Why Biodiesel Takes a Coop
Years ago biodiesel was that “whacky” fuel made from vegetable oil that people whipped up in their backyard that made their exhaust smell like french fries. That’s back when a barrel of crude was thirty bucks and diesel fuel was just over a dollar a gallon.
Since then an industry has emerged. Biodiesel has rapidly become a serious renewable fuel, which has entered America’s energy conversation.
The nascent U.S. biodiesel industry is easy to divide into two dominant groups — corporate interests, often big agricultural companies like Cargill and Archer Daniels Midland, and grassroots efforts like the one going on in a town near you. After all, it is legal to make your own fuel, put it in your vehicle, and drive down the road.
Projects on the grassroots side of the street tend to emerge as a Biodiesel Coops. These often start out life with a handful of like-minded individuals who want to pool their resources in order to meet their fuel needs. One person has some time to collect waste vegetable oil. Another has a nice out-of-the-way location. And another has some cash to fund a small reactor. This scenario makes for ideal coop forming conditions.
From a legal perspective, a coop is merely a corporation. It can be a corporation that is not-for-profit, or it can make all the money it cares to. It can be kind and egalitarian and motivated by sustainability, or it can be motivated by profit.
What guides a corporation is its by-laws, articles of incorporation, and governance. Step one is to contact your Secretary of State, and step two is to introduce your new corporation to the IRS. In both steps a Board of Directors is required, which generally consists of the folks who were inspired in the first place.
So the like-minded individuals form a corporation, and begin to govern it the way they wish. Anyone who wants in, buys a membership, and bingo, the coop is born. Folks are making some biodiesel; more people are showing up at the door with an interest in clean burning renewable fuel that can be made in America, and life is good.
That is until the group realizes that hundreds of gallons of homemade fuel doesn’t really power that many vehicles. At Piedmont Biofuels, the average fuel consumption is around 45 gallons per member per month. Typically, a 100 gallon batch of homebrew is run each week. That means to meet the complete fuel needs of the membership, we could fuel about ten members.
And some coops, like Burlington Biodiesel, limit their membership size and do exactly that. With over 300 members, Piedmont Biofuels would need to brew around 13,000 gallons a month to keep everybody’s tank full.
The reality is that brewing your own fuel is a mountain of work. Inevitably the grassroots biodiesel community will come up short on fuel and a desire to buy some from the large corporate interests will emerge. On the grassroots side of the street, hundreds or thousands of gallons are being made, and on the commercial side of the street millions of gallons of biodiesel are being traded.
So the Biodiesel Coop starts buying commercial fuel and distributing it, and at that moment the coop structure is exceedingly helpful. Because regulators are easier on member based organizations than they are on those that are “open to the public.”
This isn’t true in law, but it is true in practice. A similar “members only” strategy can be seen in other heavily regulated industries — like bars. The regulatory perception is that likeminded people understand what they are doing — which is why they became members, and subsequently need less protection from the state than John Q. Public requires.
Some biodiesel coops, like Brevard Biodiesel, skip the home brewing step and simply form as “buyers coops,” where a load of biodiesel is brought into a community and shared amongst its members.
And as the coop moves along, it is subject to the same stressors and pressures that any other group of humans face. Whether it is a church, a charity, or a 4x4 club, there are ample opportunities to do more work than the next fellow, or resent the newcomer, or get in the way of successful growth. In backyard biodiesel there are plenty of opportunities to pack up your reactor and go home.
Some biodiesel coops fold when the IRS visits them. Rather than learn how to remit their road taxes, like everybody else who uses the public roadways, their members flee.
Many biodiesel coops fold when they have to change locations. This might be due to zoning, or to a landlord, but moving can often cause a biodiesel coop to collapse.
Some have collapsed under the weight of their own glycerin. Crude glycerin is a co-product of the biodiesel reaction, and unless a disposal strategy is devised, it can accumulate rapidly when you are brewing your own fuel. On the commercial side of the street, crude biodiesel glycerin is readily shipped by the tanker load for boiler fuel, or animal feed, or other uses. Glycerin from a backyard reactor tends to be large enough to cause major pain, but too small to enter a market.
Forming a biodiesel coop is ripe with liabilities. The biodiesel recipe calls for methanol. Transporting, storing and handling methanol is a dangerous and sometimes bewildering task. Methanol often invites conversations with the local fire marshal, and the local health department, and the Drug Enforcement
Administration. Distributing commercial biodiesel invites conversations with Weights and Measures, and the Department of Revenue and the IRS. Some biodiesel coops survive all of the above. At Piedmont Biofuels, we have managed to keep the best interest of the fuel in mind. At the heart of our effort lies education and outreach. We do workshops, and run the Biofuels Program at Central Carolina Community College. We also offer free tours to the public every Sunday afternoon. We have met every liability head on, and we balance each out with an appropriate asset.
We have managed to negotiate with regulators, and navigate around big personalities and put up with the chaffing of different opinions.We have managed to keep working during those times when there is no recognition, and no money, and no fuel.
The glib response to those “who wants to form a coop like ours,” is simply “be careful what you wish for.” The actual response is that biodiesel coops empower a lot of people, and for many they are a gateway to independence from big oil and sustainable living.
At present we are building a biodiesel plant that will be able to produce a million gallons of fuel per year. We intend to get our feedstock from within one hundred miles of our small town, and we intend to ship our biodiesel out into that same hundred-mile radius.
We are not interested in becoming the next Rockefellers — rather we are interested in modeling a different way of being.
One of the beautiful things about making your own fuel, or shifting your fuel dependence to a biodiesel coop is that conservation leaps to the fore. The problem is not the number of gallons that can be produced. The problem is the number of gallons consumed. There is no better object lesson for conservation than jumping into the act of making your own fuel.
And running on biodiesel can be addictive. Whether you are brewing your own, or buying from an industry player, it is a liberating feeling to bomb down the road on fuel that did not come from far away, troubled, corners of the earth. For many, biodiesel is freedom — freedom from giant oil companies and sending our hard earned dollars overseas.
Some are drawn to grassroots biodiesel out of a yearning for self-sufficiency. Some are drawn to it for its superior emissions profile. Some join the biodiesel coop because there is no war required getting the stuff. For many, the biodiesel coop represents new thinking on our current energy regime, and they find appeal in a micro nodal, locally produced energy source in which the consumer can play an active role.