Biodiesel maker REG to upgrade Minnesota plant

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: May 9, 2012 - 9:38 PM

Improvements will shift Glenville facility away from use of soybean oil for fuel.

The nation's largest biodiesel maker says it plans a $20 million upgrade that'll let its Glenville, Minn., plant produce diesel fuel from waste fats and oils rather than higher-cost soybean oil.

Renewable Energy Group (REG) announced the plan Wednesday with its first-quarter financial results. The company said net income nearly tripled to $14 million, as biodiesel production and revenue were up from a year earlier.

CEO Daniel Oh said the upgrade to the Minnesota plant, 8 miles southeast of Albert Lea, is part of a strategy to shift away from soybean oil and other refined oils as the raw material for biodiesel. "We intend to switch over to lower-cost feedstock with minimal interruption to production," he said on a conference call with stock analysts. "We will see a clear margin benefit."

Waste cooking oil and inedible corn oil that is a byproduct of ethanol plants have recently cost about 20 percent less than refined oils, the company said. Three other of REG's six operating biodiesel plants already can process lower-cost oils.

Biodiesel still costs more than petroleum-based diesel. Minnesota law requires 5 percent biodiesel in diesel fuel. A 2007 federal law also encourages oil companies and fuel distributors to blend biodiesel into motor fuel to satisfy renewable energy mandates. A $1-per-gallon federal blender subsidy expired last year.

Ames, Iowa-based REG reopened the Glenville plant last year after buying it from local investors, who'd closed it in a biodiesel industry slowdown. REG stock, sold publicly only since January, closed unchanged Wednesday at $8.43 a share.

David Shaffer • 612-673-7090

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