Legislature(2009 - 2010)BUTROVICH 205

01/26/2010 01:30 PM Senate ENERGY


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01:33:36 PM Start
01:34:31 PM Presentation by Denali Bio-diesel
02:29:05 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
Joint w/(S) Resources
+ Presentation: Denali Biodiesel TELECONFERENCED
                    ALASKA STATE LEGISLATURE                                                                                  
                         JOINT MEETING                                                                                        
               SENATE SPECIAL COMMITTEE ON ENERGY                                                                             
              SENATE RESOURCES STANDING COMMITTEE                                                                             
                        January 26, 2010                                                                                        
                           1:33 p.m.                                                                                            
                                                                                                                              
MEMBERS PRESENT                                                                                                               
                                                                                                                                
SENATE SPECIAL COMMITTEE ON ENERGY                                                                                              
                                                                                                                                
Senator Lesil McGuire, Chair                                                                                                    
Senator Albert Kookesh                                                                                                          
Senator Bill Wielechowski                                                                                                       
Senator Lyman Hoffman                                                                                                           
                                                                                                                                
SENATE RESOURCES STANDING COMMITTEE                                                                                             
                                                                                                                                
Senator Lesil McGuire, Co-Chair                                                                                                 
Senator Bill Wielechowski, Co-Chair                                                                                             
Senator Hollis French                                                                                                           
Senator Thomas Wagoner                                                                                                          
Senator Charlie Huggins                                                                                                         
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
SENATE RESOURCES                                                                                                                
                                                                                                                                
Senator Bert Stedman                                                                                                            
Senator Gary Stevens                                                                                                            
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
Presentation: Denali Bio-Diesel                                                                                                 
     HEARD                                                                                                                      
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record.                                                                                                   
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
GREG MICK, CEO                                                                                                                  
Denali Bio-Diesel                                                                                                               
Alaska State Capitol                                                                                                            
Juneau, AK                                                                                                                      
POSITION STATEMENT: Presented an  overview of Denali Bio-Diesel's                                                             
proposal  to  reduce or  eliminate  the  Power Cost  Equalization                                                               
Program.                                                                                                                        
                                                                                                                                
SCOTT MCCORMICK, Vice-President                                                                                                 
Denali Bio-Diesel                                                                                                               
Alaska State Capitol                                                                                                            
Juneau, AK                                                                                                                      
POSITION STATEMENT: Presented an  overview of Denali Bio-Diesel's                                                             
proposal  to  reduce or  eliminate  the  Power Cost  Equalization                                                               
Program.                                                                                                                        
                                                                                                                                
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
1:33:36 PM                                                                                                                    
CHAIR  LESIL  MCGUIRE called  the  joint  meeting of  the  Senate                                                             
Special  Committee on  Energy and  the Senate  Resources Standing                                                               
Committee to  order at 1:33  p.m.  Present  at the call  to order                                                               
were Senators Wagoner, Kookesh,  French, Hoffman, Wielchowski and                                                               
McGuire. Senator Huggins joined the meeting shortly thereafter.                                                                 
                                                                                                                                
               ^Presentation by Denali Bio-Diesel                                                                           
                                                                                                                                
                                                                                                                                
1:34:31 PM                                                                                                                    
CHAIR MCGUIRE  announced today's agenda  to be a  presentation by                                                               
Denali Bio-Diesel.                                                                                                              
                                                                                                                                
GREG MICK,  CEO of Denali  Bio-Diesel, said Denali  Bio-Diesel is                                                               
owned  by Disabled  Veterans,  is Alaska-based  and  is the  only                                                               
licensed  commercial biodiesel  producer in  the state.  In 2009,                                                               
Governor Palin and  her energy adviser, Joe  Balash, asked Denali                                                               
them to consider  a biodiesel refinery program  that would reduce                                                               
or eliminate the Power Cost Equalization (PCE) program.                                                                         
                                                                                                                                
MR.  MICK explained  that  biodiesel contains  many  of the  same                                                               
traits  as   conventional  diesel  fuel   and  it  is   a  direct                                                               
replacement for  petroleum diesel.  A manufacturing  and refining                                                               
process  converts   high  quality   oils  to   biodiesel  through                                                               
pretreatment   known   as   acid   esterification   followed   by                                                               
transesterification.  Denali   Bio-Diesel  uses  pure   fish  oil                                                               
derived by  cutting and grinding  fish waste and  then separating                                                               
the oil out  from the water and solids  through centrifuging. The                                                               
oil is then run through the process of transesterification.                                                                     
                                                                                                                                
1:37:04 PM                                                                                                                    
MR. MICK pointed out that Dutch  Harbor is blending fish oil with                                                               
petroleum  diesel,   creating  a  diesel  blend   as  opposed  to                                                               
biodiesel.                                                                                                                      
                                                                                                                                
