Bio-Fuel Oil in Focus ‘ Part 1

Cover Story

Bio-Fuel Oil in Focus ‘ Part 1

New York Governor George Pataki with Sprague Energy President and CEO John McClellan at the grand opening of its Albany, NY Biofuel facility.

FON takes an in-depth look at going clean and green

By Keith Reid

Biofuels are inescapable both in the public domain and throughout the industry. Hardly a week goes by without another announcement of a biodiesel or ethanol facility coming on line; a merger, acquisition or strategic partnership; an increase in production capacity of an existing facility; or some new development in processing technology. There is a groundswell of support for this product among the public, and early adopters among both the fuel oil and retail petroleum segments can cite some notable success stories.

However, not all of the news is supportive. Under the Energy Policy Act of 2005 there is a biofuels mandate ‘ the Renewable Fuels Standard ‘ requiring the use of 7.5 billion gallons of biofuels by 2012. As with any commodity, this dramatic increase in “demand” has rippled into the price of the agricultural feedstocks used to produce ethanol’mainly corn’and the soy used typically in the United States to produce biodiesel. This has sparked an entire “food-to-fuel” debate about the impact U.S. biofuels policy is having on the price of food stocks. While the science behind the actual impact and the actual cause is a bit lacking at this point in time, biofuels are finally on the radar as an 800 pound gorilla instead of an underdog. This makes them a natural target for a variety of players. This is important because currently neither biodiesel nor ethanol can exist without government support, and that support can be impacted by public opinion.

Fortunately, if you were to develop a hierarchy of biofuel products based on their relevance to serving real market needs, at the top of that pyramid you would likely find bio-fuel oil. Similarly, marketers and dealers are likely the least at risk should the national support for biofuels evaporate.

Bio-fuel oil in review
To some extent, biodiesel has been shortchanged in all of the recent activity over biofuels, with the RFS being considered to serve more the ethanol market. While biodiesel is included in the RFS as a biofuel, there is no specific mandate for quantity, and ethanol is anticipated to make up the bulk of the RFS fuel quota. The biodiesel industry is working to change that, and according to the National Biodiesel Board, based in Jefferson City, Mo., the industry goal is to capture five percent of the on-road diesel market by 2015. Biodiesel is typically marketed at B2 (2 percent); B5 (5 percent); B20 (20 percent); B99 (99 percent) and B100 (100 percent).

There are currently 148 companies that have invested millions of dollars into the development of biodiesel manufacturing plants and are actively marketing biodiesel. The annual production capacity from these plants is 1.39 billion gallons per year.

Biodiesel as used for home heating is commonly referred to as Bioheat? fuel, a common trademarked industry term (by NBB) for a blend of home heating oil and biodiesel fuel. It is also simply referred to as biodiesel and in this article it will be called bio-fuel oil to simplify matters. The common mixture, at least for the near future, is likely to be the B5 blend. The heating oil must meet its specification, ASTM D 396, and the biodiesel must meet its ASTM specification, ASTM D 6751, before blending them together.

A variety of organizations have studied, or are studying, bio-fuel oil including: Brookhaven National Laboratory; U.S. Department of Energy’s National Renewable Energy Lab; Massachusetts Oil Heat Council; Abbott & Mills Oil Company; NOCO; New York State Energy Research and Development Authority (NYSERDA); and the National Oilheat Research Alliance (NORA). Current findings include:

Nitrogen Oxide emissions are frequently reduced by about 20 percent (though opposing findings have been noted in the past)
Sulfur Oxide emissions are frequently reduced by about 83 percent
Smoke numbers are lower
The odor of middle distillates is reduced
When gas leakage during transmission, storage, and distribution are considered a bioheat fuel blend has less environmental impact than natural gas.
The biodiesel in bio-fuel oil goes completely into solution with heating oil and once it is blended it does not come out of solution and will not separate

