The deadliest hurricane of 2005 plowed into the states along the Gulf of Mexico and became the costliest natural disaster in US history. Homes were flooded, people were displaced, and a swath of mass destruction cut through the Gulf Coast communities. Oil and gas prices shot up causing distress across the country.
Thus began a chain of events that would lead several unlikely people of different backgrounds and ideologies to sell biofuel from a music store.
The following is the story of how OM Biofuels,llc began in Charleston, SC. Only first names are used to protect the innocent, although those who were involved in the early days of Charleston’s biodiesel community will know who they are.
MY INTRODUCTION TO WVO AND BIODIESEL
I became interested in alternative fuels and energies a few years before Hurricane Katrina hit the Gulf States. A friend of mine put me in touch with a gentleman named Randy from Folly Beach who had been running his old 1988 Mercedes on vegetable oil he collected himself from local restaurants. After speaking with Randy H, I began to really look into the subject and started hunting for a diesel vehicle myself.
The only vehicle I could find at the time was a used diesel GMC Suburban for sale at a used car lot on James Island. While I was thinking about purchasing that diesel vehicle, I ran into a young man named James, who was sitting in his own diesel Suburban near what was known then as “Sunrise Park”. I began asking him about his vehicle and what he thought of it. He put me in touch with his dad, Charles, with whom I called sometime later and began a long friendship.
ALTERNATIVE ENERGY MEETINGS
A few months later, I started a Meetup group to talk about alternative energy and invited different people to speak about the subject who had experience with it.
One of the first people I interviewed about biodiesel was a guy named Bert. He came to Charleston from Columbia and gave a talk to a small group of us. He introduced us to a website called “Journey to Forever” and went into detail on how to build a biodiesel reactor. Charles was at that first meeting. This sparked even more interest in the subject and I began to scour the internet for information.
I ended up buying the diesel Suburban and decided to give biodiesel a try.
It was sometime later that I received a call from a gentleman named Brett. He invited me to his home in Sol Legare where a handful of others were meeting to discuss the possibilities of alternative fuels, specifically: biodiesel.
There was talk of a wave-piercing speed boat named Earthrace that was racing around the world using biodiesel to raise awareness about biofuel. Charleston was one of its stops on its pre-race tour to visit Earthrace’s first sponsor, the local Cummins marine engine plant. One of the crew members was also going to be speaking during the meeting at Brett’s house.
Among the group that met that evening were the following: a geology professor by the name of Anton, who had been brewing biodiesel for a number of years and running his vehicle on it, a fisherman who was looking for an alternative fuel for his shrimp boat, several entrepreneurial ladies who were supportive of the cause, a technology developer named Jonathan, Randy H and his wife, Charles, myself, and Anthony from Earthrace. Several people from that meeting would become a part of the growing biodiesel movement in Charleston.
Brett had a tank of biodiesel that he kept at his house and used to fuel his diesel truck for his construction business. This was my first source of biodiesel.
I continued to hold monthly alternative energy meetings at Earthfare. Some of the key people that would attend was a guy named Ari, who used biodiesel for his tree-trimming business machinery and vehicles. Another attendee was a retired engineer named Bob. Bob had no problem sharing his conservative political views or his extensive knowledge on biodiesel. He became nicknamed: Bio-Bob.
These meetings were the beginnings of a deeper understanding of the story of biodiesel.
What is biodiesel?
Biodiesel is made from plant or animal oils through a process called transesterification that converts the oil into a fuel that can be run in diesel engines. It is considered an actual fuel, regulated to meet the standards of (ASTM D 6751), and can be blended with petroleum diesel.
What is WVO?
WVO is used vegetable oil that is recycled from the food industry. It can be filtered and run in diesel vehicles that have systems installed to heat and regulate the oil before it goes through the engine. WVO is not considered a fuel.
What is SVO?
SVO usually refers to straight vegetable oil that has not been used yet. SVO is not considered a fuel.
When the diesel engine was invented by Rudolf Van Diesel, it ran on vegetable oils. It was not until later that diesel fuel made from petroleum was used.
Biodiesel has been in existence for some time, but was usually considered much more expensive than petroleum diesel to produce commercially. When fuel prices shot up after hurricane Katrina, the biodiesel industry began to grow rapidly. New biodiesel operations popped up everywhere and demand began to grow for the product. This was also stimulated by a tax credit that was issued by the Federal government to help biofuels become more competitive.
