biodiesel and other chemicals from vegetable oils and animal fats

BIODIESEL AND OTHER CHEMICALS FROMVEGETABLE OILS AND ANIMAL FATS

March 5, 2004

Prepared for:Agriculture and Agri-Food Canada

Agriculture and Agri-Food CanadaBiodiesel and Other Chemicals from Vegetable Oils and Animal Fats—March 5, 2004

TABLE OF CONTENTS

ACKNOWLEDGEMENTS

EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i

1.0 Petroleum diesel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Fuel prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.0 Biodiesel feedstocks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.1 Potential sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.2 Current markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.3 Size of surplus feedstocks (US) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42.4 Near term biodiesel supply potential (US) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52.5 Biodiesel feedstock costs (US) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72.6 Potential biodiesel feedstock supply in Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . 82.7 Industrial mustard: a new biodiesel feedstock . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

3.0 The biodiesel production process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.1 Transesterification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143.2 Estimated capital and operating costs for a processing plant (in $US) . . . . . . . . 163.3 Community-based biodiesel production cost model (in $US) . . . . . . . . . . . . . . . 183.4 Biodiesel companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

4.0 Biodiesel markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284.1 Fuel issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284.2 Storage issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304.3 Environmental benefits/costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314.4 Key markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

5.0 Other fuel additives, alternative fuels, and technologies . . . . . . . . . . . . . . . . . . . . . . . . . 575.1 Competing fuel additives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575.2 Potentially complementary “biofuel packages” . . . . . . . . . . . . . . . . . . . . . . . . . . 575.3 Competing alternative fuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615.4 Competing technologies and systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67

6.0 Biorefining of oils, fats, and proteins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 756.1 Methyl esters used as a platform chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 756.2 New products from glycerol . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 806.3 Higher-value products from vegetable meal . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82


7.0 Summary and conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

8.0 Recommendations for public policy changes in Canada . . . . . . . . . . . . . . . . . . . . . . . . . 878.1 Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 878.2 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 878.3 R&D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 888.4 Fiscal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 898.5 Standards development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89

APPENDIX A CANOLA FEEDSTOCKS

APPENDIX B SOYBEAN STATISTICS

APPENDIX C ASTM BIODIESEL TEST METHODS AND STANDARDS


ACKNOWLEDGEMENTS

This report was developed with the help of the following biodiesel experts who formed a Delphidiscussion group and contributed valuable advice and direction for this part of the project.However, any errors of omission or commission are strictly the responsibility of the consultingteam. Our thanks to the Delphi members who gave generously of their time.

Delphi Group Members:

< Claude Bourgault, Rothsay< Ajay Dalai, Professor, Chemical Engineering Department, University of

Saskatchewan< Tim Haig, Biox Corporation< Helgi Helgason, Milliagn Biotech< Barry Hertz, Professor, Mechanical Engineering Department, University of

Saskatchewan< Ed Hogan, Natural Resources Canada< Barb Isman, Canola Council of Canada< Martin Reaney, Agriculture and Agri-Food Canada< K. Shaine Tyson, National Renewable Energy Laboratory, US Department of

Energy


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EXECUTIVE SUMMARY

This report critically examines several key issues that are central to assessing the future marketpotential of biodiesel, including: biodiesel feedstock availability; feedstock and production coststructures; fuel performance issues; competing products and technologies; potential nichemarkets; and possibilities for increasing revenue streams from the production of higher value-added products.

As of 2001, the diesel fuel market in North America was 245.5 billion litres (United States –222.9 billion litres; Canada – 22.6 billion litres). The market has been growing steadily, withmost of the growth occurring in on-highway consumption, which represents 56% of the marketin the US and 43% in Canada. Other significant market segments in Canada include commercialand institutional use (15%), industrial (14%), agriculture (11%), railways (9%), and marine(5%).

US diesel fuel prices have ranged between 29.3 cents per litre in 1995 to 39.9 cents per litre in2003. Canadian refiners are essentially “price takers,” i.e., Canadian wholesale diesel prices tendto be based on markets in places like New York, Minneapolis, and Seattle. Differences in retailprices in the US and Canada are due mainly to differing excise taxes. Prices also vary acrossprovincial borders due to the cost of transporting fuels to market, the size of the local markets,and differing provincial fuel taxes.

Feedstock availability and cost are the two major barriers to the commercialization of biodiesel:

< Biodiesel feedstocks — such as surplus vegetable oils, animal fats, and recycledcooking oils — can only provide about 3% of the diesel fuel market in NorthAmerica.

- There needs to be a detailed study of the regional availability and cost ofvarious biodiesel feedstock options in Canada as well as an inquiry intothe potential for growing dedicated energy crops (e.g., industrial mustard,high erucic acid rapeseed, high oleic acid canola, soybean and sunfloweroilseeds, salt-tolerant canola varieties, and choke berries). Other factors,such as the influence of drought on crop yields and potential impacts ofBSE restrictions on feed markets, also need to be studied.

< In 2002, Canadian diesel wholesale prices were 20–30 cents per litre compared toa projected cost of 36 cents per litre for biodiesel made from animal fats and 63cents per litre for biodiesel made from vegetable oils.

- Feedstock costs account for 75% or more of production costs. With thepossible exception of converting animal fats to biodiesel, few


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improvements in biodiesel production technologies can make a majorimprovement in production costs.

Biodiesel has been promoted because of its environmental benefits, particularly its ability toreduce carbon dioxide (CO2), particulate matter (PM), total hydrocarbons (THC), and carbonmonoxide (CO) emissions. There is still some dispute over nitrous oxide (NOx) emissions, with anumber of studies finding slight increases from the use of biodiesel. However, NOx emissionsfrom using biodiesel in heating furnaces and boilers have been found to be lower. More researchis required into mitigating the higher NOx emissions from transportation applications (e.g., byusing blends, restricting feedstocks, modifying engines, using catalysts, etc.) and discovering thecause of the unexpected lower NOx emissions in heating applications. A recent major life cyclestudy has also found increased THC emissions from biodiesel use. This is another area that needsattention.

Biodiesel also has environmental benefits because of its higher energy efficiency. Biodieselproduces 3.2 units of fuel energy for every unit of fossil fuel consumed in its life cycle, whilepetroleum diesel yields only 0.83 units.

At present, there are no commercial-scale biodiesel production facilities in Canada, althoughseveral pilot plants are in operation including: Biox Corporation (Oakville, Ontario); InnovationPlace Bioprocessing Centre (Saskatoon, Saskatchewan); Milligan Biotech (Foam Lake,Saskatchewan); Ocean Nutrition Canada (Mulgave, Nova Scotia); and Rothsay (Ville Ste.Catharine, Quebec). Neat biodiesel made from soybean feedstock is also being imported byrailway tank car from Iowa and Nebraska, mixed with conventional diesel (usually as a B20blend), and then sold to truck and bus fleets operating in urban areas.

The quality and performance of biodiesel fuel is an important issue. In Europe, biodieselproduction capacity is more than double sales due, in part, to concerns over fuel quality; morethan 30% of the biodiesel sold in the EU does not meet EU biodiesel standards. Thedevelopment, and enforcement, of American Society for Testing Materials (ASTM) andCanadian General Standards Board (CGSB) standards in North America will help addressquality issues. There are, however, still a number of knowledge gaps including:

< engine performance and life expectancy under various concentrations of biodieselblends in the full range of engine types, Canadian driving conditions, andchemistry of the accompanying diesel fuel

< cold weather “gumming” problems with biodiesel blends across variousapplications (e.g., on-road transportation, locomotive, heating oil)

< lubricity attributes of biodiesel, particularly with regard to heavy trucks, to verifybench scale lubricity test results (i.e., reduced engine wear, improved fueleconomy) and the effectiveness of various competing lubricity additives andadditive blends


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1Although ultra low-sulphur diesel (15 ppm) combined with new pollution control equipment (i.e., PM trapsand three-way catalytic NOx adsorbers) will reduce PM and NOx emissions by over 90% and will do much to reducethe environmental rationale for using biodiesel to reduce smog in urban areas, biodiesel may still offer an importantstrategy for reducing CO2 emissions. Biodiesel has a very positive net energy balance (i.e., a 4–3 to 1 ratio overpetroleum diesel), and compared to ethanol, it has a higher energy content per gallon (~ 120,000 BTUs compared to80,000 BTUs).

< the comparative benefits of biodiesel and SuperCetane as cetane enhancers forsyncrude and tar sands diesel fuels .

Niche markets like government fleets, underground mines, and recreational marine use havebeen targeted over the past decade in the US and elsewhere, but these markets tend to be small,fragmented, and subject to competition from other technologies. Four potential niche markets inCanada include on-farm use where the agricultural community can have some direct control overmarket pull; mass transit in southwestern Ontario where summer smog levels are having serioushealth impacts; home heating oil on the east and west coasts where waste fish oil provides a lowcost feedstock; and use as a blend in locomotives, particularly in freight switching yards, andalong the Sarnia - Quebec corridor, where bulk fuel storage facilities can help facilitate fueldistribution.

Many other products and technologies in the marketplace compete with biodiesel. Perhaps themost serious challenges come from:

< competing fuel additives, e.g., Sunoco’s Soy Gold< competing alternative fuels, e.g., compressed natural gas, liquid natural gas, and

propane< competing technologies and systems, e.g., diesel-electric hybrid vehicles; thermal

depolymerization and chemical reforming of organic waste into clean energy; andnew pollution control technologies.1

Finally, biodiesel is a low-value commodity product that requires tax subsidies to becompetitive. Governments should support research aimed at finding higher-value uses forbiodiesel esters that may not require government subsidies. The potential market for higher-value non-fuel biodiesel esters in the US has been estimated to be as high as 40 billion pounds(US$53 billion). Potential markets include plastics and plasticizers; solvents and paint strippers;adhesives; surfactants; agrochemicals; industrial chemicals and lubricants. Research should alsobe targeted at developing new higher-value markets for glycerol and vegetable meal, which areboth co-products of biodiesel production.


1

2Tyson, K. Shaine. Biodiesel The Flexible Option. Renewable Biodiesel Fuels: The Flexible OptionConference. Sacramento, California. September 25, 2001.

3Nyberg, Michael. California Diesel Fuel Supply Overview. Renewable Biodiesel Fuels: The FlexibleOption Conference. Sacramento, California. September 25, 2001.

Residential, 11%

Vessel Bunkering, 4%

Railroad, 5%

Electric Utility, 2%

Oil Company, 1%

Industrial, 4%

Commercial, 6%

On-Highway Diesel, 56%

Military, 1%

Off-Highway Diesel, 4%

Farm, 6%

1.0 Petroleum diesel

1.1 Markets

As of 1999, the diesel fuel market in the US was 207.4 billion litres, segmented into thefollowing markets:2

1.2 Fuel prices3

Diesel fuel prices can be expressed in three ways:

< spot prices- used when there are large volume purchases and immediate transactions

for same-day delivery- pipeline, terminals, barge, or refinery transactions- from January 1997 to July 2001, the California spot prices ranged from

about 27 cents per litre to almost 44 cents per litre.


2

< wholesale prices- “rack prices” at the terminal level- price paid by distributors- during the same period, the California wholesale prices closely followed

the spot prices

< retail prices- price paid on the street for immediate consumption- during the same period, the California retail prices closely followed the

pattern for spot prices and wholesale prices, but were about 20 to 24 centsper litre higher, ranging from almost $0.47 per litre in January 1997 to ahigh of over $0.68 per litre in mid July 2000 and returning to a little over$0.54 per litre in the first six months of 2001.

For biodiesel to be competitive, it must be able to compete with wholesale diesel prices ataround CAN$0.34 per litre.


3

4Tyson, K. Shaine. Biodiesel Feedstock Supplies. Biodiesel: Renewable Biodiesel Fuels: The FlexibleOptions Conference. Sacramento, California. September 25, 2001. Also see Duffield, J., Shapouri, H., Graboski, M.,McCormick, R., and Wilson, R. U.S. Biodiesel Development: New Markets for Conventional and GeneticallyModified Agricultural Products. Office of Energy, Economic Research Service, U.S. Department of Agriculture.September, 1998.

5Ibid.

2.0 Biodiesel feedstocks

2.1 Potential sources4

< Food grade cooking oils (soy, rape, canola, palm, peanut, olive, sunflower, etc.)< Off quality and rancid vegetable oils< Animal fats (lard, tallow, chicken fat, fish oils, etc.)< Used cooking oils from restaurants< Waste oils (sewage and trap greases)

2.2 Current markets5

< Soy: cooking oils, animal feed, industrial chemicals, exports< Other vegetable oils: cooking oils, salad dressings, industrial chemicals, exports< Edible tallow and lard: cooking oils, exports< Inedible tallow: industrial chemicals, animal feed< Yellow grease: animal feed< Other greases: limited markets


4

6Pearl, Gary G. Biodiesel Production in the U.S. Presentation at the Australian Renderers Association 6th

International Symposium. July 25-27, 2001.7Tyson, K. Shaine. Biodiesel Feedstock Supplies. Biodiesel: Renewable Biodiesel Fuels: The Flexible

Options Conference. Sacramento, California. September 25, 2001.

2.3 Size of surplus feedstocks (US)

The total production of vegetable oils and fats in the US is about 14 billion kilograms, with thefollowing breakdown.6

Table 1: Vegetable oils and fats breakdownVegetable oils (in billion kilograms) Animal fats (in billion kilograms)

Soybean - 6.774 Edible tallow - 0.676Peanuts - 0.128 Inedible tallow - 1.643Sunflower - 0.394 Lard (choice white grease) and grease - 0.592Cottonseed - 0.553 Yellow grease (recycled cooking/restaurant grease) - 1.194Corn - 0.942 Poultry fat - 1.005Others - 0.294

Total - 9.085 Total - 5.111

The US Department of Energy’s National Renewable Energy Laboratory (NREL) estimatespotential surplus feedstocks as follows:7

< Soy- excess inventories 0.5-0.9 billion kg- exports 0.7-1.1 billion kg

< Other vegetable oils- excess inventories 0.3 billion kg- dry millers corn oil (potentially)


5

8Tyson, K. Shaine. Biodiesel Feedstock Supplies. Biodiesel: Renewable Biodiesel Fuels: The FlexibleOptions Conference. Sacramento, California. September 25, 2001.

9See, for example, Campbell, John B. New Markets for Bio-Based Energy and Industrial Feedstocks:Biodiesel - Will There Be Enough? Paper presented at the Agricultural Outlook Forum. February 25, 2000.

< Inedible tallow and yellow grease- excess inventories 1.5 billion kg- exports 1.5 billion kg

< Other greases- no markets, waste disposal costs for 1.7 billion kg.

2.4 Near term biodiesel supply potential (US)

According to the DOE Energy Information Administration (EIA),8 the total diesel market in theUS in 2001 is about 207.4 million litres. The potential biodiesel supply, using surplus feedstocks,is estimated to be around 3.2% of the total diesel market, or 5.65% of the on-highway dieselmarket.

The table below identifies biodiesel supply by type of feedstock. Clearly, all feedstock sourcesmust be considered in order to meet future biodiesel market demand.

Table 2: Surplus biodiesel supply by feedstock sourceFeedstock Million kg Million litres Percent

Soy 2,074 2,354 33Brown grease 1,727 1,961 28Inedible tallow and yellow grease 1,519 1,726 25Corn 548 625 9Everything else 310 352 5

Total 6,256 7,104 100

Some experts believe these figures may be high. For example, John Campbell, Vice President ofAg Processing Inc., estimates the current US domestic feedstock availability at 492 million litresof soybean oil and 246-492 million litres from alternative feedstocks, totalling 738–984 millionlitres or about 8/10ths of 1% of the on-highway diesel fuel market.9


6

10Ibid.11Ibid.

Campbell notes that US biodiesel feedstocks could be increased in the future through:10

< higher soybean acreage- estimated to be up to 10 million acres, yielding 1.9 billion litres

< higher soybean oil yield- estimated at 10% improvement, or the equivalent of 870 million litres

< conversion of idle acres to oilseed crops like canola and sunflower- assuming 10 million acres of idle land in the northern tier and high plains

states were converted to these crops, it would yield another 2.3 billionlitres of biodiesel

< switching from grain crops to oilseed crops- if 20 million acres currently used for wheat and other small grains crops

were switched to oilseed crops, it could produce another 4.5 billion litres

< increasing oil crush capacity- if the 4.85 billion kilograms of soybean oil currently being exported were

crushed domestically for biodiesel fuel, it would yield 5.3 billion litres.

The longer-term, best-case scenario is about 15.1 billion litres, or about 13% of the on-highwaydiesel fuel market.

It has been suggested that a more reasonable, or practical, long-term goal for biodieselproduction in the US is about 2% of the transportation fuel market.11 This goal would requireover 2.3 billion litres of biodiesel.


7

12Tyson, K. Shaine. Biodiesel: The Flexible Fuel. Biodiesel: Renewable Biodiesel Fuels: The FlexibleOptions Conference. Sacramento, California. September 25, 2001. Prices were as of August 9, 2001. These figuressummarize data reported in public literature.

13For analyses of tallow and yellow grease use in biodiesel production, see Nelson, R.G., Howell, S.A., andWeber, J. Potential Feedstock Supply and Costs for Biodiesel Production. Presented at the Sixth National BioenergyConference. Reno, Nevada. October 2-5, 1994.

14Campbell, John B. New Markets for Bio-Based Energy and Industrial Feedstocks: Biodiesel - Will ThereBe Enough? Paper presented at the Agricultural Outlook Forum. February 25, 2000.

2.5 Biodiesel feedstock costs (US)

The following feedstock prices (as of August 9, 2001) were used by S. Tyson at a biodieselconference in Sacramentao, California:12

< sunflower - 56 cents/kg< corn - 54 cents/kg< soy - 51 cents/kg< inedible tallow - 40 cents/kg< yellow grease - 25 cents/kg< brown grease - 14 cents/kg.

A 57-76 million litre biodiesel plant processing feedstocks at US $0.28 per kilogram can producebiodiesel at US $0.34 per litre and be competitive with petroleum diesel.

Unfortunately, all vegetable oils exceed 28 cents per kilogram. Feedstock costs can be reducedby using less expensive “off-spec” vegetable oils, inedible tallow, and yellow grease, butprocessing costs can be higher because conversion yields for some of these feedstocks are lowerand processing losses are higher.13 In addition, a significant increase in demand for lower qualityanimal fats and used cooking oils could result in increased feedstock prices.14 Restrictingfeedstocks to lower priced sources also places further limits on the capacity of biodiesel to meetmarket needs.

Notwithstanding these limitations, yellow grease (i.e., recycled cooking oils) is priced at about25 cents CAN per kilogram (about 13 cents less than vegetable oils) and is a good starting pointfor reducing biodiesel feedstock costs.

Because yellow grease is important to reducing biodiesel feedstock costs, it is useful tounderstand, in more detail, the nature of this feedstock supply. A 1997 study conducted inChicago, Illinois found that baking and frying oils represent about 0.9 billion kilograms of totalUS usage. About 50% is used in the preparation of french fries with the remainder fairly evenlydistributed between the preparation of chicken (15%), baking (15%), doughnuts (10%), and


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15Sigmon, M. Demonstration and Economic Analysis of Biodiesel in Fleet Vehicle and MarineApplications. Final Report of the Urban Consortium Energy Task Force. City of Chicago, Department ofEnvironment. June 1997.

16Ibid.17Ibid.18 Wood, S.M., and Layzell, D.B. A Canadian Biomass Inventory: Feedstocks for A Biobased Economy.

Final Report. June 27, 2003.19 Canola Council of Canada. See appendix ?? For a breakdown by year.20 Ibid.21Ibid.

fish/shrimp uses (10%). In the City of Chicago and the broader Cook County area, there are over6,500 used cooking oil establishments – 3,133 restaurants, 74 cafeterias, and 3,367 refreshmentplaces (includes doughnut shops, ice cream places, etc.) according to the 1992 Census. Eachrestaurant produces approximately 340 kilograms of waste grease per week, and about 80% ofthat amount ends up as tradeable yellow grease after processing. Using only restaurants andcafeterias in the City of Chicago and Cook County area, the study authors projected the supplyof yellow grease at 45 million kilograms, sufficient to produce about 51 million litres ofbiodiesel per year.15 If yellow grease from refreshment places, schools and hospitals and theprojected rise in fast food establishments since 1992 were included in the calculations, thevolume of feedstock supply could probably be increased by a further 50% to 76 million litres peryear.16 The market demand for biodiesel (assuming a B20 blend) was between 208 and 1,325million litres. Even at the low end of the projection, supply would only meet about 35% ofbiodiesel demand.17

2.6 Potential biodiesel feedstock supply in Canada

< Seed oil crops, such as canola, soybean and flax, account for 17% of the landarea devoted to major crops in Canada. In 2001, canola was grown on 3.83million hectares; soybean - 1.08 million hectares; and flax - 0.67 millionhectares.18

< Canola: < The ten-year (1994-2003) average annual Canadian canola oil production

was 1.13 million tonnes.19 Saskatchewan (44%), Alberta (30%) andManitoba (24%) accounted for most of Canada’s production over the past5 years.20

< The ten-year (1994-2003) average annual ending stocks (i.e., surplus) was35,000 tonnes.21

< The average yield over the last five years was:


9

22Ontario Soybean Growers’ Marketing Board. See appendix ?? for a breakdown by year.23Cooper, K. Ontario Soybean Commentary, February 13, 2004.24See appendix B for details on Ontario production.25Provided by a member of the Delphi Group.26Provided by a member of the Delphi Group.

- 0.575 tonnes per acre- 25 bushels per acre.

< The 14-year average annual price for canola oil was 30 cents/lb. Meal was8 cents/lb and seed was 16 cents/lb. Prices ranged considerably over the14 year period. Oil varied from 22 - 38 cents/lb, while meal ranged from 6- 11 cents and seed ranged from 12 - 20 cents/lb.

< Soybeans:< The five-year (1998-2002) annual average soybean supply for Canada was

3.17 million tonnes, with an average price per bushel of $7.53.22 < At the present time, Ontario accounts for 76% of the total Canadian

soybean production, while Quebec supplies 17% and Manitoba 6%.< However, Manitoba is becoming a larger producer of soybeans. Five years

ago, there were only a few hundred acres of soybeans. In 2003, there were225,000 acres, with estimates for 2004 between 300,000 to 400,000 acres.Officials at the Manitoba Ministry of Agriculture estimate soybeanacreage in the province could reach 800,000 - 900,000 acres within thenext five years.23

< The Ontario five-year (1998-2002) average annual production was 2.69million tonnes.24

< Ontario’s five-year (1998-2002) average annual usage was 2.56 milliontonnes:- crush - 1,618,949 tonnes- export - 384,700 tonnes- seed - 103,000 tonnes- other (feed, waste, dockage, etc.) - 458,366 tonnes.- carry-out stocks (i.e., surplus) averaged 132,000 tonnes.

< Ontario’s average five-year (1998-2002) price per bushel was $7.65.

