Biofuels Journal — 2Q_2010
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SeQuential Pacific Biodiesel

SeQuential-Pacific’s 5.5 MMGY Plant Buys and Sells Locally.
SeQuential-Pacific Biodiesel, a 5.5 million-gallon-a-year (MMGY) plant, Salem, OR, has stayed in production despite the expiration of the federal biodiesel tax credit at the end of 2009.

With an estimated 90% of the biodiesel industry shut down because of the federal biodiesel tax incentive expiring, SeQuential-Pacific owes its survivalTo its strategy of sourcing its feedstock locally, selling its biodiesel in nearby markets, and benefiting from the state of Oregon’s and the city of Portland’s biodiesel incentives.

Tyson Keever, general manager of SeQuential-Pacific Biodiesel, said the company sources its yellow grease feedstock through a subsidiary, Encore Oils, and markets its biodiesel through SeQuential Biofuels LLC branded pumps and other retail outlets in Oregon.

It is now the largest distributor of biodiesel in Oregon, Keever said.

Half of its biodiesel is sold in the Portland area.

“A community-scale facility like ours has a number of advantages, most notably the low cost of transportation of the feedstock to the plant and the cost of transporting the finished product to market,” he said. “We can compete with soybean-based biodiesel produced in the Midwest because transportation costs to the Pacific Northwest are so high.” State, City Incentives According to Keever, Oregon and Portland have several economic incentives for biodiesel plants that also have helped SeQuential-Pacific.

• The Business Energy Tax CreditSupplies a tax credit on qualifying investments in renewable energy projects.

• The Small Energy Loan Program provides access to capital, with the state as the lender, at a competitive interest rate.

• Oregon requires that 2% of every gallon of diesel must be blended with biodiesel.

• The City of Portland requires2. 5% of its biodiesel fuel come from qualifying feedstocks, including canola, camelina, and recycled cooking oil, all of which are processed by SeQuential-Pacific.Cheaper Feedstock An advantage of processing yellow grease, used restaurant cooking oil, is that it is cheaper than other feedstocks.

Although its varying quality makes it more difficult to process, technology developed by Pacific Biodiesel Inc., Kahului, HI, which owns about 40% of SeQuential-Pacific, can handle the quality problems, Keever said.

“We can process high free fatty acid material using Pacific Biodiesel’s production technology,” he said.

Another problem is that recycled cooking oil has limited availability.

“Because our plant has a 5.5 MMGY capacity, there is not enough cooking oil available locally, so we have to go to Washington State to get enough oil for production,” Keever said.

More than 95% of SeQuential- Pacific’s feedstock comes from yellow grease and the rest from regionally-grown canola and camelina.

Company History SeQuential Biofuels partnered with Pacific Biodiesel to build the plant, which started operation in August 2005 with a capacity of 1 MMGY. In October 2008, the plant finished an expansion to 5.5 MMGY.

According to Keever, SeQuential-Pacific was the first commercial biodieselPlant in Oregon and the second in the Pacific Northwest.

Biodiesel was selected for production for several reasons, Keever said.

“We felt that it made a lot of sense for energy security reasons, cleaner tailpipe emissions, and local economic development,” he said. “I wanted to feel good about coming to work.” Oregon has a 720-MMGY diesel market, Keever said. “We need to displace less than 1% of that to sell our entire annual production here in Oregon,” he said. “That’s why the plant’s expansion occurred.” SeQuential-Pacific was operating at 85% of its production capacity in March, Keever said, and has been increasing its production steadily.

“Every gallon meets ASTM specifications and the company has submitted an application for BQ 9000 certification with the National Biodiesel Board,” he said.

Ownership SeQuential-Pacific is organized as an LLC with seven partners.

They include Pacific Biodiesel, Inc., SeQuential Biofuels, Ron Tyree, Cameron Healey, John Miller, and singers Willie Nelson and Jack Johnson.

Financing Money was raised from the private equity of the seven partners and from the Oregon Small Energy Loan Program, Keever said.

