Homegrown fuel: a waste of energy?

REARDAN, Lincoln County — On a blazing day last July at his farm west of Spokane, Fred Fleming placed a machine that looks like a meat grinder the size of a truck engine on a concrete slab and started dumping tiny canola seeds into the top.

The machine kept clogging as it squashed the seeds into oil, and Fleming was reduced to slowly pouring in the seeds.

After three straight days under the searing Eastern Washington sun, he shut down the crusher. After all that, he had managed to produce about 400 gallons of vegetable oil, which eventually was sold to become some of the first homegrown biodiesel ever made in Washington. The biodiesel was a paltry trickle.

"That was one of the dumber things I did," Fleming said, recalling the heat and "wondering if I should really be committed and be in counseling."

Such is the state of Washington's biodiesel industry — more farmyard experiment than full-sized factory.

The fuel — a mix of vegetable oil and methanol used in place of diesel to fuel engines — has been pushed as a way to help both struggling farmers and the environment, with talk of Washington farm fields producing 100 million gallons of clean-burning fuel a year and pumping millions of dollars into the state's faltering farm economy.

Gov. Christine Gregoire recently proposed low-interest loans for biodiesel factories, and a requirement that diesel sold in the state contain at least some biodiesel. State lawmakers from both parties are vowing to promote similar plans when the Legislature convenes next month. And Congress last summer included a tax credit for biodiesel in its energy bill.

At least four companies plan to build biodiesel plants, and a refinery is already operating in South Seattle. But even the enthusiasts say there are daunting obstacles to actually making money. Skeptics point out that recent history has seen plenty of hype around crops like sugar beets that were supposed to be the salvation of Washington farmers but flopped.

"It's like an old carcass out there and everyone's circling to see if it's going to make us sick when we eat it," said Fleming, a fourth-generation farmer.

Making it worth planting

Though getting fuel from plants isn't new, the industry has been mostly confined to the Midwest, where corn is turned into ethanol and soybean oil is made into biodiesel. Biodiesel can be mixed with regular diesel or, in some engines, used alone.

But recent high gas prices and global warming, joined with farmers' hunger for a new lucrative crop, have people in Washington talking seriously about homegrown fuel.

While most of the biodiesel today comes from soybeans, the oil can also come from canola and mustard seeds that grow well in Washington.

Seattle Biodiesel, the state's largest refiner, made about 1 million gallons this year, and has the capacity to produce 5 million gallons as the market grows. But that's a fraction of the 1 billion gallons of diesel fuel sold in the state. And for now, the company imports its soybean oil from the Midwest.

So would-be biodiesel companies are trying to figure out how to pay Washington farmers enough for their crops to make them worth planting, and where to get the millions of dollars to build a factory to turn the crop into biodiesel.

"Everybody will tell you they can sell all the biodiesel they can produce. Nobody wants to take on the risk that's involved in the crushing or the production," said Chad Kruger of Washington State University's Climate Friendly Farming Project.

Projects "don't pan out"

Mike Roecks would like to grow canola again, if he could just make money at it.

The past few years, he has grown tall, leafy canola plants on his farm just south of Spokane. But he stopped this year, when the price of the seeds plummeted.

At most recent count, in 2002, about 20,000 acres of canola and mustard were grown in Washington. But that's only enough to make 1 million or 2 million gallons of biodiesel.

On a recent November day, Roecks, 51, stood in his brightly lit machine shop and listened impassively as David Ostheller, a farmer who serves on the board of Cooperative Agricultural Producers, talked about the co-op's plans to build a biodiesel plant to be fed with local crops.

"There's been projects for a long time that don't pan out," Roecks replied. "So I'll believe 'em when I see 'em."

Even if farmers planted the crops, so far no one has risked the $8 million to $12 million it could cost to build a plant capable of crushing the seeds into oil. The closest large-scale crushers are in central Montana and in southern Alberta, Canada.

"We need the capital for a crusher and a refinery, that's what it boils down to," said Mike Conklin, president of Palouse Biodiesel, an alliance of four Eastern Washington farm cooperatives, including Cooperative Agricultural Producers.

Companies optimistic

Palouse Biodiesel is one of at least four companies in Washington claiming to have plans that will actually make money.

Fleming has already successfully tapped into the eco-friendly agricultural market with a company that makes sustainably grown wheat flour. Now he has formed an alliance with Seattle Biodiesel and another farm cooperative to build a high-capacity crusher. Two groups of Eastern Washington investors are also pursuing plants, one in Columbia County near the Oregon border and another near Othello, Adams County.