All known oil tanks and systems are compatible with bio-fuel oil at B20 or less
Existing burners should be cleared for at least B5
All known gaskets, seals, hoses and O-rings are compatible with B20
The standard storage and handling procedures used for heating oil should be used for bio-fuel oil. The fuel should be stored in a clean, dry, dark environment. If storage life enhancing additives (stabilizers) are not used, it is recommended to use bio-fuel oil within six months of receipt. “The oil heat market represents a tremendous opportunity for biodiesel,” said Gary Haer, vice president of sales and marketing for the Ralston Iowa-based biodiesel producer, Renewable Energy Group. “This is a market that is facing considerable pressure from other fuels, like natural gas. I think bioheat presents a great opportunity for the oil heat industry to change their image, to become more of a green type fuel, a renewable, domestic type fuel. There are benefits to the industry with using bioheat. The equipment stays cleaner. The furnaces burn cleaner. So there are advantages to the dealers. The customers like the fuel. They like that there’s something different, and better, about it. I think we’re going to see many of the marketers and the retailers in the oil heat area start to differentiate themselves. With bioheat, they can do that. They can differentiate themselves from their competitors and maybe gain new customers, new business, and maybe hold on to their market and not lose it to other types of fuels such as natural gas.”

Perhaps the most significant opportunity with bio-fuel oil is the ability to offer customers a “clean” alternative to natural gas and propane. That aspect features prominently among the strategic initiatives being undertaken by the National Oilheat Research Alliance, based in Alexandria, Va. An important cornerstone of the NORA Fuels Pathways is to develop a biofuel transition to B20. This should appeal to both the green movement and those looking to use a product with at least some domestic content as a counter to foreign oil. It helps that some of the most prominent oilheat areas are also known for having strong environmental sensibilities. “I think that the environmental movement ‘ the pro-green ‘ is an ever expanding area and not a peaking kind of thing,” said John Huber, NORA president. “We’ve looked at 30 to 40 years of the environmental movement and it has never taken a retreat. So we absolutely think it will be part of the American psyche for many generations ahead.”

Biodiesel does have some downsides. It is seen as providing a reduced storage life relative to petroleum fuel, but not by an excessive amount, and that can be treated with additives like conventional fuel oil. The primary negative with biodiesel is its cold flow performance. According to the NBB, a 20 percent blend of biodiesel usually raises the cold weather properties 2? to 10? F (pour point, cloud point, cold filter plugging point). “Everything else, frankly, is better (where cold flow is concerned)” said Elliot Quint, senior vice president at the Waltham, Mass.-based Global Companies LLC. Global is one of the Northeast’s leading distributors of petroleum products. “But only to a point, because that can be surmounted by quality biodiesel, in reduced quantities, mixed with other quality products products. We’re based in New England, and it gets bloody cold up here. We’re very experienced in creating blends that we can guarantee.”

Marketer Ed Burke, chairman of the board of Dennis K. Burke, Chelsea, Mass., splash blends and supplies biodiesel and bio-fuel oil blends in the Northeast. “As a company, I like to sell B5 during the winter,” he said. “But then ‘ after March 17 ‘ we will go to B20. We won’t do B20 from Halloween to St Patrick’s Day. They may be happy with something above B5 below the Mason-Dixon Line, but B5 is very forgiving in the Northern states. You have some room for error, unlike B20.”

Price is also a consideration with bio-fuel oil. Biodiesel receives a blender’s credit that comes in at $1 per gallon of virgin oil with a $.50 credit for recycled oil or grease (biodiesel produced directly from meat manufacturing byproducts would also receive the $1 credit). That credit only applies to the original blender of the B100 (100 percent) product. The credit is essential today because soybean oil has dramatically increased in price during the past year.

“The feedstock represents 70 percent to 80 percent of the cost of the product,” said Jennifer Ligums, vice president of BioSelect Fuels, a biodiesel producer based in Houston, Texas. Bioselect is working in partnership with Chevron. Ligums noted that in 2006 when feedstock costs were low and crude oil costs were high, biodiesel was less expensive and it was being used as a supply extender domestically based on price alone.

According to NBB, a 2 percent blend of biodiesel is estimated to increase the cost of by two or three cents per gallon, including the fuel, transportation, storage and blending costs ‘ though this obviously changes dynamically with each trading day. There are a variety of additional state incentive programs that can help support the marketing of biodiesel. Details can be found at the NBB Web site (www.biodiesel.org).

CASE STUDY

Mass Biofuel makes its presence known with its attractively branded trucks.

Mass Biofuel
Mass Biofuel is a division of Fisher-Churchill Oil Company, based in Dedham, Mass. Fisher-Churchill is a full service home heating oil company that has been in existence since 1854.