The big question about biodiesel was the feedstock, or the base that the oil would be extracted from. These were some of the popular feedstocks:
Waste Vegetable Oil usually came from fryers of restaurants and cafeterias after it had been used. The problems with waste vegetable oil was that the quality was inconsistent and it was difficult to clean. There also was not an infrastructure in Charleston that collected it in great enough quantities for it to be used as a viable feedstock for biofuel. Waste oil was already being collected and used by rendering companies to make products such as make-up and other items. Previous to the biodiesel and waste vegetable oil movement, these companies did not have much competition for the oil. In fact, it was seen as a nuisance to some restaurants, and the rendering companies could actually charge a fee to come pick it up and help them dispose of it. As we looked into the possibilities of feedstocks, WVO seemed too complicated for us to deal with at the time.
Soybeans were plentiful in South Carolina. Carolina Soya in Estill SC was a huge soybean company that processed plenty of beans daily. Knightsbridge biofuels from England acquired land and began to build a biodiesel refinery right next to Carolina Soya. Bio-Bob developed a relationship with one of the lead managers and it seemed to be a reliable source of feedstock in the short term. In the long-term, it did not look so good. One acre of Soybean farm would only create about 47 gallons of fuel. The math did not work out. There was not enough land for Soybeans to ever completely replace diesel fuel. Nevertheless, it was a “bird in the hand” that seemed to be a temporary solution until something else came along.
Chinese Tallow Tree
The Chinese Tallow tree was brought to the United States as an ornamental and described by Ben Franklin and Thomas Jefferson for its beauty. It was considered as a potential crop for feedstock for biodiesel, because the berries could produce up to 700 gallons per acre. As a naturalist in the Cape Romain Wildlife Refuge, I was very familiar with the Chinese Tallow Tree. It was a tree of concern and thousands of dollars were being spent to control it. This tree was blamed for out-competing many of the native plants. It grows abundant in the Lowcountry. The idea of orchards of an exotic tree, which is considered an invasive species by many, did not seem like a good choice for feedstock.
There was research being done on algae as a potential feedstock for biodiesel by folks like NASA and others. It could be grown anywhere in photo-bio reactors, and produce up to 8-10K gallons per acre. It did not need arable land. It could be continuously harvested in any season. It could be used to sequester carbon dioxide from smokestacks, and then reused as biofuel. It seemed like an excellent choice. The problem was, no one could figure out how to grow and extract the oil from it in a way that made it economically viable. There were several different groups trying all over the world. We all hoped that someone would eventually figure out how to make it all work in time to make it a potential long-term solution for the feedstock problem.
Other feedstocks included Palm Oil, Jatropa, and sunflower among others. All of them had their problems. We were all hoping for Algae to be the savior.
None of us looked at biodiesel as the complete solution to all of our energy and fuel problems. It just seemed like it could be one piece of a multi-faceted strategy to energy independence and ease our reliance on petroleum.
After numerous alternative energy meetings, a desire to actually get something going began to grow amongst some motivated attendees. Several of us began meeting separately from the meetup group. We began putting together a strategy for a new company. The individuals in these small group meetings varied.
At the same time, rumor was being generated about a guy who was going to build a biodiesel plant on the Old Naval Base in North Charleston. His company was going to be called Southeastern Biodiesel. The owner had a background in the Chemical industry. Several of the people from our little groups ended up going to help get that started.
Since the rest of us did not know much about chemicals, we put our efforts into building a distribution outpost.
OM BIOFUELS, LLC
When it came time to actually put money down and start an LLC, there were six of us willing to take the leap. We all came from completely different backgrounds, generations, and different political ideologies.
One day, several of us were sitting at a restaurant near the SC Aquarium trying to come up with a name for the company. Several names were being thrown around. I threw out Home Fuels. Brett misunderstood it as OM Fuels and really liked the name. Charles did also. Jonathan was ambivalent. I think Bob would have liked the name American Freedom Energy or something like that but acquiesced to OM afterwards. After a few weeks it was decided. We signed an operating agreement, slapped down some money, and decided to get down to business.
A few months later, there were only 4 of us left. Bob, Chris, Charles, and I went to work on the company trying to figure out the best way to supply Charleston with quality biodiesel.
We looked for mentors who were already in operation.
The closest groups that were in operation at the time were Piedmont Biofuels, Carolina Biofuels, and Blue Ridge Biofuels. All of them were in North Carolina.
Charles and I made trips to Asheville, NC to meet with Blue Ridge Biofuels. This was a small group of entrepreneurs who had known each other since college. They were collecting their own waste vegetable oil, filtering it, converting it into biodiesel in their own plant, and distributing it. They were very helpful and willing to share information about their trials and tribulations. They also were willing to collaborate in Charleston in anyway they could.
