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Photograph by Carlie Statsky
ray of hope: Ray Newkirk's biodiesel station went belly-up on a conventional business model. He's hoping to reopen it as a member-based cooperative.

Bye Bye, Biofuels

If an alternative fuel station can't make it in Santa Cruz, we're in big trouble.

By Molly Zapp

I feel a little bit like I'm held hostage right now, because I don't know what's going to happen next," says former Pacific Biofuel customer Heather Grinager. Since the station closed down on May 23, she and her husband, Rob Grinager, have been without a local source of biodiesel to fill their two vehicles. Like hundreds of other area residents who bought diesel vehicles specifically so they could run their cars on a nonpetroleum-based fuel, the Grinagers have found that their earlier concerns over the skyrocketing prices of fuel have been eclipsed by the reality of no longer having a station in which to buy the fuel. "Pac Fuel was a godsend, and a lot of people were relying on that, and yet it was an unsustainable model and it closed," Grinager says.

The biodiesel void left in Pac Fuel's absence may soon be filled with a different kind of gas station. Pacific Biofuel co-founder and president Ray Newkirk says plans for a biodiesel cooperative are going forward. According to Newkirk, a former customer has put forth the money needed to buy the necessary equipment, and the cooperative may open as soon as this week. Through the cooperative, members would pay a joining fee and monthly dues to obtain the fuel. In return, they would receive the fuel at cost. Though Newkirk expresses disappointment at his "baby" shutting down, he emphasizes the benefits of a community-run operation.

"We kind of sidestep the whole economic structure of the federal reserve, in a way," Newkirk says. "Everybody's just got their own say-so. Instead of seven people owning this company, 700 people will," he says.

But the as-yet-unnamed cooperative is not a done deal. The card lock payment system still has to be set up, and the fuel suppliers are also still being determined. Though June's rent has been paid at the station, the building is still for sale. Like the continually fluctuating price of fuel, there are no certainties. Newkirk follows his optimistic statements with the observation that "nothing's ever 100 percent sure."

And for now, there is no nonpetroleum-based source of fuel available in Santa Cruz. On top of that, biofuels have come under increasing scrutiny in light of the so-called "food vs. fuel debate," which questions the ultimate energy and environmental impact of using biodiesel or ethanol at all. This is in addition to the other reality of biodiesel: It's not any cheaper, and sometimes costs more than petroleum diesel. In Santa Cruz and worldwide, biofuels have taken a serious beating. Are the alternative fuels dead, or simply recovering on the sidelines after being sucker-punched by Big Oil?

Big Bad Biofuels
In the 15 months since Newkirk went into, and subsequently out of, business, biofuels have gone from being the savior of the planet to a pariah blamed for a host of environmental problems and even food shortages. Corn-based ethanol in particular has come in for harsh criticism as a fuel source with high energy costs.

The biodiesel industry has come under scrutiny as well. About 90 percent of biodiesel comes from virgin soy grown in the United States; it's certainly helping to bolster industrial agriculture. But the main gripe concerns the small percentage of biodiesel that comes from palm oil grown in Indonesia and Borneo. Unlike soy oil, which has only a small market for food usage, palm oil is used for food sources, a demand that has increased as palm oil is replacing oils with trans fats in packaged goods like cookies and crackers. Additional concerns surrounding palm oil are related to rainforest damage in Borneo from the harvesting of palm oil, and the fact that the fuel has to be shipped all the way across the ocean.

Greg Reitman, producer of the documentary about biodiesel entrepreneur Josh Tickell, Fields of Fuel, does not support the use of food-based sources for biodiesel. "I am an advocate for looking at arid lands that can actually be repurposed to grow fuel, and finding places where there is a lot of carbon waste water and algae and use that to make fuel," he says, referencing the developing technology that may be able to produce biodiesel from genetically modified algae. "That's not going to deal with the food issue, and it's sustainable," he says.

In the meantime, recycled vegetable oil from restaurant fryers is the most ecologically sound source of biodiesel. Newkirk says Pacific Biofuel sold fuel that was between 50 percent and 80 percent recycled, with some seasonal variance. Good Guys Biodiesel in Campbell also sells biodiesel that is primarily from recycled sources.

"We look for the most recycled possible, 75 to 80 percent recycled now," Good Guys owner Shaz Newaz says, adding that the rest comes from virgin waste oil that is not food-grade.