Cost of the project was $10 millionPacific Biodiesel Pacific Biodiesel, Inc. was established in 1995 in response to environmental and health concerns about used cooking oil being dumped at the Central Maui Landfill.

Robert King was then the owner of King Diesel, a company that maintains the landfill’s generators. To deal with the waste oil, King designed and built a smallscale biodiesel plant at the landfill and used the oil to make biodiesel to run the generators at the landfill.

Kelly King, vice president of Pacific Biodiesel, said the business is profitable, despite the widespread pain that the rest of the biodiesel industry is going through because of the expiration of the federal biodiesel tax credit.

“We’re doing fairly well financially, despite the fact that the biodiesel industry is hurting,” she said. “Because we build small-scale plants that use local feedstocks, we can survive the ups and downs of the commodity markets.”Designer/Operator Pacific Biodiesel designs and operates biodiesel plants, in addition to running its own plants, owning stakes in other

I believe plants that produce biodiesel from local feedstocks and sell biodiesel locally will thrive.” -Plants, and marketing biodiesel.

It designed and manages the SeQuential-Pacific plant and has about a 40% ownership stake in the plant, King said.

It currently has 12 plants operating around the world and plants are being built on the big island of Hawaii and in Alaska, she said.

Pacific Biodiesel Technology The SeQuential-Pacific plant was the first one to use water-saving technology developed by Pacific Biodiesel’s subsidiary, Pacific Biodiesel TechnologyWill Smith, engineering manager at Pacific Biodiesel Technology, said the biodiesel processing system doesn’t use any water.

“We use an absorbent material that absorbs contaminants from the biodiesel stream,” Smith said.

Biodiesel plants typically use from one quarter of a gallon of water to one gallon of water for each gallon of biodiesel produced, he said, depending on the purification process used.

The Pacific Biodiesel process also uses evaporators to strip methanol from biodiesel and glycerin, Smith said.

“We can distill the methanol to remove the water and recycle the methanol through the biodiesel process, which saves us about 50% of our chemical operating costs,” he said.

Purity of the glycerin co-product is increased from 30% to 85-90% by pretreating it, before it is put it through the stripping evaporator.

Boosting the purity of the glycerin doubles its price, said Smith, who declined to describe the pre-treatment process, because it is a proprietary trade secret.

The technological innovations add up to save as much as 50-60% in operating costs, he said.

Feedstock Capability Pacific Biodiesel’s plant design allowsMulti-feedstock processing, including oil from sunflowers, safflower, cottonseed, cooking grease, canola, camelina, and soybeans, Keever said.

Palm oil, cottonseed oil, and chicken fat all have been used as feedstocks at SeQuential-Pacific, he said, but on a very limited basis.Builder Builder of the SeQuential-Pacific Biodiesel plant was JVNW, Canby, OR, a large manufacturer of stainless steel tanks and systems.

JVNW is the exclusive builder of processing tanks designed by Pacific Biodiesel.Feedstock Source A subsidiary, Encore Oils, collects yellow grease from more than 900 restaurants in Oregon and Washington.

“We focus on upstream access to our feedstock by having our own collection subsidiary, Encore Oils,” Keever said.

Storage Capacities The plant has 250,000 gallons of feedstock storage and 175,000 gallons of biodiesel storage.

Marketing/Distribution There are 25 branded pump locations that sell SeQuential-Pacific’s biodiesel through a variety of blends with petroleumBased diesel.

“We own one of the locations in Eugene, OR, and the other 24 are run through a variety of partnerships and lease arrangements,” Keever said.

It also sells its glycerin to local markets.

“Similar to our biodiesel, we prefer to sell as locally as we can,” he said.

Expansion “We’re always looking forward, but there are no plans to expand now,” Keever said.

Biodiesel Outlook “I believe plants that produce biodiesel from local feedstocks and sell biodiesel locally will thrive,” Keever said. “With the federal biodiesel tax credit up in the air, that makes it difficult for business planning and investor confidence in the industry.

The state of Oregon has been a leader in developing this local industry and that’s helped keep us going.”