CITY AND COUNTY OF SAN FRANCISCO
BIODIESEL ACCESS TASK FORCE REGULAR MEETING
WEDNESDAY, AUGUST 12, 2009, 10:00 A.M.
CITY HALL, ROOM 278, ONE DR. CARLTON B. GOODLETT PLACE,
SAN FRANCISCO, CA 94102
TASK FORCE MEMBERS: VOTING: Eric Bowen (Chair), Eric Smith (Vice-Chair), Joe Burgard, Kevin Clark, Shannon Devine, Benjamin Jordan, and Michele Swiggers. NON-VOTING: David Augustine (Treasurer/Tax Collector), Vandana Bali (Department of the Environment), Richard Berman (Port), Sarah Dennis (Planning Department), Mike Ferry (Fire Department), Laurence Kornfield (DBI), Vacant (MOCD), Marty Mellera (MTA), Virginia St. Jean (DPH), Karri Ving (PUC).
ORDER OF BUSINESS
1. Call to Order and Roll Call. The Biodiesel Access Task Force meeting convened at 10:17 a.m. Present: Chair Bowen, Vice-Chair Smith (10:17), Members Devine and Jordan; Excused: Members Burgard and Clark; Absent: Member Swiggers. Advisory Member Present: Member Ving (10:30); Advisory Members Excused: Members Augustine, Bali, Berman, Dennis, Kornfield, Mellera and St. Jean; Absent: Member Ferry.
2. Approval of the April 8, 2009 and June 10, 2009 Biodiesel Access Task Force Regular Meeting Draft Minutes. (Explanatory Documents: April 8, 2009 and June 10, 2009 Draft Minutes) (Discussion and Action).
Upon Motion by Chair Bowen and second by Vice-Chair Smith, the April 8, 2009 corrected Meeting Minutes were approved without objection (AYES: Chair Bowen, Vice-Chair Smith, Members Devine and Jordan; Absent: Members Burgard, Clark and Swiggers) (Explanatory Document: April 8, 2009 Approved Meeting Minutes).
The June 10, 2009 Draft Minutes were tabled and continued to the October 14, 2009 meeting due to time constraints.
3. Update and Informational Report on Sirona Fuels Oakland, CA Biodiesel Plant and the Bay Area Biodiesel Market. Sponsor: Chair Bowen; Speakers: Mr. John Harding, Chief Operating Officer and Mr. Robert Kirsten, Executive Vice President (Explanatory Documents: Sirona Fuels Mission Statement and Presentation) (Informational Presentation and Discussion)
Transcript from meeting:
Mr. Kirsten stated that Sirona Fuels was formed last year and was designed with the concept of “sustainable fuels sustaining lives,” which is about producing biofuels in a sustainable way that benefits communities in which both the feedstock is produced and the fuel is used. Work is being done on a domestic and international track. The domestic track is acquiring biodiesel refineries and distressed assets around the country. Right now there are some refineries that are being sold at between 10 and 20 cents on the dollar versus construction costs, which shows how difficult the environment is right now. There was a refinery that was built in Delaware that was built for between $13 and $15 million and sold for $1.3 million in February. It is good if those assets can be acquired without debt and stabilized with used cooking oil collections; otherwise, they will just be idle and go into receivership. Vice-Chair Smith asked whether the Delaware facility took a single or multiple types of feedstock. Mr. Kirsten stated that the facility took mostly soy, but the people who bought it are converting it to yellow grease. Mr. Kirsten stated that retrofitting would not be very expensive because it is a beautiful facility.
Mr. Kirsten reported that in order to stabilize long-term feedstock acquisition, Sirona Fuels is working on jatropha internationally and is also interested in algae and talking to algae producers. Right now jatropha is available, although it requires a 3-5 year planting until you get to optimum harvest. In reference to algae, regardless of the money that is being showered on startup companies, none of them are even close to producing at capacity. Sirona Fuels decided to go with jatropha and are looking at countries where there are serious challenges economically and environmentally and makes the most sense for jatropha farming. If you go into countries with a healthy agricultural sector, you would be displacing food, using land that is not marginal. Haiti is a case study for what is believed to be a place that an impact can be made. Haiti is 98% deforested, there is about 80% unemployment and there is very little economic activity of any kind there. It is felt that there will be an argument on the land use change eventually, but right now, land use is nothing in Haiti. The deforestation has led to huge problems on any kind of rains and there are huge mudslides. Jatropha is a perfect solution for these problems as it fixes nitrogen in the soil and rehabilitates top soil. Jatropha requires a lot of manpower and cheap manpower to make it work, so Haiti definitely qualifies as you have cheap inexpensive manpower.