< In summary, the projected potential biodiesel feedstock supplies include:< 100,000+ tonnes of recycled cooking oils from restaurants25

< 500,000 tonnes per year of rendered oils from animal fats (depending onmarket impacts of BSE)26

< 35,000 tonnes per year of canola oil (carry-out stocks)


10

27See Tyson, K.S., Brown, J., and Moora, M. Industrial Mustard Crops for Biodiesel and Biopesticides. TheFifth Biomass Conference of the Americas. Orlando, Florida. September 17-21, 2001.

28At one time, it was thought that industrial mustard hybrids could produce as much as 6-12 billion gallonsof biodiesel per year, enough to supply 10-20% of the total diesel market in the United States. See, for example,Tyson, K.S., Brown J., and Moora, M. Industrial Mustard Crops for Biodiesel and Biopesticideshttp://www.bioproducts-bioenergy.gov/pdfs/bcota/abstracts/19/z347.pdf. Also see Tyson K.S., and Brown, J.Mustard Hybrids for Low-Cost Biodiesel and Organic Pesticides. American Institute of Chemical Engineers Spring2002 Annual Meeting: Energy and a Sustainable Planet. However, based on the input from industry reviewers, theseestimates have been downsized to 500 million gallons. Recent comments from S. Tyson.

29See Tyson, K.S., Brown, J., and Moora, M. Industrial Mustard Crops for Biodiesel and Biopesticides. TheFifth Biomass Conference of the Americas. Orlando, Florida. September 17-21, 2001.

< 132,000 tonnes per year of soybean (carry-out stocks)< potential use of canola and soybean exports, depending on market price.

2.7 Industrial mustard: a new biodiesel feedstock

The Office of Fuels Development at the US NREL is currently developing industrial mustardhybrids that could produce 23-45 billion litres of oil per year at less than 28 cents a kilogram. Atthat level, biodiesel could supply 10-20% of the total diesel market at under $0.34 per litre forB100.27

The US Department of Energy’s Office of Fuels Development has selected industrial mustard asa promising dedicated energy crop for biodiesel production. The R&D goal was to develop acrop capable of producing 500 million gallons28 of oil a year at a cost of 10 cents a pound (whichwould result in B100 at $1.00 per US gallon). The key to economic sustainability was to developan application for the meal that would provide a value greater than animal feed. 29


11

30Ibid.31Tyson, K.S., and Brown, J. Mustard Hybrids for Low-Cost Diesel and Organic Pesticides. American

Institute of Chemical Engineers Spring 2002 National Meeting: Energy and A Sustainable Planet.

NREL is currently completing a three-year study on the use of industrial mustard as a source ofbiodiesel and biopesticides. So far, their research seems promising:30

< The defatted meal (after the oil is removed) can be used as a pesticide withoutfurther processing.

< In vitro breeding can improve the glucosinolate concentration in the meal toreduce costs.

< Specific varieties can be bred to act as fungicides, insecticides, herbicides, ornemacides.

< Oil content varies between 25 and 40%.< Depending on the variety, the oil is 90% monosaturated or more in some cases.< The oil is inedible and unsuitable for high value industrial purposes, so its market

price will not be tied to increases in food crop prices or other markets.< Seed yields of 1.8 tonnes per acre appear to be achievable in rotation with dry

land wheat production without irrigation.< Wheat yields have increased as much as 20% when grown in rotation with

industrial mustard.< The mustard crop can be planted and harvested with existing wheat equipment.< The mustard crop appears to be resistant to many of the pests common to canola.< Application trials with mustard meal have shown it to be highly effective with

fungus, nematodes, cut worms, wire worms, crab grass, and other agriculturalpests.

< Mustard meal could be used directly on soils as a substitute for methyl bromidefumigation.

The key to making the process economically viable is to:31

< find a large industrial market for the meal so that it can drive sufficient demandfor the crop to make a national impact on oil supply

< find a market for the meal that has higher value than animal feed to compensatethe oil crusher for lower oil prices.

NREL and its partner, the University of Idaho, are hoping to increase the glucosinolate contentby a factor of five times or more to make it more effective as an organic pesticide. Since theglucosinolates have a half life of 48 hours and ultimately break down into soil nutrients, they canprovide a safer, more environmentally benign compound than methyl bromide and other farm


12

32Ibid.33Tyson, K. Shaine. Biodiesel Feedstock Supplies. Biodiesel: Renewable Biodiesel Fuels: The Flexible

Options Conference. Sacramento, California. September 25, 2001. 34Agriculture and Agri-Food Canada. Mustard Seed Industry Fact Sheet. June 5, 2002.35Comments made by Martin Reaney, Agriculture Canada, during a Dephi Group conference call organized

by PRA and CANUC, June 12, 2003.36The production and processing of high erucic acid rapeseed injects $50 million into the Canadian

economy each year. See NSERC web site http://www.nserc.ca/synergy/articles/01canam_e.htm 37Ibid.

chemicals.32 NREL hopes the meal can be sold for 42 cents per kilogram or more and displace10% of pesticide market with mustard meals by 2030.33

Canada has the infrastructure to grow industrial mustard. Canada is already among the top fivemustard seed producers in the world and is the single largest exporter. Canada produces, onaverage, about 230,000 tonnes of mustard seed (including yellow, brown, and oriental) formostly the condiment and food industry markets. About three-quarters of the production isexported. Production is concentrated in the prairie provinces, with Saskatchewan accounting foralmost 89%.34

Agriculture and Agri-Food Canada has been actively involved in developing mustard seedvarieties for over 10 years and developed a patent in 1998 for using mustard seed to fightnematodes. Since then, ultra high glucosinolate levels and high oil yield varieties have beendeveloped, but much of the information is currently proprietary knowledge.35

High erucic acid rapeseed

Another dedicated energy crop that might have application for biodiesel is high erucic acidrapeseed.36 In addition to biodiesel applications, erucic acid can be used as a lubricant and anti-stick agent.

The University of Manitoba’s Department of Plant Science and CanAmera Foods have beenworking since 1978 on high erucic acid rapeseed (HEAR) that is low in glucosinolates. At thetime the partnership was formed, existing rapeseed cultivars were considered too low in erucicacid for industrial use (30-40%) and too high in glucosinolates for animal feed applications.Over the past 20 years, CanAmera has invested over $1.4 million in the university’s HEARcultivar development program, which has now developed a world standard for HEAR oil levelsat 50% or more.37


13

38Ibid.39See, for example, Taylor, D.C., Katevic, V., Zou, J., MacKenzie, S.L., and Keller, W. Improvement of Oil

Content and Seed Yield in Field-Tested Transgenic Rapeseed. PBI Bulletin, 2002, Issue 1. 40Corbett, P. Research in the Area of High Oleic Oils. PBI Bulletin, 2002, Issue 1. 41Ibid.42Ibid.43Comments by Ed Hogan (Natural Resources Canada) and Martin Reaney (Agriculture and Agri-Food

Canada).

The next step in the university’s cultivar development program is super high erucic acid rapeseed(SHEAR) that contains more than 66%.38

The Seed Oil Modification Group at the National Research Council’s Plant BiotechnologyInstitute is also developing new transgenic SHEAR varieties.39

High oleic acid canola, soybean, and sunflower oils

There is also a trend in crop breeding to produce high oleic acid oilseed varieties that havegreater oxidative stability for both food and industrial applications. There are, at present,commercially available high oleic canola (75%), high oleic safflower (75%), high oleicsunflower (82%), high oleic soybean (83%) and high oleic olive (75%) varieties.40 Once theseoils are transesterified, they can be either used as biodiesel or used in further chemicaltransformations to produce higher value-added products like polyurethane (used in automobileseat cushions), cosmetics (skin care, hair care, sunscreens, lip balms, eye shadows, conditioningcreams, bar soaps, etc.), and lubricants (engine, transmission, hydraulic, gear and grease).41

Out of the 10 million acres of canola grown in Canada, about 500,000 acres are high oleiccanola.42

Other crops

Salt-tolerant canola varieties and choke berries may also provide potential feedstock sources forbiodiesel.43


14

44Ye, Su. Supply and Demand of Soybeans as Feedstock for Soy Diesel. Minnesota Department ofAgriculture. June 2000.

3.0 The biodiesel production process

3.1 Transesterification

Biodiesel, or alkyl esters, can be produced using three basic routes:

< base catalyzed transesterification of the oil with alcohol (used with vegetable oils)< direct acid catalyzed esterification of the oil with methanol (used with recycled

greases)< combination of the first two (used with recycled greases).

The basic technology using vegetable oils is as follows:

< The vegetable oil (or animal fat) is first filtered and then pre-processed with alkalito remove free fatty acids.

< It is then mixed with alcohol (usually methanol) and a catalyst (usually sodium orpotassium hydroxide) which causes the oil’s triglycerides to form esters andglycerol.

< These fractions are then separated and purified into glycerine and biodiesel fuel.< The methanol from the biodiesel stream is recovered and reused.< Nothing is wasted:

- Process inputs include: 1% catalyst, 12% alcohol, and 87% oil.- Process outputs include: 1% fertilizer, 4% alcohol (which is reused),

9% glycerine, and 86% methyl ester.

Today most alkyl esters are produced with the base catalyzed reaction because it is the mosteconomic:44

< low temperature (66N C) and pressure processing (138 kPa)< high conversion (98%) with minimal side reactions and reaction time< direct conversion to methyl ester with no intermediate steps< no exotic materials of construction are used.


15

45Tyson, K. Shaine. Biodiesel The Flexible Option. Renewable Biodiesel Fuels: The Flexible OptionConference. Sacramento, California. September 25, 2001.

Vegetable oils Recycled Greases

Dilute AcidEsterification

Transesterification

Crude Glycerin

Refining

Crude biodiesel

Biodiesel

Sulfur +methanol

Methanol + KOH

Glycerinrefining

Glycerin

Methanolrecovery

3.1.1 Main products

The main products of the transesterification process are biodiesel and glycerol:

< Biodiesel can be used as a neat fuel (B100), a blend (B5, B20), or a fuel additiveor lubricity agent (B2 or less).

< The co-product, glycerol, can be refined into glycerine, which is used forcosmetics, etc.

< Vegetable meal is created during the seed crushing process and is used as animalfeed.

BASIC TECHNOLOGY45


16

46Data reported by Shumaker, G., McKissick, J., Ferland, C. and Doherty, B. A Study on the Feasibility ofBiodiesel Production in Georgia. Center for Agribusiness and Economic Development, University of Georgia. 2003.

3.2 Estimated capital and operating costs for a processing plant(in $US)46

The University of Georgia has recently estimated the capital costs of constructing variousbiodiesel plants ranging in size from 1.9 million litres per year to 114 million litres. In addition,they have also conducted sensitivity analyses that evaluate the projected biodiesel fuel prices pergallon according to variations in plant size and feedstock cost. Their results are summarized inthe tables below.

Table 3: Estimated capital cost comparison of various plant sizes (in $US)Plant size

(million litrers/yr) 2 11 57 114

Capital cost $1.2 million $4.4 million $12.3 million $19.2 millionFeedstock needed

KilogramsLitres

1.7 million2 million


51 million57 million


Source: Frazier, Barnes & Associates, Memphis, TennesseeAssumes a green field site.Estimated accuracy +/- 25%Total includes capital cost for pre-processing feedstock.

Table 4: Production cost sensitivity to feedstock cost by plant size, dollars per litre (in $US)Plant size

(million litres/yr) 2 11 57 114

28 cents/kg $0.66 $0.45 $0.38 $0.3742 cents/kg $0.79 $0.57 $0.50 $0.5056 cents/kg $0.92 $0.70 $0.63 $0.6371 cents/kg $1.04 $0.83 $0.75 $0.75

These data indicate that the most economically efficient plant size is about 57 million litres peryear. At that size, most of the economies of scale have been realized and further increases inplant size do not lead to lower fuel production costs. Even doubling plant size from 57 to 114million litres does not appear to lower unit costs. The cost of constructing a 57 million litre plantis estimated to be about $12.3 million CAN.


17

The following table breaks down the projected costs of a 57 million litre plant in more detail.

Table 5: Estimated biodiesel capital cost details for a 57 million litre capacity plant (in $US)Equipment $4,608,000

Buildings $1,536,000Utilities $921,600Civil/Mechanical/Electrical $3,502,080Land/Prep/Trans access $245,760Engineering/Permitting $245,760Set-up consulting $3,840Contingency (10%) $1,228,800Total installed cost $12,291,840Source: Frazier, Barnes & AssociatesAssumes a “turn-key” facility placed on a green field site located near transportation access.

According to the authors of the study, the physical plant would require 7–10 acres for thebuilding, tank farm, and transportation areas. A buffer zone may also be required depending onsurrounding land use. The plant size would be about 5,000 square feet and about 18.2 metres inheight The plant would house all the processing equipment, a laboratory for quality control, andoffices. The processing area would require about 3,400 square feet The tank farm would requireabout 20,000 square feet with tanks totalling 2.5 million litre capacity divided between holdingtanks for feedstock and finished product. The plant would operate continuously and employ eightpeople plus six more in management, sales, accounting, and clerical.

Operating costs assuming feedstock costs of 42 cents per kilogram would be about $29.372million per year. Feedstock costs would comprise about 75% of the total operating costs.

Table 6: Breakeven for biodiesel production for a 57 million litre per year facility with feedstockcost averaging 42 cents per kilogram (in $US)

Item Total Per litreIncome $23,197,440 $0.41*

Feedstock and direct (methanol and catalyst) $25,873,459 $0.46Labour $924,800 $0.017Variable cost $867,895 $0.017Fixed cost $1,705,958 $0.03

Total cost $29,372,625 $0.50Profit/Loss ($6,175,183) ($.011)* Includes glycerin and feed fat by-products


18

47Also reported by Connemann, J., and Fischer, J. Biodiesel in Europe 1998: Biodiesel ProcessingTechnologies. Paper presented at the International Liquid Biofuels Congress. Curitiba-Parana, Brazil. July 10-22,1998.

48Van Dyne, D.L., Weber, J.A., and Braschler, C.H. Macroeconomic Effects of A Community BasedBiodiesel Production System. Department of Agricultural Economics, University of Missouri. 1996.

49Ibid.

Assuming feedstock costs average 42 cents per kilogram, feedstock and direct costs (methanoland catalyst) would account for ~ 90% of the total costs.47 Total costs are 50% higher than the$0.34 per litre wholesale diesel fuel price that must be reached for biodiesel to become pricecompetitive with petroleum diesel.

The key to sustainable biodiesel production, therefore, is to reduce feedstock cost, either byrelying more heavily on low cost feedstocks (under 28 cents per kilogram) like yellow grease or recycled cooking oils, or, in the long term, developing dedicated crops like industrial mustardthat can be grown to produce dedicated feedstock at less than 28 cents per kilogram.

In the alternative, various levels of government could offer 17-20 cents per litre tax support, as isthe case now in Germany. However, the move in North America to low sulphur diesel in 2006and the introduction of new pollution controls technologies (PM traps and NOx adsorbers)in 2007 will remove much of the environmental justification for this level of public policysupport.

3.3 Community-based biodiesel production cost model (in $US)

Smaller, community-based biodiesel plants might be economically viable under very specificconditions.48 For example, in a diversified farming community where soybean and canolafarmers also operate livestock operations and can use the meal for animal feed, it might bepossible for them to retain ownership of the biodiesel processing and eliminate the additionalcharges normally paid to other businesses such as feed mills, local feed dealers, andtransportation companies. Under these limited circumstances, biodiesel might be pricecompetitive with petroleum diesel.

Under the community-based production model:49

< A 2 million litre biodiesel plant could be constructed and integrated with anexisting feed mill or grain handling facility to minimize investment.

< Plant investment costs are projected to be $2.0 million.< Producers retain ownership of their crops and biodiesel products (biodiesel, meal,

and glycerin).


19

50For more details see Weber, J.A. The Economic Feasibility of Community Based Biodiesel Plants.A Master’s thesis presented to the faculty of the Graduate School, University of Missouri-Columbia. August 1993.

51Solvent extraction facilities generally have a through put range between 450 to 2,700 tons per day. This isthe dominant system used for soybean oil crushing in the US.

52Ibid. This system has been developed by Insta Pro, a division of Triple “F,” Inc. The company has used avariety of oilseeds (soybean, canola, sunflower, rapeseed, and cottonseed) with similar success.

< Producers are charged a cost that covers only capital and operating costs.< The biodiesel and meal are used by the farmers on their own farm.50

To reduce capital costs, the usual solvent (hexane) extraction system51 for removing oil from themeal is replaced with a mechanical extruder/expeller system. The oilseeds pass through theextruder and are exposed to high temperature (141"C) and high pressure (2,758 kPA) for a shortcooking time (26 seconds). This produces a product that has high digestability, high Omega-3fatty acids, and has the aypsin inhibitor destroyed. When the oil leaves the extruder, the oil cellshave been ruptured and the oil has been cooked and sterilized. The extruder increases thethroughput of the expeller. In addition, in the case of soybeans, the gums stay within the mealportion, not the oil. This reduces the need to degum the soybean oil prior to the biodieselesterification process, further reducing production costs.52

The following table summarizes the cost of constructing a 1,892,700 litre per year oilseedcrushing and biodiesel plant.


20

Table 7: Summary costs for a 2 million litre community-based biodiesel plant in Missouri, 1993(in $US)

Annual biodiesel production (in litres) 2 millionExpenditures % of total

Capital costs

Extrusion and pressing $604,954

Esterification $1,472,000

Real annual costs

Extrusion and expelling (operates 300 days/yr, 24 hrs/day) $131,276 2%

Esterification (operates 330 days/yr, 24 hrs/day) $319,424 6%

Total real annual costs $451,980 8%

Annual operating costs

Feedstocks @ $263.38/tonne1.; soybeans 97% of feedstock $4,311,344 79%

Oilseed pressing

Electricity @ $0.02 per MJ $323,677 6%

Steam N/A

Labour (assumes plant automation) $46,240 1%

Repairs $46,240 1%

Insurance $6,049 0%

Esterification

Electricity $5,376 0%

Steam $37,236 1%

Labour $2,474 0%

Repairs $29,440 1%

Insurance $14,720 0%

Materials $50,633 1%

Sales and administration $106,762 2%

Annualized cost of working capital $12,233 0%

TOTAL COSTS $5,488,700 100%

Credits

Glycerin @ $0.85/kg $147,537

Meal @ $310/tonne $4,560,264

TOTAL CREDITS $4,707,800

Net cost of production $780,900

Transportation costs $0.014 per litre

Net cost per litre of biodiesel ($/litre) $0.43Note: $0.43 per litre does not include profit margin. The 10-year average (1981–1991) price of diesel fuel in the USwas $0.28/litre and ranged from a low of $0.24 in 1986 and 1987 to a high of $0.39 in 1981.1 The conversion of bushels into tonnes, used bushels of soybeans as a base.


21

Assuming soybeans can be purchased for $263.38 per tonne and the meal co-product can yield$310 per tonne, biodiesel can be produced for $0.43 per litre, provided no profits are taken bythe community owners.

According to this model, biodiesel can compete on price with petroleum diesel if:

< soybean prices are $246.92 per tonne or less< soybean meal can be sold for $332 per tonne or more.

This analysis also points out the importance of:

< Feedstocks, which account for 79% of the costs of production.- A $4.70 per tonne increase in the price of soybeans would result in a 4

cent per litre increase in the cost per gallon of biodiesel.

< The value of the meal co-product represents almost 97% of the co-product credit.- A $7 per tonne increase in the value of 44% soybean meal (with a 10%

residual oil content) would decrease the cost of biodiesel by 5 cents perlitre.

< The impact of glycerol on the bottom line is more limited, it represents only 3%of the co-product value.- A 6 cent increase in the price of glycerol would result in a 5 cent reduction

in the cost of biodiesel.

< The importance of electricity rates on the cost of extruding and expelling.- A $0.003 increase per MJ would increase the cost of biodiesel by 3 cents

per litre.

< Capital costs (in this system) do not have a major impact, and as a result,investment tax credits would not significantly alter the price of biodiesel,although any form of support would move biodiesel one step closer tocommercialization.- A $128,000 increase in capital costs results in a 1.7 cent increase per litre

for biodiesel.

< Using 100% canola would yield biodiesel at $0.53 per litre.- Assuming canola has a 40% content vs 18–20% for soybean.- The price for canola is $239.86 per tonne.- The value of meal is $268 per tonne.


22

53http://bigkfuels.com/profile.html.54Other distributors include: Bio-Diesel Canada Inc. (Etobicoke, Ontario) which claims it

is the largest biodiesel fuel distributor in Canada (see http://www.biodieselcanadainc.com);Western BioFuels (Vancouver, British Columbia), which claims it is the first commercialdistributor of bulk biodiesel in Western Canada (see http://www,westernbiofuels.com/); and UPI(Guelph, Ontario) which offers 2%, 5%, and 10% biodiesel blends to the SW Ontario farm

< Using 100% animal fats would yield biodiesel at $0.62 per litre.- Assuming animal fats are purchased at 34 cents per kilogram.- There is no meal co-product.- The fatty acid mixture can be sold for 3 cents less than animal fats.

< Adjusting the size of the extruder/expeller equipment to match the need (i.e., thehigher oil content of canola would leave the extruder/expeller idle a significantportion of the time) would yield the following costs per litre:- $0.43 for soybean- $0.49 for canola- $0.47 for animal fats.

< Feedstock costs must be reduced, and meal co-product values must be improved ifbiodiesel is to compete, on price, with petroleum diesel.

< The major cost components of biodiesel production (feedstock costs and co-product values) are subject to price volatility.

< Localized factors like electricity rates, the ability to use existing facilities, and alarge acreage of soybean production (to buffer price swings due to weather) willhave an impact on price competitiveness.

< It will also be important for local livestock producers to be operating on arelatively small scale and not be able to buy protein at wholesale prices.

3.4 Biodiesel companies

3.4.1 Canadian biodiesel producers

At present, there are no commercial-scale biodiesel production facilities in Canada, althoughseveral pilot pants are in operation. Neat biodiesel made from soybean feedstock is currentlyimported by distributors like Canada Clean Fuels53 (formerly called Big K Fuels) located inEtobicoke, Ontario.54 The biodiesel comes into the country by railway tank car from Iowa and


23

market (see http://www.upi-inc.com/products.biodiesel).

Nebraska and is mixed with conventional diesel (usually as a B20 blend) and sold to truck andbus fleets operating in urban areas. The imported US biodieselmeets ASTM specification D 6751and is reasonably priced competitive with petroleum diesel, due to a US$1.00 to $1.50 per USgallon subsidy provided by the US Department of Agriculture’s Commodity Credit Corporation.

Current domestic producers of biodiesel include:

The following companies are engaged in biodiesel production in North America:

< Biox Corporation (Oakville, Ontario)- Currently operates a 1 million litre per year pilot plant in Oakville,

Ontario.- A continuous process that is not feedstock specific (i.e., the process can

handle oilseed feedstocks as well as waste cooking greases and animal fats- Claims to be 40% cheaper in capital costs and 50% in operating costs

compared to other biodiesel processes.- Claims to be the only technology capable of converting high fatty acid

feedstocks into biodiesel cost effectively with 1:1 yields.- Plans to commission its first commercial scale plant (60 million litres per

year) in Canada during the spring of 2004, making it the largest biodieselplant in the world.

