Hi Guys. I was just wondering.. what are the implications in starting a BD business? I know many people are doing it. I am from Ontario we might have different rules than someone in Michigan. I know how to start a business, but do not know how cheap I can sell it to farmers, truckers, home owners (heating) and so on. Are there quality standards that need to be met in order to sell? Any clarification on this would be greatly appreciated.

Very, very, very steep learning curve. I don't mean to sound condescending, but you have no idea what you're getting into. Here are some resources that may help:

http://ybiofuels.livejournal.com/74399.html

http://energy.biofuels.coop/2007/01/05/the-permits/

Check those out, and research your local market. Remember- the feedstocks (source oils) that biodiesel is made from are going up and up in price. Same with methanol. Meanwhile, glycerin is going down in value. I recommend not basing a business plan around tax incentives, as they could disappear at some point (remember what happened in the 80s with solar hot water?).

Be careful. Slow and steady wins the race. Good luck.

P.S. - 2 things in response to a couple of comments you made. First, regarding "how cheap" - market forces (supply and demand) will make it very, very difficult for biodiesel pricing to ever compete with petroleum diesel, at least in the foreseeable future. Understanding this is very important. Second, I am not sure if Canada has its own biodiesel standard, but a good starting point is either the European EN 14214 or the American ASTM D 6751. You cannot legally sell the fuel in America without it meeting the ASTM standard, although enforcement of the standard is lax. PLEASE, PLEASE, PLEASE don't get into this if you don't plan on implementing rigorous quality control- there's already enough bad fuel on the market.

I also highly recommend this book as well.
http://www.biodieselbasics.com

and I also whole-heartedly endorse what Kumar said.

There's several plants going bankrupt right now due to feedstock shortages (well, ok, not really shortages, but the price is so high that it's not making economical sense to produce bio). It kind of stinks when your raw product starts out more expensive than the diesel fuel you're trying to compete with.

Supply & demand (and price gouging) at work....

Best of luck!
-Graydon

I have spoken to many restaurant owners and they are currently paying Rothsay $40 to pick up their 200g WVO every time. What if I would pick it up for free? I have a garbage truck that I could convert into a WVO truck, that could also run on BD. What kind of oil are the plants that you guys are about using?

quote:

Originally posted by gabrielchartrand:
I have spoken to many restaurant owners and they are currently paying Rothsay $40 to pick up their 200g WVO every time. What if I would pick it up for free? I have a garbage truck that I could convert into a WVO truck, that could also run on BD. What kind of oil are the plants that you guys are about using?

My plant uses oil from the approximately 650 restaurants that we collect grease from.

You may be lucky, in that your restaurant oil market is a bit behind the curve. However, rest assured that Rothsay and other companies like it will eventually be picking up the grease for free, and then they will even be paying for it. I fully expect to be paying 10 cents a gallon directly to restaurants for their fryer oil within the next year or two. We may be on a more advanced timeline than your area, but the same will happen where you are.

Also, the amount of infrastructure required to pick up grease professionally, make biodiesel professionally, and distribute that biodiesel professionally is huge. What this means is that even if you are making an enormous margin on each gallon of fuel you sell, your overhead costs will dictate that you reach a certain economy of scale, in order for your business to be a success. For us, that economy of scale is between 300,000-500,000 gallons per year.

Gabriel;
Have a look at The Biodiesel Company's website.Go through it all,it will give you a short end idea of the operation from an Ontario point of view.
It won't tell you what loops and hoops you have to jump through,although Ethan could probably be helpful in filling you in on some of that info.
*If you haven't got some serious start up $$ this dream could quickly turn in to a nightmare*
Ontario and the Feds are bio-friendly so their may be incentives or methods that could be helpful to you. You have lots of homework to do.
Rothsay is the country's biggest renderer and they are in the biodiesel business Rothsay Biodiesel so you would find yourself head to head with them should they decide to do it in your neighbourhood. They are what you call "connected" and have already supplied test runs of biodiesel for the Quebec government, the montreal bus sytem (STM) and the Federal goverment in their St Laurence Cruise boats; they have their foot firmly in the door.
This does not mean that it cannot be done, it means that it won't be as simple as building a reactor and filling tanks for profit.
Another avenue you could look at that would be less regulatory intensive would be a coop or association with local farms where you produce,they consume.Regs governing farms are somewhat more relaxed than they are for the general public,and most of it would be earmarked for "off road use" anyway (officially anyway) in farm equipment.
Best have a pretty good idea of what you are getting into and start off by producing for yourself to begin with. That will give you an idea of what is involved, then if you want to upscale it you can. Stay away from goverment financial programs; they will happily front you $$ but then they turn around and tell you how to run things with them in your face at every step. This kind of venture should always remain a pleasant one.

