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 biodiesel plant on the lonely croplands outside this southeast Missouri 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 available at a nearby Tyson Foods 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.
Today, only a 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 have taken notice. Tyson Foods said in November it has established a renewable energy division that will be operating this year. Competitors Perdue Farms and Smithfield Foods 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.
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 only plans to include soybean oil in his blend 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.
Tyson produces about 2.3 billion pounds of chicken fat annually from its poultry plants. That's about 300 million gallons that could be converted to fuel.
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 U.S. 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 strict guidelines, Eidman said.
Animal fat also has its technical drawbacks. It clouds up at higher temperatures than soy- based biodiesel, which means it might thicken up when used in colder, northern cities, Eidman said. That might limit distribution to southern areas where temperatures don't often drop below 40 degrees.
While these factors kept animal fat in the background, the biodiesel industry has hit a turning point.
Increasing demand for soybean oil as a fuel and as a food is making the price creep up. It now makes economic sense to invest in new technology to process animal fat into usable form as a fuel stock.
Biodiesel costs about $1 a gallon more to produce than conventional diesel, but federal tax breaks for fuel distributors help hide that cost from consumers.Wisconsin State Journal