wholesale ethanol costs. One strategy in producing lower cost ethanol is the development of cellulosic feedstocks. Cellulosic ethanol production requires a pre-treatment of the feedstock to release the plants cellulose molecules, which are composed of long chains of sugar molecules. This is accomplished by a means known as the hydrolysis process in which the feedstock is broken down with water. These cellulose chains are broken down to free the plant sugars before it reaches a fermentation process for ethanol production.

Cellulosic materials include low cost waste products such as recycled paper and rice hulls, corn stalks and leaves or dedicated fuel crops, such as switchgrass.

According to an article published by Nathanial Greene titled Growing Energy -

How Biofuels Can Help End America’s Oil Dependence (2004), switchgrass is a tall, fast growing perennial grass native to the United States prairies, grows with limited fertilizer and can actually improve soil quality. Production of ethanol from switchgrass is relatively new and more federal research has focused on developing cellulosic ethanol and improving the availability of cellulosic feedstocks. The Natural Resources Defense

Council estimates that with new technology ethanol production facilities could produce significant amounts of cheaper fuel for around $0.59 to $0.91 per gallon by 2012 making it more competitive with petroleum fuels. One major benefit of the development of cellulosic ethanol includes lower greenhouse gases and air pollutant emissions. By expanding the feedstocks for ethanol production the growth of cost effective ethanol usage in regions outside of the Midwest will increase. 27

The challenges in the organizational and infrastructural realm of biofuels are also

cited in Rosch and Kaltschmitt’s Energy from Biomass: Do Non-Technical Barriers

Prevent and Increased Use? (1998). Rosch and Kalschmitt (1998) identify decision makers from every aspect of biofuels. These start at the top with agriculture and energy

economists, people who would supply funding and insurance, to administration and local

authorities, planning, manufacturing, engineering and construction companies all the way

down to plant operators, feedstock producers and suppliers, and finally the customer and

public. As with any new industry it will take participation by all of these groups to produce a favorable outcome with the usage of biofuels. With the recent increase in the

price of crude oil the United States has already seen an increase in the development of a biofuels infrastructure.

Yacobucci (2006) addresses the cost issues related to ethanol by stating that the way to decrease the cost of ethanol is by increasing imports from countries producing ethanol from sugar cane. The production of ethanol is much more efficient when using sugar as the feedstock but as the article claims, many in the United States feel this goes against growing domestic fuels and would do little to stimulate farming economies.

Therefore, because the lower production cost of other countries, the United States has developed tax incentives and imported ethanol is subject to a 54 cent per gallon tariff, which is an obvious barrier for ethanol imports.

Purpose of this Study

The framework underlying this research is the effectiveness of biofuels in the

consumer sector of the economy and the barriers renewable fuels will face. By focusing 28

on Ohio other conclusions could be made in relation to other states attempting to increase

the production of feedstocks for use in biofuels. Over the past 3 years the cost of

petroleum based fuel, such as gasoline, diesel, and kerosene has risen dramatically. This

increase in the price of fuel has led to the new found interest in the production of cheaper,

domestic and sustainable fuels to meet an ever-growing energy demand. In order to truly

become a viable renewable and sustainable energy source, biofuels, such as ethanol and

biodiesel, must return a net energy gain from their production while remaining environmentally friendly. Many feel that biodiesel and ethanol are not the all encompassing answer to completely help the United States move away from a dependency on foreign oil but biofuels may be a start in the right direction. Toward a

more energy independent future, while more research and development advancing

biofuels is undertaken.

With the increase of the production of biofuels, issues related to land impact, food

versus fuel, net energy input versus actual gain, and infrastructure to increase availability

as well as biodiesel waste must be addressed. Although gaining support in certain niche

markets, biodiesel still suffers from the negative perception that the fuel may be harmful

to use in vehicles. This is due to the lack of knowledge and misinformation related to the

use of biofuels. Consumers are also not aware that certain precautions must be taken

when running biodiesel in cold temperatures or that pure ethanol cannot be used in non- flex fuel vehicles. These issues can be solved by educating the public that certain blends of biodiesel should be avoided in cold-climates and that ethanol can be safely used as an additive to petroleum gasoline in blends up to 15% without any vehicle conversion. 29

There is also what one author refers to as the “coalition of drilling” (Estill, 2005).

Instead of using the petroleum based fuels we have now to help us work toward energy independence, our present system is further using finite oil products to explore for more finite oil reserves. Many feel the discovery of oil has already peaked and we are quickly realizing a sense of urgency to meet our current energy needs. When oil will cease to be a viable world energy source is under debate but what is agreeable by many now is that it is important to use our present petroleum resources to aid us as a country to work for more sustainable energy resources. Producing more sustainable biofuels can be used to extend our present petroleum reserves to help prolong our energy supply. With more research and development in the field of biofuels a solution to our future energy needs can be met.

Further research and development is needed to bring biofuels to the mass market.

The major goal of this thesis is to identify the challenges of biofuels in the United States but more specifically Ohio. This study will contribute to further research in the areas of biofuels by addressing the following questions: Assuming that the technology to promote biofuels exists, what are the challenges keeping renewable biofuels from gaining widespread support in the United States? What role can Ohio play in the production of biofuels? 30

Chapter 2: Urgency Breeds Innovation

Creation of a Consumer Society and the Need for Oil

For the next few decades crude oil was being discovered all over the country including the Hugh McMurray No. 1 well in Hancock County, Ohio, which in 1891, was the world’s largest well producing around 42,000 barrels a day. In late 1894 new technology such as the internal-combustion engine invented by Rudolf Diesel and slow- speed gasoline engines would start to come into use and replace the steam engine. (Clark,

1963) New technology in oil discovery and in drilling also led to the influx of cheap crude oil, which seemed to be everywhere. More than ever oil production was providing an abundant and reliable energy resource and, to some, proved to be extremely profitable.

The more oil that could be produced, as quickly as possible, the more oil companies could profit. (Abdullah, 2005)

At the turn of the century, during the modern industrial revolution, there was no need to be concerned about where the United States’ growing economy would harvest its energy resources. From the late 1800s to the early 1900s the United States experienced the economic boom of the industrial revolution. This led to a shift from a mostly agrarian society to a more industrial, one where people became less self-sufficient and more dependent on industry jobs to support a new way of life.

With the invention of the light bulb the need for kerosene dropped dramatically.

Some felt the oil industry was threatened but it would not be long before something else would begin to fill this void. The personal automobile.

31

Oil and Transportation

The automobile industry has been dependent on the use of petroleum fuels for

over 100 years. Fuel consumption has dramatically increased due, in part, to population

growth and an increased expansion of the auto industry benefiting from a government

highway plan initiated in the late 1940s. At the turn of the 19th century oil proved to be

convenient and easy to transport paving the way for the modern fuel infrastructure. By

November 1900 there were 8,000 automobiles in the country with 4,000 being sold that

year alone. The Ohio Oil Company, later renamed Marathon, started an initiative to

cooperate with manufacturers of gas engines to replace steam engines that would help

power oil field equipment. This would later lead to the replacement of steam engines by

petroleum burning engines in locomotives (Clark, 1963).

The following decades saw an unprecedented increase in the use of petroleum

fuels from railroads to sugar and rice plantations in Louisiana and from Navy Ships in the

war arsenal to personal transportation. In 1902 Henry Ford enters the automobile business and starts to develop more efficient vehicles marketed toward the new consumer class. Pipelines were beginning to be built around the country to make transporting oil more cost effective and easier to reach the market. New wells were still being discovered and drilled and in 1903 California surpasses Ohio by becoming the biggest oil producing state, supplying the nation with 24% of its total (Clark, 1963).

By 1908 the first Model T was build by the Ford motor company and by 1910

468,500 automobiles were registered in the United States leading to the creation of the first service stations to repair automobiles (Clark, 1963). The Model T is regarded as the 32 first affordable automobile that started the auto age. Ford invented the assembly line, eliminating more expensive means of automobile production such as hand crafting the automobile, and gave workers more of an incentive to create a quality product by paying decent wages (Wik, 1972). The Model T was the first mass produced car directly aimed at a middle-class market and by the end of its run more than 15 million were produced

(Iacocca, 1998).

By the end of the 1910s automobile production would boom and in 1920

9,239,161 automobiles would be registered. This number would triple to 26,749,853 by

1930 and by 1940 there were 32,453,233 vehicles registered in the United States. By the time of the Great Depression the United States was producing one billion barrels of crude oil a year. In 1939 exports from what would be later known as the biggest proven oil reserve in the world in Saudi Arabia began (Clark, 1963).

Middle East Oil

In 1904 an important event took place when the first oil reserves were discovered in modern day Iran. This well produced around 122 barrels of oil a day from January until it suddenly ran dry in May 1904. The discovery of this oil well opened the market to Middle East oil. Drilling continued in the region and in 1908 the Anglo-Persian Oil

Company (later the Anglo-Iranian Oil company then British Petroleum) was formed.

Drilling and oil discovery continued in the coming decade and in 1912 the Abadan refinery was put into operation. By 1913 oil exports from Iran had begun. Shortly afterward, in neighboring Iraq, oil drilling would begin and in 1927 the first Iraqi oil 33

would be discovered (Yergin, 1991). However, it was not until after WWII that the

importance of Middle-East oil to supplement a dwindling domestic supply was realized.

In 1956 President Dwight D. Eisenhower signed the interstate Highway Bill. This multi-million dollar bill provided funding for over 40,000 miles of a highway system that would greatly network the United States. The bill, backed by lobbyists from the automobile makers, state governments, truckers, car dealerships, oil companies, rubber companies, trades unions and real estate developers, would come to change transportation dramatically in the United States by making personal transportation much more convenient (Yergin, 1991).

Although the interstate highway system was built under Cold War concerns of rapid movement of materials and evacuation of major cities, the creation of and enormous personal transportation industry would eventually lead to the insufficient public transportation in rural areas by undercutting the train and bus industry. The national system of interstate highways would eventually lead to a consumer-based society that depends on less fuel-efficient means of transportation and more on personal automobile transportation.

Following World War II the United States experienced another economic boom, this time from soldiers returning home from the war looking to settle down. Cheap energy was again everywhere and these resources seemed to be infinite. The United

States then turned towards becoming a consumer based economy and industry thrived.

This would inevitably lead to the exploitation of more of a finite resource to feed this booming economy. Since the 1960s the discovery of oil wells has declined in the United 34

States due to consumption of a large amount of the countries oil reserves. Today most of the oil produced and consumed comes from oil wells discovered over 40 years ago. By the 1980s more oil started being consumed than discovered.

The oil crisis of the 1970s was a wake up call for many in the United States as we became aware of the nation’s dependency on oil. In 1973 The Organization of the

Petroleum Exporting Countries (OPEC) cut off exports to countries that supported Israel in the Yom Kippur War with Syria and Egypt. This embargo against the U.S. lasted for one year and in this time the price of oil quadrupled to $12 a barrel.

The need for more oil led to the construction of the Alaskan pipeline, which was completed in 1977 (Trumbore, 2000). At this time the United States was in a position to move toward oil conservation and renewable fuels. The Carter Administration started developing Corporate Average Fuel Economy (CAFE) standards to increase fuel efficiency on domestic vehicles and even installed solar panels on top of the White

House. But when these crises passed and when oil prices fell, the Reagan Administration ended the tax incentives and other support for the renewable energy industry (Pahl,

2005). When United States oil production peaked in the 1970s and the country was not able to produce enough oil to meet its own domestic demand foreign oil became much more important.

In hindsight, the United States had the potential to start developing other means to meet its energy needs and policy to do so was initially enacted. The national speed limit was lowered to 55 mph to help conservation and a year-round daylight savings time was enacted in 1974. Also the big domestic automakers in the U.S. were required to comply 35

with the CAFE regulations as part of the Energy Policy and Conservation Act of 1975 to

produce more gas efficient vehicles (Bamberger, 2002). A second oil crisis came in 1979

with the fall of the Shah in Iran but when gas prices finally started to level off due to

increased importation of foreign oil from the Middle East, especially Saudi Arabia, the

government and the consumer gently pushed oil conservation aside for the time being.

OPEC

In the late 1950s a surplus of oil began to mount in the Middle East partly due to

an increase in production by the Soviet Union. The price of crude was also cut by

Standard Oil, which cut the Middle-East countries revenue. The Iraqis saw this

opportunity to align oil-producing countries in order to establish an organization that

could wield power over non-oil producing countries and to unify policies (Yergin, 1991).

In September of 1960 the Organization of Petroleum Exporting Countries (OPEC) was

formed when the governments of Iraq, Iran, Kuwait, Saudi Arabia and Venezuela met in

Baghdad, Iraq to discuss the reduction in crude oil produced by their countries in order to

bring prices back up to pre-cut levels. OPEC’s five founding members were responsible

for 80 percent of the world’s crude oil exports but oil was too cheap and not a huge

source of income (Yergin, 1991). OPEC wanted to get the supply under control and limit

production but not get prices up so high as to were people would start looking for

alternative fuel resources but on a steady level to make a profit.

At first the creation of OPEC did not seem threatening and was considered by

some to be “more bark than bite.” Even though OPEC was trying to get its own oil under

control these countries still needed the technical expertise of the western powers to run 36

oil fields. In 1961, after Kuwait became independent of Britain, Iraq claimed Kuwait as a

lost province from the Ottoman Empire days and threatened to invade. The threat was

quelled when Britain dispatched a small force in defense of Kuwait. In response Iraq

suspended its membership in protest, but this lasted for only two months. Also, the oil

companies would try to avoid any direct negotiation with the cartel because most of the

oil in the ground was already under license by specific countries for extraction (Yergin

1991).

Between 1960 and 1975, the organization expanded to include Qatar, Indonesia,

Libya, the United Arab Emirates, Algeria, and Nigeria. Ecuador and Gabon were members of OPEC, but Ecuador withdrew in December 1992, and Gabon followed suit in

January 1995. Current estimates are that the eleven current OPEC members account for around 40% of world oil production, and about 2/3 of the world's proven oil reserves

(Marcus, 1992).

Peak Oil

Peak oil refers to the stage when oil production can no longer be increased in

response to its demand. Some experts believe that the world oil supply has already

peaked while others believe that oil reserves will last for at least another generation. The

estimates of world oil peaking come in at around the year 2000 while other more

optimistic critics feel peak oil will arrive around 2020. If, in fact, oil has already peaked and reserves continue to go down while demand for oil increases, especially with growing economies in China and India, the economies of the United States and the world will be forced to deal with the oil crisis and look for other resources to meet energy 37 needs. With rising gas prices the auto industry and the government may have already reached a point of urgency to find a new source of energy. Public disapproval of our dependence of foreign oil further increases this concern. Consumers and politicians cannot ignore fuel prices above $3.00 a gallon.

In the case of China, when demands for oil cannot be met, this country of over 1.2 billion people will look for ways to meet their energy needs and according to one expert,

China will then be tempted to burn its huge coal deposits (Abdullah, 2005). This may lead to an increase in global warming and a potential “tragedy of the commons” where a finite resource is depleted through exploitation (Hardin, 1998).

Peak production of oil may destabilize the world and could potentially be catastrophic. The rise of the price of oil will cause fierce competition for the resource and may lead to disputes between foreign countries leading to military actions against countries that have this resource (Abdullah, 2005).

In the United States, oil production peaked in the 1970s when our oil production hit 9.6 million barrels per day. Since then, oil production in the United States has steadily declined hitting around 5.6 million barrels a day in 2004, with 80% of the United

States’ wells producing less than 3 barrels a day (Abdullah, 2005). This peak in oil production was predicted in 1956 by the geologist M. King Hubbert by taking into consideration the extraction of a finite resource.

What became known as “Hubberts Peak”, (refer to Table 3) a bell shaped curve was applied to U.S. oil production and the estimated reserves at the time (Hubbert, 1956).

Hubbert was surprisingly close by predicting that oil would continue to rise for around 13 38

more years before it would level off and eventually start to decrease. This gave Hubbert

the year 1969, give or take a few years as he claimed (Deffeyes, 2001). Critics dismissed

Hubbert, surely, because he was forecasting something that many in the profitable oil

world did not want to hear but also in part because false predictions had come before him

starting as early as 1900. But predictions prior to Hubbert’s did not take into

consideration oil wells that had not been discovered yet and as more oil wells were

discovered and drilled the peak oil prediction seemed to get further and further away.

Table 2. Hubberts Peak Ultimate world crude oil production based upon Initial reserves of 250 billion barrels

In 1971 Hubbert’s prediction was confirmed and every state was producing at full capacity while demand continued to increase. It was from this point on that the United

States has been dependent on foreign oil, namely from OPEC (Abdullah, 2005). Of course, when world production of oil does peak the world will not immediately run out of oil, but the ability to produce crude oil will never rise again. This leads to the need to find other forms of renewable resources, which may take a generation or more. This 39

gradual reduction has been referred to as a “Hybrid Solution” with a goal to decrease the

country’s dependence on foreign oil by 2-5% a year (Abdullah, 2005). Movements

toward renewable energy such as biodiesel and ethanol have the potential to supplement

the needs of the country’s energy dependence and boost the domestic economy.

Straight Vegetable Oil and Waste Vegetable Oil as a Biofuel

Another alternative fuel used for transportation that is often ignored is the use of straight vegetable oil (SVO) or waste vegetable oil (WVO). Many often confuse these fuels as being the same as biodiesel but SVO and WVO as a fuel is vegetable oil that has not gone through the transtesterification process. SVO refers to virgin vegetable oil and

WVO more specifically refers to waste vegetable oil that is usually left over by restaurants using vegetable oil in their deep fryers to cook foods such as french fries, chicken nuggets, or buffalo wings. Many restaurants pay to have their WVO hauled off and are willing to give it away especially in the name of recycling. After the WVO is collected it has to be filtered to remove large chunks of left over food but also small particles that can clog automobile fuel filters. It is also important to be careful to collect oil that is not contaminated with water but water can be removed by heating the oil. This heating to remove water ads an extra step so most “greasers” just try to simply collect water free WVO. Since water sinks to the bottom of grease dumpsters one technique is to filter off the top when possible.

Because SVO and WVO is more viscous, or thicker, than petroleum diesel and biodiesel it is necessary to heat the oil before the vehicle can be switched over to run on oil. As the vegetable oil is heated it reaches the same viscosity as diesel. One way to 40

accomplish this is to install an auxiliary fuel tank heated by heat exchangers tapped into

the vehicles existing coolant system, such as the one pictured in Figure 2. With the addition of a tank designated for WVO, the operator could start the engine on diesel or

biodiesel and switch to the auxiliary tank when the oil gets up to 160 degrees F, which is

the temperature SVO and WVO reach the same viscosity as diesel or biodiesel. Because

the combustion chamber of diesel engines can reach upwards of 900 degrees F, the temperature of approximately 600 degrees necessary to combust vegetable oil can be easily reached. This is also the reason why gasoline engines cannot run on SVO, because the temperature necessary to combust vegetable oil is not possible in spark ignition engines.

Figure 2. A Heated Vegetable Oil Tank in a 1982 Mercedes-Benz Diesel. Photo by Author.

41

The vehicle conversion, oil collection, and oil filtration process in order to run a

“veggie car” is too much for the normal everyday consumer to endure. Collecting used

vegetable oil is not the cleanest or easiest thing to do and can be extremely messy at times. Also, special filtration equipment and some basic mechanical knowledge is a

must. This is why the owners of “veggie cars” still remain a small percentage of people

using WVO and SVO as alternative fuels.

The use of unprocessed or untranstesterified vegetable oil as an energy source is

still considered experimental and beyond the scope of this thesis but as a possible future

biofuel, I feel it is worth mentioning.

As discussed, the United States has grown as a consumer society based on a finite

resource. When the U.S. was not able to meet its oil demand it looked toward other

countries to supplement the consumption. The energy crises were wake up calls to many

who questioned our dependence on foreign countries and who have grown skeptical of

American foreign policy. As I have also discussed, there are at least partial solutions to

the growing energy problem, but more research and development need to be enacted if

these energy sources are going to be widely available to the general public at a price that

is comparable with petroleum based products. 42

Chapter 3: Barriers of Biofuels

Land Impact Issues in Biofuel Production

One big question about the production of biodiesel is: Which vegetable source, or feedstock, will be used in to get the maximum net energy gain? Biodiesel can be made from an assortment of different vegetable feedstocks including soybean, rapeseed

(canola), corn, sunflower, mustard seed, palm oil and even hemp. Animal fats such as lard, tallow and fish oils can also be used but the net energy gain is relatively low. When considering the net energy gain in relation to producing biodiesel the farmer, as one

might expect, would want to grow the crop that produces the most oil per acre. Palm oil

produces approximately 600 gallons of oil per acre making it the best feedstock that can

be used for the maximum net energy gain per acre. However, as a domestic oil source

Palm Oil cannot be used in the United States because it only grows in tropical climates.

The best oil-producing crop for the United States therefore is rapeseed, or canola,

producing approximately 100-150 gallons of oil per acre. It seems obvious that in order

to get the most oil per acre for vegetable oil production rapeseed would be used.

However, with a strong soybean lobby in the United States, soy is the feedstock presently

being touted as the feedstock that should be used to produce biodiesel. This is also due to

the fact that soy is a much more diverse plant. The farmer can either sell the vegetable

oil produced from soy as a possible fuel or as a possible food source.

According to Jim Motavalli, author of Biodiesel: The Burning Question (2006),

the National Biodiesel Board (NBB) spokesperson Jenna Higgins has been quoted as

saying “We don’t believe Biodiesel is the silver-bullet solution to our fuel needs.” She 43

goes on to say that it has the possibility to supplement more that 10% of U.S. fuel needs

since it can be made from any fat or vegetable oil. Biodiesel only has the possibility to complement petroleum diesel, not replace it. According to Motavalli (2006), Higgins states that as of 2006 there were no plans to start growing crops specifically for biodiesel

and according to a study by the British Guardian in order to convert all road

transportation in the U.K to canola (rapeseed) based biodiesel would require 64 million acres of land, when there are only 14 million acres of farmable land in U.K. Motavalli

(2006) also provides other useful information by stating that biodiesel production was

likely to climb to 75 million gallons in 2005 from 25 million gallons in 2004, the U.S.

consumed 139 billion gallons of gasoline and 41 billion gallons of diesel fuel in 2004 and

that the NBB estimates that there are around 2.5 billion pounds of waste vegetable oil

available every year.

Food vs. Fuel

Another environmental concern dealing with an increase in biodiesel is the land

impact issue in regards to food versus fuel. Lyle Estill, author of Biodiesel power: The

Passion, The People, and The Politics of the Next Renewable Fuel (2005), claims that if

biodiesel was successful and tomorrow everybody was driving an efficient diesel car and

using biodiesel, it would take over 30 percent of the United States’ arable land to sustain

a crop that could produce enough oil to be processed into biodiesel. This number, of

course, would depend on the feedstock grown for the production process. Whatever

number, the United States does not have this amount of land to spare for alternative fuels

when taking into consideration that farmers also need to grow crops for food. 44

Estill (2005) also explores the grassroots biodiesel movement in the United States.

He begins by providing background on biodiesel and the use of vegetable oil as an energy

source in developing a cooperative to serve a community of consumers who participate in

starting a biodiesel refining plant. Estill (2005) writes about his experience of starting up

the co-op and some of the obstacles he faced. He also writes about our culture as a

“coalition of drilling.” This is a culture where, instead of looking for ways to get away

from oil consumption, we are spending enormous amounts of money and wasting time

looking for new places to drill for oil to meet our current energy demand. In Estill’s, and

others, view this does nothing for our dependence on foreign oil in the long run and

prolongs the inevitable.

One promising technology presently being explored is extracting oil from algae to

be processed into biodiesel. From 1978 to 1996, the U.S. Department of Energy’s Office

of Fuels Development supported a program to develop renewable and sustainable

transportation fuels from algae. The focus of the program, known as the Aquatic Species

Program (ASP) was to grow algae specifically to be processed into biodiesel. The alga used has high oil content and was grown in ponds. With this program, major advances were made in the science of manipulating the metabolism of algae for higher oil yield and the engineering of microalgae production systems. Through the course of the research an attempt to develop large-scale algae ponds was made being. The thought was that a series of algae ponds for biodiesel production could be placed around the country to limit supply routes for the fuel. This proved to be challenging due to algae not being able to be 45

grown in colder climates outside the test sites of Hawaii, California and New Mexico

(Sheehan et al., 1998).

Another obstacle proved to be the high cost involved in the production of

biofuels. Biofuels were not as cost efficient at the time of cheaper crude oil but with

increasing crude oil prices the production cost of petroleum-based fuels is catching up to

biofuels. One conclusion drawn from the algae research is that one acre of an algae pond

is able to provide hundreds of gallons more feedstock oil than conventional soybean

feedstock. This is promising for the land impact issue of biodiesel from traditional

feedstock. Also, alga uses less water than traditional crops. But even with these

advantages, oil from algae at the time of the study was not able to compete with

petroleum-based fuels and the project was ended (Sheehan et al., 1998). The project

ended in 1998 but the data from these tests are still available for future use and it is now

being revisited with the recent increase in domestic fuel prices.

