Interview with Curtis Mearns: part 1 – the biodiesel industry

November 24, 2008 -- Filed under Clean Diesel by Andrew Macdonald

Curtis Mearns is CEO of Cascadia Biofuels. He kindly allowed us to interview him for TDI Curious. Here is the first in a series of three posts on this encounter.

Andrew: Curtis, when did you get your start in the biofuel industry?

Curtis: I started in the biofuels industry in 2001 in the U.S.-pre 9/11. In 2003, we started marketing in British Columbia and in 2005, we became part of the Cascadia group, the largest renewable fuel retail network in Canada.

A: Who are the major players in the Canadian market?

C: Currently the biofuels industry is in its embryonic stage of development. Biofuels or liquid motive fuel is derived from relatively recently dead biological material. Based on their energy content, biofuels can be used pure or as a blend for both gas and diesel fuel. On the gas side, the product is generally referred to as Ethanol. On the diesel side, it is referred to as biodiesel. You can find all the players in this interactive map.

A: Who is leading the way in the production of these fuels here in Canada?

C: The Canadian Renewable Fuels Association (CRFA) is a non-profit organization that tracks this type of information. In the west, most biodiesel is imported from the United States.

A: We continue to hear about something called the Canadian RFS. What is this?

C: The Canadian RFS refers to the renewable fuels standard. Renewable energy is energy generated from natural resources-such as sunlight, wind, rain, tides, and geothermal heat-which are renewable (naturally replenished). Renewable energy technologies include solar power, wind power, hydroelectricity, micro hydro, biomass, and biofuels. Biomass may also include biodegradable wastes that can be burnt as fuel.

This definition excludes organic material that has been transformed by geological processes into substances such as coal or petroleum because these substances are non-renewable.

Bill C-33, which allows the government to regulate the renewable content in fuels, was passed on June 26, 2008. Amendments to the Canadian Environmental Protection Act, 1999, proposed in this bill to allow the federal government to implement regulations that require an average of 5% renewable content in gasoline by 2010. Subsequent regulations will also require an average of 2% renewable content in diesel and heating oil by 2012, upon demonstrating that renewable diesel fuel can be successfully used in Canada’s wide range of environmental conditions.

A: Are you talking primarily about cold flow issues? All fuels have a gelling point at cold temperatures-is the demonstration test looking at this?

C: Yes. The cold weather condition has been satisfied with The Alberta Renewable Diesel Demonstration, which was completed in September 2008. It confirmed the general acceptability of low-level ULSD/biodiesel blends in regards to vehicle performance (e.g. fuel economy, power, general operability, and maintenance requirements) in Alberta long-haul trucking fleets. During certain periods of this test, winter temperatures fell to -38°C with no reports of unusual filter clogging, non-starts, or breakdowns.

A: Is it true that some provinces are moving ahead with biofuel blends long before the national standard comes into play in 2012?

C: Yes. Actually, some provinces may do nothing while others take a leadership role. In fact, in B.C., Bill 16, the Greenhouse Gas Reduction (Renewable and Low Carbon Fuel Requirements) Act was introduced on April 1, 2008, and was passed on May 1, 2008. It requires an average renewable content of 5% for both gasoline and diesel by 2010.

This requirement will bring about change and put British Columbia in a clear leadership position.

A: I continue to hear concern in the market about the price of diesel fuel. What is going on? Diesel continues to sell at a premium to regular unleaded fuel.

C: The price of diesel fuel is generally influenced by the international spot market price (per barrel), but there can be other factors such as supply and demand that will play a role in regional markets:

“Planned and unplanned shutdowns and upgrades at three refineries in the petroleum-rich province of Alberta have caused the fuel supply shortfall that began in late September 2008. Suncor’s 260,000 barrel per day Northern Alberta oilsands plant that supplies diesel to the wholesale market went down on an unplanned outage in early October. Petro-Canada’s 135,000 barrel per day Edmonton refinery has had its major diesel producing unit off line since the summer. Imperial Oil’s 187,000 barrel per day refinery in Strathcona, Alberta, was the last to go down after it could not wait until the other diesel producing refineries were back on line to begin its scheduled maintenance.

This supply shortfall has caused enormous headaches for the trucking sector. This has led, in some cases, to fuel rationing, as the refiners are reportedly fulfilling only those contracts where they have supply guarantees in place. Is this fuel shortage just an unlucky coincidence in a country that has vast reserves of petroleum just waiting to be refined? Ironically, this country with proven reserves of approximately 180 billion barrels is on the wrong side of the current price of oil. Much of Canada’s petroleum supply is in the oilsands–requiring a heavy industrial and environmentally costly extraction process that, according to some observers, becomes economically unfeasible when the price of oil falls below $80 per barrel.” Source

As the international spot market price falls, further refineries will go offline until the supply dries up. Demand pressures will eventually cause the price to rise to the point where it is once again economically feasible for these refineries to start back up.

Having said this, there is definitely a correlation: When the international spot market price rises, the street price is quick to follow. Conversely, when the price falls, the reduction in street price is anything but quick. Couple this with the fact that major integrated oil companies continue to post record earnings, I will leave it to you to draw your own conclusion.

A: Thank you, Curtis. We will continue this discussion on the quality of biodiesel here.

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