Leagal,

I agree with you at 100%. I should have stated my intentions in the beginning. I am looking into making enough biodiesel for myself, people who heat with oil in the area, and farmers. If being part of a co-op allows me to sell to these markets then I would consider it. I know selling it to the general public would have more red tape.

This Big Do It Yourself BioDiesel Plant will get you set up with some basic equipment but there are still business tax issues to deal with.
If your oil supply is already taken care of, making home heating oil is a pretty straight forward process. I don't know all the laws but I think the tax issue is much simpler for furnace fuel and off road fuel than it is for on-road fuel.

I can tell you this, It would not have taken much "business effort" to turn myself into the local Exxon guy selling biodiesel if I wanted to. The market is there and you can make a lot of money fast if you can secure your oil supply adn if you can avoid spending $250K on equipment setup.

Murphy, I like the way you think! There many many farmers in my area that you lovw to pay 75 cents per litre v.s $1+ per litre. And this also goes for heating oil. I know the demand is there... when I go to Tim Hortons in the morning to get my coffee... thats all what farmers talk about. I will sereously look into this. I don't know how to make BD from soy bean? How hard is it? What are the steps?

1. Secure an oil supply.
2. Dont quit your day job.

quote:

Originally posted by fabricator:
1. Secure an oil supply.
2. Dont quit your day job.

Yup. Why soy ? Is that all there is in that area ? Soy made biodiesel is more cold weather sensitive than liquid canola or mustard oil, but there are trade offs.

You'll have to come out with it, and then it will be so much simpler to fill in the blanks.

This past year I supplied 2 farms with 4 tractors running B100,so I know a little about what you want to do.

An "official" co op may not be what you want to do either when staying under the radar may be better, but that will depend on your situation and the farms involved and how you all can work out a living arrangement.
Farmers are much more versatile and flexible than people in cities and can be very accomodating when there are benefits to be had. I don't "sell" any BD, but I have received some "trades" in the form of organic chicken products and other services which have been very beneficial.
The barter system is one of the oldest and most mutually benficial ones ever invented ...
Before jumping out of the fry pan into the fire you will have to make a realistic evaluation of your oil needs and then see if you can reach them with the feedstock you can get.
A farm co op could be set up so that each farm produces an oil crop in rotation and then you press that seed into oil and then process it into biodiesel for the farms' equipment (tractors, heating, generators ect.). Your end would be set up of equipment and BD production. Don't underevaluate your feedstock need and time alotment required or you will find yourself in a pickle once you've commited to the project.
Farmers are patient people but they do have better things to do than waste their time. things have to be able to work, and work well and reliably.
I have 4 oil contacts (3 weekly,1 occasional) and need at least one more weekly to meet this coming year's need.
If you have farms that are running full sized combines you are looking at around 5K litre per unit per season.That's a lot of used cooking oil if you are not producing it yourself. 4 combines would use upwards of 20K litres. It's big time.
At first I would build a mid range reactor unit to get the hang of the process and go through the learning curve and then consider moving into the automated area with a BioPro 380.
I could get contracts for thousands of litres a year if I wanted them, but I don't, I prefer to stay small and in control of my situation. Biodiesel is a passion for me not a job. All that glycerine could come in real handy "down on the farm" as a degreaser though.

Fabricator is right in saying "Don't quite your day job." When I started my company, I was able to go a year-and-a-half without getting paid, because my wife got a decent salary at her job, and we were living rent-free in a house owned by my folks.

quote:

Originally posted by Murphy:
I can tell you this, It would not have taken much "business effort" to turn myself into the local Exxon guy selling biodiesel if I wanted to. The market is there and you can make a lot of money fast if you can secure your oil supply adn if you can avoid spending $250K on equipment setup.

Sorry, but Murphy is over his head here. There is no "low business effort" route to a successful biodiesel business. You cannot "make money fast" in this industry, especially now, with the rising cost of feedstock, assuming you are offering a professional product. The only get-rich-quick schemes that work in the biodiesel industry are subsidy scams, investor fraud (often based on inflated claims in press releases to generate quick capital), and over-valuation of new technology. Show me a single business that has "made money fast" based on simply delivering a quality, home-made biodiesel product, and I'll show you a blank page.