MR. MICK said the state funds  up to $40 million in PCE subsidies                                                               
for high  energy costs in rural  areas; this has increased  25 to                                                               
30  percent yearly.  Many rural  areas  with substantial  fishing                                                               
operations  could  produce 100,000  to  600,000  gallons of  fuel                                                               
annually  from  fish waste.  Processors  currently  grind up  and                                                               
discharge fish  waste back  into the ocean.  This waste  could be                                                               
invaluable  biodiesel. Communities  that produce  excess fuel  in                                                               
this way could also sell it as a commodity.                                                                                     
                                                                                                                                
SCOTT MCCORMICK,  Vice-President of Denali Bio-Diesel,  said they                                                               
singled out  25 high potential  areas for reducing PCE  cost with                                                               
fish  waste  biodiesel  production  and  consumption.  Challenges                                                               
unique to  small, remote fishing  operations limit  the potential                                                               
for a  commercial biodiesel operation, he  said. These challenges                                                               
include   transportation,  access   to  methanol   and  technical                                                               
services,  ability  to  train  and   certify  staff,  ability  to                                                               
maintain  a laboratory  and to  have  one or  two people  running                                                               
start up and  shut down operations coinciding with  the six month                                                               
fishing season. Converting fish waste  into a product that allows                                                               
for  the extraction  of oil  could  also be  a challenge  because                                                               
while major fisheries already use  a centrifuge and fish-grinding                                                               
process, many rural  communities only use machetes  and tables to                                                               
cut up  fish. There would  also be the issue  of what to  do with                                                               
the de-oiled fish waste.                                                                                                        
                                                                                                                                
1:40:34 PM                                                                                                                    
MR. MCCORMICK  reported that the Environmental  Protection Agency                                                               
(EPA) restricts the amount of fish  waste that is dumped into the                                                               
water. Many fisheries then convert  excess waste to fishmeal at a                                                               
loss.  He  said  fish  waste  can  be  made  into  more  valuable                                                               
commodities than fishmeal. He explained  that a filtering process                                                               
removes small particulates  and results in oil  and de-oiled fish                                                               
solids. Refining the oil then  results in two products, biodiesel                                                               
and glycerol.  A number  of commodities  are made  from glycerol,                                                               
such as  soap. He  reported that of  132 communities  that Denali                                                               
Bio-Diesel looked  at, 25 are  likely to produce biodiesel  and a                                                               
number  of the  others could  use it  as a  cottage industry  for                                                               
making products out of the glycerol.                                                                                            
                                                                                                                                
1:42:00 PM                                                                                                                    
CHAIR MCGUIRE said  that Mr. Mick's wife takes  the glycerol from                                                               
Denali  Bio-Diesel production  and  makes it  into soap.  Senator                                                               
McGuire has tried the soap and said it is fantastic.                                                                            
                                                                                                                                
SENATOR  KOOKESH  asked  what Denali  Bio-Diesel  does  with  the                                                               
filtered solids and how much is produced in a typical day.                                                                      
                                                                                                                                
MR. MICK  replied that 25  million pounds  of waste in  the Kenai                                                               
Peninsula  would   yield  approximately  1  million   gallons  of                                                               
biodiesel fuel. The remaining 19  to 20 million pounds would then                                                               
be converted into a fish-based fertilizer product.                                                                              
                                                                                                                                
MR.  MCCORMICK said  the fertilizer  product is  called a  liquid                                                               
hydrolysate. Removing oil and glycerol  from fish waste initially                                                               
results in  a dry product  similar to  a soil amendment.  The dry                                                               
product can  be put on another  product, such as formic  acid, to                                                               
stabilize  it,  prevent  pathogens  from forming  and  allow  for                                                               
shipping  and handling.  Secondary  processing  converts the  dry                                                               
fertilizer to  a liquid  called a  liquid hydrolysate  that sells                                                               
for  about $5  to $7  a gallon.  Twenty million  pounds of  waste                                                               
would result in $12 million of liquid hydrolysate.                                                                              
                                                                                                                                
SENATOR KOOKESH said he thought it was just waste.                                                                              
                                                                                                                                
MR. MCCORMICK  replied that without  a good understanding  of how                                                               
to process  the filtered  solids, it  has been  considered waste.                                                               
Three locations in the world make  fish waste into fuel. One is a                                                               
tilapia  farm in  Honduras, where  biodiesel fuels  all buses.  A                                                               
Finnish  company,  VTT, is  building  a  $40 million  company  in                                                               
Vietnam using  large channel  catfish waste.  The third  place is                                                               
the Denali Bio-Diesel plant in Chugiak, Alaska.                                                                                 
                                                                                                                                
