Portland to grow biodiesel industry

With new plants on horizon, commissioner proposes setting mandates on alternative fuels

The race is on to build the first alternative energy plant in Portland.

At least three different groups are working to build a biodiesel processing plant in Portland: one in the North Portland Rivergate Industrial District, another at the site of the Linnton Plywood Mill and yet another at an undisclosed location.

All this is happening as Commissioner Randy Leonard is proposing to require that all diesel sold within the city include 5 percent biodiesel and that all gasoline contain 10 percent ethanol.

Asked where such large quantities of the alternative fuels would come from, Leonard said a biodiesel processing plant could be 'popping up very soon' in the Rivergate District - then declined to reveal the name of the developer behind the project or elaborate on the timeline. The Rivergate District is between the St. Johns Bridge and the mouth of the Willamette River.

That potential project is separate from an effort by Marty Johnson, of the Vancouver, Wash.-based company Northwest Fuels. He would not reveal the site he is looking at until the final permits go through - but he tells the Portland Tribune that the facility 'is probably going to be the largest biodiesel plant coming to Portland,' adding, 'It's going to be huge.'

Just how huge? The first phase, which he hopes will be completed next summer, would produce 60 million to 120 million gallons of biodiesel each year. The next phase, added over about a year, would ramp it up to 300 million gallons. Johnson says it would use vegetable oil from local farmers.

In addition, there is another proposal in the works by local developer John Beardsley and Tualatin businessman Rece Bly for the mill site across the river from the Rivergate District. Beardsley and Bly have yet to persuade the mill's owners - the Linnton Plywood Association - to sell them the property, meaning either or both of the other plants could come on line first.

Currently, there is only one biodiesel plant in Oregon - the Salem-based SeQuential-Pacific Biofuels - but the company came close to opening a second facility in Portland in the Rivergate area last year.

The company received a grant from Portland's Green Investment Fund but then returned it, deciding to expand its Salem plant instead. Capacity at the Salem plant is for 100 million gallons, which is considered the industry standard. One of the same size is slated to open next summer in Aberdeen, Wash.

The Rivergate site is awash with potential developers. Portland Development Commission spokeswoman Elissa Gertler says the agency has gotten at least three inquiries from biodiesel companies about the site in the past six months but did not have the names of the firms.

Developers talk about opening biodiesel plants at various sites all the time, according to Brent Searle, special assistant to the director of the Oregon Department of Agriculture. According to Searle, the biggest hurdle is lining up enough investors. A facility that produces 100 million gallons costs about $25 million.

Whoever develops the next facility in Portland must build one that large to meet the demands of the marketplace, Bly says.

As a separate piece of Leonard's biodiesel effort, he has set aside one-time funds of $735,000 in the city's budget for the Office of Sustainable Development to create an economic development strategy for the biodiesel industry in Oregon. Also, on Monday the PDC released a report on growing canola for biofuel in the Portland metro area.

Leonard promises benefits

With one fell swoop, Leonard says he has come up with a way to better the environment, set a bold national precedent, boost the statewide economy and bridge the gap between Portland and Eastern Oregon.

'It just seems to me we have to have a political will,' he says. 'I'm just completely fed up with the inability of elected officials to rise above the influence of the petroleum industry when we know that there are alternatives that make sense.'

While Leonard claims to have the support of a majority of the City Council for his plan, some in the industry are issuing words of caution, and the petroleum industry is dead set against the proposed mandates.

'The marketplace is already working with biodiesel,' says Steve O'Toole, director of the Oregon Petroleum Association. 'Why disrupt it?'

The council is set to discuss Leonard's proposal at 9:30 a.m. Wednesday and vote on it July 5. As currently written it would:

• Require that all diesel fuel sold in the city of Portland contain at least 5 percent biodiesel by next summer and 10 percent biodiesel three years from now. Biodiesel is an environmentally friendly fuel that has been cut with vegetable oils or animal fats and chemically treated with alcohol. Leonard wants to utilize the farmers in Eastern Oregon to produce it first.

• Require that gasoline be blended with a minimum of 10 percent ethanol year-round in the city, rather than just in the winter months. Ethanol, largely made from corn grown in the Midwest, is another way to produce cleaner combustions and can be used in any vehicle.

• Require that all city vehicles operate on either a 20 percent blend of biodiesel or 10 percent ethanol. Leonard already has directed the bureaus under his supervision - including the water bureau and Bureau of Development Services - to convert to biodiesel.

The water bureau, with its fleet of 145 vehicles, is the largest in the nation, he believes, to run at 99 percent biodiesel. (They don't run on 100 percent biodiesel because there is a federal tax credit for blending gasoline.)

Critics worry about supply

Leonard says the entire package would reduce petroleum consumption in Portland by between 15 million and 35 million gallons each year. Yet critics raise issues with the concept of mandates.

'Our organization is very supportive of biodiesels,' says O'Toole, whose association includes 130 motor and heating fuel marketers and dealers statewide. 'But the problem is mandates. Even though it's well-intentioned, the difficulty is usually when you establish mandates, it can create shortages that can increase the price.'

He cites the recent rise in gas prices as an example. The federal energy bill passed by Congress mandated that gasoline use ethanol rather than the fuel additive MTBE, which was designed to make fuel burn cleaner.

But after MTBE was found to be a harmful contaminant of water, states on the West Coast moved away from it, toward ethanol. Many East Coast states had not yet switched over. So at the time of the nationwide ban, ethanol became short in supply and gas prices rose - but less so on the West Coast.

Other skeptics have similar concerns about supply and demand if a mandate were in place.

'The real key is to not ramp up too fast on renewable fuel standards; otherwise the local infrastructure will not keep up with it,' Searle says. 'Are you trying to do an air quality thing or also do an economic development effort? To do those in tandem, you've got to be very thoughtful and measured about how it was brought into place.'

Warren Karlenzig, chief strategy officer of an online sustainability forum called SustainLane, watches Portland closely and thought Leonard's concept sounded innovative, but he wonders about the nuts and bolts.

'Mandating something like this is a tricky issue, because if people can't meet that because there's not enough biodiesel available, do you fine them or force them to go to another market and get it?' he says.

Leonard's proposed enforcement includes a written notice and fine of up to $5,000 for the vendor's first violation; up to $10,000 for the second.

In response to all of the questions about supply and demand, Leonard says he's been working on the initiative since the fall, consulting with people statewide, and is 'assured by local folks that there's enough' biodiesel to go around.

'Farmers are reluctant to grow the crops because up to this point, biodiesel couldn't compete (with regular fuel),' he says. 'They're willing to commit the land and resources necessary to grow the crop if there's a competitive market.'

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