- Its business model involves the construction and operation of turn-keybiodiesel facilities.

< Innovation Place Bioprocessing Centre (Saskatoon, Saskatchewan)- Owned by the Province of Saskatchewan- Pilot plant capable of producing biodiesel in batches of about 30 tonnes

per day- The Centre charges CDN $0.90 to $1.10 per litre

< Milligan Biotech (Foam Lake, Saskatchewan)- Operates a small pilot plant that produces canola methyl esters for use as a

lubricity additive to reduce engine wear and improve fuel economy.

< Ocean Nutrition Canada (Mulgave, Nova Scotia)- Uses a chemical process to extract Omega 3 fatty acids from fish oil- The by-product can be used as a biofuel- Ocean Nutrition has been using almost 1 million litres per year of the

waste biodiesel as a boiler fuel without problem since 1999


24

55National Biodiesel Board Fact Sheet: Production Capacity.

- A large plant expansion will result in an additional 4-6 million litres/yearof waste by-product.

- The company has signed a 10-year deal to sell Wilson Fuels Inc. 5 millionlitres per year of the waste biodiesel fuel

- Wilson Fuels will mix the fish oil biodiesel with home heating oil in 5-20% blends to ensure it does not gel in cold weather.

< Rothsay (Ville Ste. Catharine, Quebec)- A division of Maple Leaf Foods- Uses a batch process that can accept either seed oil or animal fats- Provided biodiesel for the City of Montreal’s BIOBUS demonstration

project.

There are also a number of entrepreneurs interested in producing biodiesel including JeffKempson (Kingston, Ontario) who is making small batches of biodiesel in his garage usingrecycled cooking oils as a feedstock; and Topia Energy Inc. (Ottawa, Ontario), which is planningtp building a biodiesel plan in the Sudbury area.

3.4.2 US biodiesel producers

The National Biodiesel Board claims that there are currently 12 dedicated biodieselmanufacturers in the US with an estimated production capacity of 60 to 80 million gallons peryear. In addition, there is also available excess production capacity in the oleochemical industry, which uses methyl esters for solvent, surfactant, and adjuvant applications. About 200 milliongallons of biodiesel production capacity could be available under long-term agreements withexisting biodiesel marketing firms.55 Here are a few examples of US companies that areproducing biodiesel or are planning to do so in the near future:

< Ag Environmental Products (Lenexa, Kansas)- A subsidiary of Ag Processing Inc., the world’s largest cooperative

soybean processing company.- Produces SoyGold, which can be used as a solvent, diesel fuel lubricity

additive, or an alternative to conventional diesel fuel.

< Archer Daniels Midland (Decatur, Illinois)- A leading biodiesel producer in Europe with two facilities located in

Germany.


25

- On April 2, 2002, ADM announced it was launching a biodiesel feasibilitystudy in the US focused on the Mankato area of Minnesota where italready has a soybean crushing and vegetable oil refining facility.

< Best BioFuels LLC (Austin, Texas)- Intends to become a biodiesel producer- Partnered with Smithfield Foods, Inc., which plans to invest $20 million to

build a plant near Milford, Utah to convert swine waste into biomethanolthat will be sent to another plant outside Utah to process soybean oil,animal fats, and recycled cooking oil into biodiesel.

- Smithfield Foods is the largest producer of hogs and the leading processorand marketer of fresh pork and processed meats in the US.

< Columbus Foods (Chicago, Illinois)- Producer of biodiesel.- Also marketing methyl esters for applications as adhesive removers,

asphalt clean-up, auto waxes, corrosion preventatives, graffiti removers,hand cleaners, metal working lubricants, mould release agents, oil spillclean-up, paint removers, parts cleaning and degreasing, paint and resinclean-up, pesticide carriers and adjuvants, screen printing ink removers.

< Griffin Industries (Cold Spring, Kentucky)- The second largest rendering company in the US.- Produces biodiesel from vegetable oils, soybean oil, and recycled

restaurant grease.

< Ocean Air Environmental Fuels and Glycerine, LLC (Lakeland, Florida)- Previously operated under the name of Nopec Corporation but was bought

out by Ocean Air in September 2000.- Operates a 10 million gallon per year biodiesel plant and a 12 million

pound per year glycerine refinery.- 150,000 gallons of storage on site.- Can process vegetable oils, animal fats, and recycled cooking oils.

< Pacific Biodiesel (Honolulu, Hawaii)- In 1996, built a small biodiesel plant at the Central Maui Landfill to

process restaurant grease.- In 1997, built a similar facility in Nagano, Japan to process waste cooking

oils from 60 restaurants.


26

- In 2000, built a plant with the capacity to process 25,000 gallons per dayof grease trap waste and produce 1,500 gallons per day of biodiesel.

< Peter Cremer North America (Cincinnati, Ohio)- A full line oleochemical manufacturer.- Now offers Nexsol Biodiesel (B100)

< Proctor & Gamble (Cincinnati, Ohio)- A multi-national oleochemical company.- Various methyl ester products for use as an agricultural adjuvant, metal

working fluid, low-volume solvent, rolling oil.- Various grades of glycerine used as an emulsifier, emollient, plasticizer,

humectant, sweetener, anti-freeze, in surface coatings and paints,cosmetics, drug and food products.

< Stepan (Northfield, Illinois)- A major manufacturer of surfactants used in detergents, shampoos,

lotions, toothpaste, and cosmetics.- Also produces solvents, lubricants, and cutting oil ingredients.- Operates worldwide.

< West Central Soy (Ralston, Iowa)- West Central Soy is the manufacturing division of West Central

Cooperative, a central Iowa agricultural cooperative.- $25 million has been invested in the processing plant, which can process

more than 163,000 tonnes annually- Produces biodiesel, lubricants (e.g., hydraulic oil, fifth wheel grease, chain

bar lubricant), and solvents and cleaners (i.e., graffiti remover, asphaltrelease concentrate, herbicide stain remover).

< Imperial Western Products (Indio, California)- Imperial Western Products has joined forces with Baker Commodities to

convert restaurant waste cooking oils into biodiesel fuel called Biotane.- Has two plants in Southern California: one 6 million gallon and one 8

million gallon.


27

3.4.3 Equipment manufacturers/supplies

The following are examples of biodiesel equipment manufacturers/suppliers.

< Biodiesel Industries (Santa Barbara, California)- Produces the Modular Production Unit (MPU), which fits within a

standard 8' x 8' x 40' shipping container and fits on a 60' x 70' pad with allancillary equipment.

- Process heat is supplied by a Caterpillar generator that runs on B100.- Can process a variety of feedstocks including virgin and recycled cooking

oils.

< Crown Iron Works (Minneapolis, Minnesota)- Has provided oleochemical technologies since the 1920s.- The largest supplier of oilseed extraction and refining plants and

equipment in North America.- A biodiesel equipment manufacturer offering both batch and continuous

methyl ester production technologies and glycerol recovery equipment.

< Lurgi Life Science GmbH (a subsidiary of Lurgi Ag in Frankfurt, Germany)- A world leader in building turnkey biodiesel plants- Building a 100,000 ton / year plant in Marl, Germany- Also heading a consortium that is building a 37,000 ton / year biodiesel

plant in Malchin, Germany


28

56Tyson, K. Shaine. Biodiesel: The Flexible Fuel. Biodiesel: The Flexible Option Conference. Sacramento,California. September 25, 2001.

57Caterpillar Release Memo: PMP01-01. Preventive Maintenance Products. March 2001.58Cummins Position on the Use of Biodiesel Fuel. Cummins Field Announcement, August 30, 2001. 59Detroit Diesel Corporation September 2002 Lubricating Oil, Fuel and Filters Engine Requirements Guide.

4.0 Biodiesel markets

4.1 Fuel issues56

< Fuel quality:- Injector deposits and varnishing in combustion chamber occurs with poor

quality fuel that contains glycerin and un-reacted fats/oils. (Glycerin andun-reacted fats/oils act like sugar.)

- These fuel quality issues have been addressed by The American Societyfor Testing Materials, which has published test methods and standards – ASTM D 6751 – for ensuring fuel quality for pure biodiesel (B100) and aprovisional standard – ASTM PS 121 – has been established for a 20%biodiesel blend (B20). The Canadian General Standards Board (CGSB) isalso developing standards in Canada for a B20 blend. Appendix C sets outmore details for ASTM standards for both B100 and B20.

- The main standards in Europe include DIN 51606 (Germany’s standard)and CEN Standard EN14214 (EU standard).

< Warranties:- Warranties vary. Some companies will warranty for B100, some for B20,

some “veggie only,” and some limited to B5.- In March 2001, Caterpillar released a document stating biodiesel fuel must

meet ASTM PS 121, DIN 51606 (the German standard) or Caterpillar’sown biodiesel specification in order to be used in their engines. Someengines may use biodiesel in any blend while others are restricted to amaximum of 5%.57 However, any failures due to the use of biodiesel willnot be covered under Caterpillar’s warranty.

- In August 2001, Cummins released their own biodiesel specifications andreported that biodiesel blends of 5% or less should not cause engineproblems.58

- Detroit Diesel will not cover any engine failures attributed to the use ofbiodiesel. They strongly recommend that biodiesel blends be restricted toless than 5%.59


29

60Memo released November 2, 2000.61John Deere release September 14, 2001.62Ibid.63Diesel Fuel Quality - Common Position Paper. March 5, 1999.64Knothe, G., Matheaus, A. C., and Ryan III, T. W. Cetane Numbers of Branched and Straight-Chain Fatty

Esters Determined in An Ignition Quality Tester. Elsevier, December 24, 2002.65Reported in Dunn, R. Table 1 in Biodiesel As A Locomotive Fuel in Canada. Report prepared for the

Transportation Development Centre, Transport Canada. May 2003.66BIOBUS Newsletter 2 - October 2002.67Biodiesel Demonstration and Assessment with the Société de Transport de Montréal (STM): Final

Report. May 2003, p. 11.

- International Engine Corporation states that “use of products such asbiodiesel is at the discretion of the end user. Any engine performanceproblem or failure attributed to biodiesel would not be recognized as theresponsibility of International Engine Corporation.”60

- John Deere states that biodiesel may be used in their engines providedthey meet ASTM PS 121 or DIN 51606 standards.61 However,performance loss or failures related to the use of biodiesel are not theresponsibility of John Deere.62

- Bosch states that no guarantee on FIE is given to any alternative fuelexcept for Diesel + 5% FAME.63

< Higher cloud point:- Cloud point is the temperature at which waxes first start to crystallize in a

fuel and is an indication of the temperature when fuel filters will becomeblocked and affect engine operation.

- The cloud point for biodiesel can range from -10°C to +20°C dependingon the feedstock source. When blended with diesel at a rate of 20%, itscloud point can range from 3 to 5°C higher than diesel.

- Cold starts and fuel freezing are big concerns in cold climates, but this canbe managed by using additives, lower blend levels, or biodiesel based onbranched fatty esters that have improved low temperature performance.64

However, no cloud point problems were reported by Canada Clean Fuelsin Toronto region bus and truck fleet trials during the winters of 2001-02and 2002-03.65 These trials used soybased biodiesel. Another trial ofbiodiesel using buses from the City of Montreal’s transit fleet found coldweather could be a problem for blends above 5% when animal fats areused as the feedstock.66 However, this should not pose a problem if thebuses remain running and are stored in heated garages.67


30

68Cummins Position on the Use of Biodiesel Fuel. Cummins Field Announcement, August 30, 2001. 69Dunn, R. Table 1 in Biodiesel As A Locomotive Fuel in Canada. Report prepared for the Transportation

Development Centre, Transport Canada. May 2003.70Ibid.71See other sections of the report that comment on fuel lubricity.72Cummins Position on the Use of Biodiesel Fuel. Cummins Field Announcement, August 30, 2001. 73Ibid.

< Lower energy intensity- Cummins testing indicates biodiesel produces 5-7% less energy intensity

per gallon, compared to diesel fuel.68

- Based simply on lower energy intensity, measured in MJ/kg, B100biodiesel has 1 to 10% lower energy content than diesel, depending on thefeedstock source used.69 For a B20 blend, this could translate into a 0.2 to2% increase in fuel consumption70 However, lower fuel intensity might beoffset by higher lubricity, which could reduce engine wear and improvefuel consumption.71 It also has a higher viscosity range, which results inslightly improved injection efficiency.72

< Some material compatibility issues:- More problems with B100 than B20.- Replace rubber seals and hoses with VitonTM.- Replace copper and brass pipes and fittings with steel.- Fuel pumps may need replacement with B100.

< Some solvency issues:- Biodiesel dissolves accumulated sediments in fuel systems, which can

plug up fuel filters.- Can remove paint.

4.2 Storage issues73

< B100 requires heaters in cold climates:- B20 and underground storage pose fewer problems.- Mixing B100 into cold diesel fuel causes problems.

< Some material compatibility issues:- Need to replace rubber seals and hoses with VitonTM

- Need to replace copper and brass pipes and fittings with steel.


31

74Ibid.75The US Environmental Protection Agency (EPA) has announced that long-term exposure to diesel

exhaust will likely cause lung cancer. Use of pure biodiesel (B100) made from soybean oil can reduce targetedcancer-causing emissions by 80% for Polycyclic Aromatic Hydrocarbons (PAH) and 90% for Nitrated PolycyclicAromatic Hydrocarbons (nPAH). The EPA study was based on diesel vehicles built prior to the mid-1990s. Vehiclesbuilt after that date use much cleaner burning technology. See Biodiesel Emissions Reduce Cancer Risks Comparedto Diesel. National Biodiesel Board news release, September 5, 2002.

76EESI Congressional Briefing: John Sheehan, National Renewable Energy Laboratory. July 31, 2002. Alsosee An Overview of Biodiesel and Petroleum Life Cycles. National Renewable Energy Laboratory. May 1998.

77A Comprehensive Analysis of Biodiesel Impacts on Exhaust Emissions. Draft Technical Report. USEnvironmental Protection Agency. October 2002.

< Limited storage stability:- Up to six months.- Need to consider antioxidants and biocides.

4.3 Environmental benefits/costs74

< Biodiesel is non-toxic and biodegradable.

< Cancer risk reduction:75

- Assuming No. 2 diesel risk is equal to 1.- B100 is equal to 0.064

- 86% reduction in quantity- 80% reduction in PM toxicity.

- B20 is equal to 0.725- 13.7% reduction in quantity- 16% reduction in PM toxicity.

CO2 emissions:

- Biodiesel emits 78.5% less CO2 than petroleum diesel over its life cycle.- B20 emits 15.66% less CO2.

< Energy efficiency:76

- Biodiesel produces 3.2 units of fuel energy for every unit of fossil fuelconsumed in its life cycle.

- Petroleum diesel yields 0.83 units.

Smog and air pollution:77

- A B20 blend using soybean-based biodiesel compared to an average basediesel fuel had the following emissions:


32

78Notwithstanding the higher NOx emissions, B20 produces emissions within the legal limits with a varietyof engines.

- 2.0% increase in NOx (sulphur oxide)78

- 10.1% decrease in PM (particulate matter)- 21.1% decrease in HC (hydrocarbons)- 11.0% decrease in CO (carbon monoxide)- no difference in CO2 tailpipe emissions (reductions in CO2

emissions are a result of renewable crop production)- Emission impacts vary according to type of biodiesel (e.g., soybean,

rapeseed, animal fats) and type of conventional diesel fuel used in theblend.

- These emission impacts were based on heavy-duty highway engines, andthe results can not be extrapolated to light-duty diesel vehicles or off-roadequipment.

- The highest NOx emissions come from soy feedstocks followed indeclining order by emissions from canola, yellow grease, lard, tallow, andpetroleum diesel (see figure below).


33

79Source: 1991 Detroit Diesel Series 60, Colarado School of Mines, 1999. Referenced by Lynch, E.Biodiesel: An Environmental Perspective. Biodiesel Fuels: The Flexible Option Conference. Sacramento, California.September 25, 2001.

80Lopp, D., and Stanley, D.. Soy Diesel Blends: Use in Aviation Turbine Engines. Purdue University.September 2, 1995.

0

2

4

6

8

10

12

14

16

soy canola yellowgrease

lard edibletallow

inedibletallow

% c

hang

e N

Ox

g/bh

p-hr

Nox FEEDSTOCK DIFFERENCES79

< However, the addition of DTBP reduces these emissions. There is also research tosuggest that NOx can be reduced to baseline levels by adjusting the injectiontiming of the engine and the addition of a platinum catalyst.80


34

81Ye, Su. Supply and Demand of Soybeans as Feedstock for Soy Diesel. Minnesota Department ofAgriculture. June 2000.

82For a similar conclusion, see Campbell, John B. New Markets for Bio-Based Energy and IndustrialFeedstocks: Biodiesel - Will There Be Enough? Paper presented at the Agricultural Outlook Forum. February 25,2000.

4.4 Key markets81

As discussed above, diesel fuel use for on-road transportation, rail, marine, and other off-roadapplications dwarfs the current and future production capabilities of the vegetable oil and animalfats industries.82 As a result, biodiesel is generally targeted at niche markets, namely:

< fleet vehicles< mass transit< marine< railroad< on farm< residential and commercial heating oil< mines< environmentally sensitive areas like parks< lubricity additive.< cetane improver.

4.4.1 Government fleet vehicles

The US Energy Policy Act, 1992 regulations requires federal, state, and private alternative fuelproviders to purchase specific percentages of alternative fuel vehicles beginning in the 1996model year.


35

83Noyes, G., and Burke, T. Getting Biodiesel Into Your Fleet. Renewable Biodiesel Fuels: The FlexibleOptions Conference. Sacramento, California. September 25, 2001.

84Booz Allan Hamilton. Market Potential of Biodiesel in Regulated Fleets, Marine Vessels, andUnderground Mining Equipment. Report to the United Soybean Board. November 11, 1998.

85Ibid. 86These estimates may even be on the high side. For example, the consumption of diesel fuel by the Ontario

provincial government (Canada’s largest province) is known to be only about 1 million litres annually or 264,201gallons per year.

At present, the following US federal and state fleets are known to be using biodiesel:83

Table 8: Federal and state fleets known to be using biodiesel< State of Ohio< State of New Jersey< State of Michigan< US Post Office< US Department of Agriculture< US Department of the Interior< Florida Department of Transportation< North Carolina Department of Transportation< State of Delaware

< New Jersey Transit< Southwest Ohio Transit< State of Alabama< Virginia Department of Transportation< State of Connecticut< US Navy

Booz Allen Hamilton has tried to estimate the market demand resulting from the AlternativeFuel Transportation program. It established two scenarios: a base case and an aggressivescenario.

In the base case scenario, it projected the market potential for B20 at approximately 1.3 millionlitres in 1999, rising to 12.5 million litres in 2005. This translates to 265,000 to 2,460,000 litresof B100. At $1.01 per litre, this would yield an annual revenue of $269,000 to $2.5 million in2005.84

Using an upper bound, aggressive scenario, it estimated B20 use at 15 million litres in 1999,rising to 140 million litres in 2005. This represents 3 to 28 million litres of B100. At $1.01 perlitre, this represents a revenue of $3.1 to $28 million.85

We do not have diesel fuel consumption by the Canadian federal and provincial governmentfleets. Assuming the Canadian government fleet market is 1/10 of the US, the most aggressivescenario would result in Canadian biodiesel sales to federal and provincial fleets of 14 millionlitres. Assuming biodiesel sold at $3.00 US per gallon, the revenue would be only $11.1 USmillion per year.86


36

87Howell, S.A., and Weber, A. U.S. Biodiesel Overview. National Biodiesel Board. January 1995.88Ibid.89Tyson, K. Shaine. Biodiesel: The Flexible Fuel. Biodiesel: Renewable Biodiesel Fuels: The Flexible

Option Conference. Sacramento, California. September 25, 2001.90Booz Allan Hamilton. Market Potential of Biodiesel in Regulated Fleets, Marine Vessels, and

Underground Mining Equipment. Report to the United Soybean Board. November 11, 1998. For a comparison ofB20 to low sulphur diesel, see Schumacker, L.G., Weber, J.A., Russell M.D., and Krahl, J.G. An Alternative FuelFor Urban Buses. National Biodiesel Board Document Database. August 1995.

These data do not paint a very optimistic picture. If you recall from our earlier section onproduction costs, a 57 million litre, stand-alone, biodiesel plant is required to reach economies ofscale; even an aggressive marketing scenario for biodiesel on-road use by government fleets would rise within 6 years to 14 million litres—not enough to keep a single 57 million litrebiodiesel plant running at anywhere near capacity.

Although Canadian federal and provincial government fleets, by themselves, do not offer amarket large enough to sustain a biodiesel plant, they can demonstrate leadership by providing ahighly visible public example of biodiesel use. They could also participate by working with thebiodiesel industry in the generation, collection, and distribution of field demonstration data.

4.4.2 Mass transit

Mass transit is seen as a good potential market because it is government funded and less likelythan commercial fleets to face the same competitive pressures to reduce costs. Mass transit busesare also centrally fuelled, follow routine schedules, and have high public visibility—all factorsconducive to market acceptance.

The American Public Transit Association (APTA) estimates the urban bus market in the USconsumes 2.2 billion litres of petrodiesel annually.87

Approximately 80% of the 58,000 mass transit buses in the US are subjected to theEnvironmental Protection Agency’s Clean Air Act of 1990.88 The Act requires a reduction in PMemissions beginning in 1995. A B100 summer blend could reduce PM emissions by 55%, whilea B20 winter blend could reduce PM emissions by 18%.89

A study by Booz Allen Hamilton suggests that a B20 blend is competitive compared to otheralternative fuel options (e.g., compressed natural gas) because of lower life cycle costs. Thiscomparative advantage would be strongest for small fleet operators with low annual fuelconsumption.90 These findings are supported by a study conducted at the University of Georgia,which reports the life cycle costs for diesel buses at 19.6 cents per kilometre; biodiesel-poweredbuses at 22.2 to 37.8 cents per kilometre depending on blend (B20 vs B100) and biodiesel prices


37

91Ahouissoussi, N., and Wetzstein, M. Life-Cycle Costs of Alternative Fuels: Is Biodiesel Cost-Competitive for Urban Buses? National Biodiesel Document Database. September 1995.

92BIOBUS Newsletter Issue 1 - April 2002; Newsletter 2 - October 2002; Newsletter 2 - May 2003.93Ibid.94BIOBUS Newsletter 2 - October 2002.95Biodiesel Demonstration and Assessment with the Société de Transport de Montréal (STM): Final

Report. May, 2003 p. 11.96BIOBUS Newsletter Issue 3 - May 2003. 97Ibid, p. 18.98Ibid.