Forests vs. Fuel

The world’s forests are what Renton Righelato, author of Forests or Fuel (2007)

refers to as “carbon sinks” that remove and store CO2 from the environment. The

benefits of the world’s forests to fight climate change are being ignored. These forests

are in jeopardy of being cut down to make way for more fuel crops. This would not only

hurt endangered species habitat but would also negatively impact the amount of CO2 in the atmoshere. According to Righelato, more arable land being used for biofuel production should instead be converted back to cropland. Carbon stored by vegetation would outweigh the emissions avoided by the production of biofuels. Cropland 46

converted back to tropical forest would store 20-30 tons of CO2 per hectare per year or 2

to 3 times higher than what the emission avoided by sugarcane based ethanol. As

Righelato argues, the process of restoring tropical forests would be a slow process but

would pay off over a long period of time. Balancing the amount of carbon in the

atmosphere with the emissions avoided through the use of biofuels is something that

needs to be considered if biofuels are going to be a viable energy resource in the United

States.

Ohio Agriculture

According to the United States Census Bureau, Ohio was considered a part of the

North Central Region prior to 1984. This region was renamed the Midwest, an area

known for large amounts of farmland and agriculture. The region is further split into two

divisions and Ohio is now considered to be in the East North Central States section. Ohio

also has the highest density of population of any state not on the Atlantic Ocean (Census,

2001). Ohio's geographic location in the lower 48 has proved to be an asset for economic growth and expansion in the Midwest. The state has a well-developed highway system and links the geography of the Northeast to the Midwest making it a crossroads for business traffic passing through its borders. Ohio has the nation's 10th largest highway network in the country. And because of its geographic location and highway system

Ohio is within a one-day drive of 50% of North America's population and 70% of North

America's manufacturing capacity (Transportation Delivers, 2003). Ohio businesses also take advantage of shipping ports with the Lake Erie coastline to the north and the Ohio

River in the south. 47

Geographically Ohio is located in the area known as the Corn Belt (see figure 3 in

red). The Corn Belt is a region of the Midwest of the United States where agriculture has been developed into a major economic factor and where corn is the predominant cash crop. This region originally grew corn as food for livestock but as the value of corn became known and the market for corn grew production further increased. The Corn Belt is also known for growing large amounts of grain and more recently expanding soybean agriculture. The Corn Belt primarily includes Iowa, Indiana, Illinois, and Ohio where a majority of the corn grown in the United States is produced. The Corn Belt also includes, to a lesser extent, parts of South Dakota, Nebraska, Kansas, Minnesota, Wisconsin,

Michigan, Missouri, and Kentucky (Hudson 1994).

Figure 3. The Corn Belt Map by author using USDA website data

With the large amount of cropland, existing infrastructure and proven ability to

cultivate the needed feedstocks for biofuels, Ohio has the potential to become a key

player in this field. 48

Biofuel Competition

According to John Manuel, author of Battle of the Biofuels (2007) both ethanol and biodiesel require significant energy to produce, have their own environmental impacts and could possibly divert corn and soybeans from the nation’s food supply.

More recently, there has been debate on the energy balance and environmental impacts of these biofuels and if they should be subsidized by the government in order for the fuels to compete with petroleum-based fuels.

According to Tilman, Hill, Nelson, Polasky. & Tiffany, (2006), a viable alternative fuel must meet four criteria: 1) Superior environmental benefits of the fossil fuel it replaces; 2) economically competitive with fossil fuel; 3) producible in sufficient quantities to make a meaningful impact on energy demand; and 4) provide a net energy gain over the energy sources used to produce it. A comparison between corn based grain ethanol and soybean diesel shows that the positive net energy balance (NEB) for ethanol is 25 percent compared to 93 percent (NEB) for biodiesel. The emissions of air pollutants of ethanol show a 12 percent reduction in CO2 compared to 41 percent reduction for biodiesel. As of 2005, price comparison between ethanol and petroleum gasoline shows that ethanol costs approximately .63 cents to produce an energy

equivalent liter (EEL) where gasoline costs approximately .45 cents to produce an EEL.

Soy biodiesel costs approximately .82 cent per EEL compared to petroleum diesel, which costs .53 cents per EEL.

Tilman et al., (2006) also concludes that if the United States were to devote all of

the corn and soybean production to biofuels in order to offset the amount of fossil fuels 49 used in fuel production this would still only offset gas consumption by 12 percent and diesel consumption by 6 percent as of 2005. And because of the increase in the production net energy gain would be reduced to only 2.4 percent for ethanol and 2.9 percent for biodiesel. Also, the cultivation of both biofuels could create a negative environmental impact in relation to the use of fertilizer and pesticides used.

According to Tilman et al., (2006) biofuels produced from corn and soybeans is a

“fledgling” industry in its infancy but is a good first generation biofuel. The next step would be to develop biofuels based on nonfood crops such as prairie grasses and woody plants that will require lower chemical and energy inputs but can return greater energy and environmental benefits.

Price and Availability of Biofuels

A 2005 document titled Evaluation and Analysis of Vegetable Oil Markets from the National Biodiesel Board website offers good analysis on how biodiesel has become more competitive with petroleum diesel in the past 2 years. The main reason, of course, is the rising price of world crude oil. From 1995 to 2005 the average price of retail diesel was approximately $1.32. Towards the end of 2005 diesel prices averaged around $3.00 per gallon. One of the biggest obstacles for biodiesel is producing biodiesel from raw materials and having it meet quality standards for transportation, while keeping the price competitive with petroleum diesel. The variables for keeping the price of biodiesel down involve scale, location, processing technology, and feedstock. A biodiesel facility that is dependent on purchasing its feedstock faces different conditions and cost issues than a facility that has an assured supply. The location is important because depending on 50

which state the facility is located, the facility may be entitled to tax incentives

(Evaluation and Analysis, 2005). Also, the cost of transportation is an issue. One can

rationally conclude that biodiesel will not be in as high demand unless petroleum diesel

starts becoming consistently higher.

According to Lyle Estill and Rachel Burton co-authors of Our Place in the

Biodiesel Waste Stream (2005) and representatives of Piedmont Biofuels in Piedmont,

North Carolina, the biodiesel they produce has consistently been priced at approximately

$3.50 a gallon for B100 for the last several years. When they first started producing

B100 petroleum based diesel was $1.69 but peaked at $3.59 after hurricane Katrina. As

of May 2007 petroleum diesel hovers around $2.75 a gallon around Piedmont.

According to Estill and Burton (2005) the American public has been subsidizing

petroleum fuels ever since the energy crisis of the 1970s. This is when the United States

first installed a huge military presence in the Persian Gulf, which has been sustained for

more than 30 years. Ever since the American taxpayer has been paying the bill so that

tankers can receive fighter jet escorts out of the Middle East.

Estill and Burton also claim there is a direct correlation between the price of fuel

in the U.S. and the American health care system. The United States is one of the last

countries in the world to have a free market for health care and everywhere else where

the government provides health care for its citizens, petroleum fuel is more expensive due

to an increase in taxes. So if, in fact, the oil companies were forced to provide their own

security for its tankers and if the government collected more tax-payer dollars for 51 national health care like many other industrialized countries, the price of petroleum fuels would be much higher than the biofuels currently being produced.

In September 2005 Minnesota became the first state to implement a mandate that required the blending of at least 2% biodiesel into the state’s fuel supply (Biodiesel

Leaders, 2006). Now the state is implementing a program to enhance quality control measures. The state is now calling for all biodiesel producers to become qualified under what is known as the “BQ-9000” quality assurance program. According to the NBB sub- par biodiesel was delivered to some Minnesota terminals, which may have been the cause of clogged fuel filters in trucks. There was also speculation that some off spec biodiesel may have had a bad reaction in cold weather. NBB CEO Joe Jobe assured consumers that

NBB, along with the Minnesota Biodiesel Counsel (MBC), is working aggressively to make sure that all biodiesel is safe for consumption in the Minnesota State fleet. The

BQ-9000 program, backed by the NBB and the MBC, may put into place regulations for biodiesel producers to provide a certificate of analysis for every batch of biodiesel produced (BQ-9000, 2007). This may be viewed as just more red tape for the small batch producer to deal with but in the long run will be important to maintain higher fuel standards for consumers.

Greenhouse Gases

According to Sean Kilcarr author of Adapting to Alternative Fuels (2003) one of the benefits of the increased use of biofuels is lower greenhouse emissions in automobiles. This may help some fleet vehicles comply with certain clean air standards while keeping the cost of converting to alternative fuels relatively low. But the lack of 52

alternative fueling sites has been a major impediment to using alternative fueled vehicles.

Kilcarr (2003) also discusses the lack of incentives for the production of biofuels,

something that is changing presently. But California, for example, under the California

Air Resources Board (CARB) has offered up to $1,000 in incentives for fleets to

purchase Alternative Fueled Vehicles (AFV’s) and up to $100,000 for the construction of

fueling stations. The EPAct is a government program that promotes the use of alternative

fuel use but only applies to light-duty vehicles with a gross vehicle weight ratio under

8,500 pounds so most heavy-duty vehicles such as dump trucks that traditionally run on

diesel, which could be supplemented with biodiesel, are not covered. The DOE and EPA

have also targeted “niche” fleet vehicles such as airport ground service vehicles, local

emergency vehicles, school buses, and other long haul vehicles as targets to help promote

alternative fuels.

In Buying Biodiesel off the Racks by Steve Richter (2003) deals with issues such as distribution and availability of biofuels at truck stops. In 2001 the EPA established a

program to lower emissions from diesel engines. Refineries are required to produce Ultra

Low Sulfur Diesel (ULSD) for use in model year 2007 and later vehicles. Biodiesel

offers an option for replacing the lower lubricity levels in ULSD because of biodiesel’s

high lubricity properties. Richter’s cooperative has been a proponent of soy-based

biodiesel. To help propel its use members have been developing market strategies and

educational programs with the United Soybean Board. The members of the board and the

cooperative would like to see the same kind of support for biodiesel as there is for corn-

based ethanol, which can be used as a supplement for gasoline. With record high oil 53

prices the urgency of finding other sources of energy are heightened and law makers are

paying attention.

In an article from the New Scientist Journal, Fred Pearch (2006) asks the

question, “Are biofuels really the greenhouse-busting answer to our energy woes?” The

immediate answer is no, but it’s not that simple. There is a misconception that biofuels

are the solution to wean the country off of foreign oil. According to Pearch the major PR

campaign for biofuel acceptance is their eco-friendly image. There are concerns that

biofuels will trash rainforests, suck water reserves dry, kill off species and raise food

prices. There is also concern over the corporate takeover of agriculture for the mass

production of biofuels. Pearch cites a Worldwatch study, which estimates in order for the

United States to meet its target of 10% biofuels use, the U.S. would have to designate

30% of its agricultural land to biofuels.

There are also doubts that the energy input for growing and processing corn to ethanol is more than what can be produced. Another study conducted by David Pimentel from Cornell University and Tad Patzek from the University of Berkley at California concluded that the production of ethanol and biodiesel create more greenhouse gases than you would by just burning fossil fuels. The study found the energy input for biofuels, such as ethanol and biodiesel actually returns a negative net energy balance. According to the article, ethanol production using corn grain required 29% more fossil energy than the ethanol fuel produced and ethanol production using switchgrass requires 50%more fossil energy than the ethanol fuel produced. Ethanol production using wood biomass requires

57% more fossil energy than the ethanol fuel produced. As for biodiesel production, 54

using soybeans required 27% more fossil energy than the biodiesel fuel produced and

biodiesel production using sunflowers requires 118% more fossil energy than the

biodiesel fuel produced (Pimentel & Patzek, 2005).

But as Pearch (2006) claims other studies have found contradictory results. So

the topic is open to quite a bit of controversy and is the subject of an ongoing debate on

the sustainability of biofuels that use traditional means of agriculture to produce them.

Non-Technical Barriers

Although biofuels seem to be a feasible energy resource there are still barriers that

need to be overcome in order to make it more viable to replace fossil fuels. According to

Rosch and Kaltschmitt authors of Energy from Biomass: Do Non-Technical Barriers

Prevent and Increased Use? (1998) non-technical barriers are identified as financial

challenges, legal and administrative barriers, lack of knowledge and negative perception

and lack of acceptance for biofuels.

The technology to convert energy carriers that operate on fossil fuels is available but is not cost efficient compared to the relatively cheaper prices of petroleum fuels. The authors also cite the fact that the advantages of using biofuels to reduce greenhouse gases were not as widely know when this article was published in 1998. It will only be when these advantages are realized that sufficient financial support will be available. The advantages of biofuels in reducing greenhouse gases will help European Union countries comply with the Kyoto Protocol. Programs for research and development in the areas of biofuels for EU counties were in their infancy when this article was published. It would be interesting to follow up on the accomplishments or shortcomings of these programs in 55

recent years, especially since the price of crude oil has skyrocketed over the last eight

years.

Despite financial challenges for biofuels Rosch and Kalschmitt (1998) also

acknowledge that there are administrative challenges in order to make biofuels usage

more widespread. In order to operate a bioenergy facility in the EU certain permits must

be obtained. Some roadblocks may be encountered because the framework for operating

a bioenergy plant may not be available or is unclear. This is due to authorities lack of

experience when dealing with the new concept. According to the authors, looking for

existing regulations that can be applied to new bioenergy plants can lead to long waiting times for approval. The development of a framework for bioenergy plants may be difficult but are needed for the development of biofuels.

The acceptance of domestically produced renewable energy by the general public seems almost certain, however, the authors claim that most people are not completely familiar with the benefits of using biofuels. The article cites negative connotations with biomass energy being supplemented for home heat. The negative views have to do with low efficiency and bad odor, which are not true when using newer biomass technology.

From my experience with biodiesel specifically I have also heard negative views on biofuels related to loss of power and gelling in cold temperatures. Although I have never experienced loss of power when running high blends of biodiesel it is true that biodiesel does gel at a higher temperature. But like petroleum-based diesel, anti-gelling agents may need to be added in colder climates. To help the public understand biofuels it is important to get the proper information to the public. 56

According to Rosch and Kalschmitt (1998), there should also be a focus on the

use of biofuels making a contribution to the reduction of greenhouse gas in the

atmosphere, the creation of new jobs in rural areas, the higher economic values of land

set aside for biofuel feedstock and the increase in the value of organic residues and

biowastes. The lack of awareness to these possibilities is what has led to low financial

support.

Resistance for Biofuels

As biofuels become more widely used there has been speculation that big oil will attempt to resist their growth. An article titled Will the Oil Companies Resist Biodiesel by Peter Bell (2002) defends oil executives and claims they, in fact, welcome the development of biofuels. Oil companies are also tired of being cast as destroyers of the environment. The main reason oil companies should embrace biodiesel is because it can solve lubricity issues of Ultra Low Sulfur Diesel. Ultra Low Sulfur Diesel reduces black smoke and emission levels in diesel exhaust and helps decrease particulate matter. One problem with ULSD is its low lubricity properties, which lead to injection pump problems but using a blend of biodiesel as low as 1% can alleviate this. The EPA mandated that the sulfur content in all diesel, on-road and off-road, be lowered in 2007 by 15PPM. This is compared to past diesel, which was 300 to 500 PPM. Bell (2002) closes by saying that most American oil executives prefer dealing with a farmer in Texas than a “radical” in Saudi Arabia. 57

I have discussed what I believe are some of the barriers of biofuels in order to become a viable energy resource. This research focuses on the state of Ohio and the challenges it faces in order to become a producer and consumer of biofuels. 58

Chapter 4: Methodology

Site

The site for my study is biofuel production facilities in Ohio. I have chosen

biodiesel plants in Ohio because there is sufficient data available and the experts in the

field should be easily available to interview for data collection. Ohio is a mid-western

state that, like other mid-western states, is working to increase domestic corn and soy

production in order to attract ethanol and biodiesel production plants in order to promote

economic development. Also, interest in the development of renewable energy resources

in the United States has grown dramatically over the last three years because of the

increase in domestic fuel prices in the United States. Many are beginning to learn there is

an alternative to importing petroleum based fuels from unstable parts of the world and the

United States is able to produce more fuel to meet, or at least supplement, its ever-

growing energy needs.

Sample

For the purpose of this study, biofuel producers are categorized as follows: 1) The

grassroots/small-scale producer often referred to as home brewers; 2) the medium scale

producer who may produce biofuels on a local scale; and 3) the advanced producer who

is developing factories for regional production. The three levels of producers were narrowed to the small to medium producers in Ohio who may produce biofuels on a more local basis with typically less than a 100-mile radius of distribution.

Participants were selected based on the quantity of biodiesel produced by their factory. While this study does not specifically look at the size of biodiesel production 59

plants, I expect to find similar obstacles by each small to medium scale local producer as

well as different obstacles associated with the size of the business.

Access and Sample Selection

The participants I included in my sample are biofuel producers in Ohio. The experts in the field of biodiesel production are referred to as “key informants” in Crabtree

and Miller’s book, Doing Qualitative Research (1992). This is what Crabtree and Miller

(1992) describe as historically being the “anthropological researcher’s link to the tribe.”

The experts I plan to interview possess the special skills and knowledge I need for my

research. As further described by Crabtree and Miller (1992), the key informant is

articulate and willing to share their knowledge with the researcher. They are also

important to use because they can offer “access and sponsorship” to key areas I may wish

to visit for my research. For example, by first developing a relationship with the key

informant the interviewer may gain further access to what the key informant is involved

in. In my case, by calling and interviewing an expert in biofuels I will probably be better

received in the future if I wish to tour the facility than if I were to show up at the facility

unannounced. In this aspect Crabtree and Miller (1992) refer to the key informant as a

“research collaborator.”

Interviews

I used in-depth interviews with the biodiesel processing plants as the main method

of data collection. The questions in the interview were related to the technical and non- technical barriers for the production of biofuels. As identified before, some consumers may not be willing to spend the extra money for a gallon of an alternative fuel so I am 60

interested in the consumer’s motivation for their usage of biofuels and what the producers

may do in order to branch out to promote their product with the aim of gaining more

customers.

Crabtree and Miller (1992) state that, “the researcher’s aim in using informants is

to uncover patterns and not to get questions answered, the researcher cannot, like the

interview, direct the conversation.” All researchers bring some type of bias to the table

and as a user of biodiesel I understand that I am no exception. It is important to remain

as unbiased as possible in order to uncover unpredicted issues. In my specific research

by putting the emphasis on listening to the informant I will be more successful in

uncovering patterns of the challenges all biofuels producers may face.

As explained in Crabtree and Miller (1992), the first series of questions should be introductory in order to get an idea of the specifics of the business. (i.e., How much the specific plant produces, who the customers are, what the customers motivations may be and if the processing plant has any plans to expand?) The second series of questions are referred to as structural questions with the intention of focusing my research. (i.e., What are some of the advantages/disadvantages of using biofuels?) The final series of

questions will further clarify the main research question. (i.e., What are the barriers of

biofuels?)

A chapter written by Tim Rapley in the book Qualitative Research Practice, ed.

Seale, Gobo, Gugrium & Silverman (2004) explains the process of conducting a

qualitative interview. The process detailed in the text I will use for my research is what

Rapley (2004) refers to as the “Interview-data-as-a-resource.” This is where the data 61

collected are seen as reflecting the interviewee’s reality outside of the interview. Rapley

also discusses the recruitment of the interviewees, crafting the questions for the interview and tips for beginning the interview in which the interviewer arrives early, but not too early, and picks the proper environment to conduct the interview in order to provide a

comfortable atmosphere. Since my interview will be on a topic where the interviewee is

not revealing any personal or confidential data the environment of my interview should

not hinder my data collection.

Rapley (2004) begins by describing how he contacts the interviewee over the phone to set up a meeting. When he meets with the interviewee, Rapley reminds them of the research and explains issues of confidentiality and anonymity if it applies. Rapley also explains that he uses a tape-recorder in order to interact with the interviewee personally by maintaining eye contact and a steady conversation instead of spending a lot of time with his head down writing. The tape recorder also provides a detailed record of the interview where data can be revisited or used to produce transcripts.

Trustworthiness

According to Crabtree and Miller (1992), trustworthiness in qualitative research

has been hard to define because it is as much a reflection of the researcher and research instrument. One way to view qualitative research as valid is by finding a story so as to resonate with other people who may have similar stories. Crabtree and Miller (1992) go on to state four criteria in trustworthiness in qualitative research; 1) “Member Checks”,

which draws conclusions between the analyst and key informants; 2) “Searching for

disconfirming evidence,” which may include conflicting accounts in order to strengthen 62

the analysis; 3) “Triangulation,” which refers to the use of multiple data sources and

methods; i.e. scholarly articles and key informants; and 4) “Thick description,” which is a

detailed description of the information or setting in which the information was collected and a through description of the transaction observed during that the context of data

collection that are relevant to the problem the researcher is addressing.

In order to increase trustworthiness and to minimize common threats to validity I

choose subject matter experts in the field of biofuels. To narrow my scope I interviewed

biofuel experts who operate facilities in Ohio. I contacted a representative from the

facility who directly works in the field of biofuels and identified myself as a graduate

student conducting research on the topic. I then asked each interviewee the same series

of questions in order to be consistent with my data collection. By asking the same series

of questions while conducting the interviews I hoped to minimize the chances of the

findings being inconsistent. I also used the basic series of questions to help build on

further concepts I uncovered while conducting the interview. For example, if an

interviewee explains a process or concept I do not understand I can use follow-up

questions such as, “How did this affect you?” or “How did you deal with this problem?”

to strengthen my research. (Refer to page 67 for list of sample questions)

Concerns

Due to the nature of the research with biodiesel experts who are willing to participate in a simple interview and my status as a graduate student with no concerns to

the administration, there should be no threat to the reputation of the interviewees. All

assumptions the participant may have in relation to how the data collected from the 63

interviews will be used will be addressed up front and there will be no hidden agenda.

One concern I did have, as a user of biodiesel, is ensuring that I do not portray myself as

an advocate of biofuels so the participant’s responses might be more biased. Therefore, I

only identified myself as a researcher interested in the topic until the interview starts or is

complete.

Also, as I described before, I recorded the interviews to facilitate accurate data

analysis. As Tim Rapley describes in the book Qualitative Research Practice, ed. Seale,

Gobo, Gugrium & Silverman (2004) the use of a tape recorder may increase nervousness or make the interviewee feel like they must be interesting or dramatic 64

Limitations

As with most research the findings in this master’s thesis will be tentative and will

change over time with the development of more research and technology in the area of

biofuels. The interview questions were developed based on the literature but the responses are from each Ohio biofuel producer’s viewpoint only. Therefore, the sample for this qualitative study will not completely represent biofuel production as a whole but will aid in the identification of the barriers that biofuels may face in order to become a more viable energy resource in the United States.

Another limitation uncovered while conducting the interviews was the lack of small-scale ethanol producers in Ohio. As of the writing of this thesis there were no small-scale producers currently in business but seven large-scale ethanol plants were being built with plans to start production in 2008.

Data Analysis

Using qualitative research methods I coded the data from my interviews in order

to find patterns. According to Herndon, et al. (1993), qualitative research has emerged

since the 1970s as a way to develop methods to study the process of communication.

Crabtree and Miller (1992) identify and explain qualitative research methods in its most

simplistic terms as “What is going on here and how can I explain it?” Some of the

qualitative techniques identified in this book are the survey style of inquiry, which

include structured interviews and interviews that use a ratings scale, i.e., On a scale of 1

to 10 how important is the use of biofuels in the United States? According to Crabtree

and Miller (1992), the survey style of inquiry focuses on a representative sample from a 65

defined population in order to generalize the result to the larger populations. One of the advantages of using qualitative research for my personal research is that it allows for smaller sample sizes of data collection and the ability to gather detailed information firsthand from biofuel processors.

I relied on what is identified by Crabtree and Miller (1992) as the “documentary-

historical research method” of qualitative research. This will be in the form of a literature

review, which will depend on scholarly articles related to the topic. According to

Crabtree and Miller (1992) qualitative research is ideally suited for the essential task of

identification. I will use the qualitative research method to identify the challenges that

biofuels face in Ohio and what can be accomplished in order for them to gain more

widespread support. 66

Chapter 5: Data Collection and Research

For my research I chose Qualitative Interviews as outlined in Qualitative

Interviewing: The Art of Hearing Data by Herbert J. Rubin and Irene S. Rubin. This book was helpful in designing my interviews based on research and was a guide to stimulating conversation in order to absorb what the interviewee says.

I interviewed five small-scale biofuels producers in Ohio, which included four biodiesel processing plants and one ethanol-processing plants. A list of the same sample questions to each interviewee ahead of time in order to give each producer an idea of my research interests. Four of the interviews were conducted in person and one interview by telephone. The conversations were recorded with a digital voice recorder so I could transcribe the interviews in order to revisit them for further review and to help formulate more questions as my research progressed. I explained to the participants all biofuels processing plants in my thesis would remain anonymous, would not be referred to by name and would only be identified by general characteristics. The processing plants were labeled with a letter, Plants A through E, and the interviewees are referred to as such in my research as well as the transcriptions in the appendices. After the transcripts were complete I forwarded them to the interviewees for review and approval and gave them the option to give me additional feedback if they liked. Complete transcripts of the interviews are found in the appendices.

The following list of questions were forwarded to each interviewee prior to the interview:

67

Sample Questions

How much biofuel does the specific plant produce?

