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Faith in mustard seed fuels Blue Sun’s vision of biodiesel cartel

Colorado Agriculture Commissioner Don Ament (second from left), Rural Development Director Gigi Dennis and Tom Wernsman (right), director of Blue Sun Producers, Inc., joined Glenn Babcock (left) and Howard Wickham (second from right), co-owners of Heartland Town and Country store, to cut the ribbon on the state’s first all-biofuel filling station. Heartland sells B20, a 20-percent biodiesel/80-percent petroleum diesel mix, and ethanol to the general public. (Photo courtesy of Blue Sun)

Innovation can mean creating something completely new, or, in the case of Blue Sun Biodiesel, it can be taking a great idea—like extracting fuel oil from a renewable plant source—and tailoring it to the specific needs of a region or group—like struggling farmers in dry western states.

The Ft. Collins, Colo.-based agriculture energy company opened for business in 2001 to capitalize on the growing market for biodiesel. “We started with the idea of producing and distributing a high-quality, dependable product that both diesel engine manufacturers and consumers would fully endorse, and worked backward from there as we learned more about the business,” recalled owner and CEO Jeff Probst.

Search for cost-effective feedstock uncovers high-performing alternative
An early lesson was that importing soybeans, a commonly used biodiesel feedstock, from the Midwest to Colorado added to the cost of manufacturing the renewable fuel. Blue Sun enlisted researchers from Colorado State University, Kansas State University and the University of Nebraska to investigate industrial oilseed crops that could grow in dry land crop areas. “We could build a business on importing soy, but to compete in the long term, we knew we had to exploit western resources,” Probst noted. “So we started looking at alternative feedstocks, not only from a cost perspective but also in terms of fuel performance.”

Blue Sun turned its attention to a mustard family plant similar to a biodiesel feedstock used in Europe, which offered many performance advantages over soybeans. Pound for pound, the oil content of mustard seed is 40 percent, compared to the 18 percent content of soybeans. Mustard seed has a higher cetane rating, the measurement of fuel’s ignition quality, and it retains flow properties in freezing temperatures better than soy-derived oil.

Best of all, both for Blue Sun and for Colorado farmers, mustard seed is better suited than soybeans and other oil-bearing crops to the growing conditions of the High Plains region. The drought-tolerant and heat -resistant crop requires little irrigation, a factor that improves the fuel’s energy balance. Soybeans produce 3.2 units of energy for every unit of energy used to process the oil into fuel. Probst estimates that growing the low-moisture feedstock close to the manufacturer helps to boost mustard seed’s energy balance to more than four units of energy per unit spent in processing.

Growers’ co-ops give farmers stake in biodiesel’s future
Mustard seed’s early spring planting season and July harvest fits into the fallow cycle of eastern Colorado’s winter wheat producers, adding incremental value to the farmers’ crops without adding to irrigation loads. “It offers an opportunity to support the rural economy, keep revenues in the state and give farmers more control over their own destiny,” said Probst.

Blue Sun formed two growers’ co-ops— Colorado-based Blue Sun Producers, to serve Colorado, eastern Kansas and Wyoming farmers, and Progressive Producers, exclusively for the state of Nebraska—to offer farmers a stake in their vision. Members must invest a minimum of $5,000 and plant up to 200 acres with seed Blue Sun provides. The company will contract with the farmers before planting season, and pay them an annual dividend on the investment. Participating farmers will also benefit from the expected equity appreciation in the company.

The money will be used to fund the construction of a 2.8-million-gallon biodiesel production facility in northeastern Colorado. More than 50 farmers have already joined the cooperatives, according to Probst.
The U.S. departments of Agriculture and Energy have shown interest and support for the project, too. DOE awarded Blue Sun a $100,000 Phase I SBIR grant to breed new oilseed varieties that may improve on the fuel properties of mustard seed. The research may lead to a Phase II grant of $750,000.

The company received two separate USDA Rural Development matching grants for $450,000 each to help with setting up the growers’ co-ops. The money will add 2.5 cents per pound incentive to the 9-cent-per-pound payment mustard growers would receive for their crop.

Greater availability, lower price needed to build consumer acceptance
Colorado Rural Development Director Gigi Dennis presented the grant to Blue Sun at the Feb. 6 opening of the state’s first all-biofuel retail station. Heartland Town and Country store in Ft. Morgan joins Bartkus Oil Company in Boulder, Colo., the Catherine Store in Carbondale, Colo., and Shoco Oil in Commerce City, Colo., in pumping B20, a 20-percent biodiesel/80-percent petroleum diesel mix, for the general public.

Glen Babcock, co-owner of the Heartland Town and Country store, heard about the product from a fellow Farmland Co-op member who had worked with Blue Sun. “The more I learned about it, the more I thought we should give local farmers and ranchers the option of renewable fuel,” he explained.

Turning an entire station over to biofuels did not require extensive retrofitting. Heartland had recently installed a new pump to handle ethanol, and any diesel pump was compatible with pumping biodiesel. “My feeling is, we’ve been held hostage to fossil fuels long enough,” Babcock declared. “Biofuels are good for farmers and for the local economy. Heartland is supporting the product from tillage to tank.”

Whether consumers will support biofuels as enthusiastically is still an unanswered question. The smog that frequently plagues Colorado’s Front Range has made cleaner-burning biodiesel attractive to many fleet customers. The University of Colorado uses Blue Sun in most vehicles, and Denver’s Regional Transportation District has begun a pilot program for the product. The cities of Boulder, Breckenridge and Colorado Springs, a Western customer, recently contracted with Blue Sun’s distributor and retail network to supply B20 for their municipal diesel vehicles.

Still, with only five retail outlets in Colorado and a sixth to open in Ft. Collins. Colo., it takes a committed driver to seek out the pumps. Also, the B20 fuel blend customers prefer costs about 20 cents more per gallon than petroleum diesel. Congress is considering a revised energy bill with a 20-cent-per-gallon tax reduction on biodiesel and a new transportation bill with a similar incentive. If one of those bills carrying the incentive proposal passes, it could offer some price relief.

And, of course, Blue Sun continues to believe that the humble mustard seed can reduce air pollution and dependence on foreign oil, save the family farm and build a multi-million dollar industry. All it takes is a good idea and a little faith.

Vol. 23, No. 2
April 2004

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Biodiesel offers renewable alternative to petroleum
Blue Sun Biodiesel
Blue Sun Producers
USDA Rural Development
Farmland Co-op
Jeff Probst
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