Biodiesel Blending project in Rhode Island

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EnergyOne is working with Alterra Energy Services to develop a biodiesel storage, blending, and distribution facility in Quonset, Rhode Island.

Business Description

Alterra Energy Services, Inc. intends to construct bio-diesel storage, blending, and distribution facility with a storage capacity of 1 million gallons and capacity turnover of up to 25x per year. Alterra Energy Services aims to become the preferred wholesale supplier of bio-diesel blended fuels in Rhode Island, and nearby areas of Connecticut, and Massachusetts. Alterra intends to manage and operate all aspects of the facility’s operations, including purchasing, sales, and fuel handling.

Growth in Demand

The federal Renewable Fuel Standard (RFS) requires 500 million gallons of renewable biomass diesel fuel to be used in 2009 and increases to 1 billion gallons in 2012. Beyond 2012, a minimum of 1 billion gallons of biomass-based diesel must be used, and the EPA has the discretion to increase the use requirement.

Regionally, in Massachusetts, the recently passed Clean Energy Bio-fuels Act requires a minimum percentage of bio-fuel as a component in all diesel fuel and heating oil sold in the state. This requirement starts at 2% in 2010 and ramps up to 5% in 2013.

The Rhode Island (State of RI only) market for distillate fuels which includes both diesel and heating oil is estimated at 259 million gallons per year. The regional RI, Conn, and Mass full market fuel use is 2.3 billion gallons. The local competitive market is wide open.

Favorable Environmental Impact

Alterra’s Quonset bio-fuel blending facility will make an immediate positive environmental and economic impact on the region. Rhode Island is one of the northeastern states participating in the Regional Greenhouse Gas Initiative (RGGI) to limit greenhouse gas emissions.

Alterra estimates these emission reductions at 35 thousand pounds or hydrocarbons, 323 thousand pounds for carbon monoxide, and 29 thousand pounds for particulate matter per year.

The facility will also provide a local economic impact. Alterra estimates that the blending facility will create 3 full time jobs on site and 10 jobs in product marketing and distribution.

Storage Facility Location

Alterra’s seven acre site in the Quonset Business Park, North Kingstown, RI location is ideally situated to meet the needs of its regional customers.  The selected site has rail access allowing flexibility in sourcing bio-diesel while reducing transportation and operating costs, and is in close proximity to I-95. Alterra has an exclusive right to a 30 year renewable ground lease, with purchase option.

Capacity and Turnover Expansion

The ground lease is for a seven acre site, of which 1/3rd will be utilized by the initial one million gallon storage facility. The determination behind the development of an initial one million gallon storage facility was driven by conservative cost management and current market size (10 million gallon of product turnover is estimated in year one). Facility expansion, without incremental permitting expense, is open and available, once product turnover capacity requires storage facility growth. The facility can max out at 6-8 million gallons of on-site storage and can sustain turnover of 25x per year, resulting in maximum fuel flow-through of 150-200 million gallons per year when fully utilized.

Customers

To meet this growing regional demand, Alterra will focus on several key customer groups including:

• Government

• Corporate

• Fuel and heating oil distributors

Alterra’s status as a Minority Business Enterprise, a Local Small Disadvantage Business Enterprise and a Woman Owned Business Enterprise will be viewed positively by both government and large corporate accounts.

Government customers include federal and state agencies, and local governments that would benefit from using bio-diesel in their large vehicle fleets (school buses, mass transit, agency fleets) as well as for heating offices and schools.

Corporate customers would be large users of fuel such as trucking companies, manufacturers and distributors, or other users of fuel with large fleets or heating requirements.

Alterra will also work with fuel jobbers and heating oil distributors to help them provide their customers with environmentally friendly bio-diesel fuels.

Memorandum of Understanding (MOU) agreements have been developed with multiple fuel providers and purchasers.

Timeline

Construction of Alterra’s facility is expected to take four to six months. The short timeframe is due to the availability of facility engineering and fabrication, the site and business preparation that Alterra has undergone, and the predictability of environmental permitting.

Project Financial Requirements

This project provides a low cost entry point into the bio-fuel industry with sustainable, strong ROI. Total project capital requirements are $7.5M dollars