Biodiesel fuel plan picks up speed.

Byline: Susan Palmer The Register-Guard

Oregon will become one of about 18 states producing biodiesel fuel, thanks to a joint venture between Eugene entrepreneurs and a Hawaii-based company.

SeQuential Biofuels LLC of Eugene and Pacific Biodiesel of Maui will break ground on a Portland manufacturing plant in August that will convert used cooking oil into biodiesel, a renewable fuel that powers diesel engines with little or no modifications. The plant should be up and running by November, said Tomas Endicott, a SeQuential partner.

Kettle Foods, a snack food manufacturer in Salem, has agreed to sell its used cooking oil - about 30,000 gallons a year at first - to SeQuential-Pacific.

The enterprise has financial backing from several investors, including Eugene fuel distributor Ron Tyree of Tyree Oil, and country music star Willie Nelson, whose company already provides biodiesel to Texas truck stops.

Other investors include Wells Fargo Bank, Kettle Foods founder Cameron Healy and Oregon businessman John Miller.

The state Department of Energy has approved a low-interest loan of $861,000 for the processing plant, and another $400,000 for a biodiesel refueling station. SeQuential-Pacific also will receive an energy tax credit, consisting of 35 percent of the eligible project costs, that can be taken over five years.

The state agency has offered such tax credits since 1978, Energy Department spokeswoman Diana Enright said. SeQuential's project fits the agency's mission to encourage the use of renewable fuels, she said. While there are other people in the state looking to set up production facilities, no one else has yet applied for a similar loan or tax credit relief, Enright said.

"We hear a lot of talk, and recently we've been speaking to someone in Medford about a production facility, but it takes time to come up with the investors," she said.

SeQuential got its start in Eugene in 2002, distributing biodiesel in Oregon in conjunction with Tyree Oil, but the company's goal has always been production, Endicott said. Financial advisers suggested they build the market first, so Sequential began by importing biodiesel made from soybean oil from the Midwest.

In the past year, SeQuential has ramped up its distribution network throughout the state from two to 12 locations.

"When you look at what SeQuential has done in the last year, we've really gotten out there and pushed," Endicott said.

SeQuential-Pacific has purchased a 1-acre parcel on Kelly Point, an industrial section of Portland, and is in the process of applying for building permits.

Endicott declined to say how much it would cost to build the production facility, but quoted an industry rule of thumb: $1 million per million gallons of fuel produced annually. SeQuential-Pacific expects to produce 1 million to 4 million gallons, he said.

This isn't the first time Kettle Foods has dabbled in providing its used cooking oil to biodiesel producers, but it is the most significant relationship, company public relations manager Jim Green said.

"This is the first time there's a real commitment from a company that is really solid and well-financed," he said.

Converting used cooking oil to fuel is a chemical process that involves removing the glycerin from the oil and adding about 10 percent methanol, an alcohol that improves the lubricity of the oil.

Endicott knows the process well because in SeQuential's early days, the partners actually produced the biodiesel themselves.

"We made it on a very small scale for about six months," he said. "It just wasn't a very efficient process, and demand was so great we couldn't keep up with it."

Demand continues to grow as more people look for alternatives to fossil fuels, he said. Last year, about 30 million gallons of biodiesel were sold in the United States, and this year some experts predict sales of 60 million gallons. That's still just a drop compared with the 55 billion to 60 billion gallons of regular petroleum diesel sold annually, he said.

Endicott estimates that consumption in Oregon was about 1 million gallons last year, while Washington users consumed 2 million gallons.

Nationwide, there are 35 active production plants with another 25 in some phase of construction, according to the National Biodiesel Board, an industry organization. It's the fastest-growing alternative fuel, because it's so easy to use, National Biodiesel Board spokeswoman Jenna Higgins said.

Biodiesel can be used in pure form called B100 or blended with petroleum diesel. The most common mix - B20 - uses 20 percent biodiesel. Engines burning it release 67 percent fewer pollutants into the air with an 80 percent reduction in carbon dioxide emissions.

The city of Eugene uses the fuel in its fleet as does Rexius/Grant's Landscape Service.

While the manufacturing plant represents a solid step in the realm of state infrastructure for biodiesel, it's unlikely that Oregon farmers will jump on the bandwagon right away.

It would take about 40,000 acres of a crop such as canola or mustard seed to grow enough seed to supply a 4 million-gallon plant, said Brent Searle, a special assistant to the director of the Department of Agriculture. Last year, Eastern Oregon farmers grew about 3,200 acres of canola, he said.

The Willamette Valley is home to farmers who specialize in growing seed for vegetables such as radishes and cabbage, which are similar to canola. They worry about cross-pollination contaminating their seeds, Searle said.

But there is no processing facility to convert the seeds to oil in Oregon.

A group of farmers has discussed building such a plant, he said, but no concrete plans for one yet exist.

"It all boils down to economics. What are the alternatives for growers? Are they able to pay growers here enough so it's something they can make money on?"