($0.85 per litre vs $1.01 per litre); 29.8 to 33.4 cents per kilometre for CNG; and 58.5 cents perkilometre for methanol-powered buses.91

One of the largest biodiesel demonstrations in North America was conducted by the Société deTransport de Montréal (STM) in Montréal. The $1.3 million project evaluated the economic andenvironmental impacts of using about 500,000 litres of B5 and B20 biodiesel blends in 155 masstransit buses using vegetable oil (B5), animal fats (B20), and recycled cooking oil (B20) asfeedstock sources. The demonstration, called BIOBUS, was carried out between March 2002 andMarch 2003. Partners in the demonstration included the Canadian Renewable Fuels Association,Fédération des producteurs de cultures commerciales du Québec (FPCCQ), STM, Rothsay/Laurenco (member of Maple Leaf Foods Group), Natural Resources Canada, EnvironmentCanada, Environment Québec, and Transports Québec.92

Testing carried out by Environment Canada’s Environmental Technology Centre indicated “theuse of biodiesel blends have no significant impact on performance of mechanical-injection dieselengines with respect to power, maximum torque and fuel consumption.”93 The study also found“the use of animal-based fat biodiesel in cold weather will be a major challenge, particularly atconcentrations above 5%” because of poorer ASTM cloud point and low-temperaturefilterability threshold values.94 However, this should not pose a problem if the buses remainrunning and are stored in heated garages.95 All three feedstock sources provided lubricitysuperior to petrodiesel, even at low concentrations.96

Emissions testing indicated that biodiesel, regardless of concentration or source, can help reducesmog formation. Unlike other studies, NOx emissions were not increased in comparison to the #2diesel low sulphur (500 ppm) reference standard and could even reduce them.97 Emissionsreductions were not found to be a simple linear function of biodiesel concentration. In fact, theB5 animal fat biodiesel blend had the most potential for reducing ozone-forming emissions.98


38

99Montréal Gazette. June 14, 2003.100Biodiesel Marine Market Pre-evaluation. Final report to the National Biodiesel Board by Arthur D.

Little. September 7, 1995.

In general, the demonstration was considered successful, but the recent decision by the Québecgovernment not to remove the 16.4 cent per litre tax on biodiesel could negatively impact theeconomics of biodiesel purchases and may stop the program from expanding to include the full1,600-bus fleet.99

Other Canadian biodiesel demonstrations include:

< The City of Brampton runs all of its 137 transit buses on B20. It is the firstmunicipality in Canada to commit to using biodiesel.

< The City of Vaughan has started a pilot project using biodiesel blends in selectedCity and Hydro fleet vehicles with the intention of converting the entire fleet inthe future.

< The City of Saskatoon has initiated a BioBus pilot project. Over the next twoyears, two transit buses will use a 5% blend of canola biodiesel.

< Five Lower Mainland municipalities in BC (Burnaby, Delta, the City of NorthVancouver, Richmond, Vancouver) and the resort municipality of Whistler willbe testing biodiesel in a dozen heavy-duty vehicles, such as garbage trucks.

The demand for biodiesel blends within the Canadian municipal mass transit market will likelycontinue to expand and provide an important market.

4.4.3 Marine vessels

The marine market in the US is divided into the following market segments:100

< Recreational vessels (e.g., pleasure craft) – approximately 1 million boats arediesel powered and use about 360 million litres of diesel fuel.

< Inland, harbour, and coastal commercial vessels (e.g., fishing vessels, freighters,ferries, tug boats, barges, etc.) – approximately 33,000 are diesel powered andconsume 10.2 billion litres.

< Ocean-going commercial vessels (e.g., tankers, container ships, passenger liners,cruise ships, etc.) – approximately 180 are diesel powered and consume anestimated 76 million litres of diesel fuel.


39

101A number of marketing efforts have been targeted at this niche area. See, for example, IntroducingBiodiesel in the Great Lakes Recreational Marine Market. A report produced by the Great Lakes Biodiesel MarketDevelopment Program with funding assistance from the Illinois Soybean Marketing Board. June 1999. Teall, R.Introducing Biodiesel Into The Marine Market - Phase I Florida Keys. National Biodiesel Board Report. October1995. Von Wedel, R. Technical Handbook for Marine Biodiesel in Recreational Boats. Report prepared for theNREL, US Department of Energy. April 1999.

102Biodiesel Marine Market Pre-evaluation. Final report to the National Biodiesel Board by Arthur D.Little. September 7, 1995.

103Booz Allen Hamilton. Market Potential of Biodiesel in Regulated Fleets, Marine Vessels, andUnderground Mining. Report to the United Soybean Board. November 11, 1998.

104Ibid.

< Government affiliated vessels (military ships, coast guard) – approximately 100military ships and 2,000 coast guard ships are diesel powered and consume about114 million litres.

< Research vessels – about 80 are diesel powered and consume 151 million litres ofdiesel fuel.

The main diesel engine manufacturers for recreational vessels are Yanmar (40–60%), VolvoPenta (15–30%), and Perkins (5–10%). The main engine manufacturers for inland/harbourcommercial vessels are Caterpillar (40–45%), Cummin (25–30%), and Detroit Diesel (20–25%).

Recreational vessels represent the best market opportunity for biodiesel blends.101 Approximately1 million diesel-powered boats operating in and around the US consume about 360 million litresof diesel fuel annually. Unlike commercial vessels, annual fuel usage is generally low, and thehigher fuel cost of biodiesel can be more easily offset by the benefits of greater fire safety,improved exhaust odour, reduced environmental liability for spills, and green image.102

About 85–90% of sailboat operators have been shown in biodiesel industry studies to be highlysupportive of biodiesel.103 About 70% of recreational boaters, especially tour and dive boatoperators and government agencies, are willing to pay 10 cents more per litre for B20. Thismarket niche could be addressed by biodiesel if there was increased manufacturer (i.e., warranty)support and more convenient distribution involving pre-blended fuels.104


40

105Biodiesel Marine Market Pre-evaluation. Final report to the National Biodiesel Board by Arthur D.Little. September 7, 1995.


107Ibid.

The higher cost of biodiesel will be a major market barrier for commercial vessels where fuelcosts represent a major portion of total operating costs.105 Commercial boaters are not willing topay even a few cents more per gallon for biodiesel.106

Booz Allen Hamilton have projected the potential US market for B20 in the recreational boatingcategory:107

Table 9: Projected B20 market share of the recreational marine marketMarket segment Diesel consumption B20 share B20 consumption

Sailboats 15 million litres 25% 3.8 million litresOther recreational boaters 500 million litres 5% 25.0 million litresPublic transit ferries 83 million litres 10% 8.3 million litresTotal 37.1 million litres

Even in the large US market, recreational boaters would provide a market for only 7.6 millionlitres of B100. In Canada, this would amount to probably only 757,000 litres. Given thedispersed location of recreational users and the difficulties in distribution, the marine marketprovides limited opportunities for biodiesel.

To break into the large, price-sensitive, commercial marine market — estimated to be over7.6 billion litres — will require a drastic reduction in biodiesel fuel prices, which tend to beabout twice as high as regular diesel.


41

108Statistics Canada. Quarterly Report on Energy Supply-Demand in Canada 2001-IV, Catalogue no.57-003-XPB.

109US Energy Information Administration. Fuel Oil and Kerosene Sales, 2002. See Table 13, AdjustedSales of Distillate Fuel Oil by Energy Use in the United States: 1998 - 2002.

110Dunn, R. Table 1 in Biodiesel As A Locomotive Fuel in Canada. Report prepared for the TransportationDevelopment Centre, Transport Canada. May 2003.

111Ibid.

4.4.4 Railroad use

In 2001, Canadian railways consumed 2.13 billion litres of diesel fuel, or 9.5% of the total dieselmarket.108 This significant niche market has the potential to be more important in the Canadiancontext than it might be in the US, where it represents only 5% of the total diesel market.109 If Canadian railways used a B20 blend, there would be it would create a market for about 400million litres of neat biodiesel.

Urban commuter rail operations are likely to be near term market opportunities, including:110

< the AMT service in Montreal, which operates 15 locomotives and uses 2.56million litres of diesel fuel annually

< the GO train service in Toronto, which operates 45 locomotives and uses 21.6million litres annually

< the West Coast Express (WCE) in Vancouver, which operates 6 locomotives anduses 1 million litres per year.

Intercity passenger operations could also be considered for demonstrations including:

< the VIA Rail Quebec-Windsor Corridor service, which operates 35 locomotivesand consumes 30 million litres of diesel annually.

Freight switching operations could be another opportunity for demonstrating biodiesel becausethey typically use older engines where warranty issues are not as critical. As well, the duty cycleof switching locomotives is such that fuel consumption concerns would also be minimized.111

< There are 643 switching locomotives in Canada, which consume about 5% ofCanadian railway diesel fuel.


42

112Ibid.113Ibid.114This position does not take into account other environmental and economic benefits including fewer

emissions of carcinogens, improved fuel biodegradability, diversification of energy supply, and rural economicdevelopment.

Freight locomotives in Canada are generally modern and EPA-compliant. Many of theselocomotives are still under warranty. These would not be good candidates for demonstration.112

In general, there are currently a number of barriers to using biodiesel in railway locomotives:113

< Cost – B20 in Canada currently costs about 2 – 4 cents per litre more than diesel.The higher biodiesel costs remain, even after the removal of federal andprovincial excise taxes. However, this may improve if diesel costs increase in thefuture and biodiesel production costs decline as a result of improved economies ofscale.

< Higher NOx emisions – Research by the Southwest Research Institute using a GMEMD GP-38 locomotive engine found increased NOx emissions of 5 – 6%. This isa concern to the Railway Association of Canada because it has signed amemorandum of agreement with Environment Canada, promising to cap NOxemissions at 115 kilotonnes per year through to 2005. Despite fuel savingsinitiatives, increased railroad traffic has meant that members of the associationhave been very close to exceeding the cap.

< Few greenhouse gas (GHG) incentives for railway use – The life cycle CO2reduction savings from using biodiesel occur mostly at the production stage of thelife cycle. There appear to be minimal savings on the transportation side due tothe lower energy intensity and potentially higher (slightly) fuel consumption.There would have to be incentives for railways to use biodiesel as a GHGreduction strategy. An emissions trading system would have to share GHG creditswith end users, like railways. At the moment, the producers want to claim thecredit for emissions reduction without taking into account the important role thatend users play in creating markets for the fuel producer.114

< Lack of field testing – Most of the current field testing of biodiesel fuel has beenconducted using high-speed diesel engines found in trucks and buses. It isdifficult to extrapolate the emissions profile from high speed diesel engines tomedium speed locomotive engines. There is a need to perform testing onCanadian freight locomotives, such as the older GM EMD SD-40 locomotive. Inaddition, no performance or emissions testing has been conducted on the new


43

115Ibid., p. 11.116Ibid., p. 13. This would require an independent testing laboratory like the Engine Systems Development

Centre (located in Lachine, Quebec) to benchmark biodiesel and diesel performance and emissions in medium-speeddiesel locomotive engines used in Canada. Tests would be performed in accordance with the procedures specified inPart 92 (Control of Air Pollution from Locomotive and Locomotive Engines) of Title 40 of the Code of FederalRegulations (40 CFR) administered by the US EPA.

117Statistics Canada. Quarterly Report on Energy Supply-Demand in Canada 2001-IV, Catalogue no.57-003-XPB.

118US Energy Information Administration. Fuel Oil and Kerosene Sales, 2002. See Table 13, AdjustedSales of Distillate Fuel Oil by Energy Use in the United States: 1998 - 2002.

Pratt & Whitney gas turbine engine that is being used in Bombardier’s prototypehigh-speed JetTrain passenger train. Critical research questions would be theeffect of biodiesel on “startability and operations, and whether the biodieselwould produce smoke and undue carbon erosion of the combuster nozzle andturbine blades.”115

< US EPA engine certification – Canada purchases new locomotive engines that areEPA-certified compliant at the time of purchase using in-service diesel fuel. “Inorder to maintain EPA certification when using biodiesel, US EPA-compliancetesting would have to be performed on existing US EPA-compliant locomotivesoriginally certified with diesel.”116

< No warranty protection – At the moment, the two North American locomotiveengine builders are still developing their position on biodiesel use. Extensivetesting and evaluation would have to be conducted to determine engine reliabilityand emissions compliance.

< Security of supply – Currently, there is no commercial-scale biodiesel productionin Canada.

4.4.5 On-farm use

On-farm use of biodiesel is another large potential niche market.

In 2001, Canadian agriculture consumed 2.5 billion litres or 11% of the total market for dieselfuel in Canada.117 The market share represented by Canadian agriculture is significantly largerthan in the US where agricultural consumption represents only 6% of the US diesel fuelmarket.118


44

119National Biodiesel Board news release, October 31, 2002.120Fact Sheet on Farmer Use, National Biodiesel Board.121National Biodiesel Board news release, August 30, 2001.122Ibid.123National Biodiesel Board news release, February 27, 2003.124Ibid.

Bob Metz, president of the National Biodiesel Board and a soybean farmer in South Dakota, hascalled for all farmers to use a B2 blend in their farm equipment.119 If a B2 blend was usedthroughout Canadian agriculture, it would create a market for 50 million litres of neat biodiesel.Biodiesel blends may offer farmers several benefits that outweigh paying just a few cents moreper gallon than petroleum diesel. According to the US National Biodiesel Board, the benefits forfarmers include:120

< exceptional lubricity< longer equipment life< lower maintenance costs and less equipment down time< a cleaner-burning fuel that is friendlier to the user and the environment< showing leadership in promoting use of a renewable fuel< increased biodiesel demand helps improve oilseed prices (and therefore net farm

income).

Examples of distributors that have begun targeting this market segment in the US include:

< Fauser Oil (Elgin, Iowa), which obtains biodiesel from Ag Processing Inc. andcreates a B2 blend, which it sells at the same price as premium diesel to farmersin northeastern Iowa.

< Houseman Oil (Estherville, Iowa) is selling B2 to farmers in the northwestern partof Iowa. B2 sells for a few cents more than #2 diesel.121

< Logan Agri-Service Inc. sells B10 to famers in west central Illinois for 5 centsmore per gallon than diesel.122

Other agricultural stakeholders participating in the support of biodiesel include:

< The Pioneer Hi-Bred International seed company has committed to usingbiodiesel blends in its on-road and farm and tractor equipment as of April 1,2003.123 The policy will affect Pioneer’s US and Canadian research and supplymanagement operations and includes more than 300 diesel vehicles and pieces offarm equipment. Pioneer purchases an average of 200,000 gallons (litres) of dieselfuel annually.124 It also joined the Biodiesel Alliance, a broad coalition of over


45

125Ibid.126National Biodiesel Board Fact Sheet web site. See section on heating oil.127Statistics Canada. Quarterly Report on Energy Supply-Demand in Canada 2001-IV, Catalogue no.

57-003-XPB.128Krishna, C.R. Biodiesel Blends in Space heating Equipment. Report prepared by the Brookhaven

National Laboratory for the National Renewable Energy Laboratory. December 2001.129Ibid.

325 nonprofit organizations, private companies, and government agencies thatsupport the increased use of biodiesel.125

< The farm equipment giant, New Holland North America, has also joined theBiodiesel Alliance.

4.4.6 Residential and commercial heating oil

Based on data from the Energy Information Agency for the year 2000, No. 2 heating oil isconsumed in 7.7 million homes in the US, with about 69% located in the Northeast. USconsumption in 2000 was 6.7 billion gallons, of which 88% or 5.5 billion gallons was consumedin 11 mid-Atlantic and northeastern states.126

In Canada, commercial and institutional diesel use accounts for 3.3 billion litres, or 15% of thetotal diesel market in Canada.127

Brookhaven National Laboratory has tested a number of biodiesel blends in home heating andcommercial boiler equipment. Their results indicate that biodiesel blends can be used with fewor no modifications to equipment or operating practices. The study also found reductions insmoke and NOx emissions.128 The researchers recommended the following furtherinvestigations:129

< A B20 blend should be tested over several heating seasons in the field to identifyany potential problems

< Laboratory testing should be carried out to determine the effects on non-metallicmaterials, e.g., pump seals, valve seats, etc.

< The mechanisms behind the reduction in NOx emissions in boilers should bediscovered, and scale-up laws should be established.

The National Oilheat Research Alliance has evaluated the performance and emissions of a B20soy diesel blend with low-sulphur (0.05%) highway diesel compared to conventional home


46

130Batey, John, E. Final Report. Combustion Testing of A Bio-Diesel Fuel Oil Blend in Residential OilBurning Equipment. A report prepared for the Massachusetts Oilheat Council & National Oilheat Research Alliance.July 2003.

131Ibid.132Cerio, Robert S. Warwick Public Schools BioHeat Project. Slide presentation found on National

Biodiesel Board web site.133Fish oil is also being considered as a replacement for diesel fuel in electricity generators. UniSea Inc. in

Alaska has been studying the effects of using a 50/50 blend of fish oil and diesel fuel in a 2.3 megawatt dieselgenerator. See Steigers, J. A. Demonstrating the Use of Fish Oil as Fuel in a Large Stationary Diesel Engine.

heating oil in a range of furnaces and boilers.130 Key observations and findings from the studyinclude:

< NOx emissions are frequently reduced by 20%< good combustion stability, similar to conventional heating oil< SOx emissions are reduced by 83%< a 16% net reduction in CO2< reduced smoke numbers< improvement in fuel oil and combustion odours.

These results indicate that biodiesel blends can be used as a premium home heating fuel.

The researchers indicate that the following additional research is required:131

< combustion testing across a range of blends to optimize performance and cost< tests for cold flow characteristics using above ground outdoor fuel storage tanks< tests with ultra-low sulphur (0.0015%) fuel oil< long-term tests of boiler fouling rates with biodiesel fuels< field tests and demonstrations.

Several field demonstrations are being conducted by public sector organizations. TheAgricultural Research Service of the US Department of Agriculture began using a B5 blend in itsheating oil in the winter of 2000. The Warwick Public School Department in Warwick RhodeIsland began testing biodiesel blends (10%, 15%, 20%) in medium to large boilers starting in2001/02. They also found a significant reduction in NOx emissions using a B20 blend.132

Biodiesel made from waste fish oil should also be studied further. In Canada, Ocean Nutrition(Mulgave, Nova Scotia) has signed a 10-year deal with Wilson Fuels Inc. for 5 million litres ofbiodiesel per year. Wilson Fuels intends to sell a biodiesel blend for home heating.133


47

134See Howell, S., and Weber, J.A. Biodiesel Use in Underground Metal and Nonmetal Mines. NationalBiodiesel Board. May 1997.

135Sheehan, J., Camobreco, V., Duffield, J., Graboski, M., Shapouri, H. An Overview of Biodiesel andPetroleum Diesel Life Cycles. A Joint Study Sponsored by the US Departments of Agriculture and Energy. May1998.

136See Howell, S., and Weber, J.A. Biodiesel Use in Underground Metal and Nonmetal Mines. NationalBiodiesel Board. May 1997. This paper provides a useful summary of the advantages of biodiesel for undergroundmines and summarizes some of the other benefits like biodegradability, higher flash point, improved lubricity, lowertoxicity, ability to use with existing equipment, etc.

137Howell, S.A., and Weber, A. U.S. Biodiesel Overview. National Biodiesel Board. January 1995.138Biodiesel Fuels for Underground Mines. Report to the National Biodiesel Board by Power Systems

Research. August 31, 1995.139Ibid.

4.4.7 Underground mines

Evidence indicates diesel PM is a potential carcinogen and may pose a special hazard to thoseworking in confined areas like underground mines.134 A number of researchers have suggestedthat biodiesel’s reduced air emissions profile might open the door to this niche market.

Biodiesel reduces tailpipe emissions of PM, CO2, and CO. Sulphur (SO) emissions are absent.HC tailpipe emissions are reduced significantly, but their life cycle emissions are increased. NOxare increased.135

A test conducted by the US Bureau of Mines using a Caterpillar 3304 PCNA equipped with anexhaust catalyst found that biodiesel reduced the Ames mutagenicity of diesel particulate matter(DPM) by 50% over conventional diesel fuel. The reduction in mutagenicity appears to be theresult of the lack of aromatics or polycyclic aromatic hydrocarbons (PAHs) in biodiesel fuel.136

In the US, there are over 250 metal and non-metal mines and almost 190 coal mines that usediesel engines that consume over 2.3 billion litres of diesel fuel.137

Almost 9,000 pieces of diesel equipment are used in the US mining industry. The breakdown byequipment includes: rubber tired loaders (25%), drills (12%), trucks (11%), haulage (5%),personal carts (36%), forklifts (2%), bulldozers (2%), load haul dump (3%), and others (4%).138

The relatively small market size for these specialized pieces of equipment means thatdevelopment cycles for new technologies are typically quite long. Biodiesel offers mine ownersthe possibility of meeting emission reduction goals using biodiesel with existing diesel and aftertreatment pollution control technologies (Exhaust Gas Realization [EGR], catalysts, etc.).139


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140Fruin, J.E., and Tiffany, D.G. Economic Analysis of Biodiesel Usage in Underground Mines. Bioenergy98 Expanding Bioenergy Partnerships. 1998.

141Ibid.142Ibid.143Booz Allen Hamilton. Market Potential of Biodiesel in Regulated Fleets, Marine Vessels, and

Underground Mining. Report to the United Soybean Board. November 11, 1998. 144Ibid. 145See Fruin, J.E., and Tiffany, D.G. Economic Analysis of Biodiesel Usage in Underground Mines.

Bioenergy 98 Expanding Bioenergy Partnerships. 1998. Booz Allen Hamilton. Market Potential of Biodiesel inRegulated Fleets, Marine Vessels, and Underground Mining. Report to the United Soybean Board November 11,1998.

The acceptance of biodiesel in underground mines depends greatly on economics. Mine ownersbasically have two strategies for controlling particulate emissions:

< use disposable filters (DF) that trap particulates on machines using regular dieselfuel

< use neat biodiesel (or a blend) on machines that employ catalytic converters.

A comparative study of the economics of using these two strategies found that the reduction ofPM in either metal or coal mines is about 70% when the entire complement of mine vehicles usedisposable filters. To achieve the same level of emissions reduction would require the use ofB100.140

In the case of the metal mine case study, B100 would have to be priced at $0.40 per litre to breakeven with disposable filters, while in coal mines it could break even at $0.48 per litre.141

Factoring “lost production” in coal mines suggests that biodiesel could even be competitive at$0.64 per litre. Biodiesel may also be easier to implement because no maintenance or minertraining is required.142

Effective April 25, 1997, the US Department of Labour, Mine Safety and Health Administration(MSHA) required underground coal mines to use low-sulphur diesel fuel only and provideadequate ventilation to exhaust contaminants.143 On April 9, 1998, MSHA also proposed a rulerequiring mine operators to install and maintain high-efficiency filtration systems on all heavyduty equipment used in underground coal mines. The filtration system must remove 95% ofdiesel PM emissions. These emission reductions cannot be achieved, even using B100.144

Although biodiesel could target light duty underground mining equipment, this equipment is bydefinition not used frequently and does not consume much fuel. It is unlikely that mine operatorswould go to the bother of installing a separate fuel storage system for so little benefit.145


49

146Evaluation of Biodiesel Fuel and a Diesel Oxidation Catalyst in an Underground Metal Mine. DieselEmissions Evaluation Program. Natural Resources Canada. Project Summary.

147Peeples, James E. Biodiesel Parks and Environmentally Sensitive Areas: Market Pre-Evaluation Study.Report to the National Biodiesel Board. February 1996.

148Ibid.

