Not a Tiger, but Maybe a Chicken in Your Tank

Tyson is keeping the specifics of its renewable-fuels division under tight wraps. But Jeff Webster, the company's vice president, told a recent investment conference that the potential is clear: Tyson produces about 2.3 billion pounds of chicken fat annually from its poultry plants. That's about 300 million gallons that could be converted to fuel.

The market for biodiesel and ethanol started to boom in August 2005, after passage of the federal Energy Policy Act, experts say. The bill set a standard requiring the United States to use 7.5 billion gallons of renewable fuels annually by 2012.

While it's always been cheaper, animal fat was initially overlooked as a biodiesel fuel stock because of its uneven quality, Eidman said.

When the energy bill passed, soybean oil was already widely sold as a food additive. Biodiesel refiners could depend on its quality because the oil was marketed and certified under strict guidelines, Eidman said.

Animal fat also has technical drawbacks. It clouds up more at higher temperatures than soy-based biodiesel, which means it might thicken when used in colder areas, Eidman said. That might limit distribution to areas where temperatures don't often drop below about 40 degrees.

Although these factors have kept animal fat in the background, the biodiesel industry has hit a turning point.

Increasing demand for soybean oil as a fuel and as a food is driving the price up, so it's starting to make economic sense to invest in new technology to process animal fat into usable fuel stock.

Tyson and Perdue are experimenting with biodiesel, and both have started using it in their trucking fleets.

Perdue, based in Salisbury, Md., is also selling soybean oil as a biodiesel fuel stock through its grain and oilseed division. The company said this summer it was studying plans to build biofuel plants or invest in others.

Smithfield has established its own biofuel division. Smithfield BioEnergy is studying how to turn hog waste into fuel and has started producing biodiesel from vegetable oil. The company didn't comment on the division, but recent financial filings show that the biodiesel program is still losing money because of start-up costs.

Having a massive new source of fuel stock is a welcome development for the biodiesel industry, said Amber Thurlo Pearson, a spokeswoman for the National Biodiesel Board.

"More biodiesel in the marketplace could help make biodiesel's cost even more competitive with diesel fuel," Pearson said.

The board estimates that U.S. biodiesel production is doubling to tripling annually, going from 25 million gallons in 2004 to 75 million gallons in 2005. The final tally for 2006 should be between 150 and 225 million, it said.

Biodiesel costs about $1 a gallon more to produce than conventional diesel, but federal tax breaks for fuel distributors help keep that cost from consumers.

Bagby said his plant would be running by the end of the month. His equipment can refine soybean oil, cottonseed oil and animal fat. That gives him flexibility to use whatever is cheapest on the commodity markets. His first batches will be made from soybean oil because it's easiest to calibrate the equipment.

After that? Soybean oil has a long way to drop before it's as affordable as chicken fat.

"You can see the difference in cost," he said.