Kumar;
Here that is not entirely the case.It would be possible to scale up in a hurry and the demand is there, but the main problem is government and cronyism and the assortment of monkey wrenches that would conveniently (for them) find their way into your spokes.
The farm avenue is a viable one, being political suicide for any politico to try to squash especially after all the mouthing and hoopla they've lip serviced bio fuels with this last year or so. Red taping a farm operation into death is not something they want on their CV,wheras a straight out commercial venture aimed at the public is another box of cookies entirely and run on different rules where cronyism IS the rule and guys like Rothsay are at the top of THAT heep.
Where Gabriel is is considered rural Ontario, think plains of Iowa, so it is not the same venue as LA or some other big center where the rules area applied unevenly depending on whom your friends are.

quote:

Originally posted by kumar:
Fabricator is right in saying "Don't quite your day job." When I started my company, I was able to go a year-and-a-half without getting paid, because my wife got a decent salary at her job, and we were living rent-free in a house owned by my folks.

But that whole statement is true for any start-up business not just biodiesel. You

quote:

Originally posted by Murphy:
I can tell you this, It would not have taken much "business effort" to turn myself into the local Exxon guy selling biodiesel if I wanted to. The market is there and you can make a lot of money fast if you can secure your oil supply adn if you can avoid spending $250K on equipment setup.

Sorry, but Murphy is over his head here. There is no "low business effort" route to a successful biodiesel business. You cannot "make money fast" in this industry, especially now, with the rising cost of feedstock, assuming you are offering a professional product. The only get-rich-quick schemes that work in the biodiesel industry are subsidy scams, investor fraud (often based on inflated claims in press releases to generate quick capital), and over-valuation of new technology. Show me a single business that has "made money fast" based on simply delivering a quality, home-made biodiesel product, and I'll show you a blank page.

Kumar,
When I say "low business effort", I mean I could pick up the phone and sell as much biodiesel as I can make.

Oh, and one other note, I've said this before so I'll say it again. Nothing I ever say applies to California. You folks should apply to become your own country.

quote:

Originally posted by Murphy:
Nothing I ever say applies to California. You folks should apply to become your own country.

No kidding.

Probably was pride talking, anyway. I've been in this industry for over 6 years, and I'm jaded as hell.

Oh, and Legal, you really oughtta come to my neck of the woods some day. Mendocino County is pretty darn rural, even though it's in California. 3,509 square miles, and around 90,000 people. 4 incorporated cities, the biggest of which has 15,000 people (Ukiah).

That's not to say rural Canada ain't different.

I still remember my last visit to California ... vividly.

Leagal, I will tell you exactly what I am trying to do woth this. I have many farmers in this are, construction companies that would love to buy BD. The problem is that the majority of these copanies are paying 40% tax on their gross income at the end of the year. If I sell them fuel under the table he had to use this cash from his capital. I cannot issue him a receipt if I don't have a business and he is not able to claim it as a expense. You need expences. My father has a large construction company and he is also in the same predicament as the local famers mentionned above. This is where I go this idea about making this into a business. Yes I can make a very good coin by selling it, but I need to be able to issue rceipt in order for them to claim it as an expence. No one in business would do otherwise. I agree with eagle that the barter system has it's plus side, but in this case I actually want to sell it.

Well correct me if I am wrong but I know of no special rules concerning selling heating oil or off-road fuel.

At the very least you could sell it as heating oil and let the guy use it for what he wants. (make sure you follow the dye laws if required)

The only thing to be concerned of then (i think) would be sales taxes.. which are normal.

quote:

Well correct me if I am wrong but I know of no special rules concerning selling heating oil or off-road fuel.

At the very least you could sell it as heating oil and let the guy use it for what he wants. (make sure you follow the dye laws if required)

The only thing to be concerned of then (i think) would be sales taxes.. which are normal.

Hi Murphy.

Aside from being free of road tax, I don't think that ANY motor fuel is tax exempt. Sure, off road fuel may not be required to meet ASTM spec, but taxes are a different story.

In Canada, biodiesel is currently tax exempt at the federal level, but that will change this April. When the federal tax vampires start sucking on biodiesels' neck, nearly all commercial incentive to brew bio will be gone. At that point, the only people brewing bio will be the million gallon industrial giants riding on infrastructure grants and the smaller environmentally motivated brewers.

At Petro-Canada, a government run gas chain franchise, there are little pie charts on the pumps showing where the money actually goes. OPEC and the other sources get a surprisingly small piece, while taxes hungrilly gobble up the rest. When the feds start bleeding bio, the results will be the same.

In short, the only $0.75 B100 will be sold under the table and will face stiff enforcement action like garnishment of wages, property leins and the withholding of tax returns.

It appears that "The Man" is onto us.

What other taxes are applied to off-road fuel besides regular sales taxes that are applied to almost everything?

Do you know of any difference for home heating oil?

It was my understanding that there are no taxes (other than sales tax of course) on off-road fuels or home heating oils.

Did I miss something?