Company looks to replace petroleum-based diesel with
Gilroy – The solution to the diesel fuel crisis threatening area farmers may soon flower in the fields of South County.
A startup company led by former Morgan Hill Mayor John Varela aims to replace the petroleum-based diesel farmers use with environmentally-friendly blends of biodiesel, a renewable energy source derived from plant and animal waste.
If things go as planned, local farmers will save money on gas and profit by growing the produce used to make biodiesel. Varela is also predicting that 100 jobs will sprout up in a South County production plant.
“We have an opportunity to not only produce but to market biodiesel,” Varela said. “In light of what’s happening with petroleum going through the roof, this is an opportune time.”
With wholesale diesel prices hitting the $3-a-gallon threshold and local farmers buckling under the weight of fuel bills that are two and three times as high as they were a year ago, Varela believes the time is right to sell biodiesel to a large marketplace.
Traditionally, biodiesel has been more expensive than standard diesel. But crude oil is selling for more than $60 a barrel and there is now price parity between the two fuels. Varela said improved economies of scale will push biodiesel prices down dramatically in the near future.
“When oil was selling between $20 and $40 a barrel, biodiesel was not a viable alternative,” Varela said. “We’re anticipating a pricing structure in line with what consumers were paying two or three years ago.”
Varela said his company, Biofuels Distribution, will open a production facility with a minimum capacity of 500,000 gallons a year somewhere in South County in the coming months. He expects to open other facilities in California to exploit industries such as agriculture and transport that are thirsty for cheaper diesel.
“The whole world seems to run on diesel,” Varela said. “As much as we could produce, we could never meet the demand.”
The initial response from the local farming community has been very positive. As a test, George Chiala farms used 500 gallons of a biodiesel blend produced earlier this year in Gilroy. Tim Chiala said he was pleased with the results.
“It’s still in an experimental phase, but we didn’t notice any problems,” Chiala said. “Anything to get away from diesel. There’s a lot of interest in it. It’s not a need problem, it’s a supply problem.”
According to the National Biodiesel Board, there are four production facilities in California, with many more planned, including Pacific BioFuel in Santa Cruz.
Ray Newkirk, who started Pacific Biofuel, said his business is an effort to change the world by getting thousands of people to switch to more ecologically sound fuel. Currently, his company distributes biodiesel on smaller scale, mostly in 55-gallon drums.
“We have lots and lots of commuters,” Newkirk said. “We also have farmers and vintners and backhoe drivers. A lot of heavy equipment users.”
Jenny Derry, executive director of the Santa Clara County Farm Bureau, said local farmers are enthusiastic about being in the forefront of a new energy movement.
“The chance for farmers to be involved in producing an alternative fuel source is very exciting,” Derry said. “We definitely think this is going to be something important for the agriculture industry and the general public.”
And biodiesel wins praise from the Bay Area Air Quality Management District.
Anything that moves us away from petroleum is good for the environment,” district spokeswoman Luna Salaver said. “Now that people are finding ways to produce, we can have more stations selling it, which will make it cheaper. Wouldn’t it be great if you could just go to McDonald’s and fill up your tank?”