All of them are trying to win financial help from the state, and talk of breaking ground next year.

The Palouse Biodiesel venture, which represents about 1,200 farmers, wants to start a complete biodiesel operation, from field to fuel tank, so that the farmers will profit from the finished product, not just the seed. But Conklin said the company doesn't have the capital to build a plant.

"I can guarantee you it's going to get done. Whether it's my company or another company, the momentum in Eastern Washington for this is huge," Conklin said.

Several of the other companies say they can make money, partly by selling the crushed seed pulp as livestock feed.

Building a market

Politicians, farm groups and environmentalists are trying to help make the companies profitable.

Gregoire recently endorsed legislation that would mandate that every gallon of diesel sold in the state contain 2 percent biodiesel.

Gregoire and others say that could translate to 20 million gallons of biodiesel a year — based on the 1 billion gallons of diesel fuel consumed a year in the state — and create an instant demand.

"It allows the farming community and us, as producers, the safety to know there will be a market for the fuel," said John Plaza, president and founder of Seattle Biodiesel.

Others, however, warn a mandate might only benefit huge Midwest biofuel producers, such as Archer Daniels Midland (ADM).

"If we go with a mandate and a big-time program and we don't think of the producer at the farm level or the refinery level, we've done ADM a great favor but we really haven't helped the state's economy," said state Sen. Mark Schoesler, a Republican whose district includes much of the farm country south of Spokane.

To address that, Gregoire has proposed $17.5 million in low-interest loans to help build crushing plants.

But with so many companies rushing to get into the market, some may not survive. To keep all those new crushers fed with local seeds, hundreds of thousands more acres of land would have to be planted with canola.

"We've got massive facilities under consideration for what we don't grow," cautions Kruger, of WSU's Climate Friendly Farming Project.

Snake oil?

Hanging over all this is another specter: the legacies of strawboard and sugar beets.

In the 1990s, boards made from straw were hyped as an environmentally friendly substitute for wooden particle board, and also touted as a boon for Washington farmers. By the end of the decade, factories started churning out the boards.

But quality was uneven. Horses sometimes ate the grassy panels. And the boards often cost more than the wooden ones. The main plant went out of business.

Around the same time, a group of farmers in Moses Lake built a $100 million sugarbeet refinery. But equipment failures left beets rotting on the ground. Farmers lost big. Banks quit loaning on the crop. Four years after opening, the refinery shut down.

"You have seen a lot of snake-oil salesmen come through with the next best thing," acknowledged Conklin, the Palouse Biodiesel president.

Unpleasant reminder

On the outskirts of Creston, a farming town west of Spokane, a metal-sided building at the end of a dirt road stands as a monument to the pitfalls of biodiesel investment.

The Northwest Lincoln County Regional Public Development Authority built it in 2003 with money from the state to house American Premix Technologies, a company that was supposed to hire locals to make animal feed.

The development authority was also going to borrow $980,000 to erect a building next door for Columbia Oilseeds, a related company that was going to crush canola oil for biodiesel.

Instead, the development authority has been fighting with John Graff, a founder of the companies, alleging unpaid bills and broken promises.

Lately, development authority officials have been trying to evict American Premix from their building.

Graff, whose meeting room in the Creston building is furnished with a folding table, a chair, a dry-erase board and a jar of golden biodiesel, says it's the development authority that broke a promise by failing to build a railroad spur to the building.

The issue has gone to court.

Now Graff is the chief operating officer for Technical Holdings, a company of investors who want to build a biodiesel plant near Othello.

Gary Trautman, who runs a Moses Lake-based insurance company, has invested a lot of his own money in the project. He said he knows about Graff's disagreement with the folks in Lincoln County. But this new business shouldn't be judged by the history of one member, he said.

"We really think that some of our competitors have taken this thing, John's problems with the [public development authority], and tried to use it to their competitive advantage," he said.

Another try

And back at his farm outside Spokane, Fleming said his first summertime frustrations with biodiesel haven't extinguished his enthusiasm. He sees huge promise in biodiesel if private enterprise and government work together.

He likes to think of it as something akin to President Franklin Roosevelt's New Deal, when the federal government helped build industries and create jobs during the Great Depression.

So Fleming planted canola again last fall.

But he planted only five acres.

"This is sort of an experiment," he said. "Just to see what we could do."

Warren Cornwall: 206-464-2311 or wcornwall@seattletimes.com

"I can guarantee you it's going to get done ... the momentum in Eastern Washington for this is huge."

Mike Conklin, president, Palouse Biodiesel