Where does your facility get its feedstock and what kind do you primarily use?

Does the biofuels plant have any plans to expand and if so how big do you plan to go?

Who are the primary customers?

What do you believe are the customer’s motivations for purchasing biofuels?

In your opinion, what are some of the advantages of using or producing biofuels?

In your opinion, what are some of the drawbacks of using or producing biofuels?

What are some of the obstacles you face in the production of biofuels?

As for the future of biofuels, what are some promising technologies being developed to promote biofuels?

Are you aware of any state or government incentives in order to promote the development of biofuels in Ohio?

What is Ohio’s potential role for biofuel production?

What do you believe are the major barriers of biofuels and what should be done in order for them to gain widespread support?

Some critics feel that major oil companies do not want the United States to seek out alternative energy, what is your opinion on this issue?

Background of Producers

I decided to focus on what I considered small-scale producers, which was 5

million gallons per year (MGPY) or less (Table 4). As of November 2007 Ohio had no ethanol producing plants but seven were currently being built and were scheduled to

begin operation in 2008. The first series of questions were introductory questions in

order to get an idea of the specifics of the business; i.e., How much the specific plant 68

produces, the nature of the customers, including their motivations, and if the processing

plant has any plans to expand (Crabtree and Miller, 1992).

Early in my research I found that I would be limited to the amount of small-scale

ethanol plants available to interview. Plant E was a small-scale ethanol producer

manufacturing approximately 1 MGPY at the time of their maximum output but shut

down earlier this year due to regulatory issues. Because of the lack of ethanol producers in Ohio at the time of this thesis I found it challenging to find a small producer around the

same size as Plant E. Therefore, the challenges of biofuels in Ohio are from the

perspective of only one small-scale ethanol producer who is no longer in business.

Plant Type of Feedstock Annual production Presently in biofuel Operation? 365,000 gallons Plant A Biodiesel WVO from Restaurants Yes (projected) Bacon Grease/Multi- Not as of Oct. Plant B Biodiesel 4-5 MGPY (projected) Feedstock in the future 2007 Not as of Oct. Plant C Biodiesel Virgin Soy Oil 3 MGPY (projected) 2007 1.5 MGPY / 7 MGPY Yes. In the Virgin Soy Oil/Multi- Plant D Biodiesel projected for next process of stock in the future year. expanding. No. Out of Plant E Ethanol Waste Beverages 1 MGPY Business.

Table 3. General Characteristics of Biofuel Producers Interviewed

Because of the limited output of the small-scale plants, production size by each

was restricted to a smaller distribution area. The area was usually limited to the

surrounding counties near where production occurred. Plant A produced biodiesel from

WVO collected from area restaurants. The production size was the smallest of any plant

I interviewed and the distribution radius was limited to the surrounding farming community of about 20-30 miles for off-road use only. Plant A’s small processing plant 69

uses a 400-gallon tank with the ability to produce around 350 gallons of biodiesel at a time. However, their facility is limited to one biodiesel wash tank, which restricts them

to 1000 gallons a week. Plant A referred to this as a “bottle-neck” but they plan to

overcome this in the near future with the addition of another wash vessel.

Biodiesel can be “washed” by using a system of injecting small particles of water

to remove any traces of alcohol, catalyst and glycerin. The water is then removed after

several days of washing and the biodiesel is then ready for market. Some small-scale

“backyard home brewers” who produce biodiesel for personal vehicle consumption, skip

the time consuming washing process but commercial producers usually have to perform

this step in order to meet certain biodiesel industry standards such as the American

Society for Testing and Materials (ASTM) specifications mentioned later.

Plant B, who expects to produce 4 MGPY of biodiesel from bacon grease starting

late this year, estimated the largest distribution area from the sample interviewed at 50-75

mile radius. Plant C estimated that their distribution radius would be in the 50-mile range

with production starting at 3 MGPY. Plants B and C were still in construction at the time

of this thesis but were slated for start up around the end of this year or early next year and both plan to sell on-road biodiesel. In order to sell on-road biodiesel Plants, B, C and D may be required to meet certain quality standards discussed in the next section.

Plant D is an operational multi-feedstock production plant located in northern

Ohio. The Plant D representative I spoke with stated that for approximately two years the plant exclusively used soybean oil for production because it is the easiest to work with and was, at the time, affordable. But recently the plant has also used choice white grease, 70

a pork animal fat, and has had the opportunity to use palm oil in limited amounts. The

plant currently produces approximately 1.5 MGPY of B100 biodiesel and is currently in

the process of expanding their plant to produce another 5.5 MGPY, giving them a total production size of 7 MGPY by next year.

Plant E was unique because it was the only small-scale ethanol producer in Ohio until earlier this year. They also used waste beverages as a feedstock as opposed to traditional feedstock such as corn but as the representative I spoke with explained they were involved with corn but in more of a derivative way meaning that they did use corn but corn that had already been processed by other manufactures. Earlier this year Plant E was shut down because of regulatory issues and not a lack of business. The downfall of the company came when the city where they were located informed them that they would not be able to process their waste water, which was high in sugars, at the local sewage plant.

The next smallest ethanol plant in Ohio was closer to 50 MGPY while Plant E was around 1MGPY at peak production. Plant E enjoyed having a revenue stream on both ends. Companies would pay them to dispose of their waste cola, beer, mouthwash or other sanitizers. They would, in turn, process the waste products into ethanol and sell it to other companies who would then use it to mix with other products such as mouthwash again or automobile ethanol.

On-road Biodiesel Standards

On-road biodiesel needs to meet standards defined by the American Society of

Testing and Materials (ASTM) D6751 guidelines. According to the National Biodiesel 71

Board (NBB) and the American Society of Testing and Materials (ASTM), 100 percent

biodiesel is defined as “a fuel comprised of mono-alkyl esters of long chain fatty acids

derived from vegetable oils or animal fats, designated B100, and meeting the

requirements of ASTM D6751.” Biodiesel blend is further defined as “a blend of biodiesel fuel meeting ASTM D6751 with petroleum-based diesel fuel, designated BXX,

where XX represents the volume percentage of biodiesel fuel in the blend” (What is

Biodiesel, 2007) Although federal law may not require ASTM D6751, some automobile

manufacturers may adopt D6751 for a clear definition of biodiesel in order to provide

information to customers regarding biodiesel. They may also use ASTM D6751 standard

to define or enforce engine warranty information (Active Standard, 2007).

The biodiesel industry under the direction of the NBB has developed another

standard known as the BQ-9000 specifications for biodiesel fuel. According to The

National Biodiesel Accreditation Program, the BQ-9000 quality management program is

a voluntary program for the accreditation of producers and marketers of biodiesel. The

program is a combination of the ASTM D6751, and a quality control program that

includes storage, testing, blending, shipping, distribution, and basic fuel management practices. This program is designed to give accreditation to processors and to ensure quality biodiesel is being produced (BQ-9000, 2007). Due to Plant A’s decision to sell only off-road biodiesel specifically they would not have to participate in the ASTM’s program. However, there is some indication that groups such as the Ohio Soybean

Council are making a push for consumers to make sure they purchase ASTM D6751 or

BQ-9000 accredited fuel. 72

Feedstock

Plants B and C have a similar customer base. They will sell the biodiesel

produced in their facilities to distributors who will in turn use it to blend with petroleum

diesel; most likely with blends such as B5 and B20. Plant B plans to start off production at 4 MGPY but claims they will top out at 5 MGPY using multiple feedstocks starting with bacon fat purchased from a regional distributor. Plant C plans to do a max capacity of about 3 MGPY using strictly virgin soy oil known as crude degummed soy oil, which must be pure and produced from quality crude soybean oil. This oil has had the major portion of the gums that are naturally present in the oil removed by hydration and mechanical or physical separation. According to Plant C’s spokesperson the advantage of using crude degummed soy oil is that you do not have to worry about the impurities or filtering left over food particles as you would with WVO. Crude degummed is also lower

in free fatty acids and is more conducive to biodiesel production because the process of

converting crude degummed takes less of your catalyst, which reduces cost. Another

benefit, according to Plant C’s spokesperson, is that the Ohio Soybean Council has been

pushing customers to buy 100% soy oil based biodiesel. Because Plant C will produce

soy-based biodiesel it will benefit from efforts by the Ohio Soy Bean Council urging

farmers and consumers to buy biodiesel produced from soyoil.

Plant B differs from A and C with the type of feedstock they use. They also differ

in the reason why they decided to use bacon fat for their feedstock as opposed to virgin

soy oil. Plant B will operate as a multi-feedstock processing plant but will start

production using refined bacon fat. According to one spokesperson from Plant B they 73

chose not to use virgin soy oil due to the cost involved. Also, Plant B stated that soy oil is expensive and not cost effective for the industry because soy and rapeseed oil prices have skyrocketed with demand rising due to biofuel production. They also feel that although WVO is relatively affordable it takes more refining at the plant, which increases cost, but Plant B plans to add the equipment to handle WVO in the future.

Plant A uses strictly WVO collected from area restaurants and because the oil collected is free the cost for his biofuel production is low. However, cost involved with filtering remaining food particles and the extra catalyst used to process WVO may in turn increase cost. Because Plant A sells strictly off-road biodiesel, therefore state and federal taxes associated with on-road fuel usage are not applied making it a much more affordable fuel for off-road biodiesel consumers.

When Plant D began they used exclusively soybean oil because it is the easiest to work with and was affordable. But recently the plant has also used choice white grease, a pork animal fat, and has had the opportunity to use palm oil in limited amounts. Because of the constant fluctuation of the price of soy oil, biodiesel processing plants are constantly looking for alternative feedstocks to remain competitive in the biofuels market.

Again, Plant E would charge soda, beer and other producers to dispose of their waste. This waste was then processed into ethanol and sold to other companies such as perfumers or others who would further process their product into fuel. Because Plant E was categorized as a biofuel producer they were able to benefit from federal tax incentives and gain access to funding from investors. 74

Primary Customers

The primary customers for both Plants B and C are fuel distributors, although

Plant C plans to sell on-site biodiesel in the future. Plant B stated that they are not in the

retail fuel market and their customers will be fuel distributors such as B.P., Marathon and

Sunoco who will use the biofuels as an additive for petroleum diesel. Plant C also plans to sell biodiesel to distributors who will use the fuel to blend with petroleum diesel. Plant

C’s spokesperson stated there has been a rising demand for biodiesel since the EPA’s implementation of Ultra Low Sulfur Diesel (ULSD), which helps lower emissions from diesel engines. According to Plant C one of the main advantages of biodiesel is the added lubricity lacking in the ultra low sulfur. So in many vehicles the added lubricity

biodiesel contains makes a significant difference. This corresponds with Richter (2003)

in Buying Biodiesel off the Racks who claims that blends as low as even 1% or 2% make

up the lubricity difference lacking in ULSD.

Plant A’s customer base is rural farmers and it sells only off-road biodiesel.

When asked if they plan to expand their facility Plant A stated no plans to expand

although they would like to boost production within the next couple of months with an additional wash tank.

Plant D is also similar to Plants B and C in their customer base because they also sell to distributors such as BP or Sunoco and on occasion an independent facility.

Plant E, as I mentioned before, was a small ethanol plant operating in Ohio whose customer base included industrial customers. As a small ethanol producer Plant E could 75

sell their product at a better price to industrial customers as opposed to companies who

wanted to buy it for fuel.

Customers Motivations

Most of the producers I interviewed would agree that the price of a particular fuel

is the main motivating factor when purchasing for use in an automobile. In order to

gauge the increase in demand and interest in biofuels I asked all producers what they

believed their customer’s motivations for purchasing biodiesel are. Plant A claims that his primary customers motivations were, “primarily money,” or price because the off-

road biodiesel his plant produces can be purchased cheaper than off-road farm diesel sold

at nearby fuel stations. Although cost is a major factor for many who purchase Plant A’s fuel, he believes one of his best customers, a local farmer, had different motivations and purchases the fuel for ecological reasons. Plant A stated that even though this one local farmer does get a good price he does have an “eco-friendly” mindset and would purchase the fuel regardless of the price.

Plant B believes that their customers’ motivations will primarily be patriotic above all other motivating factors. He feels that a number of individuals will support biodiesel because it is American grown; American made and will support the American economy. Another representative from Plant B stated his customers’ motivations would

also be to help the environment because biodiesel produces fewer pollutants than

petroleum diesel.

Plant C stated his primary customers’ are going to be fuel distributors who will

use the biodiesel he produces as a fuel additive. As mentioned before the motivation for 76 these distributors is to blend ULSD with biodiesel in order to add needed lubricity for the fuel. Plant C also stated he hears from truckers in the area claming that when their diesel trucks run on blends of biodiesel the engines seem to run smoother with a reduction of the clanking sound associated with most diesel engines.

Plant D feels the customers motivations for purchasing biofuels are to support the farm economy, environmental concerns and the fact that more individuals are looking at domestic forms of energy as opposed to tradition non-domestic energy sources. He also claims the distributors he sells to have a specific demand for biodiesel from their customer base and on occasion it is more competitively priced when compared to petroleum fuels.

Plant E stated his customer base was made up of industrial customers who used it as an additive for products such as mouthwash, perfumes or, to a smaller extent, fuel producers. According to Plant E’s representative, a mature ethanol market has existed in the United States before the recent ethanol boom to the extent of being a 2 billion gallon per year industry.

Advantages of using Biofuels

In order to study what each biofuel producers’ opinions are on the advantages of using or producing biofuels I asked a second series of structural questions. For example:

“In your opinion, what are some of the advantages or disadvantages of using or producing biofuels?”

Plant A names a few advantages of using and producing biodiesel such as less reliance on foreign oil, creating jobs in the local community, burning a cleaner fuel and 77

less reliance on foreign oil. According to Plant A, The United States’ number one export

is petrodollars. Plant A stated that:

[For] every drop of biodiesel made is one less drop of oil that’s…brought in from foreign countries…We just ship money overseas left and right and that money could be staying in the country…going towards paying off deficit, making our grandchildren’s future more stable, creating jobs here, creating a sustainability issue, creating less impetus [for] greedy reactions towards liquid, or fossil fuel industry where you have dictators, or whatever it may be, shut off your fossil fuel supplies and therefore leaving your economic systems and structures and industries stranded.

Because the feedstock collected by Plant A is strictly local he feels his business model can do a lot to help the community benefit from the production of biofuels directly. The WVO he has access to is recycled into biodiesel locally, which also creates jobs locally. The fuel is produced locally and distributed locally, which conserves fuel in the long run by saving other collection companies from further away the potential fuel consumption in pick-up and transportation. According to Plant A, companies would have to drive from as far away as 60 miles or more to collect the WVO he uses. The community would then “burn” the fuel locally so the benefit of consuming a “90%” cleaner fuel stays in the community in the form of cleaner air. Plant A’s representative feels that it does not make sense to:

Grow soybeans in Ohio, ship it down the Ohio River on a barge, to ship the oil to someplace in Mississippi, let them produce biodiesel, and then put it on a truck, and take it out to California? It makes no sense.

But if the biodiesel industry takes off like many expect it to a majority of soy oil

produced in Ohio will stay in Ohio for biodiesel production. If is fair to also expect that

with the increase of soyoil for production, Ohio biofuel plants will need to import more

soyoil from other states or look outside the country’s borders for suppliers to keep up 78

with demand in the state. The number of biodiesel plants operating, being built and

increasing production in Ohio suggests that demand will continue to increase and more feedstocks will need to be developed.

Plant B feels the primary advantages of using and producing biofuels are not only that they alternatives to fossil fuels but more importantly, they are American-made fuels.

Plant B feels the majority of support for biofuels will come in the form of consumers encouraging the purchase of a domestic fuel source in order to support the American farmer and the American economy. One of the representatives made a case stating the potential for biofuels to put money back into the pockets of American consumers. A representative from Plant B stated:

Well my particular feeling is, it’s American made, American grown, it is American, and with the value of the American dollar right now…it’s becoming more and more important to purchase an American made product. And of course, I’m on my own soapbox right now, but I’ve never been a proponent of NAFTA and I feel that, in order to get Americans to be able to purchase an American made product, you better buy some poor American made products so that those people can have money to buy it. So if it’s not made in the United States I don’t want to buy it.

Another representative from Plant B was quick to point out that biodiesel, in particular, is a cleaner burning fuel that produces less greenhouse gases.

The other big reason is environmental. You know, not only [does] burning biodiesel produce a lot less pollutants, but it’s full circle. Since it is grown, since it is made from plants and animals there are…you’re not adding to the greenhouse gases, because you’re using as much as you’re producing. So it keeps it in check.

To clarify what Representative B stated, because the amount of carbon released by the consumption of biofuels is equal to the amount of carbon in the plant or animal matter consumed during the life of the feedstock biodiesel is seen as being “carbon 79

neutral.” This is opposed to the consumption of petroleum fuels that have millions of

years of carbon stored that are released when burned (Tickell 2006).

Plant C representative stated that the development of a renewable fuel just makes

sense in the long run.

The biggest advantage is that it is a renewable fuel. You go out and grow it in a field, you are not taking it from one place that at some point is going to run out, I mean, that’s one of my biggest advantages. I mean, I’m not someone that goes around yelling, “save the earth.” I look at it from a scientific point of view. If you can do something to conserve it, do it because it just makes good sense. I’m not doing it biasly, you know, my soul purpose is not to try to go completely organic or anything like that. There’s nothing wrong with that, but I just look at it from a perspective of why waste something, you know.

Plant C has no problem with the oil industry using the fuel his company produces

as an additive because he acknowledges that at this time the United States cannot produce

all the biodiesel it would need to completely replace petroleum fuels. He looks at

biodiesel as a form of conservation to help supplement our existing oil supply in order for

it to last longer.

Plant D reports the advantages of using biofuels are similar to what other

producers have mentioned. He stated that people in the community have asked the distributors he sells to specifically for biodiesel. He goes on to state that people are

seeking a renewable fuel, they want to support the farm economy; they have

environmental concerns and issues related to domestic versus foreign sources of energy.

He also claims that price and benefits to vehicles engines are also an advantage.

When you specifically ask, what are our direct customers’ reasons for purchasing it is because they’re being asked for it. Now if you’re asking why are their customers, the end users asking for it, the answers would be varied. It would be in support of the farm economy that we live and work in here. It would be environmental concerns. It would be 80

purchasing domestic versus non-domestic sources of energy. It would be a benefit to the engine and on occasion it would be price.

Plant E stated, as an ethanol producer, he benefited from the production

advantages of biofuels. Because his company produced ethanol they benefited in terms

of raising capital for the business and to generate interest in their product. According to

Plant E’s spokesperson there was a 2 billion gallon per year market for ethanol in the

United States before the current interest in ethanol as a biofuel started to increase.

Although the plant closed, they predicted there was going to be demand for ethanol in the future for fuel usage but were not able to expand and tap into this market before they closed.

Well, in our case, we were interesting play, in that we benefited in terms of our ability to raise capital and a lot of things we did to get help in developing our business because we were seen as a biofuels company. And yeah, when we really got into the business we really realized that this thing that most people wanted to think of and use as a biofuel, we could actually sell at much better price as a specialty chemical. So that was a business decision that we made along the way. Having said that, we were, I believe early and very accurate in identifying the fact that there was going to be a tremendous amout of growth and interest and excitement about biofuels and ethanol particularly. And this goes back to 2001-2002 kind of time frames, when we were just organizing the business plan, seeking our initial capital and just wanting to get involved in this because several years before oil prices soared to these new levels never before seen and its really promoted the importance of an opportunity for a big biofuels industry.

Drawbacks of Biofuels

As discussed in previous chapters, ethanol and biodiesel production does have its

drawbacks. When I asked the question, “In your opinion, what are the drawbacks of

using or production biofuels,” I expected to hear responses associated with public

perception, feedstock and land impact issues but also heard answers such as ethanol not 81

being as efficient as gasoline, solvency of biodiesel and the dependency on public policy in Washington.

Plant A, who again produces biodiesel, named drawbacks of ethanol production being the fuel returns very little energy in relation to the energy being used to produce it.

He stated that for every 1 ¼ gallons of ethanol produced there is approximately one unit equal to 1 gallon of ethanol consumed. He also mentioned soil runoff from chemicals used to produce biofuel feedstock or other crops. He stated the only way ethanol is going to be an effective biofuel in the future is to go with cellulosic ethanol.

As for biodiesel, Plant A representative stated that only a certain percentage of biodiesel can be met with soybeans or rapeseed. He also brings up further land impact issues.

Only a certain percentage of your biodiesel market can be met by soybean, or rapeseed for that matter, or any oil seed. You know, right now, we are growing soybean in Argentina. Mow down rain forest to grow soybean to import into the United States for our biodiesel habit. We’re raping, you know, rainforest in Madagascar to grow palm plantations to export other nations for their biodiesel habit. People are seeing that the biodiesel industry is very, very lucrative but they are not taking into consideration that they are destroying the planet in the same process.

When asked the same question a representative for Plant B stated that there are no drawbacks to using or producing biodiesel.

Okay, as far as our product with biodiesel, there aren’t any drawbacks, okay you’re not, it does not produce less energy, it’s cost effective to actually produce the fuel, okay it’s…for the most part and in the near future, it won’t be taking any food off of tables. Right now soybean oil is probably the feedstock of choice. And it is, it doesn’t affect the food supply near as much as ethanol. But it is with us, there aren’t any.

Another representative from Plant B present at the interview was quick to point out the feedstock availability issues. 82

The only problem I can see…some of the obstacles we face in the production of biofuels is the limited amounts of feedstock available. And that’s why we are in constant search of being able to produce our own feedstocks as well.

Plant C stated that one of the biggest drawbacks for the production of biofuels is getting the general public to accept a new fuel and the cost involved with the production of biodiesel. He also blames the soybean industry directly for the high price of virgin soy oil.

I guess from my standpoint it’s a little harder because it’s a new thing for people. So it’s a littler harder to get people to switch over from something that they have used for 100 years, essentially. And the costs now, of course, with the price of crude oil being at record highs, like $88 a barrel, it’s cost competitive again. Unfortunately the soy industry, for me, is shooting themselves in the foot because a lot of producers have slowed down their production due to soy oil prices. So right now that’s a problem; as an alternative fuel producer we’ve created a new marker, a bigger marker for soy crushers but they’ve started getting greedy and we’ve essentially raised the price on ourselves. The more we produce the more they increase the price. And I don’t even; it’s a straight line, you know, with what we do…I can understand if we were doing 2 billion gallons of biodiesel a year from soy oil, and so you raise the price, you try to keep it even with the amount of production but they’ve raised the price far exceeding what we have increased in production wise. And the supply is still there but they’ve gotten greedy. I mean, today’s cost, I keep a daily, keep track daily, today’s delivered cost to me would be about $3.26 point 3 cents a gallon [for virgin soyoil].

Plant C representative goes on to state:

No matter what a person tells you, it is hard to get someone to change what they’ve always done. You know, people like to think that they are adventurous and they do stuff on the spur of the moment but yet you ask them to change something like the fuel they put in their car everyday, if there’s any question that it’s not exactly the same then people are hesitant. People don’t like change no matter what they tell you. That is probably the main obstacle is, unacceptance of alternatives. Really, you know, whether it be from oil companies or the general population. They don’t know…it’s the fear of trying something new. That’s probably the biggest obstacle.

Plant C representative also mentions the technical issues associated with biodiesel’s solvent properties. Some of the equipment Plant C uses has rubber gaskets or other components that biodiesel will dissolve. Components originally used with diesel 83 fuel such as nitrates and rubber gaskets are not compatible with biodiesel especially in higher blends. As a producer you have to be aware of this and replace equipment with viton or nylon components, which are more expensive and add cost at initial start up.

Some other things that we’ve ran into in the biodiesel specifically, biodiesel production, believe it or not are material incompatibilities. Stuff they have always used for diesel such as rubbers and nitrials and stuff aren’t compatible with biodiesel. So it’s actually been harder to find. And through development of biodiesel production and equipment, they have gotten better about this. For instance, rubber o-rings and stuff, you need to get viton or nylon stuff like that, which is a lot more expensive, for biodiesel production. So, the equipment has been a big one, you know, people don’t know much about biodiesel so it’s nothing you just go and order off the shelf. You kind of either have to buy someone’s technology for it or if you have any background, develop your own through trial and error, stuff like that, you know, what information you can get. Which is what I did with my background…I was familiar with the processor equipment in general and I just kind of immersed myself in the biodiesel industry and tried to figure out all that stuff.

Plant D also mentioned solvency properties as being one of the drawbacks of biodiesel. He also points to the low gel point of biodiesel and the larger picture of food versus fuel.

One of the concerns some folks have is cold weather issues. Another issue is the solvency effect of biodiesel, it cleans an engine and if you have a vehicle or a piece of equipment that has many, many hours or miles with petroleum fuel only the biodiesel tends to clean that out pretty quick. The first time it’s used and sometimes that requires a quick change of the fuel filter and then you’re on your way. But yeah, people have to know that is likely to happen. Those are concerns. Some people want to debate, speaking of like a big picture issue, food versus fuel.

He also stated that public acceptance of the fuel in the local farming community is also a major factor with biodiesel and the transition to using a new fuel is going to take some time.

