HERO BX Newsroom
Noble: Subsidy needed for biodiesel industry
By MICHAEL NOBLE
Contributing writer
President Abraham Lincoln wanted to tie the nation together with a railroad of the same gauge, stretching from coast to coast. So he subsidized the railroads by giving them federal land upon which to lay their tracks and build towns.
This subsidy helped everyone -- the railroads, of course, but also the farmers who could get their produce to market and the families who could conveniently travel great distances to visit loved ones.
In our time, President Barack Obama wanted to save the Detroit auto industry to keep this important manufacturing asset in the United States. So he arranged for the American people, through their government, to buy General Motors.
As a people, we make value judgments all the time. We subsidize desirable social objectives and we tax some undesirable social objectives.
For example, we know from experience that children must be educated in order to become productive citizens. So school districts are empowered to tax everyone who owns land in order to raise the money to educate our children, whether or not the landowners have children in the school system.
Conversely, the state heavily taxes alcohol and tobacco because their use is often harmful.
And so it is with America's energy. We have come to realize that we are very dependent on foreign countries for oil and that most of them don't like us. Saudi Arabia and Venezuela come to mind.
There is also a consensus that the carbon emissions in the atmosphere are causing the warming of our planet with unknown, but probably negative, results.
Nationwide, we are trying to diversify our sources of energy, wind, solar and biodiesel. But these new industries face daunting challenges that do not affect mature industries. In the case of the biodiesel industry, biodiesel is much preferred as a fuel over petrodiesel. The reasons are that it can be made from a variety of fatty acids that come from plants and animals, thus they can be grown again and again each season. They are renewable.
Moreover, they don't contain as much carbon, so there are fewer harmful particles emitted into the air we breathe. Thus there is a public policy favoring supplementing petrodiesel with biodiesel so we can use less foreign carbon-based fuel.
About 92 percent of the cost of biodiesel is the cost of the feedstock, the raw material out of which it is made. In recent years, the feedstock prices have varied dramatically. For example, soy bean oil was $5.65 per gallon in 2008. Today, the price is $3.04 per
gallon.
At the other end of the process, the biodiesel has to be price competitive with petrodiesel, otherwise truckers and home heaters won't buy it. The market price of petrodiesel was $5 per gallon in June 2008. Today it is $2.86 per gallon.
Because of this wide fluctuation in the prices of the feedstock and petrodiesel, very few businessmen would invest in such an unstable market. Nevertheless, as citizens, we want them to do so. For example, in 2009, Pennsylvania passed a law requiring that 2 percent of
all vehicle fuel sold in Pennsylvania by May 1, 2010, must contain biodiesel. But where are we going to get the 25 to 40 million gallons of biodiesel to meet this mandate, if no one will make it because of the volatile pricing of the raw materials and end product?
We all have to work together to achieve energy independence. The investor has to put in the capital to buy the land, buildings, machinery and equipment, raw materials and railroad cars to manufacture the biodiesel and get it to market.
The employees have to contribute their skill and effort to transform the feedstock into usable fuel. The government has to help by "smoothing out" the market fluctuations until the industry stabilizes and no longer faces such chilling uncertainties.
Congress recognized its role in helping the biodiesel industry in 2004 when it subsidized the cost of a gallon of biodiesel with a $1 per gallon credit that is passed on to the customer in the form of a lower price. That subsidy enabled investors to estimate that they might make a profit by supplying a renewable fuel.
So they built 173 plants around the United States. That subsidy expired at the end of 2009. About half of the plants closed and 29,000 jobs were lost. This year, another 23,000 may be lost because of the economic downturn, the uncertainties of demand for biodiesel and the lack of a subsidy from the federal government, according to economic analyst John M. Urbanchuk.
So what should Hero BX do? It has a modern plant, fully paid for by Pat Black; customers who want to buy its product, provided they can pay prices comparable to petrodiesel and trained expert employees who are willing to work.
All it needs now is a renewal of the subsidy to help stabilize the biodiesel market. And that is what it is asking Congress to do.
MICHAEL NOBLE is president of Hero BX, formerly Lake Erie Biofuels on the former International Paper Co. site off East Lake Road.
Editor's note: The U.S. Senate on March 10 passed the Tax Extenders Act, which includes a tax credit to incentivize the use of biodiesel and renewable energy. U.S. Sen. Arlen Specter, R-Pa., is also co-sponsor of a Senate bill that would extend the tax credit through 2014.
