The North Coast’s only commercial biodiesel manufacturer has stopped producing vehicle fuel and is preparing to close its retail outlet, a reflection of the perils of running a small business in an industry subject to unsteady federal subsidies.
For more than 13 years, Yokayo Biofuels has collected used cooking oil from restaurants, transformed it into biodiesel, then sold it at its south Ukiah pumps and to other fuel outlets.
It’s weathered tough times in the past but a series of financial hits this time have dealt the alternative fuel maker what appears to be a lethal blow.
“We’re in the process of closing down. We’re selling off our remaining fuel,” said Kumar Plocher, Yokayo Biofuels’ chief executive officer and co-owner.
The primary culprit for Yokayo was a promised bank loan that failed to materialize, voiding a $1.86 million matching state expansion grant after the company already had spent its financial cushion on preparatory engineering work, Plocher said.
That cushion, about $400,000, could have protected the company from subsequent financial hits — including suspension of a federal tax credit and stagnation of the Renewable Fuel Standard, which sets minimum biodiesel production levels. By leaving the production standard static, the government effectively slashed the amount of money Yokayo Biofuels could earn selling carbon credits to other companies, Plocher said.
At $1 a gallon, the tax incentive alone was worth about $30,000 a month to the company, Plocher said.
The incentives are aimed at bringing down the price of biodiesel in order to make it attractive to more consumers and move it from a niche market to mainstream. Without them, biodiesel can be significantly more costly than regular diesel, warding off customers.
Yokayo is not alone in suffering from the cutbacks.
The “policy setbacks in Washington are taking a major toll” on the biofuel industry, according to the Missouri-based National Biodiesel Board. The board represents an industry that produced nearly 1.8 billion gallons of fuel last year and employed more than 62,000 people whose salaries are valued at $2.6 billion, said board spokesman Kaleb Little. Yokayo Biofuels had employed up to 20 people.
A recent survey by the trade group indicated that 80 percent of biodiesel producers have scaled back production and more than half have idled a production plant since subsidies were cut. Small producers have been hit the hardest, Little said.
In late May, 117 biodiesel companies and affiliated businesses in 41 states signed the organization’s letter calling on President Barack Obama to boost the biodiesel standard.
About a third of the organization’s 250 members utilize used cooking oil, like Plocher. Others may use animal fats or a mix of fats and oils. Adding to the manufacturing costs is the demand for biodiesel components. As biodiesel became more popular, restaurants began selling their used oil, whereas they were once happy to simply avoid paying to have it collected.
Plocher said he has made arrangements that will keep his restaurant oil suppliers with pickup service should he close his business for good.
There has been discussion in Congress about reviving the tax credit but it’s not yet been reinstated, noted Jeff Buss, an official with the U.S. Environmental Protection Agency.
“The debate is always about whether the biofuel market is mature enough to stand on its own,” he said.