Changing marketplace: As gas prices drop, a maker of alternative fuel adapts
Photo / Tim Greenway
Jarmin Kaltsas, president of Maine Standard Biofuels, looks to greater market share to compensate for low prices at the pump.
Photo / Tim Greenway
Maine Standard Biofuels principals, from left, are Jarmin Kaltsas, founder and president; Derek McIntosh, vice president of sales; and Alex Pine, who oversees outreach and technology, at the company’s site in Portland.
So you've built this smart little company, manufacturing a renewable fuel from recycled fry grease. Your oil burns clean, dramatically reducing carbon emissions, is competitive with the price of petroleum, and can be produced with zero waste and pollutants; it even provides all the fuel you need to run your plant. It's got real potential. The government supports it with tax credits and fuel-blending mandates, and the future is starting to look pretty bright.
Then the bottom drops out of the oil barrel, and the federal subsidies expire or are delayed, leaving the emerging biofuel industry out in the cold. What do you do?
Many biofuel producers across the country closed up shop. Quitting wasn't an option for Jarmin Kaltsas, founder of Maine Standard Biofuels in Portland. It took him three years to get up and running, he re-mortgaged his house to start the company, and a number of friends and supporters invested. Plus he's committed to creating an affordable alternative to fossil fuels. For Kaltsas there was only one way to go: work harder and smarter, diversify the product line, increase efficiencies and decrease costs, keep spreading the gospel and hold on.
“We try not to think too much about what's happening at the federal level. My number one concern when [petroleum] fuel prices drop is that people forget about conserving and forget about alternative fuels,” Kaltsas says. “We're really optimistic about growing this, and we're really proud that we haven't laid anyone off. Right now we're not so much looking at it in terms of profit and loss, we're looking at it as survival. That's where we're focused.”
Essentially, the company is predicated on a simple multiplication formula. One base ingredient—used cooking oil from restaurants — equals three marketable products: heating oil, engine fuel and a liquid soap made from a by-product of the process.
Furnaces that burn conventional oil can swap in a biodiesel blend with no modifications. The fuel meets strict standards established by the trade group ASTM International [formerly American Society for Testing and Materials]. Maine Standard also sells biodiesel, both full-strength and as a blend, to truck fleets, to other fuel distributors, and from the pump at its headquarters on Ingersoll Drive. The soap is popular with a range of industries and the company is expanding opportunities for sales of all products.
Kaltsas readily admits that making the numbers work right now is a challenge, but his eye is on the future.
“With fuel prices this low, we're selling at a loss to our trucking customers. It costs us $2.50 to make a gallon of biodiesel, but we're subsidizing [our bottom line] with heating oil, and we're hopeful the market is going to turn around by spring,” he says. “It comes down to getting more people using the fuel, so if we take a slight loss on one side, but are increasing our market share, it's worth it.”
Maine Standard has more than doubled heating oil deliveries this winter, to 250 homes. “It's spreading mostly through word of mouth,” Kaltsas says. “Once people find out there's a local fuel alternative, they give us a call.”
Alex Pine, the company's director of outreach, says the benefits of biodiesel make it an easy sell. “It's mostly a matter of educating the consumer; a lot of people don't know enough about it. We do outreach at energy fairs, schools and concerts. We're working with students at Casco Bay High School and with the Bangor waterfront series.”
Maine Standard works with the Portland nonprofit Reverb, which works with musical acts like Jack Johnson and the Dave Matthews Band to find more fuel-efficient, green methods of touring.
“We work with Reverb to fuel band buses,” Pine says. “It's amazing how many biodiesel advocates there are in the music industry. Willie Nelson is like the poster child for biodiesel.”
Pine argues that biodiesel burns cleaner, has less wear and tear on engines and emits fewer pollutants, including sulfur. He claims he can clearly recognize the difference in conventional and biofuels as they exhaust. “Biodiesel smells a bit like barbecue, with a hint of Chinese.”
Expanding the base of trucking customers has also been a focus for the company. Derek McIntosh, a vice president at the company, says, “We're actively reaching out to municipalities to educate them about biofuels. Biodiesel was heavily pushed in the state five to seven years ago, and a few bad experiences from other suppliers created some skepticism.”
Fleet customers include Oakhurst Dairy, Atlantic Transport, Pine Tree Waste, Blue Rock, Revision Energy, the Downeast Duck Adventures, Portland Trails and Barber Foods. In the case of Barber Foods, it sells Maine Standard its grease, then turns around and buys it back in the form of biodiesel it uses to heat its facility.
At Oakhurst Dairy, fleet trucks have used 3.6 million gallons of Maine Standard biodiesel since 2006, reducing carbon dioxide emissions by an estimated 14.7 million pounds, David Green, Oakhurst's manager of fleet and facilities, says.
“We needed a solid local company to help us meet our goals of reducing emissions, and we've worked with them to get a product we can truly use year round,” Green says. “As our past president Stan Bennett said, 'Our cows eat and breathe our environment.'”
Maine Standard Biofuels is the only EPA-registered biodiesel manufacturer in Maine. Other distributors are either buying from Maine Standard or working with a plant out of state. “Biodiesel from other suppliers is almost always a lower blend, usually just 10% biofuel,” Kaltsas says.
The company benefits from government incentives, including a discount in the on-road state excise tax per gallon. It reaps some revenue from selling Renewable Identification Numbers, or RINs, essentially fuel blending credits. “We generate a RIN and a half for every gallon we make,” Kaltsas says, “but right now the RIN market is pretty weak; they're trading pretty low.”
The industry faces a number of regulatory changes, which are creating uncertainty. The EPA has delayed setting Reusable Fuel Standard mandates, while Congress has held off on voting on the so-called blenders tax credit, leaving biofuel manufacturers in limbo.
Experts say federal foot-dragging slowed investment, but the industry increased output last year to 800 million gallons of biodiesel, close to double 2011's number. By 2017, that number is expected to more than double, to 1.7 billion gallons, according to the Natural Resources Defense Council.
“With so much uncertainly with the RIN market and subsidies, we're working to be sustainable without relying on either of them,” Kaltsas says. “The heating oil and the liquid soap are helping us diversify. We're really excited about our soap. We're selling it to restaurants. Allagash Brewing, Garbage to Garden, Pine Tree Waste and other companies [use it]. We can expand distribution and may do private label with soap distributors. By the end of year we hope to have 250,000 gallons out the door.”
McIntosh adds that the company has the capacity to increase fuel production as well, to as much as 1.5 million gallons with, “little to no additional investment.” The plant made 410,000 gallons last year.
The workforce totals 14, including two hires last year, and Maine Standard occupies two, 10,000-square-foot buildings. It buys grease from close to 1,000 restaurants in the Northeast.
But Kaltsas is carefully balancing supply with demand. And with petroleum prices so volatile, he's not keen to purchase more for blending than he knows he can sell within the week.
“Or we could lose our shirts with a price drop,” he says. “One of my visions for Maine is to create a biodiesel trail, with a number of conventional filling stations carrying our B20 blend at the pumps. We're going to get that in the works this spring.”
Pine notes that in the Midwest biodiesel is more common — Iowa is a leading manufacturer — and can be purchased at conventional filling stations. In Europe, furnaces can burn the fuel unblended.
For Kaltsas and crew, the future for biofuel is about more than the bottom line. Pine says, “We're lessening our dependence on foreign oil. We're not just making fuel; we're doing it because we believe it will take us to a better place.”
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