The conclusion seems to be that underground mining does not offer much hope for biodiesel. Itis too expensive and cannot meet the performance targets for heavy equipment set out by theMSHA.

A Canadian study conducted in 1997 at the INCO metal mine in Sudbury found 21% lower totalcarbon emissions when a diesel-powered scooptram equipped with diesel oxide catalysts used ablend of 58% soy-based biodiesel and low-sulphur No. 2 diesel, compared to low-sulphur No. 2diesel used alone. The results, however, were lower than the researchers initially expected(30% – 50%). One of the main barriers to adoption will be costs. At 1997 price levels, biodieselfuel ranged from $3.00 to $3.50 US per gallon compared to $1.00 US per gallon for low-sulphurNo. 2 diesel. At a 50% blend, the cost would be between $2.00 to $2.25 US per gallon. Biodieselfuel costs would have to be significantly lower for it to be a viable particulate emissions controloption for underground metal mines in Canada.146

4.4.8 Parks and other environmentally sensitive areas

The release of air pollution and toxic exhaust emissions and fuel spills can have a significantimpact on forests and marine life. Because biodiesel is biodegradable and non-toxic, and hasfewer toxic emissions, US federal and state agencies consider it an important component of anoverall strategy for protecting parks and other environmentally sensitive areas.

A survey conducted for the National Biodiesel Board in the mid 1990s found that over 5,000pieces of diesel-powered equipment are used in US federal and state parks and environmentallysensitive areas. A diverse range of diesel-powered equipment is used, including medium toheavy-duty trucks, a wide range of marine vessels, fire control equipment, locomotives, utilitytractors and mowers, road construction and maintenance equipment, stationary generators, andair compressors. Caterpillar and Cummin were the most frequently cited suppliers of dieselequipment.147

Based on the results of the survey, the total diesel demand was estimated at 379 million litres peryear. Assuming biodiesel was used as both a blend (e.g., B20) and in neat form (B100), the studyprojected the near-term market for biodiesel in the US to be about the equivalent of 11.4 millionlitres of B100, excluding the use of biodiesel by the US Coast Guard. If the Coast Guard movedto B20, it could add an additional demand for 49.2 million litres of biodiesel.148


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149At present, over 650 pieces of equipment in 19 US national parks are using biodiesel blends to power onand off road equipment as well as power stand-by generators. See Bullard, K. Environmental Leadership in theNational Parks. Biodiesel Fuels: The Flexible Option Conference. Sacramento, California. September 25, 2001.

150Howell, S., Sharp, C., and Tyson, K. Shaine. Exhaust Emissions and Performance of Diesel Engines withBiodiesel Fuels. Renewable Biodiesel Fuels: The Flexible Option Conference. Sacramento, California. September25, 2001.

151Reported by Hertz, P. Barry. Biodiesel Fuel Lubricity Additives for Increasing Engine Life andEfficiency. Presentation to the Association of Professional Engineers and Geoscientists of Saskatchewan. Saskatoon,Saskatchewan. May 3, 2003.

Assuming that the Canadian market for biodiesel in parks and environmentally sensitive areas isabout 1/10th the US market, this niche market could provide a projected demand for about 1.1million litres of biodiesel, excluding fuels used by the Canadian Coast Guard. This is a smallmarket that is relatively fragmented by types and uses of diesel equipment, making efforts tocommunicate and organize change difficult, though not impossible.149

Capturing this market niche will be a challenge given the higher price of biodiesel fuel and theprospect that Canada, like the US, could head into another economic downturn and create afiscal environment not conducive to accepting higher fuel costs. In addition, any attempts to usebiodiesel in its neat form (B100) will face additional challenges because recent tests indicate thatpower levels are lowered by about 10% and fuel consumption is increased by about 13%.150

4.4.9 Lubricity additives

In general, diesel fuel additives are used to create “premium” fuels. Additive “packages” cancontain any of the following:

< detergents (to keep fuel injectors clean and prevent engine deposits that makeengines lose power and run poorly)

< cetane improvers (to improve cold starts and reduce white smoke)< corrosion inhibitors (to prevent corrosion in engines as well as pipelines) and< lubricity additives (to reduce friction, improve gas mileage, and reduce engine

wear).

Lubricity additives are particularly important for low sulphur diesel fuel (less than 500 ppm)because the hydrotreatment process lowers the natural fuel lubricity by removing nitrogen andoxygen compounds. When low-sulphur diesel fuel was first introduced in 1994, there were highwear failures in diesel engines and fuel pumps. For example, both Bosch (VW) and Stanadyne(GM) have reported rotary injection pump failures caused from reduced lubricity in low sulphurfuels. Refiners have responded to the problem by using various lubricity additives.151


51

152Van Gerpen, Jon H. and Chang, David Y.Z. Evaluation of the Lubricity of Soybean Oil-Based Additivesin Diesel Fuel. Study prepared for the United Soybean Board. February 25, 1998.

153Ibid.154Reported by Hertz, P. Barry. Biodiesel Fuel Lubricity Additives for Increasing Engine Life and

Efficiency. Presentation to the Association of Professional Engineers and Geoscientists of Saskatchewan. Saskatoon,Saskatchewan. May 3, 2003.

155Munson, Jason W., and Hertz, P. Barry. Seasonal Diesel Fuel and Fuel Additive Lubricity Survey Usingthe “Munson ROCLE” Bench Test. SAE Technical Paper 1999-01-3588. October 1999.

156Hertz, P. Barry. Winter Engine Wear Comparisons With A Canola Bio-Diesel Fuel Blend. A studyprepared for the Saskatchewan Canola Development Commission. May 1995.

Commercial grades of No. 1 diesel and No. 2 diesel now both contain additives. Yet even thoughNo. 2 diesel has greater lubricity than No. 1 diesel, many of the No. 2 diesel fuels sold in NorthAmerica do not meet minimum lubricity requirements recommended by engine manufacturers.152

Lubricity problems are particularly acute in the winter months when No. 1 diesel is used, or ablend of No. 1 and No. 2 is used to combat gelling.153

Moreover, according to Paramins’ worldwide survey of winter diesel fuel quality, the lubricity ofCanadian winter diesel for the years 1996–1998 was consistently among the worst in theworld.154 In fact, lubricity testing by the University of Saskatchewan in 1999 using the M-ROCLE bench scale test found that only 4 of 9 Saskatoon winter and summer diesel fuels passedminimum lubricity requirements.155

The proposed 2006 Canada and US diesel fuel standards will require still further sulphur levelreductions to less than 15 ppm. This is expected to cause even further lubricity problems.

Lubricity Studies at the University of Saskatchewan

As early as 1995, research at the University of Saskatchewan demonstrated that an Isuzu 1.8 litreIDI diesel powered automobile operating under Saskatchewan winter conditions using a 10%blend of canola methyl ester in No. 1 diesel resulted in:156

< improved cold weather starting and reduced white smoke< an audible reduction in engine noise< lower production of black smoke under load< a reduction in engine wear< a reduction in oil sediments.


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157Hertz, P. Barry. Summer ’95 Engine Wear Investigations Using Canola Methyl Ester and No. 2 DieselFuels. A study prepared for Canodev Research Inc. April 1996.

158Hertz, P. Barry. Biodiesel Fuel Lubricity Additives for Increasing Engine Life and Efficiency.Presentation to the Association of Professional Engineers and Geoscientists of Saskatchewan. Saskatoon,Saskatchewan. May 3, 2003.

159Munson, Jason W., Hertz, P. Barry , Dalai, Ajay K., and Reaney, M. Lubricity Survey of Low-LevelBiodiesel Fuel Additives Using The “Munson ROCLE” Bench Test. SAE Technical Paper 1999-01-3590. October1999.

160Munson, Jason W., and Hertz, P. Barry. Seasonal Diesel Fuel and Fuel Additive Lubricity Survey Usingthe “Munson ROCLE” Bench Test. SAE Technical Paper 1999-01-3588. October 1999.

Further investigation using an Isuzu IDI diesel-powered 1985 Chevette during the summer of1995 using 5 and 10% blends of canola methyl ester in No. 2 diesel also indicated reducedengine wear.157

Subsequent field research using canola at different treatment rates (10%, 5%, 2%, 1%, 0.5%,0.2% and 0.1%), various fuel types (No. 1 diesel, No. 2 diesel), and a range of diesel enginemakes (Dodge/Cummins, Volvo/VW, Ford/Mazda, VW) and sizes (1.9L, 2.0L, 2.4L, 5.9L)consistently found reduced engine wear and improved fuel economy. The most recent field testsusing a 1998 VW Beetle TDI found that:

< Canola-based additives are capable of decreasing engine wear by up to half(double engine life) with a treatment rate of less than 1%

< Fuel economy is improved by 2–13% using a treatment rate of less than 1%< Canola additives work effectively with both unadditivized and commercially

additivized low sulphur diesel fuel.158

Additional bench scale tests conducted by the University of Saskatchewan also demonstratedthat 1% biodiesel blends made from a variety of vegetable oils, including soy, canola, sunflower,rapeseed, linseed (flax), and mustard all raised the lubricity of an unadditized, low sulphurreference diesel fuel above the M-ROCLE lubricity pass/fail number. Two of the most promisinglubricity additives were canola methyl esters and a canola oil derivative. Both were able to raisethe lubricity of the unadditivized diesel fuel to acceptable levels using only 1/10th of 1%.159

Vegetable oil-based lubricity additives also compare favourably economically withcommercially available non-biobased lubricity additives. A University of Saskatchewan studycomparing a canola oil derivative to seven other non-biobased additives found the canola oil-derived additive to be the most cost-effective at the 0.1% treatment rate (additional cost of 0.07cents per litre) and the second most cost-effective at the 1% rate (additional cost of 0.68 centsper litre).160


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161Van Gerpen, Jon H. and Chang, David Y.Z. Evaluation of the Lubricity of Soybean Oil-Based Additivesin Diesel Fuel. Study prepared for the United Soybean Board. February 25, 1998. This paper was later presented atthe 1999 ASAE Annual International Meeting in Toronto, Ontario, July 18-21, 1999.

162Reported in National Biodiesel Board Fact Sheet: Lubricity Benefits.

If a 2% biodiesel lubricity additive was added to all diesel fuels in Canada, it would create a market for 450 million litres of biodiesel, or about twice the current volume of ethanol sold inCanada.

Lubricity Studies at Iowa State University

Lubricity tests conducted at Iowa State University using two widely used lubricity test methods(the Scuffing Load Ball on Cylinder and the High Frequency Reciprocating Rig test) also foundthat a blend of 1% methyl soyate (soy diesel) was sufficient to bring a commercial No. 1 dieselfuel with no additives (either for corrosion resistance or lubricity) up to meet lubricity recommendations of engine manufacturers. A specially prepared soybean oil-based additive(a polyhydroxy esterified co-polymer produced by International Lubricants Inc.) was effective at1/18th the treatment rate of methyl soyate.161

Lubricity studies by Stanadyne Automotive Corporation

Stanadyne Automotive Corporation has tested No. 1 and No. 2 US low-sulphur diesel fuels(500 ppm) that are representative of the market after 1993 and found the following results:162

Table 10: HFRR Scar (microns)Percent biodiesel No. 2 diesel No. 1 diesel

0.0 536 6710.4 481 6491.0 321 5002.0 322 35520.0 314 318100.0 314 314


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163Ibid.164Reported by Howell, S. and Schumacher, L. Biodiesel Lubricity - Field Test Extension. Fiscal Year 1994

Final Report to the National Biodiesel Board. October 31, 1994.165Biodiesel Demonstration and Assessment with the Société de Transport de Montréal (STM): Final

Report. May 2003.

A 1% biodiesel blend for No. 2 and a 2% blend for No. 1 diesel was all that was required toreduce scarring to the 460-micron maximum using the High Frequency Reciprocating Rig(HFRR) test. Based on their testing, Stanadyne reports that:

...we have tested biodiesel at Stanadyne and results indicate that the inclusion of2% biodiesel into any conventional diesel fuel will be sufficient to address thelubricity concerns that we have with these existing diesel fuels. From ourstandpoint, inclusion of biodiesel is desirable for two reasons. First it wouldeliminate the inherent variability associated with the use of other additives andwhether sufficient additive was used to make the fuel fully lubricious. Second, weconsider biodiesel a fuel or fuel component - not an additive...Thus if morebiodiesel is added than required to increase lubricity, there will not be adverseconsequences that might be seen if other lubricity additives are dosed at too higha rate.163

Some concerns about biodiesel lubricity claims

There are a number of concerns about the lubricity claims of biodiesel:

< Conflicting evidence – Lubricity tests conducted at the Southwest ResearchInstitute in San Antonio Texas in 1994 using the Scuffing Ball on CylinderLubricity Evaluator (BOCLE) found that biodiesel blends at levels below 5% hadessentially no effect on lubricity.164 In a more recent City of Montreal field study,transit buses using biodiesel blends did not result in improved fuelconsumption.165

< Need for field tests using heavy trucks – Most of the lubricity tests have beenconducted using either lab bench testing or field tests using small diesel vehicles.A representative from the Canadian Trucking Association has recommended thatlubricity claims (reduced engine wear, improved fuel consumption) about usingsmall amounts of canola and/or soy methyl esters should be verified using on-road transportation trucks. Other performance factors, such as engine power,


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166Comments by Stephen Laskowski, Director, Policy Development, Canadian Trucking Association. 167According to a National Biodiesel Board Fact Sheet: Lubricity Benefits, “The two most popular bench

test methods for lubricity are the Ball on Cyclinder Lubricity Evaluator (BOCLE), and the High FrequencyReciprocating Rig test (HFRR). The BOCLE is commonly used to evaluate the lubricity of fuels or fuel blends butdoes a poor job of characterizing the lubricity of fuels containing lubricity additives, while the HFRR is commonlyused for both the neat fuels and with fuels containing small amounts of lubricity enhancing additives.”

168Reported in National Biodiesel Board Fact Sheet: Lubricity Benefits.169Bennick, C. Would You Benefit From An Additive? Equipment Today, March 2002.170CMC Consulting Inc. Fuel Additives Derived From Soybean Oil: Final Report. National Biodiesel

Board. August 1, 1997.

should also be studied to determine whether there are any downside issues tousing biodiesel esters as an additive.166

< There is no ASTM standard for lubricity, although the industry is close toadopting one.167 The Society of Automotive Engineers (SAE) has developed astandard using the High Frequency Reciprocating Rig test. The Fuel InjectionEquipment (FIE) manufacturers have adopted the use of HFRR (ISO 12156-2:1998) and recommended that all diesel fuel meet a limit of 460-micron maximumWear Scar Diameter.168

< Premium diesel fuels generally include a lubricity additive.

4.4.10 Cetane improvers

The cetane number measures the interval between the beginning of injection and the autoignitionof the fuel. The higher the number, the shorter the interval. Fuels that have a low cetane numbercause hard starting, rough operation, noise (clattering), and exhaust smoke.

The ASTM standard D975 for diesel fuel sets the minimum cetane number at 40, and enginemanufacturers use this standard when they design engines. In practice, diesel fuel refinersslightly exceed the cetane number of 40; a recent survey reports average cetane numbers in the43 to 44 range.169

The North American market for cetane improvers in 1997 was estimated to be about 50 millionpounds annually split almost equally among California, Alberta/Canada, and the rest of the US.It is driven in California by emissions reduction legislation, which requires an increase in cetanenumbers by as much as 15 over the norm (40). In Alberta, it is driven by Syncrude and Tar Sandsstocks which struggle to meet the ASTM D975 standard of a minimum cetane of 40. It is drivenin the rest of the US because refiners maximize aromatic stocks in diesel fuels because they arelimited in gasolines, especially reformulated gasolines.170


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171Ibid.172Ibid.173Ibid.174Ibid.175Van Gerpen, J. Cetane Number Testing of Biodiesel. September 1, 1996.176Ibid. Also see Knothe, G., Matheaus, A. C., and Ryan III, T. W. Cetane Numbers of Branched and

Straight-Chain Fatty Esters Determined in An Ignition Quality Tester. Elsevier, December 24, 2002.

Diesel engine manufacturers have suggested cetane levels should be increased to 50 to reducediesel emissions. This would increase the potential market to 340 million pounds/year. Cetanelevels might also have to be increased 55 to 60 to meet the EPA’s proposed 2004 NOx limit of2.5 g/bhp-hr. This could further increase the market to 650 million pounds per year if it wasmandated.171

The estimated cost of making refinery changes to increase the cetane number by 10 is 8-10 timesmore expensive than using cetane improvers.172

Biodiesel has to compete with four major cetane improver suppliers: Ethyl, Octel America,ARCO Chemical, and AKZO.173 These companies typically use nitrates and peroxides in 0.1 to0.5% concentration levels to boost cetane numbers by 5 to 10.174

By comparison, a review of biodiesel cetane numbers using soybean and rapeseed feedstocksranged from:175

< 45.0 to 67.0 for soy biodiesel< 48.0 to 64.7 for rapeseed biodiesel.

The variations appear to be due to differences in fatty acid composition. The longer the fatty acidcarbon chains and the more saturated the molecules, the higher the cetane number.176


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177Caution: additive claims in the US do not require proof, except in California, and many tests areconducted on bench-top equipment that does not correlate to EPA-certified emissions testing procedures.Communication from Shaine Tyson, NREL.

178Information obtained from Sunoco.

5.0 Other fuel additives, alternative fuels, and technologies

Many other fuel additives, alternative fuels, and technologies offer the consumer environmentalbenefits. Some of these alternatives may compete with biodiesel, while others may becomplementary.

5.1 Competing fuel additives

Gold Diesel

If biodiesel is used as a fuel additive (B2% or less) to increase lubricity, it will have to competewith other fuel additive packages already on the market.177 One example is Sunoco’s GoldDiesel.

Sunoco has developed a premium low sulphur diesel additive package called Gold Diesel, whichhas a higher cetane rating than #2 LSD resulting in quicker starts, smoother engine running, andless smoke and emissions. Black smoke is reduced 13% on average, and HC/CO/NOx / and PMare reduced by 4–22%. The additive package includes detergents (to maximize engine power andfuel economy), a lubricity additive, a water de-hazer and de-icer (to prevent freeze-ups), andcorrosion inhibitors and stabilizers. The small increased costs (1.3 cent at wholesale and 2.6cents at retail) address the needs of trucking companies that operate on thin profit margins andwant to control their fuel costs. In short, Gold Diesel offers good environmental benefits andimproved engine performance at a small increase in cost and without government subsidies.178

5.2 Potentially complementary “biofuel packages”

A number of fuel additives and alternative fuels offer environmental benefits, includingSuperCetane, oxy-diesel, water emulsion, and F-T diesel. These additives/fuels could compete inthe marketplace with biodiesel, or alternatively, biodiesel could be blended with theseadditives/fuels to form an enhanced “biofuels package.”


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179See http://www.canren.gc.ca/tech_appl/index.asp?CaId=2&PgId=1083 for a description of thehydrotreating process that uses conventional petroleum refinery hardware under proprietary operating conditions toproduce a cetane-enhancing product.

180See Spataru, Alex. Is There A Future for Yellow Grease As A Fuel Additive? Render Magazine,February 2001.

181Ibid.182A six-month test program using a fleet of Canada Post delivery vans operating in Vancouver found an

8% improvement in fuel economy savings. See http://www.canren.gc.ca/tech_appl/index.asp?CaId=2&PgId=1083

5.2.1 CETC SuperCetane179

Scientists at CANMET Energy Technology Centre (CETC), Natural Resources Canada, haveproven at lab scale a process for converting yellow grease and/or tallow to a low sulphur, highcetane premium diesel blending stock, which was originally called AGTANE (AGriculturalceTANE) or BIOZOIL (in French-speaking countries).180 The licence agreement with thetechnology developer promoting AGTANE has been terminated, and CETC controls the rights.The product is now called SuperCetane.

The CETC SuperCetane Technology is not a biodiesel, but rather a collection of long-chainparaffins. It has a number of economic advantages:181

< It does not require more algae and/or bacteria-killing additives than regulardiesels and has a storage life equal to or superior than currently commercializeddiesel fuels.

< It does not require the use of special storage materials.

< It can be used in conventional diesel engines without modification.

< It has a cetane value of about 100 before blending. The cetane number measuresthe quality of fuel ignition and combustion.

< It works well with traditional cetane improvers.

< It allows diesel blenders/traders to buy and profitably resell lower cetane “non-responsive” diesel stock, i.e., stock that does not respond well when traditionalcetane additives are used.

< It has excellent physical and chemical characteristics, e.g., high flashpoint andgood lubricity, which make it an ideal blending stock.

< Fleet testing using mail delivery vans have found increases in fuel economy.182

< It has a low sulphur content (~ 15 plus or minus 5 ppm).


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183http://www.canren.gc.ca/tech_appl/index.asp?CaId=2&PgId=1083184Ibid.185Spataru, Alex. Is There A Future for Yellow Grease As A Fuel Additive? Render Magazine,

February 2001.186Communication from Ed Hogan, Natural Resources Canada.

< It can be distributed through existing refined petroleum products distributionchannels.

< SuperCetane and the waxy residue from the hydrotreating process can be sourcesof renewable n-paraffins for refinery and petrochemical applications.183

< Its yield is not affected by the free fatty acid (FFA) content in yellow grease.

CANMET has developed a semi-pilot plant for producing large volumes of SuperCetane for fueltesting and process optimization. It has also recently completed an engineering and economicfeasibility study for the construction and operation of two (400 and 800 barrels/day) commercialplants to convert vegetable oils and yellow grease to a cetane enhancer and a highly paraffiniclubricant basestock (wax). “For a 400 b/d plant costing US$5.6 million, the payout time (definedas capital cost divided by net income) was estimated to be 4.6 years using a feedstock costingabout US$0.018/lb. In the case of the 800 b/d plant, (US$8.5 million), the payout time is reducedto 2.7 years (32 months), due to the economy of scale.”184

CANMET still needs to validate the technology using a field-proven pilot plant.185

Natural Resources Canada believes that biodiesel and SuperCetane are complementary ratherthan competitive fuels. Testing is now under way in which SuperCetane will be mixed with ablend of 80% diesel / 20% biodiesel to see if NOx emissions from biodiesel blends can bereduced. It is possible that these two fuels (SuperCetane and biodiesel) could be marked as partof a “biofuels package” that would offer improved fuel quality through better lubricity, highercetane, lower GHG emissions, etc.186

In a second test program, SuperCetane will be added to an oil sands-derived diesel fuel toimprove the cetane level. Emissions and fuel consumption will be measured using a Caterpillar3401E diesel engine. The effects of SuperCetane will be compared with conventional cetaneimprovers (nitrate and peroxide) as well as Fischer-Tropsch (F-T) diesel and several oxygenates.


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187Information obtained from Sunoco. Also see the presentation by James Peeples of AAE TechnologiesInc called E-Diesel: New Market Opportunity for Ethanol. Delivered at the Renewable Diesel Workshop sponsoredby the NREL (DOE). Sacramento, California. September 25, 2001. AAE Technologies, Inc. has been selling oxy-diesel (O2DieselTM) since the second quarter of 2000, and has an exclusive marketing agreement with Octel Starreonfor US and Canada. AAE’s data, based on testing and research conducted by the Colorado School of Mines in 2000indicates slightly different findings. NOx reductions range from 2–5% (lower than figures provided by Sunoco),while PM emissions are reduced by 34–40% (higher than figures provided by Sunoco). CO reduction figures are thesame.