We deal with a lot of farm community around here and they’ve got stuff that costs them 2 and 300 thousand dollars, a single piece of equipment and gosh darn it they don’t want…One they don’t want something that screws that investment up; If they think that can happen. Two, they don’t want that to occur right in the middle of harvest when they 84

have absolutely no time for that sort of down time. So we understand people easing into this…It’s going to take time.

Plant E stated one of the biggest drawbacks of using ethanol is that the fuel is not

as efficient as gasoline in terms of energy content. This leads to a reduction in fuel

efficiency when running high blends of ethanol. One would expect the consumer to be

weary of an alternative fuel that gets significantly less miles per gallon.

Well, they aren’t, in the case of ethanol, ethanol is not as efficient as an auto fuel or an auto fuel additive as gasoline, and so too the extent, autos are running on fuel blends that have ethanol in them, they are not going to get the kind of mileage that pure gasoline gets. With 10% ethanol blends the difference is not that notable. But if you’re getting, if you’re promoting usage of blend like E85, E85 really needs to be considerably less expensive than any 10 [blend]…

Plant E’s representative also stated one of the major challenges of ethanol is that

distributors have not figured out how to price it to be competitive with gasoline. Since

ethanol is only 66-75% as efficient as petroleum gasoline, the consumer experiences less

miles per gallon when running high blends such as E85. Distributors have, in turn,

attempted to price a gallon E85 cheaper than a gallon of gasoline in order to make up for

the reduction of mileage.

In terms of the cost per gallon of using these fuels, this is one of the reasons that E85’s demand has not grown as rapidly as some would have expected is because the distributors of it have not figured out how to price it correctly.

Challenges of Biofuels

There are challenges faced by the biofuel industry as a whole. The major ones being feedstock, public perception and technical issues such as decrease in power and

solvency. These obstacles affect biofuels as a whole but there are also producer obstacles

such as affordable feedstock to remain competitive in price; skepticism of potential 85 investors and the lack of state incentives to promote biofuels. The final series of questions focuses on the obstacles in the production of biofuels and the future of biofuels in Ohio.

All the plants I interviewed mentioned that one of the biggest obstacles associated with biofuel production was the availability of feedstock in order for the fuels to remain competitively priced. A constant theme throughout all of the interviews was producers looking for or expanding to new, competitively priced feedstocks. As I expected there was also more discussion about public acceptance for biofuels on a local level, material incompatibilities related to rubber gaskets being used in some equipment for biofuel production and bigger picture issues such as land impact associated with farming. One reoccurring theme I was interested in exploring was the mention lack of political leadership to promote biofuels.

Plant A went on to explain one of the obstacles of biofuels as trying to change a system, social and political, that just does not want to change.

It’s constantly having to harangue with people that just don’t want to change, at the levels that could create the changes, but politicians don’t want to change it. History don’t want to change it. The oil and the fossil fuel industry doesn’t want to change. You know, and then you take all these lies, as Mark Twain said, “A lie goes half way around the world before the truth can tie its shoes in the morning.” So here we have the age of the internet, and a 24 hour news cycle, I could spoon feed a lie to somebody and it could be in the New York Times before noon tomorrow, and everybody read it and I adjusted it and considered it as fact and the gospel when all it was a fear monger story or something. Those are the kind of impediments that we got right now. The truth is really, really slim and its availability to the public and that’s by and large because a lack of leadership. I mean it’s so easy to tell the truth. The facts and figures don’t lie; they are available. You know, “no we can’t do this, it’s going to kill us as a nation, it’s going to cost us jobs.” And tobacco was good for your health. Those are the impediments. Make it profitable. Make it desirable and industry will find a way to make it profitable.

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Besides obstacles, such as equipment, some of the other obstacles mentioned by

Plant A for the production of biodiesel specifically, is that there is currently a bigger push for ethanol in this country. This might be expected because gasoline, which would be supplemented by ethanol, is a fuel that is used much more by everyday consumers than diesel.

Plant B stated that one of the major obstacles he faces in the production of biodiesel is access to funds or investment in order to get processing facilities off of the ground. This is due to a lack of knowledge of alternative fuels on the part of potential investors. Because starting a biodiesel or ethanol facility can be a multi-million dollar venture, investors are skeptical.

What do you believe are the major barriers of biofuels and what should be done in order for them to gain widespread support? Agreeing with [Representative 2], yeah, we have to have more biofuels available. But to get it to there, [Representative 3] will agree with me, getting the financing needed to build these plants is like pulling a tooth out of a mad jackass, I mean it’s tough.

When asked if investors are skeptical another representative from Plant B stated:

They [potential investors] don’t know anything about it and so therefore they don’t want to take the risk with it. Even though there are all kinds of information out there to support it…they still won’t.

Another obstacle mentioned by Plant C was a lack of investment by the government in alternative fuels. According to the Representative I spoke with, a lot of investment in biodiesel promotion has been by The National Biodiesel Board, which is funded by its members. He also feels there is too much emphasis on funding oil companies that things such as alternative fuel research gets left behind.

One, I think there should be, the Department of Agriculture has helped out a lot with this. I think they need to be funded for more alternative fuel and energy research so that 87

smaller companies like myself that would like to be up on whatever technology we can to make this a more efficient or economic process can get essentially free information through the government that way. That’s one of the big things that would help. So I think they need to lower…the amount they give in oil research and stuff like that and switch it over to alternative fuels. That would be one barrier that they could take down to help us out. Right now, like through the national biodiesel board. The National Biodiesel Board is funded by us members and then the National Soybean Council and the soybean farmer check off dollars. So essentially the people themselves have implemented any research there are in alternatives for that. So I think the government needs to switch some funding around. Take more from the oil companies and give to us if they are doing so well and their record profits every year.

According to Plant D’s spokesperson, since petroleum diesel has been around for

so long, people have come to appreciate the reliability of petroleum diesel, especially

farmers who depend on expensive farm equipment during harvest season. He also kept it

short and pointed to one obstacle in biodiesel production, feedstock.

Well, right now one of the biggest obstacles is finding feedstock priced competitively that we can use. I think there is not much that equals that challenge right now.

This statement can generally sum up the opinion of all biofuel processors and the constant dependence on the fluctuation of soy and corn market in order to determine the price of biofuels.

As an ethanol producer Plant E has obstacles associated with transportation and infrastructure. According to Plant E the existing infrastructure used to transport petroleum gasoline will be hard to adapt for ethanol transportation because the petroleum fuels in these pipelines are moved by hydraulic pressure. Since ethanol is hygroscopic, meaning it mixes well with water as opposed to oil which notoriously does not mix with water, is will not be able to be transported through these pipe lines.

Because you probably know one of the issues with ethanol is because, it collects water…

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I was not aware of the fact that ethanol collects water but I had read that ethanol was corrosive. When I asked Plant E representative about this he stated:

Well the corrosion was an earlier problem I think pretty much mastered that, but it cannot be transported through the same pipelines that move hydrocarbon products around because they use hydraulic pressure to move the oils, which is great because oil and water don’t mix. But [water] and ethanol mix, passionately.

Ohio Ethanol Plants

As Table 6 demonstrates, at the completion of this thesis there were no operating ethanol plants currently in Ohio. One of the last facilities was an ethanol producer in southern, Ohio that closed its doors in 1995. The small ethanol plant I was able to find information about and interview also closed down due to regulatory barriers involved with the wastewater produced. Although there are currently no ethanol facilities in Ohio a revival in the ethanol industry in the state is evident because there are currently seven being built in Ohio alone with plans to come online next year (Table 5). According to one biofuel expert I interviewed the ethanol industry is benefiting from a big government push to develop ethanol in the United States.

Name of Location Annual Production Feedstock Production Processor Status Greater Ohio Lima 54 MGPY (projected) Corn November Ethanol 2007 (tentative) POET Ethanol Foresta 65 MGPY (projected) Corn Summer 2008 Products POET Ethanol Leipsic 65 MGPY (projected) Corn January 2008 Products POET Ethanol Marion 65 MGPY (projected) Corn Summer 2008 Products Coshocton Ethanol Coshocton 69 MGPY (projected) Corn Winter LLC 2007 VeraSun Energy Bloomingburg 110 MGPY (projected) Corn First Quarter Corporation 2008 The Andersons Inc. Maumee 110 MGPY (projected) Corn First Quarter 2008 Table 4. Potential Ohio Ethanol Producers

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With the number of ethanol plants and an enormous increase in the amount of

ethanol that companies in the State of Ohio plan to start producing, it will be interesting

to see where these producers plan to get their feedstock and if corn production will

increase. If corn production in the state does increase some may wonder if land formally

used for soybean production might turn into land for corn production. Especially if

demand for corn increases, which may lead to a more profitable crop for farmers. It is

possible that biofuel producers in Ohio may battle for cropland for their fuel? This, in

turn, may lead to feedstock imported from other states or possibly even other countries

raising questions about the patriotic nature of biofuels.

Lack of Alternative Fuel Incentives in Ohio

Most of the producers I interviewed would agree that Ohio has done little to

promote the development of biofuels in the state. There were also issues discussed such

as lack of Ohio’s political leadership in developing incentives for biodiesel producers. I

asked all interviewees about state or government incentives in order to promote the

development of biofuels in Ohio and the majority of the feedback I received was negative

towards the state.

Plant A feels that subsidies to help promote biofuels are going to the wrong

people.

…Subsidies are not going to the farmers; they are going to people that blend 1% diesel fuel with 99% biodiesel. But the subsidies are going to the wrong people, but the impetus is there for the farmers to grow more, more soybean. But there you have a problem. It’s great up to that point where you consumed all your feed meal. But then you just keep growing soybean. What do you do with the feed meal? We used to have an oil glut, now are we going to have a soybean glut? Or a feed meal glut?

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The feed meal that Plant A is talking about is what is basically left over after

crushing the soybean and extracting the oil from it. According to Plant A, there are uses

for this feed meal but with the increase in soybean crops the United States will have an

enormous amount of left over feed meal that will need to be dealt with. As for state incentives, Plant A claims to not keep up on state incentive issues but also feels that his company does not need present incentives in place.

There may be a couple of pennies per bushel for soy. And there is ethanol. Most of it is national. I don’t delve into it too much, I know there’s a 50-cent per gallon tax credit for biodiesel from waste vegetable oil, which we would be eligible for if we so desire, but we don’t desire. You know, basically all you’re doing is taking, you know, you’re taking money out of taxpayers pockets. If we can make a micro-biodiesel business fly and productive, for 2 or 3 employees on a micro scale on a population center of 25,000, why in the hell should we take 50 cent a gallon. Even if we are doing 1000 gallons a week, you know, 500 dollars a week, 50 weeks over. That’s what? $25,000 a year? Why should we take $25,000 out of somebody else’s pocket? When we’re quite happier, when we are making nice livings, you know, at anywhere from $45 to $75,000 a year or whatever, why should we take a handout? But other people would argue with that and say, “well somebody else is doing it, might as well.” You’re doing a good work and somebody else just taking it for gold plated bathtubs or knobs or whatever. Then at least you would put it toward a better use than them. I think the point is to prove that subsidies are not necessary.

Plant B mentioned his company could benefit from the Ohio Clean Air

Development Authority but also acknowledged Ohio is not as aggressive as other states in promoting biofuels.

Ohio isn’t anywhere near as aggressive in this as other states are, and that’s sad. But there are monies that are being offered to us for now, to develop an R&D center and some other things to develop our new type of feedstocks we are working with.

But when asked if these were in the form of grants or incentives the representatives I spoke with from Plant B acknowledged there are few if any Ohio tax incentives. 91

The Ohio Clean Air development authority is the tax incentive. If all of our loan money was run through the Ohio Clean Air Development authority, which is a government agency that doesn’t really give you anything. But you get 15-year total complete tax abatements from all state taxes, which is good. Plus you have your, what do that call that development fund money for um, land, to build a building on,,,enterprise zones. They have enterprise zones. But that is not specifically towards alternative energies. But the Ohio Clean Air Development Authority is specifically for this type of work.

Plant C stated his facility could benefit from a federal excise income tax to the tune of $1 a gallon and an additional small-producer tax credit of an additional 10 cents per gallon. According to the representative I spoke with when his plant becomes operational he will be able to benefit up to $1.10 of tax credits per gallon through the federal government. But as for Ohio at this time there are no tax credits for biodiesel.

Plant C explains the federal tax credit as follows:

Tax credit is a federal excise income tax credit. There’s also small producer tax credit, 10 cents a gallons. So we have tax credits through the federal government at around $1.10 a gallon. If you can put those to use the right way, I mean, the dollar credit is a refundable credit, the 10-cent a gallon isn’t. So, but that Ohio is one of the last one’s to develop anything in biofuels. They have no tax credits, or any other type of credits for alternative fuels. [As for Ohio] Nothing, zip. In fact, now the department of taxation will tell you differently because they want their taxes for the fuel. But on the biodiesel board’s website, if you look, Ohio has no definition for biodiesel as a fuel. In fact, even through the department of taxation, they denoted it as clear diesel, which would essentially be putting it in the same category as kerosenel…and see, by [Ohio’s] definitions, they don’t even have a clear definition for biodiesel. But since they are considering it a clear diesel they’ve, lumped it in with that. But the closest it comes to us is any person who refines motor fuel in this state and since it’s a completely different process than just refining it’s an actual reaction. It’s not you’re just, distilling something off, or filtering, which is the way I refine. That’s the closest definition, but they want their tax money so we have to do that. But they are pretty good, I mean, the government entities that I’ve dealt with, the IRS, the EPA, Department of Taxation. They have all been real good and understanding [and] helpful in getting stuff going.

Plant C also goes on to mention the new political administration in Ohio.

Governor Strickland says that he wants us to be one of the leading in alternative fuels so; but I think he ought to put his money where his mouth is and try implement those incentives to do that. But I have gotten no government grants, no funding, no help from 92

any government entity other than that tax credit which is essentially for anyone that can produce an alternative fuel. So they need to do more to really, they can say all, they can talk they want all they want about it but until they act, you know, that’s all it is, talk.

Plant D stated that Ohio is probably last in the promotion of biofuels to any other

state it shares a border with. But with the recent administration change in Ohio, Plant D

spokesperson stated that there seems to be more of an initiative to promote biofuels at the

state level.

Ohio, I’ll be frank, ranks near the bottom of any state that we touch [geographically]. Indiana does very well, Michigan does well, Pennsylvania does well and Kentucky does okay and even dear old West Virginia probably has more than we do. Ohio has pretty well stunk in the states actual true incentives, there is a lot of lip service a lot of talk; everybody wants to be for renewable fuels. Now that, I should say, has started to turn with the new administration that started in January, the Strickland administration. However, they’re not there yet. They’re working on it. They have gotten a few things that have improved a little bit. So we have maybe gone from about a two to a three on a scale of 1-10 but right now there are a few things but that’s pretty weak comparatively.

Although there are currently no state incentives at this time Plants C and D claims that there is a lot of talk by legislators who now see Ohio’s potential role in alternative fuels. On July 12th, 2007 Ohio allocated $4.5 million to alternative fuel programs in its biennial state budget for 2008 and 2009. The funding in this budget is designed to make high blends of ethanol, such as E85, and biodiesel more widely available to consumers by making the fuels more competitively priced. Ohio will start offering a tax credit eligibility for E85 ethanol and B20 soy biodiesel of 15 cents a gallon in 2008 and 13 cents a gallon in 2009 (Werner, 2007). This is definitely a step in the right direction but when compared to other states, as one producer I interviewed stated, “Ohio was late to the party.” 93

Plant E, an ethanol producer, stated that as for ethanol there are grants available

from the USDA and USDA loan guarantees. The whole ethanol industry also benefits from the federal excise tax credit given to distributors of ethanol who blend it with gasoline and sell it to retail outlets. As Plant E representative acknowledged, the excise

tax credit of 51 cents on each of those gallons is to reduce the cost of using ethanol. The

reason this was established is because traditionally ethanol cost approximately 50 cents a

gallon more than gasoline to purchase at the pump. This is intended to make ethanol

more cost competitive. Plant E Representative did not mention any direct Ohio state

incentives for biofuels.

There is, what is called the small ethanol producer tax credit. So it would apply to actual fuel consumption of ethanol, which is 51 cents a gallon. And you can receive that, and that’s a tax credit, and I’ll come back to that…That is a volumetric credit, which means that your ability to benefit from this as a producer is tied to the number of gallons that you produce. And it is 51 cents a gallon. And because it is a tax credit it can be, those dollars can be deducted from the taxes, the income taxes that a corporation or a partnership formed to produce ethanol owes to the government. It’s not just a deduction against income, it’s a deduction against the tax dollars owed, which means it is a very powerful incentive.

When asked if Plant E benefited from this tax credit he stated:

The whole ethanol industry benefits from the excise tax credit…The excise tax credit is made available to purchasers of ethanol who blend it with gasoline and then sell it or deliver it to gas stations. And the way that works is, that those excise tax credits…say that I set up1000 gallons of ethanol for you for blending, from you for blending as a distributor. I then, as the distributor, can file for my excise tax credit of 51 cents on each of those gallons and the net effect of that is to reduce my cost of using ethanol and the reason that was established was that traditionally ethanol cost about 50 cents a gallon more than gasoline to purchase at the whole sale level. So this was intended as a way to level the playing field so that people wouldn’t say, “Well I’m not buying ethanol, I have to pay more for it…” And in today’s world it’s very interesting because ethanol is trading at about 50 cents a gallon cheaper than wholesale gasoline and that’s before the impact of this excess tax credit.

94

Future Ohio Incentives

Every biofuels producer I interviewed agreed that the state of Ohio is lacking in

incentives to promote biofuels. Three out of five interviewees directly mentioned

political leadership as failing to develop programs to promote biofuels. Since Ohio defines biodiesel as a “clear diesel” it is placed in the same tax bracket as kerosene. As of the completion of this thesis the tax paid on each gallon of biodiesel, or any other liquid fuel is $.54 cents per gallon; this includes state and federal taxes. But as mentioned before, this past summer Ohio passed a measure allocating $4.5 million to alternative fuel programs in its biennial state budget for 2008 and 2009. The funding in this budget is designed to make high blends of ethanol such as E85 and biodiesel more widely available to consumers by making the fuels more competitively priced (Energy

News, 2007). New to Ohio, the state will start offering tax credit eligibility for E85 ethanol or B20 soy biodiesel of 15 cents a gallon in 2008 and 13 cents a gallon in 2009 to support existing retail outlets and to promote new stations. The budget program will also fund a number of grants to alternative fuel distributors and producers. These incentives are in conjunction with federal initiatives, which include a 30 percent tax credit for infrastructure needs for alternative fueling stations. Ohio Soybean Council Chairman

Dan Corcoran as saying that "It is exciting to see the high level of confidence our state

leadership has put into this alternative fuel” (Werner, 2007).

Renewable Fuel Standard

According to the Environmental Protection Agency the Renewable Fuel Standard

(RFS) took effect Saturday, September 1, 2007. The Renewable Fuel Standard program is 95

designed to increase the quantity of renewable fuels necessary in order to be blended into

gasoline. Under the Energy Policy Act of 2005, the Environmental Protection Agency is

responsible for making sure that gasoline sold in the United States contains a minimum

volume of renewable fuels. As of 2006, 4 billion gallons of ethanol was to begin to be

used as a blend with gasoline. According to the RFS this will increase to 7.5 billion

gallons by 2012. The RFS program was developed in collaboration with refiners and

renewable fuel producers (Renewable Fuel Standard, 2007).

American Jobs Creation Act

According to the Renewable Fuels Association website, on October 22, 2004

President George W. Bush signed into law the American Jobs Creation Act of 2004. This included the Volumetric Ethanol Excise Tax Credit (VEETC), extension of the ethanol tax incentive to 2010 and modifications to the small ethanol producer tax credit in order

to allow the excise tax credit to be claimed by farmer cooperatives. It also included a

new federal biodiesel tax credit (Position Papers, 2007).

For renewable fuels initiative in H.R. 4520, the federal government's tax collection system will work with the petroleum industries and independent terminals fuel delivery system. The bill is designed to create a simplified system of excise tax collection while promoting renewable fuels. The law is mean to simplify the tax process by blenders and distributors.

H.R. 4520 is designed to provide new flexibility to gasoline refiners, marketers, and ethanol producers. It eliminates the restrictive blend levels, such as 5.7%, 7.7% and

10%, formally dictated by the tax code to reflect obsolete Clean Air Act requirements. 96

The law also provides more flexibility to oil companies to blend as much or as little

ethanol to meet their octane or volume needs.

Any taxpayer eligible for the alcohol fuels tax credit will be able to use the

volume ethanol excise tax credit system, which means they will be able to file for a

refund for every gallon of ethanol used in the marketplace without regard to the income

of the taxpayer or whether the ethanol is used in a taxed fuel or tax exempt fuel.

As for biodiesel, a federal tax created by H.R. 4520 is $1 per gallon for biodiesel

produced from agricultural products such as virgin oils derived from feedstock and

animal fates; and $0.50 per gallon for non-agricultural biodiesel produced from WVO,

brown grease, yellow grease etc. It also allows the credit to be claimed in both taxable and nontaxable markets, such as tax-exempt fleet fuel programs and off-road diesel

markets such as off-road farm diesel. The credit is a refundable income tax credit that

would zero your income tax liability and then refund anything above and beyond that

with a check from the IRS. 97

The Future of Biofuels in Ohio

Figure 4. Arable Land in Ohio Map Created by Author using U.S. Census data

From the map in Figure 4 it is evident that a major portion of the state consists of arable land, especially in the northwest corner. The southeast section of Ohio is made up of what is known as the Appalachian plateau. The more rugged southeastern section of the state, evident in lighter color of the map, forms a distinct socio-economic unit where 98 traditional agriculture is present but due to its hilly topography huge tracts of farming land are not present as they are in the more glaciated, leveled section of the state. The southeast section of the states’ legacy is coal mining, which is similar to its regional neighbor West Virginia. The other light colored areas on the map represent population centers. Due to the large amount of farming land in the state, Ohio is in a good position to grow its own feedstock for biofuel production. Ohio is one of the top-ten agricultural states in the country in terms of acres harvested and produces significant amounts of corn and soybeans, as demonstrated in figure 5, the main feedstock for biofuels in the United

States (National Agricultural, 2007).

Figure 5. Ohio Corn and Soybean Acres Planted per Crop Chart created by Author, Nov. 2007 using data from USDA and NASS quick stats (crops) 99

I asked each interviewee what they believed was Ohio’s potential role for biofuel

production. Plant A stated that he felt Ohio’s potential was no worse than any other

semi-agricultural state but also acknowledged that Ohio is a highly agricultural state.

According to him, the future for biofuels lays in the development of algae-growing bioreactors built next to coal-fired power plants in Ohio.

Plant B points out that Ohio is a populous state, has a significant amount of agriculture and is close to a large amount of the nations’ population.

Well for biofuel production, especially for biodiesel, if you look at the map, and where agriculture is in the United States and where the demand for the product is you have a tremendous demand in the northeast portion of the United States. However, agriculture kind of stops on the eastern border of the state of Ohio. Okay, so we are the last state available going towards New York, and New Hampshire, and Connecticut, where biofuel feedstocks can be grown. So I see it being very important for us being here on the southeastern edge of Ohio to build our plant to feed the demand east of us…So if you are looking at where we are, generally. Even though Ohio is a populous state we are within 8 hours drive of literally about 70-80 % of the nations population.

According to The Ohio Department of Transportation’s (ODOT) website, Ohio

has the nation's 10th largest highway network in the country. And because of its

geographic location and highway system, Ohio is within a one-day drive of 50% of North

America's population and 70% of North America's manufacturing capacity. Ohio

businesses also take advantage of shipping ports along the Lake Erie coastline to the

north and the Ohio River in the south.

Plant C, who plans to produce biodiesel from virgin soyoil, also points out that

Ohio has a significant amount of cropland and produces a lot of soybeans. He is

optimistic about the potential role for Ohio. He points to a poster hanging on the wall of

his office and reads a quote. 100

Ohio has a real large, they do a lot of soybeans. There’s a poster up there on the wall, this recording you’re not going to be able to see it but you can see it there it says, “This Ohio soy biodiesel pump…” this is put out by the soy bean council so it might a little, one way or you know…

Interviewer: Right, a little skewed…

Yeah, but it says “if every Ohio farmer filled up with B20 at one of these [referring to the pump pictured on the poster] it would use 14,286,000 bushels of Ohio soybeans. This would generate $73.6 million of revenue for Ohio soybean farmers. Support your profits by pumping soy biodiesel.” Now that’s, of course, directed specifically at farmers, for supporting something that they are selling. But, Ohio has a lot of soybeans. I think, don’t quote me on this but, the last statistic I saw was somewhere around 250 million bushels of soybeans in 2005, I think was the last stat I saw for that. And so they have a lot of potential as a soy producer to, you know…And I think Ohio has a lot of potential in alternative fuels in general.

Plant D stated that biodiesel production in the state has the potential to be strong due to a significant soybean agricultural interest, soybean crushing plants in the state and the geographic location of the state. Ohio also has good transportation and good petroleum distribution channels that the biofuels sector could easily be integrated into.

