While the Mississippi Delta region is considered a centerpiece of agricultural diversity and productivity in the southern U.S – distinguished by a variety of soil types, favorable climate and fairly long growing season – the biofuels industry must become viable to take advantage of the area’s assets.

Ian Lemmonds, left, and John Garland of Memphis Inc. wear a couple of their T-shirts at Goner Records, where they have some shirts on display. The pair create pro-Memphis products. (Photos: Lance Murphey)

Along with the rest of the country, the Memphis biofuels industry has came to a standstill as oil prices and feed stock prices became volatile. Nearly 70 percent of companies nationwide were forced to shut down, including local companies like Memphis Biofuels LLC and Milagro Biofuels.

In June 2010, Memphis Biofuels LLC – the biggest biofuel producer in the city – went out of business after the principal shareholder and equity investor pulled out and deserted the facility on 18 acres at 2227 Deadrick Ave.

Memphis Biofuels was formed in late 2005 with the ability to produce 36 million gallons of biodiesel annually and plans to eventually produce 100 million gallons per year. Fortunately, the company’s two owners – Brandon Sheley and Ken Arnold – maintained the company and were able to buy the loan back from the bank, rejuvenating as BioEnergy Development Group.

In October, Arnold told the Industrial Development Board compliance committee he was seeking to raise $5 million in new capital. Since the meeting, however, that investment has doubled, a significant portion of which will be used for oil seed crushing operations in its Memphis biodiesel facility.

In addition to the regular crushing of seeds like soybean, canola and safflour, BioEnergy Development Group is looking to do organic seed crushing because it does not intend to use that oil for biodiesel. Arnold has until Dec. 8 to revisit the IDB committee.

“At the current time, we’re looking at equity institutions in New York and banking institutions off shore,” Arnold said. “The only banks we’re dealing with right now – and that may change, obviously, if we are successful with this fundraising – are the ones that we have checking accounts with.”

The first generation of biofuels (including Memphis Biofuels) failed because a noncompetitive raw material was being produced and a cheap product was being sold, said Pete Nelson, director of the AgBioworks Regional Initiative, a program of Memphis Bioworks Foundation. A similar misstep can’t be made again.

“(Memphis Biofuels’ former site) could only make biodiesel, so the end product was inherently something that can only be sold for a couple dollars a gallon at most, and its competing with whatever you are buying at the gas tank,” Nelson said.

Throughout the Mid-South and Mississippi Delta, the biofuels industry has access to three major pipelines for transporting goods – barge access on the Mississippi River for raw materials, and truck and air for more specialty products.

BioEnergy Development Group LLC – the site formerly occupied under the name Memphis BioFuels – is seeking to raise $10 million in new capital. Some of that total will go towards the rehabbing of the manufacturing plant, allowing lower production costs of seed stocks than before, like waste vegetable oil and yellow grease.

Between the rich soil and robust distribution network here, that puts Memphis in a good position.

“The basic principle is that we are taking plants, so we are capturing solar energy into crops or trees, and then we are converting those crops and trees into the same type of things that we make out of petroleum currently,” Nelson said. “So we’re growing a variety of new crops – like sweet sorghum, canola, camelina, switch grass, energy beats – so farmers have new income.”

But while affordability for customers and farmers are vital for a sustainable market, a guaranteed demand can be expected moving forward as well. In 2011, with the federal government’s second version of the Renewable Fuel Standard (RSF2), several parties will be obligated to meet a standard of 800 million gallons of biodiesel to be blended into fuel. In 2012, the number will be boosted to 1 billion.

Bill Day, executive director of media relations for Valero Energy Corp., said as the RFS2 increases, all areas of the country will eventually see ethanol blended in at different levels because ethanol helps gasoline burn more efficiently.

Memphis’ Valero refinery is one of the company’s prime markets, producing a substantial amount of the Mid-South’s gasoline and diesel fuel. And Valero’s experience with commodity market and price fluctuation places the company at an advantage. The Amarillo, Texas-based company has bought 10 ethanol plants out of bankrupcy that are now profitable, such as VeraSun Energy Corp. – one of the largest ethanol producers that went bankrupt in 2008.

“It was affected by the price of corn going up dramatically, and by long-term contracts that it had signed and it did not have the capital to survive the downturn,” Day said.

AgBioworks has a strategy in place for weathering the storm as well, by building what is already being built in Memphis. Companies like PMC BioGenix Group Inc., Buckeye Technologies Inc. and BioDimensions Inc. are industries with new types of feedstocks developed specifically for biofuels. And they are competitive because they are controlled within the region.

These factories plan to be competitive by not only producing biofuels, but also producing products from lubricants and plastics to lipstick and food ingredients.

The AgBioworks initiative, which was launched at the Biomass South conference three weeks ago, is a five-state, 98-county program that introduces both biofuels and green chemicals.

During the next 10 years, AgBioworks predicts the transformation to the bioeconomy to support more than 25,000 green jobs and more than 50,000 jobs within the next two decades related to bioprocessing.