Erie-based Hero BX sees tax credit as short-term fix
Erie plant, industry wait for mandates, solid customer base
By JIM MARTIN - ERIE TIMES-NEWS
The president of Erie-based Hero BX is hoping a $1-a-gallon tax credit is restored soon for the sake of the company and its employees.
But he doesn't need to see it restored forever.
The tax credit, which expired Dec. 31, figures to be a key to helping the industry stand on its own until customers are established and mandates kick in that build demand, said Mike Noble, president of Hero BX.
The company, formerly known as Lake Erie Biofuels, is Pennsylvania's largest biofuel producer and one of the largest plants in the country with a production capacity of 45 million gallons a year.
But the plant hasn't been producing at full capacity for much of this year, operating for just 20 of the first 71 days of 2010.
Simple math explains the slowdown.
"It costs us about $3 to produce a gallon of biofuel and (without the subsidy) we are selling it for $2," said Chris Peterson, company vice president.
Critics have repeatedly questioned the use of a business model that relies on a subsidy for its survival.
Both Peterson and Noble insist, however, that economics isn't the driving rationale for using more biodiesel. The real advantages are dramatically reduced pollution and less demand for foreign oil, Peterson said.
Instead of petroleum, Hero BX makes diesel from a blend of animal fats, fish oil and used restaurant grease.
"You hear a lot of environmentalists, interested parties and others state this country is addicted to foreign oil," Peterson said. "If we want to get off foreign oil, we need to do something about it."
Hero BX and the industry as a whole view that something as a continuation of the $1 blender's tax credit, which the Senate voted March 10 to extend through 2014.
But the Senate can't do this alone.
It's going to need the approval of the House of Representatives and President Barack Obama. And that could take time.
Noble said the quickest route to extending the tax credit would be a conference committee.
"Here is the problem," he said. "Right now the House is talking about nothing but health care."
By the time health care is likely to be resolved, the Congressional calendar seems likely to get in the way.
"If it (the tax credit) doesn't pass by the 29th, they are gone for two weeks vacation," Noble said. "That puts us well into April, by which time we could be in deep trouble."
In the short term, that's likely to mean more idle days at Hero BX.
"We are trying to juggle our money," Noble said. "But we can't run at full rate because we don't have enough cash flow."
That won't be the case forever, he said.
A statewide mandate that requires 2 percent biodiesel to be included for all on-road diesel is expected to cement the demand for about 23 million gallons a year beginning in May.
New federal Renewable Fuel Standards will also help, Peterson said, by requiring that 1.15 billion gallons of biodiesel be used nationwide this year.
Those mandates and the $1 tax credit are similar to the measures that helped ethanol take hold as a renewable additive to gasoline, Noble said.
In another five years, he said, the biodiesel industry should be able to walk without the crutch of a tax credit.
"We just need an opportunity to establish ourselves," he said.
The president of Erie-based Hero BX is hoping a $1-a-gallon tax credit is restored soon for the sake of the company and its employees. But he doesn't need to see it restored forever.
Lake Erie Biofuels To Announce New Name, New Technology Pathway
Lake Erie Biofuels, LLC Announces New Name & Technology Pathway to Advanced Biofuels
"The American people are ready to be part of a mission. On this Earth Day, it is time for us to lay a new foundation for economic growth by beginning a new era of energy exploration in America."
President Obama discussing the need for a green revolution on April 23, 2009.
ERIE, PA – Leonard Kosar, CEO of Lake Erie Biofuels LLC, will hold a media conference call Tuesday, September 8, at 10:00 a.m. ET to discuss the launch of a new company name which encompasses their key position as a leader in the renewable energy revolution. Kosar will also discuss the company’s financial stability and profitability despite the overall financial instability of the biodiesel industry. In addition, the Company will announce its new technology pathway from its current production of first generation biodiesel using 15 feedstocks, to second generation bidiesel to third generation biodiesel and synthetic fuels.
WHO: Leonard Kosar, CEO, Lake Erie Biofuels
WHAT: Media Conference Call to announce new name
WHEN: Tuesday, September 8, at 10:00 a.m. ET/9:00 a.m. CT
About Lake Erie Biofuels, LLC
Lake Erie Biofuels, LLC (www.lakeeriebiofuels.com) started operations in 2007 and is Pennsylvania’s first large-scale biodiesel production facility. A fully accredited BQ-9000 producer and marketer of biodiesel, Lake Erie Biofuels, LLC is the leading producer of biodiesel in the Northeastern United States. Its on-site laboratory for ASTM D6751 testing, guarantees its biodiesel surpasses all accepted industry standards for performance and quality.
