Features Biodiesel Bioenergy
Grow your own fuel?

With today's tough farm economy, many producer groups and rural communities
in Manitoba are looking at canola-based biodiesel production as one possible
opportunity to help turn the situation around. Although there are many positives
to local biodiesel production, it does require sound business planning, as well
as proper equipment and careful processing procedures.

"We're optimistic that biodiesel production will help from a financial
standpoint," says Henry Nelson with the Energy Development Initiative of
Manitoba Agriculture, Food and Rural Initiatives (MAFRI). "It's a product
that is going to be in demand. It is environmentally friendly, biodegradable
and non-toxic. It has a good energy balance: you get about 3.2 units of energy
out for every unit of energy in. In comparison, for ethanol you get about 1.25
to 1.5 units out for every unit in."

Nelson explains, "Plus you don't need as big an investment compared to
ethanol production. About 75 percent of biodiesel production costs are for the
feedstock, which makes smaller plants more viable and feasible. It is more affordable
to get into production on a community scale and there are more spin-off benefits
locally. Depending on how you build them, the type of processing system and
so forth, the costs for a two to 10 million litre biodiesel plant could range
from under $1 million to about $2 million or more."

Biodiesel is usually made from vegetable oils or animal fats. Canola has several
advantages as a feedstock. Canola seed has a high oil content, it is readily
available on the prairies, and canola oil has superior properties for use in
cold weather compared to other bio-feedstocks. In Europe, where biodiesel is
much more commonly used, canola/rapeseed is one of the main feedstocks.

In Manitoba, the two pre-commercial (smaller scale) production facilities that
are probably the furthest along in moving towards full commercial production
are: Celtic Power in Rapid City and Bifrost Bio-Blends in Arborg. Celtic Power
is producing biodiesel with used canola oil from restaurants. The city of Brandon
is using that biodiesel to operate some buses. Bifrost Bio-Blends was turning
canola seed into biodiesel for use by Manitoba Hydro's fleet; however, that
facility is temporarily closed for expansion.

Nelson says interest in biodiesel production is strong in many Manitoba communities.
"At least a couple of community projects have been announced publicly.
About 10 other communities are quite interested but have not made public announcements
of their intentions to go forward."

It is hard to know exactly how increased biodiesel production might affect
Manitoba's canola industry, but Nelson is optimistic that it could firm up canola
prices. He does some rough calculations: "If you add up the proposed production
from all the announced biodiesel plants in Manitoba, we're looking at possibly
about 200 million litres of production annually. That requires about 20 million
bushels of canola. Assuming average canola yields are around 30 bushels per
acre, you may be looking at about 600,000 acres of canola. In Manitoba, we've
been growing about 2.5 million acres of canola in the last few years. So 20
to 30 percent of our production could go into biodiesel."

As the cost of petroleum diesel continues to rise, the economics of biodiesel
production look better and better. In addition, various government policies
and programs are also setting the stage to encourage biodiesel production in
Canada. For instance, the federal government and some provincial governments,
including Manitoba, have removed some taxes from biodiesel.

In Manitoba, the Biodiesel Advisory Council made a number of recommendations
to the Manitoba government in the February 2005 report – Biodiesel:
Made in Manitoba. In response, the government announced a range of initiatives
in November 2005 to encourage a biodiesel industry in the province. One of those
initiatives is the Manitoba Biodiesel Production Program. Through a partnership
with Natural Resources Canada, this program has $1.5 million available for capital
support for development of community-based biodiesel plants that will be producing
at least two million litres of biodiesel per year. Funding will cover one-third
of the eligible costs for a facility, up to a maximum of $250,000. The deadline
for applications was September 30, 2006.

Nelson identifies several aspects that groups need to consider when investigating
the possibility of developing biodiesel production facilities. The first one
is finding a secure, affordable supply of a suitable feedstock because the feedstock
is such a large portion of the total production costs. Other key aspects include:
finding the appropriate equipment and setting up the proper procedures to safely
produce a high quality product; doing market research and developing a good
marketing plan for both the biodiesel and the co-products of biodiesel production;
finding financial backing and developing a sound financial plan; and obtaining
environmental approval.