‘Back in around 2003, both my son and daughter came to work for me, and my daughter Elizabeth came up with some ideas about how we could make a difference with pollution ‘ making a cleaner, better product,” said Bob Warren, Mass Biofuel president. ‘She did a lot of research, and we came up with biofuel. So we started to market it to our existing customers, and some of them decided they wanted to try it. We began in October of 2004. We had, probably 15 to 30 customers by the end of December. Then we really started to market it outside of our existing customers, and started getting a lot of people.”

Warren noted that his customers had two main reasons for choosing a biofuel solution ‘ split about evenly. Half wanted to make a difference to the environment, and the other half was seriously interested in impacting the importation of foreign oil. These customers ranged from war veterans to environmentalists, along with regular homeowners who just wanted to do their part. ‘So many people wanted to jump on board on this thing,” he said. ‘Over the last couple of years we’ve grown to have about 400 customers. So it definitely increased our customer base.”

This growth did not significantly come from his existing customers ‘ perhaps only 100 total with the rest being new to his business. ‘I think dealers are a little skeptical about turning their whole customer base on to biofuel, but if they look at it a little differently you’re pretty much securing your existing customer base. You may not be adding to it at the moment, but you’re securing it away from somebody else, another competitor, because you offer this product.”

Mass Biofuel uses a soy based biodiesel supplied by several companies. Warren splash blends it himself using careful heating and mixing. While the process is manageable, Warren is waiting for more infrastructure development before he makes a major switchover throughout his entire operation. ‘We will go to all biofuel when the infrastructure, the wholesalers, start carrying it at the terminals,” he said. ‘Whether it’s B5, B10, B20 ‘ it really won’t matter ‘ because we’ll be able to go into the terminal and select. But until we can get the biofuel easily into our trucks with a minimum of effort, we can’t change all of our customers over. I don’t think anyone could, unless they had their own terminal. And that’s the only thing holding us back right now because it does take an extra hour to load bio. Doing two loads a day, you have to splash blend the bio, and it takes time. And in the middle of winter, you don’t always have that luxury.”

Mass Biofuel offers two primary heating oil blends. There is the ’80/20″ Green Blend ‘ 80 percent home heating oil with 20 percent biodiesel; and the ’90/10″ Premium Green Blend ‘ 90 percent ultra low sulfur diesel with 10 percent biodiesel. Customers show perhaps a 10 percent greater interest in the 80/20 option.

So far there have been no customer maintenance issues. ‘The oil is much cleaner, the oil filters are much cleaner and the nozzles are much cleaner,” Warren said. ‘As a matter of fact, we do a survey when we first get a customer. We go out, change the nozzles, filter, strainer, check inside the boiler and make a report. And a year later, when we go back to do a clean-out, we have a special form that my techs fill out. We pay very careful attention to what everything looks like, and the results are phenomenal. A lot of times, some of these systems aren’t even going to have to get cleaned for two or three years because the fuel is just so good. By eliminating sulfur, you eliminate all your sooting problems, and the majority of the problems we have in the boiler are sooting. The people using the ULSD ‘ you open that boiler and there’s nothing there. The industry really has to start going that way.”

CASE STUDY

Steve Chase fuels up musician and biofuels advocate Willie Nelson’s tour bus.

Alliance Energy Services
‘When the Alliance Energy Services was originally formed, it was formed as a co-op, and it was formed with the idea that the company would eventually get into renewable fuels,” said Stephen Chase, president and CEO of Alliance Energy Services based in Holyoke, Mass. ‘Biofuels were really just being talked about, back in ’99. That was really the emphasis of what was going on. So by the time I came on as president in 2002, it was a documented need that we would start looking at alternative fuels.”

The first foray involved selling a B20 biodiesel blend at the pump. The next effort came when Chase participated in a fuel oil dealers’ forum in New Jersey. ‘A lot of us dealers stood around talking about biodiesel,” he said. ‘Brookhaven had already started its testing, and it had a year under its belt and didn’t have any problems using the blends ‘ B20 and all that. We talked about what we thought it was going to be, and it ended up, everybody thought bioheat was going to end up being a B3 or B5 blend. So, I just made a decision that if I was going to do it, I would do it full bore when I started.”

