PRETORIA, South Africa () -- New Environmental Protection Agency regulations requiring refiners to produce ultra-low sulphur diesel fuel (ULSD) for use in non-road diesel equipment, such as that used in construction and heating, went into effect in June. The EPA's Non-Road Diesel Rule requires refiners to reduce sulphur levels for diesel used for non-road purposes by 99% - from 3,400 parts-per-million (ppm) to 15 ppm - by 2010, as per clean air regulations set the by the EPA in 2004.
The Non-Road Diesel Rule is the latest step in the EPA's drive to enable refiners, engine manufacturers and vehicle owners to reduce emissions and meet the new standards through a phase-in approach. EPA rules requiring 80% of highway diesel fuel to have no more than 15 ppm sulphur went into effect and refiners began producing ULSD for use in highway vehicles just over one year ago, in June 2006. The EPA estimates the cost of diesel fuel will increase by at least five cents per gallon, due to expenses incurred by petroleum producers.
The new regulations are opening up opportunities for biodiesel producers such as Dallas-based International Oil & Gas Holdings Corp., which recently announced ambitious plans to scale up its biodiesel production capacity to as much as 100 millions gallons per year.
Cleaning the Air
Some 2.6 million tonnes of smog-producing nitrogen oxide and 110,000 tonnes of soot and particulate matter per year will be taken out of the atmosphere once the ULSD regulations are in full effect, the EPA estimates, thereby potentially preventing a range of respiratory ailments, including 360,000 asthma attacks, 386,000 cases of respiratory symptoms in asthmatic children, 1.5 million lost work days, 7,100 hospital visits and 2,400 emergency room visits for asthma.
The EPA's industry progress review indicates that engine manufacturers are on-schedule to introduce new engines with diesel particulate filters that reduce harmful emissions by 90% in 2007. The new, cleaner-burning ULSD engines introduced this year will reduce nitrogen oxide emissions by 50%, reduce particulate matter emissions by more than 90%, will contribute to substantially improving air quality and enable states to meet Clean Air Act goals, according to the EPA.
The use of low and ultra-low sulphur diesel poses problems for everyone running a diesel engine pre-2007, however, and that is opening up opportunities for biodiesel producers, such as International Oil & Gas Holdings, to grow their revenues.
"IOGH biodiesel can be an essential new additive to 2007 diesel fuel," explained Rick Graves, IOGH's president, in a media release. "The new EPA-mandated low sulphur formulations lack the lubricity needed by almost all diesel engines operating today. This lack of lubricity raises the specter of higher operating costs and reduced engine life. When mixed 5% with 2007 diesel fuel, IOGH biodiesel restores the lost lubricity, increases fuel efficiency, and normalises performance expected from pre-2007 fuel."
New Digs Pave the Way for Big Production Increases
IOGH on August 8 announced that it had contracted to purchase a 52,000 square-foot building on 4.8 acres of land in Guymon, Oklahoma, appraised at US$1.5 million and close to sources of the non-food oilseeds, animal fats and waste products that comprise the raw materials IOGH uses in a proprietary process to produce biodiesel.
The company plans to invest US$25 million to renovate the building and construct a biodiesel refinery that when completed will enable it to scale its biodiesel production as high as 100 million gallons of biodiesel per annum. IOGH expects to close the purchase in September after a building inspection, Phase I environmental surveys, title work and other requirements have been completed.
"We are excited about moving into our new facility. It is a perfect fit for us in regards to location, size and design at a substantial savings in time and money over building from the ground up. This allows us to take a giant leap in our overall expansion plans. This facility will also become the Research and Development Center for IOGH and future development of chemical and processing technologies," Wes Marr, president of IOGH's Bio-Tec subsidiary, stated in a media release.
Growing Use of Biodiesel & Biodiesel Byproducts
Chemical industry manufacturers last month began purchasing the by-products of biodiesel production from IOGH's Oklahoma plant last month.
Management reported that bio-chemical manufacturers are purchasing the glycerin used as a catalyst to produce IOGH's biodiesel as part of their plans to replace petroleum-based chemicals currently used to produce a range of specialty chemical products, including cleaning solvents, surfactants, two-cycle engine oil additives and marine fuel replacements, with bio-chemical by-products.
IOGH in early July announced that its Oklahoma biodiesel production plant established an initial, uninterrupted production rate of 6,000 gallons of biodiesel fuel per day and plans to increase that to 12,000 gallons per day within 60 days. All of the plant's biodiesel is being shipped to regional agricultural users to be mixed with newly formulated low and ultra-low sulphur diesel fuel required by 2007 EPA standards.
IOGH on July 26 announced an agreement with a trucking firm, CP and the Farm Boys Inc., to transport raw material into IOGH facilities and then transport finished product out to all IOGH customers. The agreement secures the company's ability to supply and deliver its entire planned production of 12,000 gallons of biodiesel per day, according to management.
"The conversion of regionally available organic materials into high quality biodiesel fuel and glycerin comes at a time when petroleum-based products face significant supply and price pressures," Graves stated. "We feel that IOGH can make an important contribution to America's need for a fully-scalable domestic supply of energy and petroleum equivalent products. As a company, we see an abundant supply of domestic raw material playing a measurable role in America's efforts to reduce dependence on foreign oil supplies."