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Originally published Tuesday, December 25, 2012 at 6:59 PM

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From the dairy to the highway, a plan to make fuel from waste

A Seattle energy company has a plan to turn manure into compressed natural gas to fuel trucks, selling it cheaper than diesel.

Yakima Herald-Republic

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GRANGER, Yakima County — Dan DeRuyter knows his expensive digester that generates electricity from dairy manure is not paying off.

But he has new hope. A Seattle energy company has a plan to turn the manure into compressed natural gas to fuel trucks, selling it cheaper than diesel.

"You got $4 fuel and I can give you $2 fuel," said DeRuyter, co-owner of DeRuyter and Sons Dairy.

The idea may involve his neighbors, too. Promus Energy, a Seattle energy-development firm, is working with DeRuyter, as well as neighboring Cow Palace and Liberty Dairy, to convert biogas released when a digester chemically breaks down manure — in a process called anaerobic (without oxygen) digestion — into a form of natural gas.

The plan then is to sell it to nearby truck-fleet owners. They also want to build filling stations in the Lower Yakima Valley and perhaps Ellensburg. They believe it will work, said Dan Evans, president of Promus Energy.

"This is a project that pencils as profitable," Evans said.

They now are trying to recruit investors for construction, which will cost about $20 million if all three dairies participate. Evans is not expecting the owners to invest any money but they may, said DeRuyter and Adam Dolsen, co-owner of Cow Palace.

"It makes sense to be involved in it financially," Dolsen said, because dairy owners want to show they are trying to be part of the solution to groundwater pollution. "I think the compressed natural-gas thing will work out."

Environmental officials hope the proposal breathes new life into digesters, which are giant, concrete pits where chemical reactions remove odors and pathogens from manure and release a gas that can be either burned off or used to generate electricity.

Dairy owners have been bombarded with sales pitches for digesters for more than 10 years, Dolsen said. The problem is they're expensive. The state has eight so far, including at Werkhoven Dairy in Monroe. That's up from three digesters in 2008.

In 2006, DeRuyter spent $3.8 million from a combination of his own funds, grants and government loans to construct a digester, which to the naked eye looks like a covered concrete pit the size of a gymnasium.

It's connected to two buzzing generators that stand about four times the height of a man. Those in turn are connected to the region's power grid.

However, rates paid to DuRuyter by Pacific Power have dropped to 3.5 cents per kilowatt-hour, less than half what they were than when he started.

"To be honest with you, it's not a cash-flowing deal," he said. "I haven't got out of it what I hoped to get out of it."

Evans, of Promus, believes his plan will change DeRuyter's fortunes and make digesters more attractive to dairy owners by both harvesting the natural gas and adding equipment to make the leftover waste, which the dairy industry and regulators call "nutrients," more concentrated and easier for plants to use.

Cattle manure contains nitrogen, potassium and phosphorus that can both fertilize crops and contaminate groundwater if applied in excess. Numerous studies have shown that 20 percent of residential wells, relied upon for drinking water by thousands of rural Lower Yakima Valley residents, have nitrate levels higher than federal standards.

Officials with the federal Environmental Protection Agency (EPA) have said the dairies in Promus' project are among the likely contributors to the pollution. And the EPA has been working with the owners to draft legally binding management plans to clean up, while environmental advocacy groups have threatened to sue the dairies.

New purification plan

However, traditional digesters such as DeRuyter's don't get rid of those nutrients. Besides the gas, they leave behind a brown slurry that farmers must store in lagoons and apply to fields, as well as solid waste they turn into compost for livestock bedding.

With the help of Washington State University engineers, Promus is pitching a new way of purifying the liquid into a more concentrated form, which dairy owners could more easily afford to truck or pump to fields farther away.

That part has environmental officials interested, said Bill Dunbar, an EPA policy adviser in Seattle.

"Maybe that's the way to solve the problem," he said.

The EPA does not regulate digesters but has started a national program called AgStar that helps farmers share information about them.

"That's what our role has been, sort of the cheerleader," Dunbar said.

Making natural gas is the second part of Promus' idea.

Evans plans to scrub the fumes released by the digester into a cleaner form of methane, which yields more heat, similar to home-heating natural gas, and sell it to businesses that own trucks. He declined to name his potential clients.

If Evans can cultivate the market, his backers would start building in the spring. They would begin with new digesters at Cow Palace and Liberty Dairy, then install pipes to connect them to a central gas-scrubbing station, fueling stations and possibly a pipeline to run some of the methane to the nation's natural-gas network. They would begin operations a year later, he said.

Because of its abundance, Evans believes the United States is ready to embrace natural gas as a fuel of choice for transportation.

Many transit and refuse-hauling fleets use natural gas. So do Seattle taxis. And T. Boone Pickens, the petroleum tycoon who made his fortune through Dallas-based Mesa Petroleum, has created a company working on a similar project that has caught the attention of President Obama.

"This is a tectonic shift in the U.S. energy equation," Evans said. "We're at the front end of this tip."

Dairy pioneer

But they aren't the first group of farmers to try it. They aren't even the first dairies.

A year ago, Fair Oaks Farms, a consortium of dairies in Fair Oaks, Ind., bought 42 new milk-delivery trucks that run on natural gas, building fuel stations in Fair Oaks and in Louisville, Ky., to expand their range.

They started by purchasing fuel for the trucks, but in October this year they began harnessing their own.

They spent more than $10 million, which they expect to earn back in fuel savings in fewer than five years, said Mark Stoermann, project manager for Fair Oaks Farms.

The area near Fair Oaks has six digesters, and five of them generate electricity, not natural gas.

Generally speaking, the Midwest, especially Wisconsin, has hundreds of digesters because farm owners usually find more profitable electrical contracts from utilities than in the Northwest, where relatively inexpensive hydropower is hard to beat on price.

All of Evans' ideas are just proposals, but state economic officials helped him with his homework.

The Department of Commerce put up $200,000 for a market study that found a lot of potential for the business, said Peter Moulden. For example, Hanford contract managers have discussed using renewable natural gas to power their shuttle van fleets, the 100-page study said.

The plan has plenty of "ifs" and potential pitfalls, Moulden said.

For one, persuading oil-addicted American drivers to switch to a new fuel is a tall order and natural-gas prices won't stay low forever, he suspects.

And whether dairy owners build the equipment themselves or Evans' investors pay for it, the proposal involves a lot of money and considerable risk. "How do you get over the initial hurdle of financing?" Moulden said.

That's the same question dairy owners have been asking of digesters all along.

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