SENATOR KOOKESH clarified  that he was asking  about the filtered                                                               
solids.                                                                                                                         
                                                                                                                                
MR. MCCORMICK said  depending on how the fish  are harvested, the                                                               
amount of  removed solids is 85  to 90 percent of  the fish waste                                                               
volume.  One   eighth  of  that   can  be  made  into   a  liquid                                                               
hydrolysate. If mixed  with peat moss, the fish  waste solids can                                                               
be used as  top soil. California uses a mixture  of peat moss and                                                               
fish solids  as topsoil for  desert areas and  low-quality earth.                                                               
Plants absorb 100 percent of fish  filtered solids when used as a                                                               
fertilizer as  opposed to absorbing  only 20 percent  of chemical                                                               
fertilizers.                                                                                                                    
                                                                                                                                
SENATOR FRENCH asked what a liquid hydrolysate is.                                                                              
                                                                                                                                
MR.  MCCORMICK answered  that  the process  of  removing oil  and                                                               
glycerol  from  fish waste  results  in  a dry  product.  Another                                                               
chemical  process  turns  the  dry product  into  a  liquid  fish                                                               
fertilizer called a hydrolysate.                                                                                                
                                                                                                                                
1:46:20 PM                                                                                                                    
SENATOR  FRENCH  would  like  to  see a  chart  showing  what  is                                                               
currently  happening across  the  state and  the  value of  waste                                                               
products. He  would also like to  see a projection of  what would                                                               
happen  if  the  state  adopted  a  process  like  this  and  its                                                               
potential economic value.                                                                                                       
                                                                                                                                
MR. MICK said most processing  plants have a meal plant operating                                                               
at a loss  because they are in  excess of what can  be ground and                                                               
dumped back  into the  water. Dealing with  excess fish  waste is                                                               
going to  become a bigger  problem because the EPA  reported that                                                               
ground and discharged waste is  not decomposing or being consumed                                                               
by aquatic  life, but is building  up on the ocean  floor. Ground                                                               
and  discharge   practices  will   eventually  not   be  allowed.                                                               
Processors will  have to turn  to a  company to convert  the fish                                                               
waste to biofuel, or the waste will go to landfills.                                                                            
                                                                                                                                
SENATOR FRENCH said, for example, it  is costing a processor $2 a                                                               
pound to make fish meal that can be sold for $1 a pound.                                                                        
                                                                                                                                
MR. MCCORMICK  responded in the  affirmative, saying the  cost is                                                               
about 10 to 25 cents a pound.                                                                                                   
                                                                                                                                
SENATOR WAGONER asked what nutritional  value the filtered solids                                                               
have  and  if  a  secondary industry  could  be  developed  using                                                               
filtered solids to feed pigs, poultry or livestock.                                                                             
                                                                                                                                
MR. MCCORMICK replied that filtered  solids have to be stabilized                                                               
to  avoid the  formation of  pathogens in  the decomposing  fish.                                                               
Filtered  solids can  be used  as  feed within  a day  or two  or                                                               
stored  at a  cold temperature.  If large  quantities need  to be                                                               
shipped, then filtered  solids are not usable as  a feedstock but                                                               
only as a soil amendment, fish fertilizer or fishmeal.                                                                          
                                                                                                                                
MR. MICK  said the word  "feedstock" creates confusion; it  is an                                                               
industry standard term…                                                                                                         
                                                                                                                                
SENATOR WAGONER interrupted and said  he knows what feedstock is.                                                               
He said  he was referring  to feed  for livestock and  noted that                                                               
dried feed  can be fed  to poultry, cattle  or pigs. He  asked if                                                               
the filtered solids could be stored and used as feed.                                                                           
                                                                                                                                
MR.  MICK said  many places  do that  with the  fishmeal that  is                                                               
created at a loss. Fishmeal  is dried, further ground, stored and                                                               
sold.                                                                                                                           
                                                                                                                                
MR.  MCCORMICK said  that fishmeal  does not  require vitamin  or                                                               
mineral additives;  specific additives are required  for fishmeal                                                               
that will be used to feed stock.                                                                                                
                                                                                                                                
1:51:33 PM                                                                                                                    
SENATOR HUGGINS asked if the solids have an odor.                                                                               
                                                                                                                                
MR. MICK  said the  fish waste  right from  the fish  plants does                                                               
smell like  dead fish. Once  the waste  is ground, dried  and the                                                               
oil has been removed, the  smell is eliminated. The biodiesel has                                                               
no smell.                                                                                                                       
                                                                                                                                
CHAIR MCGUIRE asked if they had any of biodiesel here with them.                                                                
                                                                                                                                
