www.checkbiotech.org ; www.raupp.info ; www.czu.cz

Ted Durfey was paid peanuts for the first harvest of canola seed taken off
his Sunnyside farm in 2003. But he wasn?t in it for the money. It was a
test. ?We grew 120 test plots to see which types of canola grew best and how
much yield we would get,? says Durfey, the owner of Natural Selection Farms,
February 2007 by Mary Hopkin.

This year, the farmer became an environmental entrepreneur and turned the
2,000 acres of canola he had grown into biodiesel, using the seed-crushing
facility he built at the Port of Sunnyside, with the help of $750,000 in
low-interest loans from the state.

Durfey is one of many farmers and business leaders who are looking to
biofuels, such as biodiesel and ethanol, as a new business opportunity. The
rise of alternative vehicle fuels could transform the state?s agricultural
economy and support a whole new industry. But the new industry may be
hamstrung by a lack of available farmland, opposition from oil companies,
and the fact that the infrastructure necessary to build this economy may
never be developed.

Setting the agenda

When Washington state lawmakers convened in Olympia in 2006, biofuels were
high on the agenda. Gasoline and diesel prices had steadily climbed after
Hurricane Katrina rav- aged the Gulf Coast and disabled oil refineries.
President George Bush had signed the Energy Policy Act in August 2005, which
mandated doubling the use of ethanol and biodiesel by 2012 to 7.5 billion
gallons annually. And state leaders believe Washington is the perfect place
to drill for biodiesel ? a simple mix of methanol and plant oils, from
soybeans or seeds like canola and mustard. Biodiesel burns cleaner than
petroleum and can be burned in most diesel engines. And the state sees it as
a new cash crop for Washington farmers, so they started seeding the pot.

In March, Gov. Chris Gregoire signed a bill giving the state its own
renewable fuel standards (RFS) ? requiring diesel sold in Washington to be
blended with 2 percent biodiesel, and gasoline to include 10 percent
ethanol ? making Washington the fourth state to have its own standards.

The state Legislature passed the Energy Freedom Program, which set aside $17
million in low-interest loans for bioenergy projects in the state ? $6.75
million of the money was set aside for projects to convert agricultural
waste into energy, and $10.25 million was earmarked for developing
oilseed-crushing capacity in the state.

?We have to get the horse before the cart,? says Durfey, whose oilseed
crusher was not only one of the first projects to receive funding through
the Energy Freedom Program; it?s the first commercial project in the state
to be crushing seed. In February, Natural Selection Farms cut a deal to sell
1 million gallons of canola oil to Imperium Renewables, the largest producer
of biodiesel in the state.

State Department of Agriculture Director Valoria Loveland says she believes
the biofuel industry, and in particular biodiesel, can be a huge boon for
Washington?s farmers, but all the puzzle?s pieces, like the seed crushers,
have to be put in place first. Loveland says the federal renewable energy
standards will create demand for 1 billion gallons of biodiesel annually on
Washington?s military installations alone.

?We can either be a player, or they will get it from someone else,? she
says. Loveland hopes the mandated local demand will create a trickle
effect ? giving a greater market to local biodiesel producers, like Imperium
Renewables, which is building a 100 million gallon refinery in Grays Harbor.
As biodiesel producers pump out more of the veggie-petrol, they?ll need more
soybean, canola and other oils to make their product.

If farmers know there is a market, and there are seed-crushing facilities
nearby, they are more likely to take a chance on a new crop.

Durfey explains that although he and other farmers have tested canola crops
in eastern Washington and have proven they can grow it, without local
processing capability, the crop?s value is quickly lost through
transportation costs.

?We recognized that this is a crop that will work here, but there is no
processing ? you have to ship to Lethbridge (Alberta) and that will cost you
2-3 cents a pound,? Durfey says.

Seeding an industry

By the time the Legislature convened in 2007, Durfey?s seed-crushing
facility was operating, and seven others were planned or under construction
in the state. Five biodiesel plants are operating, with an additional dozen
in the planning, permitting and financing stages. And seven ethanol plants,
capable of producing a total of 435 million gallons of ethanol a year, are
in the permitting stages.

Inland Empire Oil Seeds LLC is building a fully integrated oilseed-crushing
facility and biodiesel plant in downtown Odessa, just a block off Highway 2.
The company received $3.34 million from the state for the project and plans
to be shipping biodiesel in late 2007.

The plant will make about 8.5 million gallons its first year and have a
capacity of 11.5 million gallons. And they plan to use local oilseed as
feedstock. What?s more, even though it isn?t through the permitting process
yet, the biodiesel company already has letters of intent and interest from
jobbers ? independent petroleum brokers ? and petroleum companies looking to
buy its biodiesel.