188James Peeples of AAE Technologies Inc. E-Diesel: New Market Opportunity for Ethanol. Delivered atthe Renewable Diesel Workshop sponsored by the NREL (DOE). Sacramento, California. September 25, 2001. Alsosee McCormick, R.L., and Parish, R. Advanced Petroleum Based Fuels Program. Milestone Report: TechnicalBarriers to the Use of Ethanol in Diesel Fuel. National Renewable Energy Report, November 2001.

189Information obtained from Sunoco.

5.2.2 Oxy-diesel

Oxy-diesel involves a 7.7% blend of ethanol with No. 2 diesel fuel using a 1% co-solvent tokeep the ethanol and diesel in phase. This option also results in environmental benefits. PM andCO are reduced by 20–30%, and NOx emissions are reduced by 3–10%. In short, Oxy-dieseloffers very good smog reduction benefits, using the existing ethanol infrastructure, and may notrequire further government subsidies.187

As part of a commercialization effort, supporters are preparing an “Ethanol-Blended Diesel FuelHandbook,” “Uniform Safety and Handling Procedures,” and “A Greenhouse Gas ImpactAnalysis.”

Like biodiesel, oxy-diesel faces similar commercialization issues like OEM engine warrantyacceptance and the need to establish ASTM standards. Technical issues include concerns aboutflash point, flammability, and water tolerance. On the other hand, oxy-diesel is generally lessexpensive, offers greater emissions benefits than B20, and is more easily available because of thegreater maturity of the ethanol industry.188

5.2.3 Water-diesel emulsions

This involves a blend of 20% water, 3% emulsifier, and 77% diesel fuel. It is still in the researchand demonstration stage. Emission reductions are dramatic. NOx reduction ranges from 10–30%with 20+% being typical. PM reductions are in the 50% range. Smoke reduction ranges from50–90%. However, there is a loss of power/mileage in the 10% range, which can be minimized ifthe fuel is used by urban municipal fleets with “stop and go service.”189


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190Clean Alternative Fuels: Compressed Natural Gas. US Environmental Protection Agency Fact Sheet.March 2002.

5.3 Competing alternative fuels

A number of alternative fuels offer environmental benefits that could compete with biodiesel inthe marketplace.

5.3.1 Compressed natural gas (CNG)

CNG is made from pipeline natural gas, which is composed of 90% methane. For vehicular use,the natural gas is compressed to high pressure (20,684–24,821 kPa) and stored in high-strengthcylinders. The compression of the gas occurs on-site where the vehicles are fuelled.

More than 85,000 natural gas vehicles are in operation today, including one out of every fivetransit buses in the US. CNG vehicles can come as two types of systems: one that operatesexclusively on natural gas and another that operates as a dual-fuel vehicle, which can use bothnatural gas and gasoline. CNG systems are used in a variety of vehicles including compacts,trucks, vans, and buses.190

The development of natural gas engines for the heavy-duty market began in the late 1980s withtransit buses. Caterpillar, Cummins, Detroit Diesel Company, John Deere, Mack, and PSA/Cathave all developed natural gas engines. The main reason for interest in natural gas engines istheir ability to reduce PM and NOx. This is clearly demonstrated in the table below, whichcompares the PM and NOx emissions of natural gas to other alternative fuels likemethanol/ethanol, B20, DME, A-21, and F-T diesel fuels.


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191CNG, LNG, LPG, A-21, DME, and F-T diesel all have lower energy density and achieve fewer miles perequivalent gallon. Biodiesel on the other hand is very similar to diesel (35,873 kJs per litre for diesel vs 34,796 kJsper litre for biodiesel. As a result, there is no fuel economy penalty, no additional vehicle weight, and no loss inpassenger carrying capacity to make up for additional fuel load needs. See Booz Allan Hamilton. Market Potential ofBiodiesel in Regulated Fleets, Marine Vessels, and Underground Mining Equipment. Report to the United SoybeanBoard. November 11, 1998, page III-118 for more details.

192Howard, L. Biodiesel vs Other Alternative Fuels. Report by Manager of Quality Assurance, BiStateDevelopment Agency. National Biodiesel Board Document Database. March 15, 1994. Ahouissoussi, N., andWetzstein, M. A Comparative Cost Analysis of Biodiesel, Compressed Natural Gas, Methanol, and Diesel forTransit Bus Systems. National Biodiesel Board Document Database, January 1994. Booz Allen Hamilton. Technicaland Economic Assessment of Biodiesel for Vehicular Use. National Biodiesel Board Document Database. April 14,1994.

Table 11: Comparison of air emissionsFuel engine technology Nox emissions PM emissions

Diesel baseline baselineNatural gas (LNG/CNG1)- Lean burn- Stoiciometric- Dual fuel

-50 to -60%-60 to -85%

-15%

-70%-70%-50%

Methanol/ethanol -50 to -70% -60%B20 +8 to -5% -10 to -20%DME -25% -50%A-21 -40% -10 to -15%F-T diesel -8 to -15% -30%1 Note: Clean Alternative Fuels: Compressed Natural Gas. US Environmental Protection Agency Fact Sheet. March 2002reports reductions in CO emissions of 90–97%; reduction in NOx emissions of 35–60%; potential reductions in non-methaneHC emissions of 50–75%; fewer toxic and carcinogenic pollutants and little to no PM produced and no evaporativeemissions. Source: Booz Allan Hamilton. Market Potential of Biodiesel in Regulated Fleets, Marine Vessels, and Underground MiningEquipment. Report to the United Soybean Board. November 11, 1998.

However, the main challenge for CNG (and liquid natural gas and liquid petroleum gas) is highlife cycle costs. Fuel price costs may be lower, but their life cycle costs are higher because ofhigher capital costs. For example, CNG buses have significantly higher capital costs (up to20%); higher infrastructure costs (expensive fast fill stations, modifications to HVAC systemsand electrical wiring for indoor vehicle storage); greater safety hazard (methane gas may causean explosion); lower operating range (about 30% less than diesel)191; higher operating costs(refill station may require a stationary engineer, higher cost of replacement parts, longerdowntime waiting for parts replacement); higher training costs (specialized training required formechanics); and concerns about fuel quality (poor fuel quality can lead to catastrophic enginefailure).192


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193See Barwood Cab Fleet Study Summary. US Department of Energy, Office of Energy Efficiency andRenewable Energy. May 1999.

194Clean Alternative Fuels: Liquid Natural Gas. US Environmental Protection Agency Fact Sheet.March 2002.

195Ibid.196Clean Alternative Fuels: Propane. US Environmental Protection Agency Fact Sheet. March 2002.197Ibid.

Similar results have been found using CNG-equipped taxi cabs. On a cents per kilometre basis,the fuel costs for a fleet of 10 CNG-powered Crown Victoria taxi cabs were found to run 30%lower (3.46 cents vs 5.08 cents) than a fleet of 10 Crown Victoria cabs running on conventionalgasoline. However, the CNG-equipped Crown Victoria taxi cabs cost $2,662 more. For a vehicleoperating 80,000 kilometres per year, a taxi cab owner would expect to achieve $1,664 in fuelssavings per year and reach a life cycle break-even point within 16 months. For most drivers whoput only 24,000 kilometres on their car, it would take more than five years to break even.193

5.3.2 Liquid natural gas (LNG)

Today there are more than 1,000 vehicles on US roads using LNG.194 LNG is produced bychilling natural gas to minus 127"C and storing it in thermally insulated cylinders at low pressure(138–1034 kPa). LNG is purer than CNG because it contains 90–99+% methane.

LNG is used only for heavy duty fleet applications running very routinized operations. Heavyduty trucks and buses running on LNG can cost $38,400 to $64,000 more than conventionaldiesel-powered vehicles. LNG fuel storage and dispensing can cost $19,200 to $28,160 pervehicle. Potentially flammable methane vapours can vent from the cylinders if left idle. Becauseof the fuel’s ultra low temperature, it can cause frostbite if it comes into contact with skin. As aresult, LNG vehicles should be frequently driven, stored outdoors, and serviced only by trainedprofessionals.195

5.3.3 Liquid petroleum gas (LPG) or propane

Liquid propane currently fuels over 350,000 vehicles on US roads today, including taxi cabs,school buses, and police cars. There are over 5,000 refuelling stations across the US, making itthe most widely used alternative fuel.196

LPG is a by-product of natural gas and petroleum refining. It is comprised mostly of propane andsmaller amounts of butane. Propane can be converted to liquid under moderate pressure so that itcan be more easily transported and stored in vehicle fuel tanks. LPG systems can also come intwo versions: LPG only and LPG/gasoline dual fuel systems.197


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198Ibid.199Ibid.200Booz Allan Hamilton. Market Potential of Biodiesel in Regulated Fleets, Marine Vessels, and

Underground Mining Equipment. Report to the United Soybean Board. November 11, 1998.201Clean Alternative Fuels: Methanol. US Environmental Protection Agency Fact Sheet. March 2002.202Ibid.203Ibid.

Propane vehicles typically cost $3,840 to $5,120 more for light duty vehicles and $5,120 to$6,400 more for medium duty delivery trucks. Propane and gasoline fuels prices are comparable,but the lower energy content of propane means it can travel fewer miles and requires a slightlylarger fuel tank to travel the same distance.198

If propane is stored indoors, proper ventilation and leak detection sensors are needed to increasefire safety.199

5.3.4 Methanol

Methanol can be produced from biomass and coal, but natural gas is the most economicalfeedstock. Methanol is used as the chemical feedstock for products like methyl tertiary butylether (MTBE), formaldehyde, acetic acid, and various solvents. Neat methanol (M100) is used inheavy duty vehicles, while M85 is used in light duty, flex-fuel vehicles. Methanol must beshipped by barge, rail, or truck to retail stations because methane is too corrosive to ship bypipeline.200

More than 15,000 M85 flex fuel vehicles are in operation, mostly in California and New York.201

Several auto manufacturers are also developing methanol-powered fuel cell vehicles because itssimple chemical structure simplifies the overall fuel cell design.202

Although methanol costs less than gasoline on a per gallon basis, it has a lower energy content.On a gallon equivalent basis, methanol costs slightly higher than gasoline. In general, lightpowered methanol vehicles also cost about $384 to $640 more per vehicle than their gasolinecounterparts.203


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205Ibid.206Ibid.

5.3.5 Dimethyl ester (DME)

DME is currently used as a propellent in aerosol sprays for personal products. Amoco Corp.,Haldor Topsoe, and Navistar have been promoting it as a substitute for diesel. DME has a highcetane rating (55–60) and can be used in diesel engines to achieve ULEV standards without theuse of catalytic converters. DME can be processed from coal or biomass material, like cornstalks, but natural gas is the most economical feedstock. Its price is expected to be slightly lessthan methanol but well above natural gas.204

5.3.6 A-21

A-21 can be used with both spark-ignition and compression-ignition (diesel) engines and isbeing marketed by Advanced Fuels Limited Liability Company. A-21 consists of a blend ofpetroleum, water and additives, Naptha, and a light petroleum distillate. When combined with30% or less water, it can be used in existing diesel engines without significant modification.205

5.3.7 Fischer-Tropsch (F-T) diesel

Fischer-Tropsch is a technology that converts process gas derived from coal, natural gas, orbiomass feedstocks into a synthetic petroleum substitute. F-T fuel contains no sulphur oraromatics. Initial testing by the South West Research Institute indicated that it can be used inunmodified diesel engines and achieve a 30% reduction in PM and an 8% reduction in NOx. Likebiodiesel, F-T fuel is also compatible with the existing diesel infrastructure. F-T fuels can betransported in the same ships and pipelines as crude oil. Some experts believe that F-T willeventually be competitive with regular diesel. In the meantime, F-T fuel is being considered asan additive or blending component with petroleum diesel.206

Several oil companies are researching large-scale production of F-T fuels. At least four majorcompanies have announced plans to build pilot plants in Indonesia, Africa, South America, andthe US. The California Energy Commission believes that F-T fuels will eventually account for2–3 million barrels per day, or about 2–3% of world refinery output by 2005. Sasol, a worldleader in Fischer-Tropsch technology, has a South African facility that produces 150,000 barrels


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207Clean Alternative Fuels: Fischer-Tropsch. US Environmental Protection Agency Fact Sheet. March2002. Also see Peterson, R. GTL’s From Alaska North Slope and Cook Inlet. Renewable Biodiesel Fuels: TheFlexible Option Conference. Sacramento, California. September 25, 2001. Petersen claims Shell has announced sixplants to be constructed in Egypt, Trinidad, Indonesia, Iran, Australia, and Argentina. Sasol is looking at four plantsto be located in Qatar, Nigeria, Malaysia, and Iran. Mossgas is looking at several plants in Iran, Norway, and SouthAfrica. The total projected capacity would be 600,000+ billion barrels per day with a possible potential world marketof 16 million barrels per day.

208Clean Alternative Fuels: Fischer-Tropsch. US Environmental Protection Agency Fact Sheet. March2002.


210Esper, G.A. DaimlerChrysler presentation at the US Department of Energy California EthanolWorkshop. April 14, 2003.

per day from domestic low grade coal. It has powered all South African vehicles from buses totrucks to taxi cabs.207

F-T fuels currently cost about 10% more than conventional diesel and have a lower energycontent (lower fuel economy).208

5.3.8 Hydrogen

Hydrogen can be produced by reforming methanol, natural or other hydrocarbon fuels, gasifyingbiomass, or splitting water molecules through electrolysis. Hydrogen can be burned in internalcombustion engines or fed into fuel cells to create electricity. Unlike biodiesel, which can use theexisting distribution system, hydrogen has no pipeline system and the cost to create that systemis considerable.209

DaimlerChrysler has begun to deploy 30 fuel cell-powered city transit buses around the world,and beginning in 2003, they intend to market 60 small fuel-celled vehicles. They believe thatvolume production is at least 10 years away due to cost, complexity, and fuel infrastructureissues. The biggest uncertainty is not the fuel cell per se, but how the fuel will be distributed. There are four options: pressurized or liquified hydrogen stored on-board; methanol on-boardreforming; gasoline on-board reforming; or use of other materials for generating on-boardhydrogen like sodium borohydride.210


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212Personal communication with Ewen Coxworth. Also see Coxworth, E. The Role of Renewable LiquidTransportation Fuels in Canada’s Climate Action Plan. A discussion paper for the Saskatchewan EnvironmentalSociety and the Climate Action Network. April 2003.

5.3.9 Hythane

Hythane is a blend of hydrogen and natural gas, typically 5% hydrogen and 95% natural gas byweight. The addition of hydrogen to natural gas helps combustion and reduces emissions. It isconsidered an interim fuel until a hydrogen distribution system can be created.211

5.4 Competing technologies and systems

A number of other technologies and systems could compete with biodiesel, either as a solutionfor reducing pollution in the transportation sector (e.g., diesel-electric hybrid vehicles; low-sulphur diesel regulations combined with improved pollution controls) or as a potential optionfor handling organic waste disposal in the rendering industry (e.g., thermal depolymerization andchemical reforming). There are also alternative technologies for producing bio-oils(e.g., pyrolysis), which may compete with the transesterification of oils and fats into biodiesel.This section reviews one of these pyrolysis technologies (i.e., Ensyn Technologies’ RapidThermal Processing (RTP™)) in depth, and discusses possibilities for integrating this technologywith biodiesel production into a larger biorefinery system.

5.4.1 Diesel-electric hybrid vehicles

In this new type of engine system, a diesel engine is coupled with a large battery system.A generator driven by the combustion engine charges the battery pack. Electric motors in thewheels provide all the power in a series design. In a parallel design system, the combustionengine both drives the wheels and charges the battery pack. The battery pack provides extrapower during acceleration. During braking, the battery pack is recharged by using the electricmotors in the wheels as generators. A bus trial in Brazil measured a 90% drop in PM, a decreasein CO of 60–70%, and a reduction in NOx of 25–30%. Trials in Oregon with hybrid diesel-electric buses recorded a 60% improvement in fuel efficiency. The life cycle costs of diesel-electric buses were more expensive than conventional buses but less expensive than natural gas-powered buses.212


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213See Spataru, Alex. Is There A Future for Yellow Grease As A Fuel Additive? Render Magazine,February 2001.

5.4.2 AGTANE/BIOZOIL

Scientists at the CANMET Energy Technology Centre (part of Natural Resources Canada) haveproven at lab scale a process for converting yellow grease and/or tallow to a low sulphur, highcetane premium diesel blending stock called AGTANE (AGricultural ceTANE) or BIOZOIL (inFrench-speaking countries).213


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214Ibid.215Ibid.

AGTANE is not a biodiesel, but rather a collection of long-chain paraffins. It has a number ofeconomic advantages:214

< It does not require more algae and/or bacteria-killing additives than regulardiesels and has a storage life equal to or superior than currently commercializeddiesel fuels.

< It does not require the use of special storage materials.

< It can be used in conventional diesel engines without modification.

< It has a cetane value of about 100, before blending. The cetane number measuresthe quality of fuel ignition and combustion.

< It works well with traditional cetane improvers.

< It allows diesel blenders/traders to buy and profitably resell lower cetane “non-responsive” diesel stock, i.e., stock that does not respond well when traditionalcetane additives are used.

< It has excellent physical and chemical characteristics, e.g., high flash point andgood lubricity, which make it an ideal blending stock.

< It has a low sulphur content (~ 15 plus or minus 5 ppm).

< It can be distributed through existing refined petroleum products distributionchannels.

< AGTANE’s yield is not affected by the free fatty acid (FFA) content in yellowgrease.

< The process yields a low sulphur, heavy oil by-product that is readily marketableand can be used as a source material for hydrogen production.

AGTANE is expected to be economically viable for mass production plants (>1.2 million litresper year). One economic model (referred to as the renderer-only model) projected the total costsof production (including yellow grease feedstocks at $0.23 per kilogram) at $0.46 per litre ofAGTANE. Revenues were expected to be $0.53 per litre of AGTANE: $0.44 per litre forAGTANE and $0.09 per litre for the heavy cut by-product. This would yield a gross profit of$0.07 per litre of AGTANE.215


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216Ibid.217Assuming canola and soybean oil sell for $750 per tonne.

CANMET still needs to validate the technology using a small, field-proven pilot plant.216

Although the hydrotreating process used to make AGTANE from yellow grease couldtechnically be applied to the processing of vegetable oils, it does not appear to provide aneconomic breakthrough compared to the costs of production using traditional transesterificationmethods. Even using low cost yellow grease at 23 cents per kilogram, and assuming a conversionrate of 77%, the feedstock costs for the hydrotreating process represent 58% of AGTANEproduction costs, or about $0.26 per litre of AGTANE. The use of edible canola and soybeanoils, which sell for about 96 cents per kilogram217, would push the costs of production well pastthe break-even price, even if one assumed a 100% conversion rate.

5.4.3 Pyrolysis

Ensyn Technologies Inc., located in Ottawa, has a core technology called Rapid ThermalProcessing (RTP™) that converts wood (or other biomass) into bio-oil, which can then be furtherbiorefined into value-added chemicals and fuels. Other co-products include carbon, in the formof charcoal, and a combustible gas. The same technology can be used to upgrade heavy oil andbitumen in the petroleum industry.

RTP™ is a fast thermal conversion process (pyrolysis) characterized by moderate temperaturesand atmospheric pressures and very short processing times. The process involves feeding woodor other biomass into a heated vessel where it comes into contact with steam and hot sand. Thehot sand instantly flashes the biomass into vapour and, when cooled, condensed and recovered,produces a liquid product (bio-oil). The process does not involve combustion because air input isminimized.

Ensyn believes it is the only bio-oil company in the world that is operating commercially and theonly commercial technology capable of producing large quantities of bio-fuel. Ensyn’s currentcapacity is 18.9 million litres of bio-oil per year.

The charcoal and combustible gas can be used as fuels without further processing, but it is moreeconomical to first recover natural resins from the bio-oil. After this recovery, the quality of thebio-oil is improved and can be used in petroleum-fired combusters, boilers, and engines. Thebio-fuel has been used commercially for industrial heat since the early 1990s and can be used inindustrial boilers to produce green energy that is CO2-neutral and has almost no sulphur. It canalso be blended with conventional diesel fuels for use in transportation fuels, and it can be usedin modified turbine and diesel engines for power generation. Initiatives under way in these areasare confidential.


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Ensyn is working with petroleum companies in North America and Europe to accelerate thetechnical development and commercialization of green transportation fuels and with leadingengine and turbine manufacturers to commercialize the use of bio-fuel for diesel engines andstationary power generation.

Product and process development is carried out by Ensyn Technologies Inc. in Ottawa, whilecommercial refining of biomass is done by Ensyn Renewables Inc. The commercial refining ofheavy oil and bitumen is done by Ensyn Energy Inc. (Boston).

Ensyn claims their research and development lab in Ottawa is a “world-class analytical, testingand product development facility. Their fully-equipped RTP™ pilot facilities and laboratories canproduce, optimize and analyze a host of value-added fuels and chemicals produced from biomassand petroleum feedstocks.” The lab includes both bench-scale and pilot-scale reactors, with acommercial plant located close by in Greely, Ontario.

In 1989, Ensyn granted its first commercial licence to Red Arrow Food Products Company Ltd.(Wisconsin) for product applications (flavourings) in the food industry. Red Arrow uses charcoalproducts to provide industrial heat and electricity. A biomass refining plant was built in 2001that produces natural resins from bio-oils. A sixth commercial biomass plant is expected to beoperational in 2003.

The following is a brief history of key joint ventures and alliances:

< In November 1999, Ensyn received $433,704 from the federal government’sClimate Change Action Fund (CCAF) to develop and commercialize a process toconvert char into a high-value activated carbon that can be used as a filter inapplications like waste water treatment. Ensyn also received another $156,250 todeploy a micro-emulsion technology to mix cellulosic-derived bio-oil with dieselfuel in a 10% blend.

< In August 2000, Ensyn and Louisiana-Pacific received $1.8 million from the USDepartment of Energy to develop bark-based adhesives for use in the productionof structural building materials including oriented-strand board (OSB) andplywood.

< In November 2000, Gulf Canada Resources acquired an interest in Ensyn and alicence to use the RTP™ technology to upgrade heavy oil or bitumen in Canada.

< In April 2001, Ensyn received a $98,000 green economic development grant fromthe British Columbia government to test the commercial viability of producingnatural resins from wood waste. ACM Chemicals (Woodchem Ltd.) isformulating the resin into commercial OSB resins.


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218Personal communication with Dave Broulard of Ensyn Technologies. For more details, see Ensyn’s website at http://www.ensyn.com/index.htm

219April 8, 2003 press release by Changing World Technologies, Inc.

< In January 2002, Ensyn announced a strategic partnership with Enbridge Inc. tofacilitate the development of Ensyn’s heavy oil upgrade technology. The alliancewill help Ensyn build a 1,000 barrel per day demonstration plant at Enbridge’sHardisty terminal in Alberta. The partially upgraded oil would reduce diluentrequirements and help increase existing pipeline capacity to carry heavy oil andbitumen from the oil sands to major markets in the US. Ensyn also formed a jointventure with ITS Engineered Systems in Houston to manufacture and supplyEnsyn’s RTP™ technology for heavy oil and bitumen upgrading.