Lake Erie Biofuels LLC, will hold a media conference call Tuesday, September 8, at 10:00 a.m. ET to discuss the launch of a new company name.
HERO BX Sponsors Sundance Award Winning Film "FUEL"
HERO BX SPONSORS SUNDANCE AWARD WINNING FILM “FUEL”
Nearly 500 people fill the seats for the Erie premiere
September 16, 2009 (Erie, PA) –Nearly 500 people filled the seats last night at the historic Warner Theater, to watch a little history – the Erie premiere of the Sundance award winning film “FUEL”. The event was made possible by the support of Samuel, P. “Pat” Black, III, the founder of local biodiesel company HERO BX. Black is also an executive producer of the film.
“I'm passionate about this film because it is a dynamic portrayal of what will happen to America, and the world, if we don't move to alternative energy, such as biodiesel,” said Black. “That's why I founded HERO BX. We are committed to helping lead the way to alternative fuels, but without the support of each and every American, we can't move our country to energy independence or environmentally sustainable energy sources.”
Energy Exec talks to Lake Erie Biofuels’about its new biodiesel facility
Energy Exec talks to Lake Erie Biofuels’ management team to find out more about its new biodiesel facility.
Written by Ian Armitage
Supplier of alternative fuel additive Methyl Ester (or biodiesel as it is more commonly known), Lake Erie Biofuels, LLC is one of the leading participants in the fast-growing US biodiesel industry. Its state-of-the-art biodiesel plant, which became fully operational in fall 2007, has the ability to annually produce 45 million gallons of biodiesel.
Located on the former Hammermill Paper plant in Erie, Pennsylvania, a town emerging as the center for biofuels and environmental research, the company supplies “the highest-quality biodiesel in the industry,” according to Mark Heckman, part of Lake Erie Biofuels’ experienced three-man management team, which includes Mike Noble and Chris Peterson. Continuing, Heckman says the plant “exists to aid Pennsylvania shed its dependence on foreign oil.”
State-of-the-art production
Lake Erie Biofuels, an Erie Management Group company (a holding company that invests and manages companies with innovative products and prospects for growth), is Pennsylvania’s first large-scale biodiesel production facility. The multi-feedstock, 45-MMGY biodiesel plant, which cost an estimated $54 million, employs around 40 people and could strengthen national energy security and help grow the regional economy.
Mike Noble, the plant’s manager, helped to build the facility, which is co-incidentally the fourth biodiesel plant he has played a significant role in building. Believing it is amongst the most successful he has ever worked on, Noble tells Exec more about the facility’s benefits and how it is different to other plants: “Well first off it is strategically situated on the shores of Lake Erie. That means we are easily accessible to the Northeast’s high-consumption diesel and heating oil markets. We also have in-plant railcar and tanker truck load-out capabilities,” he says, excited by the prospects of the plant that operates continuously, producing more than 136,000 gallons of Biodiesel per day.
So, it has the transport infrastructure in place. But what else makes it appealing? According to Chris Peterson, as the leading producer of biodiesel in Northeasten United States, Lake Erie Biofuels “can be trusted for excellent, competitively priced biodiesel product.”
He continues: “Our Desmet Ballestra designed continuous-flow technology is the front runner in industry processing methods. The technology, capable of both transesterification and acid esterification, means the product produced is of the highest standard.”
Quality biodiesel, adds Chris, begins with quality process-technology design and this is why Lake Erie Biofuels “maintains the best technology and on-site laboratory facilities in the entire industry.” Indeed, its on-site laboratory facilities for ASTM D6751 and EN 14214 testing “guarantees,” he says, “the biodiesel produced will surpass industry standards.”
There are other benefits too; the Desmet Ballestra continuous-flow technology allows superior feedstock flexibility and helps ensure the facility runs at full capacity, while maintaining high standards of quality. “Quality is our number one priority,” adds Heckman, when talking about the facility which has adopted BQ-9000 standards and is working to become a fully accredited BQ-9000 producer.
Benefits of biodiesel
Biodiesel meets rigorous EPA Clean Air Act standards and because it is derived from renewable resources it is considered to be an environmentally-conscious fuel choice. “Biodiesel significantly reduces the harmful emissions associated with global warming,” explains Mr. Peterson, when talking about the fuel which also enhances the lubricity of conventional diesel fuel.
