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Diamond Diesel Service, Inc., Auto Repair & Service - Diesel, Oakland, CA

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Back To Diesel Products>Valero explores renewable energy

'We're looking for ways to make sure we're part of the future'

By VICKI VAUGHAN San Antonio Express-News

June 19, 2010, 12:46AM

SAN ANTONIO — Valero Energy Corp. has spent almost $750 million buying 10 ethanol plants in the past 14 months, but those purchases didn't signal the end of the company's investments in renewable energy.

The San Antonio-based refiner has put bucks into six other ventures, including the conventional (a wind farm at one of its refineries) and others that sound like science-fiction experiments (using algae to produce gasoline and making diesel fuel from animal fat.)

"If you look at our name, it's not Valero Petroleum Corp., it's Valero Energy," company spokesman Bill Day noted. "We're looking for ways to make sure we're part of the future.

"We know that alternative fuels and renewable fuels will be part of the mix going forward," Day said. "It's going to take a mix of petroleum-based fuel, biofuels and other sources of energy that we haven't thought of yet."

Major companies, including oil and chemical companies, are investing in renewable fuels now because they understand it will take time to develop them, said Vignesh Sundaram, a senior research analyst for consulting firm Frost & Sullivan.

"It will take five to 10 years to build plants to take the technology from the pilot stage to commercial use," Sundaram said.

"The new technologies aren't going to replace oil overnight," the analyst said, despite President Barack Obama saying last week that he wants to end the nation's dependence on fossil fuels in the wake of the BP disaster in the Gulf of Mexico.

Valero's most recent investment is with Algenol Biofuels, a private company that makes ethanol from carbon dioxide and seawater using algae. The two companies plan to collaborate in developing a commercial-scale plant.

Valero took an earlier stake in a venture to use algae to make biofuels when, in late 2008, it invested in Solix Biofuels of Fort Collins, Colo., which almost a year ago started producing biofuels from algae at a demonstration project near Durango, Colo.

Last year, Valero said it would join Irving-based Darling International to build a plant near Valero's refinery in Narco, La., to produce diesel from used cooking oil, animal fat and other renewable feed stocks.

Valero and Darling seek a federal loan guarantee from the Energy Department for the plant, and the project has made it through two rounds of scrutiny. Both companies hope the loan guarantee will come through by early fall. "Then we could order equipment and break ground on the plant by the end of the year," Darling Treasurer Brad Phillips said.

"We're choosing Narco because most of our fats - cooking oils, tallow and restaurant grease - are in the central part of the nation" and could be transported by truck, barge or rail to the plant, Phillips said.

Also last year, Valero took a stake in ZeaChem. of Colorado, which develops biorefineries that can convert biomass, including forest waste, into fuels and chemicals. Next year, ZeaChem expects to start producing cellulosic ethanol at a biorefinery in Oregon.

Valero also has put money into Terrabon, which has developed a patented process to convert organic materials such as municipal solid waste and food waste into organic salts that can be chemically converted into gasoline, diesel and industrial chemicals.

The Houston-based company has a demonstration plant in Bryan and expects to start engineering work on its first commercial-scale plant late this year, chief financial officer Malcolm McNeill said.

Producing fuels from algae "is not the whole answer, but it will be part of weaning this country off the need for petroleum," McNeill said. But he acknowledged that it could take 15 or 20 years "for this particular technology to start to make an impact in terms of the volumes of fuels and industrial chemicals that can be produced."

Valero hasn't disclosed how much it has invested in developing renewable fuel technologies, but Day described the amounts as "relatively small."

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