Memphis Biofuels opens as major biodiesel force

December 1, 2006 --

With barbecue and Ruby Wilson singing the blues, Memphis Biofuels Thursday opened one of the nation's largest biodiesel plants, right in the heart of Orange Mound.

With a contract in hand to sell more than 35 million gallons of biodiesel, the company is already in line to produce more than half of the biodiesel the nation produced in 2005.

"Within a very short time, biodiesel will be commercially available in the Memphis region," said Memphian Ken Arnold, president, CEO and part owner of Memphis Biofuels. "We've signed a contract with a major travel center based in Tennessee."

While he did not reveal the customer, it is widely believed to be Pilot Travel Centers LLC, which is expected early this month to begin offering a 20 percent biodiesel mix at its pumps across the region.

Since July, Arnold and partner Brandon Sheley have transformed what was Cochran Corp., a protein-feedstock business, into one of the largest biodiesel plants in the nation.

They did it in a 1914-era plant off Lamar and Airways that looks nothing like the wave of future, ramping up essentially since July to a plant large enough to produce 50 million gallons of biodiesel a year.

"I've seen fleet managers take longer to decide if they want to use the fuel," said Brian Hensley, director of energy for the department of Economic and Community Development division.

The plant was once used by Procter & Gamble to purify vegetable oil byproducts. The jump to biodiesel required little conversion.

Something in the gritty juxtaposition of old and new imbues the project with great possibility. The optimism was palpable, not only for the jobs and economic development it provides cash-strapped Orange Mound, but also for hope it offers the state's farmers and energy consumers.

"Last year, Tennesseans burned 1.2 billion gallons of diesel fuel. If we could substitute biodiesel for 2 percent of that, we would keep $42 million here in our state," Hensley said.

Because the key ingredients are corn and soybeans, the renewable energy boom has been a godsend to rural America, where commodity prices now show record-breaking potential.

The strength is almost entirely thanks to demand for the corn and soybeans feeding the appetite for renewable fuel sources, which burn clean, are domestically produced and cut U.S. reliance on foreign oil.

"I've been promoting renewable resources that burn clean and cut our reliance on foreign oil for years," said Andrew Couch, coordinator of Clean Cities of West Tennessee. "People say 'that sounds good, but the question is, where are these fuels going to come from?'

"Memphis Biofuels is answering the question today."

By congressional mandate in the 2005 Energy Bill, the nation will produce 7.5 billion gallons of renewable fuels by 2013.

"If you take into account existing capacity and what is under construction right now, we'll be above that level by 2008," said Bruce Scherr, president and CEO of Memphis-based Informa Economics Inc., which has just released a comprehensive study on the impact of renewable energy sources on North America's refining and gasoline markets.

What the industry has in its favor, Scherr said, are "extraordinary policy initiatives" from both sides of the aisle, coupled with economic need.

"I believe that by 2015, it's highly likely we will be providing enough ethanol in particular to displace roughly 10 percent of gasoline consumption."

But as the price of commodities rise and fuel prices drop, the incentive to produce renewable energy declines.

At prices today, biodiesel is not profitable without subsidies that are paid to the manufacturer and the consumer.

That level of government intervention has its critics, who say that an energy source that shows such promise shouldn't need government help.

"The mandates alone should generate the demand," said Doug Koplow, president of Earth Track in Cambridge, Mass.

He suggests the biofuels industry is growing at what may be an unsustainable pace, largely due to the subsidies that make it profitable.

He also says the enormous need for corn, the major ingredient in ethanol, could have serious ramifications on land and crop conversions.

"It used to be that farmers used a corn-soybean rotation, using the beans to fix nitrogen from the air into the soil. Now you're seeing farmers skipping the soy rotation, which depletes the soil," he said.

Without beans, he said, farmers will need to use higher levels of chemicals to sustain corn production year after year.

The Orange Mound plant is the third biodiesel plant to open in Memphis this year. The city offers easy access to agricultural commodities and transportation, key because biofuels cannot be transported by pipeline.

Although Tennessee does not currently offer a state incentive for biodiesel production, Memphis Biofuels does receive $1 per gallon from federal sources.

The plant also got an eight-year tax freeze from the county and city, saving it $367,251 over the term.

"If the price of oil continues to go down and feedstock goes up, the issue for me is the ability to use less expensive feedstocks in additional to soybean oil," said Arnold, who hopes to increase production to 100 million gallons. "I can use poultry fat and cottonseed oil. We're looking at some other fats and oils, too."

But he admits the company's $5 million investment here is subject to political whim if the price of fuel continues to fall.

"The risk is that we get the plant up and running at the performance yield and cost we have worked out on paper. In addition, you have the risk that American politicians will become fickle."

--Jane Roberts: 529-2512

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Memphis Biofuels

President: Ken Arnold

Address: 2227 Deadrick

Employees: 40

Median pay: $28,600

Copyright 2006, commercialappeal.com - Memphis, TN. All Rights Reserved.

This article is ﾩ 2006- Commercial Appeal, The (Memphis, TN)