Animal fat becomes key biodiesel ingredient

DEXTER, Mo. -- Jerry Bagby is typical of the oil men who are prospecting for a fortune in the Midwestern biofuels boom. He's convinced there's oil in these hills -- and he's found a well that no one else is using.

Bagby and a longtime friend have cobbled together $5 million to build a new biodiesel plant on the lonely croplands outside this Stoddard County town. They're betting they can hit paydirt by exploiting a generally overlooked natural resource that's abundant in these parts -- chicken fat.

There's a virtual gusher of the stuff at a nearby Tyson Foods Inc. poultry plant. Currently, the low-quality fat is shipped out of state to be rendered and used as a cheap ingredient in pet food, soap and other products.

Bagby and his partner, Harold Williams, plan to refine the gooey substance, mix it with soybean oil and produce about 3 million gallons of biodiesel annually.

Soybean oil costs rising

Tim Hutchcraft, left, plant construction foreman and Nicholas Pavelka, plant chemist for the Global Fuels refinery, review the refining process equipment Monday, Dec. 4, 2006, inside the Global Fuels refinery under construction in Dexter, Mo. Today, only a tiny fraction of U.S. biodiesel is made from chicken fat, but that seems likely to change. The rising cost of soy bean oil, which accounts for roughly 90 percent of all biodiesel fuel stock, is pushing the industry to exploit cheap and plentiful animal fats. (AP Photo/Joel West Ray)

Today, only a tiny fraction of U.S. biodiesel is made from chicken fat, but that seems likely to change. The rising cost of soybean oil -- which accounts for roughly 90 percent of all biodiesel fuel stock -- is pushing the industry to exploit cheap and plentiful animal fats.

The nation's biggest meat corporations haven taken notice. Tyson Foods announced in November it has established a renewable energy division that will be up and running during 2007. Competitors Perdue Farms Inc. and Smithfield Foods Inc. are making similar moves.

As meatpackers enter the field, they bring massive amounts of fuel stock that could make biodiesel cheaper and more plentiful.

The shift to animal fat as a fuel stock could be key to making the budding biodiesel industry a reliable fuel source for U.S. trucking fleets, said Vernon Eidman, a professor of economics at the University of Minnesota who has extensively studied the biofuels industry.

Eidman estimates that within five years, the United States will produce 1 billion gallons of biodiesel, and half of it will be made from animal fat. By that time soybean-based biodiesel will account for about 20 percent of the total, he said.

Global Fuels company owners, Jerry Bagby, corn and soybean broker, and Harold Williams, owner of Williams Moving in Dexter and Heavy Duty Truck Lines in Bloomfield, point out, on Monday, Dec. 4, 2006, the refining process highlights from the schematic hanging on one of the storage tanks of refinery Global Fuels is constructing in Dexter, Mo. (AP Photo/Joel West Ray)

For fuel refiners like Bagby, the allure of animal fat is clear. Soybean oil costs 33 cents a pound while chicken fat costs 19 cents. He plans to include soybean oil in his blend only because it adds necessary lubrication for engine parts.

"Soybean oil is more expensive than other products, so we just use enough of it to make the system run clean," Bagby said, gesturing toward a row of pipes and vats being installed in his new refinery.

For companies like Tyson, the attraction is simple. Being the nation's biggest meat company, Tyson is also the biggest producer of leftover fat from chicken, cattle and hogs.

The market for biodiesel and ethanol really started to boom in August 2005, after passage of the federal Energy Policy Act, experts say. The bill set a new standard requiring the United States to use 7 billion gallons of renewable fuels by 2012.

While it's always been cheaper, animal fat was initially overlooked as a biodiesel fuel stock because of its uneven quality, Eidman said.

When the energy bill passed, soybean oil was already widely sold as a food additive. Biodiesel refiners could depend on its quality because the oil was marketed and certified under a strict guidelines, Eidman said.

Bagby said his plant will be up and running by the end of January. His equipment can refine soybean oil, cotton seed oil and animal fat. That gives him flexibility to use whatever's cheapest on the commodity markets.

His first batches will be made from soybean oil because it's easiest to get the equipment calibrated.

After that? Soybean oil has a long way to drop before it's as affordable as chicken fat.

"You can see the difference in cost," he said.

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On the Net:

Tyson Foods: www.tyson.com

Perdue Farms Inc.: www.perdue.com

National Biodiesel Board: www.biodiesel.org