It is also a versatile and reliable fuel, which operates like petroleum diesel, meaning there is no need for engine modifications. Most importantly, its high cetane rating results in efficient ignition.
Increased production?
The US will produce record amounts of biodiesel in the coming years, so naturally everybody at the company is excited by the future in what is an “industry still in its infancy,” according to Heckman. He has a point; nationwide, biodiesel production amounted to just 25 million gallons as recently as 2004 (according to figures from the National Biodiesel Board).
Production climbed to 250 million gallons in 2006, and it is expected to dramatically increase in the next few years.
“It’s an industry that is growing so rapidly,” comments Noble, who believes that because of this a strong focus on quality must be maintained. Mike wants Lake Erie Biofuels to separate itself from “the smaller plants that are trying to get into the industry who are not up to scratch.” He adds: “these are damaging the reputation of the industry by producing poor quality product.” Despite this the management team is sure the market will “filter out eventually”.
Another challenge, plaguing most producers is rising feedstock prices, which have doubled in the last year. This has created what Plant Controller Peterson calls “severe margin compression.”
Peterson continues: “I guess our approach to that is to focus on quality and demand fair compensation for the quality of the product we are producing.” He suggests solid risk management will play a very important role in overcoming this challenge, while the pursuit of long term relationships with reputable suppliers of alternative feedstocks will also be essential.
Education is another problem. Mark believes “there is a large void” between what biodiesel can do and what the general public knows about it. “I think education is critical to the development of the industry,” he adds. “The National Biodiesel Board is taking the lead in promoting the product and educating the public as to what the benefit to biodiesel actually is.”
He adds: “To give you an example, there are federal and state mandates that try to reduce emissions through utilising ultra low sulphur diesel and our petroleum product is by definition a low sulphur product; so it is an alternative to that low sulphur diesel that is currently being pushed. If we can get the message out that we have a renewable alternative to low sulphur diesel we can help lower pollution.”
In the short term, the biodiesel facility is a 45 million gallon capacity producer and “we have to be able to sell that much biodiesel,” continues Mike. “Our first and foremost goal is to be able to sell, profitably, 45 million gallons worth of biodiesel per year. Past that we are looking at some strategic growth initiatives. I don’t know if we can go into those right now. But we are looking at capacity increases as well as vertical integration.”
History Made: Completion of First Biodiesel Trans-Continental Jet Flight
10/11/2008 - Leading the way in the biodiesel industry, Lake Erie Biofuels, LLC has made history with co-sponsoring the first ever biodiesel trans-continental jet flight “Green Flight International.” “With Lake Erie Biofuels supporting this project, I had full confidence in the aircraft's ability to perform at peak capability”, said Green Flight’s Chief Pilot Carol Sugars.
Lake Erie Biofuels, an Erie Management Group company, and world-class biodiesel production facility located in Northwest Pennsylvania, announced today the completion of the world’s first jet flight powered by biodiesel. “This transcontinental flight was distinctive in that 1,776 miles of the 2,486 total miles flown were powered on 100% biodiesel,” said Douglas Rodante, Green Flight International President and CEO. Only 710 miles of the flight were powered by a mixture of 50% biodiesel and 50% standard jet fuel. The 50/50 fuel mix was used to compare performance data and demonstrate the capability of blending biodiesel with existing jet fuel supplies.
Green Flight International (www.greenflightinternational.com) was founded in 2006 to promote wider adoption of environmentally-friendly fuels in commercial aviation through international television media and print outlets. Michael L. Noble, President of Lake Erie Biofuels states, “Our accomplishment with Green Flight International marks a vital breakthrough for the mass transportation industry and sets the stage for future growth. We congratulate Green Flight International, and are proud of our role in providing the aviation industry with environmentally friendly, clean, petroleum substitutes. This is something we can all take pride in.”
Lake Erie Biofuels, a BQ9000 accredited producer and marketer, was selected by Green Flight International to supply the biodiesel for the record-breaking flight because of its national recognition and superior quality standards. Lake Erie Biofuels incorporates a unique, internally designed filtration system and Desmet Ballestra continuous-flow technology — the vanguard in industry processing methods. A state of-the-art on-site laboratory, promises clean, pure and consistent fuel certifying every drop of biodiesel created.
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