The president of Sustainable Systems Inc. works in a conference room at a law firm on North Higgins Avenue. Last week the secretaries at the front desk didn't know he was there.
But there he was, hard at work at a table covered with papers.
Minutes later he and CEO Michael McGowan were talking about the possibility of building, buying or otherwise becoming involved in biodiesel plants in eastern Montana, Texas or central Washington.
If that seems like a major leap, it is.
Until about six months ago, Miller practically was Sustainable Systems. The University of Montana graduate student - he earned his Ph.D. in chemistry this spring - had founded the company in 2001 as a sideline to his academic work because of personal interest in the renewable fuel industry and a few informal connections to the UM bus system.
In the early days, Miller made the batches of biodiesel in his garage. Later, Sustainable Systems used federal Small Business Innovation Research grant money to move into a warehouse. Miller soon stopped making his own fuel - it was too inefficient. Instead, he markets fuel from West Central Soy, an Iowa company. Sustainable Systems sells biodiesel in bulk and at a few pumps in town.
Then, early this year, Miller teamed up with Michael McGowan, who owns a small financial firm called Daniel Capital Management Ltd.
A former linebacker for the Montana Grizzly football team, McGowan moved fast. He introduced Sustainable Systems to interested and knowledgeable investors, some of whom contributed equity to the firm and joined the firm's board. The board's chairman, in place for about three months, is former top Texaco executive Kenneth T. Hern.
After searching for the right word to describe the past six months, Miller said, "It's been divine."
This growth might seem outrageous, but it is par for the course in the world of biodiesel today, said spokeswoman Jenna Higgins of the Missouri-based nonprofit National Biodiesel Board.
Crude oil prices are at near-record highs. Biodiesel has been growing in popularity as an alternative fuel. And a federal tax incentive has all but erased the cost difference between biodiesel and its oil-based equivalent.
"It has kind of been a perfect storm," Higgins said.
Biodiesel production in 2005 is expected to more than triple, from 30 million gallons to
100 million gallons. Twelve new plants are in construction from Texas to New York and Minnesota to Georgia. Others are expanding, Higgins said.
Also, demand is spiking. School districts and municipalities across the country are joining the 400 fleets that already fill their tanks with biodiesel, Higgins said. The U.S. Navy recently announced a plan to use the fuel in all of its non-tactical vehicles. On the consumer end, DaimlerChrysler announced that the recommended fuel for its 2005 diesel Jeep Liberty is biodiesel.
"We're starting to see biodiesel go mainstream," Higgins said.
The DaimlerChrysler connection and the involvement of major oil companies in most major biodiesel companies is a clue to the recent surge in investment and production capacity Higgins said. Familiar names - Shell Oil, Gulf Oil and others - back the largest biodiesel companies, as well as the National Biodiesel Board.
One established example is World Energy, LLC, a privately held subsidiary of Gulf Oil, said vice president of sales Graham Noyes. Headquartered with Gulf in Massachusetts, World Energy has several sales offices around the country, including Sacramento, Calif.
World Energy produces some of its own biodiesel at a plant in Lakeland, Fla., and contracts with a half-dozen other plants.
"This year we're onto explosive growth. We are significantly expanding our capacity," Noyes said. World Energy has been in the biodiesel business for five years and has consistently been one of the market leaders.
In the beginning, "it was the what-the-heck-is-biodiesel stage," Noyes said. Not anymore.
There has only been one damper: rising soy prices have made biodiesel less attractive.
Soy is the most common raw material for biodiesel at this stage. In 2004, soy markets tightened because of increased exports to China. It takes about 7.5 gallons of soy oil to produce one gallon of biodiesel. Other costs factored into the finished price are transportation and production, Noyes said.
The way Sustainable Systems approached that basic equation intrigued Hern, who headed Texaco subsidiaries in Saudi Arabia, Nigeria and Brazil during his time with the oil giant.
For one thing, Miller has developed and refined methods of making biodiesel and other products from other, cheaper sources. He has also developed bio-hydraulic fluid and has made headway toward other lubricants and fluids useful in domestic and industrial settings.
"There's not much the biodiesel guys can do about the cost of crude oil. But they can be careful about their raw materials. That's what Paul (Miller) has done. He's very solid and sensible," Hern said.
Miller's raw materials might include alternative seed oils, such as the flax that grows near Culbertson and might be turned into biodiesel at a plant there. But cheaper raw materials might work just as well, such as rendering waste from meatpacking plants.
"Our concept is a biorefinery that would produce a variety of products of renewable or alternative fuels from agricultural and waste sources. That would include trap grease, brown grease, yellow grease, rendering grease, things of that nature," he said.
Sustainable Systems may purchase Montola Growers Inc., an oilseed-processing plant in Culbertson. If finalized, the sale would occur by August, McGowan said. The price could be anywhere from $500,000 to $5 million, he said.
Principals at Sustainable Systems are also considering locations in Texas and Washington that are closer to meatpacking plants and large biodiesel markets.
Whatever the future holds, Sustainable Systems will remain headquartered in Missoula, both Miller and McGowan said.
This may seem like an overnight success, but the industry is not in its infancy, Hern said. European car manufacturers have developed quiet turbo diesel engines with plenty of power, he said.
And people forget that the oil industry was young and rough not long ago, Hern added. Refineries used to be fed by pools of oil on the ground. Open flames burned near where workers walked.
"That's how this business started," Hern said.
It's no wonder Miller has no sign on his door.
Reporter Robert Struckman can be reached at 523-5262 or rstruckman@missoulian.com
|
 |
 |
Add your comment now! Write your comment in the form below.
(Email address is for verification only. If you'd like to email a story, look for the link above)