Chase conducted a secret test using B3 for four months, and worked closely with his service technicians to see if there were any issues. ‘I expected to see all kinds of issues with clogged nozzles and filters, and unclean tanks,” he said. ‘But we had no problems. After the first year, the guys started saying that doing the cleanings was easier, that they didn’t seem to be as heavily sooted, and that the filters weren’t as bad. The second year we noticed we hadn’t gone through as many fuel pumps as we normally do. From a scientific standpoint, I don’t know if that’s because the equipment was newer or what, but our use of oil pumps really diminished probably because of the lubricity of the fuel. From that point on, it’s been all good. Then we really started marketing it, putting the advertisement ‘B3 ‘ The Environmentally Clean Fuel’ on our trucks.”

Chase noted that some work was required to build the market. That was not helped by competitors claiming that Alliance was selling ‘salad oil.” TV advertising worked to drive more interest. ‘We’ve solidified our base to where we lose very few customers, because they really believe it’s a better fuel, as do I. We’re making the right steps and as an industry, offering an opportunity for customers to realize there are alternatives, and demonstrating our industry’s commitment to cleaner, renewable fuel and we all win with that.”

One issue Chase noted has been the increase in price in the past year. ‘The tolerance for buying a higher priced product is probably going to be something to pay attention to,” he said. ‘When I started mixing B3, it cost me three quarters of a cent. Now it costs two cents. Can I pass that on? Sure, but there’s going to be a point where to be competitive with the discount houses, you can’t. And that’s on a B3 blend. Imagine what it would be on a B20 blend. Then again, they’re going to give additional tax breaks to the consumer.”

Chase is confident that should the market turn sour biofuels, backing away from the product would be an easy process. ‘If I were to stop advertising bio tomorrow and stop putting it in the fuels, and lowered the price a couple cents a gallon I don’t know that it would make a big difference,” he said. ‘Some people do want a variety of blends but we have a lot of loyal customers. The attraction has been that we’re willing to do something different. And if we don’t mess up, they’ll stay with us. If you mess up, they’ll leave. The mess up could be related to pricing, or service, or the way someone answers the phone. But if it was strictly price, everybody would be dealing with the discounters.

What else should a marketer consider? ‘It is a niche, and once all the other dealers get involved then it will not be a niche anymore, and all we’ll be able to do is say we were first,” Chase said. ‘But our service can keep them around. A few other companies out here are now looking at it. The key is going to be availability. If I didn’t have my terminal would I be selling it ‘ probably not. I probably wouldn’t send out trucks specifically to pick up bio. So those are the key factors. But more and more suppliers are coming along.”

Quality control
The current biodiesel push got off to a rocky start with some notable quality control problems with product sold in Minnesota in 2005. A lot of effort went into identifying and addressing those concerns, but quality should be a primary consideration today when seeking a supplier. This is particularly the case with the explosive growth in new production.

Fuel-grade biodiesel must be produced to strict industry specifications (ASTM D6751) in order to insure proper performance. Biodiesel that meets ASTM D6751 and is legally registered with the Environmental Protection Agency is a legal motor fuel for sale and distribution.

Dennis K. Burke supplies its customer with several seasonal blends of bio-fuel oil.

“The specs, the standards, get better all the time,” Burke said. “There were three revisions to ASDM last year. They didn’t even have oxidation standards until December, and the spec didn’t get out until February or March. Everyone has issues out of the box with a new business.”

NBB also offers the National Biodiesel Accreditation Program as a cooperative and voluntary program for the accreditation of producers and marketers of biodiesel fuel. The BQ-9000 program combines the ASTM 6751standard and a quality systems program that includes storage, sampling, testing, blending, shipping, distribution and fuel management practices. BQ-9000 is open to any biodiesel manufacturer, marketer or distributor of biodiesel and biodiesel blends in the United States and Canada.

“Not all biodiesel is made the same,” said Tim Keaveney, marketing manager at Portsmouth, N.H.-based Sprague Energy, a major fuel supplier serving the East Coast. “From a marketer’s standpoint, you should absolutely be looking for suppliers who are established, who meet, and make an effort to meet, ASTM 6751 quality. They should look for companies who are BQ9000 certified, Sprague being the first petroleum marketer in the country to become a certified BQ9000 marketer. I guess I’m biased to the program, being on the NDP BQ9000 committee. I’m all about quality.” It should be noted that not every reputable biofuel marketer considers BQ900 to be absolutely necessary.