Well I think it could be strong. We have a strong soybean agriculture interest. Crushing plants in the state. And again I’m only speaking about biodiesel, I don’t know about other renewables as well. And we are situated well. A lot of these plants have been stuck out in Iowa and so forth where there are a lot of corn and soybeans, but the demand is not all there by any means. Here in Ohio we’re about half way to Iowa, if that’s the center of feedstock production and we’re halfway then again in the other direction, to the east coast where there’s huge markets. So I think we’re well situated. Good transportation, good petroleum distribution, channels that we can plug in to. So I actually think that Ohio, Indiana…let’s just stick with Ohio and Indiana are really good places for potentially for biodiesel to blossom.

In 2006 Ohio produced over 217 million bushels of soybeans valued at $6.46 per bushel totaling $1,357,125,000 in revenue (Refer to Tables 6 & 7). This production rate was the highest annual rate in Ohio history and was up from over 201 million bushels in

2005. In 2006 Ohio corn production was over 470 million bushels, which has been pretty 101 steady in production over the last ten years with the exception of 2002 when a little over

264 million bushels were produced. In contrast to the decrease in state soy production, corn production in Ohio skyrocketed to over 542 million bushels in 2007, an increase of

72 million bushels from the previous year (National Agriculture, 2007).

Figure 6. Ohio Soybean and Corn Production in Thousands of Bushels Chart created by Author, Nov. 2007 using data from USDA and NASS quick stats (crops)

The price per bushel of corn was $3.30, an all time state high up from $1.98 in

2005. Soybean production has dipped in 2007 with only 190 million bushels harvested, a four year low (Refer to Table 6). As of the completion of this thesis the 2007 price per bushel was not yet determined but according to one biodiesel producer the price of soy oil at this time is the highest he has ever seen (Refer to Table 7).

102

Figure 7. Ohio Soybean and Corn Price Per Bushel in U.S. Dollars Chart created by Author, Nov. 2007 using data from USDA and NASS quick stats (crops) Ohio’s Neighbor

To compare Ohio to its neighbor, which is also a big agricultural state, Indiana has been promoting the development of biofuels in the state with an aggressive alternative fuels plan. According to the U.S. Department of Energy’s Energy Efficiency and Renewable Energy website following state incentives, an ethanol producer located in the state of Indiana is entitled to a credit of $0.125 per gallon of ethanol produced. This also includes cellulosic ethanol. A biodiesel producer located in Indiana is entitled to a credit of $1.00 per gallon of biodiesel produced and a biodiesel blender located in Indiana is entitled to a credit of $0.02 per gallon of blended biodiesel produced at a facility located in the state. (Alternative Fuels & Advanced Vehicles Data Center, 2007) 103

Indiana even goes as far as granting immunity for E85 sellers, suppliers, distributors, manufacturers, and refiners from civil liability for personal injury of property damage resulting from a person fueling any vehicle with E85 that is not a flexible fuel vehicle as long as the proper E85 warning signs required by law are properly posted.

Ohio Grassroots Initiatives

Soybean farmers largely fund the Ohio Soybean Council by checkoff dollars. The

USDA oversees a checkoff organization, which collects funds from producers of a particular agricultural product. These organizations, such as the soybean councils, use checkoff dollars to promote and do research on the product. Checkoff programs attempt to improve the market position of the product by expanding markets, increasing demand, and developing new uses and markets. According to one interviewee the regional soybean councils have benefited from a 2-cent per bushel checkoff dollar.

Plant A’s representative stated that in the process of making feed meal for livestock soybeans are crushed and the oil is extracted. At the time there was a good market for feed meal but no market for the oil. Soybean farmers had problems dealing with the glut of oil and would try to dispose of it by burning it. During the 1990s the soybean council was attempting to find a market for massive quantities of soy oil. As regional soybean councils were benefiting from checkoff dollars the money was available to do research and develop biofuels from soy oil. According to Plant A, this is how the modern soy-oil-based biodiesel industry was born. Now that the Ohio Soybean Council 104

has been successful in finding a market for virgin soy oil they are now faced with finding

a market for an excess of feedmeal left over from crushing soybean to extract the oil.

The Ohio Soybean Council is a for-profit entity formed to promote soybean

production. They are a business funded by soybean farmers with the intent to promote

their product, which in turn, promotes the use of soy-based biodiesel; that is their number

one concern (refer to Appendix F). They are not an environmental entity developing soy-

based biodiesel to help the environment as a whole. The Ohio Soybean Council’s sole

purpose is to promote the use of soy. If promoting soybeans comes in the form

developing a market for soy-based biodiesel that will surely benefit them. From what

was an oil glut prior to the demand for biodiesel we are going to begin to see a feedmeal

glut. According to the Ohio Soybean Council’s website the vision of the Ohio Soybean

Council is to assure the long-term viability of the Ohio soybean farmer while the mission

of the Ohio Soybean Council is to invest soybean checkoff funds to maximize the profit

opportunities for Ohio soybean farmers. These checkoff dollars, in the past, have been

used to promote the development of soy-based biodiesel.

Promising Technologies

The four biodiesel processors I interviewed all mentioned algae as one of the most promising technologies to solve the feedstock issue in relation to biofuels. Out of the five total interviews I conducted two of the four biodiesel producers mentioned cellulosic ethanol. Although Plant E did not mention oil from algae, the ethanol producer I interviewed did mentioned cellulosic ethanol as well. Plant C’s representative refered to algae as the “Holy Grail” of biodiesel production. 105

I guess kind of like in fuel cell, technology, hydrogen is their holy grail, to use pure hydrogen. Ours would be algae, something they’ve researched in the 70s through the Department of Energy’s Alternative Energy’s and Algae would be a great new technology to develop. To get a high lipid producing algae to find out what the best way to produce it, whether it is bioreactors or open run ponds, people are going both ways on that.

From 1978 to 1996, the U.S. Department of Energy’s Office of Fuels

Development supported a program to develop renewable and sustainable transportation fuels from algae. The focus of the program, known as the Aquatic Species Program

(ASP) was to grow algae specifically to be processed into biodiesel. The alga used has high oil content and was grown in ponds. With this program, major advances were made in the science of manipulating the metabolism of algae for higher oil yield and the engineering of microalgae production systems. (Sheehan et al., 1998)

According to Plant A the one “saving grace” that will allow biodiesel to grow to a

level where it meets entire liquid transportation fuels market is by developing algae

bioreactors. This process could take present day fossil fuel users such as coal-fired

power plants, cement kilns and even industrial bread baking facilities to use as what he

describes as “point sources of carbon dioxide.” You would then build algae bioreactors

next to these carbon sources and feed the algae with waste carbon dioxide from the power

plants “scrubbing” emissions emitted. The algae uses the waste carbon dioxide produced

from coal-fired power plants, along with sunlight and water, to produce sugars by

photosynthesis. These are then metabolized into fatty oils and protein. This localized

approach to biodiesel productions would eliminate the need for mega refineries

traditionally located along the coastlines of the United States. The micro-refineries 106

would be located in more urban centers further eliminating major petroleum trucking

routes.

According to Plant C representative algae has a fast growth rate and grows not in

only huge quantities but is also fairly quick in reproduction. He believes that an alga,

which has a quick harvest time, can produce approximately 1000 to 1200 gallons of oil

per acre in outdoor ponds or in bioreactors built next to coal fired power plants. The algae growth in the bioreactors would benefit from carbon being produced by the coal and would, in turn, lead to cleaner coal-fired power plant emissions.

Conclusion

Although I focused on the challenges of biofuels from the perspective of

producers in Ohio I feel that the obstacles named in this thesis apply to the bigger picture of the challenges of biofuels as a whole. While conducting research for this thesis it

became more and more evident that in order for biofuels to contribute to a sustainable domestic U.S. liquid fuel supply more technology will need to be developed. In order to accomplish this, alternative feedstock development in the areas of cellulosic ethanol and algae bioreactors will need to be studied and applied.

The state obstacles named by producers were namely legislative in nature and dealt with lack of incentives for producers. At this time it is important for Ohio to continue to develop more incentives for biofuel producers and to support programs that will educate others on biofuels. Even though the price of petroleum fuels is constantly rising, people still appreciate the reliability of petroleum fuels. When more people start 107

using biofuels and start having success with them then the benefits of biofuels may

finally be seen by others.

In order to organize responses associated with the production of biofuels I created

a checklist of common themes mentioned by biofuel producers. Table 6 summarizes my

findings and is ranked from what I consider the most to least challenging.

Table 5. Challenges of Biofuels Checklist

All of the Plant representatives I interviewed mentioned feedstock availability and price competitiveness as being their main obstacles. These obstacles are closely related because the more feedstock available on the market the less the production cost is. But the ability to remain cost competitive also depends on other issues such as government incentives in the form of tax credits or support of biofuel producers in the form of grants.

The ability to remain cost competitive also depends on the fluctuation of the price of petroleum fuels. And this largely depends on the global market of crude oil prices. 108

Four out of five mentioned technical issues related to biofuels such as the energy

content of ethanol or the solvent properties of biodiesel. Three out of four biodiesel

producers mentioned public skepticism as a major barrier while Plant B’s view differed

strongly because their company viewed domestically producer biofuels as having a major

marketing advantage. Also the same three out of four biodiesel producers mentioned a

lack of political leardership to promote the development of biofuels while two producers

mentioned Ohio’s Governor Strickland’s administration directly. But as mentioned, there

appears to be a turning point in state leadership with more incentives to biofuels

producers in Ohio.

Plants B and C mentioned a problem gaining access to funding as a major

challenge while Plant E, who was an ethanol producer, was able to gain interest and

finances because they were viewed as a biofuel producer. But Plant E was the only

biofuel producer who mentioned regulatory challenges as a major challenge, which

eventually lead to their downfall.

Ohio has the ability to contribute to biofuel production in the country by supply

soy oil, rapeseed oil and the infrastructure needed to transport alternative fuels. Ohio also

has the potential to develop point source carbon algae facilities for biofuel production.

As a country we are not going to be able to grow our way out of our petroleum use dilemma, at least by traditional means. The ethanol industry will continue to hardly make a dent in gasoline consumption and the feedstock to grow enough biodiesel is simply not available. When government policy changes and federal or state incentives dry up will the ethanol industry be able to continue to grow? 109

Even if the United States focused on rapeseed, which produces three times the amount of oil as soy or if the United States was tropical and could grow palm oil which produces ten times the amount of oil as soy, the United States would still not be able to grow enough oil to completely replace diesel fuel. With the increase of soybean farming a new overabundance of feedmeal will be seen. This feedmeal can be used to some extent as a feed for livestock but a new infrastructure may need to be developed to deal with it or it will in evidently rot at the place of production.

Although biofuels may be a part of an “energy puzzle” to help solve the growing concern on the reliance of foreign oil it will not completely solve our liquid fuel dependence, especially with the current technology used to produce it. At this point, the biofuels industry is taking off and is starting to enjoy more public and government support. A lot of businesses are trying to get their foot in the door to make money in the biofuel industry but there is still not enough feedstock available to turn into a significant amount of biofuel. These businesses may be able to supply some short-term solution and may buy some time but it does not solve the long-term liquid fuel problem in this country.

Recommendation for further research

This study is a small start in the research that is applicable to the topic of biofuels in Ohio. The following ideas were generated while researching this topic.

Nobody I interviewed mentioned anything related to cropland in Ohio coming into competition for a future biofuels crop, however food versus fuel topics were 110 mentioned a few times. Is it possible that the ethanol industry and the biodiesel industry may end up fighting over what feedstock should be grown?

Depending on which feedstock crop has a higher demand, will farmers switch from one crop to another in order to maximize profits?

As of the writing of this thesis there are currently two biodiesel plants being built, one biodiesel plant expanding production and seven corn ethanol plants being built.

When these facilities do come on line it will be interesting to see where they all get their feedstock and if this feedstock is truly domestic or if it is imported from other countries.

If the feedstock is imported from overseas, it will be interesting to see if this feedstock was harvested in a sustainable manner or if rainforests were leveled to plant biofuel crops as some have suggested might happen (Righelato 2007).

Also, as one Plant Processor mentioned the soybean council at this time is not supplying enough soy oil for production into biofuels to make it cost competitive to petroleum products. By keeping soy oil production down and the price up, are regional soybean councils actually hindering progress and availability in biofuels?

For the biennial budget plan for Ohio in 2008 the state will start to offer incentives to biodiesel producers for the first time ever. This measure is expected to promote biofuel development by making it cost competitive at the retail outlets. After these incentives are removed will the biofuels industry be able to stand on its own?

111

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Appendices

Appendix A: Interview with Plant A on October 13th 2007

Interviewer: Sitting here with [Plant A]. Doing a quick interview with the biofuels plant that he is running. I going to ask you a couple of quick questions you can give me some feedback and if you want to lead into other things that will work as well. How much Biofuel does you specific plant produce, would you say?

Plant A: We are right at 1000 gallons a week now. We are at a bit of a bottleneck. In the next couple of months we should be able to do about 1000 gallons a day.

I: 1000 gallons a day?

Plant A: We just don’t have the washing capacity right now to 1000 gal a day.

I: All right. Where does you facility get its feedstock? What kind do you primarily use?

Plant A: It’s all what they call yellow grease. This is unprocessed yellow grease, waste oils and greases from restaurants, university dining halls and no virgin oil feed stocks.

I: So mostly just waste vegetable oil?

Plant A: 100% waste vegetable oil. The worst of the worst

I: Does the biofuels plant have any plans to expand and if so how big do you plan to go?

Plant A: No, what this whole venture has been and it started in 2000. Fall of 2000, just playing with it on desktop, kitchen counter top. We immediately realized that…well what I was playing with for several months and a friend of mine just saw what we were doing. And in his travels he ran across some people that wanted to travel something like 13,000 miles, a circuit around the country back in the summer and fall of 2001. And they needed somebody to make fuel from industrial hemp for them. They just wanted to do something that was really in promotion of the hemp industry at the time the federal government was trying to shut down all hemp related foods saying that they had THC in them, whatever. And [name deleted] was on the lead of that one at the time. And so the industry was looking at getting shut down, uh so, these guys wanted to get some press out. So they decided to get supporters from around the country from all these different hemp businesses, plastered their cars with cars with stickers and everything and travel around the country on marijuana oil, cannabis oil. And so they needed somebody to make the fuel for them and my friend volunteered since he had the oil and he had been playing with it. And it took my all of about 30 minutes to realized that there was no way in the world we could provide enough fuel for them in a small little desktop environment, lab top to environment. It takes about as much time to make a gallon as it does to make 1000 117

gallons basically. So, I was put towards, pointed a farmer [name deleted] and he provided us with an old dairy cooling tank, 400 gallon dairy cooling tank so we could make 350 gallons at a time instead of 3 gallons at a time or whatever. And that’s where we started and we still use it as the primary reactor. So, like I said we can do 1000 gallons a week right now, but the limit is the wash vessels. This started out as to be something that would fit into a 2 car garage and in a 2 car garage that was fine, but now we are something where we would like to be at 1000 gallons a day so our bottle neck is, manufacturing wise, making the fuel and the chemical reactions, we can do 1000 gallons a day. To wash the fuel and make it road worthy or to make it acceptable, ASTM spec. and then we have to wash it and to keep up with our production on the manufacturing end or on the chemical reaction end, we need to increase our tank sizes and the like or our methodology, so we will stay at 1000 gallons a day. A town, a population center like Athens, 25,000, somewhere in there, should be able to support a 1000-gallon a day plant. Chillicothe should roughly be able to support the same thing.

I: So who are you primary customers at this point?

Plant A: Farmer, off-road use only. There is no reason to sell on-road use in a small micro-environment like this. We couldn’t even supply, 1/100 of the off road market even at 1000 gallons a day, within a 25 mile radius of here. This country’s just so gluttonous for liquid fuels for transportation fuels. There is just nog enough waste grease. So, why drop 5-6 grand a year into, to have your, or 5-6 grand initially and a then a couple of grand every year, just so you can sell on road fuel. When you can make off-road fuel and save that 5-6 thousand dollars.

I: What do you believe are you customer’s motivations for purchasing biofuels?

Plant A: Primarily money.

I: Price?

Plant A: Primarily. Our first and our best customer, he’s been with…He was with the Ohio, not Dept. of Agriculture some farmers co-op, on their board for a decade, and finally he had to you know, not throw in the towel he still stays in touch [name deleted]. He realized that you know, I want to help, I’m helping out but I need to take of my farm, my goal and everything. I’m spending too much time…But his main reason for buying it is ecological and farming. It’s nice he gets a good price, but primarily everybody else, there just in it for the money. [He] being a lifetime farmer more or less or you know, and having a pretty good eco-friendly mind set, he’s…if the cost to put in a methane digester for his cattle and he didn’t make any money off of it he’d still do it. So his motivations are a little different.

I: In your opinion what are some of the advantages of using and producing biofuels.

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Plant A: Well, advantages… social, socio, every drop of biodiesel made is one less drop of oil that’s, that’s brought in from foreign countries. And you wanted to stretch that, somebody on the right side of the bench could say, that we are sending money to terrorists for every drop of oil that we purchase, which is partly true. That we are also, the United States, the number one export is petro-dollars, we just ship money overseas left and right, and that money could be staying in the country and, you know, going towards paying off deficit, making our grand children’s future more stable, creating jobs here, creating a sustainability issue, creating less impetus greedy reactions towards liquid, or fossil fuel industry where you have dictators, or whatever it may be, shut off your fossil fuel supplies and therefore leaving your economic systems and structures and industries stranded. Of course the price of goods rise and have to pass on to your go out of business or whatever. Create this stable economic environment. When Jimmy Carter was president he declared fuel efficiency and conservation, the whole fuels program, what used to be a program, as being more of the moral equivalent of war. I still believe that; unfortunately our own politicians that are willing to endorse that statement today, tomorrow or anytime in the near future. The only one who seems to want to carry the ball on that is Al Gore, and he is probably not going to run next year. So, but uh, there is this social, where you can create jobs in the community, you keep them in the community, you burn the fuel in the community, which means the emission benefits of burning a 90% cleaner fuel stays in the community instead of, what? We have all somebody come into Athens, collect all the grease, they come in from Zanesville, 60 miles away, driving a fossil fuel truck, you know, making a 500 mile circuit, spend ass-loads of fuels, picking up the grease, transport back to Zanesville or Columbus. And then they, what do they do with it then? Do they package it up as yellow grease, and sell it to 3rd world countries, so they can boil their potatoes or fry their potatoes, put in their food. What we consider trash they put in their food, supplements for 3rd world countries. It goes into the dog food, cat food industry. Our dogs and cats have higher rates of tumors and cancers as a result of eating high food fatty acid content of oil and the like. Kraft oils, I know they say they remove the free fatty acids. But that’s okay. There’s the infrastructure it takes to make all those trucks, the energy it takes to make all those trucks, the labor involved. (At this point the interviewees dog walks in the garage where we are conduction the interview) She probably smells like dead deer….[laughs]

(Continuing)

The labor involved for transportation, manufacturing, the energy it takes for all that. The liability issues, the insurance industry that, you know, insures all those trucks and everything. All the energy and resources that are wasted though transportation, take a look doesn’t matter, 1800 miles for every bit of food that goes in our mouth has traveled 1800 miles. Apply the same process to the present biodiesel industry, what? Grow soybeans in Ohio, ship it down the Ohio River on a barge, to ship the oil to someplace in Mississippi, let them produce biodiesel, and then put it on a truck, and take it out to California? It makes no sense.

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I: What are some of the drawbacks of using or producing biofuels, in your opinion?

Plant A: Biofuels, first of all, anyone who wants to carry on a conversation needs to dissect it. Biofuels is everything from biomass. It doesn’t matter if its methane produced from biomass, methanol produced from biomass, ethanol, biodiesel produced from oil. It doesn’t matter what it is, so….If you read the recent National Geographic they talk about biofuels, but the big push is ethanol. And they leave a little bitty back page for biodiesel. So, first of all, that has to be segregated, a different chapter for each feedstock or a different chapter for each final fuels. Because each one is almost an independent industry of itself. So the question again was?

I: What are some of the drawbacks of using or producing biofuels.

Plant A: Well, if you, once you dissect it, the drawbacks and benefits from each on. Right now you look at ethanol, its 1 and one-quarter gallon production for every one gallon of energy that goes in…so yes that is a positive, but it’s so minimal, it’s dismal, you look at all the soil runoff, the rain water runoff that goes down the Mississippi, and the tributaries, into the Gulf of Mexico and you have a dead zone there that is getting bigger and bigger every passing year. What? So we can keep our SUV’s or keep our Cadillac Sevilles on the road. But we’re running ethanol so we’re green and we’re conscience it’s somebody else’s dead zone we are not going even worry about it. You know, What about the poor clambers out in the Gulf of Mexico or the shrimpers or whatever else. And whatever that contributes to beyond, you know, future generations, we haven’t even seen yet. So there are those problems, if you going to go with ethanol, you have to go with cellulosic ethanol, there are just no two ways about it. Um, unfortunately, the transportation industry in seeking to go with lighter vehicles to improve fuel economy they were semi-forced to use aluminum for, you know, heads on engine blocks or carburetors, etc…Um, body parts, and methanol, personally, if you look at logically, from a scientific and a yield perspective, methanol is the energy, liquid energy fuel of choice. Unfortunately it eats aluminum, it would eat up heads, it would eat up carburetors, injector pumps, etc. So, but still, methanol has its place as a biofuel, industrial biofuel feedstock. But unfortunately the only methanol plants by and large are in, you know, Venezuela or somewhere in South American, so we are still importing all our methanol to make things like biodiesel. But we should be taking places like, you know, [a local farm] that has plenty of saw dust, plenty of trimmings that can’t be turned into wood veneer, whatever, or beams. That they could be producing methanol from biomass. Small little micro-methanol facilities, every population center. 25,000 or something like that.

And when it comes to biodiesel, There would be different tiers of biodiesel. Obviously you would want to access your waste greases from restaurants and the like. And that’s important. It’s a part of the energy issue. You would also, when you press, soybean to make high energy content, high protein content feed meal for your dairy cattle or your chicken feed or whatever you’re going to have waste for left over oil. That’s where the 120

biodiesel industry got it’s greatest push was from the soybean councils. Because they were producing all this high protein feed meal but the oil was going in these tanks and just going rancid. They had 3 billion gallon glut. Farmers were just burning it. Because it was cheaper to burn that, then to buy…it’s cheaper…the money they were losing was less then to buy petroleum fuel for their boilers or whatever. So that’s really where biodiesel got its big push in the early 90s. That gluts now gone. Now we are giving subsidies to farmers, actually the subsidies are not going to the farmers; they are going to people that blend 1% diesel fuel with 99% biodiesel. But the subsidies are going to the wrong people, but the impetus is there for the farmers to grow more, more soybean. But there you have a problem. It’s great up to that point where you consumed all your feed meal. But then you just keep growing soybean. What do you do with the feed meal? We used to have an oil glut, now are we going to have a soybean glut? Or a feed meal glut? I don’t think too many capitalist are going to send all that feed meal to south, or to Africa to feed the impoverished, you know, on a capitalist’s wallet. They are going to want to sell it to somebody. But if there is no market for it, it is going to sit there and rot. So, only a certain percentage of your biodiesel market can be met by soybean, or rapeseed for that matter, or any oil seed. You know, right now, we are growing soybean in Argentina. Mow down rainforest to grow soybean to import into the United States for our biodiesel habit. We’re raping, um, you know, rainforest in Madagascar to grow palm plantations to export other nations for their biodiesel habit. People are seeing that the biodiesel industry is very, very lucrative but they are not taking into consideration that they are destroying the planet in the same process. What it basically elevates to is the biodiesel industry has only one saving place that will take it to a level of industrial production where it meets entire liquid transportation fuels market. And that is to take your present polluters, your present day users of fossil fuels. It could be anything from an industrial bread-baking oven that makes millions of loafs of bread a week or whatever. To a cement kiln that burn tires. Or you have a toxic waste incinerator that burns, you know, liquid toxins, you know, petro-chemical, methane or um, benzene, taluline. Hazardous waste. It could be solid waste incinerators. It could be coal fired power plants. It could be natural gas fired power plants. Essentially any stationary point source of carbon dioxide. The saving grace for biodiesel is to locate a bioreactor right next to it. Feed the flu stack gases from those point sources of carbon dioxide into the bioreactor, to grow algae.

I: You’re starting to get into my next question, which is, you touched on it very much, the future of biofuels and some promising technologies being developed to promote it.

Plant A: That’s it. That’s how you got to…Bioreactor next to all the present day polluters and next to that, you would have, either a biodiesel plant, or a Fisher-Trope plant. Where you would take algae and the water. Fisher-Trope reaction is the same reaction they wanted to use to take coal and turn it into a liquid synthetic fuels. It’s the same reaction Germany used in WWII. Once South Africa, or I guess Northern Africa, was, was recovered and the allies recovered it from the axis powers. They lost their energy source, they lost their fossil fuel transporting fuel source. So they were relying more and more heavily on synthetic fuels from coal, which they had an abundance of. 121

Well that process is intensely water intensive. Enormously water intensive. So what you do is since you’re growing biodiesel, or growing algae, which is water intensive too, but the water can be recycled there. And to make biodiesel from algae. You have to dewater the algae. Press the oil out, dewater that. Well whey not just take the whole damn slurry and through it into a Fisher-Trope process. And turn it into, break it down to its basic carbon elements that you want and then rebuild it in synthetic manufacturing plant. Gasoline, to meet our present day, or domestic fleet of vehicles. Synthetic diesel fuel. Methane, methanol. Just rebuild everything in a refinery. So you’re going to see, coal- fired power plant, a bioreactor, and strewn out. The bioreactor will be enormous most probably. Then you will see either and or biodiesel plants right next to it or Fisher-Trope plants right next to it. And what looked liked refineries next to it.