Vice-Chair Smith inquired whether Sirona is looking at Central and South America as a possible source. Mr. Kirsten stated that he is looking in South America mostly and Sirona Fuels has three projects in Africa. Member Jordan asked whether an effort is being made to purchase jatropha seeds or the oil pressed from countries where they have existing jatropha growing and established, such as El Salvador and Honduras. Mr. Kirsten stated that Haiti has a number of failed jatropha plantations. It is similar to the biodiesel industry where a lot of people rushed in, built plants, and they didn’t have a feedstock strategy, which is similar to jatropha projects around the globe. The biggest example was in Burma, where they had forest planting, and they made all of these peasants plant jatropha but there was no infrastructure for collection, pressing and processing. Those are all fallow. There are about seven other farms in Haiti that Sirona Fuels is talking about taking over. The model is to help the farmers with seedlings and seeds, help them with training on how to grow, and then provide the collection and crushing infrastructure. Sirona Fuels would like to build a refinery in Haiti eventually, but currently building anything in Haiti would require armed guards. So building a refinery in Haiti would be next to impossible at this time. The best thing is to have it all local and produced there.
Mr. Kirsten stated that Sirona Fuels has already processed jatropha at their Oakland plant. Mr. Harding stated that jatropha creates some of the best biodiesel available--its culpable properties are even better than soy. Sirona Fuels is looking for jatropha in spot market purchases on the international market, but there is very little out there. You run into a situation where you are talking to seven different brokers and they are all talking about the same farm--it is very expensive. Right now with all of the planting going on, the value of the seeds is worth more than the value of the oil to crush them. A discussion is being held with a group in Africa that has significant quantities for 2010-2011 and an effort is being made to import.
Mr. Kirsten stated that Sirona Fuels acquired the Blue Sky Biofuel refinery in Oakland and is a 5013C foundation. Vice-Chair Smith asked if there were plans for the Haitian product to be implemented in other markets. Mr. Kirsten stated that Sirona Fuels is looking at acquisitions of other refineries in the Gulf Coast, Pacific Northwest. Vice-Chair Smith asked where the Haitian market product would go. Mr. Kirsten stated that the oil would be crushed and exported southeast to Florida. Mr. Harding stated that it doesn’t make sense to go across the world and truck and ship in the product because you would be breaking the logic of biodiesel. Mr. Kirsten stated that the plant in Haiti is very close to Florida. It was stated that there are many more problems with palm oil than jatropha because jatropha can grow on land that is not really suitable for anything else, pest resistant, and drought tolerant. However, the yields do go down if you don’t have enough water or enough nutrients in the soil. In the places that there are even small incremental revenue streams, it can make a big difference for those communities.
Sirona Fuels has a foundation that is attending to the international activities assisting those communities in things that Sirona Fuels can’t have a business purpose for. Sirona Fuels is a corporation, so you can’t put buying water buffalos for the village on your books because that is not an accepted business practice. Ten percent of revenue goes to Sirona Cares that can fund things like mosquito nets, libraries, shoes, nutrition, health and education, and similar activities. Other types of funding is being sought after to help with these activities, and USAID is now a network working for Haiti. There is a significant amount of international resources available for anybody doing anything in Haiti.
Mr. Kirsten stated that there had been a lot of people that rushed in and didn’t have the business acumen to run their refineries properly and did not have a feedstock plan. It was stated that the market demand is mandated, so an effort is being made to connect all levels of the supply chain straight through and reducing middle men along the line. One of the biggest problems for access to biodiesel is markups along the value chain. Whenever a refiner does not control an entire value chain, they get killed by middle men. Sirona Fuels has an extensive management team for their single refinery in Oakland, but it is meant for producing protocols and the systems and processes for running a successful oil collection and batch process refinery. Mr. Harding is going to be working on making future acquisitions reputable and scalable. Mr. Kirsten described the management team and their background (see explanatory document).
Mr. Kirsten stated that Sirona Fuels wants to learn from mistakes of the industry–-stabilizing with the local feedstock, so a consistent high quality product is consistently available. The same thing with jatropha—to avoid the mistakes made to just to go in and start planting and hope everything is going to work out. There will be agronomists analyzing the soil and climate, training on how to plant and select which species of jatropha to plant. A determination will be made on what is going to be done, how it will be collected, crushed, and expelled, etc. Jatropha is poisonous and there is significant work that has to be done to protect people from it. The danger is not from touching jatropha, but through ingestion of the seeds. The fumes from the crushed oil can be toxic also. Member Devine asked how it could be neutralized. Mr. Harding stated it is more about how to protect the workers from the farm all the way to the refinery. Member Jordan asked if the toxins are present in the post product. Mr. Harding stated that the post product was tested, and it was not toxic.
Mr. Kirsten stated that Sirona Fuel’s plan for penetrating the market is to provide a stable, consistent, high-quality available product at prices competitive to petroleum diesel. The pricing model is basically at production cost and Sirona Fuels does not want to go below that. Then whenever the price of average unbranded UOSB #2 goes above this level that is what will be charged. There are very little premiums. Mr. Kirsten stated that in the market, he has seen considerable premiums being paid by certain customers and certain contracts, which inhibits access to biodiesel. This will change with some of the legislation in California and nationally, but right now that is the way it is. In order to increase access to biodiesel, you have to be extremely competitive.