Obtaining biodiesel made from used fryer oil comes with its own challenges. Former Pac Fuel employee Will Noel says it's more difficult to get biodiesel from recycled sources. Tallow companies already collect used vegetable oil to make animal feed and cosmetics, so obtaining recycled oil can mean tapping into materials with an already established market. "Recycled stuff is a bit more of a local thing, where a biodiesel producer will get into the business, start picking up oil and making biodiesel out of it," Noel says. "They're totally limited in the supply that is available to them."

No Escape From Big Oil
The Santa Cruz biodiesel conundrum serves as a glaring reminder that sustainability is not simply about the environment but about economics as well. Newkirk says his 25-cents-per-gallon markup on biodiesel simply could not keep the business afloat. Though biodiesel is renewable, safer, potentially domestic and cleaner-burning than petroleum-based diesel, its price continues to match or exceed that of petroldiesel. In 2002, biodiesel's average national price was about $1.75 per gallon. In September 2004, it was $2.95. In April, Pacific Biofuel sold a gallon at $4.29, and it sold its last gallons at a stunning $4.99. Today, a gallon of the fuel is selling at $5.09 at Good Guys in Campbell, while petroleum diesel is about $5.19. The rising price concerns Heather Grinager. "It cost me $92 to fill up my Mercedes last week," she said. "It's getting harder for me to do it, cashwise."

Newkirk explains that the grim reality behind the cost of biodiesel is directly related to--you guessed it--the rising price of petroleum. Gasoline's high price means a significant increase in the cost of biodiesel's production across the board: the petroleum-based fertilizer for the soybeans is more expensive, which makes the virgin soy oil prices rise. Since most biodiesel is shipped on trucks that run on petroleum, biodiesel's shipping costs have also soared. Biodiesel producers do receive a federal tax credit of $1 per gallon for biodiesel made from virgin sources, and 50 cents per gallon from recycled sources. However, one of the stipulations is that biodiesel must be blended with petroleum-based diesel in order to qualify for the tax credit. Newkirk blames the petroleum companies for this requirement, and calls it "the most screwball idea anybody ever came up with." This is why biodiesel that is sold as B100 is really B99--otherwise, it would be up to a dollar more expensive per gallon. In addition, biodiesel gels at a higher temperature than petroldiesel, so they blend in a little more petroleum in the winter. Still, many former customers have asked why the price keeps rising.

Though the cost per gallon of fuel can be a difficult economic reality, the barriers to having a biodiesel-ready car are less so. Any car that can run on diesel can run on biodiesel, with no need for a conversion kit. Pacific Biofuel employee Ryan Lewitter sees biodiesel as relatively accessible. "With green energy and green alternatives, you have to be kind of upper middle-class to afford to be able to be green," Lewitter says. "With biodiesel, you can buy a 30-year-old car for $2,000 and start using biodiesel that day. I think that's a pretty cool part."

So Do It Yourself
The looming question mark surrounding biodiesel in Santa Cruz has biofuel users looking at other options, at least in the interim. The only current local supply of biodiesel is a 5 percent blend--meaning it's 95 percent petroleum-based--available at Seventh and Soquel (Pacific Biofuel's mix was 99 percent biodiesel). Rafael Meng, owner and operator of Summit Limousine, who runs his one-vehicle fleet on biodiesel, was Pacific Biofuel's very first customer on the day it opened in April 2007, and he filled up his Mercedes on the day it closed.

"Unfortunately, I've had to go back to B5 at the place on Seventh," Meng says.

As he often chauffeurs clients to the airport in San Jose, he has also filled up with biodiesel over the hill at Good Guys. "We've definitely had Santa Cruz people come to get biodiesel here," says Newaz, adding that most of them commute.

Newaz says he's looking into setting up a cooperative or retail station in Santa Cruz as well, independent of Pacific Biofuel. Though he was looking into a Santa Cruz station before Pac Fuel closed, the current void has increased the urgency of his project. "There's a demand there that needs to be fulfilled, and with biodiesel it needs to be filled with somebody with a reputable name," Newaz says. "Basically, we're looking to make biodiesel a sustainable fuel in the Santa Clara and Santa Cruz areas so people don't have to go back to petroleum diesel." He says he hopes to get a Santa Cruz station running within three to six months.Newaz is not the only entrepreneurial environmentalist looking into starting a cooperative from scratch. Go Green Cab founder and former Pac Fuel customer Brian Lister says that he has wanted to make his own fuels for his business for a while now, and that he felt the closing of Pac Fuel coming.