4 Fall Biodiesel Handling and Storage Tips

1) Blending Temperature is Important: To achieve a homogeneous blend, always blend biodiesel with petroleum diesel with both fuels at least 10 °F above their respective cloud points. A blending temperature of at least 70 °F is best.

2) In-line Blending is Best: If you must ‘splash blend” keep in mind that biodiesel is more dense than petroleum diesel. When filling from the top of a tank, add petroleum diesel first and then add the heavier biodiesel on top. If filling from the bottom, add the biodiesel first and then pump petroleum diesel into it.

3) Store B100 above 50 °F: Tank insulation and heating should be used as needed to maintain B100 (or B99.9) at least 10 °F above its cloud point. 50 °F is a good minimum storage temperature, but biodiesel cloud point depends on its feedstock and storage temperature should be adjusted accordingly.

4) Minimize Moisture in Biodiesel: This is good practice for any fuel, but B100/B99.9 holds more moisture than petroleum diesel and conventional tank water detection methods may not indicate the presence of water in biodiesel, so prevention is even more critical. Keeping tanks full and regular sampling of tank bottoms are good practices to minimize and detect water in biodiesel. Nitrogen blanketing or desiccant packs on vacuum relief vents provide the highest level of security against moisture.

Source: Dave Slade, a member of Renewable Energy Group, Inc.’s SoyPOWER technical support team.

Quality concerns extend beyond just the production facility. “At this point in time, the petroleum industry needs to understand a couple of things,” said Haer. “It’s easy for biodiesel to become contaminated in the supply chain ‘ in distribution ‘ because it’s fragmented at this point in time. So I think it’s important that fuel retailers, and the petroleum community in general, understand that not all biodiesel is produced to the proper specifications. They need to be sure that the biodiesel that they purchase meets the specifications of the industry.”

Injection blending at the terminal is often the recommend means of producing biodiesel blends ‘ particularly by larger suppliers well positioned to provide injection blended product. NBB’s Cold Flow Consortium conducted testing that showed biodiesel must be kept at least 10?F above its cloud point to successfully blend with diesel fuels in cold climates. However, splash blending can be quite effective if sufficient care is taken in the process (such as adequate pre- heating of the fuel) and if quality fuels are used ‘ both petroleum and biodiesel. “Kerosene is harder to blend than biodiesel,” said Burke. “You have a five, six degree variation in gravity, but biodiesel lines up very well with the fuel. I’ve successfully blended B20 in the winter. Even if you’re heating it and injecting it, and life is good, if the ambient temperature of the fuel gets to a certain point you still are prone to problems. I put the biodiesel in first at 100 degrees, and then I load my fuel. It’s absolutely a no brainer. But if the ambient temperature of the fuel is under 20 degrees, I won’t blend it. It’s too risky.”

When storing biodiesel, or supplying customers, marketers should be aware that it is an aggressive product in previously used tanks. It will cleanse the tanks of built-up sediment.

“For a retailer or distributor, you need to be very quality focused,” said Haer. “You’re bringing in a product that has tremendous solvency characteristics. It will do a real good job of cleaning up contaminants that might be in your fuel system, or storage and transfer equipment. It’s always a good idea to go back to best practices. You just have to be focused on making sure that you’re doing everything possible to eliminate possible contamination in your fuel system and from the external environment. As a company we try to be a resource for our distributors so they understand what is involved when they’re handling it, such things as keeping moisture and water out of the fuel. We try to advise best practices. Filtration may not be necessary, but it’s always a good idea to have a filter out of your product storage. It just eliminates the possibility of contamination to your customers.”

Temperature concerns for the customer are also less of an issue once the product is blended, particularly with lower concentration blends. “I’m pretty confident that 90 percent of the heating oil is stored inside tanks in the home,” said Keaveney. “So once it reaches the homeowner, there’s virtually no threat of cold weather interfering with the fuel. But it’s often between the time it’s moved out of the terminal to the point of getting it into the home that you run that risk. Carrying high blends in a peddle truck from Point A to Point B, or leaving higher blends outside in the elements, that’s where there’s a potential for problems. The different characteristics between a B5 and traditional heating oil are somewhere in the neighborhood of two to three degrees Fahrenheit, virtually nothing, so B5 does not pose those concerns.”