MR. MICK replied no.                                                                                                            
                                                                                                                                
CHAIR MCGUIRE  said she has a  mason jar of the  biodiesel in her                                                               
Anchorage office and it is odorless.                                                                                            
                                                                                                                                
MR. MICK said the biodiesel is odorless and non-toxic.                                                                          
                                                                                                                                
MR.  MCCORMICK  said  rural  communities   would  need  some  new                                                               
equipment,  such as  a machine  similar to  a high  speed garbage                                                               
disposal, to process the amount of  fish waste that would make it                                                               
viable for  a rural community  to generate  its own fuel.  Such a                                                               
machine processes up to a ton an  hour into a slurry that is then                                                               
heated and pressed  to remove the oil. Home  equipment could make                                                               
small quantities of soap; industrial  equipment could make larger                                                               
quantities. A  tank system, costing  about $100,000  to $250,000,                                                               
would process  the de-oiled, dried  solid fish waste into  a soil                                                               
amendment in a passive fashion.                                                                                                 
                                                                                                                                
1:55:12 PM                                                                                                                    
MR. MCCORMICK  reported that 25  rural communities  could produce                                                               
about 4 million  gallons of biodiesel annually.  Depending on the                                                               
region, diesel  fuel costs between  $4.00 and $10.00  per gallon.                                                               
Therefore,  the rural  communities could  create between  $16 and                                                               
$40 million worth of biodiesel.                                                                                                 
                                                                                                                                
SENATOR HOFFMAN  asked if  biodiesel is  a substitute  for diesel                                                               
and if gasoline can also be made.                                                                                               
                                                                                                                                
MR.  MICK  said  biodiesel  is   a  substitute  for  diesel,  not                                                               
gasoline. Biodiesel can run in  diesel engines and generators and                                                               
be used  for home  heating. Anything that  burns diesel  fuel can                                                               
burn biodiesel with 100 percent compatibility.                                                                                  
                                                                                                                                
SENATOR HOFFMAN  asked if  the BTU  of a  gallon of  biodiesel is                                                               
equivalent to a gallon of diesel.                                                                                               
                                                                                                                                
MR.  MICK  replied that  a  gallon  of diesel  has  approximately                                                               
140,000 BTU's  and a gallon  of biodiesel  produces approximately                                                               
134,000 BTU's. He  said that biodiesel, when run  in any internal                                                               
combustion  engine, has  far better  lubrication properties  than                                                               
number 1 and  two diesels and ultra low  sulfur diesel. Biodiesel                                                               
lubrication is superior and causes less wear on the engine.                                                                     
                                                                                                                                
SENATOR HOFFMAN asked if biodiesel  can be used as substitute for                                                               
low sulfur diesel.                                                                                                              
                                                                                                                                
MR. MICK replied absolutely.                                                                                                    
                                                                                                                                
MR.  MCCORMICK  explained that  beginning  in  2010, federal  law                                                               
allows oil companies  to deliver low quality high  sulfur fuel to                                                               
remote  regions.  The  oil  companies  had  claimed  it  was  too                                                               
expensive to supply  two different kinds of  fuels. Mr. McCormick                                                               
said this would add more pollution to the environment.                                                                          
                                                                                                                                
SENATOR  HOFFMAN asked  if  there  is a  rule  exemption for  low                                                               
sulfur diesel in rural Alaska this year.                                                                                        
                                                                                                                                
MR. MCCORMICK replied yes, beginning this year.                                                                                 
                                                                                                                                
1:58:14 PM                                                                                                                    
SENATOR  WAGONER  commented  that  the performance  of  his  boat                                                               
engine  goes down  if he  is using  low sulfur  diesel, but  that                                                               
biodiesel would perform as good as  number 1 or number 2 diesels.                                                               
He asked where he can get  some of Denali Bio-Diesel's product to                                                               
try in his boat.                                                                                                                
                                                                                                                                
MR.  MCCORMICK replied  that Senator  Wagoner could  get some  in                                                               
Chugiak.                                                                                                                        
                                                                                                                                
SENATOR WAGONER asked the price per gallon.                                                                                     
                                                                                                                                
MR.  MICK  replied that  he  generally  keeps  the price  of  the                                                               
biodiesel  about  25 percent  less  than  pump diesel.  Methanol,                                                               
which is  derived from petroleum,  is the one chemical  needed to                                                               
make biodiesel; therefore,  if the price of oil  sky rockets, the                                                               
price  of methanol  goes up  too. Right  now diesel  in Anchorage                                                               
sells at  $3.50 a gallon,  the biodiesel sells between  $2.75 and                                                               
$3 per gallon.                                                                                                                  
                                                                                                                                