?We probably have more interest than we have capacity,? says Mike Dunlap,
project and business development manager for Inland Empire Oil Seeds.

If all the planned biodiesel plants came online at full capacity, they could
produce more than 270 million gallons a year ? just 27 percent of what the
state?s military bases will use.

But it?s unlikely that Washington state would be able to produce enough
feedstock and oilseed to support the plants. Hal Collins, a microbiologist
at the U.S. Department of Agriculture?s research station in Prosser, said it
takes about 30,000 acres to grow enough canola to supply a 5 million gallon
plant.

That means it would take about 1.6 million acres of canola to supply all the
proposed biodiesel projects and operating plants in the state. Right now,
less than 10,000 acres of canola are grown in Washington each year. It?s
unlikely that farmers would pull out productive crops to plant canola, but
it is a good rotational crop that adds nutrition to soil that would
otherwise be left to rest, Durfey explains. And the canola meal, left over
after the seed is processed, makes exceptional cattle feed. ?In our case, we
?ve been getting the seed off that ground, then feeding the canola meal that
comes off the seed to dairy cows,? he says.

Dunlap says he doesn?t think Inland will have a problem obtaining enough
canola and rapeseed to meet its capacity because it has a distinct
advantage. Its equity partners include two agricultural co-ops: the Odessa
Union Warehouse and Reardon Grain Growers. ?They probably represent about
1,500 farmers from Spokane to the Tri-Cities,? Dunlap says.

An essential key to Washington-grown biodiesel will be the farmers? ability
to make money, Loveland says, and it?s one of the biggest issues facing the
industry. Dave Sjoding, of Washington State University Extension?s Energy
Program in Olympia, says biodiesel has been gaining market share in the
state. ?The key is getting the economics to work at the farm,? he says.

A few years ago, the price for canola was so low ? 8 cents per pound ? that
for many farmers, it wasn?t even worth harvesting. Now, with the demand for
biodiesel, the price of canola has risen to more than 13 cents a pound,
giving farmers the potential to make money. Loveland says that hinges on
?critical mass.?

Reaching the crticial mass

If only a handful of farmers around the state plant oilseed crops and there
are hundreds of miles between them, it?s unlikely the infrastructure needed
to make it economical, like shared crushing and distribution, will be
created. But groups of farmers working together to grow seed crops to keep a
steady flow of seed in the market will benefit the farmers and the state.
?The more we produce, the more the price will come down, and the more
competitive we can be,? Loveland says.

But there are other issues facing the industry. Although oil companies
supported the president?s Energy Policy Act and Renewable Fuel Standards,
and Washington and other states are passing their own fuel standards, oil
companies are raising questions about quality, distribution and liability.

David A. Smith, director of regulatory affairs for BP America Inc., says
that when states and cities pass their own fuel standards, it creates a
situation where the oil company has to blend different biofuel mixes in
different jurisdictions.

Smith says that for biofuels to become viable and permanent, there must be
regulations, quality control and definitive boundaries. ?There are product
liability issues when we are mandated to do these things,? he explains. ?If
the biodiesel causes engine problems, who is liable? Is the state going to
pay for it??

Smith is a member of the Washington State Department of Agriculture?s
Biofuels Advisory Committee, which has one short year to come up with
recommendations for issues facing the industry. ?We need to make sure we
have sound science and standards, and we need to do everything we can to
ensure quality ? that is very important to us,? says H. David Sinks, a fuel
issues adviser for ConocoPhillips and another committee member.

In addition, the oil representatives say that although it?s OK to offer
federal tax credits and state incentives to help the industry get off the
ground, the tax breaks shouldn?t be perpetual. ?We need to promote a biofuel
industry that is renewable and sustainable ? not reliant on tax credits,?
says BP America?s Smith.

Loveland says that despite the issues facing the industry, the state,
farmers and biodiesel producers shouldn?t waste time getting the
infrastructure in place. The industry will help farmers, help the economy,
help the environment, and help reduce America?s dependence on foreign oil,
she says.

?This is a fast-moving train. We can either get on it or watch it go by,?
Loveland says. Durfey agrees, saying that if Washington?s biodiesel industry
blooms, the state?s rural communities will benefit.

?Currently, there are 247,000 cows in the Yakima Valley, which eat three to
five pounds of meal per day ? meal that we are importing from Canada,? he
says. ?So that?s $25 million going to Canada annually that could be staying
here. That?s a lot of money in revenue that could stay in the county, and
maybe some of the rural communities wouldn?t be impacted so much.

?There are other beautiful spinoff factors,? he continues: ?producing a
product that has less carbon dioxide emissions, it?s biodegradable, it?s a
renewable resource ? there are so many positives.?

[www.washingtonceo.com]