Biodiesel from chicken fat may be in your future.
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Not a Tiger, but Maybe a Chicken in Your Tank
As Cost of Soybean Oil Rises, Biofuel Entrepreneurs Look to Cheap
Animal Fat
By Christopher Leonard
Associated Press
Wednesday, January 3, 2007; Page D03
DEXTER, Mo. -- Jerry Bagby is typical of the oil men who are prospecting
for a fortune in the Midwestern biofuels boom: He's convinced there's
oil in these hills. And he's found a well that few others are pumping.
Bagby and a longtime friend have cobbled together $5 million to build a
new biodiesel plant on the lonely croplands outside this southeast
Missouri town. They're betting that their company, Global Fuels, can hit
paydirt by exploiting a generally overlooked natural resource that's
abundant in these parts -- chicken fat.
There's a virtual gusher of the stuff at a nearby Tyson Foods
<http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=TSN&nav=el>
poultry plant. The low-quality fat is shipped out of state to be
rendered and used as a cheap ingredient in pet food, soap and other
products.
Bagby and his partner, Harold Williams, plan to refine the gooey
substance, mix it with soybean oil and produce about 3 million gallons
of biodiesel annually.
Today, only a tiny fraction of U.S. biodiesel is made from chicken fat,
but that seems likely to change. The rising cost of soybean oil -- which
accounts for roughly 90 percent of all biodiesel fuel stock -- is
pushing the industry to exploit cheap and plentiful animal fats.
The nation's biggest meat corporations have taken notice. Tyson Foods
announced in November that it had established a renewable-energy
division that will be up and running this year. Perdue Farms and
Smithfield Foods
<http://financial.washingtonpost.com/custom/wpost/html-qcn.asp?dispnav=business&mwpage=qcn&symb=SFD&nav=el>,
Tyson's competitors, are making similar moves.
As meatpackers enter the field, they bring massive amounts of fuel
stock, which could make biodiesel cheaper and more plentiful.
The shift to animal fat as a fuel stock could be key to making the
budding biodiesel industry a reliable fuel source for U.S. trucking
fleets, said Vernon Eidman, a professor of economics at the University
of Minnesota who has studied the biofuels industry extensively.
Eidman estimates that within five years the United States will produce 1
billion gallons of biodiesel and that half of it will be made from
animal fat. By that time, soybean-based biodiesel will account for about
20 percent of the total, he said.
For fuel refiners like Bagby, the allure of animal fat is clear. Soybean
oil costs 33 cents a pound, while chicken fat costs 19 cents. He plans
to include soybean oil in his blend only because it adds necessary
lubrication for engine parts.
"Soybean oil is more expensive than other products, so we just use
enough of it to make the system run clean," Bagby said, gesturing toward
a row of pipes and vats being installed in his new refinery.
For companies such as Tyson, the attraction is simple. The nation's
biggest meat company, Tyson is also the biggest producer of leftover fat
from chicken, cattle and hogs.
Tyson is keeping the specifics of its renewable-fuels division under
tight wraps. But Jeff Webster, the company's vice president, told a
recent investment conference that the potential is clear: Tyson produces
about 2.3 billion pounds of chicken fat annually from its poultry
plants. That's about 300 million gallons that could be converted to fuel.
The market for biodiesel and ethanol started to boom in August 2005,
after passage of the federal Energy Policy Act, experts say. The bill
set a standard requiring the United States to use 7.5 billion gallons of
renewable fuels annually by 2012.
While it's always been cheaper, animal fat was initially overlooked as a
biodiesel fuel stock because of its uneven quality, Eidman said.
When the energy bill passed, soybean oil was already widely sold as a
food additive. Biodiesel refiners could depend on its quality because
the oil was marketed and certified under strict guidelines, Eidman said.
Animal fat also has technical drawbacks. It clouds up more at higher
temperatures than soy-based biodiesel, which means it might thicken when
used in colder areas, Eidman said. That might limit distribution to
areas where temperatures don't often drop below about 40 degrees.
Although these factors have kept animal fat in the background, the
biodiesel industry has hit a turning point.
Increasing demand for soybean oil as a fuel and as a food is driving the
price up, so it's starting to make economic sense to invest in new
technology to process animal fat into usable fuel stock.
Tyson and Perdue are experimenting with biodiesel, and both have started
using it in their trucking fleets.
Perdue, based in Salisbury, Md., is also selling soybean oil as a
biodiesel fuel stock through its grain and oilseed division. The company
said this summer it was studying plans to build biofuel plants or invest
in others.
Smithfield has established its own biofuel division. Smithfield
BioEnergy is studying how to turn hog waste into fuel and has started
producing biodiesel from vegetable oil. The company didn't comment on
the division, but recent financial filings show that the biodiesel
program is still losing money because of start-up costs.
Having a massive new source of fuel stock is a welcome development for
the biodiesel industry, said Amber Thurlo Pearson, a spokeswoman for the
National Biodiesel Board.
"More biodiesel in the marketplace could help make biodiesel's cost even
more competitive with diesel fuel," Pearson said.
The board estimates that U.S. biodiesel production is doubling to
tripling annually, going from 25 million gallons in 2004 to 75 million
gallons in 2005. The final tally for 2006 should be between 150 and 225
million, it said.
Biodiesel costs about $1 a gallon more to produce than conventional
diesel, but federal tax breaks for fuel distributors help keep that cost
from consumers.
Bagby said his plant would be running by the end of the month. His
equipment can refine soybean oil, cottonseed oil and animal fat. That
gives him flexibility to use whatever is cheapest on the commodity
markets. His first batches will be made from soybean oil because it's
easiest to calibrate the equipment.
After that? Soybean oil has a long way to drop before it's as affordable
as chicken fat.
"You can see the difference in cost," he said.
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Regards,
LelandJ
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