SENATOR MCGUIRE asked  if Mr. Mick also brings  tanks to people's                                                               
homes.                                                                                                                          
                                                                                                                                
MR. MICK said he can do that upon request.                                                                                      
                                                                                                                                
SENATOR WIELECHOWSKI asked  how much fish waste there  is and the                                                               
amount of diesel that can be created with it here in Alaska.                                                                    
                                                                                                                                
MR.  MCCORMICK said  the 25  high potential  villages could  make                                                               
about 4 million gallons of  biodiesel per year. Alaska has enough                                                               
commercial fish waste discarded every  year to produce between 85                                                               
and 90  million gallons  of diesel. The  state consumes  about 58                                                               
million  gallons of  diesel, all  of  which is  imported. In  the                                                               
United  States,  just  50 percent  of  commercial  fishery  waste                                                               
equates to 10 percent of national diesel needs per year.                                                                        
                                                                                                                                
2:01:05 PM                                                                                                                    
SENATOR HOFFMAN  inquired as to why  the US and the  world is not                                                               
implementing this technology more widely  if the biodiesel can be                                                               
used as a low sulfur substitute and is cheaper.                                                                                 
                                                                                                                                
MR. MICK  said biodiesel is  being widely  implemented throughout                                                               
the United States.  Last year, 750,000 gallons  of biodiesel were                                                               
produced and consumed  in the US. In Europe,  2.6 billion gallons                                                               
of  biodiesel  were  produced and  consumed.  Seven  states  have                                                               
mandates requiring all pump diesel to  be B20 within the next two                                                               
years. Mr. Mick  explained that the "B" stands  for biodiesel and                                                               
the number  is the percentage  of biodiesel that is  blended with                                                               
diesel. By  2012 at  least seven  states are  mandating biodiesel                                                               
blend for all consumers.                                                                                                        
                                                                                                                                
SENATOR HOFFMAN asked  for Mr. Mick and  Mr. McCormick's response                                                               
to those who say this is unproven technology.                                                                                   
                                                                                                                                
MR.  MCCORMICK said  that when  he heard  that response  from one                                                               
individual,  he asked  the under-secretary  at the  Department of                                                               
Energy  to send  some information  to that  person. He  said that                                                               
Denali  Bio-Diesel's  product has  been  graded  by the  American                                                               
Society of Testing and Materials  (ASTM, which is the standard by                                                               
which any fuel  product is measured. He said a  lack of awareness                                                               
and some  misconceptions about biodiesel  exist but a  variety of                                                               
information  is available.  He reported  that a  catfish farm  in                                                               
Alabama  buried the  equivalent  of 20  million  gallons of  fuel                                                               
because they  didn't know  what to do  with it.  Biodiesel people                                                               
often do  not know  about fishing communities  or fish  farms and                                                               
fisherman do not know about biodiesel.                                                                                          
                                                                                                                                
MR. MCCORMICK  said that  as with  any product  that is  not main                                                               
stream,  it is  misunderstood. Some  places have  mixed biodiesel                                                               
with diesel and called it biodiesel.  When the mixed fuel did not                                                               
work, biodiesel got a bad reputation.                                                                                           
                                                                                                                                
SENATOR HUGGINS  asked about the logistics  involved for offshore                                                               
processors, including  transloading the  fish waste. He  asked if                                                               
it was  true that the EPA  is going to eliminate  the processors'                                                               
ability to dump fish refuse.                                                                                                    
                                                                                                                                
2:05:29 PM                                                                                                                    
MR. MICK said that it was  his understanding that the EPA intends                                                               
to severely  limit or restrict  the processors' ability  to grind                                                               
and discharge.                                                                                                                  
                                                                                                                                
SENATOR HUGGINS asked  about the logic and  logistics of bringing                                                               
offshore processing waste on shore for biodiesel processing.                                                                    
                                                                                                                                
MR. MCCORMICK  felt part  of the  solution would  be to  design a                                                               
refinery that can fit in  a 20'x8'x8' shipping container. He said                                                               
most processors  have a support  vessel and  it would be  easy to                                                               
put  this refinery  on  a  ship and  process  waste  at sea.  The                                                               
offshore processors  would still have  to deal with  the de-oiled                                                               
waste,  but  it  has   substantially  lower  pathogenic  material                                                               
growth.                                                                                                                         
                                                                                                                                
MR.  MCCORMICK noted  it may  be a  decade before  the EPA  would                                                               
restrict the grind and discharge ability of offshore processors.                                                                
                                                                                                                                
SENATOR FRENCH asked what the catch  is, what the cost is or what                                                               
the main impediment to implementing this idea might be.                                                                         
                                                                                                                                
