A R Fuels

Source: Energy Digital

Date :4/11/2008 1:52:17 AM

Exec talks to ARFuels’ Ross Garrity and learns more about how the emerging biodiesel industry is working around the clock to ensure cost-effective alternative fuel becomes a reality

Written by Megan Santosus and Produced by Melissa Abbott

It seems like the quest to cost-effectively produce alternative fuels has been going on for years. If American Renewable Fuels Inc., (ARFuels) has anything to say about it, the conclusion of that quest is on the horizon. By 2009, the Dallas, Texas-based company expects to have a plant in operation that can annually produce 75 million gallons of biodiesel fuel made from animal fat.

ARFuels was founded in 2006 by Australian parent company Australian Renewable Fuels Ltd. The parent company operates two biodiesel plants in Australia, and was looking to expand to the United States “where we could increase our production,” says Ross Garrity, the New Zealand-born president and CEO of ARFuels.

Biodiesel is the name given to alternative fuel that is made from renewable resources including animal fat or tallow, canola oil and even waste vegetable oil. The biodiesel is mixed with petroleum-based diesel fuel to create a biodiesel blend. “Ethanol is to gasoline what biodiesel is to diesel,” says Buddy Mabie, ARFuels’ vice president of marketing. Existing diesel vehicles do not need to be retrofitted in order to run on biodiesel.

The Australian parent company has been in business since 2001. Before launching in the U.S., the company was looking for technology that could meet three criteria: it had to enable the manufacturing process to be zero-waste (everything that goes into the process of creating biodiesel comes out as a product or byproduct); it had to be able to process lower-cost animal fat; and it had to be a fast, continuous process of making biodiesel.

Austrian technology

The company found the technology it was looking for from an Austrian company called Energea. As Garrity explains it, the process of converting feedstock (the fats and vegetable oils) into biodiesel is relatively simple on a small scale. Things get tricky when production is scaled up. The feedstock has to be of certain and consistent quality, and care must be taken to maintain temperatures and remove unwanted byproducts throughout the process.

Energea’s technology enables biodiesel production on a large scale and also facilitates production using low cost animal fat. ARFuels bought the patented technology and will be using it in its U.S. plant.

The $87 million U.S. plant will be located on a 25-acre site in Clovis, N.M., with construction set to begin this summer. After conducting due diligence that involved evaluating several sites in the Southwest, Garrity says the Clovis location was chosen based on the area’s available source of feedstock as well as it’s proximity to railroad facilities and refineries that do the blending. (There are four refineries within 100 miles of Clovis).

Currently, ARFuels has wrapped up the feasibility and preliminary engineering phases of the project and is now working on detailed engineering, permitting and financing. ARFuels has partnered with the Industrial TurnAround Corp., (ITAC) of Chester, Va., to serve as Engineering, Procurement and Construction company for the project.

Incentive

According to Garrity, New Mexico Governor Bill Richardson worked hard to secure the deal by offering incentives. When open in 2009, the plant will be among a few alternative fuel production facilities in the Clovis area, making New Mexico something of an epicenter in the alternative fuel industry.

Garrity expects the plant to employ around 50 people, who will join ARFuels’ current staff of eight. If the plant produces its capacity of 75 million gallons annually, and if today’s biodiesel prices are taken into account, ARFuels has the potential to reach $245 million in sales.

The market for biodiesel fuels is an interesting one. While individual states have various mandates proscribing the use of biodiesel, (for example, a mandate requiring the use of B2 means that diesel must contain two percent biodiesel), there are federal tax credits that haven’t been extended, which have made raising money a challenge. In addition, with each state comes different standards and regulatory requirements.

ARFuels believes it is well-positioned to handle the challenges. In addition to early-mover status, the company’s proprietary technology will give it an edge. “Our plant will be the most technologically-advanced biodiesel plant,” says Mark Lindsey, vice president of engineering.

Biodiesel is manufactured via a chemical process called transesterification; the triglycerides in feedstock are converted to the methyl esters from the fatty acids, creating the biodiesel as well as glycerin and mineral fertilizer as byproducts. Thanks to ARFuels’ technology, the company’s plant will have a fast reaction time of eight seconds—that’s the time it takes to strip the glycerin and bind the esters with ethanol.

That fast reaction time has a very practical benefit.

"We have a continuous manufacturing process rather than batch, which means we’ll have greater output throughout with a small footprint,” Lindsey says. That means ARFuels can continuously supply feedstock and introduce a catalyst to initiate the conversion process; other plants that don’t have the technology to support fast reaction times have to produce biodiesel in more discrete, sequential batches.

In addition, ARFuels expects to get very high yields due to its technology. “We have a 99.8 percent recovery rate compared to 92 percent for other producers,” says Garrity. So for every ton of feedstock, ARFuels can produce nearly a ton of products.

Production is imminent

By the time production is set to begin, Garrity expects to finalize a deal with a national marketer who will supply the feedstock. That partner will then buy the biodiesel back, and ARFuels will realize the net profit. The bulk of ARFuels’ business will be with three different customer segments. The company will supply to the local refineries and regional distributors. The company will also target the states that have mandates requiring their fleet of public vehicles to run on some grade of biodiesel. And the military, which has mandated the use of biodiesel in non-tactical vehicles, is another market ARFuels will pursue.

While construction of the plant is still a few months away, Garrity envisions a bright future for the U.S. biodiesel industry. “The industry has been at a standstill because the price of soybeans is so high that producers can’t make a profit,” he says. “One advantage we’ll have come from using animal fat; we’re not limited by the relatively high cost of vegetable oil”