< In February 2002, Ensyn announced the commissioning of the world’s largestcommercial RTP™ biomass pyrolysis plant (181 tonnes per day).

< In March 2002, Ensyn announced that Dr. Ron Robinson had joined the EnsynBoard of Directors. Dr. Robinson was President of Texaco’s Technology Divisionfrom 1996 to 2001 and is currently Department Head of the PetroleumEngineering Program at Texas A&M University.

< In April 2003, Ensyn announced that it had received $3.4 million from theOntario government to build a new $9 million state-of-the-art biorefinery inRenfew, Ontario. The facility will take wood residues from local industry,municipal landfills, and saw mills and produce a bio-oil from which they willextract and develop adhesives, polymers, carbon filtration products, and foodflavouring compounds. The remaining fuel (after the higher value-added productsare extracted) will be used to generate green electricity.

Although Ensyn may appear to offer a competitive process (pyrolysis) that uses competingfeedstocks (oil, forestry, and municipal wastes) to produce a competing product (bio-oil), theremay be some interesting synergies between their process and the transesterification production ofbiodiesel. As the biodiesel industry expands, it may be possible, for example, for Ensyn’stechnology to convert surplus oilseed meal into higher-value chemicals, fuels, and electricity.218

5.4.4 Thermal depolymerization and chemical reforming(TDP)

Changing World Technologies, Inc. (CWT) recently announced the first commerciallysuccessful application of thermal depolymerization and chemical reforming of organic waste intoclean energy.219 The process breaks down long chains of organic polymers into their smallest


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220Lemley, B. (2003) Anything Into Oil. Discover, 24 (5).221April 8, 2003 press release by Changing World Technologies, Inc.222Lemley, B. (2003) Anything Into Oil. Discover, 24 (5).

units and reforms them into new combinations of solid, liquid, and gaseous alternative fuels andspecialty chemicals.

The process entails five steps:

< pulping and slurrying the organic matter (e.g., turkey offal) with water< heating the slurry under pressure (4,137 kPa) to the desired temperature (260"C)< flashing the slurry to a lower pressure to separate the mixture< heating the slurry again (coking) to drive off water and produce light

hydrocarbons (residence time about 15 minutes)< separating the end product.

A full-scale industrial plant has been constructed in Carthage, Missouri adjacent to one ofConAgra Food’s Butterball Turkey plants. The US EPA provided $6.4 million to help fund the$25.6 million facility. It is expected to digest more than 181 tonnes of turkey processing wasteper day (including fats, bones, feathers, greases, and oils). The plant will produce 9.1 tonnes ofgas per day (which will be used to provide process heat for the plant), 79,000 litres of cleanwater (which can be reused or released into the municipal sewage system), 600 barrels of oil(equivalent to number 2 heating oil), and 10 tonnes of minerals (which can be used asfertilizer).220

The process is very energy efficient (16 kJs are used to process 106 kJs of energy products) andproduces no uncontrollable emissions or secondary hazardous waste streams.221

Demonstration plants using other feedstocks are also being considered, including a chicken offaland manure plant in Alabama, crop residues and grease in Nevada, turkey waste and manure inColorado, and pork and cheese waste in Italy.222


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223Regulations requiring low sulphur fuel are implemented first because sulphur emissions (even in smallamounts) have been found to significantly reduce the effectiveness of pollution control devices. See Proposed-HeavyDuty Engine and Vehicle Standards and Highway Diesel Fuel Sulphur Control Requirements. US EnvironmentalProtection Agency. May 2000.

224Summary of EPA’s Proposed Program for Low Emission Nonroad Diesel Engines and Fuel. USEnvironmental Protection Agency. April 2003.

225Draft Regulatory Impact Analysis: Control of Emissions From Nonroad Diesel Engines. USEnvironmental Protection Agency. April, 2003.

226Ibid.227Proposed-Heavy Duty Engine and Vehicle Standards and Highway Diesel Fuel Sulphur Control

Requirements. US Environmental Protection Agency. May 2000.228Summary of EPA’s Proposed Program for Low Emission Nonroad Diesel Engines and Fuel. US

Environmental Protection Agency. April 2003.

5.4.5 Low-sulphur diesel regulations combined withimproved pollution control technologies

Much of the current environmental rationale used to justify the use of biodiesel, e.g., lower PMand hydrocarbon tailpipe emissions, will disappear when the US and Canada moves to ultra-lowsulphur diesel in 2006 and new pollution control technologies in 2007 for on-road vehicles.223 Ithas been proposed that sulphur levels for non-road engines will be reduced to 500 ppm startingin 2007, moving to 15 ppm in 2010.224

The performance benefits of treating fuel and pollution control technologies as an integratedsystem is dramatic. Low sulphur content (i.e., 15 ppm) in diesel fuels, when combined with thesynergistic use of catalyzed diesel particulate filters (CDPFs) and three-way catalytic NOxadsorbers, can reduce PM and NOx emissions by over 90% as well as virtually eliminatehydrocarbon and CO emissions.225

These pollution control devices could also be retrofitted to current fleet vehicles and extended tooff-road vehicles.226

The average increased cost to the consumer is expected to be 1.0–1.4 cents per litre for lowsulphur diesel and about $1,280 to $2,048 per new on-road vehicle227 and an increase of 2 centsper litre and 1–2% of the capital cost for non-road diesel engines.228

Although biodiesel is a low sulphur fuel, its high cost (about 2–3 times the cost of regular diesel)and its limited feedstock availability (capable of supplying only about 3–4% of the diesel fuelmarket in the US and Canada) would rule it out as a commodity fuel.


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229Draft Regulatory Impact Analysis: Control of Emissions From Nonroad Diesel Engines. USEnvironmental Protection Agency. April 2003.

230Ibid.231See the discussion in Munson, Jason W., and Hertz, P. Barry. Seasonal Diesel Fuel and Fuel Additive

Lubricity Survey Using the “Munson ROCLE” Bench Test. SAE Technical Paper 1999-01-3588. October 1999

The downside of moving to low sulphur diesel is the potential loss of lubricity caused byhydrotreating the fuel to remove the sulphur content.

More likely, biodiesel could find a niche as a lubricity fuel additive for ultra low sulphur fuel (15ppm). Evidence suggests that small amounts (1–2% or less) of biodiesel can significantlyimprove fuel lubricity for low sulphur diesel (500 ppm). More direct testing using the proposed ultra low sulphur diesel (15 ppm) would be necessary to confirm its effectiveness.229

The degree to which the removal of sulphur will affect fuel lubricity depends on the blendstockand the process used to manufacture the fuel.230 We know that Canadian diesel fuels, especiallywinter diesel fuels, are among the poorest in the world when it comes to fuel lubricity.231


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232Ahmed, I., Clements, L. Davis, and Van Dyne, Donald L. Non-Fuel Industrial Uses of Soybean Oil-Based Esters. Final report to the National Biodiesel Board. January 1997.

233Ibid.234Ibid.235Of which there are, perhaps, as many as 100 in North America. Communication from Shaine Tyson,

NREL.

6.0 Biorefining of oils, fats, and proteins

6.1 Methyl esters used as a platform chemical

The basic business philosophy, borrowed from the petro chemical industry, would be to run abiodiesel plant at full capacity and sell as much of the production output as possible into higher-value markets to maximize revenues, while selling the residual methyl esters into the lower-value diesel fuel market.232 In fact, this approach is currently used by oleochemical companies.

The potential market for non-fuel biodiesel esters in the US has been estimated to be as high as18.1 billion kilograms ($68 billion).233

The market segments are as follows:

< plastics and plasticizers - 5.1 billion kilograms< solvents and paint strippers - 2.7 billion kilograms< adhesives - 3.4 billion kilograms< surfactants - 2.7 billion kilograms< agrochemicals - 0.5 billion kilograms< industrial chemicals - 2.2 billion kilograms< lubricants - 1.6 billion kilograms.

Using low-growth (2% market capture) and high-growth (5% market capture) scenarios, thepotential market for biodiesel esters could range between 408 million kilograms ($1.28 billion)and 907 million kilograms ($3.39 billion) per year in the non-fuel market.234

6.1.1 Companies selling value added co-products frommethyl esters

In addition to oleochemical companies,235 a growing list of firms in the US have begun sellinghigher value-added products from methyl esters:


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236The information is taken from Ahmed, I., Clements, L. Davis, and Van Dyne, Donald L. Non-FuelIndustrial Uses of Soybean Oil-Based Esters. Final report to the National Biodiesel Board. January 1997.

< Ag Environmental Products L.L.C. produces a range of solvents that have lowvolatile organic compound (VOC) emissions and high flash characteristics andcan be used as a substitute for d’Limonene, naphtha, mineral spirits, and otherpetroleum-based solvents. Their products can be used for a variety of applicationsincluding: petroleum degreasing, precision cleaning processes, animal fatdegreasing, asphalt equipment cleaning, concrete form release, mould release,metal cutting, adhesive removal, ink removal, and moisture barrier and rustprevention.

< Stepan produces methyl esters that can be used as solvents, lubricants, degreasers,and carrier oils in agricultural applications. Steposol SB-D is a soybean oil methylester that can be used as a waterless hand cleaner, adhesive remover, floorscrubber, mould release agent, lacquer thinner, hood/grill oven cleaner, and inkremover. Steposol SC is a blend of soy and corn esters that can be used as avarnish remover, graffiti remover, concrete cleaner, grease trap cleaner, brakecleaner, carbon remover, parts washer solvent, and adhesive remover.

< Ocean Air Environmental Fuels and Glycerine LLC currently sells about 1% ofits biodiesel production into the solvent market and about 5% of its productioninto the agricultural adjuvants market (used in agricultural sprays for distributingpesticides and fertilizers).

< Best BioFuels LLC produces biodiesel, as well as specialty products likemetalworking solvents, lubricity additives, glycerol, non-petroleum-based drillingmuds, biodegradable and cleaning materials.

< West Central Soy produces biodiesel, lubricants, solvents, and cleaners.

The following sections summarize some of the potential markets for methyl esters or theirderivatives and provide references to some example patents.236

6.1.2 Plasticizers and plastics

< Fatty acid esters are mentioned in the following patents:- Tires - US Patents 4,616,685 and 4,737535- Elastomer Stabilizers - US Patent 5,276,258- Transfer Sheets - US Patent 4,275,106- Biodegradation Promoter - US Patent 4,931,488


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237Communication from Shaine Tyson, NREL

- Mold Release Agent - US Patent 4,130,698.

< However, use of methyl esters may not be promising because polyhydric alcohols(ethylene glycol, polyethylene glycol, etc.) and sorbitan esters are more stable.

< Fatty acid esters have found limited use as monomers in plastics production.Because the applications involve specific chemical functionalities, they are notcompatible with biodiesel production. However, several interesting varieties offatty acids as well as unconverted vegetable oils could play significant roles inthis market.237

6.1.3 Solvents

< Fatty acid esters are mentioned in the following patents:- Temporary Metal Corrosion Protectant - US Patent 4,752,336- Micro-Emulsion Liquid Detergent - US Patents 4,919,839 and 5,415812- Oil Well Drilling Mud - heavily patented by Henkel Corporation.

Examples include US Patents 5,106,516 and 4,802,998. Other mudcompounding companies include Bariod and Lubrizol.

- Paint Stripping - no fatty acids mentioned in the patent literature between1976 and 1996. However, there were 8 patents for N-methyl-2-pyrrolidoneand 2 for d-limonene — both natural ingredients.

- Metals Cleaning - no patents between 1976 and 1996 but biodiesel haspotential advantages over cold cleaning solvents (e.g., kerosene, naptha,mineral spirits, Stoddard solvent), chlorinated hydrocarbons, etc. becauseof its lack of toxicity and dermatological hazard and biodegradability.It may be possible to also introduce a second phase of vapour degreasingusing alcohols such as isopropanol and butanol, which could replacemethylene chloride, trichloroethylene, perchloroethylene and 1,1,1-trichloroethane, which are scheduled for removal from general use.

- Adhesive Removers - no patents between 1976 and 1996 but may alsopresent opportunities.


79

6.1.4 Adhesives

< Fatty acid esters are referenced in the following patents:- A Reactant in Adhesive Making - US Patent 5,373,050- Release Coating for Pressure Sensitive Adhesives - US Patents 5,284,690

and 5,413,815- Slip Agent - US Patent 5,198,292.

< May not be a promising area because it is too specialized.

6.1.5 Surfactants

< Fatty acid esters are referenced in the following patents:- Water in Oil Emulsions for Cosmetics and Medicines - US Patent

4,714,566- Freeze-Thaw Stable Cookware Lubricant - US Patents 4,073,411 and

4,073,412- Adjuvant for Pesticides and Herbicides - US Patent 5,178,795- Fabric Treatments - lubricity for synthetic fabrics (US Patents 4,051,299

and 4,438,001); smoothing agent for natural fibres (US Patents 4,122,018;4,201,680; 4,297,407; 4,446,034; and 4,469,606); soap pretreatment (USPatents 4,877,556 and 4,775,492); fabric softeners (US Patents 4,092,253;4,129,506; 4,776,965; 4,814,095; and 4,851,140). Probably not anopportunity area for biodiesel producers because most of the patents areheld by oleochemical companies like Bayer, Ciba-Geigy, Colgate-Palmolive, Lever Brothers, Proctor & Gamble, and Henkel.

- Conditioning Agents in Mineral and Ore Processing - froth flotation(US Patents 4,253,944 and 4,305,815) used in coal cleaning process;removal of silicaceous materials from phosphate ores (US Patents4,234,414 and 4,301,004).

- Slurry-Forming Surfactants - dispersants for keeping solid particles insolution (US Patent 4,312,675).

- Pipeline Friction Reducers - no patents between 1976 and 1996 butdrilling muds suggest they may provide drag reduction. Williams PipelineCompany has expertise and could be a partner.

- Specialty Product Applications - wax sealants for the encapsulation offertilizers like sulphur coated urea (US Patent 5,423,897); surfacemodifying agents in extender formulation (US Patent 5,486,233).

- Enhanced Oil Recovery - surfactant flooding (US Patent 4,825,951). Useof biodiesel for oil spill clean-up from sand and rocks suggests that thiscould be exploited for enhanced oil recovery. The Department of


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Petroleum Engineering at the University of Texas - Austin has laboratoryexpertise.

6.1.6 Agrochemicals

< Fatty acid esters are referenced in the following patents:

- Formulations To Enhance Chemical Activity - insecticides (US Patent4,861,762); herbicides (US Patents 4,629,493; 4,975,110; 5,098,467;5,098,468; and 4,626,274).

- Adjuvants - US Patents 5,559,078; 4,966,728; and 5,238,604.- Product Enhancement Applications - drying agents for corn (US Patent

5,049,192) and grapes; oiling agents for leathers and skins (US Patent4,903,362); enhancement of the aroma and flavour of tobacco (US Patent5,103,843).

6.1.7 Industrial chemicals

< Fatty acid ester derivatives include:- Printing Inks - Nippon Zeon Company (US Patents 4,252,701; 4,256,619;

4,268,427; and 4,339,367); Topez Company’s lithographic ink (US Patent5,173,113); binder to hold pigments in halftone gravure printing (USPatent 5,556,454) and ink jet printing (US Patents 5,006,170 and5,122,187); gloss for offset printing inks (US Patent 5,324,350);plasticizers in hot melt inks used in ink jet printing (US Patent 5,531,819);cleaning solution for the thermal head used on thermal transfer printers(US Patent 5,547,917). The ink applications are very specific, segmentedand dispersed, making it difficult for biodiesel esters to make abreakthrough.

- Pharmaceutical Applications - time release delivery of medications; anti-fungal preparation (US Patent 4,915,940); transdermal delivery ofbuprenorphrine (US Patent 5,026,556); delivery of drugs to the mucousmembranes of the mouth (US Patent 4,572,832); carrier for medications (US Patent 5,405,617).

- Cosmetics - emollients in skin and hair care products (US Patent4,740,367); make-up removers (US Patent 5,179,128); skin moisturizers(US Patent 4,165,385); shower gels (US Patent 5,393,450); antiperspirant(US Patent 4,278,655); hair conditioning shampoo (US Patent 4,676,978);pearlescing agents in shampoos (US Patent 4,654,207).


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- Magnetic Recording Media - lubricants in magnetic tape media (21patents by Fuji Photo Film Company, TDK Corporation, Hitachi Maxwell,Sony, IBM, 3M).


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238Including use in toothpaste, skin creames and lotions, pre-shaving lotions, deodorants, make-up, lipstickand mascara.

239Glycerol is one of the most widely used ingredients in drugs and pharmaceuticals including use incapsules, suppositories, ear infection remedies, anaesthetics, cough remedies, lozenges, gargles, and a vehicle forantibiotics and antiseptics.

240Used in soft drinks, candies, cakes, casings for meat and cheese, and dry pet food.241Glycerol is used to keep tobacco moist, add flavour to chewing and pipe tobacco, and manufacture

cigarette filter tips.242Used in grease-proof paper, food wrappers, and inks.243Heming, M.P.D. Glycerine Market Report. CTVO-net Workshop on Valorization of By-Products:

Glycerol. January 21, 1999. Also see Uses of Methyl Esters. National Biodiesel Board Fact Sheet.244Summary of Discussion, CTVO-net Workshop on Valorization of By-Products: Glycerol. January 21,

1999.

6.1.8 Lubricants

< Fatty acid derivatives are widely used as lubricants:- Automatic Transmission Fluid (US Patent 3,933,659)- Specialty Motor Oil for Diesel Engines (US Patents 4,176,072 and

4,820,431)- High Temperature Lubricants (US Patent 4,519,927)- Motor Oil Base Stock (US Patents 5,229,023; 5,413,726; and 5,567,345)- Motor Oil Additives (US Patents 4,244,829; 4,960,530; and 4,243,540)- High Pressure Lubricant (US Patent 4,053,427)- Viscosity Improver (US Patent 5,534,175)- Metal Working Oils (US Patents 4,445,813; 4,636,323; 4,212,750; and

4,978,465)- Pour Point Depressant for Lubricating Oils (US Patent 5,338,471).

6.2 New products from glycerol

Glycerol is currently used in cosmetics238 and soaps (16%), pharmaceuticals239 (10%), esters(11%), polyglycerols (12%), food and drink240 (8%), cellulose films (3%), tobacco241 (3%), andpaper242 (1%).243

Glycerol may have other promising applications:244

< Replacement for synthetic polyols, e.g., ethoxylates used in making surfactants.


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245Mouloungui, Z. Network of Valorization of Glycerol: Synthesis Processes For The Production ofGlycerol Carbonate, Glycidol and pure "-Monoglycerides. CTVO-net Workshop on Valorization of By-Products:Glycerol. January 21, 1999. The production process described by Mouloungui is ecologically friendly because thereactions take place without a solvent, the catalysts are reusable, and a polyvalent reactor which does not requirefurther purification, is used.

246See Wittlich, P. and Dieter-Vorlop, K. Microbial Conversion of Glycerol Towards 1,3-Propanediol.CTVO-net Workshop on Valorization of By-Products: Glycerol. January 21, 1999. Cameron, Douglas C., andKoutsky, James A. The Conversion of Glycerol from SoyDiesel Production to 1,3 Propanediol. Final Report to theNational Biodiesel Development Board. 1994.

247Ibid.248Pages, X. Opening Epoxidized Oils with Glycerol. CTVO-net Workshop on Valorization of By-

Products: Glycerol. January 21, 1999. 249Noted by a Delphi panel member.250Martin Reaney of Agriculture and Agri-Food Canada has discovered that the alkali transesterification

catalysts (containing crude glycerol and alkali) from biodiesel production can be recycled and used to react with alinoleate rich triglyceride to produce conjugated linoleic acid (CLA), a very desirable nutraceutical. See US Patents6,409,649; 6,414,171; and 6,420,577. This new process has helped to improve the economics of biodieselproduction. The process is being developed by Bioriginal Food and Sciences Corporation in Saskatoon,Saskatchewan. Reported in An Assessment of the Opportunities and Challenges of A Bio-Based Economy for

< The production of glycerol carbonate, which in turn can be used to produceglycidol, an important intermediate in the production of cosmetics andpharmaceuticals and the synthesizing of surfactants using very puremonoglycerides.245

< Microbial conversion of glycerol to produce 1,3-propanediol.246

- 1,3-propanediol may find applications as textile polymers, biodegradableplastics, elastomeric fibres, engine lubricants, fast drying and more UV-resistant coatings, detergent stabilizer, anti-freeze component, jet printingink, humectant in cosmetics, solvent, and flavour enhancer.247

< Lab and pilot-scale studies in Europe suggest that epoxidized methyl esters madefrom either rape or high oleic sunflower oils can be synthesized into etheralcohols using glycerol as a reactant. The co-products from this process are nowbeing investigated for applications as lubricants and detergents.248

< Glycerol can be converted to syngas and hydrogen by reforming with steam in thepresence of a Ni-based catalyst at low temperature conditions. The syngas caneasily be converted to gasoline and diesel fuel with proven technology. Thehydrogen can be used in fuel cells to produce electricity.249

< Recycled glycerol can be used to create conjugated linoleic acid.250


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Agriculture and Food Research in Canada. A report prepared by the Canadian Agricultural New Uses Council forthe Canadian Agri-Food Research Council and BIOCAP Canada. June 2003. p. 69.

251Soybean oil yields are about 20% compared to canola at 40%. 252Duffield, J., Shapouri, H., Graboski, M., McCormick, R., and Wilson, R. U.S. Biodiesel Development:

New Markets for Conventional and Genetically Modified Agricultural Products. Office of Energy, EconomicResearch Service, U.S. Department of Agriculture. September 1998.

253Selvaraj, G. Adding Value to Canola by Reducing Sinapine in the Meal. PBI Bulletin issue 2, pp. 2-3.Plant Biotechnology Institute, NRC. Georges, F. Improving Canola-Development of Low Phytate Canola. PBIBulletin issue 2, pp. 3-4. Plant Biotechnology Institute, NRC.

254Reported in An Assessment of the Opportunities and Challenges of A Bio-Based Economy forAgriculture and Food Research in Canada. A report prepared by the Canadian Agricultural New Uses Council forthe Canadian Agri-Food Research Council and BIOCAP Canada. June 2003. See p. 68.

255See the earlier section in this report on pyrolysis for more details about Ensyn and the RTP™ process.

6.3 Higher-value products from vegetable meal

A 5% biodiesel market share (1 billion kg) would yield approximately 100,000 tonnes ofglycerol and 900,000 tonnes of meal. It is clear that the economics of biodiesel productiondepends, to a significant degree, on developing higher-value markets for meal co-products. Oneof the downside risks from increased biodiesel production, particularly using low-oil yield cropslike soybeans,251 is that the increased meal production could flood the feed market, drive downprices, and undermine the profitability of biodiesel production.