MR.  MCCORMICK  reported  that  over   a  couple  of  years,  the                                                               
infrastructure  would probably  cost $6  million for  two plants;                                                               
one plant would be about  $3.5 million. Incrementally, each plant                                                               
would  cost about  $2.5 million.  If  the plant  made 100,000  to                                                               
600,000 gallons of biodiesel, the  payback would be less than 1.5                                                               
years.                                                                                                                          
                                                                                                                                
MR.  MCCORMICK explained  that Denali  Bio-Diesel  was asked,  as                                                               
domain  experts, to  do  a  study and  propose  a solution;  they                                                               
presented this proposal as a  potential solution for reducing the                                                               
PCE cost and  helping rural communities. A number  of firms could                                                               
implement this  proposed development. Mr. McCormick  said that he                                                               
and Mr. Mick  are not financial experts and  feel the legislators                                                               
and  others would  need  to decide  how to  manage  and run  this                                                               
project.                                                                                                                        
                                                                                                                                
2:08:31 PM                                                                                                                    
SENATOR  FRENCH  asked  where  Denali  Bio-Diesel's  proposal  is                                                               
written down.                                                                                                                   
                                                                                                                                
MR. MCCORMICK  explained that as  he understood  this committee's                                                               
role and  expertise not  to include working  out the  funding, he                                                               
removed four  pages from  the document  before the  committee; he                                                               
had them  to distribute separately.  His intention was  that this                                                               
be solely an informational meeting.                                                                                             
                                                                                                                                
SENATOR WAGONER corrected Mr.  McCormick's earlier statement that                                                               
diesel is imported into Alaska and  stated that diesel is made in                                                               
North Pole and  in Kenai. He said most low  sulfur diesel used in                                                               
Alaska is made here.                                                                                                            
                                                                                                                                
MR. MCCORMICK apologized and said  that was the information given                                                               
to him.                                                                                                                         
                                                                                                                                
SENATOR WAGONER  asked if the  biodiesel processing  plants would                                                               
be permanently  in place  or just when  fish are  being harvested                                                               
and waste  is being generated.  He asked  if the waste  could sit                                                               
and then a plant could be brought to process it.                                                                                
                                                                                                                                
MR. MICK replied that these  would be permanent locations because                                                               
fish  degrades quickly  without immediate  processing or  correct                                                               
storage.                                                                                                                        
                                                                                                                                
2:11:14 PM                                                                                                                    
SENATOR WIELECHOWSKI  said he envisioned this  taking off through                                                               
the Emerging Technology Fund in  the Omnibus bill. He said Alaska                                                               
could  become  a pioneer  and  that  the opportunity  to  provide                                                               
diesel  fuel, at  a  low cost,  with  payback in  a  year or  so,                                                               
certainly needed to be looked into.                                                                                             
                                                                                                                                
MR. MICK  agreed with  Senator Wielechowski  and said  fish waste                                                               
biodiesel would enable rural communities  to create their own low                                                               
cost  fuel source.  Alaska can  be a  technological leader  and a                                                               
center  for   excellence  for  the   production  of   fish  waste                                                               
biodiesel. Only  two other places in  the world do this,  a small                                                               
Honduras company and a Finnish  company in Vietnam. By setting up                                                               
small scale  refineries in rural  communities, Alaska  would also                                                               
be a center of excellence for economic development.                                                                             
                                                                                                                                
2:13:12 PM                                                                                                                    
CHAIR MCGUIRE said  the Blended Tax Credit of 2004  gave a $1 per                                                               
gallon subsidy for  fish diesel which expired in  2008. She asked                                                               
if there any new subsidies on the horizon.                                                                                      
                                                                                                                                
Mr. MCCORMICK understood  that the Department of  Energy (DOE) is                                                               
waiting to see if there is going  to be a stimulus package and if                                                               
Stimulus Two  would include  subsidies. Denali  Bio-Diesel worked                                                               
with the DOE, Congressman Peters  and Senator Stabenow on some of                                                               
the language used  in their last $3 billion energy  bill to allow                                                               
subsidies  to be  a  consideration  on a  state  by state  basis.                                                               
Congress has not  decided whether there is going to  be a federal                                                               
mandate yet and will not know  until August when they get through                                                               
many of the committee meetings.                                                                                                 
                                                                                                                                
CHAIR MCGUIRE  said she understood  low sulfur diesel to  be much                                                               
more expensive  and yet mandates for  it are on the  horizon. She                                                               
understood that the Department of  Transportation is easing their                                                               
fleet into  low sulfur diesel  and it is expensive.  She reminded                                                               
the committee that in the late  1970's, the US started to require                                                               
that  gasoline  be  refined  down  and  the  environment  harming                                                               
elements  be removed.  The  government did  not  require this  of                                                               
diesel at that  time, but now the push exists.  She said she sees                                                               
the  US  going  toward  low  sulfur  diesel.  She  suggested  Mr.                                                               
McCormick and  Mr. Mick look  at the cost comparison  between low                                                               
sulfur diesel  and the  biodiesel itself because  that will  be a                                                               
most relevant comparison.                                                                                                       
                                                                                                                                
