PITTSBURGH, PA -- (Marketwire) -- 09/26/11 -- The market for biodiesel-blended heating oil is growing swiftly as oilheat dealers look for ways to green their offerings and supply a product that offers comparable economic benefits to natural gas. The lack of proper storage and blending infrastructure in some Northeast markets, however, may make local oilheat dealers less willing and able to offer the product to customers. Fortunately, several companies in the region are taking initiative and investing in infrastructure that promises not only to serve today's demand, but provide valuable transportation, blending and storage services once biodiesel mandates in the region ramp up, creating additional demand for the product.
Paul Nazzaro, petroleum liaison for the National Biodiesel Board, notes there are several different ways that an organization can approach biodiesel blending. 'Any petroleum terminal can take control of biodiesel and either blend it directly into a diesel fuel or heating oil tank and make up a blend onsite,' Nazzaro says. 'Or they can go to electronic injection and handling systems to bring it in, store it in a fuel vessel, and on-demand bring a specific blend -- B2 to B99.9 -- to the rack. That's where we want to go as an industry. We want the electric rack blending facilities, because they, without a shadow of a doubt, will ensure the industry the most competitive, operationally sound blend.'
Nazzaro points out that electronic blending equipment is expensive, though. In fact, adding that type of infrastructure to a facility to handle biodiesel can cost anywhere from $750,000 to several million dollars. A company or organization needs to have a strong business case for making that type of investment. 'The spread runs a parallel track with how much volume is going to go through the terminal,' Nazzaro says.
It is much easier to build a business case for making the investment in areas where biodiesel mandates and incentives have already gone into effect. According to Nazzaro, the NBB estimates there are between 87 and 90 electronic blending facilities nationwide for biodiesel today, which is a small minority of the roughly 1,200 core terminal locations that are estimated to be located across the U.S. The vast majority of the locations that do blend biodiesel electronically are located in and around states and municipalities with biodiesel mandates in force, such as Minnesota. 'Every key pipeline terminal [in Minnesota] without a doubt has to have biodiesel configured in their terminal,' adds Nazzaro.
The Northeast oilheat market offers some distribution challenges not typical to the fuel transportation market. Specifically, a large percentage of heating oil dealers in the region is relatively small, family owned operations. 'In the Northeast, we obviously have infrastructure issues with getting good product into a series of small dealers,' says John Huber, president of the National Oilheat Research Alliance.
Huber points out that proper infrastructure isn't just important from a handling point of view, but it also plays a role in ensuring fuel quality. 'We have to make sure we have a quality biodiesel product that is ASTM qualified coming in, and that it's blended uniformly,' Huber says. 'That, to an extent, requires significant infrastructure improvements at the significant terminals on the East Coast. I think we all understand that, for the size of the market we are talking about, having infrastructure improvements made at the terminal level are critical just because they a have the ability to do quality control on the fuel coming in, know who the supplier is and have the correct type of equipment to keep the biodiesel at the right temperature, and then have it blended uniformly into the heating oil.'
One area where biodiesel infrastructure development is taking place is the New York City metro region. Several organizations have identified the business opportunity the city's pending biodiesel mandate will create and have made investments to serve the growing Bioheat market.
About Bioheat® Northeast:
Presented by the National Biodiesel Board and Biodiesel Magazine, Bioheat® Northeast will include a comprehensive agenda focusing on federal, state and local biodiesel oilheat mandates, as well as technical solutions for biodiesel storing, blending, and transporting. As an attendee you'll have the opportunity to shake hands with industry leaders and help carve the future of the industry.