Traditional plant breeding and biotechnology can be used to increase the oil yield and therebyminimize the potential for the over-production of meal.252

Transgenic methods can also be used to increase the value of meal and open up new markets byreducing sinapine and phytate content in canola meal. Sinapine is a phenolic compound thatreduces the palatability and digestibility of canola feed. High phytate levels in canola meal havelimited value for some markets like aquaculture.253

In another approach, Professor H.L. Classen from the Animal and Poultry Science Department,University of Saskatchewan, has developed a method to extract a protein concentrate fromcanola meal. A company called MCN has been formed to commercially develop the newprocess, which could be used to develop a protein concentrate for the aquaculture market.254

Ensyn Technology Inc.’s RTP™ may also be capable of extracting higher-value added chemicalsfrom oilseed meal.255


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256Shumaker, G., et al. A Study on the Feasibility of Biodiesel Production in Georgia. Center forAgribusiness and Economic Development, University of Georgia. 2003.

257Ibid.

7.0 Summary and conclusions

The cost of producing biodiesel in the US given current average feedstock costs of about $0.15per pound is about $1.56 per gallon.256 To break even, a 15-million-gallon biodiesel plant wouldhave to reduce its feedstock costs to about US10 cents per pound.257 This should be comparedwith the wholesale price of petroleum diesel to determine its competitive position.

Wholesale Diesel Prices (WDP) can be estimated using the following formula:

WDP = Crude Oil Price per Barrel / 42 Gallons + Processing ($0.05/gal) + Transportation ($0.02) + Profit ($0.05)

Using this formula, the WDP would be as follows:

< $20 / barrel - $60 cents / gallon< $30 / barrel - $83 cents / gallon< $40 / barrel - $1.07 cents / gallon.

For biodiesel to be competitive, the WDP must approach $40 per barrel, and biodiesel feedstockprices must approach 10 cents per pound in order for biodiesel to be produced at around $1.00per barrel and be able to compete with petroleum diesel on price without government taxsupport.

In addition, biodiesel must also be capable of supplying a significant percentage of the dieselmarket to interested refiners and distributors. At present, the US and Canada only have enoughsurplus vegetable and animal fat surplus feedstocks to supply about 3% of the diesel fuel market.As a result, attention must be turned to developing a dedicated biodiesel crop (e.g., industrialmustard) that could supply feedstocks at under 10 cents per pound and deliver additional


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258The situation is similar in Europe. The European capacity (potential) to produce biodiesel is estimated tobe 10-15% of the total EU diesel fuel market, based on the use of rapeseed, sunflower, animal fats, and used cookingoils. See Connemann, J., and Fischer, J. Biodiesel in Europe 1998: Biodiesel Processing Technologies. Paperpresented at the International Liquid Biofuels Congress, Curitiba-Parana, Brazil, July 10-22, 1998.

259Shumaker, G., et al. A Study on the Feasibility of Biodiesel Production in Georgia. Center forAgribusiness and Economic Development, University of Georgia. 2003.

supplies to the diesel market.258 Unless these conditions are met, biodiesel will have to rely ongenerous public policy support in the way of tax incentives and other support systems.

Another alternative is to promote biodiesel as a lubricity additive (B2) or low-level blended fuel(e.g.. B5 to B20) to boost cetane levels in Canadian diesel fuels. The table below examines thecompetitiveness of these two biodiesel products with petroleum diesel.259

Table 12: Added cost to retail price of diesel fuel when blended with either 2% or 20% biodieselRetail diesel prices per gallon

$0.60 $0.75 $0.90 $1.05 $1.20 $1.35 $1.50

Added cost in cents per gallon - B2 biodieselBiodiesel (100%) cost per gallonNow* ($1.50) 0.018 0.015 0.012 0.009 0.006 0.003Future** ($1.25) 0.013 0.01 0.007 0.004 0.001 0 -0.01

Added cost in cents per gallon - B20 biodieselNow ($1.50) 0.18 0.15 0.12 0.09 0.06 0.03Future ($1.25) 0.13 0.1 0.07 0.04 0.01 -0.02 -0.05* Equivalent to about 15 cents / lb feedstock price.** Equivalent to about 11 cents / lb feedstock price.

< Both B2 and B20 are price competitive above $1.25 per gallon with feedstockcosts of 15 cents per pound.

< If feedstock costs can be reduced to 10 cents per pound, B2 and B20 wouldactually begin to reduce the costs of diesel fuel once it reached $1.35 per gallon.

< Note that in California, retail diesel prices exceeded $1.35 per gallon for at leasttwo years (running from July 1999 to July 2001).

< Producing a dedicated crop like industrial mustard at less than 10 cents per poundand focusing on B2 and B5 blends are two key strategies to developing asustainable industry that does not require tax incentives.


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260It has been estimated that Canada could easily produce approximately 600 million litres of biodieselannually from surplus canola, soy, tallow, and tall oil. This would account for about 3.2% of the 19 billion litres ofdiesel fuel consumed in Canada in 1995. Personal communication from Dr. Martin Reaney, Agriculture and Agri-Food Canada, to Dr. Chandra B. Prakash, GCSI - Global Change Strategies International, Inc. Referenced inPrakash, Chandra B. A Critical Review of Biodiesel As A Transportation Fuel in Canada. A report prepared for theTransportation Systems Branch, Air Pollution Prevention Directorate, Environment Canada, March 25, 1998.

261Biodiesel Demonstration and Assessment with the Societe de transport de Montréal (STM): Final Report.May 2003.

< However, in the short term, tax support will be required to develop the industry.

The Delphi Group felt that in the short term (one to five years), low cost oils including wastefrying oil, tallows, waste restaurant oil, off-grade canola oil, vegetable oil soap stock, and tall oil(from pulp and paper processing) will become the core source for biodiesel production andaccount for 1–5% of the market.260 They can be converted to biodiesel efficiently and cost-effectively using existing technology. Since these feedstocks are in relatively short supply, theywill likely be used in small amounts in diesel, fuel and they should be able to compete on price(with excise federal/provincial tax exemptions).

With the exception of off-grade canola oil, the remaining oils will cause low-temperature flowproblems. They will not be suitable for use in winter fuels at concentrations above 10%.However, a B5 blend using animal fats has been shown to work well during the winter inMontréal in a mass transit demonstration, and it produces significant reductions in smogemissions.261

These low-cost oils (with the exception of tall oil) already form the backbone of severalindustries involved in the production of animal feed and chemicals. Prices will likely rise asthese industries react to the competition for raw material supplies. However, the mad cow scarein Canada may depress some of the traditional markets for animal fats and keep prices low.

In the medium to long term, dedicated crops will have to be developed for biodiesel productionthat are less expensive to grow than current varieties and that produce greater oil yields.Biorefineries that produce other value-added products (in addition to biodiesel) may also have tobe developed to offset costs by increasing revenues. It is expected that the biodiesel producedfrom these biorefineries would be more price competitive with diesel fuel and could penetrate5–15% of the market (assuming that dedicated feedstocks become available).


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262In 2002, Canadian diesel wholesale prices were 20-30 cents per litre vs a projected cost of 36 cents perlitre for biodiesel made from animal fats and 63 cents per litre for biodiesel made from vegetable oils. See LeveltonEngineering Ltd. and (S&T)2. Assessment of Biodiesel and Ethanol Diesel Blends, Greenhouse Gas Emissions,Exhaust Emissions, and Policy Issues. Report to Natural Resources Canada.

Without some form of renewable fuel standard, most members of the Delphi Group believe theconsiderably higher price of biodiesel fuel262 will limit it to niche markets where environmental,health, and safety benefits could justify higher prices.

There was also broad consensus among panel members that biodiesel should not be positioned asan alternative to fossil fuels since the cost of biodiesel is too high. Rather, it should be viewedeither as a potential lubricity additive when low sulphur diesel fuel is mandated in 2006 or as acetane enhancer for lower quality diesel fuels made from syncrude and tar sands feedstocks.


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263It should be noted that the EU has recently backed away from a similar portfolio standard, and arenewable portfolio standard has not yet passed in the US.

264This would result in a 50 cent per litre tax support system (which compares with an average 17 cents perlitre federal/provincial ethanol excise tax exemption) less than Germany, for example, where the exemption is theequivalent of 66 cents per litre. The cost to Canadian tax payers would range from $230 million (at 2%) to $600million (at 5%).

8.0 Recommendations for public policy changes in Canada

We asked our Delphi Group what public policies (e.g., regulatory, tax, fiscal, R&D) couldcontribute to making biodiesel production technically and economically viable in Canada. Ingeneral, panel members expressed the belief that environmental benefits derived from usingbiodiesel, and its utility as a strategy for meeting Kyoto commitments, could justify the use ofgovernment tax and R&D support, much like the case with ethanol. They also pointed to thesupport biodiesel has received in both Europe and the US.

Some of the suggestions for government policy support were as follows:

8.1 Regulations

Assuming adequate feedstock supplies, a renewable fuel standard could be “ramped up,” startingwith, say, 2% and rising to 5% within eight years.263 This could ameliorate any sudden priceshocks to food/feed markets. Policies that eliminate solvent extracted oil from the food marketcould free up oil for the biodiesel fuel market and improve industry efficiency.

8.2 Taxes

One panel member suggested that a half-cent tax exemption for every 1% of blended fuel wouldbe sufficient to generate demand.264 Another approach could be to charge an environmental levyon conventional diesel fuel at a half cent per litre and exempt blended fuels meeting therenewable fuel standard. It was also pointed out that biodiesel has a higher energy content thaneither ethanol or conventional gasoline and could justify higher tax support.


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265For a more complete discussion of R&D opportunities, see An Assessment of the Opportunities andChallenges of A Bio-Based Economy for Agriculture and Food Research in Canada. A report prepared by theCanadian Agricultural New Uses Council for the Canadian Agri-Food Research Council and BIOCAP Canada. June2003.

266Canola breeding programs, for example, may be able to increase oil yield from 40 to 50% within the nextfew years.

267Dr. John W. Goodrum and Daniel P. Geller at the Biological and Agricultural Engineering Department,University of Georgia, have developed a small-scale continuous flow reactor.

268For example, improving the cetane number has been found to improve ignition quality, reduce particulateand NOx emissions, and improve cold-start ability. High levels of stearic acid have been found to increase the cetanenumber, although at the expense of cold flow properties. This fatty acid composition would make an ideal summerdiesel. A high oleic acid content combined with low levels of palmitic, linolenic, and stearic acid would produce a

8.3 R&D265

< In the short term, improve agronomics and crop breeding to produce highlyproductive food/nonfood oilseed crops with low nitrogen and phosphorousfertilizer inputs. In the longer term, develop crops with higher yielding oils.266

These biofuel crops would significantly improve the economics of production.Advances in hybrid technology, fall seeding, disease resistance, and stresstolerance will also improve the Life Cycle Analysis (LCA) of these fuel crops andprovide stronger rationale for public policy support.

< Assist processors to identify low cost feedstocks such as used oil, oil fromgreen/heat damaged seeds, etc.

< Examine the benefits of continuous versus batch processing267 (note that highgravity batch fermentation processing was more economically viable in the caseof ethanol processing).

< Investigate cold weather impacts (appropriate to the Canadian context) onbiodiesel blends — e.g., some refiners are concerned that blends above 5% mayvoid engine warranties. A major biodiesel demonstration in Montréal hasprovided much needed information. More demonstrations in other areas would bebeneficial.

< Identify new market opportunities for glycerol and oilseed meal.

< Improve the quality of biodiesel fuel. Use traditional breeding and plantbiotechnology to alter the composition of fatty acid chains to improve the cetanenumber, cold flow properties, and oxidative stability.268


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diesel fuel with good overall performance including a boost in cetane number, improved oxidative stability (loweriodine value), and improved cold flow properties. For a more detailed discussion, see Duffield, J., Shapouri, H.,Graboski, M., McCormick, R., and Wilson, R. U.S. Biodiesel Development: New Markets for Conventional andGenetically Modified Agricultural Products. Office of Energy, Economic Research Service, U.S. Department ofAgriculture. September 1998.

8.4 Fiscal

< Provide venture capital assistance to small processors.

8.5 Standards development

< Quality Standards for Biodiesel — adopt the European standard for biodiesel fuelto ensure a quality product and provide engine manufacturers with greaterconfidence.

< Quality Standards for Diesel — Canadian winter diesel fuels have poor frictioncharacteristics compared to fuels from other parts of the world. High frictionresults in lower fuel economy and decreased engine life. Canadian winter dieselalso has lower cetane characteristics, which contributes to reduced engineefficiency and increased emissions. Canada could tax substandard fuel and createan incentive for refiners to use biodiesel for its lubricity and cetane benefits.

< Encouragement of LCA, particularly with respect to fuel manufacture. Ethanol,for example, could be used by refiners as an octane enhancer in gasoline, andparaffinic molecules derived from bio-oils could be used as cetane improvers.Tax incentives could be constructed to encourage LCA.

APPENDIX ACANOLA FEEDSTOCKS


1

Table 1: Average canola prices (CDN$)Per tonne Per pound

Oil Meal Seed Oil Meal Seed1990 537.35 155.75 303.72 0.24 0.07 0.141991 553.36 133.32 287.72 0.25 0.06 0.131992 534.96 127.53 274.85 0.24 0.06 0.121993 585.46 168.06 321.72 0.27 0.08 0.151994 750.42 178.70 392.10 0.34 0.08 0.181995 836.64 148.48 419.59 0.38 0.07 0.191996 770.61 205.19 432.33 0.35 0.09 0.201997 725.58 244.46 440.25 0.33 0.11 0.201998 819.22 178.58 419.99 0.37 0.08 0.191999 754.27 142.10 372.43 0.34 0.06 0.172000 568.84 156.27 287.82 0.26 0.07 0.132001 486.46 205.05 289.91 0.22 0.09 0.132002 633.10 222.80 356.96 0.29 0.10 0.162003 813.70 214.63 415.39 0.37 0.10 0.19

14-year average 669.28 177.21 358.20 0.30 0.08 0.16Notes: Crude degummed oil. FOB plants. April 2000 to present FOB Vancouver.Source: Cereals & Oilseeds Review - Statistics Canada. Published on Canola Council of Canada web site.

Table 2: Average yield (bu./acre), 1999 – 2003ON MB SK AB BC TOTAL

1999 34.3 30.6 26.7 29.0 27.5 28.22000 37.8 28.4 25.8 26.1 30.4 26.52001 39.4 26.6 20.2 27.3 25.0 23.72002 32.5 29.3 19.7 21.4 20.0 22.92003 36.0 30.7 20.9 28.8 24.3 25.4

Average 36.0 29.1 22.7 26.5 25.4 25.3Source: Field Crop Reporting Series, Statistics Canada (December 31, 2003). Published on Canola

Council of Canada web site.


2

Table 3: Average yield (tonnes/acre), 1999 – 2003ON MB SK AB BC TOTAL

1999 0.768 0.687 0.607 0.647 0.607 0.6472000 0.849 0.647 0.566 0.607 0.687 0.6072001 0.890 0.607 0.445 0.607 0.566 0.5262002 0.728 0.647 0.445 0.485 0.445 0.5262003 0.809 0.687 0.485 0.647 0.566 0.567

Average 0.809 0.655 0.510 0.599 0.547 0.575Source: Field Crop Reporting Series, Statistics Canada (December 31, 2003). Published on Canola


Table 4: Five-year average annual production yields (1999 – 2003)Harvested(000 acres)

Production(000 tonnes)

Yield(tonnes/acre) Yield bu/acre

ON 52 42 0.647 36.0MB 2,258 1,499 0.607 29.1SK 5,296 2,778 0.526 22.7AB 3,258 1,928 0.526 26.5BC 69 40 0.567 25.4

TOTAL 2,187 1,257 0.575 25.3Source: Field Crop Reporting Series, Statistics Canada (December 31, 2003). Published on

Canola Council of Canada web site.


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Table 5: Canola production (000's tonnes)ON MB SK AB BC TOTAL

1999 54 1,708 3,976 2,971 62 8,7982000 39 1,488 3,425 2,155 45 7,2052001 31 1,134 2,155 1,724 43 5,0172002 44 1,429 1,656 794 16 4,1782003 41 1,735 2,676 1,996 36 6,669

Average 42 1,499 2,778 1,928 40 6,373% of total 23.52 43.58 30.25Source: Field Crop Reporting Series, Statistics Canada (December 31, 2003). Published on Canola



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Table 6: Harvested acreage (000's acres)ON MB SK AB BC TOTAL

1999 70 2,460 6,570 4,520 100 13,7492000 45 2,310 5,860 3,700 80 12,0072001 35 1,880 4,700 2,670 60 9,3532002 60 2,150 3,700 2,100 35 8,0592003 50 2,490 5,650 3,300 70 11,587

Average 52 2,258 5,296 3,258 69 10,951% of total 0.47 20.62 48.36 29.75 0.63Source: Field Crop Reporting Series, Statistics Canada (December 31, 2003).

Table 7: Oil production 1999 – 2003 (thousand tonnes)

Stocks Production Imports Totalsupply Exports Domestic

utilizationTotal

demandEndingstocks

1993/1994 35 913 6 954 414 511 925 291994/1995 29 1,063 13 1,105 423 665 1,088 171995/1996 17 1,153 13 1,183 550 644 1,154 291996/1997 29 1,137 52 1,218 695 338 1,175 431997/1998 43 1,364 76 1,483 882 397 1,434 491998/1999 49 1,283 10 1,342 778 438 1,314 281999/2000 28 1,243 102 1,373 628 428 1,325 482000/2001 48 1,266 56 1,370 825 428 1,322 482001/2002 48 971 34 1,053 582 384 1,053 292002/2003 29 926 28 983 514 342 983 31

10-year average 36 1,132 39 1,206 629 458 1,177 352003/2004 (forecast) 31 1,331 28 1,390 900 450 1,390 40Source: Cereals & Oilseeds Review and COPA Newsletter - Statistics Canada. Published on Canola Council of Canada web site.

APPENDIX BSOYBEAN STATISTICS


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Table 1: Canadian soybean supply and distribution

Crop year* 1998/99 1999/00 2000/01 2001/02 2002/03** 2003/04** 5-year average(1998-2002)

Soybean supplyAcres harvested 2,420,600 2,479,880 2,620,670 2,584,500 2,529,280 2,460,000 2,526,986

Beginning stocks 188,000 242,000 252,000 180,000 172,000 160,000 206,800

Production 2,737,000 2,781,000 2,703,000 1,635,000 2,335,100 2,500,000 2,438,220

Imports 253,825 454,834 430,966 982,435 500,000 600,000 524,412

Total supply 3,178,825 3,477,834 3,385,966 2,797,435 3,007,100 3,260,000 3,169,432Soybean usageCrush 1,516,300 1,714,300 1,648,300 1,663,900 1,675,000 1,700,000 1,643,560

Exports 867,405 946,360 746,241 471,492 650,000 850,000 736,300

Seed 98,000 105,000 120,000 100,000 90,000 90,000 102,600

Other*** 455,120 460,174 691,425 390,043 452,100 440,000 489,772

Total usage 2,936,825 3,225,834 3,205,966 2,625,435 2,867,100 3,080,000 2,972,232Carry-out stocks 242,000 252,000 180,000 172,000 160,000 180,000 201,200Average price ($/bushel) $7.58 $7.17 $7.07 $7.31 $8.50 $7.00 – $8.00 $7.53Notes: Figures are in tonnes.

*Crop year is September 1 to August 31**Forecast/estimate***Other - Other domestic usage, feed, waste, dockage, etc.

Source: Statistics Canada, Agriculture & Agri-Food Canada and Ontario Soybean Growers


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Table 2: Canadian soybean supply and distribution

Crop year* 1998/99 1999/00 2000/01 2001/02 2002/03** 2003/04** 5-year average(1998-2002)

Soybean supplyAcres harvested 2,100,000 2,123,000 2,235,000 2,250,000 2,064,000 1,750,000 2,204,600

Beginning stocks 130,000 120,000 150,000 140,000 120,000 90,000 123,000

Production 2,343,300 2,340,500 2,311,500 1,279,100 1,905,100 1,858,000 2,133,680

Imports 236,690 423,770 419,500 982,435 500,000 600,000 439,355

Total supply 2,709,990 2,884,270 2,881,000 2,401,535 2,525,100 2,548,000 2,696,035Soybean usageCrush 1,516,300 1,714,300 1,648,300 1,663,900 1,675,000 1,700,000 1,618,949

Exports 326,672 408,685 337,582 300,000 400,000 450,000 384,700

Seed 95,000 120,000 110,000 85,000 85,000 80,000 103,000

Other*** 652,018 491,285 645,118 232,635 275,100 223,000 458,366

Total usage 2,589,990 2,734,270 2,741,000 2,281,535 2,435,100 2,453,000 2,564,035Carry-out stocks 120,000 150,000 140,000 120,000 90,000 95,000 132,000Average price ($/bushel) $7.58 $7.17 $7.07 $7.31 $8.00 – $8.80 $7.50 – $8.30 $7.65Notes: Figures are in tonnes.

*Crop year is September 1 to August 31**Forecast/estimate***Other - Other domestic usage, feed, waste, dockage, etc.

Source: Statistics Canada, Cereal & Oilseeds Review and Ontario Soybean Growers

APPENDIX CASTM BIODIESEL TEST METHODS AND STANDARDS


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ASTM D 6751 Biodiesel Fuel (B100) Blend Stock for Distillate FuelsProperty Test Method LimitsFlash Point, °C D 93 130.0 min

Water and Sediment, % vol D 2709 0.050 max

Kinematic Viscosity, 40°C, mm2/sec D 445 1.9 - 6.0

Sulfated Ash, % mass D 874 0.020 max

Sulfur, % mass D 5453 0.05 max

Copper Strip Corrosion D 130 No. 3 max

Cetane Number D 613 47 min

Cloud Point, °C D 2500 Report

Carbon Residue, 100% sample% mass D 4530 0.050 max

Acid Number, mg KOH/gm D 664 0.80 max

Free Glycerin, % mass D 6584 0.020 max

Total Glycerin, % mass D 6584 0.240 max

Phosphors Content, % mass D 4951 0.001 max

Distillation, % recovered, °C D 1160 360 max

ASTM PS 121 Biodiesel B20 Blend StockProperty Test Method LimitsFlash Point, °C D 93 100.0 min

Water and Sediment, % vol D 2709 0.050 max

Kinematic Viscosity, 40°C, mm2 D 445 1.9 - 6.0

Sulfated Ash, % mass D 874 0.020 max

Sulfur, % mass D 5453 0.0015 max

Copper Strip Corrosion D 130 No. 3 max

Cetane Number D 613 46 min

Cloud Point, °C D 2500 Report

Carbon Residue, 100% sample, % mass D 4530 0.050 max

Carbon Residue, Ramsbottom, % mass D 524 0.090 max

Acid Number, mg KOH/gm D 664 0.80 max

Free Glycerin, % mass D 6584 0.020 max

Total Glycerin, % mass D 6584 0.240 max

Source: Dunn, R. Table 1 in Biodiesel As A Locomotive Fuel in Canada. Report prepared for the TransportationDevelopment Centre, Transport Canada. May 2003.

biodiesel and other chemicals from vegetable oils and animal fats

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