Fat into fuel.

THE FUTURE OF BIODIESEL production in the United States took a big leap forward last week with a venture worked out between Tyson Foods Inc. and ConocoPhillips.

That deal eventually could produce some 175 million gallons of biodiesel a year using byproduct fat from poultry, pork and beef, much of which now goes into cosmetics, pet food and soap. That's big since biodiesel makers in the United States produced only between 225 million and 250 million gallons last year.

Biodiesel has caught on in Arkansas with its vast supply of chicken fat and soybeans. And Gov. Mike Beebe is pushing for a greater emphasis on biofuels that could use waste from the forest industry as well as some grasses to help ease America's energy security and climate change concerns.

ConocoPhillips and Tyson are calling their product the next generation of renewable diesel fuel. They will use a thermal depolymerization process to co-process animal fat with hydrocarbon feedstock, making it chemically equivalent to conventional diesel, which will allow it to be transported directly through existing pipelines to distribution terminals. In that sense, they argue, the different processing method creates a chemically different product from most biodiesel.

Traditional petroleum-based diesel fuel will still make up the bulk used to move things, but the new fuel will supplement that supply, creating a steadier stream of fuel. And more fuel could reduce retail prices, which in turn aids the entire economy, which depends so much on transportation.

Tyson said it would make capital improvements this summer to begin pre-processing animal fat from some of its rendering facilities later in the year. ConocoPhillips will begin some $100 million in capital expenditures over the next three to five years to enable it to produce the fuel at several of its refineries. The finished product will meet all federal standards for ultra-low-sulfur diesel.

"This strategic alliance is a big win for the entire agricultural sector because it paves the way for greater participation of fats and oils in renewable fuels," said Richard L. Bond, Tyson president and CEO.

As the nation's largest meat company--Tyson is first in poultry, second in pork and beef--it is, of course, the biggest producer of leftover fat.

"ConocoPhillips believes the key to a secure energy future is the development and efficient use of diverse energy sources," said Jim Mulva, ConocoPhillips chairman and chief executive officer. "This alliance will provide a new and significant contribution to our nation's domestic renewable fuel supply."

Tyson says the deal should help its long-term financial performance. "Production is expected to begin in late calendar year 2007, ramping up through spring 2009," Bond said. "Once at full production, we currently project between $0.04 and $0.16 cents per share in additional annual earnings." That's somewhere between $14 million and $57 million to the bottom line.

This looks to be a win for everyone. It makes sense to use animal fat. And by selling more animal fat, Tyson can boost earnings. ConocoPhillips can sell more diesel fuel and increase profits. More of the fat-based diesel fuel means less ever-increasing-in-price petroleum will have to be imported. And the new product is more environmentally friendly in that its carbon emissions are lower and it contains no sulfur.

Animal fat could give the still small biodiesel industry the needed boost to make biodiesel a reliable fuel source for trucking companies.

Maybe the day isn't far off when automakers will be turning out more cars with the new diesel engines--similar to the situation in Europe, where more than 50 percent of the cars have the engines.

Sure, soybean growers in the state are hoping to benefit from better prices as more soybeans are used for biodiesel. Prices have risen, which is behind the push to use cheaper animal fats. We believe there will be room for all.

We applaud Tyson's efforts to find new uses for animal fat as well as ways to generate energy from poultry litter and other by-products. Making money on it makes it even sweeter.