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Officials optimistic for biofuels despite low fuel prices

Mississippi took an early lead in developing biofuels to meet America’s need for alternative energy and break the dependence on costly foreign oil. The drop in oil and gasoline prices these past few months is having an adverse effect on the biofuels industry. However, Mississippians working in this industry are optimistic about its future.

“I believe lower fuel costs are a temporary situation due to the significant slow down in the economy, which in turn has lowered the demand for all energy sources,” says Sumesh Arora, director of the Strategic Biomass Initiative for the Mississippi Technology Alliance. “There is not much reason to celebrate the drop in prices due to a downturn in the economy. As our production and output levels start to rise, the demand for oil, natural gas and electricity will also pick up and some experts believe that gasoline could go back up to $4 a gallon in a year or two.”

Brad Adams, plant manager for Scott Petroleum’s Greenville operation, says consumers have quickly forgotten why biofuels production was started now that gas costs are down. The company’s biofuel production is temporarily shut down but will start back, perhaps as soon as next month.

“We’ve stopped producing at this time because of the winter months, the economy, the costs of lower gas and the higher cost of feedstock,” Adams said. “We will begin production again, and we still offer it for sale. We feel like the price of gasoline will go back up.”

With locations throughout the Delta, Scott Petroleum’s main consumer of its biodiesel is the farm and agriculture industry. The company also sells it at its seven convenience stores.

Feedstock used by Scott Petroleum to produce biodiesel comes from used animal fat, including poultry, pork and beef. “The price for animal fat has been on a roller coaster ride, too,” Adams said. “It was real high and then went real low so that those producers stopped selling it and are now using it for their own use.”

Hoping to enter this industry, Channel Chemical Corporation in Gulfport began researching and testing biodiesel methods in 2004.

“With that you need the right process, equipment and feedstock – that’s the main ingredient,” said Tim Reid, plant manager and vice president of operations. “We were close to going into production before Hurricane Katrina. After the storm, the main feedstock was soybean oil and that went up as farmers saw the demand go up. At that time we focused on our chemical tolling operation rather than continue with biofuels research.”

He says the whole biofuels industry is searching for other feedstocks, such as palm and cottonseed oil, algae and other innovative feed stocks. Now Channel Chemical is researching other feed stocks and also looking for partners.

“We’re moving along and making good headway. We hope to have a plan in place by the end of 2009,” he said. “The two big numbers to look at are the price of feed stock and the price of diesel. Biofuels production has dropped dramatically in the past several months as fuel costs have decreased. That has idled many plants. They do have federal credits, but taking that into account, many can not make it profitably.”

The thing that sets his company apart, Reid says, is it is not a start-up operation and it has other products. Located on Gulfport’s Bayou Bernard industrial area, Channel Chemical is ideally situated near Interstate 10, the State Port and the Gulf of Mexico.

“I think the biofuels industry will come back and will be good for Mississippi,” he said. “The slowdown has given us time to get things off on the right foot. It would help if the state could give incentives or tax credits as other states do. That subject comes up in our talks with companies we ask to partner with us.”

Arora says the state has two large biodiesel plants with a combined capacity of over 40 million gallons per year and two smaller plants with combined capacity of less than five million gallons per year. There is also one large ethanol plant producing about 60 million gallons per year.

He believes there will be a continuing interest in this industry with more emphasis on the next generation of biofuels producers; primarily the production of cellulosic ethanol as well as natural resources which will play a key role in the nation’s energy future.

“Last year, Forbes magazine rated Mississippi among the top five places in America for generating renewable energy from biomass,” he said. “We have significant forest acres that can be harvested to convert into liquid biofuels or solid fuels such as pellets.”

Additionally, an Arizona company has developed technology to grow and harvest algae that could convert dormant catfish ponds into basins for algae products. Raven Biofuels, which has proprietary cellulosic ethanol and other high-value chemical production technology, has also announced plans to construct a biorefinery in Mississippi.

“While it may be tempting to discard the use and further development of biofuels in the face of low energy prices, I believe that strategy would be very short sighted,” Arora said. “We need to diversify the state’s and nation’s energy supplies. We cannot wait till the energy supplies are depleted even if it is 100 years from now.

“Diversity in energy supplies will help us smooth out the extremes of price swings in energy prices.”

Contact MBJ contributing writer Lynn Lofton at llofton656@aol.com.

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