CHAIR  MCGUIRE  said  that  the   meeting  was  meant  to  expose                                                               
committee members  to the many  ways that the state  would recoup                                                               
its investment  in this biodiesel  plan, including  job training,                                                               
energy  production  and  independence in  villages.  Denali  Bio-                                                               
Diesel's  proposal  fits  with the  concept  of  Emerging  Energy                                                               
Technology,  formerly SB  150, now  within the  energy plan,  and                                                               
could make Alaska a world leader.                                                                                               
                                                                                                                                
2:16:50 PM                                                                                                                    
MR. MCCORMICK  showed a photo  of a typical  commercial biodiesel                                                               
refinery that processes large quantities.                                                                                       
                                                                                                                                
CHAIR MCGUIRE asked Mr. McCormick to list costs when possible.                                                                  
                                                                                                                                
MR.  MCCORMICK  said this  type  of  large, commercial  biodiesel                                                               
refinery usually costs  between $8 and $15  million, depending on                                                               
how many gallons  it produces. Other designs made  in Germany and                                                               
Belgium  cost about  $2.2 to  $2.4 million  and produces  between                                                               
100,000  gallons  and  600,000  gallons. To  use  this  equipment                                                               
however,  fish rendering  equipment is  also needed,  as well  as                                                               
some  extra  handling and  some  external  tanks. Both  types  of                                                               
refineries fit  in 20'x8'x8' shipping  containers. They  could be                                                               
barged or flown to the desired location.                                                                                        
                                                                                                                                
CHAIR  MCGUIRE  said the  ability  to  ship these  refineries  is                                                               
important.                                                                                                                      
                                                                                                                                
MR. MICK said the refineries  are built into a shipping container                                                               
and can go  on barges or a C-130. They  can be transported easily                                                               
to the communities.                                                                                                             
                                                                                                                                
MR.  MCCORMICK  said  he  asked for  some  information  from  the                                                               
company in Whitehorse  that has the contract to  build housing in                                                               
the pipeline  area. That  housing fits into  a container,  can be                                                               
removed, unfolded  and built  into a facility  that would  be big                                                               
enough to house  the refinery equipment and  sometimes host other                                                               
community activities  in a  loft space. He  said the  refinery is                                                               
self-sufficient, not  requiring water and  using its own  fuel to                                                               
run itself after an initial start up.                                                                                           
                                                                                                                                
2:19:16 PM                                                                                                                    
MR. MCCORMICK referred to a  summary chart illustrating the goals                                                               
of the proposed  solution: to consume locally  generated waste as                                                               
a  feedstock,  to produce  biodiesel  for  local consumption,  to                                                               
produce no  unusable waste or  pollution and to train  and employ                                                               
residents  of rural  communities. The  daily maintenance  for the                                                               
refinery system  is no more  complex than doing maintenance  on a                                                               
snow mobile.                                                                                                                    
                                                                                                                                
SENATOR WAGONER what happens if  some of the biodiesel is spilled                                                               
on water.                                                                                                                       
                                                                                                                                
MR. MICK  replied that one  tablespoon of  salt is more  toxic to                                                               
the water than 10,000 gallons of biodiesel.                                                                                     
                                                                                                                                
MR. MCCORMICK said these refineries  would diversify the industry                                                               
and increase the skills of  the rural communities. The design can                                                               
be scaled  up or down  to produce  100,000 to 600,000  gallons of                                                               
output. This  biodiesel system would  help the state  decrease or                                                               
eliminate  the  energy  subsidies.  The villages  would  have  to                                                               
provide a plant  site but would gain  an environmentally friendly                                                               
fuel, would  employ people with  new skill sets and  would reduce                                                               
reliance on imported fuel.                                                                                                      
                                                                                                                                
2:21:23 PM                                                                                                                    
MR. MCCORMICK  said he does not  view this as a  bio-fuel program                                                               
but an  economic development  initiative. A  village with  a high                                                               
level operation  of 600,000  gallons would  employ four  to eight                                                               
people.   A  training   and  certification   center,  which   the                                                               
University of Alaska  Fairbanks has been helping  to identify and                                                               
create, would probably employ 6  to 10 university personnel, most                                                               
of  whom  would be  students  involved  as  a  part of  a  course                                                               
program. Another 8  to 10 jobs would staff a  chemical and spares                                                               
warehouse, an  office and  field positions.  There would  also be                                                               
collateral  employment  growth  in transportation,  chemical  and                                                               
other industries that participate.                                                                                              
                                                                                                                                