Sphinx, a privately owned chain of fuel stations in upstate South Carolina, was also offering biodiesel blends as an option for their customers. We would reach out to them from time to time for information and support as well.
We continued to relentlessly scour the internet for information and researched different operations around the country.
After purchasing a couple of 1000 gallon cylinder fuel tanks from Carolina biofuels, an old fuel truck retired from the Mecklenburg County School District from BlueRidge Biofuels, and a nineteen fifties fuel pump, OM Biofuels,LLC was open for business right out of the Fox Music House parking lot.
Bio-Bob built a strong relationship with a large company who was making biodiesel from soybeans in Estill, SC.
It took some time, but SouthEastern Biodiesel got up and running on the Old Naval Base in North Charleston. They decided to forgo the soybeans and use animal fats as their source of feedstock.
These two separate plants supplied the first biodiesel OM Biofuels, LLC began distributing.
When Mayor Riley started the Charleston Green Committee, I was asked to serve as one of the original 16 members. Later, I would become part of the Energy Sub-Committee that was headed by another geology professor named Mitch. We held our meetings at the College of Charleston in the Hollings Science building. I began using the same room for the Alternative Energy meetup group. Then moved to using conference calls.
At the time, I was the executive director of the Lowcountry Environmental Education Program(LEEP) and Charles was a board member. Biodiesel powered LEEP’s big, blue school bus that we used to take local school kids on environmental education field trips.
EARLY DAYS OF OM BIOFUEL OPERATIONS
I can say with honesty, it was quite a learning experience for OM Biofuels in the first years of operation.
Customers had to wait in line behind people who were purchasing pianos and sheet music before they could get someone to walk out and fuel up their vehicles. There was tremendous strain on the employees of Fox Music, who were really not getting paid any extra for the fuel business. No one in OM Biofuels, LLC was getting paid any salaries. All of this was done as volunteer work by people who were determined to supply an alternative to petroleum diesel.
Even with all the craziness, things were still functioning.
Our customers were as varied as the owners of OM Biofuels, LLC.
There were a lot of conservative contractors, some conservationist dirt worshippers, some high-performance vehicles, some high-class lawyers, and a lot of other people.
Conservatives loved biodiesel because it was made in the USA and it kept money out of the hands of foreign countries that did not like the United States.
Conservationists loved it because it was better for the environment and reduced carbon emissions.
Some people claimed it improved their vehicle’s performance.
Some people just loved it because it smelled so much better than petroleum diesel.
THE FEEDSTOCK DILEMMA AND THE FUEL INDUSTRY
Shortly after OM Biofuels began operation, soybean oil prices started to go through the roof, and we learned a whole lot about the fuel industry.
A couple lessons about the fuel industry:
The factors affecting the price of fuel are based on thousands of numbers and market forces based on speculation.
Most of the cost of fuel is in the raw materials used to make it. 68% of the cost of gas comes from crude oil. Feedstock makes up 73%+ of the cost of biofuel.
About 18% of our crude oil comes from Canada. While about 8-11% comes from countries like Nigeria, Venezuela, Saudi Arabia, and Mexico respectively.
Fuel is taxed upon tax and heavily subsidized by the federal government. You are paying taxes on fuel whether you buy it or not. When you buy fuel, you are paying taxes again. At the same time, if we paid the real cost of fuel, the price would be double digits around $15+/gallon (see 70 page report by Clifford W. Cobb ”The Roads Aren’t Free” -510-444-3041, extension 300).
Filling stations sell their fuel at razor thin margins from the price they buy it. They may even sell fuel at a loss when customers buy with a credit card. The majority of profit at most fuel stations comes from what people buy from the convenience store.
As time went by, the demand on the feedstock steadily increased. The future traders in the stock market drove up commodities prices higher and higher. Soybean and vegetable oil prices skyrocketed until they priced out of the US market. Estill began selling their soybean oil and biodiesel to Europe.
When the weather became really cold in Charleston, we began having problems with the pump and filters.
The 100% animal fat biodiesel did not do well in cold weather. We ended up getting complaints from customers also.
Feedstock prices continued to rise through 2006-7.
After a year in operation, OM Biofuels, LLC was down to 3 active owners from the original 6. As we limped along, we realized that we needed to make getting fuel more convenient for our customers and less of a burden on the Fox Music Staff. So we began investing in new construction, an automated pump that takes credit cards, and a 10,000 gallon tank so we would not run out of fuel so quickly.
After making a large investment, we had all kinds of issues with the construction company, the software, and the pump itself. That saga continued for 2 years with that pump not working. There was all kinds of trouble with the pump that I won’t go into detail about. You would not believe it if I told you.