I: So more kind of like a localized approach to producing biofuels.

Plant A: Pretty much, but instead of it being just fossil fuel refineries like we have right now in Texas city or the New Jersey coast, or whatever, or the California coast, or whatever, where they are all, where the big tankers come in that’s by and large, where the refineries are. And then everything is transported by pipeline or by truck the rest of the way. Instead of having that kind of a system now what you do is, you still have those, and slowly they will be depleted, or as their life cycle dies, they are slowly just mothball them and then they scrap the steal out hopefully. Instead of having these mega refineries along the coast lines of the United States then you have these micro-refineries in domestic centers, in urban centers, whatever it might be. And 10-15 of them per state, any place where there is a concentrated stationary point source of carbon dioxide you will have something like this. Now what that effectively does when you look at algae, being harvested from that CO2, one the algae eats up a lot of the other pollutant, not just the CO2. The algae is 90 % efficient at removing the CO2, unfortunately shines approximately 12 hours a day on average, so that makes it 45% efficient at removing the CO2. So lets assuming your plant, your bioreactor is operating at maximum efficiency, you are now removing 45% of the CO2 from all the fossil fuels that are being burned. Natural gas, whatever it might be. Well that sure as the dickens beats Kyoto protocol right off the bat right there. That meets and beats it. And then that’s, then you take the CO2 turn it into algae and that’s that much less oil that is going to be pulled from Prudo Bay, or the Alaskan National Wildlife Refuge or Saudi Arabia or Iran or Kuwait or wherever. Any then you start getting right back into your social structure, you remove the impetus, or the stranglehold that some people could have on your own economic system. I’m not a very firm believer in George Bush’s statement, or George Bush Sr.’s statement. Or George Herbert’s Herbert Walker not senior, back in the Kuwait I or uh, Iraq War I, where he said, “This is about preserving the American lifestyle…” quote unquote. That, uh, well I’m not too fond with the American lifestyle in its entirety. Enormous portions of it sure, but when our lifestyle becomes an impetus you know, for other people, if such is the case to drill sideways underneath Kuwaiti soils and steal their oil, meaning Iraq back then. That and then to invade them, if having to go back and reinvade, you know, to take the dictator out of Kuwait [Iraq] or whatever, is the result of preserving our own lifestyle, 122 then there is something wrong with our lifestyle. So you know, yes, there is the global and environmental aspect that can be gained. Any you take things like the Smartcar that can get 82 miles per gallon, diesel….

I: They are all over the place in Europe.

Plant A: Yeah, and in Canadia as well…Crash tested at 70MPH and you might break an ankle. You know, and the glass doesn’t even shatter and 70MPH. At uh, and you can get 82MPH. You got the Lupo, 72 MPG in Europe. So you take, biodiesel plus fuel efficiency. And what? The average car travels with just one person in it in the first place. Let’s say you’re getting 72 MPG off biodiesel in a VW Lupo may finally be allowed into this country by the EPA, next year or so. It’s uh, the Smartcar, smart is going to offer a gas version, they are not even going to offer a diesel version for the American market, which is not very intelligent in my opinion but, or my belief system. But once you have done that you go from cars that are getting 28 MPG to three time that. You have improved you efficiency so much that you are only using 1/3 as much fuel. So you have reduced you carbon dioxide from that particularly vehicle by 66%. So that’s another part of the future. You got to go with the biofuels, with the fuel efficiency, through in conservation, you know, people who would choose to go 55 instead of 75 just because the speed limit says it. But uh, and that’s where the future that’s where the answer is; personal responsibility, industrial responsibility, political responsibility, national, basically you know, a nation wide Marshall plan invocate the public on energy conservation and biofuels.

I: Are you aware of any state or government incentives to promote the development of biofuels in Ohio.

Plant A: There may be a couple of pennies per bushel for soy. And there is ethanol, most of it is national. I don’t delve into it too much, I know there’s a 50 cent per gallon tax credit for biodiesel from, waste vegetable oil, which we would be eligible for if we so desire, but we don’t desire. You know, basically all you’re doing is taking, you know, you’re taking money out of taxpayers pockets. If we can make a micro-biodiesel business fly and productive, for 2 or 3 employees on a micro scale on a population center of 25,000, why in the hell should we take 50 cent a gallon. Even if we are doing 1000 gallons a week, you know, 500 dollars a week, 50 weeks over. That’s what? $25,000 a year? Why should we take $25,000 out of somebody else’s pocket? When we’re quite happier, when we are making nice livings, you know, at anywhere from $45 to $75,000 a year or whatever, why should we take a handout? But other people would argue with that and say, “well somebody else is doing it, might as well.” You’re doing a good work and somebody else just taking it for gold plated bathtubs or knobs or whatever. Then at least you would put it toward a better use than them. I think the point is to prove that subsidies not necessary.

I: What is Ohio’s potential role for biofuel production? 123

Plant A: No better, no worse than any other semi-agricultural state. My personal belief is that they need to make the transition now like every state should. They could even be a leader in transitioning to cellulosic ethanol, they could be a leader into a transition into, you know, algae from stationary carbon sources. Or they continue in the same vain and try to eek every penny they can out of it until they absolutely have to round that curve and then they are going to behind the wave instead of in front of the wave. Personally I can find, I find that to be…If the sharks are nipping at your feet and you’re behind the wave, you ain’t going to get to shore any faster. So um, there is a lot to say about being pro-active. As far as their future goes, it’s a highly agricultural state. Indiana, Illinois are also. And Nebraska, North Dakota, South Dakota on down and Ohio. And Kansas. I don’t see benefit more or less than anybody else. Their future is the same as anybody else’s. They could with the right leadership and I think maybe Strickland is probably one of the more pro-active energy aware governors that we’ve got at the moment. The trick is if he gets tired or loses momentum or whether he actually takes the point on this. And takes state monies and puts it toward a prototype bioreactor. I mean hell we have a coal- fired power plant at OU, we got the leading people in the country working on algae, some of the leading people in the country working on algae there. And we’re talking about clean coal. A lot of coal in Ohio. You don’t want to destroy your constituencies’ jobs in the coal industry. You got a lot of coal power plants that still have another 20-30 year life expectancy before they can be mothballed. They are not going to mothball them, plan and pure and simple so you’re going to keep working them. Why not? Just work hand and hand and take the point on that. And make the best of a bad situation. Then in 30 years later you got the best of a good situation. So that, that would be the future if the governor wants to do it great, you know. Or the next president or whoever else.

I: What do you believe are the major barriers of biofuels and what should be done in order for them to gain widespread support?

Plant A: Major barriers? I’ll think about that. The first place you want to assess blame or whatever would be political. Um, the industrial…I buy a car today it gets 30MPG not even knowing that there was a car 30 years ago that could get 50MPG. I want to drive that car 10 years to get my max utility out of it. And uh, basically so, I can’t afford to find out tomorrow that all of a sudden they got this new program and there’s a car that gets twice the mileage and, and go trade it in and by and large a high percentage of the American public just can’t do that. They operate from hand to mouth and buying a car is a major step and um, so we’ve got Detroit, we’ve got no leadership at the national level, we’ve got Detroit that has been going gangbusters for it’s SUV’s and minivan and large trucks. Which, I don’t have anything against a large truck, they have their place; But we’ve got the fear mongers that tell us that small cars are death traps, have been telling us for a long time, hell, airbags were death traps before air bags came around. Seat belts were going to bankrupt the automobile industry before seatbelts came around, but, they were willing to sacrifice the body public over profit. And that’s going to be the biggest, biggest shortfall, or impediment, or barriers. It’s constantly having to harangue with 124

people that just don’t want to change, at the levels that could create the changes, but politicians don’t want to change it. History don’t want to change it. The oil and the fossil fuel industry doesn’t want to change. You know, and then you take all these lies, as Mark Twain said, “A lie goes half way around the world before the truth can tie its shoes in the morning.” But uh, or “get its shoes tied”, something to that effect. So here we have the age of the internet, and a 24 hour news cycle, I could spoon feed a lie to somebody and it could be in the New York Times before noon tomorrow, and everybody read it and I adjusted it and considered it as fact and the gospel when all it was a fear monger story or something. Those are the kind of impediments that we got right now. The truth is really, really slim and its availability to the public and that’s by and large because a lack of leadership. I mean it’s so easy to tell the truth. The facts and figures don’t lie; they are available. You know, “no we can’t do this, it’s going to kill us as a nation, it’s going to cost us jobs.” And tobacco was good for your health. Those are the impediments. Make it profitable. Make it desirable and industry will find a way to make it profitable.

I: I have one last question and we will be done. Some critics feel that major oil companies do not want the United States to seek out alternative energy, what is your opinion on this issue?

Plant A: Well hell. BP is beyond petroleum already aren’t they? Anybody in business has a vested interest in maintaining their profit margins. I personally don’t have a problem with making a profit. There is nothing wrong with making money, its just how do you make it and what do you do with it. The problem is that there is not a lot of visionaries at the corporate levels, in the upper tiers to start making transitions in the new technologies that not only benefit our planet, but benefit their customer base, benefit their shareholders and help stabilize their jobs. Their employee’s jobs and their jobs. These people just don’t have the testicles for it. But uh, by and large, um, they got the infrastructure, they got the steel stamping machines, they got the Ford motor plant, its all sitting right there but the people at the top just don’t have the guts for it. So…the question was again?

I: Some critics feel that major oil companies do not want the United States to seek out alternative energy, what is your opinion on this issue?

Plant A: They would like to maintain their profits, but what if they could make the same profit, you know by, going into alternative fuels. Right now we have an infrastructure distribution, infrastructure, where if we go with ethanol or biodiesel it still has to be distributed to the pump. So the distribution mechanism remains the same. That’s, um, the coal industry, they are still going to burn coal for electricity, so they don’t loose out on the number of kilowatts that they sell, they actually sell a few more kilowatts to themselves and can take that tax credit. But um, the fossil fuel industry, take a look at where we were a couple of years ago at $27 a barrel, now we’re at $83 a barrel. So you charge a little more, you get a little higher margin per barrel, but you sell a few less barrels, you still have, your margins are still the same, which gives you that buffer to 125

make the transition, in investment to other things. You take those high profits and you sock those away in a place and start dedicating them towards your transition endeavors. Now where they are putting their profits right now, I have no clue. But, uh, I don’t think it’s in wind turbines, I don’t think it’s in biodiesel plants, I don’t believe it’s in ethanol plants, well, maybe in ethanol plants. The coal fire industry really likes ethanol. They’re building coal fire plants to make ethanol right now. So, but, uh yeah they have an interest in maintaining their profits. Maintaining their investments. Saudi Arabia does too, Iraq, Iran, whoever, Venezuela, all these places up and coming; Coastal African nations, that got a large Chinese investment. They all have their interest. The Caspian Sea with high Russian investment. All these new supposed pipelines going through Turkmenistan. You know, if there is no profit to be had from fossil fuels there is no point in laying all this stuff in. So the trick is just sitting down at the table, with a global OPEC, not just a few countries, but now everybody sits down and says, “look guys, we have to maintain economic stability, we have to maintain it in Russia, we have to maintain it in Saudi Arabia.” Maybe we should all be making transitions and maybe Saudis, maybe instead of investing in gold plated kabalas or Taj Mahals, or whatever, uh, maybe we should be investing in education in infrastructure and you know, and kind of create this platform for our body public to rest on, you know, and when things are stabilized and peripheral jobs are created and everything, and spread this base out. Just, you know, focusing on one thing, kind of like eating beef all you life and nothing else. I think you’re probably going to get scurvy before too long even though you stomachs full everyday. And I think that’s about where the world is, uh, and with leaders in the fossil fuel industry and the oil industry that can’t see that…their going to take the whole damn planet that way. Fruit on the vine for the picking but it’s not worthy.

I: All right, that’s all I have. Do you have anything else to add.

Plant A: It’s going to be a long lifetime chore.

The following is a follow up email I received from the interviewee a couple of days after the interview:

Hey Izaak,

I failed to carry out one thread of thought that was mentioned to its logical conclusion.

Remember when I said that there will eventually be algae bioreactors and biorefineries or Fischer-Tropsche refineries located at each stationary point-source of CO2? And that the present day polluters would now have a revenue stream from liquid fuels derived from their present-day pollutants?

I forgot to mention the second inevitable revenue stream that will be derived from reducing greenhouse gas emissions - carbon credits. Their 126

reductions in emissions will earn them the opportunity to sell credits elsewhere.

When a person comes up with a paper that ties all the economics together from those angles and offers a revenue projection, you'll see polluters starting to "jump" at bio-reactors like white on rice.

Anyway, just wanted to complete that thought.

The following is from a follow up email sent 25 October 2007.

Question: One thing that I think we touched on but never really discussed was what you do with the byproduct of you biodiesel production, glycerin. I know there are many uses for glycerin but this is still an issue for some. Can you fill me in on what you, or others you know, do with their glycerin.

Thanks. Izaak

Reply:

A few things can be done with the glycerol cocktail (glycerol, soap, methanol and excess catalyst).

1) Store it until there's enough volume (5,000 gallons) to make it worth another company's effort to buy it and/or pick it up. (Methanol is recovered before storage.)

2) Conduct a free fatty acid recovery step, breaking the soap down to oil with concentrated phosphoric acid, leaving a potassium phosphate salt (fertilizer) on the bottom, a glycerol, alcohol and acid layer in the middle and a free fatty acid (oil) layer on top. The FFAs are reprocessessed in the esterification stage. Acidic middle layer is neutralized, producing more fertilizer. Methanol is recovered (evaporate and condense) and glycerol is either stored for resale or can be diluted in wash water and applied as gray water. Glycerol, although an alcohol, is a simple sugar.

3) Evaporate and condense the methanol and use the thick, soapy, glycerol laden product as an additive to further soap making.

We're woking on a soap product that incorporates the latter approach. 127

Appendix B: Interview with Plant B on October 15th 2007

Interviewer: I am sitting here with [Three individuals from a biodiesel plant]. I’m doing a thesis on biofuels; I’m going to ask them a few questions…

REP. 1: Don’t forget [Representative 3]

I: Okay…Obviously your plant is still under construction so some of these questions will be worded a little different. So, how much biofuels does your specific plant produce or plan to produce in the future?

REP. 1: Well, this plant is designed to manufacture 4 million gallons per year.

I: I saw you had the [Specific Brand] processor out there. Is that the…are you just going to be able to use on of those that’s going to be able to handle 4 million [gallons per year]?

REP. 2: That’s the small one, the large one is almost done being built right now. We’ll go over to [another country] the first or second week in November where they train you and run your particular processor and then it will come back and that will be the main processor. This is because of the time delay on ordering and producing these come much quicker so we can get started and refine…especially our testing techniques.

REP. 1: Yeah, and the reason for having both a batch processor and a continuous flow processor here in this plant is that we are also the national distributor [Specific Process]. So, [Representative 3] is already working with several different people who coming to this plant sometime after [Fall], when we commission the plant, to see a continuous flow and a batch processor work so they can make up there mind on which one they want to buy.

I: Okay. Where does your facility get its feedstock or where do you plan to get your feedstock and what kind will you primarily use?

REP. 2: We can, well we are starting off with a company named Annamax. We can also go with Cargile, Bungie, there are several companies that deal with commodities. But our particular plant is multi-feedstock. We will, um, start off with, we are going to be using bacon fat, refined bacon fat…because it mirrors the same qualities, the same specifics as soy oil does. But soy oil right now is extremely expensive and is not cost effective for the industry.

I: So you mean virgin oil is not really cost effective?

REP. 2: Well no, Bacon fat is virgin oil also…

I: Okay 128

REP. 2: Okay…but right now soy oil and rapeseed oil, just have, the demand for them has gone up so high, the prices have temporarily skyrocketed. And there’s one of your later questions. That’s one of the big problems in the industry right now. So, the used oil just takes, there is a lot of it and it is affordable. But it takes more refining at the plant once we get it here. That, in this particular plant, we’re not set up for that as yet. As time goes on we will probably add the equipment and then be able to go with the used vegetable oil also.

I: Does you biofuels plant have any plans to expand and if so how big do you want to go?

REP. 1: Well we’re building our plants from what you would refer to as the European model. The American model is to build one huge plant of 150 million gallons at a time. Where we don’t feel that is the right way of doing it. With the European model we’ll be building a whole bunch of small plants. Because the cost of transportation of the feedstocks and shipping of the fuel is one of the major costs in production. So we will be eliminating that with many small plants.

REP. 2: This particular plant will top out at about 5 million. And that’s strictly because the only logistics we have is truck. Now when you go to a location where you have either rail or barge access. Then you can go to probably a good 15 million gallons, 20 million gallons and still keep economies to scale.

I: Who will your primary customers be?

REP. 2: Distributors.

I: Distributors?

REP. 2: Yeah, we are not a retail outlet.

I: Like local area distributors, or just pretty much anybody?

REP. 2: We have talked to, we will probably have customers in a 50-75 mile radius…that will come and pick up.

I: So pretty local.

REP. 2: But with the capacity we have, that’s all the farther you need to go.

I: Right.

REP. 2: I mean, if it was a 30 million gallon plant then we would probably be talking a lot larger radius. 129

I: What do you believe are the customer’s motivations for purchasing biofuels?

REP. 1: Well my particular, um, feeling is, it’s American made, American grown, it is American, and with the value of the American dollar right now…it’s becoming more and more important to purchase an American made product. And uh…of course, I’m on my own soapbox right now. But I’m never been a proponent of NAFTA and I feel that, in order to get um, Americans the be able to purchase an American made product, you better buy some poor American made products that those people can have money to buy it. So if it’s not made in the United States I don’t want to buy it. Does that make sense?

I: Yeah, it makes sense. An American made fuel.

REP. 2: The other big reason is environmental. You know, not only is it burning biodiesel produce a lot less pollutants, but it’s full circle. Since it is grown, since it is made from plants and animals there are…you’re not adding to the greenhouse gases, because you’re using as much as you’re producing. So it keeps it in check.

I: We kind of touched on this a little bit about less pollutants, but in your opinion what are some of the advantages of using biofuels. Obviously less pollutants, American made, um, you know any other advantages.

REP. 2: Well, as time goes on and more comes on line it’s going to become very cost competitive with sulfur, or with the fossil fuels.

REP. 1: And primarily, one of the very first books I read about this a few years ago was Hubberts Peak, by Dr. King Hubbert. I’m sure you have read that…

I: I have read that.

REP. 1: And I mean, you just follow every, every day you look back at that book you see more and more of his predictions come true. So we got to realize that petroleum in not an infinite source…

I: Right

REP. 1: So we’re got to come up with our own alternative energies to keep our way of living up without relying upon fossil fuels, which we are running out of.

I: Yeah, I have definitely come across and read Hubbert’s Peak a lot. It gets cited a lot in some of the literature that I’ve read.

REP. 1: Yeah.

130

I: Important book…In your opinion what are some of the drawbacks of using or producing biofuels?

REP. 2: With biodiesel there isn’t any drawback. With ethanol, I mean if you’re going to go with the term biofuels…

I: I’m kind of encompassing the ethanol

REP. 2: Okay, as far our product with biodiesel, there aren’t any drawbacks, okay you’re not, it does not…produce less energy, it’s cost effective to actually produce the fuel, okay it’s…for the most part and in the near future, it won’t be taking any food off of tables. Right now soybean oil is probably the feedstock of choice. And it is, it doesn’t affect the food supply near as much as ethanol. But it is with us, there aren’t any.

REP. 1: The only probalem I can see…some of the obstacles we face in the production of biofuels is the limited amounts of feedstock available. And that’s why we are in constant search of being able to produce our own feedstocks as well.

I: What are some of the obstacles you face in the production…I think I already went over that one…All right, what are some of the obstacles you face in the production you said feedstocks…limited feedstocks…

REP. 1: Yeah, limited supply of feedstock.

I: As for the future of biofuels what are some of the promising technologies being developed to promote biofuel?

REP. 2: Number one is going to be the different feedstocks that people are working with now that will become common. Um, they are working with [inaudible something like Utopa] they’re working especially with algae. That can be a real boom to the industry and also make the fuel much more competitively priced. And…there are constantly being improvements made in the processors. When we first started all you could get was what was called a batch processor…which is basically what that little one is. Okay where now they’re using continuous processors, where the reaction is much more complete, there is less waste, it costs less per gallon. So those are the big things.

I: Are you aware of any state or government incentives in order to promote the development of biofuels in Ohio?

REP. 1: Oh yes. Ohio isn’t anywhere near as aggressive in this as other states are, and that’s sad. But there are monies that are being offered to us for now, to develop an R&D center and some other things to develop our new type of feedstocks we are working with.

I: Does that come in the form of grants or… 131

REP. 1: Some are grants some are low interest loans.

I: Low interest loans…any tax incentives?

REP. 2: Not from the state. Everything available…

REP. 1: The Ohio…The Ohio Clean Air development authority is the tax incentive. If all of our loan money was run through the Ohio Clean Air Development authority, which is a government agency that doesn’t really give you anything. But you get 15-year total complete tax abatements from all state taxes, which is good. Plus you have your, what do that call that development fund money for um, land, to build a building on,,,enterprise zones. They have enterprise zones. But that is not specifically towards alternative energies. But the Ohio Clean Air Development Authority is specifically for this type of work.

I: What do you see is Ohio’s potential role for biofuel production.

REP. 1: Well for biofuel production, especially for biodiesel, uh, if you look at the map, and where agriculture is in the United States and where the demand for the product is you have a tremendous demand in the northeast portion of the United States. However, agriculture kind of stops on the eastern border of the state of Ohio. Okay, so we are the last state available going towards New York, and New Hampshire, and Connecticut, where biofuel feedstocks can be grown. So I see it being very important for us being here on the southeastern edge of Ohio to build our plant to feed, um, the demand east of us.

I: That’s an interesting point. I just read something the other day in a book called the Corn Belt where it was talking about how Ohio with its infrastructure and its roadways, um, is close to 50% of the United States population. So I thought that was interesting, that’s something I never read before. Especially east.

REP. 1: Yeah, so if you are looking at where we are, generally. Even though Ohio is a populous state we are within 8 hours drive of literally about 70-80 % of the nations population.

I: All right. So what do you believe are the major barriers of biofuels and what should be done in order for them to gain widespread support?

REP. 2: Number one right now is the quantity made. As the quantities increase it should follow into…

REP. 1: I’ll just go back a step or two from that…What do you believe are the major barriers of biofuels and what should be done in order for them to gain widespread support? Agreeing with [Representative 2], yeah, we have to have more biofuels 132

available. But to get it to there, [Representative 3] will agree with me, getting the financing needed to build these plants is like pulling a tooth out of a mad jackass, I mean it’s tough. And [Representative 3] and I both have our [property] on the line for this. And, even to get a bank to work with us was extremely difficult…

I: Kind of skeptical?

REP. 3: They don’t know anything about it and so therefore they don’t want to take the risk with it. Even though there are all kinds of information out there to support it…they still won’t.

I: That’s something I’ve run across, especially out in Utah. Everybody out there has a diesel truck. And when I talk about my diesel Mercedes and biodiesel, they’re like, “I don’t want to run that in my truck.” It’s a lot public perception I think.

REP. 1: That and a lot of the other biodiesel plants and ethanol plants with the cost to set these plants up, I mean it’s a tremendous cost. So if you’re looking at people like, you know, Representative 3 and I, in order for us to put this together, neither one of us had a golden spoon in our mouths…

I: Right.

REP. 1: Um, you know, we are both retired. How are we going to do this? We both had limited resources. If you look at other companies that are setting up biodiesel plants like ADM, Cargil…

I: Oh yeah, they are the big one.

REP. 1: Yeah, if you look at those two companies by themselves, we got a quarterly report from Cargil, one year. For their bad quarter, which was the quarter ending January of that year, um, they had over a billion dollar gross profit, for one quarter and they considered that a bad quarter. But if you look at [Representative 3] and I together, I mean, we are small guys, we are peons, we are nothing to those people. But we put this plant together and within five years we are going to have a billion dollar company.

I: That’s great.

REP. 1: Yeah

I: Well moving on to my last question here. Some critics feel that major oil companies do not want the United States to seek out alternative energy, what is your opinion on this issue?

REP. 1: Well [Representative 3] why don’t you comment on this, you’re had… 133

REP. 3: They may not but I don’t think they’re going to have any choice, I mean because, um, the environmental and everything else you know, demands it…so…they may want to be in charge of all of it, or own, but as far a producing it and stuff I just don’t think they are going to have that much of a choice. Because what’s going to happen is that people are going to do it, people are going to demand it.

REP. 1: And if you look at like BP oil, BP is not a manufacture of oil. They’re a distributor, just a big distributor. So they are not in the business of making biodiesel, they’re in the business of buying biodiesel, distributing it. And we’ve been contacted by BP. We’ve been contacted by Marathon. We have been contacted by Sunoco. They all want to buy from us to put into their fuels as a blend. And we’d be more than happy to do that, so um, we are manufacturer and a manufacturer only, we are not a distributor. That’s what those people do. So, it depends on what the American public wants. If the American public wants those distributors to sell our fuel, they’ll buy every drop we can make. So that’s…that’s pretty much the way it is.