MAFRI is involved in various research efforts, often in partnership with other
agencies, to develop information needed to get biodiesel production going. R&D
activities include such topics as: investigating feedstock options such as high
yielding canolas, borage, camelina and other oilseed crops; developing equipment
options; and testing potential uses of the co-products, which are glycerol,
which can be refined into glycerine, a gel-like substance with many potential
uses, and canola meal in the case of canola-based biodiesel.

Dena Hunter, a business development specialist with MAFRI, is working with
a producer group in southwestern Manitoba that is exploring the potential for
a biodiesel plant. One of the group's first tasks was to conduct a feasibility
study, a vital step in developing a strong business plan. She says, "Many
groups work with independent consultants to create a feasibility study. This
study often will help to determine if one should continue or abandon the idea.
The study's results can cause a group to work even harder to find cost effective
solutions, ask more questions and further define the business to gain profitability.
Typically, a business can take up to two years in the creation phase."

Hunter's group is investigating various options to develop a successful biodiesel
business. Recently, they sat down with another producer group that is in the
process of moving forward with a biodiesel plant. She says, "It turned
out to be a terrific experience. We need to look at the possibilities of working
together, which may include exploring areas for cost-sharing, opportunities
for investment, new business creation or a combination of these. All these factors
work towards increasing the feasibility of a project."

Hunter notes, "Groups are looking to build biodiesel plants where it makes
sense for the business. The main factors to consider include: end and by-product
markets, transportation, resources, canola availability and community support.
Any business going forward must have a solid plan for profitable return and
risk management assessments."

She emphasizes that producers need to look at the complete equation when evaluating
potential net returns from biodiesel operations. "Producers are faced with
rising fuel prices which add to their operational costs for growing crops. Too
often, the producer pays the increased production costs and lives on a smaller
margin of return. But producers need to be able to sell their crops to markets
that provide reasonable returns. Some canola growers are looking at biodiesel
as a way for their farm to gain control of their operational costs for fuel.
However, we do not want to be simply taking from one side of farming to offset
another. A business needs to be financially sound on its own."

New training opportunity
With the many technical and business aspects to consider, developing
a complete plan for a biodiesel operation is not simple. Although some Manitobans
have attended biodiesel production courses through the University of Idaho and
the University of Iowa, at present there are no facilities in Manitoba offering
hands-on training in canola-based biodiesel production. Now the Canadian International
Grains Institute (CIGI) is aiming to fill that gap by offering courses that
will cover biodiesel chemistry, equipment, economics and more.

CIGI is a non-profit agency that promotes Canada's field crops in domestic
and international markets through educational programming and technical activities.
In July 2006, CIGI received $45,000 from the Manitoba Rural Adaptation Council
to purchase portable equipment for manufacturing biodiesel. That equipment will
be used in training sessions in large and small communities across Manitoba,
Saskatchewan and Alberta.

"We see this project as an opportunity to find additional markets and
value for canola," explains Dr. Rex Newkirk, CIGI's director of feed technology,
who is leading the biodiesel training project.

"Our primary target for the training will be agricultural producers, as
they are growing canola and looking for markets, and there is the potential
for them to develop some community-based facilities to utilize that canola.
However, we will likely be putting on courses both for international markets,
to educate potential buyers who would be using canola for biodiesel and for
people who work with producers, such as government agricultural departments,"
says Newkirk.

He notes, "There are a lot of people interested in biodiesel, but they
are not sure where to get complete information. For instance, if you go on the
internet, you'll find some information but it may not tell you the whole package
– what you have to do to be careful with methanol, what to do with wastewater
and things like that. This course is designed to provide the full spectrum,
talking about what you have to do from a safety perspective, from an engineering
perspective, the chemistry, the process and helping people develop their economic
models. So we are trying to cover as many areas as possible, including where
they can get additional information after the course."

Between courses, the equipment will be housed at the Richardson Nutraceutical
Centre at the University of Manitoba. That will allow researchers and others
access to study such things as uses for the co-products and ways to make the
biodiesel system more efficient.

Newkirk is currently working on designing, building and testing the biodiesel
production equipment. The courses will probably start late in 2006. They will
likely be short, intensive workshops, perhaps two or three days long. CIGI is
looking for ways to keep the course fees as low as possible, including the possibility
of sponsors covering some of the costs. For details on course dates, locations
and fees, visit www.cigi.ca -30-