Sirona Fuels actually raised their first round of financing in November/December of last year and were one of the few people that managed to raise money in that environment. There were investors who had confidence in them. Mr. Kirsten stated that Sirona Fuels is engaged in their first fixed price and offers many kinds of contracts. A contract will be agreed upon for three or six months at a fixed price based upon the market because they know the feedstock can be acquired. Some people did very well with the prices continuing to rise this past six months and provided a stable revenue stream.
Vice-Chair Smith inquired about the amount of product that Sirona Fuels has at this time. Mr. Harding stated that there is a constant issue in trying to match feedstock intake with fuel outtake as it is not feasible to have either product sitting around. Part of the process is how to do it sustainably and economically. Vice-Chair Smith asked about the feedstock origin. Mr. Harding stated that Sirona Fuels runs their own local collection and primarily services the East Bay and have accounts from Santa Rosa to San Jose to Vacaville. Sirona Fuels has partnered with the San Francisco Public Utilities Commission (SFPUC) to receive Greasecycle oil which is the bulk share at this time, has its own collection, and are in partnership with several smaller collectors who know they will always have a place for their off-take. These sources make it possible to match production to current demand. If demand goes up, an effort will be made to look for more resources for waste vegetable oil, or for whatever the demand happens to be.
Mr. Kirsten stated that San Francisco is doing a great job and thinks that cities should mandate that higher quality waste oils be used in fuel production. Member Jordan asked if Sirona Fuels has marginal oil processing in their business plan. Mr. Harding stated that they can take the whole range of heavy solids. You have your oil that has turned to solids at room temperature on one side that is readily available, inexpensive, difficult to work with, and produces a lower-quality fuel. Then there is the high-grade food product that is expensive but is easy to work with and produces a high-quality fuel. So where do you want to be? Used cooking oil sits in the middle. It is not your best product, you have to clean it and dewater it, but if you match your intake with your outtake and process it quickly you can keep your acid level and oxidation low. You don’t want your 40,000 gallons of cooking oil baking in the sun as it will go rancid. Chair Bowen thanked Mr. Kirsten and Mr. Harding for their presentation and asked them to attend a future meeting for an update. Chair Bowen left the meeting at this time.
The meeting adjourned at 10:42 a.m. due to a loss of quorum. Items 4 – 16 were not heard and continued to the October 14 meeting as a result.
4. Master Fuel Contract and City Biodiesel Program Update. (Continued Discussion from the June 10, 2009 Meeting) (Discussion) SPEAKERS: Members Bali and Mellera
5. State Water Resources Control Board Underground Storage Tank (UST) Update. (Continued Discussion from the June 10, 2009 Meeting) (Informational Report and Discussion) SPEAKER: Chair Bowen
6. Hazardous Material Classification of Biodiesel. (Continued Discussion from the June 10, 2009 Meeting) (Discussion) SPEAKER: Member St. Jean
7. Proposal to Create a B20 Mandate in San Francisco. (Continued Discussion from the June 10, 2009 Meeting) (Discussion) SPEAKERS: Chair Bowen and Vice-Chair Smith
8. Creation of a Local Biodiesel Permitting Work Group to review and identify any necessary changes to permitting and code review and remove barriers for biodiesel implementation. (Discussion and Possible Action). SPEAKER: Member Jordan
9. Green Depot Program Report. (Continued Discussion from the June 10, 2009 Meeting) SPEAKER: Vice-Chair Smith
10. Dogpatch Biofuels Update. (Continued Discussion from the June 10, 2009 Meeting) SPEAKER: Member Swiggers
11. Fat Free Biofuel LLC Refinery Update. (Informational Report and Discussion) SPEAKER: Member Devine
12. Update on the Greasecycle Program and San Francisco Public Utilities Commission (SFPUC) Pilot Plant. (Continued Discussion from the June 10, 2009 Meeting) SPEAKERS: Members Jordan and Ving
13. Update on the Status of Darling’s Proposed Biodiesel Manufacturing Plant in San Francisco. (Continued Discussion from the June 10, 2009 Meeting) SPEAKER: Vice-Chair Smith
14. Diesel Engine - Post Combustion Injection Diesel Particulate Filter Regeneration Technique Discussion. (Continued Discussion from the June 10, 2009 Meeting) (Informational Presentation and Discussion) SPEAKERS: Members Jordan and Swiggers
15. New Business/Future Agenda Items. (Information and Discussion)
16. Public Comments: Members of the public may address the Task Force on matters that are within the Task Force’s jurisdiction and are not on today’s agenda.
17. Adjournment. The Biodiesel Access Task Force meeting adjourned at 10:45 a.m. due to a loss of quorum.
** Copies of explanatory documents are available at (1) the Task Force office, 11 Grove Street, San Francisco, California between the hours of 9 a.m. and 5 p.m., (2) upon request to the Task Force Secretary, at telephone number 415-355-3709 or via e-mail at Monica.Fish@sfgov.org, or (3) on the meeting website as attachments to the agendas or meeting minutes.
*Approved: October 14, 2009