I: I think it would be advantageous for them [oil companies] to invest in some alternative energy. Kind of my opinion…but…

REP. 2: In business history over the years a lot of big corporation have gotten burned very badly developing new technology. I believe the oil companies are just in a position that they’re going to let somebody else get their lumps. And then once they, once they get big enough, then they’ll just, they’ll, then they’ll start investing because they will be buying them.

REP. 1: Representative 3 and I and some of our other investors, you know, have also made the decision that with our profits from this company, and my wife and I in particular, once we have our investment returned to us, which should happen fairly quickly, once we get that back. We’re going to put all of our profits from this company into a foundation that we’re setting up. Because another thing I have discovered over the last 10 years is that the great educational…product that the United States has to offer…is no more. Other countries have far outstripped us in getting their people educated. And a lot of the problem is right now, for a kid to go to even Ohio State and…[Representative 3] you’ve sent kids to [College], you can’t do it anymore it’s to expensive. So my wife and I are setting up all these funds for education. Scholarships. Because to even become a bartender, or a policeman, or a fireman, you got to have schooling past high school. And the way I can about this decision to work towards it, before I retired I was recruited by [A Business] as [Representative] of their divisions. I was told I couldn’t hire anyone with less than 5 years of college, for entry-level sales. I mean, that’s crazy but that’s what they demanded.

I: So kind of giving back to the community.

134

REP. 1: Yeah, so that’s, my wife and I set up a scholarship at [A scolarship location] just to figure out how to do it. It works. So we’re offering through that one and the foundation we are setting up here monies for a 4 year, 2 year or trade school education. And we feel like the people here in [specific Ohio County] they need that kind of assistance. So we want to help American become re-educated and get strong. I’m almost 60 years old now. I’m too old to benefit from that but the kids coming like up your age or younger. It helps. And that’s how this country is going to become strong. As [Rep. 3] and I both agreed when we first got started in this, we are doing this for our country, not necessarily for ourselves, for our country. This is American made fuel, our profits are going in to help get Americans more educated. We are going to try to do our part to build this into a much stronger country. That’s our thing.

I: That’s a noble cause. It really is.

REP. 1: I don’t know if it’s a noble cause but its what we think is right. And we’ve made a pledge that every county we put a plant in, we want to have the largest flag available to fly in that county. We are going to be flying a 6 x 10 off of this pole. That will be largest flag in this county. Every county we go to we will do the same because we are proud of what we are doing.

I: All right. Well that’s all of my questions; do you guys have anything else to add?

REP. 1: Use more biofuel.

135

Appendix C: Interview with Plant C on October 18th 2007

Interviewer: I’m sitting here [Plant C]. I’m going to ask him a few questions. Okay, how much biofuel does the specific plant produces?

PLANT C: Right now we are still in start up. We have done about 6000 gallons so far and our start up testing and what not, that phase. But we can do a max capacity of about 3 million gallons a year. I mean we are a small plant, but it’s still a significant amount of biodiesel

I: Where does your facility get its feedstock and what kind do you primarily use?

PLANT C: We use strictly virgin soy oil. We get our feedstock, the last 12,000 gallons I’ve got, I still have 6,000 sitting in the tank, I got from Bungie in Marion, Ohio. Crude Degummed is what I use, I don’t use the RBD [Refined Bleached Deodorized].

I: What is it called, Crude…

PLANT C: Crude Degummed.

I: Does the biofuels plant have any plans to expand and if so how big do you plan to go?

PLANT C: The biggest we’d probably ever go around here would be 10 million gallons a year, which is decent but not huge. I don’t want to go huge, I’d rather put in more smaller plants and then diversify with our feedstocks. Right now we do the virgin soy oil strictly because that’s what our customers want. It’s really well spread, I mean, the Ohio Soy Bean council has really pushed to get customers wanting soy oil based biodiesel so that’s what we are doing. It’s an easier process too. You don’t have to worry about the impurities so much as you would like with recycled vegetable oil. You don’t have the filtration issues and you know, you can go from different ends of the spectrum on veggie oil, whether it’s 5% free fatty acids or 20% free fatty acids. And if you’re familiar with those the free fatty acids are something you don’t want in biodiesel production. Because the first thing you have to do is neutralize them which means it takes more of your catalyst, your base catalyst, which we use sodium methalite. And it takes more of that to neutralize those and then do the reaction. So it just adds cost. You can make up some of the cost, of course, with the recycled oils and then you don’t pay as much for them. But then again, it’s what the customers want. And so I use soy oil.

I: Who are the primary customers?

PLANT C: Our primarily customers are the fuel dealers, the distributors around, the fuel distributors within 50 mile radius. Their customers are the retail side of it. [A retailer near Columbus has] an actual trucking lane where the trucks can come in and fuel and he has two B20, 20% biodiesel, 80% diesel fuel pumps. And another two, for the smaller 136

cars and trucks he’s got B20 and E85 ethanol up there. So he’s pushing it so that’s been one of my customers. I go through [A distributor], which is a distributor to supply them.

I: What do you believe are the customer’s motivations for purchasing biofuels?

PLANT C: Lately there’s been a lot of problems with switching over to ultra low sulfur diesel [ULSD]. So, one of the main advantages a lot of people have seen with the biodiesel is the added lubricity that the ultra low sulfur doesn’t get. So in older vehicles, I’m talking just 5 years old, that added lubricity is, you really notice a difference. I have had a lot of truckers that have used it tell me that their engine runs smother and everything with the biodiesel than with the Ultra Low.

I: From my experience I can definitely tell a difference between petro-diesel and biodiesel. In your opinion, what are some of the advantages of using or producing biofuels?

PLANT C: I just the biggest advantage is that it is a renewable fuel. You go out and grow it in a field, you are not taking it from one place that at some point is going to run out, I mean, that’s one of my biggest advantages. I mean, I’m not someone that goes around yelling, “save the earth.” I look at it from a scientific point of view. If you can do something to conserve it, do it because it just makes good sense. I’m not doing it biasly, you know, my soul purpose is not to try to go completely organic or anything like that. There’s nothing wrong with that, but I just look at it from a perspective of why waste something, you know. I come from a conservative family and you just don’t waste things if you don’t have to. So, I don’t have to many problems, and you probably won’t find many people saying this, I don’t really have a problem with oil companies other than the fact that they hinder, they hinder progress in alternative fuels because that is our future. I have no problem with B20 blends as opposed to 100% biodiesel because even at the rate that we produce it in the United States now, we can’t make up all the diesel fuel used. So if we wanted to and the oil companies said, “Here, have whatever market share that you can take from us without us doing anything to hinder you,” we could never supply it all. So I have no problem with people selling blends like that. Because on the other side of it, it helps conserve our oil so we don’t have purchase as much. Because, you know, most of our oil here in the United States comes from foreign countries and then we sell ours. We buy it and we sell it from other countries then we sell it to other counties, what we make, what we actually produce. So if we can conserve that oil supply that will help it to last longer. So I don’t have a problem with oil in general but it’s just a matter of conservation. Don’t waste one of your natural resources because someday you won’t have it.

I: In your opinion, what are some of the drawbacks of using or producing biofuels?

PLANT C: Some of the drawbacks….I guess from my standpoint it’s a little harder because it’s a new thing for people. So it’s a littler harder to get people to switch over 137

from something that they have used for 100 years, essentially. And the costs now, of course, with the price of crude oil being at record highs, like $88 a barrel, it’s cost competitive again. Unfortunately the soy industry, for me, is shooting themselves in the foot because a lot producers have slowed down their production due to soy oil prices. So right now that’s a problem as an alternative fuel producer we’ve created a new market, a bigger marker for soy crushers but they’ve started getting greedy and we’ve essentially raised the price on ourselves. The more we produce the more they increase the price. And I don’t even, it’s a straight line, you know, with what we do. It doesn’t, I can understand if we were doing 2 billion gallons of biodiesel a year from soy oil, and so you raise the price, you try to keep it even with the amount of production but they’ve raised the price far exciding what we have increased in production wise. And the supply is still there but they’ve gotten greedy. I mean, today’s cost, I keep a daily, keep track daily, today’s delivered cost to me would be about $3.26 point 3 cents a gallon…

I: And that’s for…

PLANT C: That’s for the soy oil. That’s crude degummed, if you’re to get RBD, which is Refined Bleached Deodorized, you’d have about another 21 cents on top of that. So that has nothing, that is just 3.26 for the oil and then I have to process it. So I have process cost, I have other chemicals with the methanol and the base catalyst, which is sodium methalate. So, by the time you process it, you have a fortune in it. And they have just, they’re hindered the production on biodiesel essentially. So why they may be getting more per gallon they’ve definitely lowered the quantity of what’s available. But that’s the only way we can make money in this. To try to make enough so that pennies count. I mean, half a cent is huge for me in a commodities market. So that’s the biggest drawback. We have essentially created our own high costs for feedstock.

I: You touched on something that I have come across and that’s the new fuel aspect. It seems like getting people to change to a new fuel has been something that seems to be a big challenge

PLANT C: Yeah, no matter what a person tells you, it hard to get someone to change what they’ve always done. You know, people like to think that they are adventurous and they do stuff on the spur of the moment but yet you ask them to change something like the fuel they put in their car everyday, if there’s any question that it’s not exactly the same then people are hesitant. People don’t like change no matter what they tell you.

I: You already touched on this a little bit but what are some of the obstacles you face in the production of biofuels? You said cost was a big deal anything else you can think of.

PLANT C: You always hear these conspiracy theories on the oil companies but lately the oil companies have, I guess, been buying up more land they use for crops. So that’s one of the things that have been an obstacle. Let me think of something else…That is probably the main obstacle is, unacceptance of alternatives. Really, you know, whether it 138

be from oil companies or the general population. They don’t know…it’s the fear of trying something new. That’s probably the biggest obstacle. Some other things that we’ve ran into in the biodiesel specifically, biodiesel production, believe it or not are material incompatibilities. Stuff they have always used for diesel such as rubbers and nitrials and stuff aren’t compatible with biodiesel. So it’s actually been harder to find. And through development of biodiesel production and equipment, they have gotten better about this. For instance, rubber o-rings and stuff, you need to get viton or nylon stuff like that, which is a lot more expensive, for biodiesel production. So, the equipment has been a big one, you know, people don’t know much about biodiesel so it’s nothing you just go and order off the shelf. You kind of either have to buy someone’s technology for it or if you have any back ground, develop your own through trial and error, stuff like that, you know, what information you can get. Which is what I did with my background, my degree in chemical engineering I was familiar with the processor equipment in general and I just kind of immersed myself in the biodiesel industry and tried to figure out all that stuff.

I: As for the future of biofuels, what are some promising technologies being developed to promote development?

PLANT C: One of the, I guess kind of like in fuel cell, technology, hydrogen is their holy grail, to use pure hydrogen. Ours would be algae, something they’ve researched in the 70’s through the Department of Energy’s Alternative Energy’s and Algae would be a great new technology to develop. To get a high lipid producing algae to find out what the best way to produce it, whether it is bioreactors or open run ponds, people are going both ways on that. They’ve had their own opinions why one would work better than the other. So algae I would like to see them, you know, develop the algae market because you can use dry arid land to put in ponds. Or bioreactors for algae without taking up other cropland, valuable cropland, which is one of the worries, one of the concerns that people have about stuff like that. But, so if they can develop the algae for, you know, for making biodiesel. Algae, has, grows real fast, high growth rate, it has a fast growth rate, it’s not just in huge quantities but it’s fairly quick in reproducing. And if think the numbers are between 1000 and 1200 gallon of oil potential per acre of algae and harvest times are smaller for algae. So that would be one of the technologies I’d like to see developed. The other alternative crops such as jintro, which are grown on drier lands, it’s big in India. Tamalina, of course up in Canada they produce a lot of canola which we bring in. So just different alternatives to soy. Soybeans are actually one of the lowest oil producing crops per acre. Palm oils, one of the larger one, I think it’s around 640 gallons per acre. Somewhere around there. But you know, that’s something you have to essentially have to hand pick, so the poorer countries that have that kind of economy can support that. The algae’s one, the other thing, they’re coming out with new micro reactors that you can stack and have high efficiency for reaction. I forget it if its The University of Iowa or one of those out there that there’s a professor that has developed this micro reactor where it goes through just a tube the size of a hair so it can interact on 139 molecular basis a lot better than if it’s just in one big tank stirring and mixing. That’s another, I’d have to look it up to get the exact…

I: It’s definitely something I’ve heard of, the micro reactor thing.

PLANT C: Yeah, and so they want to make them so that its stackable so you can get something the size of a computer monitor and be able to produce at high quantities and high purity. So I’d like to see that technology developed. There are other technologies that have to do with solid catalysts so you’re not using a chemical catalyst for the production. I’ve seen a critical temperature and pressure type of reactors where you are not using catalyst again or you can use less methanol, less excess methanol. So stuff like that just to make the overall process more efficient and economical because, like I said, right now with the price of soy going up and methanol prices just went up again. They just need to develop the technology so that if that tax credit that we currently receive isn’t there in the future that it can still be viable. Right now if you took the tax credit away people would go bankrupt that were producing biodiesel. You just can’t do it. People aren’t going to pay $3.80 a gallon for biodiesel. Which is probably about what it would cost.

I: That kind of gets into my next question; are you aware of any state or government incentives in order to promote the development of biofuels in Ohio? You talked about a tax credit.

PLANT C: Tax credit is a federal excise income tax credit. There’s also small producer tax credit, 10 cents a gallons. So we have tax credits through the federal government at around $1.10 a gallon. If you can put those to use the right way, I mean, the dollar credit is a refundable credit, the 10-cent a gallon isn’t. So, but that Ohio is one of the last one’s to develop anything in biofuels. They have no tax credits, or any other type of credits for alternative fuels.

I: That’s exactly what another guy said that I interviewed the other day…

PLANT C: Yeah, nothing, zip. In fact, now the department of taxation will tell you differently because they want their taxes for the fuel. But on the biodiesel board’s website, if you look, Ohio has no definition for biodiesel as a fuel. In fact, even through the department of taxation, they denoted it as clear diesel, which is, would essentially be putting it in the same category as kerosene. So, they don’t even, its on a form, in fact that’s what I’m filling out now for my, you have a licensed fuel, motor fuel dealer in Ohio [to sell street biodiesel].

I: Yeah, I have definitely heard about that. Those issues too.

PLANT C: And see, by their definitions, they don’t even have a clear definition for biodiesel. But since they are considering it a clear diesel they’ve, lumped it in with that. 140

But the closest it comes to us is any person who refines motor fuel in this state and since it’s a completely different process than just refining it’s an actual reaction. It’s not you’re just, distilling something off, or filtering, which is the way I refine. That’s the closest definition, but they want their tax money so we have to do that. But they are pretty good, I mean, the government entities that I’ve dealt with, the IRS, the EPA, Department of Taxation. They have all been real good and understanding, helpful in getting stuff going.

I: What is Ohio’s potential role for biofuel production?

PLANT C: Ohio has a real large, they do a lot of soybeans. There’s a poster up there on the wall, this recording you’re not going to be able to see it but you can see it there it says, “This Ohio soy biodiesel pump…” this is put out by the soy bean council so it might a little, one way or you know…

I: Right, a little skewed or whatever….

PLANT C: Yeah, but it says “if every Ohio farmer filled up with B20 at one of these [referring to the pump pictured on the poster] it would use 14,286,000 bushels of Ohio soybeans. This would generate $73.6 million of revenue for Ohio soybean farmers. Support your profits by pumping soy biodiesel.” Now that’s, of course, directed specifically at farmers. For supporting something that they are selling. But, Ohio has a lot of soybeans, I think, don’t quote me on this but the last statistic I saw was somewhere around 250 million bushels of soybeans in 2005 I think was the last stat I saw for that. And so they have a lot of potential as a soy producer to, you know…And I think Ohio has a lot of potential in alternative fuels in general. Governor Strickland says that he wants us to be one of the leading in alternative fuels so; but I think he ought to put his money where his mouth is and try implement those incentives to do that. But I have gotten no government grants, no funding, no help from any government entity other than that tax credit which is essentially for anyone that can produce an alternative fuel. So they need to do more to really, they can say all, they can talk they want all they want about it but until they act, you know, that’s all it is, talk. So I think Ohio can be a large potential supplier of alternative fuels if they would just help their farmers out a little more.

I: What do you believe are the major barriers of biofuels and what should be done in order for them to gain widespread support?

PLANT C: One, I think there should be, the Department of Agriculture has helped out a lot with this. I think they need to be funded for more alternative fuel and energy research so that smaller companies like myself that would like to be up on whatever technology we can to make this a more efficient or economic process can get essentially free information through the government that way. That’s one of the big things that would help. So I think they need to lower their, the amount they give in oil research and stuff like that and switch it over to alternative fuels. That would be one barrier that they could take down to help us out. Right now, like through the national biodiesel board. The 141

National Biodiesel Board is funded by us members and then the National Soybean Council and the soybean farmer check off dollars. So essentially the people themselves have implemented any research there are in alternatives for that. So I think the government needs to switch some funding around. Take more from the oil companies and give to us if they are doing so well and their record profits every year. And they don’t need the funding and yet our funding for the tax incentive, for instance, the dollar tax incentive is up in December 2008, which I think was about a…they just extended it in 2006 with was 2 years they extended it. Well the government has been funding oil companies for years and years. They’re not even thinking about taking away their funding but yet they can make record profits and it doesn’t say, “Oh well, I guess we don’t need to fund them anymore.” So I think they need to take that and give to alternatives and fund us for a while and make it a more permanent thing. I mean, if they do extend it it’s only going to be another 2 years. Well that’s such a small amount of time to develop a technology to where it is efficient and self-sustaining. If they would drop it then the whole thing would just hit rock bottom.

I: We talked about this a little bit, you touched on oil companies a little bit. But some critics feel that major oil companies do not want the United States to seek out alternative energy, what is your opinion on this issue?

PLANT C: The oil companies would like to seek alternative energy if they are making money off of it. But I think in general they want to milk this cash cow as long as they can. And anything that might have any, be any threat to that they don’t like. But until it gets larger they are not going to waste too much time holding it down. But at some point I think that they’ll play a larger role in keeping alternative energy’s from being developed. I think it takes a lot more government help and stop listening to the big oil companies and what policies they make to develop the alternative energy. So I think they do hinder it some just because right now we’re just kind a pest but at some point if we’d ever be any type of threat then the big oil company which is well developed with billions and billions of dollars could easily wipe out alternative energy’s. So it takes a lot of passion, I guess, in alternative energies to get the financing and stuff you need and to keep it against all the other odds…keep it going. So I think big oil plays some role in hindering it but right now I don’t think they are pushing too hard. Some companies like Conoco Phillips are actually advertising that they’re helping, they’re developing, starting to help alternative energies. But some of that could be like the cigarette companies financing their own anti-smoking adds. I mean, they know people are going to buy gas so they can say all they want to look good.

I: I guess Conoco and ADM, is that another company?

PLANT C: Yeah, of course ADM has always been a grain company. They develop all kinds of stuff. ADM and Conoco Phillips are pairing up on some kind of a biomass…

I: I just heard about that the other day but I haven’t researched it at all. 142

PLANT C: Cellulosic ethanol, I think is what their focus is and a little bit of biobutanol.

I: Well that’s all the questions I have, do you have anything else to add?

PLANT C: I can’t think of anything. What kind of focus are you doing on the alternatives, on the biofuels?

I: On biofuels I’m basically focusing on the challenges and the barriers of biofuels. So, I’m trying to just name, talk to producers, namely small producers and pick out what each one of them feels the major barriers or challenges they face.

PLANT C: Feedstock, funding as far as government help, grants, tax incentives and acceptance. Those are really, in a nutshell the main barriers that as biodiesel producer I face. To convince people to use something new, to make sure that this company can make money to self-sustaining. And making sure that the feedstock, I can still afford the feedstock and make something on it. And that it’s readily available. So at some point feedstock could be so that it is at such a high demand that it isn’t readily available and that we need to develop the alternatives like the algae.

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Appendix D: Interview with Plant D on October 30th 2007

Interviewer: How did you personally get interested in biofuels?

PLANT D: It was as simple as it can get. I read a general article on a local newspaper about something new and different that really wasn’t so new and different I guess, called biodiesel, back in January of 03. I was in between ventures, project, and looking at different opportunities. And this one went into the mix and I started studying and researching the subject and eventually decided to go forward with the project.

I: It sounds like we heard about biofuels about the same time, or biodiesel about the same time. I think that’s when a lot of public interest started to happen anyway.

PLANT D: Yep, like a lot of people.

I: I think it was around the summer of 03 that I heard about it. But um, how much biofuel does you’re specific plant produce.

PLANT D: Well we have two lines in our single facility here in Northwest Ohio. One is what we call, or refer to as our pilot plant, which we got off the ground producing, starting in July of 05. And that system can produce about a million and a half gallons of B100 annually. The expansion, which we are finishing up adding on to our operation here will add 5 and a half million. So 5 and a half and 1 and a half will be a total of 7 million gallons of B100 annual capacity.

I: What does your facility get its feedstock and what kind do you primarily use?

PLANT D: We are a multi-feedstock capable plant. For a good two years we were exclusively soybean oil. It’s the easiest to work with. It was affordable. And we are now using choice white grease, that is a pork animal fat. And we have on occasion, had the occasion to use palm oil. And I’m trying to think if we have actually ran anything else. We have gotten a lot of samples of different things but that is pretty much what we have run thus far.

I: Is that choice white grease, is that the same as bacon grease or bacon fat.

PLANT D: It is.

I: I have heard a little bit of talk about that.

PLANT D: Essentially the same thing.

I: I guess we kind of already covered this, but does your biofuels plant have any plans to expand and if so how big do you plan to go? 144

PLANT D: Well, we are in the midst of expansion right now.

I: All right.

PLANT D: We are completing our 5 and a half million-gallon expansion here. Yes.

I: And who are your primary customers?

PLANT D: Who by name, or who by…

I: You know, are you a retail outlet…distributors…

PLANT D: Yeah, most everything is through fuel distributors

I: Yeah, kind of like BP…

PLANT D: Yeah, local BP distributors, or Sunoco, or an independent what have you.

I: And what do you believe are your customers motivations for purchasing biofuels?

PLANT D: Well, a number of things. When you specifically ask, what are our direct customers reasons for purchasing it is because they’re being asked for it. Now if you’re asking why are their customers, the end users asking for it, the answers would be varied. It would be in support of the farm economy that we live and work in here. It would be environmental concerns. It would be purchasing domestic versus nondomestic sources of energy. It would a benefit to the engine and on occasion it would be price.

I: So you sell it to the fuel distributors and they, in turn, use it as kind of a fuel blend. Is that right?

PLANT D: Correct.

I: Do a lot of people up there, is it more around the blends of B20 or B5?

PLANT D: It ranges quit a bit. Anywhere from a B2 to a B20. We probably cover 90% of the blends that people use. We have had on occasion, once in a while someone who burns B100.

I: In your opinion, what are some of the advantages of using or production biofuels?

PLANT D: Well, I don’t know what the advantages are of producing them [laughs]; Of course that is what we do but in using them, those reasons I just named. That people have stated for, for seeking a sort of renewable fuel. Support for the farm economy, 145 environmental concerns, domestic versus foreign sources of energy, benefits to the engine and sometimes price. Can you hold on for a second.

I: Oh yeah, absolutely.

PLANT D: Thank you. [Pause to answer another call]

Continuing…

I: We were just talking about the advantages of using or producing biofuels. You said renewable fuel and the benefits to the engine. I don’t know if you wanted to expand on that anymore.

PLANT D: No, those are the main reasons.

I: In your opinion what are some of the drawback of using or producing biofuels?

PLANT D: One of the concerns some folks have is cold weather issues. Another issue is the solvency effect of biodiesel, it cleans an engine and if you have a vehicle or a piece of equipment that has many, many hours or miles with petroleum fuel only the biodiesel tends to clean that out pretty quick. The first time it’s used and sometimes that requires a quick change of the fuel filter and then you’re on your way. But yeah, people have to know that is likely to happen. Those are concerns. Some people want to debate, speaking of like a big picture issue; food versus fuel.

I: I just read an article with that exact name.

PLANT D: Yeah, and we can talk about that if you want but I know that’s something else that may be an issue somewhere with some folks.

I: I know that there is a lot of public perception going on. I have a diesel Mercedes so I run a lot of biodiesel but I have ran into a lot of, when I talk to people about biodiesel a lot of them aren’t really comfortable putting a new product in their vehicle.

PLANT D: And I understand that. We deal with a lot of farm community around here and they’re got stuff that costs them 2 and 300 thousand dollars, a single piece of equipment and gosh darn it they don’t want…One they don’t want something that screws that investment up. If they think they can happen. Two, they don’t want that to occur right in the middle of harvest when they have absolutely no time for that sort of down time. So we understand people easing into this, whether they have a Mercedes or whatever. It’s going to take time.