MR. MCCORMICK said that Argonne  National Laboratory analyzed the                                                               
amount of energy  used to recover a fuel from  its source through                                                               
usage.  They found  that  B100  fuel, fuel  that  is 100  percent                                                               
biodiesel, is the cleanest known  fuel. This was illustrated in a                                                               
DOE table,  "A Comparison of  Alternative Fuels." The  EPA looked                                                               
at the exhaust emissions from  the product that Denali Bio-Diesel                                                               
produced and  compared to  petroleum, there  is 101  percent less                                                               
pollution.  It is  more than  100  percent because  the fish  are                                                               
collected whether the waste is made  into biodiesel or not, so no                                                               
extra energy is  used to harvest the feedstock.  Every other fuel                                                               
requires collection and processing  of feedstock specifically for                                                               
the purpose of making fuel.                                                                                                     
                                                                                                                                
MR.  MICK referred  to a  chart of  fish waste  derived biodiesel                                                               
pollution and  said the  carbon dioxide  (CO2) reduction  is 96.8                                                               
percent.  The  nitrogen  oxide  (N20)  is  up  slightly  at  15.7                                                               
percent.  The green  house gases  (GHG) are  down 95.3%.  The de-                                                               
oiled fish  waste is  up 338.2  percent but  that is  then turned                                                               
into  fertilizer.  Carbon Monoxide  (CO)  is  down 85.3  percent.                                                               
Particulate Matter,  <10 micrometers,  is down 162.3  percent and                                                               
particulate matter, <2.5 micrometers, is down 86.3 percent.                                                                     
                                                                                                                                
2:24:22 PM                                                                                                                    
SENATOR  WAGONER  referred  to   a  previous  chart  of  relative                                                               
greenhouse gas emissions  and said he did not  understand the gas                                                               
emissions of  liquid petroleum gas  (LPG) and  compressed natural                                                               
gas (CNG) being  almost as high as gasoline. He  said LPG and CNG                                                               
are much lower in emissions than diesel.                                                                                        
                                                                                                                                
MR. MCCORMICK replied  that the DOE calculates  total green house                                                               
gas  emissions by  counting how  much pollution  is given  off to                                                               
harvest the  original fuel source,  to transport it, to  store it                                                               
and to use it                                                                                                                   
                                                                                                                                
SENATOR WAGONER said that it is funny math.                                                                                     
                                                                                                                                
SENATOR  FRENCH asked  if it  is a  life-cycle approach  to green                                                               
house gas, from cradle to grave.                                                                                                
                                                                                                                                
MR. MCCORMICK  said the  GREET model for  well to  wheel analysis                                                               
was created by Argon National Laboratory for the DOE.                                                                           
                                                                                                                                
SENATOR FRENCH asked if these  green house gas emissions were DOE                                                               
numbers.                                                                                                                        
                                                                                                                                
MR. MCCORMICK responded yes, they were DOE numbers.                                                                             
                                                                                                                                
2:26:05 PM                                                                                                                    
SENATOR Wagoner asked if Denali  Bio-Diesel is undertaking a fish                                                               
waste biodiesel refinery on the Kenai Peninsula.                                                                                
                                                                                                                                
MR.   MICK  confirmed   that  Denali   Bio-Diesel  is   currently                                                               
undertaking this project.                                                                                                       
                                                                                                                                
SENATOR  WAGONER said  he doesn't  think the  offshore processors                                                               
are going to have to bring their waste on shore.                                                                                
                                                                                                                                
MR. MICK  said EPA  individuals willing to  speak off  the record                                                               
and offshore  processing managers  themselves told him  that they                                                               
foresee a day when grinding  and discharging will not be allowed.                                                               
Material that is ground and  discharged is not decomposing at the                                                               
depth it is  deposited into the ocean. It  was originally thought                                                               
that  other   sea  life  would  consume   ground  and  discharged                                                               
material, but that has not been the case.                                                                                       
                                                                                                                                
SENATOR  WAGONER said  it was  true that  other sea  life doesn't                                                               
consume what is  ground. Sea life would consume fish  waste if it                                                               
was not ground. Any processor or fisherman understands that.                                                                    
                                                                                                                                
2:28:47 PM                                                                                                                    
MR.  MCCORMICK  thanked  Chair McGuire  for  the  opportunity  to                                                               
present.                                                                                                                        
                                                                                                                                
2:29:05 PM                                                                                                                    
CHAIR  MCGUIRE  thanked  the presenters  and  having  no  further                                                               
business before the committee, the meeting was adjourned.                                                                       
                                                                                                                                

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