"I feel like it's going to push me toward my original concept on being more self-reliant, which was a taxi company that produces its own fuel," Lister says. After he finds a space in which to produce the fuel, he estimates that he could make 400 gallons per month, enough for another small retail business or cooperative. Open to working with others to form a station, he hopes to be producing and selling biodiesel in "three to four months."

The Ethanol Question
There is another renewable fuel option besides biodiesel, albeit not one available in Santa Cruz--yet. Local ecologist and alternative-fuels activist David Blume is not one for making conservative statements. "Without any new breakthrough in technology, we can actually replace all the fuel we use in the world, all the fuel we use to produce electricity as well," Blume says. "That's totally possible on a fraction of the land we have." Author of Alcohol Can Be a Gas!, Blume estimates that in "eight or nine years" with "about $150 billion dollars," the United States could become completely independent of petroleum-based oil. Blume wants to give companies like Exxon Mobil, Chevron and Shell his alcohol version of the Pepsi Challenge, and he's setting up shop in Santa Cruz.

A proponent of ethanol since the 1980s, Blume is part of a handful of area activists, scientists and entrepreneurs who advocate the use of biofuels in spite of mounting criticism; the "food vs. fuel" debate surrounding ethanol is even more heated than that surrounding biodiesel.

Blume calls the recent slew of articles and press releases that say that ethanol in particular uses more energy than it saves "manufactured propaganda." His organization, the International Institute for Ecological Agriculture, was recently given a $170,000 grant from the state of California to bring in an alcohol fuel station in conjunction with the city of Santa Cruz. Though he's still looking for a site, he estimates that the station  will open in about six months. "We're hoping the station will sell a million gallons of alcohol per year, which is a fraction of the county's usage ... less than 1 percent at one station," he says. "But it's a start."

One of the most widely quoted scientists on the subject of ethanol is David Pimentel, a professor at Cornell University. Pimentel has repeatedly stated that ethanol made from corn uses 29 percent more energy from fossil fuels that it could save. Blume strongly disputes Pimentel's conclusions, and claims in his book that Pimentel was "secretly on the payroll of Mobil Oil" in 1982. Other studies have shown favorable net energy outputs from ethanol. A recent Agriculture Department study set the net benefit of corn-based ethanol at 69 percent; other studies show smaller but still positive net gains. A graduate of San Francisco State's ecology program, Blume calculates the energy return on alcohol fuel to be "8.3 to 1"--that is, for every unit of energy put into making the fuel, 8.3 units of energy are produced.

Still, Blume does not believe that the current corn-based method of production is the most efficient source for making alcohol fuel. "Anything with starch or sugar can make alcohol. The answer is certainly not corn," he says.

The vast majority of corn grown in the United States is used to feed livestock, and less than 2 percent of corn is eaten by humans. The starch can be removed from the grain and fermented into alcohol, and the leftover grain can be used to feed livestock and fertilize subsequent crops. Blume believe that "excessive amounts" of corn are grown in the United States, which is why the crop is the current leading source of ethanol.

"The minute we start taking ethanol seriously, we start changing what we grow. ... It's not that farmers don't want to grow something else, it's that there's no one to buy it," he says.

Blume instead points to kelp and a variety of local agricultural waste products as potential sources. He cites the American Gas Association's 1978 estimate that the energy we can obtain from kelp grown off the coast of California can produce 23 quads of methane-based energy alone. In 2001, the United States used 97 quads of energy, according to the government Energy Information Administration.

Meanwhile, here in Santa Cruz, hope and frustration at the community's current lack of options seem to go hand-in-hand for biofuels advocates. "Santa Cruz is such a progressive community," Grinager says. "I have friends in the Midwest and they think I'm a revolutionary. We're Santa Cruz. We should be having co-ops in every other neighborhood. We should have more than one biodiesel station in this town. This should be happening already," she says.

With any luck, it will. Determined to see what failed as a business succeed as a coop, Newkirk says to his former customers, "Don't give up hope. It's really about to happen."


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