I: My investment in biodiesel is, you know, a $900 Mercedes. So I can imagine. A lot of people I talk to have 30-40 thousand dollar diesel trucks and they are not really 146 comfortable using biofuels. So, what are some of the obstacles you face in the production of biofuels?

PLANT D: Well right now one of the biggest obstacles is finding feedstock priced competitively that we can use. I think there is not much that equals that challenge right now.

I: And I guess the feedstock in turn drives up the cost of biodiesel, so kind of a cost competitive issue from what I have gathered. As for the future of biofuels what are some promising technologies to promote biodiesel?

PLANT D: You say what are some promising technologies?

I: Yeah.

PLANT D: I think, I would just maybe stick with one mostly because I’m not a technical person and can’t speak to a lot of that. But I would say that going right back to the immediate question we just finished on feedstock issues. The technologies that are trying to convert algae oil into something usable in terms of our operation. That technology is, when it becomes practical and refined, is potentially going to make a big difference.

I: One guy I talked to mentioned algae, he called it the Holy Grail.

PLANT D: That’s a good way…I might know who that was, I heard somebody else say that. But I have heard that before. Yeah, if it can ever live up to what the calculations are it’s going to be a big deal and that, right away, solves that or washes away that food versus fuel debate…

I: Yeah, absolutely.

PLANT D: Gets rid of that. So, we’ll see.

I: Are you aware of any state or government incentives in order promote the development of biofuels in Ohio?

PLANT D: Ohio, I’ll be frank, ranks near the bottom of any state that we touch [geographically]. Indiana does very well, Michigan does well, Pennsylvania does well and Kentucky does okay and even dear old West Virginia probably has more than we do. Ohio has pretty well stunk in the states actual true incentives, there is a lot of lip service a lot of talk, everybody wants to be for renewable fuels. Now that I should say has started to turn with the new administration that started in January, the Strickland administration. However, they’re not there yet. They’re working on it. They have gotten a few things that have improved a little bit. So we have maybe gone from about a two to a three on a scale of 1-10 but right now there are a few things but that’s pretty weak comparatively. 147

I: What is Ohio’s potential role for biodiesel production?

PLANT D: Well I think it could be strong. We have a strong soybean agriculture interest. Crushing plants in the state. And again I’m only speaking about biodiesel, I don’t know about other renewables as well. And we are situated well. A lot of these plants have been stuck out in Iowa and so forth where there are a lot of corn and soybeans, but the demand is not all there by any means. Here in Ohio we’re about half way to Iowa, if that’s the center of feedstock production and we’re halfway then again in the other direction, to the east coast where there’s huge markets. So I think we’re well situated. Good transportation, good petroleum distribution, channels that we can plug in to. So I actually think that Ohio, Indiana…let’s just stick with Ohio and Indiana are really good places for potentially for biodiesel to blossom.

I: What do you believe are the major barriers of biofuels and what should be done for them to gain widespread support? I know we talked about some barriers already.

PLANT D: Yeah we did. Beyond that I think it’s just openness and willingness to try something that to some folks is pretty new. Other than that, things already mentioned.

I: And I have one more question. Some critics feel that major oil companies do not want the United States to seek out alternative energy, what is your opinion on this issue?

PLANT D: I’d say the jury’s out. I think those folks that you mention are driven, not by other sorts of considerations, but mostly by economics. And to the extent that we can show economic viability of renewables and a way that they can, perhaps participate, and some people don’t want that but I don’t know if I would make that determination myself of who should do it and who shouldn’t. But to the extent that they can see the economics of it and where it fits into what they have been doing in some cases, for 100 years. Then they’ll adapt to it, they will fit it into their portfolio, they’ll participate. But some don’t see it and I think they are resistant, others are starting to see it and so they are starting to come around. And others have actually seen it for a while. So I think it all depends on the economic studies, analysis that each of them are doing. And there are different points on that continuum right now.

I: Those are pretty much all the questions I have. Do you have anything else to add?

PLANT D: No, not really. Hope it’s been some assistance.

I: As my research has been going on I know there is a big deal about the byproduct glycerin…

PLANT D: Yeah.

148

I: And I don’t know if…one guy I talked to said that he collects it and then uses it…collects enough of it so it where it would be profitable for another company to pick it up and they make soap out of it or cosmetics or something like that.

PLANT D: In its more refined form it can certainly be used for that. What we produce and what most biodiesel operations produce is more of a crude glycerin and it can be used for heating, for feed, for low tech uses like dust control. So the uses are improving, I mean, the demand side. A lot of volume has come onto the market and continues to be anticipated but the uses are starting to catch up. 149

Appendix E: Interview with Plant E on October 15th 2007

I: I’m sitting here with [Plant E]

PLANT E: Yeah.

I: I’m going to ask him a few questions about the challenges and the barriers of biofuels. How much biofuel does your specific plant produces?

PLANT E: Now first you have to realize that we are no longer in operation…

I: You’re no longer in operation.

PLANT E: So everything is in past tense. But that’s okay, still go on.

I: But you still have experience?

PLANT E: Oh yeah, absolutely. When we closed we were approaching a million gallons a year, that’s annual production. And I repeat, that’s an annual rate.

I: Where did your facility get its feedstock?

PLANT E: We got it from a variety of soft drink bottling plants, beer distributors, and manufacturers of other household products, such as mouthwash and sanitizer.

I: So it was kind of a byproduct of stuff that has already been produced, I guess.

PLANT E: Exactly

I: So you never used any corn for feedstock?

PLANT E: Correct, correct. Although the extent we were recycling and recycling is a critical concept in all of this. To the extent that we were recycling beverages, soft drinks that had corn derivatives in them like, high fructose corn syrup, sweeteners or other kinds of sugar sweeteners that ultimately come from corn. We were tied in to the whole corn agricultural system but only in a derivative way.

I: Does the biofuels plant have any plans to expand; well obviously you’re not because you’re closed down.

PLANT E: We had great plans to expand, it just didn’t happen.

I: It just didn’t happen. 150

I: All right, who were your primary customers for the ethanol?

PLANT E: For the Ethanol?

I: Yes.

PLANT E: We sold it to industrial customers because we saw as a small producer we could sell our product at a much higher price to industrial customers as opposed to people who wanted to buy it for fuel.

I: And what did the industrial customers use it for?

PLANT E: They used it for…I’m trying to think. I know at some of our most recently acquired customers just as things wrapped up for us…One wanted to use it in mouthwash. So we were both getting mouthwash destruction and selling the product into mouthwash. Another was a perfumery. Others…one company took our product and then further distilled it so they could use it as fuel. Those would be a couple of examples. Just as a side, in addition to all the fuel application of ethanol that we hear so much about there is a large, but very mature market for alcohol in a variety of other industries, it’s actually about 2 billion gallons a year. And that’s a market that has been around for a long, long time.

I: Even before Ethanol started to take off…

PLANT E: Well interestingly ethanol was the fuel of choice for John D. Rockefeller and Standard Oil Company…

I: I’ve definitely done some research on that…

PLANT E: And so when it all goes back and so you probably know Henry Ford’s first Model T design was designed to run on Ethanol…

I: Yeah, I think they had an optional carburetor or something like that…

PLANT E: Yeah, then he decided that the future was in gasoline.

I: I heard prohibition, I read something about prohibition, There was a book by a guy by the name of Josh Tickell and he was talking about how prohibition started to hurt the ethanol industry…

PLANT E: Well it couldn’t help; nothing good about prohibition for ethanol. But the point that I’m really building up to is that industrial ethanol is used in all kinds of products. Household products, sprays, etc, anything we have to deliver a cleaning agent 151 or a solution to a specific place. Ethanol is a good carrier for that solution just like it is a good carrier of the essences that are used in perfumes. So there is this great mature market of 2 billion gallons a year industrial ethanol and there is the high growth market that we hear so much about.

I: What were your customer’s motivations? To pretty much, just to put them into their products.

PLANT E: Yeah, yeah, they need just, an additive. A specialty chemical. The ones we were targeting viewed ethanol as a specialty chemical to be used as an additive for their products that they were manufacturing.

I: What were some of the advantages of using or producing biofuels in your opinion?

PLANT E: Well, in our case, we were interesting play in that we benefited in terms of our ability to raise capital and a lot of things we did to get help in develop our business because we were seen as a biofuels company. And yeah, when we really got into the business we really realized that this thing that most people wanted to think of and use as a biofuel, we could actually sell at much better price as a specialty chemical. So that was a business decision that we made along the way. Having said that, we were, I believe early and very accurate in identifying the fact that there was going to be a tremendous about of growth and interest and excitement about biofuels and ethanol particularly. And this goes back to 2001-2002 kind of time frames, when we were just organizing the business plan, seeking our initial capital and just wanting to get involved in this because several years before oil prices soared to these new levels never before seen and its really promoted the importance of an opportunity for a big biofuels industry.

I: In your opinion, what are some of the drawbacks of using or producing biofuels?

PLANT E: Well, they aren’t, in the case of ethanol, ethanol is not as efficient as an auto fuel or an auto fuel additive as gasoline, and so too the extent, autos are running on fuel blends that have ethanol in them, they are not going to get the kind of mileage that pure gasoline gets. With 10% ethanol blends the difference is not that notable. But if you’re getting, if you’re promoting usage of blend like E85, E85 really needs to be considerably less expensive than any10 [blend]…

I: To bring it up to the same level playing field…

PLANT E: Exactly… In terms of the cost per gallon of using these fuels, this is one of the reasons that E85’s demand has not grown as rapidly as some would have expected because the distributors of it have not figured out how to price it correctly.

I: Right. I think I remember reading somewhere that it has something like 66% of the energy of a gallon of gas or somewhere in that area... 152

PLANT E: The numbers I have seen were more like ¾, but we’re not arguing a big difference here.

I: What are some of the obstacles you faced in the production of biofuels?

PLANT E: Well we had to find our initial challenge was getting enough inbound feedstock, since our business model was not based on going out and purchasing quantities of corn, which we would then process and then ferment and distill into ethanol. We had to find customers who would be willing to pay us to handle their waste and you know, offer that service at a price that they found competitive especially when they also factored in the price in which they had to accrue of transporting that material to us. But we were able to do that. We knew what those prices would be, we knew what the value of those services was to those customs. And so since we had a good handle on what the appropriate pricing was, it was really, the first challenge was classic sales and marketing. One of rolling out a new business and establishing a set of customers, some of whom were familiar with the capability we offered because we had exactly one competitor and we competed with them and certain customers in certain locations. But we found many other customers who had not dealt with that company and not, were not aware that such a service like ours was even available. And it took them a little while how good an opportunity this was for them, but typically with a little bit of salesmanship, they got the idea and we were able pretty much always, when we decided we wanted to get new business. We would simply tell our sales and marketing, our sales guy to go out to target some new territory and generally he would come back with a bunch of new orders. And the beauty of it was the nature of this business was, once you got a customer you had them, because they keep having waste. It’s not a one-shot sale kind of transactional relationship. It’s a servicing oriented relationship, they always had a need for removing their waste on an ongoing basis and if you become their vender then you’re going, you’re going to do regular business. And the divide, of course, is tied to how big the operation is. But once you’re in there as their vender. They are going to turn to you.

I: I guess the same could be said about biodiesel and yellow grease.

PLANT E: Well on the yellow grease side yes, if you’re in the business of collecting somebody’s waste grease it is very analogous to that. But the only different being is, I think, people know at this point that the waste grease has some value…

I: It has a little bit of value, yeah.

PLANT E: And people at the restaurants etc., who generate it, expect to be paid. We got paid for taking these products. So these customers, bars, would pay for the transportation of truckloads full of pallets piled high with cases of beer or soda pop or whatever it was. And they would pay us to receive it. It was a great business model. Still is. Now you asked about challenges of that was, the first set of challenges, we found that it took hard 153 work and time but we did well with that. But the challenges that brought our business to our knees that killed us were environmental.

I: As for the future of biofuels, what are some promising technologies being developed to promote development?

PLANT E: Well, right now, we are still in the phase of the industry’s development that I would call the first phase. I would view phase 1 our first stage biofuels as being ethanol from corn. Biodiesel from various vegetable oils and animal fats. There is lots of research now going on for ways to make ethanol from non-sugar commodities. Basically cellulose, forms of cellulose, which can be grasses, wheat’s, paper, a variety of other ways in which sugars are stored that are not the kind of sugar we get from corn or sugar cane. And a tremendous amount of money has been invested in researching and developing those kind of technologies and plants now are beginning to be constructed and the first cellulosic ethanol is expected to start coming into the market sometime next year. Although it’s very uncertain to me how quickly the production of cellulosic ethanol is going to ramp up. There are…just as we had to go out and find a way to get customers to send us the kind of feedstocks that we could use works for them represent waste. Cellulosic ethanol plants face a similar problem. There is a huge industry that is actually in place to get corn from the fields where it is grown to the customers. But for switchgrasses, these other kinds of materials, there just isn’t that kind of infrastructure. So to the extend a cellulosic ethanol plant is located right in the middle of ten’s or hundreds of square miles that can grow these kind grasses. Well they are going to be in pretty good position. Although then there is another question of whether that location is served by a railroad and how they will ship their product out. So there are a lot of logistical questions on both how they will get them to rail in and out.

On the…another second-generation biofuel that is interesting is just really, I’ve only just begun to read about it is called biocrude. And it is a, I believe, it is a type of ethanol, but I’m not even sure they are calling it ethanol is accurate. That will be consistent with, or have the same, or similar characteristics to gasoline such that oil refineries, pipelines and distributors will be much more comfortable handling it. Because you probably know one of the issues with ethanol is because, it collects water…

I: It’s corrosive…

PLANT E: Well the corrosion was an earlier problem I think pretty much mastered that, but it cannot be transported through the same pipelines that move hydrocarbon products around because they use hydraulic pressure to move the oils, which is great because oil and water don’t mix. But oil [water?] and ethanol mix, passionately.

I: I have read something about that ethanol couldn’t be transported through existing pipelines but…

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PLANT E: It cannot…

I: It cannot…

PLANT E: Yeah.

I: But I can’t remember reading, you know, a good explanation of why…

PLANT E: It’s chemical word, just write this word down. Hygroscopic. H-Y-G-R-O scopic. That is just a chemical word that describes the fact that ethanol and water like to mix. All right and just think of that as compared to oil and water that famously don’t mix. So biocrude is being engineered and developed as a, an alternative that can function like ethanol and yet, be adapted into the production, distribution world of the oil business. But I have just begun to read that, if you want to research that further…

I: That’s something I’m definitely going to look up…

PLANT E: Yeah, and it should be easy to find because 2 public companies have made a big announcement about this, and they are ADM and Conoco. And if you just go to Yahoo finance or something like that and look at the news stories from either of those companies, I think they made the announcement in the last two weeks.

I: I’ll check that out. Let’s see; are you aware of any state or government incentives in order to promote the development of biofuels in Ohio?

PLANT E: Oh sure, oh yeah, there are lots of them. For ethanol there are grants…from the agriculture department, from the USDA. The USDA offers the loan guarantees. There are, there is, what is called the small ethanol producer tax credit. So it would apply to actual fuel consumption of ethanol, which is 51 cents a gallon. And you can receive that, and that’s a tax credit, and I’ll come back to that. Underline credit and I’ll come back to the significance of that. That is a volumetric credit, which means that your ability to benefit from this as a producer is tied to the number of gallons that you produce. And it is 51 cents a gallon. And because it is a tax credit it can be, those dollars can be deducted from the taxes, the income taxes that a corporation or a partnership formed to produce ethanol owes to the government. It’s not just a deduction against income, it’s a deduction against the tax dollars owed, which means it is a very powerful incentive. And, I believe if your company produces up to 60 million gallons a year, you are eligible for that credit.

I: You said 60 million?

PLANT E: 60, I believe. Double-check that; it might still be 30 but I’m pretty sure that the energy policy act of 05 took that from 30 up to 60 million gallons a year. 155

I: So did your company benefit from any of the tax incentives?

PLANT E: We did, we still, even as big as that was, we weren’t convinced that it was the best fit for us, even though it’s a very interesting one. But to stay on point. For biodiesel, oh, there is another ethanol one and then I’ll get to biodiesel. All ethanol, the whole ethanol industry benefits from the excise tax credit, which is also 51 cents, it’s actually 54 cents a gallon I believe, you might want to double check that actual number. The excise tax credit is made available to purchasers of ethanol who blend it with gasoline and then sell it or deliver it to gas stations. And the way that works is, that those excise tax credits…say that I set up1000 gallons of ethanol for you for blending, from you for blending as a distributor. I then as the distributor can file for my excise tax credit of 51 cents on each of those gallons and the net effect of that is to reduce my cost of using ethanol and the reason that was established was that traditionally ethanol cost about 50 cents a gallon more than gasoline to purchase at the whole sale level. So this was intended as a way to level the playing field so that people wouldn’t say, “Well I’m not buying ethanol, I have to pay more for it…”

I: Because they don’t want to get less miles per gallon, or whatever…

PLANT E: Right. And in today’s world it’s very interesting because ethanol is trading at about 50 cents a gallon cheaper than wholesale gasoline and that’s before the impact of this excess tax credit. So it’s pretty interesting. I’ve been making the argument, no one else seems to be talking about this, that the reason gasoline, retail gasoline prices have not gone up, and by the way crude oil went over $85 a barrel…

I: Last time I saw it was $84 and that was a couple of days ago…

PLANT E: Well, it’s now 85, which is, we have never seen these prices and retail gasoline prices and not moving, at all. Wholesale gasoline finally started to move, it’s been stuck at 2 bucks and now it’s 2.10. And retail just isn’t going up. And I’m convinced that it leads to one of the reasons, maybe not all of the reasons, but one of the reasons is that there is so much cheap ethanol around that the cost savings that the distributors can achieve by blending ethanol are giving them some cushion not to have to raise their retail price. Because otherwise it’s just inexplicable to me, that the retail price of gasoline would not go up, at least somewhat proportionally to what’s happening to crude.

I: I just started buying gasoline again with my truck.

PLANT E: Yeah, it’s just not going up and it’s almost inexplicable, but it’s happening. So the one thing I know else is that ethanol is really, really cheap right now. So that’s the excise tax credit. 156

And then on the biodiesel, there is also an excise tax credit. It is a dollar a gallon. And it works the same way as the excise tax credit I described on ethanol in that, if I buy biodiesel, if I buy B100 to blend to make B10 or B5, for every gallon of B100 I can make that same kind of filing and get one dollar excise tax credit per gallon that I buy. And realize we talked about excise tax credit, the people who buy gasoline to sell it to retail pay excise taxes on that. And so the excise tax credits they get from purchasing these biofuels, off set what they would owe otherwise. If I owe 1000 dollars of tax, excises taxes for a given purchase or say a given week or a month or whatever and they simply deduct these excise tax credits from what they owe. And that’s how it all adds up as far as the transactions, how the money moves.

I: That’s interesting.

PLANT E: Yeah, it is.

I: Do you know of any websites, I know this is a little of the topic, but and websties of the top of your head where you can check the wholesale price of gasoline?

PLANT E: Yeah, what’s a good website. Actually I just watch CNBC. On CNBC every 3 minutes they update the price of gasoline on one of their ticker tapes. But another good website is always, ethanol RFA, ethanol renewable fuels association, which I think is www.ethanolrfa.org. Yeah if you just google renewable fuels association, I’m pretty sure it’s ethanolRFA.org.

I: What do you believe are the major barriers of biofuels and what should be done in order for them to gain widespread support?

PLANT E: Well, feedstock availability is a double edge sword in that farmers every year make choices about how much of their acreage they want to allocate to corn versus to how much they want to allocate to soybeans and other vegetables from which oil can be made. And to the extent there’re excited about corn prices. They increased their plantings of corn in terms of acreage, and cut back on beans. Well, that has a big impact on the economics of their products. Right now ethanol is in a huge glut because the rapid expansion of new ethanol producing facilities, which continue to come on line really rapidly, now has combined with tremendous availability of corn. And while corn prices, corn prices are finally starting to cycle past when they started to rise expedientially last year around September, around this time last year. Even before but especially when they came out with the final crop report for the production season. It showed what everybody expected, a huge corn harvest last year. It wasn’t quite as big as they expected and that just caused the market for corn to go from the low to mid 2 dollars a bushel to the high 3’s. And it got over 4 early this year until people started to realize that we’re going to have another, particularly when there was fear that we’re going to have a drought. Remember back in the spring when there were drought conditions in much of this part of the country. Now since then the rain caught up and it ended up being another 157 phenomenal corn harvest so corn prices have fallen off down to the low to mid three dollar a bushel, which is historically quite high. But because so many fewer acres of bean were planted, bean prices went through the roof in that same phase and they haven’t even budged. They basically went from 20 cents a pound to 40 cents a pound since I have been watching over the last 15months. Soybean oil is what I’m talking about right now because that is what biodiesel is manufactures actually purchase. And because soybean oil has gone up that has pulled up all the other kinds of vegetable oils that can be used in biodiesel production too. And animal fats, wasted vegetable oil, every possible source, everything has just ratcheted up. Because the petroleum product prices haven’t moved in that same time frame, biodiesel prices can’t go up. So there has been, because of these economics, remember I said ethanol prices despite corn being up or way down. The biofuels producers are, right now, are getting creamed in terms of their margins. This is not what drove us down, ours was more regulatory and I’ll come back to that, I’ll discuss that later, ours was more of a special case. But the small to medium sized ethanol and biodiesel plants can’t make money right now. And what’s happening as a result of that is a number of plants that have come on stream are shutting down until the economic conditions improve. Other projects that are still being, where people still require capital to complete their construction are finding that capital is not available all of a sudden because the people who wanted to invest changed their minds because suddenly everything is upside down. So there are some economic challenges that are very real right now and they there is another category, which I would call regulatory challenges which particularly have to do with the ability of plants to secure the air emission regulatory approval that they need and also the waste water discharge issues. Actually the waste-water purchasing in many cases because the production of, particularly ethanol to a much lesser degree biodiesel, requires a far amount of water. Typically in ethanol’s case 3 gallons of water for every 1 gallon of ethanol produced. Biodiesel is not that water intensive but they still use a fair amount of water and they tend to be located in areas where there is not necessarily a lot of spare water available and then they have to get rid of the waste water that is left over as result of the various processes that they use and waste water regulators can be very tricky and difficult to deal with on stuff like this.

I: That’s one thing I wanted to revisit, the environmental. You said that’s one reason you said your plant shut down was the environmental regulations.

PLANT E: Oh yeah, it was never a lack of business. The reason was that while we had done what we thought was very appropriate, due diligence, when we chose our location in Medina, once we entered operation the local waste water regulators found that they had difficulty processing the effluent that we were discharging even though it was, we thought exactly what we told them we would be discharging. And, that led to rapid deterioration in our relationship and ability to work with them. And after a while they just said, “Listen, guys we can’t do what we were going to do so we’re going to terminate your discharge permit.” And that was the situation that led to our downfall because while we had this great economic and financial business model it never was constructed to 158

include the cost to haul our waste waters to other treatment plants. You know, just about all the other treatment plants we found had no problem handling our effluent. Our problem was that we picked the wrong community and once we were there we couldn’t find a way to move out. So basically we fought valiantly to try to stay alive long enough for something to change and it never happen. Literally ran out of financial fuel.

I: Well my last question here is, some critics feel that major oil companies do not want the United States to seek out alternative energy, what is your opinion on this issue?

PLANT E: I think its much more complex then that. Historically I think that’s a fair statement. The competition between the oil industry and ethanol industry goes back all the way, as we said, 150 years. Um, but I think as the world has changed and our dependence on energy from overseas and you know, countries that we don’t really have a lot of confidence in has grown, the oil companies have realized that they…and also as the oil companies have also come to grips with the fact that global production of oil, if it already hasn’t peaked, probably is close to peaking and that it’s in their interest to find incremental sources of fuel that they can work with. Whether it’s finding ways of using ethanol or ethanol like fuels alternative fuels that we talked about, the biocrude or biodiesel or new fuels that are still being developed. They need to be able to coexist. And then that’s why this joint venture between Archer Daniels Midland [ADM], the biggest ethanol company, and Conoco a major oil company was unheard of. It’s never been seen, we’ve never seen a partnership like that before. So that is a real sign. Another sign, and you can certainly write about this too was when, I think it was 2006, Archer Daniels Midland announced it had hired its new Chief Executive Officer. First of all they hired somebody outside the company, which was unheard of for Archer Daniels Midland and second of all they hired a woman who was a senior executive from Chevron. So a female, an outsider…and a senior executive from an oil company.

I: From another oil company?

PLANT E: Archer Daniels is not an oil company, it is an ethanol, an agricultural company; So this would be like the Browns hiring the coach of the Pittsburg Steelers. Like that…it just doesn’t happen. But it did and now we are starting to see agricultural, slash, ethanol biofuel companies working with oil companies. So a new trend, nascent would be a good word for it, it’s just beginning. So I think the oil companies are seeing, that you know, there has got to be life beyond gasoline as we see it.

I: That’s interesting. That is something I definitely something I want to check out.

PLANT E: Well the good news is on these companies is that they are publicly traded so there is plenty of information available and you can find their press releases or probably, if you want, call their PR folks and they’ll probably give you some information.

I: Well that’s all my questions. 159

Appendix E: Pamphlet from the Ohio Soy Council