Then, the hammer came down followed by the samurai sword!
Fuel prices plummeted. Feedstock prices stayed high. The tax credit was removed. Like a tidal wave, we watched the biodiesel industry get wiped out in a 12 month period. Nearly everyone who invested in expensive biodiesel plants and large scale biodiesel operations were out of business.
The Biodiesel conference that was once full the year before, was half empty the following year.
Unfortunately, algae never did come around as an economically viable feedstock.
Everything looked pretty bleak. SE Biodiesel was having a hard time and eventually halted operation.
OM Biofuels, LLC shut down as well.
Interestingly, operations like Blue Ridge Biofuels who controlled every aspect of the process on a manageable scale seemed to survive the tsunami.
It looked like that was the end for the rest of us.
It was clear that a music store owner, a retired engineer, and a saxophone playing naturalist were not the most qualified people to run a fuel distribution business.
We looked for someone with the right background that would be willing to take over the operation. We also looked for investors. The crash of 2008 made money hard to find.
I had been in touch with John and Erika at the SC Energy Office. When the new administration took over in 2008. Stimulus money was put into restarting the clean energy sector. Many of us in North and South Carolina joined together and collaboratively applied for a grant called the Carolina Blue Skies Clean Cities Project.
It was a long, two years of processing a mountain of documentation before any money was seen from the Blue Skies grant. OM Biofuels, llc was able to get a small portion of the grant. It was not enough to repay our investments, but just enough to pay some of our debts and get us back up and running.
By the time that happened, Bio Bob was no longer able to play an active role in the business.
I handled the back-end business, and Charles and the Fox Music Staff handled the onsite work.
Amazingly, South Eastern Biodiesel changed ownership and also resumed operations.
The biofuels industry slowly creeped back into existence. This time, companies moved a little more cautiously than before.
OM Biofuels opened for operation again in 2013 and pumped fuel. It was still high-quality, biodiesel made right here in the USA. Then it shut down forever. There were several tragic events that happened in the following years. Only those who lived through them will understand. The biofuel story may be carried on by a new generation.
An interesting side story involves shrimp boats and the oil that cooks them:
I was running some kayak tours out of a property that was owned by a certain fishing family that was an integral part of the Charleston community and had owned it for many years. At this time, I got a call from my friend, Chris, who was also friends with a famous singer/ songwriter/ author named Jimmy. Chris was asking if I knew anyone that would have a source of vegetable oil. His friend, Jimmy, was looking to run his diesel van that he called “The Green Tomato” on vegetable oil as he traveled to his various concerts. I put Chris in touch with my friend, Randy H. Randy had accumulated a collection of waste vegetable oil in an airplane hanger that he owned. He acquired it from cleaning fryers for friends of his who owned restaurants throughout the Folly Beach and Charleston area. Randy was more than willing to help Chris with his source of vegetable oil. After supplying Chris and Jimmy vegetable oil for a period of time, it occurred to Jimmy that he had his own source of waste vegetable oil from the restaurant chain that was named after one of his famous songs. The short version of the story is: a deal was worked out with the fishing company to trade waste vegetable oil from the restaurants for wild caught shrimp. The fishing company ran their diesel shrimp boats on the waste vegetable oil. Randy H installed an intricate system which included a centrifuge and filtering equipment that would be used to clean the vegetable oil that was then pumped out to the shrimp boats. When those shrimp boats went out on their fishing expeditions, they smelled like a big fish fry. They were being run on the same oil used to cook the shrimp that they were going to catch. This operation lasted for a number of years and was written in a cool story in an article in “Garden and Gun” magazine. Eventually events took place and the operation was halted. It was quite a story! When the tragic event happened that caused the Deep Horizon oil rig to explode and crude oil to spill out into the Gulf of Mexico, Jimmy actually went out there to do a concert for the people in that area. We had hoped that there would have been more discussion on alternative fuels and cleaner sources of energy. That story still continues.
– Ian Sanchez, GrowPurpose.com
- The Real Price of Gasoline
Clifford W. Cobb ”The Roads Aren’t Free” Redefining Progress 1-510-444-3041, extension 300
- Feed Stock Prices and research for ethanol and biodiesel
- USDA Regulations and Research on Feedstock Prices for Biofuels
- Latin American Feedstock trends
- Big Companies Controlling Feedstock Prices to Create Value in Biofuels
- Shell Oil Gets into Biodiesel
- 2011 Report on the state of Biodiesel Industry
- 2008 Emerging Markets Report on Biodiesel